Phoenix of Uganda Assurance Company Limited v Kuti Investments Limited and Another (Miscellaneous Application 679 of 2023) [2023] UGCommC 107 (4 October 2023)

Full Case Text

### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT I(AMPALA

#### (CoMMERCTAL COURT)

## MISCELLANEOUS APPLICATION NO. O679 OF 2023

## (ARTSTNG FROM CrVrL SUIT NO.386 OF 2018)

## PHOENIX OF UGANDA ASSURANCE CO. LTD: : : : : : : : : : : : :APPLICANT

## VERSUS

# 1. KUTr TNVESTMENTS LTD 1 2. K. CB BANK UGANDA LTD I: :: : :::::::::::: :: : :: : : :R. ESPONDENTS

## Before Hon. Lady Justice Patricia Kahigi Asiimwe

## Ruling

## Introduction

- This Application was hled by way of Chamber Summons under Order 6 Rules 19 and 31 of the Civil Procedure Rules SI 71-1 and Section 98 of the Civil Procedure Act Cap 71. The Applicant seeks leave to amend its Written Statement of Defence and to file a counterclaim in the Civil Suit. 1 - The background to this Application is the 1"t Respondent got a loan from the 2"a Respondent and secured it with motor vehicle Registration Number UAW 826G. The vehicle was comprehensibly insured by the Applicant. On 17tn May 2O18, the 2"a Respondent instituted a summary suit against the l"t Respondent for recovery of outstanding loan amounts of UGX. 184,1O1,997. The l"t Respondent filed a defence and a counterclaim against the 2"d Respondent and the Applicant for breach of the debenture agreement and breach of the comprehensive insurance policy contract respectively. The gist of the counterclaim against the Applicant was that the Applicant 2

did not adequately compensate the $1^{st}$ Respondent for an accident that the vehicle was involved in. The Applicant filed its Written Statement of Defence to the Counter Claim denying liability and stated that the $1st$ Respondent was adequately compensated.

- 3. As part of its evidence the Applicant sought to tender in evidence the vehicle inspection report whose admission was objected to by the 1st Respondent and the Applicant undertook to file a certified copy of the report. Court proceeded with the hearing of the Respondents' case and on 2nd May 2023 when the matter was called for hearing of the Applicant's case, counsel for the Applicant informed court that they had discovered that the vehicle inspection report in question was forged and that they intended to amend their written statement of defence and file a counterclaim, hence this Application. - 4. The grounds of the Application are contained in the Chamber Summons and the Affidavit in Support deponed by Leuben Ssajabi, claims manager with the Applicant who stated as follows: - a) In January 2015 the 1st Respondent reported to the Applicant that its vehicle Registration Number UAW 826G had been involved in an accident on the 23rd January 2015 in Nakapiripiriti- Moroto Road, and the Applicant compensated the $1^{st}$ Respondent for the accident claim. - b) On 4th September 2015, the 1st Respondent reported a second accident involving the same subject vehicle that happened on 2nd August 2015 at Nakapiripiriti. - c) The 1st Respondent submitted the necessary documents and the Applicant compensated the Respondents. - d) The $1^{st}$ Respondent was dissatisfied with the compensation and filed a counterclaim against the Applicant. - e) When the Applicant sought certification of the vehicle inspection report from Nakapiripiriti Police, it learnt from the

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Police that the said vehicle inspection report that had been submitted by the 1st Respondent and relied on by the Applicant to pay the claim was unauthentic, falsified and tainted with forgeries. The Applicant paid the second claim believing it to be genuine yet it was a fraudulent claim.

- $5.$ The 1st Respondent opposed this Application in an Affidavit in Reply sworn by Stephen Kuteesa, director of the 1st Respondent who stated as follows: - a) The suit vehicle was involved in an accident along Nakapiripiriti-Namalu road on the 4th of August 2015. The accident was reported to Nakapiripiriti Police Station and was registered under TAR $/18/2015$ . - b) On $2^{nd}$ May 2023 there was an allegation that the said motor vehicle was never involved in an accident. - c) Their lawyers wrote to the OC Nakapiripiriti Police Station for a Police report, and they obtained a sketch map of the accident. However, the lawyers were informed in a letter dated 5th May 2023 that the inspection report could not be traced. - d) The $1^{st}$ Respondent is not aware of the forged vehicle inspection report attached as annexture N to the Affidavit in support of the Application. - e) The said document does not indicate that the Applicant received it from the $1^{st}$ Respondent. - The accident alleged by the Applicant in attachment F3 $\mathbf{f}$ shows that it took place on 23rd January 2015 along Moroto Nakapiripiriti Road registered under TAR $\frac{1}{2}$ 02/2015 which $1^{\rm st}$ earlier accident and the Respondent an was acknowledges receipt of compensation from the Applicant. - g) The second accident took place along Nakapiripiriti -Namalu $2nd$ 2015 registered Road the August under $\overline{on}$ TAR/18/2015.

