[2025] UGSC 5

# THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO. 02 OF 2022

## EAST AFRICA FOAM LIMITED: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :APPELLANT VERSUS

## 1. ATTORNEY GENERAL

# 2. THE EASTERN AND SOUTHERN AFRICAN TRADE AND DEVELOPMENT BANK

## 3. FULGENCE MUNGEREZA RESPONDENTS

(Appeal from the decision of the Court of Appeal (Kiryabwire and Mugenyi, JJA and Kasule, Ag. JA) in Civil Appeal No. 0216 of 2013)

#### CORAM: HON. HON. HON. HON. HON. IADY JUSTICE PERCY NIGHT TUHAISE, JSC LADY JUSTTCE ELTZABETH MUSOKE, JSC MR, JUSTICE STEPHEN MUSOTA, JSC MR. JUSTICE CHRISTOPHER MADRAMA IZAMA, JSC LADY JUSTICE CATHERINE BAMUGEMEREIRE, JSC

## D MENT F ELIZABETH

This appeal is against the decision of the Court of Appeal (Kiryabwire and Mugenyi, llA and Kasule, Ag. JA) which dismlssed the appellant's appeal against the decision of the High Court (Obura, J, as she then was) in which the learned trial Judge dismissed the consolidated suits that the appellant lodged against the respondents.

## Background

The appellant filed, in the High Court, two separate suits challenging the sale of its land, then known as Plot 9-11, Eighth Street, situated in Kampala and contained in Leasehold Register Volume 2833 Folio 16 ("the suit land"). The first sult was High Court Civil Suit No. 1567 of 2000 and was filed on 15th November, 2000 against the 1s and 3'd respondents. The second suit was High Court Civil Suit No. 292 of 2002 and was filed against the 1d, 2nd and 3'd respondents and another person not party to this appeal. The two suits were by consent of the parties consolidated and tried together before Obura, J (as she then was).

The factual background, as derived from the record and the respective judgments of the lower Courts, can be described as follows: On certain dates in 1996, the 2nd respondent an international financial institution, gave a loan to an entity known in the relevant agreement as Eritrea Foam Industry Ltd (EFIL), on terms set out therein. The advanced loan was secured by a mortgage over the suit land whose registered proprietor, according to its certificate of title, was "East African Foam Limited." The loan was also secured by a debenture charging the assets of the same company whose main business involved operating a foam making factory situated on the suit land. The terms for the mortgage and the debenture were set out in the respective agreements that were signed by Mr. Silas Majyambere on behalf of East African Foam Ltd.

EFIL was subsequently unable to repay the advanced loan, and the 2nd respondent moved to recover from East African Foam Ltd, the guarantor. In this regard, the 2nd respondent, pursuant to its powers under the debenture, appointed the 3'd respondent as receiver to manage the foam making factory situated on the suit land. In the course of the receivership, the 3'd respondent was apparently not satisfied by the foam making factory's financial prospects, and took a decision to sell the suit land so as to recover money and reduce EFIL's debt.

Mr. Majyambere subsequently learnt of the 3'd respondent's decision to sell the suit land and was opposed to it. He then resorted to litigation to stop the potentlal sale. In this regard, the appellant, around 15th November, 2000, filed High Court Civil Suit No. 1567 of 2000 against the 2nd and 3'd respondents challenging the loan transaction and the appointment of the 3'd respondent as receiver. It sought a declaration that the mortgage deed and debenture executed to secure the loan advanced to EFIL were null and void for, among other reasons, first, that the relevant moftgage deed and debenture were executed to guarantee a debt to non-existent company; and secondly, that it did not authorize the making of the mortgage deed and debenture. The 2nd and 3'd respondents filed a joint defence denying the appellant's claims.

It seems that notwithstanding the filing of High Court Civil Suit No. 1567, the 3'd respondent, nonetheless, went ahead and sold the suit land to another person not pafi to this appeal. As a result, the appellant, on 4th December, 2002 filed High Court Civil Suit No. 292 of 2002 against the 1\* respondent, 2nd respondent, the 3'd respondent and the third party. The appellant's claim against the 2nd and 3'd respondent and the third pafi was for a declaration that the sale of the suit land was illegal and null and void. In relation to the 1\$ respondent, the appellant claimed that the sale of the suit land was facilitated by the wrongful act of the Chlef Registrar of Titles (CRT) of unlawfully removing a caveat it had filed on the certificate of title for the suit land forbidding any dealings therein. Thus, the appellant made an alternative prayer for an order directing the 1\$ respondent to pay compensation for its loss of the suit land. The 1\*, 2nd and 3'd respondents and the third pafi all filed their respective defences in which they opposed the appellant's suit.

There then followed a slgnificant time period in which neither of the appellant's suits came up for hearing. Subsequently, on 28th June, 2011, the parties filed a consent order agreeing to the consolidation of High Court Clvil Suits No. 1567 of 2000 and No. 292 of2002. The hearing ofthe consolidated suits commenced on 14th February, 2012 before Obura, J (as she then was). During the course of the hearing, the appellant withdrew its suit against the third party, and the hearing proceeded only against the present respondents. The following seven issues were, at the commencement of the trial, framed for resolution:

- '1) Whether the plaintiff has a cause of action against the defendants. - Whether the said facility and loan agreements were valid and enforceable. 2) - Whether the said mortgage and debenture were valid and enforceable. 3)

- 4) Whether the appointment of the 3'd defendant as receiver by the 2nd defendant is valid. - s) Whether the plaintiff's caveat was lawfully removed. - Whether the sale of the plaintiff's propefi was valid andlor lawful. 6) - 7) Whether the plaintiff is entitled to the remedies prayed for,"

Issues 1 and 4 are no longer in contention in this appeal. In relation to issues 2 and 3, the learned trial Judge noted that the appellant's grounds for challenging the validity of the relevant loan, mortgage and debenture agreements were as follows: first, that the agreements were executed in favour of EFIL, which was a non-existent company; secondly, that the guarantor named in the relevant mortgage and debenture was a company with a distinct name from the appellant, and therefore, it was wrong to sell the appellant's assets in the circumstances; thirdly, that the agreements purported to have been executed by Mr. Majyambere, an illiterate, but did contain a statement of his illiteracy, which was contrary to the Illiterates Protection Act, Cap. 78. In relation to issue 5, the learned trial Judge noted the appellant's ground for seeking compensation from the 1\$ respondent was based on the alleged negligence of the CRT in unlawfully removing the appellant's caveat which paved the way for the sale of the suit land.

