Grindlays Bank (U) Limited v Boazi (Civil Appeal 23 of 1992) [1992] UGSC 20 (1 December 1992)

Full Case Text

## IN THE SUPREME COURT OP UGANDA

## *Q* AT MENGO'

(COR41V: . MANYINDO, D. C. J., ODER, J. S. C., & PLATT-, JSC) . CIVIL APPEAL NO. 2?/92

- BETWEEN

APPELLANT GRINDLAYS BANK (U) LTD

## A N D

RESPONDENT EDWARD BCAZI i

> (Appeal from Judgement and. Decree of Mr. justice H. E. Okalebo dated 16th. June 1992 in C. A. No. 558/84)

## JUDGEVENT=OP=M4NYINgO=-=DCJ:

This is an appeal against the Judgement of Okalebo . Ag. J,' (as he then was) which was delivered in the High -Court sitting -at> The respondent had in 1.984, sued the appellant Bank for the return of his property which he had mortgaged to the appellant Bank and which were allegedly illegally sold off by the latter. He also sought, inter alia, damages for trespass and damaged property and mesne profits. In the alternative an adcount was sought. It is not clear . why the case was not tried until November, 1991. ^ampala on 16-6-92.

The facts of the case according to the appellant were these. . In 1976, one Joe Mayanja obtained a loan from the appellant Bank. The respondent secured or guaranteed that by mortgaging his property comprised

<.../2

in leasehold Register Volume 693 Folio 19 situate at Najjanankumbi, within Kampala City. A mortgage Deed (exhibit D1) was duly drawn on 24-2-76, between the respondent and the appellant Bank. The Principal Debtor (Mayanja) defaulted in the payment of the loan, whereupon the appellant recalled the loan, with Notice to the respondent, who was asked to meet his obligation under the mortgage. When he did not oblige, the appellant instructed their lawyers to appoint a receiver which they did. The Receiver, one Sempala Musoke (DW2) sold the mortgaged property in July, 1979 to one Kyaluzi.

The respondent's version of what happened was some what different. It was that there was no default in the payment of the loan; that no Receiver was properly appointed and that the purported sale by public auction was fraudulently carried out by private treaty. $Tn$ . other words the purported sale was null and void.

Five issues were framed at the beginning of the trial. They were:-

$(1)$ Whether the defendant/appellant appointed 궆 a receiver in respect of the suit property as envisaged by the Mortgage Deed and the Mortgage Decree,

Whether there was a valid sale of the suit property by the Receiver,

$(2)$

Whether the plaintiff/appellant had $(3)$ suffered (damages) as a result of the defendant's actions and if so how much,

$\overline{3}$

$(4)$ Whether the defendant was entitled to re-possession of his property,

(5) Whether, in the alternative to damages, the plaintiff was entitled to an account from the defendant.

After hearing the evidence and arguments the leafned trial Judge held that the purported appointment of the Receiver was invalid as it did not comply with the provisions of the Mortgage Deed. He also held that there was no valid sale of the suit property because the sale was not carried out by a Receiver, was not effected by public auction and there was no court order of fore-closure. And so the first two issued were answered in the negative. The trial Judge was also pleased to consider another point on his own. He put it this way:-

> "Though not raised in the proceedings, I wish to state that there is no question of bona fide purchaser for value in our present case considering that the sale was invalid."

