THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
CIVIL SUIT NO 525 OF 2015
NATIONAL SOCIAL SECURITY FUND}.............................................................PLAINTIFF
MAKERERE UNIVERSITY t/a
MAKERERE UNIVERSITY GUEST HOUSE}....................................................DEFENDANT
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA
It was agreed that the court would be addressed in written submissions. The Defendant commenced written submissions with a reply from the Plaintiff and the rejoinder of the Defendant. The written submissions are reproduced herein below for ease of reference.
Written Submissions of Counsel
The Defendant stated the background of the case as follows;
The Plaintiff filed a suit against the Defendant seeking orders for payment of alleged unremitted social security contributions of UGX. 51,236,513/=, alleged statutory penalty of UGX.451, 775,168/=, general damages and costs of the suit. The Plaintiff alleges in paragraph 4(c) that it conducted an audit and found that the Defendant had, between the period of July 2004 to August 2010 failed to remit mandatory social security contributions for its employees amounting to UGX.51,236,513/= (Uganda Shillings Fifty One Million, Two Hundred Thirty Six Thousand, Five Hundred Thirteen). The Defendant, in its written statement of defence denied the allegations and raised two preliminary objections;
- That the Plaintiff’s claim against the Defendant is time barred;
- That the Plaintiff’s claim against the Defendant for the remittance of 15% of the total wages is unconstitutional and tantamount to deprivation of the Defendant’s property outside of the provisions of Article 26 of the constitution of the republic of Uganda.
The Plaintiff did not file any rejoinder to refute the claim of the Defendant that the Plaintiff’s claim is time barred and unconstitutional. They therefore stand un-refuted.
The Defendant’s Counsel raised the following issues for determination;
- Whether the Plaintiff’s claim against the Defendant is barred by limitation
- Whether compulsory monthly contributions to NSSF amount to deprivation of property
Whether the Plaintiff’s claim against the Defendant is barred by limitation
The Defendant in paragraph 3(b) of its written statement Defence pleaded that the Plaintiff’s claim is time barred. Section 3(1) (d) of the Limitation Act Cap. 80 provide that:
An action to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty of forfeiture “shall not be brought after the expiration of six years from the date on which the cause of action arose”
The Plaintiff states in paragraph 4 (c) of the claim against the Defendant is for unremitted contribution of employees’ wages are in respect of the period of July 2004 to August 2010. The Plaintiff annexed an audit report as Annexure ‘A’ of the plaint in which they give the breakdown of their claim for unremitted contribution from July 2004 to August 2010. The Plaintiff filed this suit on 13th August 2015. This therefore means that the claim arising out of the period from June 2014 to August 2009 is barred by limitation.
Section 3(1) (4) of the limitation Act cap 80 further states that an action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of two years from the date on which the cause of action accrued.
The plaint in paragraph 4 (d) avers that the unremitted social security contributions have since attracted a statutory penalty of UGX 451,775,168/=, being statutory interest as at 30th June 2014. The Plaintiff’s claim arose between July 2004 and August 2010. Therefore the Plaintiff should have filed its suit by August 2016 to avoid being caught by the statute of limitation. The claim for interest is time barred within the meaning of section 3 (1) (4) of the limitation Act because it was filed outside the two year period from which the cause of action arose.
In the case of Madhvani International S.A vs. Attorney General SCCA No 23 of justice Kitumba held that;
“The above is a statute of limitation which is strict in its nature and inflexible and is not concerned with the merits of the case…Once the axe falls and a Defendant who is fortunate enough to have acquired the benefit of the statute of limitation is entitled, of course to insist on his strict rights.”
Hon. Lady Justice Elizabeth Musoke in the matter of Justice Olwedo vs. Attorney General HCCS No. 381 of 2005 held that:
“Regarding the issue of limitation, the position of the law as was stated in F.X Miramago vs. Attorney General (1979) HCB 24 is that the period of limitation begins to run as against a Plaintiff from the time the cause of action accrued until when the suit is actually filed”
Similarly, in the case of Iga vs. Makerere University (1972) 1 EA 65 (CAK), court held that:
“A plaint which is barred by limitation is a plaint “barred by law”. Reading these provisions together it seems clear to me that unless the appellant in this case had put himself within the limitation period by showing the grounds upon which he could claim exemption the court “shall reject” his claim”.
The Plaintiff filed this suit on 13th August 2015. This therefore means that the claim of UGX 37,464,044/=, arising out of the period from June 2004 to August 2009 is barred by limitation and should be dismissed with costs. Similarly the entire claim of the Plaintiff for a statutory penalty of UGX.451, 775,168/= is barred by limitation. The claim for the statutory penalty should have been filed by August 2012. It is time barred because it was filed outside the two year period allowed by the statute of limitation and should be struck out with costs.
In reply to this issue the Plaintiff’s Counsel submitted that the Defendant contends that a significant portion of the suit is barred by section 3(1) (d) of the Limitation Act Cap. 80 which provides that actions to recover sums recoverable by virtue of any enactment shall not be brought after the expiry of 6 years from the date on which the cause of action arose. It is therefore argued that the action to recover unremitted contributions from July 2004 to August 2009 is barred by this provision. However, the Defendant’s argument above is an admission that part of the Plaintiff’s claim is not bared by the said statute of limitation. This alone would militate against dismissing the whole suit as prayed for in his concluding prayers. The Plaintiff’s contention is that in fact the entire suit is not barred by the provisions of the said limitation Act Cap. 80 and the sections of the Limitation Act cited by the Defendant are not relevant to the present suit. The crucial question to be decided on the face of the plaint is the date when the cause of action arose for purposes of computation of the 6 years. Counsel took note of the Defendant’s silence and reluctance to submit on this particular point yet the plaint and its annexure are unequivocal on the question of when the Defendant’s indebtedness, non-compliance with the NSSF Act and liability to pay were discovered by the Plaintiff. Counsel cited Paragraphs 4(b), (c) and (d) of the plaint which provide as follows;
4(b) on 20th September, 2010 the Plaintiff conducted an inspection of the Defendant’s records relating to social security contributions to ascertain its compliance with the NSSF Act and it found that the Defendant was not fully compliant with its obligation to remit for all its employees. A final Audit/inspection report was issued and the Defendant duly acknowledged receipt thereof.
4(c) the audit found that during the period July 2004 to August 2010 the Defendant failed to remit mandatory social security contributions for its employees amounting to UGX. 51,236,513/=.
4(d) the unremitted mandatory social security contributions attracted statutory penalty of UGX. 451,775,168/= as at 30th June, 2014 and UGX. 57,650,775/= being statutory interest as at 30th June, 2014.
Counsel submitted that the cause of action concerning the unremitted social security contributions arose when the same were discovered and established by the Plaintiff in the final audit/inspection report. It is neither lawful nor logical to claim as indeed the Defendant’s Counsel does that the unremitted social security contributions of June 2004 to August 2009 are barred by limitation when the same were only discovered after the audit /inspection report that was concluded and issued on 15th December, 2010. The supreme court in Charles Lubowa and others vs. Makerere University, SCCA No. 2 of 2011 held that in determining when a cause of action arose, one has to look at all the facts and peculiar circumstances of the case and pleadings have to be considered in all their entirety to be able to conclude that they present all the facts which were material. As pleaded in the plaint the Defendant’s liability and indebtedness was only discovered on or around 15th December, 2010 and consequently that is the time when the cause of action arose. Since the suit could be filed within 6 years from the said date up to 15th December, 2016, the Plaintiff was well within time when it filed the present suit on 13th August, 2015 to recover inter alia the unremitted savings to the tune of UGX. 51,236,513/= and accrued statutory interest of UGX. 57,650,775/=. The Defendant’s objection is therefore unfounded and should be overruled with costs as it is based on a selective and erroneous interpretation and application of the provisions of the Limitation Act Cap. 80.
With regard to the statutory interest of UGX. 451,775,168/= Counsel submitted that the plaint in paragraph 4(d) earlier reproduced provides that the same was assessed on 30th June, 2014. Consequently even if we adopt the Defendant’s contention that section 3(1)(4) of the Limitation Act limits actions to recover penalties to a maximum period of two years from the date the cause of action arose the two years expired on 30th June, 2016. The suit to recover the statutory penalty among other remedies was filed on 13th August, 2015 within the permissible time frame. The cause of action to recover the statutory penalty only arose when the same was finally imposed on the Defendant and this imposition was carried out on 30th June, 2014. The Plaintiff is therefore entitled to recover the imposed statutory interest arising out of the Defendant’s deliberate failure to remit social security benefits. The above notwithstanding Counsel submitted that the provisions of section 3 (1)(4) of the Limitation Act which limit actions to recover any penalty or forfeiture to 2 years from the date the cause of action accrued are not applicable to the present action. The provision is strictly restricted to actions whose sole purpose is to recover a penalty which is not the case in the present suit.
Without prejudice to the above, Counsel submitted that even if we take the interpretation that the cited provision prohibits recovery of statutory penalty as well not all the statutory penalty assessed upon the Defendant would be barred by that provision. The statutory penalty incurred by the Defendant continues running and was only quantified as at 30th June, 2014 for purely recovery purposes. So the statutory penalty continues to run until the time when the arrears are paid in full. Statutory penalty is computed on a monthly basis and the statutory penalty would therefore be within the limitation period and recoverable under the present suit since the arrears have not yet been remitted by the Defendants.
Section 14(1) of the NSSF Act provides inter alia that a penalty equal to 10% of outstanding unpaid sums is added on such sums till the whole outstanding sum is paid. Consequently penal interest is a running liability on a monthly basis and cannot be completely extinguished by the earlier cited provision of the Limitation Act. The best it would do if applicable is limit the period for recovery of penal interest for the 2 years prior to filing of the suit. Besides the provisions of section 25 of the Limitation Act specifically provide for postponement of the limitation period where there is concealment of fraud till the same is discovered. The import of this provision is to freeze the limitation period till the point where the Plaintiff is deemed to have discovered the fraud. Section 25(a) and (b) of the Limitation Act provides that where, in the case of any action for which a period of limitation is prescribed by this Act, either—the action is based upon the fraud of the Defendant or his or her agent or of any person through whom he or she claims or his or her agent; the right of action is concealed by the fraud of any such person as is mentioned in paragraph (a) of this section; or(c) the action is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the Plaintiff has discovered the fraud or the mistake, or could with reasonable diligence have discovered it;
Although the averments in the plaint do not make specific use of the word fraud the pleaded particulars of the cause of action demonstrate that the Defendant had dishonestly concealed the fact that it was deducting monies from some of its employees and not remitting the same to the Plaintiff as required by the law. Additionally the Defendant was deliberately not remitting its full statutory contributions. These averments in paragraph 4 of the plaint are well stated. The Defendant’s acts and omissions as particularized in paragraph 4 of the plaint and the Audit/inspection report attached thereto point to commission of fraud which has the effect under section 25(a) and (b) of the Limitation Act of freezing the limitation period till this fraud was discovered around 15th December, 2010.
