[1996] UGHC 57

## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## CIVIL SUIT NO. OF 199?

GULABaLLI USHALANI PLAINTIFF ⁴ versus

DEFENDANT NTABGOBA-PRINCIPAL JUDGE KAMPALA PHARMACEUTICALS LTD-BEFORE:- HON. MR. JUSTICE J. H.

## JUDGMENT

The plaintiff, Gulaballi Ushalani, brought this action against the defendant, Kampala Pharmaceutical Ltd. in breach of Contract of employment. In her plaint, the Production and Quality Control Manager. She adduced ^a Contract of employment in her favour concluded by **/o** Inlex Pharmaceuticals, Ltd on 4th December 1991 but covering the period from 1st January 1991, as will be explained in this judgment. Under the contract, Inlex Pharmaceuticals, Ltd was to pay to the plaintiff a salary of Ug. shs.200,000/ per month and an overseas allowance of US.\$2,000 per month. She would be entitled to several fringe benefits, which would include: plaintiff alleges that she was offered employment as

(a) Medical treatment for the plaintiff and her immediate relatives;

(b) a fully furnished house and house servants;

(c) a Car for transport fully maintained by Inlex pharmaceuticals, Ltd, the employer;

(e) thirty days' leave annually involving free passage for herself and two of her immediate relatives for overseas leave. . (d) education allowance for two Children, and

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' xSde was also to earn annually a Commission of 3% of the net total sales after deduction of production and marketing expenses earned by the business e.t.c.

The plaintiff alleges that she worked for a total of 9 months out of the employment contract of 5 years. She says that sometime at the beginning of "1992 she was persuaded by her bosses to fake illness whereby she was facilitated to travel to India, her home Country. When she returned, she found the Management of Inlex Pharmaceuticals had sold the business to Dembe Enterprises Ltd. The story that can be gathered from all the evidence adduced, including the testimony of Mr. Ben Turyasingura, an Assistant Registrar of Companies, is that Inlex Pharmaceuticals, Ltd changed its name to Kampala Pharma-Ltd on '13-5-92. The directors of Inlex Pharmaceuticals who were Dilip Adatia, Shadrack Angopa and Ismael Luwangula, transferred their shares to various other persons, in effect changing the name of the plaintiff's employer and its management. ceuticals,

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than reproducing Mr. Turyasingura1s relevant testimony as follows:- I can do no better,

> **10** " I am a lawyer in the Registry of Companies. I know Inlex Pharmaceuticals Ltd. It was registered with us but it changed its name. It was incorporated on 6th January, '1986. On 15.5.92 it changed its name to Kampala Pharmaceuticals Industries (U) Ltd.,(the defendant). The directors of Inlex Pharmaceuticals, Ltd at the time were Dilip Adatia, Shadrack Angopa and Ismael Luwangula. Notification of change of Directors in 1991 - Adatia ceased to be Director, replaced by Shadrack Angopa.

" 16.11.95 a resolution was passed that the Company shall appoint Dembe Enterprises, its Sister Company with a power of attorney.

" 15-1.96 ^a' resolution appointed Katagirya Moses as director of the Company, in addition to Karim Hir.ji and Aziz Damari.

**50** Katagirya Moses, were directors. " On 16.2.96 Company form No.8 stated that Karim H:rji and Aziz Damani Karim Hi .'Ji and Aziz Damani became shareholdres because Dembe Enterprises purchased Adatia's shares. Angopa also transferred his shares to Dembe Enterprises. Mrs. Adatia also transferred her shares to Dembe Enterprises; Ismael Luwangula also transferred his shares uo Dembe Enterprises. Kampala Pharmaceuticals, Ltd, is the holding Company of Dembe Enterprise'! Ltd. The Memorandum and Articles of Association ^c ^f Inlex Pharmaceuticals, Ltd, are the ones used L; Kampala Pharmaceuticals, Ltd."

**a** Ltd was the 6™?!''./?!- of the plaintiff, Kampala Pharmaceuticals is, and that th'. : -Dot ² tne employment agreement between That Mr. Turyan:ngura was not cross-examined speaks million regarding the fact that where Inlex Pharmaceuticals,


Inlex Pharmaceuticals, Ltd and the plaintiff was an employment agreement between Kampala Pharmaceuticals, Ltd and the plaintiff.

