Kitongo & Another v Lystra Investment Limited (Miscellaneous Application 544 of 2023) [2023] UGCommC 258 (19 September 2023)

# THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA

## (coMMERCTAL DTVTSTON)

### MISC. APPLICATION NO. 544OF 2023

# ARISING FROM CIVIL SUIT NO. 999 OF 2022

# I. KITONGOWILLIAM

# 2. NKUUBI PACAL PAUL : : : :: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :: :: : :APPLICANT

#### VERSUS

## LYSTRA INVESTMENTS LIMITED: : : : : : : : : : : : : : : : : : : : : : : : : : : : : RESPONDENT

#### BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI

#### RULING

This Application is brought by way of Notice of Motion under Section 98 of the Civil Procedure Act (Cap 71) and Section 33 of the Judicature Act (Cap 13), Order 36 Rule I I and Order 52 Rule I of the Civil Procedure Rules SI 71-l (CPR) for orders that the Decree in Civil Suit No. 999 of 2022 be set aside, the Execution in EMA No.0l03 of 2023 be set aside, Applicants be granted unconditional leave to appear and defend Civil Suit No. 999 of2022 and costs be provided for.

The Application is supported by two Affidavits of Kitongo William and Nkungi Pascal Paul, while the same was opposed by the Affidavit in reply of Elizabeth Kobusingye of M/S TASKK Advocates.

#### BACKGROUND OF THE APPLICATION

The first Applicant obtained a loan facility from the Respondent to the tune of Ugx 25,236,0001: at an interest rate of 20Yo per month and his motor vehicle Subaru Registration No. UBE 618 S was given as security. The second Applicant was the guarantor for the said loan. The l'' Applicant paid five million and defaulted on the repayment of the balance and the Respondent filed civil suit No. 999 of 2022 against the Applicants. Summons were duly served on the Applicants and the ten days within which the Applicants was required to file an Application for leave to appear and defend lapsed without him filing the same.

Upon the ten days lapsing, the Applicant through his lawyers on 20th December 2022 submitted M. A. No.036 of 2023 for extension of time within whichto apply for

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leave to appear and defend civil suit 0999 of 2022 and grant of unconditional leave to appear which was filed on 1 lm of January , 2023 . The application was brought to the attention of Court on 21't February 2023 when the main suit was scheduled for hearing and, while noting that a Default Judgment was entered on the 12th day of January 2023 this Court, in the presence ofcounsel for both parties, closed the main suit and observed that M. A. No. 036 of 2023 had been overtaken by events.

Meanwhile a similar application, M. A. No. 0036 of 2023 seeking orders that the decree in civil suit No. 0999 of 2022 be set aside and that the Applicants be granted unconditional leave to appear and defend civil suit 0999 of 2022, appears to have been filed in February 2023 and the present application seeking similar orders was filed in April2023.

The Applicant's case is that Default Judgment was allegedly entered before the hearing of the Application for extension of time, hence this Application seeking for orders of setting aside the Judgment and decree and granting leave to appear and defend.

# REPRESENTATION

The Applicant was represented by M/s E. Wamimbi Advocates and Solicitors and the Respondent was represented by M/s TASKK Advocates.

# SUBMISSIONS

Counsel for the Applicant submitted that the Applicants are seeking orders setting aside the Decree in Civil Suit No. 999 of 2022, stay of execution and unconditional leave to appear and defend the said suit on grounds that the Default Judgment was erroneously entered pending the disposal of Misc. Application No. 036 of 2023. That the Applicant filed an Application for extension of time and leave to appear and defend on the 20th day of December 2022 which was last modified on the I 1t day ofJanuary 2022 and before the same could be disposed of, the Registrar entered a default Judgment on the 12th of January 2023 which was a glaring error on her part; and that Applications ofsuch a nature are a reserve of a Judge and not the Registrar.

