Bank of Uganda v Banco Arabe Esponal (Civil Appeal 23 of 1998) [1998] UGCA 36 (1 December 1998)

# **THE REPUBLIC OF UGANDA**

## IN THE COURT OF APPEAL OF UGANDA HOLDEN AT KANPALA

HON. MR. JUSTICE S. T. MANYINDO, DCJ; **CORAM:** HON. MR. JUSTICE S. G. ENGWAU, J. A.; AND HON. MR. JUSTICE A. TWINOMUJUNI, J. A.

## CIVIL APPEAL NO. 23 OF 1998

#### **BETWEEN**

BANK OF UGANDA:::::::::::::::::::::::::::::::::::

#### AND

BANCO ARABE ESPONAL::::::::::::::::::::::::::::::::::::

(Appeal arising from the Ruling and Order of the High Court (Byamugisha J.) dated 27th May, 1998 in HCCS No. 527 of 1997).

## JUDGMENT OF S. G. ENGNAU, J. A.

This is an appeal against the ruling and order of Byamugisha J. dated 27/5/98 in which she allowed the reinstatement of HCCS No. 527 of 1997.

The brief facts of the case are as follows. The respondent Bank filed a suit in the High Court at Kampala against the Attorney-General and the appellant bank on 2/6/97 seeking the repayment of a Bank loan to the tune of US\$ 1 million with interest thereon. The loan was advanced to the Government of the Republic of Uganda on 11/11/87 for the purposes of purchasing railway wagons and that loan was guaranteed by the appellant.

The Attorney-General was sued in his representative capacity and the appellant bank was sued as a guarantor of the said loan. Both the Government and the appellant filed their Written Statements of Defence in which a preliminary point of objection of law was raised to the effect that the suit was time barred.

The applicaEion was heard and the learned crial ,Iudge upheld the objecEion in favour of the AE Eorney-General and rejecEed it in respect of the appellant bank. However, Ehe appellant. applied for securitsy for costs in the suit. against tshe respondent and the order to deposit Shs.20 million wit.hin 30 days was granted on l6/L/98 and it was to expire on L5/2/98.

on 13/2/98 tshe respondenE purported to deposiE a guarantee in the place of cash and Ehis was rejecEed by Ehe Registrar. As t.he security for costs vras not deposj-Eed in courts, E.he suit. was dismissed on 25/2/98 under order 23 Rule 2 (1) of t.he Civil Procedure Ru1es.

On 2/3/93 the respondenE filed an application under Order 23 RuIe 2 (2) Civil Procedure Rules for reinstatsement of the suit. This applicat.ion was allowed on 27/5/98 and the suit was reinstaEed. Hence this Appeal .

There are 3 grounds of appeal namely: -

- t1l The learned trial . Tudge erred in Iaw and in fact in set.t.ing aside Ehe order for dismissal of the suit and reinstaEing Ehe same since the Respondent,/ Plaint i f f did not establish sufficient cause for failure to furnish the securiEy within tshe 30 days period allowed as is required by order <sup>23</sup> Rule 2 (2) of the Civil Procedure Rules S.1 55 - 3. - l2l The learned Judge erred in 1aw and in fact in failing to hold that Ehe RespondenE/Plaintiff ' s conEent.ion that they would not effect the transfer of the equivalent. of Uganda Shs. 20 million from Spain tso Uganda within 30 days was inconvicible unproven and conLrary to the

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Commercial realities of International money transfers of which judicial notice can be taken.

- In the alternative and in any event the $[3]$ learned trial Judge erred in law and in fact in not allowing the Appellant the costs of the application. - 10 It is proposed to ask court for order that:-

- $(a)$ The trial Judge's ruling and order on the reinstatement be set aside and the suit stand dismissed; - $(b)$ The costs of appeal be provided for.

