Habre International Uganda Limited v Dabo Kalilou (Civil Suit No. 739 of 2006) [2011] UGHCLD 2 (17 March 2011)

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## **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMAPALA [LAND DIVISION]**

### **CIVIL SUIT NO. 739 OF 2006**

**PLAINTIFF** 5 **DABO KALILOU DEFENDANT HABRE INTERNATIONAL (U) LTD. ::::: VERSUS**

### **BEFORE: HON. JUSTICE RUBBY AWERI OPIO**

## JUDGMENT

## **Introduction: 10**

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The Plaintiff **Habre International (K) Limited** formerly known as **Habre International Trading Company Limited** and later **Habre International Trading Company (1993) Limited,** filed this suit against the Defendant DABO KALILOU seeking the cancellation ofthe Defendant's name on the certificate of title to the land comprised in **Block 12 Plot** 885 Land at Mengo. The suit further sought special and general damages and costs. The Plaintiffpremised its action on the grounds that the Defendant in purporting to purchase the suit land dealt with one Hussein Abdalla in the transaction which transaction was tainted with fraud and illegalities. The Plaintiff contended tha\rt all material times, it had been the registered proprietor of

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the suit land and was in occupation. Without the authority of the Plaintiff, the Defendant did enter into a transaction with respect to the property with Hussein Abdalla, a director of the Plaintiff wherein a transaction was allegedly signed by the said Hussein Abdalla and subsequently the Defendant did procure the registration of himself as proprietor sometime on <sup>1</sup> December 1994. On or about 4th June 2006, the Defendant through his servants and or agents entered the suit land and demolished the Plaintiffs structures thereon.

In his defence, the Defendant denied the claim and contended that he purchased the suit land from authorised directors ofthe company who signed transfer forms which enabled him to get registered on the title on 1st December, 1994. Thereafter, he took possession ofthe property. He denied any fraud either on his part or that ofthe directors who authorised the sale of the suit land.

At the commencement of hearing both Counsel filed a joint scheduling memorandum whereupon the following issues were agreed for determination.

### Issues:

- Whether the defendant purchased the suit land from the Plaintiff **(1)** company. 2.0 - Ifso, whether the purchase was tainted with fraud and illegality. **(2)**

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- (3) Whether the Defendant demolished the Plaintiffs structures on the suit property. - (4) Remedies available to the parties.

In an effort to prove its case on the balance of probabilities, the Plaintiff relied on the evidence of one **Hassan Hussein** in support of its case while the Defendant gave his evidence and called one witness in support of his case.

### Evidence:

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**Hassan Hussein Pwl** - **<sup>33</sup> years old** testified inter alia that he was <sup>a</sup> director in the Plaintiff company. He stated that he knew the Defendant in 2006. In 2006 he got involved in a dispute with one Abdul Karim where he has a Pool table. To solve the dispute they were to get a surveyor to open up the boundaries. In the process he had to get a certificate oftitle in respect of Plot 885 which is the suit land. That was when he realised that the land had been transferred in the names ofthe Defendant and yet all along he thought the land was belonging to the Plaintiff. Subsequently the Defendant demolished all the structures on the Plot in June 2006.

After the demolition and upon discovering that the title was changed into the Defendant's name, he caveated the title and carried investigations and found that the transaction was fraudulent because there-was a conspiracy to defraud the Plaintiff because the property was under Greenland Bank. There was no resolutions by the directors authorising sale. There were three directors if?

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Hussein Abdalla, Abdalla Hussein and Adam Hussein but only one director purported to sign the transaction involving the Plaintiff (Habre International (1993). Hussein Abdalla had no authority to sign alone, He stated further that resolution (exhibit D2) allowing Hussein Abdalla to get a loan or sell the property was okay because it was effected because Hussein Abdalla got a loan from Greenland Bank. After securing the loan, Hussein Abdalla could not again use the same resolution to effect a sale. He testified further that the said resolution was signed by Directors of Habre International Trading Company Limited but by the time the Defendant acquired the suit land the company had changed to Habre International 1993 Limited with new Board ofDirectors and new shareholders. Therefore, documents signed to enable Husseing Abdalla to mortgage or sell Plot 885 by the Directors of Habre International Company Limited could not work for Habre International (1993) Limited. He testified further that the transfer documents were signed by Hussein Abdalla for Habre International Trading Company Limited. However no other people signed to witness for Habre International Trading Company Limited.

