Pan African Insurance Company (U) Ltd v. International Air Transport Assoc

In The High Court of Uganda at Kampala

(Commercial Court Division)

HCT-00-CC-CS-0667 of 2003

Before: Hon. Justice Lameck N. Mukasa

 

25^th January, 2008

Guarantee - valid and proper demand under a guarantee - Whether or not the plaintiff properly paid a sum of Ugshs83,700,000/= to the defendant under the guarantee -Whether or not the plaintiff owes the defendant any money under the counter-claim.

The doctrine of estoppel.

The remedies available - General damages – Interest.

There was an agreement called a General Service Agency Agreement between the defendant and Afrique Voyages Ltd. The plaintiff and the defendant were party to a guarantee agreement in reference to Afrique Voyages Ltd in the terms of the Agreement, Exhibit P1. On 21^st February 2003 the plaintiff made a payment of UgShs83,700,000/= to the defendant’s advocates for transmission to the defendant.

Held:

1. A guarantee is a contract whereby one person contracts with another to pay a debt owed by a third party who notwithstanding remains primarily liable for such payment. It is a cardinal principal of law that the rules of construction of a guarantee are in principle the ordinary rules relating to construction of contracts. Having carefully studied the Guarantee Instrument and considered the evidence of the two witnesses and the documents exhibited by both parties, the defendant’s letters constituted a valid and proper demand under the Guarantee and the plaintiff properly paid the sum of Ug Shs83,700,000/- to the defendant under the Guarantee.

2. By the date of cancellation the defendant’s claim under the guarantee had already accrued. Therefore, the cancellation was of no consequence to the defendant’s claim. In the premises the plaintiff still owes money to the defendant under the guarantee, as both parties agree that the sum paid did not satisfy the full demand or amount due of US$75,000.

3. The doctrine of estoppel by conduct prevents a party against whom it is set up from denying the truth of the matter. The principle is that where a party has by his declaration, act or omission intentionally caused the other to believe a thing to be true and to act upon such belief he cannot be allowed to deny the truthfulness of that thing. The doctrine of estoppel is applicable in the circumstances of this case. The plaintiff is in the circumstances estopped from seeking recovery of the monies paid to the defendant. All in all the plaintiff is not entitled to the refund of the sum of US$45,000 or Ugshs83,700,000/= paid to the defendant.

4. General damages for breach of contract are compensatory in nature for loss suffered and inconvenience caused to the aggrieved party. The measure of general damages is a question of discretion albeit judiciously exercised to reinstate the successful party in the same position it would have been as far as monetary compensation can. Considering that this was a commercial transaction an award of Ugshs 5,000,000/= as general damages is adequate.

5. As regards interest the principle is that where a party is entitled to a liquidated amount or specific goods and has been deprived of them through the wrongful act of another party, he should be awarded interest from the date of filing the suit. Where however, damages have to be assessed by the court, the right to these damages does not arise until they are assessed. In such event, interest is only given from the date of judgment. Accordingly the defendant is awarded interest on the sum of US$31,767.00 at the rate of 20% per annum from the 10^th December 2003 and at the same rate on the general damages from the date of judgment until payment in full.

Plaintiff’s suit dismissed with costs. Judgment entered in favour of the defendant on the counter-claim.

Cases referred to:

Bank of Credit & Commerce Int. SA (In liquidation) Vs Ali (2001) I AllER 961

Development Finance Co of Kenya Vs Wino Industries Ltd (1995 – 98) 2EA 65

Clison Vs Hawley (1966) EA 41

Cairncross Vs Lorimer (18600 3 LT 130

Habre International Co Ltd Vs Ebrahim Alaraki Kassam & others SCCA No 4 of 1999

Bank of Uganda Vs Banco Arabe Expanol (2002) 2 EA 333

Legislation referred to:

Section 114 of the Evidence Act Cap 6

Counsel for the plaintiff: Mr. Byenkya Counsel for the defendant Mr. A Kibaya

JUDGMENT:

Lameck Mukasa J: The Plaintiff, Pan African Insurance Company (U) Ltd is a Company incorporate in Uganda and carrying the business of an insurance company. The defendant International Air Transport Association is an International Organization whose membership is open to members of the airlines industry.

