Bankone Limited v Simbamanyo Estates Limited (Miscellaneous Application 645 of 2020) [2021] UGCommC 178 (27 September 2021)

# **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA (COMMERCIAL DIVISION) MISCELLANEOUS APPLICATION No. 645 of 2020** 5 **(Arising from Civil Suit No. 0198 OF 2020) BANKONE LIMITED …………………………………………………… APPLICANT VERSUS SIMBAMANYO ESTATES LIMITED ………………………………… RESPONDENT Before: Hon Justice Stephen Mubiru. RULING**

# a. Background.

15 During or around November, 2017 the applicant executed a credit facility agreement with the respondent by which the respondent borrowed a sum of US 10,000,000 for re-financing its loan with Equity Bank (U) Limited and Equity Bank limited, and for completion of remaining works on its "Afrique Suite Hotel." The respondent having defaulted on the terms of the loan, the applicant foreclosed and realised the security for the loan, thereby attaining full recovery of the 20 outstanding debt.

The respondent then filed a suit against the applicant and two other financial institutions, one based in Uganda and the other in Kenya, seeking multiple orders and declarations, including; that the applicant is not licensed to conduct business as a financial institution in Uganda, that the Kenyan 25 financial institution's participation in a tripartite loan arrangement with the respondent rendered it void and unenforceable, the securitisation of the arrangement was illegal hence null and void, the applicant's re-financing of that loan arrangement was procured by undue influence, and so on. Summons to file a defence were issued on 5th March, 2020 and served upon the applicant at its place of business in Mauritius on 19th March, 2020. The applicant not having filed a written 30 statement of defence to the suit within the time allowed by *The Civil Procedure Rules*, an interlocutory judgment was entered against it on 12th June, 2020 by the registrar pursuant Order 9 rule 8 of *The Civil Procedure Rules,* but never set down the suit for hearing as required by that rule. The applicant then filed this application more than two months later, on 27th August, 2020.

## b. The application;

The application is made under section 98 of *The Civil Procedure Act,* Order 9 rule 12 and Order 52 rules 1 and 3 of *The Civil Procedure Rules*. The applicant seeks an order setting aside an interlocutory judgment entered against it in the main suit on 12th 5 June, 2020. The applicant, a private limited liability company incorporated and operating business in the Republic of Mauritius, was on 19th March, 2020 served with summons to file a defence. The applicant was unable to respond since at the time the country was under a nationwide lockdown as part of measure taken to curb the spread of Covid-19, which was only lifted on 30th May, 2020. Several other restrictions 10 remained in place which prevented the applicant's officials from becoming aware of the litigation then afoot in Uganda, until 2nd July, 2020. It is only on 23rd July, 2020 that the applicant managed to retain legal representation in Uganda, only to learn that an interlocutory judgment had already been entered against the applicant on 12th June, 2020. Throughput the period of the lockdown the

15 Legal Department was required to work from home. Furthermore the legal services sector was at the time locked down totally preventing the applicant from seeking legal advice. The applicant has a plausible response to the suit since it seeks to contest the jurisdiction of this court on ground of *forum non conveniens*. In clause 17 of the agreement underlying the dispute between the parties, it was agreed that any dispute or difference arising out of the agreement, was to be "governed by

applicant's operations had been reduced to its departments classified as "essential." Staff in the

20 the exclusive jurisdiction of the Courts of the United Kingdom." The applicant seeks an opportunity to file

## c. The affidavit in reply;

- 25 In the affidavit reply sworn by one of the advocates in the firm representing the respondent, the respondent avers that the deponent to the affidavit supporting the application did not attach express authorisation to swear it on behalf of the applicant and therefore it is defective. The transaction between the applicant and the respondent was illegal, null and void and therefore unenforceable. The suit pending before the court is competent since the court has jurisdiction to try it considering - 30 the subject matter an the legal issues raised regarding the illegality of the transaction, it involves other parties not party to the forum selection clause stipulated in the agreement between the

applicant and the respondent, it will avoid a multiplicity of suits and the arguments intended to be raised by the applicant are misconceived since it is not a submission to arbitration. The applicant was not prevented by the nationwide lockdown to file a defence since the banking sector was exempted. There is no reasonable explanation for that failure.

