Damuco Investments Limited v Opportunity Bank (U) Limited (Civil Suit 589 of 2019) [2024] UGCommC 334 (12 November 2024)

# 5 **THE REPUBLIC OF UGANDA**

#### **IN THE HIGH COURT OF UGANDA AT KAMPALA**

# **(COMMERCIAL DIVISION)**

# **CIVIL SUIT NO. 0589 OF 2019**

#### **DAMUCO INVESTMENTS LTD. :::::::::::::::::::::::::::::::::::::::::::::::::::: PLAINTIFF**

#### 10 **VERSUS**

**OPPORTUNITY BANK (U) LTD. :::::::::::::::::::::::::::::::::::::::::::::::::: DEFENDANT**

#### **BEFORE HON. LADY JUSTICE HARRIET GRACE MAGALA**

#### **JUDGMENT**

#### **Background**

- On the 7th 15 day of March 2018, the Plaintiff and the Defendant executed two contracts i.e. one for construction of fifteen Automatic Teller Machines (hereinafter *referred to as* ATMs) rooms and the second for painting of the Defendant's branches. The contract for construction and installation of ATMs was later varied by an Addendum dated 5th June 2018. - 20 Later, the Defendant through a notice terminated the contract for installation of the ATMs based on failure by the Plaintiff to meet the contractual timelines. The Plaintiff sued for recovery of the special damages to the tune of Ugx 112,253,237.09/-, general damages for breach of the two contracts, interest and costs of this suit.

5 The Defendant denied the allegations and counterclaimed for special damages to the tune of UGX 122,281,063.68 being the contractual penal fee, special damages of UGX 101,454,432/-, general damages and interest, and costs of the counterclaim.

# **Representation**

10 The Plaintiff was represented by Mr. Richard Mulema Mukasa of M/s KSMO Advocates while the Defendant was represented by Mr. Phillip Kasimbi of Okalang Law Chambers, Advocates and Legal Consultants.

# **Hearing and Evidence**

At the hearing, the Plaintiff led evidence through its Managing Director,

15 Kirabira Collins as PW1, Kawuma Drake as PW2, Semuko Allan as PW3 and Moses Sebyala Kiwanuka as PW4.

The Defendant/Counter-claimant led evidence through one witness, Concilie Uwodukunda as DW1 who was at the time of the hearing the Procurement and Administration Manager of the Defendant.

- 20 The Plaintiff relied on the following documents: - a) A copy of the ATM rooms construction contract dated 7th March 2018 marked as PEXH.1; - b) A copy of the painting contract dated 7th March 2018 marked as PEXH.2; - c) A copy of the amended ATM rooms construction agreement dated 5th 25 June 2018 marked as PEXH. 3; - d) A Copy of Notice of termination dated 23rd July 2018 marked as PEXH. 4; - e) Minutes of the meeting between the Plaintiff and Defendant dated 28th May 2018 marked as PEXH. 5;

- f) A copy of the response to the Notice of termination dated 6th 5 August 2018 marked as PEXH. 6; - g) Pre-bargain proposal dated 28th August 2018 marked as PEXH.7; - h) Minutes of the meeting between the Plaintiff and the Defendant dated 6 th September 2018 marked as PEXH. 8; - i) Minutes of the meeting dated 19th 10 October 2018 marked as PEXH. 9; - j) A copy of the Plaintiff's letter requesting payments dated 17th October 2018 marked as PEXH. 10; - k) A copy of the assessment report dated 24th September 2018 marked as PEXH. 11; - l) A copy of assessment report dated 5th 15 April 2019 marked as PEXH. 12; - m) The Notice of intention to sue dated 18th December 2018 marked as PEXH. 13; - n) The Defendant's response to the Notice of intention to sue dated 10th June 2019 marked as PEXH. 14; - o) A Status Report dated 24th 20 April 2018 marked as PEXH.15; - p) A Letter requesting for 20% advance dated 2nd May 2018 marked as PEXH. 16; - q) Correspondences by email between the Defendant and the ATM service provider marked as PEXH.17; - 25 r) A Pictorial report at partial handover inspection for the ATM works dated 21st September marked as PEXH. 18; and - s) Receipts for the extra expenses/costs incurred by the Plaintiff marked as PEXH. 19

