[2025] UGCommC 180

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] CIVIL SUIT NO. 543 OF 2020**

10 **SARI CONSULTING LIMITED ] PLAINTIFF**

#### **VERSUS**

### **FRANCIS MAGAMBE BYARUHAANGA ] DEFENDANT**

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

#### **JUDGMENT**

#### 20 **BACKGROUND**

The Plaintiff, a limited liability Consulting Company filed this suit against the Defendant for recovery of USD 73,000 from the Defendant as consideration for equity/shares in Sari Consulting (Uganda) Limited ["SCUL"], interest thereon at the rate of 25% per annum from September 2019 until payment in full, general damages for breach of contract and costs of

25 the suit.

The brief facts of the case are that the Plaintiff, an international consultancy company duly incorporated in Uganda is the majority shareholder of a company called Sari Consulting Uganda Limited with 80 shares while the Defendant is the minority shareholder. The

- 30 Plaintiff's case against the Defendant is that on 12th September, 2019, through a Board Resolution, the Plaintiff agreed to sell and relinquish its entire equity in the company to the defendant. It was agreed that the Defendant would pay to the Plaintiff the sum of USD 73,000 for its stake in the company which would be paid not later than 30 December 2019. The parties reduced this agreement into a board resolution which was registered on 19 - 35 September 2019. The Plaintiff contends that it made several demands for the payment of


5 the sums agreed, and the Defendant made several promises to effect payment to no avail hence this suit.

### **Defendant's Case**

The Defendant contends that the Plaintiff together with him entered an agreement wherein 10 the Defendant contracted to pay the Plaintiff USD 73,000 in exchange for its equity in SCUL. From the onset, the intention of the resolution recording the agreement of the parties was to provide a mechanism for the management and operation of the National Irrigation Master Plan [NIMP] contract. Accordingly, the Defendant represented that he would pay the Plaintiff a sum of money derived from the NIMP contract which was a contract between Tractebel

- 15 Engineering Gmbh ["Tractebel"] and the Ministry of Water and Environment ["MWE"] as the client, the same having been signed on 26 February 2019. SCUL was a subcontractor of Tractebel under the said contract. On 24 October 2019, the first deliverable in the MWE contract was met and an invoice for the same raised and settled. Accordingly, the Defendant thereafter made a payment of USD 15,000 as part of the consideration for the equity. - 20

However, before any other payments under the NIMP contract could be made, MWE issued a notice of suspension of execution of the contract on 13 January 2020. As a result, Tractebel on 13 March 2020 issued a notice of a sub-clause 13 situation in the condition of the contract stating that as a result of the global outbreak of the COVID-19 epidemic a force majeure event

25 had occurred.

On 29 June 2020, Tractebel submitted the first draft of the NIMP report to MWE which was a milestone payment in the resolution between the Plaintiff and the Defendant but MWE rejected the report and has never effected payment on the same. The MWE contract which

30 was the basis of the contract between the parties and therefore the agreement of the parties contained in the above stated resolution was unenforceable.

To date, the SCUL has never changed its name as agreed under Clause 7 of the resolution and the Plaintiff is still the majority shareholder in SCUL with 80 shares, the position pertaining

35 prior to the execution of the agreement.

- 5 The Defendant also contended that without prejudice to the averments, Article 54 of Sari Consulting Uganda Limited's Article of Association is to the effect that any dispute between the parties shall be referred to two arbitrators appointed by each party in difference or to an umpire to be chosen by the arbitrator. As a result, the Defendant objects to the jurisdiction of this Honorable Court and prayed the suit be dismissed and the dispute referred to - 10 Arbitration.

### **Preliminary Determination: Arbitration**

The Defendant in fulfillment of the above objection proceeded to file Miscellaneous Application No. 740 of 2023 under Section 5 of the Arbitration Act and prayed that the main

- 15 suit (this Civil Suit No. 0543 of 2020) be stayed and referred to arbitration. The Defendant contended that Article 54 of the SCUL articles of association provided that all disputes arising between the parties shall be referred to arbitration. This court took note of the fact that Proviso 12 of the resolution containing the agreement of the parties provided for dispute resolution by recourse to court. Accordingly, this court ruled that the parties had substituted - 20 the provisions of Article 54 with those of proviso 12 in respect of the present dispute and therefore, the suit was competently before the court.

The above ruling resolved any and all questions on the jurisdiction of this court to hear and determine this matter hence this judgment on the merits of the present suit.

## **Representation and submissions:**

The Plaintiff was represented by the law firm of M/s Okello Oryem & Co. Advocates and the Defendant was represented by the law firm of Kaggwa & Kaggwa Co. Advocates. The parties were directed to file written submissions and all parties accordingly filed the same. All

30 parties' submissions were considered by this court.

## **Evidence:**

The Plaintiff presented one witness Mr. Goffredo De Pascale who gave his evidence in chief by way of witness statement and was admitted in court record as PW 1. The Plaintiff filed a

35 trial bundle of 5 documents namely, a copy of a Certificate of Incorporation of Sari Consulting


- 5 (Uganda) Limited (PEX 1), A copy of a Memorandum and Articles of Association of Sari Consulting (Uganda) Limited (PEX 2), A copy of a Company Resolution of Sari Consulting (Uganda) Limited dated 12th September 2019(PEX 3), A copy of a Notice of breach dated 24th April 2019(PEX 4), and A copy of a letter from defendant's lawyers dated 25th February, 2020 (PEX 5). - 10

The Defendant presented one witness, Mr. Francis Mugambe Byaruhanga who led his evidence in chief by way of a witness statement which was admitted in court as DW 1. The Defendant filed its trial bundle of 3 documents namely, A copy of a resolution (DEX 1), A copy of a Notice from Tractebel Engineering Gmbh (DEX 2), and A copy of the Articles of

15 Association (DEX 3). A supplementary trial bundle of 2 documents namely, A copy of a Notice of Suspension (DEX 4) and A copy of a Notice from Tractebel Engineering Gmbh (DEX 5).

