[2024] UGCA 238

## THE REPUBLIC OF UGANDA

## IN THE COI,'RT OF APPEAL OF UGANDA AT KAMPALA

lCoram: Egonda-Ntende, Mulgagonja & Luswata, JJA. I

## CTVIL APPEAL NO. 0116 OF 2019

lArising from Original High Court (Commercial Court Dlalslon) Ctail Suit No.8O9 of 2O74 at Kampalal

# ZZIMWE ENTERPRISES, HARDWARES & CONSTRUCTION LTD :: : : : : : :: : : : : : : : :: : : : : : : APPELLANT \rERSUS ATTORNEY GENERAL RESPONDENT lAn appeal fron the Judgment of the High Court of Uganda (Mugengi, J., dated 25tn October,2O78.l

## JUDGMENT OF HON. LADY JUSTICE EVA K. LUSWATA JA.

## Introduction and blief background

- 1l This is an appeal from the judgement ald orders of Mugenyi, J., delivered on 25th October,2OlS uide Civil Suit No.809 of 2014 in the High Court of Uganda, Commercial Division at Kampala. - 2l The background to this appeal as established from the record is that the Appellant brought a claim against the Respondent for general, punitive and exemplary damages for loss of income arising out of detinue of the Appellant's road construction equipment, an order for interest and costs of the suit. On 6th November 2008, a contract was awarded to the Appellant by the defendant for the rehabilitation of the Kalapata - Piire Road as part of the Karamoja Roads Development Programme (KRDP)

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under the Ministry of Finance Planning and Economic Development (MoFPED) and under supervision of the Ministry of Works and Transport. There was mobilization of machinery and trucks by the Appellant to the construction site in Karamoja, Kabong District ald work commenced on Sth January 2009. The contract period expired on 4th December 2009, but due to slow progress, it was extended two times to 4th October 2010. The Respondent made a decision to terminate the contract on 22"d November 2010, claiming slow work progress, by the Appellant' Citing its reliance on a term in the contract, the Respondent also retained the Appellant's machinery and trucks and declined to release them to the Appellant on demand who then filed the suit. The suit was decided against the Appellant and it lodged this appeal on the following grounds of appeal, that:

- i. The learned trial Judge erred in law and' fact tn holding that the plainttff s clolm of non'perJormance being as a result of force maJeure and insurgencg in the area utere false and unbeliertable. - ii. The learned trial Judge erred ln law and fact in holdtng that the defendant was Justified in retalning the plaintiffs' construction equipment. - iii. The learned trlal Judge erred ln laut ond ln fact in hotding that the defendant u.tas not ltable for special damages for toss of incotne arislng out of detlnue. - iu. The learned trtat Judge erred in laut and. in fact in not autarding general, punitive, aggrantated dnd exemPlary damages.

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# ^a The learned trlal Jud.ge erred in law qnd tn fact in not autarding interest to the appellant.

3l The Appellant then prayed for orders that the appeal be allowed, the decision of the High Court, Commercial Division be set aside, the Appellant be awarded special damages for loss of income arising out of detinue, and in addition, general, punitive, aggravated and exemplar5r damages and finally, the Appellant be awarded costs of this appeal and in the High Court.

# 1s Representation

- 4l When the matter carne up for hearing on 276 November 2023, the Appellant was represented by Mr. Edmund Kyeyune and Mr. Albert Byamugisha, while the Respondent was represented by Hilary Nathan Ebila a State Attorney. The Court agreed to adopt their respective written submissions as the legal arguments in the appeal. I have considered those with the authorities filled and a-lso sourced by the Court to decide the appeal. - 25 5] In their submissions, Respondent's counsel contested what appeared to be an attempt by the Appellant to introduce new evidence into the appeal. I note that, that matter was considered and then resolved by this Court in Zzirnwe Enterprises, Hardwares & Construction Limited vs Attorney General, Civil Application No. 353 of 2O2O. It was dismissed because this Court considered some evidence sought to be adduced as not being relevant to the appeal, and also determined that other evidence could have been reasonably obtained by the Appellant

⁵ before filing the suit or before it was decided. I consider that matter closed, and sha,ll now turn to resolution of the grounds raised by the Appellant in their submissions.

### Ground one

¹⁰ Submissions for the Apoellant

- 6] Counsel commenced their submissions by referring to the duty of this Court as a first appellate court which is to re-evaluate the evidence on record and subject the same to fresh scrutiny before an independent conclusion. In support of the above legal position, counsel cited Kifamunte Henry vs Uganda Criminal Appeal No. lOlL997 and Seller & Another vs Associated Motor Boat Company Ltd & Others [1968]1 EA 123. - 20 7l In regard to ground one, counsel referred to Paragraph 4(c) of the amended plaint where force majeure was pleaded. Counsel then referred to the evidence of PWl who testified that progress of contract works was impended by insecurity and adverse weather, the latter in the form of torrential rains and the resultant impassable slippery roads due to flooding. Counsel argued that the appellant laboured to notify the respondent through its Project Manager of those unpredicted elements, as evidenced in various communications at pages 416, 423 and 424 of the record of appeal. 25 - ³⁰ 8f Counsel then explained that force majeure is one of the implied terms of a contract under English contract law and therefore,

