[2010] UGCA 54

#### THE REPUBLIC OF UGANDA

# IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### HON. JUSTICE A. TWINOMUJUNI, JA CORAM: HON. C. N. B. KITUMBA, JA HON. JUSITCE C. K. BYAMUGISHA, JA

### **CIVIL APPEAL NO.21 OF 2008**

ATTORNEY GENERAL....................................

#### **VERSUS**

## <table> MONDAY P. ELIAB ....................................

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[Appeal from the decision of the High Court of Uganda at Kampala (Hon. Justice Lameck N. Mukasa,J) dated 19^th October 2007, In HCT-00-CC-CS-1084 of 2000.]

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#### **JUDGMENT OF TWINOMUJUNI, JA:**

- This is an appeal from the decision of the High Court at Kampala dated 30 19^th October 2007, whereby the respondent's suit against the appellant was successful. The respondent was awarded damages and costs of the suit. - The facts of the case are not in dispute. The respondent entered into a 35 hire agreement with State House for the hire of his vehicle Land Cruiser, Reg. No.860 UAJ at an agreed price of Ushs.200,000/= (Two hundred thousand only) per day, effective 7^th March 1998. On the 31^st March 1998, the said motor vehicle was involved in an accident on Masaka

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The vehicle was towed by police and taken to Masaka Police Road. Station till when it was claimed by one Paul Kagwa who had its registration card and he was allowed to remove the same. He testified in court as DW3 that at the time the suit was being heard, he had the vehicle which he started using shortly after receiving it from Masaka Police Station.

The respondent filed the suit against the appellant claiming for the payment of Ushs.174,220,000/= (One hundred seventy four million two hundred twenty thousand only) being payment of Ushs.200,000/= per day from the date of filing the suit, return of the motor vehicle or payment of its market value, general damages in conversion or detention of good and breach of contract, interest and costs.

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During the scheduling conference which was held before the Registrar of the High Court before trial, the following matters were agreed:-

- 1) That there was agreement of hire of the plaintiffs motor vehicle to - the defendant at an agreed price of shs.200,000/= per day. The agreement being effective on $7/03/98$ . - 2) There was an accident involving the motor vehicle in question on $31/03/98$ . - 3) There was some payment of shs.5,580,000/ $=$ made to the plaintiff

in respect of the hire of the said motor vehicle.

During trial in the High Court, the following issues were agreed;

# 1. Whether the contract subsisted beyond 31^st March 1998.

- 2. Whether the defendant owed the plaintiff any money in respect of the hire agreement. - 3. Whether the defendant retained the custody of the vehicle in question. - 4. What are the remedies available?

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While considering issue number one, the judge held that the plaintiff had failed to prove that the hire agreement was open ended and that the defendant had on a balance of probabilities proved that the hire agreement for the period after 18^th March 1998 was for a period up to 31^st March 1998. Therefore the contract did not subsist beyond 31^st March 1998.

On issue number two, the judge found that since the vehicle was not returned to the plaintiff, the hire agreement was presumed to continue and $15$ was earning the plaintiff income. Therefore the defendant still owed the plaintiff in respect of the hire of his vehicle.

On issue number three, the judge found that following the accident, State House retained custody of the plaintiff's vehicle since it was never 20 returned to him.

On issue number four, the trial judge entered judgment in favour of the plaintiff and awarded Ushs.66,800,000/= (Sixty six million eight hundred thousand only) being loss of income, $2,000,000/$ = (Two million only) being general damages, interest at 35% p.a. and costs of the suit.

The appellant being dissatisfied with the decision/judgment of the learned trial judge appealed against the whole judgment and the respondent filed

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a Notice of cross appeal. The appellant filed a memorandum of appeal on 8^th day of October 2008 on four grounds namely.

- 1. The learned trial judge erred in law and fact in holding that the plaintiff was not notified of the accident and yet he was. - 2. The learned trial judge erred in law and fact in holding that while the vehicle was in police custody for investigation, State House was still in constructive custody of the vehicle. - 3. The learned trial judge erred in law and in failing to properly evaluate the evidence as whole and therefore came to a wrong decision. - 4. The Honourable judge erred in law and in fact in awarding an interest rate of 35% p.a. to the plaintiff which is excessive. - The memorandum of appeal then prayed that the appeal be allowed with $15$ costs, the judgment of the lower court be set aside, and judgment be entered as prayed in the written statement of defence.

