Topic: Special Damages
Date of Judgment: 18 June, 2024
Court: Supreme Court of Uganda
Case Number/Citation: Civil Appeal No. 10 of 2020
Judges: Justices; Mike J. Chibita; Faith Mwondha; Alfonse C. Owiny-Dollo, CJ; Percy Night Tuhaise; Prof. Lillian Tibatemwa-Ekirikubinza.
Summary Facts of the Case
On June 29, 1999, a partnership known as Bombo Wholesalers, consisting of three brothers, entered into an exclusive agency agreement with Century Bottling Company Ltd, the respondent, under which they were to distribute its product over a defined territory.
Years later, the appellant’s benefactor Kasim Ramathan registered an entity known as Top Bombo Wholesale and entered into a Manual Distribution Centre (MDC) agreement with the respondent.
Following the deaths of two of the brothers including the Appellant’s benefactor Kasim Ramathan, a notice of cessation of the business partnership known as Bombo Wholesalers was registered.
The Appellant Osman Kasim Ramathan and one of the remaining brothers Mustapha Ramathan would incorporate another entity known as Bombo Wholesale Limited.
The Appellant as a beneficiary of the estate of Kasim Ramathan together with Mustapha Ramathan, who also passed on later, sued the respondent in the High Court claiming breach of the 1999 exclusive agreement, the MDC, leading to alleged significant financial losses for Bombo Wholesalers.
Among other damages, they prayed for special damages amounting to UGX 404,720,567/= which was rejected by the High Court and they appealed that decision in the Court of Appeal and now in the Supreme Court.
Legal Issues Before the Court
- Whether there was sufficient evidence to support the claim for special damages.
The Decision of the Court
The Supreme Court dismissed the appeal, upholding the decision of the Court of Appeal which found no sufficient evidence to support the appellant’s claim for special damages.
The Court held that special damages must be specifically pleaded and strictly proved.
The Court found that the Court of Appeal had scrutinized the evidence presented by the appellant and it did not support the claimed for special damages.
The Court further found that the 1999 exclusive agreement was no longer operative with the cessation of the partnership.
A lawsuit or a claim for special damages cannot be founded on an inoperative agreement, the Court further held.
Editor’s Note: The Supreme Court guided on strictly proving special damages in the following ways;
- Specific Pleading
- Special damages must be explicitly stated in the pleadings. The claimant must detail the specific amounts being claimed and the exact nature of the damages suffered.
- Concrete Evidence
- The claimant must provide concrete and tangible evidence to substantiate the claims. This includes providing documents such as receipts, invoices, payment vouchers, and audit reports that directly link the claimed damages to the defendant’s conduct.
- Direct Causation
- There must be a clear demonstration that the losses incurred were a direct result of the defendant’s actions. The claimant must show a direct link between the breach of contract and the financial losses claimed.
- Verification of Transactions
- All financial transactions and claims must be verified through proper documentation. This includes ensuring that all payments, salaries, and expenses claimed are supported by corresponding financial records.
- Consistency in Business Names and Accounts
- If multiple business names or entities are involved, there must be clear evidence showing their interrelation and consistency in financial records. The claimant must prove that the different names used in business transactions pertain to the same existing entity.
- Past Pecuniary Losses
- The special damages claimed should relate to past pecuniary losses calculable at the date of trial. These are actual financial losses that can be ascertained in terms of monetary cost.
- Avoidance of Speculation
- Claims for future earnings or anticipated profits must be substantiated with solid evidence and should not be speculative. The claimant must provide a reasonable basis for calculating future losses, considering the entity’s past performance and future projections.
Key Quote: “ The totality of the evidence is that the appellant did not prove the special damages and therefore the learned Justices cannot be faulted. I also note that it is common ground that the suit was brought in the name of Bombo Wholesalers and was premised on the 1999 agreement between the parties. I therefore share the same view with the learned Justices that the claim or breach thereto could only arise from the 1999 agreement then and only during the operation of Bombo Wholesalers. To successfully claim the special damages for breach, the appellant had to show that the contract and business were still in existence which was not the case here.” – Justice Mike Chibita, Majority Judgement.
Law Applied By the Court
- Makubuya Enock William (T/A Polla Plast) v UMEME (U) Limited SCCA No. 1 of 2019; Special damages relate to past pecuniary loss calculable at the date of trial. They are awarded to cover financial loss that can be actually ascertained in terms of monetary cost.
- Musoke V Departed Asians Property Custodian Board & Another SCCA No.1 of 1992
Counsel on Record
- For the Appellant: Mr. Richard Omongole
- For the Respondent: Mr. Ernest Kalibbala
Conclusion
This case reinforces the legal principle that claims for special damages must be specifically pleaded and strictly proved with cogent evidence.
It also illustrates the importance of ensuring a business has an active legal personality in order to found an action for special damages if the action relates to a transaction the business entered under by virtue of that legal personality.