THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 114 OF 2015

(ARISING FROM H.C.C.S. NO 189 OF 2006)

MEERA INVESTMENTS LIMITED}.........................................................APPLICANT

VS

UGANDA INVESTMENT AUTHORITY}...............................................RESPONDENT

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicant filed this application under the provisions of section 98 of the Civil Procedure Act as well as Order 52 rule 1 of the Civil Procedure Rules for orders that the dismissal of High Court Civil Suit Number 189 of 2006 be set aside, for the suit to be reinstated and for costs of the application to be provided for.

The main ground of the Application is that the Respondent was engaged in discussions with the Applicant on the issue of costs by the time the Respondent’s Counsel applied for dismissal under Order 17 rule 1 of the Civil Procedure Rules. Other grounds deal with the grounds of the suit against the Respondent as well. The other grounds are mentioned and considered in the written submissions and ruling.

The court was addressed in written submissions.

The gist of the Applicant's submissions are that the application is for the reinstatement of HCCS 159 of 2006 which had been dismissed on 12 November 2014 by the Deputy Registrar under Order 17 rule 6 (1) of the Civil Procedure Rules. The rule provides that if no application is made or step taken for a period of two years by either party with a view to proceeding with the suit, the court may order the suit to be dismissed.

The contention of the Applicant is that the suit arose from the Respondent’s miscommunications in respect of the certificate of incentives it had issued to the Applicant. The communication led to the imposition of undue taxes on the Applicant by Uganda Revenue Authority. This was the anomaly that resulted in the filing of the main suit. The affidavit in support of Counsel Alex Rezida deposes that the discussions were held about who should bear the costs of the residue of the suit considering that the main suit between the Applicant and the third Defendant, the Uganda Revenue Authority, had been settled. Ms Samalie Mukyala in the affidavit in opposition paragraph 4 thereof concedes that what was outstanding between the parties appears to have been the appropriate costs which the court could inquire into. Indeed the costs are the subject of annexure AR2 to the affidavit of Alex Rezida. Furthermore the Respondent’s defence annexure AR4 clearly shows that it merely sought to set straight the record which had been distorted to the detriment of the Applicant. With the consent judgment in place, all that was required was to pay the Applicant's costs for the injury it suffered and this had been the subject matter of discussions between the parties. The last such documented discussion is dated 31^st of October 2014 but only twelve days later, on 12 November 2014, the Respondent applied for dismissal of the suit. It is not surprising that the Respondent applied to court when faced with an imminent prospect of paying costs.

The Applicant’s submission is that the question of costs was the proper matter for discussion by Counsel that should have resulted in another possible settlement. The Respondent’s Counsel, faced with the prospect of costs, chose to apply for dismissal of the suit, abandoning the discussions. On the basis of the above, the court has inherent powers under section 98 of the Civil Procedure Act cap 71 to set aside the dismissal of the suit.

Setting aside the dismissal of suit dismissed under Order 17 rule 6 of the Civil Procedure Rules was considered in the case of Rawal while versus Mombasa Hardware Ltd [1968] EA 392, by the Court of Appeal of East Africa. The Court of Appeal of East Africa considered the exercise of the courts inherent powers under the equivalent of section 98 of the Civil Procedure Act and held that the court has jurisdiction to set aside the dismissal of a suit under that rule.

In the current application the court has been moved to set aside the dismissal on the ground that there were ongoing discussions between the parties at the time of the dismissal. Unfortunately one of the parties went to the court and deliberately refrained from appraising the court about the discussions with the other party. It would be an injustice for the court to allow conduct of the Respondent with all the hallmarks of injustice to stand. In short Counsel submitted that this was a good and proper case for the court to exercise its inherent powers to set aside the dismissal and reinstate the suit.

In reply the Respondent’s Counsel agreed that a suit dismissed under Order 17 rule 6 can be reinstated under the inherent jurisdiction of the court preserved by section 98 of the Civil Procedure Act. The reinstatement of the suit is a matter of the courts discretion which must be exercised judiciously. The Respondent’s Counsel contended that there are two matters with a bearing on whether the court should exercise discretion in favour of setting aside the dismissal. He proposed two issues as:

1. Whether the Applicant has explained away sufficiently its failure to have the suit fixed for hearing in excess of the two years statutory period?
2. Whether in fact there is anything still outstanding in the suit as framed capable of termination upon its reinstatement?

