Peoples Transport Co. Ltd v Afric Co-operative Society Limited (Civil Suit No. 467 of 1995) [1996] UGHC 1 (6 December 1996)

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)}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \s15\qc \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1 \widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16605997 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\b\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 THE REPUBLIC OF UGANDA \line IN THE HIGH COURT OF UGANDA AT }{\b\ul\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16605997 KAM}{\b\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16605997 PALA}{\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 \line }{\b\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 CIVIL SUIT NO. 467/1995}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 \par }\pard\plain \qc \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16605997 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\lang1033\langfe2057\langnp1033\insrsid16605997 PEOPLES TRANSPORT CO. LIMITED\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85....... PLAITIFF -VERSUS- AFRIC CO-OPERATIVE SOCIETY LIMITED\'85\'85\'85\'85\'85\'85\'85\'85.. DFENDANT}{\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16402164 \par }\pard\plain \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16402164 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\lang1033\langfe2057\langnp1033\insrsid16605997 BEFORE THE HON. MR}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 . J. H. NTABGOBA - PRINCIPAL JUDGE \line }{\b\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 RULING: }{ \b\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 \line }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 The plaintiff in this case which is Peoples Transport Company, Limited in Receivership was put under receiv ership on 10/6/94 for the purposes of winding it. up pursuant to the provisions of the Public Enterprises Reform and Divestiture Statute (No. 9 of 1993) . To appreciate what was done to the Company one needs to read the short summary of the Statute as fol lows:}{\lang1033\langfe2057\langnp1033\insrsid16605997 - \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid16605997 {\lang1033\langfe2057\langnp1033\insrsid16605997 \'93A }{ \lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 Statute to provide for}{\lang1033\langfe2057\langnp1033\insrsid16605997 the reform and divestiture of }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 public enterprises, to establish the Divestiture and Reform Implementation Committee charged with the implementation of the Government programme on the matter and for other related matters.\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid16605997 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16605997 {\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 Th e overall objective of the Statute can be stated }{\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16402164 simply}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 and in short as to divest the Government of its role in running business and vest it in Commercial or business concerns other than the Government. In common parlance then when a public enterprise (rea d Government enterprise) is divested under the Statute it becomes private, meaning it becomes owned by proprietors (or proprietor) other than Government S. 25(2) of the Statute stipulates : - \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid16605997 {\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 \'93 Where a public enterprise is subject of divestiture under Class II, III or IV of the first schedule to }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16605997 this}{\i\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 }{ \lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 Statute and the enterprise is riot already a public limited liability company under the Com panies Act, the enterprise shall be registered as a public limited liability company under that Act for the purpose of effecting the divestiture with the respective shareholding prescribed by S.20 of this statute.\'94 \line }{ \lang1033\langfe2057\langnp1033\insrsid16605997 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16605997 {\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 The plaintiff happens to be subject to d ivestiture under Class IV of the first schedule to the Statute. It is an enterprise to be divested by the state fully. It is listed down in the schedule as number 23. According to 5.20 of the Statute \'93 as to the enterprise specified in Class IV of that schedule, the state shall totally divest itself by disposal of all the shares in each enterprise to persons other than the state in accordance with this statute.