Counsel for the Respondent in response opposed this Application and submitted that since the Applicant was supposed to apply for leave to appear and defend HCCS No. 999 of 2022; and the time for the said Application had lapsed without them seeking leave the Court was right to enter the Default Judgement in issue. Counsel submitted that the Application the Applicant is referring to is for extension of time and that it would be eroneous to say that Judgment was not rightly entered. That Judgment was rightly entered as there was service of summons on the Applicants and no

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Application for leave to appear and defend was brought in the prescribed time. That the learned Registrar wamed herself and stated in the minutes that there is no Application for leave filed by the Defendants and it was on that ground that Judgment was rightly entered.

Counsel for the Applicants in reply submitted that they have a plausible defense to file thus leave should be granted for them to file a defense; and that the 1't ground is that the Respondent is not privy to the contract with the Applicants as the creditor is Elizabeth Kobusingye. Counsel also stated that the second Applicant is not a party to the acknowledgement and was only a guarantor but was sued by the Respondent; and that the loan agreement is illegal and unenforceable under section 69 of Tier 4 Microfinance Institutions Act as the Respondent is enforcing a compounded interest of 2Yo as seen in paragraph 3 of the loan agreement. That the transaction also contravened section 88 of the Tier 4 Microfinance Institutions Act to the extent that the Respondent did not declare the record of interest or security in respect of money lent. Counsel contended that the Respondent did not follow the due process for disposing of securities when they sold motor vehicle UBE 61 8 S. He submitted that the acknowledgement of sixty- eight million indebtedness was secured unduly through duress.

In rejoinder Counsel for the Applicant submitted that there is an Agreement attached as annexure C of the affidavit in reply which is an acknowledgement of indebtedness of sixty- eight million to the Respondent signed by both parties.

# RULING

I have read and considered the pleadings and submissions of the parties in this matter and the main Issue for determination by this Court is:

I. Whether this is a proper case for setting aside the Judgment/Decree in Civil Suit No.999 of 2022 and granting the Applicants leave to appear and defend the said suit.

#### Issue I

# Whether this Application discloses any grounds for setting aside the Judgment/Decree in Civil Suit No.999 of 2022

As pointed out earlier, a similar application to the present application was filed by the Applicants in February 2023 and abandoned for no clear reasons. This action alone would render the present application filed in April 2023 after the earlier one irregular and improperly brought before this Court. However, since the parties

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appeared before Court and were allowed to proceed with the present application, I will proceed to determine the same.

In this case, the Default Judgment in Civil Suit No. 999 of 2022 was entered under Order 36 of the Civit Procedure Rules. It is trite law that a Judgment made under Order 36 of the CPR can only be set aside under Order 36 rule 1l which states that:

'After the decree the court may, if satisfied that the service of lhe summons b'as not effective, orfor ony other good cause, which shall be recorded, set aside the decree, and if necessary stay or set aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the court so to do, and on such terms as the court thinks fit'.

The duty of the Applicants, therefore, is to satisfu the court that service of the summons was not effective, or show any other good cause in order to have the Judgment/ Decree in issue set aside and be granted leave to appear and defend the suit.

From the facts of this case, it is not disputed by any of the parties to this suit that there was effective service of summons. In paragraph 8 of the Applicants' Affidavit in support of the Application, the 1't Applicant admitted receiving and acknowledging the receipt of summons to file a defense. It was, therefore, true that the Applicants were effectively served with summons but failed to make an Application for leave to appear and defend within the stipulated time of ten days.

