Wills International Engineers and Contractors Limited and Another v DFCU (Civil Appeal No. 260 of 2017) [2022] UGCA 57 (24 February 2022)

Full Case Text

### THE REPUBLIC OF UGANDA

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

### CIVIL APPEAL NO. 260 OF 2017

(Arising from High Court Ciuil Suit No. 802 of 2017)

### 5 1. WILLS INTERNATIONAL ENGINEERS

### & CONTRACTORS LTD

### 2. GEORGE WILLIAM KIYEGA APPELLANTS

### VERSUS

# DFCU BANK (U) LTD : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : RESPONDENT CORAM: HON. JUSTICD E,LIZABETH MUSOKE, JA HON. JUSTICE CATHERINE BAMUGEMEREIRE, JA HON. JUSTICE STEPHEN MUSOTA, JA 10

### JUDGMENT OF HON. JUSTICE STEPHEN MUSOTA, JA

#### 15

### Background

The l"t appellant is a customer to the respondent while the 2"d appellant is the Managing Director of the 1", appellant company. In July 2012, the appellants obtained a loan of UGX.318,000,000/= from the respondent and the loan was secured by a mortgage on Block 265 Plot 7346, which loan was fully repaid. The appellants however, fully repaid the loan but the respondent continued to

Page 1of 15

encumber the appellant's title. In May 2014, the 1"t appellant sought a Bank Guarantee from the respondent for execution of a contract No. UDC/WRKS/2013-2014/00089 for a duration of four months ending 13th August 20 14 using the certificate of Title for Block 265 Plot 7346 as security. Under the same contract, the 1"t Appellant applied for a Performance Bond facility secured by the same securit5r Block 265 Plot 7346. The money from performance guarantee was however released by the respondent on 3,d November 20 14, long after the expiry of the said contract and after the 2"d appellant had notified the respondent that it was no longer required.

Despite the communication, the respondent entered a mortgage on the land comprised in Block 265 Plot 7347 which the 2"d appellant had only handed to the respondent for safe custody. This caused financial distress to the appellants and they sought another facility of UGX 350,OOO,O0Ol= for which they used Block 265 Plot 7346 as security. The respondent only released UGX 200,0OO,OOO/= to the appellants on the said facility.

On 17th November 2015, the appellants were served with a Notice of Sale for the property comprised in Block 265 Plot 7346 to allegedly recover UGX 416 ,7 64 ,552 I = as the outstanding loan. The appellants disputed the claim and filed a suit in the High Court disputing the loan sum, stopping the sale, an order for return of an unencumbered title for Block 265 Plot 7347 and damages. The respondent filed a counterclaim for Ugx.416,764,552 and alleged that it was an error of the Registrar to encumber Block 265 Plot 7347 , wl:ic}:^ allegation the

Page 2 of 16

learned trial Judge disputed. The trial Judge dismissed the counter claim not having been proved. He awarded nominal damages of UGX 2O,00O,O00/= and UGX 2,948,4791= as fees charged on the performance bond.

- 5 The appellants were dissatisfied with that decision and filed this appeal on five grounds namely: - 1. The learned trial Judge erred in law and fact when he dismissed the respondent's counter-claim but denied the appellants costs. - 2. The learned trial Judge erred in law and fact when he failed to find fraud/illegality committed by the respondent but simply referred to it as an error but which he doubted in respect of Block 265 Plot 7346 and Plot 7347 . - 3. The learned trial Judge erred in law and fact when he held that the appellants had not proved that they requested for the title in Plot 7347 to be sold, thereby denying them an award of General Damages. - 4. The learned trial Judge erred in law and fact when he failed to consider an award of General Damages even after the respondent had been cited in disobedience/contempt of court orders. - 5. The learned trial Judge erred in law and fact when he only awarded Nominal Damages after he found that the respondent had wrongly and deliberately encumbered the titles for Block 265 Plots 7346 and7347.

### Representation

When this appeal came up for hearing, Counsel Mr. MacDosman Kabega appeared for the 1"t and 2"d appellants while Counsel Simon Peter Lukwiya Nyero appeared for the respondent on brief for Counsel Edwin Tabaro. Both parties filed written submissions.

