|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Uganda: Commercial Court |
[Database Search] [Name Search] [Recent Decisions] [Noteup] [Help]
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT
KAMPALA
(COMMERCIAL COURT DIVISION)
HCT-00-CC-CS-0588 OF
2003
1. ROBERT MWESIGWA
2. ABEL NAYEBAZA AND 134 OTHERS
:::::::::::::::::::: PLAINTIFF
VERSUS
BANK OF UGANDA :::::::::::::::::::::::::::::::::::::: DEFENDANT
BEFORE: THE HONOURABLE MR. JUSTICE YOROKAMU BAMWINE
R U L I N G:
It is claimed in this suit that on
18/9/98 the Defendant under the authority of the Financial Institutions Statute
(Statute No. 4/1993)
seized and took over control of the International Credit
Bank Ltd, ICB. It is also claimed that the Defendant negligently ran ICB
and
mismanaged it in the sense that the Defendant has currently not fully paid the
Plaintiffs, who were employees of ICB, their salaries
and terminal benefits.
This state of affairs is said to have occasioned suffering, hardship and
inconvenience for which they hold
the Defendant liable. Hence the claim for
general damages for breach of contract, duty and/or trust and negligence,
exemplary damages
for bad faith, recklessness, mental anguish, destitution,
embarrassment and/or inconvenience and a declaration that the Plaintiffs
are
entitled to salary arrears and terminal benefits from the Defendant.
It
is noteworthy that the same points were raised before my brother Lugayizi, J. in
HCCS No. 1/2000. He dismissed them for reasons
stated in his Ruling of
22/9/2003. Subsequent to that Ruling, the Plaintiffs filed another suit, the
instant one. In HCCS No. 1/2000,
the Plaintiffs had sued ICB and BOU jointly
and severally. My brother Lugayizi, J. held that the suit against BOU was
unmaintainable
in the form in which it had been instituted. Hence the
Plaintiffs’ decision to fine tune their claim in the current form,
this
time against BOU alone since the Court had okayed the plaint against ICB in that
suit. We therefore have 2 suits running along
side each other, one against ICB
(HCCS No.1/2000) and the other against BOU (HCCS No. 588/2003, the instant one).
Both are in respect
of the same employment contracts between the Plaintiffs and
ICB.
This is a second Ruling in this case. When it first came up for
hearing on 23/3/2005, Mr. Masembe Kanyerezi for the Defendant raised
some
preliminary points of law. He argued that the Plaintiffs’ claim was
resjudicata and that the suit was incompetent in
that there was yet another suit
pending in this Court (HCCS No.1/2000). In a Ruling which I delivered on
6/4/2005, I over ruled
the 2 objections for reasons that appear in that Ruling.
I did state, however, that there was yet another hurdle for the Plaintiffs
to
jump and this was whether or not the plaint raises a cause of action against the
Defendant. The point had not been raised for
Court’s determination. When
the case came up for a scheduling conference once again, Mr. Masembe-Kanyerezi
this time raised
it.
The thrust of his argument is that the Defendant is
a statutory liquidator of all closed banks, including ICB. That the power to
close them is derived from a statute, the Financial Institutions Statute, FIS.
That the plaint discloses no cause of action against
BOU in so far as it seeks
enforcement of employment contracts which BOU is not privy to. In his view, the
Plaintiffs may have a
cause of action against their employer, ICB (now in
liquidation) but not against BOU which is merely managing ICB in accordance with
powers vested upon it under the statute.
The second leg of Mr.
Kanyerezi’s objection is that under S.49 of the Statute, no suit or legal
proceedings shall lie against
the Defendant or any officer thereof for anything
which is done in good faith pursuant to the provisions of the statute. That to
sustain a claim against BOU, bad faith must be pleaded with sufficient
particularity which, in his view, the Plaintiffs have not
done. On the strength
of the 2 objections above, he has invited me to have the plaint struck
out.
Mr. Rutiba for the Plaintiffs does not agree. According to him,
when the Defendant terminated services of the Plaintiffs, it assumed
the
contractual role of the employer. That as such, BOU is liable on the contracts
of employment between the Plaintiffs and ICB.
He has invited me to find that
the doctrine of promissory estopped is applicable in this case.
On the
issue of bad faith, his assertion is that bad faith has sufficiently been
pleaded and particularized. He therefore invited
me to reject the two
objections and proceed to determine the suit on its merits.
I have very
carefully addressed my mind to the arguments of both counsel. It is trite that
a plaint which discloses no cause of action
must be rejected.
To say that
a plaint discloses a cause of action, it must show that the Plaintiff enjoyed a
right; that the right was violated; and
that the Defendant is liable for that
violation. There is a wealth of authorities on this point, including the often
cited AUTO GARAGE & OTHERS –VS- MOTOKOV (NO. 3) [1971] E.A.
514.
As regards privity of contract, this refers to a relationship
between the parties to a contract, which makes the contract enforceable
as
between them. The general position is that a stranger to a contract cannot sue
upon the contract unless given a statutory right
to do so: Kayanja
–Vs- New India Assurance Company Ltd [1968] EA 295.