As far as the first question of whether there was any sufficient explanation about the failure of the Applicant to have the suit fixed within a period of two years, Counsel submitted that it was incorrect for the Applicant to submit that because it had discussions with the Respondent, it did not fix the suit. The Respondent’s Counsel contends that the communication between the parties put forward by the Applicant is an e-mail dated 14^th of October 2013 from the Respondent’s lawyer Apollo Makubuya, to the Applicant's lawyer Alex Rezida which merely stated that as a settlement has been reached between the Applicant and Uganda Revenue Authority, the Respondent considered the matter concluded and sought to have the file closed and its costs paid for having been dragged to court by the Applicant. The e-mail relied upon by the Applicant came over three years subsequent to the consent judgment and cannot be called in aid to explain the failure by the Applicant as Plaintiff to settle this matter for trial for a period of three years.

The Applicant's lawyer’s e-mail in response of 31 October 2014 contested its liability to pay the Respondent’s costs and is not helpful because it came outside the relevant period within which it was incumbent upon the Applicant to have fixed this suit. The Applicant failed to put forward any other bases or explanation for the inordinate delay in fix the suit for hearing so as to form the basis for the court to exercise its discretion to reinstate the suit.

1. Whether in fact there is anything still outstanding in the suit as framed capable of determination or reinstatement?

The Respondent’s Counsel submitted that judicial discretion cannot be exercised in vain and the suit cannot be reinstated because there is nothing left to be tried. He argued that in the plaint dated 30th of March 2006, the Applicant sought to be adjudged by the court as not liable for taxes assessed by Uganda Revenue Authority for the period 1996 to 2003 because a certificate of incentives issued by the Respondent exempted it from the relevant tax for the same period. The Respondent in its defence supported the Applicant's entitlement to the relevant exemption.

In the consent judgment the Applicant is not to be liable for the relevant taxes for the period up to June 2002, albeit on the basis of a tax waiver comprised in the Finance Act of 2008. In the consent judgment, the Applicant accepted liability for taxes on interest paid on its foreign loans on the ground that it was not an allowable expense.

In the premises the consent judgment disposes of the whole suit and there is nothing left in the plaint that can be the subject matter of adjudication on reinstatement of the suit other than the question of costs. It is therefore the Respondent’s case that costs should be left to stand on the ground that the Respondent was dragged to court by the Applicant in a matter that the Applicant never proceeded to have determined.

In rejoinder the Applicant’s Counsel submitted by way of background that the Applicant applied for and was granted a certificate of incentives by the Respondent in 1995. It was a precondition further to demonstrate that the Applicant had invested at least US$2 million. The Applicant demonstrated that it qualified by listing five projects whose value exceeded US$2 million. The certificate of incentives granted to the Applicant entitled it to a tax waiver for five years. Thereafter Uganda Revenue Authority wrote to the Respondent seeking clarification on whether the certificates of incentives covered the entire real estate business of the Applicant or the five properties that were listed for purposes of proving that the threshold had been attained.

The Respondent replied that the certificate of incentives covered the five properties only. Uganda Revenue Authority then demanded taxes from the Applicant for the rest of the property whereupon the Applicant filed HCCS 175 of 2000 against the Respondent since the certificate of incentives had been rendered useless by the letter. The Respondent clarified in a board meeting that the certificate of incentives covered the entire real estate business. Uganda Revenue Authority backed off and the suit was withdrawn.

In 2005, Uganda Revenue Authority recycled the same argument that the certificates of incentives covered only five properties and not the entire real estate. By letter dated 29th of June 2005 Uganda Revenue Authority also wrote to the Respondent citing various, conflicting letters regarding the coverage of the certificate of incentives issued by the Respondent to the Applicant. On 21 July 2005, the Respondent replied stating that the certificate of incentives covered the entire real estate business of the Applicant. Uganda Revenue Authority disputed that and chose to rely on the first letter and imposed a tax liability on the Applicant and this led to the filing of HCCS 189 of 2006 from which this application arose.

