Wakilii

Seroy Airport Hotel Ltd v Uganda Breweries Ltd (Civil Suit No. 90 of 2014)

High Court · [2016] UGCOMMC 64 · 2016 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for declarations and damages arising from alleged breach of distributorship agreement
Decision
Judgment entered for the Plaintiff with damages and interest awarded on multiple heads

Observed later treatment

No later-treatment classification is recorded for this judgment.

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions—always read the source judgment before relying on it.

Holding

The High Court held that a distributorship contract existed between the parties beyond the initial three-month trial period, continuing on the terms of the original letter of intent. The Defendant breached contract by terminating the distributorship with immediate effect without giving reasonable notice as required by the Contracts Act 2010 s.140. The Court held that property and risk in goods remained with the Defendant as principal. The Plaintiff was awarded damages including UGX 197,816,434 representing the balance of funds improperly called on guarantee, UGX 90,000,000 deducted for empties, general damages in lieu of notice, and interest on various sums from the dates of deprivation.

Outcome

Judgment entered for the Plaintiff with damages and interest awarded on multiple heads

Facts

Uganda Breweries Ltd advertised for beer and spirits distributors. Seroy Airport Hotel Ltd successfully applied and was appointed distributor for Najjanankumbi territory by letter dated 12 March 2013 for a three-month trial period ending 21 June 2013. The letter stipulated targets and requirements including working capital of UGX 600,000,000, warehouse capacity, trucks and personnel. The Plaintiff deposited the required capital and commenced distribution. The relationship continued beyond 21 June 2013 without a formal written contract being executed. The Defendant made demands for a bigger warehouse. The Plaintiff obtained a bank guarantee of UGX 700,000,000 and purchased additional land. The Defendant terminated the distributorship on 20 November 2013 citing underperformance. On 21 November 2013, the Defendant called on the bank guarantee for UGX 464,596,656 before reconciliation of accounts. Partial reconciliation resulted in a consent judgment in September 2014. The Plaintiff claimed the Defendant breached contract and improperly withdrew funds.

Issues

  1. Whether there was a distributorship contract between the Plaintiff and the Defendant and if so, whether the Defendant is in breach of the same?
  2. Whether the Defendant is indebted to the Plaintiff in the sums claimed?
  3. Whether the risk in the goods held by the Plaintiff passed to the Defendant upon termination of the contract?
  4. What remedies are available to the parties?

