Bank of Uganda v Banco Arabe Espanol (Civil Application 20 of 1998) [1999] UGSC 33 (22 January 1999)

# IN THE SUPREME COURT OF UGANDA

# AT MENGO

### (CORAM: ODER, J. S. C.)

## CIVIL APPLICATION NO.2O OF I998

BETWEEN BANK OF UGANDA APPI-ICANT

#### VE,RSUS

# o (An application arising from Supreme Court Civil Appeal No.8 of 1998)

# RTILING

This is an application brought by Bank of Uganda (BOU) against the respondent, Banco Arabe Espanol (BAE). The application seeks an order from this Court that the respondent should give further security for costs in Supreme Court Civil Appeal No.8 of 1998; and security for past costs in the courts below.

The background to the application may be stated briefly as follows

o

The respondent instituted a suit in the High Court on 2-6-97 against the applicant and the Uganda Govemment for repayment of a loan of US\$I nrillion lent by respondent to the Uganda Govemment. The applicant had guaranteed repaynrent ofthe [oan. The suit was resisted by the two defendants by raising a preliminary objection that it was statutebaned. The objection was made in an application by a Notice of Motion filed on l8-9- 97. The High Court up-held the objection on2l.ll.97, ruled on the motion on21-ll-97, up-holding the objection by the Uganda Govemment, but it over-ruled the applicant's objection. The High Court also ordered for the trial of the suit against the applicant to proceed. The applicant subsequently applied to the High Court for an order for security for costs against respondent. The application was granted on l6-l-98. The respondent was ordered to deposit in Court shs.20 million as security for costs within 30 days from the date of the order. When the respondent failed to cornply with the order, the suit was dismissed on25-2-98. On 2-3-98, the respondent filed an application in the High Court for reinstatement of the suit on the ground that it had been prevented by sufficient cause from depositing the security for costs ordered by the High Court. The application was heard on 27-5-98. It was granted, the court making an order for reinstatement ofthe suit. It was also ordered that the respondent should deposit shs.20 million as security for costs

and that the suit should proceed for trial. The respondent promptly deposited the sum of shillings 20 million ordered by the Court. Thereafter the suit was heard to the stage when the respondent closed its case as the plaintiff.

In the meantime, the applicant appealed to the Court ofAppeal against the order for reinstatement of the suit. The Court ofAppeal allowed the appeal on 1.i2.98. The High Court order reinstating the suit was reversed, and set aside. The order against the respondent to deposit security for costs was upheld. On 18.12.98 the respondent appealed against the Court ofAppeal decision. On23.12.98 the applicant brought the present application under rule 100(3) of the Rules of this Court. The grounds ofthe application are stated in the Notice of Motion thus:

"The appeal involves a very substantial amount ofmoney, is ofa complicated natue, the appellant is a foreign Corporation with no assets in Uganda, the security for costs ofthe appeal and for past costs so far deposited is in adequate and the respondent has filed a bill for past costs standing at Uganda shillings 2l 5,571 ,500/= in the Court Appeal and Uganda shillings 27,926,8191= in the High Court for taxation."

The application was supported by an affidavit deponed to by V. Mathias Sekatawa an advocate from the firm representing the applicant in this matter. The affidavit merely elaborates the grounds of the application above referred to. Particulars stated in the affidavit worth noting are that Statutory/Security for costs of shs.400,000/= paid by the respondent in this court and the one of shs.20m/= paid in the High Court are grossly inadequate to cover the applicant's legal costs in the appeal, which would be colossal. Another is that the appeal originates from a failure by the respondent to pay security for cost within the tirne prescribed by the High Court.

o

o

The respondent filed an affidavit in reply deponed to by its counsel on 28.12.98. The main allegations in that affidavit are that the appeal, scheduled to be heard on25.1.99, has a high probability ofsuccess because thejudgement ofthe Court ofAppeal and the costs awarded are unjustified. The applicant's claim for security lor costs is only speculative as its bills ofcosts in the High Cou( and the Court ofAppeal have not yet been taxed; and that since the appeal is already set to be heard in thirteen day's time it would be prejudicial to the respondent to be ordered to fumish security for costs on the basis ofspeculative bills ofcosts not yet taxed.

