The High Court in Kampala has ordered the Uganda Revenue Authority (URA) to pay Shs1.66 billion in compensation to Babaana Children of Uganda Ltd after finding that the tax body unlawfully disposed of donated medical equipment intended for a charitable healthcare project.
In a judgment delivered by Judge Bernard Namanya, the court awarded the organisation Shs1.46 billion in special damages, representing the value of the lost medical equipment, and Shs200 million in general damages, together with interest and the costs of the suit.
The dispute arose from a consignment of donated medical equipment imported from Switzerland in 2017 for the establishment of a specialised clinic in Naguru, Kampala. The equipment had been granted a tax exemption by URA following a request from the Ministry of Health.
Court heard that the charity applied for an extension of the warehousing period in September 2018 because construction of the clinic had not been completed. However, URA later disposed of the equipment, arguing that the statutory warehousing period had expired and the goods had been forfeited under the East African Community Customs Management Act.
Judge Bernard Namanya found that although URA had the legal authority to dispose of unclaimed goods, it failed to comply with the mandatory procedures required before selling the consignment.
“I find that the defendant sold the plaintiff’s goods without issuing the statutory one-month notice required by law. Had such notice been issued, the plaintiff would have been afforded an opportunity to take remedial action,” Judge Namanya ruled.
The judge also questioned how medical equipment valued at approximately Shs1.46 billion could allegedly have been sold for only Shs4 million.
“The defendant offered no satisfactory explanation for that considerable disparity. I find that the defendant failed to account for the plaintiff’s medical equipment in the manner required by law,” Judge Namanya said.
He further observed that URA failed to produce a valuation report before the alleged auction and did not demonstrate proper accountability for the proceeds of the sale, as required by law.
The court rejected the charity’s claim for more than Shs17.2 billion in special damages, finding that the loss assessment report relied upon had not been sufficiently proved because its authors did not testify.
However, Judge Namanya accepted evidence showing that the donated medical equipment was worth approximately CHF319,885, equivalent to about Shs1.46 billion, and awarded that amount as special damages.
The court also awarded Shs200 million in general damages, noting that the unlawful disposal of the specialised equipment denied Ugandans access to planned modern healthcare services and frustrated the charity’s healthcare project.
“The unlawful disposal deprived the intended beneficiaries of the anticipated medical services and caused inconvenience, disappointment, and loss to the plaintiff and its donors,” Judge Namanya stated.
The judge, however, declined to award exemplary damages, holding that the circumstances did not meet the legal threshold for punitive compensation.
In the final orders, the court directed URA to pay Shs1.46 billion in special damages with interest at 6 percent per annum from December 24, 2018, until payment in full, Shs200 million in general damages with interest at 6 percent per annum from the date of judgment, as well as the costs of the suit.
