Surgipham Uganda Ltd v Noble Health Ltd and Anor (HCT-00-CC-CS 595 of 2003) [2005] UGCommC 60 (13 October 2005)

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)}} {\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8 \pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs28\insrsid1136281\charrsid8736269 \par }\pard \qc \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid14287185 {\b\f36\fs28\insrsid14287185 THE REPUBLIC OF UGANDA \par \par IN THE HIGH COURT OF UGANDA AT KAMPALA \par (COMMERCIAL }{\b\f36\fs28\insrsid2818667 COURT }{\b\f36\fs28\insrsid14287185 DIVISION) \par \par }{\b\f36\fs28\insrsid2818667 HCT-00-CC-CS-0}{\b\f36\fs28\insrsid14287185 595 OF 2003 \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid14287185 {\b\f36\fs28\insrsid14287185 \par SURGIPHAM UGANDA LTD :::::::::::::::::::::::: PLAINTIFF \par \par }\pard \qc \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid14287185 {\b\f36\fs28\insrsid14287185 VERSUS \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid14287185 {\b\f36\fs28\insrsid14287185 \par 1. NOBLE HEALTH LTD ] \par 2. TONY BADEBYE ] \par 3. SUSAN MUNALWA ] :::::::::::::::::::::::::::: DEFENDANTS \par \par \par BEFORE: }{\b\f36\fs28\ul\insrsid14287185\charrsid9571472 THE HONOURABLE MR. JUSTICE YOROKAMU BAMWINE \par \par }{\b\f36\fs28\insrsid14287185 \par }{\b\f36\fs28\ul\insrsid16130692\charrsid3564001 J U D G M E N T}{\b\f36\fs28\insrsid14287185 : \par \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16130692 {\f36\insrsid9129432 The Plaintiff\rquote s case against the Defendants is for recovery of Shs.26,575,293- arising out of an alleged bre ach of contract, general damages, interest and costs of the suit. It is not disputed that on 17/8/2001, at the 1}{\f36\super\insrsid9129432\charrsid9129432 st}{\f36\insrsid9129432 Defendant\rquote s own request and instance the Plaintiff}{ \f36\insrsid8924843 supplied the 1}{\f36\super\insrsid8924843\charrsid8924843 st}{\f36\insrsid8924843 Defendant with goods/drugs}{\f36\insrsid5774392 worth Shs.21,288,000- for which payment was t o be made within one month from the date of receipt of the goods. The dispute is }{\f36\insrsid14702800 about}{\f36\insrsid5774392 :}{\f36\insrsid14287185 \par }{\f36\insrsid5774392 1.\tab Whether the Defendants are indebted to the Plaintiff in the sums claimed. \par 2.\tab Whether the Defendants are jointly and severally liable to the Plaintiff for the \tab debt, if any. \par }{\f36\insrsid2582447 3.\tab Remedies. \par }{\f36\ul\insrsid2582447\charrsid11010570 Representations: \par }{\f36\insrsid2582447 Mr. Adriko for the Plaintiff. \par Mr. Nagemi for the Defendants. \par \par I will go straight to the resolution of the above issues. \par \par As to whether the Defendants are indebted to the Plaintiff in the}{\f36\insrsid11232374 sums claimed in the plaint, I have considered the evidence of the Plaintiff\rquote s very witness, PW1 Chary. He is an accountant with Surgi Pharm (U) Ltd since 1999. The company sells human drugs. It is his evidence that on 17/8/2001 the Plaintiff supplied to the 1}{\f36\super\insrsid11232374\charrsid11232374 st}{ \f36\insrsid11232374 Defendant, itself a dealer in human drugs as well, drugs worth Shs.21,288,000-. That the said sale on credit was subject to payment of the cost price within one month. The sale transaction is not denied by the defence. I can}{ \f36\insrsid2491456 therefore safely make a finding that the sale took place and I do so.