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- ⁵ needs no inclusion in a contract before a party can invoke it. For guidance, counsel referred to Taylor vs Caldwell [1861-73] ALLER Rep 24 which was followed in Appleby vs Myers [1867] LR2 CP 65 1. Counsel also referred to Section 2 of the Contracts Act, which provides that English Contract law shall apply in Uganda, and that English Contract law allows for contracts to be vitiated by force majeure. Counsel contended then that the trial Judge tailed to evaluate the facts of force Majeure that were raised by the Appellant and acknowledged by the Respondent in numerous correspondences above. He argued in particular that the extension of time to perform the contract on 7th December, 2009 and 17tt February, 2O7O was borne out of issues pertaining to force majeure and insurgency in the area. 10 15 - 9l In conclusion, counsel submitted that the trial Judge erred in law and in fact in holding that the Appellant's claim of nonperformance as a result of force majeure and insurgency in the area were false and unbelievable.

## Submissions for the Respondent

10f In response, Mr. Ebila submitted that force majeure was not provided for in the contract. That even so, in Clause 32.1 of the General Conditions (GCC), provision was made for the Appellant as contractor to warn the Project Manager at the earliest opportunity of any event or circumstances that could adversely affect the quality of work or delay the execution of works. He submitted that the law allows contracting parties to opt out of the 25 30

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- ⁵ doctrine of force majeure or limit its application to very specific circumstalces. In this case, that was done under Clause 32.1. Counsel relied on the case of Bank of Uganda vs Banco Arabe Espanol, Supreme Court Civil Appeal No. 23 of 2OOO were that principle was emphasized. - 10 - 111 Mr. Ebila drew court's attention to page 632 of the record where the trial Judge found that the Appellant failed to respond to a letter dated 17th June 2009 and other correspondence, raising concerns of delayed works. She also observed that the Appellant did not communicate to the employer any oacts of God" (force majeure" ) or insurgency in the area that they claimed had hindered their progress in the execution of the contract or could have frustrated execution of the works on time. Further that the only time the issue of insecurity was raised, was in a meeting held on 7th December, 2OO9 after the expiry of the contract period. Further that the Respondent's resident engineer expressed concern that the site agent had not communicated to him any issues affecting the Appellant's progress, nor did they issue aly early warning on matters that appeared to be the employer's risks. Additionally, that the security had been beefed up as agreed in the meeting that was held on 13th October 2OO9 and therefore, insecurity was no longer a matter of concern on site. 15 20 - 12] Counset continued that in a meeting held on 17th February 2010 that was attended by the Appellant's agents, their poor performance was again discussed after it was raised that the Appellant had by then only carried out 25o/o of the works in the 30

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- ⁵ 620/o, elapsed revised contract period and was 31 weeks behind schedule. The Appellant did not dispute the report of the Project Manager and indicated the steps it had taken as a strateS/, to turn the project around. - 13| Respondent's counsel opined that the facts of force majeure and insecurity/insurgency were an afterthought and the Appellant who was behind in executing the contract works even after being given countless opportunities to turn around the project, could not raise them. Counsel added that even if impediments such as cattle rustlers and weather patterns eisted, these could only make it difficult but not impossible for the Appellant to perform the contract. That in order for an obligor to claim force majeure, their performance of the contract must be actually impossible and not merely onerous. That if performarlce is still possible in spite of the obstacle, the obligor must fulfil their obligation at any cost. For guidance, counsel cited the case of Tsakiroglou & Co. versus Noblee & Thorl Gmbh 1L9621 AC 93. It was held there that ^a contract for the sale of Sudanese ground nuts to European buyers could not be frustrated by the closure of the Suez Canal, when the longer route of the Cape of Good Hope was available. 10 15 20 25

141 In conclusion, counsel prayed that this honourable court upholds the findings of the learned trial Judge that the Appellant's claim that it could not execute the works as agreed, due to force majeure and insurgency, was so farfetched and not supported by any concrete evidence.

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#### **Analysis** $\mathsf{S}$

- As a first appellate court our duty is cut out in the law and as 151 established by numerous authorities. I adopt the finding of the Supreme Court in Fr. Narsensio Begumisa and 3 Ors vs Eric **Tibebaga CA No. 17 of 2002,** where it was held that: - "The legal obligation of the $1^st$ appellate court to reappraise 10 the evidence is founded in the common law rather than rules of procedure. It is a well settled principle that on a $1^{st}$ appeal, the parties are entitled to obtain from the appeal court its own decision on issues of fact as well as of law. Although in case of conflicting evidence, the appeal court has to make due 15 allowance for the fact that it has neither seen nor heard the witnesses."

I will be guided by the above principles in determining the grounds of appeal.

