Uganda Legal Information Institute - Banking, Finance and Insurance Law https://old.ulii.org/tags/banking-finance-and-insurance-law en General Industries (u) Limited V Non Performing Assets Recovery Trust & Others (Civil Appeal No 51 of 2007) [2019] UGCA 1 (17 January 2019); https://old.ulii.org/ug/judgment/court-appeal-uganda/2019/1 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li></ul></section><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-rss"><div class="field-items"><div class="field-item even" property="content:encoded"><div> <p class="rtejustify"> </p> </div> <p class="rtejustify"> </p> <div> <p class="rtejustify"><strong>THE REPUBLIC OF UGANDA<br /> IN THE COURT OF APPEAL OF UGANDA AT KAMPALA<br /> CIVIL APPEAL NUMBER 51 OF 2007</strong></p> <p class="rtejustify"><strong>GENERAL INDUSTRIES (U) LIMITED:::::::::::::::::::::::::::::::::::::: APPELLANT</strong></p> <p class="rtejustify"><strong>VERSUS</strong></p> <ol> <li class="rtejustify"><strong>NON PERFORMING ASSETS RECOVERY TRUST</strong></li> <li class="rtejustify"><strong>Z.J HASHAM FISH INDUSTRIES LIMITED</strong></li> <li class="rtejustify"><strong>TASFAH LIMITED</strong></li> <li class="rtejustify"><strong>DOTT SERVICES (U) LIMITED :::::::::::::::::::::::::::::::::::::: RESPONDENTS</strong></li> </ol> <p class="rtejustify"><strong>CORAM: HON. MR. JUSTICE REMMY KASULE, JA</strong></p> <p class="rtejustify"><strong>HON. MR. JUSTICE KENNETH KAKURU, JA HON. MR. JUSTICE GEOFFREY KIRYABWIRE, JA</strong></p> <p class="rtejustify"><strong>IUDGMENT</strong></p> <p class="rtejustify"><strong>Brief Facts</strong></p> <p class="rtejustify">The appellant filed Tribunal Claim No. 032 of 1999 before the Non-Performing Assets Recovery Tribunal (NPART) seeking to be discharged from liability to repay a loan debt of Ug shs. 700,000,000 (Uganda Shillings Seven Hundred Million Shillings). When the claim came up for hearing before the Non- Performing Assets Recovery Tribunal, counsel for the first Respondent raised a preliminary point of law to the effect that the claim was res judicata. The second and third Respondents had not filed their Written Statements of Defence (WSD) and hearingof the matter proceeded against the first and fourth Respondents.</p> <p class="rtejustify">On the 22<sup>nd</sup> of February 2007, the Tribunal upon considering submissions by counsel for the respective parties rendered its Ruling that the suit was res judicata and barred by Section 7 of the Civil Procedure Act. The plaint was therefore struck out in accordance with Order 7, Rule ll(d] of the Civil 5 Procedure Rules with costs to both the first and the fourth Respondents. The Appellant being dissatisfied with the Ruling and Orders made therein appealed to the Court of Appeal of Uganda at Kampala, hence this Appeal.</p> <p class="rtejustify"><strong>Grounds of Appeal/ Issues for Determination</strong></p> <p class="rtejustify">The Appellant filed a Memorandum of Appeal, which details the grounds of appeal. They are Eight (8) in number and these can be rephrased in issues as;</p> <p class="rtejustify"> <!--[endif]----></p> <p class="rtejustify">Whether the Chairman and members of the Tribunal erred in law and fact to disallow an application for adjournment to enable the Appellant amend its plaint to its prejudice and went on to proceed with the hearing of the claim.&lt; &gt;Whether the whole Tribunal Claim 032 of 1999 was res judicata or not as against all the Respondents.</p> <!-- --><p>Whether Ug. Shs. 700 million had been reversed and demanded from General Parts (U) Ltd as per the judgment in H.C.C.S. 386 of 1993.</p> <!-- --><p>Whether the Appellant had ever been foreclosed of his equity in the suit properties.</p> <!-- --><p>(a) Whether the acquisition of the suit land (s) by the 4<sup>th</sup> Respondent was lawful or not, and;(b) Whether the Appellant's claim against the 4<sup>th</sup> Respondent was res judicata.</p> <p class="rtejustify">Whether the Tribunal relied on extrinsic evidence to come to its findings to the Appellants' prejudice.</p> <!-- --><p>Whether the acquisition of the suit property by Tasfah Ltd was legal and proper, in the presence of the original validly executed mortgage document.</p> <p class="rtejustify">Whether the sale of the suit properties between the Defendants was proper and lawful.</p> <p class="rtejustify"><strong>Representations</strong></p> <p class="rtejustify">At the hearing of this appeal, Mr. Kugumikiriza Moses represented the appellant, Mr. David Ssemakula Mukiibi represented the second and third respondents. Mr. Peter Walubiri and Mr. Musika Brian represented the fourth respondent. The first respondent was unrepresented.</p> <p class="rtejustify">However the appeal against the first respondent was withdrawn and thus is dismissed because the first respondent is no longer in existence.</p> <p class="rtejustify"><strong>Duty of Court</strong></p> <p class="rtejustify">It is the duty of this court, being a first appellate court, to subject the evidence on record to a fresh review and scrutiny and come to its own conclusions 20 bearing in mind, however, that it did not see the witnesses testify.</p> <p class="rtejustify">See: Rule 30 of the Judicature (court of Appeal Rules) Directions S.I.13-10. Pandya VR [1957] EA 336, Okeno V Republic [1972] E.A 32 and Kifamunte Henry V Uganda, S.C.C.A No. 10 of 1997 (unreported).</p> <!--[endif]----><!--[endif]----> <p class="rtejustify"> <!--![endif]----><!--![endif]----></p> </div> <div> <p class="rtejustify"><strong>LEGAL ARGUMENTS</strong></p> <p class="rtejustify"><strong>Grounds One and Two</strong></p> <p class="rtejustify">Whether the Chairman and members of the Tribunal erred in law and fact 5 to disallow an application for adjournment to enable the Appellant amend its plaint to its prejudice and went on to proceed with hearing of the claim; and Whether the whole Tribunal Claim 032 ofl 999 was res judicata or not as against all the Respondents.</p> <p class="rtejustify"><strong>Arguments for the Appellant</strong></p> <p class="rtejustify">Counsel for the Appellant submitted that before the claim came up for hearing before the Tribunal, an application for adjournment was made by counsel for the appellant to enable him file an application for amendment to the Plaint. However, that application for adjournment was unreasonably disallowed by the Tribunal to the prejudice of the appellant. Counsel further submitted that a case should be decided on merits and the parties should be allowed to present its case on pleadings. Counsel argued that this is the reason courts allow parties to amend their pleadings at any stage of the proceedings and that this opportunity was denied to the appellant which greatly prejudiced the Appellant.</p> <p class="rtejustify">Counsel alluded to the fact that Mr. Lule, a member of the Tribunal had observed that part of the claim was likely to be res judicata and had rightly advised the Appellant to amend its pleadings accordingly. Counsel argued that this would have narrowed down the matters for decision by the Tribunal as the Appellant would have had the opportunity to present matters which are not res judicata. Counsel prayed that this ground of appeal be allowed in favor of the Appellant.</p> <p class="rtejustify">Regarding ground two, it was contended for the Appellant that res judicata is a creature of Statute and in this case it was a creature of Section 7 of the Civil Procedure Act.</p> <p class="rtejustify">Counsel submitted that it is clear that by the time of S.C.CA No. 5 of 1998 between the parties, the sale of the suit properties had not taken place and the to principle of res judicata cannot apply to those parts of the claim in which the sale and transfer of the suit properties was the subject of challenge. Counsel argued that the Tribunal therefore erred in finding that the whole Tribunal Claim 032 of 1999 was res judicata. Court should have gone ahead to investigate and hear the parties on the issue of sale of the suit properties because that part 15 of the claim was clearly not res judicata.</p> <p class="rtejustify">Counsel also submitted that what was in issue in Misc. Cause No. 7 of 1997 are well set out in the ruling of the Court and the issue of illegality of sale was not one of them. It was further submitted that the issue came up later and that is why it was envisaged in the later Tribunal Claim No. 32 of 1999.</p> <p class="rtejustify">Counsel relied on the authority of Makula International vs His Eminence Cardinal Nsubuga, Civil Appeal No. 4 of 1981 as against Section 7 of the Civil Procedure Act and submitted that such illegality over rides all questions of pleadings and the moment it is brought to the attention of Court, any defence including res judicata cannot be raised. Section 7, Explanation 4 of the Civil 25 Procedure Act is therefore not envisaged to bar the suit because Court has to go ahead and investigate the allegation of illegality. Counsel prayed that this ground also be allowed.</p> <p class="rtejustify"><strong>Second and Third Respondent's Arguments</strong></p> <p class="rtejustify">Counsel for the respondent opposed the appeal as having no merit in law. He submitted that all the claims under Tribunal Claim number 32 of 1999 are also contained in the appellant's amended plaint in Tribunal Claim No. 4 of 1999, as particularized in paragraphs 7a-n concerning the legality of the legal mortgage and the sum of Ug shs. 700 million.</p> <p class="rtejustify">Counsel further submitted that Tribunal Claim No. 4 of 1999 was appealed to the Court of Appeal in Civil Appeal Number 24 of 1996 and was appealed to the Supreme Court as Supreme Court Civil Appeal No. 5 of 1998. Counsel contended that the subject of the appeal which was whether there was consideration giving rise to contractual liability on the part of the appellant, was ably dealt is with and determined by the Supreme Court. This rendered the matter res judicata finally putting it to rest. Hence, he argued, the same matter could never arise again in Tribunal Claim No. 32 of 1999.</p> <p class="rtejustify"><strong>Fourth Respondent’s Arguments</strong></p> <p class="rtejustify">Counsel Walubiri for the fourth respondent opposed the appeal and concurred with the submissions of Mr. Mukiibi, counsel for the second and third respondents. He further submitted that the NPART Tribunal was right to hold that the issues raised in Tribunal case No. 32 of 1999 were res judicata. He</p> <p class="rtejustify">contended that the amended plaint raised two broad claims. First, the claim of liability of General Parts. On this point, counsel maintained that the Shs 700 million/= loan was restructured and it was to be paid by General Parts Ltd which he argued, was an issue determined by the NPART Tribunal, the Court of 5 Appeal and the Supreme Court against the appellant. The second broad claim was alleged illegality of the sale of the suit property by NPART to Tasfer Ltd, the third respondent in this appeal.</p> <p class="rtejustify">Counsel went on to submit that the orders under Misc Cause No. 7 of 1999 were that the first respondent is entitled to possession of the properties which were to enumerated. Further, that it was also ordered that the respondent show cause why agents, servants and representatives of the respondent should not be evicted from or vacate the said plots.</p> <p class="rtejustify">Counsel then argued that General Parts (u)Ltd. had the opportunity in its defence to that application to challenge the sale on any ground they so chose. 15 Such grounds were that there was no consideration, or that they sold under the wrong mortgage or that the purchaser of the land was a non-citizen not entitled to purchase the suit properties. Counsel relied on Section 7 [Explanation 4 ] of the Civil Procedure Act which he submitted was very clear in providing that any matter which might or ought to have been made a ground of defense or 20 attack in the former suit shall be deemed to have been a matter directly and substantially in issue in that suit.</p> <p class="rtejustify"><strong>Resolution of Court</strong></p> </div> <p class="rtejustify">Ground one of this appeal faults the NPART Tribunal for disallowing the appellant's application to amend the plaint in Tribunal Case No. 32 of 1999. The ruling of the Tribunal on the application to amend was as follows:</p> <p class="rtejustify"><strong>"... We observe that the defence was raised on these particular pleadings. These pleadings have been with us for a long time. We have noted the reason for the belated intention to amend the plaint and appreciate it. However, we feel that the issue of res judicata is so fundamental at this stage that an adjournment to effect yet another amendment would not be in the interests of justice. We would invite the parties to address us on that point and in case it fails, the Tribunal would consider allowing the plaintiff to make the intended fine tuning to the plaint..."</strong></p> <p class="rtejustify">It is our finding that the point raised by the Tribunal was a critical point of law which could not be cured by way of amending the plaint. We further find that the belated timing of the amendment did not reflect an interest in pursuing justice as counsel for the appellant submits.</p> <p class="rtejustify">The question for determination therefore is whether the Tribunal Claim No. 32 of 1999 was res judicata. This is a point of law which was considered by the Tribunal as follows:</p> <p class="rtejustify"><strong>"...Res judicata includes two related concepts: claim preclusion and issue preclusion. The former focuses on barring a suit from being brought again, and again, on a legal cause of action that has already been finally decided between the parties or sometimes those in privity with a party; while the latter bars the re-litigation of factual issues that have already been necessarily determined by a Judge or jury as part of an earlier claim. It presupposes that:</strong></p> <p class="rtejustify"><strong>i. There are two opposing parties;</strong></p> <p class="rtejustify"><strong>i. There is a definite issue between them;</strong></p> <p class="rtejustify"><strong>i. There is a tribunal competent to decide the same; and</strong></p> <p class="rtejustify"><strong>i. Within the competence, the tribunal has done so..."</strong></p> <p class="rtejustify">We agree with this position of the law. Section 7 of the Civil Procedure Act provides that:</p> <p class="rtejustify"><strong><em>"7. Res judicata</em></strong></p> <p class="rtejustify"><strong><em>No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try the subsequent suit or the suit in which the issue has been subsequently raised, and has been heard and finally decided by that court."</em></strong></p> <p class="rtejustify">(See: <strong>Henderson vs Henderson 3 Hare 114)</strong></p> <p class="rtejustify">The common law doctrine of res judicata thus bars re-litigation of cases between the same parties over the same issues already determined by a competent Court. The rationale is to prevent multiplicity of suits and bring finality to litigation. This appeal has had a long and checkered history. The facts show that the dispute arose from a debt owed by General Parts Ltd which was subsequently restructured and taken over by the appellant company amounting to Ug. Shs. 700 million/= . The appellant’s properties were later foreclosed upon and sold to the fourth respondent.</p> <div> <p class="rtejustify">We have carefully examined the record of appeal and we find that <strong>Court of Appeal Civil Appeal No. 49 of 2004</strong> and subsequently <strong>Supreme Court Appeal No. 9 of 2005 </strong>were concerned with the issue whether there was consideration for the loan; which both Courts decided in the affirmative. However, it was further held in <strong>Supreme Court Civil Appeal No. 9 of 2005</strong>, that the proper question for determination would have been whether the loan had been restructured and not whether there was consideration for the loan. Justice Mulenga (as he then was) found as follows:</p> <p class="rtejustify">“...Before I take leave of the case, I should, for avoidance of doubt and possible confusion, point to two matters which, though mentioned, have not been subject of adjudication in this appeal. First is the appellant's (General Parts) indebtedness to the respondent. In the High Court Trial, at the close of the defence case, the court granted leave for amendment of the plaint whereby the quantum of the debt owed by the appellant was specified and the plaintiff prayed for an order that the defendant (NPART) pays the same. As a result of the amendment, the following additional issue was added to the 8 which had been framed at the start of the trial namely:-</p> <p class="rtejustify">"Whether the debt of shs2,288,82,473/= was due and owing to the plaintiff and due for payment"</p> <p class="rtejustify">In his judgment, however, the learned trial Judge did not avert to that issue at all, let alone answer it."</p> <p class="rtejustify">The record shows that the appellant then later filed another suit in the NPART Tribunal as Case No. 4 of 1996. Therein, a question arose as to whether there was any consideration that gave rise to any contractual liability on the part of</p> <p class="rtejustify">the appellant to pay to NPART the sum of Ug. Shs. 700million/=. We agree with the Tribunal that this issue as to whether a legal mortgage had been executed, was handled by the Tribunal in Case No. 4 of 1996, and thereafter on appeal to the Court of Appeal and the Supreme Court. That issue was determined 5 substantially in favor of the respondents in Court of Appeal and Supreme Court.</p> <p class="rtejustify">Regarding NPART Tribunal Case No. 32 of 1999, the appellant's claim against the respondents was principally seeking to be discharged from liability to repay the loan debt of Shs. 700 million/= undertaken by the appellant from General Parts (Uganda). The appellant also sought orders that NPART erroneously sold 10 the appellant's property having been forewarned that those properties were discharged from liability due to breach by UCB of the new contractual arrangement restructuring the loan.</p> <p class="rtejustify">From the foregoing it is a fact that it was Tribunal Case No. 6 of 1996 which subsequently culminated into appeals to the Court of Appeal and the Supreme is Court. We accordingly agree with the Tribunal decision that this matter was finally determined and there is a bar at law to re-opening it according to Section 7 of the Civil Procedure Act, Cap 71.</p> <p class="rtejustify">We dismiss this ground of appeal.</p> <p class="rtejustify"><strong>Ground Three:</strong></p> <p class="rtejustify"><strong>Whether Ug. Shs. 700 million/= had been reversed and demanded from General Parts (U) Ltd as per the judgment in H.C.C.S. 386 of 1993.</strong></p> <p class="rtejustify">Arguments for the Appellants</p> <p class="rtejustify">The Appellants contention here is that General Industries (U) Ltd had taken over part of the indebtedness of General Parts (U) Ltd in the sum of Shs 700Million/=. However the indebtedness was later reversed and Shs. 700 million/= demanded from General Parts (U) Ltd as is evidenced by the decision 5 of court in H.C.C.S 386 of 1993. Counsel argued that the Tribunal was not alive to this fact and consequently it came to a wrong decision because the sale of the securities of the Appellant was wrongly exercised in that even the Shs 700 million/= was demanded from the Appellant whereas it was no longer indebted in that sum.