[2024] UGCommC 178

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] CIVIL SUIT NO. 221 OF 2023**

| 10 | TURKISH AIRLINES INC | ] | PLAINTIFF | |----|------------------------------------------|---|------------| | | VERSUS | | | | | 1.<br>KK FRESH PRODUCE EXPORTERS LIMITED | ] | | | 15 | 2.<br>DR. JAMES KANYIJE | ] | DEFENDANTS | | | 3.<br>DR. DATTATREY NAGIREDDY | ] | |

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

#### 20 **JUDGMENT**

#### **Introduction**

The Plaintiff is a private limited liability company dealing in airlines business. The Plaintiff brought this suit against the Defendants jointly and severally for breach of the forwarder

25 agent agreement. The Plaintiff sought a number of reliefs namely;

- a) A declaration that the 1st Defendant breached the above said forwarder agent agreement executed on 14 January 2022. - b) A declaration that the 2nd and 3rd Defendant obtained freight services from the Plaintiff with intent to defraud and cheat the plaintiff. - 30 c) A declaration that the bank guarantee vide Reference No. UTBCFP7102110 issued by United Trust Bank SARL presented to the Plaintiff by the 1st Defendant was procured through misrepresentation occasioned by the 2nd and 3rd Defendants with intent to fraudulently obtain freight services from the Plaintiff through the 1st Defendant. - d) An order directing the Defendants jointly to pay USD 576,334.38 to the Plaintiff being 35 the outstanding sum for the freight services extended to the 1st Defendant by the Plaintiff and USD 28,545 being the contractual interest thereto.

- 5 e) An award of punitive, exemplary, aggravated, special and general damages be made to the plaintiff. - f) Interest on (D) and (E) at a rate of 25% per annum from the date of the cause of action until payment in full. - g) Costs of the suit. - 10 h) Any other and/or incidental relief this Honourable Court deems fit.

The Plaintiff contends that the 1st Defendant exports fresh foods to places outside of Uganda. Between 2018 and 2022, the Plaintiff and 1st Defendant had a business relationship through which they offered freight services to the 1st Defendant. The 2nd and 3rd Defendants are

15 directors of the 1st Defendant.

The Plaintiff alleges that the 1st Defendant, who was at all times represented by its Managing Director, the 2nd Defendant, negotiated freight prices with the Plaintiff's officials. The Plaintiff contends that there was a good business relationship with the Defendants and on many 20 instances the 1st Defendant was provided freight services on a non-cash basis. In order to

secure payment of the freight services provided, the 1st Defendant was required to take out a Bank Guarantee in favour of the Plaintiff. During the course of their business relationship, among others, the 1st Defendant issued the following guarantees;

| NATURE | ISSUER | REFERENCE | QUANTUM | Date | |-------------|-------------------|---------------|---------------|-----------| | | | NUMBER | | | | Performance | Standard | 328020072293 | USD 180,000 | 20 | | Guarantee | Chartered Bank | | | September | | | | | | 2018 | | Bank | Standard | 328020085421 | USD 220,000 | 7<br>June | | Guarantee | Chartered Bank | | | 2019 | | | | | | | | Bank | United Trust Bank | UTBCFP7102110 | USD 1,000,000 | 7 October | | Guarantee | SARL | | | 2021 | | | | | | |

- 5 The Plaintiff contends that on the basis of the above guarantees, and more especially the guarantee issued by United Trust Bank SARL ["UTBS"], the Plaintiff continued to provide freight services between the months of October 2021 and May 2022. Despite providing the freight services as agreed, the Plaintiff contends that the 1st Defendant failed and without reason refused to make any payments for the services provided by the Plaintiff's for the - 10 months of October-December 2021.

Because of the above non-payment, the Plaintiff contends that it was prompted to make a demand for payment vide a letter dated 18 January 2022. The Plaintiff contends that 1st Defendant upon receipt of the letter undertook to cause payment of the outstanding sums

15 and requested the Plaintiff to keep providing the freight services as there was an existing guarantee from UTBS guaranteeing payment for the same services.

The Plaintiff alleges that it heeded to the above request and kept providing the services until May 2022 when the sums outstanding had accumulated to USD 576,334.8. The Plaintiff

20 contends that both parties undertook a reconciliation where the 1st Defendant's indebtedness was confirmed as USD 576,334.8.

The Plaintiff contends that, there being no repayment by the 1st Defendant, it took measures to liquidate the guarantees issued in its favour, in order to secure payment of the sums owing.

Below is a tabular summary of the measures alleged to be taken by the plaintiff;

| No | Measure | Result | |----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | 1. | Wrote to Eco Bank Uganda Limited ["EBUL"] vide<br>letter dated 24 February 2022 requesting bank to<br>initiate the process of liquidating the bank<br>guarantee. | On 1 March 2022 EBUL<br>responded<br>confirming<br>that<br>it<br>was<br>only<br>an<br>advising<br>bank<br>at<br>the<br>request<br>of<br>Eco<br>Bank<br>Tanzania<br>Limited<br>["EBTL"] prior to relaying |


