Wakilii

Construction Engineers & builders v Attorney General [1995] UGSC 18

Supreme Court · 1995 Appeal Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from a High Court judgment and decree in a first-instance suit for breach of a construction contract
Decision
Appeal allowed; High Court judgment varied in the appellant's favour, with damages, costs and reduced interest awarded to the appellant and the respondent's counterclaim rejected

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

On a road construction contract disrupted by the Liberation war, the Supreme Court held that the appellant did not abandon the works; the contract ultimately foundered on the Government's lack of finance, entitling the appellant to repudiate. The trial Judge's findings on Interim Certificates were varied to add omitted sums and retention money. The Currency Reform Statute 1987 applied only to local debts, not to amounts payable in or measured as Deutschmarks or compensation for loss of plant. Claims for economic dislocation and suspension costs failed. The respondent's counterclaim failed. The appeal was allowed, damages for breach awarded as found by the trial Judge, interest reduced from 30% to 12%, and costs awarded to the appellant.

Outcome

Appeal allowed; High Court judgment varied in the appellant's favour, with damages, costs and reduced interest awarded to the appellant and the respondent's counterclaim rejected

Facts

The appellant company contracted with the Government in September 1977 to build a first-class tarmac road from Pakwach to the Arua Municipality boundary, work to be completed by 1 June 1980. The Liberation war intervened and, on 11 April 1979, the Engineer's Representative permitted the works to be suspended. Indian nationals working on the contract were evacuated to Kenya with part of the plant; the company's site offices were destroyed and equipment damaged. Funding originally provided by two Arab States and later sought from OPEC proved unstable, and re-mobilisation was difficult. In 1982 the Government re-designed the contract to a lower specification, which the appellant agreed to reschedule, but in 1983 and finally 1985 the Government said it could make no further payments for lack of funds. The appellant treated this as a breach or abandonment, claimed its dues including foreign-currency elements and special-risk (war) claims, and sued. The respondent denied liability and counterclaimed 6,000,000/= paid on account, alleging the appellant had abandoned the works.

Issues

  1. Whether the trial Judge correctly assessed the sums outstanding to the appellant under Interim Certificates Nos. 1–6 (including retention money).
  2. Whether the Currency Reform Statute 1987 applied to sums expressed in or payable as Deutschmarks under the contract.
  3. Whether the appellant could claim compensation for devaluation or economic dislocation under the special conditions of the contract.
  4. Whether the appellant abandoned and thereby breached the contract, or whether the respondent repudiated it through lack of finance.
  5. Whether the respondent was entitled to counterclaim the sum of 6,000,000/= paid on account and damages for breach.

Orders

  • Appeal allowed and the judgment of the High Court varied as prayed in prayers 2(a), (b) and (e) of the memorandum of appeal.
  • Appellant awarded the full amount proved as outstanding and due (including retention money) on Interim Certificates 1–6 inclusive, setting aside awards (A)(a)–(e) of the High Court judgment.
  • Money payable in foreign currency under the Interim Certificates and by way of compensation for loss of plant and establishment is not subject to the Currency Reform Statute.
  • Damages for breach of contract awarded in the terms found by the learned trial Judge.
  • No award for economic dislocation or suspension costs (prayers (c) and (d) refused).
  • Three quarters of the costs of the appeal awarded to the appellant, with a certificate for two counsel.
  • Respondent to pay the costs of the suit and the counterclaim to the appellant in the High Court.
  • Interest on the monetary claims reduced from 30% to 12% per annum; interest on costs left at 6%.

Rules and key headnotes

Contract Law — Construction Contracts — Repudiation by Employer for Lack of Finance
Where a contractor does not abandon construction works but the contract ultimately founders because the employer is unable to provide the finance necessary to continue, the contractor is entitled to treat the contract as repudiated by the employer and to recover accordingly.
Contract Law — Construction Contracts — Abandonment — Requirement of Certification and Notice
A contractor cannot be held to have abandoned the works where the Engineer never certified abandonment in writing to the employer nor served notice that the contractor had failed to recommence after suspension, and the parties continued to negotiate resumption of the works.
Contract Law — Suspension of Works — Authority of Engineer's Representative
Under the contract conditions, only the officer expressly empowered (here the Permanent Secretary) could lawfully suspend the works; a letter issued by the Engineer's Representative is not a valid suspension but may operate as permission to leave the site so as to avoid the contractor being held to have abandoned the contract.
Statutory Interpretation — Currency Reform Statute 1987 — Scope as to Foreign-Currency Obligations
The Currency Reform Statute 1987 applies to the local payment of debts owed in Uganda currency but not to sums which for all intents and purposes are payable in Deutschmarks, nor to damages or compensation for loss of plant under a contract internationally financed and expressed in both currencies.
Contract Law — Damages — Compensation for Devaluation and Economic Dislocation
A contractor cannot recover compensation for devaluation of sums owing or for economic dislocation where the contract's economic-dislocation clause provides only for increased costs of executing the works and the contractor claims compensation rather than increased costs.
Contract Law — Counterclaim — Failure Where Employer in Breach
An employer's counterclaim for damages for breach and for the return of a sum validly received on account fails where the sum was validly received and it was the employer, through lack of funds, who was forced to break the contract.

Legislation cited (1)

  • Currency Reform Statute 1987

Full judgment

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Construction Engineers & builders v Attorney General [1995] UGSC 18 (5 September 1995)
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.