Vehicle & Equipment Leasing Limited v Strogen Limited & 2 Others (Civil Suit 194 of 2017) [2024] UGCommC 296 (19 April 2024)

**THE REPUBLIC OF UGANDA**

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

**(COMMERCIAL DIVISION)**

**CIVIL SUIT NO. 194 OF 2017**

**VEHICLE AND EQUIPMENT LEASING LTD ::::::::::::: PLAINTIFF**

**VERSUS**

1. **STROGEN LIMITED** 2. **FARM ENGINEERING INDUSTRIES LTD** 3. **TARANJEET SINGH PADHAAL :::::::::::::::::: DEFENDANTS**

**Before: Hon. Lady Justice Cornelia Kakooza Sabiiti**

**JUDGMENT**

1. **Introduction** 2. Under the amended plaint filed on 9th April 2018, the Plaintiff’s claim against the Defendants was for recovery of USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty-Three Thousand Seven Hundred Sixty-Five and Ninety-Three Cents) being outstanding rentals, interest on the rentals and early termination costs. The Plaintiff also claimed Ug.shs. 76,155,250.62 (Uganda Shillings Seventy-Six Million, One Hundred Fifty-Five Thousand Two Hundred Fifty and Sixty-Two Cents) as out of scope costs incurred on the hired assets, interest on the amounts due and outstanding, general damages and costs of the suit. 3. It was the Plaintiff’s case that pursuant to a rental agreement and rental schedules executed with the 1st Defendant on 23rd January 2013, it leased 32 assets to the 1st Defendant comprising of 25 vehicles and 7 heavy duty equipment. The 2nd and 3rd Defendants guaranteed the 1st Defendant who was to make monthly rental payments on the respective rental schedules. The 1st Defendant failed to settle the rental repayments as and when they fell due in accordance with the schedules, and is a subsidiary of the 2nd Defendant. 4. Upon default of the 1st Defendant, a call on the 2nd and 3rd Defendant’s corporate and personal guarantees was made for the rental arrears, to which a reply was made by the 1st Defendant on 24th November 2016 admitting liability for the amount outstanding. Following their failure to settle the amounts due and owing, a final call for the entire amount owing was made and duly acknowledged by the Defendants who made no payment. 5. The Defendants did not file an amended written statement of defence. However as per the written statement of defence filed on 4th April 2017 by the 2nd and 3rd Defendants, the gist of their defence was that there were no valid contracts of guarantee executed. The 1st Defendant was not a subsidiary of the 2nd Defendant and there was no admission of a debt or any amount outstanding. They denied any liability to the Plaintiff. 6. According to the Plaintiff’s submissions on page 2, the 1st Defendant filed a WSD on 8th May 2018 admitting leasing of the motor vehicle and the same being secured by guarantees of the 2nd and 3rd Defendants. 7. **Issues** 8. The following issues were adopted for determination. 1. Whether the Defendants are indebted to the Plaintiff and if so, to what extent or by how much. 2. What remedies are available to the parties. 9. **Witnesses** 10. Hearing was by witness statements in lieu of examination in chief. The Plaintiff led evidence through Ms. Asio Anna P, its Leasing Manager. The Defendants did not lead any evidence despite numerous adjournments of the matter by the court to enable them adduce evidence. On 20th September 2022, Counsel Jordan Kinyera appearing for the Defendants informed court that he had failed to locate his clients and would therefore not present any evidence. He was directed by court to notify his clients of the status of the matter and confirm whether he still had instruction to defend them and whether they would allow the matter to proceed without adducing any evidence. 11. On 5th December 2022, Counsel Kinyera still informed court that he was unable to contact the Defendants and the Court directed him to file pre-trial documents including witness statements and trial by the next hearing date. He was also informed by the Court that the matter would proceed for hearing if he failed to comply with the Court’s instructions. 12. When the matter came up on 17th May 2023, neither the Defendants nor their counsel were present in court and they had not complied with the instructions of court. Consequently, the court ordered that the matter proceeds exparte under Order 17 rule 4 of the Civil Procedure Rules. 13. **Representation** 14. The Plaintiff was represented by M/s. Amber Solicitors & Advocates and the Defendants were represented by M/s. Adalci Advocates.

e**) The Law and analysis of Evidence**

1. The Plaintiff bears the burden to prove to the satisfaction of Court its averments if it is to succeed as provided for under section 101 of the Evidence Act. This burden is on a balance of probabilities.