The Defendant/ Counter-claimant adduced and relied on the following

30 documents as evidence at the trial:

- 5 a) A Copy of the Plaintiff's bid marked as DEXH.1; - b) A Copy of a bid from Vector (U) Ltd marked as DEXH.2; - c) A Copy of a bid from Legend Ltd marked as DEXH.3; - d) A Copy of the ATM room construction contract marked as DEXH.4; - e) A copy of the contract to paint marked as DEXH. 5; - 10 f) A copy of the addendum to the construction contract marked as DEXH. 6; - g) A copy of the termination notice marked as DEXH.7; - h) A copy of the contract between the counter-claimant/defendant and the new service provider for 5 ATM sites that the counter defendant failed to complete marked as DEXH.8; and - 15 i) A copy of the contract between counter-claimant and new service provider for the completion of works on 9 ATM sites that the counterdefendant failed to complete as DEXH.9.

The parties' respective counsel filed written submissions which have been considered and shall be referred to in this judgment.

#### 20 **Issues**

The parties filed their joint scheduling memorandum and framed the issues below for determination as:

- *1. Whether the Defendant breached the two construction contracts dated 7 th March 2018 for construction of ATM rooms and painting of the* 25 *Defendant's branches?* - *2. Whether the Plaintiff/Counter defendant is liable on the counterclaim?* - *3. What remedies are available to the parties.*

# 5 **Determination**

# *1. Whether the Defendant breached the two construction contracts dated 7 th March 2018 for construction of ATM rooms and painting of the Defendant's branches?*

It was an agreed fact between both parties that they executed two contracts dated 7 10 th March 2018. It was alleged by the Plaintiff that the Defendant breached these contracts unilaterally by terminating the construction of the ATM Rooms contract and made it impossible for the contracts to be performed due to hardships.

The Defendant denied the allegations and counter claimed that it was the 15 Plaintiff who breached the contract.

It is trite that the standard of proof in civil cases is on a balance of probability, and the burden of proof in civil cases lies on he/she that alleges the existence of facts and seeks judgment on any legal right or liability those facts. In the case of *Kabaco (U) Ltd Versus Turyahikayo Bonny HCCS No. 0014 of 2021***, Hon. Justice**

20 **Wagona Vincent** observed that:

*"Whereas the legal burden solely lies upon the plaintiff and does not shift, the evidential burden keeps shifting depending on the facts alleged by either side."*

A breach of contract has been defined in *Meridiana African Airlines (U) Ltd* 25 *Versus Avma Spares (EA) Ltd HCCS No. 111 of 2017* as:

*"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,*

5 *to perform any promise that forms all or part of the contract."* (Emphasis added)

Under **Section 33 of the Contracts Act, 2010**, 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. As observed in

- 10 *Kabaco (U) Ltd Versus Turyahikayo Bonny* **(supra),** where a contract sets out a bundle of promises to be performed by either party to it, in the event the same are not performed as per the terms of the contract without any justification as provided for under that contract, a party at fault is said to have breached the contract. However, a party who alleges breach of a contract must have fully - 15 performed his/her bargain of the contract. A party who is the cause of the breach or whose failure to perform his or her obligations partly led to the breach cannot competently sustain a claim for breach of contract.

In the matter before court, the conflict arose from the termination of the ATM rooms construction contract by the Defendant (see PEXH.4). The reason for

- 20 termination was failure by the Plaintiff to finish the works agreed to be done within the time stipulated. It was contested by the Plaintiff through PW4 that the two agreements in question lacked clarity by providing two timelines i.e. clause 3 providing six months and clause 8 providing for fifteen days of completion of the works. Counsel for the Plaintiff argued that this Court should - 25 apply the *contra proferentem rule* and construe these clauses against the Defendant.