The plaintiff’s claim is that upon the request of its client, M/S Afrique Voyages Ltd, the plaintiff issued a written guarantee to the defendant whereby it undertook to guarantee the payment of monetary amounts owing to members of the defendant and/or any other airlines participating in a scheme known as “Billing and Settlement Plan” to a maximum limit of US$75,000. The plaintiff contends that it was a condition precedent to the plaintiff’s liability under the Guarantee that the defendant’s specified agent would make a written demand accompanied by a separate letter stating that the plaintiff’s client, the principal debtor, had been declared in default and specifying the total amount due and owing by the said debtor to members of the defendant and to airlines participating in the said Billing and Settlement Plan.

On or about 20^th December 2002 the plaintiff received a letter notifying it that the plaintiff’s client had been declared in default. The plaintiff contends that the letter did not make any specific demand for payment, neither did it specify the total amount owed or name or otherwise specify which, if any, airlines participating in the Billing and Settlement Plan were owed payments by Afrique Voyages Ltd.

That on 30^th January 2003 the plaintiff received another letter from the defendant’s appointed agent. This letter made a demand to the plaintiff to pay US $75,000, the maximum amount covered by the guarantee. The plaintiff contends that there was no accompanying letter stating the total amount due and owing to members of the defendant or any other airline participating in the Billing and Settlement Plan as required by the guarantee instrument. Further that no attempt was made to name or otherwise specify the particular members or airlines to which payment were outstanding.

The plaintiff contends that the aforesaid letter did not constitute a valid and proper demand under the guarantee. But that its officers under the mistaken impression that the letter did amount to a valid and proper demand and faced with incessant demands and increasing threats of legal action by the defendant effected payment of Ug83,700,000/= equivalent to US 45,000. The Plaintiff’s case is that the payment was made in error thus this suit whereby the plaintiff claims recovery of the sum of US$45,000, interest and costs.

The defendant in its defence states that when M/S Afrique Voyages Limited defaulted, a proper demand was made to the plaintiff in accordance with the guarantee. It therefore contends that payment was properly made and further that having acted on the demands and paid in honour thereto the plaintiff is estopped from raising any irregularities, if any, that may have been in the demand. The defendant Counter claim for US$31,767 being the balance owed by the plaintiff on a guarantee, general damages for breach of the contract of guarantee, interest and costs.

At the scheduling conference conducted before my brother Justice Sempa-Lugayizi, the following facts were agreed upon by the parties.

1. There was an agreement called a General Service Agency Agreement between the defendant and Afrique Voyages Ltd.

2. The plaintiff and the defendant were party to a guarantee agreement in reference to Afrique Voyages Ltd in the terms of the Agreement, Exhibit P1.

3. On 21^st February 2003 the plaintiff made a payment of UgShs83,700,000/= to the defendant’s advocates for transmission to the defendant.

The issues agreed upon for courts determination were:-

1. Whether or not the plaintiff properly paid a sum of Ugshs83,700,000/= to the defendant under the guarantee.

2. Whether or not the plaintiff owes the defendant any money under the counter-claim.

3. The remedies available.

The plaintiff was represented by Mr. Byenkya while the defendant was represented by Mr. A Kibaya. The plaintiff adduced the evidence of only one witness Mr. George Kihunguru, the General Manager of the plaintiff between April 1999 and November 2003. The defendant also called one witness Abdulrazah Khalfan. At the close of evidence of both parties, upon the application of both Counsel dates were fixed within which to file Written Submissions. It is only the defendant’s Counsel who filed his.

It is an agreed fact that the plaintiff guaranted the financial obligation of M/S Afrique Voyages Ltd to the defendant as surety and co-principal debtor to the tune of the USD75,000. The particulars of the guarantee were set out in exhibit P1 which provided:-

 

“2 Payment of all amounts due hereunder will be made on the Manager, Agency Services for Eastern Africa, IATA Agency Services Office on his./ her written demand and not exceeding 7 days accompanied by a letter signed by him/her stating that the Agent has been declared in default under the Sales Agency Rules of IATA specifying the total amount due and owing by the Agent to Members of IATA and airlines participating in the Billing and Settlement Plan. Monies to be paid to the Manager, Agency Services East Africa in respect of amounts specified as due and owing to airlines Members of IATA shall be paid to the Manager, Agency Services as Agent for each member and airlines participating in the Billing and Settlement Plan,”

For the liability of the plaintiff to arise under the Guarantee the following had to happen:-

