M/s Semuyaba, Iga & Co. Advocates & Another v Attorney General of the Republic of South Africa & 2 Others (Taxation Application 315 of 2023) [2023] UGCommC 219 (29 December 2023)

Full Case Text

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# **IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA COMMERCIAL DIVISION**

Reportable Taxation Application No. 315 of 2023

In the matter between

## **1. M/s SEMUYABA, IGA & CO. ADVOCATES**

## **2. YU SUNG CONSTRUCTION LIMITED APPLICANTS**

**And**

| 1. ATTORNEY GENERAL OF THE REPUBLIC OF SOUTH SUDAN | RESPONDENT | |----------------------------------------------------|------------| | 2. AFRICAN EXPORT-IMPORT BANK | GARNISHEE | | 3. NILE PETROLEUM CORPORATION | GARNISHEE |

**Heard: 13 September, 2023. Delivered: 29 December, 2023.**

*Taxation of costs - Once successful, a person named as a party to the proceedings is entitled to an award of costs - In determining the issue of costs, the Court is entitled to look at inter alia the conduct of the parties, the subject of litigation; the circumstances which led to the institution of the legal proceedings, the events which eventually led to their termination; the stage at which the proceedings, etc. As a general rule, costs follow the event.*

*Civil Procedure - Jurisdiction - Immunity - immunity of the foreign sovereign from jurisdiction may be waived, either expressly or tacitly, for example, by filing a suit, by entering a general appearance, or by acts or conduct inconsistent with a special appearance entered solely for the purpose of raising a jurisdictional issue - For participation in litigation to constitute constructive waiver of immunity, the decision to participate in such litigation must be altogether voluntary on the part of the sovereign state entity .*

#### **RULING**

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#### **STEPHEN MUBIRU, J.**

#### Introduction:

- [1] The 2nd applicant is a private limited liability company incorporated in Kenya but also registered in the Republic of South Sudan. Following a commercial dispute between the 2nd applicant, and the Government of the Republic of South Sudan (GoSS) regarding contracts of construction of facilities for the army, the "Dr. John Garang Military Academy" and the "Natinga Warehouses," the 2nd garnishee on 1st November, 2019 instructed the 1st applicant law firm jointly with another law firm based in Nairobi, Kenya, to take out proceedings against the Attorney General of the Republic of South Sudan (the respondent), before the First Instance Division of the East African Court of Justice. - [2] Those proceedings resulted in a consent judgment executed by the parties on 26th November, 2020 obliging the 1st garnishee to pay a total sum of US \$ 49,398,473.91 and costs (subsequently taxed and allowed on 4th February, 2021 at US \$ 8,025,382.38), in four instalments, the last one of which was due on 30th September, 2021. Despite several correspondences written thereafter by the Ministry of Justice and Constitutional Affairs of the Republic of South Sudan acknowledging that debt and undertaking to pay it, the sum decreed remained unpaid. The applicant together with the Kenya based law firm took out certificates of order requiring the Government of the Republic of South Sudan (GoSS) to pay the decretal sum and costs awarded by the Court, without success. The applicants then took out garnishee proceedings before the Commercial Division of the High Court of Uganda against the 1st and 2nd garnishee, seeking recovery of the decretal sum and costs. - [3] By the application as originally filed, the applicants sought the adoption, for purposes of enforcement, the decree and certificate of costs issued the East

African Court of Justice. The applicants sought an order directing the 1st and 2nd garnishee, within seven days of the order, to furnish the applicants with a full account of all monies held in favour of the applicants / judgment creditors, sufficient to pay the applicants the travel costs of US \$ 8,025,382.38, and an order directing the 1st and 2nd garnishee to remit to the applicants the said sum of US \$ 8,025,382.38 in satisfaction of the certificate of costs issued by the East African Court of Justice on 4th February, 2021 in the applicants' favour.

