[2025] UGCommC 47


# **IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA COMMERCIAL DIVISION**

Reportable Miscellaneous Application No. 0327 of 2025 (Arising from Civil Suit No. 0447 of 2022)

In the matter between

## **PAUL MUWANGA T/A POLO BOUTIQUE APPLICANT**

**And**

# **1. BERNARD BYAMUKAMA**

## **2. DFCU BANK UGANDA LIMITED RESPONDENTS**

## **Heard: 3rd April, 2025. Delivered: 3rd April, 2025.**

*Civil Procedure - Pleadings - Joinder of parties - two categories of persons may be joined as necessary parties: (a) a person "who ought to have been joined as a party"; and (b) a person "whose presence before the court is necessary to ensure that all matters…may be effectually and completely determined and adjudicated upon - the latter category includes; - (a) a person whose interests are affected directly by the outcome of the case. It is not enough that a person's interest may be affected commercially by a judgment against a party to the suit; it must be an interest that would be legally affected; (b) a person whose presence enables the court to adjudicate more effectually and completely the maters in issue, although such person need not be one in favour of or against whom the decree is to be made. The test is whether common questions of law and fact will arise if separate suits were to be brought against the respondents separately. The physical object may be the same, but different legal relationships may exist in relation thereto giving rise to different legal issues between the same or different parties; (c) a person who must take action in order to afford the relief sought; (d) where success against the party sought to be joined has a bearing on the relief sought in the pending suit - While delay is not in and of itself a basis for refusing an amendment, there must come a point where the delay is so long and the justification so inadequate that some prejudice to the other party will be presumed absent a demonstration by the party seeking* *the amendment that there is in fact no prejudice despite the lengthy and unexplained delay non-compensable prejudice, that which cannot be dealt with by way of an adjournment or a costs order, will result in denial of the relief.*

### **RULING**

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#### **STEPHEN MUBIRU, J.**

The background;

- [1] At all material time, the respondent was the registered proprietor of a commercial building situated on land comprised in Kibuga Block 13 Plots 881 and 391 at Najjanankumbi being a parcel of land measuring approximately 0.0480 and 0.0400 Hectares respectively. The applicant was proprietor of a garments business occupying part of that building as a tenant. Being desirous at the time, of selling off the said building in order to settle an outstanding debt he then had with Ms/ Equity Bank Limited, the respondent placed the said land and developments thereon on the market. On or about 25th October, 2019 the respondent sold the property to the applicant at a purchase price of the shs. 2,000,000,000/= In order to finance that purchase, the applicant sought funding from DFCU Bank Uganda Limited which offered only shs. 1,800,000,000,000/= to be secured by the title deed to that land, by then mortgaged to Ms/ Equity Bank Limited. - [2] The applicant sought and obtained a letter of undertaking from Ms/ Equity Bank Limited to the effect that upon receipt of shs. 1,800,000,000,000/= from DFCU Bank Uganda Limited, it would release the certificate of title to the latter. He then signed a loan agreement with the 2nd respondent by which he authorised the 2nd respondent to transfer that sum directly to the 1st respondent's account with Ms/ Equity Bank Limited whereupon the title deed was handed over to the 2nd respondent. The applicant also executed an agreement of purchase of the property, by which the applicant undertook to pay the balance of shs. 200,000,000/= in two equal instalments; shs. 100,000,000/= by the end of October, 2020 and another shs. 100,000,000/= by the end of October, 2021. The applicant

having defaulted on that obligation, the 1st respondent on 13th June, 2022 filed a summary suit against the applicant, seeking recovery of shs. 200,000,000/= being the outstanding balance of the purchase price.

- [3] The applicant filed an application for leave to appear and defends the suit. In a ruling delivered on 22nd August, 2022 a summary judgment was entered in favour of the 1st respondent in the sum of shs. 200,000,000/= but the applicant was granted leave to file a counterclaim in a bid to secure an offset against that sum based on claims of breach of contract on the part of the 1st respondent. The applicant filed his counterclaim against the 1st respondent on 13th September, 2022. The 1st respondent filed a reply thereto on 29th September, 2022 and hearing of the counterclaim commenced on 19th October, 2023. On 25th September, 2024 before she could call P. W.2 to the stand, Counsel for the applicant made an oral application seeking to add the 2nd respondent as a defendant to the counterclaim. - [4] The Court directed Counsel to file a formal application to be considered subsequently. Hearing of the suit continued with the testimony of P. W.2 until 7th November, 2024 when the applicant closed his case. The matter was adjourned to 20th February, 2025 for the opening of the case by the counter-defendant. On that day, new counsel recently engaged by the applicant sought an adjournment to enable her access the record, which was reluctantly granted. The hearing was adjourned to 28th March, 2025 on which day counsel still sought another adjournment on ground that she had on 24th February, 2025 filed an application seeking to join the 2nd respondent as a defendant to the counterclaim.

## The application;

[5] The application by Chamber summons is made under the provisions of sections 96 and 98 of *The Civil Procedure Act*, Order 1 rules 1 and 3; Order 6 rules 19 and 31; and Order 51 rule 6 of *The Civil Procedure Rules*. The applicant seeks leave to amend the counterclaim by adding the 2nd respondent as a defendant to the counterclaim, and to plead a cause of action against it. The applicant also seeks an award of the costs of the application.