| | | the bank guarantee to | |----|-----------------------------------------------------|---------------------------------| | | | Standard Chartered Bank | | | | for their final advising of | | | | the Plaintiff. | | 2. | On 19 April 2022, the Plaintiff wrote to UTBS | On 21 April 2022, UTBS | | | requiring them to cash out the bank guarantee to | responded<br>outlining<br>a | | | enable the Plaintiff recover the outstanding | number of discrepancies | | | balance. | that<br>required<br>to<br>be | | | | addressed before cashing | | | | out the bank guarantee. | | 3. | Plaintiff held a meeting with EBUL on 6 May 2022 | UTBS<br>responded | | | to discuss UTBS' response. | insisting that the demand | | 4. | Pursuant to the guidance rendered by officials of | to<br>liquidate<br>the<br>above | | | EBUL, by a letter dated 21 June 2022, the Plaintiff | guarantee could only be | | | provided a response to the issues raised in the | made<br>through<br>swift | | | letter by UTBS. | messages. | | 5. | On 1 August 2022, the Plaintiff requested its | Standard Charted Bank | | | banker, Standard Chartered Bank to initiate a | agreed<br>to<br>provide<br>the | | | | | | | swift channel as the plaintiff's bankers and final | above assistance subject | | | advising bank on the subject guarantee. | to signing an indemnity | | | | form which was signed | | | | and<br>submitted<br>vide<br>a | | | | letter dated 23 August | | | | 2022. | | 6. | On 24<br>August 2022, Standard Chartered Bank | On 6 September 2022, | | | Uganda Limited sent out the required swift | EBUL relayed the swift | | | message to EBUL for reliance to EBTL and finally | message to EBTIL. | | | UTBS. | | | 7. | Due to the fact that the guarantee was about to | No payment secured. |


| | to ensure that EBTIL quickly relayed the swift | | |-----|----------------------------------------------------|---------------------------------| | | message to UTBS. | | | 8. | On 12 September 2022, the Plaintiff sent UTBS | UTBS sent the Plaintiff | | | another claim reflecting all the changes that they | another<br>discrepancy | | | had in the past proposed. | notice on 22 September | | | | 2022 indicating that it | | | | needed<br>the<br>1st | | | | Defendant's<br>consent<br>to | | | | make<br>payment<br>on<br>the | | | | guarantee. | | 9. | On 22 September 2022, the Plaintiff reached<br>out | The<br>consent<br>was | | | to the 2nd and 3rd Defendants to issue the said | purportedly<br>issued. | | | consent | | | | The Plaintiff engaged lawyers in the United | | | | Kingdom to expedite payment of the claim on the | | | | guarantee by UTBS. | | | 10. | On 29 September 2022, the Plaintiff sent a | UTBS<br>notified<br>the | | | revised claim addressing the new discrepancies | Plaintiff<br>that<br>the<br>2nd | | | pointed out by UTBS. | Defendant<br>did not have | | | | authority<br>to<br>sign<br>the | | | | consent to demand and | | | | the person so authorized | | | | was the 3rd Defendant. | | | | | | | | UTB further notified the | | | | Plaintiff<br>that<br>the<br>3rd | | | | Defendant<br>had objected | | | | to the liquidation of the | | | | guarantee. |

| 11. | On 5 October 2022, the Plaintiff submitted a final | Claim not paid because of | |-----|----------------------------------------------------------|----------------------------| | | claim reflecting all previously proposed changes | the<br>3rd<br>Defendant's | | | by<br>UTB<br>and<br>accompanied<br>by<br>all<br>relevant | refusal. | | | documents. | | | | | On 10 October 2022, 2nd | | | | Defendant wrote a letter | | | | to UTBS revoking earlier | | | | consents permitting the | | | | Plaintiff to liquidate the | | | | said guarantee. |

The Plaintiff contends that the 2nd and 3rd Defendants as directors of the 1st Defendant deliberately misrepresented to the Plaintiff when they furnished a guarantee which on its face was unconditional yet in fact it was conditional upon the 3rd Defendant's consent and that the guarantee was by the 1st Defendant yet it in fact it was by the 3rd Defendant. The 10 Plaintiff alleges a connivance between the Defendants to defraud it of the proceeds of its

freight services.

Accordingly, the Plaintiff sought the following reliefs:

- i. USD 576,334.8 as freight fees - 15 ii. USD 28,545 as contractual interest - iii. USD 20,000 as professional fees and disbursements paid to M/s Katende, Ssempebwa to act for the Plaintiff between January 2022 and October 2022 to oversee liquidation of the Bank guarantee - iv. USD 850 as professional fees and disbursements paid to M/s Fin & Law Co. Advocates 20 to follow up on the swift messages to EBTL. - v. USD 1,500 being professional fees and disbursements paid to Oracle Solicitors to follow up payment of the plaintiff's claim from UTBS. - vi. USD 500 being courier costs

5 The Plaintiff also prayed for various declarations, interest, punitive, exemplary, aggravated, special and general damages as well as costs of the suit. The Plaintiff contends that it made various demands for payment from the Plaintiff without success, hence this suit.

Briefly, the case of the Defendants is that the 2nd and 3rd Defendants were not privy/parties to the forwarder agent agreement executed by the Plaintiff and the 1st Defendant. The 1st 10 Defendant disputes any allegations of breach and contends that the Plaintiff accepted the bank guarantee as it were. The Defendants contend that the failure by the Plaintiff to cash the guarantee which would have extinguished the 1st Defendant's debt cannot be blamed on the Defendants. The Defendants contend that they are not guilty of any misrepresentation or 15 any fraud.

#### Pre-Trial Proceedings

Prior to hearing of this suit, the Plaintiff filed HCMA 755 of 2023 seeking the following reliefs;

- (a) The written statement of defence filed by the respondents on 30th March 2023 in Civil - 20 Suit 0221 of 2023 be struck out for offending the provisions of the Civil Procedure Rules. - (b) The Respondents' Written Statement of Defence filed in Civil Suit 0221 of 2023 is a sham, frivolous, vexatious and an abuse of court process. - (c) Judgment be entered against the plaintiffs on such terms as prayed in the plaint. - 25 (d) Costs of this application be granted to the applicant.

