[2015] UGCA 2033

# THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

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# TAXATION REFERENCE/ APPEAL NUMBER 25 OF 2013

, « « *(Arising from the decision of the Asst. Registrar, Her Worship Ssali Harriet Nalukwago in taxation ruling dated 18/10/2012 in Election Petition Appeal Number 30 of 2011)*

¹⁰ MUDI. OBOLE ABEDI NASSER ........................................................... APPELLANT

## VERSUS

MUGEMA PETER RESPONDENT

## BEFORE: HON. JUSTICE RUBBY AWERI OPIO, JA

### 15 RULING

This is a reference to a single Justice under Rule 110(1) of the Rules of this Court. It is from the decision of the Asst. Registrar of this Court in her capacity as taxing officer in Election Petition Appeal Number .30 of 2011, Mugema Peter V Mudiobole Abedi Nasser.

^•2'0 The background of this reference is that the appellant herein was the unsuccessful party in Election Petition Appeal No. 30 of 2011. The respondent was awarded costs in the appeal and in the High Court whereupon he filed a Bill of Costs on the 25th day of July 2012 totaling Ushs. 223,446,350/=. The matter was heard by her Worship Ssali Harriet Nalukwago, Asst. Registrar of this Court sitting as a taxing master who delivered 25 her ruling allowing the bill of costs at Ushs. 62,203,110/= to wit Ushs. 50,000,000/= being instruction fees,. Ushs. 2,714,500/= being other costs plus disbursements and VAT of Ushs. 9,488,610/=..

- The appellant however, being out of time to lodge a taxation reference, filed Miso. Application Number 283 of 2012 seeking leave to enlarge the time within which to file the taxation Reference/Appeal. The said leave was granted and on the 27th day of February 2013, the appellant filed this reference preferring three grounds:- . - 1. The award of 50,000,000/= (fifty million shillings) as instruction fees is manifestly excessive and not in compliance with the law. - 2. That items 2-41 of the bill ought to have been taxed off as they all fall under item ¹ (instruction fees). - 3. That VAT was wrongly awarded.

### Legal Representation

10 *c*

> The appellant was represented by M/s Ochieng, Harimwomugasho & Co. Advocates while the respondent was represented by M/s Kiwanuka & Karugire Advocates. The advocates filed written submissions in respect of this reference.

### Ground ¹

20 25 Counsel for the appellant submitted that the taxing master failed to take into consideration the principles and benchmarks laid down in Rule 9(2) of the Third Schedule to the Rules of this Court. In her ruling, she noted that the different grounds of appeal were just like any other election petition case with the same issues. This ought to have guided her to award a lesser instruction fee than Ushs. 50,000,000/=. To support his arguments, counsel relied on the authorities of Lanyero Sarah Ochieng & Anor V Lanyero Molly, Court of Appeal Civil Reference No. 225 of 2013; Brenda Nabukenya V Rebecca Nalwanga Balwana, Court of Appeal Taxation Reference No. 208 of 2014; Patrick Makumbi & anor V Sole Electronics', SCCAppL No. 11 of 1994; and Obiga

5'- Mario Kania V ^^ctoral Commission & Anor, CACA 169 of 2012. Counsel prayed that the ■■ ^z reduced. \*■ me instruction fees ^u

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Counsel *for* tne'respondent however submitted that there was nothing inordinate / \* fl I about an award of Ugsh^' 50-000,000/= as instruction fees in an Election Petition Appeal of this nature which involved review of hundreds of affidavits taken out from witnesses in 10 the trial Court as well as the said witnesses' testimonies. He prayed that the award be *I* upheld. !x

\* \

^I have carefully *considered* the submissions of both parties, the evidence on record and the authorities provided. The starting point in matters of taxation is Rule 9(1) & (2) of the Third Schedule to the Rules, of this Court and several cases. Importantly, 15 Justice Manyindo, DCJ (as he then was) ii) the case of Patrick Makumbi & anor V Sole Electronics *(supra)* ably summarized the principles of taxation under seven (7) « • \ straightforward and practical points, as follows:

