[2023] UGCommC 273

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

CIVIL SUIT NO. 320 OF 2021)

1. SINO EAST AFRICA TRADE DEVELOPMENT

COMPANY LIMITED

1. CHINA MACHINERY ENGINEERING CORPORATION:::::::::::::::::::::::::::::::::::::::::::::::::::::PLAINTIFFS

VERSUS

DIDA INVESTMENT

CONSULT LIMITED::::::::::::::::::::::::::::::::::::::::::::::::::: DEFENDANT

**Before: Hon. Lady Justice Cornelia Kakooza Sabiiti**

**JUDGMENT**

**Introduction**

1. The Plaintiffs brought this suit against the Defendant for recovery of USD 60,000, general damages, interest and costs of the suit. 2. The Plaintiffs’ case is that as the Defendant executed two (2) Memoranda of Understanding with the 1st and 2nd Plaintiffs on different dates to render consultancy services in relation to the bid for the construction of the Masaka-Mbarara 220kv Electricity Transmission line (herein after referred to as the **“**1st Project", and for the construction of water and sanitation infrastructure for Kagera water works. (hereinafter referred to as the “2nd project" for a money consideration. The Memorandum in respect of the 1st Project provided for the advance of USD 40,000 to the Defendant while the Memorandum in respect of the 2nd Project provided for the advance of USD 20,000 to the Defendant. It was stipulated under both Memoranda that in the event of the bidding process for both Projects not turning out in favour of the identified contractors for the 1st Plaintiff and 2nd Plaintiff, then the Defendant would cause the refund of all and any money advanced to him under the said Memoranda. None of the identified contractors under the Memoranda in respect of the two Projects were awarded any contracts hence this suit by the Plaintiffs’ against the Defendant claiming for the refund of USD 60,000. 3. The Defendant did not file a Written Statement of Defence despite having been served by Substituted Service following the order of the court. A judgment in default against the Defendant was then entered by the Deputy Registrar who then forwarded the matter for formal proof of the Plaintiffs’case.

Representation

1. The Plaintiff was represented by M/s Emoru & Co Advocates.

Hearing

1. The matter proceeded exparte against the Defendant in accordance with Order 9 Rule 20 (1) (a) of the Civil Procedure Rules. The burden of proof remains on the plaintiff to prove the case on the balance of probabilities as held in case of Yoswa Kityo vs Eriya Kaddu [1982] HCB 58. At the hearing the Plaintiff led one witness, namely Wang Shujun, the Managing Director of the 1st Plaintiff as PWI who gave evidence by witness statement and referred to the Exhibits PEX.1 to PEX.4 in the Plaintiff’s Trial Bundle.

**Issues**

1. The Court adopted the following issues under the Joint Scheduling Memorandum: 2. Whether there was a breach of contract by the Defendant? 3. Whether the Plaintiffs’ are entitled to recover the claimed sum of USD 60,000? 4. Remedies available

