[2012] UGHCCD 302

## THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA AT KAMPALA

### CIVIL DIVISION

### CIVIL SUIT NO. 313 OF 2011

## KALUUMA KASSIM & ⁴ OTHERS PLAINTIFFS

### VERSUS

KAMPALA CAPITAL CITY AUTHORITY: DEFENDANT

#### RULING

# BEFORE: HON. JUSTICE BENJAMIN KABIITQ

The Plaintiffs were appointed as members of the Kampala Local Government Public Accounts Committee of Kampala City Council for ^a period of five years with effect from 25th March 2009 to 30th March 2014, by the Mayor.

The Defendant is the successor of Kampala City Council following the enactment of the Kampala Capital City Authority Act 2010.

^A brief background to this suit is as follows. **1S**

Following the enactment of the Kampala Capital City Authority Act of 2010 and its commencementin March 2011, the Town Clerk of the then Kampala City Council and the Director of Kampala Capital City Authority required the Plaintiffs in March 2011 to handover their instruments of office. By reason of the fact that by the coming into force of the said Act, Kampala City Council had ceased to exist as ^a local government together with all the **2x>** organs and offices created and operated under the Local Governments Act cap 243.

**IO**

The Plaintiffs duly handed over office to the Executive Directorof Kampala Capital City Authority in 2011.

The plaintiffs have brought this suit contesting the termination of their contractson ground of breach of employment contract and wrongful termination with ^a prayer for an award of special damages for the unexpired term, general damages, interest and costs.

All five Plaintiffs were represented by the learned counsel Fred Makada while the Defendant was represented by the learned counsel Ouma.

At the scheduling conference, it was agreed that the court ought to resolve the preliminary issue raised by counsel for the Defendant as to whether the Plaintiffs' contracts of service had been frustrated by operation of law. Court proceeded to hear the submissions of both **io** counsel in this preliminary issue.

It was submitted for the Defendant that Kampala City Council was previously managed as ^a local government under the Local Governments Act (Cap 243) Laws of Uganda.

amended under Constitution (Amendment) (No. 2) Act, 2005, Act No. ¹¹ of ²⁰⁰⁵ to provide **15** *interalia,* for Kampala as the capital city for Uganda to be administered by special arrangement. Clause 4 and 6 of the amendment provides thus, It was submitted further that the Constitution of the Republic of Uganda 1995 was

> *"(4) Kampala located in Buganda shall be the capital city for Uganda and shall be administered by the Central Government.*

*(6) Parliament shall, by law make provision for the administration and ZP development ofKampala as the capital city."*

The operative law enacted by Parliament in this regard is The Kampala Capital City Authority Act, 2010 Act No. 1 of 2010. (hereinafter referred to as the K. C. C. A Act).

2 *b* \*

underSection 58(1) K. C. C. A Act and it is by different appointing authorities. The Section, provides thus, Counsel pointed out that the Plaintiffs were appointed under the Local Governments Act by the Mayor while theappointment of the Public Accounts Committee is provided for

> *"There shall be establishedfor the Capital City, a Public Accounts Committee consisting of a chairperson and four other members appointed by the Authority on the recommendation of the Lord Mayor and with the approval ofthe Minister."*

It was contended for the Defendant that the enactment of the K. C. C. A Act was neither **\$7** envisaged by Kampala City Council (the predecessor) nor by the Plaintiffs at the time of **16** making of their contracts of employment whose termination is the subject of the dispute before this court.

the issue of frustration. The facts of the case cited involved inordinate delay by ^a buyer and seller to refer ^a dispute to an arbitrator as provided in ^a vessel sale agreement. The whether the inordinate delay amounted to frustration of the agreement to factors to establish if frustration had occurred. It was held that no frustration in the said ^I factors were laid out at page 44 thereof as follows, Counsel proceeded to cite the case of PAAL WILSON & CO. A/SVS. PARTENREEDEREI HANNA BLUMENTHAL [1983] 1 All ER 34 which he stated was similar to the present case on question was refer the matter to arbitration. The House of Lords pronounced itself on the two essential case had not occurred because the delay had been caused by both parties. The essential

> *"... The first essential factor is that there must be an outside event or extraneous change of situation, not foreseen or provided for by the parties at the time of contracting, which either makes it impossible for the contract to be performed at all, or at least renders its performance something radically different from what the parties contemplated when they entered*

> > 3


*into it. Thesecond essential factor is that the outside event or extraneous change ofsituation concerned, and the consequences ofeither in relation to the performance of the contract, must have occurred without either the fault or the default of either party to the contract."*

Counsel concluded that in the circumstance of this case liability cannot be visited upon the Defendant for the acts of the Legislature.

In reply, counsel for the Plaintiffs submitted that the employment contracts of the Plaintiffs were not frustrated by the operation of law and therefore the Defendant cannot be discharged of liability.

Counsel submitted further that the test for the defence of frustration was whenevents **10** occur of ^a character and extent so sweeping as to cause the foundation of the contract to disappear. Further that the events must not have been foreseen or extraneous to both parties.

The learned counsel contended that the Defendant was liable on the basis of Section 85(1) of the KCCA Act,²⁰¹⁰ which provides for transition arrangements. Section 85(1) reads, **|S**

> *"All rights, assets and obligations of any entity existing in the capital city area immediately before the commencement of this Act are transferred to the authority or the corresponding entity under the authority."*

Counsel contended that there was no lacuna in law as there was a smooth transfer from the old to the new entity and that if the old obligations were not transferred to the new entity there would be chaos in the city.

It was contendedfurther that the actions of the Defendant to terminate the employment contracts of the Plaintiffs was self-induced frustration which in law cannot be relied on as ^a defence.