- [6] It is the applicant's case that the 2nd respondent breached the terms of the facility letter when it disbursed to the 2nd respondent a whopping shs. 1,800,000,000/ against no security as opposed to legal interest in land described as Kibuga Block 13, Plots 88 l and 391 at Najjanankumbi, measuring approximately 0.0480 and 0.0400 Hectares respectively. It is over five years since the 2nd respondent received all the documents of title to that property but to date it has never registered a legal interest in favour of the applicant, yet it continues to levy interest on the loan against the applicant. As a result of the aforementioned breach the property got encumbered by third party claimants and the applicant spent colossal sums of money to discharge the encumbrances and only succeeded after close to two years. The 2nd respondent did not register a legal interest in favour of the applicant. It instead represented to the applicant that the 1st respondent had lodged a Caveat thereon, a fact the 1st respondent has denied whereupon the 2nd respondent threatened to recall the outstanding loan as against the applicant. - [7] Despite being in breach, the 2nd respondent declined to re-capitalise the applicant's businesses, at the difficult post Covid-19 induced lockdown and instead transferred the blame to the applicant. To date the applicant has been unable to secure mortgage financing from elsewhere, because of the 2nd respondent which is holding onto the documents of title over which it has never created a legal interest in the applicant's favour and consequently, the applicant's businesses which were thriving have completely collapsed, leaving the applicant heavily indebted hut unable to service his business loans, for which the applicant holds the 2nd respondent culpable. Common questions of law and fact would arise if the counterclaim against the 1st respondent and the claims against the 2nd respondent were tried separately. Amendment by adding the 2nd respondent is absolutely necessary for the determination of the real questions in controversy between the three parties. The joinder is also necessary for the avoidance of a multiplicity of

suits. The joinder and amendment sought will not prejudice any of the parties.

#### The affidavits in reply;

- [8] In his affidavit in reply, the 1st respondent contends that if any encumbrances existed on the land at the time he sold it to the applicant, then he was unaware of their existence, more so that even when the applicant's then lawyers conducted a search at the Land Registry in the year 2020, they only found mortgages which the 1st respondent had disclosed to the applicant. Since the transaction of sale, the 1st respondent does not have any claim over the land and thus has never lodged any caveat on its title as alleged. The sale agreement executed between the applicant and the 1st respondent is separate, distinct and autonomous from the Mortgage Facility Agreement between the applicant and the 2nd respondent. The causes of action relating to the said transactions are different; one being a breach of land sale agreement and the other being a breach of a mortgagor/mortgagee agreement. - [9] If the applicant is heavily indebted to the 2nd respondent by reason of its breach of the loan agreement, then the applicant can pursue an independent suit against the 2nd respondent. There are no common questions of law and fact that can arise from the two separate, distinct and autonomous transactions. The 2nd respondent is not a necessary party to be added to the counterclaim. The 1st respondent stands to suffer grave injustice and unfairness as the counterclaim against him is nearing its logical conclusion. the applicant has several remedies to seek justice, including bringing a new suit against the 2nd respondent and any other party he may desire. - [10] By an affidavit in reply sworn by its Corporate and Institutional Banking Recoveries Manager, the 2nd respondent contends that the application has been filed belatedly in bad faith to frustrate the intended 2nd respondent's efforts to recover its money, repayment of which the applicant is in default. The applicant was granted leave to file a counter claim on 22nd August 2025 and he filed his counter claim on 13th September 2022. The issues in the head suit and the resultant counter claim

revolve around the sale agreement between the applicant and the 1st respondent, to which sale agreement the 2nd respondent is not party. The relationship between the applicant the 2nd respondent is one of a borrower and lender pursuant to a facility agreement and a mortgage deed. The presence of the 2nd respondent is not necessary to resolve the questions before this Court in the applicant's counterclaim. The applicant has no right of relief against the 2nd respondent with regards to the sale agreement and the obligations therein.

#### The submissions of Counsel for the applicant;

- [11] Counsel for the applicant submitted that the issues between the applicant and the 2nd respondent arise from customer bank relationship after being given a facility to acquire land from the 1st respondent. The conditions precedent included a search before disbursing the money. the terms or both the Sale Agreement and Mortgage Facility Letter were to the effect that DFCU Bank Uganda Limited first effects a transfer of the suit property into the name of the applicant, register a Mortgage on the said suit property and then disburse to the 1st respondent/plaintiff/1st counter defendant part of the purchase price in the sum of shs. 1,800,000,000/= The 2nd respondent failed to do this. They were supposed to transfer into the name of the applicant name before disbursement and therefore lodge a mortgage on the title. They have never done this up to-date. The 1st respondent is a beneficiary, he received shs. 1,800,000/= leaving a balance of shs, 200,000,000/= It arises from the transaction between. Clause 1.2 of the agreement of sale. The seller is aware that the financing was to be by the 2nd respondent. The bank placed the money on the applicant's loan account and it was paid without his authority. Clause 3.3.2 drawdowns are based on request. Clause 3.3.1 authorised the bank. - [12] The applicant enjoys the right of indemnity in clause 3.0 of the sale agreement the seller is supposed to indemnify the applicant for all losses. If the indemnity provision is triggered, it would be fair for the bank to be heard before that liability is transferred to it. The bank filed a suit by way of originating summons against the

