Summer Fruits Uganda Limited and Another v Development Finance Corporation of Uganda and 2 Others (Civil Suit 1077 of 95) [1996] UGHC 52 (4 April 1996)


All Ill contra virter order 13 for securit

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPAZ

CIVIL SUIT NO. 1077/95

1. SUMMER FRUITS (U) LTD 2. UGANDA AVIATION SERVICE

-versus-

DEVELOPMENT FINANCE

CORPORATION OF UGANDA & 2 OTHERS ::::::: DEFENDANTS

BEFORE;-- HON. MR. JUSTICE J. H. NTABGOBA-PRINCIPAL JUDGE

R U L I N G

This is a chamber application brought under order 23 Rule 1 of the Civil Procedure Rules and S.404 of the Companies Act. It seeks an order for the respondents to deposit security for costs amounting to shs.200,000,000/before the respondent's/plaintiff's case, HCCS. No.1077/95, is heard.

The brief background to this application is that the two respondents/plaintiffs, namely, Summer Fruits(U)Ltd and Adviation Services Ltd, filed HCCS. NO.1077/95 challenging the appointment of the 2nd and 3rd applicants/ defendants as receivers to manage the affairs of the first respondent. Their appointment had been made under mortgage provisions and the respondents are alleged to have defaulted under the mortgage. In response to the suit, the applicants have filed this application requesting that the plaintiff deposit security for costs because they fear that in the event the plaintiffs lose their suit, they ms not be able to pay the sum

remaining under the mortgage plus costs.

The applicants have, by aseries of affidavits, alleged that, besides any consequent costs, the respondent number one, has to raise a sum of US \$292,419.5. In another series of affidavits in reply sworn by A. C. Small, Managing Director of the second respondent Company, the depoment alleges that the first respondent has assets worth US $\cancel{8}$ 73,600 and that it holds 49% of the shares in Ug. Prod. (U)Ltd, which are worth US \$49,000. $0.0462 \pm$ Mr. Mulindwa, learned counsel for the respondents, strongly opposed the application giving several reasons why an order for security for costs should not be given. At this juncture, it is pertinent to set down the relevant provisions of the law and rules under which this application was brought:-

Order 23 rule of the Civil Procedure Rules:-

"The court may if it deems fit order a plaintiff in any suit to give security for costs incurred by the defendant."

S.404 of the Companies Act provides:-

"Where a limited liability Company is a plaintiff in any suit ----Judge having jurisdiction in the matter may if it appears by credible testimony that there is a reason to : the believe that the Company will be unable to pay the costs of the defendant if successful in this defence,

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require sufficient security to be given for those costs and may stay all proceedings until the security is given."

The facts as they appear in the affidavits in support of this application and in reply clearly show that if the respondent lost suit number 1077/95, it would not be able to pay the sum owed of US \$292.419.5 since its assess including the 49% shareholding in Ug. Prod. (U)Ltd amount

only to US \$122,600.

the procedure and the addition

It is trite law, upon authorities that poverty should not act as a bar to litigation by ordinary poor persons, so that an order for security for costs should not be made so as to stop a poor person from litigating (see John Bishop (Caterers) Itd, & Another -vs- National Union Bank, Ltd and ors 79737All ER 707; Ochembo -vs -Sentamu 779777 HCB.193 and G. Matherads - vs - N. M. Patel & Another (HCCS No. 94/64, MB. 12/64) as well as A. K. Detergents Ltd.-vs- G. M. Combined (U)Ltd (unreported). However, it is also trite law that whereas courts should avoid barring litigations by poor natural persons, the courts will readily order for security for costs in cases where a company is a plaintiff and it is such orders for security for costs which are made under S.404 of the Companies Act. (See also A. K. Detergents $-vs-$ G. M. Combined (U) Ltd (Supra) at p.7).

