Wakilii

Stanbic Bank Uganda Ltd v Millenium Stones Supplies Ltd (HCT-00-CC-MA 214 of 2012)

High Court · [2013] UGCOMMC 65 · 2013 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for security for costs arising from a negligence suit concerning the sale of mortgaged property
Decision
Application granted with security for costs ordered; main suit stayed pending provision of security

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Court exercised its discretion under Companies Act s.404 to order security for costs of UGX 67,063,934 to be furnished within 90 days. Application not time-barred as filed within the cut-off period. Court found credible evidence that respondent company ceased business operations, disposed of assets, and would be unable to pay applicant's costs if unsuccessful. Continuous prior litigation and settlement of related claims indicated respondent's limited financial capacity justified security order.

Outcome

Application granted with security for costs ordered; main suit stayed pending provision of security

Facts

Respondent company sued applicant bank for negligence and loss arising from sale of its stone quarry business after loan default. Applicant took possession of mortgaged property (stone quarry on land in Mukono) in April 2010. In October 2010, respondent and its managing director sold the quarry machinery and movable assets to Laxicon Enterprises Ltd, which settled the debt and redeemed the title. Respondent subsequently brought the present negligence suit (HCCS 154 of 2011) claiming damages. Applicant contended respondent had no assets, was not carrying on business, and would be unable to pay costs if unsuccessful. Evidence showed respondent had been involved in previous related litigation (HCCS 40 of 2010) which was settled and withdrawn by consent.

Issues

  1. Whether the application for security for costs is time barred and should be dismissed.
  2. Whether the application was an afterthought being used oppressively to stifle the respondent's genuine claim.
  3. Whether the respondent should furnish security for costs.

Orders

  • Application for security for costs granted.
  • Respondent company to furnish security for costs of UGX 67,063,934 within 90 days.
  • Security may be provided in cash or such other form acceptable to the Registrar (excluding post-dated cheques).
  • Case to be fixed for hearing upon provision of security, or dismissed if respondent defaults.

Rules and key headnotes

Civil Procedure — Interlocutory Applications — Time Limits — Cut-Off Date
Under Civil Procedure Rules O.12 r.3(1), interlocutory applications must be filed within 21 days from completion of Alternative Dispute Resolution or, where there has been no ADR, within 15 days after completion of the scheduling conference. This date is the cut-off date for interlocutory applications.
Civil Procedure — Interlocutory Applications — Purpose and Nature
Interlocutory applications are made incidental to the main suit principally to prevent the ends of justice being defeated. They are tools in case management and should be viewed as for the benefit of the court in managing the suit, not to create rights in favour of any party or deprive parties of their rights under the Civil Procedure Rules.
Company Law — Security for Costs — Discretionary Nature
Under Companies Act s.404, the grant of an order for security for costs is not mandatory but discretionary, having regard to all circumstances of the particular case including special circumstances such as lateness of the application and whether such delay is prejudicial to the respondent.
Company Law — Security for Costs — Test for Grant
The main considerations for granting security for costs are: (i) whether the applicant is being put to undue expense by defending a frivolous and vexatious suit; (ii) whether the applicant has a good defence to the suit; and (iii) whether the applicant is likely to succeed. The inability of a plaintiff company to pay the defendant's costs is a substantial factor in the decision whether to exercise the court's discretion.
Company Law — Security for Costs — Shell Companies and Abuse of Process
Section 404 of the Companies Act provides protection for the community against litigious abuses by artificial persons manipulated by natural persons. Where a company is a shell with no assets and is being manipulated by its directors to pursue litigation knowing that it cannot satisfy a costs order, the court may order security for costs. However, the court must not allow the section to be used as an instrument of oppression by shutting out a small company from making a genuine claim against a large company.

Legislation cited (6)

Cases cited (5)

  • Uganda Moslem Supreme Council v Sheikh Kagimu Mulumba [1980] HCB
  • G.M Combined (U) Ltd v A.K Detergents (U) Ltd (Civil Application No. 34 of 1995)
  • Namboro & Waburoko v Kaala [1975] HCB 315
  • Pearson and Another v Naydler and others [1997] 3 All ER 531
  • Sir Lindsay Parkinson & Co Ltd v Triplan [1973] 1 QB 609

Full judgment

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

Stanbic Bank Uganda Ltd v Millenium Stones Supplies Ltd (HCT-00-CC-MA 214 of 2012) [2013] UGCommC 65 (18 April 2013)
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.