**Issue one- Whether the Defendants are indebted to the Plaintiff and if so, to what extent or by how much?**

1. PW1’s evidence was that the Plaintiff (also referred to as VAELL) operates a business model of leasing vehicles and equipment to companies that do not intend to own their fleet of vehicles but prefer to hire or lease for a period of time. In January 2013, the 1st Defendant was involved in fuelling generators and managing telecom company towers which created a need to lease vehicles to manage monitoring and fuelling of the towers. The 1st Defendant approached the Plaintiff for motor vehicles and equipment, and the 2nd Defendant as a related entity to the 1st Defendant undertook to secure the repayments of the rentals by executing a corporate guarantee. This was followed by the personal guarantee of the 3rd Defendant who together with the 2nd Defendant undertook to repay the lease facility in the event the 1st Defendant fails to honour its repayment obligations. 2. On 23rd January 2013, the Plaintiff executed rental agreement/schedules with the 1st Defendant and leased 32 vehicles and seven heavy duty earth moving equipment which were handed over to the 1st Defendant. The parties executed a total of twenty-two lease agreements/schedules which provided the particulars of the leased vehicles and/or assets, and the amount payable by way of monthly rentals. Each hire/rental schedule was an independent contract and they each indicted a net rental to be paid totalling to a monthly rental of USD 70,274.86 (United States Dollars Seventy Thousand Two Hundred Seventy-Four and Eighty Six Cents) to be paid by the 1st Defendant. 3. Further that the 1st Defendant was expected to service the lease for 36 months. However, during the course of the lease, the 1st Defendant defaulted on its repayments and the Plaintiff made demands for the same. As at 23rd December 2015, the 1st Defendant had accumulated outstanding rentals to a tune of USD 391, 049.59 (United States Dollars Three Hundred Ninety-One Thousand forty Nine and Fifty Nine Cents) and at 23rd September 2016, the 1st Defendant had an outstanding amount of USD 427,983.62 (United States Dollars Four Hundred Twenty Seven Nine Hundred Eighty Three and Sixty Two Cents). 4. The 1st Defendant did not honour the demands and as a result, the facility was terminated by the Plaintiff by demanding USD 466,495.80 (United States Dollars Four Hundred Sixty-Six Thousand Four Hundred Ninety-Five and Eighty Cents) as the outstanding rental arrears; the accrued interest and Ug. shs. 76,155,250.60 (Uganda Shillings Seventy-Six Million One Hundred Fifty-Five Thousand Two Hundred Fifty and Sixty) being the total amount for the out of scope services performed on the leased vehicles and equipment. 5. It was also PW1’s evidence that the termination was followed by a call on the corporate and personal guarantees of the 2nd and 3rd Defendants on 23rd December 2015 which was ignored as no payments were made. On 24th November 2016, the 2nd Defendant replied to a call on the corporate guarantee admitting that they guaranteed the 1st Defendant as an associate company and admitted to pay the outstanding balance from their surplus which would be generated from future business. The 2nd Defendant does not dispute that the 1st Defendant owes the Plaintiff unpaid lease rentals and their letter unequivocally requested of the Plaintiff and the 2nd Defendant to reach a final reconciled figure as at 31st December 2016 and the amount be blocked and repaid within 36 monthly instalments commencing 15th January, 2017. The Defendants did not pay the outstanding lease rentals and at the time of filing the suit, it totalled USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty Three Thousand Seven Hundred Sixty Five and Ninety Three cents) and Ug. Shs. 76,155,250.60 (Uganda Shillings Seventy Six Million One Hundred Fifty Five Thousand Two Hundred Fifty and Sixty Cents) owed on out of scope services. 6. In addition, PW1’s evidence was that the above figures were arrived at from addition of USD 433, 323.15 as the outstanding amount in lease rental arrears; USD 778,757.95 being the future rentals payable by the 1st Defendant; and USD 71,684.82 as the interest on each delayed lease rental schedule. The amount claimed for out of scope services included costs incurred in repairs, service of the vehicles which included hard body double cabin pickups registration Nos. UAT 784N, UAT 845N, UAT 777N, UAT 707N, UAT 946N, UAT 709N, UAT 718N, UAT 945N, UAT 459Q, UAT 457Q, UAT 947N, UAT 192Q, UAT 645Q, UAT 460Q, UAT 138Q, UAT 698Q and UAT 716N. The other vehicles did not have expenses incurred. 