Mr. Masembe-Kanyerezi, learned Counsel for appellant argued grounds one and two of the appeal together. Basically it was his contention that the learned trial Judge erred in law in reinstating the suit without sufficient cause being established for failure to deposit the security for costs in court within the time allowed. The affidavit in support of the application for reinstatement of the suit, sworn by Birungi Wycliff, an advocate in the respondent's firm of advocates, paragraph 9 thereof states:

> That I am informed that it $"9.$ was $\overline{a}$ mistaken belief on the part of Counsel for the Plaintiff that a guarantee would suffice for a cash deposit and the terms of the guarantee included in provision that the money would be payable immediately on demand."

In yet another affidavit in support thereof sworn by one Justo Trashorras Diaz, General Secretary of the Respondent bank states in paragraphs 3, 4, and 5 as follows: $\frac{1}{2}$

"3. ThaE. on the 15th day of January <sup>1998</sup> when this Honourable Court ordered the appl icant /pl-aint i f f to pay securit.y for cosEs of Shs.20,000,000/= (Twenty milLion shillings only) I was present in Uganda.

4. That tshereafter I returned to Spain to make arrangemenEs for the payment. of the money j-n Court. .

5. That however, due to t.he bureaucratic procedures involved in approving payment of the money and the delays in working fnternational money transfers. the appl i-cant /plaint i f f Bank was unabl-e to send the money wj.thin thirty (30) days as was ordered by Court . "

In view of the clear averments deponed t.o by Birungi and Diaz, Learned Counsel for appellant submitted t.hat. Ehere is conflict. for reasons why security for costs was noE depositsed j-n CourE on time. According E.o Birungi, there was a mistaken belief thaE <sup>a</sup> guaranEee would suffice for a cash deposit. Learned CounseL for appellant contended that the reasons given by Birungi are false in view of the cl-ear conEents of the let.ter from his firm of advocates co che advocates of the appeflantF, daLed t3/2/98.

In that letter, it was stated inter alia thaE according to the authority of ITNIDROM verBug M/s Kawe6i & Co., C. S. No. 878/90 following Farrab Inc. vergua Pircea [1956] E. A. 441, securiEy for costs can be furnished eiEher j-n cash or by bond or guarantee. The respondent had opted for the latter. Diaz on his part. stated that due to Ehe bureaucralic procedures involved in approving payment of the money and the defays in making rt Int.ernat. ional money transfer, " the respondent Bank was unable to send the money within the time allowed by Court. Therefore, Counsel argued t.he delay in processing money as stated by Diaz, does not arise.

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In the alternative, he submitted that the learned trial Judge did not specify which affidavit furnished sufficient cause in the circumstances of this case. In his view, the respondent's reason that they would not process money from Spain within (30) days was untenable. Learned Counsel submitted that nowadays money can be transferred within a short time. He relied on the authority of Bank of Baroda V Panessar & Another (1987) Ch.335, for the proposition that in view of the modern methods of communication and transfer of money available the time needed is exceptionally short. He therefore asked court to take judicial notice of that point in this matter.

In conclusion, learned Counsel for the appellant submitted that no sufficient reason was advanced to show cause why security for costs was not deposited in court. In the premises, the learned trial Judge was in error to reinstate the suit and in so doing she was mistaken in the exercise for her discretion. See: Patrick Njoroge Ngumi Vs Livingstone Wanjii Muthui (1955) Vol. XXII EACA 43 and Shabir Din Vs. Ram Parkash Aradin (1955) Vol. XXII EACA 48.

Mr. Semuyaba, learned Counsel for the respondent, argued grounds one and two separately. On the first ground, the learned Counsel supported the reinstatement of the suit by the learned trial Judge on the ground that sufficient cause was shown. In his view, a guarantee would suffice instead of a cash deposit.

Learned Counsel for the respondent conceded that as the security for costs was not paid in court, the learned trial Judge rightly dismissed the suit under Order 23 Rule 2 (1) Civil Procedure Rule. The application for extension of time was also dismissed the same day unheard. Learned Counsel for the respondent submitted that due to the bureaucratic procedures involved in approving payment of the money and the delays in making Internal money transfers, the respondent Bank was unable to send the money within the time allowed by court and that was sufficient cause for reinstatement of the suit.

