Kamuhanda v National Bank Of Commerce And Bank of Uganda (Labour Dispute Miscellaneous Application 187 of 2021) [2022] UGIC 60 (9 March 2022)

# THE REPUBLIC OF UGANDA

## THE INDUSTRIAL COURT OF UGANDA AT KAMPALA

## MISC. APPLICATION NO. 187 OF 2021

# OF 2017] [ARISING FROM LABOUR DISPUTE REFERENCE NO. 003/2019, HCT CS 582

ESAU KAMUHANDA . APPLICANT

VERSUS **ft**

NATIONAL BANK OF COMMERCE

AND BANK OF UGANDA

RESPONDENT

BEFORE:

*!*

**I**

**I**

**I**

i. THE HON. JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA

PANELISTS

- 1. MS. HARRIET MUGAMBWA NGANZI - 2. MR. FXMUBUUKE - 3. MR. FIDEL EBYAU

#### RULING

This is an application brought by Chamber summons under Section <sup>31</sup> (2) (e) ofthe Financial Institutions Act, 2004, Order <sup>1</sup> rule 10(2) & (13), Order 52 rules 1&3 ofthe

**1**

**J**

Civil Procedure rules SI 71-1 and section 98 ofthe Civil Procedure Act cap 71, seeking orders that:

- **1.** leave be granted to amend the memorandum of Claim in Labour Dispute Claim No.03 of 2019. - 2. the name of Bank Of Uganda be added as a Respondent in Labour claim No 03 of 2019 and the Memorandum is accordingly amended to reflect the Applicant's complaint against her. - 3. that the costs of the Application be provided for.

# Back ground

*!*

**I**

The Applicant was formerly employed by the <sup>1</sup>st Respondent in various capacities between 1995 as a clerk, until 20/10/2006 when he was summarily dismissed at the rank of operations officer. According to him, he was dismissed without any justification and without a hearing. He subsequently instituted a case before the Mabarara High court which was transferred to the Industrial Court under LDR No. 0003 of 2019, where he seeks a declaration that his dismissal by the <sup>1</sup>st Respondent was wrongful and for the recovery of damages unpaid salary arrears and other remedies within the Court's discretion.

#### The Applicant's case:

The Applicants case as stated in the Notice of Motion and and supporting affidavit sworn by the Applicant, Esau Kamuhanda, in summary states as follows:

1. That he is the Claimant in Labour Dispute claim No. 0003 of2019 (arising from High Court Civil Suit No 582/2017 and Kabale High Court Civil Suit No.028/2017) which he filed seeking a declaration that his dismissal by the ist

**2**

**i**

Respondent on 20/10/2006, without a hearing was wrongful and for the lecovery of damages , unpaid salary arrears and other remedies within court's discretion.

- **2.** That in the course of the Court's proceedings, the ist Respondent's Counsel revealed that the Respondent was under liquidation which prompted the Applicant to write to the Governor ofthe Bank ofUganda seeking clarification on the matter and has not received any response for the Bank ofUganda which is in charge ofthe liquidation process. - 3- That the presence of the Bank of Uganda as regulatory body having exclusive powers of management and control of the affairs of the <sup>1</sup>st Respondent and presently in charge of the Respondent's liquidation process is necessary to enable this court to effectually and completely adjudicate upon and settle all questions involved in the suit. - 4 therefore in the interest of substantive justice this application should be allowed.

# The Respondent's case

**i!**

The Respondent's case as we stated in the Affidavit in reply which was sworn by Joseph Luboyera legal officer at the 2nd Respondent in opposition ofthe Application is summarised as follows:

i. That, he has Knowledge of the facts which are the basis of this Application and with the help of the 2nd Respondent's Advocates M/s MMAKS Advocates, he read and understood the Affidavit in support.

**3**

**,1**

**nd** 2. He denied the allegations made in the affidavit in support, because the 2<sup>1</sup> Respondent is the Central Bank and is possessed of Independent legal personality granted to it under the Bank of Uganda Act.