</p> <p class="rtejustify">Counsel submitted that the Tribunal should have therefore come to the conclusion that the sale of the suit properties to the second, third and fourth Respondent by the first Respondent was evidently wrong and the Tribunal should have gone ahead to inquire into the issue of sale which was evidently not res judicata.</p> <p class="rtejustify"><strong>Arguments by the Respondents</strong></p> <p class="rtejustify">Both counsel for the respondents on this point reiterated their submissions as in grounds one and two above. It was their submission that the matter of indebtedness of General Parts (U) Ltd in the sum of Shs 700 Million/= was res 20 judicata having been determined by the Court of Appeal and the Supreme Court.</p> <p class="rtejustify"><strong>Resolution of Court</strong></p> </div> <p class="rtejustify">In <strong>H.C.C.S. 386 of 1993 between UCB and General Parts (U) Ltd,</strong> court ordered that:</p> <p class="rtejustify">“a) The plaintiff properly appointed a Receiver/Manager who were M/s Key Agencies &amp; Auctioneers on 7<sup>th</sup> July, 1992.</p> <p class="rtejustify">5 b) The Receiver/ Manager will go ahead and execute the power conferred upon them by the plaintiff (UCB)</p> <p class="rtejustify">c)................ "</p> <p class="rtejustify">We are not aware if HCCS No. 386 of 1993 was appealed against. At least there is no evidence before us that it was. However, the record shows that the 10 appellant then later filed another suit in the NPART Tribunal as Case No. 4 of 1996. Therein, a question arose as to whether there was any consideration that gave rise to any contractual liability on the part of the appellant to pay to NPART the sum of Shs. 700 million/=. We agree with the Tribunal that the issue handled by the Tribunal in Case No. 4 of 96,the Court of Appeal and the is Supreme Court was whether a legal mortgage had been executed. That issue was substantially determined and in favor of the respondents by the Court of Appeal and the Supreme Court.</p> <p class="rtejustify">We find therefore that this issue has been adjudicated upon and the litigation must clearly come to an end. We have already considered the law governing res judicata.</p> <p class="rtejustify">In our view, this ground of the appellant's indebtedness or discharge from the debt is res judicata.</p> <p class="rtejustify">This ground is dismissed.</p> <div> <p class="rtejustify"><strong>Ground 4. Whether the Appellant had ever been foreclosed of his equity in the suit properties.</strong></p> <p class="rtejustify"><strong>Arguments for the Appellant</strong></p> <p class="rtejustify">The thrust of the Appellants submission on this point is that the Appellant has never been foreclosed of its equity in the suit properties in respect of which it was the registered proprietor. Foreclosure is a process of law the exand an order of the foreclosure must exist in its proof. The tribunal all through the 10 ruling was moving on mistaken belief that the appellant had ever been foreclosed of its equity in the suit properties which was an error both of law and fact. It was this mistake of fact and law that led the tribunal to come to the conclusion that the issue of sale of the suit properties was as well res judicata whereas not. This issue should therefore be found in favor of the Appellant.</p> <p class="rtejustify"><strong>Arguments by the Second and Third Respondents</strong></p> <p class="rtejustify">In response to the ground relating to foreclosure, counsel reiterated that the fact that the issue is res judicata was still applicable. Counsel argued that all questions relating to the foreclosure was ably dealt with under Court of Appeal 20 Civil Appeal No. 49 of 2004 and subsequently Supreme Court No. 9 of 2005.</p> <p class="rtejustify">Counsel submitted that the totality of these decisions relied upon by the respondents, is that NPART which was formerly the first respondent (now withdrawn} was entitled to foreclose on all those suit properties. Counsel prayed that the appeal be dismissed with costs as all questions framed as grounds of appeal relating to foreclosure were ably dealt with.</p> </div> <p class="rtejustify"><strong>Arguments for the Fourth Respondent</strong></p> <p class="rtejustify">Counsel submitted that the appellant cannot re-open the foreclosure since the right of redemption was lost He prayed that this Court be pleased to dismiss this appeal with costs in this Court and the Court below.</p> <p class="rtejustify"><strong>Resolution of Court</strong></p> <p class="rtejustify">On this point, we agree with counsel for the fourth respondent regarding the issue of foreclosure. It is our view that at the time of the sale of the suit properties to the fourth respondent, the equity of redemption had already been lost. H.C.C.S No. 386 of 1993 held that the Receiver/ Manager was rightly appointed by UCB. By this time, the issue of indebtedness had been settled by 15 foreclosure on the appellant's property following restructuring of the loan.</p> <p class="rtejustify">In Tribunal Case No. 32 of 1999, the appellant challenged the right of NPART to sell in view of the restructuring, which we have found is a settled question. We agree with counsel for the respondent that no amount of argument as to the illegality or impropriety of the sale would reverse the foreclosure. At worst, the 20 sale could be nullified and the properties resold. The appellant would only participate as any other buyer but not to redeem the suit properties.</p> <p class="rtejustify">This ground therefore also fails.</p> <p class="rtejustify"><strong>Grounds 5(a)and (b), 6, 7 and 8;</strong></p> <div> <p class="rtejustify"><strong>On illegality of acquisition of the suit properties by the Respondents</strong></p> <p class="rtejustify"><strong>Arguments for the Appellant</strong></p> <p class="rtejustify">Counsel for the Appellant submitted that the acquisition of some of the suit properties by the fourth respondent was clearly unlawful and illegal and should have been investigated by the Tribunal as the matter was not res judicata. The third Respondent from whom the 4<sup>th</sup> respondent acquired the suit property is a foreign owned company that could not own Mailo land in Uganda. No consent of the Minister of Lands was obtained before leasing the suit property to the fourth Respondent and yet on the other hand the first Respondent purported to have executed transfer of property in favor of the fourth Respondent directly to conceal the illegality complained of. Counsel Submitted that all these matters were not res judicata and the Tribunal ought to have investigated them. They is cannot be said to be matters that ought to have been envisaged in the suits that led to S.C.C.A 05 of 1998.</p> <p class="rtejustify">In respect of ground six, counsel for the Appellant submitted that the Tribunal relied on extrinsic evidence to come to its findings to the Appellants’ Prejudice. Before the ruling could be delivered, a request was made to the parties outside proceedings of Court, to furnish the Tribunal with the history of the disputes between General Parts (U) Ltd and General Industries (U) Ltd inclusive of HA]I HARUNA SEMAKULA on one hand and NPART on the other hand. This evidence of correspondences and suits was not part of the record/pleadings before the Tribunal. Counsel argued that the decision as to whether the matter was res judicata had to be based on pleadings and nothing else. The reliance on extrinsic evidence by the Tribunal prejudiced the Appellant and had the Tribunal not relied on such evidence it would have come to a different conclusion.</p> <p class="rtejustify">Concerning ground seven, counsel for the Appellant reiterated his submissions on grounds 4 and 5 in general and submitted that the acquisition of the suit property was improper firstly because the first Respondent unlawfully sold the securities without a foreclosure order and even if it was there the amount demanded included Shs. 700 Million/= that had earlier been demanded from 10 General Parts (U) Ltd. Secondly, Tasfah Ltd as a company did not have the capacity to buy land in Uganda particularly Mailo land being a company owned by foreign non-Ugandan Directors/Stakeholders. Thirdly, the mortgage upon which the first Respondent purported to act was/is invalid both in law and fact. The Appellant therefore prayed that this is a matter that was not res judicata 15 and should have been investigated by the Tribunal. In that regard, this appeal had to be allowed with costs to the Appellant both in this Court and the Court below.</p> <p class="rtejustify"><strong>Arguments by the Second &amp; Third Respondents</strong></p> <p class="rtejustify">Regarding the question of sale, counsel submitted that in the amended plaint, specifically under claim number 7, paragraph F-m related to the unlawful acquisition of the suit land by the second, third and fourth respondents. Counsel argued that those claims were also ably dealt with under Misc. Application No. 7 of 1997, the parties to it being Tasfer Ltd &amp; Npart vs General Industries.</p> <p class="rtejustify">Therein, it was determined that the first applicant (Tasfer Ltd) was entitled to vacant possession as purchaser of all the land described.</p> <p class="rtejustify">Counsel argued that any questions surrounding illegality of acquisition of land by Tasfer (the third respondent) were determined under Misc. Cause No. 7 of 5 1999. Counsel submitted that any other questions surrounding the same ought to have been dealt with hence rendering the question of sale res judicata. To buttress his point, counsel relied on Section 7 of the Civil Procedure Act and the case of Henderson vs Henderson (Supra) which is to the effect that the plea of res judicata applies, except in special cases, not only to points upon which the 10 Court actually required the parties to form an opinion and pronounce a judgment but to every point which properly belongs to the subject of litigation under which the parties exercising reasonable diligence might have brought forward at that time.</p> <p class="rtejustify"><strong>Arguments for the Fourth Respondent</strong></p> <p class="rtejustify">Regarding the alleged illegality of sale of land, there is no pleading about nationality on the face of the plaint. Counsel submitted that since there is nothing new in the pleadings that can allow the appellant redeem the suit properties, the suit was rightly rejected as res judicata.</p> <p class="rtejustify"><strong>Resolution of Court</strong></p> <p class="rtejustify">The main thrust of all these grounds which we have decided to determine together is that the sale of the suit properties to the fourth respondent was illegal since the fourth respondent is a foreigner or a non-Ugandan who should not acquire mailo land.</p> <p class="rtejustify">Counsel for the appellant argued that the sale was void ab initio subject to Section 2 of the Land Transfer Act, Cap 202 which provides that:</p> <p class="rtejustify"><em><strong>"No non-African or person acting as his agent shall without the consent in writing of the Minister occupy or enter into possession of any land of 5 which an African is registered as proprietor (otherwise than by receiving rent and profits payable by non-Africans who have gone into occupation or possession with the consent of the Minister) or make any contract to purchase or take on lease or accept a gift inter vivos or a bequest of any such land or of any interest therein other than a security to for money" </strong></em>(Emphasis added)</p> <p class="rtejustify">We have already made our findings in ground four that an illegal sale does not reverse the foreclosure on a debt that is due and owing. In any event this very issue was litigated upon under Misc. Application No. 7 of 1997, the parties to it being Tasfer Ltd &amp; Npart vs General Industries and resolved against the is Appellant. That matter is not on appeal to this Court.</p> <p class="rtejustify">We accordingly also dismiss ground 5, 6, 7 and 8.</p> <p class="rtejustify">Before we take leave of this appeal it is necessary to state that to our mind this appeal at its core is an attempt at a second bite and more at claims and issues already adjudicated upon in the courts of the law and cannot be allowed to stand. It is of no benefit to the parties to craft suits in a way that the courts will always have to reconsider their past decisions. Such persistence ultimately will amount to an abuse of court process.</p> <p class="rtejustify"><strong>Final Result</strong></p> <p class="rtejustify">We accordingly dismiss this appeal with costs to the second ,third and fourth respondents. No costs are awarded to the first respondents since the first respondents is no longer in existence.</p> </div> <p class="rtejustify">We so Order.</p> <p class="rtejustify">Dated at Kampala, this 17th day of January, 2018.</p> <p class="rtejustify"><strong>HON. JUSTICE KENNETH KAKURU<br /> Justice of Appeal</strong></p> <p class="rtejustify"><strong>HON. JUSTICE GEOFFREY KIRYABWIRE<br /> Justice of Appeal</strong></p> <p class="rtejustify"><strong>HON. JUSTICE REMMY KASULE</strong></p> <p class="rtejustify"><strong>Ag. Justice of Appeal</strong></p> <p><!--![endif]----><!--![endif]----></p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-7c302117e5c6a7cf3ae4ed95952da908"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"></div> </div> </div> </div> </div> Thu, 07 Feb 2019 10:34:01 +0000 Daniel Bwambale 29313 at https://old.ulii.org Barclays Bank of Uganda Ltd Vs Gamuli Tukahirwa (CIVIL APPEAL NO. 08 OF 2016) [2018] UGCA 4 (18 January 2019); https://old.ulii.org/ug/judgment/court-appeal-uganda/2019/4 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li><li class="field-item odd"><a href="/tags/bank" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Bank</a></li></ul></section><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-2caa124bcb968dddcdf6ede7caa44423"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"><a href="https://old.ulii.org/system/files/judgment/court-appeal-uganda/2019/108/court-appeal-uganda-2019-108.pdf" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"><iframe class="pdf" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen="" frameborder="no" width="100%" height="600px" src="/sites/all/libraries/pdf.js/web/viewer.html?file=https%3A%2F%2Fold.ulii.org%2Fsystem%2Ffiles%2Fjudgment%2Fcourt-appeal-uganda%2F2019%2F108%2Fcourt-appeal-uganda-2019-108.pdf" data-src="https://old.ulii.org/system/files/judgment/court-appeal-uganda/2019/108/court-appeal-uganda-2019-108.pdf">https://old.ulii.org/system/files/judgment/court-appeal-uganda/2019/108/court-appeal-uganda-2019-108.pdf</iframe> </div> </div> </div> </div> </div> Wed, 06 Feb 2019 07:34:22 +0000 Ben Mulingoki 29306 at https://old.ulii.org Mugerwa v Wagona T.A Skyline Coffee Processors (CIVIL SUIT NO. 619 OF 1992) [1993] UGHC 29 (5 May 1993); https://old.ulii.org/ug/judgment/high-court/1993/29 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li><li class="field-item odd"><a href="/tags/contract-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Contract Law</a></li><li class="field-item even"><a href="/tags/breach-contract-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Breach of Contract</a></li></ul></section><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-rss"><div class="field-items"><div class="field-item even" property="content:encoded"><p>&nbsp;</p> <p>THE REPUBLIC OF UGANDA</p> <p>IN THE HIGH COURT OF UGANDA AT KAMPALA</p> <p>CIVIL SUIT NO. 619 OF 1992</p> <p>JAMES MUGERWA:::::::::::::::::::::::::::::::::::::::::::::::::::::::PLAINTIFF</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VERSUS</p> <p>&nbsp;</p> <p>WAGONA T/A SKYLINE COFFE PROCESSORS::::::::::::::::DEFENDANT BEFORE: THE HON. MR. JUSTICE G.M. OKELLO</p> <p>ORDER,</p> <p>The Plaintiff brought this suit against the defendant allegedly in breach of contract and claimed against the defendant</p> <ol> <li>Repayment of the loan plus interest to the Plaintiff's Bankers.</li> <li>General Damages for breach of contract.</li> <li>Costs of this suit and</li> <li>Interest on (b) at the rate of per annum from the date of filing till payment in full.</li> </ol> <p>&nbsp;</p> <p>It was the case for the Plaintiff that in 1990, the Plaintiff entered into a partnership with the Defendant in the business of buying, processing and selling coffee. That the Plaintiff provided capital for running the partnership business; the Defendant in turn availed his licence, mill number for processing coffee, and account number for use in the partnership. That the said partnership business thereon commenced and operated under the above arrangement. That after sometime was mutually agreed between the Defendant and the Plaintiff that:-</p> <ol> <li>The Partnership capital be raised.</li> <li>The plaintiff's land title certificate be used as security for obtaining a loan for the partnership business.</li> <li>Once obtained the said loan would be used only for the partnership business.</li> <li>That proceeds from the said loan be used for servicing the same till liquidation.</li> </ol> <p>That pursuance to the aforesaid mutual agreement, the plaintiff exe cuted a mortgage of his land and secured a loan from Messrs Interstate Finance company Ltd. For the above named purpose. When the loan was obtained, coffee was purchased, processed and sold to coffee marketing Board made the necessary payments through the Defendant’s account as had mutually been agreed upon. That the defendant refused and or neglected to pay the money to service the Bank loan and Messrs Interstate Finance Company LTD. Threatened to sell off the plaintiff’s land which was mortgage. Consequently the plaintiff brought this suit against the defendant for breach of contract. The Defendant denied the claim.</p> <p>&nbsp;</p> <p>After pleadings, the parties set down the case for hearing. At the hearing, counsel for the called the plaintiff and later sought to withdraw the suit. When that move was resisted, both counsels consented to the dismissal of the suit with cost. Upon that consent the suit was duly ordered to be dismissed with cost.</p> <p>&nbsp;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; G.M. OKELLO</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JUDGE</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13/5/93 &nbsp;</p> <p>&nbsp;</p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-3cfad45af101e2cf98eb0b1a4f792107"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"><a href="https://old.ulii.org/system/files/judgment/high-court/1993/29/high-court-1993-29.docx" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"></div> </div> </div> </div> </div> Mon, 27 Jul 2015 14:09:34 +0000 Anonymous 19010 at https://old.ulii.org Alpha International Investment Limited v Akida ((Miscellaneous Application No.88 of 2004)) [2005] UGHC 7 (29 June 2005); https://old.ulii.org/ug/judgment/high-court/2005/7 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li></ul></section><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-rss"><div class="field-items"><div class="field-item even" property="content:encoded"><p>&nbsp;</p> <p>THE REPUBLIC OF UGANDA<br /> <br /> IN THE HIGH COURT OF UGANDA AT KAMPALA<br /> <br /> <strong>MISCELLANEOUS APPLICATION NO</strong><strong> 88 OF 2004<br /> <br /> Arising from Civil S</strong><strong>uit No.