Greenland Bank Ltd v Westmont Land (Asia) (CIVIL SUIT NO. 309 OF 1999) [1999] UGHC 46 (25 August 1999)

Full Case Text

## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA 0

## CIVIL SUIT NO. 509 OF 1999

| GREENLAND BANK LTD. | | PLAINTIFF | |----------------------------|-------------|-----------| | | - versus | 5 | | WESTMONT LAND (ASIA) | | DEFENDANT |

BEFORE:- HON. THE PRINCIPAL JUDGE - MR. JUSTICE J. H. NTABGOBA

## RULING

recover a sum of Shs.564,611,979/= and United States Dollars 16,442,626/= as money paid by the plaintiff to the defendant and when requested by the defendant" as credit facilities. graph made the following averment Greenland Bank Ltd brought HCCS. No. 509 of 1999 against Westmont Land (Asia)Bhd by which the plaintiff bank seeks to |O "as Westmont Land (Asia)Bhd, in its defence in the opening para**t5**

"Save as herein specifically admitted the defendant denies each and every allegation in the plaint as if the same were set out seriatilm and specifically denied".

In paragraph 1 of the Written Statement of Defence, the defendant^ averred:-

"1 Paragraph 1 of the plaint is denied in that the said Counsel have no instructions from the plaintiff. Defendant shall further aver and contend that the said Counsel have no locus standi in view of the fact that the plaintiff was closed by the Bank of Uganda on 1/4/99 and is due to be liquidated/wound up".

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But it is important also to cite paragraph 1 of the plaint which of Defence. It avers that:- Counsel for the plaintiff did not respond to paragraph 1 of the Written Statement of Defence above cited. is being challenged by paragraph 1 of the Written Statement **5**

lO ""1. The plaintiff is a Commercial Bank in Uganda with Head Offices in Greenland Towers, 50 Kampala Road, Kampala and its address for service in this suit is care of MESSRS. BYAMUGISHA & RWAHERU ADVOCATES of East African Development Bank Building, Plot 4 Nile Avenue, P. O. Box,9400 Kampala who are representing it jointly with MESSRS. MUGERWA & MATOVU ADVOCATES, 5rd floor Diamond Trust Building, Plot 17/19 Kampala Road P. O. Box 7166 Kampala".

raised an objection which they contended would dispose of the case before its formal hearing. They are challenging the two Firms of advocates representing the plaintiff on the ground that the firms have no instructions to institute the suit. The basis of their (defendant's Counsel) is that Greenland Bank could not have had powers to instruct advocates to Bank. represent it because it was closed by the Central Bank and that it is due for being liquidated/wound up by the Central At the commencement of hearing of the case on 25th August, 1999, Mr. Shonubi and Mr. Bwanika, Counsel for the defendant

During the preliminary objection, Counsel for the defendant relied on sections 51 and 52 of the Financial Institutions Statute (F. I. S)1995 which respectively provide:-

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- "3'1 (1) The Central Bank may take possession of a Financial Institution:- - (a) which is insolvent;

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- (b) which is conducting its business in a manner contrary to this Statute; *;* - (c) when the continuation of its activities is detrimental to the interests of depositors; - (d) that refuses to submit itself to inspection by the Central Bank as required by this statute; or - *IO* (e) whose licence has been revoked under S.'I'I of this statute. - (2) Where a financial institution is seized under this section the following shall apply:- - L5 (a) any term whether Statutory, contractual or otherwise on the expiration of which a claim of right of the financial institution would expire or be extinguished, shall be extended Six months from the date of seizure; - (b) any attachment or lien existing Six months prior to seizure of the institution shall be vacated and no attachment or lien except a lien created by the Central Bank, shall attach any property or assets of the financial institution as long as the Central Bank continues to possess the financial institution. - and (c) any transfer of any asset of the financial institution made Six months before the insolvency or seizure of the institution, with intent to effect a preference shall be void".

