Nived Enterprises Limited v Uganda Revenue Authority (Miscellaneous Application 301 of 2023) [2024] UGHCCD 82 (17 May 2024)

### **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA CIVIL DIVISION MISC. APPLIC. NO. 00301 OF 2023 (ARISING OUT OF MISC. CAUSE NO. 0111 OF 2023)**

**NIVED ENTERPRISES LIMITED :::::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

#### **VERSUS**

**UGANDA REVENUE AUTHORITY :::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT**

#### **BEFORE: HON. JUSTICE SSEKAANA MUSA**

#### **RULING**

The applicant brought this suit by way of motion under Section 64 (e) and 98 of the Civil Procedure Act, Section 33, 37 and 38 (1) of the Judicature Act and Order 52, Rules 1, 2 and 3 of the Civil Procedure Rules, seeking for orders that;

- *a) An interlocutory mandatory injunction be issued directing the respondent to allow the applicant to import 8,540 tonnes of rice without charging withholding tax on the said imports, as that was the legal position & applicant's equitable legitimate expectation as at the 12th of March, 2023 (the date of the peaceable or non-contested status quo that was prevailing immediately before the dispute/ contention between the parties herein arose.* - *b) Costs of this application be in the main cause.*

The grounds supporting this application are contained in the affidavit of Mr. Isaac Kashaija, the director of the applicant herein attached to the application which briefly states that;

1. In the application for judicial review (Miscellaneous Cause No. 0111 of 2023), the applicant seeks to assert its inherent and constitutionally guaranteed fundamental rights and freedoms that the respondent violated and

contravened and which are issues of great importance as they relate to the respect of the supremacy of the constitution by public bodies in performing their duties;

- a) The applicant is challenging a decision taken to revoke the applicant's withholding tax exemption status, to the detriment of the applicant, without according the applicant a fair hearing in violation and contravention of Articles 28 (1) which right is non derogable under Article 44 (c) of the constitution of the republic of Uganda. - b) The applicant is challenging the respondent for arbitrarily and unreasonably depriving the applicant of its economic right to carry on lawful trade/ business, a right bestowed on it by Article 40 (2) of the Constitution of the republic of Uganda. - c) The applicant is challenging the respondent for failure to treat it justly and fairly yet as the respondent is expected to do under Article 42 of the Constitution of the republic of Uganda. - d) The applicant is challenging the respondent for breach of its constitutional mandate to respect, uphold and promote the fundamental rights and freedoms of the applicant as articulated above, which the respondent is mandated to respect, uphold and promote as directed under Article 20 (2) of the Constitution of the republic of Uganda. - 2. In the main application, the applicant raises a prima facie case of abuse of court process by the respondent, namely: stamping a wrong date of receipt of court documents to buy time to defeat justice. - 3. In the main application, the applicant raises a prima facie case of contempt of court orders by the respondent, which is an issue that lies at the core of administration of justice in this country.

- 4. In the main application, the applicant has raised a prima facie of an equitable right of legitimate expectation which the respondent owed the applicant but violated. - 5. In the main application has not sought the remedy of general or specific damages because the imminent loss it will suffer if this application is not granted includes incalculable good will and other damages that cannot be recompensed for by damages either now or in the future or forever. - 6. From a just, rational, practical and logical perspective, the respondent will not in any way be prejudiced or suffer any damages or any form of injustice whatsoever, if this application is granted. - 7. Since minimizing the risk of injustice is the essence of the court's jurisdiction to grant an interlocutory injunction, in advance of determination of the main application/ suit, on the assessment of risk of injustice in deciding this application, it can be observed that, - a) The grant of this application is what guarantees the least risk of injustice even if it later transpires that the injunction should not have been granted; or alternatively rephrased. - b) If this application is denied, the risk of injustice significantly and fundamentally far outweighs the risk of injustice if it is granted. - 8. The respondent will not face any hardship whatsoever in implementing the interlocutory mandatory order, if granted. - 9. The chronology of events as listed below are glaring incidences of illegality, irrationality, malicious abuse of power and deliberate mal-administration. - a) The clearing of rice imports at Nil withholding tax, then subsequently refusing to physically release them on an informal demand that the applicant pays withholding tax.