Right from the beginning of this case, efforts were strenuously made to prove that the defendant is not the employer of the plaintiff. At one stage an application, which was later dismissed by G. Tinyinondi, J, was made to join Dilip Adatia, Shadrack Angopa and Ismael Luwangula so as to indemnify the defendant. I notice from the records that the three gentlemen even executed indemnity agreements which the defendant tried to shelter under in abid to avoid liability to the plaintiff. Even as late as 5th March 1996, in its amended Written Statement of Defence, the defendant pleaded such indemnity in paragraph $5(a)$ and $(b)$ as follows:-

> "(a) The former shareholders and directors of Inlex Pharmaceuticals, Ltd, sold and or transferred their shares to Dembe Enterprises vide agreements $\mathcal{I}$ sale and agreements of indemnity $\ldots$ , and formal transfers copies whereof are attached hereto marked $A, B, C, D, E, F, G$ , and H, respectively,

"(b) Under the said agreements of sale and of Indemnity, it was specifically provided that the purchaser shall not be liable for the seller's debts excepting a few."

With due respect, all these pleas about indemnity were mere fraudulent means of trying to non-suit the plaintiff. The law is and has always been clear that a limited liability Company (in this same, Inlex Pharmaceuticals 2 Ltd) is a separate legal personality from its shareholders.

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$\mathbf{4}$ $\ddot{\phantom{0}}$ $\overline{1}$ Therefore Company• my answer to issue number 4, was protected by an indemnity agreement is in the negative. an employment'Contract concluded betwee^i the Company and the plaintiff is no business of the three shareholders of the whatever They cannot vary it by means, including an indemnity agreement. Straght away therefore whether the defendant

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**/o** change as detailed by the learned Assistant Registrar of Companies is that as late as '1996 the shareholding of the defendant was the same as had been the shareholding of Inlex Pharmaceuticals Ltd in 1991 when the plaintiff. *2b* was no difference between Inlex Pharmaceuticals, Ltd and the defendant. Mere change of directors or share-Needless to say that also my answer to issue number 1, whether there was a contract of employment between the plaintiff and; the defendant, is in the affirmative. holding of a limited liability Company does not change There existed the contract of its legal personality. employment between the plaintiff and the defendant. ceuticals, Ltd did no more than change its name to -ff that of the defendant, and infact, the genesis of the latter concluded the employment agreement with the What this means, in essence, is that there The testimony of Ben Turyasingura, as I have referred to at length shows that Inlex Pharma-

To the allegation by the plaintiff that the a new defendant is guilty of breach of that Contract (issue number 2) the defendant introduced in its amended W. S. D. defence in paragraph 6 -

an alternative plea that "the plaintiff absoconhed from and abandoned her job in other breach of contract in consequence of which the defendant suffered great damage. Further more the defendant was not duty bound to discharge the plaintiff in any way whatsoever as she was no longer having any dealings with the defendant."

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In view of the defendant's denial that there existed [0 an employment contract between it and the plaintiff, the above alternative plea was "without prejudice" to such denial.

Mr. Angopa, in his On this plea a lot of evidence was adduced by the defendant in a bid to show that actually the plaintiff was the one in breach of the Contract and that she committed the breach by absconding, testimony, alleged that when the plaintiff was brought in from Bombay, she was brought in with her husband who was also offered employment by Inlex Pharmaceuticals, Ltd; that the plaintiff having had a little affair with Dilip Adatia, her husband got offended and had to return to India leaving behind the plaintiff; that the affair ( between the plaintiff and Adatia continued for a while and then they fell out; that when Dembe Enterprises purchased Inlex pharmaceuticals, Ltd, Karim Hirji wanted to keep Adatia on for a while during the transitional period; that the plaintiff would not countenance continuing to work with Dilip Adatia and she therefore kept away from the new Company (the defendant) thereby forcing the defendant to employ an alternative Quality Controller.

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This He even went as far as alleging that she caused the disappearance of the factory'^s important machines which analysed the tablets, is part of Karim Hirji'^s testimony: t>uch was the allegation of the plaintiff's absconding. Karim Hirji, in his testimony, reinforced Angopa1s testimony and forcefully argued that he had looked for the plaintiff to employ her but that she was no where to be found.

