High Court Holds Developers Bound by MOU, Rejects Partnership Claim in the Naguru Apartment Development Dispute, Orders Developers to Refund USD 270,172 and Pay Damages for Breach of Contract

Byaruhanga Joshua Morris
Jul 22
6 min read

Geoffrey Tindyebwa & Anor v Denis Tindyebwa & Anor

Civil Suit No. 640 of 2020, High Court of Uganda at Kampala (Commercial Division), before Hon. Lady Justice Patience T.E. Rubagumya, delivered 21 July 2026

Facts

In 2011, the Plaintiffs and Defendants executed a Memorandum of Understanding for the construction of 12 apartments on land in Naguru, Kampala, registered in the 1st Defendant's name. The Plaintiffs agreed to contribute UGX 816,666,664 towards construction, entitling them to four of the twelve apartments and their condominium titles. The Defendants agreed to contribute the land and obtain a bank loan to fund the remaining eight apartments.

By 2012, the Plaintiffs had paid a total of USD 521,339, more than the amount required for their four apartments. Construction was complete by 2012, but the Defendants never handed over the apartments, their titles, or the rent collected from tenants. In August 2019, the Defendants sold the property to a third party for USD 1,750,000 and remitted only USD 251,167 to the Plaintiffs.

The Plaintiffs sued for USD 270,172, being the unpaid balance of their contribution, together with mesne profits, general, aggravated and exemplary damages, interest and costs. The Defendants denied breach, contending that the parties were in a partnership, that title transfer was conditional on discharging the bank loan, and that the sale proceeds were distributed according to an agreed 8:4 ratio.

Legal Representation

For the Plaintiffs: Alex Kabayo, Janet Murungi and Reagan Ahumuza of M/s SM & Co. Advocates.

For the Defendants: John Fisher Kanyemibwa of M/s H&G Advocates.

Submissions of the Parties

The Plaintiffs' Submissions

Counsel submitted that the Defendants breached the contract by failing to hand over the four apartments and their titles, failing to remit collected rent, providing unsubstantiated expenses, and misrepresenting the Plaintiffs into opening a joint bank account for the sale proceeds that the Defendants then bypassed. Counsel argued the Defendants sold the property in 2019 without properly accounting to the Plaintiffs and that the refusal to refund the full USD 521,339 constituted breach.

The Defendants' Submissions

Counsel submitted that the parties were in a general partnership, evidenced by shared capital contribution and risk, and that the absence of a signed partnership deed did not defeat this. Counsel argued that title transfer depended on the bank's consent and discharge of the loan, that the apartments generated no net income due to operating costs and loan servicing, and that there was no misrepresentation regarding the joint account. Counsel further argued the Plaintiffs departed from the terms of the Kampala Settlement.

Court's Findings

Absence of a Partnership deed does not of itself preclude a finding of a partnership

The Court applied Section 2(1) of the Partnership Act, Cap. 110, which defines a partnership as a relationship between persons carrying on business in common with a view to profit. Relying on Reamaton Limited v. Uganda Corporation Creameries Ltd & Another, the Court affirmed that the absence of a formal partnership deed does not negate the existence of a partnership; the determinative question is the parties' real intention, assessed against the indicators in Section 3 of the Partnership Act.

On the facts, the Court found that the parties had deliberately declined to formalise a partnership deed when the Defendants proposed one, and that the MOU's language ("shall own," "amount for the cost of two apartments") reflected a purchaser-developer relationship rather than shared risk and profit. No partnership was found to exist.

A valid contract legally binds parties to Its Terms except in cases of fraud or misrepresentation

Applying Section 9(1) of the Contracts Act, Cap. 284, and citing William Kasozi v. DFCU Bank Ltd, the Court reiterated that once a contract is validly executed, it creates reciprocal rights and obligations, and a signatory is bound by its terms absent fraud or misrepresentation. Breach of contract was defined, per Meridiana Africa Airlines (U) Ltd v. Avmax Spares (EA) Ltd, as a failure, without lawful excuse, to perform any promise forming all or part of a binding contract, including failure to perform within the time or manner the contract requires.

The Court found multiple breaches such as failure to transfer apartments and titles already fully paid for; failure to notify the mortgagee bank of the Plaintiffs' beneficial interest; failure to remit net rental income and to furnish audited accounts; unilateral alteration of the development concept without consent; and failure to deposit sale proceeds into the agreed joint account.

