Grindlays Bank Uganda Limited v Uganda Bottlers Limited (Civil Appeal 29 of 1995) [1996] UGSC 32 (17 May 1996)

Full Case Text

re enventr

IN THE SUPREME COURT OF UGANDA AT MENGO MANYINDO DCJ, ODOKI JSC, & ODER JSC) $(CORAM:$

CIVIL APPEAL NO. 29 OF 1995

**BETWEEN**

JB:RU-KAI $BOX 83$ APPELLAN

$\frac{1}{2}$

GRINDLAYS BANK (UGANDA) LTD

$\overline{1}$ .

$\ldots \rightarrow \{x_i\}_{i=1}^n$

$\ddot{\mathbf{1}}$

AND

$\ldots$ RESPONDENT UGANDA BOTTLERS LTD

(Appeal from the judgment and Decree of the High Court of Uganda (Porter J) dated 2nd May, 1995

Civil Suit No. 114 of 1992)

AND

CIVIL APPEAL NO. 16 OF 1996

## **BETWEEN**

APPELLANT KAMPALA BOTTLERS LTD ........ **.................**

## AND

RESPONDENT **...............** UGANDA BOTTLERS LTD .................

> (Appeal from the judgment and Decree of the High Court of Uganda (Porter J) dated 2nd May, 1995

> > $IN$

Civil Suit No. 435 of 1992)

## JUDGMENT OF ODOKI JSC:

The respondent, Uganda Bottlers Ltd filed two separate actions in the High Court against the two appellants, Grindlays Bank Ltd (hereinafter referred to as the Bank) and Kampala Bottlers Ltd, arising out of the appointment of receivers by the Bank, and sale of the respondents properties by the receivers to Kampala Bottlers.

$\mathsf{Z}$

The hearing of the suit was consolidated although the parties had agreed that Civil Suit No. 114 of 1992 be heard first as a test case. This would have been a better way to proceed to avoid the confusion arising out of hearing together two separate suits which did not involve the same parties. Be that as it may, judgment was given in favour of the respondent In both suits. The appellants then filed two separate appeals against the respondent whose hearing was, for convenience, also consolidated. This judgment is therefore in respect of both appeals.

The brief facts the case in CS No. 114 of 1992 which gave rise to Civil Appeal No. 29 of 1992, are that in 1966 the Bank's predessor granted, a loan to the respondent in the sum of shs.1,000,000/= which was secured by a debenture dated 22nd June, 1996, and by a Memorandum of a Deposit of Title Deed in respect of Plot No. 136 Sixth Street Kampala, of the same date. $By$ that debenture the respondent charged with the payment and discharge of all moneys and liabilities intended to be thereby secured all its undertaking, goodwill, assets and property whatsoever, both present and future.

It was provided in Clause (3) of the Debenture that the security given would not prejudice any other security including equitable mortgage. It was further provided in Clause (7) that if the money became payable the defendant would appoint a receiver and manager with power to replace such receiver or manager. It was also provided that the receiver and manager would be the agent of the respondent who alone would be liable for his acts and defaulter By Clause 8 (b) of the debenture, the receiver was given authority in the ev of default to sell or to concur in the selling of any property charged in su manner and terms as he shall think fit, and to transfer such property in the name and on behalf of the respondent.

The incumbrance created by these documents were noted on the Title Deeds and the Registrar of Companies was notified of these charges on 25th June, 1966. In addition to Plot 136, another property which was charged was composed in LRV 319 Folio 11 Plots 171, 173, 175 and 177, 6th Street Kampala.

$\mathfrak{Z}$

In 1972, all the Directors of the respondent who were Asians were expelled by Idi Amin. However the Managing Director of the respondent who was a Greek, Mr. N. Gabgeropoles, remained behind managing the respondent company. The respondent defaulted in the payment of the loan which had risen to shs. 1,550,000/= . On 13th February, 1976, Mr. J. Tullidepth and Mr. R. Bebbington were appointed joint receivers and managers in a meeting which was attended by representatives of the Bank and the respondent. Notice of appointment was filed with the Registrar of Companies.

In April 1977, one of the receivers left the country and Mr. G. Egaddu was appointed to replace him.

When the default occurred, the property was advertised for sale. It was first bought by Musa Akuma who died before paying the whole amount. After readvertising the property, it was sold to Kampala Bottlers. the appellant in the second appeal.

The respondent then brought an action in the High Court challenging the sale of the property to Kampala Bottlers on the ground that the transfer was effected through fraud. The particulars of fraud were:

(a) Purported to appoint a Receiver under the terms of the deberture without having made a written demand for payment or without the debt becoming otherwise due and owing.

