Joseph Lkito v GAI'CO (U) Ltd (miscellaneous Application No. 102 of 2000) [2000] UGSC 38 (1 January 2000)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA (COMMERCIAL COURT) MISCELLANEOUS APPLICATION NO. 202 OF 2001 (Arising from Arbitration Cause No. 02 of 2001) JOSEPH SEKITOLEKO................................... **VERSUS** GAPCO (U) LIMITED....................................

#### BEFORE: HONOURABLE MR. JUSTICE JAMES OGOOLA

#### **RULING**

Plaintiff/Objector brought this application to Court for an order to remit an arbitration award for reconsideration. The application was brought under section 11 of the Arbitration Act (Cap. 55), and under Rules 7,8 & 16 of the Arbitration Rules (S. I 55-01).

A preliminary issue concerning this application was the question whether the new Arbitration and Conciliation Act (Act No. $7/2000$ ) – which repealed the old Arbitration Act (Cap. 55) - is applicable to this application? In response, learned counsel for the Plaintiff/Objector stated that section 75(2) of Act 7/2000 does not affect proceedings commenced before the coming into force of the new Act. That provision states as follows:

> " $75(2)$ The repeal of the Arbitration Act shall not *affect any arbitral proceedings commenced before the coming into force of this Act.*"

The arbitration claim was lodged with the arbitrators on or about $01/03/99$ , followed by the Respondent's reply on $20/04/99$ . The Act $7/2000$ , on the other hand, did not come into force until 19/05/2000. In these circumstances,

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counsel for both parties agreed, and the arbitrators held - quite rightly - that the applicable arbitralion Iaw to the dispute at hand was Cap. 55. I completely agree rvitlr this position. In this, Court is fortified by the wellknown principle enshrined in the Interpretation Decree (section l3(2)) to the effect that thc reperrl o1'an existing Act does not affect any right or privilege acquired or accrued under the repealed Act. Therefore, the instant application is governed by the provisions ofCap. 55 - as indeed both counsel have expressly and mutually admitted in their written submissions in this app lication.

The grounds for the instant application (to remit the arbitration award for reconsideration of rhe arbitrators) are three. First, it is contended that there is an error ol' law apparent on the face of the award - namely, that even though the arbitrators rightly held the parties' sub-lease agreement to be invalid ab inrtio, yet they still ordered a ref und of the rents and other monies already paid under that illegal transaction. Learned counsel for the Applicant contended that the r>rder for such a refund contravenes the principle that no money paid under an illegal agreement can be recovered - see Mistri Singh v. Kulubya Il963l EA 408. Accordingly, counsel submitted that this Court has power to l'emit the arbitrators' award (in the instant case) as it is based on awrong understandrng or interpretation of the law - see l\Ioledina v. Hoima Ginners [967] EA 645.

Second, counsel strtrrrilted that the award is uncet'tain, in as much as items 5, 6 and 7 of that award orders a refund of "rents and other monies", but without ascertaininli the amounts thereof. Similarly, item 3 of the award ordered that the claimant (GAPCO) is the owner of the rrrovable items on the disputed land, but rvithout ascertaining the particular items referred to. In these uncerlain circumstances, tnovable properties owned by the Applicant

and situate on the disl)uluti tand. are at risk of i.,eing mistaken for GAPCO's propefty. The intention of the award was to allow GAPCO to carry away only those propellies ,,hat belong to GAPCO.

Thirdly, the Applicant contends that the arbitrators exceeded their authority, by including matters rn the award which were outside their terms of reference (i.e. enforcement of the sublease agreement).

ln his response to the above contentions, leamed counsel for the Defendant/Cross Objector (GAPCO), averred as follows: As regards the first ground, the arbitrators were justified to order a refund of the monies paid under the illegal agleement because the Plaintiff/Objector (SEKITOLEKO) had got unjust enric:hment since the parlies were not in pari delicto in the transaction - see Ka riri Cotton Co. Ltd v. Ranchoddas Dewani [967] EA 183; also Shelle1"r,. Padrlr''r'k lt980l Vol. I QC 348. l'or the second ground, Ieamed counsel avers that there was no error apparent on the face of the award - and none has been disclosed either in the summons or in the suppo(ing affidavir.. As regards the rnovable items, counsel contended that the relevant items rvere neither uncertain, nor did the arbitrators exceed their authority in including these iterns in their award.