applicant and the 1st respondent. It is Civil Suit No. 0007 of 2024. The matter was struck out because the questions asked were too wide to be determined by way of originating summons and the bank was advised to raise the issues by way of a plaint. It involves the same suit land. The Court would be avoiding a multiplicity of suits if it allowed this application. The applicant bought land from the 1st respondent. The bank holds the land titles. Regarding the issue of delay, the applicant had challenges with his former counsel. The mistake of counsel cannot be visited on the applicant. The facility letter was signed on the same day.

#### The submissions of Counsel for the 1st respondent;

- [13] Counsel for the 1st respondent submitted that Order 12 rule 3 of *The Civil Procedure Rules* provides that interlocutory applications are time bound. Order 51 rule 6 allows for extension of time but they have not applied for enlargement of time. Common questions of law or fact will not arise. The 1st respondent is not a party to the loan agreement. The bank only financed to the tune of shs. 1.8 billion. The arrangement was for a direct transfer to Equity Bank. The titles were in equity bank and the 2nd respondent got the titles from there. He signed the transfer and handed over to the bank in due time. The agreement between the 2nd respondent and the applicant is their business. - [14] The due diligence was on the part of the buyer not the seller. There will be no decision that can be made to indemnify the applicant for as long as he undertook the due diligence and found only mortgages. The caveat came in much later. They can file a suit against the 2nd respondent. The applicant is in possession of the property so the longer it takes to decide the counterclaim, the better for him. The behaviour of the lawyers as well shows dilatory intent. There is no prejudice to the set-off if the application is dismissed. There is no need of the participation of the 2nd respondent. There is no multiplicity of suits. The 1st respondent has no interest in the property. There is no common question of law and fact. The application does not indicate any fault on the part of the 1st respondent.

#### The submissions of Counsel for the 2nd respondent;

[15] Counsel for the 2nd respondent submitted that the questions before the court do not relate to the securitisation, transfer of offer letter. The issues relate to the balance of shs. 200,000,000/= There is correspondence from the applicant to Equity bank asking them to undertake to release the title to DFCU Bank. It was responded to on 28th October, 2019 confirming they would do it on payment. The agreement of sale provides for scenarios related to sale Clause 3.2 there is no need of intervention by the bank. The payment of the shs. 200,000,000/= is not dependant on any action of the bank. The mode of payment has never been in issue. There is no likelihood of a decision on the case now before Court has nothing to do with the security. The 2nd respondent is not a necessary party. The issues between the 2nd respondent and the applicant have to be decided separately. The facility letter Clause 3.3.1 authorised the 2nd respondent to pay the 1st respondent upon him furnishing his bank account.

#### The decision;

[16] Under Order 1 rule 10 (2) of *The Procedure Rules*, the Court may add a party whose presence in the suit, is necessary to enable the Court to effectually and completely adjudicate upon and settle all questions involved in the suit. Such person may be joined even if the plaintiff has no cause of action against him or her provided that such party's presence is necessary for effectual and complete adjudication and settlement of all issues involved in the suit before court. The application to add a party could be by any of the parties, or done by the court on its own motion, or by any person whose legal right may be directly affected by the grant of the relief claimed in the action and who can show that his or her presence is necessary to enable court effectively and completely adjudicate or settle the suit before it (see *Kayondo and three others v. The Administrator General and two others, H. C. Misc. Application No. 628 of 2016; Departed Asians Property Custodian Board v. Jaffer Brothers Ltd, S. C. Civil Appeal No. 9 of 1998* and *Kampala International University v. Hima Cement Limited, H. C. Civil Suit No. 304 of 2006*).