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- h) Save for the forged report which was disputed by the 1st Respondent for lack of authenticity, the other facts about the accident of August 2015 are undisputed and the Applicant's assessors who also inspected the vehicle confirmed the accident and issued their report, reporting that indeed the losses were a result of an accident in August 2015. - The Applicant was in possession of annexure N even during $i)$ the trial, it therefore cannot claim to just be discovering such information and, if any fraud should be imputed, it should be on the Applicant. - If it is true that the forged inspection of vehicle report was $i)$ issued by the $1st$ Respondent, the Applicant should have issued a received one with their stamp and or the purported original should have been availed as they always demand for original copies. - k) The original inspection of vehicle report for the accident on Namalu - Nakapiripiriti road was duly handed over to the Applicant when the 1st Respondent was seeking repairs of the said motor vehicle. - $1)$ This application is intended to introduce a new cause of action which will jeopardize and prejudice the $1$ st Respondent's case. - 6. The Applicant in Rejoinder stated as follows: - a) The $1^{st}$ Respondent does not deny reporting the accident of $2^{nd}$ August 2015 which forms part of the subject of the present suit. - b) The alleged accident of 4th August 2015 was never reported to the Applicant and does not form part of the dispute before this Honorable Court. - c) The Documents in support of the accident on 4th August 2015, were drawn in May 2023 for an accident that happened in 2015.

- d) On $3^{rd}$ May 2016, the Applicant requested the $1^{st}$ Respondent to submit the requisite documents to process the claim and he submitted the claim form, police report and inspection report relating to the accident of $2^{nd}$ August 2015. - e) Insurance is based on the principle of utmost good faith and comprehensive policy that existed only covered genuine claims duly reported to the Applicant for compensation. - The 1st Respondent's Affidavit in Reply contains glaring $f$ falsehoods and inconsistencies which cannot be taken lightly. - g) Fraud can be claimed at any time and the court cannot allow a person to keep an advantage which he obtained by fraud. - 7. The $2^{nd}$ Respondent opposed the Application in an Affidavit in Reply sworn by Timothy Nabaala, senior recoveries & collections manager of the $2^{nd}$ Respondent who stated as follows: - The Applicant and the Respondent's relationship is $a)$ established through a comprehensive motor insurance policy that had been taken out by the 1st Respondent, and the interest of the $2^{nd}$ Respondent was as a loss payee under the policy. - It is the duty of the Applicant to make sure that before $b)$ any insurance claim is paid out to any claimant it is verified and ascertained by the insurance company's system. The Applicant ought to have done due diligence. - The $2^{nd}$ Respondent has no duty to carry out due $c)$ diligence it was only a beneficiary of the policy. - In the email dated 21st June 2016, it was reported that $d$ ) inspection was done on 17th June 2016 which was almost a year after the said incident which also imputes negligence on the Applicant.

- $e)$ The $2^{nd}$ Respondent was not the author of the accident report nor was it the instigator of the claim which gave rise to the accident report that is in question. - $f$ The fraud has not been linked to the $2^{nd}$ Respondent and neither was it detected at the time of payment therefore money was paid out negligently to the Respondents. The $2nd$ Respondent was bona fide in the transaction. - It will be unfair to allow the Application because both the $g)$ Respondents have closed their cases at trial. - There is no evidence of connivance between the $2nd$ $h$ Respondent and the 1st Respondent being presented in the Application; it is not just to sue the $2^{nd}$ Respondent.

## Representation

8. The Applicant was represented by M/S Nakiranda & Co Advocates. The $1^{st}$ Respondent was represented by M/S Signature Advocates and the 2nd Respondent was represented by M/S Katongole, Yiga & Masane Advocates/Solicitors.

## Issue

9. Whether the Applicant should be granted leave to amend its Written Statement of Defence

# Resolution:

- 10. The parties filed written submissions which I have taken into account in resolving this matter. I will first address the preliminary issues raised by counsel for the Applicant. - a) The $2^{nd}$ Respondent did not oppose the Application having not filed and served any Reply to the Application - 11. The Applicant submitted that Court gave directions to the $2nd$ Respondent to file its Affidavit in Reply by 25th May 2023 however, the 2nd Respondent did not file the Application and

neither did they serve the Applicant which amounts to an admission. In response, the $2nd$ Respondent stated that they did file the Affidavit in Reply on 25th May 2023 and that since the matter is on ECCMIS the Applicant should have had access to it.

