Lebel (E.A) Limited v Eclipse Limited (Civil Suit 1520 of 1986) [1991] UGHCLD 1 (29 July 1991)

Full Case Text

## ?HE REPUBLIC OF UGANDA

## IF THE HIGH COURT OF UGANDA AT KAMPALA

## HIGH COURT CIVIL SUIT No,/1520/86.

LEBEL (E.. A/) LTD PLAINTIFF. VERSUS

ECLIPSE LTD : : : DEFENDANT.

# BEFORE:. HONOURABLE ETR. JUSTICE A. N. KARCKORA.

# J U D G M E N T:

This had been fixed for hearing the counter claim filed by 2nd' Defendant Mr. Nkvrvnziza applied to wi-uidraw the suit on behalf of the plaintiff as evidence had come up which proved that.the consent, to sell the suit property had been given by the Landlord. The dst Defendant had not entered appearance nor filed a defence. before the case was heard,

When the counter claim came up for hearing on neither the plaintiff nor his counsel appeared though it had been fixed for hearing by consent. I therefore ordered the proceedings to go ahead ex-parte.

Alphonse Odido, hereinafter referred to as 2nd defendant stated that he first leased property plot 65 on yearly basis» to the advert. In 1985, the pr nar\*h v *•.* '<v vv u *in '* cv1 -> y t? i*•* r 3c e he offered to buy it. Ivlobut^5- Road Makindye Road from Lebcl EA EA ltd decided.• to sell it to him.. 11-p Qpo-ndijd

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•r The plaintiff accepted his offer. As he had organised to which had an house in the names of Eclipse Mercantile. He contacted UCB Manager who accepted to give facility to purchase the house. Mercantile. Chairman UCB received as Exh. P2. The loan of Shs. approved. He personally 50,000,000/=. The UCB channelled the loan through Lebel EA Ltd transferred the title to the property into the names of Eclipse Mercantile with mortgage to UCB. Later mortgage was removed. After the collusion between Lebel EA Ltd and Eclipse Mercantile Ltd in order to defeat justice, Eclipse Mercantile Ltd transferred the title of the suit property to Lebel EA Ltd by court order which court order has since been sot-aside. Kow 'lebel EA Ltd came to court and withdrew its own claim to the property as Odido had duly purchased nJ- from them; hencc: this counterclainu be transferred into his names. get a loan through Eclipse Mercantile, • — •— •« .. .. • account in UCB, he applied to buy or offered to buy the Eclipse Mercantile ltd whose general ciimages, Gilbert Ochwada had consented to this arrangement. He agreed to channel the loan through Eclipse He presented a photocopy of the letter to applying for a loan - which letter was to be removed and for the property to - *■; 50,000,000/= was* lie prays for the cave it This money was to Lebel EA Ltd\*, paid Shs. 10,000,000/= on top of the loan of Shs.

Mr. Augstino Kayondo who was Special Assistant to Choirman M/D of UCB to stifled that, he was directed by the Chairman Manng-ing Director of UCB to give a loan of Shs. 50,000,000/= to Odido to enable him to purchase a house ...

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at Makindye Flot 63 Block 261 Mobutu Road. This Loan of Shs. 30,000,000/= was deposited on Eclipse Mercantile Ltd's account in UCB as Odido did not have an account with UCE. The amount of money was released in favour of Alphonse Odido through Helipse Mercantile Ind. The letter which granted the loan to Odido and passed the loan through Eclipse Mercantile Ltd's account was received as Exh. P5. The loan was later repaid by Odido. He admitted having written letter Exh. P6 acknowledging that the loan had been repaid by Odido of Shs. $36,840,000/=$ ie loan + interest. He stated Odido personally negotiated for the loan and personally repaid it on the loan account which was in the names of Eclipse Mercantile Itd. He stated that the house could not be Eclipse Mercantile Ltd/because the beneficiary was Odido.

