Hydro Uganda Limited and 3 Others v Rwenzori Hydro (pty) Limited and Others (Civil Appeal 155 of 2023; Civil Application 30 of 2023) [2023] UGCA 155 (25 May 2023)

Full Case Text

### THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### CIVIL APPLICATION NO. 155 OF 2023

## Coram: Irene Mulyagonja, JA (As a Single Judge)

### ARISING FROM CIVIL APPLICATION NO 154 OF 2023

**AND**

#### CIVIL APPEAL NO 0030 OF 2023

### (All Arising from Miscellaneous Application No 0030 of 2022 in High Court Civil Suit No 0022 Of 2022)

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#### **RULING**

The applicants brought this application under rules $2(2)$ , $6(2)$ (b) and 42 of the Judicature (Court of Appeal Rules) Directions, SI 13-10. They sought an interim order for an injunction to restrain the 4th respondent, UAP Old Mutual Insurance (hereinafter referred to as "UAP") or her 30 agents, receivers, managers, servants, assignees or any other person acting under or pursuant to their authority from effecting payment on demand on three (3) Advance Payment Bonds, until final determination of the main application for a temporary injunction in Court of Appeal Civil Application No. 154 of 2023. 35

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The application was supported by an affidavit sworn by Owitigala Didsanayakage Dilan Chatura Dissanayake, an accountant in the l"t applicant who was authorised to depose to the affidavit by the rest of the applicants. The grounds stated in the affidavit were summarised in the application and were that:

On the 13th March 2023, the High Court Commercial Division delivered a ruling in Misc. Application No. 0030 of 2022, arising from HCCS No OO22 of 2022.ln the application, the applicants sought an injunction to restrain the 4th respondent and its agents, among others, from effecting payment on demand on performance bonds Nos: OtO I 132 / t I OO1055/ 2Ol7 and olO I 133 / t I OOLO14 I 2oI7 and advance payment bonds Nos: OlO I l33l LIOOOT L6l2O2O; otolt33/tloo711l2oI9; orolt33/I/ooo7o9/20t9; and lO I L32l I I OOO /7 17 I 2021; until final disposal of HCCS No 0O22 of 2022. 10

The application for a temporary injunction was allowed and an order issued to restrain the 4th respondent its agents, receivers, managers, servants, assignees or any other person acting under their authority from effecting payment on demand on performance bond No OIO/l32lllOO|O55l2O17 whose value was USD 2,577,O2O in favour of the l"t respondent and performance bond No. OIO / I33l I lOOIO54l2Ol7 for USD I,322,15O in favour of the 2nd respondent, to secure the 1"t applicant's performance of its contractual obligations on account of an EPC contract between the 1"t applicant and the 2"d respondent in respect of Nyamagasani II Hydro Power Project, until final determination of HCCS No 0022 of 2022. 20 25

The trial judge declined to gra.nt a temporary injunction to prevent payments on account of the three (3) advance payment bonds which were issued by the 4th respondent to guarantee repayment of loan facilities that were afforded to the VS Hydro (U) Ltd, the 1"t applicant

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(contractor) by Rwenzori Hydro (PVT) Ltd, the 1st respondent and employer. The reason that the trial judge gave for denial of the order was that the applicants neither made out a case for fraud nor unconscionability; it was not shown that the 1st to 3rd respondent could not honestly have believed in the validity of their demands under the guarantees. He thus dismissed the application in that regard with the costs to abide the result of the main suit.

