[1998] UGCA 47

## THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

COR: S. T. MANYINDO, DCJ; J. P. BERKO, J. A; AND A. TWINOMUJUNI, $J. A$

## CIVIL APPEALS NO. 23/45 OF 1997

BANK OF UGANDA ............................ APPELLANT

- VERSUS -

FRED WILLIAM MASABA .................... RESPONDENT

AND

BANK OF UGANDA ............................ APPELLANT

- VERSUS -

KIYAGA & 5 OTHERS ........................ RESPONDENTS

(Appeals from the judgements of the High Court of uganda at Kampala (H. Ntabgoba P. J.) dated 17th October 1996 and (I.<br>Mukanza J.) 6th April 1997 in H. C. C. S. No. 633 of 1995 and H. C. C. S No. 725 of 1995 respectively)

JUDGEMENT OF TWINOMUJUNI J. A.:

This is a consolidated appeal from two decisions of the High Court in two separate suits which were filed against the Bank of Uganda separately by its employees.

In H. C. C. S No. 633 of 1995 Fred William Masaba sued his employer, the Bank of Uganda alleging that on 1st November, 1994, the Governor, Bank of Uganda wrote to all its members of staff outlining the benefits that would be available to any member of staff who accepted to retire voluntarily from the bank. The letter made representations intended to induce members of staff to retire voluntarily as the bank was facing acute financial difficulties. It stated among other things that:-

"The Bank shall have the right to offset all personal loans, other than housing loans, granted to employees leaving the Bank under this compensatory package. However any<br>housing loan, which is currently secured by hypothecation of Mailo land certificate or leasehold deposited in the Bank, shall be registered as a legal mortgage loan to be repaid over a period to be agreed between the Bank and each employee concerned before departure." (Emphasis mine).

$\cdot$ .

The letter promised other attractive payments that would benefit those who took the decision to retire voluntarily. Alfred Masaba offered to retire which offer was accepted. He was however shocked to find that the whole of the housing loan which he had with the bank was deducted from his retirement package. He was lured out of employment without enough money to make a start. He was soon penniless as a result and suffered general and special damages for which he sought redress.

In H. C. C. S No. 725 of 1995 one Kiyaga Francis and five other former employees of the Bank of Uganda sued the bank alleging that they were induced to retire voluntarily from the bank by the same representations that induced Fred Masaba to retire and they also suffered in the same way when they found that their retirement packages had been reduced by deducting the housing loans they had with the Bank of uganda.

In both cases the trial judges held that the Bank of Uganda had made false representations and was in breach of contract. Judgement was entered for the plaintiffs (now respondents) for general and special damages including an order against the bank to refund the amount of the housing loan it had deducted from the respondents. The Bank of uganda appealed in both cases.

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On appeal it was agreed by all the parties involved in the two appeals that:-

The appeals involved exactly the same facts; $(a)$

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- The appeals involved exactly the same questions of $(b)$ law, - The respondents in both appeals were former employees $(c)$ of Bank of Uganda; - The appellant in both cases was the Bank of uganda; $(d)$ - The cause of action in both cases was founded on $(e)$ representations made by the Bank of Uganda on 1st November 1994 and - (f) The grounds of appeal were similar in all material particulars.

In those circumstances and upon the application of the Bank of Uganda with the consent of the respondents, this court ordered the consolidation of both appeals and counsel for both parties arguments which were submitted written arguments. The subsequently filed were a response to the Memorandum of Appeal filed in Civil appeal No. 45/97. It was agreed that the grounds covered therein adequately covered the grounds contained in the Memorandum of Appeal in Civil appeal No. 23/97.

The Memorandum of Appeal raises ten grounds of appeal as follows:

The learned trial judge erred when he failed to answer $\mathbf{1}$ issue number one as framed which was whether the constituted false of complained circular representations actionable at law.

$\overline{3}$

² The learned Erial judge erred when he held that the appellant's circular ExhibiE P2 waa a represenEation acEi-onable ats law,