16] Force Majeure was pleaded in paragraph 4(c) of the plaint which reads as follows:

> "The plaintiff began carrying out the works for which it was contracted by the defendant albeit serious impediments namely adverse weather and insurgency of cattle rustlers all acts of force majeure on the part of the plaintiff and initial poor survey on the part of the defendant thus having a slow progress in the works as *per the prescribed timetable"....*

17] Force Majeure can be explained as an unforeseen event or events, that can be neither anticipated nor controlled which interrupt the

$6$ $\mu$ performance of a contract rendering it burdensome or impossible $\mathsf{S}$ to fulfil. See for example **Taylor v Caldwell** (supra); also see Black's Law Dictionary.¹ It is a limited defence that could exonerate the successful party who raises it from from liability under the contract or its further performance. However, its application is limited. In Ryde v Bushell and Another, [1967] **E. A. 817**, the Court of Appeal for East Africa dealt with the doctrine. In that case, the plaintiff sued for damages occasioned to his coffee plantation as a result of the defendant's act by directing the flow of flood water into the plantation. The defendant responded that heavy rains, which had corrosive effects, 15 occasioned the damage. The Court rejected the defence. Newbold, P., stated that:

> "... But before the plea can succeed it must be established that it was an act of God which prevented performance or which destroyed the results of performance. Nothing can be said to be an act of God unless it is an occurrence due exclusively to natural causes of so extraordinary a nature that it could not reasonably have been forseen and the results of which occurrence could not have been avoided by any action which *should reasonably have been taken by the person who seeks* to avoid liability by reason of the occurrence. It is for the person setting up the plea of act of God to prove the various *facts which constitute an act of God."*

18] This passage states the law, in my view, as to what may amount 30 to an act of God or mutatis mutandis, *force majeure*, as well as the party who has the burden to prove its occurrence. However, force

$\stackrel{9}{4}$

^&lt;sup>1</sup> Black's Law Dictionary 10^th Ed at 761

- ⁵ majeure includes more than acts of God. The terms also include acts of people (e.g. riots, strikes and wars also termed as uis major2. I have therefore considered the evidence to explain nonperformance of the contract by the Appellant to determine whether the defence was available to it. - 10 - 15 ¹⁹¹PW1 Mr. Paul Kasagga the Appellant's financial director was presented as the principal witness. He testified in his witness statement that works commenced in spite of the serious impediments to wit; adverse weather and insurgency of cattle rustlers, all acts of force majeure on the part of the Appellant. He also testihed of an initial poor survey by the Respondent that resulted into slow work progress not in tandem with the prescribed time table of works. He added that as a result of the above, the contract was terminated by the respondent on advise of M/s HP Gauff Ingenieure GmbH & Co. KG-JBG, the Project Manager, in its letter dated 2nd December, 2010. That after termination of the contract, the Respondent retained the Appeltant's construction equipment and materials and remains in illegal possession of it. Further that all equipment which was in good condition has now been vandalized beyond repair which has occasioned loss to the Appellant. In cross examination, PWl, testified that the contract was to run for 11 months from the commencement date of 6tn November 2008, but the Appellant was given two extensions, the first which required a variation of the contract and the second, which run for five months' PWl 25 30 20 - ²Black's law Dictionary 10'h Ed (supra)

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- ⁵ conceded that that even after those two extensions, the Appellant did not complete the works as expected and as a result, the Respondent terminated the contract. - 2Ol ln his testimony PWI raised several factors he considered to be force majeure that made the contract impossible to perform. Those included, adverse weather, insecurity, insurgency by cattle rustlers, theft of the Appellant's property and a poor survey by the Respondent during the preparatory stage of the contract. He considered all those factors collectively contributed to a delay in works and that he raised those issues with the Project Manager. However, he was unable to provide proof of that fact on request stating that he had that evidence in his office. 10 15

21] Conversely, in the Respondent's defence, DWI Eng. Emmanuel Mugamba testified in his evidence in chief that despite severa-l warnings from the Employer, the Appellant's performance throughout the project was slow and dismal. That on 4th December 2OO9 when the contract period ended, the Appellant posted completion at only 22o/o, whic}:, prompted extensions at its request. That even with persistent warnings, work did not improve. That owing to the Appellant's persistent breach of its contractual obligations, the Respondent made a decision to terminate the contract and invoke clause GCC 60.1 and GCC 61.1 of the contract. The decision to terminate the contract was communicated to the Supervisor and Appellant on 28th June 2010 and 22"d November 2010, respectively. Also in his cross examination, DW2 Eng. Alex Onen, repeated that there was slow

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- ⁵ progress on the project. He conceded that although there was a problem of security within Karamoja, that alone would not prevent the Appellant from executing the works because the UPDF was in place to offer security at all times. DWl confirmed knowledge of a shooting incident at the contract site and admitted that following the shooting incident, it became very difficult to retain stalf and re-organise the security agents who had become over dependent on the Appellant for their day to day survival. He also admitted that soldiers drained and carried away 8000 litres of diesel that had been left on site. 10 - 221 Even then, both DWl and DW2 maintained that the decision to terminate the contract was lawful and justified owing to the Appellant's persistent breach of contractual obligations occasioned by its lack of performance. - 23] I agree with Appellant's counsel that generally speaking, the acts leading to force majeure are events beyond any contracting party's control, which could not have been foreseen at the time the contract was entered into, or prevented by the affected party' In Globe Spinning Mills Nigeria PLC versus Reliance Textile Industries Ltd (20171 LPELR-41433(CA)' the parties entered into a contractual relationship whereby the Appellant agreed to sell to the Respondent specified amounts of cotton yarn' In the course of the contractual relationship, a dispute arose between the parties and it was subjected to arbitration. The arbitration was decided in favour of the Appellant and the Respondent appealed 25 30

