THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
MISC APPLICATION NO 584 OF 2013
(ARISING FROM HCCS NO 503 OF 2012)
THREEWAYS SHIPPING SERVICES (GROUP) LTD}.........APPLICANT/DEFENDANT
MTN UGANDA LTD}......................................................RESPONDENT/PLAINTIFF
HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA
This is an application by chamber summons commenced under the provisions of section 98 of the Civil Procedure Act and Order 6 rules 18 and 19 of The Civil Procedure Rules (CPR) for leave to amend the defendant's written statement of defence and for costs of the application to be provided for.
The grounds of the application are as follows:
The Applicant has discovered new information that was not available to the applicant at the time of filing its written statement of defence. Secondly the application has been made promptly before hearing of the suit and the proposed amendment will enable the court to determine the real issues in controversy between the parties. Thirdly the respondent shall not be prejudiced or injured in anyway by the amendment. Fourthly the proposed amendment seeks to avoid multiplicity of suits. Lastly the applicant avers that it is in the interests of justice that the amendment is allowed. The application is supported by the affidavit of Counsel Sumaiyah Nanyondo, hereinafter referred to as the applicant’s deponent. The applicants deponent deposes that the applicant instructed its advocates Messieurs a F Mpanga advocates to file a defence on its behalf against a claim by the respondent for breach of contract between the parties constituted by a memorandum of understanding by failing and/or refusing to pay the sum amounting to US$3,827,820.71 in accordance with the contract, general damages, interests and costs of the suit. The advocates filed the written statement of defence on 15 November 2012. Subsequently the applicant instructed Messieurs Kiwanuka and Karugire Advocates jointly with Messieurs Birungi and Company Advocates to jointly represent it. Notice of joint instructions annexure "A" dated 20th of June 2013 was filed in court. Upon receiving the instructions and perusal of pleadings filed on the applicant in court and after various discussions between the trade advocates and the applicant, new information necessary for determination of the real issues in controversy between the parties which had not been included in the applicant's written statement of defence was discovered.
The information was that the memorandum of understanding, the subject of the suit is void for illegality and its enforcement would be contrary to public policy and cannot be enforced by the court. Secondly the memorandum of understanding was obtained by the respondent under pressure, undue influence and/or duress on the applicant by the respondent. The applicant's deponent deposes that the new information was not in its knowledge at the time the written statement of defence was filed in the honourable court. Furthermore that it is necessary for the applicant set out all factual aspects of its defence in evidence of a defence to enable the determination of all matters in controversy between the parties. The written statement of defence of the applicant was forwarded to the respondent’s counsel's who declined to consent to it. The application was made promptly before hearing of the suit and there is no in ordinate delay in bringing it. The proposed amendments are necessary for purposes of determining the real questions in controversy between the parties. Furthermore they have included matters of law and fact that would be in the interest of justice for the court to consider. The respondent would not be prejudiced in anyway by the amendment as it will not occasion any injury to the respondent. Considering that the plaintiffs claim is based on contract, the proposed amendments relating to duress an illegality are not a departure from the applicants defence as contained in its written several defence on record but rather the amendment seeks to expound on the applicants defence. The proposed amendment seeks to bring the courts attention, facts of illegality and unenforceability of the contract upon which the plaintiffs claim is solely based.
The respondent opposed the application and filed an affidavit in reply. The affidavit in reply is that of Ronald Zakumumpa, the senior manager of the respondent/plaintiff hereinafter referred to as the respondent’s deponent. The averments of the respondents deponent is that on 29 October 2012, the respondent/plaintiff through its advocates Messieurs Kampala Associated Advocates, instituted HCCS number 503 of 2012 against the applicant/defendant and summons were served on the defendant. On 19 November 2012 the defendant served the respondent with its written statement of defence. The draft written statement of defence attached to the applicant’s application converts the character of the defence and is a departure from the written statement of defence filed by the applicant in this court. On the basis of advice from Messieurs Kampala Associated Advocates, the deponent deposes on the basis of belief that the draft amended written statement of defence seeks to deny admissions that were already made in the existing written statement of defence. The proposed written statement of defence establishes new issues that are inconsistent with the previously filed written statement of defence. Furthermore the facts that the applicant is proposing to established in the proposed written statement of defence was unknown to the applicant at the time of filing the original defence. The amendment was made in bad faith and calculated to delay the course of justice. The proposed amendment prejudices the rights of and will occasion injustice to the respondent.
