Court name
Commercial Court of Uganda
Judgment date
27 May 2013

Wamono v Equity Bank Uganda Ltd & Anor (Miscellaneous Application-2012/600) [2013] UGCommC 98 (27 May 2013);

Cite this case
[2013] UGCommC 98

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 600 OF 2012

WAMONO SHEM}........................................................................ APPLICANT

 VS

  1. EQUITY BANK UGANDA LTD}
  2. CONSTANCE WAKYEMBA}............................................... RESPONDENTS

BEFORE HON JUSTICE CHRISTOPHER MADRAMA IZAMA

JUDGMENT

The Applicant's application/the suit was filed under sections 33, 34, 35 and 36 (1) of the Mortgage Act, Act 8 of 2009, order 52 rules 1 and 3 of the Civil Procedure Rules by originating summons. It is for orders that the applicant be heard in an application for orders that this honourable court reviews the mortgage by declaring the same void; that the recovery process under the mortgage is declared void; and costs of the application are provided for.

The grounds of the application are contained in the affidavit of the applicant and are also summarised in the notice of motion. The grounds are that firstly the mortgage was obtained in an unlawful manner in as much as the security is family land and there was no spousal consent to mortgage the property. Secondly the recovery process of the loan is unlawful inasmuch as section 19 of the Mortgage Act had not been complied with. Finally that it is just and fitting that the application is allowed. In the affidavit in support of the application the applicant avers that the second respondent is his wife pursuant to customary marriage celebrated on 30th day of January 2006. The applicant lists five children of the marriage. He avers the 2nd respondent had agreed that all property acquired by the family was family property for the social and financial security of the family. The property the subject matter of the application was specifically used to provide for family income to cater for school fees of their children. He was shocked to learn that the property was the subject of a mortgage when he got notice through the new vision advertisement of 23rd of August 2012 showing that the property was to be sold. He avers that he did not consent to the family property being pledged with the first respondent as security by the second respondent. The respondents did not at any one time inform him of their dealing in the property. The deponent avers that he had all along been trying to obtain the mortgage instruments to establish what actually occurred. He established that there was no spousal consent and there was no evidence of any enquiry by the first respondent as to whether the property was family property or not. He further learnt that the notice of default was not a notice at law because the statutory period had not elapsed. The security documents revealed that there were specific conditions to be complied with by the first respondent before the disbursement of the loan, which conditions were not complied with.

The affidavit in reply of the first respondent bank is sworn by Ms Mulalazi Joweria, a Legal Officer in Equity Bank. She first of all contends on the advice of her lawyers that the application is incompetent and bad in law. The ground of the alleged incompetence is the assertion that in the circumstances the court has no jurisdiction to review the mortgage agreement executed between the parties in the absence of fraud or illegality. Furthermore the first respondent was never favoured with sufficient proof of the marriage between her and the applicant. The respondent carried out a due diligence study in which it put to task the respondent to provide a statutory declaration as proof of her marital status. The evidence shows that she was unmarried at the time of execution of the mortgage.

She further avers that AM (U) Ltd referred to as the principal debtor applied for and was offered a loan facility of Uganda shillings 100,000,000/= by the first respondent. The second respondent donated powers of attorney to the principal debtor, to pledge the suit property as security for a loan from the first respondent. The loan facility was secured by a mortgage of property comprised in Kibuga block 29 plot 1682 land at Kanjokya registered in the second respondents names and the mortgage deed was executed between the second respondent (mortgagor) and A.M. (U) Ltd (the principal debtor) on the one hand and the first respondent. The first respondent carried out the requisite due diligence and investigated whether the second respondent was at the material time married or not. The second respondent was not married at the time the mortgage deed was executed and swore a statutory declaration to that effect. The second respondent further gave her approval and consent to the first respondent to appoint a receiver to enter into possession, collect by demand or action all the income or arrears and to exercise its powers of sale under the mortgage by private treaty in respect of the suit property. In breach of the terms of the mortgage deed between the parties, the principal debtor or the second respondent did not service the loan as the instalments fell due as a result of which the first respondent demanded full payment of the amounts outstanding on the loan. Notice of default was duly served upon the principal debtor and the second respondent notifying them of the default and demanding that they pay the outstanding amount of Uganda shillings 104,603,912/=. After expiry of the notice of default, a notice of sale was served upon the principal debtor and the second respondent notifying them of the intended sale of the suit property. The property was advertised for sale in the New Vision paper of 23rd of August 2012. Consequently the deponent avers that the applicant’s application does not warrant any remedies/orders sought and lacks any merit.