The Defendants filed a response and made submissions in opposition of the application. This court considered the above application, inter alia, and found that

(a) The Respondents'/Defendants' defence in the main suit consists of general denials.

- 30 (b) The Respondents'/Defendants' defence in the main suit is deemed an admission of the contents of the plaint save for paragraphs 5(b), 5(d) and 5(e) of the defence. - (c) The trial of the main suit shall proceed only in regard to the grounds of defence contained in paragraphs 5(b), 5(d) and 5(e) of the defence.

- 5 Consequently, the Defendants herein filed HCMA 2291/2023 seeking to stay proceedings in the main suit pending their appeal against the decision and orders in HCMA 755/2023. Upon hearing the parties, this court consequently denied that application, principally ruling that the stay was not in the interests of justice as it would delay resolution of this dispute and might result into a loss of evidence necessary to resolve the dispute. Consequently, this court 10 ordered that the hearing proceed only on the grounds of defence set out in 5(b), 5(d) and - 5(e) of the defence and these are; - i. The 2nd Defendant is not privy to the contract between the 1stDefendant and Plaintiff and is not liable in respect of the same in any way. - ii. The Plaintiff accepted the guarantee as it were which was a valid guarantee 15 enforceable in accordance with the terms set therein and within the timeframe set therein. - iii. Failure to enforce the guarantee in time before its expiry which would have been sufficient payment to discharge the obligations of the 1st Defendant towards the Plaintiff cannot be blamed on the plaintiffs. - 20

Subsequent to the determination of the above applications the Defendants were given several opportunities to participate in the trial of this suit, the neglected and or refused to do so. On March 11, 2024 this court was constrained to issue an order to proceed exparte. The said order was set aside by Consent of the Plaintiff on April 17, 2024 in order that the Defendants

25 take part in the proceedings and the matter fixed for hearing on April 25th 2024. The subsequently failed to do so and on April 25, 2024 Court again was constrained issue another order to proceed exparte the Defendants having not appeared for the scheduled hearing.

## **Representation**

30 The Plaintiff was represented by M/s Katende, Ssempebewa & Co. Advocates while the Defendant s were represented by M/s JOSKA Advocates.

## **Decision**

The following issues were framed for determination


- (a) Whether the 2nd Defendant is liable together with the 1st 5 and 3rd Defendants for the Plaintiff's claims in the suit. - (b) Whether the Defendant failed and/or refused to enforce the Bank Guarantee to recover the outstanding sum. - (c) What remedies are available to the parties. - 10

I note that, of the issues raised above, none covers the question as to whether the guarantee issued was not unconditional as alleged by the Plaintiff. In their defence, the Defendants denied that the guarantee as issued was unconditional or intended to so be, and as such that they were not liable in misrepresentation. I would therefore find it necessary to add a new 15 issue to this effect. The revised issues are therefore as below:

(a) Whether the 2nd Defendant is liable together with the 1st and 3rd Defendants for the

Plaintiff's claims in the suit.

- (b) Whether the Defendants failed and/or refused to enforce the Bank Guarantee to recover the outstanding sum. - 20 (c) What remedies are available to the parties.

# **Issue One: Whether the 2nd Defendant is liable together with the 1st and 3rd Defendants for the Plaintiff's claims in the suit.**

The 2nd Defendant contends that he is not liable for the claims of the Plaintiff in the suit, 25 having not been a party to the agreement between the Plaintiff and the 1st Defendant. The Plaintiff for its part alleges that while acting as the 1st Defendant's Managing Director, the 2nd Defendant used the 1st Defendant as a vehicle to obtain freight services with the intention of cheating the Plaintiff, thus unjustly enriching himself. The Plaintiff also accuses the 2nd Defendant of misrepresenting that the guarantee was unconditional and that it was issued

30 by the 1st Defendant whereas not.

I have considered the evidence on record, principally paragraphs 6-11 and 44 of the witness statement of the Plaintiff. The thrust of this testimony is that at all material times, the 2nd Defendant was acting as Managing Director of the 1st Defendant through whom the said bank

35 guarantee was furnished to the Plaintiff, it is the 2nd Defendant who obtained the freight services utilized by the 1st Defendant and it is the 2nd Defendant who represented the 1st 5 Defendant during the entire process of trying to liquidate the guarantee.

In my view, the starting point is to consider the nature of this misrepresentation. The Plaintiff's evidence is to the effect that the 2nd Respondent misrepresented to the Plaintiff

10 that there existed an unconditional guarantee in favour of the Plaintiff company issued by the 1st Defendant.

