Kabu Auctioneers & Court Bailiffs & Another v F.K. Motors Limited (Civil Application 29 of 2009) [2009] UGSC 45 (24 November 2009)

Full Case Text

U ) ,

# THE REPUBLIC OF UGANDA

# IN THE SUPREME COURT OF UGANDA AT MENGO

CORAM: l. W. N. TSEKOOKQ JSC (SINGLEIUD6E)

CIWL APPLICATION NO. 29 OF 2OO9

BETWEEN

## 1. KABU AUCTTONEERS & COURT BATLTFFS) 2. MUL'HIBHAI MADHVAN & CO LTD} :::::: APPLICANTS

#### AND

### F. K. MOTORS LTD:: :::::: :::: ::RESPONDENTS

(An application arising from Supreme Court Civil Application No. 16 of 2009 and No. 17 ol'2009)

# RULING OF J. W. N. TSEKOOKO, J. S. C

Kabu Auctioneers & Court Bailiffs (1\* Applicant) and Muljhibhai Madhvan & Co. Ltd (2'd Applicant) instituted a notice of motion under Rules Z (Z), 5, 42 (1),43(10 and a7 Q) ot the Rules of the Court praying for-

- (a) An order to set aside or modify the Couft's order made on 9th September, 2009, or - (b) Extend time within which the applicant may deposit security for due performance of the order of the Court.

The application is supported by an affldavit sworn on 12th October,2OOg, by K. P. Eswar, a Director of Corporate Affairs of the 2nd applicant. There is an affidavit in reply sworn on 3'd November,2OOg, by David Wandera of Andrew and Frank, Advocates, counsel for the respondent.

### Brief backqround

The respondent sued the applicants in the High Court to enforce a tenancy agreement. The respondent lost first the suit in the High Court and an appeal there from in the Court of Appeal. However the Court of Appeal a found that the distress levied against the respondent's properties by the applicants was unlawful and ordered the applicants to return to the respondent its properties which had been seized for nonpayment of rent. Because the propefties could not be returned the Court ordered the applicants to pay to the respondent shs. 2,300,000,000/= in lieu. The applicants instituted a notice of appeal intending to appeal to this Court against that order. On 22nd July, 2009, the applicants filed in this Court application No. 17 of 2009 seeking for an interim order for stay of execution of the said order of the Court of Appeal pending the hearing of O substantive application No. 16 of 2009 also seeking stay until final determination of the intended appeal. The applicants sought to have the application for interim order of stay heard exparte. As there was no evidence of imminent execution, I decided to hear the application interpaftes. It was fixed for hearing on 61812009 on which date the matter was adjourned to enable parties to agree on settlement.

)

When the matter came up again before me for hearing on 9th September, 2009 both sides agreed:

(i) That execution be stayed until the determination of the intended appeal (ii) That there was no need for Court to hear the substantive application no. 16 of2009 and

(iii) That security for the due peformance of the final order of the Court in the intended appeal is to be provided by a written formal guarantee by the fnsurance Comoany of East Africa Ltd. to be lodged in Couft on or before 7\* September, 2OO9.

The third condition was not fulfilled. Consequently the applicants have instituted the notice of motion, the subject of this ruling. The gist of the applicants'submissions made by Mr. Mwesigwa, counsel for the applicants, is first that on 91912009 when the consent order was agreed upon, the two sides were labouring under a mistaken belief that the Insurance Company of East Africa would provide the requisite security within the agreed time of nine days, i.e, before or by L81912009. This turned out to be impossible. So the applicants now seek an order that the period be O extended to 30/1U2009 to enable the applicants to secure and provide the necessary security.

The alternative prayer is that it by 301LU2009 the said Insurance Company is unable to provide the security the applicants should provide an alternative security acceptable to Court. This would be a guarantee to be issued by the East African Underwriters Ltd. A draft of the proposed

guarantee was annexed to the affidavit of Eskwar and marked as annexture "B".

Mr. Sekatawa, counsel for the respondent, opposed the application contending first that it was not made in good faith principally because counsel for the applicant did not consult him, or the respondent, in the matter especially on the question of the alternative security and in pafticular the proposal to make a wholly new entity, the East African underwriters guarantors of the requite security. He also contended that t bad faith is evidenced by the conduct of the applicants in filing similar application without consultation. He argued that the respondent objects to the proposed guarantor and that the applicants are aware of this objection. The respondent objects because the proposed guarantor is subsidiary of the 2nd applicant. Learned counsel contended that the explanation in annexture "A" is not sufficient in that it does not say that the first guarantor was unable to issue the guarantee within the stipulated time. Learned counsel submitted further that the applicants be ordered to open an Escrow Account a submission opposed by counsel for the applicant. O Respondent's counsel cited the case of BANCO ARABE ES?AIIOL US BANK oF UGANDA (supreme Court civit Application No. 08 of t99g) for the proposition that in such a case an Escrow Account is the best

alternative. (He undertook to provide the authority but did not. I had to look it up myself). on the lateTafternoon of l9ltll2009, just a few days remaining before I

was to deliver this ruling, I received from the Registrar a letter dated

l8lLll2009 containing additional brief submissions by counsel for the applicant in which he cited two rulings to support his application that I should accept the alternative insurance guarantor for security. The first ruling is stated to be of this court in Civil Application No. 12 of 2002 (Ahmed Bholim Vs Car General Ltd). Although learned counsel knew that the ruling is unreported he un courteously contended that "this case is unrepofted but the Supreme Court files exist in the registry" and that the successful appellant duly paid pursuant to the guarantee".

Obviously this submission demonstrated extreme lack of diligence on the I part of counsel to say the leas! because here he expects this court to do research for him!!. He would do well to read Rule 27 (5) of the Rules of this Court.