}{\f36\insrsid2582447 \par }{\f36\insrsid4918668 \par It is also the evidence of the said PW1 Chary that following that sale, the 1}{\f36\super\insrsid4918668\charrsid4918668 st}{\f36\insrsid4918668 Defendant issued to the Plaintiff two post dated cheques for Shs.11,288,000- dated 31/8/2001 and Shs.10,000,000- dated 7/9/2001. This much is also admitted by the 1}{\f36\super\insrsid4918668\charrsid4918668 st}{\f36\insrsid4918668 Defendant\rquote s Managing Director, DW1 Badebye. Court is therefore satisfied that the cheques were issued to the Plaintiff as averred. \par }{\f36\insrsid12323665 \par It is further claimed by the Plaintiff that the cheques were presented to their bank on 20/9/2001 and that on presentation the same were dishonoured. According to PW1 Chary, on 30/8/2001 the Defendant\rquote s Managing Director wrote to the Plaintiff explaining to them the financial difficulties the 1}{\f36\super\insrsid12323665\charrsid12323665 st}{\f36\insrsid12323665 Defendant was experiencing and requesting that the same be not pr esented till 20/9/2001 when they hoped to have overcome those difficulties. The letter is on record as P. Exh. VIII and again this much is not}{\f36\insrsid8525777 denied by the 1}{\f36\super\insrsid8525777\charrsid8525777 st}{\f36\insrsid8525777 Defendant\rquote s Managing Director. From the Defendant\rquote s own evidence, the defence stopped the presentation of the cheques by the Plaintiff to its bank on the due date. I so find.}{\f36\insrsid12323665 \par }{\f36\insrsid8525777 \par It is further averred by PW1 Chary that upon presentation of the cheques on 25/9/2001, they bounced. The fact of the 2 cheques bouncing is not denied by the defence. They are on record as P. Exh. VII. It is indicated on both of them that payment was stopped.}{\f36\insrsid10110616 I am satisfied that DW1 Badebye stopped the payment.}{\f36\insrsid8525777 \par }{\f36\insrsid10110616 \par It is further claimed by PW1 Chary that the fact of the cheques dishonour was brought to DW1\rquote s attention and th at he promised to settle the debt as soon as possible. That on 10/10/2001 the Plaintiff was paid a sum of shs.7,000,000- out of the outstanding amount. }{\f36\insrsid10299803 This much is also admitted by the defence save that according to DW1 Badebye he ordered stoppage of the payment after paying Shs.7m. I\rquote m not persuaded by DW1\rquote s evidence on this point. From the records, the 1}{ \f36\super\insrsid10299803\charrsid10299803 st}{\f36\insrsid10299803 Defendant was experiencing financial problems. On or around 21/9/2001, he stopped the payment of the cheques. The Shs.7m was paid in October, 2001. }{\f36\insrsid792396 Court is of the view that DW1 stopped the payment because the company had not recovered from its financial difficulties. Later, it managed to mobilize Shs.7m. For this reason, I have not accepted DW1\rquote s evidence that he ordered stoppage of the payment because the parties had sat and varied the terms of the payment. By the time the Shs.7m was paid, the 1}{\f36\super\insrsid792396\charrsid792396 st}{\f36\insrsid792396 Defendant\rquote s indebtedness stood at Shs.21,288,000-. This therefore reduced it to Shs.14,288,000-.}{\f36\insrsid10110616 \par }{\f36\insrsid7028025 \par It is the evidence of PW1 Chary that in }{\f36\insrsid1274715 Octo}{\f36\insrsid7028025 ber 2001 the parties agreed that the 1}{\f36\super\insrsid7028025\charrsid7028025 st}{\f36\insrsid7028025 }{\f36\insrsid3562893 Defendant deposits stocks }{ \f36\insrsid1274715 of }{\f36\insrsid3562893 drugs with the Plaintiff worth Shs.16.000.000=. }{\f36\insrsid2241120 T}{\f36\insrsid3562893 hat they were to }{\f36\insrsid2663 be }{\f36\insrsid3562893 kept as security for the debt pending payment. DW1 does not agree. He claims that the stock of drugs was to offset the indebtedness. \par \par I have addressed my mind to the evidence and arguments of both Counsel on the matter. \par \par The agreement between the parties is on record as }{\f36\insrsid2241120 D. Exh. 1 and none of them claims that it was doctored. It is dated 19/10/2001, in a form of a letter to DW1 Badebye. It reads: \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid11010570 {\i\f36\insrsid14357119\charrsid11010570 \'93}{\i\f36\insrsid2241120\charrsid11010570 RE: ACCOUNTS S}{\i\f36\insrsid1274715 ETTLEMENT}{ \i\f36\insrsid2241120\charrsid11010570 \par This is to acknowledge resolution}{\i\f36\insrsid14357119\charrsid11010570 s}{\i\f36\insrsid2241120\charrsid11010570 passed and agreed upon in today\rquote s meeting with the Surgi Pharm Management Team}{\i\f36\insrsid14357119\charrsid11010570 . \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16130692 {\f36\insrsid14357119 \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid11010570 {\i\f36\insrsid14357119\charrsid11010570 You have agreed to send us stocks of Nobaquin and Curamol to secure your account balance of Shs.14,388,000-. The modalities agreed upon were as follows: \par 1.