THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMM ERCIAL DIVISION)
MISC. APPLICATION NO. 105 OF 2004
(Arising from CS No. 79/2004)
SOUTHERN INVESTMENTS LTD:::::::::::::::::::::::::::::::: APPLICANT/DEFENDANT
INVESTMENTS LTD::::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT/PLAINTIFF
BEFORE: THE HON. LADY JUSTICE M.S. ARACH — AMOKO
This is a Notice of Motion under Order 33 rules 3 & 4, Order 48 rules 1 and 3 of the CPR seeking unconditional eave for the Applicant to appear and defend the main suit. The grounds are contained in the affidavit of Paul Nkangi, the Applicant’s Administration/personal; Assistant to the Chairman, dated 27/2/2004; but briefly are that:
a. The Applicant is not indebted to the Respondent as claimed.
b. The plaint does not disclose a cause of action against the Applicant
c. The Applicant has a good and meritorious defence to the suit.
d. There are triable issues of fact for determination by the Court.
e. It is in the interest of Justice that the application is granted.
Mr. Silas Majyambere, a Director of the Respondent filed an affidavit in reply on 10/6/2004. There is an affidavit in Rejoinder by Mr. Habib Kagimu dated 1/11/2004.
The brief background to the application is this. The Respondent filed CS 79/2004 claiming $118,800, with interest at 25% p.a from date of Judgment till payment in full by Summary Procedure (0.33 CPR). In the plaint and accompanying affidavit the Respondent’s Director, Mr. Majyambere states that the Applicant was and is still indebted to the Respondent in the said sum. That in an effort to pay this debt, the Applicant issued to the Respondent an irrevocable and unconditional transfer of funds from its account No. 32 — 9 — 40 —33229 — 00 — 1 at Standard Chartered Bank in Kampala. Mr. Majyambere further stated that when he went to the said bank to register the said transfer, the bank officials informed him that the Applicant had no such account with the said bank. Mr. Majyambere stated that he has made several demands for payment thereafter, but the Applicant has deliberately refused/neglected to pay the said debt. That he believes the Applicant has no defence to the suit. He attached a copy of the transfer document to the plaint. It is on the letterhead of the Applicant, and it reads in bold letters:
“7th March, 2001
TRANSFER OF FUNDS
STANDARD CHARTERED BANK
P.O BOX 7111.
We Southern investments Ltd. do hereby authorize you to irrevocably and unconditionally debit our account NR 32-9-04-33229-00-1 held with your bank by US $118,800 (One Hundred Eighteen Thousand and Eight Hundred US Dollars) only, and transfer said amount to the following account without any further notice:
Bank: Tropical Africa Bank Limited Kampala — Uganda
Beneficiary: Mukaburura Foundation Investments Ltd.
Account NR. 21 22 99 98 47
Habib Kagimu Muyanja Mbabaali
CHAIRMAN EXECUTIVE DIRECTOR”
In the supporting affidavit Mr. Nkangi deponed that he is the Administrator/Personal Assistant to the Chairman of the Applicant/Defendant Company. That he has read the affidavit of Mr. Majyambere in support of the plaint and understood the contents. The Applicant is not indebted at all as alleged in the plaint. That the Applicant Company had in the past only had dealings with an organization know as The International Consultant Group (ICG) and Mr. S. Majyambere and the Respondents are its officials. That as part of the dealings with the ICG the Applicant issued payment instructions from its bank account to the account of the Respondent Company upon the directions of the ICG.
That the said irrevocable transfer was to be made upon receipt of funds on the Applicant’s account which event has not occurred todate. He attached details of dealings between the Applicant and ICG to the affidavit.
Mr. Nkangi admitted that the Applicant holds A/C NR 32-9-04-3322-9-00-1, but denied that several demands were made by the Respondent for payment and that the Applicant had refused to pay. He maintained that the Applicant has a good and meritonous defence and should be given leave to defend.
Mr. Majyambere on is part, contended in his affidavit in reply, that the dealings between the Applicant and Respondent for which the Applicant issued the irrevocable and unconditional payment instructions have no connection at all with the dealings between the Applicant and the ICG. That the attached documents also have no relevance to the claim in the instant suit. That the Applicant has no defence and affidavit of Mr. Nkangi is hearsay as he has no knowledge of the dealings between the two parties. He attached a copy of a demand letter dated 9/11/2003 to prove that demands were made and ignored.
