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THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANDA
AT MENGO
(CORAM: ODOKI, CJ, ODER, KAROKORA, MULENGA AND KANYEIHAMBA, JJ,SC).
CIVIL APPEAL NO.17 OF 2004
BETWEEN
UGANDA TELECOM
LTD APPELLANTS
AND
TANZANITE CORPORATION RESPONDENT
(Appeal from the decision of the Court of Appeal at Kampala (Mpagi Bahigeine, Kitumba and Byamugisha, JJ.A.) in Civil Appeal No. 44 of 2003)
JUDGMENT OF ODER J.S.C.
Tanzanite Corporation (the respondents) jointly sued Uganda Telecom Ltd (the appellants) and Uganda Post and Telecommunication Corporation Ltd (UPTCL) in the High Court for general and special damages for alleged breach of contract for supply of telephone sets to the respondents. The remedies sought consisted of loss of profits, loss of unused materials, unpaid bank loan, general damages, interests, and cost of the suit. UPTCL was not served with the summons and, so the suit against it was not proceeded with. The appellants defended the suit, denying that there was any contract between the two parties and prayed for its dismissal. The suit was heard by Arach Amoko, J, who allowed only the respondent's claim for loss of unused materials, disallowing all the other claims.
The respondents successfully appealed to the Court of Appeal, which allowed
all the heads of the respondent's claim in the suit. Hence
this appeal.
The background to the case is briefly this. The respondents were originally
incorporated in the USA. They answered a call by the Government
of Uganda for
potential investors to come and do business in Uganda. They became locally
registered, and engaged in telecommunication
business. The respondents, through
their chairman/ Managing Director, Frank Butamila, (PW1), entered into
negotiations with the appellants
to sell telephone sets to them. The
negotiations resulted in a commitment letter from UPTCL dated 6 .7 .93 (exhibit
p2). On 27 .9
.94, the respondents made an offer to supply to the appellants
10,000 Model TA- 101 telephone sets at US $ 44.75 per set. The offer
was made in
a proforma invoice No. 94/09/101 (exhibit P3) The respondents alleged in their
pleadings that on 22, 12 .94. the appellants
made a counter - offer to purchase
30,000 telephone sets of the same model and on the terms specified in exhibit
P,3. The appellants
accepted the terms and signed the proforma invoice (P3) on
21 .1. .95.
Thereafter, the respondents allegedly started mobilizing
funds to buy raw materials and workshop materials to assemble the 30,000
telephone sets. They allegedly established a workshop at Kisugu, Kampala, and
made orders abroad for supply of materials. They also
obtained a loan from the
Co-operative Bank Ltd, which the appellants apparently guaranteed. All this was
done to enable the respondents
supply telephone sets to the appellants. It was
the respondents' case that the appellants acted in breach of their contract by
taking
and paying for only 3,000 telephone sets, leaving the respondents
stranded with unsold telephone sets, and unused materials in Kampala
and in Hong
Kong and an unserviced bank loan. The respondents sued the appellants in the
High Court for the remedies to which I have
already referred.
At the trial five issues were framed and agreed to. They were:
1. Whether there was a contract for the supply of 30,000 telephone sets or not.
2. If so, whether the appellants breached the contract.
3. If so whether the respondents suffered any damages as a result of the breach.
4. Whether there was a guarantee of the loan from the Co-operative Bank Ltd to the respondents.
5. Whether the respondents are entitled to the remedies sought.
The learned trial judge resolved
issues numbers one to four in the negative. She resolved the fifth issue partly
in favour of the
respondents and awarded US. Dollars 260,000 to the respondents
as the cost of unused materials, and interest there on at the rate
of 8% pa from
the date of filing the suit till payment in full, and half of the cost of the
suit.
The respondents were dissatisfied with the trial Court's decision. They appealed to the Court of Appeal, which allowed the appeal and granted the remedies, which the respondents had sought in the suit. Hence this appeal. Six grounds are set out in the memorandum of appeal, the last four being in the alternative to the first two. They are:
1. The leaned Justices of Appeal erred in law and in fact in finding that there was a contract between the Appellants and the Respondents for the purchase of 30,000 telephone sets.
2. The learned Justices of Appeal erred in law and infact in finding that the appellants were in breach of contract for the 30,000 telephone sets.
In the alternative, but without prejudice to the foregoing:
3. The learned Justices of Appeal erred in law and infact in awarding general damages in addition to the award for loss of profits.