However, on record there is DEXH. 6, which is an Addendum to the Agreement for construction of 15 ATM Rooms at the Defendant's designated branch sites. DEXH.6 under *Recital 'B'* recognizes that the contract was scheduled to run for

a period of two weeks starting 7 30 th March 2018, and under '*C'* that the

Page **6** of **23**

- 5 Contractor had exceeded the agreed schedule for completion of the works and therefore under '*D'* the contractor had faced working capital constraints as the major cause of delay in completing the above works and requested for an advance from the second installment of the contract price to complete the works. - 10 The Plaintiff and the Defendant agreed that under *clause 2* of the *Addendum,* all the pending works shall be completed within fifteen days from the date of execution of the Addendum. The Plaintiff signed this Addendum and does not deny this throughout its evidence. By signing this Addendum, the parties had defined the period within which to complete the works and thus amended or - 15 overrode the earlier agreed terms relating to the period of execution of the works earlier agreed; which then made time of the essence. The Plaintiff in the Addendum acknowledged that it was out of time for completion of the works i.e. within fifteen days under clause 8 of the Contract for construction of 15 ATM Rooms. It is now estopped from seeking to rely on clause of 3 of the - 20 former contract, which, by virtue of the Addendum was amended.

According to **Treitel, The Law of Contract 12th Edition at 917**, where time is of essence under a provision clause in the contract, that clause is a condition and any failure to perform such a stipulation justifies termination, unless if the failure is justified by a lawful excuse.

- 25 Additionally, DEXH.6 extended the time of completion of the construction of the works within fifteen days with effect from the 11th day of June 2018. The ATM construction contract between the parties herein had terminated on the 25th June 2018 by lapse of time since time was of the essence. This discharged the parties to the contract. This was then followed by PEXH.4/DEXH.7 from the - 30 Defendant which terminated the contract of the construction of the ATM

Page **7** of **23**

Rooms on the 23rd 5 day of July 2018 which was after the expiration of the period for the completion of the works as agreed upon by the parties.

It was the persistent testimony of the Plaintiff that it faced hardships in the execution of the contract such as delay in delivery of the ATM machines by the service provider, Sybyl that was contracted by the Defendant; and lack of

- 10 effective communication and supervision between the officers of the Defendant. As seen from the evidence of PW1 and PW2, this lack of effective communication and supervision by the Defendant and its staff would lead to denial of and failure by the Plaintiff to access to the Defendant's branches. The Defendant had also not processed construction and or renovation permits from - 15 area local authorities in some branches. In other instances, the structure set up of the various branch premises required more time than what was given by the defendant.

The above complaints by the Plaintiff notwithstanding, the court record shows that the Plaintiff's Director and the Defendant's officials met on the 28th May

- 20 2018 with the sole purpose of discussing the pending works by the Plaintiff and finding a way forward as seen from PEXH.5. The Plaintiff updated the parties among others about the causes of the delays to include lack of coordination with team players like Sybyl, Budecore, landlords and bank staff; the scope of the work was larger than what had been anticipated and as well as the inflation - 25 rate that went higher during the execution of the contract. The Plaintiff then requested for funding of Ugx. 35,000,000/- from the contract price. It was then resolved under minute *6/28/5/18* that the Defendant advances Ugx. 35,000,000/- to the Plaintiff from the contract price to enable completion of the remaining works and the works to be completed within fourteen days from - 30 the date of the release of the funds. 5 This meeting then led to DEXH.6. This Addendum extended or specified the time for completion of the works. It did not create any new obligations for the Defendant save for advancing the agreed sums to the Plaintiff.

In my considered opinion, the Addendum resolved the concerns of the Plaintiff. That is why after its execution, it went ahead to perform the contract. It

10 remains baffling why the Plaintiff did not have the other concerns addressed in the Addendum or why its director signed the addendum when its concerns had not been fully addressed.

