THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[CIVIL DIVISION]

CIVIL SUIT NO.0215 OF 2020

ISMAIL DABULE::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::PLAINTIFF

VERSUS

1. GOLDEN LEAVES (U) LIMITED

2. MRS. ZHANG NAN ::::::::::::::::::::::::::::::::::::::::::::::::::::DEFENDANTS
3. MR. ZHANG NAN

BEFORE: HON.JUSTICE SSEKAANA MUSA

JUDGMENT

The plaintiff brought this suit (summary) against the defendants jointly and
severally for payment of Ug shs 60,000,000/= being rent arrears, payment of
interest at commercial rate of 25% per annum from the date of cause action
till payment in full and costs of this suit.

The plaintiff entered into a tenancy agreement with the defendants wherein
the defendants operated a Restaurant; Great Chinese Wall under Golden
Leaves (U) Ltd. The defendant was to pay a monthly rent of 5,000,000/=. The
2nd and 3rd defendants operating under the 1st defendant did not pay rent for
a period of over 12 months from May 2018 to April 2019 making the
accumulated rent arrears to a tune of 60,000,000/=.

The defendants kept promising to pay the rent to no avail and vacated the
premises without the knowledge of the plaintiff. The plaintiff averred that
the property was commercial and has lost income for which he sought
interest.

The defendants made an application for leave to file a defence/ appear and
defend the suit. The same was granted and the defendant filed a defence and
counterclaim to account and pay for the value obtained by the counter-
defendant/plaintiff from taking over the good will ($60,000), reputation and
clientele built by the 1st defendant/counterclaimant for the restaurant, its
furniture, cooking equipment, utensils, cutlery, well trained staff and good
location. They also sough general damages, interest at 25% and costs of the
suit.

The defendant contended that the plaintiff cannot seek to recover the sum of
60,000,000/= without a written contract and therefore the suit is barred in
law.

The defendants in defence averred that, the 1 st defendant operated the Great
Chinese Wall Restaurant at the plaintiff’s premises since 2007 having bought
the same from another Chinese company at over US$ 40,000. Throughout the
tenancy, the parties maintained an informal and cordial relationship and in
fact at no time did they ever execute a written tenancy agreement and no
dispute ever arose over rent arrears.

That all payments of rent were made in cash to the plaintiff’s agents a one
Osman who would always pick it from the premises. In February 2019, the
3rd defendant who was managing the restaurant decided to hand over the
Restaurant to the plaintiff upon deciding to go back to China.

That upon making the decision to go back to China, it was resolved by the
1st defendant that instead of selling the said restaurant, its good will and
assets to a third party, the same was given to the plaintiff as a reward for the
good relationship enjoyed by the parties over the years which offer was
accepted by the plaintiff.

The 3rd defendant convened a meeting between the plaintiff and 1 st

defendant’s restaurant staff at the time and informed them of the change of
management and urged the staff to work with the plaintiff. The restaurant
was managed for and on behalf of the plaintiff and the money was remitted
to him by the manager called Livingstone and therefore the defendants owe
the plaintiff nothing.

The plaintiff/counter-defendant in reply to counterclaim denied ever being

handed over the restaurant and he denied any reward of good will and
assets of the restaurant being handed to him. The plaintiff denied any
meeting being held to inform the staff about the change of management and
he has never instructed a one Livingstone to manage the restaurant on his
behalf.

The plaintiff all along had known that the 2 nd and 3rd defendants were still
operating the business as they kept on promising to pay the rent arrears
when their other case is concluded.

The parties filed a joint scheduling memorandum and disagreed in

everything, but agreed on one issue for determination.

The main issues for determination are

1. Whether the plaintiff is entitled to the rent arrears claimed?

2. Whether the directors of the 1st defendant can be personally liable for
acts of the 1st defendant.
3. What remedies are available to the parties?
The plaintiff was represented by Counsel Massajjage Steven holding brief for
Counsel Lillian Omurangi for the plaintiff, while the defendant was
represented by Counsel Abio Patience Teddy and Counsel Damalie Tibugwisa

The plaintiff led evidence of himself as the sole witness. The defendants
failed to lead any evidence and the court proceeded to determine suit under
Order 17 rule 4 of the Civil Procedure rules.

The parties filed their respective submissions which I have considered in this
matter.

DETERMINATION

Whether the plaintiff is entitled to the rent arrears claimed?

The plaintiff’s counsel submitted that the plaintiff testified that he entered
into a tenancy agreement with the defendants in 2007 to rent the premises
situate at Slow Boat, Plot 21, Kampala Road in which the defendants
operated and ran a restaurant under the names of Golden Leaves at a
monthly rent of 5,000,000/= and the same was remitted for the initial 2 years.

