THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
CIVIL SUIT NO. 799 OF 2014
ATTORNEY GENERAL :::::::::::::::::::::::::::::::::::::::::DEFENDANT
BEFORE: THE HON. JUSTICE DAVID WANGUTUSI
J U D G M E N T:
In this suit the Plaintiff Coil Limited sued the Defendant Attorney General seeking recovery of Value Added Tax in the sums of USD 339,015.83 resulting from construction works under the African Development Bank funded programme of Lot 7 for Moyo and Yumbe districts. She also seeks Euros 436,684 arising from the construction works under the Investment Programme for Selected Business Technical and Vocational Education and Training centers in Uganda. In addition to that she seeks interest on the VAT refund arrears totaling UGX. 4, 270,556,751/=.
The Plaintiff further more seeks general damages, interest at 20% and costs.
The facts as discerned from the pleadings are quite straight forward namely on 9th December 2007 the Plaintiff and the Ministry of Education and Sports executed a construction contract for the construction of two seed schools in Moyo and Yumbe districts all valued at USD 2,215,729.77. The Plaintiff executed the contract and handed over the finished works to the Ministry of Education and Sports but when it came to payment the Ministry of Education and Sports herein after called the Employer paid the contractual sum less USD 339,015.83.
On 4th December 2008 the Plaintiff executed another contract with the Employer for construction and rehabilitation of selected vocational institutions in respect of IP-BTVET programme for Northern and Eastern Uganda at sum of UGX. 7,091,525,060/=. In this contract payments were made in Euros. Again the Plaintiff performed the said contract and handed over the building. Payments were made by the Employer but less by Euros 436,684 which were taken as VAT.
That work was fully done by the Plaintiff is supported with final certificates issued by the Project Manager Arch Design Limited. On obtaining the certificates the Plaintiff contending that the contracts were all inclusive of VAT raised the outstanding certification for USD 339,015.83 and the ones in Euros 436,684.
The Employer failed to pay for the balance of these sums and the Plaintiff being aggrieved raised the issue with the Permanent Secretary of the Employer who in turn sought the advice of the Solicitor General as to whether the Plaintiff was entitled to that payment.
On the 9th of February 2011 the Solicitor General wrote and stated that the Government was obliged to pay the VAT arrears.
Following that Advice the Employer and the Plaintiff signed an Amendment of the contract, ExhP3 where the Employer undertook to pay the outstanding VAT with interest attracted by belated payment. Earlier on 10th March 2011 the Employer had written to the Ministry of Finance, Planning and Economic Development requesting for funds to pay. After the Addendum ExhP3 the Employer again wrote to the Ministry of Finance, Planning and Economic Development to avail money for payment.
On 12th October 2012 the Plaintiff wrote to the Employer notifying them claiming interest of UGX. 1,763,364,958 due to belated payment.
The Employer having failed to effect payment the Plaintiff filed this suit.
The issues for determination are;
- Whether the Plaintiff is entitled to payment from the Defendant for VAT claimed and interest thereon?
- What are the remedies available?
Before I proceed to resolve the issues it is necessary to say that this suit proceeded without the Defendant calling any evidence. On the 24th January 2019 the suit came up for scheduling conference. It was agreed and Court directed that witness statements be filed by 20th of February 2019. On the 30th of May 2019 four months later the Defendant had not filed any witness statements. Counsel for the Defendant submitted that his witness had been out of the country for the last two months. But the last two months meant that even by 20th February 2019 when the agreed date expired, no attempts had been made to file the witness statement.
Court assuming that they intended to call no witnesses proceeded to hear the Plaintiff’s witnesses and the matter was set for submissions.
As it stands therefore there is no oral evidence on record to explain the Defendant’s case.
On the issue of whether the Plaintiff is entitled to payment from the Defendant for the VAT claimed and interest thereon the parties on the 21st of April 2011 met and agreed on several items which included the payment of money that had been withheld by the Defendant namely sums in respect of the construction of the two seed schools in Moyo and Yumbe districts and another for construction and rehabilitation of selected vocational institutions which fell in the IP-BTVET Programme BMZ.
