Equator Touring Services Limited v Kampala Capital City Authority (Civil Appeal 119 of 2014) [2024] UGCA 212 (15 August 2024)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPAIA CIVIL APPEAL 119 OF 2014

### (ARTSING FROM HCCS 763 ()F 2007 ANp HCCS 278 0F 2010t

# EQUATORTOURING SERVICES LIMITED APPELLANT v

KAMPALA CAPITAJ, CITY AUTHOIUIY ======= RESPONDENT

CORAM; HON. JUSTICE CHEBORION BARISHAKI JA, HON. JUSTICE MOSES I(AZIBWE KAWI'MI JA, HON. JUSTICE DR. ASA MUGENYI JA.

#### JUDGMENT OF DR. ASA MUGENYI JA

# 1. INTRODUCTION

This is an appeal from the judgment of High Court delivered by Justice Christopher Madrama given on 2nd May 2014 where the legality of a contract between the parties was challenged.

#### Representation

At the hearing the appellant was represented by Mr. Bwango Araali. The respondent was represented by Mr. Denis Byaruhanga.

# 2. BACKGROUND

2.1 The respondent is a successor to the defunct Kampala City Council (KCC). On 1st April 2005, the appellant entered into a contract with KCC for the management of Park Yard market where the former was required to remit a monthly sum of Shs. 15,434,55 to the latter for management of the park. pc.1

Following a disagreement in the management of the contract, KCC terminated the contract resulting in HCCS 763 of 2OO7 filed by the appellant. The parties attempted to amicably settle the matter. The respondent requested that before any settlement could be reached the High Court should render a decision on the legality of the contract and the need to gazette the market. The issues raised at the trial were;

- 1) whether the contract for the management of Nakil'ubo Park market entered into by the parties was a valid and legal contract? - 2) Whether gazetir:g is a requirement for a market to be established under the laws of Uganda?

On 2nd May 2014, the High Count ruled that the contract was a nullity having been procured in violation of the Public Procurement and Disposal of Public Assets (PPDA) Act 2003 since no clearance from the Attorney Genera-l u,as obtained. The appellant being aggrieved by the said decision appealed to this court.

### 3. GROUNDS OFAPPEAL

The appellant raised the following grounds of appeal

- 3.1 The learned trial judge erred in law and fact when he failed to eva-luate the whole of the evidence adduced at the trial thereby reaching a wrong conclusion. - 3.2 The learned trial judge erred in law and fact in holding that the contract in issue between the parties required to be cleared by the Attorney General of Uganda. - 3.3 The learned trial judge erred in law and fact when he failed to evaluate the whole of the evidence adduced at the trial in holding that there was no valid and legally enforceable contract between the parties.

- 3.4 The learned judge erred in law and fact when he failed to evaluate the whole of the evidence adduced at the trial which showed that the contract between the parties signed in 2005 was a mere contract extension with a variation of terms of the contract signed in 2000 and not a fresh contract. - 3.5 The learned judge erred in law and fact in holding that the contract between the parties in issue was procured in violation of the PPDA Act and Regulations made thereunder. - 3.6 The learned judge erred in law and fact and in holding that the contract between the parties was a nullity.

# 4. ISSUES RAJSED

The parties raised the following issues for determination premised on the above grounds.

- 4.1 Whether the trial judge erred in law and fact when he failed to evaluate the whole of the evidence adduced at the trial thereby reaching a wrong conclusion? - 4.2. Whether the trial jr:dge erred in law and fact in holding that the contract in issue between the parties required to be cleared by the Attorney General of Uganda? - 4.3 Whether the trial judge erred in law and fact in holding that there was no valid and legally enforceable contract between the parties? - 4.4 Whether the trial judge erred in law and fact when he failed to evaluate the whole of the evidence at the trial which showed that the contract between the parties was executed in 2000 and routinely renewed with variations in the terms? - 4.5 Whether the judge erred in law and fact when he failed to lind that the contract between the parties signed in 2005 was a mere contract extension with a variation of the terms of the contract signed in 2000 and not a fresh contract? - 4.6 Whether the trail judge erred in lar,v and fact in holding that the contract between the parties in issue was procured in violation of the PPDA Act and Regulations made thereunder? - 4.7 Whether'the trial judge erred in law and fact in holding that the contract between the parties was a nullity?

no?

