[2024] UGCommC 328

#### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA

# (COMMERCIAL DIVISION)

## **CIVIL SUIT NO. 365 OF 2020**

**B. J CONSULTS LIMITED....................................**

#### **VERSUS**

**ATTORNEY GENERAL... DEFENDANT** . . . . . . . . . . . . . . . . . . . .

Before: Hon. Lady Justice Patricia Kahigi Asiimwe

## Judgment

## Introduction

1. The Plaintiff brought this suit against the Defendant for breach of contract for the provision of customs clearing services to the Ministry of Education & Sports, payment of UGX 1,031,710,855, general damages, interest and costs of the suit.

## The Plaintiff's Case

- $2.$ The Ministry of Education and Sports prequalified the Plaintiff as a provider for clearing and forwarding services for three financial years, that is $2017/2018$ , $2018/2019$ and $2019/2020$ . - The Plaintiff was engaged to provide clearing and forwarding $\mathfrak{F}$ services for medical equipment and furniture under contract No. MoEs/Goods/ADB-HEST/GDS/16-17/PR00216/and Hydraulics No. equipment in the under Contract MoES/Goods/ADV-HEST/GDS/16-17/PR00216/C1123.

- 4. Upon receipt of the online appointment, the Plaintiff embarked on the exercise of customs clearing of an assortment of medical and laboratory equipment. - The Plaintiff cleared and delivered a total of 19 shipments of $5.$ assorted medical and furniture equipment to Muni University, Kyambogo University, Gulu University, Makerere University, and Mbarara University of Science & Technology. The Plaintiff presented invoices to the Ministry; however, the Ministry refused, defaulted, or neglected to settle the claim. - 6. The Plaintiff states it has suffered great inconveniences because it obtained an invoice discounting facility of UGX. 183,000,000 with an interest rate of 26% from the Bank of Africa to be discounted directly from the invoices paid by the Ministry of Education and Sports. As a direct result of the Ministry of Education and Sports' failure to pay, the Plaintiff defaulted on its loan obligations.

# The Defendant's Case

$\mathbb{R}^{\mathbb{P}}$

- The Ministry of Education and Sports appointed the Plaintiff on- $7.$ line to provide clearing and forwarding services for equipment received under two contracts. - 8. The Plaintiff failed to clear 6 of the twenty-one consignments air waybill numbers that is AWB 574 32426726, AWB 235 32115801, AWB 235 30204322 and AWB 157 47755466. - 9. The Ministry of Education and Sports directly cleared four (4) house consignments and directly paid the demurrage and handling charges of UGX 112,752,120 (to Entebbe Handling Service (NAS formerly ENHAS).

- 10. The Plaintiff presented the Ministry of Education and Sports with an invoice for UGX. 989,061,855 for clearing 19 consignments supplied by $M/S$ Techfab International PVT Ltd. Upon receipt of the invoice of UGX 989,061,855, the Ministry of Education and Sports queried the charges for custom verification, bond in force, agency fees, and Miscellaneous/constructive clearance. - 11. On 14^th May 2020, the Plaintiff, represented by Ben Zimulinda, met with the Ministry of Education and Sports representatives to reconcile the inconsistencies in the payment quotation. As a result of the meeting, the outstanding balance was reduced to UGX 180,453,006. The Defendant admits indebtedness and is willing to pay the Plaintiff the agreed amount of UGX. 180,453,006.

## Representation:

12. The Plaintiff was represented by $M/s$ Marlin Advocates and the Defendant was represented by the Attorney General's chambers. Both parties filed written submissions.

## Issues

- 13. The issues agreed upon are as follows: - Whether there is a valid contract between parties $\mathbf{I}$ . - Whether there was breach of contract $\mathbf{H}$ . - III. What remedies are available to the parties?

# Evidence

14. The Plaintiff called one witness, PW1 Mr. Ben Katushabe Zimuringa, the Managing Director of the Plaintiff. The Defendant presented two witnesses, Mr. Henry Maggwa Njuba and Mrs. Miriam Lawino Ssembatya (The procurement manager and the former project manager of the project under which the procurement was made respectively).

