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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0954 OF 2004
ESTHER SEMPEBWA :::::::::::::::::::::::::
PLAINTIFF
VERSUS
THE NON PERFORMING ASSETS
RECOVERY TRUST
:::::::::::::::::: DEFENDANT
BEFORE: THE HONOURABLE
MR. JUSTICE YOROKAMU BAMWINE
J U D G M E N
T:
The plaintiff claim against the defendant is for a declaration
that the defendant breached the contract it made with her; special
and general
damages for misrepresentation; an order of specific performance; interest and
costs of the suit.
From the evidence, the defendant advertised property
described as Block 194 Plots 44 and 45 land at Kungu for sale. The advert
appeared
in Monitor Newspaper. The property was described to have on it a four
bed room house with servants quarters and a coffee/banana
plantation all on one
acre. On the basis of that advert, the plaintiff made a search in the Land
Registry. She was satisfied about
the existence of the property and put in her
bid accordingly. The bid was successful. The defendant then handed over to her
the
certificate of Title in respect of Plot 45. To-date she is yet to get the
one for Plot 44.
After the purchase, the plaintiff discovered that the
four bed-roomed house described in the advert was out side Plots 44 and 45.
It
is on Plot 117 which she had not bought. She allegedly bought that one as well
from the owner. She now wants to recover Shs.26m
being the alleged cost of that
additional property.
The defendant accepts that the bit about the four
bed-roomed house on the advertised property was a misrepresentation but an
innocent
one. It disputes the alleged purchase of Plot 117 by the
plaintiff.
At the hearing, the parties agreed that:
1. The sale of
land constituted a contract between the plaintiff and the defendant.
2. The
house was found on Plot 117, not 44 or 45 as advertised.
The following
issues are for determination:
1. Whether the defendant’s conduct in
failing or refusing to hand over title for Plot 44 amounts to breach of
contract.
2. Whether the improper description of the property in the advert
amounts to a misrepresentation.
3. Whether the plaintiff had an obligation
to make proper inquiries regarding the land before purchase.
4. Remedies, if
any.
Counsel:
Mr. Muwanga Sebina for the plaintiff.
Mr.
Peter Nkurunziza for the defendant.
Both counsel agreed to file written
submissions, counsel for the plaintiff by 3/5/2006, that of the defendant by
17/5/2006 and any
reply by plaintiff’s counsel by 24/5/2006. Learned
counsel for the plaintiff defaulted. This judgment is therefore without
his
in-put by way of submissions.
As to whether the defendant’s
conduct in failing or refusing to hand over title to Plot 44 amounts to breach
of contract, it
is an agreed fact that the sale of Plot 44 constituted a
contract. The plaintiff gave evidence of completing the purchase formalities
on
her part. She went to Ministry of Lands to make a search and she was satisfied
that the property had indeed been mortgaged to
UCB. It has been argued by the
defendant that the plaintiff did not request to see the Duplicate Certificate of
Title from the defendant
and only responded to the advertisement. That there is
no evidence to show that the availability of the duplicate certificate of
title
was a term and condition of the sale.
I have considered this argument. It is
unfortunate that the plaintiff’s counsel has not addressed me on it as
well. Be that
as it may, the plaintiff was dealing with registered property.
It was so advertised and when she went to the Land Office for a search,
she was
able to ascertain the registration and the fact that it had been mortgaged. The
mortgage transaction itself presupposed
the depositing of the certificate
(duplicate) of title with the mortgagee, Uganda Commercial Bank. When the right
under that transaction
was assigned to the defendant, the assumption is that the
duplicate certificate of title was or would equally be conveyed to the
defendant. By the time the property was put up for sale, the defendant ought to
have ascertained or was under duty to ascertain
the whereabouts of the duplicate
certificate. It is true that the Registration of Titles Act provides for the
Registrar to issue
a Special Certificate of Title where the duplicate cannot be
found or is destroyed or obliterated. The law therefore recognizes
that the
duplicate certificate may not be available so that in such cases a Special one
may issue. However, in the situation such
as the one described by the
plaintiff, in the absence of any word from the defendant prior to the sale that
the duplicate certificate
of title in respect of Plot 44 was unavailable, this
being registered land, the plaintiff was entitled to assume its availability.
