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THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANDA
AT MENGO
(CORAM: ODOKI-CJ, ODER, TSEKOOKO, KAROKORA, AND KANYEIHAMBA, JJ.SC)
CIVIL APPEAL NO. 7 OF 2004
NILE BANK LTD
:::: :::::::::: ::::::::::::::: APPELLANT
VERSUS
RICHARD
DESMOND KAGGWA ::::::::::::: RESPONDENT
(An appeal from the decision of the Court of Appeal in Kampala
(Mukasa-Kikonyogo, DCJ, Twinomujuni, and Kitumba, JJ.A) in Civil Appeal
No. 71
of 2001)
JUDGMENT OF ODER, JSC
The High Court dismissed the respondent's suit against the appellant and two
others, who are not parties to this appeal. He successfully
appealed to the
Court Appeal against that dismissal. This appeal is against the Court of
Appeal's decision allowing that appeal.
The facts of the case as found by the trial Court were as
follows:
In the suit, Richard Desmond Kaggwa (the respondent), as the Plaintiff sued
M/S Bond Air Services Ltd. (1st defendant); Nile Bank Ltd. (the
present appellant as the second defendant) and Odoi Onyango as the third
defendant. Odoi Onyango
was the Chairman and Managing Director of the first
defendant. The plaintiff sued all the three defendants jointly and severally
for
a permanent injunction; return of the certificate of title of his land,
comprised in LHR. Block 216; plot 750, situated at Buye,
Ntinda, Kampala; and
for damages and costs. The plaint alleged that the 3rd defendant
defrauded the plaintiff, who was the Operations Manager of the 1st
defendant. It was also alleged that the 3rd defendant promised the
plaintiff shares in the 1st defendant company. The 3rd
defendant then asked the plaintiff to give him (3rd defendant) a
power of attorney to mortgage his registered land (herein after referred to as
"the suit property.")
The plaintiff further alleged in
the plaint that no shares were given to him as promised. He could not therefore
be issued with share
certificates of the 600 shares in the first defendant
company, which had been promised to him. About six months after the execution
of
his (plaintiff's) power of attorney in favour of the 1st defendant,
the plaintiff received a letter addressed by the 2nd defendant to the
1st defendant by which the suit property was threatened with sale by
auction "due to failure by the first defendant to pay a mortgage loan of Shs:
24,708,724/= for which the plaintiff's said certificate of title
had been
deposited by the first defendant as a security for the said
loan."
Paragraph 15 and 16 of the plaint averred that:
"On 1st December, 1991, the plaintiff discovered from the
first defendant that on a date unknown to the plaintiff, the third defendant
acting
in the course of his employment as the servant argent of the first
defendant "orally" agreed and arranged with the second defendant
to divert the
plaintiffs said certificate of title to be used as a security for an old
mortgage loan obtained by the first defendant
from the second defendant in
1989.
16. The plaintiff also discovered from the 1st defendant
that the 3rd defendant acting in the course of his employment as the
servant or argent of the 1st defendant had orally agreed and effected
with the 2nd defendant, the redemption and substitution of the
3rd defendants certificate of title which had been used to secure the
old mortgage loan with the plaintiffs certificate as a security
for the said old
mortgage loan granted by the 2nd defendant to the 1st
defendant in 1989."
The plaintiff did not say by what means he learnt of the oral agreement. The
learned trial judge found that the plaintiff had on 26
January, 1991 executed a
mortgage in favour of the second defendant over the suit property to secure a
loan in favour of first defendant.
He held that the plaintiff had voluntarily
executed the mortgage and that his title was rightly being detained for that
purpose.
He dismissed the suit with costs to the second defendant. The plaintiff
appealed to the Court of Appeal, which allowed the appeal.
There are
five grounds of appeal, set out in the memorandum of appeal as follows:
1. The learned Justices of Appeal erred in law in finding that the burden of proof lay on the Respondent (Appellant herein) to prove that the power of attorney was not duly executed. 2. The learned Justice of Appeal erred in law in finding that the power of attorney was invalid 3. The learned Justices of Appeal erred in fact and in law in finding that there was no evidence that the mortgage (ExD2) was executed by the Appellant (Respondent herein) 4. The learned Justices of Appeal erred in law in finding that the mortgage was invalid for lack of attestation. 5. The learned Justices of the Appeal erred in law in awarding general damages of Shs: 30,000,000/= and 12% thereon.
Mr. John Mike Musisi argued the
appeal for the appellant, and Mr. Richard Okalany argued the respondent's
opposition to the appeal.
The appellant's learned counsel abandoned ground one
of the appeal.
Regarding validity of the mortgage, the learned counsel
criticized the learned Justices of Appeal for finding that:
a) it was not attested by a witness who is one of those listed in section 155 (1) of the Registration of Titles Act; b) it was not signed by the mortgagor; c) the manner of its execution contravened sections 155 and 156 of the Registration of Titles Act in that it was not attested by any of the persons listed in section 47 and the signatures were not in Latin character: and
d) there was no evidence that the respondent ever knew of its
existence.
The learned counsel contended that there was no need
for the respondent to execute the mortgage as he had granted a power of
attorney.