- b) Formally assessing withholding tax on the applicant's goods while the withholding tax exemption was existing, after the applicant had written seeking clarification on the same. - c) The respondent later writing a self-contradictory letter that the exemption status was valid and applicable on imports, but the same letter failing to address the issue of why the goods were not being given exit notice. - d) Wrongly stamping a date of receipt of court documents to buy time that to alter the status quo that the court documents sought to preserve. - e) Revoking the applicant's withholding tax exemption without giving the applicant a right to a fair hearing. - f) Revoking the applicant's withholding tax exemption status without any valid reason. - g) Frustrating the administration of justice by disregarding court orders. - 10. On all four corners of justice, the balance of convenience is in favour of the applicant as there is a high likelihood of success of the main application. - 11. On the face of the application, the respondent has committed many illegalities that it has no justified defenses to. - 12. This application raises sufficient grounds that tilt the balance in favour of the grant of the injunction and for this court to exercise its inherent powers to grant the prayer sought as the best remedy to make the ends of justice to meet.

The respondent filed its affidavit in opposition of this orders sought in this application deponed by Ms. Mpumwire Christine wherein she raised preliminary objections that the applicant has not exhausted existing remedies available within the respondent and the law, is in contempt of the Tax Appeals Tribunal's orders and is not entitled to audience before this court and that the application contravenes the *lis pendens rule*. The respondent also stated that the affidavit in

support of the application contains material falsehoods and ought to be struck out and that the application is an abuse of court.

The respondent further contended that this application is *res judicata* for having been considered by the Tax Appeals Tribunal vide TAT Misc. Applic. No. 59 of 2023. In further opposition to the application, the respondent deponent stated that the applicant applied for withholding tax exemption status on grounds that it was an importer of agricultural products and needed the facility to complete favorably and it was granted. The certificate was subject to revocation in the event of non-tax compliance and stated that the tax audits and tax clearance certificates are not conclusive and irrebutable evidence of a tax payers tax compliance.

The respondent issued withholding tax assessments on the said rice amounting to Ugx. 576, 831,130/= which the applicant has never objected to. the applicant instead filed TAT Misc. Applic. No. 40 of 2023 for temporary injunction restraining the respondent from enforcing tax collection measures against it in respect of the assessed taxes, release of its rice consignments and the costs of the application. The Tax Appeals Tribunal granted the temporary injunction on condition that the applicant pays 30% of the tax assessed. The Tribunal never gave any orders in respect of the 10,000 tonnes of rice that had not yet been imported into Uganda.

The respondent further deponed that it had since complied with the Tribunals injunctive orders and released the applicant's 5000 tonnes of rice which were subject of the respective applications. The applicant has never paid the 30% of the tax in dispute TAT Application No. 47 of 2023 and is thus in contempt of the Tribunal's orders and should not be accorded audience by this court.

The respondents further stated that the applicant does not have a prima facie case with a likelihood of success. The respondent further stated that by the time this application for judicial review was filed, the applicant's withholding tax exemption and certificate on its rice imports had been revoked.

Consequently, the status quo at the time this application was instituted was that the applicant was liable to pay withholding tax on its rice imports and the same has not changed to warrant an order for restoration of the same. The application is overtaken by events since the withholding tax exemption the applicant purports to rely on has since expired.

The respondent further stated that the applicant shall not suffer irreparable injury which cannot be adequately compensated for by an award of damages. It was further contended that the balance of convenience lies in favour of denying the applicant's prayers and dismissal of this application.

The applicant was represented by *Mr. Atwiine Allan* whereas the respondent was represented by *Mr. Sam Kwerit, Ms. Sheba Tayebwe* and *Mr. Ahabwe Stuart*.

The following issues were proposed for determination by this court by the parties.

- *1. Whether the applicant fulfills the conditions for the grant of the interlocutory mandatory injunction.* - *2. Whether the grant of the mandatory injunction would be disposing off the main application.* - *3. Whether the applicant is entitled to the remedy of interlocutory mandatory injunction that it seeks.* - *4. Whether the respondent is in contempt of the court order dated the 5th day of April, 2023 granting a temporary injunction to the applicant to import goods at the border.* - *5. Whether the preliminary objections raised by the respondent are meritorious?*

Order 15, Rule 5 of the Civil Procedure Rules SI.71-1 gives this court the power to amend and strike out issues at any time before passing a decree as it thinks fit as may be necessary for determining the matters in controversy between the parties. In the interest of adequate discussion of the legal issues at hand, the court rephrases the issues for determination to reflect as;

## *Whether the applicant fulfills the conditions for the grant of the interlocutory mandatory injunction.*

The parties were ordered to file written submissions which was accordingly done.

The respondent raised several preliminary objections to this application which I will consider in the determination of the main cause.

