5 THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

CIVIL SUIT NO. 0589 OF 2019

DAMUCO INVESTMENTS LTD. :::::::::::::::::::::::::::::::::::::::::::::::::::: PLAINTIFF

10 VERSUS

OPPORTUNITY BANK (U) LTD. :::::::::::::::::::::::::::::::::::::::::::::::::: DEFENDANT

BEFORE HON. LADY JUSTICE HARRIET GRACE MAGALA

JUDGMENT

Background

15 On the 7th day of March 2018, the Plaintiff and the Defendant executed two
contracts i.e. one for construction of fifteen Automatic Teller Machines
(hereinafter referred to as ATMs) rooms and the second for painting of the
Defendant’s branches. The contract for construction and installation of ATMs
was later varied by an Addendum dated 5th June 2018.

20 Later, the Defendant through a notice terminated the contract for installation
of the ATMs based on failure by the Plaintiff to meet the contractual timelines.
The Plaintiff sued for recovery of the special damages to the tune of Ugx
112,253,237.09/-, general damages for breach of the two contracts, interest
and costs of this suit.

Page 1 of 23
 5 The Defendant denied the allegations and counterclaimed for special damages
to the tune of UGX 122,281,063.68 being the contractual penal fee, special
damages of UGX 101,454,432/-, general damages and interest, and costs of the
counterclaim.

Representation

10 The Plaintiff was represented by Mr. Richard Mulema Mukasa of M/s KSMO
Advocates while the Defendant was represented by Mr. Phillip Kasimbi of
Okalang Law Chambers, Advocates and Legal Consultants.

Hearing and Evidence

At the hearing, the Plaintiff led evidence through its Managing Director,
15 Kirabira Collins as PW1, Kawuma Drake as PW2, Semuko Allan as PW3 and
Moses Sebyala Kiwanuka as PW4.

The Defendant/Counter-claimant led evidence through one witness, Concilie

Uwodukunda as DW1 who was at the time of the hearing the Procurement and
Administration Manager of the Defendant.

20 The Plaintiff relied on the following documents:

a) A copy of the ATM rooms construction contract dated 7th March 2018
marked as PEXH.1;
b) A copy of the painting contract dated 7th March 2018 marked as PEXH.2;
c) A copy of the amended ATM rooms construction agreement dated 5th
25 June 2018 marked as PEXH. 3;
d) A Copy of Notice of termination dated 23rd July 2018 marked as PEXH. 4;
e) Minutes of the meeting between the Plaintiff and Defendant dated 28th
May 2018 marked as PEXH. 5;

Page 2 of 23
 5 f) A copy of the response to the Notice of termination dated 6th August
2018 marked as PEXH. 6;
g) Pre-bargain proposal dated 28th August 2018 marked as PEXH.7;
h) Minutes of the meeting between the Plaintiff and the Defendant dated
6th September 2018 marked as PEXH. 8;
10 i) Minutes of the meeting dated 19th October 2018 marked as PEXH. 9;
j) A copy of the Plaintiff’s letter requesting payments dated 17th October
2018 marked as PEXH. 10;
k) A copy of the assessment report dated 24th September 2018 marked as
PEXH. 11;
15 l) A copy of assessment report dated 5th April 2019 marked as PEXH. 12;
m) The Notice of intention to sue dated 18th December 2018 marked as
PEXH. 13;
n) The Defendant’s response to the Notice of intention to sue dated 10th
June 2019 marked as PEXH. 14;
20 o) A Status Report dated 24th April 2018 marked as PEXH.15;
p) A Letter requesting for 20% advance dated 2nd May 2018 marked as
PEXH. 16;
q) Correspondences by email between the Defendant and the ATM service
provider marked as PEXH.17;
25 r) A Pictorial report at partial handover inspection for the ATM works dated
21st September marked as PEXH. 18; and
s) Receipts for the extra expenses/costs incurred by the Plaintiff marked as
PEXH. 19

The Defendant/ Counter-claimant adduced and relied on the following

30 documents as evidence at the trial:

