Civil Aviation Authority v East African Underwriters Ltd (MISC. APPLICATION NO. 127 OF 2001) [2001] UGHC 116 (27 April 2001)

Full Case Text

# THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## **MISC. APPLICATION NO. 127 OF 2001 (ARISING OUT OF H. C. C. S. NO. 1504 OF 2000)**

# **S'- CIVIL AVIATION AUTHORITY PLAINTIFF/APPLICANT**

## **VERSUS**

# **EAST AFRICAN UNDERWRITERS LTD DEFENDANTS/RESPONDENT**

## **BEFORE: THE HONOURABLE LADY JUSTICE C. K. BYAMUGISHA**

## **R U L I N G**

On the 1st November 2000, the Plah^iffTApplicant -Civil Aviation Authority filed **10** this action against the Defendants various amounts of money from each of them. However for purposes of the1 Instant Application, the Plaintiff is claiming the sum of Shs. 10,000,000/= against the third Defendant under a performance bond.

The third DefendaTTtj£Hjs written statement of Defence paragraph three thereof denied in t^the contents of paragraph 4 (a) to 4 (j) of the plaint and it put the Plaintiff to strict proof of the allegations therein.

On the 3rd April, 2001 the Plaintiff applicant filed the present application under the provisions of order 11 rule 6 seeking orders that:-

**1.** Judgment or order upon admission of the Defendant/Respondent for their indebtedness to the Applicant/Plaintiff for Shs.10,000,000/= (Shilling Ten Million only) plus interest of 45% from 22nd October, 1999 when a

demand was struck on the Defendant for enforcement of the performance bond.

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2. Costs of the application be provided for.

The grounds of the application which were supported by the affidavit of Samuel Muneeza briefly were as follows:-

- **1.** The Applicant/Plaintiff entered into a performance bond whereby the Respondent/Defendant undertook to be Seed to the Applicant/Plaintiff in the sum of Shs. 10,000,000/= (Shillings Ten Million only) for landing fees, control tower costs etc provided to Busy Bee International Uganda Ltd. **/C** - 2. Busy Bee International Uganda Ltd issued cheques worth Shs.12,480,000/= to the Applicant/Plaintiff which were dishonoured. - 3. Notice of dishonour of the cheques were communicated to the Respondent/Defendant on the R'^pwd&Qt/B^f^RdanTofTtte 22nd Day of October 1999 but the Defendant/Respondent failed to enforce the bond. - **4.** By written letters dated 22nd October 1999 and 16th December the Respondent/Defendant undertook to settle the Plaintiff/Applicants claim upon the bond. - 5. However up to date no payment has ever been made to the Applicant/Plaintiff hence the suit. - 6. lt is in the interest of Justice and in order not to waste Court's time to enter Judgment for Shs. 10,000,000/= plus interest at 45% p.a from 22/10/99 till payment in full.

The Respondent/Defendant filed an affidavit through its Deputy General Manager one Rathinam, .

Both counsel made submissions and I will briefly summarise them. Counsel for the Applicant/Plaintiff stated that the Defendant/Respondent claims in its affidavit that the letters being relied on were written "without Prejudice" and therefore are not binding. He stated that they are authorities which show that they are binding. He relied on an English decision of Tomlin Vs Standard Telephones and Cables Ltd [1969] 3 All ER 201 for his contention. He claimed that the Defendant made a definite undertaking to pay the Plaintiff in accordance with the terms of the bond. He claimed that the bond is clear in its terms and the cheques issued by Busy Bee International Ltd was outside the undertaking. He cited the case of Kamrudiu Mohammed Vs Jinja Cooperative Society Ltd 1957 8 U. L. R 331 for the legal proposition that once the cheque are not part of the collateral, the creditor is entitled to sue on the guarantee.

Regarding the rule under which the application was filed, counsel relied on Mulla on the Code of Civil Procedure at page 1184 where the author was considering a similar rule. Counsel stated that he is relying upon admissions otherwise made and not admissions made on pleadings. He prayed that Judgement be entered for the Plaintiff in the sum prayed for in the plaint.

Counsel for the Respondent/Defendant while responding to the above submissions Opposed the application and relied on the affidavit of Rathinam. He stated that the letters which the Applicant is relying on were written "without prejudice". According to counsel no services were rendered to Busy Bee International by the Applicant but services were rendered to Bogal Air Services Ltd and that is when the cheques issued by Busy Bee come in. He claimed that the terms of the bond were not satisfied since no services were rendered to Busy Bee.

