[1998] UGCA 64

## IN THE REPUB TC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

## CIVIL APPLICATION NO.3O OF 1998

HON. LADY JUSTICE A. E. MPAGI-BAHIGEINE, J. A.

COMMERCIAL BANK & ANOTHER APPL I CANT VERSUS

RAL PARTS (U) LTD RES PONDENT

(ApplicaE.ion arising f rom t.he Cj,vj-1 Appeaf No.20l98. )

## ^E I A. E. MPAGl -BAHIGEINE . IA .

s application for further security was brought by Notice of ion under Rul-e 104(3) of the Rules of this Court. The Applicant, Non-Performing Assets Recovery Trust was seeking an order that respondent /appl j.cant General parts (U) Ltd. do furnish furtsher riEy for cost.s in the l-ov/er courE and in the Appellate Court re Civil Appeal No.20/98 is heard and disposed of. It was d on the following grounds:

- There is no Likelihood of the respondenE/appel lant succeeding in the said appeal . - There is reason to befieve that in the Iike1y event of t.he appl icant /respondent succeeding in defending the said appeal , the respondenE /appel lant. wil-1 be unable to pay the appl icant. /respondenE ' s costs since its indebEedness is already beyond whaE iE can handle. - There is reason to bel j-eve that the respondenE /appel lant has neither resources nor assets capabLe of being attached to saE.isfy Ehe appl icant /respondent ' s cbsts in Ehis court and the

court be10w security for ^slnce the all its assets are held by the credi-t.or as debt .

A ap urther order was sought that lication abide the result of the costs of and incidental Eo this the appeal .

..

T He 2n Ha ap application was supported by Ewo affidavits deponed to by bert Kwikiriza, Iegal. manager of the applicant and both dat.ed December 1-998. The second affidavit wa6 in reply to one of i Haruna Semakula, Managing Director of tshe respondent./ ell-ant dated 30-11-98.

A by re Ad in l4 reI j,minary objection Eo Ehe hearing of the application was taken Mr. Kabugo holding a brief for Dr. J. Byamugisha for the pondent /appel lant , on the ground that the firm of M/s ELue & Co. ocates purporting to represent the appl icant /re spondent. was not exist.ence due to tshe sad demise of Mr. Edward Sembuzi EIue on 7-98, who was a sole part.ner.

som Muw grv Mr. t hi Ge ru CO Kabugo \$renE to greaE 1engtsh to challenge the various clauses of Memorandum of Understanding 'A1' under which, Mr. EIue. before death, had admitt.ed int.o the business Mr. Godfrey Zziwa and Mr. ge Muwanguzi as partners to E.ake over control of t.he day to day ing of Ehe firm, as the senior part.ner had been indisposed for t.ime. Af t.er noting all his numerous objections and Mr. nguzi's answers t.heret.o, I overruled Mr. Kabugo, promising to my reasons Iat.er and ordered the hearing of Ehe application to ence .

My gen cha bef con put reasons were as folfows: First, it was remarkable that the ineness of t.his memorandum of underst.andi,ng should have been lenged so belatedfy. Dr. .]oseph Byamugisha who had appeared re t.his court on 2-l-2-98 never alluded Eo the issue. He only eded to an adjournment sought by Mr. Muwanguzi Eo enabl-e him his papers in order by striking out 'UBC', as earlier on

ordered by the Principal Judge. Mr. Muwanguzi further told the court that Dr. Byamugisha who had handled the matter all along never raised the issue, and that when he later examined the document he had confirmed to his learned brother that he would not be pursuing the matter. I do not propose to reproduce the objections so raised, because on a perusal of the memorandum and the law applicable especially Ss.36 and 37 of the Partnership Act (Cap.85) relating to the death of Mr. Elue and Ss. 6 and 8 of the Business Names Registration Act (Cap.87) in regard to the failure to register within time, I came to the following conclusions. The provisions of the Partnership Act were subject to the agreement of the partners. It was under the same understanding that the firm was stated to be a continuing firm until the partners decided otherwise. It was not a temporary arrangement as contended by Mr. The provisions of the memorandum are to be taken as the Kabugo. quide of the partnership so continuing. It cannot therefore be said that there would be anything inconsistent with the provisions of the Partnership Act nor the Registration of Business Names Act. The partnership which evolved after the death of Mr. Edward Sembuzi Elue elected and was entitled to continue under the name and style of $M/s$ Elue & Co. Advocates. Needless to say the applicant was lawfully represented before Court.

Now I turn to look at the substantive application. Mr. Muwanguzi argued that there was no likelihood of the respondent/appellant sucpeeding in the pending appeal and that therefore it would not be proper to subject the applicant to expenses of defending an appeal which was devoid of any merit. He pointed out that the respondent/appellant is heavily indebted and cannot handle its indebtedness which is more than Shs.2bn. and that consequently the company is under receivership. He further stated that all the assets of the company are held under a debenture and mortgage which fact was not disputed. Learned Counsel pointed out that under Misc. Application No.420/98 the application to the High Court for stay of execution was rejected on the ground that the company could

n rh Ap no ex ma in de ci. su ac furnish securiEy for costs and performance of the decree and t Ehis dismissal was not appealed contended that Civil eal Misc. Application No.27/98 dJre for hearing on 15-12-98 is an appeal against Ehat order but an application for st.ay of cution pending hearing of the main appeal on 15-12-98. Ee ntained that what was important in this application was to prove apacity to pay and not unwillin\$ttnd that the court could only art from this principle by the respondent showi.ng special cumstances. c. M. Combined v A. K, Deterqents C/A 34/95. He itted t.hat Ehe respondent /appe 1l ant should deposit an ept.able amount of Shs. Som. before the appeaf is heard.