Mr. Masembe Kanyerezi argued all the grounds above refened to in support ofthe application. He also submitted that in the instant case, there was no delay in bringing the application after the appeal was filed. Consequently, an order for security for cost would not prejudice the respondent; and that it is not necessary that the applicant's bills ofcosts should be taxed before the applicant could bring the present application. The leamed connsel relied on the following authorities Farab Incorporated v Brian John Robson 0957) EA 44lVallabhadas Hirii Kapadia v. Thakersay Laximidas (1960) EA 852: Atul Kumar Patel v. American Express lnternational. S.upreme Court Civil Application No.9/1989 (unreported); Premchand Rarkhand Ltd. & Another v. Ouarrv Service o{East Africa Ltd. & Others (l) (197 l) EA 172

With regard to the quantum ofsecurity for costs being sought, in this Court the applicant's leamed cowtsel suggested the sum of shs.100 million. He suggested the figure on the basis ofthe provisions ofparagraph 9(2) ofthe Third Schedule to the Supreme Court Rules, 1996. As security for costs in the Court of Appeal, the leamed counsel suggested the sum ofshs.215,571,500, this being the total amount of the applicant's untaxed bill ofcosts in that Court.

In reply, Mr. Justin Semuyaba, leamed counsel for the respondent, opposed the application on several grounds. First, that the respondent's appeal arises out ofan interlocutory order ofthe High Coua reinstating the respondent's suit. The respondent not only complied with that Court Order by depositing shs.20 million as security for costs, which sum ofmoney is still in the custody ofthe High Court, but it also paid the mandatory deposit ofshs.400,000/= in this Court. Secondly, the respondent's appeal to this Court has a high probability ofsuccess, because the decision ofthe Court ofAppeal appealed from is unjustified. Thirdly, the applicant's bills ofcosts of shs.27,9268191: and shs.2 I 5,591 ,500/: in the High Court and the Court of Appeal respectively are speculative as they have not yet been taxed. More-over the applicant's latter bill of costs has not yet been served on the respondent. Since the two bills ofcosts have not yet been taxed, they are not claimable by the applicant. Fourthly, no execution has been ordered, showing that it is not possible for the costs to be recovered from the respondent. In the view ofthe leamed counsel, bills ofcosts have to be taxed and execution issued before an application for security for costs can be enforced. For these submissions the leamed counsel relied on the cases of Lalii v. Nathoo Yassamjee ( I960) EA 3 I 5 ; and Ueanda Commercial Bank v Multi Constructions Ltd. Civil Application No.20/94 (SUC) (unreported) : and Transroad Ltd. v. Bank of Usanda Civil Appeal No.4 j of <sup>1995</sup> (SC U) (unreported).

o

o

Mr. Semuyaba further submitted that delay on the part of the applicant in applying for security for costs is another reason for the respondent's objection. As stated in the leamed counsel's affidavit, the appeal was due to be heard on 25.1.99. That is thirteen days away. It would therefore be unj ust to order security for costs on the basis ofuntaxed bills ofcosts. On the issue of the respondent being a foreign corporation the leamed counsel submitted that it is not in every case that a foreign litigant must deposit security for costs. He referred to Vallabhadas Hiiir Kapadia (Supra): Transroad Ltd. (Supra); Far ab Incor oor ate d (Supr a).

Rule 100(3) ofthe Rules of this Court under which this application is brought provides:

"100(3) The court may, at any time, ifthe Court thinks fit, direct that security for costs be given and may direct that security be given for the payment of past costs relating to matters in question in the appeal.

Ordinarily security for costs is ordered where the plaintiffor appellant is resident abroad. But there are exceptions to this rule. According to Forab Incorporated (Suprd one such exception is if the plaintiffor appellant has substantial property within the jurisdiction. ln that case security for costs was ordered on that ground. Connell J. said at page 442:

"Security will not be required from a person permanently residing outside out of the jurisdiction, if he has substantial property whether real or personal within it. The leading case is *Re Apollianaris Company's Trade Marks (2) (1891) Ch: 1:* Lord Halsbury there said "His being so resident (i.e. abroad) makes a prima facie case for requiring him to give security; but it is subject to a well known ordinary exception if there are goods and chattels of his in this Country, which are sufficient to answer the claim of the other litigant, and which would be available to execution the Courts will not order him to give security for costs."

