The High Court has ordered businessman Patrick Bitature to pay Finicon (U) Limited more than Shs1.9 billion for unpaid consultancy services provided for two construction projects in Kampala.
The court found that Finicon substantially performed its obligations under two consultancy agreements entered into with Bitature but was not fully compensated for the work it carried out.
The dispute stemmed from a July 6, 2012 agreement under which Finicon was contracted to provide professional consultancy services for the development of a high-end boutique hotel along Summit View Road on Kololo Hill. The proposed project was estimated to cost between US$5 million and US$6 million, equivalent at the time to about Shs18 billion and Shs21.6 billion respectively.
A second agreement was signed on August 24, 2012, for consultancy services relating to the remodelling of Bitature’s residence on Plot 9 Malcolm-X Road in Kololo, Kampala.
Under the hotel agreement, Finicon was entitled to a consultancy fee equivalent to five per cent of the locked project sum of US$6 million if the bills of quantities exceeded that figure. Where the actual project cost was lower, the fee was to be calculated at five per cent of the actual construction cost.
Finicon told court that it undertook substantial work on both projects, including surveying, appraisal and feasibility assessments, preparation of schematic and production drawings, compilation of project summaries and management of the tendering process.
The company also secured clearance and approval from the National Environment Management Authority and began the process of obtaining development permission from Kampala Capital City Authority.
According to court records, Finicon subsequently made technical modifications required by KCCA but the project did not proceed further.
Under the residential remodelling agreement, Finicon was also entitled to a five per cent consultancy fee based on the construction cost.
Finicon said it had completed about 76 per cent of the consultancy work covered by the two agreements and was therefore entitled to US$228,000 under the July agreement and US$63,136.20 under the August agreement.
The total claim was US$291,136.20, equivalent to about Shs1.05 billion, before taking into account other components of the claim.
Finicon said Bitature had paid only US$23,538, about Shs84.7 million, by October 28, 2014, leaving an outstanding contractual balance of US$267,598.20, equivalent to about Shs963.4 million, exclusive of VAT.
The consultancy company said the failure to settle the balance forced it to use its own resources to pay subcontractors involved in the projects, affecting its cash flow and operations.
It subsequently sued Bitature seeking recovery of the outstanding contractual sum, damages, interest and costs.
Bitature disputed the claim, arguing that the consultancy fees under the July 2012 agreement were supposed to be calculated according to the actual project cost if it was lower than the US$6 million locked sum.
For the August agreement, he argued that the five per cent fee was to be determined using either the cost estimate reached after completion of the concept or the bills of quantities.
He maintained that neither project reached the stage at which bills of quantities were produced and that the construction costs were therefore never ascertained.
“That being the case, in so far as the agreed consideration is incapable of ascertainment, the terms of either contract are vague and unenforceable,” Bitature argued.
He further claimed that the US$23,538 already paid to Finicon constituted full and final settlement because the projects had not proceeded to the development stage.
Bitature also denied responsibility for fees Finicon said it had paid to subcontractors.
The court rejected Bitature’s argument that the amount already paid constituted full and final settlement.
It found that Finicon had performed substantial portions of the work required under the two agreements and that there was no clear evidence that the parties had agreed to terminate their contractual obligations through the payment of US$23,538.
“The absence of a clear and unambiguous agreement to that effect supports this conclusion. Therefore, this issue is answered in the negative; the part-payments made by the defendant were not in full and final settlement of the plaintiff’s claim,” the court ruled.
The court also found that the contracts were sufficiently clear and contained workable mechanisms for determining the consultancy fees.
It held that the fees could be calculated using the construction costs, bills of quantities or agreed estimates, meaning the agreements were not rendered unenforceable merely because the projects were not completed.
The court relied on documentary evidence, including project documents, KCCA and NEMA approvals, bills of quantities and tender documents, in determining that Finicon had carried out substantial stages of the contracted work.
According to the ruling, Finicon had progressed up to Stage G, involving bills of quantities, under the hotel project and up to Stage H, involving tender action, under the residential project.
The court assessed the work completed at approximately 76 per cent of the consultancy obligations.
Bitature had also challenged the enforceability of the contracts on grounds that Finicon or its directors were not individually registered architects when the services were performed.
The court rejected the argument, holding that the law governing architects’ registration regulates individual professional practice and does not prevent a corporate entity from employing a duly registered architect to undertake professional work under appropriate professional control.
The court found no evidence that the arrangement amounted to unlawful fee-sharing or that a registered architect had merely allowed his professional credentials to be used by others.
The court also declined to entertain certain allegations of fraud, lack of privity and illegality that had not been properly pleaded and particularised before trial.
The ruling emphasised that parties to a civil case are generally required to plead the material facts and specific allegations on which they intend to rely.
After considering the evidence, the court determined that Finicon was entitled to an outstanding contractual sum of US$256,136.17, exclusive of VAT.
“Bitature not having furnished proof of any further payment, the court finds that the defendant has proved its entitlement to the outstanding contractual sum of US$256,136.17 exclusive of VAT, to the required standard,” the court ruled.
The court therefore entered judgment in favour of Finicon for US$256,136.17, exclusive of VAT, together with interest at nine per cent per annum from May 20, 2014, until the amount is paid in full.
Using the exchange rate figures cited in the case, the principal award is equivalent to about Shs922.1 million.
The interest accumulated over the years, together with the contractual amount and applicable VAT, brings the financial liability arising from the judgment to more than Shs1.9 billion.
Bitature was also ordered to meet the costs of the suit.
However, the court declined to award Finicon punitive or exemplary damages and rejected additional claims for general damages based on alleged reputational or other losses.