The last witness to be called was Augustine Lubega Natovu who stated in 1985 ho was the General hamager of Lebel HA Ltd. He stated that the house on plot 63 Mobutu Road, Makindye belonged to Lebel EA Ltd. It was being rented by Cdido. The nouse had been badly damaged during the Liberation War of 1979. Where was arrangement for the tenant to repoyate it so that the bill for renovation would/off-set from his rent. Later, however, a decision was taken to sell it by public auction. So it was offered to be sold. Relipse Mercantile Ltd. applied to the and was the highest black. When they wrote to Managing Director of Eclipse Mercantile Ltd and called him to comply with the terms, they wrote back accepting to buy the house.

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He told him (Matovu) '-ha4 of Eclipse Mercantile Ltd, he was the actual\* buyer. He told him he could not- bid in his companies, because he could not get financial facilities from UCB where he did not So he was merely using that company which belonged to his colleague, Gilbert Ochwada,who Lind approved of that arrangement. He stated subsequent;!y, he met Ochwada in company of Odido and they talked about the house. In course of their conversation, Ochwada told him Odido was the one who was buying the house, but was merely using his company1s name. Eventually he stated that his company was paid by draft in favour of Lebel EA Ltd from UCB delivered by Odido and they also received some cheques from Odido. He also directed his Chief Accountant to receive cash from Odido . The last cheque of Shs> 5>500,000/= was written and signed by Odido. He stated 4-hau he knew the owner of the land Plot 63 as Mr. F. Lutwama. The Lebel EA Ltd. Lutwana seeking consent\*to sell the house.. Lutwama wrote back giving consent, for Lebel EA Ltd to sell the house. Lutwama1s letter of consent to sell was received as Exit. P9. though the bid was in the names own names or one of'his The letter of acceptance, was delivered to them by Odido. nave an account;\* wrote to Mr. Ft The letter was received as Exh. P8. Mre

/5 interest in the house but ns far as he was concerned ho (Ochwada) had no bona fide claim\* However, before he left Lebel EA Ltd. as the Manager, Mr. Ochwada approached him (Mr. Matovu) and expressed

As far as he was concerned,he knew Ochwada and Eclipse Mercantile Ltd as trustees for benefit of Odida.

a beneficial owner of the suit property. It was submitted . that there was overwhelming evidence { hat he was a beneficiary to I:he suit property which Eclipse Mercantile Ltd was holding on trust. The co'uritcrcluimari?- had merely secured bunk facilities through Eclipse Mercantile Ltd. This fact of Odido, Special Assistant to Odido. All +-hese testified that the loan to purchase the house granted to Odido was channelled through Eclipse All these o Eclipse Mercantile Lhd. of Odido. See Exh. ]?% it was Odido who address as I was proceeding on leave, which in short deals with whether or not the 2nd Defendant Alphonse Odido was At the close of the- case for counter-claimant, Mr. Bwanika of Kayondo &. Co. Advocates sent me a written came up very clearly in the urr-ontroverted evidence, counterclaimant, Kayondo Chairman 'and Managing Director of UCB, who prepared papers sorted tppb the suit property was purchased by Odido, although the property was trans feirr^d for granting loan t0 Odido and Mr; Liatovu *,w* then General Manager of Lcbol EA Ltd, which sold the \*?uit property to Mercantile Lud, which had. an account in UCB. The transfer of property to EcJipse Mercantile Ltd. was ft- &lt; c 'C«J 4el *H*H *(t.t* 1 0 fl n." But' from E^h. PS, were applied for by Eclipse Mercantile Lt,d for the benefit due to the fact -Hint papor; indicated that the facilities

From the evidence of Matovu, who was the General Manager of Lebel EA Ltd, it was submitted that Mr. Lutwama, the lessor had given his consent to Lebel EA 1td to sell the suit property. Further from the evidence of Ochwada Matovu, Gilbert : indicated interest in the suit property, which Ochwada had previously before him, admitted in preserve of Odido to be Odido's house.