**d**

**f**

- 3. That the <sup>1</sup>st Respondent is a limited liability Company incorporated in Uganda and was formerly a licensed Commercial Bank operating in Uganda and it's currently under/in liquidation. - 4. That the 2nd Respondent by virtue of the Financial Intuitions Act, 2004, is its liquidator, although the <sup>1</sup>st Respondent while in liquidation, still remains a separate entity from the 2nd Respondent, therefore the prayers in this application have been overtaken by events. - 5- That the 2nd Respondent is not in itselfliable, whether as a liquidator ofthe ist Respondent or otherwise, for any cause ofaction that the Applicant may have against the ist Respondent. - 6. That the Applicant has no cause of action against the 2nd Applicant and none was pleaded against it in Labour Dispute No. 3 of 2019 (the main Claim) or any of the matters preceding it. (Referred to attachment of memorandum marked "A"). - 2nd Respondent in its capacity as an independently existing entity as a party to the main suit. 7. Therefore, there is no basis for adding the - 8. That as advised by the 2nd Respondent's advocates, section 100(1)(a) of the Financial Institutions Act, 2004 empowers the 2nd respondent to defend any legal proceedings in the name and on behalfofthe financial Institution under liquidation and therefore it is not a requirement to add the 2nd Respondent as a party to the main suit in its capacity as an independently

**4**

existing entity yet it is already acting in the name and on behalf of the <sup>1</sup>st Respondent.

9- That the continuation ofthe main suit has no direct bearing on the validity and continuation ofthe liquidation ofthe <sup>1</sup>st Respondent and it is therefore redundant, therefore the application is misconceived and unnecessary and it should be dismissed with costs to the Respondent.

### DECISION OF **COURT**

**£**

After carefully considering the Notice of Motion, the Affidavits in support and against the Application and both parties' submissions, we established that, the National Bank of Commerce, the <sup>1</sup>st Respondent is under liquidation and the liquidator is the Bank of Uganda and the liquidation is still ongoing.

# **The** question for resolution is whether an action **can be maintained** against **the Bank of**Uganda as liquidator?

It is the Applicants' case that, adding the Bank ofUganda as regulatory body having exclusive powers ofmanagement and control ofthe affairs ofthe isl Respondent and presently in charge of its liquidation process is necessary to enable this court to effectually and completely adjudicate upon and settle all questions involved in the suit.

The Respondent contests the application on the grounds that, as its liquidator and pursuant to section 100(1) (a) of the Financial Institutions Act 2004, the Bank of Uganda is already defending the main suit in the name and on behalf of the <sup>1</sup>st Respondent. And it is not directly liable for the acts and omissions of the ist Respondent while the liquidation is still ongoing, because until the liquidation is concluded the <sup>1</sup>st Respondent is an independent corporate entity that can sue and be sued, save that this can only be done through the Bank of Uganda.

**5**

**-J**

We have had the opportunity to peruse the entire Section 100 of the Financial Institutions Act which provides for liquidation and particularly Section 100(1)(a) provides that:

*100(1) The liquidator may with the approval ofthe central Bank-*

*(a)bring or defend any action against or other legal proceedings in the name and on behalfofthefinancial institution;..."*

Despite the ambiguity created by the expression *"in the name and on behalf of thefinancial institution..."* in subsection (a), in our understanding, it means that, the liquidator acts in the name and on behalf of the Financial Institution in issue. Whereas the section in our considered view, empowers the liquidator to bring or defend any action in the name and on behalf of the Financial institution, it is silent on whether the financial institution in issue ceases to exist as a corporate legal entity when the liquidator takes over its Control and Management during liquidation. We therefore, associate ourselves with the holding in **Greenland Bank Ltd vs Westmont Land (Asia) HCCS No. 309/1999,** to the effect that, by the Central Bank taking possession and control of the Bank does not mean that the Bank in issue ceases to be a body corporate capable ofsuing or being sued, the only change is that it cannot sue or be sued directly. "... *it can sue or be sued through the central Bank and ifit sues, the Central Bank would have to institute the suit not its own name but, in the name, "* of the of the Bank/ financial Institution. The Court in this case, went further to state that: *"... Until the Bank isfinally liquidated, it retains 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. "* Therefore, by the Central Bank taking over the Bank as liquidator it does not become the Bank, it only

**I**

**)**

mes the roles ofmanagement and control ofthe Bank in issue, which roles were rcised by the Board of Directors and depositors respectively before the takeover. (see Robert Mwesigwa , Abel Nayebaza and 134 others vs Bank of Uganda HCCS No. 0588 of 2003. It is our understanding, that it is only in circumstances where an institution has changed its corporate character that a liquidator is required to sue in its own name (see Peoples Transport Company vs Afric Cooperative Society Ltd HCCS No 467 of 1995,).

