Southern Investments Limited v Libyan Arab Foreign Investment (Civil Suit No. 250/2011) [2013] UGHCCD 871 (7 February 2013)

## The Republic Of Uganda

## In the High Court Of Uganda at Nakawa

## Civil Suit NO. 250/2011

Southern Investments Ltd.................................... $\vdots$

### Versus

Libyan Arab Foreign Investment Co. (LAFICO) ....................................

# **Before Hon Lady Justice Faith Mwondha**

#### **IUDGMENT**

This suit came before me through counsels for the plaintiff Co Ms Kavuma Kabenge and Co. Advocates. It was brought under Or36r2 of the CPR(summary procedure)filed in court on 28-11-2011. Judgment experte was entered after the defendants had failed to apply for leave to file a defence. In the interest of justice upon application of the counsel for the defendant to set aside the expertee decree, this court set aside the expert decree and the defendant filed the defence consequently. The claim of the plaintiff company was based on an agreement entered into between the defendant company and the plaintiff company on 9-09-2001. The defendant engaged the plaintiff company to recover debts owed by the government of Uganda to the Great Socialist People's Libyan Arab Jamahariya amounting to United States dollars 166,757,826.86(one hundred and sixty six million seven hundred and fifty seven thousand eight hundred and twenty six dollars and eighty six cents). The defendant executed agreement as an agent having been specifically authorized and instructed by the Libyan treasury to negotiate and sign all document s pertaining to the recovery of all debts owed by the government of Uganda and and owe any of its parastatals or entities to the Great Socialist People's Libyan CERTIFIED CORRE Arab Jamahariya.

$317486$

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It was part of the agreement in article 7 therein that;

a) Where the whole of the amount of the debt is collected, 15% of the amount collected would be the plaintiffs company fees.

b)where the amount collected was 75% of the whole debt 10% would be the fees of the amount collected.

c) where repayment is effected through exchange of properties and all assets the plaintiff would be remunerated by the same percentage as above in the assets or properties.

Article 10 of the agreement provided that disputes arising under the agreement would be settled amicably by the two parties if there was no agreement or settlement reached, then by arbitration in a formula to be agreed by the parties. The duration of the agreement was one year renewable by another one year. By a subsequent agreement after the initial expiry of the two years, on the $25<sup>th</sup>$ -01-2006 was executed between the General Popular Committee for the Treasury represented by brother B. Ashour Khalifa Tribil in his capacity as Permanent secretary of the General Popular Committee herein after referred to as the first party And Southern Investments Co. Ltd represented by Mr. Habib Jaffer Kagimu in this capacity as the chairman board of Directors where he was referred to as the second party. Referring to the agreement N0.(625)dated 02-05-2005 C. E in which the first party assigned the second party to make every effort to recover the loans granted by Jamahariya to the Republic Of Uganda(see Ex D1)In paragraph 2 of the preamble in the document ie Ex. D1 the two parties agreed on the method of payment of the second party's fees for its consultancy services regarding the recovery of the debt at 10% of the total amount of money recovered among others. In the third paragraph of the preamble it was stated among others that the remaining installments and the interest agreed upon had been rescheduled to be paid in cash disimbursements during the period from 31-07-2006 to 31-07-2008 C. E. The two parties further agreed to fix the second party's fees at 2.560.628 million dollars.



The plaintiff company had recovered 95.000,000USD for the defendant company. the fact which was not contested by the plaintiff company. The defendant company in the WSD denied that the defendant company owned the plaintiff's company any money. The defendant company stated that the defendant entered into an agreement on the 25-01-2006 in which the two parties agreed to settle the fees by payment of 2.560,628 USD as full and final settlement of the debt through its chairman at that time by the Government of Libya. They contended further that the suit had to be settled amicably and that the defendant fulfilled her part of the bargain at that material time.

There were four issues identified as follows;

1) whether the suit was time barred.

2) whether the suit was premature in view of the arbitration clause in the agreement dated 9-9-2001.

3) whether the defendant owes the plaintiff the sum of money claimed in the plaint

4) what remedies were available to the parties.

As far as the first issue is concerned:

a) it was very clear that after the parties had signed the agreement, there was yet another agreement entered into between the government of Libya by the permanent secretary on the general Popular committee of treasury (see Ex D1 dated 25-01-2006 who ad instructed the defendant Company in the suit to negotiate and sign all documents pertaining to the recovery of all debts owed by the government of Uganda to recover USD 166,757,826.86 cents(see Ex p1 Debt Recovery Agreement) in the preamble of the agreement of 25-01-2006 in the 4<sup>th</sup> paragraph the remaining installments and interest were rescheduled to be paid in cash disbursements during the period from 31/07/2006 to $31/07/2008$ C. E.


b)According to Ex p4 concerning the status of the debt settlement Agreement between the Government of Uganda and Govt of Libya the Government contracted a loan with the Libyan Govt in 1974 and in 1989.