Accordingly, learned Counsel submitted on the second ground that Bank of Baroda (Supra) is distinguishable and not relevant in the present case. **Patrick Njoroge** (supra) which was based on Order 23 Rule 2 (2) Civil Procedure Rules does not apply on the ground that court dismissed the application for enlargement of time before it was heard.

In my view, the crux of the matter in grounds one and two of this appeal is whether or not sufficient cause was shown for the reinstatement of the main suit. Learned Counsel for appellant rightly, in my view, submitted that a guarantee in place of a cash security for costs was not enough as it was contrary to court order. Learned trial Judge did not say on what basis the suit was reinstated. In view of what I have stated above, a quarantee would not be sufficient cause for reinstatement of the suit.

Learned Counsel for respondent has submitted that the bureaucratic procedures involved in approving payment of the money and the delays in making International money transfers were sufficient cause for reinstatement of the suit. I do not agree as the alleged bureaucratic procedures and delays in money transfers were not established. I agree with Counsel for appellant that the respondents had no serious intention to pay the security in cash. In my view, the alleged bureaucratic procedures and delays in the transfers were an afterthought.

Accordingly, I find merits in grounds one and two.

30 On the third ground, learned Counsel for appellant submitted that the learned Judge was wrong in not awarding the appellant costs of the application. Learned Counsel for respondent on the other hand submitted that since the application for reinstatement of the suit was in their favour, the learned trial Judge should have awarded costs to the respondent as the successful party.

It is trite that normally costs follow the event. The matter of

costs is the discretion of court. In the instant case the successful party should have been awarded the costs unless the Judge thought otherwise. As it is, the Judge was silent as to costs. Therefore ground 3 ought to succeed because the appellant should have been the successful party in the lower court.

In the result, I would allow this appeal, set aside the judgment and order of the lower court and substitute an order dismissing the suit with costs here and in the lower court.

Dated at Kampala this....................................

S. G. ENGWAU

JUSTICE OF APPEAL

## THE REPUBLIC OF UGANDA

#### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### CIVIL APPEAL NO.23/98

CORAM: THE HON. MR. JUSTICE S. T. MANYINDO, DCJ. THE HON. MR. JUSTICE S. G. ENGWAU, JA. THE HON. MR. JUSTICE A. TWINOMUJUNI, JA.

BANK OF UGANDA ........................... APPELLANT

#### - VERSUS -

BANCO ARABE ESPONAL ........................... RESPONDENT

> (Appeal arising from the ruling and order of the High Court of Uganda (Byamugisha, J.) dated 27th May, 1998 in HCCS No.527 of 1997)

#### JUDGMENT OF TWINOMUJUNI, J. A.

I have had the benefit of reading the judgment prepared by My Lord, Justice S. G. Engwau, J. A. I agree with it and the orders proposed by him.

Dated at Kampala this $181$ day of $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA **CIVIL APPEAL NO.23/98**

THE HON. MR. JUSTICE S. T. MANYINDO, DCJ. **CORAM:** THE HON. MR. JUSTICE S. G ENGWAU, JA. THE HON. MR. JUSTICE A. TWINOMUJUNI, JA.

<table>

BANK OF UGANDA APPELLANT

#### **VERSUS**

<table>

BANCO ARABE ESPONAL RESPONDENT

(Appeal arising from the ruling and order of the High Court of Uganda (Byamugisha, J.) dated 27<sup>th</sup> May, 1998 in HCCS No. 527 of 1997)

# **JUDGMENT OF MANYINDO, DCJ.**

I read the judgment of Engwau, JA just delivered.

I agree with it and the orders proposed in that judgment. As Twinomujuni, JA also agrees it is so ordered.

DATED at Kampala this ....................................

r ayjindo

S. T. MANYINDO DEPUTY CHIEF JUSTICE