Uganda Legal Information Institute - Termination of Contract https://old.ulii.org/tags/termination-contract en Agri-Industrial Management Agency Ltd vs Kayonza Growers Tea Factoty Ltd And Another (HCT - 00 - CC - CS - 0819 - 2004) ((HCT - 00 - CC - CS - 0819 - 2004)) [2008] UGCOMMC 4 (30 January 2008); https://old.ulii.org/ug/judgment/commercial-court-uganda/2008/4 <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/cl" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">CL</a></li><li class="field-item odd"><a href="/tags/contract-validity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Contract Validity</a></li><li class="field-item even"><a href="/tags/waiver-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Waiver</a></li><li class="field-item odd"><a href="/tags/termination-contract" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Termination of Contract</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 align="CENTER"> <font face="Times New Roman"><font size="3"><b>Agri-Industrial Management Agency Ltd v. Kayonza Growers Tea Factory Ltd &amp; Anor</b></font></font></p> <p align="CENTER"> <font face="Times New Roman"><font size="3"><b>In The High Court of Uganda at Kampala</b></font></font></p> <p align="CENTER"> <font face="Times New Roman"><font size="3"><b>(Commercial Court Division)</b></font></font></p> <p align="CENTER"> <font face="Times New Roman"><font size="3"><b>HCT - 00 - CC - CS - 0819 &ndash; 2004</b></font></font></p> <p> &nbsp;</p> <dl> <dt> &nbsp;</dt> </dl> <p align="CENTER"> <font face="Times New Roman"><font size="3"><b>Before: The Hon. Justice Geoffrey Kiryabwire.</b></font></font></p> <p align="CENTER"> <font face="Times New Roman"><font size="3"><b>31<sup>st</sup> January, 2008</b></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Contract - Whether there was a valid management agreement between the parties during the years 2000 and 2001; -Whether the said agreement was terminated by the plaintiff or the defendants; - Whether the parties suffered any damage; - What remedies are available to the parties? - Whether the defendant is entitled to the counter claim and if so what are their remedies.</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Contract &ndash; Waiver - whether under <u>clause 14 </u>and the whole contract the parties intended for each year to rescind the existing contract and replace it with a new one contained in Annexture &ldquo;A&rdquo;, or to vary the existing contract.</i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Contract &ndash; Termination of contract.</i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Contract &ndash; Breach of contract.</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff, Agri-Industrial Management Agency Ltd (hereinafter referred to as &ldquo;Agrimag&rdquo; as it is popularly known) executed management agreements with each of the defendants, Kayonza Growers Tea Factory Ltd and Igara Growers Tea Factory Ltd (in this dispute also popularly referred to as Tea Factory Companies or &ldquo;TFCs&rdquo;), to run from May 1998, for 5 years, ending in May 2003. The agreements provided inter alia that the plaintiff was to provide management and secretarial services to the defendants and that the management fees were to be separately agreed upon annually and that the fees so agreed were to be contained in an Annexture &ldquo;A&rdquo; to each of the agreement. Annexture &ldquo;A&rdquo; were annually altered made for the years 1998 and 1999 to provide for the adjusted fees but no fee adjustments were specifically made for the years 2000 and 2001. However a management fee was never the less paid for the year 2000 was paid by both defendants. For the year 2001 an advance fee was paid by both defendants being Ushs.43, 000,000/- by Igara Tea Factory Company and Ushs.67, 000,000/- by Kayonza Tea Factory Company. The plaintiff and the defendants for the years 2000 and 2001 continued to carry out their contractual obligations until the agreements were terminated on 23<sup>rd</sup><sup> </sup>September 2001. It is the termination of the agreements that crystallized the dispute between the parties.</font></font></p> <p> &nbsp;</p> <p> <font face="Times New Roman"><font size="3"><b>Held:</b></font></font></p> <dl> <dt> &nbsp;</dt> <dt> &nbsp;</dt> </dl> <ol> <li> <p align="JUSTIFY"> &lsquo;<font face="Times New Roman"><font size="3">Waiver&rsquo; in contract is most commonly used to describe the process whereby one party unequivocally, but without consideration grants a concession or forbearance to the other party by not insisting upon the precise mode of performance provided for in the contract, whether before or after any breach of a term waived. Waiver is however to be distinguished from consensual variation. Consensual variation is where the parties to a contract agree in a subsequent simple contract to vary its terms as between the parties to the original contract by way of a second contract, and as opposed to waiver, the agreement for variation must possess the characteristics of a valid contract. Where the contract is still executory on both sides, however, consideration may be found in the mutual surrender of rights or the conferment of benefits on each party by the variation. Clause 14 goes to the contract validity and therefore could not have been the intention of the parties that it can be waived. The clause provides for the mode of performance of the contract by the defendant without which there was no contract. However, despite the absence of the annexture both parties continued with the agreement. Accordingly, there was no valid agreement in relation to clause 14 thereof but that notwithstanding there did exist a quasi-contract based on the terms of the signed contract that is enforceable by court. </font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">From the conduct of the parties and the correspondence that went on between them, consequent termination of the agreements by the defendant Tea Factory Companies was with notice and thus the agreements were lawfully terminated.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The only damages that the plaintiff would have suffered would have been the non payment of fees, which is a special damage, up to the time of the termination. The Management fee due to plaintiff with respect to Kayonza Tea Factory Company (taking into account the advance paid) would be Ushs.95,337,493/=. On the other hand, the money due to the plaintiff with respect to Igara Tea Factory Company being management fee and bonus (taking into account the advance paid) would be Ushs.115,621,030/=. Accordingly interest awarded on the special damages is at 24% p.a. from the 30<sup>th</sup>September 2001 until payment in full on both awards of special damages, as well as costs of the main claim to the plaintiff.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">There was total confusion as to the question of the privatisation of the plaintiff company. This can be seen clearly from the correspondences especially between the plaintiff company itself and its parent company Uganda Tea Growers Corporation. Agrimag&rsquo;s failure to privatize and transfer 15% of its shares to the defendants was a breach of contract and the defendants are entitled to damages for this breach.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants did not on the balance of probability prove the breach, of Failure to appoint key staff, mismanagement and misappropriation. There was even some evidence that there were some profits being made as well. There was no proof that the expenditure by the plaintiffs were not in execution of its duties and obligations to the defendants. </font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The breach of Loss caused by <i>&ldquo;Sale&rdquo; </i>of tea to Sam Mugisha alias Stephen Muhire t/a West Ankole Tea Packers was not proved on the balance of probabilities. The plaintiff in pursuing the said Mugisha in court exercised the necessary standard of care and skill as would be expected of a manager regardless of the fact that the judgment though in their favour did not result in the recovery of the money.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Since there was an attempt by the parties themselves to promote reconciliation among themselves court will promote and give it legal efficacy by accepting those figures therein as the figures due from the plaintiff to the defendants. To the extent that they have not already been paid there are due and owing by the plaintiff to the defendants. These figures of course can be offset from the awards in the main claim. Accordingly, the plaintiff owes the Kayonza Tea Factory Company Ushs.177,458,371/= and Igara Tea Factory Company Ushs.107,377,987/= as special damages.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Each of the defendants awarded Ushs.2,000,000/= in general damages for breach.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Interest at 24% p.a. from the end of September 2001 on the special damages until payment in full and 8% p.a. on the general damages from the date of judgment until payment in full.</font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Judgement in favour of the defendants.</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Cases referred to:</b></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>National Insurance Corporation V Spans International Ltd, C.A.C.A No. 13 of 2002,</i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Ficom S.A. V Sociedad Cadex Ltd [1980]2 Lloyds Rep. 118</i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Bank of Credit &amp; Commercial International S.A. (in liquidation) V Ali [2001]1 All ER 961</i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] A.C. 32</i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Wallis, Son &amp; Wells V Pratt and Haynes [1910]2 K.B. 1003</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Legislation referred to:</b></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">0.10A of the Civil Procedure Rules, S.I 71-1</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Counsel for the plaintiff: Mr. Kahawa Muhumuza and Mr. Kwemara Kafuuzi</i> </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>Counsel for the defendant: Mr. B. Tusaairwe and Mr. Tayebwa</i>.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="CENTER"> &nbsp;</p> <p align="CENTER"> &nbsp;</p> <p align="CENTER"> &nbsp;</p> <p> &nbsp;</p> <dl> <dt> &nbsp;</dt> </dl> <p align="CENTER"> <font face="Times New Roman"><font size="3"><b>J U D G M E N T:</b></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Godfrey Kiryabwire, J</b>: The claim by the plaintiff involves two separate suits against the defendants that were consolidated by court under <u><b>0.10A of the Civil Procedure Rules, S.I 71-1</b></u>by the consent of the parties. There is also a counter-claim by the defendants against the plaintiff. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The facts of this case, as agreed at scheduling, are that the plaintiff, Agri-Industrial Management Agency Ltd (hereinafter referred to as &ldquo;Agrimag&rdquo; as it is popularly known) executed management agreements with each of the defendants, Kayonza Growers Tea Factory Ltd and Igara Growers Tea Factory Ltd (in this dispute also popularly referred to as Tea Factory Companies or &ldquo;TFCs&rdquo;), to run from May 1998, for 5 years, ending in May 2003. The agreements provided inter alia that the plaintiff was to provide management and secretarial services to the defendants and that the management fees were to be separately agreed upon annually and that the fees so agreed were to be contained in an Annexture &ldquo;A&rdquo; to each of the agreement. Annexture &ldquo;A&rdquo; were annually altered made for the years 1998 and 1999 to provide for the adjusted fees but no fee adjustments were specifically made for the years 2000 and 2001. However a management fee was never the less paid for the year 2000 was paid by both defendants. For the year 2001 an advance fee was paid by both defendants being Ushs.43, 000,000/- by Igara Tea Factory Company and Ushs.67, 000,000/- by Kayonza Tea Factory Company. The plaintiff and the defendants for the years 2000 and 2001 continued to carry out their contractual obligations until the agreements were terminated on 23<sup>rd</sup>September 2001. It is the termination of the agreements that crystallized the dispute between the parties. At the Pre trial scheduling conference the parties agreed the on the following issues for determination:-</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <ol> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Whether there was a valid management agreement between the parties during the years 2000 and 2001; if so,</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Whether the said agreement was terminated by the plaintiff or the defendants;</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Whether the parties suffered any damage;</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">What remedies are available to the parties?</font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">One other important issue was left out at the pre trial scheduling but was canvassed during the trial is the counter-claim of the defendants. Court shall therefore adjust the issues for the complete and final resolution of the dispute before it add an issue as follows;</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <ol start="5"> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Whether the defendant is entitled to the counter claim and if so what are their remedies</font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr Kahawa Muhumuza and Mr Kwemara Kafuuzi appeared for the Plaintiff while Mr B. Tusaairwe and Mr Tayebwa appeared for the Defendants. I shall address the issues for determination before court starting with issues 1 to 4 being the main suit and then issue 5 being the counter-claim..</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> </dl> <dl> </dl> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Issue No. 1: </b><u><b>Whether there was a valid management agreement between the parties for the years 2000 and 2001.</b></u></font></font></p> </dd> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The case for the plaintiffs is that whereas no amendments were made to the agreement to reflect the fees chargeable for those years the agreement still remained valid and enforceable.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>The management agreement between the plaintiff and the 1<sup>st</sup>defendant (Kayonza Tea Factory Company) and that between the plaintiff and the 2<sup>nd</sup>defendant (Igara Tea Factory Company), Exhibits P.E 3 and P.E 15 respectively, both provided in clause 14 that</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>This agreement shall be null and void if the parties hereto (Tea Factory Company and Management Agent) do not agree on the management fee. Accordingly therefore this agreement is not binding and is not in any way operational until the management fee is agreed upon. The management fee agreement shall be Annexture &ldquo;A&rdquo; to this agreement&rdquo;</i></font></font></p> </dd> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. Kaahwa, counsel for the plaintiff however submitted that the defendants by accepting the plaintiff&rsquo;s services and actually paying the management fees for the years 2000 and 2001 the defendants waived their right to nullify the agreements for lack of an amended or expressly agreed to Annexture &ldquo;A&rdquo; and therefore the management agreements remained valid and were not affected by the provisions of clause 14 to the agreements.</font></font></p> <dl> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It is an agreed fact that no Annexture &ldquo;A&rdquo; was signed between the parties for the years 2000 and 2001. It is also not disputed that both parties continued to carry out their obligations under the management agreement during that time and the management fees were fully paid to the plaintiff by both defendants for the year 2000 and some advances were paid on the fees for 2001. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">According to the testimony of PW1 Vincent Tumuhaise an accountant and audit supervisor with the firm of accountants M/s Lawrie Prophet &amp; Co. who were the statutory auditors for the defendants between 1998 &ndash; 2002, there was no Annexture &ldquo;A&rdquo; in the year 2000 and so they relied on the Annexture &ldquo;A&rdquo; of 1999 (Exh. P.2) to calculate the management fees payable by the defendants to the plaintiff. He explained that the difference in the amounts paid was because sometimes the fees were paid in US Dollars and the amounts therefore depended on the exchange rate at the time. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The audited accounts of Kayonza Tea Factory Company (Exh. P.5) at page 10 show that the 1<sup>st</sup>defendant paid Ushs.205,657,000/= as management fees for the year 1999 and Ushs.185,185,000/= for the year 2000. The audited accounts for 2001 (at P.11) also show that Ushs.209,667,000/= was paid by the 1<sup>st</sup>defendant as management fees.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The accounts of Igara Tea Factory Company (Exh. P.8) at P.10, also show that the 2<sup>nd</sup>defendant paid Ushs.240,035,000/= as management fees for the year 1999, and Shs.289,145,000/= for the year 2000. Exh. P.6 at P.10, also shows that Ushs.174,829,000/= was paid as management fees for 2001. Mr. Vincent Rwakijuma PW2 the former accountant of the first plaintiff company from 1995 &ndash; 2003 however testified that in 2001 Kayonza Tea Factory Company actually paid Ushs.67,000,000/= as part payment for the management fees due to the plaintiff for the year 2001.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">For his authority that the conduct of the defendants amounted to a waiver, Counsel for the plaintiff relied on the case of</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><u><b>National Insurance Corporation</b></u><b> V </b><u><b>Spans International Ltd, C.A.C.A No. 13 of 2002,</b></u>at P.7 and 8 to define what constitutes a waiver.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">He also quotes from &lsquo;<u>Words and Phrases legally defined&rsquo;</u>4<sup>th</sup>Volume at P. 404 where waiver is defined as <i>&ldquo;the abandonment of a right in such a way that the other is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted, and is either express or implied from conduct&rdquo;.</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">This argument was refuted by Mr. Tusasirwe, counsel for the defendants who submitted that in absence of a second agreement relating to the management fee contained in Annexture &ldquo;A&rdquo; for each years for the years 2000 - 2001 there was no agreement to speak of as one of the basic elements of a contract was lacking. He submitted that the payments made by the defendants to the plaintiff as management fees sought to create an agreement where none existed. He further submitted that, at best, such payments could only be said to have been deposits on fees pending conclusion of the agreement in Annexture &ldquo;A&rdquo;. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The learned counsel for the defendants submitted in the alternative that, the arrangement and relationship between the parties can be said to have created a totally new relationship outside the (now void) written agreements and that the terms of this new relationship would have to be proved afresh from oral or other evidence. He refutes the plaintiff&rsquo;s contention that the defendants by their conduct waived their right to rely on clause 14 of the agreements and states that &lsquo;waiver&rsquo; relates to an express or implied promise not to insist on one&rsquo;s rights and does not apply to the instant case because clause 14 is not a &ldquo;rights&rdquo; creating clause but sets down a condition precedent to the validity of the contract.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. Tusasirwe submitted that the mainstream agreements P.E 3 and P.E 15 were incomplete and could not stand without Annexture &ldquo;A&rdquo; and therefore were not legally enforceable. He asserts that given the wording of clause 14 of the agreements, the absence of Annexture &ldquo;A&rdquo; would automatically render the agreements null and void. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I have considered the evidence before court on this matter and the arguments of both counsels. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It would appear to me, that the in order to answer the issue of validity one would have to consider whether requirements of clause 14 to the said agreements were waived or not. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">According to <u><b>Halsbury&rsquo;s Laws of England</b></u>, Vol. 9(g), (4<sup>th</sup>Ed) para 1025 &lsquo;waiver&rsquo; in contract is most commonly used to describe the process whereby one party unequivocally, but without consideration grants a concession or forbearance to the other party by not insisting upon the precise mode of performance provided for in the contract, whether before or after any breach of a term waived.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Waiver is however to be distinguished from consensual variation. Consensual variation is where the parties to a contract agree in a subsequent simple contract to vary its terms as between the parties to the original contract by way of a second contract, and as opposed to waiver, the agreement for variation must possess the characteristics of a valid contract. <u>(Halsburys (supra) paras 1019 and 1023</u>.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Where the contract is still executory on both sides, however, consideration may be found in the mutual surrender of rights or the conferment of benefits on each party by the variation (See <u><b>Ficom S.A</b></u><b>. V </b><u><b>Sociedad Cadex Ltd [1980]2 Lloyds Rep. 118</b></u>).<b> </b>authors H.G. Beale, W.D. Bishop and M.P. Furmston in their book <u><b>Contract, Cases &amp; Materials, 4</b></u><sup><u><b>th</b></u></sup><u><b> Ed [2001] at P. 836</b></u>, also state that,</font></font></p> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>to be fully effective, a variation requires agreement and consideration just like a fresh contract and if these are present, the variation cannot be withdrawn unilaterally by either party&rdquo;.