THE REPUBLIC OF UGANDA

IN THE SUPREME COURT OF UGANDA

AT MENGO

(CORAM: ODOKI - CJ, ODER, TSEKOOKO, KAROKORA, AND

KANYEIHAMBA, JJ.S.C.)

CIVIL APPEAL N O . 15 OF 2001

B E T W E E N

1. SUFFISH INTERNATIONAL )
FOOD PROCESSORS ( U ) LT D . ) 2 . PANWORLD INSURANCE
COMPANY)::::::::::::::::::::::APPELLANTS

A N D

EGYPT AIR CORPORATION

T / A EGYPTAIR UGANDA: ) ::::::::::::::::::::::::::::::::::RESPONDENT

(An appeal from the decision of the Court of Appeal at Kampala

(S.T. Manyindo, DCJ, Berko, and Engwau, JJ.A) dated 29-06-99
in Civil Appeal No. 2 of 1999).

JUDGMENT OF ODER - JSC.

This is an appeal against the decision of the Court of Appeal overturning the
judgment of the High Court which had allowed the appellants' suit against the
respondent.

The facts of the case are simple.

On or about March 16 1996, the first appellant entered into a contract with the
respondent to airfreight a consignment of chilled fresh fish from Uganda to
Brussels. On arrival at the destination, the consignment was found to be unfit
for entry into the European Economic Community, was rejected and
destroyed. The second appellant indemnified the first appellant as its insured
for the loss in the sum of USD 48, 100 on an alleged Insurance Cover. The
first appellant instituted a suit against the respondent for the benefit of the
second appellant under the doctrine of subrogation to recover the sum of USD
48,100 which the latter had paid to the former. The trial judge found that the
goods were damaged either during the process of loading them into the plane
or during the flight and blamed the respondent for causing the damage.
Judgment was entered for the second appellant. The respondent was
dissatisfied with the decision of the trial court, and appealed to the Court of
Appeal, which allowed the appeal, overturning the trial court's judgment.
Hence this appeal.

Two grounds of appeal are set cut in the memorandum of appeal but, in
essence, they constitute only one complaint, which is to the effect that the
Court of Appeal erred in law and in fact by holding that the first and second
appellant failed to prove that there was a binding and operative contract of
insurance between them.

Before making his own conclusions in the lead judgment, with which the
other members of the Court of Appeal agreed, Berko, JA, re-evaluated the
evidence in the case to the effect that the appellants' plaint in the trial court
pleaded in paragraph 6(b) thereof that the first appellant took out a valid
insurance policy cover No. 10/MR/OC/4499 with the insurers (the second
appellant) to cover 1000 Kgs. of Fresh Chilled Nile Perch Fillets, inclusive of
airfreight transportation, and handling. A copy of a Marine Certificate of
Insurance was attached to the plaint. However, no such insurance
policy/cover was produced in evidence. Instead, the appellants put in
evidence as Exhbit P.l the Marine Certificate of Insurance, which contained
the following pertinent information:

"We acknowledge receipt of your Marine declaration No.

181 dated and have to advise you that you pre hereby covered,
subject to the conditions and Terms of the Company's Marine open
 Policy/Cover No. 10/MR/OC/4499 under which your declaration is
made."
After giving the descriptions of the goods and the Airway Bill number, its
date and the sum insured the document concluded -

"The condition of Insurance briefly being AS PER OPEN COVER NO.

10/MR/OC/4499."

The learned Justice of Appeal then made his finding and concluded as
follows:

"It is clear from the above that Exh. P.l was not the insurance policy
under which the goods were insured. The actual policy was the open
policy/cover No. 10/MR/OC/4499.

As that document governed the rights of the parties, it would have

contained the distinctive features of the contract of insurance. These
are the parties, the subject matter of insurance, the period of the
insurance, the date of commencement of the policy, the details of the
peril which was insured against and also a list of exemptions
specifying the circumstances in which the insurers would not he liable.

