El Bueno Technologies Limited v Insolx Ingeniera S.A (In liquidation) & Another (Miscellaneous Application 432 of 2022) [2024] UGCommC 161 (3 May 2024)

| 5 | THE REPUBLIC OF UGANDA<br>IN THE HIGH COURT OF UGANDA AT KAMPALA<br>[COMMERCIAL DIVISION]<br>MISCELLANEOUS APPLICATION NO. 432 OF 2022<br>[ARISING FROM CIVIL SUIT NO. 256 OF 2022] | | | |----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|-------------| | | | | | | | | | | | | | | | | | | | | | 10 | EL BUENO TECHNOLOGIES LIMITED | ] | APPLICANT | | | VERSUS | | | | 15 | 1.<br>INSOLX INGENIERA S. A [IN LIQUIDATION] | ] | | | | 2.<br>UGANDA ELECTRICITY TRANSMISSION | ] | RESPONDENTS | | | COMPANY LIMITED [UETCL] | ] | | | | | | |

**Before: Hon. Justice Ocaya Thomas O. R**

## **RULING**

# **Introduction**

This is an application brought under Section 126(2)(d) of the Constitution of Uganda, Section 25 33 of the Judicature Act, Section 98 of the Civil Procedure Act, Order 40 Rule 5 and 12 of the

Civil Procedure Rules SI 71-1.

The Application seeks the following reliefs:

(a) The 2nd Respondent deposits in court a total sum of USD 300,000 being a portion of

- 30 the funds the 2nd Respondent received when it cashed the performance bond guarantee issued by Ecobank (U) Limited in favour of the 1st Respondent in respect to the contract for the interconnection of Electric Grids of Nile Equatorial Lakes Countries (Uganda Part- Lot C) as security for due performance of the decree likely to be granted by court in the main suit against the 1st Respondent. - 35 (b) Costs of this application be provided for.

### 5 **Background**

The Applicant filed HCCS 256/2022 against the Respondents jointly and severally seeking recovery of USD 191,462.60 as special damages, general, punitive and exemplary damages estimated at USD 300,000.

The Applicant contends that:

- 10 (a) The 1st Respondent is undergoing insolvency proceedings in Spain and it remains undischarged to date. - (b) The Republic ofSpain does not have a reciprocal enforcement agreement with Uganda that would allow for the enforcement of court judgments in Spain. - (c) The 1st Respondent, with intent to obstruct or delay the execution of any decree that 15 may be passed against it quit the Jurisdiction of Uganda leaving only one asset namely money cashed by the 2nd Respondent from the performance guarantee by Ecobank (U) Limited in favour of the 2nd Respondent. - (d) The 2nd Respondent is duty bound to account to the 1st Respondent for the money received as a result of cashing the performance guarantee and remit the unspent 20 balance to the 1st Respondent. - (e) The Applicant shall not be left with a reasonable means to recover or enjoy the fruits of litigation if the reliefs sought are not granted. - (f) It is in the interests of justice that this application be allowed. - 25 The 1st Respondent declined to enter appearance in the present proceedings. However, the 2nd Respondent opposed the present application, and contended that: - (a) The 2nd Respondent is a company wholly owned by the Government of Uganda ["GOU"] and is licensed by ERA to, inter alia, purchase, transmit and sale/supply bulk electricity. The 2nd Respondent also has the mandate to construct and maintain 30 electricity transmission lines. - (b) On 29 November 2012, the 1st and 2nd Respondents executed a contract in respect of the interconnection of electric grids of Nile Equatorial Lakes Countries (Uganda Part-Lot C for the construction of substations for the interconnection of Uganda-Kenya and Uganda-Rwanda electricity grids.