The plaintiff further contended that the defendants continued paying rent
until May 2018 when they failed and started defaulting. It was submitted
that the defendants indeed defaulted in the payment of the rent arrears and
that the plaintiffs evidence was not challenged and or contradicted.

It was part of the plaintiff’s evidence that the defendants failed to pay rent
for the period between May 2018 and April 2019 totaling for 12 months.

Counsel for the plaintiff further submitted that there are receipts issued by
the plaintiff which to him satisfy the requirement of the contract to be in
writing as envisaged under the Contract Act. Citing the case of Musoke
Kitenda v Roko Construction Ltd Misc. Civil Application No. 1240 of 2020
cited in Roko Construction Ltd v Isa Male Misc. Application No. 37 of 2021,
Justice Stephen Mubiru stated that;

“The writing envisaged does not require a formal written contract. This requirement
is satisfied by any signed writing that; reasonably identifies the subject matter of the
contract; is sufficient to indicate that a contract exists, and states with reasonable
certainty the material terms of the contract. It can be a receipt or even an informal
letter.”

The defendant in their submissions raised an issue of whether the suit is

competent against the 2nd defendant?

The defence counsel submitted that the plaintiff sued a non-existing party,
named as Mrs Zhang Nan (2nd defendant) and it was contended that no claim
can be sustained against such a party. The plaintiff recognized the mistake
although he never took active steps to rectify the grave error.

The defendant’s counsel submitted that the plaintiff did not adduce a
certificate of title to prove that he owned the premises which would entitle
him to claim as a Landlord and that he never furnished the purported
tenancy agreement in court. During cross–examination, the plaintiff testified
that he was not the one who received the cash paid by the tenants since he
was sick from 2015 onwards and last stepped in office in 2015. It was
counsel’s contention that he had no clue whatsoever of what his claim is, if
any.

It was further submitted that it was the plaintiff’s sons Osman and Doka
who received cash from his tenants during the pendency of the tenancy and
the receipts were signed by Osman. These key witnesses did not testify and
yet they were authorized to collect and receive rent from the defendant.

The receipts that were adduced by the plaintiff as PEx 1 and PEx 2 were not
numbered consecutively. They were dated in the months of August and
September in the year 2018, and yet in cross examination, testified that no
payments were made in 2018. The receipts contradict his assertions that the
defendants last made any payments in April 2018.

The defendant’s counsel submitted that the evidence of the plaintiff was full
of contradictions which point to deliberate falsehoods. The receipts were in
the names of Lui Fang who is not named as a defendant and issued by a
person who never testified in court. The demand note written in November
2019 demanded for rent arrears as of November 2019 to be one year. This
would be contradictory to the period alluded to in evidence of May 2018 to
April 2019.

Analysis

The plaintiff sued the 2nd defendant known as Mrs Zhang Nan and there is
no such person and he assumed that it was the wife known by those names.
The person does not exist and the plaintiff ought to have established the
proper names before coming to court. The court would issue orders against
unknown person in law which cannot be enforced. In the case of The
Trustees of Rubaga Miracle Centre v Mulangira Ssimbwa & Anor HCMAs
No. 576 & 655 of 2006 the court held that a suit in the names of a non-existent
plaintiff or defendant cannot be cured by amendment and that the plainti
ought to be rejected under Order 7 rule 11 of the civil procedure rules as the
defendant did not exist as a real or legal person capable of suing or being
sued.

The name of a competent party to a suit must be the real name by which he
is known, in the case of a natural person and its corporate name, in the case
of a non-natural entity. Where a person commences an action in court, such
a party must be a person known to the law, i.e a legal person, and if a party
to an action is not a legal person, the party should be struck out of the suit.
See IDEA Uganda Limited v Okello Stephen & 2 Others HCMC No. 316 of
2021;

The plaintiff in his evidence availed exhibits which indicated the proper
name if at all he wanted this court to believe that she was the person
intended to be sued. Mr. Zhang Nan could have several wives and each
would carry the ‘baptized name’ of Mrs Zhang Nan.

The defendant raised this issue in the pleading that indeed the 2 nd defendant
does not exist but the plaintiff ignored or never bothered to address the
changes or make amendments. An amendment of a genuine misnomer will
be allowed where the other party is not misled or prejudiced and the guilty
party shows reasonable ground for the misnomer.

The plaintiff’s suit against the 2nd defendant is struck off being she was a
wrong party.

