Exim Bank (Uganda) Ltd v Westwinds Trading C.O Matco Ltd (Misc. Application No. 251 of 2025) [2025] UGCommC 182 (24 June 2025)

#### 5 **THE REPUBLIC OF UGANDA**

# **IN THE HIGH COURT OF UGANDA AT KAMPALA**

#### **(COMMERCIAL DIVISION)**

#### **MISC. APPLICATION NO. 251 OF 2025**

#### **(ARISING FROM CIVIL SUIT NO. 1250 OF 2024)**

10 **EXIM BANK (UGANDA) LTD :::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

#### **VERSUS**

#### **WESTWINDS TRADING C. O MATCO LTD ::::::::::::::::::::: RESPONDENT**

# **BEFORE: HON. LADY JUSTICE PATIENCE T. E. RUBAGUMYA RULING**

Introduction

20 This application was brought by way of Chamber Summons under **Section 64(b) of the Civil Procedure Act, Cap. 282 and Order 26 rules 1 and 3 of the Civil Procedure Rules SI 71-1**, seeking orders that:

1. The Respondent furnishes security for costs to the Applicant.

2. The costs of this application be provided for.

Background

The background of the application is detailed in the affidavit in support 30 deponed by **Ms. Immaculate Murungi**, an Advocate and the Legal Officer of the Applicant, and is summarized below:

1. That the Respondent filed a suit against the Applicant in the 35 Commercial Division of the High Court vide *Civil Suit No. 1250 of 2024* wherein it alleges breach of fiduciary duty, negligent and illegal transfer of USD 95,841 (United States Dollars Ninety-Five Thousand Eight Hundred Forty-One) to Wamimbi and Co. Advocates from Account No. 0050012771 by the Applicant.

- 5 2. That the Respondent has no known assets within the jurisdiction of this Court. - 3. That the Applicant exercised due diligence and verified the garnishee 10 order nisi dated 4th May, 2022, which required it to freeze the account and attach the funds of the judgment debtor MarkAfrica (U) Limited with Account No. 0050012771. - 4. That the Applicant also verified the garnishee order absolute dated 15 12th May, 2022, which directed it to transfer USD 95,841 to Wamimbi and Co. Advocates from Account No. 0050012771. - 5. That the Respondent has no relationship with the Applicant and 20 therefore lacks *locus standi* and has no reasonable cause of action. - 6. That the Applicant has a good defence to the Respondent's suit with a strong likelihood of success. - 25 7. That on account of the fact that the Respondent has no known assets against which the Applicant shall have recourse if it successfully defends the main suit, it is in the interest of justice that the application is granted. - 30 In reply, the Respondent, through an affidavit deponed by **Mr. Lovemore Marowa**, its representative, opposed the application contending that: - 1. The Respondent having a residence outside the jurisdiction of this Court is not enough to prove that the Applicant will be frustrated when judgment in the main suit is delivered in its favour. - 35 2. The Respondent is a Plaintiff in *Civil Suit No. 957 of 2022* at the High Court Commercial Division between *Westwinds Trading C. O MATCO Limited Vs MarkAfrica (U) Ltd and Others* in which the Respondent seeks to recover USD 191,121 against the Defendants

- 5 and the same monies once recovered in Uganda can be attached in satisfaction of the costs (if any) arising out of this suit. - 3. *Civil Suit No. 957 of 2022* is founded on breach of a contract by the Defendant failing to supply soya beans, and the Defendant has 10 no valid defence at all and therefore has very high chances of success. - 4. That the Applicant transferred USD 95,841 to Wamimbi and Co. 15 Advocates from Account No. 0050012771 on 11th May, 2022, before the decree absolute was issued by the Court on 12th May, 2022. - 5. The Respondent has a customer-banker relationship with the Applicant because he was the signatory to Account No. 0050012771, 20 which received the Contract sum held by the Applicant. - 6. The instructions to the Applicant were that the Respondent's representative had the mandate to authorize all the transactions on the said account. - 25 7. The likelihood of success in the main suit is in the Respondent's favour because the Applicant transferred USD 95,841 to Wamimbi and Co. Advocates from Account No. 0050012771 before the issuance of the decree absolute.

**Ms. Immaculate Murungi** swore an affidavit in rejoinder reiterating 30 some of the earlier averments and added that:

- 1. The Applicant transferred the said USD 95,841 to Wamimbi & Co. Advocates on 12th May, 2022, following the orders of this Court. - 2. The Respondent's representative was only a signatory to the 35 account held with the Applicant by MarkAfrica (U) Ltd under Account No. 0050012771, which does not give rise to any

5 contractual relationship between the Applicant and the Respondent.

