THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA HOLDEN AT KAMPALA
CIVIL SUIT NO 126 OF 2010
UGANDA BAATI LTD)……………………………………………………………………… PLAINTIFF
PATRICK KALEMA)……………………………….……………………………………… DEFENDANT
BEFORE HONOURABLE MR JUSTICE CHRISTOPHER MADRAMA
On the 12th of April 2010 the plaintiff filed this suit against the defendant to recover a sum of Uganda shillings 85,499,800/= from the defendant, interest, general damages for breach of contract and costs of the suit. The plaint avers that the plaintiff is a limited liability company dealing in roofing materials among other building supplies and accessories.
The facts constituting the plaintiffs cause of action are that the plaintiff made an arrangement with the defendant for the supply of various building materials to the defendant. The plaintiff opened and account for the defendant reflecting the transactions in which account would reflect the make payments made by the defendant on materials supplied to him and any amount owing. The defendant drew cheques all on Centenary Bank Ltd as follows:
Dated 29th of January 2009 a cheque for Uganda shillings 7,478,000/=.
Dated 6 February thousand nine a cheque for Uganda shillings 4,256,000/=.
Dated 14 February 2009 a cheque for Uganda shillings 14,716,800/=.
Dated 2 March 2009 a cheque for Uganda shillings 13,481,500/=
Dated 4 March 2009 a cheque for Uganda shillings 2,183,100/=
Dated 10 March 2009 a cheque for Uganda shillings 8,274,000/=
Dated 15 March 2009 a cheque for 5,146,000/=
Dated 17 March 2009 a cheque for 11,003,500/=
Dated 24 March 2009 a cheque for 3,075,000/=
Dated 28 April 2009 a cheque for 3,076,000/=
Dated 30 April 2009 a cheque for 12,710,000/=.
The cheque dated 6th of February 2009 was returned with the words "insufficient funds". The plaintiff immediately informed the defendant of the dishonour of the cheque and the defendant in turn requested the plaintiff not to present for payment any of the other cheques listed above as well.
The plaint avers that despite this good will gesture the defendant failed, refused or neglected to pay the plaintiff. Prior to the filing of the suit the plaintiff demanded that the defendant settles the above outstanding total amount in vain.
The plaintiff avers that it suffered loss in that it was unable to use the money for its other businesses thereby occasioning it substantial loss. Consequently the plaintiff seeks:
Payment of Uganda shillings 85,499,800/= for goods supplied and based on the face value of cheques issued;
Interest on principal claim at 25% per annum.
General damages for breach of contract.
And costs of this suit.
The record shows that summons to file a defence were issued by the Deputy Registrar of this court on the 12th of April 2010. The affidavit of the process server of the High Court, Mr. Oketch Venja of Shonubi Musoke and Co. Advocates avers on oath that the Defendant was served.
Paragraph 3 of the affidavit of service avers:
“On 20 April 2010 I went to Nakawa, where the defendant carries out his business to serve and on reaching there I found the defendant who was pointed out to me by one Dennis of Uganda Baati and I fully introduced myself and the purpose of my visit by tendering to him a copy of the summons together with a copy of the plaint and asked him to sign on the original summons which he accepted by appending a signature on the original summons and I left him a copy of the summons to file a defence together with a copy of the plaint….”
The summons was acknowledged on 20 April 2010 and a writing of the names Kalema Patrick is the acknowledgement. On the 21st of May the plaintiff’s Advocates filed an application in court seeking an order for an interlocutory judgment under order 9 rule 8 of the Civil Procedure Rules against the defendant and for the suit to be set down for formal proof.
The Registrar on the 21st of May 2010 entered interlocutory judgment under order 9 rule 8 of the Civil Procedure Rules and the suit was set down for formal proof. The record shows that this suit was initially sent for mandatory mediation. However mediation was not attempted as shown by the mediator's report. The mediator's report dated the 1st day of July 2010 states:
"This matter was referred to me for mediation pursuant to directions for mediation by the registrar dated April 22, 2010. The plaintiff was represented by learned counsel Peter's Musoke …
No mediation was held because the plaintiff had already obtained an ex parte Judgment against the defendant. The matter is closed as concluded before mediation."
