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Last Updated: 25 May 2007
Shafa Cleaners & Anor V Tropical Africa Bank HCT-00-CC-MA-0801-2006 [2007] UGCommC 15 (9 February, 2007)
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-MA-0801-2006
(ARISING FROM
HCT-00-CC-CS-062- 2006)
SHAFA CLEARERS AND FORWARDERS LTD
.APPLICANT/DEFENDANT
NKUTU SHABAN SADIQ
VERSUS
TROPICAL
AFRICA BANK LTD ................... RESPONDENT/PLAINTIFF
9
February 2007
BEFORE: HON. JUSTICE LAMECK
N. MUKASA
RULING
This is an application
brought by way of Notice of Motion under Order 36 rule 11 and Order
52 rules 1 and 3 of the Civil Procedure
Rules for Orders that:-
1. The exparte decree and judgment passed against the applicants in the main suit be set aside.
2. Execution of the aforesaid decree be set aside.
3. Applicants be granted unconditional leave to appear and defend the main suit
4. Costs of this applicant be granted to the applicants.
The grounds for the application are that:-
1. The Applicants have a good defence to the respondents claim, namely that:-
(a) the main suit was wrongly instituted against the 2nd Applicant, Nkutu Shaban Sadiq.
(b) The respondent’s debt is disputed.
2. The Applicants have a counter claim against the respondent for breach of contract.
3. There are bonafide triable issues which go to the root of the whole of Respondents claim.
4. It is just and equitable that the orders sought be granted.
The brief background to this Application is
that the Respondent M/s Tropical Africa Bank Ltd, filed Civil Suit
No. 62 of 2006 against
the Applicants, M/s Shafa Clearers and
Forwarders Ltd and Shaban Sadiq Nkuutu, jointly and severely seeking
recovery of the liquidated
amount of shs16,089,920 as at 31st
December 2005 plus accrued and accruing interest until payment in
full in respect of an overdraft facility advanced by the Respondent
to the Applicants. Judgement was on 31 March 2006 passed in favour of
the Respondent pursuant to the provisions of Order 33 (now
36) rule 3
of the Civil Procedure Rules.
This application is made under
Order 36 rule 11 of the Civil Procedure Rules which states:-
"After the decree the court may, if satisfied that the service of the summons was not effective or for any other good cause, which shall be recorded, set aside the decree and if necessary stay or set aside execution and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the court so to do, and on such terms as the Court thinks fit."
The rule gives court the discretion to set
aside a decree if satisfied that the service was not effective or for
any other good cause.
In Sulaiman Nsamba Vs Fred Balinda
HCCS No. 102/98 (1998) KALR 64 Justice Akiiki – Kiiza
held that once an applicant for an order to set aside an axparte
decree under Order 33 (now 36) rule 1 establishes
that he has a
defence on the merits of the case, then in light of all facts and
circumstances both prior and subsequent it is just
and reasonable to
set aside the decree. In Fr Francis Payer Vs Josephat
Kawalya Mwebe & Others H.C.C.S. No.194/94 (1995) IV KALR 143
Justice Kereju held that justice required that the defendants who
had shown an interest in being heard should be given the opportunity
as long as they can be penalised in costs. In Patel
Vs Cargo Handling Services Ltd (1994) EA 75 Duffas
P at page 76 stated:-
"--- in this respect defence on merit does not mean ---- a defence that must succeed it means --in a triable issue, that which raise a prima facie defence and which should go to trial for adjudication"
Therefore what is important at this stage is
only for the applicant to establish a triable issue sufficient for
proposes of granting
the leave to defend the suit.
The
application is supported by an affidavit sworn by Nkuutu Shaban
Sadiq, the 2nd Applicant and Executive Director of the 1st
applicant. In the affidavit it is admitted that the 1st
Applicant applied for various overdraft facilities from the
Respondent but it is denied that it was granted a facility to the
tune
of Shs15,000,000/= as stated in the plaint. The applicants
contend that the 1st Applicant was granted an overdraft facility of
shs14,000,000/=
at an interest agreed not to exceed 19% per annum.
The specific interest rate to be applied was at the time of
disbursement of the
overdraft facility still the subject of
negotiations between the 1st Applicant and the Respondent
but that the Respondent applied varying interest rates per month from
0.82% to 3.8% per month which
comes to 9.8% per annum to 45% per
annum. The Applicants claim that the said interest was
unconscionable, unascertained and contrary
to the agreement between
the parties. The applicants further content that by 31st
May 2006 the 1st Applicants indebtedness to the Respondent
for both the principal and interest stood at UgShs17,751,296/= which
by 31st August 2006 the 1st Applicant had paid
all the principal pending payment of the accrued interest, if any,
which was yet to be ascertained and finally
resolved by the
Respondent after its Board had met over the issue.
Specifically
about the 2nd Applicant, in paragraph 15, Nkuutu avers that at all
times material to this suit he was acting as the Executive
Director
and therefore an agent of the Applicant, a disclosed principal.
Mr.
