Mukisa Foods Limited v East African Development Bank (Civil Suit 615 of 1992) [1995] UGHC 66 (14 November 1995)

Full Case Text

#### 23 TAS ALVA COURT OF 天然起心

# $H_0$ C, C, S. NO. 515 OF 92

HINGISA FOODS IND:::::::: :::::::: ::::::::::::PLAINTTHT

## ERSUS

EAST AFRICAN DEVELOPMENT BANK: ::::::::::::::::::::::::::::::::::: BEFCHE: THE HONOURABLE MR. JUSTICE I. MUKANZA.

# **JUDGMBST:**

The plaintiff company filed this suit against the defendant seeking for certain declarations viz.

(1) That as a transmitted liability company the plaintiff's property to wit freehold register volume 8 folios 34 and 5 plots Nos, 124, 125 and 126 land at Kowempe, Kyadordo and the plaintiff's other property, undertakings shares equites (herein after collectively called the plaintiff's properties) were never subject to expropriation decrees of Jaian amonerties passed under Idi Amin's or other

expropriation laws encoted thereafter.

(ii) That the purported expropriation of the plaintiff's said properties were taken over by the Ugenda Development Corporation between 1972 and 1978 and thereafter supervised by the Ministry of Comerce Industry and Technology through an appointed Board of Directors up to February 1990 when the National Enterprises Corporation took over management were contrary to the Provisions of Article 8, 13 and 20 of the constitution and therefore null and void.

(iii) That by reason of 1 and 2 above purported deposit of the title deeds to the above described proporties with the

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was illegal and of no legal consequences and therefore intenable in law since the deposit was not properly sanctioned by the plaintiff's registered and rightful shareholders, members or directors.

- (17) That the defendant cannot in the circumstances realise committy through sale of the plaintiff's property as has been threatened by the defendant. - $(v)$ That since the Government of the Republic of Uganda which has further recognised the plantiff's inalienable legal right's over the properties and issued latters of reputation to the same is at the same time the guarantor of the loan given by the defendant to the then purported management of the plaintiff. The defendant's remedy to have the loan retrived lies with or against the Government of Uganda which has almost allowed the repossession of the property by the plaintiff to takeplace. (vi) That its in the interest of justice that the defendant be restrained by the Honourable court from selling the plaintiff's property on the basis of the purported equitable mortgage as doing so will render impossible and neaningless the repossossimed the properties by the plaintiff and the government policy of $t_{he}$ expeditions return of properties to the true

owners would be defeated in the process.

The facts of this case is simply that the plaintiff company was registered by Ugandan citizen of Asian extraction. It is the registered i Proprietor of land comprised in freehold register vol. 88 folios 3,4, and 5 plot None 124, 125 and 126.

In 1972 the military government of Idi Am: 1 passed a decree which cancelled entry permits and certificate of residence to any person who was of Indian, Pakistan or Bangledash origin. Many Ugandans of Asian extraction were as a result forced to flee the country. So the plaintiff's shareholder and directors left the F verty being $... / 3.$

properties were The management of the plaintiff's company appointed by the Ministry of Industry deposited the plaintiff's respective corticate of title for a loan with the defendant's bank when the plaintiff repossessed the property found that 'the defendant incumbered the said-certificate of title with a caveat and their pleas to have the titles back was rejeered to sell the plaintiff !s property to get back the loan advanced. onporatr the company through the appointed board. of directors up to 1\$\$O. Thereafter the p--operti55 wsrc allocated to the National Enterprises taken over by the Ministry of industry which ran px-operly managed. Ch oheir departure the Uganda Development Corporatica imaged the plaintiff»s property up to 1978 -when the ano. Tae ueiencianu cuopax-v uxu/eaueneil

