The Micro Finance Support Centre Ltd v The Uganda Micro Enterprenuers and Ors (HCT-00-CC-CS 1007 of 2004) [2006] UGCommC 26 (7 June 2006)

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)}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8 \pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs28\insrsid1136281\charrsid13446588 \par }\pard \qc \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid13461619 {\b\f36\fs28\insrsid13461619 THE REPUBLIC OF UGANDA \par \par IN THE HIGH COURT OF UGANDA AT KAMPALA \par (COMMERCIAL COURT DIVISION) \par \par HCT-00-CC-CS-}{\b\f36\fs28\insrsid9979270 1007-2004}{\b\f36\fs28\insrsid13461619 \par }\pard \qj \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\b\f36\fs28\insrsid9979270 \par \par THE MICRO FINANCE SUPPORT CENTRE }{\b\f36\fs28\insrsid285595 LTD}{\b\f36\fs28\insrsid9979270 :::::::::: PLAINTIFF \par \par }\pard \qc \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16529224 {\b\f36\fs28\insrsid9979270 VERSUS \par }\pard \qj \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\b\f36\fs28\insrsid9979270 \par 1. THE UGANDA MICRO ENTERPRENUERS \par ASSOCIATION LTD \par 2. JENINAH MARY NTABGOBA \par 3. KAYONGO NKAJJA GODFREY }{\b\f36\fs28\insrsid12525467 ::::::::::::::::::: DEFENDANTS}{\b\f36\fs28\insrsid9979270 \par \par \par BEFORE: }{\b\f36\fs28\ul\insrsid9979270\charrsid8278273 THE HONOURABLE MR. JUSTICE YOROKAMU BAMWINE}{\b\f36\fs28\insrsid9979270 \par \par }{\b\f36\fs28\ul\insrsid9979270\charrsid9724355 R U L I N G: \par }{\b\f36\fs28\insrsid9979270 \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\f36\insrsid9724355 The MICRO FINANCE SUPPORT CENTRE LIMITED, herein after called the plaintiff sued the three defendants jointly and severally for special and general damages particularised in the plaint. The suit is based on three loan agreements.}{\f36\insrsid9979270 \par }{\f36\insrsid9724355 \par When the suit came up for hearing, Mr. Wambuga for the defendants raised a preliminary point of law. He submitted that the plaint does not disclose a cause of action against the defendants. The reason for arguing}{\f36\insrsid4592352 th}{ \f36\insrsid12525467 u}{\f36\insrsid4592352 s is that according to the plaint, the plaintiff relies on three agreements}{\f36\insrsid8870794 which were entered into between the Government of Uganda and the 1}{\f36\super\insrsid8870794\charrsid8870794 st} {\f36\insrsid8870794 defendant. The other defendants are said to have guaranteed }{\f36\insrsid12525467 re-}{\f36\insrsid8870794 payments. Counsel\rquote s view is that the plaintiff is not the Government of Uganda and there is no evidence in the plaint of any assignment of the government\rquote s rights in the agreements to the plaintiff. The long and short of Mr. Wambuga\rquote s argument is that the plaintiff is a third party, who cannot benefit from those agreements.}{\f36\insrsid9724355 \par }{\f36\insrsid8656835 \par Mr. Karugire for the plaintiff does not agree. According to him, to determine whether a cause of action is disclosed or not, the Court should look at the plaint. It should not look at the }{\f36\insrsid3696846 attachments to it}{\f36\insrsid8656835 . In his view, to determine whether or not the plaintiff was party to the agreements, it requires evidence which evidence is y et to be led. The plaint is not a document that contains evidence. It is a statement of claim. They have pleaded in para 6 (a) of the plaint that the money was lent out by the plaintiff\rquote s predecessor, }{\f36\insrsid3696846 t}{ \f36\insrsid8656835 he Rural Micro-Finance Support Project. That should be enough for purposes of establishing a cause of action. \par \par }{\f36\ul\insrsid8656835\charrsid9535175 Counsel: \par }{\f36\insrsid8656835 Mr. Edwin Karugire for the plaintiff. \par Mr. Henry Wambuga for the defendant. \par \par I have addressed my mind to the able arguments of both counsel. \par \par Halsbury\rquote s Laws of England, Vol. 1 at P.6 defines a \'93}{\i\f36\insrsid8656835\charrsid9535175 cause of action}{\f36\insrsid8656835 \'94 as }{\i\f36\insrsid8656835\charrsid9535175 \'93 that particular act on the part of the defendant which gives the plaintiff his cause of complaint.