It must be noticed that there is a difference between contractual misrepresentation on one hand, and the tort of deceit on another. See **Section 16 of the Contracts Act, 2010, Laura** 15 **Kinalwa v Compuscan CRB Ltd HCCS 237/2020, Fredrick K. Zaabwe v Orient Bank Limited SCCA 4/2006, Lawrence Tumusiime v Patrick Idringi Salvado HCCS 321/2018, AZK Services Ltd v Crane Bank Ltd HCCS 334/2016**

The law contract distinguishes between two types of misrepresentations; 20 misrepresentations in constituting a contractual promise and misrepresentations external to the contract. A misrepresentation of facts which does not constitute a contractual promise justifies the grant of remedies to the innocent party to reflect the part such misrepresentation played in inducing entry into the contract. See **Chitty On Contracts, 6th Edition (Hong Kong Volume) Para 21-043-21-044, Chesire, Fifoot & Furmston's Law of** 25 **Contract, 16th Edition, Chapters 6 and 9, Trietel, The Law of Contract, 14th Edition,**

### **Paras 9-04-9-167**

It is the evidence of the Plaintiff that the parties entered an agreement on 14 January 2022 to regularize their activities. Clause 5 of that agreement obliged the 1st Defendant to provide

30 advance default guarantee in the form of cash deposit and/or bank guarantee. The evidence of the Plaintiff, which I found truthful was that the parties transacted on the basis of the guarantee for the periods October-December 2021, in which the Defendants made no payment, and the services were provided on the basis of the oral contract (which was regularized on 14 January 2022) and the guarantee.

5 In my view, the 2nd Defendant's misrepresentation was the basis of the initial oral and later written contract and the performance of the same by the provision of the freight services. At the very least, the misrepresentation was external to the contract and the 2nd Defendant is liable for the injury it caused the Plaintiff in entering into the contract.

10 Fraud

Also, as against the 2nd Defendant, the Plaintiff alleged that the actions of the 2nd Defendant were fraudulent.

Fraud is defined to mean an intentional perversion of truth aimed at obtaining an undue

15 benefit of depriving someone of a benefit due to them. See **Fredrick Zaabwe v Orient Bank Limited SCCA 4/2006**

The position of the law is that allegations of fraud are of a serious nature and must be strictly proved, calling for a standard, although not as high as proof beyond reasonable doubt, that is

20 higher than the ordinary balance of probabilities that is normally applicable to civil matters. See **KCB Bank v Paul Alinda HCCA 37/2016, Ratlal G. Patel v Baiji Makayi (1957) EA 31 at 317, Fredrick Zaabwe v Orient Bank & Others, SCCA No. 4 of 2006.**

In the present case, the Plaintiff led evidence that the 2nd Defendant provided the guarantee 25 and was at all material times acting for the 1st Defendant in sourcing the freight services, including in representing that in default of payment, the same guarantee could be liquidated to recover the unpaid freight fees.

It is clear to me that the parties' relationship envisaged an unconditional guarantee as 30 security for non-payment of the freight fees. The guarantee was intended to be a certain security that ensured that in the event the 1st Defendant did not pay, the freight fees were recovered without delay, argument or cajole. From the evidence, 2nd Defendant as aware that the guarantee was conditional on the acceptance of the 3rd Defendant and knew that the guarantee was not issued by the 1st Defendant but rather the 3rd Defendant. The position of

35 the 2nd Defendant as Managing Director of the 1st Defendant and the person managing the relationship and transacting with the applicant put him in position to know if a guarantee


5 had been issued by the 1st Defendant as he would have been the person causing the bank to provide the above and executing any agreement or instructions to this effect.

In light of the evidence on record, it is my finding that the 2nd Defendant knew that the guarantee necessary was one issued by the 1st Defendant and one which was unconditional

10 in nature and represented that the UTBS guarantee was a compliant one whereas not.

I therefore find that the 2nd Defendant is jointly liable with the rest of the Defendants for fraud.

15 **Issue Two: Whether the Defendant failed and/or refused to enforce the Bank Guarantee to recover the outstanding sum.**

Here, the Plaintiff led evidence that it took measures to liquidate the guarantee and the same was not liquidated because it required an applicant's consent before the same could be liquidated which consent was of the 3rd Defendant who refused to issue it. The Plaintiff

- 20 further led evidence that subsequently, the 2nd Defendant wrote to UTBS retracting the consent he had previously issued to liquidation of the guarantee. This evidence was principally adduced in paragraphs 12-41 of PW1's witness statement which was admitted as his evidence in chief. To this end, the Plaintiff exhibited documents labelled PEX 7-PEX 28. From the evidence on record, it is clear that the Plaintiff took the measures to liquidate the - above guarantee and the same was not liquidated because it required the consent of the 3rd 25 Defendant which was not issued.

# **Section 71** of the Contracts Act, 2010 provides thus

"(1) The liability of a guarantor shall be to the extent to which a principal debtor is liable,

30 unless otherwise provided by a contract.

(2) For the purpose of this section the liability of a guarantor takes effect upon default by the principal debtor."

A guarantee is a contractual agreement to make payment of sums due and owing in the event

35 of default by the principal borrower. The Guarantee is a separate security from any of other securities that may have been provided and is enforceable if there is a default by the principal 5 borrower in the event of a default, unless there is a contrary provision of law, a creditor is entitled to pursue all securities available simultaneously. The creditor need not first pursue one remedy before they can exercise another.

See **Barclays Bank of Uganda v Jing Hong & Guo Odong HCCS 35/2009, Moschi V Lep Air Services and Ors [1973] AC 345, Paul Kasagga and Another v Barclays Bank (u) Ltd**

10 **HCMA 0113/2008, MTK Uganda Limited v Housing Finance Bank HCMA 62/2021, Pamela Anyoti v Root Capital Inc. HCMA 244/2023**

The import of the above is that, unless it is a statutory or contractual pre-condition, the failure or refusal to liquidate a guarantee is not a defence to indebtedness. This is because a 15 guarantee such as the one herein is a security. The purpose of the guarantee is to provide quick relief to the creditor. Once a default occurs entitling a party to liquidate the guarantee they may (a) sue to recover the sums outstanding, (b) choose to liquidate the guarantee or

- (c) take options (b) and (a) simultaneously. - 20 Accordingly, the non-liquidation of the guarantee in the present circumstances was not even a ground of defence against an action for recovery of the debt as there was no statutory or contractual pre-condition to liquidate the guarantee before commencing an action for recovery of the sums outstanding.

