THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
MISC. APPLICATION NO 746 OF 2014
(ARISING FROM HCCS NO 550 OF 2014)
SPRINGWOOD CAPITAL PARTNERS LTD}.............................................APPLICANT
TWED CONSULTING COMPANY LTD}..............................................RESPONDENT
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA
This ruling arises from an application by the Defendant in High Court Civil Suit Number 550 of 2014 (a summary suit) for unconditional leave to appear and defend the main suit and for costs of the application to be provided for in the main suit.
The grounds of the application are that the suit is premature, misconceived and a total abuse of the court process. Secondly the suit raises triable issues of fact and law in respect of the Applicant's indebtedness to the Respondent. Thirdly the Applicant has a proper, good and complete defence to the claim. Lastly that it is in the interest of justice that the Applicant is granted leave to appear and defend the suit.
The application is supported by the affidavit of Mr Peter Sekandi, the Managing Director of the Applicant. He deposes that he read and understood the contents of the plaint, and its annexure as well as the affidavit in support of the summary suit of Dr Dan Twebaze.
The deposition of Peter Sekandi is that it is true that the Respondent entered into an agreement with the Applicant for purposes of participating as joint bidders with Vishal Patel in a bid for Uganda Police Force Public-Private Partnership for the design, construction and financing of the Uganda Police Force Institutional and Commercial Developments Project. To that end the Respondent advanced a sum of US$75,000 to the consortium for the project under an open ended contract. The Respondent had a 32.5% equity stake in the consortium and undertook to fulfil his obligations pro rata his equity. The consortium took out a bid bond of US$350,000 from the United Bank of Africa for which the Respondent had an obligation to pay his pro rata share of the bond totalling to US$113,750. The Applicant paid for the bid bond and the Respondent undertook to reimburse the Applicant’s the US$113,500 as his contribution to the bid bond. It was also the Respondent’s obligation as an equity stake holder in the consortium to pay the consultants engaged by the consortium on the project. The consortium engaged Mott Macdonald as a consultant to the project for a total cost of £225,843. The Applicant paid the consultant the full sum for the consultancy and to date the Respondent has refused or failed to reimburse the Applicant pro rata his equity stake in the consortium.
The Respondents claim for recovery of a sum of US$50,625 from the Applicant is premature and a total abuse of court process as the Respondent has failed to meet his financial obligations under the contract and also as the project for which the funds were disbursed is yet to reach financial close. The project undertaken by the consortium and for which funds were advanced by the Respondent is yet to reach financial close which is within the full knowledge of the Respondent.
The Applicant has a complete defence and should be allowed to defend the main suit brought by the Respondent. There are several triable issues relating to the payment which the honourable court can only considered during the trial in the main suit. Finally that it is just and equitable that the application is granted.
The application was filed on 25 August 2014 and fixed for hearing on 3 December 2014. It was however issued on 1 October 2014 by the registrar and served on the Respondents on 13 October 2014 according to the affidavit of Hadengho Moses. The affidavit in reply to the application was filed on 1 December 2014 and is that of Dr Dan Twebaze the managing director of the Respondent. In paragraph 4 of the affidavit in reply he deposes that the Respondent admitted that it had a 32.5% stake in the consortium which is clear testimony that as far as the Applicant is concerned, the Respondent is no longer part of the consortium. Secondly by the Applicants communication dated 25th of May 2012 and 16th of July 2012 the Applicant indicated that they did not want to deal with Dr Dan (and therefore the Respondent) anymore and in fact suspended all manner of communication about the project with the Respondent up to date. For that reason the Respondent has never learned of any payment made to anyone working for the consortium whether before or after payment is made. Specifically because the Respondent was shut out by the Applicant, it has never been approached by any person or body to contribute to any payment of any service provider or make any input at all. The Respondent was committed financially without its knowledge.
Dr Dan deposes that he has never authored the e-mail Annexure "C" to the affidavit which is a forgery. Secondly the issue of the consortium is a deliberate ploy by the Applicant to mislead court by dishonestly asserting that the Respondent is part of the same as a way of defeating the Respondent's suit yet the Applicant indicates that the Respondent is no longer part of the consortium.
Even if payments were made to any consortium service provider, it has nothing to do with the specific agreement on the basis of which the suit is brought namely that the Applicant shall refund the suit sum to the Respondent. The refund by the Applicant of the Respondent’s money was not pegged on the financial close of the project neither was it pegged on the Respondent’s further contributions to the consortium or its purported failure to do so. The transaction in this suit is a stand-alone loan to the Applicant which ought not to be stuck up with other transactions of the consortium.