In this meeting which was reduced into a written addendum to the contract the Defendant recognized and conceded to her responsibility to pay the money retained in respect of the two contracts in these words;
“The Employer has recognized that he defaulted under the contract by not settling VAT invoices due to the contractor.”
The Defendant undertook to pay and stated;
“The Employer reassures that the contractor will be paid all outstanding VAT Certificates and interest caused by late payments…”
These certificates received the required approvals, ExhP3 and were not disputed by the Defendant. That the Defendant undertook to pay is also evidenced in several communications originated by the Permanent Secretary Ministry of Education to the Permanent Secretary/ Secretary to Treasury Ministry of Finance Planning and Economic Development. In one of them ExhP11 written on 13th April 2015 she cites the Solicitor General to have advised payment. Referring to the claims by the Plaintiff the Permanent Secretary, of the Employer wrote in part;
“Consequently , the Solicitor General through his response letter ADM/7/156/01 dated 9th February 2011, particularly advice No. 1, clearly indicated that Government was obliged to pay VAT Arrears verified in paragraph 2.”
It is clear that the arrears to the Plaintiff were verified by a team that was sent after the Solicitor General‘s letter because the Permanent Secretary in the same letter ExhP11 wrote;
“You will note that M/s Coil (U) Limited was one of the contractors whose arrears were verified by your office. To this end, funds to clear arrears have not been released to clear the Ministry obligations following the verification exercise.”
These admissions are clear and unambiguous and state precisely what the Defendant conceded to and admitted. They therefore form a basis upon which judgment would be based in favour of the Claimants. Moreover ExhP3 which carries the addendum signed by all parties clearly places the liability on the Defendant.
It is not the Court’s duty to read other provisions into the agreement. The addendum was entered into by willing parties. It is therefore within this agreement that this dispute should be resolved; Simon Tendo Kabenge Trading as M/s Simon Tendo Kabenge Advocates vs Mineral Access Systems Uganda Limited HCCS No. 275 of 2011.
This position was also well illustrated by Lord Jessel MR in Printing & Numerical Registering Co. vs Sampson (1875) Lr Eq 462 AT 465 in these words;
“If there is one thing more than another which public policy requires, it is that men of full age and competence and understanding shall have the utmost liberty in contracting and their contracts, when entered freely and voluntarily, shall be held enforceable by the Courts of Justice.”
Seventy nine years later in Stockloser vs Johnson (1954) 1 ALLER 640 the Court held;
“People who freely negotiate and conclude a contract should be held to their ‘bargain’, rather that the judges should not intervene by substituting each according to his individual sense of fairness, terms which are contrary to those which the parties have agreed upon for themselves.”
From those authorities, to read different clauses into the agreement would be judicial interference resulting into what the parties had never intended.
Lastly on the 4th of December 2018 when the matter came up in Court the Defendant through its Mr. Atwiine admitted that the Defendant was obliged to pay VAT. He stated;
“It is true the Government of Uganda was obliged to pay VAT. We have paid some of the companies that were verified. This particular case still has to be verified as to how much before payment.”
In conclusion the first issue of whether the Plaintiff is entitled to payment from the Defendant is answered in the affirmative.
Turning to the remedies, there is no doubt that there were two contracts namely; Construction of two seed schools in Moyo and Yumbe districts valued at USD 2,215,729.78 and another for construction and rehabilitation of selected vocation institutions in Uganda at UGX. 7,091,525,060 but was to be paid in Euros.
It is agreed between the parties that all the work was properly executed. It is also agreed by the parties that the money paid was less by USD 339,015.83 in respect of the first contract and Euros 436, 684 in respect of the second contract.
Since there is no dispute as to those sums, judgment is entered in favour of the Plaintiff against the Defendant for refund of USD 339,015.83 and Euros 436,684.
