General Parts (U) Ltd v Non-Performing Assets Recovery Trust (Civil Application 21 of 2000) [2001] UGSC 18 (12 January 2001)

## IN THE SUPREME COURT OF UGANDA **HOLDEN AT MENGO**

CORAM: MULENGA, KANYEIHAMBA, MUKASA-KIKONYOGO JJ. S. C.

### **CIVIL APPLICATION NO. 21 OF 2000**

#### **BETWEEN**

GENERAL PARTS (U) LTD :::::::::::::::::::::::::::::::::::

$AND$

NON-PERFORMING ASSETS RECOVERY TRUST ::::::::::::::::::::::::::::::::::::

(Application from ruling on taxation reference to a single Judge (Hon. Justice Karokora JSC)made in Civil Application No. 13 of 2000 on 12<sup>th</sup> September 2000.

### **RULING OF THE COURT**

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This is an application under subrule $(7)$ of r.105 of the Rules of this Court. General Parts (U)Ltd.(hereinafter referred to as "General Parts"), applies for an order to reverse the decision of a single judge of this Court, whereby costs in Civil Appeal No.5 of 1999, taxed and allowed by the taxing officer at Shs.188,927,427/=, were reduced to Shs.5,000,000/= on a reference to him under subrule $(5)$ of the same rule.

There are three grounds on which this application is based. The first ground is:

#### $\ll 1.$ The learned Justice of the Supreme Court erred in law in over ruling the preliminary objection."

At the hearing before the single Justice of the Supreme Court, it was contended by way of preliminary objection by the present applicant, that the application for reference was time barred. The learned Justice overruled the objection. Before us, Dr. Byamugisha, counsel for General Parts, reiterated the contention that the application for reference was made on $8<sup>th</sup>$ June, 2000. which date was well after the period prescribed under r.105(5) of the Rules of this Court which reads:

> $(5)$ An application for a reference may be made to the Registrar informally at the time of taxation or by writing within seven days after that time."

The taxation was done on, and is dated 17<sup>th</sup> May, 2000. Exactly seven days later, on 24<sup>th</sup> May, 2000, the advocates for Non-Performing Assets Recovery Trust (hereinafter referred to as "NPART") wrote a letter to the Registrar of this Court saying in part, as follows:

> "In accordance with Rule105(5) of the Rules of the Supreme Court 1996, we are hereby applying for a reference of your decision in the above matter made in your capacity as a taxing officer to be made to a Judge of the Court.

> We are accordingly applying to you for a typed copy of the taxation proceedings and ruling to enable us formulate grounds of reference."

Dr. Byamugisha submitted that the letter was not an application for purposes of the said r.105(5), because the matter to be referred to the Judge, as stipulated in subrule (1) or subrule (3) of the same rule, was not specified in the letter. He argued that the letter served only as an application for copy of the taxation proceedings. According to counsel, the requirement for specifying the matters to be referred to the Judge was complied with in the memorandum of reference, which was dated and lodged in the Registry, on 8<sup>th</sup> June, 2000. He contended that therefore, that was the effective date on which the proper application for reference was made, and that therefore the application was out of time. Mr. Nangwala, counsel for NPART, submitted that rule 105 does not require an application for reference to contain or


speciry the grounds which will be argued before the single Judge in the reference.

Subrules ( I ) and (3) of rule 105, are concemed wlth the right to require <sup>a</sup> reference to a Judge, and the scope of that right. In substance the subrules provide that a person dissatisfied with a taxation decision by the Registrar, as a taxing officer, either on a matter of law or principte or because the alnount taxed and allowed is rnanifestly excessive or inadequate, has a right to require that the decision be referred to a Judge of this Court. Subrule (5) stipulates who slrall be required to nrake the reference and prescribes the . tirne within which to do so. It is the Registrar to be required, and he has to be so required within 7 days after his decision. In that subrule, the mode of ' requiring for the reference is called "An application.for a reference. " To . our understanding, however, what is invisaged is more in nature of a notice to the Registrar. lt is not an application on which the Registrar has to make a decision of a judicial nature. An application in which it is necessary to .state the grounds on which it is made, is one which seeks a decislon of the court. Under r..11 of the Rules of the Court, such application has to be by rnotion stating the grounds on which it is made. An application for <sup>a</sup> reference made to the Registrar does not talt in that category. We agree with tlre leamed Justice that there was no merit in the objection. We hold that the letter of 24s May,2000, the contents of which we reproduced earlier in this ruling, was a proper application for a reference under r.105 (5) and was ' rnade in tirne. Ground I of this reference therefore fails.