7. PW1 also testified that as part of its business model, the Plaintiff obtains funds from banks to purchase the vehicles or equipment to be leased and the clients make repayments in instalments agreed, which are tagged to the repayment of the lease facility with the bank. Any default of the customer directly affects the Plaintiff’s ability to meet its repayment obligations and cause a strain on the business. Pursuant to theDefendant’s default, the Plaintiff was unable to service her loan facilities with NC bank Ltd leading to pressure, stress and the bank taking steps to repossess the leased assets. This forced the Plaintiff to file HCCS No. 431 of 2019 seeking orders to stop the bank from impounding the leased assets. She prayed for Ug. shs. 150,000,000/= (Uganda shillings One Hundred Fifty Million) as general damages, interest of a commercial rate of 12% per annum on the sums outstanding in the United States Dollars and 28% per annum on the sum claimed in the Uganda Shillings and costs of the suit. 8. I have carefully considered all the pleadings and evidence of the Parties. For the effective resolution of this issue, it is necessary to determine the indebtedness of the 1st Defendant and its extent, if any before determining that of the 2nd and 3rd Defendants liability. In summary, the sum of USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty Three Thousand Seven Hundred Sixty Five and Ninety Three cents) claimed by the Plaintiff is arrived at by addition of USD 433, 323.15 as the outstanding amount in lease rental arrears; USD 778,757.95 being the future rentals payable by the 1st Defendant; and USD 71,684.82 as the interest on each delayed lease rental schedule. This was the evidence of PW1. 9. According to the testimony of PW1, the rental agreement dated 23rd January 2013 between the Plaintiff and the 1st Defendant which was tendered in evidence as PEX 23, and the rental schedules at pages 1 to 91 of the Plaintiff’s trial bundle tendered in evidence as PE1, the Plaintiff leased to the 1st Defendant the following vehicles and equipment; UAV 859P, UAV 880P, UAV 066Q at a rental fee of USD 7,949.8 USD payable per month for 60 months; UAT 716N at a net rental fee of USD 2,109.35 payable per month for 36 months; UAT 718 leased at USD 2,109.35 payable per month for 36months; UAT 784 leased at USD 2,109.35 USD payable per month for 36months; UAV 014J, UAV 118J, UAV 119J, UAV 049J leased at USD 13,054.39 payable per month for 36 months; UAV 862Q, UAV 849P leased at 7,419.67 payable per month for 60months; UAV 506Q, UAV 327Q leased at USD 3,886.7 payable per month for 60 months; UAT 947N leased at USD 2,109.35 payable per month for 36months; UAT 777N at USD 2,109.35 payable per month for 36months; UAT 220Q leased at USD 2,109.35 payable per month for 36months; UAT 709N leased at 2,109.35 payable per month for 36months; UAT 645Q leased at USD 2109.35 payable per month for 36months; UAT 945N at USD 2,109.35 payable per month for 36 months; UAT 459Q leased at USD 2,109.35 payable per month for 36months; UAT 458Q leased at USD 2,109.35 payable per month for 36months; UAT 457Q leased at USD 2,109.35 payable every month for 36months; UAT 698Q leased at USD 2,109.35 payable per month for 36months; UAT 149Q at USD 2,109.35 payable per month for 36months; UAT 450Q leased at USD 2,109.35 payable per month for 36months; UAT 138Q leased at USD 2,109.35 payable per month for 36months; UAT 192Q leased at USD 2,109.35 payable per month for 36months; and UAT 707N leased at USD 2,109.35 payable per month for 36 months. 10. It is noteworthy that PE1were signed by the 3rd Defendant on behalf of the 1st Defendant and it is indicated that the net rental fee is inclusive of tracking, insurance and maintenance. The commencement date is July 2013. Apart from UAV 859P, UAV 880P, UAV 066Q, UAV 862Q, UAV 849P, UAV 506Q and UAV 327Q leased for 60 months, the rest of the vehicles were leased for 36 months. 11. According to the figures listed above, the 1st Defendant was to pay to the Plaintiff a monthly total of USD 70,278.86 (United States Dollars Seventy Thousand Two Hundred Seventy Eight and Eighty Six Cents) for the leased vehicles. This was a contractual obligation on the 1st Defendant which was supposed to be paid on time as required by clauses 4.1 and 9.1 of PEX 23. PW1’s testimony was that at the time of filing the suit on 14th March 2017, the 1st Defendant owed arears of USD 433,323.15. This is corroborated by PE8 at pages 108 to 109 of the Plaintiff’s trial bundle which is a summary of all the leased assets by registration number, cost of purchase, number of monthly rentals for each asset, rental amount per month, amount remaining in future rentals, outstanding lease rentals, and out of scope costs incurred by the Plaintiff. The Plaintiff has proved that the 1st Defendant owed the same in rental arrears and it is accordingly awarded to the Plaintiff. 