Dr. Maj. Rtd Anthony Jallon Okullo v Attorney General (Civil Appeal No. 3 of 2020) [2025] UGSC 32 (11 September 2025)

5 THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO. 03 OF 2O2O (Aising from a decision of the Court of Appeal (Egonda-Ntende, Cheborion, and Tuhaise, JJA) in Ciuil Appeal No. 2O7 of 2016). CORAM: OWINY - DOLLO, CJ; TIBATEMWA - EKIRIKUBINZA, MUSOKE, MADRAMA, KIBEEDI, {-J_.Sq. DR. MAJ. RTD ANTHONY JALLON OKULLO::::::::::!:: APPELLANT VERSUS 19. 09.2025. Mr. Ben Wacha for the Appellant together with Mr. Dan Wandera Ogalo and Mr. Davis Ndyomugabe. Mr. Franklin Uwizera for the Respondent. The Appellant present Birungi C/C. Wacha: We are ready to receive the Judgment. Court: The Judgment of Court read out to the parties in Chambers. Copies of Judgment availed to them. 15 25 30 40 Registrar, Supreme Court. 10 ATTORNEY GENERAL: : : : : : : : : : : ! : : : : : : : : : : : : : : : : : : : : ! : : : : : : : : : RESPONDENT 20 35 5 THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CORAM: OWINY . DOLLO, CJ; TIBATEMWA ' EKIRIKUBINZA, MUSOKE, MADRAMA, KIBEEDI, JJ.SC. CIVIL APPEAL NO. 03 OF 2O2O (Arising from a decision of the Court of Appeal (Egonda-Ntende, Cheborion, and Tuhaise, IJA) in Civil Appeal No. 207 of 2016). DR. MAJ. RTD ANTHONY JALLON OKULLO APPELLANT l0 YERSUS RESPONDENT JUDGMENT OF OWINY - DOLLO, CJ. 15 This is an appeal against the decision of the Court of Appeal, which was the first appellate Court vide Civil Appeal No. 207 of 2016; in which it overturned, in part, the judgment of the High Court in Civil suit No. 383 of 2012, and dismissed in its entirety, the Appellant's Cross Appeal. Background 20 In 1988, following the signing of the peace accord between the Government of Uganda and a group of rebels known as the Uganda Peoples Democratic Movement,/Army, the rebels' Ieader known as Lt. Col. Angelo Okello, fell ill. The Ministry of Defense contracted rhe Appellant, a medical practitioner, to provide medical services to the 25 patient at the expense of the government. The Appellant agreed with the Government that he would be paid at a later date after the services rendered to the patient. The Appellant performed his part of the bargain, and attended to the patient in Uganda, and as well, I ATTORNEY GENERAL . accompanied him to Uganda, Kigali, Jedda, Brussels, Rome; until the patient succumbed to the ailment. At the request of the government, to allay the claim by some people that the Government had a hand in that death, the Appellant carried out 5 a post mortem examination on the deceased. After the demise of the patient, the Appellant submitted to the government, two invoices. One was in the sum of US$ 68,950 (sixty eight thousand, nine hundred and fifty only), covering his professional services; and the other in the sum of US$ 24,200 (Twenty four thousand, two hundred only), covering l0 expenses incurred on transport, accommodation, and meals, when he accompanied the patient outside Uganda. The trial Court found that under the agreement between the government and the Appellant, the government bound itself to settle the two invoices, totaling US $93,150, together with a compound interest thereon at24% per annum, to cater 15 for fluctuations in the value of money, and any delay in payment. However, it took twenty-five years for government to pay the Appellant the principal sum of US$ 93,150, in two instalments of UGX 138,455,750/= in 20l I, and UGX 94,2O0,0OO/= in 2012; but the agreed interests that had accrued on the principal sum, remained outstanding. 20 The Appellant then filed a suit in the High Court claiming for: "recovery of ...(US$ 19.362,821) or its equivalent in Uganda shillings, beina exoenses i n breach of contract in the prov ision of medical services to and treatment of the Late. LT.COL.ANGELO ORELLO, interest, general damages and costs." 25 He then prayed for: "[a]. Special damages of US $19,362,821. 2 [b]. Further interest on (a) above at 24% compound interest as agreed. from the date of filing till payment in full. [c]. General damages for breach of contract. tdl. 8% interest on (c) from contract date till payment tn full. 5 [e/. Costs. " The learned trial Judge found for the Appellanq and, albeit with some downward variations, granted him the remedies he had sought. The judge was not satisfied with the Appellant's stated basis for the claim for US$ 19,362,821; and found the provision for compound interest of l0 24% per annum, on the outstanding amount, to be on the higher side. Thus, taking the amount of US $ 93,150 as the starting principal sum, instead of US$ 19,362,821 as claimed by the Appellant, he applied the lesser rate of 15% compound interest rate, per annum, therefrom and arrived at the sum of US$ 3,066,400.44 as the amount money due and 15 payable to the Appellant. The judge was of the view that, among other considerations, this award would cater for all issues of inconveniences, expectations, opportunity costs, risk and inflation, suffered by the Appellant. In addition, he awarded the Appellant 'nominal' damages in the sum of UGX 500M/:. 20 Aggrieved at the decision of the trial Court, the Respondent appealed to the Court of Appeal; to which the Appellant cross-appealed. The Respondent's contention was, first that the award of UGX 500,000,000/= in nominal damages was inordinately high. Second, was that the rate of compound interest of 15% per annum was still 25 manifestly harsh and unconscionable; and third, was that the award of a certificate of costs for two counsel was unlawful because the trial Judge was functus officio by then. In the cross appeal, the Appellant 3 faulted the trial Judge for awarding a sum of general damages of UGX 500'000'000/=, which was less than what was prayed for; and for failing to award interest of 8% on the general damages as prayed. He also contested the reduction, by the trial judge, of the interest rate on the 5 the compound interest from the 24% per annum, which the parties to the suit had agreed upon, to 15% per annum. Egonda- Ntende JA, with whom the other members of the Coram concurred, allowed the appeal only in part; but dismissed the cross appeal altogether. Having found that the 15% interests imposed by the 10 trial judge was still harsh and unconscionable, the Court of Appeal substituted this with 6% simple interest on the contractual sum of US $93,150; to run from the date of the contract, till the date of the suit in the High Court. The Court of Appeal also awarded general damages of UGX 50M/= (Fifty million only); with interest on the whole decretal sum 15 from the date of judgment, till full settlement. It is from this decision that the Appellant has appealed to this Court; on the following grounds: 20 1. The learned Justices of the Court of Appeal erued in law and fact in rejectinq the parties' agreed compound interest and instead substituted it with simple interest, thereby occasioning a miscarriage of justice. 2. The learned Justices of the Court of Appeal used the wrong premises in determining that the compound rate of 24% agreed upon by the parties, was harsh and unconscionable. 3. The learned Justices of the Court of Appeal failed to judicially evaluate the evidence on record thereby reaching a wrong conclusion. 25 4 5 4. The learned Justice of the Court of Appeal erred in law and fact when they injudiciously interfered with the discretion of the lower court, thereby occasioning a miscarriage of justice. 5. The learned Justices of the Court of Appeal erred in law in considering extraneous matters to reach their decision, and thereby occasioning a miscarriage of justice. l0 The Appellant prayed that this Court: a) AIIows the appeal b) Sets aside the judgment and orders of the Court of Appeal c) Orders that the parties' agreed compound interest rate of 24% per annum to be payable. d) Provides for the costs of this appeal, and of the Courts below, to the Appellant. 15 Representation At the hearing, the appellant was represented by Counsel Ben Wacha, Dan Wandera Ogalo, and Davis Ndyomugabe. The Respondent was represented by Wanyama Kodoli (Principal State Attorney), Ms. Imelda Adong (Senior State Attorney), and Uwizera Franklyn (State Attorney). 20 Submissions for the parties. Ground 7 Under this ground, Counsel for the Appellant submitted that the Court of Appeal occasioned a miscarriage of justice when they substituted compound interest agreed upon with simple interest. Counsel argued 25 that a literal reading of section 26 (1) of the Civil Procedure Act brings out that only the rate, and not the type of interest levied, can be varied by Court. Counsel contended that in absence of any factor vitiating the 5 Ground 2, 3,4 & 5 Counsel for the Appellant submitted that following the principle laid 25 down in Twiga Chemicals Industries v Viola Bamusedde S.C. Civil Appeal No. 16 of 2oo4forthispinciple,lhe Court of Appeal could only interfere with the trial Judge's exercise of discretion under three circumstances. First, is 6 contract, Court was bound to enforce the interest as was freely agreed upon by the parties in the contract. For their part, Counsel for the Respondent submitted that the Court of Appeal correctly exercised their discretion in substituting the 5 compound interest awarded, with simple interest. They urged this Court to agree with the Court of Appeal that the trial judge erred in applying s. 26 (2) & (3) of the Civil Procedure Act; instead of section 26 thereof, which permits Court's interference with interest agreed upon by the parties, where such agreed upon interest is unconscionable. 10 Second, it was within the discretion of the Court of Appeal as a matter of law to determine whether, or not, the interest rate agreed upon was harsh or unconscionable; but not basing on the pleadings and submissions of the parties. Third, in order to justify the variation, the Court of Appeal rightly took 15 judicial notice of the fact that interest rates for US Dollars levied by Ugandan banks are rarely outside single digits. Lastly, the Appellant was guilty of laches in reviving a stale claim by clutching upon payment by the Respondent of the principal sum in 2011 & 2012. In that regard, Counsel for the Respondent argued that had the Appellant filed the suit 20 in time, the interest claim would not be so exorbitant. Counsel concluded that the simple interest awarded by the Court of Appeal did not occasion any miscarriage of justice. 5 where the judge has failed to take into account a material consideration, or relied on an immaterial consideration, or made an error in applying a known principle. Counsel argued that in this case, the principles for interfering with the discretion of the trial Judge had not been met. Counsel also argued that the Respondent had not discharged the burden that lay on it to prove that the compound rate of interest of 24% was harsh and unconscionable. Counsel argued first that the determination of whether an interest rate is harsh and unconscionable should be informed by other instances 10 where Court has found so. He referred to the cases of. Anieline Akinyi Otieno v Makaba Malakasi Farmers Co'op llnion Ltd [1998] eKIR, Kenya Court of Appeal, and Danson Muriuki Kihara v Amos Kathu Gatuigo Kenyan High Court CivilAppealNo. Tl of 2o11; where the two Courts found that the interest rates of 284% per annum, and 600% per annum, respectively, agreed l5 upon by both parties, were harsh and unconscionable. Second, Counsel submitted that the Court should have considered the Bank of Uganda lending rates specified in the Statutory Instruments dated 9'h August 1991 and 2l" August 1992, as these were closest to the year 1989 when the compound rate of 24% was agreed upon. Under these statutory 20 instruments, the rates were 39% and 42% per annum, respectively; which were well above the 24% interest rate agreed upon by the parties. Counsel for the Appellant also faulted the Court of Appeal for relying on extraneous and irrelevant considerations, which led it to find that the rate agreed upon by the parties was harsh and unconscionable' 25 These considerations were the apportionment of blame on witnesses who committed government to the agreed upon interest, and the Appellant for failure to bring the action for the debt owing to him from the Respondent, promptly. Counsel reproduced extracts from the 7 testimony of a witness, showing that the accounting officer of the relevant government Department, in fact, approved the impugned interest rate. He then contended that had the contractual obligation been timely settled, the total payment would not have been as huge as 5 it has become, owing to the delay in effecting payment. Counsel for the Appellant also submitted that in reducing the interest rate from 24% to 6%, lhe Court of Appeal injudiciously interfered with the discretion of the High Court. He contended that the trial Judge had three considerations in mind when he reduced the interest rates from 10 25% to 15%. First, was that since the payment owing was from Government, there was the possibility that the debt would not be paid promptly. Second, was that there was need to take cognizance of the public concern regarding expenditure of public funds. He then faulted the Court of Appeal for interfering with the discretion 15 exercised by the trial Court, and for changing the substance of the discretion. In this, counsel argued, the Court was influenced by the following considerations; namely: the fact that the dollar rates are stable and rarely outside single digits, the cavalier attitude of the public officer who committed Government to 24% compound interest rate, and 20 the inordinate delay in making the claim, as it was made when government had made part payment. Counsel argued that the trial Court had been alive to the first reason, while the second reason did not satisfy the permissible grounds for interference with discretion, as was laid in the Twiga Chemicals Industrtes case (supra). Last, counsel 25 submitted that the lower Court had already dealt with the issue of limitation of time. He argued that if the Respondent had paid the debt timely, the Appellant would not have come to Court. 8 Counsel argued that notwithstanding the stability of the US Dollar, with less fluctuations in the interest rates levied, interest was nonetheless chargeable on damages, at commercial rates, as compensation for deprivation or loss suffered. He cited Prem Lata v Peter Musa Mbivu [1965] 5 EA 592; and Francis Sembuya v All Ports Services (u) Ltd SCCA No' 6 of 1999i and pointed out that for the instant case before us, the compensation was for 25 years the government had failed to make payment. Counsel cited other cases where higher interest rates were awarded by Courts. Such cases include Interfreight Fowarders (U) Ltd v EADB s.c.C.A No. 33 of 10 r992, where this Court, per Oder JSC, awarded 36% interest rate on a claim of GBf 10,2 75. Second, is Premchandra Shedndi & Anor v Aximos OIeg U.S.C.A No. 9 of 2o03; in which interest of 20% was awarded on the sum of US$ 220,000. Third, is Air Consult Architects v A. Bauman (U) Ltd; where 15% interest rate was awarded on GBf7,200. Fourth, is wilIv owachav 1 5 Ringa Enterprises & Anor S,C,C.A No. 31 of 1994; where 30% interest rate was awarded on US$ 253,700. 20 Counsel was of the view that the basis of the interest rate hinges on whether the claim is based on general damages, which are compensatory on the one hand, or commercial/business transactions that attract higher rates of interest. He then contended that the principal amount herein arising from a commercial transaction carried out outside Uganda, in foreign currency, the interest agreed on was not harsh or unconscionable. Counsel then concluded that there was thus no justification for Court's interference with the trial judge's discretion; and prayed this Court to enforce the 24% interest rate per annum on the compound amount as was agreed upon by the parties. 25 9 Counsel for the Respondent however submitted that the Court of Appeal rightly exercised their discretion and gave sound reason, for both interfering with the discretion of the trial judge and determining that the interest rate was harsh and unconscionable. The reasons 5 advanced by the Court of Appeal were that the rate was, first, unreasonable. Second, it imposes a harsh burden on the public purse. This is the more so, in addition to the fact that the trial judge did not rely on section 26 (1) of the Civil Procedure Act, the Appellant was guilty of laches, and the principal sum was in US Dollars, which was 10 judicially noted to be stable and the interest rates thereon was rarely outside single digits or exceeding 10%. According to Counsel, section 26 (l) of the Civil Procedure Act permits the exercise of discretion by Court, basing on the evidence, to award interest and the rate thereof. Counsel further submitted that the award of general damages is in the 15 discretion of the Court, and the measure in law is what one would both presume to be the natural and probable consequence of the Defendant's act or omission. The interference by the Court of Appeal, counsel argued, was because damages in the sum of UGX 500M/= was not nominal award; but rather disproportionate in the circumstance of 20 breach of a contract of UGX 23OM/=. Counsel argued that this amounted either to a gratuitous benefit to the Appellant, or a punishment to the Respondent; other than compensation, as no loss was proven by the Appellant. Counsel also faulted the trial judge for applying section 26 (2) & (3), instead of 26(l) of the Civil Procedure Act, in arriving at the 25 interest rate, since the principal sum had already been paid. Counsel submitted that the Court of Appeal could not interpret the contract between the parties in a vacuum; but that contrary to the 10 contention by counsel for the Appellant, the Court of Appeal in fact considered no extraneous matters. He also submitted urging this Court to find that both the compound nature of the interest, and the rate thereon, were harsh and unconscionable; and therefore the award of 5 the Court of Appeal was legal. Accordingly, he prayed that this Court answers issues 2,3,4 & 5 in the negative. Submissions in Rejoinder Counsel for the Appellant argued back that all cases relied upon by the Respondent are distinguishable from the instant one before this Court. 10 He specifically argued that unlike the instant one, the case of e.G v Virchand Mithalal & Sons Civil Appeat No. 20 of ZOOZ and that of A.G V Sam Semanda Civil Appeat No. 8 of 2OO6, were not with regard to interest that had been agreed upon by the parties. He pointed out that in the latter case, the compound interest did not feature at all; and in that case, the 15 Court held that: " IJnder section 26 of the Civil Procedure Act, unless interest is provided by agreement and is not harsh and unconsctonable, courts exercise discretion in awarding interest." (emphasis added) He also submitted that Nuru Kaaya v Crescent Transportation Ltd Civil Appeal 20 No. 6 of 2oo2, was a case where Court found the lower Court to have injudiciously denied adjournment; since it is pertinent that both sides are heard, except when a party is deliberately dragging proceedings. According to Counsel, there was no injudicious exercise of discretion in the matter under consideration because the trial judge had looked 25 into the compound interest, found it unconscionable and reduced it. Finally, the case of e.e v Goodman Agencies (supra) did not involve the ll alteration of interest from compound to simple one, as in this case. Instead, it merely reduced the rate from 24% to 6%. CONSIDERATION AND DETERMINATION OF THE APPEAL This Court is vested with jurisdiction to hear this appeal from the Court 5 of Appeal, where the latter was the first appellate Court in a matter that originated from the High Court. This jurisdiction is provided for under Rule 30 (1) of the Judicature (Supreme Court Rules) Directions; which state s as follows: " Power to reappraise evidence. 