### 25 **Issue Three: What remedies are available to the parties?**

Having held as above, it follows that this court has to explore the remedies available to the parties. The Plaintiff sought the following remedies in its plaint:

- (a) A declaration that the 1st Defendant breached the forwarder agent agreement executed with the Plaintiff dated 14 January 2022 - (b) A declaration that the 2nd 30 and 3rd Defendant obtained freight services from the Plaintiff through the 1st Defendant with intent to defraud and cheat the Plaintiff. - (c) A declaration that the bank guarantee vide Reference No. UTBCFP7102110 issued by UTBS presented to the Plaintiff by the 1st Defendant was procured through misrepresentation with intent to fraudulently obtain freight services from the 35 Plaintiff through the 1st Defendant. - Page **13** of **25**

- 5 (d) An order that the Defendants jointly pay USD 576,334.38 to the Plaintiff being the outstanding sum for the freight services extended to the 1st Defendant by the Plaintiff and USD 28,545 being the contractual interest thereto. - (e) An award of punitive, exemplary, aggravated, special and general damages be made to the Plaintiff. - 10 (f) Interest on (d) and (e) at a rate of 25% per annum from the date the cause of action arose until full payment. - (g) Costs of the suit. - (h) Any other and/or incidental relief this Honourable Court may deem fit. - 15 Reliefs (a) and (b) require no further consideration in light of the ruling of this court in HCMA 2291/2023.

A declaration that the bank guarantee vide Reference No. UTBCFP7102110 issued by UTBS presented to the Plaintiff by the 1st Defendant was procured through misrepresentation

20 with intent to fraudulently obtain freight services from the Plaintiff through the 1st Defendant.

From the findings of this court above, the evidence of the Plaintiff which was accepted by the court is that the Defendants fraudulently misrepresented the performance guarantee issued by UTBS to be unconditional and issued by the 1st Defendant whereas not, with the intention

25 to fraudulently obtain freight services. Therefore, this court would issue the declaration that the Defendants fraudulently obtained freight services from the Plaintiff by misrepresenting the nature and character of the guarantee issued by UTBS.

An order that the Defendants jointly pay USD 576,334.38 to the Plaintiff being the

30 outstanding sum for the freight services extended to the 1st Defendant by the Plaintiff and USD 28,545 being the contractual interest thereto.

Owing to the findings in issues 1 and 2 above, I find that the Plaintiff is entitled to this order. With specific regard to the claim for interest, I note that the same is explicitly provided for under Clause 4 of the forwarder agent agreement and accordingly make the finding that the

35 Plaintiff is entitled to recover the same from the Defendants.

5 An award of punitive, exemplary, aggravated, special and general damages be made to the plaintiff.

Lord Greene MR, in **Hall Brothers SS Co. Ltd V. Young [1939] 1 KB748, at 756 (CA)** defined the term damages thus:

**"'Damages' to an English lawyer imports this idea, that the sums payable by way of** 10 **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."**

Damages are, in their fundamental character, compensatory, not punishment. Whether the 15 matter complained of is a breach of contract or tort, the primary function of damages is to place the Plaintiff in as good a position, so far as money can do it, as if the matter complained of had not occurred. Accordingly, damages are usually measured by the material loss suffered by the plaintiffs. As a general rule, the Plaintiff must not receive more, nor should he receive less than the appropriate measure of damages commensurate with his or her 'material loss'.

- 20 It is trite law that damages are the direct probable consequence of the act complained of. see *Storms versus Hutchinson (1905) AC 515,* **Chief Justice (Emeritus) Justice Bart M. Katureebe, Principles Governing Award of Damages in Civil Cases. Paper Presented At The Induction Of New High Court Judges at Entebbe Resort Beach Hotel. 18 June 2008.** - 25 In his treatise on damages cited above, Justice Katureebe enunciated the principles governing the award of damages, as distilled from various precedents of the courts. These include:

1. No damages can be given on an indictment.

2. In all civil actions, the law does not so much regard the intent of the actor as the loss and damage to the party suffering. This rule is recognised more in breach than 30 observance. This does not always mean that a court proceeded on wrong principle.

3. The law presumes damage in respect of any unlawful act. The essence of this rule is that wherever there is a breach of a contract or any injury to a legally enforceable right or interest, nominal damages are recoverable even though the Plaintiff may not be able to prove actual damage. See **Ongom & Another v. Attorney-General [1979] HCB 267;** 35 **Bhadelia Habib Ltd. v. Commissioner General, URA [1997-2001] UCL 202; Ssendi**

# 5 **Edward v. Crown Beverages Ltd [2005] 2 ULSR 7; Karim Hirji v. Kakira Sugar Works Ltd. [2005] 2 ULSR 60**

4. Public policy considerations may operate to prevent a Plaintiff from claiming damages in an unworthy cause. Courts are the custodians of public morals and they may justifiably preclude a Plaintiff from an award of damages in order to register their disapproval with 10 the Plaintiff's case if it offends public policy or outrages morality.

