Kitonsa v Pio Padre Group Limited & 4 Others (Civil Suit 185 of 2021) [2022] UGCommC 185 (7 November 2022)

Full Case Text

# a THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) ('tvtL sutr No. r85 C)F 202t

PIT]S KITONSA KIZII'O PLAINI'IF F

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- I. PIO PADRE GROUP LTD - 2. KATO KATENDA - 3. KASOZI GERALD WAISWA - 4. NAMAGANDA KASOZI. IUDITH - 5. NASSAZA SHARON MARIA....... ................ DEFENDANTS

### IIEFORE: HON. LADY. IUSTICE ANNA l]. MUGENYI

#### . IUDGMENT

#### PLAINl-IFF'S CASE

On l " December 2019, and on various other dates in the sarne year, the plaintift at the invitation of the 2"d to 5'l' defendants entered into a series of investment agreelnents with the l '' det'endrint. Under the said agreernents, the plaintit'f was to give rnoney to the l" def-endant fbr the latter, using the afbre mentioned tlonies, to trade on the plaintiff-s behall' in an online crypto currency business where the l't defendant had and or clainrecl expemise.

It was agreed that the l'r det-endant was to always advance 50% of the profits made therefionr to the plaintitl'and the l'' def'errclant was under obligation to return the initial invested capital to the plaintitT upon request by the latter. The plaintifF advanced a total of tlGX 77,050,000/= to the l" det'endant in capital lirr the said purpose, but the defendants have failed or declined to pay the said monies hence this suit.

The det'endants were served with court process on l3'r' May 202 l, but failed to file a det-ence within the prescribed time. An interlocutory .iudgrnent against them was entered on l7'l'september 202land the matter was eventually set down fbr tbrrnal proof on 28tr' September 2022.

#### REPRESENTATION

The plaintifl'was represented by M/s Allan & Partners Advocates while the def'endants did not flle their written statement ol def'ence and neither did they and lheir counsel attend Court.

#### . TUDGMENT

'lhe lssues lbr determination by this Court ale:

- l. Whether the I't defendant breached the contract between herself and the plaintiff? - 2. Whether the 2nd to 5th defendants acted fraudulently - 3. Whether the veil of incorporation should be lifted against the 2n'r -sth defendants? - 4. Remedies available

## lssue I : Whether the I't defendant breached the contract between herself and

## the plaintiffl

In order to deterrnine whether the I't Det-endant breached the contract between itself

and the Plaintifl the PlaintifT rrust prove their case on a balance of probabilities as

that is the standard of proof in civil rnatters. According lo Section I0l ttf the

Evidence Act Cup 6, he who alleges a f'act must prove it unless it is admitted by the

other party.

According to the Legal Informotion lnstilute (LII) wehsite ot'the Cornell Sc'hool of'Luw,'a breac'h of contract occurs whenevera partv v,ho enlerecl u c'ontruct./hils Io 1tu'fitrnt their prontiscd obligution.t. 'The Cor.rrts have equally laboured to deflne the terrrr as seen in the case ol' Ronold Krtsihonle V Shell Ugundo Limiled HCCS

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No.542 of 2006 which was cited by the Plaintiff Counsel and has been referred to in several cases and where it was held that:

" hreach o/ a contract is the breaking of the obligation which a contracl imposcs. which confbrs a right o/ action.for damage:; on the injured parD). lt entitles him to treat the contract as discharged if the other party renounces the contracl or makes its performance impossible or .substantiallv fails to per/brm his promise. The victim is left with suing .for damage.s, treating the contract as discharged or seeking a dis c re t io nary re medy. "

The Plaintif'f testified that on the lll2l20l9 and on various other dates in the same year, at the invitation of the 2'"1 to 5tl' Det-endants the Plaintil'f' entered into a series of investnrent agreements with the l'' delbndant (the agreerrents were attached to the Plaintitls witness statement and n.rarked PE,X I to Ptrx 3 ). He stated that under the said agreements, the PlaintifT was to give rroney to the l" Def'endant fbr the latter, using the atbrenrentioned rnonies, to trade on the Plaintif ls behalf in an online crypto currency business where the l'' Detbndant had or clairre'd expertisci and that the I'r Detbndant was to always advance 50% o1'the profits rrtade there-oilt to the Plaintiff'. Further that the l" Det-endant was under obligation to return the initial invested capital to the Plaintiflupon the plaintitls request.

