[2023] UGCommC 228

#### THE REPUBLIC OF UGANDA

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# IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCTAL DrVrSrONl

#### CryIL SUIT NO. 616 OF 2016

# 1. HERMAN JOSEPH SSEMAKULA 2. ST. JOSEPH'S COLLEGE KISUBI LTD::::::::::::::::::: PLAINTIFFS

#### VERSUS

# ATTORNEY GENERAL: : : : : 3 3 : : : : : : : : : : : 3 : : : : : : : : : : : : : : : : : : : : DEFENDANT BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI JUDGMENT

The Plaintiffs brought this suit against the Defendant for breach of contract for the sale of land, refund of money deducted contrary to clear terms of the agreement, an order for unconditional payment of the balance of UGX 200,000,000/, general, punitive and exemplary damages, interest at commercial rate on all monetary rewards, and costs ofthe suit.

The brief facts constituting the Plaintiffs case are that the Plaintiffs owned land comprised in Busiro Block 383, Ptots 5734, 3857,4487,7650 and 7901 land at Bwebajja; which land was developed with structures, on which the Plaintiffs ran a school. That around 2011, upon the request ofthe Uganda Police Force, the Plaintiffs accepted to provide accommodation for between 7 to 15 police officers on the premises although to their surprise, between 700 to 1000 police officers were brought on the land. That this went on for four years causing a lot of damage to the premises, as well as high utility bills which were paid by the Plaintiff.

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The Plaintiffs raised these concerns to the management of Uganda Police Force but nothing was done. This prompted the Plaintiffs to look for market and sell off the land but because of the presence of the police officers, they failed to find willing buyers. Uganda Police Force offered to buy the land and the plaintiffs agreed to sell, therefore a sales agreement was made for a sum of UGX 9,600,000,000/ on lhe 24th day of June 2014. That upon paying the first instalment, Uganda police Force made other demands before completion of the balance of UGX 2,600,000,000/ therefore the parties entered an addendum on l5th June 2015 stating that the balance would be paid after the Plaintiffs fenced off the property and graded the access road. The Plaintiffcompleted the repairs but have only been paid UGX 1,861,200,000/ and the Defendant claimed to have deducted UGX 538,800,000/ as taxes and that they used UGX 200,000,000/ to tarmac the alternative access road.

The Plaintiff avers that the Defendant breached the contract by failing to comply with the agreed terms, imposing new and extraneous terms, not paying the Plaintiffs as and when agreed, ordering the Plaintiffs to repair structures destroyed by police officers among others. That the Defendant continues to illegally hold onto the Plaintiff s money despite several reminders hence this suit.

In their written Statement of Defence, the Defendant denies breaching the contract and avers that the Plaintiffs are not entitled to the claims and declarations prayed for. They prayed that the suit be dismissed with costs.

During the hearing, the l't plaintiff was PWI while the defendant presented Ibanda Kagoda (DWl), Nsanja George (DW2), Muhirwa Rogers (DW3), Kibuka Sozi (DW4), Erasmus Twaruhukwa (DW5) and Edyegu Richard (DW6). Counsel for

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the parties agreed to file written submissions which have been considered in this Judgment.

#### REPRESENTATION

During hearing, the Plaintiffs were represented by IWs KSMO whereas the Defendant was represented by the Attorney General's Chambers.

#### JUDGMENT

The following issues for determination by the court were agreed upon in the Joint Scheduling Memorandum prepared by the parties herein:

- l. Whether there was breach of contract by any of the parties? - 2. What remedies are available to the parties?

#### Issue One: Whether there was breach of contract by any of the parties?

Each party alleged breach of the contract by the other, therefore, I will deal with each separately.

#### A. Whether the Defendant breached the contract.

It is the Plaintiff s case that the Defendant breached the contract in various wavs as will be seen below.

#### Failure to pay the balance on the contract within the agreed time. a.

Counsel for the plaintiff referred to Clause 1.3 (c) of the Sales agreement on page 45 of the Plaintifls Trial Bundle (PTB) to submit that the Defendant has breached the contract as to date a balance ofUGX 861,000,000/ has not been paid, and yet according to that clause, it should have been paid by 30'h June 2015. He added that

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this is ipso facro a breach of contract as time is of the essence according to Section 44 of the Contract Act.