At the hearing of the application, the Respondent/plaintiff was represented by Counsel Paul Kuteesa while the defendants were represented jointly by Counsels Kiryowa Kiwanuka, Wycliffe Birungi and Frederick Mpanga.
Frederick: This is an.
Submissions by Frederick Mpanga:
The application is supported by affidavit Sumaiyah on five grounds as set out in the application. The application is made under Order 6 rule 19 of the CPR gives court discretion at any stage to allow parties to amend their pleadings to the extent that the amendment is necessary to determine real matters in controversy between the parties. Firstly there is new matter which has arisen in that AF Mpanga Advocates filed a WSD on the 15th of November 2012. Subsequently the applicant appointed two firms to join AF Mpanga Advocates to represent it. Upon the new firms joining, new facts were discovered. These were that the facts of duress and undue influence and illegality arise in the matter. Duress and undue influence are matters of law which cannot be discerned by the applicant’s directors. They were discovered upon perusal of document by the subsequent firms of advocates. Secondly the applicants are the beneficiaries of the amendment but could not discern the legal issues before.
The applicant’s case further is that the application was made promptly and without delay. The new matter was discovered by Messrs Kiwanuka Karugire Advocates jointly with Messrs Birungi and Co advocates upon giving them joint instructions in June 2013. The Applicant sent the draft amended written statement of defence to the respondent’s counsels after writing on 27th June 2013, and the response thereof came on 7th of July 2013 refusing consent. Nine days later the application was filed. In the circumstances there was prompt filing without delay. Steps were taken before hearing and before cut off date provided in order 12 rule 3 (1) CPR. Paragraph 5 of applicant deponent affidavit explains this ground and shows the applicants were vigilant.
The amendment would help the court to determine the real matters in controversy (i.e. the MOU). The main suit is based on the memo of understanding between the applicant and the respondent and there is no denial of signing the memo of understanding. The question that has arisen is that it is illegal or not permissible and that execution was procured under undue influence etc. The enforceability of the MOU the subject of the suit is now in question and is a pertinent issue according to paragraphs 7, 10, 11 and 13 of affidavit in support.
Furthermore the application will not cause prejudice or injury to the respondent and it is not prejudicial in that the respondents are aware of the MOU and the respondent has had opportunity to investigate the amendment. Furthermore the respondent has a right to rebut the allegations made in the amendment. The amendments are based on the MOU and contain no departure from the pleadings. The amendment will avoid multiplicity of suits.
It is in the interest of justice and no prejudice will be occasioned to the respondent if the proposed amendments are allowed. Principles applied by the court are in the cases of this court in MA 6 of 2012 arising from HCCS 236 of 2009 Buffalo Tungsten Inc vs. SGS Uganda Ltd where Hon. Lady Justice Helen Obura relied on the Supreme Court case of Gaso Bus services vs. Obene [1990 – 1994] EA pages 88 and page 96 thereof for principles applicable.
The application is not made in bad faith as alleged in the affidavit in reply. It is the duty of counsel to raise any Illegality once discovered according to Makula International vs. Cardinal Nsubuga and Soroti Joint Medical Services Ltd vs. Sino Africa Medicines. There is no legal bar to the proposed amendment.
In reply Counsel Paul Kuteesa strongly opposed the application and prayed that it is dismissed with costs.
The respondent argues that he agrees with the law but noted that granting the application is an exercise of the Courts discretion. That discretion has to be exercised according to established principles. The applicant has failed to demonstrate that the application has merit and should be allowed on three grounds namely; the application if allowed will prejudice the rights of the respondent and will occasion injustice to it because it seeks to negate admissions of fact made in the WSD. It will as a consequence deprive the respondent rights accruing from those admissions. Paragraph 8 of annexure “B” seeks to deny and negate averments of the respondent in the plaint which were admitted in paragraph 4 of existing defence according to annexure C to affidavit in reply the admissions therein are admissions of fact. Denial of factual admissions will prejudice the respondent. Counsel relies on the decision of Justice Irene Mulyagonja in MA 178 of 2011, HCCS 131 of 2010, and Plessey (Pty) Ltd vs. Mutoni Construction ltd. She held that an amendment which deprives the plaintiff and prejudicially affects the plaintiff’s rights should be refused. The respondents counsel also relies on the case of Eastern Bakery vs. Castelino  EA 461 and prays that the application is dismissed on this ground alone.