That document was not produced in Court. I am not persuaded by the

argument of Mr. Shonubi, Counsel for the respondents, that the
second respondent could not produce it in evidence because at the
time its existence was denied in the further amended written defence,
they had closed their case. Nothing prevented the respondents from
adducing further evidence to rebut the denial, when in fact
Counsel had reserved the right to do so at the time the amendment
was being considered. The respondent therefore failed to
prove that there was a binding and operative contract of indemnity
between the first and second respondents. The learned judge
erred in holding that there was such a proof.

It must be observed that the whole basis of the subrogation doctrine is

founded on a binding and operative contract of indemnity. It derives
its life from the original contract of indemnity. In my view the essence
of the matter is that subrogation springs not from payment only but
from actual payment conjointly with the fact that it is made pursuant
to the basic and original contract of indemnity.

If then the right of subrogation rests upon payment under a contract of

indemnity, how does the matter stand when there is no such contract?
If there is no contract of indemnity, then, if I may borrow the words of
 McCardie, J, in John Edwards and Company -vs- Motor Union
Insurance Company Ltd. (1922) 2 KB. 249, "there is no juristic scope
for the operation of the principle of subrogation."The essential basis
of subrogation is wholly absent.

In the result, I would allow the appeal, set aside the judgment and
orders of the learned trial judge and substitute an order dismissing the
action.

Mr. Alan Shonubi argued the appellants' grounds of appeal. He had also
represented the appellants in the Court of Appeal where he filed written
submissions. His arguments before us are similar to those he put forward
before the Court of Appeal in reply to the respondent's written submission in
support of the appeal in that Court. In his submission before us, Mr. Shonubi
contended that it is not only a policy of insurance that can prove existence of
a contract of insurance. A relevant Certificate of Insurance derived from a
marine policy is sufficient to prove existence of a valid contract of insurance.
In the instant case, the learned Counsel contended, the Marine Certificate of
Insurance (Exhbt.P.1) was sufficient to show that there was a valid contract of
insurance between the appellants. The evidence of Richard Byansi, (PWl) also
proved that the second appellant issued the first appellant with insurance
Policy No. 10/MR/OC/4499 and a Marine Certificate of Insurance (Exbht.
P.l). What the appellants did is standard procedure under Marine Insurance.
For this preposition he relied on a publication by the Chartered Insurance
Institute. "Marine Insurance. The Legal and Documentary Frame Work",
1 9 9 9 Edition. In his further submission the learned Counsel contended that
in modern practice of export, the requirement for policy of insurance can be
dispensed with since a policy of insurance is not the only means by
which a contract, of insurance can be proved. Generally there is no common
agreement in the commercial world on the definition of a policy. An insurance
contract may exist without a policy. At common law the insurer was allowed
to sue the third party, because subrogation was regarded as implied, so a third
party could not say that there was no contract once the insured and the insurer
had settled. Common law regarded subrogation as an implied term of a
contract of insurance; each certificate of Marine Insurance being regarded as a
separate contract. The learned Counsel relied on several authorities for his
submission. These included Export/Import Procedures and Documentation,
3rd Edition, 1997, by Johnson Thomas E., at pages 126 to 133; The Law of
Insurance, Fourth Edition 1979, by Paul Colinvaux, page 136; King -vs-
Victoria Insurance Company (1896) AC 250, at page 254; McLeod -vs-
Compagnie d'Assurance Generales L'Helvetia (1952) 1 Lloyds, 12.

In the instant case, the learned Counsel further submitted that the respondent
having admitted negligence and liability to the first appellant, as indicated by
Exhbt. 4, it should not have denied the claim made against it by the
appellants in the suit. The letter of subrogation, Exhb. P.3 also showed that
the first and second appellants regarded the contract of insurance between
them as binding. Evidence of settlement, shown by Exhbt. P.6, also indicated
that the two parties had accepted the contract as binding between them. On
the balance of probability learned Counsel submitted, Exhibits P.3 and P. 6
proved that there was a contract of insurance. The evidence of Richard Byansi
(PW.l) also supported the existence of such a contract.

Finally, learned Counsel submitted that in the circumstances of this case, and
in view of the settlement by the second appellant of the first appellant's claim
under the relevant insurance contract, the respondent should not be allowed to
benefit from its negligence. It was paid to carry the goods, but the goods did
not reach their destination. The learned Counsel then criticized the Court of
Appeal for following the case of John Edwards and Co. Motor Insurance
Ltd. (1922) 2 KB.249, which he said is not applicable to the instant case.