# *Whether the applicant fulfills the conditions for the grant of the interlocutory mandatory injunction.*

### *Applicant's Submissions*

The applicant in its submission relied on section 14 (2) and 33 of the Judicature Act, 64 (e) and 98 of the Civil Procedure Act and the case of *Alcon International Ltd vs the New Vision Publishing Co. Ltd & Ors SCCA No. 4 of 2010* where the Supreme Court held that every court has inherent power to make any order as may be necessary for achieving the ends of justice or to prevent abuse of its process. It also relied on section 37 of the Judicature Act as to grant an interlocutory order in all cases in which it appears to be just or convenient to do so.

The applicant cited the case of *Xing Wang Company Ltd vs Zheng Zupig Misc. Co. Cause No.001 of 2018* where the High court held that the grant of an interlocutory mandatory injunction is in the discretion of the court taking into consideration the facts and circumstances of a particular case and the extent of the injury or inconvenience caused to the applicant by the conduct of the respondent and the extent of injury or hardship that will be cause to the respondent by the grant.

The applicant also submitted that an interlocutory mandatory injunction is to restore parties to the status quo that existed on the date of the institution of the suit. it relied on the case of *Sudhir Ruparelia vs Crane Bank Uganda (in receivership) & Anor.* The applicant defined status quo to mean the existing state of things, existing prior to a particular point in time.

As to whether the respondent prejudicially altered the status quo intending to defeat a court proceeding already instituted, the applicant submitted that the respondent revoked the applicant's withholding tax exemption on the 23rd March, 2023 a day after being served with court documents seeking for a temporary injunction not to alter that status quo.

The applicant submitted that the respondent's alteration of the status quo after being served court documents to maintain the same was an abuse of court process and thus prayed for the restoration of the status quo to what it was as at 23rd March, 2023 before the email of the 29th March, 2023 revoking the applicant's withholding tax exemption.

The applicants relied on the case of *Saleh Kamba & Anor* (supra) to state that the principle to guide court in whatever course to take is what is likely to cause the lest irremediable prejudice to one party or the other. The most important consideration for court to bear in mind in case of this nature is as to which of the parties bore the greater risk of suffering injustice if the remedy sought was to be withheld by the court.it was submitted that those circumstances outweighed the risk of injustice if the injunction is refused.

The applicant submitted that it has 8000 tonnes of rice stuck in stores in Tanzania and the longer it takes, the more uncertainty of collecting it since this is cross border trade with its risks. It further submitted that it has 540 tonnes of rice stuck at Mutukula border which were in transit after being paid for and their import approved by the respondent according to court order of 5th April, 2023 but could not proceed after the consignment was illegally intercepted ad impounded for court orders.

The applicant further submitted that the respondent wants it to pay Ugx. 985,227,570.04 which is contrary to its legitimate expectation established when the withholding tax exemption was granted and later illegally revoked. It was submitted that the principle of legitimate expectation according to the case of *Alex Agandru vs Etoma Francis & Ors Civil Suit No. 07 of 2011* is said to arise as a result of promise, representation, purpose or policy made, adopted or announced by or on behalf of government or a public authority. It extends to a benefit that an individual has received and can legitimately expect to continue or a benefit he expects to receive.

The applicant submitted that had the respondent not awarded the applicant a withholding tax exemption, it would not have bothered to enter into the business of would have done so on different terms.

The applicant also submitted that its non-quantifiable good will is at stake and defined good will according to the *Halsbury's Laws of England Vol 80 (2013) at 807*

as cited in *Primus International Holding Co. Ltd & Anor vs Triumph Controls UK Ltd (2020) EWCA Civ 1227* to mean the whole advantage of the reputation and connection formed with customers together with the circumstances.

The applicant noted that the its business is that save for what is already paid for now for future trade, the applicant's suppliers of rice can stock for the applicant without pay on the basis of its good will hoping that it will soon purchase. The implication is that the trading partners of the applicant will think that the applicant is not a credible entity to deal with because it's not tax compliant. It therefore submitted that the applicant will continue to suffer if this injunction is not granted.

The applicant submitted that the respondent's argument that this application would have the effect of determining the main application baseless as it seeks for order remedies under judicial review in the main application.

## *Respondent's submissions.*

The respondent submitted that there are no sufficient grounds for the grant of an interlocutory mandatory injunction. In regards to status quo, counsel submitted that injunctions are equitable remedies intended to maintain the status quo. Counsel relied on *Thugitho Festo vs Nebbi Municipal Council HCMA No. 0015 of 2017* where the court noted that mandatory injunctions are granted for the purposes of maintenance of the status quo which prevailed at the date of the suit or immediately preceding thereto.

