Standard Chartered Bank v Grand Hotel Uganda Limited (Civil Suit Originating Summons 81 of 1993) [1996] UGHC 54 (15 April 1996)

Full Case Text

## THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA

#### CIVIL SUIT NO. 81/93 (OS)

STANDARD CHARTERED BANK ..................... PLAINTIFF $\cdot$ $\cdot$

- VERSUS -

GRAND HOTEL (U) LIMITED ................... DEFENDANT

### BEFORE THE HONOURABLE MR. JUSTICE A. O. OUMA

$\mathcal{L}$

#### **JUDGEMENT**

This suit by originating summons arises out of the originating summons ex-parte, brought under Order 34 rules 3A and 7 of the Civil Procedure Rules and under Section 2 of the Mortgage Decree (No. 17 of 1974) for the determination of the following question:-

> "Whether the plaintiff as the Mortgagee of the Lands comprised in LVR 217 Folio 25 Plot No.4 and LVR 218 Folio 1 Plot 6 is entitled to foreclose and sale of the said mortgaged property."

The suit is supported by four affidavits dated 29.1.1993, deponed to by E. A Bentley, Managing Director of the Plaintiff Company, the second, third and fourth affidavits dated 18.3.1994. 30.3.1994 and 26.10.1995 respectively deponed to by Bernard Oram. Executive Director of the Plaintiff Company.

There are defence affidavits filed on the suit file. The first is dated 15.4.1993 deponed to by Mr. Peter Mulira as a Director of the Defendant Company. The second is $dated$ 11.8.1994. deponed to by Kass Verjee as a Director of the Defendant Company. The third is dated 13.12.1994, deponed to by Philip Karugaba as an Advocate. The fourth is dated 27.10.1995 deponed to by Mr. James Mukasa, an advocate of M/S Mulira and Co. Advocates. The fifth and last defence affidavit is dated 10.11.1995 deponed to by Mr. James Mukasa of M/S Mulira and Co. Advocates.

Briefly the facts of this suit are that way back in 1965, the defendant company were the registered proprietors of the lands stated above in the question for determination (hereinafter called the Mortgaged property). In order to secure loans facilities the defendant company deposited with the plaintiff company two certificates of title deeds (See Annexure A1 and A2 to Bentley's Affidavit dated 29.1.1993) in respect of the mortgaged property as security for payment and discharge of all such moneys and liabilities as aforesaid on demand.

Additionally the defendant company executed a memorandum accompanying the deposit, with the plaintiff company, of the two certificates of the title deeds (see Annexure "A" to Bentley's Affidavit dated 29.1.1993), consequent upon which execution, the plaintiff company issued two loans facilities which were paid in pounds sterling. It was an express term of the Memorandum accompanying the Certificates of title deeds that the defendant company had to pay and discharge all such monies and liabilities accruing on the two loans facilities on demand. (see Annexure "A" to Bentley's Affidavit dated 29.1.1993).

On 8.3.1991, Mr. Mulira of M/S Mulira and Co. advocates on behalf of the defendant company wrote a letter (see Annexure "C"

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to Bentley's affidavit dated 29.1.1993) to M/S Sebalu and Lule, Advocates of the Plaintiff Company, demanding release and giving the two Certificates of Title Deeds to the defendant company. In response M/S Sebalu and Lule and Co. Advocates, on behalf of the plaintiff company purported to write a formal letter dated 15.3.1991 (see Annexure "D" to Bentley's Affidavit dated 29.1.1993 to M/S Mulira and Co. Advocates, demanding payment of the outstanding account due on the two loans facilities. $I t$ seems the defendant company failed to pay. Hence this suit by originating summons.

The thrust of the case of the plaintiff company, therefore, $i$ s that the defendant company having failed to pay the outstanding amounts due on the two loans facilities, which amounts were payable on demand after a purported formal demand was made on the defendant company, the plaintiff company is therefore, entitled to an order of foreclosure and sale of the mortgage property, hence, the framing of the question for determination in the manner it was framed in the format of general form of an Originating Summons (See appendix "B" Form 13 at page 200 to Civil Procedure Rules (Grey Book).