*n*

It is not dispute that, the <sup>1</sup>st Respondent in the instant case is under liquidation and the liquidation is still ongoing. It is also not in dispute that the Central Bank, the (t Bank of Uganda is the liquidator. In light ofthe holding in Greenland Bank Ltd vs Westmont Land (Asia) (supra), until the <sup>1</sup>st Respondent is finally liquidated, it remains a corporate entity that can sue and be sued, save that it cannot do so directly but through the Liquidator, that is Bank of Uganda. Does this require the Bank ofUganda to be added as a Co-Respondent? We think not.

It is trite that a Claimant/plaintiffmust disclose a cause ofaction against a defendant /Respondent otherwise the plaint/claim ought to be rejected and struck out (see Order 7 rule 11). It was the submission of Counsel for the Respondent that the Applicant had not disclosed any cause ofaction against the Bank ofUganda in itself. He contended that, the claim for unlawful termination could not be maintained against Bank of Uganda because it was not privy to the Applicant's contract of employmentwith the ist Respondent and it he was not employed by Bank ofUganda. He relied on Birakwate Vs Kilembe Minses [1976] HCB at 19, and other authorities where the holding was to the effect that under order 7 rule 11, it is mandatory upon Court to reject a plaint which does not disclose a cause of action against the Defendant. It is true, the Applicant has not shown this court that he

**7**

**r**

enjoyed a right and the right was violated and the Bank of Uganda is liable for its violation (see **Kayanja** Vs **New India insurance Company Ltd** [1968] which was cited in **Robert** Mwesigwa, **Abel** Nayebaza **and 134 others vs Bank of** Uganda**(supra).** The principle of privity of contract connotes that, a stranger to a contract cannot sue upon the contract unless he or she is allowed by statute to do so. Therefore, the Applicant's assertion that, the addition or joinder of the Bank of Uganda as co- respondent would enable this court to completely and effectively settle the main suit to avoid a multiplicity of proceedings, cannot hold because it is a stranger to the employment contract between the Applicant and the <sup>1</sup>st respondent, whose termination is the subject of controversy. There is nothing on the record to indicate that the Bank ofUganda as liquidator by operation oflaw was assigned any liability arising out of the Applicant's employment contract. The Financial Institutions Act 2004, is silent on the transfer ofsuch employment rights from the ist respondent to Bank ofUganda.

As already discussed before, by Bank of Uganda taking over management and control ofthe <sup>1</sup>st Respondent, it did not mean that the <sup>1</sup>st Respondent ceased to be a corporation sole, capable ofsuing and being sued in its name. However, it cannot sue or be sued directly using its own lawyers because this function has been assumed by Bank of Uganda, through which it can sue or be sued. Therefore, until the National Bank of Commerce, <sup>1</sup>st Respondent is finally liquidated and deregistered , it remains liable for the Applicant's employment rights. We reiterate that, the Applicant has no direct cause of action against the Bank of Uganda regarding his employment dispute, LDR N0.03/2019. Given that the National bank of Commerce can only sue and be sued through Bank of Uganda, it can only be to sued as the National Bank of Commerce (in Liquidation).

**8**

Accordingly, we find no merit in the Application seeking to amend the Memorandum of claim to add or join the Bank of Uganda as co- respondent in the main suit. It is denied. No order as to cost is made. delivered and signed by:

i. THE HON. JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA

### PANELISTS

i. MS. HARRIET MUGAMBWA NGANZI

2. MR. FXMUBUUKE

3. MR. FIDEL EBYAU

DATE: 09/03/2022

**9**

**,1**