1. A default by the Agent – i.e. Ms Afrique Voyages Ltd.

2. A Written demand by the Manager Agency Service Office.

3. A letter signed by the Manager stating that the Agent has been declared to be in default.

4. Statement of the specific amounts due and owing by the Agent under the Plan.

These were conditions precedent to the plaintiff’s liability to pay under the Guarantee. Mr. George Kihunguru testified that there was an arrangement between the Travel Agents and various Airlines called the Billing and Settlement Plan (BSP) under which the Agents could sell tickets on behalf of the Airlines on credit. Under BSP IATA required that the Travel Agents have a Guarantee in place that should they fail to pay the amounts for which they would be liable to pay having sold them on credit the Guarantee would come in force to make good any short fall. The Travel Agent was the client of the Insurance Company which acted as the surety and IATA the beneficiary of the Guarantee when it comes into force. M/S Afrique Voyage Ltd was one of the Travel Agents who were the clients of the plaintiff. Thus the execution of the Guarantee, Exh P,1 on behalf of M/S Afrique Voyages Ltd in favour of the defendant.

Mr. Kihunguru testified that the plaintiff received a letter from the defendant dated 20^th December 2002 and received in evidence as exhibit P2. The letter stated:-

“We would like to notify you that the above named agent has been defaulted under Sales Agency Rules of IATA. The agent has failed to settle airlines’ dues. As per the IATA Rules the agent has been given one month to settle 50% of the outstanding amount and to submit a given schedule of repayment of the balance within 3 months.

 

If the agent complies with the above it will be placed on cash basis with commission until all the outstanding dues are settled where upon the agent may then be re-instated subject to satisfactory financial review evaluation. Failure to comply will lead to termination of the agent from the IATA agency list. In view of the above, we would like to notify you that in case Afrique Voyages Ltd. does not comply with the above, and as per the provisions of paragraph 2 of Afrique Voyages Ltd guarantee, we shall demand a cheque of USD$75,000 (seventy five thousand) being part payment due and owing by the agent to IATA Member airlines”

The witness stated that the letter informed the Plaintiff that :-

1. The agent has failed to settle Airline’s dues

2. The Agent had been given a time within which to settle the dues

3. Failure to comply within that time frame would lead to termination of the Agent from the IATA Agency list.

4. The plaintiff is put on notice that in the event of failure to pay as aforesaid the defendant would demand for payment of USD75,000 being part payment due

According to the witness this was not a demand envisaged in the Guarantee Agreement but a notice of possible demand.

The witness stated that this letter informed the plaintiff that:-

 

Mr. Kihunguru further testified about another letter dated 21^st January 2003, exhibit P8. The letter stated:-

 

“With reference to our letter dated 20^th December 2002, we would like to inform you that the above named agent was defaulted under the Sales Agency Rules of IATA. As per the provisions of paragraph 1 of Afrigue Voyages Ltd guarantee, we demand a cheque of USD75,000 (USD seventy five thousand) being part payment due and owing by the Agent to IATA Member airlines. Enclosed please find a copy of the default letter to the agent and a copy of the bank guarantee. Kindly process the above cheque as soon as possible to enable us pay the Airlines their dues.”

 

The copy attached to the above letter was dated 10^th January 2003 written by the defendant to Afrique Voyages Ltd. It was “RE DECLARATION OF DEFAULT – OUTSTANDING AMOUNTS USD 225,249.26.”

 

 

 

1. Afrique Voyages Ltd had been defaulted.

2. A demand for USD 75,000 was being made.

3. The amount was part payment due and owing by the Agent to IATA member airlines.

According to him the letter did not satisfy the requirement of a demand note under the Guarantee in that:-

1. It did not specify the names of the Airlines which were owed money and the amounts due to each of them.

2. It was not accompanied by a letter signed by the Manager Agency Services for Eastern Africa.

The witness argued that the letter was from the IDFS Regional Manager EA.

The defence witness Mr. Abdulrazah Khalfan, testified that around November 2002 Afrique Voyages Ltd failed to remit monies for sales they had made on behalf of various Airlines. The defendant then took the required action as per the Passenger Sales Agency Agreement Exh D10, and declared Afrique Voyages Ltd in default. That the defendant wrote to the plaintiff as provided by paragraph 2 of the Guarantee – Exb P1. The witness identified exhibit P8 as the letter written. He stated that the attachment to exhibit P8, the letter written by the Defendant to the Agent dated 10^th January 2005, indicated the default amount as US$225,249.26. He argued that the Guarantee Exh, P1, did not require the defendant to state the Airlines owed money. That it was only required to state that the Agent had been declared in default and the total amount outstanding. That at the material time he was the defendant’s Manager Agency Services and his duties included managing agency services. He was the signatory to the demand letter.

