Najjuko v Uganda Microcredit Foundation Ltd and Another (Civil Appeal 9 of 2023) [2024] UGHC 498 (15 April 2024)

Full Case Text

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT MPIGI

### CIVIL APPEAL NO. 009 OF 2023

#### (Arising from Civil Suit No. 21 of 2021at Nsangi)

#### <table> NAJJUKO SUZAN.................................... $\mathsf{S}$

#### **VERSUS**

1. UGANDA MICROCREDIT FOUNDATION LTD ...................................

2. KISHAIJA PAUL

#### BEFORE: HIS LORDSHIP HON. JUSTICE OYUKO ANTHONY OJOK $10$

## Judgment

The appellant brought the instant appeal upon being dissatisfied with the decision of Her Worship Pamela Muhwezi B. Magistrate Grade one at Nsangi delivered on the 23/01/2023. The grounds of appeal as per the Memorandum of appeal are as follows;

- 1. That the Learned Trial Magistrate erred in law and fact when she held that the appellant/ plaintiff failed to discharge her loan obligation whereas not thereby occasioning a miscarriage of justice. - 2. That the Learned Trial Magistrate erred in law and fact when she held that the 2nd respondent is not a trespasser on the suit kibanja yet no valid sale was conducted thereby occasioning a miscarriage of justice. - 3. That the trial Magistrate erred in law and fact when she held that the available remedy to the appellant was to appeal H. C. C. S 2699/2014 which does not exist and was never served as she was staying in Sweden thereby occasioning a miscarriage of justice. - 4. That the Learned trial Magistrate erred in law and fact when she failed to properly evaluate the evidence hence arriving at a wrong decision.

#### Brief background:

The appellant filed a suit against the respondents jointly for; a declaration that she was the rightful owner of a kibanja located at Nabaziza Zone, Nsangi Sub-30 County, Kyengera; a declaration that the $2nd$ respondent is a trespasser on the suit land; a recovery of a kibanja located at Nabaziza Zone, Nsangi Subcounty, Kyengera; vacant possession; a permanent injunction; general damages, interest and costs.

$20$

In the alternative, that the respondents jointly pay UGX $20,000,000/$ = as the current market value of the kibanja.

It was the appellant's case that on $30/6/2014$ , she applied for a loan facility which she received of UGX 4,000,000/=from the 1st respondent. That she pledged her kibanja located at Nabaziza Zone, Kyengera as security. That she started servicing the loan then went abroad but kept paying. And when she came back in 2019, the 1st respondent informed her that her outstanding loan amount was UGX 4,953,400/ $=$ which she cleared on 3/3/2020. That the appellant then asked for the original agreement of the suit land and when she tried to develop the same, the $2nd$ respondent chased her off it and his acts amount to trespass. The $2nd$ respondent is also a neighbour to the suit land. And that the acts of the respondents needed to be atomed to in general damages. That the current value of the kibanja is now UGX 20,000,000/ $=$ .

The respondents denied all the allegations contained in the plaint. The 1st 15 respondent specifically stated that the appellant breached the loan obligations with it and as a result the suit land was attached and sold to the 2nd respondent through court process. The $2nd$ respondent asserted that he bought the suit land from court upon seeing it advertised for sale.

## Representation:

$\mathsf{S}$

Mr. Kansiime Elias appeared for the appellant while Ms. Ashaba Rinah 20 represented the 1st respondent and Mr. Omela Deogratious appeared for the $2nd$ respondent. All the parties filed written submissions.

#### Resolution:

#### Duty of the first appellate court:

It is trite law that the first appellate court has a duty to re-evaluate the $25$ evidence on record afresh and make its own conclusion keeping in mind that it neither heard nor saw the witnesses in the trial court. (See: Kifamunte Henry v. Uganda, Criminal Appeal No. 10 of 1997).

#### Preliminary objections:

Counsel for the 1st respondent raised a preliminary objection to the effect that 30 counsel for the appellant in his submissions raised new facts that were not raised during the trial in the lower court. The new facts are that UGX 1,000,000/= remained for the appellant and more UGX 4,953,400/= was received from the appellant by the 1st respondent totalling to UGX $5,953,400/$ =. That it is trite law that the appellate court will not admit 35 additional evidence that was never raised in the lower court.