$... / 4$

$3:$ $\mathbf{.}$

Now let us revert to the present application. It is clear, as I have said, from the affidavits that the likelihood is that the assets of the 1st respondent cannot satisfy the sum of US \$292,419.5 plus any consequent costs, should the respondents lose HCCS. No.1077/95. There has been no plea of inability to pay and so the issue of barring the respondents from contesting the pending suit does not arise since, on the contrary learned counsel for the respondent and

Mr. A. C. Small his client have been strongly trying to show that the first respondent can meet the expenses if they lose the litigation and besides this being a company under liquidation, it would be unwise not to order it to deposit security for costs when the likelihood is that the company is on the way to extinction. Besides, Mr. Small or anyone else has not sworn an affidavit indicating that the second respondent has sufficient assets which would satisfy the indebtedness of the first respondent in the event of losing HOGS. No.1077/95.

I do not think that the question of likelihood of the pending suit succeeding is a convincing argument to make me refrain from ordering the furnishing of security for costs, when it is clear that most assets of the first respondent have been sold and that the company is, as I have said, on the way to extinction.

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Another argument was that the sum of security applied for is too much. That sum is shs.200,000,000/=. That sum itself is less than the sum of US \$ 292,419.5 converted at the prevailing dollar rate and you have' then to add costs when determined. No the sum of shs.200m/ $=$ is not too excessive in the circumstances.

In the result, I order that the respondents/ Plaintiffs furnish security for costs in the sum of shs. $200m/-$ . They are given 30 days in which to comply failure of which HCCS. No.1077/95 will be struck out.

NTABGOBA

$\frac{1}{4}$ / $\frac{1}{4}$ / $\frac{1}{4}$

4.4.96. Mr. Mulsim Kalinge for the apphant<br>Mr. Muchindwa for the apphant<br>Ruhig is read in Chambers

THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA

CIVIL SUIT NO. 1077 OF 1995

SUMMER FRUITS (U) LIMITED 1 1. ........... PLAINTIFFS UGANDA AVIATION SERVICE $2.$ VERSUS DEVELOPMENT FINANCE CORPORATION OF) ) .................................... UGANDA AND 2 OTHERS

ORDER

This application coming on this day for final disposal before HON. MR. JUSTICE J. NTABGOBA in the presence of D. S. MUBIRU-KALENGE, Counsel for the Applicants/Defendants and MR. MULINDWA, Counsel for the Respondents/Plaintiffs.

IT IS ORDERED that the Respondent/Plaintiffs furnish security for costs in the sum of Shs.200m/= (Shillings Two Hundred Million only).

IT IS FURTHER ORDERED that the Respondents/Plaintiffs are given 30 days in which to comply, failure of which H. C. C. S. No. 1077/95 will be struck out.

GIVEN UNDER MY HAND AND THE SEAL OF THIS HONOURABLE COURT THIS 4..... DAY OF ................................... $.... 1996.$

REGISTOR: P $\mathbf{p} \mathbf{p} \mathbf{p} \mathbf{e} \mathbf{E} /$

THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA CIVIL SUIT NO. 1077 OF 1995

| | SUMMER FRUITS (U) LIMITED | | | | |---------------------------------------------------------------------|---------------------------|--|--|-------------------| | | UGANDA AVIATION SERVICE | | | <b>PLAINTIFFS</b> | | $\sigma_A := \text{card}(\psi)^T_{-n} \text{max}(G)_{-n}$<br>VERSUS | | | | | | DEVELOPMENT FINANCE CORPORATION OF | | | | | | <b>UGANDA AND 2 OTHERS</b> | | | | <b>DEFENDANTS</b> |

ORDER

AND ORDER having been made on the 4th day of April, 1996, for the Plaintiff to furnish security for costs in the sum of Shs. 200.000.000 = (Shillings Two Hundred Million only) within 30 (thirty) days, and the Plaintiff having failed to comply with the said Order within the said 30 days, IT IS HEREBY ORDERED that H. C. C. S. 1077 of 1995, SUMMER ERUIT (U) AND UGANDA AVIATION SERVICES LIMITED VERSUS DEVELOPMENT FINANCE COMPANY OF UGANDA LIMITED AND 2 OTHERS BE STRUCK OUT WITH COSTS.

GIVEN UNDER MY HAND AND THE SEAL OF THIS HONOURABLE COURT THIS May $\ldots$ DAY OF $...$ 1996.

REGI\$TRAR HODGE