- [17] Parties to suits fall within one of the following three categories: (1) proper parties; (2) necessary parties; and (3) indispensable parties. A proper party is one whose presence is not necessary for making an effective order; but whose presence is necessary for a complete and final decision on the question involved in the proceeding, or whose presence may facilitate the settling of all the questions that may be involved in the controversy. The question of joining such a person as a party to a proceeding depends upon the judicial discretion of the Court in the circumstances of each case. A necessary party is one without whom no order can be made effectively. The persons whose rights are directly affected are the necessary parties. Necessary parties must be joined, either as plaintiffs or defendants, unless there is a valid reason for excluding them. Indispensable parties, on the other hand, are so integral to the suit that it cannot proceed without them. Thus, the suit would have to be dismissed if they could not be properly joined. - [18] Only two types of persons may be joined under the necessity limb: (a) a person "who ought to have been joined as a party"; and (b) a person "whose presence before the court is necessary to ensure that all matters…may be effectually and completely determined and adjudicated upon". Thus, building on the second point, the necessity limb applies only to: (a) a person whom the plaintiff could have and should have joined as a party to the proceedings; or (b) a person who has a *lis* as against a party to the proceedings to be determined and adjudicated upon. In contrast, the just and convenient limb does not restrict the person to be joined in the same way: any person may be joined under the just and convenient limb so long as the non-discretionary requirements of that limb are satisfied. Such persons may be joined even if the plaintiff has no cause of action against them, provided that such party's presence is necessary for effectual and complete adjudication and settlement of all issues involved in the suit before court. - [19] Under Order 1 rule 10 (2) of *The Procedure Rules*, the Court may add a party whose presence in the suit, is necessary to enable the Court to effectually and completely adjudicate upon and settle all questions involved in the suit. It may be useful to think of necessary parties as the larger, all-inclusive class, out of which the exceptional classes of indispensable and proper parties are carved. A necessary or proper party includes a person or persons whose interests are affected directly by the outcome of the case; a person or persons who must take action in order to afford the relief sought; or those whose presence enables the court to adjudicate more effectually and completely though they need not be persons in favour of or against whom the decree is to be made. The reasons why necessary, proper and indispensable parties should be joined boil down to a very few basic considerations; (i) court has no jurisdiction over a person who has not been made a party to an action before it. No judgment or decree in an action is binding on non-parties, nor is any finding made in the course of arriving at the judgment; (ii) avoiding a multiplicity of suits and the possibility of inconsistent results in two or more lawsuits; and (iii) safeguarding of society's interest in economy and effectiveness in litigation and the disadvantages caused to the administration of justice generally by crowded dockets. - [20] In the instant case, it is the applicant's case that DFCU (U) Limited breached its agreement with him when it advanced to the 1st respondent a whopping shs. 1,800,000,000/= before it had perfected security by causing a transfer of the title to Kibuga Block 13, Plots 88l and 391 at Najjanankumbi, into his name and lodging a mortgage thereon. Consequently, the title deed got encumbered by third party claimants; the applicant spent colossal sums of money to discharge the encumbrances and only succeeded after close to two (2) years. The 1st respondent lodged a Caveat thereon, a fact the 1st respondent/plaintiff/counter defendant has denied and DFCU Bank Uganda Limited threatened to recall the outstanding Loan as against the applicant. To date the applicant has been unable to secure mortgage financing from elsewhere, because DFCU Bank Uganda Limited which is holding onto the documents of title has never created a legal interest in the

applicant's favour and consequently, the applicant's businesses which were thriving have completely collapsed, leaving the applicant heavily indebted and unable to service his business loans, for which the applicant holds DFCU Bank Uganda Limited culpable.

## i. A person whose interests are affected directly by the outcome of the case;

- [21] This includes all individuals or entities whose rights or property are directly at stake in the suit. These are persons who have their interests directly affected by the outcome. They are persons who claims an interest relating to the subject of the suit which is so situated that disposing of the suit in the person's absence may as a practical matter impair or impede the person's ability to protect the interest. The Court should consider the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties. A party should not be joined merely because that would the applicant the expense and bother of a separate suit for seeking adjudication of a collateral matter, which is not directly and substantially in issue in the suit into which he seeks to be joined. - [22] The rule cannot be extended so far as to say that whenever a person would be incidentally affected by a judgment he may be added as a defendant (see *Moser v. Marsden, (1892) 1 Ch 487*). It is not enough that a person's interest may be affected commercially by a judgment against a party to the suit; it must be an interest that would be legally affected. A person may not be added as a party merely because he or she would be incidentally affected by the judgment. Third parties may not be added simply for the applicant to ventilate his or her grievances against them over matters that are of a collateral nature. The power of a Court to add a party to a proceeding cannot depend solely on the question whether the person has interest in the suit property. The question is whether the right of that person may be affected if he or she is not added as a party. Such right, however, will include necessarily an enforceable legal right

- [23] In the case at hand, a summary judgment in the main suit was entered against the applicant. The applicant only seeks to prove its counterclaim as a means of offsetting the result of that determination, against the sum awarded in the summary judgment. That counterclaim is premised on accusation made by the applicant to the effect that the 1st respondent "breached the Sale Agreement when he conveyed to the [applicant] title to the suit property subject to known defects/encumbrances which he did not disclose," whereupon the applicant "paid Lawyers' Fees of over shs. 30,000,000/= to discharge the encumbrances," which sums are claimed as special damages. That claim is founded on clause 3.0 of the agreement providing as follows; - 3.0 Assurance of title and Indemnity: - 3.1 The Vendor hereby warrants to the Purchaser that he is the registered proprietor of the Property with full authority to sell and transfer it; and that save for the Equity Bank mortgage encumbrance as disclosed herein, the Vendor has sold the Property absolutely free from other third party encumbrance. For avoidance of doubt the Property is designated for commercial purposes and the Vendor warrants to the Purchaser that he will clear all outstanding Property Rates and Income Tax due on the Property; and clear any outstanding utilities, including electricity, water, garbage collection or other charges for the portion of the Property which the Vendor and the other Tenant are occupying. The Vendor further undertakes to hand over the receipts thereof to the Purchaser. - 3.2 In the event that Purchaser suffers loss as a result of discovery of an undisclosed third party encumbrance, want or defect in title, the Vendor shall fully indemnify the Purchaser' at the open market value of the Property, which open market value shall be determined by competent valuers, as at the time of compensation, and the Vendor shall further be liable to pay to the Purchaser all reasonable costs sale/purchase and expenses that the Purchaser incurred including but not limited to all loan management fees, valuation fees, transfer, mortgage registration, botched loan application costs and related costs bank penalties with interest at commercial rate from

the date the costs were incurred until refund in full. Provided that if the breach can be rectified by payment to discharge a third party interest or encumbrance, the Vendor shall make the full payment to remedy the breach or discharge the encumbrance.