> > $\cdot$ /4

to either Mayanja-or the respondent. It followed that the respondent had since 1979 been deprived of his Since was per month as rent, he had been deprived of that rent. The trial' Ag. , Judge^. accordingly answered the third property illegally which ioccassioned ^trespass,.. in. 1979 the respondent was receiving shs.5,000/- &gt; is.sue in . the ' affirmative. With regard to the, third issue the learned acting Judge found as a fact that it had not been proved that Mayanja owed the appellant Bank ''anything so as to make the surety •liable, " or that if the alleged .loan taken out' ' was in fact l>y Mayanja, that he had defaulted in payment. , He also found <thet.no> demand had been made

4 /•

. shs% -5 million general damages, shs. 62,807,040/- •mesne profits and rent at the rate of shs.640,000/ per month And of i comse he' was awarded the e costs of the suit and' interest on the decretal sums '■ from the date of judgement till payment in full. • In view of his findings on the first and second issues the trial Ag- Judge easily held on £he fourth *'* and fifth issues, that the purported -transfer was invalid with the result that the respondent was entitled "for the subsequent' months up to the return of the property." to repossession of his property. Consequent to-the finding on the third issue, the respondent.was.awarded

• Five grounds of appeal were filed, namely:

.../5

"1. The learned trial Judge erred in law in holding that there was no appointment of a receiver;

- The trial Judge erred in law when he held $\overline{2}$ . that the property inquestion was sold improperly,. irregularity and sale was consequently invalid $(sic);$ - 3. Even if the Judge's holding in (2) above was correct, he erred in law failing (sic) to appreciate that, on conducting the sale the receiver was deemed to be an agent of the respondent who, alone, was responsible for the defaults of the receiver; - The learned trial Judge was in error in law in holding that:- - There was no evidence that Joe Mayanja owed $a)$ any money to the appellant; - Joe Wayanja and the respondent were not B) notified of any default in repaying the loan to the appellant; - $c)$ There was evidence that no demand for the money for made; - $d$ ) That no title passed to Kyaluzi; - e) The buyer of the property was not a bonafide purchaser: - 5. The learned trial Judge erred in law in the assessment and award of damages.

At the hearing of the appeal the last ground of appeal I would like to consider the fourth ground was abandoned. first. It was conceded by Counsel for the respondent, Mr. Sekandi, that there was ample evidence to show that Jos Mayanja owed money to the appellant. These can be no doubt that the finding by the Judge on the point was contrary to the evidence which clearly showed that Joe Mayanja was advanced a loan of shs.250,000/- by the appellant which loan was guaranteed by the respondent

$...16$

$\div$ $\mathsf{G}$

by mortgaging the suit property. That is what the Mortgage Deed (exh DI) was all about. The Deed was duly executed by Joe Mayanja and the respondent. The respondent gave evidence on the point. This is what he said in cross-examination:-

> "I knew the late Joe Mayanja, an Advocate and my friend. Yes, he borrowed money from Grindlays Bank in May 1976. It was shs.250,000/- and I gave guarantee to the Bank that if Mayanja failed to pay they them I would pay, myself and I signed a guarantee on $4-5-76$ . In addition, I executed a mortgage in favour of the Bank over my property, leasehold R2. Vol. 693 Folio 19 Plot No. 167, Entebbe Road, at Najjanankumbi".

The point in ground $4(a)$ of appeal was thus well Ground 4 (b) and (c) can be considered together. taken. In my opinion the trial Ag. Judge's finding that no demand was made before the Receiver was appointed is correct. Under clause 3 B of the Mortgage Deed the appellant had first to demand the money from the respondent and then upon default appoint a Receiver.

There is no evidence to show that the appellant Bank made a direct demand either to the late Mayanja (borrower) or the mortgagor (PWI) for the repayment of the loan in terms of clause 3 B which reads in part:-

> "At any time after payment of the moneys hereby secured has been demanded and the Surety has made default in paying the same Bank may appoint by writing under the hand of any Manager or Officer of the Bank a person whether an Officer or Officers of the Bank or not to be a Receiver or Receivers of the mortgaged proper- ties or any part thereof and in like manner from time to time remove any Receiver so appointed and appoint another in his stead"."

> > $\ldots / 7$

The evidence of PWI on the point, given in cross examination was this:

> "I was not approached by the Bank to pay money. Yes the Bank demanded for repayment of its money from both Mayanja and me. There was an advertisement in Newspapers that the property was going to be sold I came down to see the Auctioneer - Ssempala - Musoke and explained to him and said I was going to settle the debt. $\mathbf{u}$ accepted and stayed the Auction sale. This was in 1979,, April."

