Friecca Pharmacy Ltd v National Drug Authority & 2 Others (Civil Suit 731 of 2017) [2018] UGCommC 85 (30 July 2018)

Full Case Text

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

#### **COMMERCIAL DIVISION**

## **CIVIL SUIT 731 OF 2017**

FRIECCA PHARMACY LTD.................................... $\mathsf{S}$

#### **VERSUS**

<table>

NATIONAL DRUG AUTHORITY 1ST DEFENDANT GUARDIAN HEALTH LTD ................................... <table>

NATIF ANTHONY.................................... BEFORE HON LADY JUSTICE ELIZABETH JANE ALIVIDZA

RULING ON PRELIMINARY OBJECTION

#### **Representation:**

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The Plaintiff is represented by Counsel Peter M. Walubiri

The 1st Defendant is represented by Counsel Rebecca Nambafu

The 2nd and 3rd Defendant is represented by Counsel Ali Kankana 15

## **Background**

A claim was brought by the Plaintiff, Friecca Pharmacy Ltd seeking a permanent injunction restraining the 1st Defendant National Drug Authority (NDA) from authorising or licensing the 2nd Defendant (Guardian Health Ltd) and 3rd Defendant (Natif Anthony) from operating a pharmacy at Plot 210 Kibuga in Wandegeya or within a 200 metre radius from Plot 160 Haji Musa Kasule road.

The 1st Defendant responded by claiming that the suit is fatally incompetent, frivolous, defective and barred in law. That the suit was speculative at best with the Plaintiff not giving the 1st Defendant a chance to respond to a complaint that the Plaintiff had earlier filed.

The 2nd and 3rd Defendants in their joint WSD similarly indicated the intention to raise preliminary objections that the suit was fatally defective, barred in law and didn't raise a cause of action against them.

In the joint scheduling memorandum, preliminary issues were raised for Court's determination. These are;

- 1. Whether the Plaintiff's suit discloses a cause of action - 2. Whether the Plaintiff's suit is premature - 3. Whether the Licensing guidelines 2017 issued by the first Defendant on 01.12.2016 are still in force or enforceable - 35

4. Whether the Professional Licencing Guidelines (Amended) 2017 are enforceable

Counsel filed written submission. However none filed within the Court set timeframes and this lead to delay in writing of the ruling.

# Issue number one: Whether the Plaintiff's suit discloses a cause of action

2nd and 3rd Defendant's Counsel submitted that the 200-metre exclusivity sought 40 by the Plaintiff is not founded in any law and its claim of unfair competition has no pleaded facts to support it. Counsel submitted that the Plaintiff is seeking protection from an unfounded fear of legitimate business competition. He therefore concluded that the Plaintiff has no cause of action in law and in fact as the claimed right is not premised on any valid legal instrument. 45

Counsel contended that there is no claim against the 3rd Defendant especially. It is merely mentioned that the 3rd Defendant is a shareholder and a director of the $2nd$ Defendant which isn't a basis for one to establish a cause of action.

On the other hand Counsel for the Plaintiff argued that the cause of action is that the Plaintiff being the proprietor of retail pharmacy at Plot 210 Kibuga Block 38 situated has a right to operate this pharmacy at the exclusion of any other

pharmacies within a 200 meter radius and the Defendants' actions of setting up a pharmacy within 200 meters radius are infringing on this right.

Counsel for the $1^{st}$ Defendant argued that NDA was just carrying out its statutory duty and has not violated any right of the Plaintiff or breached any laws and thus the Plaintiff has no locus standi to bring about this suit.

## Resolution.

It is noted that a cause of action is a fact or facts which when combined give rise to a right of action. The famous case of Auto Garage Vs Motokov (1971) EA **314** sets down three ingredients to sustain a cause of action. These are; 1) The Plaintiff enjoyed a right 2) The right was violated 3) The Defendant is liable. It is also now a well-established principle of law that the Plaint and its annexures should clearly reveal the cause of action otherwise, the suit is a nullity.

Also see Serugo Ismail vs. KCCA Constitutional Appeal no. 2 of 1998 and Bakwanye Trading Co. Ltd vs. URA CS 602 of 2006 where in the latter 65 Bamwine PJ while referencing the authority of Jeraj Shariff & Co vs. Chotai Fancy Stores 1960 EA 374, held that the question of whether or not a Plaint discloses a cause of action must be determined upon perusal of the Plaint alone, together with anything attached as to form part of it.

In perusing the plaint, the statement of claim lists the cause of action as a 70 permanent injunction restraining the first Defendant from authorising, allowing and licensing the second Defendant and the third Defendant from opening and operating a pharmacy....within a radius of 200 metres...general damages, costs and interest thereon. The facts of the cause of action were listed which indicates that the second Defendants were likely to be granted a licence to operate a 75 pharmacy. They are preparing the new premises.