Counsel further submitted that the Defendant’s preliminary objection is misconceived as its conduct in deliberately failing to remit social security contributions was only discovered after completion of the Affidavit which was commenced in September 2010 hence the suit for recovery of the said sums could be filed within 6 years from the said date. The present suit that was filed in 2015 is therefore well within the limitation period. Most importantly the provisions of Section 22(4) of the Limitation Act provides that where there has been an acknowledgment of a claim then the Limitation period is deemed to have started running from the date such acknowledgment is made. Paragraph 7 of the plaint provides that the Defendant subsequently invited the Plaintiff for a meeting to resolve the issue of non-remittance evidenced by Annexure B which is a letter dated 17th June, 2013 written by the Defendant’s senior legal officer and head legal unit under the office of the university secretary. The letter states that …reference is made to the above matter and the various communications between Makerere University and NSSF in regard to unremitted contributions for Makerere University Guest House employees. In the said statement in the letter the Defendant acknowledged its outstanding obligation in writing and sought to discuss the same in a meeting with the Plaintiff which was held on 10th July, 2013 in the University Council room. Consequently in accordance with the provisions of Section 22(4) of the Limitation Act, a right of action began to run from that date.
The Learned Justice Bamwine (as he then was) addressing the above provision of the Limitation Act held in Greenland Bank(In Liquidation) vs. Dr. Apuuli Kihumuro and another, CS No. 790 of 2003 as follows;
‘Under that law where any right of action has accrued to recover a debt or other liquidated pecuniary claim and the person liable or accountable thereafter acknowledges the claim or makes any payment in respect thereof the right shall be deemed to have accrued on and not before the date of acknowledgment or the last payment. Since the Plaintiffs have pleaded the fact of the alleged act of acknowledgment of a debt by the Defendants, this now makes it a triable issue.’
In determining what amounts to an acknowledgment for purposes of proving an exception to application of the limitation period under the Limitation Act, a liberal approach and construction of the document described as an acknowledgment is to be pursued. The Indian court in Tenumal Bishamal vs. Amar Mohandas and others, Civil Rev Application No. 998 of 1969 restated the same authoritative statement of the law in this regard and reproduced it as follows;
In Megh Raj v. Mathura Das, ILR (1913) All 437, it has been observed that a liberal construction should be placed upon documents purporting to be acknowledgments. It is sufficient if the statement on which a plea of acknowledgment is based relates to a present subsisting liability through the exact nature or the specific character of the said liability is not indicated in words. All that is necessary is that the words used in acknowledgment must indicate the existence of jural relationship between the parties such as that of debtor and creditor and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission and need not be expression in words. If the statement is fairly clear then the intention to admit jural relationship nay be implied from it. The admission need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making it intended to refer to a subsisting liability as at the date of the statement. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. As the law of limitation restricts a man from enforcing his rights it must receive strict construction and if there be any doubt the interpretation placed upon the law should be in favour of the right to proceed. As has been stated in Anantram vs. Inayat Ali Khan, AIR 1920 Lah 447, the tenor of the section is certainly strongly against a narrow interpretation of what constitutes an acknowledgment. A narrow interpretation should not be put on what constitutes an acknowledgement under section 18. It is but just and reasonable that the section should be construed so as to afford every possible support to a just and lawful claim against an unjust and unconscionable resistance to that claim. The cause of action began to run afresh on the said date when a meeting was held between the Plaintiff and the Defendant authored to discuss the failure to remit the outstanding staff savings and forge a way forward. The Plaintiff’s entire claim is not barred by the limitation Act as it was filed well within the limitation period as argued above and it’s a statutory debt that accrues monthly.
In rejoinder to the Plaintiff’s submissions Counsel for the Defendant submitted that the Plaintiff has contended that its claim is not time barred because the Plaintiff only discovered the Defendant’s indebtedness on the 15th December, 2010 and that therefore the cause of action arose on the date of discovery; that claim was based on fraud by the Defendant and that the cause of action arose on 15th December, 2010 when the fraud was discovered and the Defendant acknowledges the claim in a letter dated 17th June, 2013 and that therefore the cause of action started to run on the said date.
Counsel submitted that the Plaintiff did not plead any grounds in the plaint to demonstrate the exceptions upon which it relies to bring a claim outside the period of limitation. Even after notice of a preliminary point of law was raised in paragraph 3 (b) of the written statement of Defence, the Plaintiff did not file any reply to deny the claim or to show the circumstances under which the claim pleaded in the plaint was not barred by limitation. In order for the Plaintiff to rely on the exemptions to filing their suit out of the limitation period, it ought to have stated grounds upon which exemptions from such law is claimed. Order 7 of rule 6 Civil Procedure Rules provides that when a suit is instituted after the expiration of the period prescribed by the law of limitation, the Plaintiff shall show grounds upon which exemption from such law is claimed. In our instant suit, the Plaintiffs did not show any grounds in its plaint upon which the limitation period of 6 years should be exempted. The above provision was upheld by the Court of appeal for Eastern Africa in Iga vs. Makerere University (1972) EA 66 which was cited with approval in the matter of Mathias Lwanga Kagada vs. Uganda Electricity Board HCCS NO: 124 of 2013 whereby Hon. Justice Andrew Bashaija held as follows: “A plaint which is barred by limitation is a plaint barred by law. Reading these provisions together, it seems to me that unless the appellant in this case had put himself within the limitation period showing the grounds” upon which it could claim exemption; the court shall reject his claim. The appellant was clearly out of time. He did not show for the grounds of the grounds he relied on, presumably because none existed…when a suit is time barred the court cannot grant the remedy or relief.”
Counsel submitted that the Supreme Court in the matter of Madhvani International S.A vs. Attorney General SCCA No.23 of 2010 pronounced itself on the strict nature of the Law on limitation when it held that a statute of limitation “is strict in the nature and inflexible and is not concerned with the merits of the case…Once the axe falls and a Defendant who is fortunate enough to have acquired the benefit of the stature of limitation is entitled, of course to insist on his rights.”
Counsel submitted that alternatively, the Plaintiff argues that its claim is not barred by limitation because the Defendant’s alleged noncompliance/ indebtedness was discovered on 20th September, 2010. The Plaintiff argues that therefore this means that the cause of action arose on the date of discovery and is not barred by limitation. With all due respect, the Plaintiff misconstrued the application of discovery as an exception to the statute of limitation. Under section 25 (a) and (b) of the Limitation Act Cap 80, discovery only operates as an exception/extension to the period of limitation where the cause of action is fraud or mistake. Section 25 of the Limitation Act clearly states as follows: “Where, in the case of any action for which a period of limitation is prescribed by this Act, either…”
- The action is based upon the fraud of the Defendant or his or her agent or of any person through whom he or she claims or his or her agent;
- The right of action is concealed by the fraud of any such person as is mentioned in paragraph (a) of this section; or
- The action is for relief from the consequences of a mistake the period of limitation shall not begin to run until the Plaintiff discovered the fraud or the mistake.
The Defendant’s Counsel submitted that in that instance, the cause of action begins to run from the date of discovery of the fraud or mistake. The Plaintiff’s cause of action, as stated in paragraph 3 and 4 of the plaint and as stated in section 48 (1) of the NSSF Act, is recovery of a debt and not fraud or mistake. With reference to fraud, Counsel submitted that the Plaintiff further argues that though it did not specifically plead fraud in the plaint, that the same is implied in the cause of action. It is a decided principle of law that fraud must be specifically pleaded. It cannot be implied as stated by the Plaintiff. The Supreme Court in the matter of Semyalo Michael V. The Registered Trustees of Kampala Archdiocese SCCA No.12 of 2009 held that that “There is no doubt that Rules 1 (1), 3 and 13 of Order 6 require that particulars of fraud and misrepresentation should be pleaded in the plaint.”
Rule 3, in so far as relevant states-
In all cases in which the party pleading relies on any misrepresentation, fraud …and in all cases in which particulars may be necessary, the particulars with dates shall be stated in the pleadings.
Rule 13, also reads thus-
Wherever it is material to allege malice, fraudulent intention, knowledge or other condition of the mind of any person, it shall be sufficient to allege the same as a fact, without setting out the circumstances from which the malice, fraudulent intentions, knowledge or other condition of mind of any person is to be inferred.” See also MS Fang Min & Crane Bank vs. Belex Tours and Travel Ltd SCCA (Consolidated).
Therefore since the Plaintiff did not plead fraud as a cause of action, the date on which they discovered the alleged indebtedness is immaterial. The Plaintiff’s claim that arose outside the period of limitation therefore cannot be sustained. Counsel submitted that the Plaintiff further argued that the Defendant acknowledged the indebtedness when it issued a letter to the Plaintiff and that therefore the limitation period is deemed to have started running from the date such acknowledgement was allegedly made. In the alternative, Counsel submitted that even if there was such an acknowledgment (which is not the case); there is no provision under the Limitation Act for the revival of time barred statutory claims by way of acknowledgement. In Madhvani International S. A vs. Attorney General SCCA No.23 of 2010. The Supreme Court held that for a statement to amount to an acknowledgement…it has to be clear and unequivocal. The letter referred to by the Plaintiff inviting the Plaintiff for a meeting to resolve the issue of non remittance (Annexure D) does not amount to an acknowledgment. In the said letter the Defendant did not admit owing any money to the Plaintiff. There was no acknowledgment of indebtedness by the Defendant. Therefore the cause of action is limited by statute. He submitted that the Plaintiff contends that the statutory penalty and interest assessed upon the Defendant is not barred by limitation because it continues to run until the arrears are paid in full. Counsel further submitted that a statutory penalty and interest cannot be sustained on a claim which is barred by the law of limitation. The statutory penalty can only legally be sustained against statutory contributions that are not caught up by limitation. Therefore, once Court finds that the Plaintiff’s claim for the principle sum that arose out of the period from June 2004 to August 2009 is barred by the statute of limitation, the claim for statutory penalty and interest arising out of that period must also fail. In the alternative, Counsel reiterated that the time of discovery only applies to freeze the period of limitation where the cause of action is fraud. The Plaintiff’s claim for the outstanding penalty was crystallized in their pleadings as at 30th June, 2014. The Plaintiff cannot in their submissions claim for it in their pleadings.
