Standard Chartered Bank (U) Ltd. v Grand Hotel (U) Ltd. (CIVIL APPEAL NO. 13 OF 1999) [1999] UGCA 64 (15 April 1999)

## THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

CIVIL APPEAL NO. 13 OF 1999

CORAM: HON. MR. JUSTICE C. M. KATO, JA. HON. MR. JUSTICE J. P. BERKO, JA. HON. MR. JUSTICE A. TWINOMUJUNI, JA.

STANDARD CHARTERED BANK ) (UGANDA) LIMITED $\ldots$ APPELLANT

## VERSUS

GRAND HOTEL (UGANDA) LIMITED).................................... (Appeal from the judgment of the High Court of Uganda at Kampala by his Lordship A. O. Ouma dated 15/4/96 in HCCS 81 of 1993)

## JUDGMENT OF HON. J. P. BERKO, J. A.

This is an appeal against the judgment and decree of Ouma J. delivered on $15/4/96$ in HCCS No. 81/93 in which he dismissed the appellant's Originating Summons taken under Order XXXIV $rr$ 3A and 7 of the Civil Procedure Rules and Section 2 of the Mortgage Decree, 1974.

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My Lords, I cull the facts which gave rise to the present proceedings, without exactly quoting it, mainly from the judgment of the learned trial Judge. Grand Hotel (U) Ltd., the respondent Company, were registered proprietors of leasehold properties LRV 217 Folio 25 known as Plot No. 4 Portal Avenue and LRV 218 Folio 1 known as Plot 6 Speke Road. Both properties were in Kampala. In order to secure loans facilities the respondent Company deposited with the appellant Bank the certificates of titles of the two properties as security for payment and discharge of all monies and liabilities that would become due under the loan. A memorandum accompanying the deposit of

the title deeds was executed by the respondent Company. Consequent upon the execution of the memorandum of deposit, the appellant Bank issued to the respondent Company two loan facilities which were payable in pounds sterling. It was an expressed term of the memorandum accompanying the Title Deeds that the respondent Company was to pay and discharge all monies and liabilities accruing on the two loans facilities on demand. The transaction took place in 1965.

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In 1972 the shareholders and directors of the respondent Company left Uganda following the so called "Economic war" declared by the Military Government then in power. Consequently, the mortgaged properties were expropriated and taken over by the Government in 1972 and were transferred to the Departed Asians Properties Custodian Board under the Assets of Departed Asians Decree, 1973 (Decree No. 27 of 1973).

In 1991 the mortgaged properties were repossessed by the respondent Company pursuant to the Expropriated Properties Act, 1982. On the 8/3/91 Mr. Mulira, Counsel for the respondent Company, wrote a letter, annexture $C$ , to $M/s$ . Sebalu and Lule Advocates, advocates for the appellant Bank, demanding the release of the two Title Deeds of the mortgaged properties on the 30 ground that the mortgage had been extinguished pursuant to Section 19 of the Limitation Act, Cap. 70. M/s. Sebalu and Lule Advocates replied to Annexture C and contended that the mortgage had not been extinguished on the ground that during the period the properties were in the hands of the Government, there had been acknowledgements by the Government of the appellant Bank's debts. They accordingly made a demand for the payment of the two loans amounting to £158,376.89. When the respondent Company 40 failed to pay, the appellant Bank took out an Originating Summons for the determination of the question:

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"Whether the Plaintiff as the mortgagee of Lands comprised in RRV 217 Folio 25 Plot 4 and LRB 218 Folio 1 Plot 6 is not entitled to foreclose and sale off the mortgaged property".

At the trial, counsel for the appellant Bank relied only on the above issue. Counsel for the respondent Company, on the other hand, framed three issues for determination. These were:

- whether the action is time $(i)$ barred under the Limitation Act; - $(i i)$ whether the originating Summons as filed is the correct procedure and - (iii) whether Grand Hotel (U) Ltd was at that time subject to the provisions of Decree 27 of 1972.