Turning to interest the Plaintiff claimed that nonpayment of the sums above had attracted interest of UGX. 4,270,556,751 which was calculated and posted on the Ministry of Finance, Planning and Economic Development website, ExhP6.
This claim appeared as paragraph 4(g) of the Amended plaint. The Defendant did not file a reply to this claim and as I have earlier said she did not call evidence to rebut the Plaintiff’s claim of interest.
Interest was provided for under Clause 43 of the General conditions of the contract, ExhD15. The clause provides on payments as follows;
“43 (1) The Employer shall pay the Contractor the amounts certified by the Project Manager within 56 days of the date of each certificate. If the Employer makes a late payment, the Contractor shall be paid interest on the late payment in the next payment. Interest shall be calculated from the date by which the payment should have been made up to the date when the late payment is made at the prevailing rate of interest for commercial borrowing for each of the currencies in which payments are made.”
In the Addendum the Defendant undertook to pay interest on late payment they wrote;
“The Employer re-assures that the Contractor will be paid all outstanding VAT certificates and interest caused by late payments as soon as the required funds have been allocated to the Ministry of Education and Sports by the Ministry of Finance.”
To prove interest the Plaintiff called PW2 who exhibited no knowledge of accounting. He was supposed to show the formula used in computing the interest. He said he had used general principles. Later he however said they had used interest formula, namely that;
Interest = Principal x Rate x Time where Time would be the delay in payment and rate was the monthly interest.
He did not expound on this. Counsel for the Plaintiff in his submissions said PW2 had admitted that he had no expertise in accounting or finance matters. He had joined the Plaintiff in 2016 much after the execution of the contract. That his evidence was therefore of no probative value.
I do agree with those submissions above. The Plaintiff should have called the consultant who made the assessment of interest on delayed payments.
ExhP8 purportedly the Consultant’s assessment of interest on delayed payments of the contractor bears no name, no company name, no signature and was not dated. An expert report must include statement of qualification, the assignment given to him, documents reviewed and research undertaken, his opinions, necessary disclaimers, signature and date. ExhP8 was lacking in all this and for those reasons cannot be considered an expert report and so cannot be relied upon. Moreover the expert himself was not called to testify.
This left the Plaintiff with only ExhP6 to support her claim of interest accrued. ExhP6 a print out from the website of Ministry of Finance, Planning and Economic Development detailing tax obligations of certain companies which included the Plaintiff in respect of the ADB and BTVET contracts with the Employer.
The Print out indicates that VAT had accumulated interest of UGX. 4,270,556,751 as at March 2014.
The danger with such digital evidence is that it can easily be created, tampered with or modified in one way or another. Courts should therefore be very careful before admitting it especially if such evidence is contested. Where digital evidence is uncontested Courts are known to rely on it. Its admissibility was discussed in Amongin Jane Fances Akili & vs Lucy Akello & The Electoral Commission HC Electoral Petition No 1 of 2014 where court held digital evidence is often attacked for its authenticity due to the ease with which it can be modified although it would be necessary to sustain such an agreement with proof of tampering.
In this case electronic evidence can be relied on if the party who alleges has inter alia established its authenticity and the opposite party has not produced any proof of tampering. A holding almost on the same line is found in Uganda vs Sserunkuma &8 Others HC CR SC 15/2013 where the Court held;
“The authenticity and integrity of electronic evidence is not in question until the party suggesting otherwise can produce evidence to say so.”
This means that where the source of digital evidence has been established and no tampering has been shown by the opposite party it would be admissible like any other documentary evidence.
In the instant case the Plaintiff stated the source of the Print out as a website of the Ministry of Finance, Planning and Economic Development known to publish current affairs relating to public debts, grants and guarantees, budget monitoring and tax matters. This was not disputed by any evidence oral or otherwise. The Defendant did not call any witness to rebut this evidence and so in the absence of any evidence to indicate tampering or modification of ExhP6 the Court finds it relevant and relying on it holds that the figures UGX. 4,270,556,751 was the interest as at March 2014 that had accrued in respect of unpaid VAT that resulted from the Plaintiff’s contract with the Employer.
