Post Bank (U) Limited v Kato Eco Farming Limited and Another (Civil Suit No. 251 of 2020) [2022] UGCommC 76 (31 August 2022)

Full Case Text

#### THE REPUBLIC OF UGANDA

#### IN THE HIGH COURT OF UGANDA AT KAMPALA

#### (COMMERCIAL DIVISION)

#### **CIVIL SUIT No. 251 OF 2020**

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POST BANK (U) LIMITED PLAINTIFF $10$

#### **VERSUS**

1. KATO ECO FARMING LIMITED 2. CHEMUSTO TOM .................................

#### 15

$5$

# BEFORE: HON. LADY JUSTICE SUSAN ABINYO

### **JUDGMENT**

#### Introduction

The Plaintiff instituted this suit against the 1st and 2nd Defendants jointly and severally for recovery of UGX 678,649,866 (Uganda Shillings Six Hundred Seventy Eight Million Six Hundred Forty Nine Thousand Eight Hundred Sixty Six only), special,

and general damages for breach of contract, interest, and costs of the suit.

And in the alternative against the 1st Defendant for recovery of money had and received of UGX 615,000,000 (Uganda Shillings Six Hundred Fifteen Million only), interest, and costs of the suit.

#### 25 **Facts**

That on the 26th day of November, 2014, the Plaintiff and the 1st Defendant entered into a Memorandum of Understanding wherein, the Plaintiff agreed to partner with the 1st Defendant with the purpose of availing credit facilities to the 1st Defendant's grain agricultural produce contract farmers. A copy of the

- Memorandum of Understanding was attached as Annexture "A" to the plaint, 30 and marked exhibit PE1. That under the Memorandum of Understanding, the 1st Defendant was to recommend its farmers who are eligible for credit facilities to the Plaintiff, and to guarantee payment of the credit facilities to its members. That the Plaintiff was to issue letters of guarantee for each of its contracted farmers - who was to obtain a credit facility from the Plaintiff. 35

- 5 Thoi the lsl Defendont guoronteed poyment of the loons for eoch of its 150 controct formers, ond the Plointiff ovoiled to eoch, o credil focility of UGX 4, 100,000 (Ugondo Shillings Four Million One Hundred Thousond Shillings Only) oggregoiing to o sum of UGX 6,l5,000,000 (Ugondo Shillings Six Hundred Fifteen Million Only). A copy of the list of the controcl formers, qnd the sum omount - disbursed wos ottoched, ond morked exhibits PEl3 ond PEI2 respectively. Thol bosed on the foct thot the ls1 Defendonl wos to ovoil technicol services, the credit fociliiies odvonced to the formers were to be tronsferred to the 'lsr Defendont, ond thot the formers duly signed slonding orders outhorizing the tronsfer of ihe money to ihe I't Defendont. 10 - Thot lhe money wos duly tronsferred 1o the l sl Defendont os per the Memorondum of Understonding(MOU), ond the stondlng order executed by ihe controct formers. A copy of the lsr Defendont's occount slotement io prove the lronsfers wos ottoched os Annexlure "E", ond morked exhibit PE 12. Thot the lsr Defendont's formers subsequenlly defoulled in repoying the loon omounts 15 - odvonced to ihem, ond the lsl Defendont os guorontor sought for on extension of the loon repoymenl period for (03) three months. Thot the lsi Defendont committed iiself to poy ihe outstonding loon omounts for the 150 controct formers ot Kopchorwo Bronch. A copy of the letter doted 23,d Oclober, 2015 wos ottoched, ond morked PEl0. 20 - Thot in the soid letter obove, lhe ls1 Defendont ovoiled to the 2nd Defendont the outstonding loon bolonces os its guorontor, ond furnished the Ploinliff with unregistered lond ol Amukokel Villoge Sikwo Villoge Ngenge Sub County Kween District meosuring 93 ocres, ond developments thereon purchosed by lhe lno Defendonl. A copy of the commitment ogreement wos otloched os Annexture 25 - "H", ond morked PE2. Thot the lstDefendoni defoulted on oll these commilments ond hos to dole foiled ond, or neglected to poy ond fulfill its outstonding loon obligotions owed by the ln Defendoni's formers to ihe Ploinliff. Thol os o result, the Plointiff hos suffered bolh generol ond speciol domoges due to the lstond 2nd Defendonls tolol breoch of lhe controct. 30 - 3s Representolion

The Plointiff wos represented by Counsel Koyiwo Wilber of M/s Crimson Associoted Advocotes. Counsel for the Plointiff opplied lo the Registror in o conespondence doted 3l't August, 2021 , for o defoull judgment to be entered, which wos gronted, ond the suit wos set for formol proof. On the dote fixed for mention of

this suit, Counsel for the Plaintiff was directed by this court to file a witness $\mathsf{S}$ statement.

