High Court Finds Bulenge Investment Ltd Liable for Breach of Investment Agreement Arising from Non-Remittance of Profits and Principal

FACTS

The Plaintiff, Themi Nakibuuka Sebalu, entered into an investment agreement with the 1st Defendant, Bulenge Investment Limited, dated 1st July 2023, running until 1st July 2024. Under the agreement, the Plaintiff advanced UGX 200,000,000 to the 1st Defendant and was to receive monthly profits of UGX 20,000,000.

The Plaintiff only received one month's payment totaling UGX 20,000,000 in installments, which were paid out of time. The Defendants subsequently defaulted on all subsequent monthly installments and failed to refund the principal sum.

The Plaintiff alleged that the 2nd Defendant, Kasibante John, who was claimed to be a director of the 1st Defendant, fraudulently induced her to execute the contract without any intention to perform it. She alleged the Defendants were operating a fraudulent 'Ponzi scheme' without proper licensing.

The Defendants failed to enter an appearance despite being served with summons on 27th September 2024. A Default Judgment was granted on 17th January 2025 under Order 9 Rules 5 and 10 of the Civil Procedure Rules. Although the Defendants filed a Written Statement of Defense and Counter claim on 22nd December 2025, it was not admitted due to late filing and non-payment of court filing fees.

ISSUES FOR DETERMINATION

The Court framed three issues for determination:

1. Whether the Defendants breached the contract?

2. Whether the Defendants were fraudulent?

3. What remedies are available to the parties?

SUBMISSIONS

Plaintiff's Submissions

The Plaintiff submitted that the Defendants breached the contract by failing to pay monthly installments of UGX 20,000,000 totaling UGX 220,000,000 and failing to refund the principal amount of UGX 200,000,000, for a total claim of UGX 420,000,000.

The Plaintiff also alleged fraud, claiming the 2nd Defendant fraudulently induced her to execute the contract without intention to perform, that the 1st Defendant fraudulently held itself out as an investment company, and that it was purporting to carry out investment business without a license as part of a 'Ponzi scheme'.

The Plaintiff sought recovery of UGX 420,000,000, general damages, exemplary damages, interest, and costs of the suit.

Defendants' Position

The Defendants did not enter an appearance despite being served. Their late-filed defense and counterclaim were not admitted for filing due to late submission and non-payment of court filing fees.

LEGAL REPRESENTATION

The Plaintiff was represented by M/S Mulindwa Associates and Co. Advocates. The Defendants were not represented and did not appear.

COURT'S FINDINGS

Issue 1: Breach of Contract

The Court held in the affirmative that the Defendants breached the contract.

The Court emphasized that even in ex parte proceedings, the Plaintiff bears the burden of proving her case on a balance of probabilities, citing Kirugi and another v. Kabiya and three others [1987] KLR.

The Court defined breach of contract as 'a violation of a contractual obligation by failing to perform one's own promise, by repudiating it, or by interfering with another party's performance' (Black's Law Dictionary 11th Edition).

The Court held that:

"A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract, and this includes circumstances where an obligation that is stated in the contract is not completed on time. It is a failure, without legal excuse, to perform any promise that forms all or part of the contract."

The Court noted that the Plaintiff testified she only received UGX 20,000,000 for one month in installments paid out of time, and received no further payments. The agreement (PEX 1) obligated the Defendants to ensure agreed remittances to the Plaintiff.

Importantly, the Court stated:

"It is trite that failure to file a defense is a presumption of constructive admittance, and therefore, the said allegation must be taken as the truth."

 The Court cited Sylar Kakugu Tumwesigyire v Trans Sahara International General TRDG L.L.C and Smith V Auto Electric Services Ltd (1951) 24 KLR 22.

The Court concluded that

"The Plaintiff has satisfactorily proved her case on a balance of probability, and it is more likely than not that the 1st Defendant breached its Obligation to pay the Plaintiff interests on her investment."

Issue 2: Fraud

The Court found no merit in the Plaintiff's claim for fraud.

The Court defined fraud according to Black's Law Dictionary 6th Edition as an intentional perversion of truth for the purpose of inducing another to part with something valuable.

Ocaya J, quoted Fredrick J.K Zaabwe v Orient Bank and Others, noting that fraud is 'always positive, and intentional.'

The Court emphasized the heightened standard of proof:

"It is also settled law that the standard of proof in cases of fraud is higher than the usual balance of probabilities required in Civil cases, but not quite the level of beyond a reasonable doubt required in Criminal cases." 

The Court cited Betuco (U) Limited v Barclays Bank of Uganda and 3 Others, 2018 UGSC 39.

The Court found critical evidentiary gaps:

"The element of the actual intention to defraud by the Defendants in this case has not been brought out by the Plaintiff. The Plaintiff in this, needed to prove that the Defendants did indeed defraud her of her investment, other than their failure to pay her as agreed."

Specifically, the Court noted the Plaintiff failed to adduce evidence through search certificate or other means to prove the Defendants operated without a license.

Additionally, the Plaintiff did not prove through company forms that the 2nd Defendant was a director of the 1st Defendant.

Regarding lifting the corporate veil, the Court referenced Section 18 of the Companies Act and cases including Beatrice Odongo and Another v Tamp Engineering Consultants Ltd and ABSA Bank (U) Ltd v Enjoy Uganda Ltd, which allow piercing the corporate veil in cases of fraud.

However, the Court stated: "The Plaintiff having failed to prove the averment that the 2nd Defendant is a director in the 1st Plaintiff company, by itself already fails any attempt to lift the 2nd Defendant company's veil."