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on grounds that the arbitrators and trial court neglected to consider certain evidence supporting a claim of force majeure.

nA common clause in contracts uthich prouides that one or both parties can cancel a contract or be excused from either part or complete performance of the contract on the oca nrence o.f a certain specilied event or events begond the parties' control. Such euent(s) mag include; ua1 strike, iot, crime, or an euent described by the legal term act of God (hurricane, Jlood, earthquake, uolcanic eruption, etc.), preuents one or both parties from fulfilling their obligations under the contrqct. Force majeure is generally intended to include occturrences beyond the reasonable control of a partg, and therefore would not couer: (1) Ang result of the negligence or malfeasance of a partg, uthich has a mateially aduerse effect on the abilitg of such partg to perform its obligations. (2) Ang result of the

The Court of Appeal of Nigeria held that:

241 Generally speaking, many contractual duties are strict. However, the principles of strict liability to perform may be modified by the terms of contract for example by a force majeure clause. In this case, the contract had none. Appellant's counsel citing authority strongly argued that under English Contract Law, the doctrine is always an implied term in contracts, and need not be included in a contract, for one to invoke it. That may be so, but as highlighted above, the party seeking to invoke the doctrine must furnish proof of such events and their effect on performance of the contract. That follows the general principle that the party seeking to be discharged from contractual performance, and relying on the terms of the agreement, carries the burden of proving the facts

usual and nafitral consequences of erternal forces"

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## ⁵ necessary for such discharge. See for example: PJ Van der Zijden Wildhandel NV v Tucker & Cross Ltd: 1975 2 Lloyd's Rep. 24O.

251 In her decision, after critically evaluating the evidence, the Judge was not satisfied that the events advanced as force majeure, prevented the Appellant from executing the works by no fault of its own. She noted that the reason advanced to terminate the contract was because the Appellant halted work for 28 days without authorisation, ald did not protest the termination letter until 2014 when it filed its notice of intention to sue the Respondent. The question will then be whether the impugned acts were unforeseen and beyond the control of the Appellant.

²⁶¹The main events raised as force a maieure appea-r in the minutes of the Management Meeting No.1 held between the parties on 7tt' December 2009. The Appellant as contractor was present and raised three events as impediments to their progress.

- i) Four members of their staff and one for the Project Manager were fatally shot resulting into a mass exodus of staff from the site. After that shooting, it became very difficult to retain staff and reorganize the security agents who had become ever dependant on the Appetlant for their survival. - i) Their fuel amounting to 8000 litres left on site were drained and taken away by the soldiers. - iii) Lack of water on site.

²⁷¹lt appears all three concerrls were fully addressed in the same meeting. Security at the site had prior to that meeting been

- 5 15 improved by interventions of Brigadier General Kankiriho. Save for that intervention, the Appellant was requested to submit a revised security plan to address intensilication of unforeseen security matters at the time of bidding. Additionally, the Appellant agreed to urgently address the issue of lack of water and to use their discretion in providing assistance to the UPDF in their operations. Significantly, during that meeting, the parties agreed that insecurity was no longer a matter of concern on site. It was also confirmed in the same meeting that the Appellant was ready to continue with the contract with site personal, equipment and materials. With such uncontested facts in place. The Appellant would have no basis to raise force a majeure. - 281 Additionally, as raised for the Respondent, there is nothing to show that the Appellant reported any of those events to the project manager, whether in any routine correspondence or even at the time the contract was terminated. Conversely, there is ample evidence to indicate that over a considerable period of time, the Respondent's agents raised concern about the slow progress of work. I noted that there were clear requests for improvement in several letters dated22"a September 2009, 13th October 2OO9 and 8th January 2010 from the Project Manager. Similar complaints were raised by the Resident Engineer in letters, dated lTtt June 2009, Bth January 2010, as well as one undated letter. Also during the meeting held on lTtt February 2010, its Chairperson raised concerns of poor performance by the Appellant.

