Court name
Commercial Court of Uganda
Judgment date
23 June 2011

Liberty Construction Co Ltd & Anor v Centenary Bank Ltd (Miscellaneous Application-2011/1) [2011] UGCommC 48 (23 June 2011);

Cite this case
[2011] UGCommC 48
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
[COMMERCIAL DIVISION]
MISCELLANEOUS APPLICATION NO 1 OF 2011


1.      

LIBERTY CONSTRUCTION COMPANY LTD}………AP PLICANT/PLAINTIFF
2.       DR DANIEL ONEN KAITAITA}
                                                               versus
CENTENARY BANK LTD }……………… RESPONDENTS/DEFENDANTS



BEFORE HONOURABLE MR JUSTICE CHRISTOPHER MADRAMA

RULING
The applicants chamber summons was initially brought under order 41 rules 2 and 9 of the Civil Procedure Rules and section 98 of the Civil Procedure Act for a temporary injunction pending the hearing of the main suit. In the course of the proceedings the applicant abandoned orders sought in prayers 1 and 2 of the chamber summons. The orders sought which survived are (c) and (d) of the chamber summons to the effect that:
•        
The first respondent does release to the applicant its excavator, CAT 320B, pending the hearing and determination of the main suit.
•         The costs of this application are provided for.
Secondly, the grounds of the chamber summons which have survived the withdrawal of the suit against the second respondent are as follows:
1.      
The applicant entered in to an arrangement with the first respondent, whereby the first respondent took over the responsibility to complete the contract the applicant had earlier entered into with the government of Uganda for the construction of Bushenyi Aquaculture Research Centre and;
2.       The first respondent has also refused to release the applicants excavator
3.       The applicant has now filed a suit, to compel the respondent’s honour their obligations to the applicant.
4.       The applicant will suffer enormous and/or irreparable loss if the respondents continue to deprive it of funds and/or if the first respondent is allowed to withdraw and appropriate the same to himself, and if the excavator is not released.
5.       It is in the interest of justice that the order prayed for be granted.
The application is supported by the affidavit of Edmund Mabiro the Managing Director of the applicant. As far as the remainder of the applicants application is concerned, reference can be made to paragraph 20 of the affidavit of Edmund Mabiro dated 23rd of December 2010 and to quote:
“20.      Meanwhile, on 17 December 2010, the first respondent having neglected/refused to deliver the excavator in his possession to the applicants premises at Kampala has undertaken, and police in Bushenyi having insisted that I must go there in person to receive the excavator, I drove from Kamuli, hired a lowbed truck and went to Bushenyi to recover the excavator, but was I prevented from doing so by the first respondent with police assistance."
21.      The applicant has now herewith filed a suit against the respondents seeking, inter alia Augusta compared with the respondents to release the funds as agreed and the first respondent to release the excavator.
22.      I am apprehensive that if the fourth respondent is allowed to withdraw the funds, the applicant will have no way of recovering the same. In the meantime, if the funds remain on the account pending determination of the suit, while the debt with DFCU continues to accumulate interest, the latter bank would be forced to foreclose and liquidate the securities we gave, and in any event, the applicant would suffer enormous and/or irreparable loss. The applicant is also suffering loss by not putting the excavator to use.
23.     
Consequently, I very believe that it is in the interest of justice and will mitigate losses if the orders sought are granted.
24.      I swear this affidavit in support of an application for release of funds and property, and/or for a temporary injunction."
The first respondent filed an affidavit in reply which affidavit was sworn on 15 February 2011. As far as the remainder of the chamber summons is concerned, the first respondents reply starts at paragraph 16 which avers that: "it was also agreed that all equipment at the Bushenyi site including an excavator would remain for use at the site till the conclusion of the Bushenyi ARDC at no charge to me. I was to provide for security, maintenance and eventual demobilisation at the end of project." The document referred to in the affidavit is annexure “DOK I” and is dated 5 October 2010. Paragraph 7 thereof provides: "For purposes of facilitating execution of other works the excavator shall remain at Bushenyi ARDC site and used at no charge to Dr Daniel Kaitaita. Nonetheless Dr Daniel Kaitaita shall be responsible for its maintenance, security and demobilisation from site to Kampala after use. It goes on to provide in paragraph 8 thereof: "completion and demobilisation from Bushenyi ARDC project shall be the responsibility of Dr Daniel K; whereas completion and demobilisation of Kasolwe AGRC Project shall be the responsibility of Edmund Mabiro."
