THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
CIVIL SUIT NO. 644 OF 2000
1. D.K. CONSTRUCTION CO. LTD]
2. JAMETEX INTRA SALES LTD]
BARCLAYS BANK OF UGANDA LIMITED:::::::::::::::::::::::::::::: DEFENDANT
BEFORE: THE HONOURABLE LADY JUSTICE C.K. BYAMUGISHA
The Plaintiffs are limited liability companies incorporated under the provisions of the companies Act and carrying on business in Uganda. They filed this suit against the Defendant seeking a declaration that the latter is a legal or constructive trustee of the monies to the tune of Shs.24, 852,500/= previously held by the first Plaintiff on its Account No. 2863 at Uganda Commercial Bank Kawempe Branch and the sum of Shs.17, 604,990/= also previously held by the second Plaintiff on Account No. 1822 at Uganda Commercial Bank Mukono Branch. The suit is also seeking a declaration that the Plaintiff are the beneficial owners of these monies, interest at the rate of 36% Per Annum from the date the money was wrongly held by the Defendant in 1997 till payment in full. The Plaintiffs are also seeking costs of the suit.
The facts which led to the institution of these proceedings and which were agreed upon at the scheduling conference held before the trial are as follows:-The first Plaintiff Company was incorporated on the 13th June, 1991 with Lawrence Kasasa Kasekese (P.W1) as one of its subscribers and Managing Director. On the 17th June, 1991 it opened a Bank Account No. 2863 at Uganda Commercial Bank Kawempe Branch P.W 1 was one of the signatories to the Account. The second Plaintiff Company was incorporated on the 14th day November 1990. On the 26th June 1991 it opened Account No. 1822 at Uganda Commercial Bank Mukono Branch. Again P.W 1 was one of the signatories and Managing Director.
On 18th June Total (U) Ltd issued cheque No. 750504 in the sum of Shs.100,000,000/= drawn on its Account with the Defendant Bank, in favour of Uganda customs and Excise Department. The Department did not receive the proceeds of the cheque but the Account of Total was debited with the amount.
On the 28th June 1991 Caltex Oil issued cheque No. 1093341 for Shs.70, 849,000/= in favour of Uganda Customs and Excise Department drawn on its Account with the Defendant. The cheque and the money was never received by the payee but the Total Account with the Defendant was debited with the amount.
The Defendant Bank had a customer called Mapinto Enterprises who had Account No. 1397480 and the proceeds of the two cheques ended up on that Account. On 20th June 1991 the first Plaintiff banked cheque No. 050/583704 for Shs.100,000,000/= drawn on the Mapinto Account. The cheque was banked on the first Plaintiff’s Account at UCB Branch. On the 27/06/91 the second Plaintiff banked a cheque No. 050/583706 for Shs.70, 849,990/= again drawn on the Mapinto Account. It was banked with UCB Mukono Branch on the second Plaintiff’s Account No. 1822.
Other facts relevant to this case and which were admitted are the following:
Total (U) Ltd had an employee one Christopher Mufutumukiza in the Accounts Department which handled Uganda Revenue Authority cheques. He also had a company canaries Ltd and on 3rd July, 1991 it was paid a sum of Shs.5m by the first Plaintiff. Again on 09 July, 1991 it was paid another sum of Shs.4.5m. Both amounts were paid by cheques. On 17th July, 1991 one Antony Oroga an employee of Caltex Oil Ltd was paid Uganda Shs.5m by the first Plaintiff. He too was working in the Accounts Department dealing with outgoing cheques of Uganda Revenue Authority.
The activities involving the above transactions became a subject of police investigations which led to the prosecution of eleven people including P.W1 among others. They were tried and convicted of various offences. The convictions were quashed and a retrial was ordered on the 5th June 1998. In the meantime the trial Chief Magistrate had ordered the transfer of the money still outstanding on the Plaintiff’s Accounts to the Defendant. This was done in 1997. However there was no trial of the accused persons, as the Director of Public Prosecutions withdrew the charges against them. P.W1 made an unsuccessful attempt to have the money the subject - matter of the suit refunded to him - hence this suit by the companies.
At the commencement of the trial, the following were the agreed issues:-
1. Whether the money Shs.24,857,500/= belongs in law or equity to the first Plaintiff or the Defendant.
2. Whether Ug. Shs.17, 606,402/= belongs in law or equity to the second Plaintiff or the Defendant.
3. Whether the veil of incorporation should be lifted in respect of the Plaintiffs and Lawrence Kasasa Kasekese.
4. Reliefs if any.
I shall deal with the third issue because it’s the answer to the lifting of the veil will more or less dispose of the whole case. It was averred in paragraph 10 of the Defence and counter - claim as follows:
“The Defendant repeats the contents of paragraph 6 (a) to (b) a bore
and shall add that at all material times the said Lawrence Kasasa Kasekese was using the 1st and 2d Plaintiff companies as his alter ego for grand and as a device and sham to avoid recognition while perpetrating fraudulent activities.”
In paragraph 11 it was alleged that:
“The Defendant shall pray that the veil of incorporation of the 1st and 2nd Defendant be lifted and a declaration that the monies in question are the traceable proceeds of the monies fraudulently debited from the Accounts of Total (U) Ltd and Caltex (U) Ltd.”
In reply, the Plaintiff companies denied the allegations that Lawrence Kasasa Kasekese used the companies as his alter ego for fraud as a device and sham to avoid recognition while perpetuating his fraudulent activities is baseless and it does not necessitate lifting the veil of incorporation.
The principle of the independent corporate existence of a company from its promoters and subscribers was enunciated and emphasized in the case of Solomon Vs Solomon (1897) A.C. 22. Therefore the magic of corporate personality enjoyed by companies has hamstrung the efforts of Courts to lift the veil.