The debt relief arrangement was done in which the government agreed to pay USD 95.000,000 in full and final settlement after Libya had cancelled 48% i.e. 89 million USD of the reconciled outstanding amount.

The government agreed to pay the 95,000,000 USD in two parts

a) a debt equity swap of 49% shares in National Housing and construction Cooperation(NHCC) USD 20.3 million.

b) The balance of USD 74.7 million paid in cash.

A payment schedule was made for USD74.7 million as follows

- $30-6-2005...$ 11.0 - 31-7-2005.........11.0 - 31-7-2006.........14.0 - 31-7-2007.........14.0 - 31-7-2008.........14.0 - 31-7-2009..........10.7

It was very clear from the above schedule that USD 95,000,000 was to be fully recovered by the plaintiffs in 2009. This meant that this would be the time when the cause of action stated to in s.3 of the Limitation Act could not be applicable and so is the case cited by counsel for the defendants James Semusambwa Vs Rebecca HCCS No.417/92.<br>CERTIFIED CORRECT

The schedule was agreed upon by the government's<br>delegations/representatives that is Uganda<sub>H</sub> and c bibya as per Ex p3 and p4. From the above schedule it was clear to me that the recovery date had to


P ss by 31-07-2009. S<sup>o</sup> the cause of action within which the plaintiff company a to sue was after 31-07-2009 and therefore the suit could not be time barred.

On the second issue of the suit being premature, since Article 10 of the agreement provides that the suit could be resolved amicably. <sup>I</sup> have the following to say;

- a) In the submissions of the defense counsel he did not submit that there was any effort to settle the matter and neither was it pleaded in the statement of defense. - b) The suit was filed in court in 2011 which meant that there was a lot of room for arbitration or settlement for example when the parties met and made a joint scheduling conferencing memorandum. That time was not utilized for that purpose, it was clear that the defendants just wanted to waste time by raising that preliminary objection. So that issue is resolved in the negative. Besides the rules of court in the civil procedure rules pre trial is a requisite but the defendant never offered any settlement in which court should have mediated . So the resolution of this issue is that the suit was not premature and in any case article 126 2(e) of the constitution obliges courts to administer justice without undue regard to technicalities, therefore upholding defense counsel's submission would be violating that principle of the law hence sacrificing justice at the altar oftechnicalities.

On the third issue whether the defendant company owed the plaintiff company the sum of money claimed in the plaint USD 95 million. Both counsels at the hearing of this suit they informed court that the documentary evidence they tendered to be relied on to prove their cases on a balang^of probabilities, on the 10/12/2012. They informed court that the documentary evidence tendered was sufficient.

are allowed to file written submissions to support in the joint Scheduling Memorandum. <sup>I</sup> agreed with their r-e-ec^upo^^rfcwh^h to file the written They proposed that they what they agreed on proposal and so the schedule

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missions for each party. <sup>I</sup> perused Ex. Pl that is the debt recovery agreement signed between the parties. <sup>I</sup> also perused Ex P2 the powers of ttorney donated to the defendant by the Libyan treasury. <sup>I</sup> also perused Ex which had a number of documents from the Ministry offinance of Uganda including minutes of meetings between the Libyan delegation and the Uganda government <sup>I</sup> also perused Ex P4 which also had minutes of the meetings between the government of Uganda and the Libyan delegation.

**6**

It was not in dispute that the government of Uganda settled the US \$ 95,000,000 owed to the Libyan government There was also no dispute that the terms of the debt recovery agreement provided that if more than 75% was collected or recovered by the plaintiffs, the plaintiffs were entitled to 10% of the amount recovered. It was clear that the defendant was authorized and instructed by the Libyan Arab Treasury y to negotiate and sign all documents pertaining to the recovery of all debts owed by the government of Uganda etc.

