Sentumu v Lwanga Development Trust Limited (Civil Appeal 9 of 2007) [2019] UGCA 2092 (22 October 2019)

Full Case Text

#### THE REPUBLIC OF UGANDA

# IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# CIVIL APPEAL NO. 09 OF 2007

(Coram: Alfonse Owiny-Dollo DCJ, Barishaki Cheborion JA and Hellen Obura JA)

SHEIKH SENTAMU AHMED:::::::::::::::::::::::::::::::::::: 10

## **VERSUS**

LWANGA DEVELOPMENT TRUST LTD:::::::::::::::::::::::::::::::::::

$\mathsf{S}$

(Appeal from the decision of the High Court of Uganda at Kampala before His Lordship Hon. Justice Yorokamu Bamwine dated 29/11/2006)

# **JUDGMENT OF HELLEN OBURA, JA**

This is an appeal against the decision of Yorokamu Bamwine, J in High Court Civil Suit No. 509 of 2004 in which he entered judgment for the respondent and awarded it special damages worth Shs. $7,850,000/$ = with interest and costs.

# **Background to the Appeal**

The background to this appeal is that the respondent filed a summary suit against the 25 appellant for recovery of Ushs. 9,000,000/= (nine million shillings) being an outstanding debt following an agreement for purchase of some computer items by the appellant from the respondent dated 14/02/2004. The appellant took delivery of some of the items upon payment of Shs. 1,150,000/ $=$ and was to continue taking delivery of more items as and when he made additional payment of the agreed installment within a period of 7 weeks. However, the 30 appellant defaulted on the payments whereupon the respondent brought a summary suit against him. The appellant successfully applied for leave to appear and defend the suit, and upon filing his written statement of defence, the matter was fixed for scheduling on 5 2510912006. The parties were advised to explore a settlement out of court and return on 18/10/2006 for mention and on 1611112006 for hearing in case the settlement failed.

On 1 6/1 1/2006 the matter was called for hearing but only the respondent's counsel appeared in the company of its Managing Director. The matter was heard ex parte and judgment was delivered in favor of the respondent. The appellant being dissatisfied with the court's decision appealed to this Court on grounds that;

- 1. The learned trial Judge misdtected himself in law and fact when he held that the agreement of 1/0U2004 was a sale agreement and not an agreenent to sell. - 2. The learned trial Judge misdirected himself in law and fact when he held that title in the goods passed to the applicant when the contract was made. - 3. The learned trial Judge failed to evaluate the evidence and misdirected himself in fact when he held that the appellant sorted out the most valuable components and what remained was of little valLn. - 4. The learned trial Judge ened in law and fact when he entered judgment against the appellant for payment of Ushs. 7,850,000h (seven nillion eight hundred fifty thousand shillings) with interest thereon.

#### Representations

At the hearing of this appeal, Mr. Adubango Richard represented the appellant while Mr. Peter Kusiima represented the respondent.

### Case for the Appellant

On ground 1, counsel submitted that the evidence on record shows that the respondent agreed to kansfer the property in all the selected goods for a consideration of Shs. 9,000,000/= represented on the cheque issued to the appellant. He argued that the property in the selected items was to pass from the respondent to the appellant each time the appellant 25

- 5 made payments of Shs. 1,000,000/= to Shs. 1,500,000/= where upon he would be allowed to take delivery of some and not all of the items. According to counsel, there was a contract lo sell and not a sale in regard to the items retained by the respondenl pending actual payment. He further argued that the contract to sell was to be followed by a sale each time payment was made and this was coupled wilh a conveyance. - 10 15 Counsel further submitted that the trial Judge should have considered Sections 2 (1) (4) (5) and 31 of the Sale of Goods Act as the law applicable in determining the issue of whether or not the transaction was a sale or a contract to sell and the requirements stipulated thereunder. He contended that if the contract to sell is coupled with delivery of the goods sold to the buyer then it amounts to a sale but where the delivery or transfer of the property in the goods is to take place at a future time or subject to some condition to be fulfilled later, the contract is called an agreement to sell according to section 2 (4) of the Sale of Goods Act. Furthermore, that in the instant case, delivery of goods and the passing of property in the selecled items

20 was to take place in future upon payment of the agreed amount and not at the time of signing the agreement. This therefore made it an agreement to sell and the actual sale was to take place each time an installment payment was made.

