Shiv Construction Co.Ltd V Endesha Enterprises Limited (Civil Appeal 34 of 1992) [1993] UGSC 21 (6 August 1993)

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LTD :: :: :: :: :: :: APPELLANT \line AND \line ENDESHA ENTERPRISES LTD : : : : : : : : : : : :RESPONDENT \line (Appeal from the Ruling of the High Court of Uganda at Kampala \line (Ag. Judge Mr. Justice L. Ongom dated 13/12/92) \line IN \line HIGH COURT CIVIL SS. CASE_NO.302/91 \par }{\insrsid12154322 }{\b\ul\insrsid12154322\charrsid4661713 JUDGEMENT OF PLATT J. S. C.}{\ul\insrsid12154322\charrsid8471405 }{\insrsid12154322\charrsid8471405 \line This is an appeal against t he order of a temporary injunction. Before I deal with the issues on appeal a preliminary point was taken that the appeal was incompetent because the notice of appeal had not been filed in the High Court as required by Rule 74 of the }{ \ul\insrsid12154322\charrsid8471405 Supreme Court Rules. }{\insrsid12154322\charrsid8471405 T he notice of appeal was lodged in both courts, and while the notice was apparently first brought to the Supreme Court, it was later lodged in the High Court on the 1st July, 1992. As this court had allowed the appeal to be lodged in 7 days from the 25th J u ne, 1992 it was lodged within time. There is no fault if the notice of appeal is filed in both Courts, the Supreme Court and the High Court, so long as the lodgment in the High Court is within time. Consequently the court dismissed the preliminary objecti on and these are the reasons for that order.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 \line Endesha Enterprises Ltd., a newly formed Company brought an action against one of its promoters, namely Shiv Construction Ltd., seeking general damages. The agreement, which had been called the joint venture ag}{ \insrsid12154322 reement, was entered into on 7}{\super\insrsid12154322 th}{\insrsid12154322\charrsid8471405 December, }{\insrsid12154322 1988. In it}{\insrsid12154322\charrsid8471405 Shiv Construction Ltd, was to take 5% of the shares in Endesha Enterprises }{\insrsid12154322 Ltd,}{\insrsid12154322\charrsid8471405 and its part in the formation of the new venture was to provide land, labour, machinery and tools to erect a go-down for the new Company. Shiv Construction Ltd. was in fact the owner of the land described as Plot M 277 at Nakawa. The agreement states that the extent of the land is 0.43 hectares, which, according to documents from the City Council of Kampala should perhaps b e only 0.389 hectares. Endesha Enterprises was to provide the building materials and other \'93accessories\'94 required to erect a go-down on the land of Shiv Construction Ltd and to import the necessary machinery which would contribute to its 95% share holding. The land was to become part and parcel of the new company\rquote s assets. Unfortunately, the parties fell into a dispute of some sort. The Plaintiff, the Endesha Enterprises Ltd. , claimed that the Defendant Shiv Construction Ltd., failed to transfer the latter\rquote s land to the plaintiff, although the plaintiff had fulfilled its obligation under the agreement. The plaintiff had, for instance, provided the machinery required by the new company. But due to the defendant\rquote s refusal to give the plaint}{ \insrsid12154322 iff access to the new go }{\insrsid12154322\charrsid8471405 down to install the machinery, the machinery had not been installed. The defendant\rquote s breach of contract had caused the plaintiff loss.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 The defendant Shiv Construction Ltd. defended itself in the following way, according to the ame nded written statement of defence. Apart from a technical objection (which was not pursued in this court) the burden of the defence is that the defendant did not agree to transfer 0.389 hectares of land as the portion}{\insrsid12154322 of land which was the subject }{\insrsid12154322\charrsid8471405 matter o f the agreement. The land was to be surveyed arid measured before clause 4 of the agreement had the blank spaces filled in. (That would refer to Plot M 477 measuring 0.43 hectares). It was a fraud to prematurely fill in the blank spaces. The defendant all eges that the agreement was }{\ul\insrsid12154322\charrsid8471405 ultra vires }{\insrsid12154322\charrsid8471405 the convenants in the defendant\rquote s head lease. Alternatively, the defendant claimed that the defendant itself provided a considerable part of the prefabricated structures of the building materials, and challenged the Plaintiff\rquote s assertions that the}{\insrsid12154322 machinery had been ordered. }{\insrsid12154322\charrsid8471405 The defendant counterclaimed for general damages as mesne profits for sixteen months at the rate of U. S. $4000 per month.