10 (1) Where the Court of Appeal has reversed, affirmed or varied a decision of the High Court acting in its original iurisdiction, the court may dectde matters of law or mixed law and fact, but shall not have discretion to take additional evidence". When sitting on a second appeal, this Court has no jurisdiction to rehear 15 a matter as a first appellate Court would. The overarching duty of this Court is to establish whether the Court of Appeal properly executed its duty as a first appellate Court. Thus, this Court has power to determine whether, or not, the first appellate Court, in approaching its task, applied the correct principles (See'. Milly uasembe vs sugar Corporation and 20 Anor, S.C Civil Appeal No. Ol of 2000', Kifamunte Henry vs Uganda SC Cr. App No.lO of 1gg7; and, also, Pandya vs. R. (1957) E.A. 336). On the other hand, the duty of the Court of Appeal as the first appellate Court is to re- evaluate the evidence, as a trial court would, and come to its own conclusion. Failure by the Court of Appeal to carry out this duty is a 25 matter of law; thus, this Court would intervene. In doing so, it can assume the powers of the trial Court, which includes re-evaluating the evidence, making its own findings, and reaching its own conclusion; as t2 is provided for under section 7 of the Judicature Act, which provides in this regard as follows: " Supreme Court to have powers of the court of original iurisdiction. For the purposes of hearing and determining an appeal, the Supreme 5 Court shall have all the powers, authority and jurisdiction vested under any written law in the court from the exercise of the original jurisdiction of which the appeal originally emanated". The matter for resolution in the instant case is the enforcement of a specified rate of interest based on a contractual agreement. I consider 10 it prudent to deal with all the grounds of appeal together; because they raise issues that are interlinked since they all gravitate around the interest and rate thereon imposed by the Court of Appeal on the principal sum the parties had agreed upon; and challenge the general damages awarded by the Court of Appeal. I will first deal with the issue 15 of interests, then the one regarding the impugned general damages. From the judgment of the Court of Appeal, and submissions made before this Court by counsel for the parties hereto, the crux of the issues regarding the interests revolve around the following: (i) whether Court can substitute compound interest agreed upon by 20 the parties with simple interest under section 26 (1) of the Civil Procedure Act; (i0 whether the Court of Appeal was right to apply section 26(1) of the Act, instead of section 26 (2) of the Act, which the trial iudge had done; l3 5 (iii) whether by its very nature, without more, liquidated damages expressed as compound interest is harsh and unconscionable as to entttle Court to vary the same; (iv) whether the compound interest rate of 24% agreed on by the parties, and 15% imposed by the trial Court were harsh and unconscionable; and (v) whether in interfering with the interest, and varying the rate thereof downwards, the Court of Appeal applied the correct law. In his judgment, Egonda-Ntende J.A, with whom the other members of 10 the Coram concurred, had this to say: 15 "... the learned trial judge in applying section 26 (2) and (3) of the Civil Procedure Act, while dealing with the question of interest rate applied the wrong provisions of the law. The correct provision to take into account should have been section 26 (1) of the Civil Procedure Act which permits a court to interfere with interest agreed by the parties if in the view of the court such interest is unconscionable ... " Section 26 of the Civil Procedure Act, which the learned Justice of Appeal referred to, provides as follows: " Interest. 20 (1) Where nn nn ment rt ho nottvnont nf tn terest ls <t'rttaht tn ho enforced, and the court is of opinion that the rate agreed to be paid h nd unconsciona ht not to be e r process, the court may give judgment for the payment of interest at such rate as it ma y think just. (2) Where and in so far as a decree is for the payment of money, the court may, in the decree, order interest at such rate as the court n h 25 m reasonable to be t4 rlncl al sum a u the date of the suit to the date o f the decree. in addi tion to anv rest ad ud e h rinci al r n eriod n the s rther i ch rate r asonable re ate s d ed r 5 of the de ree to the date of Davment or to such earlier date as the 10 court thinks fit. (3) Where such a decree is silenf with respect to the payment of further interest on the agqregate sum specified in subsection (2) from the date of the decree to the date of payment or other earlier date, the court shall be deemed to have ordered interest at 6 percent per Year." (Emphasis is mine) It is clear from the provisions above that it is not sub sections (2) and (3) of section 26 of the Act, but rather sub section (1) thereof' which confers on Court the discretion to interfere with the rate of interest the 15 parties to a contract have agreed upon; and the circumstances under which it may do so. Unlike sub section (t), which provides for the parties agreeing on the interest and rate thereon payable to the aggrieved party for the period prior to the Court's decree, sub sections (2) and (3), in the converse, confer upon Court the discretion to 20 determine the interest and rate thereof charged on a monetary award decreed by Court. This could be either special/liquidated, or other, damages awarded by Court. Indeed the trial judge erred in relying on section 26 (2) and (3) of the Act, to justify his interference with the interest rate agreed upon by the 25 parties; and on this, I concur with the Court of Appeal. However, albeit inadvertently, the trial judge exercised his discretion in satisfaction of the provision of section 26 (1) of the Act that empowers Court to 15 interfere with interest rates agreed upon by the parties to a contract. He then correctly applied the provision of section 26 (2) and (3) of the Act for other awards of damages, and interest chargeable thereon. This, I will advert to, shortly. 5 The pertinent issue for determination by this Court, as it was before the lower Courts, is whether the remedial provision in the form of interest rates charged on the compound interest agreed upon by the parties hereto, in anticipation of possible delay in payment of the sum owing, was enforceable. The trial judge rightly refrained from interfering with 10 the compound interest the parties agreed upon; but found the interest rate of 24% charged thereon harsh and unconscionable. Hence, he reduced the rate from 24% to l5%. The Court of Appeal, for its part, found both the compound interest agreed upon by the parties, and the interest rate of l5% thereon imposed by the trial Court, still harsh and 15 unconscionable; and interfered with both. Egonda-Ntende JA said: "33. I am aware that in the court below the appellant did not attack, on the pleadings, interest as unconscionable and it is right to say that this was not in contest at the trial. However, the provision grants the discretionary power to the Court, if in the opinion of the court, such 20 interest rate bein g sought to be enforced is 'harsh and unconscionable' to give judgments for such interest rate 'as it may think just.' 34. Of course I agree with counsel for the respondents' submissions that it is not for the court ordinarily to write a new contract for the parties. However, under section 26 (1) of the Civil Procedure Act, court has the power specifically to deal with the issue of interest being sought to be enforced, if it is in the opinion that the rate agreed is l6 25 harsh and unconscionable, to give iudgment at such rate as it will thtnk just." He therefore interfered with both the interest and rate thereon that the parties had agreed upon in their bargain; and substituted the 5 compound interest with simple interest, and varied the interest rate thereon by lowering it further from the l5% charged by the trial Court, to 6% per annum. With utmost respect for the learned Justice of Appeal, this was an erroneous interpretation of the provision of section 26 (1) of the Act. This too, I will advert to and expound upon further. t0 The jurisdiction of our Courts is rooted in the Constitution and legislations enacted by Parliament. However, having been a Common law jurisdiction by virtue of the 1902 Order in Council, the Judicature Act provides for application of the Common law in circumstances where there is no specific legislation applicable in that regard. It is upon this 15 premise that decisions by Courts with similar iurisdictional background as ours are of highly persuasive force. I should point out that the provisions of section 26 of the Act are a codification of aspects of Common law principles; hence, in dealing with those provisions, decisions of Courts of Common law jurisdiction are instructive. 20 I construe the provision of section 26 (1) of the Act as being specifically restrictive; in that it only confers upon Court the discretionary power to vary interest rates agreed upon by parties to a contract if in the view of the Court such impugned interest rate is harsh and unconscionable. I however find nothing in that provision of the Act extending the 25 Court's discretionary power over interest rates, to include invalidation or variation of the type of interest as well; which in the instant case would be variation from compound to simple interest. It is l7 unmistakable that the terms 'type of interest' and 'rate of interest' ref.er to two distinct and separate considerations. Thus, the issue before this Court, in the exercise of its discretionary powers in this regard, is strictly to determine whether or not the rate of interest agreed upon by 5 the parties hereto is enforceable. Court may uphold the interest rate the parties have agreed upon in anticipation of possible default by the party under obligation to pay; or interfere with such interest rate by imposing a rate it considers appropriate if, in the circumstance of the case, it is of the view that the 10 rate agreed upon is harsh and unconscionable. Where it chooses to interfere, the interest it imposes is computed and is recoverable as liquidated damages. On this, Halsbury's Laws of England, Vol 29 (2019), provides at para 6l l, thus: " On breach of a contract to pay money due, the amount recoverable 15 is ... the amount o f the debt toaet her with such interest from the time nt came r the contra or by statute, or as the court may allow under its st atutorv iurisdiction to award pre- iudg ment interest. " (Emphasis addeil) In the exercise of its discretion to determine the appropriate interest 20 rate agreed upon by the parties, Court applies the principle governing enforcement of agreed upon liquidated damages; which is rooted in freedom of contract, as is herein contended by the Appellant. Per Richard Stone, in: "fie Modern Law of contract, Eighth Edition, Routledge Cavendish, 2O09" 25 "'Freedom of contract' in this context has two main aspects. The first is that it is the indtvidual's choice whether or not to enter into a contract, and if so with whom - in other words, the freedom to l8 contract, or 'party freedom'. The second is the freedom to decide on the content of the contractual obligations undertaken, or 'term freedom'. This allows parties to make unwise, and even unfair, bargains - it is their decision. and the courts will not generally 5 intervene to brotect them r om their own fo olishness. " (emphasis added) l0 ln Printing and Numerical Registering Co' vs Sampson (1875) IR 19 Eq 462' Sir George Jessel stated thus: "... IAlll men of full age and competent understanding, and without fraud or misrepresentation, should have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily, should be held sacred and enforced by courts of iustice." Where a provision in the agreement imposes an onerous obligation on a defaulting party, Common law regards it as a penalty clause; which is governed by the penalty rule rooted in common law and equity. Once 15 Court determines that a provision in a contract is a penalty, it must decline to enforce the clause for being unreasonable and contrary to public policy; and substitute it with a reasonable and appropriate provision. Indeed, it is this proposition of the Common law that has been codified through section 26 (1) of the Civil Procedure Act with 20 regard to rates of interest. In the enforcement of a clause in a contract agreed upon in anticipation of possible breach of the contract, the Court should not be quick to interfere with a bargain the parties have freely made; but should instead strike a balance, and interfere only where necessary. It should 25 not restrict itself to stringent considerations under the penalty rule; but should rather, and under well-established considerations, interfere only in cases where the provision agreed upon clearly warrants such 19 5 intervention. As was stated in Cavendish Square Holding BV vs Tatal El Makdessi t2o15l ITKSC 67, at para 33, per Lord Neuberger & Sumption: " 33. The penalty rule is an interference with freedom of contract. It undermines the certainty which parties are entitled to expect of the law. Diplock IJ was neither the first nor the last to observe that: "The court shou ld not be astute to desc rv a 'penaltv clause"': Robo phone at p. 1447. As Lord Woolf said, speaking for the Privy Council in Philips Hong Kong Ltdv Attorney General of Hong Kong (1993) 61 BLR 41, 59, ".-. the court ha s to be careful not to set t oo strinqent a s tanda rd and bear in l0 mind that what th e Darties have aareed should n ormally be upheld" not least because "Inl n other nnn r o ach will lond to undesirab lo uncertaint v esoeciallv i n commercial c ontracts". (emphasis added) Whether a clause in a contract is a penalty, or not, is a matter of construction; and is dependent on the nature of the provision' Neither 15 section 26 of the Civil Procedure Act, cited herein, nor any other law has provision for the penalty rule, by which Court may determine that a provision in an agreement is a penalty clause' Court will therefore, in the exercise of powers conferred on it by the Judicature Act to apply Common law in the absence of legislation in our jurisdiction in that 20 regard, resort to the Common law position or provision on penalty rule. It is thus prudent to seek guidance on this from decisions of Courts applying Common law, or with Common law background as ours. It was pointed out by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor co Ltd [1915] AC 79, at pp 86-87, that the application of 25 the penalty rule under the Common law, does not extend to the agreed upon principal sum. It is restricted to issues such as interest thereon, or the rate thereof. This ensures that the rule mitigates any adverse 20 5 Accordingly, Court will interfere with an agreed upon provision, and grant relief, when it determines that rather than a clause therein 10 providing the remedy of restitution for the loss the innocent party has suffered, it goes beyond being compensatory in nature; and, in reality, turns out to be a punitive clause instead. To determine whether a contractual clause is penal, or otherwise, Courts have laid down principles and tests founded on a number of 15 criteria; one of which is whether the sum claimed under the contract represents a true pre-estimate of damages provided for in a clause, which is clearly for liquidated damages; or it is a penalty clause. In the Cavendish case (supra), Lord Neuberger and Sumption noted as follows: "... the common law courts introduced the now fa miliar distinction 20 between a provision for the pavment of a sum re Dresentinq a aenutne pre-esti ate of damaa es and a penalty clause in which the sum was out of all proportion to anv damaqes liable to be suffered ... (Emphasis added) In The scaptrade (supra) Lord Diplock noted at p.702 that: "The classic form of penalty clause is one which provides that upon breach of a primary obligation under the contract a secondary 25 2T consequence of construction of the impugned agreed clause. In Campbell Discount Co Ltd v Bridge tlg62l AC 600, 622, Lord Radcliffe had this to say: "... the intention of the parties is never conclusive and may be overruled or ignored if the court considers that even its clear expression does not represent 'the real nature of the transaction' or what 'in truth' it is taken to be." obligation shall arise on the part of the party in breach, to pay to the other party a sum of money which does not represent a genuine pre' estimate of any loss likely to be sustained by him as the result of the breach of primary obligation, but is substantially in excess of that 5 sum. In the Clydebank case (supra), Lord Halsbury stated that Court may intervene in an agreement between the parties when the provision for payment upon default is "unconscionable and extravagant, and one which no court ought to allow to be enforced." He made the finding in that case that the provision for payment of f500 a week, for delayed delivery, was not a penalty clause; hence, it was an enforceable conscionable bargain. He laid no rule for determining what an unconscionable or extravagant bargain is; but explained that it must depend upon: In Dunlop (supra), Lord Dunedin formulated four tests for determining whether a contractual clause is penal. These I can sum up to mainly two, as follows: (i) The provision would be penal if "the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach." (ii) The provision would not amount to a penal clause by reason only of the impossibility of precisely pre-estimating the true loss 15 "... the nature of the transaction ' the thing to be done, the loss likely to accrue to the person who is endeavouring to enforce the performance of the contract, and so forth." 