On ground 2, counsel submitted that the general rule as to passing of property in goods sold are governed by Sections 1 8 and 19 of the Sale of Goods Act which can be modified by the intention or conduct of the parties to the sale. He cited the case ol Jane Bwiriza vs John Osapil, SCCA No. 5 of 2N2in which the High Court held that property in the vehicle passed to the buyer at the time of making the contracl and this Court upheld that decision. On appeal to the Supreme Court, Odoki C. J (as he then was) held that;

"The lower courls came to that conclusion withont considering the intention of the parties as evidenced by thet conduct, which elements are emphasized rn sections 18 and 19 of the Sa/e of Goods Act. The fact that the buyer allowed the respondent to retain the logbook, the

5 insurance ceftificate and road /lcense, shows that the intention of the paiies was that the propefty in the vehicle would not pass at the signing of the sale agreement.'

Counsel submitted that the learned trial Judge in the instant case reached his conclusion erroneously without considering the intentions and conduct of the parlies which was that propefl in the selected ilems remained in the seller and property in the items which the buyer was allowed to take only passed to the buyer each time such payments of Shs. 1,000,000/= to Shs. 1,500,000/= were made. He argued that had the learned trial Judge properly evaluated the evidence and addressed his mind to the law, he would have found and concluded that the parties intended that property in the selected items would pass to the buyer upon fulfilment of that condition.

On ground 3, counsel submitted that taking delivery of fewer of the items did not in any way affect the value or state of the ones which remained with the respondenl since all of the items stood to be sold on lheir own. He added that what remained in the respondent's possession was not dependent for their use on the few items that were taken delivery of by the appellant. Counsel argued that the respondent should have mitigaled his loss by selling the remaining items which he retained to olher interested persons. The reason he gave for not doing so was not sufficient to warrant the trial Judge to hold as he did that he failed to do so because of the few items which the appellant had taken delivery of. He submitted that had the trial Judge properly evaluated the other pieces of evidence as highlighted above, he would have found that many items which remained in custody of the respondent were not reliant on the few items taken by the appellant and therefore the respondent should have sold the items lo mitigate the loss. 20

On ground 4, counsel submitted that at the time of filing the suit, the appellant had only taken delivery of few items out of the list of all the items the appellant had agreed to buy, worth Shs. 30

5 1,620,000/= and had paid to the respondent Shs. 1,150,000/=. According to counsel, lhe respondent should have limited his claim to the unpaid balance of Shs. 470,000/= for the goods which the appellant took actual delivery of. He cited the case of Saleh vs Montgomery, 1972 ALR Commercial at 161 and submitted that it is a general rule that recovery for avoidable damages will be denied where the plaintiff either passively suffers economic loss which could have been averted by reasonable efforts or actively increases such loss where prudence would require that such activity cease. 10

Regarding the order to pay interest at the rate of 8% per annum, counsel submitted that it should have been limited to the amount of Shs. 470,000/= which he contends is the actual outstanding decretal sum for lhe goods the appellant took possession of. He prayed that this Court allows the appeal, sets aside the lower court's order and decree for payment of Shs.7,800,000/= and instead substitute it with the order for payment of Shs. 470,000/= as the right outstanding decretal amount. He also prayed lhat costs in this Court and in the lower court be awarded to the appellant.

# The Respondent's reply

Counsel argued grounds 1 and 2 together. He relied on sections 17, 18 and 19 of the Sale of Goods Act and submitted that it is clear from the facts that the goods were ascertained, the parties had agreed on the price and that the terms of payment were clearly set. He added that the sale was complete and the property in the goods passed on the day the appellant signed the agreement. Further, that by the appellant issuing a postdated cheque to be honored on 510412004, he committed himself to pay for all the items he had identified on the date of the cheque and the mere fact that possession of the goods remained with the respondent does not mean that title to them remained with it as well. 20

5 Counsel further argued that contrary to the submission of the appellant's counsel, the agreement was devoid of conditions to be fulfilled at a future date because all that was stated were payment terms and the mode of delivery. He submitted that it is clear that the appellant agreed to pay the full sum on the stipulated date on the cheque for an asce(ained quantity of goods at the time the parties entered into the agreemenl and therefore this was a sale and not an agreement to sell. 10

ln reply to grounds 3 and 4, counsel submitted that the learned trial Judge did not misdirect himself in any way on these grounds because no evidence was led othenruise and that the respondent was truthful.