- 291 Without any improvement from the Appellant, a decision was made to terminate the contract. That decision was effected after a comprehensive evaluation of the project. In particular, on 13th May, 2010 with the European Union (EU), Nationa-l Audit Office (NAO) and the supervisor to discuss the project, it was agreed that the Appellant was incapable of completing the works by 31st December 20 10. The convenors arrived at that decision after it was confirmed that the Appellant had in a period of 16 months completed only 3.2 km against an agreed 44 km which was considered 'dismal performance". Therefore, as found by the Judge, non-performance would be as a result of the Appellant's slow progress and not acts of prce majeure as alleged' 10 5 - 30] Suffice to note, the Respondent did not specifically deny the claim that they carried out what turned out to be a poor initial survey' That could also result into slow progress. However, the Appellant raised no complaint when the survey was presented to them' They perhaps had an option to consider it a fundamental breach of the contract, but chose to ca-rry on with the works. They would be estopped from raising it as force majeure for it was a technical event well within their knowledge at the point they executed the contract. - 31] I would agree then with Respondent's counsel that the facts of force majeure were raised as an a-fterthought in a bid to explain the appellant's dismal performance of the contract. In conclusion I would hold that, there were no acts of force majeure tlrat

prevented the Appellant from performing their contractual obligations as agreed in the contract for the procurement of works. 5

321 I therefore find no merit in ground one of the appeal and it fails

# Ground two

# 10 Whether the learned trial Ju&e erred in law and fact in holding that the defendant was iustified in retaining the plaintiffs construction eouipment.

# Submissions for the Appellant

- 15 331 Citing Section 62 of the Contracts Act, Appellant's counsel submitted that compensation must not exceed the amount named or the penalty stipulated. Counsel in addition referred to Clause GCC 60.1 of the contract which made provision for paS,.rnents that can be claimed by the contractor in the event that the contract is terminated because of a fundamental breach. - 20

34] In that regard, counsel specifically referred to the testimony of DWl that upon reconciliation of the project account, it was confirmed that the contractor was paid Ugx 556,293,6 13 which was 5O7o of the advance payment. That is, the amount released in the Interim Payment Certificate No.4, was Ugx 396,633,801, and the total amount retained as retention money was Ugx 126, 385,954. DW1 testified further that when the above three points were considered, the final certificate had a value of UGX - 453,455,236 as the amount due and owing from the contractor/Appellant to Government. Counsel continued that in two letters dated 4tt, May 201 1 and 2"a August 20 1 1 from MoFPED

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- ⁵ to M/s Tropical Bank Limited, the bank released payment towards the advance payment guarantee to MoFPED. That the respondent recovered Ugx 565,293,6 13 from Tropical Bank Limited on 3rd August 2011 which was in excess of the sum of Ugx 453,455,236 which was due. Counsel contended then that the Respondent received a sum of Ugx 1 I 1,838,377 /= ovet and above what it was entitled. 10 - 351 Counsel in addition referred to Clause 61.1 of the GCC which provided that all materia-ls and works on site were deemed to be the property of the employer in the event the contract was terminated. For guidance, he cited the cases of St Aubyn (LMf vs Attorney General (1951) 2 ALLER 473 and Geoffrey Gatete and Another vs William Kyobe l2OO7lVol.1, 158 at 164. In the later decision, Mulenga, JSC, (RIP) held that the word "deemed" is commonly used in legislation to create legal or statutory fiction' It is used for the purpose of assuming the existence of a fact that in reality does not exist. Counsel concluded that the materials on site, temporar5r works and works were in fact not the property of the Respondent as the emPloYer. 15 20 - ³⁶¹Appellant's counsel also referred to clause 15 -2 of the International Federation of Consulting Engineering Rules (FIDC) which outline the steps to be taken by the employer on termination of a contract. He argued that the clause offers an explanation for retention of equipment, plant and materials and that the reason given under Clause 6 1 . 1, was for va-luation of the same which was never done. Counsel added that having recovered

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⁵ all monies due to them, the Respondent wrongfully retained the Appellant's constn:ction equipment. They noted that the wording of Clause 61. 1 that was used to retain the Appellant's equipment, does not of itself give the Respondent an outright mandate to retain it as other avenues were available to the Respondent to recover any monies that were due to it. To buttress their arguments, counsel cited Article 26 of the Constitution and the Supreme Court decision in Uganda National Roads Authority v Irumba Asumani & Anor, Supreme Court CA No.2 of 2Ot4 which is to the effect that prior, and adequate compensation must be paid in the event of compulsory acquisition of property. In their view, there was no justification for retention of the Appellant's equipment without compensation. 10 15

# Submissions for the Respondent

37] In response, Respondent's counsel, invited us to critically examine the facts on the contract performance by the appellant, the reasons for termination, and the consequences that flowed from termination due to the Appellant's default. Counsel submitted that it was an admitted fact in the joint scheduling memorandum that the contract was terminated for breach of contract by the Appellant. Counsel emphasized that once the Appellant conceded to being in breach, and there being no contest to the termination, the Employer had a right to invoke Clause 61.1 of the GCC. Counsel referred to the evidence of DW1 who testified that the equipment on site was retained by Government on site in accordance with Clause 61.1 of the contract. 20 25 30

