[2003] UGCA 39

## THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

CORAM: HON. DEPUTY CHIEF JUSTICE L. E. M. MUKASA-KIKONYOGO HON. LADY JUSTICE A. E. N. MPAGI-BAHIGEINE, J. A. HON. MR JUSTICE A. TWINOMUJUNI, JA.

## **CIVIL APPLICATION NO.125 OF 2002**

$10$

#### **APPLICANT** CHARLES TWAGIRA ::::::::::::::::::::::::

### **VERSUS**

**EXAMPLE 20 EXPONDENT** OIL SEEDS (U) LIMITED

[Arising from Civil Appeal No. 76 of 2002]

#### RULING OF THE COURT 20

Charles Twagira, hereinafter referred to as the applicant, brought this application, by way of Notice of Motion, under rules 81 and 42(1) of the Rules of this court seeking an order to strike out Civil Appeal No.76 of 2002 filed by Oil Seeds (U) Limited, hereinafter referred to as the respondent company. He also prayed that the costs of the application be provided for by the respondent's counsel, M/s Kampala Solicitors.

The application is based on the following grounds as set down in the motion, namely that:

That the appeal was filed only against Charles Twagira, the " $(i)$ " applicant herein, whereas the ruling being appealed affects both the said Charles Twagira and one Remmy Kasule as defendant and plaintiff herein respectively.

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# (ii) The purported counsel for the respondent herein, Nl/s Kampala Solicitors, do not hal e instructions to t'ile the appeal."

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The application is supported by an afttdavit sworn by the applicant and dated 14'h November 2002, the gist of which is that he as rnajority shareholder did not authorize the filing of the suit nor did he authorize anv general meeting in which such a decision to file the suit was taken.

In reply thereto is the affidavit of one Ambrose Kagangure, one of the three directors ofthe respondent company, dated l2'h June 2003, which states that himself and other director Mr Katenta Apuuli authorised the filing of the suit in their capacity as directors and that the quorum for any meeting/action is two as stipulated in the Articles.

The background to the application is as follows. The applicant is one of the three directors of the respondent company, Oil Seeds (U) Limited, and is the rnajority shareholder owning 60% of the shares. The other two directors hold the remaining 40oZ between them.

On 27.10.2000, the respondent company tlled HCCS No.l488 of ²⁰⁰⁰ against the applicant claiming inter alia a specified sum of Shs.685,888,0451:. On 23.11.2000, the applicant filed his written statement of defence denying liability let alone any wrongdoing. t0

On 12.12.2000, when the suit came up for hearing, one Mr Remmy Kasule applied to court to be joined as a plaintiff against the applicant under Order ^I rules l0(2) and 13 of Civil Procedure Rules. He was clairning Shs.70

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million as arbitration fees against the applicant. The court allowed his application to be joined as co-plaintiff with the respondent company suing the applicant. He became the 2''d plaintiff and was allowed to file his papers within seven days, which he did. When the matter came up again for hearing on 10.5.2001, a number of preliminary issues of law were raised, one of which was the issue of the competence of the suit being brought in the name of the respondent company against the applicant, who is the majority shareholder.

On 25.9.2001 the learned Judge upholding this preliminary objection ruled and ordered: IO

> "I have in the circumstances found that this trial of a point of law has satisfied me that there should rather than disposing of the case, be a substitution of parties. In terms of Order l0 rule 2 of the Civil Procedure rules, it is my decision to order that the first plaintiff herein be struck out as such and that the same Oil Seeds (U) Ltd. be added as the second defendant on this action. I also order that either Ambrose Kakangure or Amoti Katenta Apuuli or both of them be added as plaintiffs in this case."

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As a result of this ruling Mr Remmy Kasule ftrrther amended his pleadings to sue the applicant as l't defendant and the respondent company as 2nd defendant, both of whom subsequently filed their written statements of defence.

