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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0318 OF 2004
LUNCO CONSTRUCTORS LTD :::::::::::::::::::::::
PLAINTIFF
VERSUS
1. THE ATTORNEY GENERAL OF UGANDA]
2. COMBINE SERVICES LTD
] ::::::: DEFENDANTS
BEFORE: THE HONOURABLE MR.
JUSTICE YOROKAMU BAMWINE
R U L I N G:
The
Plaintiff is a company with limited liability duly incorporated and carrying on
business of construction in Uganda. This Ruling
is in respect of the suit it
filed against the 1st Defendant, the Chief Government Legal Officer
being sued in his representative capacity.
Representation:
Mr.
David Ndyomugabe for the Plaintiff.
Mr. Sam Serwanga for the 1st
Defendant.
As a brief introduction, the 1st Defendant through
its Ministry of Water, Lands & Environment embarked on Luwero Town Water
Supply Project. A contract to undertake
the said project was signed with the
2nd Defendant, M/S Combine Services Ltd. With the apparent knowledge
and approval of the Ministry, M/S Combine Services sub-contracted
the Plaintiff
to do the work on its behalf. This was in 1999. In December 2000, the Ministry
was advised to terminate the contract
on account of shoddy work and the contract
was accordingly terminated.
The Plaintiff claims to have imported
materials for the said project. The Defendant through its Ministry of Water,
Lands and Environment
paid for them but declined to pay for the works done
because, according to the 1st Defendant, there was no contract
between them and the Plaintiff. Hence this suit for recovery of
Shs.264,904,018-.
In this Ruling, I have been asked by the parties to
determine whether the Plaintiff has a cause of action against the 1st
Defendant.
Ii have very carefully addressed my mind to the arguments of
both counsel as contained in their written submissions. It is trite
that a
plaint which discloses no cause of action against the Defendant must be
rejected.
To say that a plaint discloses a cause of action, it must show
that the Plaintiff enjoyed a right; that the right was violated; and
that the
Defendant is liable for that violation. There is a wealth of authorities on
this point, including the often cited Auto Garage & Others
–Vs-Motokov (No. 3) [1971] EA 514.
As regards privity of
contract, this refers to a relationship between the parties to a contract, which
make the contract enforceable
between them. The general position is that a
stranger to a contract cannot sue upon the contract unless given a statutory
right
to do so: Kayanja –Vs- New India Assurance Company Ltd [1968]
EA 295.
In considering whether a cause of action is revealed by
the pleadings, Courts consider what right of the Plaintiff has been allegedly
violated. In other words, the Plaintiff must from the pleadings as a person
aggrieved by the violation of the right and Defendant
as a person who is
liable.
Applying the above principles to the issue now before Court,
there is no dispute that the contract, the subject matter of this suit,
was
entered into between the 1st Defendant through its Ministry of Water,
Lands and Environment on the one hand, and M/S Combine Services Ltd, on the
other. The
Plaintiff was only contracted by the latter to execute the contract
on its behalf. The Plaintiff was not party to the impugned contract.
From the pleadings, the Plaintiffs enjoyed a right, that is, the right
to be paid for the work done. However, in as far as they purport
to hold the
1st Defendant liable for that violation, and they base their claim on
a contract to which they are a stranger, they are, in my view,
at the wrong end
of the law; the law that provides that only a person who is a party to a
contract can sue or be sued on it.
I have considered counsel’s argument
that the 1st Defendant made representations to them which they acted
upon to their detriment. If this is so, then the cause of action would not
be
breach of contract but making a false representation. They would be entitled to
a remedy in law or equity other than what they
are asking for
herein.
Counsel has also argued that the sub-contract to the Plaintiff by
the 2nd Defendant with the knowledge and consent of the
1st Defendant amounted to an assignment of the 2nd
Defendant’s rights under the contract to the Plaintiff. Counsel thinks
that the principle of Novation is applicable.
I have addressed my mind to
that argument as well. The issue in this case is liability under a contract to
which the Plaintiff is
a stranger. The general rule is that liability under any
contract cannot be assigned. However, it can be assigned with the consent
of
the other party to the contract, a situation known as novation in
law.
Generally speaking, the parties may make liabilities under a
contract assignable, expressly or impliedly.
In the instant case, there
is no dispute that the work to be done under the contract was for the benefit of
the 1st Defendant. Likewise there is no dispute that the contract to
do the work was between M/S Combine Services Ltd and the 1st
Defendant. Clearly, the issue of the sub-contract was a matter between the
Plaintiff and M/S Combine Services Ltd. The 1st Defendant was a
stranger to that arrangement, whether or not he gave a blessing to it or whether
or not he purchased the materials
from the Plaintiff upon termination of the
contract. He could have got them from any other source.
When the
Plaintiff did not do the work to the 1st Defendant’s
satisfaction, the first Defendant terminated the contract. Much as the actual
work on the ground was being done
by the Plaintiff, the contract that was
terminated was between the 1st Defendant and M/S Combine Services
Ltd. Upon its termination, M/S Combine Services Ltd was entitled to sue for
quantum maruit and
upon being paid meet the Plaintiff’s claim, if any.
Therefore the Plaintiff cannot proceed against the 1st Defendant as
if there existed a contract between them. As I understand the principle of
Novation, parties to a contract enter into
a fresh one substituting it for the
old one, thereby discharging the old one. In other words, the same parties
agree that the old
contract be abandoned in favour of the fresh one. In the
instant case, to the extent that the Plaintiff’s claim is based on
an
agreement to which it is a stranger and to which it supplied no consideration,
counsel’s argument based on Novation is misplaced.
This Court is
also cutely, aware that a right or benefit under a contract can indeed be
assigned by legal assignment; equitable assignment;
or by operation of law.
None of the above is pleaded in the plaint. The plaint merely paints a picture
of a person who is not party
to a contract seeking to enforce it. The Law says
No. It can sue on the sub-contract but not the main contract. To sanction the
suit on the pleadings as they are before Court would be to allow the Plaintiff
to enforce a right against a wrong party.
In the result, I hold that the
plaint does not disclose a cause of action as against the 1st
Defendant. I make no finding in respect to the 2nd Defendant. There
is therefore merit in the point of law raised by Mr. Serwanga. I allow
it.
Under 0.7 r 11 (a) of the Civil Procedure Rules, a plaint which does
not disclose a cause of action against the Defendant must be
struck out. It is
accordingly struck out as against the 1st Defendant.
As
regards costs, although the usual result is that the loser pays the
winner’s costs, I am in the unique circumstances of this
case inclined to
the view that each party should bear its own costs. I order
so.
.................................
Yorokamu
Bamwine
J U D G E
24/1/2006
Order: This
Ruling shall be delivered by the Registrar of this Court on a date to be fixed
by him and thereafter in consultation with my
clerk fix a date for a scheduling
conference in respect of the claim against the 2nd Defendant. A
hearing notice shall be issued accordingly.
Yorokamu
Bamwine
J U D G E
24/1/2006
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.RTF of original document