#### PARTIES SUBMISSIONS

The parties adopted the conferencing notes as their submissions.

### 5. APPELLANT'S SUBMISSIONS

- 5.1 The appellant submitted that the trial judge erred in law and fact when he failed to evaluate the evidence adduced at the trial reaching a wrong conclusion. The court held that the contract between the parties was a nullity because it had not been cleared by the Attorney General. The appellant contended that the court did not address itself to the following issues. - a) Did KCC seek advice from the Attorney General at ary one time before or after the execution of the agreement?

b) if so, did the Attorney General object to the contract and if so what reasons did he give?

The appellant submitted that the failure by the judge to address the above issues rendered his findings erroneous. It cited Finishing Touches Ltd. u Attorneg General of Uganda Civil Suit 744 of 2O7O where the court noted that

"The issue of legality of procurement is being raised after the procuring entity enjoyed the services of the plaintiff and there was satisfaction. It would be unjust for the plaintiff not to be remunerated when the alleged acts of non-compliance were the acts of the defendant's servants."

5.1 The appellant contended that under the constitution all litigants are equal. It is difficult for a party intending to enter a contract with government to establish that it has been cleared by the Attorney General. This creates discrimination and inequality among litigants contrary to the Constitution. The appellalt cited Kabandize ctnd 2O others u KCCA Civil Appeal 28 of 2Oll where it was stated that it is a well-established principle of law that where a person who has no control to enters into dealings with those whose duty is to promote the intentions

pc.4

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of the legislature, and they do not, any dispute under resolution would be resolved more strictly against those whose duty it was to ensure the following of the procedure.

5.2 The appellant contended that the trial judge erred in law and fact in holding that there was no valid and legally enforceable contract. The appellant submitted that the respondent advertised an invitation to tender for the management, control and maintenance of Nakivubo Park Yard market. The appellant was successful in the award. The appellant submitted that S. 10(1) of the Contract Act 2010 defines a contract as "an agreement made with the free consent of parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention to be legally bound". The appellant submitted that the need for consensus in contracts is illustrated in Rose & Frank Co. u J. R. Crompton & Bros Ltd. lL924l ALL ER 248 where it was stated that "lt is essential to the creation of a contract, using the word in its legal sense that the parties to art agreement shall not only be ad idem as to the terms of their agreement but that they shall have legal consequences and be legally enforceable." The appellant also relied on the doctrine of estoppel laid out in S. 114 of the Evidence Act Cap 6 2000. It cited Setrmaco International Ltd. u Board of directors/ head teacher Lubiri Secondary School and another HCT-OO-CC-47 a-2O05 where Justice Kiryabwire stated that "lf the principal induces a third party to believe that the agent has authority and the third party relies and acts upon this so called "apparent authority'' the principal will be estopped from denying the authority and will be liable accordingly." The appellant contended that there was a valid and lega-lly enforceable contract between the parties. The appellant also cited Lord Denning in Combe u Combe (l95ll 2 KB 215 who stated that "the doctrine of consideration is too firmly fixed to be overthrown by a side wind... it remains a cardinal necessity of formation of a contact." The appellant submitted that the contract between the parties was never a nullity since ali the elements to form a binding contract existed, i.e., offer, acceptance, consideration, competency of parties, mutuality of obligations and a legal objective.

