Wakilii

Nakamya v Kinyera (Miscellaneous Application 538 of 2024)

High Court · [2024] UGCOMMC 167 · 2024 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to set aside default judgment entered in summary suit for breach of motor vehicle purchase contract
Decision
Default judgment set aside; applicant granted leave to appear and defend main suit

Observed later treatment

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Holding

Held that the default judgment should be set aside where the contractual default interest rate of 10% per day (approximately 3,600% per annum) appeared harsh and unconscionable on its face, warranting full investigation as to whether it was a genuine pre-estimate of damage. The court exercised its discretion under section 26(1) of the Civil Procedure Act to grant leave to defend, notwithstanding that the application was filed one day late.

Outcome

Default judgment set aside; applicant granted leave to appear and defend main suit

Facts

The applicant purchased a motor vehicle from the respondent on 5 November 2021 for UGX 15,500,000. She paid UGX 14,800,000 and agreed to pay the balance of UGX 700,000 within 3 days. The contract provided that unpaid balance would attract default interest at 10% per day. The applicant claimed she paid the balance through a broker, but the respondent denied receipt. On 18 January 2024, the respondent filed a summary suit claiming the balance plus accrued default interest totalling UGX 55,300,000. The applicant was served with summons on 19 January 2024 requiring a response by 29 January 2024. She filed an application for leave to defend on 30 January 2024, one day late and without seeking leave to file out of time. Default judgment was entered in favour of the respondent. The applicant then sought to set aside the default judgment.

Issues

  1. Whether the default judgment in Civil Suit No. 65 of 2024 should be set aside.

Orders

  • The default judgment entered in Civil Suit No. 65 of 2024 is set aside.
  • The Applicant is granted leave to appear and defend Civil Suit No. 65 of 2024.
  • The Applicant shall file her written statement of defence in Civil Suit No. 65 of 2024 within 10 days from the date of this order.
  • Miscellaneous Application No. 142 of 2024 and Miscellaneous Application No. 537 of 2024 are overtaken by events and, accordingly, dismissed with no order as to costs.
  • Costs of this application shall abide by the cause.

Rules and key headnotes

Civil Procedure — Setting Aside Default Judgment — Good Cause — Harsh and Unconscionable Interest Rates
A default judgment may be set aside on grounds of good cause where the contractual interest rate appears harsh and unconscionable and requires investigation as to whether it represents a genuine pre-estimate of damage flowing from breach.
Contract Law — Interest Rates — Harsh and Unconscionable Terms — Judicial Discretion
Section 26(1) of the Civil Procedure Act empowers the court to refuse enforcement of a contractually-agreed interest rate if the court considers it harsh and unconscionable, and to substitute a rate the court considers just.
Contract Law — Penalty Clauses — Distinction from Liquidated Damages — Pre-Estimate of Loss
An interest provision that is not a genuine pre-estimated assessment of damage flowing from breach should be struck down as harsh and unconscionable. A default interest rate of 10% per day (approximately 3,600% per annum) causing a debt of UGX 700,000 to grow to UGX 55,300,000 in little over three years is prima facie harsh and unconscionable.
Civil Procedure — Service of Summons — Effective Service — Late Filing
Where a defendant is effectively served with summons but files an application for leave to defend outside the prescribed time without seeking leave to file late, the court retains discretion to set aside default judgment if the defendant demonstrates good cause in the form of a triable defence.

Legislation cited (7)

Cases cited (4)

  • Post Bank (U) Ltd v Abdu Ssozi (Supreme Court Civil Appeal No. 08 of 2015)
  • Geoffrey Gatete and Another v William Kyobe (Supreme Court Civil Appeal No. 7 of 2005)
  • Crane Bank Ltd v Kabuye Victoria (High Court Miscellaneous Application No. 719 of 2007)
  • R.L. Jain v Loy Komugisha and 2 Others (High Court Civil Suit No. 98 of 2013)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Nakamya v Kinyera (Miscellaneous Application 538 of 2024) [2024] UGCommC 167 (31 May 2024)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.