The second respondent on the other hand filed an affidavit in reply in which she avers that she was still married to the applicant under a customary marriage regime contracted on 30 January 2006 at the time she obtained a credit facility from the first respondent. That the property the subject of the application is indeed family property she mortgaged without the consent of her husband.

The applicant was represented by Messieurs Kawenja, Othieno and Company Advocates and the first respondent represented by Kigozi Sempala Mukasa Obonyo Advocates [KSMO] and Counsels addressed the Court in written submissions.

In support of the application the written submissions of the applicant is that the mortgage was obtained in an unlawful manner in as much as the security involved is family land and there was no spousal consent to mortgage it. The applicant is married to the second respondent with whom he shared family property. The applicant and the second respondent agreed to treat the mortgaged property as family land as provided for under section 38 A (4) (c) of the Land (Amendment Act) Act 2004. Counsel submitted that under article 31 of the Constitution partners in marriage have equal rights which extend to rights over property. Counsel relied on the judgement of the Court of Appeal Twonomugisha JA in Julius Rwabinumi vs. Hope Bahimbisombwe CACA number 30 of 2007 for the proposition that a matrimonial property is joint property as between a husband and wife and should be shared equally on divorce. The fact that it is registered in the names of the wife or the husband is not relevant because it belongs to both. Consequently it is deemed that the property is part of the family land and jointly owned.

The crux of the applicant’s case is that the second respondent did not obtain the applicants consent before mortgaging the property contrary to section 39 of the Land Act as amended. Failure to obtain consent rendered the mortgage transaction unlawful and illegal. The manner in which the mortgage was executed or obtained was unlawful and should be declared void under sections 34 and 36 of the Mortgage Act 2009. The applicants counsel further contended that the statutory declaration made by the second respondent was not a statutory declaration at all because it was not attested before a judge, registrar, magistrate or justice of the peace, a notary public or Commissioner for oath as provided for under the Statutory Declaration Act. In those circumstances the purported statutory declaration does not amount to a valid statutory declaration.

Under section 39 (4) of the Land Act as amended where a mortgagee had no notice of the requirement for spousal consent, the transaction is void but the mortgagee has recourse to claim from any person with whom he or it executed the transaction.

Secondly the applicants counsel submitted that the recovery process under the mortgage was unlawful because section 19 of the Mortgage Act had not been complied with. The mortgagee did not give 45 days’ notice as required by section 19 (2) for the mortgagor to rectify any default. The mortgagee only gave 21 days notice to the applicant. Consequently section 19 (d) was improperly invoked to sell the applicants property and the process to recover the sums claimed under the mortgage is incurably defective, and ought to be declared null and void.

Lastly the applicants counsel submitted that it was just and fitting that the application is allowed. Counsel contended that the second respondent gave a power of attorney to the first respondent and after giving that power of attorney she could not again sign the mortgage herself. All documents and instruments were supposed to be made in the second respondent’s names. The loan facility documents are in the names of A M (U) Ltd and the money was paid to the company and not the second respondent. The signing of the mortgage with the second respondent was meant to ratify the transaction between the principal debtor and the first respondent and cannot stand according to the authority of Imperial Bank of Canada versus Begley [1936] 2 All ER 367 which holds that an act is done for the agents own purposes to the exclusion and detriment of the principal will be outside the scope of the power of attorney and not capable of ratification by the principal.

Furthermore the facility documents envisaged transfer of the property into the names of the principal debtor and it is safe to conclude that the second respondent was the vendor in the circumstances as no other vendor is mentioned. However the second respondent as a vendor was never paid. Lastly it was a condition precedent before the proposed facility could become available to the borrower for the duly executed and perfected security documents to be in place. The requirement of transfer of the property into the borrower’s names was never done. The first respondent did not comply with the very terms of its loan facility agreement and therefore the application should be allowed with costs.

In reply the first respondent's counsel submitted that though the Mortgage Act 2009 empowers a spouse to challenge the legality of a mortgage under sections 34 and 35, the applicant has failed to show his right as a spouse to qualify for a declaration that the mortgage is void.

Counsel submitted that the Mortgage Act 2009 and the Land Act both do not define a spouse. Black's law dictionary 8th edition however defines the term to mean one's husband or wife by lawful marriage. The question therefore is whether the applicant was lawfully married to the second respondent at the material time of the mortgage transaction. The Customary Marriages (Registration) Act cap 248 defines a customary marriage as a marriage celebrated according to the rights of an African community and one of the parties to which is a member of that community. Secondly customary marriages are supposed to be registered and certificates of marriage issued as evidence. The applicant did not furnish a certificate but refers to a letter he wrote to show that he paid dowry. The letter does not show whether it came from the father of his purported spouse. Counsel further contended that the consent of a father to a customary marriage of his daughter is mandatory. For this proposition counsel relied on the case of Bruno Kiwuwa vs. Ivan Serunkuma and Another HCCS No.52 of 2006. A letter written by the applicant cannot prove any customary marriage. Consequently it does not prove celebration of a customary marriage.

