Afrofreight Forwarders Ltd v Shell (Uganda) Ltd (Civil Appeal No. 083/09) [2011] UGCA 16 (21 September 2011)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA **HOLDEN AT KAMPALA**

#### **CORAM:** MPAGI-BAHIGEINE DCJ, BYAMUGISHA &NSHIMYE, JJA. $\mathsf{S}$

### **CIVIL APPEAL NO.083/09**

### **BETWEEN**

## AFROFREIGHT FORWARDERS LTD:::::::::::::::::::APPELLANT

### AND

SHELL (UGANDA) LTD:::::::::::::::::::::::::::::::::::: 15 Appeal from the judgment of the High Court of Uganda sitting at Kampala (Lugayizi J) dated $27th$ February 2009 in HCCS No. $193/02$

### **JUDGMENT OF BYAMUGISHA, JA**

This is a first appeal from the judgment and orders of the High Court wherein the appellant's claim against the respondent was dismissed with costs.

The facts which led to the institution of the proceedings in the lower court are

generally not in dispute. The appellant is a registered company in Kenya. $25$ According to paragraph three of the plaint which was not disputed in the defence, it is engaged in the business of shipping, clearing and forwarding, packaging, rail, and road transport and warehousing of cargo within the Republic of Kenya and transit destinations in Uganda.

$30$

$10$

$20$

Sometime in 1998 or thereabouts a contract was executed between the parties.

The terms of the agreement are sketchy but it was understood that the appellant would, in the words of paragraph 5 of the plaint convey oil products on behalf of the respondent from its depots in Mombasa and Eldoret to its depots in

Kampala. 35

> In pursuit of this arrangement, the appellant loaded a total of 758 train wagons of oil products and conveyed them to the respondent's depots in Kampala between February 1998 and 13th June 2000. It raised invoices for its services which were paid from time to time. By the 13th June 2000 when the contract

- was terminated, an outstanding sum of US\$ 256,696.23 was due and owing. The $40$ respondent refused to pay this sum claiming that it suffered excess transit losses of its products during the transportation from Kenya to Uganda. It was holding the appellant liable for the loss. - The appellant filed a suit in the High Court claiming the sum which was $45$ withheld by the respondent and other reliefs.

The appellant's claim was concretized in paragraph seven of the plaint thus:

"7. The plaintiff avers and shall contend that the alleged transit losses did not occur, that it duly performed the contract and the alleged losses were merely reading variations reflected as a result of the defendant's using conflicting $50$ *measuring procedures to determine the quantities at the point of embarkation* and those at the destination, effecting readings at a tilted(not level) railway siding at the off-loading terminal, and opening the wagon seals in the absence of the plaintiff's personnel, contrary to agreed procedures."

The respondent in its amended written statement of defence and counter-claim contended that it recorded numerous excess losses on oil deliveries made and notified the appellant about the same. It was further contended that the respondent's depot was at all material times a Bonded Warehouse and all

- deliveries were verified by Uganda Revenue Authority. The respondent 60 contended that the appellant breached its contractual duties and caused delays and losses and as such it was justified to withhold the payments which were being claimed. - At the trial the following facts were agreed: 65 - 1. That both parties are limited liability companies. - 2. The plaintiff is engaged in business of carriage of goods, freight and forwarding. - 3. The defendant is an oil company. - 4. Parties herein entered into a contact by which the plaintiff was to $70$ deliver petroleum products from Kenya to the defendant's premises in Uganda. - 5. Upon the defendant's order the plaintiff would collect petroleum products from Shell Kenya Ltd and deliver the same by train wagons

### $75$ to defendant's premises.

6. Documents used in the transactions were:

(a) stock transfer advices.

$\mathfrak{Z}$

- (b) Combined consignment notes, invoices, advices and delivery notes of Kenya Railways, and - 80

(d) Discharge of bridgers at checklists at destination.

