Chanty Links Limited and Others v Centenary Rural Development Bank (Miscellaneous Application 510 of 2024) [2025] UGCommC 71 (27 January 2025)

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCTAL DrVrSrONl MISCELLANEOUS APPLICATION NO. O51O OF 2024

## ARISING OUT OF CIVIL SUIT NO. O57I OF 2022

#### I. CHANTY LINKS LIMITED

#### 2. NUWAMANYA HUMPHREY

#### 3. CHARITY MBABAZI: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :APPLICANTS

#### VERSTJS

# CENTENARY RURAL DEVELOPMENT BANK : : : : : : : : : : : : : :RESPONDENT BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI

#### RULING

#### INTRODUCTION

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This application was brought by way of notice of motion under section 98 of the Civil Procedure Act (CPA), Order 52 rule 1 and Order 36 rule 11 of the Civil Procedure Rules CPR) for orders that:

- a. An order to set aside decree & judgment vide civil suit no 571 of 2022 Centenary Rural Development Bank Versus Chanty Links Limited for just cause. - b. An order staying execution and enforcement ofa decree vide civil suit no <sup>571</sup> OF 2022 Centenary Rural Development Bank Versus Chanty Links Limited - c. An order doth issue that a contractual interest at a rate of 23Yo per annum charged on 670,3 12,1481: (Six hundred Seventy Million, Three Hundred Twelve Thousand, One Hundred Forty-Eight) be declared illegal, harsh, unconscionable, null and void and any payments in excess thereof be reconciled/refunded back to the Applicant upon recall of the loan. - d. The Costs of this Application be provided for

The application was supported by the affidavit of the 2'd applicant, Nuwamanya Humphrey, the director ofthe 1't applicant on behalfofthe applicants and opposed

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by the affidavit in reply of Ruth Birungi, an advocate working with the respondent's legal firm.

### BACKGROUND

The respondent filed a summary suit vide civil suit no 571 of 2022 in this court seeking for the recovery of Ugx 670,312,1481: (six hundred and seventy million three hundred and twelve thousand one hundred forty-eight shillings only), contractual interest at 22%o per annum and the costs of the suit.

The applicants applied for leave to appear and defend and the same was dismissed for want of prosecution. A decree was subsequently entered against the applicants on the 66 day of April 2023. The applicant thus filed this application to set aside the default judgment.

# o REPRESENTATION

The applicants were represented by M/s GM Kibirige & Co. Advocates whereas the respondent was represented by IWs Kampala Associated Advocates.

#### DECISION

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I have read the pleadings and submissions of counsel in this matter and the main issue for consideration is whether the judgment and decree in civil suit no 571 of 2022 should be set aside.

<sup>A</sup>judgment passed under Order 36 of the CPR can be set aside under Order 36 Rule ll of the CPR which states that:

" After the decree the court may, if satis/ied that the service of the summons was not effective, or for anv 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 thinl<s fit".

Therefore, for a court to set aside a default judgment passed under order 36 stated above, it must be satisfied that there was ineffective service of summons or that there was any other good cause that warrants the setting aside of the same.

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In the present case, the applicants submit that that there is good cause to warrant the setting aside ofthe decree and they particularly relied on the mistake and negligence of counsel.

Counsel for the applicants submitted that under paragraph 4 ofthe grounds in the application, the applicant has been able to demonstrate that the application for leave to appear and defend was dismissed due to the failure of counsel to prosecute the same and as such, mistake of counsel should not be visited on the litigant.

Counsel for the respondent submitted that a litigant is bound by the actions of their advocate unless they can prove that they were not complicit or failed to exercise due diligence. Counsel submitted that the applicants have failed to show any proactive steps through following up on their case or rectifting their alleged counsel's error. O Their conduct for over two years exhibits gross negligence and ulterior motives to delay execution.