On the other hand, in a nutshell, the case of the defendant is that the plaintiff company does not have anv company enforceable interest in the Mortgaged Property (see Mr. Mulira's Affidavit dated 15.4.1993, paragraph 2 thereof).

At the commencement of his submissions learned counsel for the defendant company framed the following issues:-

> whether the action is time $(a)$ barred under the limitation $Act;$

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- (b) t he whe t her summon s correct the originating as filed is procedure; and - (c) Gr and t i me wa s t o **No** at t he 27 whe ther any provi s i ons of 1973. Hotel subject of Decree

**I** find it more per ti nen t a t the ou t set, t o cons i der t he que st i on raised i n issue (b) , t o wit, whe ther the procedure foil owed in filing t he originating summon s i s t he correct procedure. Coun se 1 for the defendant company argued that court can not make an order for foreclosure and sale on the basis o f t he que s t i on a s set ou t i n the originating s ummon s which t he counsel termed a s a prayer. I do not agree with this ar gumen t. Be i t or que sti on, it certainly conforms t o the format *I* a prayer or wording as pre s cr i bed in or i g ina ting summons Gener a 1 Form. *(See Appendix* **"F"** *Form* 13 *a t page 200, Grey Book).* 1 t was prescribed under *rule* 7 *of order 34 of the Civil procedure Rules.* **I** wou 1 d therefore consider that t he format of the originat ing summon s i s par t of the procedural law. under which foreclosure and sale may be s ought ( *see Sheikh Mohamed Bashir vs. Un i ted Africa Company (Kenya) Ltd. [1959] E. A 864.*

Counsel further argued that the question for determination does no t state any sums o f money which court has to determine t o payable by the defendant company to the plaintiff company, be that t he prayer simply asked cour t t o dec I are whe t he r t he a right of foreclosure add ing that i t mor t gagee t o s pec i f y t o cour t i n t he up t o t he summons t he sums of money due for payment and how the Mortgagee wan t s t o enforce his right which wa s no t done in this Pr e s en t seems to me, it depends on what procedure the plaintiff suit. I t originat ing i s Mortgagee has or no t ;

decided to follow. In this suit the plaintiff appears to have followed the procedure provided under the general Rules of Civil procedure. As to whether the procedure under the general Rules of Civil Procedure was ousted by the Mortgage Property Decree, 1974, is not an issue raised in this case, I would therefore, not consider and make a finding on it.

However, in this suit section 2 of the Mortgage Decree, 1974, which prescribes situations under which a Mortgagee may realise his or her security under a Mortgage was complied with. Foreclosure is one of the situations prescribed in the section. The originating summons also complied with rule 3A of order 34 of the Civil procedure rules which enables a mortgagee, whether legal or equitable to take out an originating summons for such relief as may by summons be specified, and as the circumstances or the case may require, that is to say, sale. foreclosure, delivery of possession and so on. In this present suit the circumstances specified were foreclosure and sale.

The originating summons further complied with rule 7 of order 34 of the Civil Procedure rules, to the extent it specified the relief sought that is to say, sums of money due for payment, (see Annexure "D" to Bentley's affidavit dated 29.1.1994, in support of the originating summons). Under rule 7 of order 34, a Judge is not required to determine relief sought, unlike under the procedure by the Mortgage Decree, 1974. All that is required by the procedure under the rules of Civil procedure, is that the judge is satisfied that the alleged facts are sufficient.

However, in this present suit, on further examination or consideration of Annexure "D" to Bentley's affidavit dated

$\mathsf{S}$

29.1.1993 and as supported by Annexure "B" to Bernard Oram's affidavits dated 28.11.1994, both affidavits supporting this suit, the snag I am constrained to find is that Annexure "D" was not signed or shows any trace of any signature on it at all. So is Annexure "B" to Bernard Oram's affidavit dated 28.11.1994. It is a photocopy of the alleged formal letter of demand, dated $15.3.1991.$ It is, as if it were photocopied from a draft letter. In Law a letter or a copy thereof, is only properly so described, when it is signed, otherwise, it could very well be just a draft letter which can not be relied on as sufficient evidence. In the premise, Iam constrained to find that Annexure "D" does not provide sufficient evidence in support of the specified sums of money due for payment, for the purposes of this suit. $A$ S annexed to Bentley's affidavit dated 29.1.1993, its contents can not be incorporated in the affidavit (see Castelino Vs. Rodrigue $(1972)$ E. A 223 at 224.