In her judgment, the learned trial Judge answered all issues in favour of the 1s, 2nd and 3'd respondents. With respect to the point on EFIL being a nonexistent entity, the learned trial Judge accepted that EFIL was not in existence at the time of the making of the relevant loan agreement. However, she found that Mr. Majyambere had, by signing the relevant agreements, represented that EFIL was an incorporated company, and that it was on the basis of those representations that the 2nd respondent agreed to advance the loan to EFIL. The learned trial Judge found that the principle ofestoppel as enacted under Section 114 ofthe Evidence Act, Cap. 6 applied, and thus Mr. Majyambere and the appellant in whom he was a director could not deny EFIL's existence so as to escape liability for the unpaid funds that were disbursed under the agreement. In relation to the contention that the company mentioned in the relevant mortgage and debenture had a different name from, and was thus not the appellant, the learned trial Judge, while noting that the company named in the relevant agreements was East African Form Limited and the appellant's name was "East Africa Foam Limited", nonetheless held that the appellant was the intended guarantor in the relevant agreements, because it had, through its resolution agreed to become the guarantor for the loan advanced to EFIL, and had through Mr. Majyambere its director signed the relevant mortgage and debenture. As for the appellant's contention alleging unlawful execution of the relevant mortgage and debenture based on the failure to note Mr. Majyambere's illiterary, the learned trial Judge found that Mr. Majyambere was not illiterate as there was evidence showing that he had previously written some documents in English. She rejected this contention.

In relation to the appellant's claim that the 1\* respondent's agent, the CRT, had acted negligently In removing the appellant's caveat against the suit land title, the learned trial Judge noted that this claim was based on an allegation that the notice to remove the caveat that was issued by the CRT quoted a wrong description of the suit land as Plot 418 Nakawa Industrial Area Leasehold Reglster Volume 2536 Folio 6 instead of the correct description which was Plot 9-11 Industrial Area Kampala Leasehold Register Volume 2833 Folio 16. The learned trial Judge found that there was a misdescription as alleged by the appellant, but found that the notice had been duly served on his lawyers but was ignored. The learned trial Judge found that the misdescriptlon of the suit property was a matter of form and not substance that was insufficient to cause the Invalidation of the notice, especially since the notice contained the correct instrument number, and as such had given the appellant adequate notice of the intention to remove its caveat. The learned trial Judge therefore answered all issues in the negative and dismissed the appellant's suits for lacking in merit with costs.

The appellant was dissatisfied and lodged an appeal in the Court of Appeal but the same was dlsmissed with costs.

Eeing also dissatisfied with the decision of the Court of Appeal, the appellant lodged the present appeal on the following grounds:

- '1) The learned Justices of Appeal erred in law in failing to adequately evaluate and scrutinize the evidence as a whole with the view to coming to their own conclusion as the 1st appellate coult and thereby prejudiced the appellant. - 2) The learned Justices of Appeal erred in law when they held that the trial Judge was correct in holding that the names East African Foam Ltd and East Africa Foam were used interchangeably and both referred to the appellant. - 3) The learned f ustices of Appeal erred in law when they held that the Managing Director of the appellant was literate in the English language when he executed the debenture, mortgage deed and other loan agreements and there was no need for a certificate of translation. - 4) The learned Justices of Appeal erred in law and in upholding the mortgage and debenture as enforceable when they were executed to guarantee a pre-incorporation contract with a non-incorporated "Eritrea Foam Ltd." - s) The learned Justices of Appeal erred in law when they held that the debenture, mortgage and other loan agreements were validly executed and that they were binding and enforceable on the appellant. - 6) The learned Justices of Appeal erred in law in upholding the enforcement of the mortgage and debenture when the lease upon which they had been created had expired. - 7) The learned Justices of Appeal erred in law in upholding the doctrine of estoppel which was not pleaded and/or was inapplicable. - 8) The learned Justices of Appeal erred in law by holding that the appellant's caveat on the suit land was lawfully removed from the Register."

The appellant, in his memorandum of appeal, prayed for the followlng orders:

- '1) The appea! be allowed. - The judgment and decree of the Court of Appeal be set aside, 2)

- 3) The appellant be reinstated as the proprietor of the suit land or alternatively be compensated for the loss of the suit land. - 4) The respondents pay damages as pleaded. - 5) The respondents pay the appellant's costs in this Court and in the Cou rts below,"

The ln, 2nd and 3'd respondents opposed the appeal.

## Representation

At the hearing of the appeal, Mr. John K. Kaggwa and Mr. Edward Kayemba appeared for the appellant. Mr. Ojambo Bichachi, a State Attorney represented the 1n respondent. Mr. Patrick Mugarura appeared for the 2nd and 3'd respondents.

The Court, on application of the respective counsel/ adopted the written submissions filed for the respective parties.

## Appellant's submissions

Counsel for the appellant stated, in their written submissions, that they were abandoning grounds 1, 6 and 7 and that they would argue the remaining grounds 2,3, 4,5 and 8 independently, and in ascending order.

## Ground 2

Counsel submitted that the Court of Appeal erred in upholding the learned trial Judge's finding that the names "East African Foam Ltd" and East Africa Foam Ltd were used interchangeably in relation to the relevant mortgage and debenture, and that both names were used in reference to the appellant. They pointed out that the relevant mortgage and debenture affected a company called East African Foam Ltd yet the appellant's name is East Africa Foam Ltd. Counsel therefore contended that since the name of the entlty indicated in the motgage and debenture documents differed from the name of the appellant, the Couft of Appeal ought to have found that the appellant was not the guarantor named in the relevant documents. Counsel prayed that this Couft answers ground 2 in the affirmative.

