Wakilii

Summer Fruits Uganda Limited and Another v Development Finance Corporation of Uganda and 2 Others (Civil Suit 1077 of 95)

High Court · [1996] UGHC 52 Application Granted — Security for Costs Ordered AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Chamber application by defendants for security for costs under Order 25 Rule 1 of the Civil Procedure Rules and Section 404 of the Companies Act
Decision
Civil Suit No. 1077 of 1995 struck out with costs following failure to furnish security for costs within the stipulated time

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court ordered the plaintiff companies to furnish security for costs in the sum of Shs.200,000,000 within 30 days. The application was brought under Order 25 Rule 1 of the Civil Procedure Rules and Section 404 of the Companies Act. The court found credible testimony that the first plaintiff company would be unable to pay the defendants' costs if unsuccessful, as its assets totalling US $122,600 were insufficient to cover the debt of US $292,419.5 plus costs.

Outcome

Civil Suit No. 1077 of 1995 struck out with costs following failure to furnish security for costs within the stipulated time

Facts

The plaintiffs, Summer Fruits (U) Limited and Uganda Aviation Service, filed a suit challenging the appointment of receivers to manage the affairs of the first plaintiff company. The appointments had been made under mortgage provisions after the plaintiffs allegedly defaulted. The defendants/applicants applied for an order requiring the plaintiffs to deposit security for costs of Shs.200,000,000. The applicants alleged that besides costs, the first plaintiff owed US $292,419.5 under the mortgage. Evidence showed that the first plaintiff's assets, including a 49% shareholding in Uganda Products (U) Ltd, totalled only US $122,600, insufficient to satisfy the debt plus costs if the plaintiffs lost the suit. The plaintiffs failed to comply with the court's order to furnish security within 30 days, resulting in the suit being struck out.

Issues

  1. Whether the plaintiff company should be ordered to furnish security for costs under Section 404 of the Companies Act.

Orders

  • Application allowed.
  • Respondents/Plaintiffs ordered to furnish security for costs in the sum of Shs.200,000,000 within 30 days.
  • Upon failure to comply within 30 days, HCCS No. 1077/95 struck out with costs.

Rules and key headnotes

Civil Procedure — Security for Costs — Application by Company Defendants
Under Section 404 of the Companies Act, where a limited liability company is a plaintiff in any suit, the court may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in the defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given.
Civil Procedure — Security for Costs — Poverty as Bar to Litigation Distinguished
While poverty should not act as a bar to litigation by ordinary poor natural persons, so that an order for security for costs should not be made so as to stop a poor person from litigating, courts will readily order security for costs in cases where a company is a plaintiff and credible testimony establishes the company's inability to pay the defendant's costs if unsuccessful.
Company Law — Limited Liability Companies — Security for Costs Where Assets Insufficient
Where a plaintiff company's assets are clearly insufficient to satisfy the debt claimed plus costs if the company loses the litigation, and the company is on the way to extinction, it would be improper not to order the company to deposit security for costs.

Legislation cited (2)

Cases cited (4)

  • John Bishop (Caterers) Ltd & Another v National Union Bank Ltd and Others [1973] 1 WLR 797
  • Ochenbo v Sentamu [1977] HCB 19
  • G Mathereds v NM Patel & Another (Civil Suit No. 94 of 1984)
  • AK Detergents Ltd v CM Combined (U) Ltd

Full judgment

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Summer Fruits Uganda Limited and Another v Development Finance Corporation of Uganda and 2 Others (Civil Suit 1077 of 95) [1996] UGHC 52 (4 April 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.