### Appellant's arguments

Counsel submitted that a counter-claim is a suit of its own in terms of Order 2 rule 1 and Order 8 rule 2 of the Civil Procedure Rules and court ought to have dismissed it with costs to the appellants. Counsel argued that it is a settled principle of law that costs in any action follow the event unless court, for good cause, decides otherwise under section 27(21 of the Civil Procedure Act. That for court to deny costs to a successful litigant, special circumstances must be shown to exist by either party so as to disentitle the successful party. Counsel prayed that the appellants be awarded costs on the counterclaim. 10 15

While arguing grounds 2 and 5, counsel submitted that there was illegality on the part of the respondent in respect of the mortgages registered on Block 265 Plots 7346 and 7347. The 1"t appellant took a loan on Sth February 2013 and fully repaid it but the mortgages were not released from the certificate of Title for Block 265 Plot7347 by April 2017. Counsel argued that the encumbrances on both titles for Block 265 Plots 7346 and7347 were entered on the same day but

PaBe 4 of 16

with different signatures which imputes fraud on the respondent. Counsel relied on the Supreme Court decision in Senkungu Yakobo and 4 others vs Cresenio Mukasa S. C. C. A No. 14 of 2OL4 in which fraud was defined to include all acts, omissions, concealments which include breach of legal or equitable duty, trust or confidence.

Counsel relied on the evidence of DWl and submitted that the mortgages were fake and the bank charges and stamp duty as per Exh. P. 32 were not paid to URA and that the respondent filed forged documents. Counsel argued that these actions were deliberate to deprive the appellants of their property. Further, that the filing of a forged court document in Exh. P. 32 purporting to show that the respondent had paid stamp Duty to URA whereas not and the debiting of the 2"d appellant's account constitutes fraud.

Counsel submitted that the learned trial Judge found that the encumbrances of Block 265 Plot 7347 were not entered in error because the encumbrances on both titles were entered on the same day at the same time and yet the certificate of title for Block 265 Plot 7347 was only deposited for safe custody and not as security for any facility. The actions of the respondent caused the 2"d appellant financial distress and gross hardship for which he prayed for damages. 15 2Q

In regard to ground 3, counsel submitted that the 2"d appellant, in his witness statement, indicated that he required his title without any encumbrances to have it sold to clear the loan. Block 265 Plot 7347 was encumbered with three mortgages namely: Inst. No.

Page 5 of 16

565080 of Sth February 2Ol3 purportedly for 24O,OOO,000/= which was not documented; Inst. No. WAK 0003839 1 of 28th January 2015 for 200,000,000/: (Exh. P4); Inst. No. WAK 00041022 of 27th February 20i5 for 73,000,000/= (Exh. P3). Counsel submitted that the 2nd respondent had a buyer for his land but failed to sell it due to the encumbrances placed on the land by the respondent. Counsel argued that it was an error on the part of the learned trial Judge to find that the appellants did not prove that they had requested for the title for purposes of selling the land.

While arguing ground 4, counsel submitted that on 1Oth June 2016, the court in Wills International Engineers & Contractors and another Vs DFCU Bank Ltd Misc. Application No. 1000 of 2015, ordered the respondent to return immediately the appellant's certificate of title for Plot 7347 free of encumbrances. However, the respondent did not comply with this order. 10 15

Counsel relied on the decision of this court in Housing Finance Bank Ltd Vs Edward Musisi C. A Misc. Application No. 158 of 2O1O in which this court observed that contempt of court exists where there is existence of a lawful order, potential contemnor's knowledge of the order and potential contemnor's failure to comply with the order. Counsel prayed that this ground succeeds with costs on this court and the court below.

### Respondentts arguments

In reply, counsel submitted that under Section 27 (ll of the Civil Procedure Act, costs of and incidental to all suits are in the discretion 25

Page 6 of 16

of the court to give necessary directions and that the trial Judge in this case exercised his discretion to make no order as to costs. That the learned triat judge considered the total credit balance for both credit facilities and ordered that there must be a reconciliation of accounts and it was upon that basis that the counter-claim was dismissed with no order as to costs.