- [24] The applicant claims further that the 1st respondent "breached the Sale Agreement when he defaulted on payment of property rates arrears, income tax and outstanding water and electricity bills," which the applicant breaks down as follows; - (ii) Ugx. 5,495,082/= Withholding tax as required by law. - (ii) Ugx. 5,495,082/= Property Rates arrears over the Suit Property, which accrued before the Respondent sold the Suit Property to the Counter-Claimant and it accrues Interest at the rate of 2% per month; and - (iii) Ugx. 581,490/= water bills arrears over the Suit Property, which accrued before the Respondent sold the Suit Property to the Counter-Claimant, among others. - [25] The applicant claims in addition that the 1st respondent breached the Sale Agreement "when he defaulted on vacating the portion of the Suit Property he was occupying, by 30th December, 2019. He only vacated on 3rd January, 2020 and he unlawfully removed fixtures from the Property, including a hand-wash basin, mirror and First Aid Box. He attempted to remove aluminium doors and toilets but the [the applicant] prevailed over him." It is on account of the three aspects of breach that the applicant seeks to be granted the following reliefs; (i) a declaration that the 1st respondent breached the agreement for sale of the Suit Property comprised in Kibuga Block 13, Plots 881 & 391 at Najjanankumbi, measuring approximately 0.0480 and 0.0400 Hectares respectively. - [26] The applicant further seeks; (ii) a declaration that the applicant is entitled to offset the following from the balance on the purchase price of the Suit Property: - (a) shs. 120,000,000/=, being Withholding Tax, by virtue of *The Income Tax (Amendment) Act, 2019*; (b) shs. 5,495,082/=, being Property Rates arrears over the Suit Property, which arose prior to the 1st respondent's sale to the applicant,

with interest at the rate of 2% per month from 25th October, 2021; (c) shs. 581,490/=, being water bills arrears over the suit property, which accrued prior to the 1st respondent's sale to the applicant; and (d) shs. 30,000,000/= being Lawyers' Fees expended towards discharge of the encumbrances; (iii) an order directing the 1st respondent to forthwith remove his encumbrance on the suit property; (iv) a permanent injunction restraining the 1st respondent from making any further claim over the suit property and/or registering an encumbrance thereon; (v) an order directing the 1st respondent to pay to the applicant indemnity/special damages as pleaded, general, exemplary and punitive damages; (vi) the 1st respondent pays the costs of this suit with interest thereon at the court rate, from the date of judgment until payment in full; and (vii) any further or alternative relief that this Court may deem fit.

- [27] It is therefore evident that none of the heads of claim made in the counterclaim implicate the 2nd respondent and neither do any of the reliefs sought pose any danger of adversely affecting the 2nd respondent's claimed interest in the land as mortgagee of its title. Indeed, in paragraph 16 of the counterclaim the applicant pleads that "the [applicant's] relationship with his bankers was badly damaged as they thought he had connived with the [1st respondent] to defraud them and all applications for further financing to capitalise his business, especially after the Covid19 induced lock-downs were turned down and that seriously affected his business." - [28] In the circumstances, I find that any decision made in determination of the counterclaim will be limited to liquidated and unliquidated damages which the applicant seeks to offset against the summary judgment already entered in favour of the 1st respondent. That determination may or may not have incidental financial implications for the business relationship between the applicant and the 2nd respondent, but will not by any stretch of the imagination affect the 2nd respondent's claimed legal rights as mortgagee over the property. Accordingly, the

2nd respondent does not qualify as a person whose interests are affected directly by the outcome of the case.

- ii. A person whose presence enables the court to adjudicate more effectually and completely the maters in issue, although such person need not be one in favour of or against whom the decree is to be made; - [29] A necessary party is the one whose presence is indispensable for determination of all the issues involved in the suit and to settle the dispute conclusively and without their presence, the effective determination of the dispute is not possible. Necessary parties are those persons in whose absence no decree can be passed by the court or in respect of whom there is a right to some relief against some party in respect of the controversy involved in the proceedings. A proper party is one whose presence before the Court is not necessary but it may be proper for an effective and complete adjudication of all the dispute between the parties. These are persons whose presence before the court would be necessary in order to enable the court effectually and completely adjudicate upon and settle all the questions involved in the suit, although no relief in the suit is claimed against them. - [30] To "effectually and completely adjudicate" means to settle a dispute or case in a thorough, decisive, and legally sound manner, ensuring all relevant issues are resolved and the rights of all parties are definitively determined. A person ought to be joined as a party if in that person's absence, the court cannot accord complete relief among existing parties or may leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of an interest affected by the decision, or leave a party exposed to a later inconsistent recovery by the absent person. Adding the person as a party should not result in the introduction of a new cause of action. - [31] This consideration covers persons without whose presence the questions directly and substantially in issue in the suit cannot be completely decided. "Directly and

