Star Supermarket (U) Ltd v Attorney General (CIVIL APPEAL NO. 34 OF 2000) [2000] UGCA 46 (25 April 2000)

Full Case Text

## t THE REPUBLIC OF UGANDA

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

## CIVIL APPEAL NO. 34 OF 2OOO

#### CORAM: HON, MR. JUSTICE G. M. OKELLO, JA. HON. MR. JUSTICE J. P. BERKO, JA. HON. MR. JUSTICE A. TWNOMUJUNI, JA.

STAR SUPERMARKET (U) LTD APPELLANT

#### VERSUS

# ATTORNEY GENERAL..... .... RESPONDENT

(Appeal from Judgment and Decree ofthe High Court of Uganda at Kampala by the Hon. Justice R.o. okumu-Wengi, dated 25th April, 2o0o in H. C. C. S. No. 485 of 1999)

#### JUDGMENT OF HON. J. P. BERKO:

This appeal arose out of a suit involving a contract. The appellants were the original plaintiffs The respondent was the original defendant. Hereinafter I shall refer to them by the designation they bore in the High Court.

The contract was for the supply of emergency dry ration to the Uganda Peoples Defence Forces (UPDF). The dry ration consisted of biscuits, beans and chicken. The plaintiffs and the defendant did not reduce their agreement into writing. The only documents evidencing the contract were lhe defendant's order of 2515198 (Exh P2) in which the items required and their quantities were indicated and the Delivery Notes (Exh P4 and P5) from the plaintiffs. The prices of the items were not indicated in Exh P2. They appeared on the plaintiffs' Delivery Notes Exh P4 and P5. The total value of goods supplied by the plaintiffs came to Shs. 202,064,000/=. The defendant made part payment of Shs. 101,032,000/=, leaving a balance of Shs. 101,032,000/=. The dispute between the plaintiffs and the defendant is about that balance 30

ln his plaint, the plaintiffs had claimed the above sum together with special damages alleged to have arisen from a loss incurred by the plaintiffs from the fluctuation in exchange rates between US Dollars and Uganda Shillings; there was also a claim for general damages arising out of loss of business with the plaintiffs' local and overseas suppliers and interest. The plaint shows that the exchange rate between Uganda shilling and US Dollar had moved from Ug. Shs. 12OO al the time of contracting to Shs. 1450 to the US Dollar at the time of the surt. The loss arising from the depreciation of the Uganda Shillings to the US Dollars is said to be Shs.142, 082,850/=. Thrs is what is claimed as special damages. The defendant, in his defence, denied the plaintiff's claim generally and required strict proof of the debt. The defendant neither testified nor called witnesses.

The evidence of Hussein Majib Bumathur, the Managing Director of the Plaintiffs'Company, was that in May 1998 an UPDF Officer came and requested for the supply of the dry ration. The plaintiffs agreed and issued Proforma lnvoice No.301 dated 2515198 confirming that they could supply the goods. The plaintiffs moved fast and supplied the goods within 24 hours. The UPDF helped them to clear the goods quickly through customs. The receipt of the goods was evidenced by Delivery Notes acknowledged by UPDF officers. The total value of goods supplied came to Shs. 202,064,000/= in respect of which the defendant has paid one half, leaving half unpaid. This is not denied by the defendant. The witness said that the goods were purchased in US Dollars from suppliers in South Africa who were demanding payment in US Dollars lf they were paid in Uganda Shillings they would not be able to purchase sufficient US Dollars to pay their suppliers. 20

The learned trial Judge found and, quite correctly in my view, that there was a contract between the plaintiffs and the defendant for the supply of dry ration; that the plaintiffs have completely fulfilled their part of the contract, and that the defendant has made part payment of Shs. 101,032,OOO1= leaving a balance of Shs. 101,032,0001= remaining unpaid. These were conceded by Cheborion Barishaki, learned counsel for the defendant. The learned trial 30

judge accordingly entered judgment in favour of the plaintiffs for that amount. That is not challenged in these proceedings. He, however, refused to award the special damages claimed by the plaintiffs. His reasons being that:

> "There is no pleading or prayer indicating that the total claim was in dollars. Even all the documents and evidence advanced related to Uganda shillings, lt must be taken that the transaction subject of this suit was purely in Uganda shillings and judgment has been recorded in Uganda shillings. There is therefore no way that the exchange date of SDs. 1200 or Shs. 1450 to the dollar referred to in paragraph 5(a) of the plaint arises and in what way. This court can only conclude that the parties clearly dealt in Uganda shillings and profits were included in the values put forward and the plaintiff must have included this in these values".

This conclusion rs challenged in ground one of the memorandum. The learned trial judge awarded 6% interest in the decretal sum instead of the 36% claimed in the plaint This is also challenged in ground two of the grounds of appeal.

It was submitted on ground one that UPDF officers were aware that the plaintiffs supplied goods made from South Africa. PW1 said that they bought the goods in US dollars. And as there has been contrnued depreciation of the Uganda Shillings to the dollar, the defendant should re-emburse them for that loss.

I do not see any merit in this argument. As the learned trial judge rightly found out the parties negotiated in Uganda Shillings. lt was neither agreed upon by the parties nor was it ever brought to the notice of the UPDF officers that the prices quoted by the plaintiffs were pegged to the US dollars. The mere fact that the UPDF officers knew that the plaintiffs bought the goods from South Africa does not affect their obligation to perform their part of the 30

contract by payment in Shillings, which is the currency of the contract. Therefore the special damages based on the depreciation of the value of the Shilling to the dollar was too remote. The learned trial judge was right to reject that claim. Ground one, as a result, should fail.

