Mawokota Coffee Works Limited v Kiragga and 5 Others (Civil Suit 425 of 1991) [1992] UGHCLD 1 (12 June 1992)

Full Case Text

THE REPUBLIC OP UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

## CIVIL SUIT NO. 425/91

MAWOKOTA COFFEE WORKS LTD. PLAINTIFF U *8* vers

S. KIRAGGA & 5 OTHERS defendants

Before: Hon. Mr. Justice W. K\* M« Kityo

## JUDGMENT

The plaintiff is a legally incorporated company and engaged in the coffee processing business in Uganda, while on the other hand, the defendants are all adults -sound winded © Ugandans citizens and the joint owiwre of the property,1 forming the subject matter of this.suit. The property in issue 5 is described to be: The land and Coffee Factory in the leaeehoXd Register Vol. 1J02, Folio 25 - Mawokota, Block Plot 209, comprising as I said before the land and coffee factory

In this suit the plaintiff is seeking a declaratory judgment to be entered in its favour against the defendants 10 and in the following terms:-

- (a) . That the sublease which was executed in the year 1985 in favour of the plaintiff consisting of the defendants1 property earlier described, is still subsisting - despite the fact that the plaintiff defaulted in payment of rent; - (b) That this court makes a further order, to restrain the 'defendants cxcrcinin : f "'r'foiturc,'anf\* the termination of the lease for non-payment of rent; and

makes such **other** govern the said That this court reasonable terms to to leasei as it will deem fit.

case , is pleaded to consist of the following relevant .facts• &gt; 5 The brief background of the plaintiff's

Firstly, that in the year 1983 the plaintiff and the defendant entered and concluded a mutual sublease, the subject . matter of which the land earlier described and the coffee factory thereon . a^d both being situated at M&wokota, Mpigi District.

Secondly, that inter alia the several terms stipulated in are the two important and giving rise of the 515 but agreed and arranged to be payable in 'two equal blocks of half yearly instalments payable in advance. initially required to pay to the defendant (the lessor) ■the'7 sum the lease agreement, plaintiff was to pay the monthly rent of the sum ofvShs.^0,000/ dispute in this suit, i-.e. that the plaintiff as a leassee was of Shs .2 ,000,000/.- as the premium, and then f.rrhci :re the x

Thus thereafter and in the persuit of the 3ald agreement, the plaintiff paid both the 'agreed premium and the monthly 20 rent as agreed above, and the defendants acknowledged receipt of due or at all ,and continued to default up to the' year 1991; thereby committing the breach of 25 rent • one of the. earlier singled out' terms of payment'of the monthly plaintiff defaulted to pay the rent as 'such agreed payments,for some years until the year 1985^ when the

.••./5

It is abundantly clear on the record and fully admitted by both sides, that one of the joint defendants l.ei- (the owner of the land in issue) was and still is, at the same time, a director in the plaintiff/cbmpany, as such enjoying both the status of the lessor, and that of the leasee at the same time **5** and as such, he played a leading role in the negotiations which resulted in the delay by the defendant of taking up appropriate action resulting from the defcnfttnam. payment" <of rent.

However, the plaintiff has made 10 default in'payment of rent was caused by facts Which were beyond its own control, facts such as: that the factory ceased been badly.looted,as a result of the Liberation War, which is popularly referred to as.the "Katonga War"« That the factory 15 needed to be rehabilitated before it could resume functioning. That all along, during the period of non-payment or rent, the plaintiff has continued to occupy the. factory and indeed, is-s still presently in the factory with the Finally that the factory was presently partially functioning for the remedies as earlier stated. those were the fac«3 functioning during the stated period of war, and because it had - - - a firm claim that the J cm® nt of the defendants.\* constituting the plaintiff's case in praying ^0

On the other hand, the defendants have not only jointly but also severally denied' the plaintiff's claim, that he is still occupying the factory. They have contended that the alleged sublease of the defendants' land and factory to the 25 plaintiff as earlier described, was lawfully determined by the

**A**

the lense agreement. reason of the plaintiff's breach of the terms which had been formally agreed upon in

re-entry into that formerly demised land and factory. Secondly, that the defendants had already effected a