In the Respondent’s written statement of defence, it is written that the certificate of incentives covered the entire real estate. Uganda Revenue Authority disputed that basing on the Respondent’s contradictions and imposed a tax liability on the Applicant. The case against the Respondent was for causing the confusion that resulted in Uganda Revenue Authority rejecting the certificate of incentives. The Respondent’s letter resulted in a tax demand being made.

The background of this matter is that Mr Rezida had several discussions with the Respondent’s Counsel Mr Apollo Makubuya over time. The Applicant’s position is that the genesis of the action by Uganda Revenue Authority was the Respondent’s actions. In the affidavit in reply to this application, the Respondent does not deny this assertion.

The Respondent stealthily moved the court to dismiss the Applicant’s suit for want of prosecution without informing the court that there were discussions between the parties. In the premises the application for dismissal was made in bad faith. It was not copied to the Applicant yet it yielded a judicial decision. It was silent on the interaction between the author of the letter Mr Apollo Makubuya, and Counsel for the Applicant Mr Rezida whose discussions were held over time.

The Applicant’s Counsel submitted that in exercising its discretionary powers the court has to consider all the circumstances of the case. On the same point he emphasised the existence of ongoing discussions between the parties through their respective Counsels. Secondly it was the Respondent who caused the delay in the negotiations. In the very least, a notice to show cause why the suit should not be dismissed, should have been issued first.

Ruling

I have carefully considered the application, the affidavit evidence and documentary evidence attached as well as the submissions of Counsel. The application is for the setting aside of the dismissal of the suit as well as for reinstatement of the suit and for costs.

The grounds of the application are that the Applicant and Counsel for the Respondent engaged in several discussions over time in respect of the suit until the last discussion in October 2014 followed by e-mail correspondence. Secondly the conclusion of the discussions delayed partly due to lack of comment on the Applicant’s stand and it also transpired that there may have been an issue of instructions that Counsel for the second Defendant needed to address first before reaching a conclusion. Thirdly it is contended that they were ongoing steps between the Applicant and the Respondent that prevented Counsel for the Applicant from fixing the suit for hearing. Lastly the Applicant avers that it is in the interest of justice that the dismissal of HCCS 189 of 2006 is set aside and the suit reinstated.

The application is supported by the affidavit of Alex Rezida Counsel for the Applicant as well as that of Dr Sudhir Rupaleria, the Managing Director of the Applicant.

The deposition of Alex Rezida in support of the application is that he as an advocate working with Messieurs Nangwala, Rezida and Company Advocates duly instructed by the Applicant to file HCCS 189 of 2006. On 4 February 2015 they were served with a taxation hearing notice for the Respondent’s bill of costs which he personally saw on 6 February 2015 as he was out of Chambers when it was served. He was shocked to learn upon enquiry that on 6 February 2015 the Respondent applied for dismissal of the suit for want of prosecution in a letter dated 12^th of November 2014. He was surprised because they had held several discussions over time with Mr Apollo Makubuya Counsel for the Respondent regarding the case against the second Defendant. The last discussion they had was in October 2014 and it was followed by e-mail correspondence attached to the affidavit. Part of the delay in concluding discussions with Counsel for the Respondent was lack of comment on the Applicant’s stand and it transpired that there may have been an issue of instructions that Counsel for the second Defendant needed to address first. The Applicant’s position was that the genesis of actions taken by the third Defendant with the Commissioner General of Uganda Revenue Authority was the contradictory positions in letters from the third Defendant dated 29^th of June 2005, 15^th of November 2005 and an earlier letter from the Respondent dated 15th of April 2003. These correspondences are referred to in the written statement of defence.

The gist of the correspondence are that the Respondent at one time wrote a letter stating that the certificate of incentive it gave the Applicant covered five out of several of the Applicant’s properties only whereas not. Secondly the consequence of the Respondent’s communication resulted in the filing of the suit. Thirdly the consequences of the suit including the consent judgment between the Applicant and the third Defendant required to be addressed in a possible settlement between the Applicant and the Respondent. At all times, he made it clear to Counsel for the Respondent that there was need to address the consequences of their client’s actions and if there was to be settlement, the Applicant would be entitled to costs as part of it.

