The Court of Appeal has upheld MTN Uganda Limited’s liability for unlawfully interfering with Ezee Money Uganda Limited’s contractual relations but reduced the damages payable to the payment services company from Shs2.3 billion to Shs300 million.
In a judgment delivered in Civil Appeal No. 66 of 2016, the court set aside findings that MTN had breached statutory competition provisions under the Uganda Communications Act, 2013, but maintained that the telecommunications company used unlawful means to disrupt Ezee Money’s business relationships.
The court reduced general damages from Shs800 million to Shs200 million and punitive damages from Shs1.5 billion to Shs100 million. Both awards will attract interest at the court rate from the date of the High Court judgment until payment in full.
The decision arose from a dispute over MTN’s refusal to connect Ezee Money’s payment platform to its network through Yo! Uganda Limited, a third-party aggregator, as well as allegations that MTN’s mobile money agent arrangements restricted competition and disrupted Ezee Money’s operations.
Ezee Money wanted to use short code 7711 on MTN’s network to facilitate its payment services through Yo! Uganda. However, MTN declined to provide the connection through the aggregator and instead required Ezee Money to negotiate commercial terms directly with it.
MTN also withdrew Ezee Money’s post-paid telecommunications services, citing the company’s failure to meet credit vetting requirements because it was a new business.
The dispute extended to MTN’s exclusivity agreements with mobile money agents, which Ezee Money said prevented the agents from serving competing platforms. Court records indicate that some agents who continued working with other operators were allegedly harassed, had their equipment confiscated and were temporarily detained.
Ezee Money sued MTN, accusing it of breaching statutory duties, causing loss by unlawful means and interfering with its contractual relations. The High Court Commercial Division ruled in Ezee Money’s favour in November 2015, prompting MTN to appeal against the findings and damages.
The appeal was heard by Justices of Appeal Geoffrey Kiryabwire, Jesse Byaruhanga Rugyema and John Mike Musisi, with Justice Kiryabwire delivering the lead judgment. The other two justices agreed with his reasoning and orders.
One of the principal questions was whether Ezee Money’s payment services qualified as “communication services” under the Uganda Communications Act, 2013, which would entitle it to protection under the law’s competition provisions.
MTN argued that Ezee Money was a payment services provider rather than a licensed communications operator and therefore could not rely on Section 53(1) of the Act, which prohibits operators from engaging in activities intended or likely to unfairly prevent, restrict or distort competition in businesses relating to communication services.
The court agreed, finding that the use of telecommunications networks to facilitate financial transactions did not automatically make a payment services company a provider of communication services.
Justice Kiryabwire noted that Ezee Money’s business involved facilitating money transfers and payments rather than disseminating or exchanging audio, visual or data content as defined by the law. The court also considered testimony by Ezee Money’s chief executive that the company did not provide communication services, was not licensed to do so and was not regulated by the Uganda Communications Commission.
The judges consequently set aside the High Court’s findings that MTN had breached Sections 53(1) and 56 of the Uganda Communications Act.
However, the ruling did not absolve MTN of liability for its conduct towards Ezee Money’s business partners.
The court upheld the finding that MTN had induced Yo! Uganda Limited to terminate its aggregation arrangement with Ezee Money. It also agreed with the High Court’s findings that agents who continued serving Ezee Money had faced harassment, confiscation of equipment and temporary detention.
MTN had argued that its exclusivity agreements with agents were lawful during the period in question, between October 2012 and February 2013, because restrictions introduced under the Bank of Uganda’s Mobile Money Guidelines came later.
The Court of Appeal distinguished the legality of the agreements from the methods used to enforce them. Justice Kiryabwire held that even if the exclusivity arrangements were not expressly prohibited by legislation at the time, that did not justify harassment, confiscation of property or physical restraint of agents.
The court found that unlawful interference with contractual relations was an independent common law claim that did not depend on Ezee Money establishing a breach of the statutory competition provisions.
“The means used to enforce them,” the judgment reasoned, were unlawful in their own right, regardless of whether the underlying agreements were lawful.
The judges therefore upheld MTN’s liability for wrongful interference with contractual relations despite setting aside the statutory breach findings.
In considering the damages, the court took into account evidence that the disruption had caused a 79 per cent decline in Ezee Money’s transactions, left 65 per cent of its service centres inactive, increased its operating costs and damaged its reputation as a newly established business.
The court found that these losses supported an award of general damages for unlawful interference with contractual relations.
However, it faulted the High Court for relying on internet financial reports about MTN’s performance that had been rejected as evidence when determining punitive damages. Justice Kiryabwire said material rejected by the court could not properly be used to calculate an award.
Although the judges found that punitive damages were justified to deter conduct involving harassment, confiscation of property and interference with contractual arrangements, they considered the original awards disproportionate to the proven harm.
The court accordingly reduced general damages to Shs200 million and punitive damages to Shs100 million.
MTN also challenged the suit on the ground that Ezee Money had failed to exhaust the complaint and appeal mechanisms provided under the Uganda Communications Act before going to court.
The Court of Appeal rejected that argument, finding that Ezee Money’s case included common law claims that could be pursued before the High Court under Article 139(1) of the Constitution. The judges acknowledged that the trial judge should have addressed the preliminary objection more clearly but concluded that failure to exhaust statutory remedies did not justify dismissing the entire suit.
The court also upheld the finding that MTN occupied a dominant position in the market. MTN had argued that its lawyers mistakenly admitted this position in a joint scheduling memorandum and that dominance should have been formally established by the Uganda Communications Commission.
However, the court found that the High Court was correct to hold MTN to the admission made during the pre-trial process.
The judges struck out MTN’s tenth ground of appeal, which broadly challenged the High Court’s evaluation of the evidence without identifying specific errors or the orders sought, as required by the Court of Appeal Rules.
In its final orders, the court dismissed MTN’s challenges concerning exhaustion of statutory remedies, market dominance and wrongful interference with contractual relations. It allowed the grounds challenging the application of the statutory competition provisions and partly allowed the challenge to damages.
Because the appeal had produced a mixed outcome, the court awarded MTN half of the taxed costs in both the appeal and the original High Court proceedings.
English 