The witness statement of Ms Rhona Nsiima was filed on record, and during the hearing, it was admitted as the Plaintiff's evidence in chief. Counsel for the Plaintiff filed written submissions as directed by this Court.

#### 10 Issues

The following issues were raised by Counsel for the Plaintiff with the guidance of this Court:

- 1. Whether there was breach of contract by the Defendants, and if so, whether the Plaintiff suffered financial loss? - 2. What remedies are available? 15

### Evidence

During the hearing of this case, the Plaintiff led the evidence of one witness namely, Nsiima Rhona (hereinafter referred to as "PW1") the Manager Credit Monitoring and Recoveries with the Plaintiff Bank. The Annextures referred to in

the witness statement of PW1, were accordingly admitted as the Plaintiff's 20 evidence, and marked exhibits "PE1" to "PE13" respectively.

Issue No. 1: Whether there was breach of contract by the Defendants, and if so whether the Plaintiff suffered financial loss?

Counsel for the Plaintiff reiterated the assertions made by PW1 in paragraphs 2, 3 7, 8, 9, and 10 of her witness statement, to submit that under section 33(1) of the 25 Contracts Act, 2010, parties to a contract are obliged to fulfill, and perform their respective obligations under the contract, unless if performance is dispensed with or excused under the Contracts Act or any other law, and that the maximum loan period of the loans advanced to the 1st Defendant's farmers was limited to one

crop farming season under clause 3(i) of the MOU, in which the 1st Defendant's 30 farmers defaulted to repay the loans advanced to them within the stipulated loan repayment period. That the 1st Defendant's failure to repay the Plaintiff's loans advanced to its farmers' amounts to a breach of its contractual obligations.

Counsel contended that the 1st Defendant requested the Plaintiff for an extension of the loan repayment period for three months, in which the 1st Defendant 35 committed itself to repay the loans owed to the Plaintiff as seen in exhibits "PE10" & "PE11" but the 1st Defendant failed to honor his commitment under clause 2.1

of the commitment agreement dated 13th November, 2015. That until today the $\mathsf{S}$ sums advanced to the 1st Defendant's farmers still remain outstanding.

Counsel further relied on the provision of section 71 of the Contracts Act, 2010, to submit that a guarantor's liability is only limited to the extent of the principal debtor's liability, and that the guarantor's liability only accrues upon default by

- the Principal debtor. That in this case, PW1 averred under paragraphs 4, 5 & 7 of 10 the Plaintiff's supplementary witness statement that the 1st Defendant personally guaranteed the repayment of the loans advanced to its contract farmers under clause 1 (ii) of the Memorandum of Understanding, and that the 2nd Defendant also personally guaranteed the repayment of the loans advanced to the 1st - Defendant's farmers under clause 3.1(b) of the commitment agreement dated 15 13th November, 2015, and another commitment agreement dated 29th April, 2016 marked exhibits PE2 & PE3 respectively.

Counsel further submitted that since the 1st Defendant's farmers defaulted in repaying their loans to the Plaintiff, that the $2nd$ Defendant's liability as a guarantor

of the said loans accrued as per clause 3.1 (b) of the commitment agreement 20 dated 15th November 2015 and the commitment agreement dated 29th April, 2016, thus the 1st and 2nd Defendants' failure to honor their commitments under the agreements amounts to breach of contract.

### Decision

I have considered the evidence adduced by the Plaintiff, and the submissions of 25 Counsel for the Plaintiff to find as follows:

It is noteworthy that the Defendants failed to file written statements of defence.

