[2024] UGCommC 136

## 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) MISC. APPLICATION NO. 369 OF 2024 (ARISING OUT OF CIVIL SUIT NO. 1399 OF 2023)**

### **DR. FRANCIS KITAKA :::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

### **VERSUS**

## 15 **GUARANTY TRUST BANK (U) LIMITED :::::::::::::::::::::::: RESPONDENT**

### **BEFORE: HON. LADY JUSTICE PATIENCE T. E. RUBAGUMYA**

## 20 **RULING**

Introduction

This application was brought by Notice of Motion under **Section 98 of**

# **the Civil Procedure Act, Cap.71, Order 36 Rules 3 and 4** and **Order**

## 25 **52 of the Civil Procedure Rules SI 71-1** seeking orders that:

- 1. The Applicant be granted unconditional leave to appear and defend Civil Suit No.1399 of 2023. - 2. Costs of this application be provided for.

## Background

The background of this application is contained in the affidavit in support of the application by the Applicant, and is summarised below:

1. That the finance facility mentioned in the plaint was advanced to 35 MTK Uganda Limited and not the Applicant.

- 5 2. That the Applicant only gave the certificate of title for land comprised in Kyadondo Block 244 Plot 8199 at Muyenga to MTK Uganda Limited to use as security to get the finance facility. - 3. That the Applicant has never been advanced any money by the 10 Respondent thus he is not indebted to the Respondent in any way whatsoever. - 4. That the Applicant is aware that MTK Uganda Limited got the loan and used it to import vaccines for supply to the Ministry of 15 Agriculture, Animal Industry and Fisheries. - 5. That though the Applicant is referred to as the mortgagor in the mortgage deed and further charge, he has never received any loan from the Respondent and has never guaranteed payment of the 20 same but only gave his certificate of title to MTK Uganda Limited to use as security thus he is not indebted to the Respondent in the amount claimed in the plaint at all. - 6. That the Applicant has never been served with a demand notice 25 because he is not indebted to the Respondent in any way whatsoever and all the demand notices were issued to MTK Uganda Limited. - 30 In reply to the application, the Respondent through its Legal Officer, Atukunda Bless, opposed the application contending that: - 1. The facility was granted to MTK Uganda Limited as a corporate entity and it was secured by property comprised in Kyadondo Block 244 Plot 8199 at Muyenga registered in the name of Dr. Francis 35 Kitaka.

- 5 2. The said facility was in two types, a Bond and Guarantee Line and an Import Finance Facility altogether amounting to UGX 2,250,000,000/=. - 10 3. As evidenced in the offer letter dated 31st January, 2019 and the mortgage deed dated 5th February, 2019; the Applicant executed a mortgage deed with the Respondent undertaking to unconditionally pay the loan upon default by the principal borrower (MTK Uganda Limited). - 4. The facility was restructured according to the offer letter dated 21st July, 2021 and the Applicant once again executed a further charge with the undertaking to unconditionally pay the loan upon default by MTK Uganda Limited. - 20

5. Under clause 1 of the mortgage deed, the Applicant unconditionally guaranteed to discharge the Respondent of all monies and liabilities due and owing to the Bank by MTK Uganda Limited; the basis of 25 which the suit was instituted.

- 6. The Applicant is being sued as a guarantor of the facility following default in making payment by MTK Uganda Limited and not as a mortgagor. - 7. The Respondent was served with a notice of default on 4th May, 2021 putting him on notice of the principal borrower's debt. - 35 8. The security presented by the Applicant is subject to a land dispute between the Bank, the Applicant and his spouse which has rendered the foreclosure process futile and the more reason the guarantee should be enforced.

## 5 Representation

The Applicant was represented by M/s Mutabingwa & Co. Advocates while the Respondent was represented by M/s Terrain Advocates.

The parties were directed to file their written submissions which they did 10 and the same have been considered by Court.

## Issues for Determination

In accordance with **Order 15 Rule 3 of the Civil Procedure Rules,** this Court framed the issues as follows:

15 1. Whether the Applicant has raised sufficient grounds to warrant the grant of unconditional leave to appear and defend Civil Suit No.1399 of 2023?

