Uganda Registration Services Bureau v Stellar Properties Limited (Miscellaneous Application 1495 of 2022) [2022] UGCommC 184 (6 December 2022)

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCIAL DIVISIONI MISCELLANEOUS APPLICATION NO. 1495 OF 2022 (ARISING FROM HCCS NO.0688 OF 2022)

## UGANDA REGISTRATION SERVICES BUREAU: : : : : : : : : : : : : : :APPLICANT VERSUS

### STELLAR PROPERTIES LIMITED RESPONDENT

## BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI RULING

The Applicant filed this application against the Respondent under Section 33 ofthe Judicature Act (Cap 13) and Order 36 of the Civil Procedure Rules SI 71-1 for leave to appear and defend Civil Suit No. 688 of 2022 and that costs of the application be provided for.

#### Grounds of the application

The grounds of the Application are found in the affidavit of Ms Mercy K. Kainobwisho, the Registrar General of the Applicant, and are briefly that the Respondent filed a civil suit against the Applicant claiming for a sum of UGX 6,136,000,000/ being outstanding rental arrears. The Applicant then lodged this application seeking for leave to appear and defend the matter.

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The Application was opposed by the affidavit in reply sworn by Mr Karim Hirji, wherein he avers that there is no arbitrable dispute within the meaning of Clause 17 of the Special Conditions of the Tenancy Agreement as there is no dispute in relation to rental arrears. That the balance of the accrued rentals amounting to UGX 5,689,186,1521 has never been disputed by the Applicant and even admits it in the Termination of Tenancy letter issued by it on the 29th August 2022. He further avers that Clause 17.2 of the 2022 Tenancy Agreement provides for arbitration as the means of dispute resolution but also provides for litigation at page 5.

He further avers that the claim of illegality cannot stand because each of the three tenancy agreements were signed by the Ms Mercy Kainobwisho and the tenancy service was consumed for the duration of each tenancy. That all three agreements were cleared by the Attorney General. That the Application raises no triable issues and the Applicant has no defence to the unpaid rental claim.

### REPRESENTATION

The Applicant was represented by the Attorney General's Chambers and the Respondent was represented by M/s MMAKS Advocates.

### RULING

The main Issue for determination by this Court is whether the Applicant should be granted unconditional leave to appear and defend Civil Suit No. 688 of 2022 and what remedies are available to the parties.

Counsel for the Applicant submitted that Court has the powers to grant orders to meet the ends ofjustice, and that justice in this case requires that the Applicant be granted a fair opportunity to present its defence. He cited Order 36 of the Civil Procedure Rules and the case of Mako ll/arehouse Co. Ltd V Total (U) Ltd

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Miscellaneous Application No. 1031 of 2021 where Justice Jean Rwakakoko held that leave to appear and defend a suit may be granted where the Applicant shows that he or she has a good defence on the merits or that a difficult point of law is involved or that there is a dispute which ought to be tried or a real dispute on the amount claimed.

Counsel further submitted that the application may also be granted where the Defendant shows that his or her defence raises a triable issue or questions of fact or law which ought to be determined at trial. He cited the case of MMK Engineering V Mantrust Ugando Limiled Miscellaneous Application No. 128 of 2021 in support. In relation to this case, Counsel submitted that paragraph 7 ofthe affidavit in support and paragraph 8 of the affidavit in rejoinder raises an issue as to the legality of the contracts from which the claim arises. That there were irregularities in the procurement process as there was no proof that funds had been committed in the full amount over the required period. That the Applicant should be given an opportunity to present evidence before Court.

Secondly, Counsel submitted that the issue as to whether the matter should be referred to arbitration is triable as it arises from the contracts that the Respondent seeks to enforce in the Civil Suit. He added that the sum of the arrears is in dispute and that this is an arbitrable matter although the Respondent says it is not, therefore that the Applicant should be allowed to appear and defend the suit. Lastly, he submitted that there is another triable issue as to whether or not the Applicant is liable to pay the total sums claimed.