The issues raised by the Applicant are totally different and have nothing to do with the loan to it by the Respondent which is the subject matter of the suit. Because the Respondent no longer forms part of the consortium as far as the Applicant is concerned, the loan had nothing to do with any future transactions of the consortium which the Respondent has no knowledge of and therefore the issues raised are not necessitate a substantive trial. In the premises the Applicant has no valid defence to the suit.
Furthermore Dr Dan deposes in the alternative and without prejudice that if the court is inclined to grant leave to appear and defend, it should be conditional upon the Applicant depositing the sum in court because the Applicant is a foreign company with no known assets within the jurisdiction of the court.
When the application came for hearing on 3 December 2014 Counsel Peters Musoke represented the Applicant while Counsel Kalule Ahmed Mukasa represented the Respondent. Both Counsels agreed that they would address the court in written submissions while Counsel Peters Musoke intimated that he had a preliminary objection to the affidavit in reply which was filed out of time.
In the Applicants written submissions objecting to the affidavit in reply as well as in support of the application, the Applicants Counsel submitted that the application was served on the Respondent’s Counsel on 13 October 2014 according to the affidavit of service but the reply contained in the deposition of Dr Dan Twebaze was filed on the court record on 1 December 2014 and served on the same day about six weeks from the date of service of the application. There was no application to extend time within which to file an affidavit in reply. In the premises Counsel submitted that the court should make a finding of fact that Dr Dan Twebaze's affidavit was filed out of time.
In the reply the Respondent’s Counsel submitted that the application is misconceived and has no merit because the gist of the Applicants submission is based on Order 12 rule 3 (2) which prescribes that service of interlocutory applications to the opposite party shall be made within 15 days from the filing of the application. He contended that the prescription is based on applications which are "remaining interlocutory applications" within the meaning of Order 12 rule 3 (1) of the Civil Procedure Rules and that the rule does not apply to applications for leave to appear and defend since it is not a "remaining interlocutory application". The Respondents Counsel relies on the case of Standard Chartered Bank Uganda Ltd versus Mwesigwa Godfrey Philip in Miscellaneous Application Number 477 of 2012 to the effect that the rule comes into play when there has been an alternative dispute resolution effort. Secondly the application and this suit are governed by the specific provisions of Order 36 of the Civil Procedure Rules. Where there are specific provisions, general provisions of the law will not apply. He invited the court to find that the objection is without merit and ought to be overruled.
I have carefully considered the Applicant’s objection on the ground that the Respondents Reply was filed out of time. The question of fact about the timing of the filing of the affidavit in reply has not been contested. The Applicant's served the application on the Respondent’s lawyers on 13 October 2014 and the affidavit in reply was filed on 1 December 2014 about six weeks from the date of service of the application. Consequently the only question in this objection is whether the Respondent was obliged to file the affidavit in reply within 15 days as prescribed by Order 12 rule 3 (2) of the Civil Procedure Rules after service of the application. The gist of the Respondents reply is that the rule is inapplicable to applications and replies under Order 36 of the Civil Procedure Rules which specifically deals with summary suits.
Counsel referred to my decision in HCMA No. 477 of 2012 Standard Chartered Bank Uganda Ltd versus Mwesigwa Geoffrey Philip for the proposition that the timelines under Order 12 rule 3 (2) of the Civil Procedure Rules should be restricted to “remaining applications” prescribed in that rule filed after completion of the alternative dispute resolution effort. The decision is however distinguishable because it dealt with the timing of the filing of an application as opposed to the time of service of an affidavit in reply. The matter in contention in that application was whether the application had been filed out of time according to the timelines prescribed by Order 12 rule 3 (2) of the Civil Procedure Rules. Applications are pleadings governed by Order 6 rule 1 of the Civil Procedure Rules and that is why even applications are accompanied by summary of evidence to be adduced, a list of witnesses, a list of documents and a list of authorities to be relied upon. Where a Defendant has been served with summons in the form prescribed under Order 8 rule 1 of the Civil Procedure Rules, he or she shall file a defence within 15 days after service of the summons. This issue was considered by this court in Stop and See (U) Ltd versus Tropical Africa Bank Ltd in HCMA No. 333 of 2010. Whereas the court found that the application in that matter fell outside Order 12 rule 3, the court also ruled that the rules are meant to give the parties timelines within which to file and complete their pleadings. The same time lines would apply to all interlocutory applications. A reply or defence to an application has to be filed within 15 days. I will quote from the ruling at page 5 thereof where I said:
“Thereafter we assume Order 12 comes into operation. It is however my finding that order 12 rule 3 sub rule 2 is meant to give the timelines for all interlocutory applications that are envisaged after the completion of the scheduling conference or alternative dispute resolution. There are other kinds of interlocutory applications which are catered for in the preceding rules to rule 3 of Order 12 that I have outlined above. I do not need to outline exhaustively the kinds of interlocutory applications envisaged in rule 1 and 2 of Order 12. I may say that they deal with inter alia applications that do with interrogatories, discovery and alternative dispute resolution. The rest of interlocutory applications are covered by Order 12 rules 3. The logical conclusion is that this application falls outside the provisions of Order 12 itself. (It should be noted however that an application can be filed anytime depending on the circumstances of the case and of the parties) Secondly, the rules are meant to give the parties timelines within which to file and complete their pleadings. These pleadings follow the same pattern as that of a plaint and a written statement of defence. It follows that the same time lines would apply to interlocutory applications. A reply or defence to an application has to be filed within 15 days. Failure to file within 15 days would put a defence or affidavit in reply out of the time prescribed by the rules. Once the party is out of time, he or she needs to seek the leave of court to file the defence or affidavit in reply outside the prescribed time. The practice of legal practitioners is to file an affidavit in reply at pleasure. This has to be discouraged. Order 12 rule 3 should guide advocates on the time lines for pleadings in interlocutory applications.”
