Nanzaala v Virunga Finances Limited (Miscellaneous Application 2558 of 2023) [2024] UGCommC 205 (30 July 2024)

#### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION)

# **MISCELLANEOUS APPLICATION NO. 2558 OF 2023** (ARISING FROM CIVIL SUIT NO. 0922 OF 2023)

JULIET NANZAALA ::::::::::::::::::::::::::::::::::

#### **VERSUS**

VIRUNGA FINANCES LIMITED ::::::::::::::::::::::::::::::::::::

#### (Before: Hon. Justice Patricia Mutesi)

#### **RULING**

### **Background**

The Applicant brought this application by notice of motion under Section 33 of the Judicature Act Cap 13, Section 98 of the Civil Procedure Act Cap 71 and Order 36 Rule 3 and Order 52 Rules 1 and 3 of the Civil Procedure Rules S. I. 71-1 seeking for orders that:

- 1. The Applicant be granted unconditional leave to appear and defend Civil Suit No. 0922 of 2023. - 2. Costs of this application be provided for.

Briefly, the grounds of this application are that:

- 1. The Applicant has never had any dealing with the Respondent relating to a loan sum of UGX 15,000,000. - 2. The Respondent has never advanced money to a sum of UGX 15,000,000 to the Applicant. - 3. The Applicant is not indebted to the Respondent in any way as she has never attained a loan to a sum of UGX 15,000,000 from the Respondent. - 4. The Applicant has a plausible defence against Civil Suit No. 0922 of 2023 (hereinafter "the main suit"). - 5. This application has been brought without delay.

The application is supported by an affidavit sworn by the Applicant. She stated that she never had any dealing with the Respondent relating to a loan sum of

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UGX 15,000,000 on the stated date of 30<sup>th</sup> April 2015 and that the Respondent has never disbursed the said sum to her. That the Respondent issued to her a notice of intention to sue to which she respondent denying knowledge of the claim. Due to the continued harassment and threats from the Respondent, she lodged a complaint with the local council chairperson of her area of residence who referred her to the Resident District Commissioner. The latter held a meeting with all stakeholders, including James Mukembo (the 2<sup>nd</sup> Defendant in the main suit). In that meeting, James Mukembo admitted that he is the one who obtained the loan from the Respondent. The Applicant added that she believes the claim in the main suit is time barred.

The Respondent opposed the application through an affidavit in reply sworn by its director, Akifeza Grace Ngabirano. She told the Court that the Applicant applied for a loan of UGX 15,000,000 from the Respondent. Her application was allowed and the loan was disbursed. The loan was repayable in a period of 4 months. James Mukembo was the guarantor of the loan and the security was the land comprised in Kyadondo Block 185 Plot 5930 situate at Namugongo. She finally stated that the Respondent has a good cause as to why it delayed to file the main suit which is that the Applicant and the Respondent were in prolonged negotiations that prevented any earlier institution of the suit.

Akifeza Grace Ngabirano filed a supplementary affidavit in reply on behalf of the Respondent still opposing the application. She revealed that the Applicant made 2 partial payments towards the loan on 20<sup>th</sup> July 2019 and 11<sup>th</sup> April 2022 totalling to UGX 1,500,000. She also said that from 11<sup>th</sup> April 2022 onwards, the Respondent kept calling the Applicant for further payment but all in vain.

## **Issue arising**

Whether the Applicant has a bonafide defence which raises a triable issue in the Civil Suit No. 0922 of 2024.

## **Representation and hearing**

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At the hearing of the application, Mr. Joshua Ahabwe of M/S Ahabwe Associated Advocates represented the Applicant. Neither the Respondent nor its advocates appeared. Counsel filed written submissions to argue the application. I have fully

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considered their submissions, the laws and authorities they cited and all other materials on record in deciding this application.

### Determination of the issue

# Whether the Applicant has a bonafide defence which raises a triable issue in the Civil Suit No. 0922 of 2024.

It is trite law that summary procedure should only be resorted to in clear and straightforward cases, where the demand is liquidated and where there are no points for the court to try. For that reason, a defendant in a summary suit has no automatic right to defend the suit. Once served with the summary suit, he or she can only defend the suit after obtaining leave from the court in which the suit was filed. (See Order 36 rules 3 and 4 of the Civil Procedure Rules S. I. 71-1.)

Over time, courts have developed a number of principles which they consider before granting a defendant in a summary suit leave to defend himself or herself against the claims raised by the plaintiff. These principles were well-summarised in Maluku Interglobal Trade Agency v Bank of Uganda [1985] HCB 65 where it was held that:

"... Before leave to appear and defend is granted, the defendant must show by affidavit or otherwise that there is a bonafide triable issue of fact or law. Where there is a reasonable ground of defence to the claim, the plaintiff is not entitled to summary judgment. The defendant is not bound to show a good defence on the merits but should satisfy the court that there is an issue or question in dispute which ought to be tried and the court shall not enter upon the trial of issues disclosed at this stage ..." Emphasis mine.

In an application for leave to appear and defend a summary suit, it is incumbent on the applicant to present a plausible defence. Leave will often be denied if the Court is of the opinion that grant of leave would merely enable the applicant to prolong the litigation by raising untenable and frivolous defences. The true test to be applied in adjudging such an application is, therefore, whether or not defence intended to be raised discloses a real issue and not a sham one in the sense that, if the facts alleged by the applicant are proved, there would be a good or a plausible defence. (See Agony Swaibu v Swalesco Motor Spare and Decoration Dealers, HCCA No. 48 of 2014).

