Zirobwe Agali Awamu Agribusiness Training Association v Uganda Central Cooperative Financial Services & Another (Miscellaneous Application 532 of 2023) [2024] UGCommC 288 (12 July 2024)

Full Case Text

## THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCTAL DTVTSTON)

### MISCELLANEOUS APPLICATION NO. 0532 OF 2023

### (ARISING FROM EMA NO 389 OF 2022)

# (ARTSTNG FROM CrVrL SUIT NO ll02 OF 2020)

## ZIROBWE AGALI AWAMU AGRIBUSINESS

TRAINING ASSOCIATION:::::::::::::::::::::::::::::]:::::::::::::: APPLICANT

#### VERSUS

## I. UGANDA CENTRAL COOPERATIVE FINANCIAL SERVICES

2. MAYAMBALA GODFREY: : : : : : : : : : :: : : : : : : : : :: : ] : : : :: : : :: :: : :: RESPONDENTS

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

#### RULING

#### INTRODUCTION

This Application was brought by way of Notice of Motion under Sections 64(e) and 98 of the Civil Procedure Act (CPA), Section 33 of the Judicature Act, Order 36 Rule ll, Order 9 Rule 12, and Order 52 rules 1,2 and 3 of the Civil Procedure Rules(CPR) for orders that:

a) This Honorable court be pleased to set aside the consent settlement vide Execution Miscellaneous Application No. 389 of 2022, Decree and Judgment passed exparte in civil suit No. I 102 of 2020.

b) This Honorable court orders the l't Respondent to retum the Applicant's certificate of Title of land comprised in Block 57 Plot 91 I at Bulemezi and be handed over to Mr. Kaliba Ismail a member of the Association.

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c) Unconditional leave be granted to the Applicant to appear and defend the suit.

d) The main suit be heard and determined on its merits.

e) Cost of the application be provided.

The Application was supported by the affidavit of Kaliba Ismail, a member of the Applicant Association and opposed by the affidavit in reply of Walakira Moses for the 1st Respondent and Mayambala Godfrey for the 2nd Respondent.

# **BACKGROUND**

The 1st Respondent filed a summary suit against the Applicant, the 2nd Respondent and two others vide civil suit No. 1102 of 2020 for the recovery of Ugx 227,370,798/= (Two hundred twenty-seven million three hundred and seventy thousand seven hundred ninety-eight). The 1st Respondent subsequently applied for a default judgment following the Applicant's failure to file an Application for leave to appear and defend the suit within ten days. The default judgment was granted, a decree issued and extracted, and the 1st Respondent filed for execution vide EMC No. 389 of 2022. When the Notice To Show Cause why execution should not proceed came up for hearing, neither the Applicants nor the guarantors made any appearance thus a warrant of arrest was issued against the guarantors. The 2nd Respondent was subsequently arrested and when he was brought before the court, he entered a consent settlement with the 1st Respondent where he deposited the certificate of title of the Applicant land comprised at Block 57 Plot 911 in Bulemezi as security for the payment of the decretal sum.

The Applicant filed this Application seeking to set aside the judgment and decree entered, the consent settlement, and for unconditional leave to be granted to appear and defend the suit.

# **REPRESENTATION**

The Applicant was represented by M/s IBC Advocates whereas the 1st Respondent was represented by M/s Luganda, Ojok & Co Advocates and the 2nd Respondent was represented by M/s Murungi Kairu & Co Advocates.

### RULING

I have considered the pleadings and submissions of the parties in this matter. During the hearing of this case, the l'r Respondent raised two points of law that shall be determined by this Court namely:

- l. The deponent of the Appticant's affidavit in support has no locus to swear the affidavit as he is not a member of the Applicant. - 2. This suit is incompetent without merit as it was filed without authority.

## l't Point of Law

# The deponent of the Applicant's affidavit in support has no locus to swear the affidavit as he is not a member of the Applicant.

counsel for the l't Respondent submitted that it is well settled that a member of a company is a person who subscribes to the Memorandum and Articles of Association of the company or by resolution is appointed as a member by the said company. In the case of Mathew Rukikaire v Incafex Limited civil Appeal No. 3 of 2015, a member was defined as a subscriber to the Memorandum and Articles of Association of the company or entered into the roll of register of members through a resolution. counsel submitted that in the affidavit of the Applicant, there is no resolution or any form of proof to show that the deponent is a member of the said company. counsel submitted that on carrying out a search, it was established that the deponent is a secretary and therefore an employee of the company with no authority to do anything on behall of the company.

counsel for the Applicant submitted that the Applicant is an association of farmers who are of different localities and the Memorandum and Articles of Association fumished before the Court does not give a full list of all its members. He submitted that as an association of farmers, they are divided into groups of thirty members, and in one of the groups is where the deponent belongs. counsel submitted because the company is limited by guarantee, once you have a list of the mainstream subscribers, the office of the Applicant keeps the list of the additional members that have been created within different groups to reach ordinary farmers on the grounds. Counsel presented a list of 2003 with a group named Bukimu vanilla growers farmers group in Zibrobwe sub-county, Luweero district. counsel submitted that the deponent is

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number 29, among the 5,000 farmers that do subscribe to the Applicant. He concluded by stating that the deponent is a member of the Applicant as he stated in his affidavit in support.