In as far as the issue ofgood cause being shown by the Applicants is concerned, in the case of Pinnacle Projects Limited v Business in Motion HCMA No. 362 of 2010 the Court held that:

"The phrase "good cause" is not defined under the rules but is defined in Black's Law Dictionary, 7th Edition as "a legally sfficient reason". However, the phrase " good cause " has been explained in a number of authorities. In the case of Mugo v Wanjiri [ 1970J EA 481 at page 483 it was held that sfficient reason must relate to the inability or failure to take the particular step in time. "

The I't Applicant in paragraph 9 of his affidavit in reply stated that he instructed an Advocate in the names of Samson Mashipe to file a defence, but no Application was made for leave to file a defence. It is an established principle of the law that negligence ofCounsel ought not be visited on an innocent litigant and that a litigant ought not to bear the consequences of default by an advocate unless the litigant is privy to the default or the default results fiom the failure on the part ofthe litigant to give the advocate due instructions (Banco Arabe Espanol vs Bank of Uganda,

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SCCA No.8 of 1998). Such mistake by Counsel, in this case, would amount to sufficient cause for setting aside the default Judgement. However, the Applicants have not attached any evidence such as the notice of instruction to said Counsel in this Application to show that they indeed engaged the said Advocate and neither have they adduced any affidavit from the said Advocate to support their allegations.

In the absence ofsuch evidence, I find that the Applicants have not proved that an Advocate was indeed instructed by them and failed to carry out their instructions in as far as filing an application for leave to appear and defend was concemed. Therefore, the aforementioned assertions by the 1't Applicant does not pass the test of sufficient cause as envisaged in Order 36 rule I I of the CPR.

With regard to whether the Default Judgement in issue was erroneously entered by the Registrar, counsel for the Applicants submitted that the Registrar did not hear or dispose of their Application for extension of time and leave to appear and defend which was created on ECCMIS on 20th December 2022 and last modified on llth lanuary 2023.

Counsel for the Respondent, on the other hand, submitted that the Respondent applied for and was granted Default Judgment on the 12th January 2023; andthat the learned Registrar wamed herself in the minutes that there was no application for leave filed by the Applicants and therefore the Default Judgment was rightly entered.

On close perusal of the record, annexure B to the Affidavit in support of the I't Applicant, indicates that an Application for extension of time (Misc. App No. 036 of 2023) was created on ECCMIS on the 20th of December 2022 and last modified by the Leamed Registrar on 1ls January 2023 when it was filed (almost a month after the ten days with in which to file an application for leave to appear and defend had expired). Annexure D of the same also indicates that a Decree was entered on the 12th of January 2023. As earlier stated, on 2l't February 2023 when the main suit was closed, this Court observed that the said application was overtaken by events since Default Judgment had been entered on l2th January 2023.|n essence, Misc. App No. 036 of 2023 which counsel for the Applicants insists should have been heard by the Leamed Registrar, was closed and as such does not exist.

Be that as it may, it is clear from the said record that at the time the Leamed Registrar entered the Default Judgment in issue, there was no application for leave to appear and defend the main suit filed by the Applicants as required by law.

Nowhere in the Rules is it stated that such unserved applications for extension of time do away with the requirement to file an application for leave to appear and defend within the ten days specified therein and, therefore, in accordance with Order

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36, rule 3 (2) of the CPR which is couched in mandatory terms, rn default of the application by the defendant or by any of the defendants (if more than one) within the periodfixed in the summons served upon him or her, the plaintiffshall be entitled to a decree .. .(emphasis mine).

I, therefore, find that the Default Judgment was properly entered by the Leamed Registrar in the absence ofany application for leave to appear and defend the main suit by the Applicants. The Applicants argument that the Leamed Registrar should have first heard and determined the pending unserved application for extension of time before entering a Default Judgment has no basis in law and does not constitute sufficient cause for setting aside the Default Judgment.

All in all, I do not find this a proper case for setting aside the Default Judgment entered in Civil Suit 0999 of 2022.

Having held as I have above, the prayers for orders to stay execution of the said judgement and grant of leave to appear and defend have been overtaken by events and granting the same is of no consequence.

This Application is accordingly dismissed with costs to the Respondent.

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HON. LADY JUSTICE ANNA B. MUGENYI DArED.......... r.t .t. l. ]..,r . ?..2.: t........