A subsequent settlement agreement overrides and replaces the original contractual distribution terms

The Court determined that the 2017 "Kampala Settlement," established to resolve disputes between the parties, replaced the distribution terms of the original MOU. Upon finding that the Defendants made deductions and applied a distribution ratio that did not align with the terms agreed upon in the Kampala Settlement, and in the absence of a credible, independently verified accounting of expenses, the Court deemed it "just and equitable" for the Plaintiffs to recover the full amount of their contribution.

Mesne profits require proof of wrongful possession and of profits actually received

Citing Thalion International Ltd v. Vivo Energy Uganda Limited and Takiya Kashwahiri and Another v. Kajungu Denis, the Court reaffirmed that wrongful or unlawful possession by the Defendant is the essence of a mesne profits claim, and that the burden of proving the profits received lies on the claimant. The Plaintiffs' claim for USD 924,000 in mesne profits failed because the Defendants were never in wrongful possession of the suit property, and no evidence quantified profits actually received during the relevant period.

General damages are compensatory and must be anchored in evidence of actual loss or inconvenience

Applying Section 60 of the Contracts Act and Kabandize John Baptist and 21 Others v. Kampala Capital City Authority, the Court held that general damages restore, so far as money can, the position the injured party would have occupied but for the breach. Guided by Uganda Commercial Bank v. Deo Kigozi on the relevance of the value of the subject matter and the extent of the breach, the Court awarded UGX 120,000,000/= in general damages, having regard to the Plaintiffs' evidence of hardship, stress and inconvenience arising from a lost retirement investment.

Aggravated & exemplary damages demand proof of oppression, malice or impunity; a commercial breach alone is insufficient.

Relying on Costa Construction Services Ltd v. Globe Trotters Limited and Fredrick J.K. Zaabwe v. Orient Bank Ltd & Others, the Court held that aggravated damages arise only from oppressive, arbitrary or unconstitutional conduct, or conduct marked by malice or arrogance, while exemplary damages, per Luzinda Marion Babirye v. Ssekamatte (Alias Mulwana Samuel) & Others, exist to punish and deter rather than enrich the claimant. Notwithstanding the finding of breach, the Court declined to award aggravated or exemplary damages in the absence of evidence of oppression, malice, fraud or impunity underscoring that a commercial disagreement, without more, does not attract punitive remedies.

Interest is discretionary but must reflect economic reality

Pursuant to Section 26(2) of the Civil Procedure Act, and applying Milly Masembe v. Sugar Corporation (U) Ltd and Mohanlal Kakubhai Radia v. Warid Telecom Uganda Ltd, the Court held that interest is awarded at the Court's discretion, judiciously exercised with regard to inflation and currency depreciation. The Court awarded interest at 20% per annum on the principal sum from the date of filing until payment, and 6% per annum on general damages from the date of judgment until payment.

Holding

The High Court entered judgment in favour the Plaintiffs and made the following orders:

Declared that the Defendants breached the contract.
Ordered the Defendants to pay USD 270,172 as the balance of the Plaintiffs' contribution.
Awarded UGX 120,000,000 in general damages.
Awarded interest at 20% per annum on the decretal sum from the date of filing until payment in full.
Awarded interest at 6% per annum on the general damages from the date of judgment until payment in full.
Awarded the costs of the suit to the Plaintiffs.

Key Takeaways

Parties structuring joint development or investor-developer arrangements should ensure the governing instrument unambiguously states whether the relationship is a partnership or a sale/investment arrangement .courts will look past labels to the substantive indicators in Section 3 of the Partnership Act.
A party controlling shared property or funds should maintain contemporaneous, independently verified (preferably audited) accounts; self-prepared statements of account produced after litigation has commenced carry little evidentiary weight.
Where parties conclude a settlement varying an original agreement, the settlement terms not the original contract will govern the courts' assessment of compliance.
Claimants seeking mesne profits must plead and prove both wrongful possession and the quantum of profits actually received; a claim for lost income under a subsisting contractual relationship is more appropriately framed as damages for breach.
Aggravated and exemplary damages remain exceptional remedies in commercial disputes; parties should not assume that proof of breach, without more, will found a claim for punitive-type damages.