Muganyizi v 3 AT 1 Business Center Limited & Another (Civil Suit 776 of 2021) [2023] UGCommC 283 (28 March 2023)

Full Case Text

### THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA AT KAMPALA

### [COMMERCIAL DIVISION]

#### **CIVIL SUIT NO. 776 OF 2021**

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ROBERT MUGANYIZI:::::::::::::::::::::::::::::::::::

### **VERSUS**

### 1. 3 AT 1 BUSINESS CENTER LTD

# 2. KATO GODWIN::::::::::::::::::::::::::::::::::::

# **BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI** JUDGMENT

### **PLAINTIFF'S CASE**

The plaintiff's cause of action against the defendants is for recovery of UGX 78,529,000/= arising out of breach of the memorandum of understanding dated $23^{rd}$ October 2020, general damages, exemplary and punitive damages, interest and costs of the suit.

The facts of the plaintiff's case are that in early October 202, the 2nd defendant who had been a long-time friend of the plaintiff informed him that his company, the 1st defendant, was the best evaluated bidder in respect of procurement and supply of a Global Navigation Satellite System to the Ministry of Water and Environment under Reference No. MWE/WSDF-SW/SPLS/20-21/00002.

The 2nd defendant further informed the plaintiff that the cost of the survey equipment was USD 13,500 which he did not have and requested him to contribute half on the understanding that the plaintiff would equally share the cost price of the procurement of UGX 157,058,000/= by January 2021 i.e. UGX 78,529,000/= after performance of the contract which payment was personally guaranteed by the 2nd defendant.

It was also agreed that a bank account was to be opened and submitted to the Ministry of Water and Environment on which the payment of the cost price of the

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procurement would be made and by a resolution dated 23.d october 2020, the l,t defendant opened account number 90300 r79176g3 in Stanbic Bank Uganda Ltd and the appointed signatories where the 2nd defendant and the plaintifrs aglnt, one Kalid Mpata.

After verifing from the Ministry of water and Environment, by a memorandum of understanding dated 23'd october 2020 executed at Kololo in Kampara, the plaintiff advanced to rhe l't defendant company usD 6,750 and UGX s,ooti,oooz: in cash to perform the supply contract.

Around early January 202r, the 2nd defendant informed the plaintiff that the equipment was safely delivered to the Ministry but on inspection they discovered that it had a missing component which had to be imported and fitted before the Ministry paid the cost price. In May 202r, the plaintifi again inquired from the 2,d defendant whether the missing component had been suppried but the 2nd defendant claimed that he had not yet got money to purchase the same, but after some time the 2nd defendant became evasive and .ude to the plaintiff claiming that payment had not yet been effected.

The 2'd defendant's conduct caused the plaintiff to contact the Senior Accountant Ministry of water and Environment who confirmed to him that on the 27th April 2021' ucx 80,000,000/: was paid to the tr defendant on Stanbic Bank Account No 9030013635705 and in proof thereof he availed the plaintiff with a copy of electronic fund transfer instrument. The plaintiff also confirmed that the balance of UGX 69,072,000/= was also paid to the l't defendant on 7th Decemb". ioj t uut .titt the defendants refused to pay the plaintiffs his share as per the memorandum of understanding.

The plaintiffcontends that the payment of the I'r defendant on stanbic Bank Account No' 9030013635705 and not on the opened account No.90300r79176g3 was in breach of the memorandum of understanding; and that the defendants, refusar to pay his money as agreed greatly inconvenienced him financially and emotionaily hence the present suit.

The defendants were duly served with summons to file defences, but defaurted on filing\_the same and the present suit was set down for hearing exparte in accordance with Order 9 rule I I (2) of the Civil procedure Rules on 2g,iJanuary ZOiZ.

The plaintiff was the sole witness (pwl) and his counser agreed to file written submissions which have been considered in this Judgment.

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## **REPRESENTATION**

The plaintiff was represented by M/s Tumwebaze, Kasirye & Co. Advocates while the defendants were unrepresented having failed to file written statements of defence as required by law.

### **JUDGMENT**

The Issues for determination by this Court are:

- 1. Whether the defendants are indebted to the plaintiff to the sum of UGX $78,529,000/=$ - 2. What remedies are available to the parties?

# Issue 1: Whether the defendants are indebted to the plaintiff to the sum of UGX $78,529,000/=$

I have had the opportunity to look at the memorandum of understanding between the 1st defendant and the plaintiff dated 23rd October 2020 marked as **PE1**, the Board Resolution dated 23rd October 2020 marked as PE2 as well as PE3 that indicated account number 9030013635705 had been opened in Stanbic Bank Uganda Ltd on account of the plaintiff's memorandum of understanding with the 1st defendant.