**RESOLUTION**

**Issue No. 1: *Whether there was a breach of contract by the Defendant?***

1. A contract is defined under ***Section 10 of the Contracts Act 2010*** as an agreement made with the free consent of parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention to be legally bound. 2. From the testimony and evidence adduced on record by PW1, Mr. Wang Shujun there was the 1st Memoranda of Understanding (PEX.1) signed on 13th May 2019 between the 1st Plaintiff Company represented by PW1 and the Defendant Company represented by Mr. Agaba Moses Kambanda in respect of provision consultancy services in the bidding process for the construction of the Masaka-Mbarara 220kv Electricity Transmission line to a Contractor nominated by the 1st Plaintiff for the consideration of USD 40,000. 3. The 1st MOU was followed by a Contract of Indemnity (PEX.2) signed between the same parties that stipulated that the 1st Plaintiff had identified a company called North East Electric Power Engineering Corporation of China Energy Engineering Group, who expressed interest to participate in the bidding process of Onduparak-Yumbe transmission line and the Masaka-Mbarara 220kv Electricity Transmission line. That the Defendant would provide the necessary assistance, information and documents to assist the 1st Plaintiff and the said Contractor to prepare s successful bid and in consideration the 1st Plaintiff would advance the Defendant the sum of USD 40,000 which receipt was acknowledged by the signature of the Defendants Managing Director to the Contract. Clause 3 of the Contract of Indemnity provided that should it happen that the best evaluated bidder for the Onduparak-Yumbe transmission line and the Masaka-Mbarara 220kv Electricity Transmission line is not North East Electric Power Engineering Corporation of China Energy Engineering Group, the Defendant would reimburse the 1st Plaintiff the sums paid within sixty (60) of the Notice of the successful bidder and thereby issued a postdated cheque Number 248 of Equity Bank in guarantee of the funds received. 4. I find that this MOU read together with the Contract of Indemnity created a binding contractual agreement between the 1st Plaintiff and the Defendant with a lawful intent and consideration as was held in the case of *Olanya Hanninqton versus Acullu Hellen HCCA No. 38 of 2016.* 5. The evidence adduced of the second contract was in respect of provision of consultancy services for the bidding process for the construction of water and sanitation infrastructure for Kagera water works under National Water and Sewerage Corporation (NWSC). On 9th March 2020 the 1st Plaintiff, 2nd Plaintiff and the Defendant signed a Memorandum of Understanding (PEX.4) under which the 1st Plaintiff and the Defendant would provide Consultancy services to the 2nd Plaintiff for preparation of a successful bid to be pre-qualified for the NWSC Project for Water and Sanitation Infrastructure for Kagera Works for the consideration of USD 30,000. 6. It was agreed under Clause 5 of the MOU that the 2nd Plaintiff would pay the Defendant USD 25,000 on signing of the MOU and the balance of USD 5,000 immediately after the tender advertisement. Under Clause 6 of the MOU it was provided that if the 2nd Plaintiff as the identified Contractor fails to get the contract, the Defendant would refund the monies paid and for this reason the Defendant was to issue a postdated cheque as a guarantee when receiving the corresponding payment. 7. This MOU was followed by an Addendum signed by the three parties on 22nd May 2020 in which it was acknowledged that the Defendant was unable to submit bids for the Kagera water works project and in lieu it was to be replaced with similar consultancy services for the Construction Mbarara-Masaka water and waste water works under NWSC. Under Clause 3 of the Addendum it was stipulated that the Defendant had already been paid USD 20,000 under the Principal MOU with the balance of USD 10,000 to be paid on publication of the list of pre-qualified service providers under the project. Clause 4 of the Addendum required the Defendant to deposit as security for due performance of their obligation under the Principal MOU and its Addendum, four cheques all totaling to Ugx 73,400,000. I find that the second MOU between the 1st Plaintiff, 2nd Plaintiff and the Defendant when read together with the Addendum created a binding contractual agreement between the 1st Plaintiff and the Defendant with a lawful intent and consideration as was held in the case of *Olanya Hanninqton versus Acullu Hellen(supra).* 8. A breach of contract occurs when a party neglects, refuses or fails to perform any party of its bargain or any term of the contract, written or oral, without a legitimate legal excuse. This was held in the case of ***United Building Services Ltd Vs Yafesi Muzira T/A Quickest Builders and Co. [2006] UG Comm 15*** where court held that;

*“A breach of the contract occurs when one or both parties fail to fulfill the obligations imposed by the terms of the contract.”*

1. From the testimony of PW1, none of the identified contractors under the two Memoranda were awarded any contracts and the Defendant did not heed to the demand to reimburse the Plaintiffs’ for the sums advanced for the consultancy services as agreed in the under the MOUs. Further, the evidence added of four cheques issued by the Defendant as security/guarantee of the monies advanced by the Plaintiffs to be reimbursed were returned by Equity Bank with the annotation *“Bounced cheque. Insufficient funds. Return to drawer”*. This is clear evidence of failure by the Defendant to fulfill the obligations under the MOUs.

Based on the evidence adduced I find that the Defendants breached the two MOUs.

Issue No. 1 is answered in the affirmative.

