[2024] UGCommC 214

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] CIVIL SUIT NO.0067 OF 2024**

10 **BALAAM BARUGAHARA ATEENYI ]:::::::::::::::::::::::: PLAINTIFF**

#### **VERSUS**

**HARUNA MUWANGA a.k.a ]**

### **Before: Hon. Justice Ocaya Thomas O. R**

# **JUDGEMENT**

#### 20

# **Background**

The Plaintiff's claim against the defendants is for breach of contract, recovery of a sum of UGX 1,400,000,000/= money had and received by the Defendant from the Plaintiff, interest, general damages, and costs of the suit.

The brief facts of the case are that the Plaintiff a business man was approached by the Defendant around July 2021 for financial support of UGX 1,400,000,000/=. The Plaintiff agreed to advance the monies to the Defendant and on the 29th of July 2021 he transferred UGX 1,000,000,000/= to the defendant's account in DFCU Bank by EFT to Account No 30 Ol363O44l6924O. On the 30th of July 2021 in addition to the UGX 1,000,000'000/= the Plaintiff added the Defendant400,000,000/= in cash and all totaled to UGX 1,400,000,000/= (One Billion, Four Hundred Million Ugandan Shillings) to which both parties entered into an agreement.

35 In the contract it was agreed that the Defendant shall return the money given to him by the Plaintiff in a period of Six (6) calendar months from the date of signing the agreement to wit;

15 **HARUNA KALULE MUWANGA ]:::::::::::::::::::::: DEFENDANT**

5 UGX 100,000,000/= to be returned by 30th October 2021 and a sum of UGX 1,300,000,000/= to be returned by 30th January 2022.

As assurance of payment, the Defendant who stated to the Plaintiff that he was a director in BMK Uganda Ltd set up standing orders by BMK Uganda Limited through DFCU Bank in favor

10 of the Plaintiff and also agreed to handover to the Plaintiff some cheques to be banked only if the standing orders bounced.

The Defendant later asked the Plaintiff not to deposit the cheques and promised to pay in cash which the Plaintiff agreed to and subsequently the Defendant paid back sums of UGX 15 400,000,000/= in cash leaving a balance of UGX 1,000,000,000/=.

On 11th January 2022, the Defendant came back to the Plaintiff and asked for further financial support of UGX 400,000,000/= to which the Plaintiff agreed and an addendum to the contract was made to that effect. It was agreed in the addendum that the sum of UGX 100,000,000/= be returned by 11th March 2022 and a sum of UGX 1,300,000,000/= be returned by 11th 20 July 2022.

The Defendant undertook to set up standing orders by BMK Uganda Limited through DFCU Bank in favor of the Plaintiff for transfer of payments and to give to the Plaintiff one hundred 25 forty (140) post-dated cheques. It was agreed that the previous securities of the issued cheques and standing orders should not be banked or implemented because of the new addendum that had new dates of payments. However, the Defendant never provided the standing orders and the cheques as he undertook in the addendum, and that he also never paid the sums extended to him even when the Plaintiff made several attempts to meet with

30 the Defendant in demand of his money, that the Defendant continuously hid from him.

The Plaintiff then filed this suit against the Defendant on the 18th January 2024 and a summon to file a defense was issued on the 19th January 2024. That upon failure to serve the Defendant despite all efforts to physically locate him, the Plaintiff filed an application to serve

35 the Defendant by substituted service which was granted, and the substituted service of


- 5 summons together with the plaint was duly effected by way of advertisement in The New Vision Newspaper and the same was equally affixed at the Commercial Court Notice Board. That the Defendant did not file a defense nor did he enter an appearance in this matter and on the 15th June 2024, the Plaintiff wrote to Court praying for default judgment under Order 9 Rules 5, and 10 of the Civil Procedure Rules. - 10

Order 9 rule 5 provides that: -

*Where any Defendant fails to file a defense on or before the day fixed in the summons and the Plaintiff is desirous of proceeding upon default of filing the defense under any of the rules of this Order, he or she shall cause an affidavit of service of the summons and failure of the Defendant*

15 *to file a defense within the prescribed time to be filed upon the record*. *Rule 10 provides that: -*

*In all suits not by the rules of this Order otherwise specifically provided for, in case the party does not file a defense on or before the day fixed therein and upon compliance with rule 5 of this Order, the suit may proceed as if that party had filed a defense.*

In *Kanji Devji V Damodar Jinabhai & Co. (1934)1 EACA 87*, which is still a good authority on a Defendant's failure to enter an appearance in Court despite service of summons, it was held that A Defendant who fails to file a defense puts himself out of Court and no longer has any locus standi and cannot be heard.