Secondly the second respondent when asked to disclose her marital status declared that she was not married to anyone and that the mortgaged land was not matrimonial property.

As far as failure to obtain consent before mortgage is concerned, counsel submitted that section 4 (2) (a) and (b) of the Mortgage Act makes it obligatory for parties to the mortgage to act honestly and in good faith and to disclose relevant information relating to the mortgage. As a consequence thereof the first respondent as mortgagor was obliged to disclose such facts to the bank before extension of the facility to the borrower. In the second respondents affidavit in reply, she asserts she was married at the time of the transaction. Yet she had issued a statutory declaration that she was unmarried and that the property was not matrimonial property at the time of application for a loan. The duty is imposed on the mortgagee under section 5 (2) of the Mortgage Act to ascertain whether the intending mortgagor is married and whether or not the property to be mortgaged is matrimonial property. Under subsection 3 the duty is discharged if he obtains a marriage certificate issued in accordance with the laws of Uganda and in the absence of it a statutory declaration from the spouse or spouses of the mortgagor as proof of marriage. The first respondent required the mortgagor (the second respondent) to disclose her marital status whereupon she deposes a statutory declaration asserting that she was unmarried and the property was not matrimonial property. In those circumstances the first respondent took reasonable steps to ascertain whether the intending mortgagor was married and whether or not the property to be mortgaged was matrimonial property. The first respondent bank was led to believe that the property was not matrimonial property.

On the basis of the statutory declaration the first respondent's counsel contends that the mortgaged property was not matrimonial property. Secondly the Mortgage Act and section 2 thereof defines a “matrimonial” home to mean a building or part of the building to which a husband and wife or as the case may be the wives and children if any ordinarily reside and includes: where a building and its cartilage are occupied primarily for residential purposes, that cartilage and outbuildings on it or where a building is occupied in conjunction with agricultural land or pastoral land, any land allocated by one spouse to his or her spouse or in the case of the husband to his spouses for her or their exclusive use. A mortgage of the matrimonial home is valid where an intending mortgagee takes reasonable steps to ascertain whether or not the intending mortgagor is married and whether or not the property to be mortgaged is matrimonial property. The mortgagee ascertained the marital status of the applicant under regulations 3 and 18 of the Mortgage Regulations 2012.

Even though the statutory declaration was not properly commissioned, the document has the effect that the second respondent intended the bank to know that she was unmarried and that the property was not matrimonial property.

Concerning the position of the law regarding mortgaged property, counsel for the first respondent submitted without prejudice that in the unlikely event that the court holds that the property is matrimonial property, the court should find that by the time the mortgagor intended to secure the loan with the property, she knew that the property would be subjected to possible sale in the event of default. A person who pledges property as security has in a way agreed that it should be sold upon default of the borrower. Counsel relied on the case of David Luyiga versus Stanbic Bank (U) Ltd miscellaneous application number 202 of 2012 persuaded by the holding in Matex Commercial Suppliers Ltd and another versus Euro Bank Ltd in Liquidation (2008) 1 EA 216 that such a mortgagor agrees that the property is suitable for security and cannot plead that the property has sentimental or spiritual value or sanctity.

On the question of requisite notices counsel submitted that it is within the mortgagees rights under section 26 of the Mortgage Act to sell property which has been mortgaged upon default of the borrower. The first respondent issued a notice of default together with a notice of sale under the provisions of section 19 of the Mortgage Act and regulations made there under. Notice of default was issued to the second respondent and AM (U) Ltd under section 19 (2) and (3) of the Mortgage Act and the Mortgage Regulations and regulation 32 thereof on 5th of June 2012 and 21 days notice elapsed. The applicant filed the action in October 2012, 90 days after the notice of default and sale had been issued. The submission that there was no notice of default of 45 days is premature. Because the mortgagor did not rectify the default, the bank was entitled to sell the property. As far as the power of attorney granted by the second respondent to the company to borrow money is concerned, it was clearly a power to pledge the property as security to Equity Bank (U) Ltd. It was not the first respondent's duty to ensure that the proceeds of borrowing were remitted to the second respondent and the matters between the second respondent and AM (U) Ltd was their own arrangement and the bank was not privy thereto.