While looking at the plaint and its attachments only, the question for this Court to answer is whether the pleadings confirm the existence of the three essential requirements of a cause of action.

- In the instant case, the Plaintiff avers that it has operated a retail pharmacy 80 since 1996 and contends that a grant of license to the $2^{nd}$ Defendant will be in contravention of the $1^{st}$ Defendant's policy in respect of equitable distribution of pharmaceutical outlets and shall subject the Plaintiff to unfair competition. - The right that the Plaintiff seeks to maintain is a right to operate its pharmacy at the exclusion of any other new pharmacies within a 200 metre radius and the 85 Defendant's actions of setting up a pharmacy near them are infringing on this right; essentially protection from competition. The existence of this economic right to trade is unquestionable but has this right been violated? I think not. There hasn't been any action to violate this right. The Plaintiff merely anticipates that a decision may be taken that would possibly jeopardise its operations. It is 90 my opinion that it cannot be maintained on a prima facie basis that this right has been violated.

Additionally, there are no facts averred that indicate that the $2^{nd}$ and $3^{rd}$ Defendants have violated the Plaintiff's rights. The averments are strictly restraining the 1st Defendant from exercising its statutory mandate.

This Court cannot tie a statutory body's hands from operating when there is no illegality in procedure or even a decision from which a claim arises. The law provides remedies to individuals aggrieved who can seek redress from Courts for abuse of power through arbitrary acts or lack of action by government institutions.

It is my opinion that the Plaintiff's cause of action is speculative as it is not even been guaranteed that a relocation approval will be granted by NDA the 1st Defendant. It is therefore my opinion that this suit is premature such that issue two is answered in the same vein.

In regards to unfair competition, the Plaintiff alleges that grant of a license to 105 another pharmaceutical enterprise would be impairing its own business. I seek to differ from this position. Whereas Uganda does not have an anti competition

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legal regime, it is my opinion that the COMESA instruments give some guidance in that regard. The COMESA Competition Regulations were passed to help in the prevention restrictive business practices with the intention to enhance the welfare of the consumers in the region. The EAC region has also been working on the same and Court is not sure whether there is a legal framework in place as of date.

These COMESA regulations mention that the purpose of competition policy is not to frustrate the efficiency and profit making objectives of enterprises but to 115 level the business playing field, by discouraging and removing those business practices that prevent or retard fair competition, in order to improve business efficiency.

- Examples of such prohibited practises include; price fixing agreements, collusive tendering and bid rigging, market or customer allocation agreements, allocation 120 by quota as to sales and production, collective action to enforce arrangements, concerted refusals to supply goods or services to a potential purchaser, or to purchase goods or services from a potential supplier, collective denials of access to an arrangement or association which is crucial to competition. - From the above listed examples, it would be unfair to assume that all businesses 125 which are validly conducting legal businesses within the neighbourhood of the Plaintiff would be unfairly competing against it.

It is therefore my opinion that there isn't any illustration of unfair competition. As such, there is no cause of action. This is especially so since the $1^{st}$ Defendant has not issued the 2nd Defendant the relocation approval as yet.

I will not waste court's limited time to handle the remaining issues in detail especially since this suit is premature. If the $2^{nd}$ and $3^{rd}$ Defendants has been granted the relocation approval by NDA and even moved in and started operating the Pharmacy, then the Plaintiff would have prima facie evidence of the violation

of their rights requiring Court to handle this matter. However for now, there is 135 no cause of action.

However, I will make some brief comments on the remaining issues.

I take note that from the onset, the National Drug Authority guidelines are not clear about Distribution of pharmaceutical outlets. The 200 meter rule is not very clear as still applicable and whether relocation must still be 200 meters from existing pharmacies is not certain.

The copy from the Plaintiff's document titled licensing guidelines for 2017 approved on 1/11/16 mention the under 3.7 distribution of outlets and also relocation of pharmacies. In particular 3.8.4 states "Pharmacies in Kampala district may relocate within the district but the new location must be at least 200 meters from existing pharmacies".

The 2nd and 3rd Defendant filed a different copy of the NDA professional guidelines 2017 licensing. (Amended) effective date 2/1/2017. Of interest is 4.9.4 under relocation of Pharmacies. It states that "Pharmacies in Kampala district my relocate within the district but new location must be at least 200 meters 150 from existing pharmacies except; (1) if the relocation is within 200 meters of the previous location and the cause of the relocation is outside the control of the license holder. (2) if the relocation involves a wholesaler whose move is intended to increase compliance to Good Distribution Practices (GDP) and other NDA regulations/guidelines and the move is not expected to impact adversely on 155 *existing pharmacies.*"

Clearly from the reading of the two guidelines, there are exceptions to the "200 meter exclusivity rule". However I expected the 1st Defendant NDA to clarify on the issue and put this matter to rest. NDA's Counsel only submitted that the guidelines keep changing. I found this unhelpful. Which licensing guidelines is applicable becomes a matter of moot especially since the application filed by the $2^{nd}$ Defendant has not be considered by the 1st Defendant. Court is not certain

what licensing guidelines NDA is applying currently. Maybe 2018 has new guidelines. This was not made clear by NDA's Counsel to the disappointment of this Court.