4. The learned Justices of appeal erred in law and in fact in allowing the claim for loss of unused materials in addition to the award for loss of profits.
5. The learned Justices of Appeal erred in law and infact in allowing the claim for unpaid bank loan in addition to the award for loss of profit.
6. The learned Justices of Appeal erred in law and infact in finding that the claim for the unpaid bank loan has been proved.
The memorandum of appeal then prayed for setting aside the judgment and order
of the Court of Appeal and costs of the appeal and of
the suit.
The respondents Cross-appealed on the following grounds.
1. The learned Justices of Appeal erred infact and in Law in failing to award further interest on the head of damages relating to the unpaid bank loan.
2. The learned Justices of Appeal erred in law and infact in failing to award interest on the head of damages for loss of profits from the date of filing suit as opposed to the date of judgment.
At the hearing of the
appeal, the respondents sought and were granted leave to amend the notice of
Cross-appeal by additional ground,
namely, that the learned Justices of Appeal
erred in law upon dismissing the appellants' Cross-appeal against the award of
Us dollars
260,000 for unused materials in failing to affirm the award of 8%
interest on the said amount granted by the lower Court from the
date of filing
suit till payment in full.
Mr. William Byaruhanga and Mr. Kasirye,
assisted by Mr. Okuwa, represented the appellants. Mr. Ebert Byenkya with Mr.
Oscar Kihika
appeared for the respondents. Mr. Byaruhanga for the appellants
argued grounds one and two together. He criticized the Court of Appeal
for
finding that there was a contract between the parties for supply of 30,000
telephoned sets by the appellants to the respondents.
Learned Counsel contended
that there was neither such a contract nor a breach of contract it by the
appellants. Learned counsel criticized
the finding of Kitumba, JA, who wrote the
lead judgment, supported by the other members of the Court, that the Proforma
invoice,
P3, contained the offer by the respondents to sell to the appellants
10,000 telephone sets at US $ 44.75 per set, which was accepted
by the parties
on 21. 1. 95 by signing at the bottom of the document. P.3 was preceded by a
letter dated 23. 12. 94 (exhibit P4)
written by the appellants' Managing
Director, acknowledging receipt of Exhibit P.3 and the terms specified therein.
When the appellants'
Managing Director said in P.4 that they had the capacity to
purchase 30,000 telephone sets under the terms stated in P.3, the appellants
were making a counter-offer to buy 30,000 telephone sets. The appellants'
learned counsel contended that the learned Justices of
Appeal erred in finding
that Exhibit P.3 was not a mere formal offer, as proforma invoices ordinarily
are because it was detailed
in nature and was signed by both parties, specifying
their acceptance to be bound by the terms contained therein; and that Exhibit
P.3 and Exhibit P.4 should be read together. In support of his contention the
appellant's learned Counsel referred to the definition
of"Proforma" in
Blacks Law Dictionary 7th Edition, page 1227, where it
is said to mean "Made or done as formality: of an invoice or financial statement
provided in advance to describe
items, predict results or secure approval,". He
also relied on the book: An outline of the Law of Contract
5th Edition by G.H. Treitel
Butterworths. 1995 for the law on acceptance and
counter-offer in contract. Learned Counsel further submitted that the signature
of the respondents'
Managing Director at the bottom of Exhibit P3 was an
approval, and not acceptance of the terms; that Exhibits P3 and P4 did not
create
a contract; that there was an offer for the purchase of 30,000 telephone
sets which was concluded by the appellants' several Local
Purchase Orders (LPO).
Exhibit P4 was not the basis of a contract as a counter-offer, because there was
no acceptance by the respondents.
Moreover there was uncertainty in Exhibit P4
about the number of units being ordered; the time for delivery and how the
30,000 units
were to be paid for. This was inconsistent with the well known
principle of the law of contract that unless the essential terms of
the contract
are agreed upon, there is no binding and enforceable obligation: May and
Butcher Ltd vs. The King (1934), 2 King's Bench Division 17,
C.A. In the instant the documents on which the Court of Appeal based its finding
did not amount
to a contract.
In oppositions to the appeal, Mr. Byenkya, learned counsel for the
respondents also argued grounds one and two together. He submitted
that the
trial court and the Court of Appeal concurrently found that a contract existed
between the appellants and the respondents.
The learned trial judge found that
there were three separate contracts for a total of 20,000 telephone sets, and
the Court of Appeal
found that there was contract for 30,000 sets of telephone.
