Numani v Friends Estate Limited (Civil Appeal 104 of 2018) [2020] UGCA 2141 (4 June 2020)

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA CORAM: OWINY - DOLLO DCJ, KAKURU & TUHAISE JJA CIVIL APPEAL No. 104 OF 2018

(Appeal from the judgment of Bashaija J. in High Court Civil Suit No. 612 of 2014)

HAJI NUMANI MUBI AKULAMUSA } ................................... $10$

#### **VERSUS**

FRIENDS ESTATE LIMITED } ...................................

$15$

$\mathsf{S}$

## JUDGMENT OF OWINY-DOLLO; DCJ

#### **Introduction**

This is an Appeal from the judgment and orders of Bashaija J.; in Kampala High Court Civil Suit No. 612 of 2014. The facts of the case are that the Respondent acquired property comprised in Leasehold Register $20$ Volume 149, Folio 9, Plot 1 Rubaga Road (herein after referred to as the suit property), and was registered as proprietor thereof on 3<sup>rd</sup> of March 1968. One James Kalungi was registered on 1<sup>st</sup> June 2004 as the immediate and direct successor in title to the Respondent. He then transferred it to, and it was registered in the name of, G. K. Kalule; who $25$ transferred it to Hajji Haruna Mumya Musiwa (upon whose demise the administrators of his estate were registered thereon as proprietors). The administrators of that estate transferred it to Mash Investments Ltd., which in turn transferred it to the Appellant in 2010.

The Respondent filed Kampala HCCS No. 612 of 2014, for the recovery 30 of the suit property from the Appellant; alleging therein that the Appellant had acquired the suit property fraudulently. The Appellant denied this allegation; contending that he had lawfully acquired the suit

$\mathbf{1}$

property by purchase. He also set up the defence of being a bona fide $\mathsf{S}$ purchaser for value without notice of any fraud in the transactions pertaining to the suit property. After hearing the suit, the learned trial Judge made a finding that the Appellant had acquired the suit property fraudulently. He accordingly allowed the suit; and ordered for the cancellation of the registration of the Appellant from the certificate of $10$ title to the suit property, and the restoration of the Respondent on the register of the suit property as the proprietor.

It is this judgment and the orders made therein, with which the Appellant is aggrieved; hence this appeal. The appeal is based on ten grounds; which are as is listed down immediately hereunder:

- The learned trial Judge erred in law in holding that there was $1.$ no bonafides in the transaction between Mash Investment Ltd *and the Appellant.* - The learned trial Judge erred in law in holding that the $2.$ equitable interest which Mash Investment Ltd had in the suit property ceased on 5<sup>th</sup> October 2015 whereas not. - The learned trial Judge erred in law in holding that the $3.$ transfer to Haji Musiwa had the mortgage to DFCU Bank ltd had been declared illegal, null and void for fraud and there was nothing to be challenged in HCCS. 612 of 2014 regarding these transactions before recovery of the suit from the Appellant. - The learned trial Judge erred in law in holding that the $4.$ Appellant was a bonafide purchaser for valuable consideration *without Notice.* - The learned trial Judge erred in law in holding that the $5$ 30 alleged haste in registering these parties including the Appellant

$-20$

$\mathcal{L}$

- in one day was intended to quickly create bonafides and to further put the suit property out of reach of the Respondent and to defeat the court Orders that existed on the land office file. - $6.$ The learned trial Judge erred in law in holding that the Appellant under declared the consideration for the suit property and deliberately intended to cheat the Government of tax revenue and that this constituted of illegality and fraud. - $\overline{7}$ . The learned trial Judge erred in law in holding that the Appellant was dishonest in purporting to have paid part of the purchase price of the suit property from the loan monies and that this alleged dishonest amounts to fraud. - 8. The learned trial Judge erred in law in holding that the defendant did not properly search the Register. - $9.$ The learned trial Judge erred in law in holding that the Appellant was made aware of the frauds and was aware of the $20$ physical presence of the Friends Estate agents/tenants on the *property and had adequate notice of the adverse claims* in the *suit property.* - The learned trial Judge erred in law in entering judgment 10. against the Appellant and granting reliefs set out in the $25$ judgment.

#### **Representation**

At the hearing of the appeal, the Appellant was represented by learned Counsel Peter Walubiri and Andrew Wamina; while the Respondent was represented by learned Counsel Christopher Bwanika and Sarah Kisubi

$15$

$10$

$\overline{5}$

Nansamba. Counsel on both sides made brief oral submissions; and, $\mathsf{S}$ with the permission of Court, they adopted their respective written submissions they had made to the trial Court.

### **Submission of Counsel:**

#### Ground 1.

$25$

- Counsel for the Appellant faulted the learned trial judge for finding that $10$ the suit property was transferred to the Appellant, by Mash Investments Limited, in a process that was *mala fide*. Counsel argued that the fact above does not amount to *'positive, intentional acts calculated by the Appellant to deceive, and deprive'* the Respondent of the suit property, - in terms of the definition of fraud in Fredrick Zabwe vs Orient Bank& Others $15$ SCCA No. 4 of 2006. Counsel submitted that the advertisement and sale of the suit property by the bank, was not what deprived the Respondent of the suit property, since the Respondent had lost it, a long time before, to another person; after whom a number of persons had acquired it as proprietors. 20 - Counsel submitted further that the discrepancy between the date on the sale agreement and the one on the transfer form, which were the documents used for the transfer of the suit property to the Appellant, were explained by Francis Wandui Mashate (DW1); who stated that the bank insisted that the administrators of the estate of Haji Musiwa, who had an equitable title to the suit property, first sign a transfer of the suit property to him before the bank could facilitate his buying of the property. This was not done to defraud the Respondent, or anyone else. This was before the Appellant had come into the picture. - Counsel for the Respondent submitted that the learned trial judge 30 properly analysed the evidence relating to the transactions on the suit land; and further that the learned trial judge correctly made the finding

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that the Appellant was not a bona fide purchaser thereof, owing to the $\mathsf{S}$ predetermined process where the vendor purported to transfer the suit property to the Appellant without any title to do so; since it was not registered as proprietor. Second, the vendor and his predecessors in title had no title to pass due to the acts of fraud committed by them. Counsel contended that the impugned transactions were a formality to $10$ cover up the fraudulent scheme involving DFCU Bank, the Appellant, and Mash Investments Limited.

Counsel pointed out entries in the Register Book, such as Court orders restraining alienation of the suit property, which he contends were fraudulently cancelled to pave way dealings in the suit property. Counsel further submitted that the Appellant was aware of all these fraudulent acts. Counsel pointed out that the search report to the Appellant had a disclaimer about its correctness; hence the Appellant ought to have exercised due diligence by doing more to establish whether the property was encumbered or not. Counsel further submitted that the back to back transaction in the suit property interconnected the Appellant to the fraud of his predecessors.

Counsel urged Court to impute on the Appellant's predecessors in title, and to the Appellant himself, any knowledge of fraud which DFCU Bank had regarding the suit property. Counsel also faulted the process by which the suit property was transferred to the Appellant before a sale agreement was made. Counsel also urged Court to find the repeated under declaration of the value of the suit property by the Appellant and his predecessor in title as evidence of fraud intended to cheat the government the stamp duty payable on the transaction.

Ground 2.

$20$

Counsel for the Appellant faulted the trial judge for holding that upon signing the transfer instrument in favour of the Appellant, the equitable

interest which Mash Investments Limited held in the suit property $\overline{5}$ ceased. Counsel argued that under the Torrens system of land registration, which is the system practiced in Uganda, a legal interest in land is not created by mere execution of an instrument like a transfer form; but rather, by registration of the transfer instrument, which then turns the equitable interest into a legal one. So, the purported transfer $10$ before Mash Investments Limited was registered as proprietor did not extinguish the equitable interest in the property. Counsel relied on Section 54 of the Registration of Titles Act in support of this contention.

Counsel for the Respondent argued that the judge was right in finding that because of the *mala fide* transactions between the Appellant and 15 Mash Investments Limited, no equitable interest could have existed as fraud unravels all. Counsel contended further that Mash Investments Limited could not claim in the agreement that it had legal title so as to defend the sale of the suit property to the Appellant, and still claim an equitable title as well when the legal title it claimed is challenged. In $20$ short, Mash Investments Limited could not be allowed to approbate and reprobate with regard to its interest in the suit property to suit its interest at a given time.

#### Ground 3.

Counsel for the Appellant submitted that a registered proprietorship, $25$ like that of Haji Mumiya Musiwa, cannot be declared illegal, null and void for fraud when such a proprietor has not been given a hearing on the matter in issue. For this, Counsel relied on Article 28 (1) of the Constitution. Counsel further argued that the Respondent could not contest the Appellant's bona fide status when it did not join Haji Musiwa 30 and DFCU Bank; against which it alleged fraud. Second, counsel argued that the orders by Kiraybwire J. (as he then was), nullifying transfer from the Respondent to G. K. Kalule and so on, could not bind a person

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who was not a party to the suit; and indeed that is why this Court $\mathsf{S}$ pronounced itself that the Appellant could not be ejected from the suit property on an order of Court in a suit to which he was not a party.