It is the Court’s finding that the figure is outstanding and ought to paid to the Plaintiff.
The Plaintiff sought for general damages. The settled position is that the award of general damages is in the discretion of Court and as the law will presume to be the natural and probable consequence of the Defendant’s act or omission; James Fredrick Nsubuga vs Attorney General, H.C.C.S No. 13 of 1993, Erukana Kuwe vs Isaac Patrick Matovu & Anor H.C.C.S No. 177 of 2003.
A Plaintiff who suffers damage due to the wrongful act of the Defendant must be put in a position he or she should have been in had she or he not suffered the wrong; Kibimba Rice Ltd v Umar Salim, S.C.C.A of No. 17 of 1992.
Taking into account the fact that the Plaintiff executed the said contracts, did the construction works to the satisfaction of the Employer and handed over the finished buildings to her, payment should have been made in full as agreed upon in the Addendum.
The Plaintiff made several demands for the payment , was kept out of that money since it had to satisfy the demands of Uganda Revenue Authority which in my view amounted to damage calling for compensation.
Having considered that the Plaintiff was kept out of its money for all these years notwithstanding the admission by the Defendant that it owed, I find an award of general damages of UGX. 100,000,000 appropriate. It is so awarded.
The Plaintiff also sought for interest at a rate of 20% per annum from date of default till payment in full.
Interest is awarded at the discretion of court, but like all discretions it must be exercised judiciously taking into account all circumstances of the case; Uganda Revenue Authority vs Stephen Mabosi SCCA No.1 of1996.
The basis of such an award is that the Defendant has kept the Plaintiff out of his money and the Defendant has had use of it so the Plaintiff ought to be compensated accordingly; Harbutt’s Plasticine Ltd vs Wyne Tank & Pump Co. Ltd  1 Ch 447.
Except for the averments that the Plaintiff had obtained a facility so as to pay VAT, neither the Plaintiff nor Counsel justified why the Plaintiff ought to be awarded a commercial interest rate from date of default till payment in full.
Considering that the Plaintiff is a commercial entity who would have used this money to re-invest in her business, the Plaintiff would be entitled to such a rate that would not neglect the prevailing economic value of money but at the same time insulate her against any economic vagaries and the inflation and depreciation of the currency in the event that the money awarded is not promptly paid when it falls due; Mohanlal Kakubhai vs Warid Telecom Uganda HCCS No.224 of 2011.
Taking into account that the sums to be refunded are in United States Dollars and Euros, it is my opinion that these currencies being foreign are cushioned against the ever rising inflation and depreciation of the currency.
For those reasons, I find interest on the USD 339,015.83 and Euros 436,684 at 4% per annum sufficient. The Court also awards interest of 6% per annum on the accumulated interest of UGX. 4,270,556,751.
The last certificate was issued on the 8th of May 2010 and under Clause 43 payment should have been effected with 56 days. So by the beginning of August 2010 the Defendant was in default. The interest awarded on the USD 339,015.83 and Euros 436,684 will therefore run from 1st August 2010 till payment in full.
As for the accumulated interest, interest thereon will run from 1st May 2014 till payment. Interest on general damages at court rate will run from date of judgment till payment in full. The Defendant will also pay the costs of the suit.
In conclusion judgment is entered in favour of the Plaintiff against the Defendant in the following terms;
- Defendant to refund to the Plaintiff USD 339,015.83 and Euros 436, 684
- Defendant to pay UGX. 4,270,556,751
- Defendant to pay general damages of UGX. 100,000,000/=
- Interest on a) at 4% per annum from 1st August 2010 till payment in full.
- Interest on b) at 6% per annum from 1st May 2014 till payment in full
- Interest on c) at court rate from date of judgment till payment in full
- Costs of the suit.
Dated at Kampala this 22nd day of January 2020
HON. JUSTICE DAVID WANGUTUSI