East Africa: Court of Appeal

EAST AFRICA PLANS LIMITED        ………………………….…….. APPELLANT

ROGER ALLAN BICKFORD-SMITH . . . . . . . ……….. . . . . . . .. .. RESPONDENT

(Appeal from a judgment and decree of the High Court of Uganda at Kampala (Goudie J.) dated 15^th January, 1971 in Civil Case No. 426 of 1969)

22^nd December, 1971.

The following Judgments were read:-

LAW, AG. V-P.

This appeal and cross-appeal arise out of a suit filed by the appellant company against the respondent, who was at all material times a share-holder in the appellant company, in respect of the supply to the respondent of water, I quote from the plaint-

“…by virtue of the provisions of and at the rates prescribed by the Articles of Association of the plaintiff (that is to say, the appellant) company and resolutions duly passed thereunder";

alternatively, at a reasonable commercial rate. The defence was, firstly, that as the charges exceeded Shs. 10/- per 1,000 gallons, they exceeded the maximum rate chargeable as fixed under section 16 of the Water Boards Act and were to that extent un1awful and irrecoverable; secondly, that to the extent that the water was supplied under the terms of an injunction granted in another suit, no charges could be raised for the period covered by the injunction; and thirdly, that as to the major part of the claim purporting to be meter charges levied under an addition to the Articles of Association, this addition was made without the agreement of the respondent who was then a member of the appellant company.

The second and third grounds of defence were rejected by the learned trial judge, and form the substance of the cross-appeal. The first ground of defence found favor with the learned judge, who dismissed the suit because, in his view, I quote-

“…the whole of the charges in excess of Shs. 10 per 1,000 gallons were unlawful and are irrecoverable in law".

I will deal first with the cross-appeal. The claim in the plaint covered a period of 18 months. For some 10 months of that period water was supplied in terms of an injunction obtained by the respondent in another suit, under which the appellant was ordered to reconnect the respondent's water supply and continue to supply him with water, until further order as to payment for such supply. No further order was in fact made. Mr. Oder for the respondent submitted that in these circumstances the respondent was not liable to pay for water supplied during the 10 month period covered by the injunction, as the water was supplied in terms of the injunction under which no order requiring payment was ever made.

I am quite unable to accept this submission. A temporary injunction issues in order to preserve the status-quo as it existed between the parties before its issue, and I have no doubt that the respondent is liable to pay for water supplied while the injunction was in force at the same rates as he would have been liable to pay had the injunction not issued.

The second ground of cross-appeal is that, as the respondent had refused to pay more than Shs. 10/- per 1,000 gallons of water supplied to him, any implied contract which may have arisen to pay for water after such refusal should be construed as involving the respondent in ,liability to pay at that rate and no more. I see no merit in this ground. The respondent was never in a position to alter unilaterally the rates at which he was contractually bound to pay for water supplied.

His liability, whether under an express or subsequent implied contract, is to be determined by whether the rates charged under the express contract were 1awful or unlawful and the answer to that question depends on the result of the appeal. I see no merit in the cross-appeal. I now turn to the appeal.

Many of the grounds raised in the memorandum of appeal related to the allegedly unjustified structures passed by the learned judge as to the way in which the appellant company was run and carried on business. As these matters did not form the basis of the lower court's decision, Mr. Keeble for the appellant company did not press them, beyond commenting that the trial judge's strong views on the subject must have colored his approach to the issues before him in a sense unfavorable to the appellant company. The main point in this appeal is whether the learned judge was right in holding that the charges raised by the appellant company against the respondent were unlawful and irrecoverable in so far as they exceeded Shs. 10/- per 1,000 gallons supplied.

To decide this question it is necessary to go in some detail into the history of events relating to this appeal. The main function of the appellant company is to supply water to dwelling houses on Busiga Hill, near Kampala. For this purpose it installed a pump-house at the foot of the hill, and pumped water up to reservoirs on the hill, from whence it was distributed to the houses through a system of pipes. Each householder wishing to be supplied with water was required to buy a certain number of shares in the appellant company.

Water was originally obtained from a swamp. This source of supply being unsatisfactory, arrangements were made to obtain supplies from the Kampala and District water Board in 1960. As the pumping- station was then just outside the area of the water Board, the authority of the Governor in Council was required to the arrangement, under Section 11 (a) of the waterworks Act (Cap. 137). This authority was duly obtained, and was published as Legal Notice No. 196/60. It authorised the Water Board to supply water to the appellant company at the plot on which the pump house is situated. The consent of the Minister concerned was also required under Section 16 of the Water Boards Act (Cap. 138). This was duly obtained on 9th September, 1960. The water Board was authorised to supply water to the appellant company at Shs. 3/- per 1,000 gallons, and the latter were authorised to re-sell it at a maximum of Shs. 10/- per 1,000 gallons.