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- The learned trial judge erred when he held that tshe pIainE had sufficiently pleaded parEiculars of representac ion/MierepresencaE ion as required by 1aw. - The learned trial judge erred when he held Ehat. there was a binding contracts between Ehe appellant and the respondents whoge Eerms were EhaE t,he housing loans of the respondents would not be deducEed from t.he respondent's benefiEs under Ehe Voluntarj-ly TerminaE.ion Scheme. In partsicular the learned tsriaI judge erred when he held tshat: 4 - (a) "The burden is on t.he defendant tso show Ehat no legaI relations were enEered in Exp.2 (Exhibit vzl; - (b) "The Bank was bound by EXP 2 and could not unilaEerallY alEer the Eerms. rl - (c) "I do agree with tshe submissions of tshe defence thats tshe Bank had Ehe power Eo terminate lhe employment of the plainciffs buE I do not. agree thaE the housing loans could have been deducEed from Ehe volunEary Eerminat.ion scheme withouts consent of t.he Plaintiff. " - The learned trial judge erred when he failed to rule EhaE Ehe phrase in ExhibiE P2 Ehat tshe houeing loans would be repaj.d ,ovetr a perJ.od to be agresdn between t.he appellant and E.he respondenEs meanE/impLied thaE 5

t.he part.ies had noE reached a binding agreement thaE' the housing loans would noL be deductsed from their reti-rement benefiEs.

5 The learned trial judge erred when he failed to consider Ehe appellanE's submission tshaE if any contract resulEed between Ehe partiea, it. did eo when tshe appellant accepled t.he reEpondent's applicat'iona for voluntsary ret irement /terminatsion of services subjecE to deduction of housing Ioans.

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- ? The learned trial judge erred when he failed Eo address the appellant's alternative submission that the appellanE resorted to its righE to Eerminate the services of Ehe respondenE involuntsarily. - 8 The learned triat judge erred when he held thac the housing loans be returned Eo Ehe respondenta when he declared himself unable Eo make any ruling aa Eo the repayments of Ehe same. - 9 The learned trial judge erred when he made a blanket award of general damages of Ug' Shs. L0,000,000/= (Uganda shillings Ten million only) "collectiveIy. " - 10 The learned urial judge generatly misdirected himself in evaluaEing the evidence on record'

The Memorandum of Appeal cont.ained a prayer Ehat thia courE al1ows both appeals, sets aside both judgements of Ehe High CourE and dismises boE.h suits witsh coats. There is an alternaEive prayer Ehat the appeals be alIowed, judgemenEs of the High CourE be set. aside and re-Erials be ordered. The appellanE also prays for the cost.s of the suits'

Learned counsel in this appeal submiEted lengthy written arguments. I do noL consider iE neceesary Eo go deeply into aL1 of Ehem in order to detsermine this appeal . I feel however that Ehe above grounds of appeal raise four guestsions thaE should be answered namely: -

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- (a) Whelher the circular complained of consEiEuted false repreeentaEions actionable at law, - (b) whether Ehere was a conEract. bet.ween the appellanE and the respondenEs Ehat the housing loans would not be deducted, - (c) whether Ehere was a breach of contract by Ehe appellant, and - (d) wheEher the High courE awarded tshe correct amounts of damages.

In presenting a summary of the argumenEs of counsel , I propose to relaEe Ehem Eo the above issues '

Profegsor Sempebwa, learned counsel for the appellant vehement.ly atEacked che findings of Ehe learned judges of the High Court. On Ehe first issue as to \$rhether Ehe circular complained of consE,it.uted false represenEaEions actsionable at law. he submitted tshat the Erial judges arrived aE wrong conclusions because:

- (a) IE was not clear from tshe plaint and tshe evidence whats acEionable mi srepreeentsat ion the respondenta relied upon, - (b) A misrepresenEaE ion even if iE affecEe ^a represenEee is noE act.ionable if iE is

innocent,

- respondents were relying $(c)$ If the on fraudulent misrepresentation, then they neither pleaded particulars of fraud nor did they prove them and - If the respondents wished to rely on $(d)$ careless or negligent representation, these were neither pleaded nor proved.

For all these submissions he relied on the following cases:-

- Patel-v-Lalji Makanji [1957] E. A. 314. - Hedley Byrne Co Ltd vs Heller and Partness [1964] 2 All-ER- 575. - Katarahweire vs Lwanga [1988-89] HCB 86,87. - Esso Petroleum Co Ltd vs Mardon $[1975]$ E. A. 56. - Ngaire v NIC of Tanzania [1973]E. A. 56. - Okello-Okello vs Uganda National Examinations Board Civil Appeal No. 2/87. (Supreme Court).