In rejoinder it was submitted for the appellant that in the typed proceedings DW1 stated that after selling and deducting costs there remained a balance of

close to UGX 1,000,000/=. That UGX 4,900,000/= was received in error and the appellant was called and refused to pick it. Thus, the 1st respondent's preliminary objection was raised out of context and a total of UGX $5,900,000/$ = is still with the respondent as per the proceedings.

- I have considered the submissions of both parties and carefully looked at the 5 record of proceedings. It was the testimony of DW1 that in a bid to recover the outstanding balance by the appellant there were expenses incurred of which the 1st respondent still has a debt of UGX 1,000,000/=. - DW1 in her witness statement also stated that the UGX $4,000,000/$ = that the appellant paid was used to clear the costs incurred and then in cross $10$ examination stated that the money was received in error. That the appellant was called to come and pick it but she declined to do so stating that she wanted her land back.

In re-examination DW1 stated that the system they had at the time could not permit any payment after the loan had been written off. So the appellant was 15 called to pick her money but she refused.

It is my finding that there are new facts introduced by counsel for the appellant in this case but rather a counsel misconstrued part of DW1's testimony in regard to the fact that the UGX $1,000,000/$ = was a debt still held

by the 1st respondent and not money that remained as a balance from the sale 20 of the suit land.

In regard to the UGX 4,953,400/=, it was the testimony of DW1 that the same was received from the appellant well knowing that they had already sold the suit land to recover the outstanding loan. As such this is borne from the evidence of the respondents and not a new fact. The respondents particularly in the evidence for the 1st respondent acknowledged the fact that UGX $4,953,400/$ = was obtained from the appellant allegedly in error since the suit property had already been sold off to recover the loan.

It was further stated for the 1st respondent that the money paid by the appellant was used to clear the outstanding bills incurred in the pursuit of 30 recovering the loan. However, there was no documentary proof for these bills allegedly incurred while recovering the loan that were said to have been cleared using the UGX 4,000,000/= that the appellant paid in 2020. As such this is not a new piece of evidence but rather was adduced in evidence for the respondents.

This preliminary objection is hereby overruled.

Counsel for the 2nd respondent objected to all the grounds of appeal as being argumentative and contrary to Order 43 Rule 1(2) of the Civil Procedure Rules. (See: Ruryabeita Frank v. Beyunga Kenneth and Others, C. A. C. A No. 5 of

2020). That the said grounds should be struck out with costs to the 2nd respondent.

In this regard counsel for the appellant submitted that the grounds framed clearly pointed out the errors both in law and fact. As such they were properly framed. And in the case of Jem Nyero v. Olweny Jacob and Others, H. C. C. A No. 50 of 2018, it was stated that; properly framed grounds of appeal should specifically point out errors observed in the trial, including the decision, which the appellant believes occasioned a miscarriage of justice.

I find that save for ground 4 of appeal, all the other grounds are properly framed and not in contravention of Order 43 Rules 1(2) of the Civil Procedure Rules. I accordingly strike out only Ground 4 of appeal.

This preliminary objection is hereby overruled.

Counsel for the 2nd respondent also submitted that the suit was barred by Res judicata whereof, counsel for the appellant contended that Res judicata does not apply in the current case.

I do agree with counsel for the appellant that Res judicata does not apply in the instant case. A case with similar facts/subject matter, issues and parties has never been heard and determined by a competent court before. As such this preliminary objection is misplaced. It is hereby overruled.

The preliminary objections as raised by the respondents are hereby all $20$ overruled. I will now proceed to the merits of the appeal.

Ground 1: That the Learned Trial Magistrate erred in law and fact when she held that the appellant/ plaintiff failed to discharge her loan obligation whereas not thereby occasioning a miscarriage of justice.

