Development Finance Co. (U) Limited v Uganda Polybags (Civil Appeal 58 of 1999) [2000] UGCA 31 (5 January 2000)

# Nation THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OFUGA HOLDEN AT KAMPALA

#### HON. MR. JUSTICE G. M. OKELLO, JA CORAM:

CIVIL APPEAL NO. 58 OF 1999 (Reference on Taxation)

#### BETWEEN

### DEVELOPMENT FINANCE }:::::::::::::::::::::::::::::APPLICANTS CO (U) LTD. AND 2 OTHERS}

#### AND

## UGANDA POLYBAGS::::::::::::::::::::::::::::::::::::

### RULING OF G. M. OKELLO, JA.

This is a reference on taxation brought under rule 109 $(1)$ $(3)$ and $(5)$ of the Court of Appeal Rules Directions, 1996. It challenges the decision of the Registrar of this Court as a Taxing officer, delivered on 26/11/99 allowing to the respondent instruction fee of shillings 150 million in Civil Appeal No. 24 of 1999.

The background facts to the reference are that the respondent, a company in receivership, sued the applicants in the High Court Civil Suit No. 105 of 1999 challenging the Receivership. The applicants applied for security for costs which the High Court ordered to be shillings 8 million to cover the costs of all the three applicants in defending the suit. The applicants were aggrieved by that order and they all appealed to this Court on the ground that the sum awarded to secure their costs was

inadequate. They prayed that it be increased to 37 8 million shillings per applicant thus totaling to Shs' I l3'4 million for all the three'

Therespondentalsocross-appealedonfourgtoundsinteraliathatthe order for security for costs be set aside or in the alternative that the amount ordered be reduced. The court of Appeal heard the appeal and the cross-appeal and dismissed them both: the main appeal with costs to the respondent and the cross-appeal with costs in favour of the applicants.

Subsequently,counselfortheapplicantsfiledthreebillsofcostssetting instruction fee at Shs. l8m for each ofthe applicants Counsel for the respondent also filed the respondent's bill ofcosts setting Shs'350 million for instnrction fee.

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on26lll|lgg,theTaxingofficerdeliveredhisrulingallowingShs. 5,056,000/= as costs for all the three appiicants. His reasolr was iirai the applicants instructed one counsel and were therefore entitled to only one bill of costs. on the other hand, he allowed the sum of shillings <sup>150</sup> million as costs for the respondent. It was this order that prompted this reference.

There is only one reason for the reference: that the taxing officer's award of she. 150,061,800/= to the respondent as instruction fee was manifestly excessive and erroneous in law and in principles because he wrongly based his taxatioD on She. 4.7 billion as the value of the subject matter on appeal. Mr. Christopher Bwanika who spoke for counsel for the applicants criticised the Taxing Offrcer for basing his taxation on that figure because though that was the alleged value of the subject matter of the suit before the High court, it was not the value of the subject matter on appeal. 'i

In his view, the subject matter on appeal was the amount of security for costs which the High court had put at Shs. g million but which the applicants wanted increased to I13.4 million.

one of the factors for consideration when dealing with taxation as set out in Paragraph 9 (2) of the Third Schedule to the Court of Appeal Rules is the value of the subject matter involved. In the instant case, the taxing officer's finding on the value of the subject matter on appeal went as follows:-

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"From the findings of the Judge of the High Court that the value of the assets of the property in dispute was Shs. 4.7 billion and for the fact that Mr. Bwanika, Counsel for the Appellants, submitted that Shs. 4.7 billion touchcs ijre merits of the main suit clearly indicates that the pecuniary the parties are fighting for in the main suit in the appeal is worth Shs. 4.7b "

With respect to the leamed Taxing Officer, that was in my view, <sup>a</sup> misdirection. The subject matter on appeal was not the assets in dispute before the High court. It was the amount to secure the applicants' costs in defending the suit. The High court put the amount at shillings <sup>g</sup> million though the applicants wanted it increased to Shs.ll3.4 million The value of the subject matter on appeal was therefore Shs. g or 113.4 million.