It is immaterial that she did not ask to see it first before submitting the bid.
The existence of the same was in my judgment an
implied term of the contract.
As Lord Wright observed in LUXOR –VS- COOPER [1941] 1 ALL. ER
33:
“......... there may be cases where obviously some term must be implied if the intention of the parties is not to be defeated, some term of which it can be predicated that ‘it goes without saying’, some term not expressed, but necessary, to give the transaction such business efficacy as the parties have intended ....... The implication must arise inevitably to give effect to the intention of the parties.”
The
concept of the ‘officious by stander’ is not a new one. It was
introduced by MacKinnon L.J. in Shirlaw –Vs- Southern Foundries
[1939] 2 ALL. ER 113 when he said (about Courts implying a term):
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying. Thus, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common: ‘Oh, of course!’ At least it is true, I think, that if a term were never implied by a judge unless it could pass that test, he could not be held to be wrong.”
I
agree.
This Court is of course cutely aware that it must be very cautious
in its approach to implying additional terms into the contract
before it.
However, from the circumstances as explained by the parties, it is only the
defendant who was better placed to advise
the plaintiff on the absence of the
certificate of title and leave her to decide whether or not to go ahead with the
bid. The defendant
breached that duty of disclosure. In the absence of any
express provision as to the time within which the duplicate certificate
of title
would be availed to her, the presumption is that it had to be done within a
reasonable time. The advert appeared in the
Monitor Newspaper of
24th February, 2003. Soon thereafter the parties concluded the deal.
Up to the time when the suit was filed on 2/12/2004, close to 2
years after the
sale, the defendant had not provided the duplicate certificate of title. The
notice to issue a special certificate
of title was not filed till
19th December, 2005 and as I write the judgment, she has not got it.
In all these circumstances, I’m unable to accept the defendant’s
argument that there has been no failure or refusal by the defendant to deliver
the certificate of Title to the plaintiff. A delay
of over three years cannot
by any standard be said to be a reasonable one.
The Law divides terms
into ‘conditions’ and ‘warranties’. Whether a term is a
condition or a warranty becomes
important if, like in the instant case,
something goes wrong so that there is a breach of the contract. In the
circumstances of
this case, the implied term as to the existence of the
duplicate certificate of title was a warranty, a less vital term which, if
broken, the injured party, will still have to go on with the contract, Like the
plaintiff has done in this case, but may be compensated
for that breach by an
award of damages.
For the reasons I have advanced above, I would answer
the first issue in the affirmative and I do so.
As to whether the
improper description of the property in the advert amounts to a
misrepresentation it is trite that a representation
is not a term, but a
statement of fact made by one party, to the other, during their preliminary
negotiations, which was intended
to induce the other party, to enter into the
contract and which did so induce the other party, to enter into that contract.
A misrepresentation
is therefore a representation which is false.
Misrepresentation manifests itself in three shapes: it may be fraudulent,
negligent
or innocent.
It is conceded by the defendant that the advert
which described the land as having a four bed room house and servants quarters
was
a statement of fact and was intended to attract purchasers including the
plaintiff who did act on it. The plaintiff appearing as
PW1 said that she was
attracted by the advert in the form it was. In view of the concession that this
amounted to a misrepresentation,
I have no reason to decide
otherwise.
The second issue is therefore also answered in the
affirmative.
As to whether the plaintiff had an obligation to make proper
inquiries regarding the land before purchase, I think this goes without
saying.