- Counsel for the appellant submitted that the appellant discharged her loan on $25$ $3/3/2020$ when she paid UGX 4,953,400/= and was issued with a loan ledger card PED2. That the purported sale was in 2015 at UGX 7,000,000/=, so, where did the proceeds go because the loan remained unpaid until $3/03/2020$ when the appellant paid UGX 4,953,400/= and was issued with a loan ledger with zero balance. That the said ledger does not reflect UGX 30 - $7,000,000/$ = was deposited on the appellant's account to clear the loan. That on that same day of sale on 8/04/2015, the appellant deposited UGX $798,500/$ = towards clearing her loan.

Counsel for the 1st respondent on the other hand submitted that it was not in dispute that the appellant got a loan facility from the 1st respondent for a sum 35 of UGX 4,000,000/ $=$ to be paid back in 12 months. That during cross examination of the appellant she admitted that the loan was to be paid back within a period of one year from $30/6/2014$ to be paid up by $30/07/2015$ . That it was DW1's testimony that the appellant breached her repayment terms

$\mathsf{S}$

from the onset for a continuous period of four months which amounted to a fundamental breach. That the appellant admitted to travelling abroad and returned in 2019 and paid the loan facility in 2020 which was a period of over 5 years. That upon default the 1st respondent pursued legal action for recovery by filing a suit where an order for sale was granted vide HCT - EMA $-$ NO. $-$ 2699 of 2014 to recover the outstanding amounts.

Counsel for the $2^{nd}$ respondent submitted that it is settled law that, breach of a contract entails circumstances where one or both parties fail to fulfil their obligation imposed by the terms of the contract. (See: David Sebuliba v. Basalidde Joseph, C. S No. 17 of 2014). That the trial Magistrate rightly found that there was a breach of contract as per the evidence on record.

It is my considered view that whereas it is not in dispute that the appellant obtained a loan facility of UGX 4,000,000/= from the $1^{st}$ respondent; the loan agreement though referenced to was never availed to court for it to see the terms and conditions of the loan agreement. It is therefore not known what was the agreed redress available as per the agreement to the 1st respondent in case of default by the appellant and at what point would it be invoked; whether during the subsistence of the loan facility or at its expiry.

Be that as it may, it is evident from the loan ledger card as relied on by both parties that the appellant obtained a loan from the 1st respondent which is also 20 not in dispute. However, she did default on the monthly payments of the instalments right from the beginning and the last instalment was paid in 2020 as opposed to 2015 when the loan facility was meant to expire.

I hereby find no fault in the holding of the trial Magistrate in this regard. This ground of appeal hereby fails.

Ground 2: That the Learned Trial Magistrate erred in law and fact when she held that the 2nd respondent is not a trespasser on the suit kibanja yet no valid sale was conducted thereby occasioning a miscarriage of justice.

- Counsel for the appellant submitted that there was no valid sale of the appellant's kibanja. That DW1, stated that the appellant's kibanja was sold at 30 UGX 7,000,000/= below the forced sale value of UGX 8,000,000/=. That no LCs were involved and that since the appellant's kibanja had been sold in 2015, the 1st respondent ought not to have received the appellant's UGX $4.953,400/$ = on 03/3/2020 to clear the same loan that was already cleared. - That DW1, stated that UGX $1,000,000/$ = remained for the appellant and 35 again received UGX 4,953,400/= from the appellant meaning that the $1^{st}$ respondent has UGX 5,953,400/= belonging to the appellant. That in the circumstances the purported sale between the 1st respondent and the 2nd respondent is null and void. As such the $2nd$ respondent is a trespasser.

$10$

$\mathsf{S}$

Counsel for the 1st respondent on the other hand submitted that the 2nd respondent is not a trespasser on his own land. That due to the appellant's continuous default, the 1st respondent exercised its right as a mortgagee by filing a suit in court for recovery of the said amount. That the 1st respondent obtained an order for attachment and sale of the suit property. The 2nd respondent bought the suit land upon the sale and has been in possession since 2015.

