Nagji Textiles Ltd v Popat and Others (Civil Appeal 5 of 2008) [2009] UGSC 42 (13 October 2009)

Full Case Text

## THE REPUBLIC OF UGANDA

$\rightarrow$ $\cup$ Cot

# IN THE SUPREME COURT OF UGANDA **AT MENGO**

### (CORAM: CORAM: C. J., TSEKOOKO, KANYEIHAMBA, KATUREEBE, OKELLO. J. J. S. C.)

#### CIVIL APPEAL NO.5 OF 2008

#### **BETWEEN**

#### NAGJI TEXTILES LTD:::::::::::::::::::::::: APPELLANT

#### AND

1. A. B. POPAT 2. ANIL DAMANI :: RESPONDENTS 3. JOSEPH SSEMPEBWA

[Appeal from the judgment and orders of the Court of Appeal (Mukasa - Kikonyogo, D. C. J, Engwau, and Twinomujuni, JJ. A.) dated 14th of March, 2008, in Civil Appeal No.37. of $2003,1$

### JUDGMENT OF KANYEIHAMBA, J. S. C.

The facts and background to this appeal are well set out in both the lead judgment of Court of Appeal and in the judgment of the High Court. They may be briefly stated as follows:

The appellant is a limited company incorporated in Uganda. In Civil Case No.1212 of 1998 in the High Court (Egonda-Ntende, J.), it sought multiple reliefs including a declaration that it was the lawful owner of the property comprised in Plot No.3, Acacia Avenue, Kampala, hereafter in this judgment referred to as the "suit property". It also sought an order for cancellation of the $2nd$ and $3rd$ respondents, Anil Damani and Joseph Ssempebwa respectively, as subsequent registered owners of the suit property on the basis the sales and transfers of the suit property by ths 1"t respondent, A. B. Popat, to both were illegal and therefore null and void.

The appellant alleged that A. B. Popat illegally and without authority signed documents on behalf of the appellant to transfer the suit property to Anil Damani fraudulently. Similarly, the appellant alleged further that Anil Damani transferred the same suit property to Joseph Ssempebwa also fraudulently and with the knowledge of the latter which rendered him a purchaser with notice.

Respondent No.1 admitted that he performed the sale transactions in dispute but did so legitimately and legally on behalf of the appellant and with the appellant's express authority. Respondents 2 and 3 both asserted in their respective defences that they were bona fide purchasers of the suit property without notice. They denied any acts of illegality or fraud as claimed by the appellant.

In the High Court admitted documents showed that while the appellant operated as a registered limited company, two of its directors, Mr. Kanchanben Bhagwanji Musrani and Jayantilal Kalyanji Musrani; granted a power of attorney to the lirst respondent, A. B. Popat with authoritSz to repossess the suit property which had been compulsorily acquired under the military government of Idi Amin and placed under the management of the Departed Asians Property Custodian Board. The power of attorney was signed, sealed and executed on the l6tt of July 1992. On Sft, December, 1996, the same two directors of the appellant executed an additional power of attorney in favour of the 1st respondent giving him authority to sell and transfer the suit property to buyers. The two respective powers of attorney are contained in two undisputed documents, namely Exhibits No. Pl2 and No. P.20.

On the 2"d January, 1997, a document signed by one of the directors, Jayantilal Kalyanji Musrani, Exhibit P. 11, purported to cancel the powers of attorney granted to the lst respondent. The alleged

revocation became crucial in the determination of this case both in the High Court and the Court of Appeal. After analysing and reviewing the evidence, the two courts rcached a concurrent finding, namely that a revocation by one director of a power granted by two directors of the company was ineffectivc and that in any event the revocation had not been served or received by thc respondents before the completion of the sale and transfer transactions of thc suit property. Consequently, both courts dismissed the plaint and appeal ol the appellant respectively and confirmed the successivc sales and transfers of the suit property as lawful and effective. Dissatisficd with thc dccision of the Court of Appeal confirming the findings and orders of the High Court, the appellant has now appealed to this Court.

The Appellant's Memorandum of Appeal contains 4 grounds of appeal framed as follows:

- 1. Thelr Lardshtps of the Court of Appeal (Slc) erted ln laut and ln Jact uhen theg held that there uas no elfectlae reuocatlon of powers oJ attorneg and that llrst respondent had acted wlth autlarltg o,nd lallthout lllegalltg or fault on hls part. - 2. The coura erred in laut o;nd ln fact uhen lt held that the breach oJ power of attorneg bg the 7"t respondent u)as n,ot a breach of laut but a breach of agreement betuteen the agent and the princlpol and that thls had no effect on the sale or transJer. - 3. Thelr Lordshlps erred. ln Jact and ln laut when theg held that the allegatlon of Jraud uas not proten and ha,d not been establlshed a.ga'lnst ang of the respondents. - 4, Thelr Lordshlps erred ln fact o'nd ln laut uhen theg arriaed dt a final conclusion that the Jlrst