#### d. Submissions of counsel for the applicant;

Counsel for the applicant, M/s ENSafrica Advocates, submitted that applicant was prevented by the Covid-19 nationwide restrictions imposed in Mauritius from filing its defence to the suit, within 10 the period of time prescribed by the rules. The restrictions caused disruptions in the applicant's normal business operations as a financial institution. It took time for the applicant to instruct counsel in Mauritius following which the applicant received advice to retain counsel in Uganda. The interlocutory judgment sought to be set aside was erroneously entered under a rule designed for claims "for pecuniary damages only or for detention of goods with or without a claim for

15 pecuniary damages," which the respondent's suit is not. The suit involves issues of law that would be better determined after hearing all parties on the merits.

## e. Submissions of counsel for the respondent.

The parties were on 16th 20 August, 2021 directed to file their respective written submissions. Todate counsel for the respondent, M/s Muwema and Co. Advocates has not complied.

#### f. The decision.

25 Order 9 rule 12 of *The Civil Procedure Rules* empowers courts to set aside or vary an interlocutory judgment upon such terms as may be just, that has been entered by the registrar pursuant Order 9 rule 18 of *The Civil Procedure Rules*, "where the plaint is drawn with a claim for pecuniary damages only or for detention of goods with or without a claim for pecuniary damages," and the defendant fails to file a defence on or before the day fixed in the summons. The court may set aside 30 *ex-parte* orders, for any "sufficient cause" from taking a necessary step in the proceedings.

Sufficient reason must relate to the inability or failure to take the particular step in time (see *Mugo and others v. Wanjiri and another [1970] EA 481 at 483*; *Njagi v. Munyiri [1975] EA 179 at 180*).

By judicial practice however, "sufficient cause" is liberally constructed in order to advance 5 substantial justice, when no negligence, or inaction or want of bona fides, is imputed (see *Bishop Jacinto Kibuuka v. The Uganda Catholic Lawyers' Society and two others, H. C. Miscellaneous Civil Application No. 696 of 2018*). They include mistakes by an advocate though negligent, ignorance of procedure by an unrepresented litigant and illness by a party. The question now is whether the grounds which have been advanced in support of the application show "sufficient 10 reason" for the exercise of the court's discretion.

i. Authority to swear the affidavit in support of the application;

It is contended in the affidavit in reply that the deponent to the affidavit supporting the application 15 is not authorised to swear it on behalf of the applicant, since there is no express authorisation attached thereto, thus rendering it defective. The applicant retorts in the affidavit in rejoinder as well as the written submissions that the affidavit having been sworn by the applicant's Head of Legal and Regulatory Affairs, who by that description is a principal officer and member of the applicant's senior management, it is a competent affidavit which should not be struck out.

An affidavit is defined as "a written or printed declaration or statement of facts, made voluntarily, and confirmed by the oath or affirmation of the party making it, taken before an officer having authority to administer such oath (see *Amtorg Trading Corporation v. United States, 71 F. 2d 524*). It is a written statement where the contents are sworn or affirmed to be true, signed in front of an 25 authorised person. The statement usually is intended to and serves as evidence before a Court for the proper determination of factual disputes.

Affidavits have the common feature of being written in the first person by an identified deponent regarding evidence of which that individual has first-hand knowledge, witnessed themselves or, if

30 they are relying on another source, identifying that source, all of which the deponent swears that the contents are true, in front of a commissioner of oath, a notary public, judicial officer or other

authorised person. An affidavit may state only what a deponent would be permitted to state in evidence at a trial, except that if the source of the information is given, an affidavit may contain statements as to the deponent's information and belief, if it is made in respect of an application for an interlocutory order, or by leave of the court (see Order 19 rule 3 (1) of *The Civil Procedure*

5 *Rules* and *The Co-operative Bank Limited v. Kasiko John [1983] HCB 72*).