The second authority is Court of Appeal Ruling in Civil Application No. 110 of 2003 (Uganda Telecom Vs Tanzanite Corporation). There is no indication in counsel's forwarding letter that a copy of the ruling was seryed on counsel for the respondent. Omission or failure to do that would ceftainly contravene the provisions of Rule 27 of the Rules of this Court. This O conduct must be deprecated.

Be that as it may I should point out that the ruling is a ruling of the Court of Appeal. Most importantly, in that ruling unlike here both parties agreed that the applicant there should execute a guarantee from a reputable bank for the full decretal amount. The court endorsed that agreement. So that ruling is distinguishable from this application.

)

Of the rules cited in the notice of motion, Rule 5 is relevant. It states:

"The Court may, for sufficient redson, extend the time prescribed by these Rules or by any decision of the Court,,...,,.,..,..for the doing of any act authorized or required by these Rules whether before or after the expiration of that time and whether before or after the doing of the act and any reference in these Rules to any such time shall be construed as a reference to the time as so ertended."

Clearly Court has power under Rule 5 to extend time for the provision of requisite security where there is sufficient reason.

Mr. Sekatawa opposes the application because in his opinion this application was made in bad faith. In his contention court's power to grant extension of time is discretionary and can only be granted where an applicant shows sufficient reason. I agree with the contention that Court exercises discretion to grant extension where there exists sufficient reason. So the question is have the applicants given sufficient reason.

It will be recalled that Civil Application No. 17 of 2009 in which the order to provide the guarantee was made first came up on 6th August, 2009 when adjournment was granted to enable both counsel to consult their clients with a view to agreeing on a settlement. The matter was adjourned to 41912009 and counsel were directed to file a written consent settlement. There was no settlement until 9/9/2009 when the matter came up again before me for hearing. On that day counsel for the two sides agreed on settlement in the terms reproduced earlier in this ruling.

In his affidavit in support of the application, Mr, K. P. Eswar states as follows in paras 4 to 8 of his affidavit.

4. That however owing to circumstances beyond the control of the parties it was not possible to obtain the security from Insurance Company of East Africa Limited consented to by the parties owing to certain legal limitations and internal constraints sufferd by the intended issuer Insurance Company of East Africa Limited. Such matters related to interalia the lack of relevant rquirements by Insurance Company of East Africa Limited and internal administrative/negotiation mafters and procedures and parent Company approvals. A copy of the letter written by the intended issuer outlining its inability to act in accordance with the parties' expectations is attached hereto and marked annerture'A".

- 5. That we are making further efforb with Insurance Company of East Africa Limited to establish authorization from the regulator and to ensure that parent Company approuals are obtained for issuance of the guarantee but this cannot be achieved within the time as consented to and agreed by thr's Court - 6. That in the interim and as testament to the desire of the applicants to comply with the order of the hurt and also furnish security for due performance, the applicants filed in Court an enforceable Insurance guarantee issued by East African Underwriterc Limited. A copy of the said guarantee is attachd hereto and markd annexture ltB rt

- 7. That the said interim/alternative security has been issued by East African Underwriters Limited, a duly licensed and operational Insurance Company in Uganda and which is ranked as the fourth largest Insurance Company in Uganda and whose financial statements reflect a strong position in the market and capacity to satisfii any final orders of the Court. - B. That the applicant requires a further period of up to the 3dh day of November, 2009, to finalize the process of obtaining a guarantee from Insurance Company of East Africa Limited or such other security as this Court may determine and undertakes to furnish the said security on or before the said date as and when the same is finalized.

In reply, in his affidavit, Mr. Wandera averred in paras 5 to 7 as follows;

5. That paragraphs 4,5 and 6 of the affidavit are not within the knowledge of the respondent, as neither discussions nor consent of the respondent was sought prior to filing of a guarantee by an entity different from the one ordered by the Court.

7. That in light of paragraph 14 the respondent is agreeable to an Escrow Account being opened with the decretal sums deposited thereon as an alternative security.

Obviously Eswar's affidavit particularly paragraph 4 could have been better drafted to explain in clearer terms the difficulties encountered. Similarly is O Annexture "A" which is a letter dated 17th September, 2009 by Mr. Gary V. Corbit, Managing Director of the proffered guarantor. The letter was written to Mr. Alan Shonubi, one of the applicants' lawyers, just a day before the dateline for provision of the bond. It is short and states as follows:

"Allan, further to the various conversations we have had regardtng the above bond I regret to advise that we are unable to issue such a Financial Instrument due to our lack of reinsurance treaty support'.

It is however evident from this letter and the affidavit of Eswar that efforts were made to get the bond. The affidavit shows that efforts are continuing to be made to secure the necessary security or bond. There is no evidence to show the contrary.

Although I think that the explanation should have been clearer, I am not, with respect to counsel for the respondent, satisfied that the application for extension of time or for alternative prayer was made in bad faith. It is arguable that applicants should have consulted the respondent about the inability to get the bond in time and given reasons for getting alternative guarantor. But I would not construe that as bad faith. It is more a question of lack of diligence and reasonableness than bad faith. Consequently I allow the application and extend the period within which the security O should be provided up to 30th November, 2009. The terms of stay of execution in the consent order of th September, 2009 remain. Further since I have granted extension of time I find it unnecessary to consider the alternative prayer.

It is evident that the applicants did not consult the respondent's counsel about the difficulties they are facing. This is therefore the type of

application where I would exercise my discretion to grant costs of this application to the respondent in any event. I grant the extension of time to 301tU2009 and order that the applicants pay respondents costs in this application.

Delivered at Mengo rriis....kt.(y..day of November, 2009.

J. W. N. TSEKOOKO.

JUSTICE OF THE SUPREME COURT.

L< w\* +tIt t>To .1 1