Highway Trading Company Ltd v The Attorney General & Anor (HCT-00-CC-CS 301 of 2005) [2006] UGCommC 65 (31 October 2006)

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{\insrsid13917490 \chftnsepc \par }}\sectd \linex0\headery708\footery708\colsx708\endnhere\sectlinegrid360\sectdefaultcl\sftnbj {\footer \pard\plain \s15\ql \li0\ri0\widctlpar \tqc\tx4320\tqr\tx8640\pvpara\phmrg\posxc\posy0\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid14703155 \fs24\lang2057\langfe1033\cgrid\langnp2057\langfenp1033 {\field{\*\fldinst {\cs16\insrsid11215619 PAGE }}{\fldrslt { \cs16\lang1024\langfe1024\noproof\insrsid8936867 1}}}{\cs16\insrsid11215619 \par }\pard \s15\ql \li0\ri0\widctlpar\tqc\tx4320\tqr\tx8640\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\insrsid11215619 \par }}{\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4\pnlcltr\pnstart1\pnindent720\pnhang {\pntxta )}} {\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8 \pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid8936867 \fs24\lang2057\langfe1033\cgrid\langnp2057\langfenp1033 {\b\insrsid2495232\charrsid8936867 THE REPUBLIC OF UGANDA}{\b\insrsid15861250\charrsid8936867 \par }{\b\insrsid2495232\charrsid8936867 \par IN THE HIGH COURT OF UGANDA HOLDEN AT KAMPALA \par \par COMMERCIAL COURT DIVISION \par \par HCT-00-CC-CS-0301-2005 \par }{\insrsid2495232\charrsid8936867 \par Highway Trading Company Limited Plaintiff \par \par Versus \par \par The Attorney General Defendant No.1 \par Kampala City Council Defendant No. 2 \par }{\insrsid5910539\charrsid8936867 \par }{\b\i\ul\insrsid5910539\charrsid8936867 Legislation referred to: \par {\listtext\pard\plain\i\lang2057\langfe1033\langfenp1033\insrsid5910539\charrsid8936867 \hich\af0\dbch\af0\loch\f0 1.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar \jclisttab\tx720\aspalpha\aspnum\faauto\ls2\adjustright\rin0\lin720\itap0\pararsid8936867 {\i\insrsid5910539\charrsid8936867 Local Government Act, Cap 243 \par {\listtext\pard\plain\i\lang2057\langfe1033\langfenp1033\insrsid5910539\charrsid8936867 \hich\af0\dbch\af0\loch\f0 2.\tab}Constitution of Uganda \par }\pard \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid8936867 {\insrsid2495232\charrsid8936867 \par }{\b\ul\insrsid2495232\charrsid8936867 BEFORE: THE HONOURABLE MR. JUSTICE FMS EGONDA-NTENDE \par \par }{\b\ul\insrsid12976332\charrsid8936867 RULING}{\b\ul\insrsid2495232\charrsid8936867 \par }{\insrsid2495232\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid12976332\charrsid8936867 \hich\af0\dbch\af0\loch\f0 1.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar \jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid8936867 {\insrsid12976332\charrsid8936867 The plaintiff entered into a contract with Kampala City Council, hereinafter referred to as KCC, on 1 November 2003 to collect monthly taxes from Boda-Boda operators in Rubaga and Makind ye Divisions for a period of 3 years. A written agreement was executed between the parties. The cycling licence or operating licence was Shs.10,000.00 per month.}{\insrsid15614590\charrsid8936867 It appears that the plaintiffs started executing their part of the bargain until sometime in early 2004 when the office of the Resident District Commissioner Kampala intervened, and effectively stopped the plaintiffs from performing this contract.}{ \insrsid2495232\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid15614590\charrsid8936867 \hich\af0\dbch\af0\loch\f0 2.\tab}}{\insrsid15614590\charrsid8936867 The plaintiffs }{\insrsid209606\charrsid8936867 requested}{\insrsid15614590\charrsid8936867 KCC to provide them with law enforcement staff to enforce collection of the t ax, but to no avail. The plaintiff therefore brings this action against the Attorney General in respect of the acts of the District Commissioner, Kampala and against KCC for breach of contract. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid15614590\charrsid8936867 \hich\af0\dbch\af0\loch\f0 3.