substantially in issue" refers to matters that are central and necessary for the determination of the suit, i.e. questions, the answers to which affect the rights of parties to the suit, distinguishing them from matters that are merely incidental or collateral. In order to be considered a matter directly or substantially arising or involved in the suit, there must be first, a foundation for it laid in the pleadings, and the question should emerge from the sustainable findings of fact, arrived at by the Court, and it must be necessary to decide that question for a just and proper decision of the case. The same material facts or legal questions should be at the core of the claim against the party sought to be joined, as those already laid out in the existing suit. These could be matters of fact, of law or mixed law and fact.

- [32] Where the determination of an issue depends upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of any principle of law, the issue merely raises a question of fact. This usually involves disputes about what actually happened or what the circumstances were. On the other hand, a question of law refers to an issue that involves the interpretation, application, or validity of legal principles, rules, or statutes. It concerns how to understand/interpret and apply existing laws to a specific situation. Questions of law can also relate to the validity or existence of a legal principle or rule. Finally, a question of mixed law and fact involves determining whether established facts satisfy a particular legal standard or test; it's a matter that requires both an understanding of the law and an evaluation of the facts to reach a conclusion. These are questions which require both legal and factual analysis to be resolved. - [33] The Court must meticulously analyse the nature and substance of the issues arising in the claim against the party sought to be joined, vis-a-vis the ones in the suit to which joinder is sought. Only a party against whom the applicant has a claim with significant overlap in matters of fact and/or law with the existing suit, may be joined. The Court should also consider whether the applicant would have an adequate remedy if the suit were dismissed for non-joinder. The three issues

agreed in resolving the counterclaim arise from the agreement of sale dated 25th October, 2019 are as follows;

- 1. Whether the counter defendant breached the land sale agreement as alleged. - 2. Whether the counterclaimant is entitled to the set off as claimed. - 3. What remedies are available to the parties. - [34] By seeking to join the 2nd respondent, it is the desire of the applicant that issues arising between himself and the 2nd respondent relating to the loan agreement and the mortgage deed executed between them, be decided alongside those arising in the counterclaim. They are the following; - 1. Whether the 2nd respondent breached the loan agreement and mortgage deed as alleged. - 2. Whether the applicant breached its obligations under the loan agreement. - 3. What remedies are available to the parties. - [35] To succeed under this limb, the applicant has to demonstrate that in order for the Court to effectually and completely adjudicate upon and settle all questions involved in the counterclaim, it is necessary to join the 2nd respondent as a party because common questions of law and fact will arise if separate suits were to be brought against the respondents separately. It is evident that the two sets of issues relate to the same land, i.e. land comprised in Kibuga Block 13 Plots 881 and 391 at Najjanankumbi. However, they arise from two different transactions; one is the transaction of sale of that land between the applicant and the 1st respondent, and the other the collateral arrangement between the applicant and the 2nd respondent for the use of that land as security for financing the purchase. Common to both transactions is the applicant. That notwithstanding, the issues of law and fact arising in the two transactions are distinct because it is trite that the same "*res*" may give rise to different "*lis*" that may not necessarily be joined in the same suit.

- [36] In Latin, "*res*" generally translates to "thing" or "matter," while "*lis*" means "lawsuit" or "quarrel." Although "*res*" can refer to the subject matter of a dispute or the thing in question, within the context of joinder of persons and causes of action it ought to be understood in the manner of the issues in contention in the litigation, rather than the physical object in relation to which the issues have arisen. The physical object may be the same, but different legal relationships may exist in relation thereto giving rise to different legal issues between the same or different parties. The evidence required may be relevant to one cause of action but not to the other. - [37] In the first place, a loan agreement and a collateral agreement are distinct, though often related. A loan agreement outlines the terms of the loan itself (principal, interest, repayment schedule), while a collateral agreement specifies the assets pledged as security for the loan. It is for that reason that generally, a defect in a collateral agreement, which is an agreement that supports or is ancillary to a main contract, does not automatically invalidate the principal agreement itself. The principal agreement remains enforceable, but the party may have remedies for the breach or defect in the collateral agreement (see *Vision Fund (U) Limited v. Buwembo Monday Kasule, H. C. Civil Appeal No. 98 of 2017* and *Formula Feeds Limited and three others v. KCB Bank Limited, S. C. Civil Appeal No. 13 of 2020*). If the security is defective, then it simply means that the credit facility is not capable of being reimbursed from that source. Consequently, a person who borrows money is expected to pay it back in accordance with the loan agreement and declaring the mortgage illegal does not extinguish the borrower's indebtedness. - [38] In similar vein, a sale agreement and a collateral agreement relating to the same property are distinct serving different purposes: a sale agreement transfers ownership, while a collateral agreement secures a debt with the property as security. A sale agreement and a collateral agreement can exist independently or concurrently, but they address different legal relationships. They are distinct legal instruments, and their terms and conditions should be carefully considered in each case. Issues arising between parties to one legal relationships do not necessarily overlap with those between parties in another legal relationship, only because they relate to the same property.