</strong><strong> 110 OF 2004</strong></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>ALPHA INTERNATIONAL]<br /> INVESTMENTS LIMITED<strong>]</strong><strong>&nbsp;&nbsp;&nbsp;&nbsp; </strong><strong>………………..</strong><strong> </strong>PLAINTIFF/RESPONDENT</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong>VERSUS</strong></p> <p>ALLI GABE AKIDA&nbsp; ………………………………: DEFENDANT/APPLICANT<br /> <br /> <strong>29</strong><strong><sup>th</sup></strong><strong> June,</strong><strong> </strong><strong>2005.</strong><br /> <br /> <strong>BEFORE: THE HON. MR. JUSTICE R.O. OKUMU WENGI</strong><br /> <br /> <br /> <strong>J</strong><strong>UDGMENT:</strong><br /> &nbsp;</p> <div>This appeal arises out of a civil suit brought against an advocate by a Judgment Creditor in an earlier case before the Chief Magistrates Court. The facts are that in execution of a judgment in Civil Suit No.655 of 2001 the judgment debtor one Taban Issa had been put in civil passion to recover the decretal sum of sum of Shs.573,000/=. The advocate who is the present who is the present appellant issued a personal cheque to his counterpart M/s Basaza Wasswa &amp; Co Advocates on the basis of which his client was released from civil prison. In subsequent days the advocates cheque was dishonored and he paid cash of Shs.325,000/= leaving a balance of Shs.248,000/=. The case from which this appeal arises was then filed to recover this sum of Shs.248,000/= from the advocate. In essence therefore the suit was brought to the cheque.<br /> <br /> In arguing this appeal Mr. Nyote learned counsel for the appellant contended that the suit was incompetent as the plaintiff was not a drawee of the cheque which had been written in the names of M/s Basaza Waswa &amp; Co Advocates, who is the advocates for the Respondent/Plaintiff. Mr. Nyote argued that the Plaintiff could not sue on the cheque and as such there was no cause of action. Mr. Basaza Wasswa asked this court to dismiss the appeal.<br /> <br /> I have examined the court record and the conclusions reached there along the suit to contrive to be heard on its merits. It is clear that the plaintiff of Respondent was not a holder of the cheque in issue and could therefore not sue upon it and has no cause of action against the defendant: <strong>Auto Garage vs Moroke</strong> (1971) EA 514. The Plaintiff was also not a holder of the cheque within the meaning of that word in the Bills of Exchange Act. See <strong>Arab Bank Ltd vs Ross</strong><u> </u>(1951) 2 QB 216. As such it could not sue on the cheque alter. Further still I did not see any notice of dishonour and none was pleaded in the Plaint without the notice and pleading the Plaintiff could not sustain a suit on this bill: <strong>Emile Habib Bateekha vs Rosen</strong><u> </u><strong>Alam Eddin</strong> (1970 (1) ALR 205 at 206. See also <strong>Dhaneshw</strong><strong>er</strong><strong> </strong><strong><u>Vaj</u></strong><strong>eshanker</strong><strong> Metha vs Doka Fatuhnal</strong> (1951) 18 EACA 126. This being the case, once no notice of dishonour was given and pleaded<br /> <br /> the defendant would be discharged not only on the cheque but also on any antecedent obligation. <strong>Raichur vs Uganda Chemist</strong> Civil Appeal No.61 of 1956 unreported. From the above it is clear that the plaintiff’s suit discloses no cause of action and must be rejected.<br /> <br /> But even looking at the case as a whole, one gets the impression that an advocate is being sued in order to realize a decree. By issuing his check and attempting to ensure its discharge his is being held down on the cheque. The new suit is in essence a suit for recovery of the decretal sum already under execution. Besides what I have stated above this kind of case is brought in abuse of the court process is frivolous and vexatious to say the least. It is multiplying proceedings to engulf the advocate of the elusive judgment debtor. It is not in good taste firstly because a decree is not supposed to be the subject of a new suit to recover it. Further still if the recovery is directed at an advocate who did not get value for a cheque he issued he would not be liable either on the cheque or in contract as there was no consideration for it. For this matter it would be inconceivable if the Plaintiff would have turned against its own lawyers and sued for the balance on the decretal sum; and the Lawyers in turn would apply to join the present appellant. Such suit would equally be abusive of the court process. In the result this appeal is allowed, the order of the<br /> <br /> <br /> <br /> <br /> &nbsp;</div> <p>Magistrate is set aside and the Plaintiffs suit is dismissed as the<br /> Notice of dishonour of the cheque could not and was not pleaded. The Respondent will pay the costs of this appeal.<br /> <br /> <br /> <br /> R.O. Okumu Wengi<br /> <strong>JUDGE</strong><br /> 29/6/2005.</p> <div>&nbsp;</div> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-c7171ead0187ea3eed7660b81e070af3"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"><a href="https://old.ulii.org/system/files/judgment/high-court/2005/7/high-court-2005-7.rtf" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"></div> </div> </div> </div> </div> Mon, 27 Jul 2015 13:56:26 +0000 Anonymous 17115 at https://old.ulii.org Suffish International Food Processors (U) Ltd. and Anor v Egypt Air Corporation t/a Egyptair Uganda (Civil Appeal No. 15 of 2001) [2002] UGSC 6 (19 June 2002); https://old.ulii.org/ug/judgment/supreme-court/2002/6 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li><li class="field-item odd"><a href="/tags/insurance-and-indemnity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Insurance and indemnity</a></li><li class="field-item even"><a href="/tags/insurance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Insurance</a></li></ul></section><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-rss"><div class="field-items"><div class="field-item even" property="content:encoded"><p><strong><em>THE REPUBLIC OF UGANDA </em></strong><br /> <strong><em>IN THE SUPREME COURT OF UGANDA </em></strong><br /> <strong><em>AT MENGO</em></strong></p> <p>&nbsp;</p> <p><strong><em>(CORAM: ODOKI - CJ, ODER, TSEKOOKO, KAROKORA, AND KANYEIHAMBA, JJ.S.C.)</em></strong></p> <p><strong>CIVIL APPEAL NO. 15 OF</strong> <strong>2001 </strong></p> <p><strong>BETWEEN</strong></p> <p>&nbsp;</p> <p><strong><em>1. SUFFISH INTERNATIONAL</em></strong><em> <strong>)</strong></em><br /> <strong><em>FOOD PROCESSORS (U) LTD. ) 2. PANWORLD INSURANCE COMPANY)::::::::::::::::::::::APPELLANTS</em></strong></p> <p>&nbsp;</p> <p><strong><em>AND</em></strong><br /> <strong><em>EGYPT AIR CORPORATION</em></strong><br /> <strong><em>T/A EGYPTAIR UGANDA: )&nbsp;::::::::::::::::::::::::::::::::::RESPONDENT</em></strong></p> <p>&nbsp;</p> <p><em>(An appeal from the decision of the Court of Appeal at Kampala (S.T. Manyindo, DCJ, Berko, and Engwau, JJ.A) dated 29-06-99 in Civil Appeal No. 2 of 1999).</em></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong><u>JUDGMENT OF ODER - JSC</u><em>.</em></strong></p> <p>&nbsp;</p> <p>This is an appeal against the decision of the Court of Appeal overturning the judgment of the High Court which had allowed the appellants' suit against the respondent.<br /> &nbsp;</p> <p>The facts of the case are simple.</p> <p>&nbsp;</p> <p>On or about March 16 1996, the first appellant entered into a contract with the respondent to airfreight a consignment of chilled fresh fish from Uganda to Brussels. On arrival at the destination, the consignment was found to be unfit for entry into the European Economic Community, was rejected and destroyed. The second appellant indemnified the first appellant as its insured for the loss in the sum of USD 48, 100 on an alleged Insurance Cover. The first appellant instituted a suit against the respondent for the benefit of the second appellant under the doctrine of subrogation to recover the sum of USD 48,100 which the latter had paid to the former. The trial judge found that the goods were damaged either during the process of loading them into the plane or during the flight and blamed the respondent for causing the damage. Judgment was entered for the second appellant. The respondent was dissatisfied with the decision of the trial court, and appealed to the Court of Appeal, which allowed the appeal, overturning the trial court's judgment. Hence this appeal.</p> <p>Two grounds of appeal are set cut in the memorandum of appeal but, in essence, they constitute only one complaint, which is to the effect that the Court of Appeal erred in law and in fact by holding that the first and second appellant failed to prove that there was a binding and operative contract of insurance between them.</p> <p>Before making his own conclusions in the lead judgment, with which the other members of the Court of Appeal agreed, Berko, JA, re-evaluated the evidence in the case to the effect that the <em>appellants' plaint in the trial court pleaded in paragraph 6(b) thereof that the first appellant took out a valid insurance policy cover No. 10/MR/OC/4499 with the insurers (the second appellant) to cover 1000 Kgs. of Fresh Chilled Nile Perch Fillets, inclusive of airfreight transportation, and handling. A copy of a Marine Certificate of Insurance was attached to the plaint. However, no such insurance policy/cover was produced in evidence. Instead, the appellants put in evidence as Exhbit P.l the Marine Certificate of Insurance, which contained the following pertinent information:</em></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong><em>"We acknowledge receipt of your Marine declaration No. 181 dated and have to advise you that you pre hereby covered, subject to the conditions and Terms of the Company's Marine open Policy/Cover No. 10/MR/OC/4499 under which your declaration is made."</em></strong></p> <p>After giving the descriptions of the goods and the Airway Bill number, its date and the sum insured the document concluded -<br /> &nbsp;</p> <p><strong>"The <em>condition of Insurance briefly being AS PER OPEN COVER NO. 10/MR/OC/4499."</em></strong></p> <p>The learned Justice of Appeal then made his finding and concluded as follows:</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong><em>"It is clear from the above that Exh. P.l was not the insurance policy under which the goods were insured. The actual policy was the open policy/cover No. 10/MR/OC/4499.</em></strong></p> <p>&nbsp;</p> <p><strong><em>As that document governed the rights of the parties, it would have contained the distinctive features of the contract of insurance. These are the parties, the subject matter of insurance, the period of the insurance, the date of commencement of the policy, the details of the peril which was insured against and also a list of exemptions specifying the circumstances in which the insurers would not he liable.</em></strong></p> <p>&nbsp;</p> <p><strong><em>That document was not produced in Court. I am not persuaded by the </em>argument <em>of Mr. Shonubi, Counsel for the respondents, that the second respondent could not produce it in evidence because at the time its existence was denied in the further amended written defence, they had closed their case. Nothing prevented the respondents from adducing further evidence to rebut the denial, when in fact Counsel had reserved</em> the <em>right to do so at the time the amendment was being considered.</em></strong><em> <strong>The respondent therefore failed to prove that there was a binding and operative contract of indemnity between the first and second respondents. The learned judge erred </strong></em><strong>in <em>holding that there was such a proof.</em></strong></p> <p>&nbsp;</p> <p><strong><em>It must be observed that the whole basis of the subrogation doctrine is founded on a binding and operative contract of indemnity. It derives its life from the original contract of indemnity. In my view the essence of the matter is that subrogation springs not from payment only but from actual payment conjointly with the fact that it is made pursuant to the basic and original contract of indemnity.</em></strong></p> <p>&nbsp;</p> <p><strong><em>If then the right of subrogation rests upon payment under a contract of indemnity, how does the matter stand when there is no such contract? If there is no contract of indemnity, then, if I may borrow the words of McCardie, J, in </em></strong>John Edwards and Company -vs- Motor Union Insurance Company Ltd. (1922) 2 KB. 249, <strong>"there <em>is no juristic scope for the operation of the principle of subrogation."The essential basis of subrogation is wholly absent.</em></strong></p> <p>&nbsp;</p> <p><strong><em>In the result, I would allow </em>the <em>appeal, set aside the judgment and orders of the learned trial judge and substitute an order dismissing the action. </em></strong><br /> &nbsp;</p> <p>Mr. Alan Shonubi argued the appellants' grounds of appeal. He had also represented the appellants in the Court of Appeal where he filed written submissions. His arguments before us are similar to those he put forward before the Court of Appeal in reply to the respondent's written submission in support of the appeal in that Court. In his submission before us, Mr. Shonubi contended that it is not only a policy of insurance that can prove existence of a contract of insurance. A relevant Certificate of Insurance derived from a marine policy is sufficient to prove existence of a valid contract of insurance. In the instant case, the learned Counsel contended, the Marine Certificate of Insurance (Exhbt.P.1) was sufficient to show that there was a valid contract of insurance between the appellants. The evidence of Richard Byansi, (PWl) also proved that the second appellant issued the first appellant with insurance Policy No. 10/MR/OC/4499 and a Marine Certificate of Insurance (Exbht. P.l). What the appellants did is standard procedure under Marine Insurance. For this preposition he relied on a publication by the Chartered Insurance Institute. <strong><em>"Marine Insurance. The Legal and Documentary Frame Work", </em>1999 Edition. </strong>In his further submission the learned Counsel contended that in modern practice of export, the requirement for policy of insurance can be dispensed with since a policy of insurance is not the only means by which a contract, of insurance can be proved. Generally there is no common agreement in the commercial world on the definition of a policy. An insurance contract may exist without a policy. At common law the insurer was allowed to sue the third party, because subrogation was regarded as implied, so a third party could not say that there was no contract once the insured and the insurer had settled. Common law regarded subrogation as an implied term of a contract of insurance; each certificate of Marine Insurance being regarded as a separate contract. The learned Counsel relied on several authorities for his submission. These included <strong><em>Export/Import Procedures and Documentation, 3<sup>rd</sup> Edition, 1997, </em></strong>by Johnson Thomas E., at pages 126 to 133; <strong><em>The Law of Insurance, Fourth Edition 1979, </em></strong>by Paul Colinvaux, page 136; <strong><em>King -vs- Victoria Insurance Company (1896) AC 250, at page 254; McLeod -vs- Compagnie d'Assurance Generales L'Helvetia (1952) 1 Lloyds, 12.</em></strong><br /> <br /> <br /> In the instant case, the learned Counsel further submitted that the respondent having admitted negligence and liability to the first appellant, as indicated by Exhbt. 4, it should not have denied the claim made against it by the appellants in the suit. The letter of subrogation, Exhb. P.3 also showed that the first and second appellants regarded the contract of insurance between them as binding. Evidence of settlement, shown by Exhbt. P.6, also indicated that the two parties had accepted the contract as binding between them. On the balance of probability learned Counsel submitted, Exhibits P.3 and P<em>.6 </em>proved that there was a contract of insurance. The evidence of Richard Byansi (PW.l) also supported the existence of such a contract.</p> <p>Finally, learned Counsel submitted that in the circumstances of this case, and in view of the settlement by the second appellant of the first appellant's claim under the relevant insurance contract, the respondent should not be allowed to benefit from its negligence. It was paid to carry the goods, but the goods did not reach their destination. The learned Counsel then criticized the Court of Appeal for following the case of <strong><em>John Edwards and Co. Motor Insurance Ltd. (1922) 2 KB.249, </em></strong>which he said is not applicable to the instant case.</p> <p>Mr. Kasirye learned Counsel for the respondent opposed the appeal. In his submission he emphasized the appellants' pleading in paragraph <strong>6</strong>(b) of their plaint that an insurance policy existed between them. The existence of such a policy was denied by the respondent in its final amended written statement of defence which averred that the appellants would be put to strict proof thereof. The denial was made necessary by the evidence of Richard Byansi (PW.l) that the marine certificate of insurance (Exhbt. P.l) dated <strong>19-03-1996, </strong>was issued after the arrival of the fish consignment. Learned Counsel contended that after the learned trial judge had granted the respondent leave to amend its w.s.d. the appellants had the opportunity to produce the insurance policy, but they chose not to do so.</p> <p>Learned Counsel contended that the Marine Certificate of Insurance is not an insurance policy, and it does not contain the features of an insurance policy.</p> <p>In the instant case, Exhbt. P.l does not bear these features. The most significant omission was when the policy of insurance began and ended. The Marine Certificate of Insurance (Exhbt. P.l) was dated 19-03-1996, after the consignment had arrived on 16-03-1996 according to the evidence of Edison Hammed (DW.l). This means that Exhbt. P.l was issued after the arrival and rejection of the consignment in Brussels. The learned Counsel contended that subrogation is not a blanket right at common law, but it is in the contract of a particular insurance. It is different from a contract of carriage, such as an Air way Bill. In the instant case, the respondent's case was that there was no insurance relationship between the two appellants. With regard to the respondents' admission of responsibility for the damage, the learned Counsel contended that it had no bearing on the relationship between the first and second appellants as the insured and the insurer respectively.</p> <p>In his counter argument, Mr. Kasirye disagreed with Mr. Shonubi's contention that marine policy of insurance does not have to be in writing, and referred to M<strong><em>acGillivry and Parkington on Insurance Law, 8<sup>th</sup> Edition, page 267.