Remodel Enterprises Limited v Matovu and 4 Others (Civil Suit No. 405 of 2011) [2013] UGHCLD 401 (19 September 2013)

Full Case Text

## **ITHE REPUBLIC OF UGANDA**

**IN THE HIGH COURT OF UGANDA AT KAMPALA (LAND DIVISION) CIVIL SUIT NO.405 OF 2011**

**REMODE ENTERPRISES LIMITED PLAINTIFF**

**VERSUS**

**1. MATOVU RICHARD 2. NAKAYIZA EDITH MATOVU 3. NAKIRUNDA ELIZABETH I 4. LUBEGA ROBERT 5. BUKENYA HENRY**

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**JUDGMENT BY HON. MR. JUSTICE JOSEPH MURANGIRA** / COPY Or

## **1.0 Introduction**

- The plaintiff through Katende, Ssempebwa & O^^civocates &gt; brought this suit against the five (5) defendants jointly and /or severally seeking the following orders; that:-' - **(a) The 1st defendant pays to the plaintiff Ugx 112,000,000/= (one hundred twelve million shillings)being the loan amount due and owing to the plaintiff.** - **(b) Damages for breach of contract.** - **(c) Interest on (a) and (b) above.** - **(d) An order for attachment and sale of the 3rd defendants' property in zion estate described as .block 83 plot 487**

**Mengo land at Katalemwa measuring approximately 0.047 hectares as security for the loan**

- **(e) A declaration that the 5th defendant fraudulently connived with the 1st and 2nd defendants to enter into a sale agreement for the suit premises and the 5fh 5" defendant took possession of the suit premises, to defeat the interest of the plaintiff.** - **(f) A consequential order that, the first defendant's house in Ocheng zone, Nansana be subjected to foreclosure, attachment, and sale by the plaintiff to recover the moneys due, damages and costs of the suit.** - **(g) An order that the 5th defendant immediately vacates the suit premises.** - **(h) Costs of the suit.** - **CO Any further or alternative relief as c<j>urt deems fit.** - **1.2** The 3rd 1st defendant never filed a defence tcM^eP StlOhe 2nd, and 4th defendants through M/s Madibo, Mafabi Advocates Solicitors filed a defence to this suit. However, down the road, during the scheduling conference of the suit the plaintiff, 2nd, 3rd and 4th defendants entered into consent judgment. The consent judgment is in the following terms and orders, that: - **i. The 1st and 2nd Defendants' house in Ochieng Zone 'A' Nansana, Wakiso District was on 28th July 2008 mortgaged by the 1st Defendant to the Plaintiff as**

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**security for a loan of llg. Shs. 70,000,000 [Seventy million only].**

- **The 1st Defendant failed to pay the loan amount due and is indebted to the Plaintiff to the tune of Ug. Shs. 112,000,000 [One hundred twelve million only] being the loan amount due and owing and interest accruing therefrom.** - **The security for the loan that is the 1st and 2nd Defendants' house in Ochieng Zone 'A', Nansana, Wakiso District be subject to foreclosure, attachment 1° and sale by the Plaintiff to recover the monies due.** - **The security the 1st and 2nd Defendants' house situate at Ochieng Zone 'A', Nansana, Wakiso District is to the knowledge of the 2nd, 3rd and 4th Defendants still subsisting and not in any way encumbered.**

**''The proceeds from the security will be enough to fully ~ cleaHhp 1st Defendant's loan money due and owing. 7\*1.5'•'•\* si X**

The 5th defendant through M/s Tuwesigye, Baingana & '"CorcAdypcates; and M/s Kawanga, Kasule & Co. **•\*'A'J** *J?* ^Advocates; and M/s Jingo, Ssempijja & Co. Advocates filed a defence to the suit. The 5th defendant vehemently opposes this suit, High Court Civil Suit No. 405 of 2011.

**1-3** On 21st June, 2012 when this suit come up for scheduling, Counsel for the 2nd, 3rd and 4th defendants, Mr. Osupelem Justin from Madibo, Mafabi Advocates and Solicitors submitted that; his clients are admitting the following facts; that:-

(i) There was a loan by the plaintiff company to the 1st defendant.

- (ii) The 2nd, 3rd and 4th defendants were guarantors to the loan. - (iii) It is also admitted that the 1st defendant failed to pay the loan.

He further said, on that date, that according to the 2nd, 3rd and 4th defendants, the 1st defendant pledged his house and the land it stands on as security for the loan from the ptaintiff's company.

OFTW^ffi^ddmEsions are well set out in the consent judgment 7 which has bedn set out herein above in paragraph 1.2. The 'pSfe^ffect ofjhdt consent judgment on the case of the plaintiff 1st anc| 5th defendants speaks volumes against the 5th defendant's defence to the suit and the 1st defendant who never filed a defence to the suit.