- [39] Although a party may join two or more claims as counterclaims, cross-claims, or third-party claims even though one of them is contingent on the disposition of the other, generally claims cannot be joined if the "*facta probanda*" (the facts necessary to prove each claim) are different, as this can lead to confusion and prejudice in the proceedings. Joining claims with distinct *facta probanda* can create a complex and confusing situation for the court and the parties involved. In such situations Order 2 rule 7 of *The Civil Procedure Rules* empowers Courts to order separate trials. What the *facta probanda* are in each particular case, is essentially a matter of substantive law, and not of procedure. The material or fundamental facts that a party must prove to establish a claim or cause of action for breach of a land sale agreement are distinct from those that must be proved for breach of a loan agreement and corresponding mortgage deed. The facts required to determine the issues arising in one legal relationship are not required for the other. - [40] While in the land sale agreement the terms and conditions of sale/purchase are the *facta probanda* necessary for the applicant to assert that the property was to be transferred to him, in the loan agreement and corresponding mortgage deed it is all about the terms of borrowing and the attendant use of that property as security for the loan. The *facta probanda* necessary to prove the claim against the 1st respondent and those necessary to prove the claim against the 2nd respondent differ substantially, which is indicative of the fact that joining the 2nd respondent would introduce a different cause of action in a proceeding that is already at its tail end, which is highly prejudicial as it unfairly disadvantages the 1st respondent. No reference had previously been made to these arguments and claims. Consequently, the 1st respondent will be unduly prejudiced by the amendments. - [41] Prejudice is damage or detriment to one's legal rights or claims. In the context of applications of this nature, the relevant kind of prejudice is loss of a party's ability

to fully and cost-effectively present their case. Amendments of pleadings often cause prejudice. The other parties, who have already spent time and money responding to the original pleadings, must spend more time and money responding to the amended pleadings. However, if prejudice can be compensated for by costs or an adjournment, then the court will deal with the prejudice by ordering costs or an adjournment. In the instant case, the 1st respondent who has relied on the initial case as stated in the counterclaim, did not have the opportunity to prepare a defence against the proposed new claim. To mitigate that effect would require to re-start the trial of the counterclaim by filing amended pleadings, witness statements, etc. at great cost in time, money and other resources, yet the applicant is at liberty to initiate a separate claim against the 2nd respondent. The applicant seeks to amend his pleading after the evidentiary phase of the trial. If allowed it would work a retroactive, yet fundamental, alteration of the issues.

[42] A presumption of prejudice to the 1st respondent's legal rights in defending the counterclaim results from the passage of two and a half years between the commencement of the counterclaim and the applicant's motion to amend his pleadings. The amendment, if allowed, would alter the case to be met by introducing a new cause of action. Not only will the 1st respondent's strategy in proceeding with the counterclaim be undoubtedly affected, but also the costs or an adjournment would not permit the 1st respondent the opportunity or ability to fairly meet it. This therefore is non-compensable prejudice, which cannot be dealt with in this way. This justifies denial of the addition of a party and the consequential amendment sought.

## iii. A person who must take action in order to afford the relief sought;

[43] As legally binding orders, all court orders can be enforced. However, sometimes, the person that wants to enforce an order has to move a non-party for the decision to be enforceable. Sometimes, enforcement requires action by someone other than then the judgment debtor. The reliefs sought against the 1st respondent include declarations, off-set, removal of encumbrance on the suit property, a permanent injunction restraining the 1st respondent from making any further claim over the suit property and/or registering an encumbrance thereon, payment of indemnity/special damages as pleaded, general, exemplary and punitive damages, costs of this suit with interest. None of these reliefs requires participation of the 2nd respondent in order to be enforced.

## iv. Success against the party sought to be joined has a bearing on the relief sought in the counterclaim.

- [44] The 2nd respondent may not be necessary party whose presence is indispensable for constitution of the counterclaim and passing of the effective order by the Court but, the Court has to consider whether or not it is a proper party whose presence is material for the grant of a complete and effective relief, based upon the pleadings. In a case such as this where the applicant seeks to secure a set-off against the judgment already entered in favour of the 1st respondent, the options are limited to persons in respect of whom the applicant has a right of contribution or indemnity. - [45] A right of contribution or indemnity arises where it could be said that responsibility for the harm is shared in law or equity. Generally speaking, there are three situations wherein a claim for contribution and indemnity may be made: (i) between contracting parties, (ii) between concurrent tortfeasors, and (iii) between tortfeasors and contracting parties. The terms contribution and indemnity are often used interchangeably, but contribution distributes the loss among the tortfeasors by requiring each to pay his proportionate share where indemnity shifts the entire loss from one tortfeasor who has been compelled to pay it to the shoulders of another who should bear it instead. The doctrine of contribution amongst joint debtors is not founded in contract, but is the result of general equity on the ground of equality of burthen and benefit (see *Dering v. Earl of Winchelsea [1787] EngR 39, (1787) 1 Cox 319, (1787) 29 ER 1184*). The 2nd respondent is neither a

concurrent tortfeasor with the applicant, nor bound by any contract with the applicant creating a common obligation with the applicant to discharge liabilities owed to third parties. Neither the loan agreement nor the mortgage deed contains a clause creating mutual discharge of liability obligations, where the parties agreed to release each other from any current or future claims, liabilities, or obligations related to their contract.

