[2010] UGCA 52

#### THE REPUBLIC OF UGANDA

## IN THE, COURT OF API'EAL O!' UGANDA AT KAMPALA

## CORAM: HON. JUSTICE A. TWINOMUJUNI, JA HON. C. N. R. KITUMBA, JA HON. JUSITCE C. K. I}YAMUGISHA, JA

## CIVIL APPEAI, NO.2I OF 2OO8

ATTOITNEY GENERAL APPELLANI-

## VEIISUS

## MONDAY I'. E,LIAB RE,SI'ONDENT

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#### [Appeal from thc decision of the IIigh Court of Uganda at Kampala (Hon. Justice Lamcck N. Mukasa,J) datcd lgth Octohcr 2007, In IIC'l -00-CC-CS-1o84 of2000.1

### . II]D(;MEN'I' OF TWINOMT]JTJNI, . IA:

- 'Ihis is an appeal from the decision of the High Court a1 Kampala dated ^lgtr' October 2007, whereby the respondent's suit against the appellant was successful. The respondent was awarded damages and costs of the suit. r0 - 'fhe lacts of the case are not in dispute. The respondent entered into ^a hire agreement with State House for the hire of his vehicle Land Cruiser, I{eg. No.860 UAJ at an agreed price of Ushs.200,000/: (Two hundred thousand only) per day, effective 7'l' March I 998. On the 3 1'1 March 1998, the said rnotor vehiclc was involved in an accident on Masaka li

Road. The vehicle was towed by police and taken to Masaka Police SLation till whett it was clairrrcd by urre Paul Kagwa who hsd 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 l0 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, retum of the motor vehicle or payment of its rnarket value, general damages in conversion or detention of goodfand breach of contract, interest and costs.

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

- ^I) 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 31/03198. - 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 l{igh Court, the following issues were agreed;

# l. Whcthcr thc contract subsistcd bcyond 3l'r March 1998.

- 2. Whcther thc defcndant owcd the plaintiff any moncy in rcspcct of thc hirc agrcemcnt. - 3. Whether the defendant retained the custody of thc vchicle in question. - 4. What are thc rcmcdies availablc?

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While considering issue number one, the judge held that the plaintiff had failed to prove that the hire agreernent was open ended and that the defendant had on a balance of probabilities proved that the hire agrcement lbr the period after 1 8'r' March I 998 was for a period up to 3 l't March 1998. Therefore the contract did not subsist beyond 31" March 1998.

On issue number two, the judge found that since the vehicle was not returned to the plaintiff, the hire agreement was presurned to continue and rvas eaming the plaintifT incorne. 'l'hcrefore the defendant still owed the plaintifl in respect of the hire of his vehicle. t5

On issue number three, the judge found that following the accident, State Flouse retained custody of the plaintiffs vehicle since it was never returned to him. )0

On issue number four, the trial judge entered -iudgment 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%o p.a. and costs of the suit.

1'he appellant being dissatisfied with the decisioiljudgment of the leamed trial judge appealed against the whole judgrnent and the respondent filed

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a Notice of cross appeal. The appellant filed a mernorandum of appeal on Sth day of October 2008 on lour grounds namely.

- ^I. The leamed trial judge erred in law and fact in holding that the plaintiff was not notified of the accident and yet he was. - 2. The leamed 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 leamed 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%o p.a. to the plaintiff which is excessive. - The mernorandum of appeal then prayed that the appeal be allowed with costs. the judgment of the lower court be set aside, and judgment be cntered as prayed in the written statement of delbnce. t5

At the joint conferencing in this court, the agreed issues for detennination were framed as; 20

- ^I. 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 plaintifflrespondent failed to mitigate his loss? - 6. Whether interest awarded was fair"

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'Ihe above gnrunds of appeal were inter-twinned with the gruultls of tlrc cross-appeal.

Bcfole I go into the merits of thc casc and arguments put forward by counsel, I would like to first settle the issue neglected by the trial judge as to whether there was a validly subsisting contract between the parties.

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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 which was the basis of the respondcnt's case was the Local Purchase Order datetl 7'h March 1998 with terms that shs. 200,000/- to be charged per day. l'his meant that, that Local Purchase Order was accepted by both parties and the Local Purchase Order dated I 8th March 1998 was totally irrelevant to this case. The two elements that constituted the original Local Purchase Order were the price of200,000 thousand per day an<l the date of 7th March 1998 which was not the case in the 2"d l.ocal Purchase Order. Therelbre Local Purchase Order Exhibit D4 should never have been exhibited and the trialjudge should not have relied upon l0 t5 20 11.

