National Enterprises Corporation v Mukisa Foods Limited (Miscellaneous Civil Application No. 07/98) [1998] UGCA 67 (29 April 1998)

Full Case Text

THE REPUBLIC OF UGANDA

### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# MISCELLANEOUS CIVIL APPLICATION NO.07/98

# (CORAM;C. M. KATO, J. A.; A. E. MPAGI BAHIGEINE,J. A.; J P. BERKO, JA.)-

NATIONAL ENTERPRISES CORPORATION APPLICANT

#### VERSUS

MUKISA FOODS LIMITED RESPONDENT

#### RULING OF THE COURT

This is a second application for stay of execution of the decree in HCCS No. 746 of 1992 pending disposal of Civil Appeal No. 42 of 1997 already filed in this court.

The first application which was before the High Court was granted conditionally upon the Applicant depositing security into court within a specified period.

The Applicant has found it impossible or inexpedient to fulfil that condition. Hence the application to this court.

It is brought by way of Notice of Motion under Rules 5(2) (b) and 42 of the Rules of this court.

The grounds as set down in the application are that:-

(i) The decree was passed in the High Court on 29th May 1996 and an application to set it aside was made and rejected.

The application for stay of execution was allowed with a condition to pay into court the decretal sum and the costs.

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- (ii) The Applicant has sum failed to raise the decretal sum and costs to deposit into court because the amount involved is colossal and the Respondent is about to execute the decree. - iii) record of appeal vide The Applicant has already filed a Civil Appeal No.42/97 and a deposit for security for costs paid. - (iv) nugatory. If the execution is not stayed the appeal will be made - (v) There has been no delay in bringing the application.

The application is supported by an affidavit deponed to by Mr. Vincent Kamigisha, Legal officer of the Applicant Corporation. According to this affidavit and for purposes of this application an ex-parte decree in HCCS No.974/92 was entered against the Applicant on 29/5/96 for a sum of Shs. 360*,*000*,*000=. The application to set it aside was dismissed with costs on 15/10/97. On 14/11/97 the application for stay of execution pending appeal was granted by the High Court on. condition that the Applicant deposits the decretal amount of Shs.360,000,000= and costs amounting to Shs.9,868,950= in Court as security for its due performance by 15/12/97 which deadline the Applicant failed to meet as it could not obtain money from the Treasury being a Government Corporation. It is averred that the only option was for the Applicant to sell off the suit machinery to get the money to deposit into court but this would render the appeal nugatory since the basis of the appeal is to retain the machinery.

The learned Judge rejected the Applicant's offer to avail the machinery as. security for due performance of the decree.

,t is contended for the Applicant that there is merit in the appeal in that the Judge held that the Applicant/Defendant had not entered appearance in the suit when the fact was apparent on record. Further that the learned Judge erred in proceeding on an amended plaint which was never served on the Applicant who had entered appearance. It was contended that the Applicant was prevented by sufficient cause from attending the hearing and had a good cause. That the Applicant is likely to suffer irreparable loss by the sale of the suit property which is situated in the Industrial Area, a prime and strategic location. That the appeal ^/has a high probability of success.

It of It An affidavit in reply was deponed to by Mr. Mubiru Kalenge. is dated 23/02/98. According to him the order of stay execution was adjudicated upon on its merits and finalised, is therefore res judicata.

At the hearing, Mr. Bwanika opposing the application contended that both parties consented to the order by the High Court on The Applicant was to deposit the decretal amount into Having failed to meet the condition the Applicant did not He argued that the Applicant never to accept 4(3) of the a necessary unlikely to 14/11/97. court. appeal against the order, delivered the machine and the Respondent failed delivery. He urged the court not to ignore O. 39, r. C. P. Rs. which makes furnishing of security precondition. He maintained that the appeal was succeed and invited the court to reject it. Alternatively should stay be granted, he prayed the court to order security to be given.

Mr. Muhwezi countered that the Applicant only consented to the stay of execution but not to the deposit of security. He reiterated that they had proposed to surrender the machinery as security which suggestion was rejected by the Judge.

