Tibeingana and Co. Advocates and Anor v Warugaba (H.C.Miscellaneous Application No. 119 of 2020) [2021] UGCommC 77 (19 March 2021)

THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL COURT] M. A. No. 119 of 2020 (Arising from Civil Suit No. 1046 of 2019) 1. TIBEINGANA &CO. ADVOCATES 2. DEOX TIBEINGANA:::::::::::::::::::::::::::::::::::::::::APPLICANTS VERSUS ATTRACTA WARUGABA BISHANGA::::::::::::::::::::::::::::::::::::::::::::::::::::::::::DEFENDANT RULING

BEFORE: HON. JUSTICE DUNCAN GASWAGA

- This is an application brought under, Order 36 r 4 & Order 52 rr ¹ & 3 of the CPR SI 71-1 for orders that; leave be granted to the applicant to appear and defend Civil Suit No. 1046 of 2019 and for costs of the application to be provided for. - The grounds of this application are set out in the affidavit of Deox Tibeingana and are that; *the applicant merely acted as a guarantor for the 3rd defendant in Civil Suit No. 1046 of 2019 in respect to a debt the respondent advanced to the former, that the said debt was to be paid by the 3rd defendant in the said suit and not the applicants herein; the agreement in respect of the impugned debt was never reduced into writing contrary to the law; the applicant therefore denies being indebted to the respondent in the sum claimed at all; the applicant has a formidable defence to the claims in Civil Suit No. 1046 of 2019*

*which defence raises triable issues for court's investigation;it is just, fair and equitable that the applicant be granted unconditional leave to appear and defend the said suit.*

- [3] This application raises one issue; - *(i) Whether the application raises triable issues for which the applicant should be granted leave to appear and defend Civil Suit 1046 of 2019* - [4] The parties were rquested to file written submissions. Counsel for the applicant submitted that the applicants merely acted as guarantors for the 3rd defendant in Civil Suit 1046/2019 in respect to a debt the respondent advanced to the former and as such the debt claimed in the instant suit was to be paid by the 3rd defendant and not the applicants. Counsel relied on the case of Jimmy Kasule Vs. Steel Rolling Mills (1995) 11 where it was held that; *"it is trite law that summary procedure should only be resorted to in clear and straight forward cases where the demand is liquidated and where there are no points for court to try",* and stated that in the instant case there was an unsecured money lending transaction between the respondent and the 3rd defendant to the main suit (Angel Coble). That the applicants were neither informed by the third defendant of this particular money lending transaction nor was there any documentation to that effect as shown in paragraphs 3 and 4 of the affidavit in support of the application. That the 3rd defendant in the suit (C. S No. 1046/2019) merely sought for rescue from the applicants when the respondent sought for her money, which the applicants accepted to do on a friendly basis without any sort of consideration given by the 3rd defendant. Counsel further relied on the case of Corporate

Insurance Co. Ltd Vs. Nyali Beach Hotel Ltd [1995-19981 where it was held that *"leave to appear and defend will not be given merely because there are several allegations of fact or law made in the defendant's affidavit"* to state that the applicants are not merely making allegations.

[5] That the applicant accepted to bail out the 3rd defendant, which acceptance was followed by the applicant issuing cheques to guarantee the 3rd defendant's loan obtained from the respondent. That even though the applicant acted as a guarantor, as per the memorandum of understanding referred to in the plaint as annexure C between the first applicant and the respondent, for the payment of the third defendant's debt obligation to the plaintiff, still there was no consideration provided for by the 3rd defendant to the 1st applicant at all. Further that the above memorandum of understanding guarantees that the 3rd respondent will pay but does not guarantee payment and that this makes the respondent's suit untenable, premature and outside the purview of the summary suit. Also, that there is no liquidated demand, nor privity of contract and the whole matter requires a party to be heard. That the obligation of the applicants would only arise in the event of failure by the 3rd respondent to pay but not to recover concurrently and as such the applicants made no payment whatsoever to the respondent. That if at all the said guarantee was executed then it is void abinitio considering that a transaction whose subject value exceeds twenty five currency points ought to be reduced into writing and this particular one wasn't, see Section 10(5) Contracts Act 2010. Counsel further stated that the applicants have met the legal standard established in the decision of

Sembule Investments Ltd Vs Uganda Baati Ltd M. A No. 664 of 2009 where Mulyagonja, J (as she then was) stated that *"the defendant who wishes to resist the entry of a summary judgment should disclose through evidence that there are some reasonable grounds of defence."* That from the above, the applicants raise a plausible defence, more so an absolute defence that the guarantee contract was not reduced into writing. Counsel concluded by praying that the applicant be granted leave to appear and defend the suit.