Justice Order JSC, in Interfreight Forwards Uganda Limited V. East African Development Bank (SCCA No. 32 of 1992) is very instructive on this issue;
“The system of pleadings is necessary in litigation. It operates to define and deliver with clarity and (precision) the real matters in controversy between the parties upon which they can prepare their respective cases and upon which court will be called upon to adjudicate between them. It thus serves the double purpose of informing each party what the case of the opposite party which will govern the interlocutory proceedings before the trial and which the Court will have to determine at the trial…. Thus issues are formed on the case of the parties so disclosed in the pleadings and evidence is directed at the trial to the proof of the case so set up and covered by the issues framed therein. A party is expected and bound to prove the case as alleged by him and as covered by the issues framed. ”He will not be allowed to succeed on a case not s set up by him and be allowed at the trial to change his case or set up a case inconsistent with what he alleged in his pleadings except by way of amendment of the pleadings…”
The Plaintiff’s argument that their claim for statutory penalty continues to run to date therefore cannot be sustained because it departs from its pleadings. From the foregoing, the Defendant retaliated their earlier submissions that the Plaintiff’s claim of UGX 37,464,044/= arising out of the period from June 2004 to August 2009 is barred by limitation. It follows that the claim for interest is also barred by limitation. The entire claim of the Plaintiff for a statutory penalty of UGX451, 775,168/= is barred by the statute of limitation and should be struck out with costs.
Whether compulsory monthly contributions to NSSF amount to deprivation of property
With reference to this issue the Defendant’s Counsel averred that the Plaintiff’s claim against the Defendant for the remittance of the equivalent of 15% monthly contribution of the total wages of the Defendant’s employees to the Plaintiff pursuant to the National Social Security Fund Act CAP 222 (NSSF Act) is unconstitutional and illegal and is tantamount to compulsory deprivation of the Defendant’s property and its employees property outside the provisions of Article 26 of the Constitution of the republic of Uganda.
The protection from deprivation of property is enshrined in the constitution of the republic of Uganda under Article 26(2) specially provided that:
“No person shall be compulsorily deprived of property or any interest in or right over property of any description except where the following conditions are satisfied
- The taking of possession or acquisition is necessary for public use or in the interest of defence, public safety, public order, public morality or public health and
- The compulsory taking of possession or acquisition of property is made under a law which makes provision for (i) prompt payment for fair and adequate compensation, prior to the taking of possession or acquisition of the property and (ii) a right of access to a court of law by any person who has an interest or right over the property.
Black’s Law Dictionary 7th edition 2004, on page 1232 defines property as “the right to possess, use and enjoy a determinate thing ... In its widest sense, property includes all a person’s legal rights, of whatever description”. It defines an asset as, “An item that is owned and has value. The entries on a balance sheet showing the items of property owned, including cash ... all the property of a person. The Merriam Webster’s Dictionary of law, 1st edition at page 387 defines property as something (as an interest, money or land) that is owned or possessed. The contributions made by employers such as the Defendant are money contributions from income of the employer and part of the salary of the employee, which is their property. From the foregoing, money and income is property within the meaning of Article 26 of the constitution. Out of the claim of the Plaintiff of UGX. 52,775,168/=,UGX.34,157,675/= is income/ property of the Defendant.
Section 7 of the NSSF Act provides for compulsory registration of employers to contribute to the Plaintiff. Section 11 provides that employers shall contribute 15% of an employee’s total monthly wages to the fund. Of that contribution 5% is deducted from the employees thus depriving the employee of 5% of the employee’s wages due to him/her monthly (section 12). The employer is then required to contribute a further 10% over and above the employee’s wages to the fund of the benefit of the employee (section 13). The Defendant, an employer is deprived of its income by making compulsory contribution which does not fall under the exceptions provided under Article 26 of the constitution. Article 2 of the Constitution provides that “the Constitution is the Supreme law of Uganda and shall have binding force on all authorities and persons throughout Uganda.” Further Article 2 (2) provides that “if any other law or custom is inconsistent with any of the provisions of this Constitution, the Constitution shall prevail and that other law or custom shall to the extent of the inconsistency be void.”
The above principle was upheld in Constitutional Petition No. 2 of 2002, WOMEN LAWYERS OF UGANDA AND OTHERS VS. ATTORNEY GENERAL, where Justice Okello in delivering the lead judgment of the Constitutional Court held that:
“I think that the message which the makers of the Constitution intended to send out in that Article is clear. They enjoined to clear away existing laws that they find to be inconsistent with any provision of the Constitution. They are to do that by modifying them such that they do not exist but void.”
The NSSF Act came into force on 1st December, 1985, before the promulgation of the 1995 Constitution of the Republic of Uganda. Accordingly, the NSSF Act is void to the extent of its inconsistency with the Constitution. The NSSF Act, specifically section 7, 11, 12, 13 & 14 is inconsistent with Article 26 of the Constitution and is void to the extent of its inconsistency. Article 274 (1) of the Constitution provides that existing laws shall be constructed with such modifications, adaptations, qualifications and exceptions as may be necessary to bring it into conformity with the Constitution. The power to deprive any person of property has to be enshrined in the Constitution. For example, the power to impose tax is provided for under Article 152 and the Power of Local Government to collect tax is provided for under Article 191. It is the Defendant’s submission that the Plaintiff’s act of compulsorily collecting contributions from employers such as the Defendant is unconstitutional. If the Defendant was an authority envisioned by the framers of the Constitution, it would have been specifically provided for in the Constitution.
In other jurisdictions, social security is a constitutional creation. In Kenya, the Constitution under Article 43 (1) (e) provides for a right to social security. It is reasonable to conclude from the above Article that the said constitutional provision is where the NSSF in Kenya and the enabling Act derive its constitutional protection. Similarly in South Africa, the Constitution of the Republic of South Africa 1996 provides under section 27 (1) (c), everyone has access to social security, including if they are unable to support themselves. Under section 27(2), the Government of South Africa is required to take legislative and other measures to achieve this right. It is reasonable to conclude that that constitutional provision is the basis for the unemployment Insurance Act 2001 and the unemployment Insurance Contributions Act 2002. The above Acts set up the unemployment Insurance Fund of South Africa which receives mandatory contributions from employers/employees and gives short term relief to workers when they become unemployed or are unable to work. There is no such provision in our constitution on which the Plaintiff can otherwise rely on to justify its mandatory collections of part of the employees’ wages and employers income. The Plaintiff therefore has no constitutional basis to deprive employees and employers of their property.
Further the mandatory contribution to the Plaintiff violates Article 21 of the Constitution which provides that all persons are equal before and under the law in all spheres of political, economic, social and cultural life and in every other respect and shall enjoy equal protection of the law. Article 21(2) provides that without prejudice to clause 1, of this article, a person shall not be discriminated against on the ground of sex, race, colour, ethnic, tribe, birth, creed or religion, social or economic standing political opinion or disability.”
Schedule 1 of the NSSF Act lists a number of people who are exempt from making contributions to the Plaintiff. These include among others, members of the Uganda Police Force, the Uganda people’s Defence forces, employment in public service, etc. It is discriminatory to force the Defendant to make contributions while other employers are exempt. The NSSF Act and the Plaintiff discriminate against employers on the basis of their economic standing. People are forced to make contribution to the Plaintiff based on where their income is derived. See Constitutional Petition No. 13/05/ & 05/06 Law and Advocacy for Women in Uganda vs. Attorney General, where the Constitutional Court held that the Constitution prohibits discrimination where in this particular matter was on grounds of sex. Court further held that Article 21 provides for equality before the law and any law which contravenes the same is null and void to the extent of its inconsistency. It is clear from the above that the role of the Plaintiff and the NSSF Act from which it derives its authority are not in conformity with the constitution. Counsel reiterated that by compelling the Defendant to remit part of its employees’ wages to the Plaintiff, the Defendant shall be depriving its employees of its property in the form of 5% of its wages.
Further, in compelling the Defendant to contribute a further 10% of the employees’ wages, over and above what is due to the employee, the Defendant is being deprived of property that could be otherwise put to better use. Premised on the above, it’s our submission that the Plaintiff’s claim is illegal and unconditional and the same should be dismissed with costs. In the alternative, the Defendant has succeeded in showing prima facie that there exists a question for constitutional interpretation. Counsel prayed that this Honourable Court refers the above matter to the Constitutional Court for interpretation.It’s now trite that “any court before deciding to make reference to this court must first be satisfied that prima facie there exists a question for constitutional interpretation.”See Article 137(5) (a) or (b); Constitutional Reference No. 20/2011, Hajji Yusuf Bagalye & Anor V. Attorney General & Anor; Constitutional Petition No. 23 of 2013, Anold Brooklyn & Company V. KCCA & Attorney General. Counsel prayed for the Plaintiff’s suit to be dismissed with costs or in the alternative, that the matter be referred to the Constitutional court for determination as to. “Whether the National Social Security Fund Act cap 222, is inconsistent with Article 26 (1) and 21 (2) of the Constitution of the Republic of Uganda.”
In reply, Counsel for the Plaintiff argued that the NSSF Act is unconstitutional and illegal as it amounts to compulsory deprivation of the Defendant’s property and that of its employees outside the provisions of Article 26 of the Constitution. Counsel prayed for this matter to be referred to the constitutional Court to determine whether the NSSF Act is unconstitutional. The NSSF fund was established by an Act of Parliament that is the NSSF Fund Act Cap. 222 with the mandate to collect social security contributions for eligible employees and to pay out benefits to qualifying beneficiaries. Counsel did not agree that simply citing one provision of the Constitution and then proceeding to apply it against the provisions of a statute or Act of Parliament is sufficient to raise a prima facie case for reference of a question to the constitutional court. In Andrew Kibaya vs. Uganda, Constitutional reference No. 28/10, the Justices of the Constitutional Court criticized a trial magistrate for making a constitutional reference to the court without making a considered decision as to whether the interpretation of the Constitution had arisen in the proceedings or not. As a result they summarily dismissed the reference as belonging to the category of references which are made mechanically.