On 16.10.2002, however, the respondent company filed an appeal against the applicant, contesting the ruling, to the exclusion ol Mr Remmy Kasule who was equally affected by the said ruling. The appeal challenges the Judge's order of substitution and joinder of parties as against the appellant and his holding that the appellant's lawy'ers had no instructions to file the SLIII

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The applicant thus seeks an order to hal'e the appeal struck out.

Arguing ground one, Mr David Mpanga, leamed counsel, contended that Mr Kasule was not made a party to the appeal whereas his rights were alfected by the Judge's order and that grave injustice would be occasioned to him if he was not made a party to the appeal. He pointed out that the omission to make him a party renders the appeal incompetent. In support of this he relied on Bitahwa Nyire Samson v lshanga Ndyanabo Longino, Election Petition Appcal lI ol' 2(X)2 rrntl .,\hnltd Ilin Ahnretl Kassinr Kusa's ^r Sved Abdulla Fadhal (l95lJ) E. A 60. '['he ettect ol both these authorities is that an appeal would be incompetent if a party at'fected by the entire decision in the court below were not joined in the appeal. Mr Mpanga therefore prayed court to strike out and dismiss the appeal.

In reply, Mr Bernard Tibesigwa, leamed counsel, submitted that the omission to join Mr Remmy Kasule to the appeal did not in any way render the appeal incompetent. It was filed properly without him being made ^a party. He asserted that it is only a party who is affected by the whole decision appealed that would be atfected by'the appeal. He pointed out that the decision appealed in this case affects only Oil Seeds (U) Limited and Charles Twagira. Mr Kasule's position will not be affected in the lower court. His claim is distinct and is against the applicant. The decision appealed did not affect Mr Kasule as co-plaintiff but affects only Oil Seeds

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(U) Limited and the applicant. Furthermore the respondent, Oil Seeds (U) Limited, has no clairn against Mr Kasule. This is evident tiom the grounds of appeal formulated. Mr Tibesigwa argued that Mr Kasule's position in the lower court will not be affected and will only invite unnecessary costs on appeal if he is made aparty. He pointed out that the authorities cited by Mr Mpanga were distinguishable in that the parties left out of the appeals had participated in the proceedings in the lower courts and were affected by the entire decisions appealed.

As pointed out above, Mr Remmy Kasule applied to be joined as a plaintitT to sue the applicant in the following words: l()

> "I am applying that I be joined as a plaintiff to this suit against defendant under Order I rule l0 (2) and also rule 13 of the Civil Procedure Rules. The grounds are that I acted as an arbitrator in a dispute between Oil Seeds and U. D. B. The amount which is the subject of the suit was part of the award I made and it contained ^a sum of (U) Shs.70 million, being arbitrators fees. This money, according to information I have was passed over to M/s Bitangaro and Co. Advocates, counsel to the defendant, to be paid to me and that sum has never been passed on to me by defendant - Mr Twagira. I pray that I be joined so that I can claim. The second ground is that the witnesses I would use are the shareholders and directors of Uganda Oil Seeds. It is essential to have me in so that court can effectively dispose of the dispute. ."

That being the case, Mr Remmv Kasule's clair-n ol Shs.70 rnillion is clearly distinct and is against the applicant. His position as claimant was not

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affected by the ruling appealed against. It is only the respondent, Oil Seeds (U) Limited, who is aggrieved by having its position as claimant suing the applicant personally changed to that of co-defendant with the applicant, whom it was originally suing. Oil Seeds (U) Limited has no claim against i\4r Kasule.

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We wouid also point out that the preliminary objection in this case was taken at the earliest opportunity, there having been no prior proceedings unlike in the authorities cited by Mr Mpanga. The appeal against applicant is therefbre properly filed and is competent without Mr Kasule being joined as a party. Ground one of the application fails.

