[2025] UGCommC 91

## 5 **THE REPUBLIC OF UGANDA**

### **IN THE HIGH COURT OF UGANDA AT KAMPALA**

## **(COMMERCIAL DIVISION)**

### **CIVIL SUIT NO. 1033 OF 2023**

### **INTERNATIONAL HOLDINGS UGANDA LIMITED ::::::::::::::::::::::::: PLAINTIFF**

## 10 **VERSUS**

- **1. MODERN COAST COURIER LTD** - **2. MODERN COAST COURIER UGANDA LIMITED** - **3. MODERN COAST EXP UGANDA LIMITED** - **4. HAROON SHAHID BUTT :::::::::::::::::::::::::::::::::::::::::::::: DEFENDANTS** - 15 Before Hon. Lady Justice Harriet Grace Magala

### Judgment

### **Background**

On or about 5th November, 2021, the Plaintiff and the 1st and 2nd Defendants (tenants) executed a written tenancy agreement whereby the Plaintiff agreed to

- 20 let to the 1st and 2nd Defendants a portion of its land and property comprised in Plot 28 Jinja Road Kampala known as Pioneer House. The portion was described as an "open yard, ground floor offices and annexed building for accommodation of the drivers" which the Defendants were to rent for a term of twenty-four (24) months from with effect from 1st December 2021 to 30th - 25 November 2023. The parties agreed that the rent to be remitted by the tenants in year 1 was USD \$3,500 (United States Dollars Three Thousand Five Hundred) from 1st December 2021 to 30th November 2022, and in year 2 was USD \$3,850 (United States Dollars Three Thousand Eight Hundred fifty), and they also agreed payment may be made in Uganda Shillings using the dollar - 30 rate of Diamond Trust Uganda Forex Bureau.

- 5 The tenants took possession of the said portion on the Plaintiff's property with effect from 1st December 2021 and carried on business under the management of the 4th Defendant. However, the tenants failed or refused to remit the agreed rent according to the tenancy agreement, thereby accumulating rental arrears to the tune of Ugx. 175,000,000/= (Uganda Shillings One Hundred Seventy- - 10 Five Million). On the 3rd April 2023, the 2nd Defendant executed a Deed of Acknowledgement of Indebtedness and Undertaking to Pay, whereby it undertook to settle the sum by the end of June 2023 in three (3) equal monthly installments of Ugx. 58,350,000/=, that is; 1st installment by 23rd April 2023, the 2nd installment by 23rd May 2023 and the 3rd one by 30th June 2023. - 15 The Plaintiff stated that the 2nd Defendant issued eighteen (18) Stanbic Bank post-dated cheques of Ug. Shs. 9,725,000/= each to cover payment of the outstanding amount. However, six (6) of them were dishonored when they were banked on the 23rd April 2023, for being invalid and making the rest invalid. The Defendants promised to make good the invalid cheques by remitting - 20 payment by RTGS; however, despite repeated demands, the Defendants failed to pay the outstanding rental arrears to date. The Plaintiff instituted this suit against the Defendants jointly and severally for breach of contract, seeking outstanding rental arrears of Ugx. 175,000,000/= and legal fees of USD 600 as special damages with interest at 22% until paid in full, general damages and 25 costs of the suit.

The Defendants did not file a defence despite being served with court summons by way of substituted service, that is; by affixing a copy on the Commercial court's notice board, by an advertisement in the newspaper, via email to one of the Defendants' directors, a one Haroon Shahid Butt and via the second

30 Defendants' Director's WhatsApp number, a one Sakina Pothiwalla. This is clearly reflected on the Affidavit of service dated 18th April 2024 on court record.

Page **2** of **11**

## 5 **Representation and appearance**

The Plaintiff was represented by M/s Twesigire & Co. Advocates. On the 8th April 2024, the Plaintiff applied for an interlocutory judgment against the Defendants jointly and severally and prayed the suit be set down for assessment of damages according to Order 9 Rule 8 of the Civil Procedure

10 Rules S. I 71-1. On the 22nd April 2024, the Learned Registrar entered the interlocutory judgment in favor of the Plaintiff. The suit was set down for assessment of damages on 10th July 2024.

