Wakilii

Draco(U) Ltd v Kamuli District Local Council (Civil Suit No. 250 of 2003)

High Court · [2004] UGCOMMC 16 · 2004 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for breach of contract claiming refund of VAT payment
Decision
Judgment entered for the Plaintiff with monetary award, interest, general damages, and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that a contractor who executed a VAT-inclusive contract and paid VAT to URA is entitled to reimbursement from the employer where the contract expressly provided for VAT. Ministry of Finance directives to local councils cannot frustrate contractual obligations between separate legal entities. The plaintiff was awarded the VAT sum with interest at 20% per annum from the date payment fell due, plus general damages for breach of contract.

Outcome

Judgment entered for the Plaintiff with monetary award, interest, general damages, and costs

Facts

The plaintiff, a drilling contractor, entered into a contract with the defendant district local council in 2002 to drill boreholes. The contract price was Shs.88,291,710 VAT-inclusive or Shs.75,463,000 excluding VAT. The contract was later varied. The plaintiff executed the contract satisfactorily and received certificates of substantial completion. The defendant paid the entire contract sum except the VAT component of Shs.14,697,000. In June 2002, the Uganda Revenue Authority required the plaintiff to pay this VAT when filing its returns. The plaintiff demanded reimbursement from the defendant but the defendant refused. The plaintiff then brought suit for recovery of the VAT amount, general damages, interest, and costs.

Issues

  1. Whether the Plaintiff is entitled to a refund of the VAT it paid to URA.
  2. What other remedies, if any, should be awarded to the Plaintiff.

Orders

  • Judgment entered for the Plaintiff.
  • Defendant to pay the Plaintiff Shs.14,679,971 being the VAT refund.
  • Interest at 20% per annum on Shs.14,679,971 from 1 July 2002 until payment in full.
  • General damages of Shs.3,000,000 awarded to the Plaintiff.
  • Costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Contract Law — Contractual Terms — VAT-Inclusive Contracts — Liability for VAT Payment
Where a contract expressly provides that the contract price includes VAT, the employer is contractually obligated to pay the VAT component to the contractor who performed the taxable supply, notwithstanding that the contractor is the taxable person liable to remit VAT to the revenue authority under the VAT Act.
Tax Law — Value Added Tax — Taxable Supply — Contractor's Obligation to Issue Tax Invoice and File Returns
A contractor performing services for consideration is making a taxable supply under the VAT Act and is required to provide a tax invoice and file returns with the revenue authority within 15 days after the end of the supply period, failing which penalties including fines up to Shs.300,000 or imprisonment for up to six months may be imposed.
Contract Law — Privity of Contract — Third Party Directives — Ministry of Finance Instructions to Districts
A directive by the Ministry of Finance to district local councils prohibiting the use of funds for VAT does not bind a contractor who is not party to that directive, and cannot frustrate or vary the contractual obligations between the contractor and the district council as separate legal entities capable of suing and being sued in their own right.
Civil Procedure — Pleadings — Parties Bound by Pleadings — Fresh Defences in Submissions
Parties are bound by their pleadings and cannot rely on defences not pleaded in their written statement of defence. A defence of frustration of contract not raised in the pleadings cannot be considered by the court when raised for the first time in counsel's submissions.
Civil Procedure — Evidence — Adducing Evidence During Submissions — Documents Not Admitted at Scheduling Conference
Fresh evidence cannot be adduced during submissions. Where documents were not tendered by a party at the scheduling conference and were not admitted as part of the evidence by the court, counsel cannot rely on such documents in written submissions.
Contract Law — Interest on Late Payment — Contractual Interest Clauses — Commercial Borrowing Rate
Where the general conditions of contract provide that the employer shall pay interest on late payments at the rate of interest for commercial borrowing, and the contract specifies 28 days for payment, interest runs from the expiry of that 28-day period at the commercial borrowing rate, which may be awarded at 20% per annum where that rate falls within the commercial range.
Damages & Quantum — General Damages — Breach of Contract — Assessment Where Contractor Paid VAT From Own Resources
Where an employer breaches a VAT-inclusive contract by refusing to reimburse the VAT component, causing the contractor to pay VAT from its own resources, the contractor is entitled to general damages for the breach in addition to the principal sum and contractual interest.

Legislation cited (6)

  • VAT Act (Cap 349) s.5(a)
  • VAT Act (Cap 349) s.11
  • VAT Act (Cap 349) s.18(1)
  • VAT Act (Cap 349) s.29(1)
  • VAT Act (Cap 349) s.31(1)
  • VAT Act (Cap 349) s.53(1)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Draco(U) Ltd v Kamuli District Local Council (Civil Suit No. 250 of 2003) [2004] UGCommC 16 (26 June 2004)
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.