Zubeda and Another v Kaka Wallia and Another (Civil Suit No. 062 of 2013) [2015] UGHC 15 (18 August 2015)

Full Case Text

# THE REPUBLIC OF UGANDA

the office IN THE HIGH COURT OF UGANDA AT MBARARA 34 $\overline{a}$ $HCF - 05 - CV - CS - 0062 - 2013$

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et大家

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1. ZUBEDA MOHAMMED : PLAINTIFFS 2. SADRU MOHAMMED

#### **VERSUS**

### 1. LAILA KAKA WALLIA

$[1]$

2. THE ADMINISTRATION OF THE ::: DEFENDANTS ESTATE OF THE LATE SUNDER KAKA WALLIA

#### **BEFORE: JUSTICE DAVID MATOVU**

#### JUDGMENT

The plaintiff instituted this suit against the defendants jointly and severally seeking a declaratory order that the $2nd$ defendants in their capacity as the legal representatives of the late Sunder Kaka Wallia are jointly or severally indebted to the plaintiffs. in a sum of Us \$ 245,721 (Two hundred forty five thousand seven hundred twenty one United states dollars) as money had and received from the plaintiffs but put to personal use by the late Sunder Kaka Wallia and that this sum of Us \$ 245,721. (Two hundred forty five thousand seven hundred twenty one United states dollars) should be paid back by the defendants. The plaintiffs sought general, special and punitive damages for breach of contract and fraud, and interest at commercial rate on the above items.

The defendants in their defence contended that the alleged [2] sum of Us \$ 245,721 (Two hundred forty five thousand seven hundred twenty one United states dollars) was invested by the plaintiffs in M/s Danae Foam Industries (U) Ltd, where the plaintiffs, the 1st defendant and the late Sunder Kaka Wallia were the share holders. In this respect the Estate of the Late

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Suder Kaka Wallia had nothing to do with the affairs of m/s Danae Foam Industries (U) Ltd.

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$[3]$

督士

At the scheduling of this case both counsel agreed on the following issues:-

Whether the late Sunder Kaka Wallia and the 2nd defendant rightfully put the said Us\$ 245,721 (Two hundred forty five thousand seven hundred twenty one United states dollars) they received on behalf of the company to its use?

2. If $so$ , whether the plaintiffs are creditors of the Estate of the late Sunder Kaka Wallia?

What remedies are available to the parties?

- It was agreed to file witness statements and indeed both $[4]$ counsel ably filed their respective witness statements. - $[5]$ Counsel for the defendants raised a preliminary objection in his written submissions to the effect that since m/s Danae Foam Industries (U) Ltd was a separate entity from its shareholders, this suit was misconceived and should be struck off or dismissed with costs. Counsel cited the case of Priamit Enterprises Ltd versus Attorney, General (2003) IEA 236.

In his submissions in rejoinder, counsel for the plaintiff argued $\cdot [6] \cdot$ that this is a case of money had and received by the 1st defendant and late Sunder Kaka Wallia and the plaintiffs had been defrauded in the guise of this being their capital contribution to m/s Danae Foam Industries (U) Ltd. Counsel invited this court to consider the case of Makula International versus Emmanuel Cardinal Neubuga (1982) HCB to the effect that once an illegality is brought to the attention of court it derides everything else including pleadings and admissions thereon.

To this court, this preliminary objection goes to the roots of this $\lceil 7 \rceil$ case and has to be determined first because if actually disposes off a greed issues for determination.

/s Danae Foam Industries (U) Ltd was incorporated on the 2"d day of Ociober, 2009 as indicated in exhibit P2. According to tl)e. Memorandum and Articles of Association which were signed on 25tt1 September, 2009 and are marked exhibit P3 each of the four (4) shareholders owned 25% of the shares in ■. the company.

