International Credit Bank (In Liquidation) v Tropical Commodities Suppliers Limited and 2 Others (Civil Appeal 24 of 2004) [2007] UGCA 75 (27 August 2007)

#### THE REPUBLIC OF UGANDA

#### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# CORAM: HON. JUSTICE S. G. ENGWAU, JA HON. JUSTICE A. TWINOMUJUNI, JA 1 HON. JUSTICE C. N. B. KITUMBA, JA

#### **CIVIL APPEAL NO.24 OF 2004**

# **INTERNATIONAL CREDIT BANK....................................** (IN LIQUIDATION)

#### **VERSUS**

#### 1. TROPICAL COMMODITITES SUPPLIERS LTD ) 2. COUNTRY AGENCIES LTD ) 3. ATEKER EJALU )......... RESPONDENTS

$\overline{5}$

$10$

**Appeal from the ruling of the Commercial Division of** the High Court of Uganda at Kampala (Ogoola, PJ) dated 21<sup>st</sup> May 2003 in H. C. C. Application No.379 of 20031

#### JUDGMENT OF TWINOMUJUNI, JA

This is an appeal against the ruling of the High Court of Uganda in which the court ordered a Stay of Execution but declined to grant security for due performance of the decree it had made in HCCS No.132 of 1998. The High Court, however, ordered the respondent to deposit shs.20,000,000/= as security for costs. The appellants contend that the trial court erred because it is not a requirement of the law or practice that an appellant should deposit any security for costs before a stay of execution is granted. In their view, the trial judge should have ordered

the respondent to deposit "Security for due performance of the decree or order as may ultimately be binding upon them." This is a requirement under Order 39 rule 4(3) of the Civil Procedure Rules. Their counsel submitted that the Court of Appeal Rules provided for payment of shs.200,000/= as security for costs before filing an appeal and it cannot make sense for the High Court to make yet another order for security for costs in respect of the same appeal.

In reply, learned counsel for the respondent, Mr. Muhamad Mbabazi, conceded that the trial judge had made an error to order for security for $10$ costs but should have ordered for security for due performance of the decree which was being appealed from. He argued, however, that the amounts to be paid were discretionary and the judge was free to assess the amounts to be deposited. He submitted that the order for payment of shs.20,000,000/= as security for costs was made in error. He asked this $15$ court to assume that the amount was intended to be for security for due

performance of the decree. His prayer was that the order of the trial judge should be maintained but be substituted as being for due performance.

$\mathcal{L} \times \mathcal{L} \times \mathcal{L}$

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The contentious matter in this appeal is reflected in the single ground of appeal which states:-

"The learned trial judge erred in law and in principal in not ordering the respondents to deposit security for the due performance of the Decree in High Court Civil Suit No.132 of 1998 and instead ordering them to provide only security for costs of the said suit."

$\overline{2}$

In rejecting the application to order for security for due performance as provided for in 0.39 r. $4(3)$ , the learned trial judge discussed the three criteria named therein as conditions precedent to the stay of execution pending appeal. Coming to the third one, which is in contention now, he stated in his ruling:-

"That leaves only the third - criterion namely payment of security. The applicants did not offer any security. The respondent for its part sought security of shs.137.5m/-, representing the entire balance of the decretal amount. Here again, as discussed elsewhere in this ruling, we are faced with yet another difficulty from the *Kampala Bottlers Case (supra)*. In that case, their Lordships of the Supreme Court talked in terms of 'security for costs'. Similarly, in the Lusejjere case (supra) the Court of Appeal made the categorical statement that:

> 'Under Order 39 $r$ 4(3) of the CPR an application for stay of execution pending an appeal must be accompanied by payments of security for costs.'