Page 3 of 23
 5 a) A Copy of the Plaintiff’s bid marked as DEXH.1;
b) A Copy of a bid from Vector (U) Ltd marked as DEXH.2;
c) A Copy of a bid from Legend Ltd marked as DEXH.3;
d) A Copy of the ATM room construction contract marked as DEXH.4;
e) A copy of the contract to paint marked as DEXH. 5;
10 f) A copy of the addendum to the construction contract marked as DEXH. 6;
g) A copy of the termination notice marked as DEXH.7;
h) A copy of the contract between the counter-claimant/defendant and the
new service provider for 5 ATM sites that the counter defendant failed to
complete marked as DEXH.8; and
15 i) A copy of the contract between counter-claimant and new service
provider for the completion of works on 9 ATM sites that the counter-
defendant failed to complete as DEXH.9.

The parties’ respective counsel filed written submissions which have been
considered and shall be referred to in this judgment.

20 Issues

The parties filed their joint scheduling memorandum and framed the issues
below for determination as:

1. Whether the Defendant breached the two construction contracts dated

7th March 2018 for construction of ATM rooms and painting of the
25 Defendant’s branches?
2. Whether the Plaintiff/Counter defendant is liable on the counterclaim?
3. What remedies are available to the parties.

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 5 Determination

1. Whether the Defendant breached the two construction contracts dated

7th March 2018 for construction of ATM rooms and painting of the
Defendant’s branches?

It was an agreed fact between both parties that they executed two contracts
10 dated 7th March 2018. It was alleged by the Plaintiff that the Defendant
breached these contracts unilaterally by terminating the construction of the
ATM Rooms contract and made it impossible for the contracts to be performed
due to hardships.

The Defendant denied the allegations and counter claimed that it was the
15 Plaintiff who breached the contract.

It is trite that the standard of proof in civil cases is on a balance of probability,

and the burden of proof in civil cases lies on he/she that alleges the existence of
facts and seeks judgment on any legal right or liability those facts. In the case of
Kabaco (U) Ltd Versus Turyahikayo Bonny HCCS No. 0014 of 2021, Hon. Justice
20 Wagona Vincent observed that:

“Whereas the legal burden solely lies upon the plaintiff and does not shift,
the evidential burden keeps shifting depending on the facts alleged by either
side.”

A breach of contract has been defined in Meridiana African Airlines (U) Ltd
25 Versus Avma Spares (EA) Ltd HCCS No. 111 of 2017 as:

“a violation of any of the agreed-upon terms and conditions of a binding

contract, and this includes circumstances where an obligation that is stated
in the contract is not completed on time. It is a failure, without legal excuse,

Page 5 of 23
 5 to perform any promise that forms all or part of the contract.” (Emphasis
added)

Under Section 33 of the Contracts Act, 2010, the parties to a contract shall
perform or offer to perform, their respective promises, unless the performance
is dispensed with or excused under this Act or any other law. As observed in
10 Kabaco (U) Ltd Versus Turyahikayo Bonny (supra), where a contract sets out a
bundle of promises to be performed by either party to it, in the event the same
are not performed as per the terms of the contract without any justification as
provided for under that contract, a party at fault is said to have breached the
contract. However, a party who alleges breach of a contract must have fully
15 performed his/her bargain of the contract. A party who is the cause of the
breach or whose failure to perform his or her obligations partly led to the
breach cannot competently sustain a claim for breach of contract.

In the matter before court, the conflict arose from the termination of the ATM
rooms construction contract by the Defendant (see PEXH.4). The reason for
20 termination was failure by the Plaintiff to finish the works agreed to be done
within the time stipulated. It was contested by the Plaintiff through PW4 that
the two agreements in question lacked clarity by providing two timelines i.e.
clause 3 providing six months and clause 8 providing for fifteen days of
completion of the works. Counsel for the Plaintiff argued that this Court should
25 apply the contra proferentem rule and construe these clauses against the
Defendant.