(b) Purported to appoint a Receiver orally contrary to the agreement.

$\ldots\ldots/4$

- (c) Charged the Receivers and Managers to realize the sum of Uganda shs.1,550,000/- from the Plainuff contrary to the provisions of the debenture which the debenture could be realized on security was shs.1,000,000/-. - (d) Acted fraudulently in concealing and is still fraudulently concealing the state of the plaintiff's occurents at the time of the appointment of the Receiver and Manager. - (e) Acted fraudulently in realizing securities under equitable mortgage without recourse to Court. - (f) Acted fraudulently in realizing the suit premises under an equitable mortgage by private treaty. - (g) Acted fraudulently in realizing the suit premises at a time when the plaintiff's indebtedness was quite minimal in relation to the value of the suit premises. - The transfer filed with the Registrar of Title was fraudulent in as much as the proper purchase price was not stated. $(h)$

The respondent prayed for the following orders:-

- a declaration that the bank and their agents acted fraudulently $(a)$ in selling the respondents' property; - an order that the suit premises on Plots $171/\mathit{7}$ and $136$ Sixth Street be returned to the respondent, and cancellation of Kampala Bottlers' $(b)$ Certificate of Title; - (c) an order directing the Registrar of Title to register the respondent as proprietor;

(d) general damages for fraudulent and unlawful appointment of receivers and managers;

$-.15$

- mesne profits from the date of fraudulent or unlawful $(e)$ appointment of recevers and managers to the date of judgment; - $(f)$ rent for the Suit premises from the date of judgment till handover of the premises; and - $(g)$ costs and interest.

In its written statement of defence, the bank denied that in selling the property it committed any fraudulent acts. The bank pleaded that it appointed receivers under the powers conferred on it by the security given by Uganda Bottlers after default in payment of the loan extended by the bank, and that the receivers sold the property to realize the security. They pleaded further that if Mr. George Egaddu was improperly appointed in breach of the terms of the debenture, then the proceedings were commenced outside the period of limitation and alternatively, the respondent was stopped from bring, the proceedings as it should have complained at the time when the receiver was carrying out his duties.

At the hearing of the Suit, the following issues were framed:

- 1. Whether the appointment of Receivers was validly made. - Whether the sale of the premises was legally made. 2. - 3. If the Receivers were appointed in breach of the terms of the debenture, were these proceedings commenced outside the period of limitation? Alternatively is the plaintiff $\overbrace{\text{stopped}}^{\Omega}$ bringing these proceedings?

If not what remedies are available to the Plaintiff.

The respondent called Mr. Manyi (PW1) who admitted that at the time of appointing receivers the respondent owed money to the bank. He also admitted that Mr. Birnie and Mr. B@bbington were appointed receivers but did not know whether Mr. Egaddu was appointed. Mr. Egaddu (PW5) testified that Mr. Birnie and Mr. B&bbington were appointed receivers, and that at the time of appointment the respondent owed shs.1,550,000/= to the bank. It was his evidence that following the departure of Mr. B&bbington, he was appointed a receiver as per Exh. P. 12. Thereafter the properties were advertised and sold to Kampala Bottlers and conveyed to them.

$\mathbf{6}$

On the first issue, the learned judge held that the receivers were not validly appointed because they were not appointed in writing by the bank. As regards the second issue, the learned judge held that the purpoted sale of the suit premises was null and void as the purported receivers were not properly appointed. On the third issue, the learned judge held that since the action which was filed on 7.7.92 was for recovery of land which had been transferred on 10.9.80, the action was not out of time since it was filed within the limitation period of 12 years. On the question of estopped he held that the respondent was not estopped from challenging the appointment of receivers because its Managing Director had not intentunally led the bank into believing that the appointment was correct. As regards the remedies, the learned judge declared the Sale of the Suit Property null and void and awarded normal damages of shs.500.000/= to the respondent.

. It is against that decision that the appellant bank has appealed to this Court.

In the second suit, CS No. 435/92, the respondent sued Kampala Bottlers claiming a declaration that the registration of Kampala Bottlers as propretor of the suit premises was fraudulent and therefore null and void. The respondent also prayed for an order that it was entitled to be reinstated as the registered proprictor.

$\ldots$ .

It was pleaded in the plaint that appellant had purported to purchase the suit premises from the bank in settlement of a loan owed by the respondent to the bank. As a result of the sale the appellant had got registered as propriator of the suit property on 25.9.80. The respondent contended that the transfer was fraudulently made with the full knowledge of the appellant rendering its title null and void. The following particulars of fraud were listed:

$\overline{7}$

- No stamp duty was paid in respect of the registration. $(a)$ - Instrument No. 207622 of the 25.9.80 does not exist. $(b)$ - The registration of the appellant was based on a $(c)$ document or documents which were incompetent to pass title and this was known to its representatives.

