Birungi Kagyenda v Dembe Trading Enterprises (HCT - 00 - CC - CS - 414 - 2009) [2013] UGCommC 219 (6 June 2013)

Full Case Text

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### **THE REPUBLIC OF UGANDA**

**AT THE HIGH COURT OF UGANDA AT KAMPALA COMMERCIAL DIVISION**

**HCT - 00 - CC - CS - 414** *-* **2009**

## **BIRUNGI CEPHAS KAGYENDA PLAINTIFF 5**

#### **VERSUS**

**DEMBE TRADING ENTERPRISES DEFENDANT**

### **BEFORE: HON JUSTICE GEOFFREY KIRYABWIRE**

# **JUDGMENT:**

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The plaintiff brought this suit against the defendant for recovery of UGX 469,651,598 (Uganda Shillings four hundred sixty nine million six hundred fifty one thousand five hundred ninety eight only) as fees arising from the tax consultancy services rendered to the defendant, interest at 30%p,a. from date of breach till payment in full and costs of the suit.

The case for the plaintiff is that some time in 2008 and early 2009, he was orally instructed by the defendant to provide tax consultancy services to the defendant in order to advise on the tax assessments, evaluations, balancing the reduction thereof and the realization of a fair, just and reasonable final tax assessment to be paid by the defendant to Uganda

Revenue Authority. It is the case for the plaintiff that it was agreed at the commencement of their contract that the plaintiffs fees would be 8% on the differences between the original presumptive assessed tax and the final tax assessment. The plaintiff further avers that he proceeded to act on the above instructions as a Tax Consultant to re-assess, evaluate, and reconcile all the pre-tax assessment of UGX 6,292,628,960 to be paid by the defendant.

It is the case for the plaintiff that after diligently rendering the service, Uganda Revenue Authority agreed that the defendant should pay as final f ' tax assessment the sum of UGX 705,665,962 instead of UGX V 6,292,628,960 as earlier assessed. The, plaintiff avers that the defendant as part of the plaintiff's fees only paid a deposit of UGX 89,000,000 leaving an outstanding amount of UGX 380,651,598. The plaintiff avers that he is entitled to a remuneration of 8% of the reduced tax liability which is equivalent to UGX 469,651,598 as agreed with the defendant.

The defendant denies the claim of the plaintiff and contends that the plaintiff was instructed to provide consultancy services for an agreed fee for which he was paid UGX 89,000,000. The defendant counterclaimed against the plaintiff for breach of the contract and for special and general damages. The defendant averred that it had to engage a new consultancy M/s T & B Tax Consultants to complete the plaintiff's assignment at a cost of UGX 31,000,000. The defendant pleaded particulars of breach by the plaintiff including failure to complete the services for which he was contracted and being adequately remunerated, failure to handover documents after termination of the contract and failure to refund the amounts paid.

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The plaintiff in reply to the Counter claim contended that judgment be entered in his favour for the admitted sums of UGX 31,000,00.0/= under Orderl3 rule 6 of the Civil procedure rules. The plaintiff also contended that the defendant never gave them notice for the alleged breach of contract. It was further averred for the plaintiff that, the agreement between the defendant and M/s T & B Tax Consultants was a sham and an afterthought by the defendant to avoid paying.the. plaintiff's agreed fees.: The plaintiff further contended that the counter claim was an afterthought, sham, and ruse and that there was no breach of contract, no failure to handover since there was no termination of contract and no refund was ever demanded.

