The Court of Appeal has upheld a finding that Uganda Breweries Limited (UBL) unlawfully terminated its distributorship agreement with Seroy Airport Hotel Ltd and ordered the brewer to pay the company more than Shs1.59 billion in damages, interest and costs.
The unanimous decision was delivered by Justices Cheborion Barishaki, Esta Nambayo and Musa Ssekaana in Civil Appeal No. 001 of 2017, arising from a 2016 judgment of the High Court Commercial Division.
The dispute arose after UBL appointed Seroy Airport Hotel as its distributor for the Najjanankumbi area in March 2013. Although the initial arrangement was expected to run for three months, the parties continued doing business for another five months before UBL terminated the relationship on November 20, 2013.
Seroy sued UBL, arguing that the termination was unlawful because it was effected without reasonable notice. UBL, however, maintained that no substantive distributorship contract had been signed and that Seroy had failed to meet the required sales and stock targets.
The Court of Appeal rejected UBL’s argument that there was no binding contract, finding that the parties’ continued dealings after June 2013 had created a contractual relationship by conduct.
The court also relied on UBL’s own termination letter, titled “Notice of Revocation of Appointment and Termination of Distribution Agreement,” saying the wording confirmed that a distribution agreement existed between the parties.
The judges further held that UBL had breached the Contracts Act by terminating the agency with immediate effect without giving Seroy reasonable notice.
According to the judgment, Section 139 of the Contracts Act requires a party revoking or renouncing an agency to give reasonable notice and compensate the other party for any damage suffered. The court therefore upheld the finding that UBL’s November 20, 2013 termination was unlawful.
The Court of Appeal also upheld the Shs345 million awarded by the High Court as damages in lieu of notice. It found that although Seroy had not produced audited accounts, the evidence of its managing director on monthly turnover had not been rebutted, while the trial judge had already substantially discounted the figures claimed.
The appellate court further upheld the award of Shs19.4 million for salaries paid to an operations manager, accountant and security guard after the termination. It found that UBL delayed collecting its stock and conducting the promised reconciliation until June 2014, making it reasonably foreseeable that Seroy would retain staff to safeguard and account for UBL’s property.
The court also found that UBL was not justified in calling Seroy’s bank guarantee before reconciling the parties’ accounts. It awarded Shs20 million in general damages for the unjustified call on the guarantee.
The judges further faulted UBL for requiring Seroy to make additional investments, including acquiring land and vehicles and obtaining a bank guarantee, before abruptly terminating the relationship. The court awarded an additional Shs10 million for what it described as unexpected and capricious conduct.
In addition, the court awarded Shs63 million in special damages for the use of Seroy’s premises to store UBL’s goods for about nine months after the termination.
The court also ordered interest on Shs197.816 million, which it found had been wrongfully withheld from Seroy. The amount will attract interest at 10% per annum from November 20, 2013 until payment in full.
In its final orders, the Court of Appeal awarded Seroy Airport Hotel Shs1 million in nominal damages, Shs30 million in general damages under additional heads, Shs1.5 billion in general damages and Shs63 million in special damages.
The court further ordered interest on the Shs197.816 million at 10% per annum, as well as interest on the general damages at 6% per annum from the date of judgment until payment in full.
UBL was also ordered to meet the costs of the appeal and the proceedings in the lower court.
The Court consequently dismissed UBL’s appeal and allowed Seroy Airport Hotel’s cross-appeal, upholding the High Court judgment to the extent modified by the appellate court.
The judgment was delivered on August 26, 2026, by a three-member bench comprising Justices Cheborion Barishaki, Esta Nambayo and Musa Ssekaana.
