THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
MISCELLANEOUS APPLICATION NO. 0247 OF 2011
[ARISING FROM CIVIL SUIT NO. 0304 OF 2010]
PCCW GLOBAL (HK) LTD.::::::::::::::::::::: APPLICANT/PLAINTIFF
GEMTEL LTD. :::::::::::::::::::::::::::::::::::RESPONDENT/DEFENDANT
BEFORE: HON. LADY JUSTICE IRENE MULYAGONJA KAKOOZA
This application was brought under the provisions of Order 25 rules 1 and 2 of the Civil Procedure Rules (CPR). The applicant, plaintiff in the suit, sought to withdraw HCCS No. 304 of 2010 which she brought against the defendant claiming special and general damages for breach of a contract for the provision of telecommunication services worth over US$ 3 million, of which the applicant claimed the respondent failed to pay US$ 2.8m.
The grounds of the application were briefly stated in the affidavit in support but more particularly set out in an affidavit deposed by Naboth Muhairwe, an Advocate, on 11/05/2011. In his affidavit, Mr. Muhairwe stated that by an order of this court issued on 9/02/2011, all proceedings in HCCS 304/2010 were stayed to enable the parties submit the dispute to arbitration at the International Centre for Dispute Arbitration in New York, United States of America. He further averred that all issues in dispute including costs would be satisfactorily resolved at the arbitration in New York. Further that the schedule for the arbitration had been successfully drawn up inter parte, and the matter would be concluded by November 2011. He finally averred that withdrawal of the suit would reduce the backlog of cases pending hearing in this court and so it was in the interests of justice that leave be granted to withdraw the suit.
The defendant filed no affidavit in opposition and when the parties appeared before me on 25/05/2011, Mr. Didas Nkurunziza who represented the defendant conceded to the application for withdrawal on condition that the plaintiff pays the defendant’s advocates costs in the suit. Mr. Rogers Kakooza for the plaintiff was of the view that the plaintiff should not be subjected to costs on the withdrawal of the suit. He therefore proceeded to address court on that issue.
In that regard, Mr. Kakooza submitted that all issues between the parties would be addressed in the course of the arbitration proceedings including the costs of the instant suit. Further that the plaintiff would not have filed the suit had it not been for the defendant’s recalcitrant conduct when the plaintiff approached her officers with a view to commencing arbitration proceedings. That the plaintiff had to effect service upon the defendant by substituted service because her officers in the Southern Sudan refused to acknowledge receipt of summons served on them. That in view of such conduct, this court has the discretion to make an order that the suit be withdrawn without an order for costs. He relied on the provisions of ss. 27 and 30 of the Judicature Act, as well as s.27 CPA, and the decisions in J. B. Kohli & Others v. Bachulal Popatlal  1 EA 219 and Departed Asians Property Custodian Board v. Jaffer Brothers  1 EA 12 for his submission, that the court has the discretion to award or deny a litigant costs.
In reply, Mr. Nkuruziza agreed that orders for costs are within the discretion of court but that under s.27 CPA, costs must follow the event. He charged that there was no reference to the costs in this suit in the scheduling order in respect of the arbitration that was attached to the plaintiff’s affidavit in support of the application as Annexure “A”. Further that there was no evidence in this application to show that there was any effort by the plaintiff to move for arbitration before the suit was filed. And finally, that the arbitrator in New York had no jurisdiction to decide issues to do with costs in a suit in this court.
The plaintiff sought to withdraw the suit under the provisions of Order 25 rule 1 rules 1 and 2 CPR but it appears from the onset that rule 2 does not apply to the application since such discontinuance would have been by written consent between the parties filed in court. I will therefore consider the application under rule 1 of Order 25 only. Order 25 rule 1 (1) CPR provides that
“(1) The plaintiff may at any time before the delivery of the defendant’s defence, or after the receipt of that defence before taking any other proceeding in the suit (except any application in chambers) by notice in writing wholly discontinue his or her suit against all or any of the defendants or withdraw any part or parts of his or her alleged cause of complaint, and thereupon he or she shall pay the defendant’s costs of the suit, or if the suit is not wholly discontinued the costs occasioned by the matter so withdrawn. Upon the filing of the notice of discontinuance the costs shall be taxed, but the discontinuance or withdrawal, as the case may be, shall not be a defence to any subsequent action.”