10 20 25 22 anticipated in the event of default by the party who is under the obligation to pay. However, in the cavendish case (supra), a landmark decision regarding the enforceability of contractual penalty clauses, the UK Supreme Court 5 rendered clarity on the matter. It held that the correct test for determining whether a clause is a penalty is whether it imposes a detriment on the party in breach that is disproportionate to the legitimate interests of the innocent party. The Court urged the need to focus on the commercial justification for the clause, rather than the 10 penalty classification. It then clarified on the four tests formulated by Lord Dunedin, as follows: "31. In our opinion, the law relating to penalties has become the prisoner of artificial categorization, itself the result of unsatisfactorv distinctions between a oenaltv an aenuine ore-estimate of loss. and 15 between a penalty and a deterrent. These distinctions originate in an over-literal reading of Lord Dunedin's four tests and a tendency to treat them as almost immutable rules of general application which exhaust the field ..." (Emphasis added) The Court then formulated the proper test as follows: 20 "The real auestio when a contractual provision is chall enqed as a oenaltv is w hether it is oenal. not hether it is a Vre-esti ate of loss. These are not n tural oooosites or mutuallv exclusive cateqories. A damages clause maybe neither or both. The fact that the clause is not a pre-estimate of loss does not therefore, at any rate without more, mean that it is penal. To describe it as a deterrent (or, to use the Latin equivalent, in terrorem) does not add anything. A deterrent provision in a contract is simply one species of provision designed to influence 23 25 the conduct of the party potentially affected. It is no different in this respect from a contractual inducement. Neither is it inherently Denal or contra rv to the oolicv of the law. The a estion whether ir is enforceable sh ould dep end on whether the means by which the 5 contractin a Dartv's conduct is to be influenced ar 'e "u nconscionable" or ch will usual y amo unt to the same thi na) "extravaqant" b v refere nce to some no rm." (Emphasis added) The provision of section 26 (1) of the Civil Procedure Act restricting Court's power of intervention in a contract between the parties only to 10 varying the rate of interest agreed upon is, as has already been noted, a codification of the Common law principles laid down in the authorities cited immediately above' However' section 26 (l) of the Act vests the Courts with limited discretion in the application of the Common law principles on penalty clauses; in that it restricts the l5 exercise of such discretion only to the variation of the rate of interest agreed upon by the parties, to a reasonable or appropriate rate. In the instant case before us, the 24% per annum rate of interest agreed upon by the parties to the contract, as payable upon default by the Respondent, was on a compounded interest; on a money transaction, 20 which was in the dollar currency. This Court must therefore determine whether the rate of interest in issue would serve as compensation for the anticipated loss upon default by the Appellant; or it instead went beyond this, and therefore amounted to a harsh and unconscionable bargain; thereby necessitating the requisite remedial intervention by 25 Court, as provided for by section 26 (l) of the Civil Procedure Act. In his determination of this issue, the trial iudge upheld the compound interest on the contractual principal sum; as was agreed upon by the 24 Appellant and Respondent. In doing so, he inadvertently acted in compliance with the provision of section 26 (1) of the Act; albeit that he erroneously relied instead on sections 26 (2) and (3) of the Act. He however held that the 24% interest rate the parties had agreed upon was 5 unconscionable; hence, he varied the rate to l5%. The Court of Appeal however conversely interfered with the compound interest the parties had levied on the principal sum, as well; and substituted it with a simple interest, on which it charged the rate of 6% instead. Furthermore, the Court of Appeal reduced the general damages of UGX 10 500,000,000/= (Five hundred million only) awarded by the trial Court, to UGX 50,000,000/= (Fifty thousand only); basing on its finding, first that the Appellant had not proved any loss, and second that the transaction between the parties was not of a commercial nature. In this regard, he Court stated thus: 15 "The respondent agitates for a sum of shs. 3.8 billion as general damages. He contends that the respondent was compelled to sell his personal palatial house in 1989 to pay his debts and had not quite paid all debts. He comes to the measure of shs. 3.8 billion because he assumes that this market value of his property. In the plaint it is 20 suggested that he had to take a mortgage on the property and eventually sell it to pay off his debts. No connection is really made between his contract with the appellant and his obtaining of a loan from Housing Finance Company Ltd in 1996, 8 years after entering into a contract with the appellant to provide medical services to one 25 officer. Neither is the sale which was voluntary rather than a forced sale on account of his indebtedness rationally connected with the breach of contract. 25 5 Whatever losses the respondent suffered on selling his property for which there is no proof provided had nothing to do with the contract or breach thereof between the appellant and respondent. In paragraph 5 of the plaint it is averred that 'His property was sold off.' Suggesting that it was sold off by his creditors. This contradicted by the supporting document for his averment 'F2' WHICH IS A LETTER FROM Housing Finance Company Limited which indicated that tt was sold off by the respondent himself." It is trite that any person making a claim for damages owing to default 10 by a party bearing the responsibility to perform a duty under a contract, must adduce evidence in proof of such claim; and indeed from such evidence, sufficient causal connection between the breach and the loss suffered must be manifest. In Sempra Metals Ltd v Inland Revenue Commissioner tzoo7l 4 ALL ER 567, Lord Nicholls noted thus: 15 " ... in princi ple. it is always o pen to a cla imant to olead and prove his actual inte rest losses caused bv late payment o f a debt. The se losses will be recov erable. subiect to the orincioles a o vernina all claims for damaqes r breach of contract such as remoteness, failure to mitiaate a nd so forth." 20 In the instant case, the letter "F2" dated 22 August 2011, written by Housing Finance Bank Ltd., which the Court of Appeal referred to in part of its judgment reproduced above, stated thus: "RE: This is to confirm that the above property was mortgaged to this . bank by Dr. Anthony Okullo in 1996. He sold the property in 1998 and cleared all his credit obligations with the bank." 25 26 Basing on this communication from the bank, the Court of Appeal was of the persuasion that the Appellant had failed to adduce evidence that showed linkage of the mortgaging of his house, to the contract executed by him and the Respondent eight years earlier; which the Respondent 5 had defaulted upon by its failure to perform its part of the bargain. I am unable to agree with the Court of Appeal in this regard. On the uncontested evidence, the Appellant had, with the acquiescence of the Respondent, injected personal funds to enable him perform his part of the bargain in the contract; and this was in anticipation of prompt 10 settlement by the Respondent. The Appellant, a practicing medical doctor, would certainly have otherwise utilized these funds either in his medical practice, or elsewhere; to his benefit. He would then not have been constrained to mortgage his property. However, eight years after the execution of the contract between the parties, the Respondent 15 was still in default; and it was this inordinate delay, which compelled the Appellant to mortgage his property to the bank in mitigation of his financial woes, but he instead lost the property. ln the Sempra Metats Ltd case (supra), Lord Hope of Craighead, urging a departure from the earlier position taken by Courts in decided cases, 20 agreed with Lord Nicholls, and noted thus: " .... at common law, subject to the ordinary rules of remoteness which apply to all claims of damages, the loss suffered as a result of the late payment of money is recoverable. ... The realitv is that every creditor who is deortved of funds to which he is entitled and which he needs to 25 run his business will have to incu r an interest-bearina loan or employ other funds whic could themselves have earned interest. lt is a short 27 Indeed, this proposition of the law applies to the instant matter before this Court. I find that the Court of Appeal erred in taking a rather narrow 5 view of what the requisite evidence, required to connect the two transactions, was; and thus applied a wrong principle to establish the existence, or not, of a causal link between the breach, and the taking of the mortgage. There was discernible linkage between the mortgaging of the property, and the Respondent's gravely inordinate delay in paying 10 the Appellant what was owing to him. There is therefore sufficient causal connection from the failure by the Respondent to perform its part of the bargain to the loss that necessitated the mortgage by the Appellant of his property in an endeavour to mitigate the loss he had suffered owing to the Appellant's breach of the contract between them. 15 The Court of Appeal held the view that the contract between the parties hereto was not of a commercial nature. Accordingly, it altered the interest the parties had agreed upon, from a compounded to a simple interest; and similarly reduced the interest rate from 24% to 6%. I find, with the greatest respect to the Court of Appeal, no basis upon which it 20 made these findings and decision. The uncontested evidence on record is that the Appellant, a medical doctor running a private practice, rendered professional services for the Respondent, including the use of his own funds; for an agreed upon fee. This was, by any account, a commercial transaction. Had the Respondent received these services 25 from a financial institution, interest levied thereon would have been at a commercial rate. No wonder, then that the parties deemed it proper to levy on the principal sum both a compounded interest, and a high 28 step to say that interest losses will arise "in the ordinary course of things" in such circumstances." (Emphasis added) rate thereon; which is the core issue before this Court for determination. The substitution by the Court of Appeal, of the compound interest agreed upon, with a simple interest, and the interference with the 5 interest rate of 15% challenged in the appeal on the ground that they were harsh and unconscionable, thereby substituting a reduced rate of 6%, was informed by certain considerations. First, was that the public officer who committed Government to pay 24% compound interest had acted in a cavalier manner in handling public resources. Second, was 10 that the interest rate imposed by Ugandan banks on US dollar transactions rarely exceeds a single digit. Third, was that the Appellant's claim had gone stale; and he had only revived it when the Respondent made part payment of its obligation under the contract. The Court ascribed a cavalier attitude to the officer who represented l5 the Government in entering the contract, for committing it to pay 24% compound interest rate per annum; holding that the interest and rate thereon were both unreasonable, as it would impose a harsh burden on the public purse. Court was of the view that the Appellant's claim had become stale. I quote in extenso from the judgment of the Court; per 20 Egonda-Ntende JA: " 37. PWz, a witness for the respondent, who testified that he committed Government to pay 24% compound interest testified that it t. m wh ln m r hensible to me iv n ha i r he Mini t o D n 25 h tm wh t ensur that the Minist me i h commit ov rnm i m thi n w 1i w n r 24 2 29 un tn int re t which he re r n no bia deal. I am not too sure if he was dealina with his own resources that he would ke thi.s cava li r attitude that he took e resources. 39. Secondlv this claim had become stale and wqs onlv revived after t with nuhlic 5 10 the i h llant the rlnct al debt in 2011 and 2012. The respondent had othe rwise sat on his claim for 22 vears 15 without takin a he claim been led in 1989 or 1991 mavbe the claim wo uld not look so outraaeous as it is now. 40. Takinq into account all circumstances surroundina this aareed interest I am satisfied that it is har. .s h and unconscionable and would 20 not enforce it. /t is clearlv unreaso nable and imoose a harsh burden 25 on the public purse. I would enter judgment of simple interest at 6% per annum on the principal debt of US 593,150.00 from the time interest was agreed to be paid to the filing of the suit. In the result I would allow ground 2 of the appeal and dismiss ground 3 of the cross appeal. " (Emphasis added) Admittedly, it is within the Court's remit to vary the interest rate agreed on by the parties, or damages awarded by Court. However, Court can 30 38. The principle sum was denoted in United States Dollars and so is the interest now claimed. If the principal sum had been in Uganda shillings the interest claimed maybe would pass muster. However, the debt in this case, was expressed in the United States Dollars, a currency that is more stable and given less to fluctuations of the kind that compel interest rates to be rather high for the Ugandan shilling. I am prepared to take judicial notice of the fact that interest rates in IJgandan Banks for the US dollars are rarely outside single digits. only do so when such interest rate agreed upon, or damages awarded by Court, are manifestly high or inordinately low, or where the lower Court has erred by applying wrong principles in determining the rate of interest chargeable, or damages awardable, in the circumstance. 5 The evidence on record shows what happened between the date of contract, and the Appellant instituting the suit against the Respondent for the recovery of the contractual sum. In fact, and contrary to the finding by the Court ofAppeal, the evidence on record offers proof that the Appellant had not abandoned his claim against the Respondent at 10 all; but had in fact consistently followed up on it. The letter dated 1" April 2011 (Exhibit C4,by PW2, to the Permanent Secretary, Ministry of Defence, clearly recognises the plight of the Appellant in the pursuit of his claim, following the default in payment by the Respondent. It reads as follows: 15 20 25 We were rewarded for engaging Dr. Okullo. All the expected rumours/ speculations were diffused promptly by his accurate first hand and public testimonies in churches and ancestral burial ground of the late Col. Okello. Dr. Okullo's testimonies were based on confidential and 3l " Apart from working to save the life of Col. Okello, Dr. Okullo directly worked to avert an expected possible embarrassment on our part as well as to dispel negative political speculations from the public in general and from Acholi sub-region in particular in case Col. Okello had died in the hands of the NRM/NRA establishment, soon after his integration into the NRA. We were indeed satisfied with the complete medical report handed over to my office by Dr. Okullo Anthony; along with the accepted professional fees and other claims. authentic combined medical reports he obtained locally and from abroad. his two invoices, we did no t discharae our duties promDtly then. 5 I w had some challen e r r ultin in the mis lacem Anaelo Okello's file (bv the time I left officd. The file contained all the l0 original important hospital and claims documents. In addition there were two recorded unfortunate cases of misbehavior at the entrance to the Republic House, meted out to Dr Okullo by a few undisciplined soldiers for which we apologized to him." (Emphasis added) Indeed, in his letter dated 3'd August 2011, (Exhibir Cr, PW2, as the Government official who had represented the Government at the time of entering into the contract with the Appellant, recognized with 15 appreciation the Appellant's exercise of restraint from taking the Government to Court; until much later. Furthermore, the letter, which discloses the factor that informed the agreed upon imposition of the 24% interest rate on the compounded interest, reads as follows: "Without going into any details it is true that in 1989 we never 20 anticipated any difficulty at all in oavina off the invoice amounts within one month, but as you indicated one unfortunate event after another interrupted the process, for which we have already apologized. So we were not at all bothered bv the 24% compound interest n er annum su o ested and a a ree d to. It was just of no 25 consequence really because there were far bigger payments than your invoice amounts we were handling. 32 I regret to sav, however. that although I authorized pavment against m t thank ou or listenin r vtc to have the matt r t witho ut involvina a court process. I am sure vou will reach an i n with the curre t he Minist o De fence. " (Emphasis ailded) 5 It is therefore clear from the testimony of PW2 above that, contrary to the finding by the Court of Appeal, he did not in any way act in a cavalier manner. Had the Respondent honored its obligation to the Appellant within one month, or soon thereafter, as PW2 had envisaged, the compound interest levied on the contractual sum, as well as the 24oA 10 per annum interest rate charged thereon, would have been insignificant, hence inconsequential; and would accordingly never have been in issue at all. From the evidence above, it is quite manifest that the Court of Appeal took into consideration extraneous and irrelevant factors in the 15 determination of whether or not the interest and rate agreed upon by the parties was reasonable and enforceable. Second, the irrelevance of treating the Appellant's claim as having become stale, apart, the Court had unfortunately effectively lifted blame from the Respondent who was guilty of default by its inordinate delay in meeting its obligation 20 under the contract, and instead placed it onto the Appellant who was the victim of that default; thereby occasioning an injustice to the Appellant. In the light of this finding, I would set aside the decision of the Court of Appeal regarding interest payable on the principal sum prior to institution of the suit. 25 It is therefore pertinent that this Court determines the proper criteria that should guide the Courts in resolving issues 2, 3 & 4. Under the general law, an innocent party deprived of the benefit of the provision 33 of an Act may find remedy in damages. As was noted by Lord Diplock in The Scandinavian Trading Tanker AB v Flota Petrolera Ecuatoriana (The Scaptrade), at p. 702: "The classic form of relief against such a penalty clause has been to 5 refuse to 7ive effect to it, but to award the common law measure of damages for the breach of primary obligation instead." For the instant case, Court has to appreciate that in anticipation of a possible default, the parties willfully provided expressly for compound interest and the impugned rate thereon. There is no allegation or 10 evidence of fraud or any other blame attributable to the Appellant that could have forced or influenced the parties to reach this contract. In the circumstance of this case, the Respondent was by its nature the powerful party, seized with a superior bargaining position; hence, the Appellant could not have taken advantage of, or exacted some undue 15 influence on it to accept the terms that were embodied in the contract. Evidence of this is in the fact that the Appellant had to plead for some 25 years before the Respondent could pay just the principal sum. In determining whether, or not, the terms of the suit contract was harsh and unconscionable, Court must take cognizance of the fact that there 20 is unfortunately no provision in the Civil Procedure Act for the definition of what is harsh and unconscionable. For the determination of this issue, I consider it prudent to rely for guidance on principles applicable under Common law for award of damages for breach of contract. The proper course of action then, is for Court to determine 25 the interest rate which, when applied, would achieve the same atonement as damages would do. Because of this, Court should be satisfied that the rate of interest when applied does not turn out to be 34 a penalty against the defaulting party; but is only compensatory of the loss suffered by the innocent party. According to the Halsbury's Laws of England VoI 29 (2019) Para 499: "The normal function of damages for breach of contract is the same 5 as that in tort: namely, compensatory. aiming to compensate the true Incs s red b ho innoro n tn ar nrl nlnro him in the ao o vtncitinn t u so far as mone v can do it. as if the cont ract had be en oerformed. Onlv 10 in exceptional circumstances do courts depart from this policy and award some greater sum." (emphasis ailded) Halsbury's Laws of England (supra), states at para 1015 that: " In the absence of some special statutory or contractual provision, the damages to which an innocent party is normally entitled in respect of a breach of contract are such as may fairly and reasonably be considered either as arising naturally (that is according to the usual 15 course of things) from the breach, or such as may reasonablv be sup0 osed 3 & 5 to have been in the contemplation of both oarties. at the time thev made the contr act. as the probable ult of the breach of it. In keeping with its compensatory purpose, the award of damages 20 should not be too speculative (see: Hadley v Baxendale (1854) I Exch. 347 at 354; andHalsbury'sLawsof EnglandVoI 12(1),Reissue, para 1015, 1018). It should do no more than compensate the innocent party for the loss suffered. In Hatsbury's Laws of England (supra), at para 1018, it