Metal & Wood Industries Limited v Mega Holdings (U) Limited (Civil Suit 33 of 2021) [2024] UGCommC 164 (31 May 2024)

Full Case Text

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION)

#### **CIVIL SUIT NO. 33 OF 2021**

## METAL AND WOOD INDUSTRIES LIMITED ::::::::::::::::::::::::::::::::::::

#### **VERSUS**

# MEGA HOLDINGS (UGANDA) LIMITED ::::::::::::::::::::::::::::::::::::

## (Before: Hon. Lady Justice Patricia Mutesi)

#### JUDGMENT

## **Background**

- 1. The Plaintiff brought this suit seeking to recover the sum of UGX 68,750,000 it had paid to the Defendant for the purchase of 110 tons of soya beans, special damages, general damages, interest and costs of the suit. The Plaintiff's case is that it entered into an agreement for the purchase of 110 tons of soya beans from the Defendant at a unit price of UGX 1,250 per kilogram and a total price of UGX 137,500,000. The goods were to be delivered to the Plaintiff within 2 weeks after receipt of 50% of the purchase price. The Defendant invoiced the Plaintiff who duly paid the said deposit. - $\overline{2}$ . The Plaintiff asserts that the Defendant knew all along that it had bought the goods for the purpose of reselling them. That at the time, the Plaintiff had already agreed to resell the goods to Maharaja Grains (Pvt) Ltd, an Indian company, at USD 51,700 (then equivalent to UGX 193,358,000). To the Plaintiff's disappointment, the Defendant did not deliver the goods and this made it impossible for the Plaintiff to deliver them to Maharaja Grains. - 3. In its defence, the Defendant maintains that the delivery of the goods was conditioned upon full payment of the total price, and since this condition

was never fulfilled, the Plaintiff was not entitled to delivery. The defendant asserts that the Plaintiff failed to provide the Defendant with 50 polythene bags of 50kgs each for re-bagging the goods. Further that the Plaintiff also failed to provide costs for the export documents along with fumigation costs and this made it difficult for the Defendant to deliver the goods.

The Defendant denies any knowledge of the Plaintiff's dealings, if any, $4.$ with Maharaja Grains or any other 3rd party. It asserts that it communicated to the Plaintiff on 14th December 2020 asking them to perform their duties under the agreement but all in vain. The Defendant insists that the Plaintiff breached the agreement by prematurely and unilaterally terminating it. By way of counterclaim, the Defendant prayed for recovery of UGX 27,500,000 (the profit it had anticipated to earn from the transaction), UGX 3,300,000 for accumulated storage costs, general damages and costs of the counterclaim.

## **Issues arising**

- $5.$ From these facts, the following issues arise for the Court's determination: - 1. Whether there was breach of the contract of sale. - 2. What reliefs are available to the parties.

## Representation and hearing

- 6. At the hearing, the Plaintiff was represented by Mr. William Muhumuza of Matrix Advocates. The Defendant did not appear and, as such, the hearing proceeded *ex parte*. The Plaintiff's Managing Director, Premil Chandariya, testified as its only witness (PW1). The Plaintiff also adduced 9 documents that were exhibited and marked consecutively from **P. Ex.1 – P. Ex.9**. - PW1 testified that Maharaja Grains (Pvt) Ltd requested him to supply 110 $7.$ metric tons of soya beans at USD 470 per metric ton. He contacted Dr. Edward Isingoma of Pearl Capital Partners to recommend a person that had the capacity to supply the said quantities. Dr. Edward Isingoma

connected him to Mr. Christopher Makode, the Defendant's Managing Director (MD). Through Whatsapp correspondence, PW1 told the Defendant's MD of his intention to purchase 110 metric tons of soya beans for export to Mumbai, India. The Defendant's MD assured PW1 that the Defendant could make the supply at UGX 1,250 per kilogram.

