THE REPUBLIC OF UGANDA
IN THE CONSTIUTIONAL COURT OF UGANDA AT KAMPALA
CORAM: HON. JUSTICE L.E.M. MUKASA-KIKONYOGO, DCJ
HON. JUSTICE G.M. OKELLO, JA
HON. JUSTICE A.E. MPAGI BAHIGEINE, JA
HON. JUSTICE A. TWINOMUJUNI, JA
HON. JUSTICE C.K. BYAMUGISHA, JA
CONSTITUTIONAL PETITION NO.2/2006
NSIMBE HOLDINGS LTD…………………………..PETITIONER
V E R S U S
THE ATTORNEY GENERAL }
2. INSPECTOR GENERAL OF
RULING OF THE COURT:
POINTS OF DISAGREEMENT FOR DETERMINATION BY COURT
3. Whether section 21 of the Inspectorate of Government Act No.5 of 2002 is inconsistent with articles 20(2) and 42 of the 1995 Constitution to the extent to which it denies any person who is aggrieved by the proceedings, findings, recommendations, investigations or inquiries by the office of the IGG the right to challenge or question the same before a court of law.
The petition was then fixed for hearing for 13th September 2007.
When the petition come up for hearing, Mr. Vincent Kasujja, learned counsel who appeared for the 2nd respondent, namely the Inspector General of Government [IGG], applied to raise four oral preliminary objections against the validity of the petition. We will hereunder outline the gist of each objection and the reply to it from counsel for the petitioner, Mr. Muzamiru Kibedi. Mr. Henry Oluka, a Senior State Attorney of the first respondent concurred in the preliminary objections raised and did not wish to add thereto.
Mr. Kasujja submitted that the petitioner had no locus standi to file this petition. He contended that the petitioner was incorporated contrary to the provisions of section 28(1) of the Companies Act (Cap.110). He pointed out that the company was a result of a joint venture agreement between Premier Developments Ltd and Mugoya Estates Ltd. Premier Developments Ltd was itself owned by the National Social Security Fund (NSSF) which is a body corporate under an Act of Parliament (Cap.301). He argued that section 28 of the Companies Act prohibited a body corporate, like NSSF, to be a member of such a company (Nsimbe Holdings Ltd). Section 29(1)(b) of the Companies Act limited the membership of a private company to 50 excluding members who are in the employment of the company or were formerly employed by the company. He contended that the formation of Nsimbe Holdings Ltd was right from incorporation in contravention of sections 28 and 29 of the Companies Act and therefore void abnitio. He gave an illustration that Mr. Onegi Obel who was the Chairman of NSSF was also the Chairman of Nsimbe Holdings Ltd. In his view, if the membership of NSSF in Nsimbe Holdings Ltd was found to be irregular, that would only leave Mugoya Estates Ltd as the sole shareholder in Nsimbe Holdings Ltd which in his view would contravene section 29 of the Companies Act.
In reply, Mr. Kibedi submitted that the petitioner was a duly incorporated company. It has a Certificate of incorporation issued under the Companies Act. Section 16(1) of the Act provides that a Certificate of Incorporation was sufficient evidence that all requirements prior to incorporation had been compiled with. In his view, the petitioner existed in law and is competent to bring the petition in court.
Mr. Kasujja contended that there was no company resolution authorising the petitioner to file this petition in court. He relied on the cases of Makerere Properties vs M. R. Karia HCCS No.32 of 1994  3KLR 25 and Bugerere Coffee Growers vs Sebaduka & Anor  E.A. 147 for his submission that a suit instituted by a company without authority of the directors is not maintainable.
In reply, Mr. Kibedi submitted that the decisions of court relied upon by the respondent have been overruled by the Court of Appeal and the present position was that any director could authorise the filing of the suit. In his view, since Mr. Onegi Obel, the chairman and a director of the petitioner had authorised the filing of the petitioner, that constituted sufficient authority.
Mr. Kasujja submitted that the petition was originated under a revoked law namely Legal Notice No.4 of 1996 which was revoked by rule 24 of the Constitutional Court (Rules and References) Rules 2005. In his view, the petition was a nullity.
Mr. Kibedi’s reply was that when he first filed the petition he was not aware that the law had been repealed. However, he amended the petition as soon as he learnt of the repeal and the petition was now in order. He submitted further that since the petition was said to be filed under article 137 of the Constitution which was valid, the original filing under the repealed Legal Notice was a minor irregularity which is not fatal to the whole petition. As to amendment to the petition, Mr. Kasujja observed that it was done without leave of court and therefore invalid.
The last objection raised by Mr. Kasujja is that some of the prayers in the petition are for prerogative writs like injunctions and mandamus which only the High Court has jurisdiction to grant. In reply, Mr. Kibedi submitted that as long as this court found that the petition was correctly filed, then it had power under article 137 of the Constitution to grant any remedy it deemed appropriate, including prerogative writs where applicable.
