THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL COURT DIVISION)
MISCELLANEOUS APPLICATION NO. 59 – 2008
(Arising from H.C.C.S. No. 31 of 2008)
PUNCH TELECOM (U) LTD ::::::::::::::::::::::::::::::::::::::: APPLICANT
WARID TELECOM (U) LTD :::::::::::::::::::::::::::::::::::: RESPONDENT
BEFORE: THE HON. JUSTICE GEOFFREY KIRYABWIRE.
R U L I N G:
The Applicant brought this application for a temporary injunction against the Respondent company under Order 41 rules 2 and 9 of the Civil Procedure Rules. The Applicant company had held a franchise with the (by way of an agreement dated 31st January 2008) Respondent telecommunication company which had just started operating in the Ugandan market. This franchise was later terminated on or about the 8th February 2008. The Applicant now seeks orders that
“i) A temporary injunction does issue restraining the Respondent/Defendant, his agents and/or servants or any new franchisee from operating the franchise in the regions of Nateete and Wandegeya and from the sale of Warid Telecom Customer products.
(The) termination of the franchise agreements for the above said regions be suspended forth with pending the determination of the main suit.
iii) The Respondents operations under the public service provider licence by Uganda Communication Commission shall comply and support the terms and the applicants franchise agreement with the Respondent.
iv) Costs of this application be in the cause…”
Mr. Geoffrey Nangumya and Yusuf Nsibambi appeared for the Applicant while Mr. Sim Katende appeared for the Respondent.
The grounds for the grant of a temporary injunction have now been well settled by case law. In the case of
Issa Kikungwe & 4 Others V Stanbic Bank & 3 Others M.A. 394 and 395 of 2004 (unreported).
Based on decided authorities, I held in that case that the granting of a temporary injunction is an exercise of judicial discretion for the purpose of preserving the status quo until the questions to be investigated in a suit have finally been disposed of. In so doing the Applicant must satisfy three main legal tests. First that the Applicant has shown a prima facie case with a probability of success. Other authorities state that the first test is really whether there are serious questions to be tried (Halsburys Laws of English 4th Edition Vol 24 para 855) which I find clearer.
Secondly, that a temporary injunction will not normally be granted unless the Applicant might otherwise suffer irreparable injury, which cannot be compensated by an award in damages.
Thirdly, if the court is in doubt, it will decide the application on the balance of convenience.
In this matter Mr. Nangumya counsel for the Applicant submitted that the Applicant had filed a formal suit against the Respondent which had a high probability of success. He submitted that the Applicant and the Respondent entered into a franchise agreement on the 31st January 2008 but that they had an informal arrangement as early as October, 2007. Counsel for the Applicant submitted that the Applicant had invested heavily in the franchise by inter-alia opening up an outlet, acquiring the Respondent’s branded materials, stationary, vehicles and a distribution network.
It is estimated that this investment was in the region of Ushs.500,000,000/=. He also pointed out that in accordance with the franchise terms, the Applicant had deposited at the Standard Chartered Bank the sum of Ushs.506,980,000/= for purposes of obtaining franchise materials and goods for sale from the Respondent. Counsel for the Applicant submitted that to their dismay, when the Respondent launched their operations in February 2008, the Respondent terminated their franchise. It was submitted that this termination was unlawful for lack of the requisite notice under clause 17 of the franchise agreement. There in lies the breach of contract. The Applicant also seeks orders for specific performance of the agreement in the main suit.
As to the test of the Applicant suffering irreparable injury which cannot be compensated for by an award of damages, counsel submitted that the projected loss to the Applicant by way of profits was unquantifiable.
As to the balance of convenience counsel for the Applicant submitted that his client was better set up to run the franchise in the Wandegeya and Nateete areas. He submitted that other new operators now authorized by the Respondent to sell their products had instead resorted to carry out their business in tents outside the Applicant’s retail outlet. So the balance of convenience lies with the Applicant.