Counsel submitted further that the appellants failed to lead evidence to prove fraud on the part of the respondents in respect to the mortgages registered in Block 265 Plots 7346 and 7347 whereas not. Counsel argued that the appellants had filed a suit seeking for declaratory orders that the respondent was illegally holding the appellant's title in respect of Block 265 Plot 7347 and encumbered it with a mortgage. The issues addressed by court did not include fraud attributable to the respondent and as such, the learned trial Judge could not have found that the respondents committed fraud in their dealings with the appellant's property. 10 15

Counsel relied on the decision in Julius Rwabinumi Vs Hope Bahimbisomwe S. C. C. A No. 1O of 2OO9 in which the court cited with approval the decision in Attorney General Vs Paul Semwogerere and another Constitutional Appeal No. 3 of 2OO4, which held that a trial court must base its decision and orders on pleadings and issues contested before it. Founding a court decision or relief on an unpleaded matter or issue not properly placed before it is an error of law. Counsel submitted that the mortgage on Plot 7347 was entered in error instead of 7346 and it was the 20 25

PaBe 7 of 16

responsibility of the Registrar of Titles to release the mortgage upon receiving a notice of release. Counsel submitted that an error does not amount to fraud.

5 While arguing ground 4, counsel submitted that the respondent is not in contempt of any court order because the said title was returned to the appellants as directed by court and the respondent did not hesitate to release the mortgages once it became apparent that the mortgages had been entered in error.

## Conslderation of the appeal

I have carefully studied the court record, considered the submissions of counsel for the Appellant, the law applicable and the authorities cited in the determination of this appeal. 10

This is a first appeal and the principles on first appeal are as follows:

On a first appeal, the law enjoins this court to review and re-evaluate

the evidence as a whole, closely scrutinize it, draw its own inferences, and come to its conclusion on the matter. This duty is recognized in Rule 3() (i) (a) of the Rules of this Court. 15

> 30. Power to reappraise euidence and to take additional euidence.

(1) On any appeal from a decision of the High Court acting in the exercise of its oiginal juisdiction, the court maA-

(a) reappraise the euidence and draw inferences offact; and

(b) in its discretion, for sufficient reason, take additional euidence or direct that additional euidence be taken bg the trial court or bg a commls s7oner.

The cases of Pandya v R [1957] EA 336 and Kifamunte Henry v

5 uganda sccA No. 1O of L997 have also succinctly re-stated this principle. I will apply those principles herein. I will resolve the grounds in the way the parties have argued them.

### Ground 1

10 Ground one faults the learned trial Judge for dismissing the respondent's counter-claim but denied costs to the appellants. At the trial Court, the respondent, in its written statement of defence denied the appellant's claim and counter-claimed against the appellants in the sum of UGX.416 .764.5521= payable to it by the appellants' The learned trial Judge dismissed the counter-claim but made no order 1s as to costs

It is trite law that costs follow the event unless court, for good cause, orders otherwise. In deciding the issue of costs, court is guided by the provisions of section 27l1-l of the civil Procedure Act which grants court the discretion to grant costs and to what extent costs incident to suits are to be paid. Despite the wide discretion, the general rule is that a successful party in contested proceedings is entitled to an award of costs. It is the accepted general rule of law that in the absence of special circumstances, costs follow the event.

In the case of considering the exercise of discretion Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd, [195U 1 Afl ER 873, Devlin J formulated the relevant principle in exercise of such discretion as follows:

5 .. No doubt, the ordinary rule is thaL where a plaintiff has been successful, he ought not to be depiued o/ his costs, or, Qt ang rate, made to pag the costs of the other side, unless he has been guittg of some sort of misconduct."

In the present case, the learned trial Judge found that the appellants 10 were not indebted to the respondents in the amount of Uganda Shillings 416,764,552 l-- as contained in the counter-claim'

The special circumstances envisaged in denial of costs usually involve some sort of misconduct on the part of the successful party' In this case no such misconduct was proved or alluded to against the

1s Appellant to d.eny them costs. It is my considered view that the trial Judge ought to have dismissed the counter-claim with costs awarded to the appellants. Ground one ofthe appeal therefore succeeds.