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In the instant case the Applicant has contended, inter alia, that the main suit is time-barred. This claim has the potential of disposing of both this application and the main suit. Section 3(1)(a) of the Limitation Act Cap 80 provides that an action founded on contract shall not be brought after the expiration of 6 years from the date on which the cause of action arose. The Respondent's affidavit in reply revealed that the contract for the impugned loan was entered into on 20<sup>th</sup> April 2015. The contract provided that the loan was repayable within 4 months from the date of execution, i.e. on or by 20<sup>th</sup> August 2015.

The Respondent's case in the main suit is that the Applicant has never repaid the loan or any part of it, although it alleged in its supplementary affidavit in reply that the Applicant later made two repayments totalling to UGX 1,500,000 on 20<sup>th</sup> July 2019 and 11<sup>th</sup> April 2022. This implies that the breach of contract is alleged to have started on 20<sup>th</sup> August 2015 when the entire loan sum and accrued interest became payable. The Respondent instituted the main suit in this Court on 17<sup>th</sup> August 2023. This was 6 years, 11 months and 27 days after the cause of action arose. As such, the main suit was filed out of time.

The Court will now consider whether there is any justifiable excuse for the late filing. Sections 22, 23, 24 and 25 of the Limitation Act anticipate that limitation periods for civil actions may be postponed due to the occurrence or existence of some factors / events like, acknowledgment or part payment, fraud, mistake and disability. The Respondent has explained in its affidavit that the late filing of the main suit was caused by prolonged negotiations between the parties which were aimed at reaching an amicable settlement.

The Supreme Court has given guidance on the treatment of negotiations as a ground for postponement of limitation periods in the Limitation Act. In Peter Mangeni v Departed Asians Property Custodian Board, SCCA No. 13 of 1995, Kanyeihamba, J. S. C. (as he then was) affirmed that:

"... an offer to negotiate terms of settlement between parties to an action, admirable as it may be, has no effect whatsoever on when to serve statutory notice or file a suit in time. It is my opinion that even where genuine and active negotiations are going on or contemplated between the parties, it is still incumbent upon those who need to file documents to do so within the time allowed. Thereafter, they are at liberty to seek adjournments for purposes of negotiation ..."

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The Supreme Court cited and relied on the Peter Mangeni case (supra) with approval in Nyeko Smith & 2 Ors v Attorney General, SCCA No. 1 of 2016.

I am alive to a related decision in Charles Lubowa v Makerere University, SCCA No. 2 of 2011 in which the Supreme Court found that negotiations between an employer and its employees were a good justification for postponing a limitation period. However, Charles Lubowa (supra) ought to be read within its specific factual context. In that case, an employer had initiated the negotiations with its employees and expressly written to them asking them to hold off bringing court action so that their scales of employment are first determined. The employees waited for this clarification before bringing their action but, by that time, their limitation period had lapsed. In dealing with a claim that their suit was barred by time, the Supreme Court found that this was not a case of negotiations but a case of the parties establishing the facts necessary to sue.

Indeed, the position in **Charles Lubowa** (supra) presents an exception to the known position on negotiations in the law governing limitation of actions. As a general rule, the fact that negotiations have taken place between a claimant and defendant does not stop the defendant from pleading limitation, even though the negotiations led to delay in filing the suit. However, that the defendant will be estopped from setting up a limitation claim if, during the negotiations, he had agreed with the plaintiff not to sue at the time.

It follows that, for negotiations to justify late filing of a suit, there should be proof that those negotiations involved an express request and, or, agreement between the parties to delay of the institution of the suit. In such cases, it would simply be inequitable for a party who induced another to delay filing so that they can talk to each other about settling the suit to take the benefit of the delayed institution of the suit by raising a claim for limitation when the suit is finally filed.

However without proof of such consensus, the Court is bound to find that negotiations do not constitute proper justification for late filing. In this case, the Respondent did not show when the alleged negotiations started, how they progressed and how they ended. Worse still, the Respondent has not presented any proof that it had any express consensus with the Applicant to delay the filing.

Furthermore, the alleged partial payments of the loan debt by the Applicant in 2019 and 2022 appear to be an afterthought. These payments were not pleaded in the main suit. The cause of action in the plaint, as it stands, is based on the 2015 agreement only and no mention is made of any later partial payments yet the Respondent now claims that they were made before the main suit was filed. The alleged payments cannot also constitute an acknowledgment of liability by the Applicant since Section 23 of the Limitation Act requires an acknowledgment of a cause of action to be express and in writing.

In these circumstances, I am convinced that there is no lawful justification for the late filing of the main suit. The filing of the main suit outside the prescribed time renders it incompetent because all civil actions ought to be filed within their prescribed time. Public interest and the needs of judicial economy have always favoured the institution of civil claims within a reasonable time. It is for that reason that, except for cases in which the specified exceptions apply, statutes of limitation are strict and inflexible.

I therefore find that this application has, in principle, raised a good defence to the main suit which is that the main suit is barred by time. However, since I have already confirmed that defence to be true and correct, any further consideration of the main suit would be moot and inconsequential. Granting the Applicant leave to appear and defend an incompetent suit would be an exercise in futility.

Consequently, I make the following orders:

- Civil Suit No. 0922 of 2023 is hereby struck off the Court record for $\mathbf{i}$ being filed outside the prescribed time. - This application is overtaken by events. ii. - Costs of this application, and those of Civil Suit No. 0922 of 2023 if any, iii. are awarded to the Applicant/Defendant.

modeules

Patricia Mutesi

JUDGE

$(30/07/2024)$