[2024] UGCommC 268

AMERICAN PROCUREMENT COMPANY, INC

**CIVIL SUIT NO. 664 OF 2021**

# IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION]

**THE REPUBLIC OF UGANDA**

## (AMPROC, INC):::::::::::::::::::::::::::::::::::: **VERSUS**

#### EUGENE ARIGYE::::::::::::::::::::::::::::::::::::

## **BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI JUDGMENT**

The Plaintiff brought this suit by way of ordinary plaint seeking for a declaration that the Defendant is in breach of the agency agreement, an order that the Defendant pays to the Plaintiff the agreed commission, general damages, interest and costs of the suit.

The brief facts constituting the Plaintiff's case are that the Plaintiff was appointed

jointly by the Defendant and Messrs John Karuhanga and Cleophas Mahatane as their agent to demand, negotiate and secure compensation payments from the

Government of Uganda in respect of land comprised in Leasehold Register Volume 2830 Folio 19 Plot 21, Isingiro Block 28. That they signed a Memorandum of Understanding (MOU) dated 13^th May 2019 wherein it was agreed that the Plaintiff would be remunerated sixty percent of the money paid by

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the Government among others, and that irrevocable powers of attorney were executed that same day.

That pursuant to the MOU, the Plaintiff negotiated compensation of UGX 8,070,400,000/ with the Government of Uganda represented by the Ministry of Lands, Housing and Urban Development. After that, the parties executed an additional document where the Plaintiff was to be paid sixty percent of UGX 8,070,400,000/ and the rest had their percentages, and the five beneficiaries were to open an account where the money would be credited. Upon communication of the agreement, the money was remitted as agreed, and contrary to the agreement, the Defendant lawyers knowing that the Defendant had executed irrevocable powers of attorney, informed the Plaintiff that the said power of attorney and the MOU had been revoked.

That by letter dated 11^th August 2021, M/s Kakuru & Co. Advocates further informed the Permanent Secretary, Ministry of Lands, Housing and Urban Development to stop further payment to the Plaintiff and effect payment of UGX 2,188,133,333/ to their firm account. The Plaintiff avers that the Defendant knew that 60% of that amount constitutes the Plaintiff's remuneration and also the total amount remitted to the Defendant's advocate accounts is a breach of the agreement, which had caused the Plaintiff loss and damage, hence this suit.

In his Written Statement of Defence and Counterclaim, the Defendant denies the allegations and contended that the Plaintiff had no cause of action against him. However, the Defendant admits to having entered the said MOU and executing both the power of attorney and additional documents dated 29^th October 2019. He also admits to revoking the power of attorney and MOU, and issuing a letter to the Permanent Secretary. However, the Defendant avers that the Plaintiff, through its

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Managing Director Robert Mwesigwa Rukaari approached him with promises to help him realise his compensation from government for land he had lost to refugee settlement.

That since the said Robert was personally known to the Defendant, and being a public figure close in the NRM circles had convinced the Defendant that he would assist him get his compensation in record time, the Defendant without doubt convinced his colleagues John Karuhanga and Cleophas Mahatane who were tenants in common with him, to deal with Robert.

Therefore, that the parties entered the said MOU wherein they appointed Robert Mwesigwa Rukaari as their agent to process their claim, and also executed the said power of attorney. That since the Plaintiff was an international company paying high taxes and to fund the process, they negotiated for 60% of entire sum. That the agreement was entered into on the basis of superior position and connections, plus a promise that he had been sent by the President to help claimants recover their money. The Defendant avers that upon realising that the Plaintiff was accountable and coupled with several complaints from other claimants revoking powers of attorney with the Plaintiff, he equally did the same. He denies breaching the contract and instead requests Court to find it unconscionable, oppressive, fraudulent and illegal. He prays that the suit be dismissed.

The Defendant filed a Counterclaim against the Plaintiff/1^st Counter Defendant and Robert Mwesigwa Rukaari jointly for a declaration that the MOU was illegal, a declaration that the 2^nd Counter Defendant was fraudulent and is not entitled to any commission, an order that the 2^nd Counter Defendant is not entitled to any further payments, an order of refund of UGX 381,520,000/ taken by the Counter Defendants before termination of the agreements, general damages, aggravated

damages, interest and costs. He avers that he has so far received UGX 120,480,000/ as his share out of the UGX 1,506,000,000/ released to the Counter Defendants, and he seeks an order for payment of the balance of UGX $381,520,000/$ to complete one third of his share.