The court was not involved in the negotiations between the parties and the negotiations prevented the Applicant’s Counsel from fixing the case for hearing. His firm always had full instructions to proceed with the suit if the Respondent was not willing to amicably consider the consequences of its actions which resulted in the suit.

The application is further supported by the affidavit of Dr Sudhir Rupaleria confirming he had instructed Messieurs Nangwala Rezida and Company Advocates and they instituted an action against the Respondent. He received a letter from the Applicant's lawyers to the effect that there was taxation of the Respondent’s bill of costs. Prior to the award of costs there were interactions between the Applicant's lawyers and the Respondent’s lawyers and his instructions were to the effect that the Respondent had some responsibility for the manner the certificate of incentives it issued to the Applicant was handled by its officers thereby giving rise to the filing of the suit.

He was briefed and was aware of the interaction with the Respondent’s Counsel including the delay in prosecution of the suit. In October 2014 he received e-mail from the Applicant’s lawyers about the latest interaction. At no time was the court made aware of what was going on between the parties. The Applicant is ready and willing to have the case against the Respondent heard and disposed of in the absence of an amicable settlement. The drive for settlement was the contradictory nature of the Respondent’s interpretation of its certificate of incentives. This was reflected in their contradictory correspondence contrary to the purpose of the certificate of incentives; subsequent letters supporting the purpose of the certificates of incentives; and a written defence in the suit contradicting the letter that the third Defendant relied on to act against the Applicant’s which resulted into the filing of the suit. The Applicant stands to suffer grave injustice if the suit is not heard in the absence of an amicable settlement. The injustice includes failure to address the loss and damage caused by the Respondent’s offending letter that the resulted in damages of over Uganda shillings 7,000,000,000/=, loss of goodwill and the suffering.

The Respondent opposed the application and filed an affidavit in reply deposed to by the Senior Investment Executive (Legal and Board Affairs) Ms Samalie Mukyala. The facts in the depositions are that on 31^st of October 2011 the Applicant executed a consent judgment with the third Defendant (Uganda Revenue Authority) in the main suit in which consent judgment the Applicant agreed with the third Defendant to estimate tax payable and have a schedule for its payment thereby disposing of the tax dispute which was the basis of the suit. Having excluded the Respondent from the consent judgment, the Applicant took no steps whatsoever to fix whatever remained in the suit for hearing. Subsequent to the consent judgment and perusal of the prayers in the plaint and the content of the consent indicate that this was for the reason that none of the outstanding claims can be pursued after the Applicant had conceded to the tax sum set out in the consent judgment. The Applicant being the Plaintiff in the main suit ought to have set down the suit for hearing and because it had not done so for a period in excess of three years, the suit was lawfully dismissed under Order 17 rules 6 of the Civil Procedure Rules and there is nothing to be reinstated.

Regarding the exchange of correspondence between the party’s lawyers, it was initiated by the Respondent in October 2014 long after the consent judgment and it does not form any lawful basis or excuse for the Applicant's failure to have set down the matter for hearing. What was outstanding between the parties appears to have been the appropriate court order and it is probably only what the court was required to inquire into. In the premises Samalie Mukyala deposes that the Applicant has not shown sufficient cause for setting aside the dismissal of the main suit and for its reinstatement.

In rejoinder Dr. Sudhir Ruparelia agrees that there is a consent judgment between the Applicant and the third Defendant in the main suit. The Applicant would never have commenced the suit if it had not been for the Respondent’s misrepresentations and inconsistencies regarding the certificates of incentives it issued. The Respondent is liable for the consequences of its actions or omissions and this is not part of the consent judgment according to a copy of the plaint annexed to the affidavit. He further deposes that he was periodically briefed by Rezida of Messieurs Nangwala, Rezida and Co. Advocates of their meetings with Counsel Makubuya of MMAKS Advocates about the issue long before October 2014. The discussions were hampered by the Respondent’s lawyer’s quest for confirmation of instructions. He personally met Mr Masembe an advocate in MMAKS Advocates long before October 24 on the same matter. He thinks that the application for dismissal of the suit was done purposely to undermine the discussion of settlement of the suit and the Applicant would suffer grave injustice if the suit is not reinstated.

