Private Sector Foundation Uganda Limited v Bakawa & Sons Holdings Limited (Civil Suit 286 of 2022) [2024] UGCommC 220 (12 July 2024)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) **CIVIL SUIT NO 0286 OF 2022**

## PRIVATE SECTOR FOUNDATION UGANDA LIMITED:::::::PLAINTIFF **VERSUS**

## **BAKAWA AND SONS HOLDINGS LIMITED::::::::::::::::::::::::::::::::::::**

#### **BEFORE: LADY JUSTICE ANNA B. MÜGENYI**

#### JUDGMENT

The Plaintiff filed a suit against the Defendant claiming the following;

- a) A declaration that the Defendant breached the contract. - b) An order for recovery of Ugx l20,000,000/= (Uganda Shillings One Hundred and Twenty Million) being sums disbursed to the Defendant and not accounted for and channeled to other use. - c) An order for punitive and general damages. - d) Interest on (b) above. - e) Costs of this suit.

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The Plaintiff's case against the Defendant is that:

- a) The Plaintiff's Grants committee meeting held on the 17th of December 2020 approved a total budget of Ugx 400,000,000/= (Uganda Shillings Four Hundred Million) with a grant of Ugx 200,000,000/= (Uganda shillings Two Hundred Million) and at least a minimum of the Ugx $200,000,000/=(Uganda)$ shillings Two Hundred Million) as grantee's contribution to train a minimum of 15(fifteen) trainees as TOTs in skills related to working at heights' confined space and scaffolding erection. - b) Following the award by the Grants Committee, the Plaintiff signed a grant agreement with the Defendant on the 19th day of December 2020 for the project period from the 30th of January 2021 to the 30th day of May 2021.

- c) The grant was to be disbursed in two tranches. On the 15th day of February 2021, under the skills development facility (SDF), the Plaintiff advanced the first tranche of the grant disbursement worth Ugx 120,000,000/= (Uganda Shillings One Hundred and Twenty Million) to the Defendant. - d) The agreement placed an obligation on the Defendant to furnish the Plaintiff with periodic reports and accountability for the funds disbursed as a grant and also allow the Plaintiff to monitor the execution of the activities under the grant - e) The funds were to be sent to the trainees electronically but the Defendant withdrew the funds in cash and put it to other use other than those agreed upon in the agreement. - f) The Defendant has since refused to give the periodic reports and proper accountability for the grant funds. - g) On the 18th day of February 2021, grant funds were credited to the Defendant account and the Defendant withdrew Ugx 60,000,000/- (Uganda shillings sixty Million) the same day and Ugx 50,000,000/= (Uganda shillings Fifty Million) the following day of $19^{th}$ February 2021. - h) The Defendant failed and/or neglected to do any activity for which the funds were disbursed or provide periodic reports and accountability for the funds disbursed as per the agreement and has to date not done so which is a fundamental breach despite the various reminders from the Plaintiff. - i) It was a term in the agreement that if no accountability is given by the grantee or no activity at all is done, the grant would be terminated and funds would be refunded and recovered from the grantee.

When the Plaintiff filed this suit, the Defendant was served with the summons to file their written statement of defense on the 4th of May 2022 and they failed to file the same as required by the law. The plaintiff applied for an interlocutory judgment and the same was granted on the 1st of November 2022. The suit was then set down for formal proof.

During the hearing for formal proof, the Plaintiff presented one witness to testify namely Mr. Cornelius Henry Mukiibi Sentamu(PW1), and his witness statement was admitted as evidence in chief of PW1.

### REPRESENTATION

The Plaintiff was represented by M/s CMS & Co Advocates

### JUDGMENT

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I have considered the pleadings, evidence adduced by the Plaintiff and their submissions in this matter.

The Plaintiff raised two issues for determination by this court namely:

- 1. Whether the Defendant breached the grant agreement - 2. What are the remedies available to the parties?

In the case of Hajji Asumani Mutekanga vs Equator Growers (U)Ltd SCCA No.7 of 1995 it was held that:

"A Defendant who neither enters appearance nor files a defence is precluded from taking part in the proceedings during formal proof hearing when there is a subsisting interlocutory judgment. It was further held that where an interlocutory judgment has been entered in favor of the Plaintiff, the question of liability of the Defendant is no longer in issue. What is in issue is the assessment of the quantum of damages."