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 The general issues from these pleadings is whether the joint venture agreement was broken by the defendant. The plaintiff\rquote s director Mr. D. P. Haria in his supporting affidavit made the points that the land n question formed the basis of the plaintiff\rquote s claim, so that any letting or disposal to a third party would prejudice the plaintiff\rquote s interests, and damage would be irreparable. The defendant was trying to let out or dispose of the land without the knowledge and express consent of the plaintiff. }{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Mr. Jadva Patel a director of the Defendant company expressed the view in his aff idavit in reply, that the joint venture was only made in respect of that part of land on which the go-down was erected. The transfer of this land was subject to the importation of machinery from Italy. This machinery was never imported and that was a fund amental breach on the Plaintiff\rquote s part, discharging the defendant\rquote s obligation to transfer the land. The joint venture agreement was also discharged because the area of land had been described as larger than it really is. There was fraud in filling up the spaces }{\insrsid12154322 in the agreement. The agreement}{ \insrsid12154322\charrsid8471405 had irretrievably broken down and required \'93wind}{\insrsid12154322 ing up.\'94 Then comes paragraph 9- \par }{\insrsid12154322\charrsid8471405 \'939. That if an injunction is granted against the respondent for property owned by itself and which it can rent out it would cause injustice.\'94}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 In paragraph 10 it is contended that no sale of the property is permitted by the City Council.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 In a supplementary affidavit, Mr. Haria agreed that the acreage was 0.389 hectares. He contended that the City Council of Kampala, had in effect, acknowledged the situation on the land. There was no breach of }{ \insrsid12154322 importation, because the go-down}{\insrsid12154322\charrsid8471405 had not been completed, so that the ma}{\insrsid12154322 chinery could be erected. On }{\insrsid12154322\charrsid8471405 the other hand the plaintiff had invested some shs. 200 million in the project, so that it would suffer seriously if no injunction were granted.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 The learned Judge weighed up these disputes and the submissions of the Counsels, and came to conclusions which may be summarised as follows: \line 1. The learned Judge noted that the application had been ( brought under Order XXXVII Rule 1 (a) of the }{\ul\insrsid12154322 Civil }{\ul\insrsid12154322\charrsid8471405 Procedure Rules. }{\insrsid12154322 That provision}{\insrsid12154322\charrsid8471405 permits an injunction where the suit premises may be in danger of being alienated. }{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 2. The learned Judge correctly directed himself on the principles to be applied.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 3. The learned Judge sought to hold the status quo until the disposal of the suit. There was no fraud or impedement to the suit.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 4. On the balance of convenience, it was held that the plaintiff would suffer greater injury if the injunction was not granted, than the defendant might sustain if it was granted. The conclusion of the learned Judge }{ \insrsid12154322\charrsid11410787 was }{\insrsid12154322\charrsid8471405 that the temporary injunction}{\insrsid12154322 must be granted;-}{\insrsid12154322\charrsid8471405 }{\insrsid12154322 \par \'93}{\insrsid12154322\charrsid8471405 to restrain the defendant/respondent Company its officers, servants and a}{\insrsid12154322 gents from selling renting, sub-}{\insrsid12154322\charrsid8471405 letting, transferring or in any way, parting with ownership and possession of Plot M 477 Nakawa Industrial Area, including its development until other orders of (the) Court. The defendant/r}{\insrsid12154322 espondent shall be at liberty t}{\insrsid12154322\charrsid8471405 o move the Court to dismiss the head suit if the plaintiff does not take steps to fix it for hearing within 3o days. I order that costs of this pending application do abide the event of the final di}{\insrsid12154322 sposal of the pending suit.