Nile Bank Ltd and Anor v Thomas Kato and Ors - (High Court Miscellaneous Application No. 1190 of 1999) [2000] UGCommC 5 (29 August 2000)

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S.} {\nofcharsws27088}{\vern24689}}{\*\userprops {\propname Editor}\proptype30{\staticval Readiris}}\margl1440\margr1440 \widowctrl\ftnbj\aenddoc\noxlattoyen\expshrtn\noultrlspc\dntblnsbdb\nospaceforul\hyphcaps0\horzdoc\dghspace120\dgvspace120\dghorigin1701 \dgvorigin1984\dghshow0\dgvshow3\jcompress\viewkind1\viewscale100\nolnhtadjtbl\rsidroot10711061 \fet0\sectd \linex0\sectdefaultcl\sftnbj {\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4\pnlcltr\pnstart1\pnindent720\pnhang {\pntxta )}}{\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \qc \li0\ri0\sl220\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 NILE BANK LTD AND ANOTHER \par }\pard \qc \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qc \li0\ri0\sl220\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 v \par \par }\pard \qc \li0\ri0\sl240\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 THOMAS KATO AND OTHERS \par }\pard \qc \li0\ri0\sl273\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par HIGH COURT OF UGANDA AT KAMPALA \par (COMMERCIAL COURT) \par \par }\pard \qc \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 HIGH COURT MISC. APPL. NO. 1190 OF 1999 \par \par }\pard \qc \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 (Arising from Civil Suit No. 685 of 1999) \par \par }\pard \qc \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\b\insrsid10711061 (Before: Hon Lady Justice M. S. Arach -Amoko) \par \par }{\insrsid10711061 August 30, 2000 \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\b\insrsid10711061 \par }{\i\insrsid10711061 Contract \endash Sale Agreement \endash Sale of private company and assets by shareholders \endash Indemnity clause incorporated to protect buyer against claims by third parties \endash Breach of indemnity clause \par \par Civil Procedure \endash Pleadings \endash Written statement of defence \endash Application to strike out \endash Whether sufficient grounds sufficient for dismissal \endash Defence of illegality \endash Whether applicable \par }{\insrsid10711061 \par }\pard\plain \s1\qj \li0\ri0\sl230\slmult0\keepn\nowidctlpar\faauto\outlinelevel0\rin0\lin0\itap0 \b\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 Brief facts \par }\pard\plain \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 The Plaintiffs, Applicants in this matter, filed a suit against the Defendants/Respondents seeking damages for alleged breach of a contract of sale. In their plaint, the Plaintiffs stated that in 1990, the Defendants as shareholders and on behalf of the o ther shareholders sold a company, Sanyu Properties Ltd and it\rquote s assets to the Plaintiffs. It was stipulated in the contract of sale that the Defendants would indemnify the Plaintiffs against any claims of the Departed Asians Property Custodian Board or othe r claimants. In 1997, the plaintiff discovered that two of the properties had been repossessed and asked the Defendants to compensate them according to the terms of the agreement. The Defendants neglected to do causing the Plaintiffs to file a suit agains t them. The Defendants filed a statement of defence denying all the Plaintiffs allegations in the plaint, and a defence that that the agreement was illegal. \par \par By notice of motion, the Plaintiffs applied under Order 6 Rule 29 }{\i\insrsid10711061 Civil Procedure Rule}{\insrsid10711061 s to Court t o have the Defendants written statement of defence struck off on grounds that it did not disclose a reasonable answer to the Plaintiffs claim. The issue for court to decide was whether the defence filed by the Defendants was reasonable, and the legality o f the agreement. \par \par }{\b\insrsid10711061 Held}{\insrsid10711061 : \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (i)\tab}}\pard \qj \fi-360\li720\ri0\sl230\slmult0\nowidctlpar\jclisttab\tx720\faauto\ls1\rin0\lin720\itap0 {\insrsid10711061 The defence filed by the defendants contained general denials to the plaintiffs \rquote allegations, and did not give clear and specific responses to the plaintiffs\rquote allegations. It thereby offended the provisions of Order 6 rule 7 }{\i\insrsid10711061 Civil Procedure Rules}{\insrsid10711061 , which requires each party to specifically deal with each allegation of fact that is denied; \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (ii)\tab}}\pard \qj \fi-360\li720\ri0\sl230\slmult0\nowidctlpar\jclisttab\tx720\faauto\ls1\rin0\lin720\itap0 {\insrsid10711061 Basing on the provisions of Order 6 rule 5 of the }{\i\insrsid10711061 Civil Procedure Rules}{\insrsid10711061 , the defence of