Esco Uganda Limited v Baluku (Civil Suit 19 of 2022) [2024] UGHC 1146 (6 December 2024)

Full Case Text

#### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT HOIMA

# CIVIL SUIT NO. 19 OF 2022

# (Formerly MSD Civil Suit No.66 of 2022)

# ESCO (U) LTD :::::::::::::::::::::::::::::::::::

#### **VERSUS**

MICHAEL BALUKU :::::::::::::::: **HIROCOLOMIC DEFENDANT**

Before: Hon. Justice Byaruhanga Jesse Rugyema

### **JUDGMENT**

- [1] The Plaintiff filed this suit against the Defendant, seeking inter alia, Special damages of **Ugx 39,020,800/=,** General and punitive damages, interest and costs of the suit. - It is the Plaintiff's case that that as a company engaged in the business of $[2]$ processing cocoa, vanilla and chillies for export operating in Western and Central Uganda, it employed the Defendant as a Branch Accountant at its branch in Kagadi District. - $\mathcal{L}$ That the Defendant's role was to provide accountability to the plaintiff for finances and stock at the branch office by purchasing crop produce, disbursing cash to field buyers, reconciling ledgers, posting purchases and expences on the accounting system and preparing financial reports and related documents. - The Plaintiff averred that contrary to the Plaintiff's policy, the Defendant $[4]$ fraudulently deprived the Plaintiff of stock amounting to 6.786 kgs of cocoa by purchasing less produce as compared to the money he had requisitioned, failed to maintain accurate records, failed to reconcile book values with the field officer's ledgers, manipulated records thereby

$\mathbf{1}$

causing stock losses to the detriment of the Plaintiff. As a result, the Plaintiff carried out an investigation of the stock and cash account which revealed massive stock losses attributed to the Defendant. The Defendant was summoned for a disciplinary hearing where he admitted responsibility for the loss of stock and money and undertook to pay the monetary value of the stock loss.

The Plaintiff averred further that the Defendant owed it a duty of care but $[5]$ he acted negligently and fraudulently when he failed to account for the Plaintiff's stock, falsified documents and made false entries in the Plaintiff's books of accounts respectively. The aspects of negligence and fraud were particularised as below;

# **Negligence**

- a) Failure to maintain accurate documentation in regard to the plaintiff's finances. - b) Failure to inspect/examine the physical cocoa before making entries in the Plaintiff's books of account. - c) Absconding from work during the stock and cash account. - d) Failure to disburse money during the vanilla season leading to lower purchase volumes.

### Fraud

- a) Generation of fictitious entries and/or forgeries in the books of account in order to conceal loss of stock. - b) Intimidating field officers to maintain silence as regards to the fraud. - Upon the plaintiff failing to serve the defendant through the ordinary $[6]$ mode of service of process because he could not be easily located, the Defendant was served with the summons and plaint by way of substituted service in New Vision Newspaper on the 19th day of April 2023 as per the affidavit of service on record dated $2^{nd}$ May 2023 deponed by a court process server, **Kisa Benjamin**. To date, no defence has been filed by the defendant and as result, on the 12th day of July 2023, this court issued directions to the parties to file a joint scheduling memorandum, witness statements and trial bundles and the matter was fixed for hearing *exparte* on the $14$ th day of November 2023.

- The following issues as per the scheduling memorandum on record were $. [7]$ formulated for determination. - 1. Whether the Defendant breached the terms of his employment with the Plaintiff. - 2. Whether the plaintiff suffered loss as a result of the defendant's actions. - 3. Whether the Defendant breached the Agreement to refund Ugx $39,020,800/$ = to the Plaintiff. - 4. Whether the Plaintiff is entitled to remedies sought.

# **Counsel legal representation**

$[8]$ The Plaintiff was represented by Mr. Mark Kiiza of M/s Origo Advocates. Kampala who filed written submissions for consideration in the determination of this suit.

# **Burden and Standard of proof**

- In Civil suits, the burden of proof lies with the Plaintiff who has to prove $[9]$ his or her case on the balance of probabilities; Sebuliba Vs Coop. Bank Ltd [1982] HCB 130. Under S.103 of the Evidence Act, 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. He who asserts must affirm, See also Jovelin Barugahare Vs A. G, SCCA No.28/1993. - $\bigcirc$ 0] In this suit, the Plaintiff claimed against the defendant inter alia, special damages of $Ugx$ 39,020,800/= arising out of the negligence and fraud attributed to the Defendant during the execution of his duties in the plaintiff company. It follows therefore that the burden to prove negligence and fraud lies on the plaintiff who alleges the same. According to **Kampala** Bottlers Ltd Vs Damanico (U) Ltd SCCA No.22/1992, the burden of proof of fraud is heavier than on a balance of probabilities generally applied in civil matters for example, negligence as in this case.