\tab}The plaintiff seeks as against the Attorney General, declarat ions for its rights, special damages, general damages and exemplary damages and costs of the }{\insrsid13378416\charrsid8936867 proceedings. The}{\insrsid15614590\charrsid8936867 plaintiff seeks against KCC special and general damages for breach of contract and costs of these proceedings. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid15614590\charrsid8936867 \hich\af0\dbch\af0\loch\f0 4.\tab}The Attorney General, in his defence, contends that the tax imposed by KCC, was not authorised by law}{ \insrsid14963560\charrsid8936867 , and was therefore unlawful. The Attorney General further contends that the contract to collect the tax was therefore illegal. The Attorney General further asserts that the actions of the R esident District Commissioner were not unlawful, and were in the scope of his statutory duties.}{\insrsid15614590\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid14963560\charrsid8936867 \hich\af0\dbch\af0\loch\f0 5.\tab}}{\insrsid14963560\charrsid8936867 KCC pleaded that on its part it was ready and willing to perform the contract but that the contract was frustrated by government. It denied negligence. In the alternative it contended that if this contract was illegal, then the action }{ \insrsid13378416\charrsid8936867 can not be maintained}{\insrsid14963560\charrsid8936867 under the principle }{\i\insrsid14963560\charrsid8936867 ex turpi causa oritur non action}{\insrsid14963560\charrsid8936867 . \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid14963560\charrsid8936867 \hich\af0\dbch\af0\loch\f0 6.\tab}At scheduling stage it was agreed that I shall try the first issue of whether or not the tax to be colle cted under the contract was authorised by law. This ruling is in respect of the court\rquote s decision on that preliminary point of law. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid13378416\charrsid8936867 \hich\af0\dbch\af0\loch\f0 7.\tab}}{\insrsid13378416\charrsid8936867 Mr. Peters Musoke, learned counsel for the plaintiff submitted that the Boda-Boda Tax was a fee authorised by the Local Government Act, Cap 243, the 5}{\super\insrsid13378416\charrsid8936867 th}{\insrsid13378416\charrsid8936867 Schedule thereto, under regulation 13(a) thereof as annual bicycle licence. }{\insrsid14625236\charrsid8936867 He submitted that bicycle include}{\insrsid209606\charrsid8936867 s}{\insrsid14625236\charrsid8936867 both a vehicle manually propelled by foot pedals or propelled by a small engine.}{\insrsid7623327\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid157983\charrsid8936867 \hich\af0\dbch\af0\loch\f0 8.\tab}}{\insrsid157983\charrsid8936867 Secondly Mr. Peters Musoke submitted that Second Schedule to the Local Government Act, Regulation 26, authorises an urban council such as KCC, to regulate including fixing fees or charges for any of the things or services the council is required or empowered to do. These functions are not l i mited to those set out in part 2 and part 3 and would include fixing or imposing the Boda Boda tax. The local government councils are responsible for any functions not reserved for Government, and imposing Boda Boda tax is not reserved for the central gov ernment. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid11238867\charrsid8936867 \hich\af0\dbch\af0\loch\f0 9.\tab}}{\insrsid11238867\charrsid8936867 Lastly Mr. Musoke argued that the maintenance of the roads and control of their use is one of the functions reserved for the local government hence ta}{\insrsid10372060\charrsid8936867 x}{\insrsid11238867\charrsid8936867 ing the users to that extent}{ \insrsid10372060\charrsid8936867 , for the use of the roads,}{\insrsid11238867\charrsid8936867 as per 2}{\super\insrsid11238867\charrsid8936867 nd}{\insrsid11238867\charrsid8936867 Schedule}{\insrsid4802103\charrsid8936867 ,}{ \insrsid11238867\charrsid8936867 part 3}{\insrsid4802103\charrsid8936867 ,}{\insrsid11238867\charrsid8936867 Regulation 1(z) of the Local Government Act, I presume. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid11238867\charrsid8936867 \hich\af0\dbch\af0\loch\f0 10.