Zone Four International Limited & Another v Euro Cargo Aviation (Miscellaneous Application 1315 of 2023) [2024] UGCommC 128 (23 April 2024)

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL DIVISION]

MISCELLANEOUS APPLICATION NO 1315 OF 2023

(ARISING FROM CIVIL SUIT NO.688 OF 2023)

1. ZONE FOUR INTERNATIONAL LTD |

$2.$ KAIRES ODOM $|==========APPLICANTS$

VERSUS

EURO CARGO AVIATION=================RESPONDENT

Before Hon. Justice Patricia Kahigi Asiimwe

Ruling

Introduction

- This Application was brought under Order 36 Rule 3 and Order $1.$ 52 Rules 1 and 3 of the Civil Procedure Rules seeking orders that the Applicants be granted unconditional leave to appear and defend Civil Suit No. 688 of 2023 and costs of the application be in the main cause. - The Application was supported by an affidavit sworn by Kaires 2. Odom, the 2^nd Applicant and the Manager of the 1^st Applicant. He stated that: - The Applicant is not indebted to the Respondent to the $a)$ tune of USD 230,000 and the transaction referred to in paragraphs 8 and 9 of the Affidavit in Support of the Plaint was in respect of the purchase of fuel of USD 28,579.50 which amount was paid. - The 1^st Applicant does not maintain the said bank $b)$ account in the United States of America where the money being claimed was allegedly sent.

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- $c)$ He has been advised by his lawyers that this Court has no jurisdiction to hear this matter; that the Plaint does not disclose a cause of action against the Applicants, and also that the claim for interest is illegal since interest did not form part of the transaction. - $d$ He has also been advised by his Lawyers that the transaction between the 1^st Applicant and the Respondent is illegal and cannot be enforced by this Honorable Court. - 3. The Respondent opposed this application through an Affidavit in Reply and a Supplementary Affidavit in Reply deponed by Kamanzi Derrick an advocate. He stated that: - December 2021, the $a)$ Sometime in $2^nd$ Applicant approached the Respondent for a friendly loan to help boost the 1^st Applicant's business in Uganda - On 4^th January 2022, the Respondent agreed to loan the $b)$ Applicants USD 250,000 for a period of 6 months at no interest, the money was supposed to be paid back by 1^st July 2022. - The said money was put on the $1^{st}$ Applicant's account in $c)$ Bank $\overline{of}$ America $N/A$ vide Account Number 33406984450. - The Applicant managed to pay USD 20,000 but neglected $d$ ) to pay the balance of USD 230,000 despite several reminders. - In rejoinder, the $2^{nd}$ Applicant stated that: 4. - $a)$ The purported appointment of Kamanzi Derrick to represent the Respondent is ineffectual in responding to the Application.


- $\mathbf{b}$ ) In all dealings with the Respondent, he acted as director of the Company and not in his personal capacity, therefore, he is not liable. - He has been informed by his lawyers that issues $c)$ pertaining to ascertaining the personal liability of a director in a company require full trial. - He has been informed by his lawyers that the inquiry into $d)$ whether the impugned loan transactions constitute a money lending transaction that violates both local and international laws related to money lending is a matter not amenable to summary judgment. - There is a conflict of interest as the appointed lawyers of $e)$ the Respondent Company are also the Company Secretary for the 1^st Applicant; the relationship between the Respondent and the lawyers is a violation of advocate-client privilege and it was done in bad faith.

Representation

The Applicants were represented by $M/S$ Blair & Company 5. Advocates and the Respondent was represented by M/S Oasis Advocates.

Resolution

*Preliminary points of law:*

*Whether the Respondent's lawyers have a conflict of interest*

- 6. Counsel submitted that CR Amanya Advocates & Solicitors are not only the Advocates representing the Respondent but also the Firm acting as company secretary of the 1^st Applicant. - 7. Counsel submitted that the impugned loan transaction materialized as a result of decisions taken by the $1^{st}$ Applicant's

directors, and in such processes, the company secretary plays an integral role by providing legal and compliance advice.