}{\f36\insrsid8656835 \'94 It is, so to say, the fact or combination of facts which gives a person the right to judicial redress or relief against anot her. The rationale is that where there is a right recognized by law, there also exists a corresponding remedy for its violation. Thus 0.6 r 1 (a) of the Civil Procedure Rules requires all pleadings generally to contain a brief statement of the material} {\f36\insrsid1269145 f acts on which the party pleading relies for claim or defence. And under 0.7 r 1 (e), it is mandatory that a plaint contains the facts constituting the cause of action and when it arose. The consequences of a plaint which discloses no cause of action are grave: it must be rejected by the Court. It is as serious as that. Therefore, before rejecting a plaint for non-disclosure of a cause of action, the Court must be duly satisfied that the case as presented to it is }{\f36\insrsid8278273 unmaintainable}{ \f36\insrsid1269145 an}{\f36\insrsid3696846 d}{\f36\insrsid1269145 unarguable. Let me now turn to the impugned plaint.}{\f36\insrsid8656835 \par }{\f36\insrsid1269145 \par In para 6 (a) thereof, the plaintiff states that its cause of action is derived from an agreement dated 30/11/2001 entered between the Rural Microfinance Support Project, the predecessor of the plaintiff, and the first defe ndant for the advancement to the first defendant of a loan of Shs.35,000,000-. The other claims are also based on similar agreements. \par }{\f36\insrsid10832218 \par Mr. Karugire was of the view that in determining whether or not the plaint discloses a cause of action, Court should not }{\f36\insrsid3696846 concern itself with}{\f36\insrsid10832218 the agreements themselves. }{\f36\insrsid3696846 His argument}{ \f36\insrsid10832218 does not }{\f36\insrsid3696846 in my judgment }{\f36\insrsid10832218 represent the law. For in }{\b\f36\ul\insrsid10832218 Jeraj Shariff & Co. \endash Vs- Chotai Fancy Stores [1960] EA 374}{\f36\insrsid10832218 , the Court of Appeal for Eastern Africa stated at p. 375, and I agree: \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid9535175 {\i\f36\insrsid14491716\charrsid9535175 \'93The question whether a plaint discloses a cause of action must be determined upon perusal of the plaint alone, together with anything attached so as to form part of it, and upon the assumption that any express or implied allegations of fact in it are true.\'94.

\par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\f36\insrsid14491716 \par The relevant portions of the agreement of 30/11/2001 read as follows: \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid9535175 {\i\f36\insrsid14491716\charrsid9535175 \'93This agreement is made this 30}{\i\f36\super\insrsid14491716\charrsid9535175 th}{ \i\f36\insrsid14491716\charrsid9535175 day of the Month of November in the year 2001. \par }{\i\f36\insrsid9535175 \par }{\i\f36\insrsid8278273\charrsid9535175 BETWEEN the}{\i\f36\insrsid14491716\charrsid9535175 Government of Uganda (GOU) represented by the Executive Director, Rural Micro Finance Support Projec t (RMSP) of P. O. Box 33711, Kampala, on the one part Uganda Micro \endash Entrepreneurs Association P. O. Box 49336 Kampala District on the other part. \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\f36\insrsid14491716 \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid9535175 {\i\f36\insrsid14491716\charrsid9535175 WHEREAS \par 1.\tab The Government has received funds from the African Development Bank (ADB) \tab in order to support the RMSP being implemented under the Office of the Prime \tab Minister (OPM). \par 2.\tab The Government represented by Rural Micro Finance Support Project (RMSP) wishes to use these funds to promote the development of sustainable financial services to the micro and small scale entrepreneurs. \par }{\i\f36\insrsid8007822\charrsid9535175 3.\tab Uganda Micro-Entrepreneurs Association is applying for a loan to increase its \tab lending capacity to the micro and small entrepreneurs. \par 4.\tab The Rural Micro Finance Support Project (RMSP) and Uganda Micro}{\i\f36\insrsid15029386 \par }{\i\f36\insrsid8007822\charrsid9535175 \endash }{\i\f36\insrsid15029386 }{\i\f36\insrsid8007822\charrsid9535175 Entrepreneurs Association hav e agreed to enter into this agreement for the purpose of channeling part of the funds to the Micro-Enterprises upon the terms and conditions thereafter set forth. \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\f36\insrsid8007822 \tab \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid9535175 {\i\f36\insrsid8007822\charrsid9535175 NOW THIS AGREEMENT WITNESSETH AS FOLLOWS: \par Art 1: THE LOAN \par 1:1 The Rural Microfinance Support Project (RSMP) hereby agrees to lend \'85\'85\'94 \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\f36\insrsid11958672 \par From the above, it appears to be very clear to me that this was a case of a disclosed principal. The agreement was between the 1}{\f36\super\insrsid11958672\charrsid11958672 st}{\f36\insrsid11958672 defendant and the Government of Uganda represented by the Executive Director of the Project. The Rural Microfinance Support Project was a Project in the Office of the Prime Minister}{\f36\insrsid15346662 with an Executive Director}{ \f36\insrsid11958672 . It had no corporate status. It was not a person in law, a \lquote }{\i\f36\insrsid11958672\charrsid5312706 person}{\f36\insrsid11958672 \rquote being any entity with legal rights and existence inclu ding the ability to sue and be sued,}{\f36\insrsid13962816 to sign contracts, appear in Court either by themselves or by lawyers, and generally, other powers incidental to the full expression of the entity in law. It simply had no independent existence} {\f36\insrsid281962 , a corporate personality so to say}{\f36\insrsid13962816 . It was a Project in the Office of the Prime Minister and that was it.}{\f36\insrsid11958672 \par }{\f36\insrsid13962816 \par If I got Mr. Karugire\rquote s argument properly, }{\f36\insrsid4983125 t}{\f36\insrsid13962816 he plaintiff\rquote s case is based on an alleged succession, that is, that the Rural Microfinance Support Project was the predecessor of the plaintiff. }{ \f36\insrsid4983125 It is not indicated in the plaint as to how that succession came about. This is where Mr. Karugire feels that if he is given time, he will provide the missing link through evidence. And it is of course where the problem lies. T}{ \f36\insrsid13962816 he plaintiff is a limited liability company, or so it has been described in the plaint. It could not have been born by }{\f36\insrsid4877733 the}{\f36\insrsid13962816 }{\f36\insrsid4877733 P}{\f36\insrsid13962816 roject, a non-legal person. It could only have }{\f36\insrsid4877733 come into existence through incorporation}{\f36\insrsid13962816 . If on incorporation it assumed the rights of the }{\f36\insrsid4877733 P}{\f36\insrsid13962816 roject}{ \f36\insrsid4877733 or the incorporation was for purposes of the limited liability company assuming the Project rights}{\f36\insrsid13962816 , the law is settled that a contract made before a company is formed cannot bind the company formed afterwards. Nor can a company by adoption or ratification obtain the benefit of a contract purporting to have been made on its behalf before it came into existence. In order to do so a new contract must be made with it after its incorporation on the terms of the old one. See }{ \b\f36\ul\insrsid13962816 NEC & 2 Others \endash Vs- Nile Bank Ltd SCCA No. 17/97}{\f36\insrsid13962816 reproduced in }{\b\f36\ul\insrsid13962816 [1995] 1 KARL 138}{\f36\insrsid13962816 at p.144. \par \par The agreements attached to the plaint are not such new contracts envisioned in the above case.}{\f36\insrsid12875140 As to any likely assignment of contract, the law is that rights or benefits under a contra ct may be assigned by legal assignment, equitable assignment or by operation of law. Except, perhaps for equitable assignment, }{\f36\insrsid15299175 n}{\f36\insrsid12875140 one of the others is applicable herein in the sense that none has been pleaded.} {\f36\insrsid15299175 In case of any written assignment or document giving rise or explaining the genesis of such succession, the law requires under 0.7 r. 14 of the Civil Procedure Rules that it be attached to the plaint on filing. None has been attached.}{\f36\insrsid13962816 \par }{\f36\insrsid12875140 \par I have consider}{\f36\insrsid15299175 ed}{\f36\insrsid12875140 }{\i\f36\insrsid12875140\charrsid5312706 \lquote equitable assignment\rquote }{\f36\insrsid12875140 in view of Mr. Karugire\rquote s passionate prayer that if Court so wants, he can produce evidence of the succession. }{\f36\insrsid15299175 The issue is of course not what the Court wants but what a party must do to establish a cause of action. }{\f36\insrsid12875140 I have already expressed doubt on the possibility of a non-legal person }{\f36\insrsid15299175 giving birth and later on }{\f36\insrsid12875140 being succeeded. As regards equitable assignment, a transfer of property taking effect only }{ \f36\insrsid4877733 i}{\f36\insrsid12875140 n equity, I\rquote m mindful of the fact that no particular }{\f36\insrsid4877733 fo}{\f36\insrsid12875140 rm is necessary; it need not even be in writing. But an equitable ass ignee of a legal chose in action can enforce the right assigned by action, joining}{\f36\insrsid402301 the assignor as a co-claimant, if he consents; or as a co-defendant if he does not. See: }{\f36\insrsid402301\charrsid402301 Osbo}{\f36\insrsid402301 rn\rquote s Concise Law Dictionary, 9}{\f36\super\insrsid402301\charrsid402301 th}{\f36\insrsid402301 Edn, at p. 152.