Counsel argued that the trial judge was right in holding that all persons who acquired the suit property before the Appellant, from G. K. Kalule to the Appellant, did so in violation of the Court orders that had been $10$ entered on the Register forbidding any dealing in the suit property; so their respective acquisitions subsequent to the notices in the Register were fraudulent. Since the Appellant's title is rooted in fraud, to which he was party, it cannot stand. Counsel argued that this applies to DFCU Bank whose dealings with the suit property was not done bona fide. $15$

#### Grounds 4, 5, 8, and 9.

Counsel for the Appellant argued that the Appellant was not aware of the fraud allegedly committed on the suit land; and submitted further that if the alleged fraud took place, it was done long before the Appellant bought the land from Mash investment. He carried out a $\overline{20}$ search on the register, and carried out physical check on the property and verified the ownership from the tenants. Counsel faulted the trial judge for finding that the Respondent's tenants were in possession of the suit property; when such finding was not supported by any evidence on record. To the contrary, evidence by a Mr Sham was that the $25$ Respondent did not take possession of the suit property even though Court had ruled in its favour.

Counsel pointed out that PW2 Patrick Sunday Muganzi said he was a tenant of Kalungi. The Registrar of Titles, basing on section 78 of the RTA, cancelled entries from the register on the ground that they had been entered in error. Appellant had no reason to check beyond the register. Relying on the authority of Kampala Bottlers Ltd vs. Damanico (U)

$\overline{7}$

*Ltd, SCCA No.22 of 1992,* Counsel for the Appellant argued that the history $\mathsf{S}$ of fraud and illegalities allegedly committed by other persons on the suit land, cannot be blamed on the Appellant unless they are directly attributed to him. Counsel for the Appellant faulted the trial Judge for holding that if the Appellant had made a proper search of the Register, he would have discovered that entries on the title had a problematic $10$ history of fraud and illegalities.

Counsel submitted that the land file, on which there may be found several documents including correspondences, registered instruments and all manner of documents, does not constitute the Register as defined in Section 37 of the Registration of Titles Act. Counsel $15$ submitted that a search of the Register would simply reveal registration of proprietors and encumbrances; but not the circumstances under which such registrations were made. Counsel submitted further that cancellation of an entry for the reason that it was "registered in error" is not, by itself, evidence of fraud; but is, rather, evidence of an administrative mistake. Counsel submitted that there is an affidavit by

Mr. Sham stating that the company had been prevented from obtaining vacant possession of the property. So they were not in possession, and they had no tenants therein.

Counsel for the Respondent reiterated his submissions with regard to $25$ ground of appeal No. 1; and added that all that pointed to the Appellant having acted with mala fide in his acquisition of the suit property. This included the whole process from failure to make a proper search in the Register, dealing with a person who was not a registered proprietor, and colluding with the bank to facilitate the purchase of the suit property 30 between parties who had no justification to deal in the property. Hence, the trial judge was right in making a finding and coming to the

conclusion that the haste in registering the administrators of the estate

of Haji Musiwa, Mash Investments Limited, and Appellant on the same $\mathsf{S}$ day within a space of five minutes did not follow the due process; and raised serious credibility questions in the light of the history of fraud over the suit property.

Counsel submitted that after pointing out that transfer to and registration in several persons' names may not necessarily be evidence of fraud, the trial judge found that:

"... in this case however, the haste fortifies allegations of fraud when taken together with other particulars of fraud already proved and *given the history of fraud and illegalities on the suit property.*"

Counsel pointed out what the Respondent considers blameworthy 15 conduct of the Appellant pointing to fraud. These included transfer of the suit property to Appellant before a sale agreement was executed. Payment of money purportedly on a mortgage, which was however executed much later. The Appellant cheated the government of stamp duty revenue in under declaring the value of the suit property. These $20$ cannot be severed from the overall fraudulent scheme of his predecessors in title.

Trial judge found that proper search of the Register should have led the Appellant to the Land Registry file where he would have found the Court orders and evidence of the checkered history of dealings in the suit $25$ property. Counsel then argued that the Appellant had due notice of the Court orders; but disregarded them by not searching in the Registry file. Counsel argued further that the Appellant did not take heed of the fact, which he was aware of, that the Respondent had tenants in the suit property at the time he acquired it. 30

$10$

#### $\mathsf{S}$ Ground 6.

$10$

Counsel for the Appellant argued that underpayment of stamp duty by an innocent purchaser, like the Appellant, for land bought by another innocent purchaser, is not the kind of dishonesty that constitutes fraud, which can be the basis for cancellation of a whole series of registrations backwards to restore the Respondent's name on the certificate of title.

With regard to the under declaration of the value of the suit property, in the transfers of the suit property to Mash Investments Limited, and to the Appellant, Counsel for the Respondent justified the learned trial judge finding that:

"... the logical inference is that it was deliberately intended by the $15$ defendant and his predecessors in title to cheat Government of tax revenue. ... It is not correct that payment of stamp duty is a mere tax $\mathbf{r}$ policy which does not override the Constitutional right of a party to property. If anything, the Constitution, in Article $17(1)(g)$ , imposes a duty on every citizen of Uganda to pay taxes ... It is now settled that $20$ *where a party understates the value of property, to cheat Government* of revenue, the acquisition of that property is tainted with fraud and illegality, and such a person cannot be considered bona fide in respect to the property because bona fide includes "without" any fraud or *participation in the wrong doing."* 25

#### Ground 7

Counsel for the Appellant submitted that the purchase of the suit land by the Appellant could not by any stretch of argument be the reason the Respondent lost the suit property, because the Respondent had already lost the property in an earlier transaction to which the Appellant was not privy. Furthermore, the Appellant explained that he was an old customer of the bank; so it was easy for him to arrange to be facilitated

- by the bank to pay the purchase price for the property. His acquisition $\mathsf{S}$ of finance from the bank helped him to top up the purchase price for the suit property. Further still, the vendor to whom the payment was made has not complained; so where is the fraud? - Counsel for the Respondent defended the finding of the trial judge as well founded. Counsel pointed out that there is no documentary 10 evidence that the parties had agreed on a tripartite arrangement for the acquisition of the suit property by the Appellant.

Ground 10.

- Counsel for the Appellant submitted that in light of the above submissions, the reliefs granted including general damages Shs. 15 500,000,000/= were not justified in law. On the evidence, the Appellant has added an entire block of commercial building to the suit property, has added floors to the structure he found on the property. Even if he were found to have committed fraud, in his acquisition of the suit property, it would be harsh to condemn him to payment of such 20 damages when the Respondent would be the beneficiary of the developments the Appellant has made on the suit property. - Counsel for the Respondent justified the award of damages by the learned trial judge; as arising from the chequered history of fraud, by the Appellant and his predecessors in title, whose acts had deprived the $25$ Respondent of the suit property. Counsel argued further that the trial judge ought to have awarded a much higher sum for damages than what he did in view of the suffering the Respondent underwent due to the injustice occasioned by the Appellant and his predecessor in title. Counsel defended the learned trial judge's award of mesne profits in 30 the light of what the Respondent suffered from loss of rentals for the period he was deprived of the suit property.

## COURT'S CONSIDERATION AND DETERMINATION OF THE APPEAL

I have subjected the record of appeal to a careful perusal; and have internalized the parties' respective pleadings and the evidence adduced at the trial. I have also given due consideration to the submissions made by counsel for either party to the appeal; and, as well, the respective authorities they have cited and relied on. This I have done, pursuant to $10$ the provision of Rule 30 (1) of the Judicature (Court of Appeal Rules) Directions S. I. 13-10; which enjoins this Court, as a first appellate Court in a matter such as this, to evaluate and reappraise the evidence adduced before the trial Court, and then make any finding of fact, and or draw relevant inferences there from, and arrive at its own conclusion. 15 This Court will then be able to determine whether, or not, to uphold and sustain the findings of the trial Court.

Although the memorandum of appeal lists ten grounds of appeal as is set out herein above, I am of the considered view that this appeal really turns on just one question; namely: -

$20$

$25$

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"Whether the Appellant was either involved in, or was aware of, any fraudulent act that deprived the Respondent of the suit property; and the Appellant benefited from it."

The particulars of the alleged fraud by the Appellant, which the Respondent (as Plaintiff) set out in the plaint, are as follows:

- "(a) Purporting to purchase land from a predetermined Registered Proprietor, Mash Investments Limited on the 26<sup>th</sup> of October, 2010 whereas the Company was registered on the title on the $27<sup>th</sup>$ of October 2010. - Purporting to acquire title to the suit property without due payment $(b)$ 30 of the total consideration.