On the other hand, the Defendant admits to not paying the entire sum and they attribute it to breach of contract on the part of the Plaintiff by way of failing to paint some buildings, poor workmanship and use of weak fencing materials as well as failure to level the playground.

It is not disputed that the Defendant has not paid the balance of the contract, in fact as seen above, the Defendant admitted to having withheld UGX 200,000,000/ for alleged breach by the Plaintiff of its obligations under paragraph 4.3 of the land sale agreement.

According to Clause 1.3 (c) on page 45 of the PTB, the balance of UGX 3,100,000,000/ was supposed to have been deposited on the Plaintiffs account in the financial year 201412015. Further, in Clause 1 on page 67 of the PTB, it was agreed that the outstanding balance of UGX 2,600,000,000/ would be paid by electronic transfer. However, from the 151h of June 2014 when that addendum was signed, to date, the balance has never been paid to the Plaintiff.

### Section 33 (l) of the Conlracts Act 2010 provides:

"The parties to a contract shall perform or ofer to perform, their respective promises, unless the performance is dispensed with or excused under this Act or any other law."

In this particular case, there is no evidence to show that the requirement to make payment was dispensed with, or that the contract had in any way been varied. Therefore, pursuant to the above provision on the obligation of parties to perform

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their promises, I find that the Defendant has breached the contract by failing to pay the balance on the contract within the agreed time.

## b. Failing to meet all tax obligations as agreed.

Counsel for the plaintiff submitted that the Defendant acted in breach of Clause 2.2 of the Sales Agreement which provided that the purchaser would bear all the taxes incidental to the presents plus costs of transfer. That the Defendants defence that taxes are met by the vendors does not stand, and that the taxes were instead credited on the account ofKisubi High School, not the Plaintifls account. That the Plaintiffs sold the property at a lower price because Uganda Police Force had agreed to shoulder the tax burden.

He further submitted that the Defendant is estopped from reneging on their representation by the doctrine of promissory estoppel and that on pages 66 and 67 of the PTB, the Defendant undertook to pay the balance of UGX 2,600,000,000/ in Clause 1; and they are bound by their bargain.

In reply, Counsel for the Defendant submitted that since the Plaintiff was not tax exempt, the Defendant deducted UGX 538,800,000/ withholding tax payable to Uganda Revenue Authority; and that they issued the Plaintiff with a withholding tax certificate to enable them to claim a refund from the Commissioner General.

Counsel further submitted that the duty to pay taxes is a statutory one and that one cannot contract out of the dictates of the law. That Article 17 (1) (g) of the Constitution of the Republic of Uganda imposes the duty to pay taxes on every citizen of Uganda. That the Defendant obliged with its tax obligations under Section 119 of the Income Tax Act Cap 340 by paying the 6Yo of UGX

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538,800,000/ payable to URA and that they issued the Plaintiff with a withholding tax certificate.

I have considered the submissions from both parties and the authorities cited. It is true that in an ideal situation of purchase of land, the obligation to pay taxes is on the vendor, without any agreement to the contrary. Similarly, in a transaction involving a govemment institution like in this particular case, Section 119 of the Income Tax Act would be the ideal arrangement, in the absence of any agreement to the contrary.

As Counsel for the Plaintiff submitted, the Defendant was at all times advised by lawyers and in fact, they are the ones who drafted the sales agreement upon completion of the negotiations. Therefore, they ought to have had knowledge of the provisions of Section 119 of the Income Tax Act above.

It would be absurd for the Defendant to try and shun away from the very terms which they proposed. It is very clear in Clause 2.2 of the Sales Agreement on page 46 of the PTB that the Defendant agreed to pay all the taxes incidental to the presents plus costs of transfer. The emphasis is on the word 'all' taxes, without excluding any, therefore the Defendant ought to have paid the withholding tax outside the contract sum. In addition, the Defendant does not deny that undertaking; DW5 admitted to the same during cross examination. I find that the Defendant is in breach of Clause 2.2 of the Sales Agreement by failing to meet all tax obligations as agreed.

