Wakilii

AK Detergents v GM Combined (U) Limited (Civil Suit 348 of 1994)

High Court · [1994] UGHC 42 · 1994 Application Granted — Security for Costs Ordered AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Interlocutory application for security for costs under Order 23 Rule 1 of the Civil Procedure Rules and Section 404 of the Companies Act
Decision
Plaintiff ordered to provide security; proceedings stayed pending compliance

Observed later treatment

Cited — treatment unverified cited in 7 (treatment unverified) Sequitur — Uganda’s citator · Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

No adverse treatment recorded Cited 7 times with no adverse treatment recorded; not yet tested on the merits. Citations rising — 7 citing cases on record, 6 in the most recent three data years. Derived from citing cases in the Wakilii corpus — a deterministic signal, not legal advice.

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions—always read the source judgment before relying on it.

Holding

The High Court granted the defendant's application for security for costs, ordering the plaintiff company to deposit UGX 50,000,000 within ninety days as security for the defendant's costs. The court held that where a plaintiff company is in receivership, heavily indebted, subject to winding-up proceedings, and unable to satisfy existing court decrees, there is credible testimony under Section 404 of the Companies Act that the company will be unable to pay the defendant's costs if unsuccessful. The court further held that receivers appointed under debentures retain their powers of sale notwithstanding the commencement of winding-up proceedings, as the company has no power to revoke the receivers' authority.

Outcome

Plaintiff ordered to provide security; proceedings stayed pending compliance

Facts

The plaintiff company had obtained loans from UDB and DFCU secured by debentures charging its assets. Following default in repayment, UDB and DFCU appointed receivers on 13 December 1993. The receivers exercised their powers under the debentures and on 21 March 1994 sold the plaintiff's movable and immovable assets to the defendant. The defendant took possession and was registered as proprietor of certain buildings. On 18 May 1994, the plaintiff instituted suit seeking to nullify the sale and registration. Meanwhile, the plaintiff had failed to satisfy a decree for UGX 93,895,197 in HCCS No. 633 of 1991, and winding-up proceedings (Company Cause No. 26 of 1994) had been instituted against it on 9 February 1994. The plaintiff had been unable to furnish security for stay of execution as ordered. The defendant applied for security for costs on the ground that the plaintiff was in receivership, heavily indebted, subject to winding-up proceedings, and unable to meet its existing liabilities.

Issues

  1. Whether the plaintiff company should be ordered to provide security for the defendant's costs under Order 23 Rule 1 of the Civil Procedure Rules and Section 404 of the Companies Act.
  2. Whether the sale of the plaintiff's property by court-appointed receivers was void by reason of pending winding-up proceedings under Sections 227, 228 and 229 of the Companies Act.
  3. What quantum of security, if any, should be ordered.

Orders

  • Application granted.
  • The respondent/plaintiff is ordered to provide security for costs in the sum of UGX 50,000,000 within ninety days from the date of this order.
  • All proceedings by the respondent/plaintiff in the suit are stayed until security is given.
  • Costs of the application to be costs in the cause.

Rules and key headnotes

Security for Costs — Company in Receivership — Discretion of Court
Where a limited company is a plaintiff in any suit and it appears by credible testimony that there is reason to believe the company will be unable to pay the defendant's costs if successful in his defence, the court may order the company to give security for costs under Section 404 of the Companies Act. The court's discretion to order security for costs is more readily exercised against a company plaintiff than against a natural person plaintiff, particularly where the company is in receivership and facing winding-up proceedings.
Receivers — Powers of Sale Under Debenture — Effect of Winding-Up Proceedings
Receivers appointed by debenture holders exercise powers of sale derived from the debentures, which powers the company cannot revoke. Winding-up proceedings do not affect the receiver's power to hold and dispose of the company's property comprised in the debenture, including the power to use the company's name for that purpose. The disposition by receivers pursuant to debenture powers is not rendered void by Section 227 of the Companies Act, which applies to dispositions by the company itself (such as by its directors) and not to dispositions by receivers acting under debenture powers.
Security for Costs — Quantum — Assessment
In determining the quantum of security for costs to be provided by a plaintiff company, the court may have regard to the Advocates (Taxation and Remuneration) Rules, the value of the suit property, and the probable scale of the litigation. The amount ordered need not cover the entirety of the defendant's likely costs but should represent a reasonable proportion having regard to the sum at stake in the litigation.
Security for Costs — Credible Testimony — Evidence Required
Credible testimony within the meaning of Section 404 of the Companies Act may consist of affidavit evidence showing that the plaintiff company is in receivership, has failed to satisfy existing court decrees, is subject to winding-up proceedings, and is heavily indebted to numerous creditors. A receiver's report on the company's financial affairs is admissible as credible testimony supporting the application for security.
Security for Costs — Stay of Proceedings Pending Compliance
Where an order for security for costs is made under Section 404 of the Companies Act, the court may stay all proceedings by the plaintiff until the security is given. The stay operates to prevent the plaintiff from prosecuting the suit pending compliance with the order.

Legislation cited (6)

Cases cited (14)

  • Highlands Union v AA Jamal [1937] EACA 641
  • Sawman v David Samuel Trust Ltd [1978] 1 All ER 616
  • Mawagola Farmers v Kayanja [1974] EA 108
  • Procon (GB) Ltd v Provincial Buildings Co Ltd [1984] 2 All ER 368
  • Heinz Heger v Car & General Equipment Co Ltd (HCCS No. 367 of 1960)
  • John Bishop (Caterers) Ltd v National Union Bank Ltd [1973] All ER 707
  • Ochembo v Sentamu [1977] HCB 193
  • G Matheradas v NM Patel (HCCS No. 94 of 1964)
  • Pearson v Naydler [1977] 3 All ER 531
  • Makakha Ochembo v Ssentamu [1977] HCB 193
  • Kaura v Moraam [1961] EA 462
  • Bilcon v Fegmay Ltd [1966] 2 All ER 515
  • Household Centre Ltd v Achelis Ltd [1967] EA 825
  • Dobies & Co. Vs. United India Insurance Co. [1964]

Cases citing this judgment (7)

How later Ugandan judgments in the Wakilii corpus have cited this case. Treatment labels come from Sequitur — Uganda’s citator — each backed by a verbatim span from the citing judgment, and are not an assertion that this case is, or is not, good law.

Full judgment

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AK Detergents v GM Combined (U) Limited (Civil Suit 348 of 1994) [1994] UGHC 42 (11 July 1994)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.