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Last Updated: 25 May 2007
Greenboat Entertainment Ltd V City Council of
Kampala- HCT-00-CC-CS-0580-2003 [2007] UGCommC 20 (27 February
2007)
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0580-2003
Greenboat
Entertainment Ltd Plaintiff
Versus
City Council of Kampala
Defendant
27th February 2007
BEFORE: THE
HONOURABLE MR. JUSTICE YOROKAMU BAMWINE
JU D G M
E N T:
The plaintiff’s claim against the defendant
is for special and general damages for breach of contract, recovery
of money owed under
the contract and costs. From the pleadings, the
defendant contracted the plaintiff to manage street parking in
Kampala for four years
under an agreement commencing on 1/7/98. The
contract expired on 30/6/2002. The defendant re-advertised the tender
in October, 2002.
The plaintiff was one of the bidders. It continued
managing street parking pending completion of the tendering process.
The tender
was awarded to Multiplex (U) Ltd on 20/2/2003 and the
plaintiff was asked to hand over to the new tenderer.
At the
scheduling conference, the parties agreed that:
(i). There was a
contract between the parties dated 17th July, 1998.
(ii).
There was a re-advertisement of the tender in October, 2002.
(iii).
The plaintiff participated in the bidding.
(iv). The tender was
awarded to Multiplex (U) Ltd.
(v). On 28/2/2003 the plaintiff was
instructed by the defendant to stop its activities.
There are
two issues for determination:
1. Whether the contract
between plaintiff and defendant was breached by the defendant.
2.
Whether the plaintiff is entitled to the remedies
sought.
Counsel:
Mr. John Mike Musisi for the plaintiff.
Mr.
Nelson Nerima for the defendant.
Before I delve into
the assessment of evidence in this case, I consider it necessary to
state the law on some aspects of this case.
First, the burden
of proof.
In law a fact is said to be proved when Court is
satisfied as to its truth. The general rule is that the burden of
proof lies on the
party who asserts the affirmative of the issue or
question in dispute. When such a person adduces evidence sufficient
to raise a
presumption that what he asserts is true, he is said to
shift the burden of proof: that is, his allegation is presumed to be
true,
unless his opponent adduces evidence to rebut the presumption.
The standard of proof is on a balance of probabilities. Relating the
above principle to this case, the plaintiff has alleged breach of
contract. The burden rests on it to prove that allegation.
Second,
the parole evidence rule. This rule is to the effect that evidence
cannot be admitted (or even if admitted, it cannot be used)
to add
to, vary or contradict a written instrument. In relation to
contracts, it means that where a contract has been reduced to
writing, neither party can rely on evidence of terms alleged to have
been agreed, which is extrinsic document, that is, not contained
in
it. Where, however, there is a dispute as to what transpired between
the parties, as in the instant case, evidence can be admitted
to show
that a written contract has been varied or even rescinded. I now turn
to the issues.
As to whether the contract between the
plaintiff and the defendant was breached, the question that comes to
one’s mind is, which
contract? From the pleadings and the evidence,
the contract dated 17/7/98 was for a period of four years, effective
from 1/7/98.
It therefore expired on 30/6/2002. It automatically
terminated upon expiry of the contract period of 48 months. If there
was any
breach, therefore, it was not in respect of this four year
contract. This contract was performed by the parties. Any breach can
only
be in reference to the alleged renewed contract. The issue as I
see it is whether after the expiration of the initial contract, the
contract was renewed by the parties.
In law, when we talk of a
contract, we mean an agreement enforceable at law. For a contract to
be valid and legally enforceable, there
must be: capacity to
contract; intention to contract; consensus and idem; valuable
consideration; legality of purpose; and sufficient
certainty of
terms. If in a given transaction any of them is missing, it could as
well be called something other than a contract.
Learned
counsel for the plaintiff’s argument is that the contract was
supposed to expire on 30/6/2002 but the plaintiff continued
in
operation under the same terms until 28/2/2003 when the defendant’s
town clerk wrote a letter terminating the contract. It is
the
plaintiff’s case that its continued service to the defendant
followed verbal re-assurances from the various concerned authorities
of the defendant that the contract had been renewed.
From the
records and the evidence presented to Court, the contract was not
merely supposed to expire on 30/6/2002; it actually expired
on that
date. There was a mechanism for its renewal. The parties agreed on
that mechanism. Under clause 2 thereof, at the expiry
of the
contract, the same was subject to review for purposes of renewing or
re-tendering. The parties agreed under clause 17 that
the contract
was terminable at the expiry of the contract period or any other
period over and above the contract period that may
be agreed upon by
both parties in writing. That the parties continued operating on the
same terms as the expired contract till 28/2/2003
is not in dispute.
