Court name
Commercial Court of Uganda
Judgment date
6 August 2014

Attorney General v Intex Construction Ltd (Miscellaneous Application-2012/507) [2014] UGCommC 104 (06 August 2014);

Cite this case
[2014] UGCommC 104

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL DIVISION]

MISC. APP No. 507 OF 2012

(Arising Out Of ARB. CAUSE AB/06/2011 AND MC. 632/2008)

ATTORNEY GENERAL :::::::::::::::::::::::::::::::::::::::::::::: APPLICANT

VERSUS

INTEX CONSTRUCTION LTD ::::::::::::::::::::::::::::::::::::: RESPONDENT

 

BEFORE: HON. JUSTICE B. KAINAMURA

RULING

This is a reference arising out of the ruling of the Deputy Registrar in     MC. 632 of 2008 and CAD/ARB No. 14 of 2008 dated 22nd and 28th August 2014.

By way of back ground, the respondent through Misc. Application No. 632 of 2010 moved the said Registrar to tax two bills Viz AB06 of 2011 originating from CAD/ARB No. 14 of 2008 and MA 632 of 2010. Both were allowed at UGX 2,273,389,580, and UGX 5,277,200/= respectively.  The applicant aggrieved by the ruling in the said matter filed this appeal.

The bill of costs arose out of CAD/ARB No.14 of 2008 Intex Construction Ltd Vs Attorney General where a dispute between the respondent and the applicant relating to a contract between the parties for the rehabilitation and upgrading the border post at Malaba was referred to arbitration.

At the hearing Ms. Christine Kaahwa appeared for the applicant while Mr. MacDosman Kabega appeared for the respondent.

The reference is made on seven grounds namely:-

  1. That the Taxing Officer erred in not taking into account and addressing her mind to the appellant/applicant alternative argument to wit that the costs of CAD/ARB 632/2010 had already been provided for in arbitration ruling at page 34 and they were UGX 200,000,000/=.
  2. That the amount/figure of the cost awarded totaling to UGX 2,276,389,580/= is manifestly excessive and ought to be reduced.
  3. That the Taxing Master erred in finding without reference to any authority that 10% of the subject matter was instruction fee and thereby awarded  an unjustifiably excessive instruction fee of UGX 1,900,000,000/=
  4. The Taxing Master erred in relying on awards made in other cases without considering the subject matter and circumstances of those cases as compared to the above suit and thereby did not exercise her discretion judiciously in making the award.
  5. That an award of UGX 190,000,000/= as instruction fees would have been justifiable and reasonable in the circumstances.  
  6. That the Taxing Officer erred in not taking into account the principle of consistency in awarding costs.
  7. That the Taxing Officer erred in not taking into account the principle which requires that costs be kept at reasonable level so as not keep away poor litigants.

In her submissions on ground (a), Ms. Kaahwa contended that the costs of the arbitration in CAD/ARB 632/2010 were consolidated and awarded at UGX. 200,000,000/=. She further contended that it was an error on the part of the Taxing Officer to award UGX 1.9 billion as instruction fees. In the alternative, it was Ms. Kaahwa’s argument that the Arbitrator in fact did not award costs. In support of this contention Counsel referred to paga 34 of the award where the Arbitrator stated:-

“Consequently the respondent must pay the above costs incurred by the claimant in these proceedings”   

She argued that the words “above costs” referred to what the Arbitrator had enumerated “above” i.e damages, inconvenience and depreciation. Counsel further made reference to page 37 of the award where the Arbitrator stated:-

“Consequently the counter claim raised in issue six must fail. It is accordingly dismissed with costs”.

It was Counsel’s contention that the costs awarded were only in respect of issue six of the counterclaim.

On his part Counsel for the respondent urged all grounds together but in a way put emphasis on the ground whether the award was excessive or not.

I have considered Counsel for the applicant’s submission on the first ground and I am of the view that her argument cannot be sustained. I note that both Counsel were only intent on looking for the magic word “costs” in the award in relation to the Attorney’s remuneration and failed to notice that the Arbitrator was in fact using the word “costs” in a liberal way to include damages. By way of example, at page 29 the Arbitrator held:-

Consequently I am holding that the claimant was entitled to extension of time and Costs therefore” (emphasis mine)

Additionally the words “above costs” appearing on page 34 of the award can only be in reference to UGX 200 million which was awarded as damages. However when one looks at the use of the word “Costs” on page 37, my view is that it is in reference to the costs of the counter claim which was dismissed. 