As far as I am aware, the above ruling has not been overturned by an appellate court. I cannot depart from my own decision without grounds to do so. In any case I fully agree with that ruling. The Respondent’s Counsel ought to have filed the affidavit in reply within 15 days after service of the application but chose to wait for six weeks (about one month and a half) to file a reply. The Respondent’s Counsel has not deemed it fit to seek the leave of court to file the reply outside time. Last but not least, a summary suit is supposed to be handled expeditiously and where an application has been filed, it should as far as possible be expeditiously handled just in the case the application lacks merit so that the object of Order 36 is not defeated. According to Parker LJ in the case of Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd (In Liquidation)  3 All ER 74 at page 77, the purpose of the rules prescribing the procedure of a summary suit is to enable a Plaintiff to obtain a quick judgment where there is plainly no defence to the claim.
In the premises I agree with the Applicant’s Counsel that the affidavit in reply was filed out of time and there being no application for extension of time to validate the filing of the affidavit in reply out of time, I cannot on my own motion extend the time to validate the affidavits in reply of Dr Dan Twebaze. The objection of the Applicant’s counsel on the ground of late filing of the affidavit in reply of the Respondent is sustained.
The remaining issue before the court is whether the Applicant’s application raises any triable issue/s of fact or law.
On the first ground the Applicant’s Counsel submitted that the Plaintiff’s summary suit is premature, misconceived and an abuse of court process and relies on the affidavit in support paragraphs 3, 4, 5, 7, 8 and 9 of Peter Sekandi. The issue raised in the affidavit is that the name of the consortium is AHADI and it is conceded in paragraph 4 (ii) of the plaint. The Respondent advanced US$75,000 to the consortium. The Respondent has a 32.5% stake in the consortium. The Respondent was obliged to share in the development costs pro rata. The Respondent has not contributed US$113,750 which is the pro rata contribution of 32.5%. Instead the Applicant’s paid the entire sum. The Respondent undertook to reimburse the Applicants US$113,300 but never did.
Secondly there are obligations of both parties to pay £225,843 to Mott Macdonald, the consultant agent. The money was paid by the Applicant only.
In the premises the Respondents claim for US$50,625 is premature because it has clearly failed to meet its own pro rata financial obligations to the consortium. The Respondent has acknowledged its financial obligations in writing.
Counsel proposes that the issues which arise are whether the suit is premature? Whether the right Defendant was sued? Whether the Plaintiff has made its financial obligations under the agreement attached to the claim. Furthermore the Applicant has attached a draft defence to the application.
I have further considered the submissions of Counsel for the Respondent in reply to the submissions of the Applicant’s Counsel to gauge whether matters of law have been raised against the application. I should be able to consider any points of law on the basis of the summary suit and the application as well as submissions of the Respondent’s Counsel.
Firstly the Respondent’s Counsel argued that the Applicant’s case is that the money was loaned to a consortium and therefore the issue is whether the Defendant was the right party to be sued. He relies on clause 5 of the agreement which forms the basis of the suit that for the sake of urgency the Respondent would loan the consortium a sum of US$75,000 and 67.5% of which shall be refunded by Springwood Capital, the Applicant. He contends that the refund was agreed upon to be made by the Applicant and not the consortium.