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- 5.3 The appellant further contended that the trial judge erred when he failed to consider that the contract between the parties was executed in 2000 and routinely renewed with variations in terms, hence it was one agreement. It submitted that on l"t December 1999, the respondent advertised in Monitor newspaper a tender for the management, control and maintenance of markets in Kampala. On 1st June 2OO2 the respondent made a similar advertisement. On 18th March 2005 the respondent made a fresh offer of extension of the contract which the appellant accepted on 2l"t March 2005. - 5.4 The appellant submitted that the trial judge erred when he failed to find that the contract between the parties signed 2005 was a mere contract extension with a variation of the terms of the contract signed in 2000 and not a fresh contract. The tria.l judge noted that the contract was first signed in December 1999 and was routinely extended until 2008 when it was summariiy and illegally terminated. - 5.5 The appellant contended that the trial judge erred in finding that the contract between the parties was procured in violation of the PPDA Act and the Regulations made thereunder. It cited Setrmaco International Ltd. u Board of directors/ head teacher Lubii Secondary School and another HCT-00-CC-478- 2005 where Justice Kiryabwire held

" As to the PPDA Act I frnd in it no express provision that states that non-compliance with the Act makes a contract illegal and indeed unenforceable. In answer... I find that there was a valid contract between the plaintiff and the defendant."

The appellant submitted that the PPDA Act was enacted after the contract between the parties had been signed in 2000 and had been performed by the parties for at least 3 years and was therefore not applicable.

pc. 6

#### RESPONDENT'S SUBMISSIONS IN REPLY

- 6.1 The respondent submitted that the law requires a first appellate court to reeva-luate the evidence on court record and make up its mind without disregarding the judgment appealed but carefully weighing and considering it. It cited Kifamunte Henry u Uganda Criminal Appeal 1O of 7997 and Fredick J. K. Zaabu.te u Oient Bank Ltd. and 5 others Supreme Court Civil Appeal 4 of 2006. - 6.2 The respondent combined issues 2 and 3. In respect of the contract not being cleared by the Attorney General, the respondent contended that Article 119(5) of the Constitution of Uganda provides that no agreement, contract, treaty or convention or document by whatever name called to which Uganda is a party, or in respect of which the Government has an interest sha-ll be concluded without legal advice from the Attorney General. The respondent further contended that the contract was for a period of three years for an annual sum of Shs. 185,214,000 which amounted in total to Shs. 555,642,000. The respondent cited the Constitution (Exemption of the Particular Contracts from Attorney General Legal Advice) lnstrument which in Paragraph 12 provides

### "Exemption of certaln contracts from the need for legal advice of Attorney General.

( 1) An agreement or contract involving an amount of fifty million shillings or less is exempted from the application of Article 119(5) of the Constitution."

The respondent argued that because of the amounts involved, the contract needed approval of the Attorney General. It cited Nsimbe Holdings Limited u Attorneg General and Inspector General of Gouernment Constitution Petition 2 of 2006 where it was held that a contract executed without advice of the Attorney General is a nuliity.

6.3 The respondent contended that issue (4.5) on whether the contract between the parties signed in 2005 was a mere contract extension and not a fresh contract was not part of the issues framed for determination by the trial court. The respondent cited ugonda Breweies Ltd. u uganda Railwags corporation sccA 6 of 2001 where it was observed that a party should not depart from its pleading.

6.4 The respondent further cited uganda Deuelopment Bank u National Insurance corporation & GM Combined (u) Ltd. sccA 28 of 1995 where it was held that

> "A court of appeal should not interfere with the exercise of the discretion of a judge unless it is satisfied that the judge in exercising his discretion has misdirected himself in some matter and as a result has arrived at a wrong decision, or unless it is manifest from the case as a whole that the judge has been clearly wrong in the exercise of his discretion and that as a result there has been injustice."

The respondent also cited Blay v Pollard [1930] I KB 628 at 634 where it was stated that.

uCases must be decided on the issues on the record; and if it is desired to raise other issued they must be pleaded on the record by amendment. In the plesent case the issue on which the judge decided was raised by himself without amending the pleadings, and in my opinion, he was not entitled to take such a coutse."

The respondent prayed that the appeal be dismissed with costs because it lacked merit.

