High Court Awards Shoprite Checkers (U) Limited UGX 19,557,320 in Repair Costs and UGX 20,000,000 in General Damages for Breach of Lease Following Fire Outbreak.

6 days ago

10 min read

Updated: 2 days ago

High Court Awards Shoprite Checkers (U) Limited UGX 19,557,320 in Repair Costs and UGX 20,000,000 in General Damages for Breach of Lease Following Fire Outbreak; Holds That Landlords Must Prove Tenant’s Fault to Recover Rent Arrears Attributable to Fire Damage

Snap-shot

The High Court has held that a tenant who breaches a commercial lease agreement by failing to obtain insurance cover required under the lease, and consequently held the tenant liable for the costs of repairing premises damaged by fire. However, the Court declined to award the landlord outstanding rent arrears claimed during the repair period and for the unexpired term of the lease because the landlord had not proved that the fire was attributable to the tenant’s fault and had not properly particularised the alleged negligence in its pleadings.

In Shoprite Checkers (U) Limited v Mr Tasty Limited t/a Mr Tasty Fried Chicken & Another, the Court distinguished the tenant’s established contractual breach concerning insurance from the separate question of whether the tenant was liable for rent following the fire and the resulting interruption of business.

The Court awarded the Plaintiff UGX 19,557,320 as repair costs, UGX 20,000,000 in general damages, interest at 17% per annum on the repair costs from the date of filing suit until payment in full, interest at 6% per annum on general damages from the date of judgment until payment in full, and costs of the suit.

Facts

Shoprite Checkers (U) Limited, the Plaintiff, entered into a lease agreement with Mr Tasty Limited, trading as Mr Tasty Fried Chicken, the First Defendant, for Shop No. 6 in the Plaintiff’s Shoprite Kampala building situated at Plot 2, Ponsonby, 1, 3 and 5 Ben Kiwanuka Street, Kampala.

The lease was for a term of three years, with a monthly rental obligation of USD 5,482.35, inclusive of VAT. The judgment records the lease commencement date as 1 August 2017 and the expiry date as 31 July 2020, although the parties’ agreement is also described as having been executed on 23 May 2018.

The Second Defendant, Hassan Ashraf Kalair, a director and managing director of the First Defendant, executed the lease on behalf of the company and also signed a deed of suretyship guaranteeing the First Defendant’s obligations under the agreement, including the payment of rent.

The lease contained provisions governing the tenant’s obligations to maintain the premises, the consequences of damage caused by fire or other disasters, and the requirement to obtain insurance against risks arising from the tenant’s business.

On 2 July 2018, at approximately 23:35–23:40 hours, a fire broke out at the leased premises. The fire destroyed or damaged the First Defendant’s business stock and equipment, including refrigerators, deep freezers, billing machines, a CCTV camera system and a food warmer.

The incident was reported to the Uganda Police Force Directorate of Fire Prevention and Rescue Services. According to the police report presented in evidence, the fire was attributed to an electrical short circuit.

Following the incident, the Plaintiff notified the Defendants of the fire and reminded them of their contractual obligation to obtain insurance cover against risks arising from the conduct of their business on the premises.

The Plaintiff subsequently took possession of and locked the premises, informing the Defendants that the premises would not be reopened until repairs had been undertaken and approved by the Plaintiff. The Defendants maintained that the Plaintiff took an unreasonably long time to carry out the necessary repairs, thereby preventing them from resuming business.

As the premises remained inaccessible and the First Defendant’s business could not continue, the First Defendant sought alternative premises and, by a letter dated 12 March 2019, formally communicated its intention to vacate the leased premises.

The Plaintiff treated the letter as a handover of the premises but maintained that the Defendants remained liable for outstanding rent arrears of USD 37,466.42 for the period from 1 September 2018 to 31 March 2019.

The Plaintiff also sought USD 87,717.60, representing rent for the remaining sixteen months of the lease, on the basis that the premises had not been re-let and that the lease permitted recovery of rent for the unexpired period.

In addition, the Plaintiff sought UGX 19,557,320 as the cost of reinstatement and repairs to the damaged premises, together with interest, damages and costs.

The Defendants denied liability for the claimed rent arrears and repair costs, arguing that the fire was an independent event that frustrated the lease agreement and rendered continued performance of the contract impossible.

The Plaintiff contended that the First Defendant had breached the lease by failing to obtain the required insurance cover, leaving the premises before the agreed expiry date and failing to meet its contractual obligations following the fire.

The Defendants argued that the fire had resulted from an electrical short circuit rather than any unlawful or negligent conduct on their part. They further contended that the Plaintiff had taken possession of the premises, prevented access and failed to carry out repairs promptly.