On whether there was a contract between the appellant and the respondents that the housing loans would not be deducted, learned counsel for the appellant submitted that there never was any such a contract. He raised the following points in support of this submissions:-

That the respondents never pleaded or relied on $(a)$ contract in their plaint which failure was fatal and therefore the learned judge should have dismissed the the claim on that account and

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That a contract results from an offer made $(b)$ by one party to the other and when the terms are accepted a binding agreement results provided sufficient consideration is passed. Prof. Sempebwa then submitted that during submissions in the lower court, he had challenged the trial judges to trace this relationship from the evidence before court but they had failed. He argued that the circular written by the Governor of the appellant to the respondents were mere invitations to treat and not offer as such. That there was no evidence, that there was any firm offer made by any party and accepted by the other resulting into a That on the contrary binding agreement. showed that before court evidence negotiations were never concluded which forced the appellant to fall back on his powers to terminate the employment of the in accordance with their respondents original terms of service.

Finally on this point he argued that the trial judges failed to consider the issue of consideration which is essential to all contracts and that there was no evidence of any consideration to support the alleged contract.

For all these submissions learned counsel cited and relied

Mayanja-Nkangi - vs - NHC [1972] HCB. 37

Edward - vs - Skyways Ltd [1964] IWLR 349.

May & Butcher - vs - $R(1934)2KB$ 17.

$on: -$

On whether there was a breach of contract by the appellant, learned counsel for the appellant did not deal with the issue directly presumably because having argued that there was no contract at all, it followed by necessary implication that there could be no breach.

On the quantum of damages awarded by the learned judge, learned counsel for the appellant attacked their findings as erroneous in law. He submitted that once the court accepted the principle that it could not negotiate a contract for the parties, it was a serious error for the same court to order the respondent to refund the amount of loan on housing it had deducted. He also submitted that the award of general and special damages was based on no evidence of loss suffered and was merely speculative and should not be allowed to stand.

Prof. Sempebwa in conclusion submitted that the decisions of the trial courts could not be sustained and prayed that they be set aside and the appeals be allowed with costs to the respondents.

The main arguments in support of the respondents' case are contained in the written submissions of Mr. Vincent L'okucha Emoru, learned counsel for Kiyaga Francis and 5 others. He made detailed arguments which I shall endeavour to summarise relating them to the main issues as I see them and which I have already summarised above.

on E.he issue of misrepreeent.at ion, Mr. Emoru aubmitted chats Ehe circular issued by tshe apPell-anE constituted false representaEion actionable at 1aw. He heavily relied on the aut.horit ies in : -

l{edlev Bvrne & co. Ltd - vs He11er & n rs A11 -

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tro ^C 1. E. R.

Mr. Emoru submitt.ed that it was not. tshe case for respondents thaE Ehe representaEions relied upon were made fraudulently. The learned Erial judges had found Ehat Ehe representatione made by the appellant in the circular dated 1st November L994 and other circular complained of were made recklessly as Ehey had noE firsE ascertained where the money tshey were promising Eo pay would come from and in chat respecE they amounEed Eo false representatsion actionable a! law. He furt.her submitEed Ehat EheBe had been pleaded and more than enough evidence on this matter was adduced at tshe Eriat. In his view iE was on the sErength of that evidence thaE the t.ria1 court acted in finding EhaE the appellanE.s had made false represenEaEions to tsheir employees upon whj-ch they acted to Eheir det.riment. and Eherefore were entitled Eo damages. He asked Ehe courE to uphold this holding of the Erial courE.

On whet.her lhere was a conlract beEween the appellanE and the respondenEs that the housing loans would nots be deducEed, learned counsel for the respondenls submiEEed thaE there was ^a binding contract. with all iEs elemenEs noE only pleaded buE also proved by evidence in tshe lower courts ' Mr. Emoru submittsed thaE all Ehe respondenEs were formally employees of Ehe appellanE bound by a contract of employment which provided among oEher terms the manner in which this contracE could be Eerminatsed. In Ehe case of Ehese respondents who were in Ehe clerical grade, they were enEitled to one montshs notice. However Ehe represenEaEions of the appellanE offered Eo vary Ehe tserms of Ehis cont.racts by request.ing voluntseers Eo terminate Eheir contracts in consideration for an aEEracEive package. The respondents offered to reEire which offer was accepEed by Ehe appellant. However tso tsheir amazement they found thaE the appellant had unilaEeraly altered considerably Ehe t.erms upon which they had been induced to retire. Mr. Emoru submitted thaE in Ehese circumgEances the learned t.ria1 judge were justified to find thats there was a contracE lhaE the housing foans were noE Eo be deducted and since Ehe appellants deducted the loans contrary Eo what was agreed, they were in breach of EhaE contracE. Learned counsel then ciEed Ehe following cases E.o support his submissions that E.here was a binding conEracE in this case which was breached by the appel}anE: -

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- Edwards vs Skywavs LEd. [1954]1wL,R 344. - Evans ,J. Lt.d vs Andre3 Merzario Ltd [1976,l1wLR l-078. - Esso PeE.roleum Co. Ltd vs Customs and Exercise Commissioners [1976 ] L WLRI . - Moschi vs Leo. Air Service Ltd [197212 A]-,L ' ER 392.