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The applicants were dissatisfied with the ruling. They lodged a notice of appeal and requested for the typed record of proceedings. The appellants' reasons for the intended appeal were that the ruling of the $10$ High Court, Mubiru, J, was arrived at by applying principles that were contrary to law and current usage having the force of law, and it failed to determine material issues of law and therefore was an erroneous decision. They in addition filed CACA 154 of 2023 in which they sought

- an order for an injunction against the 4th respondent herein to restrain 15 her from effecting payment on account of the advance payment bonds that were not restrained by the trial judge. This application arises from that main application. The applicants assert that the main application seeking a temporary injunction has high chances of success since the - intended appeal raises important matters of law, among which is one of 20 the travesty of cardinal positions of the law on variation of terms of an advance payment bond and the application of the rules of demand guarantees, which they opine has a high likelihood of success. Further, that the trial judge correctly found that the applicants had established - a strong prima facie case of an unfair or unconscionable calling of the $25$ performance bonds and that the balance of convenience was therefore in favour of the applicants with regard to issuing an injunction on the advance payment bonds. That as a result, the trial judge partly granted a temporary injunction and erroneously declined to grant a temporary injunction to prevent the payment of the Advance Payment Bonds, Nos: 30

$010/133/1/000716/2020;$ 010/133/1/00711/2019

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O1O/l32lllOOOl7L7l21, on the basis that the applicants failed to make out a case of fraud or unconscionability. That the appeal and application for an injunction shall be rendered nugatory if this application is not granted.

- 5 The appellants further state that this application was Iiled without unreasonable delay. Further, that there is a high risk of payment of the Advance Payment Bonds unless an interim order is granted, since the l"t to 3.d respondents made another demand for payment on the 4th respondent and unless she is restrained, she will pay them before the main application and the appeal are heard and determined by this - court. 10

The applicants filed a supplementary affidavit to support their application deposed by the same Owitigala Didsanayakage Dilan on 4th May 2023. In the said affidavit, he averred that though the further demands on the Advance Payment Bonds referred to in paragraph 10 of his earlier affidavit were not attached to his affidavit, the supplementary affidavit was filed in order to adduce the said demand notices. Copies of the said demands were attached to the supplementary affidavit as Annexure A, B, C and D. Mr Owitigala Didsanayakage Dilan further averred that he had since learnt that there is a pending Summary Suit between the 1st,2nd and 3.d respondents against the 4th respondent in the High court, as civil Suit No 251 od 2023. That through the said suit, the lst, Jnd and 3.d respondents seek payment of sums due on the Advance Payment Bonds which are the subject of this application. He attached a copy of the plaint to his affrdavit. 15 20

The l"t to 3.d respondents opposed the application. They filed an affidavit in reply deposed by Hamlet Ahimbisibwe, Finance Manager in l"t respondent company, who was authorised to so depose the affidavit by the 2"d and 3'd respondents. They contend that there is no valid appeal pending against them in this court because the respondents first

saw the purported Notice of Appeal that was annexed to the application as "C" when they were served with the application. That by inference therefore, the Notice of Appeal was not served on the l"t to 3.d respondents within seven days as it is required by rule 78 (1) of the Court of Appeal Rules, or at all. The deponent emphasised that the Notice of Appeal was only served on the 4th respondent; and that in addition to that, she received service of the letter requesting for the record of proceedings which was annexed to the application as Annexure "D". They therefore contend that in the absence of a valid appeal, which can now only be attained by an application to extend time within which to serve the Notice of Appeal, the application for an injunction under rule 6 (2) (b) of the Rules of this Court cannot be entertained, let alone sustained.

Mr Ahimbisibwe further averred that, without prejudice to the objection above, the trial judge correctly held that the payment of demand guarantees can only be injuncted in circumstances where fraud and unconscionability is established. That neither of the two exceptions was made out by the applicants and that continues to be the position in respect of the three demand payment guarantees/advance payment bonds in respect of which the applicants seek an interim order for an injunction from this court. That as a result, the intended appeal has no prospects of success. 15 20

He went on to aver that it was not true, as alleged in paragraph 1O of the affidavit in support filed by the 1st to the 3.d applicants, that the respondents made any demands for payment on the three advance payment bonds that are the subject of this application after the decision of trial judge dismissing the application for an injunction in that regard. That as a result, there is no need for any injunction because the respondents have no intention to pursue payment through the said bonds/guarantees, except through the determination of High Court 25 30

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Civil Suit No. 251 of 2023, which was hled by the 1"t and 3.d respondents on 22"d March 2022. That inder:d the applicant filed an application for leave to defend the said suit on 3l"t March2023.