The plaintiff led evidence to prove that there existed a tenancy agreement
but the same was not tendered in court to know the terms of the tenancy.
The plaintiff’s claim is for unpaid rent for a period of 12 months at the rate
of 5,000,000/= to make a total sum of 60,000,000/=. In the plaint it was averred
that the 1st defendant did not pay rent for a period of 12 months from May
2018 to April 2019.

The plaintiff in exhibit P2 demanded for rent in November 2019 contending

that it was over 12 months in arrears. The plaintiff in his testimony does not
explain how he got the cut off of April 2019 and not November 2019 as
period of rent arrears.

The plaintiff in his testimony and cross examination stated that he was sick
for 3 years and it was his sons who were collecting rent and indeed the
signatures on the receipt were for the son. The evidence on record does not
show how much was due and from which period. The plaintiff tendered two
receipts to show the payment and both were issued 17 th /08/2018 and
15th/09/2018. The person whom issued a receipt of 17 th August 2018 indicated
that the defendant was paying for the period June to October and they paid
5,000,000/= and were left with a balance of 36,400,000/=.

The plaintiff in his witness statement testified that the defendants continued
paying rent until May 2018 but the receipts exhibited in court shows that the
defendants continued paying rent in August and September. The receipt for
September does not show any balance outstanding which contradicts his
witness statement that the defendant never paid any money since May 2018.

It is trite law that where witnesses of a party gave inconsistent and/ or

contradictory evidence on material facts, their evidence on a point must be
regarded as unreliable and must also be rejected. Contradictions of a minor
detail in evidence, adduced on behalf of a party, which do not affect the
substance of the issue to be adduced, are irrelevant and do not vitiate the
case of a party. The relevant contradiction is that which amounts to a
disparagement of other evidence adduced, thereby making it unsafe for the
court to rely on either.

In the case of Oryem David v Omory Phillip, HCCS No. 100 of 2018, cited in
the case of Bintubizibu v Sekibamu (Civil Appeal) No. 9 of 2019 it was held
that;

“It is trite law that grave inconsistencies and contradictions unless satisfactorily
explained will usually but not necessarily result in the evidence of a witness being
rejected. Minor ones unless they point to deliberate untruthfulness will be
ignored….what constitutes a major contradiction will vary from case to case.

The question always is whether or not the contradictory elements are material, i.e
“essential” to the determination of the case. Material aspects of evidence vary from
case to case, but generally, in a trial materiality is determined on the basis of the
relative importance the point being offered by the contradictory evidence and its
consequences to the determination of any of the facts or issues necessary to be proved.
It will be considered minor where it relates only on a factual issue that is not central
or that is only collateral to the outcome of the case.”

The plaintiff is demanding for a period ascertained of May 2018 to April 2019
which totals 60,000,000/=. The evidence as noted earlier contains several
contradictions and is quite unreliable to be prove the plaintiff’s case. The
plaintiff who denies knowledge of the whereabouts of the 1st defendant’s
directors from 2018 or contends that they left mysteriously and left the
restaurant to their worker. He left them to continue to operate the restaurant
for a period of 12 months which is quite unbelievable.

The plaintiff was mean with his evidence and avoided giving this court
sufficient evidence to determine the period of unpaid rent if any, by not
allowing his sons who were conversant rent arrears since they were
responsible for collecting rent for the period of 3 years when he was sick and
never appeared at his office. Why didn’t the plaintiff present these key
witnesses who were in charge of collecting the rent? Why didn’t the plaintiff
adduce more evidence in form of receipts for payment of rent for the period
of the tenancy or why did he only produce 2 receipts for the entire tenancy?

The plaintiff’s testimony contradicted the pleadings when he claimed that

the defendant never paid any rent since May 2018 and yet the receipts
tendered were issued in August and September 2018. This was a major
contradiction in his evidence to show that the plaintiff was not aware of the
actual rent arrears if any or the facts surrounding the case. He further
contended that the receipts had a mistake in them and yet they were
authored by his sons responsible for the rent collection for the 3 years he was
unwell.
When the evidence of a witness in court is different from the facts pleaded,
or is contradictory to the facts pleaded, such evidence should be rejected. In
the exercise of assessing such evidence, the court will not consider it
improbable simply because there some minor inconsistencies in it via-a-vis
the facts pleaded. It is any evidence so materially at variance with the
pleadings in the sense that they both cannot be reconciled (or which has
notable internal conflicts) that the court will unjustifiably reject. See Makinde
v Akinwale (2000) 2 NWLR (pt 645) 435 at 450

The plaintiff’s evidence is contradictory, and the contradictions are material

and would result in a miscarriage of justice that would warrant such a
rejection. It is not for this court to endeavor to find explanations for the
contradictions in the evidence of the plaintiff.