Mr. Emoru also cited general extracts from CHITTY ON CONTRACTS 26 ED. AND CHESHIRE, FIFOOT AND FURMISTON Law of Contract 12 ED. to support his arguments that the contract which was entered into by the appellant and the respondents had all the necessary elements of a good contract which were breached giving rise to these suits.

Finally Mr. Emoru supported the trial courts' decision on the issue of refund of loan amounts to the respondents and the issue of damages generally. He submitted that the appellant had honoured all other parts of the promised package except the promise not to deduct the housing loans. It was that breach that caused dissatisfaction and injury to the respondents. The only logical remedy in those circumstances would he to order the appellant not to deduct the loans but since they had already been deducted, then the right remedy was to order for a refund. In support of this argument, he relied on following cases:-

Esso Petroleum Co. - vs - Mardon(supra)

<u>Fliat - vs - Lovell (2935) 1K. B.354</u>

Davies - vs - Powell Duffryn Colieries (1942) AC 601.

Nance - vs - British colombia electric (1951) AC 601, 613.

Mr. Emoru's prayer was that those appeals had no merit and should be dismissed with costs to the respondents both here and in the lower courts.

In his appeal $\underline{\text{Fred William Masaba}}$ was represented by M/S Matovu & Kimenje Nsibambi Advocates who also submitted written submissions on his behalf. Since the issues were similar to those in Kiyaga Francis and 5 others the arguments were substantially the same.

I now turn to the merits of this appeal. The facts which gave rise to this suit are simple and not disputed.

On 21st September 1994 the governor of the appellant wrote to all his employees a letter headed.

"Voluntary Termination Scheme"

The letter reads:-

"At its meeting of September 20, 1994 the Board of Directors approved a Business Plan for the Bank that will result in significant changes over the next few years. This Plan intended to ensure that the Bank maintains and strengthens its role as a viable and independent agency capable of ensuring stability in financial markets, supervising the financial system, meeting the country's currency needs and providing efficient banking and clearing systems.

Over the last few years the number of staff at the Bank has increased significantly while reforms in the financial sector have reduced our role in some areas and increased it in others. some of these reforms have reduced the Bank's revenues and the Bank cannot continue to meet all its operating At the same costs at the current rate. been Uqandan economy has the time, undergoing considerable restructuring which has led to reductions in the civil service and changes in public sector job structures, pay and benefits.

Accordingly, one of the elements of our Business Plan is the objective of reducing our operating expenses to more accurately match our revenues. In order to achieve this, the Bank will be offering a Voluntary Termination Scheme which staff may take advantage of to assist their departure from the Bank. It has always been our policy to our employees fairly and the treat Termination Scheme will be as equitable as the Bank can reasonably afford. I will $\mathbf{I}$ establish a Work-force Adjustment Committee to manage the implementation of the Scheme and Coordinators will be appointed in each function to help you understand how the proposals might apply to you.

The details of the Voluntary Termination Scheme will be developed in consultation with staff over the next 6-8 weeks and the other aspects of the Business Plan will also be communicated to you in due course."

The letter was signed by "C. N. Kikonyogo, Governor." On 1st November 1994 the Governor wrote another letter to all employees of the Bank of Uganda which reads:-

# "Re: Bank of Uganda Restructuring Programme: Retirement/voluntary Early Termination of Service.

In my circular ref. G. O.19 dated 21 September 1994, I outlined the nature of the difficulty the Bank was experiencing to meet its operating costs at the current rate and informed you that the Board of Directors had approved a Business Plan which would result in restructuring the Bank with the objective of reducing its operating expenditure to match its income.

also communicated to you the Board's $\mathsf{T}$ decision to work out a compensatory package to be offered to staff who may wish to voluntarily terminate their services to the Bank or opt for early retirement.

Under current Personnel Policies, a staff is eligible for early retirement if he or she is 50 years or above. However, all pensionable staff will be eligible to apply voluntary termination of service for Staff on irrespective of age or rank. temporary and contractual employment are not apply for this facility. eligible to Acceptance of an application shall be at the discretion of the Board.

To facilitate the resettlement of staff who will elect to leave the bank under the early retirement and/or voluntary termination of services scheme, the Board of Directors has decided to pay the following compensation package:

- One month's gross salary per year 1. of service. - Early Retirement: 2.

