Wakilii

United Builders & Contractors Ltd v Hariss International Ltd (Civil Appeal No. 29 of 2016)

High Court · [2017] UGCOMMC 26 · 2017 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from Assistant Registrar's order requiring appellant to furnish security for costs in underlying civil suit
Decision
Appeal dismissed with costs; order of Assistant Registrar requiring security for costs upheld

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a separate suit to enforce a judgment by lifting the corporate veil of a company not party to the original decree is barred by section 34 of the Civil Procedure Act. Questions relating to execution, discharge or satisfaction of a decree must be determined in execution proceedings in the original suit, not by a separate suit. Appeal dismissed with costs.

Outcome

Appeal dismissed with costs; order of Assistant Registrar requiring security for costs upheld

Facts

The appellant obtained judgment for US$240,000 against Riham Biscuits Industries (U) Ltd in Civil Suit 203 of 1998. The appellant alleged that the respondent, Hariss International Ltd, was incorporated after judgment to defeat execution, acquired Riham Biscuits' assets, and was part of a single economic unit with associated companies using the judgment debtor's property as collateral. The appellant filed a fresh suit (Civil Suit 597 of 2015) against five defendants including the respondent, seeking to lift the corporate veil and enforce the 1998 judgment against them. The respondent applied for security for costs on grounds the appellant was unlikely to pay costs if unsuccessful. The Assistant Registrar ordered the appellant to furnish security for costs of UGX 30,000,000, noting that the respondent was not a party to the 1998 judgment. The appellant appealed.

Issues

  1. Whether the learned Assistant Registrar erred in ordering the appellant to furnish security for costs when the appellant's claim was not frivolous or vexatious.
  2. Whether a separate suit can be maintained to enforce a judgment against a party not named in the original decree.
  3. Whether proceedings to lift the corporate veil for judgment enforcement purposes are barred by section 34 of the Civil Procedure Act.

Orders

  • Appeal dismissed.
  • Costs awarded to the respondent.
  • Dismissal without prejudice to any right of execution of the decree by the judgment creditor in the original suit or hearing the main suit on the merits.

Rules and key headnotes

Security for Costs — Principles for Ordering Against Limited Liability Companies
When a limited liability company is plaintiff, the court may order security for costs under Order 26 rule 1 of the Civil Procedure Rules or section 284 of the Companies Act 2012. Relevant considerations include whether the plaintiff's claim is bona fide and not a sham, whether the plaintiff has reasonably good prospects of success, whether there is an admission by the defendant, whether the application is oppressive or seeks to stifle a genuine claim, and whether the plaintiff's want of means was caused by the defendant's conduct.
Execution of Decrees — Bar to Separate Suit Under Section 34 of the Civil Procedure Act
All questions arising between parties to a suit and relating to the execution, discharge or satisfaction of the decree must be determined by the court executing the decree and not by a separate suit. Section 34 of the Civil Procedure Act bars proceedings in another suit for enforcement of a judgment; the only remedy to enforce a judgment is by way of execution in the original suit.
Lifting the Corporate Veil — Enforcement Against Directors in Original Suit
The veil of incorporation can be lifted at the execution stage where directors have dealt with company assets as their personal bounty or incorporated a new company as a stratagem to defeat a judgment. However, proceedings to lift the veil for judgment enforcement must be brought in the original suit by adding the directors as parties, not by way of a separate suit against the newly incorporated company, as the directing mind and will behind alleged fraud lies with the directors, not the artificial entity incorporated after the fraud.
Corporate Personality — Directing Mind and Will of a Company
A company is an artificial person separate from its members. The state of mind of directors and managers who represent the directing mind and will of the company is treated by law as the state of mind of the company. An artificial entity incorporated after alleged fraud cannot be accountable for a cause of action that arose and predates its incorporation; any fraud alleged is the fraud of the directors who incorporated it.
Appellate Powers — Deciding on Grounds Other Than Those of Lower Court
Under Order 43 rule 20 of the Civil Procedure Rules, the High Court on appeal may base its decision on grounds other than those on which the trial court proceeded, even if it means re-evaluation of evidence. A decision which proceeds on erroneous grounds may be supported on another ground disclosed by the record.

Legislation cited (6)

Cases cited (7)

  • GM Combined (U) Ltd v AK Detergents (U) Ltd [1999] 2 EA 94
  • R v Singh [1957] EA 822
  • Corporate Insurance Company Ltd v Savemax Insurance Brokers Ltd [2002] 1 EA 41
  • Yusuf Manji v Edward Masanja and Abdallah Juma (Civil Appeal No. 78 of 2002)
  • Peters v Sunday Post Ltd [1958] 1 EA 424
  • HL Bolton Co v TJ Graham and Sons [1956] 3 All ER 624
  • Jimmy Mukasa v Tropical Investments Ltd and Others (Civil Suit No. 232 of 2007)

Full judgment

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

United Builders & Contractors Ltd v Hariss International Ltd (Civil Appeal No. 29 of 2016) [2017] UGCommC 26 (31 March 2017)
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.