is stated on award of damages that: 35 5 " It contemplates the recovery of true loss and no more, by puttinq the innocent party, as far as money can achieve this, in the position which he would have occupied had the contract been performed." The general principle is justified: "... on the grounds of fairness or reasonableness and the avoidance of unduly harsh results; and also by reference to consideration of economic efficiency and the avoidance of waste." See para 1020 of Halsbury's Laws of England (suPra). In the instant case, pursuant to the provision of section 26 (1) of the 10 Civil Procedure Act, I have to determine what interest rate would be appropriate to achieve justice in the circumstances. It is quite clear that section 26 (1) of the Act envisages the need arising for the mitigation of the harsh effect of the penalty rule under Common Law. Thus, it accords Court the remit to determine a just interest rate in the 15 circumstance. In this regard, there are a handful of decisions in our jurisdiction, wherein Courts have pronounced themselves on what they considered would accord the aggrieved parties reasonable atonement for the loss suffered. I find these authorities quite instructive. ln Prem Lata v Peter Musa Mbiyu tlg65l EA 592, money due to the Plaintiff 20 was withheld from him for 25 years. Court held that for suffering such deprivation, the Plaintiff was entitled to compensation through an award of interest on the money owing. ln Francis Sembuya v AII Ports Services (U) Ltd sccA No. 6 of 1999, this Court equated an award of interest on a principal sum owing, to an award of damages; as both are meant 25 to be compensation for loss of use of that money. Hence, it awarded interest on U Shs. 147,500,000/= at the rate of 22%per annum; to run 36 from the date it first became due, until payment. Court stated that such an award of interest is done at a commercial rate since the aggrieved party would have put the money to use, had it been availed at the time it first became due. In Interfteight Fowarders (U) Ltd v EADB - S.C.C.A No. 33 5 of 1992, when the Bank of Uganda lending interest rate was 40%, this Court held per Oder JSC that 36% simple interest awarded on a claim of t10,275, "... does not appear excessive in the circumstances." ln Premchandra Shedndi & Anor v Aximos OIeg - S.C.C.A No. 9 of 2OOi, Oder JSC upheld the award by the Court of Appeal, of interest rate of 20% on US$ 10 220,000, since the Appellants had received the money claimed, under a commercial transaction; for which an interest rate of 6% awarded by the trial Court was inappropriate. In Air Consult Architects v A. Bauman (Il) Ltd; Willy Owacha v Ringa Enterprises & Anor S.C.C.A No. 31 of 799e, this Court awarded 15% interest rate on the decreed sum of GBf 7,200. In J.Kpatel 15 v Spear Motors Ltd S.C.C.A No. 4 of ,99I, Seaton JSC took judicial notice of the Bank of Uganda lending rate, which was 38% at the time; hence, he found the award of 30% interest rate on a sum of US$ 253,700, reasonable. He also held that the interest was chargeable on that sum from the time it became due, until payment in full. 20 Regarding the instant case before this Court, I have made the finding that the application of compound interest on the contractual sum, by the parties, does not offend any provision of section 26 of the Civil Procedure Act, or of any provision of any other law. It is owing to this finding, that I fault the Court of Appeal for interfering with the 25 compound interest agreed upon by the parties hereto. The trial judge correctly applied the law in leaving the compound interest agreed upon by the parties undisturbed. The issue before the Court of Appeal was 37 what remedy would adequately atone for the Appellant's loss. In my considered opinion, the Court ought to have taken into account the fact that the contract between the parties hereto was a commercial one. Had it done so, it would have determined a rate of interest that could have 5 had the effect of, as nearly as possible, restoring the Appellant to a position he would have been in if the Respondent had performed its part of the bargain. It is in levying an interest rate that appropriately compensates the Appellant for the loss he has suffered, that this Court will give effect to 10 the true intention of the parties to the contract, as is discernible from the provision of the suit contract. To determine an interest rate that is appropriate in the instant case, this court must have regard to certain crucial considerations. Foremost, is the suit contract being a commercial transaction. Basing on the authorities on award of interest 15 rate in our jurisdiction, which I have cited above, the instant case being a commercial contract understandably attracts a higher rate of interest for it to atone for the loss suffered by the Appellant' It is quite apparent from a proper understanding of the terms of the contract between the parties that it was not their intention that the 20 agreed upon 24% rate of interest on the compound interest, made in anticipation of possible default in payment by the Respondent, should be a penalty clause. It was, to the converse, a compensatory remedial provision. Indeed, PW2 who signed the contract on behalf of the Respondent explained in his letter (Exhibit Cr, that the Respondent had 25 envisaged payment of the contractual sum within a period of one year. If the Respondent had performed its part of the bargain as PW2 had hoped, rhe 24% interest per annum accruing on the principal sum of 38 The trial Court did not interfere with the compound interest agreed upon by the parties; but revised the interest rate thereon from24% to l5%. The Court of Appeal found the interest rate imposed by the trial Court to be still high. It accordingly interfered with both the compound interest and 20 the rate charged thereon, by substituting the compound interest with simple interest, and then lowering the interest rate thereon further to 6%. In varying the interest from compound to simple interest, the Court of appeal acted in error as this was in contravention of the provision of section 26 (1) of the Civil Procedure Act. In Sempra Metals (supra) the issue 25 before Court was whether to make an award of damages, or restitution, for the loss caused to Sempra Metals by the United Kingdom's Revenue Commission. In holding with clarity that under English law compound US$ 93,150 would have been for one year only; for which the amount payable would have been US$ 115,506. From this, the issue of harsh and unconscionable bargain would not have arisen at all. However when the 24% interest rate was applied for twenty-five years, 5 basing on the compounded interest, the resulting amount payable became enormous. Thus had the interest agreed upon not been compounded, but was a simple one, the amount payable upon the application of the 24% interest rate on the fixed principal sum for whatever period of time, would have been reasonable and acceptable. I 10 therefore find in concurrence with both the trial and first appellate Courts that in the circumstance, the 24% interest rate agreed upon by the parties on a compounded interest had become a penal provision; hence, it was harsh and unconscionable. This necessitated and justified the intervention of the Court therein, pursuant to the provision of 15 section 26 (1) of the Civil Procedure Act. 39 5 interest is applicable to commercial transactions, Lord Nicholls of Birkenhead stated thus: "ts2l We live in a world where interest payments for the use of money are calculated on a compound basis. Money is not available commercially on simple interest terms. This is the daily experience of everyone, whether boruowing money on overdrafts or credit cards or mortgages or shopping around for the best rates when depositing savings with banks or building societies. lf the law is to achieve a fair and just outcome when assessing financial loss, it must recognize and give effect to this reality. 11281 ... ... With the restitutionary claims therefore the reference to a conventional rate should be taken to refer to the rate at which the government could borrow the relevant amounts in the market at the relevant times. The need for this distinction came to light as a result of the much fuller submissior'ls on the law of restitution presented to the House. 20 Lord Hope of Craighead, who agreed with Lord Nicholls, stated that: "[41] The fundamental point, however, is this. Compound interest is a necessary, and very familiar, fact of commercial life. As the Law Commission said in'Compound Interest: A Consultation Paper' (No. 167), p. l0 l5 40 31 (para 4. 1), the obvious reason for awarding compound interest is ' that it reflects economic reality. ... $limple interest never provides a full indemnity for the loss to the litiqant. ... [T]he case against the compounding of interest was essentially a case against interest itself." 5 Lord Walker of Gestingthope who concurred with Lord Nicholls and Lord Hope, had this to say on the issue of compound interest: "It is true that the time value of money (as opposed to money itselfl may be regarded as a'non-money benefit' ... But it is a benefit which can readily be quantified in money terms; that has been, for many centuries, the function of interest." 10 He accordingly held that the Court should award compound interest at "a conventional rate calculated by reference to the average cost of government borrowing during the relevant period. " He pointed out that it is this, which would achieve complete restitution. He also pointed out 15 that the Revenue Commission, which was the Defendant therein, was "economically powerful and sophisticated and must be supposed (as the agreed 'conventional basis' seems to recognise) to have taken full advantage of" the claimant; and "it is not suggested that the claimant has been at fault or has been dilatory in making or pursutng its claim. 20 As I have pointed out above, section 26 (1) of the Civil Procedure Act, strictly clothes court with the remit to interfere only with the rate of interest; but not the type of interest the parties have agreed upon in the contract. In the absence of any law to the contrary, I find with respect to the Court of Appeal that it erred in interfering with the compound 25 interest agreed upon by the contracting parties hereto. It should have upheld the position taken by the trial Court in that regard. 4l The cases of Interfreight Fowarders (U) Ltd v EADB (supra), Premchandra Shedndi & Anor v Aximos OIeg (SUpra), Air Consult Architects v A, Bauman (U) Lrd (Supra), Willy Owacha v Ringa Enterprises & Anor (supra), and J.X Patel v spear Motors lrd (supra), in which this court determined the appropriate 5 interest rates to award, are all in one particular respect in pari materia with the instant case before this court. This is that they were all commercial ftansactions carried out in either the uS Dollar or Great Britain Pound Sterling currencies. These cases are, however, each distinguishable from the instant one in that the interest rates in each 10 of them were all charged on simple interest; while, in the converse, the impugned rate of interest in the instant case is levied on a compounded interest. In the event, the charge of interest rate of 24% on the compounded interest agreed upon renders the rate harsh and unconscionable; so, it amounts to a penalty. Section 26 (1) of the Civil l5 Procedure Act, confers on this Court the jurisdiction to intervene thereon, and exercise the discretion to determine a rate of interest that is appropriate. Therefore, with regard to the instant case, the task confronting this Court is to determine an interest rate, which when computed on the 20 compound interest agreed upon by the parties, for the period running from the date of the contract to the date of judgment of the trial Court, would not be harsh and unconscionable; but reasonable and appropriate. It is this approach, which would achieve the true intention of the parties herein. ln Campbell Discount Co Ltd v Bridge [1962] AC 600, 25 622,Lord, Radcliffe, referring to an aspect of equitable law inherited by the Common law Courts, stated thus: 42 "... the intention of the parties is never conclusive and may be overruled or ignored if the court considers that even its clear expression does not represent 'the real nature of the transaction' or what 'in truth' it is taken to be." 5 It is this proposition of the law, which is discernible in the provision of section 26 (1) of the Act, granting the Court discretionary powers to intervene and vary the rate of interest the parties have agreed upon if in the view of the Court the rate agreed upon is inappropriate. I am persuaded by, hence place reliance on, the explanation on compound 10 and simple interests, and the mode of their computation, provided in Fgrbes Advisor ux; https://search.app/xa4BDCgaZGetMOBs6) as follows: "Compounding is a process where interest is credited, not only to the original principal amount, but also to previously earned interest. This interest earned on interest results in the maximization of returns over 15 time. This process differs from so-called simple interest, which is when interest from previous years is ignored, and the calculation is made only with reference to the original amount. The difference between simple and compound interest is that: for simple interest, the interest you earn or pay stays the same each year 20 (if there is no change in the rate of interest paid or charged, and principal remains the same). Compound interest is calculated on the gross balance at the end of the year, which includes any interest accrued in previous years. Hence, this compounds the returns. So the interest is paid on the closing balance at the end of the previous year, 25 which includes the interest paid in previous years." From the explanation above, one can see that if the parties in the instant case had agreed on a simple interest, instead of the compound interest, 43 the charge of 24% rate of interest on the fixed principal sum would have been appropriate and acceptable. It is in similar premise that this court held in Interfreight Fowarders (U) Ltd v faOr (supra) that owing to the fact that the Bank of uganda lending interest rate was 40% at the time, the 5 rate of 36% on simple interest awarded on a claim of f.lo'275, "... does not appear excessive in the circumstances." Similarly, in I.K Patel v Spear Motors Ltd. (supra), Seaton JSC took judicial notice of the Bank of Uganda lending rate being 38% at the time; hence, he found the award of 30% interest rate on a sum of US$ 253'700' 10 reasonable. Indeed, I find merit in the submission made by Counsel for the Appellant that to determine the appropriate rate of interest on the compound interest, the Court should have found relevance in, and considered for guidance, the Bank of Uganda Iending rates closest to the year 1989 when the contract was made. 15 A number of options are available for computing compound interest out of the principal sum; to arrive at a fair value of what the Appellant would be entitled to in compensation. One, ordinarily considered as appropriate for an award of damages, is the rate of prevailing interest on commercial borrowing from finance institutions. The other, is the 20 rate measured by an award of interest at conventional rates calculated by reference to borrowing by the government from the market during the relevant period, as has been discussed in sempra Metals (supra). Government may engage in domestic borrowing of money from the Bank of Uganda in the form of treasury bills and bonds at a rate set by 25 the Bank of Uganda; which is currently also, coincidentally, the market rate. Section 33 (4) of the Bank of Uganda Act provides that: 44 "... the bank shall charge market rates of interest on any advance to the Government unless the board determines otherwise." The Bank of Uganda lending rates closest to the 22"d day of February 1989 when the parties hereto executed the Suit contract, were issued 5 vide Statutory Instruments dated the 9'h August 1991' and 21" August 1992. The lending rates provided for under these instruments were respectively 39% and 42% pet annum. The Appellant has asked this Court to uphold lhe 24% rate of interest on the compound interest, the parties have agreed upon in the contract. 10 I have to take cognizance of the fact that the contract was a commercial transaction; but without losing sight of the need to ensure that the interest rate Charged on the compound interest does not amount to a penalty. I would accordingly charge 9% interest rate on the compound interest; which would be equivalent to 30% interest rate charged on a 15 simple interest. I find 9% interest rate charged on the compound interest not harsh or unconscionable, but quite reasonable; hence, it is not a penalty. I would then compute the compound interest that has accrued, by applying the 9% rate thereon, pursuant to the formula provided in Forbes Advisor rJK (supra) as follows: 20 Formula: A= P(1 +r/n)"' In this formula: A = final amount P = initial principal balance r: intereSt rate n = number of times interest applied per time period 45 25 t = number of time periods elaPsed I would, following the formula above, compute the compound interest accruing on the initial sum of USD 93,150, for the twenty-five years running from 22"d February 1989 being the date of contract, to 9'h 5 September 2015, being the date of judgment of the trial Court; at the rate of 9% per annum. I however have to take note of the fact that the Respondent made two part payments in the course of the twenty-five years. First, was in the sum of USD 55,434 made on I 7'h November 201 1 ; and the other was in the sum of USD 37'716 made on 17'h May 2012. l0 These payments have to be factored in, when computing the interest that has accrued in the twenty-five years under consideration. This, in my opinion, makes a fair rendition of the loss suffered by the Appellant in the twenty-five years the Respondent failed to pay him what was due to him under the contract. 15 Therefore, I begin the computation of the compound interest accruing with the period running from 22d February 1989, to 17'h November 2011; which is 22 years and nine months. From the resulting amount, the first payment of USD 55,434 is deducted; and the amount remaining thereafter forms the basis for the computation of the interest accruing 20 from 17'h November 2011, to 17'h May 2012; which is six months. From the resulting amount, the second part payment of USD 37'716 is deducted; and interest accruing from the resulting balance, is computed for the three years and four months period running from 17'h May 2012, to 9'h September 2015 which is the date of judgment of the 25 trial Court. Thus, the total computed interest that has accrued in the twenty-five years under consideration is USD 79O,262; which I would award the Appellant as special/liquidated damages. 