illegality of the sale agreement on grounds that pr ovisions of the Companies Act were flouted could not hold against the Plaintiff, since the issue of illegality was not specifically pleaded, and did not indicate which provision of the Act was breached; \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par {\listtext\pard\plain\hich\af0\dbch\af0\loch\f0 (iii)\tab}}\pard \qj \fi-360\li720\ri0\sl230\slmult0\nowidctlpar\jclisttab\tx720\faauto\ls1\rin0\lin720\itap0 {\insrsid10711061 The written statement of defence would be stru ck out for failure to disclose a reasonable defence, and judgment entered in favour of the plaintiff. \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }{\b\insrsid10711061 Cases referred to: \par }\pard \qj \fi720\li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Dever Finance Co. Ltd v Harold G. Cold}{\insrsid10711061 [1969] 1 WKL at 1877 \par }\pard \qj \fi720\li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Kahima & Anor v UTC}{\insrsid10711061 [1978] HCB 318. \par }\pard \qj \fi720\li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Libyan Arab Uganda Bank v Messrs Intrepco Limited}{\insrsid10711061 }{\ul\insrsid10711061 }{\insrsid10711061 [1985] HCB 73 \par }\pard \qj \fi720\li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 North Western Salt Co. Ltd v Electrolytic Alkali Co. Ltd}{\insrsid10711061 [I914] AC \par }\pard \qj \fi720\li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Obidegwu F.v D. B Ssamakadde}{\insrsid10711061 Civil Suit No. 59 of 1992 (Unreported) \par }\pard \qj \fi720\li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Phillips v Copping}{\insrsid10711061 [1935] 1 KB 15 \par }\pard \qj \fi720\li0\ri0\sl312\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Warner v Sampson}{\insrsid10711061 [1959] 2 WLR 109 at P.114}{\b\insrsid10711061 }{\insrsid10711061 \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }{\b\insrsid10711061 Legislation referred to: \par }\pard \qj \fi720\li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Civil Procedure Rules}{\insrsid10711061 Order 6 rules 5, 7, 29 \par }{\i\insrsid10711061 Expropriated Act }{\insrsid10711061 Sections 4, 5 \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\i\insrsid10711061 Counsel for Applicant: }{\insrsid10711061 Mr. Byenkya. \par \par }\pard\plain \s2\qc \li0\ri0\sl220\slmult0\keepn\nowidctlpar\faauto\outlinelevel1\rin0\lin0\itap0 \b\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 RULING \par }\pard\plain \qj \li0\ri0\sl220\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\b\insrsid10711061 ARACH AMOKO, J}{\insrsid10711061 : This application is by Notice of Motion under Order 6 Rule 29 of the Civil Procedure rules for orders that: \par }\pard \qj \li0\ri0\sl230\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl278\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 (a) The Respondent's defence be struck out for failing to disclose a reasonable answer to the Plaintiff s claim. \par }\pard \qj \li0\ri0\sl235\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 (b) Judgement be entered for the Plaintiffs in the terms of the plaint. \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par The main grounds for the Application are that the defence filed by the Respondents in HCCS No. 685 of 1999, discloses no reasonable answer to the Plaintiffs claim in so far as it inter alia, constitutes of general denials and does not allege any facts con stituting illegality. That it is a frivolous and vexatious defence and an abuse of the process of court. \par }\pard \qj \li0\ri0\sl192\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl331\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 It is supported by the affidavit of Godfrey Zziwa a legal officer of the 1}{\super\insrsid10711061 st}{\insrsid10711061 Plaintiff/Applicant bank dated September 23, 1999. Patrick Iyamulemye Kato the 1}{\super\insrsid10711061 st}{\insrsid10711061 Respondent swore an affidavit in reply on May 24, 2000 on behalf of both Respondents. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 The brief background to this application is that the Plaintiffs sued the Defendants under HCCS No. 685 of 1999, for damages for breach of contract. In their 20 paragraph plaint filed on the July 14, 1999 the Plaintiffs set out the facts constituting the cause of action as follows:\- \par }\pard \qj \li0\ri0\sl235\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 {\insrsid10711061 \'931. On August 17, 1990 the Defendants on their own behalf and on behalf and on behalf of the other shareholders in a limited liabili ty Company known as Sanyu Properties Ltd, Hereinafter referred to as \'93the company\'94), entered into a sale if their entire interest in the Company and transferred