The record shows that there was an ex parte interlocutory judgment. The suit was fixed for hearing before me on the 14th of December 2011 whereupon it was fixed for formal proof on the 20th of February 2012. I declined the request of the plaintiff’s counsel to file witness statements on the ground that they were inappropriate because there was no room for cross examination and testing the truthfulness of the witnesses. The suit proceeded for formal proof on the 20 of February 2012. The plaintiff was present and through its representative the Senior Executive Credit and Receivables Manager who also testified as PW1. At the hearing the plaintiff was represented by Counsel Brian Tendo who led PW1 in his examination in chief and thereafter opted to address the court in written submissions.
PW1 Jitendra Parihar, a Hindu by religious belief, undertook to tell the truth. There was some difficulty in comprehending his oral testimony because of the accent of English that he spoke. From his testimony however, I was able to gather the following facts.
PW 1 is the Senior Executive, Credit and Receivable Manager of the plaintiff for the last two years. He testified that the defendant owes the plaintiff Uganda shillings 85,499,800/= which arose when he came to Uganda Baati and made a special arrangement to obtain steel products on credit. He bought goods on credit against post dated cheques which were identified and exhibited as exhibits P1 – P11. The cheques collectively amount to Uganda Shillings 85,499,800/=. The plaintiff wrote a letter dated February 2010 through Messrs Shonubi Musoke and Co Advocates to the defendant demanding for due payment of UG Shs 85,499,800/= and the defendant accepted and signed on this letter. The letter dated 12th February 2010 and acknowledged by Kalema Patrick of Nakawa was admitted in evidence as exhibit P12. The letter addressed to the defendant reads in part:
"It is well within your knowledge that you owe the above sums which comprises of several dishonoured cheques. Our clients supplied you with various goods to a tune of Uganda shillings 85,499,800/=. Please find attached a copy of your running account and the dishonoured cheques for your reference.
Our client has informed us that despite repeated reminders to pay this outstanding sum of Uganda shillings 85,499,800/=, you have chosen to ignore or deliberately decided not to pay this outstanding balance. Be informed that this continued disregard of the obligations towards our client amounts to breach of contract under the law and also your bounced cheques are actionable in the courts of law.
Our clients instructions are to demand that you immediately pay Uganda shillings 85,499,800/=, costs of Uganda shillings 2,000,000/= within seven days from the date of this letter.
You are hereby warned that failure to comply with the contents of this letter within the stipulated time will mean the commencement of legal action to your regrettable detriment, heavy embarrassment and colossal costs.…"
After this letter the defendant did not pay any amount. The cheque exhibit P2 dated 6th February 2009 was returned with the words “insufficient funds”. Out of 11 cheques, the defendant advised only one cheque to be banked and after it was banked, it bounced due to insufficient funds. The defendant did not tell the plaintiff to re-bank the cheques. The plaintiffs officials kept asking whether to re-bank and the defendant said he had no funds and after wards the defendant stopped responding as to whether there were funds or not. Had the defendant cleared his bills the plaintiff would have used the capital but they lost the money to the defendant. PW1 testified that the defendant used to be a good customer and once he writes a cheque he used to bring cash and he is given back his cheque until he defaulted.
In the written submissions of the plaintiff, the following issues are addressed namely:
What were the terms of the agreement between the parties in respect of the goods supplied by the plaintiff?
Whether the defendant issued the cheque was dishonoured?
What remedies are available to the plaintiff?
What were the terms of the agreement between the parties in respect of the goods supplied by the plaintiff?
Counsels written submissions are that the evidence of PW1 is that there were pre-contractual negotiations between the parties before the supply/sale of the metal products were made to the defendant. This is typical in most commercial transactions. However, these were oral terms as stated by PW1 and one of which was that the defendant was given 45 days credit on his approved running account for the supply of metal products by the plaintiff. The defendant was a paying customer until he started defaulting on payments.