In my view, the “holding” in the award is found at the top of page 38 and for clarity I will rearrange the paragraph as I perceive it. I have broken it into five items of award and these are:-

  1. The respondent must pay special damages and general damages as I have held herein above.
  2. The respondent must pay interest on special damages at commercial bank lending rates from date of award till payment is full.
  3. The respondent must pay Arbitrators costs for 10 days of hearing at rate of Shs. 1,000,000/= per day.
  4. Costs plus
  5. 2 preliminary applications and ruling each at 1,000,000/= total 2,000,000/= (emphasis mine)

Clearly under my (d) above the respondent was condemned to pay costs of the arbitration.

In the result Ground a) of the appeal must fail.

I will now handle Ground C next. It was Counsel for the applicant’s contention that the Taxing Officer should have followed the sixth schedule of the Advocates (Remuneration and Taxing of Costs) Regulations instead of awarding 10% of the subject matter as instruction fee. She relied on Mukula International Ltd Vs His Eminence Cardinal Nsubuga & An. 1982 HCB 11 where the Supreme Court observed:-

“The practice which has grown in the Chamber of Taxing Officers of awarding 10% indiscriminately without having regard to the basic scale fee is without legal sanction. It completely ignores the legal scale and the mode of Taxation laid down in Schedule VI. That is to say the last illegal. It must be discontinued”.

On his part Counsel for the respondent relied on National Insurance Corp Vs Pelican Services Ltd Civil No 13 of 2005 where KigonyogoDCJ (as she then was) observed:-

“I have already concluded that there is no laid down mathematical formula on which to base the calculation but I am of the view that I would prefer the 10% of the value of the subject matter”.

In her ruling of 22nd August 2012, the Taxing Officer stated

“The Supreme Court has variously ruled a 10% charge of the value of the subject matter to be appropriate as instruction fee. I allowed the sum of UGX 1,900,000,000/= on that basis”.

In the affidavit in support of the application Ms. Maureen Ijang averred in paragraph 5 that the Taxing Officer erred in allowing 10% of the subject matter as instruction fee without reference to any authority. I agree. As noted above the Taxing Officer merely stated that the Supreme Court has variously ruled a 10% charge of the value of the subject matter to be appropriate as instruction fee. With due respect she should have cited the decisions.

Indeed as observed by Odoki JSC (as he then was) In Attorney General Vs Uganda Blanket Manufacturers (1973) Ltd Civil Application No 17 of 1993:-   

“The Principle of 10% as a basis for assessing instruction fee was rejected by the Advocates (Remuneration and Taxation of costs) Rules (SI No. 123/82) which introduced a sliding scale for charging instruction fees ranging from twelve and a half per centum to one per centum of the value of the subject matter. I know that these rules do not apply to this court as they apply only to taxation of costs in the High Court and Magistrates Courts but I believe that the intention of the Rules was to strike the right balance between the need to allow advocates adequate remuneration for their work and the need to reduce the costs to a reasonable level so as to protect the public from excessive fees” (emphasis mine)

Accordingly it would have been instructive to know whether the said Supreme Court decision mentioned by the Taxing Officer in her ruling emanated from a taxation in the High Court or not. That said I am persuaded by the observation of the Supreme Court in the Mukula International Ltd case (supra) basically for its relevance since it related to a taxation reference emanating from the High Court. Accordingly I am of the view that the Taxing Officer should have strictly followed the legal scale and the mode of taxation laid down in Schedule VI.

Since the other grounds of appeal revolve around instruction fees, my decision on this ground more or less resolves them and I will not delve into them.

Consequently for the reasons I have given above, I allow this reference. I set aside the instruction fee taxed by the Learned Registrar at             UGX 1,900,000,000/=.

I also find that the Taxing officer not only did she not follow the legal scale provided for in law but in any event the sum of UGX 1,900,000,000/= awarded as instruction fees was manifestly excessive. It is trite that in taxing a bill, the Taxing Officer should have established the instruction fees using the basic scale provided and ought to have in the exercise of her discretionary powers reduced or upped the fees as circumstances dictated. (see Mukula International Supra) If the Taxing Officer had followed the scale as provided, the basic fee should have been UGX 194,105,381/=. To this, in a bid to strike a balance and in view of the complexity of the case I would add UGX 205,894,619/= to come to a total of UGX 400,000,000/= which I consider fair and reasonable in the circumstances of this case. I will leave the other items unchanged. 

Consequently the total bill of costs arising out of CAD/ARB No. 14 of 2008 is reduced from UGX 2,276,389,580/= to UGX 506,390,181/= comprised of UGX 423,631,018/= under item 1-68, UGX 76,253,583/= as VAT and UGX 6,505,580/= as disbursements. The bill of costs arising out of M.A 632 of 2010 will remain at UGX 5, 277, 200/=. 

The applicant will have costs of this reference. 

 

 

B. Kainamura

Judge

6.08.2014