Counsel also cited Articles 44 and,274 (l) of the Constitution of the Republic of Uganda to submit that the Applicant has proved on a balance of probabilities that there are triable issues that deserve to be considered by this Honourable Court. He prayed that the Application be allowed.

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In opposing the Application, Counsel for the Respondent submitted that the claim is for rental arrears for four years based on three contracts and said the amount due is UGX 5.6 billion and not UGX 6.3 billion as put by the Applicant, which would have been the case had the Applicant not terminated the contract in respect of 4 flours. On the first ground Counsel submitted that the contracts are not illegal and that the Applicant has been on the property for the past 15 years, and that the service was consumed therefore it is not contentious. That the claim of illegality is an afterthought. He cited Section 26 of the Public Procurement and Disposal of Public Assets Act which gives the Accounting Officer of a procuring and disposing entity, the overall responsibility for the execution of the procurement and disposal process like certifuing the availability of funds to support the procurement and signing contracts for procurement or disposal activities on behalfofthe entity in (0 and (g) respectively.

Counsel submitted that the Accounting Officer who is also the deponent of the affidavit in support of the Application is the one who signed some of the agreements; and that rentals have been paid continuously though not fully. He added that the Applicant in Annexure A (ii) to the affidavit in reply admitted the outstanding rent obligations and committed that they were working out a payment plan; and that they did not raise a reconciliation issue. That rent obligations cannot be debated and that the flours occupied and the duration are known. He added that in both A (ii) and D (ii), the Applicant did not dispute the rent, and that if these contracts were illegal, the Applicant would have been claiming back the UGX 6.1 billion, and that they would not have paid part of the money. He then prayed that the issues on illegality and quantum must fail.

Counsel further referred to Annexures C (i), (ii) and (iii) to the Affidavit in Reply which show that the three agreements were cleared and that they included the

quantum. Therefore, illegality is an afterthought and an attempt to delay or avoid payment.

In relation to the claim that arbitration is the dispute resolution mechanism, Counsel submitted that it is false and he added that when the Solicitor General advised in Annexure C (i) to the Affidavit in reply that the clause on dispute resolution be changed to litigation, it was accordingly changed as seen in Annexure A (iii) to the Plaint at page 5. He added that this matter cannot be referred for arbitration under Section 5 of the Arbitration and Conciliation Act because there is no triable issue and hence no dispute. That there is no contention within the English meaning to amount to a dispute; and that it does not pass the two tests of whether there is a dispute in existence both at the time arbitration is commenced and whether there is a dispute of a material of time.

In conclusion, Counsel submitted that the provisions of the Constitution on fair hearing quoted by Counsel for the Applicant have been in existence and are inelevant to the circumstances. He added that it is wrong for a government institution which is required to uphold the law on contract, with powers to exact tax collections, to be seen to hide when asked to meet its obligations.

In rejoinder, Counsel for the Applicant referred to clause 17.2 of annexure B to the Affidavit in reply at page 15 that provides for arbitration as the method of dispute resolution and page 5 on litigation conflicts and submitted that there is an illegality that needs to go for trial and that the advice ofthe Solicitor General in Annexure C (i) was not complied with. Counsel submitted that Annexure A (ii) relied on by Counsel for the Applicant does not state the outstanding amount anywhere but only states that they were cognisant of their rent obligations. That even Counsel for the Respondent has now stated a different amount from the sum in the summary suit so there is a triable issue and that Annexure A (i) is not signed and that the source is not known so it cannot be used to show the amount owing.

In relation to the issue of arbitration, Counsel submitted that the fact that the Respondent came to court shows that there is a dispute which needs to be considered and resolved through arbitration. He prayed that Court allows their application.

I have carefully read the pleadings, listened to the submissions and considered the authorities cited by both Counsel. It is trite law that in an application for leave to appear and defend, the Applicant must show that he or she has a good defence or that a difficult point of law is involved or that there is a dispute which ought to be tried or a real dispute on the amount claimed (See Mako Warehouse Co. Ltd V Total (U) Ltd Miscellaneous Application No. 1031 of 2021).

