After failing to transfer the title to the defendant, the Late Norattam Bhatia decided in the alternative to invoke the clause in
the agreement to effect a full refund to the purchaser and have the property reverted back to the vendor. A refund was purportedly
made through the Late Norattam Bhatia's Lawyers. Upon depositing the refund, the Late Norattam Bhatia proceeded to request the defendant
to vacate the premises. The defendant however declined, refused or neglected to vacate. Hence this suit.
The defendant in its defence denied that the plaintiff had made proper attempts to have the legal title vested in him. The defendant
averred and contended that clause 2 of the sale agreement provided that the vendor would indemnify the purchase for any loss or damage
suffered as a result of any defect in the vendor's title to the property and not the failure to transfer as alleged. It was contended
that in a bid to frustrate the contract, the plaintiff deliberately refused and/or neglected to regularize his title to the said land
by adopting the right procedure proposed by the commissioner for land Registration. The defendant concluded that it was in effective
occupation/possession of the suit property, legally and rightfully and was willing to complete payment therefore in accordance with
the terms of the sale agreement but for the plaintiff's attempts to frustrate the contract.
The defendant made a counterclaim where it was contended that it was the plaintiff who was in breach of agreement as a result of which
the defendant suffered loss and damage.
At the commencement of the trial the following significant facts of the case were admitted;
(1)
Firstly, it was admitted that the parties entered into a sale agreement on the 17th April 1996 whereby the plaintiff agreed to sell the suit property, Plot 1 Martin Road, to the defendant. The agreement was marked
exhibit P3.
(2)
It was also admitted that the defendant paid to the plaintiff 50% of the agreed consideration of US $75000,
amounting to US$ 37500, at the time of execution of the agreement.
(3)
It was a term of the agreement that the balance would be paid upon the successful transfer of title into
the defendant's name. (4) It was admitted that the defendant had not completed payment of the purchase price.
(5)
It was further admitted that the plaintiff fulfilled part of his obligations by handing over possession
of the suit property to the defendant upon execution of the agreement.
(6)
Lastly, it was agreed that the plaintiff had not managed to transfer title to the defendant under the
agreement.
Arising from the above facts the plaintiff encapsulated that due to the circumstances beyond his control he was unable to transfer
title to the defendant and therefore was entitled to rely on the provisions of the sale agreement, clause 2.2. The plaintiff contended
further that he was entitled to invoke the clause and refund the purchase money and repossess the property.
The defendant on the other hand contended that by failing to transfer the property as per contract the plaintiff was in breach of
that agreement, and that clause 2.2 protected the plaintiff in a situation where he had a defective title and not a scenario where
he failed to transfer due to negligence or wilful laziness.
Issues:
(1) Whether the plaintiff was entitled to invoke clause 2 of the sale agreement;
(2) Whether the plaintiff was in breach of contract by failing to transfer title to the defendant;
(3) What remedies if any, are available to the parties.
During the hearing Nippon Norattam Bhatia (PW1) testified for the plaintiff while Sudhir Ruparelia (DWl) testified for the defendant.
Nippon Norattam Bhatia (PW1) testified as the plaintiff's attorney and later as legal representative, the plaintiff having passed
away in the course of the trial. He testified that this suit was in respect of Plot 1 Martin Road, which was purchased by his grandfather
and grandmother and registered on 5th November 1935 under Instrument No.31655. On the same day they executed a declaration of trust in favour of his father Norattam D
Bhatia which was reflected on the title deed under encumbrances. He testified that the trust deed used to be kept in the safe in
their office at Buganda Road prior to the expulsion of Asians in 1972. Since then the trust deed was lost. He testified that there
was a sale agreement (exhibit P3) between his late father and Crane Bank Ltd in which he acted on behalf of his father through his
power of attorney. In that agreement his father was selling the suit property as lawful and beneficiary owner of the property by
virtue of the trust declaration.
He stated that at that moment he was not in possession of the trust deed and that fact was brought to the attention of the purchaser
before the agreement was executed. He stated that after the death of his grandparents, who were registered proprietors, his aunt
Mrs Naresh Kara became the executrix. In that circumstance, the plaintiff was not given power to administer the estate.