It is the defendant’s evidence that around November 2002 Afrique Voyages Ltd had defaulted in remittances in respect of the sales it had made. In his testimony the plaintiff’s witness does not dispute the fact that Afrique Voyages Ltd had defaulted in its obligation. Therefore the event of default by the Agent had occurred.

In the event of default the Guarantee envisaged that the defendant would declare the concerned Agent in default. In the defendant’s letter dated 20^th December 2002 – Exhibit P2, the plaintiff was notified that Afrique Voyages Ltd had been defaulted under the Sales Agency Rules of IATA for having failed to settle airline dues. The letter addressed to the General Manager of the plaintiff company was “Re Default Agent – Afrique Voyages Ltd (89-2-4045-4) and stated:

“We would like to notify you that the above named agent has been defaulted under the Sales Agency Rules of IATA”

 

Also the defendant’s letter to the plaintiff dated 21^st January 2003, exhibit P8, stated

 

“With reference to our letter dated 20^th December 2002, we would like to inform you that the above named agent was defaulted under the Sales Agency Rules of IATA.”

 

Attached to the above letter was a letter by the defendant to the agent, M/S Afrique Voyages Ltd, dated 10^th January 2003. The letter was:-

 

“Re: Declaration of Default, Outstanding Amounts: USD 225,249.26.”

The above three communications show that Afrique Voyages Ltd had been declared in default under the Sales Agency Rules of IATA. This fact was not disputed or contradicted by any evidence to the contrary.

The issue is whether that declaration was properly communicated to the plaintiff as per the provisions of the Guarantee. Paragraph 2 of the Guarantee – exhibit P1, required a written demand. In its letter exhibit P8, the defendant stated:

 

“—we demand a cheque of USD 75,000 (USD Seventy five thousand) being part payment due and owing by the Agent to IATA Member airlines.”

This letter satisfied the requirement of a written demand.

This demand was required to be accompanied by a letter signed by the Manager, Agency Services for Eastern Africa IATA Agency Services Office. The demand letter, exhibit P8, is accompanied by a letter by the defendant to Afrique Voyages Ltd. Both the demand and the attached letter were signed by “Khalfan Abdulrazak, IDFS Regional Manager EA” The plaintiff’s witness, Mr Kihunguru, states that the letter exhibit P8 did not satisfy the requirements of a demand note under the Guarantee. He contends that the letter was from the IDFS Regional Manager EA and not accompanied by a letter signed by the Manager Agency Services for Eastern – Africa.

The defendant’s witness Mr. Khalfan Abudrazak, who was the author of the two letters, testified that at the time of making the demand he was the person managing the agency services of the East African region in the IATA Agency Services Office at Nairobi. That in IATA there is no person whose title is Manager Agency Services, but that there is a person who carries that job description and responsibility. That he was that person at the material times. Counsel for the defendant submitted that the issue under the guarantee is not about title but duty or responsibility of the person with the authority to act. That is the person at the time managing the Agency services of IATA in Eastern Africa. It had to be the responsible officer at the IATA Agency Services for Eastern Africa, IATA Agency Services Office.

A guarantee is a contract whereby one person contracts with another to pay a debt owed by a third party who notwithstanding remains primarily liable for such payment. See The Encyclopedia of Form and Precedents 4^th Ed. Page 761. It is a cardinal principal of law that the rules of construction of a guarantee are in principle the ordinary rules relating to construction of contracts. The Court when constructing the guarantee as a merchantile contract does not apply technical rules but does so as to reflect what may reasonably be inferred to have been the parties’ real intentions. The guarantee must be looked at as a whole and natural meaning given to it taking into account the surrounding circumstances and the intention of parties where the guarantee requires some explanation. See Halsbury’s Law of England 4^th Edition paras 143 and 147. In Bank of Credit & Commerce Int. SA (In liquidation) Vs Ali (2001) IAllER 961 Lord Binighan of Cornhill held:

“In constructing contractual provisions, the object of the Court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the Court reads the terms of the contract as a whole , giving the words used their natural and ordinary meaning in the context of the agreement, the parties relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties intentions the Court does not of course inquire into the parties subjective states of mind but makes an objective judgment based on the materials already identified.”