The trial court is therefore required to make a considered decision before referring a matter for constitutional interpretation. It is not enough that one party has applied for the same and attempted to justify the application by cherry picking certain provisions of one statute and contrasting them with a lone Article of the Constitution detached from the overall context. The Defendant has failed to demonstrate that there is a prima facie and bona fide question for determination by the constitutional court. The present attempts to apply or a reference should be seen for what they clearly are; a tactic to delay recovery of monies due to the Defendant’s employees which employees have further through their lawyers Ms. Twinobusingye Severino & Co. Advocates have demanded from the fund confirmation of whether the Defendant has remitted their social security contributions. With due respect to Counsel for the Defendant they do not seem to have been alive to various provisions of both the NSSF Act Cap. 222 and the 1995 Constitution as amended in making a rushed conclusion that there is an apparent conflict between the Constitution and the NSSF Act. They did not interpret the provisions of the Act and the Constitution as a whole yet this is a key principle of both statutory and constitutional interpretation. If they had done so, they would not have arrived at the manifestly erroneous conclusion that the NSSF Act or certain provisions of it are prima facie unconstitutional and merit judicial scrutiny by the constitutional court. Counsel did not dispute the fact that the law defines property to include cash or money. However, Counsel strongly disagreed with the attempt by Counsel for the Defendant of misinterpreting the provisions of Article 26 of the Constitution against provisions f the NSSF Act relating to compulsory savings to arrive at a conclusion that contributing employees and employers are deprived of property. In view of the provisions of sections 7, 19, 20, 21, 22, 23 and 24 of the NSSF Act it is erroneous for the Defendant to claim that employees who compulsorily contribute to the fund are deprived of their money. The said provisions clearly demonstrate that the monies contributed are saved and then paid out to the members with interest or their dependent relatives under the following benefits enshrined in section 19 of the NSSF Act; age benefit, withdrawal benefit, invalidity benefit, emigration grant and survivor’s benefit.
The cited provisions of the NSSF Act clearly demonstrate that contributing employees of the Defendant or any other contributing employer for that matter are the sole and exclusive beneficiaries of the monies saved with the Plaintiff subject to the satisfaction of any one of the aforementioned conditions before payment. The monies registered against their accounts with the Plaintiff remain their property which can be enjoyed if any of the conditions precedent is met. It is therefore grossly misleading and erroneous t o contend as Counsel for the Defendant defaulting employer does that the provisions on mandatory saving with the Plaintiff deprive employees of their property. The provisions actually boost the employees’ savings and enable them prepare for a secure retirement assure their dependants in case of death and also provision for various physical or mental disabilities.
Counsel for the Defendant suggested in his arguments that in comparison to other jurisdictions, Uganda’s social security law the NSSF Act Cap. 222 do not have any constitutional backing unlike the power to impose tax for instance which is created under Articles 152 and 191 of the Constitution. This is an admission that tax laws do not amount to deprivation of property. In fact Articles 152 (1) and 191 (1) do not expressly provide for any taxes. They simply vest parliament with power to enact tax statutes. Similarly the constitution vests parliament with power to enact laws for social security and or social protection. The existence of these constitutional provisions is sufficient proof that there is no question for constitutional interpretation since the Defendant seems to have laboured under an erroneous premise.
Objective XIV (b) of the National Objectives and Directives Principles of State Policy enshrined in the Constitution specifically provides that the state shall endeavour to fulfil the fundamental rights of all Ugandans to social justice and economic development and shall in particular ensure that all Ugandans enjoy rights and opportunities and access to education, health services, clean and safe water, work, decent shelter, adequate clothing, food security and pension and retirement benefits. Article 8A of the Constitution specifically provides that Uganda shall be governed based on principles of national interest and common good enshrined in the national objectives and directive principles of state policy. In short, the state is mandated by the constitution to ensure that the objectives such as the one cited above are realized. The objective XIV (b) imposes a duty on the state to ensure that all Ugandans have access to inter alia pension and retirement benefits. This is one of the key objectives that the NSSF Act Cap. 222 set out to realize for a portion of the employees who save with the fund. The state has a compelling interest to ensure that the social security of employees in the private sector is assured. Besides, Article 40 (1) of the constitution provides that parliament shall enact laws to provide for the right of persons to work under satisfactory, safe and healthy conditions. The NSSF Act is one such law enacted by parliament and subsequently adopted after the 1995 constitution to realize the duty of parliament to ensure that there are laws to protect employees. The NSSF Act is designed to achieve part of this objective of achieving a satisfactory work environment where retirement benefits are assured. The contention that the NSSF Act discriminates against the exempted category of employees such as members of the Uganda Police `force, the `Uganda Peoples Defence Forces and the rest in public service is rather surprising and a confirmation of their earlier contention that the application for a constitutional reference is made in bad faith.
Article 254 of the constitution specifically provides that a public officer shall on retirement receive such pension as is commensurate with his or her rank, salary and length of service. This constitutional provision imposes a duty on government to pay pension to all public officers who include members of the forces and the public service. In fact these categories of employees have their own pension law as well which is the Pensions Act Cap. 286. Consequently, they are not discriminated against. The constitution carefully provides for social security protection for both the public officers and for those in the private sector employment. It imposes an onerous duty on government to pay pension for all public servants as their employer and it is therefore fair that employers in the private sector who fall within the realm of the NSSF Act should also be required to contribute to social security for their employees. The claim that the NSSF Act is prima facie discriminatory is therefore misconceived as it did not take into account that public servants have a different but similar pension law that also imposes an obligation on their employer the government. In view of the provisions of the constitution on social security, the contention by Counsel for the Defendant that social security law in Uganda does not have a Constitutional basis unlike in Kenya and South Africa has no merit at all. The state has a constitutional duty and compelling interest in ensuring social security in form of pension and retirement benefits for all categories of employees. This duty is partially achieved through the provisions of the NSSF Act and therefore the same cannot be construed to amount to a deprivation of property just like income tax laws. Counsel demonstrated the constitutional basis both for the NSSF Act Cap. 222 and the Public Pension Scheme. The Defendant’s main contention that mandatory contributions by an employer must have a constitutional basis is ably addressed by the cited provisions of the constitution and consequently there is absolutely no question requiring interpretation before the constitutional court as no prima facie case for interpretation of a bona fide question arises. Counsel prayed that the Defendant’s preliminary objections be overruled with costs and the proposed reference to the constitutional court rejected as the same does not demonstrate a serious prima facie constitutional question and is made mala fide. Counsel further prayed that court enters judgment in favour of the Plaintiff for the statutory debt in accordance with Order 8 Rule 3 of the Civil Procedure Rules since the Defendant did not deny the debt but only argue that the deductions are unconstitutional.
In rejoinder to this issue the Defendant’s Counsel submitted that the Plaintiff has not provided any convincing argument to support the fact that the NSSF Act is in conformity with the Constitution of the Republic of Uganda. The Plaintiff quoted Article 40(1) (a) of the Constitution as a basis for NSSF Act. Article 40 (1) (a) states that Parliament shall enact laws to provide for the right of persons to work under satisfactory, safe and healthy conditions. Article 40 is not relevant to the instant case. It is concerned with providing a satisfactory, safe and healthy work conditions, which has been effected by the employment act. It does not provide a constitutional basis for the NSSF Act. The Plaintiff further argued that objective XIV (b) of National Objectives and State Policy imposes a duty on the state to ensure that all Ugandans have access to inter alia, pension and retirement benefits. The Plaintiff argues that the NSSF Act seeks to realize they said retirement benefits for a portion of employees in the private sector. Objective XIV (b) provides that.
The state shall endeavour to fulfil the fundamental rights of all Ugandans to social justice and economic development and shall, in particular, ensure that- all development efforts are directed at ensuring the maximum social and cultural well being of the people; and All Ugandans enjoy rights and opportunities and access to education, health services, clean and safe water, work, decent shelter, adequate clothing, food security and pension and retirement benefits. The Plaintiff’s argument cannot be sustained, because the duty to provide the said pension and retirement benefits is imposed on the State. The state fulfils this obligation partially through the Pension scheme. With regard to the discriminatory nature of the NSSF Act, the Plaintiff argued that Article 254 of the Constitution and the Pensions Act 286 caters for the categories of employees that are exempted from the NSSF Act. The distinction between the NSSF Act and the Pension Act is that the first, the Pension Act has a constitutional basis (Article 254 of the Constitution), whereas the NSSF Act does not. Secondly, under the Pensions Act, employees’ income is non contributory and not compulsorily deducted for purposes of the pension.
The Plaintiff claimed that because employees recover the monies that are compulsory taken from them after fulfilling certain conditions, that it doesn’t amount to compulsory deprivation of property. Counsel submitted that firstly, the said argument does not apply to the 10% contribution made by the employers under Section 13 (1) of the NSSF Act because the same is never returned to the employer. The Defendant and other employers are forced to make contributions to the Plaintiff over and above the salary they pay to their employees, and that amounts to compulsory deprivation of property in contravention of Article 26 of the constitution. From the foregoing, she reiterated earlier submissions that the Plaintiff’s claim of UGX 37,464,044/= arising out of the period from June 2004 to August 2009 is barred by limitation. It follows that the claim for interest arising out of the same claim also barred by limitation. The entire claim of the Plaintiff for a statutory penalty of UGX 451,775,168/= is barred by the statute of limitation and should be struck out with costs. Counsel adopted earlier submissions that the Plaintiff’s claim is illegal and unconstitutional and prayed that the same be dismissed with costs. Counsel submitted that in the alternative, the Defendant has succeeded in showing prima facie that there exists a question for constitutional interpretation.
The Plaintiff is a statutory body established under the National Social Security Fund Act Cap 222 laws of Uganda 2000 and filed this action against the Defendant for recovery of Uganda shillings 560,662,456/=. It is averred that the Defendant is a registered employer with the Plaintiff carrying on the business of hotel and catering services.