#### Court's Consideration

- I have carefully studied the court record and considered the submissions of both counsel and the issues they raised. lt is clear from the submissions of both counsel that the dispute between the parties to this appeal is a matter of interpretation of the contract they entered into being a sale agreement admitted in evidence as exhibit Pll. The question to be answered is whether the contract amounted to a sale or an agreement to sell. 15 - I take guidance from the provisions of the Contracts Act, the Sale of Goods Act as well as the principles that govern interpretation of contracts in determining this appeal. 20

# Section 2 of the Sale of Goods Act provides thus;

"(1) A contract of sa/e ofgoods rs a contract by which the seller transfers or agrees to transfer the properly in goods to the buyer for a money consideration, called the price.

(2) There may be a contract of sale between one paftowner and another.

(3) A contract of sale may be absofute or conditional.

(4) Where under a contract of sale the properf in the goods is transfened from the seller to the buyer, the contract is called a sale; but where the transfer of the propedy in the goods is to take place at a future time or subject to some condition to be fulftlled later, the contract is called an agreement to sell.

(5) An agreemenf to se// becornes a sale when the time e/apses, or the conditions are fulfilled subject to which the propefty in the goods is to be transferred.'

10 Section 18 of the Sale of Goods Act provides thus;

"Property in specific or asceftained goods passes when rntended fo pass.

(1) Where there is a contract for the sale of speciftc or asceftained goods, fhe property in them is transfened to the buyer at such time as the paiies to the contract intend it to be transfened.

(2) For the purpose of asceftaining the intention of the padies, regard shall be had to the terms of the contract, the conduct of the pafties and the circumstances of the case.'

Section 19 ofthe Sale of Goods Act provides thus;

"Rules for asceftaining intention as to time when properfy passes. Unless a different intention appears, the following are rules for asceiaining the intention of the pafties as to the time at which the property in lhe goods ls to pass to the buyer-

(a) Where there is an unconditional contract for the sale of specific goods in a deliverable state, the propedy in the goods passes fo the buyer when the contract is nade, and it is immateial whether the time of payment or the time of delivery or both are postponed."

The well-established principle on interpretation of written documents including contracts is that courts must give effect to the intention of the parties. For the purpose of lhe construction of contracts, the intention of lhe parties is the meaning of the words they have used. There is no intention independent of that meaning. See; "Ihe lnterpretation of Contracts", 2nd Edition at page 4 by Kim Lewison.

- 5 10 Chitty in his book entitled "Chitty on Contracts," Volume 1 paragraph 124t4 & 043 at page 604 states that the common and universal principle has to be applied, namely, that an agreement ought to receive that conslruction which its language will admit, and which will best effectuate the intention of the pafies, to be collected from the whole of the agreement and that greater regard is to be had to the clear intention of the parties than to any particular words which they may have used in the expression of their intent. However, he cautions that the task of ascertaining the intention of the paftes must be approached objectively. The question is not what one or olher of the parties meant or understood by the words used, but the meaning which the document would convey lo a reasonable person having all the background knowledge which would reasonably have been available to the parties in the - 15 situation in which they were at the time of the contract.

ln L Schuler AG vs Wickman Machine lools Sales Ltd, [1974] A. C. 235 HL, Lord Morris observed that "subject to any legal requirements, businessmen are free lo make what contracts they choose but unless the terms of their agreement are clear, a court will not be disposed to accept that they have agreed something utterly fantastic. lf it is clear what they have agreed, a court will not be influenced by any suggestion that lhey would have been wiser to have made a different agreement."

Guided by the above principles, I shall proceed to analyze the contract for purposes of its proper interpretation. The contract staled thus: 25

# "UNDERTAKNG TO BUY AIVD SELL COMPUTER ITEMS FOUND IN A STORE, AT 9,000,000F-

l, Sentamu W. Ahmad have agreed with Ha11i Medi, to buy all computer items at 9,000,000/= (Sh//ings nine million only) payable in a period of seven (7) weeks. I have given him a postdated cheque of 9,000,000/= to mature on the flh /04/04.

, I have taken the first computer items and I will collect other 10 (ten) computers whenever I will bring money to Hadijja, abod 1,000,000h or 1,500,000/= untilfull payment. The amount on the cheque will continuously be aftered whenever I will pay. Srgned

Sentamu W. Ahmad"

My interpretation of the contract in its entirety is that the appellant undertook to purchase all the 10 computer items from the respondent at Shs. 9,000,00Q7= payable in a period of seven weeks. To that end, he gave the respondent a post-dated cheque of Shs. 9,000,000/= to mature on 5104104.|t was also clear from the agreement that the postdated cheque was not to be banked as a separate mode of payment was agreed upon to the effect that whenever an amount (installment) of Shs. 1,000,000/= or Shs. 1,500,000/= is paid, the amount on the cheque was to be altered and the appellant was to collect more computer items from the agreed 10. The cheque therefore merely acted as security for those 10 computer items, being the subjecl matter of the agreement.