- Purporting to effect a transfer of the suit property from Mash $\mathsf{S}$ $(c)$ Investments Limited to the Defendant's names, three (3) minutes after its acquisition of title without due process. - Failure to pay stamp duty before effecting the transfer. $(d)$ - *Purporting to purchase the suit property in an encumbered state by* $(e)$ DFCU Bank on the 26<sup>th</sup> of October 2010, whereas the DFCU Bank Mortgage was registered on the $27$ <sup>th</sup> of October, 2010. - Purporting to acquire a Credit facility from DFCU Bank as $(f)$ Registered Proprietor using the suit property as security on the $11^{\text{th}}$ of October 2010 before being registered on title. - Disregarding vital information on the Register pointing to a history 15 $(q)$ of flagrant fraudulent dealings and Court orders restraining further dealings. - $(h)$ Being party to a scam of multiple players that resulted into the transfer of the suit property to three different proprietors in 5 *minutes.* - All along being a player in a transaction tainted with mala fides, $(i)$ forgeries, and frauds."

From the pleadings and evidence adduced at the trial, what is not in dispute, and is relevant for the determination of this appeal, is that the Respondent lost its registered proprietary interest in the suit property 25 on $1^{st}$ June, 2004, when one James Kalungi was registered in the certificate of title thereof as proprietor of the suit property, replacing the Respondent. James Kalungi had acquired the suit property pursuant to a Court order made by Kiryabwire J. (as he then was), in *H. C. C. S. (O. S.)* (Commercial Division) No. 27 of 2003 - Nasser Kiyingi vs Friends Estate Ltd., for 30

the foreclosure and disposal of the suit property by sale, and vacation $\overline{5}$ of the Respondent's caveat from the Register.

However, in H. C. Misc. Application No. 552 of 2004 - Friends Estate Ltd. vs Nasser Kiyingi & Anor, the learned judge reviewed the orders he had made in H. C. C. S. (O. S.) (Commercial Division) No. 27 of 2003 (supra); and set them

aside. He did so upon discovering that he had issued the order in the $10$ earlier suit, due to a fraudulent misrepresentation made to Court in that suit by Nasser Kiyingi. He accordingly ordered for the cancellation of the name of James Kalungi from the suit property; and, as well, ordered for the restoration of the Respondent's name onto the Register. He further ordered for the cancellation of all the transfers of the suit $15$ property to whomsoever, that had been made subsequent to the registration of James Kalungi as proprietor thereof.

Pursuant to this order, the Register for the suit property was amended by restoring the Respondent's name thereon as proprietor. However, when the learned judge issued the aforesaid orders in H. C. C. S. (O. S.) $20$ (Commercial Division) No. 27 of 2003 (supra), on the 19<sup>th</sup> January 2005, James Kalungi had already transferred the suit property to G. K. Kalule; who was registered as proprietor thereof on the 25<sup>th</sup> August 2004. Accordingly, the order by the learned judge, resulting in the restoration of the Respondent's name onto the Register of the suit property, did not $25$ affect James Kalungi; but instead G. K. Kalule whose name was cancelled from the Register thereof; leading to a number of suits not relevant for the determination of this appeal.

I should point out from the outset that the Respondent did not in its pleadings specifically attribute the alleged fraud over the suit property, to the Appellant. All that it alleged in its pleadings is the generalized and rather imprecise claim against the Appellant of "All along being (sic) a player in a transaction tainted with malafides, forgeries and frauds."

- In his acquisition of the suit property, the Appellant denied any $\mathsf{S}$ wrongdoing or notice of any wrongdoing by some other person; thereby raising the claim that he was a bona fide purchaser thereof for value, without notice of any circumstance that would have restrained him from the acquisition of the suit property. - For Court to be able to determine whether, in the process of his $10$ acquisition of the suit property, the Appellant is guilty any fraud, or had notice of any fraud committed by some other person, or not, the governing principles and legal provisions pertaining to dealings in registered land, must be invoked. First, is that the law accords greater protection to a person with registered proprietary interest in land, than $15$ the regard it has for other forms of ownership of property. To this effect, there are provisions in the Registration of Titles Act (Cap. 230, Laws of Uganda, 2000 Edn.), which spell out rights enjoyed by a registered proprietor of land. Section 59 of the Registration of Titles Act (Cap. 230, Laws of Uganda) provides as follows: 20

"59. Certificate to be conclusive evidence of title.

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 informality or irregularity in the application or in the proceedings previous to the registration of the certificate, and every certificate of title $\overline{25}$ issued under this Act shall be received in all Courts as evidence of the particulars set forth in the certificate and of the entry of the certificate in the Register Book, and shall be conclusive evidence that the person named in the certificate as the proprietor of or having any estate or interest in or power to appoint or dispose of the land described in the 30 certificate is seized or possessed of that estate or interest or has that power."

However, the provisions of section 59 of the Act reproduced above is $\mathsf{S}$ fettered by the provision of section 176 of the Registration of Titles Act; the relevant part whereof is as follows:

"176. Registered proprietor protected against ejectment except in certain cases.

No action of ejectment or other action for the recovery of any land shall lie or be sustained against the person registered as proprietor under this $10$ Act, except in any of the following cases—

$(a)$ ...

$(b)$ ...

the case of a person deprived of any land by fraud as against $(c)$ the person registered as proprietor of that land through fraud or as against a person deriving otherwise than as a transferee bona fide for value from or through a person so registered *through fraud;*

$(d) \ldots$

(*e*) ... $"$ $20$

> Courts of law have, in a number of cases, given effect to these provisions of the Registration of Titles Act. In Hariprasad Ramabai Patel vs Babubhai Kalidas Patel, HCCS No. 981 of 1990, [1992-93] HCB 137, Karokora $I$ (as he then was) stated as follows: –

"A certificate of title is conclusive evidence of ownership of the suit $25$ property. No submission or oral evidence can be called to vary the certificate of title unless fraud, lack of consideration or illegality is *proved.*" (*emphasis added*).

In Olinda De Souza Figueiredo vs Kassamali Nanji [1962] 1 EA 756, the Court stated that: 30

"... in the absence of fraud a Court will not go behind the fact of registration."

In Namusisi & 2 Others vs. Ntabazi, Supreme Court Civil Appeal No. 004 of 2005 *(unreported)*, the Court stated that:

"... a certificate of title is only defeasible in a few instances which are listed in Section 176 of the Registration of Titles Act."

In Robert Lusweswe vs Kasule & Anor. HCCS No. 1010 of 1983, wherein, on the provision that the certificate of title is conclusive proof of ownership, Odoki J. (as he then was) clarified as follows: -

"Therefore while the cardinal rule of registration of titles under the Act is that the Register is everything, the Court can go behind the fact of registration in cases of actual fraud on the part of the transferee."

In Kampala Bottlers Ltd. vs Damanico (U) Ltd., SCCA No. 22 of 1992, [1994-95] HCB 49, Wambuzi C. J. cited, with approval, the holding by Odoki J. (as he then was) in Robert Lusweswe vs Kasule & Anor. (supra) on the effect of fraud in land acquisition. He restated the circumstances under which fraud can defeat the claim of 'bona fide' purchase of registered land; clarifying that for a plea of fraud to succeed, the: -

"..................................... that it must be attributable either directly or by necessary implication. By this I mean the transferee must be guilty of some fraudulent act or must have known of such act by somebody else and taken advantage of such act."

From the above provisions of section 176 of the Registration of Titles Act, only a person deprived of land through fraud, which includes misdescription of the land in the registered title, can bring an action

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$25$

against the person registered as proprietor of that land under the Act. $\mathsf{S}$ Court has to be satisfied that the registration was fraudulently done.

Second, the law places a much higher premium or threshold for proof of a claim of fraud than is required for proof in ordinary civil claims. This is because an allegation of fraud is a very grave assertion; and as Court held in Jonesco vs Beard [1930] AC 298, at pp. 301 to 302 thereof: -

$10$

"Fraud is conduct which vitiates every transaction known to the law. It even vitiates a judgment of the Court. It is an insidious disease, and if clearly proved, spreads to and infects the whole transaction."

The standard of proof in an allegation of fraud is however not as high as 'proof beyond reasonable doubt', required to establish a criminal 15 offence. In the Kampala Bottlers Ltd. vs Damanico (U) Ltd. case (supra), after stating that fraud proved must be attributable to the transferee, Wambuzi C. J. also restated the position in law on the standard of proof required to prove a claim of fraud; stating that:

"Further, I think it is generally accepted that fraud must be proved $20$ strictly, the burden being heavier than on a balance of probabilities generally applied in civil matters."

It was thus incumbent on the Respondent to discharge the burden of proving the fraud it has attributed to the Appellant; or that the Appellant had notice of fraud having been committed on the suit property by someone else, but he nonetheless still went ahead and acquired it regardless. The evidential burden to prove the contention that one is a bona fide purchaser of the suit land without notice against dealing with that land, however lies on the person who pleads so. While the standard of proof required for a claim of fraud is at a higher level of balance of probability, than that required for proof in an ordinary civil suit, the standard required to prove the contention that one is a

bona fide purchaser of land for value, without notice of any inhibiting $\mathsf{S}$ matter, is the standard applied in ordinary civil claims.