It is common ground that the appellant company could not carryon without imposing some surcharge on this permitted maximum price. In 1965 an agreed annual charge of Shs. 500/-, variously described as a gallonage or meter charge, was paid by the residents of Busiga Hill who received water from the appellant company, in addition to the authorised charge of Shs. 10/- per 1,000 gallons.
In 1966 when the respondent became a resident on Busiga Hill and a share-holder in the appellant
company, the surcharge was shs. 600/-. This surcharge was necessary to enable the appellant company to meet its operating expenses. The respondent paid it. On the 3rd March, 1968, the share-holders (including the respondent) were given notice of an Extraordinary General Meeting of the appellant company to be held on 26^th March at which it would be proposed to amend the company's Articles of Association by providing for the payment of a meter charge, the amount to be decided in General Meeting. The Extraordinary General Meeting was duly held. The respondent did not attend, but a quorum of members was present.

The proposed resolution was duly passed, and an annual meter charge of Shs. 1950/- per annum approved. The respondent and two other residents then filed the suit to which reference has already been made, claiming a declaration that the resolution had not validly been passed. The suit was eventually unsuccessful. The respondent has always refused to pay the meter charge of Shs. 1,950/-, and the question in this appeal is whether he is entitled to avoid paying it on the ground upon which he now relies, that such a meter charge is unlawful having regard to the maximum resale price of Shs. 10/- per 1,000 gallons fixed by the Minister in 1960.

The appellant    company's case is, briefly, stated, that the maximum resale price applies only to the water as delivered at the pumphouse, and that the company is entitled to recoup its expenses of delivering the water to the residents on Busiga Hill, and of maintaining its pumphouse, reservoirs, tanks and pipe-lines, from those residents. The respondent's case is that any charge in excess of the Shs. 10/- authorised by the Minister is irrecoverable as unlawful.

The respondent's case found favor with the learned judge. I find myself quite unable
to agree with this conclusion. As I see the position, the maximum resale price of Shs.10/- per 1,000 gallons applied to the water as delivered by the Water Board at the pump-house. Had any resident of Busiga Hill preferred to collect his water at the pumphouse and make his own arrangements to carry it up the hill to his house, he would have paid Shs. 10/- per 1,000 gallons, and borne his own transport charges. I do not see how, in these circumstances, it can be said that the charges raised by the appellant company for' delivering the water can be said to have been unlawful.

They may have been excessive, but the consumer's remedy in that case would be to cease making use of the appellant company's facilities, and to make his own arrangements for transporting the water. To take a simple example, a man might have a stand-pipe outside his house, from which he is authorised to sell Water Board water to the public at 20 Cts. a debe. Some of his customers ask him to carry these debes to their houses, at an agreed charge of 10 Cts. each. Could it seriously be argued that such an arrangement was unlawful, as involving a resale of water at a price higher than the maximum authorised by the Minister? I do not think so.

In the present case, the respondent, when he agreed to take water from the appellant company, was fully aware that in addition to paying the maximum authorised resale price for the water itself he would be required to pay such surcharge, to cover pumping, storage and delivery, as should be necessary to keep the appellant company solvent. The surcharge would necessarily vary with the cost of providing these facilities, but it was an implied term of the contract between the appellant company and its members who were supplied by it with water that they would pay such surcharge as was reasonably necessary to enable the appellant company to continue its operations. It is unfortunate that the appellant company described this surcharge as "meter rent".


Mr. Oder for the respondent relied strongly on this description in supporting the learned judge's finding that the surcharge was unlawful and irrecoverable. He pointed to rule 36 of the Waterworks Rules, made under the authority of the Waterworks Act (Cap. 137) which fixes the scale for meter rents far lower than the "meter rent" charged by the appellant company. In my opinion, the Waterworks Rules only apply to services operated by a Water Authority, and have no application to a privately owned system of water distribution such as that belonging to the appellant company. The Kampala and District water Board’s interest, so far as Busiga Hill is concerned, ceased when its water was delivered to the consumer, in this case the appellant company, at its pump-house. In any event, as I have a1ready said, the expression "meter rent" to describe the surcharge imposed by the appellant company was a misnomer, an unfortunate choice of words. The surcharge was in no sense a meter rent, but a charge for pumping, storing and delivering water. There was, in my opinion, nothing unlawful in the imposition of such a charge, and with respect I am of opinion that the learned judge was in error in coming to the conclusion that it was an unlawful and irrecoverable charge. I would accordingly allow this appeal, with costs; set aside the judgment and decree appealed from, and substitute a judgment and decree in favor of the appellant company for Shs. 12,994/- with interest at 8 per centum per annum from the date of filing suit until payment, together with the costs of the suit. I would dismiss the cross-appeal, with costs. As Lutta and Mustafa J.J.A. agree, it is so ordered.

LUTTA, J.A.     

I have had the advantage of reading the judgment prepared by the learned Acting Vice-President with which I respectfully agree and have nothing useful to add.


MUSTAFA, J.A.

I have had the opportunity of reading the judgment prepared by the learned Ag. Vice-President. I agree with his reasoning and conclusions and have nothing useful to add.