### 7. DETERMINATION OF COURT

7. 1 The respondent contended that some of the grounds that the appellant raised were not pleaded nor raised at the trial. A perusal of the amended plaint shows that it was based on breach of contract. The respondent terminated the contract three months to its expiration. The Inspector General of Government (IGG) wrote stopping the assigrment of control of markets. Neither the plaint nor the Written statement of Defence raised the issue of public procurement nor that of legal advice from the Attorney General being sought. The joint scheduling memo shows that the issues agreed for trial were

( - 1) Whether the contract for the management of Nakivubo Park Yard Market entered into by the parties was a valid and legal contract? - 2) Whether gazement is a requirement for a market to be established under the Laws of Uganda?

Whereas the cause of action was based on breach of contract, the parties raised the validity of the contract as an issue, which the appellant consented to. The issue of procurement and legal advice being sought from the Attorney General was submitted on by the respondent in its submissions and the appellant replied to them in its rejoinder. The Court made judgement thereon. The case of Odd Jobs u Mubia [1970] EA 476, is to the effect that a court can decide an unpleaded matter if the parties have led evidence and addressed court on the matter in order to "arrive at a correct decision in the case and to finally determine the controversy between the parties." Therefore, if the parties addressed the court on matters that were unpleaded it could make a decision on them so as to determine the controversy between them. The appellant did not deny that procurement under the PPDA Act did not take place nor advice from the Attorney General was sought. Therefore, the parties were not prejudiced. The respondent cited Makula International Ltd. u His Eminence Cardinal Nsubugo and another [1982] HCB 11 where the Court of Appeal held that "A court of law cannot sanction what is illegal and illegality once brought to the attention of the court, overrides all questions of pleading, including admissions made thereon." The said decision still stands. Though the parties did not raise the issue of procurement and legal advice sought from the Attorney General in their pleadings it arose from the issues they had agreed on. The appellant contended that since the contract of 2005 was an extension of that of 2000 with variation in the terms, there was no need for procurement and to obtain advice from the Attorney General. The appellant contented that at the time the PPDA Act was enacted, their contract was already in existence. Though it was not pleaded, the appellant wished to raise it as a defence. As already stated the issue of the validity of the contract was not part of the pleadings but was raised during the trial by the consent of the parties. I cannot deny the appellant a chance of arguing that it merely extended a contract of 2000 so as to circumvent the pc. 9

-z<

application of the PPDA Act, which was not enacted at the time the contract was made, if it arose from the issues agreed on. The parties are bound by the issues they agreed on. The court will go ahead and address the grounds raised.

- 7.2 In resolving the dispute, I will combine grounds 1 and 3. Both grounds were on failure to evaluate evidence by ttre trialjudge. I noted that the evidence relied on by the trial court included agreed documents and the trial bundie. No witnesses were called. Although the appellant argued the trial judge failed to evaluate the whole of the evidence adduced, it does not show which evidence he failed to evaluate. The judgement of the trial court was premised on lega1 points arising from the failure to comply with procurement under the PPDA Act and seek advice from the Attorney General, which the respondent did not deny at the trial. A perusal of the documents in the trial bundle shows that no procurement was made under the PPDA Act nor wds legal advice sought from the Attorney General. - 7.3 The appellant contended that the learned trial judge erred in law and fact in holding that the contract in issue between the parties required to be cleared by the Attorney General of Uganda. The parties cited Article 119(5) of the Constitution which reads; - "(5) Subject to the provisions of this Constitution, no agreement, contract, treaty, convention or document by whatever name called, to which the Government is a party or in respect of the which the Government has an interest, shall be concluded without legal advice from the Attorney General, except in such cases and subject to such conditions as Parliament may by 13rx, prescribe" (Emphasis added).

So, I have to ask whether the said Article was applicable to the dispute between the parties. Por Article 119(5) to apply one has to show that the Government is a party to the contract and or that it has an interest. The Interpretation Act was made to provide for the following.