### Grounds 2 and 5

Grounds 2 and 5 fault the learned trial Judge for failing to find fraud 20 and awarding only nominal damages after having found that the respondent had wrongly encumbered the title in P\ot7347 '

The testimony of DW1 in cross examination was that whereas the l"t appellant took a loan on sth February 2013 and fully repaid it, the mortgages had not been released from the certificate for Block 265

Page 10 of 16 Plot 7347 by April 2017. Another encumbrance was entered on the same title on 28th January 2015 under Instrument No' WAKOOO3839 1 to secure a loan of UGX 200,000,000/=' This same mortgage was entered on Plot 7346 on 28tn January 2Ol5 at the instance of the respondent yet the certificate of title for Block 265 Plot 7347 was only given to the respondent for safe custody' From the evidence on the record, it is clear that the mortgages were entered on the wrong titles. Exh. P. 24 and Exh. P. 25 had encumbrances entered on the same day, at the same time but with different signatures.

Further, in Exh. P. 38, a stamp certificate, the respondent purported to have paid stamp duty of UGX 1,100,000/= on behalf of the appellants to URA for the UGX 200,000,000/=' However, PW3 from URA testified that the stamp certificate was not genuine and was never issued by URA. These actions of the respondent were not only abreach of the respondent's fiduciary duty to the Appellant but also fraudulently denied the appellants utilisation of their property.

The Supreme Court in Fredrick J. IKZaabwe Vs Orient Bank and 5 others s.c.c. A No. o4 of 2o06 defined fraud as follows; 'qn act rpith intent to defraud means to act willfullg, and with the specific intent to d.eceiue or cheat; ordinary for the purpose of either causing some financial loss to another, or binging about some financial gain to oneself.' 20

The respondent,s act of debiting the 2"d appellant's account with bank charges on an untaken loan and presenting a forged stamp duty 25

certificate were actions intended to defraud the appellants. It is my considered view that the respondents' acts were fraudulent and therefore warranted an award of damages on the appellants for the inconveniences caused and the loss incurred therein.

5 Grounds 2 and 5 are also allowed'

### Ground 3

Ground 3 faults the learned, trial Judge for not awarding general damages to the appellants for reasons that there was no credible evidence that the appellant had made a request for his title to be returned.

The 2"d appellant's witness statement indicates that he made a request for his title to have it sold to clear the loan. Block 265 Plot 7347 was encumbered with three mortgages namely; Inst' No' KLA 565080with 24O,000,000/=, Inst' No' WAK 00038391 of 28tn January 2015 for 2O0,0OO,0OO/= and Inst. WAK OOO4|O22 of 27n February 2015 for 73,000,000/=' The 2"d appellant demonstrated during cross exarnination that he had a buyer for the plot of land but failed to sell because it was encumbered. In Exhibit P'30, the appellants requested for a mortgage release of Plot 7347 Block 265 from the respondent, which, had been kept with the respondent for safe custody. It is clear from ExhP3O that the Appellants requested for the title to be availed to them to be sold' 20 15

This evidence was never challenged. I too find therefore with greatest respect to the trial Judge that it was wrong on his part to find that

Page 12 of 16

the Appellant never requested for the title to be sold I agree with the appellant's submissions that the false encumbering and holding of the appellant's title ought to have attracted an award of General damages against the respondent. I therefore find for the appellants on ground 3 of the memorandum of appeal.

### Ground 4

On lOth June 2016, in Wills International Engineers & Contractors and another Vs DFCU Bank Ltd Misc. Application No. 1000 of 2015 court ordered the respondent to immediately return the certificate of title for PIot 7347 free of any encumbrances to the appellants, which order the respondent did not comply with. This court in Housing Finance Bank Ltd and another Vs Edward Musisi Miscellaneous Application No. 158 of 2O1O held that contempt of court exists where there is;

- a) Existence of a lawful court order, - b) Potential contemnor's knowledge of the order, - c) Potential contemnor's failure to comply with the order

20 In this case, DW1 testified that he received the court order directing the respondent to return the appellants'title with all encumbrances removed, but the respondent did not comply with the order. For the respondent, it is contended that the release of mortgage on the property was made and the land title handed over to the appellants by a letter dated 4tf, August 2016.

