Modern Developments Uganda Ltd and Another v FBW Uganda Ltd (Miscellaneous Application No.273 of 2014) [2014] UGCA 146 (1 July 2014)

Full Case Text

![](_page_0_Picture_0.jpeg)

### THE REPUBLIC OF UGANDA

# IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

## MISCELLANEOUS APPLICATION No.273 oF 2014

(ARISING FROM MISCELLANEOUS APPLICATION No.168 OF 2014 & 171 OF 2014 AND ARISING FROM CIWL SIJIT No,481 oF 2012)

1) MODERN DEVELOPMENTS UGANDA LTD ::::::::::::::::::r::::: 2) DT. KAIJUKA MUTABAZI EMMANUEL APPLICANTS

#### VERSUS

FBW UGANDA LTD::::::::::::::::::::::::::::::::::::::::::::::!:::::::::::::: REsPoNDENT

CORAM:

HON. MR. JUSTICE S. B. K KAVUMA, DCJ

HON. MR. JUSTICE A. S. NSHIMYE, JA HON. LADY JUSTTCE FArTH E. K. MWONDHA, JA

### o

This application was brought under Rules 2(2), 6(2) b ,i2 and 43 of the Judicature (court of Appeal Rures) Directions sI 13-l t'r counsel for the applicant was seeking to be heard :-trr orders

Page 1 of 15

# tl l)That the hearing of civil Application No.4g1 of 2OL2 be stayed pending disposal of reference No. t]-z ol 2oL4 and Civil Appeal No.67 of 2OL4

# 2) costs of the apprication be provided for

The application was supported by the affidavit of Dr. Emmanuel Kaijuka Mutabazt and briefry the grounds were as hereunder:

( 1) That the applicants were the applicants in Civi! Applications No. 168of 20L4 for stay of execution and Civil Application No.l7l of 2074 for an interim order.

(2) That the hearing went on before Hon. Justice Kenneth Kakuru JA who dismissed Misc. Application No.777 of 2o74 with costs and 168 of 2OL4 without costs.

(3) That to avoid exparte decree the applicants filed defenses in the main suit No.4B1 of Z}Lz

(4) That the applicants applied for stay of proceedings before the trial court but the application was dismissed with costs.

(5) That the applicants obtained leave to appeal and have appealed against the ruling of the learned Judge

(6) That there are serious issues for determination by a bench of th Justices namely but not limited to the following:

whether the learned Justice of Appeal misdirected himself :

- (i) on considerations for granting an interim order. - (ii) On the import of S.12 of the Judicature Act.

tl" {

Page 2 of 15

- o (iii) On Rule 42 Court of Appeal Rules. - (iv) When he dismissed Givit Application No.16g of 2OL4 without a hearing. - (v) when he condemned the applicants for abuse of court process. - (vi) By failing to order that costs for interim order abide the results of the main Application for stay.

(7) That right from the hearing and the determination at the triat court in Miscellaneous Application No.777 of 2014, the lega! issue whether a director of a company can be joined in an action against the company without lifting the veil on allegations of fraud.

(8) That the znd applicant, who is a director of the l't appticant and who signed the contract in that capacity, will be greatly inconvenienced, disturbed and wil! suffer irreparable damage if the trial court continues and give judgment against him as the indication of the learned justice are clear if this application is not allowed and the hearing stayed.

(9) That Misc. Application No.768 of 2074 was for an order staying the process in the trial court.

t0) Civil Appeal No.67 of 2074 has a high likelihood of success.

11) That the hearing of Civil Suit No,487 of 2O72 in the trial cou has been set for 4th Nov. ZOL4.

12) That it is, therefore, in the interest of justice that this appli be allowed as prayed

O The respondent filed a repty in which she, among other things deponed as follows: -

(1) "In reply to paragraph 2, the 2nd applicant was added as a party necessary to adjudicate the matters arising (A copy of the High Court Ruling was annexed and marked . A,).

(2)That she was advised by her 1awyer Ms. Verma Jivram and Associates, whose advice she believed to be true and convert, that the matters being raised by the applicants can be fully dealt with in the main trial.

(3) That the application for stay of proceedings before the trial judge was made after Hon. Justice Kakuru JA had dismissed the applicant,s applications for Iack of merit in his brief Ruling on 2ndMay 2OL4 (annexure c1) and therefore was lawfuily dismissed.

(4) That the application for stay of proceedings was dismissed after submissions from the parties and considerations by the learned tria! judge to the effect that the applicant had failed to show sufficient cause for the proceedings to be stayed.

(5) That the applicants were granted Ieave to appeal almost six months ago but have not taken any step to fix the appeal.