I will now deal with the above issues in the order in which they were raised:

## Issuc No. I - error on the facc of thc au'ard

Plaintitls contentron here was that once the arbitrators held (as they rightly did) that the suble,ase between the parties was illegal ab initio, they should not have ordered relund of monies hitherto paid as rent, etc under that illegal agreement; as to ,lo so contravenes the principle in the Mistri v. Kulubya case (supra). to tl'e eft-ect that money paid under an illegal agreement cannot

be recovered. On this issue, iourl notes that Plaintill, who was the registered proprietor of the suit land, clearly had some responsibility in executing the obligatory statutory consenr lor the transfer of the land to a non-African (Defendant). He needed to fill in and contplete the required form. He does not appear to have completed thal process. Somehow, the documentation process for the transler came to a stop. Even more importantly, unbeknown to the Defendant, Plaintiff had, in any case, already encumbered the lancl with a prior lease of 99 years. It is quite evident that that encumberence rvould have adversely affected execution of any transfer to the non-African Defendant, even if bne had been attempted. ln my view, the Plaintiff in this transaction tried to have the best of all possible worlds: a 99-year lease, a transfer to a non-African, and failure to process the consent forms - all at ihe same time. It would be patently unconscionable to allow him to get'away with all this. He must not be allowed to keep any ill-gotten gains fronr thcse transactions A ^^:-dingl),. I fir-,C nothing wrong r^,ith the Arbitrators' order for Plaintiff to refund to the Defendant the moneys paid under this nefarious arrangement. The Arbitrators' order is fully supported by the doctrine of unjust enrichrnent, on the one hand; and, on the other, by the principle tl.rat thi: two pafties to this transaction were not in pari delicto. Clearly, in the instant case, Plaintiff did carry the larger burden of the guilt surrounding the illegial transaction. In vierv of this, I find no error of law at all on the face of the Arbitrators' award.

### Issuc No. 2 - Uncertain Au,ard

Plaintiff argued that the arbitration award rvas unceftain. In particular, the order to refund rent and other monies did not ascenain the exact atnounts thereof. Similarly, the order concerning ownership of the movable iiems situate on the suit property, did not ascerlain the particular items, and failed

to ditFercntiate those items that belong to PlaintilT liom those that belc-ng to Defendant. As regards ownership of the items of property, I find no uncertainty at all in the award. Ilowever, as regards the amounts to be refunded, the award is not sulficiently specific.

The order tbr the refund is couched in the fbllowing terms:

" ... whatever payments exchanged between the claimant and the respondent on the basis of the void sub-lease agreement must be refuncied so that lhe parties reverl to the original position that the parties were in before the void sub-lease. "

" The respondent must therefore reJund the claimant the sum of shs.3,500,000/- paid to him by the claimant on/or about j7'h January, 1999, "

Likewise, any rent paid by the claimant to the respondent under the void srtb-lease, is to be refunded bv the respondent to the claimant." If the claimanl has been paid or paid himself any money by or from the respondent on the basis of the void sub-lease agreement,... such ' amount, 'tf ony is ordered to be refunded to the respondent. "

Save for'the Shs.3.5rn/-, which is specific, all the amounts referred to in the above-quoted arbitration order(s) are mere generalities, without any specificity whatsoever. Indeed, two of the references (i.e. rents and claimant's deductions) are no befter than mere speculation. In their letter of 12122/97, addressed to GAPCO's Legal Officer, Plaintiffs lawyers (IWS Nshimye & Co., Advocates) specified Plaintiff s claim as follows:

" Our client fu claiming lltat since 3l -tult', 1997, when he terminated the lease agreement, you have been wrongly debiting his account with Shs.200,000/- as station rent monthly. He now claims a total refund of shs.1,000,000/- which you debiredfor August, September, October; November, and December 1997."