12. Clause 18.1 of PEX23 provides that “in respect of any amount due but unpaid you must pay to us on demand interest at the overdue rate the applicable rate shall be advised in the relevant rental schedule.” Clause (e) of PE1 provides that “the overdue rate of interest shall be advised from time to time.” Both provisions allow the Plaintiff to determine the rate of interest to charge for overdue payments. Therefore, they form the basis upon which the Plaintiff can charge USD 71,684.82 (United States Dollars Seventy One Thousand Six Hundred Eighty Four and Eighty Two Cents) as interest on delayed payments. Pursuant to the above provisions, the Plaintiff’s claim for interest is justified and is accordingly awarded as claimed. 13. Under clause 11.1 of the rental agreement (PE1), the Plaintiff had the discretion to terminate the contract in case of breach of any essential term specified in clause 9.1, which included paying all rental instalments on time. When the 1st Defendant failed to pay the rentals, the Plaintiff terminated the contract in PE14 dated 15th October, 2016 to the director of the 1st Defendant at page 119 to 120 of the Plaintiff’s trial bundle. In this notice of termination, the Plaintiff demanded that the vehicles are retuned, 100% of the remaining lease rentals from the date of termination was paid and any early repayment or other break costs incurred by the Plaintiff or a secured or financing party or the owner of the vehicle was paid. This was in line with the provisions clause 11.3 of PE1. 14. According to PW1 and the PE8, the total amount for the remaining months was USD 778,757.95 (United States Dollars Seven Hundred Seventy Eight Thousand Seven Hundred Fifty Seven and Ninety Five Cents). Pursuant to clause 11.3 of PE1, the Plaintiff has proved that it had the basis to charge this money it is accordingly granted. 15. I now turn to the Ug. shs. 76,155,250.60 (Uganda Shillings Seventy Six Million One Hundred Fifty Five Thousand Two Hundred Fifty and Sixty) claimed as out of scope services performed on the leased vehicles and equipment. Pursuant to clause 13.1 of PE1, the 1st Defendant had an obligation to return the leased vehicle and equipment in good working condition with no abnormal leaks of engine/transmission, at least 6 months future life span within good working condition of exhaustible parts, tires within at least 45% tread, Electrical connections and gadgets in fine working order and with sound connections, engine in good working order and repair of all dents, holes and damages. 16. It was PW1’s evidence that the amount claimed for out of scope services included costs incurred in repairs, service of the vehicles which included hard body double cabin pickups registration Nos. UAT 784N, UAT 845N, UAT 777N, UAT 707N, UAT 946N, UAT 709N, UAT 718N, UAT 945N, UAT 459Q, UAT 457Q, UAT 947N, UAT 192Q, UAT 645Q, UAT 460Q, UAT 138Q, UAT 698Q and UAT 716N. 17. Though PE8 gave a breakdown of how much each vehicle took to repair, the Plaintiff did not adduce evidence proving that the repairs were done. The Plaintiff did not also adduce any other evidence to substantiate its claims regarding the out of scope services but only apportioned figures to each vehicle. Considering the amount of money claimed by the Plaintiff, I am of the considered opinion that it did not discharge the burden of proving that it incurred the said sum in repairs and service. Although I am aware that such costs can be proved by oral evidence, I am inclined to believe that Plaintiff at least must have engaged either its mechanical department or a third party to repair and service the vehicles. For such engagement, there must have been some documentary evidence especially given the costs the Plaintiff alleges to have incurred during these repairs. I have found that the Plaintiff did not prove that on a balance of probabilities, these costs were incurred. I will therefore decline to award the same. 18. On the basis of the above, it is my finding that the 1st Defendant owed the Plaintiff sum USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty Three Thousand Seven Hundred Sixty Five and Ninety Three cents) being unpaid rentals, interest and early termination costs.