- **2. Facts** - a) The 1st Defendant entered into a loan agreement with the Plaintiff, the 2nd, 3rd and 4th Defendant, guaranteed the loan. - b) The 1st and 2nd Defendant's House in Dispute situate at Ocheng zone, Nansana, Wakiso District was mortgaged as security for the loan. - c) The 1st Defendant defaulted in payment of the loan money and interest accruing there from amounting to Ug. Shs. 112,000,000/= - d) The 1st Defendant disappeared and his whereabouts are unknown to date, he never filed a defence and a default judgment was entered against him. - e) The 5th Defendant applied to be joined as a party to the suit claiming that he had bought the House in disputed 6 days before the House was mortgaged to the Plaintiff.

The 5th Defendant further claimed that on 20th July 2011 'he-7bought the suit property from' the 1st and 2nd ;Po^^enddpts and took possession of the house in y OF ' a September 2011 after the 2nd Defendant handed over ° 5th Defendant.

DViiJgj1 eC Plaintiff, 2nd 3rd and 4th Defendants entered a Consent judgment briefly stating that the House in dispute is not encumbered and should be sold by the plaintiff to recover the loan amount due and owing.

## **Issues framed for the determination by Court.**

- a) Whether the plaintiff has a cause of action against the 1st and 5th defendants. - b) Whether at the time the house in dispute was mortgaged to the plaintiff, the same had prior to the mortgage been sold to the 5th dependant by the 1st and 2nd defendants.. - c) Remedies.

## **4. Resolution of the issues by Court**

**4.1** The plaintiff called three (3) witnesses:

(i) Kagina Wycliff (PW1);

(ii) Nakayiza Edith Matovu (PW2);

(iii) Sekubunga Robert (PW3). These witnesses gave evidence in support of the plaintiff's case. This evidence was not challenged by the defence during cross examination.

**4.2** The 5th defendant called four (4) witnesses

- (i) Bukenya Henry -5th defendant (DW1); - (ii) Bukenya Muhammed (DW2);

(iii) Ssempijja Mike the advocate (DW3);

(iv) Nabuwaati Kakembo (DW4). The witnesses' evidence was *2s>* tested vigorously by the plaintiff's counsel during cross examination. The 5th defendant's witnesses' evidence was shaken during cross-examination.

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4.3 Issue no.l: Whether the Plaintiff has a cause of action against the 1st and 5th defendants.

The plaintiff in the evidence adduced by its witnesses and in its submissions endeavoured to show that the plaintiff proved that it has a cause of action against the 1st and 5th defendants. On the other hand the 5th defendant argued that the plaintiff has no cause of action against the 5th defendant. That in its amended plaint, the plaintiff introduced fraud against the 5th defendant, a third party to the loan agreement, and where the plaintiff's interests as a mortgagor had not even crystallized. The 1st defendant never filed a defence to the suit. And he never adduced evidence to challenge the plaintiff's case against him. The evidenc^gdduced by the plaintiff's witnesses proves.the '^plaintiff's [case against the 1st Defendant "

>rzthe 5th defendant furthe gued that in the ^dilamehaed Plaint the Plaintiff claims against the defendants save the 5th Defendant is for recovery of its money Ug. Shs. 112,000,000 [One hundred twelve million only] being due 2° and owing on the loan facility granted by it to the 1st defendant having borrowed it and the 2nd, 3rd and 4lh Defendants having guaranteed the loan and for fraud, a declaration that the 5th defendant is a fraudster and trespasser on the suit premises.

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It is clear on record that the 2nd, 3rd and 4th defendants and the plaintiff entered a consent judgment. In the consent judgment and the evidence on record by the plaintiff, the suit property that was the security for the loan the 1st defendant got from the plaintiff to be sold to pay off the loan which is due and owing to the plaintiff by the 1st defendant. The evidence on record is that the suit property is in occupation by the 5th defendant. It is the contention of . the 5th defendant that he bought the suit property from the • 1st defendant before the same property was mortgaged to the plaintiff by the 1st defendant as security for a loan which at the time of instituting the suit had accumulated to Ug. Shs.l12,000,000/=. From the evidence on record, the plaintiff is asserting that it has interest in the suit propertv,\*-€)Tr'fh^~'^ other hand, the 51h defendant disputes the ptdirffiFf in the suit land. 9

gave evidence that herself and her husband (1st defendant) never sold the suit premises to the 5th defendant. At that point in time, the burden of proof on balance of probabilities shifted to the 5th defendant. To get out of this dilemma, the 5th defendant needed to have called the 1st defendant to come and give evidence in support of his case. From the evidence on record by the plaintiff and statements on record before final scheduling, all indicate that the 1st

defendant was within Kampala, but in hiding. It is my considered opinion that the 5th dependant and the 2nd defendant (PW2) knew where the 1st defendant stays. If the two (DW1 and PW2) wanted, they would have dragged him to Court to give evidence in this.suit.

Whether a plaintiff has a cause of action against the 1st and 51h defendants in this suit, the following authorities are instructive:-

- Spry, V-P in the celebrated case of **Auto Garage and others Vs Motokov (No. 3) F1971J1 EA 514** gave three essential elements to support a cause of action^. - 1. The Plaintiff enjoyed a right - 2. The right has been violated - 3. The Defendant is liable

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**(>>) In the case of Olal Bosco Vs Nsereko Lucky & Avon Africa Investments Ltd- 00 - Cc - 0113 - 2011 Mr Justice Christopher Madrama in deciding whether there was a cause of action quoted the cases of Ismail Serugo vs. Kampala City Council and the Attorney General Constitutional Appeal No.2 of 1998 Where** Wambuzi CJ (as he then was) held that in determining whether a plaint discloses a cause of action under Order 7 rule 11 or a reasonable cause of action under Order 6 rule 29 of the Civil Procedure Rules only the plaint can be looked at.

