Wakilii

DFCU Bank Ltd v Mukiibi & 3 Ors (Civil Suit No. 195 of 2012)

High Court · [2013] UGCOMMC 187 · 2013 Preliminary Objection Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Preliminary objection by 4th defendant to competence of suit against him personally
Decision
Preliminary objection dismissed; matter to proceed to hearing on the merits

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a director of a company can be sued personally for professional negligence without first lifting the corporate veil. Sections 206 and 405 of the Companies Act permit third parties to sue directors in their personal capacity for negligence, default, breach of duty or breach of trust. The suit against the 4th defendant for professional negligence in signing a valuation report is competent. The 4th defendant may raise defences on the merits including that he is not personally liable. The preliminary objection was overruled.

Outcome

Preliminary objection dismissed; matter to proceed to hearing on the merits

Facts

The plaintiff bank sued four defendants including the 3rd defendant (a company) and the 4th defendant (a registered surveyor who was managing director of the 3rd defendant) for negligent and fraudulent misrepresentation in a property valuation report. The plaintiff alleged it relied on a valuation report dated 14 February 2011 signed by the 4th defendant on behalf of the 3rd defendant company valuing property at Kibuga Block 3 Plot 787 Nakulabye at UGX 400,000,000 open market value. The valuation allegedly contained material falsehoods causing the plaintiff financial loss when the borrowers defaulted. The 4th defendant filed a preliminary objection contending the suit against him personally was incompetent and barred in law because the plaintiff had not obtained a court order lifting the corporate veil of the 3rd defendant company. The 4th defendant argued he could not be held personally liable for acts done in his capacity as director without first lifting the corporate veil under Order 38 rule 5(d) of the Civil Procedure Rules. The plaintiff responded that it was not seeking to lift the corporate veil but was suing the 4th defendant in his personal professional capacity as a registered surveyor for fraudulent misrepresentation and gross professional negligence.

Issues

  1. Whether the plaintiff's suit against the 4th defendant in his personal capacity is competent and not barred in law.
  2. Whether the plaintiff was required to first obtain a court order lifting the corporate veil of the 3rd defendant company before suing the 4th defendant personally.
  3. Whether a director of a company can be sued personally for professional negligence arising from acts allegedly done on behalf of the company.
  4. Whether the 4th defendant as a registered surveyor owed a personal professional duty of care to the plaintiff independently of the contractual relationship between the plaintiff and the 3rd defendant company.

Orders

  • The 4th defendant's preliminary objection to the suit against him is overruled.
  • The suit against the 4th defendant shall proceed on the merits without prejudice to any defence that it is the 3rd defendant company and not the 4th defendant personally that is liable.
  • Costs of the preliminary objection awarded to the plaintiff.

Rules and key headnotes

Directors' Liability — Personal Liability for Negligence — No Need to Lift Corporate Veil
A director of a company can be sued personally for professional negligence, default, breach of duty or breach of trust without first obtaining a court order lifting the corporate veil. Sections 206 and 405 of the Companies Act cap 110 expressly contemplate and permit proceedings against officers of a company in their personal capacity for negligence.
Preliminary Objections — Order 38 Civil Procedure Rules — Application to Lift Corporate Veil — Not a Prerequisite to Suing Directors
Order 38 of the Civil Procedure Rules deals with company matters such as winding up proceedings. It does not apply to third-party claims against a company for breach of contract or tort. A plaintiff suing a director for professional negligence is not required to apply under Order 38 rule 5(d) to lift the corporate veil before commencing the action.
Professional Negligence — Duty of Care — Directors and Officers as Professionals
Where a director or officer of a company is alleged to have acted in a professional capacity (such as a registered surveyor), the question of whether that person owed a personal duty of care to a third party is a question of law and fact to be determined at trial. The mere fact that the professional acted through a company does not automatically shield him from personal liability.
Separate Legal Personality — Professional Services — Limited Liability and Professional Standards
The principle of separate legal personality and limited liability does not permit professionals to escape personal liability for negligence. Professional responsibility and ethical conduct require personal accountability. Professional qualifications under regulatory statutes such as the Surveyors Registration Act can only be obtained by natural persons, not companies.
Preliminary Objections — Merits Disguised as Procedure — Determination of Liability at Trial
Where a preliminary objection raises issues that turn on disputed facts and go to the merits of the case rather than pure points of law or procedure, the objection should be overruled and the issues determined at trial. The question of whether a director is personally liable for alleged professional negligence is a matter for the merits, not a preliminary point.

Legislation cited (10)

Cases cited (7)

  • Nsangiranabo Erasmus t/a Nsangira Auctioneers and Court Bailiffs v Associated Properties Ltd and Others (HCMA No. 953 of 2001)
  • Makula International Ltd v Cardinal Nsubuga (Court of Appeal Civil Appeal No. 4 of 1981)
  • Williams and Another v Natural Life Health Foods Ltd and Another [1998] 2 All ER 577
  • Nanam Aviation Ltd v Captain George Mike Mukula and Another (HCCS No. 309 of 2008)
  • Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575
  • Caparo Industries Plc v Dickman [1990] 2 AC 605
  • Belvoir Finance Co Ltd v Harold G Cole & Co Ltd [1969] 2 All ER 904

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

DFCU Bank Ltd v Mukiibi & 3 Ors (Civil Suit No. 195 of 2012) [2013] UGCommC 187 (8 November 2013)
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.