\'94 \line }{\insrsid12154322\charrsid8471405 \line The Defendant Shiv Construction Company did not take advantage of the unusual subsidiary order at the end of the granting of the temporary injunction. The learned Judge gave his decisi}{\insrsid12154322 on on the 13th December, 1991. }{\insrsid12154322\charrsid8471405 No further step has been successfully taken to set the suit down for hearing to determine the rights of the parties. Time was taken to bring this appeal, when the suit might very well have been disposed of and the temporary injunction thereby lifted. }{\insrsid12154322 \par However, the appeal was}{\insrsid12154322\charrsid8471405 taken on four grounds. They are unfortunately not of great}{\insrsid12154322 merit}{\insrsid12154322\charrsid8471405 . Ground 1 concerns the grantin}{\insrsid12154322 g of the inju}{ \insrsid12154322\charrsid8471405 nction on mere suspicion that the property was likely to be disposed of by the appellant without real evidence to that effect. In ground 2 it is said that the learned Judge had failed to consider the inconvenience to the Appellant by being denied rent i n respect of premises constructed before the joint venture agreement. Thirdly it was said that the joint venture was an illegal contract tainted with fraud. Finally it is said that the learned Judge did not properly address his mind to the principles guid ing the granting of a temporary injunction. In general, the appellant really brought this appeal on the first ground and to some extent on the second.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 On the first ground that there was mere suspicion that the property would be alienated, the learned Judge was surely right when he held that the Appellant/Defendant\rquote s attitude was that he should be able to sub-let.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Looking at the evidence afresh two aspects call for attention. One was that the Appellant/Defendant had built a workshop, office and flat before the joint venture. The area of land which these buildings occupied had not been intended for transfer. They }{\insrsid12154322 were to he separate from the go }{\insrsid12154322\charrsid8471405 down which was to be erected as part of the joint venture. The injunction should not cover the defendant/appe1ant\rquote s own buildings, and it should be able to sub}{\insrsid12154322 -let them. \line }{\insrsid12154322\charrsid8471405 \line There is no evidence of any kind to support this contention. The joint venture agreement does not distinguish between the land to be transferred to the plaintiff/respondent and the land to be retained by the defendant. how the acreage came to be inserted in clause 4 of the agreement may be one que}{\insrsid12154322 stion; how the division of the l}{\insrsid12154322\charrsid8471405 and was not part of the agreement}{\insrsid12154322 is much more important on this aspect of the}{\insrsid12154322\charrsid14965504 case}{\i\insrsid12154322\charrsid8471405 }{\insrsid12154322 . Nor is it in e}{\insrsid12154322\charrsid8471405 vidence whether such a divi sion would indeed be a practical proposition. There is no firm indication that a division of plot M 477 had been intended, which is after all only about an acre. But to make this claim certain indicates that the appellant wished to use the property indepe ndently.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Secondly, it became clear even in argument before this court that the appellant wished to sublet what it considers its own property in order to gain U. S. $4000 per month. That is the figure in the counterclaim. The appellant considers that the joi nt venture agreement is at an end. It considers that it is harsh to refuse it permission to allow it to sublet. There was every reason to believe that the appellant would alienate the property o}{\insrsid12154322 r part of it, if the injunction }{ \insrsid12154322\charrsid8471405 had not been imposed.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Now, th ere are cases where the courts have held that mere suspicion is not enough to support a temporary injunction. But it is clear that in this case, there was ample material before the learned Judge upon which he could reach the conclusion that he did.