They also relied on the disaster-damage provisions of the lease, arguing that the circumstances had frustrated the contract and that the Plaintiff could not continue charging rent for premises that were unusable and inaccessible.

The main dispute was therefore whether the fire and its consequences constituted a breach attributable to the tenant, whether the tenant was contractually liable for the repair costs and rent arrears, and what remedies were available to the parties.

LEGAL REPRESENTATION

For the Plaintiff
Ms. Babirye Miriam Kaggwa of Onyango & Co. Advocates.
For the Defendants
Mr. Moses Ingura with Mr. Harman Magoma of Ingura & Co. Advocates.

Submissions for the Plaintiff

Counsel for the Plaintiff, Babirye Miriam Kaggwa of M/s Onyango & Co. Advocates, submitted that the First Defendant had breached the lease agreement by leaving the premises before the expiry of the agreed term.

Counsel relied on sections 1 and 9 of the Contracts Act, Cap. 284, together with William Kasozi v DFCU Bank Ltd, Civil Suit No. 1326 of 2000, and Kyalimpa Sarah v Harriet Nassozi Hewett, Civil Suit No. 0794 of 2016, in support of the proposition that parties are bound by their contractual obligations.

Counsel further relied on clause 9.2.1.1 of the lease, arguing that the tenant was liable for rent covering the period following premature departure from the premises. Clause 15.4 was also invoked in support of the contention that the tenant remained responsible for rent during repairs or until a replacement tenant took possession.

On insurance, the Plaintiff submitted that clause 39 expressly required the First Defendant to obtain insurance against risks arising from its business. The Second Defendant had acknowledged during cross-examination that the tenant was responsible for obtaining insurance but had failed to do so.

Counsel argued that the Defendants could not rely on frustration where their own fault had contributed to the circumstances relied upon to excuse performance. In support, Counsel cited Taylor v Caldwell [1863] 3 B & S 826 and contended that the First Defendant had been negligent by failing to implement appropriate fire-prevention measures and leaving kitchen appliances switched on.

Regarding the repair costs, the Plaintiff relied on sections 7 and 8 of the Landlord and Tenants Act, 2022, and clauses 15, 24.2 and 39 of the lease, arguing that the First Defendant was liable for the damage and the resulting reinstatement expenses.

Submissions for the Defendants

Counsel Moses Ingura and Counsel Harman Magoma of M/s Ingura & Co. Advocates submitted that the Defendants had not breached the lease in the manner alleged because the fire had made continued business operations impossible.

They relied on clauses 47(1) and 47(2) of the lease, arguing that the damage rendered the premises unsuitable for immediate business operations and necessitated repairs. Counsel contended that the Plaintiff, through its property managers, had taken possession of the premises instead of facilitating the tenant’s relocation or allowing it to participate in the restoration process.

The Defendants relied on the police fire report, which attributed the fire to a short circuit. They maintained that electrical appliances had to remain switched on to preserve perishable products, including milk and chicken, and that the mere presence of operating appliances did not establish negligence.

Counsel further argued that clauses 24.2 and 24.3 imposed obligations concerning the repair of the building and the assessment of any reduction in rent. According to the Defendants, the Plaintiff had failed to comply with those obligations promptly and had thereby aggravated their commercial losses.

The Defendants also contended that the Landlord and Tenants Act, 2022, could not properly be relied upon in relation to the dispute, arguing that its application would offend Article 92 of the Constitution of Uganda, 1995, as amended.

Finally, Counsel invoked the contra proferentem rule, submitting that any ambiguity in the lease’s disaster-damage and breach provisions should be construed against the party responsible for drafting the agreement. Reliance was placed on Akol v Doka, Civil Appeal No. 00001 of 2014, which cited Direct Travel Insurance v McGeown [2004] 1 All ER (Comm) 609.

The Plaintiff’s submissions in rejoinder

In rejoinder, Counsel for the Plaintiff maintained that the First Defendant had breached the fixed-term lease by vacating the premises before the agreed expiry date and that the lease’s express provisions continued to govern the parties’ obligations.

Counsel further argued that the doctrine of contra proferentem was inapplicable because there was no ambiguity requiring the Court to construe the agreement against the Plaintiff. The Plaintiff also maintained that Akol v Doka was distinguishable from the circumstances of the present case.

Issues

The Court framed three issues:

Whether the lease was breached and by whom
Whether the 1st Defendant must pay repair costs;
What remedies are available.