## 2. What remedies are available to the parties?

Counsel for the Applicant in his submissions in rejoinder raised a preliminary objection to the effect that the affidavit in reply was defective and should be struck out since it was sworn by a person not authorized to do so. Counsel contended that Atukunda Bless did not state that he is 25 an advocate for the Respondent and only stated that he is a Legal Officer of the Respondent.

## **Order 6 Rule 28 of the Civil Procedure Rules** stipulates that:

*"Any party shall be entitled to raise by his or her pleadings any point of law and any point so raised shall be disposed of by the Court at* 30 *or after the hearing; except that by consent of the parties, or by order of the Court on the application of either party, a point of law may be set down for hearing and disposed of at any time before the hearing."*

5 It is trite that where there is a preliminary objection capable of disposing of the matter in issue, it is judicious to determine the objection before embarking on the merits of the case. (See*: Uganda Telecom Limited Vs ZTE Corporation SCCA NO.03 2017*).

Given the above, I shall proceed with consideration of the preliminary 10 objection so raised.

Let me first state that the Applicant did not comply with the timelines given by Court for filing submissions in rejoinder. The submissions in rejoinder were filed on Friday 26th April, 2024 at 4:30pm and yet Court had directed that submissions in rejoinder be filed by 22nd April, 2024 15 and that the Ruling would be delivered on 30th April, 2024.

Counsel for the Applicant raised the preliminary objection in relation to the affidavit in reply in the submissions in rejoinder which were filed late as stated above. If the objection been raised in his submissions, Counsel for the Respondent would have had the opportunity to respond to the 20 same. In addition, the Applicant did not file an affidavit in rejoinder wherein he would have raised the issue soon after the Respondent had filed the affidavit in reply to enable the Respondent respond to the objection raised. Accordingly, in the interest of justice and since the issue was raised by Counsel for the Applicant after the Respondent had 25 filed their submissions, it would be unjust to condemn the Respondent unheard on a matter that Counsel raised after the Respondent had filed their submissions; by striking out the affidavit in reply on the basis that the Legal Officer did not state that he is an advocate for the Respondent.

The above notwithstanding, the deponent, Atukunda Bless stated that he 30 is a Legal Officer of the Plaintiff/Respondent, conversant with the facts of the case and authorised to swear the affidavit in reply. In the case of

5 *Namutebi Matilda Vs Ssemanda Simon and 2 Others MA 430 of 2021,* **His Lordship Stephen Mubiru** while addressing a preliminary objection relating to the Respondent's joint affidavit stated that:

*"What is required in affidavits is the knowledge or belief of the deponent (see for example Order 5 rule 24, Order 10 rule 19(3) of* 10 *the Civil Procedure Rules)".*

In the premises, this being a Court matter and the fact that the deponent disclosed the capacity under which he represented the Respondent and that he had authorization; Atukunda Bless would in my view, as a Legal Officer have the authority to represent the Respondent in this instant 15 matter, and would be conversant with the facts of the case in Court as he stated in the affidavit in reply.

I shall therefore disregard this objection and proceed to consider the merits of the application in the interest of justice.

Issue No.1: Whether the Applicant has raised sufficient grounds to 20 warrant the grant of unconditional leave to appear and defend Civil Suit No. 1399 of 2023?

## Applicant's submissions

Counsel for the Applicant averred that according to paragraph 5 (a) of the plaint and **annexure** "**A"** thereto which is an offer letter dated 31st 25 January, 2019, showing the Respondent's contention that it granted an import finance facility in the sum of UGX 740,000,000/= to MTK Uganda Limited, Counsel for the Applicant argued that the above verifies that the loan was not granted to the Applicant.

30 Counsel submitted that the Applicant only facilitated the 1st Defendant in the main suit (MTK Uganda Limited) to get the loan by providing 5 security for the loan which is still with the Respondent and that the personal guarantee was signed by the 2nd Defendant in the main suit (Fiona Migadde) and not the Applicant.

Counsel for the Applicant also submitted that the plaint was wrongly brought under summary procedure as it does not seek to recover a 10 liquidated demand as required by **Order 36 Rule 1 of the Civil Procedure Rules**. He contended that the plaint seeks to recover UGX 1,083,003,181/= yet in paragraph 5(a) it is portrayed that the Respondent advanced only UGX 740,000,000/= to the 1st Defendant. Counsel contended that paragraph 5 (g) of the plaint states that a 3rd 15 party further charge was executed in 2021 to secure the restricted sum of UGX 828,327,466/= and that neither was the principal sum stated nor the interest so accrued.