From the above authority, since the question of liability is no longer in issue, this Court will proceed to address assessment of the quantum of damages claimed by the Plaintiff.

The Plaintiff in the present case claims a refund of Ugx $120,000,000/$ = paid to the Defendant under the project.

It can be seen in the bank statement of the Defendant attached as PExh 1 that the Defendant's bank account was credited with Ugx $119,990,000/$ = (One hundred and nineteen million nine hundred and ninety thousand shillings) on the 15th of February 2021. The bank statement also indicates that on the 18th of February 2021, the Defendant withdrew Ugx 60,000,000/= (Sixty million shillings) and on the 19th of February 2021, withdrew Ugx 50,000,000/= (Fifty million shillings) from his bank account.

The evidence in the bank statement is corroborated with the correspondence between the Plaintiff and the Defendant as seen in PExh 2-9 and PExh 11 where the Defendant acknowledges the receipt of the funds on his account and also admits that he had not carried any project activities as per their agreement and had equally not accounted for the funds disbursed. In the correspondences, the Defendant can be seen to be asking for an extension of time for him to conduct activities and subsequently account.

From the above, it can be seen that the Plaintiff has demonstrated through evidence that the Defendant was advanced with Ugx I 19,990,000/: that he failed to account for. I believe that the balance of Ugx 10,000/: (Ten Thousand shillings) was meant to cover the bank charges connected with the transaction.

I therefore find that the Defendant is liable to pay the outstanding amount of Ugx 120,000,000/: (One hundred and twenty million shillings) to the Plaintiff as sums disbursed to the Defendant and not accounted for.

Counsel for the Plaintiff submitted that the Plaintiff disbursed funds to the Defendant and the same was diverted for other use not prescribed in the agreement and no accountability has ever been furnished. As a result, the Plaintiff suffered grave loss, disappointment and inconvenience since the funds would have been used for other profitable projects and the Plaintiff has also incurred the cost of litigating this matter.

Counsel contended that the Plaintiff and the Defendant entered into an agreement on the 19th of December 2020 and it has been four years and the Defendant has still not honored any part of the agreement. Counsel relied on the case of Ronald Kasibante vs Shell Uganda Ltd and Robbialac Paints (U) Ltd vs K. B Construction Limited [1976] HCB 45 where it was held that; "it is now settled that substantial physical inconvenience and discomfort that is not strictly physical and discomfort caused by breach of contract will entitle the plaintiffto damages. "

Counsel submitted that based on the evidence adduced and the authorities cited, this is a proper case for the award ofdamages and prayed for a sum ofUgx 70,000,000/: to be awarded as general damages

Section 6l (l) of The Contracts Act, 7 of 2010, provides that where there is a breach of contract, the party who suff'ers the breach is entitled to receive from the pa(y who breaches the contract, compensation for any loss or damage caused to him or her.

General damages are a direct natural or probable consequence ofthe act complained of and are awarded at the discretion of the couft and the purpose is to restore the aggrieved person to the position they would have been in had the wrong not occurred as rightly held in cases of Hadley v Baxendale (1894) 9 Exch 341 and Robert Cuossens vs Attorney General SCCA No. 8 of 1999.

This award is also assessed on the value of the subject matter, the economic inconvenience that the Defendants may have been put through, and the nature and

extent of the injury suffered as held in the case of Uganda Commercial Bank vs Kigozi [20021 EA 305 at 313.

The Plaintiff in claiming general damages must demonstrate to the Court through evidence the inconvenience suffered as a result of the breach.

In the instant case, the agreement between the Plaintiff and Defendant expired before the Defendant implemented any of the agreed activities. The Defendant was meant to implement the SDF project of the government of Uganda being funded by World Bank through the Plaintiff. Failure to implement the project and account for the monies would not only cause physical and economic inconvenience to the Plaintiff but also anxiety and disappointment of having to explain themselves to the donor for failure to deliver.

The Plaintiff is therefore entitled to general damages for the breach of contract.

The Plaintiff is therefore awarded general damages of Ugx 70,000,000/: as prayed for the inconvenience occasioned by the Defendant.