5 Mr Ahimbisibwe concluded that this application for an interim order is not only unnecessary but an abuse of court process as the pending suit cannot be restrained by an order for an injunction issued by this court. That the merits or otherwise of the demand for payment shall be determined in that suit.

The 4th respondent filed a separate aff,rdavit in reply to the application L0 which was deposed by Ms Philo Elizabeth Nyadoi, Advocate and Legal Manager of the 4th respondent, on the 4th May 2023. In support of the application, she stated that the ruling of Mubiru, J. concerning the Advance Payment Bonds was founded on the finding that the applicants failed to show that there was fraud or unconscionability in the calls 15 made by the lst, lnd and 3.d respondents. That she believes that the decision was misconceived. And that as a result, the applicants filed Civil Appeal No 139 of 2023 in this court to challenge the decision of the trial judge dismissing the application and an application for a

20 25 She further averred that the proposed appeal will raise serious issues which require consideration in a full hearing, but there is imminent risk that the Advance Payment Bonds will be honoured if this application is not granted. Further, that the lst to the 3'd respondents have already issued demands to the 4th respondent for payment of the sums in the bonds and it is in the interests ofjustice that the application be granted, lest the proposed appeal ani pending application are rendered nugatory.

temporary injunction as Civil Application No 154 of 2022.

At the hearing of the application on sth May 2023, Mr Timothy Masembe Kanyerezi and Ms Joan Nakalika represented the 1"t to 3.d respondents,

30 while the 4tr' respondent was represented by Ms Josephine Muheise.

The applicants were represented by Mr Jason Kiggundu and Ms Gloria Byaruhanga. The parties filed written submissions as directed by court.

However, before the court, counsel for the l"t to 3.d respondents raised two preliminary objections: first, that there was no valid appeal before this court owing to failure to serve the Notice of Appeal on his clients, and, secondly, that there was no demand made by the l"t to 3.d respondents in respect of the advance payment bond/guarantees to necessitate an interim order for an injunction to prohibit payment thereon. The objections were also the subject of the affidavit in reply deposed by Mr Ahimbisibwe, and which I already referred to above.

Counsel for the applicants asserted that the Notice of Appeal was served on the 1"t to 3'd respondents. He promised to avail a copy of the affidavit of service to prove it and court granted him leave to do so before a ruling could be delivered on the objections. He provided the said afhdavit through the Deputy Registrar on 10tn May 2023. The respondent filed an affidavit in response to the contents of the affidavit of service deposed by Annicent Busing/e on 1sth May 2023.

# Resolution of the Preliminary Objections

With regard to the contention that there is no valid appeal in this court 20 against the 1"t to 3'd respondents, there having been no service of the Notice of Appeal on them, there was a copy of the Notice of Appeal attached to the affidavit in reply deposed by Hamlet Ahimbisibwe, as Annexure C. It showed that it was served on the 4th Respondent, UAP Old Mutual on 15th March 2023. It was received by Philo Nyadoi who 2s appended her signature and the stamp of UAp to it. The copy of the affidavit of service that was supplied to this court by Mr Jason Kiggundu on loth May 2023 showed that efforts were made to serve the Notice of Appeal and letter requesting for the record on the 1"t to 3.d respondents on 16th March 2023. The affidavit of Frank Taremwa, process server of the High Court, dated 24th March 2023, states, in paragraph 4 thereof, that the premises of the said parties were known to him before as 7th Floor Workers House, Southern Wing, Plot 1, Pilkington Road. That on 16th March 2023, he s went to the said premises to effect service and he handed over copies of the Notice of Appeal and letter requesting for the record to a receptionist whose name he did not state. That she told him that "her bosses,, told her that they would first consult their lawyers before they could receive the documents. That he left the documents with her and returned to 10 that office on 246 March 2023 to get a copy, after acknowledgement of receipt, but he was informed by the same receptionist that their lawyers filed a new suit. That they forwarded the Notice of Appeal and letter to the lawyers whom he should serve with any further process.