He further submitted that even if the Respondent was liable, the cheques having bounced, the Respondent should have been given notice of dishonour

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in good time. He further stated that the Applicant has to establish liability of Busy Bee International.

As regards letters written "without prejudice" counsel relied on Osborn's Concise Law Dictionary where the words were defined to mean that when negotiations are taking place and letters are written with proposals made which are not accepted such letters are not admitted in evidence at the instance of the other party. If they are accepted a complete contract is established. He submitted that the document cannot be relied upon. He prayed that the application be dismissed.

I think there is no dispute that on 10th day of November 1997, a performance Bond No. PB/30059 was executed in favour of the Applicant/Plaintiff by the 3rd Defendant/Respondent. It was valid from 10th November to 9th November 1998. On 6th April 1999, the third Defendant/Respondent and the insured Busy Bee International Ltd, extended it for a further period of 12 months and it was to expire on 9th November 1999.

In the bond the third Defendant bound itself to pay the sum of Shs.10 million to the Applicant/Plaintiff for services which the latter would provide to Busy Bee International Ltd. It is claimed by the Plaintiff that during the year 1999 tt^ Busy Bee International and Bogal Air Services Ltd (the first and second Defendants respectively) operated an aircraft Reg. No. UR - UCY and incurred navigation expenses totalling the sum of Ug. Shs. 12,480,000/=. The 'flights in question which are the subject of these proceedings were made on 30th July 1999, 8th and 9th August 1999 and were paid for by cheques drawn by Busy Bee International Ltd. The said cheques were dishonoured and the Plaintiff gave notice of dishonour to the parties concerned in a letter dated 8th September, 1999. The first and second Defendants failed to honour their obligations of making good the cheques.

On the 22nd October, 1999 the Plaintiff/Applicant wrote to the 3rd Defendant/Respondent a letter requesting for the execution of the performance bond because of the default by the insured. On the same date,

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the 3rd Defendant/Respondent replied acknowledging receipt of the above letter lodging the claim. The letter in part says:-

"We are processing your claim and shall revert to you shortly

Some other letters were exchanged and on 16th December the third Defendant/Respondent wrote another letter to the Plaintiff which states in part that:-

"We regret to note that Mr. Whiting has not kept his promise and has not paid the debt owed to you. We therefore agree to settle your claim under the bond and request you to return the enclosed Discharge voucher duly signed, together with the following so as to enable us to send your own cheques."

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The two letters were written "without prejudice".

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Turning to the Application itself, the rule under which it was filed states that:-

"Any party may at any stage of suit, where an admission of facts has been made, either on the pleadings, or otherwise apply to the Court for such Judgment or orders as upon such admission he may be entitled to without waiting for the determination of any other question between the parties and the Court may upon such application make such order, or give such Judgment, as the Court may think just."

The provisions of this rule has two limbs. The first is that admissions which are being relied upon should be made on the pleadings. In order for the party applying to succeed, he/she has to show that on the pleadings as filed the admissions made are clear and unequival. It is also a requirement that if the party moving the Court is the Plaintiff, such party should have a clear case. The second limb, concern admissions which are made otherwise than on pleadings. These might include letters in which liability is admitted by the

Defendant and these should clearly show at once that the Defendant has no defence to the suit.

In the matter now before Court, it the Applicant's contention that the letters written by the 3rd Defendant/Respondent together with the performance bond are sufficient in themselves to entitle it to immediate Judgment. The third Defendant/Respondent contends that the letters were written "without prejudice" and therefore cannot be used against it. However the Respondent did not explain why the letters were being written without prejudice. Normally when a letter is written without prejudice, the author is trying to safeguard his position during negotiations for a settlement. The Respondent as the Insurer of Busy Bee International Ltd was informed that the insured had issued cheques to settle its indebtedness to the Applicant for navigational services rendered and that the cheques had been dishonoured. The beneficiary of the bond was specifically calling upon the insurer to pay in accordance with the terms of the bond. The law regarding performance bonds was set out in the case of Edward Owen Engineering Ltd vs Barclays Bank International Ltd [1978] All ER 976 where the principles to guide Court were summarised. Basically these are that a performance bond stand on a similar footing to an irrevocable letter of credit and is independent of the primary contract of sale between the buyer and the seller and once it has been issued the authority issuing it must honour it according to its terms, the exception to the above is where there is fraud.