However, on record there is DEXH. 6, which is an Addendum to the Agreement

for construction of 15 ATM Rooms at the Defendant’s designated branch sites.
DEXH.6 under Recital ‘B’ recognizes that the contract was scheduled to run for
30 a period of two weeks starting 7th March 2018, and under ‘C’ that the
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 5 Contractor had exceeded the agreed schedule for completion of the works and
therefore under ‘D’ the contractor had faced working capital constraints as the
major cause of delay in completing the above works and requested for an
advance from the second installment of the contract price to complete the
works.

10 The Plaintiff and the Defendant agreed that under clause 2 of the Addendum,
all the pending works shall be completed within fifteen days from the date of
execution of the Addendum. The Plaintiff signed this Addendum and does not
deny this throughout its evidence. By signing this Addendum, the parties had
defined the period within which to complete the works and thus amended or
15 overrode the earlier agreed terms relating to the period of execution of the
works earlier agreed; which then made time of the essence. The Plaintiff in the
Addendum acknowledged that it was out of time for completion of the works
i.e. within fifteen days under clause 8 of the Contract for construction of 15
ATM Rooms. It is now estopped from seeking to rely on clause of 3 of the
20 former contract, which, by virtue of the Addendum was amended.

According to Treitel, The Law of Contract 12th Edition at 917, where time is of
essence under a provision clause in the contract, that clause is a condition and
any failure to perform such a stipulation justifies termination, unless if the failure
is justified by a lawful excuse.

25 Additionally, DEXH.6 extended the time of completion of the construction of

the works within fifteen days with effect from the 11th day of June 2018. The
ATM construction contract between the parties herein had terminated on the
25th June 2018 by lapse of time since time was of the essence. This discharged
the parties to the contract. This was then followed by PEXH.4/DEXH.7 from the
30 Defendant which terminated the contract of the construction of the ATM
Page 7 of 23
 5 Rooms on the 23rd day of July 2018 which was after the expiration of the period
for the completion of the works as agreed upon by the parties.

It was the persistent testimony of the Plaintiff that it faced hardships in the
execution of the contract such as delay in delivery of the ATM machines by the
service provider, Sybyl that was contracted by the Defendant; and lack of
10 effective communication and supervision between the officers of the
Defendant. As seen from the evidence of PW1 and PW2, this lack of effective
communication and supervision by the Defendant and its staff would lead to
denial of and failure by the Plaintiff to access to the Defendant’s branches. The
Defendant had also not processed construction and or renovation permits from
15 area local authorities in some branches. In other instances, the structure set up
of the various branch premises required more time than what was given by the
defendant.

The above complaints by the Plaintiff notwithstanding, the court record shows
that the Plaintiff’s Director and the Defendant’s officials met on the 28th May
20 2018 with the sole purpose of discussing the pending works by the Plaintiff and
finding a way forward as seen from PEXH.5. The Plaintiff updated the parties
among others about the causes of the delays to include lack of coordination
with team players like Sybyl, Budecore, landlords and bank staff; the scope of
the work was larger than what had been anticipated and as well as the inflation
25 rate that went higher during the execution of the contract. The Plaintiff then
requested for funding of Ugx. 35,000,000/- from the contract price. It was then
resolved under minute 6/28/5/18 that the Defendant advances Ugx.
35,000,000/- to the Plaintiff from the contract price to enable completion of
the remaining works and the works to be completed within fourteen days from
30 the date of the release of the funds.

Page 8 of 23
 5 This meeting then led to DEXH.6. This Addendum extended or specified the
time for completion of the works. It did not create any new obligations for the
Defendant save for advancing the agreed sums to the Plaintiff.

In my considered opinion, the Addendum resolved the concerns of the Plaintiff.

That is why after its execution, it went ahead to perform the contract. It
10 remains baffling why the Plaintiff did not have the other concerns addressed in
the Addendum or why its director signed the addendum when its concerns had
not been fully addressed.