The proposition of law is that, whoever alleges given facts, and desires the Court to aive judgment on any legal right or liability dependent on the existence of any

fact, has the burden to prove that fact unless, it is provided by law that the proof 30 of that fact shall lie on another person. (See sections 101 and 103 of the Evidence Act, Cap 6)

It's a well-established principle that failure to file a defence raises a presumption of constructive admission of the claim made in the plaint and the Plaintiff's story 35 must be accepted as the truth. (See United Building Services Limited Vs Yafesi Muzira T/A Quickset Builders and Co. H. C. C. S No. 154 of 2005)

- In the given circumstances of this case, I find that although the evidence of PW1 $\mathsf{S}$ was uncontroverted, the Plaintiff failed to discharge the burden of proof to the standard generally applied in civil cases on the claim of UGX 678,649,866 (Uganda Shillings Six Hundred Seventy Eight Million Six Hundred Forty Nine Thousand Eight Hundred Sixty Six only), jointly and severally against the 1st and 2nd - Defendants, and in the alternative against the 1st Defendant on the claim of UGX 10 615,000,000 (Uganda Shillings Six Hundred Fifteen Million only), as monies had, and received for the 150 contract farmers. This will be dealt with hereunder.

This Court looked at the evidence adduced by the Plaintiff marked PE12 the 1st Defendant's account statement, and PE13 the list of 150 farmers, and found that

- PE12 does not indicate first of all the alleged disbursed sum of UGX 4,100,000 15 (Uganda Shillings Four Million One Hundred Thousand Shillings Only) to each of the 150 farmers, when a comparison is made with the list of farmers in PE13. Secondly the list of the farmers in PE13, does not totally with the disbursements in PE12 made to the 1st Defendant in respect of the 150 farmers, this notwithstanding the fact - that the listed names does not correspond with the disbursements in the 1st 20 Defendant's Bank statement.

Be that as it may, the Plaintiff failed to attach Copies of the letters of guarantee referred to as Annexture "B", and the standing Orders in Annexture "D", as alleged in paragraphs 5(c), and (f) of the plaint, and the Plaintiff makes no mention of the said documents in its evidence.

It's an established principle in law that where the Defendant does not offer any evidence, the Plaintiff still bears the burden of proving his or her case on the balance of probabilities even if the case was heard on formal proof only. (See Ewadra Emmanuel Vs Spencon Services Ltd H. C. C. S No. 0022 of 2015)

- This Court found after the comparison of PE12 and PE13 above, that the Plaintiff 30 discharged the evidential burden of proof to the required standard in respect of the total sum of UGX 308,021,000 (Uganda Shillings Three Hundred Eight Million, Twenty One Thousand only), and proved that the 1st and 2nd Defendants jointly breached their contractual obligations, and as such caused financial loss to the - Plaintiff, when the 1st Defendant failed to pay the loan sum of UGX 308,021,000 35 (Uganda Shillings Three Hundred Eight Million, Twenty One Thousand only), and as such the 2nd Defendant is liable as a guarantor to the 1st Defendant for the outstanding loan sum of UGX 308,021,000 (Uganda Shillings Three Hundred Eight Million, Twenty One Thousand only) to the 1st Defendant's farmers. - For reasons above, this issue is answered partially in the affirmative. 40

## s lssue No. 2: Whot remedies ore ovoiloble?

The remedies sought by the Plointiff ore ovoiloble, given the finding of this Court os obove in issue (l ).

It is trile low thot speciol domoges must be specificolly pleoded ond strictly proved. (See the coses of Kyombodde Vs Mpigi District Adminislrotion |l983l HCB 44; Bonhom - Corter Vs Hyde Potk Holel Il948I 64TLR 177, ond Ronold Kosibonfe

## Vs Shell (U) Limiled, H. C. C. S No. 542 ot 2006)

The Plointiff's evidence wos thol speciol domoges occrued in the creotion of o ceriificote of tille for the unregisiered lond under clouse 2 of PE3 the commitment ogreement doted 291h April 2016, which totols to the sum of UGX ,l5,675,000

(Ugondo Shillings Fifteen Million Six Hundred Seventy Five Thousond Only) os per PE4. 15

This evidence wos unconlroverled by the Defendonts however, I hove looked ot the two receipts, PE6 in regord 1o the sum of UGX 7,837,500 (Ugondo Shillings Seven Million Eight Hundred Thirly Seven Thousond Five Hundred only), os

- 20 focilitotion for the surveyor, ond PEB in respect of the sum of UGX 3, 135,000(Ugondo Shillings Three Million One Hundred Thirty Five Thousond only), os focilitotion to process o title for KEFL/Koio's lond, which omount totols to UGX 10,972,500(Ugondo Shillings Ten Million Nine Hundred Sevenly Two Five Hundred Shillings only). - 25 lfind thot the Plointiff hos proved to the sotisfoction of this Court the sum of UGX 10,972,500(Ugondo Shillings Ten Million Nine Hundred Seventy Two Five Hundred Shillings only), in speciol domoges.

