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Chen JianWen and Others v Bang Cheng Investment Company Limited and 2 Others (Miscellaneous Application 531 of 2023)

High Court · [2023] UGCOMMC 27 · 2023 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for attachment before judgment arising from Civil Suit No. 033 of 2022
Decision
Application for attachment before judgment granted with specified property attached and conditions imposed to allow ordinary business operations

Observed later treatment

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Holding

The court granted the application for attachment before judgment. The applicants demonstrated a good arguable case on the merits based on nominee shareholding and investment agreements. The court found a real risk of dissipation of assets evidenced by the respondents' past conduct, including an unexplained interest-free loan of UGX 1.5 billion to a director, the opaque corporate structure with a sole director and signatory out of jurisdiction, and the respondents having quit the jurisdiction. The court ordered attachment of specified land (subject to existing mortgages), 75% of bank account funds, and 73 of 97 trucks, while permitting ordinary business operations to continue.

Outcome

Application for attachment before judgment granted with specified property attached and conditions imposed to allow ordinary business operations

Facts

The 1st respondent company was incorporated in Uganda in January 2015. The applicants claim to have invested ¥57,919,927 in the company under a nominee shareholding agreement (April 2015) and an investment agreement (September 2019), with shares held by their sister Chen Jian Fang. The company operated a stone quarry and acquired land and 97 Sino Truck lorries. The applicants received dividends in 2016 but none thereafter. Relations deteriorated after COVID-19 lockdowns when the applicants were denied access to company premises in September 2021 and were arrested for criminal trespass. The 3rd respondent had left Uganda, leaving management to his son, the 2nd respondent, who was sole signatory to all bank accounts. The 2nd respondent also subsequently left Uganda. In August 2021, the company extended an interest-free loan of UGX 1.5 billion to the 2nd respondent. The applicants filed the underlying civil suit seeking inspection of accounts, cash-out of their contributions, and return on investment.

Issues

  1. Whether the applicants have established a prima facie, bonafide and valid claim against the respondents.
  2. Whether there is evidence that the respondents are removing or there is a real risk that the respondents are about to remove their assets from the jurisdiction or otherwise dissipate them.
  3. Whether it is just and convenient to grant an order for attachment before judgment.

Orders

  • Subject to existing mortgages, land comprised in Bulemezi Block 60 Plot 231, LRV 4546 Folio 5 at Nampunge; Kyadondo Block 121 Plot 2927, LRV WAK 5553 Folio 9 at Nangabo; and Kyadondo Block 121 Plot 2928, LRV WAK 5553 Folio 14 at Nangabo is attached before judgment.
  • 75% of all funds standing to the credit of the 1st respondent on its US dollars and Shillings Bank Accounts No. 0028650001 and 0028650002 held in Diamond Trust Bank and Account No. 9030012632621 and 9030012632680 held in Stanbic Bank are frozen and attached before judgment.
  • The 2nd and 3rd respondents, their agents, successors in title and persons claiming under them are not to withdraw within one month more than 25% of all future deposits made onto the 1st respondent's bank accounts.
  • Out of 79 Sino Truck Lorries registered to the 1st respondent, 73 are attached before judgment.
  • The 2nd and 3rd respondents are directed within fourteen days to furnish security of UGX 50,000,000 each or produce and place at the disposal of the court the property or its value sufficient to satisfy the decree, or appear and show cause why they should not furnish security.
  • The 1st respondent may withdraw up to 25% monthly of future deposits for operational expenses including legal expenses.
  • The 1st respondent may deal with or dispose of other assets in the ordinary and proper course of business.
  • The 1st respondent may discharge obligations bona fide and properly incurred under contracts entered into before this order, provided it gives the applicants at least seven working days written notice.
  • Costs of the application to abide the result of the suit.