The Plaintiff adduced no proof that after the extension of the contract, it faced
the same or further constraints in the execution of the contract or that
15 communication of the challenges was made to the Defendant. In fact, during
re-examination, DW1 clarified that the Defendant never received any
communication from the Plaintiff that they could not access the premises.

To say that the Defendant breached the contract, these challenges must be
attributed to the Defendant and must have arose out of failure by the Defendant
20 to honor any of the obligations specified in the contract or addressing the alleged
challenges faced by the Plaintiff; which is not the case here.

According to the evidence on record, the Plaintiff’s major challenge was

financing due to the raise of the cost of materials amongst others things that was
experienced during the execution of the contracts. The cost of executing the
25 contracts turned out to be much higher than what was either anticipated and or
budgeted for.

Page 9 of 23
 5 Whereas there were assertions by the Plaintiff that it was headhunted, the
Plaintiff did not dispute DEXH.1, DEXH.2 and DEXH.3. The Defendant adduced
evidence that there were other bidders vide DEXH.2 and DEXH.3, but the
Plaintiff was awarded the contract. I believe the Plaintiff was awarded the
Contract after they turned out as the best evaluated bidder. This therefore
10 implies that the Plaintiff responded to a bid from the Defendant vide DEXH.1
and quoted what it thought as a seasoned and experienced entity believed was
the proper cost of fully executing the works. The parties then executed the
respective contracts. The Plaintiff at execution never contested the contractual
sum but later cried foul because of the high costs and extra expenses incurred
15 during the execution of the works. I have had the opportunity and scrutinizing
both contracts and found that the Plaintiff given their vast experience as
testified by PW1 did not have the mind to budget for contingencies when she
quoted for the work and prior to the execution of the Contracts. Depending on
whether the contract is admeasured or not, contingency is about plus or minus
20 10% of the contract price 18 % VAT exclusive. This caters for expenses for on
spot or unforeseen items. These funds do not belong to the contractor but
rather the project owner and disbursed upon being requested for and justified
by the contractor.

It is therefore my finding that the Plaintiff quoted for the job and later failed to
25 perform the contracts within the stipulated time.

The contract for the construction of ATM rooms and installation of ATM was
discharged by lapse of time. Although from the record, the Plaintiff continued
to stay on the premises of the Defendant after the expiry of the contract and
the Defendant sent the termination notice after the time period had expired, I
30 cannot find this conduct to amount to waiver of the limitation of time of

Page 10 of 23
 5 performance as it was held in the case of M and B Engineers Ltd Versus UNRA
and another CACA No. 316 of 2021, that:

“to release or waive a right of action or interest in property, legal or

equitable, requires an express or implied agreement of the person entitled
to that right. Where the agreement is express, it has to be under seal or
10 supported by valuable consideration. An implied agreement, if acted upon
by the other party, would operate on the principle of estoppel”.

Relying on the above case, I find that there was no express agreement to the
same and nor was there a request made by the Plaintiff for such. Further there
was no inference through conduct of the Defendant of any waiver or release as
15 to time of performance.

Regarding the contract for the painting of the branches(PEXH2), I found no

evidence on record that it was terminated by the Defendant. PEXH.4 only
terminated the ATM installation and ATM room construction contract.

DW1 during cross examination averred that she received no communication

20 from the Plaintiff that they had been denied access to the premises. The two
contracts were not intertwined with each other and could be executed
separately. Thus the argument advanced by the Plaintiff that the termination of
the latter terminated the former is frail.

Therefore, the first issue is answered in negative.

25 2. Whether the Plaintiff/Counter defendant is liable on the counterclaim?

The claim against the Counter-defendant/Plaintiff as seen from the

counterclaim is for breach of contract, contractual interest, special damages
and general damages.