I have carefully studied the Guarantee Instrument and considered the evidence of the two witnesses and the documents exhibited by both parties. The intention of the parties to the Guarantee must have been that payment was to be made to and the demand for payment was to be made by an officer at the level of a manager at the IATA Agency Services Office for Eastern Africa. I agree with Counsel for the defendant that the issue was not about title description but the duties and responsibilities of the person with authority to act. The officer intended by the parties was one at the material time responsible for managing the defendant’s Agency Services for Eastern Africa at the IATA Agency Services Office. The defendant’s witness who was the signatory was at the material times at the level of a Regional Manager – Eastern Africa. It is his evidence that at the material time he was the responsible Manager Agency Services. His duties included managing the agency services. His title description was Regional Manager IDFS for Eastern Africa. During cross-examination he insisted that the plaintiff had been dealing with the defendant for a number of years and was aware that the witness was managing the defendant’s agency services. Such awareness can comfortably be inferred from exhibit D7, a faxed massage from the plaintiff’s Operation Manager dated 7^th February 2003. It is addressed to “IDFS Regional Manager EA” and it is in respect to the payment in issue. Also from Exhibit P7, a letter by the plaintiff’s General Manager dated 24^th February 2003. It is also addressed to the same officer.

Considering all the above I find that both the demand letters and the attached letter were properly signed by a Manager in charge of Agency Services for Eastern Africa at the IATA Agency Services Office as was required by the Guarantee.

Lastly the demand was required to specify the total amount due and owing by the Agent to Members of IATA and airlines participating in the Billing and Settlement Plain. Mr. Kihunguru argued that the letter, exhibit P8, did not specify the members of the airlines who were owed money or show the amounts due to each of them. True the letter, exhibit P8, in its body demands for USD75,000. The plaintiff’s maximum liability under the guarantee was limited to and not to exceed US$75,000. However, under the Guarantee the demand for payment was required to specify the total amount due and owing by the Agent to Members of IATA and airlines participating in the Billing and Settlement Plan. In his testimony the defence witness stated:

 

“The total amount was stated in our letter dated 10^th January 2003 to the agent and copy of the letter was attached to our letter of 21^st January 2003 to Pan African Insurance Company. The attached letter indicates the default amount as US$ 225,249.26. The letters do not state to which Airline the money was owed. It was not a requirement to indicate the Airline owed. The guarantee does not require to state the Airline owed. It only required to state that the Agent had been declared in default and the total amount outstanding.”

The demand letter, exhibit P8, states:

 

 

“Enclosed please find a copy of the default letter to the agent.”

 

The attached letter stated the outstanding amount to be USD225,249.26. It is trite that where a document is mentioned in the main document and it is attached thereto such mentioned and attached document becomes part and partial of the main document. I therefore find that the letter to the Agent dated 10^th January 2003 which was attached and mentioned in the demand letter, exhibit P8, was by such mention and attachment made part and partial of the demand letter. The demand letter thereby specified the amount in default to be USD222,249.26. The requirement by the Guarantee was to specify the total amount due and owing by the Agent to members of IATA and airlines participating in the Billing and Settlement Plan. There was no requirement to break down the total by naming which airline was owed how much. All that the defendant was required to do was to specify the total amount due and owing to the members and this was done. The requirement for a list, schedule or names of the members owed cannot be read into the Guarantee.

In light of my finding above the plaintiff’s claim that its officers had laboured under the mistaken impression that the defendant’s letters constituted a valid and proper demand under the Guarantee and that they had erroneously effected payment to the defendant is un acceptable. It is rejected.

It is the evidence of both parties that following the demand a sum of Ugshs83,700,000/= was paid by the plaintiff to the defendant. In answer to the first issue I find that the plaintiff properly paid the sum of Ug Shs83,700,000/- to the defendant under the Guarantee.

The second issue is whether or not the plaintiff owes the defendant any money under the counter-claim. The defendant’s claim in the counter-claim is that it on 20^th September 1995 entered into a Passenger Sales Agency Agreement with M/S Afrique Voyages Ltd whereby Afrique Voyages Ltd was to sell tickets on behalf of IATA member airlines. The agreement was received in evidence as Exh. D10. On 13^th August 2002 the plaintiff issued the Guarantee – PA17 – 00608 in the maximum sum of U$75,000, to the defendant as surety and co-principal debtor to the benefit of Afrique Voyages Ltd. M/S Afrique Voyages Limited sold tickets on behalf of airlines between the months of November and December 2002 for which it defaulted on payment of a sum exceeding US$75,000. The list of the Airlines to which M/S Afrique Voyages Ltd owed money was received in evidence as exhibit D3. Demand was made to the Plaintiff pursuit of the Guarantee, Exhibit P1. The defendant contends that the plaintiff acknowledged the indebtedness to the defendant and paid part of the money owing under the Guarantee to the tune of US$43,333 leaving a balance of US$31,767 as owing on the Guarantee. Thus the Counter-claim for US$ 31,767. In its letter to the defendant’s lawyers dated 21^st February 2003, the plaintiff’s Finance Manager states:-

