Katamba v SESACO Limited (Civil Suit 978 of 2019) [2024] UGCommC 146 (30 January 2024)

Full Case Text

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) CIVIL SUIT No. 978 OF 2019**

10 **DR. KATAMBA DAVID …………………………… PLAINTIFF/COUNTER- DEFENDANT**

#### **VERSUS**

**SESACO LTD .…………………………………….. DEFENDANT /COUNTER- CLAIMANT**

#### **BEFORE: HON. LADY JUSTICE SUSAN ABINYO**

#### 15 **JUDGMENT**

## Introduction

The Plaintiff brought this suit against the Defendant a Limited Liability Company duly incorporated under the laws of Uganda, seeking recovery of UGX 115,000,000(Uganda Shillings One Hundred Fifteen Million Only), interest at a rate 20 of 30% per annum compounded monthly; USD 2,250 (United States Dollars Two Thousand Two Hundred Fifty only), interest at a rate of 15% per annum compounded monthly, general and aggravated damages, and costs of the suit.

Facts

The brief facts giving rise to the Plaintiff's claim against the Defendant are that on 25 the 20th day of March, 2018, the Defendant appointed the Plaintiff to its Board of Directors pursuant to an appointment letter, and duly executed a Service Agreement. That in accordance with the Service Agreement, the Plaintiff was entitled to an annual honorarium of USD 1500 (United States Dollars One Thousand Five Hundred Only) however, for one year and six months, the Defendant refused,

30 declined, and or failed to pay the Plaintiff's remuneration, which was a fundamental breach of the Service Agreement.

That during the Plaintiff's tenure as a Board member, he was convinced by Mr. Nsubuga Charles the Managing Director, to purchase Defatted Soya Flour (DSF) from the Defendant, which is used in the production of animal feeds, for the

35 Plaintiff's Agribusiness Enterprise, as a way of supporting the company.

- 5 That upon reaching an agreement, the Defendant's Lawyers, M/S Mukhwana & Co. Advocates prepared an agreement for execution by the parties, in which the Plaintiff was required to pay into the Defendant's account a sum of UGX 100,000,000 (Uganda Shillings One Hundred Million only) in advance for the supply of DSF, and that the Defendant could only execute the Agreement upon receipt - 10 of the said sum.

That in accordance with the terms of the Agreement, the Plaintiff transferred UGX 100,000,000 (Uganda Shillings One Hundred Million only) in two installments by electronic wire transfer from his account No. 9030006245152 in Stanbic Bank to the Defendant's Account No. 9030005749610, held in Stanbic Bank.

- 15 That upon the Plaintiff's payment of the agreed contractual sum of UGX. 100,000,000, the Defendant was required to give the Plaintiff a copy of a fully executed Agreement, and also deliver the consignment of DSF within 3 months however, the Defendant declined, refused, and or failed to deliver a fully executed Agreement, and supply the DSF to the Plaintiff despite several - 20 reminders.

That upon the Defendant's failure to honor its obligation, the Defendant's Managing Director approached the Plaintiff, and proposed that since there was a delay in delivery of his consignment, the Defendant would pay compensation of UGX 4,650,000 for every month his money is retained by the Defendant without

25 making the supply, and that the Defendant reneged on this undertaking as well.

The Defendant in defence contended that the entire suit is illegal, and does not disclose a cause of action against it. That the Plaintiff exploited, and abused his position as Board Chairperson, when he made illegal transactions on the Defendant's Bank account, and property, contrary to his service contract, and 30 Board Charter.

That the Plaintiff further in abuse of his position, and without any legal basis, caused the Defendant's agents, and employees to pay him on sales of DSF. That in order to further his illegalities, the Plaintiff filed this suit against the Defendant for an alleged payment of a non existing contract, whether formal or informal for an

35 alleged purchase of a defatted soy flour from the Defendant.