#### c Deducting UGX 200,000,000/ as a representation of unfinished works

Counsel for the plaintiff submitted that the two contracts did not allow the Defendant to make any deductions on the contract price, therefore that the

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Defendant erred in making such deductions. That instead, the Defendant ought to have reached out to the plaintiffs over the alleged incomplete works. He added that the Defendant is estopped from such allegations basing on the addendum made on l5th June 2015; which was drafted by the Defendant's lawyers and wherein they unconditionally undertook to pay the balance. counsel invoked the best evidence rule, that once facts are reduced into an agreement, a party is estopped from bringing oral evidence to negative, vary or contradict contents ofa document.

In their written submissions, the Defendant agrees to disbursing all the money due to the Plaintiff under the contract less UGX 200,000,000/ which they say was withheld by the Defendant for breach of clause 4.3 of the contract by the plaintiff, where they undertook to fence the property with chain link fence, level the playground, paint the building and replace the damaged roof. The Defendant's submission is that the Plaintiff failed to properly paint the buildings and that Uganda Police Force incurred costs to remedy the defects. In addition, that the Defendant's witnesses adduced evidence that show that the fencing was poor and the playing field was not levelled properly.

In considering whether or not the Defendant was justified in holding the money for unfinished works, one must look at the provisions of the contract goveming the transaction.

I have perused both contracts dated 24th June 2014 and the addendum dated l5rh June 2015 and there is no provision authorising the Defendant to withhold that sum of money. whereas the Defendant claims that the plaintiff failed to properly paint the buildings, used weak chain-links to fence the property and that Uganda police Force incurred costs to remedy the defects, none of that was mentioned in the addendum where it was agreed that the entire balance be paid electronically to the

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Plaintiff. The only seemingly unfinished work by then was putting up a gate house and grading the altemative access route as well as reinforcing it with marram, as seen in clause 3 on page 67 ofthe PTB. In fact, clause 3 ofthe first paragraph still on page 67 states that the vendor had fenced off the property and was still in the process of completing to grade the alternative access route. No mention is made of painting or poor workmanship or use of weak chain-links.

I therefore find that all the allegations of the Defendant may have been an afterthought and a means of denying the Plaintiffs what was rightfully due to them. It is trite law that parties to a contract cannot tum away from terms that they had agreed upon, therefore, I find the Defendant in breach ofclause 1.3 (c) on page ⁴⁵ ofthe PTB and clause 1 on page 67 ofthe PTB.

# d. Introducing new and strange terms to the contract to justify refusal to pay.

counsel for the Plaintiff submitted that the Plaintiff undertook to comply with the obligations under clause 4.3 (page 47 of the PTB) and also later undertook to fulfil the one of grading an altemative access route and putting up a gate house according to the addendum, despite the fact that it was imposed on the plaintiffs. According to PW1, the Plaintiff accepted because they wanted to receive their balance of monies due to them.

Upon perusal of the evidence on record, it is true that the condition of provision of an altemative tarmac access route found in paragraph 5 of a letter written to the Plaintiffs on page 7l of the PTB, is a new term that was not in the original agreement. In fact, the altemative access route was never part of the original terms, except putting the marram which the Plaintiff agreed to.

N\$\ In cross examination, DW3 the author of the said letter confirmed that he could not trace for that term in both agreements. It was therefore erroneous for Uganda Police Force to say they would only pay the balance when the Plaintiff addressed the outstanding obligations, one of them being putting tarmac on the alternative access road which was not one of the agreed upon obligations since it was a new one. It is obvious that putting tarmac is way too expensive compared to marram, and this would have cost implications. Therefore, I find that the Defendant breached the contract by introducing new terms.

# B. Breach by the Plaintiff

On the other hand, the Defendant claims that the Plaintiff breached their obligations under Clause 4.3 of the contract and he listed three ways in which the breached happened as seen below, although I will handle them together.