*"That, firstly, the instruction fees should cover the Advocate's work, including taking of instructions as well as other work necessary for presenting the case for* 20 *trial or appeal, as the case may be.*

X

*Secondly, there is no legal requirement for awarding the appellant a higher brief than the respondent, but it would be proper to award the appellant's counsel a slightly higher brief fee since he or she has the responsibility to advice his or her client to challenge the decision.*

- 25 . , *Thirdly, there is no mathematical or magical formula to be used by the taxing master to arrive at a precise figure. Each case has to be decided on its own merits and circumstances. For example, a lengthy or complicated case involving* - *lengthy preparations and research will attract high fees.*

⁵ *Fourth, in a variable degree, the amount of subjec ^involved may have a* I *bearing. /*

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*Fifthly, the taxing master had discretion in the matt^ taxatjon but mu9st I exercise the discretion judicially and not whimsically*

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*Sixthly, while a successful litigant should be fair's cost\$ he has* 10 *incurred, the taxing master owes it to the Ptfbiic t0 ensure that costs do not rise above a reasonable level so as to deny tpe p0Qr access to the Courts. However, the level of remuneration must be such as t0 attract recruits to the profession.*

> *Seventhly, so far as practical there stfould be consistency in the awards made" f*

The learned Registrar was indeed alive to the benchmarks and principles is governing matters of taxation although she did not labor to reproduce the same in hgr ruling. She noted that upon perusing the record, the Election petition appeal case involved grounds of appeal which were similar to other election petition appeals. This means that the matter did not present any complexity which would warrant a high fee. ^I also take cognizance of the fact that the appellant was equally condemned to costs in 20 the High Court amounting to Ushs. 59,174,000/=. The fund and person to bear the same \* \* would, in my opinion and the circumstances of this case be over burdened.

*r*

Further more, the taxing master did not consider consistency and trend adopted by election jurisprudence in awarding costs in election petitions. The majority of decisions have restricted award of costs between 10,000,000/= to 20,000,000/= on the 25 ground that legal costs in election petitions should not be excessive as to appear as a weapon against political opponents: see Lanyero Sarah VS Molly Lanyero (supra); Brenda Nabukenya VS Nalwanga (supra); Kabusu Moses Wajaba VS Lwanga Timothy and another, Taxation Reference No. 185 of 2014.

^I accordingly find that the instruction fees amounting to Ugshs 50,000,000/= for the appeal, is excessive in the circumstances of this case. The costs are hereby reduced and awarded at Ugshs 20,000,000 for the appeal. This ground accordingly ■succeeds.

Ground 2

io Counsel for the applicant contended that the taxing master erroneously taxed items 2-37 of the bill of costs separately and yet they are covered under item ¹ by virtue of Rule 9(3) of the Third schedule to the Rules of this Court and supported by the case of'Akael Ogola V Akisoferi Michael Ogola V Akika Othieno Emmanuel & Anor, CACA No. 18 of 1999. In addition, counsel submitted that since the learned Registrar had 15 taxed off over a quarter of the total bill, the costs for drawing, filing and serving the bill and of attending taxation should have been disallowed. Counsel prayed that this ground ■be allowed.

Counsel for the respondent opposed this ground and submitted that the learned Registrar duly considered the said items and duly exercised her discretion in making the 20 award. Regarding the point of disallowing costs for drawing, filing and serving the bill and of attending taxation, counsel conceded that the learned Registrar erroneously ' taxed them off. He invited this Court to dismiss this ground accordingly.