“In connection with the guarantee issued on behalf of Afrique Voyages Ltd to IATA and which guarantee has been called in we are pleased to attach herewith our cheque No,. 100239 in the amount of Ushs83,700,000./= (Eighty three million seven hundred thousand shillings only) equivalent to US$ 45,000.00 (United States Dollars forty five thousand only) in part settlement of the amount of US$ 75,000. the amount of the guarantee. The balance amount of US$30,000 will be paid within the subsequent weeks but not later than March 31^st 2003.”

This letter was received in evidence as exhibit P4 A and a photocopy of the cheque as Exh. P 4B. Also in its fax message addressed to the IDFS Regional Manager EA of the defendant dated 7^th February 3002. Exh. D7, the plaintiff’s Operational Manager states:-

“—Please note Afrique Voyage have given a cheque for the US$ 75,000 which we have banked and its proceeds will when it clears, be remitted to you immediately.”

 

A photocopy of the cheque in the sum of US$75,000 dated 31 January 2003 drawn by Afrique Voyages Ltd in favour of the plaintiff was received in evidence as exhibit D6.

In its reply to the counter-claim the plaintiff contends that the liability of the plaintiff under the guarantee was not dependant merely on the default of the agent but rather on the strict compliance of the defendant with the terms of the guarantee. Further that the contents of exhibit D3, showing the list of the airlines owed money by the agent should have been disclosed to the plaintiff at the time of making a demand under the guarantee as required by the terms of the said guarantee which was not done. That the non-disclosure resulted in fundamental non-compliance with the guarantee. Further that the Guarantee was on 24^th February 2003 cancelled by a three months notice in compliance with the terms of the Guarantee. The notice of cancellations of guarantees, including the one in favour of Afrique Voyages Ltd, was received in evidence as exhibit P7.

By the Guarantee the plaintiff contracted with the defendant to pay the debts owed by M/s Afrique Voyages Ltd to IATA members and airlines which were members of the Billing and Settlement Plan. Under the Guarantee the plaintiff’s liability was subject to a demand by the defendant made to the plaintiff in compliance with the terms as provided in the Guarantee. Notwithstanding the guarantee the principal debtor remains primarily liable for the payment of the debt.

Any expreses or implied conditions precedent to the guarantor’s liability must be fulfilled before recourse can be to the guarantor. In my ruling on the first issue I have found that the conditions precedent as provided in the Guarantee had been complied with and that a proper demand had been made vide the defendant’s letter, exhibit P8. It is the evidence of both parties that following that demand a sum of Ug Shs 83, 7000,000/= was paid by the plaintiff to the defendant. Both parties agree that the sum paid did not satisfy the full demand or amount due of US$75,000 There remained a balance due and this is acknowledged in the plaintiffs letter to the defendant’s lawyer dated 21^st February 2003, exhibit P4A.

The defendant’s witness Abdulrazah Khalifan testified that the balance was not paid. There is no evidence adduced to show that M/s Afrique Voyages Ltd had itself paid any money to the defendant in respect to the claim. The notice of cancellation of the Guarantee, exhibit P7, is dated 24^th February 2003 whereas the defendant’s demand, exhibit P8, is dated 21^st January 2003. Therefore, by the date of cancellation the defendant’s claim under the guarantee had already accrued. Therefore, the cancellation was of no consequence to the defendant’s claim. In the premises I find that the plaintiff still owes money to the defendant under the guarantee.

The last issue concerned the remedies available to either party. In its plaint the plaintiff prayed for payment or refund of US$45,000, interest at 25% from the date of filing the suit and costs. In the event, I am wrong in my findings above, I need to consider the defendant’s defence that the plaintiff having acted on the demand as made and paid in honour thereof is estopped from raising any irregularities in the demand. Thus estopped from claiming a refund. Counsel for the defendant submitted that a plaintiff is estopped from recovering money paid by mistake where the defendant by reason of the payment has spend the money he would not have spent but for the payment.