The first respondents counsel further submitted that that courts are temples of justice and should apply equity to protect rights and redress legal wrongs. The applicant and the second respondent colluded after the notice of default and sale of the property to defeat the interest of the first respondent and to that extent second respondent averred in an affidavit that the property was family property she mortgaged without the consent of her husband. It shows a total breach of her obligations created under section 4 and her dishonesty. She never disclosed the relevant information relating to the mortgage making her culpable under section 4 (2) of the Mortgage Act. She acted in breach of duty to disclose relevant information and act in good faith. Counsel further submitted that under section 36 (2) of the Mortgage Act the court is barred from declaring a mortgage void unless it is satisfied that the circumstances justify it. In the circumstances of the case the applicant has raised no satisfactory grounds to nullify the mortgage and application should be disallowed.

In rejoinder the applicants counsel submitted that the letter of the applicant is a valid document showing that dowry was paid. Secondly there is no rule of law requiring such a letter to the written by parents of the bride. Thirdly that registration of a marriage under section 1 of the Customary Marriage Registration Act is for evidential purposes but does not render an unregistered marriage null and void. The penalty imposed by section 20 of the Customary Marriage Registration Act for failure to register a customary marriage does not render such a marriage null and void for non-registration.

As far as the duty to act honestly and in good faith for purposes of disclosing relevant information is concerned, whatever transpired between the first respondent and the second respondent was unknown to the applicant. Secondly the first respondent cannot deny that there was no statutory declaration to the effect that the second respondent was not married. Even if the first respondent acted innocently, under section 39 (4) of the Land Act as amended the transaction as it stands is still void. A purchaser under that Act is defined to include a mortgagee.

As far as the position of the company to pledge the property as security is concerned, the power of attorney has to be strictly interpreted and construed. A strict interpretation shows that the respondents acted outside the powers given thereby rendering the mortgage null and void. A M (U) Ltd clearly acted for itself and not for the donor of the power of attorney. In those circumstances the first respondent should recover its money from AM (U) Ltd.

As far as the requisite notices are concerned form 6 of schedule 2 of the Mortgage Regulations provides for a period of notice within 21 days but the Act itself is provides for not less than 21 days showing an inconsistency. Because the notice did not stipulate that it was not less than 21 days, it does not matter whether 90 days have lapsed after the giving of notice. The notice given is not the notice of default envisaged in the law.

Judgment

The Applicant's suit was brought by originating motion under the provisions of sections 33, 34, 35 and 36 (1) of the Mortgage Act and order 52 rules 1 and 3 of the Civil Procedure Rules for review of the mortgage by declaring it void.

The head note of section 33 of the Mortgage Act deals with and is worded as: “application for relief by mortgagor”. It provides that an application to the court for relief against the exercise by the mortgagee of any of the remedies referred to in section 20 may be made by the mortgagor; if two or more persons are joint mortgagors, by one or more of them on their own behalf; by a spouse or spouses of the mortgagor; or by the trustee in bankruptcy of the mortgagor. The remedies of the mortgagee under section 20 is exercisable where the mortgagor is in default and does not comply with the notice served on him or her under section 19. In such cases the mortgagee may require the mortgagor to pay all the monies owing on the mortgage; appoint a receiver of the income of the mortgaged land; lease the mortgaged land or where the mortgage is of a lease, sublease the land; enter into possession of the mortgaged land or sell the mortgaged land.

In this case the applicant is the spouse of the second respondent/mortgagor and has a right to bring an application for relief under section 33 of the Mortgage Act. Section 34 on the other hand confers jurisdiction on the court to review certain mortgages. An application may be made by a person or persons mentioned in section 35 of the Act in the interest of justice. The applicants may be the mortgagor or the mortgagee; a spouse or spouses of the mortgagor, trustee in bankruptcy of the mortgagor; be a surety. The court may review the mortgage where it was obtained through fraud, deceit or misrepresentation by the mortgagor or in a manner containing a provision which is unlawful. Lastly section 36 of the Mortgage Act gives the court jurisdiction to declare the mortgage void or direct that the mortgage shall have effect subject to such modifications as the court shall order or require the mortgagee to repay the whole or part of any sum paid under the mortgage or any related or collateral agreement by the mortgagor or any surety or other person who assumed an obligation under the mortgage whether it was paid to the mortgagee or any other person.