In doing so, the Court of Appeal as the first appellate court re evaluated
the
evidence and reached its own conclusion, agreeing with the trial court on
finding of facts. As a second appellate court, this
Court should not interfere
with that concurrent finding. Learned counsel relied on Erisafani
Mudumba Vs. Wilberforce Kuluse, C.A. No. 9 of 2002 (SCU) (unreported), and
Lutaya Vs. Attorney General, C.A. No. 10 Of 2002
(scu)(unreported) Milly Masembe
Vs Sugar Corporation and Another, C.A. No. 1 of 2000 (SCU) (unreported) and
Banco Arabe Espanol Vs. Bank of Uganda C.A No. 8 of 1998 (SCU)
(unreported).
He contended that in the instant case this
Court should not interfere with the concurrent findings by the lower courts that
there
was a contract between the parties.
The respondents' learned
Counsel further submitted that by Exhibit P.5 the appellants informed the
Co-operative Bank Ltd that the
appellants had entered into a contract with the
respondents for the latter to supply them with telephone sets to meet their
needs
and that the appellants -
"will guarantee and pay the amount due to Tanzanite Corporation directly to the Co-operative Bank Ltd, which will satisfy all or part of its financing out lay to the Tanzanite Corporation from these funds."
The learned counsel submitted that the appellants having guaranteed to pay
the proceeds of sale of the telephone sets payable to the
respondent direct to
the bank; they were estopped from denying the contractual relationship between
them and the respondents. They
had presented themselves as being in such a
relationship, making the respondents act on the presentation by taking a loan to
its
prejudice. The learned Counsel revealed that it was not the respondents'
case that exhibits P.5 was a guarantee. It was a representation
to the bank,
which induced it to give the loan to the respondent.
Regarding the
appellants' LPO's Mr. Byenkya submitted that they could not have formed the
basis of valid contracts, because they were
predated by exhibit P5 dated
25.4.95. It said that a contract for supply of telephones had been made between
the appellants and the
respondents. This was long before the LPO's dated
2.5.95,3.1.99 and 31.1.96 were issued. The LPO's did not contain the terms of
the
contract, but exhibit P3 did. Counsel contended that the respondents proved
the terms of the contract by documentary evidence and
the oral evidence of their
Managing Director (PW1). On the other hand, all the respondents' witnesses did
not know the terms of the
contract, as Kitumba, J.A found in her lead judgment.
Moreover, the appellants did not rebut the respondents' evidence that a contract
existed between the two parties.
Arising from the pleadings in the
suit the first issue for trial was whether or not a contract for sale of 30,000
telephone sets by
the appellants to the respondents had been agreed between them
and existed. The issue was not whether or not there was a contract
for the sale
or purchase of 100, 500, 10.000, 20,000 or 25,000 telephone sets. The learned
trial judge answered the first issue in
the negative. While rejecting the
argument of the counsel for the respondents that exhibit P4 was a counter-offer,
the learned trial
judge said this:
"With much due respect to leaned counsel, this letter is very clear. In the first paragraph UP&TC acknowledges receipt of the plaintiffs' Proforma invoice No. 94/09/101 offering to furnish single line model TA-101 telephone sets to UP&TC and the plaintiffs' "Subsequent inquiry on our (UP& TCJ demand market."
In the second Paragraph UP&TC confirms that it had received the proposal (contained in the proforma invoice) as well as the technical specifications submitted and PT&TC agrees to purchase the said Model TA-101 sets from the plaintiff. PW1 stated that after meeting with UP&TC officials, he went back to their head office in Washington and brought their specifications and a sample, which was later, tested by UP& TC approved (sic). That also agreed on the price of the phones. Then he made the offer of 10,000 per exhibit P3.
The third paragraph was a response to the last part of the 1st paragraph, which stated "Your subsequent inquiry on our demand market." In that paragraph, UP &TC said it has a capacity to purchase up to 30,000 telephone sets on the same terms in the proforma invoice (Exhibit P3). That it is also very likely that UP&TC will have additional need for telephone sets beyond this initial order meaning the 10,000. That UP&TC will also acquire additional units by Local Purchase Order (LPO) from the plaintiffs' warehouse, "whenever necessary" since the plaintiff is a local supplier in Kampala.
Lastly Mr. Sempala informed the plaintiff that it is now an approved vendor to UP & TC.
