Wakilii

Multifarm Investments Ltd and Another v HCH Financial Services Ltd (Miscellaneous Application No. 204 of 2025)

High Court · [2025] UGCOMMC 195 · 2025 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to review and set aside default judgment, decree, and consent order arising from summary suit for debt recovery
Decision
Default judgment and consent order set aside; applicants granted conditional leave to appear and defend upon payment of 50% of claimed sum into court within 30 days and filing of defence within 15 days

Observed later treatment

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Holding

The court held that the default judgment and decree in Civil Suit No. 363 of 2023 should be set aside as the applicants established good cause by disclosing triable issues relating to a Trust Account Agreement and Master Assignment of Accounts Receivable that were the basis of the loan agreements but were not before the court when judgment was entered. The Consent Order in Execution Miscellaneous Application No. 771 of 2023 was also set aside on the grounds that it was entered against the 2nd Applicant personally using his property as collateral when the judgment debtor was the 1st Applicant company, a separate legal entity, thereby constituting good cause for setting aside. The applicants were granted conditional leave to appear and defend upon payment of 50% of the claimed sum into court within 30 days.

Outcome

Default judgment and consent order set aside; applicants granted conditional leave to appear and defend upon payment of 50% of claimed sum into court within 30 days and filing of defence within 15 days

Facts

The respondent obtained a default judgment and decree against the applicants in Civil Suit No. 363 of 2023 for recovery of UGX 99,927,090 allegedly being monies advanced as loans. The applicants did not apply for leave to appear and defend. Subsequently, execution proceedings were commenced and a consent order was entered in Execution Miscellaneous Application No. 771 of 2023 in which the 2nd applicant personally consented to use his property as collateral to extinguish the debt. The applicants then sought to review and set aside both the default judgment and the consent order, alleging that: (a) the respondent misrepresented to them that the court proceedings were for debt collection purposes and persuaded them not to oppose; (b) the 2nd applicant was coerced into signing the consent order due to prison conditions and threats; (c) there existed Trust Account Agreements and Master Assignment of Accounts Receivable between the parties which were the basis of the loan arrangements but were not disclosed to the court when judgment was entered; and (d) the consent order was entered against the 2nd applicant personally using his property when the judgment debtor was the 1st applicant company. The original loan agreements were between the respondent and the 1st applicant company and were secured by cheques and assignment of receivables, not personal property of the 2nd applicant.

Issues

  1. Whether the application raises grounds for setting aside the default judgment and decree in Civil Suit No. 363 of 2023?
  2. Whether the Consent Order in Execution Miscellaneous Application No. 771 of 2023 can be set aside?
  3. Whether the Applicants should be granted leave to appear and defend Civil Suit No. 363 of 2023?
  4. What remedies are available to the parties?

Orders

  • The default judgment and decree in Civil Suit No. 363 of 2023 are hereby set aside.
  • The Consent Order vide Execution Miscellaneous Application No. 771 of 2023 arising from Civil Suit No. 363 of 2023, is hereby set aside.
  • The Applicants are hereby granted leave to appear and defend Civil Suit No. 363 of 2023, conditional on the satisfaction of the condition in (4) below.
  • The Applicants shall pay into Court 50% of the sums claimed in the specially endorsed plaint in Civil Suit No. 363 of 2023 within thirty (30) days from the date of this Ruling.
  • The Applicants are ordered to file and serve their Written Statement of Defence within fifteen (15) days from the date of this Ruling.
  • Where the condition in (4) above is not satisfied within the stipulated timeframe, the Applicants' leave to appear and defend in Civil Suit No. 363 of 2023 shall be revoked, any pleadings or documents filed struck off the record and a default judgment shall be entered in favour of the Respondent.
  • Costs of this application shall be in the cause.

