[2021] UGCA 214


### THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### CORAM: KIRYABWIRE AND MUGENYI, JJA AND KASULE, AG. JA

#### CIVIL APPEAL NO. 135 OF 2012

#### **BETWEEN**

1. JING HONG GUO DONG ....................................

AND

BARCLAYS BANK OF UGANDA LIMITED ....................................

(Appeal from the Judgment of the High Court of Uganda at Kampala (Madrama, J) in Civil Suit No. 35 of 2009)

Civil Appeal No. 135 of 2012

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### JUDGMENT OF MONICA K. MUGENYI, JA

I have had the benefit of reading in draft the lead Judgment of Hon. Justice Remmy Kasule, Ag. JA in this Appeal. I agree with the decision arrived at and

the orders therein, and have nothing useful to add. 文字 人口的 化基金 $\left\{ \begin{array}{c} \text{Tr}(\mathcal{A}) = \mathcal{A}(\mathcal{A}) \\ \text{Tr}(\mathcal{A}) = \mathcal{A}(\mathcal{A}) \end{array} \right.$ maio Dated and delivered at Kampala this ..... day of ................................... 2021.

Mur egenyi,

Hon. Lady Justice Monica K. Mugenyi **JUSTICE OF APPEAL**

# THE REPUBLIC OF UGANDA

# IN THE COURT OF APPEAL OF UGANDA

### AT KAMPALA

# Civil Appeal No.135 of 2012

[Appeal from the decision of the High Court of Uganda at Kampala (Commercial Division) before His Lordship Justice Christopher Madrama, J. (as he then was) dated 10^th February, 2012 in Civil Suit No.35 of 2009]

1. Jing Hong

**Guo Dong** $2.$ ......................................

#### Versus

Barclays Bank of Uganda Limited ....................................

Coram: Hon. Justice Geoffrey Kiryabwire, JA

Hon. Lady Justice Monica Mugenyi, JA

Hon. Justice Remmy Kasule, Ag. JA

Judgment of Justice Remmy Kasule, Ag. Justice of Appeal

## Background

Jinda International Textiles Corporation Ltd, through HCCS No.156 2008 sued Barclays Bank of Uganda Ltd and Andrew Kasirye, challenging the legality of the bank to put the plaintiff under receivership and appointing the second defendant as the receiver/manager. The plaintiff sought an injunction to restrain the defendant from carrying on the receivership and from disposing of any properties, including land, mortgaged by the plaintiff to the first defendant bank.

Both defendants in their written statement of defence to the suit contended that the receivership of the plaintiff had been properly commenced and executed in accordance with the law after the plaintiff had failed to repay the money advanced to it by the first defendant bank within the time and upon the terms agreed upon between the plaintiff and the $1^{st}$ defendant bank.

The defendants counter-claimed against the plaintiff for the outstanding principal amount of the money advanced by the bank with accrued interest, penalties and costs.

The plaintiff however did not file a reply to the defendants' counter-claim with the result that the judgment was entered on 18^th February, 2010 for the defendants against the plaintiff for the sum counter-claimed.

On 24^th August, 2011, the main suit was dismissed with costs for the reason of the absence, without valid reason, of the plaintiff when the case was called for scheduling on a date that had been fixed in the presence of both the plaintiff and the plaintiff's Counsel

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HCCS No.35 of 2009: Commercial Division, was filed in Court on 11^th February 2009. In the suit, Barclays Bank of Uganda Limited sued Jing Hong and Guo Dong to recover the sum of money advanced by the plaintiff to Jinda International Textiles Corporation Limited on 28^th October, 2004. The repayment of that money had been guaranteed in writing by the two defendants to the suit on 22^nd September, 2004 and 12^th November, 2004. The borrower had failed to re-pay the money borrowed and on 18^th December, 2008 the guarantors, were called upon to meet their obligation as guarantors.

The defendants, as guarantors, denied liability contending that the borrower had been placed under receivership by the plaintiff bank and the process of recovering the money claimed was still going on. The defendants further contended that since the money whose payment they guaranteed had also been claimed in HCCS No.156 of 2008, then HCCS No.35 of 2009 against the defendants as guarantors then the subsequent suit was barred by the doctrine of res judicata.

The defendants, in their written submissions, contended that HCCS No.35 of 2009 was re-litigating the very same matter already determined in HCCS No.156 of 2008. It was thus barred by Section 7 of the Civil Procedure Act.