**(iii)** In the case of **Major General David Tinyefunza vs. Attorney General of Uganda Const.** Appeal No. 1 of 1997 the court upheld a passage in Mulla on the Indian Code of Civil Procedure, Volume 1, and 14th Edition at page 206 where it was stated that a cause of action is a bundle of facts which is necessary for the Plaintiff to prove if taken with the law applicable to them would give the Plaintiff a right to relief claimed against the Defendant.

In the present case, the Plaintiff sued the 1st, 2nd, 3rd and 4th Defendants for breach of contract, foreclosure, attachment and sale of the house in dispute. Judgment has long been entered against the 1st, 2nd, 3rd and 4,h defendants who consented to the sale of the disputed house. The 5,h defendant applied to be joined as a party to the suit claiming that he is in occupation of the disputed premises and bought the same from the 1st defendant before the house in dispute was mortgaged to the Plaintiff. The Plaintiff amended its Plaint to include the 5th defendant as a party to the suit and the Plaintiff's claim against the 5th. defendant was for a declaration that the 5th defendant's purported purchase of thesuit property was marred by fraud and prayed to court for an xXprder"t1W'-the^51h defendant vacates the suit premises, general **... t r"? ITT jf) J Si** costs of the suit. COPY Or \

therefpr6 raises a cause of action of fraud on the part of ■Pau **DiwiS'Oii** '^-^ihsJlLcinchS1^ defendants and refusal to grant the Plaintiff vacant possession. In his written statement of defence, the 5th defendant

denies the suit against him. The facts constituting a cause of action against the 1st and 5th defendants raise triable issues, and the same have to be investigated by this Court.

It is therefore very clear from the pleadings in the plaint, the law quoted above and the evidence on record that there is a cause action against the $1^{st}$ and $5^{th}$ Defendants in this suit. In the premises, I answer issue no.1 in the affirmative.

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4.4 issue no.2: Whether at the time the house in dispute was mortgaged to the Plaintiff, the same had prior to the mortgage been sold to the 5th Defendant.

The plaintiff through its witnesses and in submissions tried to show that the house in dispute was properly mortgaged to it. That it has never been sold to the 5th defendant as is being alleged by the 5th defendant. The $5th$ defendant (DW1) and his three witnesses adduced evidence to show that he (DW1) bought the disputed house before the 1st defendant mortgaged the same house to the plaintiff. DW1 insisted in his submissions that the said mortgaged house at the time it was mortgaged was long sold to him. That he COPY OF THE ORIGINAL is the rightful owner. The 1st defendant never defended the suit. e exidence against him remained unchallenged.

The submissions of the 5th defendant under paragraph 6, state that he was not included in the plaint and there were no facts that were relating to him in the original pleadings. That is right. $\blacklozenge$ $\bigcirc$ $\bigcirc$ $\bigcirc$ $\overline{\mathbf{0}}$ $\bigcirc$

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However, the plaintiff cannot be faulted on that. In miscellaneous application no.791 of 2011, the $5th$ defendant applied to be added as a party to the suit. The aforesaid application was allowed by consent. In the amended plaint that was filed in Court on 9th march 2012, the 5th defendant was added as party to the suit. And in paragraphs 6,7,8,10,11,12 and 13 of the amended plaint, the plaintiff pleaded facts of fraud in the suit against the 1st and $5$ th defendants.

In reply to that, it is not in dispute that the original plaint was amended and the amended plaint was accordingly served on the defendants. This is clearly a misguided argument as indeed the recurrent reference to the original plaint is wrong in law as the amended plaint as aforesaid was duly served on the $5th$ defendant and it was owing to his successful application that he was added to the suit prompting the plaintiff to amend his plaint.

The principles relating to amended pleadings were set out in the case of **Eastern Radio Service and another v R J Patel t/a Tiny Tots** and another [1962] I EA 818 where it was stated that:-

" under the law it is open to a litigant to amend his COPY OF THE ORIGINAL IN AN ACTION, SOMETIMES AS OF right and sometimes by leave of the Court, and once a plaint has been amended, there is authority for saying it speaks as from the commencement of the action"

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In that same case it was stated that, "the writ as amended becomes for this purpose the original commencement of the action".

In that regard consideration ought to be given to the facts as they are in the amended plaint because once pleadings are amended, what stood before amendment is no longer material before the Court and no longer defines the issues to be tried. Furthermore, it should be noted that the 5th defendant initiated the amendment of the plaint as it was subsequent to the 5th defendant's successful application to be added as a party to the suit.