\'94 \line }{ \lang1033\langfe2057\langnp1033\insrsid16605997 \par }{\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 S.21 provides the modes of actual sale and transfer }{\ul\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16605997 of publ}{ \ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16605997 ic enterprises}{\ul\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 and, the Divesture Accou nt on which the sale proceeds are deposited \'93shall be used for promoting }{\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16402164 Ugandan}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 entrepreneurs for industrial development\'94. But such sale proceeds may also be used pursuant to S.23 of the Statute:}{\lang1033\langfe2057\langnp1033\insrsid16605997 -}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 }{ \lang1033\langfe2057\langnp1033\insrsid16605997 \par }\pard \s15\ql \fi-720\li1440\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1440\itap0\ipgp1\pararsid16605997 {\lang1033\langfe2057\langnp1033\insrsid16605997 \'93}{ \lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 (a}{\lang1033\langfe2057\langnp1033\insrsid16605997 )}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 }{\lang1033\langfe2057\langnp1033\insrsid16605997 \tab }{ \lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 to pay off-debts, if any, or otherwise compromise with the creditors of the public enterprise; \line }{\lang1033\langfe2057\langnp1033\insrsid16605997 \par }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 (b) }{\lang1033\langfe2057\langnp1033\insrsid16605997 \tab }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 compensate or otherwise provide for employees who are laid off as a result of divestiture; \line }{\lang1033\langfe2057\langnp1033\insrsid16605997 \par }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 (c) }{\lang1033\langfe2057\langnp1033\insrsid16605997 \tab }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 do anything necessary to attain the most favourable conditions for divestiture.\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid16605997 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16605997 {\lang1033\langfe2057\langnp1033\insrsid16605997 Suff}{ \lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 ice it to say that an enterprise that has been declared subject of divestiture becomes an object for sale, or, to use the common language, a commodity on the market. }{ \lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16402164 It}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 follows that the receivers appointed to manage it must necessarily liquidate it. \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid16402164 {\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 To liquidate it, it must, if no t yet, be transformed into a public limited liability company. In my view then it would be a contradiction in terms to say that the purchaser of the assets of a company who wishes to purchase so as to liquidate such company is concluding the purchase agre ement with the same company. I tend to agree with Mr. Odimbe learned Counsel for the defendant when he says that the parties to be sued should be either the Government or its appointed liquidators who would be sued as the agents of the government. \line } {\lang1033\langfe2057\langnp1033\insrsid16605997 \par }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 There is another leg to Mr. Odimbe\rquote s argument. S.25(2) provides that before an enterprise is divested, if it be a private limited liability company, like the plaintiff in the instant case it must first be converted to a public limited liability company. And I agre e with Counsel that the presumption here, if not rebutted, is that the plaintiff was so converted. It cannot be said that 5.2}{\lang1033\langfe2057\langnp1033\insrsid16605997 5(4) was disobeyed which directs that th}{ \lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 e Registrar of Companies \'93shall give every assistance for expediting the registration of a company, the establishment of which has become necessary by reason of any provision of this Statute.\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid16605997 \par }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 The presumption, I agree, is that }{\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16402164 S.25 (}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 4) was co}{ \lang1033\langfe2057\langnp1033\insrsid16605997 mplied with. The point Mr. Odim}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 be made is that between the time of the appointment of the receivers and the nego tiation of the sale between such receivers and the defendant of the plaintiff\rquote s assets, the plaintiff\rquote s personality and character had so changed that we cannot be talking of the original private limited liability company. The process of divestiture starts with converting the private limited liability company to a public limited liability company. The process ends when the receivers and managers submit their final report. But its important to note that the receivers and managers did not negotiate the sale o f the company (whichever, whether the private one or the new public one}{\lang1033\langfe2057\langnp1033\insrsid16605997\charrsid16402164 ). }{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 They negotiated the sale of the property of the private turned public company. Once the company was divested it ceased to be. A nonexistent company could not sue or be sued. \line }{\lang1033\langfe2057\langnp1033\insrsid808760 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid808760 {\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 I think there are sound reasons for the support }{ \lang1033\langfe2057\langnp1033\insrsid808760\charrsid16402164 of}{\lang1033\langfe2057\langnp1033\insrsid808760 Counsel Odim}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 be\rquote s preliminary objections on a legal point that the suit was instituted by a non-existent plaintiff. \line I agree the suit was thereby misconceived and I strike it out with costs o the defendant. }{\lang1033\langfe2057\langnp1033\insrsid808760 6/12/96}{\lang1033\langfe2057\langnp1033\insrsid748322\charrsid16402164 \line \par }}