### Merits of the suit

### **Issues 1: Whether the Defendant breached the terms of his employment** with the Plaintiff.

- [11] Counsel for the Plaintiff submitted that the Defendant was employed by the plaintiff as an Accounts Assistant as supported by the appointment letter and that therefore, there was a contract between the parties which the defendant breached by being negligent and fraudulent in the execution of his duties which culminated into loss to the plaintiff company. He relied on the authority of Acaye Richard Vs Saracen (U) Ltd & Ors, C. S No.63 of 2011 to support his argument that the defendant's actions breached his employment agreement with the plaintiff to the extent that he breached the duty of care and good faith when he received money but failed to purchase cocoa, concealed missing stock by fabricating Goods Received Notes (GRNs) and making fictitious entries in the Plaintiff's books of account thereby breaching his duty to keep up to date acute and dependable records of goods taken in and out of stores. - [13] On the aspect of fraud, Counsel submitted firstly, that **Acire David Erica** (PW1) testified that the Defendant forged signatures of suppliers on the GRNs which was corroborated by the forensic report (P. Exh.271) which concluded that the Defendant was the only person signing on these GRNs and not the actual suppliers. 2ndly, that during the handover to a one Wamaani Bernard on 27th/01/2022, the defendant deceived the Plaintiff's officials by providing a wrong book value of 5,009 kgs of cocoa as his opening balance contrary to the loss that was discovered in the stock count on $31^{st}/01/2022$ . While relying on the definition of fraud as per the authority of Fredrick Zaabwe Vs Orient Bank & 5 Ors, Civil Appeal **No.04/2006**, counsel submitted that the defendant's acts of dishonesty amounted to fraud.

[12] The Plaintiff adduced evidence through its sole witness Acire David Erica (PW1) a supervisor of the Plaintiff's Kagadi Office/branch. **PW1** stated in his witness statement that the Defendant was employed by the Plaintiff as a Branch Accountant at the Kagadi Branch. The Defendant's appointment letter, confirmation of appointment and employment agreement were admitted in evidence as P. Exhs.1, 2 &3 respectively. The Defendant's appointment letter **(P. Exh.1)** bear an attachment of his job description. According to PW1, the Principal role of the Defendant was to handle accounts and finance, receiving daily stock and making reports. In June 2021 when PW1 went to supervise the Kagadi Branch, he stated that he noticed abnormal stock losses. At pages 2-3 of his witness statement, PW1 states thus;

> "I noticed patterns of suspicious transactions unusual from the other branches I had supervised. The stock losses at the *Kagadi Branch were abnormal as compared to other branches.* The discrepancies and losses triggered an investigation and the Defendant was requested to hand over his office.... I also noticed that the Defendant had forged signatures on the goods received notes and while others had handwritings similar to his which could explain some of the losses that were being incurred. The defendant was not issuing receipts for the day's purchases but fabricating figures of the daily purchases which eventually led to abnormal losses being recorded after doing a stock count."

He continues in **paragraph 7** to state thus;

"As a result of the consistent poor book keeping and abnormal stock losses, I issued the Defendant with a warning letter and it was discovered that he had continued buying cocoa without issuing receipts to farmers while other written receipts were also not issued to farmers. A second warning letter was issued after money amounting to $Ugx$ 706,000/= was missing in the company safe without any valid reason to back up any transaction that led to the loss."

[13] In the instant case, it is apparent that after the Plaintiff company conducted investigations, and upon discovery of the loss it had incurred due to the negligent and fraudulent acts of the defendant, issued 2 warning

letters dated $22^{nd}/11/2021$ and $7^{th}/01/2022$ (P. Exhs.7 & 8 respectively) and also reported to police a case of Causing financial loss under SD REF; $43/09/02/2022$ . The Defendant was later invited to a disciplinary hearing dated $25th/01/2022$ where he admitted liability for the loss the plaintiff incurred. Thereafter, a consent agreement (P. Exh.9) dated $10^{th}/02/2022$ was signed between the Plaintiff and the Defendant where the defendant agreed to pay back a sum of $Ugx 39,020,800/$ = to the Plaintiff as the value of the missing stock (6.786 kgs of cocoa).

[14] I find that the foregoing evidence as adduced by **PW1** is not denied by the Defendant. In absence of any evidence to the contrary, I find that the Defendant breached the terms of his employment with the Plaintiff. This issue is therefore found in the affirmative.

#### Issues No.2: Whether the plaintiff suffered loss as a result of the $\cap$ defendant's actions.

[15] It is the evidence of $PW1$ that the Plaintiff paid out money to the Defendant for the purpose of purchasing cocoa. However, when a stock count was carried out, it was revealed that stock of 6.786 kgs of cocoa valued at Ugx $39,020,800/$ = was missing and no reason was advanced by the Defendant who was solely in charge of purchasing the said stock. The Defendant could not offer any valid explanations as to what happened to the missing stock and when subjected to a disciplinary hearing, the defendant admitted liability for the plaintiff's loss as a result of his actions. In the premises, I find that the Plaintiff suffered financial loss as a result of the negligent and fraudulent actions of the Defendant, who was employed as the Assistant Accountant at the Plaintiff's Esco (U) Ltd, Kagadi Branch.