On whether there is a triable issue, the Applicant raised three main issues, the first on legality of the tenancy contracts, referral to arbitration and whether the sum claimed should be paid. On legality of the contracts in issue, I have looked at the three contracts marked as Annexures A (i), A (ii) and A (iii) to the Plaint and all three were signed by the Accounting Officer, the last being signed by Ms Mercy K. Kainobwisho, the deponent to the Affidavit in support of the Application. Under section 26 of the Public Procurement and Disposal of Public Assets Act, the Accounting Officer has overall responsibility for the execution of the procurement and disposal process in the procuring and disposing entity. Specifically, under section 26 (l) (0 and (g), the Accounting Officer has the function of certifuing the availability of funds to support the procurement and also signing contracts for the procurement or disposal activities.

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In light ofthe above, I find the said tenancy agreements were duly signed by the Accounting Officers at the time. The above provisions presume that the Accounting Officers would have confirmed the availability of funds before signing the contracts. In fact, the Applicant even went ahead and got clearance from the Attorney General as evidenced in C (i), C (ii) and C (iii). In C (iii), the Attomey General advised that the provision in SCC (GCC 17.2) be changed from arbitration to litigation and this was done. Clause 17.2 on page 15 of C (iii) provides that parties may refer a dispute for arbitration or such other formal mechanism specified in the SCC if parties fail to resolve disputes. Under the Special Conditions of Contract (SCC) in the Tenancy Agreement on page 5, the agreement provided that the formal mechanism for dispute resolution shall be litigation before a Court of competent jurisdiction in Uganda.

I have taken cognisance of the deliberate use of the words 'may' on page <sup>15</sup> suggesting arbitration or formal mechanism in the SCC and the word 'shall' on page 5 in the SCC. From those wordings, it is clear that the intention of the parties was to make litigation mandatory as the dispute resolution mechanism. Therefore, the suggestion of the Attorney General in Annexure C (i) to the Affidavit in reply was considered. It is therefore settled according to the SCC on page 5 that litigation is the rightful dispute resolution mechanism and therefore there is no triable issue in that regard.

In relation to quantum, the Applicant has not produced any evidence to show that they dispute the outstanding rental arrears although Annexure A (ii) does not state the amount owed. Like Counsel for the Respondent submitted that the duration of the tenancy is known save for the fact that the Applicant terminated the agreement earlier. The amounts paid are also known and therefore the outstanding amount should also be known. Counsel for the Respondent in his submissions explained

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the discrepancy in the figures from UGX 6.6 billion to UGX 5.6 billion as seen in Annexures A, B and C to the Plaint.

Apart from giving a general denial on the sum claimed, the Applicant has not given evidence on the sum which they think is the rightful amount. I find that they have not proved their allegations/ claim and therefore I am inclined to find that it was an afterthought and a deliberate move to delay payment as suggested by Counsel for the Respondent. Therefore, there is no triable issue on the amount claimed in rental arrears.

In relation to the constitutional right to be heard, I agree that the Applicant ought to be given the right to be heard, however, summary suits are provided for under Order 36 of the Civil Procedure Rules. The present case is one of the circumstances under which a matter can be filed under that provision. As earlier stated, for an Applicant to be granted leave to appear and defend, he or she must show that he has a good defence or that there is a difficult point oflaw involved or that there are triable issues in the defence. In this case, the Applicant has not shown any of those grounds, therefore, the Application has no merits so the right to be heard cannot be relied on.

In the premises, I find that this Application has no merit whatsoever and it is hereby dismissed with costs to be paid to the Respondent.

In the result therefore and in conclusion, judgment is entered in favour of the Respondent as prayed in the Plaint in Civil Suit No. 688 of 2022 as follows:

l. The Applicant / Defendant shall pay Ugx 5,689,186,152l: being the rental arrears owed to the Respondent /Plaintiff for the period up to 3Oth September 2022.

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- 2. The Applicant/ Defendant shall pay Ugx 613,687,8421: to the RespondenV Plaintiff for the period <sup>1</sup> st October to 3 l't December 2022. - 3. Costs of the suit are awarded to the Plaintiff / Respondent.

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HON. LADY JUSTICE ANNA B. MUGENYI DATED 6. J..w..t L