**4**


It was argued that ^a mere change of name and appointment procedure under Section58(l) of the K. C. C. A Act does not go to the root of the contract. Further that Section 58 of the K. C. C. A Act, 2010, in fact preserves the Public Accounts Committee which performs the frustration would apply to the circumstances of this case. same duties that the Plaintiffs were performing under the old regime. It was contended further that if the Public Accounts Committee had been abolished then the doctrine of

In rejoinder, Counsel for the Defendant submitted in respect to Section 85(1) of the K. C. C. A Act that the K. C. C. A Act did not preserve the status of theservices of the Plaintiffs. It only transferred the rights, assets, liabilities and obligations of the Local Government Public Accounts <Committee.lt> was contended that if the services of the Plaintiffs were to be **\O** deemed to have been transferred to the Defendant, the legislature would have made preserved subject to such employees having to reapplyjjnd^sit-for interviews prior to being engaged. specific provision for such ^a transfer expressly. Counsel cited Section 85(4.^(5) and\_Xj6J.^of the K. C. C. A Act where services and offices of the employees of the defunct K. C. C were

^I now turn to the resolution of the preliminary point of law.

**B**

What is frustration? How is the occurrence of frustration determined?

In the words of Lord Radcliffe in DAVIS CONTRACTORS LTD VS. FAREHAM URBAN DISTRCIT COUNCIL [1956] 1 AU ER 145atPage 145,

*"So, perhaps, it would be simpler to say at the outset thatfrustration occurs whenever the law recognizes that, without the fault of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is colledfor would render it ^a thing radically different from that which was undertaken by the contract. Non haec in foederaveni. It was not this that I promised to do."*

OSBORN'S CONCISE LAW DICTIONARY 9th Edition at page 179 states,


&

**5**

*"Under the doctrine offrustration a contract may be discharged if, after its formation, events occur making its performance impossible, illegal or radically different from that which was contemplated at the time it was entered,"*

The test to establish whether or not frustration has occurred was laid out in the case of **3** TSAKIROGLOU & CO. LTD VS. NOBLEE & THOL G. M. B [1961]2 All ER 179 per VISCOUNT SIMONDS and LORD REIDcited with approval by LORD DENNING in OCEAN TRAMP TANKERS CORPORATION VS. SOVRACHT [1964J1 AH ER 161 at page 166 and it reads,

> *"To see if the doctrine (frustration) applies, you have to first construe the contract and see whether the parties have themselves provided for the \0 situation that has arisen. If they have provided for it, the contract must provide. Then you must see how different it is. The fact that it has become more onerous or more expensive for one party than he thought is not* **13** *sufficient reason to bring about frustration. It must be more than merely more onerous or expensive. It must be positively unjust to hold the parties bound. It is often difficult to draw the line. But it must be done, and it is for the courts to do it as a matter oflaw." govern. There is no frustration. If they have not provided for it, then you have to compare the new situation with the old situation for which they did*

In light of the test provided in the foregoing authority and on the basis of the facts of this case has frustration occurred?

^I have perused the court record and taken note of the following:-

**©**

A situation has arisen in which Kampala City Council has ceased to operate by i) its place. reason of K. C. C. A Act, 2010 which establishes Kampala Capital City Authority in **ZA**


- ii) All five employment contracts of the Plaintiffs with Kampala City Council do not make provision for the change in status from Kampala City Council to Kampala Capital City Authority and nor was such ^a change envisaged in the contract. - iii) The old situation is that Kampala City Council was a local government under the Local Governments Act Cap 243. The Plaintiffs were appointed as members of the Kampala Local Government Public Accounts Committee under Section 88of the Local Governments Act. The new situation is that ^a new law has been enacted, that is, K. C. C. A Act, 2010 to establish Kampala City Council Authority to replace K. C. C. Kampala City Council Authority is accountable to the Central Government and in Section 58(1) K. C. C. A Act ^a Public Accounts Committee has **IO** been established. The change in status is on account of no fault of either party. - iv) The new law introduces ^a new appointing procedure which is radically different with the involvement of the Executive Director and the Minister for Kampala Capital City Authority acting on behalf of the central government.

v) unjust to hold the Defendant as bound in ^a matter that arises on account of change in applicable law. The Plaintiffs' contracts did not provide for this development and it would be

It is my finding that frustration by operation of law has occurred and as such the Plaintiffs' employment contracts have been brought to an end.

**3** Counsel for the Plaintiffs submitted that the Defendant could not rely on the defence of **25** frustration because it was self-induced frustration. He explained that the action of the Defendant to terminate the Plaintiffs' contracts is self-induced frustration. I, however, find it difficult to agree with Counsel because the Defendant's hands are tied by operation of law it would be unjust and illegal to enforce the employment contracts of members of ^a defunct committee, a defunct local government (K. C. C).

With respect, it has frequently been said that the doctrine of frustration only occurs when the new situation is "unforeseen" or "unexpected" nor "un-contemplated" as if that were


an essential feature. But it is not so. It is not so much that it is "unexpected', but rather that the parties have made no provision for it in their contract. It is as it were, ^a new situation that is so sweeping emerges as to cause the old foundation to disappear altogether.(OCEAN TRAMP TANKERS CORPORATION Vs. V/O SOVFRACHT [1964]! All ER 161 considered.)

In the result and for the reasons stated ^I uphold the preliminary objection and dismiss High **A** Court Civil Suit No. 313of 2011 as the defence of frustration by operation of law is maintained.

Each party to bear its costs.

BENJAMI^ KABIITO JUDGE 15th/November/2012

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