- [46] The right to indemnity or contribution arises where two parties are liable in respect of the same injury, damage or loss in which case the liabilities of the co-obligors to the principal claimant are such that enforcement by the claimant against either coobligor would diminish that obligor in his material substance to the value of the liability. What is required to be established in order to demonstrate that the liabilities are coordinate, is that the claimant could pursue either obligor for its injury, loss, or damage and either would be liable for it, and that payment by either one would discharge the liability of the other. It arises in situations where it is unjust for the burden of meeting a loss for which others share responsibility to be borne by one party, to the benefit of those who escape liability. In the instant case, the 2nd respondent not being privy to the contract of sale of land between the applicant and the 1st respondent, it cannot be a co-obligor with the applicant for payment of the outstanding shs. 200,000,000/= nor a co-obligor with the 1st respondent for the undertakings made concerning the unencumbered status of the land. - [47] The 2nd respondent bank as a mere mortgagee with no collateral assignment agreement with the applicant, did not acquire the rights of the applicant as buyer arising from the sale contract. The 2nd respondent thus did not acquire the option to exercise the applicant's rights as buyer so as to makes the bank liable to fulfil any obligations of the buyer under the sale contract, such as the payment of the balance of the price, taxes and fees owed by the buyer; those obligations remained solely obligations of the applicant. There is no overlap in liability created under the agreement of sale of land and that under the loan agreement and corresponding mortgage deed. There is no basis for and it is not necessary that the 2nd

respondent's covenants in the loan agreement and mortgage deed must be brought into account to reduce the 1st respondent's claim against the applicant.

## v. The timing of the application;

- [48] The granting or refusal of an application for amendment or joining a party is in the discretion of the Court, which is to be exercised judicially in the light of all facts and circumstances of the case. If the court is to grant a discretionary remedy, then it must be sought timeously. Inordinate delay may significantly impact the granting of discretionary remedies by a court, as Courts are less likely to exercise their discretion in favour of a party who has caused or suffered to occur undue delay, especially if it prejudices the other party. Delay is inordinate when it is unreasonable, excessive, or disproportionate, considering the circumstances of the case. A delay can prejudice the other party by making it harder to mount a defence, find evidence, or locate witnesses. Not enforcing one's right at the opportune time to seek to join a party to ongoing proceedings may rebut the existence of a nexus of such a party with the proceedings before Court. - [49] The grounds on which a court can refuse to grant a discretionary remedy include undue delay in seeking relief, availability of an effective alternative remedy, futility of granting relief, acquiescence, ulterior motive/bad faith in invoking court's jurisdiction, non-disclosure of material facts, and granting the remedy sought is contrary to public interest or in conflict with public policy. A court has the discretion to refuse an application depending on the presence of one or more such discretionary bars. Perhaps the factor which is most fatal to an applicant who has delayed is reliance by and consequent prejudice to the respondent or some third party. - [50] As it is said, "equity aids the vigilant and not those who slumber on their rights." A party seeking a discretionary remedy after a delay must provide a strong justification for the delay, demonstrating that it was not due to their negligence or

dilatory conduct. While delay is not in and of itself a basis for refusing an amendment, there must come a point where the delay is so long and the justification so inadequate that some prejudice to the other party will be presumed absent a demonstration by the party seeking the amendment that there is in fact no prejudice despite the lengthy and unexplained delay. The reason advanced by the applicant is most unsatisfactory. Had there developed a breakdown in the advocate-client relationship following the proceedings of 25th September, 2024 when Court directed a formal application to be filed, the applicant would not have returned to Court two months later on 7th November, 2024 with the same counsel.

[51] Although there is no time restriction for the bringing of an application to join a party to a proceeding or amend the pleadings therein, but to wait for two and a half years since the commencement of the counterclaim (from 13th September, 2022 to 24th February, 2025), and six months since being instructed by Court to file a formal application (from 25th September, 2024 to 24th February, 2025), and then seek to invoke that provision in my view is inordinate and dilatory conduct. The 1st respondent will suffer substantial prejudice in being denied a speedy trial. A costs award will not compensate the 1st respondent's suffering caused by an additional lengthy period of time, and neither can it be compensated by an adjournment, since the delay is the very basis for the prejudice. It as well cannot entirely be met by prejudgment interest, assuming the 1st respondent succeeds, and also the risk of his being unable to recover from the applicant, in the event of success, is increased by any further adjournment of the trial.

## Final Orders;

[52] All in all, this is not a proper case for the grant of leave to join a party as defendant to the counterclaim nor to amend the counterclaim consequentially. The application lacks merit and it is hereby dismissed with costs to the respondents. The ruling has been delivered in open Court the presence of the parties and their counsel


Appearances;

- For the applicant : M/s Murangira Kasande & Co. Advocates. - For the 1st respondent : M/s Barungi Baingana & Co. Advocates. - For the 2nd respondent : M/s S & L Advocates.