^I have considered submissions and authorities of both counsels for which ^I am very grateful. Rule 9(3) of the Third schedule to the Rules of this Court provides:

²⁵ *"The sum allowed under subparagraph (2) of this paragraph shall include all the work necessarily and properly done in connection with the appeal and not . otherwise chargeable, including attendances, correspondences, perusals and c onsulting authorities"*

s In the instant case, the learned Registrar held that, as regards other items, the resst , will remain as prayed for except items 3, 5, 10, 15, 16, 21, 22, 25, 43, 46, 47, 48. As required by Rule 9(3) of the Third Schedule to the Court of Appeal Rules, instruction fees must include, though not limited to, attendances, correspondences, perusals and consulting authorities. In the premises, ^I find that items 17 18, 23, 25, 26, 29, 30, 31, 32, io 33, 34, and 35 are covered under item 1.

The second limb of this ground concerns disallowing costs of drawing, filing and serving the bill and of attending taxation. Rule 13 of the Third Schedule to the Court of Appeal Rules provides:

*"13. Excessive claims, if more than one quarter of the profit costs claimed is* 15 *disallowed on taxation, the costs of drawing, filing and serving the bill and of attending taxation shall be disallowed"*

The learned Registrar taxed off items 38, 39, 40, 41 and allowed them as prayed for when she should have disallowed them considering that the bill amounting to Ushs. 223,446,350/= had been taxed off to Ushs. 62,203,110/= which is more than a quartenof 20 the total bill. Counsel for the respondent also conceded to disallowing these items. Accordingly, items 38, 39, 40 and 41 are disallowed.

#### Ground 3

On this ground, counsel submitted that it was wrong for the taxing master to award VAT without a VAT certificate from the respondent. Counsel further argued that 25 there was no proof that the respondent's counsel collected and remitted VAT as an agent to Uganda Revenue Authority (URA) to warrant a reimbursement.

- ^S «. Counsel for the respondent opposed this ground and submitted that under the Value - Added Tax Act, Cap 349, VAT is levied on the supply of professional services including legal services and thus an award of instruction fees is chargeable to VAT.

Counsel for the appellant mentioned the commercial transaction levy which tax , « was governed by the Finance Decree No. 14 of 1972 by virtue of Section 1(1) of the 10 Decree. It was chargeable upon Advocates from the professional fees obtained for the legal services rendered to clients. In this regard, reliance was placed on the case of Patrick Makumbi and another V Sole Electronics *(supra),* for the preposition that the tax can^ only be awarded to an Advocate as a reimbursement. ^I find that preposition inapplicable particularly in the context of which the *Patrick Makumbi* case was decided. ¹⁵ Therein, the law applicable was the Finance Decree No. 14 of 1972 and it is imperative to note that the commercial transactions levy as a tax in Uganda was repealed in 1996 by the Value Added Tax Statute 06 of 1996 (now Cap 346) which replaced it with VAT. ^I agree with counsel for the respondent that it would be illogical to consider VAT as a disbursement simply because this can only be determined after the taxing officer has 20 taxed off and awarded a specified amount as instruction fees.

Regarding the issue of VAT certificate, Section 6 (2) of the VAT Act, Cap 346 is called . Into play.

It provides:

"6. *Taxable person*

25 *(1) A person registered under section* 7 *is a taxable person from the time the registration takes effect.*

*(2) A person who is not registered, but who is required to apply to be registered, is a taxable person from the beginning of the tax period immediately following the period in which the duty to apply for registration arose". (Emphasis added).*

*\**

This means that irrespective of whether the taxable person is registered or not 10 according to Section 6 (2) of the VAT Act, VAT is chargeable on a taxable person including advocates on instruction fees. ^I find that VAT was properly charged against the instruction fees by the learned Registrar at the rate of 18%. The same rate will appfy ' although following my findings in ground 1, the VAT payable is reduced to Ushs 3,600,000.

15 Each party shall bear their own costs of this reference.

^I so Order Dated at Kampala, this day of 2015. HON. JUSTICE RUBBY AWERI OPIO JUSTICE OF APPEAL • .. 2