Page 11 of 23
 5 I have observed that the Counter-defendant’s reply to the counterclaim
includes general denials. It is trite that a defence that is based on general and
evasive denials must be rejected. The defence must set out the answer and
particulars responding to each allegation (see Order 6 rule 8 of the Civil
Procedure Rules as amended). In addition to the provisions of the statute law,
10 Mulla The Code of Civil Procedure 16th Edition Volume 2, at pages 1965 &
1966, it was stated that:
“The Defendant must take each fact which is alleged against him
separately, and say that he admits it, or denies it or does not admit it. ‘It
is not merely denial which is meant, but the rule covers non-admission,
15 for [the defendants] is to deal specifically with every allegation of fact he
does not admit the truth. Every allegation of fact in the plaint will be
taken to be admitted if it is not denied specifically or by necessary
implication or stated to be not admitted.

Where a defendant denies an allegation of fact in the plaint, he must not

20 do so evasively, but answer the point of substance.

Therefore, since a counterclaim is a separate suit, the reply to the counterclaim

is a written statement of defence and, in this case the defense being evasive, is
hereby struck out.

This leaves the Counterclaim uncontested. However, the Counter-claimant must

25 prove its case on the balance of probabilities to this court.

Counsel for the Counter-defendant urged this Court to find that the Counter-
claimant has failed to adduce evidence to prove its claims against the Counter-
defendant that there was no evidence of breach. But the pleadings of the
Counter-claimant clearly state the alleged breach and further the

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 5 Plaintiff/Counter -defendant admitted during the hearing that it did not
complete the works on time.

Additionally, counsel for the counter-defendant submitted that the counter-

claimant breached the contracts by its conduct and cannot benefit from its
wrong. He supported this argument with the maxim of equity that he who
10 comes to equity must come with clean hands and not benefit from his or her
omission or commission.

However, counsel for the Counter-claimant argued that Section 46 of the

Contracts Act 2010 provides for reciprocal promises. That the Counter-
defendant had promised to complete the works within fifteen days by signing
15 the contract but then failed.

In the case of Charles Richards Ltd. Vs. Oppenheim [1950] ALL E.R 420, Lord
Denning observed that although the buyer extended the time for delivery of
the goods, still the buyer reserved the right to rescind the contract and there
was no waiver of such right.

20 According to DEXH.6, the Counter defendant agreed to complete the works

within fifteen days from the date of the execution of the contract but then
failed to meet its obligations under the contract. As earlier observed, a breach
of contract occurs where a party to a contract fails to execute an agreed
obligation under a contract without a lawful excuse. The Counter defendant
25 failed to honour its commitments under the contract within time.

This court therefore finds that the Counter defendant is liable to the
Counterclaimant for breach of contract.

Page 13 of 23
 5 3. What remedies are available to the parties.

Remedies sought by the Plaintiff/ Counter- defendant

(a) The Plaintiff prayed for a declaration that the Defendant breached the
two contracts dated 7th March 2018.

I have found that the first contract for construction of ATM Rooms and
10 installation of ATMs had been discharged by lapse of time and as well as the
breach by the Plaintiff/counter-defendant. The second contract of painting the
branches of the Defendant was never terminated by the Defendant. Hence the
declaration that the Defendants breached the contracts is hereby denied.

Rather, this court finds that the Plaintiff/Counter-defendant breached the two
15 contracts by not honoring its obligations under the contracts.

(b) The Plaintiff prayed for Ugx. 112,253,237.09/- being special damages, as
particularized under paragraph six (6) of the Plaint.

The Plaintiff did not execute the contract as agreed with the Defendant. The
Plaintiff does not dispute receiving an advance payment of Ugx. 35,000,000/-
20 from the contract price to complete the works.

Further, the two assessment reports of the works i.e. one dated 24th
September 2018, PEXH. 11 and another dated 5th April 2019, PEXH. 12 were
contested by the Defendant through DW1. Whereas PEXH. 11 is not signed by
the Defendant, and the defendant contests it, it is a report signed by the
25 consultant and addressed to the Defendant, this court can rely on it. The report
indicates that nine out of the fifteen ATMs works had been 87% completed and
the works on six ATMs were pending.