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In its written statement of defence the defendant disputed all the company is not a Ugandan Company and expropriated under Amin decree. And that in the alternative tut without prejudice to the averment to the above even if the plaintiff was a owner, and the encumbrances was therefore validxy xeau-kj. created\* compensation to be paid The defendant's interest in the 20 of the Constitution as. was alleged\* Since the plaintiff As regards oncombent on it to discharge the defendants encumbrance. section 4 of the decree of 1973\* Government and by virtue of the provision section 70 ) property acquires the title taken subject to encumbrances. purports to have accepted repossession of the suit property it rfas And that in so far as the expropriation decree provide for did not act contrary to the provisions of Article Ugandan Germany the defendant shall contend that it was abandoned under It was the property exproprated by the *CU-J* cIaju suit property does not affect title but is a mere encumbrance xho ever declarations sought by the- plaintiff and contended that the plaintiff its properties were totally

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properties were taken over by the Ministry or industry which ran the company through the appointed board of directors up to 1990\* allocated to the National Enterprises The management cf the plaintiff's company appointed by the liinistry of Industry deposited the plaintiffTs respective corticate of title for a loan with the defendant's bank when the plaintiff repossessed the property found that 'the defendant incumbered the said-certificate of title with a caveat and their pleas to have the titles back was rejected cl me ojoienuaxib coupat-^y uu±c<juoxxel to sell the plaintiff!s property to get back the loan advanced. ^ora vXcn\* properly managed\* ua meir departure rhe Uganda Development Corporatim managed the plaintiff's property up to 1978 when the Thereafter the properties ware Ch their departure the

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In its written statement of defence the defendant disputed all the declarations sought by the- plaintiff and contended that the plaintiff company is not a Ugandan Company and al its properties were totally expropriated under Amin decree. And that in the alternative but without prejudice to the averment to the above even if the plaintiff was a created» compensation to be paid did not The defendant's interest in the 20 of the Constitution as was alleged. Since the plaintiff As regards encumbent on it to dis charge the defendants encumbrance\* And that in so far as the expropriation decree provide for act contrary to the provisions of Article acquires the title taken subject to encumbrances. purports to have accepted repossession of the suit property it was section 4 of the decree of 1973\* Government and by virtue of the provision section 70 ) property owner, and the encumbrances was therefore validxy x-eaxxj. . Ugandan cormany the defendant shall contend that it was abandoned under It was the property exproprated by the ci\*j LU\* suit property does not affect title but is a mere encumbrance \*ho ever

the guarantee the guarantor is legally not called up to redeen the guarantee untill the debtor guaranteel is incapable of discharging his obligation. As the debtor had still had the property to meet the obligation it should do so without recourse to the guarantor.

With regards its claim on repossession certificate made on 20th March 1992 that was out of time in terms of section 3 of the Expropriated Act 9 of 1983. At the commencement of this suit the following issues were framed and agreed upon by the parties.

(i) whether the taking over of the plaintiff's company

was authorised by Amin's decree.

(ii) whether the loan was authorised by the company. (iii) what were the remedies or relief available.

The plaintiff company called the evidence of Sudrudin Eassan Iakhani the company director and shareholder PW1 and one Peter Maloba PW2 a legal officer with the Departed Asian Property Custodian Board.

Whereas for the defendant company there was the testimony of Doctor William Nganwa DN1 the was one time Chairman and Board of Directors of Mukisa Foods Ltd, and it further called the evidence of DW2 Misusera Wanala the then port-folio manager incharge of banking facilities with the defendant company.

### ON TASIR NO. 1.

After the expulsion of the Asians by the muntary regime of Idi Amin in 1972 the said regime embarked on the exercise of promulgation of a number of decree in connection with the properties left behind by the fleein; Asians. I am of the view that it is pertinant at this stage to mention a few of such relevant decrees before issues No. 1 is Lesolved.