What is required in affidavits is the knowledge or belief of the deponent (see for example Order 5 rule 24, Order 10 rule 19 (3) of *The Civil Procedure Rules*). Similarly for suits under summary procedure, the affidavit verifying the claim may be sworn "by the applicant, or by any other person 10 who can swear positively to the facts, verifying the cause of action, and the amount claimed, if any, and stating that in his or her belief there is no defence to the suit" (see Order 36 rule 2 of *The Civil Procedure Rules*). Affidavits should state the facts only, without stooping to add the deponent's descriptive opinion of those facts. Just as with regular testimony in Court, evidence tendered by affidavit will be inadmissible if irrelevant, particularly if scandalous, oppressive, 15 embarrassing or judgmental, or where privileged facts or documents are submitted.

Affidavits are a means of adducing sworn, written evidence and must be used in applications where sworn evidence is required by the court. The validity of the affidavit therefore is subject to the same rule as that which governs oral evidence found in section 117 of *The Evidence Act*, to wit; 20 all persons are competent to swear an affidavit unless the court considers that they are prevented from understanding the questions put to them, or from giving rational answers to those questions, by tender years, extreme old age, disease, whether of body or mind, or any other cause of the same kind. For under age deponents, section 9 (1) of *The Oaths Act* provides that if it appears to the court [or Commissioner for oaths] that the person about to take the oath or make the affirmation 25 ought not; - (a) by reason of immature age; or (b) for any other sufficient cause, to be allowed to take the oath or make the affirmation, the court or officer may, if the court or officer in its or his or her free discretion so thinks fit, allow that person, in lieu of taking the oath or making the affirmation, to give evidence or make a declaration without oath or affirmation. Representing a company for purposes of signing pleadings is regulated by Order 29 rule 1 of *The Civil Procedure* 30 *Rules*, by which the secretary or by any director or other principal officer of the corporation "who is able to depose to the facts of the case" is so authorised.

From the above discourse it then becomes clear that throughout the web of legal provisions relating to affidavits, one golden thread is always to be seen; that what is required in affidavits is the knowledge or belief of the deponent, rather than authorisation by a party to the litigation. Their content is dictated by substantive rules of evidence and their form by the rules of procedure.

5 Competency to sear an affidavit is pegged to ability "to depose to the facts of the case," which in turn is circumscribed by the deponent's ability to "swear positively to the facts," on account of personal knowledge or disclosure of the source, where that is permitted.

I have considered the available decisions positing the principle that a person is not to swear an 10 affidavit in a representative capacity unless he or she is an advocate or holder of power of attorney or duly authorised (see *Kaingana Joy per Kaingana John v. Boubon Dabo [1986] HCB 59*; *Makerere University v. St. Mark Education Institute and others, H. C. Civil Suit No. 378 of 1993*; *Taremwa Kamishani and others v. Attorney General, H. C. Misc. Application No. 38 of 2012*; *Edrisa Mutaasa and others v. IGG, Lyantonde District Administration and another, H. C. Misc.*

- 15 *Cause No. 06 of 2010*; *Kaheru Yasin and another v. Zinorumuri David, H. C. Misc. Application No 82 of 2017* and *Ssenyimba Vincent and two others v. Birikade Peter and another, H. C. Misc. Application No. 378 of 2018*). Those decisions posit the view that where there is no written authority to swear on behalf of the others, the affidavit is defective. - 20 I have not found any basis for that principle in the rules of evidence nor those of procedure. The principle appears to have developed from the analogy of representative suits, which analogy I find to be misplaced. In *Taremwa Kamishani and others v. Attorney General, H. C. Misc. Application No. 38 of 2012*the court expressed the view that "where the party obtains a representative order it is sufficient authority to represent himself/ herself and others in the same interest and he or she 25 can swear an affidavit on his or her own behalf and on behalf of the others represented. Conversely, where a party swears an affidavit on his or her own behalf and on behalf of the others without the others' authority when it is not a representative suit, the affidavit becomes defective for want of authority." In *Ssenyimba Vincent and two others v. Birikade Peter and another, H. C. Misc. Application No. 378 of 2018* the court expressed the view that "the law [is] that save in 30 representative suits where the party who obtains the order to file the suit can swear affidavits binding on others on whose behalf the suit is brought, where an affidavit is sworn on one's behalf

and on behalf of others there is need to prove that the others authorised the deponent to swear on their behalf."