Where the property is developed, a purchaser of such land would be expected to
make proper enquiries, especially as regards
the boundaries. In Prajapat
–Vs- Ashok Cotton Co. Ltd [1964] EA 309 a case gratefully drawn to
my attention by counsel for the defendant, the Court cited with approval dicta
in Terrene Ltd –Vs- Nelso [1937] 3 All E.R. 739:
“In the ordinary case (of a sale of real estates) a purchaser has to go for information from the vendor but bearing in mind the principle of caveat emptor, he is bound to make proper inquiries for himself ...............”
I agree.
In a country like
ours characterized by fake certificates of title or prospects of ‘buying
air’, it is necessary and actually
incumbent upon the prospective buyer to
make his/her own inquiries, for example by arranging a survey, and generally
heed the maxim
caveat emptor – ‘let the buyer beware.’
PW1 testified that she never inspected the site of Plots 44 and 45 and
did not know where the property was by the time she concluded
the deal with the
defendant. In my judgment she earns no credit for that. Since the property was
developed and being occupied by
people, if she had taken the bother to inspect
it before concluding the deal, she would, in my view, have discovered at the
preliminary
stage of the negotiations the fact that the advert was not accurate
about the house and servants quarters being on the advertised
property. I would
answer the 3rd issue in the affirmative and I do so.
As to the
remedies, if any, she has first and foremost, claimed special damages of
Shs.26m. This claim is founded on her averment
that having failed to find the
house on Plot 45 she was forced to buy Plot 117 on which the house is. She
stated in her evidence
that she had paid Shs.25m for the suit property. By
implication, this was the fair value of the property if the description of it
in
the advert had been accurate. As it has now turned out, it was not
accurate.
The defendant pleaded in its written statement of defence and
gave evidence to that effect through its Legal Officer, DW1 Kwikiriza
that it
did not knowingly misrepresent to the plaintiff that the house was on Plot 44
and 45; that it was labouring under an innocent
mistake as to the facts arising
out a Valuation Report, D. Exh. 1. I accept that defence. However, the mere
acceptance of it itself
does not wash away the sin. Through that innocent
misrepresentation, the plaintiff suffered a loss. Neither party has given me
a
report as to how much the property was worth without the component of the house
and the servants quarters. But it is fair to say
that without those
developments, the plaintiff must be deemed to have bought the equivalent of an
undeveloped Plot. I would put
its value at Shs.10,000,000- (ten million only).
The issue of the alleged purchase of Plot 117 by the plaintiff is still shrouded
in uncertainty. The vendor was never called to testify nor was any witness to
the agreement. But the plaintiff tendered P. Exh.
111, a purported Sale
Agreement between herself and one Namuli. The said Namuli is stated in the said
document to be the registered
proprietor of Block 194 Plot 117. The Certificate
of Title which the plaintiff’s counsel has submitted to Court indicating
that Plot 117 is now Plot 370 perhaps after some sub-division, indicates
Catherine Namuli as the Administrator of the estate of the
late George William
Kiwanuka. She was entered on the certificate of title on 30/4/2004 through
instrument No. KLA 259495. An Administrator
of an estate is not necessarily the
owner of such property, unless of course he/she is the sole beneficiary of the
estate. There
is no evidence on record that she is the sole beneficiary of the
estate to raise the inference that she could pass an impeachable
title. And
while the purported sale between the plaintiff and Namuli is said to have taken
place on 17/6/2003, Namuli’s interest
was registered on 30/4/2004,
implying that the Agreement tells a lie about the registered proprietorship.
There is on record a letter,
D. Exh. 11, indicating that the plaintiff’s
claim to Plot 117 is not free of challenge. In all these circumstances, it
cannot
be said that the plaintiff has proved her claim of Shs.26m against the
defendant. Special damages must not only be pleaded but also
strictly proved.
This the plaintiff has not done to the satisfaction of Court. She should
therefore be contented with an award
of general damages.
Relying on
Prajapat –Vs- Ashok Cotton Co. Ltd, supra, where it was held
that if a representation made proves to be wrong but was made in good faith and
innocently the purchaser
has no claim to damages, counsel for the defendant has
invited me not to consider the plaintiff for any general damages at
all.
