|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Uganda: Commercial Court |
[Database Search] [Name Search] [Recent Decisions] [Noteup] [Help]
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
CIVIL SUIT NO.
604 OF 2004
NIS PROTECTION (U) LIMITED :::::::::::::::::::::
PLAINTIFF
VERSUS
NKUMBA UNIVERSITY ::::::::::::::::::::::::::::::
DEFENDANT
BEFORE: THE HONOURABLE MR. JUSTICE YOROKAMU
BAMWINE
J U D G M E N T:
The plaintiff
is a limited liability company registered in Uganda and engaged in the business
of providing guard services. Its claim
against the defendant is for general and
special damages for breach of contract, interest thereon and costs of the suit.
The dispute
arises out of an agreement between the plaintiff and the defendant
dated 24/4/2003 for provision of guard services. The contract
price was
Shs.5,840,000- per month for a period of one year.
From the evidence, the
agreement was signed on behalf of the defendant by its security officer and on
behalf of the plaintiff by its
Managing Director. The plaintiff began
mobilising staff for performance of the contract. However, the defendant
stopped it from
deploying the guards on the ground that the security officer had
acted without authority. Hence the suit.
At the scheduling stage, the
parties agreed that:
1. A contract for provision of security services was
purportedly entered on behalf of the defendant with the plaintiff.
2. The
defendant stopped the deployment of the plaintiff’s guards.
There
are two issues for determination:
1. Whether there was a valid contract
between the plaintiff and the defendant for provision of security
services.
2. Whether the plaintiff is entitled to the remedies
sought.
Mr. Moses Adriko for the plaintiff.
Mr. Joseph Luswata for the
defendant.
First, whether there was a valid contract between the
plaintiff and the defendant for provision of security services.
From the
evidence of PW1 Mr. Chitembo, formerly the plaintiff’s Operations Manager,
he was in office when someone rang and introduced
himself as Mutebi Rogers of
Nkumba University. He said he was a security officer and they needed guard
services. He contacted his
Managing Director, PW2, who mandated him to go and
conclude a deal with the defendant. He concluded the deal for provision of 21
security guards and reduced the terms and conditions of the deployment of the
guards into writing. The contractual terms are on
record as D. Exh. 1. His
evidence on this matter tallies with that of his Managing Director, PW2 Asega
Charles. It is not necessary
to repeat it here. Suffice it to say that the
draft contract was prepared by the plaintiff’s lawyers and submitted to
the
defendant. It was returned to the plaintiff duly signed by the
defendant’s said security officer, Rogers N. Mutebi and one
A.S. Kayongo,
for and on behalf of the client, the defendant herein.
Neither Mr. Mutebi
nor A.S. Kayongo appeared as a witness for either party. Mutebi is said to have
lost his job with the university
for reasons partly to do with this case. Be
that as it may, the defendants do not dispute the contract. Their argument is
that
it was negotiated and executed by a person without authority to commit the
defendant to any contractual agreement with regard to
provision of guard
services. Learned counsel for the defence has argued that the issue of the
defendant’s liability can only
be decided on the principles of actual and
ostensible authority, popularly known in matters of company law as the indoor
management
rule, or on the principles of vicarious liability.
Under the
indoor management rule, an individual director may be able to bind the company
in any transaction with outsiders on the
basis of the application of
constructive notice. The matter was put better by Lopes L.J. in BIGGER
STAFF –VS- ROWATT’S WHARF LTD (1896) 2 Ch. 102 when he said
that a company is bound by the acts of the persons who take upon themselves with
the knowledge of the directors to act
for the company, provided such persons act
within the limits of their apparent authority; and strangers dealing bonafide
with such
persons, have a right to assume that they have been duly
appointed.
As I stated above, the security officer did not appear as a
witness for either party. There is evidence, however, that when the dispute
arose, he admitted the conclusion of the agreement with the plaintiff and the
fact that he lacked the authority of the defendant
to do so. DW1 David
Sentongo, the defendant’s Secretary, said that much.
I have looked
at the appointment letter of Rogers Mutebi. His first duty was to be
responsible full time for providing effective
protection and safety of the
university’s property and personnel (staff and students), on the campus
and its annexes. The
second was formulating, planning, advising and seeking
approval of security policies for the university to adopt.
Duty No. 6 is
to advise on the manning of the unit and the recruitment of security guards at
their stations on the campus and annexes
day and night.
And under duty
No. 15, he could do any other act either by his own initiative or by direction,
and take any other measures that will
be in the best interests of the university
subject to consultation with and reporting to the relevant
authorities.
It is significant to note that even as between Mutebi and
Chitembo, PW1, Mutebi did not claim to be the final authority. He would
take
papers on condition that he was going to discuss the matter with his bosses and
bring them duly endorsed. There is no way the
plaintiff could have guessed that
all the internal regulations of the university had not been complied
with.