#### Failing to fence off the property, failing to paint all the buildings and failing to properly level the playground. il

counsel for the defendant submitted that the Plaintiff failed to properly fence off the property using non-durable chain-link for fencing, and that they used evident poor workmanship due to poor fencing methods and that some parts of the fence were falling. In regard to painting, he added that the Plaintiff used inappropriate surface preparation and paints while most areas remained unpainted. He also said heaps of black soils were dumped onto the playground. counsel said the plaintiff was informed of the defects but he failed to rectil! them, therefore the Defendant held the money until the breaches are rectified. He cited authorities on breach and that parties are bound by their agreements.

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He also cited case law to the effect that the Defendant acted reasonably in the adoption of the remedial measure to carry out repair works at its own costs to mitigate the consequences of the Plaintiff s breach. That since the Plaintiff breached the contract, they were not entitled to full payment.

In reply, Counsel for the Plaintiff submitted that the Defendant's evidence on the allegations is contradictory. He cited DW2 who admitted in cross examination that when he went to the property, he found chain linked fence and that they only painted buildings and worked on the access road. He referred to the addendum which stated that the vendor had fenced offthe property but was still in the process of completing to grade the altemative access route. That the addendum was executed by both parties therefore the Defendant cannot renege from it after two years.

Counsel added that from the Defendant's witnesses, the Plaintiff fenced the entire property, out of which 35Yo was a wall fence, 600Z concrete fencing and 5Yo wooden poles. That the Plaintiffs gave the reason that they used wooden poles on the filled part of the land after levelling because it would give the desired height as the concrete poles were short, and that it was on a small percentage of the land. Counsel pointed out that the Defendant's witnesses all confirmed that the playground was levelled, therefore that the black soil was for planting grass. Also from the addendum, it implies that the Defendant had introduced new terms of grading the marram road and building a gate house, which terms the Plaintiff was already working on because it was imposed on them. Therefore, that all the alleged breaches were watered down bv the addendum.

In addition to the submissions, I have looked at the evidence presented to this Court by the parties. All the Defendant's witnesses gave evidence in relation to the

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fencing, and pictures were tendered in to show the state of the fence. Although some said the fencing work was complete, others said it was not or that it was not done properly. Also, one thing to note is that the Plaintiffs used three different kinds of fencing, concrete wall fence in some parts, chain link with concrete poles in others and chain link with wooden poles in the smallest percentage. Whereas the Defendant argues that the wooden poles are weak, the Plaintiff s witness explained that the wooden poles were only used along the side of the playground where the land had been filled with soft soil and that the concrete poles would not be long enough to give the desired heights. In my opinion, this is satisfactory explanation, besides, the agreement only mentioned chain link fence without specifying the type ofpoles to be used.

Evidence was also given including pictures as to the state of painting work on the buildings. DW2 an Engineer with the Defendant said he went to the property to carry out renovation works and that they painted and worked on the altemative access route. In cross examination, just like the other witnesses, he stated that the playground was levelled, although it had heaps of black soils. Therefore, it is apparent that the playground had been levelled as agreed, and that the heaps of black soils had been placed there as an added advantage for planting grass, which I think was a plus, beyond what the parties had agreed upon.

Although the buildings were not fully painted, the Defendant made no mention of it in the addendum signed one year after, in 201 5, in which they agreed to send the balance to the Plaintiff. What stands out in this agreement is that under clause 3 of the first part on page 67 of the PTB, the Defendant did not mention anlthing to do with poor painting or unpainted buildings or the unlevelled playground which they now allege as a breach, instead, they specifically mentioned that the fencing had

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been completed and that he was in the process of completing to grade the altemative access route.

Apart from the Defendant coming up with a new condition to tarmac the altemative access route instead of the marram which the Plaintiffs seem to have fulfilled, there is no evidence that the Plaintiffs breached their obligation in grading that road. To me, according to the addendum, that was the only pending obligation together with building the gate house, which was not originally agreed upon, which were unfinished by 2015 when the balance was to be paid. These were done, therefore, I find no breach on the part ofthe Plaintiff, and therefore the Defendant was not justified in withholding the UGX 200,000,000/ for alleged unfinished work.

