Express Electrical Engineers & Contractors v Uganda Post & Telecommunications Corporation (Civil Appeal 8 of 1980) [1981] UGCA 3 (3 December 1981)


EXPRESS ELECTRICAL ENGINEERS & CONTRACTORS ........ APPELLANTS

$'$ <sub>ND</sub>

UGANDA POSTS & TELECOMMUNICATIONS CORPORATION ...... RESPONDENT (Appeal from the Ruling and Order of High Court of Uganda (Odoki, Ag. J.) dated 22nd February, 1978

Civil Suit No. 696 of 1978).

in

JUDGMENT OF NY MUCHONCHO, J. A:

In the year 1976, the East African Posts & Telecommunications Corporation one of the Corporations within the East African Community (hereinafter referred to as "the defunct corporation") invited tenders for carrying out electrical installation works at its project at Nakawa, Kampala. The appellants, in response to the invitation, offered to do the work for a sum of Shs. 367,750/-. On the 6th December, 1976, they were awarded the contract by the architects of the defunct corporation. The appellants proceeded with the work. In the month of June 1977, the defunct corporation terminated the appellants' contract without giving any reason. At about the same time the East African Community collapsed and together with it the defunct corporation. In August 1977, the Government promulgated a decree (hereinafter referred to as "Decree 15 of 1977") establishing the Uganda Posts & Telecommunications Corporation (hereinafter referred to as 'the defendant corporation'). By section 2 of the said decree it made the defendant corporation responsible for the affairs of the defunct corporation.

On 27th June, $\ldots$ /2

Decree 15 of 1977 does not vost its assets and liabilities in the defendant corporation. He said that the defendant corporation is only responsible for the affairs of the defunct corporation on a caretaker basis until its assets are divided, and that in that capacity, the defendant oorporation is not the successor of the defunct corporation and consequently cannot be liable for the breach of contract committed by the defunct corporation. Mr. Kayondo submitted, on behalf of the plaintiffs, that the defendant corporation can be sued by virtue of section 1(2) of Decree 15 of 1977. Mr. Kayondo further submitted that the defendant corporation can be sued because there is nothing in the law which limits the liabilities of the defendant corporation for past actions.

The trial judge rules that Decree 15 of 1977 does not vest in the defendant corporation the assets and liabilities of the defunct corporation upon which it can be sued. He dismissed the plaintiffs' claim. This appeal is against that ruling.

Before us, counsel have more or less rehearsed their submissions before the lower court. Mr. Kayondo repeated his assertion that the defendant corporation can be sued by virtue of section 1(2) of Decree 15 of 1977. He argued further that the defendant corporation by using the assets and buildings of the defunct corporation, and by collecting rents in respect thereof to run its business, the defendant corporation stands in the shoes of the defunct corporation and can be sued for the breach of contract by the defunct corporation. He urged the court to take judicial notice of the fact that all the assets of the defunct corporation, such as buildings, are being used by the defendant corporation. Mr. Nsibirwa denied that the defendant corporation is using the assets of the

defunct $\ldots$ /4

$\frac{1}{2}$

defunct corporation. He maintained that the defendant corporation is not the successor of the defunct corporation. He submitted that the defendant corporation can sue or be sued under section $1(2)$ of Decree 15 of 1977 only in respect of the functions conferred on it by Decree 15 of 1977. We agree with Mr. Nsibirwa that section $1(2)$ only applies where the defendant corporation is sued for the wrong committed by itself, its servants or agents. It does not authorise actions to be brought against the defendant corporation for a breach of contract to which it is not a party.

It is apparent from the submissions of counsel, both here and in the court below, that there were no agreed facts, before the trial of the point of law started, on which the point of law hangs. It is also apparent that no agreement was reached as to what point of law was to be decided. Counsel for the defendant corporation ignored entirely the provisions of section 2 of Decree 15 of 1977 which empowers the defendant corporation to run the affairs of the defunct corporation, though temporarily. The point of law as framed above depended on the construction of section 2 of Decree 15 of 1977. That in turn required an inquiry to be made into the powers and functions of the defendant corporation under section 2 as caretaker of the affairs of the defunct corporation. In proceedings under O. VI r.27, the point of law to be decided must be stated precisely. The parties must agree before hand what the point of law to be decided is. See: National Real Estate Co. v. Hassan $\sqrt{19397}$ 2 K. B. 61. The facts on which such point is to be decided must be agreed on. See: N. A. S. Airport Services Ltd. v. The Attorney General of Kenya /19597 E. A. 53. In that $c_8$ se, it was held that the object of O. VI r.27

