Court name
Commercial Court of Uganda
Judgment date
4 May 2015

Equator International Distributors Ltd v Beiersdorf East Africa Ltd & Anor (Miscellaneous Application-2014/1127) [2015] UGCommC 123 (04 May 2015);

Cite this case
[2015] UGCommC 123

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL DIVISION]

MISC. APPLICATION No. 1127 OF 2014

(ARISING FROM CIVIL SUIT NO. 877 OF 2014)

       EQUATOR INTERNATIONAL DISTRIBUTORS LTD ::::: APPLICANT/PLAINTIFF

VERSUS

  1. BEIERSDORF EAST AFRICA LTD
  2. DEMBE TRADING ENTERPRISES LTD :::::::: DEFENDANTS/RESPONDENTS

 

BEFORE:      HON. MR. JUSTICE B. KAINAMURA

 

RULING

The applicant brought this application for a temporary injunction against the respondents under O 41 r 1 CPR and S 98 of CPA. The applicant company has held since 1997 an informal distributorship/agency in Uganda for NIVEA and other branded goods of the 1st respondent. This arrangement was formalized by an agreement between the parties in January 2013. In February 2013 a further agreement was initiated at the instance of the applicant but the 1st respondent did not sign. The parties continued relating informally under same arrangement as they had prior 2013. During the period the applicant and the 1st respondent have defined their business relationship policy orally and through electronic communication. The applicant now has information that the 1st respondent sometime in December 2014 engaged the 2nd respondent as its distributor/agent in Uganda and has ceased to honour orders from the applicant.

The applicant now seeks orders that:-

  1. A temporary injunction be issued restraining the 1st respondent, its servants, agents and/or any person holding title or authority from it from engaging the 2nd respondent or any person other than the applicant as the 1st respondents distributor/agent for purpose of importing into Uganda, storage, promotion, sale or distribution of the Nivea or other Beiersdof branded products until the disposal of the main suit.
  2. Cost of the application be in the cause

Mr. Muzmil Kibedi and Ms. Lydia Tamale appeared for the applicant and Mr. Sekatawa appeared for the 1st respondent and together with Ms. Sophie Dhatemwa for the 2nd respondent.

The grounds for the grant of a temporary injunction are now well settled. In Issa Kikungwe & 4 others Vs Stanbic Bank & 3 ors MA 394 and 395 of 2004 (unreported) court held that granting of a temporary injunction is an exercise of judicial discretion for the purpose of preserving the status quo until the questions to be investigated in the suit have finally been disposed of. For court to exercise the discretion the applicant must satisfy three main legal tests viz:-

  1. The applicant has to show a prima facie case with probability of success. This has been variously stated in other cases that the first test is really whether there are serious questions to be tried.
  2. A temporary injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury which cannot be compensated by an award in damages and
  3. If the court is in doubt, it will decide the application on the balance of convenience.

In the case at hand, Learned Counsel for the applicant submitted that the applicant has demonstrated that it has a prima facie case and that the main suit is neither frivolous nor vexatious. That the applicants claim against the respondents is for breach and/or wrongful termination of contract and that the applicants case is based on the fact that the 1st respondent cut off all lines of communication with the applicant and neglected to honour the applicant’s orders for goods and purported to terminate the applicants distributorship/agency contract without prior reasonable notice and secretly diverted it to the 2nnd respondent.

As to the test of suffering irreparable injury which cannot be compensated by an award of damages, Counsel submitted that the applicant has been the 1st respondents sole distributor for over 17 years and it has built a strong business network reputation and goodwill in the market and that the injury that will be occasioned to the applicant from the termination of the distributorship will be irreparable.

As to the balance of convenience, Counsel submitted that the comparative inconvenience likely to arise from failure to grant the application tilts in favour of the applicant. That denial of a temporary injunction is bound to impede the applicant’s efforts to collect money from creditors, result into beach of the applicants supply contracts and interfere with the applicant’s obligations to pay creditors.

As to the status quo, Counsel submitted that the status quo sought to be maintained is that the applicant has been the 1st respondent’s distributor of goods in Uganda and at the time of filing the suit and this application there is no other distributor of the 1st respondent’s products in Uganda and that this is the status quo the applicant seeks to be maintained.

