Rak Ceramics & Sanitary Ware Ltd and Others v Bank of Baroda (U) Ltd (Civil Suit No. 0898 of 2024; Miscellaneous Application 1609 of 2024) [2025] UGCommC 65 (12 February 2025)

THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] MISCELLANEOUS APPLICATION NO. 1609 OF 2024 ARISING FROM CIVIL SUIT NO. 0898 OF 2024 1. RAK CERAMICS & SANITARY WARE LTD 2. SHAAHID RAMZAM ALI JEMANI 3. ALIRAZA FIROZ LADIWALA::::::::::::::::::::::::::::::::::: VERSUS BANK OF BARODA (U) LTD:::::::::::::::::::::::::::::::::::: BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI

RULING

INTRODUCTION

This application was brought by notice of motion under Order 36 Rules 3 & 4, Order 52 Rules 1 & 2 of the Civil Procedure Rules(CPR) and section 98 of the Civil Procedure Act(CPA) for orders that unconditional leave be granted for the applicants to file their written statement of defence and the costs of the application be provided for.

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This application is supported by the affidavit of Shaahid Ramzam Ali Jemani, the director of the 1^st applicant, and opposed by the affidavit in reply of Sanal Jhanjhan who is in charge of the credit department of the respondent.

BACKGROUND

The respondent filed civil suit no. 0898 of 2024 against the applicants claiming for the recovery of a liquidated sum of USD 215,768.41, interest and costs of the suit arising from a loan/overdraft facility. The applicants were served with summons. 24

The applicants filed this application for leave to appear and defend. The applicants contend in their application that the 1^st applicant took out a credit facility from the respondent which was guaranteed by the 2^nd and 3^rd applicants. That business projects had been commenced at Kyambogo whose proceeds were meant to clear the

- loan but the same were halted by Kampala City Council Authority (KCCA) upon 30 which a suit was instituted against KCCA by the applicants. The applicants contend that the entire loan agreement was frustrated and the applicants were discharged and therefore not indebted to the respondent. The applicants annexed their proposed written statement of defence to their application. - The respondent in its defence contends that this application is without merit, an abuse of the court process, and is frivolous and vexatious. The respondent contends 36 that it is not a party to any transaction between the applicants and KCCA and that the payment of the loan was not conditioned on any third-party arrangements or contracts. The respondent contends that the contract which is the subject of the summary suit is not frustrated and is enforceable. The respondent further contended that the applicants are jointly and severally indebted to the respondent to the tune of USD 215,768.42 and the applicants have not disputed the disbursement, or disputed - the guarantee for repayment by the 2^nd and 3^rd applicants and that they have not 42 challenged the legality of the agreements. The respondent further contend that the applicant's draft /proposed defence does not provide any answer to the specially endorsed plaint.

REPRESENTATION

The applicants were represented by M/s Baingana & Associated Advocates whereas 48 the respondent was represented by M/s H & G Advocates.

DECISION

I have addressed my mind to the pleadings of the parties and the submissions of counsel in this matter and the main issue for consideration is whether the applicants should be granted unconditional leave to appear and defend civil suit no. 898 of

2024. 54

Order 36 Rule 4 of the CPR gives powers to a defendant who has been served with summons under Order 36 Rule 1 of the CPR to make an application for leave to appear and defend the suit.

The rationale for summary procedure was discussed in the case of Post Bank (U) Ltd v Abdul Ssozi SCCA 8/2015 wherein JSC Tumwesigye stated that:

"Order 36 was enacted to facilitate the expeditious disposal of cases involving debts 60 and contracts of a commercial nature to prevent defendants from presenting frivolous or vexatious defences in order to unreasonably prolong litigation. Apart

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from assisting the courts in disposing of cases expeditiously, Order 36 also helps the economy by removing unnecessary obstructions in financial or commercial dealings."

The test for the grant of leave to appear and defend was laid out in the case of 66 Maluku Inter Global Trade Agency v Bank of Uganda [1985] HCB 65, where the court stated that:

"Before leave to appear and defend is granted, the defendant must show by affidavit or otherwise that there is a bonafide triable issue of fact or law. When there is a reasonable ground of defence to the claim, the defendant is not entitled to summary judgment. The defendant is not bound to show a good defence on the merits but

72 should satisfy the court that there was an issue or question in dispute which ought to be tried and the court shall not enter upon the trial of issues disclosed at this stage."

Further in the case Geoffrey Gatete & Anor v William Kyobe SCCA No. 7 of 2005 Mulenga JSC explained that:

- 'In an application for leave to appear and defend a summary suit, the court is not 78 required to determine the merits of the suit. The purpose of the application is not to prove the applicant's defence to the suit but to ask for opportunity to prove it through a trial. What the court has to determine is whether the Defendant has shown good cause to be given leave to defend. What courts have consistently held to amount to good cause is evidence that the defendant has a triable defence to the suit.'' - In an application for leave to appear and defend a summary suit, there must be 84 sufficient disclosure by the applicant of the nature and grounds of his or her defence and the facts upon which it is founded. Secondly, the defence so disclosed must be both bonafide and good in law. A court that is satisfied that this threshold has been met will then grant unconditional leave. (Harold Wejuli & Another v Aggrey Bwire HCMA No 656 & 657 of 2019). - In the instant case, the applicants do not dispute that the loan sums claimed were 90 disbursed to them; and they equally do not dispute that the said loan was guaranteed by the 1^st and 3^rd applicants; and neither do they dispute that the said loan was not paid back.

The applicants however contend in their draft/proposed defence that they encountered some financial constraints emanating from the COVID-19 pandemic that distorted their payment plan to the respondent. This however was not raised in

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their affidavit in support and the same was also not addressed by the applicants during submissions.

The applicants also contend in their affidavit and proposed defence that the loan repayment was frustrated when KCCA stopped their building projects at Kyambogo. The applicants contend that they had hoped to use the proceeds from the project to facilitate the repayment of the loan.

The principle of frustration is addressed in section 65(1) of the Contracts Act as revised thus:

"Where a contract becomes impossible to perform or is frustrated and where a party cannot show that the other party assumed the risk of impossibility, the parties to the contract shall be discharged from the further performance of the contract".

I do not think that the alleged events by KCCA operated to frustrate repayment and 108 subsequently discharge the applicants from paying/honoring their loan obligations to the respondent. No agreement/contract was attached by the applicants to show that the repayment of the loans to the respondent was conditioned on the developments stopped by KCCA.

The applicants have not disclosed through affidavit and their draft written statement of defence how the actions of KCCA affected the very premise on which their loan 114 agreement was entered into.

The actions of KCCA might have made the performance of the applicant's obligations difficult but they certainly did not radically make it different or impossible to perform.

While dealing with such applications court should consider the right of the defence to be heard and should equally be conscious enough to dismiss frivolous and vexatious applications intended to prolong litigation with no actual bonafide triable 120 issues.

In the instant case, I do not see any bonafide triable issue of law and fact being raised by the applicants and I equally do not see any triable defence raised in the proposed written statement of defence.

From my assessment of the affidavit and the proposed written statement of defence, I perceive that the applicants filed this application to prolong litigation without any 126 actual bonafide triable issues and this court cannot grant such an application.

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I, therefore, find that the applicants have failed to show through their affidavit and their draft written statement of defence that there are bonafide triable issues of law and fact that need to be tried. I also do not see any reasonable/triable grounds of defence raised.

132 This application is dismissed with costs to the respondent.

Judgment is entered on the summary suit as prayed in the plaint in civil suit no. 0898 of 2024.

Anghitatie

HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................