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The learned trial Judge held that:

- $(i)$ the Suit was not time barred under the Limitation Act; - the procedure followed in the $(i i)$ originating Summons was the procedure sanctioned by the Civil Procedures Rules and - (iii) the mortgaged properties were expropriated and taken over by the Government and were transferred to the Departed Asians Properties Custodian Board and managed under the Assets of Departed Asians Properties Decree, 1973 (Decree No. 27 of 1972).

The effect of the holdings is that the Judge resolved all the issues framed by Mr. Mulira in favour of the appellant Bank. The inevitable consequence would have been to grant the order for foreclosure and sale of the mortgaged properties prayed for. The learned trial Judge,

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however, declined to grant the order prayed for on the sole ground that the letter of demand, Annexture D, to Bentley's Affidavit dated 29/6/93, and as supported by Oram's affidavit of $28/9/94$ , was not signed. The appeal is against that decision. There is a cross-appeal by the respondent Company.

The appellant's complain in ground one is that the learned Judge erred in law and in fact $10$ in declining to grant the relief sought on the ground that Annexture D to Bentley's affidavit was not signed. The argument of learned counsel for the appellant is that the Judge was wrong in rejecting the appellant Company's claim on the around that Annexture D was not signed as that was not an issue for determination in the case.

My Lords, the facts which are basic to the question of law arising in this appeal lie in 20 very narrow compass. The Originating Summons taken out by the appellant Bank was supported, principally, by two affidavits. The first one was by Mr. E. A. Bentley, the Managing Director of the appellant Bank. The relevant parts are paragraphs $7$ , $8$ and $9$ which provide:

> $\sqrt{7}$ That the defendants through their Lawyers $M/s$ . Mulira and Co. Advocates wrote to our lawyers $M/s$ . Sebalu and Lule Advocates a letter dated $8^{th}$ March, 1991 demanding for their Certificates of Titles they had deposited with the Bank (A copy of the said letter is hereto attached and marked Annexture C.)

> That in reply to the said letter 8. from $M/s$ . Mulira and Co. Advocates our lawyers $M/s$ . Sebalu and Lule Advocates made a formal demand for payment of the outstanding loan amount by letter dated 15<sup>th</sup> March 1991 (a photocopy of the said demand

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letter attached and marked Annexture $'D'''$ .

9. That I am informed by our lawyers that time for recovery of the loan started running against the Bank as and when it made a formal demand on the $15^{th}$ day of March 1991 and as such the said mortgage has never extinguished pursuant to Section 19 of the Limitation Act Cap. 70".

The above averments show that in response to M/s Mulira and Co. Advocate's letter (Annexture C) the lawyers of appellant Bank made a formal demand for payment of the outstanding loan in a letter dated 15<sup>th</sup> March 1991, Annexture D. That letter was addressed to M/s. Mulira and Co. Advocates. James Mukasa, who is one of the Advocates in the firm of $M/s$ . Mulira & Co. Advocates, swore to an affidavit on 27/10/95 in $20$ correction with this case. In that affidavit he referred to the affidavit of Mr. Bentley in which Annexture D had been specifically mentioned as having been sent to them. Mr. Mukasa never denied the receipt by them of Annexture D.

The next affidavits came from $Mr.$ Be hard Oram, Executive Director of the appellant Back. His affidavit, relevant for our purpose, is the one dated 28/11/94. Paragraph 6 of the 30 affidavit read:

> "6. That on the 15<sup>th</sup> of March 1991, the applicant, through $M/s$ . Sebalu and Lule Advocates made a formal demand of the said loan but the respondents have failed and/or refused to pay."

This affidavit was replied to by Philip Karugaba, $40$ also one of the advocates instructed to handle this case by the respondent Company. Mr. Karugaba specifically referred to para 6 of Bernard Oram's Offidavit. All that he said in response to what

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Oram stated in paragraph 6 of his affidavit was "that they did not at any time accept or even agree to pay the amount alleged to be outstanding". He never said that the original of Annexture D was not received. In fact his reference to "amount alleged to be outstanding" shows that the original of annexture D was received. Mr. James Mukasa also referred to Bernard oram's affidavit. He never denied Oram's averment quoted above.

