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 )
JUDGMENT OF KATUREEBE, JSC.
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.
(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.”
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,
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?
In the words of Lord MAUGHAM at page 374:
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.