Mr. Kasirye learned Counsel for the respondent opposed the appeal. In
his submission he emphasized the appellants' pleading in paragraph 6(b)
of their plaint that an insurance policy existed between them. The existence of
such a policy was denied by the respondent in its final amended written
statement of defence which averred that the appellants would be put to strict
proof thereof. The denial was made necessary by the evidence of Richard
Byansi (PW.l) that the marine certificate of insurance (Exhbt. P.l) dated 19-
03-1996, was issued after the arrival of the fish consignment. Learned
Counsel contended that after the learned trial judge had granted the
respondent leave to amend its w.s.d. the appellants had the opportunity to
produce the insurance policy, but they chose not to do so.

Learned Counsel contended that the Marine Certificate of Insurance is not an

insurance policy, and it does not contain the features of an insurance policy.

In the instant case, Exhbt. P.l does not bear these features. The most
significant omission was when the policy of insurance began and ended. The
Marine Certificate of Insurance (Exhbt. P.l) was dated 19-03-1996,
after the consignment had arrived on 16-03-1996 according to the evidence of
Edison Hammed (DW.l). This means that Exhbt. P.l was issued after the
arrival and rejection of the consignment in Brussels. The learned Counsel
contended that subrogation is not a blanket right at common law, but it is in
the contract of a particular insurance. It is different from a contract of
carriage, such as an Air way Bill. In the instant case, the respondent's case
was that there was no insurance relationship between the two appellants. With
regard to the respondents' admission of responsibility for the damage,
the learned Counsel contended that it had no bearing on the relationship
between the first and second appellants as the insured and the insurer
respectively.

In his counter argument, Mr. Kasirye disagreed with Mr. Shonubi's contention
that marine policy of insurance does not have to be in writing, and referred to
MacGillivry and Parkington on Insurance Law, 8th Edition, page 267.

Mr. Kasirye distinguished the authorities relied on by the appellants' learned

Counsel as not applicable to the instant case because they were based
on the English Marine Insurance Act of 1906. This was a statute of general
application which ceased to apply to Uganda after the enactment of the
Judicature Statute 1996. The case of King -vs- Victoria Insurance Company
(supra) is also distinguishable from the instant case in that in that case there
was a contract of insurance between the insurer and the insured, which had
assigned its rights to the party who sued under the insurance contract. The
Privy Council, on the peculiar facts of that case rightly held that the third
party who was the author of the damage to the insured's goods and was a
stranger to the contract of insurance was not entitled to refuse to indemnify
the insurers. The decision in King -vs- Victoria Insurance Co. (supra)
notwithstanding, the respondent's learned counsel contended that under the
principle of subrogation, it is open to a third party, like the respondent in the
instant case, to rely on a policy of indemnity in defence of a claim by the
insured or insurer against him.

Regarding the case of John Edwards and Company -vs-Motor Insurance Co.
(supra) Mr. Kasirye submitted that it is relevant to the instant case although it
is not binding on this Court.

With regard to negligence on the part of the respondent which the learned trial
judge found proved, Mr. Kasirye argued that such finding cannot stand in the
absence of a contract of insurance between the first and the second appellants.
As the record shows the 1 s t appellant was only a nominal plaintiff in the suit.
It could have sued the respondent on negligence, but it chose not to do so.
Consequently, the second appellant, cannot rely on the negligence in the
absence of a contract of indemnity.