## General Damages

The Plaintiff claimed for general damages. General damages are what the law presumes to be the direct, natural or probable consequence that will have resulted from the Defendant's

- 15 breach of contract. They are normally damages at large and can be nominal or substantial depending on the circumstances of each case. Nominal damages will be awarded where the court decides in the light of all the facts that no actual damage has been sustained. - The function of nominal damages is to mark the vindication, where no real damage has been 20 suffered, of a right which is held to be so important that its infringement attracts a remedy. Substantial damages will be awarded when actual damage is proved to have been caused. In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it is more logical and just rather than tie the Plaintiff to the date of the original breach, to assess damages as at the date when (otherwise 25 than by his or her default) the contract is loss. See **Neville v. London Express Newspaper Ltd [1919] A. C. 368, Johnson v. Agnew [1979] 2 W. L. R. 487, Waigobe (U) Limited v Sai Beverages Limited HCCS 16/2017** - The thrust of the plaintiff's claim for damages is that the Defendants acted wrongfully when 30 they neglected to cause payment of the freight fees, when they misrepresented the nature and character of the guarantee provided and when they wrongfully prevented encashment of the same guarantee. The effect of this, according to the plaintiff's evidence, was that the Plaintiff was deprived from monies for which it had already provided services.


- 5 Any business/entity is entitled to be paid in accordance with the agreement with the person obliged to make payment. A business which provides services and is not paid for the same is disadvantaged because it incurs expenses (cost of sales) which are not recouped by revenue. This accumulation of receivables is disadvantageous to the business and may even cause it to close or struggle financially. The Plaintiff is a player in the airlines business which is - 10 notorious for being highly competitive and to require significant resources and liquidity for one to remain competitive or even present in the market. The profit margins are narrow, the competition cutthroat and the market is liable to fairly open avenues of entry by competitors (called "open skies").

See also **Rigas Doganis, The Airline Business in The Twenty First Century. Routledge.**

- 15 **2001. ISBN 0–415–20882–3, Button, K., Martini, G. and Scotti, D. (2017a). The Economics and Political Economy of African Air Transport. Routledge, Macrae, C. (2014). Close Calls: Managing Risk and Resilience in Airline Flight Safety. London: Palgrave Macmillan UK: Imprint: Palgrave Macmillan.** - 20 The Defendants wrongfully and fraudulently obtained freight services for a significant quantum of money without making payment for the same services. Accordingly, I find that general damages of USD 10,000 as sufficient compensation to the Plaintiff.

# Special Damages

- 25 Special damages, on the other hand, are such as the law will not infer from the nature of the act. They do not follow in the ordinary course. They are exceptional in their character, and, therefore, they must be claimed specially and proved strictly. Special damages relate to past pecuniary loss calculable at the date of trial - 30 It is trite law that in all cases where special damages are claimed, they must be pleaded with sufficient specificity and strictly proved:

**See Musoke v. Departed Asians Custodian Board [1990-1994] EA 219; Uganda Telecom v. Tanzanite Corporation [2005] EA 351; Mutekanga v. Equator Growers (U) Ltd [1995- 1998] 2 EA 219; Uganda Breweries Ltd. v. Uganda Railways Corporation Supreme Court**

35 **Civil Appeal No. 6 of 2001 (unreported)**

5 The Plaintiff claimed the following as special damages:

| EXPENSE | PROOF | |------------------------------------------------------|----------------------------------------| | | | | USD<br>20,000<br>as<br>professional<br>fees<br>and | Testimony (Para 50 of the witness | | disbursements paid to M/s Katende Ssempebwa | statement of PW1) | | to act for the Plaintiff between January 2022 and | | | October 2022 to oversee liquidation of the bank | PEX34 (invoice) and PEX35 (Proof of | | guarantee | payment) | | USD 850 as professional fees and disbursements | Oral testimony (Para 50 of the witness | | paid to M/s Fin & Law Co. Advocates to follow up | statement of PW1) | | on the swift messages to EBTL | | | | PEX33 (invoice) | | USD<br>1,500<br>being<br>professional<br>fees<br>and | Email correspondences (PEX22) | | disbursements paid to Oracle Solicitors to follow | | | up payment of the plaintiff's claim from UTBS. | | | USD 500 being courier costs | Oral testimony | | | | | | Annexure PEX10 | | | |

As regards the claim for legal fees for M/s Katende Ssempebwa & Co. Advocates to pursue the liquidation of the guarantee, I take the view that such fees must be assessed against the thresholds in the Advocates (Remuneration & Taxation of Costs) Regulations.

The starting point is **Regulation 4** which reads thus:

"No advocate shall accept or agree to accept remuneration at less than that provided by these Regulations except where the remuneration assessed under these Regulations would exceed the sum of one hundred thousand shillings, and in that event the agreed fee shall not be less

15 than one hundred thousand shillings." 5 The import of the above is the that remunerations rules create the statutory minimum for the various services provided by the advocate below which the advocate should not accept payment, save as provided in the regulation.

In my view, the instructions to the above stated firm fall within the ambit of debt collection.

