The Court of Appeal has upheld a finding that Uganda Breweries Limited (UBL) unlawfully terminated its distributorship arrangement with Seroy Airport Hotel Limited and has ordered the brewer to pay more than Shs1.59 billion in damages, interest and related awards.
The unanimous decision, delivered in Civil Appeal No. 001 of 2017 on August 26, 2026, rejected UBL’s appeal against an earlier High Court judgment while allowing Seroy Airport Hotel’s cross-appeal.
The case arose from a distributorship arrangement in which Seroy was appointed to distribute Uganda Breweries products in the Najjanankumbi area in 2013. The relationship began after UBL advertised for additional distributors and subsequently appointed Seroy by a letter dated March 12, 2013.
Although the initial arrangement was supposed to run as a three-month trial, the Court found that the parties continued doing business for another five months, effectively extending the contractual relationship through their conduct.
The Court said UBL’s continued dealings with Seroy after the initial trial period amounted to confirmation of the contractual relationship.
It further noted that UBL’s own termination letter was headed “Notice of Revocation of Appointment and Termination of Distribution Agreement”, which the Court regarded as a formal acknowledgement that a distribution agreement existed.
“One cannot terminate something that does not exist,” the judgment states, concluding that the letter confirmed the existence of a binding contractual relationship.
Court faults abrupt termination
The Court’s biggest finding was that UBL acted unlawfully when it terminated the distributorship with immediate effect on November 20, 2013 without giving reasonable notice.
The judges relied on the Contracts Act, which requires reasonable notice when an agency relationship is revoked or renounced.
The Court said the statutory notice requirement was particularly important in a commercial arrangement involving distribution of goods, substantial investments and bank-backed credit.
By terminating the relationship immediately, UBL deprived Seroy of the opportunity to wind down its operations, recover outstanding debts, manage its stock and mitigate its losses.
The Court consequently upheld the Shs345 million award made by the High Court as damages in lieu of reasonable notice.
The judges rejected UBL’s argument that the award was excessive, noting that although the original trial arrangement was for three months, the parties had continued operating for approximately eight months before termination.
The Court also held that loss of income during a reasonable notice period was a foreseeable consequence of abruptly terminating an ongoing commercial distributorship.
Brewer faulted over bank guarantee
The Court delivered another significant blow to UBL over its decision to call a bank guarantee shortly after terminating Seroy.
While acknowledging that bank guarantees are generally autonomous instruments enforceable on demand, the Court distinguished the relationship between a bank and the beneficiary from the separate contractual relationship between UBL and Seroy.
It found that, in this case, no reconciliation of accounts had been conducted before UBL called the guarantee, despite the termination letter contemplating a reconciliation to establish what either party owed the other.
The figures relied upon by UBL were also found to be unverified and disputed.
The Court held that UBL’s immediate termination and subsequent call on the guarantee formed part of a continuous course of conduct and that the brewer could not rely on its own unlawful conduct to justify the subsequent action.
The Court therefore awarded Seroy Shs20 million in general damages for the unjustified call on the bank guarantee.
Court says UBL pushed distributor into costly investments
The appellate court also found that UBL’s conduct was inconsistent and prejudicial because it required Seroy to make substantial investments to meet its distribution requirements before abruptly terminating the relationship.
The evidence showed that UBL required the distributor to have substantial working capital, expanded warehousing capacity, trucks, a spirits van and specific personnel.
The Court found that Seroy acted on those requirements in good faith and made substantial financial commitments in reliance on the continuation of the relationship.
It said UBL could not, on the one hand, demand major investments indicative of a continuing commercial relationship and, on the other, abruptly terminate that relationship without properly considering the consequences of those investments.
The Court consequently found UBL’s conduct amounted to a breach of contract and bad faith.
The Court also rejected UBL’s argument that investments in land and vehicles could not be attributed to Seroy because they were registered in the personal name of its managing director and majority shareholder, Herman Ssemakula.
It found that Ssemakula was the company’s directing mind and that the evidence demonstrated the investments were made for purposes of the company’s business.
Brewer ordered to compensate for nine months’ storage
The Court further found that Seroy was forced to keep UBL’s stock at its premises for approximately nine months after the termination.
Despite repeated requests for UBL to collect its goods, the stock was not removed until June 27, 2014.
The Court ruled that Seroy had no obligation to continue storing UBL’s property after termination and that maintaining the goods and providing security amounted to a benefit to UBL.
It awarded Shs63 million in special damages, calculated at Shs7 million per month for the nine-month storage period.
Shs197.8 million over-recovery
The Court also upheld the finding that UBL had recovered goods and money in excess of what was due.
Evidence showed that Seroy had goods worth more than Shs381 million when the business was closed, while UBL subsequently recovered approximately Shs464 million through the bank guarantee, after partial credits of about Shs175 million.
After accounting for payments made under a partial consent judgment, the Court found that Shs197,816,434 remained due to Seroy.
The appellate court ordered interest on this amount at 10% per annum until payment in full.
Shs1.5 billion general damages
In a major expansion of the High Court award, the Court of Appeal awarded Seroy Shs1.5 billion in general damages for the various losses arising from UBL’s conduct, including the consequences of the abrupt termination, failure to reconcile accounts, continued payment of staff salaries, investments in trucks and other infrastructure, and related losses.
The Court specifically found that the High Court’s damages awards had been inadequate and that Seroy had proved significant financial commitments made specifically to satisfy UBL’s requirements.
The appellate court also accepted evidence that Seroy’s business collapsed following the termination and the calling of the guarantee, resulting in the forced sale of land valued at approximately Shs3.9 billion that had been pledged as security for the loan.
It further found evidence of claimed lost expected earnings of Shs13.8 billion, although the final damages award was not based on granting that entire amount.
Final award
In its final orders, the Court awarded Seroy:
- Shs1 million in nominal damages;
- Shs30 million in general damages under specific heads;
- Shs1.5 billion in general damages;
- Shs63 million in special damages;
- Interest on Shs197,816,434 at 10% per annum;
- Interest on the general damages at 6% per annum from the date of judgment until payment in full; and
- Costs of the appeal and the lower court proceedings.
The Court formally concluded that UBL’s appeal failed while Seroy Airport Hotel’s cross-appeal succeeded, with Justices Esta Nambayo and Musa Ssekaana concurring with the lead judgment.
The ruling leaves Uganda Breweries facing substantially increased financial liability over a distributorship relationship that began in 2013 and ended abruptly later that year.