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" I knew she was the Quality Controller of the Company. When we took oteer I get a jamstart; we wanted to start immediately. . People in the Quality Control reported that a machine which analyses the tablets was missing and that the - Quality Controller was also not there. So I asked Mr. Angopa for the machine and the Quality Controller. He said he had a habit of lending it to the Government Chemist and that the plaintiff would know better. He promised to look for the plaintiff. He wondered why she had not come on duty when she had been asked to come and start with the old Management. I was annoyed with the old Management. There is . a time we were about to exch^S⁶ blows because of the Quality Controller's and the machine's absence ---- After buying the Company, I never saw her. So I could not talk to her -- I have never seen her at my factory------

The above story must be viewed against the story told She alleged that *2£>* Inlex Pharmaceuticals, Ltd, factory and found it locked. by the plaintiff and her witnesses. when she returned from home (Bombay) she went to the

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When suit. was The case was being prosecuted by an It was later on dismissed for want of prosecution. She agrees with Karim Hirji that the latter prosecuted in the Criminal Court of Nakawa for failing to employ her\* official from the Ministry of Labour. bhe looked for Angopa who directed her to Dembe Enterprises saying the plaintiff should talk to Karim Hirji. When she made several attempts to see Karim Hirji, he was too busy constructing his Equatoria Hotel, she tried Karim Hirji\*s brother, he insulted her. She went to Angopa again, but without telling her that he had sold the factory, he kept on shuttling her. She says, he promised to contact Karim Hirji but kept on shilly shallying. She got desparate; and approached the late Jonathan Kateera who advised her to file this

she The story of payment of the Hotel Bills was He says he He the time Karim Hirji appeared in Court, was still driving the Company's B. M. W. Car but Karim Hirji did forcefully remove it from her in December /I9r''x. She al\$o says that Mr. Angopa continued paying her hotel bills at the Summer Hotel, Kansanga until the first we^k of May, ^992. Confirmed by the plaintiff's witness, one Kisiriko Isa (PW4) who had worked as a Waiter at the Summer Hotel and was later promoted to an Accounts Clerk. was acquainted with payments of the plaintiff's hotel - - *- J* bills by Mr. Angopa of Inlex Pharmaceuticals, Ltd. says the Company paid sbs.d.2m to 1.5m/= per month depending on the type of service.

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story for the plaintiff and to disbelieve defendant. It In the first place, I do not agree that if the plaintiff had absconded, the Company would have continued to pay for her Hotel bills up to May 1992 when she is alleged to have absconded.in February, 1992 when the Company's management changed, is even more incredible that the plaintiff could have kept the use of the employer's B. M. W. Car until as recently as December 1994. I have weighed the evidence on the plaintiff's side against that on the defendant's side. I am persuaded to believe the the story of the

type of crook Adatia has been described by Mr. Angopa to have been. His fraudulent handling of the UDJ3 loan shows what a fraud and a crook he was. In fact the plaintiff herself tells it all in her testimony when she asserted. Regarding the so called little affair between her and Dilip Adatia, the story could be true, given the

with him\* and his return to India. that the plaintiff's husband came to Uganda with her and If that were true one would they were employed together. have expected the defendant to have produced a record of his employment; his coming in, his immigration status Nothing of the sort was adduced. although she categorically denied having had an affair 'what I cannot be convinced about is the story " Adatia came back and started disturbing me"

I am inclined to accept the story of the plaintiff that Adatia induced her to forge letters claiming that she needed money together with a Ram Babu.

♦i Che says that her husband is called Iqbal and not Ram Babu. I honestly believe her story when confronted with the documents which she accepted to have been the author thereof.

# This is what she said:- ^I

[O **<20** I said I had no husband with me (in Uganda). My husband has never been to Uganda. My husband's name is Perve Iqbal --- I am the author of these documents. I received a Bank Draft in Indian Rupees 159,000. This money was in response to my letter dated 17.7\*90. Ram Babu never existed. Dilip is the one who was forcing me to claim a salary for Ram Babu as a fictitious expartriate. I got the bankdraft and then he got back some of the money. He took Rupees 15,000. The letter says that I was asking for my leave and my husband's. I was saying in the letter that my husband was Ram Ba'.q. I am telling the Court that I knew that what I was doing was illegal."

