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Ngobi & 133 Others v Steel Corporation of East Africa Limited (Civil Appeal 218 of 2019)

Court of Appeal · [2025] UGCA 24 · 2025 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
First civil appeal from a High Court (Civil Division) judgment dismissing a suit for outstanding terminal benefits for disclosing no cause of action.
Decision
Appeal dismissed; respondent held not liable for the appellants' outstanding terminal benefits, with each party bearing its own costs.

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Holding

The appellants, former employees of EASCO (a company government incorporated to manage an expropriated steel plant), sued the respondent — to whom the plant was returned under the Expropriated Properties Act — for outstanding terminal benefits. The Court of Appeal held the plaint did disclose a cause of action, so ground 1 succeeded and the trial judge erred. However, on the merits the respondent was not liable: novation requires express agreement of all parties, and an assignment by operation of law requires express statutory language. The EPA contained no provision transferring EASCO's liabilities on repossession, and no deed of assignment or novation existed. The appeal was dismissed, each party bearing its own costs.

Facts

The respondent, a private steel-manufacturing company owning the Masese Steel Plant in Jinja, had its assets expropriated by the Idi Amin Government in 1972 following the expulsion of persons of Asian descent. Between 1980 and 1994 the Government managed the plant through EASCO, a private company it incorporated for the purpose, which hired and employed the appellants. EASCO terminated the appellants' employment effective 31 July 1994 and computed their terminal benefits, but made only partial payment. In February 1994 the Masese plant was returned to the respondent, its former owner, under the Expropriated Properties Act. The appellants, 134 former EASCO employees, sued the respondent for outstanding terminal benefits of UGX 328,841,896, contending that on repossession the respondent took over EASCO's assets and liabilities, including their benefits. The respondent denied liability, maintaining EASCO was a separate entity responsible for its own debts and that no novation or assignment of liability had occurred.

Issues

  1. Whether the appellants' suit disclosed a cause of action against the respondent.
  2. Whether the respondent was liable to pay the appellants' outstanding terminal benefits.
  3. What the most appropriate remedies in the case were.

Orders

  • Appeal dismissed.
  • Ground 1 (no cause of action) succeeds; ground 2 dismissed.
  • Each party to bear its own costs of the appeal.

Key headnotes

Civil Procedure — Cause of Action — Test for Disclosure on the Pleadings
A plaint discloses a cause of action where it shows that the plaintiff enjoyed a right, that the right was violated, and that the defendant is liable; in determining this the court looks only at the plaint, assumes the facts pleaded are true, and need not assess the merit of the allegations.
Contract Law — Assignment of Liabilities — Assignment by Operation of Law Requires Express Statutory Language
An assignment of liabilities may arise by operation of law only where a statute, in express terms, transfers the liabilities together with the assets; a court will not infer such a transfer in the absence of express statutory language.
Contract Law — Novation — Requires Express Agreement of All Parties
Novation, the substitution of a new contract for an existing one, can arise only by the express agreement of all parties to both the old and new contracts and never by operation of law.
Statutory Interpretation — Expropriated Properties Act — Return of Assets Does Not Carry Attendant Liabilities
The Expropriated Properties Act provides for the return of expropriated assets to their former owners but contains no provision transferring the liabilities incurred in managing those assets during expropriation; had Parliament intended to transfer such liabilities it would have said so expressly.
Employment & Labour — Terminal Benefits — Liability of Separate Employing Entity
Where a distinct company employed, terminated and computed the terminal benefits of workers prior to handover of a business, liability for those benefits remains with that company and is not transferred to the repossessing owner absent a specific agreement to assign liabilities or an express provision of law.

Legislation cited (7)

  • Rules of the Court of Appeal r.30(1)(a)
  • Employment Act Cap. 219 (repealed) s.18
  • Employment Act Cap. 219 (repealed) s.18(3)
  • Expropriated Properties Act No. 9 of 1982 (Cap. 87)
  • Non-Performing Assets Recovery Trust Statute No. 11 of 1994 s.11(2)
  • Civil Procedure Rules O.39 rr.1 and 2
  • Constitution of Uganda 1995 art.126(2)(e)

Cases cited (9)

  • Kifamunte Henry v Uganda (Criminal Appeal No. 10 of 1997)
  • Muljibhai Madhvani & Co. Ltd v Francis Mugarura and Others (Civil Appeal No. 13 of 2006)
  • Waga B. Francis vs The Chief Administrative Officer of Maracha and Another, Civil Suit No. of 2016
  • National Social Security Fund v Alcon International Ltd (Civil Appeal No. 15 of 2009)
  • Auto Garage Ltd v Motokov (No.3) [1971] 1 EA 524
  • Jeraj Shariff & Co. v Chotai Fancy Stores [1960] 1 EA 374
  • Attorney General v Major General David Tinyefuza (Constitutional Appeal No. 1 of 1997)
  • Non-Performing Assets Recovery Trust v Kapeeka Coffee Works Ltd and Another (Civil Appeal No. 8 of 2001)
  • Scarf v Jardine (1882) 7 App Cas 351
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.