The plaintiff had before this application moved another application in chambers to stay the proceedings which were filed as M/A 59/2011, and which were granted. Rule 1 (1) of Order 25 therefore did not apply in the circumstances. Had it been applicable, the payment of costs on the discontinuance would have been mandatory. On the other hand Order 25 rule 1 (2) provides as follows:
“(2) Except as in this rule otherwise provided, it shall not be competent for the plaintiff to withdraw or discontinue a suit without leave of the court, but the court may, before or at, or after hearing upon such terms as to costs, and as to any other suit, and otherwise as may be just, order the action to be discontinued or any part of the alleged cause of complaint to be struck out.”
It appears to me that the rule above applies in situations where the plaintiff has taken some step in the suit after the conclusion of pleadings, including an application in chambers as was the case in this suit. And in such situations, the suit cannot be withdrawn, except by consent of the parties, without the court hearing representations about costs. That then implies that the court has discretion in such cases to award costs or to allow the suit to be withdrawn with no order as to costs.
In Kiska Ltd v. De Angelis  1 EA 6 the East Africa Court of Appeal affirmed the default position of the law in s.27 of the CPA that costs follow the event. The court also discussed the discretion of court in the award of costs and relied on the decision in Devram Nanji Dattani v. Haridas Kalidas Dawda (1949), 16 E.A.C.A. 35, where the East Africa Court of Appeal held that a successful defendant can only be deprived of his costs when it is shown that his conduct, either prior to or during the course of the suit, has led to litigation which, but for his own conduct, might have been averted. In that case, the following passage from the judgment of Lord Atkinson in Donald Campbell v. Pollak,  A.C. 732 at p. 813 was applied:
“It is well established that when the decision of such a matter as the right of a successful litigant to recover his costs is left to the discretion of the Judge who tried his case, that discretion is a judicial discretion, and if it be so its exercise must be based on facts. If, however, there be, in fact, some grounds to support the exercise by the trial Judge of the discretion he purports to exercise, the question of the sufficiency of those grounds for this purpose is entirely a matter for the Judge himself to decide, and the Court of Appeal will not interfere with his discretion in that instance.”
I am mindful of the fact that this particular suit did not proceed to trial and that the court did not hear anything except the application to stay proceedings and this application. But the suit was filed and a WSD filed by an advocates on behalf of the proceedings. That should attract some costs and this court should make a decision as to who will meet the costs incurred by the defendant.
I reviewed the provisions of ss.27 and 30 of the Judicature Act cited by Mr. Kakooza to advance his argument that the costs in this suit will be considered by the arbitrator in New York. S.27 of the Judicature Act simply provides that in civil matters the High Court may at any time, order the whole cause or matter, or any question of fact arising in it to be tried before a special referee or arbitrator agreed to by the parties, or before an official referee or an officer of the High Court. S.30 of the Judicature Act then provides that an order made by the court under the Act relating to inquiries or trials by reference may be made on such terms as to costs as the High Court thinks fit. In my view, s.30 only clarifies that in such situations the court retains the discretion to grant or not to grant costs on referring a matter to a referee or arbitrator.
I also reviewed the decisions cited by counsel for the plaintiff in favour of his submissions that his client ought to be spared the costs of the suit but they do not seem to be in the plaintiff’s favour. The decision in DAPCB v. Jaffer Brothers (above) upholds the default position that costs follow the event and the discretion to award them is a judicial function. Kohli v. Bachulal Popatlal (above) is to the same effect and the court in that case applied the decision in Ritter v. Godfrey  All E.R. Rep. 714, that “this discretion, like any other discretion, must of course be exercised judicially and the judge ought not to exercise it against the successful party except for some reason connected with the case.”
The discretion of a trial judge to award costs thus seems to be absolute but it must depend on facts placed before that judge. Although the dispute has not been disposed of on its merits in this court, it is because the plaintiff has chosen to go elsewhere to have that done. And that to me implies that she concedes that the dispute ought to have been subjected to arbitration before the suit was filed. On that point alone the plaintiff lost the suit.