I should also point out here that similarly, the relevant part of section 64 of the Registration of Titles Act provides, on the paramountcy of the estate of the registered proprietor, as follows: -

- $"(1)$ Notwithstanding the existence in any other person of any estate or $10$ interest, whether derived by grant or otherwise, which but for this Act might be held to be paramount or to have priority, the proprietor of land or of any estate or interest in land under the operation of this Act shall. except in the case of fraud, hold the land or estate or interest in land - subject to such incumbrances as are notified on the folium of the Register 15 Book constituted by the certificate of title, but absolutely free from all other incumbrances, except the estate or interest of a proprietor of the same land under a prior registered certificate of title, ... ... " (emphasis *added).* - Because of the importance of the certificate of title in determining $20$ proprietorship in the terms provided for under sections 59 and 64 of the Registration of Titles Act reproduced herein above, and the decided cases thereon, some of which have been cited hereinabove, I consider it pertinent to reproduce here at the very outset, part of the record in certificate of title of the suit property, which was admitted in evidence $25$ at the trial; and is relevant for the determination of the matters in controversy between the parties hereto. It is as follows: - - On the 1<sup>st</sup> January 2004, one James Kalungi was registered on $(i)$ . the Register of the suit property, under Instrument No. 343562, as proprietor; and the name of Friends Estate Limited (the Respondent), as proprietor since 1968, was cancelled.

- On the $25$ <sup>th</sup> August 2004, G. K. Kalule was registered on the $(ii)$ . Register of the suit property, under Instrument No. 346090, *as proprietor.* - (iii). On the 20<sup>th</sup> October 2005, Friends Estate Limited (the *Respondent) was, under Instrument No. 359630, registered on* the Register of the suit property, by restoration of its registration under Instrument No. 173611 of 1968 as proprietor; pursuant to Court order in H. C. Misc. Appl. No. 552 of 2004. The entry of G. K. Kalule above as proprietor was *cancelled.* - *On the 23<sup>rd</sup> April 2007. G. K. Kalule was, under Instrument No.* $(iv)$ 379597, registered on the Register of the suit property as *proprietor by restoration of his registration under Instrument No.* 346090 of 2004. The entry (restoration) of Friends Estate Limited on the Register on the $20<sup>th</sup>$ of October 2005 as *proprietor, vide Instrument No. 359630, was cancelled; with* next to it that it had been "ENTERED IN the remark ERROR". - On the 19<sup>th</sup> June 2008, Hajji Haruna Mumya Musiwa was $(v)$ registered on the Register of the suit property, under *Instrument No. 397873, as proprietor.* - (vi). On the $2^{nd}$ October 2008, the mortgage of the suit property by Hajji Haruna Mumya Musiwa to DFCU Bank Limited was *registered on the Register under Instrument No. 403194.* - (vii). On the $27$ <sup>th</sup> October 2010, the mortgage of the suit property to DFCU Bank Ltd. was, under Instrument No. 438128, released.

$25$

$15$

$10$

$\overline{5}$

$20$ - (viii). On the 27<sup>th</sup> October 2010, Akim Sondit Musiwa, Chemisto Badru, and Hasifa Musiwa were, under Instrument No. 438129, registered on the Register of the suit property as administrators of the estate of the late Hajji Haruna Mumya Musiwa. - (ix). On the $27<sup>th</sup>$ October 2010, Mash Investments Limited was, under Instrument No. 438130, registered on the Register of the suit property as proprietor. - $(x)$ . On the 27<sup>th</sup> October 2010, Hajji Numani Mubi Akulamusa (the *Appellant) was, under Instrument No.* 438131. registered on the Register of the suit property as proprietor. - (xi). On the $27<sup>th</sup>$ October 2010, the suit property was, under *Instrument No. 438132, mortgaged to DFCU Bank Limited.*

At the time the Appellant was registered as proprietor of the suit property, the 'incumbrances pages' of the Register reflected the following relevant entries: -

- $(i)$ Various caveats that had been lodged on the Register had all been cancelled. - $(ii)$ Court order in H. C. (O. S) No. 27 of 2003, barring debtors from transferring or changing the suit property, which had been registered under Instrument No. 342610 on 26<sup>th</sup> April 2004. in the Register had been cancelled as having been "ENTERED" IN ERROR". - $(ii)$ Court order stopping any change or transfer of ownership pending the disposal of Misc. Application No. 1005 of 2004, and H. C. Misc. Applica. No. 24 of 2005, which had been

$21$

$20$

$10$

$\mathsf{S}$

realistered under Instrument No. $350458$ on $18$ <sup>th</sup> January 2005, had been cancelled as having been "ENTERED IN" ERROR".

As is manifest from the record above, the Appellant was registered as the proprietor of the suit property on 27<sup>th</sup> October 2010; which was six years after the Respondent first lost proprietorship over the suit $10$ property. By the time the Appellant was registered as proprietor of the suit property, it had been transferred at different times to five successive proprietors, as is evidenced by the entries in the Register of the suit property exhibited at the trial, and is reproduced above.

$\mathsf{S}$

That being so, any cause of action the Respondent could have had for 15 the loss of the suit property, would have been against James Kalungi to whom the suit property was transferred from the Respondent, six years before the Appellant acquired proprietary interest therein. Such fraud could not, by any stretch of apportionment of blame, be attributed to the Appellant. However, and I find this inexplicably strange, neither did 20 the Respondent allege any commission of fraud by James Kalungi, or his successors in title, in their respective acquisition of the suit property; nor did it join, James Kalungi, or any of the successive registered proprietors of the suit property subsequent to James Kalungi, but prior to the Appellant, as parties to the suit. $25$

Most notably, no evidence was adduced before the trial Court, showing that the Appellant participated, or was in any way involved, in the transactions that led to the acquisition by, and registration of the suit property in the names of, the five different persons (from James Kalungi to Mash Investments Limited) as proprietors thereof at various times over a period covering six years before the Appellant acquired it. Because the Appellant acquired the suit property long after it had

$\overline{22}$

- already been transferred from the Respondent to James Kalungi, it $\overline{5}$ follows that any fraud that James Kalungi could have committed in his acquisition of the suit property would have been too remote to in any way be linked to, leave alone have the effect of infecting, the Appellant's acquisition of the suit property. - Furthermore, before the Appellant acquired the suit property, five other $10$ persons had been registered as proprietors thereof after James Kalungi; hence the Appellant was at the tail end of a long chain of acquisition and transfer of the suit property by various persons, beginning with James Kalungi. It is thus quite difficult to logically, or at all, discern any nexus whatever between the Appellant and James Kalungi. Any $15$ fraudulent acquisition of the suit property by the Appellant, if there was any, would have instead been to the detriment of the administrators of the estate of the late Hajji Haruna Mumya Musiwa, who had an equitable interest as proprietors of the suit property at the time; since they had acquired probate for the estate of Hajji Haruna Mumya Musiwa, but had $20$ not yet registered themselves as proprietors pursuant to the probate.

Similarly, such fraud would have been to the detriment of Mash Investments Limited, which had acquired equitable interests in the suit property upon purchasing it from the administrators of the estate of the late Hajji Haruna Mumya Musiwa; and the Appellant was aware of this. 25 The Respondent however accused the Appellant himself of fraud, faulting him in the whole process whereby DFCU Bank, to which the suit property was mortgaged by Hajji Haruna Mumya Musiwa, financed Mash Investments Limited, and as well the Appellant in their respective purchase of the suit property. The learned trial judge made a finding 30 that in this, the Appellant, the administrators of the estate of Hajji Haruna Mumya Musiwa, Mash Investments Limited, and DFCU Bank, acted in collusion in a fraudulent back-to-back series of transactions,

$\overline{23}$

which facilitated the Appellants acquisition of the suit property as $\mathsf{S}$ registered proprietor.

The impugned process includes, first, concluding agreements for sale of the suit property before the purported vendors became registered proprietors thereof. Second, executions of instruments of transfer for the suit property to Mash Investments Limited, and then to the $10$ Appellant, before the parties had executed the respective sale agreements. Third, is the transfer to and registration of three different persons in the Register Book as proprietors of the suit property within just a few minutes of each other. Fourth, is the involvement of DFCU Bank in financing the purchase of the suit property by the various buyers. Lastly, is the contention that Mash Investments Limited, which transferred the suit property to the Appellant, acted together with the Appellant and deliberately under-valued the suit property; and this was with the intent to defeat payment of stamp duty on the transfer.