Page 14 of 23
 5 It is also not disputed that the Plaintiff received Ugx. 63,528,813.91/- from the
Defendant to do the works. According to PEXH.1, the cost of constructing each
ATM room was agreed to as Ugx. 6,368,801/-. This figure multiplied by 9 ATM
Rooms comes to Ugx. 57,319,209/- leaving a balance of UGX 6,209,604/- owing
to the Defendant, notwithstanding the fact that the works were 87% complete.

10 The final report PEXH.12 was not signed by its author, a one Jude Rogers Asiimwe
and neither was it signed by any of the parties mentioned therein. Therefore, its
authenticity and reliability can be challenged.

Additionally, it was agreed to in the meeting held on 6th July 2018 that the
Plaintiff had not completed works on Hoima, Mayuge, Mityana, Iganga, Mbale
15 and Park View branches and they were to be assigned to another contractor.

I therefore find no justification to award the Plaintiff a sum of Ugx.

112,253,237.09/- as special damages.

(c) Additional expenses

The Plaintiff claimed sums for additional expenses on the contract yet the
20 contractual prices were set in the respective contracts. These terms were
reduced in writing. They should have only been altered or changed or adjusted
through writing and / or with the consent of both parties. The additional
expenses incurred by the Plaintiff were done on its own volition by
underestimating the works and incurring them without the consent of the
25 Defendant. As such, blame should not be attributed to the Defendant.

Page 15 of 23
 5 (d) Other remedies sought by the Plaintiff

The rest of the remedies sought by the Plaintiff were subject to the success of
their claim for breach of contract by the Defendant, which has been
unsuccessful.

Remedies sought by the Defendant/Counter-Claimant

10 (a) A declaration that the counter-defendant breached both contracts dated

7th March 2018.

This court as seen above has already found that the Counter-defendant
breached the two contracts by not fulfilling its obligations set out in the said
Contracts. The prayer is thus granted.

15 (b) An order that the counter-defendant pays Ugx. 122,281,063.68/- being

contractual penalty fee of 1% per day on the ATM rooms construction
contract from 21/06/2018 till 26/10/2018 (122 days) when the works
were completed.

Under Clause 2.2 of DEXH.6, the parties agreed that the counter- claimant shall
20 impose a penalty of 1% of the total contract sum every day that the works
remain outstanding upon the expiry of the time frame agreed. The said
provision was agreed to by both parties in the Addendum to the contract by
appending their signatures thereon. There is nothing on the Court Record that
shows that said clause was contested by the Plaintiff/Counter-Defendant. This
25 court is therefore bound to respect and enforce the freedom of contract as
between the parties. This was an agreement that was freely executed between
the Parties within the meaning of sections 10 and 13 of the Contracts Act of
2010.

Page 16 of 23
 5 Clause 2.2. of DEXH.6 appears to be a penalty clause. A penalty clause has been
defined by the United Kingdom’s Supreme Court in Cavendish Square Holding
BY v Talal El Makdessi, and ParkingEye Ltd v Beavis [2015] UKSC 67. The Court
quoted Lord Diplock in Scandinavian Trading Tanker Co AB Y Flota Petrolera
Ecuatoriana (The “Scaptrade”) [1983] 2 AC 694 where he stated that:

10 “The classic form of penalty clause is one which provides that upon breach of
a primary obligation under the contract a secondary obligation shall arise on
the part of the party in breach to pay to the other party a sum of money which
does not represent a genuine pre-estimate of any loss likely to be sustained
by him as the result of the breach of primary obligation but is substantially in
15 excess of that sum. The classic form of relief against such a penalty clause has
been to refuse to give effect to it, but to award the common law measure of
damages for the breach of primary obligation instead.’ (Emphasis is mine)

To determine if a clause is a penalty clause, Lord Dunedin in Dunlop

Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd (Dunlop) [1915] AC
20 79 espoused four tests to be considered i.e. the first is that, a sum that is
extravagant or unconscionable when compared to the greatest loss likely to
be proved from breach is a penalty; secondly, where the breach is a failure to
pay, a sum that is greater than the amount that was originally required to be
paid will be a penalty; thirdly, a sum that is required to be paid in response to
25 several different breaches that cause differing extents of damage is a penalty;
and finally, a sum is not automatically a penalty simply because precise pre-
estimation is not possible.

