THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANADA
CIVIL APPEAL NO. 04/2006
(CORAM: TSEKOOKO, KAROKORA, MULENGA, KANYEIHAMBA
FREDRICK J.K. ZAABWE :::::::::::::::::::::::::::::::::::::::::::::: APPELLANT
1. ORIENT BANK LTD )
2. MARS TRADING CO. LTD )
3. ALLAN SHONUBI )
4. MARTIN NKUTU ):::::::::::::::::::::: RESPONDENTS.
5. TITO TWIJUKYE )
6. RENZIGYE BYARUHANGA )
(Appeal from the Judgment of the Court of Appeal , at Kampala (Twinomujuni, Byamugisha and Kavuma, JJA) dated 23rd December 2005 in Civil Appeal No. 10 of 2003).
JUDGMENT OF KATUREEBE, JSC.
This is a second appeal by the appellant, both his original suit in the High Court and his subsequent appeal to the Court of Appeal having been dismissed.
The facts of the case are not in contention. The appellant, who is an experienced Advocate, found himself indebted to the Law Council, in the sum of Shs.1,000,000/= which he was required to pay within a given time. He did not have the money. He then approached a friend, also his client, one Livingstone Masambira Sewanyana to assist him to pay the money. Mr. Sewanyana agreed but required the appellant to execute a power of attorney in favour of 2nd respondent, a limited liability company, in which Sewanyana was a shareholder and director which would then borrow the money from a bank. On 7th November 1996, the appellant executed a Power of Attorney in respect of his land comprised in Kibuga Block 9 Plot 534. The appellant was the registered proprietor of that land. Sewanyana then gave to the appellant a personal cheque for Shs.1,000,000/= written in favour of the Law Council to settle the appellant’s obligations to that body. The cheque was never honoured by the bank for want of sufficient funds on the account. The appellant reported this to Sewanyana, who advised that the cheque be re-banked. The appellant accordingly advised the Law Council to re-bank the cheque, which it did. The cheque bounced once again. In the meantime, Sewanyana had also introduced two of his fellow shareholders/directors in the 2nd respondent to the appellant, and the appellant surrendered to them not only the power of attorney but also the certificate of title in respect of his said land. The Power of Attorney was then registered with the Registrar of Documents.
Thereafter, and on the basis of the Power of Attorney, the 2nd respondent mortgaged the appellant’s property to the 1st respondent to secure its borrowing from the 1st respondent. A mortgage deed was duly drawn to this effect. The 2nd respondent defaulted and failed to pay back the money it borrowed from the 1st respondent. In consequence thereof the 1st respondent sold the property, Kibuga Block 9 Plot 534, to one Ali Hussein for Shs.35,000,000/= on 11th December 1998. On 19th May 1999, the appellant was evicted from his house on the property aforesaid by the 5th and 6th respondents. He and his family have consequently had to live away from his property. His law office or chambers which were also on the same property had to close. The appellant filed a suit in the High Court challenging the mortgaging and sale of his property and alleging fraud on the part of the respondents. He was unsuccessful. He appealed to the Court of Appeal which also concurred with the High Court that there was no merit in the case and dismissed his appeal, hence this second appeal.
The appellant filed six grounds of appeal and filed written submissions in support thereof. For ease of reference, I reproduce the grounds of appeal in full.
“THAT the learned Justices of Appeal erred in law in that they allowed the trial Judge’s conclusion that the mortgage was made in consequence of the appellant’s power of attorney to stand when that conclusion was not supported by evidence on record.
THAT the learned Justices of Appeal erred in law in that they held that the mortgage against the appellant’s land was valid when it did not comply with the provisions of the law.
THAT the learned Justices of Appeal erred in law in that they held that no fraud was committed against the appellant when oral and documentary evidence on record clearly indicated that fraud was committed against him.
THAT the learned Justices of Appeal erred in law in that they failed to consider, review, appreciate the evidence on record and draw just conclusions.
THAT the learned Justices of Appeal erred in law in that they ignored the documents which the Court of Appeal under Reference No.90/2003, allowed the appellant to produce at the time of hearing his appeal and that this act denied the appellant of his right.
THAT the learned Justices of Appeal erred in law in that they dismissed the appellant’s appeal in complete disregard of the facts;
That D.W.1’s evidence was false and unreliable
(ii) That D.W.2’s evidence was unreliable because it was hearsay.
(iii) That the 2nd respondent did not file any defence or defend the suit or contradict the appellant’s evidence.