#### Ground 3

In support of ground 3, counsel submitted that there was no evidence proving that Mr. Silas Majyambere, the appellant's managing director was llterate. They contended that the Court of Appeal and the High Court erroneously based thelr finding that Mr. Majyambere was llterate on ceftain documents purportedly written in English by Mr. Majyambere, including a hand written letter dated 24th June, 1996 that he purportedly signed in the capacity of Chairman of EFIL, and an affidavit he made in support of an application to lodge a caveat against the title for the suit land. Further, counsel submitted that in relying on the stated documents the Courts below wrongly disregarded Mr. Majyambere's evidence in which he explalned that he had given a blank headed paper on which someone else had written the contents of the relevant letter; and with regard to the affidavit in the caveat application, that the same was prepared by his lawyer and he only signed it.

Counsel maintained that Mr. Majyambere's explanations were credible and ought to have led to the Court of Appeal finding that he was illiterate and fufther that since the mortgage deed, the debenture, and the other loan agreements did not contain information indicating that Mr. Majyambere was an illiterate, all the relevant documents were made in contravention of Section 3 of the Illiterates Protection Act, Cap. 78 and were therefore null and void. For the interpretation of the import of Section 3 of the IPA, counsel referred to this Court's decision in Kasaala Growers Co-operative Society vs. Kakooza Jonathan and Another, Civil Application No. 19 of 2O10 (unrepofted). He also cited Bostel Brothers Ltd vs. Hurlock [1984] 2 ALLER 3t2 for the principle that a contract executed in violation of a statutory provision is void.

In light of their submissions, counsel urged this Court to find that the relevant mortgage deed, debenture and loan agreements were filed in contravention of the law and were illegal and unenforceable. He submitted that ground 3 also ought to be allowed.

### Ground 4

In relation to ground 4, counsel submitted that according to the evidence, EFIL was non-existent at the time it allegedly received the loan from the 2nd respondent, and for that reason it was manifestly wrong for the appellant to be held liable for a debt arislng from a loan extended to a non-existent company. Counsel submitted that ground 4 ought to also be allowed.

## Ground 5

In support of ground 5, counsel submitted that the mortgage deed and debenture were a nullity because they were not affixed with the company seal. He cited General Pafts (U) Ltd vs. NPART, Supreme Coutt Civil Appeal No. 5 of 1999 (unreported) where it was held that a company may duly execute a document by affixing its common seal thereto. Counsel also submitted that the mortgage deed and debenture were invalid as against the appellant because they were executed by a separate entity known as East African Foam Limited. For the above reasons, counsel submitted that the relevant mortgage deed, debenture and other loan agreements were invalld and the Court of Appeal erred in finding otherwise.

## Ground 8

Counsel submitted that the Court of Appeal erred in finding that the caveat that the appellant lodged on the title for the suit land was lawfully removed. They contended that the notice to remove the relevant caveat that was issued by the Chief Registrar of Titles, although addressed to the appellant, contained a misdescription of the suit land referring to it as Plot No. 418 Nakawa Industrlal Area, Leasehold Register Volume 2536 Folio 6 yet the suit land's proper description was Leasehold Register Volume 2833 Folio 16, Plot 9-11, Bth Street, Kampala. In counsel's view, owing to the highlighted misdescription, the appellant was entitled to disregard the notice altogether without seeking any clarification on whether it referred to the caveat on the suit land. Counsel submitted that, therefore, the Court of Appeal, like the High Court, erred in holding that the appellant and his lawyers were under obllgation to seek clarificatlon with respect to the impugned notice.

Counsel urged this Court to find that the appellant's caveat was removed owing to the negligence of the Chief Registrar in lssuing a defective notice for its removal containing a misdescription of the suit land, and to resolve ground B in the affirmative.

## 1't respondent's submissions

In counsel for the 1\* respondent's submissions, the respective grounds were handled in the following order: ground 2, followed by ground 3, then grounds 4 and 5 jointly, and lastly ground 8.

## Ground 2

Counsel submitted that the Court of Appeal was correct In upholding the learned trial Judge's finding that the appellant was the company referred to in the relevant debenture and mortgage although there was a misdescription therein referring to lt as East African Foam Limited. He contended that the findings of the two lower Courts were supported by the evidence on record, especially by evidence that showed that on the ceftificate of title for the suit land, the appellant was referred to as East African Foam Limited. Counsel further contended that despite the misdescription of the appellant, the 2nd respondent had advanced the loan to EFIL on the security of a guarantee provided by the appellant, and all parties knew that the appellant was affected by the transaction.

## Ground 3

In relation to ground 3, counsel submitted that although the appellant's Managing Director, Mr. Majyambere, alleged illiteracy in order to establish that he had signed the relevant transaction documents without understanding their import and repercussions, there was no evidence to support his illiteracy allegations. Instead, as the High Court found, Mr. Majyambere had prior to and after signing those documents, written various documents in English which proved that he was literate. It was also contended by counsel that, moreover, as the two lower Courts found, if he was illiterate, Mr. Majyambere would have notified the 2nd respondent of his illiteracy or sought the assistance of counsel to conclude the transactions, and therefore, having not done so, and in the absence of evidence showing

that he was coerced into signing the relevant documents, he could not turn around and claim illiteracy during the trial.

#### Grounds 4 and 5

With respect to grounds 4 and 5, counsel submitted that the 2nd respondent provided a loan to EFIL whose chairman was Mr. Majyambere, who was also a director in the appellant company. Furthermore, counsel submitted that the appellant had decided to act as a guarantor for the loan advanced to EFIL, and made the necessary resolutions and documentation permitting its agents to make security documents for that loan including a mortgae and a debenture. In those circumstances, the Court of Appeal had no basis for finding that the relevant security documents were invalid.

#### Ground 8

Counsel submitted that the Court of Appeal's finding that the appellant's caveat was lawfully removed from the Register is well-grounded in law and supported by the evidence. He pointed out that the appellant's main contention is that the removal of the caveat was unlawful because the notice that the CRT issued for its removal contained a mlsdescription of the suit property, and submitted that although there was such misdescription as alleged, the Court of Appeal had considered other circumstances which justified the removal of the caveat, namely, first, evidence that the notice of removal of the caveat was received by the appellant's lawyers meaning that the appellant was informed about the impending removal of its caveat; secondly, evidence that although there was a misdescription of the suit land, the notice indicated the correct reference number and instrument number; thirdly, evidence of the appellant's laxity in that although it received the notice, it did not take any action to seek clarification or challenge removal of the caveat. Counsel referred to Boyes vs. Gathure [1969] EA 385, for the proposition that a caveat serves a two-fold purpose: on the one hand, it is intended to give the caveator temporary protection, and on the other, it is intended to give notice of the nature of the claim to the person whose estate in the land is affected and to the world at large. He also referred to Section 14O (3) of the Registration of Titles Act, Cap. 230 whlch imposes an

obligation that once a caveator lodges a caveat, he/she must demonstrate cause as to why the caveat should not be removed after the statutory period has elapsed. Counsel contended that the appellant made no efforts to show cause why its caveat should not be removed, and that failure further supported the Court of Appeal's decision that the appellant's caveat was lawfully removed.