Otherwise, I find that the procedure followed in the originating summons, being the procedure under the rules of Civil procedure rules, is proper.

On the argument by learned counsel for the defendant, that an order issued by court in this present suit, would not enable the plaintiff company to sell the mortgaged property. I would suppose that the law is that the primary remedy of an equitable mortgagee, and I would suppose the plaintiff company is one, is foreclosure, the effect of which is to convey the mortgaged property free of any right to redeem and puts an end to other remedies. (See Barclays Bank (U) 1td. vs. John Hilton Northcorte and another [1976] H. C. B 34 at page 35. In Barclay's Bank D. C. O

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Vs. *Gulu Millers Ltd. 11959] E. A. 540.* i t wa s held inter alia. that one of the r euied i e s o f an equi table mortgagee under the doc trine of equity is sale by order o f cour t and that court shou1d apply the doc trines of equity and order a sale. This being the law a s I under s t and it, there would have been no reason why an order is sued by this court would not have been enforced, had it not been due t o the fact that the suit i s snagged by the fact, a s stated above that Annexure "D" to Ben11ey's affidavi t da ted 29.1.1993 and a s supported by Bernard Oram's affidavi t dated 28.11.1994 s i gned. was not

With regard to the matter or issue t ha t or action is time barred, counsel for the plaintiff company contended that the plaintiff has an enforceable interes t i n this ma t t er. He referred t o paragraphs 2,3,4,5 and 6 of Mr. Mu 1i r a \* s affidavi t dated 15.4. 1993 and ar gued that t he mor t g aged pr ope r t y were *I* appropriated and t aken over by Government i n 1972. They were transferred t o the Departed Asians Proper ties Custodian Board under the *Assets of Departed Asians Decree, 1973 (No. 27 of 1993) [see section 4, thereof].* They were returned to the former owner in 1991, in accordance with the provisions o f the Expropriated Proper ties Act, (19821 (Act No. 9 of 1982 ) . this suit

Coun relied paragraph s 3,4 and 5 o f s e1 on and paragraphs 11,13 and 14 o f Mr . J ame s affidavi t dated 27.10. 1995 and submi t ted that t he mortgaged proper ty were under control o f Governmen t and accord i ng 1y the counsel for the defendant can not claim that the action was t i me barred under *section 19 (2) of the Limitation Act.* Counse 1 further ar gued that computation of t ime unde r the Limitation Ac t affidavi t Bernard Oram's Muka s a ' s

starts running when the right t o seek the money due has accrued and that in thi s present suit the plaintiff company made a formal demand for paymen t on 15.3.1991 [see Annexure "D" to Ben t 1 ey's affidavit dated 29.1.1993 and Annexure "B" t o Bernard Oram's af f idavi t dated 28.11.1994, bot h affidavi ts are i n suppor t o f this suit).

Counsel for the defendant company on the other hand counter argued that this sui t wa s t i me barred. since the law doe s no t date of demand and that even if i t were admi t ted that the letter of demand was valid. the letter of demand wa s da t ed 27.10.1975 [see Annexure "C" t o Kass Ver jee's a f f i dav i t dated 11.8.1994 and t o Annexure "A" t o Mr . J ame s Muka s a ' s affidavit dated 10.11.1995 in which case, this suit would by now be time barred. In my view. Annexure "A" can not be ascertai ned guarantee agreement dated 19.6.1966, as averred in Mr. J ame s Muka s a ' s affidavit. Moreover i t wa s dated 10.6.1966 and no t 19.6.1966 a s averred in paragraph 3 of the affidavit. a s a talk of a

I agree with the ar gumen t by counse1 f or t he plaintiff company that the mortgaged property were appropriated and t aken over by Government in 1972 and were transferred to the Departed Asians properties Custodian Board under *the Assets of Departed Asians Decree, 1973 [No. 27 of 1993].*