The gist of Mr. Kagimu’s affidavit in rejoinder is that the Respondent was merely nominated by the ICG as a party to whose account the proceeds of the deal between ICG and the Defendant/Applicant were to be paid. As such the Applicant has received no consideration from the Respondent. That there is also no evidence that the said instructions were ever presented for payment to the bank as no endorsement appears on it. That Mr. Nkangi knows all dealings of the Applicants in his capacity as Administrator of the Applicant.
Mr. Edwin Karugire represented the Applicant while Mr. Babigumira, Senior counsel appeared on behalf of the Respondent.
Mr. Babigumira raised an objection to the affidavit in Rejoinder of by Mr. Kagimu on the ground that leave of the Court should have been sought and obtained first before filing
it. He relied on 0.33. He also availed to this Court copies of the following authorities:
1. Abdul Aziz Sulaiman —Vs- South British Insurance Co. Ltd  EA 66 and
2. The Management Committee of Rubaga Girls School —Vs- Dr. Bwogi Kanyerezi CA No. 34/99 (CA).
With much due respect, I think this objection is misconceived. The application before this Court was brought by Notice of Motion — as provided under 0 48 rule 1. Mr. Babigumira acknowledged this fact when arguing the objection raised to the Respondent’s affidavit in Reply for a similar reason raised by Mr. Kagumire earlier on in these proceedings. I ruled in his favour. I have read the authorities cited. As I stated earlier on in my ruling, the Abudul Aziz case was discussing affidavits under 0 35 of the Kenya Rules, which is different from our 033. Under 035 of Kenya CPR, the Court is dealing with an application for Judgment. Our 033 rule 3 is for leave to appear and defend. The procedure is 0.48 r 1. The practice of this Court has been for parties to file affidavits in Rejoinder without leave of Court, to affidavits in Reply. It should normally stop there unless parties get leave from Court first to file further affidavits. No objections have been raised to this practice hereto.
The ruling in the case of the M.C of Rubaga Girls School does not also support Mr. Babigumira’s contention. The circumstances addressed in that application are very different. In that application the Respondent did not file any affidavit in Reply. Counsel for the Applicant then contended during his submissions that the facts deposed to by the Applicants counsel stood unchallenged in the absence of an affidavit in reply. In the part highlighted by Mr. Babigumira at page 4 Justice Bahegaine, JA observed:
“I think I should first make a remark on the lack of an affidavit in reply by the Respondent though Mr. Masembe did not seem keen to reply to it. That failure to file an affidavit in reply by the Respondent means acceptance of the Applicant’s averments is a curious position. It is well settled that it is always the Applicant to make out is case, and if it does not, his opponent need not file any affidavit at all.”
This quotation does not in any way suggest that leave of the Court is required to file an affidavit in rejoinder. I also agree with Mr. Karugire that the objection was raised rather belatedly; that is during counsel’s response to the application. In my view, the best practice is and has always been, to raise such an objection at the outset, so that the Court can deal with it before delving into the merits of the application. Besides, learned Senior Counsel has not suggested to this Court that the affidavit in question is likely to prejudice this client’s case in anyway. I am cushioned in any decision by the authority of S.98 CPA, S. 4 of the Judicature (Amendment) Act 2003 and Article 126 of the 1995 Constitution; which enjoin this Court to ensure that substantive Justice is administered without undue regard to technicalities. I therefore overrule the objection raised for that reason.
Turning to the merits of this application, I must start by stating that the law in this area is well settled. Before leave to appear and defend is granted, the Defendant/Applicant must show by affidavit or otherwise that there is a bonafide triable issue of fact or law. Where there is a reasonable ground of defence to the claim the Plaintiff/Respondent is not entitled to summary Judgment.
The Defendant/Applicant is not bound to show a good defence on the merits but should satisfy the Court that there is an issue or question in dispute which ought to be tried and the Court should not enter upon the trial of the issues disclosed at this stage.
Secondly, the defence must be stated with sufficient particularity to appear genuine.
General or vague statements denying liability will not suffice. (See: Maluku Interglobal Trade Agency Ltd —Vs- Bank of Uganda  HCB 66.
Now, it is not disputed from the arguments and I gathered that the instrument upon which the main suit is based is a Bill of Exchange. Mr. Babigumira submitted so, and Mr. Karugire appeared to agree with the learned senior counsel, at least that far. It is also borne out by the definition of a bill of exchange under section 2 (1) of the Act as:
“(1) A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it , addressed to pay on demand, or at a fixed or determined future time a sum certain in money to or to the order of a specified person or to the bearer.”
