[2024] UGCommC 362

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION)

### **CIVIL SUIT NO 0640 0F 2022**

## DENNIS OSIKOL ERIC (SUING THROUGH KABAGAMBE MATHIAS HIS LAWFUL ATTORNEY)::::::::::::::::::::::::::::::::::::

#### **VERSUS**

# <table> MUTEBI ERIC::::::::::::::::::::::::::::::::::::

# **BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI**

### **JUDGMENT**

The plaintiff brought this suit against the defendant seeking for orders that:

- a) The defendant pays back to the plaintiff the sum of Ugx 70,000,000/= (Seventy Million) being the principal amount of money borrowed from the plaintiff - b) The defendant pays the sum of Ugx 71,400,000/= (seventy-one million, four hundred thousand) being interest accrued against the said principal amount as of the time of filing of this suit - c) The defendant pays all additional interest that has been accrued on the principal amount from the date of filing this suit up to the date of judgement on/or payment in full. - d) General damages. - e) Costs of the suit - f) Interest on costs at the rate of $6\%$ p.a. until payment in full.

The facts giving rise to this suit are that the plaintiff, through his lawful attorney Kabagambe Mathias, entered into a loan agreement dated 4^th January 2021 with the defendant where they undertook to advance Ugx $70,000,000/$ = to the defendant in two installments of Ugx 27,500,000/= and Ugx 42,500,000/= respectively payable in six months. The loan was for an interest of Ugx 4,200,000/= per month and the defendant deposited his certificate of title on land in Kyadondo Block 184 Plot 793 where an equitable mortgage was registered.

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The plaintiff contends that the first installment of the loan was advanced on the day the loan agreement was signed and the balance was advanced on 8th January 2021 to the defendant. The plaintiff avers that the defendant has defaulted in the payment of the amounts lent to him.

The defendant contends that the loan agreement was frustrated by the plaintiff and therefore became unenforceable as the sums sought to be advanced under it were never advanced. The defendant further averred that Kabagambe Mathias on the 4s January 2021 personally offered to lend the defendant Ugx 45,000,000/: which the defendant accepted. The defendant contended that on 6th January 2021 Kabagambe Mathias advanced Ugx 2,500,000/: and on 8th January 2021he advanced the balance of Ugx 42,500,0001: and the defendant deposited his certificate of title and an equitable mortgage was registered on land in Kyadondo Block 184 Plot 793.

During the hearing ofthis suit, the plaintiff presented three witnesses namely Dennis Osikol (PWl), Kwikiriza Herbert (PW2), Mathias Kabagambe(PW3) and the defendant presented one witness namely Mutebi Eric(DWl ).

### REPRESENTATION

The plaintiff was represented by M/s Magumba & Co Advocates whereas the defendant was represented by IWs Byarugaba & Co Advocates.

### JUDGMENT

I have carefully read the pleadings and submissions of the parties, listened to the testimonies of the witnesses in this matter. During the scheduling conference, the parties raised two issues to be determined by this Court as below:

## 1. Whether the defendant is indebted to the plaintiff

## 2. What remedies are available to the parties

The defendant raised a preliminary objection in his defence that the instant suit is a nullity as the plaintiff has no cause of action against the defendant. The above preliminary objection was reiterated during the defendant's submissions.

It should be noted that during the scheduling conference, a joint scheduling memorandum was signed by both parties and the defendant did not ensure that the preliminary objection was scheduled as one of the issues to be determined by this court. One of the questions during scheduling was whether there were any points of law that need to be addressed by this court and the answer by both parties was in the negative.

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### Under Order 12 r (1) (l) ofthe CPR and as established by the holding in the case of Tororo Cement Co. Ltd v Frokina International Ltd SCCA No. 02/2001 :

"The principal objective of the scheduling conference is to enable court to assist parties to dispose of cases expeditiously by sorting out points of agreement and disagreement or assessing the possibility of mediation, arbitration and other forms of settling the suit. ' '

With the spirit behind scheduling as stated above, the defendant therefore had a duty to court to ensure that the same point of law was scheduled as one of the issues to be determined by this court.

That having been said this Court will go ahead to determine the point of law since the same was raised by the defendant in his pleadings and submissions.

