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THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANDA
AT MENGO
(CORAM; ODOKI, CJ., ODER, TSEKOOKO, MULENGA, KANYEIHAMBA,
J.J.S.C.)
CIVIL APPEAL NO. 8 OF
2002
BETWEEN
B.M. TECHNICAL SERVICES LTD. :::::::::::::
APPELLANT
AND
CRESCENT TRANSPORTERS CO. LTD. :::::
RESPONDENT
[Appeal from the Judgment and decisions of the Court of Appeal at Kampala (Kato, Okello, Mpagi-Bahigeine, J.J.A.) of 7th, April, 2001, in Civil Appeal No. 25 of 2000].
JUDGMENT OF KANYEIHAMBA, J.S.C.
This is an appeal from the judgment and orders of the Court of Appeal dated 7th, April, 2001, in which the appellant's appeal against the judgment of the High Court was allowed with costs.
The background to this appeal may be stated as follows:
Crescent Transportation Company Limited, the present respondent, sued B.M.
Technical Services Limited, the present appellant for breach
of contract of
carriage of goods from Mombasa to Kampala. The contract between the appellant
and the respondent was partly written
and partly oral. The terms of the written
part of the contract provided that the respondent was to clear the appellant's
container
from Mombasa and deliver it to Kampala. The respondent was to notify
the appellant of the date of arrival of the container upon which
the appellant
would pay to the respondent a sum of US $4,050 to cover the freight and clearing
charges. It was part of the same agreement
that the appellant would collect the
container from the respondent's premises within four days of receipt of the
notice of the container's
arrival. In default of such collection on the part of
the appellant, the appellant would pay the sum of US $150 each day that the
container remained on the respondent's trailer. According to the oral part of
the contract, the respondent was obliged to return
the container to Mombasa
within a month of delivery of the container in Kampala and in default of that
return, the respondent would
pay the sum of US $20 per day of detention of the
trailer.
The container was delivered in Kampala on 11.11.1998. The
respondent notified the appellant of the delivery on 12.11.1998. The appellant
paid to the respondent the sum of US $2,167 and promised to pay the balance on
10.12.98. The promise was not fulfilled. However,
the appellant failed to take
the container from the respondent's premises. Ultimately, the respondent was
forced to drop the container
from the trailer at its premises on 28.5.1999.
Thereafter, the respondent filed a suit in the High Court claiming a total
balance
of US $35,820 as the cost of the freight charges and accumulated
container detention charges.
In its written statement of defence, the appellant admitted the contract but
contended that delivery of the container had not been
effected at the agreed
destination which it claimed to be Mbarara and not Kampala as alleged by the
respondent. When the time for
hearing of the suit came, the appellant failed to
turn up and was not represented. The court heard the case ex
parte.
The learned trial judge awarded freight and clearing
charges in the sum of US $1,883 but rejected the claim in respect of the
container
and trailer detention. The respondent was also awarded costs and the
trial judge allowed interest on the awarded amount at 4%. Dissatisfied
with the
judgment, the respondent appealed to the Court of Appeal challenging the refusal
by the learned trial judge to allow respondent's
claim for container and trailer
detention and the low rate of interest awarded. The Court of Appeal allowed the
appeal and awarded
an interest on the amount allowed at the rate of 22% from the
date of filing the suit till payment of the judgment debt in full.
It is against
the judgment and orders of the Court of Appeal that this appeal has been
filed.
There are four grounds of appeal framed as follows:
1. The learned Justices of Appeal erred in fact and in law when they found that the respondent was entitled to special damages which were not properly pleaded or proved.
2. The learned Justices of Appeal erred in law and in fact when they found that the respondent was entitled to damages which it could have mitigated.
3. The learned Justices of Appeal erred in law when they found that an allied request constituted a contract between the parties.
4. The learned Justices of Appeal erred in law when they awarded an excessively high and unjustified interest rate.
Dr. Byamugisha, counsel for the appellant argued the four grounds together.
Counsel's submissions were of a general nature. He contended
that the only
amount of money supported by the evidence adduced before the learned trial judge
was the sum of US $1,883 which was
the balance on the costs of freight from
Mombasa to Kampala. He contended that when the learned Justices of Appeal
awarded further
sums which they said were container storage charges and
retention of trailer, they went beyond the evidence adduced before the trial
court.
Dr. Byamugisha submitted that the Court of Appeal ought to
have accepted the findings of the trial court that the respondent had failed
to
mitigate its loss. Counsel contended that for a considerably long period of
time, the respondent had retained both the container
and the trailer without any
attempts to mitigate its losses. He further contended that the respondent could
easily have unloaded
the container off the trailer and returned the latter to
Mombasa without waiting for so long to hear from the appellant.
Dr.
Byamugisha submitted that the contract between the parties did not impose any
obligation on the respondent to retain both the
container and the trailer if the
appellant defaulted.