He added that the 2^nd Counter Defendant knew his actions were calculated to defraud the Counter claimant choosing to hide behind the 1^st Counter Defendant. The Counter claimant avers that the 1^st Counter Defendant misled him into signing an irrevocable power of attorney claiming to be holding instructions from the President and used his position to influence them.

In reply to the Defence and Counterclaim, the Plaintiff avers that the Counterclaim is misconceived as all parties entered into the MOU freely without duress, undue influence or coercion and are legally bound by it. That the Plaintiff enjoys a reputation of successfully negotiating compensation payments and duly delivered on its obligations in a timely manner. That the Counterclaimant is not owed any money and is indebted to the Plaintiff. He prayed that the Counterclaim be dismissed.

#### **REPRESENTATION**

The Plaintiff was represented by M/S Stratten Advocates whereas the Defendant

### was represented by M/S Kakuru & Company Advocates.

## JUDGMENT

I have read the pleadings and listened to the testimonies of the parties herein as well as considered the submissions of their counsel. The following issues were agreed upon in the Joint Scheduling Memorandum for determination by the Court:

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1. Whether the Defendant breached the agency agreement?

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- 2. Whether the Plaintiff is entitled to payment of the agreed commission in respect of the agency agreement? - 3. What remedies are available to the parties? - 4. Whether the agreement between the Counterclaimant and the Counter **Defendant is void?** - 5. Whether the Counterclaimant is entitled to the remedies sought? $$

Whether the agreement between the Counterclaimant and the Counter **Defendant is void?**

Counsel for the Plaintiff argued that since the Defendant does not dispute executing the MOU (PE 1) and irrevocable power of attorney (PE 2), he would first deal with issues 4 and 5, Counsel for the Defendant adopted that order, therefore, I equally adopt the same because if issue 5 is found in the affirmative, it disposes off the first two issues.

It was submitted for the Plaintiff that all the provisions of Section 10 of the Contracts Act 2010 exist in the two agreements, and they include free consent, capacity to contract, lawful consideration and a lawful object with intentions to be bound. He added that the agreements clearly spelt out that the Plaintiff would demand, negotiate and process payment; which the Plaintiff did, and the Defendant agreed to pay the Plaintiff by allowing the Plaintiff to retain sixty percent of the

payments due. He cited Section 33 (1) of the Contracts Act 2010 on performance of promises by parties to a contract unless performance is dispensed with under the Act.

In relation to the execution of irrevocable power of attorney, Counsel submitted that the law provides that the power of attorney remains in force until realisation of

its intended purpose except where there is fraud. He relied on case law and concluded that the Defendant did not have the power to terminate the irrevocable power of attorney.

Specifically, on whether the agreement (MOU) is void, Counsel submitted that once parties have agreed to contract, then there is a contract that none of them can deny. He added that the Defendant knew the law pertaining to irrevocable powers of attorney that is why he is claiming that the agreement is void long after securing the benefit of the Plaintiff's services. That the Defendant is estopped from turning around that the agreement is void because he obtained a service on the basis of an

understanding that the agreement was valid and legally binding.

In reply, Counsel for the Defendant suggested an amendment of the issue to whether the agreement is enforceable by Court, because if resolved in the affirmative, it could lead to a dismissal of the case. He also relied on Sections 10 and 13 of the Contracts Act 2010 that free consent in making agreements is vitiated by coercion, undue influence, fraud, misrepresentation and mistake. He further cited Section 92 (a) of the Evidence Act where a written contract is invalidated by evidence of fraud, intimidation, illegality, want of due execution, want in capacity of the contracting party.

Counsel relied on Section 26 of the Contracts Act 2010 and case law to submit that the promise to do an illegality makes a contract void and that such contracts oppose public policy and encourage corruption in public offices, therefore, should not be enforced by Courts. Counsel submits that the Plaintiff company deals in influencing public servants and monetising access to otherwise free public services, which is against public policy and therefore unenforceable. He also relied on Section 14 (1) and (3) of the Contracts Act to submit that the contract was

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at a bargain is not unconscionable merely because the parties to it are unequal pargaining position or even because of unequal results in an allocation of risks the weaker party. But gross inequality of bargaining power, together with terms reasonably favourable to the stronger party, may conform indications that the insaction involved elements of deception or compulsion, or show that the weaker rty had no meaningful choice, or real alternative, or did not in fact assent to the rfair terms.'