On the first issue, I must state that from the evidence which is overwhelming on record, the suit property was purchased by Odido from Lebel EA Ltd in the names of Eclipse Mercantile Ltd. Odido secured a loar from the UCB TOTALLING Shs. 30,000,000/= and added on Shs. 10,000,000/= from his own carnings and paid Lebel EA Ltd +hrough Eclipse Mercantile Ltd. He explained why he purchased the suit property through Eclipse Mercantile Ltd. The reason he gave was that he (Odido) had no account in UCB from where he had negotiated a loan. Because, Mr. Gilbert Ochwada, the General Manager, was a friend of his, he permitted him to use his company to scence a loan. The property in question was consequently conveyed to belipse Mercantile Ltd.

From the above, I would held that justice and equity would presume that Alphonse Odido intended Eclipse Mercantile Ltd. to hold the property in trust for him unless otherwise explained by Eclipse Mercantile Trd; which explanation is missing.

. . . . . . . /7 qualify Alphonse Odido to be a benificial owner , of the suit great force is the case of Re- Howes (190\$) 21 TLR . 1 find this case to be- more or loss on all fours to the ins-rant case. Here it is a general principle of law in equity on resulting trust that if X purchases property (real or personal) in the name of Y, and t)).c property is transferred into names of Y, Y will be holding this property on --rust for X on principles of resulting trust. pays money, i+- will be in hru\$t< llu him..'-ha<- pays the The man in whose name the 'property was transferred, who paid no money (consideration) will be holding the property in trust WLR 1286 unless the man -who paid for the 1 and was the- father of the fellow in whose name the property was transferred, where resulting trust might be rebuttable on the ground Hint the transfer and registration could have been an in Loco - parentis. See aJ'Cuhard Vs. 3 ALL ER 649. property under Hie principle of resulting trust and I think the relevant authority which would apply with hildre-n in whom tho purchaser stood Cartwright (1954) money tho'-y.hon principle of resulting trust for benefit of -\*\*he man who provided funds see also Huss;ej7 -Vs- ,-Palmer (1972)1 no deed declaring Hu; trust. In my considered view, the facts of this case would unless fraud or illegality can be proved, or In oHrerwords, if a man buys land in another's name, and advancement '• o Hie

from the evidence in the instant case, the counter-claimant •negotiated personally for a loan from UCB and secured it.- V/iHicut ' going into the lietn of Re-Jlowc s ( supra) ,

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He cent t?.c ted Gilbert Ociuvada,Managing Director of Eclipse Mercantile Ltd to be permitted to secure a loan from UCB, by using the company's account\* The counter-claimant bidded for the house\*and was successful. Funds were released to him through Eclipse Mercantile Ltd's account in UCB. The Label EA Ltd were- paid by Alphonse Odido through Eclipse Ltd and partly by himself. They effected transfer, after they were paid, of Hie house to the Eclipse Mercantile repaid the loan t0 the bank. had paid nothing in respect of Hiis house. If the • property had boon transferred to Eclipse Mercantile Ltd on trust for benefit of Alphonse Odido the re-transfer of the same suit property by Eclipse Mercantile Ltd to Label EA Ltd was nothing but fraudulent on the part of Eclipse fraudulent on the\* part of Lebel EA Ltd, who knew that the house in question was personally purchased by Alphonse Odido through Eclipse Mercantile Ltd and w|l° knew that the ' house had been transferred to Eclipse Mercantile Ltd as a trustee for Alphonse Odido, to again go behind Odido's back, and accept the property in question rc-transferred to them by the trustee when they knew the trustee was holding the property for benefit of Alphonse Odido. Mercantile Ltd, which 7/ns a breach of trustee's duty he owed to •»:11• bencJ.'ici ary. - Od 1 do. Alphonse Odido himself So Eclipse Mercantile Ltd Ltd on trust for benefit of Odido• Lit ewi se , it was

beneficiary. /9. the benel'j.oiary (Odido), c. i' rjio proonr'-y by was a breach of duty towards whs--.h ttp triistoe o-cd t0 the Th *tri* r\* &lt; • . t7?*•* vn ta />,. p Eclipse L?d +-o l<ixl LH3

The duties of a trustee to the beneficiary are clearly summarised in the Law of Trusts by Ford and Lea. The Law Book Co. Ltd 1983 at page 383 which include the following:

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- The duty to preserve the trust property. $(1)$ - $(2)$ The duty of loyalty. - $(3)$ The duty of keeping and rendering to the beneficiary full and candid accounts.