He pointed another fraud when the Defendant claimed he had bought the land at 14 million and yet in the transfer documents the price was indicated at 2 million only. He stated that the Defendant being a foreigner could not own a Mailo land without Ministerial consent. Lastly the witness presented the value of his destroyed property at Shs.10.5 million. He prayed court to cancel the Plaintiff's name and return the land to the rightful owner i.e. Habre International Kampala Limited.

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*Ilf* In cross-examination he testified that he was born in 1977 and that in 1994 he was 17 years old. He stated that he became a director in 1997. He conceded that in 1994 he was not a director. In 2006 there were five directors - Hussein Abdalla, Jamilia Hussein, Fatuma Hussein, Asha Hussein and Hassan Hussein. He stated that company matters are carried out by resolutions. He stated that the legal effect of change of name of a company does not nullify previous transactions before change of name.

He conceded that he was not privy to the change of name in 1993. He stated that the change of name from Habre International Trading Company 1993 to Habre International Kampala Limited was dated 20-10-1997 and by that time, he was not a member of the company. He stated that Patrick Kamugasha and Yusuf Ali were directors of Habre International Trading Company Limited and that the two were involved in the change of name from Habre International Trading Company to Habre International Kampala Limited. He admitted that Greenland bank never complained that it had been unlawfully deregistered. Fie concluded that he was different from the company and that the people on the land had been put there by Hussein Abdala. They were Ibrahim Kalou, Mariam Zainab and others.

In a short re-examination he admitted that exhibit D2 mentioned four directors but he only knew the signature of Hussein Abdalla. He concluded that the resolution shows that there were four people in the meeting but did not show that there was a resolution.

The Defendant, **Dabo Kalilou** testified that he was the owner ofthe suit land (exhibit P6). He stated that in 1994 he was informed by one Cisse

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occu **Abukabar** that his friend (Cisse) had land for sale. **Cisse** later took him to that man called **Habre Hussein Abdalla,** the father of **Hassan Hussein** (Pwl). **Cisse** took him to **Hussein Abdalla's** office in a shop at Nakasero. It was a shop with a sign post of **Habre International. Cisse** introduced him as a person interested in buying the land. Thereafter they went to see the land at Mengo. After seeing the land, they started negotiating the price from 21 million, 18 million and eventually they came down to 14 million. Hussein Abdalla then took him to his lawyers M/S Kayondo where he paid half ofthe price and the balance was to be paid after all the documents were prepared and title transferred in his name. The transaction was handled by **Kayondo's** son **Alexander.** The transaction took sometime because **Hussein Abdalla** had some problems to sort with Greenland Bank. Eventually they signed **a** Sale Agreement exhibit DI. The parties were himself and **Habre Inernational Trading Company Limited. Hussein Abdalla** said he was a Director of the company. **Hussein Abdalla** went with **Yusuf Ali** whom he said was the company secretary. **Hussein Abdalla** said he had taken a mortgage with Greenland Bank and requested for sometime to clear the same. The lawyers told him to sign transfer forms and leave the rest to him. After the paper works were concluded he paid the balance. Later **Hussein Abdalla** gave him the official receipt for the 14 million he paid plus all the documents in respect of the land from the <sup>1</sup>st owner to the rest. Later on **Hussein Abdalla** took him to those who were ipying the land and introduced him as the new owner. Those who were there were relatives of **Hussein Abdalla.** He went to the lawyer and he wrote to them to vacate (exhibit D4). Another notice was written in 1996. He stated that since then, he had been in occupation ofthe suit land until in 2006 when the suit was filed. He stated that the company never denied

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selling the land to him. That the Plaintiff company never advised the tenants not to leave the suit land. He stated that when he returned to Uganda in 2006 he ordered the tenants to vacate but they told him that they had some difficulties. So he helped them with \$.4000 and they vacated. After the vacation, he demolished the building. He concluded that the Plaintiffs claim was baseless because he bought the property genuinely and that he did not know **Hassan Hussein.**

In cross-examination he stated that he left all the rest of the transactions to be done by his lawyers, including getting ministerial consent. He stated that he dealt with **Hussein Abdalla** because of the confidence he got from lawyer Kayondo. He stated that **Habre International** got registered on the title on 1/12/1994 and immediately transferred the title to him.