Counsel relied on the cases of *M/s Kots (U) Ltd Vs Woddamba Nathan C. A. C. A No. 58 of 2001, George William Semivule Vs Barclays Bank*

20 *(U) Ltd Misc. Application No. 267 of 2008*, and *Geoffrey Gatete & Anor Vs William Kyobe SCCA No.7 of 2005*. In his conclusion, Counsel for the Applicant prayed that the Applicant be granted leave to appear and defend the suit as there are triable issues.

## Respondent's submissions

- 25 Counsel for the Respondent contended that it is not the Respondent's case that the loan facility was extended to the Applicant as alleged by the Applicant but rather that the Applicant's liability as a guarantor accrues from the third-party mortgage duly executed by the Applicant and MTK Uganda Limited in favour of the Respondent. - 30 Counsel submitted that under **clause 1** of **annexures** "**A**" and "**D**", the Applicant unconditionally undertook to pay the loan in case of default by

5 the principal borrower. Since the principal borrower defaulted on the facility, the mortgagor, the Applicant, automatically became liable to discharge the debt obligation which at the time of filing this suit was UGX 1,083,003,181/= as per the laws relating to the liability of a guarantor. Counsel further submitted that contrary to the averment 10 made by the Applicant that the interest so accrued was not stated, the amount due and owing was arrived at by simple arithmetic calculations using **annexures "A"** and **"C"** wherein the interest rate was 9% and 18% per annum respectively. More so, the Respondent went ahead to produce a copy of the account statement which clearly provides both cases of 15 normal and penal interest.

Counsel relied on the cases of *Guma Paulino Vs Bank of Africa and 2 Others Civil Suit No. 13 of 2008, MTK Uganda Ltd Vs Housing Finance Bank Ltd HCMA No. 62 of 2021* and *Alice Norah Mukasa Vs Centenary Bank Ltd and Another Civil Suit No. 77 of 2010.*

- 20 In conclusion, Counsel for the Respondent submitted that the suit instituted against the Applicant falls within the ambit of **Order 36 of the Civil Procedure Rules** and thus this Court should find that the Applicant is liable for the debt obligation of MTK Uganda Limited as a guarantor. - 25 Submissions in rejoinder

Counsel for the Applicant further reiterated his submission that the Applicant is not indebted to the Respondent and that even then, the suit would be premature as no demand notice has ever been served on to the Applicant as required by clause 1 of the mortgage deed. Counsel further 30 argued that the plaint does not state how much interest has accrued. In

5 conclusion, Counsel for the Applicant prayed that the Applicant be granted leave to appear and defend the suit.

## Analysis and Determination

I have taken into consideration the affidavit in support and the affidavit in reply to the application together with the submissions and the 10 authorities thereto.

**Order 36 Rule 3 (1) of the Civil Procedure Rules**, stipulates that a Defendant served with summons, issued upon the filing of a specially endorsed plaint and affidavit under **Rule 2** of this Order, shall not appear and defend the suit except upon applying for, and obtaining leave 15 from Court. As was held in the case of *Maluku Interglobal Trade Agency Ltd Vs Bank of Uganda [1985] HCB 65* for leave to appear and defend a summary suit to be granted, an Applicant must show by affidavit or otherwise that there is a bona fide triable issue of fact or law.

In the case of *Jamil Ssenyonjo Vs Jonathan Bunjo Civil Suit No. 180* 20 *of 2012,* a triable issue is one that only arises when a material proposition of law or fact is affirmed by one party and denied by the other. It is, hence, capable of being resolved through a legal trial that is, a matter that is subject or liable to judicial examination in Court.

Therefore, a defence so raised by the Applicant should not be averred in 25 a manner that appears to be needlessly bald, vague or sketchy. A triable issue must be differentiated from a mere denial. The defence raised must also not be a sham intended to delay the Plaintiff from recovering his/her money. If the defence is based upon facts, in the sense that material facts alleged by the Plaintiff in the plaint are disputed or new facts are 30 alleged constituting a defence, the Court does not attempt to decide these

5 issues or to determine whether or not there is a balance of probabilities in favour of the one party or the other.