The Plaintitl averred that he advanced a total of UGX. 77,050,000/: (Uganda Shillings Seventy- Seven Million, Fifty Thousand Only) to the l'' Delbndant in capital fbr the said purpose and attached receipts rlrarked PEX4 to PEX 9 to prove the said payments. He also stated that the said amount invested by the PlaintifT has accumulated and entitled the PlaintifT to a protit of UGX 64,550,000i= (Uganda shillings one hundred twenty million only) and attached copies ol'screenshots of a website with back-end database where irrvestors could access theil accounts shorving part ol'the profit so tar made at thc tinle o1'filing the present suit.

The PlaintifT testified that the l'' Detbndant has t'ailed and or declined to advance/ pay hirr the said rnonies; and that it had equally failed/declined to pay the principal amount initially invested by the Plaintiff.

I have had the opportunity to look at the agreements tendered in Courl by the Plaintifl' and heard the testimony of the Plaintif I which was not challenged by the l'r Def-endant who did not bother to tlle a written statenrent of defbnce despite being served with court process.

I agree with the submissions of counsel for the Plaintifl who stated while citing the case of Marvin Baryaruha V AG M. C. No,l49 of 2016 that f-acts not rebutted are deemed adrnitted.

I accordingly find that the l'' Def-endant breached the said contract between herself and the Plaintiff and the same is deemed discharged.

This Issue is resolved in the aftlrrnative.

# lssue 2: Whether the 2n'l to 5th defendants acted fraudulently

The PlaintifTpleaded fraud in his plaint and testified to the ef fect that the he later got to know that the ?'rd to 5rh Def'endants, who were of ficials/ stakeholders in the I'r Defendant, fbrrned the I't Def'endant as a vehicle to cheat hirn; and that they lured him into signing agreenlents well knorving that they did not intend to honour their promises therein. He stated that the def-endants lied to him that they had a lot of expertise in crypto currency online trade business and promised to generate fbr him a lot of profits whereas not; and that they received money from him without ottering any consideration and or without the intention of ever otfering the satne.

Fraud is deflned as the intentional use of deceit, a trick or sonre dishonest rneans to deprive another of his/ her /its money, property or legal right. (see Legal Dictionary; dictionary.law.corn )

Fronr the above definition and the testirnony olthe PlaintifT in this regard, it is clear that the Defendants acted fi'audulently and dishonestly towards the PlaintifTand this Issue is accordingly resolved in the afflrrnative.

# Issue 3: Whether the veil of incorporation should be lifted against the 2n'r to 5il' Defend a nts

I agree with the submissions of courrsel for the Plaintiff that scctiorr 2(l of tlrc ( ornp:rrrics .\ct 2011. Proritlcs lirr IirrLrrl u: u rtoLtrtri lirr liliirrg llte' r'cil ol' in( or.p()nrlion rrntl lhlrt lraud was proved against the 2"'l to 5'l' Defendants who are of flcials of the I '' Def'endant.

I also aglee with the subrnissions that the said of}icials with deceit Iured the plaintiff into a venture where they were sure the latter would lose his nroney and that the said acts were acts of dishonesty.

The lua to 5'l' Def'endants did not file any written statements of defbnce nor attend Court to def-end themselves thereby accepting the claims of the Plaintif'f'which they f'ailed to challenge or rebut.

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As guided by the Court in the case of The Liquidator Rift Valley Railways (U) Ltd v East African Rail and Handling Logistics Limited Companl'Cause No. 0017 Of 2019 cited by counsel fbr the Plaintift, this Court is of the view that the corporate veil of the l" Det'endant in this nratter was deliberately used for a dishonest purpose and t'raud and will accordingly ignore the sarne and look at the reality behind the veil in older to enable Courl to rnake directiorls that will do.iustice to the parties concerned.

In the prernises the veil of incorporation is lifted and the 2nd to 5th Defendants are accordingly liable tbr the lraudulent actions of the l'' Det'endant.