There is evidence that in January 2003, the defendant’s town clerk
wrote to the plaintiff as follows:
"You will therefore continue to pay the contract sum as agreed upon and execute other conditions of the contract as spelt out."
From the evidence, however, this letter
written on 2/1/2003 was not the basis for the alleged renewal of a
contract that expired on
June 30th, 2002, in view of the
uncontroverted evidence that between June 2002 and December 2002, the
plaintiff continued operating as before.
By January 2003, the
contract had either been renewed or it hadn’t. So what is there to
show that it had been renewed?
The plaintiff relies on alleged
re-assurances from the various concerned authorities of the defendant
that the contract had been renewed.
It does not name any of the
officials of the defendant who may have been the source of the said
re-assurances to raise the inference
that the alleged re-assurances
were binding on the defendant. In general, oral contracts are just as
valid as written ones. An oral
contract is a contract the terms of
which have been agreed by spoken communication, in contrast with a
written one, where the contract
is a written document. In my view,
whether a contract is oral or written, it must have the essentials of
a valid contract, which
I have already spelt above. In my opinion,
even if I were to accept that any such re-assurances were given as
alleged, but I don’t,
it is clear to me that they lacked sufficient
certainty of terms until January 2003 when the town clerk advised
them that they were
to continue to pay the contract sum as agreed
upon.
I have devoted considerable attention to P. Exh. 111, a
letter from the defendant which the plaintiff is heavily relying on
as evidence
of a negotiated contract. I find it necessary to
reproduce it here to emphasize my point. It reads:
"January 2, 2003
The Managing Director
Green Boat Entertainment Ltd
Kampala
ADVERTISEMENT OF TENDER FOR MANAGEMENT AND CONTROL OF STREET PARKING AND REQUEST FOR REVIEW OF CONTRACT SUM
I refer to yours GB/TC/2002 of 1st November, 2002. I regret to have responded to it late but I had to study the issues which you raised to which I respond as follows:
1. Whereas advertising for new bids could have negative effects, as contract Managers, it is your responsibility to take control of issues 1 – 3 because the contract is still in your hands. The machinery to deal with culprits is still in place. Indeed, my revenue staff have been in the field to verify the claims and have found them baseless. You will therefore continue to pay the contract sum as agreed upon and execute other conditions of the contract as spelt out. (emphasis mine).
2. Regarding issues you raise on page 2 of your letter, I like wise respond as follows:
a. The contract sum was agreed upon in Uganda shillings and any devaluation in the Uganda shillings equally affects the Council as well as the firm-yourselves.
b. ...............................................
c. ...............................................
d. ...............................................
Council will therefore not entertain any more proposals from changes in the contract sum because the listed issues are within your means.
G.T. Mwesigye
Town Clerk."
From the tone of the letter, the parties were
re-negotiating the deal. The first contract had expired and the
parties, in accordance
with clause 2 of the main agreement, were in
the process of reviewing their performance under the expired contract
for purposes of
renewing or re-tendering. Under the expired contract,
the plaintiff had been paying a fee of Shs.35m per month. In the
contract under
negotiation, the plaintiff wanted the fee reviewed
down wards. The prayer for the revision of the contract sum was in
accordance
with clause 5 of the main agreement. The defendant
rejected the proposal. In my view, therefore, the plaintiff’s
argument, based
on this letter, that the defendant had given them a
go ahead to pay the contract sum as agreed upon, cannot be sustained.
The defendant
is being quoted out of context, given that as at
2/1/2003, the intended renewal of the contract was a matter still
under negotiation.
I would agree with learned counsel for the
defendant’s submission that renewal of the contract could only be
done under clause
17.1.1. for another period agreed upon in writing.
The contract document provided so. Accordingly, the alleged oral
re-assurances, even if any had been proved to have been made, cannot
be used to add to, vary or contradict the written agreement. Court is
satisfied that at the time the plaintiff was asked to wind
up, there
was no new period agreed upon in writing. Accordingly, while it is
true that the plaintiff continued operating the service,
there was no
agreement in writing on the duration/period as clause 17.1.1
required. If it had been renewed, the plaintiff would be
talking
about a definite period the parties had agreed upon. No such period
has been mentioned by any of the plaintiff’s witnesses.
DW2
Basil Bataringaya Rwankwene testified that after the expiry of the
initial contract, the plaintiff continued until the tendering
process
was to be completed. I accept this evidence. From the evidence, the
defendant awards contracts through a tender board. In
the performance
of its functions, the board has to conform to the standards
established by the Central Tender Board for procurement
of goods,
services and works. Section 91 (7) of the Local Governments Act, Cap.
243, is clear on this. There is no evidence that
the said board ever
sanctioned the renewal. The matter was subjected to competitive
bidding. There is evidence that the plaintiff
participated in the
bidding process, without raising any query as to any existence of
another valid contract between the parties.