- 7. Upon dispatching each consignment the plaintiff delivered over 750 wagons of petroleum products and would raise an invoice covering its claim. - 8. In performance of the contract the plaintiff delivered over 750 wagons of petroleum products and raised invoices totaling US\$ 3,068,552.64. - 9. Of this money US\$ 2,800.890.53 was paid leaving a balance of US\$ 267,662.11. - 10. The parties had agreed an allowable loss of 0.25% on petrol, diesel and kerosene. - 11. The defendant claimed there were excess losses of goods which the plaintiff denied. - 12. At loading, the metering method of reading was used to determine 95 quantities loaded while at destination the dipping method of reading was used to measure the volume delivered.

Eight issues were framed for determination.

- 1. Whether the contract between the parties was completed in 1989 or before. - 2. Whether there were conditions precedent to the contract and if so what were they? - 3. What were the terms of the contract? - 4. Whether the defendant suffered excess losses on the wagons delivered - under the contract? 105

- 5. If so whether the plaintiff was liable for the loss? - 6. If so whether the plaintiff is entitled to the sum invoiced as handling charges? - 7. Whether the defendant was induced to enter into the contract by

### 110 misrepresentation?

8. Available remedies.

The trial judge in his judgment held that the appellant failed to prove the allegations in the plaint and dismissed the claim with costs to the respondent

hence the instant appeal. 115

> The memorandum of appeal filed on its behalf listed 12 grounds of appeal. The grounds were reduced to 4 issues at the joint scheduling conference with the Registrar of this court on 18th November 2010.

The issues for our determination are: 120

- 1. Who had the burden to prove the existence or non existence of excess transit losses? - 2. Whether the respondent suffered excess transit losses in fact - 3. And if so whether the appellant is liable for those losses. - 4. Whether under the contract the appellant was entitled to handling 125 charges.

Both counsel made spirited submissions in support of their respective cases.

- Before dealing with said submissions, I have to state at once, that contrary to the 130 findings of the trial judge that the contract between the parties was unwritten, there was indeed a written contract. The contract in question is contained in correspondences exchanged by the parties dated 18th September and 29th September 1997 respectively. The two letters were marked as exhibits D3 and - D4 respectively. They were signed by one Waithaka (PW1), the Managing 135 Director of the appellant. The letter of 18th September 1997 which was addressed to the Operation Manager of the respondent read as follows:

# **Re: TRANSPORTATION USING DEDICATED OIL TANK WAGONS**

We refer to previous correspondence and recent discussions held with *yourselves on the above captioned subject matter.*

We are pleased to inform you that the Uganda Railways Corporation have agreed to dedicate some of their wagons to us to beef up our current fleet of 145 tank wagons( underlining added) to run between Mombasa/Kampala and Eldoret/Kampala.

As explained to you before, Afro freight Forwarders Ltd has the capacity to ensure the quick turn round of wagons loaded with products. For your kind 150 information, your counterpart in Kenya have for sometime contracted us to transport their products between Mombasa and Nairobi to their satisfaction. In this connection, you can seek a confidential report regarding the quality of the services we offer from your counterparts in Kenya.

*In view of this, we can confidently say that we are better placed to offer* 155 quality services.

On transit losses, we would like to assure you that we will take responsibility

of the losses if they exceed 0.25% of allowable levels. (underline added). 160

*We do however; intend to review the current security and related* arrangements to minimize any siphoning of products enroute. We do further assure that you will continue to pay the standard Kenya/ Uganda Railway freight rates.

The purpose of this letter therefore, is to kindly request that we be contracted to transport your oil products using our dedicated wagons.

**..................**

We would like to emphasize once again that we will provide you with a quality service package that will enable you meet your contractual obligations and be 170 a better leader in your chosen field of business.

We look forward to be of service to you.