Under paragraph 8 of the 5th defendant's written submissions he alleges that the plaintiff do not have a cause of action against the 5th defendant. In paragraph 9 thereof he alleges that the plaintiff is introducing fraud as a new cause of action against the ! 5th defendant. I do not agree with those submissions of the case is clear. ■tee

Considering the amended plaint, paragraph^ ^.^glypS'-.thq, \_ particulars of the fraud that was actuated by the X^and defendants.

In my considered view, the plaintiff is well within its right to impute fraud as against the 1st and 5th defendants and the details of this are stated well in the plaintiff's written submissions. However briefly

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they ore: the 1st and 5,h defendants by back dating the purported sale agreement between him (DW1) and the 1 defendant was indeed fraudulent. The plaintiff equally states that the 5th defendant did not take immediate possession but rather for some reasonably and honestly explicable reason, postponed taking possession to two months after the purported purchase. Furthermore, DW1 took possession of the house in the night. The plaintiff submits that this is not the conduct of an innocent or honest person.

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As already held on issue No.l above and in summing this up, the plaintiff has a cause of action, especially in relation to the fraudulent conduct of the 1st and 5th defendants as clearly shown in the amended plaint and evidence adduced by the plaintiff's witnesses and. DW2 and DW4.

In **Al Hajjl Nasser N. Sebbagala vs AG & others Constitutional Petition No.l of 1999 the constitutional Court** defined a cause of action as Thus:

**"every fqct which if traversed, would be necessary for copy of Prove &gt;n order to support his right to a judgment oAcourt, it must include some act that is r | done by the' defendant and it is not limited to the ^Q^jactuat-'infringements of the right sued but it includes glLmat'erial facts on which it is founded. It does not comprise evidence that is necessary to prove the facts but every fact that is necessary for the plaintiff to prove to enable him to obtain a decree. Everything that if not proved would give the defendant a right to**

**an immediate judgment must be part of a cause of action. It has no relation to the defence that may be set up nor does it depend upon the character of the relief prayed for by the plaintiff, the cause of action must be antecedent to the institution of the suit. "(emphasis ours).**

Under paragraph 11 of the defendants written submissions, the 5th defendant avers that an action for the recovery of the money cannot be brought together with that of foreclosure.

In reply to that, the plaintiff submitted that under para. 13 where the plaintiff makes his prayers, foreclosure comes as a consequential prayer under sub para. (f). This means that it should be granted in case of failure to fulfill the other granted prayers of the plaintiff.

The 5th defendant claims that the suit was initiated pre maturely and they were entitled to notice of 45 days as is provided for of the Mortgage Act. It should be brought to e 5,h defendant that a consent judgment was lis Court on the 29th day of June, 2012. under section otice of Or THE ORiOlMAL 19

ent is governed by ordinary principles of contract set aside only in circumstances that would afford a good ground for varying or rescinding a contract between parties to wit, duress, influence, mistake or fraud. ^^^consentjud^ D1<:dn4d can

This has long been settled by the Supreme Court in A. G and Uganda Land Commission v James Mark Kamoga and James Kamala SCCA No. 8/2004 as it stated that:

"It is a well stated principle that a consent decree has to be upheld unless it is vitiated by reason that will enable court to set aside an agreement such as fraud, mistake, misapprehension or contravention of public policy. This principle is on the premise that a consent judgment is passed on the terms of a new contract between the parties to the consent judgment".

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Neither of the above have been stated or proved by the $\mathfrak{S}$ defendant through evidence. Thus, the consent judgment has a big and fundamental effect on the plaintiff's case as against the sum COPY OF THE ORIGINAL $1st$ and $5th$ defendants' defence case.

Consequent to the above, PW1 (Kagina Wycliff) testified before Court that he was an employee in the Plaintiff Company. That on the 19th day of July 2011 PW3 went to Ocheng Zone, Nansana, $\sqrt{5}$ Wakiso District and met with the area Local Council 1 members who all assured him that the land was not in any way encumbered, he talked to the neighbours and stayed in the village until the 27th day of July 2011 conducting a due diligence. That on the $28^{\text{th}}$ day of July 2011 he went back to the LC1 of Ocheng Zone and the secretary requested Matovu Richard's wife 20 Edith Nakayiza to sign a spousal consent and mortgage documents which were endorsed by the L. C1 Vice chairperson and secretary. This witness was very credible and truthful. His

evidence was never challenged by the defence in crossexamination.

According to PW2 (Nakayiza Edith) she testified that she is a wife to Mr. Matovu Richard, the 1st Defendant. That on the 28th day of July 2011 Matovu Richard borrowed money from the Plaintiff Company with her knowledge and consent, she guaranteed the loan; the other guarantors were her sister Nakirunda Elizabeth and brother in law Lubega Robert. As security for the loan Matovu Richard mortgaged their family house in Ocheng. Zone, Nansana, Wakiso District.

ever participating in a Sale of the and truthful; it did not contain any --2^-^Hriconsistencies. PW 2 in cross examination said that she signed on the purported sale agreement long after the Plaintiff had given her and Matovu Richard the loan money. She testified that to the best of her knowledge J6y the ffme the disputed property was mortgaged to the Plaintiff, it Was free of any encumbrances whatsoever and the 5th Defendant has never dWtitJhis'pi'operty from her and Matovu Richard as he claims. ^Sne vehemently denied / ,dispute^'3g/id to the 5th Defendant on cross examination. Her ..'tW^videnpo was credible

