D.K Construction Co. Ltd & Anor v Barclays Bank of Uganda Ltd (Civil Suit No. 644 of 2000) [2002] UGHC 42 (9 March 2002)

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{\insrsid11697815 \chftnsepc \par }}\sectd \linex0\headery708\footery708\colsx708\endnhere\sectlinegrid360\sectdefaultcl\sectrsid4000177\sftnbj {\footer \pard\plain \s16\ql \li0\ri0\widctlpar \tqc\tx4153\tqr\tx8306\pvpara\phmrg\posxr\posy0\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid13067871 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\field{\*\fldinst {\cs17\insrsid11697815 PAGE }}{\fldrslt { \cs17\lang1024\langfe1024\noproof\insrsid9838647 1}}}{\cs17\insrsid11697815 \par }\pard \s16\ql \li0\ri360\widctlpar\tqc\tx4153\tqr\tx8306\aspalpha\aspnum\faauto\adjustright\rin360\lin0\itap0\pararsid11697815 {\insrsid11697815 \par }}{\*\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 \s15\qc \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1 \widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid11697815 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 THE REPUBLIC OF UGANDA \line }{ \b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 IN THE HIGH COURT OF UGANDA AT KAMPALA \line }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 CIVIL SUIT NO. 644 OF 2000 \line }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 1. D}{ \b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 . K. CONSTRUCTION CO. LTD] \line }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 ::::::::::::::::::::::}{ \b\lang1033\langfe2057\langnp1033\insrsid11697815 ::::::::::::}{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 :}{\b\lang1033\langfe2057\langnp1033\insrsid11697815\charrsid5986110 : PLAINTIFFS}{ \b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line 2. JAMETEX INTRA SALES }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 LTD]}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{ \b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 VERSUS \line }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 BARCLAYS BANK OF UGANDA }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 LIMITED:}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 ::::::::}{ \lang1033\langfe2057\langnp1033\insrsid11697815 ::::::::}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 ::::::::::::: }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 DEFENDANT \line }{ \b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 BEFORE: }{\b\ul\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 THE HONOURABLE LADY JUSTICE C. K. BYAMUGISHA \line }{ \b\ul\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }{\b\ul\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 JUDGMENT }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{\b\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }\pard \s15\qj \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid11697815 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid11697815 The P laintiffs are limited liability companies incorporated under the provisions of}{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 the companies Act and carrying on business in Uganda. They filed this suit against the Defendant seeking a declaration that the latter is a legal or constructive trustee of the monies to the tune of }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid11697815 Shs.24}{\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid11697815 , 852,500/}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid11697815 =}{ \i\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 previously held by the first Plaintiff on its Account No. 2863 at Uganda Commercial Bank Kawempe Branch and the sum of }{ \i\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Shs.17}{\i\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 , 604,990/}{\i\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 = }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 also previously held by the second Plaintiff on Account No. 1822 at Uganda Comm ercial Bank Mukono Branch. The suit is also seeking a declaration that the Plaintiff are the beneficial owners of these monies,}{\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 interest at the rate of 36% Per Annum}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 from the date the money was wrongly held by the Defendant in 1997 till payment in full. The Plaintiffs are also seeking costs of the suit. \line }{ \lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The facts which led to the institution of th}{ \lang1033\langfe2057\langnp1033\insrsid11697815 ese proceedings and which were }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 agreed upon at the scheduling conference held b}{ \lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 efore the trial are as follows:-}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The first Plaintiff }{\lang1033\langfe2057\langnp1033\insrsid3878962\charrsid5986110 Company}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 was incorporated on the 13}{\lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid11697815 th}{\lang1033\langfe2057\langnp1033\insrsid11697815 June, 1991 with }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Lawrence Kasasa Kasekese (P. W1) as one o}{\lang1033\langfe2057\langnp1033\insrsid11697815 f its subscribers and Managing }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Director. On the 17}{\lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid11697815 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 June, 1991 it opened a Bank Account No. 2863 at Uganda Commercial Bank Kawempe Branch P. W 1 was one of the signatories to the Account. The second Plaintiff }{\lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 Company}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 was incorporated on the 14}{\lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid11697815 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 day November 1990. On the 26}{\lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid11697815 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 June 1991 it opened Account No. 1822 at Uganda Commercial Bank Mukono Branch. Again P. W 1 was one of the signatories and Managing Director. \line On 18}{\lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid11697815 th}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 June Total (U) Ltd issued }{\lang1033\langfe2057\langnp1033\insrsid11697815 cheque No. 750504 in the