THE REPUBLIC OF UGANDA IN THE UGSC AT MENGO (CORAM: ODOKI-CJ, ODER, TSEKOOKO, KAROKORA, AND KANYEIHAMBA, JJ.SC) CIVIL APPEAL NO. 7 OF 2004 NILE BANK LTD :::: :::::::::: ::::::::::::::: APPELLANT VERSUS RICHARD DESMOND KAGGWA ::::::::::::: RESPONDENT (An appeal from the decision of the Court of Appeal in Kampala (Mukasa-Kikonyogo, DCJ, Twinomujuni, and Kitumba, JJ.A) in Civil Appeal No. 71 of 2001) JUDGMENT OF ODER, JSC The High Court dismissed the respondent's suit against the appellant and two others, who are not parties to this appeal. He successfully appealed to the Court Appeal against that dismissal. This appeal is against the Court of Appeal's decision allowing that appeal. The facts of the case as found by the trial Court were as follows: In the suit, Richard Desmond Kaggwa (the respondent), as the Plaintiff sued M/S Bond Air Services Ltd. (1st defendant); Nile Bank Ltd. (the present appellant as the second defendant) and Odoi Onyango as the third defendant. Odoi Onyango was the Chairman and Managing Director of the first defendant. The plaintiff sued all the three defendants jointly and severally for a permanent injunction; return of the certificate of title of his land, comprised in LHR. Block 216; plot 750, situated at Buye, Ntinda, Kampala; and for damages and costs. The plaint alleged that the 3rd defendant defrauded the plaintiff, who was the Operations Manager of the 1st defendant. It was also alleged that the 3rd defendant promised the plaintiff shares in the 1st defendant company. The 3rd defendant then asked the plaintiff to give him (3rd defendant) a power of attorney to mortgage his registered land (herein after referred to as "the suit property.") The plaintiff further alleged in the plaint that no shares were given to him as promised. He could not therefore be issued with share certificates of the 600 shares in the first defendant company, which had been promised to him. About six months after the execution of his (plaintiff's) power of attorney in favour of the 1st defendant, the plaintiff received a letter addressed by the 2nd defendant to the 1st defendant by which the suit property was threatened with sale by auction "due to failure by the first defendant to pay a mortgage loan of Shs: 24,708,724/= for which the plaintiff's said certificate of title had been deposited by the first defendant as a security for the said loan." Paragraph 15 and 16 of the plaint averred that: "On 1st December, 1991, the plaintiff discovered from the first defendant that on a date unknown to the plaintiff, the third defendant acting in the course of his employment as the servant argent of the first defendant "orally" agreed and arranged with the second defendant to divert the plaintiffs said certificate of title to be used as a security for an old mortgage loan obtained by the first defendant from the second defendant in 1989. 16. The plaintiff also discovered from the 1st defendant that the 3rd defendant acting in the course of his employment as the servant or argent of the 1st defendant had orally agreed and effected with the 2nd defendant, the redemption and substitution of the 3rd defendants certificate of title which had been used to secure the old mortgage loan with the plaintiffs certificate as a security for the said old mortgage loan granted by the 2nd defendant to the 1st defendant in 1989." The plaintiff did not say by what means he learnt of the oral agreement. The learned trial judge found that the plaintiff had on 26 January, 1991 executed a mortgage in favour of the second defendant over the suit property to secure a loan in favour of first defendant. He held that the plaintiff had voluntarily executed the mortgage and that his title was rightly being detained for that purpose. He dismissed the suit with costs to the second defendant. The plaintiff appealed to the Court of Appeal, which allowed the appeal. There are five grounds of appeal, set out in the memorandum of appeal as follows: 1. The learned Justices of Appeal erred in law in finding that the burden of proof lay on the Respondent (Appellant herein) to prove that the power of attorney was not duly executed. 2. The learned Justice of Appeal erred in law in finding that the power of attorney was invalid 3. The learned Justices of Appeal erred in fact and in law in finding that there was no evidence that the mortgage (ExD2) was executed by the Appellant (Respondent herein) 4. The learned Justices of Appeal erred in law in finding that the mortgage was invalid for lack of attestation. 5. The learned Justices of the Appeal erred in law in awarding general damages of Shs: 30,000,000/= and 12% thereon. Mr. John Mike Musisi argued the appeal for the appellant, and Mr. Richard Okalany argued the respondent's opposition to the appeal. The appellant's learned counsel abandoned ground one of the appeal. Regarding validity of the mortgage, the learned counsel criticized the learned Justices of Appeal for finding that: a) it was not attested by a witness who is one of those listed in section 155 (1) of the Registration of Titles Act; b) it was not signed by the mortgagor; c) the manner of its execution contravened sections 155 and 156 of the Registration of Titles Act in that it was not attested by any of the persons listed in section 47 and the signatures were not in Latin character: and d) there was no evidence that the respondent ever knew of its existence. The learned counsel contended that there was no need for the respondent to execute the mortgage as he had granted a power of attorney. Counsel also contended that the mortgage was valid because it was the kind of mortgage signed by three parties - in the instant case, the mortgagor or (the registered owner). Bond Air Services Ltd. the beneficiaries, the bank as the mortgagee. The mortgage (Exhit. D2) bound three