The defendant submitted that this suit is incompetent before this court as it offends Order 7 rule 14(1) ofthe CPR since the plaintiffsues upon a contract executed by his lawful attorney but neither does he attach it to the plaint and nor does the contract itself mention of such legal mandate bome by the said Mathias Kabagambe. Counsel averred that it is evident that the plaintiff is not privy to the contract with the defendant if any that he seeks to enforce.

Counsel for the defendant further submitted that PWI stated that he acted through his lawful attomey yet he had not issued any power of attomey to his alleged attomey by the time of execution of the loan agreement and the powers of attomey were only issued in November 2021 when this suit was instituted.

Counsel for the defendant averred that the plaintiff has no locus standi to institute the instant suit against the defendant since he is alien to the dealings ofthe defendant. Counsel submitted that there was no contract between the plaintiff and defendant since Kabagambe Mathias was not clothed with the legal mandate to contract as the plaintiff s attomey and the contract was therefore void ab initio.

Counsel for the plaintiff submitted that reference to Kabagambe Mathias as a lawful attorney of the plaintiff is only in relation to the power of attomey executed that gave the said Kabagambe Mathias the right to sue on behalf of the plaintiff. It is the plaintiff s case that Kabagambe Mathias was at all times the agent of the plaintiff in respect ofthe loan transaction that was purported to have been executed between the plaintiff and the defendant. Counsel further submitted that an agent and principal relationship does not require any consideration or document under section 121 &

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122 ofthe Contracts Ac, 2010 and the absence ofthe words 'principal' or'agent' is merely a matter of form and not of substance.

In the instant case, the plaintiff s suit is for breach ofcontract and he attached a loan agreement to the plaint as the document upon which the suit was based. I therefore find that the plaintiffs plaint does not offend order 7 rule 14(1) of the cPR as claimed by the defendant since the document upon which the plaintiff is suing is attached.

This Court has also had the opportunity of reviewing the parties' pleadings and their supporting affidavits. A loan agreement is seen to be attached as PEX 2 dated the 4loll2o2l entered between osikol Denis Eric through Kabagambe Mathias with the defendant. The said agreement is signed by Kabagambe Mathias for and on behalf of Osikol Denis Eric.

Similarly, a power of attomey is attached as PEXI executed on the 2/1 112021 where Kabagambe Mathias was appointed by the plaintiff as his lawful attomey for the purpose of instituting this suit. From the foregoing it is clear that the loan agreement was executed before the power of attorney and furthermore it is clear that the power of attomey explicitly gave Kabagambe Mathias the powers to sue on behalf of the plaintiff.

An agent is defined in section l18 of the Contracts Act as a person employed by ^aprincipal to do any act for that principal or to represent the principal in dealing with a third person and section 122 of the same Act provides that the authority of an agent may be express where it is given by spoken or written words and implied when it is inferred from the circumstances of the case.

In this case, the plaintiff contends that the authority to be an agent was given to Kabagambe Mathias by way of spoken words(orally). There is no evidence on record to dispute that such authority to act as an agent was given to Kabagambe Mathias. From the wording of the loan agreement which is signed by all parties, it can be clearly inferred that there exists an agent and principal relationship between Kabagambe Mathias and the Plaintiff. From the wording of the loan agreement, it is also clear that the defendant was at all times aware that Kabagambe Mathias was not transacting with him on his personal capacity but was doing so on behalf of the plaintiff. This is corroborated further by the testimony of PW2 and PW3 who were present during the execution of the agreement and PWl.

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PW3 also testified that he would run every conversation he had with the defendant with PW1 before responding and making any decisions. This therefore meant that PW3 implemented the wishes of the plaintiff in the transaction.

I therefore find that Kabagambe Mathias was at all times acting as the agent of the plaintiff and the plaintiff therefore has a cause of action against the defendant arising from the loan agreement signed by his agent. This preliminary objection is over ruled accordingly.

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## Whether the defendant is indebted to the plaintiff

I have reviewed the loan agreement as well as the acknowledgment form attached as DEX 2 in the defendant's trial bundle and PEX 3 in the plaintiff's trial bundle, power of attorney and all the other documents in the trial bundle.

The plaintiff also relied on a phone recording that was later transcribed and marked as PEX 8 alleged to have been between Kabagambe Mathias and the defendant. The position of the law on electronic evidence in legal proceedings in Uganda has been settled by the Electronic Transactions Act and the Electronic Transactions Regulations. Before any data message or electronic record is admitted in evidence and evidential value is attached to it, proof of its authenticity has to be established by the Court.

