Mudiobole v Mugema (Taxation Reference Appeal Number 25 of 2013)

Court of Appeal · [2015] UGCA 2033 · 2015 Reference Partly Allowed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Reference to a single Justice of the Court of Appeal under Rule 110(1) against a taxing officer's bill of costs ruling

Decision

Reference partly succeeded; instruction fees reduced to Ushs. 20,000,000, certain items taxed off and disallowed, VAT reduced to Ushs. 3,600,000

The full judgment

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Holding

On a reference under Rule 110(1), the Court reduced instruction fees from Ushs. 50,000,000 to Ushs. 20,000,000, finding the election petition appeal lacked complexity and that consistency in election jurisprudence restricts such costs to Ushs. 10–20 million to avoid costs being a weapon against political opponents. Items covered under instruction fees per Rule 9(3) were taxed off, and the costs of drawing, filing, serving the bill and attending taxation were disallowed under Rule 13, since more than a quarter of the profit costs had been taxed off. VAT was held properly chargeable on instruction fees under the VAT Act regardless of registration, but reduced proportionately to Ushs. 3,600,000.

Facts

The appellant was the unsuccessful party in Election Petition Appeal No. 30 of 2011. The respondent was awarded costs both in the appeal and in the High Court, and filed a Bill of Costs on 25 July 2012 totalling Ushs. 223,446,350. The taxing master, the Assistant Registrar, taxed the bill at Ushs. 62,203,110, comprising Ushs. 50,000,000 instruction fees, Ushs. 2,714,500 other costs plus disbursements, and Ushs. 9,488,610 VAT. Being out of time, the appellant obtained leave to enlarge time and filed this taxation reference on 27 February 2013, contending the instruction fees were excessive, that items 2-41 fell under item 1, and that VAT was wrongly awarded. The appellant had also been condemned to costs of Ushs. 59,174,000 in the High Court.

Issues

Whether the award of Ushs. 50,000,000 as instruction fees was manifestly excessive and contrary to the principles of taxation.
Whether items 2-41 of the bill of costs ought to have been taxed off as covered under item 1 (instruction fees) under Rule 9(3) of the Third Schedule.
Whether the costs of drawing, filing and serving the bill and of attending taxation should have been disallowed under Rule 13 of the Third Schedule.
Whether VAT was wrongly awarded in the absence of a VAT certificate.

Orders

Instruction fees reduced from Ushs. 50,000,000 to Ushs. 20,000,000 for the appeal.
Items 17, 18, 23, 25, 26, 29, 30, 31, 32, 33, 34 and 35 held to be covered under item 1 (instruction fees).
Items 38, 39, 40 and 41 (costs of drawing, filing and serving the bill and of attending taxation) disallowed under Rule 13.
VAT properly charged at 18% on instruction fees but reduced to Ushs. 3,600,000.
Each party to bear their own costs of the reference.

Key headnotes

Costs — Taxation — Instruction Fees — Principles Governing Assessment

Instruction fees on taxation are assessed on the merits and circumstances of each case without any mathematical formula; complexity, length and the subject matter involved bear on the figure, and the taxing master must exercise discretion judicially while keeping costs at a reasonable level.

Election Petitions — Costs — Restraint to Avoid Costs as a Weapon Against Political Opponents

Legal costs in election petitions should not be excessive lest they operate as a weapon against political opponents; consistent jurisprudence restricts awards of instruction fees in such matters to between Ushs. 10,000,000 and 20,000,000.

Costs — Taxation — Items Covered by Instruction Fees under Rule 9(3)

The sum allowed as instruction fees under Rule 9(3) of the Third Schedule includes all work necessarily done in connection with the appeal, including attendances, correspondences, perusals and consulting authorities, and such items cannot be taxed separately.

Costs — Taxation — Disallowance of Bill Costs for Excessive Claims under Rule 13

Where more than one quarter of the profit costs claimed is disallowed on taxation, the costs of drawing, filing and serving the bill and of attending taxation must be disallowed under Rule 13 of the Third Schedule.

Value Added Tax — Chargeability on Legal Services and Instruction Fees

VAT is chargeable on instruction fees as a supply of professional legal services under the VAT Act, and by section 6(2) a person is a taxable person whether or not registered, so VAT may be charged irrespective of the production of a VAT certificate.

Legislation cited (9)

Rules of the Court of Appeal r.110(1)
Rules of the Court of Appeal Third Schedule r.9(1)
Rules of the Court of Appeal Third Schedule r.9(2)
Rules of the Court of Appeal Third Schedule r.9(3)
Rules of the Court of Appeal Third Schedule r.13
Value Added Tax Act Cap 346 s.6(2)
Value Added Tax Act Cap 346 s.7
Value Added Tax Statute 6 of 1996
Finance Decree No. 14 of 1972 s.1(1)

Cases cited (6)

Lanyero Sarah Ochieng v Lanyero Molly (Civil Reference No. 225 of 2013)
Brenda Nabukenya v Rebecca Nalwanga Balwana (Taxation Reference No. 208 of 2014)
Patrick Makumbi v Sole Electronics (Supreme Court Civil Appeal No. 11 of 1994)
Obiga Mario Kania v Electoral Commission (Civil Appeal No. 169 of 2012)
Akael Ogola v Akika Othieno Emmanuel (Civil Appeal No. 18 of 1999)
Kabusu Moses Wajaba v Lwanga Timothy (Taxation Reference No. 185 of 2014)

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