Nile Breweries Limited (NBL) has been ordered by the Commercial division of the High court to pay more than Shs 322 million to Fuel Stick Uganda Limited after the company failed to prove allegations of fraud and forgery against a supplier and three of its former employees.
The court also awarded Fuel Stick Shs 45 million in general damages, plus interest. Fuel Stick sued Nile Breweries in 2022 for breach of contract, seeking recovery of Shs 322,848,000 arising from the supply of biofuel conditioner S19 to Nile Breweries’ Mbarara plant on March 16, March 23 and April 28, 2022.
The supplies were valued at Shs 100,890,000, Shs 121,068,000 and Shs 100,890,000 respectively, in fulfilment of purchase orders issued on March 4, March 12 and May 24, 2022.
Court heard that Nile Breweries issued goods received notes confirming delivery and undertook to pay within one month from the date of issuance of the tax invoices. However, the company later defaulted, citing alleged fraud by Fuel Stick and connivance by three of its staff; Michael Obwana, Julius Robert Odongo and Cosmas Wasswa, who were later dismissed.
In its defence and counterclaim, Nile Breweries denied the claim, insisting that Fuel Stick never supplied the goods and that the goods received notes and delivery notes were forged and fraudulently reproduced.
Nile Breweries, represented by Henry Agaba of M/s Meritas Advocates, told court that the alleged scheme had caused the company losses of Shs 769 million in 2020, Shs 1 billion in 2021 and Shs 342 million in 2022, bringing the total claimed loss to Shs 2.3 billion for payments allegedly made for fuel stick supplies that were never delivered.
The company further claimed in its written statement of defence that the supplied biofuel conditioner S19 was counterfeit, did not meet standards, and did not bear certification from the Uganda National Bureau of Standards (UNBS).
Nile Breweries alleged that investigations revealed a racket in which purchase orders for biofuel supplies would be generated and entered into its electronic procurement system for payment, even though the goods were never physically delivered.
Fuel Stick denied the allegations, describing claims of fraud, counterfeiting and dishonesty as unfounded. The company insisted the goods supplied were of good quality and that all documentation was authentic.
It further argued that Nile Breweries had never raised issues of forgery or fraud prior to the filing of the suit. Fuel Stick also denied any connivance, stating it was unaware of any scheme involving purchase orders for fuel that was never delivered.
At trial, Fuel Stick presented Sachin Joshi, the company’s operations consultant, as its witness. Nile Breweries called two witnesses; Moses Mgema, a risk manager at Tanzania Breweries Plc (a sister company), and Joseph Omondi, a senior controller with KK Security Limited, the firm responsible for security at the premises from December 2019 to April 2022.
In her ruling, Justice Patience Rubagumya found that Fuel Stick had indeed supplied Nile Breweries with the biofuel conditioner, relying on delivery notes that were duly signed and stamped by Nile Breweries, as well as goods received notes confirming receipt.
The judge further held that by signing and stamping the delivery notes and purchase orders, Nile Breweries’ security team accepted the goods. Court noted that the company had the opportunity to inspect the supplies and reject them if they were substandard, but did not.
Nile Breweries had sought Shs 2.3 billion in general, aggravated and exemplary damages, interest and costs. However, the court found the company in breach of contract for failing to pay Shs 322,848,000 within 120 days.
The court ordered Nile Breweries to pay the Shs 322,848,000 with interest at two per cent per month (equivalent to 36 per cent per annum) from the date of accrual until payment in full. Nile Breweries was also ordered to pay Shs 45 million in general damages, with interest at six per cent per month, arising from the loss suffered over three years of non-payment.
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