Turning now
to the issue before me, I’m of the considered view that on the face of the
pleadings, the Plaintiffs case against
the Defendant satisfies the two
requirements stated in the AUTO GARAGE case, supra. The plaint shows that the
Plaintiffs enjoyed
a right and that their right was violated. It shows that
they have since 1998 been rendered idle on account of loss of employment.
They
are yet to be paid their terminal benefits, if any. The issue as I see it is
over whether the Defendant, BOU, is liable for
that violation.
From the
pleadings, the Defendant was not party to the contracts of employment in issue.
The contracts were between the Plaintiffs
and ICB. In view of the fundamental
principle that only a person who is a party to a contract can sue or be sued on
it, clearly
the Plaintiffs have no cause of action against BOU.
I notice
that what is in issue herein are liabilities under a contract of employment.
The general rule is that such liabilities can
not be assigned. However, they
can be assigned with the consent of the other party to the contract, a situation
known as Novation
in law. Generally speaking, the parties may make them
assignable, either expressly or impliedly. None of the circumstances above
is
applicable to the issue at hand. The above notwithstanding, this Court is also
cutely aware that a right or benefit under a contract
may be assigned by legal
assignment, equitable assignment or by operation of law. The only likely event
herein would be assignment
by operation of law. In such event, the law would
itself confer such a right.
I have looked at the Financial Institutions
Statute, 1993. It is silent on the transfer of any such employment rights from
the employer
to the Central Bank that may take possession of a financial
institution. The Plaintiff’s strong point appears to be based
on their
interpretation of the FIS, especially S. 32 thereof. This section provides that
the Central Bank shall, upon possessing
a financial institution under S. 31 of
the Statute, be vested with exclusive powers of management and control of the
affairs of the
Financial Institution. Under Subs. 2, the powers include the
power to continue or discontinue its operation as a financial institution,
initiate, defend and conduct in its name any action or proceeding to
which the financial institution may be a party. The Plaintiffs argument herein
is that BOU is liable
because it took over the management and control of ICB.
In view of this Court’s decision in GREENLAND BANK LTD –VS
WESTMONT LAND (Asia), HCCS No. 309/1999, unreported, the Plaintiffs’
argument is unsustainable.
In that case, BOU had taken over as herein,
the management and control of Greenland Bank. S.32 came under direct
interpretation of
Court. The Court, per Ntabgoba PJ (as he then was) held that
by BOU taking possession of Greenland Bank, the latter had not ceased
to be a
corporation sole, capable of suing or being sued in its name. That the Central
Bank had assumed the roles of management
and control of the institution which
was exercised by the Board of Directors and depositors respectively, before
Greenland Bank was
taken over. Applying the same reasoning to the instant suit,
ICB has not ceased by reason of its being possessed by BOU. It cannot
sue or be
sued directly using its own lawyers because that function has been assumed by
the Central Bank. However, it can sue or
be sued through BOU which has the
management function of that Bank. True, the employment contracts were
terminated by officials
of the Central Bank. However, it did what the Board of
Directors of ICB would have done if the Board had not been disbanded. Until
ICB
is finally liquidated and de-registered, it remains liable for its former
employees employment rights. Accordingly, I find merit
in Mr. Kanyerezi’s
argument that the Plaintiffs have no direct cause of action against BOU as
regards the alleged breaches.
Mr. Rutiba’s other argument relates
to the doctrine of promissory estoppel, that is, that BOU promised to pay them
(i.e. the
Plaintiffs) but that it has renaged on its promise. Once again, it
would not be BOU to pay them but their employer ICB. Such payment
would come
from ICB although it would reach the Plaintiffs through BOU by virtue of its
being the current manager of ICB. Accordingly
I have not found the doctrine of
any help to the Plaintiffs. In any case, to rely on it, the law places a duty
on the Plaintiffs
to plead it and prove it. The law as I understand it is that
facts giving rise to a plea of waiver or estoppel must be pleaded.
See:
BALWANT SINGH –VS- KIPKOECH arap Serem [1963] EA 651. In the
instant case, estoppel is only left to be inferred, it is not pleaded as a cause
of action. The Plaintiffs have only cited
it as an instance of bad faith, not
as a cause of action.
For the reasons stated above, I find merit in the
objection raised by Mr. Kanyerezi on this point and sustain it.
This now
brings me to the other leg of Mr. Kanyerezi’s argument, the
Plaintiffs’ purported failure to plead the acts of
bad faith. Paragraphs
4,5 and 6 must be read together. Para 4 sets out the facts constituting the
alleged cause of action against
BOU. They include seizure of the Bank on
18/9/98. It is not alleged that this was done in bad faith.
In para 5,
it is contended that the actions of the Defendant (pleaded in para 4) amount to
breach of contract for failure to pay salary
arrears in the first instance, and
terminal benefits in the 2nd instance, and clearly an abuse of the
Defendant’s statutory powers. It is not shown what provisions of the
statute were abused.
It was necessary that it be pleaded.