In support of his submission, the respondent's learned Counsel relied on

MacGillivry & Parkington on Insurance Law, 8 th Edition; General
Principles of Insurance Law by E. R. Hardy Ivammy (ButterWorths) 5 th
Edition; Halsbury's Laws of England; 4th Edition, volume 25
(Butterworths); King -vs- Victoria Insurance (1896) A. C. 250 P.C.; Digby
C. Jess: The Insurance of Commercial Risks Law and Practice; John
Edwards & Co. Motor Union Insurance Ltd. (1922) Z. K. B. 249.
In my view, the doctrine of subrogation is at the centre of this case. The
appellants' court action is founded on it; and the respondent's resistance of the
suit was on the basis that the doctrine did not apply because no contract of
indemnity between the appellants was proved. As I have already indicated, the
appellants and the respondent have relied on many authorities in support of
their respective arguments. Some are decided cases and others are written
opinions by learned authors. As I understand them, nearly all the authorities
appear to agree on the essential elements of the doctrine and its general
application in the law of insurance. In summary these are that if a person
suffers a loss for which he can recover against a third party and that person
has insured himself against such a loss the insurer cannot avoid liability on
the ground that the insured has a claim against the third party.

Conversely, the third party cannot avoid liability on the ground that the
insured has been or will be fully compensated by his insurer. These principles
are fundamental to the law of insurance. Contracts would be largely defeated
if the law were otherwise and the right of subrogation is corollary to them.
Subrogation is thus the right of an insurer who has paid for a loss to receive
the benefit of all the rights and remedies for the insured against the third
parties which, if satisfied, extinguish or diminish the ultimate loss
sustained. The insurer who has paid for a loss, may thus exercise the rights of
the insured to recover from the third party, or if the insured has already
exercised that right, the insurer will be entitled to repayment from him.

A contract of insurance by which an insurer agrees to pay a certain sum of

money to the insured on the happening of a certain event regardless of actual
loss suffered by the insured has no basis for the operation of the doctrine of
subrogation.

From the foregoing it appears to be clear to me that in order for the doctrine to
operate, it is essential for a valid and operative contract of indemnity to exist
between the insurer and the insured. In the authorities I have referred to a
contract of indemnity and a contract of insurance appear to be used inter-
chargeably. Payment of indemnity by the insurer to the insured alone is not
enough. There must be a valid and operative contract of insurance as the basis
of payment by the insurer upon a loss by the insured. The policy sets out the
details of the event which is insured against, and also a list of exceptions
specifying the circumstances in which the insurers will not be liable. In
certain cases where the event insured against has been brought about by
the conduct of the insured, he will not be entitled to recover under the policy.

To establish the existence of such a contract, it is not necessary that all its
terms should have been separately agreed. As the contract is usually in
common form, there is, as a rule, no real negotiation of terms, the agreement
being, on the part of the insurers, to issue, and on the part of the insured to
take a policy in the ordinary form issued by the insurers. There must,
however, be a clear agreement as to the distinctive features of the particular
contract of insurance. The parties, therefore, must be ascertained; the assured
must have agreed to the particular insurers. They must be ad idem as regards
the subject matter of the insurance. The period of insurance must be fixed and
there must be agreement as to the sum insured and the premium to be paid. It
must also be clear that there was, in fact, an offer to enter into the contract by
one party followed by an acceptance of the offer by the other and that a
complete contract resulted.

Usually the acceptance of the offer will not take place at once, and before it
does so, it is the practice for a "Cover note" to be issued.

Before acceptance, neither party is bound, and either may withdraw at its
pleasure. After acceptance, there is a contract from which neither party can
withdraw, binding the insured to pay the premium, and the insurer to accept
the premium when tendered, to issue a policy, and to pay any sum that may
become payable under the terms of the contract. The various steps in the
negotiations leading to a contract of insurance are usually recorded in certain
formal documents, i.e. the proposals, the cover note, and, finally, the policy.
The absence of any such document, however, during the preliminary steps
does not necessarily lead to the inference, that there is no contract of
insurance between the parties.

In the instant case, the appellant's learned Counsel also contended firstly, that
because a certificate of insurance derived from a marine policy is sufficient to
prove the existence of a valid contract of insurance; secondly, that because in
modern practice of export the requirement of a contract of insurance can be
dispensed with; and thirdly, that because a policy of insurance is not the only
means by which a contract of insurance can be proved, therefore, in the
instant case, it was not necessary to prove by production in evidence the
existence of a contract of insurance. With respect, I am not persuaded by the
learned Counsel's propositions. I think that the conclusion made by Berko,
J.A., in disallowing the appellants' suit cannot be faulted because no policy of
indemnity was proved. The following are my reasons.