Starting with the issue of consent, agreed to the deposit of security, as to whether the Applicant the learned Judge's order

reads inter alia:

" ORDER

It is HEREBY ORDERED that ..

- (a) By consent of the Respondent's Counsel, stay of execution is granted pending the appeal to the Court of Appeal. - (b) The Applicant deposits in court by 15th December 1997 the decretal sum and costs as security for the performance of the decree in the main suit. - (c) Costs of this application abide the results of the appeal.

## Sqd Judge. 11

it is not It In considering whether an order is entered by consent, essential that such an order be in any particular form, should however clearly indicate the fact of agreement and the terms agreed upon and the court's order should follow the stipulation or agreement.

As a general rule an order to the rendition of which the parties have agreed should show on its face that it was entered by consent, though such a showing is not indispensable and the fact may be established by other evidence.

res"judicata in a on which it is based is validly entered into. An order by consent is a contract. In absence of fraud it can operate as res"judicataina second action at least where the compromise

Be that as it may the learned Judge's order as it stands does not or cannot support Mr. Bwanika's argument that the entire order was consented to. We therefore had to call for the record of the proceedings leading to the order in order to satisfy ourselves. It is dated 12/11/97.

According to this record when the application came up for hearing Mr. Mubiru Kalenge told the court that he did not oppose it in

substance and stated that he would only pray that the Applicant complies with the provisions of 0.39, $r.4(3)$ of the CPRs to provide security into court for due performance of the decree together with costs. He cited Lawrence M. Kyazze vs Eunice Businqye - S. C. Civil Appeal No.18/90 and Misc. Application No.446/95 - Kisuqu Quarries Ltd. vs Attorney General, where the Applicants were ordered to pay security for due performance of the decrees.

#### Hur

Mr. Muhwezi rejected this argument on ground that the application is not under 0.39 which refers to appeals to the High Court; the application concerns an appeal from the High Court. Such appeals are governed by the Rules of this Court, especially, Rule 5(2)(b) under which security is not required. All that is necessary is a Notice of Appeal to the Court of Appeal.

Mr. Muhwezi submitted before the learned Judge that security is not laid down under the Court of Appeal Rules except where the Respondent proves that the Applicant will fail to perform the terms of the decree in the event of the appeal failing and only then the court could order a stay of execution on such terms as it may think just.

1. t is therefore clear from the foregoing that Mr. Muhwezi never consented to the order of depositing security as claimed by Mr. Bwanika. He only consented to the order to stay execution. The order regarding security was the Judge's order as a result of submissions by Mr. Mubiru Kalenge. The question of res judicata would therefore not arise.

We now turn to the merits of the application. Mr. Bwanika submitted in the alternative that the court should order the Applicant to deposit security as it is a precondition for stay of execution under 0.39 $r.4(3)$ . We find it rather strange that Mr. Bwanika could opt to proceed under 0.39 of the CPR when it is clear that this order refers to appeals to the High Court and not from it. This is manifest from its title which reads:

# 'Order XXXIX

Appeals to the High Court"

*vs* This procedure insisted on by Mr. Bwanika is specially surprising in view of the fact that the Court of Appeal Rules are in existence. This position was made clear in Lawrence M. Kyazze Eunice Busingye (supra) where the Supreme Court observed:

*a* "There is no provision in any of this legislation for stay of execution, and when one looks at Order XXXIX one finds with some surprise that these rules only govern appeals to the High Court and not from the High Court. This is made more poignant because there are the usual rules concerning a stay of execution relating to appeals to the High Court.... "

There is therefore no ambiguity. The application before this court can only be entertained under Rule 5(2) (b) of the Rules of this court and not under 0.3 9 of the Civil Procedure Rules.

