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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0 595 OF 2003
SURGIPHAM UGANDA LTD ::::::::::::::::::::::::
PLAINTIFF
VERSUS
1. NOBLE HEALTH LTD ]
2. TONY BADEBYE
]
3. SUSAN MUNALWA ] ::::::::::::::::::::::::::::
DEFENDANTS
BEFORE: THE HONOURABLE MR. JUSTICE YOROKAMU
BAMWINE
J U D G M E N T:
The
Plaintiff’s case against the Defendants is for recovery of Shs.26,575,293-
arising out of an alleged breach of contract,
general damages, interest and
costs of the suit. It is not disputed that on 17/8/2001, at the 1st
Defendant’s own request and instance the Plaintiff supplied the
1st Defendant with goods/drugs worth Shs.21,288,000- for which
payment was to be made within one month from the date of receipt of the
goods.
The dispute is about:
1. Whether the Defendants are indebted to the Plaintiff
in the sums claimed.
2. Whether the Defendants are jointly and severally
liable to the Plaintiff for the debt, if
any.
3. Remedies.
Representations:
Mr. Adriko for the
Plaintiff.
Mr. Nagemi for the Defendants.
I will go straight to the
resolution of the above issues.
As to whether the Defendants are indebted
to the Plaintiff in the sums claimed in the plaint, I have considered the
evidence of the
Plaintiff’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 1st
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 therefore
safely make a finding that
the sale took place and I do so.
It is also
the evidence of the said PW1 Chary that following that sale, the 1st
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 1st Defendant’s Managing Director, DW1 Badebye. Court
is therefore satisfied that the cheques were issued to the Plaintiff as
averred.
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’s
Managing Director wrote to the Plaintiff explaining
to them the financial
difficulties the 1st Defendant was experiencing and requesting that
the same be not presented 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 denied by the 1st Defendant’s Managing Director. From the
Defendant’s own evidence, the defence stopped the presentation of the
cheques
by the Plaintiff to its bank on the due date. I so find.
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. I am
satisfied that DW1 Badebye stopped the payment.
It is
further claimed by PW1 Chary that the fact of the cheques dishonour was brought
to DW1’s attention and that 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. 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’m not persuaded by DW1’s evidence on this point. From the
records, the 1st 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. 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’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 1st
Defendant’s indebtedness stood at Shs.21,288,000-. This therefore reduced
it to Shs.14,288,000-.
It is the evidence of PW1 Chary that in October
2001 the parties agreed that the 1st Defendant deposits stocks of
drugs with the Plaintiff worth Shs.16.000.000=. That they were to be kept as
security for the debt
pending payment. DW1 does not agree. He claims that the
stock of drugs was to offset the indebtedness.
I have addressed my mind
to the evidence and arguments of both Counsel on the matter.
The
agreement between the parties is on record as 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:
“RE: ACCOUNTS SETTLEMENT
This is to acknowledge resolutions passed and agreed upon in today’s meeting with the Surgi Pharm Management Team.
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:
1. Send us 100 (one hundred) ctns of Nobaquin at Ug. Shs.160,000- per ctn less 10%. If stocks of Nobaquin are insufficient, top up with Curamol at Shs.165,000- less 10% to the value of the outstanding.
2. This goods (sic) shall be held as security, however should we get a buyer, we shall sell them with your consent and offset the monies against your account.
3. The balance of goods shall be returned to you on completion of the payment of your account.
We are sure this settlement plan will be quite convenient and help us proceed with our normal business terms.”
From the
construction of the above letter, it is clear to me that the parties did not
contemplate an outright set off. The agreement,
properly construed, was for the
drugs to act as security for the outstanding debt. This is clear from the
agreement itself: “You have agreed to send us stocks of Nobaquin and
Curamol to secure your account” and “This (sic) goods shall be
held
as security, however, should we get a buyer, we shall sell them with your
consent and off set the monies against your account.”
If the
parties had intended an out right set off, they would have stated so. The
defence argument that the Plaintiff received the
drugs as settlement of the debt
is flawed 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 1st Defendant. The
argument simply lacks logic.
The Court’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 to off set 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 in 10 months time. Certain matters must 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, 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.
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’s) sincerity on
that point. He knew that since the principal
sum was Shs.21,288,000-, upon
payment of Shs.7,000,000-, the amount was reduced 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.50,000- each. This
penalty is stipulated in the Credit Application
Form, P. Exh. 1, which DW1
claims not to have been aware of. In these circumstances, Court is satisfied
that what was Shs.11,288,000-
became Shs.11,338,000- 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- (i.e. Shs.11,338,000- + Shs.10,050,000- minus
Shs.7,000,000). The sale of the drug stocks in 2004 reduced the indebtedness
to
Shs.11,188,000-.
It is stipulated in the said Form, P. Exh. 1, that 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 willful
defaults, it is the view of this Court that the interest
at 36% 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:
Juma –Vs- Habib [1975] EA 103 (T). 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’s
claim regarding interest between October 2001 – 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’s
claim under this head from
Shs.11,088,000- to Shs.6,042,960- (that is, Shs.14,388,000- x 21 x
2).
100
The Plaintiff prays for Shs.1,438,000- which it allegedly spent on a
Debt Collector. I’m of the view that engaging the debt
collector at that
stage was entirely the Plaintiff’s debt recovery mechanism. It’s
not a matter 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’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’s
final bill of costs.
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 prospective creditors, it obtains shareholders guarantees
from them. Court is satisfied about the existence of such policy. In his
testimony, DW1 Badebye accepts that he signed the share
holder’s
guarantee, P. Exh. 11. He therefore made a personal guarantee of the payment.
This makes him liable jointly and
severally with the 1st Defendant
for the debt due to the Plaintiff. The 3rd Defendant Susan Munalwa
denied signing the shareholder’s guarantee. None of the Plaintiff’s
officials was present when
P. Exh. 11 was being executed. PW1’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 expert to conclude that her
signature as it appears in the Articles and Memo of
Association differs
materially from that on the guarantee document. In these circumstances, Court
holds that she is not jointly
and severally liable with the 1st and
2nd Defendants. I would discharge her from personal liability and I
do so.
As regards the Plaintiff’s claim for general damages, one of
the duties of counsel 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 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 and suffering, which the Court assumes
the
Plaintiff did sustain.
Taking the evidence as a whole and doing the best
I can, I consider a sum 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.
In the result, Judgment is entered for the Plaintiff against
1st and 2nd Defendants in the following
terms:
a. Shs.11,188,000- (eleven million one hundred and eighty thousand
only) being the balance due on the supply of the drugs.
b. Shs.6,042,960-
(six million forty two thousand nine hundred sixty only) being interest on the
outstanding balance for the period
October 2001 – October
2003.
c. Shs.1,000,000- (one million only) being general damages for breach
of contract.
d. Interest of 25% per annum on (a), (b) and (c) from the date
of Judgment till payment in full.
e. Costs of the suit.
Yorokamu
Bamwine
J U D G E
13/10/2005
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