In my view, paragraph 2,3,4 and 6 of Mr . Mu lira's affidavi t dated 15.4.1993 , were i n t ended to prove that t lie plaintiff company no longer has enforceable i n t ere s t i n t he mort g aged I n my v i ew the content ion does no t t ake proper t y. consideration the fact tha t appropri and t aken over by Government i n 1972 , a s a t ed the into. the mortgaged property were forcibly

following evidence by affidavit moreover, in support of the defence case shows. The following paragraphs of Mr. James Mukasa's affidavit dated 27.10.1995 are material;

- "10. That since the first demand was made more than twelve years ago, their application for foreclosure is time barred and ought to be dismissed with costs. - "11. That in further support of paragraph $1\,0$ herein above, the applicant failed $t_0$ enforce his rights against Government of Uganda/Custodian Board, within the statutory period, even after they had been advised by the guarantor's lawyers that the suit property was forcibly over by taken Government of uganda (see Annexure "D" t o the affidavit). - "13. That for the purpose of computing the limitation period, in the absence $\mathbf{o}\,\mathbf{f}$ documentary evidence, one has to start from 1972, when the Directors of the defendant company were expelled from Uganda or 1976, the year the last instalment was supposed to be paid and this renders the application time barred.

I would have thought that appropriation of the mortgaged property not only excluded the defendant company's right to claim the property against the Government, and hence, how could the plaintiff company enforce their right against the Government, more so, in the absence of law enabling them to do so.

may, the preceding paragraph 13 $i$ s $\mathbf{i}$ t that as $\mathsf{Be}$ contradicted by @Annexure "H" to Bernard Oram's affidavit dated 18.3.1994, in which N. K. Radia an Advocate, acting for the defendant company, on 15.5.1990, acknowledged the existence of the debt, when he wrote to the Manager of the plaintiff company to let him know the amount outstanding against his client, the This acknowledgement was as at 15.5.1990. defendant company. when the mortgaged property were in the process of being returned

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to the defendant company a s former owner. I n my v i ew. this clear 1y shows that the defendant company realised that once they were ou t of con tro1 or management o f the mortgaged property, there wa s no possibility that t he amoun t ou t s t and i ng on t he mortgaged property would be paid. In other wards , the defendant company recognised the f ac t that t he Limitation Act ceased t o apply to the transaction during the period the mortgaged property were out of control or management by the defendant company, and therefore, t here was no way the plaintiff company cou 1 d have enforced their right.

Besides, i n my v i ew, I would think, that sub-section (3) of section 19 of the Limitation Act, would seem to be applicable in view of the fact that sums of money due for payment had not been determined, in whi ch case the right to foreclose could not have been deemed have accrued. In vi ew of t he s e considera ti on s, **1** t o I wou 1 d hold that this sui t wa s no t t i me barred under the

Limitation Act.

As regards the argument by counsel for the defendant company the def endan t company wa s a pub lie company i t wa s t ha t a s therefore no t appr opr i a ted. i t may very we 1 1 be ar gumen t i n *Section 2 (1) of the Assets of Departed Asians* semant ics. *Decree, 1973* i s clear . It required every departing Asian holding a relating to any business interests. those trading licence to declare his assets and liabilities including

Moreover, the phrase "Former *Owner"* is de f i ned i n section Expropriated Act, a s 17 of t he

> or any person who or propr i e t o r of in Uganda or was a business or enterprise "Former Owner" means and included was either the registered owner any real or movable property share holder in a

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registered in uganda and who was either expelled or forced to flee from Uganda during the Military Regime or was in any way disposed of such property or business and any body who is the legal heir or successor of such person".

Counsel $\quad \text{for} \quad$ the defendant company conceded the that Expropriated Properties Act, 1982, applies to the Mortgaged Property. In that case, then the Mortgaged Property must have been appropriated otherwise, they would not have been returned to the defendant company under the Expropriated Properties Act, 1982.

As regards removal of caveat on plot 6 Shimon Road, Iam of the view that the removal was improper or illegal in view of the fact that the Mortgaged property having been forcibly taken over: by Government, and were under Government control, it was not legally possible to remove the caveat.