The affidavit of Edmund Mabiro dated 12th of April 2011 avers in paragraphs 14 and 15 thereof as follows:
14.      That upon the signing of the proceeds sharing agreement, I told the first respondent that I needed some time to receive funds from DFCU, from which the 88,531,262/= was to be paid back, in his characteristic manner, he raised a fracas demanding immediate payment or, in the alternative a form of security and it was on the basis that, on his own specific demand, the first respondent was given excavator UAK 413X and all instruments of title thereto as security for the payment on 5 October 2010, the very day of signing the agreement.
15.      That contrary to what is stated in paragraph 16 of the affidavit in reply; the agreement between the parties did not state that all equipment at Bushenyi site would remain at the site. The fact that since the conclusion of the agreement and his receipt of Uganda shillings 88,531,262/= which he admits, he has totally failed to raise the resources to perform the underlying contract to completion and not activities are going on at the site and, in the meantime, the applicants excavator is lying idle at the site. It is my strong contention that whilst the dishonoured his obligations under the proceeds sharing agreement, he lost the right to continue to hold on gratis to the applicants property indefinitely, while subjecting the applicant versus thereon.
On 26 May Dr Daniel filed an affidavit entitled an affidavit in sur joinder whose signature had been scanned and is dated 10th of May 2011. The same was struck out by consent of the parties because the signature thereon had been scanned.
Edmund Mabiro swore a supplementary affidavit dated 30th of May 2011. In the affidavit he avers that on 12 April he filed an affidavit in rejoinder that subsequently received the documents which show beyond doubt that as far as the Ministry of Agriculture, Animal Industry and Fisheries is concerned Dr Daniel had fully performed the contract for construction of Bushenyi Aquaculture Research and Development Centre to the satisfaction of the said ministry. Paragraph 4 of this affidavit attaches the relevant documents to that effect. In paragraph 5 he avers that after making enquiries in the Ministry he established that the claimant of the final certificate attached to this affidavit had been paid. In paragraph 7 he avers that the performance of the contract had for all intents and purposes come to an end.
Again on 1 June 2011 Dr Daniel K swore another affidavit entitled "affidavit in reply to supplementary affidavit". In paragraph 3 thereof he avers as follows:
(a)     
The excavator in my possession at the Bushenyi ARDC site is registration number UAL 494 B.
(b)      The same was handed to me under the proceeds sharing agreement dated fifth of October 2010.
(c)      In terms of the said agreement, I am entitled to use the said excavator at the site until after use.
(d)      Works are ongoing at the said site. The excavator is in good working condition, and in use at the said site.
In paragraph 8 thereof he avers that under the terms of the guarantee referred to in annexure "A" to the supplementary affidavit, the contractor is liable to maintain the works and correct any defects in fulfillment of the contract during the defects liability period which expires on 25th of September, 2011. In paragraph 9 thereof he avers:
"I know that the excavator is still needed at this site. Maintenance of the drainage system, the plants, dams and reservoirs can only be done by use of the excavator."
Paragraph 10:
"
In a further reply to paragraphs 4, 5, 6, 7, and 10, I know that in terms of clause 55 of the contract at the agreement for the Bushenyi ARDC, competition of the works is to be signified by the client issuing a certificate of completion upon the expiry of the defects liability period. The said certificate is yet to be issued. Page 23 of the said contract document is attached."
As far as the main suit is concerned, the plaintiffs claim in the main suit inter alia is for an order to the defendants to pay shillings 141,334,582/- and for the first defendant to release to the plaintiff its excavator CAT 320 B and costs.