As I have already said, this is an honest confession about the Crimes she committed in 1990 before the advent ^l of the contract of employment under consideration. Even if she had come with her husband to Uganda and assuming, currency as alleged, that they fell out and he left her in the Country, and that she subsequently fell out with Dilip Adatia, that was no cause for her employer to renage upon the employment contract. In this regard, it is also noteworthy that learned Counsel applied for adjournment to enable him summon Dilip Adatia to come and rebut the plaintiff's allegations regarding the illegal deals and Counsel failed to produce Adatia.

the preliminary Another ground upon which I based my disbelief of the defence allegation thn-t- -h d from duty is address made to this Court by

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Mr. Kasirye, learned Counsel for the defendant in which he rfeally can be said to have admitted liability. This is what he said:-

> II Before my learned friend proceeds I want to put it on record that this morning I proposed to the plaintiff that this matter could be amicably settled outside the Court. When we departed from Court on Friday, you advised that we explore possibilities for a settlement. I contacted my client, Mr. Karim Hirji and took him through the proceedings. I put it across that that change of the name does not shield the company from the obligations entered into by the Company. So I impressed it upon him

out of Court. (my client) that the plaintiff had a plausible claim before the Court and that it would be in the defendant's interest to sit down and negotiate Mr. Karim Hirji gave me a go-ahead to put the matters to my learned friend, Mr. Mugenyi, and I have done so this morning. Because of the brief time interval between Friday and now I could not put the proposals in writing."

Mr. Hugenyi, in response said:-

" The plaintiff has waited for three years in vain. If the defendant is interested in settlement why can he not put down the case for assessment of damages? I want to call my first witness."

This brings me t< two other issues, namely, issue number 2 and issue nurber three. In view of the foregoing discussion of the la" and cts. my answer to the second issue is that the iefendant has been in breach of the employment contract.

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but *^&lt;* As for the third issue my answer is in the affirmative, namely, that upon change, not of ownership, because, as I have said, ownership did not change until 1996, upon change of name, the defendant refused to provide for and facilitate for the plaintiff's obligations. It instead banished her from the employment for a period of 4 years and 3 months.

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To me this employment contract about the termination of the contract-Clause 8 of the Agreement provides that:- I now pass on to the fifth issue: whether the defendant has frustrated the plaintiff's career by refusing to discharge her in writing. issue does not arise in view of the provision in the

" The Production and Quality Control Manager's employment hereunder may be determined at any time by either of the parties hereto giving to the other of them six months written notice to that effect or by the Company paying her in addition to any salary or Commission that may be due to her a sum equivalent to six months' salary in lieu of such notice."

In view of this provision, it is.not clear why the did not, *30* plaintiff herself would not exercise her option to give the six months' notice and terminate the employment. Her insistence on the defendant terminating her employmen\* as a matter of fact, mitigate the general damages. She has argued and said that being an exoartriate who had been recruited on a work permit for the particular assignment of Production and Quality Control Manager would make it difficult for her to get *a* similar or different employment in the Country.

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I think it is also her argument that she could not have travelled back pay her at least salary and allowance for the 6 months of the notice. But since she was not interested in leaving her employment, the duty fell upon the employer to take the initiative and sack her. to India in the absence of being paid her salary and travel allowances. She is right in that argument but, I have the impression that if she had taken the initiative herself to terminate the employment contract she would still have forced the defendant to

*I* now turn to the gth issue, namely, whether the plaintiff is entitled to the remedies prayed for in the plaint. I propose to deal with each of the prayers one by one.

#### (a) Special Damages;-

It is not disputed that under the contract of employment, the plaintiff was to be paid in local ■Currency a monthly salary of shs.2OO,OOO/= plus an overseas allowance of US 112,000 per month. It has also been proved that the plaintiff worked for the defendant and was paid for 9 months whereas her contract of employment was to last for 5 years. This means that she has to recover her salary and allowances in respect of 4 years and 5 months I award (ie. 51 months). This would give her special damages of UG. Shs. 10,200,000/=, plus US \$102,000?00£ as expartriate allowance, both figures to her.