## **Issues for determination**

- 1. Whether a valid contract existed between the Plaintiff and the - 15 Defendants? - 2. Whether the Defendants breached the contract? - 3. What remedies are available to the Plaintiff?

## **Determination**

The law on interlocutory judgments under **Order 9 Rule 8 of the Civil**

20 **Procedure Rules S. I 71-1** states that:

"Where the plaint is drawn with a claim for pecuniary damages only or for detention of goods with or without a claim for pecuniary damages, and the defendant fails or all defendants, if more than one, fail to file a defence on or before the day fixed in the summons, the plaintiff may, 25 subject to rule 5 of this Order, enter an interlocutory judgment against the defendant or defendants and set down the suit for assessment by the court of the value of the goods and damages or the damages only, as the case may be, in respect of the amount found to be due in the course of the assessment."

30 The Plaintiff submitted that an interlocutory judgment having been entered in favor of the Plaintiff therefore the issue of breach of the agreement was no longer

Page **3** of **11**

- 5 an issue. Therefore, issues 1 & 2 are in the affirmative and court is left with only issue 3, which is re-framed as: - a) Whether the Plaintiff is entitled to the claim of damages?

## Decision

- Even where an interlocutory judgment has been entered, the burden of proof 10 rests on the Plaintiff, and the standard of proof is on the balance of probability of what it claims from the Defendants. This rule applies where a suit proceeds *inter partes* or *ex parte.* It follows that even where, as in the instant case, the Defendant neither enters appearance nor files a defence, the Plaintiff bears the burden to prove his case to the required standard. The burden and standard or - 15 proof does not become any less. (*see Hajji Asumani Mutekanga vs. Equator Growers (U) Ltd SCCA No. 7 of 1995 reported in [1995-1998] 2 EA 219 at 225 & 227*)

The Plaintiff claimed special damages of Ug. Shs. 175,000,000/= and USD 600 or its equivalent in Uganda Shillings with interest at 22%, general damages with 20 interest, and costs of the suit. The thrust of the Plaintiff's claim is that it is a victim of breach of contract by the Defendants, who rented their premises at Pioneer House but have failed to pay their outstanding rental arrears to date. The Plaintiff claims an award of the said special damages as atonement for the injury, inconvenience, and embarrassment it suffered.

25 In his paper on the **Principles Governing the Award of Damages in Civil Cases, Justice Bart Katureebe (CJ Emeritus)** stated that:

*"Damages are the pecuniary recompense given by process of law to a person for the actionable wrong that another has done him. Lord Greene MR, in Hall Brothers SS Co. Ltd vs. Young [1939] 1 KB 748, at 756* 30 *CA, defined the term damages thus:*

> *'Damages' to an English lawyer imports this idea, that the sums payable by way of damages are sums which fall to be paid by reason of some*

Page **4** of **11**

5 *breach of duty or obligation, whether that duty or obligation is imposed by contract, by the general law, or legislation."*

## He added that:

*"Damages are, in their fundamental character, compensatory, not punishment. Whether the matter complained of is a breach of contract or* 10 *tort, the primary function of damages is to place the Plaintiff in as good a position, so far as money can do it, as if the matter complained of had not occurred. As we shall see later, this primary notion is controlled and limited by various considerations, but the central idea remains compensation. Accordingly, damages are usually measured by the* 15 *material loss suffered by the plaintiffs. As a general rule, the Plaintiff must not receive more, nor should he receive less than the appropriate measure of damages commensurate with his or her 'material loss'."*

## Special damages

Special damages are such as the law will not infer from the nature of the act. 20 They do not follow in the ordinary course. They are exceptional in their character, so they must be claimed specially and proved strictly. It is trite law that special damages and loss of profit must be specifically pleaded as stated in the case of