The ar iriiration arvard ulakes lto relerence ier any specific amount of or period for which the deductions were made. This silence can only lead to further disputation and litigation between the parties in a bid to determine the exact monthly deductions, and the total period over which the deductions were made. Simrlarly. the amount of rent and the period over which such rent was payable are indeterminate. By his affidavit of 10i05/01, Plaintiff depones that the sublease was executed on 30106/91 for 20 years, but was terminated for non-payment of rent (see paragraphs 3 & 6). No indication is given of how much the rent was, whether it was paid on a monthly or yearly basis, nor indeed how much of that rent was paid and how much remains unpaid. GAPCO's statement of clairn, on the other hand, categorically insists that the claimant paid rent regularly from 1991 to 2818197, when Plaintiff refused to accept GAPCO's cheque of Shs.l.115m/- for rent (see paragraphs 3(l), (n), (q) and 4 of the statement of clairn). Indeed, by their l€'ne1 6rlQ,r!/Q7 tc, rhe Plaintiff. GAPCO conlended rhal:

" (e) You were paid a premium sum for the lease and you have since then been receiving your annual rent as agreed from 1986 to date. "

It is very clear, therefore, that a real dispute existed between Plaintiff and Defendant regarding the exact amount of the annual rent agreed, the amount of rent actually paid, the amount still owing, and the total period for computing that rent. These are elements that the arbitration award did not resolve. To that (:xtent, there remains uncertainty as to how much is to be refunded under the Arbitrators' order. That aspect of the arvard, therefore, leaves the possibility for further litigation between the parties. Accordingly, the award must be remitted for reconsideration by the arbitrators on the issue of the specific am('unts of refunds to be made.

.{s regards the ar'bitration order to apportlon ownership of the various properties on the suit land to the two parties, the position is vastly different from that pertaining to the refund of moneys. The award states (at p. 132 of the Record) that:

'' we... make an award to the elJbct that the respondent is the owner of the buildings and other permanent fixtures on the suit land. With regards to other movables that are not permanent fixtures we httld and award that the claimant is the owner of the same and is entitled to remove fhem from the land. "

Any doubts as to what was intended by the above apporlionment is erased by recourse to pages 4l ,43 and 6l of the Arbitration Record. At p.41, is a letter of 25l8l97.written b'l the Plaintiff himsell', addressed to the Sales Manager of the Defendant /G ^ pCO). naragraph 4 of rvhi,. ! ,ir ,tei il,rt.

" (4) The onlf items that belong to G. APCO are movable items, which GAPCO is free to remove. " [emphasis added]

In response to the ,rbove letter, GAPCO wrote only four days later (on 2918197, see p.43 of the Record) to say, inter alia, that:

" As regards tite items which belong to G. APCO, the Operators A.qreemenl c'leurh'stales lhe ProPerl ies that belons to us and we du not need an,t /urther rentinder. " [empnasis added]

From a reading of the above two quoted letters, it is evident that both parties knew and acknowledged which properties and which movable items belonged to whom. {n parlicular, the list of GAPCO's ilems is said to be

"cieal iy stated" in tlre Operator's Agreenrenr. Plaintiff did not challenge the existence of the Operator's Agreement, nor the list of properties contained therein. On the contrary, Plaintiff did expressly acknowledge (in his above quoted letter of 2518197), that movable items belong to GAPCO. That is exactly what the Arbitrators' award also states. Indeed, the award (at p. I 3l ) specifically lists the panicular properties that belong to the Plaintiff, thus:

" ... what is on the land is an office where oil is sold, a store where there is a compressor and other accessories, a hoist i.e. lifter of vehicles, two toilets, j undergro nd tanks, a service bay for lorries, four pumps and a tarmackedpart ofthe compound."

