Automated Summary
Key Facts
SurgiPharm Uganda Ltd supplied drugs worth Shs.21,288,000 to Noble Health Ltd in 2001 under a one-month payment agreement. Two post-dated cheques were issued but dishonored, with Shs.7,000,000 paid later. An agreement to deposit drugs as security (not outright settlement) was made, later sold in 2004 for Shs.3,200,000. Court found Tony Badebye (Noble Health's MD) jointly and severally liable, Susan Munalwa not liable. Final judgment: Shs.11,188,000 principal, Shs.6,042,960 interest (21% p.a. for 2 years), Shs.1,000,000 general damages, and 25% p.a. interest from judgment date.
Transaction Type
Sale of Goods
Issues
- The court determined whether the 1st and 2nd Defendants (Tony Badebye and Noble Health Ltd) are jointly and severally liable for the debt, based on the shareholder's guarantee. It found Tony Badebye personally liable as he signed the guarantee, while Susan Munalwa was discharged from liability due to insufficient evidence of her signature on the guarantee document.
- The court addressed whether the Defendants are indebted to the Plaintiff for Shs.26,575,293- arising from an alleged breach of contract, including the validity of the supply of goods worth Shs.21,288,000- in 2001 and the subsequent dishonored cheques. It also examined if the debt was reduced by Shs.7,000,000- paid in October 2001 and whether the drug stocks deposited as security further offset the balance to Shs.14,388,000-.
Holdings
- The court found that the 1st Defendant (Noble Health Ltd) and 2nd Defendant (Tony Badebye) are indebted to the Plaintiff (SurgiPharm Uganda Ltd) in the sum of Shs.11,188,000 for the supply of drugs. This amount accounts for the initial supply of Shs.21,288,000, partial payment of Shs.7,000,000, and adjusted for bounced cheque penalties.
- Tony Badebye (2nd Defendant) is jointly and severally liable with Noble Health Ltd for the debt due to his personal guarantee under the shareholder's guarantee. Susan Munalwa (3rd Defendant) was discharged from liability as her signature on the guarantee was not genuine.
- General damages of Shs.1,000,000 were awarded to the Plaintiff for breach of contract, as no specific figure was provided by the Plaintiff and such damages are not quantifiable in monetary terms.
- The court awarded interest at 25% per annum on the outstanding amounts (principal, interest, and general damages) from the date of judgment until full payment, reducing the contractual 36% rate as it was deemed excessive.
- The court rejected the Plaintiff's claims for Shs.1,438,000 in debt collector fees and Shs.2,392,500 in legal costs due to lack of evidentiary support and procedural requirements.
Remedies
- Costs of the suit awarded to the Plaintiff, subject to final bill submission for taxation
- Interest of 25% per annum awarded on (a), (b) and (c) from the date of Judgment till payment in full
- Shs.6,042,960- (six million forty two thousand nine hundred sixty only) awarded as interest on the outstanding balance for the period October 2001 - October 2003 at 21% p.a.
- Shs.11,188,000- (eleven million one hundred and eighty thousand only) awarded as the balance due on the supply of drugs
- Shs.1,000,000- (one million only) awarded as general damages for breach of contract
Contract Value
21288000.00
Monetary Damages
18230960.00
Legal Principles
- General damages of Shs.1,000,000 were awarded for the breach of contract, as the court deemed it adequate compensation for the Plaintiff's losses.
- The court acknowledged the Plaintiff's mitigation of loss by selling the security drugs to Neon Pharmacy Ltd at a reduced price to offset the debt.
- The court ruled that the Managing Director (DW1 Badebye) is jointly and severally liable with the company (Noble Health Ltd) for the debt due to his personal guarantee.
- The court found the contractual interest rate of 36% p.a. to be excessive and unconscionable, adjusting it to 21% p.a. as a reasonable alternative.
Precedent Name
Juma -Vs- Habib
Key Disputed Contract Clauses
- The Plaintiff's credit policy required shareholders to sign guarantees for debts. The court found the 2nd Defendant (Tony Badebye) liable under this clause, while the 3rd Defendant (Susan Munalwa) was discharged due to insufficient evidence of her signature on the guarantee.
- The credit application form (P. Exh. 1) imposed a Shs.50,000- penalty for each dishonored cheque. The court found the Defendants liable for these penalties, adjusting the debt balance to account for the bounced Shs.11,288,000- and Shs.10,000,000- cheques.
- The credit agreement included a 36% annual interest rate for overdue accounts. The court reduced this to 21% p.a., citing the original rate as excessive and unconscionable, referencing the precedent Juma -Vs- Habib [1975] EA 103 (T).
- An agreement allowed the Plaintiff to hold drug stocks as security for the debt. The court ruled this arrangement did not constitute an outright settlement, requiring the Defendants to repay the remaining balance after the drugs were sold at a reduced price in 2004.
- The contract stipulated payment within one month from the date of receipt of goods. The court examined whether this term was breached when the Defendants failed to pay the Shs.21,288,000- debt promptly, leading to dishonored cheques and subsequent disputes over partial payments.
Judge Name
Yorokamu Bamwine
Passage Text
- the interest at 36% p.a. was excessive... I would disallow this claim... the most this Court can allow is interest at the rate of 21% p.a.
- He therefore made a personal guarantee of the payment... I would discharge her from personal liability and I do so.
- I can therefore safely make a finding that the sale took place and I do so.
Damages / Relief Type
- Shs.11,188,000 in compensatory damages for the outstanding debt balance
- 25% annual interest on all amounts from the date of judgment until full payment
- Shs.6,042,960 in interest at 21% p.a. for the period October 2001 - October 2003
- Shs.1,000,000 in compensatory damages for breach of contract