On the question of whether the suit is premature, he submitted that the issue of the Applicant’s obligation in clause 5 did not depend on the financial closure of the project and any submission in that regard is deliberately misleading. The agreement to repay has nothing to do with the rest of the consortium transactions.
The Respondent’s Counsel argued that the contract to repay is severable from the rest of the agreement and can be enforced singularly without affecting the rest of the agreement. That clause 5 is a separate contract to repay and can be enforced as such.
On the submission of the Applicant's Counsel that the agreement provided no time within which to repay, Counsel contended that this may be so but the correct position of the law is that where no time is prescribed, performance must be done within a reasonable time. The Applicant cannot argue for instance that because no time was provided, it would repay within 20 years from the date of execution. The agreement was signed in March 2012 and nearly 3 years later the Applicant has taken no steps to repay the loan. Counsel argued that three years is a long time to repay. The Respondent issued a demand notice according to annexure "C" to the plaint. Consequently the suit is not premature.
The rest of the submissions are based on the affidavit in reply of Dr Dan Twebaze and I have accordingly disregarded that part of the submissions.
Under Order 36 rule 3 (1) of the Civil Procedure Rules, a Defendant cannot be heard in defence except after applying for and obtaining leave of court. According to Odgers' Principles of Pleading and Practice in Civil Actions in the High Court of Justice 22nd edition at pages 75 and 76 whenever a genuine defence, either in fact or law, sufficiently appears, the Defendant is entitled to unconditional leave to defend. The learned author notes that the Defendant is not bound to show a good defence on the merits. Secondly the court should be satisfied that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial. Thirdly the defence should be made in good faith. Fourthly the defence must be stated with sufficient particularity, as appear to be genuine. These principles were also considered as good law in the authorities quoted below namely Maluku Interglobal Trade Agencies Ltd versus Bank of Uganda  HCB 65; Tororo District Administration versus Andalalapo Industries HCM 8/2/1997 and Souza Figuerido & Co Ltd versus Moorings Hotel Co Ltd (1959) EA 426 .
Furthermore a summary suit should not be decided finally on the basis of contested affidavit evidence which is not supported by other evidence. The purpose of the Order 36 which enables summary suits is expounded by Parker L.J in the case of Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd (In Liquidation) (supra) at page 77:
“The purpose of Ord 14 is to enable a Plaintiff to obtain a quick judgment where there is plainly no defence to the claim.”
Consequently it should be apparent from the face of the pleadings that there is no defence to the suit. The basis of the summary suit under paragraph 4 of the plaint is that on 12 March 2012 the Plaintiff/Respondent entered into an agreement with the Defendant for purposes of participating as joint bidders together with Vishal Patel. Furthermore that it was agreed that the Plaintiff would loan to the consortium a sum of US$75,000 out of which the Defendant undertook to refund 67.5% amounting to US$50,625. Finally despite incessant demands, the Defendant has failed, neglected to refund the sum owing to the Plaintiff in accordance with the agreement inter partes. The Plaintiff seeks recovery of the entire sum claimed in the plaint together with interest at court rate from the date of filing the suit until payment of the decretal sum in full as well as costs. This suit is supported by the affidavit of Dr Dan Twebaze verifying the contract which was attached and marked Annexure "A". The Applicant does not deny execution of the contract.
The Plaintiff primarily relies on clause 5 of the contract which reads as follows:
"For the sake of urgency and getting consultants to start work immediately, TWED shall loan to the consortium a sum of 75,000 US dollars to Vivaki Architects immediately, 67.5% of which shall be refunded by Springwood Capital."
On the face of the pleading the money is refundable by the Applicant and not the consortium. The only issue that arises in that regard is whether the money is due on whether the suit is premature. The primary submission of the Respondent’s Counsel is not backed by any factual grounds about the transaction and is based on the proposition that three years delay is unreasonable. The issue as to whether three years delay is unreasonable is a triable issue and furthermore in light of the Applicant’s submission and evidence that the Respondents has some other obligations to the Applicant which have not been fulfilled. This is in practical terms a defence of setoff. Secondly the question of the obligations of the parties ought not to be decided summarily in light of the e-mail evidence adduced by the Applicant purporting that Dr. Dan Twebaze admitted having obligations towards the Applicant and the issue ought to be inquired into on the merits.
In the premises the Applicant is granted unconditional leave to file a defence to the summary suit within 14 days from the date of this ruling with costs to abide the outcome of the main suit.
Ruling delivered in open court on the 9th of January 2015.
Christopher Madrama Izama
Ruling delivered in the presence of:
Kalule Ahmed for the Respondent
Kawesi Paul for the Applicant in court
Parties not in court
Charles Okuni: Court Clerk
Christopher Madrama Izama