That one Wasswa Ronald on the 10th day of June, 2019, sent a draft Agreement by email to the Plaintiff, and two other Directors, and that upon receipt of the email, Ms. Anne Ngugi, one of the Directors raised a red flag, and demanded that before concluding any dealings with the Plaintiff, the matter be tabled, and 5 or brought to the board for a resolution, which advise the Plaintiff refused, wantonly neglected, and ignored to oblige.

That it is not true that the Defendant entered into any agreement with the Plaintiff in relation to any purchase of defatted Soy Flour as alleged. That no agreement of whatsoever nature, whether informal or formal was agreed, and that the

10 Plaintiff acted without any resolution of the Defendant or any communication from the Defendant.

That the Defendant breached no obligation, and the Defendant's Director has never approached the Plaintiff as alleged; that no contractual arrangement exists between the Plaintiff and the Defendant.

15 Counterclaim

The Counterclaimant's claim against the Counter-Defendant seeks orders for negligence, conversion, special, exemplary, and general damages, interest, a permanent injunction, and costs for the suit.

The Counter Claimant contended that the Counter-Defendant, who was the 20 Counter Claimant's Board Chairman, during his tenure, and without any legal basis, began running a business within a business in the Counterclaimant's business, in total abuse of his position as a Director, as well as the Board Chairman.

That the Counter-Defendant has to date not accounted for all the Counterclaimant's money had and received, and instead chose to resign in total

25 disregard of the terms of service of the contract, and that as a result of his actions, the Counterclaimant has suffered damage.

That the Counter-Defendant has no justification to transact a business within a business, for to do so was illegal, negligent, and fraudulent, for which the Counterclaimant seeks special and general damages.

30 The Counter-Defendant filed a reply to the counterclaim, and contended that the counterclaim is misconceived, frivolous, incompetent, and lacks merit; that the Counterclaimant is not entitled to the reliefs prayed for or any other reliefs whatsoever. That the Counterclaim should be dismissed with costs.

## Representation

35 The Plaintiff, and or Counter-Defendant was represented by Counsel Ali Kankaka of M/S Kyazze, Kankaka & Co. Advocates, while the Defendant, and or Counterclaimant was initially represented by M/S Madibo, Mafabi Advocates & 5 Solicitors, who withdrew from representing the Defendant, and or Counterclaimant in the course of the hearing.

## Issues for determination

supporting the company.

The agreed issues during the scheduling proceedings are that:

- 1. Whether the plaint discloses a cause of action? - 10 2. Whether there is any contract enforceable at law between the Plaintiff, and Defendant, if so, who breached it? - 3. Whether the Counterclaim has merit? - 4. What remedies are available to the parties?

# Evidence

15 The Plaintiff adduced his evidence (hereinafter referred to as "PW1"), however, the Defendant failed to adduce any evidence, as will be explained later hereunder.

# The Plaintiff's, and or Counter-Defendant's evidence

PW1 stated that in or about the beginning of the year 2018, he was approached 20 by Mr. Nsubuga Charles, who requested him to join the Defendant Company as a Director. That he accepted the invitation, and Mr. Nsubuga forwarded to him an appointment letter as a Director, and a Service Agreement dated 20th March, 2018.

- 25 That according to the Appointment Letter, and Service Agreement, he was entitled to an annual honorarium of USD1500(United States Dollars One Thousand Five Hundred only) however, for a period of one year, and six months, the Defendant refused, and or failed to pay his remuneration, and to date, a total of USD2,250 (United States Dollars Two Thousand Two Hundred Fifty only) is still - 30 outstanding for the professional service he rendered as a Non Executive Board member.

That during the Plaintiff's tenure as a Board member, he was convinced by Mr. Nsubuga Charles the Managing Director, to purchase Defatted Soya Flour 35 (hereinafter referred to as "DSF") from the Defendant, which is used in the production of animal feeds, for the Plaintiff's Agribusiness Enterprise, as a way of

25 making the supply, and to date, the Defendant has neither paid the said monies nor delivered the consignment of the DSF.

That the Plaintiff has suffered psychological stress, and financial loss, for which the Defendant should be accountable in special, general, and aggravated damages, and costs of the suit.