Counsel also contended that the mortgage was valid because it was the
kind of mortgage signed by three parties - in the instant case,
the mortgagor or
(the registered owner). Bond Air Services Ltd. the beneficiaries, the bank as
the mortgagee. The mortgage (Exhit.
D2) bound three parties, namely the
respondent as the mortgagor, who actually signed it, but whose signature cannot
be read: Bond
Air Services Ltd (the principal debtor) and the bank (the
appellant). Learned counsel conceded that the respondent's signature was
not
attested.
Mr. Musisi further submitted that the mortgage document bound the appellant
bank and Bond Air Services Ltd. as both parties affixed
their respective company
seals to the document under section 132 of the Registration Act. The respondent
was a director in Bond Air
Services Ltd. In the alternative, the appellant's
learned counsel submitted that a deposit of certificate of title created an
equitable
mortgage under section 129 of the Registration of Titles Act. For this
submission learned counsel relied on Barclays Bank Vs. Gulu Millers Ltd.
(1959) EA 540 learned counsel submitted that in the instant case, there
was a basis for an equitable mortgage because the registered owner of the
certificate of title, the respondent, was present when the certificate of title
was deposited with the Bank. Learned counsel prayed
that if there was no legal
mortgage we should find that an equitable mortgage was created over the
respondent's suit property.
The respondent's learned counsel argued
grounds three and four together. On these grounds counsel supported the finding
of the learned
Justices of Appeal that the mortgage Exhit. D2 was neither
executed by the mortgagor nor attested by any witness. The burden was
on the
appellant to show that both were done. This was not possible because first, the
document was not mentioned in the appellant's
written statement of defence,
secondly, it is not known how it was introduced in evidence at the trial and
thirdly it was not canvassed
at the trial.
The learned Justices of
Appeal considered the validity of the mortgage document (Exbt. D2) and came to
the conclusion that it was
invalid. I agree with that conclusion and the
reasons for it.
which are clearly stated in the lead judgment of Twinomujuni, J.A with which
the other members of the Court agreed. He said:
"Next, I
consider the validity of a Mortgage deed allegedly executed by the appellant on
26th February, 1991. A mortgage deed, just like a power of attorney
is governed by the provision of section 155 of the Registration of
Titles Act.
It also requires attestation at the time of its execution. In the instant case,
the space provided on the mortgage deed
where the witness to the signature of
the mortgager is supposed to sign is blank. This means that nobody witnessed the
signature
of the mortgagor. There is no evidence whatsoever on the face of the
document to prove that the appellant is the one who actually
executed the
document marked Exhibit D2. The respondent did not lead any evidence to show
that the document was signed by the appellant.
The manner of its execution
contravenes both section 155 and 156 of the Registration of Titles Act. This is
a very serious defect,
which renders the document
invalid.
There is little wonder that this document was
not mentioned in the pleadings of any party to the suit. There is no evidence
that the
appellant ever knew of its existence till long after he had finished
giving his evidence. The respondent seems to have deliberately
concealed its
existence till the last possible moment. The manner in which it was introduced
in evidence is mysterious, as it had
not been annexed to the pleadings of the
respondent. There is also something highly questionable about the document. If
the respondent
mortgagee and the entity named as the Principal Debtor genuinely
believed that the appellant had executed a valid power of attorney
in favour of
the Principal Debtor, how could he, before revoking suck power of attorney,
execute a mortgage deed in respect of the
same
property?................ ..................................... I would
hold
that there is merit in the second ground of appeal. Both
the power of attorney and the so called mortgage deed are invalid for want
of
form prescribed by sections 155 and 156 of the Registration of Titles
Act."
In my opinion, the issue of Bond Air Service Ltd. having executed the
mortgage document as the donee of a power of attorney by the
respondent does not
arise, because the power of attorney was invalid.
On the question of
whether an equitable mortgage by deposit of title was created by the respondent,
the respondent's learned counsel
submitted that the issue was neither pleaded,
nor raised in the High Court. No evidence was led on the issue. The appellant
therefore,
should not have argued it in this Court. Learned counsel relied
on
General Parts (10 Ltd. Vs. Non Performing Assets Recovery
Trust, Civil Appeal No.5 of 1999 (SCU) unreported). Learned counsel
contended that the provisions of section 129 (3) are to the effect that it is
mandatory for a caveat to be entered.
In the instant case, if the intention was
to create an equitable mortgage, the appellant bank should have entered a
caveat. In any
case, the respondent did not intend to be an equitable mortgagor.
Deposit of title alone is not enough. There must be an intention
by the
registered owner to deposit title as an equitable mortgagor.
Section 129 (1), (2) and (3) of the Registration of Titles Act (Cap. 230) provides:
"(1) Notwithstanding anything in this Act, an equitable mortgage of land may be made by deposit by the registered proprietor of his or her certificate of title with intent to crate a security thereon whether accompanied or not by a note or memorandum of deposit subject to the provisions hereinafter contained.
(2) Every equitable mortgage as aforesaid shall be deemed to create an interest in land
(3) Every equitable mortgagee shall cause a caveat to be entered as provided by section 139."