PW1 testified that prior to selling the property Mrs Kara had put a caveat on the title with the hope that she would usurp the property
and prevent the plaintiff from getting the property, to his benefit. As a result of Mrs Kara's action the plaintiff could not regularize
his title to the suit property. In 1993 they applied to the High Court for a directive to vest the property with the plaintiff being
a sole beneficiary to the trust created by the registered proprietor but that application was disallowed. All that happened before
the sale agreement was entered. He stated that all those difficulties were communicated to the defendant who despite that went ahead
to enter into the agreement. Because of the above difficulties he created a clause in the agreement that full refund of money would
be made in case of failure in transferring title to the buyer. He testified to the various attempts which were made to have the title
deed registered in the names of the plaintiff without success. Among the same was an attempt to apply for vesting under which the
Registrar of titles rejected.
The next option was to go through Mrs Kara for direct transfer or under succession. This option could not go through because of the
mentality of Mrs Kara. The same Mrs Kara frustrated an option for the application of a limited grant under Administration Case No.
701/1998.
In view of the above dead-end, he decided to opt for a sub-lease which would allow the defendant to use the property for the balance
of the period of the lease. That option also flopped because of lack of response from the defendant. Having tried all options in
vain, he decided to invoke clause 2 of the agreement and refund the money in order to have the property returned to him. He concluded
that court should order the defendant to return the property to him and for him to refund the advanced payment to the defendant.
He also prayed for the defendant to give full account of the money they had received as rent to be paid to him.
As for the defendant Mr Sudhir Ruparelia (OWl) testified inter alia, that he was shareholder, Director and Vice Chairman of the defendant company. He stated that the suit property
was acquired by the defendant in order to sell it to their prospective client, the late Lt. Col. Dragon's family. By agreement dated
17/4/96 (exhibit P3) the defendant acquired the suit property from Bhatia. Nippon B. Bhatia (PW1) signed on behalf the vendor as
holder powers of attorney. The agreement was so prepared by Nippon Bhatia's lawyers. The agreement showed that Bhatia was selling
the property as successor to his father. Clause 1 of the agreement stated that Bhatia was selling the property as a sole lawful and
beneficiary of the property by virtue of a declaration of trust by the registered proprietors. He stated that during the execution
of the agreement, he did not see the trust deed but it was agreed that the plaintiff's lawyers would transfer the property to the
defendant and transfer forms were signed to that effect. Mr Sudhir testified that all along it was not mentioned to him that the
trust deed was missing otherwise he would not have concluded the transaction. He stated that Mr Bhatia did not declare to the defendant
that he had made attempts to transfer the property in his names but failed. He testified that since the certificate of repossession
was in his father's name the issue of trust deed never came up. He testified that they had bought leasehold interest in the land
so they could not accept a sub-lease offered by the defendant.
Mr Sudhir continued by stating that the plaintiff did not follow that advice of the Chief Registrar of title as to the procedure to
follow to register the suit property through retransfer or under section 143 of the Registration of Titles Act. He stated that the
plaintiff was not interested in transferring the property because it has now appreciated in value up to $400000 as opposed to $75000
at the time of the agreement. He concluded that the property was now in possession of a third party who had bought it from the defendant.
As such it was not available for return to the plaintiff. He prayed that the transaction should be fulfilled to enable the transaction
finalized. In the alternative he testified that a second option was to refund the $37000 with interest at 36%p.a. plus damages.
Resolution of issues:
Issue No.l:-
(1) Whether the plaintiff was entitled to invoke clause 2 of the sale agreement.
There is no doubt that clause 2 is the cornerstone of the sale agreement. It is therefore very central to the resolution of this dispute.