Furthermore, counsel contended that the appellant was, at the time it received the notice of removal of its caveat, aware that the suit land, against whose title it had lodged a caveat, was liable to be sold to recover a debt guaranteed by it. According to counsel, the knowledge of these debt recovery proceedings further supported the conclusion that the suit land was lawfully sold.

### 2nd and 3'd respondents' submissions

In his submissions, counsel for the 2nd and 3'd respondents handled grounds 2,3, 4,5 and 8 independently, in ascending order.

#### Ground 2

Counsel suppofted the Couft of Appeal's decision to uphold the learned trial Judge's finding that the names East African Foam Limited and East Africa Foam Limited were, in respect to the relevant transactions, used interchangeably to refer to the appellant, and submitted that there was evidence suppofting the same. He referred to evidence showlng that the appellant's stamp bore the name East African Foam Limited, and the stamp was used in executing all documentation In the relevant transactions. Further, counsel referred to evidence that the name indicated on the certificate of title for the suit land which was owned by the appellant was East African Foam Limited; and further to evidence showing that the appellant prepared and filed resolutions at the Company's resolutions bearing that same name and executed the debenture and moftgage and other facility documentation in the same name, and it was on the basis of those documents that the loan of US Dollars 316,384 was advanced to ^a company that was described in the relevant resolutions as the appellant's sister company. Counsel further submitted that upon failure of the primary

debtor to pay the loan, the appellant, as quarantor, was placed under receivership, whose basis was known to its managing director but he did not raise the issue of varying names, which issue was raised for the first time during the trial. In counsel's view, raising of the names variation issue at the trial was an afterthought.

Furthermore, counsel agreed with the Court of Appeal's finding that the doctrine of estoppel as set out under Section 114 of the Evidence Act, Cap. 6 was applicable in this case and provided a bar against the appellant denying the name East African Foam Limited having used the same name in the relevant transactions with the 2^nd respondent. Counsel also relied on the doctrine of approbation and reprobation as articulated in this Court's decision in Okumu and 7 Others vs. Uganda Electricity Transmission Company Limited and 6 Others, Civil Appeal No. 18 of 2020 **(unreported)** to argue that the appellant could not derive benefits under the relevant transactions using the same name it now seeks to deny.

Counsel further submitted that in any case the reference to East African Foam Limited on the relevant documents was a misnomer and the appellant, who was the intended party, could be and was rightly substituted in the former's place, so as to enable the $2^nd$ respondent recover the outstanding loan. For principles on substitution of a party due to a misnomer, counsel relied on the English and Wales Court of Appeal decision of **Nittan (UK) vs.** Solent Steel Fabrication Ltd [1981] 1 Lloyd's Rep. 633. Counsel submitted that the **NSSF authority (supra)** and the relevant excerpts from the Halsbury's Laws that were cited by the appellant's counsel were inapplicable as they concerned circumstances that did not involve a misnomer of a party.

Furthermore, counsel contended that allowing the appellant to disown the name it used in the relevant documents yet permit it to recover land which was registered in the same name would be illogical, and ought to be rejected. Counsel submitted that ground 2 of the appeal should therefore be disallowed.

#### Ground 3

Counsel submitted that the evidence adduced at the trial, although inadvertently omitted from the appellant's record of appeal, showed that Mr. Majyambere was llterate. This evidence, which was alluded to in the submissions of counsel for the ls respondent, included a handwritten letter and an affidavit in support of an application to lodge a caveat against the title for the suit land. Counsel also referred to a lease agreement at page 20 of the record of appeal where Mr. Majyambere signed without indicating that he was illiterate. Counsel submitted that all the evidence showed that Mr. Majyambere was literate and the lower Courts reached the right conclusion. He submitted that ground 3 also be disallowed.

#### Ground 4

Counsel submitted that the loan advanced to EFIL amounted to a preincorporation contract slnce at the time EFIL had not been incorporated. He also submitted that there is no legal rule that invalidates a pre-incorporation contract. Instead, the pre-incorporation contract is deemed to have been recoverable from Mr. Majyambere to whom the loan was advanced on behalf of EFIL, and the liability of the appellant as guarantor was unaffected. Counsel submitted that ground 4 also ought to be dismissed.

#### Ground 5

In relation to ground 5, counsel began by submitting that the relevant mortgage deed was irrelevant for purposes of evaluating the lawfulness of the sale of the suit land since the land was sold pursuant to receivership commenced under the relevant debenture.

As for the validity of the debenture, counsel noted that the appellant's main ground of challenge to its validity was the fact that it was not endorsed with the appellant's seal, but submitted that this contention was misconceived, since there is no legal requirement that a debenture on behalf of a company is only valid if it contains the company seal. In support of thls submission, counsel referred to Section 33 of the Companies Act, Cap. 11O, In force at the time of the relevant transactions, which enacted that a contract made

on behalf of a company is valid if signed by any person with the authority to sign for the company; and to Section 37 of the same Act which enacted that a document requiring authentication by a company may be signed by a director, secretary or other authorized officer of the company and need not be under its common seal. Therefore, in counsel's view, the relevant debenture was valid since it was signed by the appellant's managing director.

In the alternative, counsel submitted that the even the mortgage deed was valld because lt contained the appellant's stamp which acted as its common seal. Counsel concluded by praying that ground 5 also be disallowed.

## Ground 8

In relation to ground 8, counsel submitted that the appellant's caveat was lawfully removed after notice for its removal was sent by the CRT to the appellant who ignored it and opted not to take any step. Therefore, according to counsel, ground 8 also ought to be disallowed.