With regord to interest, in the obsence of ony ogreement by the porlies herein, on the interest rote poyoble, this Court hos considered oll the circumstonces of

30 this cose, ond finds on oword of interest on the decrelol sum oi the rote of 8% per onnum sufficient, from the dote of filing this suii until poyment in full. (See seciion 26(l) of the Civil Procedure Act, Cop 7l)

Generol domoges ore the direct noturol or proboble consequence of the wrongful oct comploined of. ond include domoges for poin, suffering,

inconvenience ond onticipoted future loss. (See Slorms Vs Hulchinson fi9051 A. C 5rsJ

It is settled low thot on oword of generol domoges is given ot the discretion of Couri. (See Crown Beveroges Lld Vs Sendu Edword S. C Civit Appedl No. I ol 2005),

5 ond Ugondo Commerciol Eonk Vs Kigozi [20021 1 EA 305 on lhe foctors to be considered by the Courls when ossessing the quonlum of generol domoges.

Following lhe decision in Ugondo Commerciol Eonk Vs Kigoi(supro) on the foclors to be considered by the Courls when ossessing ihe quontum ol generol domoges which ore os follows: - lhe volue of the subiecl motter, the economic

- inconvenience thol the Plointiff moy hove been put lhrough, ond the nolure ond extent of the injury suffered; given the circumstonces of this moiler, where the Plointiff hos odduced evidence thot the Defendonts hove foiled 1o poy the loon sum of UGX 308,021,000 (Ugondo Shillings Three Hundred Eight Million. Twenty One Thousond only), ond lhot the Defendonts' foilure to poy hos coused finonciol loss 10 - to the Ploinliff . 15

This Court finds thol the Plointifl hos proved lhot il suffered finonciol loss for which lhe lst Defendonl is held lioble in generol domoges.

ln the result, I find thot the Plointiff is entitled to generol domoges. ond lhe sum of UGX 25,000,000(Ugondo Shillings Twenly Five Million only), is oworded in generol domoges, considering the economic inconvenience which the Plointiff hos been pul through by thg 1st Defendonl's oclion.

- ln regord 1o costs, section 27111 of the Civil Procedure Act, Cop 7l provides os follows: - "sub.ject to such conditions ond limitotions os moy be prescribed, ond to the provisions of ony low for the iime being in force, the costs of ond incident to oll suits sholl be in the discretion of the Courl or Judge, ond the Courl or Judge sholl hove full power io determine by whom ond oul of whot property ond to whol extent ihose cosls ore lo be poid, ond lo give oll necessory directions for the purposes of oresoid." - Toking into consideroiion the obove provision on costs, ond thot costs follow the event unless for jusiified reosons ihe Courl otherwise orders (See section 27(2) of the Civil Procedure Act, Cop 7l ), ond the decision in Ugondo Developmenf Eonk Vs Mugongo Conslrucllon Co. Ltd (1981) H. C. B 35 where Juslice Monyindo (os he then wos) held thot: 30 - "A successFul porty con onty be denied cosls if its proved, lhot, but for his or her conduct, the oction would not hove been brought, lhe costs wi// foltow lhe event where the porty succeeds in the moin purpose of the suit"' 35

I find no reason to deny the Plaintiff costs, and accordingly the Plaintiff is awarded $\mathsf{S}$ costs of this suit.

Judgment is hereby entered for the Plaintiff against the Defendants in the following terms: -

- 1. Special damages of Ugx 318,993,500(Uganda Shillings Three Hundred Eighteen Million Nine Hundred Ninety Three Thousand Five Hundred only). - 2. Interest on (1) above at the rate of 8% per annum from the date of filing the suit until payment in full. - 3. General damages of UGX 25,000,000 (Uganda Shillings Twenty Five Million $only)$ . - 4. Costs of the suit. 15

Dated, signed and delivered by email this 31st day of August, 2022.

SUSAN ABNYO **JUDGE** 31/08/2022