Decree 27 of 1972 the Declaration of Assets (non citizen Asians) Decree forbad: any Arian who had to leave Uganda as a result of decree 17/72 to transier or mortgage any property, or in the case of companies, to issue new share a or appoint new directors. Every departing Asians was require 1 to declare his Assets and liabilities. This decree was ... /5.

repealed by Decree 27 oz

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This was repealed. by Decree 11 of 1975\* nhereas Decree 32 of 1972 - The properties and business Acquisition 7 Decree provided for the acquisition by Government of certain properties and businesses\* Then came decree 2 *'* of 1972 - The declaration of Assets citizen Asians) Amendment Decree amended Decree 27 of 1972 by setting up the Abandoned property .custodian board consisting of 6 ministers. S 12 made provisions for the vesting of abandoned property in the board.' This was repealed by Decree 27/73\*

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Decree 27 of 1973 — The assets of Departed. Asian Decree established. the Asian Custodian Board and. irepealed decree 27 of 1972 and 5 of .1973 *end'* some sections of the decree were deleted by tho Expropriated Act, Act 9 of 1982>

.(Acquisition Decree 1975 repealed decree 12 of 1972 and.provided for the acquisition by the Government certain properties and business And finally to crow it all came Act 9 19'82 - The Expropriated the disposal of the same by. the Government\*. properties Act which provided for the transfer of properties and business acquired or otherwise expropriated during the military- regime to the Minister of finance and for their return to former owners cr Then came decree 11 of 1975\* The properties and business

Kasolo wont to about title about the management of property\* cal Ted Bm Kasolo, Jacob raid It is not in dispute that that the company called Mukisa Ibods Limited owed the property\* The matter colors the court is not P W1 testified that when he left in 1972 they left a man All managing tho company and some other people\* Lcndcn jn 1973 and saw PW1 and ropoxtod to bin. that sinco 1972 the factory was taken over by the Uganda Development Corporation and that Khsolo had been sent to London.by tho Uganda Development-

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*zi* ths **-J** running the company including raising the loan for the defendant). company was taken over. in the pleadings -to show that the plaintiff's Bl acknowledging of a Corporation. This piece of evidence about how the conpeny was taken oveia reflected in the testimony of Dr. Nganwa W whose'testify was to the effect that he was Chairoan of Mukisa Foods I^ted was appointed ' That he started being in that position by the Ministry of Industry, member of the board. in 1975"and in 1979 to 196y became on\*-: Board of directors until 1\$89, He uao charge company and signed exhibit loan from the East African Development Bank (the Besides this piece of evidence there are indeed averment

holding any trading licence or licence to manufacture a scheduled article or not "before leaving Uganda to declare specified in the schedule to this decree his assets and liabilities as may be requested by the minister,' Be that as it may under decree 2? of 1973 the -Assets of Departed Asians Decree 1973 S2(l) required on forms PHO/1 and PBO/2 a very departing Asian whether

Whereas Decree 11 of 1975 - The properties and business Acquisition deemed to have been, so vested and acquired by the Government as from Decree Act? properties and certain business (3,1 ) shall-by virtue of this decree and. without further assurance rest in the Government and shall be 18th Decemberj 1972\*

He never made was **S,** According to the testimertey of BUI there is no the latter complied with section 1 of Decree 27 of 1973# any declaration of the Assets left behind as required by the decrees nor there evidence to show that he made subsequent efforts to make business by 31st December 1972\* prior permission of nintstor declare to him in writing, evidence to show that \ d£durations of such properties or 4(1 ) of the said decree required that the owner of any property or business who had not submitted his declaration by 31,12.72 'with

The position appears to be that the property custodian board which it passed over to Uganda Development Corporation th«n to the National Jhterpxise Corporation and then back to MFC Board, **... A** was handled "by the I am besides the refe and to decrees the expropriated properties gazet a of November 1991 1 3. 504 Bukisa Foods Limited was listed by the Departed Asian Custodian Board as property being claimed for repossession. Definately the property appeared to have been taken over by the Government.