</em></strong><br /> <br /> <br /> Mr. Kasirye distinguished the authorities relied on by the appellants' learned Counsel as not applicable to the instant case because they were based on the English Marine Insurance Act of 1906. This was a statute of general application which ceased to apply to Uganda after the enactment of the Judicature Statute 1996. The case of <strong><em>King -</em>vs- <em>Victoria Insurance Company </em></strong>(supra) is also distinguishable from the instant case in that in that case there was a contract of insurance between the insurer and the insured, which had assigned its rights to the party who sued under the insurance contract. The Privy Council, on the peculiar facts of that case rightly held that the third party who was the author of the damage to the insured's goods and was a stranger to the contract of insurance was not entitled to refuse to indemnify the insurers. The decision in <strong><em>King -vs- Victoria Insurance Co. </em></strong>(supra) notwithstanding, the respondent's learned counsel contended that under the principle of subrogation, it is open to a third party, like the respondent in the instant case, to rely on a policy of indemnity in defence of a claim by the insured or insurer against him.</p> <p>Regarding the case of <strong><em>John Edwards and Company -vs-Motor Insurance Co. </em></strong>(supra) Mr. Kasirye submitted that it is relevant to the instant case although it is not binding on this Court.</p> <p>With regard to negligence on the part of the respondent which the learned trial judge found proved, Mr. Kasirye argued that such finding cannot stand in the absence of a contract of insurance between the first and the second appellants. As the record shows the <strong>1<sup>st</sup> </strong>appellant was only a nominal plaintiff in the suit. It could have sued the respondent on negligence, but it chose not to do so. Consequently, the second appellant, cannot rely on the negligence in the absence of a contract of indemnity.</p> <p>In support of his submission, the respondent's learned Counsel relied on <strong><em>MacGillivry &amp; Parkington on Insurance Law, 8<sup>th</sup> Edition; General Principles of Insurance Law by E. R. Hardy Ivammy (ButterWorths) 5<sup>th</sup> Edition; Halsbury's Laws of England; 4<sup>th</sup> Edition, volume 25 (Butterworths); King -vs- Victoria Insurance (1896) A. C. 250 P.C.; Digby C. Jess: The Insurance of Commercial Risks Law and Practice; John Edwards &amp; Co. Motor Union Insurance Ltd. (1922) Z. K. B. 249.</em></strong></p> <p>In my view, the doctrine of subrogation is at the centre of this case. The appellants' court action is founded on it; and the respondent's resistance of the suit was on the basis that the doctrine did not apply because no contract of indemnity between the appellants was proved. As I have already indicated, the appellants and the respondent have relied on many authorities in support of their respective arguments. Some are decided cases and others are written opinions by learned authors. As I understand them, nearly all the authorities appear to agree on the essential elements of the doctrine and its general application in the law of insurance. In summary these are that if a person suffers a loss for which he can recover against a third party and that person has insured himself against such a loss the insurer cannot avoid liability on the ground that the insured has a claim against the third party.</p> <p>Conversely, the third party cannot avoid liability on the ground that the insured has been or will be fully compensated by his insurer. These principles are fundamental to the law of insurance. Contracts would be largely defeated if the law were otherwise and the right of subrogation is corollary to them. Subrogation is thus the right of an insurer who has paid for a loss to receive the benefit of all the rights and remedies for the insured against the third parties which, if satisfied, extinguish or diminish the ultimate loss sustained. The insurer who has paid for a loss, may thus exercise the rights of the insured to recover from the third party, or if the insured has already exercised that right, the insurer will be entitled to repayment from him.<br /> <br /> <br /> A contract of insurance by which an insurer agrees to pay a certain sum of money to the insured on the happening of a certain event regardless of actual loss suffered by the insured has no basis for the operation of the doctrine of subrogation.<br /> <br /> <br /> From the foregoing it appears to be clear to me that in order for the doctrine to operate, it is essential for a valid and operative contract of indemnity to exist between the insurer and the insured. In the authorities I have referred to a contract of indemnity and a contract of insurance appear to be used inter-chargeably. Payment of indemnity by the insurer to the insured alone is not enough. There must be a valid and operative contract of insurance as the basis of payment by the insurer upon a loss by the insured. The policy sets out the details of the event which is insured against, and also a list of exceptions specifying the circumstances in which the insurers will not be liable. In certain cases where the event insured against has been brought about by the conduct of the insured, he will not be entitled to recover under the policy.</p> <p>To establish the existence of such a contract, it is not necessary that all its terms should have been separately agreed. As the contract is usually in common form, there is, as a rule, no real negotiation of terms, the agreement being, on the part of the insurers, to issue, and on the part of the insured to take a policy in the ordinary form issued by the insurers. There must, however, be a clear agreement as to the distinctive features of the particular contract of insurance. The parties, therefore, must be ascertained; the assured must have agreed to the particular insurers. They must be ad idem as regards the subject matter of the insurance. The period of insurance must be fixed and there must be agreement as to the sum insured and the premium to be paid. It must also be clear that there was, in fact, an offer to enter into the contract by one party followed by an acceptance of the offer by the other and that a complete contract resulted.</p> <p>&nbsp;</p> <p>Usually the acceptance of the offer will not take place at once, and before it does so, it is the practice for a "Cover <em>note" </em>to be issued.</p> <p>Before acceptance, neither party is bound, and either may withdraw at its pleasure. After acceptance, there is a contract from which neither party can withdraw, binding the insured to pay the premium, and the insurer to accept the premium when tendered, to issue a policy, and to pay any sum that may become payable under the terms of the contract. The various steps in the negotiations leading to a contract of insurance are usually recorded in certain formal documents, i.e. the proposals, the cover note, and, finally, the policy. The absence of any such document, however, during the preliminary steps does not necessarily lead to the inference, that there is no contract of insurance between the parties.</p> <p>In the instant case, the appellant's learned Counsel also contended firstly, that because a certificate of insurance derived from a marine policy is sufficient to prove the existence of a valid contract of insurance; secondly, that because in modern practice of export the requirement of a contract of insurance can be dispensed with; and thirdly, that because a policy of insurance is not the only means by which a contract of insurance can be proved, therefore, in the instant case, it was not necessary to prove by production in evidence the existence of a contract of insurance. With respect, I am not persuaded by the learned Counsel's propositions. I think that the conclusion made by Berko, J.A., in disallowing the appellants' suit cannot be faulted because no policy of indemnity was proved. The following are my reasons.</p> <p>Firstly, the appellants founded their suit on the existence of a particular insurance policy made between the two of them, namely, open policy/cover No. 10/MR/OC/4499, which was pleaded in paragraph 6(b) of their plaint. This was confirmed by the evidence of Richard Byansi (PWl), the second appellant's Claims Manager, to the effect that the second appellant issued the respondent with an insurance cover and the Marine Certificate of Insurance (Exhbt. P.l), based on the insurance cover.</p> <p>Secondly, the respondent, in his final written statement of defence totally denied the existence of such an insurance contract and required the appellants to strictly prove it. The appellants were, therefore, put on notice to prove that there was such an insurance contract. Even if the respondent did not deny the existence of such a contract the appellants were under a duty to prove their case in accordance with their pleadings in order to succeed. All that notwithstanding, the appellants did not prove that such a contract existed and, in my view stubbornly, refused to explain why they chose not to do so.</p> <p>Thirdly, the Marine Certificate of Insurance (Exhbt. P.l) stipulated that the conditions on which the consignment of Fish was insured were as stated in the open insurance/cover No. 10/MR/OC/4499. The document also warned the First appellant: <em>"Please read the Important Notice on the Reverse."</em></p> <p>The terms and conditions stated in the insurance/cover and on the reverse side of Exhbt. P.l were never produced in evidence. They are not known by anybody especially by the respondent. As the authorities to which I have referred indicate, the respondent might have had certain defences against the second appellant's subrogation if he had seen the insurance contract, because such a contract sets out in details the conditions and terms of the event which is insured against and also a list of exceptions specifying the circumstances in which the insurer may not be liable.</p> <p>Although the third party, like the respondent in this case, is a stranger to the insurance contract, it nevertheless, would be interested to know its details. Digby C. Jess put it this way in <strong>"The Insurance <em>of Commercial Risks Law and Practice at page 346: </em></strong><em>"The third party may also refer to the policy under which the insurers are exercising the subrogation and rely, for example, on an express waiver of subrogation against themselves, or on the fact that the insurance itself is illegal and therefore, unenforceable to give rise to any subrogation. This right of the third party sued to refer to the policy does not extend, however, to argue the technical merit of the insurer's decision to make an indemnity under the terms of the policy provided the insurers made the indemnity honestly."</em></p> <p>I agree with that statement of the law, but I would add that it applies provided that a valid and operative contract of indemnity is the basis of the relationship between the insured and the insurer.</p> <p>&nbsp;</p> <p>In the instant case it was a common ground that the Marine Insurance Certificate (Exhbt. 1) and the contract of indemnity was issued after the fish consignment had already arrived and rejected at Brussels. It is not known when the contract of indemnity was made. The respondent would, therefore, be interested to know whether the contract of insurance or indemnity was retrospective or at least validly covered the period from the date the consignment was airfreight to when it arrived at Brussels.</p> <p>In the circumstances, my view is that it matters not that the respondent apparently first admitted liability which they subsequently retracted, or that the appellants as between themselves acted on the basis that there was a binding contract of insurance between them. The respondent was still entitled to know the details of the insurance policy/cover No. 10/MR/OC/4499 stipulated in the Marine Certificate of Insurance (Exhbt. P.l). The appellants having failed to prove it by producing it in evidence, the learned Justices of Appeal, in my view, rightly rejected the appellants' appeal before them, and dismissed their suit.</p> <p>&nbsp;</p> <p>The first appellant had an option to recover its loss by a suit in negligence against the respondent.</p> <p>In the result, I would dismiss this appeal with costs to the respondent here and in the courts below.<br /> &nbsp;</p> <p>&nbsp;</p> <p><strong><u>JUDGMENT OF ODOKI, CJ.</u></strong></p> <p>I have had the benefit of reading in draft the judgment of Oder JSC and I agree with him that this appeal should be dismissed with costs here and the courts below.<br /> <br /> <br /> As the other members of the court agree with judgment and orders of Oder JSC, there will be an order in the terms proposed by Oder JSC.<br /> &nbsp;</p> <p><strong><u>JUDGMENT OF TSEKOOKO JSC.</u></strong></p> <p>I have had the benefit of reading in draft the judgment prepared by my Lord Oder, JSC, and I agree with his conclusions and with the orders which he has proposed.</p> <p>The objections to the judgment of the Court of Appeal are in the form of two grounds of appeal. In the first ground, the appellants complain that the Justices of the Court of Appeal erred in law when they held that the appellants failed to prove that there was a binding and operative contract of indemnity between the two appellants. The second complaint is that the Justices of Appeal erred when they allowed the respondent to argue that there was no contract of Insurance when the said respondent was not a party to the said insurance contract. In effect these two complaints refer to different aspects of the same question of whether there was a contract according to and effective in law.</p> <p>&nbsp;</p> <p>The claim in the suit had its foundation in the doctrine of subrogation. Subrogation is the substitution of one person for another, so that the same rights and duties, which attached to the original person, attach to the substituted one. In matters of insurance, a person paying the premium on a policy of insurance belonging to another may be subrogated to that other; and an Insurer is subrogated to the rights of the insured on paying the latter's claim. This is the foundation upon which the first appellant based its claim. It claimed that it insured its cargo of fish for $48100 with the 2<sup>nd</sup> appellant who paid afterwards, the said money to the first appellant because the fish were condemned when they were delivered in Brussels. Because the first Appellant received indemnity, for loss of fish, from the second appellant, the rights of the former were subrogated to the latter.</p> <p>The suit was instituted by the appellants against the respondent. First the claim averred that the respondent was in breach of a contract between itself and the first appellant. The claim was also based on grounds that the respondent was negligent or careless in handling, packing, piling and loading the fish in the aircraft. Thirdly the appellants relied on the doctrine of Res Ipsa Loquitor.</p> <p>As the second appellant had indemnified the first appellant under an alleged policy of insurance, therefore, the second appellant in effect took over the rights of the first appellant so that the fruits of the present litigation, if it ended in favour of appellants, should go to the 2<sup>nd </sup>appellant. The respondent in its defence denied liability and filed a counter-claim to the suit.</p> <p>Issues were framed by plaintiffs' counsel in his written submissions after evidence for both sides had been adduced. So initially the hearing of the case was conducted without clear issues. Each side went on fishing spree. Hence recalling of witnesses by both sides.</p> <p>Be that as it may, at the trial, the learned Principal Judge relied on a marine certificate of insurance, exh.P.l, dated 19/3/1996, and held that the certificate is evidence of the contract of insurance. The Court of Appeal, on the other hand, held that the said document alone was not enough. That the actual physical policy of insurance should have been tendered in evidence by the appellants. That the policy would show the distinctive feature of the contract of insurance. These features would be the parties, the subject matter of the insurance, the period of the insurance, the date of the commencement of the policy, the details of the peril which was insured against and also a list of exemptions specifying the circumstances in which the insurers would not be liable. Because the document called the policy of insurance could not be produced in the trial court, or indeed up to now, it is impossible to ascertain the distinctive features of the alleged policy of Insurance. That being the case, there was no binding and operative contract. Mr. Alan Shonubi counsel for the appellants contended that in matters of marine insurance, it is the practice to rely on the marine certificate of insurance and relied <strong><em>on <u>The Legal and Documentary</u> Frame <u>Work, 1991 Ed. of the Chartered Institute.</u> </em></strong>This authority does not say that production of the policy of insurance should not be made. Nor indeed, does the case of <strong><em><u>King Vs Victoria Insurance Co.</u> </em></strong>(1896) Ac 250 which was also cited to us. In that case the policy of Insurance was valid and that is a major distinguishing feature.</p> <p>Both parties relied on a number of decided cases and also on opinions of learned writers on the application of the doctrine of subrogation.<br /> &nbsp;</p> <p>In the absence of the actual marine policy of insurance or any reasonable explanation showing why the appellant did not tender it in evidence, I cannot appreciate how the Court of Appeal can be criticised for its decision that there was no binding and operative contract. This is especially so in view of the evidence suggesting that the insurance cover may have been taken out after the fish cargo was rejected on 16/3/96 in Brussels.</p> <p>I have looked at the various authorities <strong><em>including King Vs. Victoria insurance Co. </em></strong>(supra) and <strong><em>J. Edwards &amp; Co. Vs. Motor Union Insurance (1922) 2 K.B. 249 cited </em></strong>by Shonubi, learned counsel for the appellants. It is my considered view that none of the authorities he relied on provides a solution to the major question in these proceedings which is the failure by his clients to produce the relevant policy of insurance. In the absence of that policy, or credible explanation for its absence, the appellants' case has no foundation. With respect I do not find soundness in arguments based on ground two namely that because the respondent was not a party to the contract of insurance, therefore, it can not contest the validity of that contract. Of course, the respondent would be affected if we in the courts found that there was an enforceable contract between the two appellants. First of all, it was the appellants who took the respondent to court to enforce rights under the doctrine of subrogation which rights to subrogation, of necessity, must be discerned from the provisions of the policy that was never proved in court.</p> <p>The validity of the rights to sue lies in the existence and the terms of the policy of insurance. The policy was not produced. Its contents are unknown, as are the rights of the parties. Moreover, from the evidence of Ehassan Hammad (DW1), it is clear that a consignor of valuable commodity can ensure the commodity privately and if he does that, then the consignor must disclose the fact of the insurance and also give the policy, presumably a copy thereof, to the carrier in this case the respondent. This was not done in this case. This lends credence to the view that there was no policy of insurance. Moreover, Hammad's evidence shows that previously the first appellant used to rely on the respondent's insurance to cover its cargo. Why did it take a private insurance this time? And why didn't the first appellant reveal this to the respondent? The respondent must have a say in the existence or nonexistence of the policy of insurance. I think that both grounds of appeal must fail.