I have considered that submission. The absence of the
plaintiff’s submissions has made my task a lot harder. Be that as it
is,
I have already stated what a misrepresentation is and the manner in which it
ordinarily manifests itself. To say that a misrepresentation
has been made
fraudulently is a very serious allegation and the clearest of proof is required.
In the leading case of Derry –Vs- Peek (1889) 14 App. Cases
337 Lord Herschell said:
“....... Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false.”
I don’t
consider the plaintiff’s evidence in this case to offer the clearest proof
of what is required in an allegation
of fraud.
Negligent
misrepresentation occurs when the party, gets the matter wrong because he has
not bothered to look into it properly. Considering
the manner of the assignment
of the debt to the defendant, I’m inclined to the view that this is not a
case of negligent misrepresentation.
Innocent misrepresentation takes
place where the party, acting in good faith, just slips up. I’m sure this
is what happened
in the instant case.
I understand the law to be that any
form of misrepresentation will allow the injured party, to rescind (cancel) the
contract, provided
that restitutio in integrum is still possible. That simply
involves putting both sides back in the position where they were before
the
contract was made. This does not appear to be the plaintiff’s desire in
this case. It would appear that restitutio in
integrum is no longer possible in
this case. She has preferred to go on with the contract and recover damages to
compensate her.
She has in effect affirmed the contract. I have considered the
position in Prajapat, supra. In my view it no longer represents
good law. In Gosling –Vs Anderson (1972) Times 7 February
1972, Lord Denning M.R. (R.I.P) pointed out that before 1967 (and the
Prajapat case was before 1967), the plaintiff would have been without
any remedy
unless she had been able to prove fraud. Instead a retired school mistress was
awarded damages for innocent misrepresentation
that the flat she was buying had
planning permission for a garage. I’m persuaded by the reasoning in that
case. I think the
possible course in a case such as this must depend on the
nature of the misrepresentation. Believing as I do that she was induced
to buy
the suit property herein because of an advert that showed that there was a house
and servants quarters on it; and trusting
that the purchase price of Shs.25m was
arrived at on a mistake of fact; and recognising the fact that the
plaintiff’s claim
for special damages has been disallowed on account of
lack of concrete proof that she bought that house on Plot 117, I consider a
sum
of Shs.17,000,000- (seventeen million shillings only) adequate compensation for
the innocent misrepresentation, the breach of
contract, and the attendant loss
suffered by the plaintiff. In arriving at this figure, I have considered the
amount paid by the
plaintiff for the suit property, and the approximate value of
Shs.10,000,000- which I have put to an undeveloped plot. The balance
(Shs.15,000,000-) is what I have considered to be the would have been value of
the developments and Shs.2,000,000- the attendant
loss occasioned by the breach.
I decree the amount to her. This award shall attract interest at the rate of
25% per annum from the
date of judgment till payment in full.
As regards
the Certificate of Title in respect of Plot 44, Court is satisfied that the
defendant is in the process of obtaining a
Special Certificate of Title. It has
no power over that process. It must await the issuance by the Commissioner for
Land Registration.
I have already ruled that its provision was an implied term
of the contract. For the avoidance of the doubts and lest the defendant
reneges
on its promise to provide the same, I hold that the defendant is legally obliged
to provide the same to her.
As regards costs, the usual result is that
the loser pays the winner’s costs. This practice is of course subject to
the Court’s
discretion. I have considered the fact that this was an
innocent misrepresentation and what has been awarded to the plaintiff as
general
damages. The defendant’s effort has in my view achieved partial success,
which I assess at 20%. I would therefore
award 80% of the costs of the suit to
the plaintiff and I order so.
Yorokamu Bamwine
J U D G
E
07/06/2006
7/6/2006
Mr. Muwanga Sebina for
plaintiff.
Plaintiff present.
Mr. Hatanga Erick for the
defendant.
Court: Judgment delivered.
Yorokamu
Bamwine
J U D G E
7/6/2006
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