Yours faithfully, 175

FOR: AFROFREIGHT FORWARDERS LTD

$S_{gd}$

C. K. WAITHAKA

### **MANAGING DIRECTOR** 180

The letter of 29th September 1997 was also addressed to the Operation Manger

of the respondent. It stated:

# RE: TRANSPORTATIONUSING DEDICATED OIL TANK WAGONS

I refer to previous correspondences and discussions I held with you and the Supplies and Distribution Manager in your offices in Kampala on Tuesday $23rd$ September, 1997 on the above captioned subject matter.

We would like to thank you for the fruitful meetings we held which 190 culminated in your acceptance to contract us to transport your oil products using our dedicated oil tank wagons subject to our agreeing to the Transport Agreement and also showing that we have a Goods- In- Transit Cover for Petroleum products.

We have studied the draft Transport Agreement which you gave me. This Agreement is quite similar to the one which we agreed upon with your counterparts in Kenya and we therefore have no objection in adopting the same.

As agreed, Iam pleased to attach herewith, the Goods-In-Transit cover for petroleum products for your kind information. **.....................**

- *One arrangement that we seem to agree upon in this regard, as it will enable* 205 an easy and cost effective security surveillance of the oil tank wagons, is having these oil tanks move in block trains from points of loading in Mombasa or Eldoret, to off-loading sidings at your depots/terminals or worksites. In this connection, we would like to advise that as much as - possible, orders placed by yourselves from either Mombasa or Eldoret, be in 210 quantities that can be transported by 20-25 oil tank wagons so as to have them in a block train for reasons given above.

We are pleased to inform you that the oil tank wagons that the Uganda Railways Corporation have dedicated for our use are now ready and at our 215

disposal. You may wish to inspect these wagons and suggest any modification on them before they are put into operation.

Meanwhile, do let us know when you will like to place first orders so that appropriate arrangements can be made. 220

In the event that you need further clarification on the forgoing, please do not *hesitate to contact the undersigned.*

We look forward to be of service to you. 225

Yours faithfully.

FOR: AFROFREIGHT FORWARDERS LTD

$Sgd$

C. K. WAITHAKA **MANAGING DIRECTOR**

These two letters in my view do constitute a contract of carriage between the

- appellant and the respondent. The arrangement was concluded at the end of $240$ 1997. The letters stated the consideration concisely which was the standard Kenya/ Uganda Railways freight charges. The letter of 18th September 1997 stated the appellant as the party who would be liable for excess transit losses if they exceed 0.25% of allowable levels. Therefore when the first tank wagon - No. T 623117 was loaded with 52058 liters of PMS product, on 8th February $245$ 1998(according to exhibit P9), the terms contained in the two letters governed the relationship between the two parties.

$\overline{9}$

The principle which guides the first appellate court when dealing with an appeal

from a decision of the High Court in the exercise of its original jurisdiction has 250 been restated in decisions of this court and the Supreme Court. The principle has been restated in a recent decision of the Supreme Court in the case of Rwakashaija Azarious & others v Uganda Revenue Authority SCCA No.8/09

(unreported) in the lead judgment of Tumwesigye JSC. At page 9 of the

judgment he said: 255

"The principle, as I understand it, can be stated as follows: 1. The Court of Appeal acting as a $1^{st}$ appellate court has power and also a duty to carefully and exhaustively re-evaluate the evidence as a whole and make its own decision on the facts. 2. In making its decision it should bear in mind that it has not had the opportunity of seeing or hearing the witnesses as the trial

judge had especially when the demeanor of witnesses is key to findings made. 3. However, even where the demeanor of witnesses is relevant, the court may reverse the decision of a trial judge if it is of the view that considering all the circumstances his or her decision cannot stand. 4. where the question is not of demeanor of witnesses but rather of drawing inferences from facts adduced 265 the Court of Appeal is entirely free to reverse the findings of a trial judge if after its own re-evaluation of evidence, it is of the view that the findings of the trial judge were wrong."

$270$ I shall use the above principle in determining the issues that were framed commencing with who had the burden of proof. The law on who has the burden of proof is found in sections 101, 102 and 103 of the Evidence Act (Cap 6 Laws of Uganda).