# Consideration of the Appeal

I have carefully studied the record of appeal, and considered the submissions of the respective counsel and the law and authorities cited.

I note that this ls a second appeal from the declsion of the Court of Appeal dismissing an appeal against the decision of the High Court at first instance which dismissed the appellant's consolidated suits against the respondents. It is therefore worth stating that this Court's duty, while handling a second appeal, is to consider whether the findings of the Court of Appeal are justified by the law and the evidence, so that lt can safely be concluded that the Court of Appeal properly approached its task, which is to reappraise the evidence and all the materials of the case, and make its own conclusions as to whether the trial Court's findings were correct. For a discussion on the duty of the second appellate Court, See: Kifamunte Henry vs. Uganda,119997 2 EA L27. It is also worth mentioning that that the Supreme Court, as ^a second Appellate Court, is not required to, and will not re-evaluate the evidence as the first Appellate Court is under duty to do, except where it is

# clearly necessary. See: Masembe v Sugar Corporation and another [2002] 2EA 434 (per Mulenga, JSC).

I shall bear the above principles in mind in my discussion of the grounds of appeal.

I note that counsel for the appellant abandoned grounds 1, 6 and 7 and therefore, I need not deal with them. I shall handle the rest of the grounds independently, in ascending order.

# Ground 2

Ground 2 arises from the Court of Appeal's decision to uphold the learned trial Judge's finding that the names "East African Foam Ltd" and "East Africa Foam Ltd" were, in the context of the relevant transactions, used interchangeably and that they both referred to the appellant. The background to this ground is that in 1996, the 2nd respondent advanced a loan to a company indicated in the relevant loan agreement as Eritrea Foam Industry Ltd (EFIL). In the transaction, EFIL was represented by Mr. Majyambere, who is also a director in the appellant. The loan was secured by a guarantee provided by a company in which Mr. Majyambere was the director. A mortgage and debenture were made in connection with the guarantee, and In those documents, the guarantor was indicated as East African Foam Ltd. When EFIL, which was never subsequently incorporated, failed to pay the loan, the 2nd respondent moved to recover the loan by appointing a receiver over the assets of the appellant which operated a foam making factory on the suit land located at Plot 9-11, Industrial Area, Kampala. The appellant subsequently lodged a suit challenglng the receivership, and among others, relied on the ground alleging that it was not the company indicated as guarantor in the relevant transaction documents.

I noted that the relevant transaction documents and all the other exhibits tendered in evidence in the trial Court were not included in the record of appeal, which, in my view, was in disregard of Rule 83 (5) of the Rules of this Court which requires that all documents tendered in evidence must be included in the record of appeal. The omission of the relevant transaction documents from the record of appeal has denied this Court the opportunity

to scrutinize the documents and instead have to rely on the description of the same in the judgments of the lower Coufts. I would therefore exhort advocates to ensure that they include all the documents exhibited at the trial in the record of appeal, so as to facilitate this Court to scrutinize the same and come up with a just decision. Nonetheless, for purposes of this appeal, I will adopt the description of the relevant documents as set out in the judgments of the lower Courts.

According to the judgment of the Court of Appeal, a debenture and mortgage deed were executed to provide a guarantee for the loan advanced by the 2"d respondent to EFIL, in which the guarantor, who provided the security under the said documents, was named as East African Foam Limited. In concluding the relevant transactions, the said guarantor was represented by Mr. Majyambere (PW1) who is also the Managing Director of the appellant. According to the relevant documents, the named guarantor was the registered proprietor of the suit land on which it operated a foam making factory. The suit land was the named security in the mortgage while the relevant debenture charged the assets of the foam making factory business.

I must observe that it often happens that a contract, creating legally binding obligations, names a wrong party, and this usually happens with companies. In appropriate circumstances, the naming of a wrong party may be regarded as a misnomer that a Court can, In the interests of justice, rectify by ordering that the right pafi be substituted for the wrong party. The relevant principles were discussed by Ramsey, J in the England and Wales High Court decision in Libefi Mercian Limited vs. Cuddy Civil Engineering Ltd and Another [2O13] EWHC 2688, which was cited by counsel for the 2nd and 3'd respondents, and which discussed several authorities on the subject. In one of the discussed authorities Nittan (UK) Limited vs. Solent Steel Fabrications Limited [198U 1 LIoyds Law Rep 633, Lord Denning stated:

"In this Court, we are very used to dealing with misnomers. We do not allow people to take advantage of a misnomer, when everyone knows what was intended. I will only refer to one authority, Whittam vs. WJ

Daniel & Co. Ltd [1962] 1 QB 271 atp.277 where Lord Justice Donovan cited the words of Lord Justice Devlin:

"I think that the test must be: how would a reasonable person receiving the document take it? If, in all the circumstances of the case and looking at the document as a whole, he would say to himself: "Ofcourse it must mean me, but they have got my name wrong, then there is a case of a mere misnomer,

After an extensive dlscussion of the authorities, Ramsey, J then stated at paragraph 92 of his judgment that the relevant test requires consideration of two factors:

## ",..firct, whether there is a clear mistake in the contract when the document is read with rega rd to its background or context. Secondly, whether it is clear what correctaon ought to be made in order to cure the mistake."

In the present case, the Court of Appeal and the High Court extensively considered the background and context, and concluded that the company which was intended as a guarantor in the relevant mortgage and debenture was the company in which Mr. Majyambere was director, and which same company owned the suit land on which it operated a foam making company, and which company is the appellant. I find no reason to fault this conclusion. In my view, the company envisaged in the relevant transaction documents was the appellant and naming it differently was clearly a mistake that could be rectified. Therefore, I understand the lower Courts' concurrent finding that the names East African Foam Limited and East Africa Foam Limited were used interchangeably as meaning that in all the circumstances of the case, the appellant was the intended guarantor, and including a different name was a mistake that could be rectified.

I also agree with the Court of Appeal and the High Court that the doctrine of estoppel as set out under Section lt4 of the Evidence Act, Cap. 6 was applicable in the present case, and being a point of law, it was immaterial that the polnt was not argued in counsel's submissions.