(6) The applicants have always abused court process by filing several applications with an aim of delaying the main trial as evidenced by 7 applications so far filed.

(7) That the applicants have failed to prove that civil Appeal No. 6 2014 (interlocutory Appeal) has any chances of success.

Page 4 of 15

(8) That the plaintiff in the main suit has a right to chose the party he wants to sue.

(9) That the issues being raised in the appeal and in the applications may be raised in the main suit and will be effectively dealt with by the trial judge.

(10) That the applicant's application for stay of proceedings was dismissed by the trial judge who has set time lines for the matter to commence since it was filed more than two years ago.

(11) That there is no threat of execution or prejudice that will be occasioned if the applicant's application is not granted so it doesn't warrant a stay of the proceedings.

(12) That it is in the interest of justice that this application is denied."

### **Background**

$\overline{\phantom{a}}$

The applicants are defendants in Civil Suit No.481 of 2012 still pending hearing in the Commercial Division of the High Court of Uganda. The respondent is the plaintiff in the above mentioned suit. The first applicant, who is the first defendant in the above suit, was the only defendant and upon determination of an application to join the $2^{nd}$ defendant, the $2^{nd}$ applicant was joined as the $2^{nd}$ defendant now the 2nd applicant. The applicant preferred an appeal to this Court and they applied for leave to appeal from the High Court. By consent of both parties, leave to appeal was granted. The applicants filed a Memorandum of Appeal in this Court having been dissatisfied by the decision of the High Court Commercial Division to join the

Page 5 of 15

applicant. Before that appeal could be heard, applications for stay and interim stay of proceedings in Civil Suit No. 481 of 2012 were filed. The application for interim order was before a single justice of this Court. It was dismissed with costs. This application No.273 was filed to stay the proceedings in Civil Suit No.481 of 2012. The applicant's Reference No.112 of 2014 against the single Justice's dismissal of the **Application No.168 of 2014** is yet to be determined.

### **Representation:**

Mr. Blaze Babigumira (Counsel for the applicants) represented the applicants and Ms. Deepa of Ms. Verma Jivram and Associates (Counsel for the respondent) represented the respondent.

Both Counsel for the applicants and respondent made oral submission. Mr. Babigumira submitted that this was an application for stay of proceedings in High Court Civil Suit No.481 of 2012 and set aside the dismissal of **Civil Application No.168 of 2014**. He relied on the cases of **Hon. Theodore SSekikubo and four others vs. Attorney** General and four others: Constitutional Application No.4 of 2014 (SC), Tropical Bank Ltd and another vs. Lweza Clays Ltd and another Civil Reference No.64 of 2009 CA, Hwan Sung *Industries Ltd vs.* Tajdin Hussein and others SC Civil Application No.19 of 2008 (2008 HCB 157).

He submitted that the right of Appeal should be preserved and that Rule 2(2) of the Judicature Court of Appeal Rules gives Court very wide discretion to make such orders as may be necessary to achieve the ends of justice. One such end of justice is to preserve the right of Page 6 of 15

O appeal. That a defense has been fited and the Court seems to be in a hurry to hear the case as it had been fixed for hearing on O4th November 20L4.

Counsel for the respondent submitted that the defenses were filed on orders of Court as per the learned Judge's Ruling. The guiding principle before stay of proceedings can be granted was whether the applicant would be prejudiced. There is an appeal but he had not taken any steps to have it disposed of. That there is an appeat also from Justice Kakuru's Ruling when he dismissed the matters.

She further submitted that the points of law he alleges can be disposed of through preliminary objections when the defense has been filed. The defense was filed and they are at the stage of joint scheduling. That the appeal has no chance of succeeding. She further submitted that the znd defendant was not being joined as a Director but as a person whose presence before Court was necessary to enable Court effectually and completety to adjudicate upon and settte alt questions involved in the Suit.

That the issue in the Lower Court is whether the plaintiff had a cause of action against the second defendant. She further argued that the cases cited by Counsel for the applicants particularly case No.2, Hon. Theodore Ssekikubo and 2 others V, Attorney General Supra was in relation to stay of execution not stay of proceedings. She retied on the case of Commodity Export Internationat and Another V. MKN Trading company Ltd civil Application No.96 of 2oos. submitted that stay of proceedings was discouraged but rai

Page 7 of 15

fN,

o issue where court can issue an order if it feels that it wilt be prejudicial to a party. She pointed out that Counsel for the applicant only singted out inconvenience of the Director which issue was personal as opposed to public interest of accumulatlon of backlog in the High Court Commercial Division. She said there was no inconvenience as the applicant has various avenues to address his grievances. She prayed that the application be dismissed.