This bill was payable on demand. The Bank was to:
“transfer said amount to the following account without any further notice.”
Section 9 of the Act states:
‘9. Bill payable on demand.
(1) A bill is payable on demand —
(a) which is expressed to be payable on demand, or at sight, or on presentation;”
Section 29 of the Act provides that:
‘29. Presumption of value and good faith.
(1) Every party whose signature appears on a bill is prima fade deemed to have become a party to it for value.
(2) Every holder of a bill is prima fade deemed to be a holder in due course, but if in an action on a bill it is admitted or proved that the acceptance, issue or subsequent negotiation of the bill is affected with fraud, duress or force and fear or illegality, the burden of proof is shifted, until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the But”
The holder of a bill has inter alia the right to sue on the bill using his or her name. (S. 37 of the Bills of Exchange Act) 0.33 r 2 (a) gives the procedure as a summary suit.
Regarding the first three grounds Mr. Karugire submitted that his client is not indebted to the Respondent and that the plaint disclosed no cause of action against the Applicant because the Applicant had no dealings with the Respondent but with a company called International Consultants Group, although Mr. Majyambere and the Respondent are officials thereof. That the payment was to be made after transfer of funds to the Applicant’s account, which event has not occurred to date. That no consideration therefore flowed from the Respondent to the Applicant and as such the Respondent has no cause of action against the Applicant.
He also pointed out that the said account existed and still exists at the said bank albeit under different numbers. That there is no endorsement on the said bill indicating that it was ever presented to the bank and rejected and the reason for rejection. Mr. Majyambere’s affidavit is therefore false. In his view, the triable issues of law and fact raised by his application are:
1. Whether the Plaintiff had any contractual dealings with the Defendant.
2. Whether the Defendant raised any consideration for the issuance of the payment instructions.
3. Whether the payment instructions were presented to the bank for payment.
4. Whether the plaint discloses a cause of action against the Defendant.
5. Whether presentation of a Bill of Exchange is required under the Bill of Exchange Act.
6. Whether valuable consideration was given for the bill (repeated 2).
Mr. Karugire further submitted that the amount of USD 118,000 is considerable and Court ought to investigate the issues raised by the Applicant other than give summary Judgment to the Respondent.
He relied on Nkangi’s and Mr. Kagimu’s affidavits and the annextures thereto.
Mr. Babigumira opposed the Application very strongly. Regarding the claim, counsel maintained that his client has a good cause of action against the Applicant. S. 29 (2) is very clear on the rights of a holder of a bill in due course. There is no better cause of action than the holder of a Bill of Exchange in due course. The only defence is fraud, duress, illegality or fear. Such are not raised in the present action. According to learned counsel, if A receives a cheque from B — B would be guaranting payment on presentation without any more action. The transfer form is irrevocable. All his client had to do was to go to the bank to get money. It is now settled law. If a transaction has been reduced in writing like the transfer in this case, any extrinsic evidence is not permissible to explain that is was conditional or that payments were not made etc.
For that reason, counsel invited the Court to find that the transfer of funds was given to his client to go straight to the bank and get money without any condition. The defence of no cause of action is merely the struggle of a drowning man to deprive his client of money. All the alleged transactions are very irrelevant because they relate to other transactions. This one is neat and clear. All the affidavits are just a gamble. The application should be dismissed with costs.
Mr. Karugire made a brief reply and submitted that the key word in S.29 is “prima facie’. The section is not conclusive that the person has received the bill for value. The application has laboured to show that the Respondent did not receive the instrument in question for value.
Also under S.44 (1) and (2) the bill must be presented for payment. If it is not so presented, the drawer and endorsers shall be discharged.
While I agree with Mr. Babigumira that his client received a clean unconditional and irrevocable document; I am a bit uncomfortable with the assertion by Mr. Majyambere that he actually presented the same to the bank and he was told by bank officials that no such account existed. This is because of the well — known banking practice of endorsing bills of exchange in cases of rejection and the reason therefore. Annexture ‘A’ to the plaint is very clean indeed. It bears no endorsement that it was ever rejected by the bank.