$\mathcal{A}$

The appellant denied all the allegations of fraud in its written statement of defence. It pleaded that it bought the suit properties in 1979 from the receivers and managers of the respondent and was subsequently registered as proprietor of the properties.

At the hearing of the suit, two issues were framed, namely,

- 1. Whether the transfer by defendant in Civil Suit to defendant in HCCS No. 435/92 was fraudulently made. - 2. If so, whether the plaintiff is entitled to reliefs sought.

The learned judge answered the first issue in the negative holding that no fraud had been proved against the appellant. The learned judge however held that the issue had been incorrectly drawn to depend sorely. on fraud and that the real issue was nullity of the transfer. He held that despite the provisions of the Registration of Titles Act which appear to preclude interfering with the Tittle of the appellant, nevertheless he was able to do so where the purported transfer was null and void. He therefore made the following orders:

$\ldots / 8$

(a) an order that the premises be returned to the respondent, and the name of Kampala Bottlers, the appellant, be cancelled from the Certificate of Title;

**TEMPLATER SERVICE**

(b) an order directing the Registrar of Title to register the plaintiff as propriators.

It is against that decision that the Kampala Bottlers has appealed to this Court.

I shall first deal with the appeal by the bank against the respondent, Uganda Bottlers. The bank has appealed on nine grounds. The late Mr. Kateera, learned counsel for the appellant, filed written submissions which were relied on at the hearing of the appeal by Mr. Kagumire who took over the conduct of the appeal from him.

Learned Counsel for the appellant bank abandoned ground eight which complained about the award of interest, and argued the first ground first. This ground is that having held that the appointment of the receiver or receivers was done in breach of the contract which was constituted by the debenture, the learned trial judge erred in law in failing to hold that the action was statute barred. It was submitted that the cause of action accrued more than six years before the commencement of the proceedings and the suit was brought out of time and since the plaint did not state the grounds of exemption from the time barrier as required by 0.7 $\sqrt{6}$ of the Civil Procedure Rules and on the authority of Iga V Makerere University (1972) E. A. 65, the action should have been dismissed or struck out. For the respondent it was contended that the action was not for breach of contract but $f\overrightarrow{\phi}f$ recovery of land and since the time started running from the time of the transfer of the suit property, the action was not statute barred.

In dealing with the issue of limitation, the learned judge said, $% \left\vert \mathbf{r}\right\rangle$

"On the period of limitation which is pleaded in the defence, it is argued that there was a breach of contract, that is the debenture, on the appointment of Mr. Egaddu ..... the plaint therefore, was brought out of time and does not contain grounds for the claim of exemption from limitation as required by O. VII v 6 CPR $\,$ since the breach was of contract the period is 6 years.

.... $/9$

On this, the plaintiff argues that it was only aware of the appointment of receivers in 1991 and therefore that is the date from which time runs".

$\mathbf{Q}$

The learned judge then went on to reject the respondents' claim of lack of knowledge in these words:

> "It is however clear the company was aware of the purported appointment of receiver at the meeting of 13.2.76 and actively participated during the afternoon meeting although the parties at present say they did not know of this; however, that does not assist either them or we since a proper representative of the company appears to have known at the time".

It was submitted for the appellant bank that lack of knowledge was not a valid ground for exemption from limitation and time could not be extended except for fraud, mistake or disability. In the present case, the grounds were not stated in the plaint nor were they proved and therefore time could not be extended. The action for breach of contract was therefore time barred and the trial judge aught to have so held.

The learned judge however held that the action was not time barred because it was for recovery of land. I am unable to agree with this finding. The action was clearly based on breach of contract, the debenture. The breach may may have included the sale of the suit property in addition to the appointment of receivers. But it was not for recovery of land because the bank was not holding the suit property, which had already been sold, transferred and registered in the name of Kampala Bottlers. No such land could be recovered from the bank, but only damages which indeed were awarded.

$...10$ Even if the action was for recovery of land, it was time-barred since the Suit property was sold in 1979 and the Suit was filed in 1992. Accordingly, the learned judge erred in holding that the respondent's action was not time-barred, and in failing to dismiss the Suit. This ground alone could have been sufficient to dispose of this appeal but in view of the importance of other remaining grounds, I shall consider them.

