Leads Assurance Company Limited had through its lawyer, Newton Jazire requested for a leave of court, saying the applicant had a good, bona fide and meritorious defense to the suit.
“The applicant asserts that it is not indebted to the respondent. It is in the interest of justice that the applicant is granted unconditional leave to appear and defend the suit.”
However, Jane Bitek Langoya, the Corporation Secretary of the respondent reiterated his averment that the applicant’s application raises serious bona fide triable issues that go to the root of any credibility the respondent seeks to attach to the terms of the Advance Payment Guarantee (APG).
“The applicant issued the APG in order to satisfy a condition precedent to a further advance payment under the construction contract but no advance payment was in fact made. If the applicant had merely taken over an existing liability from Leads Insurance Company limited it would have done so by way of an endorsement rather than the issuance of the APG,” argued Langoya.
However, while giving his ruling early this week, Justice Christopher Madrama Izama said the application had succeeded and that the applicant’s fate should not in the circumstances be decided without a hearing.
“Secondly, under the same circumstances the applicant is entitled to unconditional leave to appear and defend the action. This would obviously give the respondent a chance to advance to prove that there is no fraud whatsoever involved in it’s the demand,” ordered Izama.
Request for a guarantee
The issue arose after National Housing and Construction Limited opened up a Civil Suit number 239 of 2013 in the High Court against Leads Assurance Company Limited alleging that the later had failed to pay US$3,627,762 on the basis of an APG taken out by Messieurs MKP Builders SDN BHD Ltd on 16 November 2012 as per the contract.
According to the submissions of the applicant, court heard that In November 2012, the applicant was approached by officials of MKP Builders SDN BHD with a request to provide a guarantee/bond for a sum of US$3,627,760.00 from the period 27th of December 2012 to 26 December 2013.
It was on the representation of MKP the Builders SDN BHD that it had been contracted by the respondent to construct apartments at Naalya for a contract sum of US$18 million. As per the contract that they signed, it required a guarantee as a precondition for the release of an advance payment under the contract by the respondent.
The applicant told Court that it issued an advance payment guarantee number B1/BON/POL/0007481 dated 16th of November 2012 for an amount not exceeding US$3,627,762. 00
However, the applicant said that in a letter dated 4th of February 2013 the respondent demanded payment of US$3,627,762.00 under the APG and the applicant immediately responded by requesting pertinent information which the respondent refused to provide.
Intent to defraud
Consequently the applicant carried out its own investigations headed by the deponent and established that by a construction contract dated July 15, 2011, the respondent contracted NH -MKP Builders Ltd to evict 312 condominium apartments at Naalya for the sum of US$18,138,812.00.
He also found out that the respondent is a majority shareholder in NH – MKP Builders Ltd – by a subcontract dated July 22, 2011.
“NH-MKP Builders Ltd subcontracted MKP Builders SDN BHD to perform the construction contract for a sum of US$17,959,220.00. MKP builders SDN BHD had no contractual relationship with the respondent.”
Langoya also said that NH-MKP builders Ltd did not make any advance payment to MKP builders SDN BHD as required by the sub contract.
The main contract and subcontract had identical terms in clause; which provided that the advance payment would be made against receipt of an advance payment guarantee and in the amount and currency equal to the advance payment.
Closure of Leads Insurance Company Limited
The applicant also claimed to have established that Leads Insurance Company Limited had previously issued an APG in favour of the respondent for US$3,627,762.00 due to expire on December 27, 2012.
“In November/December 2012, investigations into corrupt practices in the Ministry of public service in Uganda revealed that one of the principal shareholders in Leads Insurance Company Limited was a key suspect corrupt practices and the Insurance Regulatory Authority suspended the licence of Leads Insurance Company Limited.”
The applicant alleged that though the respondent was aware that the contract had not been performed by May 2012, and that the money advanced under the main contract together with the Leads Insurance guarantee ought to have been recovered, “the respondent refused to call on the Leads Insurance guarantee”.
“The respondent and MKP builders SDN BHD opted, in fraudulent contrivance, to obtain a fresh guarantee from the applicant, unsuspecting innocent insurance provider, so as to cover themselves should the possibility that the Leads Insurance guarantee could not be called upon to materialize.”