Counsel for the I't Respondent contested the additional list presented on grounds that the list was just the last page attached and not part of the original Memorandum and Articles of Association and that there is another list which has number 29 of its member as Adeke Silver. Counsel further submitted that the list is not certified as the others and is not part of the Memorandum and Articles of Association.

Counsel for the Applicant undertook to present before the court the certified and full list of the Applicant's members. The Court takes note of the fact that the certified and full list of members was not filed and presented to this court as submitted by counsel for the Applicant.

In the instant case, the deponent swore the Affidavit in support of the Application in his capacity as a member of the Applicant. No evidence was adduced to indicate that he was indeed a member of the Applicant company. The Applicant undertook to present certified copies showing that the deponent is a member but failed to do so. In the absence ofany evidence to the contrary, I therefore find that the deponent is not a member of the Applicant Company and therefore had no capacity to swear the affidavit as a member. The paragraph of the Affidavit where he swore as a member is therefore expunged from the record.

Regardless of the fact that there is no evidence showing that the deponent is a member of the Applicant, what is required in affidavits is the knowledge or belief of the deponent and not any other person and Order 19 rule 3(l) of the CPR provides that:

"Affidavits shall be confined to such facts as the deponent is able of his or her own knowledge to proye, except on interlocutory applications, on which statements of his or her belief may be admitted, provided that the grounds thereof are stated".

In the case of Bankone Ltd vs Simbamanyo Estates Ltd HCMA No 647 of 2020 Justice Mubiru while addressing the law on swearing affidavits stated that:

"From the above discourse it then becomes clear that throughout the web of legal provisions relating to affidavits, one golden thread is always to be seen; that what is required in affidavits is the knowledge or belief of the deponent, rather than authorization by a party to the litigation. Their content is dictated by substantive rules of evidence and their form by the rules of procedure. Competency to swear an affidavit is pegged to ability "to depose to the facts of the case," which in turn is circumscribed by the deponent's ability to "swear positively to the facts," on account of personal knowledge or disclosure of the source, where that is permitted".

## Further Order 29(1) of the CPR provides that:

"In a suit by or against a corporation any pleading may be signed on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case".

In the instant case, the 1st Respondent acknowledges in their submissions that the deponent is a secretary in the Applicant company. A secretary is a principal officer of a company and can swear an affidavit to the facts of the case that are within his knowledge. The deponent was therefore competent to swear the affidavit as the facts deponed were those within his knowledge and belief by virtue of his position and work in the company.

I therefore find that the deponent had locus to depone the affidavit in support. This preliminary objection is therefore overruled.

## 2nd Point of Law

## This suit is incompetent without merit as it was filed without authority.

Counsel for the 1st Respondent relied on the case of Bugerere Coffee Growers Limited vs Sebaduka and another 1970 E A, where it was observed that a suit instituted in the name of the company without the authority of the director is incompetent. Counsel submitted that there is no resolution where the board of directors resolved to bring this application before the Court and the person swearing the affidavit is a member, not a director and the said application is therefore incompetent as there is no authority granting the institution of the said Application. Counsel further relied on the case of Rubaga Building Company Limited vs Gopo

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Dervsi Vekaria and Masaka Tea Estate Limited vs Shakikant Amratlal Karia. to emphasize that the instant Application is incompetent.

Counsel for the Applicant submitted that courts have shifted from the position that was held in the case of **Bugerere Coffee Growers Limited vs Sebaduka and another(supra)** and have held in a variety of authorities that it is no longer mandatory for a company to have a resolution before commencing a suit. Counsel relied on the case of **Money Lenders Association Uganda Limited and another** vs Uganda Registration Services Bureau High Court Miscellaneous Cause No. 11 of 2019 where the court held that it is a settled position of law that a resolution to commence a suit is no longer a necessary prerequisite and prayed for Court to overrule the preliminary objection.

As rightly stated by counsel for the Applicant, it is now the position of the law as stated in the case of Moneylenders Association of Uganda Limited & Mk Financiers Limited vs Uganda Registration Services Bureau HCMA No 1 of **2019** where the Honorable Mr. Justice Richard Wejuli Wabwire after examining a plethora of decisions on the point concluded that:

*'It is indeed a settled position of the law in this jurisdiction, that Resolution to* commence a suit is not a necessary pre-requisite, however, a lawyer or Agent who goes out to commence action on behalf of a company must, in the case of a lawyer *be duly appointed.* ''

Therefore, much as it is a good practice to pass a resolution to start legal proceedings, this requirement is not mandatory. I therefore overrule this objection.