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So much for S.51 of the F. I. S. Section 52 provides as follows;-

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"(1) The Central Bank shall, upon possessing a financial institution under S.51 of this Statute, be vested with exclusive powers of management and control of the affairs of the Financial Institution.

(2) The powers referred to^ ;;sub-section (1) of this Section shall include power to:-

(a) Continue or discontinue its operation as a financial institution (notwithstanding the revocation of its licence);

(b) stop or limit the payment of its obligations;

- (c) employ any necessary staff; - (d) execute any instrument in the name of the financial institution; \*- - (e) initiate, defend and conduct im its name any action or proceeding to which the financial institution may be a party; - (f) re-organise or liquidate the financial institution in accoradance with this Statute; and c - (g) In any other act which is necessary to enable the Central Bank carry out its obligations under this Section".

So far as the defendant's preliminary objection goes, I deem it that sub-sections (5) and (4) of S.52 are not relevant strictly speaking.

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I now revert to the grounds upon which Counsel for the defendant rely in their preliminary objection.

- $1.$ In the first place Counsel seem to think that by the Central Bank taking possession of Greenland Bank Ltd, the later ceases to be a Corporation sole $5$ capable of suing and being sued in its name. This is far from it. The plaintiff bank does not cease to be by reason of its being possessed by the Central Bank. The only change is that Greenland Bank cannot sue or be sued directly. It can sue or $IO$ be sued through the Central Bank, and if it sues, the Central Bank would have to institute the suit not in its own name but in the name of Greenland Bank. - 15 This brings me to the meaning of the expression $\overline{2}$ . "in its name" appearing in Section $32(2)(e)$ of the Financial Institutions Statute which reads:-

(2). The powers referred to in sub-section (1) of this section shall include power to:-

20 (a) - (d) --------------------------------(e) initiate, defend and conduct, in its name, any action or proceeding to which the financial intitution may be party".

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the expression "in its name of the Central Bank. reasons \_ 6 \_ O *'* With due respect learned Counsel for the defendant misconstrued " which they say it means in the name This cannot be true for the following

- instruments would (b) The use of the work "its" referring to Greenland Bank starts 5 in Sub-Section (2)(a) where it . qualifies the main "operations". It runs into Sub-Section (2)(b) where it qualifies the noun "obligations", in which both cases "its" refers to the financial institution. Besides paragraph (d) of Sub-Section (2) tells that execution of Greenland Bank's *:----------- -------* be in its name. - (2) Suppose an action had been instituted by Greenland Bank against a party and was still pending when the Bank was taken over, would the Central Bank apply to Court to have its name substituted for Greenland Bank? Not at all. Greenland Bank is, as I have already stated, still in existence. It is like an infant unable to sue by itself. Its quardian adlitem sues in its name. Similarily, by the statute, the Bank of Uganda will sue in the name of Greenland Bank as the Central Bank cannot pretend to be Greenland Bank, the existing corporation sole. By taking over Greenland Bank, the Central Bank does not become Greenland Bank. The Central Bank assumes the roles of management and control of the institution which was exercised by the Board of Directors and depositors respecti- / vely, before Greenland Bank was taken over. / - (5) This brings me to Dr. Byamugisha's argument that a Company's or for that matter, a bank's affairs are managed by the Board of Directors with the ultimate control by the shareholders, in the case of the Company, and the depositors, in the case of the Bank. Since at no time can the Board of management and or depositors claim the right to be sued in their names on behalf of the Bank, so also -the Bank of Uganda cannot claim the right to sue on behalf of Greenland Bank in its (Central Bank's name). This is because the Central Bank's role when it took over Greenland Bank was that of management and control as if it (the Central Bank) were the Board of Directors and depositors of Greenland Bank.