Looking at the duties of this officer, 16 of them all spelt out in
his letter of appointment, D. Exh. V. although the plaintiff did
not seek to
look at Mutebi’s letter of appointment before concluding the deal with the
university, he (Rogers Mutebi) was not
a junior officer in the university
establishment. He was highly placed, responsible for the defendant’s
security matters.
From the evidence, although the plaintiff’s business
includes provision of guard services, it is not the one which went touting
for
business. The defendant’s servant, Rogers Mutebi, contacted them and told
them the defendant’s security needs.
The plaintiff’s Operations
Manager went to the defendant’s premises and concluded the impugned deal,
himself on behalf
of the plaintiff, and the said Rogers Mutebi for and on behalf
of the defendant. It would appear to me that the plaintiff was in
the
circumstances of this case right to assume that Rogers Mutebi had the defendants
mandate to conclude the deal. PW1 was entitled
to assume that Rogers Mutebi was
acting within his usual authority.
In the law of agency, usual
authority has 3 possible meanings:
1. It may mean implied or incidental
authority.
2. It may refer to cases where an agent has apparent authority
because he has been placed by his principal in a situation in which
he would
have had incidental authority if this had not been expressly negatived by
instructions given to him by the principal and
not communicated to the third
party.
3. It may refer to a situation where the principal is bound by the
agent’s contracts even though there is no express, implied
or apparent
authority.
See: LAW OF CONTRACT IN UGANDA by D.J. BAKIBINGA, FOUNTAIN
PUBLISHERS at p.128. From his letter of appointment, he was never told in
categorical terms not to recruit or cause recruitment of anybody
for guard
services. And from the records, he never recruited anybody to the
defendant’s pay-roll. He appears to have concluded
the contract on behalf
of his master, in the hope that his master would bless it later. As between
himself and his master, he may
have got it wrong. The issue is whether the
plaintiff too got it wrong, expressly or by implication.
In my view,
the case falls within the third meaning above. The case of WATTEAU
–VS- FENWICK [1891 – 4] ALL ER 897 illustrates
my point. One Humble owned the Victoria Hotel. He sold it to Fenwick, who
employed him as manager and allowed his name
to remain over the door. Fenwick
forbade Humble to buy cigars on credit. However, Humble bought some on credit
from Watteau. Later
Watteau discovered the existence of Fenwick and claimed
their price from him. The claim succeeded on the ground that it was within
the
usual authority of a manager of a hotel to buy cigars on credit.
From
the above facts and holding, it is clear to me that a principal whether
disclosed or not, is liable for the acts of an agent
acting within his
authority. A secret limitation of such authority is useless where the principal
is sued by a third party, like
in the instant case. Wills J. stated in the
Watteau –Vs- Fenwick case, supra at page 898:
“The principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations as between the principal and his agent put upon such authority ....... “
I agree.
In my view, the indoor
management rule as already seen above applies to the instant case. As Gower
says at p. 184 of his PRINCIPLES OF MODERN COMPANY LAW, 4th
Edn, the rule is manifestly based on business convenience, for business could
not be carried on if everybody who had dealings with
a company had meticulously
to examine its internal machinery in order to ensure that the officers with whom
he dealt had actual authority.
Not only is it convenient, it is also just.
For the reasons stated above, Court is satisfied that the defendant is
liable. The contract concluded on its behalf by one Rogers
Mutebi was binding
on it from the point of view of the indoor management rule.
I have in
the alternative also considered the issue of vicarious liability raised by
counsel.
From the evidence, Rogers Mutebi was an employee of the
defendant. As such, he performed the duty of a security officer. In the
performance of that duty, he concluded the impugned deal with the plaintiff.
The question which arises is whether he did so in the
course of his
employment.
I would answer such a question in the affirmative.
The
case of Muwonge –Vs- Attorney General [1967] EA 17
immediately comes to my mind. It was a case in which the appellant’s
father had been killed during a riot. The shot which
caused the death was fired
by a police man who had seen the appellant run towards a house, had concluded
that the appellant was a
rioter and, having followed him, fired wantonly into
the house not caring whom he killed or injured. At that time, stones were being
thrown and shots were fired nearby.
It was held, on appeal, that firing of
shots was an act done within the exercise of the policeman’s duty, for
which the Government
was liable as a master, even though it was wanton, unlawful
and unjust. Newbold, P. said:
“An act may be done in the course of a servant’s employment so as to make his master liable even though it is done contrary to orders of the master; and even if the servant is acting negligently or criminally, or for his own benefit, nevertheless if what he did is merely a manner of carrying out what he was employed to carry out, then his master is liable.”
What he said above has since been followed
with approval in many cases in this country concerning liability of masters for
acts of
their servants. I fully agree with the principle. Not only does it
make sense but it is also just.
In all these circumstances, whether the
issue is approached from the point of view of the Law of Agency or the Law of
Torts, there
was a valid contract between the plaintiff and the defendant for
provision of security services.