They lost the bid. I have
been invited by learned counsel for the defendant to find that the
only reasonable conclusion which can
be drawn is that at the time the
plaintiff was stopped, the written contract had long expired. That
the contractual relationship
between the parties was now based on an
oral understanding. Form the oral evidence presented to Court and the
documentary exhibits,
I accept the submission. In my view, to hold
that the contract had been renewed would be to re-write P. Exh. 1 for
the parties. I’m
unable to do so.
Counsel for the plaintiff
has argued that notice was required to terminate the contract. I have
already said that there was no contract
in place by the time the
plaintiff was stopped; just an oral understanding between the parties
to continue operating until the tendering
process was to be
completed. The notice referred to in clause 17.1.2. is couched in the
following terms:
"17.1.2 if either party commits a breach of any of its obligations the aggrieved party shall give to the other six months notice from the date of receipt of the notice of its intention to terminate the contract, such notice shall be in writing."
It is submitted for the defendant that the notice
required in the above clause only applied when the party was in
breach. I’m inclined
to the same view. From the evidence, there was
no termination due to breach. The plaintiff’s services to the
defendant came to
the end when the tender was awarded to another
company after a competitive bidding process in which the plaintiff
unsuccessfully
participated. Clause 17.1.2 is therefore
inapplicable.
PW1 Moon testified that the nature of the
business required notice. That the plaintiff had made orders of
materials unique to the
business they were doing, which materials, if
they had been given a notice of six months, they would not have
purchased. By this
evidence, I have understood the plaintiff to mean
that whether or not they lost the subsequent tender, there was still
need for a
notice of six months to enable them wind up its activities
and dispose of any unused materials.
I have looked at the
pre-qualification tender documents, D. Exh. 1, which the plaintiff
submitted to the defendant. In these documents,
the plaintiff credits
itself with a wealth of experience in the ‘Parking Service’
industry. It lists a number of world cities,
including Seoul, where
it had carried out similar business. I would think that the award to
them was, among other factors, based
on the said wealth of experience
in the industry. It has not been indicated to me that K.C.C had any
comparable experience in the
same field. In view of this claim of
experience, I find it strange that the plaintiff did not find it
necessary to include in the
contract document provision for any
notice period, in the event that they lost the subsequent tender, in
which they would be enabled
to wind up their operations in the manner
claimed herein. In my view, it was up to the plaintiff, drawing from
its own experience,
if any, to demand from the defendant a term in
the contract giving it notice before they could hand over to any new
contractor in
case their subsequent bid for the renewal of the
contract was unsuccessful; or even demand for an automatic renewal
for a stated
period.
It is trite that Courts must be cautious
in their approach to implying additional terms into the contract
before them. In my view,
while it was perhaps reasonable to include
such a term in the contract, it is not open to this Court to imply it
therein, without
re-writing the agreement for them. When all is said
and done, I find that at the time the plaintiff was stopped on
28/2/2003, the
written contract had long expired. The service
relationship between the parties thereafter was based on an oral
arrangement between
them, pending formalization of the next tender
award to the plaintiff or any other company that would win the
tender. Having participated
in the bidding process without protesting
that its old contract had been renewed, the plaintiff is in my view
estopped from claiming
unlawful termination of its relationship with
the defendant. Accordingly, while there was a contract between the
parties for the
four year duration, there was nothing more than an
administrative arrangement, call it agreement if you may, for the
subsequent period
of 8 months in which the tender for the next
awardee was being processed. While, in my view, any work done by the
plaintiff during
that period, merited recognition by the defendant,
it by no means meant that the expired contract had been renewed. My
conclusion
on this point is fortified by the fact that legally, every
contract involves an agreement much as not every agreement amounts to
a contract: the element which converts an agreement into a legally
enforceable contract being the intention of the parties to enter
into
legal relations and thereby bind themselves to carry out the
agreement. With all respect to the plaintiff, I have not seen any
such intention in the impugned arrangement. There was a clear lack of
consensus ad idem; the contract, if any, lacked fresh consideration;
and the agreement lacked certainly of terms. It lacked, so to say,
most of the essentials of a valid contract.
I would therefore
answer the first issue in the negative and I do so.
As to
whether the plaintiff is entitled to the remedies sought, its cause
of action is based on an alleged breach of contract. Having
held, as
I have done, in issue No. 1, that there was no breach, I find that
the reliefs sought by the plaintiff are not available
to it. I would
find no merit in the suit and dismiss it with costs to the defendant.
However, in the event of a successful appeal,
since the plaintiff had
prayed for damages, special and general, I shall try to address the
issue of damages as well.
I will start with special damages.
The rule has long been established that special damages must be
pleaded and strictly proved by
the party claiming them, if they are
to be awarded. The special damages claims are particularized under
heads A-D.