In brief it is averred in the plaint that the Defendant is a contributing employer and on eighth of December 2004 started remitting Social Security contributions to the Plaintiff. When the Plaintiff conducted an audit on 20th September, 2010, the Plaintiff conducted an inspection of the Defendant's records relating to Social Security contributions to ascertain its compliance with the NSSF Act and found that the Defendant was not fully compliant with its obligation to remit for all its employees. A final audit/inspection report was issued which was duly acknowledged by the Defendant. It was established that for the period July 2004 to August 2010 the Defendant failed to remit the mandatory Social Security contributions for its employees amounting to Uganda shillings 51,236,513/=. Secondly the contributions not remitted attracted statutory penalty of Uganda shillings 451,775,168/=. The statutory interest amounted to Uganda shillings 57,650,775/= by 30th June, 2014.
The Plaintiff demanded for the said monies but the Defendant declined to pay. The Plaintiff prays for judgment for the above amount together with interest from the date of judgment till payment in full, general damages, costs of the suit and any other remedy that this court may deem fit to grant.
The Defendant denied the claims and asserted that at all material times, the Defendant was not being in breach of the provisions of the national Social Security fund act. Secondly, the Plaintiff’s claim in the suit is time barred. Furthermore and in the alternative the Defendant asserts that the Plaintiff’s claim against it for remittance of the equivalent of 50% monthly contribution of the total wages of the Defendant's employees to the Plaintiff under the NSSF Act is unconstitutional and illegal and amounts to compulsorily deprivation of the Defendant's property and its employees’ property rights contrary to article 26 of the Constitution of the Republic of Uganda.
On 20th June, 2017, the court observed that the Plaintiff’s claim of Uganda shillings 569,662,456/= is a statutory debt and the action could have been commenced by way of a summary procedure under order 36 of the Civil Procedure Rules. This was pursuant to the absence of the Defendants Counsel. However, it was also observed that the defence of the Defendant was primarily based on points of law. The matter was adjourned to 5 July 2017 to hear from the Defendant on the points of law. On 5th July, 2017 Counsel Rachel Nsenge appeared for the Plaintiff while Counsel Aruho Kenan jointly with Counsel Aida Wada appeared for the Defendant and it was agreed that the point of law in the defences is the main defence and concerns the deductions or contributions to National Social Security Fund and this could be determined on points of law under Order 6 rule 29 and Order 15 rule 2 of the Civil Procedure Rules.
Two points of law were argued namely:
- Whether the Plaintiffs claim against the Defendant is barred by limitation?
- Whether compulsory monthly contributions to National Social Security Fund amounts to deprivation of property?
The second issue is a constitutional issue dealing with the fundamental rights in that the arguments are made under article 26 of the Constitution the Republic of Uganda. I have duly considered the contention that any article of the Constitution overrides any other law under article 2 of the Constitution of the Republic of Uganda, where the law is inconsistent with it. Article 2 of the Constitution of the Republic of Uganda deals with the supremacy of the Constitution and provides as follows:
"2.Supremacy of the Constitution.
(1) This Constitution is the supreme law of Uganda and shall have binding force on all authorities and persons throughout Uganda.
(2) If any other law or any custom is inconsistent with any of the provisions of this Constitution, the Constitution shall prevail, and that other law or custom shall, to the extent of the inconsistency, be void."
Issue number two therefore deals with the supreme law of Uganda and has to be handled first. The only question for consideration is whether any question arises as to interpretation of the Constitution so as to refer that question to the constitutional court under the mandatory provisions of article 137 (5) of the Constitution. Article 137 (5) (supra) provides that where any question as to the interpretation of this Constitution arises in any proceeding in a court of law other than a field Court Martial, the court may, if it is of the opinion that the question involves a substantial question of law or shall, if any party to the proceedings requests it to do so, refer the question to the constitutional court for decision in accordance with clause 1 of article 137.
In this particular case, the Defendant's Counsel has not requested the court to refer any question for interpretation of the constitutional court except Counsel prayed that if the court is of the opinion that it is necessary to do so, the constitutional matter should be referred. In other words the Defendant left it to the court whether to refer any question that arises for interpretation of the constitution to the constitutional court. Constitutional matters take precedence over other civil matters and therefore it is proper that I determine issue number two before resolution of the objection to the suit on the ground that it is time barred. In any case the second issue challenges the constitutionality of contributions made to NSSF by employers and cannot be time barred. It is also of great public importance.
Article 50 of the Constitution of the Republic of Uganda provides for enforcement of fundamental rights and freedoms by courts. Furthermore, article 137 of the Constitution of the Republic of Uganda gives exclusive jurisdiction to the constitutional court where a question as to interpretation of the Constitution arises. Questions as to interpretation means controversy about the meaning, scope or application of any article of the constitution. I refer to the ruling of this court on 18th May, 2012 in the case of Testimony Motors Ltd (suing by representative action on behalf of numerous importers of used motor vehicles in Uganda and on its own behalf) versus The Commissioner Uganda Revenue Authority High Court Civil Suit No 004 of 2011 (O.S) where I discussed the meaning of the words “any question of construction” with emphasis on the word “interpretation” as contrasted with the word “Construction” under Order 37 rule 6 of the Civil Procedure Rules. The rule allows the court on being moved by Originating Summons to construe or determine a question of construction or a will or deed or other instrument and for declaration of the rights of the party interested. The ruling was that the word “construction” means “interpretation”. The word “construction” when put in context means to “construe”. With reference to dictionary meanings, the Cambridge International Dictionary of English stipulates that the word “construe” means to “understand the meaning especially of other person’s actions and statements, in a particular way. On the other hand the word “interpret” means to decide what the intended meaning of something is. Interpretation also means to ascribe a meaning to. With reference to Chambers 21st Century Dictionary Revised Edition the word "construction" as far as grammar is concerned means the arrangement of words in a particular grammatical relationship. It also means "interpretation". The word “interpret" is to explain the meaning of or to consider or understand or to convey one's idea of the meaning of. Interpretation is an act of interpreting or the sense given as a result. It is the representing of one's idea of the meaning of something such as a piece of music.
According to Black’s Law Dictionary 7th Edition pages 308 and 309 the word ‘construction’ is:
"The act of building by combining or arranging parts or elements; the thing so built. 2. It is the act or process of interpreting or explaining the sense or intention of a writing (usually a statute, opinion, or instrument)....
“Construction, as applied to written law, is the act or process of discovering and expounding the meaning and intention of the authors of the law with respect to its application to a given case, where the intention is rendered doubtful either by reason of apparently conflicting provisions or directions, or by reason of the fact that the given case is not explicitly provided for in the law." Henry Campbell Black, Handbook on the Construction and Interpretation of Laws 1 (1896)
"Some authors have attempted to introduce a distinction between 'interpretation' and 'construction.' Etymologically there is, perhaps, such a distinction; but it has not been accepted by the profession. For practical purposes any such distinction may be ignored, in view of the real object of both interpretation and construction, which is merely to ascertain the meaning and will of the lawmaking body, in order that it may be enforced." William L Lile brief making and the use of law books 337 (third edition 1914).
"There is no explanation of the distinction between interpretation and construction [in the Blackstone], nor can it be inferred from the matters dealt with under each head. The distinction is drawn in some modern works, but it is not to be taken in this book because it lacks an agreed basis. Some writers treat interpretation as something which is only called for when there is a dispute about the meaning of statutory words, while speaking of construction as a process to which all statutes, like all other writings, are necessarily subject when read by anyone. Others treat interpretation as something which is mainly concerned with the meaning of statutory words, while regarding construction as a process which mainly relates to the ascertainment of the intention of the legislature." Rupert Cross, Statutory Interpretation 18 (1976).”
The word 'interpretation' has been defined by Black's Law Dictionary to mean:
"The process of determining what something, especially the law or a legal document, means; the ascertainment of meaning.
"Interpretation, as applied to written law, is the act or process of discovering and expanding the intended signification of the language used, that is, the meaning which the authors of the law designed it to convey to others." Henry Campbell Black, Handbook on the Construction and Interpretation of Laws 1 (1896).
"There is more to interpretation in general than the discovery of the meaning attached by the author to his words. Even if, in a particular case, the meaning is discoverable with a high degree of certitude from external sources, the question whether it has been adequately expressed remains." Rupert Cross, Statutory Interpretation 149 (1976).
In conclusion, where there is no controversy that would require interpretation or construction of article 26 of the Constitution of the Republic of Uganda, this court can enforce fundamental rights enshrined in article 26 as enabled by article 50 of the Constitution. In the premises, I have considered the objection of the Defendant’s Counsel the gist of which is that the compulsory contribution of 15% to the National Social Security Fund by employers to the Plaintiff does not fall under the exceptions provided for under article 26 of the constitution. The Defendant averred that the Plaintiffs claim against the Defendant for remittance of the equivalent of 15% monthly contribution of the total wages of the Defendant’s employees to the Plaintiff pursuant to the National Social Security Fund Act cap 222 is unconstitutional and illegal and tantamount to compulsory deprivation of the Defendant's property and its employee’s property outside the province of article 26 of the constitution of the Republic of Uganda. Its contention is that the money contributions are property which is being compulsorily taken because the contribution is compulsory. It means that the employers and employees are being deprived of property without adequate and prompt compensation in terms of article 26 of the Constitution. Article 26 of the Constitution provides as follows:
“26. Protection from deprivation of property.
(1) Every person has a right to own property either individually or in association with others.
(2) No person shall be compulsorily deprived of property or any interest in or right over property of any description except where the following conditions are satisfied—
(a) the taking of possession or acquisition is necessary for public use or in the interest of defence, public safety, public order, public morality or public health; and
(b) the compulsory taking of possession or acquisition of property is made under a law which makes provision for—
(i) prompt payment of fair and adequate compensation, prior to the taking of possession or acquisition of the property; and
(ii) a right of access to a court of law by any person who has an interest or right over the property.”
The key part of the article is article 26 (2) of the Constitution which provides that: “No person shall be compulsorily deprived of property or any interest in or right over property of any description except where the following conditions are satisfied.” Before even considering whether the Employers and Employees required to contribute under the NSSF Act have had their property compulsorily taken or have been deprived thereof, there is no need to consider the subsequent paragraphs of article 26 (2) (a), (b), (i) and (ii) of the Constitution which give the antecedents for lawful compulsory taking of property or property rights or the conditions for doing so. Last but not least article 26 (1) of the Constitution enshrines the right to own property. It is therefore imperative that before considering compulsory deprivation or taking it is established that someone who applies for redress or declaration establishes that they own property the subject matter of deprivation.