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After getting the title he went to the lawyer and paid the balance to **Hussein Abdalla.** He concluded that he did not know about the stamp duty because he only signed the papers. He stated that after paying the final balance they backdated the agreement to reflect the 1st deposit.

**Mohamed Gakou** Dw2 testified that he had known the Defendant since 1999 and both ofthem came from Mali. He testified that he knew the plot in dispute because he was the one supervising it on behalf of the Defendant who had left for Burundi. He started looking after the plot in the year 2002 when the Defendant was in Burundi. He was requested by the Defendant to build a wall fence around the house which he did within one month.

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He stated that when he was putting up the wall the Plaintiff company did not object. He stated that he knew the company since 1982 because they used to buy his goods which he was importing from Hong Kong. He testified further that **Hassan Hussein** was the son of **Hussein Abdalla.** That, **Hassan Hussein** never objected to the building of the wall. He concluded that in 2006 a one **Yusuf Ali** sent a letter to the Defendant that **Hussein Abdalla** was not supposed to sell that land to the Defendant. However the matter was sorted out and the Defendant's ownership was recognised. He concluded that it was the Defendant who is now in occupation ofthis land. He stated that he build a shade on a piece ofland bordering the Defendant's land for the purpose of baking bread. When that business collapsed he gave the shade to **Abdalla Hassan** who put a pool table there. Later the pool table was sold to Hassan **Hussein.**

After the closure of the Defendant's case both Counsel filed written submissions which I now proceed to consider.

### **RESOLUTION OF ISSUES:**

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**Issue <sup>I</sup> - Whether the Defendant purchased the suit land from the Plaintiff.**

It was the contention of the Plaintiff that the Defendant dealt with an individual and not a company.

It was further the contention of the Plaintiff and Counsel that at the time of the alleged transaction there was no company known as Habre International

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Trading Company Limited as the company had changed its name to Habre International Trading Company (1993) Limited; meaning that the Defendant had dealt with a non-existent company. Therefore there was no purchase of land from the Plaintiff.

It was further contended that at the time of the alleged' sale and transfer the Plaintiff company was not the registered proprietor ofthe said land.

All those allegations were denied by the Defendant.

The important questions to answer are: whether the said Hussein Abdalla acted in his personal capacity in the transaction or as the company's agent?

What was the effect of change of company name? **1D**

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Whether the company was right to sell property which was registered in the names of another party i.e. Greenland Bank.

**<sup>r</sup>** *<sup>15</sup>* In his defence the Defendant stated that he was introduced to **Hussein Abdalla** by a mutual friend called **Cisse Abubaker.** They met **Hussein Abdalla** at his office at Nakasero on Market Street. There was a sign post reading **"Habre International"** on the shop. **Hussein Abdalla** introduced himself as Director of the company. After agreeing on the purchase price **Hussein Abdalla** took him to his lawyers M/S Kayondo who executed the ■transaction.

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**Hussein Abdalla** who was Director of the company went with one **Yusuf Ali** whom he said was the company secretary. **Hussein Abdalla** signed as Director of the company. Later the said **Hussein Abdalla** gave him **a** receipt issued by **Habre International Trading Company Limited.**

It is clear from the above that the Defendant at all times had intended as he did to transact with **Habre International Limited** through its Director **Hussein Abdalla.** Indeed **Hassan Hussein** Pwl confirmed in crossexamination that **Hassan Abdalla,** his father was a director ofthe company at the time ofthe sale.

**] 40 0** <sup>1</sup>5 or 20 Record also shows that by a special board resolution of **Habre International Trading Company Limited,** which was registered with the registration of companies on 9/12/1991 Mr. Hussein Abdalla who was designated as the Managing Director was allowed to use the titles to the suit land for securing sale or loan. Therefore in the above circumstances, the Defendant had a bonafide belief that he was dealing with the company through its director. The above point appears to have been captured by the case of **Enco Plastica Limited v Freeborne [1971] EA 432** where the defunct court of Appeal for East Africa held that where a person who entered into a contract with the appellant company was appointed Chairman Managing Director of the company, the third party dealing with the company was entitled to assume that there was authority on the part ofthat person to bind the company, **Lutta JA** had this to say:

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**"The question as to whether or not the Articles of Association or Resolution of the Board empowers the**

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**chairman or any other director to enter into a contract binding the company was not a matter into which the third party should have ignored as long as he acted on a representation that the chairman or director had authority to bind the appellant company.**

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In this case there was ostensible authority that **Hassan Abdalla** had been authorised to sell or mortgage the suit property. Indeed the said property had been mortgaged to Greenland Bank. Part of his authority was an option to sell which he did to the Defendant.