Page 13 of 16

Exhibit P9, a statement of search as at 5th September 2016 indicates that Block 265 Plot 7347 Lrad three encumbrances registered on it by DFCU Bank namely Inst. No. KLA 565080 registered on Sth February 2013, Inst. No. WAK 0003839 I registered on 28th January 2O15 and Inst. WAK OOO4|O22 registered on 27rh February 20 15. This clearly indicates that the encumbrances still existed on the certificate of title as at 5th September 2016. There is no doubt from the evidence of DWl that the Respondent did not obey the order. The appellants prayed to this court to penalize the Respondent. As such, I hnd for the appellants on ground four of the memorandum of appeal. Consequently, I would award Ugx. 80,000,000 for each of the five (5) illegal mortgages for each year they remained on the property.

Lastly in both Grounds 2 and 5 the appellants submitted that they were entitled to General Damages as against an award of Ugx. 20,0OO,OO0 which was nominal. This court has stated in a number of authorities that it would interfere where the High Court has made an award which is either too low or too high in the circumstances. See Mbogo Shah (19681 EA 93 and Kabandize John Baptist & 2lOthers -vs- Kampala Capital City Authority C. A. No.36 of 20L6. 15 20

Taking into account the circumstances of this case I would with respect disagree with an award of Ugx. 20,0O0,O0O by the learned trial Judge for being too low. The actions of the respondent were deliberate, illegal and fraudulent. I would therefore award General

Damages of Ugx. 120,000,000 with interest at l2o/o from the date of judgement till payment in full.

The Respondent shall pay the costs of this court and the court below.

As such, I Iind for the appellants on ground four of the memorandum s of appeal.

I would allow the appeal and make the following consequential orders;

- 1. The Respondent pays the Appellant costs of the Counter Claim' - 2. The Appellants are not indebted to the Respondent since the 10 counter claim was dismissed. - 3. The Respondent,s act of incumbering the Appellants titles with mortgages was illegal and fraudulent. - 4. The Respondent shall release titles for Block 265 Plot 7346 an:d 7347 free of all encumbrances. - 1s 5. The Respondent do pay the Appellants the sum of Ugx.80,000,O00 for each illegal mortgages for each year they remained on the ProPertY. - 6. The Appellants are awarded General Damages of Ugx. 12O,0OO,0OO with interest at !2o/o ftorn the date of - zo judgement till payment in full for unlawful encumbrances on all the titles. - 7. The Appellants are awarded costs of this Appeal and the court below.

,:.

Dated ttrts 'L4' day of r& 2022

Stephen Musota JUSTICE OF APPEAL

PaBe 16 of 16

## THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA CIVIL APPEAL NO. 0260 OF 2OL7

## 1. WILLS INTERNATIONAL ENGINEERS AND CONTRACTORS LTD

### 2. GEORGE WILLIAM KIYEGA: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :APPE LLANTS

#### VERSUS

## DFCU BANK (U) LTD RESPONDENT

(Appeal from the decision of the High Court of Uganda at Kampala (Commercial Division) before Madrama, J. (as he then was) in Civil Suit No. 802 ot 2017)

# CORAM: HON. LADY JUSTICE ELIZABETH MUSOKE, JA HON. LADY JUSTICE CATHERINE BAMUGEMEREIRE, JA HON. MR. JUSTTCE STEPHEN MUSOTA, JA

## JUDGMENT OF ELIZABETH MUSOKE, JA

I have had the advantage of reading in draft, the judgment of my learned brother Musota, JA with whom Bamugemereire, JA agrees, I was unable to agree with the conclusions reached by Musota, JA and in this judgment I briefly set out my reasons why.