It is therefore important to set it out for the sake of c1arity:-
"The vendor undertakes to indemnify the purchaser for any loss or damage suffered as a result of any defect in the vendor's title
to the property which may prevent the purchaser, from acquiring legal title to the same or from acquiring quiet possession of the
same, and in such an event a full refund shall be effected and the property shall revert fully to the vendor'~
The question to ask is whether there was defect in the plaintiff's title. What amounts to defect to title was not particularized in
the sale agreement. However the meaning of the term "defect of title" can be derived from the book. Words And Phrase Legally Defined
by John 5aunders, 2nd Edition at page 33 as follows:-
"Defect of title: Any fact calculated to prevent the purchaser obtaining such title to the property as he was led to expect constitutes
a defect of title”.
The plaintiff's evidence was that he was a beneficiary of a trust created by his parents whereby the property was settled on him as
a sole beneficiary. However the plaintiff was not the registered proprietor. The registered proprietor was MIS Dharamsy Morarji Bhatia and his wife Motibhai. It was the plaintiff's evidence that various attempts were made both before and after
executing the agreement to get title vested in the plaintiff for the purpose of transferring the same to the defendant. Firstly there
was an attempt by way of a court application to have the trust wound up and the property vested in the plaintiff. That application
was however frustrated by the absence of the trust deed. The second attempt was made through the office of the Chief Registrar of
Titles for vesting order. The Chief Registrar of Titles rejected the various applications and advised the plaintiff to use other
techniques - provided under section 143 of the Registration of Titles Act. The next option was an attempt to have Letters of Administration
to enable the plaintiff deal with the suit property. That attempt also reached a dead-end because the executor of the estate of the
registered proprietors were unwilling to co-operate due to family wrangles. It was the plaintiff's contention that the above circumstances
constituted defect in the plaintiff's title.
The defendant on the other hand contended that the plaintiff's title to the suit property was not disputed so as to make clause 2
of the sale agreement applicable. It was their evidence that the plaintiff was deliberately refusing and/or neglecting to regularize
his title by adopting the right procedure proposed by the commissioner for Land Registration.
From the evidence on record, I note that the Registered Proprietors were Dharamsy Morarji Bhatia and his wife Motibai. The certificate
of title (exhibit P1) clearly indicates the plaintiff's interest on the encumbrance.
"The said Dharamsy Moratji Bhatia and Motibai claim an interest in the said land as Trustees of Narottam Bharamsy Bhatia by virtue
of a declaration of trust deposited as instrument No. 316567 Address for service P.O. Box 319, Kampala”.
It was the plaintiff's evidence that he took possession of the suit property in 1945 when he reached 21 years of age. That it to say
that the property vested in him since 1945. As from that time it was the plaintiff collecting rent and paying taxes from the income
accrued as well as ground rent and city rates until 1972 when properties of Asians were expropriated. When expropriated properties
Act was enacted, the plaintiff repossessed the suit property in 1995 and thereafter entered into the sale agreement whose clause
2 is the subject matter in dispute.
It is true the plaintiff made several attempts to vest the property particularly through the Commissioner for Land Registration. In
the first application for a vesting order, the Commissioner for land Registration noted that the application was not properly made
under the relevant law (exhibit P8 (a);
"With regard to the vesting order, am not satisfied that the application is properly made under section 175 of the said act. Again, in view of section 46, proprietorship
can only accrue to your client through other techniques. Be that as it may, the application is rejected and returned herewith”
In the second attempt the Commissioner responded as follows (exhibit P8 (c):-
"My advice is that you use another technique to try to get your client on the Register Book. You can try either a transfer or
an application under section 143 of the said Act if the registered proprietors are dead. I propose not to do any more correspondence on the subject”.
From the foregoing, it is clear that the plaintiff did not have any defect in title as alleged.
According to the Learned Commissioner for Land Registration, the plaintiff was not following the right procedure to enter the register
book. The proper procedure available should have been either by direct transfer or by invoking section 143 of the Registration of
Titles Act (now section 134 (1) of the Registration of Titles Act Cap 230). That section deals with succession on death of the registered
proprietor.
It was contended by the plaintiff that part of the problem was because the sole executrix of the estate, a one Mrs Suman Naresh Kara
was not willing to co-operate to have the property transferred into the names of the plaintiff. In my view the stubbornness of Mrs
Kara could not create a defect in the plaintiff's title. She could not create a deadlock because if she was not willing for one reason
or the other to perform her role as executrix of the will of Mambhai Dharamsy Bhatia, there are still other options at the table
for the plaintiff as a sole beneficiary of the estate to either remove the recalcitrant Kara or to compel her to act as the law demands
of her under the Succession Act Cap 162.