The plaintiff counter submitted that in HCCS No.156 of 2008, judgment had been obtained against the debtor as borrower for the sum he borrowed from the plaintiff. HCCS No.35 of 2009, on the other hand was for the sum guaranteed by the defendant as additional securities to secure repayment. The principal debtor had failed to pay and so the plaintiff had a cause of action to sue

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the guarantors to collect repayment. The doctrine of res judicata was not applicable to the case.

On 10^th February 2012, the High Court Commercial Court Division (Madrama, J) ruled that HCCS NO.35 of 2009 was not barred by the doctrine of res Judicata.

The Learned Judge ordered that the hearing of the said suit proceeds.

On 18^th April, 2012, the defendants with the consent of Counsel for the Respondent, were granted leave to appeal to this court against the ruling of Madrama J, as he then was, dated 10^th February, 2012. Hence this appeal.

# **Grounds of Appeal**

"1. The Learned Trial Judge erred in law and fact when he failed to properly evaluate the evidence before him, thus arriving at a wrong conclusion that the parties in the former suit HCCS No.156 were different from the parties in the current suit HCCS No.35 of 2009 and would therefore not validly claim under the doctrine of res-judicata.

2. The Learned Trial Judge misdirected himself and erred in law and fact in holding that the former suit only established liability of the principal debtor for an amount of US\$2,450,000 (two million four hundred fifty thousand united states dollars only) and would therefore not operate as a bar under the doctrine.

3. The Learned Trial Judge erred in law and fact in holding that HCCS No.35 of 2009 a current suit be heard on its merits disregarding the fact that the issues raised therein were

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substantially and directly in issue in HCCS No.156 of 2008 a former suit which had been financially adjudicated upon."

## Legal Representation

At the hearing of this appeal Kagoro Friday Roberts, Advocate represented both appellants, while Paul Wiltshire Advocate appeared for the respondent.

Learned Counsel for both parties chose to proceed by written submissions, which the court allowed.

## **Submissions of Counsel**

Counsel for the appellants submitted on grounds 1 and 3 first and then on ground 2.

### Grounds $1$ and $3$

# Submission of Counsel for the Appellants

Counsel for the appellants referred court to Section 7 of the Civil Procedure Act and the Supreme Court case of Karia and another vs. Attorney General and others, (2005) EA 84, where the doctrine of res-judicata was adjudicated upon. He submitted that HCCS No.156 of 2008 was a former suit within the meaning of Section 7 of the Civil Procedure Act and the judgment entered upon the counter-claim was by a competent court of law.

Counsel therefore contended that the claim in HCCS No.156 of 2008 being a claim of US\$2,450,000 is directly and substantially the claim in HCCS No.35 of 2009, which seeks to enforce guarantee for the same sum.

Counsel argued that the respondent was the plaintiff as counterclaimant in the earlier civil suit HCCS No.156 of 2008 and was

also the plaintiff in the subsequent civil suit HCCS No.35 of 200g. The defendants in the new HCCS No.35 of Z0A9 are shareholders in the plaintiff company in HCCS No.156 of 200g and guarantors of its debt. The appellants therefore are the same entity litigating under the same title since the relief sought against them constitutes the same one cause of action in both HCCS No 156 of 2008 and HCCS No.35 of 2009. Counsel therefore submitted that the judgrnent in HCCS No.56 of 2OpB ,an earlier suit, resolved the sante matter the plaintiff's clSirn {or United States dollars 2,450,000. He argued that recovery for thc said sum could only be by way of execution by way of attachment and sale of tlre judgment delttors securities which were in the custodir of the respondent and his appointed receiver/manager, [r/lr. Andrew Kasirye.

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The Appellants' Counsel relied on Cheborion Barishaki vs. Attorney General; Constitutional Petition No.04 of 2006, and the persuasive decisions of Omondi vs. National Bank of Kenya Ltd and others [2001 IEA 177, and Njangu vs. Wambugu and Another; Civil Suit ltio.2340 of 1991, which decisions clearly defined the meaning and applicability of the doctrine of res judicata.

Counsel for the appellants, thus contended that the respondent in this appeal filecl HCCS l.lo.35 of 2009, so as to recover the same sum from the same 1;arties; ,vet at the same time still holding to the securities of the appellants under the receivership which was simultaneousrlr-.-5frnl.'' nttrsuecl iq the earlier HCCS No.'i56 of 2008. Counsel''a@ued rhat thi#was wrong on the pai-t of the respondent because it rnay iead to the High Court (Commercial Division) delivering a judgment in HCCS No.35 of 2009, cver the

same subject matter that has already been resolved upon by an existing decision in HCCS No.156 of 2008.