### **Section 101 states:** 275

"(1) Whoever desires any court to give judgment as to any legal right or liability dependant on the existence of facts which he or she asserts must prove that those facts exist. (2) When a person is bound to prove the existence of any, it is said that the 280 burden of proof lies on that person."

Section 102 provides:

"The burden of proof in a suit or proceeding lies on that person who would 285 fail if no evidence at all were given on either side."

**Section 103 states:**

"The burden of proof as to any particular fact lies on that person who wishes 290 the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person." The general burden of proof in all civil matters lies on the plaintiff to prove on a balance of probabilities what is asserted in the claim. The burden also lies on the person who would lose if no evidence was given on either side. 295

There are two exceptions to this general legal statement. The first is that a person is not required to prove matters which are especially within the knowledge of another party. This is known as the evidential burden. The second is the presumptions of law and fact which operate to shift the burden of proof-

see sections 106-113 of the Act. 300

> I will now turn to the submissions of the parties on the first issue. Mr Tusasirwe learned counsel for the appellant submitted that the burden of proof does not lie on one party only. He stated that the appellant had the burden to prove that there

were no losses and if there were losses, the appellant was not contractually 305 liable. He pointed out that the respondent withheld payment for losses, it had the burden to prove losses. He contended that the respondent wanted court to find

that it was justified to withhold payment. He claimed that the appellant proved that save for 2 wagons, the rest were delivered intact. On the basis of this

- evidence, learned counsel submitted that the appellant discharged its burden. 310 On the figures tendered by the respondent showing loss, counsel submitted that $a\mathbf{r}$ they were arrived at unilaterally as the readings were arrived in the absence of the appellant. He further stated that the respondent cannot quote its own figures to claim that there were losses and sit back and expect the appellant to prove the - negative. He claimed that the appellant did everything to prove its case. He 315 pointed out that a joint dipping exercise which took place in May 2000 had the following results: - 1. 11 tank wagons registered losses. - 2. 11 tank wagons registered gains - 3. 4 tank wagons neither lost nor gained any product. 320

It was further learned counsel's case that the appellant suspected that there was fault in the place where the wagons were being dipped and it commissioned SGS to study the siding which it did. It produced a report (exhibit P17) through

its witness Hudson Kadilo (PW5). He pointed out that the trial judge 325 disregarded his evidence and preferred that of Kyoyanka (DW3). Another measure which the appellant took to check on the alleged losses was to request Uganda Railway Corporation to find out whether there was a problem affecting the reading. The Corporation carried out its assignment and made a report-

exhibit P.16. Counsel submitted that all the experts showed that there was a 330 problem affecting the readings which had nothing to do with the actual readings. He dismissed the testimony of Kyayonka which was accepted by the trial judge and stated that it could not dispel the evidence of experts.

He invited court to find that the burden lay on both sides and the appellant discharged its part. Mr Tusasirwe cited no authority to support his assertion.

Mr Luswata who represented the respondent argued issues one, two and three together. On the burden of proof, he submitted that under section 101 of the Evidence Act the one who asserts certain facts must prove those facts. He submitted that the appellant had the burden to prove the facts it asserted in

- 340 paragraph 7 of the plaint. The facts it asserted are: - 1. Transit losses did not occur - 2. The alleged losses were mere reading variations and it gave 4 reasons for the variations.

#### 345

The variations pleaded in the plaint according to counsel, were brought about by using conflicting measuring procedures to determine the quantities at the point of embankment and those at the destination. The second was effecting reading at a tilted level railway siding at the offloading terminal and the third was

opening the wagon seals in the absence of the appellant's personnel contrary to 350 agreed procedures.

Counsel lurther submitted that the appellant bore the burden to prove the above altegations to thc required standard and it t'ailed to discharge that burden.