The Plaintiff adduced no proof that after the extension of the contract, it faced the same or further constraints in the execution of the contract or that

15 communication of the challenges was made to the Defendant. In fact, during re-examination, DW1 clarified that the Defendant never received any communication from the Plaintiff that they could not access the premises.

challenges faced by the Plaintiff; which is not the case here.

To say that the Defendant breached the contract, these challenges must be attributed to the Defendant and must have arose out of failure by the Defendant 20 to honor any of the obligations specified in the contract or addressing the alleged

According to the evidence on record, the Plaintiff's major challenge was financing due to the raise of the cost of materials amongst others things that was experienced during the execution of the contracts. The cost of executing the 25 contracts turned out to be much higher than what was either anticipated and or budgeted for.

Page **9** of **23**

- 5 Whereas there were assertions by the Plaintiff that it was headhunted, the Plaintiff did not dispute DEXH.1, DEXH.2 and DEXH.3. The Defendant adduced evidence that there were other bidders vide DEXH.2 and DEXH.3, but the Plaintiff was awarded the contract. I believe the Plaintiff was awarded the Contract after they turned out as the best evaluated bidder. This therefore - 10 implies that the Plaintiff responded to a bid from the Defendant vide DEXH.1 and quoted what it thought as a seasoned and experienced entity believed was the proper cost of fully executing the works. The parties then executed the respective contracts. The Plaintiff at execution never contested the contractual sum but later cried foul because of the high costs and extra expenses incurred - 15 during the execution of the works. I have had the opportunity and scrutinizing both contracts and found that the Plaintiff given their vast experience as testified by PW1 did not have the mind to budget for contingencies when she quoted for the work and prior to the execution of the Contracts. Depending on whether the contract is admeasured or not, contingency is about plus or minus - 20 10% of the contract price 18 % VAT exclusive. This caters for expenses for on spot or unforeseen items. These funds do not belong to the contractor but rather the project owner and disbursed upon being requested for and justified by the contractor.

It is therefore my finding that the Plaintiff quoted for the job and later failed to 25 perform the contracts within the stipulated time.

The contract for the construction of ATM rooms and installation of ATM was discharged by lapse of time. Although from the record, the Plaintiff continued to stay on the premises of the Defendant after the expiry of the contract and the Defendant sent the termination notice after the time period had expired, I

30 cannot find this conduct to amount to waiver of the limitation of time of

Page **10** of **23**

5 performance as it was held in the case of *M and B Engineers Ltd Versus UNRA and another CACA No. 316 of 2021*, that:

*"to release or waive a right of action or interest in property, legal or equitable, requires an express or implied agreement of the person entitled to that right. Where the agreement is express, it has to be under seal or* 10 *supported by valuable consideration. An implied agreement, if acted upon by the other party, would operate on the principle of estoppel".*

Relying on the above case, I find that there was no express agreement to the same and nor was there a request made by the Plaintiff for such. Further there was no inference through conduct of the Defendant of any waiver or release as 15 to time of performance.

Regarding the contract for the painting of the branches(PEXH2), I found no evidence on record that it was terminated by the Defendant. PEXH.4 only terminated the ATM installation and ATM room construction contract.

DW1 during cross examination averred that she received no communication

20 from the Plaintiff that they had been denied access to the premises. The two contracts were not intertwined with each other and could be executed separately. Thus the argument advanced by the Plaintiff that the termination of the latter terminated the former is frail.

Therefore, the first issue is answered in negative.

25 *2. Whether the Plaintiff/Counter defendant is liable on the counterclaim?*

The claim against the Counter-defendant/Plaintiff as seen from the counterclaim is for breach of contract, contractual interest, special damages and general damages.