Ithough Counsel for the Plaintiff contends that the parties sat in meetings and greed to the terms and that the Defendant did not produce witnesses to show that here were induced, from the above decision, looking at the unreasonably unfair listribution of the money coupled with the execution of an irrevocable power of attorney in favour of the Plaintiff, I find that the MOU was unconscionable without even looking at his position in the CEC of the National Resistance Army. For this reason, I find that the contract was illegal and I find no reason to go into detailed discussion of the other grounds. This issue disposes of the Plaintiff's case.

In the premises, the case is hereby dismissed and the Counterclaim succeeds.

As regards the remedies, the Counterclaimant had sought for an order for the refund of the UGX 381,520,000/.

Following that the main suit was dismissed, I make an order for refund of the said UGX 381,520,000/ which was paid to the Plaintiff.

The Counterclaimant also prayed for general damages. The law on the award of general damages is that it is awarded at the discretion of the Court, therefore, given the circumstances of this case I make no order as to the same.

damages, interest and costs. He avers that he has so far received UGX 120,480,000/ as his share out of the UGX 1,506,000,000/ released to the Counter Defendants, and he seeks an order for payment of the balance of UGX 381,520,000/ to complete one third of his share.

He added that the 2^nd Counter Defendant knew his actions were calculated to defraud the Counter claimant choosing to hide behind the 1^st Counter Defendant. The Counter claimant avers that the 1^st Counter Defendant misled him into signing an irrevocable power of attorney claiming to be holding instructions from the President and used his position to influence them.

In reply to the Defence and Counterclaim, the Plaintiff avers that the Counterclaim is misconceived as all parties entered into the MOU freely without duress, undue influence or coercion and are legally bound by it. That the Plaintiff enjoys a reputation of successfully negotiating compensation payments and duly delivered on its obligations in a timely manner. That the Counterclaimant is not owed any money and is indebted to the Plaintiff. He prayed that the Counterclaim be dismissed.

#### **REPRESENTATION**

The Plaintiff was represented by M/S Stratten Advocates whereas the Defendant was represented by M/S Kakuru & Company Advocates.

### JUDGMENT

I have read the pleadings and listened to the testimonies of the parties herein as well as considered the submissions of their counsel. The following issues were agreed upon in the Joint Scheduling Memorandum for determination by the Court:

1. Whether the Defendant breached the agency agreement? - 2. Whether the Plaintiff is entitled to payment of the agreed commission in respect of the agency agreement? - 3. What remedies are available to the parties? - 4. Whether the agreement between the Counterclaimant and the Counter **Defendant is void?** - 5. Whether the Counterclaimant is entitled to the remedies sought? $$

Whether the agreement between the Counterclaimant and the Counter Defendant is void?

Counsel for the Plaintiff argued that since the Defendant does not dispute executing the MOU (PE 1) and irrevocable power of attorney (PE 2), he would first deal with issues 4 and 5, Counsel for the Defendant adopted that order, therefore, I equally adopt the same because if issue 5 is found in the affirmative, it disposes off the first two issues.

It was submitted for the Plaintiff that all the provisions of Section 10 of the Contracts Act 2010 exist in the two agreements, and they include free consent, capacity to contract, lawful consideration and a lawful object with intentions to be bound. He added that the agreements clearly spelt out that the Plaintiff would demand, negotiate and process payment; which the Plaintiff did, and the Defendant agreed to pay the Plaintiff by allowing the Plaintiff to retain sixty percent of the

payments due. He cited Section 33 (1) of the Contracts Act 2010 on performance of promises by parties to a contract unless performance is dispensed with under the Act.

In relation to the execution of irrevocable power of attorney, Counsel submitted that the law provides that the power of attorney remains in force until realisation of

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its intended purpose except where there is fraud. He relied on case law and concluded that the Defendant did not have the power to terminate the irrevocable power of attorney.