\tab} Mr. Sendege, learned Counsel for the defendant no.2, submitted in substantially similar terms as counsel for the plaintiff. Mr. Mwaka, the learned Senior State Attorney, appearing for the Attorney General, submit ted that though it is true that local governments are entitled to impose taxes the imposition of those taxes is dependent on the local government passing an ordinance to allow the collection of taxes. No ordinance was passed by KCC in this regard. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid11238867\charrsid8936867 \hich\af0\dbch\af0\loch\f0 11.\tab}Secondl y, Mr. Mwaka, submitted that the tax the council purported to collect was not the annual bicycle licence. Instead they were collecting a monthly licence which was illegal.}{\insrsid1666057\charrsid8936867 Lastly he submitted that a boda boda is a motor cycle, and cannot qualify to be a bicycle, as strenuously argued by counsel for the plaintiff and counsel for defendant no.2.}{\insrsid11238867\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid12583172\charrsid8936867 \hich\af0\dbch\af0\loch\f0 12.\tab}}{\insrsid12583172\charrsid8936867 Resolution of this must start with looking at Article}{\insrsid15278202\charrsid8936867 s}{ \insrsid12583172\charrsid8936867 152}{\insrsid15278202\charrsid8936867 and 191}{\insrsid12583172\charrsid8936867 of the Consti}{\insrsid209606\charrsid8936867 tution of Uganda, which provide}{\insrsid12583172\charrsid8936867 for taxation in Uganda. It states, \lquote }{\insrsid9592222\charrsid8936867 (1) No tax shall be imposed except under the authority of an Act of Parliament.\rquote }{\insrsid8479746\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid15278202\charrsid8936867 \hich\af0\dbch\af0\loch\f0 13.\tab}}{\insrsid15278202\charrsid8936867 Article 191 of the Constitution States, }{\insrsid209606\charrsid8936867 \par }\pard \ql \li1440\ri1440\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin1440\lin1440\itap0\pararsid8936867 {\insrsid15278202\charrsid8936867 \lquote (1) Local governments shall have power to levy, charge, collect and appropriate fe}{ \insrsid16660084\charrsid8936867 e}{\insrsid15278202\charrsid8936867 s and taxes in accordance with any law enacted by Parliament by vir tue of article 152 of this Constitution. (2) The fees and taxes to be levied, charged, collected and appropriated under clause (1) of this article }{\i\insrsid15278202\charrsid8936867 shall consist of rents, rates, royalties, stamp duties, cess, fees on registration and licensing and any other fees and taxes that Parliament may prescribe.\rquote }{\insrsid15278202\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid15278202\charrsid8936867 \hich\af0\dbch\af0\loch\f0 14.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar \jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid8936867 {\insrsid15278202\charrsid8936867 The Constitution provides that the revenue of local governments shall consist of rents, rates, royalties, stamp duties, cess, fees on registration and licensing}{\insrsid9990856\charrsid8936867 , and}{\insrsid209606\charrsid8936867 }{ \insrsid15278202\charrsid8936867 other fees and taxes that }{\insrsid209606\charrsid8936867 that may be}{\insrsid15278202\charrsid8936867 pre scribed by Parliament. It is Parliament to make the law, firstly that would authorise the tax. Secondly the nature of the tax to be charged and collected would have to be prescribed by Parliament. The Local Government Act sets out the }{ \insrsid16660084\charrsid8936867 fees and taxes that local governments are authorised to levy, charge, collect and appropriate. There are other Acts of Parliament authorising different taxes and licences to be levied by the local government.}{ \insrsid15278202\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid16660084\charrsid8936867 \hich\af0\dbch\af0\loch\f0 15.\tab}}{\insrsid16660084\charrsid8936867 It is clear that it is Parliament to authorise the taxes that the lo cal governments may levy. Once authorised by }{\insrsid10372060\charrsid8936867 an }{\insrsid16660084\charrsid8936867 Act of Parliament, the local governments, acting in accordance with such law, may proceed to levy, charge, and collect the same. If there is no authority of an Act of Parliament to levy and collect a particul ar tax, the levying and collection of such tax is illegal, as it is not authorised by Act of Parliament. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid9592222\charrsid8936867 \hich\af0\dbch\af0\loch\f0 16.\tab}}{\insrsid9592222\charrsid8936867 It is submitted that the boda boda monthly tax is imposed under the Local Government Act, Cap 243, Laws of Uganda, 2000 Rev Ed. Firstly it is contended that this is under the Local Government Revenue Regulations, the 5}{ \super\insrsid9592222\charrsid8936867 th}{\insrsid9592222\charrsid8936867 Schedule to the Local Government Act}{\insrsid4802103\charrsid8936867 , hereinafter referred to as the Regulations}{\insrsid9592222\charrsid8936867 . The relevant regulation is 13 which states, }{\insrsid4337345\charrsid8936867 \par }\pard \ql \li1440\ri1440\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin1440\lin1440\itap0\pararsid8936867 {\insrsid9592222\charrsid8936867 \lquote Other Revenue In addition to graduated tax, rates and g rants from the Government, local government revenue shall consist of --- }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (a) fees and fines on licenses and permits in respect of any service rendered or regulatory power exercised by the local council, }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (b), }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (c) }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (d) }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (e) }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (f) }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (g) annual bicycles licences; }{\insrsid4337345\charrsid8936867 }{\insrsid9592222\charrsid8936867 (h) parking fees\rquote }{\insrsid12583172\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid9592222\charrsid8936867 \hich\af0\dbch\af0\loch\f0 17.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar \jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid8936867 {\insrsid9592222\charrsid8936867 It is contended that this boda boda tax is the annual bicycle licence\rquote . Nothing could be further from the annual bicycle }{ \insrsid12518703\charrsid8936867 licence}{\insrsid9592222\charrsid8936867 . The boda boda tax is monthly. It is not annual. It is not restricted to bicycles. It applies, }{\insrsid4337345\charrsid8936867 most }{\insrsid9592222\charrsid8936867 probably}{ \insrsid4337345\charrsid8936867 ,}{\insrsid9592222\charrsid8936867 to motor cycles.}{\insrsid4410001\charrsid8936867 Counsel have made strenuous efforts to define bicycles in such a way as to include motor cycles. Regardless of the success of those efforts, the boda boda tax is simply not}{\insrsid4337345\charrsid8936867 an}{\insrsid4410001\charrsid8936867 annual bicycle licence as provided by the regulations. The boda boda tax is monthly, and this alone is fatal, as its imposition is at variance with what was authorised by the an Act of Parliament.}{\insrsid12518703\charrsid8936867 The boda boda tax is not authorised under regulation 13}{\insrsid4337345\charrsid8936867 (g)}{\insrsid12518703\charrsid8936867 of the Local Government Revenue Regulations.}{\insrsid4337345\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid4337345\charrsid8936867 \hich\af0\dbch\af0\loch\f0 18.\tab}I turn to }{\insrsid209606\charrsid8936867 the }{\insrsid4337345\charrsid8936867 second }{\insrsid5393068\charrsid8936867 route }{ \insrsid4337345\charrsid8936867 put forth by both counsel for the plaintiff and for the defendant no.2}{\insrsid5393068\charrsid8936867 as authorising the boda boda tax}{\insrsid4337345\charrsid8936867 . }{\insrsid209606\charrsid8936867 It is contended that}{\insrsid4337345\charrsid8936867 this}{\insrsid209606\charrsid8936867 is}{\insrsid4337345\charrsid8936867 an area that an urban council has regulatory responsibility for, and is therefore authorised to charge f ees in accordance with Regulation 13(a) of the Local Government Revenue Regulations.