\tab Send us 100 (one hundred) ctns of Nobaquin at Ug. Shs.160,000- }{\i\f36\insrsid11010570 \tab }{\i\f36\insrsid14357119\charrsid11010570 per ctn less \tab 10%. If stocks of Nobaquin are insufficient,}{\i\f36\insrsid3749095\charrsid11010570 top up } {\i\f36\insrsid11010570 \tab }{\i\f36\insrsid3749095\charrsid11010570 with Curamol at \tab Shs.165,000- less 10% to the value of the }{\i\f36\insrsid11010570 \tab }{\i\f36\insrsid3749095\charrsid11010570 outstanding.}{ \i\f36\insrsid7028025\charrsid11010570 \par }{\i\f36\insrsid2663\charrsid11010570 2.\tab This goods (sic) shall be held as security, however should we get a }{\i\f36\insrsid2663 \tab }{\i\f36\insrsid2663\charrsid11010570 buyer, we shall sell them with your consent and offset the monies }{ \i\f36\insrsid10423765 \tab }{\i\f36\insrsid2663\charrsid11010570 against your account.}{\i\f36\insrsid3749095\charrsid11010570 \par }{\i\f36\insrsid11082248\charrsid11010570 3.\tab The balance of goods shall be returned to you on completion of the }{\i\f36\insrsid11010570 \tab }{\i\f36\insrsid11082248\charrsid11010570 payment of}{\f36\insrsid11082248 \tab your account. \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16130692 {\f36\insrsid15996957 \par }\pard \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0\pararsid11010570 {\i\f36\insrsid15996957\charrsid11010570 We are sure this settlement plan will be quite convenient and help us proceed with our normal business terms.\'94 \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16130692 {\f36\insrsid7286330 \par From the construction of the above letter, it is clear to me that the parties did not contemplate an outright set}{\f36\insrsid16598691 }{\f36\insrsid7286330 off. The agreement, properly construed, was for the drugs to act as security for the outstanding debt.}{\f36\insrsid544589 This is clear from the agreement itself: }{\i\f36\insrsid544589\charrsid10423765 \'93 You have agreed to send us stocks of Nobaquin and Curamol to secure your account\'94 and \'93This (sic) goods shall be held as security, however, should we get a buyer, we shall sell them with your}{\i\f36\insrsid3489491\charrsid10423765 consent and off set the monies against your account.\'94}{\f36\insrsid7286330 \par }{\f36\insrsid6310883 \par }{\f36\insrsid14704271 If the parties had intended an out right set off, they would have}{\f36\insrsid7556818 stated so. The defence argument that the Plaintiff received the drugs as settlement of the debt is flawed}{\f36\insrsid8455419 considering the agreement contained in the same document that the Plaintiff would account to the Defendant for the proceeds of the sale of the drugs and return the unsold stocks to the 1}{\f36\super\insrsid8455419\charrsid8455419 st}{\f36\insrsid8455419 Defendant. The argument simply lacks logic.}{\f36\insrsid14704271 \par }{\f36\insrsid738847 \par The Court\rquote s finding on this point is that the drugs were deposited as security for the outstanding debt. The parties agreed that in the event of the Defendants getting a buyer, the stocks would be sold }{\f36\insrsid535625 to off set}{ \f36\insrsid291213 the amount still outstanding at the time. The Defendants did not provide such a buyer and the Plaintiff got none until April 2004 when Neon Pharmacy Ltd agreed to take them at a much reduced cost of Shs.3,200,000-. They were expiring }{\f36\insrsid14751592 in 10 months time. Certain matters m ust be considered when an issue like this arises. One such factor is the role of the injured party following the breach of the contract. He is expected to do what he can to look after his own interest. He must, in other words, }{\f36\insrsid8539126 mitigate the loss. Court is satisfied that the drugs were not deliberately sold to Neon Pharmacy Ltd at a loss. They were sold in a bid to mitigate the loss, when the drugs had only 10 months to expire.