Bajombwe v Uganda Revenue Authority (HCT-01-CV-MA-0097-2024) [2025] UGHC 278 (25 April 2025)

**THE REPUBLIC OF UGANDA**

**IN THE HIGH COURT OF UGANDA AT FORT PORTAL**

**HCT-01-CV-MA-0097-2024**

**(ARISING OUT OF HCT-01-CV-CS-0062-2024)**

1. **BAJOMBWE JUSTUS NKAYARWA** 2. **BUNDIBUGYO ENERGY COOPERATIVE**

**SOCIETY LTD::::::::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

**VERSUS**

**UGANDA REVENUE AUTHORITY ::::::::::::::::::::::::::::: RESPONDENT**

**BEFORE: HON. JUSTICE VINCENT WAGONA**

**JUDGMENT**

**Introduction**:

1. The Applicant brought this Application under Section 98 of the Civil Procedure Rules, Order 36 Rule 4 and Order 52 Rules 1 & 3 of the Civil Procedure Rules seeking Orders that; - 2. **Leave be granted to the Applicants to appear and defend Civil Suit No. 62 of 2024;** 3. **Civil Suit No. 62 of 2024 be heard and determined on merit; and** 4. **Costs of this Application be provided for.**

**Background**:

1. The Respondent filed a summary suit vide Civil Suit No. 62 of 2024 against the Applicants seeking to recover the sum of **Ug. Shs. 200,132,885/=** and interest thereon arising from a Memorandum of Understanding dated 2nd October 2018 in which the 2nd Applicant agreed to pay **Ug. Shs. 161,385,624/=** to the Respondent as outstanding Value Added Tax liability. The 2nd Applicant allegedly deposited 12 postdated cheques and that the 1st Applicant executed a personal guarantee in favor of the Respondent undertaking to assume and bear full responsibility for the due payment of all monies that may, from time to time be due and owing from the 2nd Applicant to the Respondent under the Memorandum of Understanding. That the 2nd Applicant also deposited a certificate of title for its land comprised in FRV HQT441 Folio 25 Block (Road) 5 Plot 109 at Bumate 11. That out of the agreed amount, the 2nd Applicant paid **Ug. Shs. 121,039,218/=** leaving a balance of **Ug. Shs. 40,346,406/=** which sum has now accrued interest to the tune of **Ug. Shs. 200,132,885/=**. That despite several reminders, the Applicants have deliberately failed to pay the said outstanding tax liability. 2. The Applicants filed the instant Application for leave to appear and defend. In his Affidavit in Support of the Application, the 1st Applicant contended that he is the former Chairperson (Director) of the 2nd Applicant and that on 2nd October 2018, he, on behalf of the 2nd Applicant entered into a memorandum of understanding with the Respondent in which the 2nd Applicant agreed to pay the outstanding taxes owed to the Respondent at a tune of **Ug. Shs. 161,385,624/=** to be paid within 12 instalments. That the 2nd Applicant paid off the Respondent’s debt and reduced the balance to only **Ug. Shs. 40,345,406/=** by the year 2020. That however, in the year 2020, the Electricity Regulatory Authority made a decision not to renew the 2nd Applicant’s business license, and as a result the 2nd Applicant shut down business completely by 31st March 2021 and has not been in any form of business since then. That the emergencies between the Electricity Regulatory Authority and the 2nd Applicant entirely caused the 2nd Applicant the inability to pay off the remaining small balance. That the Respondent’s actions of accruing more interest and penalties even after the 2nd Applicant had shut down business is illegal and very unfair. He contended that he has a genuine and reasonable defence to the suit and prayed for leave to appear and defend the suit. 3. In reply, the Respondent reiterated their averments made in Civil Suit No. 62 of 2024 and further stated that in Paragraph 4 of the Affidavit in Support of the Application, the 1st Applicant admitted an outstanding tax liability of **Ug. Sh. 40,346,406/=** owed by the 2nd Applicant as at the year 2020 and that this outstanding tax and interest thereon is a debt to Government and the same is due and payable by the Applicants. That the Applicants have not availed any proof of cessation of business and have never availed the same to the Respondent and that as such, the Applicants have no defence and that this Application for leave to appear and defend does not disclose any triable issues.

