The Court of Appeal has ordered brewer, Nile Breweries to pay Shs 1.117 billion in general damages to a beer distributor for breach of an agreement both parties had entered.
The case traces back to distributorship agreements signed between 1999 and 2002, under which Salvation Distributors was granted exclusive rights to distribute Nile Breweries’ products in Kyengera, Kayabwe, and Maddu.
According to court documents, Salvation Distributors made significant investments in warehouses, vehicles, and logistics infrastructure to support the brewer’s growth, including constructing a new facility in Kayabwe at a cost of about shs 2.5 billion following guidance from Nile Breweries.
However, relations between the parties deteriorated after the brewer allegedly introduced new operational requirements, including a distributorship management system, and later terminated the agreement in 2018.
Salvation Distributors challenged the termination, arguing it was unlawful and done without proper notice, and accused the brewer of failing to train its staff on the new system.
Nile Breweries denied the claims and instead counterclaimed for more than shs1.07 billion, said to be outstanding on a credit facility extended to the distributor.
While the distributor acknowledged receiving the facility, it disputed the figure claimed and insisted that the accounts had never been properly reconciled.
The High Court in its judgment awarded Salvation Distributors shs108 million in general damages for breach of contract and shs100 million for loss of goodwill.
Aggrieved with the judgement, Salvation Distributors run to the Court of Appeal accusing the lower judge of erring when it awarded them only shs108million in general damages which the distributor said was so low that it couldn’t compensate them for the damage suffered for the breach of contract.
The distributor in his appeal also said the judge made an error to award them only shs100 million for loss of goodwill, an amount that the company said was insufficient to compensate for the damage suffered for breach of contract
In a judgement by a panel of three justices including Moses Kazibwe Kawumi, Florence Nakachwa and Musa Ssekaana, the court ruled that Nile Breweries must pay shs108.2 million in general damages to the distributor for the breach of the contract.
The court however set aside the shs100 million that the High Court had directed Nile Breweries to pay as general damages for loss of goodwill and instead substituted it with shs1.117 billion.
While Nile Breweries counter claimed for the recovery of shs1.075billion said to be an outstanding amount on the credit facility secured by a mortgage of the distributor’s property, general damages, interest and costs of the suit, the Court of Appeal observed that enforcing the full claimed amount without reconciliation would be unfair.
“To order that the second appellant(Salvation Distributors) pays the claimed sum… would be unjust… since the meeting… resolved to reconcile the figures… but the same was not done.”
At the same time, the court cautioned against absolving the distributor entirely, noting that “to hold that the second appellant does not owe the respondent any money would amount to promoting unjust enrichment.”
The panel also faulted the trial judge’s findings on the disputed sums, pointing out inconsistencies in the respondent’s evidence and gaps regarding the promised reconciliation.
“This casts serious doubt on the correct figure as the due debt,” the court noted in its analysis.
Court of Appeal noted that the only fair resolution was to establish the actual debt through a supervised reconciliation process.
“The correct figure can only be arrived at after a reconciliation of accounts,” the lead judgment stated.
The court therefore directed that the parties undertake a reconciliation of accounts under the supervision of the Registrar of the Court of Appeal within 90 days, after which the distributor will be required to pay any amount found due.
Salvation Distributors was represented by Fred Muwema of Muwema and Company Advocates in the case