- 8. PW1 stated that from his estimations, since the Plaintiff was to purchase the goods at UGX 137,500,000 and resale them to Maharaja Grains at UGX 193,358,000, its profit from the transaction was to be UGX 55.858,000. On 29th September 2020, the Defendant's MD sent PW1 an invoice for 50% of the contract sum. The Plaintiff paid the 50% (UGX 68,750,000) the next day and the Defendant's MD acknowledged receipt of the said sum. On 7th October 2020, the Plaintiff sent a proforma invoice to Maharaja Grains who then transferred USD 51,700 to the Plaintiff. The Plaintiff and the Defendant signed a formal contract setting out all the terms they agreed upon on 12th October 2020. - 9. Finally, PW1 testified that on receipt of the 50% payment, the Defendant's MD started deliberately lying about delivery. He became evasive and would not always give PW1 updates. He told PW1 that he was experiencing delays in gathering the agreed quantity of the goods but that he would deliver as agreed. At the end of November 2020, he promised to refund the Plaintiff's deposit but all in vain. Eventually, the Plaintiff had to refund Maharaja's deposit on 22nd December 2020 as the Defendant's MD continued to make more empty promises. - 10. After the hearing, counsel for the Plaintiff filed written submissions which I have fully read and considered along with the laws and authorities cited therein and all the other materials on the record.

## **Resolution of Issues**

11. Section 101(1) of the Evidence Act provides that whoever desires a court to give judgment as to any legal right or liability dependent on the

existence of facts which he or she asserts must prove that those facts exist. Additionally, Section 103 of the Evidence Act provides that the burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence. In civil cases, the burden is on the plaintiff to prove the existence of his rights and the liability of the defendant on a balance of probabilities (See Miller V Minister of Pensions [1947]2 All ER 372). I will be guided by these principles on burden and standard of proof in evaluating the evidence adduced in this case.

## Issue 1: Whether there was breach of the contract of sale.

- 12. It is now settled law that, once a contract is valid, it automatically creates reciprocal rights and obligations for the parties to it. When a document containing contractual terms is signed by 2 or more parties, in the absence of any vitiating factors, the parties are bound by those terms. Breach of contract will occur when one party to that contract fails, neglects or refuses to perform the contract, without any legitimate legal excuse. (See William Kasozi VV DFCU Bank Ltd, HCCS No. 1326 of 2000). It follows that, when one party to a contract fails to perform the contract as agreed, that party is said to be in breach of the contract. That breach entitles the innocent party to a remedy. (See Kabagambe Matthias V Kahire Nobert, HCCS No. 389 of 2016). - 13. In the instant case, the parties entered into an oral contract for sale and supply of 110 metric tons of soya beans in September 2020. Pursuant to that contract, the Defendant issued a sales invoice (P. Ex.3) to the Plaintiff asking for payment of 100% of the purchase price for the soya beans which was UGX 137,500,000. On 30th September 2020, the Plaintiff responded by paying UGX 68,750,000 (50% of the purchase price) by cheques (P. Ex.4 and P. Ex.5). The parties later reduced the terms of their contract into writing on $12^{th}$ October 2020 as exhibited in P. Ex.2. - 14. In **P. Ex.2**, the parties agreed that the Defendant was to pack the sova beans into 50kg bags and make them available, at its stores, to the Plaintiff

for export purposes. In exchange, the Plaintiff, was to first pay UGX 68,750,000 (50% of the price) and then another UGX 68,750,000 being the balance on the price at sight of the bags after packing. It, therefore, appears to me that while the Defendant had earlier invoiced the Plaintiff for the entire price, the parties' agreement, as later represented in P. Ex.2, was that the Plaintiff would first pay 50% of the price and then pay the remaining 50% upon delivery. This explains why the Plaintiff only paid 50% of the price on 30th September 2020 despite being invoiced for 100% of that price.