The applicant’s case is that the mortgagor is his spouse and that he was married to the mortgagor/second respondent under a customary marriage system. Secondly that the property was matrimonial property and because his consent was not obtained before execution of the mortgage, the mortgage was a nullity or void for want of consent under the provisions of section 38 A (4) (c) of the Land (Amendment Act) 2004. On the other hand the first respondent's case is that the second respondent/mortgagor was not married to the applicant at the time of execution of the mortgage. Secondly she had declared on oath under a statutory declaration that she was not married and the property was not matrimonial property/family property. Counsels further dwelt on whether the applicant had discharged the burden of proving that the second respondent was his spouse.

It must be emphasised that the second respondent swore an affidavit in reply in which she admitted that she was a spouse of the applicant at the time of execution of the mortgage deed. Does that admission amount to proof of marriage?

I have carefully reviewed the documentary evidence. Annexure A to the affidavit of the applicant is a document indicating the dowry paid in respect of the marriage of the second respondent. It is witnessed by three witnesses. No other evidence was adduced. None of the witnesses of the alleged customary marriage was produced. It is clear from the submissions of the parties that there is agreement that no certificate of marriage under the Customary Marriage Registration Act was issued or tendered in evidence. The second document attached to the affidavit of the applicant annexure "B" is an advertisement in the new vision newspaper of August 23, 2012 advertising property for sale. It shows that Messieurs A M (U) Ltd was a debtor and the property being land and developments comprised in Kibuga block 29 plot 1682 land at Kanjokya measuring approximately 0 0.18 hectares was advertised for sale. Annexure "C" to the affidavit in support of the application is a notice of default issued to AM (U) Ltd and the second respondent. It shows that the mortgagor defaulted on its obligations under the mortgage executed on 17 March 2011 and the first respondent demanded full payment of the outstanding sum of Uganda shillings 104,633,912/=. It was notice to rectify the default within 21 working days from the date of the notice. The notice is dated 5th of June 2012. Annexure "D" shows an offer of credit facilities to the directors A M (U) Ltd (hereinafter referred to as the company) wherein the first respondent offered Uganda shillings 100,000,000/= as a credit facility to the company. Under the agreement the borrower was the company and the lender was the first respondent. The directors of the company who accepted the terms of the loan are Obulu Amos and Musiime Loyce Musika.

On the other hand the first respondent's documents include the loan offer annexure "A" to the affidavit in reply. A power of attorney annexure "B" in which the second respondent by an irrevocable power of attorney appointed the company to be her true lawful attorney in respect of Kibuga Block 29 Plot 1682 land at Kanjokya to take possession of and pledge as security for purposes of obtaining a loan from Equity Bank Uganda Limited and to assign or otherwise deal with all and any income accruing from such investment or any other dealings by the company on the property. Secondly she gave them powers to execute all such instruments, documents and do such acts, matters and things as may be necessary or expedient for carrying out the powers granted under the power of attorney. She further undertook to confirm or ratify whatever the attorneys lawfully did. The power of attorney is also endorsed by the directors of the company. Annexure "C" is the certificate of title showing that the property is registered in the names of the second respondent. Annexure "D" to the affidavit in reply is a declaration as to marital status of the 2nd respondent dated 17th of March 2011. She declares that at the time of execution of the mortgage deed in respect of the land and property (the subject matter of this application), she was not married to any person in any form of marriage recognised under the laws of Uganda or elsewhere. She further provides that in the event that there was discovery of any form of marriage solemnised under the laws of Uganda or solemnised in any other country and recognised in Uganda as a valid marriage concerning her, she would indemnify Equity Bank Uganda Limited, its assigns or successors in title of any liability howsoever arising there from. The declaration as to marital status is witnessed by Angela Kobel, an advocate. Annexure "E" to the affidavit in reply is the mortgagor's approval and consent under the provisions of section 5 (2) of the Mortgage Act cap 229. She further irrevocably and explicitly gave consent for purposes of section 9 of the Mortgage Act to exercise the mortgagee’s powers of sale under the mortgage by private treaty. The other documents are the notice of default already referred to in the applicant’s affidavit. Additionally there is a notice of sale of the mortgaged property addressed to the company and the second respondent under section 26 of the Mortgage Act and is dated 5th of July 2012.

The first point in controversy as indicated above is whether the second respondent is a spouse of the applicant. As far as the second respondent Constance Wakyemba and the registered proprietor of the property is concerned, she has represented two conflicting and contradictory positions on her marital status. In the first instance she signed a declaration that she was not married under the laws of Uganda or under a marriage recognised as valid under the laws of Uganda. This declaration was attacked by the applicant's counsel as not amounting to a statutory declaration and should not be taken into account. The second statement is the affidavit in reply of the second respondent/mortgagor who asserts contrary to her earlier statements to the first respondent/mortgagee that she was married to the applicant at the time of execution of the mortgage.