In the premises, the Plaintiff having adduced evidence of service of summons by way of substituted service in The New Vision paper on 22nd March 2024, and the plaint and summons to file defense were placed at court on the same day. The suit proceeded exparte.

# 30 **Representation and Submissions:**

The Plaintiff was represented by the law firm of M/s LSA Advocates and the matter proceeded exparte.

### 5 **Evidence:**

The Plaintiff presented one witness, himself, as PW1 and he gave his evidence in chief by way of a witness statement. The Plaintiff filed its trial bundle documents on record which was admitted on Court record as PEX A sequentially to PEX R.

### 10 **ISSUES:**

The Plaintiff in his scheduling Memorandum set up two issues;

- 1. Whether the Defendants are indebted to the Plaintiff? - 2. What remedies are available to the parties? - 15 For purposes of resolving the matter, the court will adopt three issues accordingly; - 1. Whether there was a breach of Contract? - 2. Whether the Defendants are indebted to the Plaintiff? - 3. What remedies are available to the parties?

# 20 **DECISION:**

I note that the Plaintiff applied for and was granted an interlocutory judgment on 17th April 2024. I also note that the Plaintiff's suit constitutes of both a liquidated and unliquidated claim.

25 Under Order 9 Rule 6 and Rule 8, a party whose plaint constitutes a liquidated and unliquidated claim may, when the Defendant fails to file a defence, apply for default judgment on the liquidated claim and an interlocutory judgment of the unliquidated claim which would be set aside for formal proof. See **Valery Alia v Alionzi John HCCS 157/2010, Lloyds Forex Bureau v Securex Agencies (U) Limited HCCS No. 358/2012, Dembe Trading** 30 **Enterprises Ltd V Uganda Confidential Ltd & Anor. HCCS No.0612 of 2006**

I note that the Plaintiff in their application only applied to set the suit down hearing exparte under Order 9 Rule 10 of the Civil Procedure Rules. Considering that the Plaintiff did not seek for or obtain default judgment, this court shall try the entire claim.

5 Issue 1: Whether there was a breach of Contract?

In civil proceedings, the burden of proof lies on the party who alleges and the said party must prove their case on a balance of probabilities if they are to obtain the remedies sought in court. see *Lord Denning in Miller versus Minister of Pensions (1947)2 ALL ER on page 373. See Section 101 and Section 103 of the Evidence Act.*

When a Plaintiff has led evidence establishing his or her claim, he or she is said to have executed the legal burden. The evidential burden then shifts to the Defendant to rebut the Plaintiff's claims.

15 *Black's Law Dictionary 11th Edition Page 232* defines breach of contract as a violation of a contractual obligation by failing to perform one's own promise, by repudiating it, or by interfering with another party's performance.

A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding 20 contract, and this includes circumstances where an obligation that is stated in the contract is not completed on time. It is a failure, without legal excuse, to perform any promise that forms all or part of the contract. This includes failure to perform in a manner that meets the standards of the industry. See **Meridiana Africa Airlines (U) Limited v Avmax Spares (EA) Ltd HCCS 111/2017, Prof Rubaire Akiiki & Ors v Development Consultants** 25 **International Limited HCCS 370/2011**

The Plaintiff adduced a transfer form and a bank statement dated 29th July 2021 for UGX 1,000,000,000/= which he executed in DFCU Bank in favor of the Defendant and was duly signed by both the Plaintiff and defendant. The Plaintiff also attached an agreement dated

- 30th 30 January 2021 PEX B and PEX C between the Plaintiff and Defendant where it was agreed that the Plaintiff would advance UGX 1,400,000,000/= in cash to the Defendant who would pay the said monies in four installments within 6 months under clause 4(d). The Plaintiff attached a standing order PEX C of UGX 500,000,000/= which the Defendant set up in the name of BMK Uganda Limited to be paid to the Plaintiff. The Plaintiff also attached 9 duly - 35 drawn and executed postdated cheques of UGX 10,000,000/= all dated 22nd October 2021.