With the above specificity of what properties belongs to the Plaintiff, there can be no mistaking what particular items belonged to the Defendant (G APCO) I ther't. thrr' flnd no uncer-tair:tl in the rrbitration award conceming the apportionment and ownership of the various properties situate on the suit land.

### IssueNo.3-Ultrarircs

The final issue for resolution by this Court concems Plaintiff s contention that the Arbitrators sxceeded their authority by including in their award, matters (apportionment of movable items) which were outside their terms of reference (i.e. validity of the sub-lease agreement). ln this regard, it is important to recite what counsel for both parties submitted to the arbitrators as the dispute for determination. They submitted two issues, namely:

- (a) whether the sub-lease agreement dated 30th January, 1991 was valid in law. - (b) If yes, whether there was effective re-entry by the respondent on the suit land to extinguish the legal interests of the claimant in the suit land.

In their consideration of the above issues, the arbitrators specifically emphasized that:

" The arbitrators will determine these two issues. Since, however, determination will of necessity result and lead to certain consequences, the arbitrators will also determine those consequential matters that will arise as a result of the resolution of the above two *issues.* "[emphasis added].

In matters of an arbitrator's authority, SIR UDO UDOMA CJ, stated in NUCCTF v. Uganda Bookshop [1965] F. A 533, at p.539 that.

"It is trite law that it is the duty of an arbitrator to decide neither more nor less than the dispute submitted to him and to comply strictly with his terms of reference."

It is evident, then that a cardinal doctrine in arbitrations is that the arbitrator must not exceed his powers concerning determination of the dispute as formulated in his terms of reference. At the same time, however, the law recognizes that the arbitrator's award must be sufficiently comprehensive as to dispose of the dispute with finality. In other words, the award must not be indeterminate, or leave important matters of substance still unresolved between the parties – see Ross v. Boards (1838) Ad. & EI. 290; 112ER847. In that case, the arbitration reference concerned a determination of the sufficiency of the vendor's title to the disputed land. The arbitrators' award was to the effect that the purchaser should take the conveyance of the title rvith all its defects and receive indemnity for such defects. That award was held to be invalid as not finally settling the dispute between the parties concerning the title to the land.

In practice, the doctrine requiring an arbitrator not to act ultra vires,, must be balanced delicately with the cornpeting principle requiring him to act with finality and not to leave unresolved any matters ofsubstance. In the instant case, I am satisfied that the arbitrators were fully cognizant of their responsibility to act intra vires - that is why they spelt out clearly the two issues before them. At the same time, however, they were also fully aware of their other responsibility to give a comprehensive award, one that had finality and which r.vould leave no substantive matters unresolved between the parties. That is rvhy they added a specific qualification to the two central issues before them - to the effect that determination of the two issues "will of necessity result in, and lead to certain consequential matters." These consequential matter" concem

- (i) which of the two parties should have ownership of the fixtures to, and the movable ilems on, the land in dispute; and - (ii) what moneys. if any, should be refunded to the claimant under the invalid transar:tion.

In my view, these two consequential matters are truly integral to the underlying issues; and were therefore of the essence to the award. If left unresolved, they would have rendered the award indeterminate and without finality. It would n()t have been sufficient to pronounce the land transaction valid or invalid, without at the same time determining which one of the two parties should retain or retum the moneys and Property items flowing from that transaction. In the circumstances of this case, the arbitrators were fully justified to pronounce on these consequential matters - see SIR UDO UDOMA's remarks in NUCCTC v. Uganda Bookshop case (supra), at p.540, para C.