As far as the declaration is concerned, the parties addressed the court on the requirements of section 5 of the Mortgage Act 2009. Section 5 (2) (a) provides that an intending mortgagee shall take reasonable steps to ascertain whether an intending mortgagor is married and whether or not the property to be mortgaged is a matrimonial home. Secondly in (b) an intending mortgagor shall make full disclosure to the intending mortgagee as to his or her marital status and whether or not the property to be mortgaged comprises the matrimonial home. Lastly section 5 (3) of the Mortgage Act provides that the mortgagee shall be deemed to have discharged the duty under subsection 2 if the mortgagee obtains a marriage certificate issued in accordance with the laws of Uganda, and in the absence of it, a statutory declaration from the spouse or spouses of the mortgagor as proof of marriage. The submission of the first respondent is that it carried out a due diligence and established that the second respondent was not married. On the other hand the applicant contended that this statutory declaration was not a statutory declaration and ought not to be relied upon by the court. Starting from the last point, a declaration under section 5 (3) imposes a duty on the mortgagee to obtain a marriage certificate. Noted that the duty is for the mortgagee, or in this case, the first respondent to take reasonable steps to ascertain whether the intending mortgagor is married and whether or not the property to be mortgaged is a matrimonial home. The provision is inapplicable where the party/mortgagor is unmarried. Secondly a statutory declaration under subsection 3 is obtained from the spouse or spouses of the mortgagor as proof of marriage. Where it is asserted that the mortgagor is unmarried, the question of obtaining a statutory declaration for his or her does not arise. The duty to take reasonable steps by investigating whether the intending mortgagor is married or not is not satisfied merely by obtaining a statutory declaration from the intending mortgagor. As to what reasonable steps are would depend on the circumstances of the parties. For instance, would it not be sufficient to investigate from the locality of the property whether it was matrimonial property and whether the mortgagor is married?

Furthermore, the submissions of both counsels were premised on facts that occurred before the Mortgage Act 2009 came into force. In those circumstances, the particular requirement under section 5 which puts the duty on the mortgagee to take reasonable steps to ascertain whether an intending mortgagor is married and whether or not the property to be mortgaged is a matrimonial home, is inapplicable. This is because the mortgage offer relied upon by both parties is dated 17th March 2011. Secondly the power of attorney annexure "B" to the affidavit in reply was executed on 15 March 2011. The so called “declaration as to marital status” which was witnessed by an advocate is dated 17th of March 2011. It is apparent that the transaction complained about occurred before the coming into force of the Mortgage Act 2009. According to statutory instrument 2011 number 44 namely the Mortgage Act, 2009 (Commencement) Instrument, 2011 the Minister of Lands, Housing and Urban Development exercising powers under section 1 of the Mortgage Act 2009 appointed the 2nd day of September 2011 as the date on which the Act come into force. Consequently any duties and obligations at the time of execution of the mortgage in question were made under the Mortgage Act cap 229. Under that Act, a mortgage means any mortgage, charge, debenture, loan agreement or other encumbrance, whether legal or equitable which constitutes a charge on an estate or interest in Uganda or partly in Uganda and partially elsewhere and which is registered under the Act. Section 115 of the Registration of Titles Act (RTA), cap 230, permits a proprietor of any land under the operation of the RTA to mortgage his or her land by signing a mortgage in the form of the 11th schedule to the Act.

Originally section 39 (1) of the Land Act Cap 227 restricted transfer of land by family members without consent. Section 39 (2) exempted the provisions of subsection 1 from applying to a mortgagee in exercise of powers sale under the mortgage. Subsection 1 of section 39 required prior written consent of a spouse before mortgaging family land. Section 39 was subsequently amended by the Land (Amendment) Act, 2004 which introduced section 38A for the first time and further substituted section 39. The amended section 39 provides that no member of the family shall sell, exchange, transfer, pledge, mortgage or lease any family land or enter into any contract for the sale, exchange, transfer, pledging, mortgage or lease of any family land. A critical reading of the provision imposes a duty on family members not to carry out the prohibited transactions without consent. The consent required has to be in the manner prescribed by regulations made under the Land Act. What is even more interesting is that the provision excludes transfer of property by a mortgagee in exercise of powers under the mortgage. The provision forbids family members from transferring or mortgaging land which is described therein.