- (a) 6 months of gross salary for $(a)$ those 50 years and older, with 15 or more years of service. - 3 months of gross salary for those 45 years and older, $(b)$ with 10 or more years of service.

### Long Service: $3.$

2 months gross pay for those with 10 years service and aged 50, increasing by $2$ months per year to a maximum of 12 months at the age 55.

# Adjustment Allowance: $4.$

Provident Fund contributed by both the employee and Bank, three months pay in lieu of notice and accumulated leave will also be paid as an additional separate settlement.

# Staff Indebtedness to the Bank: 5.

The Bank shall have the right to off-set all personal loans, other than housing loans, granted to employees leaving the Bank under this compensatory package.<br>However any housing loan, which currently secured by hypothecation of Mailo Land<br>certificate or Leasehold certificate deposited with the Bank, shall be registered as a legal mortgage loan to be repaid over a period to be agreed between the Bank and each employee concerned before departure.

#### Income tax: $6.$

Tax payable on the package will be met by the Bank.

The purpose of this circular is to invite pensionable staff who wish to apply for early retirement and/or voluntary termination of services to the Bank under this scheme to do so by submitting their applications to Ag. Executive Director Administration not later than 30 November, 1994.

Sqd: C. N. Kikonyogo, Governor."

On receipt of this circular, many employees of the Bank, including all the respondents made some calculations based on the offer contained in the above circular to ascertain what they stood to gain if they opted to retire voluntarily. Many of them applied for voluntary retirement including the respondents. All the respondents were employed on permanent and pensionable basis. Their contract of service stipulated retirement age as 55. All of them were young men with excellent records of service and they still had between 12 and 20 years of service before retirement. None of them had any cause to wish to retire at this stage. On the basis of the Governor's circular dated 1st November 1994 they applied on the prescribed form to retire voluntarily.

On or after 19th December 1994 the respondents received a letter from the Governor addressed to them individually in the following terms:-

"Dear Mr/Mrs .............

## Voluntary Termination of Service

I am pleased to inform you that your application for early retirement under the voluntary Termination of Service programme has been accepted by the Board of Directors and that it will become effective immediately on the date you receive the attached cheque which represents the net amount of compensation due to you.

Regarding determination of the net amount payable to each retrenchee, the Ministry of Finance which will provide money for payment of the staff retrenchment costs, has ruled that every retrenchee must settle<br>in full all his or her debts owed to the Bank before being permitted to retire under the voluntary programme. The Management has, therefore, deducted the gross amount due to you all the debts you owe to the Bank including the housing loan and arrived at the net amount of cheque as summarised below:-."

There followed a summary of the computation for each retrenchee. The letter concluded thus:

> "Before you depart from the Bank, you are<br>required to hand over to your departmental head or Executive director, assets, and other valuables belonging to the Bank which you may have in your possession or control, with exception of used uniforms which you may retain."

This letter was signed by C. N. Kikonyogo, the Governor of the appellant. No mention was made of the fate of the land titles each respondent had deposited to secure a housing loan from the Bank. According to the evidence of the respondents, they were required to hand over their identity cards issued by the bank and other assets of the Bank before receiving this letter and the attached cheque. It was after this procedure that they realised that the bank had not honoured its promise not to deduct the housing loans. By that time the bank regarded them as having already retired. Their attempts to rescind the transaction was not accepted by the bank. They were thrown out in the cold with ridiculously small amounts of money that within a matter of weeks they were reduced to paupers. The tale of what they suffered is miserable reading. One of them went through untold suffering when his wife left him and all his children dropped out of school.

The trial judges found that the appellant had made false representations actionable at law and that the bank had entered

into a binding contract with the respondents that housing loans would not be deducted. Arguments of counsel for both sides concentrated on the issues of false representation and whether there was a binding contract between the parties on the nondeduction of housing loans. I propose to deal with those issues first and in that order.

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As regards the issue of false representation, it is now trite law that an action for negligent misrepresentation, though honest or innocent, will lie where damage is occasioned by the breach of a duty to take care, arising from special relationship between the parties - Hedley Byrne & Co. ltd vs Heller & Partners Ltd [1964]All. ER. 465. This principle was applied in the case of Esso Petroleum Co. Ltdvs Mardon[1976]2 All. E. R. 5. In this case Lord Denning M. R. stated on page 16 that:-

> "It seems to me that Hedley Byrne, properly this understood covers particular proposition: If a man who has or professes to have a special knowledge or skill, makes a presentation by vortue thereof to another - be it advice, information or opinion with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion and thereby induces the<br>other side to contract with him, he is liable in damages." (emphasis mine)