- 5 (c) The above project was funded by the Africa Development Bank and Japanese International Cooperation Agency. - (d) Under the contract for the above project, the 1st Respondent was required to secure advance payment guarantees of UGX 6,331,610,759, USD 1,793,575.80 and Euros 1,979,307.60. Additionally, the 1st Respondent took out a performance guarantee of 10 USD 3,000,000 as security for the performance of the contract. - (e) The 1st Respondent secured the above guarantees and accordingly, the 2nd Respondent made a payment of UGX 6,331,610,759, USD 1,793,575.80 and Euros 1,979,307.60 to it as a payment at the start of the project and the above monies would be deducted on claims/payables of/to the 1st Respondent. - 15 (f) In July 2017, the 2nd Respondent was notified that the 1st Respondent had applied for bankruptcy and proceedings in respect of the same were ongoing in Spain. - (g) The 2nd Respondent, in light of the above, cashed the above stated performance guarantee and terminated the contract with the 1st Respondent. - (h) Thereafter, the 2nd Respondent undertook a procurement process where it contracted 20 with the Applicant and other contractors to undertake the above project which was "abandoned" by the 1st Respondent. - (i) The Applicant is not an assignee of the 1st Respondent but a separate contractor engaged under a separate contract. - (j) The 2nd Respondent was unable, through cashing of the guarantee, to recover all the 25 sums advanced to the 1st Respondent and the proceeds recovered left a deficit of UGX 2,000,000,000. - (k) Accordingly, there is no money due and owing to the 1st Respondent. - (l) The 2nd Respondent doesn't hold any monies due to the 1st Respondent since there was a direct payment system where the banks made payment only against verified, - 30 legitimate, uncontested and unencumbered claims of the 1st Respondent and the bankers paid all the verified invoices of the 1st Respondent leaving no sum outstanding. - (m) The 2nd Respondent exercised its contractual right to cash the guarantee, which was the only remedy available to it as against the 1st Respondent and in so doing 35 saved public funds from waste/loss.

5 (n) The 2nd Respondent doesn't possess USD 300,000 for purposes of depositing the same in this court as security for due performance.

(o) If the application is granted, the same will lead to nationwide load shedding, stalling of very important government projects and enormous loss of public funds owing to failure to complete the said projects as the 2nd Respondent will not have sufficient 10 project funds to undertake its mandate.

- (p) Courts ought to be reluctant to grant orders that will cause enormous financial loss/loss of public funds. - (q) The present application is an abuse of court process and sub-contractors of the 1st Respondent have filed numerous actions against the 2nd Respondent in the quest to - 15 rip GOU of the project funds. - (r) The 2nd Respondent was on compelled to deposit USD 651,511 as security for due performance and it has accordingly exhausted all monies it had secured for the project. - (s) The 2nd Respondent legally and justifiably obtained monies on account of a 20 performance guarantee issued in its favour by the 1st Respondent. - (t) The monies from the performance guarantee are not a debt to the applicant entitling recovery and the 2nd Respondent is neither liable for any breach of the sub contract(s) nor does it have a contractual relationship with the Applicant/sub-contractors. The 2nd Respondent has no legal obligation to share with the applicant monies secured by 25 the guarantee, the 2nd Respondent cashed the guarantee in accordance with the principal contract for which the Applicant was neither a party or beneficiary and a 3rd - (u) The 2nd Respondent, being wholly owned by GOU, is capable of compensating the Applicant should it succeed in the main suit.

party cannot lodge a claim for money that was validly used to implement a project.

30 (v) The Application is without merit.

In rejoinder, the Applicant contended thus:

(a) For the 1st Respondent to obtain payment, there has to be proof of a particular activity or milestone on the project and the issuance of a certificate confirming 35 completion of a particular activity among others.


- 5 (b) At the time of termination of the contract by the 2nd Respondent, a number of milestones had been achieved by the main contractor and no interim certificates had been issued for the same. - (c) The non-completion of some milestones and non-issuance of certificates of completion means that there was money that was unpaid to the 1st Respondent 10 which is separate from the money encashed from the performance/advance payment guarantee. - (d) The sub-contractors who were engaged to finish the project were paid from the unutilized project funds and not from the monies encashed from the performance/advance payment guarantees. - 15 (e) The 2nd Respondent has not asserted that the 1st Respondent was overpaid for the works done by it confirming that funds equivalent to the outstanding works left behind by the 1st Respondent are at the disposal of the 2nd Respondent. - (f) The 2nd Respondent has a separate vote where funds to cover allowances, subsistence and advances on account are appropriated by parliament.