- 12. The record on ECCMIS indicates that the $2^{nd}$ Respondent's affidavit in Reply was filed on 25th May 2023 at 12: 02 which was within the timelines given by the Court. Filing submission on ECCMIS is also a form of service to the other party particularly in cases where the parties have already been registered under the case as is the case in the present case. Normally parties get notifications when documents are filed on ECCMIS. I note that in some cases the parties do not receive notifications. However, in this case, the Applicant filed an Affidavit in rejoinder to the 1st Respondent's Affidavit in Reply and written submissions on 1st June 2023. The Applicant also filed submissions in rejoinder on $12^{th}$ June 2023. These documents were all filed after the $2^{nd}$ Respondent filed the Affidavit in Reply. Therefore, I find it difficult to believe that the Applicant was not aware that the $2nd$ Respondent filed its affidavit in reply. This preliminary objection therefore fails. - b) The 1st Respondent's Affidavit in Reply contains glaring *falsehoods and inconsistencies which cannot be taken lightly* - 13. The Applicant submitted that the $1^{st}$ Respondent's Affidavit in Reply contains falsehoods and contradictions and that as such it should be struck out. The Applicant pointed out certain paragraphs which contain falsehoods and contradictions including: - The $1^{st}$ Respondent's introduction of a new accident of i. 4th August 2023 which was never reported to the Applicant and not forming part of the dispute before court.

- 11. The 1"t Respondent's total failure to respond to the accident claim of the accident of 2"d August 2015 for which he got compensated and which forms the gist of the dispute in court and the present applications. - 111. The 1"t Respondent's failure to avail any secondar5r copies of documents issued by police which he submitted to support the compensation claim for the accident of 2"a August 2023. - lv. The 1"t Respondent's unjustified exorbitant quotations for repair of a minor single accident. - 14. Counsel for the 1"t Respondent submitted that there are no falsehoods and contradictions; there is no accident that happened on 4th August 20 15, and that that day is the day of reporting the accident on 2"d August 2015. The exorbitant quotations were not made by the 1"t Respondent, also it's not the fault of the 1"t Respondent that they were unable to get the inspection report, but the Applicant was able to obtain certified copies of the documents that prove the accident took place. - 15. I have reviewed the issues raised by the Applicant and I find that the issues (ii), (iii) and (iv) above cited by counsel for the Applicant can only be proven as falsehoods by evidence. With respect to the issue of the dates, in the a-ffidavit in issue the deponent states under paragraph 4 of the a-ffidavit that the accident took place on 4th August 2O15. Then under paragraph 15, he stated that the accident took place on 2"d August 20 15. This is an obvious inconsistency. Since both parties refer to 2"d August 2O15 as the date when the accident took place, it appears that the falsehood is in paragraph 4 of the affidavit in issue. In line with the principle established in the case of Col. Besigye Kizza V Museveni Yoweri & Electoral Commission, Election Petition No. 1 of 2OO1 court

will ignore paragraph 4 of the affidavit. This objection therefore also fails.

## *Issue: Whether the Applicant be granted leave to amend their Written* Statement of Defence

- 16. In their submissions counsel for the Applicant cited Order 6 Rule 19 on powers of the court to grant leave to amend pleadings. Counsel also listed the principles for granting leave to amend pleadings as stated in the case of **Gaso Transport** Services (Bus) Ltd V Obene [1990-1994] EA 88 and the case of Okello Wilbert V Obel Ronald HCMA No. 97 of 2020. Counsel submitted that the Applicant paid the disputed insurance claim in good faith in the belief that it was a genuine claim. The Applicant later discovered that the inspection report was falsified and the Respondents should not benefit from this wrong. Counsel cited the case of **Jas Progressive Investment** (U) Ltd V Tropical Africa Bank Ltd HCCS No 78 of 2011 for the position that no person should be allowed to keep an advantage obtained by fraud. - 17. Counsel for the 1st Respondent submitted that the origin of the inspection report is unknown and that it's not a creature of the 1st Respondent. Counsel further submitted that the Applicant could not have processed payment to the 1st Respondent if the original report had not been provided and therefore the Applicant is in possession of the original report. The 1st Respondent also submitted that the Applicant hasn't attributed the said document to them in order to prove that the 1st Respondent forged the document. - 18. Counsel for the 1st Respondent further submitted that the application is prejudicial as the counterclaim the Applicant intends to bring introduces a new cause of action. The counterclaim to recover UGX 24,613,260 is a new cause of

action that has no foundation in the original suit. Counsel cited the case of Daniel KayiziV Rince Muhammed Kayondo MISC APP No. 0387 of 2OL6 to support the submissions that the counterclaim introduces a new cause of action which should not be allowed.