</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">From the wording of clause 14 to both agreements, it would appear that the validity of the contract depended on the agreement as to management fees and this agreement was to be recorded as Annexture &ldquo;A&rdquo; to the mainstream agreement. How then should court construe this provision?</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">In the case<b> </b><u><b> Bank of Credit &amp; Commercial International S.A. (in liquidation)</b></u><b> V </b><u><b>Ali [2001]1 All ER 961</b></u>it was held by <u><b>Lord Bingham of Cornhill</b></u><b> </b></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>In construing contractual provisions, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties, the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties relationship and all the relevant facts surrounding the transaction so far as known to the parties&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The question therefore is whether under <u>clause 14</u>and the whole contract the parties intended for each year to rescind the existing contract and replace it with a new one contained in Annexture &ldquo;A&rdquo;, or to vary the existing contract.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Counsel for the defendant submitted that clause 14 is not a &ldquo;rights&rdquo; creating clause but rather is a condition precedent and therefore cannot be waived. Whereas a contractual provision in my view can create a contractual right, in this case the constant reference in clause 14 to the agreement being null and void for lack of an annexture &ldquo;A&rdquo; does suggest to my mind that this clause is indeed a condition precedent that goes to the whole validity of the agreement.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I agree with counsel for the defendant that the instant case clause 14 goes to the contract validity and therefore could not have been the intention of the parties that it can be waived. The clause provides for the mode of performance of the contract by the defendant without which there was no contract.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">However, one cannot escape the fact that despite the absence of the annexture both parties continued with the agreement. More curiously the defendant still continued to pay for the services of the plaintiff in the years 2000 and 2001 when they claim that the agreements were null and void! </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr Tumusiime Caleb DW1, the Board Chairman of Kayonza Tea Factory Company (since 2000), testified and drew a distinction as to the effect of the said payments in that the 1<sup>st</sup>defendant actually paid what he termed as &lsquo;advances&rsquo; in the absence of Annexture &ldquo;A&rdquo; to the agreement, but not the management fees. He however during cross examination also testified that </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> &ldquo;&hellip;<font face="Times New Roman"><font size="3"><i>by practice the (plaintiff) were our employees so we had to pay them&rdquo;</i>.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It is therefore clear from this evidence that the plaintiff rendered the services and the defendants freely accepted these services on the basis that some remuneration was to be paid to the plaintiff by the defendants. There was an implied promise by the defendants to pay what the services were worth. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It is not disputed that the plaintiff rendered and the 1<sup>st</sup>defendant accepted management services during this period and as discussed, surely it then became the intention of the parties that a reasonable price should be paid for these services. As stated by Goff &amp; Jones in their <b>Book </b><u><b>The Law of Restitution, 6</b></u><sup><u><b>th</b></u></sup><u><b> Ed, (2002)</b></u>at para 23-004, that if the services are supplied at the request of the recipient, or if they are freely accepted by him, he will be bound to pay a reasonable price for them. This is the position held by the House of Lords in the case of </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><u><b>Way</b></u><b> V </b><u><b>Latilla [1937] 3 All ER 759</b></u></font></font></p> <dl> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">where the appellant and the respondent had not agreed on the remuneration to be paid to the appellant for services rendered. The House of Lords held that although there was no concluded contract between the parties for they had never reached agreement about an essential term, namely; the amount of pay the appellant was to receive, the appellant was entitled to remuneration upon a quantum meruit basis. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Lord Wright stated, at P. 765 that;</font></font></p> <dl> </dl> <dl> <dd> <p align="JUSTIFY"> &ldquo;&hellip;<font face="Times New Roman"><font size="3"><i>the work was done by the appellant and accepted by the respondent on the basis that some remuneration was to be paid to the appellant by the respondent. There was thus an implied promise by the respondent to pay on a quantum meruit that is, to pay what the services were worth&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It was further held that, in computing the amount of such remuneration court was entitled to have regard to what passed between the parties showing their intention. The relief of quantum meruit results from what in English law is called a quasi-contract or restitution. In the further case of </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd</b> [1943] A.C. 32 at 61 <b>Lord Wright </b>held that quasi-contract is generically different from the remedies in tort and contract and forms a &ldquo;third&rdquo; category of remedy altogether under English law that provides against unjust enrichment or benefit.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">In answer therefore to issue 1 is therefore I find that there was no valid agreement in relation to clause 14 thereof but that notwithstanding there did exist a quasi-contract based on the terms of the signed contract that is enforceable by court. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> </dl> <dl> </dl> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Issue No. 2: </b><u><b>Whether the agreement was terminated by the plaintiff or the </b></u></font></font></p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><u><b>defendants (and whether the termination was lawful)</b></u><b>.</b></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff avers in para 4(b) of the plaint, that the defendants&rsquo; letters dated 23<sup>rd</sup>September 2001 (Exh. D2) and that dated 28<sup>th</sup>September 2001 (Exh. D1) amounted to termination of the management agreements between the parties and therefore were in breach of clauses 1(a), 11(c)(i), 11(c)(ii), and 12 of the agreement.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants on their part pleaded under para 11 of their amended written statement of defence, that on the contrary, it&rsquo;s the plaintiff which terminated the agreement by letters dated 2<sup>nd</sup>October 2001 (Exh. ID1) and 15<sup>th</sup>October 2001 by which letters, the plaintiff sent the entire defendant&rsquo;s staff away on indefinite leave.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It would appear to me that if there was any termination of the agreements by any of the parties then that is to be found in the correspondence that was clearly flying between the parties at the time.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The letter from Kayonza Tea Factory Company (Exh. D2), is entitled <i>&ldquo;TERMINATION OF THE MANGEMENT AGREEMENT BETWEEN KAYONZA GROWERS TEA FACTORY LTD ANDAGRIMAG LTD&rdquo;. </i> The letter was addressed to the National Authorising Officer, Ministry of Finance, Planning and Economic Development, states that the Board of Directors of the 1<sup>st</sup>defendant company at its extra ordinary meeting held on 22<sup>nd</sup>September 2001 terminated the agreement. Mr. Caleb Tumwesimire, the Chairman Board of Directors testified that the said letter was addressed to the National Authorising Officer because among other reasons they did not know which of two Board of Directors that plaintiff company appeared to have was the correct Board to deal with. This is because at the time of the said letter the plaintiff company is said to have had problems stemming from the existence of two different Boards of Directors for the same company at the same time. The letter is copied to several persons, including the General Manager and the Company Secretary of the plaintiff company. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The letter of termination from Igara Tea Factory Company, (Exh. D.1) is also addressed to the National Authorising Officer and is framed in similar words to that from Kayonza Tea Factory Company (Exh. D2), notifying the addressee that the Board of Directors of the 2<sup>nd</sup>defendant company had resolved, at a meeting held on 22<sup>nd</sup>September 2001, to terminate the management agreement with the plaintiff. Mr. Nuwamanya Joe, the Chairman of the Board of Directors of the 2<sup>nd</sup>defendant also testified that the letter is addressed to the National Authorising Officer because they did not know which of two the two boards of the plaintiff company they should deal with. The letter was also copied to the General Manager and Company Secretary of the plaintiff company.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Counsel for the plaintiff submits that these letters, coupled with the subsequent conduct of the defendants which included engaging an altogether new management agency from the plaintiff, amounted to the termination of the management agreement.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. Tusasirwe, counsel for the defendants refutes this assertion and submits that the said letters did not terminate the agreement because they were not addressed to the plaintiff and that it was the plaintiff&rsquo;s fault if it assumed that its services had been terminated and so sent its staff on indefinite leave. He asserted that by ceasing to have any presence in the defendants&rsquo; business, the plaintiff in fact is the party which terminated the agreement.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">To my mind whether the agreements were terminated or not is a question of fact to be discerned from the conduct of the parties and the correspondence that went on between them.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The wording of both letters in issue (Exh. D1 and Exh. D2) are clear and should be given their ordinary meaning. The letters state that the defendant&rsquo;s Boards had taken a decision to terminate the management agreement. This with respect to the first defendant was from the 1<sup>st</sup>October 2001 while for the second defendant was from around the 29<sup>th</sup>September 2001 after the reconciliation of liabilities. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Although the letters were not addressed to the plaintiff, they were copied to them. The defendants&rsquo; decision to terminate the agreement was therefore effectively brought to the plaintiff&rsquo;s notice and in my opinion the plaintiff was justified to rely on that communication. The defendants therefore terminated the management agreement. The question that follows then is whether the termination was lawful?