sum of }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Shs.100,000,000/= drawn on its Account with the Defendant Bank, in favour of Uganda customs and Excise Department. The Department did not receive the proceeds of the cheque but the Account of Total was debited with the amount. \line On the 28}{ \lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid11697815 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 June 1991 Caltex Oil issued cheque No. 1093341 for Shs.70}{ \lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 , 849,000}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 /= in favour of Uganda Customs and Excise Department drawn on its Account with the Defendant. The cheque and the money was never received by the payee but the Total Account with the Defendant was debited with the amount. \line }{ \lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The Defendant Bank had a customer called Mapinto Enterprises who had Account No. 1397480 and the proceeds of the two cheques en}{ \lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 ded up on that Account. On 20}{\lang1033\langfe2057\super\langnp1033\insrsid2438296\charrsid5986110 th}{\lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 June}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 1991 the first Plaintiff banked cheque No. 050/583704 for Shs.100,000,000/= drawn on the Mapinto Account. The cheque was banked on the first Plaintiff\rquote s Account at UCB Branch. On the 27/06/91 the second Plaintiff banked a cheque No. 050/583706 for Shs.70}{\lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 , 849,990/= again drawn on the Mapinto Account.}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 It was banked with UCB Mukono Branch on the second Plaintiff\rquote s Account No. 1822. \line }{\lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Other facts relevant to this case and which were admitted are the following: \line Total (U) Ltd had an employee one Christopher Mufutumukiza in the Accounts Department w hich handled Uganda Revenue Authority cheques. He also had a company canaries Ltd and on 3rd July, 1991 it was paid a sum of Shs.5m by the first Plaintiff. Again on }{\lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 09 }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 July, 1991 it was paid another sum of Shs.4.5m. Both amo}{\lang1033\langfe2057\langnp1033\insrsid2438296\charrsid5986110 unts were paid by cheques. On 17}{ \lang1033\langfe2057\super\langnp1033\insrsid2438296\charrsid5986110 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 July, 1991 one Antony Oroga an employee of Caltex Oil Ltd was paid Uganda Shs.5m by the first Plaintiff. He too was working in the Accounts Department dealing with outgoing cheques }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 of Uganda Revenue Authority. \line }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The activities involving the above transa ctions became a subject of police investigations which led to the prosecution of eleven people including P. W1 among others. They were tried and convicted of various offences. The convictions were quashed and a retrial was ordered on the 5}{ \lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid3492902 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 June 1998. In t he meantime the trial Chief Magistrate had ordered the transfer of the money still outstanding on the Plaintiff\rquote s Accounts to the Defendant. This was done in 1997. However there was no trial of the accused persons, as the Director of Public Prosecutions withdrew the charges against them. P. W1 made an unsuccessful attempt}{ \lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 to have the money the subject -}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 matte}{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 r of the suit refunded to him - }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 hence}{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 this suit by the companies. \line }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line At the commencement of the trial, the fo}{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 llowing were the agreed issues:-}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }\pard \s15\ql \fi-720\li1440\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1440\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 1. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Whether the money }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid3492902 Shs.24,857,500/=}{ \i\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 belongs in law or equity to the first Plaintiff or the Defendant. \line }{ \lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 2. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Whether Ug. Shs.17}{ \lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 , 606,402}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 /= belongs in law or equity to the second Plaintiff or the Defendant. \line }{ \lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 3. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Whether the veil of incorporation should be lifted in respect of the Plaintiffs and Lawrence Kasasa Kasekese. \line }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }\pard \s15\ql \fi720\li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 4. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Reliefs if any. \line }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 I shall deal with the third issue because it \rquote s the answer to the lifting of the veil will more or less dispose of the whole case. It was averred in paragraph }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 10 of the Defence and counter - }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 claim as follows:}{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \'93The }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Defendant repeats the contents of paragraph 6 (a) to (b) a bore \line and shall add that at all material times the said Lawrence Kasasa Kasekese was using the 1st and 2d Plaintiff companies as his alter ego for}{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 grand and as a device and sham}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 to avoid recognition while perpetr}{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 ating fraudulent activities.