#### Representation

The Applicant was represented by **M/s V. Agaba Advocates and Legal Consultants** while the Respondent was represented by **M/s Fontes**

## 10 **Advocates**.

Both parties filed their written submissions as directed and the same have been considered.

- 15 Issues for Determination - 1. Whether there are sufficient grounds for the grant of an application for security for costs to the Applicant/Defendant against the Respondent/Plaintiff? - 20 2. Whether there are any remedies available to the parties?

Issue No. 1: Whether there are sufficient grounds for the grant of an application for security for costs to the Applicant/Defendant against the Respondent/Plaintiff?

## Applicant's submissions

In his submissions, Learned Counsel for the Applicant referred to the law under which this application was brought together with the case of *Speke Hotel 1996 Limited (T/A Speke Hotel Apartments) Vs Sheila Nadege* 30 *Misc. Application No. 456 of 2022* for the proposition as stated by **Hon. Justice Musa Ssekaana** (as he then was) that although it is a fundamental principle that a person who asserts a claim should have access to justice, there are particular circumstances in which he should be required to provide security because of the risk that the Defendant may not otherwise 35 recover his or her costs. That in the case at hand, the Respondent does not have any known assets within the jurisdiction of this Court, posing a

- 5 risk as the Applicant may not recover its costs if the suit is determined in the Applicant's favour. He also relied on the case of *John Bosco Muwonge & Another Vs Goldsmith Peter Misc. Application No. 3018 of 2023*, to the same effect. - 10 For the considerations for the grant of an order of security for costs, Learned Counsel relied on the case of *Speke Hotel 1996 Limited (T/A Speke Hotel Apartments Vs Sheila Nadege (supra)* that cited the case of *Anthony Namboro & Another Vs Henry Kaala [1975] HCB 315*, to include whether the Applicant is being put to undue expenses by 15 defending a frivolous and vexatious suit and whether he or she has a good defence to the suit which is likely to succeed.

He relied on the case of *John Bosco Muwonge & Another Vs Goldsmith Peter (supra)* to define a frivolous case as one that lacks legal basis or 20 merit, not serious or not reasonably purposeful, while a vexatious suit is one instituted maliciously and without good cause. Learned Counsel submitted that in the instant case, the Respondent lacks *locus standi* to bring the suit, as there was no legal or customer-banker relationship between the Applicant and the Respondent, which renders the suit 25 baseless.

Learned Counsel further contended that the Respondent's claim that the sum of USD 95,841 was fraudulently transferred by the Applicant to Wamimbi & Co. Advocates under Account No. 0050012771 in the name of

30 MarkAfrica (U) Ltd on 11th May, 2022 before the garnishee order nisi was made absolute, is baseless due to the fact that the evidence adduced is directed to the fact that the money was rightly transferred on the date as stated by the Applicant, following a legal garnishee order that had been made absolute by Court. Learned Counsel further contended that no

- 5 evidence has been adduced to show the customer-banker relationship between the Applicant and the Respondent because being a signatory to an account does not create such a relationship. He referred to the case of *Iwa Kizito (Administrator of the Estate of the Late Felix Charles Maku) Vs Equity Bank & Another, Civil Suit No. 36 of 2013,* to that - 10 effect, and prayed to Court to find that the suit is frivolous and vexatious. As to whether the Applicant has a good defence to the suit, which is likely to succeed, Learned Counsel contended that the Applicant has a good defence as the Respondent does not have a cause of action against it or 15 *locus standi* to bring the suit. - Respondent's submissions

Learned Counsel submitted that the Respondent's representative was 20 appointed as a signatory to the account and the purpose of appointing him was to protect the Plaintiff's monies and that it was the Applicant that advised the Respondent's representative to be added as a signatory to the bank account. That therefore the Applicant is liable. Learned Counsel relied on the case of *Standard Chartered Bank Kenya Limited Vs*

### 25 *Intercom Services Limited & 4 others [2004] KECA 163 KLR.*

Further, Learned Counsel submitted that the Respondent has a relationship with the Applicant since a bank can have a relationship with a person by virtue of conducting business with that person even though

30 the person does not have a bank account with the bank. That the relationship creates a banker-customer relationship and therefore the right to sue a bank.

In addition, Learned Counsel contended that the Applicant was aware of 35 the circumstances under which the Respondent transferred money to the Bank Account No. 0050012771 and the purpose of the same and that

5 therefore the Applicant had an obligation to inform the Respondent that an order nisi had been served on the Applicant. Based on this, Learned Counsel submitted that the Respondent has a cause of action against the Applicant.