</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff pleaded that the defendants terminated the management agreements without due notice to the plaintiff contrary to the provisions of clauses 1(a) 11(c) (i) and (ii), 12 and 13 of the agreements, and that the plaintiff as a result suffered general and special damage.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Let me begin by reviewing what these clauses provide for. Clause 1(a) of the Agreements provides for duration of the management agreements being five years. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Clause 11(c) (i) of the agreements provides, however, that the agreement may be terminated by either party by service upon the other party of a written notice of termination if the other party fails to remedy any material breach of the agreement within 90 days after the service on them by the other of a written notice specifying the breach and requiring it to be remedied. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Clause 11(c) (ii) provides that, the termination shall be subject to Arbitration under clause 13 of the Agreement. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff&rsquo;s claim for damages in lieu of notice is based on clause 11(c) above and clause 11(4) which provides that &ndash;</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>In the event that Tea Factory Company or the management agent shall purport to terminate this agreement without due notice as provided in clause 11(c) (i) and 11(c) (ii) and subject to clause 10 hereon, then the Tea Factory Company or the management agent shall pay to the other party as liquidated damages, the aggregate amount of the management fee and commissions actually paid by the Tea Factory Company to the management agent in respect of the last completed financial year of the Tea Factory Company preceding such purported termination&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The Counsel for the defendants refutes the plaintiff&rsquo;s claims and submits that the termination of the agreement was lawful because the plaintiff had committed fundamental breaches as expressed by the defendants in their letter to the plaintiff dated 12<sup>th</sup>June 2001, complaining of poor services rendered by the plaintiff and requesting the plaintiff to attend to them or else they would terminate the agreement (Exh. D5). The Counsel for the defendants submits that by this letter, due notice of termination was issued to the plaintiff.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The letter was entitled <i>&ldquo;DISSATISFACTION WITH SERVICES BEING RENDERED TOIGARA AND KAYONZA TEA FACTORIES LTD.&rdquo;</i> It informs the addressee(s) about the decline in the services rendered by the plaintiff company which put their shareholders&rsquo; interests at peril. The letter lists the areas of dissatisfaction, with <i>&ldquo;a view ofamicably and timely resolving&rdquo;</i>the issues. The defendants express in this letter that they &ldquo;<i>strongly feel that such an alarming situation cannot be permitted to subsist anylonger&rdquo;.</i> The defendants conclude by saying that they &ldquo;<i>wished to bring to the (plaintiff&rsquo;s) attention the non-observance of the agreement and do hope that within 30 days you will have corrected these points which are of concern to us&rdquo;, </i>that they strongly put it to the plaintiff that they were not in any way interested and would not be party to wrangles that did not profit the shareholders.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">According to Mr. Caleb Tumwesimire (DW1), Exhibit D5 was written to the plaintiff to express the defendant&rsquo;s dissatisfaction and state the reasons threatening termination. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The question for court now to find is whether this letter amounted to a notice under clause 11 (c) (i) of the agreement? What does this letter say in this respect? </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Exhibit D5 dated 12<sup>th</sup>June 2001 and addressed to the Chairman of Agrimag (the Plaintiff) and signed jointly by the chairpersons of the Defendant Tea Factory Companies, inter alia provides at P2</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;&hellip; <font face="Times New Roman"><font size="3"><i>Therefore in accordance with section (sic) of the agreement, we wish to bring to your attention the non observance of the agreement and do hope that within 30 days you will have corrected these points which are of concern to us&hellip;&rdquo;</i></font></font></p> </dd> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">There were eight areas of concern listed in that letter.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Clause 11 (c) (i) of the agreement provides</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> &ldquo;&hellip; <font face="Times New Roman"><font size="3"><i><b>Termination</b></i></font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i><b>by Either Party</b></i></font></font></p> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>By service by either party upon the other of a written notice of termination, if the party of the other part fails to remedy any material breach of this agreement within 90 days after service on them by the other of a written notice specifying the breach and requiring it to be remedied&hellip;&rdquo;</i></font></font></p> </dd> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Clearly the authors of exhibit D5 had clause 11 (c) (i) of the agreement in mind but fell short of the remedy period of 90 days by 30 days thus requiring a shorter period of remedy than is required under the agreement. In any event the letters of termination from the defendant Tea Factory Companies were not written until after the 21<sup>st</sup>September 2001 well within the remedy period as required in the agreements.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">So was Exhibit D5 a written notice within the meaning of the agreement, notwithstanding the 60 days notice instead of 90 days? I say yes in substance it was. Clearly the authors just failed to accurately state the remedy period only and I find that that is not fatal to substance of the notice. I therefore find the consequent termination of the agreements by the defendant Tea Factory Companies was with notice and thus the agreements were lawfully terminated.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Issue No. 3: </b><u><b>Whether the plaintiff suffered any damage</b></u><b>.</b></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It is therefore clear from my findings above that there was an agreement between the parties enforceable by the courts which was lawfully terminated with notice by the defendants. That being the case the only damages that the plaintiff would have suffered would have been the non payment of fees, which is a special damage, up to the time of the termination.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The clearest evidence on this was given by Mr Vincent Rwakijuma (PW. 2) a former accountant with the Plaintiff Company. He relied on reconciliations&rsquo; done by the parties in 2005 and summarized them in Exh P. 13 for Kayonza Tea Factory Company and Exh P. 14 for Igara Tea Factory Company. He testified as to the fees due in 2001 the year of the termination.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">With respect to Kayonza Tea Factory Company the management fees were as follows (Exh P.13)</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">1. Management fees as per inv. 03/2001 (VAT Inc) &hellip;&hellip;&hellip;&hellip;Shs. 162, 337,493=</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">2. Fee in lieu of notice as per inv. 07/2001 (VAT Inc) &hellip;&hellip;&hellip;Shs. 216, 449,991=</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">3. Less 2001 Management fee advance paid&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;Shs. 67, 000,000=</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">With respect to Igara Tea Factory Company the management fees (payable part in Uganda shillings and part in United States Dollars but converted into Uganda shillings at US $1 = Ushs.1710) were as follows (Exh P. 14)</font></font></p> <ol> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Management fees as per</font></font></p> <ol type="i"> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">inv. 01/2001 (VAT inc)&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;..shs 115, 045, 862</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Inv. (US $) 02/2001 (VAT inc) &hellip;&hellip;&hellip;&hellip;&hellip;...shs 43, 572, 168</font></font></p> </li> </ol> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">fees in lieu of notice as per </font></font></p> <ol type="i"> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">inv. 04/2001 (VAT inc)&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;.Shs.153,394,483=</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">inv. (US$) 05/2001 (VAT inc)&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;Shs. 58,092,821=</font></font></p> </li> </ol> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">3. Bonus fee for 2000 inv. 06/2001&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;..Shs.127,698,929=</font></font></p> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">4. Less 2001 Management fee advance paid&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;Shs. 43,000,000=</font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Since I have found that the termination actually was with notice then the claim for fees in lieu of notice is not justified. Therefore the Management fee due to plaintiff with respect to Kayonza Tea Factory Company (taking into account the advance paid) would be Ushs.95,337,493/=. On the other hand following the same basis, I find the money due to the plaintiff with respect to Igara Tea Factory Company being management fee and bonus (taking into account the advance paid) would be Ushs.115,621,030/=.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Issue No. 4: </b><u><b>What Remedies are available to the plaintiff.</b></u></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff seeks to recover management fees and commission from the first defendant (Kayonza Tea Factory Company) for the period January &ndash; September 2001. These I award in the sum of Ushs.95,337,493/= as special damages.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff also claims against the second defendant Igara Tea Factory Company Management fees for the period January &ndash; September 2001 and some bonus as well. These I award in the sum of Ushs.115,621,030/= as special damages.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff also seeks general damages from both defendants for breach of contract largely for termination of the agreement without notice. These for reasons already given in this judgment I decline to give.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff seeks to recover interest at bank rate on the awarded special damages. I accordingly award interest on the special damages at 24% p.a. from the 30<sup>th</sup>September 2001 until payment in full on both awards of special damages. </font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I award costs of the main claim to the plaintiff.