is expedition, $\ldots/5$

in adpois expedition, but to achieve that end the point of law must be one which can be decided fairly and squarely, one way or the other, on facts agreed or not in issue on the pleadings and not one which will not arise if some fadt or facts in issue should be proved. The defendant corporation's pleadings raise a number of issues to be decided, for example, para. 5 of the Written Statement of Defence avers that the plaintiff has been properly remunerated; para. 7 avers that the contract was lawfully terminated. These defences do not support the defendant corporation's contention that it is not liable for the breach of contract. They raise matters which can only be proved by evidence at the trial. In circumstances such as these, the order for the trial of the preliminary point of law should have been refused. See: Western Steamship Co. Ltd. v. Amaral $\pi$ Sutherland Co. $\angle$ 19147 3 K·B· 55, in which it was held that the order for the trial of a preliminary point of law should not be made where there are facts in dispute and if made may be set aside. A similar view was held in Taverner & Co. Ltd. v. $\left( \mathcal{L} \right)$ Glamorgan County Council (19407 57 T. L. R. 243, there, Humphrey, J. said:

$\omega \in \mathcal{L}$

"If I could find that there were any evidence which the plaintiffs could call which would assist in the decision of this question of law, I should certainly refuse to make any order because any such evidence is not at this moment available to the court."

From the cases discussed above, it would appear that O. VI r.27 was wrongly invoked.

But, since the point of law to be determined is whether or not the defendant corporation as caretaker of the affairs of the defunct corporation is liable for its wrongs by virtue

of the $\ldots$ /6

of the provisions of section 2 of Decree 15 of 1977, I will proceed to examine what that appointment means in relation to the affairs of the defunct corporation and see whether it is liable by virtue of that appointment. By section 2 of Decree 15 of 1977 the defendant corporation is appointed caretaker of the affairs of the defunct corporation. Section 2 enacts:

> "2. The corporation shall be responsible on a caretaker basis for the affairs of the East African Posts & Telecommunications Corporation Ltd. within Uganda until such time as the assets are devided among the partner states by the Aughority."

This is a statutory appointment. It carries with it functions and powers and responsibilities to be performed and exercised by the caretaker. Apart from section 4, which is not relevant here, the defendant corporation has no other functions, powers and responsibilities under Decree 15 of 1977. Under Decree 15 of 1977, the defendant corporation, unlike other corporations, has no share capital. The question which arises then is what are the functions of the defendant corporation under section 2? What powers does section 2 confer on the defendant corporation? To answer' these questions, it might be useful to consider first the meaning of the word caretaker.

The trial judge thought the word caretaker connnotes the idea of temporary overseeing over the affairs or property of another; I agree, that is one meaning attached to it, but it has other meanings. Strouds Judicial Dictionary defines it, at page 385, as

"one whose $\cdots$ /7

"one whose business is to guard the premises against injury but does not include one who may create danger therefore a caretaker having charge of an unfinished house in which he also carries on business as a carpenter is not properly described as a caretaker as regards a fire policy."

This definition differentiates between a caretaker who exercises no authority over the property he is guarding and a caretaker who exercises authority over such property. A carctaker who exercies full control over the property has different powers and responsibility. Take, for example, a caretaker government. We all know that such a government has full control until a new government is formed. No one can seriously argue that such government cannot be sued for the torts committed by the servants of the government it has succeeded. What, then, is the appropriate meaning of the word caretaker in section 2 of Decree 15 of 1977? What authority has it got? What powers did the Government intend to confer on the defendant corporation? Is it to guard the premises and assets of the defunct corporation against injury until the assets are distributed? I do not think so. The defendant corporation is not only running its own business in the premises of the defunct corporation as the carpenter in the definition above did but it is also running the business of the defunct corporation in such buildings. It has full authority over the affairs of the defunct corporation within Uganda. It has no business of its own apart from managing a savings bank under section 4. It was set up solely to take charge of the affairs of the defunct corporation, in my upinion it has the same powers as a caretaker government. Section 2 enacts that the Corporation shall be responsible on a caretaker basis for

the offnir. . . the affairs of the defunct corporation. What does the expression "affairs of the defunct corporation imply?" What are those affairs the caretaker is supposed to take care of? In Regina v. Board of Trade /196571 Q. B. 603, the Court of Appeal in England had an occasion to consider the meaning of the expression "affairs of the Company" appearing in section 165 of the (British) Companies Act, 1948. (This section is similar to our section 165 of the Companies Act (Cap. $85$ ). The material words in section 165 are:

> "The court may appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the court directs -

$(a)$ ........... (b) $...$

$\mathcal{L}$


The facts of the case are not necessary and are complicated to reproduce here, it suffices to say that the appeal had to define the expression "affairs of the company" so as to determine whether or not the actions of a received and manager are included in the affairs of the company. The court held that

> "on the true construction of section 165 of the Act, 1948, the words "its affairs" were unambiguous and must be given their natural meaning of the business affairs of the company, which included its goodwill, its profit and loss, its contracts and investiments and assets, including its shareholding in and ability to control a subsidiary or a sub-subsidiary, that the affairs of the company did not cease to be its affairs upon 't'e appointment of a receiver and manager ......."

