Formula Feeds and Others v KCB (U) LTD (Civil Reference 41 of 2021) [2022] UGSC 39 (24 March 2022)

Full Case Text

## THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA

CIVIL REFERENCE NO. 41 OF 2021

(CORAM: MUHANGUZI; TUHAISE; CHIBITA: JJSC) 10

$\overline{5}$

(An application arising out of Civil Application No. 38 of 2020 arising from Civil Appeal No. 13 of 2020)

## **BETWEEN**

1. FORMULA FEEDS 15 2. GICHOHI NGARI 3. SAMSON NGARI 4. ANNE WANGUI GICHOHI :::::::::::::::::::::::::::::::::::

## AND

**KCB BANK (U) LTD ::::::::::::::::::::::::::::::::::: RESPONDENT** 20

## **RULING OF COURT**

This is a Civil Reference brought by way of Memorandum of Reference seeking the following reliefs: 25

(a) That the Reference is allowed

(b) That the ruling/decision of Hon. Justice Stella Arach-Amoko, JSC, sitting as a single Justice of the Supreme Court in SCMA 5 No. 38 of 2O2O arising from SCCA No. 13 of 2O2O be varied and set aside,

The grounds upon which the reference is based are the fotlowing: -

- 1. The learned single Justice erred in awarding excessive sums as further securitlr for costs and security for pa5rment of past costs without justification. - 2. The learned single Justice erred in issuing an unreasonable and unjustified timeline within which to deposit the securigr for costs. - 3. The learned single Justice erred in issuing a harsh and unreasonable order that Civil Appeal No. 3 of 2O20 stands dismissed if the Applicants do not deposit the said sums of money. - 4. The learned single Justice failed to properly address herself to the legal authorities and submissions presented by the Respondent during the hearing of the application resulting into an unjustified harsh and unconstitutional order. - 5. The learned single Justice erred in law and fact when she held that SCCA No. 13 of 2O2Ohas no reasonable prospect of success resulting in an unconscionable order. - REPRESENTATION 25

The applicants were represented by learned Counsel Ambrose Tebyasa assisted by Pius Katumba and Derrick Bazzek:uketta.

5 The respondents were represented by learned Counsel Terrence Kavuma.

Both Counsel hled written submissions.

The applicant raised a preliminary objection at the start of the proceedings. The gist of the objection is that the Respondent smuggled additional evidence by way of a Supplementar5r Record of Reference without leave of court. Counsel cited Rule 52 (2) of the Judicature (Supreme Court Rules) Directions.

In reply to the preliminary objection, learned Counsel for the respondents contended that the Supplementary Record objected to was in fact the Appellant's own affidavit and that of Annette lYamakula in HCMA No. 681 of 2O2l showing that the mailo properties indicated had recently been illegally sold in contravention of the High Court order in MA No. 2O8 of 2O2O.

20 It is evident that learned Counsel did not address the issue of whether or not the rules allowed him to hle a Supplementary Record of Reference. He instead addressed court on the contents of the Supplementary Record.

In light of Rule 52 (21 of the Rules of this Court, the preliminary objection raised by learned counsel for the applicant is sustained. Consequently, the Supplementary Record of Reference is rejected as prayed and will not form part of the record of this Reference. It will not be referred to subsequently in this reference.

5 On ground one of the Reference, learned Counsel for the applicants submitted that the judge erred in awarding excessive sums as further security for costs and security for payment of past costs without justihcation.

As evidence of excessiveness and harshness, Counsel submitted that the only taxed costs were Shs 7L,726,8OL1= out of which, Shs 3O,000,0OO/= had already been paid. He submitted further that no other costs have been taxed and no formal demand made either.

On the issue of the burden of proof lying on the applicant, Counsel contended that the learned single Justice misdirected herself by stating that the applicants had not proved that they had a residence in Uganda or owned assets in Uganda and Kenya. 15

Counsel further argued that inability to pay, per se, cannot be a ground for ordering payment of security for costs. He referred court

to Noble Builders (U) Ltd & Anor vs. Jabal Slngh Sandhu SCCA No. 15 of2002 and Bank ofUganda vs Joseph Nsereko & 2 Ors SCCA

No. 7 of2OO2. 20

On ground two, Counsel submitted that a timeline of forty-five days within which to pay Shs 300,O00,OO0/= was unjustifred especially in view of the Covid 19 pandemic, which court ought to take judicial notice of.