- 5 I have observed that the Counter-defendant's reply to the counterclaim includes general denials. It is trite that a defence that is based on general and evasive denials must be rejected. The defence must set out the answer and particulars responding to each allegation (**see Order 6 rule 8 of the Civil Procedure Rules as amended)**. In addition to the provisions of the statute law, - **Mulla The Code of Civil Procedure 16th** 10 **Edition Volume 2, at pages 1965 & 1966,** it was stated that:

*"The Defendant must take each fact which is alleged against him separately*, *and say that he admits it, or denies it or does not admit it. 'It is not merely denial which is meant, but the rule covers non-admission,*

15 *for [the defendants] is to deal specifically with every allegation of fact he does not admit the truth. Every allegation of fact in the plaint will be taken to be admitted if it is not denied specifically or by necessary implication or stated to be not admitted.*

*Where a defendant denies an allegation of fact in the plaint, he must not* 20 *do so evasively, but answer the point of substance.*

Therefore, since a counterclaim is a separate suit, the reply to the counterclaim is a written statement of defence and, in this case the defense being evasive, is hereby struck out.

This leaves the Counterclaim uncontested. However, the Counter-claimant must 25 prove its case on the balance of probabilities to this court.

Counsel for the Counter-defendant urged this Court to find that the Counterclaimant has failed to adduce evidence to prove its claims against the Counterdefendant that there was no evidence of breach. But the pleadings of the Counter-claimant clearly state the alleged breach and further the

5 Plaintiff/Counter -defendant admitted during the hearing that it did not complete the works on time.

Additionally, counsel for the counter-defendant submitted that the counterclaimant breached the contracts by its conduct and cannot benefit from its wrong. He supported this argument with the maxim of equity that he who

10 comes to equity must come with clean hands and not benefit from his or her omission or commission.

However, counsel for the Counter-claimant argued that **Section 46 of the Contracts Act 2010** provides for reciprocal promises. That the Counterdefendant had promised to complete the works within fifteen days by signing 15 the contract but then failed.

In the case of *Charles Richards Ltd. Vs. Oppenheim [1950] ALL E. R 420,* **Lord Denning** observed that although the buyer extended the time for delivery of the goods, still the buyer reserved the right to rescind the contract and there was no waiver of such right.

- 20 According to DEXH.6, the Counter defendant agreed to complete the works within fifteen days from the date of the execution of the contract but then failed to meet its obligations under the contract. As earlier observed, a breach of contract occurs where a party to a contract fails to execute an agreed obligation under a contract without a lawful excuse. The Counter defendant - 25 failed to honour its commitments under the contract within time.

This court therefore finds that the Counter defendant is liable to the Counterclaimant for breach of contract.

5 *3. What remedies are available to the parties.*

## *Remedies sought by the Plaintiff/ Counter- defendant*

(a) The Plaintiff prayed for a declaration that the Defendant breached the two contracts dated 7th March 2018.

I have found that the first contract for construction of ATM Rooms and 10 installation of ATMs had been discharged by lapse of time and as well as the breach by the Plaintiff/counter-defendant. The second contract of painting the branches of the Defendant was never terminated by the Defendant. Hence the declaration that the Defendants breached the contracts is hereby denied.

Rather, this court finds that the Plaintiff/Counter-defendant breached the two 15 contracts by not honoring its obligations under the contracts.

> (b) The Plaintiff prayed for Ugx. 112,253,237.09/- being special damages, as particularized under paragraph six (6) of the Plaint.

The Plaintiff did not execute the contract as agreed with the Defendant. The Plaintiff does not dispute receiving an advance payment of Ugx. 35,000,000/- 20 from the contract price to complete the works.

Further, the two assessment reports of the works i.e. one dated 24th September 2018, PEXH. 11 and another dated 5th April 2019, PEXH. 12 were contested by the Defendant through DW1. Whereas PEXH. 11 is not signed by the Defendant, and the defendant contests it, it is a report signed by the

25 consultant and addressed to the Defendant, this court can rely on it. The report indicates that nine out of the fifteen ATMs works had been 87% completed and the works on six ATMs were pending.