Lastly, but not least in importance, that because of the 5 fact, that the plaintiffiff admits its default in payment of rent - it should therefore, be estopped from asserting that the sublease is still subsisting. In brief the defendants conclude sustainable claim against the de fendants • 10 that the plaintiff has no

two issues have been framed and agreed upon by both sides \$hich are constituted in the following manner:- Now, arising out of the above pleadings on both sides,

**I**

Firstly, 15 terms of the lease\*. Secondly, the issue of whether the plain-r\* tiff is entitled to a relief against forfeiture by the defendants *f* for non-payment of arrears of rent by offering to pay it now. sublease existing in favour of the plaintiff, despite ..the fact the' that the plaintiff admits the breach of/important and operative the issue of whether or not there can be a

In search of the answers to the issues framed above, it 20 is important to examine carefully the plaintiff's evidence and the real and operative terms in the lease agreement. The plaintiff's principal witness, Emmanuel Muwanga (PW1), clearly stated that he was not a director of the plaintiff company but of yet . another company, styled as 'Firm Import <TJ) Ltd., which owns 25\$ 25 of the shares in the plaintiff company. It is, therefore, on

• •/5

$\mathbf{1} \mathbf{1} \mathbf{2} \mathbf{1} \mathbf{1} \mathbf{1} \mathbf{1} \mathbf{1} \mathbf{1}$

$\mathbb{C}\mathsf{S}$

$\dddot{i}$

$\mathcal{L}$

$25$

cha 177. Can mandoma Taricise fistand at vould surfacely . that base that he was representing his company's interest, as bin dimand is not $\cdots\cdots$ a shareholder in the plaintiff company company that he knows one of $\frac{1}{2}$ of $\frac{1}{2}$ wat cidm the directors in the plaintiff company to be one Kiragga (the riant let defendant). That he also knows about the sublease agree- are viran-or old led foot he also knows about the sublease agreewent, and the defaults committed by the plaintiff iset nonpayment of any rent due during the period of 1985-1991 of basimum of any rent due during the period of 1985-1991 of at all. He gave reasons for default and the unsuccessful attempts to offer to pay the arrears to the plaintiff, but which offer was rejected by the defendants - claiming an accomplished re-entry on default. He claims further that negotiations to have taken place, for revision of the reasonable rent payable or the renewal of the lease agreement or discussion amed at the outright sales all those matters as the being matters which were in/process. He concludes and claims that the property in issue is no longer in any danger, to be confiscated by the creditors, as the bank loan, is already repaid.

According to the evidence of PW2 (the manager) the plain mew tiff in occupation of the factory and that the defendants 20 brief attempted re-entry had been abandoned or withdrawn, on the condition that the lawyers on both sides, were to formulate terms of the Rease or outright sale of the leased property. That the plaintiff has expressed and demonstrated its willingness to pay the arrears which will be found reasonably due 25 because of the difficulties created by the currency Law Reform of the year 1987, which makes the rent as agreed in the lease agreement to be ridiculously low i.e. about Shs. 400/- per month.

$10$

$.../6$

Turrirng; to the terms of the lease agreement, it is noticed that this agreement does not expressly provide re-entry on default of payment of the rent as it should have " been the case. a covenant for

\**>*

.......... mimmiin

However, the inference one could possibly draw is that, 5 if such a right was, indeed to be created, it should have been based an express provision in the agreement itself. The document also expressly provided for the right of revisions of rent payable, every after 10 years - see Article 1 and 7 (j) on pages.2, J and 7 10 of Exh. Pl. •• e A on a specific date nominated for 'oayment as

is that there must be necessary demand, is the demand made through the defendant No.l, ) who at the same time happens to be the director of the plaintiff • company. One wonders how the first defendant would seriously demand payment from himself!! In my view this demand is not sufficiently strong^ enough to justify the re-entry. This is m 20 or otherwise is' still in the and factory. 25 'these same proceedings was to the effect that the re-entry was abandoned and the plaintiff is continuing to operate the factory though The other important missing relief of .forfeiture which is being claimed by the defendants occupation of the demised land •more so, because according to the other evidence adduced in th a formal demand for payment; but the evidence adduced in these proceedings to establish that necessary 15 necessary aspect for the