Learned Counsel further submitted that the Applicant transferred the money to Wamimbi & Co. Advocates from Account No. 0050012771 on 11th May, 2022 before the decree absolute was issued by Court on 12th May, 2022 and that therefore the Applicant does not have a good defence 15 to the main suit.

On inability to pay, Learned Counsel relied on the case of *Speke Hotel 1996 Limited (T/A Speke Hotel Apartments Vs Sheila Nadege (supra***)** where it was held that:

20 *"It is only after the two elements have been considered that factors like inability to pay may be taken into account."*

Learned Counsel submitted that the Applicant does not provide any proof that the Respondent is unable to pay the costs. In the circumstances,

25 Learned Counsel prayed that the application is dismissed and that costs be provided for against the Applicant.

Analysis and Determination

30 **Section 98 of the Civil Procedure Act** empowers this Court to make such orders as may be necessary for the ends of justice.

**Order 26 rule 1 of the Civil Procedure Rules** stipulates that:

*"The Court may if it deems fit order a Plaintiff in any suit to give security for the payment of all costs incurred by any Defendant."*

35 I am mindful that it is a fundamental principle that a person who asserts a claim should have access to justice; however, **Order 26 rule 1 of the** 5 **Civil Procedure Rules**, together with several decisions, stipulate that there are particular circumstances under which such a person can be required to provide security.

The power to grant such an application is discretionary, and the Court exercises the same judiciously after satisfaction that it deems fit to do so.

- 10 **Ssekandi Ag. J**, in the case of *Anthony Namboro and Another Vs Henry Kaala (supra)* held that the main considerations to be taken into account in an application for security for costs are: - i. Whether the Applicant is being put to undue expenses by defending a frivolous and vexatious suit; - 15 ii. That the Applicant has a good defence to the suit; and - iii. That the Applicant is likely to succeed. - iv. That the Respondent is unable to pay the costs.

In ascertaining whether the above considerations have been proved, **Oder JSC**, in the case of *G. M. Combined (U) Ltd Vs A. K. Detergents (U) Ltd*

20 *SCCA No. 34 of 1995*, observed that the Court must consider the prima facie case of both parties based on their pleadings and any other material available at this stage. Furthermore, in the case of *Noble Builders (U) Ltd & Another Vs Jabal Singh Sandhu SCCA No. 15 of 2002*, **Hon. Justice Mulenga, JSC (RIP**), quoted with approval the case of *De Bry Vs* 25 *Fitzgerald and Another [1990] 1 All ER 560*, on the rationale for the discretionary grant of an order for security for costs to the effect that:

*"A Defendant should be entitled to security if there is reason to believe that, in the event of his succeeding and being awarded costs of the action, he will have real difficulty in enforcing that order. If the* 30 *difficulty would arise from impecuniosity of the Plaintiff, the Court will*

5 *of course have to take an account of the likelihood of his succeeding in his claim, for it would be a total denial of justice that poverty should bar him from putting forward what is prima facie a good claim. If, on the other hand, the problem is not that the Plaintiff is impecunious but that, by reason of the way in which he orders his affairs, including* 10 *where he chooses to live and where he chooses to keep his assets, an order for costs against him is likely to be unenforceable only by a significant expenditure of time and money, the Defendant should be entitled to security."*

**Section 101(1) of the Evidence Act, Cap. 8** is to the effect that he who 15 asserts must prove. I shall, therefore, proceed to analyze each party's case; however, being cautious not to delve into the merits of the main suit.

i. Whether the Applicant is being put to undue expenses by defending a frivolous and vexatious suit?

According to the plaint annexed to the application as "**A**", the Respondent sued the Applicant vide *Civil Suit No. 1250 of 2024* for breach of fiduciary duty, negligent and illegal transfer of USD 95,841 to Wamimbi and Co. Advocates from Account No. 0050012771 in the name of 25 MarkAfrica (U) Ltd, recovery of the same, general damages, interest and costs of this suit.

The claim was premised on the background that, on 22nd February, 2022, the Respondent entered into a Sales Purchase Agreement with MarkAfrica 30 (U) Ltd for the supply of Non-GMO soya beans.

That, upon the Applicant's advice and guidance, and to ensure the performance of the Contract, it was agreed that MarkAfrica (U) Ltd opens an additional dollar account to the one it held with the Applicant to receive

9 35 the Contract sum. For purposes of monitoring and ensuring that the

- 5 Contract sum would be applied to its intended purpose, the Respondent's agent in Uganda, Mr. Lovemore Chidochangu Marowa, was, together with the director of MarkAfrica (U) Ltd, appointed signatories to the account. Consequently, the account was opened, and on 28th February, 2022, the Respondent transferred a total of USD 238,000 to the account for the - 10 purchase of 476 metric tons of soya beans.