# resPondent proPertg transferted the tltle to the 2il resPondent.

Themannerinwhichthesegroundsofappealareframedindicate that their draftsman is not familiar with the terminologl and style normally used in this court. I can see no difference between grounds I and 2 of this appeal. Nor is the purpose of ground 4 clear'

However in my opinion, a proper reading of these grounds and analysis of the record of proceedings show that this appeal hinges on the determination of three issues, namely whether the powers of attorney were validly revoked and whether the sales and transfers of the suit property were lawful and in conformity with the authority derived from the powers of attorney and whether or not there was fraud'

Counsel for the parties chose to file written submissions in support andagainsttheappeal. Theysuppliedanumberofauthoritiestothis court in favour of their re spcctive arguments and, many of the same are repetitions of what had been presented in the High court and the court of Appeal.

Counselfortheappellant,Mr. GodfreyLuleofSebaluandLuleand CompanyAdvocatesofKampalafiledsubmissionsonfourissues, namely, the analysis and mcaning of power of attorney, the status of the first respondent as an agent of the appellant and whether fraud had been committed by the respondents or any of them and on remedies' Mr' Lule, commences his submissions by analysing and interpreting the power of attorney gencrally, and then concludes that both the learned judge of the High Court and thc learned Justices of Appeal erred in failing to do the same. ln counsel's opinion, the courts should not have dwelt on what he terms periphery matters such as whether the power of attorney was revoked or not or whether or not it was registered or communicated, or whether or not it was a forgery.

Counsel contends further that the directors of the appellant had not signed the power of attorney as directors but as shareholders of the appellant and in their individual capacity and that consequently, the power of attorney did not exist and could not bind the appellant.

On issue No.3, Mr. Lule contends that the two directors who signed the power of attorney were acting in a personal capacity for their own benefit and not that of the appellant' Counsel argued that in doing so, the two directors werc fraudulent and they intended to steal the appellant's property. Counscl submitted that the pertinent documents this case lacked revenue duty stamps. He therefore argued that the avoidance of the use of stamp duty which is against public policy and is a statutory fraud under SecGIon 50 of the Stamps Act was further evidence that the respondents committed fraud against the appellant'

Lastly, counsel for the appellant contends that the second respondent was not a bonafide purchaser for value without notice. The reason for counsel's remarkable submission is that the transferee of the suit property paid for it the sum of only US\$ 95,000 which was less than the then market value and that therefore where a purchaser pays less than the market valuc for a property, that purchaser cannot be a bona ytde purchaser for value without notice. According to counsel's submissions, another piccc of evidence that shows that the 2nd respondent was not a bona fde purchaser is that he was aware of a caueat placed on the suit property on behalf of the appellant before the sale and transfer of the propcrty to him. Mr. Lule cited the Stamps Act' Malanla InternatTonal Ltd V. Hls Grace Cardlnal Em;mg,nuel Nsubuga a,nd Dat ld Seijaka Nallma V. Rebecca Musoke, S:C. C. No. 12 of 1998 as authorities in support of some of his arguments.

For the 2nd and 3'd rcspondents, Messrs Katende, Ssempebwa and Company Advocates opposcd the appeal. In their submissions, counsel for the respondents contend that the powers of attorney to repossess, sell and transfer the suit propcrty were validly and legally granted by the appellant through its two directors. The attempt to revoke it by one of

the shareholders failed as both the High Court and Court of Appeal found. Counsel for the two respondents contend that the evidence of PW 1 who was the sole witness to testify on behalf of the appellant contradicts the submissions of the appellant's counsel in that that witness testified that he signed the power of attorney, Exhibit P 12 as a director and shareholder, and not merely as a shareholder as alleged by the appellant's counsel. Counsel for the two respondents further contend that there was no effectivc revocation of the powers of attorney as the concurrent findings of both the learned trial Judge and the learned Justices of Appeal show. Counsel support the findings of the two courts that no fraud was committcd by or proved against the respondents. Counsel contend further that both sales and transfers of the suit property were validly and lcgally effected by the grant of the powers of attorney to do so, the evidence of repossession and the minister's consent in accordance with the provisions of the Expropriated Properties Act, Cap 87. Counsel further contend that the requirement that a repossession certificate of the suit property is needed to enable a repossessed property to bc sold is only directory and not mandatory. In counsel's opinion, all that is required is a lodgment of the certificate as sufficient authority for a transfer. Counsel for the two respondents cited the cases of Kifannunte Henry V. Uganda (S. C.) 10/97 McConnell V. Klmanl [967] E. A. 7O2, Bryant Powls and Bgrant V. La Banque lht Peuple, (1893) A. C 17O I(ampala Bottlers Ltd Vs Damanlco, (SC) 22/92, Llogd V. Grace, Smlth and Compang (1912) A. C 716, and Percg V. Glasgout Corporatlon 1992 AC 299. in support of their submissions.

