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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0614 OF 2004
ECUMENICAL CHURCH LOAN FUND (U) ECLOFF :::::
PLAINTIFF
VERSUS
1. JOHN BWIZA
2. W. TUMUHAIRWE
3.
KAHIMAKAZI
T/A KAMABARE WOMEN’S DEVELOPMENT :::::::
DEFENDANTS
BEFORE: THE HONOURABLE MR. JUSTICE YOROKAMU
BAMWINE
R U L I N G:
The
Plaintiff’s claim against the Defendants is for recovery of Shs.7,513,107-
being a debt due and owing as supported by avernments
in the plaint. When the
suit came up for a scheduling conference, Mr. Davis Ndyomugabe for the
Defendants raised two distinct points
of law.
1. That the agreement on which
the claim is based is legally unenforceable in that it was purportedly entered
into on 10/1/96 and
yet the Plaintiff was incorporated as a company on
24/2/1997. And that in any case, the Plaintiff was not a registered money
lender.
2. That the Plaintiff was at the time of the contract an agent
acting on behalf of a disclosed principal, Ecloff Foundation, Geneva,
but the
suit is in the Plaintiff’s names.
In reply, Mr. Kwemara –
Kafuzi, counsel for the Plaintiff, has invited me to over rule the objections.
He appears to accept
that the contract in question was entered into before the
Plaintiff’s incorporation but argues that long after the said agreement
the Defendant and the Plaintiff continued dealing with each other to the extent
that at some point in time the 1st Defendant acknowledged the
indebtedness to the Plaintiff. In his view, this amounted to Novation and
Ratification of the contract
which are exceptions to the pre-incorporation saga.
He said nothing about the issue of agency but invited this Court to find that
the objections amount to a technicality which Article 126 (2) (e) of the
Constitution was meant to remedy.
I have very carefully listened to the
arguments of counsel. I have considered Mr. Kafuuzi’s submission that the
parties had
agreed that determination of the objections awaits adducing of
evidence. This is denied by his learned colleague. On this, I must
say that
points of law are decided on the basis of pleadings and facts not disputed.
Where a point of law would be sufficient to
dispose of the case one way or the
other, it ought to be decided by the Court without first calling witnesses.
Where, however, issues
raised in the pleadings require evidence, it is fair that
Court does not delve into those issues as to do so would deny the other
side a
chance to produce its evidence and therefore be condemned unheard. The object
of determining points of law in the manner
suggested by Mr. Ndyomugabe is
expedition. However, in such a case, the point of law ought to be one which can
be decided fairly
and squarely one way or the other, on facts agreed or not in
issue on the pleadings, and not one which will not arise if some fact
or facts
in issue should be proved. See: N.A.S. Airport Services Limited –Vs-
A.G. of Kenya [1959] EA 53.
I will relate the above principle to the
case now before me. It is common knowledge that a company comes into existence
upon incorporation.
Upon incorporation, the company assumes the attributes of a
person. After incorporation, it is not bound by contracts entered into
in its
name or on its behalf before it was incorporated. This is because it simply did
not exist. There is nothing technical about
this. It is simply settled
law.
In the instant case, there is evidence that the impugned contract
was entered into on or about 10/1/1996. The Plaintiff was incorporated
on
24/2/1997. The ordinary rules of contract would therefore preclude the
Plaintiff from taking advantage of a contract entered
into before its
incorporation. However, this Court’s attention has been drawn to a
letter, annexed to the plaint, dated 23/7/1998.
In the said letter the author,
said to be the 1st Defendant, acknowledges indebtedness to the
Plaintiff but pleads for more time within which to pay. The defence has
disowned this
letter. It has been branded a forgery. If proved to have been
authored by the 1st Defendant, its effect would be to acknowledge
existence of the debt. An acknowledgment if proved, is a recognition of
something
as being factual. It is an acceptance of responsibility. Once it is
proved that the 1st Defendant made the acknowledgment of the debt in
1998, the issue of the Plaintiff company being non-incorporated at the time of
the
alleged contract would not arise since the alleged acknowledgment, or call
it novation if you may, would of itself found a cause
of action independent of
the contract in issue. Whether or not the letter relied upon is a forgery can
only be determined on evidence.
It cannot be determined on a point of law such
as this.
The pleadings therefore raise questions of fact which ought to
be investigated and remedied.
As to the Plaintiff not being a registered
money lender, the law on the point was considered in Naks Ltd –Vs-
Kyobe Senyange [1982] HCB 52. It was held in that case that since the
Plaintiff had no money lending licence, any agreement or contract so made in
default was
illegal and could not be enforced by the Courts on the basis of the
maxim ex turpi causa. This Latin phrase ex turpi causa non oritur
actio simply
means that ‘no claim arises from a base cause’. The policy was well
summarized by Lord Mansfield C.J in
the 18th Century when he
declared:
No Court will lend its aid to a man who founds his cause of
action upon an immoral or illegal act. If the cause of action appears
to arise
ex turpi causa ....... the Court says he has no right to be assisted: SUCCESS IN
LAW, 4th Edition by Richard H. Bruce at p.260.