46 This being a commercial transaction, I find the authorities cited above on court awarded interest rates in transactions that were commercial, quite instructive. In Premchandra Shedndi & Anor (supra), Oder JSC found the award of 6% interest rate awarded by the trial Court on the decretal 5 sum of US$ 220,000, inappropriate; so he upheld the rate of 20oA awarded by the Court of Appeal. ln Air Consult Architects (supra), this Court awarded 15% interest rate on the decretal sum of GBf 7,200. In the premises, I consider a charge of. 15% simple interest on the decretal sum of USD 790,262 awarded, to accrue from the date of the High Court 10 judgment herein, until payment in full' quite appropriate' Distinct from, and independent of, the award of special,/liquidated damages made above, is that of general damages; which section 26 (2) and (3) of the Civil Procedure Act provides for, with interest thereon' Courts award general damages for non-monetary losses such as pain, 15 suffering, emotional distress, or harm to one's reputation; which are not easily quantifiable, but have verifiable causal connection with a breach of contract, or other wrongful acts suffered by the complainant. The uncontroverted evidence in the instant case is that the Appellant has suffered anguish and great anxiety owing to the Respondent's 20 inordinate delay to pay what was due to him; and what more, he had to mortgage his personal house, which he however lost upon foreclosure by the bank. The Respondent paid him only the original contractual sum of USD 93,150; but it took twenty-five years for the Respondent to do so. AII this tribulation and ordeal had clear causal connection with 25 the Respondent's failure to honour its part of the commercial bargain. The Court of Appeal set aside the trial Court's award of general damages of UGX 500,000,000/= (Five hundred million only); and 47 substituted therefor an award of UGX 50,000,000/= (Fifty million only). The trial Court had awarded ucx 500,000,0o0/= (Five hundred million only), purportedly as nominal damages. I find this award, as nominal damages excessive; because, unlike compensatory damages, nominal 5 damages is a token or symbolic award made when a legal injury or violation of a right has occurred, but only minimal harm has resulted. The Court of Appeal acted rightly in setting aside the award of nominal damages made by the trial Court. The Appellant suffered grave harm' inclusive of loss of his house, owing to the inordinate delay by the 10 Respondent to settle its obligation to him; for which the appropriate remedy is an award of general damages. However, I find that the court of Appeal was influenced by extraneous matters to award the Appellant UGX 50,000,000/= (Fifty million only) as general damages. I would set aside this award; and substitute therefor UGX 500'000'000/= (Five 15 hundred million only), with simple interest thereon at 6% per annum, from the date of judgment of the trial Court until payment in full. In the event I would set aside the decision of the Court of Appeal, which interfered with the compound interest that the parties hereto had agreed upon; for want of court's jurisdiction to do so. I would similarly 20 vary the award of general damages, and the interest charged thereon as shown above. Accordingly, grounds 1, 3,4, and 5, of this appeal would succeed; while ground 2 would fail. Wherefore, I would make the following declarations and orders: (i) Pursuant to the provision of section 26 (1) of the Civil 25 Procedure Act, Court has no powers to vary the compound interest agreed upon by the parties hereto' 48 5 (ii) The Appellant is awarded special/liquidated damages of USD 79O,262 (Seven hundred and ninety thousand, two hundred and sixty two only), which accrued as compound interest. (iii) The Appellant is awarded UGX 500,000,000/= (Five hundred million only), as general damages. (iv) The award of special/liquidated damages in (ii) above shall bear simple interest thereon at the rate of 15% per annum, from the date of the judgment of the trial Court, until payment in full. (v) The general damages awarded in (iii) above shall bear simple interest thereon at 6% per annum from the date of the judgment of the trial Court, until payment in full' (vi) The Appellant is awarded two thirds of the costs of this appeal; and the full costs in the lower Courts. 10 Since Madrama and Musoke, JJ.SC, concur with this judgment, orders 15 are, by majority decision of the Court, hereby made in the terms proposed herein. Dated this 5'h day of September,2025. 20 Alfonse Chigamoy OwinY - Dollo CHIEF JUSTICE Judsment delivered.tir lffiv of $ r,b^l*^ 2025 49 C-, I 10 20 lL IKU s THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT I(AMPALA (CORAM: OWIIW-DOLLO, CJ, TIBATEMWA- DKIRINUBINZA, IWUSOI<D, IYIADRAIUIA & KIBDEDI,T'. SC) CTVIL APPEAL NO. 03 OF 2O2O BETWEEN DR. MAJ.RTD ANTHONY JALLON OKULLO AIID APPELLANT ATTORNEY GENERAL : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : RESPONDENT [Appeal from the judgment of the Court of Appeal at Kampala before (Egonda-Ntend.e, cheboion and Tuhaise,JJA) Ciuil Appeat No. 207 of 20 16, dated 21st Mag 2O1S.l JUDGMENT OF TIBATEMWA-E KIRIK UBINZA, JSC I have had the opportunitSr to read in advance the judgment prepared by my learned brother Owiny-Dollo, CJ. In his judgment, the Hon. Chief Justice makes a finding that as argued by counsel for the Appellant, under Section 26 (ll of the Civil Procedure Act (CpA), the court,s discretion to interfere with an agreement between parties to a contract is limited to the rate but not the type of interest. Section 26 (1) provides that: ( Where an agreement for the payment of interest is sought to be enforced, and the court is ofthe opinion that the rate agreed to be paid is harsh and unconscionable and ought not to been forced by legal 1 Ir) \\' c t ''. t. SU \ s 10 20 process, the court may give judgment for the payment of interest at such rate as the court may considerjust. I am alive to the purpose for the award and payment of interest. It is to compensate the person who has been wrongfully deprived of the use of their money by another person.l Interest is a "late payment charge." Interest is a payment which becomes due because the "creditor" has not had their money at the due date. It may be regarded either as representing the profit the creditor might have made if they had had the use of the money, or, conversely, the loss they suffered because they did not have their money. The general idea is that the creditor is entitled to compensation for the deprivation. In this, the function of interest is similar to that of award of damages for loss suffered by party A if B wrongfully withholds fundsbelongingtoA. The purpose of Section 26(1) is to provide statutory support to a common lahv principle that interest is not intended to provide windfall gains or unfair benefit of one party at the expense of another. The interest should Se sufficient, lair and equitable to compensate the person who has beln deprived of the use of their money by putting them in the place theV shou]d have been in if the money had been availed to them. Interest should not qe used for unjust enrichment. I opine that the section aims at ensuring that where an agreement provide for payment of interest on a sum of money due to one party from another, the quantum ofinterest/ the total effect ofthe agreement is not unreasonable / outrageous. 2 0 It SEP 2025 t,t 1 : ., t ATf \B CC uil Ill A E I t 0 C E 10 The interest rate, expressed in form of percentage, is not calculated independent of the nature of interest agreed upon. It is the application of both that leads to the amount payable. A properly drafted agreement which attaches interest to the money borrowed or which provides for interest in anticipation of a possible default will not and does not merely provide for a percentage payable but must necessarily also provide for the nature of interest. The parties may agr ee on interest to be calculated a s simple interest or as compound interest, or any other Wpe of interest. Sim le interest is calculated on the principal or original amount claimed by the plaintiff. compound interest is calculated on the principal amount and the accumulated interest of previous periods and can therefore be referred to as "interest on interest.,, In simple words, compound interest is interest that applies not only to the initial principal of money claimed but also to the accumulated interest from previous periods. To arrive at an amount payable by a debtor and expressed in the form ol interest a court must necessarily consider both the percentage (rate) as well as the nature of interest. And then the court will be able to answer the question: will the resultant amount compensate the person who has been deprived of the use of their money by putting them in the place they should have been in if the money was availed to them in time? or will it go beyond compensation and serve as a penalty? Indeed, in his judgment on page 16, the Hon C.J states that: The pertinent issue for determination by this court, as it was before the lower 3 20 T -- - Courts, is tphether the remedial prouision in the form of interest rates charq ed on the compound interest a greed upon by the parties hereto, in anticipation of possible delay in payment of the sum owing, was enforceable. Of course whether or not the ensuing sum is harsh depends on the naturd o: the transaction and the loss suffered by the party whose rights have beer tampered with. But it is not in doubt that there can be a big difference in the amount of interest payable on a sum due if interest is calculated on a compound basis rather than on a simple basis. 10 20 In the matter before Court, the parties expressly provided that the interest ri of 24o/oper annum would be compounded. And the Appellant's ground 2 of I appeal is that the learned Justices of the Court of Appeal used the wrd ate :he InE ol premises in determining that the compound rate of 24o/o agreed upon by tht parties, was harsh and unconscionable. I will therefore first calculate the amount being claimed using the compound rate of 24oh and then apply 2 rate as simple interest. CALCULATING COMPOUND INTEREST A = P (l+nr) nt Where: A is the amount after t years. P is the principal amount (initial sum). t $ \ r$11 x a Sq t 4 10 zo A=93,150 x (1.24)22.2s A=93, 75Oxl,O24.9I A=95,5O9,191.50 r is the annual interest rate (in decimal form). n is the number of times interest is compounded per year. t is the time the money is invested for in years. Given: P = 93,150 USD R =24% r = 24oh=O.24 (as a decimal) t=22 years and 9months. Convert this to years: t=22+9 I 12=22.75 years. Interest is compounded annually, so n=1 Applying the formula: A=P(l+nr) nt A=93, 1 5O ( 1 +0.2+ l)22.7 s A=95,5O9,191.50 Compound interest is the difference between the final 6 0 4 sEP 20?5 T IB,I t * * C U initial principal: t and the 10 20 Compoundlnterest=A-P Compound Interest=95,509, 19 1.50 - USD 93,150 Compound Interest=95,4 1 6,04 1 .50. However, two installments (i.e. USD 55,434 and USD 37,7 16l of t}:e principal sum were paid to the Appellant so these will be deducted from the above figure: USD 95,509,191.50 - USD 93,150 (repaid installments) = USD 95,416,041.50 So, the compound interest of 24o/o per annum earned over 22 years and 9 months is 95,416,O41.5O USD. On the other hand, if we compute the same values using the simple interest method the ensuing amount would drastically different as shown below: CALCI'LATING SIMPLE INTERTST USING THE SAME RATE OF 24O/" PER ANNUM: The formula used to calculate simple interest is: Simple Interest (SI) = P x r x t Where: P is the principal amount (initial sum). r is the annual interest rate (in decimal form). t is the time the b WA td E 2 * u 0 c t- i-l I money is invested for in vears. Given: P = 93,150 USD r = 24o/o = O.24 (as a decimal) t = 22 years and 9 months. converting this to years; t = 22 + 9L2 = 22.Ts 10 yea-rs. Calculating the Simple Interest SI=93,150x0.24x22.75 SI=93,150x5.46 sI = 508,419 So, the simple interest earned over 22 years and 9 months at a 24oh annual interest rate is sog,419 usD. Totar Amount with simpre Interest. To find the total amount with simple interest, the simple interest is added to the principal amount as follows: 20 Total Amount = p+SI Total Amount = 93,150 USD + 508,4 19 Total Amount = 601,569 Deducting the two installments (i.e. USD ss,434 and uSD 3T,T16r of the principal sum which were paid to the Appellant: 7 10 20 usD 601,569 - USD 93,150 = USD 508,419 Therefore, the simple interest at a rate of 24oh per annum altet 22 yeats and 9 months is 5O8, 419 USD. A comparison of the above resultant amounts from compound interest and simple interest calculations shows a stark difference. Attaching a restrictive meaning to the Section would defeat the purpose for which the provision was drafted - to ensure that the quantum of interest/ the tota-l effect of the agreement is not unreasonable/outrageous. I am persuaded that to achieve the legislative intent under Section 26 (1) of the Civil Procedure Act referred to above we must apply the well-known purposive rule of interpretation, a rule or method of judicial interpretation that seeks to understand the purpose and intent behind a law rather than just focusing on its literal meaning. It is only after carefully considering both the nature and the rate of interest that a court will be in position to determine whether the resultant amount (the amount payable by the defaulter) from the interest calculation will adequately compensate the victim for their loss or if it will instead lead to unjust enrichment. Arising from the above reasoning, I respectfully differ from the finding of the Learned Chief Justice that the discretional authority granted to the court under Section 26 (ll of the CPA cannot be used to determine whether the interest would be simple or compound. Damages for breach of contract vs interest ent, the purpose for the award of interest 8 O\ SEP ?$15 \$ U z F t 4t t Etn c0u As already indicated in this judgm E A K f + + o a = RE 10 is to compensate the person who has been wrongfully deprrve d of the use of their money by another person.2 However, this purpose should not be used for unjust enrichment. The interest is not intended to provide windfall gains or unfairly benefit one party at the expense of another. The interest should be sufficient, fair and equitable to compensate the person who has been deprived of the use of their money by putting them in the place they should have been in if the money was availed to them. To safeguard against the windfall and in order to give a just compensation to the injured party, courts should exercise their discretion by balancing other claims such as general damages since both claims have the purpose of compensating and restoring the injured party to the position they would have been in had the breach not occurred. Nevertheless, this does not necessarily mean excluding or declining the simultaneous awarding of general damages and interest. 20 Interest is a payment which becomes due because the "creditor" has not had their money at the due date. It may be regarded either as representing the profit the creditor might have made if they had had the use of the money, or, conversely, the loss they suffered because they did not have their money. The general idea is that the creditor is entitled to compensation for the deprivation. In this, the function of interest is similar to that of award of damages for loss suffered by party A whose funds have been wrongfully withheld by B. The interest should place the debtor in the place they should have been in if the money had been availed to them in time, but without being I 30 translated into unjust enrichment. 10 On the other hand, general damages are the direct natural or probable consequence of the wrongful act complained of and include damages for pain, suffering, inconvenience and anticipated future loss.3 General damages are tgpicallg awarded to compensate non-moneta-ry losses. Since interest on the other hand focuses on compensating the injured person of the monetary or financial losses suffered, where a contract involving monetary obligations (such as in the present appeal) are not performed, general damages for breach of contract if awarded as an additional relief to the interest should be nominal because interest by its nature is a compensatory award. I am fortihed in my opinion by the fact that in the law of contract, it is not unheard of to talk about contract damages. And more importantly, contract damages are defined as monetary amounts awarded to a party for loss or injury suffered due to another party's breach of contract, aiming to compensate the non-breaching party for the actua-l financia-l harm incurred or to put them in the position they would have been in if the contract had been performed. I note that in the pleadings, the appellant claimed general damages to the tune of Ug. Shs. 3.8 billion. 20 In arriving at a decision in regard to the award of general damages over and above the interest the High Court stated that: 4I am of the uiew that since I haue allowed a compound interest of 15% per annum on the principle sum and since the same encompasses a lot of factors arising out of none paAment of monies oued and it takes care of ang t t i EME C 10 tncon nces and 10 20 expectations acctuing from the breach of contract as well as compensating the one entitled to pagment under a contract and get it is not paid and further consideration that it takes care of the consequences of the delaged pagment namelg opportunitg cosf, risk and inflation, I will not anaard general damages claimed of UGX 3,80O,O0O,000/ - as praged for bg the plaintiff. Instead a nominal figure of UGX 500,000,000/ - will be awarded as general damages." On appeal, the Court of Appeal was of the view that UGX 500,000,000 was high for breach of contract that was worth about Ug shs. 230,000,000 and whose principal sum had been paid by the time the suit was filed. The court held that: "The respondent agitates for a sum of shs. 3.8 billion as general damages. He contends that the respondent was compelled to sell his personal palatial house in 1989 to pag his debts and had not quite paid all debts. He comes to the measure of shs. 3.8 billion because he assumes that this market ualue of his property. In the plaint it is suggested that he had to take a mortgage on the propertg and euenfitallg sell it to pag off his debts. No connection is reallg made between his contract with the appellant and his obtaining of a loan from Housing Finance Company Ltd in 1996, 8 years afier enteing into a contract with the appellant to prouide medical services to one officer. Neither is the sale which was uoluntary rather than aforced sale on account of rationallg connected with the breach of contract. F z = N * * c0u 30 11 his in S oq sEP 2025 10 20 Whateuer losses the respondent suffered on selling his propertg for which there is no proof prouided had nothing to do with the contract or breach thereof between the appellant and respondent. In paragraph 5 of the plaint it is auerred thqt 'His propertg was sold off.' Suggesting that it was sold off bU his creditors. This contradicted bg the supporting document for his auerment 'F2' WHICH IS A LETTER FROM Housing Finance Compang Limited which indicoted thot it was sold off by the respondent himself." A first appellate court is duty bound to review the evidence adduced before the trial court and thereafter arrive at its own conclusion. As can be seen from analysis above, the Court of Appeal fulfilled its duty as a first appellate court. On the other hand, in his judgment, the Learned Chief Justice Owiny-Dollo has stated that he was unable to agree with the Court of Appeal in regard to the issue of general damages. He says thus: On the uncontested euidence, the Appellant had, with the acquiescence of the Respondent, injected personal funds to enable him perform his part of the bargain in the contract; and thb was in anticipation of prompt settlement bg the Respondent. The Appellant, a practicing medical doctor, would certainlg haue otherwise utilized these funds either in his medical practice, or elsewhere; to his benefit. He uould then not haue been constrained to mortgage his propertg. Howeuer, eight gears afier the execution of the contract between the parties, the Respondent uas still in default; and it wqs this inordinate delag, which A Er(i f +' o = d8 $- .N{" I iEM L 10 20 compelled the Appellant to mortgage his propertg to the bank in mitigation of his financial woes, but he instead lost the property. I note that the agreement between the Appellant and the government was reached in 1988. Eight years later, in 1996, the Appellant obtained a mortgage on his house from the Housing Finance Bank, which he later sold in 1998 to satisfy his credit obligations with the bank. The question in this case is whether the Appellant proved a connection between the loss of his property and the breach ofcontract by the respondent. In Hadley v. Baxendale [1854] 