I do not need to delve deeply into the submissions because they are based on the premises that the contribution in question amounts to compulsory deprivation or acquisition of property. The question is whether the contributions amounted to deprivation of property. I agree with the Plaintiff’s Counsel that section 11 of the NSSF Act requires compulsory registration of employers to contribute to the Plaintiff.
The law provides that the employer shall contribute 15% of an employee’s total monthly wages to the fund. 5% thereof may be deducted from the employees. Section 11 of the NSSF Act provides as follows:
“11. Payment of standard contribution by employers.
(1) Subject to this section, on and after the appointed day, every contributing employer shall, for every month during which he or she pays wages to an eligible employee, pay to the fund, within fifteen days next following the last day of the month for which the relevant wages are paid, a standard contribution of 15 percent calculated on the total wages paid during that month to that employee.
(2) The Minister may direct that any payment or class of payments of a kind mentioned in the direction shall be treated as wages and may in such direction direct the manner of assessing liability in a case where abnormal or unusual pay practices may have an appreciable effect on the contribution due.
(3) If an eligible employee is employed successively or concurrently by two or more employers, each of such employers shall pay to the fund in respect of such employee a contribution corresponding to the wages he or she pays such eligible employee.
(4) When a member of the fund dies during a month, no standard contribution for the month in which he or she dies shall be paid on the wages of such member; but if the standard contribution is paid to the fund, whether or not at the time of such payment the employer knew of the death of the member of the fund, such contribution shall not be refundable but shall be regarded as properly paid and, accordingly, shall be credited to the deceased member’s account and shall form part of the balance of his or her account.
(5) If after a contribution has been assessed on the wages of an eligible employee in any one month and paid to the fund a further payment is made during a subsequent month in respect of the same period of service, no reassessment in respect of the first month shall be made; but the further payment shall be included in the assessment of the contribution in respect of the month during which the further payment was made.
(6) Every employer shall furnish to the managing director on an approved form such particulars regarding each eligible employee in his or her service, his or her wages, the contribution due on such wages, the total wages to such employees, and the total contributions and such other information as the managing director may require.
Affected employers are required to contribute a standard contribution of 15 percent calculated on the total wages paid during that month to that employee. In other words the 15% is based on the total wages per month earned by an employee. As to how total wages are established in the subsequent subsections is a matter of methods and does not affect the issue for consideration which does not depend on how much is contributed. What is material is the subsequent section 12 of the NSSF Act which provides as follows:
“12. Employee’s share of standard contribution.
(1) A contributing employer may deduct from the monthly wage payment of his or her employee the employee’s share of a standard contribution of 5 percent calculated on the total wages paid during that month to that employee, but if more than one wage payment is made during any month, the employer may provisionally deduct from all but the last wage payment part of the employee’s share of a standard contribution.
(2) Where, during any month, the total sum provisionally deducted in accordance with subsection (1) is not equal to the employee’s share of the standard contribution, the employer may, notwithstanding subsection (1), deduct from the last wage payment during that month the difference between the employee’s share and the total sum already deducted; but if the total sum so deducted exceeds the employee’s share, the employer shall refund the amount in excess to the employee forthwith.
(3) Where through inadvertence the employer fails to recover any sum due at the proper time, he or she may recover that sum as is due in not less than four equal installments and within six months of payment of wages unless the employee agrees in writing to the deduction being made over a shorter period or in fewer installments; but no such recovery shall be made where the failure to recover the sum was due to the employer’s negligence; and no deduction shall be made for any other contribution or part of a contribution which is not authorised by this section, whether or not in pursuance of a contract or an agreement between an employee and the employer.
(4) If an eligible employee so agrees in writing, the employer may make deduction at an agreed rate from the employee’s wage payment or payments in any month and shall adjust the wage payment during the month following that deduction so as to take account of the difference between the agreed deduction or deductions and the employee’s share of the standard contribution due for the month; except that—
(a) the employee may at any time withdraw his or her agreement by giving written notice to his or her employer which shall be effective from the second wage payment following the giving of the notice to the employer;
(b) such an arrangement shall not delay the payment to the fund of the actual sum due, nor shall such an arrangement authorise any extra deduction from wages over the period of the employee’s engagement;
(c) the employer shall notify the managing director of the time when such an arrangement shall commence and the time when it shall cease;
(d) the Minister may, at any time, direct that this subsection shall not apply to any employee or class of employees or any employer or class of employers.
(5) Where an employer deducts in whole or in part the employee’s share of the standard contribution from the wages of his or her employee but does not pay it to the fund as part of the employee’s share of the standard contribution, the employee’s account shall be credited, subject to such conditions as the Minister may prescribe, with the amount so deducted from the general revenue of the fund.
(6) Every contributing employer who makes any deduction pursuant to this section before payment to the fund is due shall hold the employee’s share so deducted or any part of it in trust for the fund.
(7) For the purpose of any enactment which provides for the payment of minimum remuneration and for the purpose of seeing whether a person’s remuneration is less than the minimum provided for by that enactment, his or her remuneration shall be calculated before deduction of his or her share of any standard contribution payable under this Act.
(8) The Minister may, subject to such conditions and limitations as he or she may impose by regulations, require all or any class of employers to make provisional deduction.
(9) The provisions of this section shall have effect notwithstanding the provisions of the Employment Act or any other enactment to the contrary.”
Section 12 just provides for deductions from the wages of an employee. The first issue is who makes the contribution? The law places an obligation on employers liable to contribute 15% monthly to a social security fund. However the characterisation of the money is not money paid to NSSF as a beneficiary but is a contribution to the Employees account compulsorily taken and managed by NSSF under the NSSF Act. Objectively the employer need not contribute its personal profits but only has to work out its accounts by calculating the wages in such a way that 15% is not accounted for except as a contribution to NSSF but would otherwise be the entitlement of the employee though accounted for as a contribution to NSSF. This may affect the tax treatment of the wages. The contribution of 5% by deduction from the employer is a matter of accounting. For better characterisation of the contribution, the law imposes a contribution on an Employer for the social welfare of the employee under the NSSF Act. This is government Policy for certain categories of workers to have a fund managed on their behalf. The question to be asked is who is the beneficiary of the Social Security Fund? Is it the board or employers of the NSSF Corporation?
Deprivation of property or compulsory acquisition of property was considered in the case of Société United Docks and others v Government of Mauritius Marine Workers Union and others v Mauritius Marine Authority and others  1 All ER 864, by the Privy Council. I refer to the judgment of Lord Templeman who stated the question for consideration at page 870 of his judgment in the following words:
“Their Lordships consider that the business of the appellants was not compulsorily taken possession of or compulsorily acquired by the government, the corporation or anyone else. Once the bulk terminal was constructed the business of the dock companies in providing warehouses for the storage of sugar for export from Mauritius and the business of the stevedore companies in providing stevedores to load sugar manually simply became irrelevant and ceased to exist. The appellants contend that even so they are entitled to redress under the Constitution; they contend that the effect of the Sugar Terminal Act was to deprive them of their business without compensation in breach of the rights granted to them by section 3 of the Constitution. The government of Mauritius deny that the Sugar Terminal Act deprived the appellants of any property but if it did so the appellants, it is said, are not entitled to redress because they cannot prove that their property was compulsorily taken possession of or compulsorily acquired. The Constitution offers redress where, in the words of section 8, property is compulsorily taken possession of or compulsorily acquired but not otherwise. Section 3 of the Constitution only contains a general recognition and acceptance of rights and freedoms and only affords protection in the circumstances specified in the subsequent sections of Chapter II of the Constitution. The relevant subsequent section is section 8, which only enables an individual to claim protection and to obtain redress if property is compulsorily taken possession of or compulsorily acquired without compensation.
The appellants reject the government’s narrow construction of the Constitution and deny that section 8 has a limiting effect on section 3. The appellants contend that section 3 has effect in accordance with its terms and in suitable cases, such as the present, provides protection beyond the ambit of section 8. Alternatively, section 8 must be construed in the light of section 3 and so construed applies not only when property is compulsorily taken possession of or compulsorily acquired but also when property is destroyed.
Their Lordships have no doubt that all the provisions of Chapter II, including section 8, must be construed in the light of the provisions of section 3. The wording of section 3 is only consistent with an enacting section; it is not a mere preamble or introduction. Section 3 recognises that there has existed, and declares that there shall continue to exist, the right of the individual to protection from deprivation of property without compensation, subject to respect for others and respect for the public interest. Section 8 sets forth the circumstances in which the right to deprivation of property can be set aside but it is not to curtail the ambit of section 3. Prior to the Constitution the government could not destroy the property of an individual without payment of compensation. The right which is by section 3 of the Constitution recognised and declared to exist is the right to protection against deprivation of property without compensation. A constitution concerned to protect the fundamental rights and freedoms of the individual should not be narrowly construed in a manner which produces anomalies and inexplicable inconsistencies. Loss caused by deprivation and destruction is the same in quality and effect as loss caused by compulsory acquisition. (Emphasis mine)
At page 873 Lord Templeman concluded that:
“On the true construction of the Constitution of Mauritius and on authority their Lordships conclude that if the dock companies and the stevedore companies have been deprived of property by the coercive actions of the government then they are entitled to compensation. The dock companies and the stevedore companies have undoubtedly sustained a loss. They can no longer derive profit from or sell the goodwill of a business which consisted of providing warehouses and manual labour for the storage and loading of sugar for export. That loss would not have occurred if the bulk terminal had not been built. The Sugar Terminal Act authorised and procured the construction of the bulk terminal. But the dock companies and the stevedore companies have no right to complain about the erection of a bulk terminal.”
From the emphasis above what is envisaged in article 26 of the Constitution is the freedom to own property individually or in association with others. Secondly, the above case brings out the element that is crucial in the protection of the right to property. The protection is afforded by prohibiting loss to property rights provided under the article caused by compulsory taking over of the property or deprivation of a right to property by the actions or omissions of the respondent. To answer the question of whether there was loss I have considered the issue of whose property it is? Who is the right party to allege violation? Lastly whether loss or deprivation of property occurred? These questions can be considered by examining the NSSF Act and therefore no question for interpretation of the constitution arises in that regard. The meaning of loss by deprivation or compulsory taking of property is in any case plain.
