Last updated on August 16th, 2024 at 09:13 am
Case Title: Banco Arabe Espanol v Bank of Uganda
Court: Supreme Court of Uganda at Mengo
Case Number: Supreme Court Civil Appeal No. 8 of 1998
Date of Decision: 5 October 1999
Judges: Oder, J.S.C.; Tsekooko, J.S.C.; Karokora, J.S.C.; Mulenga, J.S.C.; Kanyeihamba, J.S.C.
Topics: Security for Costs, Civil Procedure, Discretionary Powers, Appellate Review, Reinstatement of Suit.
Background and Facts:
The appellant, Banco Arabe Espanol, a Spanish bank, entered into a loan agreement with the Ugandan government in 1989, lending USD 1,000,000.
The Bank of Uganda (respondent) guaranteed the repayment of this loan. After the Ugandan government defaulted on its repayment obligations, Banco Arabe Espanol sued both the Ugandan government and the Bank of Uganda in the High Court of Uganda.
The suit against the government was dismissed as time-barred, but it was allowed to proceed against the Bank of Uganda.
Subsequently, the Bank of Uganda applied for an order requiring Banco Arabe Espanol to provide security for costs.
The High Court granted this application, ordering a deposit of UGX 20,000,000 as security within 30 days. Banco Arabe Espanol, due to a mistaken belief by its counsel, deposited a bank guarantee instead of cash, which was rejected by the Registrar, leading to the dismissal of the suit for non-compliance with the order of security of costs.
Banco Arabe Espanol applied to have the dismissal set aside and the suit reinstated, citing sufficient cause under Order 23 Rule 2(2) of the Civil Procedure Rules (at the time).
The High Court granted the application, but its decision was overturned by the Court of Appeal, leading to the current appeal to the Supreme Court.
Issues Before the Court:
- Whether the Court of Appeal failed in its duty to re-appraise the evidence as the first appellate court.
- Whether the Court of Appeal wrongfully interfered with the High Court’s discretion in reinstating the suit.
- Whether the circumstances of the case amounted to “sufficient cause” under Order 23 Rule 2(2) of the Civil Procedure Rules.
Decision of the Court:
- Duty to Re-Appraise Evidence: The Supreme Court held that the Court of Appeal failed in its duty, as a first appellate court, to properly re-appraise the evidence, as required of it under rule 29 of the Court of Appeal Rules. The Court of Appeal did not adequately consider the evidence that led to the High Court’s decision to reinstate the suit.
- Interference with Discretion: The Supreme Court found that the Court of Appeal wrongfully interfered with the High Court’s discretion. The trial judge had exercised her discretion properly, considering the “sufficient cause” presented by the appellant, including the mistaken belief about the sufficiency of a bank guarantee and the bureaucratic delays in transferring funds from Spain to Uganda.
- Sufficient Cause: The Supreme Court determined that the circumstances, including the appellant’s reliance on erroneous legal advice and international bureaucratic delays, constituted “sufficient cause” for failing to deposit the security for costs within the time allowed. The court emphasized that such errors of counsel should not be visited upon the appellant, particularly when the trial judge had found them genuine.
Ratio Decidendi (Holding): The Supreme Court held that the trial court’s discretion under Order 23 Rule 2(2) of the Civil Procedure Rules (then) to reinstate a dismissed suit for sufficient cause was properly exercised in this case. The Court of Appeal erred in reversing the trial court’s decision without adequately re-evaluating the evidence.
The discretion of a trial judge should generally be interfered with by an appellate court only under exceptional circumstances such as; Misapplication of the Law (If the trial judge applied the wrong legal principles or misunderstood the applicable law), Misapprehension of Facts (when the trial judge has made a decision based on a significant misapprehension of the facts or has ignored critical evidence), Improper Exercise of Discretion (If the trial judge exercised discretion in a manner that is arbitrary, capricious,etc), Failure to Exercise Discretion (If a trial judge fails to exercise discretion when required, for example, by rigidly following a rule without considering the specifics of the case), Injustice or Unfairness (If the decision results in a manifest injustice or unfairness to one of the parties), etc.
Law Referred to:
- Civil Procedure Rules: Order 23 Rule 2(2) (at the time) concerning the setting aside of a dismissal for sufficient cause.
- Court of Appeal Rules: Rule 29 concerning the duty to re-appraise evidence.
- G.M. Combined (U) Ltd. & Others v A.K. Detergents (U) Ltd
- Mbogo & Another v Shah (1968) E.A. 93
- Peters v Sunday Post Ltd (1958) E.A. 424
- Shah v Allou Osuman (1947) 14 E.A.C.A. 45
- Patrick Njoroge Nguri v Livingsone Mithul (1955) 22 E.A.C.A. 43
- Shabir Din Ram Parkash Anand (1955) 22 E.A.C.A. 48
- Uganda Development Bank v. National Insurance and Another SC Civil No. 28-95
- Caspair Ltd. Harry Gandy (1962) E.A 414
Quote: “On the basis of the authorities referred to above, I consider that the present case is where the error part of counsel in the form of a mistaken belief that a bank guarantee would suffice, should not be visited on the appellant, especially in view of the fact that the appellant showed an intention to bring cash. In the circumstances the failure to deposit money within the prescribed time due to such error on the part of the appellant’s counsel would amount to sufficient cause for purposes of setting aside the dismissal of the suit under Order 23 rule2 (2) of the Civil Procedure Rules.” – Justice Oder.
Counsel for the Parties:
- Appellant: Mr. Justine Semuyaba
- Respondent: Mr. Masembe Kanyerezi.