parties, namely the respondent as the mortgagor, who actually signed it, but whose signature cannot be read: Bond Air Services Ltd (the principal debtor) and the bank (the appellant). Learned counsel conceded that the respondent's signature was not attested. Mr. Musisi further submitted that the mortgage document bound the appellant bank and Bond Air Services Ltd. as both parties affixed their respective company seals to the document under section 132 of the Registration Act. The respondent was a director in Bond Air Services Ltd. In the alternative, the appellant's learned counsel submitted that a deposit of certificate of title created an equitable mortgage under section 129 of the Registration of Titles Act. For this submission learned counsel relied on Barclays Bank Vs. Gulu Millers Ltd. (1959) EA 540 learned counsel submitted that in the instant case, there was a basis for an equitable mortgage because the registered owner of the certificate of title, the respondent, was present when the certificate of title was deposited with the Bank. Learned counsel prayed that if there was no legal mortgage we should find that an equitable mortgage was created over the respondent's suit property. The respondent's learned counsel argued grounds three and four together. On these grounds counsel supported the finding of the learned Justices of Appeal that the mortgage Exhit. D2 was neither executed by the mortgagor nor attested by any witness. The burden was on the appellant to show that both were done. This was not possible because first, the document was not mentioned in the appellant's written statement of defence, secondly, it is not known how it was introduced in evidence at the trial and thirdly it was not canvassed at the trial. The learned Justices of Appeal considered the validity of the mortgage document (Exbt. D2) and came to the conclusion that it was invalid. I agree with that conclusion and the reasons for it. which are clearly stated in the lead judgment of Twinomujuni, J.A with which the other members of the Court agreed. He said: "Next, I consider the validity of a Mortgage deed allegedly executed by the appellant on 26th February, 1991. A mortgage deed, just like a power of attorney is governed by the provision of section 155 of the Registration of Titles Act. It also requires attestation at the time of its execution. In the instant case, the space provided on the mortgage deed where the witness to the signature of the mortgager is supposed to sign is blank. This means that nobody witnessed the signature of the mortgagor. There is no evidence whatsoever on the face of the document to prove that the appellant is the one who actually executed the document marked Exhibit D2. The respondent did not lead any evidence to show that the document was signed by the appellant. The manner of its execution contravenes both section 155 and 156 of the Registration of Titles Act. This is a very serious defect, which renders the document invalid. There is little wonder that this document was not mentioned in the pleadings of any party to the suit. There is no evidence that the appellant ever knew of its existence till long after he had finished giving his evidence. The respondent seems to have deliberately concealed its existence till the last possible moment. The manner in which it was introduced in evidence is mysterious, as it had not been annexed to the pleadings of the respondent. There is also something highly questionable about the document. If the respondent mortgagee and the entity named as the Principal Debtor genuinely believed that the appellant had executed a valid power of attorney in favour of the Principal Debtor, how could he, before revoking suck power of attorney, execute a mortgage deed in respect of the same property?................ ..................................... I would hold that there is merit in the second ground of appeal. Both the power of attorney and the so called mortgage deed are invalid for want of form prescribed by sections 155 and 156 of the Registration of Titles Act." In my opinion, the issue of Bond Air Service Ltd. having executed the mortgage document as the donee of a power of attorney by the respondent does not arise, because the power of attorney was invalid. On the question of whether an equitable mortgage by deposit of title was created by the respondent, the respondent's learned counsel submitted that the issue was neither pleaded, nor raised in the High Court. No evidence was led on the issue. The appellant therefore, should not have argued it in this Court. Learned counsel relied on General Parts (10 Ltd. Vs. Non Performing Assets Recovery Trust, Civil Appeal No.5 of 1999 (SCU) unreported). Learned counsel contended that the provisions of section 129 (3) are to the effect that it is mandatory for a caveat to be entered. In the instant case, if the intention was to create an equitable mortgage, the appellant bank should have entered a caveat. In any case, the respondent did not intend to be an equitable mortgagor. Deposit of title alone is not enough. There must be an intention by the registered owner to deposit title as an equitable mortgagor. Section 129 (1), (2) and (3) of the Registration of Titles Act (Cap. 230) provides: "(1) Notwithstanding anything in this Act, an equitable mortgage of land may be made by deposit by the registered proprietor of his or her certificate of title with intent to crate a security thereon whether accompanied or not by a note or memorandum of deposit subject to the provisions hereinafter contained. (2) Every equitable mortgage as aforesaid shall be deemed to create an interest in land (3) Every equitable mortgagee shall cause a caveat to be entered as provided by section 139." Under section 129 (1), one of the conditions necessary for the creation of an equitable mortgage