Counsel for the respondent contended that besides alleging mistake/negligence of counsel, the applicants have failed to show to this court that they made any efforts to follow up on the case for leave to appear and defend the suit which they had filed. This application was filed a year after the application for leave was dismissed and this not only depicts dilatory conduct but further shows ulterior motives of delaying the execution process.

It is an established principle of the law that negligence ofcounsel ought not to be visited on an innocent litigant and that a litigant ought not to bear the consequences of default by an advocate unless the litigant is privy to the default or the default O results from the failure on the part ofthe litigant to give the advocate due instructions (Zam Nalumansi v Sulaiman Lule, SCCA No. 2 of 1992; Mary Kyamulabi v Ahmed Zirondemu, CACA No. 41 of 1979 and Andrew Bamanya v Sham Sherali Zaver, CACA No.70 of 2001).

In the case of Banco Arabe Espanol v Bank of Uganda SCCA No. 8/1998 it was held that:

"A mistake, negligence, oversight or error on the part of counsel should not be visited on the litigant. Such mistake or as the case may be constitutes just cause

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entitling the trial judge to use his discretion so that the matter is considered on its merits. ' '

## Further, in the case of Edirisa Kanonya & Anor v Asuman Nsubuga & Others HCMA No.37312022, it was stated that:

"h is trite law that parties are not visited with punishment arisingfrom the mistake or inadvertence or negligence ofcounsel when the mistake, inadvertence, negligence is in respect to procedural matters in which case, the court would lean towards accommodating the parties' interests without allowing mere procedural irregularities brought about by counsel to preclude the determination ofa case on the merits. The Court must however be satisfied that the allegation of inadvertence is true and genuine".

The above principle is not absolute as there are circumstances under which the mistake and negligence of counsel may not stand as a ground for setting aside a judgment and this was discussed in the case of Okech Verkam v Centenary Rural Development Bank HCCA No.93/2019 where the honorable trial Judge stated that:

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"But before the Applicant can be excusedfrom the mistakes of his counsel, he must show that he was not in any way negligent and that he took proactive steps in correcting the errors of his counsel when hefirst became aware of the default. Proactiveness in this matter would include the applicant taking urgent steps to file an application to set aside the default judgment. "

In the instant case, the application for leave to appear and defend by the applicants was dismissed on the 26th October 2022 and there is no evidence on record to show that the applicants sought to reinstate the application. Consequently, a default judgment was entered on the 6th April 2023 and a decree subsequently extracted on theghMay 2023.

The applicants in this case filed this application to set aside the default judgment on the l5th March2024 which is over a year later from the date when their application for leave to appear and defend was dismissed. The applicants have not through their affidavit explained to this Court why they have taken close to a year to challenge a default judgment that was entered against them. They have also not demonstrated the pro-active steps they diligently took to correct the errors/mistakes of counsel

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save for this application which was filed a year later. Save for stating that their lawyer failed to follow up on their application, they have not adduced any evidence to substantiate their claim.

This clearly demonstrates inordinate delay and negligence on the part of the applicants. A litigant has a duty to diligently follow up their case and in circumstances where they have given instructions to advocates to pursue their cases, they ought to follow up with them and take appropriate action.

For the above reasons, I, therefore find that the applicants have failed to show just cause to warrant the setting aside of the default judgment.

The applicants also sought a stay of execution of the decree and for a declaration that the interest of 22%o entered in the decree was harsh and unconscionable.

The applicants' application for leave to appear and defend was dismissed which subsequently led to the default judgment being entered. Therefore, this Court cannot pronounce itself on the interest of 22Yo entered in the decree as that would entail going into the merits of the suit in which a default judgment has been entered.

Secondly, though Order 36 rule l1 of the CPR gives the Court the power to stay or set aside execution of a default judgment where necessary, this discretion can only be exercised upon the Court setting aside the default judgment. In this case, the default judgment has not been set aside and therefore the application for a stay of execution is accordingly denied.

This application is dismissed with costs to the respondent.

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HON. LADY JUSTICE ANNA B. MUGENYI DATED n)...1.:n.x.i...