At the joint conferencing in this court, the agreed issues for determination were framed as:

- 1. Whether the plaintiff/respondent was notified of the accident - 2. Whether State House was in constructive custody of the vehicle while in police custody for investigation. - 3. Whether the contract was frustrated by the accident? $25$ - 4. Whether ownership of the vehicle was in issue. - 5. Whether the plaintiff/respondent failed to mitigate his loss? - 6. Whether interest awarded was fair"

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$\gamma = \mathbb{R}^{\frac{n}{2}}$

The above grounds of appeal were inter-twinned with the grounds of the cross-appeal.

Before I go into the merits of the case and arguments put forward by counsel, I would like to first settle the issue neglected by the trial judge as $\mathsf{S}$ to whether there was a validly subsisting contract between the parties.

In any suit based on contract, the court has to first ascertain whether the contract between the parties was valid. In the lower court, during the scheduling, it was agreed between the parties that the contract of supply $10$ which was the basis of the respondent's case was the Local Purchase Order dated 7^th March 1998 with terms that shs. $200,000/$ = to be charged per day. This meant that, that Local Purchase Order was accepted by both parties and the Local Purchase Order dated 18^th March 1998 was totally irrelevant to this case. The two elements that constituted the $15$ original Local Purchase Order were the price of 200,000 thousand per day and the date of 7^th March 1998 which was not the case in the 2^nd Local Purchase Order. Therefore Local Purchase Order Exhibit D4 should never have been exhibited and the trial judge should not have relied upon

$20$ it.

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In his judgment the trial judge continued to treat both Local Purchase Orders as if they were both valid whereas the parties had, at the scheduling conference impliedly agreed that it was the Local Purchase Order dated 8/3/1998 which was valid. As a result, he was misled into

delving into irrelevant matters.

Ms. Kahawa Christine learned counsel for the appellant, took grounds one and two together. She submitted that the leaned trial judge erred in holding that the respondent wasn't notified about the accident yet in actual fact he was. Counsel submitted that the respondent was notified of the accident by the driver of the vehicle the following day after the accident occurred. This is clearly seen in the evidence DW2 Lubega Joseph. Although a formal notification was not made from State House, the evidence on record shows that the respondent knew that his vehicle had been involved in an accident.

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Secondly, in regard to issue number two, whether State House was in custody of the vehicle, counsel submitted that when the car got an $10$ accident, it was towed to Masaka Police Station for further investigation. While the vehicle was still lying there, it was picked by the registered owner, one Paul Kagwa in 2000, two years after the accident. All this meant that the State House had no control over the vehicle be it actual or constructive. Therefore, the judge erred in holding that State House was $15$ still in custody of the vehicle while it was with police for investigation. Counsel prayed that this ground should fail.

In his reply, Mr. Brain Othieno opposed the appeal. Counsel Othieno argued the issues following the order agreed during scheduling. In regard 20 to issue number one, counsel submitted that the respondent was not notified of the accident because all the evidence relied upon was hearsay evidence and the trail judge found that particular witness to be unreliable because of the lies he told court. Counsel conceded to the fact that the respondent came to learn of the accident through other people and this did 25 not amount to a formal notification. Therefore, since there was no formal notification, then the contract did not come to an end.

In regard to issue number two, counsel submitted that the trial judge rightly found that State House was in possession/custody of the Since, the vehicle was never returned to the respondent's vehicle. respondent then State House remained with it.

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I have carefully considered the arguments of both counsel on ground number one and two and I find as follows: According to the evidence on record, it is very clear that respondent was notified about the accident. I base my finding on this ground on the fact that from the evidence of DW2 Lubega Joseph, it is very clear that on the night when the vehicle got an $10$ accident, the driver DW2 took the initiative to ring the respondent the following morning to inform him that the vehicle was involved in an accident. Also, from the evidence of Mwongyere Mothodius DW1, it is shown that the respondent was clearly informed of the accident. The notification was properly made to him and this ground of appeal must $15$ fail.

In relation to ground number two, whether State House was in constructive custody while the police was carrying out investigation. From the record of proceedings, it is very clear that the appellant did not $20$ retain possession of the respondent's car be it constructive or actual. This is because from the 31^st of March 1998, State House lost control of the vehicle because it was involved in an accident and police impounded it to Also, after the police was through with the assist investigations. investigations, two years later, the owner, Paul Kagwa went to police and $25$ took the vehicle and up to now, still possesses the vehicle. Since police had it in their custody, then State House did not have control over it. Therefore this ground of appeal must fail.

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### Issue No.3

vehicle.