}{ \insrsid12154322 \par }{\insrsid12154322\charrsid8471405 The second ground of appeal has now been covered in general. But the balance of convenience was sought. }{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Choosing }{\ul\insrsid12154322\charrsid8471405 GIELILA v. CASMAN BROWN }{\insrsid12154322\charrsid8471405 (1973) E. A 358 as the }{\ul\insrsid12154322\charrsid8471405 locus Classicus }{\insrsid12154322\charrsid8471405 in Uganda and East Africa, the Court of Appeal for East Africa laid down the approach which would guide the courts in such a matter. The applicant must show a }{\ul\insrsid12154322\charrsid8471405 prima facie }{\insrsid12154322\charrsid8471405 case with a probability of success. An injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which could not be compensate}{\insrsid12154322 d}{\insrsid12154322\charrsid8471405 in damages. When the court is in doubt it will decide the a}{\insrsid12154322 pplication on the balance of \line }{\insrsid12154322\charrsid8471405 convenience}{\insrsid12154322 . It is}{\insrsid12154322\charrsid8471405 a}{\insrsid12154322 l}{ \insrsid12154322\charrsid8471405 so}{\insrsid12154322 a}{\insrsid12154322\charrsid8471405 matter }{\insrsid12154322\charrsid14965504 of}{\i\insrsid12154322\charrsid8471405 }{\insrsid12154322\charrsid8471405 concern to the court whether a valid contract has been made.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 There is nothing invalid in the joint venture agreement as such. According to the terms of the applicant\rquote s lease, it could not sublet without consent. There is nothing on the record to show that such consent was not or could not have been obtained. Indeed in clause 4, the appellant agreed to assist in the transfer of title into the new Company\rquote s name. Prima facie, that must have meant that the appellant saw no impediment to obtaining the consent necessary, which would not normally be withheld, then the agreement would come to an end. But there is no evidence t hat that was or would be the fate of this agreement.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Then it is said that the agreement was tainted with fraud. That is clearly a factual issue to be determined at the trial. It could go either way. Assuming that the learned Judge considered that the argu ments were somewhat equally balanced, it is difficult to find any ground upon which this court could interfere with the Judge\rquote s conclusion. }{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 \line The land was certainly the ba}{\insrsid12154322 sis of the agreement as the go }{\insrsid12154322\charrsid8471405 down was to be constructed upon it. Both sides may hav e invested in this concern; but if it is true that the respondent/plaintiff invested shs. 200 million and had a 95% stake in the enterprise to lose those assets would be an irreparable loss. In the case of disputes over land, damages are not usually suffi c ient as compensation. The appellant/defendant, on the other hand, would be able to use the workshop, office and flat as before. He was not prevented from carrying out his normal occupation of these premises. Whatever enterprise he was carrying on in these premises he could continue. All that the appellant could not do was alienate}{\insrsid12154322 }{\insrsid12154322\charrsid8471405 the land. It could not do so in any case witho}{\insrsid12154322 ut the consent of the City Counc}{ \insrsid12154322\charrsid8471405 il. While such consent could not be unreasonably withheld in normal circumstances, the appellant was asked to maintain the }{\ul\insrsid12154322\charrsid8471405 status quo }{\insrsid12154322\charrsid8471405 pending the trial Court\rquote s determination of the disputes between the parties. The appellant has taken its time to have the}{\insrsid12154322 se issues resolved. When one }{\insrsid12154322\charrsid8471405 balances the two sides of this dispute, it is clear that the respondent/plaintiff had more to lose than the appellant. Nothing was said as to the inability of either side to pay damages or compensation; so that nothing turns on }{\insrsid12154322 t}{ \insrsid12154322\charrsid8471405 hat possible aspect of a case such as this. }{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Taken all round, even if one were to have in mind such a penetrating judgement as }{\ul\insrsid12154322\charrsid8471405 AMERICAN CYNAMID CO, v. ETHICON LTD }{\insrsid12154322\charrsid8471405 (1975) }{ \ul\insrsid12154322\charrsid8471405 1 ALL E. R. }{\insrsid12154322\charrsid8471405 Q4 it is plain that the learned Judge approached his task judicially, and weighed up the case for each side adequately. The only fault that I could find is that the subsidiary orders given were improper. It is not right to order that the present appellant may be at liberty to move the court to dismiss the head suit if the plaintiff does not take steps to fix it for hearing within 30 days. The proper order is that the temporary