In addition, the renovations accrued out by the Defendant, according to the evidence of DW2, was done two years after vacant possession was handed to the Defendant. The Defendant had police officers in occupation of the premises, and therefore that could be treated as routine repairs. The Plaintiffs were not in breach of the contracts in issue and even if they were, for fencing and painting, the Defendant had ignored it when they agreed to pay them.

## Issue Two: What remedies are available to the parties?

on the remedies available to the parties, the Plaintiffs prayed that the Defendant be ordered to pay the UGX 200,000,000/ which was illegally deducted, and UGX 538,000,000/ wrongfully deducted as withholding tax. They also prayed for the award of exemplary and general damages as this was a deserving case as the Defendants refused to pay them, as well as interest at court rate and costs of the sui1.

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### a Refund of UGX 200,000,000/

As was earlier found, the Defendant acted erroneously in deducting the UGX 200,000,000/ on allegations that the Plaintiffhad unfinished obligations under rhe contract.

5,61 (l) Contracts lcl provides that, "a party who suffers breach of contract is entitled to compensation for the /oss ". Further, in Barclays Bank of Uganda Ltd ^v Bakojja Civil Suit 53 of 201 I , it was held that

"the only compensation for non-payment of debt is payment of debt."

In the premises, the Defendant is ordered to pay the said UGX 200,000,000/ to the Plaintiffs.

# b. Refund of the UGX 538,000,000/ deducted as withholding tax.

Having proved their case that the Defendant had agreed to cater for all taxes incidental to this transaction, withholding tax being no exception, the Plaintiff is entitled to a refund of the money which was illegally deducted fiom them. Therefore, in light of5.61 (l) Contracts Act and Barclays Bank of lJganda Ltd ^v Bakojjo (supra), the Defendant is ordered to refund the sum of UGX 538,000,000/ deducted for withholding tax in breach of their agreement.

#### Exemplary and general damages. c.

The law on exemplary damages is that they are awarded where there has been an oppressive, arbitrary or unconstitutional action by the servants of the government; or where the defendant's actions were calculated to make profit or where some law for the time being in force authorises the award of exemplary damages (See Rookes V Barnard 1964 All ER 347).

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In this case the Defendant, Uganda Police Force, is a govemment institution and therefore they qualiff as a servant of the govemment. The conduct of failing to pay the entire contract sum and withholding part of the money for alleged breach of contract was oppressive to the Plaintiffs who had fulfilled their obligations. Therefore, the Defendant is ordered to pay to the Plaintiffs UGX 30,000,000/ in exemplary damages.

The award of the general damages on the other hand, is a discretion of court, arising from the direct, natural and probable consequence of the defendant's act or omission in breach of the contract (see ugando Commercial Bank v Deo Kigozi [20021 E. A 293, and James Fredrick Nsubuga v. Afiorney General, High Court Civil Suit No. l3 of 1993).

In this case, the Plaintiffs testified that they were inconvenienced by delay in payment of monies due and owing to them to date as a result of the actions of the defendant's seryants. I agree with the Plaintiff that he was inconvenienced by the actions of the Uganda Police Force because the servants of the said institution held onto monies due to Plaintiff for close to eight years now for no sound reason yet the same could have been put it to better use. I therefore find it appropriate to award general damages of UGX 10,000,000/.

## d. Interest at commercial rate

counsel for the Plaintiff prayed for interest at commercial rate and he cited the case of Milly Mosembe V Sugarcane Co-operation of lJganda, Lugazi and onother sCCA No. I of 2000 where it held that for commercial ventures, the offending party should always pay interest at commercial. The award of interest us provided for under Section 26 of the civil procedure Act cap 21. However, in

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exercise of Court discretion, I award interest on the damages at court rate of 6%o from the date ofjudgement till payment in full

## e. Costs of the suit.

5.27 (2) of the Civil Procedure lcl, provides that "...costs of any action, cause or matter shall follow the event unless court for good reason orders otherwise". Since the Plaintiffs are the successful party here, I see no just cause to deny them costs. Consequently, costs of the suit are awarded to the Plaintiffs.

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HON. LADY. IUSTICE ANNA B. MUGENYI DATED ):+..).1"a".s A