Foods and Beverages Limited v Attorney General (Civil Suit No. 542 of 2001) [2009] UGCommC 160 (14 October 2009)

Full Case Text

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THE REPUBLIC OF UGANDA

IN THE HGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT)

### CIVIL SUIT NO. 542 OF 2001

FOODS & BEVERAGES LIMITED ....................................

Versus

THE ATTORNEY GENERAL ....................................

#### **BEFORE:** THE HON. PRINCIPAL JUDGE, JUSTICE JAMES OGOOLA

#### JUDGMENT

The Plaintiff ("FAB"), a parastatal limited liability company – with the function of. Interalia, importing and distributing "essential commodities", - dealt with TRANSOCEAN UGANDA LIMITED ("TUL") - another parastatal limited liability company (whose functions included the clearing and forwarding of Government imports). FAB's suit relates to the forwarding and clearing of certain consignments of sugar and salt through the ports of Mombasa and Dar es Salaam. There were three such consignments namely: 7140 Metric Tonnes of salt CIF Mombasa; 7000MT of Sugar (Cuba II) CIF Dar es Salaam; and 8000 MT of Sugar ("Cuba III") CIF Dar es Salaam. FAB made diverse payments sufficient for clearing and forwarding these consignments - including extra payments for delayed clearings.

Notwithstanding all these payments by FAB, TUL cleared and delivered only a part of each consignment; and, according to FAB, failed to account for the outstanding balance of the clearing and forwarding charges of each consignment.

In mitigation of loss, however, TUL contracted another clearing agent (ACME) to clear the balance of the consignment; notably the salt from Mombasa, and some of the

$2, 1201$

$\frac{10.111500}{4322163}$

Sugar trom Dar es Salaam - incurring, in the process, hefty freight and demurrage charges.

FAB claimed from TUL a refund of the "unutilized funds" (on the 3397 Mfs of Aimeia salt and 5000 MTs of Sugar) as well as damages and costs tor failure to discharge ns clearing and forwarding obligations to the full. For their pan, TUL demeo iiaonity. contending that the losses arose from (i) FAB's failure to provide the necessary funos m timely fashion: (ii) FAB's failure to avail necessary shipping documentation in time'm.; tne fact that some of the goods being sub-standard in quality, occasioned delays in securing quality certification; and (iv) delayed delivery of goods due to lack of wagons and trains from Dar es Salaam. In consequence, TUL counterclaimed from FAB tne amount of the unpaid extra charges and costs incurred.

Foliovying upon the filing of a suit by FAB (for S96.069.18 of special damages), and of ?. counterclaim by TUB- (for S542.002). the two paratatal companies were divested ano privatized by the Government. Thereupon, the Government's Privatization Unit referred the dispute to the Auditor General for verification of these claims. Tne General together with the Solicitor General approved payment of FAB's ciaim c; S730,613, conditional upon FAB's withdrawal' of their suit (HOGS No. 34/94;. FAB no withdrew that suit. However, in August 2000, tne Inspector General of Goverr.mem ("IGG") intervened in the matter, to stop that payment on the grounds that the Attorne General and Solicitor General's verification failed to take into account TUL counterclaim of S542.002.

Thereupon, FAB filed a fresh suit, the current suit, against the Attorney General for unverified and approved sum of \$730,613 - tne sum previously certified and approved both the Auditor General ano the Solicitor General. i ne . Attorney -jene/a. counterclaims a sum of S274.048.56 as money owed by FAB to FUL.

Agreed Issues: At the Scheduling Conference of this mattei the Parties formulae; the following Agreed Issues.

**(i;** Whether the Defendant owes the Plaintiff the sum ot S730.613?

**2**

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$\overline{(1)}$ Whether the Plaintiff owes the Defendant the counterclaim of \$274,048.367

The Court will consider the two issues together - as they are in reality and in truto mutually intertwined.