The following issues were framed for determination

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- 1. Whether the plaintiff completed the work as instructed by the defendant - 2. Whether the plaintiff was sufficiently remunerated for his services by the defendant. - 3. Whether the parties are entitled to the reliefs claimed. **<2,0**

At the hearing the plaintiff was jointly represented by Davis Ndyomugenyiof Davis Ndyomugenyi & Company and Andrew Kibaya of Shonubi, Musoke & Co. Advocates while the defendant was represented by Deepa Verma of Verma Jivram & Associates. Mr C. Birungyi gave evidence for the plaintiff while Mrs Fiona (aka Zia) Uwera gave evidence for the defendant company

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### **Issue No.l: Whether the plaintiff completed the work as instructed by** the defendant

The Plaintiff Cephas Birungi testified that as a Tax Consultant he was engaged by the defendant on or around the 11th September 2008 to manage, audit and advise the defendant on how to reduce the tax liability owed to the Uganda Revenue Authority in the sum of UGX 6,297,628,960 which had been imposed by URA in a post customs clearance audit, for the period January 2005 to December 2007. He testified that defendant's said tax liability had previously been referred to M/s FCK & Associates-tax consultancy who did not succeed on the same. That upon receipts of instructions from the defendant's various officials, who included Ms. FIONA UWERA and Mr. ANIL DAMANI, he communicated to the defendants that his consultancy fee would be 8% of the difference between the imposed tax obligation of UGX 6,297,628,960 and the tax finally agreed and accepted to be paid to URA. Mr. Birungi Cephas further testified that his fee notice was served on and received by the defendant.

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£5 He further testified that he held a meeting on 8th October 2008 with the defendant's officials namely KENNETH OTIM, BHAVSAR PANKAJ and FIONA UWEERA; during which they discussed the nature of the instructions, problems and modalities for his work programmes. Mr. Birungi testified that in execution of his instructions, Mr. Jacob Ngobi (an expert working with him on the assignment) and him prepared and generated communications and responses on behalf of the defendant to the URA and forwarded them to the defendant. It was agreed between

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them, that is, himself, Fiona Uwera and Bhavsar Pankaj that the defendant would use its headed paper in communications to URA.

**Io** Mr. Birungi testified that the defendants made part payment/deposit of his fees on the 4th and 15th October 2008 and 15th October 2009. He 5 stated that he made several attendances to various URA offices and officers in order to execute his instructions; he diligently executed the defendant's tax liability of UGX 6,292,682,960 which was significantly " reduced to UGX 705,665,962. It is Mr. Birungi's testimony that after noticing a very remarkable and favourable reduction on the heavy tax liability that the defendant abruptly and without any explanation/excuse stopped responding to his financial demands (agreed fees) since he was about to handover the financial report.

Counsel for the plaintiff submitted that since the measure of the performance was to provide tax consultancy services with a view to •\$ reducing the URA assessments, it was sufficient to show that the work was done that lead to a reduction in tax. He further submitted that it was not denied that the tax liability was reduced.

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**th as** Counsel for the plaintiff submitted that by the letter dated 29l" June 2009, from the URA the tax due were reduced from the earlier assessed sum of UGX 6,297,682,920/= to UGX 705,665,962. It was further submitted on behalf of the plaintiff that even if it were sufficiently and properly shown that the sum was reduced to only UGX 1,695,171,060/= as alleged by the defendant, the plaintiff discharged his obligations under the instructions.

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For the defendant company Mrs Fiona Uwera (zia) testified that, between late 2008 and early 2009, they orally instructed the plaintiff to carry out a tax consultancy for the period January 2005 to December 2008 at areasonable fee. She further testified that the actual consultancy fee however was never agreed upon but they suggested that the plaintiff would be paid for each assignment completed. She testified further that the plaintiff never completed the assignment and that he was adequately compensated in the total sum of UGX 89,000,000 for the assignments that were completed the assignment in April 2009 when they failed to agree the payment of the consultancy fee at a rate of 8% and by the time the plaintiff abandoned the work the outstanding tax liability had only been reduced to UGX 1,695,171,060. It was her evidence that the plaintiff.abandoned

IS Mrs. Fiona Uwera further testified that the defendants subsequently engaged another consultant Mr. Moses Turyagenda t/a M/s T and B consultants to do the work and paid him UGX 31,000,000 who further reduced the tax liability from UGX 1,695,171,060 to UGX 706,665,962.