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I shall now address my mind to the counter claim.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> </dl> <dl> </dl> <dl> </dl> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><b>Issues No. 5: </b><u><b>Whether the defendant is entitled to the counter claim and if so what are their remedies.</b></u></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">In their amended written statements of defence and counterclaim the defendants seek remedy against the plaintiff for breach of contract. The alleged breaches will be addressed in the same order they are enumerated by counsel for the defendants in his written submissions.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">1. <u>Failure to privatize and issue equity to the defendants</u> </font></font></p> <p> <font face="Times New Roman"><font size="3">plaintiff&rsquo;s failure to comply with this provision constituted a fundamental breach of the contract.</font></font></p> <dl> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. Tusasirwe argued for the defendants that the transformation of AGRIMAG, the plaintiff company, into a private company in which the Tea factories would hold majority shares and controlling interest constituted part of the terms of the respective contracts between the plaintiff and the defendants, and that the </font></font></p> </dd> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Clause 1(c) of both Management Agreements (Exh. P.3 and P.15) provides that;</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>The managing agent shall within two years from the date of first signing of Annexture &lsquo;A&rsquo; as defined under Clause 9(a)(ii) transform itself into an autonomous and private corporate body failure of which will be considered a material breach of this agreement&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff stated that the process to privatize and restructure the plaintiff company started on 12<sup>th</sup> December 2000 but was not completed due to the wrangles that ensued until the defendants terminated the agreements. This is conceded to by Mr Caleb Tumusiimire (DW1) who testified that the proper procedure to restructure the plaintiff company was followed but could not be completed because the situation and the management of the plaintiff company was chaotic.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff admits indebtedness to the defendants for the Shs.10m/= paid by each of them as part payment on the purchase of shares in the plaintiff company (para 13 of Reply to WSD) which will be refunded for failure of consideration.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">This of course according to the agreement is a material breach but clearly, the defendants in their relationship with the plaintiffs chose to treat this failure to privatize / restructure as breach of a warranty rather than a condition of the contract. The distinction between the two was explained by <b>F. Moulton L. J.</b> in his dissenting judgment in <u><b>Wallis, Son &amp; Wells</b></u><b> V </b><u><b>Pratt and Haynes [1910]2 K.B. 1003</b></u> in the following terms:</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>A party to a contract who has performed or is ready and willing to perform his obligation under that contract is entitled to the performance by the other contracting party of all the obligations which rest upon him but such obligations are not all of equal importance. There are some which go so directly to the substance of the contract or, in other words, are so essential to its very nature, that their non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all. On the other hand, there are other obligations which though they must be performed, are not so vital that a failure to perform them goes to the substance of the contract. Both clauses are equally obligations under the contract, and the breach of any one of them entitles the other party to damages. But in the case </i></font></font></p> </dd> <dd> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>of the former class he has the alternative of treating the contract as being</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><i>completely broken by the non-performance&rdquo;.</i></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff opposes the defendants claim for damages for breach stating that the defendants participated in the delayed privatization process without complaint and should not therefore complain about the delay or about failure to complete the process when they refused to recognize the plaintiff&rsquo;s legitimate board.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants contend that the plaintiff company&rsquo;s restructuring was never completed. Counsel for the defendant further the restructuring failed even after the defendants paid their contributions to the new share capital. The plaintiffs however claim that Uganda Tea Growers Corporation (their parent company) appointed a legitimate Board of Directors as shown by the letter dated 14<sup>th</sup> September 2001 (Exh. D13) which was also copied to the defendants but the defendants also refused to recognize this Board of Directors.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. Caleb Tumusiimire (DW1) and Ms. Joy Kanyengere (DW3) the two chairpersons of the Tea Factory Companies testified for the defendants that they did not accept or agree with this new position because (in their opinion) the actions of Uganda Tea Growers Corporation were illegal.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I am inclined to agree with the defendant/counter claimants that there was total confusion as to the question of the privatisation of the plaintiff company. This can be seen clearly from the correspondences especially between the plaintiff company itself and its parent company Uganda Tea Growers Corporation. Exhibit D11 dated 3<sup>rd</sup> April 2001 is a clear example of this where Uganda Tea Growers Corporation sought to reverse actions taken by the plaintiff in this regard. Even a meeting to reconcile the whole restructuring had to be held mediated by a whole Government Minister on 24<sup>th</sup> April 2001.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The said meeting was chaired by the Minister (Hon. Kisamba Mugerwa) and discussed the privatization/restructuring of AGRIMAG, and was attended by the Chairman of AGRIMAG Mr. Ampaire Apollo, Ag. General Manager of AGRIMAG Mr. E. Kajubu , and Mr. Balisanga respectively, the chairperson of Kayonza Tea Factory Ltd, Mr. Tumwesimire Caleb and Ntwirenabo Juliet and chairperson of Igara Tea Factory Ltd. among others. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">At that meeting it was resolved that AGRIMAG arranging for its own restructuring was improper and unacceptable and that the current Board of Directors of AGRIMAG was not recognized by all concerned. It was further resolved that there was an urgent need to reconstitute a new Board of Directors recognized by all stakeholders according to the Memorandum of Understanding not later than 8<sup>th</sup> May 2001, and that the Minister of Finance, Planning and Economic Development should take a lead in the restructuring of AGRIMAG in consultation with other stakeholders.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">This appeared to have resolved nothing because by a letter dated 14<sup>th</sup> September 2001 entitled <i>&ldquo;</i><i><u>Appointment of the Legitimate Board of AGRIMAG</u></i><i>&rdquo;</i> (Exh. D13), addressed to AGRIMAG and copied to the defendants in the instant case, Mr. Balisanga Apuuli the Ag. General Manager of Uganda Tea Growers Corporation states that, in accordance with the existing Memorandum and Articles of Association, the Uganda Tea Growers Corporation board at the extra-ordinary meeting held on 14<sup>th</sup> September 20001 resolved to appoint an interim Board of Directors to AGRIMAG to steer the company through the privatization/restructuring process with immediate effect and listed the said legitimated constituted board.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">However, Agrimag&rsquo;s reply in a letter dated 18<sup>th</sup> September 2001 (Exh. D.14) states that the actions of the Uganda Tea Growers Corporation board of the 14<sup>th</sup> September 2001 were illegal and malafide as nobody had authority to reverse the decisions or resolutions of AGRIMAG at the annual general meeting. In the same letter the Tea Factory Companies including the defendants are advised to seek court declarations inter alia that Uganda Tea Growers Corporation has unlawfully breached the agreement of sale between itself and the Tea Factory Companies.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">To my mind notwithstanding whoever may have been correct in this debate, the fact remains that Agrimag&rsquo;s failure to privatize and transfer 15% of its shares to the defendants was a breach of contract and the defendants are entitled to damages for this breach.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">2- <u>Failure to appoint key staff, mismanagement and misappropriation</u> </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. Tusasirwe, counsel for the defendants argued that under the management agreement (Exh. P.3 and P.15) the plaintiff undertook to effectively manage the business of the defendants, to engage all staff and labour required for the carrying on of the defendants&rsquo; business to train and control them.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">He states that since 2000, several key staff left and were not replaced by the plaintiff and that these departures without replacement negatively affected the services rendered by the plaintiff to the defendants and caused the defendants financial loss and were in breach of clause 2(d), 3(e), 4(f) and 2(a) of the management agreements.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">He relied on <u>Clause 3(e)</u> of the agreements that provides that it shall be the duty of the plaintiff to,</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>On behalf of the TFL to engage all staff and labour required for the carrying on of that TFL&rsquo;s business and to train and control them, the managing agent having power to dismiss any employee according to the Laws of Uganda and the TFL&rsquo;s rules and regulations, and further to second any member of their own staff, in particular with reference to senior factory management and the terms of service of all such staff shall conform at all times to those of the managing agent&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><u>Clause 2(a),</u> further provides that,</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>Subject to all the terms of the agreement, the TFL hereby appoints the managing agent to be the sale and exclusive manager of the TFL business for the duration of this agreement&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Lastly <u>Clause 2(d)</u> provides that,</font></font></p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>The Managing agent shall furthermore undertake the duty of the Company Secretary&rdquo;.