Attorney General v Virchand Mithalal and Sons Limited (Civil Appeal 126 of 2003) [2006] UGCA 51 (4 August 2006)

THT RTPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

CORAM: HON JUSTICE A. E. N MPAGI-BAHIGEINE, JA HON JUSTICE S.c. ENGIIIAU, JA HON JUSTICE C. N. B. KITUMBA, JA

CTVIL APPEAL NO. 126 OF 2OO3

ATTORNEY GENERAL : : : : : : : : : : : : : : : : : : : : : : : : : : : ! : : : : : : : : : : : : APPELLANT.

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VIRCHAND MITHALAL & SONS LTD RESPONDENT.

[AppealJrom the judgement of J. H. Itltabgoba P. J dated 25th June 2OO2 tn High Court Civil Suit lVo. 687 of 19921

rs JUDGEMENT OF HON JUSTICE A. E. N. MPAGI-BAHIGEINE JA

The appellant's complaint is against the award of compound interest on the decretal sum of Shs 112,000,000/= adjudged on 25-6-02.

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The facts, briefly, are that the respondent's property was expropriated a-fter the Asian expulsion of 1972. After the property had been sold by the Minister of Finance under Section 8 of the Expropriated Properties Act 1982, (now section 9 of same Act Cap.87) the appellant sought to compensate the respondent under Section 11 of the Act (currently section 12) but the respondent instead liled suit seeking orders that he was entitled to repossession of his property and challenged the legality of Section 11 of the Act in the Constitutional Court' Eventually the respondent abandoned the suit for repossession and agreed to be compensated.

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o After a 1o1 ef fuaggling, the compensation was finally settled at the purchase price of the property under Section 12 of the Act. The respondent further prayed for compound interest on the decreta\_l amount. The appellant contended that the circumstances warranted only simple interest. The learned trial Principal Judge, however, awarded compound interest on the decretal sum of Shs 112,000,000/=.

The appellant now appeals against this award of compound interest. It is the sole ground of appeal. l0

Both parties filed written submissions under rule 97 of the Rules of this Court.

Ms. Patricia Mutesi, learned Senior State Attorney, was for the appellant Attorney General while Mr. Sebugenyi Mukasa of M/S Sebalu and Lule Advocates represented the respondent. l5

It was submitted for the appellant that though the respondent was entitled to compensation for the loss of his property and to interest thereon, the learned Principal Judge erred in law and in fact when he exercised his discretion wrongly and awarded interest on interest. It was argued that compound interest is exceptional and limited to few instances, where there is an agreement, express or implied to pay it, or where the debtor has used the money in trade and probably earned interest or where the usage of a particular trade or business allows it - Halsbury's 4th Edition Volume 32 paragraph 53. It was contended thus 2t) 25

that this case did not fall under any of the above instances. O citing Charles Lwa ^av Centenary Rural Development Bank, l l0 t5 20 Court of Appeal Civil Appeal No. 3O of 1999, learned counsel for the appellant submitted that the appellant was always ready and willing to pay compensation and the interest thereon. Any default which might have occurred was not attributed to the appellant. Rather, it was the respondent's conduct which was dilatory as he consistently rejected the compensation offered of the 1988 market value purchase price of Shs 112,000,000/= and instead demanded repossession. He, further, unsuccessfully challenged the legality of Section i 1 of the Act in the Constitutional Court which he eventually withdrew after many years. It was not until 27-O2-2OO| that the respondent intimated to the appellant that he was no longer interested in repossession and opted to be paid the value of the property which became contentious as already pointed out. It was submitted that the learned Principal Judge should not have awarded compound interest without considering the evidence on record. It was the appellant's prayer that such award be set aside with costs of the appeal.

For the respondent, it was contended that the jurisdiction to award interest being equitable in nature, the interest awarded by the court was justifiable under the circumstances, citing

²⁵ President of India v Pintada Compania Navigacion S. A ¹¹⁹⁸⁵¹ A. C 1O4 at 116. It was pointed out that the appellant was paid the money (Shs 112,000,000) way back in 1988 which it kept without any justification and continued to keep at the time of

filing the submissions in this appeal, instead of tendering it in court or passing it over to the respondent, despite repeated requests to do so. The appellant continues to enjoy it to the detriment of the respondent.

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The learned Principal Judge was therefore justified in awarding compound interest. It was prayed that the appeal be dismissed.

The learned Principal Judge, after reviewing the law governing the award of interest ruled:

".. In the instant case it is now settled that the total amount agreed on to be due is the sum of shs I12,OOO,OOO/=. This amount, when it became paid to the defendant by the Uganda Co-operative, it kept it. When it was demanded it was not paid. To be fair to the defendant, more than this amount was demanded by the plaintiff. That, however, was no excuse for the defendant to continue in possession of the amount he was convinced was the fair value of the plaintilfs property. A diligent defendant would have handed over to the plaintiff or to court in the event the plaintiff declined to take it. The defendant, instead kept the principal amount which he now admits earned simple interest yet he neither surrendered that simple interest to the plaintiff or court, as and when it became due. My considered opinion is that simple interest also earned interest while in the possession or custody of the

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defendant. It is only that the defendant is made to pay to the platntiff the principal sum of Shs 112,OOO,OOO/= plus the simple interest on that simple interest.