Counsel for the defendant submitted that the plaintiff abandoned work and refused to hand over the documents given to him in connection to the assignment. She further submitted that by the time, the plaintiff had abandoned his assignment the defendant's tax liability stood at UGX 1,695,756,881 and that it could not be reduced any further.

Counsel for the defendant submitted that notwithstanding this reduction that the defendants still disagreed with the reduced assessment after which the plaintiff absconded from the work and did not engage in further correspondence. By the plaintiffs last correspondence to the

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defendant which was in February 2009, he had claimed that the defendant's tax liability was UGX 1,300,000,000.

Counsel for the defendant further submitted that the URA letter dated 29th June 2009 which shows the final tax payable and the timelines $\varsigma$ involved are those when the plaintiff had abandoned his assignment which is overwhelming evidence to negate the presumption that the plaintiff was responsible for arriving at the final tax position.

Counsel for the defendant also submitted that part of the terms of the assignment given to the plaintiff had been to specifically convince URA to waive the penalty imposed on the defendants as he had done for his other clients on previous engagements however this was not achieved in the end.

It was counsel for the defendant's submission that the foregoing coupled with the failure without reasonable excuse to arrive at an agreeable tax figure, failure to have a penalty waived, failure to account for the monies disbursed, abandonment of the work and blatant refusal to hand over documents when required all showed that the plaintiff never completed 20 the work and that amounted to breach of contract.

I have considered the pleadings, the evidence before me and the submissions of counsel for the Plaintiff and defendant for which am grateful.

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It appears to me that a resolution of this issue is a question of fact. The determination of facts is an evidential one for which the burden of proof is that of a balance of probabilities.

5 io To determine whether the plaintiff completed the work assigned to him is factor of what he was actually contracted to do. As it is the assignment was not reduced into writing and so there is no written contract. However existence of an oral contract between the parties is not in doubt. As to the terms of the said contract one would have to gather that from whatever documentation and other credible oral evidence that Court may be able to obtain.

On this point the learned author of **Treitel on the Law of Contract** 12th Edition page 19 writes as follows:

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*"When parties carry on lengthy negotiations, it may be hard to say exactly when an offer has been made and accepted. As negotiations progress, each party may make concessions or new demands and the parties may in the end disagree as to whether they had ever agreed at all. The court must then look at the whole correspondence and decide whether, on its true construction, the parties had agreed to the same terms. If so, there is a contract even though both parties, or one of them, had reservations not expressed in the correspondence. The Court will be particularly anxious to reach such a conclusion where the performance which was the subject matter of the negotiations has actually been rendered." (Emphasis mine).*

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Ultimately it will boil down to one party's word against the other and who among them is more believable. The real cause of this dispute is the informality with which the whole assignment, though quite involved, was carried out.

According to the evidence on record, it is clear to me and both parties agree that the scope of the work was to reduce the tax liability of the defendant though no target figure was set.

lo **IS** It is also clear from the evidence that by a URA letter dated 29th June 2009 the tax liability of the defendant company eventually came down from the earlier assessed sum of UGX 6,297,682,920/= to UGX 705,665,962. The letter however does not make it clear who was responsible for this reduction other than it being a result of dialogue. There is an email sent to the defendant by the plaintiff dated 5th February 2009, the where the plaintiff stated,

*"...pse note that the final bill will be 1,300,000,OOO/ush therefore the fee becomes 8\*(6,297,682,960/-l,300,000,000/)/100= 399,814,636/ less advances."*

This e-mail appears to have been the last communication from the plaintiff to the defendant as to the anticipated reduction in their tax liability.

**XS** There is also evidence that the defendant's concede that the plaintiff helped reduce their tax liability but only to UGX 1,695,756,881.

I am unable to find any evidence which points to a specific assignment to reduce penalty as it would appear to me that the issue of penalties was

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an integral part of the assessed tax of UGX 6,297,682,920/= and by reducing the tax liability as a whole, the penalties would as well be reduced as the penalty is dependent on the tax assessed.