Counsel prayed for grounds1 and 3 to be allowed.

### Ground 2

Counsel for the appellants submitted, referring to pages 191 and 192 of the court record, that the Trial Court misdirected itself by holding that the former suit i.e. HCCS No.156 of 2008 only established liability of the principal debtor for United States Dollars 2,450,000 and that such a holding was not a bar under the doctrine of res judicata against the same claim being pursued by the respondent against the appellants as guarantors in the later HCCS No.35 of 2009.

Counsel reasoned that if the liability for the principal debtor has already been established in HCCS No.156 of 2008, then the second suit HCCS No.35 of 2009 would as well be determining the same issue since the whole matter was about the payment of the same sum of money already determined by a Court of competent jurisdiction in HCCS No.156 of 2008.

Counsel therefore faulted the trial court for having come up with the decision it did, after having found that the matter had been already adjudicated upon.

Counsel prayed for ground 2 to be allowed.

# **Submissions of Counsel for the Respondent**

Grounds 1 and 3

Counsel for the respondent submitted that the doctrine of res judicata prohibits the re-litigation of matters with the same litigants over the same issues that have already been determined by a competent court of law. The doctrine is meant to cure the mischief of multiplicity of suits and aims at bringing litigation to finality.

Respondent's Counsel conceded that the Supreme Court in Karia and Another vs. Attorney General and Others (2005) 1EA, 83 sets out clearly the principles of the doctrine of res judicata. Learned Counsel also referred this court to **Boutique Shazim vs.** Norattam Bhatia and Hemantini Bhatia; Court of Appeal Civil Appeal No.36 of 2007, where the Court of Appeal also expressed itself on the same subject matter. In regard to the similarly of claims in HCCS No.156 of 2008 and HCCS No.35 of 2009, Counsel contended that the parties in HCCS No.156 of 2008 were Jinda International Textile Corporation Ltd vs Barclays Bank (Uganda) Ltd and Andrew Kasirye, while the parties in HCCS No.35 of 2009 are Barclays Bank (Uganda) Ltd vs Jing Hong and Guo Dong. These are therefore different parties in each suit except with regard to Barclays Bank (Uganda) Ltd.

Counsel for the respondent contended that the Learned Trial Judge's finding that the parties were not claiming under the same title and that the doctrine of res judicata did not apply was therefore correct.

Counsel invited this court to reject the submission for the appellants that since the appellants are shareholders in and the debts of Jinda International Textiles quarantors of Corporation, therefore the same were litigating under the same title and spirit envisaged in Section 7 of The Civil Procedure Act.

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Counsel maintained that for one to claim as such, the claim must be very explicit and not one that is assumed. Learned Counsel relied on Boutique Shazim vs. Norattam Bhatia and Hemantini Bhatia (supra), for this submission. The facts in that suit were that a first civil suit was brought by a plaintiff against an attorney of the registered proprietors of a piece of land. Then in a subsequent suit, the attorney was replaced by the registered proprietors of the suit land as parties to the suit. The plaintiffs remained the same in both suits. On the contention that res Judicata applied to the circumstances of the two suits, the Court of Appeal held that the Trial Judge erred in holding that the respondents and their attorney were litigating under the same capacity. The court reiterated the principle that:

"To give effect to a plea of res Judicata, the matter directly and substantially in issue in the suit must have been heard and finally decided in the former suit. It simply means nothing more than that a person shall not be heard to say the same thing twice over in successive litigations."

Counsel thus prayed this Court to find that the parties in HCCS No.156 of 2008 were different from the parties in HCCS No.35 of 2009. So too were the respective causes of action in each one of the suits.

In reply to the appellants' submissions in which he argued that the decree in HCCS No.35 of 2009 was against his clients and the same would occasion a miscarriage of justice. Counsel for the respondents submitted that HCCS No.35 of 2009, is for enforcement of quarantees, the principal debtor giving failed to repay the money borrowed.

Counsel fufther submitted that the Trial Judge rightly pointed out the role, function and liability of a guarantor, which only arises upon the default of the principal debtor to meet payment. Counsel agreed with the holding of the Trial Judge that the party upon whom the creditor elects to pursue for recovery of monies upon default is a rrratter of construction of the individual guarantee contracts

/. Respondent's Counsel supported the Judge's.'distinguishing between the two suits when he found that:

O "A careful perusal of the plaint in Civil Suit No,35 of ²⁰⁰⁹ which is the current suit is a suit for recovery of Uniteci States dollars 2,450,000. The issue that arises in this suit is not whether the principal debtor is liable for the sum of United States dollars 2,450,000 but whether the guarantors are liable under the cleed of guarantee dated 22nd September 2004 and 12th November 2004 for the liability of the principal debtor. The question whether the guarantors are liable has never been the :;rrbject of any controvcrsy in IICCS No.156 of 2048".