Firstly, the appellants founded their suit on the existence of a particular

insurance policy made between the two of them, namely, open policy/cover
No. 10/MR/OC/4499, which was pleaded in paragraph 6(b) of their plaint.
This was confirmed by the evidence of Richard Byansi (PWl), the second
appellant's Claims Manager, to the effect that the second appellant issued the
respondent with an insurance cover and the Marine Certificate of Insurance
(Exhbt. P.l), based on the insurance cover.

Secondly, the respondent, in his final written statement of defence totally

denied the existence of such an insurance contract and required the
appellants to strictly prove it. The appellants were, therefore, put on notice to
prove that there was such an insurance contract. Even if the respondent did
not deny the existence of such a contract the appellants were under a duty to
prove their case in accordance with their pleadings in order to succeed. All
that notwithstanding, the appellants did not prove that such a contract existed
and, in my view stubbornly, refused to explain why they chose not to do so.

Thirdly, the Marine Certificate of Insurance (Exhbt. P.l) stipulated that the
conditions on which the consignment of Fish was insured were as stated in the
open insurance/cover No. 10/MR/OC/4499. The document also warned the
First appellant: "Please read the Important Notice on the Reverse."

The terms and conditions stated in the insurance/cover and on the reverse side
of Exhbt. P.l were never produced in evidence. They are not known by
anybody especially by the respondent. As the authorities to which I have
referred indicate, the respondent might have had certain defences against the
second appellant's subrogation if he had seen the insurance contract,
because such a contract sets out in details the conditions and terms of the
event which is insured against and also a list of exceptions specifying the
circumstances in which the insurer may not be liable.

Although the third party, like the respondent in this case, is a

stranger to the insurance contract, it nevertheless, would be interested to know
its details. Digby C. Jess put it this way in "The Insurance of Commercial
Risks Law and Practice at page 346: "The third party may also refer to the
policy under which the insurers are exercising the subrogation and rely, for
example, on an express waiver of subrogation against themselves, or on the
fact that the insurance itself is illegal and therefore, unenforceable to give rise
to any subrogation. This right of the third party sued to refer to the policy
does not extend, however, to argue the technical merit of the insurer's decision
to make an indemnity under the terms of the policy provided the insurers
made the indemnity honestly."

I agree with that statement of the law, but I would add that it applies provided
that a valid and operative contract of indemnity is the basis of the relationship
between the insured and the insurer.
In the instant case it was a common ground that the Marine Insurance
Certificate (Exhbt. 1) and the contract of indemnity was issued after the fish
consignment had already arrived and rejected at Brussels. It is not known
when the contract of indemnity was made. The respondent would, therefore,
be interested to know whether the contract of insurance or indemnity was
retrospective or at least validly covered the period from the date the
consignment was airfreight to when it arrived at Brussels.

In the circumstances, my view is that it matters not that the respondent

apparently first admitted liability which they subsequently retracted, or that
the appellants as between themselves acted on the basis that there was a
binding contract of insurance between them. The respondent was still entitled
to know the details of the insurance policy/cover No. 10/MR/OC/4499
stipulated in the Marine Certificate of Insurance (Exhbt. P.l). The appellants
having failed to prove it by producing it in evidence, the learned Justices of
Appeal, in my view, rightly rejected the appellants' appeal before them, and
dismissed their suit.

The first appellant had an option to recover its loss by a suit in negligence
against the respondent.

In the result, I would dismiss this appeal with costs to the respondent here and
in the courts below.

JUDGMENT OF ODOKI, CJ.

I have had the benefit of reading in draft the judgment of Oder JSC and I
agree with him that this appeal should be dismissed with costs here and the
courts below.
As the other members of the court agree with judgment and orders of Oder
JSC, there will be an order in the terms proposed by Oder JSC.

JUDGMENT OF TSEKOOKO JSC.

I have had the benefit of reading in draft the judgment prepared by my Lord
Oder, JSC, and I agree with his conclusions and with the orders which he has
proposed.