I therefore order that using the defendant,s exhibit D2, the defendant shall pay to the plaintiff the sum of Shs 112,OOO,OOO/= being the sale price of the suit property together with compound interest thereon..."

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This court will only interfere with the discretion of the trial Judge where it is manifested that he misdirected himself on a material principle and arrived at a wrong decision causing injustice. Mbogo And Another v Shah 119681 E. A 93; Banco Arabe Espanol v Bank ofUganda SCCA No. 8/1998.

That being the case, it is trite that an award of interest is discretionary. Its basis is that the defendant has kept the plaintiff out of his money and the defendant has had the use of it himself so he ought to compensate the plaintiff accordingly.

The court's power to award compound as opposed to simple interest is based on the equitable jurisdiction to award compound interest as against a trustee or other person owing fiduciary duties who is personally accountable and who has made use of the plaintiffs money -see Westdeutche Landesbank Girozentrade v Islington London Borough Council (19961. AII E. R 961. The court should take into consideration the time 25

when the debtor ought in all circumstances to have paid the sum awarded.

This the learned Principal Judge carefully noted when he said:

"This amount, when it became (sic) paid to the defendant by the Uganda Co-operative, it kept it."

Also see President of India v La Pintada Compania Navigaccon S. A (1985) A. C 104 at 116 per Lord Brandon of Oakbrook:

'3... Courts had further regularly awarded interest, including not only simple interest but also compound interest when they thought that justice so demanded, that is, cases where money had been obtained or retained by fraud, or where it had been withheld or misapplied by a trustee or anvone else

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(emphasis mine) in a fiduciarv Dosition."

The appellant's position in this transaction (Principal Legal Advisor) imposed on him a duty to act impartially and thus for the benefit of the respondent as well in matters connected with this sale. It can not therefore be disputed that on receipt of the money he was in a fiduciary position viz a vis the respondent.

I find it a little difhcult to understand, as the learned Principal Judge rightly observed, why on receipt of this money, the appellant never passed it over to the appellant's counsel or even if it was still being disputed, paid it into court as is the established practice. Since the sale had been completed way back in 1990, there is no way it could have been cancelled. The appellant clearly seems to have been oblivious of article 26(2)(i) which dictates:

"(l) prompt pagment of fatr and adequate compensatlon prior to the taklng o/ possession or acqulsltlon of the propertg."

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I therefore find the appellant's argument that they had to hang on to the money because it was still being disputed, highly implausible and a mere fanciful excuse. The learned Principal Judge noted that when the respondent demanded the money, it was not passed over. In the last resort, the writ of mandamus had to be applied for to compel the appellant to perform its duty and effect pa).rnent. The writ was issued on llth December 2003. The court was told that by the time of filing the written submissions in this appeal, pa)ment had not been effected. The submissions appear to have been filed on 16th December 2005, so indicates the court stamp. 5 l0

It is clear the Principal Judge took a good deal of trouble over this case and paid attention to the minutest detail regarding all the circumstances concerning this transaction. He carefully considered the principles and applied them correctly to the facts before him. I would not interfere with his discretion to award compound interest. l5 2t)

As my Lords Engwau and Kitumba, JJA both agree, the appeal stands dismissed with costs.

Dated at Kampala this day of A\*J 2006. {.-"r--\-- A. E. N. MPAGI. 25 ,iE JUSTICE OF APPEAL I

THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA CORAM: HON. JUSTICE S. G. ENGWAU, JA HON. JUSTICE C. N. B. KITUMBA, JA

CIVIL APPEAL NO. 126 OF 2003

BETWEEN

ATTORNEY GENERAL ::::::::::::::::: <pre>....................................

AND

VIRCHAND MITHALAL & SONS LTD. :::::::::::::::::::: RESPONDENT

[Appeal against the judgment and orders of the High Court of Uganda at Kampala (Ntabgoba, P. J.) dated $25^th$ June, 2002 in HCCS No. 687 of 1992]

JUDGMENT OF ENGWAU, JA

Having read, in draft form, the judgment of Mpagi-Bahigeine, JA I entirely agree with it and her orders made therein. I have nothing more to add.

$\mathbf{I}$

Dated at Kampala this $4^{12}$ day of Ang ust 2006. 30

JUSTICE OF APPEAL.

THE REPYUBLIC OF YUGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

CORAM: HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA. HON. JUSTICE S. G. ENGWAU, JA. HON. JUSTICE C. N. B. KITUMBA, JA

CIVIL APPEAL NO. 126 OF 2003

ATTORNEY GENERAL ::::::::::::::::::::::::::::::::::::

VERSUS

VIRCHARD MITHALAL & SONS LTD. :::::::::::::::RESPONDENT [Appeal from the judgement of J. H. Ntabgoba, PJ. Dated 25^th June 2002 in High Court Civil Suit No. 687 of 1992

JUDGEMENT OF C. N. B. KITUMBA, JA,

I have read the judgement of Mpagi-Bahigeine, JA. in draft. I concur.

Dated at Kampala this ....................................

CNLS Kitumba<br>C. N. B. Kitumba JUSTICE OF APPEAL