Mr. Mulira never made reference to Annexture D in his affidavit of $15/4/93$ . However, during argument in Court, Mr. Mulira referred to it. His only complaint was that the amount mentioned in it was wrong and therefore the amount being claimed was in dispute. He never said that Annexture D was defective as it was not signed.

20 It is clear from the pleadings, the issues framed and the submissions of counsel in court, that the issue regarding whether Annextures D was signed or not was not a life issue. That being the case, was the learned trial Judge right in determining the matter on a ground which was never pleaded or put before the court?

The object of pleadings is, of course, to secure that both parties shall know what are the 30 points on issue between them so that each may have full information of the case he has to meet and prepare his evidence to support his own case or to meet that of his opponent. See Captain Harry Gandy v Caspar Air Charter Ltd., 23 EACA. 139. In the case of <u>Blay</u> v Pollar and Morris (1930) 1 KB 682 Scrutton L. J. said:

"Cases must be decided on the issues on the record; and if it is desired to raise other issues they must be placed on the record by amendment. In the present case the issue on which the Judge decided was raised by himself without amending the

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pleadings, and in my opinion he was not entitled to take such a course".

In Fernandes v People News papers Ltd, the respondent filed no defence to the appellant's claim for damages for negligence and the appellant obtained interlocutory judgment. On the assessment of damages the Judge reduced the damages by half in respect of appellant's contributory negligence when no allegation of negligence had ever been made against the appellant. On appeal, the court held that as no allegation of negligence had been made against the appellant by the pleadings, the court could not find negligence against him.

In East Africa there is some latitude regarding the rule that a court has $n_0$ jurisdiction to decree on an issue which has not been pleaded. In Odd Jobs v Mabia (1970) EA 20 476 Law JA had this to say regarding unpleaded issue:

> "On the point that a court has no jurisdiction to decree on an issue which has not been pleaded, the attitude adopted by this court is not as strict as appears to be that of the courts in India. In East Africa the position is that a court may allow evidence to be called, and base its decision, on may an unpleaded issue if it appears from the course followed at the trial that the unpleaded issue has been left to the court for decision". (emphasises mine).

In the case now before us, the issue concerning whether Annexture D was signed or not was not 40 pleaded and was not made an issue. Learned counsel for the respondent Company did not submit the issue at the trial. Therefore the $on$ unpleaded issue was not left to the Judge for

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$\overline{7}$ decision. Consequently the reliance by the learned trial Judge on that ground to deny the appellant Bank the relief they prayed for had led to a failure of justice necessitating the intervention by this court. In other words, it has been shown to my satisfaction that, in the event, the decision in the court below was wrong. The first ground of appeal, as a result, succeeds.

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The alternative ground was that the Judge, having found that the right of the appellant Bank to recover the loan was not time barred by limitation and that he would have granted the relief if Annexture D had not been defective, he acknowledged that the appellant Bank had accrued right which could be enforced. It was the contention of learned counsel that in those circumstances the suit should have been struck out and not dismissed, as a dismissal is a bar to a subsequent proceeding in the High Court for the same relief, unless, of course, the decision of the High Court dismissing the suit is set aside on appeal. A striking out would have enabled the appellant Bank to start afresh.

I do not see any merit in the argument. The matter was heard on its merit. Therefore a dismissal was the proper order.

I now turn to the cross-appeal. There were five grounds. Grounds 1 and 2 were argued together under a broad proposition that the appeal was incompetent as no formal order had been drawn up. I do not see any merit in the two grounds. In the first place, since the complaint is that no appeal lies because a "formal order" had not been extracted, the respondent Company ought to have proceeded under Rule 81 of the Rules of this Court when the Notice of Appeal was served on them to have the Notice of Appeal struck out. This was not done. The point could only be taken at the hearing of the appeal with the leave of the court. See Rule 101(b). No

such leave was sought. Consequently the objection to the competence of the appeal cannot be taken.