- 5 It is also not disputed that the Plaintiff received Ugx. 63,528,813.91/- from the Defendant to do the works. According to PEXH.1, the cost of constructing each ATM room was agreed to as Ugx. 6,368,801/-. This figure multiplied by 9 ATM Rooms comes to Ugx. 57,319,209/- leaving a balance of UGX 6,209,604/- owing to the Defendant, notwithstanding the fact that the works were 87% complete. - 10 The final report PEXH.12 was not signed by its author, a one Jude Rogers Asiimwe and neither was it signed by any of the parties mentioned therein. Therefore, its authenticity and reliability can be challenged.

Additionally, it was agreed to in the meeting held on 6th July 2018 that the Plaintiff had not completed works on Hoima, Mayuge, Mityana, Iganga, Mbale

15 and Park View branches and they were to be assigned to another contractor.

I therefore find no justification to award the Plaintiff a sum of Ugx. 112,253,237.09/- as special damages.

(c) Additional expenses

The Plaintiff claimed sums for additional expenses on the contract yet the 20 contractual prices were set in the respective contracts. These terms were reduced in writing. They should have only been altered or changed or adjusted through writing and / or with the consent of both parties. The additional expenses incurred by the Plaintiff were done on its own volition by underestimating the works and incurring them without the consent of the

25 Defendant. As such, blame should not be attributed to the Defendant.

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5 (d)Other remedies sought by the Plaintiff

The rest of the remedies sought by the Plaintiff were subject to the success of their claim for breach of contract by the Defendant, which has been unsuccessful.

## *Remedies sought by the Defendant/Counter-Claimant*

10 (a) A declaration that the counter-defendant breached both contracts dated 7 th March 2018.

This court as seen above has already found that the Counter-defendant breached the two contracts by not fulfilling its obligations set out in the said Contracts. The prayer is thus granted.

15 (b) An order that the counter-defendant pays Ugx. 122,281,063.68/- being contractual penalty fee of 1% per day on the ATM rooms construction contract from 21/06/2018 till 26/10/2018 (122 days) when the works were completed.

Under Clause 2.2 of DEXH.6, the parties agreed that the counter- claimant shall 20 impose a penalty of 1% of the total contract sum every day that the works remain outstanding upon the expiry of the time frame agreed. The said provision was agreed to by both parties in the Addendum to the contract by appending their signatures thereon. There is nothing on the Court Record that shows that said clause was contested by the Plaintiff/Counter-Defendant. This

25 court is therefore bound to respect and enforce the freedom of contract as between the parties. This was an agreement that was freely executed between the Parties within the meaning of **sections 10 and 13 of the Contracts Act of 2010.**

Page **16** of **23** - 5 Clause 2.2. of DEXH.6 appears to be a penalty clause. A penalty clause has been defined by the **United Kingdom's Supreme Court** in *Cavendish Square Holding BY v Talal El Makdessi, and ParkingEye Ltd v Beavis [2015] UKSC 67.* The Court quoted Lord Diplock in *Scandinavian Trading Tanker Co AB Y Flota Petrolera Ecuatoriana (The "Scaptrade") [1983] 2 AC 694* where he stated that: - 10 *"The classic form of penalty clause is one which provides that upon breach of a primary obligation under the contract a secondary obligation shall arise on the part of the party in breach to pay to the other party a sum of money which does not represent a genuine pre-estimate of any loss likely to be sustained by him as the result of the breach of primary obligation but is substantially in* 15 *excess of that sum. The classic form of relief against such a penalty clause has been to refuse to give effect to it, but to award the common law measure of damages for the breach of primary obligation instead.'* (Emphasis is mine)

To determine if a clause is a penalty clause, **Lord Dunedin** in *Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd (Dunlop) [1915] AC*

20 *79* espoused four tests to be considered i.e. the first is that, a sum that is extravagant or unconscionable when compared to the greatest loss likely to be proved from breach is a penalty; secondly, where the breach is a failure to pay, a sum that is greater than the amount that was originally required to be paid will be a penalty; thirdly, a sum that is required to be paid in response to 25 several different breaches that cause differing extents of damage is a penalty; and finally, a sum is not automatically a penalty simply because precise preestimation is not possible.