This letter does not and cannot therefore be interpreted by any stretch of imagination to mean that UP&TC placed an order for 30,000 telephone sets. This is also borne out by the fact that exhibit P.3, which was signed by both parties after wards, did not mention 30,000. Exhibit P.3 is an invoice of 10,000 sets only and not 30,000. It is also not a counter-offer as alleged.
The plaintiff also alleged that exhibits P.5 guaranteed the 30,000/= telephone sets. This again is not true. I agree with Mr. William Byaruhanga, Learned counsel for the defendant there is no reference to 30,000 sets in Exhibit P.3 was part performance of the process of fulfilling the said contract. I have found no such contract, that statement cannot therefore be true."
The leaned trial judge then went on to reject the contention by the respondents' counsel that Proforma Invoice P7 dated 27.9.95, signed on 28.9.95 was further confirmation of the contract for 30,000 telephone sets. She held that Exhibit P.7 was another and separate contract for the supply of another 10.000 sets. In the end, on this issue, the learned trial judge concluded:
"On the basis of this finding, I hold that there was no contract for the supply of 30,000 telephone sets between
the two parties. there were instead several in
dependant contacts between the two parties, I have not found any contract for the supply of 30,000 telephone sets between the parties. The answer of two issues is therefore negative."
Contrary to the
finding of the learned trial judge on the issue of contract, the lead judgment
of Kitumba, JA was to the effect that
there was a contract between appellants
and the respondents for the supply of 30,000 telephone sets. She said inter
alia:
"Counsel for the respondent here and in the count below argued that
proforma invoice is not a contract but a mere formal offer. That
would be the
case ordinarily. However in the appeal before this court the formal offer was
made on the proforma invoice. It was detailed
in nature time and was signed by
both parties specifying their acceptance to be bound by the terms stated
therein. Then exhibit P.4
that was written before the signing of Exhibit P.3.
made a close reference to Exhibit P.3 I accept Counsel for the appellant's
submission
that exhibit P.3 and P.4 should be read together. I am of the view
that there was a contract between both parties. When one considers
exhibit P.3
that was signed on 21st January 1995 for 10,000 sets, exhibit P.6,
signed on 5th may 1995 for 500 sets and P.7 signed 29th
for 10,000, sets. This makes a total of 25,000, which must be part of the 30,000
sets, which the appellant was to supply to the respondent.
Ground 1
succeeds."
With due respect to the learned counsel for the
respondents, I am unable to agree with him. As the passages I have referred to
from
their respective judgments show, the trial court and the Court of Appeal
did not make concurrent findings that there was a contract
between the parties
for supply of 30,000 telephone sets, which was an issue in the suit. The two
courts made inconsistent findings.
In my opinion the learned trial judge's
finding that there was no such a contract was the correct one. I also agree with
the reasons
she gave for that finding. In my view, the expression - "we
have the capacity to purchase
30,000 telephone sets at US$ 44.75 per set under the terms of the
proforma invoice" in Exhibit P.4 was part of the negotiation with the
respondents, informing them that the appellants were able to supply 30,000
telephone
sets to the respondents at the same price which had been conveyed to
them by proforma invoice. It did not explicitly mention P.3.
which was a
proforma invoice. It was therefore an offer to treat not an offer of a
contract.
Black's Law Dictionary. 7th Edition by Bryan 4.
Garner defines "Proforma invoice" as: -
"1. Made or done as a formality
2. (of an invoice or financial statement) provided in advance to
describe items, predicts result or secure approval".
In my opinion, the information in P.4 was part of the negotiation between the
two parties. It did not make an order to the respondents
that they should supply
30,000 telephones. If that was the intention, the appellants would have said so.
Further, P.4 was not a counter-offer
to purchase 30,000 telephone sets. The
appellant's offers to buy telephone sets were made by the appellants' Local
Purchase Orders
(LPO) separately, which totalled 3000 telephones the number
received and paid for by the appellants. Further, with respect to the
respondents' learned Counsel, I am unable to agree with his submission that the
appellants' letter of 25.4.1995 (exhibitP.5) was
evidence that a contract
existed between them and the respondents for supply of 30,000 telephones sets.
It mentioned such a contract,
but it did not say how many telephone sets the
appellants would supply to the respondents and other conditions of such a
contract.