Yet, 0.39 r $4(3)$ talks generally in terms of 'security', without qualification or limitation as to 'costs' etc. Indeed, 0.39 r $4(3)(c)$ requires payment of-

'security... by the applicants for the due performance of such decree or order as may ultimately be binding upon *him.*' [emphasis added]

$\overline{5}$

$\mathcal{L} = \mathcal{L}$

$\tau = \pi^V$

The above quoted language seems to embrace security for the entire decretal amount – rather than merely security for the costs of the appeal. This conclusion is fortified further by the existence of such other rules (particularly rule 9 of the same 0.39) which explicitly confer on the Court a discretionary power to 'demand from the appellant security for the costs of the *appeal.*' It is quite evident then that the security mentioned elsewhere (especially in rules 4 and 5 of that same order) cannot be security for costs. Yet their Lordships of the Supreme Court in Kampala Bottlers Case (supra) categorically held that:

'Under $[0.39, r. 4(3)]$ the applicants must show $(a) \ldots \ldots$ $(\mathbf{b})\ldots\ldots$ (c) that security for costs has been given by the applicants." [Emphasis added]

Again, regarding this particular difficulty, this Court must abide by the holding of the Supreme Court. Accordingly, in the instant case, for the application to succeed the applicants must be willing to give security for costs – rather than security for the entire decretal amount as pressed by the respondent's learned counsel. In my view that requirement is eminently more just. Insistence on a policy or practice that mandated security for entire decretal amount is likely to stifle possible appeals - especially in a Commercial Court, such as ours, where the underlying transactions typically tend to lead to colossal decretal amounts. In the circumstances of this case a

$15$

$10$

$5$

$\mathbf{r} = \mathbf{r} \mathbf{r}$

figure of about 10% of the decretal amount (of shs.200m/-) would appear to be quite adequate – if the applicants are willing and ready to pay it.

The application is hereby granted, on condition that the applicants must pay into Court a total sum of shs.20m/- as security for the costs of his appeal.

$\frac{1}{1-x} \frac{1}{x} = \frac{1}{x}$

$\mathsf{S}$

$10$

The application is granted, on condition that the applicants must pay into a total sum of shs.20,000,000/ $=$ as security for costs of his appeal."

Before coming to this conclusion, the trial judge has noted, correctly in my view, that Order 39 rule 4 Civil Procedure Rules applied to appeals to the High Court not to appeal from the High Court. He cited and $15$ discussed authorities of the Supreme Court where it held that as a matter of practice, an applicant for stay of execution on appeal from a decision of the High Court must meet the conditions in Order 39 rule 4.

- With the greatest respect to the learned Principal Judge, the decisions he $20$ considered, namely **Kampala Bottlers Case**, **Lawrence Musitwe Kyaze Case** and the **Lusejjere Case** were decided before rule 105 of the Court of Appeal Rules 1996 was enacted. Under this rule, payment of security for costs by every appellant is compulsory on filing the appeal. The Supreme Court could not have implied that an appellant should pay twice 25 for security for costs. In the instant case, when the trial judge ordered the respondent to pay shs.20m/= as security for costs, he had already paid the compulsory shs.200,000/= as security for costs on filing his appeal to this - court in the same case. At the time this order was made, the decree

against the rcspondcnt amounted to Ug.shs.l37 rn/=. This is the amount the respondent needcd to dcposit in court to assure court and the appellant that the Decree u'ould be honoured if the respondent lost the appeal to this cou(. Thal is thc purpose o10.39 rule 4(3)(c) ol the Civil Procedure Rules. I cannot accept the subrnission of Mr. Muharned Mbabazi that a deposit ol'shs.20/:rn be deerned to have been in respect ol'security lor due perfbrrnancc olthe tligh Court Dccree. That amount is too small and totally inadequate. Since bolh parties agreed that the leamed trial .judge should have ordered fbr payrnenl of security lbr due peribrrnance ol the Decrec. the only rerrainir.rg issue rvould be the quantum to be deposited.

