Entebbe Resident High Court judge Flavia Nabakooza has allowed a city law firm to proceed with the legal process of recovering more than Shs22m from Francis Runumi Mwesigye and Flora Ahiisibwe Runumi the proprietors of Entebbe based Lake Heights hotel.
In her ruling, the judge stated that she was convinced with the evidence and submissions presented by Mubiru-Musoke, Musisi and Company Advocates the applicant which is the law firm that has to enforce contractual obligations or reflect the true economic relationships between a company and its directors.
“Court lifted the veil during execution to hold the directors and controllers personally liable for the judgment debt. A similar approach is warranted here. Accordingly, I resolve this issue in the affirmative,” she stated.
The decision resulted from an application filed by the law firm claiming that in 2021, they successfully sued the hotel at Entebbe Chief Magistrates Court and secured orders directing the hotel to pay them Shs22m with 26% as interests on general damages but the hotel proprietors decided to use fraudulent means to frustrate their efforts of recovering their money.
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Through the evidence affidavit sworn by William Mukalazi Mubiru the law firm managing partner, the law firm secured a garnishee order to recover their money from the hotel’s bank account in Stanbic Bank but the bank presented evidence to Court showing that the said bank account was empty after the proprietors withdrew all the money.
He added that they secured another garnishee order against ABSA bank but the bank wrote a letter to court and attached the bank statement indicating that there were no funds on the hotel account.
The hotel proprietors also shifted from their known head offices which were situated at Plot 13 Church Road and registered in the hotel proprietors’ names and following a search at the companies’ registry, they found that the they had shifted to Lubaga Division in Kampala city.
He added that the hotel and proprietors’ known lawyers of M/s Ssesaazi & Company Advocates also declined to receive demanding documents claiming that they don’t have instructions to do so.
He stated that the only known property of the hotel which was the building housing it and the land on which it was situated were sold by the proprietor to city businessman Harji Karim.
So the only option they had to recover their money was to deal directly with the proprietors of the hotel after court lift the corporate veil.
The hotel and the proprietors through affidavit evidence filed by Flora opposed the application noting that her and the husband are directors and shareholders in the hotel but don’t have any intentions of frustrating lawyers who want to recover their money.
She stated that they established that after securing a credit facility from East African Development Bank which they failed to facilitate, the bank recalled the mortgage facility and sold the property.
The judge was not convinced with Flora’s evidence and wondered why they continued to trade as a normal business despite their knowledge that their hotel was placed under insolvency by them the proprietors.
“Such act constituted a wrongful or fraudulent trading; and therefore, a fraudulent misuse of the company’s structures,” the judge stated as lifting the corporate veil.