It was argued on behalf of the plaintiff's company that such property were not liable to be taken over under the decrees. However in the case of the Registered Trustees Institute vs. Departed Asian Property Gistoria Civil Appeal No. 21/93 Supreme Court of Uganda SCU unreported. A case which is some how similar to the instant case. Here the appellants were the registered trustees of the Kampala Institute which was a member's club originally for the Goan Community in Uganda but which later become multi racial. In 1972 members of the club was largerly Asian and most or. the nembers and trustees left the country as a result of the Expulsion of Asians by the military regime of the day. The club had land in Kampala held on a lease in the name of the appellants and the recreation grounds. After the expulsion of the Asians the Government took over under the nanagement of the Departed Asians Property Custodian Board which was the respondent in the appeal. The club house was used as a mess for senior prisoners officers. In 1993 the appellants applied for repo-20 ssession of the property under Expropriated Properties Act 1982 but their application was rejected on the ground that the lease under which the appellants held the property had expired and that we property had reverted to Kampala City Council the controlling authority. $\rm_{The}$ appellant brought a suit in this court against the Respondent seeking $25$ for declaratory orders among which were whether the Expropriated Act 1982 applied to the property. The learned $J_{udge}$ in this court held that the Expropraited properties Act did not apply to then suit property and that the appellants were not entitled to the reliefs sought. The suit 30 Their lordship had to consider the decision of this was dismissed. court. Wambuzi CJ after outlining the provisions of section 1(1) of the Expropriated properties Act 1982 had this to May. $\cdot \cdot \cdot /8$ .

$35$

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What the properties or business which Expropriated Act 1982 applied were those which had been vested in the Government under Assets of Departed Asians Decree $27/73$ and later under the same decree revested in the custodian board for management. That the intention of the legislature as indicated in all those provisions was to correct what had geno arong. That is the acquisition or taking over of properties or business or even dispossession of any person who was either expelled or or forced to flee Ugenda between January 25th 1972 and 3rd Juna 1979. In my judgment the suit property in this case before us comes within the provisions of section $1(1)$ of the Expropriated Properties Act 1982."

Their lordships allowed the appeal. I am agreeable with the decision of the CJ. It is an authority to the instant case.

In the end issue $No.$ 1 is in the affirmative.

#### CN ISSUE NO. 2:

It was submitted by Mr. Kalenge that the company as it then was never authorized the homowing of money from the defendant bank and the latter should not have given the loan. I was referred to L. C. Gower Modern Company land 2nd Edition by Steven at page 15 entitled "Basic Constitution and Internal Administration." Whether company be statutory chartered or registered its regulations will almost certainly be contained in two separate documents. Its basic constitution will be set out in the statute, charter or memorandum of association respectively and it is to this document construed in the light of the common law and general statute law will depend its powers and duties as a legal person." I am agreeable with that proposition of the law.

The learned counsel continued in his submission that everybody must address himself to the document. The memorandum of association and I was referred to the case of freeman and lockyer (A firm) vs. Buckhurst Park Properties (Mangal) Ltd And another 1964 2 OBD o 480. That myone dealing with the company is deemed to have notice of its business hence any act which is contrary to document will not bind the company unless the same is rectified by the company through its proper .../9

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organ\* appointed at **5** but — Also aaxvj. Article 34 *of* the Association, be callee. **10** upon to pay the defendant. within 2 months as required under S 183 (4) 85 according to annual return , of 1984, He further submitted that the directors did not get shares of the Companies Act There were defects in the appointment of directors. They are supposed to be General meeting by shareholder o"hich vxvla^d He finally submitted. that the loan was not authorised, by the. company and. the latter could, not finance who could, not constitute hi^elf a shareholder\* the seal was made on the document made by accountant

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Hr, Sebalu. on the other hand submitted that the board was appointed by shareholders of thn time EXT>< and th. Minister of finance as per EXD 5 and 6, The board had therefore : power to borrow money. 15 which paid, for the loan but the loan has never been repaid\* .3 loan was not authorised. by "he 'The government of the time approved, the agen-oy