I find the above cases instructive in determining whether the Order sought by
the Defendant/ Counter-Claimant should be granted or not.

Page 17 of 23
 5 In addition to the above case law, Section 62(1) of the Contracts Act
operationalizes penalty clauses in contracts. It states that:

“Where a contract is breached, and a sum is named in the contract as the

amount to be paid in case of a breach or where a contract contains any
stipulation by way of penalty, the party who complains of the breach is
10 entitled, whether or not actual damage or loss is proved to have been
caused by the breach, to receive from the party who breaches the contract,
reasonable compensation not exceeding the amount named or the penalty
stipulated, as the case may be.” (Emphasis added)

In the case of Deluxe Enterprises Ltd V Uganda Leasing Co. Ltd CACA No. 13 of
15 2004, Hon. Justice Egonda Ntende, JA observed that penalties are enforceable
by virtue of Section 62 of the Contracts Act but what is prohibited is the
innocent party receiving an amount exceeding the amount named in the
penalty stipulated.

In the case before court, the penalty fee is a percentage figure accruing per day
20 of failure to finish the works from 21st June to 21st October 2018.

The penalty of 1% of the contractual sum per day of non-completion comes

down to Ugx. 101,454,432/-. The Defendant/ Counter- Claimant is hereby
awarded a sum of Ugx. 101, 454, 432 as a penalty fee due and payable to it by
the Plaintiff.

25 (c) special damages to the tune of Ugx 101,454,432/-.

The 9th Edition of the Black’s Law Dictionary defines special damages as
damages that are alleged to have been sustained in the circumstances of a

Page 18 of 23
 5 particular wrong. It is trite that special damages must be specifically pleaded
and proved.

The Counter-claimant pleaded that the special damages arose out of the
advance payment to the counter defendant to execute the works on 15 ATMs of
Ugx. 63,528,813.91/-, engaging another contractor to complete the works on 9
10 ATM Rooms at a cost of Ugx. 65,000,000/-, engaging another contractor to
execute works on the 5 ATM rooms at a cost of Ugx. 68,457,700/-. The counter-
claimant attached contracts of new contractors to execute the works, i.e. DEXH.8
and DEXH.9, which are contracts between the counter-claimant and the new
contractor i.e. Legend Consultancy Uganda Ltd for installation and construction
15 of the 5 ATM rooms at branches, and completion of civil works on 9 ATM rooms
at the designated branches thereunder. These documents were not contested
by the counter-defendants.

On record PEXH. 11 shows that nine out of the 15 ATM Rooms were 87%
completed. I have already indicated above that out of the Ugx. 63,528,813.91/-
20 that the Counter-Defendant received from the Counter-Claimant, the nine
completed ATMs rooms were an equivalent of an amount totaling to Ugx.
57,319,209/- leaving a balance of UGX 6,209,604/- owing to the Counter
claimant. Therefore the counter-claimant is entitled to a refund of UGX
6,209,604/- being the balance of the advance payment.

25 Regarding the claim for special damages upon engaging a new contractor to
execute the pending works, the counter-claimant adduces only contracts
executed with the new contractor but does not adduce evidence to prove the
expense of the special damages. Whereas the contracts indicate engagement
with the new party, there is no proof on record that Defendant disbursed this
30 sum. It cannot be imputed or implied. There is no proof or particularizing of
Page 19 of 23
 5 what the remaining works were and how much was spent on them. Mere
entering into or signing a contract does not indicate performance or incurring
of the expense in as far as a claim for special damages is concerned.

This court would therefore award only Ugx. 6,209,604/- that is owing to the
counter claimant on the earlier disbursed sum to the counter defendant, as the
10 proved special damages.

(d) General damages

General damages are awarded at the discretion of the court to compensate the
claimant for the loss and inconvenience suffered arising out of the breach of
the contract. The intention of the award is to restore the claimant to the
15 position it was before the breach occurred.