On whether the defendant issued the cheque which was dishonoured? Counsel relied on section 72 of the Bills of Exchange Act cap 68 to the effect that the cheques were bills of exchange drawn on a banker payable on demand. A bill of exchange on the other hand is defined under section 2 of the Act as "an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand a fixed or determinable future time a sum certain in money to or to the order of a specified person or to a bearer." Counsel tabulated the cheques issued by the defendant and their corresponding values and the total sum involved.
Counsel submitted that exhibit P2 was returned with the words “insufficient funds”. This cause of action is subject to section 47 of the Bills of Exchange Act cap 68 which provides that where a bill has been dishonoured by non-payment, notice of dishonour must be given to the drawer. Counsel relied on Redfox Bureau De Change vs. Anke Alemayehu & Another (1997 – 2001) UCLR 359 where the court stated that the cause of action arose when the cheques were dishonoured. This is the position with respect to exhibit P2. He submitted that the plaintiff has met the criteria as a notice of dishonour was communicated to the defendant.
In Sembule Investments Ltd vs. Uganda Baati MA No. 0664 of 2009 it was held that judgment for the amount on cheques in issue cannot be held up except by reason of a plausible defence under the Bills of Exchange Act. The defendant has no defence as interlocutory judgment was entered in favour of the plaintiff.
Demand for the outstanding amounts on the cheque were was made in exhibit P2. In the case of Naris Byarugaba vs. Shivam MKD Ltd (1997) HCB 71 court took view that a bill of exchange constitutes, prima facie evidence of the sum of money printed on it as being due to the person in whose favour the bill is drawn. Court further held that in law, a debt is only discharged when a bill of exchange is honoured. Under section 46 of the Bills of Exchange Act, a cheque is dishonoured when it is duly presented for payment and payment is refused or cannot be obtained as was the case in exhibit PE 2.
Counsel submitted that the defendant was given the said cheques exhibits P1 – P11 as an attempt to pay off the debt arising from the supply of metal products to the defendant. The one cheque having been dishonoured the plaintiff having been advised not to bank the rest the sum of Uganda shillings 85,499,800/= is owed to the plaintiff by the defendant. Counsel referred to the case of Kotecha vs. Mohammed (2002) 1 EA 112, was held that a bill of exchange is treated as cash which entitles the holder in the ordinary way to judgment. If one is a seller who has taken bills for payment, one is entitled to judgment, irrespective of any cross-claim which can be addressed in a separate action. Counsel therefore submitted that the plaintiff has clearly shown that the cheques issued by the defendant (though not all banked on the advice of the defendant) were not honoured and it was a proper case in which the plaintiff should recover the entire value of the cheques issued as the defendant (to date) has not shown any plausible defence to the claim.
Issue No. 3 what remedies are available to the plaintiff?
Under section 46 (2) of the Bills of Exchange Act Cap 68, where a bill is dishonoured by non-payment, an immediate right of recourse against the drawer and endorser accrues to the holder. Counsel submitted that the plaintiff has an immediate right to recover from the defendant Uganda shillings 85,499,800/=. Furthermore under section 56 of the Bills of Exchange Act cap 66 where a bill is dishonoured, the measure of damages recoverable by the holder from the drawer include inter alia, the amount on the bill, interest on it from the time of presentment for payment if the bill is payable on demand, and from maturity of the bill in any other case. In Bharat’s Dishonour of Cheques (Law and Practice) 1996) by Rajesh at page 33, “The basis of this liability is that the cheque even after dishonouring works as a piece of evidence, wherein the presumption is that the holder of the cheque is the holder in due course and that the cheque was issued for consideration or debt or any other liability as the case may be.” Thus in most cases for the recovery of the amount where the cheque is the sole basis of evidence it is seen that the complainant/petitioner succeeds in getting the relief. Counsel further cited Maersk Uganda Ltd vs. First Merchant International Trading Ltd CS No. 143 of 2009 where I held that:
"... Issuance of a cheque which bounces is a serious economic crime under the penal laws of Uganda and should not be taken lightly even in a civil case. The cheque is supposed to be as good as cash and even though its use is likely to diminish with the introduction and/or adoption of electronic modes of payment, the courts will fault any person who issues a cheque for presentment to a bank by the holder thereof knowing or not caring whether it would be dishonoured."
