Galleria in Africa Limited v Uganda Electricity Distribution Company Limited (Civil Appeal 8 of 2017)

Supreme Court · [2018] UGSC 102 · 2018 Appeal Dismissed; Cross-Appeal Allowed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second civil appeal to the Supreme Court from the Court of Appeal, with a cross-appeal by the respondent

Decision

Appeal dismissed and cross-appeal allowed; no binding contract found under the PPDA Act, reversing the Court of Appeal's award of damages

The full judgment

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Holding

The Supreme Court held that no binding contract arose under the PPDA Act. A contract within the Act's meaning requires application of approved procurement procedures and a written contract under sections 3 and 76; an award decision and a letter of bid acceptance are not contracts. The procedural requirements, including publication of the best evaluated bidder under Regulation 224(4), are mandatory, not directory, and non-compliance is fatal to the procurement. Parties cannot contract out of the statute, so clause 42.2 of the bid document could not make the bid acceptance binding; Regulation 230, being inconsistent with section 76, was void to that extent. As no contract existed, the appellant's damages grounds failed; the appeal was dismissed and the cross-appeal allowed.

Facts

The respondent advertised a tender in March and April 2007 for the supply of 2,500 drums of creosote oil. The appellant submitted a bid dated 17 May 2007 to supply the goods at US$734,902. The notice of best evaluated bidder was published on 5 June 2007, and the respondent issued a letter of bid acceptance to the appellant the following day, 6 June 2007, stating that a written contract would follow. The appellant confirmed receipt and indicated it was proceeding with the supply. On 21 August 2007 the respondent cancelled the procurement, citing among other grounds that the bid had expired, following a complaint by another bidder and a finding of non-compliance with the PPDA Act and Regulations. No creosote oil was ever supplied. The appellant sued for lost profit as special damages, general damages, interest and costs for breach of contract. The High Court dismissed the suit, finding no contract. The Court of Appeal reversed, finding a binding contract and awarding general damages of UGX 20,000,000.

Issues

Whether there was a valid and binding contract concluded under the Public Procurement and Disposal of Public Assets Act between the parties.
Whether a letter of bid acceptance created legal and binding obligations on the parties.
Whether section 76 of the PPDA Act and Regulation 224(4) of the PPDA Regulations are mandatory or merely directory.
Whether the appellant was entitled to damages for lost profit and increased general damages.

Orders

Appeal dismissed.
Cross-appeal allowed.
Costs of the appeal and cross-appeal in the Supreme Court and the courts below awarded to the respondent, to be met by the appellant/cross-respondent.

Key headnotes

Public Procurement — Formation of Contract under the PPDA Act — Letter of Bid Acceptance

Under the Public Procurement and Disposal of Public Assets Act a binding contract arises only from the application of approved procurement procedures culminating in a written contract under sections 3 and 76; a letter of bid acceptance does not itself constitute a contract.

Public Procurement — Award Decision Distinguished from Contract

An award decision by a contracts committee is not a contract; by section 76(1) of the PPDA Act an award must be confirmed by a written contract signed by both parties after the statutory conditions are satisfied.

Mandatory versus Directory Provisions — Section 76 PPDA Act and Regulation 224(4)

The requirements of section 76(3) of the PPDA Act and Regulation 224(4), including publication of the notice of best evaluated bidder, are mandatory and go to the core of the Act; non-compliance renders the procurement proceedings fatally defective rather than being a mere irregularity.

Inconsistency of Subsidiary Legislation — Section 18(1) Interpretation Act

A regulation that is inconsistent with the parent Act is void to the extent of the inconsistency; Regulation 230 of the PPDA Regulations, being contrary to the spirit of section 76, is void to that extent under section 18(1) of the Interpretation Act.

Public Procurement — Contracting Out of Statutory Provisions

Parties cannot contract out of a legislative provision; a clause in the bid document (clause 42.2) purporting to make a letter of bid acceptance a binding contract cannot override the mandatory provisions of the PPDA Act.

Legislation cited (9)

Public Procurement and Disposal of Public Assets Act s.3
Public Procurement and Disposal of Public Assets Act s.76
Public Procurement and Disposal of Public Assets Act s.91
Public Procurement and Disposal of Public Assets Regulations 2003 (SI No.70 of 2003) reg.224(4)
Public Procurement and Disposal of Public Assets Regulations 2003 (SI No.70 of 2003) reg.225
Public Procurement and Disposal of Public Assets Regulations 2003 (SI No.70 of 2003) reg.230
Public Procurement and Disposal of Public Assets Regulations 2003 (SI No.70 of 2003) reg.317
Interpretation Act Cap 3 s.18(1)
Local Government Act 1997

Cases cited (5)

Devishi Sawat Shah Vs Budtiram Mohamal 18 EACA 79
Uganda Telecom Ltd v Tanzanite Corporation (Civil Appeal No. 17 of 2004)
Finishing Touches Ltd v Attorney General (Civil Suit No. 144 of 2010)
Pandya v Republic (1957) EA 336
Kifamunte Henry v Uganda (Criminal Appeal No. 10 of 1997)

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