**w** The above position was emphasized by the Supreme Court in **Tatu Niaga & Co. Emporium v Verjee Brothers Ltd. {2001-2005} HCB 75** where the Supreme Court of Uganda held that any director who is authorised to act on behalfof a company unless the contrary is shown has the power ofthe Board ofDirectors to act on behalf ofthe company.

i5 **2-0** In the instant case one wonders why after the said transaction no complaint was raised challenging the contract of Hussein Abdalla by either shareholders or the existing board members in 1994. One now wonders why in 2006 someone who was not even a shareholder nor director of the company in 1994 decided to challenge the authority of Hussein Abdalla in the transaction leading to the transfer ofthe suit property.

Another point was that the suit property was not belonging to the person • who purportedly sold it in that the company had already changed its names by the time the transaction was executed.

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In Alliance Securities Ltd. Vs Posnekoff (1992) 3 WWR 1201 (CAN) it was held that the names of a company is merely a means of indentification and a change of name does not affect the identity of the company nor its continued existence as the original body corporate.

Section 19 (5) of the Companies Act of Uganda provides that:

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"A change of names by a company under this section shall not affect any rights or obligations of the company or render defective any legal proceedings by or against the company and any proceedings that might have been continued or commenced against it by its former names may be continued or commenced against it by the new names."

Halsbury's Laws of England 4<sup>th</sup> Edition, 1996 Vol. 7 (1) paragraph 160 states that the issue of a certificate of incorporation or change of name is not to reform or reincorporate the company as a new entity but to recognise the continued existence of the company under the new name.

Exhibit D7 which is a bundle of company records obtained from the Company Registry shows that the Plaintiff company had a history of frequent change of name and ownership. According to Hassan Hussein such changes were meant to accommodate more family members and shareholders. It shows that:

- $(a)$ 17-4-1980 the company was first $On$ registered $as$ $Abre$ International Trading Company Limited. - $(b)$ On 4-8-1983, the company changed its names to Habre International **Trading Company Limited.** - On 10-12-1993, the company changed its name $(c)$ Habre to $5$ International Trading Company (1993) Limited. - $(d)$ On 20-10-1997 the company changed its name to Habre International (Kampala) Limited. - $(e)$ Lastly another company was incorporated in the name of Habre International Trading Company (1993) Busia Limited.

In all those names Hussein Abdalla, the father of Hassan Hussein (Pw1) remains as Chairman/Managing Director.

According to Halsbury's Laws of England change of name is not to reform or reincorporate the company as a new entity but to recognise the continued existence of the company under the new name. In other words therefore, even after changing its name to Habre International Trading Company (1993) Limited from Habre International Trading Company Limited. the said change of name was never meant that there was a new entity created but was meant to recognise the continued existence of the company under the new name. There was nothing wrong therefore when the transaction in dispute was carried out under the old company name who was recognised as

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the owner ofthe suit property. The above point oflaw was canvassed by the Supreme Court in the case of **Apollo Hotel vs Geoffrey Oryema & Others (2007) 1 HCB 60.**

In the above case the question of ownership ofthe Hotel variously known as Apollo Hotel, Kampala International Hotel, Sheraton Hotel, etc became an issue for decision. The court held:

**"Ownership of company property is a question of law. In determining ownership of company property, regard must be had to the instrument conferring ownership. In this case, one had to consider the Apollo Hotel Corporation Act, No. 6 of 1967 which established the corporation as a statutory body with mandate to own and manage a Five-Star Hotel. Even after the name of the Hotel was changed to Kampala International Hotel by Decree No. 34 of 1971, ownership of that hotel still remained with Apollo Hotel Corporation."**

There is therefore no doubt that even ifthe company had changed its names, ownership ofthe suit property still remained in Habre International Trading Company.

This drives me to the next point that the property was sold by a person who was not the registered owner.