Counsel further relied on *Xing Wang Company Ltd vs Zeng Zuping HCMC No. 0001 of 2018* where court held that a temporary mandatory injunction is not a remedy that is easily granted. It is an order that is ordinarily passed in circumstances which are clear and the prima facie materials clearly justify a finding that the status qou has been altered by one of the parties to litigation. He argued that the applicant's withholding tax exemption certificate was revoked on the 29th March, 2023 and HCMC No. 0111 of 2023 from which this application arises was lodged in court on the 22nd June, 2023.

He therefore submitted that the status quo prevailing at the date of filing HCMC No. 0111 of 2023 or immediately preceding that date was that; the applicant was liable to pay withholding tax on its rice imports. The respondent has not done anything to alter that status quo as to warrant the grant of an interlocutory injunction for restoration of the same.

Counsel submitted the principles for the grant of a temporary injunction as stated in Xing Wang Co. Ltd (supra) are;the presence of a prima facie case with a likelihood of success, danger of suffering irreparable damage and where in doubt, the balance of convenience.

In respect of a prima facie case with a likelihood of success, counsel submitted that HCMC No. 0111 of 2023 from which this application arises cannot be said to be one with a prima facie case for reasons that the purported lawful attorney of the applicant does not have a company resolution allowing him to represent the applicant, he has not exhausted the existing remedies as required under judicial review rules, this court does not have jurisdiction to hear and determine the tax disputes raised by the applicant and that the application offends the lis pendens rule.

On irreparable damages, or injustice, the respondent submitted that taxes are creatures of statutes and there are procedures for refund of any taxes overpaid or wrongly paid which the applicant can explore. Counsel further submitted that the applicant has not adduced any evidence of purchase or ownership of the 8540 tonnes of rice alleged to be stuck in Tanzania. Consequently, the applicant will not suffer any irreparable damage or injustistice if its compelled to pay taxes which it is presently liable to pay.

In regards to the balance of convenience, counsel submitted that the respondent and the general public stand to suffer greater harm if this application is granted. He stated that the grant of this application would tantamount to determining the main application in the applicant's favour as it would lead to the restoration of the applicant's withholding tax exemption which is what the applicant seeks.

The respondent's counsel further submitted that the grant of the application would deprive the respondent of revenues to the benefit of the applicant and loss to it and the nation at large. The grant of the application would further allow the applicant to import into Uganda large sums of rice that would distort the rice

market and perpetuate unfair trade practices to outcompete the applicant's counterparts.

Counsel further submitted that the applicant was using its exemption to help third parties import rice into Uganda without paying taxes and granting this application would enable the applicant to continue being an enabler of tax evasion to the detriment of the respondent and nation.

Her therefore submitted that the implications compared to what the applicant alleges it would suffer if the application is granted and prayed that it is dismissed with costs.

## *Analysis*

An injunction is by its very nature a coercive order. The main question for this court establish is whether in such circumstances in this case the grant of an Interlocutory mandatory injunction or a temporary injunction can still be justified. The legal principles upon which Court exercises its discretion to grant a temporary injunction in all actions pending determination of the main suit is now well settled as seen in the wealth of authorities.

Injunctive reliefs whether Mandatory or Temporary must always be granted on sound reasons and not gratuitously. A mandatory injunction can be granted under the inherent jurisdiction of the court and not under Order 41 of the Civil Procedure Rules. A Mandatory injunction is often a means of undoing what has already been done so far as possible and requires taking positive steps to undo what has been done and therefore the case has to be unusually strong before the court can grant the same. Its purpose is to preserve the status quo and the status quo to be preserved is the one that existed before the wrongful act(s) of the respondent. It can only be issued in special circumstances and in clear and obvious cases. See *East African Spinners Ltd & Others v Bedi Investments Ltd Civil Appeal No. 72 of 1994*

The granting of an Interlocutory mandatory injunction or temporary injunction is an exercise of judicial discretion as was discussed in the case of *Equator International Distributors Ltd v Beiersdorf East Africa Ltd & Others Misc. Application No.1127 of 2014.*

Discretionary powers are to be exercised judiciously as was noted in the case of *Yahaya Kariisa vs Attorney General & Another, S. C. C. A. No.7 of 1994 [1997] HCB 29.*

It should be noted that where there is a legal right either at law or in equity, the court has power to grant an injunction in protection of that right. Further to note, a party is entitled to apply for an injunction as soon as his legal right is invaded. See *Titus Tayebwa –vs- Fred Bogere and Eric Mukasa Civil Appeal No.3 of 2009***.** In the case of *Noor Mohamed Janmohamed v. Karamali Virji Madhani (1953) 20 EACA 8*, the court held that the whole purpose of a temporary injunction is that parties ought to be preserved in status quo until the question to be investigated in the suit can be finally disposed of.

