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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT
KAMPALA
(COMMERCIAL COURT DIVISION)
HCT-00-CC-CS-0576 OF
2004
1. DR. JAMES KASHUGYERA TUMWINE]
2. DR. LYNNETTE
TUMWINE ] ::::::::::: PLAINTIFFS
VERSUS
1. SR. WILLIE MAGARA ]
2. SR. MARGARET MAGOBA]
:::::::::::::::::::::::: DEFENDANTS
BEFORE: THE
HONOURABLE MR. JUSTICE YOROKAMU BAMWINE
J U D G M E N
T:
The Plaintiffs, husband and wife, sued the Defendants for
recovery of money had and received in the sum of Shs.50,000,000-. The money
was
consideration in a failed sale of land transaction.
The particular facts
giving rise to a question are always important for the easy grasp of that
question. From the pleadings, by a
land purchase agreement executed on 6/8/2004
between the parties, the Plaintiffs were to purchase property comprised in LRV
2004
Folio 13 3A Ojera Close at Entebbe, Uganda, belonging to the Defendants.
Without prior arrangement with the Defendants themselves,
the Plaintiffs had
before the execution of the said agreement paid a sum of Shs.50m to an Estate
Agent, M/S Kasulu Property Masters
(E.A) Ltd, herein after called the Estate
Agent. In that Sale Agreement, the Sellers acknowledged that the buyers had
made a deposit
of the full amount or the purchase price with the agent but that
the sellers would, upon receipt of full payment relinquish possession
and all
their interests in the said land. The sellers were also to execute transfer
forms in favour of the buyers and on receipt
of the full payment from the agent
immediately hand them over to the buyer. From the pleadings and evidence,
completion of the transaction
depended on the sellers receiving the purchase
price. Before the parties dream could be realized, the agent disappeared with
the
money. To-date, the sellers have not received the payment and the buyers
have not taken possession of the property. The buyers
have clearly called off
the deal. Through this action, they seek recovery of the purchase price, not
from the agent to whom they
paid it but from the sellers to whom the payment was
intended. Although the Defendants had indicated that they would raise the issue
of the plaint disclosing no cause of action against them as a preliminary point
of law, they did not do so. Hence the determination
of the issues on
merits.
At the scheduling conference, the parties agreed that:
1. The
Defendants had property for sale.
2. The Plaintiffs became interested in the
property.
3. The property, the subject matter of the sale, was advertised in the New Vision newspaper by Kasulu Property Masters on behalf of the Defendants.
4. The Plaintiffs approached Kasulu Property Masters, were shown the suit property, were satisfied with it, negotiated the price with the said agents, paid for it and were issued with receipts.
5. The payment was effected before execution of the sale agreement between the Plaintiffs and the Defendants.
6. A sale Agreement, P. Exh. 1,
was executed between the parties to this suit.
7. The Defendants have not
transferred the suit property to the Plaintiffs.
The sole issue for
determination is: whether the Plaintiffs are entitled to the remedies
sought.
The plaint appears to have been filed in a hurry to the
extent of counsel forgetting to sign and date it. As no objection was raised
to
it, I have disregarded the laspse in the spirit of Article 126 (2) (e) of the
constitution which mandates this Court to administer
substantive justice without
undue regard to technicalities.
At the hearing, only the first Plaintiff
testified. He is a Medical Doctor, resident of Bugolobi. He sued the
Defendants because
he paid the money to their agent. He did so in response to
an advertisement that appeared it the press. The agents showed them
the house
and determined the price with them. They paid the purchase price in three
installments of Shs.5,000,000-, Shs.40,000,000-
and Shs.5,000,000- on 30/7/2004,
3/8/2004 and 4/8/2004 respectively. The agents issued them receipts indicating
that it was payment
for Entebbe House at Alex Ojera Close Plot 3A at
Shs.50,000,000-. Then on 6/8/2004 they met with the sellers and executed the
Sale
Agreement. They were to have got possession by 10/8/2004 but to-date they
have not. The reason they received from the sellers was
that they had not
received the purchase price. According to him, they did not deem it necessary
to sue the agent because he was
not their agent but the sellers’
agent.
The evidence for the Defendants was given by Sr. Magoba, the
second Defendant. According to her, she heard announcements on radio
and other
media involving an agency that was buying and selling land. They had a house in
Entebbe which they put on the market.
The agents said they would earn 10%
commission on the transaction. Anything between Shs.50 – 55m was
acceptable to them.
Later they received communication from the Agent that a
potential buyer had been found. They went to the Agent’s office on
6/8/2004 and an agreement was written for them. In the course of the meeting,
the issue of money took centre stage. One Kusasira
who was assisting them on
behalf of the Agent assured them that the money paid in by the buyers had been
banked on the Agent’s
Account. On that understanding they executed a sale
agreement in the terms already explained. She could not allow the Plaintiffs
to
take possession because she has never been paid. She then received summons in
connection with this suit. The detailed account
of each witness is contained in
the proceedings of the day.