The Mortgage was registered under the Registration of Titles Act. 1t follows that under Section 115 of the Registration of Titles Act (Cap 205), an equitable mortgagee has to give notice or at least sue for the money. Section 116 of the same Act clearly provides that where money is payable on demand, a written demand is equivalent to notice. I agree with Counsel for the respondent that in this case the Appellant Bank should have made the demand in writing but did not. Notice of sale does not in my view amount to notice within the meaning of Section 116 of the Registration of Titles Act or Clause 3 B of the Mortgage Deed. The trial Judge in my view came to the correct conclusion on this point. There is therefore no merit in Ground 4 (b) and (c) of appeal. I will deal with Ground 4 (d) and (e) later.

I will now consider $\sim$ the first ground of appeal -

whether there was a legally appointed receiver. There is no doubt that Clause 3 B of the Mortgage Deed empowered the appellant to appoint a receiver with powers to sell the mortgaged property. During the hearing of the appeal Counsel for the appellant submitted that in the said clause there was no prescribed way for the appointment of a That is why the Appellant simply and apparently Receiver. verbally instructed its Advocates to appoint a Receiver. They in turn verbally instructed a Court Broker to attach and sell the suit property, in that capacity.

On the other hand Counsel for the respondent argued that the appointment had to be done only by the appellant's Manager or other Officers and in writing.

The provision in Clause 3 B of the Mortgage Deed seems very clear to me. It requires the Receiver to be appointed by the Appellant through a Manager or other official of that Bank. Secondly, the appointment had to be in writing. The appellant Bank did not have the right to delegate that power to its Lawyers.

The Mortgagor did clearly testify that he got no instrument or letter of appointment as a Receiver. In his evidence PW2, Sempala - Musoke said:

> "In 1979, I got instructions regarding property in Block 13 Plot 113 Kabowa Entebbe Road, from Grindlays Bank (U) Limited, to advertise and sell the above property."

> > $.../9$

$\mathsf{Q}$

$/but$

He clearly stated (page 45) that he was acting as a Court Broker and not a Receiver. $\mathbb{1}_e$ did not however state who exactly gave him the instructions and in what form. And his statement seems to contradict the position taken by the appellant and its Counsel that he was instructed not by the appellant by its Lawyers. It is noteworthy that before the trial Counsel for the respondent had requested Counsel for the appellant to produce the instrument of appointment of the Receiver but none was sent to them. Clearly the position was as the trial Judge rightly found, that the appellant did not appoint a Receiver as provided in Clause 3 B of the Mortgage Deed or in accordance with the provision in Sections 2, 3 and $5(4)$ of the Mortgage Decree No. 17 of 1974, which are as follows:

- "2. A Mortgagee may realise his security under a mortgage, - (a) by apprinting a receiver; - (b) by taking possession of the mortgaged land; and - $(c)$ by foreclosure - 3. A receiver may be appointed in writing either by the mortgagee himself under a power expressly provided in the mortgage in that behalf, or by the Court, upon application therefor by the mortgagee. - 5(4) Any appointment of a receiver not in writing and which is not consistent with the provisions of this section shall be void and of no effect."

This ground of appeal therefore fails.

$$\ldots / 10$$

10 4=

Counsel for the respondent did submit that even if the Receiver had been properly appointed under J B the appointment would have been invalid as it had not been registered with the Registrar of Titles. I cannot agree. There is no specific provision in the Registration of Titles Act or the Mortgage Decree that the appointment of a Receiver must be registered. It should be noted that Sections 117 to 121 which dealt with sales under mortgages were deleted by the present Registration of Titles and not replaced.