The 1st f6 Jrd respondents filed an affidavit to challenge the contents of 1s the aflidavit of service. Annicent Busingye, Chief Executive Officer of the 3 companies deposed the affidavit on 15tt May 20223. It was stated therein that Frank Taremwa did not effect service at the premises of the respondents as is stated in the affidavit of service. That the documents attached to the affidavit of service relate to Miscellaneous Application 20 No l77o of 2021, and in respect of that application, the deponent effected service on the 1"t to 3.d respondents on 21"t December 2021 and service was accepted. That had he served the Notice of Appeal on the 1"t to 3'd respondents in the same manner, they would have accepted and

2s While it is true that there was a copy of Notice of Motion in HCMA No l77O of 2021 attached to the afhdavit of service of Taremwa, there was also a copy of a Notice of Appeal and a letter from Jason & Co, Advocates dated 14tt March 2023, requesting for the record of proceedings in HCMA No oo3o of 2022, arising from HCCS No. 0022 of 2022. /

acknowledged receipt of service, as they did on 2l"t December 2021,.

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As a result, what needs to be established in respect of Mr Kanyerezi's 1st objection is whether the service of the Notice of Appeal and letter requesting for proceedings in HCMA No. 0030 of 2022 amounted to effective service of Notice of Appeal as it is required by the Rules of this court.

Rule 76 of the Rules of this court provides for the Notice of Appeal, in part, in the following terms:

76. Notice of appeal in civil appeals.

- (1) Any person who desires to appeal to the court shall give notice in writing, which shall be lodged in duplicate with the registrar of the High Court. - (2) Every notice under subrule (1) of this rule shall, subject to rules 83 and 95 of these Rules, be lodged within fourteen days after the date of the decision against which it is desired to appeal. - (3) Every notice of appeal shall state whether it is intended to appeal against the whole or part only of the decision; and where it is intended to appeal against a part only of the decision, it shall specify the part complained of, state the address for service of the appellant and state the names and addresses of all persons intended to be served with copies of the notice. - $(4)$ ...

The contested Notice of Appeal, Annexure "A" to the affidavit of Taremwa states that it was intended to be served on M/s MAAKS Advocates of 4th Floor, Redstore House, 7 Bandali rise, Kampala and M/s Shonubi Musoke & Co 25 Advocates of SM Chambers, Plot 14 Hannington Road, Kampala, as well as M/s Sebalu & Lule, Advocates S & L Chambers, of 14 Mackinon Road, Kampala, all stated to be counsel for the respondents in the appeal. The letter applying for the record of proceedings specified that it would be served on MMAKS Advocates and Shonubi, Musoke & Co Advocates at the aforesaid addresses. One then wonders where Mr Frank Taremwa, process server of the 30 High Court of Uganda, got instructions to effect service at the premises of the 1st to 3rd respondents situate at Workers House, Plot 1 Pilkington Road, as he says he did in his affidavit of service. If he was instructed by counsel for the

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applicants that appeared in this application, then the most certainly misdirected him because, rule 78 of the Rules of this court provides as follows:

78. Service of notice of appeal on persons affected.

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(1) An intended appellant shall, before or within seven days after lodging notice of appeal, serve copies of it on all persons directly affected by the appeal; but the court may, on application, which may be made ex parte, direct that service need not be effected on any person who took no part in the proceedings in the High Court.

(2) Where any person required to be served with a copy of a notice of appeal gave any address for service in or in connection with the proceedings in the High Court, and has not subsequently given any other address for service, the copy of the notice of appeal may be served on him or her at that address, notwithstanding that it may be that of an advocate who has not been retained for the purpose of an appeal.