The above decisions did not take into account the provisions of Order 29 rule 1 of *The Civil* 5 *Procedure Rules*, by which the secretary or by any director or other principal officer of the corporation "who is able to depose to the facts of the case" is deemed competent. They instead appeal to a misconceived analogy which can lead to really wrongful and serious harm in the name of the law. Analogical arguments always involve a comparison of two or more selected items. What is important in an analogy is that the two scenarios which are matched are both instances of 10 a more general rule or principle from which the desired conclusion in both instances can be derived. Analogical argument serves the purpose of enabling the court to discern whether the possession of some characteristics known to be shared by the source and the target rationally warrant the inference that the target also possesses the inferred characteristic that the source is known to have. Analogical arguments always involve picking shared characteristics in the 15 source(s) and the target that are judged to be rationally relevant to possession of the inferred characteristic. However, filing a suit is not relevantly similar to adducing evidence in the suit, for which reason the analogy is, respectfully, misconceived.

While filing a suit and related pleadings has aspects of *locus standi*, adducing evidence is all about 20 competence. While representative suits arise from rules of convenience prescribing conditions upon which persons who have the same actual and existing interest in the subject matter of the intended suit, although not named as parties to a suit, may still be bound by the proceedings therein, the rules of evidence on the other hand confer discretion on the court to control repetitive evidence; a judicial safety valve by which a party's attempt to adduce excessive evidence in support of the 25 same proposition can be cut short. An affidavit should not be filed when it adds very little to the probative force of the other evidence in the case. Therefore, when the relevant facts are within the common knowledge of parties having the same interest in the litigation, an affidavit by one of them will suffice. Whereas initiating a suit in another's name clearly requires authorisation since it raises issues of autonomy of the individual, adducing evidence of facts that have a bearing on 30 another's case already before court does not. The basic pattern of analogical reasoning is always this: on the basis of some shared relevant characteristics, one infers that the "target" item has an additional characteristic that the source item is known to have. For this to be a sound analogy, representative suits must have some shared relevant characteristics with affidavit evidence. Analogical arguments cannot be rationally 5 compelling unless there is some explanation that provides a rational justification for the rule's assertion that possession of the shared characteristics in an item rationally warrants the inference to the conclusion that the item also possesses the inferred characteristic. Not only have I not found shared relevant characteristics between representative suits and affidavit evidence, but also I have failed to find a rational justification for applying a principle of convenience intended for 10 representative suits, to affidavit evidence adduced by parties having the same interest in the litigation and testifying to facts in their common knowledge.

Of course the Rules of procedure, like any set of rules, cannot in their very nature provide for every procedural situation that arises. Where the Rules are deficient, my view is that the court should go 15 so far as it can in granting orders which would help to further the administration of justice, rather than hampering it. For those reasons I am not persuaded to follow the principle that where there is no written authority to swear on behalf of the others, an affidavit is defective; most especially since the decisions in which it was applied are not binding on me. That objection is accordingly overruled.

## ii. Timely filing of the application;

An application that is brought promptly will be considered more sympathetically than one that is brought after unexplained inordinate delay. The court will refuse to entertain delayed applications 25 for setting aside *ex-parte* interlocutory orders where the reasons the applicant is advancing to justify his or her delay are not convincing, considering the long period of his or her inaction (see *Rossette Kizito v. Administrator General and others, S. C. Civil Application No. 9 of 1986 [1993]5 KALR 4*). Those who sleep over their rights have no right to agitate for them after the lapse of a reasonable time.

The application in the instant case was filed five (5) months after service of summons upon the applicant, two (2) months after the interlocutory judgment was entered, and one (1) month after counsel in Uganda was instructed. The decisive factor in condonation of delay is not the length of delay but sufficiency of a satisfactory explanation. As explained in more detail under the next 5 subheading, I find that the delay was not inordinate. This delay was not on account of any dilatory tactics, want of bona fides, nor deliberate inaction or negligence on the part of the applicant or its

counsel. By virtue of article 126 (2) (e) of *The Constitution of the Republic of Uganda, 1995*) which enjoins courts to administer substantive justice without undue regard to technicalities, Courts have always been liberal and generous in construing the rules of procedure. Refusal to 10 condone delay can in some cases result in a meritorious matter being dismissed at the very threshold, thus defeating the cause of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. It is on that account that the delay in the instant case will be condoned in order to advance substantial justice.