The authorities cited are important as to the respective jurisdiction of the High Court and this court regarding filing and disposal of the applications for stay of execution but are not particularly so for depositing of security.

same be The powers of the Court of Appeal under Rule 5(2)(b) are wider than those of- the High Court under 0.39 of the Civil Procedure Rules though in practice the Court of Appeal may set the terms as the High Court is enjoined to set and has to whereas it may think just. may and satisfied that they are met before granting the order, the Court of Appeal may set such terms as

The other should have issue taken tby Mr. Bwanika was that the Applicant appealed^theHigh Court order instead of filing another application. This point was dealt with by this court in Francis Sembuya vs Allports Freight Service Ltd. Civil Application No.11 of 1997 whose facts were all on fours with the

This on Eunice instant application. Thiscourt relied on Kyazze vs Busingye (supra) where the Supreme Court reiterated the principles laid down by Cotton, J. in Cropper vs Smith (1883) 24 Ch. D. 305 and had gone further to state:

"In cases where the High Court has doubted its jurisdiction or has made some error of law or fact, apparent on the face of the record which is palpably wrong, or has been unable to deal with the application in good time to the prejudice of the parties or the said property, the application may be made to this court.

It may however be that this cc-urt\* will direct that the High Court should hear che application first or that an appeal ' be taken against the decree of the High Court, bearing in mind the interests of the parties and the costs involved. The aim is to have the application for stay speedily heard and delays avoided."

In our view significance must be attached to the words "application. .. speedily heard, and delays avoided", delay being a permanent feature of appeals. We are satisfied that the Applicant acted reasonably in coming to this court to seek relief t>y way of the same application instead of filing an appeal. An appeal would have entailed unnecessary delay.

come to consider whether we should grant the We finally application.

The court has power in its discretion to grant stay of execution where it appears to be equitable so to do with a view to temporarily preserving the status quo.

As a general rule the only ground for stay of execution is for the Applicant to show that once the decretal property is disposed of there is no likelihood of getting it back should the appeal succeed. Mr. Muhwezi cited Wilson v Church (No.2) 1878 w.81 Ch. D. 454 where the proper rule of conduct for the exercise of this discretion was stated to be that where the right of appeal exists, tiie court as a general rule ought to exercise its best

discretion in a way so as not to prevent the appeal, if successful from being rendered nugatory. It was held that this rule must be acted upon unless it is an exceptional case.

I For the sake of clarity we shall briefly repeat the history of the matter. An ex-parte judgment was entered against the Applicant who claims that its lawyer entered appearance but failed to attend the hearing. An amended plaint subsequently filed was never served on the Applicant before ex-parte judgment was entered. It is quite true from the record of the High Court that the Applicant foresaw the impracticability of obtaining the colossal decretal sum of Shs.366 million together with the costs of Shs. 9 million within the deadline set. The Applicant /{hereupon sought the indulgence of the court to deposit the machinery which is the subject matter of the suit, which suggestion was rejected by the learned Judge. We have failed to grasp the rationale behind the Judge's'refusal to accept the suit machinery as security. The Respondent's insistence on cash in preference of, the machinery seems rather oppressive bearing in mind that the Respondent had sued for the return of the machinery or its value. We do not believe this is an exceptional case where we cannot exercise our discretion in the Applicant's favour. At this stage we do not have to consider whether the appeal stands a chance of success. The Applicant is exercising his undoubted right of appeal. But we have to take into account the substantial loss that might result to the applicant notwithstanding that the decree may perhaps ultimately be set aside. This is precisely one of the situations for which, in principle, the granting of stay of execution may be granted, subject, if necessary, to the applicant effecting a reasonable measure of security for the judgment creditor against any loss which, in the event of appeal not proceeding or not succeeding he may suffer by reason of stay. By depositing this suit property into court there is no doubt it would be well preserved and the fear of non performance of the decree by the Applicant in case of the appeal not succeeding will be alleviated. No party will therefore be prejudiced. We therefore do consider the

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Applicant is quite entitled to the usual protection in case the appeal is successful.

The application is therefore granted as prayed. The respondent is hereby restrained from selling, alienating or otherwise disposing of the suit machinery till final disposal of the appeal.

soonest The Registrar is directed to list the appeal for hearing so as to minimise business operational costs.

proper case where each party should We are of the view this is a bear its own costs.

We so order.

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Dated at Kampala this . '. day of 7 1998.

C. M. Kato JUSTICE, QE- APPEAL /A. E. M^agi ^JUSTICE, ahigeine J. A. Z \ <7

J. P. JUSTICEepjcos ? APPEAL