"□hder section 5(2) of the Expropriated Act 1982 which provices—

Notwithstanding the provisions of subsection 2 of section 1 and. 2 of this Act 'where the property or business affected, by the provisions of this Act is applied. for by a former owner, end. such property or business is th® subject of a caveat, lien, loan charge mortgage or any other registered, encemberedance in fa^raur jof\_vajbsgilcfinancial .tyis+.t.tirHon nr enycth^r lender the winter Shull fixtit hold consitations with b vieir. to- securing mutually acceptable arrangements for tjie discharge of any such liabilities or encumbrsnees\* "

caveat. Its properties were mortgaged .../Q **35** arrangement for the discharge of the loan, just rashed and to file thi n suit against the bank. This was Prematurely done. of titles were deposited with the bank. owners PWl should have consulted the minister of finance and tie view to find out a mutually acceptable fortunately or unfortw-ately In the instant case the suit property which was repossessed by defendant bank with a because of the -JW1 is encumbered, with a loan granted, to the plaintiff's end. the certificate the premises the former

**ail** *iryi t \* **AX**

Besides that nder S 51 of the Registration of Titles Act the proprietor of land of any estate or interest in land under the operation of this Act shall except in cases of fraud hold the same subject to such incumbrances as are notified on the folium of registing book constituted by the certificate of title but absolutely from all other incumbrances extra.

In the instant case the former owners of the plaintiff's company would repossess the suit premises with the incumbrances.

As to the alleged defects in the appointment of DM and other directors and their lack of authority to sign for the memorandum accompanying deposit of title dead EXP 11 connected with the loan and for want of a resolution of shareholder in a general meeting. I am of the view that the company was not operating in a normal situation. The minister of Industry appeared apparently to be the shareholders of the He appointed directors and board of said plaintiff's company. directors. Strictly speaking the companies Act cap 85 could not be followed to the latter. The company was politically taken over and had to transact business. It is this considered opinion of this court that the shareholders at the time had the mandate to borrow money of behalf of Mukisa Foods Limited. DM1 testified that the loan was used for the purchase of raw materials to rehabilitate the Plantiff's company.

$I_n$ the end the second issue is in the affirmative. About the reliefs available to the parties. The suit stand dismissed with costs and I decline to make any order about all the declaration which in my humble view stand also rejected.

> L. MUKANZA. $14.11.1995.$

14.11.1995:

Court:

Mr. S tula for the defendant. Mr. Bwmikn for the plaintiff. Judgment is read and signed.

$d$ ini / | $\Lambda$

# **THE REPUBLIC OF UG INDA IN THE HIGH COURT OF UGANDA AT KAMPALA CIVIL SUIT NO. 615 OF 1992**

**; J -**

mukisa foods limited **PLAINTIFF**

## **VERSUS**

**DEFENDANT THE EAST AFRICAN DEVELOMENT BANK**

### **DECREE IN ORIGINAL SUIT**

This suit coming on this 14th day of November, 199£f for final disposal before **HIS LORDSHIP HONOURABLE JUSTICE, I.** MUKANZA in the presence of MR. C. BWANIKA for the Plaintiff and **MR. SEBALU** for the Defendant **IT IS ORDERED AND DECREED** that judgement be entered for the Defendant against the Plaintiff as follows:

The suit be dismissed. (i)

The Plaintiff pays costs of the suit. (ii)

**GIVEN UNDER my HAND AND THE SEAL OF THIS COURT** on the J.?.™, day of 1996.

**•J UD G-E-**

#### WE APPROVE the above

**\** *J* **!**

COUNSEL FOR THE DEFENDANT

**SEBALU and LULE ADVOCATES & LEGAL CONSULTANTS P. O. Box 2255 - KAMPALA**

DRAWN & FILED BY:

M/S KALENGE, BWANIKA, KIMULI AND COMPANY, ADVOCATES, PLOT 42, KAMPALA ROAD, 4TH FLOOR, AFRICA HOUSE, (OPP. CONSTITUTIONAL SQUARE), P. O. BOX 8352, KAMPALA.

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