**Hearing and Representation**:

1. The Applicants were represented by *M/s Mugabe-Luleti & Co. Advocates* while the Respondent was represented by the *Legal Service & Board Affairs Department* of the Uganda Revenue Authority. Both counsel addressed me by way of written submissions which I have duly considered.

**Issues**:

1. I find that the issue for trial is; -

***Whether the Applicant should be granted leave to appear and defend Civil Suit No. 62 of 2024***.

**Resolution**:

1. **Order 36 rule 4** of the **Civil Procedure Rule** is to the effect that unconditional leave to appear and defend a suit will be granted where the applicant shows that he or she has a good defence on the merits; or that a difficult point of law is involved; or that there is a dispute which ought to be tried, or a real dispute as to the amount claimed which requires taking an account to determine or any other circumstances showing reasonable grounds of a bona fide defence. (**See Bunjo vs. KCB (Uganda) Ltd (Misc. Appl. No. 174 of 2014** and **Roko Construction Ltd vs. Ruhweza Transportation & Construction (U) Ltd, Misc. Application No. 831 of 2020**) 2. The applicant should demonstrate to court that there are issues or questions of fact or law in dispute which ought to be tried. The procedure is meant to ensure that a defendant with a triable issue is not shut out. (See **M. M. K Engineering vs. Mantrust Uganda Ltd H. C. Misc Application No. 128 of 2012**; and **Bhaker Kotecha vs. Adam Muhammed [2002] 1 EA 112**). 3. In **Maluku Interglobal Trade Agency vs. Bank of Uganda [1985] HCB 65**, the court stated that:

*“Before leave to appear and defend is granted, the defendant must show by affidavit or otherwise that there is a bonafide triable issue of fact or law. When there is a reasonable ground of defence to the claim, the defendant is not entitled to summary judgment. The defendant is not bound to show a good defence on the merits but should satisfy the court that there was an issue or question in dispute which ought to be tried and the court shall not enter upon the trial of issues disclosed at this stage.”*

1. It is also a legal requirement that before leave to appear and defend is granted, the applicant must disclose the nature of claim against the Respondent or the objections to the Respondent/plaintiff’s claims which could be either founded on law or fact or on a mixture of law and fact which are bonafide and which merit serious judicial consideration during trial in the main suit. This must be ascertainable from the pleadings and the annexure thereto without going into the merits of the case. (**See Children of Africa vs. Sarick Construction Ltd H. C Miscellaneous Application No. 134 of 2016, Roko Construction Ltd Vs. Ruhweza Transportation & Construction (U) Ltd, Misc. Application No. 831 of 2020** and **Magric Water General Hardware Ltd Vs. Abasi Balinda Transporters Ltd, Misc. Application No. 067 of 2021**) 2. In the present case, the Respondent seeks to recover **Ug. Shs. 200,132,885/=** against the Applicants who acknowledge the signing of a Memorandum of Understanding with the Respondent on 2nd October 2018 in which it was agreed that the 2nd Applicant would pay its outstanding value added tax liability of **Ug. Shs. 161,385,624/=** to the Respondent within 12 instalments. Both parties agree that out of the said **Ug. Shs. 161,385,624/=**, the 2nd Applicant paid 9 instalments totaling to **Ug. Shs. 121,039,218/=** leaving an outstanding balance of **Ug. Shs. 40,346,406/=** which has not been paid to date. The Applicants state that the outstanding balance was not paid because the Electricity Regulatory Authority did not renew its business license leading the Applicant to completely shut down business on 31st March 2021 and that they have not been working since then. The Applicants argue that it is illegal and unfair to levy interest and penalties on a business which has shut down business. While the Respondent contends that the Applicants have not availed any proof of cessation of business and have never availed the same to the Respondent and that as such, the Applicants have no defence, the court cannot go into the merits of this claim at this stage, without going into the merits of the case by way of a trial. 3. I therefore find that the Applicants raise triable issues that need to be ably resolved through a trial after hearing evidence from both parties. Therefore, this application succeeds with the following orders: 4. **The applicant is granted unconditional leave to appear and defend Civil Suit No. 062 of 2024.** 5. **The Applicants/Defendants shall file their respective written statements of defense within 15 days from the date of delivery of this Ruling.** 6. **The costs of this application shall abide the outcome of the Civil Suit No. 062 of 2024.**

**I so Order.**

**Dated at Fort Portal this 25th day of April 2025**


Vincent Wagona

**High Court Judge**

**FORTPORTAL**