Counsel contended that the Court of Appeal erred in holding that it was an
implied term of the contract that the respondent was under
an obligation to take
reasonable care of the goods while they were in its possession. He contended
that whereas such an obligation
may arise in the case of an importer, it does
not arise in the case of a clearing house. He further contended that the
accumulation
of storage and retention fees for seven months was unreasonable and
the learned Justices of Appeal ought not to have awarded unreasonable
amounts of
money which were contractually illegitimate.
Lastly, Dr. Byamugisha
submitted that by raising the interest rate from 4% awarded by the learned trial
judge to 22%, the Court of
Appeal not only erred in interfering with a judge's
discretion to award interest but were unreasonable to fix it at such a high rate
of interest when the contract was not a commercial one but a clearing and
carriage of goods contract. He argued that no interest
was proved by evidence.
Therefore counsel submitted that the award of interest at 4% by the learned
trial judge should not have been
interfered with. Counsel cited the Rules of
this Court and "McGregor on Damages" in support of his submissions and on the
basis of
those submissions, he prayed that the appeal be allowed and the
judgment of the High Court restored.
Mr. Benson Tusasirwe, learned
counsel for the respondent, opposed the appeal. He contended that Dr. Byamugisha
had not fully argued
ground one since he had not made any submissions on the
issue of special damages. He confined his submissions to the rest of the
grounds
of appeal. Counsel contended that Annexture 'A', (exh. P1), constituted a
written contract and contained the essential ingredients
of the terms and
conditions of the agreement between the appellant and the respondent. He
contended that moreover those terms and
conditions were admitted by the
appellant in the various exchanges of communication between the parties
including attempts by the
appellant to pay what it owed to the respondent.
Counsel submitted that the Court of Appeal was correct to hold that the demand
of
US $ 150 per day was part of that contract and constituted a foreseeable loss
for each day that the appellant did not honour its
obligations under the
contract after four days of being notified. The US $20 per day payable for the
trailer detention was covered
by the oral part of the contract. Counsel
submitted that therefore the claims of US $150 and US $20 per day respectively
had been
improperly rejected by the learned trial judge and for wrong reasons.
Counsel finally submitted that the respondent had fulfilled
its obligations
under the contract while correspondingly the appellant had failed to perform its
own part with consequences that
were clearly predictable to both parties.
Counsel contended that it is not enough for the appellant to state that the
respondent
ought to have mitigated its losses without showing clearly how this
could have been done.
I will first consider grounds 1, 2 and 3 of
this appeal. In my view, with the pleadings disclosing written and admitted
terms and
conditions of agreement between the parties, this appeal revolves
around the execution of a clear and simple contract. The terms
and conditions of
the contract are clearly set out in an agreement described as Allied Request No.
B dated 15/10/1998 signed on behalf
of both parties and marked as exh. P1 and in
the oral agreement admitted by them. The appellant has not made any attempts to
deny
the existence and terms of this contract which by nature is a clearing and
carriage of goods contract. The only bone of contention
between the parties is
what meaning should the court give to the contract's terms and
conditions.
In her lead judgment, Mpagi-Bahigeine, J.A. said,
"The contract to carry the respondent's goods clearly spelt out the precise terms including the place of delivery, which was Kampala. According to the uncontroverted evidence on record, the goods arrived in Kampala on 11.10.98. The respondent was notified of their arrival the following day within the terms of the contract. The respondent did not take delivery. On 21.11.98, the respondent made a cheque for the sum of Shs.5,000,000/= which was dishonoured. On 30.11.98, the respondent wrote to the appellant acknowledging its indebtedness and promising to pay for the container on 10.12.98. On 15.12.98, the respondent tendered another cheque for Shs.3,900,000/= which was also dishonoured. On 6th January, 1999, the respondent paid the appellant the equivalent of US $2,174 for clearing and transport. No evidence was adduced to indicate that the respondent had reminded the appellant that the agreed place of delivery was Mbarara and not Kampala. The respondent still failed to take delivery at Kampala."
It is clear and I agree with the findings of the learned Justice of Appeal on this matter that from 12th November,
1998 to 6th January, 1999, the completion of the execution of the
contract was in the exclusive hands of the appellant which had already accepted
its terms and conditions as binding. This is evidenced by the appellant's
endeavours to honour it. The respondent having waited for
some four months for
the appellant to fulfil its part of the bargain was eventually forced to sue. In
any event, it is an implied
term of a contract of carriage of goods that the
career must take reasonable care to protect the goods in its possession. In my
view,
there never was any period of time between notification that the container
had arrived in Kampala and May, 1999, when the respondent
filed its action in
court, for the respondent to mitigate its losses. The admission of the contract
by the appellant and its attempts
to make good its part of the bargain
prohibited the respondent from contemplating loss, let alone its
mitigation.
I have not found the authorities cited for the proposition that the
respondent should have mitigated its losses helpful. For these
reasons, grounds
1,2, and 3 of this appeal ought to fail.