■I

[8]

[9] It is not in dispute that the late Sunder Kaka Wallia received Us •\$ 235,721 (Two hundred thirty five thousand seven hundred twenty one United states dollars) which he personally received from Diamond Trust Bank Kampala and Stanbic Bank Mbarara between 23rd October, 2009 and 7th March, 2012.. The 1st . defendant only received Us \$ 10,000 (Ten thousand United • States dollars) on 14th September, 2010. This evidence is well documented in exhibit P7. *.* i

**[10]** According to paragraphs 11, 12 and 13 of Zubeda Mohammed's witness statement she was advised by the late *■'* . . Kaka to use their funds to buy land and she was aware that four (4) Acres of land outside Mbarara were purchased at a cost of Ug.shs 310,000,000/- (Three hundred and ten million shillings). • This evidence fits in well with that of Bonny Wallia one of the . administrators of the late Sunder Kaka Wallia. He confirms that the company bought four (4) Acres of land at Rweziringiro from Issa Abdullah, and there is an agreement to this effect. **;• • -**

[11] This court has carefully perused the agreement of sale of land dated 30th September, 2009 between Issa Abdullah which is exhibit' P6.- I,.note that this agreement was executed on 3O'h September, 2009, yet the company was incorporated on 22nd October,. 2009.. It is now settled law that such preincorporation agreements cannot bind the company. The life of a company begins from the date impressed upon the certificate, this is when the company becomes a body corporate with ; ■■'■•perpetual succession and a common seal and with the right to exercise the' powers given in its Memorandum of Articles of Association. See case of **Sercmba Mark versus Isanga** pmrnanuel & others Commercial Division Company cause No.

**3**

**1**

**K9.**

0024 of 2005, Jubilee Cotton Mills versus Lewis (1924) Ac 958.

- [12] It is therefore, the finding of this court that the agreement of sale of land between Issa Abdullah and Danae Foam Industries (U) Ltd dated 30th September, 2009 is not binding on the company which was incorporated on 22nd October, 2009. - [13] Thad the opportunity to see DW2 Issa Abdullah while under cross examination he told this court that he received Ug.shs $320,000,000/$ = (Three hundred twenty million shillings) in cash, that the $1^{st}$ installment was for Ug.shs 200,000,000/= (Two hundred million) and the other for 120,000,000/= (One hundred twenty million shillings), this evidence contradicted clause 4 of the agreement of sale where he is to have received this sum in one lump sum. To crown it DW2 could not satisfactionly explain to this court what he did with this money. As court I found this witness a liar who was attempting to cover up something.

[14] It is therefore, the finding of this court that the sum of Us \$ 245,721 (Two hundred forty five thousand seven hundred twenty one United states dollars) received by the late Sunder Kaka Wallia and the 1st defendant cannot be kept from the investigations of this court, by the preliminary objection that the same was used to purchase company property, for the reason that the purported agreement of sale of land was prior to the incorporation of the company and as such Is not binding on the company and the plaintiffs. The preliminary objection is overruled.

This takes me to the issue of whether the late Sunder Kaka Wallia and the 1st defendant rightfully put the said Us \$ 245,721 (Two hundred forty five thousand seven hundred twenty one United states dollars) they received on behalf of the company to its proper use?

[15]

$1181 - 111 = 111$

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[16] According to the court record exhibit P7, Mr Sunder Kaka Wallia holder of a Uganda passport No. B0379782 hetween $23rd$ October, 2009 and $7th$ March, 2012 received Us \$ 235,721.67 (Two hundred thirty five thousand seven hundred twenty one United states dollars) from the plaintiffs and this money was received at Diamond Trust Bank Kampala and Stanbic Bank Mbarara. The first defendant Laila Kaka Wallia only received Us \$ 10,000 (Ten thousand United States Dollars) on 14th September, 2010.

$100$

If therefore follows that the agreement of cale of land dated $30^{\text{th}}$ Gertember, 2009 exhibit P6 had nothing to do with the funds received from the plaintiffs. Since Issa Abdullah acknowledged in writing to have received Ugishs 320,000,000/= (Three hundred twenty million shillings) on 30th September, 2009 this money must have been from other cources and not from the plaintiffs who paid their Us \$ 245,721.67 from 25rd October, $-2003$ and $7^{th}$ March, 2012.

This court acknowledgss receipt of critical recognition lenged in. court by Mr. Mundwa Christopher DW3, but as observed earlier. those payments were made in furtherance of transactions on the 4 acres of land at Block 6 Plot 21 where the company m/s Danae Foam Industries (U) Ltd had no interest since the same was purportedly purchased before the company was born. Accordingly all those expenses mentioned by DWS can only be for the benefit of those who own the land at Block 6 First 21 and not m/s Danae Foam Industries (U) Ltd.

