National Housing and Construction Company v Swatt Security Limited and Attorney General (Miscellaneous Application 2736 of 2024) [2025] UGCommC 149 (25 March 2025)

Full Case Text

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) MISC. APPLICATION NO. 2736 OF 2024 (ARISING FROM CIVIL SUIT NO. 1392 OF 2024) NATIONAL HOUSING AND CONSTRUCTION COMPANY :::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

### **VERSUS**

#### 15 **1. SWATT SECURITY LIMITED**

**2. ATTORNEY GENERAL :::::::::::::::::::::::::::::::::::::::::: RESPONDENTS**

#### **BEFORE: HON. LADY JUSTICE PATIENCE T. E. RUBAGUMYA**

#### **RULING**

Introduction

This application was brought by way of Notice of Motion under **Section 98 of the Civil Procedure Act, Cap. 71 (now Cap. 282), Order 9 rule 10,**

25 **Order 36 rules 3(1) and 4 and Order 52 rules 1 and 3 of the Civil Procedure Rules, SI 71-1** seeking orders that:

- 1. The Applicant be granted unconditional leave to appear and defend *Civil Suit No. 1392 of 2024*. - 30 - 2. The costs of the application be provided for. - 35 Background

The background of this application is contained in the affidavit in support deponed by **Mr. Emma Wangota**, the Applicant's Company Secretary, and is summarized below:

| 5 | 1. That the 1st Respondent was duly paid what is due to it under | |----|-----------------------------------------------------------------------------------------------| | | the contract and no monies are owing whatsoever. | | | 2. That there are various triable issues that warrant the Court's | | 10 | adjudication such as; | | | a) Whether this suit in its present state and format is competent before this Court? | | 15 | b) Whether or not there was a breach of contract on the part of the Applicant? | | | c) Whether or not there is any payment due to the 1st | | 20 | Respondent? | | | 3. That the Applicant has a plausible defence worth adjudication | | | on merit. | | 25 | 4. That it is in the interest of justice that the Applicant is granted | | | leave to appear and defend Civil Suit No. 1392 of 2024. | | | In reply, the 1st Respondent, through Mr. Mugenyi Patrick, its Managing |

- 30 Director, opposed the application and contended that: - 1. Apart from the denial, the Applicant has not shown evidence of how he paid off the outstanding principal sum. - 2. Paragraph 4(b) of the affidavit in support, which alludes to whether 35 there was a breach of contract on the Applicant's side, contradicts paragraph 3, wherein it states that it paid all its dues. That this makes the Applicant not truthful because there cannot be a breach if it has paid all its dues. - 40 3. The Applicant's assertions in its affidavit in support are aimed at buying time and not paying the sums due.

- 5 The Applicant made a rejoinder to the above contending that: - 1. The principle of breach of contract arose from thefts that occurred during the contract's tenure at the different sites under the watch and orchestration of the Respondent. That the Respondent was obligated to indemnify the Applicant against loss suffered out of the 10 thefts. - 2. Despite this glaring breach of contract, the Respondent continued to make baseless demands for unpaid contract sums. According to the Applicant's reconciliation, the issued invoices for outstanding 15 payments for services rendered stood at UGX 101,358,561/=, while the value of lost items was UGX 69,444,345/= and that therefore, the amount due was UGX 31,914,216/=, which the Applicant has since duly cleared, leaving no outstanding balance. - 20 3. It was the understanding of both parties that where a theft occurs and an invoice is due for payment, the Applicant could always offset the amount to cover the agreed indemnity and remit the balance, which happened in the instant case. - 25 The 2nd Respondent did not file an affidavit in reply, and neither was it represented in this application.

#### Representation

The Applicant was represented by **Learned Counsel Ruth Kisakye** of its 30 Legal Department, while **Learned Counsel Solomon Orone** of **M/s Orone & Co. Advocates** represented the 1st Respondent.

The parties were directed to file written submissions, which they did, and the Court has considered the same.

#### 5 Issues for Determination

- 1. Whether the Applicant has raised sufficient grounds to warrant the grant of unconditional leave to appear and defend *Civil Suit No. 1392 of 2024?* - 10 2. What remedies are available to the parties?

## Issue No.1: Whether the Applicant has raised sufficient grounds to warrant the grant of unconditional leave to appear and defend *Civil Suit No. 1392 of 2024?*

#### Applicant's submissions

Learned Counsel for the Applicant submitted that it is settled law that in an application for leave to appear and defend, the Applicant must prove that there is a bona fide triable issue of fact or law that he will advance in 20 defence of the suit. Learned Counsel relied on the cases of *Churanjila & Co. Vs A. H. Adam (1) [1950]17 EACA 92*, *Maluku Interglobal Trade Agency Ltd Vs Bank of Uganda [1985] HCB 65* and *Maria Odido Vs Barclays Bank of Uganda HC. Misc. Application No. 645 of 2008*.