I now turn to ground 4 of
the appeal. The contention in this ground is that the learned Justices of Appeal
not only unreasonably interfered
with the exercise of the learned trial judge's
discretionary powers to award interest but also unjustifiably awarded excessive
interest
at 22%.
Dr. Byamugisha contended that the provisions of s.26(2) of the Civil
Procedure Act provide that interest on a judgment award is at
the discretion of
the Court. On this basis, counsel submitted that it was therefore an error for
the Court of Appeal to interfere
with the decision of the learned trial judge
who fixed the rate at 4%. He cited the cases of Ecta(U) Ltd. v. Geraldine S.
Namirimu
& Josephine Namukasa, Civil Appeal No. 29 of 1994, (S.C),
(unreported), and Sietco v. Noble Builders(U) Ltd. (S.C), (unreported),
in
support of his submissions. He contended that in dollar terms, interest of 22%
is too high.
Mr. Tusasirwe, learned counsel for the respondent
contended that whereas it is true that the award of interest rate is at the
discretion
of the trial judge, there are occasions when an appellate court may
be justified to interfere with the exercise of that discretion.
In counsel's
opinion, the contract was a commercial one where the normal rate of interest may
be as high as 30%. In this contract,
the payments were expressed in US dollars.
However, it was counsel's contention that even then the rate of interest at 4%
allowed
by the trial judge was too low to be justified. Counsel submitted that
therefore the rate of interest at 22% fixed by the learned
Justices of Appeal
was under the circumstances, reasonable and this Court ought not interfere with
it. Mr. Tusasirwe cited Ecta(U)
Ltd. v. Geraldine Namirimu & Another
(supra) in support of his submissions.
In his short judgment, Mr. Okumu Wengi, Ag. J, as he then was, fixed the
interest on the sum awarded at 4% per annum from the date
of filing the suit
till settlement without giving any reason therefor.
This transaction was a clearing and carriage of goods contract and not an
ordinary commercial transaction in which goods are normally
exchanged for money
or some other consideration with parties contemplating to make a profit or an
interest on the business as the
expected reward.
The 4% interest per
annum awarded by the learned trial judge does not seem to have a basis in law
and the trial judge did not give
reasons for it. Be that as it may, in my view,
compensatory sums even though unrelated to commercial transactions should still
often
carry higher rates of interest than that ordered by the learned trial
judge. On the other hand, it is my view that an interest at
22% per annum in a
non-commercial transaction of the nature I have described is on the high
side.
In my opinion, the learned Justices of Appeal were in error to
label the contract in this case commercial. S.26(3) of the Civil Procedure
Act
may be considered as a guide in this matter. It provides that where a decree is
silent as to the payment of interest, the court
shall be deemed to have ordered
interest at six per centum per annum. In the
Ecta(U) Ltd. case (supra), this Court altered the order of the trial
judge fixing the rate of interest on the decretal amount at 25% per annum to 8%
because
25% was considered too high. In Sietco v. Noble Builders(U) Ltd., Civil
Appeal No. 31 of 1995 (S.C), (unreported), Wambuzi, CJ.,
as he then was, wrote
the lead judgment in which he observed that, "The court's discretion is to be
exercised if sufficient cause is shown to exist," and proceeded to confirm
the interest rate of 12% in that case from the date of filing the suit till
payment in full.
Taking the facts and circumstances of this case and
the authorities reviewed above into account, I am satisfied that the rate of
interest
at 22% awarded by the learned Justices of Appeal is too high. I would
therefore allow ground 4 of this appeal.
I would order that the
decretal amount carry interest at the rate of 10% per annum from the date of
filing this suit till full payment.
In the result, this appeal ought to partially succeed. I would order that the respondent be awarded 3/4 of the costs in this court and in the courts below.
JUDGMENT OF ODOKI, CJ
I had the benefit of reading in draft the judgment of my learned brother,
Kanyeihamba JSC, and I agree with it and the orders he has
proposal.
As
the other members of the Court also agree, this appeal partially succeeds. The
order of the Court of Appeal awarding the appellant
interest at the rate of 22%
on the decretal amount is set aside and substituted with anr order awarding
interest thereof at the rate
of 10%. The appellant will have three - quarters of
the costs in this Court and Courts below.
JUDGMENT OF ODER
I have had the benefit of reading in draft the judgment prepared by
Kanyeihamba, JSC. I agree with him that the appeal should partially
succeed. I
also agree with the orders proposed by him.
I have nothing further to add.
JUDGMENT OF TSEKOOKO, JSC:
I have read, in draft, the judgment prepared by my learned brother, the Hon.
Mr. Justice G.W. Kanyeihamba, JSC and I agree with his
conclusions that the
appeal should succeeds in part. I also agree with the orders he has proposes) as
to costs and the rate of interest.
Dated at Mengo this 22 day of October 2003.
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