Under section 129 (1), one of
the conditions necessary for the creation of an equitable mortgage by deposit of
title is that the registered
proprietor must have the intent to crate a security
thereof. In my view, this is a condition precedent. Another condition which,
to
my mind is a condition subsequent, is that the equitable mortgagee shall cause a
caveat to be entered.
In the instant case, there is no evidence that the registered proprietor of
the suit property (the respondent) intended to deposit,
or did deposit, his
certificate of title with intent to create an equitable mortgage. The
respondent's evidence at the trial was
that he gave his certificate of title to
Bond Air Services and his power of attorney to Odoi Onyango to borrow money from
the bank.
Part of the money to be borrowed was to be given to him to buy shares
in the company. When he realized that he was not being assisted
he wrote to Odoi
Onyango (the Managing Director of Bond Air Services,) to revoke his power of
attorney in order to save his property.
It is evident from the respondent's
evidence, therefore, that he did not deposit his certificate of title with the
bank to create
an equitable mortgage but as security for a loan to Bond Air
Services. With respect, I am unable to accept the submission of the
appellant's
learned counsel that in the alternative, we should find that an equitable
mortgage was created by deposit of the respondent's
certificate of title to the
suit property. Regarding equitable mortgage by deposit of title, I also find
merit in the submission
of the respondent's learned counsel that it was neither
pleaded nor canvassed at the trial, nor was it raised in the lower court:
In my
opinion, it would have been necessary to adduce evidence at the trial to show
that conditions necessary for an equitable mortgage
under S.129 of the R.T.A by
deposit of title had arisen in the instant case. For instance, whether the
respondent had the requisite
intent and whether a caveat was entered by the
bank. In my view, in the circumstances, the case of Barclays Bank Vs. Gulu
Millers Limited. (Supra), is distinguishable from the instant case and
does not assist the appellant's case.
Grounds two, three and four of the appeal should therefore fail.
Under ground five, the appellant's learned counsel submitted that the learned
Justices of Appeal did not state the basis for arriving
at Shs: 30,000,000/= as
general damages apart from saying that it was for inconvenience and denial of
use of title to the respondent.
In his prayer in the plaint and at the end of
his testimony at the trial the respondent merely prayed for the return of his
certificate
of title to the suit property. Learned counsel contended that the
respondent did not adduce evidence on which the Court could assess
damages. He
contended that the learned Justices of Appeal must have used the wrong
principles to award Shs: 30,000,000/= plus 12%
interest per annum. Learned
counsel did not suggest what amount of damages would be
appropriate.
Regarding the amount of general damages the respondent's
learned counsel pointed out that in the trial Court the respondent claimed
an
award of 25% interest per annum on general damages.
On 14/10/94, the
respondent revoked the power of attorney he had made on 19/2/91. On 12/9/99, he
entered a caveat on the title of
the suit property. Learned counsel contended
that these are clear indications that the respondent wanted to repossess his
suit property,
but he never got it back, because by the time the appeal to the
Court of Appeal was filed the bank had already sold the suit property.
If the
respondent had got his certificate of title back before the suit property was
sold off, the respondent could have used the
title to obtain a loan or used it
for other purposes.
Like the appellant's counsel the respondent's
counsel did not suggest what amount of general damages would have been
appropriate.
Considering all the circumstances of this case, my
opinion is that an award of Shs: 7.500,000/= as general damage to the respondent
would be more appropriate.
In the result, this appeal should partly succeed. Grounds two, three and four should fail but ground five should succeed. I would make the following orders: -
1. The appellant should return the respondent's certificate of title to the suit property to him 2. If the same has already been transferred cancellation of the transfer and restoration of the status quo as in 1991 3. Permanent injunction to restrain the appellant from any future attempt to transfer the respondent's title deed to the suit property 4. General damages in the sum of Shs: 7.500,000 to the respondent for loss of use of his suit property by the r espondent5. Interest on the decretal amount at the rate of 12% per annum from the date of judgment in the High Court till payment in full 6. I would award to the respondent 3/4 of costs in this Court and the Courts
below.
JUDGMENT OF ODOKI, C.J.
I have had the benefit of reading in draft the judgment of my learned
brother, Oder, JSC, I agree with him that this appeal should
partially succeed.
I concur in the orders he has proposed.
As the other members of the Court also agree, this appeal partially succeeds with the orders as proposed by Oder, JSC.
JUDGMENT OF TSEKOOKO, JSC
I have had the benefit of reading in advance the judgment prepared by my learned brother, Oder, JSC. which he has just delivered. I agree with it and with the orders he has proposed.
JUDGMENT OF KAROKORA, JSC:
I have had the benefit of reading in draft the judgment prepared
by my learned brother, Hon. Justice Oder, JSC and do agree with
the conclusions and orders he has made.
I have nothing useful to add.
JUDGMENT OF KANYEIHAMBA, JSC.
I have had the benefit of reading in draft the judgment of my brother
Oder, JSC. I agree with him that this appeal should partially
succeed and the
orders he has proposed.
Dated at Mengo, this 18th
day of August 2005.
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