The first answer is answered in the
affirmative.
Second, whether the plaintiff is entitled to the remedies
sought.
The plaintiff has prayed for special damages in the sum of
Shs.35,243,750-. Of this, Shs.26,040,000- is said to be the anticipated
total
profit for a period of one year; Shs.2,120,000- as salaries paid to 20 Askaris
and one supervisor for 1 month while waiting
to commence work each Shs.100,000-
and Shs.120,000- for the supervisor; Shs.2,120,000- as 1 month in lieu of notice
of termination
of contract; Shs.315,000- as repatriation for 21 Askaris each
Shs.15,000; Shs.1,200,000- as telephone expenses; Shs.200,000- as transport
expenses; Shs.323,750- as rifle rental; and Shs.2,925,000- as Accountancy and
Consultation fees. From the evidence, the defendant
undertook to pay
Shs.5,840,000- to the plaintiff, plus VAT every month as consideration for the
services provided by 20 security
guards and one supervisor. The parties also
agreed that the contract could be terminated by either party upon giving the
other two
(2) months written notice of such notice. The Askaris were never
deployed even for a day. It is the plaintiff’s case that
it had Askaris
recruited from Mbale, Soroti, Arua and Nebbi; that is hired a dormitory to house
them; that it had the Askaris paid
wages for one month; etc.
Court is
satisfied that the defendant had no knowledge of the contract until the matter
was brought to their attention on receipt
of a letter from the plaintiff’s
lawyers. The defendant was at liberty to terminate it if it was not in its
interest. However,
it had to do so in accordance with its terms.
The
plaintiff has held itself out as a provider of security guard services. It is
not indicated in the agreement that the parties
agreed that the plaintiff would
recruit, train and transport the Askaris to Nkumba University all at the expense
of the defendant.
The plaintiff did not have to accept the deal if it did not
have already trained man power. The defendant was therefore entitled
to assume
that the guards had already been trained and were there ready for deployment.
Accordingly, the plaintiff’s claims
for recruitment, transportation and
accommodation, etc, are in my view unjustified. These purported damages were
very remote. In
any case, no proof has been offered in respect of each of those
expenses.
It is trite that special damages must be pleaded and strictly
proved. It is not enough to just allege as has been done herein. Where
documentary evidence is not forthcoming, as appears to be the case herein, the
party should be contented with an award of general
damages. Since the plaintiff
has not led evidence of how the figures were arrived at, who was paid and when,
there is a possibility
that the figures were cooked up. I’m therefore
inclined to disallow the plaintiff’s claim for special damages and I
do
so.
As regards the claim for general damages, these are presumed by law
to be a necessary result of the harm alleged. The general rule
regarding the
measure of damages whether it is an action grounded in contract or tort is what
Courts have stated time and again as
that sum of money which will put the party
who has been injured, or who has suffered, in the same position as he would have
been
in if he had not suffered the wrong complained of. Such damages can only
be an estimate, often a very rough estimate of the present
value of his
prospective loss.
I have taken into account the technical nature of the
defendant’s liability for the wrongful act of its servant Rogers Mutebi.
I have also taken into account the fact that if the defendant had not opted to
disown its servant’s act and had in accordance
with clause 6 of the
Agreement given a two months written notice of termination to the plaintiff, or
had paid an amount equivalent
to the two months in lieu of notice, there would
have been no breach of contract for the plaintiff to write home about. The
plaintiff
would have been denied a cause of action.
Finally, I have
taken into account the fact that all the plaintiff’s claims for special
damages have been disallowed.
In all these circumstances, I consider it
just and equitable that the plaintiff be awarded a sum of Shs.12,500,000-
(twelve million
five hundred thousand only) as general damages reflecting the
value of its prospective loss under the contract. It is awarded.
In arriving
at this figure, I have considered the amount, the equivalent of the remuneration
for the notice period, that is, Shs.11,680,000-
(Shs.5,840,000 x 2), if the 2
months notice had been given or payment had been made in lieu thereof.
I
notice that there was no prayer for interest. However, the plaint contains the
ever redundant prayer for any relief this Honourable
Court may deem fit. Under
this prayer, I order that the decretal amount attracts interest at Court rate
per annum from the date
of judgment till payment in full.
As regards
costs, the defendant’s effort has earned it partial success in the sense
that the plaintiff’s claim has been
reasonably scaled down. I assess the
success at 20%.
I award 80% of the costs of the suit to the plaintiff.
Orders accordingly.
DATED at Kampala this 16th day of May,
2006.
Yorokamu Bamwine
J U D G E
16/5/2006
Joseph Luswata for the defendant.
Stephen Zimula holding brief for Moses
Adriko.
Plaintiff’s Managing Director present.
Court:
Judgment delivered.
Yorokamu Bamwine
J U D G
E
16/5/2006
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/ug/cases/UGCommC/2006/20.html
.RTF of original document