In light of all the above, Court finds no major fault with the arbitration award. In particular, Court finds no error of law apparent on the face of the award; finds no excess authority on the part of the arbitrators, and no uncertainty in the award - save for a need to assess and particularize the specific amounts of rent and other moneys that are to be refunded, as well as to reconcile that amount against the amount(s) deducted by Defendant. In determining the amount(s) of refund, the arbitrators are also to consider some suitable set-off on account of Defendants' 6-year occupation and use of Plaintiff's land. Accordingly, the award is hereby remitted to the arbitrators for reconsideration of the above elements.

The costs of this application are awarded to the Applicant/Plaintiff.

#### Ordered accordingly.

James Ogoola **JUDGE**

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$18/02/02$

DELIVERED IN OPEN COURT, BEFORE: Nerima Esq – Counsel for the Applicant/Objector Yassin Nyanzi – Counsel for the Respondent/Cross-Objector Mr. J. M. Egetu – Court Clerk

James Ogoola

JUDGE $18/02/02$

# 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. 4 OF 2005

### **BETWEEN**

| KASIFA NAMUSISI } ABDUL WAKAALO | 2. AMINA NABANKEMA} :::::::::::::::::::::::::::::::::::: | |------------------------------------|----------------------------------------------------------| | | AND |

I. K NTABAZI WILLING IN THE PROPORT

(Appeal from the judgment and orders of the Court of Appeal of Uganda at Kampala (Engwau, Kitumba and Byamugisha, JJ. A) dated September 2004 in Civil Appeal No. 63 of 2001).

## JUDGMENT OF ODOKI, CJ.

I have had the benefit of reading in draft the judgments of my learned brothers, Tsekooko JSC, and Kanyeihamba JSC as result of which it has become necessary for me to spell out the reasons for my conclusion that this appeal should succeed.

The background to this appeal has been outlined in the judgments of my learned brothers, and I need not repeat it.

The Court of Appeal allowed the appeal filed by the respondent against the appellants who had obtained judgment in the High Court on the sole ground that the appellants failed to prove that consideration was paid by Sulait Jaggwe for the two properties allegedly purchased by him from the respondent. It was the case for the respondent that the transactions between him and Jaggwe were mortgages by deposit of title deeds, secure loans from Jaggwe, who disappeared soon after the transactions had been concluded. The appellants are the administrators of his estate.

The case for the appellants which the trial judge accepted was that the two parties $e^{n}$ two separate sale agreements of the two properties. and subsequently, the respondent signed transfers which led to the registration of properties in the names of Jaggwe, and certificate-of title were issued. The respondent did not seriously dispute these facts

The respondent's defence was that the transfers were to enable him obtain loan5 from Jaggwe who promised to retransfer the properties to the respondent, upon completion of payment of the loan. The respondent claimed he paid off the loans. The trial Judge accepted the appellants evidence and rejected the

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respondent who he found to be a liar. He gave judgment in favour of the appellants.

On appeal, in her lead judgment, Byamugisha JA, with whom other Justices of Appeal agreed, criticized the trial judge for refusing to allow the Registrar of Titles to produce copies of the certificates of title in Court, but allowed the appeal on the ground that consideration had not been proved to make the contract of sale of the suit property valid.

She then concluded.

「以来に関する」・・・・・・・・・・・・・・・・・・・

"As matters stand now there is no evidence of the instruments signed by the appellant transferring his interest in the suit properties to Sulait Jaggwe for the consideration allegedly paid by the latter. The first respondent testified that she knew that "That purchase price was fully paid bv installments."

Indeed payment was made fully as she testified, there was no evidence of acknowledgement by the seller. The appellant maintained throughout that he signed blank transfer instruments for purposes of obtaining a loan or loans and there was not outright sale. The onus therefore shifted to the respondents as the alleged buyers to prove that purchase price mentioned in the the sale agreements was actually paid and received by the appellant. The second agreement P.2 set out the mode of paying the purchase price.

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The payment was made by cheques. The appellant denied having been issued with those cheques. The information from the bank (Exh. D.2) stated that the bank has never paid the said cheques. There is no other evidence of the consideration having been paid by other means. I think with respect, the learned trial judge erred when he found and held that the full purchase price was In my humble opinion the transactions in paid. this case were not supported by any consideration and therefore the respondents are not entitled to the suit properties. I think this is one of those cases in which this Court can go behind the fact of registration."

