Court name
Commercial Court of Uganda
Judgment date
17 May 2011

M/S Epsilon (U) Ltd. v Dr. Joseph Kibuyaga (Miscellaneous Application-2011/139) [2011] UGCommC 76 (17 May 2011);

Cite this case
[2011] UGCommC 76


THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
MISCELLANEOUS APPLICATION NO. 0139 OF 2011

[ARISING FROM CIVIL SUIT NO. 0084 OF 2011]


                  M/S EPSILON (U) LTD::::::::::::::::::::::::::: PLAINTIFF/APPLICANT

 


VERSUS
 

DR. JOSEPH KIBUYAGA:::::::::::::::::::::DEFENDANT/RESPONDENT


BEFORE: HON. LADY JUSTICE IRENE MULYAGONJA KAKOOZA


RULING
The applicant brought this application under the provisions of Order 41 rule 1 CPR. She sought for an order for a temporary injunction to restrain the respondent/his servants and/or agents and/or any person acting on his behalf from removing the plaintiff’s employees from the property or interfering with the plaintiff’s possession thereof, or alienating or selling the property comprised in FRV 401 Folio 25, Plots 1300 and FRV 402 Folio 1 Plot 1301, both at Lubowa.
The grounds of the application were that the applicant had executed works on the said property but had not received full payment; that the applicant had filed a suit with a high probability of success; and that the applicant will suffer irreparable damage unless a temporary injunction was issued to restrain the respondent from removing a caveat on the land meant to preserve the status quo, pending the determination of the main suit.
The application was supported by the affidavit of Moses Kitaka, a director in the applicant company deposed on 16/03/2011, and a supplementary affidavit in support deposed by the same Moses Kitaka on 15/04/2011. The respondent filed an affidavit in opposition deposed by Fred Gadala, an advocate, on 14/04/2011.
In his affidavit, Moses Kitaka deposed that on 22/03/2006 the applicant entered into a contract with the respondent to construct Lindsay Cottages on land mentioned above at Lubowa. He attached a copy of the agreement to his affidavit as Annexure
“A”. He further averred that the applicant received shs. 445m during construction but due to time and variations costs rose to shs. 705,393,628.54. That the respondent commissioned a surveyor to value the construction works and he produced a report showing that the total works were valued at shs. 705,393,628.58. The valuation report was Annexure “B” to his affidavit. Further that the applicant requested for the balance of shs. 252,500,000 from the respondent but to no avail. Respondent then lodged a caveat on the property known as Plot 1300, as Instrument No. 410229 of 16/03/2009.
further averred by Mr. Kitaka that the respondent was in the process of selling off and transferring the subject property and he intended to evict the applicant’s employees therefrom and take possession thereof without first paying the amount outstanding. That the respondent was a resident of the United States of America and he had no other assets known to the applicant. That the sale and transfer of the suit property would result into irreparable loss to the applicant who had a container thereon with building materials including glass which would be wasted if not handled properly. He asserted that the main suit filed against the respondent has a high likelihood of success and the applicant would suffer irreparable loss if the application was not granted.
And in a supplementary affidavit in support, Mr. Kitaka averred that after the respondent failed to honour the valuation report that he commissioned, the applicant requested for its own valuation of the works from M/s Inter Property Group which he annexed to his affidavit as Annexure
“AM”. That the applicant had always restricted itself to the valuation report commissioned by the respondent and completely ignored that which they commissioned but his advocates informed him that the valuation that the applicant commissioned is also relevant to the resolution of the dispute. He further averred that since the filing of the suit in court and the subsequent grant of an interim order for an injunction was brought to the attention of the respondent, the respondent made efforts to remove the caveat lodged by applicants and complete the transfer of the land to another. Finally, that there was no doubt that the respondent intended to sell off the subject property before clearing the amounts claimed by the applicant.
In his affidavit in reply, Fred Gadala averred that the applicant was paid shs. 445,000,000/= in full and final settlement of the works per contract dated 22/03/2006. That the respondent therefore played his part regarding the contract between him and the applicant. That the applicant’s suit was premised on a document (the valuation report) that was neither signed by the author nor part of the agreement with the respondent because it did not comply with the terms of the agreement. Further that in his opinion as a lawyer, the applicant’s suit has no merit, was frivolous and vexatious and so the applicant was not entitled to an order for a temporary injunction.