I would therefore find that ground 2 of the appeal fails. ### Ground 3

In the appellant's pleadings, it was averred that the appellant's Managing Dlrector Mr. Majyambere was illiterate, and could not therefore have understood the contents of the relevant transaction documents which he signed to make the appellant a guarantor for the loan advanced to EFIL. The learned trial Judge was not persuaded by thls averment and Mr. Majyambere's evidence in support thereof. The learned trial Judge took into account evidence of a handwritten letter dated 24th June, 1996 wrltten and signed by Mr. Majyambere in English, as well an affidavit signed by Mr. Majyambere in support of the appellant's application to lodge a caveat against the title for the suit land. The learned trial Judge consldered that the fact that both those documents were signed by Mr. Majyambere without any indication of his illiteracy defeated the claim that he was illiterate. The Court of Appeal agreed with the learned trial Judge's findings.

Upon consideration of the evidence, I would agree with the concurrent finding of the High Court and the Court of Appeal that Mr. Majyambere was literate in light of the evidence referenced above. In Kifamunte (supra), it was held that:

### "Once it has been established that there was some competent evidence to support a finding of fact, it is not open, on second appeal to go into the sufficiency of that evidence or the reasonableness of the finding."

Therefore, considering that there was some evidence to support the finding of fact that Mr. Majyambere was literate, I would not question the same. I would accordingly reject the explanatlons tendered in counsel for the appellant's submissions alleging that the said documents were signed by another person on behalf of Mr. Majyambere, which contention In any case is not supported by the evidence.

I would find that ground 3 also fails.

### Ground 4

This ground arises from the respective averments in the appellant's pleadings that the relevant transactlon documents which created its liability

as guarantor for the loan advanced to EFIL were invalid because they were made to guarantee a loan advanced to a non-existent company. Both lower Courts rejected this averment and found that although EFIL was non-existent at the time the loan was allegedly advanced to it, the relevant transaction documents were valid. In support of this finding, the lower Courts took into account the fact that during the making of the relevant transaction documents, Mr. Majyambere, while acting on behalf of the appellant, had represented that EFIL was in existence and therefore became liable for the repayment of the debt from the outstanding loan that was advanced pursuant to the relevant transaction documents. In this regard, Kasule, Ag. JA stated, in his lead judgment, as follows:

"The contention of the appellant that the debenture, mortgage and other loan and facility agreements were executed in respect of a non-existent Eratrea Foam Industry Limited Company lacks validity, Mr. Silas Majyambere (PW1) the appellant's Managing Director also purported to act as the chairman and owner of Eritrea Foam Industry Limited. He presented that company as being in existence at the material time.

The appellant is accordingly estopped by Section 114 ofthe Evidence Act from denying the existence ofthe said Eritrea Foam Industry Limited to the Second respondent, when the appellant's duly authorized Managing Director presented to the second respondent a situation whereby Eritrea Foam Industry Limited was in existence and the second respondent acted accordingly on the basis of that presentation (sic),

I find that on the basis ofthe proper evaluation ofthe evidence that was adduced and on the proper application of the laws relevant to this issue, the trial Judge was correct in holding that the debenture and the mortgage and any other relevant agreements and/or documents executed by and/or for the appellant with the second respondent, in the transactions, the subject of this litigation, were valid and enforceable."

I am unable to fault the above finding. I would also agree with counsel for the 2nd and 3'd respondents' submission that the loan advanced to EFIL was a pre-incorporation contract since EFIL had not yet been incorporated at the time. The applicable legal position derived from the common law is that liability under a pre-incorporation contract lies on the person who contracts on behalf of the unincorporated company. This position was summarized by Lord Denning in **Phonogram Ltd v Lane [1981] 3 All ER 182 at 186**, as follows:

"As I understand Kelner v Baxter (1866) LR 2 CP 174, it decided that, if a person contracted on behalf of a company which was non-existent, he himself would be liable on the contract. Just as, if a man signs a contract for and on behalf 'of his horses', he is personally liable."

In the present case, Mr. Majyambere, having contracted on behalf of a nonexistent EFIL became liable to pay the debt arising from the advanced loan as primary debtor, while the appellant's position as quarantor remained unaffected. I would therefore conclude that the lower Courts correctly found that the $2^nd$ respondent could proceed to recover its outstanding debt from the appellant, although the same arose out of a loan advanced to a nonexistent company.

I would therefore find that ground 4 also fails.

### Ground 5

Counsel for the appellant's submissions on ground 5, as I understood them, seemingly advanced a contention that the relevant mortgage in this case was invalid because it did not contain the appellant's company seal, contrary to the legal requirement recognized in this Court's decision in **General Parts** (U) Ltd vs. NPART, Supreme Court Civil Appeal No. 5 of 1999 that a company may only duly execute a mortgage by affixing its common seal on the mortgage document or by a signature of its duly appointed attorney. In the **General Parts (U) Ltd,** this Court, after considering the relevant provisions of Sections 3, 114, 141, 154 and 156 of the Registration of Titles Act, held (per Mulenga, JSC) as follows:

"To my understanding, the effect of these provisions, as far as the instant case is concerned is that for the appellant to duly execute the mortgage document as mortgagor, whether in the capacity of the registered proprietor or of done of power of attorney, it had to either affix its common seal to the document or to act by its attorney or attorneys, appointed for the purpose, signing the document in the manner prescribed in Section 156 above."

In the present case, the relevant mortgage ls not included in the record of appeal, and as such I am unable to make any further determination on this point. However, I have also considered counsel for the 2nd and 3rd respondents'submission, that the sult land was sold by a receiver appointed under the relevant debenture and not the mortgage. In that case, the applicable legal regime is the Companies Act, Cap. 110 which was in force at the time of the execution of the debenture since the execution of ^a debenture is done under the Companies Act and not the Registration of Titles Act which puts in place the mode of execution explained by Mulenga, JSC in the General Parts case (supra).

I noted that under the Companies Act, Cap, 110, the signature of a person authorlzed to sign on behalf of a company constituted valid execution of the relevant document. Section 33 (1) (a) thereof reads:

#### "33. Contracts, etc.

(1) Contracts on behalf of a company may be made as follows-

(a) a contract which if made between private persons would be by law required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied"

In the present case, the Court of Appeal and the High Court made ^a concurrent finding of fact that the relevant debenture was signed by Mr. Majyambere on behalf of the appellant. Since the debenture was not Included in the record of appeal, I would uphold those findings and conclude that the relevant debenture was valldly executed. I would find that ground 5 of the appeal also fails.