I have carefully considered the correspondence referred to. On 14 October 2014 Counsel Apollo Makubuya, on behalf of the Respondent wrote to Counsel Rezida to inquire about the status of the suit. He wrote in part as follows:

"Given the time and negotiations between URA and Meera we consider that the same was concluded and want to close our file. Please advise. As we have mentioned to you previously we consider that your client should meet our costs. Will wait to hear from you as you promised. Cheers, Apollo."

Counsel Alex Rezida replied on 31 October 2014 about two weeks later and wrote as follows:

“Apologies I did not revert back to you before I travelled for a couple of days.

We talked about this matter and you mentioned costs.

The case would never have arisen if there was no confusion about the scope of the incentives given by your client – especially a letter from your client that stated the scope as being limited to 5 properties while on the contrary the value of the 5 properties were a threshold for qualification for the incentives.

It may be necessary that you look at the whole matter and consider paying our client’s costs.

The basis of this application arises from the fact that on 12 November 2014 and in a letter filed on court record the same day, Messieurs MMAKS wrote to the Registrar, High Court of Uganda, (Commercial Division) on the subject of HCCS No. 189 of 2006 between the Applicant as Plaintiff against Attorney General, Uganda Investment Authority (the Respondent to this application) and the Commissioner General Uganda Revenue Authority. The Respondent’s Counsel sought dismissal of the suit on the ground that the Plaintiff and the third Defendant filed a consent judgment before the trial judge on 31 October 2011. Since that time the Plaintiff had taken no further steps with a view to prosecuting the suit against the second Defendant, who is also the Respondent to this application. The Registrar was moved to dismiss the suit with costs under Order 17 rules 6 of the Civil Procedure Rules. In the same letter there was a type written page under the letterhead of MMAKS in which it was a written that:

"This suit is hereby dismissed against the second Defendant under the provisions of Order 17 rule 6 of the Civil Procedure Rule.

GIVEN under my hand and seal of this honourable court this --- day of November 2014.

-------------

REGISTRAR”

The Registrar just endorsed what had been typed by MMAKS Advocates and filled in the date of 12^th in the space provided above.

The Registrar has powers under the Judicial Powers of Registrars (Practice Direction Number 1 of 2002) to handle rules 2, 5 and 6 of Order 17 of the Civil Procedure Rules.

By the time of the application, Counsel Rezida had communicated to Counsel Apollo Makubuya on the question of costs and it is apparent that the question of costs was under consideration by both parties. By the time the Respondent’s Counsel applied, Counsel Rezida who represented the Plaintiff had written to his colleague about 12 days earlier by e-mail which has been referred to above.

I have carefully considered the law to which both Counsels are in agreement. I will start with an examination of Order 17 rule 6 (1) of the Civil Procedure Rules which provides as follows:

“(1) in any case, not otherwise provided for, in which no application is made or step taken for a period of two years by either party with a view to proceeding with the suit, the court may order the suit to be dismissed.”

The rule gives the court discretionary powers whether to dismiss the suit or not if no application is made or step taken for a period of two years by either party with a view to proceeding with the suit. The rule envisages either the Plaintiff or the Defendant making an application or taking a step within a period of two years a view proceeding with the suit. When the court is moved or the court moves on its own motion, it should be assumed that neither party has taken any steps with a view to proceeding with the suit.

In this case the registrar did not give any reasons for the exercise of his discretionary powers to dismiss the suit under Order 17 rule 6 (1) of the Civil Procedure Rules. The pre-typed order for dismissal of the suit was written by the Respondent’s lawyers Messieurs MMAKS Advocates. That notwithstanding two judicial precedents which have considered grounds for setting aside a dismissal order issued under the discretionary powers of court under Order 17 rules 6 of the Civil Procedure Rules.