The grant of an interlocutory Mandatory injunction just like a temporary injunction is an equitable remedy and parties seeking an intervention of equity must show expression of good faith and clean hands. Equally a court of equity would grant an injunction if it is satisfied that the respondent's conduct is below the expectation of equity. It must be noted that a court of equity would frown and refuse an injunction when the person seeking it is not acting in good faith. The underpinning factor is whether the applicant has brought itself in the realm of *Giella v Cassman Brown and Co Ltd [1973] EA 358*

The respondent contend that the applicant has not come to court with clean hands since the Withholding Exemption Certificate was withdrawn due to the applicant's transgressions and failure to comply with the tax law. The respondent was acting and exercising their discretion depending on the circumstances and extent of what the tax law allows it to do.

The court cannot exercise discretion in granting an Interlocutory mandatory injunction or temporary injunction without recourse to the law and the facts of the case. Such discretion must be exercised on the strength and basis of the law and facts of the particular case and though the powers are wide, they are also restrictive. The mandatory Injunction sought by the applicant would equally have the effect of perpetuating a continuous breach of the tax law where the applicant wants to import rice without withholding any tax.

Where the remedy of mandatory injunction is sought at the interlocutory stage, it ought not to be granted save in exceptional circumstances such as in plain and obvious cases. Moreover, before granting a mandatory injunction the court had to feel a high degree of assurance that at the trial it would appear that the injunction had rightly been granted. See *Locabail International Finance Ltd v Agro Export and Others [1986] 1 All ER 901*

The courts should be reluctant to restrain the public body from doing what the law allows it to do. In such circumstances, the grant of an injunction may perpetrate breach of the law which they are mandated to uphold. The main rationale for this is rooted in the fact that the courts cannot as matter of law grant an injunction which will have the effect of suspending the operation of legislation. See *R v Secretary of State for Transport ex.p Factortame Ltd* **[***1990] 2 AC 85.*

The courts should consider and take into account a wider public interest. The public bodies should not be prevented from exercising the powers conferred under the statute unless the person seeking an injunction can establish a prima facie case that the public authority is acting unlawfully. The public body is deemed to have taken the decision or adopted a measure in exercise of powers which it is meant to use for the public good. See *Alcohol Industry Association of Uganda & others v AG & URA High Court Miscellanoeus Application No. 744 of 2019*

The question here now is; what was the status quo at the time of the filing of this application. It is undisputed that the applicant's withholding tax exemption certificate was revoked by the respondent on the 29th of March, 2023. It is further undisputed that this application was filed before this court after the 22nd of June, 2023. At that material time, the status quo prevailing was the revocation of the withholding tax exemption certificate of the applicant and the latter's liability to pay withholding tax on its rice imports.

In the circumstances, the applicant seeks an order for mandatory injunction directing the respondent to allow it import 8540 tonnes of rice without charging withholding tax as was the case as of 12th March, 2023. However, as discussed above, the purpose of this remedy is to preserve the status quo of the subject matter.

In the circumstances, what can the court do as a temporary remedy to rectify or at least to ameliorate the situation. The applicant deposed that the situation prior to the filing of the suit ought to be maintained which situation is set out in paragraph 17 and 25 of the it's affidavit in support of the application. From the reading of this, the status quo sought to be maintained, I would suppose; is the revoked withholding exemption tax certificate and the applicant's withholding tax liability since this was the situation as at the time of filing this application.

As such, there is no status quo to be maintained in the circumstances before this court to warrant the issuance of the mandatory injunctive orders. It is also argued by the respondent that the applicant's tax exemption certificate which was revoked has equally expired and would not be operational in any event. This court would act cautiously not to reverse the discretion exercised by the respondent in revoking the Withholding Tax Exemption Certificate before determining the main cause.

The applicant has not made out a case to warrant this court's orders on the reliefs sought in the application and there are no special circumstances to warrant the grant of Interlocutory Mandatory Injunction.

This application fails and is dismissed with costs to the Respondent.

I so order.

*SSEKAANA MUSA JUDGE 17th May 2024*