The Plaintiff's case (by PW1: Musoke Hamond Tamale), for the consignment of # -Almeta salt, was that they made several payments of Shs. 106,000.000/= on $8/11/35$ . \$129.128.05 on 5/12/90; and \$49,980 on 2/8/91 - covering, in all, the full payment for the entire consignment of 7140 MTs of salt. The Plaintiff's claim for that part of the salt. consignment that was not delivered is \$120,792.29. The Defendants in their submissions on the salt consignment, fully acknowledge the above payments on the stated dates. However, they (Defendant) contend that TUL transported 3743 MTs to Kampala: while the balance of 3.397MTs was transported by ACME (U) upon FAB's own instructions. More importantly, the Defendant (Attorney General) makes two fundamental contentions in their defence. First, the Attorney General contends that all the balances of consignments were re-routed at the behavior of FAB itself – namely: 3.397MTs of the Almeta salt was transported by ACME (U) Ltd on FAB's own Instructions: (ii) 3,505MTs of the Cuba II sugar was loaned by FAB itself to the Subar Development Corporation of Tanzania (SUDECO): and (iii) 1.495MTs of the Durant Sugar, was similarly loaned by FAB to SUDECO.

Secondly, the Attorney General contends that TUL incurred extra costs and expenses in clearing and forwarding all the consignments of salt and sugar at both Mombasa and Dar es Salaam over and above the amounts paid by FAB: and that these extra charges (which include expenses for wharfage, share handling, stevedoring, dockage, etc.) were, instead, paid by TUL on behalf of FAB. These extra charges were duly involved by TUL – which invoices show the extra amounts paid by TUL on behalf of FAE.

The Court agrees with the Attorney General's above contentions. The evidence tendered in this behalf -- a summary of which is meticulously set forth in the tina writter submissions of the Defendant's learned counsel - was not only full and comprehensive it was also plainly persuasive. Yes, indeed. FAB made all the payments on the dates indicated in their written submission. Nonetheless, these payments were routinely

$\overline{3}$

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remitted late. Similarly, shipping documents on which the payments were cased ano made, were also submitted late -- due oftentimes to the late arrival of the snips at coin the Mombasa and the Dar es Salaam pons. As regards the late submission of snipping documents, even FAB conceded the fact - in as much as they contended rnat those delays were effected by the Government (and not by FAB; wnose responsibility it was

"... *for procuring and processing documentation relating to the cargo and availing it to the plaintiff for purposes of clearing the cargo. The Plaintiff couiu nut therefore avail Transocean (U) Ltd with the necessary documents not notify it of the arrivals until the same was forwarded to it by the Government. Tnere is no evidence that the Plaintiff received the documents and the information mom Government on time and failed to avail the same to Transocean with diligence The Plaintiff was not negligent at all."*

Now, whether it is the Plaintiff (FAB) or the Government that was negligent in occasioning the delays, is quite beside the point. The fact remains that TUL was availed the necessary shipping documentation late, wnicn lateness occasioned extra costs paid by TUL on behalf of FAB. Indeed, as far as TUL was concerned, it would look only to FAB with whom it had the contractual relationship - and not to ;ie Government, which, strictly had no privity to the TUL/FAB suit contracts.

**A** As regards the delays in FAB's payments, one example will highlight the pom; payment of 8/11/89 (which is duly acknowledged by TUL):

'was *made 8 months after the arrival of Abbey Wonz* /. 5 *months after arrival of Abbey Wonz II, and 3 months after receipt of TUL's first invoice No. 12804.'*

**D i** All the above delays of FAB's documentation and payments led to. delays in the processing of FAB's consignments of cargo - wnicn, in turn, led to extra charges or wharfage, handling, stevedoring, dockage, etc. paid on the whole cargo (see in particular the exhaustive evidence set forth in Annextures C D E F G,H. I. J,K. L,M,N and O. referred to in TUL's written submissions).