The first, second and sixth grounds of appeal relate to the appointment of receivers. The main complaint is that the learned judge was wrong in holding that the receivers were not validly appointed and that their purported appointment was therefore null and void. Clause 7 of the Debenture provided,

"7. At any time after the principal sum hereby secured became payable either as a result of lawful demand being made by the bank or under the provisions of Clause 6 hereof the bank may appoint by writing any person ........ to be a receiver or manager of the property hereby charged or any part thereof and may in like manner ...... appoint another in his stead."

It was the respondent's contention that there was no appointment of all receivers. But the evidence produced by the respondent contradicted its arguments. Its witness Mr. Manji testified:

"As far as I can ascertain Bebbington and Bernie were appointed receivers at that meeting. Registrar of Companies was notified of the appointment. I admit that Bebbington and Biernie were properly appointed".

The learned judge accepted this evidence, which was a crucial admission, when he said,

"I understand that Counsel have agreed that Mr. Birnie and Mr. Bebbington were appointed in the manner set out in the letter p. 3 dated 28.10.92 ........ Then the evidence as is set out in that letter amount to the fact that the receivers were appointed at the meeting of 13.12.76 which was attended by Mr. Sekajja, then Manager of the bank. That appointment was reduced in writing in Mr. Birnie's notes of the meeting."

$10$

Despite those observations, the learned judge held that the two receivers were not appointed in writing because the recording of the appointment by Mr. Birnie could not help the situation since he was acting as agent of the respondent, not of the bank which had the duty to appoint. The learned judge held that the provisions of the mortgage Decree applied to the suit and they required that the appointment of receivers be in writing. He also relied on the decision of this Court in Grindlays Bank Ltd versus Boazi, Civil Appeal No. 23/92 (unreported) where it was held that verbal appointment of receivers does not satisfy the requirement of the Mortgage Decree and that a sale by such receivers was null and void.

$11$

As learned Counsel for the appellant submitted, the learned judge appears to have misdirected himself on the evidence when he held that the first two receivers were not properly appointed. The evidence adduced by the respondent was to effect that the receivers were properly appointed. Where then was the contrary evidence on which the learned judge based his finding? In my judgment he ought to have found that Burnie and Bebbington had been properly appointed. They were appointed by the bank orally in a meeting attended by a representative of the respondent, and the appointment was later reduced in writing by Mr. Birnie. It was not proved that Mr. Birnie was not acting on behalf of the bank or authorised to do so by the bank. Therefore even if the Mortgage Decree was applicable to the transaction, its requirement as to written appointment of receivers was complied with. But in my opinion, the Mortgage Decree did not apply to this case because the debenture was not registered in the Land Office, but in the Registry of Companies. The case of Grindlays Bank Ltd. versus Boazi (Supra) is therefore distinguishable and was inapplicable to the present case. I shall say more about this case later. $\mathcal{L} = \mathcal{L}$

$\cdots$

I shall now consider the appointment of Mr. George Egaddu. It was contended by the appellant that he was properly appointed as a receiver, and the learned judge was wrong to hold otherwise. The respondent called Mr. Egaddu who noted that when Mr. Bebbington left the Country Mr. Birnie as the remaining Joint Receiver and Manager advised the appellant to replace him by Mr. Egaddu. This was contained in Mr. Birnie's letter dated 12/4/77 (Exh. P.12) addressed to the General Manager of the appellant bank the body of which read:

## "Uganda Bottlers Limited - in receivership

Following the departure of Mr. Roger Bebbington from Kampala would you please appoint Mr. George William Egaddu to act as Joint Receiver and Manager of Uganda Bottlers Limited with Mr. James T. Birnie by filing form A.7 with the Registrar of Companies. Please send us a copy of the completed forms.

Mr. Egaddu should be authorised to operate the Receivers and Managers Bank Account in place of Mr. Bebbington and specimens of his signature are enclosed for your records."

On 14th April, 1977, the Manager of the appellant bank replied the above letter addressed to the Joint Receiver and Manager, $\epsilon$ oopers & Lebrand, a firm in which Mr. Egaddu was also working, stating: $\sim$ $\sim$

We thank you for your letter No. U/98/SP dated 12th April, 1977.

We have deleted Mr. Roger Bebbington from our records and replaced him with Mr. Egaddu."

Mr. Egaddu testified that there was another letter written to him about the appointment but which he could not produce. Nevertheless his evidence was not contradicted.

