Mulindwa Nathan v Kiboko Enterprises Limited (Miscellaneous Application No. 2471 of 2024) [2025] UGCommC 172 (7 May 2025)

5 THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) MISCELLANEOUS APPLICATION No. 2471 OF 2024 (ARISING FROM CIVIL SUIT No. 1256 OF 2024)

MULINDWA NATHAN ] APPLICANT

VERSUS

15 KIBOKO ENTERPRISES LIMITED ] RESPONDENT

Before: Hon. Justice Ocaya Thomas O. R

RULING.

Introduction:

- 20 This application was brought by way of Notice of Motion under Section 98 of the Civil Procedure Act; Order 36 Rules 3, Order 52 Rules 1 and 3 of the Civil Procedure Rules, seeking the following orders: - - (1) That the Applicant be granted unconditional leave to appear and defend the respondent's main suit vide Civil Suit No. 1256 of 2024. - 25 (2) That the Costs of this Application be provided for.

Background:

The grounds in support of the Application are contained in the affidavit in support of the Applicant deposed by the Applicant Mulindwa Nathan, himself and he stated that on the 1st

30 December, 2022, he entered into a two year distributorship agreement with the Respondent expiring 1st December 2024 whereupon he furnished a security of UGX 20,000,000/= and the relationship proceeded as set out in the agreement until February 2024 when the Respondent without notice came and took all the stock they had been distributed to him thus constructively terminating the contract.


5 That the Respondent at all times had his employees, Awata Emmanuel and later Gilbert, stationed at his store/shop, and they were supervisors and actively and directly participated in the sale of the goods in different parts of Mityana, Mubende, Kasanda, Kanoni, and Gomba Districts. And that Gilbert supervised him at the time the Respondent took his stock.

That after the Respondent took possession of the stocks and he was no longer in the business, around April or May 2024, he was demanded to pay to different sums of money, first UGX 114,000,000/= and later UGX 106,000,000/=.

That around June, the Respondent demanded UGX 96,572,076/=, on 7th 15 July, the Respondent demanded UGX 97,732,676/=. That the Respondent in his plaint demanded UGX 80,595,700/=.

That the Respondent does not have a definite figure of any amount that is owing, and that 20 the Respondent is abusing the court process. That all the remaining stock as contained in the invoices of 27th February 2024, 12th January 2024, 31st July 2023, 30th October 2023, among others was taken by the Respondent on 21st May 2024 bringing the distributorship contract to an end and that the Respondent cannot take all the stock and still demand him. Furthermore, that, he has a counterclaim for damages arising from the breach of contract.

- 25 That at the time of entering the contract for distributorship, he deposited UGX 20,000,000/= as security and the same was not refunded and that, he has a defense to the Respondent's claims in the plaint and he will set up a counter claim that has high chances of success; and that he is not indebted to the Respondent at all. - 30 That it is in the interest of justice that this application should be granted.

The Respondent's affidavit in reply was deposed by Tugume Immaculate, the Legal and Compliance Officer in the Respondent entity. She states that the affidavit in support is tainted with falsehoods and misinformation, and that the application is should be struck 35 out.

- 5 That the Applicant is fully aware of being indebted to the Respondent to the tune of UGX 80,595,700/= and has no valid defense. That in May 2024, the Applicant had accumulated an outstanding balance of UGX 279,214,708/= and failed to make the necessary payments to the Respondent company. - 10 That due to the Applicant's failure to pay the above-mentioned sums, the Respondent proceeded to recover the unsold stock held at the Applicant's premises in May 2024 in accordance with the distribution agreement, and that the stock returned to the Respondent's warehouse was valued at UGX 150,170,400/= as verified during stock taking. - 15 That the Respondent processed a credit note for the returned stock, applied other discounts offered to the applicant, and also deducted the cash deposited of UGX 20,000,000/=, the Applicant was left with an outstanding balance of UGX 97,732,676/= and that the applicant's claim the Respondent is unsure about the amount owed is incorrect and misleading to court. - 20

Further that the Applicant has failed to provide sufficient justification for the application.

Representation:

The Applicant was represented by the law firm of M/S BEAVER Advocates, while the 25 Respondent was represented by the law firm of M/S KMT Advocates.