## 15 iii. Sufficient cause for failure to file a defence within the time allowed;

The Courts have generally found it difficult to define precisely the meaning of sufficient cause or sufficient reason. Making such an attempt would amount to crystallisation into a rigid definition with judicial discretion which the Rules Committee has for the best of all reasons left undetermined 20 and unfettered. Whereas on the one hand, mistakes, faults, lapses and dilatory conduct of counsel should not be visited on the litigant (see *Roussos v. Gulam Hussein Habib Virani, Nasmudin Habib Virani, S. C. Civil Appeal No. 9 of 1993*), but on the other the expression "sufficient cause" is flexible enough so as to enable the court ensure an equilibrium between the rights secured by the

- plaintiff in whose favour an interlocutory judgment has been entered, against the injustice of taking 25 away the right of a defendant of adjudication on the basis of a cause which was reasonably out of his or her will. The term "sufficient cause" should be considered with pragmatism in a justiceoriented approach rather than technical detection of sufficient cause for explaining every day's delay. - 30 The court should not presume that the failure is occasioned deliberately or on account of mala fides or the applicant is guilty of culpable negligence. Unless the Court comes to the conclusion - 9

that there was intentional delay in not filing the defence timeously, or there was gross negligence on the part of the defendant for not approaching the Court after coming to know of the proceedings against it, the delay should normally be condoned. There are two phases of delay in the instant case; that which occurred immediately after service, and the other that occurred after the applicant

5 obtained knowledge of the proceedings.

It is the applicant's averment that the delay which occurred between on 19th March, 2020 when it was served and 30th May, 2020 when the nationwide lockdown was lifted was due to the fact that at the time the country was under a nationwide lockdown as part of measures taken to curb the 10 spread of Covid-19. The applicant has attached as proof thereof General Notice No. 510 of 2020 titled "Curfew Order" issued under *The Prevention and Mitigation of Infectious Disease (Coronavirus) Regulations, 2020*. The applicant has also attached copies of other orders made under *The Public Health Act* of the Republic of Mauritius, extending the lockdown until 1st June, 2020. On basis of those orders, most business premises were declared closed save food distribution 15 and related logistics, medical care facilities, banking, and so on. According to those orders, banks were to remain open from 10.00 am to 1.00 pm. I therefore do not find this to be a satisfactory

- explanation for the applicant's inaction for nearly two months following service of the summons, since the banking sector remained open albeit with restricted hours of operation. - It is the applicant's averment that the delay which occurred between on 30 20 th May, 2020 when the nationwide lockdown was lifted and 27th August, 2020 when this application was filed, was due to the fact that the applicant's management only got to know of the summons on 2nd July, 2020. It is only on 23rd July, 2020 that the applicant managed to retain legal representation in Uganda, only to learn that an interlocutory judgment had already been entered against the applicant on 12th June, 25 2020. It is not clear to me how it would take management almost four months for these summons to come to their attention yet the banking sector remained open even during the lockdown. The claim that the unprecedented circumstances of managing the financial institution in the light of the unprecedented circumstances of the lockdown, where activities in some of the departments were affected by the ensuing panic and pre-occupation with implementation of contingency plans, - 30 resulted in inadvertent inattention to the summons is a plausible explanation, but only to an extent.

It is extreme inadvertence that seeks to explain the nearly four months' delay between 19th March, 2020 when the summons were served and 2nd July, 2020 when management were notified.

The inaction which can be condoned by the court should fall within the scope of normal human 5 conduct or normal conduct of a litigant. It is more probable that the applicant's management remained inactive under the false belief that they needed to take no action in light of their *forum non conveniens* contention. Their inaction is attributable to ignorance of procedural laws of Uganda than belated notification of management. Although ignorance of the law is no defence, "acquiring legal information requires time and money. Many legal rules require more than a 10 reading of the relevant statutes, regulations, and court decisions; they require judgments about how courts would apply those rules to particular sets of facts. The skills necessary to make those judgments are the bread and butter of the legal profession" (see Stewart E. Sterk, *Accommodating Legal Ignorance*, Cardozo Law Review, Volume 42 Issue 1, 213 (2020). Most potential consumers of legal information do not think to conduct a cost-benefit analysis of the value of legal 15 investigation. Risk aversion will sometimes lead to inefficient investment in legal information. The likelihood that laypeople will overestimate the usefulness of legal information exacerbates the problem.