the Company\rquote s assets to the Plaintiffs at the sum of Shs. 60,000,000/= (Uganda shillings Sixty Million). A copy of the sale agreement is attached hereto and marked Annexture 'A'. \par \par 2. In terms of the above-mentioned sale agreement, the Defendants sold all properties known as freehold Register Volume 52 Folio 23 situated at Plot 44 Kampala Road and Fr eehold Register volume 32 folio 7, Plot 46, Kampala Road to the Plaintiffs and in that regard signed documents transferring title in the said properties to the Plaintiff and delivered the certificates of title relating thereto to the Plaintiff. \par \par 3. At the time of the above sale, the Defendants assured the Plaintiff that the above properties were free from any claims and encumbrances. The Defendants undertook to indemnify the Plaintiff against any claims of the Departed Asians Property Custodian Board or an y other claimants. Mention thereof was made in clause 9 of Annexture "A". \par \par 4. It was explicitly agreed between the parties and mention thereof made in clause 9 of the sale agreement that in the event of a third party having a superior claim to the property than that held by the Defendants, the latter were obliged to refund to the Plaintiff the purchase price together with interest thereon at the Bank rate and they would furthermore pay any damages that the Plaintiff may have suffered or incurred. \par \par 5. In April 1997, the Plaintiff was reliably informed that one of the said properties had been reposed by M/S}{\i\insrsid10711061 }{\insrsid10711061 Central Properties & Development Ltd and Certificates of Repossession No. 2890 issued in respect of plot 46 and Repossession Certificate No. 2994 dated 14th January 1997 issued in respect of Plot 44, Kampala Road. \par \par 6. Searches in Ministry of Lands confirmed that M/S}{\i\insrsid10711061 }{\insrsid10711061 Central Properties & Development Ltd had been registered on January 16, 1997 as proprietors of both Plot 46 Kampala Road and Plot 44 Ka mpala Road; vide Instrument Nos. 285089 and 285091 respectively. Copies of the Certificates of title relating thereto are attached hereto and marked Annexture "COO and "C". \par \par 7. On 7th May 1997 the Plaintiffs' lawyers wrote to the Defendants to admit liability to indemnify the Plaintiffs. A copy of the letter is attached hereto as Annexture "D". \par \par 8. On 14th May 1997, the Plaintiffs' lawyers wrote another demand to the Defendants to give the Plaintiffs a clear and unequivocal commitment to compensate the Plaintiffs in terms of the sale agreement. A copy of the said letter is attached as Annexture \'93E\'94. \par \par 9. The 1}{\super\insrsid10711061 st}{\insrsid10711061 Defendant, by way of reply in a letter dated May 15, 1997, sought to sideline their contractual obligation to compensate the Plaintiffs by attempting to involve the Ugandan government in the matter. A copy of the said letter is attached hereto as Annexture "F". \par \par 10. The Plaintiffs' lawyers by a letter dated May 19, 1997 clarified to the Defendants their contractual obligations to compensate the Plainti ffs and requested the Defendants to indicate clearly whether the Defendants challenged their liability to compensate the Plaintiffs. A copy of the said letter is attached hereto as Annexture "G 1". \par \par 11. In a letter dated May 21, 1997 written by the 1}{\super\insrsid10711061 st}{\insrsid10711061 Defendant and addressed to the Plaintiffs\rquote lawyers, the Defendants omitted to address the issue of liability to compensate the Plaintiffs for the subsequent defect in title to the sold properties. A copy of the letter is attached hereto as Annexture "G2". \par \par 12. Efforts to settle the said matter between the parties were rendered fruitless. \par \par 13. The Plaintiffs\rquote entitlement to charge interest at the Bank rate on the contractual sum in terms of the sale agreement obliges the Defendants to pay to the Plaitiffs\rquote a sum of shs. 250,241.095/= (Uganda Shillings Two Hundred fifty Million Two Hundred forty One thousand Ninety five). A copy of an account prepared by the 1}{\super\insrsid10711061 st}{\insrsid10711061 Plaintiff reflecting this amount as at 2nd February 1999 will be adduced at the hearing hereof and the accompanying letter as Annexture "H2" \par \par 14. By a letter dated March 1, 1999, the Plaintiffs' invited the Defendants to have the matter placed before an Arbitrator. A copy of the said letter is attached hereto as Annexture "I". \par \par 15. In a letter dated 4th March 1999, the Defendants explicitly declined to have the matter placed for arbitration hence entitling the Plaintiffs to file this suit against the Defendants. A copy of the said letter is attached hereto as Annexture "J".