J55 Leamed counsel pointed out that the respondent adduced enough evidence in exhibit D.l4- pa(iculars of delivcrics showing thc excess loss it sullered while its products werc bcing transported by the appellant. He further stated that all the witnesses lbr the respondent testitled that it sullered losses. Lcarned counscl submitted that the appellant lhilcd to

.160

There is no disputc that two mcthods of mcasuring products ol'the rcspondent were bcing uscd to dctcrminc thc quantities. 'l'hc method that was used at thc embankment was a l'low metcr and at the olfloading the dipping mcthod rvas

- 365 used. 'fhe dispute bctwcen thc parties hinges on thc two methods. lhe burdcn was on thc appcllant to provc that thc tlvo methods produced dillcrcnt rcsults. In order to do so a.ioint dipping cxercise was carried out in Ma1 2000. Thc rcsults ofthe exercise arc contained in a letter dated I /06/2000(exhibit P.l'1). 'l'he exercisc involved 25 wagons. lilcvcn rl'agons registered losscs another clevcn - 370 registercd gains and lirur rcgistcred ncither gain nor loss. Waithaka (PWl ) in his examination in -chief statcd that the respondent suf lbred no loss but undcr cross-cxam ination at pagc 193 of'the record ol'appcal hc said:

"I testified that no wagon arrived in Kampala with leads(sic) off or leaking. I agree a wagon arrived on 13/01/1999 with top leadoff wagon T63106 with loss 375 of 527 litres. It tallies with any other loss. I agree on same page showing above other wagons arrived with leakages and seals broken."

PW3. Mwenya testified that sometimes wagons carrying the respondent's products delayed on the way especially at Malaba. Kyayonka whose evidence was accepted by the learned trial judge explained that delays and leakages both could result in losses.

The appellant did not criticize the trial on his findings. It was not pointed out 385 that he took an erroneous view of the evidence or that the evidence of Kyayonka was intrinsically unreliable.

The appellant claimed that the railway siding where the measurements were being taken was uneven. Evidence was adduced from Uganda Railways

- Corporation and SGS to prove the allegations. The respondent disputed the 390 findings of the two organizations through its witness Kyayonka. Before the respondent closed its case, its counsel, Mr Luswata, invited court to visit the *locus in quo* particularly the railway siding and to see some wagons. The application to visit the *locus in quo was* opposed by counsel for the - appellant. The reasons he advanced for opposing the application was that such 395 visit had no evidential value and was a waste of court's and everybody's time. The second reason was that the testimony of Mr Kyoyanka was very explicit

about all mattcrs. 'l'hc learncd trialiudge agreed with his submissions and rejected the application.

4ltu I think a golden opportunity was lost when the cou( tailed to visit the loc'us in qrro especially whcn the appellant's case hinged on the raihval'siding and its eflect on the measuremcnts of the products. Be that as it ma1'. the.ioint dipping exercise showed that not alI wagons showed losses.

The contents olexhibit P.9 shows all the wagons which were transported by thc

4t)5 4t0 appellant during the duration ofthe contract. It shows which oncs recorded losses and those which did not rccord any losses. In my view the appellant cannot take advantage olwagons which recorded no losscs to escape its contractual liability lbr wagons which recorded excess transit losses. Ilthc railway siding caused thc problems in measurements. it would have alfcctcd all the wagons equally.

Considering the evidence as a whole. the appellant thited to provc the assertions it made in paragraph 7 ofthe plaint and the trialjudge was right to so lind.

This tinding u,ill dispt'rsc ol'issues trvo and thrcc. l'hc rcspondcnt provccl that it

4t5 sullercd exccss transit losscs and the appellant had undertaken in its lcttcr of' l8'h September 1997 (cxhibit D3) to'Iake responsibilitl'ol-the losscs il'thc1-' exceed 0.2570 ol'allowable levels". lt is responsible lor that loss.

The last issue is whether thc appellant was entitlcd to handling chargcs.