$...13$

The learned Jurlge held that the letter of 14lh Aprll, 1977 dtd not aoount to an appolntoent by the bank ln wrltlng but nerely a replaceoent of hlo ln the bankrs recorde. He stated:

tThere seeos llttle doubt that there wae no valld appolntnent of the purported Recelvere at the outset. As to the purported appolntEent of Mr. EgarIIu Lt aeeEs only that the bank replaced h1m ln thelr records and dld not take tlle step of .ppolntment ln \*r1t{ng: tt would be dlfflcu1t to 'cplace Mr, Bebblngton wlth !lr, Egadrlu ln the bank recorda wlren Hr. Bebblngton had not apparently been properly appolnted."

the The learned Judge also held thst Hr. Egaddu had falled to dlscharge burden whlch lay on hln to show thet he had been properly appolnted

ttl thtnk both Ju6tlc€ Tsekooko and nyself expecE nore frol! a Partner of an Internatlonel FLrm llke Coopers & Lybrand than the rsther lncluelve evldence whlch- flnally appeared on tlre record, rl

l.llth respect I thtnk the laat conment wa8 a Blsdlrectlon on th€ evldencs. There waa no evldence to shoL, that coopera 6 Lybrand xs8 a firo of lnternatlonal repute, end lf lt ea8 then lt8 practlce ln handllng recelvershlp ought to have been glven aooe credence. Secondly Egaddu wae a wltneaa called by the resPonde[t and hle evldence waB that he wae properly appolnted. There waa no contrary evldence adduced to contradlct hln. The respondent, coulu not turn round and argue that he was not properly appolnted.

On the evldence adduced by Mr. E86ddu, I tlrlnk that the learned Judge came to uronB concluslon that Egaddu had not been sppolnted ln lrrltlng. The letter fron the bsnk dated 14th Aprtl, 1977 was a vnlld apporntrnent ln wrlting. The letter was ln effect lnfornlng Hr, Egaddti that he had been eppolnted a Rocclvcr. lt do.s not mattdt ulrether the eord "gppolnted" lras not u8ed or that thc letter r.,as not,addreaaed epeclflcally to t'lr. Egaddu. The lntentlon and effect of the lett€r tras to appolnt Hr. E8addu aa Recelver ln replaceoent of Hr. Bebblngton, and thle nas done.

....lLq

and obeerved:

l I

I i

In Windsor Refrigerator Co. Ltd. versus Branch Nominees Ltd. (1961) 1 All E. R. 277, Lord Evershed said at page 282:

"The words are quite simple words 'appointment by writing' and in construing them it is fair to note that the condition also empowers the debenture holders by writing to remove. For myself I should have thought that those words should be satisfied if something was done, if the person acting for the debenture holders conducted himself that one could say he was appointing someone to be a Receiver and if he accompanied that by handing in writing which was the Company's writing to the Receiver."

I am satisfied that in the present case the appellant bank conducted itself in such a manner that it can be said that it appointed Mr. Egaddu as a receiver and manager in writing.

Accordingly, I hold that all the receivers were properly appointed and the learned judge erred in holding otherwise. The first, second and sixth grounds must, therefore, suceed.

The fourth ground of appeal is that the learned judge erred in law in holding that the Receivers should not have collected more money than was borrowed by the respondent since it is the duty of the bank in Law to protect the interest of the borrower by selling at the best price possible. It is true that the receivers were charged with realizing shs.1,550,000/= whereas the deberture stated that the maximum amount for which it was security was shillings one million only. The learned judge criticised the appeliant and the receivers for realizing more money than what was fixed in the deberture. This complaint was one of the particulars of fraud listed by the respondent in the plaint. However the learned judge found that this particular of fraud had not been established since the only way of winding up the respondent $\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\!\$ company was to sell its assets including the plots. The holding by the learned judge that the receivers should not have collected more money than what was borrowed by the respondent was wrong and ground four must succeed.

$...15$

$14 -$

In ground five, it is complained that the learned judge erred in Law in relying on the authority of Grindlays Bank (Uganda) Ltd. versus Boazi (Supra) when this authority is clearly distinguishable in that it was expressly admitted that case that the seller was appointed as an auctioneer rather than as a Receiver. It is therefore necessary to examine the Boazi case.

In the Boazi case (Supra) the respondent sued the appellant 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 damages for trespass and mesne profits, among other reliefs. The facts giving rise to the cause of action were that one Joe Mayanja had obtained a loan from the appellant bank which was secured by the respondent mortgaging his property to the bank, under a Mortgage Deed. The principal debtor defaulted in repayment of the loan whereupon the appellant recalled the loan with notice to the respondent. When the debtor failed to pay, the appellant instructed his lawyers to appoint a receiver which they did. The receiver then sold the mortgaged property.

