Kasagaki & Another v Financial Access & Trade Service (U) Limited (Miscellaneous Application 1101 of 2022) [2024] UGCommC 303 (24 September 2024)

| 5 | THE REPUBLIC OF UGANDA<br>IN THE HIGH COURT OF UGANDA AT KAMPALA<br>[COMMERCIAL DIVISION]<br>MISCELLANEOUS APPLICATION NO. 1101 OF 2022 | | | | |----|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--| | | | | | | | | | | | | | | | | | | | | [ARISING FROM CIVIL SUIT NO. 235 OF 2022] | | | | | 10 | | | | | | | 1.<br>GEORGEUS KASANGAKI | ] | | | | | 2. JOSEPH SENDAGIRE | ] | APPLICANTS | | | | | VERSUS | | | | 15 | | | | | | | FINANCIAL ACCESS AND TRADE<br>SERVICE (U) LTD | ]<br>] | RESPONDENT | | | | Before: Hon. Justice Thomas Ocaya O. R | | | |

#### **RULING**

# **Introduction**

This application is premised on Section 98 of the Civil Procedure Act, Order 9 Rules 2, 3(1)(a)

- 25 -(d), (g) Order 9 Rule 3(2) and Order 52 Rules 1 and 3 of the Civil Procedure Rules ("CPR"). The Application seeks the following reliefs; - 1. The Respondent's suit Civil Suit No. 235 of 2022 ["the Main Suit"] be dismissed for being an abuse of court process. - 2. The Respondent's suit Civil Suit No. 235 of 2022 be set aside for improper service on - 30 the Applicants. - 3. An order setting aside the summons or service of the summons on the Applicants. - 4. An order declaring that the summons has not been properly served on the Applicants. - 5. The discharge of any order extending the validity of the summons for the purpose of service.

- 5 6. declaration that in the circumstances of the case the court has no jurisdiction over the Defendants in respect of the subject of the claim or the reliefs or remedies sought in the action for the following reasons: - (a) The Claimant's illegal and baseless claim. - (b) Claim instituted contrary to the mandatory legal requirements for conducting 10 money lending business in Uganda. - (c) Failure to pay the mandatory taxes and stamp duty. - (d) Failure to institute the claimant's alleged claim within the mandatory time provided by law. - (e) Costs of the application be provided for.

"dumped" on the Applicants' lawyers herein.

The Plaintiff's case is that the plaint commencing the main suit was lodged in this court on 25.03.2022 and the same was never stamped. The Applicants contends that his advocates were served with summons on 20.6.2022 which summons were unsealed. The Applicants contended that the plaint and summons were an abuse of court process and a summons 20 without a seal was a nullity.

The Applicants contended that the summons were not served for two months and there was no attempt at serving the summons on the Applicants personally before the same were

Additionally, the Applicants contend that the present suit is brought against a wrong party and accordingly is a waste of court's time.

The Applicants contend that the Respondents' claim is illegal and baseless. It is the 30 Applicants' case that Annexure A to the plaint was never registered with the registrar of companies and Stamp Duty was not paid on the same. The Applicants also contend that the alleged deed of guarantee and indemnity was never witnessed by an independent person /lawyer which is a mandatory requirement.

35 It is also the Applicants contend that the Respondent's suit was filed out of time in so far as the plaint contends that the Applicants defaulted in 2008 and the suit was instituted after

5 four years and accordingly, the Respondent failed to institute the suit within the mandatory timelines set by the law.