The second and third grounds of reference were argued together. They read:

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- $\cdot$ 2. The learned Justice of the Supreme Court erred in law and in principle in holding that the award by the taxing officer for instruction fees was an excessive amount. - The learned Justice of the Supreme Court erred in law $3.$ and in principle in reducing the taxed costs from U. Shs.188,927,427/=....to U. Shs.5,000,000/=......which sum of U. Shs.5,000,000/= is manifestly inadequate."

There are two uncontested points which we should summarily dispose of before considering the main issues. The first is that the learned Justice erred in reducing the whole amount of the taxed costs, when the only subject of the reference was instruction fee. Counsel for NPART conceded that it was an error, calling it an accidental slip. We agree. The learned Justice could not have intended to reduce costs of items that were not subject of the reference. This is clear from the penultimate paragraph of his ruling which he opened with the sentence:

# "The issue now is the assessment of the instruction fee which should have been awarded to the respondents." (emphasis added)

The second point is that in his ruling the learned Justice appears to criticise the taxing officer for laying emphasis on paragraph $9(2)$ of the 3<sup>rd</sup> Schedule and not considering paragraph 9(1). We think this was also a slip. Paragraph $9(1)$ relates to costs in applications. The bill of costs before the taxing officer was in respect of an appeal. Indeed the learned Justice did not take the criticism beyond mere mention. In our view, it could not have affected his decision

On the contentious issue, which is what the reasonable amount for instruction fee should be, Dr. Byamugisha criticised the decision of the learned Justice on four aspects, namely:


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- (a) the work put in by the advocate; - (b) the value ofthe subject rnatter ofthe appeal; - (c) the other cosrs ro be allowed, and - (d) the quanturn.

Before considering the arguments, however, it is useful to recall briefly the background to the reference. General parts borrowed rnoney frorn Uganda cornrnercial Bank (UCB), and as security for repaymenr issued, inter alia, <sup>a</sup> debenture as well as a mortgage. Upon General parts' failure to repay, UCB appointed a Receiver/Manager under the debenture. General parts tbrcefully resisted the appointed Receiver/lr4anager from taking possession of its assets. UCB filed a suir praying principally for a declaration that the appointlnent of the Receiver/lvlanager had been properly rnade. The declaration was granted by the High court. on appeal by General parts against NPART which had become successor to UCB, the Court of Appeal upheld the declaratory judgrnent of the High Court. On further appeal, horvever, the Suprerne court held in civil Appeal No.5 of 1999 that the appointrnent of the ReceiverManager was invalid. The appeal was allowed with % of the costs. The taxing officer taxed and allowed General parts'bill of costs at Shs- 188,427,437l=. of this sum, Shs.1g7,500,000/= was ro be the instruction fee.

In deciding ro reduce the fee the leamed Justice first took the view that counsel 'did not do nruch work in the prepararion and presentation of the appeal. " He criticised the leamed taxing officer for appearing to have credited counsel for work and research which had been done by the court, as was apparent frorn the leading judgrnent. He also criticised the taxing officer for rnisconstruing a rernark in the leading judgment as showing that


the appeal was cornplex, when, actually the rernark was a reflection on poor presentation of the appeal. Dr. Byamugisha submitted that this was not an accurate or a fair assessrnent of what work, both in research and presentation, he had put into the appeal. He referred us to the list of authorities he had produced for the hearing, and to the fact that on one very material issue he had traced a precedent in Australia, as there was none available tocally, all pointing to the effort and skilt he had applied to the appeal. Mr' Nangwala supported the decision of the reamed Justice, submitting that the work done by counsel was comrrensurate w.ith the fee assessed by the learned Justice.