The plaintiff’s counsel prayed for the value of the cheques issued being Uganda shillings 85,499,800/=, interest at 25% per annum on the decreed sum, Costs of the suit and any other relief as this honourable court may deem fit to grant
I have carefully considered the submissions of learned counsel for the plaintiff, the pleadings and evidence on record. As noted above an interlocutory judgment was entered by the Deputy Registrar of this court on the 21st of May 2010. This was based on the affidavit of service filed by a process server employed by the plaintiff’s advocates one Mr Oketch Venja in his affidavit dated 21st of May 2010 and which I have quoted above. The proceedings depend on the integrity and truthfulness of the process server. The matter came to me for formal proof only. The rules are explicit that where a defendant fails to file a defence on or before the day fixed in the summons and the plaintiff is desirous of proceeding upon default of filing the defence, the plaintiff shall file an affidavit of service upon the court record. Order 9 rules 5 of the Civil Procedure Rules applies where a defendant who was served with summons has failed to file a defence on or before the day fixed in the summons for him or her to file a defence. A plaintiff who is desirous of proceeding ex parte or in default of the defence is obliged to file an affidavit of service upon the court record to prove that the defendant was served and did not file a defence within the prescribed time.
Order 9 rules 5 is read together with order 9 rules 8 of the Civil Procedure Rules which provides that:
"where the plaint is drawn with a claim for pecuniary damages only or for detention of goods with or without a claim for pecuniary damages, and the defendant fails or all defendants, if more than one, fail to file a defence on or before the day fixed in the summons, the plaintiff may, subject to rule 5 of this order, enter an interlocutory judgment against the defendant or defendants and set down the suit for assessment by the court of the value of the goods and damages or the damages only as the case may be in respect of the amount found to be due in the course of the assessment."
In this case there was a claim for a liquidated demand of Uganda shillings 85,499,800/=. The liquidated demand was not for assessment and if it wasn't for the claim for interest or damages the plaintiff would have been entitled to an order under order 9 rule 6 of the Civil Procedure Rules. I do not see how in this case be distinguished from cases where the plaintiff claims a liquidated sum only as far as entitlement to default in respect of the claim for a liquidated sum is concerned. In this case, the plaintiff claimed interest and general damages in addition to the liquidated sum.
That notwithstanding I agree with the authorities cited by counsel for the plaintiff. All the cheques were issued in the year 2009 by the defendant to the plaintiff. The cheques were dated between 29 January and 30 April 2009. Summons to the defendant was issued on 12 April 2010 almost a year later. Considering the evidence on record, the plaintiff has proved its case against the defendant on the balance of probabilities. There is nothing the court can do about the fact that the defendant did not file a defence. Compliance with order 9 rule 5 of the Civil Procedure Rules is supposed to be a sufficient safeguard in that the affidavit of service proves that the defendant was served. This depends on the integrity of the process server. I have noted that the process server did not know the defendant personally and the defendant was pointed out to him by one Dennis an official of the plaintiff. No sufficient details of Dennis were given in the affidavit of service. This is quite imperfect and uncomfortable but nothing can be done about it at this stage of the proceedings.
In the premises the plaintiff is entitled to the sum of Uganda shillings 85,499,800/= which is hereby awarded to the plaintiff. The plaintiff is awarded interest at 18% from the date of filing the suit until the date of judgment. The plaintiff abandoned the claim for general damages in that the Counsel did not address the court on any quantum of damages. The interest claim is sufficient in the circumstances. The plaintiff is additionally awarded interest at 15% from the date of judgment till payment in full. Costs of the suit are awarded to the plaintiff.
Ruling delivered in court this 9th day of March 2012.
Hon. Christopher Madrama
Judgment delivered in the presence of:
Hon. Christopher Madrama
9th of March 2012