Section 39 is read in conjunction with section 38A of the Land Act as amended. Section 38A of the Act as amended gives every spouse security of occupancy on family land which means a right of access to and a right of residence therein. It provides that every spouse shall in every case have the right to use the family land and to give or withhold his or her consent to any transaction referred to under section 39 which may affect his or her rights. Family land is defined to mean land on which is situated the ordinary residence of a family and inclusive of where the family derives sustenance. Alternatively where the family freely and voluntarily agrees that it should be treated as qualifying as an ordinary residence or where they derive sustenance. Consent to a spouse is provided for under regulation 64 of the Land Regulations 2004, S.I 2004 No. 100 which provides as follows:

“64. Consent to transactions

(1) The recorder or registrar shall not register any transaction where the consent required under section 34 or 39 of the Act is not produced, except where there is an order of the tribunal or a court to dispense with that consent.

(2) The application of a tenant by occupancy for consent of the registered owner to a transaction shall be in Form 40 specified in the First Schedule to these Regulations.

(3) The consent of a spouse(s) required for any land transaction under the Act shall be in Form 41 specified in the First Schedule to these Regulations.”

Form 41 requires certain matters to be specified in the form. These are the location of land the subject of consent; the approximate area; whether the land is registered; what the land is used for or form of occupation of land (e.g. farming, housing); the nature of the transaction and whether consent is granted by the spouse and if refused the reasons therefore.  The form is also signed and dated by the spouse.

The duty is upon the registrar not to register any instrument without consent of a spouse. The question remains how the registrar will ascertain whether the registered proprietor/mortgagor is a married person. This situation is made more complex by the provisions of the Registration of Titles Act which makes the registration effectual upon the memorial being entered to that effect by the registrar/Commissioner for land registration. This is evident from section 54 of the RTA which provides as follows:

‘54. Instruments not effectual until registered.

No instrument until registered in the manner herein provided shall be effectual to pass any estate or interest in any land under the operation of this Act or to render the land liable to any mortgage; but upon such registration the estate or interest comprised in the instrument shall pass or, as the case may be, the land shall become liable in the manner and subject to the covenants and conditions set forth and specified in the instrument or by this Act declared to be implied in instruments of a like nature; and, if two or more instruments signed by the same proprietor and purporting to affect the same estate or interest are at the same time presented to the registrar for registration, he or she shall register and endorse that instrument which is presented by the person producing the duplicate certificate of title.” (Emphasis added)

Entries in the register operate as notice to the whole world and on the basis of which bona fide purchasers for value or subsequent mortgagees may be protected. I have carefully considered the submission of the applicant that they agreed with the second respondent that the property was for paying school fees for their children. What is relevant is how a mortgagee or commissioner for Land registration would be able to ascertain what that agreement is in the absence of a written document on notice given by the spouse or spouses of the mortgagor. In my opinion written agreement to that effect is crucial. Such agreement does not create a trust relationship and therefore can and should be registered with the registrar of titles where the land has registered title as in this case. This is the only way there can be notice to the world about an agreement to treat the property as matrimonial property. What is even more definitive is that land from which a family derives sustenance is defined to mean (a) land which the family farms; or (b) land which the family treats as the principal place of residence and which provides the livelihood of the family; or (c) land which the family freely and voluntarily agrees, shall be treated as the family's principal place or source of income for food. In either case it has to be land where the family resides. Section 38A (4) of the Land Act as amended makes the fact that the land must have a residence of the family apparent. The agreement in respect to family land is defined therein as:

“family land” means land—

(a) on which is situated the ordinary residence of a family;

(b) on which is situated the ordinary residence of the family and from which the family derives sustenance;

(c) which the family freely and voluntarily agrees shall be treated to qualify under paragraph (a) or (b); or

The first conclusion is that the second respondent held out not to be a married person. She executed documents to that effect and particularly a declaration of marital status before an advocate. There is no requirement that she ought to have made a statutory declaration under the Mortgage Act 2009. A statutory declaration under the Mortgage Act 2009 can only be obtained from a spouse of an intending mortgagor. In this case the intending mortgagor claimed not to be married at all. If she were a married person, the statutory declaration would have been obtained from the applicant. Secondly the question of obtaining the consent of a spouse under the Land Act as amended firstly imposes a duty on the family member. Thirdly even if the mortgagee were to be cautious to establish whether the property was matrimonial property, it had to first establish whether the intending mortgagor was a married person.

The second respondent’s case is purely a question of deception wherein the second respondent held out to be unmarried. In those circumstances, the duty imposed on the mortgagee was to establish whether the information was true.