## **Issues:**

The parties during a Joint Scheduling Conference proposed the following issues for 20 determination by this court.

- 1. Whether the Court has Jurisdiction to hear and determine the suit? - 2. Whether a valid contract subsists between the parties? - 3. If so, whether the Defendant has breached the contract? - 4. Whether the Plaintiff is entitled to the remedies sought? - 25

## **Decision:**

In all civil litigation, the burden of proof requires the Plaintiff, who is the creditor, to prove to court on a balance of probability, the Plaintiff 's entitlement to the relief being sought. The Plaintiff must prove each element of its claim, or cause of action, in order to recover. In other

- 30 words, the initial burden of proof is on the Plaintiff to show the court why the Defendant liable for the relief claimed. Generally, the Plaintiff in the instant suit must show: (i) the existence of a contract and its essential terms; (ii) a breach of a duty imposed by the contract; and (iii) resultant damages. See **Meridiana Africa Airlines (U) Limited v Avmax Spares (EA) Ltd HCCS 111/2017, Networth Consult Co. Ltd v The Attorney General of Uganda** 35 **HCCS 541 of 2022**

### 5 **Issue 1. Whether the Court has Jurisdiction to hear and determine the suit?**

Both parties submitted in concession on this issue. This court rendered a ruling in Miscellaneous Application No. 0740 of 2023 wherein the question of the jurisdiction of this court in this matter was extensively explored. This court, after hearing the parties, determined that this court had jurisdiction to hear and determine this matter for the reasons

10 in the said ruling. Briefly, this court ruled thus;

"A board resolution is a documentary record evidencing the decision of the board. In the present case, the decision of the board reiterate/took the direction of the contract entered into by the parties. In my view, the board resolution, in the present circumstances is evidence both of the contract by the parties and the consequent decision by the board on

15 which both the applicant and the respondent (through its representative) were members.

Accordingly, this issue is resolved in the affirmative.

### **Issue 2: whether a valid contract subsists between the parties.**

- 20 Counsel for the Plaintiff submitted that in the Joint Schedule Memorandum filed by the parties, the Defendant stated his case under items 1, 7, and 11 that whereas it is true that the Plaintiff together with the Defendant filed a Company resolution dated 12th September 2019, wherein the Defendant contracted to pay the Plaintiff USD 73, OOO the said contract was frustrated and as a result all the terms therein could not be implemented as agreed. That the - 25 Defendant further stated that he paid the Plaintiff USD 15,000 as part of the first consideration on the above-mentioned resolution, however, the NIMP contract from which the resolution between the Plaintiff and the Defendant was frustrated, and no money was paid thereunder. - 30 Again the ruling of court in Miscellaneous Application No. 740 of 2023 (Supra) this Court held that: -

"A board resolution is a documentary record evidencing the decision of the board. In the present case, the decision of the board took the direction of a contract entered into by the parties. In my view (*the Court's*), the board resolution, in the present circumstances is

35 evidence both of the contract by the parties and the consequent decision by the board on


5 which both the Applicant and the Respondent (through its representative) were members."

In evidence, it was not disputed that the parties entered into a contract evidenced by the board resolution exhibited on record. In the defendant's submissions, Counsel for Defendant

10 conceded that indeed a valid contract was entered into between the Plaintiff and Defendant evidenced by the exhibited board resolution.

Therefore, Issue 2 is held in the affirmative.

### 15 **Issue 3: Whether the Defendant breached the contract?**

The key issue to determine here is whether the termination of the MWE contract and the consequent termination by Tractebel discharged the performance of the contract between the parties or whether the same had no effect on each parties' performance of their obligations under the contract.

## **Section 33(1)** of the Contracts Act, 2010 provides thus:

"The parties to a contract shall perform or offer to perform, their respective promises, unless the performance is dispensed with or excused under this Act or any other law."

25 The above provision imposes an obligation on all contracting parties to perform their promises to each other. See also **Umar Nazir Kakooza v Bank of Baroda HCCS 217/2018, Mua Insurance Uganda Limited v Charles Byamugisha t/a Baby Coach HCCS 316/2015**

A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding 30 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, Networth Consult Co. Ltd v Attorney General of The Republic Of** 35 **Uganda HCCS 541/2022**


- 5 PW1 testified that he is the Chairman of the Board of Sari Consulting Limited ["SCL"], an international company registered in Uganda. The said company and the Defendant were shareholders in SCUL holding 80 and 20 shares respectively. SCL ceased to be a shareholder when it sold all its shares and equity in SCUL to the Defendant and executed a resolution to that effect, PEX3. From the point of execution and registration of PEX3, the Defendant took - 10 over control and was exclusively in charge of all operations and dealings of the company as well as all its income and liabilities. Upon registration of the said resolution (PEX3), SCL was only entitled to 1% per annum on any sums outstanding on the purchase price for its equity in SCUL. - 15 PW1 further testified that the decision by SCL to sale its stake and exit SCUL was prompted by and taken in a meeting that was convened to consider the performance of the subcontract of NIMP between SCUL and Tractebel. The financial performance of the NIMP contract was one of the considerations of the sale and purchase negotiations however, it was never the intention of SCL that, and the sale was not dependent on the subsistence and financial 20 performance of the NIMP sub-contract.

