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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-1007-2004
THE MICRO FINANCE SUPPORT CENTRE LTD ::::::::::
PLAINTIFF
VERSUS
1. THE UGANDA MICRO ENTERPRENUERS
ASSOCIATION LTD
2. JENINAH MARY NTABGOBA
3. KAYONGO NKAJJA GODFREY
::::::::::::::::::: DEFENDANTS
BEFORE:
THE HONOURABLE MR. JUSTICE YOROKAMU BAMWINE
R U L I N
G:
The MICRO FINANCE SUPPORT CENTRE LIMITED, herein after called
the plaintiff sued the three defendants jointly and severally for special
and
general damages particularised in the plaint. The suit is based on three loan
agreements.
When the suit came up for hearing, Mr. Wambuga for the
defendants raised a preliminary point of law. He submitted that the plaint
does
not disclose a cause of action against the defendants. The reason for arguing
thus is that according to the plaint, the plaintiff
relies on three agreements
which were entered into between the Government of Uganda and the 1st
defendant. The other defendants are said to have guaranteed re-payments.
Counsel’s view is that the plaintiff is not the
Government of Uganda and
there is no evidence in the plaint of any assignment of the government’s
rights in the agreements
to the plaintiff. The long and short of Mr.
Wambuga’s argument is that the plaintiff is a third party, who cannot
benefit
from those agreements.
Mr. Karugire for the plaintiff does not
agree. According to him, to determine whether a cause of action is disclosed or
not, the
Court should look at the plaint. It should not look at the attachments
to it. In his view, to determine whether or not the plaintiff
was party to the
agreements, it requires evidence which evidence is yet to be led. The plaint is
not a document that contains evidence.
It is a statement of claim. They have
pleaded in para 6 (a) of the plaint that the money was lent out by the
plaintiff’s
predecessor, the Rural Micro-Finance Support Project. That
should be enough for purposes of establishing a cause of action.
Counsel:
Mr. Edwin Karugire for the plaintiff.
Mr. Henry
Wambuga for the defendant.
I have addressed my mind to the able arguments
of both counsel.
Halsbury’s Laws of England, Vol. 1 at P.6 defines
a “cause of action” as “that particular act on the
part of the defendant which gives the plaintiff his cause of
complaint.” It is, so to say, the fact or combination of facts which
gives a person the right to judicial redress or relief against another.
The
rationale is that where there is a right recognized by law, there also exists a
corresponding remedy for its violation. Thus
0.6 r 1 (a) of the Civil Procedure
Rules requires all pleadings generally to contain a brief statement of the
material facts on which
the party pleading relies for claim or defence. And
under 0.7 r 1 (e), it is mandatory that a plaint contains the facts constituting
the cause of action and when it arose. The consequences of a plaint which
discloses no cause of action are grave: it must be rejected
by the Court. It is
as serious as that. Therefore, before rejecting a plaint for non-disclosure of
a cause of action, the Court
must be duly satisfied that the case as presented
to it is unmaintainable and unarguable. Let me now turn to the impugned
plaint.
In para 6 (a) thereof, the plaintiff states that its cause of
action is derived from an agreement dated 30/11/2001 entered between
the Rural
Microfinance Support Project, the predecessor of the plaintiff, and the first
defendant for the advancement to the first
defendant of a loan of
Shs.35,000,000-. The other claims are also based on similar
agreements.
Mr. Karugire was of the view that in determining whether or
not the plaint discloses a cause of action, Court should not concern itself
with
the agreements themselves. His argument does not in my judgment represent the
law. For in Jeraj Shariff & Co. –Vs- Chotai Fancy Stores [1960]
EA 374, the Court of Appeal for Eastern Africa stated at p. 375, and I
agree:
“The question whether a plaint discloses a cause of action must be determined upon perusal of the plaint alone, together with anything attached so as to form part of it, and upon the assumption that any express or implied allegations of fact in it are true.”.
The relevant
portions of the agreement of 30/11/2001 read as follows:
“This agreement is made this 30th day of the Month of November in the year 2001.
BETWEEN the Government of Uganda (GOU) represented by the Executive Director, Rural Micro Finance Support Project (RMSP) of P.O. Box 33711, Kampala, on the one part Uganda Micro – Entrepreneurs Association P.O. Box 49336 Kampala District on the other part.
WHEREAS
1. The Government has received funds from the African Development Bank (ADB) in order to support the RMSP being implemented under the Office of the Prime Minister (OPM).
2. The Government represented by Rural Micro Finance Support Project (RMSP) wishes to use these funds to promote the development of sustainable financial services to the micro and small scale entrepreneurs.
3. Uganda Micro-Entrepreneurs Association is applying for a loan to increase its lending capacity to the micro and small entrepreneurs.
4. The Rural Micro Finance Support Project (RMSP) and Uganda Micro
– Entrepreneurs Association have agreed to enter into this agreement for the purpose of channeling part of the funds to the Micro-Enterprises upon the terms and conditions thereafter set forth.
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
Art 1: THE LOAN
1:1 The Rural Microfinance Support Project (RSMP) hereby agrees to lend ......”