At the trial, the learned judge held that the purported appointment of the receiver was invalid because it did not comply with the mortgage deed. He also held that there was not sale since it was not carried out by a receiver nor effected by public auction, nor through a Court Order for fore-closure. He found that the Mayanja did not owe the bank anything, nor had a demand been made to him. He finally held that the purported transfer was invalid and therefore the respondent was entitled to repossession of the property. The respondent was awarded general damages and mesne profits.

On appeal to this Court, it was held that Mayanja owed the bank money, but that the bank had not made a direct demand in writing to Mayanja or the respondent for repayment of the loan as required by sections 115 and 116 of the Registration of Titles Act under which the deed was registered - as an equitable mortgage. On the question of appointment of a receiver, the Court held that the purported appointment of the Court Broker as receiver was invalid as it was not done in accordance with the provisions of the mortgage deed or sections 2, 3 and 5 (4) of the Mortgage Decree 1974, in that the appointment was not done by a Manager of the Bank or its official but by its lawyer.

- 15 -

$...16$

The Court therefore held the sale to be null and void because it was not done by a receiver nor was it done by public auction but by private treaty. The appeal was accordingly dismissed and the decision of the

Clearly the Boazi case is distinguishable $F$ the instant case on the following grounds:

trial judge upheld.

- (1) It was admitted in evidence in the Boazi Case that the person who sold had not been appointed as a receiver but as an auctioneer whereas in the present case, the evidence was that the receivers were duly appointed. - There was no document by which the bank appointed a receiver $(2)$ whereas in the present case there are written documents. - (3) There was no evidence that money was demanded before sale as required by the mortgage deed whereas in this case there was no need for the demand because the respondent company ceased to do business. - Though the property was sold, it remained registered $(4)$ in the name of the plaintiff and the bank had not at the time of the trial transferred it to a third party as in the present case. - In Boazi's case there was evidence that when the sale $(5)$ di not take place on the first occasion, the property was sold later without further advertisement. But in the instant case, the properties were sold following advertisement and moreover, the Deberture gave power to the receiver to sale in such a manner and or such terms as he thought fit.

$\ldots / 17$

The learned judge was therefore wrong in applying the Boazi Case to the instant case when it was distinguishable. Accordingly ground five succeeds.

The next ground to deal with is ground seven. It states that the learned trial judge erred in Law in failing to hold that the respondent was estopped in bringing these proceedings. It was submitted for the appellant that since the Managing Director of the respondent company took part in the decision to put the company under receivership and was present when the receivers were appointed, and later handed over the cash, cheque books, insurance policies and keys to the receivers, the respondent was Q stopped from challenging the appointment of the receivers and in bringing these proceedings. The appellant relied on the decision in Bank of Baroda versus Pannessar and Others (1986) 3 All E. R. 751. It was also the appellant's contention that the learned judge was wrong in relying on the Boazi Case (Supra) and on Section 113 of the Evidence Act.

In considering the point of estoppel, the learned judge observed, rightly in my view, that the point had not been specifically argued in the Boazi Case although he thought that Manyindo D. C. J. had dealt with it by implication when he said:

"The property could only have been sold by a receiver. There was none, so the purported sale was null and void. There was 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 advertised following the stay of the first auction."

$\mathbf{G}$

With respect there is nothing in the above passage or in the entire decision which deals with the point of estoppel, directly or indirectly. Therefore the learned judge erred in relying on the Boazi Case on the point.

$\ldots\ldots/18$

$18 -$

which provides:

"When any person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or representative, to deny the truth of that thing."

The learned judge then held that since expertise in such matters of appointing rests with the bank and the receiver and not the company, the respondent could not be blamed for failing to challenge the wrongful $\mathcal{L} = \mathcal{L}$ appointment. He said:

"Is it really fair to say that the Managing Director whose experience is with bottles and coca cola really by his declaration act or omission intentionally caused or permitted the Bank to believe that the appointment of receivers was correct? I do not think so, in this case at any rate. In my view it was the other way round."

The above statement seems to be a misdirection on the evidence. There was no evidence that the Managing Director of the respondent did know the correct procedure for appointing a receiver. The Managing Director did participate in the appointment of the receivers and he must have known under what powers the appointment was being made and the requirements for such appointment. He had the Deberture Deed to guide him. He subsequently co-operated with the receivers in handing over the respondents assets. In these circumstances, he must have by his conduct represented to the appellant that the appointment of receivers was proper. The appellant clearly acted on that representation. In Bank of Baroda Ltd versus Pannessan and Others (Supra) the borrowers exceeded the overdraft limit set by the Bank and the bank appointed a receiver. The appointment was challenged on the grounds that:

- the bank was not justified in appointing a receiver $\begin{pmatrix} A \end{pmatrix}$ under the terms of the debenture in that notice of demand was sent after the receiver was appointed; - no reasonable notice was given to the debtor to raise $(b)$ the money; - the notice was defective in that it did not specify the $(c)$ amount owing.