# 30 The Defendant's, and or Counterclaimant's evidence

The Defendant filed a witness statement, which he refused to confirm as his statement during the hearing proceedings, and insisted that he still wanted to engage his former lawyer, who had written a letter to Court that they had withdrawn from representing the Defendant.

35 This Court guided the Defendant's witness on how to proceed, in order to have the said witness statement admitted as his evidence in chief but the said witness became uncooperative. Counsel for the Plaintiff prayed that the witness statement be expunged.

- 5 This Court considered the several adjournments at the instance of the Defendant, and exercised its inherent powers under section 98 of the Civil Procedure Act, Cap 71, and section 17(2)(a) of the Judicature Act, Cap 13, to make orders to expunge the witness statement of the Defendant, and or Counterclaimant, so as to prevent further delays in the prosecution of the case. - 10 Resolution of issues

## Issue No.1: Whether the plaint discloses a cause of action?

It was submitted for the Plaintiff that in determining whether a plaint discloses a cause of action, the law is that the plaint together with its annextures have to be considered. Counsel cited the case of *Tororo Cement Co. Ltd Vs Frokina* 15 *International Ltd, S. C. C. A No.2 of 2001*, in support of his submission.

## Decision

I have looked at the plaint in particular paragraph 4, wherein the Plaintiff contends inter alia;

That he was appointed to the Board of Directors of the Defendant on the 20th day 20 of March, 2018, and copies of the Service Agreement, and Appointment letter are attached, and marked PE1, and PE2 respectively.

That according to the Service Agreement, the Plaintiff was entitled to an annual honorarium of USD 1500 (United States Dollars One Thousand Five Hundred only) however, for one year the Defendant refused, declined and or failed to pay the 25 Plaintiff's remuneration, in fundamental breach of the Service Agreement.

I have further looked at the written statement of defence in particular paragraph 5, wherein the Defendant admits that he appointed the Plaintiff to its Board of Directors.

I agree with the submission of Counsel for the Plaintiff that prima facie the plaint 30 discloses a cause of action against the Defendant, since the Plaintiff has demonstrated in the plaint that he enjoyed a right to be paid an annual honorarium as a Director of the Defendant, and the contractual dealings for the supply of DSF pursuant to which, he paid to the Defendant UGX 100,000,000; that the said right has been violated, as he has not been paid honorarium for one year

35 and six months, and has neither been supplied with the DSF nor have the funds been refunded; and that it is the Defendant who is liable.

- 5 Following the decision in *Tororo Cement Co. Ltd Vs Frokina International Ltd,* **(supra)**, this Court finds that the plaint discloses a cause of action against the Defendant. (See also *Narottam Bhatia & Anor Vs Boutique Shazimi Ltd, S. C. C. A No. 6 of 2009*, and *Madhvani International S. A Vs Attorney General, C. A. C. A No. 48 of 2004)* - 10 Issue No. 2: Whether there is any contract enforceable at law between the Plaintiff, and Defendant, if so, who breached it?

Counsel for the Plaintiff submitted that there are two enforceable contracts between the parties namely: a contract of service as a Board member, and a contract for supply of DSF, in which, the Plaintiff deposited UGX 100,000,000 into 15 the Defendant's account, and that the Defendant breached both contracts.

# Decision

It's trite law that for a contract to be valid, and legally enforceable, the following essential elements must exist namely: capacity to contract; intention to contract; consensus ad idem; valuable consideration; legality of purpose, and sufficient

- 20 certainty of terms. *(See section 10 of the Contracts Act, 2010,* and the case of *Green boat Entertainment Ltd Vs City Council of Kampala, H. C. C. S No. 0580 of 2003*, cited with approval in the decision of this Court in *Karegyeya Geoffrey Vs Mugabi Innocent T/A Ssemanda & Sons Est, H. C. C. S No. 0753 of 2019)*, and *Mujuni Jimrex Vs Haks Investment Ltd & Anor, H. C. C. S No.446 of 2018*, relied upon by - 25 Counsel for the Plaintiff.