#### 20

### **Representation**

The Applicant was represented by M/s Emoru & Co. Advocates while the 2nd Respondent was represented by Counsel from its Legal Department. The 1st Respondent did not enter appearance in the present proceedings.

# **Evidence and Submissions**

The Applicant led evidence by way of an affidavit in support and an affidavit in rejoinder deponed by Hilary Twesiga, the Applicant's Managing Director. The 2nd Respondent led evidence by way of an affidavit in reply deponed by Innocent Owino, the Contract Manager-

30 Civil in respect of the interconnection of electric grids of Nile Equatorial Lakes Countries (Uganda Part- Lot C for the construction of substations for the interconnection of Uganda-Kenya and Uganda-Rwanda electricity grids project. As earlier stated the 1st Respondent did not enter appearance and therefore did not lead evidence.

5 Both the Applicant and 2nd Respondent filed submissions in support of their respective cases. I have considered all the submissions of the parties before coming to the ruling below, suffice to say that I have not seen the need to reiterate the same below.

## **Decision**

10 The present action is substantially founded on **Order 40 Rule 5** of the Civil Procedure Rules. The above stated provision reads thus:

"(1) Where at any stage of a suit the court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him or her—

15 (a) is about to dispose of the whole or any part of his or her property;

(b) is about to remove the whole or any part of his or her property from the local limits of the jurisdiction of the court; or

(c) has quitted the jurisdiction of the court leaving in that jurisdiction property belonging to him or her, the court may direct the defendant, within a time to be fixed by it, either to furnish

20 security, in such sum as may be specified in the order, to produce and place at the disposal of the court, when required, the property or the value of the property, or such portion of it as may be sufficient to satisfy the decree, or to appear and show cause why he or she should not furnish security.

(2) The Plaintiff shall, unless the court otherwise directs, specify the property required to be

25 attached and the estimated value of the property.

(3) The court may also in the order direct the conditional attachment of the whole or any portion of the property so specified."

The object is to safeguard the interest of the Plaintiff, if the court is satisfied that ultimately 30 when a decree is going to be obtained by the Plaintiff he may not be able to realise the fruits of the decree. The intention is to prevent any Defendant from defeating the realisation of the decree that may ultimately be passed in favour of the Plaintiff, either by attempting to dispose of, or remove from the jurisdiction of the court, his movables or because the item is subject to speedy and natural decay. The main aim is to preclude the Defendant from alienating or

35 transferring the property before the conclusion of the trial. Attachment before the Judgment


- 5 is considered a very harsh remedy because it substantially interferes with the party's property rights before the final resolution of the overall dispute. During the pendency of the suit, a party is normally entitled to carry on its ordinary course of business, and if business takes a turn for the worse and there is no money left by the time a 10 judgment is granted, that is too bad for the applicants. See **Ssengendo Paul & Anor v Pio Crypto Centre** - 10 **Investment Limited & Anor HCMA 345/2021, Nobert Kahiire v Richard Lutaaya HCMA 1617/2021, Bahman (Prince Abdul) Bin Turki Al Sudairy v. Abu Taha, [1980] 3 ALL ER 409 at 412.**

The rationale behind an order of this nature was explained in **Polly Peck International plc** 15 **v. Nadir (No 2) [1992] 4 All ER 769, 785g-786a**, as follows:

"So far as it lies in their power, the courts will not permit the course of justice to be frustrated by a Defendant taking action, the purpose of which is to render nugatory or less effective any judgment or order which the applicant may thereafter obtain. It is not the purpose of [the] injunction to prevent a Defendant acting as he would have acted in the absence of a claim

- 20 against him. Whilst a Defendant who is a natural person can and should be enjoined from indulging in a spending spree undertaken with the intention of dissipating or reducing his assets before the day of judgment, he cannot be required to reduce his ordinary standard of living with a view to putting by sums to satisfy a judgment which may or may not be given in the future. Equally, no defendant, whether a natural or a juridical person, can be enjoined in - 25 terms which will prevent him from carrying on his business in the ordinary way or from meeting his debts or other obligations as they come due prior to judgment being given in the action. Justice requires that defendants be free to incur and discharge obligations in respect of professional advice and assistance in resisting the applicant's claims. It is not the purpose of a [the] injunction to render the applicant a secured creditor, although this may be the result - 30 if the Defendant offers a third party guarantee or bond in order to avoid such an injunction being imposed."