Applying the above principles to the instant case before us, the appellant is a powerful self accounting and autonomous organisation. Its Governor is not only the Chief Executive of the organisation but also the chairman of its Board of Directors. The respondents were long standing servants of the Bank. They • had no reason to doubt the written promises of their powerful employer. In turn the employer had a duty to ensure that the promises it made to them were accurate. But the trial judges found that when the bank promised them that if they voluntarily retired from the Bank they would receive a package where housing loans would not be deducted, it knew that this was false or did not care whether that promise was accurate or not. The trial judges held that this amounted to negligent misrepresentation, It is clear to me, that the which was actionable at law. misrepresantation was relied upon by the respondents with disastrous consequences. I am of the view that on the principles discussed above, the appellant was very negligent in promising what was not in their power to fulfil. The respondents acted on the promise and suffered severe damages. Even if no contract had been entered into between the parties, the respondents are entitled to damages in tort for negligent representation.

Prof. Sempebwa submitted at length that the nature of representation relied upon was neither pleaded nor proved and therefore the lower court should have thrown out the claim.

Counsel for the respondents drew the attention of this court to paragraph 8 of the plaint in H. C. S. No.725 of 1995 (CA. 45/97) which stated:-

> "The defendant at the time it made or caused to be made the said representations knew<br>them to be false and untrue or made them recklessly not caring whether they were true or false, and were made in order to induce the plaintiffs to apply for voluntary retirement and terminate their employment."

The trial judge considered this matter and held that this was sufficient pleading of the matter of negligent misrepresentation.

He also held that the communication from the Bank of Uganda to the effect that:-

> "The Ministry of Finance which will provide money for payment of staff retrenchment costs, has ruled that every retrenchee must settle in full or his or her debts owed to the Bank before being permitted to retire under the voluntary programme."

was sufficient evidence that the Bank did not first establish the source of funding for the retirement scheme before making the representations complained of and this is the very proof of negligence. He therefore found in favour of the respondents on this issue. I think he was correct on that issue and find no merits in the appeal regarding misrepresentation. The relevant grounds of appeal on that issue must therefore fail.

On the issue whether there was a binding contract between the parties which included a stipulation that the loans on housing would not be deducted, the trial judges easily held that there was such a contract and I would agree.

The respondents were still young people with a lot of years of service ahead of them. The youngest of them still had twenty years of service and the oldest still had at least twelve year The appellants' offer contained in the Governor's to go. circular refered to above induced the respondents to retire because of the attractive package which included a promise that the housing loan would not be deducted. They accepted the offer and agreed to retire on the terms offered in exhibit on P.14 of this judgement. Indeed they retired but the appellant failed to fulfil or pay the whole retirement package as he had promised. There is no doubt whatsoever that all the respondents retired following this arrangement. It is not true as Prof. Sempebwa would have it that the Voluntary Retirement Scheme did not go through and that therefore the appellant resorted to terminate their employment under their original contract of employment with the Bank. All the evidence on record is overwhelmingly against this submission. This being the case the appellant was bound by the terms of their offer which induced the respondents to retire. The respondents could rely on the rule in Hughes v Metropolitan <u>Railways</u> [1877]2 A. C. 439 on the basis of which Denning J. as he then was in the case of Central London Property Trust Limited vs High Trees Ltd [1947]KB 130 formulated the following principle:-

"That where parties enter arrangement which is intended to create into relations between them and persuance of such an arrangement, one party makes a promise to the other which he knows will be acted upon and which is in fact acted upon by the promisee, the court will treat the promise as binding on the promisor to the extent that it would not allow him to act inconsistently with it even though the $\mathtt{may}$ not be consideration in strict sence." supported by

In other words a promise intended to be binding, intended to be acted upon and in fact acted upon should be binding. This equitable principle has been incorporated in our

Evidence Act, whose S.113 provides as follows:-

"When a person has by his, declaration, act omission, intentionally caused or $or$ permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such a person representative, to deny the truth of that his

In this case the appellant made clear inducements in their letter of 1st November 1994. Acting on those inducements the respondents accepted to retire from the Bank. It was not open

to the appellant to unilaterally alter the terms of the contract. What it could have done was to alter the terms of the offer before presenting them to the respondents for acceptance or otherwise.

It was not open to it to alter the retirement package, after it had been accepted and acted upon by the respondents because by then the contract was complete.