# 10 See **Regulations 14(e) 15, 30, 34 of the Advocates (Remuneration & Taxation of Costs) Regulations**

Therefore, against the debt of USD 576,334.8, the statutory minimum fees would be (applying the exchange rate to be UGX 3,800) calculated thus

| Band | Amount<br>(statutory minimum) | |----------|-------------------------------| | Band 1 | UGX 500,000 | | Band II | UGX 750,00 | | Band III | UGX 750,000 | | Band IV | UGX 600,000 | | Band V | UGX 43,801,444.8 | | Total | UGX 46,401,444.8 |

The above sum is below the claim of USD 20,000 claimed. I note that the computation of UGX 46,401,444.8 above is the statutory minimum. It does not follow that merely because the claim of USD 20,000 is higher, the same should be rejected. The computation above is the statutory guide below which the cost should not fall, subject to the exception within 20 regulation 4. In assessing the claim for special damages, the court has a duty to determine whether the same were actually accrued (whether or not they have actually already been expensed) and whether they were reasonably incurred. In my view, the assessment of the fees is not a one size fits all. In my considered view, the court must consider the objectives of taxation which have been laid down in numerous precedents on one side and the market

25 realities on another. Advocates/firms who have built a strong reputation of excellent service will typically cost more than those who have not and a client cannot be faulted for engaging 5 an advocate of repute by reducing arbitrarily the reimbursement due to them for legal expenses incurred. This does not mean that the court is conducting a taxation herein, but it is to say that legal practice is a business and the court is alive to this reality, and the reality that legal services will not cost the same. The purpose of the statute is to create a statutory minimum below which they should not follow rather than set a canon which must be applied

10 at all times.

**Section 56(1)(k)** of the Evidence Act empowers this court to take judicial notice of the officers of the court, including the advocates authorized to appear before it. I note that instructions are given to a firm and not an individual advocate. See **George Okodoi & Anor**

## 15 **v Okello Sam Opaire HCMA 143/2016**

In the above case, the court correctly held that in Uganda, instructions are given to a firm and the individual advocates appear on behalf of a firm. In my view, Section 56(1)(k) in so far as it empowers the court to take judicial notice of advocates also empowers it to take judicial

20 notice of licensed law firms, since the advocates are only representatives of the law firms.

In any case, the list in Section 56(1) is not exclusive and the court may take judicial notice of other facts not indicated above either with or without requiring the adducing of materials to inform or refresh the memory of court. See **Mifumi (U) Ltd & 12 Ors vs. AG & Kenneth**

## 25 **Kakuru, Constitutional Petition No. 12 of 2007, Gbaniyi Osafile and John Emeri vs Paul Odi and Okwumaso Nwaje / SC 149/1987**

I take judicial notice of the fact that M/s Katende, Ssempebwa & Co. Advocates, the firm retained by the Plaintiff to provide the above described services, is one of the imminent and

- 30 leading law firms in Uganda. Accordingly, the cost of its services are unlikely to be the statutory minimum owing to their stature in the market and demand for their services. Accordingly, balancing the above factors considered, I award special damages on this head of UGX 55,000,000 and not USD 20,000 as claimed. - 35 As regards the fees claimed in respect of the instructions to the Tanzanian and UK firms above. I note that their engagement was reasonable in order to secure encashment of the

- 5 guarantee before its expiry which was imminent. Further, their provision of services is not subject to the remuneration regulations above since they are not advocates within the meaning of the Advocates Act. The expenses incurred by the Plaintiff company were both necessary and reasonable and accordingly, I find that the claim in respect of the same is proved. - 10

Equally so, I find that the expenses incurred for couriering of documents to be proven, reasonable and necessary.

## Exemplary, Aggravated and Punitive Damages

15 Exemplary damages means damages for 'example's sake'. These kinds of damages are clearly punitive or exemplary in nature. They represent a sum of money of a penal nature in addition to the compensatory damages given for the pecuniary or physical and mental suffering. Exemplary damages are the same as punitive damages and present a sum of money of a penal nature in addition to the compensatory damages given for pecuniary loss and mental 20 suffering. They are deterrent in nature and aimed at curbing the repeat of the offending act.

They are given entirely without reference to any proved actual loss suffered by the plaintiff.

Apart from cases in which exemplary damages are expressly authorised by statute, Exemplary damages should only be awarded in two categories of cases; - cases in which the 25 wrong complained of was an oppressive, arbitrary or unconstitutional action by a servant of the government, or cases in which the Defendant 's conduct has been calculated by him to make a profit for himself which may well exceed the compensation made to the Defendant See **WSO Davies v. Mohanlal Karamshi Shah [1957] 1 EA 352, Singh v. Kumbhal (1948) 15 EACA 21; Henry. H. Ilanga Vs M. Manyoka (1961) EA 705, Oketha Dafala v The** 30 **Attorney General of Uganda HCCS 69/2004**

The Plaintiff did not lead evidence to show how the wrongs complained off yielded a profit for the Defendants in excess of the profit to be ordered. This is more so where the Plaintiff seeks to recover the contractual price agreed with the Defendants for services duly provided. 5 I therefore find no reason to award punitive damages.

#### Aggravated Damages

Aggravated damages are "extra compensation to a Plaintiff for injury to his feelings and dignity caused by the manner in which the Defendant acted. Exemplary damages, on the 10 other hand, are damages, which in certain circumstances only, are allowed to punish a