</i></font></font></p> </dd> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Mr. M. Asiimwe DW2 and Ms Joy Kanyengere DW3 for the defendants/counter-claimants both testified that a Mr. Biraro who was the Factory Manager of Igara Tea Factory Ltd was suspended in December 2000, and that in early 2000, the Financial Controller was suspended and Mr. Tayebwa who was the Internal Auditor also became the Acting Financial Controller (which was a conflict of interests because he was expected to audit himself). They stated that the Monitoring and Evaluation Officer left at about the same time and was not replaced.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">They further testified that after the General Manager left one Mr. Lee Nyaika became both Company Secretary and Acting General Manager for 2 years until early September when he was replaced by Mr. Kimpwitu as Acting General Manager who acted until the termination of the management contracts. The defence witness all testified that during this period, supervision in the defendant Tea Factorys&rsquo; was non-existent and the functions of Company Secretary remained unattended to.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants contend that owing to the said staff situation the plaintiff grossly mismanaged the defendant Tea Factory Ltd. It failed to perform its core obligations, namely; staff operations and supervision, proper procurement, spending within the agreed and/or authorized limits, presentation of accounts within the time frame laid down in para 3(a) &ndash; (d) of the agreements.</font></font></p> <p> <font face="Times New Roman"><font size="3">The defendants then pointed to the specific instances of mismanagement and misappropriation alleged by the defendants. Igara Tea Factory Limited claimed an overall loss of Ushs.1,027,071,000/= while Kayonza Tea Factory Ltd also claimed an overall loss of Ushs.664,539,000/= being losses caused by the plaintiff in the financial year 2001 as evidenced by the audited accounts Exh. D.20 and Exh. P1.</font></font></p> <p> <font face="Times New Roman"><font size="3">For the plaintiff&rsquo;s in reply, Vincent Tumuhaise PW1 and Keneth Kyamulasire PW3 testified that the defendant companies did not have General Managers but had Group Managers. Mr. Kyamulasire stated that he was the Factory Manager and later Group Manager for Igara Tea Factory Ltd from 1999 &ndash; 2000 and Group Manager of both defendants in 1999. He was transferred from Igara Tea Factory Ltd to the plaintiff company in 2000 as Factory Superintendent. The plaintiffs&rsquo; further asserted that key staff were appointed and put in place at the defendant Tea Factory Limited and they provided the required services. That, the staff who acted in place of others did so for a very short time and were at the plaintiff&rsquo;s head office and this did not affect the services to the defendants for as the targets were being met and operations went on normally.</font></font></p> <p> <font face="Times New Roman"><font size="3">The plaintiff doesn&rsquo;t deny that there was a general reduction in the defendants income in 2001 but attributes this to the world prices of tea over which it had no control. Mr Vincent Tumuhaise PW1, the audit supervisor with M/S Lawrie Prophet &amp; Co. who were the statutory auditors of the defendants between 1998 &ndash; 2002, testified that there was a general improvement in the sales of the defendant Tea Factory Companies except for the year 2001 when there was a loss due to the general world tea prices which were on the down trend.</font></font></p> <p> <font face="Times New Roman"><font size="3">Mr. Tumuhaise however admitted that he had no authoritative knowledge of the tea business and did not state the basis of his contentions. The world tea price index was not produced to substantiate this position.</font></font></p> <dl> <dt> &nbsp;</dt> <dt> &nbsp;</dt> <dt> &nbsp;</dt> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Whatever the situation was it would appear to me that evidence of breach in this area is difficult to assert. There is even some evidence that there were some profits being made as well. There was no proof that the expenditure by the plaintiffs were not in execution of its duties and obligations to the defendants. The defendants have not on the balance of probability proved this breach.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p> &nbsp;</p> <p> &nbsp;</p> <dl> <dt> &nbsp;</dt> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">3- <u>Loss caused by </u><i><u>&ldquo;Sale&rdquo; </u></i><u>of tea to West Ankole Tea Packers</u>:-</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants claim that the plaintiff in breach of its duty to provide the defendants with marketing services, sold their tea on credit to a dubious buyer known as Sam Mugisha alias Stephen Muhire t/a West Ankole Tea Packers under unclear terms and contrary to the established business practices which caused a loss of Ushs.17, 811,000/= to Kayonza Tea Factory Limited and a loss of Ushs.55, 458,000/= to Igara Tea Factory Ltd. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants in asserting this breach rely on Clause 5(a) of the management agreements which provides</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <dl> <dd> <p align="JUSTIFY"> &ldquo;<font face="Times New Roman"><font size="3"><i>The managing agent shall in the performance of their duties under this agreement exercise a standard of care and skill which would fairly and reasonably be expected of an experienced operator of tea factory acting in what they reasonably believe to be in the best interest of the TFLs but shall not be liable to the TFL for any loss of profit or contract that the TFL may suffer as a result of events beyond the control of the managing agent&rdquo;.</i></font></font></p> </dd> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The plaintiff denied this breach and stated that it took all possible steps against Sam Mugisha (aka Stephen Muhire) who handled the transaction for West Ankole Tea Packers by taking him to court, but no money was recovered as shown by the court bailiff&rsquo;s report (Annexture R4 and Exhibit P 18 i and ii). Mr. K. Kyamulasire PW3 adduced evidence that the plaintiff took court action to recover the sums under <u>H.C.C.S No. 1129 of 1998</u> in which the judgment debtor was arrested in execution and committed to civil prison but the said sums were not recovered.</font></font></p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">He further testified that that Sam Mugisha used to buy tea from the defendants and would make payments in Kampala and the marketing clerk in Kampala would authorize the sale. He further testified, that this was the practice long before the plaintiff was engaged as managing agent of the defendants, and that the manager would only call Kampala office to confirm the letters of authorization. He stated that it only later that they learnt that Sam Mugisha had used forged letters of authorization. The plaintiff denied any incompetence on their side and pointed out that the defendants did not challenge the existence of the stated business practice between them and Sam Mugisha t/a West Ankole Tea Packers. </font></font></p> <p> <font face="Times New Roman"><font size="3">I find that the plaintiff in pursuing the said Mugisha in court exercised the necessary standard of care and skill as would be expected of a manager regardless of the fact that the judgment though in their favour did not result in the recovery of the money. This breach therefore has not been proved on the balance of probabilities.</font></font></p> <dl> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> &nbsp;</p> <ol start="4"> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><u>Claims for specific amounts of money by the defendants</u></font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The defendants in their counter claims also make specific claims for special damages against the plaintiff.</font></font></p> <p> <font face="Times New Roman"><font size="3">In the case of Kayonza Tea Factory Company these are in para 22-34 of their counter-claim and include</font></font></p> <dl> <dt> &nbsp;</dt> </dl> <ol type="i"> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Misappropriation of Ushs.6,176,092/=</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Granting a loan of Ushs.18,000,000/= to their general manager</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Failing to secure project funds of Ushs.57,987,665/=</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Failing to account for expenditure of Ushs.2,518,665/=</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Ushs.10,000,000/= paid in as shares </font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">In the case of Igara Tea Factory Company these are in para of their counter-claim and include</font></font></p> <ol type="i"> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Ushs.16,000, 000/= paid for construction of a labour camp at Mari Estate Ltd as a result of falsely certified work.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Ushs.12,000,000/= paid for survey work at Kakombe estate to an apparently none existing person.</font></font></p> </li> <li> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">Ushs.10,000,000/= paid in as shares.</font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">The evidence adduced around most of the above items was highly contentious.</font></font></p> <p> <font face="Times New Roman"><font size="3">However there is the evidence of Mr Rwakijuma PW2, the accountant of the plaintiff which to my mind addresses these claims against the plaintiff.</font></font></p> <dl> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">He testified that after the termination he and another were asked to carry out a reconciliation of the monies due to each of the parties and he submitted a report dated 27<sup>th</sup> May 2005 to the said parties. This report was in the main, not contested by the defendants. He then gave a summary of the monies due in Exh. P13 and 14 (referred to supra). Based on the evidence before court, the reconciliation seems to have taken into account these specific claims before court and others not pleaded. More importantly the reconciliation shows the sums of money which the plaintiff concedes that it owes to the defendants i.e.</font></font></p> <ol type="i"> <li> <p align="LEFT"> <font face="Times New Roman"><font size="3">The plaintiff owes the Kayonza Tea Factory Company (Exh. P13)&hellip;&hellip;&hellip;&hellip;&hellip;.Ushs.177,458,371</font></font></p> </li> <li> <p align="LEFT"> <font face="Times New Roman"><font size="3">The Plaintiff owes the Igara Tea Factory Company (Exh. P14)&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;Ushs.107,377,987</font></font></p> </li> </ol> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">It is unlikely that based on the evidence before court that court can on the balance of probabilities do a more exact assessment of the monies owed by the plaintiff to the defendants; in any event the figures are more than those pleaded. Since this was an attempt by the parties themselves to promote reconciliation among themselves court will promote and give it legal efficacy by accepting those figures therein as the figures due from the plaintiff to the defendants. To the extent that they have not already been paid there are due and owing. </font></font></p> <p> <font face="Times New Roman"><font size="3">These figures of course can be offset from the awards in the main claim.