Green Land Bank Ltd (In Liquidation) v Express Sports Club Ltd (HCT-00-CC-CS 232 of 2006) [2007] UGCommC 56 (31 May 2007)

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\li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 THE REPUBLIC OF UGANDA}{\b\lang2057\langfe1033\langnp2057\insrsid4870389\charrsid3284850 \par }{\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 IN THE HIGH COURT OF UDANDA AT KAMPALA \par COMMERCIAL DIVISION \par HCT-00-CC-CS-232-2006 \par }\pard \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 \par GREENL}{\b\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 AND BANK LTD (IN LIQUIDATION}{\b\lang2057\langfe1033\langnp2057\insrsid3284850\charrsid3284850 ) =}{\b\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 =============}{ \b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 PLAINTIFF \par }\pard \qc \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 VERSUS \par }\pard \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 EXP}{\b\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 RESS SPORTS CLUB LTD}{\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 ==============}{\b\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 =========}{\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 DEFENDANT \par \par \par BEFORE: }{\b\ul\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 HON. JUSTICE LAMECK. N. MUKASA}{\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 \par \par }{\b\ul\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 RULING}{\b\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 . \par \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 The Plaintiff, Greenland}{ \lang2057\langfe1033\langnp2057\insrsid13649281\charrsid3284850 Bank Ltd (in liquidation) brought}{\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 Civil Suit No. 232 of 2}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 006 against Express Sports Club}{\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 Ltd}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 , the Defendant to recover Ug. Shs. 7,374,982/=}{ \lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 ,}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 interest thereon at the rate of 25% per annum from 31}{\lang2057\langfe1033\super\langnp2057\insrsid466936\charrsid3284850 st }{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 March 2003 until payment in full and cost}{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 s}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 of the suit. The sum of Shs. 7,374,982/= was an amount over drawn on account No. 01-523693 operated with the Plaintiff bank. \par \par At the sch}{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 eduling conference Mr. Peter Ka}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 uma, counsel for the Defendant}{ \lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 ,}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 raised a preliminary obje ction and prayed that the plaint should be rejected under Order 7 rule 11 (a) of the Civil Procedure Rules for non-disclos}{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 ur}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 e of a cause of }{\lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 }{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 a}{\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 ction. Counsel cited the authority of }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 Auto Garage & }{\b\ul\lang2057\langfe1033\langnp2057\insrsid1982762\charrsid3284850 Others }{\b\ul\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 Vs. }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 Motokov}{\b\ul\lang2057\langfe1033\langnp2057\insrsid466936\charrsid3284850 (No. 3) }{\b\ul\lang2057\langfe1033\langnp2057\insrsid1982762\charrsid3284850 [1971] EA 514 }{ \lang2057\langfe1033\langnp2057\insrsid1982762\charrsid3284850 where it was held that the provision that a plaint \'93shall be rejected\'94 is mandatory. Secondly that where a plaint fails }{ \lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 to disclose a cause of action, }{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 it is not a plaint at all and you}{ \lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 cannot amend a nullity. And thirdly that a cause of action is disclosed if the plaint shows that the plaintiff enjoyed a right}{ \lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 , that the right}{\lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 has been violated and that the Defendant is liable. If any of those essentials is missing, no cause of }{ \lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 action has been shown, }{\lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 the plaint is a nullity}{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 and no}{ \lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 amendment is permissible. Therefore must be rejected. \par \par Annexed to the Defendant\rquote s Written Statement of Defence is a Certificate of Incorporation and a copy of a Memorandum and Articles of Association which show that the Defendant Company was incorporated on 30}{ \lang2057\langfe1033\super\langnp2057\insrsid14250440\charrsid3284850 th}{\lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 November 1999. Annexture \lquote A\rquote to the plaint is a Certificate of balances dated 31}{ \lang2057\langfe1033\super\langnp2057\insrsid14250440\charrsid3284850 st}{\lang2057\langfe1033\langnp2057\insrsid14250440\charrsid3284850 March 2003 which shows that the holder of account No. 523693 was Express Sports Club and the movement on the account was detai}{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 led as follows:}{ \lang2057\langfe1033\langnp2057\insrsid13308379\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 \par }\trowd \irow0\irowband0\ts15\trgaph108\trleft-108\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \trftsWidth3\trwWidth8928\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb 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\irow0\irowband0\ts15\trgaph108\trleft-108 \trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \trftsWidth3\trwWidth8928\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb \brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth1548\clshdrawnil \cellx1440\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2048\clshdrawnil \cellx3488 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2632\clshdrawnil \cellx6120\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr \brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2700\clshdrawnil \cellx8820\row }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 31/3/99\cell 523693\cell Closure balance\cell 3,686,229/=\cell }\pard \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 \trowd \irow1\irowband1 \ts15\trgaph108\trleft-108\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \trftsWidth3\trwWidth8928\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb \brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth1548\clshdrawnil \cellx1440\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2048\clshdrawnil \cellx3488 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2632\clshdrawnil \cellx6120\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr \brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2700\clshdrawnil \cellx8820\row }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 31/3/03\cell \cell Account Interest\cell 3,688,753/=\cell }\pard \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 \trowd \irow2\irowband2\ts15\trgaph108\trleft-108 \trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \trftsWidth3\trwWidth8928\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb \brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth1548\clshdrawnil \cellx1440\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2048\clshdrawnil \cellx3488 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2632\clshdrawnil \cellx6120\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr \brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2700\clshdrawnil \cellx8820\row }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 31/3/03\cell \cell Outstanding bal.\cell 7,374,982/=\cell }\pard \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 \trowd \irow3\irowband3\lastrow \ts15\trgaph108\trleft-108\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \trftsWidth3\trwWidth8928\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb \brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth1548\clshdrawnil \cellx1440\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2048\clshdrawnil \cellx3488 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2632\clshdrawnil \cellx6120\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr \brdrs\brdrw10 \cltxlrtb\clftsWidth3\clwWidth2700\clshdrawnil \cellx8820\row }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850

\par Counsel for the Defendant argued that the Plaintiff}{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 \rquote s}{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 cl}{ \lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 aim arises out of a}{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 transaction which was before the incorporation of the Defendant Company. The clo sure balance of Shs. 3,686,220/= was on 31}{\lang2057\langfe1033\super\langnp2057\insrsid3744913\charrsid3284850 st}{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 March 1999 and the Defendant Company was incorporated on 30}{ \lang2057\langfe1033\super\langnp2057\insrsid3744913\charrsid3284850 th}{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 November 1999. Counsel }{\lang2057\langfe1033\langnp2057\insrsid10634911\charrsid3284850 cited }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid3284850\charrsid3284850 Chitty}{\b\ul\lang2057\langfe1033\langnp2057\insrsid10634911\charrsid3284850 on }{\b\ul\lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 Contracts }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid10634911\charrsid3284850 23}{\b\ul\lang2057\langfe1033\super\langnp2057\insrsid10634911\charrsid3284850 rd}{\b\ul\lang2057\langfe1033\langnp2057\insrsid10634911\charrsid3284850 Ed }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 Vol.}{\b\ul\lang2057\langfe1033\langnp2057\insrsid10634911\charrsid3284850 1 para 481 page 218}{\lang2057\langfe1033\langnp2057\insrsid10634911\charrsid3284850 where it is stated that a company is under no liability, either at law or in equity}{\lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 , to pay for benefits rendered to it prior to its incorporation. He submitted that the Defendant Company was not liable for debts incurred prior to its incorporation.}{\lang2057\langfe1033\langnp2057\insrsid3744913\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 \par Mr. Moses Adriko raised a number of interesting points. First he observed that the pre-incorporation promoters of Express Football Club are the same pro}{\lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 moters and indeed the }{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 current officials}{\lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 of Express Football Clubs Ltd, the Defendant, which was incorporated in 1999. That there is a subst}{ \lang2057\langfe1033\langnp2057\insrsid12676991\charrsid3284850 antial coincidence between the officers the activities, and the postal address}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 }{ \lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 of the pre-incorporation club and the incorporated Club. \par \par In }{\b\ul\lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 Salomon Vs. Sol}{\b\ul\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 omon & Co Ltd [1897] AC}{\b\ul\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 22 HL, }{\lang2057\langfe1033\langnp2057\insrsid3284850 Lord Macnghten }{\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 noted:}{\lang2057\langfe1033\langnp2057\insrsid5401951\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 \par }\pard \qj \li720\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 \'93When the me}{ \i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 morandum is duly signed and register}{\i\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 ed, the subscribers are a body corporate. The company is at law a different person altogether from the subscribers to the memo}{\i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 randum and though it may be}{ \i\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 that after incorporation the business is precisely the same as it was before, and the same persons are managers and the same hands r eceive the profits, the company is not in law the agent of the subscribe}{\i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 r}{\i\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 s or trustee for them.\'94 \par \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 On incorporation, the company become}{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 s a separate legal entity distin}{\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 ct and separate from its promoters and}{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 /}{\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 or shareholders. That is much the law now as it was in 1897. }{ \lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 In}{\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 }{\b\ul\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 Sentam}{ \b\ul\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 u}{\b\ul\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850 Vs. Uganda Commercial Bank & Anor (1983) HCB 61}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 Justice Benjamin Odoki (as he then was) held that a limited liability Company is a separate legal entity from its director}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 s}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 , shareholders and other member}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 s t}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 hat individual members of the}{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 Company are not liable for the Company\rquote s}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 debts. In }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 The New Vision Printing & Publishing Co. Ltd & Other Vs. Peter Kaggwa HCT-00-CC-MA-0127-2006}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 I}{ \lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 held that equally a limited liability company is not liable for the personal debts of its individual member}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 s.}{ \lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 The pre-incorporation Express Football Club had no corporate entity and its promoters had personal liability for its debts.}{\lang2057\langfe1033\langnp2057\insrsid12994809\charrsid3284850

\par }{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 \par Secondly Mr. Adriko argued that the positio}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 n that a Company is not liable o}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 n pre-incorporation contracts has changed in Engla nd since the coming into force of the EEC Council Directive 68/151 of 9}{\lang2057\langfe1033\super\langnp2057\insrsid13522848\charrsid3284850 th}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 March 1968 which gave rise to the European Commu}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 nities Act, 19}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 72 in England. Counsel sought to }{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 rely on the decision of Lord Denn}{\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 ing in }{\b\ul\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 Phonogram Ltd Vs. Lane [1981}{\b\ul\lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 ] 3 All ER }{\b\ul\lang2057\langfe1033\langnp2057\insrsid294733\charrsid3284850 182}{\lang2057\langfe1033\langnp2057\insrsid294733\charrsid3284850 While}{ \lang2057\langfe1033\langnp2057\insrsid5570774\charrsid3284850 agreeing that both the European Economic Treaties and the European Communities Act was not applicable in Uganda counse}{\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 l urged me to take Lord Den}{\lang2057\langfe1033\langnp2057\insrsid5570774\charrsid3284850 ning\rquote s holding in the above case as persuasive and probably take a pro-active stand and find that the law }{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 in Uganda }{\lang2057\langfe1033\langnp2057\insrsid5570774\charrsid3284850 has been thereby altered. \par \par I have found myself unable to be persuaded. That put }{\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 aside I}{\lang2057\langfe1033\langnp2057\insrsid5570774\charrsid3284850 have studied the judgment in the above English case and found that their Lordships therein were considering section 9(2) of the European Communities }{\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 Act 1972, which says:-}{ \lang2057\langfe1033\langnp2057\insrsid13522848\charrsid3284850 \par }\pard \qj \li720\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 \par }{\i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 \'93Where a contract purpor}{\i\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 ts to be made by a Company, or by a person as agent for a Company, at a time when the Company}{ \i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 has not been formed, then}{\i\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 subject to any agreement to the contrary the contract shall have effect as a contract entered into by the person purporting to act for the company or as agent for it, and he shall be personally liable on the contract accordingly.