This Issue is also resolved in the aftlrmative.

## lssue 4: Remedies available

The PlaintifTsought judgrnent against the Defendants fbr the fbllowing:

- a) A declaration that the l" l)efendant breached the contract - b) A declaration that thc defendants lvere fraudulcnt - c) ln thc alternative anrl without prc.judicc a tleclaration that thc tlclt'ntlants occasioncd thc Plaintiffls krss - d) That the veil of incorporation bc lifted - e) An order dirccting the Defendants to jointly and scverallv pav to thc l'laintilT U(;X 125,(XX),0(X)/= bcing principle invcsted rvith profits - l') (Jcncral rla rnagcs - g) l'u n itivc tl:rrrr:tgcs - h) Aggravated tlamagcs - i) Interest on the above at 21oh per annum - j) Costs of the suit

Having held as I did in Issues l, 2 and 3 above, the prayers in (a), (b) and (d) above o are awarded and the declarations sought therein are hereby granted/ rrrade

With regard to the prayer in (e) above, the t']laintiff adduced six original receipts issued by the l" Def'endant to him on various dates (PEX 4to PEX9) totalling to UGX 90,050,000/=. To this Cour1, the Plaintill'satistactorily proved paynrcnt olthc said rnonies to the l" Def-endant as clairned

However. with regard to the prayer tbr profits due to the Plaintift, this ('ourt is olthe considered opinion that the Plaintiff failed to prove the quantum ol profits due to him fl'onr the Def'endants. He relied on copies of screen shots allegeclly showing that they constituted the l" Def'endant's declared profits within each month as agrecd and neither did the said screen shots indicate the periods the profits wet'e tnade parl of the profits rnade at the time of tiling the suit, br.rt the sarre did not indicate

-I'he ar,rtherrticity o1'the copies of the screen shots thenrselves is cluestionable since their origin and extraction fbr evidential purposes was not attested to by an expert in infbrrnatior-r and cornmunication technology or any other rvitness knowledgeable in a sirlilar field and car.rnot therefbre be relied on by this Cor-r11.

In the prernises, I direct the Det'endants to.iointly and severally pay to the Plaintitf the surr of UGX 90,050,000/= being II()ntcs paid to the I'r Defendant by the

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Plaintiff. I decline to grant the prayer in respect of profits payable to the Plaintiff because the same was not satisfactorily proved by him.

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With regard to the prayer for general damages, the Plaintiff testified that the actions of the Defendants caused him great suffering and that all his businesses had collapsed while his children had dropped out of school. The suffering of the Plaintiff was not contested and he is entitled to an award of general damages for the actions of the Defendants who caused such suffering.

The basic aim of contractual damages is to compensate the claimant for the loss the claimant suffered as a result of the breach of contract. I find an award of general damages of $UGX$ 25,000,000/= sufficient compensation for the Plaintiff.

The Plaintiff testified, inter alia, that the Defendants defrauded him of his money and colluded to cheat him; and that they lied to him that they had a lot of expertise in crypto currency online trade business and promised to generate a lot of profits for him which they did not do; and prayed for punitive and aggravated damages for the said actions of the Defendants.

Indeed, as submitted by the Plaintiff's counsel, electronic fraud is rampant in this jurisdiction and the perpetrators of such activities must be punished. The Defendants intentionally took the Plaintiff's money and have adamantly refused to pay it back as agreed to date and did not even bother to defend themselves against the Plaintiff's

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claims. To this Court, the conduct of the Defendants was calculated to make a profit from their wrong actions and I accordingly award of $UGX$ 5,000,000/= as punitive and aggravated damages against the Defendants.

With regard to the prayer for interest at 24% per annum on the sums indicated in other prayers, I find that the parties did not agree on the accrual of the said interest in the event of any default by them and I accordingly decline to award the same. However, I award **interest at Court rate** on the sums awarded herein from the date of judgment till payment in full.

It is trite law that costs follow the event and having no good reason to deprive the Plaintiff of costs in this matter, the same are accordingly awarded to him.

MyBratie

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HON. LADY JUSTICE ANNA B. MUGENYI

DATED...................................