The objections to the judgment of the Court of Appeal are in the form
of two grounds of appeal. In the first ground, the appellants complain that the
Justices of the Court of Appeal erred in law when they held that the appellants
failed to prove that there was a binding and operative contract of indemnity
between the two appellants. The second complaint is that the Justices of
Appeal erred when they allowed the respondent to argue that there was no
contract of Insurance when the said respondent was not a party to the said
insurance contract. In effect these two complaints refer to different aspects of
the same question of whether there was a contract according to and effective
in law.

The claim in the suit had its foundation in the doctrine of subrogation.
Subrogation is the substitution of one person for another, so that the same
rights and duties, which attached to the original person, attach to the
substituted one. In matters of insurance, a person paying the premium on a
policy of insurance belonging to another may be subrogated to that other; and
an Insurer is subrogated to the rights of the insured on paying the latter's
claim. This is the foundation upon which the first appellant based its claim. It
claimed that it insured its cargo of fish for $48100 with the 2 nd appellant who
paid afterwards, the said money to the first appellant because the fish were
condemned when they were delivered in Brussels. Because the first Appellant
received indemnity, for loss of fish, from the second appellant, the rights of
the former were subrogated to the latter.
 The suit was instituted by the appellants against the respondent. First
the claim averred that the respondent was in breach of a contract between
itself and the first appellant. The claim was also based on grounds that the
respondent was negligent or careless in handling, packing, piling and loading
the fish in the aircraft. Thirdly the appellants relied on the doctrine of Res
Ipsa Loquitor.

As the second appellant had indemnified the first appellant under an

alleged policy of insurance, therefore, the second appellant in effect took over
the rights of the first appellant so that the fruits of the present litigation, if it
ended in favour of appellants, should go to the 2 nd appellant. The respondent
in its defence denied liability and filed a counter-claim to the suit.

Issues were framed by plaintiffs' counsel in his written submissions

after evidence for both sides had been adduced. So initially the hearing of the
case was conducted without clear issues. Each side went on fishing spree.
Hence recalling of witnesses by both sides.

Be that as it may, at the trial, the learned Principal Judge relied on a

marine certificate of insurance, exh.P.l, dated 19/3/1996, and held that the
certificate is evidence of the contract of insurance. The Court of Appeal, on
the other hand, held that the said document alone was not enough. That the
actual physical policy of insurance should have been tendered in evidence by
the appellants. That the policy would show the distinctive feature of the
contract of insurance. These features would be the parties, the subject matter
of the insurance, the period of the insurance, the date of the commencement
of the policy, the details of the peril which was insured against and also a list
of exemptions specifying the circumstances in which the insurers would not
be liable. Because the document called the policy of insurance could not be
produced in the trial court, or indeed up to now, it is impossible to ascertain
the distinctive features of the alleged policy of Insurance. That being the case,
there was no binding and operative contract. Mr. Alan Shonubi counsel for the
appellants contended that in matters of marine insurance, it is the practice to
rely on the marine certificate of insurance and relied on The Legal and
Documentary Frame Work, 1991 Ed. o f the Chartered Institute. This
authority does not say that production of the policy of insurance should not be
made. Nor indeed, does the case of King Vs Victoria Insurance Co. (1896)
Ac 250 which was also cited to us. In that case the policy of Insurance was
valid and that is a major distinguishing feature.

Both parties relied on a number of decided cases and also on opinions

of learned writers on the application of the doctrine of subrogation.

In the absence of the actual marine policy of insurance or any

reasonable explanation showing why the appellant did not tender it in
evidence, I cannot appreciate how the Court of Appeal can be criticised for its
decision that there was no binding and operative contract. This is especially
so in view of the evidence suggesting that the insurance cover may have been
taken out after the fish cargo was rejected on 16/3/96 in Brussels.
I have looked at the various authorities including King Vs. Victoria
insurance Co. (supra) and J. Edwards & Co. Vs. Motor Union Insurance
(1922) 2 K.B. 249 cited by Shonubi, learned counsel for the appellants. It is
my considered view that none of the authorities he relied on provides a
solution to the major question in these proceedings which is the failure by his
clients to produce the relevant policy of insurance. In the absence of that
policy, or credible explanation for its absence, the appellants' case has no
foundation. With respect I do not find soundness in arguments based on
ground two namely that because the respondent was not a party to the contract
of insurance, therefore, it can not contest the validity of that contract. Of
course, the respondent would be affected if we in the courts found that there
was an enforceable contract between the two appellants. First of all, it was the
appellants who took the respondent to court to enforce rights under the
doctrine of subrogation which rights to subrogation, of necessity, must be
discerned from the provisions of the policy that was never proved in court.