our opinion. with due respecr to the leamed Justice, is that his holding that counsel did not do rnuch work in the appeal, was not based on accurate premises. Although the quality and quanturn of counsel's work in an appeal, is sornetirnes reflected in the judgment, it does not have to be. very often what appears in the judgrnent to result from research by the coun is initiated bv counsel. It seems to us also, that the remark in the leading judgrnent, that two grounds of appeal had not been presented in correct fonn, was taken out of proportion. Ultirnately what rnattered was the presentation of the successf,rl grounds. we think that whatever shortconrings there were, were reflected in the court order giving only % of the costs. we would also add in this regard that consideration is not to be had on tlre arnount of research and slvle of presentation only. bur also on the rnagnitude of responsibility counsel shoulders in advising the unsuccessful client to appeal. In the insrant case the latter was overlooked. In conclusion, we think with due respect to the leamed Justice, that his said holding was a nrisdirecrion.


() The second criticisrn was directed to the holding by the leamed Justice that the subject rnatter of the appeal was not the indebtedness of General parts to UCBNPART. Dr. Bvamugisha strenuously argued that the subjecr rnaner of the appeal was the debt secured by the debenture. He contended that the debenture was fully litigated, and that the appeal was not rnerely on the appointrnent of the receiver. but was also on whether the ReceiverManager should execute the power confbrred on him by the appointlnenl, to recover the debt. With due respect we are entirely in agreement with the leamed Justice that the said indebtedness was not subject of the appeal. This was made verv clear in the judgrnents of the court. It is true that the original suit, and consequently the appeal, arose oul of the fact that General parts owed money to UCB. The creditor, however, opted to recover the debt not by suit in court, but by appointment of a Receiver/Jvlanager who was eurpowered to realise the debt frorn assets of the debtor. He uas sirnultaneously appointed auctioneer to sell off the assets charged under the debenture, and if the proceeds were not sufficient, to sell the mortgaged land. The creditor only resorted to court, when it was thought necessary to reinforce the power of the Receiver with a declaratorv judgrnent that the Receiver/Jr4anager was lawftll.v appointed. That is what the appeal was about. We therefore reiterate tlrat there was no "o,nourlt (of ntonel') inyolved in thc appeal " for purposes ofparagraph 9(2) olthe 3'd Schedule to the Rules ofthis Court.

lnitially, Dr. Byarnugisha took issue with rhe observation ol the leamed Justice that the taxing oflicer erred in not having regard to other costs to be allowed in the lower courts. He argued that the taxing officer had no other costs to have regard to, since none had been taxed. Ultirnately, however, counsel conceded, quite rightly in our view, that under paragraph 9(2)

referred to earlier, the taxing officer is empowered to have regard to such other costs even before they are taxed. In BANK OF UGANDA vs BANCO **ARABE ESPANOL**, Civil Application No.23/99 (unreported), Mulenga JSC expressed his view of the provision, with which we agree. He said:

> "Where it is applicable, the taxing officer ought to have regard to other costs, including costs in the lower courts, if awarded, in order to assess what is a reasonable fee. This is not for purposes of any mathematical calculation to deduct or add the other costs. It is to give to the taxing officer an overview of the costs in the whole litigation rather than confine his mind to a segment thereof.....that way the taxing officer will more rationally discharge his duty to the public to keep costs of litigation at reasonable levels, without compromising the other principles he has to abide by."

Finally, Dr. Byamugisha contended that the sum of Shs.5,000,000/= substituted by the learned Justice, was manifestly inadequate, even when taken as instruction fee only. He submitted that in a related appeal of GENERAL INDUSTRIES vs NON-PERFORMING ASSETS RECOVERY TRUST, Civil Appeal No. 5 of 1998, the successful respondent (NPART) had been allowed costs of about Shs. $150,000,000/=$ . He contended that therefore for consistency, the instruction fee to be allowed in the instant case should be about the same or reasonably comparable. Mr. Nangwala maintained his support for the amount allowed by the learned Justice and submitted that it was correctly arrived at having regard to law and principle, and particularly consistency which guided the learned Justice. He submitted that the taxation order in **GENERAL INDUSTRIES**' case (supra), was not an order of a court of record, and so it should be ignored.

