THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION) HCT-00-CC-CA-0022-2015 '
(Arising out of Makindye Chief Magistrate’s Court Originating Summons No.78 of 2014)
MK CREDITORS LIMITED............................................................................ APPELLANT
MUKUYE GEORGE SSALONGO.............................................................. RESPONDENT
This appeal arises from the decision of the Grade 1 Magistrate sitting at Makindye Chief Magistrate’s Court in Originating Summons No.78 of 2014, which was delivered on 7th July 2015 in which he dismissed the appellant’s case against the respondent, and ordered each party to bear its own costs.
The brief facts from which this appeal arises are thus. The appellant company granted a loan of sh. 1 million to the respondent at a rate of interest of 3.5 % per day repayable within 14 days. The security was a kibanja. These terms were reduced into a written agreement.
The respondent defaulted and interest accumulated such that by the time of filing the suit, the appellant was demanding at least 20 million from the respondent. In court the figure which was mentioned as the outstanding amount was sh. 70 million.
The appellant took out originating summons seeking to foreclose and sale the kibanja security. The learned trial magistrate dismissed the suit hence this appeal.
Three grounds were set out in the memorandum of appeal as follows.
- The learned trial magistrate erred in law and fact when he admitted and considered in his judgment a defective affidavit in reply by the defendant.
- The learned trial magistrate erred in law and fact and contradicted himself when after holding that the Money Lenders Act did not apply to the transaction, held that there was no mortgage created between the parties.
- The learned trial magistrate erred in law and fact and contradicted himself when he, after holding that the defendant had power to create an equitable/informal mortgage, held that there was no mortgage created on the basis of the format of the agreement executed by the parties which was not in the prescribed form for formal mortgages.
At the hearing of the appeal, Mr. Male Mabirizi who is the M.D. of the appellant company represented the appellant. The respondent appeared in person. Parties were directed to file written submissions. The respondent did not do so.
Mr. Mabirizi argued that the appeal should be summarily allowed for failure by the respondent to file submissions in objection to the grounds of appeal. He cited a number of authorities on failure by a party to file submissions within given timelines.
Failure by a party to adhere to given timelines puts that party at a disadvantage. Depending on the subject matter for resolution, court may proceed to determine the same with the available evidence. That was what I decided to do.
The appellant argued the 1st ground and combined the last two grounds. The 1st ground of appeal was a complaint about the respondent’s affidavit in reply to the summons. It was argued that the affidavit was defective and ought to be struck out. If that was to be done, it would leave the originating summoms unopposed. The appellant brought forward two grounds of objection to the affidavit.
The 1st complaint was that the affidavit was sworn by a person who did not understand English. There was in the affidavit, what was termed a verification by one JSL Muyonjo, who attested that he was fluent in both English and Luganda languages, and that he had read over and explained the contents of the affidavit before the deponent affixed his mark. The argument was that the explanation ought to have been done by the person who was administering the oath, and not any other person.
In the case of Kakooza John Baptist v. Electoral Commission & Another, EPA No. 11 of 2007, when dealing with affidavits, the Supreme Court held inter alia that an affidavit which was not sworn before the commissioning Advocate was defective and was rightly struck out. In that case, there was evidence that the alleged deponent did not sign the affidavit before a Commissioner for Oaths.
The deponent in this case was cross examined by Mr. Mabirizi on the said affidavit. It did not emerge from the cross examination that the deponent did not appear before the Commissioning' Advocate. All that the deponent stated was that true, he was illiterate when it came to the English language, and true that he signed the affidavit. That was all.
Muyonjo who was conversant in both English and Luganda languages explained to the deponent the contents of the affidavit, and this obviously had to be done before the deponent affixed his mark. To argue that the explanation had to be done by the Commissioning Advocate would imply that he or she was equally conversant in both languages. Whether what was done by Mr. Muyonjo was interpretation or verification, to me that was in compliance with the Illiterates Protection Act. I found the objection that the affidavit was commissioned in absence of the deponent not made out.
The 2nd objection to the affidavit was that it was inconsistent with the deponents oral evidence in court. In paragraph 4 of the impugned affidavit, the respondent stated that the purpose of the loant from the appellant was to pay URA the fine imposed on his car when it was found to have improper documents. In reexamination by his Counsel at the trial, the respondent told court that the purpose of the loan from the appellant was for repairing his car.
It was submitted that the affidavit which contained inconsistencies ought to be struck out. Evidence by witnesses before court is not always consistent. But it is not thrown out on account of inconsistency per se. The court will decide what weight to put on such evidence. The same is. true even with respect to affidavit evidence.
From the record, the affidavit did not contain inconsistencies. The inconsistencies came to the fore upon a consideration of the totality of the respondent’s evidence. It was up to the court to decide which evidence to accept; whether the evidence given in court through cross examination and reexamination or the affidavit evidence, and or how much weight to give it. .
