Anisuma Traders Limited v Laptop World (U) Limited & Another (Civil Suit 193 of 2023) [2024] UGCommC 293 (20 August 2024)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] **CIVIL SUIT NO. 0193 OF 2023**

# ANISUMA TRADERS LIMITED::::::::::::::::::::::::::::::::::::

#### **VERSUS**

## 1. LAPTOP WORLD (U) LIMITED

# 2. NIKHIL VISWANATHAN PILLAI::::::::::::::::::::::::::::::::::

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

#### **JUDGMENT**

The Plaintiff filed this suit against the Defendants jointly and severally for the payment of Ugx 186,835,000/ $=$ (One hundred eighty-six million eight hundred and thirty-five thousand shillings) being the outstanding purchase price, general damages, costs of the suit, and interest on the decretal sum.

The brief facts giving rise to this case are that between the 14th October 2014 and the 27th October 2021, the Plaintiff supplied to the 1st Defendant different computer accessories on a credit basis following a verbal agreement worth Ugx 186,835,000/= (One hundred and eighty-six million eight hundred and thirty-five thousand shillings).

The Plaintiff delivered the goods to the 1st Defendant and the 2nd Defendant acknowledged the receipt of the goods as a director of the 1st Defendant. The Defendants issued cheques to the Plaintiff that bounced and they have refused to pay for the goods.

Ump

The Defendants did not file defenses to this suit after being served by the Plaintiff through substituted service. The Plaintiff prayed to proceed exparte which was granted by this court on the 30th November 2023.

During the hearing of this case, the Plaintiff presented one witness Mr. Sunir Kumar Sunderdas Bhagchandany (PW1), the general manager of the Plaintiff, and his testimony was admitted as evidence in chief of PW1.

#### REPRESENTATION

The Plaintiff was represented by M/s MMAKS Advocates.

#### **JUDGMENT**

During the scheduling conference, the Plaintiff raised three issues for determination by this Court as below:

# 1. Whether the 1st Defendant is indebted to the Plaintiff as claimed in the Plaint?

# 2. Whether the 1st Defendant's corporate veil should be lifted to hold the 2nd **Defendant personally liable for its debt to the Plaintiff?**

## 3. What remedies is the Plaintiff entitled to?

I have considered the pleadings, testimony of the witness produced before the court, and the submissions of counsel for the Plaintiff in this matter.

The standard of proof in civil cases is on a balance of probability and the law of evidence is to the effect that he who alleges the existence of a particular fact must prove that those facts exist (Section 101 Evidence Act).

Further Section 103 of the Evidence Act provides that the burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence unless it is provided by any law that the proof of that fact shall lie on any particular person.

Therefore, even when a suit is not opposed like the one in issue, the legal and evidential burden rests on the Plaintiff to prove their case on a balance of probabilities that the Defendants are indebted to the Plaintiff.

The Court is duty bound to examine the evidence presented in line with the pleadings to find whether or not this test is satisfied to the required standard.

With the above in mind, I will now address the issues that were raised.

#### $$

# Whether the 1st Defendant is indebted to the Plaintiff as claimed in the Plaint

To prove that the 1st Defendant was indeed indebted to them, the Plaintiff attached a customer creation form marked as PEX1, purportedly bounced cheques amounting to 10,000,000/= issued by the $1^{st}$ Defendant marked as PEX43 and PEX44, invoices and delivery notes marked PEX2 to PEX42 and a copy of the Defendants' account Statement maintained with the Plaintiff marked as PEX 45

From the documents attached, it can be inferred by the dealings as evidenced by the cheques drawn by the 1st Defendant to the Plaintiff, invoices, and delivery notes of computer equipment that there existed a business relationship between the Plaintiff and the 1st Defendant. The invoices and delivery notes marked as PEX2-PEX42 show that the Plaintiff indeed sold and delivered computer accessories on different dates to the 1st Defendant and the same were received and acknowledged by various persons through writing their names, affixing their signature, and the stamp.

PEX43 and PEX44 of the Plaintiff's trial bundle contain cheques drawn by the 1st Defendant to their bank DFCU in favor of the Plaintiff for the payment of five million shillings on each. Both cheques are crossed with not negotiable, A/c Payee only. Much as the Plaintiff claims that the two cheques adduced in evidence bounced or were dishonored, there is no evidence adduced to that effect. There is no evidence on the cheques to show whether it was honored or dishonored. The crossing of cheques with an endorsement "Not Negotiable" and "A/C Payee Only", ordinarily means that the cheques cannot be transferred or assigned to anyone else and can only be deposited into the bank account of the named payee. Such restrictions are meant to curb any misuse or fraudulent acts, ensuring funds are only accessible to the intended recipient.