In their written submissions counsel for the respondents cited the case of Edwards - vs - Skyways Ltd [1964] IWLR 349. He pointed out the similarities between that case and the instant case as follows:-

> "The similarities of the above suit with the present one are not hard to find. In both cases the employees were employed under terms and conditions which provided for determination of employment on notice. The employers were in financial problems and The employers wanted to reduce staff. invited its employees to apply to retire retired certain those who promising payments. In the case of Edwards "exgratia" payments and in the instant case "voluntary termination package". In each of the cases the employees acting on the promises, applied to retire and they were terminated but the employers made other payment without in the case of Edwards "exgratia" payments and in the instant case, without the housing Each employer at the time it made loans. the promises intended to be bound but later discovered that due to financial constraints they should not pay.

In the case of Edwards it was held that the employer was bound to pay the ex-gratia payments."

In the Edwards case the court held at p.355:-

"In the present case the subject matter of the agreement is business relation, not social or domestic matters. There was a meeting of minds - an intention to agree.

There was admittedly, consideration for the company's promise. I accept the proposition of counsel for the plaintiff that in a case of this nature the onus is on the party who asserts that no legal effect was intended<br>and the onus is a heavy one."

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In the case of Evans Ltd - vs - Andrea Merzario Ltd [1976]1 W. L. R. 1078 LORD DENNING Held:-

> "When a person gives a promise or an assurance to another, intending that he should act on it by entering into a contract, and he does act on it by entering into a contract, we hold that it is binding."

I agree with counsel for the respondents that the case of Edwards (supra) is on all fours with the instant case and the holdings above quoted in both Edwards and Evans cases are pertinent.

Prof. Sempebwa, in his written submissions both here and in the High Court argued that:-

- $(a)$ The respondents never pleaded or relied on contract - $(b)$ There was no consideration for the contract - $(c)$ The use of the phrase to the effect that the housing loans would be repaid "aver a period" to be agreed" in the Governors letter of 1st 1994 clearly showed that the November parties never reached agreement since this matter was never settled as envisaged.

With respect, the High Court was not convinced by these arguments and I am not. All the elements of a contract did exist There was an offer and an acceptance. in this transaction. There was also consideration to make the contract complete. These were adequately pleaded in plaints.

Consideration is defined in Osborn's Concise Law Dictionary

$as:-$

"A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss ${\tt suffered}$ $or$ responsibility given, $or$ undertaken by the other."

This is in accord with the decision in Currie & Others vs Misa $(1873-75)$ 10 Exh.153.

According to Cheshire Fifoot and Furmistone Law of contract, 12th ED. at p. 557 states:-

> "Consideration raises no difficulty if the contract to be extinguished $\quad\quad\texttt{is}\quad\quad$ $\mathtt{still}$ executory, for in such a case each party<br>agrees to release his rights under the contract in consideration of a similar release by the other. The discharge in such a case is bilateral, for each party surrenders something of value."

Relying on these authoritative statements on the law of consideration, Mr. Emoru for the respondent in his written submission argued: -

> "An Executory contract is one where neither his completely $\operatorname{\textsf{performed}}$ has party obligation under the contract. It takes the form of promises to be performed in future. In the instant case, there was subsisting between the parties an employment agreement. The parties agreed by mutual consent to terminate it, when it was still executory; and executory on both sides. Each party therefore agreed to release/extinguish his rights under the employment contract in<br>consideration of a similar release by the the consideration for The other. termination lies in the mutual surrender of rights, and the consideration for the new contract lies in the mutual promises to perform the contract."

I agree with this analysis. The bank stood to gain from the voluntary retirement scheme because, in the Governors' own words

(in the exhibit appearing on P.13 of this judgement)

$\mathbb{R}^{N\times N}$ $\mathcal{D}^{\mathcal{L}}$

> "This plan is intended to ensure that the Bank maintains and strengthens its role as a viable and independent agency capable of<br>ensuring stability in financial system,<br>meeting the country's currency need and providing banking and clearing systems."

On the other hand, the respondents agreed to forego their contract of employment for a financial package from which housing loans would not be deducted.

I am very much alive to the fact that the offer stated that housing loans would be repaid "over a period to be agreed." I am also aware of the holding in May & Butcher - vs 0 R[1934]2KB where the court stated:-

> "To be a good contract there must be a concluded bargain and concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement of the parties."

However the situation in the instant case is distinguishable from that in the case of <u>May & Butcher vs R</u> because it is clear from the evidence on record that the parties envisaged that there would be two agreements, namely, the contract to terminate employment (The Voluntary retirement package) and the mortgage agreement. The parties accomplished the first contract (despite the partial breach by the appellant) and they are yet to finalise the second. The grounds of appeal based on the submissions that the contract was never pleaded or proved and that there was no binding contract between the appellant and the respondent must therefore fail.