The Court held that the appointment was valid but that even if it had not been valid, the Court would have held that the debtor would not recover because of estoppel, since nobody from the debtor company took objection. There was evidence that the receiver was in touch with members of the debtor company and their Solicitors, and one of the Directors of the Company was dealing with the receiver on the footing that he was properly appointed. Walton J said, at page 763,

"It seems to me that under these circumstances there can be no real doubt but the Companies are themselves estopped from denying that, indeed, the receiver was properly appointed."

That decision supports, in my view, the contention of the appellant that the respondent was estopped from bringing these proceedings. Furthermore, there is nothing in the evidence to show that the Managing Director of the respondent Bank was or acted/a misapprehension created by the appellant bank about the validity of the appointment.

$\frac{1}{20}$

The principle upon which estoppel is formed is that the law should not permit an unjust departure by a party from an assumption which he has caused another party to adopt for the $\frac{puvpcs}{propose}$ of their legal relationship. Here there is no evidence that the Managing Director of the respondent had been misled by the appellant to believe that a certain fact is true. Accordingly, ground seven must also succeed.

The last ground argued in this appeal is ground nine which criticises the learned judge for failing to hold expressly that the receiver was an agent of the respondent and that only the respondent was responsible for his acts or defaults. The Learned Counsel for the appellant submitted that even if the receiver was improperly appointed he was acting as agent of the respondent and not of the appellant as the learned judge held. Counsel cited the case of Bank of Baroda Ltd versus Pannesser (Supra) to support his contention. In this case Walton J, said, at P.764:

"One of the points that Counsel for the Wives sought to make was to treat Mr. Singla as an invalidly appointed receiver as being the agent of the bank by whom he was appointed. This seems to me not to be the case at all. The proposition can be put in this way: can an invalid exercise of a power to appoint $X$ as the agent of $Y$ have the effect of making $X$ the agent of the appointor? And I can see no conceivable reason why it should do so. The person making the appointment is definitely not appointing an agent of his own, he is giving no authority to the receiver to bind him in any way whatsoever. It is perfectly true of course, that there are cases to this effect, that if, having made the appointment as agent of the Company, the debenture holder then controls the receiver and what the receiver does, it may be concluded that in fact the receiver is his agent. But nothing of this kind has been suggested in the present case. Mr. Singla went his own sweet way, conducting the affairs of the companies as he thought best, but in purported status as agent of the companies.

$20 -$

And I see nothing at all which would render the bank liable for any acts of which Mr. Singha as receiver if he was invalidly appointed."

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This authority clearly settles the point about the agency of the receiver. He is the agent of the debtor, not the bank, even if invalidly appointed. Therefore the bank cannot be held responsible for the receivers actions. As Walton J suggested in the Pannesser Case (Supra) the receiver could be sued in those circumstances. Ground nine must also succeed.

In the result, I would allow the appeal in Civil Appeal No. 29 of 1995. I would set aside the decree and orders of the learned judge, and substitute an order dismissing the suit with costs to the appellant. I would award the costs of this appeal to the appellant.

I shall now move on to consider the second appeal, namely Civil Appeal 16 of 1995. Four grounds of appeal were filed. According to Dr. Byamugisha learned Counsel for the appellant, Kampala Bottlers Ltd, the last three grounds are in the alternative to the first ground which states:

"Having answered issue 1 in the nagative as he did, the learned trial judge erred in law in not then dismissing the plaintiffs suit with costs."

The second ground of appeal is that the learned judge erred in law and fact when he held that the second issue had been incorrectly drawn to depend sorely on fraud when the real issue was nullity of the transfer. The third ground which is in the alternative critises the learned judge for holding that the action was not barred by limitation. The fourth ground complains that the learned judge erred in law in holding that the appointment of the receivers was null and void and therefore their action in selling the property was also null and void. $\cdots \longrightarrow \cdots \longrightarrow \cdots$

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I shall now consider the first ground of appeal which is the main ground in this second appeal. It is based on the finding of the learned judge on the first issue in the suit which was whether the transfer by the defendant in that Civil Suit to the defendant in Civil Suit No. 435/92 was fraudulently made. The learned judge held that the transfer was not fraudulently made since fraud has not been established. Dr. Byamugisha submitted that, that finding was sufficient to dispose of the Suit in favour of the defendant/appellant.