I find the above cases instructive in determining whether the Order sought by the Defendant/ Counter-Claimant should be granted or not.

5 In addition to the above case law, **Section 62(1) of the Contracts Act** operationalizes penalty clauses in contracts. It states that:

*"Where a contract is breached, and a sum is named in the contract as the amount to be paid in case of a breach or where a contract contains any stipulation by way of penalty, the party who complains of the breach is* 10 *entitled, whether or not actual damage or loss is proved to have been caused by the breach, to receive from the party who breaches the contract, reasonable compensation not exceeding the amount named or the penalty stipulated, as the case may be."* (Emphasis added)

In the case of *Deluxe Enterprises Ltd V Uganda Leasing Co. Ltd CACA No. 13 of*

15 *2004***, Hon. Justice Egonda Ntende,** JA observed that penalties are enforceable by virtue of **Section 62 of the Contracts Act** but what is prohibited is the innocent party receiving an amount exceeding the amount named in the penalty stipulated.

In the case before court, the penalty fee is a percentage figure accruing per day of failure to finish the works from 21st June to 21st 20 October 2018.

The penalty of 1% of the contractual sum per day of non-completion comes down to Ugx. 101,454,432/-. The Defendant/ Counter- Claimant is hereby awarded a sum of Ugx. 101, 454, 432 as a penalty fee due and payable to it by the Plaintiff.

25 (c) special damages to the tune of Ugx 101,454,432/-.

The **9 th Edition of the Black's Law Dictionary** defines special damages as damages that are alleged to have been sustained in the circumstances of a

5 particular wrong. It is trite that special damages must be specifically pleaded and proved.

The Counter-claimant pleaded that the special damages arose out of the advance payment to the counter defendant to execute the works on 15 ATMs of Ugx. 63,528,813.91/-, engaging another contractor to complete the works on 9

- 10 ATM Rooms at a cost of Ugx. 65,000,000/-, engaging another contractor to execute works on the 5 ATM rooms at a cost of Ugx. 68,457,700/-. The counterclaimant attached contracts of new contractors to execute the works, i.e. DEXH.8 and DEXH.9, which are contracts between the counter-claimant and the new contractor i.e. Legend Consultancy Uganda Ltd for installation and construction - 15 of the 5 ATM rooms at branches, and completion of civil works on 9 ATM rooms at the designated branches thereunder. These documents were not contested by the counter-defendants.

On record PEXH. 11 shows that nine out of the 15 ATM Rooms were 87% completed. I have already indicated above that out of the Ugx. 63,528,813.91/-

- 20 that the Counter-Defendant received from the Counter-Claimant, the nine completed ATMs rooms were an equivalent of an amount totaling to Ugx. 57,319,209/- leaving a balance of UGX 6,209,604/- owing to the Counter claimant. Therefore the counter-claimant is entitled to a refund of UGX 6,209,604/- being the balance of the advance payment. - 25 Regarding the claim for special damages upon engaging a new contractor to execute the pending works, the counter-claimant adduces only contracts executed with the new contractor but does not adduce evidence to prove the expense of the special damages. Whereas the contracts indicate engagement with the new party, there is no proof on record that Defendant disbursed this - 30 sum. It cannot be imputed or implied. There is no proof or particularizing of

Page **19** of **23**

5 what the remaining works were and how much was spent on them. Mere entering into or signing a contract does not indicate performance or incurring of the expense in as far as a claim for special damages is concerned.

This court would therefore award only Ugx. 6,209,604/- that is owing to the counter claimant on the earlier disbursed sum to the counter defendant, as the 10 proved special damages.

