The Court of Appeal in Kampala has upheld a High Court decision that ordered Imperial Royale Hotel Limited to refund USD 1,464,363.81 (about Shs5.5billion) to the government of Uganda for breach of contract over the provision of accommodation and conference facilities during the 2007 Commonwealth Heads of Government Meeting (Chogm).
In a unanimous ruling, delivered by Justices Moses Kazibwe Kawumi, Irene Mulyagonja, and Oscar John Kihika, the court confirmed that the hotel was not ready for occupation during the agreed period and therefore, failed to fulfil its contractual obligations.
The court also maintained the High Court’s award of Shs800 million in general damages to the government, with interest and costs.
Justice Kawumi, who wrote the lead judgment, methodically addressed each ground and found no merit in the appeal.
On the question of readiness, Justice Kawumi noted that the hotel failed to demonstrate it was operational during the agreed period.
‘The trial judge correctly evaluated the law and evidence when he found that the hotel was not ready for occupation over the period of October 26, 2007, to November 18, 2007 and that therefore, the appellant was in breach of the contract,’ he held.
Regarding the occupation permit presented by the hotel as evidence of completion, the judge found it unreliable.
‘After a careful re-evaluation of the evidence, I would come to the conclusion that the occupation permit was issued without considering what was on ground,’ Justice Kawumi ruled, concurring with testimony from a Kampala Capital City Authority official who challenged its authenticity.
The court also rejected the argument that the hotel could not have carried out construction during the CHOGM event because of security cordons. Justice Kawumi observed that this defence was never pleaded in the hotel’s written statement of defence and thus could not be raised on appeal.
The court further upheld the High Court’s finding that the hotel breached the contract by charging higher rates than those agreed in the addendum. Evidence from the audit report by Messrs Johnson and Nyende showed that executive rooms were billed at USD 433.65 instead of the agreed USD 350 per night.
‘The charge was contrary to the clear provision of the addendum which was admitted as an exhibit and thus confirming the respondent’s grievance in the plaint, that there was a breach of contract,’ Justice Kawumi stated.
The Court of Appeal also dismissed the hotel’s reliance on an email allegedly sent by Mr. Hirji to the then Permanent Secretary of the Ministry of Foreign Affairs, complaining about the absence of guests.
The justices held that the contract expressly required communication through the Executive Director of the CHOGM 2007 Secretariat and by postal address, not email.
‘The appellant’s failure to express its grievance to the contact person amounted to non-communication,’ the court held.
Having failed on all grounds, the Court of Appeal dismissed the appeal and upheld the High Court’s judgment in full.
‘The appeal ought to be dismissed and the orders of the High Court upheld,’ ruled Justice Kawumi.
In 2009, the Attorney General sued Imperial Royale Hotel seeking recovery of funds paid for unutilised rooms and incomplete facilities. According to court records, the Ministry of Foreign Affairs had entered into an agreement with the hotel on June 15, 2007, and an addendum on September 10, 2007, to provide accommodation and conference facilities at a total cost of USD 2,566,849.
The government alleged that the hotel failed to complete the facilities in time for CHOGM 2007, rendering them unfit for occupation between October 26 and November 18, 2007, contrary to the contract. As a result, the government sought a refund of USD 1,464,363.81, representing payment for unutilised services.
Imperial Royale Hotel, through its managing director Karim Hirji, denied the claims, insisting that the facilities were ready for use by October 24, 2007. The hotel argued that any loss incurred arose from the government’s failure to utilise the booked rooms, not from any breach on its part.
High Court Decision
In February 2016, Justice Peter Adonyo , who was then at the High Court Commercial Division ruled that the hotel had not been ready to receive guests before November 18, 2007. The court held the hotel liable to refund the government USD 1.46 million, pay Shs 800 million in general damages, and meet the costs of the suit.
Unhappy with the decision, Imperial Royale appealed on six grounds, arguing that the trial judge erred in finding the hotel unready for occupation, disregarded discrepancies in audit reports, and ignored the occupation permit showing completion. The hotel also accused the trial judge of shifting the burden of proof and relying on inadmissible evidence.
The appeal was argued by Mr Timothy Lugayizi for the hotel, while Mr George Kallemera, a Commissioner in the Attorney General’s Chambers, represented the government.
Imperial Royale Hotel is now liable to refund USD 1.46 million to the government, pay Shs 800 million in general damages, and cover the costs of the case at both the High Court and Court of Appeal.