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Mayanja Agnes M Margaret v Mugerwa Sauda KN (Constitutional Petition No. 16 of 2006)

Constitutional Court · [2007] UGCC 4 · 2007 Preliminary Objection Upheld ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Hearing of preliminary objections to the competence of a constitutional petition brought under article 137 of the Constitution
Decision
Petition held incompetent and disposed of on the first preliminary objection; the petitioner company found not to exist in law

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Holding

On preliminary objection, the Constitutional Court held that the merger agreement forming Nsimbe Holdings Ltd committed NSSF public funds to a venture in which NSSF held only minority shares and was concluded without the Attorney General's legal advice, contravening articles 164(3) and 119(5) of the Constitution. By article 2, the agreement was void, so the company did not exist in law and could neither sue nor be sued. The petition was therefore incompetent and the first objection succeeded. The remaining objections did not arise, though the court indicated it would have rejected them. As the petitioner was a non-entity, no costs could be ordered against it.

Facts

Nsimbe Holdings Ltd was a joint venture company formed to develop the Nsimbe Estate Housing Project. It arose from a merger between Premier Developments Ltd, a wholly owned subsidiary of the National Social Security Fund (a public statutory body), and Mugoya Estates Ltd, a private company. Under the merger Mugoya Estates held 51% and Premier Developments 49% of Nsimbe Holdings, so NSSF's interest was a minority holding. NSSF's 49% contribution was paid in cash directly from the Fund. The arrangement committed public funds to a venture in which NSSF held minority shares, and the merger agreement was concluded without obtaining the legal advice of the Attorney General. Following public outcry and an Auditor General audit, the President directed the Inspector General of Government to investigate. The IGG reported critical findings of corruption and mismanagement in the formation of Nsimbe Holdings. Aggrieved by the report and by the freezing of its bank accounts, Nsimbe Holdings petitioned the Constitutional Court, where the respondents raised preliminary objections challenging the petition's competence.

Issues

  1. Whether the petitioner company had locus standi and legal existence to file the petition, given its incorporation in alleged contravention of sections 28 and 29 of the Companies Act.
  2. Whether the petition was validly authorised in the absence of a company resolution.
  3. Whether the petition was a nullity for having been originated under a revoked law (Legal Notice No.4 of 1996).
  4. Whether the Constitutional Court had jurisdiction to grant the prerogative writs prayed for in the petition.

Orders

  • The first preliminary objection is upheld.
  • The petition is incompetent.
  • No order as to costs, the petitioner being a non-existent entity that cannot be ordered to pay costs.

Key headnotes

Constitutional Law — Supremacy of the Constitution — Article 2
Under article 2 of the Constitution, any law or act that contravenes the Constitution is void to the extent of the contravention.
Constitutional Law — Government contracts — Attorney General's legal advice — Article 119(5)
An agreement in which the Government has an interest that is concluded without the legal advice of the Attorney General, contrary to article 119(5) of the Constitution, is unconstitutional and void; the omission vitiates the agreement, and the absence of an express penal provision does not cure the constitutional breach.
Constitutional Law — Control of public funds — Article 164(3)
Committing public funds to a venture in which the public body holds only a minority interest, thereby placing those funds beyond the control of the Auditor General and Parliament, contravenes article 164(3) of the Constitution requiring Parliament to monitor all expenditure of public funds.
Company Law — Membership of a holding company — Companies Act s.28
Section 28(1) of the Companies Act prohibits a subsidiary from being a member of its holding company and any transfer of the holding company's shares to the subsidiary; it does not apply where a wholly owned subsidiary merely holds minority shares in a separate private company that owns no shares in the holding company.
Company Law — Capacity to sue — Effect of void formative agreements
A company whose formative agreements are unconstitutional and void does not exist in law; it is a non-entity that can neither sue nor be sued, and any petition or suit brought in its name is incompetent.
Civil Procedure — Costs — Non-existent party
A non-existent entity cannot be ordered to pay costs.

Legislation cited (13)

  • Constitution of Uganda 1995 art.137
  • Constitution of Uganda 1995 art.2
  • Constitution of Uganda 1995 art.119(5)
  • Constitution of Uganda 1995 art.164(3)
  • Companies Act (Cap.110) s.28
  • Companies Act (Cap.110) s.29
  • Companies Act (Cap.110) s.16(1)
  • Companies Act (Cap.110) s.3
  • Inspectorate of Government Act No.5 of 2002 s.21
  • Leadership Code Act No.17 of 2002 s.34(2)(b)
  • Constitutional Court (Petitions and References) Rules 2005 (No.91) rule 24
  • Legal Notice No.4 of 1996
  • National Social Security Fund Act (Cap.301)

Cases cited (2)

  • Makerere Properties Ltd v M.R. Karia (HCCS No. 32 of 1994)
  • Bugerere Coffee Growers vs Sebaduka & Anor [1970] E.A. 147
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.