In view of the fact that the Notice of Appeal stated the addresses of persons intended to be served as the lawyers, MMAKS Advocates, Shonubi Musoke & Co, Advocates and SL Chambers, these were the advocates who had been retained for the proceedings in the High Court. Though they may have not been retained by the $1^{st}$ to $3^{rd}$ respondents 20 in the intended appeal, it has not been shown that the said respondents subsequently gave other addresses of service. The Notice of Appeal therefore pursuant to rule 78 of the Rules of this court ought to have been served at the addresses stated therein, and that within 7 days of lodging it in the High Court, but it was not.

I therefore find that, as against the $1^{st}$ to $3^{rd}$ respondents in this application, there is no valid Notice of Appeal before this court. There is therefore no appeal within the meaning of rule 76 $(2)$ (b) of the Rules of this court. The application for an interim order for an injunction against

30 them cannot not be entertained by this court; neither can it be sustained.

As to whether there was a demand made by the l"t to 3.d respondents in respect of the advance payment bonds/guarantees in order to necessitate an interim order for an injunction to prohibit payment thereon, it was evident from the submissions of counsel for the applicant before this court that the target of the interim order for an injunction was the 4th respondent. It is also the 4th respondent that was served with the Notice of Appeal. It is in respect of the 4th respondent that the applicants seek an order to stop payment of the monies due on the Advance Payment Bonds identified as Nos: orol t33l rlooo7t6l2o2o; otol133/ tloo7ttl2otg and o1o/ 132 I t I OOO I 7 t7 I 2L.

However, I observed that the demands that were made by respondents were attached to the copy of the Plaint in Civil Suit No 251 of 2023, Annexure E to the Supplementary Affidavit of Owitigala Dilan. The demands were made by Rwenzori Hydro (PVT) Ltd on the three Advance Payment Bonds on 5th December 2021. They were the subject of the application in the Commercial Court for an injunction which was denied. With regard to the contention that there were new demands in respect of the amounts due on the Advance Payement Bonds that are in contention after the dismissal of the application by Mubiru, J, I observed that the demands that were referred to in the supplementary affidavit of Owitigala Dilan dated 4th May 2023, were reflected tn 4 15 20

- documents, letters attached to the affidavit as Annexure A, B, C, and D. The letters all had the caption, "Demand for sums pagable under - counter indemnitg lssued in fouour of UAP Old Mutual Insurance Uganda Limited." They were all dated 17tt March 2023, and originated from the 4th respondent. They were signed by Philo Elizabeth Nyadoi, Company Secretary and Legal Manager. 25

The letters were addressed to various individuals. Annexure A was to Prabodha Keshana Sumsekera, the 4th applicant. Though the 30

related to the Advance Payment Bond that was issued in favour of Greenwus Energy Africa Limited, the 3rd respondent, the 4th respondent was calling up a Personal Counter Indemnity that was made by the 3rd applicant to the 4th respondent. In her demand letter, Ms Nyadoi stated,

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"As consideration for the bond issued by UAP, you executed a personal counter indemnity in which you undertook to indemnify UAP against all claims and liabilities under the bond should UAP be called upon by *Greenewus Energy Africa to say the bond sums.*

- This therefore serves to formally notify you that we have received a claim from Greennewus demanding payment of USD 550,000 (five hundred fifty Thousand United States Dollars) under the bond. A copy of the notification dated 10th February 2022 is enclosed for you further *information.*" - She then requested the $3rd$ applicant to deposit in the 4th respondent's 15 bank account given in the letter, the amount of the indemnity within 14 days of the date of the letter.