The Plaintiff also attached an addendum PEX E dated 11th 5 January 2022 where the Plaintiff agreed to extend a further sum of UGX 400,000,000/= and the Defendant agreed to pay UGX 100,000,000/= on 11th March 2022 and UGX 1,300,000,000/= on 11th July 2022. In the same addendum, the Defendant undertook to set up standing orders by BMK Uganda Limited, through DFCU Bank Uganda, in favor of the Plaintiff for a sum of UGX 1,400,000,000/=.

The agreement adduced PEX B shows the existence of a contract between the Plaintiff and the defendant. Further, the actions of the Plaintiff in executing a transfer form PEX A in favor of the Defendant in DFCU Bank Uganda show the Plaintiff performing his end of the agreement as consideration plus the acknowledgment of the same by the defendant. 15 Therefore, there existed a contract to extend UGX 1,400,000,000 upon execution of the agreement.

In *Ronald Kasibante v. Shell Uganda Ltd Civil Suit No. 542 of 2006*, Honorable Justice Hellen Obura *(as she then was)* defined breach of contract as:

20 *"The Breaking of the obligation which a contract imposes which confers a right a right of action for damages on the injured party. It entitles him to treat the contract as discharged if the other Party renounces the contract or makes the performance impossible or substantially fails to perform his promise; the victim is left suing for damages, treating the contract as discharged or seeking a discretionary remedy."*

In this instant case, the Plaintiff in fulfillment of the terms of the agreement with the Defendant made a total remittance of UGX 1,400,000,000/= as financial support whereas the Defendant undertook to pay back the said money in two installments of UGX 100,000,000/= and UGX 1,300,000,000/= which the Plaintiff would acknowledge in writing.

In this instant matter, having perused the agreement adduced PEX B and the addendum PEX E and the uncontested evidence of the Plaintiff in performing his part of the agreement whereas the Defendants did not; To add on the fact that the Defendant did not enter appearance to controvert the Plaintiff's allegation. I am convinced that the Plaintiff has 35 proved that there was a breach of contract on a balance of probabilities. 5 I therefore find Issue 1 in the affirmative.

## **Issue 2: Whether the Defendant is indebted to the Plaintiff?**

The Plaintiff in his plaint prayed for the recovery of UGX 1,400,000,000/= in paragraph 3. The Plaintiff testified that he gave the Defendant UGX 1,000,000,000/= by ETF transfer and

10 later added him 400,000,000/= and the same is evidenced by the agreements in PEX B and PEX E plus the Bank transfers in PEX A. The Plaintiff went on to testify that the Defendant later asked for a further advance of UGX 400,000,000/= and an addendum was entered into which brought the total amount to UGX 1,800,000,000/= but the Defendant subsequently paid the Plaintiff UGX 400,000,000/= and remained indebted to the tune of UGX 15 1,400,000,000/=

It is important to note that the recitals (introductory statements) of the agreement PEX B state that the Defendant was granted a Power of Attorney by BMK Uganda Limited to procure the Construction of Maternity Units for the Ministry of Health Uganda under Procurement

20 reference MOH/URMCHIP/WORKS/19-20/0OC66, which he procurement he secured. The Defendant entered the agreement in that capacity and also signed it in that capacity.

*Osbornes Concise Law Dictionary* defines Power of Attorney as the formal instrument by which one person empowers another to represent him or act in his stead for certain 25 purposes, usually in the form of a deed poll and attested to by two witnesses.

In the case of *Fredrick Zaabwe vs Orient Bank Ltd and 5 Others SCCA 03/2006*, the Supreme Court held that a donee of a power of attorney acts as an agent of the donor and for the donor's benefit.

The Defendant set up standing orders as assurance for payment of the UGX 1,400,000,000/= in the name of BMK Uganda Limited in favor of the Plaintiff and they were signed by the Defendant as attached in PEX C. The money was to be deducted from the account of BMK Uganda Limited in DFCU Bank Limited. However, there is no evidence of the Powers of

35 Attorney on the court record neither did the agreement and the addendum specifically show

5 that the Defendant was borrowing for and on behalf of BMK Uganda Limited other than the brief mention in the recitals.