Mr re rh bu Co mo re of ag ap wh co VA wh He gua res any the hav cLa suc a a p i r o Kabugo strongly opposed the application conEending that no son had been given for the appeal noE succeedi,ng. He pointsed out t this was not Ehe time for considering the merits of the appeal the capaciEy to pay security for costss. He said that the High rt. j udgment No.386/93 datsed 12-5-98 was declaratory and no iEory award was ever made, and that therefore the ondent /appe Il-ant was not indebted to the applicant in t.he sum ver Shs.2 bn. as all,eged. He claimed Ehat they were appealing nsE the order of receivership which order was temporarily ed pending Ehe appeal-. He also expressed surprise that this icat.ion was brought when Ehe Bj,lI of Costs had noE been taxed h made it impossible for anybody to know lhe magnit.ude of the s claimed. He added that the applicant was in possession of ous properties of the respondent/ appellant. mortgaged to it and e value far exceeds the decretal amounE together wit.h costs. ointed out that. the same debts were further secured by personal anEee of Haji Semakufa Managing Director of the ondenE /appel- fant , and that. therefore the question of depositing money in this Court did not arise. He questioned t.he basis of figure of Shs.50 million proposed by Mr. Muwanguzi before ng the bill taxed. He asserted that the respondent's counEer m was like1y to offset any Iikely costs when the appeal eeds. He pointed out Ehe High Court only made an order for the

applicant to take over debts owed to UCB but not costs of the case. Rule 104(3) provides.

Rule $104(3)$ provides:

"The Court may at any time if it thinks fit, direct that further security for costs be given and may direct that security be given for the payment of past costs relating to the matters in question in the appeal".

I have carefully gone through the affidavits for both sides which give all facts of this matter. The respondent paid the requisite $Sh$.200,000=$ under the law as security for costs. This was to secure the vested decree and costs. The High Court rejected the application for stay of execution of the decree for lack of security or undertaking to furnish the same. The court however granted a temporary stay until an application was made to this Court. The applicant is however seeking further security for costs in Civil Appeal No.20 of 1998.

The question before this Court therefore is whether or not the respondent will be able to pay for the costs of the appeal if adjudged to do so. The burden lies on the applicant to prove indapacity to pay on part of the respondent - Lalji Ganqi v. Nathoo Vassanjee (1960) EA 315. This must, however, be distinguished from unwillingness to pay. It should also be born in mind that mere failure to pay costs already awarded is not enough to impose an obligation on this court to grant this application. Hills v. London Passenger Transport Board (1937) 4 AER 230 per Greer L. J.

However, I accept that the respondent's indebtedness is upward of Shs. 2 bn. and that the company is under receivership though the order was temporarily stayed by the High Court.

Mr. Kabugo strongly contended that this application is premature as lower court bill of costs had not yet been taxed. I should the

point out that it is not essential to the making of an order for further security of costs that a bill of costs should have been drawn up. The court is entitled to look at all the circumstances of the case and come to a reasonable amount - The Dominion Brewery Limited v. Fosher (1897) 37 L. T. 57.

Regarding the respondent's assets which he claims are sufficient security, I hold the view that the fact that he has not attempted to provide the valuation thereof, is evidence against him. In my view this would raise an inference of impecuniosity which he is resisting to answer. If he has the means to pay, nothing is easier for him than to show that fact. The rejection of the High Court order tends to show want of means. I am further of the view that the fact that a company could be placed under receivership is prima facie evidence that the assets of the company will be insufficient to pay the applicant's costs unless evidence to the contrary is Though it has been held that an appellant should not be given. shut out of the door of the Appellate Court, security for costs is considered to be ex debito justitiae and it is a very important matter that a successful party should be able to obtain payment of his costs.

Regarding Shs.50 million proposed by Mr. Muwanguzi and strongly objected to by Mr. Kabugo, the principle applicable is that the court must have regard, in deciding the amount to be ordered, to the probable costs which the applicant will be put to so far as this can be ascertained. The court must look as fairly as it can at the whole case. I must say it is not possible to give security which will necessarily cover all the costs likely to be incurred, the court has to take a reasonable view of all the but circumstances, the nature of the suit and any other matters relevant thereto. Doing the best I can in the circumstances of this case, I find evidence of incapacity to pay is strong. The debt is colossal. I think therefore that the applicants were fully justified in making this application. Consequently it is ordered

$\mathsf{6}$

that the respondent/appellant do pay the sum of Shs.40 million as further security for costs or give an undertaking to pay the same before the appeal can come on to be heard.

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Dated at Kampala this 16th<br>Dated at Kampala this .................................... A. E. Mpagi-Bahigeine<br>JUSTICE OF APPEAL<br>14/12/00 $14/12/98$