Benson Tusasirwe appeared for the applicant/plaintiff while Andrew Kabongo appeared for the first respondent. The plaintiff withdrew the suit against the second Respondent.
Submissions of the Applicants Counsel
Plaintiff/Applicants counsel submitted that the application is brought under section 98 of the CPA and seeks an order that the respondent releases excavator Model CAT 320B pending hearing and determination of the main suit.
In 2007 the applicant Liberty Construction entered into a contract with Government of Uganda to construct an Aquaculture Research Centre at Bushenyi. Subsequently, it entered into an arrangement with the respondent who took over responsibility of construction on behalf of applicant. The contract had been partially performed and he was to complete.
It was an assignment. Under that arrangement set out under annexure “A” and “B:” to the affidavit the respondent took possession of an excavator the subject of this application. Annex A paragraph 7 provided that
the excavator was to remain at the site to be used by the respondent to perform the contract. The respondent was to be responsible for maintenance, security and demobilisation to Kampala after use. In due course the parties disagreed. The contract had provided that the first payment was to be remitted to the applicant 141,334,582 shillings. When he received he reneged on his obligation that is when this application was filed.
Paragraph 20 of affidavit shows no work
s were on going at the site and the excavator was idle. Application sought to bar withdrawal of money from bank and recover exactor from respondent. While it was doing no work, the applicant was suffering loses.
Counsel submitted that the continued detention of the excavator was unnecessary and wasteful as there was evidence to show that the entire contract has been performed to completion. Counsel referred to annexure “A” to the supplementary affidavit which was a request for payment by the Respondent of 40,101,221/- and also showing that it was the final payment under the contract. It was payment in respect of a final certificate. Referring to annexure “B” from the project engineer to PS Ministry of Agriculture, annexure “C” which is the final certificate, annexure “D” of 28th March 2011 showing approval of final payment of 40 million, counsel concluded that the contract had been completed way back on 15th of December 2010. It was fully performed and payments under it made. There was therefore no reason for the first respondent to hold on to the excavator. Last but not least counsel submitted that the defects liability period run from December 2010 for 3 months and it has long expired.
He prayed for an order releasing the excavator pending hearing of main suit and costs of the application.
Reply by Respondent’s Counsel
In reply Counsel for the Respondent Andrew Kabongo opposed the application.
Firstly he submitted that the procedure adopted for the application was incompetent in that it was brought under section 98 of the Civil Procedure Act. He contended that where there is no procedure it should be by notice of motion. He contended that the prayers sought by the applicant could not be lumped up in one application.
Secondly the orders sought in the application are also sought in the main suit. He submitted that this required the hearing of evidence to prove the allegations and that this evidence should not be adduced by affidavit and there was a need to cross examine the authors of the documents.
Thirdly counsel contended that the applicant is jumping from one ground to another to the prejudice of the defendant. That he has altered his application to the prejudice of the defendant. He further contended that initially the grounds in the application was that a sum of shillings 88 million had been paid to the respondent.
Referring to paragraph 7 of the affidavit in support, the applicants position was that the respondent was to release the excavator as soon as the money is received but the affidavit in rejoinder of 12th April changes the story. Initially the contention was that the excavator would be released upon completion of the contract. The applicant now maintains that the excavator is idle and should be returned on that ground. Finally the applicant’s story changes again in the supplementary affidavit that work was completed. He submitted that this went to the root of the application and was a clear abuse of court process. That the inconsistencies which went to the root of the applicants application and should not be condoned.
Without prejudice counsel argued that even on the merits, the application has no merit in that the applicant has admitted that the excavator was to be on site until completion of works. He referred to paragraphs 4 and 5 of the agreement and annexure “B” to affidavit in support of the application. Annexure “A” to the affidavit in support itself and paragraph 7 shows that the respondent was to demobilise after use.
As far as the documents purportedly showing that works are completed is concerned, counsel contended that the averments are hearsay as the applicant is not the author of documents. Moreover the applicant is not a party to documents. Even the documents themselves for instance the first annexure gives a guarantee to secure sums advanced to respondent after completion. There are pending obligations.