Accordingly, the resolution (PEX3) signed and registered by the parties did not provide for a conditional sale and transfer of the shares of the company and the obligations of the Defendant to pay the purchase price were not dependent on the subsistence and/or 25 performance of the subcontract with Tractebel. After the execution of the said resolution, SCL ceased to be involved in the sub-contract, even prior to its termination and until the proceedings of 5 June 2024, SCL was not even aware of the alleged suspension of the NIMP contract or the alleged reasons for the suspension.

- 30 The Defendant made part payment of the consideration leaving USD 58,000 outstanding. He did not give any reasons for nonpayment of the sums outstanding. The Plaintiff's, through their lawyers, issued several letters for payment inclusive of PEX4 which the PW1 which the Defendant did not respond to. Upon being served with notice of breach of terms of the resolution, the Defendant through his lawyers wrote to the Plaintiff a letter dated 25 - 35 February 2020 [PEX5] in which the Defendant acknowledged receipt of the letters sent to


5 him by the Plaintiff and also acknowledged that he was bound to pay the full purchase price for the shares. Accordingly, PW1 testified that the Defendant was indebted to the Plaintiff to the tune of USD 58,000.

DW1 testified that the intention of the above-mentioned resolution was to provide a 10 mechanism for the management and operation of the NIMP contract and the Defendant represented to the Plaintiff that it would pay the Plaintiff from the proceeds of the said contract. When MWE submitted the first deliverable which was approved on 24 October 2019 and resulting from which part payment was made, the Defendant made a payment of USD 15,000 out of the proceeds of the above payment.

Before the NIMP contract could be completed and full payments made, the same was suspended on 13 January 2020 and resultantly, a sub-clause 13 notice was issued by Tractebel to SCUL. Tractebel subsequently submitted a first draft of the national irrigation masterplan report to MWE but the same was rejected and no payment was made for the 20 same. Accordingly, that the above constituted frustration and made it difficult to implement any of the terms of the said resolution. SCUL has not changed its name in accordance with the resolution and additionally, SCL is still majority shareholder with eighty (80) shares.

Counsel for the Plaintiff submitted that as pointed out, the Defendant in his case stated that 25 he was discharged from his obligations under the contract because the contract was effectively terminated, first by *Force Majeure* and then by frustration. Counsel submitted that *Force Majeure* and Frustration are separate and distinct legal doctrines, both of which have the effect of terminating a subsisting contract, and discharging the parties of their obligations under the contract. However, the party asserting either doctrine must plead either or both

30 of them separately. The party asserting frustration must then prove that the contract and their contractual obligations were discharged by the pleaded frustration.

Further, that they must also prove that the event leading to the frustration was not foreseeable. They must do so by leading and placing before the Court actual evidence to

35 prove that the contract and their contractual obligations were discharged by frustration. That there is no room for conjecture and difficulty to perform a contract by one party is not

- 5 frustration to the contract even when the alleged events make performance of the contract burdensome or onerous. The party asserting frustration must also therefore prove that the obligation under the contract has become incapable of being performed because the circumstance in which the performance is called for would render it a thing radically different from that which was undertaken by the contract. The debilitating circumstances - 10 giving rise to frustration of the contract must be established and proved. For avoidance of doubt, the doctrine of frustration is subject to the important limitation that frustrating circumstances must arise without the fault of either party; that is the event which a party relies upon as frustrating the contract must not be self-induced. Proof of fault would therefore defeat the defense of frustration, the burden of proof thereof lying with the party - 15 alleging the fault.

Counsel submitted that it is only after the Defendant has proved all the above elements of frustration, that the Plaintiff would assume the evidential burden to prove that the frustration, as asserted by the Defendant in this case, was self-induced, or that the events 20 asserted as frustration did not have the effect of discharging the contract and the contractual

obligations of the parties. Counsel cited the case of **Revoluntary Ads and Designs Ltd V Board of Trustees of Nakivubo Stadium, Civil Appeal No. 131 of 2012 and Monday Eliab V Attorney General, SCCA No. 16 of 2010** in support of his submissions.

- 25 Counsel further submitted that in the instant case, the Defendant filed one witness statement dated 26th August 2023 upon which he was cross examined and re-examined. That he also filed a trial bundle dated 13th May, 2024 and none of the documents on this trial bundle was admitted into evidence and that the supplementary trial bundle with leave of Court dated 22nd May, 2024. That again none of the documents on that trial bundled was admitted into - 30 evidence. Therefore, the Defendant adduced no documentary evidence to prove his contention that the contract was frustrated.

Counsel further submitted that the Defendant in his witness statement paragraphs 3 to 8 stated that the NIMP contract was between Tractabel and the Government of Uganda and 35 that that contract is not the subject of the dispute in court. 5 That PW 1 testified that the Defendant always had and still has full control of that contract and all documents related to it and kept them secret from him and the Plaintiff Company. That according to PW 1, this is part of the reason the dispute arose in the first place.

That the above testimony of PW 1 was actually confirmed in cross-examination of the 10 Defendant who testified as DW 1 where he stated that in those proceedings, he was still the Managing Director of Sari Consulting Uganda Limited, with full and exclusive control. That he also confirmed that he has since the parties parted ways not called or attended any AGM. That there is nothing on record to show that the situation testified to by PW 1 has changed at all and there is even no record of a Board meeting since the parties parted ways before the 15 Court. That when the parties executed PEX 3, the Plaintiff company yielded and in effect ratified full and exclusive control of Sari Consulting Uganda Limited to the Defendant and

they stated so expressly in clause 10 of the resolution.