### Ground 8

In its pleading in Civil Suit No. 292 of 2002, the appellant made an alternative claim for compensation against the 1s respondent for causing its loss of the suit land which at the time of filing the suit had been sold by the 3'd respondent, as a receiver to a third party not party to this appeal. The appellant averred that it had filed a suit challenging the receivershlp before the suit land was sold and lodged a caveat against the title of the suit land to prevent its sale, which caveat was duly noted on the Lands Register. The appellant further averred that the caveat was subsequently unlawfully removed by the Chief Registrar of Titles (CRT), an agent of the 1s respondent. The particulars of the unlawful removal of the caveat are that the CRT had issued a notice of an application for removal of caveat containing a misdescription of the suit land and that although the notice was received by the appellant's advocates, the same was ignored because it contained a wrong description of the sult land.

Both the Court of Appeal and the High Court found that indeed the notice issued by the CRT contained a wrong description of the suit land, referring to lt as Plot No. 418 Nakawa Industrial Area, Leasehold Register Volume 2536 Folio 6 Instead of the proper description which was Leasehold Register Volume 2833 Folio 16, Plot 9-11, 8th Street, Kampala. However, both Courts found that the notice quoted the correct reference and instrument number relating to the appellant's caveat.

It is well-established that a caveat may be lodged against a certificate of title to prevent any dealing in the land covered by the title. It is also wellestablished that, once lodged, a caveat may be removed upon application of the registered proprietor, although notice must be given to the caveator before doing so. In my view, the notice issued to the caveator is intended to notifu him/her of the application for removal of the caveat so as to give him/her an opportunity to avail the Lands Registrar with any information justifuing the maintaining of the caveat on the register. In the present case, and as found by the two lower Courts, the appellant was in a notice from the CRT dated 23'd February, 2001, duly notified of an application for removal of its caveat but ignored the notice. Although, the notice contained a wrong description of the suit land, the appellant was duly notified and, as the two lower Courts found, ought to have approached the Lands Office to present its objection to the removal of the caveat. In this regard, Kasule, Ag. lA stated in his lead judgment, as follows:

"It is noted that the notice, in spite of the misdescription of the land property (sic) stated the correct reference number of LRV 2833/16 referring to the land property (sic) and the instrument number of the caveat was also correctly stated, Mr, Silas Majyambere (PWl), Managing Director and Chairman of the appellant, acknowledged in paragraph 20 of his witness statement that his lawyers received the said notice from the Registrar of Titles, Ministry of Lands in the last day of its expiry period.

It has to be appreciated therefore that the appellant's lawyerc received the notice to remoye the caveat, This was when the appellant had been placed under receivership and was thus aware of the steps being taken about that suit land property, so as to recover the loan money which the appellant had guaranteed, but which the borrower and the appellant as the guarantor had failed to repay.

The trial Judge concluded, in those circumstances, that on receipt ofthe said Notice to remove the caveat, the appellant, through his lawyers or otherwise, ought to have swiftly acted upon the Notice by seeking clarification or protesting the same for misdescribing the land property, or taken other appropriate acts necessary in the circumstances. There was no evidence that the appellant acted in any positive way in response to this notice, The trial Judge thus concluded that the notice adequately put the appellant on notice about the removal of the caveat, but the appellant did not in any way take any positive action in response to that notice. The appellant has himself (sic) to blame for this. The removal of the caveat was thus valid.

I have re-appraised the evidence and the law on this issue. I have no cause to disagree with the conclusion of the tria! Judge, I too hold that the caveat of the appellant was lawfully removed from the suit land property."

I agree with Kasule, Ag. JA's reasoning above. I would add that it was illadvised of the appellant to ignore the CRT's notice for removal of caveat since one could reasonably expect that ignoring the notice would result in removal of the caveat and thereby paving way for transfer of the suit land as actually did happen. I am unpersuaded by counsel for the appellant's contention that the wrong description of the suit land in the notice gave justification to the appellant to ignore the notice of removal of the caveat. In the circumstances, I would agree with the Court of Appeal and the High

Court that the appellant's caveat was lawfully removed. I would find that ground 8 also fails.

For the above reasons, I would find that all grounds of this appeal fail. Accordingly, I would find no merit in this appeal and would dismiss it with costs to the respondents, here and in the Courts below.

| Dated at Kampala this | | | |-----------------------|--|--| | | | |

**Elizabeth Musoke**

. . . . . . . . . . . . . . . . . . . .

Justice of the Supreme Court

#### THE REPUBLIC OF UGANDA,

# IN THE SUPREME COURT OF UGANDA AT KAMPALA

(CORAM: TUHAISE, MUSOKE, MUSOTA, MADRAMA, BAMUGEMEREIRE, **JJSC)**

### CIVIL APPEAL NO 2 OF 2022

## (ARISING FROM CIVIL APPEAL NO. 216 OF 2013)

# (ARISING FROM HIGH COURT CIVIL SUIT NO. 292 OF 2013)

1. EAST AFRICA FOAM LTD} ....................................

#### **VERSUS**

- 1. THE ATTORNEY GENERAL - 2. THE EAST AND SOUTHERN AFRICAN TRADE AND DEVELOPMENT BANK (PTA BANK)} - 3. FULFENCE MUNGEREZA}....................................