**I** therefore find in answer to the first issue that the plaintiff completed the work as instructed by the defendant which was to reduce the tax liability of the defendant. Whether the final assessed figure was UGX 1,695,756,881 or UGX 705,665,962 is a different matter to be resolved under the second issue.

## **Issue No. 2: Whether the plaintiff was sufficiently remunerated for his** services **by the defendant.**

**2\_o** The parties in this dispute do not agree as to what was the agreed fees payable by the defendant to the Plaintiff. As stated before it is the case for the plaintiff that the his fee would be 8% of the difference between the imposed tax obligation of UGX 6,297,628,960 and the tax finally agreed and accepted to be paid to URA. The plaintiff testified that his fee of 8% was never contested in writing. The plaintiff does not agree that he abandoned the work and further doubts that the defendant engaged another firm to complete his assignment.

Counsel for the Plaintiff submitted that no other consultant was in fact ever appointed to do the work that the plaintiff was retained to do. Counsel for the plaintiff referred to an agreement between the defendant and the new consultant M/s T & B Consultants appearing at pages 11 and 13 of the defendants trial bundle to prove that another person/consultant was brought to handle the matter. Counsel for the

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5 **|O** plaintiff submitted that the said documents at page 13 of the Defendants trial bundle (invoice) clearly showed that M/s T& B consultants was paid UGX 31,000,000/= being payment for tax consultancy services of domestic taxes for the period 2008-2010 and yet the period in respect of this suit is 2005-2007; which is very different. Counsel for the plaintiff further submitted that no one from M/s T & B consultants were not called to testify as to what they did or be cross examined in that respect. Counsel for the Plaintiff relied on case of **J. K Patel v Spear Motors S. C. C. A** ' **No. 4** of 1991 for the proposition that the failure to call as a witness should count against the Defendant. In the foregoing case, it was held by Seaton **JSC** as then he was that,

*"...the parties' evidence at the trial showed that the defendant's general manager was a key witness in this case. But since the defendant refused to call him as a witness, an adverse inference would be drawn against the defendant."*

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**2.0** The defendant on cross examination testified that the parties disagreed . on the 8% as the plaintiffs fee and agreed on UGX 125,000,000 as a flat fee. She testified that another consultant was engaged to complete the work and was paid UGX 31,000,000 and so the plaintiff was not entitled to more remuneration.

Counsel for the defendant while conceding that the plaintiff did some work in reducing the defendant's tax liability submitted that the parties did not agree on the 8% proposal of the plaintiff which should not be imposed on them. On the contrary, a flat rate of UGX 125,000,000 was agreed and it was the basis on which the plaintiff was paid. She further submitted that it was an agreed fact that the plaintiff was paid UGX

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89,000,000 by the defendant for his contribution. Counsel for the defendant relied on the case of **Felthouse v. Bindley (1862)11 CBNS869** in support of the proposition that an offeror may not arbitrarily impose a contractual liability upon offeree merely by proclaiming that silence shall be deemed consent. Counsel for the defendant submitted that the failure of the defendant to respond to the 8% proposal made by the plaintiff was not by any stretch of imagination to be construed as acceptance of it. . *f f*

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**IO (5** *Zo* Counsel for the defendant distinguished the instant facts with the case of **Buildtrust Constructions Limited v. Martha Rugasira HCCS No. 288 of 2005** where I held that, *'where a person derived a benefit from another, like in this case...and retains that benefit, the common law will not allow that person to retain the benefit without compensation on grounds that it is outside the terms of the contract.'* Counsel for the defendant noted that in the instant case, there was neither a written agreement as to the consultancy nor subsequent variation thereto. Counsel acknowledged that the plaintiff helped to reduce the defendant's tax liability from UGX 6,297,962,960 to UGX 1,695756,881 for which he was paid UGX 89,000,000. Counsel further observed that what the plaintiff was paid ) amounts to quantum meruit and that the UGX 89,000,000 paid to the plaintiff was sufficient for his contribution in reducing the tax liability to UGX 1,695756,881 although the defendant ultimately paid UGX 705,665,962/=.