- Defendant for his conduct in inflicting the harm complained of. A distinction ought to be drawn between punitive and aggravated damages; damages whose object was to punish or deter and which were distinct from aggravating damages (whereby the motives and conduct of the Defendant aggravating the injury to Plaintiff would be taken into account in assessing 15 compensatory damages). The fact that the injury to the Plaintiff has been aggravated by the malice or by the manner of doing the injury, that is, the insolence or arrogance by which it is - accompanied, is not justification for an award of exemplary damages; aggravated damages can do in this type of case what otherwise could be done by exemplary damages. - 20 Aggravated damages are awarded when aggravating circumstances exist in the act or intention of the wrongdoer. Such damages, although compensatory, may be given under a different head to represent a solatium to the Plaintiff for the distress, anxiety and further injury to feelings, reputation, dignity etc caused by the manner in which the Defendant acted. In every case considered appropriate for the award of aggravated damages, the court - 25 should always point out what it considers to be 'aggravating circumstances' in order to justify the basis of its award. Common examples of 'aggravating circumstances' or 'aggravating factors' from the reported cases include, but are not necessarily limited to, malice, ill-will, or persistence in a falsehood exhibited by a Defendant to the detriment of the plaintiff. Consider the case of a publisher who unsuccessfully attempts to plead and prove justification - 30 in answer to a defamation claim arising out of a libelous article. The courts frown upon such an attitude on the part of the Defendant and view it as an aggravating factor. See **Fredrick J. K. Zaabwe v. Orient Bank & Others Supreme Court Civil Appeal No. 4 of 2006, 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;** - 35 **Nsaba Buturo v. Munansi Newspaper [1982] HCB 134; Ntabgoba v. Editor-in-chief of**


- 5 **the New Vision & Another [2004] 2 EA 234; Bhadelia Habib Ltd. v. Commissioner General, URA [1997-2001] UCL 202; Ahmed Ibrahim Bholm v. Car & General Ltd. Supreme Court Civil Appeal No. 12 of 2002.** - In the present circumstances, I find that the Defendants were aware that the guarantee 10 provided was one that could not be liquidated without the consent of the 3rd Defendant. They proceeded to not only misrepresent the character of the same but lead the Plaintiff of a wild goose chase to secure payment, including involving lawyers from multiple jurisdictions to chase payment for services which the Defendants utilized and benefited from. All the while, the plaintiffs knew that the same guarantee required the consent of the 3rd Defendant which - 15 was not provided. Even so, the 2nd Defendant purported to provide consent and then withdrew the same. The Plaintiff was left with an egg in their face after chasing payment which they did not obtain, after expensing significant sums of money. I find that this is a was malice, ill will and a persistence in falsehood exhibited by the Defendants to the detriment of the plaintiff. The Defendants then took their anti-up a notch by filing a largely evasive defence - 20 in this court, instead of acceding to the claim and taking measures to settle it. I therefore find this is a proper case for award of aggravated damages and I condemn the Defendants to pay aggravated damages of UGX 50,000,000.

#### Interest

- 25 **Section 26** of the Civil Procedure Act 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. - 30 (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 the court deems reasonable on the

- 5 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 the date of payment or other earlier date, the court shall be deemed to have ordered interest at 10 6 percent per year."

The position of the law is to the effect that the award of interest it is a matter of the Court's discretion is applicable. The basis of awards of interest is that the Defendant has taken and used the plaintiff's money and benefited. Consequently, the Defendant ought to compensate

15 the Plaintiff for the money.

See **Sietco Vs. Noble Builders U Ltd. Supreme Court Civil Appeal No. 31 of 1995; Kengrow Industries Ltd. v. C. C. Chandran Supreme Court Civil Appeal No. 7 of 2001; Premchandra Shenoi & Anor v. Maximov Oleg Petrovich Supreme Court Civil Appeal No. 9 of 2003.**

The Plaintiff has demonstrated undue retention of its monies preventing the Plaintiff from utilizing the same for the benefit of its business or itself since 2022. I find the claim for interest merited.

#### 25 Costs

As a rule of law, costs ordinarily follow the event and a successful litigant receives his or her costs in the absence of special circumstances justifying some other order. Where the successful party has been guilty of some misconduct, an order of costs may not be granted. See **Section 27(2) Civil Procedure Act, Harry Ssempa v Kambagambire David HCCS**

30 **408/2014, , Iyamuleme David vs. AG SCCA NO.4 of 2013, Kinyera George v Victoria Seeds Limited HCCS 604/2015, Candiru Alice v Amandua Festo & Anor HCCS 19/2014, Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd, [1951] 1 All ER 873**.

The Plaintiff having succeeded in this suit is awarded costs.


#### 5 **Conclusion**

In the end, I make the following orders

- i. A declaration that the 1st Defendant breached the forwarder agent agreement executed with the Plaintiff dated 14 January 2022 - ii. A declaration that the 2nd and 3rd Defendant obtained freight services from the 10 Plaintiff through the 1st Defendant with intent to defraud and cheat the plaintiff. - iii. A declaration that the Defendants fraudulently obtained freight services from the Plaintiff by misrepresenting the nature and character of the guarantee issued by UTBS. - iv. The Defendants pay to the Plaintiff jointly and severally USD 10,000 as general 15 damages. - v. The Defendants pay to the Plaintiff jointly and severally USD 576,334.8 being unpaid freight fees. - vi. The Defendants jointly and severally pay to the Plaintiff interest at a rate 10% on the sum in (V) above from the date of judgment until payment in full. - 20 vii. The Defendants jointly and severally pay to the Plaintiff USD 29,390 and UGX 46,401,444.8 being special damages. - viii. The Defendants jointly and severally pay to the Plaintiff UGX 50,000,000 being aggravated damages. - ix. The Defendants jointly and severally pay to the Plaintiff interest at a rate of 10% on 25 the sums in (VII) and (VIII) from the date of cause of action until payment in full. - x. The Defendants jointly and severally pay to the Plaintiff the costs of this suit.

I so order.

30 Dated this\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2024, delivered electronically and uploaded on ECCMIS. **Ocaya Thomas O. R** 24th June

**Judge**

**24th** 35 **June 2024**