Wakilii

Mugerenge and Others v Rock Grass Root Investment Enterprises Limited (Civil Appeal 71 of 2015)

High Court · [2023] UGCOMMC 20 · 2023 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from the Chief Magistrates Court ruling dismissing an application for security for costs
Decision
Appeal dismissed with costs to the respondent

Observed later treatment

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Holding

The High Court dismissed the appeal and upheld the Magistrate's refusal to order security for costs. The court held that the appellants failed to discharge the burden of proving with credible evidence that the respondent company was impecunious or would be unable to pay their costs if unsuccessful. The burden of proving impecuniousness lies on the party seeking security for costs under Companies Act s.284. Mere allegations without supporting evidence are insufficient.

Outcome

Appeal dismissed with costs to the respondent

Facts

The respondent company sued the appellants in the Chief Magistrate's Court for recovery of UGX 1,000,000 arising from an alleged loan agreement. The first appellant allegedly borrowed the sum, with the second and third appellants as guarantors. A decree was entered in default. After the decree was set aside on the appellants' application, the appellants filed an application for security for costs, arguing the respondent company was impecunious, had no known property in Uganda, and the suit lacked merit. The Chief Magistrate dismissed the application for security for costs with costs in the cause. The appellants appealed.

Issues

  1. Whether the Trial Magistrate erred in dismissing the application for security for costs.
  2. Whether the appellants discharged the burden of proving with credible evidence that the respondent company would be unable to pay their costs if they succeeded in defending the suit.
  3. Whether the Trial Magistrate exercised her discretion judicially in refusing to order security for costs.

Orders

  • Appeal dismissed.
  • Costs to the respondent.

Rules and key headnotes

Civil Procedure — Security for Costs — Burden of Proof — Application by Defendant Against Plaintiff Company
Under Companies Act s.284 and Order 26 Rule 1 of the Civil Procedure Rules, the burden lies on the defendant applying for security for costs to prove with credible evidence that the plaintiff company will be unable to pay the defendant's costs if the defendant succeeds in the defence.
Civil Procedure — Security for Costs — Exercise of Discretion — Judicial Discretion
The power to order security for costs is discretionary, and an appellate court will not interfere with the exercise of that discretion unless the trial court acted non-judicially by misdirecting itself, acting on matters it should not have, or failing to consider matters it ought to have considered.
Civil Procedure — Security for Costs — Merits of the Case — Prima Facie Assessment
In determining an application for security for costs, the court must consider the prima facie merits of both the plaintiff's claim and the defendant's defence as disclosed by the pleadings, affidavits filed in support of or in opposition to the application, and any other material available at that stage, without conducting a trial on the merits.
Civil Procedure — Security for Costs — Evidence of Impecuniousness — Insufficiency of Bare Allegations
Bare allegations that a plaintiff company is impecunious or has no known property, without credible supporting evidence, are insufficient to discharge the burden of proof required for an order for security for costs to be made.
Civil Procedure — Security for Costs — Recovery of Previously Awarded Costs — Not Evidence of Impecuniousness
A successful party's attempt to recover costs previously awarded in its favour cannot be used as evidence of that party's poor financial state or impecuniousness.

Legislation cited (7)

Cases cited (3)

  • G.M. Combined (U) Limited v A.K. Detergents (U) Limited [1996] 1 KALR 51
  • Banco Arabe Espanol v Bank of Uganda [1999] KALR 354
  • Mbogo v Shah [1968] EA 988

Full judgment

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

Mugerenge and Others v Rock Grass Root Investment Enterprises Limited (Civil Appeal 71 of 2015) [2023] UGCommC 20 (19 January 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.