In Response, the Respondents contended that:

- (a) The suit was filed using the court's electronic system, ECCMIS and in that system, - 10 the summons are validated by the Learned Registrar and accordingly, there is no need to have the summons embossed physically. - (b) The summons were duly validated, signed and endorsed by the Learned Registrar in ECCMIS. - (c) The Applicants refused to acknowledge service on them personally and referred the 15 court process server to their advocates, M/s Akampumuza & Co. Advocates. - (d) The Applicants are proper parties to this suit as they are sued jointly and severally as guarantors to the supply chain credit facility extended to M/s Tulsa Investments. - (e) The Applicants were severally served with demand notices informing them of the principal borrower's default via email and registered post but the same notices were 20 ignored by them. - (f) A deed of guarantee is an private contract between the respective parties and there is no requirement that for a deed of guarantee to be witnessed by an independent person. - (g) The Respondent is duly licensed to carry out money lending transactions in Uganda. - 25 (h) The Applicant's litigious nature is intended to frustrate the Respondent company and cause her to suffer additional unnecessary legal expenses to its detriment.

In Rejoinder, the Applicants contended that:

- (a) It is false to state that the Applicants are directors of M/s Tulsa Investments an co - 30 guarantors when the same appears nowhere in the Applicants' application. - (b) Filing of matters in ECCMIS did not do away with physical embossing of the summons. - (c) The Deponent of the affidavit of service is not a process server and tells a lie that service was attempted on the applicants on their office address located at Room S.9 2nd Floor at Nasser Road when their office has always been Room S.8, 2nd Floor, Nasser

5 Road Mall and the affidavit of service is sworn over one year later to defeat the Applicants' objections.

## **Representation**

The Applicants were represented by M/s Akampumuza & Co. Advocates while the 10 Respondent was represented by M/s Engoru, Mutebi & Co. Advocates.

# **Evidence and Submissions**

The Applicants led evidence by way of affidavits in support deponed by all the applicants and by way of an affidavit in rejoinder deponed by the 1st Applicant. The Respondent led evidence

15 by way of an affidavit in reply deponed by Isabel Diana Sembiro, the Respondent's Director and General Manager.

Both parties made submissions in support of their respective cases which I have read and considered before arriving at the decision below. For brevity, I have not felt it important to

20 repeat the submissions of the parties herein.

# **Decision**

Essentially, the Applicant's application raises a number of preliminary objections namely

- (a) The Applicants were not served in accordance with the law. - 25 (b) The summons served on the Applicants are invalid - (c) The Respondent's suit is barred by limitation - (d) Suit is an abuse of court process - (e) Suit is based on an illegal document - 30 I will proceed to pronounce myself on each of the above objections.

#### Non-Service

The Applicant contended that service of summons was not made within 21 days as required by law. Additionally, service was not made on the Applicants personally. The Applicant

35 submitted that for these reasons, this suit ought to be dismissed.

## 5 **Order 5 Rule 10** of the CPR provides:

"Wherever it is practicable, service shall be made on the defendant in person, unless he or she has an agent empowered to accept service, in which case service on the agent shall be sufficient."

10 **Order 3 Rule 1** of the CPR provides:

"Any application to or appearance or act in any court required or authorised by the law to be made or done by a party in such court may, except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his or her recognised agent, or by an advocate duly appointed to act on his or her behalf; except that

15 any such appearance shall, if the court so directs, be made by the party in person."

# Rule 4 of the same order provides thus

"Any process served on the advocate of any party or left at the office or ordinary residence of the advocate, whether the process is for the personal appearance of the party or not, shall be

20 presumed to be duly communicated and made known to the party whom the advocate represents, and, unless the court otherwise directs, shall be as effectual for all purposes as if the process had been given to or served on the party in person."

Service on an agent of a defendant is sufficient service as long as such agent is empowered 25 to receive service for and on behalf of the principal such that service on the agent constitutes service on the principal.

In **Dr. B. B Byaruhanga v Alisson Kantarama HCMA 229/2019** the court held that service on an agent is effective service only if the agent is empowered to accept service. However, 30 service on an advocate without instructions to conduct a matter on behalf of a client is not effective service. See **Green Meadow Limited v Patrice Namisono HCMA 1368/2022**

The Respondent led evidence to the effect that their court process server attempted to serve the Applicants at their office and the Applicants declined to accept service and referred the

35 process server to their advocates, M/s Akampumuza & Co. Advocates who received the summons albeit in protest as can be seen on the summons annexed to the Application.