At the hearing of the application, Mr. Kato Sekabanja for the applicant submitted that the respondent did not deny that he was trying to sell off the property and if he did, the applicant’s suit would be rendered academic because the respondent does not reside in Uganda and the only known property that he had here was the subject property. He argued that the respondent commissioned the valuation which resulted in a finding that the value of the works carried out by the applicant on the subject property was 705,393,628/= and as a result shs. 252,500,000/= remained outstanding after the respondent paid shs. 445m. That the applicant had a lien on the property as the contractor as she awaited resolution of the dispute. That a temporary injunction should be issued to restrain the respondent from disposing of the subject property. Mr. Sekabanja conceded that the applicants vacate the site within a reasonable time sufficient to enable them remove the balance of building materials but he maintained that the caveat registered against the property should be maintained until final disposal of the suit.
For the respondent Mr. Sempala argued that applicant had not shown that she had a prima facie case that had a probability of success because the document on which she based her suit, i.e. the valuation report attached to the affidavit in support as Annexure
“B” and said to have been commissioned by the respondent was not signed. That the suit could not be sustained on an instrument that was incomplete such as Annexure “B”. He further argued that the applicant did not have the authority, per agreement to commission a separate valuation report because that power was vested in the respondent according to Clause 15 thereof.
Mr. Sempala further argued that the applicant’s suit could not be sustained because the amount of shs. 445m paid to her was in full and final settlement of the contract. He relied on clause 15(c) of the agreement for the submission that the variations that were made by the applicant had been covered in the amount of shs. 445m which included an additional 15% of the contract price agreed upon in Clause 15 (c) thereof. He argued so because the initial figure agreed upon in the contract was shs. 398,395,000/= as stated in Clause 1 (a) of the contract but the respondent paid shs. 445m which was more than the agreed price.
Turning to the prayer to remain in possession of the property because of the vulnerability of the building materials, Mr. Sempala submitted that the applicant had no property on the premises except its equipment such as graders and mixers but not building materials. He went on to assert that all the building materials on site had been purchased by the respondent and the applicant had no right to them whatsoever. He relied on a schedule to the agreement between the parties which he said was not attached to the copy filed with this application for this submission.
Mr. Sempala further submitted that the applicant was not entitled to maintaining a caveat against the suit property because her claim against the respondent was not in respect of the title to the property but to a claim in money per contract. That such a claim did not entitle the applicant to a lien on the title to the property because the same effect could be achieved by securing attachment before judgment under the Civil Procedure Rules. He thus challenged the procedure employed by the applicant and submitted that the correct procedure in such a case would have been to obtain attachment before judgment. He concluded that the applicant had not shown that irreparable damage would be occasioned if the application is not granted and therefore the application should be dismissed.
The principles for which temporary and/or interlocutory injunctions are granted have been reiterated by the courts in a countless number of cases. The granting of a temporary injunction is an exercise of judicial discretion and the purpose for granting it is to preserve matters in status quo until the question to be investigated in the suit can be finally disposed of {Noor Mohammed Janmohamed v Kassamali Virji (1953) 20 E.A.CA 80}. It has long been established that the conditions for granting temporary injunctions are first that, the applicant must show a prima facie case with a probability of success {Geilla v Cassman Brown Co. Ltd [1973] E.A. 358}. Secondly, an injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury which would not adequately be compensated by an award of damages {Noor Mohammed Janmohamed v Kassamali Virji (supra)}. Thirdly, Where a court cannot make up its mind after considering the above criteria, the applicant must satisfy it that the balance of convenience lies in his or her favour {E.A. Industries v Trafords [1972] E.A. 420; E. L. T. Kiyimba-Kaggwa v. Haji Abdu Nasser Kasule, [1985] HCB 43}.
In his submissions for the applicant, Mr. Sekabanja abandoned the prayer for an order that the applicant’s employees be allowed to remain in possession of the suit property till the disposal of the suit in preference of an order that the applicant be given a reasonable time within which to vacate the premises. He reasoned that the applicant must be given ample time to remove its equipment and material because some of them are delicate and could be damaged if not removed carefully. Counsel for the respondent was not averse to this but he argued that the applicant does not have any materials at the site save for its equipment. He argued so because in his view all materials for the works were purchased by the respondent and any materials remaining after completion of the works should be left on site.
