The Court of Appeal has halted proceedings in a taxation dispute between Rwenzori Cotton Ginners Co. Ltd and Southern Range Nyanza Ltd over legal costs amounting to UGX201.5 million, pending the determination of an appeal challenging an earlier High Court judgment.
In a ruling delivered by Justice of Appeal Esta Nambayo, sitting as a single justice, the court granted an application by Rwenzori Cotton Ginners to stay the taxation proceedings initiated by Southern Range Nyanza, finding that allowing the process to continue could expose the cotton processing company to greater prejudice than its opponent would suffer from postponing the assessment of costs.
The dispute stems from High Court Civil Suit No. 1252 of 2023, in which Rwenzori Cotton Ginners sued Southern Range Nyanza over an alleged breach of a Memorandum of Understanding signed on November 15, 2022, concerning the supply of cotton lint.
Rwenzori Cotton Ginners sought declaratory orders, special damages, accrued loan interest, fire insurance premiums, general damages, interest and costs, accusing Southern Range Nyanza of breaching the agreement.
However, on June 29, 2026, the High Court dismissed the suit and awarded costs to Southern Range Nyanza.
Dissatisfied with the decision, Rwenzori Cotton Ginners lodged a notice of appeal on June 30, 2026, challenging the judgment, including the award of costs. The company also requested certified copies of the court proceedings to facilitate the appeal, which were subsequently served on Southern Range Nyanza on July 7, 2026.
While the appeal was pending, Southern Range Nyanza, on July 17, 2026, served a bill of costs amounting to UGX201,508,702 in Taxation Application No. 0486 of 2026, seeking to have its legal expenses assessed and quantified.
Rwenzori Cotton Ginners disputed the bill and moved to stop the taxation proceedings, arguing that the costs arose from a judgment whose validity was being challenged before the Court of Appeal.
On July 22, 2026, the company filed a miscellaneous application in the High Court seeking a stay of execution and suspension of the taxation proceedings pending determination of its appeal.
However, in a ruling delivered on September 10, 2026, Acting High Court Judge Susan Odongo declined to halt the taxation proceedings but granted a conditional stay of execution.
The judge directed Rwenzori Cotton Ginners to deposit the full amount certified by the taxing officer into the High Court Registry Account or provide a bank guarantee within 30 calendar days after the certificate of taxation was issued and signed.
The order further provided that failure to comply would automatically terminate the stay, allowing Southern Range Nyanza to apply for and commence execution proceedings without further reference to the High Court.
Unhappy with the arrangement, Rwenzori Cotton Ginners returned to court, seeking intervention by the Court of Appeal to suspend the taxation process altogether.
Through its Managing Director, Amdan Khan, the company argued that proceeding with taxation would trigger an obligation to secure the entire amount claimed by Southern Range Nyanza before its appeal had been heard and determined.
The company warned that being compelled to deposit more than UGX201 million or obtain a bank guarantee would divert substantial working capital, disrupt its business operations and potentially render its appeal nugatory.
It also raised concerns about recovering the money should it be paid to Southern Range Nyanza and the appeal subsequently succeed.
Rwenzori Cotton Ginners relied on evidence presented by Southern Range Nyanza during the original trial concerning alleged cash shortages, cancellation of export orders and loss of its export market. It argued that Southern Range Nyanza had not provided current financial statements demonstrating its ability to refund money recovered through execution.
The company further maintained that the appeal raised serious and arguable questions concerning the interpretation of the Memorandum of Understanding, noting that the High Court had itself recognised the existence of serious questions of law and fact.
However, Southern Range Nyanza opposed the application through its Corporate Affairs Director, Richard Mubiru, arguing that Rwenzori Cotton Ginners was attempting to circumvent an existing High Court order.
Its lawyers, led by Charity Itungo, raised a preliminary objection, arguing that the High Court had already considered and determined the company’s requests for a stay of execution and taxation proceedings.
They contended that the conditional stay granted by Justice Odongo remained binding and could not be avoided through a fresh application before the Court of Appeal without first appealing against or seeking a review of the High Court decision.
Southern Range Nyanza further argued that taxation was merely the process of quantifying costs awarded by court and did not, in itself, constitute execution.
It maintained that Rwenzori Cotton Ginners had not demonstrated an immediate threat of execution, noting that no warrant of attachment, garnishee order, notice to show cause or other execution process had been presented before the court.
The company also argued that it was entitled to have its awarded costs assessed and that postponing taxation would unnecessarily delay the recovery process if the appeal eventually failed.
In her analysis, Justice Nambayo considered the circumstances surrounding the application, including the effect of the High Court’s conditional stay and the potential consequences of allowing taxation to proceed before the substantive appeal was determined.
The judge observed that although the fact that an appeal challenges an award of costs does not automatically justify stopping taxation, the court must examine whether continuing the proceedings would expose either party to undue prejudice or injustice.
She noted that under the High Court’s conditional order, the issuance of a certificate of taxation would trigger a 30-day period within which Rwenzori Cotton Ginners would be required to deposit the full certified amount or provide a bank guarantee.
Failure to meet that requirement would expose the company to execution proceedings before the Court of Appeal had determined whether the original judgment, including the award of costs, was legally sustainable.
Justice Nambayo also observed that continuing with taxation would require both parties to incur additional expenses and compel the taxing officer to spend time assessing costs arising from a judgment that could ultimately be overturned on appeal.
The judge reasoned that postponing taxation would not extinguish Southern Range Nyanza’s entitlement to costs should the appeal fail, as the company would still be at liberty to pursue taxation and recovery in accordance with the law.
“Considering these circumstances together, I am satisfied that allowing taxation to proceed at this stage would expose the Applicant to greater prejudice than the Respondent would suffer from its postponement,” Justice Nambayo ruled.
She consequently allowed the application and ordered that proceedings in Taxation Application No. HCT-00-CC-TA-0486-2026, between Southern Range Nyanza Ltd and Rwenzori Cotton Ginners Co. Ltd, be stayed pending the hearing and determination of Civil Appeal No. 512 of 2026.
The judge further ordered that the costs of the application would abide by the outcome of the appeal.
The ruling does not determine the substantive appeal or overturn the earlier High Court judgment. Instead, it suspends the taxation process until the Court of Appeal determines the challenge against the judgment that gave rise to the award of costs.
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