Claim (a) for Shs.1,000,272,258- is for loss of
income in lieu of six months’ notice. The plaintiff in such case
must prove the
net income lost as a result of a breach of contract,
that is, gross income less expenses. The evidence of PW2 Mugenyi
shows essentially
the plaintiff’s gross earnings. It does not show
expenditure. The plaintiff did not produce records showing its cash
flow at the
time. From the evidence of PW2 Mugenyi, the sum of
Shs.166,712,000- per month on which this claim is based was gross
income. It was
not a profit because they would have to deduct so many
other expenses. I think the plaintiff would have done better than it
did if
it had tendered books of accounts, even if for a couple of
months, showing profits at the time of termination. This would have
given
Court background information as to daily income, and,
consequently, monthly income. Accounts of receipts against outgoings
can be
proved to arrive at a net figure. If no accounts were kept,
then a claim in general damages should be considered. In these
circumstances,
I agree with learned counsel for the defendant that
this claim is highly speculative.
Claim (b) is for
Shs.2,740,027,200- being funds due to abrupt termination of the
agreement. It is a claim for reasonably recoverable
defaults. It is
for years 2001, 2002 and 2003. I have genuinely not appreciated the
plaintiff’s inclusion of his claim herein because
the plaintiff is
a limited liability company which, the termination notwithstanding,
could still recover the funds from the defaulters.
In my view, even
after determination, the plaintiff was not barred from recovering any
such money from the defaulters themselves
as long as they had
evidence of any such defaulters. I notice that in its submissions,
the plaintiff down played this claim in preference
for an award of
general damages.
Claim (c) is for Shs.8,918,000- being
alleged loss of investment by abrupt closure of contract. I have
already indicated that the
termination was not abrupt. It was
systematic. The plaintiff was given time to submit proposals for
another term. The proposals were
unsuccessful after a period of about
8 months. By the time the plaintiff went in for another round of
bidding, it ought to have been
aware that the tender bid could either
succeed or fail, in the absence of a right to automatic renewal of
the contract. This claim
would also fail.
Claim (d) is a road
marking claim of Shs.180,311,300-. Court has seen correspondence
appearing to suggest that the defendant’s official
had considered
paying the plaintiff for road marking, a clear responsibility of the
plaintiff under the contract. From the records,
the tender obliged
the plaintiff to do road marking and provide road furniture, earn
money from it and pay a percentage of it to
the defendant by way of a
monthly fee of Shs.35m. From the contract document, therefore, the
plaintiff was under duty to do what
it is now claiming from the
defendant for. In any case, Shs.180,311,300- was submitted to the
defendant as a mere cost estimate.
It does not represent the actual
costs for the work done. The payment was stopped before it
materialized. Whoever stopped the payment
appears to have been
suspicious of it. This Court is equally suspicious of it. I would
reject the claim for lack of substantiation.
There is then a
claim under (d) of Shs.6,850,000- for the EADB parking slots up to
January 2003. The plaintiff alleges that EADB remitted
funds to
K.C.C. in respect of some parking slots which it (K.C.C) did not pass
on to the plaintiff. It does not say how much it was.
From the
evidence of PW1 Moon, he did not know details of the arrangement
between K.C.C and EADB on the matter. Clearly, the claim
is highly
speculative.
Finally, there is a claim of Shs.13m in respect
of a private park at Wandegeya. From the evidence, K.C.C allowed the
plaintiff to
develop the park and collect proceeds from it for a
period of two years. The plaintiff claims that UTODA frustrated its
efforts by
continuing to illegally occupy the park despite a
directive from K.C.C to quit. The plaintiff’s evidence falls short
of proof that
UTODA was the defendants agent in this regard to raise
inference that the defendant is vicariously liable for its tortious
acts.
It was, in my view, up to the plaintiff to use all legal means
at its disposal to cause the eviction of UTODA from its premises.
I
have not found this claim proved either.
In all these
circumstances, Court is inclined to the view that there was pleading
but no strict proof of special damages. None would
be awarded.
As
regards general damages, these are at large and the quantum would be
within the discretion of Court. Evidence has been led that
the
plaintiff suffered inconvenience and has been deprived of its rights
under the contract. Working on the assumption that the plaintiff
is
entitled to damages, I would have awarded them nominal damages
assessed at Shs.2,000,000-, with interest and costs of the suit.
For
the reasons I have endeavoured to give, the suit stands dismissed
with costs to the defendant. I so order.
Yorokamu
Bamwine
J U D G E
27/02/2007
27/2/2007
Order:
I direct that the judgment be delivered on my behalf by the Registrar
of this Court on the due date.
Yorokamu Bamwine
J U D G
E
27/2/2007
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