I carefully perused the contract between the parties which was attached to the affidavit in support as Annexure “A”. I did not have the benefit of perusing the schedule wherein Mr. Sempala said it was indicated that building materials would be purchased by the respondent and therefore any materials remaining after construction would stay on site being the property of the respondent. Although I did not have the benefit of perusing the schedule referred to by Mr. Sempala, the second recital in the contract between the parties provided that:
“… the contractor has prepared priced bills of quantities marked “B” for the said Turn Key Project showing the materials and amount required for carrying out the said work and it is ready and able to commence the works upon signature hereof.”
The initial contract sum was named as shs. 398,395,000/= to be paid in phases but the proportion of this amount assigned to the purchase of materials and the cost of labour appear not to have been specified. And in clause 1 (e) it was provided as follows:
“All materials, goods and workmanship shall so far as procurable be of the respective kinds and standards described in the specifications and Bills of Quantities.”
The provision in Clause 1 (e) could not have been the Employer’s obligation; it must have been that of the contractor. To me that meant the applicant procured the materials required for the project. The clause above would have been superfluous if that had not been the case. And Clause 1(e) was strengthened by Clause 15 (a) which too implied that the building materials to be used for the works would be purchased by the contractor for it provided for an increase in the contract sum agreed upon in the event that duties affected the value of materials and the price payable by the contractor. I also did not see any averments on behalf of the respondent that the contract was varied to enable the respondent purchase the materials outside the contract price. Neither was there a clause in the contract that the applicant would leave all building materials that she did not use for the works on site.
The facts above led me to no other conclusion than that within the contract price, the contractor was to purchase materials and pay for labour. The balance would be his profit. That being the case, I found no justification for the respondent’s claim that the applicant should leave the remainder of materials that they purchased for the project on site. I therefore find that the applicant is entitled to, and she is hereby allowed to remove the remainder of the materials and her equipment from the site within a period of 14 days from the date of this ruling. Applicant should hand over the site to an agent duly authorised in writing by the respondent to take possession thereof.
Going back to the issue whether an injunction is due to restrain the respondent from disposing of the subject property before disposal of the main suit, the respondent did not deny that he proposed to dispose of the subject property. There was also no doubt that efforts had been made to remove the caveat lodged by the applicant on Plot 1301 at Lubowa. This was evident from the letter of the Commissioner Land Registration to the applicant (Annexure
“CM” to the supplementary affidavit of Moses Kitaka dated 19/04/2011), wherein she gave notice that the caveat would be removed within 21 days of the date of service of the notice.
The respondent also did not deny the fact that he had no other known property within this jurisdiction as was asserted by the applicant. His defence to the claim was simply that he had paid all that was due. Counsel for the applicant argued that the applicant had a lien over the subject property until the dues claimed, when proved, would be paid. Mr. Sempala denied that this is the case and offered that this application should have come to court by way of attachment before judgment. He argued so because in his view, a temporary injunction granted under the provisions of Order 41 CPR relates to a right in the property which he submitted that the applicants do not have. He went on to submit that preventing the sale of the property might not be in the interests of the applicants because the respondent could have been selling off the property in a bid to pay off the amount due. That if the sale is stopped by court the applicants may become liable in damages. This was definitely in contradiction of the averments in the affidavit in reply. Given the conflicting positions taken by counsel, it became necessary to distinguish between the proprietary rights of the respondent, the remedy available under Order 40 rule 1 CPR and the lien over the property which the applicant sought to protect in this application.