The validity of the rights to sue lies in the existence and the terms of
the policy of insurance. The policy was not produced. Its contents are
unknown, as are the rights of the parties. Moreover, from the evidence of
Ehassan Hammad (DW1), it is clear that a consignor of valuable commodity
can ensure the commodity privately and if he does that, then the consignor
must disclose the fact of the insurance and also give the policy, presumably a
copy thereof, to the carrier in this case the respondent. This was not done in
this case. This lends credence to the view that there was no policy of
insurance. Moreover, Hammad's evidence shows that previously the first
appellant used to rely on the respondent's insurance to cover its cargo. Why
did it take a private insurance this time? And why didn't the first appellant
reveal this to the respondent? The respondent must have a say in the existence
or nonexistence of the policy of insurance. I think that both grounds of appeal
must fail.
I would, therefore, dismiss this appeal with costs here and in the courts
below.

JUDGEMENT OF KAROKORA, JSC.

I have had the benefit of reading in draft the judgment prepared by my learned
brother Oder, JSC. I agree with him that the appeal must be dismissed with
costs. However, I wish to make a few comments on whether or not the
appellants proved that there was actually a binding and operative insurance
contract between themselves at the time the consignment left Entebbe for
Brussels.

In their pleadings the 2nd appellant stated that they issued insurance open
cover/policy No. 10/MR/OC/4499 to cover the 1 st appellant's l0.000Kg
consignment of fresh chilled Nile perch fillets from Entebbe to Brussels.
However, at the trial, no such insurance cover was tendered in evidence.
Instead, the 2nd appellant put in evidence a marine certificate of insurance
Exh P 1 , which stated:

"We acknowledge receipt of your marine declaration No.

181 ............. dated................. and have to advise that you

are hereby covered subject to the conditions and terms of
the company's open policy/cover No. 10/MR/OC/4499
under which your declaration is made"
After describing the type of goods, the Airway Bill number and the date of its
issue, the sum assured, the place of origin and the destination, the document
concluded as follows:-

"The condition of the insurance policy being as per open

cover No. 10/MR/OC/4499 subject otherwise to all other
terms/ conditions of open policy/ cover referred to above."

After carefully analysing Exh P 1 , it is difficult, in my view, to fault the Court

of Appeal's conclusion when it held inter alia:

"It is clear............... Exh P 1 was not the insurance policy

under which the goods were insured. The actual policy
was the open policy No. 10/MR/OC/4499. As the
document governed the rights of the parties, it would have
contained the distinctive features of the contract of
insurance. These are the parties, the subject matter of the
insurance, the period of the insurance, the date of the
commencement of the policy, the details of the peril which
was insured against and also a list of exemptions
specifying the circumstances in which the insurers would
not be liable."

In my view if the consignment of 10,000kg of the fresh chilled Nile perch

fillets was covered under insurance cover No. 10/Mr/OC/4499 it was
incumbent on the appellant to prove, which they never did, that there was
such a contract of indemnity especially after the respondent had denied
responsibility for the loss of the cargo. I think that reliance upon the marine
certificate of insurance Exh P I which was issued on 19/3/96 after the
consignment had arrived in Brussels and after it was declared unfit for entry
into EEU would not help the appellant's case, because that would clearly
prove that the consignment left Entebbe uninsured and that Exh. P 1 was
purportedly issued after the appellant had learnt of the loss of the cargo.
Clearly such certificate of insurance, Exh P 1 would not be an insurance cover
issued against the risk when the risk had already occurred.

Therefore ground one must fail.