\'94 \par \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 Lord Denn}{\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 ing M}{ \lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 R in his lead judgment stated:-}{\lang2057\langfe1033\langnp2057\insrsid6044522\charrsid3284850 \par }\pard \qj \li720\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 \'93---In my opinion the destination has been obliterated by S. 9 (2)}{ \i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 of the European Communities Act}{\i\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 1972. We now have the clear}{ \i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 words, \lquote Where a contract purpor}{\i\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 ts to be made by a company or by a person as agent for a Company, at the time when the company has not been formed\rquote . That applies whatever formula is adopted. The person }{\i\lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 w ho purports to contract for }{\i\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 the Company is personally liable\'94. \par \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 He went on further to hold that the words subject to any agreement to the contrary\rquote means \lquote unless otherwise agreed\rquote }{\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 . That if the}{ \lang2057\langfe1033\langnp2057\insrsid815542\charrsid3284850 re was a}{\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 n express agreement that the man who was signing was not }{ \lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 liable, the section would not }{\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 apply. But unless there is a clear exclusion of personal liability S. 9 (2) should be given its full effect. It means that i}{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 n all cases}{ \lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 where a person }{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 purports to contract on behalf }{\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 of a Company not }{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 yet formed, then}{\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 howeve r he expresses his signature he himself is personally liable to the contract. I have not found any change of the law in the above judgment }{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 with }{ \lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 regard to }{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 liability of a }{\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 company for pre-incorporation}{ \lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 }{\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 agreements.}{\lang2057\langfe1033\langnp2057\insrsid11940943\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 \par Mr. Adriko referring to paragraph 3 (a) of the Defendant Company\rquote s memorandum of association argued that by virtue of that provis}{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 ion the Defendant Company had }{ \lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 r}{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 a}{\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 tified the loan facilities to Express Sports Club. The paragraph states:- \par \par }\pard \qj \fi-720\li1620\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1620\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 \'933. The}{ \i\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 objects for which the company is established are:- \par {\listtext\pard\plain\i\lang2057\langfe1033\langfenp1033\insrsid10881196\charrsid3284850 \hich\af0\dbch\af0\loch\f0 (a)\tab}}\pard \qj \fi-510\li1950\ri0\sl360\slmult1\widctlpar \jclisttab\tx1950\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin1950\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 To acquire and under take the properties and liabilities and to effectuate and carry into execution the powers, obligation, duties and general }{\i\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 object}{ \i\lang2057\langfe1033\langnp2057\insrsid10881196\charrsid3284850 of the present Express Sports Clubs.\'94 \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid6751458\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 In Response Mr. Ka}{\lang2057\langfe1033\langnp2057\insrsid6751458\charrsid3284850 uma submitted that the Plaintiff had not pleaded r}{ \lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 atification of the loan agreement in its plaint. Further that for a Company to be bound by agreements entered into before its incorporation there must be a new agreemen}{ \lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 t of ratification. That the pro}{\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 visions of a memorandum and articles of association}{ \lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 of a Company are not such agreement. The objects are provisions of what a company may lawfully}{\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 do when incorporated.