The Libyan Arab Treasury authorized and consented to the appointment by the Libyan Arab Foreign Investment Company of the donnee specified who eventually nominated and constituted Southern Investments Ltd, represented by their chairman Habib Kagimu to act for them on its behalf in the with the government of Uganda and or any parastatals or entities to demand and to negotiate for the sum of US \$ 166, 754,826 being all the debts.etc

After executing such documents as fore mentioned in a subsequent agreement Ex Pl,2,3 and 4 which included 3 other documents therein. Ex DI was executed. Ex DI in some parts contradicted what had been stated in the debt recovery agreement of paying 10% of the recovered amount of the debt The payment schedule was not considered at all. This Ex DI was signed orvthe 25/01/06. In that document reference was made to assignment NO. 625 dated 2/05/05 C. E which showed that the defendant company and the government of Libya were pursuing the same matter and the two were one and the same in respect to the debt recovery agreement which was signed between the defendant company and the plaintiff company.

 I am unable to appreciate learned counsel's submissions that the claim against the defendant by the plaintiff company has no legal basis. Definitely there is a $\frac{1}{2}$ legal basis from what I have pointed out above. The document which learned counsel of the defendant tendered which included Ex D1 which had 4 documents in all don't show at all that the plaintiff company received either the US \$500,000 or the balance of over US \$ 2,000,000. In fact according to the wording of Ex D1 the two parties agreed on the modalities of payment of the second party's fees at 10% of the amount recovered. It was also agreed that US \$ 2,560,628 be paid as fees as final and full settlement. From these exhibits tendered by the defendant, there was no proof at all that the US \$ 500,000 was ever paid to the plaintiffs company whose account was stated to be in Tropical Bank Uganda.

Ex D2 which the defendant tendered showed that there was some transfer but it is not known to whom the transfer was made because there was no evidence that this money was actually deposited on the account of Tropical bank which belonged to the plaintiff company. As such there was actually no proof of receipt of these monies by the plaintiff about US \$ 2,500,000. The statement of account of LFIB Tripoli dated 8<sup>th</sup> Dec 2012; Ex D2 therefore left a lot to be desired. I hasten to add that this court was left in suspense on how the agreement of $9^{th}$ September 2001 was changed but the fees now had to be reduced to US \$ 2,560,628,000 which was contrary to what had been agreed on in the debt recovery agreement and was not in dispute from the joint scheduling memorandum. The document CLCS dc/B005 Ca/22/2/2012 was undated and in its translation but it was from the Great Socialist People's Libyan Arab Jamahiriya General Popular Committee for treasury. This document was requesting for instructions to be given to remit US \$ 2,060,628 to the chairman of Southern Investments Company Ltd. This document as well does not show or prove that this money was paid to the chairman of Southern Investments Ltd because it was seeking instructions to remit and there is no other evidence to show that the instructions were given or not.

This in my view does not prove that the money was remitted. So Ex D 2 and Ex D1 were not useful to the defendant's case. In the submission of counsel for

CERTIFIED CORRECT $11^{10}$ $1013$


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defendant she submitted that there were two powers of attorney the P aintiff was relying on i.e. one of 18/9/2001 and the special power of attorney dated 14/10/2012.

He invited court not to critically analyze the two documents vis-a-vis the defendants claim and find that the defendant is not indebted to the plaintiff.

I wonder why learned counsel submitted that both those documents are not critically analyzed. <sup>I</sup> tried to find the special powers ofAttorney but they were not on file, unless it was there but in a foreign language <sup>I</sup> could not understand. The other power of attorney dated 18/09/2001 was on file and it was clear. The issue which was pertinent to the suit was whether the defendant owed money to the plaintiff company. From the documentary evidence available particularly Ex. DI documents therein inclusive showed that there were modalities to pay the chairman of Directors Southern Investments the US \$2,560,628 but there was no proof that this was paid. But even if there was proof, this court could not understand how that amount could have been reached.

In that agreement the fees to be paid was 10% of the amount recovered. So in my well considered opinion even if the plaintiff company was paid, which is not the case as there is no evidence on balance of probabilities to prove so, still a substantial sum of US\$ 95,000,000 had been recovered so if 2.560,628 is deducted from the 95,000,000. The balance would be US \$ 6,939,372. In the instant case there was no proof that even the amount claimed to have been paid was not paid at all. The arguments of the defendants go a long way to show that they had not fulfilled their obligation to pay USD 9,500,000m as fees as was agreed. So the defendant indeed owes that amount to the plaintiff.

The defendant was an agent of the Great Socialist People's Libyan Arab Jamahiriya represented by the Libyan Treasury which authorized and consented to the appointment by the Libyan Arab Foreign Investment Co. of the donnee specified in the power of attorney to perform the acts stipulated. So whether the defendant was contracting personally was immaterial. But it was clear from the evidence that the defendaplj^u^an^^s^ct^ng in concert

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the Libyan Arab Treasury and <sup>I</sup> have not appreciated the plaintiffs °usel s submission the Libyan Arab Treasury was not a party to the agreement of the debt recovery. The evidence from the documents tendered and agreed as summarized in this judgment show that the Libyan Arab Treasury was a party and therefore liable as well. In fact by the Libyan Arab Treasury signing the agreement /document Ex DI proves that the defendant company was acting on their behalf and therefore this ratified together with the earlier documents Ex pl and p2 and legalized the defendant company's actions.