#### Resolution

#### *Issue I: Whether there is a valid contract between parties*

- 15. Counsel for the Plaintiff submitted that the Defendant, in its pleadings, admitted that there was a valid contract between the Plaintiff and the Ministry of Education and Sports. He referred to Order 6, Rule 7 of the Civil Procedure Rules SI 71-1, which states that parties are bound by their pleadings. - 16. Counsel for the Defendant submitted that there is no valid and enforceable contract between the parties as the Plaintiff's services were procured in violation of the mandatory provisions of the Public Procurement and Disposal of Public Assets Act 2003 (PPDA Act). - 17. Counsel contended that under section 3 of the PPDA Act, a contract is defined as an agreement resulting from applying appropriate approved procurement or disposal procedures. Additionally, counsel submitted that under section 55 of the PPDA Act, all procedures must be followed by parties to a procurement for it to be binding. He concluded that the Plaintiff's procurement did not comply with the Act and Regulations and was, therefore, illegal. Counsel cited the case of Galleria in Africa versus Uganda Electricity Distribution Company Civil Appeal No. 08 of 2017. - 18. In rejoinder Counsel for the Plaintiff submitted that the Defendant does not dispute consuming the Plaintiff's services and even made partial payment. Counsel prayed that the court should not permit the Defendant to benefit from the Plaintiff's

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services without paying for them. He cited the case of **Finishing** Touches versus Attorney General Civil Suit 144 of 2010.

- 19. The Public Procurement and Disposal of Public Assets (PPDA) Act, Cap 205 applies to all public procurement and disposal activities and all finances originating from the Consolidated Fund or from a procuring and disposing entity (see section 1 (a) (ii) and $(iii)$ - 20. Under section 2 of the PPDA Act, a procuring and disposing entity means a Ministry of Government. In the present case, the transaction in issue was carried out on behalf of the Ministry of Education and Sports which is a ministry of the Government. The procurement in issue is therefore governed by the Public Procurement and Disposal of Public Assets (PPDA) Act. - 21. Under section 2 of the PPDA Act, a contract is defined as follows:

*An agreement between a procuring and disposing entity and a* provider, resulting from the application of appropriate and approved procurement or disposal procedures and proceedings as the case may be concluded in pursuance of a bid award decision of a contracts committee or any other appropriate *authority*. (Emphasis added)

- 22. From the above definition, there are 3 requirements under the PPDA Act for a contract to be valid. Firstly, there has to be a provider and a procuring and disposing entity. In this case, the Ministry of Education and Sports is the procuring and disposing entity and the Plaintiff is the provider (see definition of provider under section 2 of the PPDA Act). - 23. Secondly, the agreement should result from the application of appropriate and approved procurement or disposal procedures.

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The Black's Law Dictionary 8^th Edition page 3807 defines procedure as "A specific method or course of action."

- 24. The PPDA Act and the Regulations thereunder provide for the different procedures to use in the procurement of goods, works and services. For purposes of this case, I will cite the procurement regulations of 2014 that have since been repealed because they were the ones in force at the time of the The procedures under the Procurement law procurement. include initiation of the procurement, choice of procurement method, solicitation of bids, evaluation of bids and finally award of contract. - 25. In the present case, it is not clear which procurement method was used as no bid solicitation documents were submitted in evidence. In addition, there is no evidence that a bid was submitted in response to a call for bids. PW- Mr. Ben Katushabe Zimuringa, the Managing Director of the Plaintiff in response to a question on how he got to know about the procurement testified that he went to the "project coordinator looking business." It should be noted that every procurement is initiated by an invitation to bid from the procuring and disposing entity (See Regulation 3 of The Public Procurement and Disposal of Public Assets (Rules and Methods for Procurement of Supplies, Works and Non-Consultancy Services) Regulations No. 8 of 2014. - 26. For every bid except for a micro procurement (low value procurement), there has to be an evaluation of the bids. (See The Public Procurement and Disposal of Public Assets (Evaluation) Regulations No. 9 of 2014). In this case, there is no evidence that an evaluation of the bids was ever carried out. Finally, there is no evidence of approval of the procurement or the procurement procedures used. Under section 31 (1) (a) of the PPDA Act, the Contracts Committee is mandated to approve the choice of

procurement procedure for any given procurement, the solicitation documents to be used, the evaluation report, and the contract. There is no evidence of the contracts committee's approval of the procurement procedures used in this case.