A review of the averments in the application do not reveal any allegations against 1st Respondent pointing to an intention to delay or obstruct enforcement of any decree that may

35 be passed by quitting the jurisdiction and leaving the property or being about to remove any

- 5 or all of the alleged property. An applicant seeking to invoke the above order ought to demonstrate an intention to defeat or delay the enforcement of a possible degree against the adverse party and not only that the adverse party has quit the jurisdiction leaving only this property (as this might be case for an application for security). - 10 In this case, the Applicant merely alleged that the 1st Respondent was not solvent and was therefore undergoing bankruptcy proceedings in Spain. It was neither asserted nor demonstrated that the purpose of these proceedings was to frustrate or delay the enforcement of any decree that may be passed against the Respondent. It follows in my view that the present provision is not applicable. - 15

Under **Section 98** of the Civil Procedure Act, the inherent power of court is saved in the following terms;

"Nothing in this Act shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of 20 the process of the court."

These provisions vest the High Court with wide discretionary and inherent powers respectively to grant absolutely or on such terms and conditions as it thinks just, all such remedies as any of the parties to a cause or matter is entitled to in respect of any legal or

25 equitable claim properly brought before it. See also **Kagumaho Musana v Rama and 3 Others HCMA 933 of 2019 and Tullow Uganda Limited & Anor v Jackson Wabyona & Ors HCMA 443/2017, Green Meadow Limited v Patrice Namisono HCMA 1368/2022**.

I am aware of the decision of the Supreme Court in **MS Fang Min v Belex Tours & Travel Ltd**

30 **Civil Appeal No. 1 and 6 of 2013** in which their Lordships held that a party cannot be granted a relief which was not claimed.

In my view, the invocation of court's inherent powers and their subsequent utilization to make an order in the interests of justice do not require pleading. Once the court is satisfied

35 that the circumstances exist for it to invoke its inherent powers in the interests of justice, it can go ahead and make the orders necessary in the interests of justice even if the pleadings ## 5 did not plead the same and pray for the reliefs or orders that the court may grant/issue. See **Stephen Kasako v Christ's Heart Church Limited HCMA 831/2023**

In the present case, the Applicant's circumstances are that it is pursuing a claim against the 1st Respondent which, as far as the pleadings show, does not have any other property in the 10 jurisdiction and is in the middle of insolvency proceedings, the impact of which is that the applicant may be delayed or never enforce the decree if it succeeds. In my view, the court's inherent powers can be exercised to grant the orders sought if it is demonstrated that they are in the interests of justice, notwithstanding that **Order 40 Rule 5** above is inapplicable to the present circumstances.

#### Justice/Propriety of Encumbering Proceeds of Performance Guarantees:

A performance guarantee is a bond taken out by the contractor, usually with a bank or insurance company (in return for payment of a premium), for the benefit of and at the request of the employer, in a stipulated maximum sum of liability and enforceable by the 20 employer in the event of the contractor's default, repudiation or insolvency. The purpose of the performance guarantee in the construction industry is to perform the role of an effective safeguard against non-performance, inadequate performance or delayed performance and its production provides a security as readily available to be realised, when the prescribed event occurs. There are two types of performance guarantees: Conditional guarantees or 25 default bonds, whereby the surety accepts "joint and several" responsibility for the performance of the contractor's obligations under the contract; and Unconditional guarantees or on-demand bonds, which is a covenant by the surety (usually a bank) to indemnify the employer following contractor's default, subject to stated terms. See **DFCU Bank v Abubakar Technical Services & General Supplies Limited HCMA 764/2022,**

30 **Halsbury's Laws of England, 4th Edition, Volume 20, Paragraphs 143-400**

On-demand performance guarantees constitute primary independent obligations placed on a guarantor to make payment of a guaranteed amount. The obligations are independent from the main contract and are usually triggered by a written demand being made on the 35 guarantor. When a performance guarantee is unconditional, and intended to be cash