The respondent's learned Counsel submitted that it was not a
guarantee, but an undertaking to induce the Bank to lend the respondents
money
to finance the telephone transaction between them and the appellants. In the
circumstances, it is in my opinion that exhibit
P.5 was not evidence of the
existence of a contract between the appellants and the respondents for supply of
30,000 telephones. With
the great respect to the learned Justices of Appeal, I
am of the view that there was no contract between the appellants and the
respondents
for supply of 30,000 telephones sets by the latter to the former.
Since the contract did not exist, the issue of the appellants having
acted in
breach of the contract did not arise. Grounds one and two of the appeal must
therefore succeed. The success of the first
and second grounds, in effect,
deposes of this appeal as the complaints in the other grounds criticize the
Court of Appeal for errors
regarding damages arising as a result of the alleged
contract for 30,000 telephones, which, as I have agreed with the learned trial
judge, did not exist.
I shall therefore briefly consider the other
grounds of appeal. Grounds 3,4,5 & 6 were argued together, in the
alternative, to
grounds one and two by Mr. Kasinye for the appellants. His main
arguments are first that that while the learned Justices of Appeal
were alive to
the principles of pleading and proving special damages, they apparently ignored
those principles and instead resorted
to section 52 of the sale of Goods Act
alone to hold that the appellants were not entitled to reject delivery of the
telephone sets
but to sue the respondents for breach of warranty; for holding
that PW1's oral evidence which merely estimated loss of profit of
US dollars
722, 259 on 27,000 telephone sets was sufficient proof of such loss because it
was not challenged by the appellants; and
for-relying on sub-sections (1) and
(2) of section 49 of the sale of Goods Act in exclusion of sub-section (3)
thereof, which provides
that where there is an available market for the goods
which are accepted by the buyer the measure of damages is prima facie to be
ascertained by the difference between the contract price and the market or
current at the time when the goods ought to have been
accepted or at the time of
the refusal to accept. Learned counsel contended that the learned Justices of
Appeal should have followed
the well-established legal principle that special
damages must be strictly pleaded and proved. He relied on: Siree Vs
Lake Turkana El Molo Lodges Ltd. (2000) 2 EA 520, "Sale of Goods Act," by P.R.
Aiyer: and "An outline of the Law of Contract"
by G.H Treited, Fifth Edition,
Butterwort.
Learned counsel for the appellants criticized
the learned Justices of Appeal for making a finding which was outside the
pleadings
before the court as if the suit was brought under the sale of Goods
Act. The plaint prayed for general and special damages. The counsel
who
presented the respondents case at the trial never mentioned the Sale of Goods
Act. Learned counsel also criticized the learned
Justices of Appeal for holding
that the appellants had guaranteed a loan from the Co-operative Bank Ltd to the
respondents. He contended
that the appellants did not do so. That contention is
based on first exhibit P. 10. This was a letter written by the bank to the
respondents, informing the latter that they should remit money to repay Shs.
108.683, 330 over drawn on their account with the bank.
The demand for repayment
was not made to the appellants, the alleged guarantor of the loan. Secondly, the
alleged letter of guarantee
(P.5) proposed to make direct payment to the bank,
but there is no evidence that P.5 was accepted by the bank. Thirdly, there was
no guarantee - relationship between the appellant and the bank. Finally learned
counsel submitted that as there was no contract between
the appellants and the
respondents the learned Justices of Appeal should not have upheld the award of
US. dollars 26,0000 for unused
materials. In any case the respondents should
have mitigated their loss even if the appellants had acted in breach of a
contract
in that respect.
In his submissions on damages, the respondents' learned counsel, Mr. Byenkya,
submitted that the appellants' counsel was out of order
to argue against the
award for loss of profit without leave of Court to challenge that award under
rule 97 of the Rules of this court.
Regarding the unpaid loan of shs. 108, 683,330/= learned counsel submitted
that the Court of Appeal did not award it on the basis
of a guarantee by the
appellants, but on the basis that it was a foreseeable loss caused by the breach
of contract by the appellants.
The loss of profit of shss.722, 000/= was awarded
by the Court of Appeal as the profit margine on 27.000 telephone sets. The
Court
of Appeal also awarded US dollars 260,000 for loss of unused materials by
the respondents. Regarding section 49(3) of the sale of
goods Act, the learned
counsel contended that the provisions of that sub-section are not applicable to
the instant case, because
the appellants did not adduce evidence to bring them
into pray. Available market should have been established by the appellants.