The respondent is the registered proprietor of the subject property. He has his rights protected by the Registration of Titles Act (RTA). Under s.64 RTA his estate is paramount except in the case of fraud. But by virtue of the same provision, the registered proprietor holds the land or estate or interest in land “subject to such encumbrances as are notified on the folium of the Register Book constituted by the certificate of title, but absolutely free from all other encumbrances.” This means that unless an encumbrance is registered on the title it has no force. And the ordinary means of registering encumbrances that are not specifically provided for by the RTA is by lodgement of a caveat, as in the case where the court issues an injunction preventing the proprietor from dealing with the land in any way till a dispute over it is resolved. I therefore do not agree with the view expressed by counsel for the respondent that the lodgement of an injunction or caveat may attract damages if it is lawfully done.
The provisions of Order 40 rule 1 (a) and (b) which counsel for the respondent submitted should have applied to this situation specify the situations were arrest and attachment before judgment can be obtained. An order is due where a defendant with intent to delay the plaintiff, or to avoid any process of the court, or to obstruct or delay the execution of any decree that may be passed against him or her absconds or leaves the local limits of the court; or where he/she is about to abscond or leave the jurisdiction, or where he/she disposes of or removes property from the local limits of the jurisdiction. It also applies where the defendant is about to leave Uganda in circumstances affording reasonable probability that the plaintiff will or may thereby be obstructed or delayed from executing the decree. In such cases, the court may issue a warrant to arrest the defendant and bring him or her before the court to show cause why he should not furnish security for his or her appearance.
While it is true that the respondent is about to dispose of the property related to the dispute, and which is known to be his only property in Uganda, the respondent is no longer available so that he can be arrested. And though the property could be attached before judgment, the plaintiff/applicant preferred another remedy in equity, not what is provided for in Order 40 CPR. I say so because where there is an array of remedies, the litigant is at liberty to opt into one or the other. As a contractor, the applicant has a lien against the respondent’s property based on the works carried out thereon for which he claims a balance is due. Black’s Law Dictionary (9
th Edition) defines a “lien” as a legal right or interest that a creditor has in another’s property, lasting usually until a debt or duty that it secures is satisfied. It is also there explained that typically the creditor does not take possession of the property on which the lien has been obtained.
On the other hand, a common law lien is described as one that is granted by the common law rather than by statute, equity or contract. It is the right of one person to retain possession of property belonging to another until certain demands of the possessing party are met. This type of lien cannot exist without possession, and such is the workman’s and builder’s lien under common law. The builder’s lien is not often exercised in Uganda and may sound novel to one who has not taken time to research it.
In some jurisdictions, there is specific legislation that provides for the builder’s lien to ensure that contractors are not cheated. For example in most jurisdictions in Canada there are Builders’ Lien or Construction Lien Laws; Statutes also exist in many States of the USA. In the Republic of South Africa the builders’ lien is regulated by the common law. A builder has a right of retention over the building or structure (site) or portion thereof that he has constructed, enhanced or repaired to secure payment of the contract price, by means of retaining physical control of the site, until such time as the claim has been satisfied or the contractor has been provided with appropriate alternative security in respect of its claim.
In the United Kingdom the principle is recognised under the doctrines of equity, and in International Finance Corporation v. DSNL Offshore Limited & Others [2005] EWHC 1844 (Comm), Colman, J. recognized the principle and it was stated broadly in a reproduction of the decision of the High Court of Australia in Hewett v. Court [1981-2] 149 CLR 639, where Deane J, (of the majority) sought to identify certain key attributes of a transaction which would be capable of giving rise to an equitable lien as follows:-
It is adequate for present purposes that I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. … They are: (i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it (ii) that that property (or arguably property including that property … be specifically identified and appropriated to the performance of the contract … and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriate property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged. …”
In the instant case the applicant claims to have incurred an expense on the works contracted for with the respondent of up to the tune of shs. 259,100,000/=. She claims that amount in the main suit, with interest. She is still in possession of the property in pursuit of that claim, and I would say, rightly so. Because the experience in other jurisdictions where such liens are protected only by the common law, is that the departure from the premises without other security would constitute a waiver of the builders’ lien. It is therefore appropriate for the applicant to seek the protection of an injunction, especially given the view of the Commissioner for Land Registration that applicant has no right to lodge a caveat on the property.
