Govt to fork out over sh300b for 1978 court case

By Felix Osike and Anne Mugisa

The Government is embroiled in a battle to save sh354b compensation and interest awarded to a private company whose motor vehicles were seized and bank accounts frozen in 1978.

Afric Co-op Society Ltd represented by David Sempalla and Angela Kobel on June 25 secured a Court of Appeal ruling for compensation amounting to sh128,825,004,395 approved by the Government in 2006 after protracted court proceedings and out of court negotiations.

The Appeal Court also granted Afric a 25% interest on the money accrued from 2006 when the payments were halted by the then, IGG Faith Mwondha, over alleged fraud.

The interest alone amounts to sh225,443,757,691 for the seven years.

When contacted by telephone, Sempalla of Kagwa, Sempalla, Mukasa and Obonyo Advocates said: “We are waiting for court to tax the bill.” The company, which had several shareholders, now operates as a tour company. New Vision has not established its directors.

At sh354b, this is the one of the largest recent awards to an individual firm in Uganda.

Deputy Chief Justice A.E Mpagi-Bahigeine, Justices Steven Kavuma and Augustine Nshimye comprised the Appeal Court coram. The Attorney General (AG) has fi led a notice of appeal in the Supreme Court against the ruling.

Origin of case

In January 1978, the then finance minister, Moses Ali, received allegations fraudulent banking transactions involving Afric Co-op, the defunct Uganda Commercial Bank (UCB) and Bank of Baroda.

The transactions involved credit facilities, which Baroda extended to Afric.

Afric Co-op presented the drafts to UCB for payment before the drafts could be cleared. Baroda dishonoured the drafts on grounds that they had been irregularly issued. Ali responded to the allegations by ordering the arrest of Afric Co-op officials, seizure of its 28 vehicles and a freeze of the group’s several bank accounts.

However, subsequent Police investigations did not disclose any criminal offence.

The then Director of Public Prosecutions advised that the arrested officials and seized vehicles be released, and accounts unblocked. The officials were released, but UCB declined to release the vehicles and to unblock the accounts.

Vehicles stolen

Twenty six of the 28 vehicles were stolen or looted during the 1979 liberation war and only two were given to Afric Co-op. In 1981, Afric Co-op, through Odimbe and Company advocates, fi led a case against the AG and UCB.

Out-of-court settlement

Former president Milton Obote, fearing adverse publicity about the case, directed the parties to reach an out-of-court settlement, but negotiations between 1982 and 1985 failed.

Afric Co-op in January 1988 proposed a final settlement by way of the Government allowing them to import 26 minibuses worth $832,000 through barter trade involving coffee and tea.

In March the same year, the then justice minister, Joseph Mulenga, informed the company that their proposal would only be accepted if they withdrew the case against UCB and AG.

A consent judgment was executed on July 17, 1989, providing that the Government would avail coffee and/or tea to the company in sufficient quantities. This would enable them realise $832,000 to cover the cost of acquiring minibuses.

Afric withdrew the case. Documents seen by New Vision show that between 1991 and 1994, the Government made several payments to Afric  totalling $832,000.

On September 29, 1994, Afric wrote to the Secretary to the Treasury acknowledging settlement of the principal amount of the compensation of $ 832,000. But the firm claimed sh1.7b being interest, which had accrued on the amount.

The finance ministry computed the interest as sh1.545b and on January 12, 1995, wrote to the Commissioner/Treasury office of accounts, authorizing issuance of a Promissory Note for the amount.

But the company was paid sh2.1b, which it acknowledged on January 21, 1998. In 2000, Afric sued the Government, claiming sh68, 347,550,541 for compensation and interest on blocked accounts and vehicles.

Justice Wengi rejected claim

However, Justice Okumu Wengi in 2001 noted that Afric had withdrawn the case against the AG and UCB and undertook not to institute or prosecute any further proceedings in the matter except for interest on the blocked accounts balances.

Justice Wengi on May 24, 2001, ruled that the suit was barred by law and not be allowed to proceed to trial. Afric filed an appeal against the ruling. The Court of Appeal in July 2002 directed Afric to deposit in court costs of sh690m and also security costs of sh200m before the appeal could be heard. Afri Coop did not comply with the ruling.

Museveni petitioned

Instead, in August 2003, Afri Co-op wrote to President Yoweri Museveni, seeking his assistance in recovering the funds on the blocked accounts with accrued interest.

To support their claim, the firm attached a November 18, 2003 letter purportedly written by the then IGG, Jotham Tumwesigye, clearing the transaction. But Tumwesigye denied knowledge of and signature on the letter.

Mwondha blocks pay

Former IGG Mwondha stated in a 2005 report that Afric Co-op had obtained that award fraudulently after writing to the President with forged letters and an altered court ruling.

She asked the CID to investigate the case with a view to prosecute Afric Co-op and their lawyer. She recommended that the officials, be charged with forgery and attempt to obtain money by false pretense.

Afric Co-op went back to the court, but Justice Eldad Mwangusya threw out the case on November 29, 2011, saying it had no merit. They appealed to the Court of Appeal, which granted them their request last month.