Counsel for the respondent submitted that the appellanl's agreement to pay the full sum on the stipulated date on the cheque for an ascertained quantity of goods at the time the parties entered into the agreement was a sale and not an agreement to sell as contended for the appellant. We accept that submission for the reasons discussed below. 20

Section 2 (4) of the Sale of Goods Act distinguishes a sale from an agreement to sell. lt provides thus; 25

> "Where under a contract of sale the propefty in the goods is transfened from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is fo take place at a future time or subject to some condition to be fulfilled later, the contract is called an agreement to sell.'

5 There are two essentials requirements for transfer of property in the goods which include firstly that goods must be ascertained. Unless the goods are ascertained, they (or the property therein) cannot pass from the seller to the buyer. Thus, where there is a contract for the sale of unascertained goods, no property in the goods is transfened to the buyer unless and until the goods are ascertained. Secondly, the intention to pass property in goods must be there. ln a sale of specific or ascertained goods the property in them is transfened to the buyer at such time as the parties to the contract intend it to be. According to section 18 (2) of the Sale of Goods Act regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. 10

)

ln the instant case, the computer items that were subject of the agreement were known by both parties and their total value also agreed upon. The goods were therefore ascertained. The appellant went ahead to issue a post-dated cheque of 9,000,000/= to secure those goods to ensure that they were not available for sale to other potential customers. To my mind, this signifies the parties' intention to pass the property in the goods to the appellant at the time of making the contract, notwithstanding that payments and delivery of the goods would be in installments. My view is fortified by section 19 (a) of the Sale of Goods Act which makes il immatedal whether the time of payment or the time of delivery or both are postponed. 15 20

The learned trial Judge found that the mere fact that possession of the goods remained with the respondent did not mean that it also retained the title to them. I agree with the trial Judge's conclusion and find that the property in the goods had indeed passed to the appellant at the time the contract was made in respect ofthose ascertained goods and according to section 2 (4) of the Sale of Goods Act, this was a sale agreement.

I also wish to observe that the argument that the parties entered into an agreement to sell and nol a sale agreement would be convincing if each of the 10 computer ilems were priced separately and the appellant was to pay for each separately before he could take physical

5 possession of them. However, this was not so. lt is clear from the agreement that the price of all the computer items were agreed at Shs. 9,000,000/= and there was no indication that the sum of either Shs. 1,000,000/ or Shs. 1,500,000/= agreed to be paid before more computer items were taken would be the value of those items. The appellant and his counsel seem to be reading into lhe agreement those non-existent provisions hence the argument that the parties enlered into an agreement to sell. 10

Chifty on Contract (supra) at paragraph 12-070 page 615 cautions that it is not open to the court to revise the words used by the parties, or lo put upon them a meaning other than that which they ordinarily bear in order to bring them in line with what the court may think the parties really intended or ought to have intended.

The trial Judge was therefore right to reject the argument of the appellant that imports into the agreement a meaning contrary to the parties' intention and holding that they had entered into a sale agreement and the property in the goods had passed to the appellant. 15

ln the premises, grounds land 2 fail.

On ground 3, the appellant faulted the trial Judge for failing to evaluate the evidence and misdirecting himself in fact when he held that the appellant sorted out the mosl valuable components and what remained was of little value. Counsel submitted that taking delivery of fewer of the items did not in any way affect the value or state of the others which remained with the respondent since all of the items stood to be sold on their own. He argued that had the trial Judge properly evaluated the other pieces of evidence on court record, he would have found that many items which remained in custody of the respondent were not reliant on the few items taken by the appellant and therefore the respondent should have sold the items to mitigate the loss. 20 25

5 I am not persuaded by counsel's submission because he appeared to be giving evidence from the bar. The suit from which this appeal arises proceeded ex-parte and therefore the appellant did not have opportunity to adduce any evidence to conkovert the testimony of the respondent that;

"l have not sold whatever he did not take. Ihls is because the more valuable pais are the ones he took. So people were not interested in what had remained for the components. The pafts which remained are valueless withorl the other parts which he took."

I therefore find that the trial Judge properly evaluated the evidence on record and anived at a correct conclusion that the appellant sorted out the most valuable components and what remained was of little value. I must nonetheless observe that even if the remaining computer parts were valuable and the respondent had failed to mitigate his loss by selling them to another buyer upon the appellant defaulting on the payments as agreed, his failure to do so would not exonerate the appellant from his obligation under the contract. lt would only be considered in the assessment of damages but not as a defence for breach of contract.