On ground three, Counsel submitted that court cannot of its own motion grant reliefs that have not been sought. He cited Fang Min vs. Belex Tours and Travel SCCA No. 6 of 20 13 and Crane Bank vs. Belex Tours and Travel Ltd SCCA No. 1 of2014 at pages 28 and 29.

- 5 He contended that the respondent's prayer was only for securiQr for costs but not for dismissal as ordered by the learned single Justice. On ground four, learned Counsel cited Charles Onyango Obbo and Anor vs. Attorney General SCCA No. 2 of 2OO2 and Deepak K. Shah & 3 Ors vs. Manurama Ltd and,2 Ors HCMA No. 361 of 2O01 at - 167-8 to contend that court did not consider the submissions of counsel and therefore did not express opinion on relevant and binding cases cited by Counsel as required by law. Finally, on ground five, Counsel contended that the learned single 10

Justice failed to find that the applicant did not discharge the burden of proving that the appeal had a likelihood of success. He had instead engaged in conjecture, fanciful theories and attractive reasoning without providing any grounds to justify the application. He referred court to Noble Builders (supra) 15

Learned Counsel for the respondents submitted in response that the

- bill of costs was taxed and allowed at Shs 7 | ,726,8O1 /= of which only Shs 3O,0O0,OOO/= had been paid. On the second bill of costs, he contended that though the taxation had been set aside, the figure set aside was Shs 695,650,7001=, which was a fair indication of what the costs would likely be. 20 - He therefore concluded by contending that 1O%o of the subject matter was a fair estimation as was held in NIC vs Pelican Senrices Ltd Civil Reference No. 76 of 2016. He therefore concluded by submitting that the sums ordered to be deposited as security for costs were reasonable and not excessive. 25

s On grounds two and three, Counsel submitted that Rule 1O1 (3) of the Judicature (Supreme Court Rules) Directions bestow upon court discretionary powers to order for further security for costs and past costs. He added that timelines had to be given in order to safeguard the integrity of the process. He referred court to Noble Bullders r0 (supra) where a timeline of 30 days was given and Goodman

Agencles vs Hassa Agencies Supreme Court Civil Reference No. 1 of 2011 where 45 days were given.

Counsel referred court to Mullndwa George William vs Kisublka Joseph SCCA No. 12 of 2014 where this court upheld dismissal of a 1s suit for failure to furnish securitlr for costs within the given timelines

and asked court to accordingly uphold the decision to dismiss. He disputed the argument of counsel for the applicant that the delay in paying was due to Covid 19 saying that it had not been pleaded and addressed in the pleadings.

- zo On ground four, Counsel submitted that Deepak (supra) was not binding on this Court and ought to be disregarded to the extent that it addressed different issues. He asked court to find that the learned single justice had properly addressed her mind to all the parties' pleadings and authorities. - ?s Counsel asked court to find that as far as ground five is concerned, the learned Justice was convinced that there was no likelihood of success of the appeal after considering that the grounds of appeal had been challenged and their legality found wanting.

He asked court to find that the Reference had no merit and dismiss 30 it accordingly. ## CONSIDERATION BY COURT

This is a civil reference from the ruling of Hon. Justice Stella Arach-Amoko sitting as a single Justice of the Supreme Court delivered on 14'h September, 2021 .

The brief background to the application is that the applicants, who are Kenyan nationals, obtained credit facilities from the applicant bank in 2011. The respondents failed to pay back the loan whereupon the matter went to the High Court. The High Court entered judgment in the sum of Shs 4,272,740,118/= with interest at2lo/o per annum from the date of judgment, to wit, lOth February, 2016. 10 15

The costs were taxed at Shs 7t,726,8OI/=, of which Shs 30,000,000/= had been paid by the time of hling the application before Justice Arach-Amoko.

On appeal, the decision of the High Court was upheld and costs taxed at Shs 695,650,700/= but these were subsequently set aside pending taxation inter parties as ordered by Justice Musota, JA. 2Q

An appeal in the main suit was fiIed vide SCCA No. 13 of 2O2O in this court, which is pending hearing. The Bank, the respondents in the main appeal, then filed the application for securit5r of costs before Justice Arach-Amoko, which was heard and disposed of in favour of the respondents, hence this reference to a full panel.