# I will begin with the question as to whether there is any contract of service?

It's trite law that whoever alleges a given fact, and desires the Court to give judgment on any legal right or liability dependent on the existence of any fact, has the evidential burden to prove that fact unless, it is provided by law that the

30 proof of that fact shall lie on another person. *(See sections 101, and 103 of the Evidence Act, Cap 6*, and *Jovelyn Barugahare Vs Attorney General, S. C. C. A No. 28 of 1993[1994] KALR 190)*

In this case, the fact of the Plaintiff's appointment to the Defendant's Board of Directors was admitted by the Defendant under paragraph 5 of the written 35 statement of defence.

In other words, the Plaintiff's evidence as above that he was appointed to the Board of Directors of the Defendant on the 20th day of March, 2018, as seen in the Appointment letter attached, and marked PE2 was uncontroverted. 5 For the foregoing reason, I find that the Plaintiff has discharged the evidential burden of proof to the required standard in civil cases, which is on a balance of probabilities, and proved that there is a contract of service between the parties herein.

### Secondly, as to whether there is any contract for supply of DSF?

- 10 Counsel for the Plaintiff submitted that the uncontroverted evidence of the Plaintiff proved that an agreement for the sale of DSF was drafted, and forwarded to the Plaintiff on the 4th day of February, 2019 by Bogere Jeff Mukhwana, the Defendant's Lawyer, and secretary(as he then was), and that the Plaintiff signed, and returned the contract to the Defendant for execution, whereupon several - 15 emails and correspondences were exchanged in respect of the supply of the DSF between the Plaintiff and the Defendant however, the Defendant upon receipt of UGX 100,000,000 paid by the Plaintiff into the Defendant's account, as seen in the Account statement marked PE3, refused not only to sign, and share with the Plaintiff a duly signed contract but also did not supply the DSF or return the said - 20 monies.

## Decision

I have looked at the Service Agreement marked PE1, which reads that:

"THIS AGREEMENT is made this 20th day of March, 2018

#### BETWEEN

25 SESACO LTD… [hereinafter referred to as "The Company"] … of the one part,

#### AND

DR KATAMBA DAVID … [hereinafter referred to as "The Director] … on the other part.

#### WITNESSETH AS FOLLOWS:

30 "Whereas SESACO LTD is desirous of employing DR. KATAMBA DAVID as a nonexecutive Director.

#### AND

Whereas DR KATAMBA DAVID is desirous, and has agreed to offer the services to SESACO LTD in that capacity or in such other places as the Company may direct 35 from time to time.

5 NOW THE PARTIES HEREBY AGREE AS FOLLOWS: - …"

I find therefore, that the parties to the said Agreement are SESACO LTD, the Defendant herein, and DR KATAMBA DAVID, the Plaintiff herein.

From PE3, the Account statement, it is expressly clear that on 4th February, 2019, a sum of UGX 90,000,000 was debited for a transaction description of DSF 10 prepayment purchase, and on 13th March, 2019, a sum of UGX 10,000,000 was

debited for a transaction description of IAT IFO DSF CIDR:13, which fact was not challenged by the Defendant.

Section 114 of the Evidence Act, Cap 6 provides as follows: -

# **114. Estoppel**

- 15 When one person has, by his or her declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon that belief, neither he or she nor his or her representative shall be allowed, in any suit or proceeding between himself or herself and that person or his or her representative, to deny the truth of that thing. [Emphasis is mine] - 20 In the instant case, I find that the Defendant is estopped by conduct, and cannot approbate, and reprobate, after obtaining a benefit from the said transaction. *(See Car and General Ltd Vs AFS Construction (U) Ltd [2018] UGCA 34,* and *Ken Group of Companies Ltd V Standard Chartered Bank (U) Ltd & 2 Others, HCCS No.486 of 2007)* - 25 For the above reasons, this Court finds that there is a contract for supply of DSF between the parties herein.