In conclusion, in view of my holding that the letter of demand dated 15.3.1991 (see Annexure "D" to Bentley's affidavit dated 29.1.1993) specifying the relief sought, that is to say. the sums of money due, for payment is defective, I am constrained to dismiss this suit with costs to the defendant company.

> IUDGE $65.04.1996.$

15.4.1996

in Chambers

Judgment read and signed in the presence of $M_T$ Court: Nsimbabi counsel for the plaintiff company and of Mr James Mukasa counsel for the defendant company and o Mr. Kamyuka, court/interpreter.

$11$

THE REPUBLIC OF UGANDA

$\mathcal{L}^{\mathcal{L}}(U)$

IN THE HIGH COURT OF UGANDA AT KAMPALA

CIVIL SUIT NO.81 OF 1993 (0. S.)

STANDARD CHARTERED BANK ..... PLAINTIFF

versus.

GRAND HOTEL (U) LTD ........ DEFENDANT

DECREE

THIS SUIT coming on the 15th day of April 1996 before Honourable Mr. Justice A. O. OUMA for final disposal in the presence of Mr. $\cdots \cdots \cdots$ PETER KIMANJE NSIBAMBI, Counsel for the Applicants and Mr. JAMES MUKASA, Counsel for the respondents, it is hereby decreed that:-

$\mathcal{L} = \mathcal{L}$ $\ldots r_{n,d}$ the procedure followed in filing the originating summons $\mathcal{M}^{\text{max}}_{\text{max}}\left(\mathcal{M}^{\text{max}}_{\text{max}}\right)$ was the correct procedure.

**Marine**

$\mathbf{2}$ . The suit was not time barred.

all the second

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$\mathcal{L}^{\mathcal{L}} \oplus \mathcal{L}^{\mathcal{L}} \oplus \mathcal{L}^{\mathcal{L}}$

$\mathcal{L}_{\mathcal{A}}(x) = \mathcal{L}_{\mathcal{A}}(x) \mathcal{L}_{\mathcal{A}}(x)$ 3. The removal of the caveat on land comprised in LRV 218 Folio 1 Plot No.6 Speke Road was improper or illegal.

$\mathcal{L} = \mathcal{L}$ the letter of demand dated 15.3.1991 Annexure "D" to $4:$ Bentley's affidavit dated the 29.1.1993 specifying the sums which money due for payment was defective since it was not

$\texttt{signed}\cdot$ $\mathcal{L}_{\text{max}}(x)$

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$5.$ This suit is dismissed with costs to the defendant company.

$-2 \lambda_{\mathcal{B}_1} = \lambda_{\mathcal{B}_1}^{\mathcal{B}_1} \cdot \lambda_{\mathcal{B}_1}$ $\mathcal{L} = \mathcal{L}$ We consent to the above: $\gamma_{\rm{max}}$ $\mathbb{E}[\mathbb{R}^2]$ ADVOCATES **MULIRA** $\underline{\pmb{s}}$ COMPANY $\overline{a}$ COUNSEL FOR THE DEFENDANT the open DATED this day of 1997. $\mathcal{L} = \mathcal{L}$ $\mathcal{L}_{\text{max}}$ $\alpha_{\mathcal{I}}^{(n)}$ DEPUTY REGISTRAR $\ldots, \ldots$ **Alter** $\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}\frac{1}{\sqrt{2}}$ Drawn & Filed by: Sebalu and Lule Advocates EADB Building EADB Building A Nile Avenue P. O. Box 2255 KAMPALA KP/bc $\frac{1}{\sqrt{2}}\left(\frac{1}{\sqrt{2}}\right)^{\frac{1}{2}}$ $\left\langle \cdot,\cdot\right\rangle$ $\mathcal{L}^{\mathcal{L}}$ $\mathcal{L}^{\mathcal{L}}$ $\mathbf{a}^{\mathbf{a}^{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}}_{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}_{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}_{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}_{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}_{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}_{\mathbf{a}^{\mathbf{a}}},\mathbf{a}^{\mathbf{a}}_{\mathbf{a}^{\mathbf$ $\cdots$ $\mathcal{L}^{\mathcal{L}}$ $\mathcal{C}_\bullet\mathcal{C}_\bullet$ $\mathcal{L}^{\mathcal{L}}$

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