$15$

It is therefore incumbent on this Court to inquire with a view to $20$ establish if, to the knowledge of the Appellant, there existed some unregistered interest of the Respondent, or some other circumstances forbidding any adverse dealing with the suit property; but he nevertheless proceeded to transact the acquisition of the suit property, $25$ regardless. It is such a situation, as this, that would lead Court to impute fraud on the part of the Appellant in the process of his acquisition of the suit property. I therefore consider it appropriate to set out, in *extenso*, a narrative of the process and various transactions surrounding the Appellant's impugned acquisition of the suit property. This will enable Court determine whether there existed such circumstance as I 30 have alluded to above; and for which then, I would justifiably impute fraud on the part of the Appellant.

$\overline{24}$

On the evidence, the genesis of the Appellant's involvement in the suit $\mathsf{S}$ property is that prior to the acquisition of the suit property by the Appellant, DFCU Bank Limited (the mortgagee of the suit property) had caused a newspaper advert (exhibited in evidence at the trial) notifying the public that it had, on the 16<sup>th</sup> February 2010, appointed one Mathias Nalyanya the receiver and manager of the suit property together with $10$ two other properties, which were mortgaged to the Bank by Hajji Haruna Mumya Musiwa (deceased). The Receiver/Manager was authorized thereby, to execute the sale thereof either by public auction or by private treaty; unless the registered proprietor (the mortgagor) paid in full all the monies owed to DFCU Bank, together with the 15 Receiver/Manager's fees, costs and expenses. The publicized sale was scheduled for 12<sup>th</sup> April 2010. Following the advert, two searches were made in the Register Book.

The first search, for which the Registrar of Titles issued a statement on 23<sup>rd</sup> February 2010, was caused by the estate of Hajji Haruna Mumya $\overline{20}$ Musiwa. It is noteworthy that Probate for administration of the estate of Hajji Haruna Mumya Musiwa (deceased), copy of which was exhibited in evidence at the trial, was granted to his children Akim Sondit Musiwa, Chemisto Badru, Hasifa Musiwa, by the High Court on the same date of 23<sup>rd</sup> February 2010 when the Registrar issued the search statement for $\overline{25}$ the suit property. It was after this (on the $15$ <sup>th</sup> March 2010) when the administrators of the estate of Hajji Haruna Mumya Musiwa offered the suit property to Mash investments for sale at a proposed price of U. Shs. 900,000,000/= (Nine hundred million only). A copy of the sale offer letter was exhibited in Court at the trial.

On the 20<sup>th</sup> March 2010, the administrators of the estate of Hajji Haruna Mumya Musiwa, entered into an agreement with Mash Investments Limited (the purchaser), to acquire the suit property at the price

- proposed above. The agreement (exhibited in Court at the trial) spelt $\overline{5}$ out that the purchaser would settle the vendors' debt to DFCU Bank in full: and the vendors would retrieve their certificate of title from the Bank, and deliver it to the purchaser. The purchaser would then pay the outstanding sum from the sale price, to the vendors' account with Standard Bank. On the 30<sup>th</sup> September 2010, the vendors signed an $10$ instrument (exhibited in Court at the trial) transferring the suit property to Mash Investments Limited. However, this transfer was not entered in the Register Book at the time of its execution; a matter to which I will advert, shortly in this judgment. - It is evident from this account that by the time Mash Investments $15$ Limited obtained a signed instrument of transfer of the suit property from the administrators of the estate of Hajji Haruna Mumya Musiwa, as vendors of the suit property, Mash Investments Limited had already entered into negotiations with the Appellant for the purchase of the suit - property; and this explains why the Appellant caused the second search $20$ on the Register Book for the suit property; a statement for which the Registrar of Titles issued on the 29<sup>th</sup> September 2010; and was exhibited in Court at the trial. On the 26<sup>th</sup> day of October 2010, Mash Investments Limited and the Appellant reached an agreement for sale of the suit property to the Appellant at the agreed price of U. Shs. 1,200,000,000/ $=$ $25$ (One billion, two hundred million only). This agreement, too, was admitted in evidence at the trial.

The agreement acknowledged that the Appellant had already paid the sum of U. Shs. 250,000'000/= (Two hundred million only) to the vendor Mash Investments Limited, through a cheque drawn on DFCU Bank. The agreement further acknowledged receipt of U. Shs. 580,000,000/= (Five hundred and eighty million only) paid by the Appellant to the account of Mash Investments Limited with DFCU Bank on the 12<sup>th</sup> October 2010;

- upon which the Appellant acquired an equitable title to the suit $\overline{5}$ property. As further part payment for the suit property, the Appellant agreed to convey to Mash Investments Limited, his personal property located at Kabowa valued at the sum of U. Shs. $420,000,000/=$ (Four hundred and twenty million only). - It is the whole of this process that the learned trial judge faulted; $10$ making a finding of fact that it was evidence of fraud by the Appellant and the persons he acted in concert with. Admittedly, at the time the administrators of the estate of Hajji Haruna Mumya Musiwa negotiated and concluded the agreement for the sale of the suit property to Mash Investments Limited, and executed a transfer instrument therefor, they $15$ were as yet not registered as proprietors of the suit property; although they had already obtained probate to administer the said estate. Hence, they had an equitable interest in the suit property, by virtue of the probate granted to them by Court; and accordingly, they had the legal authority to pass the equitable interest to anyone seeking to acquire $20$ proprietary interest in the property.

In Ismail Jaffer Allibhai & 2 Ors vs. Nandlal Harjivan Karia & Anor; S. C. C. A. No. 53 of 1995. [1996] IV KALR 1, at p. 13, Oder JSC approved of the legal principle expounded in THE LAW OF REAL PROPERTY, by R. E. Megarry and *H. W. R. Wade, 3<sup>rd</sup> Edition,* at p. 582; that upon purchase of land, the property $25$ therein passes to the purchaser upon making even only part payment of the purchase price. The purchaser thereby acquires an equitable interest in the property, enforceable as against third parties; while the vendor retains the legal title therein. This creates a rival claim of right over the property between the vendor and the purchaser; which $30$ operates until the conversion of the purchaser's equitable right therein to a legal right by registration as proprietor thereof, and thereby extinguishing the vendor's legal right therein.

$\overline{27}$

In the instant case from which this appeal arose, the administrators of $\mathsf{S}$ the estate of Hajji Haruna Mumya Musiwa no doubt wrongfully described themselves, in the agreement of sale of the suit property to Mash Investments Limited, as the registered proprietors thereof; whereas they were not so registered, but only had an equitable interest therein. The grant of probate to them notwithstanding, they had no $10$ authority to execute a registrable instrument for the transfer of the suit property; which explains why they failed to register the transfer they executed without a legal title thereto. However, I am unable to find that this wrongful reference by the vendors that they were registered proprietors of the suit property could, without more, vitiate the 15 contract of sale and transfer thereof to Mash Investments Limited; or cause the imputation of fraud on the part of the vendors.

This position, *mutatis mutandis*, applies to the purchase of the suit property by the Appellant from Mash Investments Limited which, at the time of the sale of the suit property, had only an equitable interest $20$ therein since it was as yet not registered as proprietors thereof. Accordingly, at that point in time, Mash Investments Limited transferred to the Appellant only the equitable interest it had acquired in the suit property from the administrators of the estate of Hajji Haruna Mumya Musiwa; and no more. It is upon appreciating this legal $25$ position that one can properly and satisfactorily resolve the virtually simultaneous sequential, though separate, registrations of three persons on the Register of the suit property, as proprietors thereof; which was done within a span of some five minutes only.

Because Mash Investments Limited had conferred on the Appellant only 30 an equitable interest in the suit property at the time of sale, which was non-registrable, it was necessary and prudent of the bank and Appellant to ensure that the record of conveyancing of the suit property from Hajji

- Haruna Mumya Musiwa to Mash Investments Limited, then finally from $\mathsf{S}$ Mash Investments Limited to the Appellant, when each of the vendors had acquired legal interest in the suit property, was properly reflected on the Register. Accordingly, the equitable interest the administrators of the estate of Hajji Haruna Mumya had in the suit property had to be converted to a legal interest by registering the said administrators as $10$ proprietors thereof; and then the transfer of the legal title to Mash Investments Limited and registration thereof, followed by transfer of the same to the Appellant. - In ensuring that the equitable interests were first converted to legal interests by registration before effecting the transfers to them, the $15$ purchasers of the suit property avoided the very danger Ssekandi J. (as he was then) cautioned against in the case of John Katarikawe vs William Katwiremu & Anor [1977] H. C. B. 187, which the Court of Appeal (now Supreme Court) cited with approval in *Matovu & 2 Others vs Sseviri & Anor* [1979] H. C. B. 174; namely that where a purchaser of land, having $20$ knowledge of the existence of an equitable interest in that land under a contract of sale, registers a transfer of the title in his name in order to frustrate the equitable interest, it would amount to fraud. Such a transfer would be declared null and void; and would be cancelled. - In this case now on appeal, the sale of the suit property by the $25$ administrators of the estate of Hajji Haruna Mumya Musiwa to Mash Investments Limited was done by private treaty under the auspices of the bank as the mortgagee thereof. Mash Investments Limited could only raise part of the purchase price for the suit property; so it obtained funding from the bank, which it secured by mortgaging the suit $30$ property to the bank. The bank could not release the title to the mortgaged property to Mash Investments Limited before full payment of the loan; hence the purchasers, Mash Investments Limited and the

Appellant, who bought the suit property in turn, could not transact the $\mathsf{S}$ purchase of the suit property without involving the bank.