Mr. Kasujja’s prayer was that for reasons given above, we should hold that the petition was invalid and declare it null and void, strike it out as incompetent with costs to the respondents. On the other hand Mr. Kibedi asked us to dismiss all the preliminary objections as frivolous and non-consequential with costs to the petitioner and order that the petition proceeds.
RESOLUTION OF PRELIMINARY OBJECTIONS:
Mr. Kasujja, learned counsel for the 2nd respondent, the IGG, challenges the legal existence of the appellant on the grounds that the appellant was incorporated in contravention of sections 28 and 29 of the Companies Act. Section 28(1) of the Act provides:-
But, the matter does not end there. Mr. Kasujja submitted that the formation of Nsimbe Holdings Ltd the petitioner in this case, was in contravention of the said section 28 of the Companies Act. Nsimbe Holdings Ltd (NHL) is a result of a merger between Premier Developments Ltd and Mugoya Estates Ltd. The merger agreement gave Mugoya Estates Ltd 51% of the shares of Nsimbe Holdings Ltd and 49% to Premier Developments Ltd. To us, we do not think that Nsimbe Holdings Ltd is a subsidiary of NSSF because through Premier Developments Ltd, NSSF holds minority shares in Nsimbe Holdings Ltd. Nsimbe Holdings Ltd is totally a private company in which Mugoya Estates Ltd, another private company, holding majority shares. Nsimbe Holdings Ltd does not own any shares in NSSF nor has NSSF made any transfer of its shares to Nsimbe Holdings Ltd. In our opinion section 28(1) of the Companies Act does not apply to the arrangements between NSSF and Nsimbe Holdings Ltd.
Mr. Kasujja submitted that section 29 of the Companies Act requires that a private company be owned by at least two people and its membership should be limited to fifty
We think it is now necessary to examine how Nsimbe Holdings Ltd came into existence. When Nsimbe Holdings Ltd (NHL) started operations, a lot of outcry was raised which led the Minister of Finance to ask the Auditor General to audit the firm. His findings are contained in his report which is annexed to the affidavit of Mr. Onega Obel Geoffrey in support of the petition. In the Executive Summary of the report, the Auditor General gives the following brief background of Nsimbe Holdings Ltd.
In her report to the President, the IGG made the following findings, which are relevant to the question whether Nsimbe Holdings is an illegal company or not:
Commenting on the IGG’s findings that NSSF failed to obtain advice from the Attorney General for the joint venture, the learned Attorney General opined:-
It would appear from the above provision that the advice of the Attorney General is mandatory in contracts in which government has an interest. Since NSSF is a Government body, Government had an interest in the joint venture between Premier Developments Ltd and Mugoya Construction Ltd. Accordingly, the IGG is correct in contending that the NSSF Board of management should have submitted the joint venture agreement to the Attorney General for legal advice.
It is unconstitutional to proceed without the legal advice of the Attorney General where the Government of Uganda is a party to an agreement. Among other things, it is part of business and diplomatic prudence that article 119 be complied with. However, the consequences for the transaction or agreement of the absence of legal clearance by the Attorney General have not been specified anywhere. This is a major lacuna (gap) which needs urgent rectification. There are clear and grave consequences for an individual public officer who after swearing to uphold the Constitution omits or fails to comply with article 119 in the course of his or her official work. The same consequences cannot legitimately be transferred by implication, to the transaction. The failure or omission to obtain the legal advice of the Attorney General is a serious breach of the operational code. But in the absence of an express legal provision to that effect, this failure to obtain advice alone does not vitiate the subject contract. In the particular instance, account must be taken of the fact that the other contracting party is private or non-governmental.”
In our considered view, the moment Premier Developments Limited agreed to hold minority shareholding in Nsimbe Holdings Ltd, the transaction put public funds held by NSSF at risk and beyond the control of the Auditor General and Parliament in contravention of article 164(3) of the Constitution. Such a transaction should not have been proceeded without advice of the Attorney General in accordance with article 119(5) of the Constitution.
The other consequence of this holding is that the other three preliminary objections do not arise as there is no petition properly before us. We must state for the record that had we not upheld the first preliminary objection, we were inclined to reject the other three preliminary objections, for reasons given by Mr. Muzamuri Kibedi on behalf of the petitioner. Since Nsimbe Holdings Ltd does not exist, it cannot be ordered to pay costs.
Dated at Kampala this ……6th ….day of …November.. 2007.
Hon. Justice L.E.M. Mukasa-Kikonyogo
DEPUTY CHIEF JUSTICE
Hon. Justice G.M. Okello
JUSTICE OF APPEAL
Hon. Justice A.E. Mpagi Bahigeine
JUSTICE OF APPEAL
Hon. Justice A. Twinomujuni
JUSTICE OF APPEAL
Hon. Justice C.K. Byamugisha
JUSTICE OF APPEAL