Much as there is no evidence that the cheques adduced in evidence bounced or were dishonored, the above cheques are proof of the existence of a relationship between the parties

With the evidence on record, this Court is not in doubt that the parties had a contract for the supply of computer accessories, the said goods were received and acknowledged by the Defendant and its agents. The Defendants made vain attempts to settle the debts that are still outstanding to date.

I, therefore, find that the Plaintiff has proved their case to the required standard and the 1st Defendant is indebted to the Plaintiff.

Omb

#### $$

# Whether the 1st Defendant's corporate veil should be lifted to hold the 2nd **Defendant personally liable for its debt to the Plaintiff**

During submissions counsel for the Plaintiff relied on section 20 of the Companies Act 2012 which provides that:

"The High Court may, where a company or its directors are involved in acts including tax evasion, fraud, or where, save for a single-member company, the membership of a company falls below the statutory minimum, lift the corporate veil."

Counsel submitted that the fraud referred to in section 20 of the Companies Act includes both fraudulent and wrongful trading. He relied on the case of **ABSA Bank** of Uganda Limited v Enjoy Uganda Limited and 2 others HCMA No 1243 of **2023** where the Court held that fraudulent trading by directors falls within the ambit of fraud as used in section 20 of the Companies Act 2012 and is a ground for piercing or lifting the corporate veil.

Counsel submitted that the 2nd Defendant ordered for and received goods from the Plaintiff between May to August 2021 and sixteen invoices and delivery notes were issued. All the invoices save for the very first one remains unpaid and the 2nd Defendant subsequently issued the Plaintiff with bounced cheques which were adduced as PEX43 and PEX44. Counsel contended that the Defendants have closed their known office/shop at Ambassador House and vanished without a trace into hiding and thus their conduct of taking goods over a long period, failing to pay, issuing bounced cheques, closing offices unceremoniously and vanishing into thin air is evidence of both fraudulent trading with intent to defraud and wrongful trading by continuing to take goods on credit well knowing that no payment will or can be made for them.

Counsel concluded by stating that the above grounds are sufficient enough for this Court to lift the $1^{st}$ Defendant's corporate veil and hold the $2^{nd}$ Defendant personally liable for the 1st Defendant's debt.

From the foregoing, it can be seen that the Plaintiff seeks to rely on fraud as a ground for lifting the corporate veil of the $1^{st}$ Defendant.

Pup

It is a settled principle of law that fraud must be specifically pleaded and proved and the standard of proof is heavier than on a balance of probabilities generally applied in other civil matters.

Fraud was defined in the case of Fredrick Zaabwe Vs Orient Bank & Others SCCA No, 4 of 2006 as:

"An intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right. A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which deceives and is intended to deceive another so that he shall act upon it to his legal injury. Anything calculated to deceive, whether by a single act or combination, or by suppression of truth, or suggestion of what is false, whether it is by direct falsehood or innuendo by speech or silence, word of mouth, or look or gesture.................................... embracing all multifarious, means which human ingenuity can devise, and which are resorted to by one individual to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated. "Bad faith" and "fraud" are synonymous, and also synonymous of dishonesty, infidelity, faithlessness, perfidy, unfairness, etc."

The Supreme Court while relying on the Black's Law Dictionary went on to define the word fraudulent as:

"To act with "intent to defraud" means to act wilfully, and with the specific intent to deceive or cheat; ordinarily for the purpose of either causing some financial loss to another, or bringing about some financial gain to oneself."

Further in the case of ABSA Bank of Uganda Limited v Enjoy Uganda Limited **and 2 others (supra),** Honorable Justice Mubiru stated that:

"In order to remove the corporate veil, it is necessary to prove the presence of control and the presence of impropriety that is the use of the company as a facade, a cloak or sham to hide violation of law."

The trial Judge further went on to state that:

"Therefore section 20 of The Companies Act, 2012 includes conduct similar to tax evasion, fraud and membership of the company falling below the statutory minimum. Applying that tenet of statutory interpretation, wrongful or fraudulent trading by the

directors would fit within the definition, to the extent that it results in the deception and defrauding of the company' creditors since it constitutes "flagrant injustice and improper conduct." The expression includes conduct that has a fraudulent effect that is so shockingly noticeable, evident, or obvious, or conduct that is glaringly unjust.

In the instant case, PW1 testified that the Plaintiff supplied the 1st Defendant with computer accessories, and the same were received and acknowledged by the Defendants as evidenced in the delivery notes.

PW1 further stated that the Defendant refused to pay for the items delivered and instead issued cheques that were dishonored by the bank. The Defendants have since closed their known place of business at Ambassador house in Kampala.