*^5* I have considered the evidence and submission of both counsels on this issue for which I am grateful.

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To my mind last the last issue the resolution of this issue is a determination of fact which is made harder by the absence of a formal agreement.

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5 As written by the learned author of Tireitel **on** the **Law** of **Contract (Supra** Page 19) the court must then look at the whole correspondence and decide whether, on its true construction/the parties had agreed to the same terms. If so, there is a contract even though either parties or one of them, had reservations not expressed in the correspondence. The Court will be particularly anxious to reach such a conclusion where the performance which was the subject matter of the negotiations has actually been rendered.

**IS** As I have already found in the last issue there is no doubt in my mind that performance was rendered and part payment made. As late as 5th February 2009 there was an e-mail from the plaintiff stating that his fees were based on the 8% rate. On the other side there is no similar e-mail on the flat rate of UGX 125,000,000/=.

**lo** 2-5 The situation becomes even more curious when one studies the pleadings of the defendant. According to paragraph 4 of the amended written statement of defence and counterclaim the defendant indicates the agreed fee was UGX 120,000,000/= of which 89,000,000/= was paid. However according to the evidence of Fiona Uwera and the submissions on page 6, the defendant seems to say that the agreed sum was UGX 125,000,000 of which UGX 89,000,000/= was paid. This is clearly an inconsistency and evidence which a departure from the pleadings. Parties

are bound to their pleadings and cannot depart from them without amendment. There was no amendment here.

All in all it appears that on the issue of the rate of fees to be paid the evidence of the plaintiff is clearly more credible and I accordingly accept **it.**

I further agree with Counsel for the plaintiff that the new consultants by virtue of their agreement with the defendant shows that they, were engaged for a totally different period. (2008-2010) compared with , the *(* assignment given.to the plaintiff (2005-2007). I therefore do not find that M/s T & B Consultants finished the work of the plaintiff.

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As to the amount of tax reduction it is clear that the relationship between the parties broke down when the tax liability was between UGX 1,695,756,881 and UGX 1,300,000,000. That was somewhere between February and April 2009. It is also clear in my mind that a final tax position of UGX 705,665,962 was not arrived at by the URA until the 29th June 2009. The timelines suggest that both parties got even better than they expected and logically the plaintiff must be credited for this. A difference of two to four months does not suggest an alternative intervention.

The remuneration due to the plaintiff would therefore be 8% of the difference between UGX 6,297,962,960 and UGX 705,665,962 (i.e. UGX 5 592,296998 which is UGX 447,383,759.84) and less the advance ' payment of UGX 89,000,000/= (which is UGX 358,383,759.84).

As regards the counterclaim of UGX 31,000,000 it is my finding that the said amount is not supported by the evidence on record and it's accordingly rejected.

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**Issue No. 3: Whether the** parties **are entitled to the reliefs claimed.**

The plaintiff prayed for special damages of UGX 380,651,598 and interest at 30 *%* from the date of breach till payment in full and costs.

of UGX 358,383,759.84 which I hereby grant. I find that of the sum prayed for the plaintiff has proved special damages

io As for interest I find that the amount prayed for is excessive and I hereby grant interest at 21% pa from the date of filing the suit until payment in full.

**IS** Costs follow the event as provided for under section 27 of the Civil Procedure Act. However this case was made significantly harder because no written agreement was made which is strange since the plaintiff and h is consultancy team operate a law firm one would have expected better preparation. Furthermore no formal fee note was written which too would have eased the work of the court. Given the level of informality in | . this case I will award the plaintiff 2/3 of his taxed costs.

Justice Geoffrey Kiryabwire

**JUDGE**

Date: 06/06/13

06/06/13 9:35

Judgment read and signed **in** open **court in the presence** of;

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- Deepa Verma for Defendant

- A. Kyakuwa h/b A. Kibaya for Plaintiff

In court

- O. Kamusiime for Plaintiff - Rose Emeru Court Clerk

Geoffrey Kiryabwire **JUDGE**

Date: 06/06/2013