- [4] Upon amending their application, with the leave of court, the applicants now seek an order of attachment of shares held by the Government of the Republic of South Sudan (GoSS) in the 1st and 2nd garnishee, and another prohibiting their transfer and the holders thereof from receiving any dividends due by virtue of those shares. They further seek an order directing the 1st and 2nd garnishee s to transfer any dividends due by virtue of those shares, to the benefit of the applicants until full and final settlement of the amount due as the decretal sum and costs. The applicants further seek an order directing the 1st and 2nd garnishee to account for all monies they have received on behalf of the Government of the Republic of South Sudan and to disclose assets that exist elsewhere belonging to the Government of the Republic of South Sudan, that are capable of liquidating the decretal sum and costs due. - [5] When the application came up for hearing Counsel for the 1st and 2nd garnishees raised a series of preliminary objections, contending that; the 1st applicant has no *locus standi* and was wrongly joined as a party to the application; the 1st garnishee enjoys procedural immunity from these types of proceedings; there was no effective service of process upon the 1st garnishee; the application for execution is an abuse of process as a disguised application for discovery; the 2nd applicant did not furnish an affidavit in support of the garnishee proceedings; this court cannot exercise territorial jurisdiction over the 2nd garnishee who is domiciled in the Republic of South Sudan; the applicant has not specified any amount by which the 2nd garnishee is indebted to the respondent but seeks to attach shares which are

not a debt attachable; as a body corporate, the 2nd garnishee cannot be held liable for the obligations of is shareholders.

- [6] In a ruling delivered on 6th January, 2023 all the objections were upheld. It was held, *inter alia* that since the law firm had only been retained as counsel representing the 2nd applicant, the 1st applicant had no capacity to appear as a party in the application in its own right as an agent of the 2nd applicant, for the reason that it is trite that an agent does not have the capacity to take out proceedings in his or her own name and such proceedings will be struck out as a nullity. It was further held that since it had not been shown that the 2nd garnishee had any physical presence in Uganda and that the property against which the disclosure order was sought has been used in Uganda for commercial purposes, the discovery sought abroad did not arise out of or relate to the 2nd garnishee's activities in Uganda. The Court found that the 2nd garnishee had jurisdictional immunity. The application was dismissed with costs to the respondent and the garnishees. - [7] The 2nd garnishee thereafter filed a taxation application seeking to recover the costs of the dismissed application consequent to which a pre-taxation meeting of the parties was held but without any positive results. When the parties appeared before the Taxing Officer for taxation of the 2nd garnishee's bill of costs, Counsel for the judgment debtor raised a number of preliminary objections, contending that; the law firm having been struck off as a party to the underlying application, it cannot be a proper party to the taxation proceedings. Furthermore, that since the Court had found that the 2nd garnishee enjoyed jurisdictional immunity, the 2nd garnishee cannot maintain taxation proceedings before this Court. Lastly, that it was erroneous of the Court to have awarded costs to respondent when it never participated in the proceedings. In accordance with Order 50 rule 7 of *The Civil Procedure Rules*, the Taxing Officer referred the three issues to this Court for determination.

## The decision.

- [8] Order 50 rule 7 of *The Civil Procedure Rules*, provides that if any matter appears to the Registrar to be proper for the decision of the High Court, the Registrar may refer the matter to the High Court and a judge of the High Court may either dispose of the matter or refer it back to the Registrar with such directions as he or she may think fit. Similarly, section 62 (2) of *The Advocates Act* provides that if any matter arising out of a taxation of a bill of costs appears to the Taxing Officer proper for the decision of a judge of the High Court, he or she may on his or her own motion refer the matter to such a judge who may either dispose of the matter or refer it back to the Taxing Officer with such directions as the judge may think fit to make. - i. Whether it was erroneous of the Court to have awarded costs to respondent when it never participated in the proceedings. - [9] "Costs" signifies the sum of money which the court orders one party to pay another party in respect of the expenses of litigation incurred. The common thread running through all statutes relating to the award of costs and the jurisprudence relating thereto, is the reiteration of three salutary principles: (i) costs should ordinarily follow the event (see section 27 (2) of *The Civil Procedure Act*); (ii) realistic costs ought to be awarded keeping in view the ever-increasing litigation expenses; and (iii) the cost should serve the purpose of curbing frivolous and vexatious litigation. The costs of proceedings are in the Court's discretion and the court has full power to determine by whom and out of what property and to what extent those costs are to be paid (see section 27 (1) of *The Civil Procedure Act* and *Halsbury's Laws of England*, 4th Edn., Vol 12, Para 414). - [10] Costs are awarded, not as a punishment of the defeated party but as a recompense to the successful party for the expenses to which he or she has been subjected, for whatever appears to the Court to be the legal expenses incurred by the party in prosecuting his suit or his defence. They are intended to reimburse the

successful party for expenses incurred in prosecuting or defending an action or special proceeding. Once successful, a person named as a party to the proceedings is entitled to an award of costs. Whether or not any recovery may be made under the award so made depends on the party's ability to prove the quantum of costs that have been fairly and reasonably incurred by the party in the conduct of the litigation, if any. The respondent having been a successful party, albeit as a beneficiary of objections successfully raised by the 1st and 2nd garnishees, was by virtue of section 27 (2) of *The Civil Procedure Act* entitled to the award so made. The objection is thus misconceived and is accordingly overruled.