\par \par 16. Notice of intention to sue was communicated to the Defendants and this cause of action arose in Kampala within the jurisdiction of this Honourable Court. \par \par 17. WHEREFORE the Plaintiff prays for judgment against the Defendants jointly and severally in the following terms:\- \par \par (a) Payment ofUg.shs. 250,241,095/= \par \par (b) Interest on (a) at the Bank rate from 2nd February 1999 till payment in full. \par \par (c) General damages for breach of contract. \par \par (d) Interest on ( c) from date of judgment till payment in full. \par \par (e) Costs of the suit. \par \par (f) Any other and such further relief as the Honourable court deems fit. \par Dated at Kampala the 4th day of June 1999. \par \par Signed \par }\pard \qj \fi720\li0\ri720\nowidctlpar\faauto\rin720\lin0\itap0 {\insrsid10711061 Counsel For The Plaintiffs\'94 \par }\pard \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 By way of a defence, the Respondents filed the written statement of defence:\- \par \par }\pard \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 {\insrsid10711061 \'93Save what is hereinafter expressly admitted, the Defendants deny each and every allegation of fact in the plaint as if the same were set forth verbatim and traversed seriatim. \par \par 1. Paragraphs 1 and 2 of the plaint are admitted and the Defendants\rquote address of service for purposes of this suit shall be c/o Tumusiime, Kabega & Co. Advocates, P. O. Box 21382, Kampala. \par \par 2. Paragraphs 3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19, and 20 are denied and the Plaintiffs shall be put to strict proof thereof. \par \par 3. Without prejudice t o the foregoing, the Defendants shall in answer to paragraphs 3 to 20 of the plaint state that the sale was illegal in so far as the provisions of the Companies act were flouted and hence the Defendants are not in any way liable to the Plaintiffs and the "loss lies where it falls". \par \par 4. In the alternative but without prejudice to the foregoing, the Defendants shall aver that they only sold their share holding in the company to the Plaintiffs and the rest of the provisions of the agreement were legally meaningless. \par \par 5. Further in the alternative and without prejudice to the foregoing, the Defendants shall aver that there has never been any claim on the property by DAPCB or by any other claimant which the Plaintiffs unsuccessfully defended. \par \par WHEREFORE the Defendants pray that the suit be dismissed with costs. \par Dated at Kampala this July 9,1999. \par \par Signed \par }\pard \qj \fi720\li0\ri720\nowidctlpar\faauto\rin720\lin0\itap0 {\insrsid10711061 Counsel For The Defendants.\'94 \par }\pard \qj \li0\ri0\sl240\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl312\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In paragraphs 4 and 5 his affidavit in support of the application, Mr. Zziwa deponed that he has read and understood the defence file d by the Respondents and that he verily believes, on the basis of his training as a lawyer and on the advice of his advocates that it does not disclose any reasonable answer to the Plaintiff s claim in so far as it constitutes of general denials and does not allege any facts constituting illegality that it is a frivolous and vexatious defence and an abuse of court process. \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl312\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 Mr. Byenkya, learned counsel for the Applicant argued the application on the basis of the said affidavit; and submitted firstly, the pl eadings in paragraph 1 of the Written Statement of Defence where the Defendants deny the allegations in paragraphs 3 to 20 of the plaint is a general denial. It therefore offends the provisions of Order 6 rule 7 of the }{\i\insrsid10711061 Civil Procedure Rules}{\insrsid10711061 which provides that a party must deal specifically with each allegation of fact which it does not admit. That this rule is mandatory, and a defence that offends the rule is bad and should be struck off and judgement entered in favour of the Plaintiff. He cited the case of }{\i\insrsid10711061 Obidegwu F.v D. B Ssamakadde}{\insrsid10711061 Civil Suit No. 59 of 1992 (Unreported) by }{\scaps\insrsid10711061 Tinyinondi}{\insrsid10711061 , Ag. J. as he then was, in support of this point. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par Secondly, Mr. Byenkya submitted that paragraph 3 of the written statement of defence offends Order 6 rule 5 of the }{\i\insrsid10711061 Civil Procedure Rules}{\insrsid10711061 which requires the Defendant to set out the facts constituting illegality. It says that the sale was illegal in so far as the provisions of the Companies Act were flouted. This plea does not tell the Plaintiff anything about the facts or act s which are alleged to be illegal. It is just a general statement which does not disclose what the defence is. It is also a general denial which covers 17 paragraphs of the plaint. \par \par Thirdly, the alternative defence in paragraph 4 of the Written Statement of Defence does not disclose any defence known in law. It says that the Defendants shall aver that they only sold their shareholding in the company to the Plaintiffs and the rest of the agreement were meaningless. \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 Fourthly, Mr. Byenkya submitted that paragraph 5 of the written statement of defence is not a reasonable defence in light of the copies of the certificates of title in respect of the two plots clearly indicating that the Rep ossession Certificates were duly registered thereon. The paragraph says that the Defendant shall aver that there has never been any claim on the property by the DAPCB, or any other claimant which the Plaintiffs unsuccessfully defended. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 Finally, and in view of}{\i\insrsid10711061 }{\insrsid10711061 the above arguments, Mr. Byenkya submitted that there is no reasonable answer on record and to continue with the trial will just waste the court\rquote s time and delay justice, and he prayed that the written statement of}{\i\insrsid10711061 }{ \insrsid10711061 defence be struck out,}{\i\insrsid10711061 }{\insrsid10711061 judgment be entered in favour of}{\i\insrsid10711061 }{\insrsid10711061 the Plaintiff for the purchase price and the suit be set down for formal proof to determine the question of}{\i\insrsid10711061 }{\insrsid10711061 interest and general damages. That he would not object to the Defence participating in the formal proof.

\par \par Ms. Khalayi Lilian, learned counsel for the Defendants opposed the application. She maintained that the written statement of}{\i\insrsid10711061 }{\insrsid10711061 defence filed on behalf of}{\i\insrsid10711061 }{\insrsid10711061 her clients disclose a reasonable answer to plaint. That paragraphs 2 and 3 of}{\i\insrsid10711061 }{\insrsid10711061 the written statement of}{\i\insrsid10711061 }{\insrsid10711061 defence read together are not a general denial because they disclose the defence of}{\i\insrsid10711061 }{\insrsid10711061 illegality based on the }{\i\insrsid10711061 Companies Act}{\insrsid10711061 . That details can only be given in evidence, so you do not have to plead specifically, she cited the case of}{\i\insrsid10711061 Dever Finance Co. Ltd v Harold G. Cold}{\insrsid10711061 [1969] 1 WKL at 1877. \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In the alternative, learned counsel proposed that since the case has not yet been set down for hearing, the Defendant may apply for leave to amend the written statement of}{\i\insrsid10711061 }{\insrsid10711061 defence to include the details of}{ \i\insrsid10711061 }{\insrsid10711061 illegality. \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl312\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 As regards paragraph 4 of the written statement of defence, the alternative defence is that the Defendants/Respondents only sold their shareholding in the company. They were therefore not responsible for any indemnity. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In her view paragraph 5 of the written statement of defence is a reply to the Plaintiff's claim denying a set of facts that arose out of the contract. \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 Finally, counsel submitted that the pleadings were closed in 1999, and the Plaintiff has not made any efforts to set down the suit for hearing. Counsel urged cour t not to condemn the defendants unheard but to set down the suit for hearing. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 Order 6 Rule 29 of he civil procedure Rules under which the application was brought, gives court discretion, upon application, to order any pleading to be struck out of the grou nd that it discloses no reasonable answer, or where it is shown to be frivolous and vexatious. In the case of }{\i\insrsid10711061 Libyan Arab Uganda Bank v Messrs Intrepco Limited}{\insrsid10711061 }{\ul\insrsid10711061 }{\insrsid10711061 [1985] HCB 73. }{\scaps\insrsid10711061 Odoki, J,.