- 19. Counsel for the 2"d Respondent submitted that the Applicant came to Court with unclean hands since the said documents to be presented in Court were filed by the Applicant and have been in the hands of the Applicant, therefore they cannot be produced as new evidence. Counsel further submitted that the Applicant is trying to introduce an element of fraud which is a new cause of action, therefore the application should not be granted. To support this position, the 2na Respondent cited the case of Mulowooza & Brothers V N. Shah Ltd SCCA No. 26 of 2O10. - 20. I have considered the submissions of all the parties and resolve this issue as follows: - 21. Under Order 6 RuIe 19 of the Ciuil Procedure Rules it is provided that:

The court mag, at ang stage of the proceedings, allow either partg to alter or amend his or her pleadings in such manner and on such terms as mag be just, and all such amendments shall be made as maA be necessary for the purpose of determining the real questions in controuersg between the parties.

22. The principles for granting leave to amend proceedings as stated in the cases of Gaso Transport Services (Bus) Ltd V. Obene SCCA No.4 of 1994 [1990-1994] 1 EA 88 and Mulowooza &, Brothers Ltd vs Shah & Co. Ltd, SCCA No. 26 of 2010 are as follows:

- i. There is no injustice caused to the other party and if there is it can be compensated by costs. - ii. Amendments are allowed by courts so that the real question in controversy between the parties is determined and justice is administered without undue regard to technicalities. - iii. The amendment would not prejudice the rights of the opposite party. - iv. The application should not be malafide. - v. Multiplicity of proceedings should be avoided. - 23. In the counterclaim, in the main suit the $1st$ Respondent's case against the Applicant is that they were not adequately compensated for the accident. The Applicant in defence stated that they adequately compensated the $1^{st}$ Respondent. The Applicant now seeks to amend its written statement of defence on the ground that the Police report upon which the 1st Respondent was compensated was forged. In addition, the Applicant seeks to introduce a counterclaim for the money that was paid to the $1st$ Respondent on account of fraud. According to the Applicant, the information about the Police report being forged is new information that only became available to the Applicant at the time of seeking an authentic copy of the report. This information was not available to the Applicant at the time of filing its statement of defence. - 24. In the case of **Bakalumba Enterprises Limited Vs. Uganda** Breweries Limited, Stanbic Bank Limited M. A No. 817 of **2021,** Rwakakooko J held as follows:

*If one party sues another under a claim which is later overtaken by events and wishes to alter/ adjust that claim*

to take into account the developments that have happened since the institution of the suit then this should not be *prevented provided the subsequent developments still fall* within the same facts or series of events constituting the basis of the initial claim.

- 25. While I agree with the Respondents that indeed this is a new claim that has been introduced by the Applicant, I note that this claim is based on the same facts as in the main suit. The 1st Respondent's counterclaim in the main suit against the Applicant revolves around the compensation paid with respect to the accident that happened in August 2015 and therefore as was held in the above-cited case, the Applicant should not be prevented from amending their pleadings in view of the new developments. - 26. I note that indeed the Application has been brought rather late in the case, I also note that the report in question was in the hands of the Applicant even before the commencement of the suit and the Applicant should have been vigilant to check the validity of the report way before the institution of this suit. However, the Applicant makes serious allegations of fraud and illegality which in the interest of justice court cannot turn a blind eye to. (see the case of Makula International Ltd v. His Eminence Cardinal Nsubuga & Anor [1982] HCB 11). - 27. I find that the amendment will allow court to determine the real issue of controversy between the parties so that justice is administered. In addition, the amendment will not prejudice the rights of the Respondents and allowing the application will prevent a multiplicity of proceedings.

- 28. In the final result the Applicant is granted leave to amend its written statement of defence and file a counterclaim and the parties are further directed as follows: - a) The amended written statement of defence and counterclaim should be filed and served on the Respondents within 15 days of this Ruling. - b) The Respondents should file their amended pleadings within 15 days from the last date on which the Applicant should have served the Respondents. - c) The costs of this Application shall follow the main cause.

## Dated this 4th day of October 2023.

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Patricia Kahigi Asiimwe Judge Delivered on ECCMIS

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