On ground One, Counsel conceded that out of a total of costs of Shs 7L,726,aOU = taxed at the lower court, only Shs 30,000,00O/= had been paid at the time of this application. There is no need therefore

5 to adduce any further evidence of inability to pay the taxed costs. The applicant admitted as much.

l,earned Counsel for the applicants further argued that inability to pay, per se, is not the only ground for ordering payment of security. Indeed, the court can use its own discretion to order securit5r for

costs. However, where failure to pay previous costs has been admitted, that presents an additional and strong reason for ordering payment of security for costs. 10

We therefore find that the single Justice was well within her right to order payment of security for costs.

The valid question is whether Shs 1O0,0OO,O0O/= as further securiqr for costs and Shs 2OO,OO0,OOO/= as security for payment of costs was excesslve. 15

We find that since the award of Shs 695,65o,70O/=was set aside in the Court of Appeal and Shs 3O,OOO,OOO/= of the taxed Shs

71,726,801 l= had already been paid, award of Shs 200,OO0,0O0/= as securit5r for payment of past costs was not only excessive but also uncalled for. 20

However, Shs 1OO,OOO,0O0/= as securit5r for costs in the Supreme Court when compared to Shs 71,726,801 1= at the Court of Appeal cannot be said to be excessive.

We therefore uphold the Shs 1OO,00O,0O0/= to be paid as security for costs before the matter can be heard in the Supreme Court.

Regarding whether a timeline of forty-five days was unreasonable or not, Counsel for the applicants did not provide authorit5r for a reasonable period.

s On the other hand, Counsel for the respondents provided the authority of Noble Builders (supra) where thirty days was given as a timeline. In Goodman Agencles forty-five days was set by court.

Based on those two precedents therefore, we find that forty-five days is not an unreasonable time within which to pay the security for

10 costs. In Goodman Agencies the security for costs was set at Shs 200,000,000 f =, an amount close to the figure in the instant reference.

On ground four of appeal, it is evident that the learned single justice addressed herself to the authorities and submissions. She may not 15 have arrived at the conclusions that learned counsel for the applicants wished but that does not mean that she did not address herself to the authorities and submissions presented during the

hearing of the application.

Learned counsel did not provide substantia-l evidence that the 20 learned single Justice did not address herself to the authorities and submissions of counsel.

Whereas absence of evidence is not evidence of absence of evidence, the burden to prove the existence of evidence lies squarely on he who alleges a particular set of allegations.

2s On ground hve of appeal, Counsel for the applicants that the single Justice erred in holding that Civil Appeal No. 13 of 2O2O had no reasonable prospect of success.

In response, Counsel for the respondents contended that the learned single Justice must have taken into consideration the grounds of

5 appeal and the admission of indebtedness in the Consent Judgment and come to the conclusion that success of the appeal was doubtful. We are inclined to agree with learned counsel for the applicant that the issue of whether Civil Appeal No. 13 of 2O2O had reasonable prospects of success or not was not a subject of determination in the

instant application. It was therefore not amply canvassed by the parties. 10

Therefore, there could not have been sufficient basis for determination by court, at that stage, whether there was reasonable prospect for success or not.

Since a timeline for deposit of security of costs was given by court, it was prudent to await the expiry of the time set before deciding on the outcome of the appeal. 15

Yet it is clear to see why the single Justice made the seemingly logical decision to dismiss the appeal in case of default of payment at the

expiry of the timeline. Otherwise, why set a timeline if no consequences result from default? 20

Proper procedure, however demands that the forty-five days expire f,rrst then an appropriate application is made before a decision is made whether or not to dismiss.

- In the result, this Civil Reference succeeds in part. We therefore make the following orders: - 1. Security for costs of Shs 10O,0OO,OO0/= (one hundred million shillings) must be paid before the hearing of the appeal at the Supreme Court.

- 2. The balance of the security for costs taxed and confirmed by the $\mathsf{S}$ Court of Appeal of Shs $71,726,801/$ = (seventy-one million, seven hundred twenty-six thousands eight hundred and one shillings) must be paid before the hearing of the appeal at the Supreme Court. - 3. The security for costs in 1 and 2 above must be paid within forty-10 five $(45)$ days of this ruling. - 4. Costs will abide the outcome of the final appeal.

Dated at Kampala this $24$ day of $24$ day of $22$

Ezekiel Muhanguzi

## JUSTICE OF THE SUPREME COURT

**Night Percy Tuhaise**

## JUSTICE OF THE SUPREME COURT

$u$ $B$ $D$ $t$

## JUSTICE OF THE SUPREME COURT

rulier destinated as directed $14 - 03 -$