This may explain why the Plaintiffs ran to Court for redress. It must be a nightmare for players in this industry to conduct business and make investments based on the erratic and unpredictable legal and policy framework. The statutory authority given to NDA should not be abused or taken lightly especially since this deals with public health. There is need for legal certainly for Uganda to develop its pharmaceutical industry in order to become competitive at a regional and international level.

In the circumstances of this case, the guidelines were changed within a space of less than 3 months. This is very an unhealthy practice that needs to change so as to avoid increased litigation. It should also be noted that corruption thrives 175 where there is legal uncertainty. As indicated before, which particular guidelines are enforceable in this case is impossible to determine given the fluidity of legal regime. It should also be noted that Courts are not be involved in speculative and academic pursuits for moot purposes. The only way Court can determine the enforceable licensing guidelines will depend on what NDA will use to consider 180 the relocation application lodged the $2^{nd}$ and $3^{rd}$ defendant. Maybe it will use even different guidelines.

Definitely, it is expected that the 1st Defendant, a statutory body with the important mandate concerning public health will apply their rules fairly so as not infringe on the Plaintiff's rights. Counsel for the 1st Defendant argued that 185 the Plaintiff's Complaint was received and has not been considered. Unfortunately it is not clear whether there is a complaints handling mechanisms to handle such complaints or even a review system. It is noted that the complaint filed by Plaintiff is dated 11/9/2017 (see part of the 1st Defendant's pleadings) and no action has been taken from the Court records. Maybe if this matter had 190

been addressed administratively, the disputes may have been resolved long ago at less cost to all parties.

In the same vein, everything is still at speculation stage. It is only after the $1^{st}$ Defendant acting arbitrary and contrary to their guidelines and policy, grants the $2^{nd}$ and $3^{rd}$ defendant a license to operate next to the Plaintiff ; that this Court can be petitioned to correct a wrong if any. More so the proper procedure would be by way of judicial review and not filing a commercial case.

Furthermore, I also wish to comment on the conduct of the 2nd and 3rd Defendant. The Plaintiff's Complaint letter indicates that renovation work has already started on a pharmacy to be opened 5 meters away from them. Also 1st Defendant produced letter from 3rd Defendant addressed to the Secretary of NDA dated 22/8/2017. I will reproduce it in part.

Re. Change of management and request for Relocation.

We brought Vine Pharmacy along Haji Musa Kasule road as per attached purchase agreement. The premises where the pharmacy was were however too small and not in good shape for the kind of operations we intend to conduct here. 205

We therefore opted to give them up and look for alternative premises, taking into $consideration \; \hat{your} \; organisation's \; \hat{g}uidelines \; on \; relocation$ .

*We found premises 10 meters from this location ........*

The purpose of this letter is to request for pre-inspection of the new premises. 210

I attempted to reconcile the arguments made by the $2^{nd}$ and $3^{rd}$ Defendant with the above documentary evidence and the licensing guidelines especially the requirement to first get approval from NDA before relocation. I find it odd that

3rd Defendant is busy renovating new premises before obtaining relocation 215 approval. Unless it is already a done deal, the whole process smells funny. How can a pre-inspection of premises be done when the issue of relocation has not been resolved. This conduct and confidence of the $2^{nd}$ and $3^{rd}$ Defendant to move ahead with renovations may explain why the Plaintiff may have rushed to Court

prematurely. Therefore, it is not clear how the $2^{nd}$ and $3^{rd}$ Defendant from their 220 pleadings state that they are in the process of renovating the former Ritah Health Care service outlet when they have not been granted a relocation license.

I also note that there may be some changes in the NDA guidelines filed in Court. Therefore let the 1st Defendant been given a chance to consider the application for relocation based on whatever guidelines in force to date. It is only after their 225 decision in favour of the $2^{nd}$ and $3^{rd}$ defendant violates the rights and interests of the Plaintiff; that Courts can intervene to resolve any emerging and existent dispute.

However, Courts cannot be petitioned to correct an anticipated wrong. Therefore the case is dismissed until the 1st Defendant takes action as regards granting 230 the relocation approval to the $2^{nd}$ and $3^{rd}$ Defendant. In case the Plaintiff feels aggrieved by the 1st Defendant and has proof that its rights have been violated, then the case can be reinstated and proceed for hearing

Meanwhile each party bears its own costs. Likewise MA 1108 of 2017 is 235 dismissed accordingly.

So ordered

Mnd

Elizabeth Jane Alividza

**Commercial Court**

Judge

30th July 2018.