Tuming to ground two, that the purporled counsel for the respondent, M/s Kampala solicitors had no instrr-rctions to file the appeal, Mr Mpanga argued that there was no Board meeting authorising the appeal. He pointed out that the evidential burden was on the respondent who claimed that there was authority but it was lacking. He submitted that the affidavit in reply could not be relied on as there was no mention ol where and when the Board meeting had taken place. No e ffort was made to annex the minlltes of the meeting if at a1l nor was the resolution extracted there frorn tbr such meeting. The applicant had to be notif-red of the meeting and no evidence was adduced to that effect. To support his arguments Mr Mpanga relied on Bugerere Col{ee Grorvers Limited v Sebirduka An Another (1970) EA 147 where it was held that when companies authorize the commencement of legal proceedings a resolution has to be passed either at a company or Board of Directors rneeting and recorded in the minutes. He subrnitted that the affidavit in reply was lacking in all respects. Referring to the authority cited

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by the respondent, N:rvichandra Kakubhai Radi:r v Kakubhai Kalidas and Co. Ltd. SCCA No.l0/199{, Mr Mpanga submitted that it did not detract from the established principle that authority to file proceedings is a matter of evidence and practice in the company's Articles of Association.

Mr Tibesigwa contended that M/s Kampala Solicitors had authority to tile the appeal. He pointed out that the decision in Navichandra Kakubhai Radia (supra) is to the effect that whether or not authority to file proceedings was given is a matter of evidence and how that authority is given depends on the Constitution of the company and that this can be verbal. He submitted that the evidential burden was on the person stating that there was no authority and not on the party stating that there was. This burden was on the applicant and he had failed to discharge it by showing the court its articles, how the applicant company authorises filing of suits.

The respondent, however, hand annexed the Constitution of the respondent 'Rl' to the affidavit in reply. Article 49 thereof vests the executive power of the day to day running of the company into the Board. He submitted that the power to instruct an advocate to file suit in the name of the company is an incident of Management and that the Constitution did not say that such power does lay in the general meeting but rather that it is an incident of management. The other two directors authorised the liling of the suit in their capacity as directors, since the applicant would not have authorised a suit to be filed against him. The quorum stipulated under the articles is two and this requirement was satisfied. He prayed court to dismiss the application.

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The Supreme Court l.reld in Navichandra Kakubhai Radia (supra)"

"We accept the submission of learned counsel for the respondent that the question whether or not an advocate has been dulv instructed to institute a suit on behalf of his client is a matter of evidence. In case of a company, how such authoritl, is given, whether by a resolution of the companv or that of its Board of Directors, rvill depend on the Constitution of the company. ln the present case,, the appellant did not adduce any evidence in support of his allegation thut the respondcnt advocates had no authority to file the suit. In our opinion, the burden of proof lav on the appellant to establish that the respondent's advocates had no such a u thority."

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As rightly pointed out by Mr Tibesigwa, giving instructions to an advocate to 1-rle suit is an incident of day to day rranagement of the business of the company. The general powers of management of the company business is vested in the Directors by Article 49. This is the established practice - see Shaw and Sons (Salford) Ltd. (1953) 2 KB l13 C. A.

According to the aft'idavit in reply sworn by Ambrose Kagangure, he together with a fellow director, Mr Katenta Apuuli authorised M/s Kampala Solicitors to file and prosecute the appeal on behalf of the respondent company. Both of them formed the necessary qLrorum under Article 45 required to authorise the tiling ol the appeal. This affidavit was not counteracted nor was any other evidence to the contrary adduced by the applicant. t0

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It is obvious that the applicant majority shareholder would not authorize such an action when he is the defendant. The two directors theretbre properly convened the general rneeting during which they instructed N4ls Kampala Solicitors to file the appeal. It is also the law that where the directors cannot give such instructions to file suit against themselves, the power to do so reverts to the general meeting . ['enrle r r l.ushington (lll77) 6 Ch. D.70. see Gower on The Princi les of Nlodern Com :rnr l -r\* 3''r Edition, page 58-1. l '' paragraph.

In view of all the above we are satisfied that IWs Kampala Solicitors were duly instructed to file this appeal on behalf of Oil Seeds (U) Lirnited. The second ground of the application also fails. t0

The application is accordingly disrnissed with costs

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