It must be noted that powers of attorney are construed strictly and the court will not enable the doing of any act not expressly provided for under the powers of attorney except if the

- 10 same is incidental to the objections of the grant of powers of attorney. **Sidpra & Sidpra v Uganda Rehabilitation Development Foundation, High Court Civil Suit No. 199 of 1993, Eric Ssali v Uganda Baati HCCS 564/2022, Nuwe Amanya Mushega v Charles Odere HCCS 102/2012.** - 15 Further, the signatory and acknowledgment parts of the agreement and the addendum do not state that Defendant was entering into the transaction for and on behalf of BMK Uganda Limited. This in itself is sufficient indication that the Defendant was acting in his personal capacity as an individual. - 20 In the premises, I find that the Defendant individually is indebted to the Plaintiff in the sum of UGX 1,400,000,000/=

I find Issue 2 in the affirmative for the Plaintiff.

## 25 **Issue 3: What remedies are available to the Plaintiff?**

The Plaintiff prayed for general damages, interest, and costs. I will deal with each head of claim.

## *General Damages:*

- 30 *Black's Law Dictionary 11th Edition page 488* defines damages as the sum of money which a person wronged is entitled to receive from the wrongdoer as compensation for the wrong. It is trite law that damages are the direct probable consequence of the act complained of. See *Storms versus Hutchinson (1905) AC 515.* The consequence varies from a loss of profit to physical, inconvenience, mental distress, pain, and suffering. See **Section 61(1)** of the 35 Contracts Act, CAP 284.

- 5 In *Haji Asuman Mutekanga versus Equator Growers (U) Ltd. SCCA NO. 7 of 1995,* Oder JSC, held that; 'With regard to proof, general damages in a breach of contract are what a Court (or jury) may award when the Curt cannot point out any measure by which they are to be assessed, except in the opinion and judgment of a reasonable man'. - 10 The most important rule regarding the award of general damages is that the court must in all cases award damages with the object of compensating the plaintiff for his or her loss. In other words, as a general rule, damages should not be used to serve any other function; neither should the plaintiff be unjustly enriched under the guise of an award of damages nor should the Defendant be unjustly punished under the same guise. **See Obongo & Another v.** - 15 **Municipal Council of Kisumu [1971] EA 91; Ntabgoba v. Editor-in-chief of the New Vision & Another [2004] 2 EA 234, Peter Musoke v Merger Technical Services Uganda Limited HCCS 426/2022, MTK (U) Limited v Attorney General & Ors HCCS 578/2022.**

The Plaintiff has shown that he is a businessman involved in businesses of radio, marketing, 20 events management, and a series of other businesses, and by the Defendant not paying him he has deprived him of using his money to invest in his businesses.

In **Luwa Luwa Investments Limited v Uganda Revenue Authority HCMA 1336/2022** this court recognized the economic harm that can be occasioned by retention of monies used in

25 business. This court held thus

"As this a commercial court, the decisions of the court should be cognizant of economic realities in Uganda today. For a business, loss of cash flow can be akin to driving a dagger at the heart of a person, who will most certainly die. Surely, that should be a consideration that court should look at to identify the justice of the case. Moreover, Uganda, like many African

30 countries experiences high costs of credit, which mean that borrowing to replace lost cash flow can be difficult or ruinous. This, coupled by inflation, that can affect the value of money retained means that the retention of money from a business can cause "irreparable damage". See also **Aya Investments (U) Limited v Industrial Development Corporation of South Africa HCMA 3063/2023 (unreported)**

5 In arriving at its decisions, the court, and especially a commercial court like this one, is enjoined to consider the economic realities and context in which litigants operate in and in which its decisions will be received and applied. See **Hussein Ali Benyoka v Kaydee Quarry Ltd [2019] eKLR, Charles Kimani Ng'ang'a v Kenya Power & Lighting Company Limited [2006] EKLR, Robert Nampogo & Anor v Attorney General CP 43/2012**

In my considered view, whereas the compensation for retention of money is often by interest, courts recognize that there are unique hardships to retention of money within the Ugandan business ecosystem which may properly be classified as harm for which general damages are appropriate.