It was therefore against the backdrop demonstrated above that the administrators of the estate of Hajji Haruna Mumya Musiwa got registered as proprietors at 2.20 p.m. on 27<sup>th</sup> October, 2010; followed three minutes later, to wit at 2.23 $p.m.$ , by the registration of Mash $10$ Investments Limited. Two minutes after this, to wit at 2.25 p.m., Mubi Akulamusa Numani (the Appellant) got registered as proprietor; thereby concluding the process which commenced by the Appellant acquiring equitable proprietary interest in the suit property, and culminating into a registered legal interest. With respect to the learned trial judge, there 15 is no evidence of fraud in the conveyance of the suit property from the administrators of estate of Hajji Haruna Mumya Musiwa to Mash

Investments Limited, then to the Appellant.

The learned trial judge found that the execution of the written agreement by Mash Investment Limited and the Appellant for the sale $20$ of the suit property after the Appellant had already been registered as proprietor thereof amounted to fraud. He had this to say: -

"The same facts show that the defendant in whose favour the suit *property was transferred acquired it before paying any consideration* for it. The sale agreement (Exhibit $D.4$ ) which spelt out the terms of the acquisition was entered into long after the suit property had been *transferred to and acquired by the defendant. Obtaining transfer into his name before executing a sale agreement with the purported vendor* implied that the defendant acquired the suit property before paying any consideration. That renders true the allegation of fraud in the *plaint to the effect."*

$\overline{25}$ - With utmost respect to the learned trial judge, I find his reasoning in $\mathsf{S}$ this regard seriously flawed; as it is neither supported by the evidence adduced at the trial, nor is it based on any legal provision, or principle known in law. It is important to bear in mind the fact that the process of acquisition of the suit property by the Appellant was conducted under the circumstance that involved the bank to which it had been $10$ mortgaged; owing to the bank's facilitation of the purchase thereof by Mash Investments Limited. Thus it was important and crucial that the payments for the suit property by the Appellant, had to take care of the interests of the bank as mortgagee. - On the evidence, it is clear that before the impugned transfer 15 instrument was executed by Mash Investments Limited in favour of the Appellant, he had made a sizeable part payment of the purchase price to Mash Investments Limited. Furthermore, as was attested to by Francis Wandui Mashate, Mash Investments Limited, of which it was an official, signed the impugned transfer before a written agreement was executed 20 because the bank, which the Appellant was relying on to partially finance the purchase of the suit property, had insisted that Mash Investments Limited, which the bank was aware had an equitable interest in the suit property, had to sign a transfer instrument for the suit property, in favour of the Appellant. $25$

This is precisely what the bank had earlier required of the administrators of the estate of Haji Haruna Mumya Musiwa, who had only an equitable title to the suit property, to do; and indeed they first signed a transfer of the suit property to Marsh Investments Limited, after which the bank extended funds to it to enable it buy the suit property from the administrators of the estate of Haji Haruna Mumya Musiwa. In all this, I see no fraud committed against the Respondent or anyone else by either the Appellant or the bank. I should also point out

that the learned trial judge erred in law when he put emphasis on, and $\mathsf{S}$ held that, a written agreement in a transaction of sale and purchase of registered land was a prerequisite for the transfer of land.

$\chi^{\pm} \chi^{\pm}$

Section 92 (1) of the Registration of Titles Act (Cap. 230, Laws of Uganda, 2000 Edn.) which is the relevant legal provision in this regard, states $that: -$

$10$

"The proprietor of land or of a lease or mortgage or of any estate, right or interest therein respectively may transfer the same by a transfer in one of the forms in the Seventh Schedule to this Act; but where the consideration for a transfer does not consist of money, the words "the

sum of" in the forms of transfer in that Schedule shall not be used to 15 describe the consideration, but the true consideration shall be concisely *stated. (Underlining for Emphasis)"*

Therefore, non-compliance with Section 92 (1) of the Registration of Titles Act is a material factor in determining whether a transfer is either illegal or fraudulent. The 'Seventh Schedule' to the Act does not include

a written agreement as one of the prerequisite instruments for the conveyancing of land. Section 92 (2) of the said Act provides that:

"Upon the registration of the transfer, the estate and interest of the proprietor as set forth in the instrument of which he or she is entitled or able to transfer or dispose of under any power, with all rights, powers $25$ and privileges belonging or appertaining thereto, shall pass to the transferee; and the transferee shall thereupon become the proprietor thereof, and while continuing as such shall be subject to and liable for all the same requirements and liabilities to which he or she would have been subject and liable if he or she had been the former proprietor or 30 *the original lessee or mortgagee."*

It is therefore the transfer instrument that confers proprietary interest $\mathsf{S}$ in registered land so transferred. For all purposes therefore, when the Appellant was registered as the proprietor of the suit property, he acquired legal title over it; and could therefore only be ejected in the manner and for the reasons stipulated under section 176 (c), and also section 181, of the Registration of Titles Act. $10$

Notably, the instrument executed by Mash Investments Limited, for the transfer of the suit property to the Appellant, was done at a time when Mash Investments Limited had only an equitable interest in the suit property; hence, the transfer conferred equitable interest therein on the Appellant. The Appellant was registered as proprietor of the suit 15 property and thereby converting his equitable interest therein to a legal title. The written agreement made after the Appellant was already registered as proprietor of the suit property, and had legal title thereto, merely formalized an agreement that had been concluded when Mash Investments Limited had only an equitable interest in the suit property. There was nothing fraudulent in this; hence, it could not vitiate the transfer of the suit property to the Appellant.

$20$

The learned trial judge also faulted DFCU Bank for its involvement in the financing, through provision of mortgage facilities, of the sale of the suit property, which had been mortgaged to it, to Mash Investments $25$ Limited; and then to the Appellant. It is this that the Respondent termed as a back to back series of transactions. It is necessary to consider this issue from the premise that the Appellant's interest in and involvement with the suit property began with the public advert by DFCU that it had foreclosed on the suit property which had been mortgaged to it by Hajji 30 Haruna Mumya Musiwa; and had placed it under the management of a Receiver for sale. Thus, the suit property was at the brink of sale to the

highest bidder; possibly at a forced sale value, to the detriment of the $\mathsf{S}$ mortgagor.

Therefore, the sale of the suit property by the administrators of the estate of Hajji Haruna Mumya Musiwa to Mash Investments Limited, when the former only had an equitable title over the property, should be seen in this light. It was evidently a move made with the concurrence $10$ of the bank, to enable the administrators of the estate of Hajji Haruna Mumya Musiwa redeem the mortgage; and thereby salvage the suit property. Ordinarily, banks are not in the business of selling properties mortgaged to them. Indeed, they are known to go to great length to help a debtor settle their indebtedness with the bank. This ranges from $15$ postponing foreclosure, to restructuring the loan by injecting in more money to enable the mortgagor perform better.

It is quite apparent that in the circumstance of this case, DFCU's repeated financing of purchases of the suit property - the one by Mash Investments Limited, and subsequently by the Appellant - albeit that it $20$ had already placed it under a Manager/Receiver when Mash Investments Limited bought it, was intended to enable the mortgagee from whom the property was being bought, to salvage the property from an otherwise painfully detrimental disposal thereof by public auction as had been advertised. The fact that DFCU Bank facilitated the purchase $25$ of the suit property by Mash Investments Limited, and as well the purchase thereof by Appellant, while retaining the suit property as security in both cases, does not manifest any *mala fide* or illegality, as the learned trial judge found. The bank was saddled with a bad loan, which it desired to be cleared; but it was also determined that this 30 should not be unfavourable terms to the proprietor.

Pursuant to the bank's position shown above, it afforded the $\mathsf{S}$ administrators of the estate of Hajji Haruna Mumya the opportunity to strike a good bargain by sourcing the purchaser of the suit property; other than getting a raw deal from a forced sale thereof under the advertised public or private sale by the Manager/Receiver. Mash Investments Limited showed interest in the suit property, and satisfied $10$ the bank that it had a robust capacity to pay off the loan; hence the bank allowed it to mortgage the suit property to the bank. The bank did precisely the same with the Appellant during the process of his acquisition of the suit property. In this, the administrators of the estate of Hajji Haruna Mumya Musiwa, the bank, Mash Investments Limited, $15$ and the Appellant, all exhibited a commendable business acumen; in which I find absolutely nothing unlawful or illegal.