Relating the principles in the above cases to the instant application, 25 Learned Counsel contended that the Applicant entered into a valid contract with the 1st Respondent, whose terms were clearly understood by both parties and that in case of any loss, the 1st Respondent was obligated to indemnify it. However, that the 1st Respondent has refused to indemnify the losses suffered during the term and, further that the thefts occurred 30 under their watch and the orchestration of the 1st Respondent's staff.

Learned Counsel further contended that the Applicant's defence of why the suit amounts were never paid to the extent they are sought, was because it was the understanding of both parties that where a theft occurs

5 and an invoice is due for payment, the 1st Respondent could always offset the amount to cover the agreed indemnity and remit the balance which happened in the instant case. To that, Learned Counsel quoted the case of *Sahib Enterprises Ltd Vs Olan Uganda Limited Civil Suit No. 180 of 2009* to illustrate principles regarding set-offs and added that in its 10 proposed Written Statement of Defence, the Applicant pleaded set-off. That it has a Counterclaim against the 1st Respondent for UGX 69,444,345/=, and that as per the case of *Bhaker Kotecha Vs Adam Mohammed [2002] 1 EA 112,* where there is a real dispute as to the amount claimed, which requires taking an audit to determine, unconditional leave to appear and 15 defend the summary suit has to be granted. Learned Counsel further contended that as per the case of *Photo Focus (U) Ltd Vs Group Four Security Ltd CA No. 30 of 2000*, denial of indebtedness per se is a defence.

In conclusion, Learned Counsel submitted that the Applicant has not only 20 proved but has also shown that there are triable issues of fact and law and a plausible defence and, therefore, a valid ground for the grant of unconditional leave to appear and defend the suit.

#### 1st Respondent's submissions

Learned Counsel for the 1st Respondent relied on **Order 36 rule 8 of the**

25 **Civil Procedure Rules**, and the case of *Zola and Another Vs Ralli Brothers Ltd and Another [1969] 1 EA 691* to explain the circumstances under which such an application may be granted and its relevance.

Learned Counsel added that where the Court is in doubt as to the merits of the intended defence but is in the interest of justice inclined to grant 30 the application, it may do so with conditions like ordering the Applicant to

deposit some form of security covering the decretal sum.

- 5 Referring to paragraph 3 of the Applicant's affidavit in support, wherein the Applicant claims to have paid what is due under the contract, Learned Counsel for the 1st Respondent contended that since the above is not accompanied by proof of payment, it amounts to hearsay, which the deponent assumes to have happened. - 10 In what seems to be an alternative to the submissions above regarding paragraph 3 of the affidavit in support, Learned Counsel for the 1st Respondent prayed that the Applicant be allowed to defend itself on condition that it deposits UGX 146,525,779.10/=, in Court within one month and that in the event of failure to deposit the stipulated sum, a 15 default judgment should be entered against the Applicant.

Learned Counsel also prayed that the Applicant be allowed to file its defence within 15 days upon compliance.

#### Analysis and Determination

20 Issue No. 1: Whether the Applicant has raised sufficient grounds to warrant the grant of unconditional leave to appear and defend *Civil Suit No. 1392 of 2024?*

I have considered the application, the affidavit in reply, the affidavit in rejoinder, the submissions and the authorities therein.

**Order 36 rule 3(1) of the Civil Procedure Rules**, stipulates that a Defendant served with summons, issued upon the filing of an endorsed plaint and affidavit under **rule 2** of this Order endorsed "Summary procedure", shall not appear and defend the suit except upon applying for, 30 and obtaining leave from Court.

5 Thus, for leave to appear and defend a summary suit to be granted, an Applicant must show by affidavit or otherwise that there is a bona fide triable issue of fact or law.

A triable issue is one capable of being resolved through a legal trial, that 10 is, a matter that is subject or liable to judicial examination in Court. It has also been defined as an issue that only arises when a material proposition of law or fact is affirmed by one party and denied by the other. (See: *Jamil Senyonjo Vs Jonathan Bunjo, H. C. Civil Suit No. 180 of 2012*).

- 15 A defence raised by the Applicant should not be averred in a manner that appears to be needlessly bald, vague or sketchy. If the defence is based upon facts, in the sense that material facts alleged by the Plaintiff in the plaint are disputed or new facts are alleged constituting a defence, the Court does not attempt to decide these issues or to determine whether or - 20 not there is a balance of probabilities in favour of the one party or the other. In essence, where an Applicant raises a good defence, the Plaintiff is barred from obtaining a summary judgment.