Counsel for the Applicants also argued that it was just and equitable that his clients who had put in so much time and resources to establish the franchise, to be allowed to continue with the franchise rather than be thrown out at the very beginning of it.
Mr. Katende for the Respondents contested the application. He submitted that based on the franchise agreement between the Applicant and the Respondent, the prayers and orders sought could not be granted. He referred court to clauses 2.1 and 10.1.2 of the agreement for the proposition that the franchise that had been given to the Applicant had been non-exclusive. Counsel for the Respondents submitted that the Respondent was free to appoint other agents for the same areas as the Applicant and could also itself as the Respondent operate directly in the said areas. Counsel further submitted that even if the Applicants franchise had not been terminated the Respondent in the agreement was free to appoint other agents and therefore the prayer that the Respondent be restrained from so doing was misplaced.
In the view of the Respondent, termination of the franchise had already occurred and therefore the status quo had been changed leaving nothing to preserve. Counsel for the Respondent submitted that if the Applicant viewed this as a breach then the only remedy available to them would be a claim in damages.
As to whether the Applicants had a prima facie case, counsel for the Respondent submitted that the franchise was correctly terminated as per agreement. He submitted that the Applicant had engaged in activities having an adverse effect on the Respondent’s business and so their relationship could be terminated immediately without notice under clause 17.1 (iii) of the agreement. He in particular referred to the Applicants in ability to deposit on their bank account (to which the Applicant had access) sufficient money to buy products from the Respondents for sale at the launch of the Respondents operations. He submitted that Ushs.370,000,000/= and not Ushs.506,000,000/= had been deposited at the time of the launch and the balance of Ushs.124,000,000/= was deposited after the launch despite repeated reminders from the Respondent that deposit had to be complete by the time of the launch. He submitted that under clause 24.8 of the agreement, the Respondent reserved the right not to supply its agents with its products at its sole discretion.
As to the test of irreparable injury, counsel for the Respondent submitted that the set up expenses of the Applicant were at their cost and were not refundable at termination. Here he referred me to clauses 5.1.5 and 17.4 of the agreement. He submitted that clause 18 of the agreement provided that the franchise was initially for a period of one year not five years as deponed by Mr. Colin Subika a director of the Applicant in his affidavit. He submitted therefore that any damages if any were indeed quantifiable.
Counsel for the Respondent submitted that the balance of convenience lay with client and not anybody else as they by far had invested the most money. He submitted that the Respondent could not be forced to work with a franchisee who had been terminated. He submitted that the termination could not be suspended as prayed.
I have read the pleadings in this application, the affidavits for and against them and considered the submissions of both counsel.
It is well settled position of the law now that interlocutory applications such as this one for a temporary injunction are designed to provide interim relief but do not dispose of the substantive suit which still has to be heard on its merits. In this case the interim relief sought should achieve the goal of preserving the status quo between the parties until the substantive suit is disposed of.
The Applicant in this case is clearly aggrieved that its franchise was terminated even before the real operations of the Respondent had began. That is understandable. It would also appear that from the exchange between counsel at the hearing that the termination was acrimonious, probably heightening the dispute as it was. This of course may be evaluated at the trial. The more important question in whether the status quo can be preserved in this case. To achieve the status quo as I understand it will involve, as prayed by the Applicant, suspending the termination of the franchise agreement so that it becomes operational again. This in my view will have the effect of granting one of the main prayers in the suit which is for specific performance which cannot be done through an application such as this. This will amount to a reversal of the status quo and not its preservation. To my mind therefore the status quo has already changed and therefore even the legal tests required for the grant of a temporary injunction can not be applied.
I agree with counsel for the Respondent that even granting such a relief when the agreement signed by the parties was “non-exclusive” would go against the spirit of what the parties contracted for. The true remedy of the Applicant if at all lies in the suit in this regard.
I accordingly dismiss this application with costs in the cause as prayed for by the Applicant.
9:10pmRuling read and signed in Court in the presence of;
- Kulumbi - Kiingi for Applicant
- Makeera for Respondent
- Applicant present
- Rose Emeru – Court Clerk