On
the contrary it was the respondents who attempted to do so. PW1 testified that
he tried unsuccessfully to sell in Rwanda the telephones
appellants did not
purchase. Learned counsel prayed for dismissal of the appeal and for up-holding
of the Court of Appeal's decision
save for the respondents' cross-appeal. I
shall deal with the cross-appeal after my conclusions on the grounds of appeal
concerning
the award of damages.
It is evident from the respondent's
pleadings that their claims for loss of unused materials and for the unpaid bank
loan were special
damages. According to "Aiyar's " sale of Goods Act" (supra),
"Special damage" is that damage in fact caused by wrong. It is trite
law that
this form of damages cannot be recovered unless it has been specifically claimed
and proved or unless the best available
particulars or details have before trial
have been communicated to the party against whom it is claimed. In a claim for
loss of profits,
the normal measure of damages, as stated in section 50(3) of
the sale of Goods thereby in co-operating the common law as stated in
Barrow -V- Amand (1846) 8. QB 610. is that
contract price less the market price at the contractual time for acceptance.
This represents the amount the seller must obtain
to put himself in the position
he would have been in had the contract been carried out, since he can sell the
goods in the market.
See Mc Gregor on Damages.
Fifteenth Edition 1988.
In the instant case, the respondents,
did not, in my view, adduce evidence to prove how the figure claimed as loss of
profit was arrived
at. The Court of Appeal merely accepted the claim of US
722,259 because it was not challenged. In her judgment, Kitumba, JA said
-
"Regarding loss of profits on the 27,000 phone sets was not challenged in
cross-examination. In his evidence, PW1 stated that the
loss of profits on
27,000 sets was US 722,259. That in my view is the estimated
loss."
The learned Justices of Appeal based their decision on
loss of profits only on the provisions of sub-sections (1) and (2) without
applying those of sub-section (3) which, in my view, were the most relevant to
the issue of assessment of damages for loss of profit.
The learned Justice of Appeal also said:
"I find that the learned trial judge considered the correct principles on proof of special damages. However, she did not consider the fact that the case before her was sale of Goods Act provides......."
As I
understand it, this passage in the judgment of the Justice of Appeal appears to
mean that because the suit was about sale of
Goods the legal requirement that
special damages must be specifically pleaded and proved was not applicable. With
the greatest respect
that would be an error. I think that in a claim for damages
for breach of contract for sale of goods, both the provisions of the
Sale of
Goods Act especially section 49(3) and the legal principles on pleading and
proof of special damages are relevant and are
not mutually exclusive. This, in
my view, is supported by what Lord Wilberforce said in Reardon Smith Line
Ltd Vs Yngvar Hamsen-Tangen (Trading as HE. Hansen-Tangen) (1976) 1.WLR.989 at
998:
"I would respectfully endorse what was recently
said by ROSKIL, L.J. in Cehave N.V Vs Bremer Handek-geseellchaf in 6H (1976)
QB44,
71:
"In principle it is not easy to see why the
law relating to the contracts for the sale of goods should be different from the
law relating
to the performance of other contractual obligations, whether
charter parties or other types of contracts Sale of Goods law is but
one branch
the general law of contract. It is desirable that same legal principles should
apply to the law of contract as a whole
and that different legal principles
should not apply to different branches of that law"
The respondents' learned counsel argued that the appellants' learned counsel should not have argued against the award for loss of profit by the Court of Appeal without the leave of this court under Rule 97 of the Rules of this Count. The learned counsel did not elaborate. It would appear that he meant rule 97 (a) of the Rules of the Court, Rule 97 (a) provides:
"97 At the hearing of an appeal-
(a) no party shall without leave of the court, argue that the decision of the Court of Appeal should be reversed or varied except on a ground specified in the memorandum of appeal or in notice of cross-appeal, or support the decision of the Court of Appeal on any ground not relied on by that court or specified in a notice given under rule 87."
With due respect, I do not find any merit in the submission of the respondents' learned counsel in this connection because in ground three of the appeal, appellants complained against the Court of Appeal for "awarding general damages in addition to the award for loss of profits." To my mind ground three complains that the Court of Appeal should not have awarded general damages as well as damages for loss of profit.
The Court of Appeal awarded to the respondents Shs: 108,683,330/= as loss for
the unpaid loan they owed the Cooperative Bank. According
to Kitumba, JA in her
judgment, this was because the appellants encouraged the respondents to take the
loan, because Exhibit P5 was
to induce the bank to advance the money to the
respondents for the purpose of acquiring materials to assemble the phones, and
because
the respondents produced exhibit P.10, a letter dated 27.4.2000 from the
Cooperative Bank demanding from them repayment of the loan.
