Court of Appeal Cuts MTN’s Damages to Ezee Money by Shs2 Billion

MTN Uganda Limited has secured a major legal reprieve after the Court of Appeal reduced damages awarded to Ezee Money Uganda Limited from Shs2.3 billion to Shs300 million in a long-running dispute over alleged business interference and competition practices.

In its judgment in Civil Appeal No. 66 of 2016, a panel comprising Justices Geoffrey Kiryabwire, Jesse Byaruhanga Rugyema and John Mike Musisi set aside findings that MTN had breached statutory duties under Sections 53(1) and 56 of the Uganda Communications Act, 2013.

However, the court upheld MTN’s liability for wrongful interference with contractual relations under common law, meaning the telecommunications company was not entirely cleared of wrongdoing.

The decision cuts the original damages award by Shs2 billion, or approximately 87 per cent.

In November 2015, the High Court’s Commercial Division, presided over by Justice Henry Peter Adonyo, awarded Ezee Money Shs800 million in general damages and Shs1.5 billion in punitive damages.

The Court of Appeal reduced general damages to Shs200 million and punitive damages to Shs100 million. Both awards will attract interest at the court rate from the date of the High Court judgment until payment in full.

In the lead judgment, Justice Kiryabwire held that Ezee Money’s business of facilitating financial transactions did not qualify as the provision of “communication services” under the Uganda Communications Act.

Ezee Money operated a payment platform that enabled users to transfer money and pay bills using telecommunications infrastructure.

The company had sought access to MTN’s network to operate its platform through short code 7711, using 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 had exclusivity agreements with its mobile money agents restricting them from serving competing platforms.

Ezee Money argued that MTN’s actions violated statutory competition protections and damaged its business.

However, Justice Kiryabwire reasoned that using telecommunications infrastructure did not automatically turn a payments business into a provider of communication services.

He also cited testimony from Ezee Money’s chief executive, who acknowledged that the company did not provide communication services, was not licensed to offer them and was not regulated by the Uganda Communications Commission.

The court consequently overturned the findings that MTN owed Ezee Money a statutory duty under Section 53(1) and had breached the relevant provisions of the Act.

Despite overturning the statutory findings, the appellate court upheld a separate finding that MTN had unlawfully interfered with Ezee Money’s contractual relations.

The court found that evidence showed MTN had induced Yo! Uganda Limited to terminate its aggregation arrangement with Ezee Money.

Justice Kiryabwire also upheld findings that agents who continued serving Ezee Money had faced harassment, confiscation of their equipment and, in some cases, temporary detention.

He held that the conduct went beyond lawful commercial enforcement of contractual terms.

Although the exclusivity agreements were not expressly prohibited by legislation during the relevant period, the judge reasoned that the methods used to enforce them could independently amount to unlawful interference with contractual relations.

The court therefore maintained MTN’s common-law liability while overturning the findings of statutory breaches.

The Court of Appeal also found that the original damages awards were disproportionate to the harm established by the evidence.

Justice Kiryabwire noted that the High Court had improperly relied on internet financial reports about MTN’s financial performance that had been rejected as evidence.

He held that material rejected by the court could not properly form the basis for calculating damages.