The Court of Appeal has substantially reduced damages awarded against MTN Uganda in a long-running legal battle with mobile money company Ezee Money Uganda Limited, while upholding a finding that the telecom giant unlawfully interfered with its rival’s contractual relationships.
In a judgment delivered in Civil Appeal No. 66 of 2016, the appellate court reduced the High Court’s award of Shs800 million in general damages and Shs1.5 billion in punitive damages to Shs200 million and Shs100 million, respectively.
The decision cuts MTN Uganda’s damages liability from Shs2.3 billion to Shs300 million, excluding interest, after the court rejected key findings that the telecom company had breached statutory competition obligations under the Uganda Communications Act, 2013.
However, the court upheld the finding that MTN was liable for wrongful interference with contractual relations under common law, citing evidence that it had induced an aggregator to terminate its commercial arrangement with Ezee Money and that mobile money agents faced harassment and confiscation of their equipment.
The judgment was delivered by Justice Geoffrey Kiryabwire, with Justices Jesse Byaruhanga Rugyema and John Mike Musisi agreeing with his reasoning and orders.
Court rejects Ezee Money’s claim under communications law
At the centre of the appeal was whether Ezee Money, a company providing payment solutions and mobile money services, qualified as a provider of “communication services” under the Uganda Communications Act, 2013.
Ezee Money had accused MTN of using its dominant position in the telecommunications market to restrict competition and frustrate its entry into the mobile money business.
According to the court record, Ezee Money needed access to MTN’s telecommunications network to operate its payment platform through short code 7711, which was to be provisioned through third-party aggregator Yo! Uganda Limited.
MTN declined to connect Ezee Money through the aggregator, instead requiring the company to negotiate commercial terms directly with it. MTN also withdrew Ezee Money’s post-paid telecommunications services, citing failure to meet its credit vetting requirements as a new company.
Ezee Money argued that MTN’s conduct breached Sections 53(1) and 56 of the Uganda Communications Act, which deal with competition and related obligations in the communications sector.
But the Court of Appeal found that Ezee Money’s business was fundamentally different from the provision of communication services.
Justice Kiryabwire observed that although Ezee Money relied on mobile telephone networks to operate its platform, that dependence did not transform its financial transactions business into a communications service.
“The Respondent is not in the business of disseminating or interchanging audio, visual, or data content,” the judge held in substance, distinguishing the facilitation of financial transactions from the provision of communications services.
The court also pointed to testimony by Ezee Money’s chief executive, who acknowledged during cross-examination that the company did not provide communication services, was not licensed to do so and was not regulated by the Uganda Communications Commission (UCC).
The judge ruled that the protections under Section 53 were intended for participants in the communications services sector and could not be extended to an unlicensed entity whose business did not fall within the statutory definition.
Consequently, the appellate court set aside the High Court’s findings that MTN had breached Sections 53(1) and 56 of the Act.
MTN held liable over alleged harassment of mobile money agents
Despite rejecting Ezee Money’s statutory competition claims, the court found that MTN remained liable for wrongful interference with contractual relations.
The dispute arose partly from exclusivity arrangements between MTN and its mobile money agents, which Ezee Money said prevented the agents from serving competing platforms.
MTN argued that the exclusivity agreements were commercially justified because it had invested in branding and training its agents. It also maintained that the restrictions were not expressly prohibited during the period in question, between October 2012 and February 2013, before the Bank of Uganda’s Mobile Money Guidelines of 2013 introduced restrictions on exclusivity.
Ezee Money, however, alleged that the enforcement of the arrangements went beyond ordinary commercial practice.
Its case included allegations that agents who continued working with competing operators were harassed, had their equipment confiscated and were, in some instances, temporarily detained.
The company also argued that Yo! Uganda Limited was induced to terminate its aggregation arrangement with Ezee Money because of concerns about losing MTN as a client.
The Court of Appeal found that the evidence established that MTN had induced Yo! Uganda Limited to terminate its arrangement with Ezee Money. It also upheld the trial judge’s findings concerning the harassment of agents and confiscation of their equipment.
The court distinguished between the legality of the exclusivity agreements themselves and the methods allegedly used to enforce them.
It reasoned that even if the agreements were not expressly prohibited by legislation at the time, unlawful conduct used to enforce them could still give rise to liability.
The judge stressed that wrongful interference with contractual relations did not require the underlying agreement to be unlawful; rather, the means used to interfere had to be unlawful.
The court therefore upheld MTN’s liability under common law, notwithstanding its rejection of the statutory competition claims.
Court says Shs2.3 billion award was excessive
The appellate court also reviewed the damages awarded by the High Court, finding that while Ezee Money had suffered substantial harm, the original amounts were excessive.
Ezee Money had presented evidence that the disruption caused a 79% drop in transactions, rendered 65% of its service centres inactive, increased its operating costs and damaged its reputation as a new business.
Justice Kiryabwire found that this evidence supported an award of general damages for the wrongful interference with contractual relations, even though the claim based on breach of statutory duty could not stand.
The court also rejected MTN’s argument that punitive damages should not have been awarded because Ezee Money had pleaded for aggravated and exemplary damages instead.
Relying on the decision in Uganda Revenue Authority v Wanume David Kitamirike, the judge held that exemplary and punitive damages were synonymous, making the objection a question of terminology rather than substance.
However, the court criticised the trial judge’s reliance on internet financial reports concerning MTN’s financial performance that had been rejected as evidence.
Justice Kiryabwire held that evidence formally rejected by a court could not properly form the basis for assessing damages.
He further found that the original awards were disproportionate to the proven harm, particularly after the statutory competition claims had been dismissed and in the absence of detailed financial evidence supporting the amounts awarded.
The court consequently reduced general damages from Shs800 million to Shs200 million and punitive damages from Shs1.5 billion to Shs100 million.
Interest on both awards will run at the court rate from the date of the High Court judgment until payment in full.
MTN loses part of its appeal
The Court of Appeal dismissed MTN’s challenges to the finding of liability for wrongful interference with contractual relations and to the finding that it had admitted its dominant position in the market.
On the question of dominance, the court noted that MTN had acknowledged its dominant position in a joint scheduling memorandum. Although the company later argued that the admission had been made through a mistake by its lawyers, the appellate court held that the trial judge was correct to treat the agreed position as binding in the proceedings.
The court nevertheless ruled that the finding of dominance did not restore Ezee Money’s statutory claim because the company’s activities fell outside the definition of communication services under the Act.
MTN succeeded on the grounds challenging the application of the statutory competition provisions, while its challenge to the damages awards succeeded only to the extent that the amounts were reduced.
The court also struck out MTN’s general ground alleging that the trial judge had failed to properly evaluate the evidence, finding that it was too vague and did not identify the specific findings being challenged.
Given the mixed outcome, the court awarded MTN half of the taxed costs of the appeal and the High Court trial.
The ruling leaves MTN facing a Shs300 million damages award, plus interest, over the surviving common law claim, while overturning the findings that it breached the competition-related provisions of the Uganda Communications Act, 2013.