> **PW3 (Ssekubunga Robert)** the Secretary, Local Council 1, Ocheng Zone, Nansana, Wakiso District testified that on the 27th day of July 2011 Mr. Kagina, an Officer from the Plaintiff Company went to his home accompanied by the Matovu Richard and the Vice

Chairperson of their Village. They wanted him to confirm the status of Matovu Richard on their village and to know whether the house in Ocheng Zone was his property and not in any way encumbered. They also wanted him to give the Plaintiff Company a recommendation Letter introducing the Matovu Richard. Mr. Kagina came back on the 28th day of July 2011 requesting that the L. C 1 committee witnesses the signing of the spousal consent and mortgaging the house which they did. That he did this because that was the true position of the disputed house then, it was not in any way encumbered. I'o

PW3 further testified that later in October he saw the 5th Defendant who went to his home in the Company of the vice chairperson so that he can endorse on his sell agreement for the same property. That PW3 informed Bukenya Henry that this house he was claiming was already mortgaged for a loan and he refused to endorse the agreement. This witness was very credible, truthful and there were no inconsistencies in his evidqRee7~"Hir't-'^ evidence was neve'r challenged by the 5th def^dJdhPJh^^ examination. *j j j*

## **The Defence response to the Claim: °**

**DW1 (Bukenya Henry)** the Defendant testified that he learnt about the sale of this house from Bukenya Mohammed. That on 16th July 2011 he visited the area L. C 1 Vice Chairperson in the company of Matovu Richard, 1st defendant, Bukenya Mohammed and Sam Ssenabulya to verify ownership before purchasing the house in dispute. That on 20th July 2011, Matovu Richard, DW1 and Bukenya Mohammed met at the 5th Defendant's lawyer Jingo, Ssempijja & Co. Advocates at Maria's Galleria building and the sale was concluded. This witness' evidence sounded so untruthful and very unbelievable, it was full of inconsistencies. On cross examination he said that the Vice Chairperson of L. C 1, Ochieng Zone, Nansana drafted the sale agreement which sales agreement she gave to Matovu and his wife and payment was supposed to be in the bank. The agreement DW1 adduced was from his lawyer DW4, Sempijja Mike. This is a major contradiction, it is not clear whether DW1 ever paid the alleged purchase price. PW2 in her evidence disputes such chains of purchase of the suit property by DW1. If the money was paid to the 1st defendant through the bank, then the 5th defendant would have produc; in hi\$ evidence banking slips of such money paid in the tyfng^py of

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**DW2 (Bukenya Mohammed)** testified that Matovi^^RrcKdrgggtnd6 > Nakayiza Edith are well-known to him. That sometimelasTy^ar around June the 1st Defendant approached him and told him that he had very many problems. That he had debts with banks and also wanted money to clear his goods in China. He then got him 2--o Bukenya Henry and the sale was concluded. This witness was very unbelievable and his evidence was tainted with falsehoods. On cross examination it was obvious that he had all along known that this house in dispute had been mortgaged to the Defendant long before the purported fraudulent sale. In his own words he stated *'ZS* that he had found no reason to tell Henry Bukenya that Matovu

was heavily indebted. He did not give evidence that he ever saw money exchanging hands between the pt and 51h defendants.

**DW3 (Ssempijja Mike)** testified that he executed the sale agreement between the parties on 20th July 2011 but did not participate in conducting a due diligence. Under cross examination he confirmed that he relied on what his client had told him and made the agreement. This witness never witnessed any payment of the purchase price for the suit land by the 5th defendant to the 1st defendant. In his evidence he never , mentioned that PW2 (2nd defendant) was present in his chafnhe^^[^^<? at the time of making the said sale agreement. A COPY

**DW4, (Nabuwaati Kakembo)** testified on cross examinatibr^Rdt^^ / when Bukenya Henry came to her home with Matovu Richard and Nakayiza Edith on 16th July 2011, **she wrote a sale agreement for them and the money was to be paid through the Bank but Matovu Richard told him Bukenya did not pay the purchase price.** She further testified that the PW1 -Kagina Wycliff consulted her before taking a mortgage on the house and she informed him that to the best of her knowledge the house was free from encumbrances because **Matovu Richard had told her that Bukenya Henry did not** *2^* **pay for the house and so the sale was never concluded.** This witness' evidence was tainted with falsehood; it was full of contradictions and cannot be relied on by this Honorable Court. In any event, this piece of evidence does not support the defence case. The evidence of a sale agreement by the area L. C1 was an

afterthought by the Defence. This agreement was never exhibited in court, this was all part of the 5th defendant's fraudulent dealings in the disputed house intended to defeat the Plaintiff's interest in the suit premises. In any case it is unlikely that parties to a sell of land amounting to ninety nine million shillings would go ahead and sign an agreement drafted by the local council without money exchanging hands. The question that needs to be asked is, **"what were the parties signing for then",** a sales agreement in the literal sense is an acknowledgment that one has received money and that money being the consideration he or she is at thatpoiwt surrendering his or her interest in the property.