by deposit of title is that the registered proprietor must have the intent to crate a security thereof. In my view, this is a condition precedent. Another condition which, to my mind is a condition subsequent, is that the equitable mortgagee shall cause a caveat to be entered. In the instant case, there is no evidence that the registered proprietor of the suit property (the respondent) intended to deposit, or did deposit, his certificate of title with intent to create an equitable mortgage. The respondent's evidence at the trial was that he gave his certificate of title to Bond Air Services and his power of attorney to Odoi Onyango to borrow money from the bank. Part of the money to be borrowed was to be given to him to buy shares in the company. When he realized that he was not being assisted he wrote to Odoi Onyango (the Managing Director of Bond Air Services,) to revoke his power of attorney in order to save his property. It is evident from the respondent's evidence, therefore, that he did not deposit his certificate of title with the bank to create an equitable mortgage but as security for a loan to Bond Air Services. With respect, I am unable to accept the submission of the appellant's learned counsel that in the alternative, we should find that an equitable mortgage was created by deposit of the respondent's certificate of title to the suit property. Regarding equitable mortgage by deposit of title, I also find merit in the submission of the respondent's learned counsel that it was neither pleaded nor canvassed at the trial, nor was it raised in the lower court: In my opinion, it would have been necessary to adduce evidence at the trial to show that conditions necessary for an equitable mortgage under S.129 of the R.T.A by deposit of title had arisen in the instant case. For instance, whether the respondent had the requisite intent and whether a caveat was entered by the bank. In my view, in the circumstances, the case of Barclays Bank Vs. Gulu Millers Limited. (Supra), is distinguishable from the instant case and does not assist the appellant's case. Grounds two, three and four of the appeal should therefore fail. Under ground five, the appellant's learned counsel submitted that the learned Justices of Appeal did not state the basis for arriving at Shs: 30,000,000/= as general damages apart from saying that it was for inconvenience and denial of use of title to the respondent. In his prayer in the plaint and at the end of his testimony at the trial the respondent merely prayed for the return of his certificate of title to the suit property. Learned counsel contended that the respondent did not adduce evidence on which the Court could assess damages. He contended that the learned Justices of Appeal must have used the wrong principles to award Shs: 30,000,000/= plus 12% interest per annum. Learned counsel did not suggest what amount of damages would be appropriate. Regarding the amount of general damages the respondent's learned counsel pointed out that in the trial Court the respondent claimed an award of 25% interest per annum on general damages. On 14/10/94, the respondent revoked the power of attorney he had made on 19/2/91. On 12/9/99, he entered a caveat on the title of the suit property. Learned counsel contended that these are clear indications that the respondent wanted to repossess his suit property, but he never got it back, because by the time the appeal to the Court of Appeal was filed the bank had already sold the suit property. If the respondent had got his certificate of title back before the suit property was sold off, the respondent could have used the title to obtain a loan or used it for other purposes. Like the appellant's counsel the respondent's counsel did not suggest what amount of general damages would have been appropriate. Considering all the circumstances of this case, my opinion is that an award of Shs: 7.500,000/= as general damage to the respondent would be more appropriate. In the result, this appeal should partly succeed. Grounds two, three and four should fail but ground five should succeed. I would make the following orders: - 1. The appellant should return the respondent's certificate of title to the suit property to him 2. If the same has already been transferred cancellation of the transfer and restoration of the status quo as in 1991 3. Permanent injunction to restrain the appellant from any future attempt to transfer the respondent's title deed to the suit property 4. General damages in the sum of Shs: 7.500,000 to the respondent for loss of use of his suit property by the respondent 5. Interest on the decretal amount at the rate of 12% per annum from the date of judgment in the High Court till payment in full 6. I would award to the respondent 3/4 of costs in this Court and the Courts below. JUDGMENT OF ODOKI, C.J. I have had the benefit of reading in draft the judgment of my learned brother, Oder, JSC, I agree with him that this appeal should partially succeed. I concur in the orders he has proposed. As the other members of the Court also agree, this appeal partially succeeds with the orders as proposed by Oder, JSC. JUDGMENT OF TSEKOOKO, JSC I have had the benefit of reading in advance the judgment prepared by my learned brother, Oder, JSC. which he has just delivered. I agree with it and with the orders he has proposed. JUDGMENT OF KAROKORA, JSC: I have had the benefit of reading in draft the judgment prepared by my learned brother, Hon. Justice Oder, JSC and do agree with the conclusions and orders he has made. I have nothing useful to add. JUDGMENT OF KANYEIHAMBA, JSC. I have had the benefit of reading in draft the judgment of my brother Oder, JSC. I agree with him that this appeal should partially succeed and the orders he has proposed. Dated at Mengo, this 18th day of August 2005.