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#### General Damages:-

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I have already observed that the plaintiff could have terminated the Contract of her employment^by giving a 6 months' written notice to the employers. However, even if. she had taken that course of action, she was' ^v a stranger in a strange land. There is no guarantee that the employer would have made payment to her of • terminal benefit, judging from the obstinacy the employer has exhibited. There is a likelihood that in view of her immigration status, it would not have been easy for her to get an alternative employment in Uganda. It would still have been impossible for her to return home since she would have no money. So, it is as'well she waited for the employer to take the initiative and terminate her contract. So, either way, she was greatly inconve- . nienced; she suffered deprivation, humiliation and . forced to depend on. charity and, to use her own words, she lived like a pauper. She was dragged into the Nakawa Criminal Court which ended in a fiasio to her further disappointment. She was following her employers so as to be employed and, instead, she was tossed hither and thither. - She was entitled to a facilitated leave which would have enabled her to visit her Children and other relatives, but this was not made forthcoming by her- - \* ¹ employers. ' Along with-her appointment, she was entitled to fringe benefits such as free accommodation, free medical treatment with her Children and free transport. I need not repeat them since they are in the employment contract and I have earlier on, in this judgment,

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In short, referred to them, hotel She was, in addition, we must not forget, entitled to a 3# of the net profit of the factory's turn over annually. as a result -of not- .employing her under the Contract, the plaintiff suffered great general Doing the best damage which she must be compensated for. I can, .1 will award her shs.7,000,0(30/= but discount it with 50% for .the fact that she is going to get it in a lump sum plus other imponderables. This will leave her with shs.4,900,000/= (Four Million nine hundred thousand 'Shillings only). In fact, some of them like transport, accommodation (or housing) and medical treatment could tweteen claimed under special damages, ijowevep, \*• in many cases no precise measure of general damages can -be indicated, and general damages thus may often include compensation for damage which is inpapabl& jef exact allegation^ proof oi? evalUatioh in. money. gUCh damage may include, in particular the claim to transport^ nndfree medical treatment and even housing accommodation, and more especially also, leave entitlement and Children\*s education.

In the result, I find for the plaintiff against the defendant and, consequently, I award her.

- (a) Shs 10,200,000/= special damages for loss of her Salary for 5^ months. - <b). US ft 102,000 for loss of her oxpartriate allowance over the period of 51 months.

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(c) Shs A,900,000/= general damages

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suit.

The defendant will also incur the costs of this ,1 award her interest at the Court rate on the special damages from the date of judgment till payment in full, and a similary rate of interest on the general damages from the date of judgment till payment in full.

J. H\*. ^FiTaBGOBA p[rincip](rincip.il).il judge 8/08/96

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Present in'Chambers when judgment is read:- Mrs. Ana Mugenyi Bitature for the plaintiff. Mr. William Byaruhanga for the defendant. Mr. Ziwa, Court Clerk.

J. H. NTABGOBA PRINCIPAL JUDGE 8/08/96

## THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA.

### CIVIL SUIT NO.349 OF 1993.

GULABALLI USHILANI .......

$M_{\rm H}$ / $\Delta$

........ PLAINTIFF $-$ v e r s u s $-$

KAMPALA PHARMACBUTICALS LTD....................................

#### DECREE IN ORIGINAL SUIT

CLAIM: US \$ 102,000 & UG. SHS. $15,100,000/=$ .

THIS suit coming up for final disposal, before His Lordship Hon. Justice Ntabgoba at High Court of Uganda at Kampala in<br>the presence of Mr. William Byaruhanga, Counsel for the<br>defendant and Mr. Yese Mugenyi, Counsel for the plaintiff, IT IS HEREBY DECREED and ORDERED that the defendant DO PAY to the plaintiff the sum of United States Dollars 102,000 and Uganda Shillings 10,200,000/= special damages, Shs.4,900,000/= general damages plus costs of the suit and interest thereof at the court rate from the date of judgment until payment in full.

| | GIVEN under my Hand and the Seal of the Court this $\mathcal{N}$ day | | |-----------------|----------------------------------------------------------------------|--| | of M. Publ 1996 | | |

**REGISTRAR.**

WE CONSENT TO THE ABOVE:-

COUNSEL FOR THE PLAINTIFF.

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COUNSEL FOR THE DEFENDANT.