In the case of *Vallabhdas Hijiri Kapadia (Supra)* the defendant's application for an order for security for costs was refused although the plaintiff was ordinarily resident in Zanzibar and out side the jurisdiction of Kenya where the suit had been filed. The ground for the refusal was that in view of the Judgements extension Decree of Zanzibar, the evil against which the rule for security sought to guard had largely disappeared. The defendant would be at no material disadvantage if successful, in taking steps to recover his costs either in Zanzibar or in Tanganyika where the plaintiff also had property. The refusal to order for security for costs in the case was therefore based on the facts that the plaintiff though not resident in Kenya, had assets in Zanzibar and Tanganyika where the plaintiff carried on business and assets which could be attached to execute an order for costs in the suit.

In the more recent case of Atul Kumar Sumantbhai Patel v. American Express Banking *Corporation, Civil Application No.9 of 1989 (SCU) (Unreported)* the respondent in an appeal to this Court applied for security for costs and past costs. One of the grounds for the application was that the appellant was a foreign corporation with no known assets in Uganda. That was one of the grounds on which this Court ordered security for costs.

In my Ruling, I said this on page 5:

"In the instant case, the Corporation according to Mr. Ariko's affidavit, is a foreign Corporation with no known assets in Uganda. This claim has not been controverted by evidence by affidavit. There is therefore, no evidence that the Corporation has assets from which it would pay costs of this suit should it be necessary for it to do so."

In the instant case, paragraph 5 of the affidavit deponed by the applicant's learned counsel V. Mathias Sekatwa, states:

"5 That the appellant is a foreign Corporation with no assets in Uganda and consequently against whom the respondent, would not be able to fully realise costs order on appeal in it favour."

This evidence by affidavit is not controverted by the respondent. In his submission, the respondent's learned counsel, Mr. Justin Semuyaba contended that the sum of shs.20 million which the respondent deposited in the High Court as security for costs is the respondent's asset within this jurisdiction, which would be sufficient to meet any order for costs against the respondent should it be necessary. With respect, I do not accept this contention. Firstly, because in my view, the kind of assets indicated in the cases of

Farab Incorporated (Supra) Vallabhadas Hijiri Kapadia (Supra) and Atul Kumar Sumantbhai Patel (Supra) as necessary to be present within the jurisdiction for purposes of satisfying orders for costs should normally be chattels, real property, trade or business goods. Secondly, the sum of shs.20 million already deposited in the High Court as security for costs is relevant, in my view, only to an order for costs in the High Court. It cannot, by any stretch of imagination, be considered to be sufficient for costs in the Court of Appeal and in this court.

In the instant case the ground of absence of assets within the jurisdiction alone, in my view, justifies making an order for security for costs and future costs.

The next important point to consider in this application is the respondent's contention that the applicant's untaxed bills of costs in the High Court, the Court of Appeal and the estimated costs of shs.100 million in this Court are merely speculative and do not justify making an order for security for future costs and past costs. If this contention means that bills of costs should first be taxed before security is ordered, I do not think that view can be correct in all cases. While in some cases, security for past costs may be based on bills of costs already taxed, others may not. For instance, where a defendant applies for security for costs in a suit the security for costs applied for cannot be based on costs already taxed. Usually the quantum of security for costs is reasonably estimated by the party applying for them, and not cost actually incurred. In the case of G. M. Combined (U) Ltd. V. A. K. Detergents (U) Ltd. Civil Appeal 34/95 (SCU) an argument that the quantum of security for costs applied for should be the costs actually incurred was rejected by this Court. The Court approvingly referred to the head note to the case of Procon (GB) Ltd. V Provincial Building Co. Ltd. (1984), 2All ER 368 which reads in part:

"... The correct principle is that any security ordered should be such as the Court thinks just in all the circumstances of the case. Normally a discount will be made to take account of the Court's expectation of any reduction by the taxing officer of the fees particularised, but after making that discount, the court should, if satisfied that the defendant has made an honest action estimate of his costs and disbursements, order that to be in corporated in the order for security......where there is an appeal against the judges decision the Court of Appeal will normally accept the 'judge's exercise of his discretion unless it is satisfied that he went wrong."

