Wakilii

Smile Communications Limited v Eaton Towers Uganda Limited (Civil Suit No 607 of 2016)

High Court · [2017] UGCOMMC 284 · 2017 Preliminary Objection Upheld AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Ruling on preliminary objection to counterclaim raised by counter-defendant
Decision
Counterclaim for additional general damages dismissed; counterclaimant limited to liquidated damages already paid

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that Clause 11.8 of the Co-Location Licence and Services Agreement is a liquidated damages clause constituting a genuine pre-estimate of loss. Where a contract provides for interest on late payments as liquidated damages, the innocent party cannot recover additional general damages for the same breach of payment obligations beyond what was contractually agreed and paid.

Outcome

Counterclaim for additional general damages dismissed; counterclaimant limited to liquidated damages already paid

Facts

Smile Communications Limited entered into a Co-Location Licence and Services Agreement with Eaton Towers Uganda Limited in late 2012 for provision of co-location services at an agreed monthly fee. When Smile fell into arrears, Eaton threatened disconnection in mid-2016. On 12 August 2016, Smile filed suit seeking a declaration that disconnection would breach the contract and obtained an interim order restraining disconnection. Eaton filed a counterclaim for the sum of USD 1,047,018 plus interest under Clause 11.8 of the Agreement, which provided that fees unpaid within 30 business days would bear interest at the Uganda Bank Rate plus 2% per annum. After Smile's temporary injunction application was dismissed on 7 September 2016, Smile paid USD 1,267,726 on 23 September 2016, including USD 87,844 as default interest for the period 13 August 2014 to 31 August 2016. Eaton then sought to proceed to trial on a claim for general damages of USD 50,000 for inconvenience. Smile raised a preliminary objection that Eaton was not entitled to general damages beyond the liquidated damages already paid.

Issues

  1. Whether Eaton is entitled to general damages for breach of the Agreement by Smile beyond the interest provided for and paid under Clause 11.8 of the Agreement.

Orders

  • Preliminary objection by the counter-defendant upheld.
  • Counterclaimant's prayer for general damages of USD 50,000 declined.

Rules and key headnotes

Liquidated Damages — Distinction from Unliquidated Damages — Contractual Interest Clauses
Where parties to a contract agree that in the event of breach the contract-breaker shall pay a specified sum of money, the sum fixed may be classified as either a penalty (which is irrecoverable) or liquidated damages (which are recoverable). A contractual clause providing for interest on delayed payments at a specified rate constitutes liquidated damages if it represents a genuine pre-estimate of loss, and is enforceable irrespective of actual loss suffered.
Liquidated Damages — Recovery Limited to Agreed Sum — Exclusion of Additional General Damages
Where a contract contains a liquidated damages clause providing for a specified sum or ascertainable amount on breach, the innocent party is entitled only to the agreed liquidated damages and cannot recover additional unliquidated damages for the same breach. This principle applies where the only breach pleaded is the breach of payment terms compensated by the liquidated damages clause.
Liquidated Damages — Exception for Breaches Outside Ambit of Clause
A claimant may recover unliquidated damages in addition to liquidated damages if other breaches have occurred outside those which fall within the ambit of the liquidated damages provision, or if only part of the loss arising from a single breach is regarded as falling within the provision's ambit. However, such additional breaches or losses must be properly pleaded.
Breach of Payment Obligations — Measure of Damages Limited to Debt and Interest
Upon breach of a contract to pay money due, the amount recoverable is normally limited to the amount of the debt together with such interest as may be provided under the contract or allowed by the court. This is the measure of damages regardless of what inconvenience the plaintiff has suffered from the failure to pay on the due date.

Cases cited (6)

  • Excel Construction Limited v Attorney General (Civil Suit No. 3 of 2007)
  • Halsbury's laws of England (Fourth Edition Volume 12 (1)) at page 484, paragraph 1063
  • Halsbury's laws of England at page 486, paragraph 1065
  • Suisse Atlantique Société D'armement Maritime S A v N V Rotterdamsche Kolen Centrale [1966] 2 All ER 61
  • McGregor on Damages, Nineteenth Edition at paragraph 15-024
  • Aktieselskabet Reidar v Arcos

Full judgment

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Smile Communications Limited v Eaton Towers Uganda Limited (Civil Suit No 607 of 2016) [2017] UGCommC 284 (28 February 2017)
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.