DW 1 testified in paragraph 3 of his witness statement that the intention of the resolution 20 was to provide a mechanism for the management of the NIMP contract, that that statement is incorrect, firstly, because apart from stating in its preamble that the meeting was occasioned by the need to consider the management and operations of the NIMP contract, the resolution did nothing apart from forming the basis of the parties parting ways by sale and purchase of all the shares of the Plaintiff company. That it also put the Defendant in full

25 and exclusive ownership and control of the company.

Secondly, that from the actual clauses of the resolution, the purpose and intention of the resolution was sale and purchase of the entire stake of the Plaintiff in the company, by the defendant.

Further that PW 1 testified to this in his witness statement as well in cross-examination and re-examination that the Plaintiff did not agree that the defendant's obligation to pay the full purchase price of the shares of the Plaintiff company depended on the performance or subsistence of the NIMP contract. That if the parties intended that payment of the purchase

35 price of the Plaintiff's shares in the company was dependent on commercial proceeds of the NIMP contract, they would have stated so in the resolution which is subject to this suit.

- 5 In Submissions Counsel for the Plaintiff submitted that the testimony of the Defendant in paragraph 3 of his witness which appears to be the crux of his defense is inadmissible and of no probative value, to the extent that it is contrary to the provisions of section 90 and 91 of the Evidence Act which prohibits the admission and consideration of oral evidence to impeach documentary evidence. That apart from that, the law does not allow the Courts to - 10 read into contracts between parties, clauses that were either the subject of negotiations and or clauses that did not make their way into the final contract. Counsel cited the case of Chen Chao and 2 Others V Zhang Jun and 3 Others, Civil Suit No. 220 of 2020. Counsel submitted that the Defendant is bound by the contract he signed and nothing more. - 15 Counsel for the Defendant submitted that currently the 80% shares are still in the Plaintiff 's name and it has received USD 15,000 and is demanding, in these proceedings, payment of the sums outstanding without execution of its obligations under the contract. That for a breach of contract to occur, the innocent part/Plaintiff that is bringing this claim must have executed his/her or its obligation under the contract with the Defendant failing or refusing

20 to execute his part hence prejudicing the Plaintiff's rights.

That in the instant case there was no performance from the Plaintiff and the first obligation per the resolution states that: -

"That, the majority shareholder of the Company shall henceforth sell and thereafter 25 relinquish its entire equity in the Company to Francis Magambe Byaruhanga, the Minority Shareholder"

Counsel submitted that it is an undisputed fact the Plaintiff has not to date relinquished its equity to the Minority shareholder, the Defendant and still remains the Majority shareholder

30 in the Company and that in fact no obligation has been met by the Plaintiff in this resolution and only the Defendant albeit partially had been able to execute his obligation under the contract by paying the initial USD 15,000 Dollars which he has not gotten value for to date.

That the question of the legal fees as directly constructed in the resolution was subject to 35 performance of the obligation which the Plaintiff has failed or refused to do and the only


5 question that remains is that if the Plaintiff failed or refused to perform its part of the contract can it then bring a claim of breach of Contract to Court.

Counsel submitted that they do not believe the Plaintiff can bring a cause of action to court as it failed or refused to execute her part in the contract and fully breached the contract from

10 the onset by refusing or failing to transfer its shares to the Defendant.

Counsel submitted that this type of contract emanating from a resolution has the Companies Act Cap.106 and Memorandum and Articles of the Company that govern it and the Defendant did not breach the contract as he entered into an arrangement with the Plaintiff wherein,

15 he was to receive the 80% shares and would pay for the same over a period of time as stated in the resolution.

Counsel further submitted that the Defendant did not receive the shares from the start and went ahead to start making an initial payment, with the Plaintiff not transferring or causing 20 to transfer the shares, they did not lose their property, interest, or rights and thus cannot claim a breach on the right that never breached as they are the ones who gained USD 15,000. That owing to the above the claim of breach of contract and all ancillary claims emanating from the same cannot stand.

- 25 Counsel cited Order 6 Rule 30 of the Civil Procedure Rules which provides that the court may upon application, order any pleading to be struck out on grounds that it discloses no reasonable cause of action or answer and in any such case, or in case of the suit or defense being shown by the pleadings to be frivolous or vexatious, may order the suit to be stayed or dismissed or judgement to be entered accordingly. That the Plaintiff has no cause of action - 30 against the Defendant because they have not yet handed over the shares that the Defendant paid for, despite the fact that he paid USD 15,000. That it is on this premise that they contend the Plaintiff does not have a cause of action because they have not fulfilled the obligations of the contract. - 35 Counsel submitted that a cause of action means every fact which is material to be proved to enable the Plaintiff succeed or every fact which if denied the Plaintiff must prove in order

- 5 to obtain Judgement and cited the *Supreme Court in Major David Tinyefuza V The Attorney General Appeal No. 1 of 1997* where the court defined a cause of action to mean every fact, which, if traversed, it would be necessary for the Plaintiff to prove in order to support his right to a judgement of court. In other words, it is a bundle of facts which taken with law applicable to them gives the Plaintiff a right to relief against the defendant…… It is in other - 10 words, a bundle of facts, which it is necessary for the Plaintiff to prove in order to succeed in the suit. But it has no relation whatever to the defense which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the Plaintiff . It is a media upon which the Plaintiff asks the court to arrive at a conclusion in his favor. The cause of action must be antecedent to the institution of the suit.

Counsel further submitted that the term "reasonable cause of action" as envisaged by Order 6 Rule 30, was expounded on by Lord Pearson in the case of Drummod Jackson V British Medical Association [1970] ALLER, to mean … the traditional and hitherto accepted view that the power should only be used in plain and obvious cases is correct according to the 20 evident intention of the rule for several reasons……… no exact paraphrase can be given, I think reasonable "cause of action" means a cause of action with some chance of success, when as required by rule 19(2) only the allegations in the pleading are considered. If when those allegations are examined, it is found that the alleged cause of action is certain to fail, the statement of claim should be struck out.