I entirely agree with Dr. Byamugisha that the first issue was sufficient to dispose of the Suit in view of Section 184 of the Registration of Titles Act which protects a registered propretor against ejectiment or any action for recovery of land except on any of the four specified grounds, one of which is registration through fraud. Indeed the Section makes clear that:

"..... in any case other than as aforesaid the production of the registered certificate of title or lease shall be held in every Court to be an absolute bar and estoppel to any such action against the person named in such document as the grantee, owner, proprietor or lessee of the land therein described any rule of law or equity to the contrary not withstanding"

The meaning and effect of this Section has been considered in a number of decisions of this Court which include David Sejjaaka versus Rebecca Musoke Civil Appeal No. 12 of 1985 (unreported) and Kampala Bottlers Ltd. versus Daminico (U) Ltd, Civil Appeal No. 22/92 (unreported). These decisions emphasise that the certificate of a registered proprietor is unimpeachable except on ground of fraud. Mere irregularities in the registration of title are not sufficient unless they amount to fraud. The learned judge held that the registration of title by the appellant was null and void because the receivers were not validly appointed. The invalid appointment of receivers could not by itself defeat the title of

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a registered proprietor, the appellant, unless there was fraud proved against the appellant. In any case I have held that the appointment of the receivers and the sale to the appellant were validly carried out. Therefore the issue of nullity did not arise and the learned judge was wrong in relying on it to defeat the title of the appellant who was in my view a bona fide purchaser without notice. I thereore find merit in the first ground of appeal which in my view is sufficient to dispose of this appeal. Consequently I do not find it necessary to deal with the remaining grounds of appeal, which must fail, for the reasons already given.

Accordingly, I would also allow the appeal in Civil Appeal No. 16 of 1992. I would set aside the decree and orders passed by the learned judge and substitute an order dismissing the action against the appellant with costs. I would award the costs of this appeal to the appellant.

Ù. 1996. day of. Delivered at Mengo this.

![](1__page_22_Picture_4.jpeg)

# IN THE SUPREME COURT OF UGANDA AT MENGO (CORAM: KANYINDO DCJ, ODOKI JSC, & ODER JSC)

### CIVIL APPEAL NO. 29 OF 1995

#### **BETWEEN**

GRINDLAYS BANK (UGANDA) LTD ...... APPELLANT

AND

UGANDA BOTTLERS LTD ........................ RESPONDENT $\sim$ (Appeal from the judgment and Decree of the High Court of Uganda (Porter J) dated 2nd May, 1995

Civil Suit No. 114 of 1992)

AND

#### CIVIL APPEAL NO. 16 OF 1996

#### **BETWEEN**

KAMPALA BOITLERS LTD ......... APPELLANT

AND

UGANDA BOITLERS LTD ............................. **RESPONDENT** $\ldots \ldots$

(Appeal from the judgment and Decree of the High Court of Uganda (Porter J) dated 2nd May, 1995

Civil Suit No. 435 of 1992)

# IN THE SUPREME COURT OF UGVIDA

### AT MENGO

(CORAM: MANYINDO, D. C. J., ODOKI, J. S. C., & ODER, J. S. C.)

CIVIL ATTEAL NO. 29 OF 1995

## BETWEEN

# GRINDLAYS BANK (UGANDA)LIMITED :::::::::::::::: APFELLANT

AND

<table><tbody>U. GANDA BOTTLERS LTD.::::::::::::::::::::::::::::::::: RESPONDENT

> ( Appeal from the judgment and Decree of the High Court of Uganda at Kampala (Porter, J.) dated 2.5.1995 in NCCS NO. 114 of $1992$ )

#### **AND**

## CIVIL APPEAL NO. 16 OF 1996

#### BETWEEN

KAMPALA BOTTLERS LTD. :::::::::::::::::::::: APPELLANT

AUD

UGANDA BOTTLERS LTD. 11111111111111111111111111

RESFOIDEIT

(Appeal from the judgment and Decree of the High Court of Ugunda at Kampala (Porter, J.) dated 2.5.1995, in HCCS. Ho. 435 of 1992)

JUDGMENT OF ODER, J. S. C.

I have had the benefit of reading in draft the judgment of Odoki, J. S. C. and I agree with it. Both appeals should be allowed with costs to the appellants.

# JUDGMENT OF MANYINDO, DCJ

I read the judgment of Odoki, JSC in draft and I agree that these appeals should be dismissed for the reasons stated in his bell condidered judgment. As Oder, JSC/elso it is so ordered. There will be orders with costs interm proposed by Odoki, JSC.

Dated at Mengo this 17th Day of May 1996.

Dhayjindo.

S. T. Hunyludo DEFUTY CHIEF JUSTICE