Court's Findings

Issue 1: Whether the lease agreement was breached and, if so, by whom

The Court reaffirmed the principle that parties are bound by the terms of a contract they voluntarily execute, unless vitiating factors such as fraud, duress, undue influence, mistake or misrepresentation are established (Behange v School Outfitters (U) Ltd [2000] 1 EA 20).

Under sections 101 and 103 of the Evidence Act, Cap. 8, the burden of proving the alleged breach rested on the Plaintiff, on a balance of probabilities. Clause 39 of the lease agreement required the lessee to obtain insurance against liability and risks arising from the conduct of its business. PW1 testified that the 1st Defendant had not obtained the required insurance cover, and this evidence remained uncontroverted by DW1.

Accordingly, the Court found that the 1st Defendant had breached its contractual obligation under clause 39.

Issue 2: Whether the 1st Defendant was liable for the costs of repairing the premises

The Court applied the literal rule of contractual interpretation, emphasising that contractual terms should be given their ordinary meaning, with ambiguity resolved, where necessary, by reference to the factual background and commercial purpose of the agreement with reference to Shariff Osman v Haji Haruna Mulangwa, SCCA No. 38 of 1995; Godfrey Magezi & Anor v Sudhir Ruparelia, SCCA No. 16 of 2001.

Read together with clause 39, clause 24.3 authorised the lessor to undertake repairs to the premises and required the lessee to reimburse the costs upon demand. Having established that the Plaintiff carried out the repairs and presented the relevant quotation (PE3), the Court held the 1st Defendant liable for UGX 19,557,320 in repair costs pursuant to clause 24.3.

The Court distinguished Akol v Doka [2016] UGHCLD 64 on its facts, noting that the case concerned the interpretation of written land-sale agreements, the admissibility of extrinsic evidence, and limitation of actions for breach of contract.

The Court held that the written agreement governed the purchase price and that the claim for the alleged outstanding balance was unsupported by the agreement and, in any event, time-barred. Unlike Akol v Doka, the present dispute concerned the interpretation and enforcement of specific lease provisions governing insurance obligations and the recovery of repair costs.

Issue 3: Whether the Plaintiff was entitled to the remedies claimed

a) Rent arrears

The Court declined to award the claimed rent arrears for the repair period and the unexpired term of the lease. Clause 24.2 excluded a reduction in rent where the damage was attributable to the lessee’s fault. However, the fire report (DE2) attributed the fire to a short circuit, while PW1 admitted that no investigation had been undertaken to establish its cause.

The Plaintiff therefore failed to establish the requisite fault on the part of the 1st Defendant to support the claim for rent arrears. The Court further observed that negligence had not been specifically particularised in the plaint. A party cannot ordinarily obtain a determination on a case that has not been properly pleaded, as affirmed in Luyimbazi v Stanbic Bank Uganda Limited, Civil Appeal No. 2 of 2019. The claim for rent arrears accordingly failed, notwithstanding the established breach of the insurance obligation.

b) General damages, interest and costs

Relying on section 60(1) of the Contracts Act, the Court awarded UGX 20,000,000 in general damages for the loss and inconvenience occasioned by the breach, applying the relevant considerations in Uganda Commercial Bank v Kigozi [2002] 1 EA 305.

The Court exercised its discretion to award interest at 17% per annum on the repair costs from the date of filing suit until payment in full, and at 6% per annum on general damages from the date of judgment until payment in full. Costs were awarded in accordance with section 27(2) of the Civil Procedure Act, Cap. 282.

The Defendants’ claim for a refund of USD 17,289.70, representing the deposit and prepaid rent, was rejected because it had not been pursued through a counterclaim.

c) Frustration and constitutional challenge

Although the Defendants raised frustration of the lease following the fire and challenged the constitutionality of the 2022 Act, the judgment did not expressly determine either matter. The decision should therefore not be cited as having conclusively resolved those questions.

HOLDING

Judgment was entered for the Plaintiff against the Defendants as follows:

A declaration that the Defendants breached the contract.
Payment of UGX 19,557,320 as the cost of repairs to the suit premises.
General damages of UGX 20,000,000.
Interest on the repair costs at 17% per annum from filing of the suit until payment in full.
Interest on general damages at 6% per annum from judgment until payment in full.
Costs of the suit.

Key takeaways

Tenants must obtain the insurance their lease requires. Failure is an independent breach and exposes them to repair costs even where the fire was not their fault.
Repair-cost clauses such as clause 24.3 will be enforced as written, and a landlord who repairs and documents its costs can recover them on demand.
Landlords seeking rent after a disaster must plead negligence with particulars and prove the tenant's fault. A tenant's fault cannot be assumed from the location of a fire.
Defendants who seek the return of deposits or prepaid rent must file a counterclaim.