Rules and key headnotes

Attachment Before Judgment — Requirements for Grant
For an order of attachment before judgment to issue, the applicant must establish that: (1) the applicant's case for damages against the respondent is strong and likely to succeed; (2) there is evidence that the respondent is removing, or there is a real risk that the respondent is about to remove, his or her assets from the jurisdiction to avoid the possibility of a judgment, or the respondent is otherwise dissipating or disposing of his or her assets in a manner clearly distinct from his or her usual or ordinary course of business or living so as to render the possibility of future tracing of the assets remote; and (3) the applicant is prepared to pay the respondent damages in the event that the court later determines that the order should never have been issued and the respondent suffers damage as a result of the order.
Attachment Before Judgment — Test for Good Arguable Case
The test of a good arguable case for purposes of attachment before judgment is that it must be one which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50 per cent chance of success.
Attachment Before Judgment — Real Risk of Dissipation
To show that there is a real risk of dissipation, the applicant is required to disclose all relevant evidence showing assets are being divested or dissipated. It is not enough for a plaintiff to assert a risk that the assets would be dissipated; he must demonstrate it by solid evidence. A 'real risk' is one that is more than fanciful and does not have to be proven that dissipation either has happened or would happen, but only that there are objective facts from which such a risk could be inferred.
Attachment Before Judgment — Evidence of Risk of Dissipation
Risk of dissipation of assets can be gauged from the nature of allegation and past behaviour of the defendant. Prior misconduct, dishonest behaviour and unreliability is adequate to prove an apprehension of risk. Good grounds for alleging that the defendant has been dishonest is relevant, and if there is a good arguable case in support of an allegation that the defendant has acted fraudulently or dishonestly, or with an unacceptably low standard of commercial morality giving rise to a feeling of uneasiness about the defendant, then it is often unnecessary for there to be any further specific evidence on risk of dissipation for the court to be entitled to take the view that there is a sufficient risk to justify granting Mareva relief.
Nominee Shareholding — Locus Standi of Beneficial Owners
In their capacity as signatories to an investment agreement, applicants have locus standi to maintain a suit for breach of contract and for specific performance, in the course of which they may seek relief of rendition of an account. In their capacity as beneficial owners of shares held by a nominee shareholder under a nominee shareholding agreement, they would have the capacity to commence a derivative suit.
Attachment Before Judgment — Duty of Candour and Full Disclosure
The applicant for an order of attachment before judgment must ensure full and frank disclosure of all relevant and material facts. The duty of candour consists in a duty to consider what any other interested person would, if present, wish to adduce by way of fact, or to say in answer to the application, and to place that material before the judge. The applicant must identify the key points for and against the application, investigate the nature of the claim and facts relied on, identify any likely defences, and disclose all facts or matters which reasonably could be taken to be material by the judge.
Attachment Before Judgment — Scope and Proportionality of Order
Freezing orders should not be used oppressively. The respondents should not be forced to cease trading and should be allowed to meet reasonable expenses. The order should exclude dealings by the respondent with its assets for legitimate purposes, in particular payment of ordinary operational expenses, reasonable legal expenses and business expenses bona fide and properly incurred, and dealings and dispositions in the discharge of obligations bona fide and properly incurred under a contract entered into before the order is made. The value of the assets restrained should usually not exceed the maximum amount of the applicant's likely claim including interest and costs.

Legislation cited (6)

  • Civil Procedure Act s.64
  • Civil Procedure Rules O.40 r.5(b)
  • Civil Procedure Rules O.40 r.5(c)
  • Civil Procedure Rules O.40 r.12
  • Civil Procedure Rules O.40 r.1(a)(iii)
  • Civil Procedure Rules O.41 r.1(b)

Cases cited (16)

  • Lister v Stubbs [1890] All ER 797
  • Bahman (Prince Abdul) Bin Turki Al Sudairy v Abu Taha [1980] 3 All ER 409
  • Polly Peck International plc v Nadir (No 2) [1992] 4 All ER 769
  • Fourie v La Roux [2007] UKHL 1
  • The Niedersachsen [1983] 1 WLR 1412
  • Uganda Electricity Board (In Liquidation) v Royal Van Zanten (U) Ltd (Miscellaneous Application No. 251 of 2006)
  • Rex v Kensington Income Tax Commissioners, Ex parte de Polignac (Princess) [1917] 1 KB 486
  • Re Stanford International Bank Ltd [2011] Ch 33
  • Siporex Trade SA v Comdel Commodities [1986] 2 LR 428
  • Ninemia Maritime Corpn v Trave Schiffahrtsgesellschaft mbH und Co KG [1983] 1 WLR 1412
  • Shepherd Construction Ltd v Berners (BVI) Ltd and another [2010] EWHC 763 (TCC)
  • Les Ambassadeurs Club Ltd v Yu [2021] EWCA Civ 1310
  • Dynasty Rangers v SBSK Plantations [2001] MLJU 439
  • Commissioners of Customs and Excise v Anchor Foods Ltd (No 2) [1999] 1 WLR 1139
  • Customs and Excise Commissioners v Anchor Foods Ltd [1999] 1 WLR 1139
  • Re Bloomsbury International Ltd [2010] EWHC 1150 (Ch)

Full judgment

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Chen JianWen and Others v Bang Cheng Investment Company Limited and 2 Others (Miscellaneous Application 531 of 2023) [2023] UGCommC 27 (9 August 2023)
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.