}{\f36\insrsid738847 \par }{\f36\insrsid14295010 \par It is the evidence of PW1 Chary that the terms of the credit were contained in a credit application form, P. Exh. 1. DW1 Badebye has feigned ignorance of that document. Court doubts his (DW1\rquote s) sincerity on that point. He knew that since the principal sum was Shs.21,288,000-, upon payment of Shs.7,000,000-,}{\f36\insrsid13194253 the amount was reduc ed to Shs.14,288,000-. However, in the memorandum of understanding, D. Exh. 1, he acknowledged the balance to be Shs.14,388,000-, one hundred thousand shillings more, implying that he was aware that the bounced cheques had attracted a penalty of Shs.50,0 00- each. This penalty is stipulated in the Credit Application Form, P. Exh. 1, which DW1 claims not to have been aware of. In these}{\f36\insrsid5987205 circumstances, Court is satisfied that what was Shs.11,288,000- became Shs.11,338,000-}{ \f36\insrsid13704122 and the Shs.10,000,000- became Shs.10,050,000-. Accordingly, after the payment of Shs.7m, the balance was Shs.14,388,000-}{\f36\insrsid9984677 (i.e. Shs.11,338,000- + Shs.10,050,000- minus Shs.7,000,000).}{\f36\insrsid8539673 The sale of the drug stocks in 2004 reduced the indebtedness to Shs.11,188,000-.}{\f36\insrsid14295010 \par }{\f36\insrsid15274741 \par It is stipulated in the said Form, P. Exh. 1, that}{\f36\insrsid798389 over due accounts will incur interest of 3% per month which translates into 36% per annum. While this penalty may have been intended to discourage }{\f36\insrsid2663 willful}{ \f36\insrsid798389 defaults, it is the view of this Court that the interest at 36}{\f36\insrsid4284429 % p.a. was excessive. This Court has a discretion to award interest at less than the contractual rate when that rate is manifestly excessive and unconscionable: }{\b\f36\insrsid4284429 Juma \endash Vs- Habib [1975] EA 103 (T).}{\f36\insrsid10961258 The Plaintiff has in the plaint prayed for interest of 21% p.a, implying that this was the obtaining rate of interest at the time of filing. While there is merit in the Plaintiff\rquote s claim regarding interest between October 2001}{ \f36\insrsid8523574 \endash October 2003, a period of 2 years, the most this Court can allow is interest at the rate of 21% p.a. The effect of this is to reduce the Plaintiff\rquote s claim under this head from Shs.11,088,000- to Shs.6,042,960- (that is, Shs.}{\f36\ul\insrsid8523574\charrsid8523574 14,388,000- x 21 x 2}{\f36\ul\insrsid8523574 ).}{\f36\ul\insrsid15274741 \par }{\f36\insrsid8523574\charrsid8523574 }{\f36\insrsid8523574 }{\f36\insrsid8523574\charrsid8523574 100}{\f36\insrsid8523574 \par \par The Plaintiff}{\f36\insrsid5125282 prays for Shs.1,438,000- which it allegedly spent on a Debt Collector. I\rquote m of the view that engaging the debt collector at that stage was entirely the Plaintiff\rquote s debt recovery mechanism. It\rquote s not a matter}{\f36\insrsid13904764 that the parties had agreed upon. In any case, no evidence of such payment has been given to Court, other than the fact that it was pleaded, to raise inference that the expense was indeed incurred. I\rquote m inclined to disallow this claim and I do so. The Plaintiff further prays for a sum of Shs.2,392,500- as legal costs. Although such expense is to be assumed, the usual practice is for the winning party to submit to Court its bill of costs for taxation. I would disallow this claim, subject to its inclusion in the Plaintiff\rquote s final bill of costs.