</p> <p>I would, therefore, dismiss this appeal with costs here and in the courts below.</p> <p><strong><u>JUDGEMENT OF KAROKORA, JSC.</u></strong></p> <p>I have had the benefit of reading in draft the judgment prepared by my learned brother Oder, JSC. I agree with him that the appeal must be dismissed with costs. However, I wish to make a few comments on whether or not the appellants proved that there was actually a binding and operative insurance contract between themselves at the time the consignment left Entebbe for Brussels.</p> <p>In their pleadings the 2nd appellant stated that they issued insurance open cover/policy No. 10/MR/OC/4499 to cover the 1<sup>st</sup> appellant's l0.000Kg consignment of fresh chilled Nile perch fillets from Entebbe to Brussels. However, at the trial, no such insurance cover was tendered in evidence. Instead, the 2nd appellant put in evidence a marine certificate of insurance Exh P1, which stated:</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><em>"We acknowledge receipt of your marine declaration No.</em></p> <p><em>181 dated and have to advise that you</em></p> <p><em>are hereby covered subject to the conditions and terms of the company's open policy/cover No. 10/MR/OC/4499 under which your declaration is made"</em></p> <p>After describing the type of goods, the Airway Bill number and the date of its issue, the sum assured, the place of origin and the destination, the document concluded as follows:-</p> <p>&nbsp;</p> <p><em>"The condition of the insurance policy being as per open cover No. 10/MR/OC/4499 subject otherwise to all other terms/ conditions of open policy/ cover referred to above."</em></p> <p>After carefully analysing Exh P1, it is difficult, in my view, to fault the Court of Appeal's conclusion when it held inter alia:</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><em>"It is clear Exh P1 was not the insurance policy under which the goods were insured. The actual policy was the open policy No. 10/MR/OC/4499. As the document governed the rights of the parties, it would have contained the distinctive features of the contract of insurance. These are the parties, the subject matter of the insurance, the period of the insurance, the date of the commencement of the policy, the details of the peril which was insured against and also a list of exemptions specifying the circumstances in which the insurers would not be liable."</em></p> <p>In my view if the consignment of 10,000kg of the fresh chilled Nile perch fillets was covered under insurance cover No. 10/Mr/OC/4499 it was incumbent on the appellant to prove, which they never did, that there was such a contract of indemnity especially after the respondent had denied responsibility for the loss of the cargo. I think that reliance upon the marine certificate of insurance Exh PI which was issued on 19/3/96 after the consignment had arrived in Brussels and after it was declared unfit for entry into EEU would not help the appellant's case, because that would clearly prove that the consignment left Entebbe uninsured and that Exh. P1 was purportedly issued after the appellant had learnt of the loss of the cargo. Clearly such certificate of insurance, Exh P1 would not be an insurance cover issued against the risk when the risk had already occurred.<br /> &nbsp;</p> <p>Therefore ground one must fail.</p> <p>Finally I come to ground 2, the thrust of which is that because the respondent was not privy to the contract of insurance between 1<sup>st</sup> and 2nd appellants, it (respondent) can not question its existence. This objection is based on common law doctrine of privity of contract which states that no one may be entitled to or bound by the terms of a contract to which he is not an original party. See <em><u>Prince v Easton (1833)</u> </em>4 B &amp; Ad 433 and <em><u>Twedle v Atkinson (1861)</u> </em>1 B &amp; S 393. In my view, although the objection is based on the correct statement of the law, in the instant case, as I have stated while discussing the first ground, no contract of insurance existed between 1<sup>st</sup> and 2nd appellant) at the time the consignment of the goods left Entebbe for Brussels. Consequently in my view, the respondent who was to be affected by the purported contract of insurance cover No. 10/MR/OC/4499 would be entitled to know the terms and conditions of that insurance cover under which the subrogation was being sought to be exercised against it.</p> <p>In the circumstances of this case, the respondent would not correctly be called a third party to the contract, since the contract of the insurance never existed. In the result, ground 2 must fail. I would therefore dismis<br /> &nbsp;</p> <p><strong><u>JUDGMENT OF KANYEIHAMBA J.S.C.</u></strong></p> <p>I have read in draft the judgment of my learned brother. Oder J.S.C, and I agree with him that this appeal ought to be dismissed with costs. I will only add a few comments of my own by way of emphasis. The facts and circumstances of this appeal have been ably set out and described in the judgment of my learned brother, Oder, JSC.</p> <p>In my view, once the appellants have averred in their pleadings that they had entered into a contract of insurance and described it. and in its defence, the respondent denies the existence of such a contract of it and expresses ignorance of its contents, it becomes incumbent upon the appellants to prove both the existence and contents of the alleged contract. Further, the appellants are obliged to show the dates and periods in which the alleged insurance policy was to operate, the parties to it, the cargo it covered and its terms and conditions of insurance.</p> <p>Mr. Alan Shonubi, learned counsel for the appellants, submitted that in marine insurance matters, it is not only a contract of insurance which can prove that parties and their cargo are insured but it may be proved by other means such as the testimony of witnesses who may be knowledgeable about the negotiations to insure and be insured between the parties and the general principles of marine insurance and their consequences, in any given situation.<br /> <br /> <br /> With respect, I disagree with this novel suggestion by learned counsel. Whereas, it may be surmised that once it has been shown that there is a contract between the parties with clearly stated terms and conditions, there may be implied trade or commercial consequences which need not be specifically proved but can be discovered from proven customs and trade practices of the transaction, these cannot be a substitute for the actual contract and its terms.</p> <p>Unfortunately for the appellants, no such contract or its terms were shown or proved in the courts below. Nor has that feat been achieved in this court. Moreover, the record of proceedings and the submissions before this court reveal that the alleged contract of insurance was effected, if at all, after the cargo to be insured had been damaged and the damage reported. In other words, the insurance policy, if any, would have been entered into and intended to cover a situation and events which had passed. Such proposed insurance contract would not only be voidable but would be void.<br /> <br /> <br /> It was also contended on behalf of the appellants by their counsel, that in this particular case, the evidence of Mr. Richard Byansi. PW10, and the production in court of a Marine Certificate of Insurance, Exhibit P1, were sufficient to show that there was a valid contract of insurance between the parties. In my opinion, this contention is untenable in this case. The mere testimony of a witness, however credible and reliable it may be. that parties had previously negotiated for a contract does not magically concretise those negotiations into a contract when the e terms of the contract are not known and when events which were contemplated to be covered by the anticipated contract occur subsequently. Moreover, the fact that one is in possession of a marine certificate of insurance and produces it in court is not proof that that certificate covered the goods affected or any other goods for that matter. The terms and conditions for marine insurance of carriage of goods differ from one type of cargo to another. One party may wish to transport corn, or timber, steel, animals, ice cream or some other goods, perishable or non-perishable. Each of these species of goods will have its own terms and conditions of insurance and delivery agreed upon between the parties and written down, differently. However, each of the parties may have and is entitled to have a marine certificate of insurance couched in general terms.<br /> <br /> <br /> The doctrine of subrogation can only apply if the facts confirm the principles of law of contract and insurance I have endeavoured to explain. The appellants" pleadings and submissions on their behalf fall far short of these requirements.</p> <p>Therefore in agreement with my learned brother, Oder JSC. I would dismiss this appeal with costs here and in the courts below.<br /> &nbsp;</p> <p><strong><em>Delivered at Mengo this 19<sup>th</sup> June 2002.</em></strong></p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-16043894fe3495e6926e683113c16a32"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"><a href="https://old.ulii.org/system/files/judgment/supreme-court/2002/6/supreme-court-2002-6.rtf" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a>, <a href="https://old.ulii.org/system/files/judgment/supreme-court-uganda/2002/6/supreme-court-uganda-2002-6.pdf" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"><iframe class="pdf" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen="" frameborder="no" width="100%" height="600px" src="/sites/all/libraries/pdf.js/web/viewer.html?file=https%3A%2F%2Fold.ulii.org%2Fsystem%2Ffiles%2Fjudgment%2Fsupreme-court-uganda%2F2002%2F6%2Fsupreme-court-uganda-2002-6.pdf" data-src="https://old.ulii.org/system/files/judgment/supreme-court-uganda/2002/6/supreme-court-uganda-2002-6.pdf">https://old.ulii.org/system/files/judgment/supreme-court-uganda/2002/6/supreme-court-uganda-2002-6.pdf</iframe> </div> </div> </div> </div> </div> Mon, 27 Jul 2015 13:35:48 +0000 Anonymous 15722 at https://old.ulii.org Bank of Uganda v Banco Arabe Espanol (Civil Appeal No.1 of 2001) [2002] UGSC 3 (18 June 2002); https://old.ulii.org/ug/judgment/supreme-court/2002/3 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li><li class="field-item odd"><a href="/tags/loan-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Loan</a></li></ul></section><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-rss"><div class="field-items"><div class="field-item even" property="content:encoded"><div> <p><u>THE REPUBLIC OF UGANDA<br /> IN THE SUPREME COURT OF UGANDA</u><br /> AT MENGO</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong>(CORAM; ODOKI C.J, ODER, TSEKOOKO, KAROKORA, KANYEIHAMBA, JJSC)</strong></p> <p>&nbsp;</p> <p>CIVIL APPEAL NO. 1/2001<br /> BETWEEN</p> <p>&nbsp;</p> <p>BANK OF UGANDA :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::APPELLANT</p> <p>&nbsp;</p> <p>AND</p> <p>&nbsp;</p> <p>BANCO ARABE ESPANOL ::::::..::::::.::::::::::::::::::::::::::::::::RESPONDENT</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>(Appeal from the decision of the Court of Appeal (Kato, Engwau, Kitumba. JJ.A) at Kampala, dated the 20th day of October, 2000 in Civil Appeal No. 23 of 2000)</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><u>JUDGMENT OF KANYEIHAMBA, J.S.C</u></p> <p>This is a second appeal against the judgment of the Court of Appeal dismissing an appeal with costs from the judgment of the High Court dated 22/2/2000 entered against the appellant in favour of the respondent.</p> <p>The facts giving rise to this appeal may be summarised as follows:</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>On <strong>1</strong>1/11/1987, the Uganda Government signed a loan agreement with the respondent in Madrid, Spain. The loan was for US$1,000,000. The appellant's representative, one George Nteeba, signed the agreement on behalf of the appellant as a guarantor. It was provided in the agreement, that the loan would be repaid in 7 instalments on the following named dates. 11/10/90, 11<strong>/4</strong>/91. 11/10/91, 13/04/92. 13/10/92, 13/04/93 and 13/10/93. The respondent was to release and remit the loan money to the Uganda Government within 180 days from the date of signing the loan agreement. However, the period was later extended.</p> <p>&nbsp;</p> <p>On 21/05/91, the first instalment was paid together with accrued interest which by then had accumulated to US $52,767.36. Following the first instalment, no further instalments were subsequently paid despite the respondent's several demands for such payment. Ultimately, the respondent made a final demand for the repayment of the loan by the appellant in its capacity as guarantor.</p> <p>&nbsp;</p> <p>As time passed, it became increasingly clear that the appellant was either unwilling or unable to repay or acknowledge liability under the loan agreement. The respondent decided to sue the appellant under clause 18 of the agreement and, for this purpose, filed a plaint in the High Court against both the appellant and the Government of Uganda. In its defence, the appellant denied liability. At the trial in the High Court, a preliminary objection was raised on behalf of the Government of Uganda that the suit was statute barred. The learned trial judge upheld the objection and dismissed the suit against the Government of Uganda. This left the appellant as the sole defendant. The appellant raised a number of defences. One of those defences was that the appellant's sole liability was limited to merely causing the borrower, that is the Government of Uganda, to pay the debt. Another defence was that the loan agreement had been frustrated by the borrower's policy of liberalising the coffee trade and of deciding to deal in foreign currency. The trial judge rejected the appellant's defences and entered judgment for the respondent and made specific orders of the court to which I will advert later in this judgment. The appellant appealed to the Court of Appeal which dismissed the appeal and ordered that the appellant pays the loan and interest thereon which by now had accumulated to the sum of US$ 1.762.347.51, plus interest at a rate of 18% per annum from the date of the judgment of the Court of Appeal to the date of payment. The Court also awarded to the respondent general damages in the sum of Shs.20,000,000 with interest thereon. The judgment of the Court of Appeal was delivered on 20.10.2000. It is against that judgment and orders that this appeal has been brought to this Court.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Peculiarly, both in this Court and in the Court of Appeal, the respondent's counsel chose to file written submissions of defence under Rule 93(1) and (2) of the Rules of this Court even though the appellant's counsel had chosen not to and did not do so. Indeed, in the Court of Appeal and in this Court, counsel for the appellant addressed the courts orally. In my view, counsel who file plaints or appeals and defences in courts should endeavour to mutually agree as to what rules of the court they wish to follow as this would save parties costs and the courts time.</p> <p>&nbsp;</p> <p>Be that as it may, there seems to be no obligation upon any counsel to proceed one way or the other even if opposing counsel <u>is</u> willing or unwilling to proceed in the manner chosen by the other counsel.</p> <p>&nbsp;</p> <p>The appellant's Memorandum of Appeal contains 10 grounds of appeal framed in such a way that grounds 4-10 inclusive are indicated as being alternative to the first three grounds. At the hearing of the appeal counsel for the appellant abandoned grounds 8, 9 and 10 The remainder of the grounds are framed as follows:</p> <ol> <li>The learned Judges of the Court of Appeal erred in law in holding that the validity and enforceability of the loan agreement against the appellant as guarantor was governed by the Corporate Bodies Contract Act 1960 of the United Kingdom and not by the Bank of Uganda Bye-Laws of 1968.</li> <li>The learned Judges of the Court of Appeal erred in law in holding that the loan agreement was enforceable against the appellant as guarantor although it was not executed under the appellant's seal.</li> <li>The learned Judges of the Court of Appeal erred in law and in fact in holding that the telex of the appellants Ag. Director of External Debt Management dated 15<sup>th</sup> February. 1991, estopped the appellant from contesting the validity and enforceability of the guarantee as against it.</li> </ol> <p>&nbsp;</p> <p>&nbsp;</p> <p><u>IN THE ALTERNATIVE TO GROUNDS 1,2 3 ABOVE</u></p> <p>&nbsp;</p> <p>4-&nbsp;&nbsp;&nbsp;&nbsp; The learned judges of the Court of Appeal erred in law and in fact in holding that the appellant's liability was not</p> <p>discharged by the variation of the draw down date for the loan by the respondent and the Government of Uganda without the consent of the appellant as guarantor and outside the scope of clause 4 of the loan agreement.</p> <ol> <li>The learned Judges of the Court of Appeal erred in law and in fact in applying the wrong test in law in deciding whether the alteration of the draw down date for the loan by the respondent and the Government of Uganda without the consent of the appellant did not amount to alterations of the terms of the loan agreement.</li> <li>The learned Judges of the Court of Appeal erred in law and in fact in holding that the alterations and extensions of the repayment dates for the loan instalments granted to the respondent to the Government of Uganda without the consent of the appellant did not amount to alterations of the terms of the loan agreement.</li> <li>The learned Trial Judges (sic) of the Court of Appeal erred in law and in fact in holding that even if the alterations and extensions of the repayment dates of the loan instalments without the consent of the appellant were alterations of the terms of the loan agreement, this did not discharge the appellant's obligations as guarantor.</li> </ol> <p>&nbsp;</p> <p>Mr. Masembe - Kanyerezi, counsel for the appellant, urged grounds 1 &amp; 2 together, ground 3 on its own, grounds 4 and 5 together and grounds 6 and 7 together. Counsel substantially adopted the submissions he had made in the Court of Appeal in arguing grounds 1 and 2. He submitted that the law applicable in this case should have been the Bank of Uganda Bye-Laws which stipulate the manner in which a contract intended to bind the Bank must be made. The making of such a contract, in this case the loan agreement, must comply with Rule 2 of Statutory Instrument No. 157 of 1968.