According to **PE1**, the $1^{st}$ defendant through its directors represented to the plaintiff that it was the best evaluated bidder in respect of procurement and supply of a Global Navigation Satellite System to the Ministry of Water and Environment under Reference No. MWE/WSDF-SW/SPLS/20-21/00002 and approached the plaintiff for purposes of jointly and equally raising funds necessary for the procurement and supply of the Survey Equipment, among other things.

Further, the parties agreed and undertook to equally contribute to the total cost for the Survey Equipment worth USD 13,500 and administrative costs for the procurement and supply of the said equipment worth UGX 10,000,000/= (clauses 1) and 2 of PE1). The 1st defendant acknowledged receipt of UGX 5,000,000/= being the plaintiff's contribution towards the administrative costs referred to in PE1 and confirmed to the plaintiff that the total contract price for the procurement and supply of the equipment in issue was UGX 157,058,000/= which sum shall be shared equally between the parties upon payment by the Ministry of Water and Environment (clauses 3 and 4 of PE1).

The 1st defendant also represented and warranted to the plaintiff that the said sum of UGX 157,058,000/= shall strictly be paid through the bank account which shall be

specifically opened and submitted to the Ministry of Water and Environment for purposes of receiving the funds; and also undertook to the plaintiff that it shall not change, amend and or substitute the bank account details submitted to the said Ministry in respect of the procurement of the Survey Equipment (clauses 5 and 6 of

In clause 8 of PE1, the 1st defendant undertook to appoint the plaintiff or his nominee/ representative as a joint/ co-signatory to the bank account referred to in clause 5 of PE1 and ensure that the requisite resolutions are executed by its directors and registered.

PE2, a Board Resolution of the 1st defendant dated 23rd October 2020 and signed by Kato Godwin and Kigongo Peace David (director and secretary of the 1st defendant respectively), indicates that sanction was given that the 1st defendant opens and operates a bank account in Uganda Shillings with Stanbic Bank Uganda Limited in the names of the 1st defendant and that the signatories to the said accounts shall be Mr. Godwin Kato and Mr Kalid Mpata.

Further "that the Bank be and is hereby authorised to honour bills of exchange... drawn, accepted and or made for and on behalf of the Company by BOTH signatories and to act on all instructions so given by the said signatories relating to the account whether the same be overdrawn or not, relating to the transactions of *the Company.* "

PE3 confirms that indeed the bank account referred to in the Board Resolution mentioned above (account number 9030013635705 and not 9030017917683 as stated by the plaintiff) was opened on account of Robert Muganyizi (MOU) and UGX 25,000,000/= was deposited on the said account on 5th November 2020.

I have also had the opportunity to look at letters dated 27th April 2021 (PE4) and 6th December 2012(PE5) to the manager, Centenary Bank, from the Ministry of Water and Environment and signed by the manager WFP, Catherine Kemigisha, and the Senior accountant, Tamukedde Joseph wherein it is indicated that the said manager was directed to effect payments on certain accounts including that of the 1st defendant for payment of UGX 80,000,000/= and UGX 69,072,000/= respectively through account number 9030013635705 held with Stanbic Bank.

From the testimony of the plaintiff and the documentation mentioned above, it is evident that the parties agreed that they would equally share the cost price of the procurement in issue of UGX 157,058,000/ $=$ upon the terms highlighted above in PE1. This would be done on condition that the plaintiff paid half of the total cost for

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the survey equipment of USD 13,500 i.e. USD 6,750 and half of the administrative costs i.e. UGX 5,000,000/= which the plaintiff averred, in his witness statement, that he advanced to the 1st defendant in cash to perform the supply contract and adduced PE3 to confirm the performance of his obligation i.e. payment of the sum of UGX 25,000,000/= on 5th November 2020 deposited on the 1st defendant's account number 9030013635705 on account of the plaintiff (MOU).

It is also evident that the 1st defendant appears to have been paid a sum of UGX $149,072,000/$ = as per PE4 and PE5 referred to above although the said sum does not appear to have been deposited on the Stanbic bank account as agreed by the parties. The plaintiff, in paragraph 13 of his witness statement, averred that the defendants have received the entire cost price from the Ministry of Water and Environment but did not avail similar evidence of instructions to pay the balance of UGX 7,986,000/= by the Ministry as seen in PE4 and PE5 thereby rendering his statement questionable.