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It was indicated that the property was registered in the names of Greenland Bank. This was because the company had secured **a** mortgage from that bank. The above transaction was authorised by the company. The law is that once **a** mortgage always a mortgage. The Defendant testified that after entering into the transaction, **Hussein Abdalla** indicated to him that there was a problem with Greenland Bank which needed to be sorted out before final balance could be paid and that Hussein Abdalla later cleared the balance and then reregistered the company on the title i.e. Habre International Trading Co. Ltd. before transferring the property into his own names, that very day. The above transactions were smart because once **a** mortgage always a mortgage. The company was right to redeem the property from the Bank before transferring it into the name ofthe Defendant. There was therefore no fraud in the above transaction,

### **Issue 2: Whether the purchase was tainted with fraud.**

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**<sup>1</sup> Z5** Counsel for the Plaintiff endeavoured to impeach the transfer of the land to the Defendant on the grounds of fraud and illegality. He contended that consideration stated at 2 million in the application for consent to transfer was less than the consideration of 14 million stated in the Sale Agreement. He relied on the case of **Samuel Kizito Mubiru & Another vs Bensilo & Another {1985} HCB 106** where it was held that payment of less dues to Government makes the transaction void ab initio. He also relied on the case of **Abdu Nasser Katende vs Vithahdas Haridas** & **Co. Ltd. CACA No. 84 2003** where it was held that whether the appellant had notice or not decision taken by his agents namely lawyers or auctioneers on his instructions must be binding to him.

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The Defendant testified that Lawyer Kayondo who acted for both of them just told him to sign only transfer forms and left him to process the transfer. It was not the Defendant who made the under declaration of 2 million. There was no evidence to establish that the Defendant was a party to the alleged fraud. I therefore find that the Defendant did not give his lawyers instructions to defraud Government in stamp duties. It is trite law to observe here that fraud must be attributable to the party being claimed against: See **Kampala Bottlers v Damanico {1994} HCB 49.**

Lastly it was contended for the Plaintiffthat transfer oftitle to the Defendant was illegal for not seeking ministerial consent.

Counsel for the Defendant countered the above submissipn and stated that by the time the said transaction took place Mailo interest had been abolished and the suit property became a leasehold interest with Uganda Land Commission as lesser. Thus Habre International Company Limited had thus acquired a leasehold interest from the previous proprietor a one Byekwaso in 1984. Consequently, the Plaintiff could only transfer leashold interest to the Defendant. He submitted that the Mailo system was reinstated in 1995 with the promulgation of the 1995 Constitution. Consequently the legal requirement governing'the said land was the Land Reform Decree 1975, the Public Land Act 1969 and the Land Transfer Act.

Section **50 of the Public Lands Act 1969** provides that the provisions ofthe Land Transfer Act did not apply to a grant of leasehold made by the controlling authority. The above provision was considered by the Supreme *<sup>I</sup> o*

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Court in **Hailing Manzoor v Serwafl Singh Baran SCCA No. 9 of 2001 (unreported)** where it was held inter alia, that upon the commencement of the Land Reform Decree on <sup>1</sup>st June 1975 the interest of a Muganda African Registered Proprietor of the Rubaga plot was converted into leasehold deemed to be granted by the Commission which Commission was a controlling authority within the meaning of Public Land Act. Therefore by virtue of Section 50 of that Act the provisions ofthe Land Transfer Act did not apply to that land.

For the above reasons I find that transfer to the Defendant was not illegal as there was no Mailo interest existing lawfully in the country.

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### **Issue No. 3: Whether the Defendant demolished the Plaintiffs structures on the land.**

There is no dispute that the Plaintiff was the proprietor of the suit land before selling it to the Defendant. The Defendant took possession ofthe suit land and wrote to the occupants to vacate. He was therefore entitled to demolish whatever structures which did not please him. because the Plaintiff transferred all hereditaments and fixtures in the land under the maximum *quic quicplantarsolo solo cedit.*

If any illegal structures Defendant. were demolished then they did not concern the

In conclusion therefore, I find that the Defendant did not demolish the Plaintiffs structures on the land or at all.

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### **Remedies available:**

Having found all the issue in favour ofthe Defendant I accordingly dismiss the Plaintiff's claim with costs.

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**JUDGE 17/3/2011 HON. JUSTICE RUBBY AWERI OPIO**

### **18/3/2011**

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Karungi Anna holding brieffor Peter. Nanziza for Defendant.

'll? Both parties in court.

**The Judgment read in Chambers as in Open Court.**

**HON. JUSTICE RUBBY AWERI OPIO JUDGE 18/3/2011**