In the case of *Bhaker Kotecha Vs Adam Mohammed (supra)* it was held 25 that where a suit is brought under summary procedure on a specially endorsed plaint, the Defendant is granted leave to appear if he/she can show that he/she has a good defence on merit, or that a difficult point of law is involved; or, a dispute as to the facts which ought to be tried; or, a real dispute as to the amount claimed which requires taking an account 30 to determine; or, any other circumstances showing reasonable grounds of a bona fide defence.

Furthermore, in the case of *Geoffrey Gatete & Another Vs William* 35 *Kyobe SCCA No. 7 of 2005*, the Court noted that in such a case:

5 "*The Defendant is not bound to show a good defence on the merits but should satisfy the Court that there was 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.*"

In the instant case, as per the affidavits of both parties and annexure "**A**" 10 attached to the plaint in *Civil Suit No. 1392 of 2024*, it is undisputed that on 13th November, 2020, the Applicant contracted the 1st Respondent to provide it with security services.

It is contended in the plaint that the above contract was renewed on 1st July, 2021, to 31st June, 2022, to which the 1st Respondent provided the 15 services until the contract ended on 31st December, 2023, with an outstanding balance of UGX 146,525,779.10/= which the 1st Respondent has demanded on several occasions but in vain hence the institution of *Civil Suit No. 1392 of 2024*.

In the instant application, as portrayed under paragraph 5 of the affidavit 20 in support and paragraphs 5, 6 and 7 of the affidavit in rejoinder, the Applicant denies the debt and contends to have a plausible defence in the suit. It contends that, under the contract, the 1st Respondent was obligated to indemnify it against any loss resulting from any theft. The Applicant further contends that several thefts occurred during the tenure 25 of the contract and were never indemnified. That, as per its reconciliation, the invoices for the outstanding payments for the services rendered were UGX 101,358,561/= and the lost items were worth UGX 69,444,345/= therefore, the amount due was UGX 31,914,216/=, which it cleared.

Though the 1st Respondent's Learned Counsel prayed that this Court 30 disregards paragraph 3 of the Applicant's affidavit in support for being hearsay for lack proof of payment, the Applicant under paragraph 6 of its

- 5 affidavit in rejoinder explains how much was owing to the 1st Respondent, the amount paid and the reason for non-payment of the balance as portrayed above. Since the 1st Respondent has not disputed the above assertions in its submissions, this in my view raises a trial issue of fact warranting further investigation by Court in a full trial so as to effectively - 10 determine the issue. Further the Applicant raised an issue of set-offs which would also require determination by Court in the circumstances.

As espoused in the authorities discussed above and as laid out in the case of *Twentsche Overseas Trading Co. Ltd Vs Bombay Garage [1958] EA*

15 *741*, summary procedure is resorted to in clear and straightforward cases, where the demand is liquidated and there are no issues for determination by the Court except for the grant of the claim.

However, in the instant case, the amount claimed is in dispute and the 20 evidence adduced is not straightforward and therefore this raises a triable issue of fact, hence placing the plaint outside the ambit of **Order 36 of the Civil Procedure Rules**.

Regarding the 1st Respondent's prayer that the Applicant should be 25 granted conditional leave by depositing in Court the sum of UGX 146,525,779.10/=, I find no justification for such deposit, neither has the 1st Respondent presented any. I accordingly decline to grant the same.

Issue No.2: What remedies are available to the parties?

According to the case of *Churanjila & Co. Vs A. H Adam (supra)*, the East African Court of Appeal held that a Defendant who has a stateable and arguable defence must be allowed to state it and argue it before the Court.

35 That all the Defendant has to show is that there is a definite triable issue of fact or law.

- 5 In the premises, I find the application to have raised triable issues of fact and law that merit the grant of this application. Accordingly, this application is granted with the following orders: - 1. The Applicant is hereby granted unconditional leave to appear and 10 defend *Civil Suit No. 1392 of 2024.* - 2. The Applicant shall file and serve its Written Statement of Defence within fourteen (14) days from the date of this Ruling. - 15 3. The 1st Respondent shall file its reply to the Written Statement of Defence within fourteen (14) days from the date of service of the Written Statement of Defence. - 20 4. Costs of this application shall be in the cause.

I so order.

Dated, signed and delivered electronically via ECCMIS this **25th** day of **March, 2025**.

Patience T. E. Rubagumya

**JUDGE** 25/03/2025 6:45am