- 5 The Applicants did not dispute that the said firm were their advocates and agents in the conduct of this matter and were empowered to receive the summons. The Applicants did not lead evidence that the service of summons on the said firm was improper in any way as the said firm were neither their agents nor empowered to receive the summons on their behalf. In these proceedings, the same firm represents the Applicant. - 10

In my considered view, service on M/s Akampumuza & Co. Advocates who were and are the Applicants' advocates and agents herein was sufficient service for purposes of these proceedings.

- 15 We now turn to the allegation that summons served were expired/summons were not served in time. The Respondent contended that the summons were endorsed on 27 May 2024 and service attempted on the Applicants on 30 May 2024 but the applicants refused to acknowledge service. The Respondent then attempted service on the Applicants' advocates between then and on 20th June 2024 when the same summons were effected. - 20

A review of the documents on record shows that the Applicants were served in time and refused to acknowledge, instead, they referred the person who attempted service to their lawyers. The Respondent's advocates then served the Applicants' advocates in time, but they did not acknowledge receipt until the 20th June 2024, after 21 days.

# **Order 5 Rule 14** of the CPR provides

"Where a duplicate of the summons is duly delivered or tendered to the defendant personally or to an agent or other person on his or her behalf, the defendant or the agent or other person shall be required to endorse an acknowledgment of service on the original summons; except

30 that if the court is satisfied that the defendant or his or her agent or other person on his or her behalf has refused so to endorse, the court may declare the summons to have been duly served. "

The above provision empowers this court to declare that service has been effect where a 35 party refuses to acknowledge such service and the court is satisfied that the service was proper. In my view, the purpose of such provision is to prevent litigation from being


5 frustrated by uncooperative litigants. The provision however does not squarely address a situation like the instant case where acknowledgment is not initially made but is subsequently provided.

Section 98 of the Civil Procedure Act provides thus:

10 "Nothing in this Act shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court."

The powers of the court under the above provision are broad, empowering this court to issue

15 any orders for the interests of justice. See **Green Meadow Limited v Patrice Namisono HCMA 1368/2022, Kagumaho Musana v Rama and 3 Others HCMA 933 of 2019 and Tullow Uganda Limited & Anor v Jackson Wabyona & Ors HCMA 443/2017**

In the present case, summons were duly served on the Applicants within time who refused 20 to accept and acknowledge receipt of the summons until after the said summons had expired. In the circumstances, it is clear that the Applicants were served in time but did not acknowledge receipt of the same until after the summons had expired.

The question in the circumstances is whether the said late acknowledgement of service of 25 the summons warrants the setting aside of the said service. First, a distinction must be made between service and acknowledgment of service. Whereas the law requires that a party ought to acknowledge service on the date such service is effect, in my considered view, service is complete when the documents to be served are delivered, rather than when service of the same is acknowledged.

Accordingly, and in exercise of this court's inherent powers, this court returns the finding that service of summons was duly made within the time stipulated under the law and the belated acknowledgment of service by the Applicants did not affect or impeach the same in any way.

#### 5 Service of unsealed Summons

The applicants relied on the cases **of Hussein Badda v Iganga District Local Government HCMA 479/2011, Soroti Municipal Council v Pal Agencies HCMA 181/2012** to contend that service of unsigned summons renders the suit fatally defective.

10 Order 5 Rules 1(1) and 1(5) provides that once a suit is validly commenced, summons may be issued against the defendant(s) and signed and sealed by the judge or such officer of the court.

I take note of the cases of **Kaur v City Auction Mart Ltd (1967) EA 108, Fredrick James**

- 15 **Jjunju & Anor v Madhvani Group Ltd & Anor HCCS 688/2015 and Kinyara Sugar Limited v Kyomuhendo Pamela HCMA 61/2020** in which the courts held that service of unsealed summons was a fundamental and incurable defect. These decisions were all decided prior to The Constitution (Integration of ICT into the Adjudication Process for Courts of Judicature) Practice Directions 2019. - 20

The Constitution (Integration of ICT into the Adjudication Process for Courts of Judicature) Practice Directions 2019 provide for the use of electronic technologies in the administration of justice, including in filing pleadings and issuance of summons.