The statute is silent as to how a mortgagee would go about establishing whether somebody is married or not. In a perfect situation, such information should be available with the registrar of marriages. For emphasis section 6 of the Customary Marriage (Registration) Act cap 248 provides that all parties to a customary marriage shall as soon as may be and not later than six months after the date of completion of the customary marriage attend to the office of the registrar of marriage with two witnesses to register details of the marriage. Under section 10 thereof a certificate of customary marriage or a certified copy thereof shall be conclusive evidence of the marriage for all purposes in any written law. Particularly under section 16 of the Act all the registers, monthly returns and indexes in the custody of the Registrar General and the registrars of marriage districts shall be open for inspection by members of the public upon payment of the prescribed fee. Finally under section 20 of the Customary Marriage (Registration) Act, failure to register a marriage within the time specified is an offence. It follows that it would be due diligence on the part of an intending mortgagee to peruse the register of marriages. It would be absurd for a mortgagee upon execution of the mortgage done without the knowledge that a spouse existed, to be confronted with an unregistered marriage celebrated with an unknown person at the time of execution of the mortgage for purposes of avoiding payment of a loan. It is my humble opinion that it would be sufficient to peruse the register of marriages which operates as constructive notice to the world. Last but not least, why should the mortgagee assume that someone is married? It was the representation of the intending mortgagor that she was not married at all and she undertook to indemnify the mortgagee if at all it was discovered that she was married.

 Furthermore counsels submitted on whether the mortgagee took reasonable steps. The provision for taking reasonable steps is found under the Mortgage Act 2009 which was not in force by the time the mortgage was executed between the parties.

The court cannot take lightly the affidavit in reply of the second respondent that she is married to the applicant after she had initially indicated that she was not married to the mortgagee. This is not only collusion but amounts to fraudulent misrepresentation. She does not give any reasons as to why she made a declaration of her marital status witnessed by an advocate of the High Court that she was not married at all. That information was meant to deceive the first respondent. More so it was meant to induce the pledging of the property in question as security without obtaining consent from a spouse (if any).

Last but not least, in the absence of proof of customary marriage as provided for by section 10 of the Customary Marriage (Registration) Act by production of a certificate of customary marriage or compliance with the requirements of the Act, the applicant has not discharged the evidential burden to prove his customary marriage to the second respondent and to the required standard. If the applicant wanted to rely on any customary marriage to the second respondent, the very least that he should have done was to have had that marriage registered under the provisions of section 6 of the Customary Marriage (Registration) Act. Moreover it is an offence not to register a customary marriage within the statutory period. The court should not encourage unregistered marriages to operate as constructive notice or rely on presumptions of marriage where there are third party rights which will be adversely and unfairly affected. Registration puts the burden on the third party to investigate and that burden is discharged if there is no registration and the third party concludes that the subject of investigation is unmarried. Registration would have been sufficient to operate as constructive notice on the mortgagee that the second respondent was a married person notwithstanding her assertion to the contrary.

I have further carefully considered judicial authorities to the effect that a certificate of marriage acts as evidence and is not the marriage itself because the validity of the marriage is proved in court when there is proof that the marriage was celebrated according to the rights and traditions of an African community in Uganda. I agree with the definition of a customary marriage under section 1 of the Customary Marriage (Registration) Act which provides that it means a marriage celebrated according to the rights of an African community and one of the parties to which is a member of that community. Those cases deal with the rights of the parties in the marriage and do not affect third parties such as the mortgagee in this case. The presumptions about equal rights in marriage also apply to the parties within that marriage. In the case of third parties, it is pertinent that the marriage is registered as required by the law so as to put them on constructive notice. It is necessary for there to be a doctrine of constructive notice, that the marriage is a registered marriage lest mortgagees are put to a hard task to establish the material facts about property which is sought to be mortgaged.

This is not a case where a court seeks to establish whether there was a customary marriage by calling witnesses. A mortgagee does not take evidence and operates under the doctrine of constructive notice. At most it should be proved that the spouse was living where the land is located and thereby putting the mortgagee on notice that there could be a marriage, albeit unregistered. In this case there is no evidence of occupation by the applicant or any written agreement to treat the property as matrimonial property and notified to the Commissioner for Land Registration.

In those circumstances and without deciding conclusively whether the applicant and the second respondent are married, the marriage if any cannot be relied upon for purposes of consent and particularly for purposes of investigation by the mortgagee as to whether the mortgagor was a married person and whether there was consent of a spouse. In other words the applicant has not proved any locus standi to the requisite standard to bring this action.

In the above premises and the circumstances of this case, the applicant’s application cannot be granted and is dismissed with costs.

 

 

Judgment delivered in open court this 27th day of May 2013

 

Christopher Madrama Izama

Judge

Judgment delivered in the presence of:

Charles Okuni: Court Clerk

Nsamba Andrew for the applicant,

Jordan Asodio for the respondent.

 

Christopher Madrama Izama

Judge

27th May 2013