With the above evidence it is clear that the lata Sundar Naka Visilia received Us\$ 235,721 (Two hundred thirty five thousand seven hundred twenty one United states dollars) and put if to his own use and not for the benefits of m/o Dancer Feam Relaxations (U) Ltd, the same applies to Unifoliate when a shed the sign of the thousand United States (1981) and the state of the sign of the sign of the $\cdots \vdots \cdots \vdots$ $\mathbf{a} = \mathbf{a} + \mathbf{b} + \mathbf{c} + \mathbf{a} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf{c} + \mathbf$

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They attempted to cover up this money in a land transaction $[20]$ carried out before the company was born and their attempt didi not pass this court.

$103$

$[21]$ The first issue is therefore answered in the negative as Us\$ 245,721 (Two hundred forty five thousand seven hundred twenty one United states dollars) had and received by the late Sunder Kaka Wallia and Laila Wallia was put to their own use.

[22] With regard to the $2^{nd}$ issue, the same applies to the late Sunder Kaka Wallia, having received such colossal sums money from the plaintiffs and putting the same to his person. use, his estate is liable to make good such conduct.

It was the evidence of the administrators of the estate of $t_{22}$ $[23]$ late Sunder Kaka Wallia that when he received the money invested in the company of m/s Danae Foam Industries (U) Ltd. this fact having been found a lie by this court, the estate of late Sunder Wallia is liable in this case.

Finally, the remedies available for the parties are as follows: $[24]$

$1.$

- Since Laila Kaka Wallia received Us \$10,000 (Ter thousand United State dollars) and did not even bother to come and explain how she spent this money, she sh pay this money to the plaintiffs. - The Administrators of the Estate of the late Sunder I Wallia are liable to pay Us\$ 235,721 (Two hundred thirt) five thousand seven hundred twenty one United set dollars) to the plaintiffs. - The Administrators of the estate of the late Sunder Wallia are liable to pay general damages of Ug.shs ,000,000/= (Thirty million shillings) to the plaintiff insidering the fraudulent conduct of the deceased.

All the above payments shall attract interest of commercial rate of 20% per annum from the date of judgment until payment is full.

The defendants shall pay the costs of this suit. 5.

Dated this 18th day of August, 2015.

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DAVID MATOVU **JUDGE**

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$167$

## THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT MBARARA

# **CIVIL SUIT NO. 062 OF 2013**

- 1. ZUBEDA MOHAMED - 2. SADRU MOHAMED

#### **PLAINTIFFS**

#### **VERSUS**

#### I. LAILA KAKA WALLIA 2. THE ADMINISTRATORS OF THE ESTATE OF THE LATE SUNDER KAKA WALLIA

# DECREE.

DEFENDANTS.

16.1

THIS SUIT coming up for final disposal on this 19th day of August 2015, before Honorable Justice David Matovu, in the presence of Mr. Allan Kyakuwa, Counsel for the Plaintiffs and Mr. Francis Butagira, unsel for the Defendants;

### IT IS HEREBY ORDERED AND DECREED as follows;

- 1. The 1st Defendant (Laila Kaka Wallia) personally pays USD 10,000 (United States Dollars ten thousand) to the Plaintiffs. - 2. The 2nd Defendants (Administrators of the Estate of the Late Sunder Kaka Wallia) are liable to pay the Plaintiffs USD 235,721 (United States Dollars two hundred and thirty five thousand seven hundred and twenty one). $\ddots$ - 3. The 2nd Defendants (Administrators of the Estate of the late Sunder Kaka Wallia) are liable to pay general damages of Ug. Shs. 30,000,000 (Uganda Shillings thirty million) to the Plaintiff; considering the fraugulent conduct of the deceased - 4. All the above payments shall attract interest at the commercial rate of 20% per annum from the date of judgment till payment in full. - 5. The Defendants shall pay the Costs of the suit.

GIVEN under my hand and seal of this Honorable Court this $\frac{1}{2}$ day of $\frac{1}{2}$ 2015.

**JUDGE/REGISTRAR**

xtracted by: honubi, Musoke & Co, dvocates & Solicitors, M Chambers. lot 14 Hannington Road, O Box 3213, $AMPAL$ ya