# On the question as to whether there was breach of contract? If so by whom?

The Courts have established in a plethora of cases that parties are bound by the terms of the contract they execute. A breach therefore occurs, where that which

- 30 is complained of, is breach of a duty arising out of the obligation(s) undertaken in the contract. *(See the Court of Appeal decision in Behange Vs School Outfitters(U) Ltd (2000)1 E. A 20; Barclays Bank of Uganda Limited Vs Howard Bakojja H. C. C. S No. 53 of 2011, Nakawa Trading Co. Ltd Vs Coffee Marketing Board H. C. C. S No. 137 of 1991[1994] 11KALR 15),* and *United Building Services Limited Vs Yafesi* - 35 *Muzira T/A Quickset Builders and Co. H. C. C. S No. 154 of 2005)*

In the instant case, according to the Service Agreement, the Plaintiff was entitled to an annual honorarium of USD 1500 (United States Dollars One Thousand Five Hundred only).

5 It was the Plaintiff's uncontroverted evidence that for one year, and six months the Defendant refused, declined and or failed to pay his remuneration without any justification.

Accordingly, this Court finds that the Defendant is in breach of the Service Agreement.

10 In regard to the contract for the supply of DSF, I find that the Plaintiff has proved to the required standard that the Defendant received UGX 100,000,000 but neither supplied the DSF nor refunded the said money to the Plaintiff.

It is notable that the parties had not executed a duly signed contract in respect of the supply of the DSF however, since the Defendant received the sum of UGX 15 100,000,000(Uganda Shillings One Hundred Million only) from the Plaintiff; the intention of the parties can be deduced from their conduct in that, the said money was meant for the purchase of the DSF.

The Defendant's failure to supply the DSF to the Plaintiff or to refund the said money therefore, amounts to breach of the Defendant's obligation in the 20 contract to supply the DSF.

For the above reasons, this Court finds that the Defendant did not perform its obligations, and acted in breach of the said contracts.

Issue No. 3: Whether the Counterclaim has merit?

The Defendant's claim was not supported by any evidence, since the witness 25 statement of a one Charles Nsubuga, the Defendant's witness was expunged due to circumstances indicated above.

Accordingly, I find that the Defendant did not discharge the evidential burden of proof to the required standard in civil cases, which is on a balance of probabilities.

In the result, this Court finds that the counterclaim lacks merit.

## 30 Issue No.4: What remedies are available to the parties?

Having found issues 1, and 2 above in the affirmative, this Court further finds that the following remedies sought for by the Plaintiff are available.

Its trite law that special damages must be specifically pleaded and strictly proved. *(See the cases of Kyambadde Vs Mpigi District Administration [1983] HCB*

## 35 *44; Bonham – Carter Vs Hyde Park Hotel [1948] 64 TLR 177, and Ronald Kasibante Vs Shell (U) Limited, H. C. C. S No. 542 of 2006)*

5 I find that the Plaintiff adduced evidence in PE1, and PE2, and proved that he is entitled to annual honorarium of USD 1500, which totals to USD 2250, for the period of one year and six months that he was not paid.

In addition, I find that the Plaintiff adduced evidence in PE3, and proved that he is entitled to recover UGX 100,000,000(Uganda Shillings One Hundred Million only) 10 from the Defendant for breach of the contract to supply DSF.

Section 61(1) of the Contracts Act, 2010 provides that where there is breach of contract, the party who suffers the breach is entitled to secure compensation for any loss or damage caused to him or her.

- General damages are the direct natural or probable consequence of the 15 wrongful act complained of, and includes damages for pain, suffering, inconvenience and anticipated future loss. *(See Storms Vs Hutchinson [1905] A. C 515)*, and *Robert Cuossens Vs Attorney General, S. C. C. A No. 8 of 1999,* on the proposition that the object of an award of damages is to give the Plaintiff compensation for the damage, loss, or injury he or she has suffered. - 20 It's settled law that an award of general damages is at the discretion of Court, which should be exercised judiciously. *(See Crown Beverages Ltd Vs Sendu Edwards, S. C. C. A No. 1 of 2005 [2006] UGSC*).