In the case of Pearson & Another v. Naydler and others (1977) 3 All ER.513 the Court in that case recommended what was called a "skeleton bill of costs" to guide the Court's. This obviously does not mean a properly drawn up bill of costs, and still less taxed ones have to be annexed to an application for security for costs. This is contrary to the applicant's submission in the instant case. Further in the case of *Premchand Raichand* Ltd. (1971) EA 173, Law, J. A said at page 174:

"In my view the present application should have been brought within a reasonable time of the appeal being filed. There was no need to wait for the costs to be taxed. In fact this application was not filed until seventeen days before the appeal was due to be heard."

Equatly important in this regard, my view, is the provision in rule 100(3) that the Court may order security for costs any time. This means that the relevant bills ofcosts do not necessarily have to be taxed before such an order may be made. An order for security for costs may be ordered by the court at anytime.

Another imporlant factor for consideration in an application for security for costs is the likelihood ofthe plaintiff s case or the appellant's appeal succeeding.

# ln G. M. Combined (lJ) Ltcl. (Supra) this Court put it this was atpageT:

o

a

"lfthere is a shong prima facie presumption that the defendant will fail in his defence to the action, the Cout may refuse him security for costs. It may be a denial ofjustice to order a plaintiff to give security for the costs of defendant who has no defence to the claim."

The same principle, in my view, applies with equal lorce to a respondent's case in an appeal.

In the instant, the respondent asserted in this Court that its appeal has a good possibility of success. Apart from saying that the decision of the Court of Appeal was unjust there was nothing more to show the likelihood ofthe appeal succeeding. This, in my opinion the respondent should have done, but it did not.

Next, the respondent put up a strong argument that since the appeal was due to be heard in thirteen day's time no order for security for costs ought to be ordered since to do so would be prejudicial to the respondent. It was said that the following cases support that view: Premchand Raichand (Supra) Noormohamed Abdalla v Rachholdbhai J. Potel & Anor ( 1962) EA. .!:!6tand Laliii v Nathoo Yassamiee (1960 EA 147. These authorities are relevant to the issue ofdelay in bringing an application for security for costs. Where there has been delay in apptying for security the applicant must show that the delay has not been prejudicial to the appellant. In the instant case there has been no delay by the applicant in bringing its application. The respondent filed its appeal on 18.12.98 and the applicant fited its apptication on 23.12.98. In the circumstances of this case, therefore, my view is that the fact that the appeal is due to be heard in thirteen days time is not prejudicial to the respondent as a result ofthe applicant's conduct, who acted expeditiously.

In the circumstances, I consider that the applicant has made out a case for an order lor security for costs. I think that the applicant has discharged its burden in the application for security for costs. Against the interests ofthe applicant in this regard, must be weighed the right ofthe respondent to pursue its appeal. The application for security for costs must not be used oppressively to stifle a genuine claim or a genuine appeal. Any security for costs must be such as the Court considersjust in the circumstances ofthe case.

Doing the best I can in the circumstances ofthis case, I think that a deposit in Court of shs.40 million by the respondent would be just as security for costs in the Court of Appeat and for future costs in this Court. This means that shs.20 million would be for

costs in the Court of Appeal and shs.20 million for future costs in this Court. The costs ofthis application shall be in the course. The respondent must deposit the security for costs in question before the appeal in this Court is heard. Such security for costs must be deposited in Court within 45 days from the date hereof. It is so ordered.

Dated at Mengo this 22"d day of January, 1 999.

I

o

a

A. H. O. Oder JUSTICE OF THE SUPREME COURT.

22.01.1999 AT 2.50 P. M.

Mr. Masembe Kanyerezi for the applicant.

Mr. Justin Semuyaba for the respondent.

Ruling signed and delivered.

A. H. O. Oder JUSTICE OF THE SUPREME COURT.

l

/