injunction will be lifted, if, by a certain time, the suit has not been set down for hearing. The second fault was that the Plaintiff/Respondent as applicant for the injunction should have been required to enter into an undertaking as to damages. Lastly t he order for costs is correct. The costs should be in the cause as the applicant was successful on the summons. If the applicant had failed, the costs w}{\insrsid12154322 ould have been ordered against }{\insrsid12154322\charrsid8471405 it. This was considered in }{\ul\insrsid12154322\charrsid8471405 GIELLA vs. CASMAN BROWN }{\insrsid12154322 above at p. }{\insrsid12154322\charrsid8471405 361.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Accordingly I would maintain the temporary injunction, and in principle dismiss the appeal. But I would vary the subsidiary orders as follows: \emdash \line (a)}{\insrsid12154322 I would order that the temporary}{ \insrsid12154322\charrsid8471405 injunction be lifted if within 4 months, from today\rquote s date, the suit is not set d}{\insrsid12154322 own for hearing}{\insrsid12154322\charrsid8471405 .}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 (b) the respondent/plaintiff, which applied for this injunction, must give an undertaking to pay the Appellant damages, to cover the loss which the appellant may have suffered due to the injunction}{\insrsid12154322 , if the suit is dismissed. \par }{\insrsid12154322\charrsid8471405 (c) As the plaintiff/respondent success}{\insrsid12154322 fully applied for the injunction,}{\insrsid12154322\charrsid8471405 the costs of the application will be costs in the cause.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 As far as this appeal is concerned the Respondent will have the costs of this appeal.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Delivered at Mengo this 6th day of August, 1993.}{\insrsid12154322 \par }{\b\insrsid12154322\charrsid16259618 }{\b\ul\insrsid12154322\charrsid16259618 H. G. PLATT }{\b\insrsid12154322\charrsid16259618 \line JUSTICE OF THE SUPREME COURT}{\insrsid12154322 \line }{\ul\insrsid12154322\charrsid16259618 \line }{ \b\ul\insrsid12154322\charrsid16259618 JUDGEMENT OF MANYINDO, D. C. J}{\insrsid12154322\charrsid8471405 \line I have had the benefit of reading i}{\insrsid12154322 n draft the judgement of Platt -}{\insrsid12154322\charrsid8471405 JSC. I agree with it, and as Odoki JSC}{\insrsid12154322 . I agree with it and as Odoki JSC, }{\insrsid12154322\charrsid8471405 also agrees there will be an order in the terms proposed.}{\insrsid12154322 \par }{\insrsid12154322\charrsid8471405 Dated at Mengo this 6th day of August, 1993. \line }{\b\insrsid12154322\charrsid16259618 S. }{\b\insrsid12154322 T}{\b\insrsid12154322\charrsid16259618 . MANY I NDO \line }{\b\ul\insrsid12154322\charrsid3229209 DEPUTY CHIEF JUSTICE}{\b\insrsid12154322\charrsid16259618 \par }{\b\insrsid12154322\charrsid8471405 \line }{\insrsid12154322\charrsid8471405 \line }{\b\ul\insrsid12154322\charrsid16259618 JUDGEMENT OF ODOKI, J. S. C.}{\insrsid12154322\charrsid8471405 \line }{\insrsid12154322\charrsid16259618 I }{ \insrsid12154322\charrsid8471405 have read in draft the judgement prepared by Platt J. S. C. with which I am in full agreement.}{\insrsid12154322\charrsid16259618 I}{\b\insrsid12154322\charrsid8471405 }{\insrsid12154322\charrsid8471405 concur with the orders proposed by him.}{\insrsid12154322 \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid12154322\charrsid8471405 Dated at Mengo this }{\insrsid12154322 6}{ \super\insrsid12154322\charrsid16259618 th}{\insrsid12154322 }{\insrsid12154322\charrsid16259618 day}{\insrsid12154322\charrsid8471405 of August}{\b\insrsid12154322\charrsid16259618 , }{\insrsid12154322\charrsid16259618 1993.}{ \b\insrsid12154322\charrsid8471405 \line }{\b\insrsid12154322\charrsid16259618 B. J. ODOKI \line }{\b\ul\insrsid12154322\charrsid3229209 JUSTICE OF THE SUPREME COURT}{\insrsid12154322\charrsid8471405 }{\insrsid14830933 \par }}