Counsel for the applicant !n a short reply argued that Justice Kakuru in dismissing this application had no jurisdiction. And it was therefore prejudicia! before the reference was heard. That the matters he handled were not before him. He had fited two appeals which have high chances of success and the 2nd applicant wil! be prejudiced as he will be put in expenses since it was not proper to join him as Znd defendant. He reiterated his earlier prayers.

## Consideration of the Application:

The issue to be determined is as to:

(i) Whether the applicants satisfied the conditions to justify a grant of the order prayed for.

The applicants brought this application under Rule 2(Z) (b), rule 42 and 43 of the Judicature (Court of Appeal Rules) Directions SI 13 for stay of proceedings in Civil Suit No.481 of ZOLZ.

For ease of reference, we shall reproduce the main rule here, Ru )

(2) "Nothing in these rules shatt be taken to timit or otherwise affect the inherent power of the court or the High court, to

Page 8 of 15 make such orders as maybe necessary for attaining the ends of justice or to prevent abuse of the process of any such court and that power shall be extended to setting aside judgments which have been proved null and void after they have been passed, and shall be exercised to prevent abuse of the process of any court caused by delay".

We carefully listened to and considered the submissions and authorities of both counsel. We also carefully considered the evidence as per the affidavits of both parties.

We observed that the authorities cited by counsel for the applicants in support of the application; Hwan Sung Industries Ltd Supra, Tropical bank Ltd supra, Hon Theodore Ssekikubo and others versus Attorney General and four others supra were all in respect of stay of execution after the subject matters had been heard on merit and they were distinguishable from the facts of this case.

In the Hwan Sung Industries Ltd case (Supra), this was a case where execution by attachment and sale was held to be incomplete. The judgment debtor's property had been attached but had not yet been sold. The **Hon. Theodore Ssekikubo & 3 others** case (Supra) was also in a situation when the substantive matter had been finally heard.

The Court of first instance in the case of **Tropical Bank Limited &** another (Supra) dismissed the case on a preliminary point of law. The Judge specifically said that the preliminary objection had disposed of the suit in *High Court: Civil Suit No.300 of 2008*. The judge

Page 9 of 15

t ordered that Lweza Ctays be returned to the appticants who immediately took possession of the same. There was an application for stay of the High Court Order. The issue was whether the Court of Appeal can entertain an application for stay of execution of a stay order notwithstanding that no Notice of Appeal under Rule 76 had been filed by the appticant.

The reference which was against the Registrar's decision that he had jurisdiction to entertain an application for an interim order when he had no jurisdiction to do so, was dismissed. The Court of Appeal held that the Court had inherent powers under Rule 2(Z) of the Court Rules to grant such order, interim or otherwise, if they are deemed necessary for the attainment of the ends of justice, or to prevent abuse of Court process...

So in all fairness, the cases cited coutd not be applicable to the facts of this case. This matter is for stay of proceedings in the High Court. The defences as ordered by the triat court (High Court) were filed and the suit was at the stage of scheduling and had not been determined as yet.

Counsel for the applicant argued that stay of execution is the same as stay of proceedings or interchangeably. rather that the two words can be u

We don't accept that submission as these two have different princip es for consideration. They are atso provided for under different provisions of the law. For example, stay of execution is provided under part III of the Civil Procedure Act starting from Section 28 thereof. It provides in

Page 10 of 15

(r t

## part "The provisions of this Act relating to the execution of decrees shall, so far as they are applicable, be deemed to apply to the execution Orders."

Counsel argued that the second applicant will be prejudiced if the suit is heard as he will be inconvenienced by spending his money.

The case cited by Counsel for the respondent, Commodity Export International and Another V. MKN Trading Co. Ltd Civil Application No.96 of 2005 is almost on all fours with the instant application.

Briefly, Commodity Export International, the applicant entered into a joint venture agreement with MKN Trading Co. Ltd and Jahead Management Co. Establishment Ltd (respondents). After the conclusion of the joint venture, the respondent sued the first applicant in High Court Civil Suit No.496 of 2001 but subsequently filed in the Commercial Court Division as Civil Suit No.298 of 2001. The respondents filed Miscellaneous Application No.213 of 2005 in which they sought to amend the plaint. The application was allowed. The respondents filed *Miscellaneous Application No.214 of 2005* seeking to lift the corporate veil of the first applicant company and to add the 2nd applicant as a party to the suit. The application was allowed.

The applicants filed a Notice of Appeal and the respondents amended their Plaint and included the $2^{nd}$ applicant as a party to the suit. They also filed a defense to the suit.