Specifically, on whether the agreement (MOU) is void, Counsel submitted that once parties have agreed to contract, then there is a contract that none of them can deny. He added that the Defendant knew the law pertaining to irrevocable powers of attorney that is why he is claiming that the agreement is void long after securing the benefit of the Plaintiff's services. That the Defendant is estopped from turning around that the agreement is void because he obtained a service on the basis of an understanding that the agreement was valid and legally binding.

In reply, Counsel for the Defendant suggested an amendment of the issue to whether the agreement is enforceable by Court, because if resolved in the affirmative, it could lead to a dismissal of the case. He also relied on Sections 10 and 13 of the Contracts Act 2010 that free consent in making agreements is vitiated by coercion, undue influence, fraud, misrepresentation and mistake. He further cited Section 92 (a) of the Evidence Act where a written contract is invalidated by evidence of fraud, intimidation, illegality, want of due execution, want in capacity of the contracting party.

Counsel relied on Section 26 of the Contracts Act 2010 and case law to submit that the promise to do an illegality makes a contract void and that such contracts oppose public policy and encourage corruption in public offices, therefore, should not be enforced by Courts. Counsel submits that the Plaintiff company deals in influencing public servants and monetising access to otherwise free public services, which is against public policy and therefore unenforceable. He also relied on Section 14 (1) and (3) of the Contracts Act to submit that the contract was

unconscionable and cited case law where the Court refused to enforce a commission agreement which provided for commission of 60% leaving the actual owners of the land with only 40%.

Thirdly, he submitted that the 2^nd Counter Defendant who is the Managing Director of the Plaintiff/ 1^st Counter Defendant was fraudulent in hiding behind the Plaintiff to achieve his illegal and selfish ends, misleading the Counterclaimant/Defendant to sign an irrevocable power of attorney yet he did not have proprietary interest claiming and holding out as carrying out instructions from the President claiming 60% of the payment plus several other undisclosed payments.

In rejoinder, Counsel for the Plaintiff submitted that the Defendant did not admit to influence peddling or promise to corrupt or influence public servants. He added that the type of agreement was not a brokerage but a commercial agency where the agent acts for the principal as if it were the principal acting and with the same authority whereas in a brokerage, the broker is an independent contractor who helps property owner to find a buyer on their terms for which the broker is paid commission. Therefore, that the Plaintiff was clothed with the authority of the Defendant and the two others.

In relation to contravening public policy, Counsel submitted for Court to decline to enforce a contract on that ground, it must be satisfied that the contract is inconsistent with the constitution or other laws of Uganda or is inimical to national

interest or is contrary to justice and morality.

On the allegation of fraud, undue influence and unconscionable terms, Counsel submitted that the Plaintiff and Defendant plus the other parties sat in all meetings and signed the agreement and other additional documents on subsequent days, and therefore, that the Defendant did not produce any evidence of the allegations. That

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the rest except the Defendant are happy with the terms of the agreement and abide by the same. He added that a contract will be vitiated if the party induced to enter it by misrepresentation had opportunity to discover the truth through due diligence but he did not.

About the remuneration, he pointed out that there is no law that regulates an agent's remuneration to less than fifty percent. He cited an Australian case on the things that need to be proved for one to claim a contract is unconscionable.

Whereas the Plaintiff argues that the contract signed between the parties fulfils all the requirements under Section 10 of the Contracts Act and is enforceable, the Defendant argues otherwise. Section 10 (1) provides:

"A contract is an agreement made with the free consent of parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention to be legally bound."

In Greenboat Entertainment Ltd v City Council of Kampala HCCS No. 580 of 2003, The Hon. Justice Yorokamu Bamwine held:

"In law, when we talk of a contract, we mean an agreement enforceable at law. For a contract to be valid and legally enforceable, there must be: capacity to contract; intention to contract; consensus and idem; valuable consideration;

legality of purpose; and sufficient certainty of terms. If in a given transaction any of them is missing, it could as well be called something other than a contract."

In this case, the Defendant has cited the existence of illegality, undue influence, and fraud and prayed that the contract be declared void and therefore unenforceable. Under Section 2 of the Contracts Act, a void agreement means 'an agreement that is not enforceable by law.' As opposed to a voidable contract, a

void contract has no legal effect from the time of creation, therefore it cannot be enforced at all.