- 25 This court takes notice of the fact that presently, this court uses the ECCMIS system in which all filings are made and summons issued. It should be noted that the purpose of signing and sealing of summons is to authenticate the same. The signature of the relevant officer and seal of the court help show that the summons were properly issued by the court. In the ECCMIS system, the summons are signed by the relevant officer and additionally authenticated by a - 30 QR Code and a linking password which allows the person receiving the summons to link themselves to the matter in respect of which the summons are served in the ECCMIS system.

In my considered view, summons issued by the court through the ECCMIS system are valid whether or not they are sealed as long as they are duly issued. In the *Kinyara Sugar Case*

35 *(supra)*, Court correctly observed that the purpose of the seal is authentication. The Cases of Kaur, Kinyara Sugar and Fredrick Jjunju *(supra)* were determined way before the ECCMIS 5 system where the mode of authentication of summons was by signature of the relevant judicial officer and the embossment of the seal of the court.

With the introduction of the ECCMIS system, the said system because the official mode of filing and extracting court documents. Court cannot recognise filings and extractions in the

10 system and not recognise the authentication features of that system. As noted above, instead of manual embossment of the seal, the ECCMIS system uses a QR Code and a signature of the relevant judicial officer (be they a Judge or Registrar).

A party cannot therefore be required to print the summons in the system and then proceed 15 to court for sealing as this would be at odds with the purpose for rolling out an electronic system for court filings and case management. The signature and QR code on the summons are sufficient authentication in the absence of a seal and such summons when duly issued are valid and operate in the same way and in the same manner as summons previously manually issued by the court and sealed.

Accordingly, I find that this objection has no merit whatsoever.

#### Limitation

Here, the Applicants contended that the suit was filed out of time having been filed four (4) 25 years after the cause of action arose. The parties' relationship is contractual and their dispute arises from a guarantorship contract.

Section 3(1)(a) of the Limitation Act provides that the limitation period for claims premised on contract is six (6) years. In its pleadings, the Respondent contends that the principal

30 borrower defaulted in 2018 and the present suit was instituted four years later.

In **Hannington Olanya v Acullu Hellen HCCA 38/2016** court held that the period of limitation begins to run when the cause of action arises and the right to commence an action crystalises.

5 Evidentially, reading the plaint and believing the contents therein to be true, the suit was filed within time and there is no basis for asserting that the same is time barred. I accordingly overrule this objection.

## Basis on an Illegal Document

- 10 Counsel submitted that the Respondent sought to rely on a deed for guarantee which was never registered with the Registrar of Companies and in respect of which stamp duty was not paid. Counsel relied on Section 34 of the Stamps Act. However, this law has since been repealed and replaced with the Stamp Duty Act. - Section 3 and item 28 of the 2nd 15 Schedule create a requirement for payment of Stamp Duty on deeds such as the one which is the basis of the Respondent's claim. The effect of noncompliance with the obligation to pay stamp duty is provided for in Section 32 of the same act which provides thus: - "1) An instrument chargeable with duty shall not— - 20 (a)be admitted in evidence for any purpose by a person who has by law or consent of the parties authority to receive evidence; or (b)be acted upon, registered or authenticated by a person, or by a public officer, unless the instrument is duly stamped. - 25 It follows that where a party has not paid stamp duty on a document, the same cannot be acted on unless they pay the duty. In my view, this doesn't bar the filing of the suit per se, but prohibits enforcement of the agreement until the duty is paid. In my view, the fact that the requisite stamp duty is paid late is not factor as the law provides remedies in the event of late payment of the duty. This therefore means that a party may even pay the duty at the time - 30 they seek to use the provision, rather than at execution per se. Obviously, the provisions on the impact of late payment of the duty would come into play, but would not prohibit exhibiting, relying or acting on the document. See **Ranchobhai Shivabhai Patel Ltd & Anor v Sylvestre Wambuga & Ors SCCA 6/2017**

5 In this case, the Respondent led uncontroverted evidence that on 19 November 2021 which was before filing of the instant head suit, the requisite fee was paid. Accordingly, I am satisfied that Stamp Duty was paid and the objection on this head is overruled.