[6] In reply, Counsel for the respondent stated that the respondent commenced summary suit proceedings jointly and severally against the applicants and a one Angela Kobel for recovery of Ugx 70,500,000 vide Civil Suit 1046 No. of 2020. The applicants jointly with the said Kobel lured the respondent into a botched investment scheme and obtained funds from her. She was then meant to receive a monthly interest or profit in addition to a refund of her full contribution after expiry of a certain period of time. That the applicants completely failed on their obligations to set up a profitable investment and consequently promised to refund the total sum of Ugx 86,500,000 she had advanced to them and a memorandum of understanding was executed to that effect. That to date the applicants have only refunded a sum of Ugx 16,000,000 leaving an outstanding balance of 70,500,000, hence the instant suit against them. Counsel relied on the case of Makula Interglobal Trade Agency Vs Bank of Uganda (1985) H. C. B 65 (supra) where it was held that *"in a summary suit before leave to appear and defend is granted, the defendant must show that there is a bonafide triable issue of fact and secondly that there is reasonable ground for defence of the claim".* He submitted

that the respondent's claim is of a monetary nature and that she lawfully took out summary proceedings pursuant to Order 36 rule 2 further, that the applicant's application did not raise any triable issues to warrant a full trial of the matter and the proposed defence is devoid of any merit.

- [7] It was also Counsel's submission that the applicants have failed to demonstrate that they have a reasonable and/ or valid defence to the suit. That on the defense of guarantorship, it was submitted that the applicants are not guarantors but rather principal debtors who executed various memoranda of understanding undertaking to invest funds into a business venture established and managed by them, from which the respondent was to earn a monthly interest. However, upon failure to undertake the same they opted to refund the money to the respondent. That the contracts executed in respect of the investment and relating to the reimbursement after the botched investment were directly between the applicants and the respondent as principal parties and it is not indicated anywhere that the applicants were acting as guarantors. That the applicants also issued cheques to secure the debt. See paragraphs 7,8,9,10,11,12,18 & 19 of the respondent's affidavit in reply and annextures attached thereto. That the transaction in question was in respect of an investment venture and not a money lending transaction as alleged by the applicant and as such their averments in this regard are completely misleading. - [8] That as regards the illegality of the contract for being unwritten,the respondent stated that various memoranda were signed between the parties in respect of the dealings between the applicants and the respondent out of which the claim in the instant suit is premised. See

paragraphs 7,11 &12 and annextures A, B & C, respectively, of the respondent's affidavit in reply. The respondent implored this court to find that the respondents claim is based on valid written contracts executed between the parties. Regarding the applicant's defence for interest at an excessive and unconscionable rate the respondent submitted that the applicant's assertions are inaccurate and incorrect. That the respondent's claim is exclusive of any interest that would have accrued on the transactions. The respondent did not demand for payment of interest but a mere refund of the money she had extended to the applicants. That the original amount was Ugx 86,500,000, the total sum of money refunded so far is Ugx 16,000,000 and principal amount Ugx 70,500,000 remains due and owing. The respondent concluded by stating that applicant's defence comprises of false and unsubstantiated allegations which are unsustainable and meritless and ought to be out rightly disregarded. She prayed for the dismissal of the application with costs and for judgment to be entered against the applicants under Order 36 rule 5 of the CPR; Interest at commercial rate of 25% from date of filing till payment in full and costs of the suit.

[9] Order 36 rule 8 of the Civil Procedure Rules provides for leave to appear and defend the suit which may be given conditionally or unconditionally, or subject to such terms as to the payment of money into court, giving security, or time or mode of trial or otherwise, as the court may think fit. In the case of Miter Investments Ltd Vs. East African Portland Cement Co, Ltd M. A No. 0336 of 2012 it was held that; *"in order to avoid judgment being entered for the plaintiff, the defendant must show that there is a triable issue or that for some*

*other reason, there ought to be a trial. Where the defendant raises a triable issue on his affidavit, he must not at this stage be shut out, and must have leave to defend, although his case may appear to be a weak one. On the other hand mere denials of the plaintiff's are insufficient. The defendant must clearly disclose the nature and extent of his defense in a clear language. "*

- [10] In the instant application, the applicant asserts that the transaction was merely a money lending transaction wherein the applicants were guarantors. This in effect is indicative of the fact that the debt is denied in its entirety as such warranting a trial on the merits. This and the other issues already discussed herein above constitute triable issues. - [11] In the circumstances therefore, ^I find that the applicants have disclosed reasonable grounds of defense that warrant being granted leave to appear and defend the summary suit. This application is hereby allowed. The applicants should file a written statement of defense within fifteen days from the date hereof and serve the same on the respondents as provided for under the law. Costs shall abide the outcome of the main suit.

^I do order

Dated, signed and delivered this 19th day of March 2021

*rvr7r'* Duncan Gaswaga

Judge