Development Finance Company of Uganda Ltd and Ors v N.G. General Ltd (High Court Miscellaneous Application No. 1527 of 1999) [2000] UGCommC 3 (6 March 2000)

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{\creatim\yr2006\mo5\dy17\hr15\min44}{\revtim\yr2006\mo5\dy17\hr15\min44}{\version2}{\edmins0}{\nofpages3}{\nofwords1012}{\nofchars5773}{\*\company I. R. I. S.}{\nofcharsws6772}{\vern24689}}{\*\userprops {\propname Editor}\proptype30{\staticval Readiris}} \margl1440\margr1440 \widowctrl\ftnbj\aenddoc\noxlattoyen\expshrtn\noultrlspc\dntblnsbdb\nospaceforul\hyphcaps0\horzdoc\dghspace120\dgvspace120\dghorigin1701\dgvorigin1984\dghshow0\dgvshow3\jcompress\viewkind1\viewscale100\nolnhtadjtbl\rsidroot7422559 \fet0\sectd \linex0\sectdefaultcl\sftnbj {\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4 \pnlcltr\pnstart1\pnindent720\pnhang {\pntxta )}}{\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (} {\pntxta )}}{\*\pnseclvl8\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \qc \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 DEVELOPMENT FINANCE COMPANY OF UGANDA LIMITED AND OTHERS \par \par }\pard \qc \li0\ri0\sl192\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 v \par \par }\pard \qc \li0\ri0\sl201\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 N. G. GENERAL LIMITED \par }\pard \qj \li0\ri0\sl201\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\b\insrsid7422559 \par }\pard \qc \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 HIGH COURT OF UGANDA AT KAMPALA \par (COMMERCIAL COURT) \par \par }\pard \qc \fi225\li0\ri0\sl225\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 HIGH COURT MISC. APPLICATION NO. 1527 OF 1999 \par (Arising out of Civil Suit No. 950/96) \par }\pard \ql \li0\ri0\sl201\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par }\pard\plain \s1\qc \li0\ri0\sl240\slmult0\keepn\nowidctlpar\faauto\outlinelevel0\rin0\lin0\itap0 \b\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 BEFORE: HON. LADY JUSTICE C. K. BYAMUGISHA \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par }\pard \qc \li0\ri0\sl240\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 March 7, 2000 \par }{\b\insrsid7422559 \par }\pard\plain \s16\qj \li0\ri0\sl240\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \i\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 Civil Procedure \endash Security for costs \endash Application for security for costs \endash Applicants receivers of respondent company \endash Whether grounds for application sufficient \par }\pard\plain \s1\qc \li0\ri0\sl182\slmult0\keepn\nowidctlpar\faauto\outlinelevel0\rin0\lin0\itap0 \b\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b0\i\insrsid7422559 \par }\pard \s1\qj \li0\ri0\sl182\slmult0\keepn\nowidctlpar\faauto\outlinelevel0\rin0\lin0\itap0 {\b0\insrsid7422559 The applicants were appointed as receivers of the respondent company upon failure to repay a loan advanced to it by the applicants. The re spondents filed a suit challenging the appointment of the receivers in which a consent judgment was entered. Disputes arose in implementation of the consent judgment resulting in applications and filing of suits in the Court by the parties. In this applic ation the applicants sought orders against the respondent for payment of security of costs, on grounds that the respondent was under receivership and was indebted to other entities. \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\b\insrsid7422559 Held: }{\insrsid7422559 This was not a case in which Court should order security for costs. There was evidence to show that the applicants were in possession of property worth one billion shillings, which was sufficient to take care of the costs likely to be incurred. \par \par }\pard\plain \s2\qj \li0\ri0\keepn\nowidctlpar\faauto\outlinelevel1\rin0\lin0\itap0 \i\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 Application dismissed \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par }{\b\insrsid7422559 Legislation referred to: \par }\pard \qj \fi720\li0\ri0\sl182\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 Companies Act}{\b\insrsid7422559 }{\insrsid7422559 Section 404 \par Civil Procedure Rules Order 23 rules 1, and 3}{\i\insrsid7422559 \par }\pard\plain \s1\qc \li0\ri0\sl182\slmult0\keepn\nowidctlpar\faauto\outlinelevel0\rin0\lin0\itap0 \b\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par \par }\pard\plain \s1\qc \li0\ri0\sl182\slmult0\keepn\nowidctlpar\faauto\outlinelevel0\rin0\lin0\itap0 \b\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 RULING}{\b0\insrsid7422559 \par }\pard\plain \qj \li0\ri0\sl182\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b\insrsid7422559 \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\b\insrsid7422559 BYAMUGISHA}{\insrsid7422559 , }{\b\insrsid7422559 J:}{\insrsid7422559 This was an application by Chamber Summons brought under the provisions of section 404 of the }{ \i\insrsid7422559 Companies Act}{\insrsid7422559 and Order 23 rules 1 and 3 of the }{\i\insrsid7422559 Civil Procedure Rules}{\insrsid7422559 seeking orders. \par \par {\listtext\pard\plain\s15 \hich\af0\dbch\af0\loch\f0 (a)\tab}}\pard\plain \s15\qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls3\rin0\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 That the respondent furnishes security for the payment of costs incurred by the applicants in the sum not less than Shs. 90, 000, 000/ = or such other reasonable sum set by the within 10 days from the date of the order or within such period to be set by C ourt \par }\pard\plain \qj \li360\ri0\nowidctlpar\faauto\rin0\lin360\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (b)\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls3\rin0\lin720\itap0 {\insrsid7422559 Costs of this application be provided for. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par The grounds in support of the application are the following:\- \par \par {\listtext\pard\plain\s15 \hich\af0\dbch\af0\loch\f0 (1)\tab}}\pard\plain \s15\qj \fi-360\li1080\ri0\nowidctlpar\jclisttab\tx1080\faauto\ls2\rin0\lin1080\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 The respondent was put under receivership pursuant to debentures and loan agreements in favour of Development Finance Company of Uganda Ltd. \par }\pard\plain \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (2)\tab}}\pard \qj \fi-360\li1080\ri0\nowidctlpar\faauto\ls2\rin0\lin1080\itap0 {\insrsid7422559 The respondent apart from being indebted to the applicant is also indebted to other entities including the Non-performing Assets and Recovery Trust. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (3)\tab}}\pard \qj \fi-360\li1080\ri0\nowidctlpar\faauto\ls2\rin0\lin1080\itap0 {\insrsid7422559 All the respondents\rquote assets are pledged and the secured creditors are in the process of realising security hence all assets are liable to be sold off. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (4)\tab}}\pard \qj \fi-360\li1080\ri0\nowidctlpar\faauto\ls2\rin0\lin1080\itap0 {\insrsid7422559 The respondent has engaged the applicants in a string of endless and costly litiga tion which have increased and continue to increase the cost of receivership. \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (5)\tab}There is little likelihood of Misc. App. No. 1471/99 will succeed and the applicants are worried that they will not be paid their costs if they succeed in their defence. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par It is in the interest of Justice to prevent the abuse of Court process and to order the plaintiff/respondents to furnish security for costs. \par \par The facts which have led to the string of applications and counter-applications seem to have began in the following manner. The respondent obtained a loan from Development Finance Company of Uganda Ltd herein after referred to as DFCU in 1993. Some debentures were signed. Pursuant to powers contained in the debentures receivers were appointed on the 8/10/96 to recover the outstanding loan of US $ 182,000 and interest of us $ 54,403.99. The plaintiff filed Civil Suit No. 950/96 challenging the appointment of the receivers. On the 6th November, 1996 a consent order was entered on the following terms:\- \par \par That the plaintiff/applicant is given up to 31st December, 1996 to pay interest arrears which is 54,403.99 US dollars. \par \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 1.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 That the plaintiff/applicant pays the balance due on the loan in the sum of US dollars 182,000 in monthly installments of US dollars 30,366.5 in a period of 6 months commencing on the 1st January, 1997 by equal monthly installments. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 2.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 That the Defendants/Respondent shall open the ginnery the subject-matter of the Suit and allow the plaintiff/applicant to carry out normal operations subject to the pla intiff/applicant strictly adhere to the terms of this consent judgment and the agreement between the parties. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 3.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 That the plaintiff/applicant shall not restructure or reorganise itself or change its constitution during this period and shall not transfer or dispose of any of its properties without the consent of the Defendants/Respondents. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 4.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 That the plaintiff/applicant shall make monthly reports of all its operations to the defendant/respondents in strict accordance with section 11 of the Loan Agreement. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 5.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 In the event that the plaintiff/applicant shall default in payments in accordance with this consent judgement all the outstanding money shall beco me immediately payable and the receivers appointed shall proceed to sell the plaintiff/applicant's property under the receivership. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 6.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 The plaintiff applicant shall pay such further interest that shall accrue on the loan during the period from the date of this order till payment in full. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 7.\tab}}\pard \qj \fi-360\li720\ri0\nowidctlpar\jclisttab\tx720\faauto\ls4\rin0\lin720\itap0 {\insrsid7422559 Costs shall be in the cause. \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid7422559 \par It is the implementation of this consent judgment that have apparently led to the numerous applications and Suits which are referred to by Christine Okot - Chono in her affidavit in support of this application. \par \par When the matter came before me both Counsel made submissions in support of their respective positions. They also cited a number of authorities. I have considered their submissions and the affidavit evidence adduced by both sides . I have noted in particular in the affidavit of John Joshua Ndege sworn on January 18, 2000 in reply to the one sworn by Okot Chono and Ogulle. Ndege states in his affidavit and he was not contradicted in his averments that the property in the hands of t h e receive is worth over one billion shillings. The property in the hands of the receivers is a ginnery which the receiver's should have managed to generate income and payoff the creditors or should have sold off by now to recover the loan due to DFCU. If the ginnery is worth one billion shillings as Ndege asserts, then the receivers have assets from which they can recover any costs which they are likely to incur in the Suits. \par \par I have also noted that it was agreed that the ginnery should be opened to allow the respondent to operate normally. The applicants state that they opened the ginnery but later closed it because the respondent did not strictly adhere to the terms of the Consent judgment. I am not persuaded that this is a case in which the Court should

order security for costs. The applicants are in possession of property worth one billion shillings according to the affidavit of Ndege and this should take care of the costs which are likely to be incurred. I therefore find no merit in this application an d the same is dismissed with costs to the respondent. }{\b\insrsid7422559 \par \par \par }}