The facts of the appeal are set out in the judgment of Musota, JA, and I need not go over them at length, It must be noted that the learned trial Judge found that the respondent wrongfully registered a mortgage on certain land belonging to the 2nd appellant, yet that land had not been presented as security for any mortgage. This finding by the learned trial Judge has not been challenged. The appellant challenges the learned trial Judge's decislon to find that only nominal damages could be awarded for the improper mortgage by the respondent, He also challenges certain other parts of the decision of the learned trial Judge, as will come out as I consider the grounds of appeal.

In relation to ground 1, wherein the appellants challenge the learned trial Judge's order of costs in the counter-claim, my view is that that the learned

trial Judge gave good reasons for not awarding those costs to the appellants, The learned trial Judge found that the appellants owed money to the respondent although it was necessary to make a reconciliation to ascertain the actual amount, meaning that he felt that it was necessary for the respondent to sue for recovery ofthose outstanding monies. In other words, the learned trial Judge reasoned that the appellant's failure to service the loan facilities advanced by the respondent had led to the respondent filing a suit for recovery of that money. This appears to be a sound reason for refusing costs and I would not interfere with the learned trial Judge's discretion.

Wlth regard to ground 2, I would not fault the learned trial Judge for not making a finding of fraud against the respondent. I noted that the appellants did not plead fraud and therefore no finding of fraud could be made, as it is trlte law that fraud must be pleaded and proved.

As for the learned trial Judge's decision to award nominal instead of general damages (ground 5), I read the judgment of the learned trial Judge and found his reasoning for denying general damages to be sound. Since he was exercising his discretion, I would be reluctant to interfere since he did not act very unreasonably.

With regard to ground 3, even if this Court were to find that the appellants had requested for thelr title, that as of itself, does not in my view justiflr awarding the amount of damages proposed by Musota, JA. General damages cannot be presumed to flow from DFCU's failure to remove the encumbrances on the relevant title. There was need for the appellants to adduce evidence to show the loss they suffered so as to justify the award of general damages. No such evidence was adduced.

In refusing to award general damages, the learned trial Judge reasoned that although DFCU had illegally encumbered the appellant's title, there was no evidence that the appellants suffered any damage beyond the charges and fees paid in relation to that encumbrance. He only awarded nominal damages.

As for ground 4, I noted that the ground relates to contempt of court, and yet the decision appealed from related to a suit for declarations regarding the illegal mortgaging of the appellants' land. In my view, the allegations of contempt of court raised in this appeal, should have been raised in an application in the trial Court,

It was for those reasons that I would disallow all grounds and dismiss the appeal.

However, as the majority (Musota and Bamugemereire, JJA) reached a different conclusion, by majority decision (Musoke, JA dissenting), this Court allows the appeal and enters judgment for the appellants in the terms set out in Musota, JA's judgment.

## It is so ordered.

| Dated at Kampala this | 19t | KL day of | 2022. | |-----------------------|-----|--------------|-------| | _-a- !\'w | | | | | Elizabeth Musoke | | | |

Justice of Appeal

### THE REPUBLIC OF UGANDA THE COURTOF APPEAL OF UGANDA CIVIL APPEAL NO.260 OF 2017

CORAM: HON. LADY JUSTICE ELIZABETH MUSOKE JA HON. LADY JUSTICE CATHERINE BAMUGEMEREIRE JA HON. MR. STEPHEN MUSOTA JA

1. WILLS INTERNATIONAL ENGINEERS AND CONTRACTORS LTD <table>

2. GEORGE WILLIAM KIYEGA::::::::::::::::::::::::::::::::::::

**VERSUS**

DFCU BANK (U) LTD:::::::::::::::::::::::::::::::::::: (Arising out of High Court Civil Suit No. 802 of 2017)

# Judgment of Hon. Lady Justice Catherine Bamugemereire JA

I have had the privilege of reading in draft the lead opinion of my learned brother Stephen Musota JA. On the crucial points which have to be decided in order to dispose of the appeal there is, as I see it, a striking unanimity, in which I respectfully concur. I therefore agree that the appeal be allowed.

Dece force

24° Sels 2032

Catherine Bamugemereire Justice of Appeal