Having failed to comply with the above steps, the plaintiff cannot be heard to say that there was a defect in his title. It could
as well be true that the plaintiff was reluctant to regularize his title to take advantage of the current value of the property by
invoking clause 2 of the sale agreement. All in all I find that the plaintiff has failed to prove on the balance of probabilities
that there was defect in his title. Clause 2 of the sale agreement cannot be invoked in the circumstances.
Issue No.2:-
Whether the plaintiff was in breach of contract by failing to transfer titles to the defendant.
This issue has substantially been addressed in the first issue when I stated that the plaintiff had failed to explore all the avenues
under the Registration of Titles Act and the Succession Act to have the property transferred to the names of the defendant as demanded
by the sale agreement, (exhibit P3). Clearly this constituted a breach of the said agreement.
Issue No. 3:-
What remedies if any are available to the parties?
From the evidence adduced, it is clear that the defendant did acquire the suit property lawfully by virtue of the sale agreement in
which he made a part payment of $37500. The defendant was bound to pay the balance upon transfer of the suit property into its own
names. The obligation to transfer the same was on the plaintiff. There is evidence that the plaintiff had failed and or refused to
effect the transfer. In the circumstances, the defendant cannot be said to be a trespasser as it lawfully acquired the suit property
under the said agreement.
The plaintiff cannot in the circumstances demand for mesne profits since the defendant is not a trespasser. Neither can the defendant
be said to have wrongfully deprived the plaintiff of the suit property. This is therefore a clear matter where the plaintiff would
not be entitled to the reliefs sought in the plaint and answer to the counterclaim.
Instead I find that the defendant is entitled to the reliefs sought in the counterclaim. The defendant had sought the following orders.
(a)
A declaration that it is lawfully and rightly in possession of the land and is entitled to stay in possession
as a bona fide purchaser for value.
(b)
An order for specific performance of the contract against the plaintiff.
(c) General damages for inconvenience.
(d)
In the alternative special damages of $37500 plus interest at 36% per annum with weekly rests from 17/4/1996
till payment in full.
Being a purchaser for value I do agree that the defendant is entitled to a declaration that it lawfully and rightly got possession
of the suit land and is entitled to stay in possession.
As regards specific performance, it is clear that plaintiff neglected and or refused to invoke the provisions of the Registration
of Titles Act and the Succession Act to effect transfer of the property into the names of the defendant. I accordingly order the
plaintiff to make use of the above provisions in order to fulfill his obligations under the sale agreement.
In the alternative if the defendant is bent on the property he should indemnify the purchaser for the loss and damage suffered. The
defendant would be entitled to special damage of $37500 plus interest at 36% per annum with weekly rests from 17/4/1996 until payment
in full. The defendant would also be entitled to general damages for inconvenience in the tune of US$20000 (twenty thousand US dollars).
All in all the plaintiff's suit is dismissed with costs to the defendant. Judgment is entered for the defendant on the counterclaim
with the following orders:-
(1)
Declaration that the defendant is in lawful and rightful possession of the suit land.
(2) Order of specific performance against the plaintiff.
(3)
General damages for inconvenience in the tune of 20000 US $ (twenty thousand US $).
(4)
In the alternative specific damages of $37500 plus interest at 36% per annum with weekly rests from 17/4/1996
until payment in full.
RUBBY AWERI OPIO J U D G E 5/7/2005.
I direct the Registrar under Order 18 rule 2 (3) of the Civil Procedure Rules to pronounce this judgment.
RUBBY AWERI OPIO JUDGE 5/7/2005.
6/7/2005:-
Ms Gorretti Arinaitwe for the defendant. I am holding brief for Mr Kiapi.
Plaintiff is absent.
The judgment was read.
PAUL GADENYA WOLIMBWA DEPUTY REGISTRAR 6/7/2005.
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