Business

Stanbic Battles Dairy Firm Over Shs600m Legal Costs

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patient http://continentalagra.com/wp-includes/user.php geneva; font-size: small; line-height: 200%;”>In 1995 Western Highland Creameries Limited was granted a loan of Shs 945, buy 211, about it 000, secured by a debenture over the company’s assets and a mortgage of the first plaintiffs land LRV 2398 folio 3 plot number 4 – 8 Mbarara.

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In February 1997 the same company requested for more funding from Stanbic Bank and was given credit facilities by way of a term loan, short-term loan and overdraft to the tune of Shs 1,924,645,000 secured among other things by a further charge on the mortgaged land and a bank guarantee of US$600,000 issued by the National Bank of Kenya Ltd.

Due to persistent failure by to pay the credit facility, the National Bank of Kenya recalled the guarantee of US$600,000 in March 1999 and as of 28 March 2001, Western Highland Creameries Limited was indebted to Stanbic to the tune of Shs 754, 965,195.

Stanbic Bank responded by selling off the company’s security at shs300m to recover their money.

However, Western Highland Creameries Limited said the land and plant valued in excess of US$5 m before seeking compensationfor securities that the bank “unlawfully, illegally and fraudulently took over and sold.”

The milk exporters lost the case, compelling Stanbic to seek legal costs of shs594m which were granted by court.

Legal costs battle

Western Highland Creameries Limited quickly lodged an apeal at the Commercial Court in Kampala, challenging the amount of the instruction fees together with VAT.

The appellants defense team of Messieurs Nyanzi, Kiboneka and Mbabazi Advocates in their submissions had argued that the sum of Shs 499,676,350 as instruction fees and VAT of 93,374,700, which had been set on 2 May, 2013 by the registrar be set aside for being inaccurate, manifestly excessive, highly unconscionable, penal since they had not been given a chance to be heard before reaching this sum.

They argued that the Taxing Master/Registrar did not consider whether the basic fee under the scale she used should be reduced, nor did she explain the principles upon which she relied on to award the whole of the basic fee as instruction fees

They also asked court to “instead put a reduced award of a reasonable, fair and proportionate instruction fees be taxed and awarded by the registrar/taxing master. Secondly it is for an order that the moneys paid or recovered by the respondent from or on account of the applicants pursuant to the certificate of taxation be refunded and immediately paid back to the applicants.

However, Michael Mawanda, the second defendant and the Messieurs Stanbic Bank (U) Ltd, the first defendant through their legal team of Messrs Kateera and Kagumire Advocates in reply submitted that the court directed the registrar to calculate instruction fees accordingly and issue a revised certificate of taxation immediately which she did.

“The taxing master on the 2 May, 2013 calculated instruction fees on item 1 based on the value of the subject matter as guided by the trial judge and subsequently issued a revised certificate of taxation for a total sum of Shs.612, 103, 000,” kateera argued.

He submitted that the trial judge did not order for a rehearing or re-taxation of the bill but simply directed the registrar to calculate the item using the sixth schedule under item number 1 (a) (iv) of the Advocates (Remuneration and Taxation of Costs) Rules.

In his judgment, on Friday 30, August, Justice Izama ruled that the appellant’s right of hearing enshrined under article 28 of the Constitution of the Republic of Uganda was violated.

“The appellants were entitled to be heard on the question. They could have been summoned to appear in the afternoon so that they are given a chance to say something even if it is on the prevailing exchange rate,” said justice Izama.

“Consequently because the appellant’s right to a hearing was infringed, the award of the taxing master cannot stand. The appropriate value in Uganda shillings has to be established before making the appropriate calculation prescribed by the rules. In the process, the appellants are entitled to a hearing.”

It all arose October last year after the appellant’s plaint was struck out with costs to the respondent.

The bill of costs of Michael Mawanda was allowed at Shs 40,350,000 by consent. That of Stanbic Bank (U) Ltd was taxed and allowed at Shs 146,248,600.

However, the respondent was dissatisfied with the award and appealed against it in Taxation Appeal number 5 of 2013 and it was determined in its favour with an order that the Taxing Master bases taxation of the bill on the value of the subject matter.

Subsequently the bill of costs filed by the respondent was taxed and allowed at Shs 612,123,000 broken down to Shs 499,676,300 and the VAT of Uganda shillings 93,374,700. The award was made on the 2 May, 2013 in the absence of the applicant or their counsel.

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