For electronic evidence to be regarded authentic, the same must have integrity in the sense that, it must remain complete and unaltered except for the addition of an endorsement and any change which arises in the normal course of communication storage or display in light of the purpose for which the evidence was generated and the information must also be capable of being displayed or produced to the person to whom it is to be presented. (Section 7 of the Electronic Transactions Act).

The burden of proof lies on the person who seeks to introduce the electronic evidence. PW3 could not state the real date on which the phone conversation was had, the phone number the defendant called him on, he did not talk about the phone he used to record and through evidence prove that the said recording was not tampered with or altered before it was transcribed. The said recording was not dated.

Similarly, PW4 who was called on to tender the transcribed copy of the recording and testify had inconsistencies in his statement as to when he stopped working with the university and admitted that the recording did not have a date. The plaintiff has

failed to prove their electronic evidence is authentic and therefore the electronic evidence is disregarded shall not be relied on. I will now proceed to determine this issue.

From the loan agreement attached, it can be seen that the plaintiff through Kabagambe Mathias agreed to lend the defendant Ugx 70,000,000/: at an interest rate of 6Yo per month payable after six months and the defendant's land was pledged as security. The loan agreement in itself established a contract between the plaintiff and the defendant.

The defendant testified and admitted that the signature on the loan agreement was his signature but however contended that the agreement he signed was not crossed like the one adduced. He also testified that the plaintiffhas never advanced to him any money and therefore the agreement was frustrated from its offset and that it is Kabagambe Mathias who advanced to him Ugx 2,500,0001: and later Ugx 42,500,0001: on 8/0112021 to wit he personally wrote the acknowledgment in his own handwriting. He admits that he has never paid back the money advanced to him by Kabagambe Mathias. The defendant therefore admits receiving a total of Ugx 45,000,000/: as a loan from the said Kabgambe Mathias.

In reference to this Court's finding on the preliminary objection above, Kabagambe Mathias was acting on behalf of the plaintiff and therefore all monies admitted in the defendant's pleadings to have been advanced by Kabagambe Mathias amounting to Ugx 45,000,000/: above were monies advanced to him by the plaintiff.

This leaves the balance ofUgx 25,000,000/: as the disputed amount. The defendant tries to deny receiving the first amount of Ugx 27,500,000/: by claiming that he only received Ugx 2,500,000/: as the first installment. This Court finds it hard to believe this assertion since he signed on all the pages of the loan agreement and even admitted to Court that the signatures on the agreement were his and not forged.

In PEX 3, the acknowledgment makes reference to the fact that the amount of Ugx 45,000,000/: being received by the defendant was the remaining balance. Relating this statement in the acknowledgment to that in the loan agreement, the correct interpretation, in the absence of any evidence to the contrary, can only be that it was the balance after advancing the initial amount of Ugx 27,500,000/:.

This Court also finds it hard to believe the assertion by the defendant that Kabagambe Mathias did not give him the acknowledgment of the Ugx 2,500,000/= and that is why he does not have evidence for the same but only gave them the

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acknowledgment of Ugx 45,000,000/:. Why would a person withhold an acknowledgment of a lesser sum and give you the one for a larger sum?

The defendant has not been consistent in his statements/swom statements and this can be seen in PEX 5 which contains his affidavit in support in M. A. No. 856 of 2021 at the Civil Division of the High Court where he denied being indebted to Kabagambe Mathias by stating in paragraph 4 thus:

"That I wish to state that I do not owe any money to the plaintif Kabagambe Mathias as claimed or at all. I have never boruowed any money from him."

However, the same defendant is claiming in the instant suit that he is not indebted to the plaintiff but to Kabagambe Mathias who he had earlier on denied. He specifically states in paragraph 14 & 15 of his witness statement that:

" 14: On 6'h /01/202 t, I met Mathias Kabagambe and he was personally willing to lend me Ugx 45,000,000/: against my certificate of title as security and on the very day advanced me cash of Ug\$ 2,500,000/:.

l5: On the 8th/01/202 l, Kabagambe Mathias gave me a sum of Ugx 42,500,000/: as the balance on the amounts he had undertaken to lend me and I handed over to him my original certiJicate of title."