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The testimonies of DW4 and PW3 cannot and looked at in isolation. It is clear that dealings witl^h^Saihfiff company involved both witnesses step by step. This was a mortgage. It is, therefore, interesting to note if DW4 is to be believed that when it came to a sell she decided to handle the transaction herself. PW3, Ssekubunga Robert's testimony further provides a date when he first had contact with the alleged buyer and the reasons he refused to be a party to the sell. This date is [ well after the date of the plaintiff's mortgage. There are same r frauds exhibited in the 5th defendant's witnesses' evidence. *In Lawrence Musebeni Baguma Vs. Namugala David & Another Civil Appeal No. 40 & 41 Of 2010 Hon. Lady Justice Monica K. Muqenyi* **said that** Fraud in land transactions has been defined to include dishonest dealing in land, sharp practice intended to deprive a

person of an interest in land, or procuring the registration of a title in order to defeat an unregistered interest.

DW4 alerted DW1 that the suit property was already mortgaged. In David Sejjaka Nalima Vs. Rebecca Musoke SCCA No. 12 of 1985, It was held at page 750 that:-

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" if it is shown that the buyer's suspicions were aroused and that he abstained from making inquiries for fear of learning the truth, the case is very different and fraud may be properly ascribed to him".

10 Further in David Sejjaka Nalima Vs. Rebecca Musoke, Odoki J. A. (as he then was) quoted the case of John Katarikawe Vs. William Katwiremu & Anor Civil Suit No. 2 of 1973 and held that

"Although mere knowledge of unregistered interest cannot be imputed as fraud under the Act, it is my view that where such knowledge is accompanied by a wrongful intention to defeat such existing interest, $\sigma$ that would amount to fraud. COPY OF Further that it is fraud if a person procures registration

to defeat an unregistered interest on the part...of... another person of which he is proved to have had printed knowledge."

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In this case of David Sejjaka(ibid), the Judge further quoted the case of Luswese Vs. Kasule Civil Suit No. 1010 of 1983 where Court took into account the second defendant's apparent failure to inquire from the neighbours the ownership of the two plots and his failure to open up the boundaries of the two plots to impute fraud.

In the case *Fredrick Zaabwe Vs. Orient Bank, Mars Trading Co. Ltd, Allan Shonubi, Martin Nkufu, Tito Twijukye and Renzigye Byaruhanga SCCA No. 4 of 2006, Kanyeihamba J,* held that. **"The laws which secure and sustain ownership and interest in land are much more elaborate and protective than those which cover persona! chattels which may be sold in markets and are subject only to market overt rules of commerce. To hold otherwise would mean that even stolen land titles or those inadvertently lost could be registered by thieves and diverse finders and then enable them to pass titles in the same way, which in my opinion,.would lead to manifest absurdities and injustices."**

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In the present case following the above <\$< testimony that he had done some kind of due diligence before he bought the property. If he is to be believed that he had bought the property long before it was mortgaged to the plaintiff, then in the very least he should have been informed of the mortgage by pride micro finance. It is hard to believe that a buyer would have missed two mortgages on the same property. This is the kind of • standard of due diligence that the above cases put on a buyer of a property. It is, therefore my finding that there was no sale and that the 5th defendants are merely trying to create this sale to prevent the plaintiff from recovering its money^Jhei^Ldefendant acts.

Furthermore, it was the evidence of PW2, Nakayiza Edith, the wife of Matovu Richard that her husband mortgaged the disputed house to the Plaintiff Company on the 28th day of July 2011 and she consented to this mortgage, this evidence was not disputed by both the Plaintiff and Defendant's witnesses. PW2 further testified that she was not aware of any sell of the disputed house to the 5th Defendant, she denied ever signing the purported Sell Agreement and informed court that if her handwriting is on the document as alleged then she remembers around end September 2011, Matovu Richard who had been away from home for sometime called her, they met in Kampala, he was with the 5th defendant whom he introduced to her as his brother and she was taken to an unknown building. That Matovu Richard brought out a document and told her to sign quickly so that they can get money to clear the Plaintiff's loan and regain their peace and freedom. She does not know what the contents of the document were, she just signed, but she guesses that must have been the alleged 5th defendant's Sale Agreement. She however maintains that this agreement she signed without reading it§. contents was way after the mortgage.

*Section 92 of the Evidence Act, Cap 6,* provides', that when Thqt V. ... ' terms of any contract, grant or disposition of any matter required by law to be reduced to the "form—©f-^d document... no evidence of oral statement shall be admitted ... for purposes of contradicting, varying, adding to or subtracting from its terms, but any fact may be proved which would invalidate

any document due to fraud, intimidation, illegality ... mistake in fact or law.