Counsel for the 1st respondent contested this application. He submitted that it is the 1st respondent assertion that the plaint as filed discloses no cause of action against the 1st respondent because the contract executed between the parties on 14th February 2014 (by the applicant) and 24th February 2014 (by the respondent) was valid for a period of one year and accordingly has expired. Counsel further submitted that even then, the contract did not appoint the applicant as sole distributor of the 1st respondent’s products in Uganda as alleged (see clause 5.1 of agreement). Further that the grant of an injunction against the 1st respondent in the terms prayed for would amount to removing the powers owned and held by the 1st respondent in dealing in its goods in Uganda.

On the question of whether the applicant will suffer irreparable injury which cannot see adequately compensated for by damages, Counsel argued that should court be inclined to find that the applicant has a valid claim against the 1st respondent, then such loss that may be proved as having been occasioned to the applicant can be atoned for by damages and that the applicant’s pleadings clearly quantify the damages and their extent and court would on the basis of evidence adduced be in a position to assess and determine the damages if any. Further that   the applicant has in its plaint prayed for general damages for breach of contract and the court would be able to evaluate all the heads of damages and award what would in courts view be adequate compensation to the applicant if it is the successful party.

On the question of the balance of convenience, Counsel submitted that the balance of convenience lies with the 1st respondent because it stands to lose more if an injunction is granted since this will prevent the 1st respondent from importing into the country and dealing in its products and yet its ownership of and the rights to trade in the branded goods is not an issue for trial in the main suit.

Counsel for the 2nd respondent also contested the application. Counsel submitted that the applicant’s cause of action against the 2nd respondent is premised on “reliable information” which is nothing but a rumor and baseless allegation as the applicant has not attached to its plaint or affidavit any document verifying or in any way pointing to the allegation.

 Counsel further argued that the main suit does not disclose a prima facie case with probability of success against the 2nd respondent and neither does it raise any serious triable questions against the 2nd respondent.

In rejoinder to the 1st respondent’s submissions, Counsel for the applicant submitted that the applicants claim against the respondents is for breach and wrongful termination of the contract of sole distributorship/agency which has subsisted between the parties since 1997 and that the applicability and construction of the contract referred to by Counsel for the 1st respondent will be subject of the main suit. On the question of irreparable damage, Counsel reiterated his submission that the injury likely to be occasioned by the abrupt termination shall be irreparable and cannot be adequately compensated for by way of damages.

In rejoinder to the 2nd respondent’s submissions, Counsel for the applicant submitted that the applicant is challenging the 2nd respondent’s conduct of secretly accepting appointment as the 1st respondent’s distributor/agent of its goods in Uganda.

I have read the pleadings and considered the submissions of all Counsel. An interlocutory application of this nature for a temporary injunction is designed to provide interim relief pending the disposal of the main suit which still has to be heard on its merits. In this application the relief sought, if granted, should achieve the goal of preserving the status quo between the parties until the substantive suit is disposed of.

The applicant in this case is aggrieved that its distributorship/agency relationship with regard to the products of the 1st respondent was wrongfully terminated and granted to the 2nd respondent. This termination became apparent to the applicant in November 2014 when its order with the 1st respondent for goods was not honoured and still remains so. According to the submission of Counsel for the applicant, the status quo sought to be maintained is that the applicant has been the 1st respondent’s distributor of the goods in Uganda and that as at the time of filing the suit and this application there is no other distributor. To my mind the latter assertion by Counsel then begs the question – why then did the applicant/plaintiff bring on board the 2nd respondent/defendant if it had not yet been granted the dealership/agency? Surely not on the basis of a rumour. In my view, clearly the more imported question to determine is which status quo can be preserved in this case. It is apparent that to preserve the status quo as prayed for by the applicant is in effect to prevent the 1st respondent from trading in its goods on the Uganda market till the disposal of this application. This will, in my view, have the effect of granting one of the main prayers in the suit which is for specific performance something that cannot be done through an application of this nature. That said, to my mind the status quo has already changed as clearly set out in paragraph 6 (V) (i) and (ii) of the amended plaint.

The above therefore leads to one conclusion, that is the legal test required for the grant of a temporary injunction cannot be applied.

The above said, I am also in agreement with Counsel for the 1st respondent that the applicant’s pleadings thoroughly quantify the damages and their extent and would, once granted by court, atone for any loss arising from the breach of contract. My view is that the true remedy of the applicant if at all, lies in the suit.

Accordingly this application is dismissed.  

Costs will be in the cause.

I so order

 

B. Kainamura

Judge

04.05.2015