In para 6,
they submit that as a statutory corporation, the Defendant was charged with the
orderly seizure, merger and/or liquidation
of Financial Institutions, that the
Defendant breached its duty/and or trust to the Plaintiffs and acted with
manifest professional
negligence. Again, what they (BOU) is alleged to have
done in bad faith is not pleaded.
Thereafter, the plaint gives what is
said to amount to breach of duty and/or trust, negligence, recklessness, bad
faith and abuse
of statutory powers. In other words, “bad
faith” is being particularised without being pleaded! This, so argues
Mr. Kanyerezi, offends against 0.6 r 2 of the Civil Procedure
Rules. Again, Mr.
Rutiba does not see anything wrong with the pleadings. He thinks that Mr.
Kanyerezi is simply splitting hairs.
I have addressed my mind to the able
arguments of both counsel.
Under S.49 of the Statute, no suit lies
against BOU or any of its officers for anything which is done or intended to be
done in good
faith pursuant to the provisions of the statute. The bad faith
must therefore relate to the implementation of the statute. Accordingly,
BOU is
protected against suits arising out of seizures of financial institutions unless
the aggrieved party is able to show that
what BOU did was not in good faith. It
is argued by counsel for the Defendant that the plaint as it stands does not
plead any bad
faith against which the Defendant should prepare itself to
defend.
I agree with that argument. 0.6 r 2 is couched in these
terms:
“In all cases in which a party pleading relies on any misrepresentation, fraud, breach of trust, willful default or undue influence, and in all other cases in which particulars may be necessary, such particulars with dates shall be stated in the pleadings.”
The
Plaintiffs’ case is based on alleged acts of bad faith. The purported
acts of bad faith are not pleaded. There is only
an attempt to particularise
them. From my reading of the plaint, no single instance is pointed out as an
act of bad faith on the
part of the Defendant or its officers. Most of the
cited grievances in the particulars relate to alleged breaches by the employer
which, as already pointed out, the Defendant is not.
In my view, the
requirement under the law not only to plead it but to also particularize it has
a sound jurisprudential foundation.
As Court observed in the Ruling in HCCS No.
1/2000 striking out the plaint as regards the Defendant, the rationale behind
the protection
under S. 49 of the Statute is fairly obvious. It is in the
public interest that BOU, as a watchdog of financial institutions in
Uganda
charged with the responsibility of ensuring that such institutions are properly
managed, must not be unnecessarily opened
up to all sorts of legal actions as it
carries out its statutory duties. Hence the requirement not only to plead bad
faith but also
to prove it. I know that proof can only be on evidence adduced.
However, it is necessary that the alleged acts of bad faith be
pleaded so that
the Defendant gets to know how to counter them. Imputing bad faith to someone,
be it to an artificial or natural
person, is a grave matter. It goes to the
person’s reputation and professionalism. As counsel has correctly put it,
a person
can act negligently towards another. To say that this was in bad faith
goes far beyond the act of negligence itself.
Accordingly, 0.6 r 2
requires that a person alleging willful default, which the Plaintiffs appear to
be alleging herein, he/she must
give particulars of the faults in issue so that
the Defendant can adequately prepare himself for the grave accusations before
the
trial begins. From the instances cited by the Plaintiffs in (a) –
(j), e.g. uttering conflicting and contradictory communications
and directions,
withholding monies due to the Plaintiffs, etc, these were matters incidental to
the seizure. The law giving the
Defendant the power of seizure was, in the
words of the learned PJ in the Greenland Bank, supra, inelegantly drafted. I
agree.
This inelegant draftsmanship cannot be blamed on the Defendant
whose onerous duty was to implement the statute to the letter. The
plaint as it
stands, as regards the alleged acts of bad faith, does not show what rights were
enjoyed by the Plaintiffs under the
statute and how those rights were violated.
To give an example, it is not enough to allege that the Defendant uttered
conflicting
and contradictory statements on the matter. They must show that the
Defendant was under duty, imposed by the statute, to do X,Y,Z
which were not
done, or if done, not done in accordance with the statute, to raise inference
that the act or omission was in bad
faith. In my view, Mr. Kanyerezi’s
second objection to the plaint also has merit. In the result, both objections
are sustained.
Under 0.7 r 11 (a) of the Civil Procedure Rules, a plaint which
does not disclose a cause of action must be rejected. In both instances
cited
by counsel, the plaint does not disclose a cause of action against the
Defendant. I would strike it out in accordance with
0.7 r 11 (a) of the Civil
Procedure Rules and I do so.
As regards costs, the usual result is that the
loser pays the winner’s costs. This practice is, however, subject to the
Court’s
discretion, so that a winning party may not necessarily be awarded
his costs. In the instant case, I’m of the considered view
that the
inelegant manner in which the Financial Institutions Statute was drafted,
particularly S. 32 thereof, greatly contributed
to the Plaintiffs’
inelegant interpretation of it. In these circumstances, I’m inclined to
order each party to bear
its own costs and I order so.
Yorokamu
Bamwine
J U D G E
21/6/2005
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/ug/cases/UGCommC/2005/29.html
.RTF of original document