lo

Learned Counscl fbr the appellant stated that if wc take into account the shs.20rn/: deposited in court and the costs of shs.5,000.000/= and the shs.72rnl: which was paid. thc lair arnount to bc paid in court as security for due perlbnnance is now Ug.shs.l <sup>13</sup>"000.000/: (One hundred and thirtecn rnillion only). I would agrce that this is the correct amount that should norv be deposited in High Court to support the order lbr Stay of Execution. Irailure to do so rvithin a given period would render the order lor stay to lapse. 'l his payment. howevcr. necd not be in hard cash. It could be a guarantcc fiorn a crediblc linancial institution or deposit ofany valuablc land titlc or valuablc propcrty valued at or about the said Ug.shs. I I 3.000.000/-. t5 l0

ln the result. I u'ould allorv this appeal rvith costs and order that the rcspondents deposit [Jg.shs. I 13.000.000/: or any olhcr valuable property to that value within lourtcen days ttorn the date of this judgment as security fbr due perlbnnance ol'the l)ecree of the High Court in HCCS No. I 32 of 1998 as a condition lor sustaining the Stay of Execution which ll

was granted by the High Court. I would also grant the appellants the costs of this application in the High Court.

Dated at Kampala this $27$ k day of $Avg_{MS}$ . 2007.

$\mathsf{S}$ Hon. Justice And Minimum O JUSTICE OF APPEAL

$\cdot \cdot \cdot \cdot \cdot$

#### THE REPUBLIC OF UGANDA

$\odot$

#### IN THE COURT OF APPEAL UGANDA AT KAMPALA

#### CORAM: HON MR. JUSTICE S. G. ENGWAU, JA; HON JUSTICE A. TWINOMUJUNI, JA: HON JUSTICE C. N. B. KITUMBA, JA;

#### CIVIL APPEAL NO. 24 OF 2004

#### **BETWEEN**

#### INTERNATIONAL CREDIT BANK (IN LIQUIDATION) ::::::: APPELLANT

#### AND

- $1.$ TROPICAL COMMODITIES SUPPLIERS LTD - $\overline{2}$ . **COUNTRY AGENCIES LTD**

$\mathcal{L} = \mathcal{L}^{-1}$

ATEKER EJALU :::::::::::::::::::::::::::::::::::: $3.$

### (Appeal from the Ruling of the Commercial Division of the High Court of Uganda at Kampala (Ogoola, PJ) dated 21<sup>st</sup> May, 2003 in H. C. C. Applic. No.2003)

### **JUDGMENT OF ENGWAU JA:**

I had the benefit of reading, in draft, the judgment of my learned brother Twnomujuni JA. My learned sister Kitumba, JA and I agree with the findings and orders of Twinomujuni JA in this appeal.

Dated at Kampala this 27/h<br>day of My Ust. 2007

mansan S. G. Engwau, JUSTICE OF APPEAL

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

#### HON. JUSTICE S. G. ENGWAU, JA. CORAM: $\overline{4}$ HON. JUSTICE A. TWINOMUJUNI, JA. $\checkmark$ HON. JUSTICE C. N. B. KITUMBA, JA.

### CIVIL APPEAL NO. 24 OF 2004

# INTERNATIONAL CREDIT BANK :::::::::::::::::::::::::::::::::::: (IN LIQUIDATION)

$12$

#### **VERSUS**

# 1. TROPICAL COMMODITIES **SUPPLIERS LTD.**

#### 2. COUNTRY AGENCIES LTD $16$ 3. ATEKER EJALU

#### **::::::::::::::::RESPONDENTS**

[Appeal from the ruling of the Commercial Division of the High Court of Uganda at Kampala )Ogoola, PJ) dated 21<sup>st</sup> May 2003 in H. C,C. Application No. 379 odf 20031

### **JUDGEMENT OF KITUMBA, JA.**

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I have read ithe judgement of Twinomujuni, JA. in draft. I concur.

Dated at Kampala this ....................................

CNES Cityph. C. N. B. Kitumba **JUSTICE OF APPEAL**

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