The l"t respondent did not put in a defence, appear nor was he represented.

As pointed out carlicr in this judgment, this appeal hinges on the determination of a number of issues namely, whether there was a power of attorney validly and lcgally executed in favour of the lst respondent,

whether that power was properly exercised to transfer the suit property without fraud and whcthcr the transferees were bona fide purchasers without notice.

In my view from thc beginning, that is from the plaint in the High Court to written submissions filed in this Court, the appellant has laboured but failed to rcspond effectively to the issues enumerated above. The submissions and arguments of counsel for the appellant in this court do not advance the cause of the appellant any further. Mr. Lule, fell into the trap that should be avoided at all times, being entangled in the explanation and interpretation of the law applicable instead of bringing out clearly the facts and circumstances of the case. Construction and interpretation of the law applicable is largely a judicial activity to be left to thc courts. Counsel for the appellant may have missed an opportunity by dwelling at length on the meaning and construction of the legal expression, " power of attomegf'. Counsel should assume that judges know the principles of the law on which they are adjudicating unless the contrary is apparently shown or the court itself requests counsel's opinion on the law.

In my view counsel overlooked or ignored very simple but crucial facts of this case. It was contendcd at length by Mr. Lule that the two directors who granted thc powers of attorney to repossess, sell and transfer the suit property were acting as shareholders and in their capacities for personal bcnefit. However, that is not what the facts or record of proceedings show. Exhibits P 2O and P l2 indicate clearly that the two directors of the appellant granted the powers of attorney to the 1"t respondent, A. B. Popat, as directors of the appellant.

It is a well known and established principle of company law that company affairs are run and administered by majority decisions of directors of a given company and not by decisions of individual shareholders. The only way shareholders can reverse or fault actions and decisions of directors is by passing requisite company resolutions

passed and adopted in gcncral meetings duly notified and held validly for disclosed purposes and in accordance with the memorandum and articles of association of the company in question. Moreover, such resolutions can only affect the interests of third parties dealing with the company if the actions of the directors are haulted in time before third party interests have alrczrdy vested and the third party is notified and the notice is not only communicated, but in somc instances registered. In this appeal, it is contcndcd on behalf of the appellant that even if the power of attorney had bccn validly granted, it was nevertheless revoked before the sale and transfcr of the suit property. Again unfortunately for the appellant this claim is factually and legally incorrect. The true facts and circumstances of this matter are well articulated in the judgment of the learned trial judge, Egonda- Ntende, J. (as he then was), as follows:

\* I hc:ue consldered the euldence on record, and I am satls:fied tlra,t there ls no proof that Exhlblt P 74, the reuocatTon of the pourer oJ attorneg, was brought to the attentlon oJ detendant No.7 either by letter or otheruise. There ls no evldence to support not{Tcatlon of d.efendant No.7 personallg. Second,lg, perttsal of Exhibit D 5 and Exhlbtt P 76 reveals that there tuas no reglstration of the reuocatlon oJ the power oJ attora,eg utlth the Reglstrars of documents as clalmed and lnltlallg supported bg Exhibit P4. The Reglstratlon numbers on the docuntent refer to d.nother document and, the revocatlon ot the pouer of attorneg ls not a oailable ln the Reglstry. hren lf one u)ere to reach the conclusion that the reuocatlon urd,s proper, lt ls clear tha't it wa,s net er reglstered. or brought to the notice of deJendant No, 7 before the sale and. transfer ot the sult propertg to defendant No. 2.'

The articles o[ associertion of thc appellant show that decisions of its board had to be convcycd by at least two board members. The power of attorney to reposscss, sr:ll and transfer the suit property was properly

authorized and signed by two directors. The alleged revocation was signed by one director or shareholder as admitted by the appellant. It was therefore null and void and ineffective. There was nothing to communicate to the respondents.

The learned trial judge, rightly, in my opinion, held that the power of attorney granted by the appellant to the l"t respondent was never revoked. Consequently, it follows that both the sale and transfer of the suit property were validly and legally effected. The learned Justices of Appeal unanimously agreed and confirmed the findings of the trial judge. In my opinion, both courts exhaustively and properly evaluated and reevaluated the evidence and came to the right conclusions. I am unable to fault their findings and judgments.

I find no merit in all the four grounds of appeal. I would dismiss this appeal with costs to the 2"d and 3rd respondents.

Dated at Mengo this.l tr day of... 2009

G. W. IHAMBA \ d,/L

JUSTICE OF THE SUPREME COURT

# THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA

#### AT MENGO

ICORAM: ODOKI, C. J, TSEKOOKO, KANYEIHAMBA, KATAREEBE AND oKELLO,lJ. S. C1.

