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G.M. Combined Uganda Limited v A.K. Detergents Uganda Limited (Civil Appeal No. 34 of 1995)

Supreme Court · [1996] UGSC 41 · 1996 Appeal Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from a High Court interlocutory order requiring the plaintiff company to give security for costs.
Decision
Appeal partly allowed; security for costs reduced from shs 50,000,000 to shs 30,000,000, with the High Court suit stayed until the security is paid.

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Holding

The Supreme Court held that both Order 23 rule 1 of the Civil Procedure Rules and section 404 of the Companies Act confer a discretionary, not mandatory, power to order a plaintiff company to give security for costs; in exercising it the court weighs the prima facie merits of both parties' cases and any special circumstances. The appellant, being in receivership, the subject of a winding-up petition and indebted to many creditors, was prima facie unable to pay costs, and its impecuniosity was not caused by the respondent, so an order was justified and did not stifle the suit. The appeal succeeded only on quantum: security was reduced from shs 50,000,000 to shs 30,000,000.

Outcome

Appeal partly allowed; security for costs reduced from shs 50,000,000 to shs 30,000,000, with the High Court suit stayed until the security is paid.

Facts

The appellant filed High Court Civil Suit No. 348 of 1994 against the respondent seeking recovery of immovable property in Kampala, alleging the respondent acquired it by fraud, together with an injunction restraining trespass and passing off. The respondent's defence was that it had lawfully purchased for value and in good faith all the appellant's movable and immovable assets (the appellant being in receivership) from duly appointed Receivers, and that the titles to the suit property were duly transferred to it. After the close of pleadings, the respondent applied by chamber summons under Order 23 rule 1 of the Civil Procedure Rules and section 404 of the Companies Act for an order that the appellant give security for costs, supported by affidavits showing that the appellant was in receivership, was the object of a winding-up petition, and was indebted to numerous creditors. The trial judge (Tsekooko J) found the appellant would be unable to pay costs, ordered shs 50,000,000 as security, and stayed proceedings in the suit until payment.

Issues

  1. Whether the trial court erred in failing to consider the merits of the appellant's (plaintiff's) case while considering the respondent's defence.
  2. Whether the trial court applied wrong principles, including whether the appellant's inability to pay security for costs was caused by the respondent.
  3. Whether the decision was erroneous by reason of bias or prejudice against the appellant.
  4. Whether the trial court erred as to the mode and quantum of the security for costs ordered.

Orders

  • Appeal partly allowed.
  • Appellant to furnish security for costs in the sum of shs 30,000,000.
  • Appellant not to proceed with the High Court suit until the security for costs is paid into court.

Rules and key headnotes

Civil Procedure — Security for Costs — Discretion under Order 23 rule 1 of the Civil Procedure Rules
Order 23 rule 1 of the Civil Procedure Rules confers an unrestricted discretion on the court to order any plaintiff, whether a company or an individual, to give security for the defendant's costs where it deems fit, without any prescribed conditions or criteria.
Company Law — Security for Costs — Section 404 Companies Act — Discretionary not mandatory
Where a limited company is plaintiff and credible testimony gives reason to believe it will be unable to pay the defendant's costs if the defence succeeds, the court has a discretion, not a mandatory duty, whether to order security for costs under section 404 of the Companies Act.
Civil Procedure — Security for Costs — Relevance of the prima facie merits of the parties' cases
In deciding whether to order security for costs the court must consider the prima facie merits of both the plaintiff's claim and the defendant's defence, assessed from the pleadings, affidavits and other material available at that stage, since no trial has yet taken place.
Civil Procedure — Security for Costs — Impecuniosity caused by the defendant's conduct
A plaintiff company's want of means is a factor against ordering security only where that want of means was brought about by the defendant's conduct; where the company's insolvency results from its own failure to meet its debts, an order for security may properly be made.
Company Law — Receivership and Liquidation — Prima facie inability to pay costs
A company in receivership, under a winding-up petition and indebted to numerous creditors is prima facie unable to pay a successful defendant's costs, which justifies an order for security for costs unless special circumstances exist.
Civil Procedure — Security for Costs — Assessment of quantum
The amount of security for costs is in the court's discretion, fixed at such sum as is just in all the circumstances; it need not equal the costs actually incurred nor be assessed on a full indemnity basis, and the relevant taxation and remuneration rules are among the factors to be considered.

Legislation cited (8)

Cases cited (16)

  • Brecon (SB) Ltd V. Provincial Building Co. Ltd (1984) 2 All E.R. 368
  • Sir Lindsay Parkinson & Co. Ltd. V. Triplan (1973) 1 QB 609
  • Anthony Namboro and Fabiano Waburo-... V. Henry Kaala (1975) HCB 315
  • Uganda Commercial Bank v Multi Constructions Ltd (Civil Appeal No. 29 of 1994)
  • Siri Ram Kaur Vs. Morgan (1961) EA 462
  • Bileon Ltd. V. Fenay Investments Ltd. (1966) 2 All E.R. (Q.B.D)
  • Pure Spirit Co. V. Fowler (1890) QB
  • John Bishop (Caterers) Ltd and Anor V. National Union Bank Ltd & Others (1973) 1 All E.R.
  • Pearson and Another V. Naydler and others (1977) 3 All ER 531
  • Lalji Gangji V. Mathuro Vassanjee (1960) EA 315
  • Noor Mohamed Abdulla V. Ranchhobhai J. Patel And Another (1967) EA 447
  • Premchand Raichand Ltd and Another V. Quarry Services of East Africa Ltd and others (1971) EA 177
  • Mawogola Farmers and Growers Ltd V. Kayanja and Others (1971) EA 108
  • Highlands Commercial Union Ltd. V. Abdul Mapek (1957) EA 641
  • Sowman & others V. David Daniel Trust Ltd and another (1978) 1 All ER 621
  • Procon (GB) Ltd

Full judgment

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G.M. Combined Uganda Limited v A.K. Detergents Uganda Limited (Civil Appeal No. 34 of 1995) [1996] UGSC 41 (17 May 1996)
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.