The learned trial judge also made a finding that the value of the suit property entered in the conveyancing deeds by the Appellant and Mash Investments Limited was falsified; which was evidence of fraud in the $20$ acquisition of the suit property, for which the Appellant's title to the suit property is defeasible. I should point out here that the stamp duty payable upon purchase of land is not computed out of the purchase price of the land as agreed to by the parties; but is instead assessed from the value given to the land by the government valuer. In *David Kizito* $25$ Kanonya and others vs Betty Kizito Court of Appeal Civil Appeal No. 187 of 2012, this Court observed, on this issue of misstatement of the value of a property upon transfer, as follows:

$30$

"Firstly, that there is the issue of misrepresentation of the consideration of the property. The $1<sup>st</sup>$ appellant did not state the true consideration of the property when he stated in form exhibit P1 that it was a gift. We know it was not. The purpose of stating the consideration, among others is to help determine the value of the

- *property. This is superfluous to say the least, as the government valuer* $\mathsf{S}$ is required to physically inspect the property in issue in every application for transfer and ascertain its value, which value is endorsed on the transfer form under his or her signature ... .... - As already noted above the value of the land or whether or not it is developed, is ascertained by the government valuer's physical $10$ inspection, irrespective of what is written on the consented or transfer form."

In the instant case, now on appeal before this Court, certainly neither the Appellant nor Mash Investments Limited was the valuer who assessed the suit property. It therefore follows that whatever they 15 stated as the price of the suit land was inconsequential in the determination of stamp duty payable thereon. If indeed there was any collusion between the Appellant and the government valuer to defeat or frustrate proper payment of stamp duty, which is not the case here on the evidence, then all that needed to be done was to bring the matter to $20$ the attention of the Lands authorities for a fresh and proper valuation of the suit property; on the basis of which the correct assessment and payment of the stamp duty would have been made.

Otherwise the crux or substance of this appeal, which requires serious consideration and in depth examination, is founded on the $25$ Respondent's assertion that the Appellant acquired the suit property, when there existed sufficient information in the Register Book thereof, and as well in the Land Registry files, disclosing a history of flagrant fraudulent dealings, and High Court orders prohibiting or restraining any adverse dealings with the suit property until the disposal of named 30 suits in Court. This served as notice to, and ought to have warned, the Appellant or anyone else, of the danger that lay in any dealings with the

- suit property. The learned trial judge found for the Respondent on this, $\overline{5}$ concluding thereby that the Appellant's acquisition of the suit property, despite this warning, was evidence of fraud on the part of the Appellant and his predecessors in title. - It is mainly regarding the issue of notice of fraud, or entries forbidding dealings in the suit property, on which this case turns; and on which $10$ this appeal must be considered and determined. On the claim that there was notice of fraudulent transactions over the suit property, which ought to have alerted the Appellant of the danger in acquiring the suit property, it is evident from the Register Book, the relevant part whereof is reproduced herein above, that the Appellant acquired the suit $15$ property when the entry in the Register, of Court order in H. C. (O. S) No. 27 of 2003, forbidding debtors from "transferring or changing this property", which had been entered in the Register on 26th April 2004 under Instrument No. 342610, had been cancelled by the Registrar of Titles. Against the cancelled entry of the Court order, was the $20$ endorsement that it had been "ENTERED IN ERROR".

Similarly, the Court order 'stopping any change or transfer of ownership of the suit property, pending the disposal' of Misc. Application No. 1005 of 2004, and H. C. Misc. Application No. 24 of 2005, which had been entered in the Register of the suit property on 18<sup>th</sup> January 2005 under Instrument No. 350458, had also been cancelled by the time the Appellant acquired the suit property. Against the cancelled entry of the Court order, was the endorsement that it had been "ENTERED IN ERROR". Further to this, as is manifest from the Register Book of the suit property, the name of G. K. Kalule was restored in the Register on the 23<sup>rd</sup> of April, 2007, as proprietor, after the cancellation of the entries of the two Court orders forbidding any transfer of, or other adverse dealings with, the suit

$25$

$30$

property, and as well the cancellation of the caveat that had been $\mathsf{S}$ entered in the Register.

After this, the suit property was on 19<sup>th</sup> June 2008 registered in the name of Hajji Haruna Mumya Musiwa as proprietor. He then mortgaged it to DFCU Bank. In the circumstances, if the cancellations of the encumbrances referred to above were fraudulently done, or done in error, then it was the Registrar of Titles who effected the cancellations who should be held to account; and for this, section 183 of the Registration of Titles Act provides a remedy for one who suffers on account of the action of the Registrar, as follows:

15 $"183.$ Actions for recovery of damages may be brought against the Government.

*Any person sustaining loss through any omission, mistake or misfeasance* of the registrar or any other officer or clerk in the execution of their respective duties under this Act or by any error, omission, or misdescription in any certificate of title or any entry or memorial in the $20$ Register Book or by the registration of any other person as proprietor, and who is barred from this Act from bringing an action of ejectment or other action for the recovery of the land, estate or interest, may, in any case in which the remedy by action for recovery of damages as herein provided is inapplicable, bring an action against the Government for 25 recovery of damages; in estimating those damages, however, the value of all buildings and other improvements erected or made subsequently *to the loss or deprivation shall be excluded."*

$10$

It is thus quite clear that any complaint the Respondent may have, regarding the cancellations of the forbidding entries that had been entered on the Register, it is certainly not against the Appellant who, in any case, had no dealing in the suit land at this material time; and was,

in fact, registered as proprietor thereof three years after the $\mathsf{S}$ cancellations, and would definitely not be in the know to explain the circumstances under which this occurred. Furthermore, the Appellant acquired the suit property after four persons had been registered, at various times before him, as proprietors of the suit property. It is therefore illogical to blame him, while leaving out those who were $10$ registered before him, for any possible fraud that may have been committed in the cancellations of the instruments from the Register.

In David Sejjaaka Nalima vs. Rebecca Musoke, Court of Appeal Civil Appeal No. 12 of 1985, (which is the 'locus classicus' on this issue), Odoki J. A (as he then was) had the opportunity to restate, with approval of the other $15$ members of the Court, the principle of law he had occasion to expound in Robert Lusweswe V. G. W. Kasule & Another - Civil Suit No. 1010 of 1983 *(unreported).* Therein, he (Odoki J. as he then was) considered the provision of section 189 of The Registration of Titles Act (section 181 of the Registration of Titles Act, Cap. 230 2000 Edn.); which provides $20$ for the plea of being a bona fide purchaser of land as follows:

## "181. Purchasers protected."

*Nothing in this Act shall be so interpreted as to leave subject to an action* of ejectment or to an action for recovery of damages as aforesaid or for deprivation of the estate or interest in respect to which he or she is $25$ registered as proprietor any purchaser bona fide for valuable consideration of land under the operation of the is Act, on the ground that the proprietor through or under whom he or she claims was registered as proprietor through fraud or error or has derived from or through a person registered as a proprietor through fraud or error; and 30 this applies whether the fraud or error consists in wrong description of the boundaries or of the parcels of any land or otherwise howsoever."

The learned Justice of Appeal then made the following observation on $\mathsf{S}$ this provision above; namely that:

"The effect of this section is that once a registered proprietor has purchased the property in good faith his title cannot be impeached on account of the fraud of the previous registered proprietor. A bona fide purchaser therefore obtains a good title even if he purchases from a proprietor who previously obtained by fraud. However, before a purchaser can claim the protection of S.189 of the Registration of Titles Act, he, must act in good faith. If he is guilty of fraud or sharp *practice he will cease to be innocent and therefore lose the protection."*

The learned Justice of Appeal further held that: 15

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"Where there are a series of subsequent transfers, for the title of the incumbent registered proprietor to be impeachable, the fraud of the previous proprietors must be brought home to him. In Assets Co. Ltd V. Mere Roihi & Others (supra) Lord Lindley said,

"Further it appears to their Lordships that the fraud which must be $20$ proved in order to invalidate the title of a registered proprietor for *value whether he buys from a person claiming under a title certified* under the Native Lands Act must be brought to the persons whose registered title is impeached or to his agents. A fraud by persons from whom he claims does not affect him unless knowledge of it is $25$ brought home to him or his agents. The mere fact that he might have found out the fraud had he been more vigilant and had made further inquiries which he omitted to make does not itself prove fraud on his part. But if it be shown that his suspicions were aroused and that he abstained from making inquiries for fear of learning the truth, the 30 case is very different and fraud maybe properly ascribed to him." In Ismail Jaffer Allibhai & 2 Ors vs Nandlal Harjivan Karia & Anor (supra), Oder $\mathsf{S}$ J. S. C. cited, with approval, the decision in *David Sejakka Nalima vs Rebecca Musoke* (supra). He also relied on the English case of *Assets Company Ltd. vs Mere Roihi & Others [1905] A. C. 176*; wherein, at p. 210, while considering statutory provisions textually similar to the provisions of the Ugandan Registration of Titles Act on fraud, the Privy Council defined fraud as $10$ "dishonesty of some sort"; and then held that for a claim of fraud to succeed as a cause of action, the fraud proved must be attributable either to the registered purchaser, or to his, or hers, or its agents.