"An Act to amend and consolidate the law relating to the construction and interpretation of Acts of Parliament, to regulate certain other matters relating to

Acts of Parliament and to statutory powers and duties, and to make general provisions for purposes connected with or similar to the purposes aforesaid.,,

S. 2 of the Interpretation Act defines "Government" to mean the Government of Uganda. It is not clear how one can define KAMpALA CITY COUNCIL or KAMPALA CITY AUTHORITY as the Government of Uganda. Kampala city council and later Kampala city Authority fall under Local Government Act. The Loca-l Government Act S. 1 defines "local government" to mean the local councils established under Sections 3(2) to (5) of the Act". It also defines Government to mean the Government of Uganda. S. 6 of the Local Government Act states that each local government shall be a body corporate. This means that there is a difference between local government and a government. under S. 91 ofthe Locat Government Act the District Tender Board upon request by the local council seeks the procurement of goods, services or works. S (1X2) of the Market Act Cap 94 (which is applicable to this case) states.

"The administration of a district may establish and maintain markets within the area of its jurisdiction and shall control and manage such markets or shall vest their control and management in such person or authority as it may deem fit; except that in the urban areas mentioned in the Schedule to this Act, markets shall be established, maintained, controlled and managed by the municipal council or town council, as the case may be, established in the area.,,

Therefore, if the respondent wanted to rely on Article 119(s) of the constitution it ought to have shown that the Attorney General had an interest in the contract between the parties for it to fall under the said Article. The word interest is defined by Black's Lana Dictionary 9th Edition p. 885 as "2 A legal share in something; all or part of a legal or equitable claim to or right in property <right, title, and interest >. Collectively, the word includes any aggregate of rights, privileges, powers, and immunities; distributively, it refers to any one right, privilege, or immunity." There was no evidence adduced to show that the Attorney General had an interest in the contract between the parties. The Inspector General of Government (IGG) wrote stopping the assignment of the control of the market to M/s Kampala United park yard co-operative credit Society Ltd who is not the appellant. The IGG is not the Attorney General. The

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pg. 11

appellant did not seek advice from the Attorney General which was not necessary as it was not government. Therefore, relying on the Constitution rnay not be useful in resolving this dispute in respect of the entire period in dispute of the contract.

- 7.:1 Therefore, the constituti.on which was passed in 1995 in respect of advice being sought from the Attorney General was not applicable to the original contract between the parties which was made in 2000. This is because it applied to the Government of Uganda and not local governments. That is why the appellant argued that the alleged subsequent contracts were mere variations of the terms of the contract of 200O and not new contracts. - 7.5 The respondent relied on the Local Governments (public procurement and Disposal of Public Assets) Regulations, 2006 to argue that the appellant needed approval from the Attorney General. Regulation 86 (2)(f) states that the bid document shall include approval of all relevant agencies including the Attorney General. The Regulations were rnade on 20th June 2006. The applicant,s contract was executed on lst April 2005 for a period of 3 years. By the time the contact period reached 20th June 2006, it ceased to comply with the Local Governments (Public Procurement and Disposal of Public Assets) Regulation s. No approval was sought from the Attorney General for the period commencing 2oth June 2006 to 1"t Aprii 20O8 when the contract expired. Such an omission to seek approval was in contravention of the Regulations. The parties have to bear the brunt for executing contracts that run for long periods, periods more than a year where the law in force applicable to them keeps on changing. The fact that the contract of 2005 was in operation in 2006 when the PPDA Act came into force did not stop the appellant from seeking approval from the Attorney General for the periods thereafter, that is 2006 to 2008 when the contract expired. Therefore, ground 2 of the appeal fails. - 7.6 I will address grounds 4, 5 and 6 together. The said grounds are in respect of what the applicant alleges were variations on terms and extension of the contact p9.12

signed in 200O and the contract of 2005 and whether they complied with the PPDA Act. A perusal ofthe contract dated 15th December 2000, under clause 2 shows that it was for a period of two years with effect from the said date to be revised every two years. On 18th March 2O05, the respondent wrote to the appellant stating that.