Secondly, the Court takes judicial notice of the difficulties encountered by TUL m translating FAB's remittances of local currency payments into external currencies The transactions took place at the very difficult time of foreign exchange constraints m m-s country. Indeed, even without taking judicial notice. TUL adduced gripping evidence or the problem: for instance. TUL's application of 27/7/89 to the Bank of Uganda (SOU- 'C. purchase of US\$47,090. The Bank of Uganda allocated those funds on 30/10/89. cm did not sell the foreign exchange to TUL's Bank. On 5/12/89, TUL appealed to BanK cf Uganda for release of the funds. On 13/3/90, Almeta also appealed to the iviinistci of Commerce to intervene. On 11/9/90, by their letter DPS/12/Ethiopian, FAB (who were similarly trying to obtain foreign exchange) admitted failure and suggested payment in local currency instead - which suggestion TUL readily admitted on'24/9/90. From af tnese frustrations, and more, the Court agrees with TUI... that the regime of foreign excnange transactions at the time of the suit transactions was a truly difficult regime impacting most negatively on the efficiency and effectiveness of the Parties transactions. True, as FAB contends, this particular difficulty "was not of [FAB'sl own making". Nonetheless, it was a problem - a very difficult problem - that affected TUL o performance of its obligations.

i' rliiV. wagon capacity to load Ugandan cargo - as Kenya Railways gave priority to ioau.nj, Kenyan goods only (see Annextuie L>. Thirdly, there were other equally disruptive difficulties. There were several instances or when (Mombasa) Transit Entries expired, forcing TUL to apply to the Kenyan Ministry o; Finance for revalidation. On the occasion of each such expiry/revalidaticn. moor, valuable time would be lost on account of suspension of loading (see Annexture rd Similarly. Uganda Railways suspended the loading of FAB cargo due to FAB s failure maintain its freight account with Uganda Railways (see Annexture N1 and N2? allied to this particular difficulty, was the related one of the lack of sufficien

In the light of all the above findings, this Court has no hesitation at all in answering me two Agreed Issues in the affirmative - namely:

**d1** To the question: whether the Defendant owes the Plaintiff the sum or S730.6'!; the answer is "Yes .

**(ii)** To the question: whether the Plaintiff owes the Defendant the counterclaim oi \$274,048.36?, the answer is also "Yes".

**^7^ % X**

In short, the Plaintiff succeeds on its claim against the Defendant: just as the Defendant also succeeds 1 his finding by the Court is, therefore, no different from the previous findings of bom. the Auditor General and the Solicitor General in their Verification and Approval of the Parties' claims; as well as the intervention of the Inspector General of Government JGG) - whose combined finding was to the effect that the FAB is entitled to its claim MINUS TUL's counterclaim. on their counterclaim (on behalf of TUL) against the Plaintiff

in the result, judgment is hereby entered for FAB in the amount of its claim of S730. CU MINUS TUL's counterclaim of \$274,048.36 - namely, a net amount of S456.564.6-s ooth Parties have succeeded in their respective claims, the Court exercising its discretion under Section 27 of the Civil Procedure Aci (Cap. 71 ), will not order the payment of costs by one party to the other. Each party shall, therefore, bear its own costs. However, FAB will be entitled to interest on its decretal amount: of \$456,564.6-4 at the Court rate from today's date of judgment, until payment in full.

Ordered accordingly.

**x tv~**

James Ogooia PRINCIPAL JUDGE

14/10/2009

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# DELIVERED IN OPEN COURT. BEFORE:

Stephen Mubiru Esq, Counsel for the Plaintiff

Mr. Tamale (MD Foods & Beverages)

Arinaitwe Goretti (brief for Luka Henry Esq), Counsel for the Defendant

J. M. Egetu, Court Clerk

James Ogoola

## PRINCIPAL JUDGE

D TRIJE E ORIGINAL $\Box$

14/10/2009 2010

ETARY TO B **JET OF P DIC**