Secondly the intended amendment seeks to introduce new and distinct areas of defence not included in the previous defence and will change the character of the defence into a different one. The introduction of matters in the proposed WSD like contravention of Public policy, economic pressure, undue influence and /or duress seek to substitute the existing defence which is that the applicant/defendant never breached the contract. It seeks to say that the contract was procured by duress etc. Counsels relied on the case of Buffalo Tungsten Inc vs. SGS Uganda Ltd MA 06 of 2012 at page 12 thereof about changing causes of action. Principles applicable to amendment of plaints are also applicable to defence according to Eastern Bakery vs. Castelino (supra).
Thirdly the applicant has advanced no substantial reason for the exercise of the discretion of court. The alleged substantive reason is based on new information but the information was in the possession of the applicant all along. The applicants signed a MOU witnessed by counsels who filed the WSD. It is false to aver that the information was new information not in possession of the Applicant one year after filing a defence. Counsel relied on the case of Mugoya Construction vs. Central Electrical MA 699 of 2011 on the question of there being no new information. The law firm which filed the WSD is still present and they have not filed any affidavit. Furthermore, while paragraph the applicant rely on new information, the intended amendment goes further than that sought in the grounds of the Application and seeks to amend the entire WSD and ought not to be allowed.
On the issue of generating a multiplicity of suits if amendment is not allowed, the respondents counsel submits that the applicant has not shown what multiplicity would ensure on refusal to allow application. The applicant is a defendant. Furthermore it is not necessary to amend pleadings to rely on illegality according to the case of Makula International vs. Cardinal Nsubuga  Court of Appeal Civil Appeal No. 4 of 1981. Lastly though the applicant sought to amend only the WSD, the proposed amendment includes an amendment to the counterclaim yet no prayer has been sought to amend the counterclaim and so that particular portion should also be disallowed with costs like the rest of the proposed amendment.
In rejoinder Frederick Mpanga submitted for the Applicant that the case of Makula International (supra) holds that an illegality can be brought at any stage of the proceeding. Secondly the cause of action of illegality is an exception to the closure of pleadings and admissions. As far as new matters are concerned, it is true that applicant was advised by David Mpanga and he is a witness.
I have duly considered the submissions of counsel, the applicant’s application and affidavits evidence for and against the application and the authorities cited.
The principles applied by courts for amendments to pleadings are not in dispute. The respondent relied on the case of Eastern Bakery versus Castelino  EA at page 461 where the Court of Appeal sitting at Kampala held that amendments to pleadings sought before the hearing should be freely allowed, if it can be made without injustice to the other side, and that there is no injustice if the other side can be compensated by costs. The court will not refuse to allow an amendment simply because it introduces a new case. But there is no power to enable one distinct cause of action to be substituted for another, nor to change by means of amendment the subject matter of the suit. The court will refuse to amend where the amendment would change the action into one of a substantially different character or where the amendment would prejudice the rights of the opposite party existing at the date of the proposed amendment e.g. by depriving him of a defence of limitation accrued since the issue of the writ. The main principle is that an amendment should not be allowed if it causes injustice to the other side. The principles in Eastern Bakery (supra) were endorsed by the Supreme Court of Uganda in the case of Gaso Transport Services (bus) Ltd versus Obene [1990 – 1994] EA at page 88 particularly the judgement of Tsekooko JSC where he held that Order 6 rule 18 of the Civil Procedure Rules gives the High Court wide discretionary powers to permit amendment of pleadings to be made at any stage of the proceedings. Amendments to pleadings may in appropriate cases be permitted as late as during appeal by an appellate court. Tsekooko JSC further held that it is well established that courts nowadays are more flexible in allowing amendments whenever the application for amendment is made promptly at the earliest stage in the litigation. Last but not least, the more advanced the progress of the litigation, the more would be expected of the applicant in satisfying the court that leave for amendment ought to be granted.