The Trial Judge therefore was right to hold that the tu,o claims in the two suits are quite distinct, tlre liability of a principal debtor ancJ the liability of a sur-=ty are separate liabilities. althcugh arising out of the same trarrsaction. Counsel thus submitted that ground '1 had rro merit arrcl ought to be dismissed.

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Counsel for the respondent maintained that the issue in dispute in both suits was vuhetl-rer- the sum of United States Dollar 2,450,000 was due and ora,ing. He faulted the Appellarrts' Counsel for

overlooking the distinction between the former HCCS No.156 of 2008 and the later HCCS No.35 of 2009 suits. The question of whether the guarantors are liable to the respondent had never been the subject of litigation in HCCS No.156 of 2008.

Counsel relied on *Paget's Law of Banking*, 9^th Edition. Butterworth's, that defines to guarantee as a promise to be answerable for the debt of another, and argued that the liability of a guarantor can only be discharged when the principal debtor settles the obligation to the lender. As such an inquiry as to whether or not the debt has been discharged and whether or not the guarantors are still liable can only be established by calling evidence in a trial, thus making HCCS No.35 of 2009 to be a legitimate suit.

Counsel also relied on the authority of The Law of Bank Guarantees, Sureties, Bills of Exchange by B. C. Mitra, in regard to obligations under the bank guarantees, and thus prayed this court to dismiss this ground 2 as well as the whole appeal.

## Resolution of the grounds

## Grounds 1 and $3$

The Supreme Court on the principle of res judicata in Civil Appeal No.17 of 2002, Fr. Narsension Begumisa and Others vs Eric Tibegaba held:

"The defence of res judicata is a bar to a plaintiff whose claim was previously adjudicated upon by a court of appellant jurisdiction in a suit with the same defendant or with a person through whom the defendant claims."

The Trial Judge addressed himself to Section 7 of the Civil *Procedure Act* that bars a court of law from entertaining any suit or issue in which the matter in issue has been directly and substantially adjudicated upon to finality between the same parties, or those through whom the parties claim, by another court competent to try that suit.

The test for determining whether a suit is barred by res judicata doctrine is to find out whether the plaintiff in the second suit is trying to bring before the court in another way in the form of a new cause of action a transaction which has already been adjudicated upon to finality in the earlier proceedings. See: Kamunye and Others vs The Pioneer General Assurance Society Ltd [1971] EA 263. See also Semakula vs Magala and Others [1971] HCB90.

In the case that is the subject of this appeal, it cannot be said that by instituting HCCS No.35 of 2009, the plaintiff was bringing the subject matter that had already been conclusively determined to finality in HCCS No.156 of 2008.

The facts also clearly establish that the two civil suits were not between the same parties. The earlier HCCS No.156 of 2008, is between Jinda International Textiles Corporation as plaintiff against Barclays Bank Uganda Limited and Andrew Kasirye as HCCS No.35 of 2009, on the other hand, was defendants. between Barclays Bank Uganda Limited as plaintiff against both appellants as defendants being sued on the contract of $\cdots \overbrace{\cdots}$ $\overbrace{\text{where}}^{\text{max}}$ **Tulial antee** $\alpha \in \mathbb{R}^{n \times n}$ The property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of t $\mathcal{L} = \mathcal{L}$

The fact that the two guarantors were also directors/shareholders in Jinda International Textiles Corporation Ltd, the plaintiff in

HCCS No.156 of 2008 was immaterial to the applicability of the doctrine of "Res Judicata". The two guarantors guaranteed as individuals and were different from the corporate entity Jinda International Textiles Corporation Ltd. The guarantors and the corporate entity cannot therefore be said to be one and the same party.

As guarantor, each appellant, was liable for the debt on default of the borrower, the principal debtor Jinda International Textiles Corporation Ltd. This made them separate entities, not one entity, when it came to liability.

The fact that the obligations of a guarantor arise only when the principal has defaulted in his/her obligations to the creditor, does not deprive the creditor, in absence of a specific prohibition in the guarantee contract, to sue the guarantor without first giving any notice to the principal borrower. The liability of a guarantor independently arise immediately the borrower is in default of payment. See: Guarantees by Geralding Mary Andews and Richard Millet at page 93.