**Issues No.2 and 3: *Whether the Plaintiffs’ are entitled to recover the claimed sum of USD 60,000 and Remedies available***

1. Section 61 of the Contracts Act 2010 provides for Compensation for loss caused by breach of contract to the party that suffers the breach. In the case of ***Akware Caroline Osilo Vs Gaaga Enterprises Ltd, HCCS No. 271 of 2011***, it was held that a plaintiff who suffers damage due to a wrongful act of the defendant must be put in the position, he would have been had he not suffered the wrong. Under the Plaint the Plaintiffs jointly sought for Special damages, General Damages, Punitive and exemplary damages and Costs of the suit. 2. From the evidence adduced, the 1st Plaintiff under the first MOU advanced to the Defendant USD 40,000 which the Defendant acknowledged receipt in writing through its Managing Director by appending his signature on the Contract of Indemnity. Under Clause 3 of this MOU, the Defendant committed to refund the USD 40,000 in the event that the contractor identified by the 1st Plaintiff was not selected as the best evaluated bidder. Further the Defendant, under the second MOU and Addendum was advanced the sum of USD 20,000 which he also undertook to reimburse in the event the 2nd Plaintiff was not on the list of successful pre-qualified service providers. 3. The Defendant has not refunded the plaintiffs the monies paid out for consultancy services as agreed under the MOUs and the cheques issued by the Defendant as security were dishonored due to insufficient funds. However, the Plaintiffs did not prove the special damages prayed for of USD 271 for transport and telephone costs. It is trite law that special damages must not only be strictly pleaded but also proved as held in the case of ***Margaret Kato & Anor versus Nuulu Nalwoga SCCA No. 03 of 2013***. Apart from mentioning the figure of USD 271 there was no documentary evidence tendered to support this claim and it is therefore denied. I find that the Plaintiffs have proved on the balance of probabilities the special damages of USD 60,000 and an award for recovery of this sum from the Defendant is accordingly made. 4. With regards the interest prayed for on the sum of USD 60,000, under **Section 26 (1), the Civil Procedure Act Cap 71,** it is a settled position of law that the interest is awarded at the discretion of court and it must be exercised judiciously considering all circumstances of the case as held in the case of ***Uganda Revenue Authority vs Stephen Mabosi SCCA No. 1 of 1996.*** Since the Defendant has kept the plaintiff’s money for more than two years and this was a commercial arrangement, I award interest of 18% per annum from the time of filing the suit till full payment. 5. With regard to the general damages, the plaintiffs averred that the actions of the Defendant have caused the Plaintiff to suffer great inconvenience, loss of use of its funds, financial embarrassment and anxiety for which they seek general damages. The general principle underlying the award of general damages in contract is that the claimant is entitled to full compensation for his losses; i.e. the principle of *“restitutio in integrum*.” In the case of ***Uganda Commercial Bank Vs Kigozi [2002] 1 EA 305***court held that;

*“In assessment of the quantum of damages, courts are mainly guided by the value of the subject matter, the economic inconvenience that a party may have been put through and the nature and extent of the breach or injury suffered”.*

1. Damages are designed to compensate for an established loss and not to enrich an aggrieved party. I do not find any circumstances of this case warranting the award of punitive damages. Accordingly, I find that UGX 10,000,000 is sufficient as general damages and it is awarded. I award interest at court rate on the general damages from the date of judgment till full payment. 2. With regard to the costs of the suit, it is the established principle of law under **Section 27 (2) of the Civil Procedure Act** that costs of any action, cause or matter shall follow the event unless court for good cause orders otherwise. The Plaintiffs being the successful party in this case is entitled to costs of the suit. 3. In the final result, judgment is entered for the Plaintiffs against the Defendant with the following orders- 4. The Defendant to pay the Plaintiffs the contractual amount of USD 60,000. 5. Interest is awarded on the above amount at 18% per annum from the date of filing this suit till payment in full. 6. The Defendant is to pay the Plaintiffs UGX 10,000,000 as general damages. 7. Interest at the court rate on the general damages from the date of judgment till payment. 8. Costs of the suit to the Plaintiffs.

It is so ordered

**CORNELIA KAKOOZA SABIITI**

**JUDGE**

**Date: 20th October 2023**