From the above, I find such a witness as one who is dishonest and unreliable.

The plaintiff has however been consistent in his testimony which has been corroborated by PW2 and PW3 who both testified that they were present when the first payment of Ugx 27,500,0001: was made and they witnessed through signing the loan agreement. PW2 who was the lawyer that drafted the loan agreement admitted crossing the initial amounts and countersigning on the same. His signature can be seen below the crossings.

I therefore find that the plaintiffhas proved their case and the defendant is indebted to the plaintiffto a sum of Ugx 70,000,000/= as claimed.

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Issue 2

What remedies are available to the parties

Special damages

The law relating to special damages is settled and the same should be specifically pleaded and strictly proved (W. M Kyambadde v Mpigi District Administration $[1984]$ HCB).

In the instant case the plaintiff has proved through evidence that he advanced Ugx $70,000,000/$ = to the defendant which has remained unpaid till to date. I therefore award the plaintiffs special damages of Ugx $70,000,000/=$ .

### **Interest**

Section $26(1)$ of the CPA provides that:

"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."

This provision allows the Courts to not enforce agreements where the interests charged is harsh and unconscionable.

In the instant case, the said money was not advanced by a money lender and the plaintiff does not conduct a money lending business but the same was advanced as a friendly loan where the defendant agreed to pay an interest rate of 6% per month.

The above agreed interest rate would culminate into 72% per annum which is very high and therefore harsh and unconscionable.

Courts need not enforce agreed interest rates which are harsh and unconscionable.

In the case of **Damalie Byakusaaga Bisobye v Byakusaaga Bisobye Sebulime** Bokoso & Anor HCMA No 1295 of 2023 Honorable Justice Stephen Mubiru stated that:

"Friendly loans can be one time loans or repeated loans spurred by a financial" emergency or specific financial needs. Such loan agreements between friends or family with a reasonable interest rate are completely acceptable legal and enforceable financial agreements. Interest may be charged on friendly loans provided that the interest rates are lower than that of a licensed money lender''.

I therefore find that the interest charged is high and unconscionable and accordingly award an interest rate of 2% per month translating to 24% per annum taking into account that the plaintiff is not a licensed money lending entity.

### General damages/Aggravated damages

Section 6l (l) of The Contracts Act, 7 of 2010, provides that 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.

General damages are a direct natural or probable consequence of the act complained of and are awarded at the discretion of the court and the purpose is to restore the aggrieved person to the position they would have been in had the wrong not occurred as rightly held in cases of Hadley v Baxendale (1894) 9 Exch 341 and Robert Cuossens v Attorney General SCCA No. 8 of 1999'

This award is also assessed on the value of the subject matter, the economic inconvenience that the defendants may have been put through, and the nature and extent of the injury suffered as held in the case of Uganda Commercial Bank v Kigozi 120021EA 305 at 313.

The plaintiff in claiming general damages must demonstrate to the Court through evidence the inconvenience suffered as a result ofthe breach. The plaintiff has been kept out ofthe use ofhis money from the year2021 which he could have used for other development purposes and his lawful attorney was dragged to court on issues related to this case.

I therefore award general damages of Ugx 5,000,000/:.

I do not see any aggravating circumstances for an award of aggravated damages.

### Costs

Section 27(1) of the CPA gives the court the discretion to determine the costs of the suit and by whom the costs of the suit are to be paid This discretion must be exercised judiciously and not arbitrarily.

The general rule is that a successful party is awarded costs unless there are good reasons to deny it. (See Jennifer Behange, Rwanyindo Aurelia, Paul Bagenzi v School Outfitter (Lf Limited CACA No.53 of 1999).

The plaintiff is the successful party in this case and I see no reason for denying him the costs ofthe suit.

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#### **Interest on costs**

#### Under Section $26(2)$ of the CPA,

"where the decree is for payment of money, the court may, in the decree, order interest at such a 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 to the date of payment or to such earlier date as the court thinks fit".

In determining a just and reasonable rate, courts 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 event that the money awarded is not promptly paid when it falls due. (Kinyera v The **Management Committee of Laroo Building Primary School HCCS 099/2013).**

The defendant has kept the plaintiff out of the use of his money since 2021 and has blatantly denied owing that money.

I therefore award an interest of 6% per annum on the aggregate sum from the date of judgment till payment in full.

Dm. B. talie

HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................