I have finally considered the question of whose property it is, and my conclusion is that it is the property of the employee for whose benefit the employer is required to contribute 15% of the wages every month. Part of the 15% may be deducted from the wages of the employee. The preamble to the National Social Security Fund Act provides that it is: "An Act to provide for the establishment of the National Social Security Fund and provide for its membership, the payment of contributions to, and the payment of benefits out of, the fund and for other purposes connected there with."
Section 2 of the NSSF Act deals with the establishment and management of the fund. The fund is supposed to be a body corporate capable of doing whatever juridical persons can do. The members of the funds are provided for by section 6 of the NSSF Act and provides that any employee of or above the age of 16 and below the age of 55 years except an employee employed in excepted employment; a non-resident employee; and an employee not employed in Uganda declared by the Minister to be such employee and any farmer or at Sanlam is a member of the cooperative societies can also be deemed to be an eligible employee. In any case what is important is that the employees of the Defendant are members and that is why the employer Defendant is an aggrieved person.
The preamble also provides for the payment of benefits out of the fund and the description of benefits is provided for under section 19 of the NSSF Act. The benefits fall into five categories namely: age benefit; withdrawal benefit; invalidity benefit; emigration grant; and survivors benefit. The amounts to be paid are from the members account in the fund at the date of payment.
Under section 20 of the NSSF Act, an age benefit is provided for where a member of the fund attains the age of 55 years and above and has retired from regular employment. Or where he or she merely attains the age of 55 years. Section 21 deals with withdrawal of the benefit. Section 22 deals with invalidity benefit and section 23 with emigration grant. Lastly section 24 deals with survivors benefit.
Section 30 of the NSSF Act provides for investment of all monies in the fund, including the reserve account which are for the time being required to be applied for the purpose of the fund and shall be invested in such investments as shall be determined by the board in consultation with the Minister. Section 34 of the NSSF Act provides that there shall be obtained and maintained for each member of the fund an account in the fund which shall be credited with all standard, voluntary and supplementary contributions and interest on the contributions and from which there shall be paid any benefits and funds to or in respect of the member and or prescribed fees chargeable for issuing evidence of membership and registration.
From the above provisions, the fund belongs to the members and is a trust fund held for the benefit of the members and from which benefits are paid out of whereupon the members account is closed. The conclusion is that the deductions and contributions are made to a members account under a compulsory scheme established by the government for the benefit of workers who are contributory members. The money is supposed to be invested so that the members get a return of profit on their investment. The question of whether the investment returns are adequate under the scheme is not a question dealing with deprivation of property but with management of trust funds.
According to Philip H. Pettit: EQUITY AND THE LAW OF TRUSTS, fourth edition London Butterworth’s 1979, a trust as a right of property held by one person called the trustee for the benefit of another person, the cestui que trust or beneficiary. A trust creates an obligation under which a person to whom property is conveyed or transferred is bound in equity to deal with the beneficial interest in such property in a particular manner in favour of a specified object or class of objects or the beneficiary (in case of NSSF the members). According to the case of Income Tax Special Purposes Commissioners v. Pamsel,  A.C. 531, the Common Law divides trusts into two main branches namely charitable trusts and private trusts. Under section 2 of the Trustees Act Cap 164 the word “trusts” must be taken to mean any trust as defined and includes implied and constructive trusts. Case law definitions extend to express, statutory, implied, resulting and constructive trusts.
A trust is an arrangement whereby money or property is owned and managed by a person, persons, a corporation or organisation for the benefit of another person or persons. The manager is called the trustee who is the legal owner of the trust property and who is under a duty imposed by law or equity to hold the property for the benefit of one or more individuals or organisations called the beneficiary of the trust property. In express trusts the beneficiary is named in the instrument creating the trust. The trustees owe a fiduciary duty to the beneficiaries and in this suit the trust is created by and governed by the NSSF Act managed by a Board and employees who are charged with management of property of the members until when the property is transferred back to the beneficiary for whom the trust is created by Parliament. They are required to pay the property back with interest and do not have a beneficial interest in the fund other than reasonable remuneration and lawful fees and charges.
The conclusion is that funds are transferred to NSSF which is the trustee for the benefit of the members who are the employees of contributing employers. The funds are to be managed for the benefit of the employees who are members of the fund and the fund is supposed to earn profit for the members according to the specific accounts created under the fund. It follows that there is no deprivation or loss of property. The compulsory contribution is not a tax but a Social Security program created by Parliament for the benefit of employees so that at the age of 55 and above all in the case of invalidity, emigration etc, benefits are paid to the beneficiary of the fund. There is no loss or deprivation of property. The question of whether adequate profits are made out of the fund is a management question. Employees are specifically interested persons in this suit even though article 50 of the constitution of the Republic of Uganda permits any other person who claims that a fundamental or other right or freedom granted under the constitution has been infringed or is threatened, is entitled to apply to a competent court for redress which may include compensation. In this case the matter came by way of an objection to a suit for the payment of benefits. The employees would be prejudiced, if benefits are not paid into the fund which was meant for their welfare. The Defendant is not the right party to prevent the employees from receiving money which would be to their benefit. If anything they are being deprived of contributions towards their social welfare as they advance in age.
In the premises, because the compulsory contribution does not amount to deprivation of property and in fact the fund earns income the contributions that are made are for the benefit of the beneficiary who is the employees, there is no loss occasioned to the beneficiary of the fund. The question of the contributions being made by the employer is a matter of accounting for purposes of entitlement and payment of the wages of an employee. It is therefore no deprivation of the employer of anything other than to pay just wages and contributions which the employee would be entitled under the NSSF Act. The NSSF Act does not determine how much money one would put into wages and how much would be the 15% out of the same. The how much wages are payable is determined by the employer and therefore the employer cannot be deprived except by its own act. In the premises, there is no question for interpretation of the constitution because there is no loss, deprivation or compulsory acquisition of the rights to property of the employees whose money is paid to a statutory fund for their own benefit. NSSF is merely a trustee holding and investing money and managing it for the benefit of the beneficiaries who are the employees. Issue number two is answered in the negative. The compulsory monthly contributions by employers to National Social Security Fund do not amount to deprivation of property of the employees or the employer. It follows that there is no violation of the right to property. If anything, the property accumulated is supposed to earn profit and NSSF can be charged with the manner in which the managed trust property as to whether adequate returns of profit is being realised from the funds collected for the benefit of the beneficiaries of the fund.
The question of whether a penalty should be automatically imposed for delayed contributions raises a real spectre of whether such a penalty should not be imposed after due process of law which gives a right of hearing. That is not the matter for consideration.
Whether the Plaintiff’s claim against the Defendant is barred by limitation?
I have carefully considered the submissions of Counsel which have been reproduced in detail above. The first observation I wish to make is that the Defendants defence is the very anti-thesis of the proposition that any contribution by the employer and the employee to the national Social Security fund, would be deprivation of property. On the contrary, the law of limitation operates by cutting out the right of action brought outside the limitation period and therefore means that the reserve fund and any contributions to the members account should not be made at all. That is why I call t an anti-thesis of the first proposition that there would be deprivation of the property rights of the employees. This issue is whether, the property meant for the benefit of the beneficiaries to the employees of the Defendant should not be contributed into their accounts and whether it should not be contributed to the reserve fund which was part of the investment account of the Plaintiff made for the benefit of the fund generally.
The above observation notwithstanding, the Defendant relies on section 3 (1) (d) and (4) of the Limitation Act Cap 80 Laws of Uganda 2000 which sections are reproduced below:
“3. Limitation of actions of contract and tort and certain other actions.
(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action arose—
(d) actions to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture, except that in the case of actions for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under an enactment or independently of any such contract or any such provision) where the damages claimed by the Plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries to any person, this subsection shall have effect as if for the reference to six years there were substituted a reference to three years.
(4) An action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of two years from the date on which the cause of action accrued; but for the purposes of this subsection, the expression “penalty” shall not include a fine to which any person is liable on conviction of a criminal offence.
(6) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except insofar as any provision of this section may be applied by the court by analogy in like manner as the periods of limitation in force before the commencement of this Act have heretofore been applied.”
The Defendant's submission is that the Plaintiff’s action is for recovery of money by virtue of any enactment. Secondly it is for recovery of the penalty. Section 2 (1) (d, limits the period of limitation for recovery of monies by virtue of any enactment to a period of six years from the date the cause of action arose. However in the case of a penalty or forfeiture, the limitation period is two years from the date the cause of action arose. The straightforward argument is that the unremitted contributions are for the period July 2004 August 2010. The Plaintiff’s action was filed on 13th August, 2015 which is more than six years from the date the cause of action arose.
I have further considered the plaint and paragraph 3 thereof avers that the action against the Defendant is for the recovery of a debt of Uganda shillings 560,622,456/=, being unpaid Social Security contributions, statutory penalty and accrued interest. In paragraph 4 which discloses the facts in support of the cause of action, the Plaintiff relies on an audit/inspection report dated 20th of September 2010 wherein the Plaintiff avers that it discovered when the final audit/inspection report was issued. The audit report is dated 15th December, 2010. Thereafter on 28th May, 2012 the Plaintiff wrote to the secretary, University Council a statutory notice of intention to sue.
The pleadings further disclose that the statutory debt is Uganda shillings 51,236,513/= while the statutory penalty is Uganda shillings 451,775,168/=. Thirdly statutory interest by 30th of June 2014 is Uganda shillings 57,650,775/=.
The Plaintiff's defence is that the defence covers a significant portion of the suit. Secondly it amounts to an admission of part of the Plaintiff’s claim which is not barred by the statute of limitation. The Plaintiff contended that the question for determination is when the cause of action arose for purposes of computation of the six years. She concluded that it was on 15th December, 2010. With regard to the statutory interest/penalty, it was assessed on 30th June, 2014 and a period of two years expired on 30th June, 2016. The action was filed on 13th August, 2015 within the limitation period. The Plaintiff's Counsel further submitted that statutory penalty is computed on a monthly basis and continues to accrue and is therefore within the limitation period and recoverable in the suit.
Lastly the question is whether the letter inviting the Plaintiff for a meeting with the Defendant amounted to an acknowledgement of the claim. The letter is dated 17th June, 2013.
With regard to this submission that the Plaintiff discovered indebtedness of the Defendant on 15th December, 2010, the Defendant's submission is that the Plaintiff did not plead any grounds of exemption under Order 7 rules 6 of the Civil Procedure Rules and there are therefore no grounds for exemption of the Plaintiff from the limitation period.