(iv) That the 4th, 5th and 6th respondents did not appear before the court and adduce any evidence to contradict that of the complainant.”
Before I consider the arguments in support of these grounds, I wish to comment on the grounds generally. Rule 81(1) of the Rules of this Court requires a memorandum of appeal to “set forth concisely and under distinct heads numbered consecutively, without argument or narrative, the grounds of objection to the decision appealed against,……..”
Clearly, some of the grounds set out in the memorandum of appeal infringe the above rule, in so far as they are argumentative and narrative. Parties or their counsel should always take care to file memorandum of appeal which comply with the rule. In the interests of justice, however, we decided to determine the appeal despite the defect.
In support of ground one, the appellant submits that the mortgage was not made on the basis of the appellant’s power of attorney in that the mortgage deed referred to Kyadondo Block 9 Plot 534 and named the 2nd respondent as beneficial owners but did not refer to the appellant’s name, power of attorney or Kibuga Block 9 Plot 534.
He submitted further that Section 114 of the Registration of Titles Act (R.T.A) only authorised the registered proprietor or holder of a power of attorney to mortgage the land, and that under the Eleventh Schedule to that Act, the mortgagor had to state the capacity under which he mortgaged the land. He submits that Kyadondo Block is different from Kibuga Block and therefore the land referred to in the mortgage was not his land. He further argues that powers of attorney are construed strictly, and the instrument will not bind the parties unless it complies with the provisions of the power of attorney. Therefore, he argues, in so far as the mortgage deed did not refer to the appellant or his title, it was unlawful to register the mortgage on the appellant’s title. He cites the Privy Council decision in the case of POWIS AND BYANT –Vs- Lc QUEBEC BANK, 1892 AC 170 and also cites SINPRA –Vs- UGANDA REHABILITATION DEVELOPMENT FOUNDATION HSCS NO. 199 OF 1995 for the proposition that the contracting party is bound to inquire into the extent of the agent’s authority, if he is dealing with an agent, and that a power of attorney must be strictly construed.
In reply, counsel for the 1st, 3rd, 4th , 5th and 6th respondents, argued that the learned Justices of Appeal correctly found that the mortgage was made pursuant to the power of attorney given by the appellant to the 2nd respondent. He argues that the power of attorney was unconditional and did not state what the funds borrowed were to be applied to, nor did it provide a borrowing limit. He concedes that there was an error in the description of the property as Kyadondo Block 9 Plot 534 instead of Kibuga Block 9 Plot 534 as given in the power of attorney, but argues that there was never any doubt as to the property that was in contention in the minds of all the parties involved. He argues that since the appellant had himself visited the offices of the 1st respondent and confirmed that he had issued the power of attorney, he could not turn around to argue that the property mortgaged was not his property. The power of attorney had been duly registered with the Registrar of Documents as required by section 146(2) of the Registration of Titles Act, and this was submitted to the Registrar together with the mortgage. He argues that it is not necessary in law to expressly reference the power of attorney, in the body of the mortgage deed, nor is it necessary to state that the 2nd respondent was a mortgagor by virtue of power of attorney, and failure to so state did not invalidate the mortgage. He submits that the Eleventh Schedule to the RTA is optional and does not require the capacity of the mortgagor to be stated. The language of the power of attorney was clear and was followed. He prays that ground one be rejected.
It is necessary to look at the record and consider the evidence that was adduced in court and which the lower courts evaluated. Ground one is similar to ground one of the memorandum which the appellant filed in the Court of Appeal. Twinomujuni, JA., who wrote the lead judgment, correctly in my view, directed himself with regard to the law as to the duty of the first appellate court. He states at page 5 of his judgment,
“The duty of this court as the first appellate court is well settled. It is to evaluate all the evidence which was adduced before the trial court and to arrive at its own conclusions as to whether the finding of the trial court can be supported …..I have studied the record of the trial …………..and all the evidence which was adduced before the learned trial judge. I now proceed to evaluate the evidence and to pronounce myself on the conclusion reached by the trial court”.
Having so properly directed itself as to its duty, the question is whether the Court of Appeal did actually evaluate the evidence in arriving at its decision. The crucial document in this case in my view, is the power of attorney. The appellant himself testified thus.
“In October 1996, I was required to pay Shs.1,000,000/= to Law council in a matter that was pending there. I did not have the money to pay them. My client Livingstone Masambira Sewanyana learned that I was not able to pay. He offered to assist me. He proposed to me that his company called Mars Trading Company Ltd could borrow the money on my behalf if I executed a power of attorney in the company’s favour over my land Kibuga Block 9 Plot 534”. (Page 43 of record). (Emphasis added).