# **Hajji** *Asumani Mutekanga vs. Equator Growers (U) Ltd (supra).*

In proving special damages, the Plaintiff submitted that on the 5th November 25 2021, it executed a tenancy agreement with the 1st and 2nd Defendants, and the 4th Defendant guaranteed the 1st and 2nd Defendants' obligations under the tenancy agreement. The Plaintiff further submitted that the Defendants failed to pay the rent arrears which stood at Ug. Shs. 175,000,000/=. It was further submitted for the Plaintiff that the Defendants also failed to fulfill their

30 obligation per the Deed of Acknowledgement of Indebtedness and Undertaking to Pay. Postdated cheques were issued and they were dishonored (see **Annexure "F" & "G"**). That despite the notice of dishonor (**Annexure "H"**) and

5 repeated remainders, the Plaintiff failed to pay the outstanding rent and instead opted to vacate the premises on 8th May 2023 (**Annexure "I"**).

PW1 was at the time of testifying the Credit Control Manager of the Plaintiff's property managers, M/s Amalgamated Property Services Ltd (**Annexures "A", "C"**), and he had been directly dealing the Defendants while they were tenants

- 10 of the Plaintiff. His evidence was detailed, specific and corroborated the Plaintiff's claim. I, therefore, find that special damages regarding the outstanding rent arrears and legal fees following the execution of the Deed of Acknowledgement of Indebtedness and Undertaking to Pay, have been specifically pleaded and proved. The Plaintiff is therefore entitled to the - 15 payment of Ugx. 175,000,000/= and USD 600 or its equivalent in Uganda Shillings.

### General damages

General damages are such as the law will presume to be the direct, natural or probable consequence of the act complained of. (*see Stroms vs. Hutchinson*

20 *[1905] AC 515)*.

The Plaintiff prayed for general damages. According to **Halsbury's Laws of England, 4th Edition reissue Volume 12(1) paragraph 812,** general damages are defined as:

"*…those losses, usually but not exclusively nonpecuniary, which are not* 25 *capable of precise quantification in monetary terms. They are damages which will be presumed to be the natural or probable consequence of the wrong complained of; with the result that the Plaintiff is only required to assert that damage has been suffered".*

General damages are awarded due to the wrongful act complained of and

30 include damages for pain, suffering, inconvenience, and anticipated future loss. In assessing the quantum of damages, courts are mainly guided, *inter alia, by the value of the subject matter, the economic inconvenience that a party may* 5 *have been put through,* and the nature and extent of the breach (**see Uganda Commercial Bank vs Kigozi [2002] 1 EA 305).**

A breach of contract is defined as the breaking of the obligation which a contract imposes which confers a right of action for damages on the injured party as

10 stated in *Sarah Kyarimpa vs. Harriet Kasozi HCCS No. 794 of 2016.*

Under **Section 61(1) of the Contracts Act cap. 284**, where there is a breach of contract, the party who suffers the breach is entitled to receive from the party who breaches the contract, compensation for any loss or damage caused to him or her. According to *Kibimba Rice Ltd Versus Umar Salim, SCCA No. 17 of*

15 *1992*, a claimant who suffers inconvenience out of actions of breach by the defendant, must be put in the position before the suffering of the damage.

In the matter before the court, the Plaintiff stated that it suffered extreme financial inconvenience and embarrassment due to the loss of rental income

- 20 from the demised premises. The Plaintiff is a business enterprise that deals in real estate development and management and has suffered a loss of business profits because of the Defendants' failure to pay rent. The rent arrears are money that, if the Plaintiff had, would have gone a long way in developing its real estate business. In the circumstances, an award of Ugx. 30,000,000/= is - 25 adequate.

### Interest

The Plaintiff submitted that the Defendants have deprived them of their rental income to a tune of Ugx. 175,000,000/=, and USD 600, which sum has deteriorated on account of the ever rising inflation. Interest can be demanded

30 only by virtue of a contract express or implied or by virtue of the principal sum of money having been wrongfully withheld, and not paid on the day on which it ought to have been paid. If a party does not pay a sum when it falls due the

5 aggrieved party is entitled to interest from the time payment is due to the time of payment. (*see Solomon Semakula Kayinda vs. Auger Revival Ministries Ltd HCCS No. 0880 of 2020 at page 20*). The plaintiff proposed an interest rate of 22% p.a from the date the breach occurred until payment in full.