**Liability of the 2nd and 3rd Defendants**

1. The Plaintiff holds the 2nd and 3rd Defendants liable for the amounts owed by the 1st Defendant by virtue of PE4 a corporate guarantee of the 2nd Defendant dated 2nd July 2014 at pages 96 to 98 of the Plaintiff’s trial bundle and PE5 a personal guarantee of the 3rd Defendant dated 13th June 2013 at pages 99 to 100 of the Plaintiffs trial bundle. Both these guarantees provide the law of Uganda as tenh applicable law under clause 3. 2. PE4 executed between the 2nd Defendant and the Plaintiff under clause 1 provides as follows: 1. that, with or without notice or demand, the undersigned shall make payment for any amount due and owing from the lessee that remains unpaid under the lease agreement as per the rental schedules indexed V-Strogen 1021/06/2014, 1022/06/2014 and V-Strogen 1023/06/2014 respectively. That the Guarantee shall immediately crystalize upon a demand letter being issued by the lessor in connection with any of the liabilities of the Borrower or the collection thereof, seven days from the due date. 2. The guarantor guarantees the lessor the entire value of the lease transactions between the lessor and the lessee, with amounts decreasing with each subsequent lease instalment received from the lessee during the lease tenure. Such amounts shall be stipulated in the respective rental schedules per asset. 3. That this guarantee is a continuing guarantee and shall remain in full force and effect irrespective of any interruptions in the business relations of the parties herein. 4. The guarantor’s obligations hereunder are absolute and unconditional, present and continuing, unlimited constitute a guarantee of payment and performance and not a guarantee of collection and shall remain in full force and until the performance in full of the Lessor’s obligations under the lease. 5. Termination of this guarantee shall only be upon maturity of the lease upon completion of the lessee’s obligations under the lease. Notice shall be given in writing terminating this guarantee with respect to all liabilities of the borrower incurred or contracted by the borrower or acquired by creditor after the date on which such notice is so delivered or received.” 3. PE5 executed between the 3rd Defendant and the Plaintiff had similar terms except for clause 1.4. pursuant to the above guarantees, there was an undertaking by the 2nd and 3rd Defendants to be unconditionally liable for any amounts accruing under the lease to the Plaintiff. Indeed, PE9 and PE10 at pages 110 to 113 of the trial bundle were calls made on the guarantees dated 15th November 2016. In reply thereto, Mr. Vinayak Limaye Sr. Finance and Audit Manager on behalf of the 2nd Defendant vide a letter dated 24th November 2016 exhibited as PE10 at page 114 stated thus:

“…We have been leasing with VAELL since last few months on various options of paying them the outstanding balances of lease charges. Kindly be known that the project under Strogen, for which the vehicles were leased from VAELL, ended be Dec 2015; since then we had no business in Strogen. However, the infrastructure & vehicles leasing arrangements set for Strogen had to be continued for the overrun period & finally we concluded to suspend business of Strogen by July 2016. However, this has the liability of huge standing overheads on Stroegn, but with no funds available for reasons explained.