\'94 \line }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 In paragraph 11 it was alleged that: \line }{ \lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \'93 The Defendant shall pray that the veil of incorporation of the }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid3492902 1}{\lang1033\langfe2057\super\langnp1033\insrsid853274\charrsid3492902 st}{ \b\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 and 2}{\lang1033\langfe2057\super\langnp1033\insrsid853274\charrsid5986110 nd}{ \lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Defendant be lifted and a declaration that the mon ies in question are the traceable proceeds of the monies fraudulently debited from the Accounts of Total (U) Ltd and Caltex (U) Ltd.\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid853274\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 In reply, the Plaintiff companies denied the allegations that Lawrence Kasasa Kasekese used the companies as his alter ego}{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 for fraud as a device and sham}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 to avoid recognition while perpetuating his fraudulent activities is baseless and it does not necessitate lifting the veil of incorporation. \line }{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The principle of the independent corporate existence of a company from its promoters and subscribers was enunciated and emphasized in the case of }{ \ul\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Solomon Vs Solomon }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 (1897) A. C. 22. Therefore the magic of corporate personality enjoyed by companies has hamstrung the efforts of Courts to lift the veil. \line }{\ul\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Gower\rquote s Principles of Modern Comp any Law 6}{\ul\lang1033\langfe2057\super\langnp1033\insrsid16409008\charrsid5986110 th}{\ul\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 }{\ul\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Edition }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 (page 173) (Sweet and Maxwell) lists three instances under which the Court can pierce the veil of incorporation. These are}{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 : - }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \fi720\li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 1. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 When the Court is construing a statute, contract or other documents. \line }{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \fi-720\li1440\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1440\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 2. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 When the Court is satisfied tha}{\lang1033\langfe2057\langnp1033\insrsid3492902 t a company is a \'93mere fac}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 ade\'94 concealing the true facts; \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 3. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 When it can be established that the company is an authorised agent of its controllers or its members corporate or human. \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 There are no comprehensive principles which ca}{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 n guide Court when lifting the}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 veil. However, the Court is entitled to look at the reality of the situatio}{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 n, t}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 he motive for the transactions and other relevant fac}{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 ts must be considered before coming to the conclusion that the company is a mere fa\'e7ade concealing the true facts.}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110

\par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 T urning to the matter now before Court, it was submitted by counsel for the Defendant Bank that if a company is used as a vehicle for fraud the Court shall pierce the veil of incorporation and look at the perpetrator of the fraud and fix him with liability . He pointed out that the money from the cheques of Total and Caltex were diverted to the accounts of the Plaintiffs through a fraudulent design engineered by their sole Managing Director }{ \ul\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Lawrence Kasasa Kasekese. }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 He enumerated facts to support this assertion. These are: - \line }{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \fi-720\li1440\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1440\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 1. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Kasasa Kasekese was the promoter of both companies and almost the sole signatory of both accounts. \line }{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 2. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The first Plaintiff was incorporated on 13}{ \lang1033\langfe2057\super\langnp1033\insrsid15601466\charrsid3492902 th}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 June, 1991 and an account was opened with Uganda Commercial Bank Kawempe Branch on 17 /06/91. The Total cheque was issued on 18/06/91. \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 3. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Christopher Mufutumukiza an employee of Total employed in the accounts section and who was involved in the handling of the outgoing cheques payable to Uganda Revenue Authority was charged, tried and con victed jointly with P. W1 in relation to the receipt and handling of the proceeds of the Total cheque although the conviction was quashed on technical grounds. \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 4. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The payment of up to Uganda Shs.9}{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 , 500,000}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 /}{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 =}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 to Mufutumukiza\rquote s company of Canaries Ltd with two separate cheques by the first Plaintiff. \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \fi720\li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 5. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 The Caltex cheque was also handled in the same manner. \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 6. }{\lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Anthony Ologa an employee of Caltex was paid the sum of Shs.5m. \line \par }\pard \s15\ql \fi-720\li1440\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1440\itap0\ipgp1\pararsid3492902 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 7. }{ \lang1033\langfe2057\langnp1033\insrsid3492902 \tab }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Two cheques banked by the Plaintiffs were drawn on the account of Mapinto Ent}{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 erprises which had been blocked or }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 frozen for fraud three months before the dates of the frauds. \line }{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5986110 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Counsel pointed out that the circumstantia}{ \lang1033\langfe2057\langnp1033\insrsid3492902 l evidence shows that Lawrence }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Kasasa Kasekese was responsible for and was}{\lang1033\langfe2057\langnp1033\insrsid3492902 the direct beneficiary of the }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 fraud and that the payments he made to }{\lang1033\langfe2057\langnp1033\insrsid3492902 the two employees of Total and }{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Caltex respectively was because o}{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 f their role in the fraud. \line \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Counsel concluded his submissions by stating that the fraud perpetrated by Lawrence Kasasa Kasekese was the diversion of the proce eds of the two cheques. He contended that the suit monies are the balances which were found on the accounts of the 1st and 2}{\lang1033\langfe2057\super\langnp1033\insrsid16409008\charrsid5986110 nd}{ \lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Plaintiffs and are part of these proceeds from the Total and Caltex accounts and therefore the Defendant is entitled in equity to retain it. \line }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 \par }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 On the }{\lang1033\langfe2057\langnp1033\insrsid16409008\charrsid5986110 other hand}{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 counsel for the Plaintiff companies submitted that no evidence was led by the Defendant to show that }{\lang1033\langfe2057\langnp1033\insrsid3492902 Lawrence Kasasa Kasekese or any }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 Director/Shareholder of the companies stole or received the proceeds of the above mentioned cheques drawn by the Oil companies. He also pointed out that no evidence was led to show that P. W1 or any other employee of the companies altered the cheques and made them payable to Mapinto Enterprises. He further pointed out that there was no evidence t o show that P. W1 connived with employees of the Oil companies to fraudulently divert the two cheques to the Plaintiffs. It was also his contention that no inference of fraud on the part of P. W1 can be drawn from the fact that the value of the cheques issu e d by Mapinto Enterprises to the Plaintiffs were similar to the amounts of the cheques from the Oil companies. On the confessions by P. W1 that he was a smuggler of goods, evaded payment of taxes, had no bank accounts, counsel stated that no inference can b e drawn from these confessions that he conspired or connived with Mapinto Ente}{\lang1033\langfe2057\langnp1033\insrsid1519418\charrsid5986110 rprises to defraud the Bank. \line }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \par Are there facts in this case which the Court can use to lift the veil? In order to do so, the Court has to look at the reality of the situation and see whether the Plaintiff companies were being using by P. W1 as a fa\'e7 ade at the time of the transaction. First and foremost, there is the proximity in time of the incorp}{\lang1033\langfe2057\langnp1033\insrsid1519418\charrsid5986110 oration of the first Plaintiff C}{ \lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 ompany, the opening of the accounts for both companies and the issuance of the cheques by two Oil companies. \line The second factor is that Mapinto Enterprises Ltd whose account with the Defendant had been blocked issued two cheques in favour of the Plaintiffs in the exact amount as the two cheques from the Oil companies. \line The third factor is that two employees of the Oil companies were paid. I do not believe the evidence of P. W1 that the payment to Canaries Ltd was for goods purchased from the company. In my view, it was payment to its proprietor Mufutumukiza who had handled the cheque of Total. He however never satisfactory explained why he paid Anthony Oroga an employee of Caltex the sum of Shs.5m. \line The fourth factor, is that the companies had no previous Bank accounts, no trading licence, etc which could have sh owed their source of trading funds. I am satisfied that the Plaintiff companies were merely used as conduits by P. W1 to negotiate the ill-fated cheques of the Oil companies. I consider this to be one of those cases in which the Court can safely pierce or l ift the corporate veil. This finding more or less disposes of the whole case with the results that the first and second issues will be answered in the negative against the Plaintiffs and in the affirmative in favour of the Defendant. In the result the sui t will be dismissed with costs and Judgment entered for the Defendant on the counter-claim with a declaration that it is entitled to retain the money. It will also have the}{\lang1033\langfe2057\langnp1033\insrsid1519418\charrsid5986110 costs of the counter-claim. \line \par 09/3/2002}{\i\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 C. K. Byamugisha \line }{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 JUDGE }{ \b\lang1033\langfe2057\langnp1033\insrsid9838647 \par \par \par \par \par \par \par \par \par }{\b\i\fs16\lang1033\langfe2057\langnp1033\insrsid9838647 Uploaded by kivumbi Sheila.}{\b\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \line }{\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \par }\pard\plain \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid5986110 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\lang1033\langfe2057\langnp1033\insrsid15601466\charrsid5986110 \par }}