Because there has been no hearing of the suit so far and the suit had reached the stage of pre-trial conferencing, I will consider whether the objections to the amendment give sufficient grounds for refusal of the proposed amendment to the written statement of defence on the basis of the above principles. In doing so I will also consider whether the amendment sought by the defendant ought to be granted on the basis of the above principles.
The first ground of objection is that the amendments sought by the defendant seek to negate admissions of fact made in the written statement of defence. Therefore because they are a departure from the admissions already made, there would be prejudice to the plaintiff. The respondent’s case is that the proposed amendment in paragraph 8 thereof seeks to deny and negate averments of the respondent in the plaint which had been admitted in paragraph 4 of the existing defence.
Paragraph 4 of the existing written statement of defence provides as follows:
"Save to the extent modified by the averments set out in the paragraph 5 herein below, paragraphs 4 (a), (b), (c), (d), (e), (g), (i) (j) and (k) of the plaint are admitted."
Paragraph 4 (a) of the plaint avers that on 10 September 2012, the plaintiff and the defendant entered into a memorandum of understanding and a copy of the memorandum of understanding was annexed as annexure "A". Secondly subparagraph (b) describes contents of clause 3 of the memorandum. Subparagraph (c) avers that the plaintiff and the defendant duly carried out a reconciliation of the amounts due and owing to the plaintiff. Subparagraph (d) further gives the terms of clause 4.1 of the memorandum of understanding and existence of the court order. Subparagraph (e) further deals with the court order freezing the bank accounts of the defendant. Subparagraph (i) pleads that in a letter dated 17th of October 2012 the plaintiff notified the defendant about its breach of the memorandum of understanding. In subparagraph (j) it is averred that the managing director in an e-mail dated 17th of October 2012 acknowledged the breach of the memorandum of understanding. Finally in subparagraph (k) it is indicated that the defendant and its advocates Messieurs A. F Mpanga advocates wrote to the plaintiffs advocates namely Kampala Associated advocates acknowledging the indebtedness and undertaking to pay but proposing different timelines which are unacceptable the plaintiff.
It is therefore true that certain factual matters were admitted in paragraph 4 of the written statement of defence. It is apparent that what is objectionable according to the respondent/plaintiff is the introduction by way of amendment the main grounds sought in this application namely according to paragraph 5 of the affidavit in support of the application by Sumaiyah Nanyondo the averment that the memorandum of understanding the subject of the suit is void for illegality and its enforcement would be contrary to public policy and cannot be enforced by the court. Secondly the defendant alleges that the memorandum of understanding was obtained by the respondent under pressure, undue influence and/or duress on the applicant.
The applicant avers that illegality can be raised at any stage and relied on the case of Makula International versus Cardinal Nsubuga Civil Appeal No 4 of 1981. Whereas it is true that illegality overrides all questions of pleadings including admissions thereof, duress is not necessarily an illegality in the sense of breach of statutory provisions. Even the level of duress may vary according to perception and circumstances. According to Words and Phrases Legally Defined 3rd Edition volume 2 Lord Scarman Held in Pao On vs Lau  3 All ER 65 at 78 that:
“Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. ... There must be present some factor ‘which could in law be regarded as a coercion of his will so as to vitiate his consent’. ... In determining whether there was a coercion of will such that there was no true consent, it is material to enquire whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. All these matters are ... in determining whether he acted voluntarily or not.”
It is a question of law whether there are some factors which vitiated the will of the applicants directors in endorsing the memorandum of understanding. The admission of the memorandum of understanding, coupled with admissions that negotiations took place and that there was correspondence about the memorandum of understanding are questions of fact. The question of whether the will of the directors was vitiated is a question of law. The issue therefore is primarily whether the defence of duress, which is a new ground of defence could be allowed by way of amendment to the written statement of defence. I will conclude this point after considering the second ground of defence which is that of illegality.
According to Osborn's Concise Law Dictionary, the word "illegal" means an act which the law forbids. It can be contrasted with acts which the law will disregard, such as a void contract. On the other hand the term "illegal contract" means a contract that is prohibited by statute. It is void and neither party can recover money paid under it. I have further considered the definitions of Illegal contracts by D.J Bakibinga in the Law of Contract in Uganda Fountain Publishers 2001 at pages 93 – 104. Illegal contracts are void. The contract is void if it is contrary to statute or forbidden by statute. It is illegal if it is contrary to public policy.
