Wakilii

Ruth Sebatindira SC ( The Administrator of Uganda Telecom Ltd ) v LAP Greenn Ltd and 4 Others (Miscellaneous Application No. 1163 of 2020)

High Court · [2022] UGHCCD 261 · 2022 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application by Administrator of a company in administration for court directions on admission of competing creditor claims under the Insolvency Act
Decision
Administrator given directions on admission of competing claims; claims of 1st to 4th respondents rejected; 5th respondent's claim admitted as unsecured creditor

Observed later treatment

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Holding

Held that an administrator of a company in administration has the power to verify creditor claims and seek court directions under section 173(1) of the Insolvency Act where claims are suspicious or competing. The claims of the 1st to 4th respondents were rejected on the basis of the anti-double proof rule and settlement agreements which extinguished their rights against Uganda Telecom Limited. The 5th respondent's claim was admitted as an unsecured creditor. The administrator was entitled to instruct her law firm to represent her in the proceedings.

Outcome

Administrator given directions on admission of competing claims; claims of 1st to 4th respondents rejected; 5th respondent's claim admitted as unsecured creditor

Facts

Uganda Telecom Limited (UTL) was placed in administration. The Administrator received competing claims from LAP Greenn Limited (1st respondent, the majority shareholder in UTL) and Huawei group companies (2nd to 4th respondents). The 2nd to 4th respondents had originally sued UTL for telecommunications equipment supply debts totaling USD 13,024,791.29. In 2013, the 1st respondent, as UTL's parent company, entered a settlement agreement with the 2nd respondent to pay USD 65,000,000 to settle all liabilities of its subsidiaries including UTL to Huawei entities. UTL issued a corporate guarantee of USD 7,060,000 as security. The 1st respondent defaulted, leading to arbitration which resulted in an award against the 1st respondent. A second settlement agreement was signed in 2016 between the 1st and 2nd respondents. Subsequently, consent orders were entered withdrawing suits against UTL on the basis that UTL had met all her obligations. The Administrator sought court directions on whether to admit the competing claims by the 1st respondent (who claimed to have paid Huawei on UTL's behalf) and the 2nd to 4th respondents (who claimed UTL still owed them money). The 5th respondent (ZTE Corporation) also submitted a claim which the 1st respondent stated it had paid on behalf of UTL.

Issues

  1. Whether the claims submitted by the 1st to 4th Respondents can be subjected to verification by court and are competing claims.
  2. Whether the Administrator has power to verify claims presented in the administration process.
  3. Whether the 2nd to 5th respondents' claims should be included on the list of unsecured creditors.
  4. Whether the Administrator can instruct her law firm to represent her in these proceedings.

Orders

  • The Administrator is directed to reject the 1st Respondent's claim.
  • The Administrator is directed to reject the 2nd to 4th Respondents' claims.
  • The 2nd to 4th respondents should pursue their claim against the 1st respondent (LAP Greenn Limited).
  • The 5th respondent's claim is to be considered among the unsecured creditors of the company.
  • The Administrator's choice of Ligomarc Advocates as her counsel in these proceedings is found proper and without fault.

Rules and key headnotes

Insolvency — Administration — Administrator's Powers — Verification of Claims
An administrator of a company in provisional administration has the power and duty to verify creditor claims before admission, even though the Insolvency Act does not expressly provide this power for administrators as it does for liquidators and trustees in bankruptcy, as the power may be implied from the administrator's general functions, conferred by the administration deed, and derived from the Insolvency Regulations which define 'insolvent' to include a company in administration.
Statutory Interpretation — Purposive Approach — Filling Legislative Gaps
In interpreting the Insolvency Act, courts have a duty to ascertain and give effect to the legislative intent and may fill gaps where the statute does not expressly provide for all contingencies, so long as the interpretation furthers the object and purpose of the legislation and the courts remain tethered to the ethos of society.
Insolvency — Administrator's Powers — Court Directions under Section 173(1)
Section 173(1) of the Insolvency Act gives the court wide discretionary powers to give directions on any function of an administrator, and such directions should be sought in special circumstances involving guidance on matters of law, questions involving legal procedure, or where there are competing interests and the administrator may be alleged to have acted in bad faith or in an unreasonable or illegal way.
Insolvency — Creditor Claims — Anti-Double Proof Rule
Under the anti-double proof rule, an insolvent estate can only accept one creditor claim for each debt that the insolvent entity owes, and where a principal creditor and a surety or guarantor submit claims arising from the same indebtedness, priority is given to the full settlement of the principal creditor regardless of whether the guarantor may have made a partial payment towards that indebtedness.
Insolvency — Creditor Claims — Effect of Settlement Agreements and Consent Orders
Where creditors have entered into settlement agreements with a guarantor that expressly released and discharged all claims against the debtor company and its affiliates, and subsequently entered consent orders withdrawing suits against the debtor company on the basis that the company had met all its obligations, the creditors' right of recourse is against the guarantor only and not against the company in administration.
Insolvency — Administrator's Duties — Professional Standards in Verification
The verification of creditor claims by an administrator must be guided by the integrity, professionalism, diligence and competence expected of an office holder under the Insolvency (Insolvency Practitioners) Regulations, and where claims are highly suspect or involve intricate dealings, the administrator is entitled to reject claims or seek court directions rather than admit suspicious claims.
Insolvency — Administrator's Choice of Legal Representation — No Conflict of Interest
An administrator is entitled to appoint a law firm in which they are a partner to provide legal and litigation support to the administration, as this is common practice in insolvency globally, and the administrator's appointment is often based on the skills and reputation of their firm, provided that the firm's fees are subject to taxation under section 171 of the Insolvency Act.

Legislation cited (26)

Cases cited (8)

  • Re: Uganda Telecom Ltd (Miscellaneous Application No. 783 of 2020)
  • Re: Uganda Telecom Ltd (Miscellaneous Application No. 220 of 2020)
  • Re: Uganda Telecom Ltd (Miscellaneous Application No. 1162 of 2020)
  • Sanderson v Classic Car Insurances Pty Limited (1986) 4 ACLC 114
  • Vipulbhai M. Chaudhary v Gujarat Cooperative Milk Marketing Federation Ltd [2015] AIR SC 1960
  • Seaford Court Estates v Asher [1949] 2 All ER 155
  • Corocraft Ltd v Pan American Airways Inc [1968] 3 WLR 714
  • Kaupthing Singer & Friedlander Ltd (in administration) (No 2) [2012] 1 AC 804

Full judgment

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Ruth Sebatindira SC ( The Administrator of Uganda Telecom Ltd ) v LAP Greenn Ltd and 4 Others (Miscellaneous Application No. 1163 of 2020) [2022] UGHCCD 261 (14 December 2022)
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.