From the above, it appears to be very clear
to me that this was a case of a disclosed principal. The agreement was between
the 1st defendant and the Government of Uganda represented by the
Executive Director of the Project. The Rural Microfinance Support Project
was a
Project in the Office of the Prime Minister with an Executive Director. It had
no corporate status. It was not a person in
law, a ‘person’
being any entity with legal rights and existence including the ability to sue
and be sued, to sign contracts, appear in Court
either by themselves or by
lawyers, and generally, other powers incidental to the full expression of the
entity in law. It simply
had no independent existence, a corporate personality
so to say. It was a Project in the Office of the Prime Minister and that was
it.
If I got Mr. Karugire’s argument properly, the
plaintiff’s case is based on an alleged succession, that is, that the
Rural
Microfinance Support Project was the predecessor of the plaintiff. It is
not indicated in the plaint as to how that succession came
about. This is
where Mr. Karugire feels that if he is given time, he will provide the missing
link through evidence. And it is
of course where the problem lies. The
plaintiff is a limited liability company, or so it has been described in the
plaint. It
could not have been born by the Project, a non-legal person. It
could only have come into existence through incorporation. If on
incorporation
it assumed the rights of the Project or the incorporation was for purposes of
the limited liability company assuming
the Project rights, the law is settled
that a contract made before a company is formed cannot bind the company formed
afterwards.
Nor can a company by adoption or ratification obtain the benefit of
a contract purporting to have been made on its behalf before
it came into
existence. In order to do so a new contract must be made with it after its
incorporation on the terms of the old one.
See NEC & 2 Others
–Vs- Nile Bank Ltd SCCA No. 17/97 reproduced in [1995] 1
KARL 138 at p.144.
The agreements attached to the plaint are not
such new contracts envisioned in the above case. As to any likely assignment of
contract,
the law is that rights or benefits under a contract may be assigned by
legal assignment, equitable assignment or by operation of
law. Except, perhaps
for equitable assignment, none of the others is applicable herein in the sense
that none has been pleaded.
In case of any written assignment or document
giving rise or explaining the genesis of such succession, the law requires under
0.7
r. 14 of the Civil Procedure Rules that it be attached to the plaint on
filing. None has been attached.
I have considered ‘equitable
assignment’ in view of Mr. Karugire’s passionate prayer that if
Court so wants, he can produce evidence of the succession. The issue
is of
course not what the Court wants but what a party must do to establish a cause of
action. I have already expressed doubt on
the possibility of a non-legal person
giving birth and later on being succeeded. As regards equitable assignment, a
transfer of
property taking effect only in equity, I’m mindful of the fact
that no particular form is necessary; it need not even be in
writing. But an
equitable assignee of a legal chose in action can enforce the right assigned by
action, joining the assignor as
a co-claimant, if he consents; or as a
co-defendant if he does not. See: Osborn’s Concise Law Dictionary,
9th Edn, at p. 152.
The pleadings herein do not reflect
compliance with any such procedure. It is a fundamental principle of our law
that only a person
who is party, to a contract can sue upon it. A stranger to a
contract can not take advantage of the provisions of the contract even
where it
is clear from the contract that some provision in it was intended to benefit
him: Midland Silicones Ltd –Vs- Scruttons Ltd [1962] AC 446.
In my view the principle stated in the above suit seals the
plaintiff’s fate herein. To maintain a suit in its current form
would
amount to the plaintiff getting a benefit out of a transaction to which it was
not a party. The law says No. In my view
a contrary position lacks any
jurisprudential foundation that I can think of. Even if I were to take a
generous course and allow
Mr. Karugire’s argument that evidence would take
care of the objection raised by counsel, no amount of evidence can in my view
change the status quo. The position would of course have been different if the
case had been filed by the Government or on its behalf
and the Attorney General
had given authority, to the plaintiff through their counsel to conduct its
prosecution. Such a course is
not borne out by the pleadings.
It is
settled law that where a plaint fails to disclose a cause of action, then it is
not a plaint at all. It is considered a nullity
which cannot even be amended.
It was so held in Auto Garage & Anor –Vs- Motokov (No. 3) [1971]
EA 514 and I respectfully agree with that position. The element of a
right enjoyed by the plaintiff is lacking in this case in its current
form. And
if any of the elements of a cause of action, such as a right enjoyed by the
plaintiff which has been violated, is lacking,
the plaint is a nullity, and no
amount of talking can save it, even if a decision were to be post poned on it to
a later date.
I would uphold the point of law raised by counsel about the
plaint disclosing no cause of action against the defendants or any of
them and
order it (the plaint) struck out with costs to the defendants. I order
so.
Yorokamu Bamwine
J U D G
E
08/06/2006
8/6/2006
Mr. Karugire for plaintiff.
Mr. Paul
Kutesa for defendants.
Court: Ruling
delivered.
Yorokamu Bamwine
J U D G
E
8/6/2006
Mr. Karugire: I’m instructed to apply for
leave to appeal.
Court: Leave is granted.
Yorokamu
Bamwine
J U D G E
8/6/2006
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