This Court finds that the above conduct and actions of the Defendants is not only glaringly unjust but also discloses their intention to defraud and cause financial loss to the Plaintiff.

Under the law of companies, a company is required to have a place of business and where there is a change of the same, they need not only notify the Registrar of Companies but also their creditors. The Defendant was aware of the fact that they owed creditors (the Plaintiff) but chose to close their known place of business without clearing their debt or notifying the Plaintiff.

I find that the act of the 1st Defendant closing their place of business after refusing to pay their creditor is a clear indication that they were trying to evade the payment of their debt and therefore qualifies as a fraudulent act.

Though a company is a distinct entity, it has no mind or body of its own and therefore acts through its directors or agents. In the instant case, the plaintiff adduced PEX47 which contains the company form 20 showing the 2nd Defendant and Mr. Dhanya Krishnan as the Directors of the 1st Defendant. The 2nd Defendant was also mentioned as the person that the Plaintiff dealt with while making the deliveries.

I therefore believe that the 2nd Defendant actively participated in the disappearance of the company from the known location at Ambassador House Kampala with an intention to defraud the plaintiff.

This Court therefore finds that it is in the interest of justice in the present circumstances to lift the corporate veil of the company and for the Plaintiff to proceed against its directors.

Ong

## $$

#### What remedies is the Plaintiff entitled to?

#### **Special Damages**

The Plaintiff submitted that they are entitled to special damages of Ugx 186,835,000/= which is the unpaid value of the goods supplied to the $1^{st}$ Defendant.

It is trite law that special damages must be specifically pleaded and particularly proved.

In the instant case, PEX2 to PEX 42 of the Plaintiff's trial bundle contains several copies of invoices issued by the Plaintiff to the 1st Defendant. The same also contains delivery notes acknowledged by the Defendant agents through signature and writing of their names. This evidence shows that the goods were indeed delivered and received by the Defendants and there were invoices issued with sums due to be paid by the Defendants.

On perusal of all the records adduced by the Plaintiff as seen above, I am satisfied that the Plaintiff has proved the special damages. The Plaintiff is therefore awarded special damages of Ugx $186,835,000/$ = as prayed.

#### **General Damages**

PW1 testified that as a result of the Defendants conduct the Plaintiff has suffered financial and economic loss and damage as it has been deprived of the benefit of utilizing the money. Counsel for the Plaintiff submitted that the Defendants conduct caused serious disruptions to the Plaintiffs business and thus should be awarded general damages of Ugx 50,000,000/ $=$ .

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

This award is also assessed on the value of the subject matter, the economic inconvenience that the Defendants may have been put through, and the nature and extent of the injury suffered as held in the case of **Uganda Commercial Bank v** Kigozi [2002] EA 305 at 313.

Omp

In the instant case, the Plaintiff is a business entity that supplied goods to the 1st Defendant on credit and the Defendant has failed to pay the outstanding amount. The Plaintiff delivered the last computer accessories in the year 2021 which implies that the Defendant has kept the Plaintiff out of the use of their money for three years. I, therefore, find that the Plaintiff is entitled to an award of general damages for the economic inconvenience occasioned by the actions of the 1st Defendant.

I therefore award general damages of Ugx 50,000,000/= as prayed by the Plaintiff.

#### **Interest**

Counsel for the Plaintiff prayed for interest at a commercial rate on the special damages and general damages.

# Section 26(2) of the Civil Procedure Act provides that;

"where the decree is for payment of money, the court may, in the decree, order interest at such a rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate as the court deems reasonable on the aggregate sum so adjudged from the date of the decree to the date of payment or to such earlier date as the court thinks fit".

In determining a just and reasonable rate, courts take into account the ever-rising inflation and drastic depreciation of the currency. A Plaintiff is entitled to such rate of interest as would not neglect the prevailing economic value of money, but at the same time one which would insulate him or her against any further economic vagaries and the inflation and depreciation of the currency in the event that the money awarded is not promptly paid when it falls due (**Kinyera v the Management** Committee of Laroo Building Primary School HCCS 099/2013).

The goods in question were delivered in 2021 and the same have never been paid for three years later. Coupled with the rising prices of goods in the market, I therefore award an interest at court rate on the special and general damages from the date of judgment till full payment.

#### Costs

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

Ump

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

The Plaintiff is the successful party in this case and I see no reason for denying him the costs of the suit. Costs are accordingly awarded to the Plaintiff.

Om Bitatie

HON. LADY JUSTICE ANNA B. MUGENYI DATED $201812024$

J. Amanguzi - 9pt mesent J. Amanguzi - 9pt mesent

unes abset

Indgement pronounced