In the
instant case, it is not pleaded by the Plaintiff that it was a money lending
institution governed by the Money Lenders Act.
Certainly not every person that
lends money is a Money Lender within the meaning of the Act. Our Act is in pari
materia with the
English Money Lenders Act 1900. Farwell J., while commenting
on that Act in Litchfield –Vs- Dreyfus [1906] 1 KB 584 at 588
– 589 observed, and I agree:
‘........... a man who carries on business as a money lender, and is not registered under the [English] Act, cannot recover. But not everyman who lends money at interest carries on the business of money lending. Speaking generally, a man who carries on a money lending business is one who is ready and willing to lend all and sundry, provided that they are from his point of view eligible.’
Relating the above to the issue before
Court, the Plaintiff has been described by counsel as a body affiliated to
churches in this
country. The law under section 1 of the Act defines who a
‘money lender’ is. Court does not know at this stage whether
the
Plaintiff comes within the meaning of that section; how the Defendants, if they
borrowed money from the Plaintiff as alleged,
came to know the Plaintiff as a
Money Lender to raise the inference that it was a ready and willing body to lend
money to all and
sundry; or whether the lending was selective, to bring it
within the exceptions stated in S. 1 (h) of the Act. Clearly, evidence
is
required in that regard.
Coming to the defence of ex turpi causa itself,
the law on the point is far from being settled. Noteworthy is the fact that
other
than this Court’s interpretation of the law in Naks Ltd case, supra,
there is no section in the Act, equivalent to one in other
jurisdictions,
stating that ‘no contract for the repayment of money lent by an unlicensed
money lender shall be enforceable.’
If any such section existed, there
would perhaps be no room for debate on this point. In England where our law
prides it origin,
opinion is divided. Thus in Bow Makers Ltd –Vs-
Barnet Instruments Ltd [1945] KB 65 at 71, Lindlay L.J. said:
‘Any rights which he (a Plaintiff) may have irrespective of his illegal contract will, of course, be recognized and enforced.’
One illustration of this principle, and
a strong case on its facts, was the decision of the Privy Council in Sajan
Singh –Vs- Sardara Ali [1960] AC 167. The Plaintiff and the Defendant
in that case concluded an illegal contract for the sale of a lorry and jointly
engaged in its unlawful
and fraudulent operation [contrary to certain Malaysian
Regulations]. The Defendant then removed the lorry from the Plaintiff and
refused to return it. The Plaintiff sued in detinue. He recovered the lorry
and damages for its wrongful detention, despite his
own participation in the
illegal contract and in the unlawful scheme involved. It was held that the
property in the lorry had passed
to the Plaintiff under the contract,
notwithstanding its illegality and that he was therefore entitled to enforce his
cause of action
in detinue despite the ex turpi causa defence. That case, and
many more including Saunders & Anor –Vs- Edwards & Anor [1987]
2 All ER 651, show that there are no rigid rules for or against the
application of the ex turpi causa defence.
This is not surprising since
it involves issues of policy and, if I may add, issues of security as well.
Depending on the circumstances
of each case, it would be preposterous for a man,
not denying taking another man’s money, to plead without shame that the
other
should whistle for his money merely because of an alleged illegality which
the parties may not have had in contemplation at the time
of the contract.
Accordingly, this Court takes the view that each case must be decided on its own
unique facts and circumstances.
The cases I have referred to show very
clearly that the conduct and relative moral culpability of the parties are
relevant in determining
whether or not the ex turpi causa defence falls to be
applied as a matter of public policy. I agree. Therefore, the authorities,
including our own Naks Ltd, supra, cannot be applied literally in every
situation. Until Court listens to the evidence, both from
the Plaintiff and the
Defendant, it is not in position to tell on which side of the line the present
case falls. At the end of the
day, after listening to both parties, Court will
be able to determine whether the moral culpability of the Defendant greatly
outweighs
any on the part of the Plaintiff to the extent that it he is found to
have indeed taken the loan, he should be allowed to keep the
fruits of his
fraud.
In view of what I have stated above, and considering the law as
enshrined in Article 126 (2) (e) of the Constitution which enjoins
the Court to
administer substantive justice without undue regard to technicalities, I am
inclined to the view espoused by counsel
for the Plaintiff that the commercial
justice engrained in this case requires that I overrule all the objections
raised by counsel
for the Defendant and I order that all issues raised be
determined on evidence. I do so.
The Plaintiff shall be entitled to the
attendant costs herein in any event. I order so.
Yorokamu
Bamwine
J U D G E
02/09/2005
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