With regard to the second ground it must fail in view of the finding on the first ground. The property could only be sold by a Receiver. There was none so the purported sale was null and void. There was also another irregularity. The sale was meant to be by public auction but as it turned out it was done by private treaty as it was not re-advertised following the stay of the first auction.

There is no'merit in the third ground of appeal for the same reason. not been appointed a Receiver under the Mortgage Deed. This leaves grounds 4 (d) and (e) of appeal. I have already held, on the second ground of appeal, that the purported sale was null and void. It follows that no title passed to Kyaluzi. This disposes of ground 4 (d). As for ground 4 (e) the matter of bona fide purchaser for value was never put to the trial Judge as an issue in the case. He took it up on his own Judgement. The respondent could not bear respor nsibility for the faults of Ssempala-Musoke, as he had

.../11

$11$

I do not find it necessary to deal with the point since it was raised obiter.

In summary, the position of the case is this. The appellant could have appointed a Receiver but did not. It could have taken possession of the mortgaged property but did not. It could have applied to Court for an Order of foreclosure but did not. Its purported sale of the respondent's property to Kyaluzi was illegal and was rightly resisted by the respondent. The property rightly remains in the hands of the respondent. The appellant can resell that property in accordance with the provisions of the mortgage Deed. In the result I would dismiss this appeal with costs to the respondent, here and in the Court below.

DATED at Mengo this ...1st... day of December, 1992

SGD: ........................

S. T. MANYINDO

DEPUTY CHIEF JUSTICE

I CERTIFY THAT THIS IS A TRUE COPY OF THE CRIGINAL.

**B. F. B. BABIGUMIRA** REGISTRAR SUFREME COURT IN THE SUFREME COURT OF UGANDA

## AT MENGO

MANYINDO, D. C. J., ODER, J. S. C., & PLATT, J. S. C) **CORAM:** CIVIL AFFEAL NO. 23 of 1992 BETWEEN GRINDLAYS BANK (U) LTD :: :: :: :: APPELLANT $A \rightarrow D$ EDWARD BOAZI :: $\cdots$ RESPONDTNT (Appeal from the Judgement and Decree of the High Court of Uganda (Okalebo, J) dated 16.6.1992) $\texttt{IN}$

H. C. C. S. No. $558$ OF 1984)

## JUDGEMENT OF ODER, J. S. C.

I have read the Judgement of Manyindo, D. C. J., in draft. I agree that the Appeal should be dimmissed with costs and have nothing useful to add.

DATED at Mengo this ........ day of December . 1992

. . . . . . . . . . . . . . . . . .

A. H. O. ODER

JUSTICE OF THE SUPREME COURT

I CERTIFY THAT THIS IS A TRUE COPY OF THE CRIGINAL.

$\cdots \cdots \cdots \cdots \cdots \cdots \cdots \cdots$ B. F. B. BABIGUMIPA REGISTRAR SUFREME COURT

## IN THE SUPREME COURT OF UGANDA

## AT MENGO

(CCRAM: MANYINDC, D. C. J., ODER, J. S. C., & PLATT J. S. C.)

CIVIL APPEAL NO. 23 OF 1992

BETWEEN

GRINDLAYS BANK (U) LTD :: :: :: :: APPELLANT A N D

EDWARD BOAZI :: :: :: :: :: RESPONDENT

(Appeal from the Judgement and Decree of the High Court of Uganda (Okalebo, $J$ ) dated $16.6.1992$ $\mathbf{T}\mathbf{N}$

High Court Civil Suit No.558 of 1984)

JUDGEMENT OF PLATT, J. S. C.

I agree and have nothing to add.

DATED at mengo this ....... day of ............... 1992

Sgd:..................

H. G. PLATT,

JUSTICE OF THE SUPREME COURT

I CERTIFY THAT THIS IS A TRUE COPY OF THE CRIGINAL.

$\mathcal{A}$

B. F. B. BABIGUMIRA REGISTRAR SUFREME COURT