Mr. Muhwezi tried to justiff that frnding of the taxing Officer on the ground ofinterest ofthe parties. He argued that ifthe appeal against the

order ofShs. 8 million as security for costs had succeeded and the amount increased to Shs. 113.4 million, the respondent's suit worth 4.7 billion shillings would have been dismissed as the respondent would not have afforded the amount. Consequently, he would have lost property worth shs. 4.7 billion.

Though I agree that interest of the parties is one of the factors to be considered in taxation of costs, I am unable to buy this argument as it is speculative The immediate interest of the parties lay in the amount that was to be set as security for costs and not in the value of the subject matter of the suit. The issues in the suit were still pending before the High Court.

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Mr. Muhwezi fi:rther argued that counsel for the applicants had put in <sup>a</sup> skeleton bill of costs setting instruction fee nf shillings 200,000,00d/: based on the value of the subject matter of the suit at 2.49 billion shillings. He submitted that the instruction fee in, the skeleton bill of costs was much higher than that allowed by the Taxing officer. In his view, the Taxing officer was justified in making that award having regard to that skeleton Bill of costs.

I think that that comparison is yet another product of misdirection. The skeleton Bill of costs projected the instruction fees based on the subject matter in dispute at the hial. This was allegedly valued at 2.49 billion shillings. [n the case before us, the value of the subject mater on appeal as stated above was either 8 or I13.4 million shillings.

For the reasons given above, I find that the taxing officer erred when he based his taxation on the value of the subject matter that was not on appeal and awarded instruction fees that were so high as to ?moutrt to an injustice.

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As stated in Premchand Raichand LTD. Vs. Quarry Services [1972] EA 162, this Court has power to interfere with the Award if it is so high or so low as to amount to an injustice to the parties. The award of instruction fees of Shs.150m to defend an appeal worth Shs.8 million is, to say the least, outrageously high. Even to allow instruction fees of shs.5m to defend a cross appeal of the same value is so high as to amount to an injustice. At that trend, access to Court would soon be restricted only to the wealthy. This violates the principle which prohibits sky rocketing fees making access to court unmanageable by the less wealthy.

It is desirable under practice principles that award should, where practicable, be consistent. In the instant case, I have considered **Bank of** Uganda Vs Transroad Ltd., Civil Appeal No. 3 Of 1997 [SC] (unreported). In that case, the value of the subject matter in dispute, was US Dollars 5,533,550.80 and the instruction fees of shs.360m was allowed. This instruction fee is about 8-9% of the value of the subject" matter in dispute. In SIETCO Vs. Noble Builders, Civil Appeal No.31 of 1993 [SC](unreported), where the value of the subject matter in dispute was US Dollars 2.9m, the instruction fees of Shs.330,068,500 was allowed. This instruction fees is about 10% of the value of the subject matter in dispute.

From those cases, it can be deduced that an Instruction fees which ranges from 8-10% of the value of the subject matter in dispute is reasonable. The difference would account for the nature of the case, it's complexity and the interest of the parties.

In the instant case, the value of the subject matter on Appeal was Shs.8m? in my view, instruction fees of shs.1m to defeat the Appeal and Shs.800,000 to defend the cross Appeal of the same value would be

reasonable taking into account the nature of the Appeals, their complexity and the interest of the parties. As stated above, the appeal was against the amount ordered as security for the costs. Similarly, the cross appeal was about the same.

Mr. Bwanika critisised the taxing officer for treating the three applicants as one and yet they had individually instructed the advocate and were entitled to separate bills of costs. I find no merit in this criticism because one Advocate handled the case of the three applicants jointly in one proceedings, their grievance being the same. The Taxing Officer was therefore justified to treat them as he did.

In the result, I allowed the reference and set aside the orders of the Taxing Officer with regards to the instruction fees. In their places I substitute instruction fees of shs.1m to defend the appeal and shs.800,000 to defend the Cross Appeal. The respondent shall pay the applicants costs of this reference. $\cdot$

Dated at Kampala this... $\mathcal{G}_1$ <br>Dated at Kampala this... $\mathcal{G}_1$ lan 2000.

G. M. OKELLO

JUSTICE OF APPEAL