}{\ul\insrsid10711061 }{\insrsid10711061 as he then was held in a similar application that:\- \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard\plain \s15\ql \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 "The discretion given to the court under Order 6 Rule 29 to strike out pleadings should only be exercised in plain and obvious cases since such applications were not intended to apply any proceedings which raised a serious question of law." \par }\pard\plain \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b\insrsid10711061 \par }\pard \qj \li0\ri0\sl273\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In the case it was further held that; \par \par }\pard\plain \s15\qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 "It is well established that in considering applications under Order 6 rule 29 the court should look at the pleadings above and any Annextures thereto, and not any subsequent affidavits" \par }\pard\plain \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 Mindful of the above authority, I now proceed to examine the pleadings in HCCS No. }{\i\insrsid10711061 685/99 }{\insrsid10711061 together with the Annextures thereto in order to determine whether the written statement of defence raises any reasonable answer to the plaint. I have reproduced the relevant paragraphs of the pl aint and the written statement of defence earlier on, I will not repeat them here. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 As can be clearly discerned from the plaint. The Plaintiffs' claim is for breach of contract based on a contract signed between the parties on August 17, 1990; a copy of wh ich is attached to the plaint as Annexture "A" in particular, Clause 9 thereof which provides:\- \par }\pard \qj \li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard\plain \s15\qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \'93 9. The vendors hereby warrant that the titles to the said plots are free of any claims and in cumbrances and they undertake to indemnity (sic) the purchasers against any claims by the Departed Asians Property Custodian Board or any other claimants. Should any claim arise and cannot be successfully defended by the purchasers, the vendors hereby undertake to refund to the purchasers the purchase price together w ith interest at bank rate and pay any damages the purchaser may have suffered\'94 \par }\pard\plain \qj \li0\ri0\sl220\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 The Plaintiffs\rquote case is that in August 1990, the Defendants sold Sanyu Properties Ltd together with its assets including plots 44 and 46 Kampala Road under the said agreement. T he Plaintiffs relied on Clause 9 above which entitled them to a refund of the purchase price together with interest thereon at in case the property is successfully claimed by DAPCB or any other claimants. In 1997, April, M/S}{\i\insrsid10711061 }{ \insrsid10711061 Central properties & Developmen t Ltd repossessed both properties. The Plaintiffs invoked the provisions of clause 9 and demanded for the refund of their money but the Defendants refused. The sum demanded now is in excess of shs. 250,241,095 inclusive of interest and consequential expen ses. The Plaintiffs attached copies of the Certificate of Title in respect of the two properties which indicate that the certificates of Repossession by M/S Central properties Ltd were duly registered thereon. \par \par }\pard \qj \li0\ri0\sl278\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 The issue therefore is, whether the defence filed in court is a reasonable defence under Order 6 rule 29 of the }{\i\insrsid10711061 Civil Procedure Rules}{ \insrsid10711061 , under which this application is made. Mr. Byenkya, learned counsel for the applicant says it does not amount to a reasonable defence. Ms Khalayi contends that it does. \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl312\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In the opening statement of written statement of defence the Defendants deny each and every allegation of fact in the plaint as if the same were set forth verbatim and traversed seriatim. \par }\pard \qj \li0\ri0\sl220\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl312\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 This is known as a general traverse and it is usually allowed at the beginning or at the end of the written statement of defence. The purpose of a general traverse is to deny material facts in the statement of claim which the Defendant inadvertently omitt ed to deal with specifically; See: }{\i\insrsid10711061 Warner v Sampson}{\insrsid10711061 [1959] 2 WLR 109 at P.114}{\b\insrsid10711061 }{\insrsid10711061 CA. \par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl182\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 The Defendants however make a general denial of paragraphs 3-20 of the plaint in paragraph 2; they plead illegality in paragraph 3; in paragraph 4, they admit having sold onl y their shares, and aver that the rest of the agreement is legally meaningless; and in paragraph 5, they aver that there was never a claim on the properties in question by the DAPCB