- 5 equivalent, subject to the exceptions of fraud, unconscionability and express terms to the contrary, it can be called on by the beneficiary upon written demand to the issuing institution, without regard to the underlying construction contract. It is characterised by the absence of any conditions required to make a call on the guarantee other than the making of the call itself. This is what is known as the "autonomy principle. A bank is not concerned in - 10 the least with the relations between the contractor and the employer nor with the question whether the contractor has performed his contractual obligation or not, nor with the question whether the contractor is in default or not, the only exception being where there is clear evidence both of fraud and of the bank's knowledge of that fraud (see **Edward Owen Engineering Ltd v. Barclays Bank International Ltd [1978] 1 QB 159**) - 15

With unconditional performance guarantees, the contractor is not a party to the arrangement. The guarantor will become liable merely when demand is made upon it by the beneficiary with no necessity for the beneficiary to prove any default by the principal in performance of the underlying construction contract. The maxim "pay first and argue later" 20 best describes one of the key principles underlying demand guarantees (see **Ward**

# **Petroleum Corp. v. Federal Deposit Inc. Corp (1990) 903 F. 2d 1299**).

The beneficiary need only have a bona fide claim of a breach of contract; upon the beneficiary asserting the basis of the claim contending that there has been a breach of contract. As 25 between the bank and the employer beneficially such a bond is tantamount to cash in the hand of the employer.

A call on conditional performance guarantees is conditioned upon proven facts establishing a breach. In conditional performance guarantees, the beneficiary must comply with 30 conditions precedent for calling the guarantee. This has the effect of making the call on the guarantee dependant on proving both the contractual liability of the principal as well as loss suffered by the employer as a consequence of the principal's breach. In on-demand performance guarantees, on the other hand, the only condition precedent for calling the guarantee is a written notice to the guarantor.

5 In **DFCU Bank v Abubakar Technical Services & General Supplies Limited HCMA 764/2022**, His Lordship Justice Stephen Mubiru went a long way in explain the purpose of the performance guarantee, especially within the context of construction contracts:

"The performance bond secures the beneficiary from the default of the counterpart. In its standard form, it is the feature of an "on-demand" guarantee to allow the beneficiary to have

10 an almost immediate remedy against the defaults of the principal, because: its payment can be requested to the guarantor without having to prove the actual default of the principal; and its payment can be obtained notwithstanding any objection based on the underlying contract which the applicant itself or the guarantor may raise. A performance bond is arguably beneficial for the employer as it provides a security of usually 10–20 per cent of the contract

15 value, which in theory is cashable on demand regardless of the existence of a dispute."

In **UETCL v Citibank Uganda Limited & Ors HCMA 1397/2020** Justice Stephen Mubiru again substantiated on the character of performance guarantees as below:

- "A guarantee is essentially a promise by a third party to ensure that an obligor meets its 20 liabilities to another. Performance Guarantees enjoy widespread use in the services industry, particularly in construction/engineering projects and international sale of goods contracts, where they are typically used to secure the interests of the supplier for the performance of the consumer's obligation to pay, especially when no previous dealings have taken place between them. It is now common practice for many suppliers in the public and major private - 25 sectors in strong bargaining positions, to demand that buyers provide demand guarantees as security to ensure that the terms of their contract are adhered to. They are versatile instruments that are essential to risk management in credit transactions…. A demand guarantee may be defined as an undertaking given for payment of a fixed or maximum sum of money on presentation to the party giving the undertaking of a demand for payment - 30 (nearly always required to be in writing) and such other documents (if any) as may be specified in the guarantee within the period and in conformance with the other conditions of the guarantee. Most demand guarantees are payable on "first written demand" or "simple demand" without any additional documents. Normally, demand guarantees are not subject to the equitable defences that are available in the case of suretyship guarantees"


5 See **DFCU Bank Limited v Polat Yol Yapi San Vstie AS & Anor HCMA 217/2022, Polat Yol Yapi San Vstie AS v UNRA HCMA 3/2022, Roko Construction Ltd v The Aga Khan University & Anor HCMC 15/2022.**

In my considered view, the proceeds of cashment of a performance bond are typically the 10 property of the employer. Why? The bond is essentially a promissory note by the issuing institution promising to pay to the employer a sum certain in money (or in the context of an unlimited and continuing performance bond), a sum of money contingent on the happening of certain events, typically default. This contract is what is sometimes called a collateral contract in the sense that it is closely related to, and is entered into owing to the existence of 15 the principal construction contract.