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**V-AJA r- V.**

I agree that S.52(2)(e) is so inelegantly drafted as to name of the Financial institution that has been possessed. the Corporate personality of Greenland Bank, Ltd by merely taking possession} management and control over the latter suffice to convince anyone that "in its name" means in the bring about an ambiguity in thm meaning of "in its name" 'S'S/.f rv) *P.* but the arguments that the Bank of Uganda did not aaauna-e

1<D behalf of Greenland Bank. Counsel for the defendant argue that since they did' challenge the locus standi of Counsel for the plaintiff to apply to Court for leave to tender in the letter of authority which Counsel Byamugisha claimed to have and which he showed to Court amid the protestations of counsel for the defendants, who sought Court to ignore that letter arguing that it had not been pleaded. 5. Now this brings me to the challenge of the authority of Counsel for the plaintiff to institute the suit on for the plaintiff in instituting the suit, it became incumbent upon Counsel for the plaintiff to adduce further evidence showing their authorityy Counsel for the defendant, in fact, went as far as suggesting that it was up to Counsel lE

This issue about lack of authority is so central Deeper consideration that it requires an indepth consideration. of the defendant's argument reveals some fallacies.

In the first place, it was due to the misinterpretation of the expression "in its name" that Counsel for the defendant thought that it was the Bank of Uganda which should have sued in its name.

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- 7 - Now with my interpretation that the Bank of Uganda should have sued in the name of Greenland Bank, the question is do Counsel for the plaintiff still have no locus? My view is that had Counsel obtained instructions direct from Greenland Bank they would have no authority because Greenland Bank after its seizure by the Central Bank lost the Capacity directly to manage its affairs, and hence to instruct Counsel.

But now that it has emerged that Counsel for the plaintiff were instructed by the new Board of Directors, 10 appointed by the Central Bank under S.32(2)(c), can it be said that they were not appointed by the Central Bank? Counsel for the defendant have argued that the new Board appointed by the Central Bank has no power to authorise advocates because its role is advisory pursuant to the Pres's 15 Release put out by the Central Bank on 11th January 1999 following the taking/of possession of Greenland Bank, Ltd on 7/1/99. Indeed the Press Release states that:-

> "The role of the Board is advisory. Management of the Bank is vested with the Central Bank as per F. I. S. 1993 sections 31 and 32".

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The question is what place in the F. I. S. has the Press Release which, in my view, conveys a wrong interpretation of the Statute, in that it conveys a wrong impression that because the management and control of Greenland Bank vests in the Central 15 Bank, ipso facto, the Central Bank shall manage and control

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such as the new Board of Directors mentioned in the Press Release. in the Central Bank, therefore, the Central Bank can be sued **5** sole to replace Greenland Bank. the institution directly and not through appointed staff The misinterpretation also raises the implication that because management and control of Greenland Bank vested and sue in its own name as if it has become a corporation

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Secondly, still on the legality of the Press Release, how can it be read together with the letter of authority written to Counsel for the plaintiff and indicating that the authors (the new JJoard of Directors) had been instructed by its appointing authority (the Bank of Uganda) to engage Counsel? How about the fact that money was released by the new Board out of the account of Greenland Bank Ltd, for the purpose of instituting this suit? Can it be said that the *\5* new Board's role is advisory as the Press Release would make us believe when such Board can operate the account of the institution? What is advisory about the management of the financial affairs by the new Board of Greenland Bank?

I am quite aware that Counsel for the defendant have challenged the letter authorising the Counsel for the They argue that the issue was documents to be adduced at the trial. plaintiffs to institute this suit. raised in paragraph 1 of the Written Statement of Defence / but that Counsel for the plaintiff did not respond, say, by seeking to including the letter of authority in the list of

