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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0547 OF 2004
SHINE PAY (U) LTD ::::::::::::::::::::::::::::::
PLAINTIFF
VERSUS
KIYONGA FRANCIS :::::::::::::::::::::::
DEFENDANT
BEFORE: THE HONOURABLE MR. JUSTICE YOROKAMU
BAMWINE
J U D G M E N T:
The
Plaintiff’s claim against the Defendant is for US $2933, and interest at
the rate of 15% per month on any unpaid instalment,
from 30/7/2004 till payment
in full. He filed the suit under Summary Procedure, 0.33 r 2 of the Civil
Procedure Rules and obtained
Judgment against the Defendant. Under Misc.
Application No. 709/2004, the said Judgment was set aside and the Defendant
filed a
Written Statement of Defence. From then on, hearing stalled. Counsel
for the Defendant failed to appear and whenever he happened
to appear he would
advance an excuse for not proceeding. The Defendant never appeared in Court at
all. On 16/3/2006, when neither
the Defendant nor his lawyer appeared in Court,
I allowed the Plaintiff to proceed exparte.
The Plaintiff led evidence of
one witness, its Managing Director one Eyasu Sirak. He testified that on
21/4/2004, the Plaintiff advanced
US $2,933 to the Defendant. He exhibited a
copy of the loan agreement to that effect. According to this agreement, the
Defendant
was supposed to pay back the said money in ten equal monthly
instalments of US $294, effective July 30th , 2004. Mr.
Eyasu’s evidence is that this was a friendly loan where, however, the
Defendant was obliged to pay interest of
15% per month on the unpaid
instalments. While the claim is for US $2933, the witness admitted that during
the pendency of the suit
the Defendant was able to pay off one instalment in the
sum of US $294.
From the evidence of this witness, the amount now due to
the Plaintiff from the Defendant is US $2639. I have no reason to believe
that
the Defendant is not indebted to the Plaintiff in that sum. It is decreed to
it.
This leaves me with one issue: that of interest.
The
Plaintiff’s claim is for interest of 15% per month on any unpaid
instalment from 30/7/2004 till payment in full. Mr. David
Innocent Nyote has
invited me to find that whereas the suit is premised on a loan agreement, which
advanced to the Defendant money
on a friendly basis, the interest chargeable on
the instalment upon which the Defendant defaulted is okay. That it is perfectly
legal in its spirit. That if the Defendant had honoured the agreement, he would
not pay any interest. But that he defaulted and
continues to do so, and the
interest of 15% per month is legally levied against him.
I have very
carefully addressed my mind to counsel’s argument. The absence of the
Defendant’s participation has of course
not made matters any easier for
Court.
Be that as it may, it is the stand of this Court that interest, if
it is not part of the contract terms, becomes a discretionary remedy.
The
general rule is that interest can only be claimed if the claim is based on an
agreement for it in the document sued upon or
by statute. In the instant case,
the interest claimed by the Plaintiff against the Defendant is not based on an
agreement. The
agreement only provided for payment of a penalty at the rate of
15% per month in the event of a default by the Defendant on the principal
sum.
By simple arithmetic, 15% per annum translates into 180% per annum which by
Ugandan Standards is unrealistically high, especially
in a situation where the
parties agree that it was just a friendly loan. There would be nothing
‘friendly’ about it.
In my view, while this penalty may have
been intended to discourage wilful defaults, interest at 180% per annum would be
excessive.
This Court has a discretion to award interest at less than the
contractual rate when that rate is manifestly excessive and unconscionable.
See: Juma –Vs- Habib [1975] EA 103 (T).
The Plaintiff has
in the plaint prayed for interest of 15% p.m from the date of default till
payment in full. The principle of interest
as a discretionary remedy was laid
down by Lord Denning in Harbutts Plasticide Ltd –Vs- Wyne Tank &
Pump Co. Ltd [1970] 1 QB 447. He observed:
“An award of interest is discretionary. It seems to me that the basis of an award of interest is that the Defendant has kept the Plaintiff out of his money; and the Defendant has had the use of it himself. So he ought to compensate the Plaintiff accordingly.”
I agree with
the above principle. In the instant case, the Plaintiff advanced a friendly
loan to the Defendant. The Defendant was
given a grace period of three months
and when the initial payment fell due, the Defendant defaulted. To date, a sum
of US $2639,
is still due and owing. On seeing that the payments were not
forthcoming, the Plaintiff filed this suit under Summary Procedure.
The
Defendant then moved in to defend the suit but thereafter
disappeared.
The principle that emerges from the authorities, including
Sietco –Vs- Noble Builders (U) Ltd SCCA No. 31/95 is that where a
person is entitled to a liquidated amount or specific goods and has been
deprived of them through the wrongful act
of another person, he should be
awarded interest from the date of filing the suit. Where, however, damages have
to be assessed by
the Court, the right to these damages does not arise until
they are assessed. In such event, interest is only given from the date
of
Judgment. In the instant suit, there are no damages being claimed.
From the evidence on record, Court is satisfied that the Defendant has
kept the Plaintiff out of its money. The Defendant has had
use of it to warrant
an order of compensation on account of that to the Plaintiff.
In these
circumstances, I award interest on the principal sum of US $2639 at the
commercial rate of 25% per annum from the date of
filing the suit (11/08/2004)
till payment in full. The Plaintiff shall also have the costs of this suit, to
attract interest at
Court rate from the date of taxation till payment in
full.
Ordered accordingly.
Yorokamu Bamwine
J U D G
E
27/03/2006
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.RTF of original document