The uncontroverted evidence on record of PW2 to explain the reason why her signature existed on the alleged sale agreement is that around end September 2011, Matovu Richard who had been away from home for sometime called her, they met in Kampala, he was with the 5th Defendant whom he introduced to her as his brother and she was taken to an unknown building. That Matovu Richard brought out a document and told her to sign quickly so that they can get money to clear the Plaintiff's loan and regain their peace and freedom. She does not know what the contents of the document were, she just signed, but she guesses that must have been the alleged 5th Defendant's Sale Agreement. Her testimony points to fraud by the first and fifth defendants and also a clear mistake of fact on her part. '

This evidence was uncontroverted by the 1st and| 5',h Defendants^ In the case of **Oywello Ceaser Vs. PaderxDfctricl'y^ppal Government, HCT - 02 - CV - CS - 009 - 2007 where** No'bvidence" was adduced by the defendant to controvert the plaintiff's assertion, court held that the plaintiff was unlawfully retired.

The 51h Defendant's failure to contradict this evidence therefore should be considered as an admission that this was the truth. That by the time the purported sale agreement was executed, the

Plaintiff Company had a subsisting mortgage on the house in dispute and this was well-known to the 5th Defendant.

Without prejudice to the above even if one was to believe that there was no fraud on the part of the $5th$ defendant, PW2's testimony on the circumstances under which she signed the alleged sales agreement negatives any spousal consent.

$\overline{10}$

$15$

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Section 20 of The Land (Amendment) Act, 2004 amending section 39 of the Land Act Cap 227 provides that Section 39 of the Act is amended by substituting for it, the following—

"39. Restrictions on transfer of family land (1) No person shall— (a) sell, exchange, transfer, pledge, mortgage or lease any family land; (b) enter into any contract for the sale, exchange, transfer, pledging, mortgage or lease of any family land: or (c) give away any family land, inter vivos, or enter into

any other transaction in respect of family land; except with the prior consent of his or her spouse."

In the case of Alice Okiror & Michael Okiror Vs. Global Capital Save 2004 Ltd &Ben Kavuya Hccs No. 149 Of 2010 Justice Hellen クロ Obura held that in the absence of written spousal consent to mortgaging the property in issue for the amount stated in the mortgage, the mortgage created over it is void. I agree with this authority and it is applicable to the present case.

**In the case of Busonya Mary, Byebye Jude & Golodo Joseph Vs. Asuman Ebeke & Fatuma Ebeke HCT-04-CV-CA-0104-2009 Justice Stephen Musota** in defining Family land that requirement spousal consent Section 39 of the Land Act that Family land means land-

**fa) On which is situated the ordinary residence of a family.**

**(b) On which is situated the ordinary residence of the family and from which the family derives subsistence.**

**(c) Which the family freely and voluntarily agrees shall be treated to qualify under paragraphs (a) and (b) or**

**(d) Which the family voluntarily agrees shall be treated to qualify I or**

*: ''■ O'"-*

**(e) Which is treated as family land according to the^npfrtis/'^^Q culture, customs, traditions or religion of the family? / '' ^7**

v-. It is not in dispute that this suit property was the ordinary'tfsider^^ A of the family (of PW2 and 1st defendant). It is therefore my findi'hg'""^'^^ that there was never any spousal consent to sell the suit property to DW1, even if one was to believe that there was a sale. The sale would be void.

It is further my finding that the 5th Defendant's title was obtained fraudulently, he was well aware of the Plaintiff Company's mortgage and threats to foreclosure, then he (DW1 )connived with the 1st defendant, Matovu Richard, forged a sale agreement, took possession of the house and claimed to be a bonafide purchaser.

![](1__page_26_Picture_9.jpeg) He is not in any way a bonafide purchaser. As at the time the House in dispute was mortgaged to the Plaintiff it had not been sold to the 51h Defendant by the W and 2^ Defendant as alleged.

Accordingly, therefore, issue no.2 is answered in the favour of the plaintiff.

## **4.4: issue no.3: remedies**

In his submissions, Counsel for the 5th defendant argued that that the suit arising out of a mortgage is subject to the Mortgage Act, 2009 and failure to follow the mandatory provisions on statutory notice, the suit is an illegality and does not found a cause of action. This argument is defeated by my findings in issye<mo~. T"' above in this judgment.

That the sale of the property done on 20th July 2011 'X. Defendant the first in equity and the subsequent morfgage\_dLd—- not affect the property because it was null and void as interest in the property is vested in the 5th Defendant. Counsel for the 5th defendant prayed that the suit be dismissed and also that since costs follow the event, Court should exercise its discretion and award costs to the 5th defendant. Again, these arguments are watered down by my findings in issue no.2 hereinabove, in this <2.° judgment.

Following the Court's findings in the affirmative on issues nos. 1 and 2 hereinabove, the plaintiff is entitled to the reliefs well set out in

the amended plaint. The plaintiff is entitled to recover the money given to the detendant as a loan.

On the relief of general damages, general damages, according to **Lord Macnaghten in Stroms v Hutchison [1905] AC 515** are such as the law will presume to be the direct natural or probable consequence of the act complained of.

**in Uganda Telecom Ltd V Tanzanite Corporation SCCA No. 17 of 2004 the Supreme Court:-** Emphasized the point .that damages are only awarded for the loss suffered.