(d) General damages

General damages are awarded at the discretion of the court to compensate the claimant for the loss and inconvenience suffered arising out of the breach of the contract. The intention of the award is to restore the claimant to the

15 position it was before the breach occurred.

On record, the Counter-claimant led no evidence of any loss or inconvenience suffered by the breach. There is therefore no justification for award of the prayer. In any case, the penalty fee awarded earlier is sufficient to compensate the counter-claimant.

20 (e) Interest at a rate of 25% per annum on the special damages and general damages.

I find **section 26 (2) of the Civil Procedure Act** instructive on interest rate to be applied. It states that:

*"Where in so far as a decree is for the payment of money, the court may,* 25 *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*

5 *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 the case of **Premchandra Shenoi & Anor – vs – Maximov Oleg Petrovich, Supreme Court Civil Appeal No. 9 of 2003** Oder, JSC (RIP) in his lead judgment 10 held that:

*"In considering what rate of interest the Respondent should have been awarded in the instant case, I agree that the principle applied by this court in Sietco vs Noble Builders (U) Ltd. SCCA No. 31 of 1995 to the effect that it is a matter of the Court's discretion is applicable. The basis* 15 *of awards of interest is that the Defendant has taken and used the Plaintiff's money and benefited. Consequently, the Defendant ought to compensate the Plaintiff for the money. In the instant case the learned Justices of Appeal rightly in my opinion, said that the appellants had received the money for a commercial transaction. Hence the court rate of* 20 *6% was not appropriate…"*

In the case before court, the Defendant is a business that has been denied use of money since 25th June 2018 when the contract on the construction of the ATM rooms lapsed. I have been guided by the above authority (**Premchandra Shenoi & Anor. Supra)** and hereby award the Plaintiff interest (simple) on Ugx 6,209,604/- at a rate of 17% per annum from the 25th 25 June 2018 until payment in full.

(f) Costs of the suit

The general rule is that costs follow the cause, unless the court finds reason to order otherwise.

## 5 **Section 27(1) of the Civil Procedure Act, Cap 71** states that:

*"Subject to such conditions and limitations as maybe prescribed, and to the provisions of any law for the time being in force, the costs of and incident to all suits shall be in the discretion of the court or judge, and the court or*

10 *judge shall have full power to determine by whom and out of what property and to what extent those costs are paid, and to give all necessary directions for the purposes of the aforesaid".*

In the case of **Uganda Development Bank versus Muganga Construction Co. Ltd. [1981] HCB 35** where it was held that a successful party can only be denied costs

15 if it is proved that but for his or conduct, the litigation could have been avoided, and that costs follow the event only where the party succeeds in the main suit.

In the instant case, the Plaintiff failed to prove its claim and court has found in favour of the Defendant in respect of the Counterclaim. In conclusion, judgement is entered against the Plaintiff / Counter – Defendant

- 20 and court hereby makes the following declarations and / or orders that: - 1. The Defendant/ Counter-Claimant did not breach the contracts dated 7th March 2018 for the construction of the ATM Rooms and painting of the Defendant's branches; - 2. The Plaintiff/ Counter-Defendant is liable to the Defendant/ Counter- - 25 Claimant for breach of contract; - 3. The Plaintiff / Counter-Defendants pays the Defendant/Counter-Claimant a sum of Ugx. 101,454,432/- as a penalty fee; - 4. The Plaintiff/ Counter –Defendant pays the Defendant/Counter-Claimant a sum of Ugx. 6,209,604/= as special damages;

- 5 5. The Plaintiff/ Counter-Defendant pays the Defendant /Counter –Claimant simple interest at rate of 17% per annum on the special damages from the 25th June 2018 until payment in full; and - 6. The Defendant /Counter-Claimant is awarded costs of the suit.

I so find.

**Dated and signed at Arua this 15th** 10 **day of October 2024.**

**Harriet Grace MAGALA**

**Judge**

**Delivered online (via ECCMIS) this 12 th day of November 2024.**

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