Secondly, the Applicants case appears to rest mainly under S.29 (1) that is the lack of value. In the case of Shirley —Vs- Tanganyika Tegry Plastics Ltd  EA 529, the Appellant, a Nairobi Advocate sued the Respondent under by summary procedure under S.35 of the Tanzania Civil Procedure Code to recover Shs.23,485- allegedly due to him as a holder in due course of a promissory note made by the Respondents in favour of a Nairobi company known as Polypen Ltd. The Respondents obtained unconditional leave to appear and defend the suit and file a defence stating inter alia, that they were not liable on the note as it had been made for a consideration that had wholly failed, and that the Appellant had become a holder of the note without consideration. It was held inter alia that:
(i) a total failure of consideration for a note is a defence against a claim on a note made by an immediate party, but it is not a defence against a holder in due course; i.e. a person who took the note in good faith and for value and who at the time the note was negotiated to him had no notice of any defect in the title of the person who negotiated it.
(ii) in fact the Appellant had used client’s money to discount the note he did not give value to it.”
In that case, Saidi J. said:
Generally there would be a presumption by reason of S 30 (1) that a promissory note must be deemed to have been given for good consideration and that the holder in due course was a holder for value. That being so, the onus of establishing the negative of these presumptions is on the defence. However if the defence has no direct evidence of its own to negative the presumptions, it can still rely on the surrounding circumstances of the transaction.”
That Judgment was upheld by the Court of Appeal for Eastern Africa. In dismissing the Appeal Law J.A said:
“The learned Judge referred to the presumption raised by S. 30 (1) of the Bills of Exchange ordinance and to the fact that the onus of rebutting the presumption was on the defence. The fact that he found in favour of the defence necessarily implies in my view, that he considered the presumption to have been rebutted. In my opinion the fact that the cheque relied on by the Appellant as establishing his title to the note was drawn on “clients account” prima fade rebutted the presumption in his favour that he was the holder thereof for value. Had notice to produce all relevant documents not been given, the Appellant would not have had to produce this cheque; he could have relied on the note and the presumption in his favour. Once the cheque was produced, however, it became evidence in the suit which on the face of it rebutted the presumption that value had been given.”
In the earlier case of Nanalel Vrajdes —Vs- Chumilal Dhainji Mehta (1946) 13 EACA 58 -the Plaintiff sued the Defendant on a promissory note which the Defendant admitted he had made and signed in favour of the Plaintiff, but which he alleged was given for an illegal consideration. It was held by the Court of Appeal for Eastern Africa that:
“(1) The presumption established by S.30 (1) of the Bills of Exchange Ordinance that a bill of exchange is decreed to be given for good consideration may be rebutted by evidence to the contrary.
(2) The presumption is rebutted when at the end of the case there is a preponderance of evidence in favour of the Plaintiff or if the Court is left in doubt.”
In the words of Sheridan C.J.:
“The suit was on a promissory note made by the Defendant in favour of the Plaintiff so that the Plaintiff has the initial advantage by reason of the provisions of 5.30 (1,) of the Bills of Exchange Ordinance which enacts appears “Every party whose signature appears on the bill is prima facie deemed to have become a party thereto for value’ The Plaintiff had there been no evidence led other than the production of the note, would have been bound to succeed/n accordance with the section quoted. The promissory note in this case was admitted to have been made by the Defendant in the Plaintiff’s favour so that the Defendant was called on to begin and the onus of proving what was alleged, that the promissory note was given for an illegal consideration, a gambling debt was placed on him. …………the onus of proving the promissory note was given for an illegal consideration rested on the Defendant.”
S. 30 (1) referred to is similar to our S. 29 (1) of the Act. The effect of the presumption is therefore that it shifts the burden of proof from the shoulders of the Plaintiff who relies upon the instrument to those of the Defendant who impugns it.
It follows therefore that case under S. 29 of the Act cannot therefore be handled in a summary manner since the Defendant is required to produce evidence to impugn the bill of exchange.
Mr. Majyambere’s affidavit is also vague. Apart from merely stating that the deal for which the payment instruction is different from the one alluded to by the Applicant, he does not disclose what the transaction was. The affidavit is therefore vague and it would be unjust for this Court to enter summary Judgment on such a vague piece of evidence in the large amount of money claimed.
I think the reasons given herein are more than enough to support the decision to grant
the application prayed for; and I do grant the same and order that:
1. The Applicant files & serves its WSD within 7 days.
2. Costs in the cause.
M.S. Arach — Amoko
Ruling delivered in the presence of:
1. Mr. Ochenya for Applicant.
2. Mrs. Babihunga for Respondent.
3. Okuni — Court clerk.
M.S. Arach — Amoko