With regard to the allegation of discovery of the cause of action the non-remittance of the statutory contributions, the Defendants Counsel submitted that the exemptions under section 25 (a) and (b) of the Limitation Act operate where the cause of action is founded on fraud or mistake. The cause of action should be based upon default of the Defendant or agent. There should be allegation of fraud on the part of the Defendant or agent. Thirdly, the action should be for relief from the consequences of the mistake; the period of limitation shall not begin to run until the Plaintiff discovers the fraud or the mistake. Fraud and mistake were not pleaded and therefore cannot be relied upon.
As far as the acknowledgement is concerned, it has to be clear and unequivocal. There was no acknowledgement of indebtedness by the Defendant.
With reference to the statutory penalty, the Defendants Counsel maintained that it could not continue to accrue where the claim is barred by the law of limitation. In the alternative, limitation operates to freeze the period caught by the law of limitation.
I have carefully considered the objections and the submissions of Counsel. The Plaintiff pleaded that the basis of the action is the discovery of non-remittance of statutory contributions at the end of 2010. The first question for consideration is whether, the cause of action arose at the end of 2010. The Plaintiff pleaded that the failure to remit was discovered by an audit/inspection report and it follows clearly that the Plaintiff was not aware that the Defendant was non-compliant with regard to the sum of Uganda shillings 51,236,513/=.
The first question for consideration is whether the discovery of the failure to remit is a mistake within the meaning of section 25 of the Limitation Act and therefore the cause of action, arises from the discovery of the mistake. Section 25 of the Limitation Act provides as follows:
“25. Postponement of limitation period in case of fraud or mistake.
Where, in the case of any action for which a period of limitation is prescribed by this Act, either—
(a) the action is based upon the fraud of the Defendant or his or her agent or of any person through whom he or she claims or his or her agent;
(b) the right of action is concealed by the fraud of any such person as is mentioned in paragraph (a) of this section; or
(c) the action is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the Plaintiff has discovered the fraud or the mistake, or could with reasonable diligence have discovered it; but nothing in this section shall enable any action to be brought to recover, or enforce any charge against, or set aside any transaction affecting, any property which—
(d) in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know or have reason to believe that any fraud had been committed; or
(e) in the case of mistake, has been purchased for valuable consideration, subsequently to the transaction in which the mistake was made, by a person who did not know or have reason to believe that the mistake had been made.”
I have carefully considered the above provision and the only question for determination is whether the right of action was concealed. The Plaintiff’s case is based on the right of action being concealed by the fraud or misrepresentation of the Defendant. The rules of pleading under Order 6 rule 3 of the Civil Procedure Rules require allegations of fraud and misrepresentation against the Defendant to be specifically pleaded and proved. The cited rule requires all cases where the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default or undue influence to give particulars of the fraud and other causes of action mentioned in the rule. I agree with the authorities which enforce the provisions of Order 6 rule 3 of the CPR that particulars of fraud or misrepresentation have to be pleaded before they can be considered. The Plaintiff can only rely on the discovery of fraud or misrepresentation to avoid the law of limitation if pleaded.
Before concluding on the application of section 25 of the Limitation Act, I have also considered the question of whether the Plaintiff can rely on the misrepresentation or mistake. Was the cause of action founded on mistake? In paragraph 4 (c) of the plaint it is averred that during the audit it was discovered that the Defendant failed to remit the mandatory Social Security contributions for its employees for the relevant period between July 2004 to August 2010. In the letter to the manager Makerere University Guest House dated 15th December, 2010, paragraph 1 informed the Defendant that the Plaintiff discovered that the Defendant had not been remitting contributions for all temporary staff in contravention of section 6 (1) of the NSSF Act. The duty to remit the contributions is that of the employer and it is not for the Plaintiff to keep on asking for the money to be remitted. The Plaintiff can only periodically check compliance of the statutory duties of the employer. I have also considered the fact that it is an offence under section 44 (1) (f) of the NSSF Act for any person to fail to make remittances or contributions by payment to the fund for which the person is liable under the Act.
It is also an offence under section 44 (1) (a) to make false statements or representations.
Is this an action for relief from the consequences of a mistake? My understanding of section 25 of the Limitation Act is that the mistake relied on should be the mistake of the Plaintiff. It follows that the Plaintiff’s cause of action can only be founded on fraud or misrepresentation. In such cases the cause of action, arises from the time of discovery of the fraud or misrepresentation and the period of limitation does not apply until the discovery. I have carefully considered the facts in support of the Plaintiff’s action as disclosed in the pleadings and have come to the conclusion that the pleading of the Plaintiff may have a defect in form but not substance on the fact that the Defendant misrepresented the actual remittance due to the Plaintiff and this is disclosed by Plaint. In paragraph 4 (b), (c) (d) the Plaintiff clearly pleads inter alia that:
"(b) ... The Plaintiff conducted an inspection of the Defendant’s records relating to Social Security contributions to ascertain its compliance with the NSSF Act and found that the Defendant was not fully compliant with its obligations to remit for all its employees. A final Audit/Inspection report was issued and the Defendant duly acknowledged receipt thereof.
- The audit found that during the period July 2004 to August 2010 the Defendant failed to remit mandatory Social Security contributions for its employees amounting to Uganda shillings 51,236,513/= (...).
- The unremitted mandatory social security contributions have since attracted statutory penalty of Uganda shillings 451,775,168/= (…) Being statutory interest as at 30th of June 2014 "
The above averments disclose that the Plaintiff conducted an inspection of the Defendant to establish whether it was compliant with its obligations. In other words, given the obligations of the Defendant to make remittances and full disclosure under the Act, the Defendant had not complied with its obligations to remit for all its employees and this was disclosed by the audit/inspection report. The above averment discloses the case of concealment by the Defendant of material information. It also discloses a breach of the statutory obligations to make the requisite remittances. It further discloses that the Defendant made some remittances for other employees because the allegation is that it did not make remittances for all employees. The audit report is attached as annexure "A" and is part of the pleadings it shows that the remittance was not made for all temporary staff in contravention of section 6 (1) of the NSSF Act. Though the word "misrepresentation" is not used, the action is definitely based on the ground of fraud or misrepresentation of the Defendant through concealment of material facts and failure to remit for its temporary employees. Some remittances were made for other members of staff and therefore the information about the temporary staff was not available to the Plaintiff until after the audit. Taking into account the purpose of section 25, the pleadings disclose concealment and therefore fraud or misrepresentation based on the duty of the Defendant to remit and the result of which was to conceal from the Plaintiff about Uganda shillings 51,236,513/=.
Finally the action falls within the provisions of section 25 (a) and (b). By misrepresenting the actual state of affairs the Plaintiff’s beneficiaries were defrauded for the material period and were it not to be for the audit the information was not available or forthcoming and there was therefore fraudulent concealment. That being the case the employees had been defrauded of their dues for social security. The Plaintiff is a mere trustee for the funds with statutory duties of recovering the same as a statutory debt. The Plaintiff is also pursuing trust funds for purposes of the NSSF Act. In the premises the limitation period was suspended until the Plaintiff discovered the fraud and time begins to run from the date of discovery around September or December 2010. The action for a statutory debt was commenced within 5 years from the accrual of the cause of action for recovery of Uganda shillings 51,236,513/=.
As far as the action for penalty is concerned, it was supposed to be commenced and brought within 2 years under section 3 (4) of the Limitation Act.
I have further scrutinised the provisions on penalties. It prescribes that a penalty shall be added for the delay under section 14 of the NSSF Act. The penalty accrues after a delay of one month to remit. That being the case, the penalty accrued from each default and the statutory formula is clear and need not be considered. What is material is that the penalty was Uganda shillings 180,221,648/- according to the audit report and letter addressed to the Defendant and annexed to the plaint as annexure A. This amount ought to have been sued for within two years of the discovery under section 3 (4) of the Limitation period. The period of limitation expired by the 15th of December 2012. To be more specific because the penalty accrued on the original amount of 51 million Uganda shillings, it can only accrue for the period of two years before the suit was filed on the 16th of September 2015. Any other period earlier than two years before the suit was filed is excluded by the limitation period. In the case of Eridad Otabong Waimo vs. Attorney General Civil Appeal No. 6 of 1990 (Reported in  V KALR page 1), The Supreme Court held that time begins to run from the accrual of each cause of action. They held at page 4 that “where a period of limitation is imposed it begins to run from the date on which the cause of action accrues. When, therefore there is for instance a trespass, libel, unlawful arrest, false imprisonment ... time begins to run from the act itself, or if there be several acts, in respect of each act from the date of its commission.” They noted that there are different limitation periods for each act which constitute a cause of action. Referring to the analogy of a trespass as a continuing tort, they noted that the cause of action continues until the wrong ceases.
In this case the amount for Uganda shillings 51,236,513/= being the statutory debt unremitted was filed within the statutory period. The other periods for recovery of penalty more than two years previous to the filing of the action expired. It is only the period two years before the filing of the suit which still accrues. It follows that penalties under section 14 of the NSSF Act can be calculated for the period of exactly two years before the 16th of September 2015. Interest is calculated for 6 years as well to the filing of the suit. The penalty can be calculated from 17th September 2013 until the filing of the suit. The rest of the claim amounting to a sum over and above this amount is time barred.
With the above ruling on issues number 1 and 2 save for the period excluded as stated in my ruling the objections of the Defendant are overruled with costs.
Judgment is entered for the Plaintiff for the sum of Uganda shillings 51,236,513/= together with statutory interest for six years.
Secondly, judgment is entered for statutory penalty under Section 14 of the NSSF Act calculated from 17th September 2013 on the sum of Uganda shillings 51,236,513/= until the filing of the suit.
Interest is awarded on the above sums from the date of filing the suit on 16th September 2015 up to the date of judgment at the rate of 19% per annum.
Further interest is awarded on the aggregate sum at the date of judgment till payment in full at the rate of 14% per annum.
Under section 27 of the Civil Procedure Act, unless otherwise ordered by court, costs follow the event. There are no grounds for denying the Plaintiff costs and the Plaintiff’s suit succeeds with costs.
Judgment delivered on 6th September 2017
Christopher Madrama Izama
Judgment delivered in the presence of:
Rachel Nsenge for the Plaintiff
Aida Wadda for the Defendant
Charles Okuni: Court Clerk
Christopher Madrama Izama
6th September, 2017