&nbsp; He contended that the Court of Appeal had erroneously confirmed the finding of the learned trial judge that the absence of the Bank's seal did not affect the validity of the loan agreement because the appellant's agent, Mr. Nteeba, had signed the loan agreement on behalf of the appellant. Mr. Masembe-Kanyerezi, contended that for the loan agreement to be validly effected, it had to comply with the Bank of Uganda's bye - laws requiring the fixing of a seal. Counsel criticised the opinion of the learned Attorney- General of Uganda which supported the loan agreement as validly made and enforceable in courts of law. He contended that the Attorney-General, being the principal legal adviser to the Government of Uganda was not the proper person to advise the Bank and the respondent on the proper law applicable and that in any event, his opinion was per incurium since it ignored the Bye-laws of the Bank of Uganda.</p> <p>&nbsp;</p> <p>Counsel submitted that two sets of laws ought to have been recognized and applied by the courts below. The first related to the capacity of parties to enter into a contract with the Bank of Uganda. That capacity was strictly governed by Uganda laws which in this case, were the Bye-laws of the Bank of Uganda which provide that such a contract must be made under the seal of the Bank and be witnessed by specified Bank officials.&nbsp; Failure to apply these bye laws and procedures invalidates any alleged agreement or contract. Counsel contended that it is only when the agreement is validly made in accordance with the bye laws and procedures of the Bank that it may be enforced under any other law, in this case, English law and in particular under the Corporate Bodies Contract Act, 1960, of the United Kingdom.</p> </div> <p>&nbsp;</p> <div> <p>&nbsp;</p> <p>Counsel cited Chitty on Contracts 22<sup>nd</sup> Edition, Volume 1, A.R. Wright and Sons Ltd v. Romford Borough Council, (1957) Q.B., 431 and Hunt v. Wimbledon Local Board (1878) CPD vol. III 208 in support of his submissions.</p> <p>&nbsp;</p> <p>Mr. Semuyaba, learned counsel for the respondent, in written submissions, supported the findings and decisions of the courts below. He contended that the absence of a seal did not affect the validity of the loan agreement. He observed that in any case the loan agreement had been signed by Mr. George Nteeba who had a valid power of Attorney that had been duly sealed and signed by the Bank's officials who are the right witnesses to both the signature and the sealing of the Banks document. It was counsels contention that the purpose of granting to an official a power of attorney stamped with the Bank's seal is to enable that official to transact business on behalf of the Bank.&nbsp;&nbsp; Counsel, further contended that the effect of a power of attorney is that the donee of it has the full powers of the donor to do all that he or she is authorised to do. Indeed, according to learned counsel for the respondent, the power of attorney authorised Mr. Nteeba to sign the loan agreement and to do all other things incidental thereto and the donor's Governor and Secretary undertook to confirm and ratify all the donee's actions.</p> <p>&nbsp;</p> <p>Mr. Semuyaba supported the opinion of the Attorney General and indeed wondered how it could be challenged by counsel for the appellant, considering that both the Attorney-General and the Bank of Uganda were the Principal advisers to the Government of Uganda, one on legal matters and the other, on financial transactions. Lastly. Mr. Semuyaba, submitted that under clause 16 of the loan agreement. Exhibit P1, the parties to the agreement chose English Law to govern the loan agreement. Counsel cited Chatney v The Brazilian Submarine Telegraph Co. Ltd., (1890) 10B 97, Chitty on Contracts, (supra), the U.K. Corporate Bodies Contracts Act, 1960, General Parts (U) Ltd v. Non-performing Assets Recovery Trust, C.A. No. 5 of 1999. (S.C.), (unreported), Powis and Byran Ltd v. Bonquet DV People (1967) IALR Comm 323 which counsel distinguished from the present case and contended that it is governed by English Law as stipulated in the loan agreement. He cited numerous other authorities which in my opinion were unnecessary in advancing the cause of the defence against this appeal.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>In my view, the issues framed in grounds 1 and 2 of the Memorandum of Appeal constitute the main substance of this appeal. I will therefore first resolve those issues. The facts and history of this case which has dragged on in Ugandan courts for more than a decade are simple and clear and are not in dispute. The only matters which have occupied everyone's attention for so long are whether or not the loan agreement concluded between the Government of Uganda, the respondent Bank, and the appellant had been validly made and whether it was governed by Ugandan law or English law.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>The loan agreement which was made in Madrid, Spain, on 11<sup>th </sup>November,1987, and was signed by representatives of all the parties to it, contains the following relevant clauses:</p> <p>A-&nbsp;&nbsp;&nbsp; The BORROWER has requested Aresbank to grant to it a loan of up to a maximum of US$ One million (1.000.000) to finance 15% (Fifteen per cent) of the price under the contract signed on 12<sup>th</sup> of May, 1987 between the BORROWER and INIRAIL (the Exporter) for the supply of one hundred tank wagons.</p> <p>B-&nbsp;&nbsp;&nbsp; The GUARANTOR (The Bank of Uganda) is willing to guarantee in favour of Aresbank, the BORROWER'S obligations, in consideration of ARESBANK's commitment for the granting of such loan,</p> <p>C-&nbsp;&nbsp;&nbsp; The Bank (Aresbank) has agreed to provide the loan requested on the terms and conditions hereafter set forth. Now therefore this agreement witnessed as follows :-</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>3- CONDITION PRECEDENT. This agreement will enter into full force and effect as of the date on which ARESBANK receives a legal opinion, satisfactory to the Bank, about the legality, validity and enforceability of this agreement.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>10 REPRESENTATION AND WARRANTIES:</p> <p>The BORROWER hereby represents and warrants to the LENDER, that,</p> <ol style="list-style-type:lower-alpha"> <li>The BORROWER has the power to enter into and perform its obligations and to borrow under this agreement, and has taken all necessary actions to authorise the execution of this Agreement and the borrowing under this Agreement, and furthermore, the BORROWER is acting subject to private law, not vested with any 'de jure imperii'</li> <li>This agreement constitutes and will constitute valid and binding obligations of the BORROWER.</li> <li>The BORROWER has obtained and received all the necessary approvals and authorisations for this facility, and specially represents and warrants that:</li> </ol> <p><strong>i)</strong>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The BORROWER is authorized to operate in foreign currency transactions.</p> <p>ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This facility has obtained the prior permission of the BANK OF UGANDA</p> <p>&nbsp;</p> <p>11.&nbsp;&nbsp;&nbsp; SPECIAL COVENANT: The BORROWER hereby covenants and undertakes with the BANK that, from the date of this Agreement to the date upon which all monies owing by the BORROWER to the Bank under this Agreement are paid in full, it will not create or permit to subsist any encumbrance over any of the revenue or assets present or future without the written consent of the BANK.</p> <p>&nbsp;</p> <p>16.&nbsp;&nbsp;&nbsp;&nbsp; APPLICABLE LAW AND JURISDICTION</p> <p>(a) This Agreement shall be governed by and construed in</p> <p>accordance with English Law, and the parties hereto irrevocably submit to the non-exclusive jurisdiction of English courts--------------------------------------------</p> <p>&nbsp;</p> <p>18-&nbsp;&nbsp; GUARANTEE.</p> <p>(a)&nbsp;&nbsp;&nbsp; We, the BANK OF UGANDA (The Guarantor), a banking institution, established under the laws of Uganda, and being the Central Bank of the BORROWER, hereby unconditionally and irrevocably jointly and severally guarantee the due and punctual payment of any and all amounts payable by the BORROWER under the loan agreement in accordance with the provisions set forth herein. In the case of any failure by the BORROWER to punctually pay any interest on, or principal of, or any other amount</p> <p>due under the Loan Agreement, we hereby agree on first demand made by tested telex to cause such payment to be made to you in compliance with the obligations of the BORROWER. Payment by the Guarantor shall be made to ARESBANK in place and, in the manner specified in ARESBANK's Demand, without raising any exception or objection of whatever nature.(The State of Israel and the Republic of South Africa being excluded).</p> <p>………………………………………………………………………..</p> <p>(h) The BANK OF UGANDA guarantees ARESBANK that the foregoing undertaking and instructions will not be in any way modified or varied by any person or body or public authority of any kind, and that they will remain in full force and effect with all the payment obligations of the borrower hereunder are completely extinguished.</p> <p>&nbsp;</p> <p>The loan agreement was duly signed by one Hon. Robert E.Ekinu. Deputy Minister of Transport, under a power of attorney granted by the Minister for Finance for and on behalf of the Government of the Republic of Uganda the presence of one O.M.J. Ndawula Senior Principal State Attorney of the office of the Attorney General of Uganda. It was also signed by Mr. George Nteeba, Chief Accountant of the Bank of Uganda, under a power of attorney granted by the Governor of the Bank of Uganda on behalf of the Bank of Uganda and witnessed by the above O.M.J Ndawula.</p> <p>&nbsp;</p> <p>Lastly, the loan Agreement was signed by Mr. Salem Zenaty. General Manager, for and on behalf of BANCO ARABE ESPANOL, S.A. and witnessed by Mr. Domingo Lago, Attorney - at - law, of Banco Arabe Espanol, S.A.&nbsp; It would appear from the foregoing provisions and terms that nothing could be more legally binding than this loan &nbsp;greement. Nevertheless, the borrower&nbsp;&nbsp; and the Guarantor proceeded to present a number of obstacles and objections which, after protracted correspondence and court proceedings, have found their way to this court by way of second appeal.</p> <p>&nbsp;</p> <p>It is the contention of the appellant that both the learned trial judge and the Court of Appeal were wrong to hold and confirm, respectively, that the loan agreement is binding and enforceable when it was not made in accordance with the requirements of the law. The contention is to the effect that whereas it is true that the terms of the agreement are governed, by and enforced under English law, the capacity of the Bank to enter into the loan agreement is governed by the laws of Uganda and especially the bye-laws of the Bank of Uganda.</p> <p>&nbsp;</p> <p>The loan agreement was made and signed on behalf of the parties by their representatives in Madrid, Spain. The issue that arises is whether they or any of them had capacity to contract on behalf of their principles. There is no dispute that both the agents of the Government of Uganda and of the respondent had full capacity to contract and bind the parties they represented. The only dispute relates to the capacity of the representative who represented the guarantor, namely, the Bank of Uganda, The agreement was signed by George Nteeba who possessed valid powers of attorney granted in accordance with the Bye Laws of the Bank of Uganda. 1968, Statutory Instrument 157/1968. In my opinion, the effect of a power of attorney which is duly signed and sealed in accordance with the regulations of a corporation and granted to that corporation's authorised agent to travel abroad on a contractual mission is to enable that agent, without further ado, to contract and enter into a binding and enforceable agreement with a named party.</p> </div> <p>&nbsp;</p> <div> <p>On whether or not the loan agreement was valid and enforceable, the parties to this tripartite agreement had been particular to include a clause in it which sought legal opinion as a condition precedent. The appellant is the principal financial adviser to the Government of Uganda and the Attorney General is the principal legal adviser to the same Government.&nbsp; In consequence, nothing could be more authoritative and aunthentic than the opinion of the Attorney-General of Uganda which he expressed and wrote on the loan agreement. Mr. Joseph Mulenga. learned Attorney General, as he then was wrote his legal opinion in which he stated, inter alia.</p> <p>"5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Under the Bank of Uganda Act (Act 5) of 1966, the Bank of Uganda is a body corporate capable of entering into an agreement and has a common seal which may he duly auntheticated by the Governor and Secretary to the Bank</p> <p>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In accordance with the laws of Uganda, an Agreement signed by a donor, of a power of attorney is as valid and effective as if it were signed by the donor of such a power of attorney.</p> <p>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In my considered opinion, the Agreement was concluded and executed for and on behalf of the Government and the Bank of Uganda by their respective attorneys in accordance with the Laws of Uganda.</p> <p>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Furthermore, in my considered opinion, the agreement is valid and constitutes legally binding and enforceable obligations on the Government and the Bank of Uganda, in accordance with the terms and conditions thereof and there are no more legal requirements to be fulfilled to make the Agreement more binding on the Government and the Bank of Uganda. "</p> <p>This opinion was given on 22.12.1987 after the loan agreement had been signed. The opinion was in accordance with the contractual requirements of the parties as set forth in clause 3 of exhibit P1 Subsequently, the appellant accepted the validity and enforceability of the loan agreement. Thus, as late as 15.02.1991, the Ag. EDMO Director of the appellant sent a telex to the respondent, the message of which is not disputed, to the effect that:</p> <p>"From: Bank of Uganda.</p> <p>This refers to loan agreement dated Nov. 11.1987 for WDT 1.000.000 for purchase of p.p. Bank wagons, and To Telexes demanding payment of principal and interest amounting to USD 143,643.73 due on 28<sup>th </sup>January, 91 STP.</p> <p>We do not dispute the claim.&nbsp;&nbsp; The delay in payment is being caused by our precarious Foreign Exchange position. We are however, doing everything in our means to ensure that payment is effected in due course STP.</p> <p>Regards</p> <p>T.Y.K. Walusimbi Ag. Director. EDMO Bank of Uganda"</p> <p>&nbsp;</p> <p>It puzzles me that following these events, the appellant should turn round and question the applicability of the opinion of the learned Attorney General which confirmed loan agreement to be valid and enforceable through its director that it was bound by the same loan agreement and was only being delayed from paying by foreign exchange constraints.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>I would therefore agree with the opinion of the learned Justice Kato,J.A. who gave the lead judgment of the Court of Appeal when he said,</p> <p>"My understanding of this clause (clause 3), is that although the contract was signed on 11/11/87 it could not be operational until the opinion of the Attorney-General about the legality of the agreement was received. The clause made the Attorney General's opinion a condition precedent The contract remained in abeyance until the respondent received the opinion in February, 1988, according to the evidence of Fernando Marques (PW1)"</p> <p>Following the opinion of the learned Attorney-General, the respondent proceeded to execute the loan agreement as evidenced by its correspondence in Exhibits PV, PV1 and PVII.</p> <p>&nbsp;</p> <p>At the time the loan agreement was signed the Uganda Constituion designated the Attorney-General as the Principal Legal Advisor of the Government of Uganda with functions, inter alia, to give legal advice and legal services to the Government on any subject and to draw and peruse agreements, contract, treaties, conventions and documents by whatever name called, to which the Government is a party or in respect of which the Government has an interest.</p> <p>&nbsp;</p> <p>In my view, the opinion of the Attorney General as autheticated by his own hand and signature regarding the laws of Uganda and their effect or binding nature on any agreement, contract or other legal transaction should be accorded the highest respect by government and public institutions and their agents. Unless there are other agreed conditions, third parties are entitled to believe and act on that opinion without further enquiries or verifications. It is also my view that it is improper and untenable for the Government, the Bank of Uganda or any other public institution or body in which the Government of Uganda has</p> <p>an interest, to question the correctness or validity of that opinion in so far as it affects the rights and interests of third parties.</p> <p>&nbsp;</p> <p>The contention by Mr. Masembe-Kanyerezi that the Attorney-General's opinion is erroneous or that in any event, it does not bind the Bank of Uganda is not persuasive and I reject it.&nbsp; I agree with Mr. Semuyaba, counsel for the respondent, that the opinion of the Attorney General accepted by the respondent was a condition precedent to the validation of the loan agreement and once given in writing as it was, it became the validing and authoritative opinion for the legality and enforceability of the loan agreement. While it is true that the Attorney-General plays a dual role as Government principal legal adviser on both political and legal matters. Nevertheless, in the latter role, the Attorney General is a law officer for the sole purpose of advancing the ends of justice. In this role, the Attorney General has access to all types of advice from fellow ministers who may have negotiated and authorised the singing of contracts. He has a host of qualified and experienced advisers on legal matters of the kind that were involved in this loan agreement. Of the Attorney-General of England whose functions are legacies adopted in the Ugandan Constitution and laws, it was said in the House of Commons Debates. Vol.179, Cols 1213-1214 of December. 18, 1924, which is reported in John L.J. Edwards" The Attorney General, Politics and the Public Interest, 1984, that,</p> <p>"It is the duty of the Attorney General, in the discharge of his responsibilities - entrusted in hint, to inform himself of all relevant circumstances which might properly affect his decision."</p> <p>&nbsp;</p> <p>Consequently, the opinion of the Attorney General on this matter should not be taken lightly. All things being equal, the opinion of the learned Attorney-General on this loan agreement was the best any of the parties could have received and having received it, the appellant should not have a sound reason for seriously questioned its correctness or applicability in relation to the loan agreement. In the result grounds 1 and 2 of the appeal ought to fail.</p> <p>&nbsp;</p> <p>I now turn to grounds 3 of the appeal.