Muzamiru Kibedi, counsel for the Applicant, submitted that the
applicant has raised various triable issues, namely:-
1. Liability of the 2nd applicant advanced.
2. Dispute on the amount advanced whether it was shs 15,000,000 or Shs14,000,000.
3. Dispute on the interest rate charged.
The Respondent filed two affidavits in reply
sworn by Wegulo T Addah, the Respondent’s Bank Secretary, and
another by Basaija David
Kisembo, a Court bailiff. In his affidavit
Wegulo maintains that the overdraft facility granted was of
Shs15,000,000. Therefore the
amount of the facility remains in
dispute. He also avers that the overdraft facility was granted at an
interest rate of 30% per annum
as the Respondent Banks Credit Policy
and practice. That the Respondent charged interest on outstanding
balances at the rate of 30%
per annum. The deponent thereby avers
that interest was charged at a uniform rate of 30% per annum yet the
Applicants contend that
the respondent applied varying interest rates
varying from 9.8% per annum to 45%. I have also studied the
annextures referred in
Wegulo’s affidavit and found that none of
them classified the overdraft facility as a temporary facility. So
the interest rate
in also in dispute. In paragraph 7 it is averred
that the 2nd Applicant was joined as a party who would be
affected by the outcome of the case. In her submission Ms Basaza
Waswa sought to rely
on Order 1 rule 3 CPR which provides:-
"All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought against those persons, any common question of law or fact would arise."
Counsel referred to the Credit facilities
Application Forms where the 2nd Applicant was named as one of the
owners and directors of
the 1st Applicant and argued that
the 1st Applicant was the registered proprietor of the
land at Block 222 Plot 845 Namugongo which was deposited as security.
In the plaint
it is claimed that the Applicants had jointly and or
severally applied for and the Respondent granted them the overdraft
facility
and that the applicants had jointly and severally defaulted
in the repayment of the monies borrowed. The 2nd Applicant
on the other hand denies personal liability. There is therefore an
issue of the 2nd Applicants personal liability which
require adjudication. Considering all the above I find that the
applicants have established sufficient
triable issues.
Ms.
Basaza Waswa submitted that the Applicants had failed to show why
they did not take the right steps at the right time. That instead
of
showing good cause for the Applicants failure to apply for leave to
defend the suit, they had only laboured to show traible issues.
She
argued that that was secondary. She relied on Caltex Oil (U)
Ltd Vs Kyobe (1998-1990) HCB 141 wherein Byamugisha J (as
she then was) held that for Court to exercise its wide and
discretionary powers to set aside a decree obtained
under Order 33
(now 36) rule 3 the applicant had to satisfy Court either that there
was no service or he had to show any other good
cause. That
sufficient cause had to relate to the failure by the applicant to
taken the necessary step at the right time. However,
her Lordship
observed that there was no and first rule as to what constitutes any
other good cause. That each case has to be considered
on its own
peculiar circumstances. In Fr Francis Payer Vs Kawalya Mwebe
(supra) Justice Kireju having found that it was apparent that the
defendants were in fact served with the summons to enter appearance
went on to find that justice, however required defendants who had
shown an interest in being heard should be given the opportunity.
In the instant case the Applicant have not anywhere
disclaimed service of the summons in the summary suit. They do not
dispute the
indebtedness but dispute the personal liability of the
2nd applicant and the amount of the facility advanced and
the interest chargeable. Further they contend that according to them
they had
paid all that owing to the respondent and have shown
interest to defend the suit. In the premises it is only just and
reasonable
that the decree is set aside and they are allowed to
defend the suit. I accordingly so order.
The applicants have
also prayed for an order setting aside the execution of the decree.
In the Respondents affidavit in reply sworn
by Basaija, the Court
bailiff, he avers that he on 12th July 2006 obtained a
warrant of attachment and sale of the suit property from court. On
20th July 2006 the property was advertised in the Monitor
Newspaper and on 21st August 2006 sold by public auction
to the highest bidder one Acham Anne. A return of execution was filed
on 30th August 2006.
The 2nd Applicants
in his affidavit in support of the application avers that he had
previous to the attachment and sale sold off the suit
property to one
Byekwaso Bob on 4th July 2006 and disputes that the
purported sale ever took place. Also in paragraph 4 of his affidavit
in rejoinder the 2nd Applicant claims that the alleged
sale was conducted contrary to the law in as far as it was carried
out without a valuation report
which was required by the
Registrar.
Mr. Kibedi submitted that there was a question of
the legality and bonafideness of the sale of the suit property.
Whether the property
was properly sold is an issued raised in the
Applicant’s counter claim. To make an order setting aside the
attachment and sale
of the suit property at this stage will amount to
pre-determining the Applicants’ Counter-claim. It is also trite
that Court must
have before it and ensure that all persons whose
interest may be adversely affected by the relief claimed are either
joined as parties
or are made cognizant of the action in order that
such persons may be bound by the decision of the court and bring
litigation to
an end. See Maria Naluvugo Vs
Isaac Hategyekimana (1977) HCB 71. I therefore
decline to make an order on this issue at this stage.
I
accordingly make the following orders:-
|
(i) |
The exparte judgment and decree passed against the Applicants in Civil Suit No 62 of 2006 is hereby set aside. |
|
(ii) |
The applicants are granted unconditional leave to file their written statements of Defence within 7 days from the date hereof. |
|
(iii) |
The order as to costs in the main suit shall bind the costs of this application. |
LAMECK N. MUKASA
Judge
9 February
2007
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