That for the Plaintiff to establish a sustainable cause of action in their pleadings, the Plaint must show; That Plaintiff has a right, that the right was violated or breached, and that the Defendant is liable as it was stated in Auto Garage V Motokov {1971} EA 51.

- 30 Counsel cited the case of *Ham Enterprises (U) Limited and 2 Others V Katende Stephen and 2 Other and Mukwaya Jimmy and 245 Others Misc. Application No. 717 of 2021* where the Court held that - Where questions whether a Plaint discloses a cause of action arise, the court is obligated to peruse Plaint together with its annexures in order to answer the question. *Kapeka Coffee Works Versus NPART CACA No. 3 of 2000* Court does not have to consider any - 35 other information save for what is laid down in the Plaint to ascertain the cause of action.

- 5 Counsel invited the court to make a finding that the Plaintiff has no cause of action against the Defendant and that they will raise a Preliminary objection on the ground that this suit lacks a cause of action and that Points of law may be raised by pleading Order 6 Rule 28 of the Civil Procedure Rules. - 10 Counsel further submitted that without prejudice to the above, the defense also plead frustration of the contract as a defense to the claim of breach of contract which will have the effect of releasing the Defendant from his obligation under the resumed contract. That they wish to argue the two issues concurrently and that this is premised on the fact that once a contract is frustrated both parties are discharged from their obligations, the question for - 15 determination that lingers is, was the contract deemed terminated upon such occurrence. That it is the defense's submission that yes, there was an effective termination of the contract upon the occurrence of COVID-19, which was classified as a pandemic on the 11th of March 2020, by the World Health Organization. - 20 That DW1 in his testimony in chief informed the court that on the 13th day of March 2020, Tractabel Engineering Gmbh (the consultant) issued a notice under sub-clause 13, a situation condition of the contract stating that as a result of the global outbreak of the Covid epidemic a force majeure event had occurred. Counsel cited Section 66 (1) of the Contracts Act 2010 which provides that, where a contract becomes impossible to perform or is frustrated and 25 where a party cannot show that the other party assumed the risk of impossibility, the parties - to the contract shall be discharged from further performance of the contract. Counsel cited the case of Revolutionary Ads and Design Limited V Board of Trustees Nakivubo Stadium (*Supra*). - 30 Counsel further submitted that following the above decision, the Covid-19 occurrence and the attendant restrictions it brought was no fault on the Defendant, neither was itself induced by the Defendant by the Defendant who now relies on it, to have him discharged from any further obligations. - 35 That turning to the facts, evidence, and the law, the Defendant pleaded defense of frustration due to the occurrence of COVID-19 which as per Public Health (Control of Covid-19) Rules


- 5 Statutory Instrument 52 of 2020: led to the Control of Public gatherings, meetings, etc. specifically, under Rule 9 (a) to (h) stipulated that the Places and premises and the activities, events, meetings and gatherings and this suspended all works under the contract from which the finance to pay for the shares was halted. - 10 Counsel further submitted that the Defendant could not then meet his obligations under the contract since the source of the money had been halted due to COVID-19 as per the evidence in chief of DW1. Counsel cited the case of Krell V Henry [1902) KB.

Counsel continued to submit that on 26th February 2019, none of the parties in this suit could 15 have foreseen or contemplated that COVID-19 would occur and that as a result of its occurrence, there would be a halt/suspension of the contract, the source from which the finance to pay for the shares from the Plaintiff and owing to this fact both parties were discharged from future obligations of the resolution/contract.

20 Counsel in conclusion submitted that the contract was deemed terminated upon the occurrence of Covid-19 and the suspension of the sub-contract with Tracteble from which the Defendant sought to get the funds made it impossible to achieve the agreed-upon outcome.

## In **Ronald Kasibante v. Shell Uganda Ltd Civil Suit No. 542 of 2006, Honorable Justice**

25 **Hellen Obura** (as she then was) defined breach of contract as:

"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

30 contract as discharged or seeking a discretionary remedy."

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 promise, by repudiating it, or by interfering with another party's performance.

- 5 A breach occurs when one party to a contract fails or neglects to perform his or her obligations or performs them in a way that does not correspond with the agreement. It connotes a violation of any of the agreed-upon terms and conditions of a binding 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 - 10 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, Networth Consult Limited v Attorney General HCCS 541/2022**

Halsbury's Laws of England, Vol. 1. 9(1), 4th Edition paragraph 897 defines frustration as 15 follows: -

"As subsequently developed, the doctrine of frustration operates to excuse from further performance where:(1) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some fundamental thing or state of things will continue to exist, or that some particular person will continue to be 20 available, or that some future event which forms the basis of the contract will take place; and, (2) before breach, an event in relation to the matter stipulated in head (1) above renders performance impossible or only possible in a very different way from that contemplated".

25 Frustration is a legal doctrine that renders a contract void where an event or events occur which (i) make performance of the contract physically impossible or illegal; or (ii) render the obligation to perform radically different from that contemplated by the parties at the contract's formation. See **Section 65(1) of the Contracts Act, 2010. See also Anson's Law of Contract, 29th Edition. Pp 474-498**

Frustration occurs when its performance is rendered impractical or useless, considering the purpose for which it was entered. Therefore, a contract can be frustrated even when its performance is still possible. For instance, consider a case where one contracts to rent a car to explicitly and only for purposes of transporting them to their graduation, the same being 35 the basis of the agreement between both parties, only for the graduation to be postponed to


- 5 a date to be communicated because of a war breaking out. In those circumstances, the car can still be made available but the intervening event has affected the essence for which the contract was entered and, barring other factors, the said intervening event has frustrated court. See **Davis Contractors Ltd v. Fareham Urban District Council [1956] AC 696. Satyabrata Ghose v. Mugneeram Bangur & Co. 1954 SCR 310** - 10

Frustration cannot be relied on where the risk was excluded or assigned to a party by contract. **Section 65(1)** provides thus;

"Where a contract becomes impossible to perform or is frustrated and where a party cannot show that the other party assumed the risk of impossibility, the parties to the 15 contract shall be discharged from the further performance of the contract."