- 27. The final condition for there to be a valid contract under section 2 of the PPDA Act cited above is that the agreement has to have been entered into following a bid award by a contracts committee. Under section 31 $(1)$ (c) of the PPDA Act, the contracts committee is mandated to make award decisions. There is no evidence of an award of contract by the contracts committee. - 28. During cross-examination, PW stated that he had a contract. He cited two internal memos marked PE 4 and 5 to the Under Secretary in the Ministry of Education requesting him or her to nominate the Plaintiff to clear workshop and laboratory equipment. It should be noted that under section 67 of the PPDA Act, procuring and disposing entities are required to use the standard bidding documents as models for the preparation of bid documents. These standard documents include a contract. Where an entity wishes to use a different contract they have to obtain approval from the PPDA Authority. There is no evidence of a contract that was entered into between the parties and neither is there evidence that the entity was allowed to deviate from the said standards - 29. In this case, there is no evidence that the above procurement procedures were followed by the Ministry of Education and Sports. Therefore, there was no valid contract between the parties. - 30. Counsel for the Plaintiff submitted that the Defendant should not benefit from the services rendered by the Plaintiff as that would

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be unjust enrichment and cited the case of **Finishing Touches** versus Attorney General Civil Suit 144 of 2010.

31. In the case of Galleria in Africa versus Uganda Electricity **Distribution Company (supra)**, the Supreme Court held as follows:

> So there's no way the Act [PPDA] can regulate practices in respect of public procurement and Disposal of public assets unless if the provisions are adhered to strictly to the letter. The provisions cannot be directory merely. They are for all *purposes and intents mandatory and non-compliance with* them makes the proceedings fatal. Procurement and Disposal *activities are processes, one cannot move to another stage of the processes without fulfilling the first one.* (Emphasis added)

32. The Supreme Court also went ahead to discuss the case of Finishing Touches versus Attorney General Civil Suit 144 of **2010** cited by counsel for the Plaintiff. The Court noted that the Judge in that case was faced with a situation where much as the procurement law had been flouted the Defendant had benefitted from the services rendered. The Supreme Court then went ahead to hold as follows:

> *On the other hand, with respect, I do not agree with the High Court decision that procurement can be valid if the provisions* of the law are not complied with provided the objectives of the Act are met. Firstly, the objectives of the Act cannot be met without due regard to the provisions of the law as already stated in this judgment. The provisions of the Public Procurement and Disposal of Public Assets Act are the life *engine of its objectives.*

> *The provisions in issue are clear. The objectives of the Act for* all purposes and intents are to achieve fairness, transparency

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and value for money procurement among others. Therefore, *breach of the provisions is not a mere irregularity since it goes* to the core of the Act. The wording in S.76 (3) is mandatory so *non observance leads to fatality.* (Emphasis added)

- 33. As noted earlier the procurement processes as provided for under the Act were not followed by the Ministry of Education and Sports. Therefore, there was no valid contract. As was held in the above cited case of Galleria in Africa versus Uganda Electricity **Distribution Company** (supra) failure to adhere to the provisions of the PPDA Act is fatal. Therefore, the doctrine of unjust enrichment would not be applicable in this case. - 34. It should be noted that in this case, the resources in issue are public funds. In the long title to the PPDA Act, it is stated that one of the purposes of the Act is to provide for the regulation of practices with respect to public procurement and disposal of activities. The principles of public procurement are nondiscrimination; transparency; accountability and fairness; competition and ensuring value for maximum money, confidentiality; economy and efficiency; and promotion of ethics. - 35. The purpose of the procurement is to ensure that in the use of public funds, the above principles are upheld. This is to prevent misuse of public resources. The intention of Parliament was to protect public resources hence the various procedures and approvals required at every stage of procurement. In this particular case, none of the procedures provided for in the law were adhered to. There was a blatant flouting of the procurement law by the officials in the Ministry of Education and Sports. - 36. PW testified that he has done business with the government for so many years, he, therefore, should have been aware of the procedures to be followed in awarding contracts.

37. In conclusion, therefore, there was no valid contract between the parties. The suit is dismissed. Each party shall bear its costs.

Dated this 14^th day of October 2024

Patricia Kahigi Asiimwe Judge Delivered on ECCMIS