The last sentence of the passage I have quoted from the judgment of the learned Justices of Appeal is the crux of this appeal. When can a Court go behind the fact of registration? This issue forms the third ground of appeal in this Court.

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That' The cardinal principle of registration of title is/a certificate of title is conclusive evidence of title. Section 59 of the Registration of Titles Act, Cap 230 provides.

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"No certificate of title issued upon an application to bring land under this Act shall be impeached or defeasible by reason or on account of any information or irregularity in the application or in the proceedings previous to the registration of the certificate, and every certificate issued under this Act shall be received in all Courts as evidence of the particulars set forth in the certificate and of entry of the c ertificate in the R egister B ook, and

shall be conclusive evidence that the person named in the certificate as the proprietor or having any estate or interest in or power to appoint or dispose of the land described in the certificate is seized or possessed of that estate or interest or has that power."

It is also well settled that a certificate of title is only indefeasible in a few instances which are listed in Section 176 of the Registration of Titles Act. The section protects a registered proprietor against ejectment except in cases of fraud, among others.

In the present case, the respondent transferred his titles to Sulait Jaggwe-allegedly as security for loans. The respondent did not execute a legal mortgage or an equitable mortgage by deposit of title deeds, which are the normal methods of securing loans by real property. Instead he signed sale agreements and blank transfers to Jaggwe who immediately obtained certificates of registration for the two properties.

The respondent can only impeach the title of Jaggwe on ground of fraud. Unfortunately the respondent did not plead or prove fraud which must be strictly proved. For the same reason I do not find any merit in the argument that the suit's property was sold to a company but was transferred and registered in the name of Jaggwe, since it was not proved that the registration was obtain by

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fraud. The fact that the appellants were the lawful administrators of the estate of the late Jaggwe was not disputed.

ln these clrcumstances I do not see how the certrficates of title held by the appellalts can be impeached. The respondent admitted receiving various amounts of nroney from Jaggwe in consideration for the ttarrsfer of the properties. I do not know what kind of consideration was needed to complete lhe transfer transaction. ln any case tl-tis fact was not pleaded in the defence or counter claim. On tlre contrary the defendant admitted receiving at least Shs.560,000/=, in respect of the transfer of Plot 655.

'alj

(

ln my view, ll,orci6,s, the Court of Appe:l e,,.,,., irr holding tltat there was no consideration proved for the transfer of the properties, and that this amounted to a circumslance which could be sufficient to in.rpeach the title of the apltellants.

The issue of the applicability of the Money Lenders Act to the transaction in this case was npt raised in the two lower Courts, but we asked both counsel to address us on il. The respondent alleged that the late Sulaiti Jaggwe was carrying out tlre business of money lending wlrich was denied by the appellants. There was no evidrrnce to shrrw that Jaggv,re had a money lenders licence. Tlre burden was on the respondent to l]rove this fact. He failed to do so. Secondly, if the transactions between Jaggrve and the

respondent were money lending transactions, they were, in my view, exempted from the operation of the Money Lenders Act by Section 21(1) (c) of the Act, on the ground that they involved security of real property and were therefore in the nature of legal or equitable mortgages, which would be governed by the Registration of Titles Act and the Mortgage Act. The respondent would, in that case, have appropriate remedies under those Acts. For these reasons, I do not find the Money Lenders Act applicable to this case, not to affect the result I have reached.

I therefore a gree with T sekooko JSC that this appeal should be allowed. I concur in the orders he has proposed.

As Karokora JSC also agrees, with the Judgment of Tsekooko JSC, this appeal is allowed with orders as proposed by Tsekooko JSC.

Dated at Mengo this 1.7 day of January 2006 $200$

B J Odoki **CHIEF JUSTICE**