## "EXTENSIOil OF CONTRACT FOR THE MANAGEMENT OF NAITIVUBO PARI( YARD MARITET.

This is to inform you that the Kampala District Tender Board at its meeting held on 15tt' March 2O05 under Minute KTB 9/277 /2OOS extended your contract for "Nakiurbo Park Yard Market for 3 (three) years with effect from 1\$ April 2005".

It is not in dispute that the respondent extended that contract of malagement of Nakimbo Park Yard Market by issuing a fresh contract dated lst April 2005 which was for a period of 3 years.

7.7 In 2OO2, the PPDA Act was passed. The Preamble to the Act states

'An Act to establish the Public Procurement and Disposal of Public Assets Authority; to formulate policies and regulate practices in respect of public procurement and disposal activities and other connected matters."

S. 2(a)(i) of the Act stated that it shall apply to all public procurement and disposal activities and in particular shall apply to all public finances originating from the Consolidated F-und and related special finances expended through the capital or recurrent budgets, whatever form these may take. S. 2(c) further provides that the Act shall apply to procurement and disposal by a procuring and disposing entity, within or outside Uganda. S. 3 of the Act defines a "procuring and disposing entity'' to mean (a) a Ministry of Government; (b) a district council or a municipal council. It is not in dispute that the appellant falls under a district council. S. 25 (1) of the Act states that a procuring and disposing entity shall be responsible for the management of all procurement and disposal activities within its jurisdiction in accordhnce with this Act, regulations and guidelines made under this Act. Under the Public Procurement and Disposal of Public Assets Act (Commencement) Instrument 2003 the Minister appointed 21\*t February 2003 as the date on s,hich the PPDA Act came into force.

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pc.13

Therefore, at the time the parties made the contract of 2005 the PPDA Act was in force.

- 7.8 The appellant does not seem to dispute that the parties did not comply with the PPDA Act. By extending the contract of 2OOO in 2005 without a fresh tender or complying with the PPDA Act, the appellant acted ultra vires the Act. I have stated that the parties also did not comply with the Local Governments (Public Procurement and Disposal of Public Assets) Regulations 2006 as approval ofthe Attorney General was not sought. The appellant relied on Setrmaco International Ltd. u Board of directors/ head teacher Lubii Secondary School and onother (supra) rvhere the court stated" As to the PPDA Act I find in it no express provision that states that non-compliance with the Act makes a contract illegal and indeed unenforceable." On the other hand, the respondent relied on Nsimbe Holdings Limited v Attonteg Generol and Inspector General of Gouernment Constitution Petition 2 of 2006 where it was held that a contract executed without advice of the Attorney General is a nullity. On the said impasse, under the foundations of a contract, there are void and avoidable contracts. Contracts that run against public policy are considered to be void ab initio. Contracts that are against the law and morality are void ab initio. For instance, if one makes a contract promoting promiscuity or prostitution such a contract become void ab initio. It does not have to be stated in the contract that noncompliance with the law will make it invalid. A Iaw, agreement, sale, or other action that is void has no legal effect. A void action cannot be ratified or validated. In this case, the contract by the parties did not comply with the PPDA Act and the Local Governments (Public Procurement and Disposal of Public Assets) Regulations, which are Acts of Parliament and are law. Therefore, I agree with the decision of Justice Madrama that the contract of 2005 between the parties was invalid and void. - 7.9 The applicant contended the contract of 2005 was an extension of the one of 2000 and or it varied the terms of the latter contract. As soon as the ppDA Act and the Local Governments (Public Procurement and Disposal of public Assets) pg.14

Regulations 2006 came into effect, the contract between the parties become void as they ran contrary to the said laws. The respondent was required to comply with the Act of Parliament and the Regulations thereunder which was not done. Therefore, grounds 4, 5 and 6 fail.

This appeal is dismissed. I uphold the decision of the lower court. Costs of the appeal and of the lower court are awarded to the respondent. I so order.

{

Dated at Kampala this I day of 2024.

DR. ASA MUGENYI JUSTICE COURT OF APPEAL