It was submitted for the $2^{nd}$ respondent that he bought the suit land when the 1st respondent sold to recover the loan that the appellant had defaulted on. That the 2nd then legalized his kibanja interest and subsequently bought the mailo interest in the said land and is now the registered proprietor. That the appellant did not challenge the order to sale the property. Thus, the 2nd respondent lawfully acquired the suit property through court process. That the $2^{nd}$ respondent is therefore not a trespasser.

It was submitted for the respondents that the appellant did not challenge the 15 court order that allowed the sale of the suit property; however, this court cannot pay a blind eye to an irregularity that it has observed on the court record

The 1st respondent in the instant case stated that the suit land was sold to the $2nd$ respondent following a court order and as such he is not a trespasser $20$ having purchased the same. I have carefully perused the court and I have not found any proof of the ruling allowing the 1st respondent to sell the suit or the application for execution through attachment for sale. Nor any proceedings from which the alleged court order emanates. All the respondents attached

- and made reference to was the order of court that allowed the sale but proof 25 as to how the order was obtained was not provided. Nor, is there proof of the proper procedure of sale being adhered to. Whereas, the respondents say there was an advertisement, there was no advertisement made in the news papers, and rightly so, because the $2nd$ respondent in his testimony stated that 30 - he saw a sign on the suit land indicating that the land was on sale with the bailiff's number who he called. He did not tell court that he saw an advert in any news paper nor was the same tendered in court or relied upon to prove that the proper court process was followed.

Order 37 rule 4 of the Civil Procedure Rules provides that:

"Any Mortgagee or Mortgagor, whether legal or equitable, or any person 35 entitled to or having property subject to a legal or equitable charge, or any person having the right to foreclose or redeem any mortgage, whether legal or equitable, may take out as of course an originating summons, returnable before a judge in chambers, for such relief of the nature or kind following 40 as may be by the summons specified, and as the circumstances of the case may require; that is to say, sale, foreclosure, delivery of possession by the

$\overline{5}$

6 | Page

# Mortgagor, redemption, reconveyance or delivery of possession by the Mortgagee."

Section 19 (1) of the Mortgage Act provides that where money secured by a mortgage is made payable on demand, a demand in writing shall create a default in payment. And, where the Mortgagor is in default of any obligation $\overline{5}$ to pay the principal sum on demand or any interest or other relief payment or part of it under a mortgage, or in the fulfilment of any common condition, express or implied in the mortgage, the Mortgagee may serve to the Mortgagor notice in writing of the default and require the Mortgagor to rectify the 10 default within 45 working days.

Section 20 (e) of the Mortgage Act gives the Mortgagee powers of sale as a remedy and also makes provision for the Mortgagee's power of sale under section 26 of the Mortgage Act. The remedy cannot be exercised through court order in the absence of evidence of fulfilment of the requirements of Section 19 (1) and (3). A default has to be established and time of 45 days given for rectification of the default.

Section 26 of the Mortgage Act provides that where the Mortgagor is in default of his or her obligations under the mortgage and remains in default after expiry of the time provided for the rectification of the default stipulated in the notice served on him or her under Section 19, a Mortgagee may exercise his or her power of sale of the mortgaged land.

Before sale by a Mortgagee notice has to be given under Section 26 (2) of the intention to sell by a Mortgagee. Most importantly a copy of the notice to sell is given to the Mortgagor, any spouse of the Mortgagor, the sureties, etc under Section 26 (3). When the Mortgagee without coming to court does this, the interested persons such as the sureties, donee of powers of attorney or spouses may apply to court for relief. (See: Ecumerical Church Loan Fund Uganda Ltd v. Ways KM Uganda Ltd, Civil Suit No. 11 of 2014).

Hence, where court orders a sale of mortgaged property, the court has to ensure that the Mortgagee has complied with the provisions of Sections 19, 20 30 and 26 of the Mortgage Act 2009. A sale by a Mortgagee shall be by Public Auction unless sale by private treaty is agreed to by the Mortgagor while a sale by order of court may be conducted in the manner directed by the court in according to regulations 8 and 9 of the Mortgage Regulations 2012 respectively. (See: Amratlal Purshottam Bhimli & Another v. Gian Singh 35 Bhambra & 3 others, . C. C. S No. 239 of 2009 consolidated with H. C. C. S No. 298 of 2010 [2014] UGHCLD).