The proposed amendment of the written statement of defence in paragraph 8 thereof denies the previous admissions of questions of fact in paragraph 4 of the current written statement of defence. It further introduces the fact that the memorandum of understanding was void for illegality.
I have carefully considered the import of the proposed amendments. As a question of fact, the execution of the memorandum of understanding dated 10th of September 2012 and the subject of this suit is not denied. The particulars of illegality contained in paragraph 8 do not give any facts but aver that the memorandum of understanding was to interfere with the due course of public justice. Secondly that it was contrary to the Penal Code Act. Furthermore that it was made to compound a felony. Fourthly that purporting to enter into a memorandum of understanding constitutes an offence punishable under the Penal Code Act.
In the case of Eastern Bakery versus Castelino  EA 461 it was held that the court will refuse leave to amend where the amendment would change the action into one of a substantially different character. Secondly the court would refuse amendment where the amendment would prejudice the rights of the opposite party existing at the date of the proposed amendment. A critical assessment of the proposed amendment only introduces one form of prejudice to the plaintiff. This is the denial of admitted facts in paragraph 4 of the original written statement of defence. The court cannot permit the defendant to blatantly deny admitted facts without prejudice to a defence on the grounds of law. Facts which have been admitted need not be proved. Consequently the subsequent denial would prejudice the plaintiff in the conduct of the plaintiff’s case to prove all the admitted facts. Most importantly the Evidence Act clearly provides in section 57 thereof that:
“57. Facts admitted need not be proved.
No fact need be proved in any proceeding which the parties to the proceeding or their agents agree to admit at the hearing, or which, before the hearing, they agree to admit by any writing under their hands, or which by any rule of pleading in force at the time they are deemed to have admitted by their pleadings; except that the court may, in its discretion, require the facts admitted to be proved otherwise than by such admissions.”
The plaintiff is entitled to have the admitted fact in paragraph 4 of the written statement of defence to be considered as proved. Consequently the denial in paragraph 8 of the proposed written statement of defence of facts which were previously admitted in paragraph 4 of the written statement of defence on court record cannot be accepted and the specific amendments proposed as departs from the previous admissions of fact is refused. Consequently the second ground of objection that the proposed amendment would change the character of the defence partly succeeds together with ground one of objection on the question of admissions.
On the other hand, the averments of law and on illegality do not introduce something that cannot be raised during the course of the proceedings. The pleading on illegalities can have as its basis existing facts in the written statement of defence. The existing facts in paragraph 5 of the written statement of defence are sufficient to plead the illegalities. In the case of Makula International Ltd versus His Eminence Cardinal Nsubuga and Another Civil Appeal Number 4 of 1981, the Court of Appeal of Uganda, decided that it could intervene when it found that the award of the taxing master contravened a statutory provision. They held that a court of law cannot sanction that which is illegal. Illegality once brought to the attention of the court, overrides all questions of pleadings, including any admissions made therein. The Court of Appeal also relied on the case of Phillips vs. Copping  1 KB 15 for the holding that it was the duty of the court when asked to give a judgement which is contrary to a statute to take the point of law though the litigants may not take it. In other words, whatever the pleading or the admissions previously made, a point of law on illegality can be taken.
In the circumstances of this case, the hearing of the suit has not yet commenced. The illegalities raised allege breach of statutory provisions which the court cannot ignore. Even though they can be raised without having to be pleaded, at this stage of the proceedings, no prejudice would be occasioned to the plaintiff if the portion of the defendant's written statement of defence paragraph 8 which pleads illegalities and particulars thereof is permitted. In those circumstances, the defence of illegality may be permitted by way of amendment to the defendant’s written statement of defence. Other averments of fact in the original written statement of defence will be retained.
On the ground of defence of duress, paragraph 12 of the proposed written statement of defence introduces the defence of undue pressure and duress or undue influence. It is an amendment that does not change the character of the defence. It retains factual admissions and only avers that the defendant was operating under pressure. The plaintiff will have an opportunity to respond to the averments about undue influence. Again I do not see any prejudice to the plaintiff because the plaintiff would have an opportunity to address court on the defence both on the basis of facts and on the basis of law. Secondly the plaintiff can be compensated in costs.