}{\insrsid5393068\charrsid8936867 The first problem with this approach is that it indicates that defendant no.2 cannot precisely determine on which provision this tax is based. It is moving from one provision to another. Its legal basis is at best imprecise}{ \insrsid10372060\charrsid8936867 ,}{\insrsid5393068\charrsid8936867 a situation that is unacceptable in tax matters.}{\insrsid3898369\charrsid8936867 The legal basis for the tax must be certain.}{\insrsid9592222\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid3898369\charrsid8936867 \hich\af0\dbch\af0\loch\f0 19.\tab}}{\insrsid3898369\charrsid8936867 If indeed the defendant no.2 exercised its powers under Regulation 13(a)}{ \insrsid4802103\charrsid8936867 of the Regulations}{\insrsid3898369\charrsid8936867 and imposed boda boda tax, there is no legal instrument, presented to this court, in the form of an ordinance, that was promulgated to signify the exercise of this power and the imposition of the tax, including the rate thereof by the local government council, the body w ith legislative powers under the Local Government Act, Cap 243. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid3898369\charrsid8936867 \hich\af0\dbch\af0\loch\f0 20.\tab} Boda Boda tax is a new tax, not falling among the heads of revenue that parliament directly authorised, when it enacted the Local Government Act. For instance}{\insrsid209606\charrsid8936867 ,}{\insrsid3898369\charrsid8936867 if}{ \insrsid209606\charrsid8936867 ,}{\insrsid3898369\charrsid8936867 instead of providing for a boda boda tax}{\insrsid209606\charrsid8936867 ,}{\insrsid3898369\charrsid8936867 what the council had passed in its budget was parking fees for motor cycles for hire, this would entirely be acceptable, as this is authorised under the Local Government Act. But simply to list in its heads of revenue in a budget, that a boda boda tax, shall raise so much}{\insrsid4802103\charrsid8936867 at such a rate per boda boda,}{\insrsid3898369\charrsid8936867 in this budget cycle, is not sufficient. \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid4802103\charrsid8936867 \hich\af0\dbch\af0\loch\f0 21.\tab}}{\insrsid4802103\charrsid8936867 The boda boda tax is not known under the Local Government Act.}{\insrsid10372060\charrsid8936867 Neither is it known under any other Act of Parliament.}{\insrsid4802103\charrsid8936867 KCC }{\insrsid10372060\charrsid8936867 did not }{\insrsid4802103\charrsid8936867 promulgate any ordinance in accordance with its powers under the Local Government }{ \insrsid13378416\charrsid8936867 Act, which gives birth to this tax,}{\insrsid4802103\charrsid8936867 for this tax to be truly authorised }{\insrsid10372060\charrsid8936867 under the legislative authority of the local government council}{ \insrsid4802103\charrsid8936867 . }{\insrsid10372060\charrsid8936867 But even if that were so, I am not sure if it would pass constitutional muster given the provisions of Article}{\insrsid13378416\charrsid8936867 s 152(1) and}{ \insrsid10372060\charrsid8936867 191(1) }{\insrsid13378416\charrsid8936867 of the Constitution which allow}{\insrsid10372060\charrsid8936867 levy}{\insrsid13378416\charrsid8936867 ing of}{\insrsid10372060\charrsid8936867 only taxes authorised by an Act of Parliament.}{\insrsid13378416\charrsid8936867 For purposes of this decision it is unnecessary to decide that point.}{\insrsid10372060\charrsid8936867 \par {\listtext\pard\plain\lang2057\langfe1033\langfenp1033\insrsid13378416\charrsid8936867 \hich\af0\dbch\af0\loch\f0 22.\tab}}{\insrsid13378416\charrsid8936867 In the result I am satisfie d that this boda-boda tax, apparently imposed by way of an agreement between the plaintiff and defendant no.2, is illegal.}{\insrsid4802103\charrsid8936867 \par }\pard \ql \li360\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin360\itap0\pararsid8936867 {\insrsid4802103\charrsid8936867 Signed, dated and delivered this 1}{\super\insrsid4802103\charrsid8936867 st}{ \insrsid4802103\charrsid8936867 day of November 2006 \par \par \par \par FMS Egonda-Ntende \par Judge \par }}