## ii. Whether in light of its jurisdictional immunity, the 2nd garnishee can maintain taxation proceedings before this Court.

- [11] The essential rationale of sovereign immunity is avoidance of the harassment of being brought before a foreign court. It is trite that a party may not deny a forum's jurisdiction by raising the immunity defence and simultaneously try to take advantage of the forum. Parties cannot escape the jurisdiction-conferring consequences of their actions by hiding behind the sovereign immunity shield, hence the doctrine of constructive waiver. Under the constructive waiver doctrine, a party that engages in an activity that demonstrates its submission to the Court's jurisdiction waives its immunity to suits brought before that Court. - [12] Anglo-American and European courts have consistently held that the immunity of the foreign sovereign from jurisdiction may be waived, either expressly or tacitly, for example, by filing a suit, by entering a general appearance, or by acts or conduct inconsistent with a special appearance entered solely for the purpose of raising a jurisdictional issue (see for example *Mighell v. Sultan of Johore, [1894] 1 Q. B. 149*; *Kahan v. Pakistan Federation [1951] 2 K. B. 1003; [1951] 2 TLR 697* and *NML Capital Ltd v Republic of Argentina [2011] UKSC 31*). Only this view of the

doctrine of immunity would allow the adjudication of a claim to which the sovereign would normally be immune.

- [13] However, there is a distinction between voluntary waiver and involuntary action. The distinction should follow from the fact that a sovereign plaintiff / applicant wilfully invokes the jurisdiction of the Court, whereas the defendant / respondent is not similarly poised. For participation in litigation to constitute constructive waiver of immunity, the decision to participate in such litigation must be altogether voluntary on the part of the sovereign state entity. Courts must determine if the foreign sovereign state entity waived its immunity voluntarily by taking affirmative action demonstrating submission to the Court's jurisdiction, such as the filing of counterclaims, submission of declarations, or participation in pre-trial activities. It is deemed involuntary action and thus not constituting a waiver when the decision to participate in such litigation was solely for the purpose of raising the jurisdictional issue. An agreement by a foreign state to assert immunity after it has been brought into court need not logically embody a submission to the power of that particular court. - [14] In the instant case, the participation of the 2nd garnishee in the underlying litigation was solely for the purpose of raising a jurisdictional issue. In a case where there has been a successful jurisdictional objection by a respondent who entered a special appearance to that litigation solely for the purpose of raising the jurisdictional issue, section 27 of *The Civil Procedure Act* applies to enable that successful respondent to recover the costs of that process. The fees and expenses incurred in deciding that the objection is justifiable, are recoverable and any action filed for that purpose is deemed to be a continuation of the involuntary action, and not a waiver. The costs sought to be recovered relate to acts with respect to which immunity was asserted and upheld; it is not fresh litigation. This objection too is accordingly overruled.

- iii. Whether M/s Semuyaba, Iga & Co. Advocates is a proper party to the taxation application. - [15] As stated earlier, the costs of proceedings are in the Court's discretion and the court has full power to determine by whom and to what extent those costs are to be paid (see section 27 (1) of *The Civil Procedure Act* and *Halsbury's Laws of England*, 4th Edn., Vol 12, Para 414). In dismissing the underlying application, costs were awarded to the respondent and the two garnishees against the two applicants, the law firm inclusive. In determining the issue of costs, the Court is entitled to look at *inter alia* the conduct of the parties, the subject of litigation; the circumstances which led to the institution of the legal proceedings, the events which eventually led to their termination; the stage at which the proceedings, etc. As a general rule, costs follow events. - [16] A successful party in civil proceedings must recover costs of litigation from the unsuccessful party. More so, the successful party should not be deprived costs except for "good cause" or justifiable grounds or unless special circumstances exist for doing so. A party wrongly joined as an applicant to proceedings is liable to pay the costs of being struck off or otherwise terminated for that reason. This objection too is overruled.

## Order:

[17] In the final result, the Taxing Officer is hereby directed to proceed with the taxation of the 2nd garnishee's bill of costs.

> Stephen Mubiru Judge.

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## Appearances;

For the applicant : M/s Semuyaba, Iga & Co Advocates.

For the 1st Garnishee : M/s AF Mpanga Advocates.

For the 2nd Garnishee : M/s Elgon Advocates.