The respondents in the instant case save for refereeing to an order granted by court did not in any way adduce any further evidence to show court that indeed the correct procedure was followed before the suit land was sold to the

$20$

$2nd$ respondent. The $2nd$ respondent only adduced evidence to show that he bought the suit land and has since obtained the legal title. Nothing to show that effort was made to reach the appellant's family or guarantors before the sale was effected. All that was stated was that the appellant could not be reached on the numbers she had availed them with even when the appellant said that she informed her loan agent that she would be travelling out of the country.

It is my considered view that the sale of the suit land in this case was null and void for failure to follow the proper court procedure. This ground of appeal therefore succeeds.

Ground 3: That the trial Magistrate erred in law and fact when she held that the available remedy to the appellant was to appeal H. C. C. S 2699/2014 which does not exist and was never served as she was staying in Sweden thereby occasioning a miscarriage of justice.

- 15 Counsel for the appellant submitted that there was never proof that there was ever a judgment in a civil suit No. 2699 of 2014 as no proof in that regard was ever brought by the respondents. Therefore, it was wrong for the trial Magistrate to state that the only available remedy to the appellant was to appeal. That the civil suit referred to by the respondents has never existed. - Counsel for the $1st$ respondent on the other hand submitted that the remedy 20 available to the appellant was review and that upon travel to Sweden, the appellant ought to have notified the 1st respondent of the change of address. Thus, the 1st respondent rightly exercised its right having failed to locate the appellant, it acquired a court order and sold the suit property in accordance with the court order. $25$

Counsel for the 2nd respondent submitted that the trial Magistrate only slipped in mentioning a civil suit as opposed to miscellaneous application. That this is not fatal as it can be corrected under Section 99 of the Civil Procedure Act. That the appellant being aggrieved with the slip ought to have applied to the trial court to have the slip corrected.

The appellant in this case claims that she was never served with the court process in the high court, and that there was no proof of the whole process adduced in court. It is my view that even though the appellant was unreachable as the 1st respondent alleges there is the option of substituted service which I believe was not explored in this case as no mention was made of the same.

Whereas, it is true that the appellant ought to have communicated about her change in address she stated that she informed her broker/agent about her travel.

8 | Page

$\mathsf{S}$

$30$

The $2^{nd}$ respondent argued that there was merely a slip in citation of the case number that allowed the sale of the suit land which I find is not the gist of this ground. The contention of the appellant is not the citation but rather the whole procedure ever being pursued since it was not supported by documentary proof save for only a court order. As such she argues that there was never a Miscellaneous Application No. 2699/2014 ever filed in the High Court to begin with. And the same was never served on her if at all. Thus, the remedy to appeal the decision of the High Court was premature since no proof of any decision of the said Court in that regard was ever brought to court by the respondents. A court order alone is not enough to prove the existence of court proceeding since it is a whole process, which begins with filing pleadings etc.

As already discuss above, I do agree with counsel of the appellant that no proof was furnished before the lower court that there was any court proceedings that took place before the court order for sale was granted. As such this aground of appeal succeeds.

Ground 4: That the Learned trial Magistrate erred in law and fact when she failed to properly evaluate the evidence hence arriving at a wrong decision.

It was submitted for the appellant that she cleared her loan facility and the proceeds of the sale of her kibanja were never used to clear the loan.

Counsel for 1st respondent on the other hand submitted that what was stated by DW1 was that even after trying to recover the loan they remained with a debt of UGX 1,000,000/ $=$ .

This ground of appeal was struck out following the preliminary objections above for being argumentative and offending Order 43 Rule 1(2) of the Civil Procedure Rules.

In a nutshell two grounds of the appeal succeed. Thus, this appeal succeeds in part. The appellant is hereby awarded half of the bill of costs in this appeal. And the respondents are also entitled to half the bill of costs in the lower court.

I so order.

Right of appeal explained.

35 OYUKO ANTHONY OJOK

**JUDGE**

$15/04/2024$

9 | Page

$20$

$25$

$\overline{5}$