Secondly counsel contended that the annexure relied on by the applicant showing that works were completed is annexure “D” to the supplementary affidavit. They show that works are supervised by MAM Works and are still being supervised by named authorities. He contended that this contradicts the assertion that works were completed.
Counsel further contended that courts rarely order attachments before judgment. He submitted that this remedy is under order 40 analogously. For court to order a party to release a subject matter order 40 gives the standard. Finally he submitted that there was no urgency. The defects liability period expires in 28th September 2011 under paragraph 5 of affidavit in reply to the supplementary affidavit. The Respondent is required to maintain the works and this requires the use of the excavator. These are fish ponds, dams, reservoirs to be maintained during this period.
Counsel contended that the applicant claims irreparable loss, but the alleged loss can be atoned for by way of damages. He prayed that the application is struck out or dismissed with costs.
Rejoinder of Applicant
In rejoinder counsel Tusasirwe for the applicant submitted that the respondent’s submissions show that there is no substantive reason why the excavator should not be released. He contended that his colleague was clutching at straws and on formal provisions of law. However the applicant’s application is about justice and common sense. He wondered whether there was a good reason why an expensive piece of machinery should be packed in Bushenyi for months lying idle. Initially the application sought an injunction under order 41. Order 41 rule 1 and 2 also covers situation to prevent waste which this application is about.
Counsel submitted that the common sense approach is to look at waste and whether this cannot be prevented? He contended that the issue is not about whether the right section was cited. Release of the excavator was an order sought ancillary to other orders of injunction.
As far as the similarity to main suit is concerned, the rationale is to prevent delay to wait for final suit. The argument that it can be atoned for by damages is that the court can avoid that problem as it is does not make business sense.
As far as shifting grounds is concerned counsel maintained that the affidavits were not contradictory but supplementary to each other. Once respondent has been paid he had no reason to hold to the excavator as security. At that time no works were on site and the argument was right. Finally new correspondences show that the contract is fully performed. The respondent has no reason to keep the excavator.
In the affidavit in reply, counsel submitted that the respondent does not deny that the works are completed but only raises technical grounds. As far as the hearsay allegation is concerned, all documents show that whoever completed works did so on behalf of Liberty Construction. Even annexure “D”, shows that Liberty Construction Ltd is the Principal and correspondence was between its agents and the ministry. Most importantly counsel contended that there is documentary proof that the contract is fully performed.
In response to the argument that the excavator had to be kept until after the defects liability period, this was not true in light of documents handed to them. Annexure “A” to the affidavit in support and also annexure “B” paragraph 4 thereof show that it is about completion of pending earthworks. Paragraph 5 talks of returning after execution of the works, i.e. works. He reiterated his prayers that the application is allowed with costs.
Ruling
I have carefully considered the submissions of the parties, the pleadings and documentary evidence attached to the affidavits. It is not in dispute that the plaintiff in the pending main suit seeks relief by way of release of the excavator. At the same time, the plaintiff seeks the same remedy in this application.
The chamber summons was brought for a temporary injunction. Counsel for the applicant submitted that it is brought under section 98 of the Civil Procedure Act for an order that the excavator be released. The gist of the respondents opposition to the application is that the relief sought is the same as that in the main suit. He further submitted that an application under section 98 of the Civil Procedure Act had to be by notice of motion and not chamber summons. According to him, there was no urgency to grant this application and in any case any injury caused could be atoned for by way of compensation or an award of damages. There is further contention between the parties as to whether the contract was completed and therefore whether there was a need for the Respondent to keep the excavator. I am required to peruse the documents attached by the applicant in the supplementary affidavits which show that the final certificate of completion of works had been issued. On the strength of these documents the applicant submits that there was no need to keep the excavator at the contract site lying idle.
Both counsel apart from reference to section 98 of the
Civil Procedure Act and order 41 and 40 of the Civil Procedure Rules did not furnish court with authorities in support or opposition of the order sought for release of the excavator. The applicants counsel requested me to apply a common sense and business approach. He submitted that it was uneconomical for the excavator to lie idle where the applicant could utilise it elsewhere. He contended that the court can prevent this economic waste by making an order for release of the excavator. He further submitted that the excavator was needed for earth moving during construction but was not required in maintenance.