As noted above, the business environment is one where the major players in the domestic market are practically foreign entities who have to service both a private sector demand for credit and the increasing appetite of government borrowing from the public sector. Against that background, domestic borrowing for private sector players like the plaintiff is difficult 20 as they are more often than not outcompeted by government who is seen as a more reliable borrower. Matters are compounded by the fact that domestic borrowing is also expensive, such that all these factors considered together show that a business person whose money is retained unduly has every few alternatives to plug that gap and continue their operations. Additionally, the retention of monies owing to a party causes them undue hardship and peril

25 in demand for the same or pursuing enforced recovery measures such as by litigation.

In the premises, I find that the Plaintiff has proved the loss suffered and the inconvenience caused by the Defendant's failure to pay back the money that was remitted to him, and the demeanor exhibited by Defendant is seemingly disingenuous. I, therefore, award Plaintiff

30 general damages of UGX 140,000,000/= which I believe is sufficient to remedy the inconveniences both financially and emotionally caused by the Defendant. *Interest:*

Section 26 of the Civil Procedure Act CAP. 282 provides for the award of interest. It provides thus


- 5 **(1)Where an agreement for the payment of interest is sought to be enforced, and the court is of opinion that the rate agreed to be paid is harsh and unconscionable and ought not to be enforced by legal process, the court may give judgment for the payment of interest at such rate as it may think just.** - **(2)Where and insofar as a decree is for the payment of money, the court may, in** 10 **the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate as the court deems reasonable on the aggregate sum so adjudged from the date of the decree** 15 **to the date of payment or to such earlier date as the court thinks fit.** - **(3)Where such a decree is silent with respect to the payment of further interest on the aggregate sum specified in subsection (2) from the date of the decree to the date of payment or other earlier date, the court shall be deemed to have ordered interest at 6 percent per year."** - 20

The position of the law is that the court is enjoined to award interest in deserving circumstances, and to a magnitude that is reasonable. See **Sietco Vs. Noble Builders U Ltd. Supreme Court Civil Appeal No. 31 of 1995; Ahmed Ibrahim Bholm v. Car & General Ltd. Supreme Court Civil Appeal No. 12 of 2003; Administrator General v. Bwanika** 25 **James & Others Supreme Court Civil Appeal No. 7 of 2003.**

Considering all the facts of this case, I find that an award of interest at a rate of 6% per annum on the contractual amount outstanding from the date of default until the date of filing this suit. Additionally, I award interest at a rate of 6% per annum on the contractual amount 30 outstanding (together with pre-judgment interest above) and the quantum of general

damages and costs from the date of judgment until the date of payment in full.

*Costs:*

*Section 27* of the *Civil Procedure Act* CAP 282 provides that costs follow the suit unless 35 there is a strong reason to suggest the contrary and are awarded at the Court's discretion. 5 See *Harry Ssempa V Kamabagambire David HCCS 408 of 2014, Lyamuleme David V. AG SCCA No. 4 of 2013, Anglo-Cyprian Trade Agencies Ltd V. Paphos Wine Industries Ltd [1951] 1 ALL 10 ER 873.*

In this case, the Plaintiff would not have brought this matter to Court had the Defendanrt 10 performed its contractual obligation or adhered to Plaintiff's demands for payment thereafter. As such, I award the Plaintiff the costs of the suit.

## **In conclusion:**

I accordingly make the following orders,

15 a) There was a breach of contract by the Defendant.

b) The Defendant is indebted to the Plaintiff to the amount of UGX 1,400,000,000/=

c) The Plaintiff is entitled to recover UGX 1,400,000,000/= from the Defendant. Interest shall accrue on the sum stated herein at a rate of 6% per annum prorated from the date of filing the suit to the date of judgment.

20 d) The Plaintiff is awarded General damages of UGX 140,000,000/=.

e) The Defendant shall meet the costs of this suit.

f) Interest at a rate of 6% per annum shall accrue on the sums in (c)-(d) above from the date of judgment until payment in full.

25 I so order.

**Dated** this\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2024, delivered electronically and uploaded on **ECCMIS.** 31st July

**Ocaya Thomas O. R Judge 31st July, 2024**

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