The Plaintiff is a money lending institution; they have lost a lot of earnings and business time defending this suit. Business money that would be lent out to others was held up. This is all because of the 5th Defendant's foul play and fraudulent dealings so as to defeat the Plaintiff's interest in the disputed house. The 5th Defendant should therefore pay general damages as a result of his conduct. I thus award the plaintiff shs. 20,000,000/= (twenty million shillings as general damages.

## **Interest**

The jurisdiction of court to award interest on by **section 26** (1) and (2) of the Civil Procedure Act, Cap 71 which provides that where an agreement for the payment of interest is sought to be enforced and the court is of the opinion that the rate

agreed to be paid is harsh and unconscionable and ought not to be enforced by legal process, the court may give judgment for the payment of interest at such rate as it may think just-

Where the decree is for payment of money, the Court may order inteiest at such a rate as the court deems reasonable to be paid on the principle sum adjudged from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate as the court deems reasonable on the aggregate sum so adjudged from the date of the decree to the date of payment or to such earlier date as the court thinks fit-

**Oder JSC (RIP)** in the Supreme Court case of **Premchandra Shenoi & Anor v Maximov Oleg Petrovich,** SCCA No. 9 of 2003 stated the principles relating to the award of interest on damages as such;

**"In considering what rate of interest the Respondent should have been awarded in the instant case, I agree that the principle applied by this court in Sietco v Noble Builders (U) Ltd SCCA No. 31 of 1995 to the effect—. that it is a matter of the court's discretion is applicqbje.o,"** - — \* / **The basis of awards of interest is that the defendant has taken and used the Plaintiff's mone^^ndCg" benefited. Consequently, the defendant ought 4o,^~ compensate the Plaintiff for the money."**

In the circumstances, the $5th$ Defendant by his fraudulent acts occasioned the Plaintiff Company loss. This was loan money that would have fetched interest which would have been multiplied back into the business and the Plaintiff ought to be compensated by the Defendant for this loss in interest earnings at court rate from the date the matter arose until payment in full. In that regard, I award the plaintiff interest of 20% per annum on both special and general damages from the date of this judgment till payment in full.

## Costs.

Section 27 (1) of the Civil Procedure Act, Cap. 71 provides that subject to such conditions and limitations as may be prescribed and to the provisions of any law for the time being in force, the costs of and incident to all suits shall be in the discretion of the Court or judge, and the Court or judge shall have full power to determine by whom and out of what property and to what extent those costs are to be paid, and to give all necessary directions for COPY OF THE the purposes aforesaid.

According to the case of Ebuneiri Waisswa Kafuko, Deceased, HC Misc. Application No. 81/93 (1994) IV KALR 29, the judge in his discretion may say expressly that he makes no orders as to costs. $20$ In that case, each party must bear his own costs. If he does not make an order as to costs, the general rule is that he shall order the costs to follow the event except where it appears to him that

$31$

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in the circumstances of the case some other order should be made as to the whole or any part of the costs.

In the instant case, the 51h Defendant fraudulently blocked the Plaintiff Company from realizing the mortgaged property and in the event the Plaintiff Company has incurred a lot of costs in prosecuting this case. It is therefore entitled to costs. I therefore order that the V\* anc| 5th Defendants pay costs to the Plaintiff.

In the premises, I answer issue no.3 in the affirmative.

\* 4'1

**b**

**bc**

**b**

**a**

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**a**

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## **5. Conclusion**

In the result and for the reasons based'on the law and evidence 1° on record in this judgment; the plaintiff's suit has been proved against the 1st and 5th defendants on a balance of probabilities as the standard of proof required in Civil matters.

Accordingly, therefore, judgment is entered in favour of the plaintiff as against the 1st and 5th defendants in the following terms and orders; that:-

- a) The plaintiff is entitled to an award of Ugx 112,000,000/= (one hundred and twelve million shillings) being the loan due and owing from the 1st defendant. - b) The plaintiff is awarded 20,000,000/= (twenty million) as general damages.

**copy of**

- Interest of 20% per annum from the date of this judgment till payment in full on the awards in (a) and (b) above is granted. - An order for attachment and sale of the 1st and 2nd defendants property (the suit land) in Zion estate described as block 83 plot 487 Mengo land at Katalemwa measuring approximately 0.047 hectares as security for the loanwithin 30 days from the date of this judgment is granted. - A declaration that the 5th defendant fraudulently connived with the 1st defendant to enter into a sale agreement for the suit land and the 5th defendant took possession of the suit premises, to defeat the interest of the plaintiff is granted. - A consequential order that, the first defendant's house in Ochieng zone, Nansana (the suit land) be subjected to foreclosure, attachment, and sale by the plaintiff to recover the moneys due, damages and costs of the suit is granted. - An order that the 5th defendant immediately vacates the suit premises is granted. - A consequential order directing the Commissioner Land Registration to cancel the 5th defendant's names on the certificate of title of the suit land and entries in the Register Book within granted. 14 (fourteen) days from today is

![](2__page_32_Picture_6.jpeg)

*d b o d u b* i) Costs of the suit ore awarded to the plaintiff as against the 1st and 51h defendants. Dated at Kampala this day of September, 2013.