> > I have no $\ldots$ /9

I have no doubt that the meaning of the word "affairs" appearing in section 2 of Decree 15 of 1977 could and should be interpreted in the same way. The defunct corporation was a business concern. The defendant corporation is now carrying on such business not as its agent as the trial judge thought but under a statutory appointment. In my opinion Section 2 of Decree 15 of 1977 vested the affairs of the defunct corporation in the defendant corporation as far as the running of the business is concerned. It is authorised by section 2 $t$ use the assets of the defunct corporation to run its affairs and by the proviso to section $13(1)$ of Decree 15 of 1977 to retain the entire staff of the defunct corporation. Section 2 does impliedly vest such assets in it and with them its liabilities. The fact that there is no specific provision in the Decree to say that the assets and liabilities are vested in the defendant corporation remains in full control and can be likened to the receiver and manager in Regina v. Board of Trade (supra). It was created and appointed sole manager and receiver of the affairs of the defunct corporation which is, so to say, being wound up. In my view it can be sued in its capacity as caretaker of the affairs of the defunct corporation. The question whether the claim should have been submitted to the mediator does not require serious consideration as counsel did not indicate under what law the claimant could lay his claim. In my view this is an alternative course which a claimant need not follow.

$\mathbf{C}$

In view of what I have said, I would allow this appeal with costs here and in the court below.

As this is a claim for special damages which have to be proved, and in view of the fact that the defendant corporation has pleaded that the contract was lawfully

terminated $\ldots$ /10

terminated and that the plaintiff has been properly remunerated I would remit the case to the High Court to be heard on merits.

DATED AT KAMPALA this 3rd day of December, 1981.

### Sgd: (P. NYAMUCHONCHO) JUSTICE OF APPEAL.

Mr. Kayondo of M/s. Kayondo & Co. Advocates for Appellants-Mr. Nsibirwa of Attorney General for the Respondent.

I certify that this is a true copy of the original.

(M. Ogang) AG. REGISTRAR. $\mathcal{L}_{\text{max}}$

#### IN THE COURT OF APPEAL $\;$ $AT$ KAMPALA

(Coram: Musoke, P., Lubogo, W. P., Nvamuchoncho, J. A.)

## CIVIL APPEAL NO. 8 OF 1980

**BETWEEN**

EXPRESS ELECTRICAL ENGINEERS & CONTRACTORS . . . . . . . . . . APPELLANTS

$AND$

JGANDA POSTS & TELECOMMUNICATIONS CORPORATION . . . . . . RESPONDENT

(Appeal from the Ruling and Order of the High Court of Uganda (Odoki, $\Lambda g$ . J) dated 22/2/78

IN

## High Court Civil Suit No. 696/78

#### JUDGMENT OF MUSOKE, P.

I agree with the judgment of Njamuchoncho, J. A. which I have ad the advantage of reading in draft; and as Lubogo, V. P. also agrees. ie appeal is allowed. There will be an order in the terms proposed the learned Justice of Appeal.

TED AT KAMPALA this [rd], day of December 1931

#### (SGD) SAULO MUSOKE PRESIDENT

$\begin{smallmatrix}&&1\\1&1&1\\1&1&1\end{smallmatrix}$

% Kiwanuka of M/s. Kayondo & Company Advocates for appellants. . Nsibirwa of Mitorney General's Chambers for respondent.

#### IN THE COURT OF APPEAL $AT$ KAMPALA

(Coram: Musore, P., Lubogo, V. P., Nvamuchoncho, J. A.)

CIVIL APPEAL NO. 8 OF 1980

**BETWEEN**

EXPRESS ELECTRICAL ENGINEERS & CONTRACTORS . . . . . . . . . . . . . . . . . . .

$AND$

UGANDA POSTS & TELECOMMUNICATIONS CORPORATION . . . . . . RESPONDENT

(Appeal from the Ruling and Order of the High Court of Uganda (Odoki, $\Lambda$ g. J) dated 22/2/78

IN

# High Court Civil Suit No. 696/78

### JUDGMENT OF MUSOKE, P.

I agree with the judgment of Njamuchoncho, J. A. which I have had the advantage of reading in draft; and as Lubogo, V. P. also agrees the appeal is allowed. There will be an order in the terms proposed by the learned Justice of Appeal.

DATED AT KAMPALA this Jrd, day of December 1931

(SGD) SAULO MUSOKE PRESIDENT

$\mathbb{R} \stackrel{\text{def}}{=}$

Mr. Kiwanuka of M/s. Kayondo & Company Advocates for appellants. Mr. Nsibirwa of Elitorney General's Chambers for respondent.