I will now deal with each of the grounds individually starting with illegality. The defence of illegality is a Common Law principle of 'ex turpi causa non oritour actio' which means that no action can arise from an illegal act, and therefore that Courts will not aid a party whose case is based on an immoral or illegal act.

Section 26 of the Contracts Act 2010 which talks about reciprocal promise to do legal and illegal acts provides:

"Where a person makes a reciprocal promise, firstly to do a certain thing which is

legal, and, secondly, under specified circumstances, to do a certain thing which is illegal, the promise to do the legal thing shall be a contract but the promise to do an illegal thing shall be a void agreement."

Whereas the Defendant contends that the business of influence peddling or promise to corrupt public officers is against public policy and makes the contract unenforceable, the Plaintiff contends that for Court to declare that the contract is against public policy, it must be satisfied that it is against the Constitution or other laws.

I have carefully considered the decision of the Court in the case of Namanya George & Frank Kabundu v Mukalagi Stephen HCCS No. 237 of 2012 and I am

inclined to agree and also find that seeking of services of the Plaintiff to demand and negotiate payment on behalf of the Defendant and others is a matter of public policy because the Court had already ordered compensation for the land owners and the same ought to have been paid to them directly.

Even if this Court was inclined to accept the Plaintiff's argument that this case is distinguishable from the Namanya case (supra) because this case is about a commercial agency where the Plaintiff acted with the same authority as the principal, different from a brokerage, I still find that the term of paying the Plaintiff sixty percent of the compensation to be unconscionable. Still in the same case, Justice Henrietta Wolayo held that the law of contract codified in the Contracts Act 2010 did not rule out the application of the principles of Common Law and went ahead to cite Regulation 5 (1) of the Unfair Contracts Act 1977 and Unfair Terms in Consumer Regulations (UTCCR) which provides:

'A contractual term that has not been individually negotiated shall be regarded as unfair. If, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.'

Considering the above, whereas, it may be argued that this contract was individually negotiated, there was no good faith which led to a significant imbalance in the percentage of payment, entitling the Plaintiff to a much higher sum of money compared to the real owners of the land.

Justice Mubiru in Charles Athembu v Commercial Microfinance Ltd & Another HCCS No. 0051 of 2009 relied on the definition of 'unconscionable' in the Shorter Oxford English Dictionary, Third Edition as 'showing no regard for conscience, irreconcilable with what is right or reasonable.' He cited several cases to support the position that Court looks at the conduct of the stronger party in enforcing or obtaining benefit of a dealing with a person under a special disability; and that the determination of whether a contract is unconscionable or not is made in the light of its setting, purpose and effect. He added that;

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'That a bargain is not unconscionable merely because the parties to it are unequal in bargaining position or even because of unequal results in an allocation of risks to the weaker party. But gross inequality of bargaining power, together with terms unreasonably favourable to the stronger party, may conform indications that the transaction involved elements of deception or compulsion, or show that the weaker party had no meaningful choice, or real alternative, or did not in fact assent to the unfair terms.'

Although Counsel for the Plaintiff contends that the parties sat in meetings and agreed to the terms and that the Defendant did not produce witnesses to show that there were induced, from the above decision, looking at the unreasonably unfair distribution of the money coupled with the execution of an irrevocable power of attorney in favour of the Plaintiff, I find that the MOU was unconscionable without even looking at his position in the CEC of the National Resistance Army. For this reason, I find that the contract was illegal and I find no reason to go into detailed discussion of the other grounds. This issue disposes of the Plaintiff's case. In the premises, the case is hereby dismissed and the Counterclaim succeeds.

As regards the remedies, the Counterclaimant had sought for an order for the refund of the UGX 381,520,000/.

Following that the main suit was dismissed, I make an order for refund of the said UGX 381,520,000/ which was paid to the Plaintiff.

The Counterclaimant also prayed for general damages. The law on the award of general damages is that it is awarded at the discretion of the Court, therefore, given the circumstances of this case I make no order as to the same.


Following that costs follow the event under pursuant to Section 27 (2) of the CVA Procedure Act, I make an order for costs of the Counterclaim to be paid to the Counter defendants.

Amb Luty

## HON. LADY JUSTICE ANNA B. MUGENYI

DATED...................................