I do not need to dwell much on the protracted submissions of the parties. The positive order sought is properly termed a mandatory injunction. The question is whether this is a proper case in which a mandatory injunction should be granted.
According to Philip Pettit in his textbook on Equity and the Law of Trusts fourth edition there is no distinction in principle between granting a prohibitory and a mandatory injunction. Every injunction requires to be granted with care and caution, but it is not more needed in one case than the other (See page 401). The court will not hesitate to grant a mandatory injunction in appropriate cases where there is breach of covenant. He likened a mandatory injunction to an order for specific performance. The same principles for grant of a prohibitory injunction such as the restraint of the defendant respondent from doing something equally apply to a positive order for the respondent to do something.
The applicants application was filed under order 41 rules 2 and 9 of the Civil Procedure Rules. Order 41 rule 2 (1) reads as follows:
“in any suit for restraining the defendant from committing a breach of contract or other injury of any kind, whether compensation is claimed in the suit or not, the plaintiff may, at any time after commencement of the suit, and either before or after judgment, apply to the court for a temporary injunction to restrain the defendant from committing breach of contract or injury complained of, or any injury of a like arising out of the same contract or relating to the same property right.
Order 41 (2) (1) covers applications filed to restrain the defendant from committing a breach of contract or causing other injury of any kind whether compensation is claimed in the suit or not. There has to be a suit to restrain the defendant from committing breach of contract or other injury of any kind before an application for an injunction is brought under this rule. This is reflected in the plaint.
In cases of breach of contract or other injury, injunctions may be granted to prevent breach of contract or threatened injury or loss. In Montgomery vs. Montgomery [1964] ALL E.R. 22 an injunction was granted to a wife to prevent her husband from molesting her and having access to her flat. Under the Judicature Act Cap 13 Section 37 (1) thereof the High Court may grant an order of mandamus or an injunction or appoint a receiver by an interlocutory order in all cases in which it appears to be just or convenient to do so. Injunctive orders may be unconditional or on such terms as the High Court thinks just.
In the case of Margaret, Duchess of Argyll (feme Sole) v Duke of Argyll and others [1965] 1 ALL E.R. 611 between pages 634 – 636, the Court noted that the foundation for the grant of an injunction is the protection of a legal right. The above authorities are persuasive as far as legal doctrine is concerned. The applicants legal right may be protected by the prevention of breach of contract or other injury of any kind as stipulated under order 41 rule (2) (1) of the Civil Procedure Rules. The jurisdiction under the Judicature Act on whether to grant an injunction is exercised to support a legal right.
In the case of Giella v Cassman Brown And Company Ltd [1973] EA 358 the Court of Appeal at Kampala held that before an injunction is granted, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction would normally not be granted unless the applicant might otherwise suffer irreparable injury, which would not be adequately compensated by an award of damages and thirdly, if the court is in doubt, it will decide an application on the balance of convenience. The purpose of an injunction is to maintain the status quo until the dispute to be investigated in the suit can be finally disposed of per Noormohamed Janmohamed vs. Kassamali Virji Madhani [1963] 1 EACA 8)
In the case of the Despina Pontikos [1975] 1 EA 38 (HCK) the Court of Appeal at Nairobi (comprised of Sir Dermot Sheridan J; Spry Ag P, Law Ag VP and Mustafa JA) decided a matter involving an application for a mandatory injunction. Per Sir Dermot Sheridan at page 48 on grounds to issue an interlocutory mandatory injunction:
I am informed that the value of the cargo is 251,000 and is going up. It is obviously in everyone’s interest that it should be released as soon as possible. There can be no defence to this claim and the defendant does not claim that there is save that it objects to the vessel being under arrest – an exercise by the plaintiffs of their legal rights. In Bailey (Malta) v. Bailey, [1963] 1 Lloyd’s Rep. 595 it was held that this interlocutory relief can be granted even if it is in substance for the whole relief claimed in the action. Woodford v. Smith, [1970] 1 All E.R. 1091 is to the same effect. There is no question of the defendant having any lien on the cargo. The freight was prepaid. From 2 May to 24 October the plaintiffs have been making unremitting efforts to get their cargo from the vessel. Why should they divest themselves of an asset which might become available for execution? I am unable to accept the submission of Mr. Talianos, for the defendant, that by terminating the contract on 11 July the plaintiffs lost all their rights. The defendant denies that the contract has been terminated. It says that it has brought the ship to Mombasa to discharge the cargo under clause 5 of the bills of lading. Even if the contract has been terminated by deviation the defendant, as ship-owner, is still carrying the cargo as a common carrier. I grant the first plaintiffs’ application (No. 2) with costs.