Evidence and Submissions:

The parties' cases were supported by the affidavits sworn by the individuals stated above, and the Court directed counsel to file written submissions, to which only the Applicant

30 complied.

Decision:

The main suit was commenced by way of a specially endorsed plaint under Order 36 Rule 2 of the Civil Procedure Rules, a procedure reserved for liquidated claims or claims for which

35 it is believed that the Defendant has no defence to the claim of recovery of money.

5 Under this procedure, there is no automatic right to defend. The right to defend is only conferred by the leave of the court, upon an application by the Defendant under Order 36 Rule 3.

The rationale for the summary procedure has been laid down in the several decisions 10 before, and in the case of Post Bank (U) Ltd v Abdul Ssozi SCCA 8/2015, the Supreme Court stated that: -

Order 36 was enacted to facilitate the expeditious disposal of cases involving debts and contracts of a commercial nature, to prevent defendants from presenting frivolous or vexatious defences to unreasonably prolong litigation. Apart from assisting the courts in

15 disposing of cases expeditiously, Order 36 also helps the economy by removing unnecessary obstructions in financial or commercial dealings. See also Zola & Another v. Ralli Brothers Ltd. & Another [1969] EA 691, 694.

The Applicant brought this application for unconditional leave to appear and defend the main 20 suit. Order 36 Rule 4,

It follows that the defendant must show grounds in the application that makes the summary procedure under the specially endorsed plaint untenable. In Kotecha v. Mohammed [2002] 1 EA 112, the threshold for grant of leave to appear and defend was laid out that: -

- 25 "The Defendant is granted leave to appear and defend if he is able to show that he has a good defence on the merit(s); or that a difficult point of law is involved; or a dispute as to the facts which ought to be tried; or a real dispute as to the amount claimed which requires taking an account to determine; or any other circumstances showing reasonable grounds of a bona fide defence". - 30 See *Saw V Hakim 5 TLR 72; Ray v Barker 4 Ex DI 279; Churanjilal and Co. v A. H. Adam (1950) 17 EACA 92; and Hasmani v Banque du Congo Belge (1938) 5 EACA 89.*

In this instant case, the Applicant's grounds shall be measured against the thresholds. Firstly;

5 *Whether the defendant/Applicant has a good defense on the merit(s).*

In this threshold, it has been noted over time that it is not sufficient to simply deny indebtedness. Firstly, because a general denial of indebtedness is not itself a valid defense under Order 6 Rule 8 of the Civil Procedure Rules. See *Eco Bank Uganda Limited v Kalson's Agrovet Concern Ltd & Anor HCCS No. 573 of 2016.*

Further, in *Uganda Commercial Bank v Mukoome Agencies [1982] HCB 22*, the Court of Appeal unanimously held that:

"In an application for leave to appear and defend in summary suits, the defense and triable issues must not only be disclosed, but the intended Written Statement of 15 Defense should be annexed to the application….it would serve a good purpose if the intended Written Statement of defense is annexed to the Notice of Motion as it would help the judge make up his mind whether to refuse or grant the application."

The above decision is a matter of good practice, and it is the mark as well as it behooves an 20 organized litigant/advocate, as it makes it easier for the judicial officer to identify and establish the defense put by the applicant. It also goes a long way into subconsciously convincing a judicial officer that the Applicant is indeed serious and is not just merely abusing the Court process.

25 In this instant application, the Applicant annexed a draft of their intended defense in annexure F of the affidavit in support, and in paragraph 17 of the affidavit in support, the Applicant stated that he is not indebted to the respondent.

The Applicant in paragraph 4 (b), (c), and (d) of his intended defence added to emphasize 30 that the Plaintiff/Respondent employed its supervisors at the defendant/Applicant's shop, who were at all material times responsible for the ordering of the assorted goods from the Plaintiff. And that the Plaintiff/respondent's role was to expedite the defendant's sale, and they would directly requisition goods and would draw a program for the defendant/Applicant as to where the goods were to be sold. Further, that it was the Plaintiff's

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5 employee who would receive money from the customers and bring it to the defendant to bank in the Plaintiff's account.

That when the Plaintiff/Respondent constructively terminated the contract, they took away stocks, and he remitted the prior sales into the Plaintiff/respondent's account.