Counsel for the appellant dealt with ground number three which is to the $\mathsf{S}$ effect that the judge failed to evaluate the evidence as a whole. On whether the contract was frustrated by the accident, counsel argued that the contract did not subsist beyond the date of the accident and since the judge had found so, then he should not thereafter find that the appellant owed the respondent any money. The contract was frustrated due to the $10$ accident that made it impossible for the appellant to utilize the said

Counsel for the respondent in reply submitted that since the contract was open ended, then it was never frustrated by the accident. The contract $15$ continued to subsist and the accident perse did not amount to frustration.

The contract between the appellant and the respondent having been based on the Local Purchase Order of 7^th March 1998 meant that it was open ended but was put to an end when the vehicle which was the subject $20$ matter of the contract got an accident. Simply put, the contract was discharged by frustration.

Discharge of a contract means in general that the parties are freed from their mutual obligations. According to Chitty on Contracts; General $25$ Principles, pg 1095 (Sweet and Maxwell), a contract may be discharged on the ground of frustration when something occurs after the formation of the contract which renders it physically or commercially impossible to fulfil the contract or transforms the obligation to perform into a radically

different obligation from that undertaken at the moment of entry into the contract.

In Krell vs Henry (1903) 2 K. B. 740 Lord Simon defined frustration as follows: $\mathsf{S}$

"Frustration may be defined as the premature determination of an agreement between parties, lawfully entered into and in course of operation at the time of its premature determination, owing to the occurrence of an intervening event or change of circumstances so fundamental as to be regarded by the law as striking at the root of the agreement, and as entirely beyond what was contemplated by the parties, when they entered into the agreement."

- The essence of the doctrine of frustration is that parties to a contract are $15$ excused from further performance of their obligation if some unexpected event occurs during the currency of the contract without the fault of either party. - Frustration happens when; (a) further performance is impossible, (b) 20 illegal or (c) makes the contract radically different from what was originally undertaken. Also, the instances of frustration include; - a) Destruction of the subject matter. - b) Death/incapacity. - 25

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- c) Unavailability. - d) Governmental or statutory intervention.

In the instance case, the contract between the appellant and the respondent was terminated by frustration i.e. destruction of the subject

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Physical destruction of the subject matter as an instance of matter. frustration was discussed in the case of Taylor vs Caldwell (1863) 3B.\$ S. 826, where the defendants had agreed to permit the plaintiffs to use a music-hall for concerts on four specified nights. After the contract was made, but before the first night arrived, the hall was destroyed by fire Blackburn J held that;

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"The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing ... but that excuse is by law shall excuse the performance. implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel."

This means that if further fulfilment of the contract is brought to an abrupt stop by some irresistible and extraneous cause for which neither party is responsible, the contract shall terminate forthwith and the parties be discharged.

Relating this to the instant case, the accident occurred without the fault of either party. Since the vehicle was the subject matter of the contract, when it was destroyed, the contract was terminated forthwith and the

parties were discharged. The burden of proof as to whether the appellant $25$ was at fault was on the respondent. Though he could have proved it with assistance of the police who investigated the accident, he did not attempt to do so. This ground of appeal should succeed.

## Issues 4, 5, & $6$

In view of my findings on issues 1, 2 and 3 as agreed at the scheduling conference, issues No.4, 5 and 6 are automatically disposed of. The issues of ownership of the vehicle, mitigation of damages and the fairness of the interest rate awarded to the respondent no longer arise. The respondent is not entitled to any damages anyway.

In the result, I would allow this appeal with costs to the appellant here and in the High Court.

16 day of Afric 2010. Dated at Kampala this ...

hujuni

ICE OF APPEAL.

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Hon. Vistice

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# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### CORAM: TWINOMUJUNI, KITUMBA & BYAMUGISHA, JJA $\mathfrak{s}$

## CIVIL APPEAL NO.21/2008

#### **BETWEEN**

ATTORNEY GENERAL::::::::::::::::::::::::::::::::::::

#### AND

MONDAY P. ELIAB:::::::::::::::::::::::::::::::::::: $15$

Appeal from the decision of the High Court of Uganda at Kampala (Lameck- Mukasa J) dated 19^th October 2007 in HCCS No. $1084/2000$

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## JUDGMENT OF BYAMUGISHA,JA

I had the benefit of reading in draft form the judgment of Twinomujuni J. which has just been delivered. It has set out the facts of the appeal and the submissions of both counsel on the issues that were framed for our determination with clarity

that I find it unnecessary to add anything. $25$

> I concur in the judgment that this appeal ought to succeed. I also agree with the orders he has proposed.

Dated at Kampala this ... 30

C. K. Byamugisha **Justice of Appeal**