The principles applied by this court in the award of interest are clear and set out 10 in **Section 26 (2) of the Civil Procedure Act,** which states that:

*"Where in so far as a decree is for the payment of money, the court may, in 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* 15 *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 to the date of payment or to such earlier date as the court thinks fit".*

The above position of the law was reaffirmed in *Lwanga vs. Centenary Bank*

20 *[1999] EA 175* wherein the Court of Appeal held that:

*"Section 26(2) of the Civil Procedure Act empowers the court to award three types of interest; interest adjudged on the principal sum from any period prior to the institution of the suit, interest on the principal sum adjudged from the date of filing the suit to date of the decree, and interest on*

25 *aggregate sum from the date of the decree to the date of payment in full."* The purpose for an award of interest is *restitutio in integrum* which means that the plaintiff may be restored as nearly as possible to a position he would have been in had the injury not occurred. In *Riches v Westminster Bank Ltd*

*[1947] 1 All ER 469 HL at page 472* Lord Wright explained the essence of an 30 interest award as:

> *"... payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had the use of the money, or, conversely, the*

5 *loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation...."*

This principle is also set out in **Tate & Lyle Food and Distribution Ltd v Greater London Council and another [1981] 3 All ER 716** where Forbes J he held at page 722 that:

10 *"I do not think the modern law is that interest is awarded against the Defendant as a punitive measure for having kept the Plaintiff out of his money. I think the principle now recognized is that it is all part of the attempt to achieve restitutio in integrum.... I feel satisfied that in commercial cases the interest is intended to reflect the rate at which the* 15 *Plaintiff would have had to borrow money to supply the place of that which was withheld."*

# In *Mohanlal Kakubhai Radia vs Warid Telecom Ltd HCCS No. 234 of*

*2011* the court stated that:

20 *"Court should take into account the ever-rising inflation and drastic depreciation of the currency. A plaintiff is entitled to such rate of interest as would not neglect the prevailing economic value of money, but at the same time one which would insulate him or her against any further economic vagaries and the inflation and depreciation of the currency in the* 25 *event that the money awarded is not promptly paid when it falls due."*

In the instant case, the Defendants have held onto the Plaintiff's money for four and a half years. An interest rate of 22% as proposed by the learned advocated was too high and unjustified. I find an interest rate of 18% per annum on the

30 outstanding rent arears and legal fees from the date of the breach until payment in in full appropriate. Interest is also awarded on the general damages from the date of judgment until payment in full at a rate of 18% p.a

#### 5 Costs

The generally established rule is that costs follow the suit unless the court finds otherwise. In the case of **Uganda Development Bank versus Muganga**

**Constructions [1981] HCB 35** where it was held that a successful party can only be denied costs if it is proved that, but for his or her conduct, the litigation 10 could have been avoided and that costs follow the event only where the party

succeeds in the main suit.

### **Section 27(1) of the Civil Procedure Act** provides that:

*"Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and* 15 *incident to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent those costs are to be paid, and to give all necessary directions for the purposes aforesaid."*

There exists no reason to deny the Plaintiff costs of this suit. Having found in 20 favor of the Plaintiff, I hereby award the Plaintiff the costs of the suit.

#### **Final Orders**

The Plaintiff's claim succeeds, and Judgement is hereby entered in favor of the Plaintiff in the following terms:

- 25 (a) The Plaintiff is entitled to the payment of Ugx. 175,000,000/- being rent arrears and USD 600 as legal fees; - (b) The Plaintiff is awarded general damages to the tune of Ugx. 30,000,000/=; - (c) The Plaintiff is awarded interest at a rate of 18% p.a from the date of - - 30 default until payment in full on the sums in (a) above; - (d) The Plaintiff is awarded interest on the general damages at a rate of 18% p.a from the date of judgment until payment in full; and

5 (e) The Plaintiff is awarded the costs of the suit.

## **Dated at Arua and delivered online via ECCMIS this 14th day of May 2025.**

10 **Harriet Grace MAGALA Judge**