Court dismisses Italian firm's sh19.4b Northern Bypass claim
Justice Stephen Mubiru dismissed the suit after finding that the company's claims had either been settled through previous contractual processes or released under a Deed of Settlement and Release signed by the parties.
The case was filed against the Attorney General and the Uganda National Roads Authority (UNRA). (File hoto)
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The High Court Commercial Division has dismissed a claim by Italian construction company Salini Costruttori SpA seeking sh9.47 billion and €2.22 million, equivalent to about sh9.95 billion, from the government over the construction of the Kampala Northern Bypass.
The total value of the claim was therefore about sh19.42 billion.
Justice Stephen Mubiru dismissed the suit after finding that the company's claims had either been settled through previous contractual processes or released under a Deed of Settlement and Release signed by the parties.
The case was filed against the Attorney General and the Uganda National Roads Authority (UNRA).
The court also ordered Salini to pay costs to the Attorney General.
Salini, which was contracted to construct the Kampala Northern Bypass, entered into the construction contract with the government on April 30, 2003.
The initial contract sum was sh98.16 billion, inclusive of VAT, with funding provided by the European Development Fund.
Works commenced on May 19, 2004, and were completed on September 30, 2009. A Provisional Acceptance Certificate was issued, while the Final Acceptance Certificate was issued on June 19, 2015.
During implementation of the project, several disputes arose between the parties and were referred to contractual dispute-resolution mechanisms, including adjudication and arbitration.
One of the disputes, known as Referral No. 26 or the Asphalt Claim, concerned delays and additional costs claimed by Salini.
An arbitrator, in an award dated March 20, 2013, found that both parties had contributed to delays and granted an extension of time up to October 1, 2009, but without additional payment.
The company was instead directed to return to site and complete outstanding defects at its own cost.
The parties subsequently conducted a joint measurement exercise, which resulted in Interim Payment Certificate No. 67, valued at sh3.04 billion and €2.98 million (about sh13.32 billion).
The amount covered several outstanding claims and was fully paid by February 2, 2012.
On June 2, 2015, the parties signed a Deed of Settlement and Release intended to bring the contractual disputes to a conclusion.
Under the agreement, the parties provided for a final payment process and released claims arising from the contract.
Salini later submitted a Draft Final Statement of Account in August 2015, claiming sh9.47 billion and €2.22 million (about sh9.95 billion).
The Attorney General and UNRA rejected the draft in March 2016, stating that it was erroneous and requesting Salini to submit a nil-balance statement.
Salini did not submit the revised statement and instead filed the suit in 2016.
The company sought payment of several amounts, including claims relating to traffic management, sand pits and backfilling, reinforced earth and bridge works, price revisions, excise duty, guard rail reflectors, input VAT, under-certified quantities, performance bond maintenance costs and accrued interest.
Justice Mubiru found that several of the claims had already been dealt with and paid through Interim Payment Certificate No. 67.
Other claims, including input VAT, excise duty, performance bond maintenance costs and accrued interest, were found to have been covered by the Deed of Settlement and Release.
The judge also rejected Salini's claim for sh3.22 billion and €765,536, equivalent to about sh3.42 billion, relating to alleged under-certified quantities.
The court noted that the issue had previously been determined by the project supervisor and was subsequently included in the joint measurement exercise and paid under Interim Payment Certificate No. 67.
On the issue of the company's legal status, the court held that Salini Costruttori SpA was the proper plaintiff.
Justice Mubiru explained that the Ugandan branch of a foreign company is not a separate legal entity from its parent company and that the suit had properly been brought in the name of Salini Costruttori SpA.
The court also considered an argument that the dispute should have been referred to arbitration.
Justice Mubiru held that although the contract contained an arbitration clause, the time within which the disputes could be referred to arbitration had expired.
He further found that the defendants had participated in the court proceedings without raising the arbitration objection at the appropriate stage, thereby waiving their right to rely on the arbitration clause.
The court therefore held that it had jurisdiction to hear the case.
On the alleged failure to complete the final statement process, the judge found that the defendants' March 2016 response, rejecting Salini's draft and requesting a nil-balance statement, constituted a substantive response within the contractual process.
Justice Mubiru consequently found no basis for awarding damages to the company.
The judge concluded that Salini's substantive claims had already been settled, paid or released and dismissed the suit with costs to the Attorney General.