This authority shows that a mandatory injunction can be granted even it resolves the main prayer in the suit. Where the right of the applicant that needs to be protected is obvious and the respondent has no possible defence to it, a mandatory injunction has been granted. The question for me to decide is whether there is a possible defence to the application to release the excavator to the applicant in terms of the contractual obligations of the parties and the convenience of releasing the same to the applicant. The legal basis that this court has to consider is the agreement between the parties dated 5th of October 2010. This agreement is attached as annexure “DOK I to the affidavit in reply of the Respondent and specifically to paragraph 12 of the affidavit of Dr. Daniel Kaitaita sworn to on the 15th of February 2011. Paragraph 7 of the relevant “Proceeds Sharing Agreement provides and I quote:
“For purposes of facilitating execution of earthworks the excavator shall remain at Bushenyi ARDC site and used at no charge to Dr. Daniel Kaitaita. Nonetheless Dr. Daniel Kaitaita shall be responsible for its maintenance, security and demobilization from its site to Kampala after use”.
The Respondent dwelt a lot on the use of the words “after use”. After use” stated in the clause simply means after execution of earthworks”. This would be during the construction phase of the project. The supplementary affidavit of Edmund Mabiro annexure “B” is a letter from the PS Ministry of Works to the Ministry of Agriculture, Animal Industry and Fisheries dated 28th March 2011. It states at paragraph 1 thereof that “for my record, and yours, Messrs Liberty Construction Company Ltd completed the whole of the referred works on the 15th of December 2010.” The letter acknowledges that the works were completed. This obviously includes the earthworks. The Respondents counsel submitted that the defects liability period was still running. A defects liability period only means that in case, something goes wrong with the works, the contractor is liable to remedy the same. The affidavit in reply to supplementary affidavit of Dr. Daniel Kaitaita dated 1st of June 2011 attached parts of the relevant contract. Firstly paragraph 56 thereof requires the employer to take over the site within 7 days of the issuance of a certificate of completion.
The project manager is require
d to issue a certificate stipulating corrections to be made to any defects within 56 days after receiving the contractors account. The total amount due and payable has already been supplied. The 56 days if counted from 15th December 2010 or from 28th of March 2011 have already run out.
In my humble opinion the respondents has not shown a need for further earthworks as
may be requested by the project manager which requests should have been issued by now. In the circumstances to keep an excavator idle without any work is a loss to the applicant company. Secondly earthworks are deemed completed by the 15th of December 2010 and the excavators use had ceased by that time. Weighing all the circumstances, this is a proper case for the issuance of a mandatory injunction. The Respondent is directed to hand over the excavator to the applicant. Under clause 7 of the proceeds sharing agreement, it is his responsibility and therefore cost to demobilize and return the excavator to Kampala.
The application of the applicant is granted
with costs and the respondent is directed to return the excavator to the applicant at Kampala.
 
Ruling delivered this 24th day of June 2011.


Hon. Mr. Justice Christopher Madrama.

Ruling delivered in the presence of:
Tusasirwe for the Applicant,
Andrew Kabongo for the Respondent,
Ojambo Makoha Court,

Hon. Mr. Justice Christopher Madrama