&nbsp; Mr. Kanyerezi submitted that both the High Court and the Court of Appeal were in error to hold and confirm, respectively, that the telex message sent on behalf of the appellant to the respondent on 15<sup>th</sup> February, 1991, Exhibit PIX, by the Ag. Director of EDMO of the appellant, Mr. Walusimbi, estopped the appellant from denying its liability under the loan agreement. The telex message was to the effect that the Bank of Uganda was not disputing the respondent's claim but wished to give reasons why it had delayed in keeping regular payments of the agreed instalments.</p> <p>&nbsp;</p> <p>Appellant's counsels sole ground for faulting learned trial judge and the Justices of Appeal was that where a contract, like the present, lacks validity and enforceability on which he submitted on grounds 1 and 2 of this appeal, then it matters not that subsequently the appellant admits liability. Counsel contended that the admission has no legal consequences. Counsel cited Chitty on Contracts (supra), pages 191 and pages 191, paragraph 454, where the learned author observes,</p> <p>"The powers of a corporation whether sole or aggregate created by statute are confined to those given expressly or by reasonable inference by the statute concerned. If the subject matter of a contract made by such a corporation is outside the scope of its constitution as defined by the statute, the contract is ultra vires and void."</p> <p>In response, Mr. Semuyaba, learned counsel for the respondent, contended that the doctrine of estoppel applied in this case, He cited the case of J.<strong>S.</strong> Mayanja Nkangi v. National Housing Corporation, (1972) ULR, 37 in which the doctrine was applied. Kato J.A. in his lead judgment in the Court of Appeal agreed with counsel for the respondent that the learned trial judge was correct to hold that the doctrine applied in this case.&nbsp; Since I have held that the loan agreement was validly made and is enforceable, I must also agree with the findings of the learned Justices of Appeal that it was correct to hold that the doctrine of estopped was properly applied in this case.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Mr. Walusimbi's telex was clearly an admission by the appellant that it was indebted to the respondent. According to the Evidence Act. s. 113, when a party in its declaration, act, or omission, intentionally causes or permits another person to believe a thing to be true and that other person acts upon such belief, neither that party nor its agent shall be allowed in any suit or proceeding to deny the truth of what was admitted. Ground 3 of the appeal ought to fail. In my opinion the failure of grounds, 1 2 and 3 disposes of this appeal. However, the appellant through its counsel choose to list additional grounds, namely 4,5, 6 and 7 as additional but alternative grounds of appeal. I will briefly comment on these grounds.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>On grounds 4 of the appeal, counsel for the appellant contended that liability on the loan agreement was discharged by the subsequent acts of the Government of Uganda and the respondent without consulting or obtaining the consent of the guarantor, the appellant.&nbsp; Mr. Masembe-Kanyerezi contended that the time within which to repay the loan agreement was extended by the respondent and borrower without the</p> </div> <p>&nbsp;</p> <div> <p>&nbsp;</p> <p>consent of the guarantor and that this extension which amounted to a substantial alteration of the terms and conditions governing the loan agreement effectively discharged the appellant as guarantor from its obligations. Counsel further contended that the trial judge and the Justices of the Court of Appeal were in error to hold that the extensions and renewals of time were not material nor substantial in the alterations of the terms and conditions of the loan agreement nor, did they constitute a detriment to the appellant. Counsel for the appellant cited Chitty on Contracts (supra), at p. 446 and Holm v. Brunkshill (1878) Q.B. 495, in support of his submissions.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Mr. Semuyaba, learned counsel for the respondent, having traced the history and reasons for the extension and renewal of time allowed to the parties, submitted that all along the Bank of Uganda was well aware and consented to the extension and renewals. Consequently, counsel contended that both the trial court and the Court of Appeal were correct in holding and confirming, respectively, that the extensions and renewals were neither material nor constituted such prejudice or detriment as to amount to a discharge of the appellant from its obligations as a guarantor.</p> <p>&nbsp;</p> <p>I find no reason to depart from the findings and decisions of the courts below.&nbsp;&nbsp; In my view, the appellant as principal financial adviser to the Government and guarantor of the loan knew or ought to have known the occurrences of the extensions and renewals and whether they affected its obligations in any material particulars.&nbsp; If so. it ought to have protested and given its intention to claim discharge from the loan agreement.&nbsp; It went along accepting all the alterations which incidentally were in favour of or suggested by the Government of Uganda for which the appellant was principal financial adviser, without denouncing them. Now that it finds itself bound to repay the loan and interest therof, it cannot, at this eleventh hour of the proceedings claim successfully that the terms and conditions of the loan agreement had been altered substantially by the other two parties to that agreement. Ground 4 therefore ought to fail.</p> <p>&nbsp;</p> <p>With respect, I can see no substance in grounds 5, 6 and 7 as alternative grounds to grounds 1,2 and 3. On the contrary, they appear to be nothing more than minor variations on the other grounds which I have considered. All in all, this appeal ought to fail with costs to the respondent in this court and in the courts below.&nbsp; I would uphold the judgment and confirm the decree of the Court of Appeal.</p> <p>&nbsp;</p> <p>Before leaving this appeal, I am constrained to comment upon the length of time and the voluminous materials including many cases produced, photocopied and presented in courts by counsel for the Government and Bank of Uganda in their ingenious defences against the respondent's claim. The facts and circumstances of this case have always been simple, clear and admitted.&nbsp; Uganda, a sovereign state and its central bank, freely and willingly sent their emissaries to Spain looking for a loan which they got from the respondent, a respectable banking institution, and they accepted the terms and conditions of that loan which the Government received.&nbsp; In subsequent correspondence, the Government, finding it economically and financially difficult to meet its obligations under the loan agreement, the parties agreed to reschedule the repayment terms. Thereafter, the Government and the Bank of Uganda suddenly turned round and disclaimed liability.&nbsp; In pursuit of technical points and questionable arguments and authorities, the borrower and the guarantor hired the services of advocates to delay the repayments on sheer technicalities. It is now more than ten years and after some seven volumes of records of proceedings and submissions in this court, and in courts below that this case has been finally disposed of in favour of the respondent.&nbsp;&nbsp; The state will now have to finally pay more than double in repayments of the loan, interest and costs, the sum of money it had borrowed all at the expense of the Uganda taxpayer.</p> <p>&nbsp;</p> <p>There have been cases in the past and presumably there will be more such cases in the future, in which it is right and proper to plead and argue vigorously for the sovereignty of the state of Uganda and in its defence and its institutions against all sorts of claims. In my opinion, however, this was not one of them.</p> <p>&nbsp;</p> <p><u>JUDGMENT OF ODOKI, CJ</u></p> <p>I have had the advantage of reading in draft, the judgment of Kanyeihamba JSC and I agree that this appeal should be dismissed with costs here and in the court below.</p> <p>As the other members of the Court agree with the judgment and orders proposed by Kanyeihamba JSC, this appeal is dismissed with costs here and in the courts below.</p> <p>&nbsp;</p> </div> <p>&nbsp;</p> <div> <p>&nbsp;</p> <p><u>JUDGMENT OF ODER - JSC.</u></p> <p>&nbsp;</p> <p>I have had the advantage of reading in draft the judgment of Kanyeihamba, J.S.C. I agree with him that the appeal should be dismissed with costs here and in the courts below.</p> <p>&nbsp;</p> <p><strong><u>JUDGMENT OF TSEKOOKO, JSC:</u></strong></p> <p>I have read in draft the judgment prepared by his Lordship, Kanyeihamba, JSC, and I agree with his conclusions that the appeal should fail and that the appellant ought to pay the respondent's costs here and in the courts below.</p> <p>&nbsp;</p> <p>As I see it, the central issue in these proceedings is clause 18(a) of the loan agreement (Exh. P. 1) between the Government of the Republic of Uganda and the respondent bank which loan agreement was executed by the parties on 11<sup>th</sup> November, 1987 in Madrid, Spain. The appellant acted as guarantor in respect of the Government of Uganda. Clause 18 of the agreement relates to the responsibility of the appellant as guarantor. It was provided in paragraph (a) thereof as follows: -</p> </div> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong>"We, the Bank of Uganda (the Guarantor), a banking institution established under </strong><strong>the </strong><strong>laws of Uganda, and being the Central Bank of the borrower, hereby <u>unconditionally and irrevocably</u> jointly and severally guarantee the due and punctual payment of any and all amounts payable by the BORROWER under the loan agreement in accordance with the provisions set forth herein. <u>In the case of any failure by the BORROWER to punctually pay any interest on, or principal of, or any other amount due under the loan Agreement, we hereby agree on first demand made by tested </u></strong><strong><u>telex </u></strong><strong><u>to cause such payment to be made to you in compliance with the obligations of the Borrower.</u></strong><strong> Payment by the guarantor shall </strong><strong>be &nbsp;</strong><strong>ade </strong><strong>to </strong><strong>ARESBANK in the place and in the manner specified in ARESBANK's demand, without raising any exception or objection of whatsoever nature"</strong> (underlining mine).</p> <p>&nbsp;</p> <p>Clearly the appellant made a personal commitment to pay to the respondent any amount which the Uganda Government failed to pay regardless of any circumstances that may lead to the default on the part of the Uganda Government.</p> <p>&nbsp;</p> <p>Mr. Masembe-Kanyerezi learned counsel for the appellant relied on the decision of this court in the case of <u>General Parts (U) Vs Non-Performing Assets Recovery Trust</u> (S.Ct. Civ. Appeal 5 of 1999) in support of the proposition that the loan agreement lacked the seal of the Appellant and therefore the loan agreement is invalid. It is my opinion that <u>General Parts</u> case is clearly distinguishable. In the present case the appellant knew that the loan agreement was to be executed outside Uganda in the absence of the Governor and or the Bank Secretary who would authenticate the sealing of the loan agreement. Therefore the appellant gave powers of Attorney sealed and dated 5<sup>th</sup> November, 1987 to its official, George Nteeba, authorising him to sign the agreement on behalf of the Appellant. The official under the authority of the powers of Attorney given to him duly executed the loan agreement on behalf of the Bank. The power of attorney did not require the official to authenticate the signing by affixing the seal of the appellant. I am not persuaded by the arguments of Mr. Masembe-Kenyerezi that the loan agreement executed by an official having powers of Attorney is utra vires or that absence of the seal was a failure of execution. I think that in this case Article 126(2) of the 1995 Constitution would take care of such arguments.</p> <p>&nbsp;</p> <p>Mr. Masembe-Kanyerezi strenuously submitted that the guarantee was avoided because there was extension of date of commencement of payment without the consent of the appellant as guarantor; that the guarantor was only entitled to pay off the loan on due date as set out in the loan agreement and then sue the principal. This obviously is an attractive submission but in my opinion the wording of clause 18(a) (supra) makes the appellant liable to pay the loan under any circumstances. I am not persuaded that whatever happened in this case exonerated the appellant from its liability to pay the amount due because of default by the Government.</p> <p>&nbsp;</p> <p>Accordingly I think that grounds 1 to 7 of the appeal must all fail.</p> <p>I would dismiss this appeal with costs to the respondent here and below.</p> <p>&nbsp;</p> <p><strong><u>JUDGMENT OF KAROKORA, JSC.</u></strong></p> <p>&nbsp;</p> <p>I read in draft the judgment prepared by my learned brother Kanyeihamba, JSC. I entirely agree with him that the appeal has no merit and ought to be dismissed with cost here and in the courts below.</p> <p>I have nothing useful to add on the merits of the appeal. However, in my view, costs, interest and time would have been avoided if the matter had been settled out of court.<br /> &nbsp;</p> <p><strong>Dated&nbsp; at Mengo </strong>this 18th <strong>day June of 2002.</strong></p> <p><br /> &nbsp;</p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-a4a687999b7a205a3bbda9edcce82374"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"><a href="https://old.ulii.org/system/files/judgment/supreme-court/2002/3/supreme-court-2002-3.rtf" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"></div> </div> </div> </div> </div> Mon, 27 Jul 2015 13:32:45 +0000 Anonymous 15336 at https://old.ulii.org Alfa Insurance consultants Limited v Empire Insurance Group ((Civil App.No.9 Of 1994)) [1996] UGSC 8 (1 February 1996); https://old.ulii.org/ug/judgment/supreme-court/1996/8 <section class="field field-name-field-flynote field-type-taxonomy-term-reference field-label-above view-mode-rss"><h2 class="field-label">Flynote:&nbsp;</h2><ul class="field-items"><li class="field-item even"><a href="/tags/banking-finance-and-insurance-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Banking, Finance and Insurance Law</a></li><li class="field-item odd"><a href="/tags/insurance-and-indemnity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Insurance and indemnity</a></li></ul></section><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-rss"><div class="field-items"><div class="field-item even" property="content:encoded"><div><strong>THE REPUBLIC O</strong><strong>F</strong><strong> UGANDA </strong><br /> <br /> <strong>IN THE SUPREME COURT OF UGANDA </strong><br /> <br /> <strong>AT MENGO </strong><br /> <br /> <strong>(COR: </strong><strong>MANYINDO, D.C.J., ODOKI, J.S.C., &amp;TSEKOOKO, J.S.C.)</strong><br /> <br /> <strong>CIVIL </strong><strong>APPEAL</strong><strong> </strong><strong>NO. </strong><strong> 9 </strong><strong>OF 1</strong><strong>994</strong></div> <p><strong>ALFA INSURANCE CON</strong><strong>SULTANTS LTD………………………..</strong><strong>APPELLANT</strong></p> <p>&nbsp;</p> <div><strong>-VERSUS-<br /> EMPIRE INSURANCE GROUP..............................................…....RESPONDENT </strong><br /> (Appeal from the decision of the H/C of Uganda by the Hon. Mr. Justice J.H. Ntabgoba Principal Judge dated 16th November, 1994).<br /> <br /> <u>IN</u><u> </u><u>CIV</u><u>IL</u><u> </u><u>SUIT</u><u> </u><u>NO</u><u>. 79 OF</u><u> </u><u>19</u><u>9</u><u>3 </u><br /> <br /> <strong>JUDGEMENT OF MANYINDO, D.C.J.</strong><br /> The Appellant Company has brought this appeal against the judgment of the Principal Judge of the High Court, Mr. Justice Ntabgoba, dismissing their suit against the Respondent. The Appellant Company<em> </em>is an Insurance Broker while the Respondent is Insurance Company. Both are based in Kampala where they carry on their businesses. The Appellant sued the Respondent for a sum of Shs. 15,049,344/=<em> </em>being the balance on their commission for brokerage work they did for the Respondent.<br /> The Appe11ants case in the High Court was that sometime in 1990, its Director, Vincent Mu1indwa (PW1), approached the American Embassy in Kampala and sold to them the idea of putting in place an Insurance scheme for the Embassy staff. The Embassy showed interest in the matter and so the parties began negotiations on a suitable package for the insurance policy cover. Subsequently the Embassy agreed (in 1991) to take out a major group medical insurance scheme for its staff. Mr. Mulindwa then started looking for a suitable Insurance Company to undertake the risk. He approached three different Companies, including the Respondent. Different rates were offered by those Companies. Mr. Mulindwa decided that the Respondents terms were the best for his client, the Embassy.<br /> <br /> According to the Respondents terms, the Insurance policy was to be in three parts, namely, for the cover of:-<br /> <br /> (a) Department of state Shs. 31,633,220/=<br /> (b) U.S.A.I.D. Shs. 20,762,500/=<br /> (c) Security Forces Shs. 43,000,000/=<br /> TOTAL Shs. 95,365,720/=<em> </em><br /> <br /> Mr. Mulindwa put those proposals to the Embassy which accepted them. The Respondents were informed of that and they agreed to undertake the risk. The policy was to be issued in two covers. The first was for Shs. 52,149,720/= in respect of the first two categories of staff mentioned above; the second one for Shs. 43,000,000/= was for the Security Forces. The first cover was issued on 14.1.92 and the second one on 26.5.92. The respondent collected the insured sums directly from the Embassy and without reference to the Appellant.<br /> <br /> According to the Appellant, their broker commission should have been Shs. 19,079,144/= (at the rate of 20% of the full insured sum of Shs. 95,395,720/=), but they were paid only Shs. 4,029,800/=,<em> </em>hence the claim for Shs. 15,049,344/ as balance.<br /> <br /> The respondent denied the claim. Paragraph 2 of their written Statement of defence stated thus: -</div> <p>&nbsp;</p> <div>“It is denied that the Plaintiff procured the insurance policy for<br /> the defendant. The deal was negotiated by the defendant<br /> direct with the American Embassy.”</div> <div>At the commencement of the trial of the suit Dr. Byamugisha who represented the appellant and late Mr. Kateera for the respondent agreed on two issues which they put to the court for determination. They were:<br /> (1) Whether it was the appellant or the respondent who procured the Insurance policy with the American Embassy.<br /> (2)<em> </em>If the policy was procured by the appellant what relief were they<br /> entitled to?<br /> During the trial Mr. Kateera is said, by Counsel for the Appellant, to have refrained the first issue when he made this submission in his final address to court.</div> <div><br /> “Now the 1st issue is misleading. In the absence of agreement as to<br /> the rate and amount of the commission is the plaintiff entitled to what is reasonable commission <strong>on </strong><strong><u>Quantum </u></strong><strong><u>merit</u></strong><u> </u><strong><u>basis”.