From the evidence, it was the understanding
of the parties that if the sellers did not get the payment, they would not
relinquish
possession of the property and would not effect the transfer. It
made sense because since the money had been deposited in the sellers’
absence, this was their only chance of verifying the alleged payment by the
buyers to the sellers. As fate would have it, the Agent
disappeared soon after.
I would appreciate this to be the reason for the buyers not pursuing the
enforcement of the contract through
an action of specific performance but to
recover the amount as money had and received.
Money which is paid to one
person which rightfully belongs to another, as where money is paid by A to B on
a consideration which has
wholly failed, is said to be money had and received by
B to the use of A. It is recoverable by action by A. The paying of A to
B,
according to the learned author of A Concise Law Dictionary by P.G. Osborn,
5th Edn at p.212, becomes a quasi - contract, an obligation not
created by, but similar to that created by contract, and is independent of the
consent
of the person bound. The author gives the basis of the action for money
had and received as being rooted in a quasi – contract
on the footing of
an implied promise to repay. The other view is that in the action for money had
and received liability is based
on unjust benefit or enrichment; i.e. the action
is applicable whenever the Defendant has received money which, in justice and
equity,
belongs to the Plaintiff under circumstances which render the receipt of
it by the Defendant a receipt to the use of the Plaintiff
(at
p.262).
Whichever way it is looked at, there must be evidence of the payment
sought to be recovered. In the instant case, the payment was
not made to the
Defendants. It is said to have been made to Kasulu Property Masters. I say
‘said’ because Kasulu Property
Masters is not a party t this case.
While the Plaintiffs may have the confidence that they paid money to the Agent,
that confidence
cannot be wholly shared by the Defendants who were not present
when the deposits were being received. No official of Kasulu Property
Masters
appeared as a witness to confirm or deny receipt of funds by them. But for
purposes of this case, it is safe to assume,
in the absence of any evidence to
the contrary, that the money was received and retained by the Agent now said to
be impecunious.
In view of the two conflicting positions in the Sale Agreement,
i.e. the sellers acknowledging that payment had been effected on
the Agent while
at the same time they withheld the transfer of the property pending receipt of
the said payment, it cannot be accurately
said that this was a typical act of
ratification in the law of agency. In ratification, the agent’s act is
adopted unreservedly.
In the instant case, it was adopted with reservation, as
if both parties knew or had cause to suspect that the Agent could after
all be
conman he turned out to be. In a typical case of ratification, the parties
would have concluded the deal, including the taking
of possession, independently
of the receipt of the money by the sellers from the Agent. I’m therefore
satisfied that the issue
of money took a centre stage in the negotiations.
Hence the agreement that the sale would be concluded upon the sellers receiving
full payment.
I now turn to the law that governs transactions of this
nature, the Law of Agency.
An agent is a person employed to act on behalf
of another. An act of an agent, done within the scope of his authority, binds
his
principal. Once an agent has brought his principal into contractual
relations with another, he drops out, and his principal sues
or is sued on the
contract. There are many types of agents. In the instant case, we are
concerned with an Estate Agent.
G.H.L. Fridman in his book, The Law of
Agency, 7th Edn at p.48, throws light on the obligations of Estate
Agents. According to the author, Estate Agents are in a very odd situation,
so
far as concerns the general law of principal and agent. Unless given express
authority in such respect, an estate agent has no
authority to make a binding
contract of sale between his client and a third party. Indeed no contract of
sale was made between the
Plaintiffs and the Agent in this case. The parties
had to meet at the Agents offices to conclude the contract. Whereas the last
payment was made by the Plaintiffs on 4/8/2004, the meeting between sellers and
buyers did not take place until 6/8/2004.
The same learned author,
Fridman, comments on the question that has caused much more judicial debate in
England than in our East African
region. This is whether a estate agent has
implied authority to receive a deposit from a prospective purchaser of the house
or property
the agent has been employed to sell on behalf of the owner. It is
the same issue in the instant case where the Plaintiffs have not
shown that the
Agent had express authority from the sellers to receive payment on their
behalf.
There is a long history of such debate in England where the
institution of Estate Agents has taken much more root than in Uganda.
In
Ryan –Vs- Pilkington [1959] All ER 689, the Court of Appeal held
that an estate agent was impliedly authorized to accept a deposit from a
prospective purchaser. The owner
of the property was held liable. A few years
later in Burt –Vs- Claude Cousins & Co. [1971] 2 QB 426, the
same Court of Appeal had a similar view over a similar deposit made to the
agent. There was, though, a dissenting view among
the Judges. Shortly
thereafter, in Barrington
-Vs- Lee [1972] 1 QB 326, the same
Court of Appeal, doubting the fairness in the Burt case, supra, but
without over ruling it, held that in some what similar situation, the owner was
not liable to the third party. But this
was because the facts showed that the
Agent received the deposit as a stakeholder and not as an agent. A stakeholder,
to appreciate
the point further, is a person with whom money is deposited
pending the decision of a bet or wager; or one who holds money or property
which
is claimed by rival claimants but in which he himself claims no
interest.