The doctrine of estoppel by conduct prevents a party against whom it is set up from denying the truth of the matter. The principle is that where a party has by his declaration, act or omission intentionally caused the other to believe a thing to be true and to act upon such belief he cannot be allowed to deny the truthfulness of that thing. See Section 114 of the Evidence Act. In Development Finance Co of Kenya Vs Wino Industries Ltd (1995 – 98) 2EA 65 at page 73 Justice Gachuhi of the Kenya Court of Appeal stated:

“---This defence of estoppel and acquisence was considered in the case of Clison Vs Hawley (1966)EA 41 at 51B and C where Harris J referred to the decision of the House of Lords in Cairncross Vs Lorimer (18600 3 LT 130 at 117 where the following conclusion was quoted:-

“It is well settled that if a party has so acted that the fair inference to be drawn from his conduct is that he consents to a transaction to which he might quite properly have objected he cannot be heard to question the legality of the transaction as against persons who, on the faith of his conduct, have acted on the view that that transaction was legal.”

 

The learned Justice further stated:-

“The citation also adds in case of Day V Lala ---- that:

“the principle applies even if the party whose conduct is in question was himself acting without full knowledge or in error.”

Following the demand letter, exhibit P8, which was dated 21^st January 2003 and a further demand in the letter dated 30^th January 2003, exhibit P3, the plaintiff wrote a letter to Afrique Voyages Ltd dated 30^th January 2003. The letter , exhibit D9C stated:

“We request to inform you that despite your submission of a payment plan to IATA for amounts owing to airlines, IATA has further demanded that we honour the guarantee issued on your behalf as per letter attached dated today.

 

We further regret to inform you that we will deposit your security cheque deposited with us for US$75,000 to meet IATA’s demands. You are requested to ensure that funds are available to meet your obligations.”

It is the evidence of the plaintiff’s witness that as security for the Guarantee, the plaintiff had a Counter-guarantee and an undated cheque in the sum of US$75,000 drawn in favour of the plaintiff by M/S Afrique Voyages Ltd. That the plaintiff at a certain point dated the cheque and banked it but that it bounced. The witness identified exhibit D6 dated 31^st January 2003 as the photocopy of the cheque. On 7^th February 2003 the plaintiff sent a fax message, exhibit D7, in which the plaintiff promised to pay the defendant immediately the cheque was cleared. By letter dated 21^st February 2003, exhibit P4 A. the plaintiff forwarded a cheque in the sum of Ushs83,700,000/= as part payment of the defendant’s claim and undertook to pay the balance not later than March 31^st 2003. The plaintiff banked the cheque but that it bounced. The witness identified exhibit D6 dated 31^st January 2003 as the photocopy of the cheque. On 7^th February 2003 the plaintiff sent a fax, exhibit D7, in which the plaintiff promised to pay the defendant immediately the cheque was cleared. It is after this payment that the plaintiff vide its letter dated 24^th February 2003, exhibit P7; cancelled the Guarantee. It was not until 9^th May 2003 when by their lawyer’s letter, exhibit P5, the plaintiff purported to demand for a refund on the ground that payment had been made in error. Evidence availed to Court shows that this action was after the plaintiff had on 2^nd April 2003 obtained judgment and decree in High Court Civil Suit No. 139 of 2003 Pan African Insurance Co (U) Ltd Vs Afrique Voyages whereby Afrique Voyages Ltd had been ordered to pay the sum of US$75,000 plus interest and costs. The degree in the above suit was received in evidence as exhibit D4.

The defendant’s witness gave evidence that when they received the money they distributed it to the airlines concerned. The defendant’s evidence in this regard was not contravated by the plaintiff. In Habre International Co Ltd Vs Ebrahim Alaraki Kassam & others SCCA No 4 of 1999, the Supreme Court held that where a witness’ testimony is not challenged in cross- examination by the opposite party it must be taken to have been admitted.

In Bank of Uganda Vs Banco Arabe Expanol (2002) 2 EA 333 the Appellant had a set a telex message to the Respondent to the effect that the Bank of Uganda was not disputing the Respondent’s claim but wished to give reasons why it had delayed in keeping regular payments of the agreed installments. Kanyeihamba JSC at page 343 held:

“Mr. Walusimbi’s telex was clearly an admission by the Appellant that it was indebted to the Respondent. According to the Evidence Act (Cap 43) , section 113 (now section 114 Cap 6 ) when a party in its declaration, act or omission , intentionally causes or permits another person to believe of thing to be true and that other person acts upon such belief neither that party nor its agent shall be allowed in any suit or proceedings to deny the truth of what was admitted.”

In its fax, exhibit D7, and its letter exhibit P4A, the plaintiff admits its liability under the Guarantee following the defendant’s demand and proceeds to satisfy the liability by making a part payment and promising to pay the balance. The defendant received the payment and pursuant to the Billing and Settlement Plan distributed the payment among the members owed money by the agent.

