DFCU Ltd v Begmohamed Ltd (Civil Application No. 65 of 2005)

Observed later treatment

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.

Holding

The Court held that the power to stay or restrain proceedings against a company under section 226 of the Companies Act is discretionary, not mandatory, and the court must consider the circumstances of the case. As the respondent was not insolvent and was willing to pay its debt, needing only to ascertain the level of indebtedness, the High Court suit should proceed to resolve that question. The Court declined to invoke section 231, since the application was not brought under that provision and no leave had been sought. Instituting winding-up proceedings while a suit and appeal remained pending amounted to an abuse of court process. The application was dismissed with costs.

Outcome

Application for stay of proceedings dismissed with costs to the respondent

Facts

DFCU Ltd, a bank, had advanced loan facilities to Begmohamed Ltd. In High Court Civil Suit No. 272 of 2003, the respondent sought to ascertain the level of its indebtedness to the applicant. By consent, the trial judge appointed independent auditors (Bahemuka, Johnson, Nyende & Co), whose findings were to bind the parties. The auditors presented two scenarios: if the respondent's two accounts were consolidated, indebtedness was about US$43,000; if not consolidated, indebtedness exceeded US$70,000. The applicant sought leave to amend its written statement of defence, which the trial judge (Lugayizi, J) rejected on the ground that the parties were bound by their pleadings that the accounts were consolidated. The applicant appealed (Civil Appeal No. 45 of 2004/2005) and separately filed a winding-up petition (Company Cause No. 16 of 2005) in the Commercial Division, where an interim liquidator was appointed. The applicant then sought a stay of the civil suit and the appeal pending the winding-up proceedings.

Issues

1. Whether the Court of Appeal should grant a stay of proceedings in a pending civil suit and a pending civil appeal under section 226 of the Companies Act pending the outcome of winding-up proceedings against the respondent company.

Orders

• Application for stay of proceedings dismissed.
• Costs awarded to the respondent.

Rules and key headnotes

Legislation cited (7)

• Companies Act (Cap 110) s.226
• Companies Act (Cap 110) s.226(a)
• Companies Act (Cap 110) s.231
• Rules of the Court of Appeal r.1(3)
• Rules of the Court of Appeal r.42
• Rules of the Court of Appeal r.43
• Rules of the Court of Appeal r.52

Cases cited (3)

• Re Tweeds Garages Ltd [1961] 1 Ch 406
• Re Welsh Brick Industries Ltd [1946] 2 All ER 197
• Re David Lloyd & Co (1877) 6 Ch D 340

Cases citing this judgment (4)

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.

• Tullow Uganda Ltd & Anor v Wabyona (Miscellaneous Application No. 443 of 2017)
• Nkarubo v Sekikubo & Anor (Misc. Cause No 137 of 2016)
• Nshimwe & Co Advocates v Microcare Insurance Limited & Insurance Regulatory Authority of Uganda (Miscellaneous Cause No. 17 of 2014)
• Mbabazi v Microcare Insurance Ltd & Insurance Regulatory Authority (Miscellaneous Cause No. 17 of 2014)

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