It was contended in the second ground that the learned trial judge erred in law and in fact when he held that the interest rate of 6% awarded was sufficient to compensate the appellant in a commercial transaction. lt was argued that the 6% awarded was not sufficient to compensate the appellant who had been deprived of his money for a long time.

Section 26(2) ot the Civil Procedure Act provides

"(2) Where and in so far as a decree is for payment of money, the court may, in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the 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 couft deem reasonable on the aggregate sum adjudged from the date of the decree to the date of payment or to such earlier date as the courl thinks fit".

Subsection (3) of the same section provides that where the decree is silent as to the payment of interest, the court shall be deemed to have ordered interest at six percent per annum.

ln his judgment the learned trialjudge said:-

"On the question of delayed payment the mechanism of interest is sulficient to compensate the plaintiff. I accordingly award him interest on the decretal sum at the

# rate of (Six) 6% effective from 19th June 1998 to date of Payment".

Clearly the court has discretion to award reasonable interest on the decretal amount. But it appears that a distinction must be made between award arising out of a commercial or business transactions, which would normally attract a higher interest and awards of general damages, which are mainly compensatory. ln the present case the award of the decretal amount arose out of a commercial or business transaction. The learned trial judge found that there had been a delay in payment. lthink that there is merit in the complaint regarding the award of interest on the decretal amount. The rate of interest is definitely low, particularly as the judge declined to award general damages for breach of contract. I would therefore raise il to 25o/o.

(

ln the result, lwould dismiss the appeal in part and allow it in part. The appeal against the trial judge's refusal to award special damages is disallowed. The appeal against the award of 6% interest is allowed. I would set aside the award of 6% rnterest. I would order that the decretal sum should carry rnterest at the rate of 25o/o per annum from 19th June, 1 998 to the date of payment in full. I would award 1/3 of the costs of the appeal to the appellants.

It Dated at Kampala this .[ I day of ) .. ... .2001

J. P. Judtice of Appeal.

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

# CORAM: HON. G. M. OKELLO, JA. HON. J. P. BERKO, JA. HON. A. TWINOMUJUNI, JA.

# CIVIL APPEAL NO.34 OF 2OOO

## BETWEEN

## STAR SUPERMARKET (U) LTD APPELLANT

## AND

# ATTORNEY GENERAL ::::::::::::::::::::::::::: RESPONDENT

(Appeal from the decision of the High Court (Okumu-Wengi J) dated 25'h April, 2000 in HCCS No.tl85 of 1999).

## JUDGMENT OF A. TWINOMUJUNI, JA.

I have read in draft the judgement of my brother Berko, JA. I agree with it entirely and I have notbilrg useful to add. Dated this t ll( 1 ... 200t. day of ll. Lz-^,.,

A STICE APPEAL.

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

#### HON. G. M. OKELLO, JA. **CORAM:** HON. J. P. BERKO, JA. HON. A. TWINOMUJUNI, JA.

### CIVIL APPEAL NO. 34 OF 2000

#### **BETWEEN**

## STAR SUPERMARKET (U) LTD.::::::::::::::::::::::::::::::::::::

### AND

#### ATTORNEY GENERAL::::::::::::::::::::::::::::::::::::

(Appeal from the decision of the High Court (Okumu-Wengi, J) dated 25th April, 2000 in HCCS No. 485 of 1999)

### JUDGMENT OF G. M. OKELLO, JA.

I have read in draft the judgment of Berko. JA and I agree that the appeal must succeed in part.

The appellants' claim for Special Damages arising from the fluctuation in the exchange rates between US Dollars and Uganda Shillings during the delayed payment by the respondent is not sustainable. The Delivery Notes Exh. P4 and P5 which are part of the contract documents expressed the value of the goods in Uganda shillings. Payment was also expected to be made by the respondent in the same currency. The loss arising from the fluctuation in the exchange rates was not anticipated in the contract and therefore too remote. The trial Judge was justified to reject it.

On the interest rate awarded by the trial Judge, it is my view that even though this is a matter of discretion of the trial Judge, that discretion must be exercised on a sound and acceptable principle. In ECTA (U) Ltd. Vs Geraldine Namubiru Josephine Namukasa, Civil Appeal No. 29 of 1994 (Supreme Court) unreported, that court held that a distinction must be made between an award arising out of Commercial or business transaction and general damages. The former would normally attract a higher interest rate than general damages which are normally In that case an interest rate of $25\%$ awarded on the compensatory. general damages was reduced to $8^{\circ}$ .

In the instant case, the transaction was clearly of a commercial nature and falls in the category which normally attracts higher interest rate. The interest rate of $6\%$ awarded by the trial Judge on the decretal amount is obviously too low for this type of transaction where the capital could have been borrowed from the bank at a high interest rate. It is clear that the trial Judge did not follow the right principle. I agree that there is merit in this ground. I do agree with the rate proposed by Berko, JA.

As Twinomujuni, JA also agrees, the appeal shall and is hereby allowed in part on the terms proposed by Berko. JA.

Dated at Kampala this $11\overline{1}$ day of May, 2001.

JUSTICE OF APPEAL.