</u></strong></div> <div>After hearing the evidence and submissions of Counsel the Learned Principal Judge came to the conclusion that Mr. Mulindwa’s role in the transaction was merely to introduce the Respondent to the Embassy which fell short of full brokerage. He reasoned that this was so because Mr. Mulindwa had not participated in the making of the final agreement between the respondent and the Embassy. He also found that the appellant had in fact introduced the respondent to the Embassy only in respect of the first policy cover.<br /> On the second issue the learned Principal Judge was of the opinion that the appellant had been adequately remunerated in the sum of Shs.<em> </em>4,029,800/=<em> </em>at the respondent’s chosen rate of 7.7% of the insured sum on the first policy cover as he had not done full brokerage work on it. He held that<em> </em>the appellant company was not entitled to a commission on the second policy as it had been negotiated or procured by the respondent directly with the Embassy. This is what he said on this point.<br /> “To hold that the defendant should pay the Plaintiff commission on any subsequent policies underwritten by the defendant in favour of the American Embassy, following the introduction by Mr. Vincent Mulindwa is to suggest that the Plaintiff can even now continue to recover a commission on any other policy that may in future be underwritten by the defendant in favour of the Embassy. I reject such claim”.<br /> It was on that basis that he dismissed the Appellant’s suit with costs to the Respondent. This appeal is founded on five grounds. They are rather narrative and argumentative, contrary to the clear provisions of Rule 84(1) of the Rules of this Court. But the complaint in those grounds can be summarised as follows:<br /> (1) The learned Principal Judge did not consider the issues as agreed and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; framed by the counsel, but decided the case according to the issue unilaterally put forward by the Respondent’s counsel which was wrong.<br /> <br /> (2)<em> </em>The learned Principal Judge should have found, on the evidence before him, that the appellant had procured the two policy covers and was therefore entitled to the full<br /> brokerage commission and at 20%<em> </em>and not 7.7%<br /> Dr. Byamugisha who presented the appellants appeal contended that the learned Principal Judge did not when he should, answer the first agreed issue, namely, and was it the Appellant or the Respondent who procured the Insurance policy from the Embassy? Instead he had only considered the new issue raised by Mr. Kateera. It seems to me that Mr. Kateera did not in fact reframe the issue. He merely shifted from the original defence of total denial and acknowledged the fact that the appellant had indeed participated in the procurement of the policy. It was of course a partial concession as his new stand was that the appellant could only be paid commission on quantum meruit basis,<em> </em>that is to say, as much as the Appellant had deserved.<br /> <br /> The principle of quantum meruit is applied as a possible measure of restoration in case of unjust enrichment or measure of payment where a contract has no fixed a price. Mr. Kateera’s argument which the learned Principal Judge accepted, was that the appellant had done some little work for which he had been adequately paid, The Principal Judges answer on the first agreed issue was that Mr. Mulindwa did not procure the first policy cover but merely introduced the Respondent to the Embassy; it was the Respondent which completed the deal. I do not therefore agree that the learned Principal Judge did not answer the issue in question. Whether he answered it correctly is another matter.<br /> <br /> It is quite clear from the evidence of Mr. Mulindwa that it was the appellant, through him, acting in its capacity as an Insurance Broker, which approached the American Embassy and solicited the Insurance deal in terms agreed by Mr. Mulindwa and the Respondent Company, through its Mr. Bwogi, who died before the trial of the suit. All the terms which Mr. Bwogi gave to Mr. Mulindwa were accepted by the Embassy. It was at that stage that the Respondent chose to side step the appellant and deal with the Embassy directly. This was essentially for the purpose of signing the standard policy documents and collection of the premium. When the appellant learnt of what had happened they claimed their commission from the respondent, but were paid only shs. 4,029,800/=.<br /> <br /> The appellant then demanded the balance on commission, to which the respondent replied on 26.5.92<em> </em>as follows in their letter (Exh. P.4):-<br /> “Dear Mr. Mulindwa, our records show that you received a total of Shs. 4,029,800/= on the U.S. Embassy case, being the &nbsp; ‘Servicing Commission paid to all non-contracted producers.<br /> Considering your status with us (non-contracted producer), the percentage commission we paid you was substantially above normal.<br /> It is a Company policy that in order to earn the full Agent/Broker &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Commissions, one must be under contract. Again, our records show that you &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and /or your brokerage have not yet been contracted.<br /> <br /> The purpose of the contract is to: (a) give you full representative status for the Company, (b) make sure that the company prepares you, through regular &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; training, to attain a certain degree of professionalism, unique to all Empire Insurance agents and (c) protect and safeguard the interests of the Customer, &nbsp;&nbsp;&nbsp;&nbsp; the Agent and the Company. We want you to know that you are welcome to &nbsp; discuss with us the possibility of acquiring an Empire Insurance Agents contract.<br /> Best wishes. Samuel M.Bwogi, CLU”.<br /> In the above letter a different defence was raised by the Respondent that the appellant had not been contracted for the job and could not be contracted as they had not been trained for the job by the Respondent Company. It seems to me that the respondent misconceived the roles of a Broker and that an Agent. It was the evidence of Mr.Kizito (DW2), a General Manager of Hogg Robinson, an Insurance Broker in Uganda that a Broker works on behalf of an insured while an Agent acts on behalf of the insuring company. This must be correct as it agrees with the definition of “Insurance Broker” In Section 57 of the Insurance Decree (No. 19 of 1978) which states: -<br /> “ Insurance brokers” means a person who, as an independent contractor and not as the agent of an insurer, is carrying on the business on the business of soliciting or negotiating Insurance for a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; commission or other enumeration on behalf of the insured, other that himself.”<br /> It follows from the above definition that the appellant or its Mr. Mulindwa could never have become an Agent of the respondent since it was a registered Insurance Broker. This much was admitted by Margaret Rutare (DW1), the Respondent’s office Manager, Interestingly she had this to say in cross- examination: -<br /> <br /> “We do not have contracts with Brokers. When we start<em> </em>dealing with them we do not train them……….. Bwogi never alleged that Mulindwa had not performed what a Broker should perform to get full commission …………… &nbsp; In this case we were considering Alfa an Agent/Broker. Alfa could not have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; been our agents since they were Brokers.”<br /> In my view and with due respect to the learned Principal Judge, he was wrong, both in law and fact, to come to the following conclusion: -<br /> “I do clearly understand what Mr. Bwogi was saying: - that the Empire Insurance Group, Ltd. has additional standards in its insurance business, above the mere registration as a broker and belonging to the Association of Insurance Brokers. Empire Insurance Group, Ltd, in those additional standards, requires that its brokers always concluded a brokerage agreement in order to be regarded by the group as “contracted producers……….. “ The law may require only registration as a broker and membership of the Association of Brokers as a standard agreement, so as to be permitted to practice as brokers in Uganda. But that is not the same thing as saying that every broker is 100% professional. Any competitive Insurance Company therefore would be in order to institute its own additional training to improve its standards of &nbsp; professionalism.”<br /> <br /> The above statement contradicts the evidence of Rutare (D W l) that the respondent does not take out contracts with the brokers they deal with and does not train such Brokers. It also contradicts the legal position of an Insurance Broker who is an independent contractor, working for the insured and not the insuring company. Clearly there is no way the insuring company can train such an independent contractor who must be qualified in his or its own right before he or it can be registered as a broker. And so there was no merit in that new line of defence. The trial court should have rejected it.<br /> <br /> The evidence of Mr. Mulindwa shows very clearly that the two policy covers were negotiated by him as a single package. It was split into two covers at the request of the Embassy for ease of payment which was to be effected in two phases. The appellant should, in accordance with practice, have gone on to collect the premium from the Embassy but was not allowed to do so by the respondent. The reason for that is obvious. The respondent dealt with the Embassy directly so that they could obtain a rebate on the policy. According to Rutare (DW1) this practice of side-stepping the broker exists in the insurance business but, as she pointed out, it is unfair to the brokers.<br /> The learned Principal Judge thought that because the Appellant had no written agreement with the respondent regarding the appe1iants renumeration for the transaction and as the appellant had not participated in the negotiations of the final terms of the policy covers, they could not claim to have done full brokerage. They were therefore not entitled to the full commission. However, it would appear from the definition of “Insurance Broker in Section 57 of the Insurance Decree quoted above that once the broker has solicited or negotiated the policy, he is entitled to full commission. He does not have to do both soliciting and negotiating. But of course as Mr. Justice Branson pointed out in <strong><u>Mc. NEIL V. LAW UNION &amp; </u></strong><strong><u>ROCK</u></strong><u> </u><strong><u>INSURANCE</u></strong><strong><u> </u></strong><strong><u>COM</u></strong><strong><u>PANY LTD</u></strong><strong><u>.(192</u></strong><strong><u>5</u></strong><strong><u>) 23 LLOYD’</u></strong><strong><u>S List LR.</u></strong><u> </u><strong><u>341</u></strong><strong><em><u> </u></em></strong><strong><u>at page </u></strong><strong><u>316,</u></strong><strong><em><u> </u></em></strong>the principle is that where an agent or, in this case, a broker, is claiming a commission upon a certain transaction, he must show that he was an efficient cause of the transaction coming about.<br /> <br /> To be an efficient or effective cause, the agent or broker need not necessarily complete or take part in all the negotiations; see:- <strong><u>Ha1sburys</u></strong><u> </u><strong><u>Laws </u></strong><strong><u>of </u></strong><strong><u>England vol. 4th </u></strong><strong><u>Ed.</u></strong><u> </u><strong><u>page 478 </u></strong><strong><u>par</u></strong><strong><u>a</u></strong><strong><u>graph</u></strong><strong><u> 800 </u></strong><strong><u>an</u></strong><strong><u>d “Insurance Law in Australia and</u></strong><u> </u><strong><u>New </u></strong><strong><u>Zealand” </u></strong><strong><u>by Sutton (Original </u></strong><strong><u>Edition) 1980.</u></strong><strong><u> </u></strong>It is not enough for him to<br /> prove that he introduced the parties to each other. In the instant case the appellant company actually successfully negotiated the package with the American Embassy and then sold it to the respondent. What<strong><em> </em></strong>remained was the formality of signing the standard policy documents and collection of the monies from the Embassy. The Respondent collected the money in an attempt to reduce the appellant’s commission.<br /> <br /> It is remarkable that at first the respondents point was not that the appellant had not done full brokerage but that they were “non-contracted producers.” In my judgment the appellant’s representative, Mr. Mulindwa did fully broker the Insurance policy contained in the two policy covers. This was not a case where the broker had brought the parties together to a certain point in negotiations and then left them to set out for themselves a new track altogether. The learned principal Judge should, on the evidence before him, have found that the appellant was entitled to full commission on the two policy covers which formed one and some transaction.<br /> <br /> There was no evidence that the second policy cover was obtained independently by the respondent. That cover flowed from the appellant’s initial efforts. And so this would not be a case of permitting a broker to continue to take commission on any other policies taken out by the claimant, although a broker may be entitled to a commission on renewal on insurance policies procured by him provided he played an effective role in the renewal on insurance policies procured by him provided he played an effective role in the renewal of the policies, see Sullton on Insurance Law in Australia and New Zealand (supra). But this point does not arise here.<br /> <br /> There now remains the question of quantum of the commission. Mr. Mulindwa claimed in his evidence, but without further proof, that the late Bwogi and himself had agreed, orally, that the commission would be at the rate of 20%.<strong><em> </em></strong>On the other hand Margaret Rutare (D W l) stated that no agreement had even been reached on the point. In absence of cogent evidence on the point, I think it would be safe to assume that the rate at which the commission was to be paid was not agreed. The principle has been established that where no Agents or Brokers fee was agreed, then the usual commission in agency or brokerage business should apply, see: Baring V .Stanton (1876) 3<em><u> </u></em>Chancery Division 502 at 505.<br /> <br /> The commission which was paid to the appellant and which the learned principal 3udge upheld was based on the rate of 7.7% which is payable under “any other renumeration” under S. 57 of the Insurance Decree. The 7.7% applied only to cases where a commission was not payable. Counsel for the appellant argued, quite rightly I think, that the respondent was wrong to apply that rate because the appellant was entitled to a commission. The rate of 20% fixed by the Commissioner of Insurance did not apply as they were not in existence at the time the policy was secured. I<em> </em>agree with the submission by Counsel for the appellant that a different rate had to apply.<br /> <br /> There was no clear evidence as to the usual commission payable at the material time. Both Mr. Mulindwa and Geoffrey Musisi (P W 2).<em> </em>(Secretary General of Uganda Association of Insurance Brokers) state that the rate of commission was 20%.<em> </em>However Mr. Musisi did also point out in the case of the National Insurance Corporation the rate was 22%.<em> </em>Those were said to be maximum rates. Then there was Mr. Frank Kizito (D 1 W), the General Manager of Hogg Robinson Insurance who stated that the average commission for full brokerage for this type of policy was at 10% of the insured sum. It is clear therefore that at the time the appellant brokered the Insurance policy there was no ruling or usual commission rate.<br /> <br /> In the circumstances, I am of the view that the appellant could only be entitled to what was a reasonable rate of the commission in the circumstances of the case. It was not shown that the transaction was difficult or expensive on the part of the appellant. Therefore the rate of the commission claimed by them was excessive. I would allow a commission at the rate of 12%<em> </em>on the full insured sum of shs. 95,395,720/= which comes to shs. 11,447,486.4 Less shs. 4,029,800/=<em> </em>already received by the Appellant which comes to shs. 7,447,868.4. in the result I would allow this appeal set<em> </em>aside the judgment and decree of the High Court and enter judgment for the appellant company for shs. 7,447,868.4 Plus interest at 45% which was the rate in 1992—93,<em> </em>which has now been certified by the Bank of Uganda. I would award the appellant costs of this appeal and of the suit in the High Court, and as Odoki JSC and Tsekooko JSC agree, it is so ordered. Dated at Mengo this……………..2<sup>nd</sup> ……..day of…..February, 1996.<br /> <strong>S.T.MANYINDO</strong><br /> <strong><u>DEPUTY CHIEF JUSTICE</u></strong></div> <p><br /> <strong>I CERTIFY THAT THIS IS A </strong><strong>TRUE COPY OF THE ORIGINAL. </strong><br /> <strong>E.K.E. TURYAM</strong><strong>UBONA, </strong></p> <p>&nbsp;</p> <div><strong>DEPUTY REGISTRAR, THE SUPREME COURT</strong><br /> <strong>JUDG</strong><strong>E</strong><strong>MENT OF ODOKI, J.S.C.</strong><br /> (I have had the advantage of reading in draft the judgment of Manyindo, DCJ and I agree with it and the orders proposed by him.)<br /> Dated at Mengo this....2<sup>nd</sup> ...day....of February...., 1996.<br /> <strong>B.J.ODOKI, </strong><br /> <strong>JUSTICE OF THE SUPREME COURT</strong><strong><u> </u></strong><br /> &nbsp;</div> <p><strong>I CERTIFY THAT THIS IS A </strong><strong>TRUE COPY OF THE ORIGINAL.</strong></p> <p>&nbsp;</p> <p>&nbsp;</p> <div><strong>E.K.E</strong><strong>. TURYAMUBONA, </strong><br /> <strong>DEPUTY REGISTRAR</strong><strong>, THE</strong><strong> SUPREME COURT</strong></div> <p>&nbsp;</p> <div>&nbsp;</div> <div><strong>JUDGMENT OF TSEKOOKO</strong><strong>, J.S.C</strong><strong>.</strong><br /> I have read in draft the judgment prepared by Manyindo, D.C.J. with which I concur.<br /> <br /> Delivered at Mengo this…….. 2<sup>nd</sup> day ……….of. February, 1996.<br /> <strong>J.W.N.TSEKOOKO,</strong><br /> <strong>JUSTICE OF THE SUPREME COURT</strong></div> <p><strong>I </strong><strong>CERTIFY</strong><strong> THAT THIS IS A </strong><strong>TRUE COPY OF THE ORIGINAL</strong><br /> <strong>E.K.E TURYAM</strong><strong>UBONA, </strong></p> <p>&nbsp;</p> <div><strong>DEPUTY REGISTRAR, THE SUPREME COURT</strong></div> <p>&nbsp;</p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-4250229baf27cb761da1092b41eda4a2"> <div class="view-content"> <div class="views-row views-row-1 views-row-odd views-row-first views-row-last"> <div class="views-field views-field-field-download"> <div class="field-content"><a href="https://old.ulii.org/system/files/judgment/supreme-court/1996/8/supreme-court-1996-8.rtf" target="_blank"><img src="https://africanlii.org/sites/default/files/Download-Button-red.png" width="180"> </a></div> </div> <div class="views-field views-field-field-download-1"> <div class="field-content"></div> </div> </div> </div> </div> Mon, 27 Jul 2015 13:32:22 +0000 Anonymous 15289 at https://old.ulii.org