Victoria Seeds Limited v Sunde (Miscellaneous Cause 11 of 2022) [2022] UGCommC 186 (7 November 2022)

Full Case Text

## 5 THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL COU RT DIVISION)

### MISC. CAUSE NO. 11 0F 2022

# VICTORIA SEEDS LIMITED:::::::::::::l::::r:::::l:::::i::::::t:::::::::::t: APPLICANT

### VERSUS

O. N. SUNDE :::::::::::r3::::::i:::r::::::::!:::::i::::::::::::::t:::t::::ii:t:!:: RESPONDENT

### BEFORE: HON. LADY IUSTICE ANNA .8. MUGENYI

### RULING

I have read the pleadings and listened to the submissions of counsel for the parties in this matter. 15

Counsel for the Respondent raised a preliminary objection before the application could be heard to the effect that the said application should be dismissed for being filed out of time prescribed by the Insolvency Act of 2011; and the Insolvency Regulations,

2013. 20

Section 5 of the Insolvency Act provides:

- 5. Setting aside a statutory demand - (1) The court may on the application of the debtor, set aside a statutory demand. - (2) An application under sub-section shall- - 25 - (a) Be made within ten working days after the date of service of the demand. - (b) Be supported by an alfidavit - (c) Be served on the creditor with the affidavit within ten working days after the date of service of the demand. - (3) The court may, for sufficient cause, extend the time for making or serving an

-N

application to set aside a statutory demand and at the hearing ofthe application, extend the time for compliance with the statutory demand.

(4).."

Regulation 5(1) of the Insolvency Regulations 2013 provides that:

"5(1) Subject to subregulation (2) a statutory demand shall be served personally on the debtor."

Regulation 5(2) provides that:

- (2) Where the debtor cannot be found, the demand may be served on the debtor- - (a) at the registered office or place of business of the debtor; - (b) by sending it to the address of the debtor by registered mail; - (c) by serving the legal representative of the debtor, if known; - (d) In any other manner determined by the court.

(3) Proof of service of a statutory demand shall be by an affidavit of service stating the time and manner of service.

Counsel for the Respondent submitted that the Respondent had three options of seruice of the statutory demand in issue as provided by the Regulations; and that because the Respondent could not serve the Applicant personally, they opted to serve the said demand through registered mail. 20

To this court, whilst this form of service may not have been a problem; Regulation 5(3) is very clear and couched in mandatory terms: "proof of service of a statutory demand shall be by an affidavit of service stating the time and manner of service"

Counsel for the Respondent referred to paragraph 6 of the affidavit in reply where a receipt from the post office is attached as proof of service of the statutory demand on the Applicant.

It is the considered view of this court that the said receipt is not sufficient proof of service of the demand in issue in the absence of an affidavit of service as required by the provisions of Regulations 5(3) of the Insolvency Regulations 2013.

5 While the receipt aforementioned does show the postal address of the Applicant; it does not indicate the item/document that was delivered on t8l6l202t at 13:38:23; and without an affidavit of service sworn by the responsible person; there is no proof that the demand in issue was actually the item served on the Applicant.

It ls the firm view of this court that Regulation 5(3) aforementioned must have been included in the Insolvency Regulations to cure instances like this so as to ensure that a party is effectively served and not condemned unheard. 10

Counsel for the Respondent also referred to an email dated 18/6/2021 wherein the counsel referred to an earlier email of 1161202l where notices of demand on behalf of his client were forwarded; and stated that since he had not got any response from the

Applicant, he had instructions to serve it with a statutory demand and informed it that the said demand had been sent by registered mail and that a copy was attached to the said email; and that they would also publish the statutory demand in the newspapers. 15

While it may be true that the debtor/Applicant could not be found; service of the statutory Demand by email is not one of the modes of service of statutory demands provided for by the Insolvency Regulations as can be seen in Regulation 5(3) especially if such service was not directed by the court (which option was also available under regulation 5 2(d) if the Respondent had been keen to evoke the same.). Neither was the email an affidavit of service envisaged by law. 20

In the circumstances and from the foregoing; this court is inclined to find that Respondent has failed to demonstrate that they served the Applicant with a statutory demand as provided by law having contravened Regulation 5(3) of the insolvenry Regulations. 25

Further; it is notable that publication of a statutory demand in the newspapers is also not a mode of service of statutory demands laid down by the Regulations unless the same or any other manner of service has been determined by coutt.

\ N"

- 5 I have not seen any application filed before this court seeking service of the statutory demand in issue in any other manner; and neither has any order been seen/made in respect of service of the said demand in any other manner other than that laid down in Regulation 5(2) of the Regulations. - 10 In conclusion and given this court has found that service of the statutory demand in issue was not done in accordance with the law; the preliminary objection raised by the Respondent's counsel is overruled. The statutory Demand in issue is irregularly procured and illegal and cannot be based onto file the present application. It is trite law that courts of law cannot sanction an illegality and said statutory demand is struck out/ off the record. - 15 The present application is oveftaken by events. Each party will bear their costs of the application.

{MAr^n\*-

20 HON, LADY ]USTICE ANNA .8. MUGENYI DATED lt J2.2.....