On record, the Counter-claimant led no evidence of any loss or inconvenience

suffered by the breach. There is therefore no justification for award of the prayer.
In any case, the penalty fee awarded earlier is sufficient to compensate the
counter-claimant.

20 (e) Interest at a rate of 25% per annum on the special damages and general
damages.
I find section 26 (2) of the Civil Procedure Act instructive on interest rate to be
applied. It states that:

“Where in so far as a decree is for the payment of money, the court may,
25 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

Page 20 of 23
 5 interest at such rate as the court deems reasonable on the aggregate
sum so adjudged from the date of the decree to the date of payment or
to such earlier date as the court thinks fit”.

In the case of Premchandra Shenoi & Anor – vs – Maximov Oleg Petrovich,

Supreme Court Civil Appeal No. 9 of 2003 Oder, JSC (RIP) in his lead judgment
10 held that:

“In considering what rate of interest the Respondent should have been
awarded in the instant case, I agree that the principle applied by this
court in Sietco vs Noble Builders (U) Ltd. SCCA No. 31 of 1995 to the
effect that it is a matter of the Court’s discretion is applicable. The basis
15 of awards of interest is that the Defendant has taken and used the
Plaintiff’s money and benefited. Consequently, the Defendant ought to
compensate the Plaintiff for the money. In the instant case the learned
Justices of Appeal rightly in my opinion, said that the appellants had
received the money for a commercial transaction. Hence the court rate of
20 6% was not appropriate…”

In the case before court, the Defendant is a business that has been denied use
of money since 25th June 2018 when the contract on the construction of the
ATM rooms lapsed. I have been guided by the above authority (Premchandra
Shenoi & Anor. Supra) and hereby award the Plaintiff interest (simple) on Ugx
25 6,209,604/- at a rate of 17% per annum from the 25th June 2018 until payment
in full.

(f) Costs of the suit

The general rule is that costs follow the cause, unless the court finds reason to
order otherwise.

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 5 Section 27(1) of the Civil Procedure Act, Cap 71 states that:

“Subject to such conditions and limitations as maybe prescribed, and to the

provisions of any law for the time being in force, the costs of and incident to
all suits shall be in the discretion of the court or judge, and the court or
10 judge shall have full power to determine by whom and out of what property
and to what extent those costs are paid, and to give all necessary directions
for the purposes of the aforesaid”.

In the case of Uganda Development Bank versus Muganga Construction Co. Ltd.
[1981] HCB 35 where it was held that a successful party can only be denied costs
15 if it is proved that but for his or conduct, the litigation could have been avoided,
and that costs follow the event only where the party succeeds in the main suit.

In the instant case, the Plaintiff failed to prove its claim and court has found in
favour of the Defendant in respect of the Counterclaim.
In conclusion, judgement is entered against the Plaintiff / Counter – Defendant
20 and court hereby makes the following declarations and / or orders that:

1. The Defendant/ Counter-Claimant did not breach the contracts dated 7th
March 2018 for the construction of the ATM Rooms and painting of the
Defendant’s branches;
2. The Plaintiff/ Counter-Defendant is liable to the Defendant/ Counter-
25 Claimant for breach of contract;
3. The Plaintiff / Counter-Defendants pays the Defendant/Counter-Claimant
a sum of Ugx. 101,454,432/- as a penalty fee;
4. The Plaintiff/ Counter –Defendant pays the Defendant/Counter-Claimant
a sum of Ugx. 6,209,604/= as special damages;

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 5 5. The Plaintiff/ Counter-Defendant pays the Defendant /Counter –Claimant
simple interest at rate of 17% per annum on the special damages from
the 25th June 2018 until payment in full; and
6. The Defendant /Counter-Claimant is awarded costs of the suit.

I so find.

10 Dated and signed at Arua this 15th day of October 2024.

Harriet Grace MAGALA

Judge

Delivered online (via ECCMIS) this 12th day of November 2024.

15

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