Wakilii

The Micro Finance Support Centre Ltd v The Uganda Micro Enterprenuers and Ors (HCT-00-CC-CS 1007 of 2004)

High Court · [2006] UGCOMMC 26 · 2006 Preliminary Objection Upheld — Plaint Struck Out AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit on preliminary objection to plaint disclosure of cause of action
Decision
Plaint struck out with costs to the defendants; leave to appeal granted

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the plaint disclosed no cause of action. The loan agreements relied upon were between the Government of Uganda (represented by a project director) and the first defendant. The plaintiff, a limited liability company incorporated after the agreements, had no contractual standing. A contract made before a company is formed cannot bind the company afterwards unless a new contract is made post-incorporation. No assignment or succession was properly pleaded or evidenced. A stranger to a contract cannot sue upon it. The plaint was struck out as a nullity.

Outcome

Plaint struck out with costs to the defendants; leave to appeal granted

Facts

The plaintiff, The Micro Finance Support Centre Ltd, sued three defendants for recovery under three loan agreements. The defendants raised a preliminary objection that the plaint disclosed no cause of action. The agreements attached to the plaint were entered into between the Government of Uganda, represented by the Executive Director of the Rural Microfinance Support Project, and the first defendant. The plaintiff claimed to be the successor to the Project. The defendants argued that the plaintiff was not party to the agreements and no assignment of the Government's rights was pleaded or evidenced. The court examined the agreements and the plaint to determine whether a cause of action was disclosed.

Issues

  1. Whether the plaint discloses a cause of action against the defendants.
  2. Whether a limited liability company can sue on contracts entered into by a non-legal entity (government project) that preceded its incorporation.
  3. Whether equitable assignment or succession was properly pleaded to confer standing on the plaintiff.

Orders

  • Preliminary objection upheld.
  • Plaint struck out as disclosing no cause of action.
  • Costs awarded to the defendants.
  • Leave to appeal granted.

Rules and key headnotes

Civil Procedure — Cause of Action — Determination — Perusal of Plaint and Attachments
The question whether a plaint discloses a cause of action must be determined upon perusal of the plaint alone, together with anything attached so as to form part of it, and upon the assumption that any express or implied allegations of fact in it are true.
Contract Law — Privity of Contract — Standing to Sue — Stranger to Contract
Only a person who is party to a contract can sue upon it. A stranger to a contract cannot take advantage of the provisions of the contract even where it is clear from the contract that some provision in it was intended to benefit him.
Company Law — Pre-Incorporation Contracts — Effect on Company Formed Later
A contract made before a company is formed cannot bind the company formed afterwards. Nor can a company by adoption or ratification obtain the benefit of a contract purporting to have been made on its behalf before it came into existence. In order to do so a new contract must be made with it after its incorporation on the terms of the old one.
Contract Law — Assignment of Contract — Requirements for Pleading and Proof
Rights or benefits under a contract may be assigned by legal assignment, equitable assignment, or by operation of law. Where written assignment is relied upon, the document must be attached to the plaint on filing under Order 7 rule 14 of the Civil Procedure Rules. An equitable assignee of a legal chose in action must join the assignor as a co-claimant if he consents, or as a co-defendant if he does not.
Civil Procedure — Plaint Disclosing No Cause of Action — Nullity — Amendment
Where a plaint fails to disclose a cause of action, it is not a plaint at all. It is considered a nullity which cannot even be amended.

Legislation cited (3)

  • Civil Procedure Rules O.6 r.1(a)
  • Civil Procedure Rules O.7 r.1(e)
  • Civil Procedure Rules O.7 r.14

Cases cited (4)

  • Jeraj Shariff & Co v Chotai Fancy Stores [1960] EA 374
  • NEC & 2 Others v Nile Bank Ltd (SCCA No. 17 of 1997)
  • Midland Silicones Ltd v Scruttons Ltd [1962] AC 446
  • Auto Garage & Anor v Motokov (No. 3) [1971] EA 514

Full judgment

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

The Micro Finance Support Centre Ltd v The Uganda Micro Enterprenuers and Ors (HCT-00-CC-CS 1007 of 2004) [2006] UGCommC 26 (7 June 2006)
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.