Since we stand as corporate Guarantor to Strogen, the liability is being transferred to us. Since all of us are aware that overall market in Uganda has been rolling in year 2016 extremely low, which has severely affected the cash flow of our company as well due to substantially reduced turnover in 2016 as par with many others in the country.

To conclude, the only available option with us is to pay off the overdue balance of VAELL from the surplus which will be generated from our future businesses. We, therefore, wish to propose as under:

* + - 1. We should reach to a finally reconciled figure as of 31st Dec 2016 as outstanding balance of VAELL by 15th Dec 2016. 2. This amount should be blocked and we propose to pay the same in 36 monthly instalments commencing from 15th Jan 2017. Necessary agreement for the same shall be entered into, during 15th Dec 2016 to 24th Dec 2916.”

1. The above excerpt of the letter (PE10) is an admission of culpability of the 2nd Defendant as a guarantor. The evidence highlighted above proves that both the 2nd and 3rd Defendants are liable to repay the monies owed to the Plaintiff by the Defendant. It follows therefore that all the Defendants are severally and/or jointly liable to the Plaintiff. This issue is resolved in the affirmative.

**Issue two- remedies available**

1. The Plaintiff prayed for USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty-Three Thousand Seven Hundred Sixty Five and Ninety Three Cents) being outstanding rentals, interest on the rentals and early termination costs. The Plaintiff also claimed Ug.shs. 76,155, 250.62 (Uganda Shillings Seventy Six Million, One Hundred Fifty Five Thousand Two Hundred Fifty and Sixty Two Cents) as out of scope costs incurred on the hired assets, interest on the amounts due and outstanding, general damages and costs of the suit.” 2. Since I have found that the Plaintiff is owed USD 433, 323.15 as the outstanding amount in lease rental arrears; USD 778,757.95 being the future rentals payable and USD 71,684.82 as the interest on each delayed lease rental schedule, the Plaintiff is awarded a total sum of USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty Three Thousand Seven Hundred Sixty Five and Ninety Three Cents) being outstanding rentals, interest on the rentals and future rentals payable. 3. For reasons stated above I have declined to award the Ug.shs. 76,155, 250.62 (Uganda Shillings Seventy Six Million, One Hundred Fifty Five Thousand Two Hundred Fifty and Sixty Two Cents) as out of scope costs incurred on the hired assets. 4. The Plaintiff also prayed for General damages. it is trite law that general damages are awarded at the discretion of court and are intended to compensate the Plaintiff for the injury suffered. It was PW1’s evidence that the Plaintiff got financing from the bank so as to acquire the assets leased to the 1st Defendant. Indeed exhibits PE 18 to PE 22 prove this facts. Due to the failure by the 1st Defendant to remit its monthly rentals, the Plaintiff was also unable to service the loan and had to go through the process of refinancing its loan with NC bank. For the financial detriment caused, the Plaintiff deserves compensation. Given the amounts involved and the suffering caused, I will award the Plaintiff general damages of Ug.shs. 30,000,000/=. 5. The Supreme Court in **Omunyokol Akol Johnson v. Attorney General Civil Appeal No. 06 of 2012,** held that, “it is well settled that the award of interest is in the discretion of the Court. The determination of the rate of interest is also in the discretion of the Court….” Since this was a commercial transaction, it is only fair that an interest at a commercial rate is awarded to the Plaintiff. I will therefore award interest on the rentals due at 8% per annum from the date of this judgment till payment in full. The Plaintiff is also awarded costs of the suit. 6. Based on the above, the Plaintiff’s suit succeeds with the following orders:

The Plaintiff is awarded USD 1,283,765.93 (United States Dollars One Million Two Hundred Eighty-Three Thousand Seven Hundred Sixty Five and Ninety Three Cents) being outstanding rentals, interest on the rentals and future rentals payable.

Interest on (i) above is awarded at 8% per annum from the date of this judgment till payment in full.

The Plaintiff is awarded general damages of Ug.shs. 30,000,000/= (Uganda Shillings Thirty Million).

The Plaintiff is also awarded costs of the suit.

It is so ordered.

**CORNELIA KAKOOZA SABIITI**

**JUDGE**

Date: 19th April 2024