In the premises I find that the doctrine of estoppel is applicable in the circumstances of this case. The plaintiff is in the circumstances estopped from seeking recovery of the monies paid to the defendant. All in all I find that the plaintiff is not entitled to the refund of the sum of US$45,000 or Ugshs83,700,000/= paid to the defendant.

The defendant’/counter-claimant in its counter-claim prayed for judgment against the plaintiff/respondent for:-

1. 1. US$31767.0 (United States Dollars Thirty one thousand seven hundred sixty seven only).

   2. General damages for breach of contract.

   3. Interest on (a) and (b) above at the rate of 20% per annum from the date of 20^th December 2002.

   4. Costs of the suit.

The plaintiff’s maximum liability under the guarantee was limited to US$75,000. The defendant’s demand was for US$75,000. In settlement of that claim the plaintiff made a part payment by cheque in the sum of Ugshs 83,700,000/= stated in the forwarding letter, exhibit P4 A, to be equivalent to US$45,000 The balance was in the same letter stated to be US$30,000.

In its pleadings the defendant counter-claim for US$31,767. In his evidence the defendant’s witness stated that though the letter stated that the amount forwarded was equivalent to US$45,000 when the cheque was presented the amount could make only US$43,000. The change in exchange rates was communicated to the plaintiff in the defendant’s lawyer’s letter dated 17^th April 2003, Exh D8. The letter states:-

“In the said correspondence you undertook to pay our clients balance of US$31,767.00 since the best rate that they could fetch on the 6^th March 03 when the cheque cleared from the Bank was US$43,233.00 from the UShs83,700.000/=,.”

 

The liability in both the Guarantee and the defendant’s demand letters was stated in United States Dollars. There was no provision for the equivalent in Uganda Shillings. Rather than providing a conversion in the letter which forwarded the payment, the plaintiff does not offer any explanation why it chose to pay in Uganda shillings contrary to the currency provided in the guarantee and the demand. Neither did the plaintiff adduce any evidence to contradict the prevailing exchange rate as testified to by the defendant. I therefore, find that the plaintiff owed the defendant a balance under the Guarantee in the sum claimed of US$31,767.00 (United States Dollars Thirty one thousand seven hundred sixty seven only). The defendant/ counter claimant is awarded the same.

General damages for breach of contract are compensatory in nature for loss suffered and inconvenience caused to the aggrieved party. The measure of general damages is a question of discretion albeit judiciously exercised to reinstate the successful party in the same position it would have been as far as monetary compensation can. Counsel for the counter-claimant prayed that considering that this was a commercial transaction and the fact that for all the time the Plaintiff/Respondent were dodging their liability court awards an appropriate sum. No figure was suggested. The defendant’s witness gave evidence that when the plaintiff failed to pay they did not give the defendant reasons for their failure to pay. That there were numerous telephone conversations in which the plaintiff was making promises to pay. Eventually instead of payment the plaintiff demanded for refund of the money. Members of the defendant and members of the Billing and Settlement Plan were kept out of the money owing, which they would otherwise have had use of . I agree with the defendant’s counsel that this was a commercial transaction. In the premises I consider an award of Ugshs 5,000,000/= as general damages adequate. The defendant is awarded the same.

As regards interest the principle is that where a party is entitled to a liquidated amount or specific goods and has been deprived of them through the wrongful act of another party, he should be awarded interest from the date of filing the suit. Where however, damages have to be assessed by the court, the right to these damages does not arise until they are assessed. In such event, interest is only given from the date of judgment. See Sietco Vs Noble Builders (U) Ltd SCCA no. 31 of 1995.

Accordingly the defendant is awarded interest on the sum of US$31,767.00 at the rate of 20% per annum from the 10^th December 2003 and at the same rate on the general damages from the date of judgment until payment in full.

In the final result the plaintiff’s suit is dismissed with costs. Judgment is entered in favour of the defendant on the counter-claim. It is ordered that the Plaintiff/ Respondent shall pay the Defendant/Claimant on the counter-claim the following:-

1. 1. US$31,767.0 or its equivalent in Uganda shillings at the rate prevailing on the date of payment.

   2. General damages of Ugshs 5,000,000/=

   3. Interest on (a) above at the rate of 20% per annum from 10^th December 2003 until payment in full.

   4. Interest on (b) above at the rate of 20% per annum from the date of this judgment until payment in full.

   5. Costs of this suit.

Hon. Mr. Justice Lameck N. Mukasa

JUDGE