I have already held
that exhibit P.5 was not evidence of a contract between the appellants and the
respondents because, first it
did not mention the amount allegedly guaranteed,
and second, the demand to the respondents to pay the loan was not linked with
the
telephone transaction and was not addressed to the appellants. In the
circumstances, I am with the greatest respect; unable to agree
with the learned
Justices of Appeal that default by the respondents to repay the loan was an
event foreseeable by both the parties
when the appellants wrote exhibit
P.5.
The learned trial Judge found, rightly in my view, that there was no contract between the appellants and the respondent, yet she awarded US $ 260,000 as damages for loss on the unused materials. According to the learned trial Judge-
" This was based on the orders for phone sets placed by the appellants in exhibit P.3, P.5 and P.7 and on the future requirements of the defendant. The plaintiff has advanced two letters (Exhibit P.8 and P.9 from Goodwell Communications Ltd, their suppliers in Hong Kong to the effect that the plaintiffs accounts have been debited with this amount for 20,000 sets. I there fore award this to the plaintiff."
The Court of
Appeal upheld this award. With great respect I am unable to agree with the
learned Justices of Appeal firstly because
exhibit P.3, P.5 and
P.7 on which the learned trial Judge apparently relied to base the
appellant's liability in this regard did not form a contract between
the
appellants and the respondents. There having been no contract it was
inconsistent to hold the appellants liable for unused materials
valued at
USS$ 260,000 which were allegedly ordered from Hong Kong to perform a
non-existent contract, secondly the Court of Appeal (as per Kitumba JA) held
that it did not matter that PW1, the appellants' Managing Director, could
not mention the exact location of the appellant's factory to assemble the
20,000 telephones for the assembly of which the materials lost in Hong
Kong were intended. The learned Justices of Appeal said:
"P.W1 failed to describe the exact location of his workshop but explained that streets in Kampala are not numbered. This is indeed true in this country and failure to tell Court the exact location of his workshop does not render his evidence incredible."
The existence in Uganda of a factory to assemble telephones by the
respondents for supply of the same to the appellants and the existence
whether
in Uganda or Hong Kong of materials ordered for the purpose was a crucial aspect
of the respondents' case. It is my view
that it was therefore necessary for them
to prove to the required standard the existence in Uganda of such a factory. The
respondents'
evidence, in my view, failed to do so. With the greatest respect,
they appear to have had an erroneous helping hand from the learned
Justices of
Appeal, in view the passage of the judgment I have just referred to. In any case
as there was no contract for 30,000
telephone sets, there was no basis for the
award of damages for unused materials.
For these reasons, I am unable
to agree with the Court of Appeal that the respondents proved the loss of US$
260,000 worth of unused
materials in Hong Kong to the required standard. In the
circumstances, they should not have been awarded US$ 260000 for unused materials
by the High and, upheld by the Court of Appeal. I would allow grounds three,
four, five and six of the appeal. Consequently, I would
allow the appeal with
costs to the appellants here and in the courts below. I would dismiss the
cross-appeal also with costs to the
appellants.
JUDGEMENT OF ODOKI, CJ:
I have had the benefit of reading in draft the judgment of my leaned brother,
Oder JSC. I agree with him that the appeal should be
allowed with costs and the
cross-appeal should be dismissed also with costs to the appellants.
As the other members of the Court also agree, this appeal is allowed and the cross appeal dismissed, with costs to the appellant in this Court and the Courts below.
JUDGMENT OF KAROKORA, JSC:
I have had the advantage of reading in draft the judgment prepared by my learned brother, Oder, JSC. I agree with him that this appeal should be allowed with costs and the cross appeal should be dismissed with costs to the appellants.
JUDGMENT OF MULENGA. JSC
I have had the benefit of reading in draft, the judgment of my learned brother, Oder JSC and I agree with him that this appeal be allowed and the cross-appeal be dismissed with costs to the appellants.
JUDGMENT OF KANYEIHAMBA, JSC.
I have had the benefit of reading in draft the judgment of my brother, Oder,
JSC and I agree with him that this appeal be allowed
and the cross-appeal be
dismissed with costs to the appellants.
Dated at Mengo, this 23rd day of June 2005.
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