# CIVL APPEAL NO. 05 OF 2OO8

#### BETWEEN

NAGJI TEXTILES LTD: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :APPELLANT

#### AND

1. A. B. POPAT ) 2. ANIL DAMANI ):::::::::::::::::::::::::::::::!::::::RESpONDENTS 3. JOSEPH SEMPEBWA)

[Appeal from the JudgmenC ol Che Coutt of Appeal at t(ampala (frlukaca-l(lkonyogo, DC. I, Engwau and Tlolnomulunl , JJA) dated l4 frlatch, 2OOO ln Clvlt Appeat No. 37 of 2OO3l.

#### JUDGMENT OF TSEKOOKO. JSC.

I have had the benefit of reading in draft, the judgment of my learned brother, G. W. Kanyeihamba, JSC, which he has just delivered. I agree with his conclusions and with the orders which he has proposed.

Delivered at Mengo this +1 day of U 009.

J,W. N ooKo ]USTICE OF THE SUPREME COURT

## THE REPUBLIC OF UGANDA

#### IN THE SUPREME COURT OF UGANDA

#### AT MENGO

#### (CORAM: ODOKI C. J; TSEKOOKO, KANYEIHAMBA, **KATUREEBE AND OKELLO, JJ. SC.)**

#### CIVIL APPEAL NO. 5 OF 2008

#### **BETWEEN**

**................... APPELLEANT** NGAJI TEXTILES LTD.:::::::::

#### AND

- A. B. POPAT 1. - $2.$ **ANIL DAMANI**

**RESPONDENTS**

JOSEPH SSEMPEBWA $3.$

[Appeal from the decision of the Court of Appeal at Kampala (Mukasa-Kikonyogo, D. C. J., Engwau and Twinomujuni JJ. A) dated 14 March 2008 in Civil Appeal No. 37 of 2003]

#### JUDGMENT OF ODOKI, CJ

I have had the benefit of reading in draft the judgment prepared by my learned brother, Kanyeihamba, JSC, and I agree with it and the orders he has proposed.

As the other members of the Court also agree, this appeal is dismissed with costs to the $2nd$ and $3rd$ respondents in this Court and the Courts below.

Dated at Mengo this 13 day of 0 to be 2009. zecy

B J Odóki **CHIEF JUSTICE**

# THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA

#### AT MENGO

(CORAM:

#### ODOKI, CJ, TSEKOOKO, KANYEIHAMBA, **KATUREEBE AND OKELLO, JJSC.)**

#### CIVIL APPEAL NO. 05 OF 2008

#### $BETWEEN$

**NAGIJI TEXTILES LTD:**

$\cdots \cdots \qquad \cdots \qquad \cdots$

**APPELLANT**

$A$ $N$ $D$

$1. A. B. POPAT$

2. ANIL DAMANI

3. JOSEPH SEMPEBWA: $\cdots \cdots \qquad \cdots \qquad \cdots$ **RESPONDENT**

[Appeal from the judgment of the Court of Appeal at Kampala (Mukasa-Kikonyogo, DCJ, Engwau and Twinomujuni, JJA) dated 14th March 2008, in Civil Appeal No. 37 of 2003].

#### JUDGMENT OF OKELLO, JSC:

I have had the privilege to read in draft, the judgment of my learned brother, Kanyeihamba, JSC, and I agree with his conclusions. I also concur with the orders which he has proposed.

Dated at Mengo this: $\frac{13}{13}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of: $\frac{13}{12}$ day of:

Guidino G. M. OKELLO JUSTICE OF THE SUPREME COURT

#### THE REPUBLIC OF UGANDA

#### IN THE SUPREME COURT OF UGANDA

#### **AT MENGO**

ODOKI, C. J., TSEKOOKO, KANYEIHAMBA, KATUREEBE, (CORAM: AND OKELLO, JJ. SC).

# **CIVIL APPEAL NO.5 OF 2008**

#### **BETWEEN**

## NGAJI TEXTILES LTD :::::::::::::::::::::::::::::::::::

#### **AND**

2. ANIL DAMANI **RESPONDENTS** 3. JOSEPH SSEMPERW

[Appeal from the Judgment and orders of the Court of Appeal (Mukasa-Kikonyogo, DCJ., Engwau, and Twinomujuni, JJ. A) dated 14th of March, 2008, in Civil Appeal No. 37. of 2003.]

## **JUDGMENT OF BART M. KATUREEBE, JSC.**

I have had the benefit of reading in draft the judgment of my learned brother Kanyeihamba, JSC, and I concur with him that this appeal ought to fail.

I also agree with the orders he has proposed.

Dated at Mengo this....................................

Bart M. Katureebe

**Justice of the Supreme Court**