Therefore, the property the Applicant ought to have referred to is any payables/debts due to the 1st Respondent from the 2nd Respondent for services provided and not the proceeds of the cashment of performance guarantee since these proceeds are the contractual property of 20 the 2nd Respondent and not the 1st Respondent.

The 2nd Respondent contends that contractually, the 1st Respondent was required to provide advance payment guarantees of secure advance payment guarantees of UGX 6,331,610,759, USD 1,793,575.80 and Euros 1,979,307.60. Which was followed by payment to the 1st 25 Respondent of an advance of the same amount. Notwithstanding the contrary contentions by the Applicant, which I will deal with later, this then means that the only question that remains is whether there is a payable to the 1st Respondent from the USD 3,000,000 performance guarantee. For the 2nd Respondent, it was contended that the sums provided by it and the quantum recovered from the above guarantee was at odds, leaving the 2nd Respondent with

30 an overpayment of UGX 2,000,000,000. This evidence is challenged by the Applicant, which contends that before being engaged as contractors on their own, the 1st Respondent had done works that were not paid.

In my view, the Applicant showed what works it claimed were done under the sub-contract 35 and not paid by the 1st Respondent, it did not show which works were these that were completed and not paid in accordance with the contract between the Respondents. While I

5 recognize that the performance of the Applicant of works may then entitle the 1st Respondent to payment from the 2nd Respondent on certification of works, there wasn't clear evidence led to the quantum that was owing from the 2nd Respondent to the 1st Respondent.

For the 2nd Respondent, it wasn't clear how it overpaid the 1st Applicant for work not done. 10 How could there have been a deficit of UGX 2,000,000,000 if indeed the entire advanced sum was discharged by the cost of works completed and the rest of the works were paid on a stage-by-stage basis once work was done and certified. Moreover, Annexure H to the affidavit in support, at the very least, demonstrates that the Applicant took measures to liquidate performance guarantees to the tune of UGX 3,700,000,000, USD 896,787.90 and Euros 15 1,002,965.70 which is at odds with the guarantee sums quoted above.

In civil proceedings, the burden of proof lies upon the party who alleges and said party must prove their case on a balance of probabilities if they are to obtain the remedies sought. see Lord Denning in **Miller v Minister of Pensions (1947)2 ALL ER 372 at page 373. Section**

20 **101 and Section 103 of the Evidence Act.**

As was held in **Night Nagujja v Namuwonge Agnes & Ors HCMA 1878/2021**, it is not enough for a party to throw unsubstantiated allegations at the court, hoping that the court will fill in the gaps, speculate or use its powers to separate the hay from the chaff. It is trite 25 law that courts base their decisions on evidence and not assumptions, abstractions or innuendos. See Also **Centenary Bank v Federation of Association of Uganda Exporters Limited & Ors HCCS 474/2016.**

In my view, it would have been helpful for the Applicant to demonstrate which 30 works/milestones entitling payment were met/done, certified and not paid for by the Applicant such as to demonstrate that there is a payable to the 1st Applicant which this court, in the interest of justice, ought to attach. This was not proved by the Applicant and I cannot assume it into existence.

35 However, even if the Applicant was able to demonstrate the existence of payables due to the 1st Respondent from the 2nd Respondent, this court would not be inclined to charge the same, 5 or portions of the same and have them paid in court as prayed by the Applicant. As noted above, the 1st Respondent is undergoing insolvency proceedings in Spain. The purpose of these proceedings is to achieve justice for all the creditors of a company by rallying all its assets and distributing them, as fairly as possible among all the creditors. See **Corporate Insolvency Law: Principles and Perspectives, 2nd Edition by Vanessa Finch and Donald**