In **Bank of Uganda v Banco Arabe Espanyol CACA 23/2000** the appellant sought to rely on frustration to excuse their breach of deed of guarantee. The deed had an express provision excluding the application of frustration. The Court of Appeal held that a party to a contract 20 in which the doctrine of frustration had been excluded could not plead frustration and was bound by such contractual exclusion. This finding was not overturned in the appeal in the Supreme Court [SCCA 1/2001].

The Indian Supreme Court held in **Naihati Jute Mills Ltd. v. Khyaliram Jagannath (1968)**

- 25 **1 SCR 821** that the test is therefore whether the intervening event has affected the very premise on which the contract was entered into, and that the parties did not intend to be bound in the new context created by the intervening event and not that it has made such contract less profitable, less beneficial, more complicated or more difficult to perform. Otherwise, a party is not entitled to relief out of a contract merely because performance has - 30 become onerous on account of an uncontemplated turn of events. To determine whether a contract has been frustrated, the court takes a multifaceted approach. In **The Sea Angel [2007] EWCA Civ 547,** in which the Court of Appeal held that what was required was a multi-factorial approach, with the factors to be considered including the terms of the contract, its context, the parties' knowledge and expectations at the time of contract, the - 35 nature of the supervening event, and "the parties' reasonable and objectively ascertainable


## 5 calculations as to the possibilities of future performance in the new circumstances". See also **Mogas (U) Ltd v Benzina (U) Ltd HCCS 88/2018**

The effect of frustration is that the loss lies where it falls. This means that where a contract is discharged by frustration of some supervening impossibility of performance, payments

- 10 previously made and legal rights previously accrued according to the terms of the contract will not be disturbed but the parties would be excused from further liability to perform the contract. See **Mogas (U) Ltd v Benzina (U) Ltd HCCS 88/2018, Chandler v Webster (1904) 1 KB 493, Fibrosa Spolka v Fairbairn Lawson (1942) 2 ALL ER 122** - 15 Frustration is a question of fact. In **Monday Eliab v Attorney General SCCA 16/2010**, the Supreme Court held that it is the obligation of a party who seeks to rely on frustration to prove that the contract was frustrated.

There are three critical elements in the consideration of whether or not an event has 20 frustrated a contract; - (i) the event must arise without the fault or election of either party; (ii) there must be such a change in the significance of the obligation undertaken that "it would, if performed, be a different thing from that contracted for," something "radically different"; and (iii) the parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. See **Lexington Properties**

## 25 **Limited v Alliance Media Uganda Limited HCCS 682/2021**

The radical difference depends upon what, on an objective basis, is thought to be the essence of the obligation. In essence the Defendant pleads "frustration of purpose" in the sense that because of the supervening events of Covid-19 and its 30 attendant restrictions, its contractual value for the Plaintiff 's counter-performance was substantially destroyed. Frustration of purpose deals with the problems that arise when a change in circumstances makes one party's performance worthless to the other, frustrating his purpose in making the contract. In order for a party's duty to be discharged under this defence, three requirements must generally be 35 met; (i) the frustrated purpose must have been a principal purpose of the contract, as both parties understood it, such that the contract makes very little sense without - 5 it; (ii) the frustration of the purpose must be substantial. It is not enough that profits will be affected or even that the party will sustain economic loss. The frustration must be so great that it is not fairly regarded as within the risks assumed when making the contract. It must have a substantial material impact on the contract; not that the business endeavour is just less profitable, but rather that it actually is near 10 worthless; and (iii) the non-occurrence of the frustrating event must have been a basic assumption upon which the contract was made. The foreseeability of the event may be a factor in evaluating this requirement, but even if the event was foreseeable, this requirement may still be met. See **Lexington Properties Limited v Alliance Media Uganda Limited HCCS 682/2021** - 15

On the other hand, force majeure allows for the discharge of performance obligations in a contract where unforeseeable and unavoidable events prevent a party from fulfilling a contractual obligation. In order for an obligor to claim force majeure, their performance of the contract must actually be impossible and not merely onerous. See **Tsakiroglou & Co. v**

20 **Noblee & Thorl Gmbh (1962) AC 93, Globe Spinning Mills Nigeria PLC v Reliance Textile Industries (2017) LPELR-41433,** *[RTI Ltd v MUR Shipping BV](https://caselaw.nationalarchives.gov.uk/uksc/2024/18)* **[2024] UKSC 18**

In **Ryde v Bushell & Anor (1967) EA 817**, the Court of Appeal for East Africa held thus

"…but before a plea can succeed it must be established that it was an act of God which 25 prevented the performance or which destroyed the results of performance. Nothing can be said to be an act of God unless it is an occurrence due exclusively to natural causes so extraordinary a nature that it could not reasonably have forseen and the results of which occurrence could not have been been avoided by any action which should reasonably have been taken by the person who seeks to avoid liability by reason of the occurrence. It is for 30 th person setting up the plea of act of God to prove the various facts which constitute an act of God."