9 Ex. 341. The court in delivering its judgement said: cWhere two parties have made a contract which one of them has broken, the damages whlch the other party ought to receive in respect ofsuch breach ofcontract should be such as may falrly and reasonably be consldered elther arising naturally, i.e., according to the usual course of thiugs, from such breach ofcontract itself, or such aa may reasouably be supposed to have been in the contemplation of both parties, at the tlme they made the contract, as the probable reeult ofthe breach ofit. they would reasonably contemplate, KI P "r* "$s '13 amount of Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, whlch 10 injury which would ordinarily follow from a breach of contract under these special clrcumstances so known and communicated. But, on the other hand, if these special clrcumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in hls contemplation the amount of lnJury whlch would arise generally, and in the great multitude of cases not affected by any special clrcumstances, from such a breach of contract." In other words, this case supplies two tests for determining which damages are on the one hand, proximate and recoverable and those which are on the other hand too remote and therefore unrecoverable. These tests are: a. Do the damages arise naturally from the breach? Or b. Were the damages reasonably contemplated by both parties when they made the contract as being a probable result of the breach? If the answer to either question is yes, then the damages are considered proimate, meaning they are not too remote and are therefore recoverable. General damages are those that the law presumes to be the direct, natural, or probable consequence of the defendant's breach of contract. On the evidence available on record, it cannot be said that the appellant adduced sufficient evidence demonstrating a causal link between the defendant's delayed remittance and the appellant's subsequent loss of his property eight years later. Specifically, the appellant's actions of mortgaging 14 1 $ * Et'l i: i'J t nii 20 10 20 and selling the property cannot be considered as a foreseeable consequence of the breach, nor could it have been contemplated by either party at the time of contract formation. IamthereforeinagreementwiththefindingoftheCourtofAppealthat: No connection is really made between his contract with the appellaut and his obtaining of a loan from Housing Finance Company Ltd in Lgg6,8 years after entering into a contract with the appellant to provide medical seruices to one officer. Neither is the sale which was voluntary rather than a forced sale on account of his indebtedness rationally connected with the breach ofcontract' There is no doubt that as stated by the Learned chief Justice, had the Respondent not breached his part of the agreement, the "Appellant' a practicing medical doctor, u.tould certainlg haue otherwise utilized these funds either in his medical practice, or elsewhere; to his benefit'. I however note that the Learned Chief Justice gives this as a reason for supporting the award of general damages to the tune of 500,000,00o million. And yet compensation for inability to utilize these funds either in his medical practice, or elsewhere to his benefit is what has been handled in form of interest - interest focuses on compensating the injured person of the monetar5r or linancial losses suffered. As stated earlier in this judgment, interest repfesents the profit the creditor might have made if they had had the use of the money, or, conversely, the loss they suffered because they did not have their money' 15 tl,' 1vl t-: 2 I c0 10 In awarding general damages to a debtor who has been awarded interest, the court focuses on compensation for non-monetary losses such as pain and suffering. In exercising their discretion, the court should balance the claim of general damages on the one hand and that of interest on the other, since both claims have the purpose of compensating and restoring the injured party to the position they would have been in had the breach not occurred. Court can then award general damages for non-monetar5r suffering such as distress and anxiety. The approach taken by the trial court represents what a court should do - when awarding general damages, the interest already awarded cannot be ignored. The trial Court held: The Court of Appeal upheld the decision of the Trial Court not to accept the figure proposed by the Appellant. The court however reduced the award of 500 million shs to 50 million arguing that 500m was not a nominal IC, 1 -.) * * 6 rJ IBAT URT 20 ... since I haue allowed a compound interest of 15% per annum on the pinciple sum and since the same encompasses a lot of factors aising out of none pagment of monies oued and it takes care of ang inconueniences and expectations accnting from the breach of contract as well as compensating the one entitled to payment under a contract and get it is not paid and further consideration that it takes care of the consequences of the delayed paAment namelg opportunity cosl, nsk and inflation, I will not award general damages claimed of UGX 3,800,000,000/ - as praged for bg the plainffi. Instead a nominql figure of UGX 50O,OOO,0O0/ - will be awarded as general damages." 04 sEP 2025 1 \B ATEI,, z NI * l/: $ C ."'U RT 10 It is trite law that the amount of general damages which a plaintiff may be awarded is a matter of exercise of judicial discretion. It is also trite law that an appellate court will not interfere with an award of damages by a lower courtunlessthecourthasacteduponawrongprincipleoflaworthatthe amount is so high or so low as to make it an entirely an erroneous estimate of the damages to which the plaintiff is entitled'r In interfering with the amount awarded by the Trial Court' the Court of Appeal said: I part compang with the learned judge on whether the sum of shs. 500 million is a nominal amounL In my uiew it is not. I agree with the appellant that this was inordinatelg highfor breach of contrqctthqtwasaboutworthshs230million,andwhose principal sum had been paid bg the time the suit was filed' I take itthattherespondentmusthauesufferedsomeinconuenienceas he tied to get paid. Neuertheless' the sum awarded is so inordinatelg highthat I rttould interfere uith the auard and reduce it to shs. 50 million. I must emphasize that "balancing" the claims does not necessarily mean declining the simultaneous awarding of general damages and interest' however in such cases, the general damages should be minima-l because interest by its nature is a compensatory award' I note that in arriving at the award of general damages, the court of Appeal .)n ' Robert Coussens vs. Attorney General SCCA No 8 of 1999; Crown Beverages Ltd vs Sendu Edwa 0 rr SEP 2025 17 rd sccA No.1 0f 2005 amount. took into consideration the frustration and inconvenience the Appellant suffered in ensuring he gets paid. As an appeal court we should not d.isturb the quantum of damages awarded bg the lower Court merely br would have come to a different figure. I find no reason ,. ,r,"r;..;r;J;. quantum of general damages arrived at by the Court of Appeal. '10 From the foregoing discussion, I hold that the learned Justices of the court of Appel did not err in reducing the quantum of general damages to shs. 50,000,000 million. I would consequently maintain the award of 50,000,000 (fifty) miltion Uganda shs as general damages. 20 Signed: .........t2\".y*f,.qr}g+arr.X3 Prof. Lillian Tibatemwa-Ekirikubinza Delivered at Kampala this...... I day of o25. E COURT IBATT lt 25 0 tr SEp ?0 REGISTRAR/JUSTICE OF THE S ( ls<- * 'i UR Conclusion 1. The discretiona-l authority granted to the court under Section 26 (r) of the cPA can be used to deal with not only the rate but also the nature of interest. 2. I would uphold the award of 50,000,000 (fifty) million Ugarda shs as general damages. Justice of the Supreme Court. tl Date :... 9..( .1.21..1.?*X: rfr I ns. of... Elizabeth Musoke Justice of the Supreme Court \aU|t Cew* AL"4 au-t Ckawho CJ and I agree with his conclusion,and reaso Dated at Kampala tnis ........../.1.].[...... ou, 2025. \ Ct\ rffi" )l ht Jo,& ka.t 1Sc ' THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO. 03 OF 2O2O DR. MAI. RTD ANTHONY JALLON OKULLO:::::::::::::APPELLANT VERSUS ATTORN EY GENERAL: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : RESPON DENT (Appeal from the decision of the Court of Appeal (Egonda-Ntende, Cheborion and Tuhaise, JIA) in Civil Appeal No. 207 of 2016 dated 2fr June, 2019) CORAM: THE HON. THE CHIEF JUSTICE ALFONSE OWINY-DOLLO HON. LADY JUSTICE PROF. LILLIAN TIBATEMWA - EKIRIKUBINZA, JSC HON. LADYJUSTICE ELIZABETH MUSOKE, JSC HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA, JSC HON. MR. JUSTICE MUZAMIRU MUTANGULA KIBEEDI, JSC JUDGMENT OF ELIZABETH MUSOKE, JSC I have had the advantage of reading in draft the judgment of The Hon. The f'w 5 THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA (C0RAM: OWINY-DOLLO, CJ, TIBATEMWA-EKIRIKUBINZA, MUS0KE, MADRAMA, KIBEEDI, JJ.SC) CIVIL APPEAL NO. 03 OF 2O2O 10 DR. MAJ. RTD ANTHoNY JALLON OKULLO) APPELLANT VERSUS ATToRNEY GENERAL) ............................RESP0NDENT (Arising from Court of Appeal Civil Appeal No. 207 of 2016 before Egonda- Ntende, Cheborion and Tuhaise, JJA JUDGMENT OF CHRISTOPHER MADRAMA IZAMA, JSC 20 I have had the benefit of reading in draft the judgment of 0winy Dotto, C.J and I concur with the judgment for the reasons I give hereunder. The facts on which the appeat is based are wet[ set out in the judgment of Owiny Dotto, CJ and I witt not repeat the facts here save as far as is necessary for purposes of my judgment on grounds 1 and 2 of the appeat. I further read the submissions of counsel which are ctearLy set out in the judgment of Owiny Dol.to, CJ. The facts as are retevant to my judgment are that a principaI sum of US$ 93,150.00 was agreed upon in a contract between the appettant and the Ministry of Defence as payment due to the appettant. The contract was approved by the accounting off icer of the Ministry of Defence. The agreement to pay the appettant was made in 1989 before the promutgation of the constitution of the Repubtic of Uganda 1995 which requires the consent of the Attorney General to be sought before committing the Government to a contract. This contract provided lhat 24% compound 25 15 1 30 tu interest was payabte on the agreed principal. sum. Other terms are not materiaI for purposes of this judgment. The learned triat judge, a judge of the High Court, awarded the agreed compound interest but reduced the rate from the contractua[ Zlt%lo 15% per annum and consequentiatty awarded the ptaintiff a sum of US$ 3,066,400.44 as interest from the date of fiting the suit titt payment in futt. For emphasis this sum was based on computation of compound interest at the rate of 15% per annum on the sum of US$ 93,150.00 for the number of years appticabte (and this is not in dispute). ln addition, the High Court awarded generaI damages of shittings 500,000,000/- to the appettant and the award carried interest at 6% per annum from the date of judgment titt payment in fut[. The Court of Appeat set aside the award of Shittings 500,000,000/= as genera[ damages and reduced it to general damages of Uganda shittings 50,000,000/= and thereby uphetd the award of generaI damages in principLe but set aside the quantum of damages for being inordinateLy high. ln addition, the Court of Appeal. set aside the contractual compound interest and substituted it with simpte interest. The rate of simpte interest was reduced from the Zlt% agreed to by the parties for the compound interest to simpte interest of 6% per annum. Further interest was awarded on the entire decreed amount which inctudes the award of interest on the principat sum and the general damages at 6% per annum from the date of judgment tit[ payment in futt. The appettant was aggrieved with the decision setting aside the compound interest and reducing the rate of interest and appeated to this court on 5 grounds of appeal as fottows: 1. The learned Justices of the Court of Appeat erred in law and fact in rejecting the parties' agreed compound interest and instead substituted it with simpte interest, thereby occasioning a miscarriage of justice. 10 15 20 25 30 2 35 5 2. The [earned Justices of the Court of Appeat used the wrong premises in determining that the compound rate of 24% agreed upon by the parties, was harsh and unconscionabte. 3. The learned Justices of the Court of Appeal faited to judicial.ty evatuate the evidence on record thereby reaching a wrong conctusion. 4. The learned Justice of the Court of Appeat erred in law and fact when they injudiciousty interfered with the discretion of the [ower court, thereby occasioning a miscarriage of justice. 5. The learned Justices of the Court of Appeat erred in law in considering extraneous matters to reach their decision, and thereby occasioning a miscarriage of justice. Grounds 1 and 2 of the appeat in this court represent the crux of the appeal white grounds 3, 4 and 5 are corottary grounds and are against the method and the grounds the Court of Appeal. relied on to reach its decision so that the Court of Appeat, (a) set aside the compound interest and (b) reduced the interest awarded from 24% to 6% per annum after substituting it with an order to pay simpte interest. This is the outcome of the appeal in the Court of Appeat hence the grievance of the appettant disctosed in grounds I and 2 of the appeat. ln retation to ground l owiny Dotto, cJ based his decision on interpretation of section 26 (1) of the Civit Procedure Act and came to the conctusion that it did not confer jurisdiction to change the type of interest but onty to substitute the rate of interest. He found that the rate of interest woutd produce an unconscionabte outcome if apptied for the material period. I woul.d state that an award of interest on an ascertained sum of money which has been withhetd is a compensatory order and has as its basis the doctrine of restitutio in integrum. Under this compensatory doctrine, the rate of interest ought not to be harsh or unconscionabl.e. ln that respect, section 26 (1) of the civit Procedure Act 10 15 20 25 30 3 35 5 gives the triaI court jurisdiction to set aside a rate of interest in a contract between the parties reached without regard to prevaiting market trends and on the ground that the rate is harsh and unconscionabte. The question is under what circumstances the court can do this. Section 26 (1) of the Civit Procedure Act provides that: 26 lnterest (1) Where an agreeme for the payment of interest is soughtlo be enforced, and the court is of opinion that the rate agreed to be paid is harsh and unconscionabte and ought not to be enforced by tegat process, the court may give judgment for the payment of interest at such rate as it may think just. (emphasis added) The Hon Chief Justice emphasised the words 'rate agreed" rather than the "type of interest agreed" and I concur with the interpretation that section 26 (1) of the CPA deal.s with the issue of whether the rate of interest agreed in a contract is harsh and unconscionabte but not the type of interest. The Civit Procedure Act confers on the court discretionary powers to interfere with lhe rate of interest, if the court is of the opinion that the agreed rate of interest is harsh and unconscionabte. The section attows the Court to give judgment for payment of interest at such other rale of interest as the court thinks just. The question therefore is what amounts to a harsh and unconscionable rate of interest whrch ought not to be enforced by legal process in the circumstances? I woutd in the premises concur with Owiny Dotto CJ and hoLd that the ground on which the Court of Appeat hetd that the interest was harsh and unconscionabl.e and shoutd be substituted with simpte interest was erroneous and ought to be set aside. what the court has power interfere with under section 26 of the CiviL Procedure Act is the rate of interest agreed to in the contract of the parties and for the reason that it is harsh and unconscionabte. ln the premises I woutd attow ground 1 of the appeat. With regard to ground 2 10 15 20 25 4 30 5 The learned Justices of the Court of Appeat used the wrong premises in determining that the compound rate ol 24% agreed upon by the parties, was harsh and unconscionabte. The appel.tant faul.ted the Court of Appeat on the ground that there was no evidence to support the conctusion that the rate of 24% was harsh and unconscionabte. The appetlant's counseI further submitted at the time of the transaction that the Bank of Uganda Lending rates were 39% and 42% per annum in the years 1991 and 1992. These were reftected in certain Statutory lnstruments namety the Bank of Uganda (Minimum lnterest Rates on Deposits and Maximum Rates on Advances) lnstrument, No. ll of 1991. Regutation 2 thereof provided that: 2. The rates of interest specified in cotumn two of the First Schedute to this lnstrument shalt be the minimum interest rates per annum, chargeabte on the deposits specified in cotumn one of the Schedute. 3. The rates of interest specified in column two of the Second Schedule to this lnstrument shatt be the maximum interest rates chargeable per annum on the advances specified in the First cotumn of that Schedu[e. The First Schedute provides that Demand Deposits carry a minimum interest rate of 12% per annum. Secondty, savings deposits carried 28% minimum interest per annum. For 'Time Deposits, 3 - 6 Months carry interest of 29% per annum and 7 - 12 months at 30% per annum. For a minimum period of one year the minimum annual interest is 31%. The Second Schedute has Lending rates as fottows; for Devetopment at 32% per annum in the maximum and for Commercial at a maximum rate of 39% per annum. ln amended regutations namety; the Bank of uganda (Minimum lnterest Rates on Deposits and Maximum Rates on Advances) (No. 2) lnstrument, .|992, other rates were set out as foltows: The First Schedule provides that the Demand Deposits carry a minimum interest rate of 8% per annum. SecondLy, savings deposits carried 33% minimum interest per annum' 10 15 20 25 30 5 5 For Time Deposits, 3 - 6 Months carry interest of 35% per annum and 7 - 12 months al 36% per annum. For a minimum period of one year the minimum annual interest is37%. The Second Schedute has tending rates as fottows; for Devetopment at 38% per annum in the maximum and for Commercial at a maximum rale of h2% per annum. The basis of the Court of Appeat striking down the interest rale of 2t+% appears in the lead Judgment of Egonda - Ntende, JA at pages 9 - 10 and paragraphs 38 - 40 where he stated with the concurrence of other Justices that: [38] The principat sum was denoted in United States Dotlars and so is the interest now c[aimed. lf the principal sum had been in Uganda shittings interest ctaimed may be woutd pass muster. However, the debt in this case, was expressed in United States Dottars, a currency that is more stabte and given [ess to ftuctuations of the kind that compel interest rates to be rather high for the Ugandan shitting. I am prepared to take judiciaI notice of the fact that interest rates in Ugandan banks for the US do[tars are rarety outside singte digits. [39] Secondty, this claim had become state and was onty revived after the respondent paid the appetlant the principal debt in 2011 and 2012. The respondent had otherwise sat on his c[aim for 22 years without taking any action to enforce it. Had the claim been fited in 1989 or 1991 may be the claim woutd not look so outrageous as it is now. [40] Taking into account a[[ circumstances surrounding this agreed interest, I am satisfied that it is harsh and unconscionable and woutd not enforce it. lt is ctearty unreasonable and imposes a harsh burden on the pubtic purse. I woutd enter judgment of simpLe interest at 6% per annum on the principal date of US$ 93,150 from the time interest was agreed to be paid to the fiting of the suit. ln the resu[t I woutd attow ground 2 of the appeat and dismiss ground 3 of the cross appeat. 