The Micro Finance Support Centre Limited v Namanyonyi Cooperative Savings & Credit (Miscellaneous Application 50 of 2024) [2024] UGHC 957 (14 October 2024)

#### THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA HOLDEN AT MBALE

## HCT-04-CV-MA-0050-2024

# (ARISING FROM CIVIL SUIT NO.23 OF 2019)

# THE MICRO FINANCE SUPPORT CENTRE LIMITED :::::APPLICANT

#### **VERSUS**

# NAMANYONYI COOPERATIVE SAVINGS & CREDIT

SOCIETY::::::::::::::::::::::::::::::::::::

# **BEFORE: HON. JUSTICE LUBEGA FAROUQ**

# **RULING**

## 1. Introduction

- 2. This Application was brought by way of notice of motion under Section 37 of the Judicature Act Cap 16, Section 98 of the Civil Procedure Act Cap 285, Order 9 rule 12, Order 29 Rule 2 and Order 51 rules 6 of the Civil Procedure Rules, seeking orders that - a. the interlocutory judgment entered on 14<sup>th</sup> November 2019 against the Applicant be set aside; - b. the ex-parte Judgment and decree entered on 24<sup>th</sup> January 2024 against the Applicant be set aside; - c. Leave to be granted to the Applicant to file a written statement of Defense out of time to Civil Suit NO.23 of 2019; - d. Costs for the Application.

# 3. Background

4. The Respondent herein filed civil suit No.23 of 2019 against the Applicant. That the Applicant was served with summons to file defence but never appeared in court, hence, the Respondent prayed that the matter proceeds exparte. The prayer was granted by court and the matter proceeded exparts under Order 9 rule 10 and $11(2)$ of the Civil Procedure Rules.

# 5. The Respondent's case

6. The Respondent alleges that the Applicant was duly served with the court Process and was fully aware of the said civil suit but just decided to waive his right to be heard.


# 7. The Applicant's case

- 8. The Applicant on the other hand alleges that they only learnt of the said suit when the Respondent started the execution process of the decree in Civil Suit No. 23 of 2019. Thus, the instant Application. - 9. This application was support by an Affidavit of DRAMDRI KILLION, the Applicant's operations officer, which has been relied upon in the determination of this application but briefly states that - a. That on or around 15<sup>th</sup> March 2024, the Applicant's officers were encountered by a court bailiff who had come with a warrant of attachment issued on 13<sup>th</sup> March 2024 and it was at that point that the Applicant learnt of existence of Civil Suit No 23 of 2019; - b. That what became clear is that the Applicant was never served with the summons to file defense and to date no summons have ever been brought to the attention of any principal officer of the Applicant and neither was any copy sent to the Applicant's registered office. - c. That it was discovered from court record that a Notice to Show Cause in respect to Civil Suit No. 23 of 2019 which was issued on 6<sup>th</sup> March 2024 according to the affidavit of service dated 12<sup>th</sup> March 2024, was allegedly served upon the receptionist who handed over the same to the Applicant's driver; - d. That the Applicant has never received or seen the said Notice to Show Cause; - e. That it was discovered on the court record that hearing notices were issued but the same were never served upon the Applicant irrespective of the directives. - f. That summons were purportedly served and stamped by the Applicant on 29<sup>th</sup> July 2019, but the Applicant does not know how the stamp was procured or where it was got from because it does not show the Applicant's officer who acknowledged the same.

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- 10. This application was opposed by an affidavit in reply sworn by **MUKHOOLI YUNUS**, the chairperson to the Respondent which has been relied upon in the determination of this application and briefly states - a. That the Respondent filed civil suit No.23 of 2019 before this Court against the Applicant who was served with the summons to file its defense; - b. That the Applicant failed to file their defense and hence prompting the Respondent to apply for an interlocutory judgment which was granted and the matter went for formal proof; - c. That the Applicant should be in know of its staff and in position to know who was at the station on a particular date to receive the said documents because the Respondent have been delivering documents to the Applicant's office before even the filing of Civil Suit No. 23 of 2019 and it is the habit of Applicant's officers receiving documents and never attach particulars of officers receiving the same; - d. That the Applicants were aware of the said suit as they attempted to commence a mediation through Justice Centers Uganda which confirms that they had knowledge of the said matter. - 11. In rejoinder the Applicant averred as follows- - (a) That at the very beginning of the hearing of this application, the Applicant shall raise a preliminary objection to the effect that the Affidavit in Reply was filed out of time without leave of court since counsel for Respondent was served on 3<sup>rd</sup> April 2024 but replied on $3<sup>rd</sup>$ May 2024; - (b) That the law on service of corporations like the Applicant is clear on who is supposed to receive summons.