# Issue No. 3. Whether the Defendant breached the Agreement to refund Ugx 39,020,800/ $=$ to the Plaintiff.

[16] It is PW1's evidence as per paragraph 8 of his witness statement that the Defendant was summoned for a disciplinary hearing and the defendant admitted liability and or responsibility for the missing stock. By the Consent agreement (P. Exh.13) the defendant undertook to pay back a sum of Ugx 39,020,800/= for the stock that was not purchased which to date, the defendant has failed to fulfil and or pay. This issue is in the premises also found in the affirmative.

### Issue No.4: Whether the Plaintiff is entitled to remedies sought.

### **Special damages**

17] It is trite that special damages must be specifically pleaded and proved See Gapco (U) Ltd Vs A. S Transporters (U) Ltd CACA No.18/2004 and Hajji Asuman Mutekanga Vs Equator Growers (U) LAtd, SCCA No.7/1995. In the plaint, the Plaintiff seeks recovery of a sum of $Ugx 39, 020,800/$ = based on the agreement that was executed between the plaintiff and the defendant (P. Exh.13). According to P. Exh.13 dated 10th February 2022, the Defendant admitted liability and agreed to refund the Plaintiff a total sum of **Ugx** 39,020,800/=. This court having found that the Defendant breached the said agreement, the plaintiff is therefore awarded special damages of $Ugx$ 39,020,800/= for the loss it suffered as a result of the Defendant's actions.

### **General damages**

[18] It is trite that general damages are awarded at the discretion of court and are intended to place the plaintiff in the position he would have been had the wrong complained of not occurred, Blackburn M. Livingstone Vs Rawyards Coal Co, [1880] 5 AC 2539. This court is also aware that

> "in assessment of the quantum of damages, courts are mainly guided by the value of the subject matter, the economic inconvenience that a party may have been put through and the nature and extent of the breach or injury suffered,"

See Uganda Commercial Bank Vs Kigozi [2002] 1 EA 305. As per **S.61(4)** of the contracts Act, while estimating loss, the court has to consider the means of remedying the inconvenience caused by the nonperformance of the contract that exists at the time.

It has already been found by this court that the Defendant breached the contract he had with the Plaintiff and as a result, the plaintiff incurred losses in form of money and stock which generally contributed to the

plaintiff's capital. The Defendant's negligent and fraudulent actions had adverse effects on the Plaintiff as the company would no longer sufficiently supply its customers due to the missing stock of 6,786 kgs of cocoa. The plaintiff has also been deprived of the use of its money i.e proceeds from the stock, for close to 2 years, i.e from 10th February 2022 when the Defendant admitted and agreed to make good the loss incurred by the Plaintiff up to date. Considering The inconvenience, stress, trauma occasioned to the Plaintiff as a result of the Plaintiff's loss not limited to its efforts to recover the lost money, I find that an award of damages amounting to $Ugx$ 10,000,000/= as requested by the Plaintiff is appropriate. In the premises, I award the plaintiff $Ugx$ 10,000,000/= as general damages for the inconveniences and failure or refusal by the Defendant to pay back the money which resulted into losses in the Plaintiff's business.

### **Exemplary damages**

[19] These are intended to punish, deter, express outrage of court at the defendant's malicious conduct, Uganda Revenue Authority Vs Wanume David Kitamirike, C. A No.43 of 2010. In Apire Michael Vs A. G, HCCS No.92 of 2004; it was held that.

"Exemplary damages are not meant to enrich the plaintiff. They are punitive in nature as a deterrent to future acts of the defendant."

The plaintiff prayed for Ugx 5,000,000/ $=$ . The plaintiff however, in this case adduced no evidence to justify an award of exemplary damages and as a result, none is awarded.

#### **Interest**

[20] The Plaintiff prayed for interest of 25% p.a on the decretal sums to cushion it on the inflationary nature of money. An award of interest is also discretionary, see Harbutt's Plasticide Ltd Vs Wyne Tank & Pump Co. Ltd [1970] 1 QB 447. Considering the circumstances of this case, I award the plaintiff interest on general damages at a rate of 18% per annum from the date of judgment until full payment and 24% p.a on special damages from the date from breach i.e $10^{th}$ February 2022 when the Defendant undertook to pay the sum but ignored and/or failed to pay until full payment.

Costs

- [21] As per **Section 27(1) CPA**, costs are awarded at the discretion of court and as per the authority of Mungecha Vs AG [1987] HCB 55, costs follow the event unless Court orders otherwise. In the present case, I accordingly award the Plaintiff costs of the suit as the successful party. - [22] In conclusion, judgment is entered for the Plaintiff against the Defendant in the following terms: - a) The Plaintiff is awarded special damages of $Ugx 39,020,800/=$ . - b) The Plaintiff is awarded general damages of $UGX$ 10,000,000/= for the loss it suffered as a result of the Defendant's actions. - c) The Plaintiff is awarded interest of 18% p.a on general damages from the date of judgment until full payment and 24% per annum on Special damages from the date of the breach i.e $10th$ February 2022 when the Defendant undertook to pay the sum but ignored and/or failed to pay until full payment. - d) The Plaintiff is awarded costs of the suit

Dated at Hoima this $6th$ day of December, 2024.

Byaruhanga Jesse Rugyema JUDGE.