• Even if the re-entry had.been effected, the plaintiff i would still be entitled in equity, to the relief against forfeiture by offering to pay all the arrears of rent and all the other closely related expenses, incurred by the defendants to achieve the re-entry. The reason for saying 5 so, is based on the well known equitable justice, that forfeiture is regarded to be a security of payment of rent. . This view is extensively propounded in the persuassive and authoritative Text Book /The Mannual of the Law of the Real Property/ by R» Miggery and the other persuassive and 10 authoritative Legal V/ri tings in the /~Hudsbury's Law of . England, Vol. XXIII, Third Edition, Para 1409 at page 68^7, as well as the cited cases: In the Matter of Godfrey Kiwanuka Martin and Another Misc. Cause No. 87/71 and Magala v

*7*

15 Qndere - both unreported\*

i *i*

**V •**

Therefore, although the defendant is entitled to move this court to exercise its discretion and grant to him the relief of forfeiture for non-payment of rent undo-? the ; provisions in Section 24, of the Judicature Act - Laws of Uganda, Act No. 11/6? but 20 **in'** the p^'eSb nt base

Since the pay all the arrears of terms, for what would be the reason?') Io. rent f' r him to pay, the and above all, that/right for revision is . . expressly lease provided for, among the- terms iv. t>e /agreement, i.e. every the -.defendants have not yet done' so. plaintiff is willing and is offering to rent / now outstanding and is also seeking to revise +1 .e reasonable

lo encount out the virt of introllo of the intrine at thinging now out anythis and to also specific to reading the respondite the the the cold inter-definition for for, high to $y$ . and above all charles for Revision in $exprosary$ 25 $\mathbb{R}^{n+1,\sigma}$ provided for, amm. Fish varter 10 years, and above all as yet another important fact, that the devaluation of the Currency Reform Act of 1987, which was rendering the rent agreed, in the terms in the agreement, 3J to be ridiculous; but the inflation has now mounted up several Matain a stage for the last diametric and t times beyonder the rate of exchange, which had been originally 5 $\cdot$ $\tau = a + 1$ $\cdot$ $\cdots$ fixed, and therefore, by payment on the current rate of exchange the lease rate payment the agreed rate of the agreed rate $\mathcal{L}$ in Section 24, of the Justanian cos -<pre>for subjective to the do not contained to read to the subjective of the subjective to the subjective to the subjective to the subjective to the subjective to the subjective to the subjective to the subjective to the s $\mathbb{R}^{\mathbb{Z}} \otimes \mathbb{Z}^{\mathbb{Z}} \to \mathbb{R}^{\mathbb{Z}} \to \mathbb{R}^{\mathbb{Z}} \to \mathbb{R}^{\mathbb{Z}} \to \mathbb{R}^{\mathbb{Z}}$ $\cdots \quad \cdots$ $\sim$ Taking all these facts into consideration, as supported **OS** di by the removal hof the fear of the threatened danger on account 10 $\mathbf{a}^{\prime},\ldots,\mathbf{a}^{\prime}$ of the debt by the plaintiff from a specific bank and which, indeed, would have attracted the sale of the property; $\mathcal{L}$ $all$ those circumstances put together, I am compelled to consider it appropriate, to accord the equitable remedy to the plaintiff $\cdots$ $\cdots \quad \cdots \quad \cdots$ and allow him to pay to the defendants 11 the arrears of rent, 15 at the original rate as in the agreement but up to the extent of only two-thirds of the total amount due. In addition I furthermore direct, that instead of waiting $\overline{r} \mapsto \overline{f} \to \overline{r}$

for ten years to review the rent, the necessary review shall now be carried out within the period of three months from today.

$\cdots\cdots,$ In conclusion I give judgment for the plaintiff on those modified terms and declare that this lease is still subsisting until another order is made by this court. Costs of this suit

to the defendants.

$\mathcal{V}^{\prime\prime}_{\ast}$

$111$ Vulle $W. K. M. KILCYO$

(JUDGE) $12706792.$

... $/9$

12/06/92 In presence of Mr. Serwadda Stephen holding the brief of Mr. Buyondo for the defendants, but in absence of Mr,. Kayondo for the plaintiffs but only one of the shareholders in the name of Mr\* Muwanga present\* The 5 above judgment is delivered and signed in court•

(JUDGE) *I I* \* 7 *'.v:* K. M. Kit.yo,>

12/06/92 \*

/em