420 Handling charges were plcadcd in paragraph six ol'the plaint. lt was allegcd that "upon dispatching each consignment. the plaintil)'rvou Id prcparc an invoicc covering lreight and handling chargcs which it would scrvc on thc dcl'endant with the request that the same be paid".

The said invoices showing that handling chargcs r,vere included in the bill rvcrc

- 425 not adduccd in evidence. Ilowever. handling chargcs wcrc introduccd in thc contract by the appellant in a letter datcd 5'h March l99tl(exhibit I).5 (a)) long after thc contract had commcnced. ['hc lcttcr in queslion statcd that therc has been an increasc in Kenya raihvays tarill'rates rvith etltct liom l'' March l99ti. The lettcr went on to stale that the appcllant wishcd to introducc a handling lce - 430 of US\$2.75 per ton to enablc it cover documcntation, wagon prcparation and expedition expenscs. It requested the rcspondent to conllrm whether it was agreeable to pay the rates.

The evidence on handling charges or f'cc rvas given b1'I)Wl during rcexamination. He stated that in its debit note to thc respondcnt dated 27'r'January

435 1999(exhibit D9) the appellant claimcd a sum ol'IIS\$123.75 as handling charges. I Iowevcr l)avid l]araka (DW4) catcgoricall-,- dcnicd pa;-'rrcnt ot'an1 handling charges to the appcllant. I Ic also statcd thal thc rcspondcnt did no1 agree to the terms of the lcttcr that introduced handling charges. The evidence and thc plcadings are not satisl'ackrry as rcgards handling chargcs.

440 The appellant claimed a spccilic lump sum ol- money u'hich it statcd rvas

withheld by the respondent because of alleged excess transit losses. There is no specific claim for handling charges and none was proved at the trial. In the circumstances there is no basis on which this court can award the appellant handling charges. This ground would also fail.

In the result, this appeal fails and it is dismissed with costs to the respondent both here and in the High Court.

Dated at Kampla this....................................

C. K. Byamugisha **Justice of Appeal**

### THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL UGANDA AT KAMPALA CIVIL APPEAL NO. 83 OF 2009 **APPELLANT** AFROFREIGHT FORWARDERS LTD $\cdots\cdots$ **VERSUS**

**RESPONDENT SHELL UGANDA LTD** $\cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots\\$

# **CORAM:** HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, DCJ; HON. JUSTICE C. K. BYAMUGISHA, JA; HON. JUSTICE A. S. NSHIMYE, JA.

### JUDGMENT OF A. E. N. MPAGI-BAHIGEINE

I have read the lead Judgment of C. K. Byamugisha, JA. I am of the same opinion that this appeal must fail. The judgment is so exhaustive that I have nothing more to add.

Since A. Nshimye JA, is also of the same view, the appeal stands dismissed with costs to the respondent here and below.

$2\left(\frac{\text{S}}{\text{day of }}\right)$ **Dated at Kampala this** 2011. A. F. N. MPAGI-BAHIGEINE **DEPUTY CHIEF JUSTICE**

# THE REPUBLIC OF UGANDA

-l

### IN THE COURT OF APPEAL OF UGANDA

#### HOLDEN AT KAMPALA

CORAM: MPAGI. BAHIGEINE DCJ, BYAMUGISHA & NSHIMYE, JJA.

## 5 CIVIL APPEAL NO. O83/09

#### BETWEEN

AFROFREIGHT FORWARDERS LTD APPELLANT

#### AND

SHELL (UGANDA) LTD RESPONDENT

10 [Appeal from judgment of the High Court of L)ganda sitting at Kampala (Lugayizi J) dated 2/h February 2009 in HCCS No.193/021

# JUDGMENT OF A. S. NSHIMYE, JA

I have had the benefit of reading in draft the lead judgment of Hon. Justice C. K. Byamugisha. I agree that the appeal lacks merit and ought to be 15 dismissed with costs as proposed by her.

Dated at Kampala this cQ-{sv day of tO^l,.bc"t .2011

20 A . Nshimye

JUSTICE OF APPEAL