## 12. Legal Representation

13. Counsel Wetaka of Luchivya & Co Advocates represented the Applicant while Counsel Kisambira Isma represented the Respondent.

#### 14. Submissions.

15. At the hearing of this application, counsel were given schedules to file their respective written submissions. Both parties complied. Their submissions have been relied upon in determination of this application.

#### 16. Submissions by Counsel for Applicant.

- 17. Counsel for Applicant submitted that the court has unrestricted discretion and authority in setting aside ex-parte Judgments. He contended that he was never served with summons to file a defense as required by law and only came in the know of Civil Suit No.23 of 2019 on or around 15<sup>th</sup> March 2024 upon commencement of execution processes. He cited Order 29 Rule 2(a) of the CPR, and the case of **Kyambogo** University V. The Heights Ltd HCMA 0954 OF 2015 and Attorney General & Anor V. James Mark & Anor Civil Appeal No.08 of 2004) USC 4(6 March 2008) to support his submissions. - Counsel argued that service on corporations must be made on 18. the secretary, director or other principal officer of the corporation. Thus, the alleged service was effected onto the uncertain secretary of the Applicant out of the scope of order 29 rule 2. - 19. Counsel further submitted for the Applicant that order 51 rule 6 of the CPR mandates court to enlarge the time upon such terms as justice of the case may require. He added that the parties have a right to be heard as a non-derogable constitutional right under Article 44 (c) of the 1995 Constitution of Uganda. - 20. Counsel submitted that the Respondent in Civil Suit No. 23 of 2019, sued for conversion and return of her purchase agreements but had never requested for the said documents and the Applicant refused to surrender them as purported by the Respondents. He argued that the Applicant did not receive any letter requesting for the said documents and the said letter of legal action is not known by the Applicant thus, the Applicant has a sufficient cause for extension of time to file a defense in

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Civil Suit No. 23 of 2019 so that the case is heard on its merits.

- 21. Submission by counsel for the Respondent. - 22. Counsel for the Respondent submitted that ex parte judgments can only be set aside upon proof of non-service of summons and sufficient cause to set aside the judgment of court. He referred court to order 9 rule 27 of the Civil Procedure rules SI.71. - 23. He argued that service of summons in Civil Suit No.23 of 2019 was effected on a responsible person of the Applicant who had to make sure that the served documents were given to the Applicant's principal officers. He cited Order 29 Rule 2(b) of CPR to support its submissions - 24. Counsel contended that service can be effected by post to the registered office of the corporation or at the place where the corporation carries on its ordinary business and by virtue of the receiving stamp onto the notice of motion and summons to file a defense, implies the Applicant had direct knowledge of Civil Suit No 23 of 2019. - 25. Counsel further submitted for the Respondent that they served documents to the Applicant's officer who was given authority, thus the Applicant was legally served and aware of the suit against it. This can be proved by the mediation session which was conducted on 10<sup>th</sup> November 2020. - 26. In addition to the above, counsel argued that sufficient cause for setting aside an exparte judgment depends on the circumstances of each case which must relate to the inability or failure to take a particular step in time. Thus, the Applicant's submission of lack of knowledge of an existing suit was false and the same does not disclose a reasonable ground for extension of time to file a defense since there was proper service on to the Applicant. He cited the case of Hakima Kyamanya V Sajjabi **Chris CACA NO.1 of 2006** to support his submission. - 27. In rejoinder counsel for the Applicant submitted that the Affidavit of service of summons to file a defense does not indicate the person the Respondent served.

28. He argued that the said mediation notice was only meant to be served upon them and they have never extracted the same and the Respondent ought to have proved that the Applicant commenced the mediation as highlighted in Kamo Enterprise Ltd *V Krystalline Slat Ltd Civil Appeal 8 of 2018.*

#### 29. Analysis of Court.

**30.** Order.9 r.12 of the Civil Procedure Rules, provides that-

"Where Judgment has been passed pursuant to any *proceeding rules of this order, or where judgment has been* entered by the Registrar in cases under order 50 of these rules the court may set aside or vary the judgment upon such terms as may be just."