I found that the affidavit in reply was properly before court, and subject to what I stated above could be considered in proceedings before court. The 1st ground of appeal is dismissed.
The 2nd and 3rd grounds of appeal were argued together. The facts of the case are relatively simple. The respondent and his wife bought a kibanja piece of land. This is un registered land measuring 100 by 50 feet. When hard times struck, the husband went for a loan from the appellant company. The appellant company describe themselves as money lenders.
The appellant advanced to him a loan of sh. 1 million upon the security of the kibanja. To that effect the wife wrote a spousal consent to this arrangement. The terms included interest at 3.5 % per day. The loan was repayable within 14 days. The respondent, according to the appellant, defaulted, hence the suit for orders to foreclose the mortgage, and sell the mortgaged kibanja by private treaty.
The trial court held that the transaction entered into by the parties did not amount to a mortgage. The question for determination from the outset will be what type of transaction the parties entered into. Whatever the answer, then the next matter for determination will be the law applicable to the transaction.
The parties entered into an agreement. It was annexed to the affidavit in support of the originating summons. It is on headed paper of;
‘MK CREDITORS LIMITED’
‘MONEY LENDERS AND BORROWERS’
It starts thus; ‘CREDIT AGREEMENT as required by the Money Lenders Act.
Then it sets out the terms of the agreement between the borrower and the creditor. The principal sum is sh. 1 million. It is repayable within a maximum of 14 days. The rate of interest is 3.5 % per day. The security which the borrower agrees to forfeit in event of default is unregistered land (Kibanja) situated in Nankinga Zone, Bunamwaya, Makindye sabagabo, subcounty, Wakiso district, formerly of W. Kijjambu, and it measures 50x100 feet. The sale agreement between W. Kijjambu and Mukuye Salongo George for the same plot of land was annexed. There was what was referred to as a spousal consent by one Prossy Mukuye the wife of Mukuye Salongo George agreeing to the sale of the plot by the creditor in event of default.
There was default. That is not disputed. The appellant deposed that the respondent sold off or appropriated part of the secured kibanja land, leaving only a portion of approximately 50x50 feet. The appellant instituted action before the Grade I magistrate to recover sh. 20 million, the value of the remaining portion of the secured property, by way of originating summons. The questions for determination in the Originating Summons were;
- Whether the plaintiff as an equitable mortgagee is entitled to foreclose and sell the mortgaged property to recover all the amount due to it in respect of the principal amounts, interest, costs and all the other charges related thereto arising from the defendants loan.
- Whether the plaintiff is entitled to sell the property by private treaty.
- Whether the plaintiff is entitled to vacant possession of the property and if so, whether the plaintiff is entitled to evict the defendant from the property and handover vacant possession thereof to a purchaser for value.
The respondent as the holder of as estate in customary land which was, according to the record unregistered. He offered the same as security to the appellant for a loan. The loan was granted upon terms including period of repayment and interest.
The credit agreement was on the appellant’s headed paper. It was preceeded by the words, ‘as required under the Money Lenders Act’. From this, it was plausible that this was a money lending transaction governed by the Money Lenders Act. But it was pointed out, and I agree that this is not so, because of the exemption granted by S. 21 of that Act.
In Waswa v. Kikunsrwe (1952-6) ULR 1, the court recognized and held that the holder of customary land which was unregistered could create a mortgage over the same, and that the law applicable would be the doctrines of equity. In Y. Mutambulire v. Yosefu Kimera HCCA No. 37 of 1972, Ssekandi Ag. J., held that where a party offered his kibanja and house for a loan, the transaction was a mortgage. The court further held that in Uganda, the law regulating mortgages is twofold. If the mortgaged land was regulated by the Registration of Titles Act, then that Act applied. In case of unregistered interest in land the applicable law was the common law and the doctrines of equity.
I would therefore agree that the transaction was an equitable mortgage. The transaction took place before the Mortgage Act came into force.
Under the (now repealed) Mortgage Act which was the applicable law at the time when the transaction in issue took place, Section 1 (b) defined mortgage to mean, •
‘any mortgage, charge, or debenture, loan agreement or other encumbrance,
Whether legal or equitable which constitutes a charge over an estate or interest in land in Uganda or partly in Uganda and partly elsewhere and which is registered under the Act.’
The Act applied to mortgages made under customary land holdings. But from the above provision, it still was applicable where the holding was registered. In the current suit, there was no registration, and so the Mortgage Act did not apply to this transaction. That only left the. common law and doctrines of equity as the applicable law to this transaction.
The question then would be, is the appellant as an equitable mortgagee entitled to foreclose the mortgagor’s right of redemption, and sale the mortgaged property. The appellant in the affidavit in support of the Originating Summons affirmed that the mortgaged property had been appropriated and only a small portion thereof remained. The credit agreement. stated that the mortgaged property was a plot of land measuring 100x50 feet. At the time of filing the Originating Summons, there was no plot of 100 x 50 feet. Therefore the mortgaged property was no longer extant.