}{ \f36\insrsid8523574 \par }{\f36\insrsid10883637 \par As to whether the Defendants are jointly and severally liable to the Plaintiff for the outstanding debt, the Plaintiff has adduced credible evidence to show that as part of its credit policy towards its p}{\f36\insrsid6310883 ros}{\f36\insrsid10883637 pective}{\f36\insrsid16720599 creditors, it obtains shareholders guarantees from them. Court is satisfied about the existence of such policy. In his testimony, DW1}{\f36\insrsid11610557 Badebye accepts that he signed the share holder\rquote s guarantee, P. Exh. 11. He therefore made a personal guarantee of the payment. This makes him liable jointly and severally with the 1}{\f36\super\insrsid11610557\charrsid11610557 st}{\f36\insrsid11610557 Defendant for the debt due to the Plaintiff. The 3}{\f36\super\insrsid11610557\charrsid11610557 rd}{\f36\insrsid11610557 Defendant Susan Munalwa denied signing the shareholder\rquote s guarantee. None of the Plaintiff\rquote s officials was present when P. Exh. 11 was being executed. PW1\rquote s evidence is that he handed over the form to DW1 Badebye and that it was returned signed. It does not require the services of a handwriting}{\f36\insrsid8470436 expert to conclude that her signature as it appears in the Articles and Memo}{\f36\insrsid14707505 of Association differs materially from that on the guarantee docume nt. In these circumstances, Court holds that she is not jointly and severally liable with the 1}{\f36\super\insrsid14707505\charrsid14707505 st}{\f36\insrsid14707505 and 2}{\f36\super\insrsid14707505\charrsid14707505 nd}{\f36\insrsid14707505 Defendants. I would discharge her from personal liability and I do so.}{\f36\insrsid14617253 \par \par As regards the Plaintiff\rquote s claim for general damages}{\f36\insrsid3016641 , one of the duties of c ounsel should be to put before the Court material which would enable it to arrive at a reasonable figure by way of damages. No figure was suggested to me by the Plaintiff. Be that as it may, general damages}{\f36\insrsid11600080 are those damages which are not easily quantifiable in money terms. They are not specified in the claim; instead the Court decides how much the injured person deserves in compensation for his pain}{\f36\insrsid11173462 and suffering, which the Court assumes the Plaintiff did sustain.}{\f36\insrsid10883637 \par }{\f36\insrsid16603499 \par Taking the evidence as a whole and doing the best I can, I consider a sum}{\f36\insrsid16211765 of Shs.1,000,000- adequate compensation to the Plaintiff for breach of contract occasioned to it by the two Defendants. It is awarded to them.}{ \f36\insrsid16603499 \par }{\f36\insrsid12397395 \par In the result, Judgment is entered for the Plaintiff}{\f36\insrsid8257576 against 1}{\f36\super\insrsid8257576\charrsid8257576 st}{\f36\insrsid8257576 and 2}{\f36\super\insrsid8257576\charrsid8257576 nd}{\f36\insrsid8257576 D efendants in the following terms:}{\f36\insrsid12397395 \par }{\f36\insrsid8257576 a.\tab Shs.11,188,000- (eleven million one hundred and eighty thousand only) being \tab the balance due on the supply of the drugs. \par b.\tab Shs.6,042,960- (six million forty two thousand nine hundred sixty only) being \tab interest on the outstanding balance for the period October 2001 \endash October 2003. \par c.\tab Shs.1,000,000- (one million only) being general damages for breach of contract. \par }{\f36\insrsid2663 d.\tab Interest of 25% per annum on (a), (b) and (c) from the date of Judgment till }{\f36\insrsid8736269 \tab }{\f36\insrsid2663 payment in full.}{\f36\insrsid8257576 \par }{\f36\insrsid16017612 e.\tab Costs of the suit. \par \par }{\f36\insrsid94780 \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid94780 {\f36\insrsid16017612 Yorokamu Bamwine \par }{\b\f36\insrsid16017612 J U D G E}{\f36\insrsid16017612 \par 13/10/2005 \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16130692 {\f36\insrsid16017612 \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid94780 {\f36\insrsid16017612\charrsid16017612 \par }}