The Court concluded that

"However, in this instant case where fraud was pleaded, the Plaintiff is required to prove the allegation to the required standard far beyond the Defendant's concluded constructive admittance which the Plaintiff herein failed to do."

Issue 3: Remedies

Recovery of Money

Following the finding of breach of contract, the Court awarded the Plaintiff UGX 420,000,000 to be recovered from the 1st Defendant Company.

General Damages

The Court awarded general damages of UGX 100,000,000. In Haji Asuman Mutekanga versus Equator Growers (U) Ltd. the Court had held that

"With regard to proof, general damages in a breach of contract are what a Court (or jury) may award when the Court cannot point out any measure by which they are to be assessed, except in the opinion and judgment of a reasonable man."

The Court referenced Luwa Luwa Investments Limited v Uganda Revenue Authority which recognized economic harm from retention of business monies:

"As this a commercial court, the decisions of the court should be cognizant of economic realities in Uganda today. For a business, loss of cash flow can be akin to driving a dagger at the heart of a person, who will most certainly die."

The Court concluded that

"It is my view that the Plaintiff was unnecessarily kept away from the money that she invested and the interest that was duly coming to her, and this inconvenienced and caused her financial distress which can be reimbursed for by way of damages paid to the Plaintiff."

Exemplary Damages

The Court declined to award exemplary damages. The Court cited Rookes v Barnard [1946] ALLER 367 which identifies three categories for exemplary damages: oppressive government action, conduct calculated to profit beyond compensation, or statutory authorization.

The Court stated:

"I have not found any circumstances warranting any consideration for the award of exemplary or punitive damages... I therefore find no justification for considering any award of exemplary damages in the circumstances of this case, being that it arises from a breach of contract which can be ably redressed through the remedies set for breach of contract."

Interest

The Court awarded interest of 15% per annum on the suit sum of UGX 420,000,000 from the date of filing the suit until payment in full. The Court cited Premchandra Shenoi & Anor v. Maximov Oleg Petrovich:

"The basis of awards of interest is that the Defendant has taken and used the Plaintiff's money and benefited."

The Court also awarded interest on general damages at 15% per annum from the date of judgment until payment in full, considering fluctuating inflation rates.

Costs

The Court awarded costs of the suit against the 1st Defendant Company, citing Section 27 of the Civil Procedure Act which provides that costs follow the suit.

HOLDING

The Court made the following orders:

1. The 1st Defendant breached the investment agreement entered into with the Plaintiff.

2. The Plaintiff is entitled to recover UGX 420,000,000 from the 1st Defendant Company.

3. The Plaintiff is awarded general damages of UGX 100,000,000 against the 1st Defendant Company.

4. The Plaintiff is awarded interest at 15% per annum on the suit sum from the date of filing the suit until payment in full, and interest on general damages at the same rate from the date of judgment until payment in full.

5. The Plaintiff is awarded costs of the suit against the 1st Defendant Company.

KEY TAKEAWAYS

1. Burden of Proof in Ex Parte Proceedings

Even when defendants fail to appear, plaintiffs must prove their case on a balance of probabilities. However, failure to file a defense creates a presumption of constructive admittance, making the plaintiff's allegations presumed true unless the required standard is higher (as in fraud cases).

2. Heightened Standard for Fraud

Fraud allegations require a higher standard of proof than ordinary civil cases, though not as high as criminal cases. The presumption of constructive admittance from non-appearance does not satisfy this heightened standard. Plaintiffs must provide specific evidence of fraudulent intent, not merely breach of contract.

3. Evidentiary Requirements for Fraud

To prove fraud allegations, plaintiffs must adduce concrete evidence including: proof of lack of licensing (through search certificates or official documents), proof of corporate positions (through company forms), and evidence of actual intent to defraud beyond mere non-performance of contractual obligations.

4. Lifting the Corporate Veil

Courts can pierce the corporate veil under Section 18 of the Companies Act in cases of fraud, but this requires proving: (a) the individual's position as director or controller of the company, and (b) fraudulent conduct meeting the heightened evidentiary standard. Mere allegations or constructive admittance are insufficient.

5. Economic Realities in Commercial Court

The Commercial Division recognizes that retention of business capital causes significant economic harm. Courts consider Uganda's high cost of credit and inflation when assessing damages, acknowledging that loss of cash flow can cause 'irreparable damage' to businesses.

6. Late Filing Without Court Fees

Documents filed outside the stipulated time and without payment of court filing fees are invalid and regarded as not being filed in court. This renders such defenses or counterclaims inadmissible, and the court will proceed as if they were never filed.

7. Exemplary Damages Limited Scope

Exemplary damages are only awarded in three circumstances: oppressive government action, conduct calculated to profit beyond compensation, or statutory authorization. Simple breach of contract, even with non-performance, does not warrant exemplary damages where ordinary contractual remedies adequately compensate the plaintiff.

8. Interest Awards in Investment Contracts

Courts award interest based on the principle that defendants have benefited from retaining and using plaintiff's money. The rate of 15% per annum reflects consideration of fluctuating inflation rates in Uganda's economic context.

9. Distinction Between Breach and Fraud

Non-performance of contractual obligations constitutes breach of contract but does not automatically constitute fraud. Fraud requires proof of intentional deception at the time of contract formation, not merely subsequent failure to perform.

10. Importance of Procedural Compliance

Strict compliance with Civil Procedure Rules is essential. Default judgments can be obtained when defendants fail to appear, but courts will not admit late defenses filed without proper court fees, regardless of their substantive merit.

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This legal alert is for informational purposes only and does not constitute legal advice.

Prepared- February 2026

Read the full case

Themi Nakibuuka Sebalu v Bulenge Investment Limited and Another 2026 UGCommC 30 (6 Februar.

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