#### Lack of Attestation

- 10 The Applicant contended that the deed founding the Respondent's suit was not duly witnessed and the same is invalid and cannot be the basis for a valid suit. The Respondent did not dispute that the present deed was not attested. Counsel did not submit on this point in his submissions and the Applicant did not identify a provision of law requiring attestation of the said deed. - 15

It is the role of a party to present their case, whether in respect of evidence, pleadings or submissions clearly and coherently. It is not enough for a party to throw incoherent averments/submissions or unsubstantiated allegations or unsupported submissions at the court, hoping that the court will fill in the gaps, speculate or use its powers to separate the

20 hay from the chaff. See **Night Nagujja v Namuwonge Agnes & Ors HCMA 1878/2021**, **Oscar Ssemawere v African Express Airways HCMA 259/2023, Kisam Enterprises v Attorney General HCMA 742/2023.**

I have not found any provision of law requiring the said deed to be attested and accordingly,

25 I find that the objection on this head has no merit.

### Lack of Independent Advice

The Applicant contended that the deed founding the Respondent's suit was executed without the Applicants being afforded independent advice. The Respondent did not dispute

30 this. The Applicants contended that in the premises, the deed could not found the basis of the Respondent's suit. The Respondent disputed this.

Generally, there is no obligation that a party to a contract ought to obtain independent advice before the contract is executed. See **MTN Two One Two Staff Cooperative and Credit**

35 **Society v Samuel Majwega HCCS 82/2021**

#### 5 In **MTN Two One Two** (supra) this court held thus;

"The need for independent legal advice is factually based. The necessity of such advice will depend on the particular facts and circumstances of a given case. Factors like the age, background, business experience, financial position and relationship with the real borrower, will be considered. Persons who may not understand the agreement because of the following:

- 10 a) minimal business experience, b) age, c) infirmity, d) lack of education, e) difficulty with language, may need independent legal advice. Non-arm's length transactions between family members too. It is a mandatory requirement though during a transaction where a party is placed at risk but doesn't get a direct benefit from, such as personal guarantees and third party mortgages which involve persons who ordinarily do not play a part in the negotiations - 15 for the loan and are unaware of its terms, to ensure that the person signing the agreement fully understands its contents including all possible consequences, as well as ensuring they are aware of any legal or financial responsibilities they are committing to. The advice is provided by an advocate who is independent to the transaction. The purpose of requiring independent legal advice is to ensure that the party has an appreciation of the nature and - 20 consequence of the transaction where the advocate involved is in a conflict of interest, in order to understand exactly what the lender can or cannot do. It helps in providing an objective review of a legal document, confirms a party understands the document properly, and verifies that the party has not been pressured into signing the document (i.e. duress or undue influence). Since the purpose of independent legal advice is to ensure that the - 25 borrower obtains a full and frank understanding of the risks and obligations associated with taking on the loan, mortgage or other facility, save for those situations where independent legal advice is mandatory, evidence may be adduced to show that even without it, the borrower signed the contract fully understanding his or her rights and obligations; to show that the party understood the general basis of the documentation and the consequences - 30 which may arise in the result of a default. This will depend on the complexity of the transaction. The need for independent legal advice may be rebutted where the lender can prove that the contract was signed by a free and independent mind with commercial knowledge, experience, and general sophistication or independence (see Bank of Montreal. v. 5 Duguid (2000), 132 O. A. C. 106). Therefore, the mere lack of independent legal advice will - 35 not invalidate a transaction in the absence of proof of non est factum, unconscionability,