Even under cross-examination, the appellant maintained this position and in his evidence was not shaken. The appellant then proceeded to testify how Sewanyana introduced to him the other shareholders / directors of the company, and how Sewanyana gave to the appellant a cheque for shs.1,000,000/= in the names of the Law Council. The appellant then further testified at page 45 thus:
“On 4th November 1996, Sewanyana, Martin Wetaya one Satyanarayana and another person whose name I did not know came to my home. On 5th November 1996, a valuer came and made a valuation report to Martin Wetaya. The property was valued at Shs. 40,000,000/=. At the time Wetaya worked for immigaration department.
On 7th November 1996, I executed a power of attorney in favour of Mars Trading Company Ltd.”
Apparently that same day 7th November 1996, he was invited to the offices of the 1st respondent where he signed a declaration that the property had no incumbrances. The power of attorney was then put in as exhibit P.II. In my opinion, the language of the power of attorney is crucial in the determination of this case. The power of attorney exhibited is quite clear. It states that:- the appellant “appoints M/s MARS TRADING COMPANY LTED P.O. BOX 7528, KAMPALA my attorneys in fact in law and in my name and on my behalf to do and execute the following acts and things that is to say:-
1) to use, mortgage or give in as security for a loan or loans my land and house situated at Kagugube Hill, Makerere and comprised in KIBUGA BLOCK 9 PLOT 534.
Clearly one of the acts authorised by the power of attorney is to mortgage his land comprised in Kibuga Block 9 Plot 534. There is no apparent doubt as to the property in question, i.e. his land and house at Kagugube Hill, Makerere . But it is important to note the language of the power of attorney. The 2nd respondent was appointed to act as attorney in the name of and on behalf of the appellant. It could not act on behalf of itself. It is therefore necessary to examine the nature and effect of a power of attorney in law. Can a donee of a power of attorney use it to his benefit and to the exclusion or detriment of the donor? Can a donee borrow money from the bank solely to finance his own business even where the donor of the power of attorney has no interest, and secure such borrowing by mortgaging the property of the donor?
“BLACK’S LAW DICTIONARY defines “power of attorney” as “an instrument in writing whereby one person, as principal, appoints another as his agent and confers authority to perform certain specified acts or kinds of act on behalf of principal …….an instrument authorising another to act as one’s agent or attorney………such power may be either general (full) or special (limited).”
Section 146(1) of the Registration of Title Act states:
“(1) The proprietor of any land under the operation of this Act or of any lease or mortgage may appoint any person to act for him or her in transferring that land, lease or mortgage or otherwise dealing with it by signing a power of attorney in the form in the Sixteenth Schedule to this Act.”
The point to note here is that the donee of a power of attorney acts as agent of the donor, and for the donor. He cannot use the power of attorney for his own benefit. The Privy Council decision, on an appeal arising from the Supreme Court of Canada, in the case of IMPERIAL BANK OF CANADA –Vs- BEGLEY  2 All ER 367 is good authority for the principal that where an agent, who has been given a power of attorney to do certain things, uses the power to do something for a proper purpose, but the act done is for the agent’s own purposes to the exclusion and detriment of the principal, the actions of the agent will be outside the scope of the power of attorney and are not even capable of ratification by the principal.
In the words of Lord MAUGHAM at page 374:
“The first essential to the doctrine of ratification, with its necessary consequence of relating back, is that the agent shall not be acting for himself, but shall be intending to bind a named or ascertainable principal. If the suggestion of ratification in this case is analysed it comes to this, that the agent having put some of the principal’s money in his pocket, the latter “ratifies” the act. For the reasons given this is not possible as a legal conception, since the agent did not take, and could not be deemed to have taken, the money for himself as agent for the principal.”
In that case, a person who had been given a power of attorney by the respondent to operate her bank account with the appellant bank for purposes of carrying out some investment for her, had actually used the power to draw money from her account to pay off his own debts with the bank. This he had done with the full knowledge and concurrence of the bank. It was held that both the agent and the bank would be liable to the respondent.
In this instant case, the agent used the power of attorney to secure its own indebtedness to the 1st respondent with the full knowledge and participation of 1st respondent. The extent of the borrowing and the purpose for which the loan facilities were required was not disclosed to the appellant.