- 8. Counsel argued that the relationship between Kamanzi Derrick who is an advocate with CR Amanya Advocates & Solicitors and the Applicants raises profound concerns of conflict of interest, which disqualifies him from being the legal representative of the Respondent. - 9. Counsel for the Respondent on the other hand submitted that there is no conflict of interest since at the time when the transactions were entered into the deponent was not part of CR Amanya Advocates who were secretaries to the Applicant. Counsel further argued that the CR Amanya recused itself from representing the Respondent. - 10. It should be noted that the deponent of the Affidavit in Reply works with the firm that previously had the role of company secretary to the Applicant at the time the transaction in issue was concluded. The issue then is whether the deponent has a conflict of interest. - 11. Under *Regulation 4 of the Advocates (Professional Conduct)* Regulations SI 267-2 it is provided that an advocate shall not accept instructions from any person in respect of a contentious or non-contentious matter if the matter involves a former client and the Advocate as a result of acting for the former client is aware of any facts which may be prejudicial to the client in that matter. - 12. In the case, Uganda vs Patricia Ojangole (Criminal Case No. 1 of 2014) [2014] UGHCACD 3, Justice Lawrence Gidudu held as follows with respect to the issue of conflict of interest:

It is both the actual and the perception that counts when tracing conflict of interest in a transaction. It is what a reasonable person would conclude while viewing the *transaction from a distance that counts. It is related to the* rule against bias. The old adage that justice must not only *be done [but] must be seen to be done applies to conflict of* interest.

*Conflict of interest ... has also been generally defined as* any situation in which an individual or corporation is in a position to exploit a professional or official capacity in some way for their personal or corporate benefit. Conflict of interest is founded on the existence of a fiduciary *relationship between a lawyer and client.*

- 13. In this case, the Applicant was a former client of CR Amanya Advocates & Solicitors. Counsel for the Respondent argued that at the time CR Amanya Advocates & Solicitors was acting for the Applicant the deponent of the affidavit in reply had not joined the firm. - 14. In the case of Uganda Vs. Patricia Ojangole supra, the learned judge further held that "the instruction to a partnership of lawyers goes to the firm and not to individual advocates. An individual partner cannot practice law in a partnership firm independent of the other partners. This would be contrary to the Partnership Act." - 15. In the same vein I find that the fact that the deponent had not joined the firm at the time when CR Amanya Advocates & Solicitors was representing the Applicants does not do away with the concern of conflict of interest. The deponent being from a firm that formerly represented the Applicant gives him access to facts that could be prejudicial to the Applicants. It should also be noted that following the hearing where the Applicants raised the issue of conflict of interest, CR Amanya Advocates & Solicitors recused itself from the case. I find that the deponent has a conflict of interest and consequently, the Affidavit in Reply is hereby struck off.

*Issue: Whether the Applicant should be granted unconditional leave to* appear and defend

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16. The principles for granting leave to appear and defend a suit are stated in the case of Makula Interglobal Trade Agency V Bank of Uganda [1985] HCB 65 where it was held 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. Where 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 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.

17. 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 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.

- 18. Counsel for the Applicants argued that the funds were transferred to a bank account in America which does not belong to the Applicants and that they are therefore not indebted to the Respondent. - 19. The $1^{st}$ Applicant in this case is Zone Four International Limited. Form 20 submitted by the Applicant indicates the company name as Zone Four International Limited. Attached to the Plaint in the main cause as Annexure A is a loan agreement, the debtor is Zone Four International Limited. Also attached to the Plaint as Annexure B is a payment slip indicating that on $4^th$ January


2022, the Respondent wired USD 250,000 to an account in the Bank of America belonging to Zone Four International LLC.

- 20. Therefore, while the loan agreement indicates the $1^{st}$ Applicant (Zone Four International Limited) as the borrower, the money was wired to Zone Four International LLC. In the absence of evidence to the contrary I find that there is doubt as to whether the money in issue was wired to the 1^st Applicant. This can only be resolved through trial. This is therefore a triable issue. - 21. In the case of Postal Corporation of Kenya Vs. Inamdar & 2 Others [2004] 1 KLR 359 court held as follows:

The law is now well settled that if the defence filed by a defendant raises even one bona fide triable issue, then the *defendant must be given leave to defend.*

- 22. In light of the above, this court has not deemed it necessary to delve into the assessment of the other defences raised by the Applicant since court finds that there is already one triable issue. - 23. Court therefore hereby grants the Applicant leave to appear and defend on the following terms: - The Applicant shall file its written statement of defence $a)$ within 15 days from the date of this Ruling; and - Costs shall follow the cause. $\mathbf{b}$ )

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Dated this 23^rd day of April 2024

Patricia Kahigi Asiimwe

Judge

Delivered on ECCMIS

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