- 15. The sales invoice also contained a commitment by the Defendant to deliver the soya beans "within $1 - 2$ weeks on receipt of funds in our [its] Account in advance". This clause was not eventually captured in the written contract. Although the parole evidence would ordinarily bar this Court from relying on that delivery clause in resolving this dispute, I am convinced that this clause contains a condition precedent to full payment of the purchase price set out in the written contract within the meaning of Section 92(c) of the Evidence Act. Therefore, the sales invoice is relevant and admissible to the extent that it clarified on what the actual agreed delivery timeline was. - Furthermore, I note that both parties referred to the said timeline in their 16. pleadings, implying that it is not contested. The only contestation appears to be is on its interpretation. The Plaintiff pleaded that delivery was to be made within $1-2$ weeks of receipt of 50% of the purchase price while the Defendant pleaded that delivery was to be made within $1 - 2$ weeks of receipt of 100% of the purchase price. Indeed, the Defendant's primary defence is that it could not deliver the goods since the Plaintiff had not paid the purchase price in full. From those pleadings, it is evident that the literal interpretation of the phrase "within $1-2$ weeks on receipt of funds in our [its] Account in advance" has produced some ambiguity since it is not clear whether the funds payable in advance were to be half of the purchase price or all of the purchase price.

- It is trite law that the ultimate aim of interpreting a provision in a contract, 17. especially a commercial contract, is to determine what the parties meant by the language they used, which involves ascertaining what a reasonable person would have understood the parties to have meant. In construing a contract before it, a court should always endeavor to give that contract an interpretation which makes commercial sense. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction that is consistent with business or commercial common sense and to reject the other. (See Andrew Akol Jacha V Noah Doka Onzivua, HCCA No. 1 of $2024$ ). - In the instant facts, I am convinced that the phrase "within $1 2$ weeks on 18. receipt of funds in our [its] Account in advance" as used in the sales invoice meant that delivery would be made within $1 - 2$ weeks of receipt of 50% of the purchase price and not upon receipt of 100% of the purchase price as the Defendant has suggested. This is because the written contract which was eventually signed by both parties included a payment clause expressly stating that 100% of the price was payable sight of the packed/delivered goods while 50% of the purchase price was payable as an initial deposit. - I am also fortified in this conclusion by the Whatsapp messages between 19. the PW1 and the Defendant's MD (P. Ex.1). P. Ex.1 proves that, prior to the 30th November 2020 deposit, PW1 actually told the Defendant's MD that the Plaintiff was going to pay 50% of the purchase price as advance and the Defendant's MD accepted. After the payment was made, the Defendant's MD acknowledged receipt without complaint. If the true understanding of the parties had been that 100% of the purchase price was payable before packing/delivery, the Defendant's MD would have immediately protested the 50% deposit through his messages to PW1. The absence of any protests from him on receipt of 50% of the price shows that it is exactly what he expected to receive at that stage of the transaction.

- 20. It follows that the Defendant was obligated to pack and make the goods available to the Plaintiff within two weeks from 1st October 2020 when the Defendant's MD acknowledged receipt of the 50% deposit, that is to say. on or by 14th October 2020. In its defence, the Defendant acknowledged that it did not deliver the goods to the Plaintiff. Apart from reasoning that delivery was conditioned on receipt of the full price, a claim which I have debunked above, the Defendant also averred that its failure to deliver was due to the Plaintiff's omission to provide the marked bags of 50kgs each addressed to the final beneficiary and to pay other due costs for certification, fumigation and preparing shipping documents. - I have not found any evidence proving that the Plaintiff availed the marked $21.$ bags into which the soya beans would be packaged for export. However, from the correspondence in P. Ex.1, it is clear that the Defendant's MD's explanation for not delivering was not that the consignment was ready and there were no bags for packing the soya beans. His explanation throughout October and November 2020 was that the Defendant experienced several delays and challenges in bringing the soya beans to Kampala. Indeed, on 18th November 2020, he told PW1 that he only had 14.5 tons out of the 110 tons and that he was still expecting delivery. On 27th November 2020, he agreed to refund the Plaintiff's deposit and requested for the Plaintiff's bank information. He made many other promises to effect the refund in December 2020, but all in vain. - 22. If the only factor that had stopped the Defendant from delivering had been the absence of the bags, the Defendant's MD would have said so expressly within the 2 weeks the Defendant was obligated to deliver. From P. EX.1, it is clear that the only reason for the Defendant's failure to deliver the consignment was that the consignment was not available. Thus even if for argument's sake, the bags had been availed in time, the Defendant

would still have been unable to deliver the consignment because it was simply not there. This is all confirmed by the defendant's written statement of defence which presents a letter purportedly written by the Defendant on 14th December 2020 notifying the Plaintiff that the consignment had at the time been made available. This was 2 months after the agreed date of delivery.