Orders

  • Declaration granted that the Plaintiff was deprived of UGX 58,110,002 for a period of five months.
  • Declaration granted that upon termination of the contract, property in the stock, empties, cases and other goods remained vested in the Defendant.
  • Declaration granted that risk in the goods remained vested in the Defendant upon termination save that the Plaintiff had a duty of care as bailee.
  • Judgment for the Plaintiff for UGX 197,816,434 being the balance of funds improperly called on guarantee.
  • Judgment for the Plaintiff for UGX 90,000,000 retained as security for empties.
  • Judgment for the Plaintiff for UGX 345,000,000 as general damages in lieu of notice.
  • Judgment for the Plaintiff for UGX 40,000,000 as general damages for inconvenience in investing in additional land and other assets.
  • Judgment for the Plaintiff for UGX 19,400,000 as special damages for salaries.
  • Interest awarded on UGX 58,110,002 at 18% per annum from 29 June 2013 to 13 November 2013.
  • Interest awarded on UGX 243,785,170 at 18% per annum from December 2013 to September 2014.
  • Interest awarded on UGX 197,816,434 at 18% per annum from 6 December 2013 to date of judgment.
  • Interest awarded on UGX 90,000,000 at 18% per annum from June 2013 to date of judgment.
  • Interest awarded on total decretal sum at 8% per annum from date of judgment until payment in full.
  • Costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Agency — Principal and Agent — Distributorship Agreement — Formation and Continuation
Where parties enter a distributorship arrangement for a probationary period with a promise to award a full contract upon satisfactory performance, and the parties continue the arrangement beyond the probationary period without executing a formal contract, a contract of agency subsists on the terms of the original letter of intent, as modified by the parties' conduct and any express variations.
Agency — Termination — Notice Requirements — Contracts Act 2010
Under section 140 of the Contracts Act 2010, a principal who revokes an agency must give reasonable notice to the agent and make good any damages suffered. Termination with immediate effect without notice constitutes breach of law. What constitutes reasonable notice depends on the circumstances, including the nature and duration of the relationship and investments made by the agent.
Agency — Agent's Interest in Property — Section 136 Contracts Act 2010
Where an agent has an interest in property which forms the subject matter of an agency, the agency shall not, in the absence of an express contract, be terminated to the prejudice of that interest. The fact that an agent has an interest in property does not imply the property belongs to the agent; the property remains with the principal and the agent may have a lien on it.
Agency — Principal's Duty to Indemnify Agent — Contracts Act 2010 s.156
Under section 156 of the Contracts Act 2010, an agent shall be indemnified against the consequences of all lawful acts done in the exercise of authority conferred upon the agent. Where the principal employs the agent to do an act and the agent does the act in good faith, the principal is liable to indemnify the agent against loss, liability and consequences of the act. This includes expenses and investments made by the agent at the direction of the principal.
Agency — Property and Risk — Distributorship of Goods
In a distributorship arrangement where the distributor acts as agent rather than as buyer, and is required to remit proceeds of sales to the principal and return stock and empties upon termination, property in the goods remains with the principal. Risk in the goods also remains with the principal, save that the distributor has the duty of care of a bailee in respect of the goods while in possession.
Damages for Breach of Contract — Election Between Capital Loss and Loss of Profits
Following Cullinane v British Rema Manufacturing Co Ltd, a plaintiff claiming damages for breach of contract must elect either to claim reliance expenditure (capital loss) or to claim loss of expected profits, and is not entitled to recover both. A claim for loss of profits proceeds on the footing that capital expenditure had been incurred and means the plaintiff should not recover gross income or profits expected under the contract and also the expenditure incurred in performance which the plaintiff intended to meet from the gross return.
Exemplary Damages — Availability in Contract Claims
Exemplary damages are not awarded for breach of contract. Following Rookes v Barnard, exemplary damages may only be awarded in tort cases involving oppressive, arbitrary or unconstitutional action by government servants, or where the defendant's conduct was calculated to procure benefit at the plaintiff's expense. Where a claim succeeds solely on breach of contract, there is no basis for an award of exemplary damages.

Legislation cited (15)

Cases cited (22)

  • Foley v Classique Coaches Ltd [1934] 2 KB 1
  • May & Butcher Ltd v R [1934] 2 KB 17
  • Bweya Steelworks v National Insurance Corporation [1985] HCB 58
  • Mayanja Nkangi v National Housing Corporation [1972] 1 ULR 37
  • Courtney and Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 All ER 716
  • Walford v Miles [1992] 1 All ER
  • Peter Kaggwa v The New Vision Printing and Publication Corporation (HCCS No. 244 of 2002)
  • Katumba Ronald v Kenya Airways Ltd (Civil Appeal No. 9 of 2008)
  • Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130
  • Ellis v Duke of Bedford [1899] 1 Ch 494
  • Guaranty Trust Company of New York v Hannay and Company Limited [1915] 2 KB 536
  • Aya Investments (U) Ltd v DAMCO Logistics (U) Ltd (HCMA No. 15 of 2015)
  • Hadley v Baxendale (1854) 9 Ex 341
  • Victoria Laundry v Newman [1949] 2 KB 528
  • Robert Coussens v Attorney General (SCCA No. 8 of 1999)
  • British Transport Commission v Gourley [1955] 3 All ER 796
  • Cullinane v British Rema Manufacturing Company Ltd [1953] 2 All ER 1257
  • Mohanlal Kakubhai Radia v Warid Telecom Uganda Ltd (HCCS No. 224 of 2011)
  • Robert Kenneth Bataringaya v Attorney General (HCCS No. 250 of 2011)
  • Filimon Kaggwa v Luweero Town Council (HCCS No. 405 of 2002)
  • Rooks v Barnard [1964] AC 1129
  • Obongo v Municipal Council of Kisumu [1971] 1 EA 91

Full judgment

↓ Download PDF

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

Seroy Airport Hotel Ltd v Uganda Breweries Ltd (Civil Suit No. 90 of 2014) [2016] UGCommC 64 (19 August 2016)
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.