Rules and key headnotes

Civil Procedure — Setting Aside Default Judgments — Good Cause — Disclosure of Material Facts
A default judgment and decree may be set aside under Order 36 rule 11 of the Civil Procedure Rules where the applicant establishes good cause, which includes the disclosure of material facts that were not before the court when judgment was entered and which, if disclosed, would have led the court to decide otherwise, particularly where such facts raise triable issues requiring determination on the merits.
Civil Procedure — Setting Aside Default Judgments — Test for Good Cause — Triable Defence
Apart from ineffective service of summons, what amounts to good cause for setting aside a decree under Order 36 rule 11 of the Civil Procedure Rules is evidence that the defendant has a triable defence to the suit, being a material proposition of law or fact affirmed by one party and denied by the other.
Civil Procedure — Consent Orders — Setting Aside — Grounds
A consent judgment may be set aside for fraud, collusion, mistake as to fact or law, misapprehension or ignorance of material facts, or for any reason which would enable the court to set aside an agreement. A consent order cannot be set aside merely on account of one party having a change of heart.
Company Law — Separate Legal Personality — Effect on Consent Orders
Where a default judgment and decree are entered against a company as judgment debtor, a consent order entered in execution proceedings against a director personally, using the director's personal property as collateral to extinguish the company's debt, constitutes good cause for setting aside the consent order since a company is a separate legal entity from its directors.
Civil Procedure — Leave to Appear and Defend — Conditional Leave — When Appropriate
Where leave to appear and defend is to be granted but the defence is doubtful or less persuasive or barely meets the legal threshold, particularly where loan monies were undisputedly advanced but there are triable issues regarding whether payments were made to a trust account and how much, the court may grant conditional leave to appear and defend subject to payment of money into court, giving security, or other terms as the court thinks fit under Order 36 rule 8 of the Civil Procedure Rules.
Civil Procedure — Defective Affidavits — Liberal Approach
In line with Article 126(2)(e) of the Constitution requiring courts to administer substantive justice without undue regard to technicalities, where an affidavit contains argumentative or legally improper averments, the court should reject only those parts that are argumentative and contrary to law and consider the parts conforming to the rules on affidavit evidence, rather than striking out the entire affidavit.
Banking & Finance — Trust Accounts — Loan Repayment Arrangements — Effect on Enforcement
Where parties to a loan agreement enter into a Trust Account Agreement and Master Assignment of Accounts Receivable providing that repayment of amounts advanced shall be made directly to the financer through a trust account for repayments received by the borrowing company from its customers, such arrangements raise triable issues regarding whether third parties deposited money into the trust account and the quantum thereof, which must be determined on the merits before a final decree can properly be entered.

Legislation cited (9)

Cases cited (23)

  • Oriental Insurance Brokers Ltd v Transocean (U) Limited (Supreme Court Civil Appeal No. 55 of 1995)
  • Uganda Telecom Ltd v ZTE Corporation (Supreme Court Civil Appeal No. 3 of 2017)
  • Re Bukeni Gyabi Fred (High Court Miscellaneous Application No. 63 of 1999)
  • M. Buwule v Mugenyi (Civil Application No. 36 of 2019)
  • Col. Dr. Besigye Kiiza v Museveni Yoweri Kaguta & Electoral Commission (Election Petition No. 1 of 2001)
  • Ladak Abdulla Mohamed Hussein v Griffiths Isingoma Kakiiza and 2 Others (Supreme Court Civil Appeal No. 8 of 1995)
  • Nyamogo and Nyamogo Advocates Vs Kago [2001] 1 EA 173
  • Yusuf Vs Nokorach (1971) EA 104
  • Re Nakivubo Chemist (U) Ltd [1979] HCB 12
  • FX. Mubuuke v UEB (High Court Miscellaneous Application No. 98 of 2005)
  • Ismail Sunderji Hirani Vs Noorali Esmail Kassam [1952] 19 EACA 131
  • Saggu Vs Road Master Cycles (U) Ltd [2002] 1 EA 258
  • Post Bank (U) Ltd v Abdu Ssozi (Supreme Court Civil Appeal No. 8 of 2015)
  • Geoffrey Gatete & Another v William Kyobe (Supreme Court Civil Appeal No. 7 of 2005)
  • Mohamed Allibhai v W.E. Bukenya and Another (Civil Appeal No. 56 of 1996)
  • Hirani Vs Kassam [1952]19 EACA 131
  • Brooke Bond and Liebig (T) Ltd Vs Maliya [1975] EA 266
  • Attorney General & Another v James Mark Kamoga & Another (Supreme Court Civil Appeal No. 8 of 2004)
  • Mpalanyi Henry & Another v Kakumba Bernard Tamale & 3 Others (High Court Miscellaneous Application No. 0581 of 2024)
  • Nakalima v Ann Nandawula Kabali (Miscellaneous Application No. 235 of 2013)
  • Jamil Ssenyonjo v Jonathan Bunjo (High Court Civil Suit No. 180 of 2012)
  • Joseph Muyinza Bunoli v William Tumusiime (High Court Miscellaneous Application No. 820 of 2023)
  • Pamela Anyoti v Root Capital Inc. (High Court Miscellaneous Application No. 844 of 2023)

Full judgment

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Multifarm Investments Ltd and Another v HCH Financial Services Ltd (Miscellaneous Application No. 204 of 2025) [2025] UGCommC 195 (1 July 2025)
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