- 23. Similarly, the claim that the Plaintiff failed to pay certification, fumigation and export document processing fees is without merit. These fees could not be paid before the soya beans consignment of 110 metric tons reached the Defendant's stores. In any case, I reiterate that, from P. Ex.1, the failure to pay these said fees does not seem to have been the real cause of the Defendant's failure to make the delivery within the time agreed. - In my considered opinion, the flow of the parties' duties under the 24. contract was that firstly, the Plaintiff had to make an advance payment of 50% of the purchase price. This would enable the Defendant to source for and procure the soya beans, and to transport them to its stores in Kampala. Thereafter, the Plaintiff was to avail the Defendant with marked bags for re-bagging along with the fees for fumigation, export certification and the preparation of other shipping documents. The Defendant would then pack the soya beans into the bags, process relevant documentation and, finally, make the soya beans available to the Plaintiff for export. The claim that the Plaintiff's failure to provide the bags and the agreed fees justifies the Defendant's default lacks merit, as it misrepresents the true sequence of contractual performance agreed upon by the parties. - 25. In view of the above findings, this Court finds that it is the Defendant, and not the Plaintiff, who breached the contract of sale by failing to deliver 110 metric tons of soya beans to the Plaintiff on or by 14th October 2020.

# Issue 2: What reliefs are available to the parties.

#### **Special damages**

- Special damages are the financial losses arising from a defendant's breach $26.$ which are ascertained and quantified at the time when the suit is filed. In Stanbic Bank Uganda Ltd V Hajji Yahaya Sekalega, HCCS No. 185 of 2009, this Court held that, for special damages to be and awarded, they ought to been specifically pleaded and proved, although such proof need not always be documentary in nature. - The Plaintiff prayed for an order for a refund of the 50% deposit it made 27. on the purchase price being UGX 68,750,000. Following my findings in Issue 1 above, I am satisfied that the Defendant received this money yet it failed to give the Plaintiff any consideration for the same thereafter. The Court shall, thus, order the Defendant to refund the said deposit of UGX 68,750,000. - The Plaintiff also prayed for an award of lost profit of UGX 55,858,000. 28. PW1 testified at the trial that, since the soya beans would cost the Defendant a total of UGX 137,500,000 and the same were to be resold to M/S Maharaja Grains at USD 51,700 (about UGX 193,358,000 at that time), the profit from the deal was to be UGX 55,858,000. The Plaintiff adduced its bank account statement (P. Ex.8) proving that Maharaja Grains paid USD 51,685 into its bank account on 9th October 2020. The Plaintiff also adduced an approved request to its bank to remit the said USD 51,685 back to Maharaja Grains on 22nd December 2020. - 29. On the basis of these 2 exhibits, I am inclined to allow this claim for lost profit. If the Plaintiff simply intended to export the soya beans to India so that it can start looking for buyers there, the claim for lost profit would have been remote because there would have been a possibility of failure to secure any buyers. There would also have been uncertainty about to the price at which the soya beans would be resold and, as such, the profit that the Plaintiff would get from the resale would not have been ascertainable. The key distinguishing facts in this case are that the Plaintiff

had already secured a buyer for the soya beans in India and that buyer had also gone ahead and made full payment of the full price to the Plaintiff. The Plaintiff's resale transaction had already crystallised and the Defendant's default in delivery caused a real and quantifiable loss to the Plaintiff.

30. According to the Bank of Uganda Exchange Rates Archive, on 09/10/2020 when the Plaintiff received payment from Maharaja Grains, \$1 was worth UGX 3,664. This implies that the Plaintiff received an equivalent of UGX 189,373,840 from Maharaja Grains on 9th October 2020. It also implies that on remitting the funds back to Maharaja Grains, the Plaintiff actually lost profit of UGX 51,873,840. As such, the Court shall award UGX 51,873,840 in lost profit to the Plaintiff.