As a matter of law, it is also up to the creditor, once the borrower makes default in payment of the money due, to join as defendants and/or third parties to the action on a guarantee, all or any of the guarantors liable under it. The principal debtor and the guarantor may be sued in the same action or in different actions. It is all up to the creditor to determine the course of action that best serves his/her interests, unless the guarantee contract provides otherwise: Gee: Halsbury's Laws of England, 4th Edition, Vol 20 para 215. See also Law of Bank Guarantees (supra) page 209.

It follows therefore that the respondent to this appeal correctly proceeded against the appellants as guarantors in instituting HCCS No.35 of 2009. The fact that HCCS No.156 of 2008 was already in existence and handled the way it was handled was no bar, through the doctrine of Res Judicata" or otherwise, to bar the respondent, as creditor, from pursuing his rights to recover the money from the appellants.

The Trial Judge exhaustively considered all the facts, applied the relevant law to those facts and arrived at the correct decision that the doctrine of "Res Judicata" did not apply to HCCS No.156 of 2008 and HCCS No.35 of 2009 as far as the respondent's rights were concerned. I accordingly find no merit in grounds 1 and 3 of the appeal. The two grounds are disallowed.

## Ground 2

The main contention of the appellants in this ground 2 is that since the money recoverable as between and/or amongst all the parties had already been adjudicated upon in HCCS No.156 of 2008, therefore the same issue could not be the subject of litigation in HCCS No.35 of 2009. It is their case therefore, that the Trial Judge thus erred when he held otherwise.

For the respondent, it was maintained that the two stated civil suits dealt with different causes of action and as such the submissions of the appellants in this ground were not valid.

A review of the proceedings of the trial court clearly brings it out that HCCS No.156 of 2008 was between the borrower as plainting and the lender as defendant. The plaintiff was challenging the act of the lender to commence receivership process against the plaintiff as borrower for apparent non repayment of the loan. The

plaintiff was contending that there were no legal grounds for the defendant to commence receivership process.

By way of defence to HCCS No.156 of 2008, the defendant asserted that the plaintiff as borrower, had defaulted in repayment of the loan on the agreed upon terms. The defendant thus counter- claimed against the plaintiff for the loan amount that was due.

The plaintiff did not take necessary steps in law to contest the counter-claim within the time prescribed by law. The trial court thus entered judgment for the defendant for the sum claimed against the plaintiff in HCCS No.156 of 2008. The rest of the issues in the said suit remained to be determined by the trial court after holding a formal hearing of the case with evidence being adduced by the parties to the suit.

Nowhere in the said HCCS No.156 of 2008 did the appellants in this appeal appear in their individual capacities as guarantors. They were totally out of HCCS No.156 of 2008. The Trial Judge in his ruling giving rise to this appeal held:

The question of whether the guarantors are liable has never been the subject of any controversy in HCCS No.156 of 2008".

The liability of the appellants as guarantors of the loan repayment would only arise when the borrower defaulted in repaying the said loan. It is only when the debtor has settled the loan that the liability of the guarantor can be said to have been extinguished. An inquiry as to whether the debt has been discharged or not, and whether or not the guarantors are still liable for the same, could only have been conducted by the court through a trial of a civil suit. This is why the respondent as lender lodged HCCS No.35 of

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2009 against the appellants as guarantors of the loan to meet their liability.

It is up to the guarantors to provide proof to court, by way of their defence to HCCS No.35 of 2009 that they are no longer liable to the respondent because the loan has been repaid. The trial court then would resolve on the issue one way or the other, depending on the evidence adduced.

The Learned Trial Judge in the considered view of the court, was thus right to hold as he did, that the causes of action in HCCS No.156 of 2008 was different from that in HCCS No.35 of 2009. Indeed even the parties themselves were different. It was never resolved to finality or at all, one way or the other, in HCCS No.156 of 2008, whether or not the appellants as guarantors of the loan. were no longer liable to the respondent bank under the respective guarantee contracts they executed with the said bank. There is therefore no merit in ground 2. The same is accordingly disallowed

Having disallowed all the grounds of appeal, I hereby dismiss this appeal.

I also order that the hearing of HCCS No.35 of 2009 be proceeded with and the suit be determined on its own merits.

As to costs, I would award the same to the respondent, those of this appeal and those of the court below.

Dated this $\ldots$ and day of $\ldots$ Hon. Justice Remmy ule. Justice of Appeal