On the question of whether the applicant advanced any substantial reason for the exercise of the discretion of the court on the basis of new information, I agree with the respondents counsel that there is no new information which was not available to the applicants at the time of filing the written statement of defence on the court record. What is material however is the fact that pursuant to other law firms coming on-board and subsequent discussions about the merits of the case on the basis of existing information, counsels for the applicant jointly deemed it fit to further allege illegality and undue influence. Those allegations can be supported by the facts in the original written statement of defence filed on the court record. I make particular reference to the case of Eastern Bakery versus Castelino  EA 461 at 462 where it was held inter alia and I quote:
"The court will not refuse to allow an amendment simply because it introduces a new case.… The court will refuse leave to amend where the amendment would change the action into one of a substantially different character."
The defendant has all along denied liability. Secondly paragraph 4 of the written statement of defence makes admissions subject to modifications set out in paragraph 5. A perusal of paragraph 5 of the written statement of defence shows that it alleges that the plaintiff made a complaint of theft, embezzlement and causing financial loss against two of its employees as well as against the defendant's directors. That in the course of investigating the complaint at the request of the plaintiff, on 30 August 2012, the Uganda police force sought and obtained an ex parte order referred to in the pleadings as an "freezing order" from the anticorruption court of the High Court of Uganda freezing all payments into and out of the defendant's account in Stanbic Bank Uganda Limited and Standard Chartered Bank Uganda Limited for six months. A copy of the court order is annexed to the written statement of defence. Specifically paragraph 5 (e) avers that in a series of meetings between the plaintiffs Chief Executive Officer, Chief Legal Officer on the one hand and the defendant's Chairman and Chief Executive Officer on the other hand as far as respective external legal counsel, the parties negotiated and agreed to terms of an amicable and confidential settlement, the principal terms of which were reduced into writing in the Memorandum of Understanding dated 10th of September 2012. Additional facts are pleaded that is unnecessary to go into at this stage. Suffice it to note that the applicant alleges that the plaintiff refused or neglected to cause the withdrawal of criminal complaints against the defendant’s shareholders and directors and that the directors remain on police bond and under the threat of criminal prosecution. On the other hand the plaintiff in paragraph 4 relies on the Memorandum of Understanding dated 10th of September 2012 for the claim of breach of contract. To allege that the memorandum of understanding contravened statutory provisions can be made at any stage of the proceedings. Secondly to allege that the memorandum of understanding was procured under duress cannot change the character of the defence. It only amounts to introducing a new ground of defence. As noted above, the plaintiff/respondent will have ample opportunity to deal with the new ground of defence.
In the premises the defence in paragraph 12 and 13 of the proposed written statement of defence is permissible and the proposed amendments are hereby allowed.
All amendments to the counterclaim are not part of the application for amendment and cannot be allowed.
I have further considered whether the application has been made without undue delay. The case of Gaso Transport Services (bus) Ltd versus Obene [1990 – 1994] EA 88 establishes that the amendments can be made at any stage of the proceedings so long as it can be made without prejudice to the opposite side. The hearing of the suit has not yet commenced and the matter was at this stage of the scheduling conference. The plaintiff would have opportunity to respond to the amendments. Secondly the plaintiff can be compensated in costs.
Save for the refusal of any departure on questions of admission of facts under paragraph 4, the applicant’s application is allowed on the grounds stated in the ruling and with the exceptions mentioned therein. The applicant shall file an amended written statement of defence which retains the factual admissions in paragraph 4 of the original WSD and averments of fact in the entire defence but introduce averments of law on illegalities and the new ground of defence of duress. The WSD with the necessary modifications will be filed on court record within 14 days from the date of this order. The applicant shall pay the costs of the application to the respondent.
Ruling delivered in open court the 23rd day of October 2013.
Christopher Madrama Izama
Judgment/Ruling delivered in the presence of:
Birungi Wycliffe for the Applicant/Defendant
Kuteesa Paul for the Respondent/Plaintiff
Christopher Madrama Izama
23rd October 2013