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

25 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 togelher. 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.

Secondly, in regard to issue number two, whether State House was in custody of the vehicle, counsel submitted that when the car got an 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 still in custody of the vehicle while it was with police for investigation. l0 l5

Counsel prayed that this ground should fail.

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In his reply, Mr. Brain Othieno opposed the appeal. Counsel Othieno argued the issues following the order agreed during scheduling. In regard 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 leam of the accident through other people and this did not amount to a formal notification. Therefore, since there was no formal 20 25

notification, then the contract did not come to an cnd.

In regard to issue number two, counsel submitted that the trial judge rightly found that State House was in possession/custody of the respondent's vehicle. Since, the vehicle was never retumed to the 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 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 DWl, 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 f'ail.

In relation to ground number two, whether State House was in constructive custody while the police was carrying out investigation. 20 From the record of proceedings, it is very clear that the appellant did not retain possession of the respondent's car be it constructive or actual. This is because from the ³I "t of March I 998, State House lost control of the vehicle because it was involved in an accident and police impounded it to assist investigations. Also, after the police was through with the 25 investigations, two years later, the owner, Paul Kagwa went to police and 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.

# Issuc No.3

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5 Counsel for the appellant dealt with ground number three which is to the eff'ect 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 l0 owed the respondent any money. The contract was frustrated due to the accident that made it impossible for the appellant to utilize the said vehicle.

Counscl for the respondent in reply subrnitted that since the contract was open ended, then it was never frustrated by the accident. The contract continued to subsist and the accident perse did not amount to frustration. t5

-[he contract between the appellant and the respondent having been based on the l,ocal I)urchase Order of 7'h March 1998 meant that it was open ended but was put to an end when the vehicle which was the subject matter of the contract got an accident. Simply put, the contract was discharged by lrustration.

25 I)ischarge of a contract rneans in gcneral that the parties are frecd from their mutual obligations. According to Chitty on Contracts: General l)rinciplcs, pg 1095 (Swcct and Maxwcll), 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

dilferent obligation from that undertaken at the lnoment of entry into the contract.

ln Krcll vs Hcnry (1903) 2 K. I].740 Lord Simon defined fiustration as 5 follows:

"Frustration may bc defincd as thc prcmaturc determination of an agrccment betwccn partics, lawfully entered into and in course of operation at the time of its premature determination, owing to the occurrcnce of an intcrvcning cvent or change of circumstanccs so fundamental as to bc rcgardcd by thc law as striking at the root of the agrccmcnt, and as cntirely beyond whal was contemplated by the partics, when they entered into the agrecment."

- l5 The essence of the doctrine of frustration is that parties to a contract are excused from further perfbrrnance of their obligation if some unexpected event occurs during the currency of the contract without the fault of either party. - 20 Frustration happens when; (a) further performance is impossible, (b) 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.

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- c) Unavailability. - d) Govemmental 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

matter. Physical destruction of the subject matter as an instance of lrustration was discrrssed 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 Blackbum J held that;

"Thc principle seems to us to be that, in contracts in which the pcrformance depends on the continued existencc of a givcn pcrson or thing, a condition is implicd that the impossibility of pcrformancc arising from thc perishing of thc person or thing shall excusc the performancc. ... but that excuse is by law implied, because from thc nature of the contract it is apparcnt that the parties contracted on the basis of the continucd cxislcncc of thc particular person or chattcl."

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This rneans 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 ofproofas to whether the appellant 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 ofappeal should succeed. 25

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# Issues 4, 5, & $6$

$\mathsf{S}$

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.

$10$ $\mathcal{M}_{\text{day of}}$ $\frac{1}{2010}$ Dated at Kampala this .. $15$ OF APPEAL.

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

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

## CIVIL APPEAL NO.21/2008

### **BETWEEN**

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# ATTORNEY GENERAL::::::::::::::::::::::::::::::::APPELLANT

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#### 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

$20$

$30$

# 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

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

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

Dated at Kampala this 1.6. day of A. R. V.2010.

**Justice of Appeal**