- 5 fraud, misrepresentation or undue influence (see Avon Finance Co Ltd v. Bridger [1985] 2 All ER 281 and Barclays Bank Plc v. O'Brien and another [1993] 3 WLR 786; [1994] 1 AC 180; [1993] 4 All ER 417). This onerous obligation to permit the other party independent legal advice is imposed on lenders to ensure that persons who are granting security, or otherwise indebting themselves to the creditor in circumstances where they may not directly benefit - 10 from the funds being advanced, or where they may be subject to undue influence, receive independent legal advice."

It is clear that such objection requires evidence to establish whether indeed the present transaction was one requiring independent advice before any determinations can be made 15 on the validity of the agreement in this regard. Accordingly, I find that this an objection that cannot be determined at this stage.

### Abuse of Court Process

# In **King's College Budo Staff Savings Scheme Limited v Zaverio Samula & Ors HCCS**

- 20 **26/2020**, the court defined abuse of court process thus: "The term abuse of court process has the same meaning as abuse of judicial process. The employment of judicial process is regarded as an abuse when a party uses the judicial process to the irritation and annoyance of his opponent and the efficient administration of justice. It is a term generally applied to a proceeding, which is wanting in bona fides and is frivolous, - 25 vexatious or oppressive. The term abuse of process has an element of malice in it. The concept of abuse of judicial process is imprecise, it implies circumstances and situations of infinite variety and conditions."

See also **Deox Tibeigana v Vijay Reddy HCMA 665/2019, Uganda Land Commission and Another V James Mark Kamoga and Another, SCCA No. 8 of 2014**

The examples of abuse of court process are numerous and not capable of being exhaustively listed. They include presentation of an abvious meritless case, conduct of proceedings in a way that shows no intention of bringing them to an end, presentation of clearly moot or stale claims, conspiracy by litigants for an improper purpose such as to defeat a legal right, re-

35 presentation of already determined matters either directly or indirectly such as by making

5 actions through third parties or proxies to reopen issues which the court has already pronounced itself on, use of proceedings to annoy or harass a party and so on.

The Applicants contended that the suit was instituted for an improper purpose of bypassing the laws relating to money lending as the same was brought against the wrong parties who 10 were not parties to the lending transaction.

With the greatest respect to counsel for the Applicants, the submission on this head was not conceptually clear. First, the Respondent led evidence by way of a money lending license and averments to that effect in the affidavit that the Respondent is licensed to conduct money 15 lending business. It was not demonstrated that the license was forged. In my view, the license

was conclusive proof that the Respondent is so licensed.

Secondly, the action is brought against the Applicants as guarantors to the facility given to M/s Tulsa Investments. Whereas the Applicants contend that they are not directors, this can 20 be dealt with during the period for leading evidence and in any case, it is not a pre-condition to a valid contract of guarantee that the guarantor ought to be a director of the principal party if it is a company.

Additionally, there is no requirement that a lender should first exhaust reliefs against the 25 principal borrower for them to pursue the guarantors. A guarantee is a security like any other and unless the contrary is agreed, the lender is entitled to utilise any and all securities whether sequentially, simultaneously or in any other way. See **Barclays Bank of Uganda v Jing Hong & Guo Odong HCCS 35/2009, Moschi V Lep Air Services and Ors [1973] AC 345, Paul Kasagga and Another v Barclays Bank (u) Ltd HCMA 0113/2008.**

There is nothing in the Respondent's claim that shows the use judicial process to the irritation and annoyance of his opponent and the efficient administration of justice. I overrule this objection.

### 5 **Conclusion**

On the whole, this application is wholly without merit. Accordingly, I dismiss the same with costs to the Respondent.

I so Order

**Dated** this \_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2024, delivered electronically and uploaded on **ECCMIS.** 24th September

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**Ocaya Thomas O. R Judge 24th September 2024**

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