- 31. Order 9 rule 27 of the Civil Procedure Rules SI.71, provides that-"In any case in which a decree is passed ex parte against a defendant, he or she may apply to the court by which the decree was passed for an order to set it aside; and if he or she satisfies the court that the summons was not duly served, or that he or she was prevented by any sufficient cause from appearing when the suit was called in for hearing, the court shall make an order setting aside the decree as against him or her upon such terms as to costs, payment into court, or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit; except that where *the decree is of such a nature that it cannot be set aside as* against such defendant only, it may be set aside as against all or any of the other defendants also." - 32. In the present case, the Applicant averred under paragraphs 4 and $2$ of the affidavit in support that it has never been served with the summons to file a defence in Civil Suit No. 23 of 2019 and to date no summons has ever been brought to the attention of either her secretary, director or any principal officer of the company and neither was any sent at the Applicant's registered office. - 33. It added that it came to know about the existence of the said

suit in court on 15<sup>th</sup> of March, 2024 when the Applicant's officers in Mbale encountered a bailiff $T/A$ Gibogi who had come with a warrant of attachment accompanied by police purporting to attach moveable property to wit Motor Vehicles Reg. UBK 876M and UBJ 344K to recover Ugx: 88,390,000/=.

- 34. The Respondent however on the other hand averred under paragraph 7 of the affidavit in reply that the Applicant was served with the summons to file defence. It attached annexure "C" which is the affidavit of service. In the affidavit of service, it is indicated under paragraph 3 that a one Amaso Winnie (the court clerk) proceeded to Micro Finance Support Centre to serve the Applicant. Upon arrival, she found a secretary to whom she introduced herself and the purpose of the visit. That the secretary accepted service by stamping on the summons. - 35. Order 29 rule 2 of the Civil Procedure Rules provides that-

"Subject to any statutory provision regulating service of process, where the suit is against a corporation, the *summons may be served-*

(a) On the secretary, or on any director or other principal *officer of the corporation; or*

(b) by leaving it or sending it by post addressed to the $\frac{1}{2}$ corporation at the registered office, or if there is no registered office, then at the place where the corporation carries on business.

- 36. In Kampala City Council V. Apollo Hotel Corporation (1985) **HCB77** it was held that under Order 26 rule $2(a)$ (now Order 29) such process must be served on senior officers of the corporation who are responsible for the management of the corporation and who are in a position to take action on behalf of the corporation. Thus, the Secretary envisaged in sub-rule 2(a) above must be a principal officer, not a secretary at the level of a receptionist. - 37. In the present case, the record indicates the Respondent served the Applicant with the summons to file defence in Civil Suit No. 023 of 2019 on 29<sup>th</sup> of July 2019. I have looked at the alleged

summons and noted that it contains the stamp of the Applicant company but although the stamp is there, the same was not signed by the recipient.

- 38. The Respondents averred under paragraph 13 of the affidavit in reply that it is the habit of the Applicant's staff to received documents and never attach the particulars of the officer acknowledging receipt of the same. It attached annexure "G" to prove the same. - 39. However, be the above as it may, it was the duty of the court process server to ensure that whoever received the documents, had to indicate his or her name as well the signature. Otherwise, the alleged stamp could be mistaken to be one of those which are generated by fraudsters. - 40. In any case, if that is the habit of the Applicant company, then, it is a wrong procedure which the court process server who is an experienced person and well informed about court process had to cure by making sure that the documents she served were signed because the implications of failure to do so are well known to her. - 41. Secondly, with the recent enhanced technology, the process server ought to have gone beyond mere service to obtain credible proof; such as taking pictures using her phone as proof of receipt. This proactive approach safeguards against subsequent denials or disputes regarding service of the summons. - 42. Therefore, since whoever stamped the summons did not endorse his or her signature, this court cannot establish whether the alleged summons was received by the Applicant's company or not. - 43. Consequently, it is the finding of this court that the summons were not duly served, and hence, the Applicant was prevented by a sufficient cause from filing its written statement of defence. - 44. In S. Kyobe Senyange V. Naks Ltd (1980) HCB 31, it was held by Hon. J. Odoki (as he then was) that-

"Before setting aside an exparte judgment, the court has to be satisfied that not only has the defendant had some

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*reasonable excuse for failing to appear but also that there is merit in the defence case.*"

- 45. In the instant case, the Applicant averred under paragraph 17 of the affidavit in reply that they have a good defence towards Civil Suit No. 23 of 2019. - 46. In the circumstance, this application succeeds in the terms below- - (a) The interlocutory judgment entered on 14<sup>th</sup> of November, 2019 against the Applicant is set aside. - (b) The ex-parte judgment and decree entered on 24<sup>th</sup> January, 2024 against the Applicant is set aside. - (c) Leave is granted to the Applicant to file its written statement of defence to Civil Suit No. 23 of 2019 within 15 days from the date of this ruling.

(d) Costs shall be in the cause.

I so order.

LUBEGA FAROUQ

Ag. JUDGE

Ruling delivered via the email of the Advocates of the parties on 14<sup>th</sup> day of October, 2024.

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