The House of Lords finally resolved this conflict in Sorrell
–Vs- Finch [1977] AC 728.
The facts in that case are almost on
all fours with the ones in the instant case. I will set them out in greater
detail than in the
other cases I have already referred to because of their
relevancy to the issue now before Court. The Appellant instructed one L,
who
had set up business as an estate agent, to find a purchaser for his house. L,
unknown to the Appellant, was an undischarged
bankrupt. The house was to be
offered for negotiations at pounds 5,500. Nothing was said about the deposit
being taken by L. Five
prospective purchasers, apart from the Respondents, paid
deposits to L. The Respondents themselves paid 10% deposit of pounds 550
to L
who issued 2 acknowledgment receipts to them. Both documents contained the
words, ‘subject to contract.’ L disappeared.
The Respondents then
visited the Appellants who informed them that many other prospective purchasers
had made similar deposits of
money with L. The Respondents sued the Appellants
for recovery of pounds 550 as money had and received by the Appellant. The
trial
Court followed Burt –Vs- Claude, supra, and decided in favour
of the Respondents. On Appeal, the Court of Appeal, by a majority dismissed the
Appeal. On further
appeal to the House of Lords, the Court held, and this is
very significant in as far as the instant case is concerned, that it was
not in
accordance with the first principles in the branch of the law concerned to hold
that the estate agent in such circumstances
as the present was athorised to
receive on the vendor’s behalf a pre-contract deposit in the absence of
express or implied
authority so to do, and in neither authority was such
authority herein given; nor did the prospective vendor’s knowledge that
a
deposit had been received of itself impose any liability upon him to repay
it.
I agree with the principle stated in that case. It makes sense. The
prospective buyer can at that stage, before the contract is
concluded, get
another property and abandon the earlier deal. He will be entitled to recover
his money from the Agent. On the other
hand, until the contract of sale is
concluded, the prospective seller would have no access to such money. It is not
yet his money.
He could even get a better offer and sell the property without
the Agent’s knowledge. He would not be in any breach of contract
with the
prospective buyer or the Agent since no contract would have been concluded
anyway. Nearer home, in Tanganyika Farmers Association Ltd –Vs-
Unyamwezi Development Corporation Ltd [1970] EA 620, money was paid by the
Defendants to the Plaintiff’s agents who subsequently disappeared. The
Plaintiffs successfully claimed
from the Defendants. In other words, the
Defendants had to pay twice, in respect of the same transaction. The Court
approved the
words of the trial Judge when he said:
“................... I find they (the agents) had no authority to receive payment on behalf of the Plaintiffs. There is no evidence of it and no reason to assume it. Such authority is not necessary to the business of brokerage and was not necessary to this particular transaction. There is no evidence or precedent of any relevant customary authority .......... there is no ostensible authority.”
I’m persuaded by the
above reasoning. Relating it to the instant case, in the absence of any
authority from the sellers, express
or implied, which the buyers can hold them
against, that is, that the sellers had given the Agent instructions to receive
the money
from the prospective buyer, only themselves know why they paid such a
hefty sum of money to a person who was not in position to conclude
a sale
agreement with them on behalf of the sellers. They could have sought legal
advice at that stage as to the effect of such
payment to an Agent, or they could
have sought audience with the sellers to confirm to them whether the Agent had
their blessing
to receive payment on their behalf. They did neither of the
above. In my view, it is immaterial that when they eventually met,
the sellers
acknowledged that payment had been passed on to the agent. The harm had already
been done. The acknowledgment was made,
as lawyers say, without any
consideration at all. From the evidence of PW1 and DW1, the only witnesses in
this case, the sellers
made the acknowledgment in the hope that the Agent was
indeed keeping the money. The sellers were not present when the money was
allegedly being deposited with the Agent. None of it has been released to them.
The sellers are not, in my view, out of order to
doubt the fact of the payment
itself. I would therefore hesitate to hold that they, the sellers, are bound by
the Agent’s
unilateral decision to receive the money from the buyers. It
is the buyers who entrusted it to the Agent and it is only them who
can recover
it from the said Agent.
In these circumstances, I’m in agreement
with counsel for the Defendants that the Plaintiffs have no sustainable claim
against
the Defendants. Accordingly, they are not entitled to the only remedy
sought herein, namely, the refund to them of Shs.50m by the
Defendants. I
would find no merit in the suit and dismiss it.
As regards costs, the usual
result is that costs follow the event. However, this rule is subject to the
Court’s discretion
so that the winning party may not be awarded his costs.
Given the circumstances of this case and the peculiarity of the issue between
the parties, fairness dictates that each party be ordered to bear its own costs.
I order so.
Yorokamu Bamwine
J U D G E
27/06/2005
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