# **General damages**

- 31. General damages refer to losses which flow naturally from the defendant's breach. They are damages which the law presumes to be the direct, natural or probable result of a defendant's breach (See the decision in Opia Moses V Chukia Lumago Roselyn & 5 Ors, HCCS No. 0022 of 2013). They are also said to be the immediate, direct and proximate result, or the necessary result, of the wrong complained of. - The evidence adduced by the Plaintiff proved that the Defendant failed to 32. deliver even a single ton of soya peas out of the agreed 110 tons. The Plaintiff's MD promptly paid the 50% deposit on the purchase price at the Defendant's request. Although delivery of the goods was to be made within 2 weeks of receipt of that payment, the Plaintiff followed up with the Defendant for over 2 months but all in vain. The Defendant knew that the Plaintiff was buying the goods for export but instead of coming clean about its inability to provide the goods in time, it chose to deceive the Plaintiff which led the Plaintiff to also default on its contract with Maharaja Grains.

I am satisfied that the Plaintiff has suffered financial loss, loss of profit 33. from its intended resale of the soya beans and great inconvenience following the Defendant's conduct. For this loss and injury, the Court shall award general damages of UGX 30,000,000 to the Plaintiff.

### **Interest**

- Section 26(2) of the Civil Procedure Act S. I. 71-1 grants courts the power 34. to award interest on the damages they award to successful plaintiffs. Usually, a successful plaintiff is entitled to interest at a rate which would not neglect the prevailing economic value of money but which would also insulate him or her against further economic vagaries, like inflation and depreciation of the currency, in the event that the money ordered to be recovered is not paid promptly when it falls due. (See Mohanlal Kakubhai Radia V Warid Telecom Uganda Ltd, HCCS No. 0224 of 2011). - In view of these principles, the Court hereby awards interest to the 35. Plaintiff on its deposit of UGX 68,750,000 at the rate of 18% per annum from 30th September 2020 when the same was effected until full payment. Interest is awarded on the lost profit of UGX 51,873,840 at the rate of 16% per annum from 21st October 2020 when the Plaintiff was supposed to have earned that profit by shipping the goods to Maharaja Grains until full payment. finally Interest is awarded on the general damages at the rate of 13% per annum from the date of judgment until full payment.

# **Costs**

Section 27(1) of the Civil Procedure Act S. I. 71-1 gives courts the 36. discretion to award the costs of a suit. The general rule is that costs follow the event. This implies that an award of costs will generally, flow with the result of litigation and the successful party in a suit usually is entitled to costs, unless the Court, for good reason, orders otherwise (See Kwizera Eddie V Attorney General, Supreme Court Constitutional Appeal No. 01

of 2008). In this case, I have not found any reason to deny the Plaintiff the costs of the suit. I, accordingly, award the costs of the suit to the Plaintiff.

# The counterclaim

37. Following my findings in Issue 1 above and the Defendant's own failure to appear at the hearing to adduce evidence in proof of its counterclaim, the said counterclaim wholly fails and is, accordingly, dismissed with costs.

# **Reliefs**

- Consequently, judgment is hereby entered in favour of the Plaintiff against 38. the Defendant on the following terms: - The Defendant shall pay the sum of UGX 68,750,000 plus interest i. thereon at the rate of 18% p.a. annum from 30th September 2020 until full payment to the Plaintiff. - The Defendant shall pay the sum of UGX 51,873,840 plus interest ii. thereon at the rate of 16% per annum from 21st October 2020 until full payment to the Plaintiff. - The Defendant shall pay general damages in the sum of UGX iii. 30,000,000 plus interest thereon at the rate of 13% p.a. from the date of judgment until full payment to the Plaintiff. - iv. The Defendant's counterclaim is hereby dismissed. - Costs of the suit and of the counterclaim are awarded to the Plaintiff. $\mathbf{V}$ .

neaderton

Patricia Mutesi

**JUDGE**

$(31/05/2024)$