- 10 Further in paragraph 13 of the affidavit in support, the Applicant stated that the Respondent took possession of the goods from him and at the same time started demanding for the amount of money equivalent to the stock of goods taken, for which he intends to counterclaim for breach of contract. - 15 From the foregoing, it is seemingly prima facie that the Applicant disputes the manner in which the distributorship contract was terminated and the summation of the suit amount claimed given the nature of the operation of their transaction.

It is the principle that the Court, while determining such an application, it is not required at 20 this stage that be satisfied that the Applicant has shown a good defense on the merits, but what is required is that the Court identifies issues or questions in the dispute which necessitate a trial. The court should not enter to determine the issues disclosed per se at this stage. See *Board of Governors Nebbi Town S. S. S V Jaker Food Stores Limited, MA-No. 0062 of 2016*.

In this instant case, thus far, there is a dispute of breach of contract, and this is further informed by the Applicant's desire to file a Counterclaim. Given the circumstances, I am inclined to agree that there is a prima facie defense to the Plaintiff/respondent's claims.

30 There is a real dispute as to the amount claimed, which requires taking an account to determine.

The Applicant in paragraph 10 of the affidavit in support stated that, after the Respondent took possession of the stocks and he was no longer in the business, around April or May 2024, he was demanded to pay to different sums of money, first UGX 114,000,000/= and

35 later UGX 106,000,000/=. That around June, the Respondent demanded UGX 96,572,076/=,

on 7th 5 July, the Respondent demanded UGX 97,732,676/=. That the Respondent in his plaint demanded UGX 80,595,700/=.

The Respondent in reply under paragraph 9 of the affidavit in reply stated that the Respondent processed a credit note for the returned stock, applied other discounts offered

10 to the Applicant, and also deducted the cash deposited of UGX 20,000,000/=, the Applicant was left with an outstanding balance of UGX 97,732,676/= and that the Applicant's claim the Respondent is unsure about the amount owed is incorrect and misleading to court.

It is considered view that the Respondent did not fully respond to the Applicant's dispute 15 on the discrepancies in the various amounts demanded from the Applicant and how they were arrived at, and this raises the question of the certainty of the liquidated amount claimed, which can only be resolved upon evidences being adduced in court.

In the premises, this satisfies the threshold that there is a real dispute regarding the amount 20 claimed.

*A dispute as to a fact which ought to be tried.*

determined at this stage. It requires a full hearing.

The in paragraph 16 of the affidavit in support, the Applicant expressed desire to file a counter claim and in the draft intended Written Statement of Defense in annexure F of the 25 affidavit in support, he embedded a counterclaim and under paragraph 3, it is stated that the counterclaimant's claim is for Breach of Contract of distributorship, an order for recovery of UGX 20,000,000/= being money received under the contract as security etcetera.

The respondent/Plaintiff in their affidavit in reply does not dispute taking possession of the 30 stock of goods and averred that it was done in accordance with the contract.

Therefore, the Applicant's intention to file a counterclaim based on the Plaintiff/ Respondent's taking possession of the stock of goods being a breach of contract creates a dispute in the facts of the case thus far; and in the circumstance, the issue of breach of 35 contract and the legalities or illegalities of the Plaintiff/Respondent's actions cannot be

- 5 In conclusion, I am satisfied that the Applicant has conveniently shown grounds that he has a prima facie defense to the amount claimed, whilst also bringing forward that there are real issues in dispute that the Court has to hear; and therefore, I am inclined to allow the Application. - 10 *Costs:*

Section 27 of the Civil Procedure Act provides that costs follow the suit unless there is a strong reason to suggest the contrary and are awarded at the court's discretion. See, *Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd, [1951] 1 All ER 873.*

In the instant case, the costs of the application shall abide by the outcome of the main suit.

In Conclusion,

I accordingly make the following orders,

- a) This application is allowed. - b) The Applicant is unconditionally allowed to file his defense within 14 days from the - 20 date of this ruling; and the Respondent is to make a reply, if any, within 7 days. - c) The parties to file the JSM and receptive trial bundles on or before the 11th June 2025 - d) HCT-00-CC-CS-1256-2024 shall come up for mention on 18th June 2025 at 8:30am - e) The costs of this Application shall abide the outcome of the main suit.

25 I so order.

Dated this\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2025, delivered electronically and uploaded on 7th May

ECCMIS

Ocaya Thomas O. R Judge, 7th May, 2025.

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