The task of assessing what is a reasonable instruction fee in any given appeal is by no means an easy one. It is not based on any mathematical formula. In

the leading case of PREMCHAND AND RAICHAND vs QUARRY SERVICES (No.3) (1972) EA 162 at p.164, the Court of Appeal for East Africa said:

The correct approach in assessing a brief fee is, we think, to be found in the case of Simpsons Motor Sales (London) Ltd vs Herdon Corporation (1964) 3 All ER 833 when Pennycuik J. said:

"one must invisage an hypothetical counsel capable of conducting the particular case effectively but unable or unwilling to insist on the particularly high fee sometimes demanded by counsel of pre-eminent reputation. Then, one must estimate what fee this hypothetical character would be content to take on the brief."

The assessment entails balancing of diverse principles and considerations that have been settled in previous decisions such as PREMCHAND AND RAICHAND's case (supra) and ATTORNEY GENERAL vs UGANDA BLANKET MANUFACTURERS (1973) LTD, Civil Application No.17 of 1993 (unreported). One such principle or consideration, which is the bone of contention in the instant case, is that there must be consistency in the assessment of instruction fees. We are astonished, however, that the learned taxing officer in the instant case, in purported application of that principle, sought to follow his assessment in the GENERAL INDUSTRIES' case, ignoring decisions of this Court which are binding on him and which he is bound to follow. We have looked at the order for costs in that case and the Bill of Costs and taxation thereof. The actual total amount allowed after taxation was Shs.131,129,500/ $=$ . Because the court had given a certificate for two counsel the instruction fees allowed were Shs.64,000,000/ $=$ for one counsel and Shs.62,000,000 for the other counsel. We refrain from commenting on this taxation since it was not referred to us. We only refer to it to show, if only for emphasis, that there was no good reason why the

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taxing officer relied on it in a case where there was no sirnilar certificate for two counsel.

' Be that as it may, we agree with the observation of the leamed Justice that in the several precedents he cited, as well as in several others, this Court has persistentlv intervened to reduce manifestly excessive instruction fees the taring officers have in recent times tended to allow, with little or no regard to appropriate principles and considerations. we agree with his decision that the surn allowed by the taxing ollicer in the instant case was rnanifestly excessive. It had to be reduced. In our opinion, however, the leamed Justice's own assesslnent of the amount to allow, was unduly influenced by his consideration that counsel "did not do a lot of vork in preparation and prosecution of the appeal. " With due respect, we have he ld that consideration to be a misdirection. we have also noted that the precedents he relied upon, except one, were appeals in respect of interlocutory lnafters where in order to avoid excessive costs resulting fiorn a rnultiplicity of large instruction fees in the same litigation, regard must be had to the fact that the decision is not final. The instant appeal was not interlocutory. The judgrnent therein was a final resolution of the dispute brought to court in the - original suit In the exception, namelv TH}] Rt]GIS'I'T]REI) TRUSTEES OF KAMPALA INSTITUTE vs DAPCB . Civil Application No.3 of I995, which is otherwise comparable to the instant case, where the amount for instructio. fee was reduced to Shs. 7,000,000/=, the assessrnent was done when the purchasing power of the Uganda shilling was stronger. we should also nrention that though the full court declined to interfere with the assessrnent by the single Judge it observed that his award was on the lower side. we are confident that, but for the rnisdirection, the learned Justice rvould have

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awarded tnore. We think that the sum of Shs.5,000,000/: is not merely on the low side, in which case it would not call for interference. It is rnanifestly inadequate. Having regard to all the foregoing therefore. we assess the reasonable fee for instruction to appeal to be Shs. 15,000,000. Accordingly we allow this reference and vary the decision of the leamed Justice as follows: The fee for instructions to appeal is allowed at Shs.15,000,000/:. The rest of the arnounts in the Appellant's Bill of Costs shall be as taxed and allowed b-v- the taxing oflicer. The appticant (General part(U) Ltd) shall have costs of tlris reference.

DATEDaIMengo the li-lLdayot -rt,r-, ZOO0

1t

J. N. Mu enga Justice of the Supreme Court

Aa,urb.t

.w. ba Justice of the Suprcmc Court

. I-. E. M. Mukasa-Kikonyogo Justicc of the Suprcme Court

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