10 15 20 30 6 35 The amendment atso has a Third Schedute with the fottowing interest rates; Rediscount rate at 41%. Bank rate to Commercial Banks at 47%. Treasury Bil.ts for 35 days carried 36%. For 65 days carried 37% and for 91 days carried 38%. 7 s The Court based its decision on the fact that the US dottar was more stable unLike the Uganda shiLtings. I note that the statutory instrument the appettant reties on prescribes rates of interest on Uganda shittings and not United States doltars. The Court of Appeat was entitted to take judiciat notice of this fact. Going back to the issue of interest, the principte behind 10 the award of interest is restitutio in integrum. The parties agreed to be paid in US dotlars and evidence that was required of the defendant was of the rate the US dottar coutd be borrowed from a bank. The ptaintiff had the burden to prove the contract giving the rate of interest and this is what he did. The burden was on the Attorney General to satisfy Court that the rate ls agreed shoutd not be enforced by tegat process. The rate of interest to be awarded shoutd adequatety compensate the appettant for the deprivation of his money. The common taw in this respect is stated in Halsbury's Laws of Engtand Fourth Edition Reissue Vot 12 (1) and paragraph i063 at page 484, that upon 20 breach of a contract to pay money due, the amount recoverabte is normalty timited to the amount of the debt together with such interests from the time when the amount became payabte under the contract or as the court may aLLow. We either award the contractual rate of interest or strike it out and award a rate as the court in its discretion would attow. 25 ln other, words the interest is compensatory and fuLfits the same purpose as general damages awarded for withhol.ding the money to the detriment of the creditor. This approach is consistent with the enforcement of contractuaI interest under the civit Procedure Act, section 26 (1) thereof which aLso envisages payment of the debt together with a reasonable rate 30 of interest as woutd compensate the pLaintiff for the time the money was withhetd. contractuaI interest is enforceab[e untess shown to the satisfaction of Court under section26 (1) of the Civit Procedure Act that the agreed rate of interest is'harsh and unconscionable and ought not to be enforced by legal Process'. 5 According to Hatsbury's laws of Engtand (supra), the rate of interest agreed to witt be the measure of damages no matter what inconvenience the ptaintiff has suffered from the faiture to pay from the day payment was due. This statement of law was considered by the CommerciaL Court Division of the High Court in Exce[ Construction Company Limited vs Attorney General (High Court Civit Suit No. 3 of 2007) [2013] UGCommC 23 where the trial. judge cited Trans Trust S P R L v Danubian Trading Co Ltd [1952] 1 Att ER 970 and judgment of Denning LJ at 977 for what I consider to be an acceptabte proposition that where specia[ [oss is foreseeabte as a consequence of non-payment, that [oss is recoverabte: It was said that the breach here was a faiture to pay money and that the law has never attowed any damages on that account. I do not think that the Law has ever taken up such a rigid standpoint. lt did undoubtedly refuse to award interest unti[ the introduction of the Law Reform (MiscelLaneous Provislons) Act, 1934, s 3(1): see London, Chatham & Dover Ry Co v South Eastern Ry Co; but the ground was that interest was'genera[ty presumed not to be within the contemptation of the parties': see Bullen & Leake, 3rd ed, p 5], note (a). That is, I think, the onty reat ground on which damages can be refused for non-payment of money. lt is because the consequences are as a rute too remote. But when the circumstances are such that there is a speciaL toss foreseeabte at the time of the contract as the consequence of non-payment, then I think such loss may we[[ be recoverabte. ln my judgment compensation which is foreseeabte as a consequence of non-payment can be recovered as general damages or the compensation may be recovered contractuatty and catculated as a rate of interest on the sum withheld and for the period of the detay. Further I concur with the judgment of owing Dol.to, cJ that circumstances on which to interfere with the freedom of contract shoutd be clear. ln this case the court coutd purport to protect the tax payer against the effect of a contract executed with the consent of the Accounting Officer of the Ministry of Defence. To what extent 10 15 20 25 30 35 can the court intervene reasonab[e? other than to estabtish what rate woutd be 8 5 The contractual approach to a compensatory award is a principle reftected in the judgment of Romer LJ. in Trans Trust S P R L v Danubian Trading Co Ltd (supra) at page 978 where he stated that: First, I am not, as at present advised, prepared to subscribe to the view that tn no case can damages be recovered for non-payment of money. I agree with Denning LJ that in certain circumstances such damages might well be recoverable provided that the loss occasioned to the plaintiff by the defendant's default was reasonably within the contemplation of the parties when the bargain between them was made. (emphasis itaticised) There was a bargain between the parties and what they envisaged was compensation for detays in payment. General.Ly, damages coutd be awarded for the withhol.ding of money that is due to a creditor but the circumstances in this case was money withhetd for services rendered by a doctor and the evidence adduced was the contract. There was an agreed rate by the parties as compensation for de[ay in payment. The rate of interest can be conceived as compensation for keeping the Pl.aintiff out of his money by detays in payment and provided for in the contract. Ctearty the parties envisaged a shorter period within which the appettant woutd be paid. For that reason, payment of damages wouLd be for aggravated loss other than for del.ay in payment per se which is covered by a contractual interest rate or for del.ay beyond what was envisaged by the parties. Further where the rate of interest agreed is not a reasonable rate or genuine pre-estimate of the foreseeabl.e loss caused by detay, then the court may substitute it with such rate of interest as the court deems just in the circumstances. The question is whether the rate of 24% on the compound interest woutd be harsh and unconscionabte under section 26 (1) of the civit Procedure Act. The triat judge substituted it with a rate of l5%. Where interest is contractuat, the onl.y question in the circumstances woutd be whether it is a reasonabte rate of interest sufficient to compensate the creditor for loss due to detay inpayment.Thefactthatanawardofinterestfutfil'sthecommonlaw remedy of restitutio in integrum was stated in Riches v westminster Bank 10 15 20 25 30 9 35 5 Ltd [1947]l Att ER 469 HL at page tt72by Lord Wright as the essence of an award of rnterest: ,.. the contention as that money awarded as damages for the detention of money is not interest and has not the quatity of interest. Evershed J, in his admirabte judgment, rejected that distinction. The appeltant's contention is, in any case. artificiaI and is, in my opinion, erroneous because the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. lt may be regarded either as representing the profit he might have made if he had had the use of the money, or, conversety, the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation.... ln the premises, I am persuaded that an award of general damages can atso futfit the same objective as an award of a rate of interest on the sum withhetd. Secondty, for the award of interest to achieve an objective of compensation is within the contemptation of prudent persons who understand what money coutd be apptied for if invested. The idea of a compensatory order is atso exptained in Halsbury's [aws of Engtand Fourth Edition Reissue Vot 12 (1) paragraph 850: it is assumed that the Ptaintiff woutd have borrowed to reptace the assets of which he has been dePrived... ln other, words, general damages ora rate of interest can be pegged to the cost of borrowing as expressed in the rate of interest for borrowing from banks. ln this case it can be presumed as borrowing by the Government from the private sector. Such pegging to a rate of interest however woutd assume that there was no agreement that sets out the rate of interest and therefore in this case, the issue is narrower and is whether the rate of interest agreed upon is harsh and unconscionabte. The principtes ittustrate a method for the assessment of compensatory awards to achieve the common Law objective of restitutio in integrum. The objective of the compensatory award is that the ptaintiff shoutd be put in a position he or she woutd be at, had the injury not occurred. The anticipated injury and any 10 15 20 75 30 35 10 I do not think the modern Law is that interest is awarded against the Defendant as a punitive measure for having kept the Ptaintiff out of his money. lthink the principte now recognised is that it is at[ part of the attempt to achieve restitutio in integrum.0ne looks, therefore, not at the profit which the Defendant wrongfutty made out of the money he withhetd (this woutd indeed invotve a scrutiny of the Defendant's financiat position) but at the cost to the Pl.aintiff of being deprived of the money which he shou[d have had. I feeL satisfied that in commercial cases the interest is intended to reflect the rate at which the Ptaintiff would have had to borrow money to suppty the place of that which was withhetd' ln Hatsbury's laws of Engtand Fourth Edition Reissue Vot 2 (1) Para 1065 the rationate for a rate of anticipated damages for breach of contract is stated at page 486: 11 25 30 s past injury in the case of an award of a rate of interest is the detay to pay money at the due time or deprivation of money which is due. The parties agreed on a rate of interest for deprivation of the ptaintiff of the money which was due. The East African Court of Appeat in Dharamshi vs Karsan 1197Ll 1EA 41 noted that this common [aw remedy of restitution is for the 10 Ptaintiff to be restored as nearty as possible to a position he or she woutd have been at had the injury comptained of not occurred. ln Hatsbury's laws of Engtand Fourth Edition Reissue Votume 12 (1) paragraph 812 generat damages are presumed to be the naturaI or probabte consequence of the wrong comp[ained of with the resutt that the Ptaintiff is 1s required onty to assert that such damage has been suffered. To determine the rate of interest, one has to consider the consequences of withhotding the money from the creditor from the time it became due and owing. According to Lord Witberforce in Johnson and another v Agnew [1979] 1 Att ER 883 at 896 an award of general damages is compensatory: 20 ... that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed. Further Forbes J in Tate & Lyte Food and Distribution Ltd V Greater London Councit and another [1981] 3 Att ER 716 at122 pul the matter thus: The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in defautt shatt pay a stiputated sum of money to the other. lf this sum is a genuine pre-estimate of the loss which is l.ikety to flow from the breach, then it represents the agreed damages. caLted tiquidated damages, and it is recoverable without the necessity of proving the actual loss suffered. The ptaintiff is entitl.ed to cl.aim an agreed rate of interest that woutd compensate him for the inordinate deLay in payment of his money. From the above authorities the reaI question before the court woutd be whether the anticipated [oss due to non-payment at the due time of the agreed payment woul.d be genuinel.y compensated by the rate of 6% awarded by the court of Appeal. on the compound interest. This is aLso whether the rate be paid on the basis of simpte interest catcutations substituted for the compound interest catcutations. Having set aside the simpl.e interest order, what is left is to determine a reasonabte rate for the compound interest award based on the agreement of the parties where a higher compensation was anticipated in the contract. I have considered the interpretation of the Law by 0winy Dotl.o, cJ and I am constrained to go by that interpretation and approach the issue on the basis of the rate of interest. ln the circumstances the parties had agreed on a rate of Zlt%. The principat sum was in US dol.tars which has a [ower rate of interest for purposes of borrowing from a bank and the court of Appeat noted that the rate did not go beyond 10% per annum or is even normal.ty in singl.e digits i.e. 6% to 9% per annum but no real data on interest rates on United States Dottars was avail.abl,e to the Court of APPeat. ln the premises, the basis on which the court of Appeat set aside the type of interest does not ftow f rom section 26 (1) of the Civit Procedure Act and I concur with the judgment and orders of owiny DotLo, cJ setting aside the judgment of the Court of APPeat. white the High court struck down the rate of 2t+% compound interest, I stitl find that what the High court ordered at 15% rate on the compound interest 10 15 20 25 30 35 t2 5 10 15 20 30 35 13 woul.d be harsh and unconscionabte in the circumstances. I concur with the judgment and reasons therefore of 0winy Dotto, CJ that the rate be fixed at 9% under the contract of the parties. The reason being that the parties anticipated that the Appettant woutd be paid at a higher rate shoutd there be breach due to detay. I woutd attow ground 2 of the appeal on that basis. Additiona[ty, the award of interest at 9% on the principat sum is from the date of breach up to the date of judgment of the high court on the basis of a compound interest. From the date of Judgment, the rate of interest is reduced to simpte interest. Given the unconscionabte detay of over 25 years without payment of the appettant, an interest rate proposed by the Owiny Dotto, CJ on the decreed sum from the date of judgment has been awarded at a simpte rate of 15% per annum in the special circumstances of this case. This speciaL circumstances inctude the fact that the appettant is now a senior citizen stitt pursuing a ctaim of over 25 years ago. A further detay in payment shoutd attract an interest rate that expresses the disapprovaL of the court of any further detaY. With regard to the award of general damages, I concur with the judgment of Owiny Dotlo CJ, that maintains the award of general damages by the High court. The appel.l.ant was kept away from his entittement for 25 years. He suffered numerous probLems during this time. Had it not been for the part payment he received after the agreement, I find that keeping an adutt person from enjoying the fruits of his tabour is a gross viotation of his constitutionat right to property through deprivation in terms of articte 25 of constitution. At an otder age he woutd not appreciate the money the way he woutd have when he was a younger person. ln the premises, my judgment is that; had there been no part payment, the 25 years' detay woutd have attracted aggravated damages. This woul.d be for the inexpl.icabLe and del.iberate del.ays inctusive, as the evidence disctoses, of the fact of how the appeU.ant was mattreated by some officiaLs of the Ministry of Defence white pursuing his tegitimate contractual' ctaims' The appeLl'ant suffered great inconvenience pursuing a contractual. cLaim. I therefore find no basis for interference with the judgment of the High court awarding the appettant 25 5 General Damages of Uganda shitLings 500,000,000/= in the circumstances. I woutd set aside the judgment of the Court of Appeat and restore the award of the High Court on general damages. ln the premises, I woutd award interest on the general damages at the rate of 6% from the date of the Judgment of the High Court titt payment in futt. I concur with the other orders of Owiny Dotto, C.J and I have nothing useful to add. 10 Signed at Kampala the 18th day of August 2025 15 Christopher Madrama lzama Justice of the Supreme Court DeLivered at Kampata ,n" l- tt- day of 2025 20 ist{z^/ s C- L4 I THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA (Coram: Owiny - Dollo, CJ;Tibatemwa - Ekirikubinza, Musoke, Madrama & Kbeedi, JJ.SC) CIVIL APPEAL NO. 03 OF 2O2O DR. MAJ. (RTD)ANTHONY JALLON OKULLO PPELLANT VERSUS ATTORNEY GENERAL RESPONDENT JUDGMENT OF MUZAMIRU MUTANGULA KIBEEDI. JSC t1l I have had the benefit of reading in advance the Lead Judgment prepared by my Learned Brother, Owiny-Dollo, CJ in which he has set out the background facts to the appeal, and the submissions of the parties. As such, I will not repeat the same except where it is necessary for purposes of advancing my analysis. l2l This appeal raises two important points for consideration by this Court, namely: a) The mandate of the Court to intervene in cases where the parties seek to enforce their agreement on payment of interest, b) Award of general damages for breach of contract in addition to the interest agreed upon by the parties. t31 I will discuss the two points in the above order. Court intervention in contracts for payment of interest. t41 There is no doubt in my mind that even where the parties have agreed upon the interest rates payable, the Court still has the mandate and discretion to interfere with the Page 1 of 13 ')/> agreement in befitting cases and enter judgment varying the interest recoverable in discharge of the Court's oveniding duty to dispense justice to all manner of people. This is pursuant to Section 26('1) of the Civil Procedure Act, Cap. 71 of the 2000 edition of the laws of Uganda (renamed - Cap. 282 of the 2023 Revised Edition of the Laws of Uganda). The section is couched thus: t51 The policy considerations underlying the above provision of the law are not hard to decipher. As the temple of justice, the Court is the last protector of justice. This duty extends to even cases where, in the opinion of the Court, the parties (both private and public) have fallen short of doing justice to themselves or to the persons whose interest they are legally mandated to protect while exercising their freedom of contract. t61 I hasten to add, the mandate must be exercised judiciously and in accordance with the laid out principles of the law. c):p->^' 171 ln the matter before us, the Appellant agreed with the then Accounting officer of the Ministry of Defence that in case of default in payment of the contract sum of USD 93,150.00 (Ninety three thousand one hundred fifty United States Dollars Only), compounded interest was payable at the rate ol 24o/o per annum. The High Court found the agreed interest rate to be harsh and unconscionable and reduced the same to 15% compounded per annum. t81 On appeal to the Court of Appeal, the Court found the interest awarded by the High Court still harsh and unconscionable. lt not only reduced the rate from 15% to 6% per annum, but also substituted the agreed compound interest with simple interest. PaBe 2 of 13 "Where an agreement for the payment of interest is soughf to be enforced, and the court is of opinion that the rate agreed to be paid is harsh and unconscionable and ought not to be enforced by legal process, the coutt may give judgment for the payment of interest at such rate as it may think just." tgl The Learned Chief Justice in his Judgment has found that the discretionary power of the Court in Section 26(1) of the Civil Procedure Act is exercisable only in respect of "interest rate" and not "type of interest" and that the first Appellate Court did not have the power to vary the type of interest agreed upon by the parties (i.e. "compound interest") to "simple interest". This interpretation is inevitable when one employs the strict rule of interpretation. But I would prefer to adopt a holistic approach because "interest rates" do not operate in a vacuum and it would be a tall order for the Court to establish whether a particular