Wakilii

Surgipham Uganda Ltd v Noble Health Ltd and Anor (HCT-00-CC-CS 595 of 2003)

High Court · [2005] UGCOMMC 60 · 2005 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of debt arising from breach of contract
Decision
Judgment for plaintiff against 1st and 2nd defendants for Shs.18,230,960 plus post-judgment interest at 25% per annum and costs; 3rd defendant discharged

Observed later treatment

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Holding

The court held that the first and second defendants were jointly and severally liable for a debt of Shs.21,288,000 arising from the supply of drugs on credit, less partial payments and mitigation. Drugs deposited by the defendants were held as security, not as outright set-off of the debt. The court reduced the contractual interest rate from 36% per annum to 21% per annum as the original rate was manifestly excessive and unconscionable. The third defendant was discharged from liability as her signature on the guarantee was materially different from her signature in company documents. General damages of Shs.1,000,000 were awarded for breach of contract.

Outcome

Judgment for plaintiff against 1st and 2nd defendants for Shs.18,230,960 plus post-judgment interest at 25% per annum and costs; 3rd defendant discharged

Facts

On 17 August 2001, the plaintiff Surgipham Uganda Ltd, a supplier of human drugs, supplied drugs worth Shs.21,288,000 to the 1st defendant Noble Health Ltd on credit, with payment due within one month. The 1st defendant issued two post-dated cheques for Shs.11,288,000 and Shs.10,000,000. The 1st defendant's managing director, the 2nd defendant Tony Badebye, requested postponement of presentation due to financial difficulties, then stopped payment on both cheques. The 1st defendant paid Shs.7,000,000 in October 2001, reducing the debt to Shs.14,388,000 (including Shs.100,000 in penalties for bounced cheques). In October 2001, the parties agreed that the 1st defendant would deposit drugs worth Shs.16,000,000 as security for the debt. The plaintiff eventually sold these drugs to Neon Pharmacy Ltd for Shs.3,200,000 in April 2004 when they were ten months from expiry. The plaintiff claimed Shs.26,575,293 including the balance, interest, and other expenses. The 2nd defendant had signed a shareholder's guarantee; the 3rd defendant Susan Munalwa disputed signing such a guarantee.

Issues

  1. Whether the defendants are indebted to the plaintiff in the sums claimed.
  2. Whether the defendants are jointly and severally liable to the plaintiff for the debt, if any.
  3. What remedies are appropriate.

Orders

  • Judgment entered for the plaintiff against the 1st and 2nd defendants.
  • 1st and 2nd defendants to pay Shs.11,188,000 being the balance due on the supply of drugs.
  • 1st and 2nd defendants to pay Shs.6,042,960 being interest on the outstanding balance for the period October 2001 to October 2003.
  • 1st and 2nd defendants to pay Shs.1,000,000 being general damages for breach of contract.
  • Interest of 25% per annum on the awarded sums from the date of judgment till payment in full.
  • Costs of the suit awarded to the plaintiff.
  • 3rd defendant discharged from personal liability.

Rules and key headnotes

Contract Law — Breach of Contract — Security for Debt — Distinction from Set-Off
Where parties agree that goods be deposited 'to secure' an outstanding debt and that the goods 'shall be held as security' and may be sold with consent to offset the debt, the agreement creates a security arrangement, not an outright set-off. The creditor holding goods as security remains obligated to account for proceeds of sale and return unsold goods.
Contract Law — Breach of Contract — Mitigation of Loss — Sale of Security at Reduced Price
A creditor holding goods as security for debt is entitled to sell those goods at a reduced price to mitigate loss where the goods are approaching expiry, provided the sale is not deliberate but necessitated by circumstances such as impending expiration of the goods.
Contract Law — Interest — Reduction of Excessive Contractual Interest Rate
The court has discretion to award interest at less than the contractual rate when that rate is manifestly excessive and unconscionable. A contractual interest rate of 36% per annum may be reduced to a reasonable rate such as 21% per annum where the higher rate is punitive rather than compensatory.
Commercial Law — Guarantees — Shareholder Guarantees — Proof of Execution
Where a shareholder denies signing a guarantee and the signature on the guarantee differs materially from the signature in the company's articles and memorandum of association, and no witness was present at execution, the court may find that the guarantee was not executed by that shareholder and discharge them from liability.
Damages & Quantum — General Damages — Assessment for Breach of Contract
General damages for breach of contract are damages not easily quantifiable in money terms. The court awards such damages as it considers reasonable compensation for pain and suffering assumed to have been sustained by the injured party, taking the evidence as a whole.

Cases cited (1)

  • Juma v Habib [1975] EA 103

Full judgment

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

Surgipham Uganda Ltd v Noble Health Ltd and Anor (HCT-00-CC-CS 595 of 2003) [2005] UGCommC 60 (13 October 2005)
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.