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- 15 20 38] Mr. Ebila argued that Clause 61.1 is an agreed contractual term which the Appellant's representatives were aware of when signing the contract. That once the Appellant defaulted and the contract was terminated, all the materials on site, plant and equipment would be property of the employer. He emphasised that the wording of the contract was clear and required an ordinary interpretation. For guidance, counsel cited the case of Hon Theodore Ssekikubo & 4 Others v The AG & 4 Others' Constitutional Appeal No. I of 2OO5. He contested the Appellant's interpretation of that clause that the purpose of retention of the equipment was for recovery of the advance payment guarantee. In his view, had it been the intention of the parties to subject Clause 61.1 of the contract to the recovery of the advance payment guarantee, they would have stated so, in no uncertain terms. 10 - 39] Mr. Ebila continued that a contract is an agreement giving rise to obligations which are enforced or recognised by law. That according to the principle of freedom of contract, the contracting parties enter into an agreement freely and willingly, and such contract is enforceable as between the parties. That a party who fails to carry out its obligations, should have the contract enforced against it. For guidance he referred to the case of Printing & Numerical Registering Company versus Sampson (1875) Lr Eq 462 at 465 that emphasized the doctrine of freedom of contract. In his view, Clause 61.1 of the contract was a term freely agreed upon by the parties and thus binding and enforceable against the

- ⁵ Appellant. That the Appetlant who did not plead coercion, undue influence, fraud, misrepresentation or mistake would be held liable once it defaulted on its obligations, and therefore, the trial Judge cannot be faulted for implementing the terms of the agreement freely agreed upon by both parties. - 4Ol Counsel contested reliance on the FIDC Rules. He explained that the Federation prepares standard form contracts for construction, plan and design industries, and the parties freely decide to adopt those contracts. In this case, the parties did not enter into any FIDIC contracts and as such Clause 6.1 of the contract should apply. For the same reason, counsel discounted the submissions that valuation of the Respondent's machinery was a key issue to be considered. Citing the decision of Sharif Osman v Hajii Haruna Mulangira, SC Civil Appeal No 38O of 1995, he prayed that Court gives effect to the clear intentions of the parties as gathered from the agreement. 10 15 20

Counsel equally discounted reference to Article 26(21 of the Constitution as applicable to the case. That contrary to what was submitted for the Appellant, this was a case of strict application of an agreed term in a contract, but not compulsory acquisition of the Appellant's property, as claimed.

# Appellant's submission's in reioinder

411 In rejoinder, Appellant's counsel submitted that the reason given by the Respondent for retaining the Appellant's equipment was as 30

!r stated in Paragraph 5(b) of the written statement of defence wherein it was stated that:

> "In exeantion of tLte aboue stated contract, the plaintiJf gathered all machinery, plants and commenced uork, upon termination of the contract all uarious construction equipment is still being held on site the ualue is get to be detennined bg the ministry of Works and Transport".

That to date, the Respondent has neither concluded the contract of works, or issued the valuation report, nor furnished the Appellant with a final certificate as is the norm by the set terms and conditions in the General Conditions of Contract (GCC).

421 Counsel again relied on Article 26(21 of the Constitution and submitted that notwithstanding Clause 61. f GCC, the Respondent cannot circumvent the conditions set out in the Constitution and the reasoning given in Uganda National Roads Authority v trumba Asumani & Peter Magellah S. C. C. A No- 2 of 2u^14, He argued that the remedy for breach of contract is to be found in damages that have been quantified' In their view, it was erroneous for the respondent to submit that the Appellant was to forfeit all its machinery under Clause 61. 1.

## Analvsis

⁴³¹The Appellant faults the trial Judge for holding that the Respondent was justified in retaining the Appellant's construction equipment a-fter terminating the contract.

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- ⁵ 441 At the trial, each side presented two witness to prove and contest that fact. In his examination in chief, PW1 Paul Kasagga, as Managing Director of the Appellant, testified that the Respondent retained and to date holds the construction equipment and material on site, but without any justifiable cause. That at the time the equipment was retained, it was in good working condition but has since been wasted. That in a bid to mitigate its loss, the officers of the Appellant tried to engage the Respondent to allow them carry away the already vandalised construction equipment, but the Respondent rejected that request. 10 - 15

451 Conversely, DW2, Eng, Alex Onen testified that his understanding of Claus 61.1 of the contract, is that if the contract is terminated due to the contractor's default, as was the case, all materials on site, including plant, equipment temporar5r works and works, were to be deemed the property of the employer. It was for that reason that the Project Manager retained on site all equipment from the date of termination of the contract, which he deemed by then belonged to the Government. DW2 added that if the Appellant were to pay back what it had received in advance as a guarantee, the Respondent is prepared to return the equipment to them. That never happened because the agents of the Appellant abandoned the site before recovering that advance payment.

46] In her judgment the trial Judge considered the issue of the retained equipment. She held in part as follows:

> " ... th.e plaintffi hauing confirmed it did not dispute the termination of the contract which it admitted it failed to

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execute, and relying on non-existent provisions of the contract to justify its non- performance among other things, cannot fault the employer for implementing terms of the agreement between the parties that were freely agreed upon by them. $... All$ in all, I am of the firm view that the defendant was justified to retain the plaintiff's construction equipment in compliance with the contract signed by the respective parties."

In short, the Judge found that the Respondent's actions were done in compliance with the agreement to withhold the construction equipment. I shall now re-evaluate the evidence to confirm whether that was a correct decision.