The second objection to the grounds of appeal is more fundamental. A decree or order is no longer an essential document in a record of appeal (See rule 86). A decree forms part of a record of appeal where the date of the decree is disputed, or the terms of the decree are disputed on the ground of being at variance with the judgment upon which the decree is drawn or where the terms of the decree form a ground of the appeal. That is not the position in this case.

complaint in ground 3 was The that Originating Summons was not the correct procedure as the questions raised were neither simple nor The appellant Bank should have clearcut. instituted an action in the ordinary way to $20$ obtain the relief which they seek.

The learned trial Judge considered the matter carefully in his judgment, and came to the correct conclusion, in my view, that the procedure adopted was the correct procedure under rule 3A of Order 34 of the Civil Procedure Rules which entitles a mortgagee to take out an Originating Summons where the mortgagee claims to be entitled to a relief for foreclosure and sale 30 of a mortgaged property. In the court below the complaint of the respondent was not that the matter for determination was not simple or clearcut, but that the summons did not specify the sums of money due for payment and how the mortgagee wants to enforce his rights. In any event, the point ought to have been raised as preliminary objection, which was not: See Kulsumbai and Another v Abdulhussein and Others (1957) EA 699. I do not see any merit in ground 40 $3$

Ground 4 is covered in ground 3. Ground 5 was abandoned.

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In the event the cross-appeal is dismissed.

I would allow the appeal, set aside the judgment of the High Court and enter judgment for the appellant Bank. I would award costs of the appeal and the court below to the appellant Bank plis the costs of the cross-appeal.

Dated at Kampala this. S. day of. October. 1999. $10$

J. P. Berko Justice of Appeal.

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### THB REPUBLIC OF UGANDA

I

### IN THE COURT OF APPEAL OF UGANDA

## A1'KAMI)ALA

# CIVIL AI'l'li;\L NO. l3 OF <sup>1999</sup>

#### IION. MII.. IUSTICE C. I\{. KA'TO, JA. HON. MR. JUSTICE J. P. BEITKO, JA. HON. MR. JUSTICE A. TWINOMUJUNI, JA. CORAM:

## STANDARD CHARTERED BANK ) (UGANDA) LIMITED ) APPELLANT

### VERSUS

### GRAND HOTEL (UGANDA) LIMITED RESPONDENT

(Appeal frorn the judgrnent of the High Courr of Uganda at Kampala by his Lordship A. O. Onrna, dated 1514196 in HCCS 8l 0f 1993)

### JUDGMENT OF C. M. KATO J. A.

o

I

I have had the advantage of reading the judgment of Berko, JA. in drali. I agree with it in total. It was wrong for the learned judge to base his decision on an issue which had not been pleaded nor arguecl before him by the parties.

With regard to the cross-appeal, there was no merit in the issues raised by the respondent's counsel. Some of the issues would have possibly been helpful to the respondent ifthejudge had not dismissed the originating summons.

As Twinomujuni, J. A. also agrees the appeal is allowed and the cross-appeal is dismissed with costs to the appellant bank here and in the court below.

Dated at Kampala this. ...................................

C. M. KATO JUSTICE OF APPEAL

#### THE REPUBLIC OF UGANDA

IN THE COURT OF APPEAL OF UGANDA

#### AT KAMPALA

HON. MR. JUSTICE C. M. KATO, JA. CORAM: HCN. MR. JUSTICE J. P. BERKO, JA. HCN. MR. JUSTICE A. TWINOMUJUNI, JA.

#### CIVIL APPEAL NO. 13 OF 1999

STANDARD CHARTERED BANK (U) LTD. .... ....... APPELLANT

**VERSUS**

GRAND HOTEI (UGANDA) LTD. .................... RESPONDENT

Appeal from the judgment of the High Court of Uganda (A. O. Ouma, J.) dated $15/4/96$ in HCCS No.81 of 1993)

#### JUDGMENT O TWINOMUJUNI, J. A.

I hav had the advantage of reading the judgment of His Lordship JP. Berko, JA. in draft. I entirely agree with it and I have noting useful to add. In the result I would allow the appeal and dismiss the cross appeal with costs to the appellant bank here nd in the court below.

Dated at Kmpala this $\mathbb{R}^{th}$ . day of $\mathbb{R}^{th}$ . 1999.

$11111128$ **TWINOMUS** $\Delta$ JUSTICE OF APPEAL