Besides the powers of attorney which were given to the defendant were not conclusive as it didn't include the power to settle. But since the donnee had the power to negotiate it was implied that the government had to pay and the fact that in the agreement of 25/01/2006 modalities were worked out by the Permanent Secretary of the Libyan Treasury, this brought it out that the consent had been given. This also showed that at all times the defendant was working in the interest of its mother state when it agreed with the plaintiff company. So in this regard it made the agent defendant liable as such <sup>1</sup> partly agree with the authority cited by counsel for the plaintiff Alex Olwor V. Registered Trustees of Arua Catholic Diocese [1995] IV KALR 132. Before <sup>I</sup> take leave of this case, <sup>I</sup> hasten to add that even if the agreement was taken to have expired which was not the case in this case, the conduct of the parties particularly the defendant showed that the agreement was still alive. For instance the agreement signed on 25/01/2006.

The case cited by learned counsel for the plaintiff the case of Edward Makubuya T/A M Furnishing Works V. Kampala City Council Kawempe Division HCCS No. 59/2003. In this case, another case of Jamfred Properties Ltd V. Eute National Per II Twismo (1989) 2 All ER 444 which considered voidable contracts was cited and therein it was held that"... whether voidable or otherwise had been effectively entered into the subsequent acts of the defendants president in authorizing payment of the deposit and offering to complete the purchase by installments constituted under Jtalian law the


ratification of the July agreement or the entry onto a fresh contract on the same terms."

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In the instant case there were a number of actions the defendant did after 2003 which apparently showed that the agreement was still alive like signing the document or agreement of 25/01/2006 (Ex D1).

Taking all the above into account, the plaintiff proved that it had not gotten any benefit from the agreement between them and the defendant company. The defendant did not dispute that US \$ 95,000,000 was recovered by the plaintiffs company. Actually the whole agreement dated 09/09/2001 was not in contest at all which provided that 10% has to be given to the plaintiff as service fees. This goes without saying that the defendant conceded to the plaintiffs services as well as the monetary value. The defendant did not prove at all that the US \$ 2, 560,687 was paid let alone prove how the payment was reduced from 10% of the amount recovered.

In light of the above judgment is hereby entered in favor of the plaintiff in the following terms

- a) The defendant pays the plaintiff the amount due i.e. USD 9,500,000m - b) Interest thereon at the rate of 15% p.a from the time of this judgment to payment in full - c) Costs of the suit

So be it done

RA Explained

Rhuer Ole Faith Mwondha Jenge 7/02/2013

**CERTIFIED CORRECT** FFB 2013 RESIDENT JUDGE HIGH COURT NAKARA


### THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA AT NAKAWA

### **CIVIL SUIT NO. 250 OF 2011**

## SOUTHERN INVESTMENTS LIMITED **VERSUS**

### **PLAINTIFF**

# LIBYAN ARAB FOREIGN INVESTMENT CO. (LAFICO)

**DEFENDANT**

### **DECREE**

THIS MATTER coming up before Hes Lordship, Hon. Justice Faith Mwondha for judgment this 7<sup>th</sup> February, 2013, in the presence of Mr. Simon Peter Kinobe, Counsel for the Plaintiff and Mr. Richard Caesar Obonyo, Counsel for the Defendant;

Upon considering the evidence on the record and upon considering the submissions of all Counsel on record, it is hereby DECREED and ORDERED as follows;

Judgment is entered in favour of the Plaintiff in the following terms;

- (a) The Defendant pays the Plaintiff the amount due i.e. USD 9,500,000. - (b) The Defendant shall pay on the above sum interest at the rate of 15% per annum from the time of this judgment to payment in full. - (c) Costs of the suit.

GIVEN under my HAND and SEAL of this Honorable Court this $\quad\text{ of }\quad$ $2014.$

**REGISTRAR**

**EXTRACTED BY:**

M/S Kigozi Ssempala Mukasa Obonyo [KSMO] Advocates, Crested Towers, 5<sup>th</sup> Floor, Short Tower, 17 Hannington Road, P. O. Box 23064, **KAMPALA**

THE REPUBLIC OF UGANDA