}{ \lang2057\langfe1033\langnp2057\insrsid6751458\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 \par Section 21 (1) of the Companies Act provides that the memorandum and articles shall when registered, bind the company and the members of the company to the same extent as if they respectively had been signed and sealed by each member an}{ \lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 d contained covenants on the par}{\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 t of each member to the memorandum and of the articles. The memorandum and articles create a contractual relationship between a company and its members and regulate the rights of its members inter se. This contractual relationship between a company and its members is limited to the members\rquote rights and }{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 liabilities as a shareholder. The memorandum and articles do not in any c}{\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 ircum stances, as between the company and a person who is not a member; constitute a contract of which that person can take advantage. See }{\b\ul\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 Halsbury\rquote s Law}{ \b\ul\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 s}{\b\ul\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 of England 3}{\b\ul\lang2057\langfe1033\super\langnp2057\insrsid2099830\charrsid3284850 rd}{ \b\ul\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 Ed }{\b\ul\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 Vol.}{\b\ul\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 6 }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 Para}{\b\ul\lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 270 page 129. \par \par }{\lang2057\langfe1033\langnp2057\insrsid11228356\charrsid3284850 There was }{\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 no resolution, whether of}{\lang2057\langfe1033\langnp2057\insrsid15756008\charrsid3284850 the Company or of its director}{\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 s to the effect that the Defendant Company had taken over the pre-incorporation loan granted by the Plaintiff bank to Express Sports Club. Even if it was there it would not have created a loan agreement between the Plaintiff and the defendant. The }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 Laws of England 3}{\b\ul\lang2057\langfe1033\super\langnp2057\insrsid4139978\charrsid3284850 rd}{\b\ul\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 Edition Vol. 6 }{ \b\ul\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 Para}{\b\ul\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 825}{\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 at page 426 states:-}{ \lang2057\langfe1033\langnp2057\insrsid2099830\charrsid3284850 \par }\pard \qj \li720\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\pararsid3284850 {\i\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 \'93 In order that the Company may be bound by agreements entered into before its incorporation, there must be a new contract to the effect of the previous agreement.\'94 \par \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 In }{\lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 the instant case the Plaintiff did n}{\lang2057\langfe1033\langnp2057\insrsid4016282\charrsid3284850 ot plead ratification of the p}{\lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 r}{ \lang2057\langfe1033\langnp2057\insrsid4016282\charrsid3284850 e}{\lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 incorporation loan agreement. Secondly there was no agreement between the Plaintiff and the Defendant Company ratifying the loan agreement. The memorandum and articles o}{\lang2057\langfe1033\langnp2057\insrsid4016282\charrsid3284850 f association of the Defendant}{\lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 Company were not an agreement between the Defendant and the Plaintiff and therefore could not ratify a pre-incorporation agreement with the Plaintiff. Lastly there were no pleading\rquote s to show that the Defendant Company had continued to operate the pre-}{ \lang2057\langfe1033\langnp2057\insrsid4016282\charrsid3284850 incorporation Express Sports Club\rquote s account and/or to enjoy benefits }{\lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 of the loan facility.}{ \lang2057\langfe1033\langnp2057\insrsid4139978\charrsid3284850 \par }{\lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 \par Considering all the above I find that the Plaintiff\rquote s pleadings have failed to show that the Defendant, Express Sports Club Ltd}{\lang2057\langfe1033\langnp2057\insrsid11735121\charrsid3284850 , is liable to pay monies overdrawn on account No . 01-523693 operated with the Plaintiff bank by Express Sports Club}{\lang2057\langfe1033\langnp2057\insrsid4016282\charrsid3284850 prior to the Defendant Company\rquote s incorporation}{\lang2057\langfe1033\langnp2057\insrsid11735121\charrsid3284850 . The preliminary objection is therefore }{\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 upheld and the Plaintiff}{\lang2057\langfe1033\langnp2057\insrsid4016282\charrsid3284850 \rquote }{ \lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 s plaint is rejected under Order 7 rule 11 (a) of the Civil Procedure Rules, with costs to the defendant. \par \par \par \par \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.. \par }{\lang2057\langfe1033\langnp2057\insrsid3031965\charrsid3284850 Lameck N. Muka}{\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 sa \par }{\b\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 JUDGE \par }{\lang2057\langfe1033\langnp2057\insrsid1911899 1/06/2}{\lang2057\langfe1033\langnp2057\insrsid10373017\charrsid3284850 007}{\lang2057\langfe1033\langnp2057\insrsid11735121\charrsid3284850 }{ \lang2057\langfe1033\langnp2057\insrsid7758169\charrsid3284850 \par \par \par }\pard \qj \li720\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\pararsid3284850 {\lang2057\langfe1033\langnp2057\insrsid6751458\charrsid3284850 \par }}