</font></font></p> <dl> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3"><u>Remedies of the Defendant/counter-claimant</u></font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I accordingly find that the plaintiff owes the Kayonza Tea Factory Company Ushs.177, 458,371/= as special damages according to their own reconciliation to the extent that this has not already been paid. I also find that the Plaintiff owes the Igara Tea Factory Company Ushs.107, 377,987/= as special damages according to their own reconciliation to the extent that this has not already been paid.</font></font></p> <p> <font face="Times New Roman"><font size="3">Since I found breach with regard to the issue of shares I will award each of the defendants&rsquo; Ushs.2, 000,000/= in general damages for breach of that and other obligations that may be encompassed that in the reconciliation.</font></font></p> <p> <font face="Times New Roman"><font size="3">I also award interest at 24% p.a. from the end of September 2001 on the special damages until payment in full and 8% p.a. on the general damages from the date of judgment until payment in full.</font></font></p> <dl> <dt> &nbsp;</dt> <dt> &nbsp;</dt> </dl> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I award the defendants the costs of the counter-claim.</font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p align="JUSTIFY"> <font face="Times New Roman"><font size="3">I so order. </font></font></p> <p align="JUSTIFY"> &nbsp;</p> <p> <font face="Times New Roman"><font size="3"><b>GEOFFREY KIRYABWIRE</b></font></font></p> <p> <font face="Times New Roman"><font size="3"><b>JUDGE</b></font></font></p> <p> <font face="Times New Roman"><font size="3"><b>Date: 31/01/08</b></font></font></p> <dl> <dt> &nbsp;</dt> <dt> &nbsp;</dt> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> <dt> &nbsp;</dt> <dd> <p align="JUSTIFY"> &nbsp;</p> </dd> </dl> <div type="FOOTER"> <p align="LEFT"> &nbsp;</p> </div> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-c978c4429d808659cc4526d2d19ca464"> <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/commercial-court/2008/4/commercial-court-2008-4.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 14:51:58 +0000 Anonymous 20344 at https://old.ulii.org Doreen Rugundu v International Law Institute ((Civil Appeal No 8 of 2005)) [2006] UGSC 18 (3 October 2006); https://old.ulii.org/ug/judgment/supreme-court/2006/18 <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/contract-law" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Contract Law</a></li><li class="field-item odd"><a href="/tags/termination-contract" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Termination 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><strong><em>THE REPUBLIC OF UGANDA</em></strong></p> <p><strong><em>IN THE SUPREME COURT OF UGANDA AT MENGO</em></strong></p> <p>&nbsp;</p> <p><strong><em>(CORAM:</em></strong><em> <strong>ODER, TSEKOOKO, KAROKORA, KANYEIHAMBA AND KATUREEBE JJSC.)</strong></em><br /> <strong><em>CIVIL APPEAL NO. 8 OF 2005</em></strong><br /> <strong><em>BETWEEN</em></strong><br /> <strong><em>DOREEN RUGUNDU:</em></strong><em> <strong>:::::::::: APPELLANT</strong></em><br /> <strong><em>AND</em></strong><br /> <strong><em>INTERNATIONAL LAW INSTITUTE: :::::::::: RESPONDENT</em></strong></p> <p><strong><em>(An appeal from the decision of the Court of Appeal at Kampala (Okello, Kitumba and Byamugisha, JJA) dated... </em></strong><br /> &nbsp;</p> <p><strong><u>JUDGMENT OF KAROKORA, JSC:</u></strong></p> <p>This is a second appeal. It arises from the decision of the Court of Appeal which overturned the judgment of the trial Judge, Mwondha, J, who had allowed a suit instituted by the appellant claiming damages for breach of contract and awarded her a sum of Shs. 10 million as damages for the breach with interest of 10% p.a., from the date of judgment till payment in full and costs of the suit.</p> <p>The facts which led to the institution of the case in the High court were not in dispute. On 25<sup>th</sup> July 2000, the respondent interviewed the appellant for the post of Special Assistant to the Executive Director/Assistant Marketing Manager. She was successful. The respondent offered the post to the appellant in a letter dated 28<sup>th</sup> July, 2000. The commencement date was 3<sup>rd </sup>January, 2001. The appellant accepted the job and a contract of employment was executed between the parties. The appellant was to spend 4 days at the respondent's office familiarizing herself with its operations. On 29<sup>th</sup> August 2000, the respondent wrote to the appellant informing her that her services were no longer required. She tried to seek an explanation for this turn of events and received no response. On 11<sup>th</sup> January 2001, M/s. Kateera &amp; Kagumire, Advocates, wrote to the respondent demanding payment of damages and costs to the appellant for breach of contract. On 16th January 2001, M/s. Byenkya, Kihika &amp; Co., Advocates, wrote to M/s. Kateera &amp; Kagumire, Advocates, on behalf of the respondent, re-offering the appellant the job on the terms that had been stipulated in the contract. The appellant rejected the offer and filed the suit in the High Court, claiming the following reliefs:</p> <blockquote> <table> <tbody> <tr> <td><strong><em>(1)</em></strong></td> <td><strong><em>Salary for the period from January to December, 2001;</em></strong></td> </tr> <tr> <td><strong><em>(2)</em></strong></td> <td><strong><em>Health Insurance, performance related bond;</em></strong></td> </tr> <tr> <td><strong><em>(3)</em></strong></td> <td><strong><em>General damages for disappointment, embarrassment and inconvenience;</em></strong></td> </tr> <tr> <td><strong><em>(4)</em></strong></td> <td><strong><em>General damages for breach of contract;</em></strong></td> </tr> <tr> <td><strong><em>(5)</em></strong></td> <td><strong><em>Interest at the rate of 24% p.a. from the date of judgment till full payment in full;</em></strong></td> </tr> <tr> <td><strong><em>(6)</em></strong></td> <td><strong><em>Costs of the suit.</em></strong></td> </tr> </tbody> </table> </blockquote> <p>The respondent in its written statement of defence denied the averments in the plaint and contended that the appellant did not suffer any loss or damage.<br /> &nbsp;</p> <p>The issues to be determined at the trial were-</p> <blockquote> <table> <tbody> <tr> <td><strong><em>(1)</em></strong></td> <td><strong><em>Whether there was a valid contract between the parties.</em></strong></td> </tr> <tr> <td><strong><em>(2)</em></strong></td> <td><strong><em>And if so, who repudiated and or breached the contract?</em></strong></td> </tr> <tr> <td><strong><em>(3)</em></strong></td> <td><strong><em>Whether the defendant mitigated the breach, if at all.</em></strong></td> </tr> <tr> <td><strong><em>(4)</em></strong></td> <td><strong><em>What remedies or quantum is the plaintiff entitled to, if at all?</em></strong></td> </tr> </tbody> </table> </blockquote> <p>&nbsp;</p> <p>The trial judge answered the first issue in the affirmative. She found that the respondent had breached the contract and therefore, gave judgment in favour of the appellant in the terms already stated. The respondent was dissatisfied with the decision of the High Court and therefore appealed to the Court of Appeal which allowed the appeal. The respondent being dissatisfied with the decision of the Court of Appeal has now appealed to this Court.</p> <p>Before considering the grounds of appeal, it is useful to note the main features of the employment contract on which the suit turns. Further, it is also necessary to consider the Employment Act and determine whether or not the appellant's termination of contract before the date of its commencement was lawful or wrongful.</p> <p>The letter of the appellant's appointment stated inter alia</p> <p><strong><em>"International Law Institute - Uganda Legal Centre of Excellence</em></strong></p> <p><strong><em>Doreen Rugunda Dear Ms Rugunda</em></strong></p> <p><strong><em>Re: APPOINTMENT AS SPECIAL ASSISTANT TO THE EXECUTIVE DIRECTOR/ASSISTANT MARKETING MANAGER</em></strong></p> <p><strong><em>After careful consideration of your background and experience, the International Law Institute, Uganda (ILI - Uganda) is of the view that you will be an excellent addition to our team and would consequently like to hire you for the above position. The period of this employment will run from </em></strong><em>January 3<sup>rd</sup> 2001, to December 31<sup>st</sup> 2001, and will include an initial 6 months probation period <strong>(emphasis is added).</strong></em></p> <p><strong><em>Your gross salary per month will be Shs. 1,500,000= and will include added benefits such as health Insurance performance related bonuses and 20 days annual leave. A salary review will be carried out following successful completion of the probation period in addition to satisfactory results in your staff evaluation. There will also be possibilities for upward adjustment based on your performance.</em></strong></p> <p><strong><em>Kindly confirm your acceptance of this offer in writing at your earliest convenience </em></strong></p> <p><strong><em>Sincerely,</em></strong></p> <p><strong><em>S. Munyantwali</em></strong></p> <p><strong><em>Executive Director ILU- Uganda."</em></strong></p> <p>The contract of employment between the appellant and the respondent was for a fixed period of 12 months and included an initial 6 months probation period. However, before the appellant commenced her service of the probationary period, the respondent terminated her services on 29<sup>th</sup> August, 2000.</p> <p>As I have already stated earlier on, the appellant's suit in the High Court for the breach of contract and damages was successful. However, the Court of Appeal reversed the High Court decision hence this appeal.<br /> &nbsp;</p> <p>There are three grounds of appeal before this Court. Mr. Adriko, counsel for the appellant argued grounds 1 and 2 together and argued the 3<sup>rd</sup> ground separately. He argued the grounds in that order. I shall deal with the grounds in the same order.<br /> &nbsp;</p> <p>Grounds 1 and 2 complained that:</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong><em>"(1) The learned Justices of Appeal erred in law and fact when they held that the appellant had no accrued rights in the employment contract simply because she had not commenced work under the employment contract.</em></strong></p> <p>&nbsp;</p> <p><strong><em>(2) The learned Justices of Appeal erred in law and fact when they held that the appellant had suffered loss or damage, which ought to attract an award of damage."</em></strong></p> <p>Counsel for the appellant submitted that the holding by Byamugisha, JA, with whom the other two Justices concurred to the effect that a person has no accrued rights in a contract of service which has been terminated before the date when it was supposed to commence is flawed, because the holding did not take into account the principle of anticipatory breach. He referred to the following cases: <strong><em>Universal Cargo Carriers Corp - vs - Citati [1957] ALLER 84, Gunton - vs - Richard - Upon Thames London Borough Council [1981] 1 Ch 448 at 467, Laws - vs - London Chronicle [1959] 2 ALLER 285 </em></strong>and <strong><em>Hochester - vs - De Lar Tour [1843- 60] ALLER Reprint at page 14, </em></strong>for the proposition inter alia - that the accrued rights in service contract, which has been breached, commences immediately after the execution of the contract by the aggrieved party who has not accepted the dismissal.