Further, in the case of *Kotecha Vs Adam Mohammed [2002] 1 EA 112,* it was held that where a suit is brought under summary procedure on a specially endorsed plaint, the Defendant is granted leave to appear if

- 10 he/she is able to show that he/she has a good defence on the merit; or that a difficult point of law is involved; or a dispute as to the facts which ought to be tried; or a real dispute as to the amount claimed which requires taking an account to determine; or any other circumstances showing reasonable grounds of a bonafide defence. - 15

Furthermore, in the case of *Maluku Interglobal Trade Agency Ltd Vs Bank of Uganda (supra),* the Court noted that in such a case:

"*The Defendant is not bound to show a good defence on the merits but should satisfy the Court that there was an issue or* 20 *question in dispute which ought to be tried and the Court shall not enter upon the trial of issues disclosed at this stage.*"

In the instant case, the Applicant refutes liability in the mortgage transaction arguing that the loan was granted to MTK Uganda Limited and that he only availed the certificate of title of the property comprised 25 in **Kyadondo Block 244 Plot 8199 land at Muyenga** registered in his name and that the Respondent still has the said title. The Applicant disputes having guaranteed payment of the loan in case of default by MTK Uganda Limited and contends that he only facilitated the transaction by placing his property as security.

30 The aforementioned security is the subject of a dispute in **Civil Suit No.603 of 2022** and there is an order from Court vide *Misc. Application No. 955 of 2022 arising out of Civil Suit No.603 of*

5 *2022* between *Victoria Vivian Katamba Kitaka Vs Guaranty Trust Bank (U) Limited and Dr. Francis Kitaka*, that restrained the Respondents, their agents and servants from selling off, occupying or trespassing on land compromised in **Kyadondo Block 244 Plot 8199 land at Muyenga**.

The above application was instituted by Victoria Vivian Katamba Kitaka on grounds that she is a spouse of the Applicant herein and that the suit property was mortgaged without her consent yet it is matrimonial property. Further, vide *Misc. Application No. 2897 of 2023*, Fiona 15 Migadde one of the Defendants in **Civil** *Suit No. 1399 of 2023* (where this instant application also arises from) sought leave to appear and defend which was granted since there were triable issues concerning the legality of the said mortgage. In the said case, this Court held among others that:

20 *"… the facts and evidence adduced by both parties disclose issues that go to the root of the legality of the transaction and the securities for the debt in issue, which all require determination by Court."*

As espoused in the authorities discussed above and as laid out in the case of *Twentsche Overseas Trading Co. Ltd Vs Bombay Garage* 25 *[1958] EA 741*, summary procedure is resorted to in clear and straightforward cases where the demand is liquidated and no issues for determination by Court except for the grant of the claim.

In the instant case, the facts and evidence adduced in *Misc. Application No. 955 of 2022 arising out of Civil Suit No. 603 of 2022* between 30 *Victoria Vivian Katamba Kitaka Vs Guaranty Trust Bank (U) Limited and Dr. Francis Kitaka* and the orders of a temporary injunction granted therein, disclose issues that go to the root of the

5 legality of the mortgage transaction relied on in the specially endorsed plaint in the matter at hand.

In the circumstances, the facts and evidence adduced by the parties disclose triable issues of law and fact that ought to be determined by this Court. This therefore places the plaint outside the ambit of **Order 36 of**

10 **the Civil Procedure Rules.**

Issue No. 1 is resolved in the affirmative.

Issue No.2: What remedies are available to the parties?

Having resolved issue 1 in the affirmative, this application is granted with the following orders:

- 15 1. The Applicant is hereby granted unconditional leave to appear and defend **Civil Suit No.1399 of 2023.** - 2. The Applicant is ordered to file his Written Statement of Defence within fourteen (14) days from the date of this Ruling. - 3. Costs of this application shall be in the cause. - 20 I so order.

Dated, signed and delivered electronically this **30th** day of **April**, **2024.**

25 Patience T. E. Rubagumya **JUDGE** 30/04/2024 7:30am