This view is buttressed by the position that when parties freely and voluntarily enter into contract, they should be bound by the terms they agreed upon. Lord Jessel MR in Printing and Numeral Registering Company vs Sampson, (1875) L. R. Eq 462 at 465 emphatically stated thus:- 20

> "lf there is one thing more than another which public policy regutes, it is that men of full age and competence and understanding shall have the utmost libeny in contracting and that contracts, when entered freelv and voluntarilv, shall be held enforced bv the courts of iustice". (Emphasis added)

ln National Bank of Kenya Ltd vs Pipeplastrcs Samkolit (K) Ltd and anor [2002] 2 EA 503 the Court of Appeal of Kenya held that a court of law cannot re-write a contract between

s the parties. The pailes are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.

ln the premises, I cannot fault the trial Judge for finding as he did. Ground 3 therefore fails.

Regarding ground 4, the appellant faults the learned trial Judge for entering judgment against him for payment of Shs. 7,850,000/= (seven million eight hundred fifty thousand shillings) with interest thereon. Counsel contended that the respondent should have limited his claim to Shs. 470,000/= which is the unpaid balance for the goods the appellant took actual delivery of and mitigated his loss by selling lhe goods that had remained in his possession to other buyers. I respectfully disagree with counsel's submission because it is based on the misconception that the parties had entered into an agreement to sell and not a sale agreement.

15 20 I cannot interpret the contract to mean that the appellant should only pay for the items he took possession of as this would be a variation of the terms of the contract and the intention of the parties. As already discussed under grounds 1 and 2, the parties entered into a sale agreement and the agreed contract sum for all the computer items was Shs. 9,000,000/=. lt is not in dispute that out of that amount, only Shs. 1,1 50,000/= was paid to the respondent. lt would then follow that the outstanding balance to be paid to the respondent was and is still Shs. 7,850,000/=.

Icannot therefore fault the trial Judge for entering judgment against the appellant for payment of Shs. 7,850,000/= with interesl thereon and I find no reason to interfere with his decision. Ground 4 of the appeal also fails.

0n the whole, I find no merit on all the grounds of appeal. I uphold the decision of the trial court and accordingly dismiss this appeal with costs to the respondent.

I so order.

10 I

y\n Dated at Kampala this... of 2019 d

Hon. Lady Justice Hellen Obura

JUSTICE OF APPEAL

### THE REPUBLIC OF UGANDA

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

### CIVIL APPEAL NO. 09 OF 2007

#### SHEIKH SENTAMU AHMED::::::::::::::::::::::::::::::::::::

#### **VERSUS**

#### LWANGA DEVELOPMENT TRUST LTD:::::::::::::::::::::::::::::::::::

(Appeal from the decision of the High Court of Uganda at Kampala before His Lordship Hon. Justice Yorokamu Bamwine dated 29th November, 2006)

CORAM: HON. MR. JUSTICE ALFONSE OWINY - DOLLO, DCJ

HON. MR. JUSTICE CHEBORION BARISHAKI, JA

#### HON. LADY JUSTICE HELLEN OBURA, JA

#### **JUDGMENT OF CHEBORION BARISHAKI, JA**

I have had the benefit of reading in draft the judgment of my sister Hellen Obura, JA. I agree with her analysis of evidence, decision and the conclusion that this appeal has no merit and should be dismissed with costs to the respondent.

$\ldots \ldots 2019$ Dated at Kampala this...... day of.

**Cheborion Barishaki**

**JUSTICE OF APPEAL**

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL AT KAMPALA

CORAM: OWINY - DOLLO DCJ, CHEBORION AND OBURA JJA.

## CIVIL APPEAL NO 09 OF 2007

(Appeal from the judgment of Yorokamu Bamwine, J; in High Court Kampala Civil Suit No. 509 of 2004)

...................................... SHEIKH SENTAMU AHMED ....................................

**VERSUS**

LWANGA DEVELOPMENT TRUST LTD. .................................

## JUDGMENT OF OWINY - DOLLO; DCJ

I have had the benefit of reading the judgment of my learned sister Hellen Obura, JA, in draft. I agree with her findings and conclusion that this appeal has no merit; and should be dismissed with costs to the Respondent.

Since Cheborion JA also agrees, orders are hereby given in the terms proposed by Obura JA in her judgment.

$\mathcal{L}_{day}$ of $\mathcal{L}$ $\bigcirc$ Dated, and signed at Kampala this

Alfonse C. Owiny - Dollo

**Deputy Chief Justice**