rate of interest is harsh and conscionable in isolation of the type of interest. ln the real world of business, "interest rates" and "type of interest" are Siamese twins, A fixed interest rate when applied onto the same principal sum of money under the simple interest regime may not be harsh and unconscionable, while the same interest rate when applied to the same principal sum under the compound interest regime may / end up being harsh and unconscionable. [10] ln short, even where the principal sum and interest rate are maintained as constants, a vadation in only the applicable type of interest may lead to completely different results. lt is in that context that the type of interest agreed upon by the parties becomes one of the relevant considerations when the Court's discretion under section 26(1) CPA is invoked. [1 1] Needless to add, formulas exist to convert interest rates under the compounded interest regime into the simple interest regime and vice-versa. As such, even where parties have agreed on compounded interest, it is very easy to establish its equivalent under the simple interest regime and vice versa. But the ultimate focus of the Court should be whether the resultant interest is harsh and unconscionable in the circumstances of the case. lf the answer is in the affirmative, the Court should not hesitate to intervene. [12] I have looked at how the Court of Appeal discharged its mandate before arriving at the decision to reduce the compounded interest rate of 15% awarded to the Appellant by the High Court to the simple interest rate of 6% per annum. The Court took judicial notice of Page 3 of 13 the interest rates in Ugandan banks for the US dollar rates. Hon. Justice Egonda-Ntende put it thus: "...The principalsum was denoted in United Sfafes Dol/ars and so ls the interest now claimed. lf the pincipal sum had been in Uganda shillings the interest claimed maybe would pass muster. However, the debt ln lhrs case, was expressed in the United Slales Dol/ars, a currency that is more stable and given less to fluctuations of the kind that compelrnterest rates to be rather high for the Ugandan shilling. I am prepared to take judicial notice of the fact that interesl rales in Ugandan Banks for the US dollars are rarely outside single digits." [13] To that extent, the first Appellate Court cannot be faulted for taking judicial notice of the rates in Ugandan Banks for the US dollars. Sections 55 and 56 of the Evidence Act, Cap. 8 (formedy Cap. 4 of the 2000 edition of the Laws of Uganda) entitle the Court to take judicial notice. Once the Court has taken judicial notice of any fact or matter, then no other evidence is needed to be adduced by the parties to prove the same. [14] I can add that patterns and trends of interest rates in Uganda's banking sector constitute a good baseline for the Court faced with the task of investigating whether the impugned interest is harsh and unconscionable in the circumstances of the case. ln the current information era, this information is in the public domain and readily available in such places as the publications of the sector regulator (Bank of Uganda) and the publications of sector associations like the Uganda Bankers Association. As such, the failure of the parties to the litigation to adduce evidence in that aspect should not be reason enough for the Appellate Court to endorse a decision of the lower Court which is detached from the sector realities. The exercise of judicial authority after the 1995 Constitution imposes higher responsibility on the judiciary than was the case before in so far Article 126(1) thereof requires judicial power to be exercised in accordance with lnler alia"the values, norms and aspiations ofthe people". The provision is couched thus "Judicial power is derived from the people and shall be exercised by the courls eslab/rshed under this Constitution in the name of the people and in conformity with law and with the values. norms and aspiations of the people.'[Emphasis added] PaBe 4 of 13 t15l For judiciary to live up to the constitutional standard, the Judicial officers are expected to, among others, keep abreast with the trends (past, present and future) in the sectors under which the specific disputes at the centre of their adjudication fall. The constitutional duty is definitely higher as one goes higher up the judicial ladder and is at its highest at the Court of Appeal and the Supreme Court. [16] ln the premises, I cannot fault the Court of Appeal for taking judicial notice of the rates in Ugandan Banks for the US dollars. They constitute a good and objective baseline. Thereafter, the first Appellate Court should have considered the fact that the government bureaucracy and culture renders doing business with it far more expensive than when one is dealing with the banking sector. This would have entitled the Appellant to a slightly higher interest rate than that ordinarily chargeable by Uganda's banking sector. [17] The first appellate Court should have also considered the interest on government treasury bills and bonds. ln their submissions, Counsel for the Appellant cited the Bank of Uganda (Minimum lnterest Rates on Deposits and Maximum Rates on Advances) lnstrument No. 11 ol 1991 to prove that at the time of the contract, the bank of Uganda lending rates were 39% and 42o/o. I have closely looked at the above Statutory lnskument and there is no doubt that the rates provided in it were in respecl oy' [18] After the baseline being set as said hereinabove, then the oth er cn ticisms about the factors the Court of Appeal failed to consider or wrongly considered as detailed in the Chief Justice's Judgment become, in my opinion, simply some of the additional factors relevant to this particular case when the Court was considering whether to add on, or subtract from, the baseline interest rate whose judicial notice the Court of Appeal rightly took. lt is in that context that I find fault with the approach taken by the Cou( of Appeal. As such, I am unable to uphold the simple interest rate of 6% per annum awarded by the Court of Appeal. Page 5 of 13 dealings in Uganda Shillings and not dollar transactions. [19] ln the same vein, I do not agree that the compounded interest rate of g% per annum for a period of twenty five years as proposed by the Learned Chief Justice is not harsh and conscionable. When converted into simple interest rate, the compounded interest rate of 9% per annum over a period of twenty five years becomes approximately 30.49% simple interest rate per annum. This is about 500% above the baseline interest rate of Ugandan banks as determined by the Court of Appeal by way of judicial notice. lnstead, I would consider raising the baseline interest on account of the complexities associated with doing business with government, the unique circumstances under which the Appellant provided his professional services to the government, and all the other considerations as detailed in the Chief Justice's Judgment. [20] I have carefully considered the authorities cited by the Appellants to demonstrate the interest rates awarded by this Court in p revious cases. ln lnterf ret o ht Fonrvarders(U) Limited v EastAfrican Development Bank (CivilAppeal 33 of 1992) t19931 UGSC 16 2 Jul 1993 the award of the interest rate of 36% on the decretal sum of 10,275 British Pounds was upheld by this Court following the Respondent's Counsel conceding that it was not excessive as 'the rate of interest applicable was about 40% at the time of the judgement." l have not been able to establish the basis of Counsel's concession which was upheld by the Supreme Court. But I am alive to the fact that at around that time, the interest rates as set out in the Bank of Uganda (Minimum lnterest Rates on Deposits and Maximum Rates on Advances) lnstrument No. 11 of 1991 ranged between 39% and 420/0. However, I have already held in my judgment that the above instrument was applicable to Uganda currency transactions and not foreign currency transactions like the subject matter of the instant appeal ,u ln Arconsuit Architects v A. Baumann (U) Ltd t19941 UGSC 5 (8 November 1994), the Appellants' claim was for recovery of their professional fees for the architectural l21l Page 6 of 13 services rendered to the respondent. ln allowing the appeal, Tsekooko, JSC who wrote the lead judgment with which the other Justices concurred held thus: 'l would allow this appeal, set aside the judgment and orders of the High Court. lwould substltute judgment for the appellant inthe sum of US $14256 or itsequivalent in Uganda currency, (namely Shs 17,685,0001=) with interest thereon at the rate of 20% p.a. from date of judgement in the High Coutl. I would grant cosfs of this appeal and in the Courl below to the appellant.' 122) My close reading of the above judgment and the court's final orders showed that the question of interest rate was not specifically raised as one of the issues on appeal for the specific analysis and adyudication by the Apex Cou( unlike the instant appeal where the crux of the appeal, and indeed all the lower Court ludgments, is about the question of rate of interest. t23l ln Willv Owacha v Rinqa Enterpr ises Co.Ltd & another t19951 UGSC 17 (21 June 1995) the appellant's claim was about the failure of the respondent to pay the British Pound component for his emoluments for the period he served as a Resident Director of one of the Respondent's subsidiaries at their London contact office. The Supreme Court upon hearing the appeal immediately granted the Appellant's claim. ln the Reasons for the decision that were subsequently given by the Court, it stated thus: " We accordingly allowed the appeal wtlh cosfs. Ihis means pound sterling 7,200 will be convefted into Uganda Shl//rngs at the rate obtaining on 01/01/1993. The amount found due will carry interesf af the rate of 15% p.a. from the date till payment in full. For purposes of general damages the proceedings are remitted to the tial judge for assessmenl of general damages." [24] Like in the previous decision, it is my finding that the question of interest rate on the foreign cunency was not an issue before the Court for specific adjudication by the Apex Page 7 of 13 '4 Court. Second, the interest rate was from the date of conversion of the foreign currency into Uganda currency. ln my understanding, the interest rate of 15% p.a was, in the circumstances of this case, in the currency into which the payment was converted, namely the Uganda Shillings. l25l ln J.K .Patel v Spear motors Ltd I19911UGSC 9 (11 Oct ober 1991) Seaton, JSC who wrote the Lead Judgment with which the other Justices concuned, dealt with the question of interest rate as follows: "As to the question of interest, a rate of 30% was claimed in the amended plaint as from 4tr,February 1986. Learned Counsel for the plaintiff urged that lhrs rs a reasonable rate and that this courl should take judicial notice of the fact that the Bank rate was 38% at the time of the hearing. There was no averment in the Written Statement of Defence that the rate of 30% was excesslye. As a matter of law, unless the rate interest was agreed in the contract, the rate awarded must be reasonable : 5.26 of the Civil Procedure Act. The time when the amount claimed was due is the date from which interest should be awarded. ln the instant case that date was the last time when the parlies agreed on the total balance due. This was 4tt,February 1986. I would therefore award interest at the rate of 30% on the amount awarded from 4th February 1986 until payment in full plus cosfs of the appeal and in the lower coutl." t26I ln Premchandra Shenoi and Anor v Maximov Oleq Petrovich t20051 uGSc 15 (17 Auqust 2005) this Court upheld the interest rate of 20% awarded by the Court of Appeal. ln arriving at the decision, Oder, JSC with whom the other Justices agreed, stated thus: PaBe 8 of 13 'Ihe basrs of awards of interest is that the defendant has taken and used the plaintiffs money and benefited. Consequently, the defendant ought to compensate the plaintiff for the money. ln the instant case the learned Justices of Appeal, rightly in my opinion, said that the appellants had received the money for a commercial transaction. Hence the Couft rate of 6% was not appropriate and I agree with them. The rate of interest of 20% awarded by the Court of Appeal was more appropriate." l27l ln Francis Sembuva v Allports Services(u) Ltd (Civil Appeal 6 of 1999) t20001 UGSC 8 (14 Februarv 2000) the transaction was in Uganda Cunency and so was the decretal sum. This Court awarded interest rate of 22o/o per annum on the decretal sum. ln arriving at the award, Tsekooko, JSC with whom the other Justices agreed, stated thus: '...The award of such interest ls based on the commercial basls thal if the money had been paid at the appropriate commercial time, the other side would have had the use of it... I would uphold interest on shs.147, 500,0008 at 22% to run from ffi1n9% fill payment.' [28] lt is clear that the above cas subject matter of the appeal w case in the instant appeal. e is not applicable to the instant matter in so far as the as in Uganda Shillings and NOT foreign cunency as i ln" [29] The aforesaid notwithstanding, the above decisions show that the interest rate awarded by this Court in commercial transactions ranges between 15% and 36%. The principle of Sfare decrsrs requires this Court to follow its own previous decisions unless it appears right to depart from them in accordance with the laid out principles. This principle is enshrined in Article 134(4) of the Constitution in the following terms: Page 9 of 13 "The Supreme Couft may, while treating its own previous decislons as normally binding depaft from a previous decision when it appears to it right to do so, and all other Courts shall be bound to follow the declslons of the Supreme Couft on questions of law." [30] The context under which the above quoted decisions were made by this Court is different from the context under which we are currently operating. We live in the lnformation age. And as I have already stated in my judgment, in the current information era, the local and international trends in the interest rates on dollar loans are in the public domain and a click away. The benchmarks for Ugandan Commercial banks for USD Credit before and after the official end of LIBOR (London lnterbank Offered Rates) on 31st December 2021 are also in the public domain. lnformation on the weighted average lending rates is readily available in the reports of the Ministry of Finance, Planning and Economic Development which are also in the public domain. lt is in this context that I have had no difficulty in not faulting the Court of Appeal for taking judicial notice that dollar loans attract a single digit interest. When I factor in the risk factors and the other variables I have already set out in this judgment, lwould find the equivalent of 12% simple interest rate as more reasonable in the circumstances of this case. When converted into compound interest rate over the period of twenty five years, 12% simple interest rate becomes the equivalent of approximately 5.68% compound interest per annum. When rounded off to the nearest whole number, the compounded rate becomes 60h per. [31] As such, ldisagree with the award of 9% compounded interest rate per annum as proposed by the Learned Chief Justice in his Judgment. [32] I will now turn to the second point of law raised by this appeal namely, the award of general damages to the Appellant for the delayed payment in addition to the contracted interest. Page 10 of 13 14 annum. Award of general damages for breach of contract in addition to the contracted interest [33] As far as the award of general damages of Ugx 500,000,000/= (Five Hundred Million Uganda Shillings Only) proposed by the Learned Chief Justice in favour of the Appellant is concerned, once again, and with much respect, I am unable to agree. [34] ln the matter before us, the parties agreed on payment of interest in the event of the delayed payment of the contract price. As observed by my Learned Brother, Hon. Justice Christopher Madrama, JSC in his judgment in this matter which I have had the privilege to read in advance, and based on the authorities he has quoted, I agree that as a general rule "interest is compensatory and fulfils the same purpose as general damages awarded for withholding the money to the detriment of the creditor.' [35] A similar position was stated in the case of Kenya Tourist Development Corporation v Sundowner Lodge Limited [2018] eKLR , by the Court of Appeal thus: "...as a general rule general damages are not rccoverable rn cases of alleged breach of contract and that has been the settled position of law in our jurisdiction, and with good reason. ln DHARAMSHI vs. KARSAN 119741 EA 41, the former Cout of Appeal held that general damages are not allowable in addition to quantified damages with Mustafa J.A expressing the view that such an award would amount to duplication.' payment of the contract sum. Tsekoo the otherjustices concurred put it thus: ko, JSC who wrote the lead judgment "an award of interest is a form of award of damages because interesl ls, in a way, compensation for /oss of use of money, which the plaintiff would have had." with vylich c).< [37] On his part, Wambuzi, CJ reiterated the same principle thus: [36] ln Francis Sembuva v Allports Services(u) Ltd (Civil Appeal 6 of 1999) [20001 UGSC 8 (14 Februarv 2000), the Supreme Court of Uganda disallowed the award of general damages in addition to an award of interest in a claim against the appellant for non- Page 11 of 13 "The damages for breach of contract to pay a sum of money are normally in the form of interest on the amount due." [38] ln the instant matter, the interest payable in case of default in payment on the part of the Respondent was agreed upon by the pa(ies. Subject to the rules which allow the Court to interfere with the agreement on account of the interest rate being harsh and conscionable, there is no doubt that the agreed interest represented what the parties considered to be a fair estimate of what it would take to restore the Appellant to the situation in the event of a breach. ln that situation, and in the absence of special circumstances, the Appellant as an aggrieved party is not entitled to claim more than what was agreed (by way of general damages) since the agreed interest serves as the agreed measure of damages to compensate him when the breach materialised. t39l A review of the Record of Appeal confirms that the above principle guided the approach taken by both the High Court and the Court of Appeal in denying the Appellant's claim for general damages as pleaded. I find no basis to fault the Court of appeal decision in respect of the general damages. I would accordingly dismiss the Appellant's complaint faulting the decision of the Cou( of Appeal in respect of the claim for general damages. Conclusion [40] For the reasons given earlier on in this judgment, I would make the following orders: The decision of the Court of Appeal awarding the Appellant simple interest of 6% per annum be set aside and substituted with an award of compounded interest of 6% per annum up to the date of judgment of the High Court. il. Thereafter, the decretal sum shall attract simple interest rate of 12% per annum from the date of the judgment until date of payment. Page 12 of 13 ilt The Appeal in respect of general damages be dismissed and the decision of the Court of Appeal in that regard be upheld. tv. The appellant be awarded 50% of the costs before this Court and the Courts below to acknowledge the 50% success level secured in the appeal before this Court. [41] However, my opinion is in the minority. Accordingly, I abide the decision of the majority which constitutes the decision of the Court. Signed: - z-- t JUSTICE OF THE SUPREME COURT Date: Muzamiru Mutangula Ki 4 ("? beedi ............... day of lt 2025 Delivered at Kampala this REGISTRAR/ JUSTI E SUPRE T Page 13 of 13 ?,^