The Vansey J at page 405 in Re Boston's Will trusts (1956) Ch 395 States: $(1956)$

- $(i)$ The duty to preserve the trust property connotes an appropriate standard of continuing care in the management of the investment Portifolio of the trust and is the primary duty of the trustee. - $(iii)$

The duty of loyalty requires the trustee to observe the terms of the trust and act exclusively for the benefit of the beneficiary.

(iii) The duty to keep and render to the beneficiary $\frac{1}{2}$ full and candid accounts requires the trustee to demonstrate to his beneficiaries the manner in which he has preserved the trust property and observed the terms of the trust.

Therefore considering the above law and applying the same to the facts of this case, I am satisfied that the countur-claiment was the bandficial owner of the suit property. Further, from the evidence, which was uncontroverted, I am outfield that it has been proved that Eclipse Morementic Led was in Droadl of its luties towards the beneficiary (Alphonse Odido), when they retransforred the suit property to Lebel EA Led.

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As regards the 3rd issue of whether both 1st Defondant (Eclipse Mercantile Ltd and Lebel EA Ltd acted fraudulently in purporting to retransfer the suit property from the trustee (2nd defendant) to the plaintiff. to the detriment of the counter-claimant, I am left in no doubt that the purported transfer of the suit property from counter-claimant's trustee to the plaintiff who had sold the property to the counter-claimant through the trustee. was fraudulent. The arrangement made between Lebel EA Ltd and Eclipse Mercantile Ltd, which was designed to defrand counter-claimant was nothing but illegal on the principles laid down in Brown Tenkinson & Co. Ltd. Vs. Percy Dalton Londer 1+d (1957) 2 08 621, see also "Cheshire and Fifoot the law of contract 7th Edition page $314 - 315$ and therefore such agreemen+/illegal and hence null and void.

Lastly, I must tackle the issue of remedies of whether Alphonse Odido is ontitled to the reliefs sought in the counterclaim. From the evidence on record, I am satisfied that justice would doctate that Alphonse Odido should get all the reliefs he prayed for. And in order to stop or prevent any future hullabalco, if the suit property was retransferred into Lebel EA Ltd's name, I am ordering that that transfer was illegal and hence null and void. It should be cancelled as having been obtained fraudulently and illegally. It is further declared that the suit property belongs to Alphonse Odido who is the rightful owner and it is therefore ordered that mone (wither plaintiff or 1st Defeadan+) shall interfere with his quict possession of that house in question. $...$ /11

It is further ordered that after cancellation of Lebel E/. Ltd from the register in respect of Block 21 plot 63 Mobutu Road Makindye, the Chief Registrar of Titles is directed to register Bleck 21 plot 63 Mobutu Road, Makindye into the names of Alphonse Odido.

And as Alphonse Odido did not ask for costs, I made no order as to costs.

A. N. RAKCICRA, $\mathcal{I} \ \subset \ \mathcal{D} \ \subset \ \mathbb{N}_\bullet \ .$ $29/7/11.$

Registrar directed to quadra Mr. E wike of Kayondo & Co. Lavocates and deliver this Judgment.

$\cdots \Longleftrightarrow$ $\cdots \rightarrow \cdots$ A. H. KAROKORA,

$7/8/91:$

Bwanika from Keyondo & Co. for the counter-claimant. Defendrant present.

$\frac{J \ U \ D \ G \ W}{29/7/91}.$

Judgment rend and explained.

Seid. G. .. AnGODA, ASE. PROISTR R. $7/3/91.$

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