It is in the light of this proposition of law that the evidence adduced by the Respondent for proof of fraud in the instant case now on appeal $15$ before this Court, and the defence available to the Appellant who denies commission of any fraud in his acquisition of the suit property, and contends he is a *bona fide* purchaser for value without notice of any inhibition to anyone dealing with the suit property to the detriment of the registered propriety thereof, ought to be considered. It is $20$ abundantly clear from the copy of the Register Book for the suit property, reproduced above, that the name of G. K. Kalule, which had been cancelled from the Register of the suit property in the enforcement of a Court order to that effect, was however restored therein on the 23<sup>rd</sup> of April, 2007, as proprietor thereof. $25$

It is not in contention that the Appellant acquired the suit property three years and six months thereafter. By this time, all the entries of encumbrances that had been reflected in the Register Book thereof had already unmistakably been cancelled; and the reason for the cancellation of each of the entries, now in issue, was clearly given in a written endorsement made against each of the cancelled entries. After the cancellation of the encumbrances referred to above, several persons were registered, on different dates over a period of time, as proprietors

of the suit property. These were, to wit, G. K. Kalule, Hajji Haruna Mumya $\mathsf{S}$ Musiwa, the administrators of the estate of Hajji Haruna Mumya Musiwa, and Mash Investments Limited.

$\overline{v} = \overline{v}$

It is quite evident that the search in the Register Book established nothing that could arouse the suspicion or concern of the Appellant: which could have necessitated further inquiry beyond the Register $10$ Book. In the circumstances, I am not persuaded by the learned trial judge's holding that the record in the Register Book for the suit property notwithstanding, the Appellant had a duty to go beyond or behind the Register Book, and also inspect the files in the Registry of Titles, to establish whether there existed therein any material or information that $15$ would have deterred him from the acquisition of the suit property. There was absolutely no reason for him to do so. In this, I am bolstered by the provision of section 136 of the Registration of Titles Act (Cap. 230 Laws of Uganda 2000 Edn.); which is that: $-$

"136. Purchaser from registered proprietor not to be affected by notice." $20$

Except in the case of fraud, no person contracting or dealing with or taking or proposing to take a transfer from the proprietor of any registered land, lease or mortgage, shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such proprietor or any previous proprietor $25$ thereof was registered, or to see to the application of any purchase or *consideration money, or shall be affected by notice actual or constructive* of any trust or unregistered interest, any rule of law or equity to the *contrary notwithstanding and the knowledge that any such trust and the* unregistered is in existence shall not of itself be imported as fraud." 30

In the David Sejakka Nalima vs Rebecca Musoke case (supra), Odoki J. A. (as he then was) brought out the purpose of the provision of section 145 of

the Registration of Titles Act then (which is section 136 of the Act, $\mathsf{S}$ reproduced above); stating as follows: -

"I agree that the object of this section and indeed the entire Act is to save persons dealing with registered proprietors from the expense of going behind the register in order to satisfy themselves of its validity, and thus simplify and expedite the process of transfer of title. But the section cannot be called in aid in cases of fraud. The section stipulates that mere knowledge of unregistered interest cannot of itself be imputed as fraud. Therefore, in my view, where this knowledge is supported by other circumstances, it may amount to fraud."

- Nonetheless, while in the circumstances of the Appellant's purchase of $15$ the suit property, the Appellant had no reason to inquire beyond the Register, he however exercised further caution and carried out an inquiry with the tenants occupying the suit property, to ascertain the proprietorship thereof. On the evidence, this was not occasioned by any suspicion whatever about the position of the suit property. The $20$ Appellant was merely exercising utmost due diligence in his pursuit of the desired acquisition of the suit property; which is a course of action that by no means points to fraud, but rather to an indulgence in a *bona fide* process in the acquisition of the suit property. - This physical inquiry by the Appellant with the tenants, as the evidence $25$ on record shows, yielded the corroborative and conclusive information and assurance that the suit property belonged to Mash Investments Limited the vendor; since the tenants named it as their land lord. None of the tenants even merely mentioned the name of the Respondent at all during the inquiry. Furthermore, at the trial, witnesses for the 30 Respondent were unmistakably clear that their attempt to take possession of the suit property pursuant to a Court order in a suit that

- was determined before the Appellant acquired the suit property, was $\overline{5}$ futile. Accordingly, then, the contrary finding by the learned trial judge that the Respondent had tenants in the suit property at the time the appellant acquired it, is not borne out by any evidence on record; hence it is an error in fact and must be rejected. - Here is a situation where two searches established that the suit $10$ property, which at the time of both searches was registered in the name of Hajji Haruna Mumya Musiwa, was subject to only one encumbrance; namely the mortgage thereof to DFCU Bank Limited. The Appellant would, in the circumstance, not be justifiably faulted if he had restricted his inquiry over the suit property to the search in the Register 15 Book only, since there was nothing therein to warn him and necessitate further inquiry. However, he exercised due diligence and physically checked with the tenants occupying the property to establish who their landlord was. Had it turned out that the tenants or some of them in occupation of the suit property had actually informed him that the $20$ Respondent was their landlord, and he nevertheless went ahead to acquire the property, then the plea of bona fide purchaser for value without notice would have been unavailable to him.

It clear, from the evidence on record, that before he acquired the suit property, the Appellant first satisfied himself that it was available for $\overline{25}$ purchase and transfer to him. The suit property was, at the time, subject to only one encumbrance; namely, the mortgage thereof to DFCU Bank Limited, which was public knowledge as it was the advert for sale thereof that had triggered the process of purchase that ended with the Appellant acquiring it. In law a mortgage, like a caveat, is not the type 30 of encumbrance that bars any transfer of proprietorship of, or any other dealing in, the mortgaged or caveated property. Acquisition of legal or equitable interest in such property is, in fact and law, permissible; only

that it is so done subject to the mortgage or caveat entered in the $\mathsf{S}$ register as an encumbrance.

No evidence was adduced before Court that in the process of acquiring the suit property, the Appellant indulged either in some act of fraud or sharp practice which the Court warned against in the authority of *David* Sejjaaka Nalima vs. Rebecca Musoke (supra); or that he had notice of some fraud committed by someone else and took advantage of it. Contrary to the learned trial judge's finding, I find that there was nothing inhibiting any dealing in the suit property which the Appellant had notice of when going through the process of acquiring the property. Therefore, the learned trial judge's finding that the Appellant involved himself in acts of fraud, and also had notice which ought to have barred him from acquiring the suit property, is neither borne out by evidence, nor supported by law or any legal principle.

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In the premises, I find that the Respondent failed to discharge the heavy burden that lay on it to prove fraud attributable to the Appellant, or that the Appellant had notice warning anyone against any dealing with the $\overline{20}$ suit property; which he disregarded. In the premises, it is my finding that the Appellant acted in good faith and exercised the requisite due diligence, and established to his satisfaction that the suit property was not encumbered by anything whatever that would bar him from the acquisition thereof. He is therefore a bona fide purchaser of the suit $25$ property without notice of any factor or circumstance inhibiting such acquisition. Accordingly, then, the Appellant's title to the suit property cannot be impeached.

In the result, this appeal succeeds in its entirety; and, therefore, I would 30 make the following declarations and orders: -

- This appeal is hereby allowed; and the judgment and orders of $(i)$ the trial Court are set aside, and substituted with the judgment and orders of this Court in favor of the Appellant. - The Appellant is the lawful registered proprietor of the suit $(ii)$ property; and is entitled to the enjoyment of legal possession thereof. - Costs of this appeal, and of the Court below, are awarded to the $(iii)$ Appellant.

Since Kakuru J. A. agrees with the findings and orders above, it is so ordered.

- (The full panel in this appeal included Lady Justice Percy Tuhaise; who 15 was in agreement with the draft judgment. However, by the time the final draft judgment was ready, the learned Lady Justice had already taken her place at the Supreme Court; hence her inability to participate at the stage of judgment). - $4$ th day of ...... $June$ 2020 Dated this ......... $20$

Alfonse C. Owiny - Dollo DEPUTY CHIEF JUSTICE

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$\mathsf{S}$

### THE REPUBLIC OF UGANDA

### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

# CORAM: OWINY – DOLLO DCJ, KAKURU & TUHAISE JJA

## CIVIL APPEAL NO. 104 OF 2018

(Appeal from the Judgment of Bashaija J. in High Court Suit No. 612 of 2014)

HAJI NUMANI MUBI AKULAMUSA ....................................

**VERSUS**

FRIENDS ESTATE LIMITED ....................................

# JUDGMENT OF KENNETH KAKURU JA

I have had the benefit of reading in draft the judgment of my Lord The Hon The DCJ.

Agree with him that this appeal ought to succeed for the reasons he has ably set out in his judgment.

I have nothing useful to add.

Dated at Kampala this $\frac{1}{\sqrt{2020}}$

JUSTICE OF APPEAL

$\eta = \frac{1}{2} \cdot \frac{1}{2}$