Annexure B to the Supplementary Affidavit was addressed to the 2nd applicant. It related to a General Counter Indemnity that was issued by

- that company in consideration for the bond issued by UAP against all 20 claims and liabilities under the bond, should UAP be called upon by the 3rd respondent to pay the bond sum. The amount of the General Counter Indemnity was again USD 550,000, which the $2^{nd}$ applicant was required to pay. Notification of the claim was dated 10th February 2022. - Annexure C and D were in similar vein. They were a General Counter 25 Indemnity and a Personal Counter Indemnity, respectively, for USD 550,000 each, payable to the $4^{th}$ respondent by $1^{st}$ and $3^{rd}$ applicants, in their separate capacities as indemnifiers.

I therefore find that the applicant has not proved that there was any new demand from the respondents to the applicants on the Advance 30 Payment Bonds that were issued by the 4th respondent to the applicants, after the decision of Mubiru, J on the 13th February 2022 Juan

Instead, what is shown is that being in a double bind to pay up under the Advance Payment Bonds, the 4th respondent was calling up her own securities in respect of the transactions. If the applicants were entitled to an injunction to stop paymerLt on the basis of the demands made in Annexures A-D of the affidavit of Owitangala Dilan, then it ought to have been to stop UAP from demanding for payment, not the 1"t, lnd 2n6l Jrd respondents.

The l"t and 3.d respondents filed a suit against the 4th respondent in the High Court as Civil Suit No 251 of 2023 on 23.d March 2023. Their claims are for payment of USD 3,8OO,OO0 owed on Advance Payment Bonds OIO / l33l I IOOOT ll dated 29th July 2O2I and OIO I 133 I 1 I OOOT 16l 2O2O date 1 3oth August 202 1. They also claim a further USD 2,634,954 on Advance Payment Bond No OIO I l33l I/OOO7O9|2O|9 dated 26th August 2O2O and Advance Payment Bond No 0lO I l33l I lOOOT IT 12021 dated 2"d February 2O2t. 10 15

The applicants'concern should be directed to their own undertakings to UAP where they guaranteed to pay UAP under personal and general indemnities should the Rwenzori Hydro (PVT) Ltd and Greenewus Energz Africa Ltd demand for payment on the Advance Payment Bonds that were issued by UAP. Rwerzori Hydro (PVT) Ltd and Greenewus Energz Africa Ltd have no nexus at all with the General and Personal Indemnities in respect of which UAP made a demand for payment from the indemnifiers therein. I therefore see no need for an injunction to prevent UAP from paying up on their obligations for it is not the applicants that have to pay the claims on the Advance Payment Bonds. That is also the subject of High Court Civil Suit No 251 of 2023 between the said parties and a decision in an appeal to this court over the matter would not stop the enforcement of orders that will be granted in that suit. The applicants are best advised to take care of their interests in as 30 far as their undertakings to UAP are concerned. 20 25

In addition to the above, there is still before the High Court HCCS No OO22 of 2022, in which the application for the temporary injunction to prevent payment on the Advance payment Bonds was denied by Mubiru, J. Ordinarily, a temporary injunction precedes a final order of s an injunction. The court has yet to determine that question in that suit on its merits, after calling evidence from all the parties thereto, as opposed to evidence by affidavit which the court relied upon to deny the order of a temporary injunction An appeal in such circumstances is to be discouraged because in the event that the suit fails, it would come to 10 this court on an appeal which an order for a temporary injunction on an application pending appeal would pre-empt. The applicants should exhaust their remedies in the High Court completely before they come to this court on appeals over interlocutory orders that have been denied in the lower court. In my view, this is not only vexatious litigation but 1s an abuse of the processes of this court. It is for that reason that I deemed it unnecessary to entertain the application against the 4th respondent, whom it is amply clear from the affidavit of Ms Nyadoi, does not want to meet her obligations under the Advance Payment Bonds, or

20 In conclusion, the preliminary objections raised by counsel for the 1"t, 2"d and 3'd respondents herein succeed. The application is hereby dismissed and each party shall bear their own costs for the application.

Dated at Kampala this day of Ivlo "s'. 3

Irene Mulyagonja

JUSTICE OF APPEAL

at all.