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I have looked at the terms of the bond and its wording, the parties in this case have not claimed that any of the words used were ambiguous or do not apply to what was agreed upon. Moreover the Respondent being an insurance company is expected to know the legal consequences and effect of issuing bond. It is not even alleging in its pleadings or otherwise that there is fraud. It is in my view estopped from introducing extraneous matters into the bond. The words contained in the letter of 22nd October to the effect that "We are processing your claim" and the one of 16th December to the effect that "We therefore agree to settle your claim" clearly show a definite commitment and a

clear admission that the Respondent would pay. The letters were not proposing anything. They were re-stating what the bond said.

It was however $\mathcal{B}'$ submitted that no services were rendered to Busy Bee International. The letter of 16th December mentions a Mr. Whiting as having not kept his promise to pay the debt. The correspondence on record show that Mr. Whiting was the one in charge of Busy Bee International and if no services were rendered, why would he promise to pay. Moreover, no cheques would have been issued without consideration.

I am satisfied on the facts and evidence before Court, that the Applicant/Plaintiff has made out a case on which the Court can enter Judgment in its favour against the third Defendant/Respondent in the sum of Shs. 10,000,000/= as claimed together with interest at the rate of 45% p.a from 22nd October 1999 till payment in full. It will also have costs of this application.

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**JUDGE**

27. $4.201$

Mr King for Reshoven Mr Semnyase de officer

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a Muliz deliveral

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## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA

## CIVIL SUIT NO. 1388 OF 2000

## MISCELLANEOUS APPLICATION NO. 127 OF 2001

CIVIL AVIATION AUTHORITY ::: ::: PLAINTIFF/A? Pl.sCA ND'

## VERSUS

## EAST ' '•RICAN UNDERWRITERS LTD DEFEND\*.? 1F/RESP01.'DENT

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THIS SUIT coming for final disposal before Her Lordship Justice Constance Byamugisha this 27th day of April 2001 in the presence of Mr. Justin Semuyaba for the Plaintiff'Applicant and in the presence of Mr. Paul Palia Kiapi for rhe Defendanl/Respondent, it is hereby ordered; -

- 1. Judgement be entered for the Plainrip/Applicani for Shs. interest of45% per annum from the 22,1J day ofOctober : - The Dcfendant/Respondent will pay the costs of this application and the saii. ■>

| Dated at Kampala, this | dax of U-2 | 2G'H | | |------------------------------|---------------------|--------------------------------------------------|--| | | ik | nCERHtW THM J! J3L?* 15C/ j * | | | | REGISTRAR DEPUTY | i swm; l?\ | | | | WE CONSENT 1 | | |

?u7s M'A'esigwa, Rukulana & Co. Advocates

DRAM N *&* EXTRACTED BY: -

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M/s Scmnx aba. Iga & Co. Advocates Apex House. Plot 66 Kampala Road P O Box 12387 1< A M P A L A.

## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA

## CIVIL SUIT NO. 1388 OF 2000

## MISCELLANEOUS APPLICATION NO. 127 OF 2001

# CIVIL AVIATION AUTHORITY PLAINTIFF/APPLICANT

#### VERSUS

# EAST AFRICAN UNDERWRITERS LTD DEFENDANT/RESPONDENT

## DECREE

THIS SUIT coming for final disposal before Her Lordship Justice Constance Byamugisha this 27lh day of April 2001 in the presence of Mr. Justin Semuyaba for the Plaintiff/Applicant and in the presence of Mr. Paul Palia Kiapi for the Defendant/Respondent, it is hereby ordered; -

- 1. Judgement be entered for the Plaintiff/Applicant for Shs. 10,000,000/- with interest of 45% per annum from the 22nd day of October 1999 till payment in full. - 2. The Defendant/Respondent will pay the costs ofthis application and the suit.

Dated at Kampala day of 2001. this **O L** Hav nf

DEPUTY REGISTRAR

M/s wesigwa, Advocates

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#### DRAWN & EXTRACTED BY: -

M/s Semuyaba, Iga & Co. Advocates Apex House. Plot 66 Kampala Road P O Box 12387 KA M P A LA