</p> <p>Therefore, counsel submitted that the appellant had the accrued rights to sue immediately after the respondent terminated her contract of employment despite the fact that its date of commencement had not yet arrived.</p> <p>On the other hand, Mr. Kihika, counsel for the respondent opposed the appeal and submitted that the Justices of Appeal were alive to the principle of anticipatory breach when they held that the respondent had terminated the contract before it was operationalised. Counsel further submitted that the Justices of Appeal were right when they held that at the time of termination of the contract of service on 29<sup>th</sup> August, 2000, no rights under the contract had accrued to the appellant as an employee of the respondent. Counsel further submitted that the respondents were right on mitigation of damages when they offered to re-engage her on the same terms which she refused to accept because at that time she had already secured another job.</p> <p>This was a contract of personal service between the respondent and the appellant. The appellant was to commence work at the respondent's Institute on 03-01-2001. But before that time of performance arrived the respondent told the appellant that they would not employ her. The respondent repudiated their promise to employ her 4 months before the commencement date of the contract.</p> <p>Section 24(1) of the Employment Act which is relevant to the termination of a contract of probationary period of service provides as follows:</p> <p><strong><em>"(1) A contract for a probationary period of service may be terminated by either party giving to the other seven days' notice or payment of seven days' wages in lieu of notice."</em></strong></p> <p>Clearly, as provided in Section 24(1) of the Employment Act, a contract for probationary period of service may be terminated by either party giving to the other seven days' notice or payment of seven days' wages in lieu of the Notice. In the instant case, the respondent gave 4 months notice of their repudiation of the contract to the appellant which was more than 7 days notice prescribed by the Act. However, when the appellant threatened to sue the respondent for what she claimed to have been wrongful termination of her contract of employment, and the respondent in order to mitigate damages, offered to re-engage her on the original terms of contract, which the appellant rejected and demanded to be awarded full remuneration she would have earned if she had performed the contract plus other benefits under the contract.</p> <p>There are decided cases which are relevant to this appeal. In <strong><em>Vine - vs -National Dock Labour Board [1956] 1 QB 658 </em></strong>Jenkins LJ, stated:</p> <p><strong><em>"It has long been well settled that if a man employed under a contract of personal service is wrongfully dismissed, he has no claim for remuneration due under the contract after repudiation. His only money claim is for damages for having been prevented from earning his remuneration. His sole money claim is for damages and he must do everything he reasonably can to mitigate them."</em></strong></p> <p>Later Salmoud LJ stated in - <strong><em>Decro - wall International SA - vs -Practitioners in Marketing Ltd. [1971] 1 WLR 361 </em></strong>that:</p> <p><strong><em>"If a master in breach of contract, refused to employ the servant, it is trite law that the contract will not be specifically enforced. As I hope I made plain in the </em></strong><em><u>Denmark Production case [1969] I QB 699,</u> <strong>the only result is that the servant albeit he has been prevented from rendering services by the master's breach, cannot recover remuneration under the contract, because he has not earned it. He has not rendered the services for which remuneration is payable. His only money claim is for damages for being wrongfully prevented from earning his remuneration. And like any one else claiming damages for breach of contract, he is under a duty to take reasonable step to minimize the loss he has suffered through the breach.</strong></em></p> <p><strong><em>He must do his best to find suitable alternative employment. If he does not do so, he prejudices his claim for damages "</em></strong></p> <p>I agree with the above opinions, which in my opinion, give the correct position of the law.</p> <p>In the instant case the contract of employment was terminated long before the date of its due performance. In her lead judgment of the Court of Appeal, when re-evaluating the evidence of both parties and making its conclusion, Byamugisha, JA, with whom the other 2 Justices concurred stated, inter alia:<br /> <br /> <br /> <strong><em>"It is not disputed that the appellant terminated the contract before it was operationalised. In my humble opinion no right had accrued to the respondent as an employee of the appellant. She was therefore not dismissed from employment. In order to get any damages for breach she had to adduce evidence of damages she suffered as a result of the alleged breach. At the trial she gave evidence and stated what she wanted from the respondent was the salary she would have earned if she had worked with the respondent, damages she would have received under the Health Insurance, damages for embarrassment and anguish which made her return to her mother's home. The respondent was not entitled to remuneration of salary because she had not commenced her work with the appellant so the principle of restitution integrum does not apply. I do not agree that by re-offering her the job, the appellant was accepting that there was a breach or that any damages had been occasioned by the termination of the contract. The notice that was given to the appellant satisfied the requirements of the law. That means that the termination was made with due notice and therefore, not wrongful."</em></strong></p> <p>I am unable to fault the above re-evaluation of the evidence and the conclusion reached by Byamugisha, JA. Clearly, the appellant had not commenced work of the 6 months probationary period under the contract and rendered any services for which remuneration would be payable. Having been prevented from commencing the contract of service, the appellant should have mitigated damages by accepting the re-engagement that had been offered.<br /> <br /> <br /> The respondent as an employer had a right under the provisions of Section 24(1) of the Employment Act to terminate the contract by giving the appellant seven days' notice or pay her seven days' wages in lieu of notice. In this case, the respondent gave the appellant a notice of over 4 months which was over and above the period prescribed by the Act or a reasonable period stipulated under common law rule. Therefore, the respondent rightly terminated the appellant's contract of employment.</p> <p>In the result, the appellant had no accrued rights under the contract of employment which was terminated before it was operationalised. Further on the facts, the appellant had suffered no loss or damage that could attract damages. Therefore, grounds one and two ought to fail.</p> <p>In my view, disposal of grounds 1 and 2 disposes of the 3<sup>r</sup> ground, because the appellant had been served with notice of termination of the contract of employment. Therefore, this ground also ought to fail.</p> <p>In the result, this appeal has no merit and ought to 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>&nbsp;</p> <p>I have had the benefit of reading in daft the judgment prepared by my learned brother, Karokora, JSC.<br /> <br /> I agree with his conclusions and the proposed orders that the appeal ought to fail and that the respondent should get the costs of this appeal.<br /> <br /> The facts of this case are summarised by my learned brother who has also reproduced the grounds of appeal. I am unable to appreciate the reasoning of the learned trial judge, Mondha. J, to the effect that termination of the contract of employment was arbitrary when the respondent in effect served a four months notice of intention to terminate the contract. By the time the notice was served the appellant had not started working. By any standards that was reasonable notice considering that according to S.24 (1) of the Employment Act, where an employee was on probation, the respondent could terminate a contract on notice of 7 days. Indeed in this case the appellant had not even assumed duty so that even the issue of probation could not arise to entitle her to a long notice.<br /> &nbsp;</p> <p>Again I am not persuaded by the reasoning of the learned trial judge when she opined that the respondent did not act in good faith when it reoffered the same job to the appellant who deliberately chose not to accept the fresh offer. Her refusal to accept that offer is tantamount to failure to mitigate damages on her part.<br /> &nbsp;</p> <p>I therefore agree with the opinion of Byamugisha, JA, that the trial judge erred in holding that the respondent did not give notice. I also agree with Byamugisha. JA. , in her conclusion that in this case, it was the appellant who should have mitigated damages by accepting the fresh offer.<br /> &nbsp;</p> <p>In my opinion since the time for the appellant to assume duty was four months away before the termination, the appellant had no accrued rights entitling her to any damages. This is one of those cases in which I believe that if she had succeeded in her appeal she could only be entitled to some nominal damages.<br /> &nbsp;</p> <p>Therefore the Court of Appeal was entirely justified in dismissing the appeal. I would dismiss this appeal which has no merit whatsoever.</p> <p>As the other members of the Court agree with the judgment of and orders proposed by Karokora, JSC, this appeal is dismissed with costs to the respondent in this Court and in the courts below.</p> <p>&nbsp;</p> <p><strong><u>JUDGMENT OF KANYEIHAMBA, JSC.</u></strong></p> <p>I have had the benefit of reading in draft the judgment of my learned brother, Karokora, JSC and I agree with him that this appeal ought to be dismissed and I would award costs in this court and the courts below to the respondent</p> <p>&nbsp;</p> <p><strong><u>JUDGMENT OF KATUREEBE, JSC</u>.</strong></p> <p>I have had the benefit of reading in draft the Judgments of my learned brothers Karokora, JSC and Tsekooko, JSC.</p> <p>I fully agree with their conclusions and orders for the reasons they have ably explained in those Judgments. I have nothing useful to add.</p> <p><sub><strong><em>Dated at Mengo this 3</em></strong></sub><sup><strong><em>rd</em></strong></sup><sub><strong><em> day of October 2006.</em></strong></sub></p> </div></div></div><div class="view view-download-button view-id-download_button view-display-id-entity_view_1 view-dom-id-18eeb482a6d603ab9a320027dfd00206"> <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/2006/18/supreme-court-2006-18.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 13:33:11 +0000 Anonymous 15392 at https://old.ulii.org