47] It was an agreed fact that the contract was terminated due to the non-performance of the Appellant. The controversy appears to be each party's interpretation of the termination clauses of the agreement. I will reproduce them for clarity:

#### Termination

- 59.1 The Employer or the Contractor may terminate the contract if the other party causes a fundamental breach of contract. - *If the Contract is terminated, the Contractor shall stop work* 59.5 25 immediately, make the site safe and secure, and leave the *site as soon as reasonably possible.*

## 6.0 Payment upon termination

If the Contract is terminated because of a fundamental breach 60.1 of Contract by the Contractor, the Project Manager shall issue a certificate for the value of the work done and materials ordered less advance payments received up to the date of the issue of the certificate and less the percentage to apply to the value of the work not completed, as indicated in the SCC. Additional Liquidated Damages shall not apply. If the total amount due to the Employer exceeds any payment due to the

$4\mu$ K

$\mathsf{S}$

Contractor, the difference shall be a debt payable to the Emploger.

# 6. l Property

- 6.1.1 AII martials on the site, plant, equipmen| temporary works, and utorks stwll be deemed to be the property of the employer if the contract is terminated due to the contractors default." - a8l By a letter dated 22"a November, 2010, the Respondent through the Permanent Secretary (PS), Ministry of Works ald Transport informed the Appellant that the contract was terminated for breach of contract. The PS explained that the Respondent was proceeding to invoke Clause GCC 60.1 of the contract. DWl Emmanuel Winyi Mugamba's testimony (in paragraphs 20-25 of his witness statement was an attempt to show that the Respondent complied with the termination clause. - a9l The Respondent substantially relied only on Clause 6.1 to hold back all construction equipment belonging to the Appellant after the contract between the parties was terminated. In his testimony, DW2 stated that once the contract was terminated, they invoked Clause 61.1 and confiscated the Appellant's equipment, with instructions to the Appellant not to remove it because henceforth, it belonged to the Govemment. Respondent's counsel considered Clause 61.1 a contractual term, with a clear and unambiguous meaning, which was understood and agreed upon by both parties. Conversely, counsel for the Appellant submitted that the reason advanced by the Respondent to retain the equipment under Clause 61.1 of the contract, was for their valuation which was actually never done. That the purpose of the valuation was either 20 25 30

- to offset the value of the equipment from the amounts owed by the $\mathsf{S}$ Appellant to the Respondent or, to compensate the Appellant for its equipment. In their view, the wording of Clause 61.1 that was used to retain the equipment does not by itself give the Respondent an outright mandate to retain the Appellant's for there were other possible interpretations, equipment, 10 available. - 50] Counsel continued that a reconciliation of costs was done at termination. It was revealed that the Appellant as contractor was given an advance payment of UGX 556,293,613 in Interim 15 Payment Certificate No. 4, with an actual payment of UGX 396,633,801 and UGX 126,385,954 as retention money. That out of that calculation, a final certificate of negative UGX 453,455,236 was found to be as due and owing from the Appellant to the 20 Government. - 51] An explanation is offered in **DEX 10** dated 7^th March 2011 in which the figures in the "Final Certificate" are given. The Project Manager explained to the PS Ministry of Works and Transport in part that:

"... When the three points above are considered, the Final *Certificate gets a value of negative UGX453,455,236 and if* Retention Money of UGX111,667,652 is withheld and the Employer recovers the balance of Advance Payment of UGX 556,293,613 by liquidating the Advance Payment Guarantee and then waives the 10% deduction made pursuant to the provisions of sub-clause 60.1 of the GCC, then the contractor will owe UGX 130,726,991. This amount can be mitigated by

$\frac{26}{4}$

| 5 | the ualue of the contractor's equipment held on site. We<br>forutard this proposal to gou for consideration. | | |---|--------------------------------------------------------------------------------------------------------------|--| | | Yours faithfullg, | | | | | |

H. P. Gauff lngenieure GmbH 11 & Co. KG JBG-Consulting Engineers D. W Mugamba Project Manager

It was clear that upon termination, after all reconciliations were made, the Appellant owed the Respondent a sum of UGX 13O,726,99L. It was suggested that the outstanding amount could be mitigated by the value of the Appellant's equipment held on site. 15

521 The issue of mitigation was only a suggestion and it would not remove the express provisions in clause GCC 60.1 that if the total amount due to the Employer exceeds any palrment due to the Contractor, the difference shalt be a debt payable to the Employer. It is expected then that the Appellant owed the Respondent in that sum and had to pay it. The Appellants' own calculation at page 7 of their counsel's submissions seems to suggest that it is in fact the Respondent who was overpaid by a sum of UGX 111,838'377 because their recovery of the paSrment guarantee from the Tropical Bank Limited, reflected such an over payrnent. If that was the case, the Appellants'strates/ should have been to plead and then prove that sum. 20 25 30