Mr. Sempala for the respondent argued that the applicant seeks to recover more money on the basis of a document that was not signed (Annexure
“A” to the affidavit in support). He argued further that the applicant was not entitled to commission her own valuation of the works because that right was reposed in the respondent only, per contract. He sought to rely on Clause 15 of the contract and in particular to 15 (c) wherein he stated that a contingency of 15% of the contract price was allowed for that head. Clause 15 (a) (on which 15 (c) was premised) provided for fluctuations and contingencies as follows:-
“The Contract Sum shall be deemed to have been calculated to include all duties on materials to be incorporated in the finished Works. If at any time during the period of the Contract the duties shall be varied and in the opinion of the Employer this shall affect the cost to the Contract of such materials, then the Employer shall either himself ascertain or shall instruct a Quantity Surveyor to ascertain the net difference in cost of such materials. Any amount from time to time so ascertained shall be added to or deducted from the Contract Sum as the case may be. In (sic) the purposes of this Clause “duties” shall include all customs and excise charges, tariffs, taxes and other duties imposed by statutory or other authority in the country where the Works are being carried out.”
Clause 15 (c ) then provided that in consideration of the factors above a contingency of 15% would be allowed. That could not by any stretch of the imagination mean that variations in the design and works would be provide for under that head. On the contrary, deviations and alterations or variations were provided for in clause 2 (d); and if any disagreement occurred over them, the parties would resort to Clause 16 of the contract. I therefore was not persuaded by the argument that because the respondent paid 15% more of the contract price to the applicant he had taken care of any variations to the original works contracted to be executed. I therefore find that despite that the excess of 15% of the contract price paid, if that was the proportion, the applicant may still have a valid claim against the respondent for variations in the works. I say so because according to Halsbury’s Laws of England (4th Edition, Vol. 4(3) at paragraph 145) in fixed price contracts prices can still be adjusted. Even where extra work required by the employer outside the contract is carried out after completion of the original contract work, or outside the variation clause, the employer will generally be liable to pay a reasonable price for such work.
I also could not agree with the submission that the applicant had no right to commission a valuation of the works apart from the respondent. The provisions of Clause 16 of the contract were clear. It provided that in the event of a dispute over delay in completion, extras or deviations
“either the Contractor or the Employer may appoint a Quantity Surveyor or Engineer” who after investigating the complaint may as he thinks proper by his certificate decide the dispute. Therefore, though the respondent’s commissioned valuation was not signed, there is another valuation commissioned by the applicant which may guide the resolution of the dispute. And the very fact that the respondent does not deny that he commissioned the unsigned valuation, which as admitted by his advocate in his submissions was not signed because it was not paid for indicates that there is no doubt a dispute about the measure and value of the works that were carried out by the applicants.
In conclusion, though it has not been proved that irreparable damage would be caused to the applicant that cannot be atoned for by the payment of damages, there is no doubt that the respondent intends to and has started on a process to dispose of the subject property over which the applicant has a builders’ lien. For that reason the status quo must be maintained by preventing respondent from doing so. The respondent did not plead that he has completed any transaction to dispose of the property so an injunction can still issue. The respondent also does not deny that it is the only property that he has in this jurisdiction. Since the lien entitles the applicants to hold onto the property till the debt is paid, I find that the balance of convenience is very much in the applicant’s favour.
For those reasons, a temporary injunction shall issue to restrain the respondent, his agents, servants or any persons acting on his behalf from delineating, selling or transferring the property at Lubowa known as Plots 1300 and 1301 whose titles are bound up in FRV 401 Folio 25 and FRV 402 Folio 1, respectively. The order shall remain in force until the final disposal of UGCC Civil Suit No. 0084 of 2011 and the costs of this application shall be borne by the respondent.
 
Irene Mulyagonja Kakooza
JUDGE
18/05/2011