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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT
KAMPALA
(COMMERCIAL COURT DIVISION)
HCT-00-CC-CS-0578 OF
2004
JOHN MAGALA ::::::::::::::::::::::::::::::::::::::::::::::::::
PLAINTIFF
(T/a Masajja Modern Primary School)
VERSUS
DAVID MUKASA :::::::::::::::::::::::::::::::::::::::::::::::
DEFENDANT
BEFORE: THE HON. JUSTICE GEOFFREY
KIRYABWIRE.
J U D G M E N T:
The Plaintiff claims from the defendant the recovery of the sum of
Ug.Shs.12,325,000/= and costs of the suit. The suit was originally
filed under
order 33 of the CPR as a summary suit on a specially endorsed plaint. The
defendant on the 29th September 2004 was granted leave to file a
defence.
The case for the plaintiff that he trading as Masajja Modern
Primary School entered on the 29th January 2004, into a Memorandum of
Understanding (MOU) with the defendants trading as Children’s Vision
Uganda (CVU) to provide
a financial subsidy for orphaned children studying at
Masajja Modern Primary School.
According to the Memorandum of Understanding
it was agreed that the defendant would send students to the plaintiff’s
school
and pay as a school fees a subsidy (being 50% of the school fees) of
Ug.Shs.25,000/= for each day attending student and Ug.Shs.65,00/=
for each
boarder.
The plaintiff then admitted the said students into the school
and taught and fed them. The implementation of the Memorandum of Understanding
started well as the first term fees (subsidiary) was paid in full. However, the
second term fees were not paid leaving a balance
of Ug.Shs.12,350,000/=.
Despite various demands the defendants have not paid the money.
Apart
from attending the application for leave to defend and filing a defence the
defendant’s lawyers did not attend the main
trial despite the service on
them of the hearing notice several times. The defence filed on the
15th October 2004 is largely a general denial of liability. However
Para 4 of the defence states;
“4. The alleged Memorandum of Understanding was made between the plaintiff and the Children’s Vision Uganda, a limited company...”
Though the name Serunjongi Frank is
shown as a defendant in the defence he was dropped as defendant by the consent
of the parties.
Three issues were agreed at scheduling as
follows:-
1. Whether the defendant is liable without the company Children Vision Uganda being sued.
2. If the defendant is liable whether he is to pay the whole sum claimed as prayed.
3. Remedies.
Mr. A. Mukwatanise appeared for
the plaintiff’s
Mr. J.F. Kityo appeared and is on record for the
defendant’s.
Issue No. 1: Whether the defendant is liable without the company Children Vision Uganda (CVU) being sued?
Counsel for the plaintiff
submits that the defendant are merely trying to hide and shield themselves from
liability by raising this
defence of a corporate existence. He prayed that
Court lift any alleged corporate veil for the defendant to face up to their
improper
conduct. He argued that where the device of incorporation is used for
some illegal or improper purpose then the Court is to disregard
the principle
and lift the veil of corporate identity so that if it is proved that a person
used a company he controls as a “cloak”
for an improper transaction
for which he should be personally held to be liable. In this regard I was
referred to the Nigerian case
of;
Dunlop Nigeria Industries Ltd. –Vs- Forward Nigeria Enterprises Ltd. and Farore (1976) NCLR 243.
Secondly it is further submitted that counsel for the defendant on the 5th August 2004 wrote to counsel to the plaintiff Exb. P4 where it was stated;
“...There are some arrangements made between our client and yours regarding the payment of school fees; however, last Sunday on 1st August, 2004 during the parents meeting your client’s representative one John Magala advised the parents to pay fees to your client direct. This was contrary to the previous arrangement agreed upon by both parties”.
Be that as it may, our clients are willing to start paying what they have so far received but before this could be done, our client would like to know how much money your client has collected from the parents. Please give us this information and we shall advise our client to take action.
Yours faithfully
for: Kityo & Company. “
Counsel for the plaintiff states that this letter amounts to an admission of liability.
I have perused the pleadings, and record of proceedings in this matter.
It would appear to me that the defendant and his counsel
sought to put in a
technical defence in this matter. The defence of separate corporate existence
of Children Vision Uganda was never
proved to Court at all. A perusal of the
Memorandum of Understanding does not immediately show that Children Vision
Uganda is a
body corporate. The onus is on the defendants to prove under
Section 58 of the Evidence Act (Cap) that Children Vision Uganda is
a body
corporate before it can expect Court to rely on such a defence. If the fact of
incorporation is not proved then it cannot
be relied on. In this case I find
that incorporation as far as Children Vision Uganda is concerned was not proved.
The effect in
reality is that the defendant can be sued directly.
However
what is more interesting is what appears to be an attempt by the defendant to
settle the matter. Whereas I am not inclined
to see Exh.P5 from M/S Kityo &
Company Advocates as an admission there is another letter filed as a copy in
this Court on the
27th May 2005 by the same defence lawyer that may
explain the absence of the defendants in Court. This letter is dated
27th May 2005 and is addressed to Counsel for the plaintiff and
reads;
“...We refer to the above suit.
We have discussed with our client the issue involved in the above suit and advised our client and he has agreed. We suggest that both parties meet and settle the matter and sign a consent judgment.
Yours faithfully
for: Kityo & Company “
It is not clear
why this letter was not raised at trial. It is not clear if this settlement
proposal was taken up or not or it just
failed. Be that as it may the Court
will take note of the letter as it was copied to it. Again I find that the onus
is on the defendant
to actively pursue the settlement proposal with the
plaintiff before trial begins, if he is serious.
In response to issue No.
1, I find that the defendant is liable without Children Vision Uganda being
sued.
Issue No. 2: If the defendant is liable whether he is to
pay the whole
sum claimed as prayed?
I have reviewed
the evidence Obol Santos (PW1) who was the Head teacher of Masajja Primary at
the time and John Magala (PW2) the Managing
Director of the school. I find that
looking at the payment schedules presented to Court and the Memorandum of
Understanding that
the defendants are indeed jointly and severally indebted to
the plaintiff in the sum of
Ug.Shs.12,325,000/=.
Issue No.
3: Remedies.
In light of my findings on the evidence and issues I
hereby grant the plaintiff the following remedies against the defendant;
1. Unpaid fees of Ug.Shs.12,325,000/=
2. Interest of 24% p.a. from date of judgment until payment in full.
3. Costs of the suit.
Geoffrey Kiryabwire
JUDGE
29/11/2005
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.RTF of original document