- 10 531 I note that their effort to make that claim failed. In Civil Application No. 353 of 2O2O, the Appellant attempted to adduce evidence of two letters dated 4th May 2011 and 2"d August 2011 from the MoFPED to M/s Tropical Bank, the gist of which was the issue of the alleged excess payment. That was new evidence not interrogated in the High Court and rejected by this Court when the application was dismissed on 9th February 2023. Even so, there is nothing in the agreement to suggest that the sum should have been offset by valuing and then ctaiming part or the whole of the equipment held on site, after the contract was terminated. - 20 25 541 With regard to clause 61.1, Respondent's counsel invited the Court to apply its literal meaning. In his view, upon breach by the Appellant as contractor, all materials and equipment were to remain on site as property of the Respondent. Counsel cited the case ofEseza Catherine Byakika vs NSSF, CA Civil Appeal No. L93 of 2OL7. In that case, the Appellant sought to obtain a proper interpretation of a conhdentiality clause in her emplo5rment contract. The Justices held that where a term in any contract is disputed before any Court, it is for the Court to give the most appropriate construction to the words used in the contract. The Court makes such construction while applying well known principles of contracts specifically, the principle that the ordinary meaning of the words used in the contracts should be applied. - 30 55] The provisions of Clauses 59.5 and 61'1 are clear. Upon termination of the contract, the contractor was to stop work and leave the site. In the same event, all materials on site, plant,

- ⁵ equipment, temporar5r works are deemed the property of the Employer. Those terms did not extend to explain why the equipment would be retained. It was not contested that the Respondent issued a Certificate in compliance with clause 60.1. Their investigations indicated that it is in fact the Appellant who was indebted to the Respondent. Even then, that would have no bearing on the terms on clause 61.1 which does not provide that the value of the equipment should offset any debts to mitigate loss. I have found nothing elsewhere in the contract or the numerous correspondence between the parties to suggest that the construction equipment would be retained for the purpose of its valuation as submitted by the Appellant's counsel. There was nothing in the agreement or the GCC for the procurement of works, to support the evidence of PW1 on page 507 of the record that the equipment was being held for purposes of completing the remaining works, or that it was to be returned to the Appellant's agents. 10 20 - 561 For the reasons above, ground two also fails.

# zs Grounds three, four and five

## Analysis and decision of court

571 In grounds three, four and five, the Appellant faulted the trial Judge for declining to make an award in damages. It had in the amended plaint claimed special damages, general, punitive, aggravated and exemplar5r damages with interest for loss of the confiscated equipment, loss of revenue as none use, and

29 4,1-\t --

- ⁵ surveyor's fees. They in addition claimed interest and costs. In her judgment, the Judge found that the Appellant who had failed to prove their claim, was not entitled to any damages and the Respondent would for that reason pay no compensation for damaged equipment, or loss of income as claimed. I agree with the Judge that the Appellant failed to adduce evidence to support its claim on a balance of probabilities. It was a correct decision then that no damages of any category should be paid. I find no reason to interfere with the findings of the trial Judge in regard to the claim for damages and interest. - 581 Therefore, I find no reason to consider the submissions on those three grounds and will make no frnding on them, and they should fail. - ²⁰ 591 In conclusion, I found no merit in all five grounds of appeal. The appeal is accordingly dismissed. The Respondent is awarded the costs of the appeal and the order for costs in the High Court is also upheld.

+t^ ²⁵ Dated at Kampala this day of ..... N. O-# ²⁰²⁴ K. Luswata

³⁰ STICE OF APPEAL

## THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

lCoram: Egonda-Ntende, Mulyagonja & Luswata, JJA)

### Civil Appeal No.0116 of 2019

(Arisingfrom Original High Court (Commercial Court Division) Civil Suit No. 809 of 2014 at Kampala)

#### BETWEEN

Zzimwe Enterprises, Hardware & Construction Ltd Appellant

### AND

Attomev General: Respondent

(On Appealfrom the judgment of the High Court of Uganda (Mugenyi, J., dated 25'h October 2018)

## JUDGMENT OF FREDRJCK EGONDA. NTENDE, JA

- t1l ^Ihave had the benefit of reading in draft the judgment of my sister, Luswata, JA. I agree with it and have nothing useful to add. - 12) As Mulyagonja, JA, also agrees, this appeal is dismissed with costs here and below.

kL" Dated, signed, and delivered at Kampala this \$day of uJ zozq

redrick E da-N nde

Justice of Appeal

#### THE REPUBLIC OF UGANDA

#### IN THE COURT O F APPEAL OF UGANDA AT KAMPALA

[*Coram: Egonda-Ntende, Mulyagonja & Luswata, JJA*]

#### CIVIL APPEAL NO. 0116 OF 2019

(Arising from Original High Court (Commercial Court Division) Civil Suit No.809 of 2014 at Kampala)

## ZZIMWE ENTERPRISES HARDWARE & CONSTRUCTION LTD ::::::::::::::::::::::::: APPELLANT

#### **VERSUS**

ATTORNEY GENERAL ::::::::::::::::::::::::::::::::::::

(An appeal from the judgment of the High Court of Uganda (Mugenyi, J., dated 25^th October, 2018.)

#### JUDGMENT OF IRENE MULYAGONJA, JA

I have had the benefit of reading, in draft, the judgment of my sister, Eva Kawuma Luswata, JA.

I agree with the analysis and the finding that the appeal had no merit and it ought to be dismissed with the orders that she has proposed.

Dated at Kampala this 30 day of August 2024.

Irene Mulyagonja JUSTICE OF APPEAL