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to prosecute cases. They further argue that, in any case, authorised by the client. He does not need to plead such authority therefore. the W. S. D. they should have replied. But now since they have disclosed the authority does that mean that non-disclosure null and void? Certainly not. the authority and any challenge it may attract can only be client. But I have already held that the new Board of Directors appointed by the Central Bank was vested with with the Central Bank. J Counsel for the plaintiff opportunity to formally respond. When an advocate who institutes a client's suit has a valid practising certificate, the presumption is that he has been | *O* I tend to agree with-Counsel for the defendant that when Counsel's authority was challenged by the authority to instruct the lawyers, more so because, prior to the written instruction to the lawyers, the- -Board cleared whether or not they had the necessary authority was a matter in issue triable at the hearing of the main suit. They say that had the defendant made a formal application to raise the objection it has raised informally, it would have afforded - 10 - Counsel for the plaintiff, in reply, argue that it is unusual for advocates to have to prove that they have been authorised prior to the preliminary objection renders such authority They still are vested with entertained if, as Counsel for the defendant would argue, the authority was improperly given or given by an incomptent

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justice. I hold that the lawyers had the necessary authority. to institute this suit. I am unable to disqualify them. extinguish it. '1999 that the role of the new Board was advisory was of no legal significance. As long as the Central Bank had power **/O 15** Greenland Bank. this suit, the lawyers had the necessary authority and the suit was properly filed by the Central Bank in the name of It would be a mere technicality to challenge the lawful authority and I think this'^one of the technicalities Courts should avoid since it occasions no miscarriage of to appoint staff to assist it in the control and management of the seized institution and as long as such staff (i.e. the new Board)was authorised to instruct the lawyers to file Non proving the authority that was validly given; does not I have already held that the statement in the Press Release issued by the Central Bank on 11th January,

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Before I take leave of this matter I should refer to the authorities cited by Mr. Bwanika, learned Counsel for the defendant. out Company, Ltd -vs- Afric Co-operative Society Ltd, HCCS. No.467 of 1995 was about the interpretation of certain provisions of the Public Enterprises Reform and Divestiture Statute No.9 of 1993» In particular, I was interpreting My decision in the case of Peoples Transport Sections 20, 21, 25 and 25 of the statute• Aat page 5 of my Ruling dated 6/12/96 thats-I ^pointed

"The presumption, I agree, is that S.25(4)was complied with. The point Mr. Odimbe made is that between the time of appointment of the receivers and the negotiation of the sale between such receivers and the defendant of the plaintiff's assets, the plaintiff's personality *Q^)*

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and character had so changed that we cannot be talking of the original private Limited liability $companyn$ .

I held as I deed, and was upheld by the Court of Appeal because on divestiture the original company is liquidated and a new one created with different shareholders and different management appointed by the purchaser. The situation is different with Greenland Bank's take over by the Central Until the Bank is finally liquidated, it retains Bank. $I\mathcal{O}$ its character, in that it remains a body corporate with capacity to sue or be sued, even though the suit or defence to the suit would be instituted by the Central Bank. It is significant that the Central Bank must sue or be sued in the name of Greenland Bank. Secondly, until its liquidation, $15$ Greenland Bank retains its depositors and a Board, even Therefore though the Board is appointed by the Central Bank. unlike People Transport Co. Ltd. in the case cited by Counsel, which lost its former character, Greenland Bank has retained its corporate character. This case and the Peoples Transport ᠴ᠔ Co. Ltd case are distinguishable.

Finally, I reiterate the preliminary objection raised by Counsel for the defendant is overruled with Costs.

J. H. NTABGOBA Dr. Payamigiska for the plaint Mr. Kitsiikamusoke & Mr. Chris Powamka Rulig to nead in Chambers. PRINCIPAL JUDGE for the objection Ofhir

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## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## CIVIL SUIT NO. 309 OF 1999

GREENLAND BANK LIMITED PLAINTIFF

VERSUS

WESTMONT LAND (ASIA) BhD DEFENDANT

## ORDER

Upon hearing of the preliminary objection of Counsel for the Defendant and to the arguments of Counsel for the Plaintiff in reply thereto, I hereby order that the objection be overruled with costs.

I further order that the Defendant be granted leave to appeal against the interpretation given to section 32(2)(e) of the Financial Institutions Statute.

DER GIVEN OF IYJHAND AND THE SEAL OF THIS COURT THIS DAY 3^zVv4c/'1999.

J. H NTABGOBA PRINCIPAL JUDGE