Finally I come to ground 2, the thrust of which is that because the respondent
was not privy to the contract of insurance between 1 st and 2nd appellants, it
(respondent) can not question its existence. This objection is based on
common law doctrine of privity of contract which states that no one may be
entitled to or bound by the terms of a contract to which he is not an original
party. See Prince v Easton (1833) 4 B & Ad 433 and Twedle v Atkinson
(1861) 1 B & S 393. In my view, although the objection is based on the
correct statement of the law, in the instant case, as I have stated while
discussing the first ground, no contract of insurance existed between 1 st and
2nd appellant) at the time the consignment of the goods left Entebbe for
Brussels. Consequently in my view, the respondent who was to be affected by
the purported contract of insurance cover No. 10/MR/OC/4499 would be
entitled to know the terms and conditions of that insurance cover under
which the subrogation was being sought to be exercised against it.
In the circumstances of this case, the respondent would not correctly be called
a third party to the contract, since the contract of the insurance never existed.
In the result, ground 2 must fail. I would therefore dismis

JUDGMENT OF KANYEIHAMBA J.S.C.

I have read in draft the judgment of my learned brother. Oder J.S.C, and I
agree with him that this appeal ought to be dismissed with costs. I will only
add a few comments of my own by way of emphasis. The facts and
circumstances of this appeal have been ably set out and described in the
judgment of my learned brother, Oder, J S C .

In my view, once the appellants have averred in their pleadings that

they had entered into a contract of insurance and described it. and in its
defence, the respondent denies the existence of such a contract of it and
expresses ignorance of its contents, it becomes incumbent upon the appellants
to prove both the existence and contents of the alleged contract. Further, the
appellants are obliged to show the dates and periods in which the alleged
insurance policy was to operate, the parties to it, the cargo it covered and its
terms and conditions of insurance.

Mr. Alan Shonubi, learned counsel for the appellants, submitted that in
marine insurance matters, it is not only a contract of insurance which can
prove that parties and their cargo are insured but it may be proved by other
means such as the testimony of witnesses who may be knowledgeable about
the negotiations to insure and be insured between the parties and the general
principles of marine insurance and their consequences, in any given situation.

With respect, I disagree with this novel suggestion by learned counsel.

Whereas, it may be surmised that once it has been shown that there is a
contract between the parties with clearly stated terms and conditions, there
may be implied trade or commercial consequences which need not be
specifically proved but can be discovered from proven customs and trade
practices of the transaction, these cannot be a substitute for the actual contract
and its terms.

Unfortunately for the appellants, no such contract or its terms were

shown or proved in the courts below. Nor has that feat been achieved in this
court. Moreover, the record of proceedings and the submissions before this
court reveal that the alleged contract of insurance was effected, if at all, after
the cargo to be insured had been damaged and the damage reported. In other
words, the insurance policy, if any, would have been entered into and intended
to cover a situation and events which had passed. Such proposed insurance
contract would not only be voidable but would be void.
 It was also contended on behalf of the appellants by their counsel, that
in this particular case, the evidence of Mr. Richard Byansi. PW10, and the
production in court of a Marine Certificate of Insurance, Exhibit P 1 , were
sufficient to show that there was a valid contract of insurance between the
parties. In m y opinion, this contention is untenable in this case. The mere
testimony of a witness, however credible and reliable it may be. that parties
had previously negotiated for a contract does not magically concretise those
negotiations into a contract when the e terms of the contract are not known
and when events which were contemplated to be covered by the anticipated
contract occur subsequently. Moreover, the fact that one is in possession of a
marine certificate of insurance and produces it in court is not proof that that
certificate covered the goods affected or any other goods for that matter. The
terms and conditions for marine insurance of carriage of goods differ from
one type of cargo to another. One party may wish to transport corn, or timber,
steel, animals, ice cream or some other goods, perishable or non-perishable.
Each of these species of goods w i l l have its o w n terms and conditions of
insurance and delivery agreed upon between the parties and written down,
differently. However, each of the parties may have and is entitled to have a
marine certificate of insurance couched in general terms.

The doctrine of subrogation can only apply i f the facts confirm the
principles of law of contract and insurance I have endeavoured to explain.
The appellants" pleadings and submissions on their behalf fall far short of
these requirements.

Therefore in agreement with my learned brother, Oder J S C . I

would dismiss this appeal with costs here and in the courts below.

Delivered at Mengo this 19th June 2002.