The above notwithstanding, the defendants did not bother to file a written statement of defence or attend Court to defend themselves and the plaintiff's claims in the plaint and witness statement therefore remain unchallenged in as far as his uncontested testimony and claim for UGX 78,529,000/= is concerned.

It is trite law that the duty of this Court is to enforce the terms of an agreement freely entered into by the parties thereto. I am grounded in the said finding by the case of Stockloser vs Johnson (1954)1 ALL ER 630 where Court held that:

"People who freely negotiate and conclude a contract should be held to their bargain and judges should not intervene by substituting, according to their individual sense of fairness, terms which are contrary to those which the parties have agreed upon themselves."

In the absence of any evidence to rebut the plaintiff's claims and following the guidance in the authority above, I find that the plaintiff has satisfactorily demonstrated that the parties entered the contract as seen in PE1 voluntarily and are bound by the terms set out therein. The defendants are accordingly liable to pay the plaintiff UGX 78,529,000/= as claimed in the plaint in accordance with the terms of the memorandum of understanding (PE1).

# **Issue 2: What remedies are available to the parties?**

The plaintiff prayed for a declaration that he is entitled to UGX $78,529,000/$ = out of the contract sum for the procurement and supply of a Global Navigation Satellite System to the Ministry of Water and Environment under Reference No.

MWE/WSDF-SW/SPLS/20-21/00002 under the memorandum of understanding dated 23rd October 2020; a permanent injunction stopping the defendants from receiving any further payments as the balance on the said supply contract from the Ministry of Water and Environment; an order directing the Ministry of Water and Environment to pay the balance on the supply contract to the plaintiff instead of the defendants; or in the alternative an order directing the defendants jointly and severally to pay to the plaintiff Ugx 78,529,000/= as the sum due under the memorandum of understanding, general damages, interest thereon at 20% per annum from the date of judgment until payment in full and costs of the suit.

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As earlier stated, the plaintiff testified that defendants have received the entire cost price from the Ministry of Water and Environment and this evidence was not rebutted/ challenged by the defendants. However, the said Ministry was not a party to the proceedings and issuing orders against it as prayed by the plaintiff would amount to depriving it of its constitutional right to a fair hearing and would be in vain. I accordingly decline to issue the orders against the said Ministry as prayed.

However, having held as I have in Issue 1 above, I find that the plaintiff is entitled to UGX 78,529,000/ $=$ out of the contract sum for the procurement and supply of a Global Navigation Satellite System to the Ministry of Water and Environment under Reference No. MWE/WSDF-SW/SPLS/20-21/00002 under the memorandum of understanding dated 23rd October 2020 and the same should be paid by the defendants jointly and severally as agreed in the said memorandum. It should be noted, however, that payment of the contract sum appears not to be complete and it is upon payment of the total sum agreed upon that the plaintiff is entitled to be paid his share as agreed in PE1.

With regard to the prayer for general damages, it is trite law that general damages are the direct natural or probable consequence of the act complained of.

According to clause 4 of the PE1, the 1st defendant confirmed to the plaintiff that the total contract price for the procurement and supply of the equipment in issue was UGX 157,058,000/= which sum shall be shared equally between the parties **upon payment** by the Ministry of Water and Environment (emphasis mine).

However, evidence on record shows that the 1st defendant appears to have received UGX 149,072,000/= and not UGX 157,058,000/=. In other words, the whole sum of UGX 157,058,000/= upon which the UGX 78,529,000/= would be paid as agreed does not appear to have been fully paid by the Ministry of Water and Environment leaving a balance of UGX 7,986,000/=.

I do not find this a proper case for an award of general damages because the alleged damage claimed by the plaintiff is not a direct/ natural consequence of the defendants' non-payment of the sums claimed by the plaintiff since the same was supposed to be paid upon the sum of UGX 157,058,000/= as per PE1 and not UGX $149,072,000/$ = the plaintiff showed had been paid. It is the considered opinion of this Court that had the full sum of UGX 157,058,000/= been paid and the defendants still failed/ refused to pay the sums due and owing to the plaintiff then such award would arise. I accordingly decline to award general damages as prayed.

The prayer for interest rate at 20% per annum from the date of judgment until payment in full on general damages does not arise following the holding above; and neither was the accrual of the said interest agreed upon by the parties in their memorandum of understanding and I decline to award the same.

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

Multi Salide

HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................