In **Zzimwe Enterprises v Attorney General CACA 116/2019**, the Court Of Appeal adopted the dicta in Ryde (above) and additionally held thus:

- 5 "This passage states the law, in my view, as to what may amount to an act of God or mutatis mutandis, force majeure, as well as the party who has the burden to prove its occurrence. However, force majeure includes more than acts of God. The terms also include acts of people (eg riots, strikes and wars also terms as vis major" - 10 A party intending to rely on force majeure ought to show that there was a provision in that regard in the contract between the parties. See **King Investment Management Ltd v Rivatex East Africa Limited [2023] KEHC 17701 (KLR), Classic Maritime Inc V Limbungan Makmur SDN BHD [2019] EWCA Civ 1102.** - 15 The table below provides a summary of the key distinctions between frustration and force majeure

| FRUSTRATION | FORCE MAJUERE | |-----------------------------------------------------|--------------------------------------------------| | May be invoked by any party to a contract | Must be included expressly in the contract | | without being expressly provide for in the | in order for it to be invoked. It cannot be | | contract | implied. | | This doctrine automatically terminates the | This doctrine offers the flexibility for parties | | contract in question and the parties will no | to fashion their responses according to their | | longer<br>be<br>bound<br>by<br>their<br>obligations | circumstances. | | thereunder. | | | The drastic consequences of contractual | The threshold is not high because parties | | frustration means<br>that the threshold here is | only have to show that the clause is in the | | quite high because it must be shown that the | contract and the specific event<br>outlined in | | obligations impacted by the event go to the | the contract has taken place and caused | | root of the contract. | their non-performance. |

In the present case, a review of the resolution evidencing the agreement of the parties shows that there was no force majeure clause. It follows then that the Defendant cannot be heard 20 to rely on a non-existent force majeure provision.

Page **20** of **27**

5 I now turn to the contention on frustration. As noted above, proving frustration requires that three ingredients are demonstrated to wit (i) the event must arise without the fault or election of either party; (ii) there must be such a change in the significance of the obligation undertaken that "it would, if performed, be a different thing from that contracted for," something "radically different"; and (iii) the parties' reasonable and objectively 10 ascertainable calculations as to the possibilities of future performance in the new circumstances

It is common ground that the termination of the NIMP contract and the consequent termination of the sub-contract were not premised on fault, that is they were no fault 15 terminations. It follows that the first element is made out.

The second and third ingredients are related. It is common ground that the management of the NIMP contract was an important factor in the conclusion of the contract between the parties. The Plaintiff contends that it was only one factor while the Defendant asserts that 20 it was the only factor, such that it was understood by the parties that a termination of the said contract would alter the very premise of the contract, frustrate it and discharge

The contract between the parties did not include any condition precedent or subsequent 25 tying performance to the NIMP contract. This does not mean that an event frustrating a contract should be a condition precedent.

performance.

Additionally, In the contract between the parties, and specifically paragraphs 8-9 SCUL control of the NIMP contract and the Defendant effectively took control of SCUL, including

30 the risk of termination of the NIMP contract as well as any benefits that would arise from such contract. Whereas the NIMP contract appears to have been a motivating condition for the sale of SCUL equity, the same was never expressed as a contractual condition such that the loss/cessation of the NIMP contract would undermine the agreement for the sale and purchase of equity. There is no evidence that SCUL was a special-purpose vehicle 35 incorporated in Uganda only for the NIMP contract. The **purpose** of the sale was not


5 **frustrated**, even if the NIMP contract later failed. This was a **commercial risk** assumed by the Defendant.

Further, the impugned obligation is the one for payment of the purchase price for the Plaintiff's equity. The payment of the purchase price in the agreement is not pegged on the 10 revenue from the NIMP contract. The obligation is not impossible and the termination of the NIMP contract did not make payment impossible as there is no correlation and causality between the obligation to pay and payment under the NIMP contract. **Lack of funds** due to external business failure does not amount to frustration. Courts have consistently held that commercial hardship is not frustration. **See** *Jackson Mubangizi v Housing Finance Bank*

#### 15 *HCMA 820/2020*

Additionally, the Plaintiff led unchallenged evidence showing that Defendant, by a letter from his lawyers to the Plaintiff dated 13 February 2020 acknowledged indebtedness in respect of the sums claimed. This letter is dated almost a month after the said terminations and 20 nowhere therein did the Defendant allege frustration. The same is not only evidence that the sale of SCUL shareholding was not completely hinged on the NIMP contract (which at the time of the letter had been terminated) but also shows that the Defendant recognized the outstanding amount as payable. In **Ismail v Polish Ocean Liners (1976) 1 ALL ER 902, 907** the appellant contended that the respondent was estopped from asserting that mode of

- 25 packing potatoes by the appellant freight company caused them to rot thereby occasioning loss to the respondent hirer. Lord Denning held that where a man has led another to believe that a particular state of affairs is settled and correct, he will not be allowed to depart therefrom and assert that they were erroneous when it would be unjust or unequitable for him to do so. - 30

In **LK Enterprises Limited & Ors v ABSA Bank Uganda Limited HCMA 404/2024** this court held that a person who acknowledges indebtedness will not be allowed to assert otherwise when it would be unjust or unequitable for them to do so. See also **Umar Kakooza v Bank of Baroda HCCS 217/2018, Roko Construction Limited v Rocktec Technical** 35 **Services Limited HCMA 1812/2022.**

5 It follows that from the evidence above, clearly, the termination of the NIMP contract and sub-contract did not frustrate the contract between the parties and accordingly, nonperformance of the payment obligation therefrom was a breach of the said contract.

In the premises, it is my finding that the Defendant has failed to prove frustration and *force* 10 *majeure* as a defense to his non-performance of his obligation under the contract thereby breaching the contract.

Issue 3 is determined in the affirmative for the Plaintiff.