Mr. Kakooza has argued before me that the defendant is not entitled to costs on the discontinuance because of her conduct before the suit was filed. That had she not been uncooperative in the plaintiff’s moving of a proposed arbitration per agreement, the suit before this court would not have been filed. However, that information came from the bar, not from any affidavit filed by the plaintiff here. I also perused the record in HCCS No. 304/2010 but found no evidence to support counsel’s allegations that the defendant did not cooperate in efforts to try and resolve the dispute by arbitration as was stipulated in the agreement between the parties.
The proceedings in M/A 499/2010 which was an application for substituted service are also not helpful because they only show that there was difficulty in effecting service upon the defendant. In an affidavit deposed on 6/09/2010 by Tadeo Bbosa, a process server, he stated that he and Mr. Kakooza had to go all the way to Juba in the Southern Sudan to effect service on the defendant but in spite of that the person that they found in the offices of the defendant refused to acknowledge receipt of the summons. That in itself does not prove that the defendant was uncooperative in the plaintiff’s efforts to resolve the dispute by arbitration. Rather, it proves that the plaintiff filed a suit in spite of an arbitration clause in the agreement between the parties. I therefore agree with Mr. Nkuruziza’s submission that there is no evidence to go by to deny the defendant an award of costs on discontinuance of the suit.
Although Mr. Kakooza advanced the argument that the costs of this suit could be settled in the arbitration between the parties that is in process before the International Centre for Dispute Arbitration, Annexure “A” to the affidavit in support of this application only referred to costs in the arbitration and not any other proceedings. Specifically, at page 3 thereof, the scheduling order refers to costs for translators, if it is found necessary to use their services during those proceedings. There is no evidence that the costs of this suit would be considered in the arbitration.
It has also been brought to the attention of this court, and it was conceded by the plaintiff that Mr. Nkuruzinza who represented the plaintiffs in the suit before this court, and who has graciously agreed to have the suit discontinued, is not a party to the arbitration proceedings in New York. Instead, the plaintiff is represented by Mr. Phillip Bliss Aliker. The defendant must have paid a get-up fee to their advocates in the suit because instruction fees are paid on instruction. And in a suit such as this one where the plaintiff’s claim is US$ 2,866,917.80, interest thereon at commercial rates, and general damages, the instruction fees required by each of the advocates must have been a hefty sum.
The plaintiff may concede to payment of the fees on discontinuance after the arbitration is concluded but it is not known how the arbitration will be determined; i.e. whether it will be in favour of the plaintiff or not. If the arbitration goes against the defendants, then counsel here would have an uphill task recovering any costs that may be due to them at this stage from the plaintiffs. Recovery would be dependent on whether the defendant can pay what is ordered against it in the arbitration or not. Moreover, it is not very realistic to believe that counsel now representing the defendant in the arbitration would be amenable to pressing for a resolution of a question relating to costs payable to the defendant’s advocates in the suit before this court in which he did not participate. It therefore does not seem to me that it would be one of the other matters brought to the attention of the arbitrator by either party, if at all that can still be done.
What seems to be the position regarding the suit pending in this court is that it is getting in the way of the smooth progress of the arbitration proceedings and it is the plaintiff here that seems to be prejudiced by it. The report on the preliminary hearing and scheduling order (Annexure “A” to the affidavit in support) shows that the defendant’s counsel intends to move a motion to dismiss the arbitration because in his view the plaintiffs waived their right to have the dispute submitted to arbitration per agreement when they filed a suit in this court.
Counsel for the defendant proposed that if costs are allowed here they need not be paid immediately for they could be set off from the award to the plaintiffs, if at all, after arbitration. Mr. Kakooza had no objection to that but in his view the costs would be set off from the costs for the arbitration. The two propositions do not amount to the same thing. Since it is open to the parties to agree on how the costs of the suit will be paid, all that is required of me is decide whether the costs of the discontinued suit should be paid or not and there is no plausible reason that has been advanced for me not to award costs to the defendant.
In conclusion therefore, HCCS No. 304/2010 now stands withdrawn and the plaintiff shall pay the defendant’s costs of the suit with interest at court rate from the date of this order till payment in full. The plaintiff shall also pay one half of the costs for this application.
Irene Mulyagonja Kakooza