The plaintiff’s counsel contended that the evidence of the plaintiff was
unchallenged simply because the defence did not call it is evidence. The
plaintiff will not be entitled to judgment merely because the defendant
abandoned its defence by failing to lead evidence in support therefore. The
court would only be bound to accept unchallenged, uncontroverted and
unrebutted evidence of the plaintiff, if it were cogent and credible. The
evidence of the plaintiff in this matter is not credible since he was not
conversant with rent arrears because he was sick for 3 years and it was his
sons who were collecting the rent.

Credible evidence in this connection means the evidence worthy of belief

and for the evidence to be worthy of belief or credit, it must not only proceed
from a credible source, it must be credible in itself in the sense that it should
be natural, reasonable and probable in view of the entire circumstances. The
evidence of the plaintiff on the claims of rent arrears for 12 months from May
2018 to April 2019 and yet the demand letter was written in November 2019
was so exaggerated. This exaggeration entered into the realm of
flamboyance or recklessness and petulance or appears to be an affront to
reason and intelligence, no credibility ought to be accorded to it. See Agbi v
Audu Ogbeh (2006) 11 NWLR (pt 990) pg 65 at 116; Fatunbi v Olanloye (2004)
12 NWLR (pt 887) 229 at 247

The evidence called by the plaintiff to prove the averments in his pleadings
is in sharp contradiction to those averments which are very material to the
plaintiff’s case, the result is that the plaintiff has failed to prove his case for
rent arrears and the proper order is a dismissal of the case.

Whether the directors of the 1st defendant can be personally sued for acts of
the 1st defendant.

The defendants’ counsel submitted that the plaintiff describes the 2nd and 3rd
defendants as directors and purports to seek relief from the directors of the
1st defendant. However, he did not specifically plead or prove fraud or any
circumstances to warrant the lifting of the corporate veil.

The plaintiff in his evidence clearly shows that the tenancy was with the 1 st
defendant and all his demand letters-PEx3 was clearly addressed to the 1st
defendant.

The plaintiff witness in his testimony tried to change his case to defendants
instead of 1st defendants, the claim is against the 1st defendant as company
as per the pleadings.

Analysis

The plaintiff has not lead any evidence or made any justification to lift the
corporate veil. Litigants have always unlawfully and illegally lifted the
corporate veil in matters involving companies duly registered. This practice
must not be encouraged and defeats the basic principle of corporate
personality under company law and especially without a proper application.
It needs to be appreciated that the alter ego doctrine is not invoked arbitrarily.
The separate personality of the company is a statutory protection accorded
to among, other things, maximize the potential of the company as a business
entity. This privilege is important for the efficient and effective operation of
businesses and the court will be slow to take it away in the absence of cogent
evidence pointing to its abuse or perversion.

I do not think the idea should be encouraged that the alter ego doctrine exists
primarily for the removal of procedural obstacles that may be faced by an
aggrieved person. It is also erroneous to consider that the doctrine exists to
produce a defence for an aggrieved person, as a matter of necessity.

What the doctrine does, from my understanding, is to afford protection

where some conduct amounting to bad faith, wrongdoing, or inequitable
conduct makes it unfair for the shareholders of the company to hide behind
the corporate veil. Then in such circumstances the courts in exercise of its
equity jurisdiction, lift the veil so that the person or persons abusing the
corporate capacity of the company may be discovered and fixed with
personal liability. See Nipun Bhatia & Anor v Boutique Shazim Ltd & 4 Ors
HCMA No. 0123 of 2023

A universal benefit of incorporation is the separate entity doctrine which

shields the shareholders, directors and other operators from liability for
corporate omissions. By the doctrine, the company’s debts are limited to the
amount shareholders have paid or have agreed to pay to the company for its
shares, in case of insolvency.
Section 20 of the Companies Act provides for;

Lifting the corporate veil.

“The High Court may, where a company or its directors are involved in acts
including tax evasion, fraud or where, have for a single member company,
the membership of a company falls below the statutory minimum, lift the
corporate veil.”
The plaintiff has failed to make any justification why he added the director(s)
as a party to a suit without leave of court to lift the veil. The plaintiff ought
to have proved fraud or dishonesty dealings against the 1st defendant.

The 2nd and 3rd defendant were not liable for the actions of the 1 st defendant
in their personal capacity.

This suit fails and is dismissed with no order as to costs.

It is so ordered.

SSEKAANA MUSA
JUDGE
31st October 2024