Counsel for the applicants in that case relied on Hulsbury Laws of England 4th Ed. Paragraph 437 which we quote in part as follows; "The object of the order is to avoid trial or hearing of the action taking place, where the court thinks it's just and convenient to make the order, to prevent undue prejudice being occasioned to the opposite party or to prevent the abuse of Court process.

The order is made generally in the exercise of the Court's discretionary jurisdiction and by way of summary process, is without a trial on substantive merits of the case, and at any rate in the exercise of its inherent jurisdiction an order for stay of proceedings is made very sparingly and only in exceptional circumstances"

The Court in the case of **Commodity International and Another**, (Supra) refused to accept submissions to the effect that by adding the second applicant as a party, he prejudged the issue of fraud as far as the second applicant was concerned. The applicant's earlier submissions were that the lifting of the corporate veil is normally on grounds of fraud.

It is not clear whether fraud was pleaded in the application before the High Court in the instant Case but we are of the view that this is not an issue relevant here. From the perusal of the lower court's Ruling of Justice Flavia Ssenoga, the application before her was brought under Order 1 Rule 7, Order 52 Rule 1&3 of the Civil Procedure Rules & Section 98 of the Civil Procedure Act. The grounds were that the amendment of the plaintiff was necessary to enable the applicant

Page 12 of 15

recover money due to it. That it was in the interest of justice and to avoid a multiplicity of proceedings.

The affidavit of the respondent, (applicant then), Lina Osborn, deponed that after filing and upon conducting a search in the Registry of Lands, the applicant/plaintiff in CS No.481 of 2OL2 was informed that the land on which the building for which the plaintiff had been consulted/contracted belongs to Dr. Kaijuka Mutabaazi Emmanuel (the certificate of title was attached and marked "A'). That on further perusal of all the documents related to the consuttancy contract, the applicantsTplaintiffs' lawyers found out that all the documents had been signed by the znd applicant, Dr. Kaijuka Mutabaazi Emmanuel. That the applicant/plaintiff, through its tawyer, further carried out a search on the defendant company and found that there had never been a resolution for the said consultancy contract filed in the Register. A copy of such report was attached and marked.. B,,.

Further that the plaintiff/applicant believed that Dr. Kaijuka Mutabaazi Emmanuel was the main beneficiary of the said consultancy contract between the plaintiff and the l'tdefendant. She deponed further that she believes that the plaintiff/applicant would best recover its money if Dr. Kaijuka is made a party under Order 1 Rule 7 of Civil procedure Rules. That the amendment was necessary in order to enable court effectually and completely adjudicate upon and setfle all the q involved in the Suit.

The second applicant, it was very clear to us from the respondents affidavit, was joined as a Director. There would be no prejudice to him Ir !

Page 13 of 15

if he acted as was stated there in. The provisions under which the application to join him was brought stipulate in Order 1 Rule 7, "where the plaintiff is in doubt as to the persons from whom he or she is entitled to obtain redress, he or she may join two or more defendants in order that the question as to which of the defendants is liable and to what extent may be determined as between all parties"

Besides, Order 1 Rule 10(2) of the Civil Procedure Rules gives court discretion at any stage of proceedings either on application of either party... to join any person ... whose presence before court may be necessary to enable court adjudicate and settle all questions involved in the suit.

It was submitted that suit No.481 of 2012 is at the stage of scheduling conference and the longer this application remained unresolved, the longer the case would take to be disposed of. It was held in the case of Commodity Export International and Another (Supra) that "this court's power to stay proceedings is discretionary and would be exercised by this court in exceptional circumstances. As stated by this Court in DFCU Limited V. Bagmonhamad Limited Civil Application No. 65 of 2005: "we should be mindful of the backlog in the High Court."

We agree with that holding, we don't consider the stay absolutely necessary. The evidence shows that, the Judge properly exercised her discretion for purposes of Order 1 Rule 7 of the Civil Procedure Rules. In addition the Court under Order 1 Rule 10(2) of the Civil Procedure

Page 14 of 15

J Rules is empowered to join or not to join any person. We are of the view that it's not just and convenient to make such an order at this stage. There is no evidence adduced by the 2nd applicant to show that he will suffer undue prejudice. Staying the proceedings now will only prejudice the respondent who has a ctaim against the applicants. It cannot be in the interest of justice that the order is granted.

The issue is therefore, resotved in the negative and we are unable to exercise our discretion to grant the stay prayed for. The Application is without merit and is dismissed with costs.

| Dated at Kampa day of la 20t4 | | |---------------------------------------------|--| | | | | t I SBK Hon. Mr. Justi uma, DCJ | | | I | | | ASNshimye,JA Hon. Mr. Jus | | | | |

Hon. Lady Justice Faith E K Mwondha, J A