}{\f36\insrsid12875140 \par }{\f36\insrsid402301 \par The pleadings herein do not r eflect compliance with any such procedure. It is a fundamental principle of our law that only a person who is party, to a contract can sue upon it. A stranger to a contract can not take advantage of the provisions of the contract even where it is clear from the contract that some provision in it was intended to benefit him: }{\b\f36\ul\insrsid402301 Midland Silicones Ltd \endash Vs- Scruttons Ltd [1962] AC 446.}{\b\f36\insrsid402301\charrsid5312706 }{\f36\insrsid402301 In my view the principle stated in the above suit seals the plaintiff\rquote s fate herein. To maintain a suit in its current form would amount to the plaintiff getting a benefit out of a transaction}{\f36\insrsid13070222 to which it was not a party. The law says No}{\f36\insrsid15299175 . }{\f36\insrsid13070222 }{\f36\insrsid15299175 I}{\f36\insrsid13070222 n my view }{\f36\insrsid15299175 a contrary position}{\f36\insrsid13070222 lacks any jurisprudential foundation that I can }{\f36\insrsid15299175 think of}{\f36\insrsid13070222 . Even if I were to take a generous course and allow Mr. Karugire\rquote s argument that evidence would take care of the objection raised by counsel, no amount of evidence can in my view change the status quo. The position would of course have been different if the case had been filed by the Government or on its behalf and the Attorney General had given authority, to the plaintiff through their counsel to conduct its prosecution.}{\f36\insrsid13330252 Such a course is not borne out by the pleadings.}{\f36\insrsid402301 \par }{\f36\insrsid7824645 \par It is settled law that where}{\f36\insrsid10190250 a plaint fails to disclose a cause of action, then it is not a plaint at all. It is considered a nullity which cannot even be amended. It was so held in }{\b\f36\ul\insrsid10190250 Auto Garage & Anor \endash Vs- Motokov (No. 3) [1971] EA 514}{\f36\insrsid10190250 and I respectfully agree with that position. The element of a right enjoyed by the plaintiff is lacking in this case in its current form. And if any of the elements of a cause of action, } {\f36\insrsid4080694 such as }{\f36\insrsid10190250 a right enjoyed by the plaintiff which has been violated, is lacking, the plaint is a nullity, and no amount of talking can save it, even if }{\f36\insrsid4080694 a decision}{\f36\insrsid10190250 were to be post poned }{\f36\insrsid4080694 on it }{\f36\insrsid10190250 to a later date.}{\f36\insrsid7824645 \par }{\f36\insrsid10190250 I would uphold the point of law raised by counsel about the plaint disclosing no cause of action against the defendants or any of them and order it (the plaint) struck out with costs to the defendants. I order so. \par \par Yorokamu Bamwine \par }{\b\f36\insrsid10190250\charrsid10190250 J U D G E \par }{\f36\insrsid10190250 08/06/2006 \par }{\f36\fs16\insrsid14968754\charrsid15282353 \par }{\f36\insrsid15282353 8/}{\f36\insrsid13523519 6}{\f36\insrsid15282353 /2006 \par Mr. Karugire for plaintiff. \par Mr. Paul Kutesa for defendants. \par }{\f36\fs16\insrsid15282353\charrsid15282353 \par }{\b\f36\insrsid15282353\charrsid15282353 Court}{\f36\insrsid15282353 : Ruling delivered. \par }{\f36\fs16\insrsid15282353 \par }{\f36\fs16\insrsid15282353\charrsid15282353 \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid15282353 {\f36\insrsid15282353 Yorokamu Bamwine \par }{\b\f36\insrsid15282353\charrsid15282353 J U D G E \par }{\f36\insrsid15282353 8/6/2006 \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9979270 {\f36\fs16\insrsid15282353\charrsid15282353 \par }{\b\f36\insrsid15282353\charrsid15282353 Mr. Karugire:}{\f36\insrsid15282353 I\rquote m instructed to apply for leave to appeal. \par }{\f36\fs16\insrsid15282353\charrsid15282353 \par }{\b\f36\insrsid15282353\charrsid15282353 Court:}{\f36\insrsid15282353 Leave is granted. \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid15282353 {\f36\insrsid15282353 \par Yorokamu Bamwine \par }{\b\f36\insrsid15282353\charrsid15282353 J U D G E \par }{\f36\insrsid13523519 8/6}{\f36\insrsid15282353 /2006 \par }}