The remaining grounds of appeal concern the question whether there was a breach of contract by the appellant and if so what is the appropriate quantum of damages. On breach of contract, there is no doubt that when the appellant decided to deduct the

housing loans from the voluntary retirement package, it was quilty of a serious breach of contract for which the respondents are entitled to damages.

On the issue of damages, the principle to be followed in such cases was set out in Esso Petroleum Co. Ltd vs Mardon [1976] 2 All. ER 5 at page 16 as follows:-

> "Mr. Mardon is not to be compensated here for 'loss of a bargain' .......... He is only to be compensated for having been induced to enter into a contract which turned out to be desasterons for him. Whether it is called a breach of warranty or negligent misrepresentation, its effect was not to warrant the throughput, but only to induce him to enter into a contract. So the damages in either case are to be measured by the loss he suffered. Just as in the case of Doyle vs Olby, (Ironmongers) Ltd, he can say, 'I would not have entered into this contract at all but for your representation. Owing to it I have lost all the capital I $\frac{1}{2}$ put into it. I also incurred a large overdraft. I have spent four years of my life in wasted endeavour without reward and it will take me sometime to re-establish myself.'

For all such loss he is entitled to recover damages. It is not to be measured in a similar way as the loss due to personal injury. You should look into the future so as to forecast what would have been likely to happen if he had never entered into this contract; and contrast it with his position as it is now as a result of entering into it. The future is necessarily problematical and can only be a rough - and - ready estimate. But it must be done in assessing the loss." (emphasis mine)

Although admittedly the case of Esso vs Mardon (supra) had its own peculiar facts, the principle on damages outlined above is applicable in this case where, like in Esso case, (supra) the cause of action is negligent representation and a breach of a warranty. In the instant case the trial judges only awarded damages to put the respondents where they would have been had the appellant not breached its undertaking not to deduct the housing loans. In so doing they acted within the principles outlined above. An appellate court will not reverse the findings of a trial judge as to the amount of damages merely because if it had tried the case in the first instance it would have given a lesser sum.

In Flint - vs - Lovell [1935] IKB 354 Greer C. J. said:-

"In order to justify reversing the trial<br>judge on the question of the amount of<br>damages it will generally be necessary that this court (appellate court) should be convinced either that the judge acted upon some wrong principle of law, or the amount awarded was so extremely high or so very small as to make it, in the judgement of this court, an entirely erroneous estimate of the damage to which the plaintiff is entitled."

In my judgment, the trial judges properly directed themselves on the quantum of damages and I do not find any justification for interfering with their findings on this issue.

In the result, I do not find any merits in this appeals and I would accordingly dismiss them with costs to the respondents both here and in the courts below.

ww

A Twinomujuni JUSTICE OF APPEAL

Dated at Kampala this ... $2.8...$ day of $\mathcal{M}$ ....................................

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

## (CORAM: S. T. MANYINDO - DCJ, J. P. BERKO - JA, A. TWINOMU.ruNI - JA)

#### CIVIL APPEAL NO.23 OF 1997

### BETWEEN

| | VERSAS | | |----------------------|--------|---------------| | FRED WILLIAM MASABA: | | RESPONDENT(S) |

### JUDGMENT OF MANYINDO - DCJ

I read the judgment of Twinomujuni JA, in draft and I agree with it. These are clear cases where the appellant induced the respondents to retire early in order to benefit from the generous retirement package which was offered to them. [t included an undertaking not to deduct the housing loan from the retirement package.

Accordingto the evidence ofthe appellant's Director and Head of the Human Resources Depaftnrent, Mr. Francis Tinkasimire (DWl), the package was approved by the appellant's Board of Governors and was presented to the respondent by the appellant's very Governor, Mr. Kikonyogo. In my view it was irnmaterial that the appellant's shareholders later disapproved of the scheme. The appellant was bound by it once it was accepted and acted upon by members of staff. Again the evidence of Tinkasimire (DWl) who recorded the Minutes of the Board Meeting showed clearly that:-

> "the intention was to ensure that staff who left under the Schemedidnot go on to the street."

Yet that is exactly what happened to the respondents in these two cases following the breach of the contract by the appellant.

In the result I would dismiss the appeals with costs. Since Berko JA, also agrees, the appeals are dismissed with costs here and in the High Court.

DATED at Kampala this: $28$ day of: $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ find $4$ f

$dv$

S. T. MANYINDO DEPUTY CHIEF JUSTICE