In the case of *Uganda Commercial Bank Vs Kigozi [2002] 1 EA 305,* the factors to be considered by the Courts when assessing the quantum of general damages 25 are enunciated as follows: - the value of the subject matter; the economic inconvenience that the Plaintiff may have been put through, and the nature and extent of the injury suffered.

Following the guidance in *Uganda Commercial Bank Vs Kigozi* above, I find that the sum of UGX 50,000,000 (Uganda Shillings Fifty Million only) in general damages, 30 will suffice for the Plaintiff, who has proved that he has suffered economic loss, and inconvenience, as a result of the Defendant's failure to honor its obligations in the said contracts.

In regard to aggravated damages, the proposition is that they are essentially compensatory in nature although, enhanced on account of the injury, 35 humiliation, distress or embarrassment suffered by the Plaintiff, due to the conduct of the Defendant. *(See Basiima Kabonesa Vs The Attorney General & Anor, S. C. C. A No.16 of 2021)*, *and URA Vs Wanume David Kitamirike, C. A. C. A No. 43 of 2010[2012] UGCA 3)*, relied upon by Counsel for the Plaintiff.

- 5 In the instant case, I find that the Defendant's conduct in not only executing a duly signed contract, after the sum of UGX 100,000,000 was deposited into their account by the Plaintiff, but also not delivering the DSF, or a refund of the said money despite several reminders from 2019 to date, has caused great economic loss to the Plaintiff. - 10 In the given circumstances, this Court finds that the Plaintiff is entitled to aggravated damages in the sum of UGX 200,000,000(Uganda Shillings Two Hundred Million only)

It's settled law that where no interest rate has been provided, the rate is fixed at Court's discretion. *(See Crescent Transportation Co Ltd Vs Bin Technical Services*

15 *Ltd, C. A. C. A 25 of 2000),* and *Premchandra Shenoi & Anor Vs Maximov Oleg Petrovich, S. C. C. A No.9 of 2003*, cited by Counsel for the Plaintiff.

This Court has taken into account the fact that the Defendant has deprived the Plaintiff of his money since 4th February, 2019, and awards interest on the principal sum of UGX 100,000,000, at the rate of 20% per annum, from the date hereof until

20 payment in full, and 8 % on the honorarium of USD 2250, from the date of filing this suit until payment in full.

This Court has taken into consideration the provision of the law under subsection 1 of section 27 of the Civil Procedure Act, Cap 71 on costs, and the decision in *Uganda Development Bank Vs Muganga Construction Co. Ltd (1981) HCB 35* 25 where Justice Manyindo (as he then was) held that:

> *"A successful party can only be denied costs if its proved, that, but for his or her conduct, the action would not have been brought, the costs will follow the event where the party succeeds in the main purpose of the suit"*

I find no reason to deny the Plaintiff costs and accordingly, the Plaintiff is awarded 30 costs of this suit.

Having found issue (3) above in the negative, this Court further finds that the remedies sought for by the Counterclaimant are not available.

The Counterclaim is hereby dismissed with costs to the Counter-Defendant.

In the final result, Judgment is entered for the Plaintiff against the Defendant in 35 the following terms: -

- 1. A declaration that the Defendant breached the said contracts. - 2. An order for recovery of UGX 100,000,000(Uganda Shillings One Hundred Million only).

- 5 3. An order for payment of USD 2250(United States Dollars Two Thousand Two Hundred Fifty). - 4. Aggravated damages of UGX 200,000,000(Uganda Shillings Two Hundred Million only). - 5. General damages of UGX 50,000,000(Uganda Shillings Fifty Million only). - 6. Interest on (2) above at the rate of 20% per annum from 4th 10 February, 2019 until payment in full. - 7. Interest on (3) above at the rate of 8% per annum from the date of filing the suit till payment in full. - 8. costs of the suit, and the counterclaim. - 15

Delivered electronically this 30th day of January, 2024.

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