” LITIGATION ALERT “
Introduction:
Recently, the Court of Appeal delivered a landmark decision in Vantage Mezzanine Fund II Partnership v. Uganda Registration Services Bureau & 4 Ors, Civil Appeal No. 263 of 2022. The judgement provides clarity on the capacity of foreign partnerships to lend, enforce loan agreements, and sue in Ugandan courts without prior registration under the Partnership Act and the Business Names Registration Act. It also addresses the jurisdiction of the Court of Appeal in arbitration-related matters, the joinder of private parties in judicial review proceedings, and the proper drafting of memoranda of appeal.
Drawing on the reasoning, procedural approach and substantive determination of the Court, this edition of the SM&Co. Advocates Disputes Resolution Alert highlights the key lessons from the case, with practical implications for foreign lenders, local borrowers, and practitioners navigating Uganda’s commercial and procedural law landscape.
The Case
The background of this appeal is that in December 2014, the Appellant signed an agreement, the Mezzanine Term Facility Agreement (MTFA) with the 2nd -5th Respondents, where funds were availed to the 2nd Respondent and charges created on shares of the 3rd, 4th and 5th Respondents.
At the execution of the agreement, the 2nd -5th Respondents, also known as the Simba Companies, signed share transfer documents in favour of the Appellant. The 2nd -5th Respondents defaulted payment of the loan installments, they filed a number of suits against the Appellant in the High Court (Commercial Division).
On the 16th June, 2021, the High Court dismissed all the suits that the Respondents had filed against the appellant and referred the matter for arbitration under Section 5 of the Arbitration and Conciliation Act. On the 18th June, 2021, the Appellant filed documents with the Uganda Registration Services Bureau (URSB) to effect transfers of the shares as per the MTFA agreement. URSB declined to register the share transfer documents as requested by the Appellant.
The Appellant then filed Misc. Cause No. 205 of 2021 for judicial review before the High Court (Civil Division). The application was dismissed on grounds that, being a foreign partnership, it ought to have registered in Uganda under Section 4 of the Partnership Act and the Business Names Registration Act, before. The Applicants appealed.
Holding of the Court of Appeal
a) Foreign Partnerships and their capacity to sue and or locus standi.
Citing S. 4 of the Partnership Act and S.2 of the Business Names Registration Act Cap. 105, the Court of Appeal held that there is a requirement to register under the Business Names Registration Act for a business firm, using such a business name, to have a place of business in Uganda. It would follow that a foreign firm that had no place of business in Uganda would not be obliged to register its business name in Uganda.
The Court held that a foreign lender who advances a loan facility to a local company or any local person without establishing himself/herself on the ground in Uganda, cannot be said to have established a place of business that requires registration within the meaning of the Partnership Act and/or the Business Names Registration Act. Therefore, the mere act of lending money without a physical address in Uganda does not create an obligation for the appellant as a foreign lender to register under the Partnership Act and or the Business Names Registration Act.
The Court further held that even if the said firms had to register their names, none of the foregoing provisions provide or deal with the question of capacity to sue or locus standi. The provisions could not logically be invoked to support the assertion that the Appellant did not have capacity to sue or locus standi.
The Court therefore found that the Appellant has a right to implement the terms of the agreement (MTFA) in Uganda including instituting proceedings in court for the enforcement of its rights without registering under the Partnership Act and/or the Business Names Registration Act.
b) Joinder of private entities as parties in public law (judicial review proceedings).
The Court of Appeal cited the definition of “Judicial Review” under Rule 3 of the .Judicature (Judicial Review) (Amendment) Rules, 2019, to mean the process by which the High Court exercises its supervisory jurisdiction over the proceedings and decisions of subordinate courts, tribunals and other bodies or persons who carry out quasi -judicial functions, or who are charged with the performance of public acts and duties.
The Court also cited Rule 7A,(supra) which provides for factors to consider when handling applications for judicial review and states that:
(1)The court shall, in considering an application for judicial review, satisfy itself of the following (c) that the matter involves an administrative public body or official.
The court reasoned that the 2nd – 5th Respondents are not public bodies within the meaning of the Judicature (Judicial Review) (Amendment) Rules, 2019 and they also had nothing to do with the actions that the appellant was challenging.
The Court therefore held that the learned trial Judge erred in law and in fact when he allowed the 2nd, 3rd, 4th and 5th respondents (private entities) to join proceedings in public law intended to compel a public body to perform its public duty.
c) Prohibition against Prolix and repetitive grounds of appeal in a Memorandum of Appeal
The Court of Appeal also held that the grounds of appeal set out in the memorandum of appeal filed in the matter were prolix and repetitive with grounds no, l, 3, 4, 5, 6 and 9 essentially complaining about the way the learned trial judge applied the law about registration of business names of partnerships in Uganda leading to the dismissal of the applicant’s application.
He also cited Rule 86 of the Judicature (Court of Appeal Rules) Directions SI 13-10 and held that the grounds of Appeal in a memorandum of appeal must be concise, and not repetitive of the same point as they waste court’s time.
Conclusion
The decision in the Court of Appeal clarifies the position that a foreign firm that has no place of business in Uganda is not obliged to register its business name in Uganda and has the locus standi and or capacity to sue in Ugandan Courts.
Whereas the Court of Appeal emphasized the distinction between locus standi and capacity to sue, little was said about the capacity of a foreign firm to sue or be sued. The court could have used this chance to elaborate on the capacity and legal competence of foreign firms to sue and be sued in Uganda.
Disclaimer:
This publication is for general consumption and should not be taken and relied upon without seeking specific legal advice on any of the matters above.