In some very exceptional circumstances, excusing persons from the consequences of actions taken 20 in reasonable ignorance of law is often consistent with principles of fairness and justice. According to Stewart E. Sterk, acquiring perfect information about the legal rules that might have an impact on their activities would leave many persons with little time and few resources to pursue those activities. Holding individuals accountable for their failure to obtain costly legal information would be unfair in many circumstances, and would also create incentives to conduct inefficient 25 legal investigation (see. *Accommodating Legal Ignorance*, supra). Ignorance of foreign law, where relevant, is treated as ignorance of fact, as so categorised under section 43 of *The Evidence Act*. It would therefore be fair, in the majority of cases, to excuse ignorance of foreign procedural rules.

This coupled with the fact that throughput the period of the lockdown the applicant's operations were partial since they had been reduced to its departments classified as "essential," and the fact 30 that the legal services sector was at the time locked down totally, in the circumstances of this case

this constitutes sufficient cause for the failure to take the requisite steps timeously. I therefore find that there was sufficient reason for the applicant's delay in filing its defence and this application.

## iv. Serious issues to be tried.

Where there are serious issues to be tried, the court ought to grant the application (see *Sango Bay Estates Ltd v. Dresdmer Bank [1971] EA 17* and *G M Combined (U) Limited v. A. K. Detergents (U) Limited S. C Civil Appeal No. 34 of 1995*). It is a cardinal principle of fairness that both parties should be given an opportunity to be heard before court pronounces itself on the matters in 10 controversy between the parties.

As a preliminary point of law, the applicant intends to challenge the jurisdiction of this court on basis of a *forum non conveniens* contention. The doctrine generally refers to the inherent discretionary power of a court to decline the exercise of its jurisdiction over a case when, in the 15 interest of convenience of the parties, the suit may be brought in a more appropriate forum. This common law doctrine is also applied when a forum-selection clause requires suit in a specific forum. The applicability of the doctrine to situations where a forum-selection clause is sought to be relied on when some of the disputants are not privy thereto, is a serious issue to be tried. The analysis may include an evaluation of the parties' contractual preselected or choice of forum, the 20 convenience of the parties and various public-interest considerations.

## v. Validity of the interlocutory judgment.

The impugned interlocutory judgment was entered under Order 9 rule 8 of *The Civil Procedure* 25 *Rules*. Under that provision, the Registrar may enter an interlocutory judgment against the defendant and set down the suit for assessment by the court of the value of the goods and damages or the damages only, as the case may be, where the plaint is drawn with a claim "for pecuniary damages only or for detention of goods with or without a claim for pecuniary damages," and the defendant fails to file a defence on or before the day fixed in the summons.

In the instant case, the respondent's claim is not "for pecuniary damages only or for detention of goods with or without a claim for pecuniary damages," but rather for multiple orders and declarations, including; that the applicant is not licensed to conduct business as a financial institution in Uganda, that the Kenyan financial institution's participation in a tripartite loan 5 arrangement with the respondent rendered it void and unenforceable, the securitisation of the arrangement was illegal hence null and void, the applicant's re-financing of that loan arrangement was procured by undue influence, and so on. It was erroneous for the Registrar to have entered an interlocutory judgment under that Order and rule.

10 For all the foregoing reasons, the application is allowed. Consequently the interlocutory judgment is set aside. Leave is granted to the applicant, within fifteen (15) days from today, to file a notice of intention to defend the suit and an application disputing the jurisdiction of the court for consideration as a preliminary point of law. The costs of this application shall abide the result of the suit.

Delivered electronically this 27th day of September, 2021 ……Stephen Mubiru…………..

Stephen Mubiru Judge, 27th September, 2021

20 .