Where a suit has been dismissed under Order 17 rule 6 (1) of the Civil Procedure Rules it can be instituted afresh subject to the law of limitation. They would be no need to apply for reinstatement if a fresh suit was not statute barred. Obviously in this case the Plaintiffs suit was filed in the year 2006 and the correspondence giving rise to the cause of action against the Respondent arose earlier and is, at the time of this application in February 2015, caught by the law of limitation. I have considered the case cited by the Applicant’s Counsel of Rawal versus the Mombasa Hardware Ltd [1968] EA 392 and of the East African Court of Appeal. In that case the Appellant sued the Respondent in 1962. No step was taken with a view to proceeding with the suit for a period of over three years and the court on its own motion and without notice to the parties dismissed the suit under the Kenyan Order 16 rule 6 of the Civil Procedure (Revised) Rules 1948 which rule is in pari materia with the Ugandan revised Order 17 rule 1 of the Civil Procedure Rules. The Appellant applied to have the order of dismissal set aside and the suit reinstated under the inherent powers of the court provided for by the equivalent of section 98 of the Civil Procedure Act (section 97 of the Kenyan Civil Procedure Act). The High Court dismissed the application on the ground that under section 97 of the Kenyan Civil Procedure Act, inherent jurisdiction had been excluded by the specific rule under which the suit was dismissed (I.e. it provided for filing of a fresh suit subject to the law of limitation). The Appellant appealed to the East African Court of Appeal. Law JA held that the inherent jurisdiction of the High Court was not excluded in the special circumstances of the case. Furthermore the Defendant had not been deprived of any defence that he originally enjoyed or that he originally pleaded. It is being deprived of what may be called and after acquired defence which accrued to him solely through the action taken by the court of its own motion of which he was not even aware. The court allowed the appeal and remitted the application back for hearing on the merits. In Adonia v Mutekanga [1970] 1 EA 429 the East African Court of Appeal sitting in Kampala discussed the case of Rawal vs. The Mombasa Hardware Ltd (supra) when Spry VP held at page 432 that ordinarily inherent jurisdiction is not invoked where a specific remedy is available. He however noted that:

“The matter is, however, not one of jurisdiction. The High Court is a court of unlimited jurisdiction, except so far as it is limited by statute, and the fact that a specific procedure is provided by rule cannot operate to restrict the court’s jurisdiction, Rawal v. Mombasa Hardware Ltd [1968] E.A. 392.”

In this case the action of the Respondent’s Counsel of moving without notice to the Applicant was not an act which can go unchallenged since both parties were in touch on the question of costs for purposes of settling the suit. Both parties were still considering the question of how the suit should be disposed of. Moreover Order 17 rule 6 (1) is invoked where either party have not taken a step or made an application with a view to proceeding with the action.  The rule is not invoked for want of prosecution by the Plaintiff. Want of prosecution by the Plaintiff is provided for by Order 17 rule 5 of the Civil Procedure Rules.  Order 17 rule 6 (1) provides for dismissal but does not mention whether the dismissal shall be with costs or not. What should be borne in mind is the fact that such a dismissal is for the inaction of either party. Last but not least there are no reasons given by the registrar for the exercise of his discretion to award costs and the reasons cannot be implied.

In the premises I agree with the Applicant that in the very least the Respondent’s Counsel ought to have notified the Applicant’s Counsel. This is because the court did not move on its own motion but was moved by one of the parties who specifically invoked Order 17 rule 6 of the Civil Procedure Rules. In light of the recent communication between the parties I am inclined to invoke the inherent powers of court which I hereby do and I hereby set aside the dismissal of the suit without commenting on the merits of the suit or the defence. The Respondent’s defence to the action is not prejudiced thereby and the suit is hereby reinstated as it is at the time of the motion to have it dismissed.

The costs of the application shall abide the outcome of the suit.

Ruling delivered in court on the 4^th of September 2015.

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Bwogi Kalibala Counsel for the Respondent

Richard Bwayo Counsel for the Applicant

Charles Okuni: Court Clerk

Christopher Madrama Izama

Judge

4/09/2015