Counsel for the Plaintiff submitted that the funds disbursed to the Defendant were meant to be transferred electronically but the same were withdrawn in cash by the Defendant on the same date they were disbursed. Counsel contended that these funds were meant to benefit Ugandans but were diverted for personal use and no accountability has been submitted despite the various demands by the Plaintiff. Counsel prayed for the court to condemn such action and award punitive damages.

The rationale behind the award of punitive damages is not to enrich the Plaintiffbut to punish the Defendant and to deter him from repeating the wrongful act.

In the case of Rookes vs Bernard [946] ALLER 367 Lord Devlin stated the nature of cases in which exemplary damages may be awarded which include;

- a) Where there has been oppressive, arbitrary or unconstitutional action by servants of the govemment - b) Where the Defendants conduct has been calculated by him to make a profit which may well exceed the compensation payable to the Plaintiff and - c) That some law for the time being in force authorizes the award of exemplary damages.

Lord Devlin further stated that the following must be in mind while making an award of exemplary damages;

- a) The plaintiff cannot recover exemplary damages unless he/she is the victim of the punishable behavior - b) The power to award exemplary damages should be used with restraint. - c) The means of the parties are material in the assessment of exemplary damages.

With the above case in mind, I do not think this is a proper case for an award of punitive damages taking into account that the implementation of the project was meant to be executed during the COVID period which generally posed a lot of challenges to businesses and as alluded to by the Defendant in their communications seen in the Plaintiff s trial bundle.

In the circumstances, therefore, the prayer for punitive damages is therefore denied.

Counsel for the Plaintiff relied on section 26(2) of the CPA and submitted that the Defendant has held onto the Plaintiffs money since 2020 and thus should be awarded interest on the money claimed under the agreement between the parties.

## Section 26(2) of the Civil Procedure Act provides that;

"where the decree is for payment of money, the court may, in the decree, order interest at such a rate as the court deems reasonable to be paid on the principal sum adjudgedfrom the date ofthe suit to the date ofthe decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate as the court deems reasonable on the aggregate sum so adjudgedfrom the date of the decree to the date of payment or to such earlier date as the court thinks fit " .

In determining a just and reasonable rate, courts take into account the ever-rising inflation and drastic depreciation of the currency. A Plaintiff is entitled to such rate of interest as would not neglect the prevailing economic value of money, but at the same time one which would insulate him or her against any further economic vagaries and the inflation and depreciation of the currency in the event that the money awarded is not promptly paid when it falls due. (See the case of Kinyera v Management Committee of Laroo Building Primary School HCCS 099/2013).

The Plaintiff and the Defendant in the instant case entered into an agreement on the lgth of December 2020 and the Plaintiff advanced Ugx 120,000,000/: (One hundred and twenty million shillings) to the Defendant on the l5th of February 202l. The Defendant has therefore kept the Plaintiff out of his money for over three years having not accounted for it or retumed it. The Defendant in this case is therefore presumed to have made use of the money himself and therefore ought to compensate

s-t

the Plaintiff accordingly taking into account the depreciation of the Ugandan currency over time.

I, therefore, award the interest of 6Yo on Ugx 120,000,000/: per annum from the date ofjudgment till payment in full.

Section 27(l) of the CPA gives court the discretion to determine the costs of the suit and by whom the costs of the suit are to be paid This discretion must be exercised judiciously and not arbitrarily.

The general rule is that a successful party is awarded costs unless there are good reasons to deny it. (See Jennifer Behange, Rwanyindo Aurelia, Paul Bagenzi vs School Outfitter (U) Limited CACA No.53 of 1999)

The Plaintiff is the successful party in this case and I see no reason for denying him the costs ofthe suit.

The Plaintiff is therefore awarded the costs of this suit.

In the final result, judgment is entered for the Plaintiff against the Defendant in the following terms; -

- a. Ugx 120,000,000/: (one hundred and twenfy million shillings) being sums disbursed to the Defendant and not accounted for - b. Ugx 70,000,000/= as general damages. - c. Interest on the sum in (a) above at the rate of 6%o from the date of this judgment until payment in full. - d. The costs of the suit.

HON. LADY JUSTICE ANNA B. MUGENYI DATED IL 1[ Lo 1,