## 15 **Issue 4: Whether the Plaintiff is entitled to the remedies sought?**

The Plaintiff prayed for recovery of the USD 73,000, General damages for the breach of the contract, interests on the outstanding amount, and the General damages and interest at the rate of 25% per annum from 12th September 2019 until payment in full and the Costs of the suit.

### 20

## *Recovery of the USD 73,000.*

Having found that the Defendant breached the contract, the Plaintiff is entitled to recover any outstanding balance from the transaction amount. PW 1 in paragraph 16 of his evidence in chief admitted to having received part payment of USD 15,000 from the Defendant leaving

25 the outstanding amount of the transaction at USD 58,000. This leaves the Plaintiff entitled to USD 58,000 and shall recover just that out of the transaction amount.

Further, The Plaintiff in his evidence in chief stated that the Defendant was supposed to pay for legal services in implementation of the transaction. I have taken note of Clause 5 of the 30 contract which states that the Company shall pay Okello Oryem and Co. Advocates USD 1,500 for restructuring taxes, fees, and legal services and USD 1,200 to Kaggwa and Kaggwa Advocates. The payments are to be made to those firms directly, rather than to the Plaintiff as a reimbursement of payments made to them.

5 I note that the said firms are not Plaintiffs in the present suit. Seeing as there is no claim for the same, it follows that this court will decline to grant orders for the said payments in these proceedings.

#### *General Damages*

- 10 In **Principles Governing the Award of Damages in Civil Cases, A paper by Bart Katurabe [Justice Emeritus]** stated on General damages that, according to Lord McNaughten in the oft-cited case of **Stroms V. Hutchinson [1905] AC 515**, are such as the law will presume to be the direct natural or probable consequence of the act complained of. - 15 Damages are the pecuniary recompense given by process of law to a person for the actionable wrong that another has done him. The sums payable by way of damages are sums which fall to be paid by reason of some breach of duty or obligation, whether that duty or obligation is imposed by contract, by the general law, or legislation. See **Hall Brothers SS Co. Ltd V. Young [1939] 1 KB748, at 756 (CA)** - 20

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

- 25 nor should the Defendant be unjustly punished under the same guise. See **Obongo & Another v. Municipal Council of Kisumu [1971] EA 91; Ongom & Another v. Attorney-General [1979] HCB 267; Kyambadde v. Mpigi District Administration [1983] HCB 44; Nsaba Buturo v. Munansi Newspaper [1982] HCB 134; Peter Musoke v Merger Technical Services Uganda Limited HCCS 426/2022, MTK (U) Limited v Attorney** - 30 **General & Ors HCCS 578/2022.**

PW 1 in his evidence in chief paragraphs 22 and 23 stated that the Plaintiff has been waiting for the outstanding balance from 12th September 2019 to date and this has affected the operation of the Plaintiff Company. Further that the Defendant's refusal to pay the balance 35 and the failure to change the name of the Company as agreed upon brought confusion which


5 has affected the Plaintiff's business. There was no evidence that the said damage from the defendant's actions was markedly substantial.

In the assessment of general damages, the Court should be guided by the value of the subject matter, the nature and extent of the breach; and the economic and other inconveniences the

10 injured party may have been put through. See *Uganda Commercial Bank v Kigozi [2002] 1 EA 305.*

I have considered the Plaintiff's evidence and am cognizant of the fact that the Defendant's breach left the business in a sort of limbo and incurred inconveniences in its operation. In

15 light of that, I am inclined to award the Plaintiff general damages of USD 5,000 which is just and considerate enough to place the Plaintiff Company in a position it would have been to date had the Defendant not breached the contract.

#### *Interest*

- 20 Section 26 of the Civil Procedure Act provides for the award of interest. It provides thus - **(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.** - 25 **(2) Where and insofar 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 any period prior to the institution of the suit, with further interest at such rate as** 30 **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.** - **(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**

# 5 **the date of payment or other earlier date, the court shall be deemed to have ordered interest at 6 percent per year."**

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.**

10 **Supreme Court Civil Appeal No. 31 of 1995; Premchandra Shenoi & Anor v. Maximov Oleg Petrovich Supreme Court Civil Appeal No. 9 of 2003; Ahmed Ibrahim Bholm v. Car & General Ltd. Supreme Court Civil Appeal No. 12 of 2003.**

Considering all the facts of this case, I find that an award of 6% per annum interest is 15 sufficient recompense on the sums claimed. This court however takes the view that the circumstances of this case do not warrant the award of interest on general damages as the award of general damages is sufficiently commensurate to restore the Plaintiff to the position it would have been had the Defendant not breached the impugned contract.

20 *Section 27* of the *Civil Procedure Act* provides that costs follow the suit unless there is a strong reason to suggest the contrary and are awarded at the Court's discretion. 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 the instant case, having found for the Plaintiff, I award the Plaintiff the costs of the suit against the Defendant.

## **In conclusion:**

- 30 I accordingly make the following orders, - a) There exists a valid contract between the Plaintiff Company and the Defendant. - b) The Defendant breached the Contract between the Plaintiff and the Defendant. - c) The Plaintiff is entitled to recover the outstanding balance of USD 58,000 from the Defendant with interest thereon at a rate of 6% per annum from 31 35 December 2019 until payment in full. - d) The Plaintiff is awarded general damages of USD 5,000.


- 5 e) The Plaintiff is award interest of 5% per annum on the general damages from the date of this judgment until payment in full. - f) The Plaintiff is awarded the Costs of the Suit.

I so order.

**Dated** this\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2025, delivered electronically and uploaded on **ECCMIS** 15th April


**Judge,**

**15th April, 2025**

20