10 **Korobkin, Corporate Insolvency Law, 2nd Ed, Fiona Tolme**

In insolvency, all assets of the insolvent company, including receivables (which are property) are collected for the benefit of the pool of the company's creditors, and with the exception of secured or priority creditors, the same are usually distributed on a prorate basis. See **Bank**

## 15 **of Uganda and Another v Kaweesi Sulaiman and Others HCMA 1047/2022, Johnson v. Gore Wood & Co [2001] 1 All ER 481.**

In my view, it would be unfair to the insolvency process, and all the creditors, to attach before judgment one asset for the satisfaction of the possible judgment in favour of the Applicant 20 and yet the applicant has a contingent debt (a debt which may or may not accrue depending on the judgment) and is also, perhaps like a couple of other creditors, an unsecured creditor in the event judgment goes their way. It is better for the Applicant to pursue its claim, and if it succeeds, proceeds to pursue its claim in the insolvency process involving the 1st Respondent.

In my view, granting the reliefs sought would have the effect of converting the Applicant, a holder of a contingent debt, into some sort of secured or priority creditor with a special pool of the 1st Respondent's assets to utilize to meet its claim, which would be unfair to the rest of the 1st Respondent's creditors. Whereas it is possible that the principles of corporate

- 30 insolvency applicable in Uganda, and highlighted above, may not applicable in the proceedings involving the 1st Respondent, I nonetheless take the view that the Applicant should, if its claim succeeds, claim as a creditor in the insolvency process in Spain, rather than tie down any assets of the 1st Respondent as this would greatly prejudice other creditors. - 35

#### 5 Assignment

The Applicant contends that all the sub-contracts were assigned to the 2nd Respondent by virtue of the termination notice dated 18 May 2017 and in accordance with Clause 7.4.5(d) of the General Conditions. This is at odds with the submissions of the 2nd Respondent that the Applicant was engaged in its own right.

A contract creates rights and obligations only as between the parties to such contract. A third party neither acquires a right nor any liabilities under such contract. Consequently, privity of contract is a doctrine of the law of contract that prevents any person from seeking the enforcement of a contract, or suing on its terms, unless they are a party to that contract. For

- 15 a person to be able to enforce a contract, he or she must have given consideration to the promisor. See **Dunlop Pneumatic Tyre Co Ltd v. Selfridge Ltd [1915] AC 847, Wagagai Mining Uganda Limited & Ors v Freight Sendy Limited & Ors HCCS 895/2020 and 6/2021** - 20 A sub-contractor cannot claim a benefit from the principal agreement as they have no privity in respect of that contract, except as third-party beneficiaries or within the other recognized exceptions to privity (agency, assignment, succession and so on). See **Lunco Constructors Limited v The Attorney General Of Uganda & Ors HCCS 318/2004** - I have considered the Annexures E, F, G which the Applicant adduced as evidence the 1st 25 Respondent's rights under the contract were assigned to it. In my view, the determination as to whether indeed the 1st Respondent's rights and responsibilities, including to the sums sought to be attached were assigned is one requiring trial and therefore one which cannot be disposed off in this application. It would follow that, should the Applicant prove that such - 30 rights and responsibilities were assigned, including payables due to the 1st Respondent, the Applicant can recover them by demand or decree and the need to attach would not exist, as the 2nd Respondent being a wholly owned subsidiary of GOU is principally resident in this jurisdiction. Accordingly, should the Applicant desire to claim payments said to be due to the 1st Respondent as due to it by virtue of the assignment, then it can commence an action - 35 against the 2nd Respondent for them and proceed to execute its decree the ordinary, as it has

5 not been suggested that their factors that would impede or delay such processes, thereby warranting grant of the orders sought preemptively against the 2nd Respondent.

### **Conclusion**

On the whole, I find that the Applicant's application fails. In light of the fact that the

10 Applicant's application was defeated by the special circumstances of the 1st Respondent, and considering some of the gaps in the evidence of the 2nd Respondent as identified above, I find that this is a deserving case for each side to bear their own costs.

I would therefore dismiss this application with no orders as to costs.

I so Order

Dated this\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2024, delivered electronically and uploaded on ECCMIS. 3rd May

**Ocaya Thomas O. R Judge** 25 **3rd May 2024**

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