I will now deal with this Application and the main issue for determination by this court is whether the Applicant has sufficient grounds to set aside the judgment, decree, and the consent settlement executed by the 1st and 2nd Respondent.

A Judgment passed under Order 36 of the CPR can be set aside under Order 36 **Rule 11 of the CPR** which states that:

"After the decree the court may, if satisfied that the service of the summons was not *effective, or for any other good cause, which shall be recorded, set aside the decree,* and if necessary stay or set aside execution, and may give leave to the defendant to

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appear to lhe summons and to defend the suit, if it seems reasonable to the court so to do, and on such terms as the court thinks fit".

Therefore, for a court to set aside a default Judgment passed under order 36 of the cPR it must be satisfied that there was ineffective service of summons or that there was any other good cause that warrants the setting aside of the same.

## llthether there was effeclive service of summons on the Applicant

As regards service on corporations Order 29 rule 2 of the CpR provides: -

"Subject to any statutory provision regulating service ofprocess, when the suit is against a corporation, the summons may be served. -

- (a)on the secretary or any director or other principal officer of the corporation; or - (b) by leaving it or sending it by post addressed to the corporation at the registered ffice, or if there is no registered ffice, then at the place where the corporation carries on business. "

In the instant case, the affidavit of service marked as annexure . C, to the ls Respondent's affidavit in reply swom by Kansiime Suraj clearly states that the plaint was served at the registered office ofthe Applicant and the process server introduced himself and the purpose of his visit to the receptionist who then called the 2,d Respondent who she referred to as their manager on phone. That the process server then had a phone conversation with their manager who is the 2nd Respondent and informed him about the summons and the suit to wit he accepted service and authorized the receptionist to receive the pleadings and append the stamp of the company/association on his behalf and that ofthe company.

order 29 rule 2(a) of the cPR acknowledges the service of summons on a principal officer ol a company as effective service on the corporation. A manager of a company is a principal officer of the corporation as he/she is involved in the day-today management of the affairs of the company. It is an agreed position of the law that service on a receptionist at the company is not effective service however the circumstances of this case are different as the manager of the company was made

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aware of the summons and plaint through a phone call and then authorized the receptionist to affix the company stamp to officialize receipt on their behalf.

I therefore find that there is effective service of summons evidenced by the official stamp of the association seen on the Plaint marked as annexure A to the ls Respondent's affidavit in reply and it shows that the plaint was received on behalf ofthe association and the 2nd Respondent on the 4th ofJune 2021.

I, therefore, find that the service was effectively done.

### Ll/hether there is any good cousefor setting aside the decree passed

In the case of Geoffrey Gatete & Another vs William Kyobe, SCCA No. 7 of 2005, the Supreme court explained reasons for setting aside the decree under order 36 rule I I by stating that:

"Apart from ineffective service of summons, what the courts have consistently held to amount to good cause is evidence that the defendant has a triable defence to the suit ".

In the instant case, it is evident that the Applicant seeks to defend the suit on the principal ground that the loan agreement is not binding on them. First, they contend that what was advanced to them by the l't Defendant was a grant and not a loan though they were tricked into signing a loan agreement. The Applicant and the 2nd Respondent contend that they discovered upon entering into a loan agreement that the said loan was a project funded by CITA of the Netherlands and UCA to be disbursed to farmers in uganda as a pilot project. The Applicant attached their intended written statement of defense marked as annexure 'E' and the 2nd Respondent equally attached his intended written statement of defense marked as annexure 'B' and chose to rely on email correspondences to prove that they were exonerated from paying back the loan as it was a grant for a pilot project. with the above assertion in mind, if the Applicant's contention that what they were advanced with is a grant and not a loan is proved to the required standard, then that could constitute a triable issue and a valid defense to the suit.

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Therefore, on account ofthe existence of triable issues offact and law, the Applicant has established good cause, sufficient to lead the Court to set aside the default judgment and grant her leave to appear and defend the summary suit.

I, therefore, allow this Application and direct the Applicant to file their written statement of defense within 14 days from the delivery of this Ruling.

The consent settlement was derived from the decree that was passed and setting aside the decree consequentially sets aside the consent settlement that was entered into by the 2'd Respondent during execution ofthe decree.

Consequently, the lstRespondent is also ordered to return the Applicant's certificate of Title of land comprised in Block 57 Plot 91 I at Bulemezi and be handed over to Mr. Kaliba Ismail.

Costs shall abide the cause

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HON. LADY JUSTICE ANNA B. MUGENYI DATED lL l.:.1..\*e.t \*...