or any other claimant. \par }\pard \qj \li0\ri0\sl288\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl316\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In my view, the written statement of defence in general and paragraph 2, in particular, does indeed offend the provisions of Order 6 rule 7 of the }{\i\insrsid10711061 Civil Procedure Rules}{\insrsid10711061 in the it is a general denial. The rule provides: \par }\pard \qj \li0\ri0\sl292\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard\plain \s15\qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \'937. It shall not be sufficient for a Defendant in his written statement to deny genera lly the grounds alleged by the statement of claim, or for the Plaintiff in his written statement in reply to deny generally the grounds alleged in the defence by a Counterclaim, but each party must deal specifically with each allegation of fact of which h e does not admit the truth except damages.\'94 \par }\pard\plain \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl369\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 According to }{\scaps\insrsid10711061 Odgers principles of Pleading and Practice}{\insrsid10711061 , 22nd Edition at page 136, \par }\pard \qj \li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 {\insrsid10711061 \'93It is not sufficient for a Defendant in his defence to deny generally the allegations in the statement of claim, or for a Plain tiff in his reply to deny generally the allegations in a Counterclaim, but each party must traverse specifically each allegation of fact which he does not intend to admit. }{\i\insrsid10711061 The party pleading}{\insrsid10711061 must make it }{ \i\insrsid10711061 quite clear how much of his opponent's case he disputes.}{\ul\insrsid10711061 }{\insrsid10711061 Sometimes in order to deny the rule and to deal with every allegation of fact of which he does not admit the truth, it is necessary for him to place on record two or more distinct traverses to one and the same allegation. Merely to deny the allegation in terms will often be ambiguous.\'94 \par }\pard \qj \li0\ri0\sl307\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par The object of pleadings is to bring the parties to a clear issue and delimit the same so that both parties know before hand the real issues for determination at the trial. See: }{\i\insrsid10711061 Kahima & Anor v UTC}{\insrsid10711061 [1978] HCB 318.

\par }\pard \qj \li0\ri0\sl297\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard \qj \li0\ri0\sl326\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 In the case of }{\i\insrsid10711061 Obidegwu v D. B Ssamakade}{\insrsid10711061 (supra) the Plaintiff brought an action against the Defendant for breach of contract by not delivering possession of a house he had leased from the Defendant, for a term of 3 years. The Defendant contended that the n on delivery of the said house was because the Plaintiff/lessee had not paid the second installment of rent. }{\scaps\insrsid10711061 Tinyinondi J.}{\insrsid10711061 held inter alia, that the Defendant's pleadings did not deny the existence of the lease agreement, because they just denied generally the grounds of the claim of the Plaintiff, without specifics as to whether the alleged lease existed or not. The learned Judge held that Order 6 rule 7 is mandatory. He said; \par \par }\pard\plain \s15\qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \'93I hold that this rule is mandatory as it clearly states so. In the case before me the existence of a lease agreement between the parties was alleged to exist. A photocopy of it was Annexed to the plaint. This was an allegation of fact. If the Defendant did not admit it, he ought to have specifically dealt with it. He did not\'94

\par }\pard\plain \qj \li0\ri0\sl326\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 \par Likew ise in the case the subject of the instant application, the Plaintiffs alleged the existence of an agreement of sale between the two parties, and a copy thereof was attached. Furthermore, they alleged an indemnity clause under the said agreement, which en titled them to a refund of the purchase price plus interest and other consequential expenses in case of any claim by 3}{\super\insrsid10711061 rd}{\insrsid10711061 parties and DAPCB. These were allegations of fact. \par \par }\pard \ql \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 If the Defendants did not admit them, they ought to have specifically dealt with th em. They did not. The second issue is the question of illegality. Under order 6 rule 5, matters to be specifically pleaded include facts showing illegality either by statute or common law. The rule provides: \par \par }\pard \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 {\insrsid10711061 \'935. The Defendant or Plaintiff, as the case ma y be, shall raise by his pleading all matters which show the action or Counterclaim not to be maintainable, or that the transaction is either void or voidable in point of law, and all such grounds of defence or reply as the case may be, as if not raised w ould be likely to take the opposite party by surprise, or would raise issues of fact not arising out of the proceedings pleadings, as, for instance, fraud, limitation act, release, payment, performance, or }{\ul\insrsid10711061 facts showing: illegality either by statute or common law\'94. }{\insrsid10711061 (The underline is mine). \par }\pard \ql \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par On the subject of illegality, }{\scaps\insrsid10711061 Odger\rquote s Principles of Pleading and Practice}{\insrsid10711061 , 22nd Edition, states at page 185; \par \par }\pard \qj \li720\ri720\nowidctlpar\faauto\rin720\lin720\itap0 {\insrsid10711061 \'93The defence that a contract is a wager within the Gaming Acts should be specially pleaded; and the facts whic h are relied on to bring the transactions within those Acts should be stated. However, the court itself will take notice of any illegality of the contract on which the Plaintiff is suing if it appears on the face of the contract or from the evidence broug h t before it by either party, and even though the Defendant has not pleaded illegality. Illegality once brought to the attention of the court, overrides all questions of pleadings, including any admissions made therein. Otherwise where the contract is not ex facie illegal as a general rule the court will not entertain the Question of illegality unless it is specifically pleaded and the court is satisfied that it has before it all the necessary facts concerning:}{\ul\insrsid10711061 }{\insrsid10711061 the contract setting\'94. \par }\pard \ql \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par In paragraph 3 of their defence, the Defendants plead that: \'93the sale was illegal in so far as the provisions of the Companies Act were flouted\'94. \par \par }\pard \qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 The facts which are relied on to indicate that the sale in question contravenes the provisions }{\i\insrsid10711061 Companies Act}{\insrsid10711061 are not pleaded. The specific section of the }{\i\insrsid10711061 Companies Act}{\insrsid10711061 flouted is not stated; and yet the Companies Act has over 300 sections. This omission in my opinion is likely to take the Plaintiffs by surprise and therefore offends the provisions of Order 6 rule 5 of the Civil Procedure Rules. See: also, }{ \i\insrsid10711061 North Western Salt Co. Ltd v Electrolytic Alkali Co. Ltd}{\insrsid10711061 [I914] AC; }{\i\insrsid10711061 Phillips v Copping}{\insrsid10711061 [1935] 1 KB 15 at page 21 Per }{\scaps\insrsid10711061 Scranton }{\insrsid10711061 LJ.

\par }\pard \ql \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 {\insrsid10711061 \par }\pard\plain \s16\qj \li0\ri0\nowidctlpar\faauto\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid10711061 The alternative defence which says that the rest of "rest of the provisions of the agreement were legally meaningless" also do not disclose any defence known in law, as Mr. Byenkya rightly said. Finally, the defence in paragraph 5 is in my view a \lquote sham\rquote defence in view of the photocopies o f the Certificates of titles in respect of plots 44 and 46, Kampala Road attached to the plaint. They show that Central Properties and Development Limited of P. O. Box 98, Kampala, were issued Certificates Authorising Repossession No. 2890 dated June 26, 1 996 Certificate No. 2994 dated January 14, 1997 under the provisions of section 4 and 5 of the }{\i\insrsid10711061 Expropriated Act}{\insrsid10711061 ; and the said certificates duly registered on the certificates of title. The defence that there has never been any claim on the property by DAPCB or any other claimant which the Plaintiffs unsuccessfully defended is therefore not only a sham but outrageous; and should be treated as such. All in all, I find that the defence filed does not disclose any reasonable defence to the plaint, it is a gener a l denial and it is frivolous and vexatious and is accordingly struck out. In the result, judgment is hereby entered for the Plaintiffs against the Defendants for the shs. 60 million, being the purchase price paid by the Plaintiffs under the agreement. The rest of the claim and in particular the, issue of interest and general damages shall be set down for formal proof on the October 18, 2000. The defence counsel is free to participate in the formal proof as suggested by Mr. Byenkya. \par }}