That in May, 2022 without the Respondent's consent or knowledge, USD 95,841 was transferred to Wamimbi & Co. Advocates. Upon inquiring with the bank, the Respondent was informed that the funds were transferred

- 15 based on a Court Order arising from garnishee proceedings stemming from *Civil Suit No. 0267 of 2022, Tong Makuac Lual Vs MarkAfrica (U) Ltd*. That the decree absolute was issued on 12th May, 2022, but the Applicant transferred the funds before the decree absolute was issued. - 20 To that, the Respondent pleaded particulars of fraud against the Applicant, including the failure to inform the Court of the Respondent's interest in the monies on the account, the fraudulent and illegal transfer of funds amounting to USD 95,841 to Wamimbi & Co. Advocates before the - 25 issuance of the decree absolute, and the failure to inform the Respondent's agent/signatory of the account about the order nisi in the garnishee proceedings. - 30 The Applicant's grounds are premised on the averments that the suit is vexatious and frivolous because there is no cause of action against it as the Respondent does not have any account with it, hence no bankercustomer relationship and *locus standi* for the Respondent to institute a suit against it. - 35

A frivolous and vexatious suit, as defined in *R Vs Ajit Singh S/o Vir Singh [1957] EA 822 at 825,* is paltry, trumpery, not worthy of serious

- 5 attention; having no reasonable ground or purpose. The Applicant herein argues that he did not contract with the Respondent but with MarkAfrica (U) Ltd, which had an account with it. - In its response, the Respondent insisted that it has a banker-customer 10 relationship with the Applicant because it was a signatory to the account No. 0050012771, which received the Contract sum, held by the Applicant. That the instructions to the Applicant were that the Respondent's representative had the mandate to authorize all the transactions on the said account. I have looked at annexure "**B**" attached to the plaint as 15 referred to by the Respondent. The said annexure is a board resolution of MarkAfrica (U) Ltd to the effect that the Company had agreed to open an additional USD account with the Applicant. That Mr. Michael Opkwo and Mr. Lovemore Chidochangu Marowa were appointed joint signatories to the said bank account with powers to jointly operate the bank account, 20 including signing of cheques and other documents or instruments for and on behalf of the Company. The Applicant has not denied the said powers granted to the Respondent's representative.

The question, therefore, that arises is whether the above transaction 25 created any contractual relationship so as to contend that the Applicant owed the Respondent a duty of care? In the foregoing, as portrayed by the pleadings of both parties, I find that a prima facie case has been established.

ii. Whether the Applicant has a good defence and is likely to succeed? I will consider the Applicant's application along with the written statement of defence. The Applicant insisted that the Respondent has no cause of 35 action against it, as it did not have any contractual relationship with the Respondent. As outlined above, the issue at hand is whether there was

5 any contractual relationship between the Applicant and Respondent that would impose a duty of care on the Applicant, a question I have reserved for the trial, because it pertains to the merits of the case.

The Applicant also argued that the Respondent has no known assets in 10 Uganda. The Respondent, however, argued that having a residence outside the jurisdiction of this Court is not enough to prove that the Applicant will be frustrated when Judgment in the main suit is entered in its favour.

The Respondent further contended that it is a Plaintiff in *Civil Suit No. 957 of 2022* at the High Court Commercial Division between *Westwinds*

- 15 *Trading C. O MATCO Limited Vs MarkAfrica (U) Ltd and Others* in which it seeks to recover USD 191,121 against the Defendants and the same monies once recovered in Uganda, can be attached in satisfaction of the costs (if any) arising out of this suit. - 20 It is trite law that the poverty of a Plaintiff is not by itself a ground to warrant an order for co sts. (See: *Anthony Namboro and Another Vs Henry Kaala (supra*).

In the instant application, the Applicant has not led any evidence of the 25 impecuniosity of the Respondent. As was held in the case of *Bank of Uganda Vs Joseph Nsereko & 2 Others Civil Application No. 7 of 2002*, lack of knowledge on the part of the Applicant cannot amount to evidence of the Respondent's inability to pay costs. In the circumstances, I find the Applicant's claim speculative.

Having considered that the Respondent is seeking recovery of money, and there is a possibility that the transaction in issue might have been fraudulent and further because the Applicant has failed to convince this

5 Court that the Respondent will be unable to meet the costs of the suit, this application fails, and the same is hereby dismissed.

The costs of this application shall be in the cause.

I so order.

Dated, signed and delivered electronically via ECCMIS this **24th** day of **June**, **2025.**

Patience T. E. Rubagumya **JUDGE** 24/06/2025

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