# (Appeal against the decision of the Court of Appeal in Court of Appeal Civil Appeal No. 216 of 2013 (Kiryabwire and Mugenyi JJS and Kasule, Ag. JA, arising from judgment of the High Court of Uganda at in HCCSs Nos. 292 1567 of 2002

### JUDGMENT OF CHRISTOPHER MADRAMA IZAMA, JSC

I have reviewed the draft judgment prepared by my learned sister, Musoke, JSC, which thoroughly details the facts, issues, and arguments presented by counsel. I have no need to restate those facts, issues and submissions 25 here and concur with her conclusions on all grounds of appeal. However, I would like to briefly address the issue of misnomers—specifically, the assertion that the entity that received the loan was distinct from the one that mortgaged the title. Additionally, I would like to highlight the implications of the loan being granted to a non-existent entity. 30

$\mathbf{1}$

- 5 A consistent theme throughout the transactions invotving Eritrea Foam Company, which secured a [oan from the second respondent, is the common directorship of Sitas Majyambere in two key companies invotved in this matter. For the purpose of my observations, I wit[ summarize the material facts. - 10 By a loan facil.ity agreement dated October 21,1996, the second respondent granted a loan to Eritrea Foam lndustries Ltd. 0n the same day, a loan agreement was executed with East African Foam Ltd. Subsequently, on November 12 and 14, 1996, the second respondent executed a debenture agreement and a [ega[ mortgage agreement, respectivety, al.so with East - 15 African Foam Ltd. The loan agreement was secured by the property detaited in LRV 2101 Fotio ,l8, situated at Pl.ot 9-11, 8th Street., Kampata. The registered proprietor of this land was East African Foam Ltd. The appettant, however, ctaims to be East Africa Foam Ltd, asserting that it is a separate entity from East African Foam Ltd. - 20 The property mortgaged was a lease that expired, and a new lease was obtained on August 10, 2000, under LRV 2833 Fotio 16. This new lease was unencumbered by the second respondent, which had todged a caveat on it on November 13, 2000, asserting an equitabte interest. Eritrea Foam lndustries Ltd uttimatety defautted on its [oan payments. Consequentty, the - 25 30 second respondent appointed the third respondent as a receiver to recoup its funds. The second respondent aLso Lodged a caveat on LRV 2833 Fol.io 16, cLaiming an equitabte mortgage on the property. The appetlant disputed the third respondent's receivership, al.l.eging fraud, and commenced High Court Civit Suit No. 1567 of 2000. The appettant contended that the debenture and mortgage were executed on behalf of a non-existent entity named Eritrea Foam lndustries Ltd and did not involve the appetl.ant, which was registered as East Africa Foam Ltd.

The appetl.ant atl.eged wrongful and fraudutent sate of its property for which it suffered losses. The property was sotd by the third respondent to Metropotitan Properties Ltd, but the suit against this buyer company was later withdrawn by the appettant.

⁵ The second respondent maintained that the appettant fraudul.entty used the name East African Foam Ltd, misteading officiats into processing a loan apptication for a non-existent company. The defence asserted that enforcement actions were directed at a third-party entity. The centraI issue was whether East African Foam Ltd, the registered owner of the mortgaged property, was indeed synonymous with East Africa Foam Ltd, suggesting that the misnaming coutd be corrected. 10

The property in question was registered in the name of East African Foam Co. Ltd, which fited HCCS No. 366 of 1998, but its case was dismissed for being brought by an incorrect party.

Testimony from Sitas Majyambere (PWl) indicated that East Africa Foam Ltd was incorporated on June 4, 1992. The tittehotder of the property is East African Foam Ltd, which was mistakenty registered under that name. White PWl had shares in Eritrea Foam lndustries Private Limited, he confirmed that his company had no Link to the [oan, despite he having signed documents associated with it. 15 20

The High Court estabtished several admissions made by Mr. Majyambere, inctuding an admission that letters of credit were opened by the second respondent for Eritrea Foam lndustries Ltd in June 1996. Fot[owtng this, an import facil.ity was executed between the second respondent and Eritrea Foam Ltd on October 24, 1996, with the [oan agreement atso executed on that date. lmportantLy, it was noted that Eritrea Foam lndustries Ltd defautted on payments, suggesting that some prior payments had been made. ln cross-examination, PWI acknowtedged that his signatures appeared on at[ documents retating to these transactions and that they

were not f orgeries. 30

On the question of the company's incorporation at the time of executing the agreements, the High Court observed that the law is that a promoter who signs a contract on behatf of an unincorporated company is personatty tiabte for obl.igations arising from that contract. The Court found that PWI ⁵ signed severa[ loan-retated documents on behatf of Eritrea Foam lndustries Ltd.

East Africa Foam Ltd was identified as the issuer of the debenture and mortgage. The High Court observed that the use of a misspetted name on letters of credit for Eritrea Foam lndustries Ltd was a ctericaI error. The 10 Court determined that East Africa Foam Ltd, E. A. Foam Ltd, and East African Foam Ltd were names used interchangeably over time and refer to the same company. PW1 executed documents on behatf of Eritrea Foam lndustries Private Company Ltd to facititate a letter of credit apptication for importing machinery.

1s The stance of the trial court and the Court of Appeat is consistent with the principte that the use of an incorrect name for a pl.aintiff is not fatal but a mere misnomer which can be amended. This was uphetd in A. N. Phakey v. Wortd Wide Agencies Limited [1948] Vot XV EACA l, where a ctericaI mistake regarding the name of a ptaintiff did not mistead the defendant, who zo adequatety responded to the attegations in the ptaint. According to B[ack's Law Dictionary 7th Edition, a misnomer constitutes a mistake in naming a person, place, or thing, especially in a legal context, and such errors can often be rectified.

The law on misnomers is ctearty spett out in the precedents. ln Rodriguez v. Parker 11966)2 Att ER 349, the ptaintiff described the defendant as R. J. Parker instead of R. S. Parker, who was a different person. Nietd J Laid out three criteria for amending a misnomer as fottows: the mistake must be genuine, not misteading, and it must be just to amend. Simil.arLy, in Mitchett v. Harris Engineering Co Ltd n967)2 Att ER 682, the Ptaintiff sued Harris Engineering Co (Leeds), Ltd instead of Harris Engineering Co Ltd when both were distinct existent companies, an amendment to correct the name of a defendant was rightfutty attowed but appeated and the appeaI was dismissed. Lord Denning at p. 686 hetd that " the court can permit the defect to be cured by amendment: and whether it should do so depends on the practice of the court." 25 30 35

- ⁵ The findings of the lower courts indicate that the interchangeabte use of names retated to East Africa Foam Ltd was uttimatel.y a misnomer, without causing conf usion among the parties invotved. The lower courts appropriatety reached the correct decision on the question of who is tiabte despite the misnomers. - Regarding the pre-incorporation actions of PWl on behatf of the unincorporated Eritrean Foam lndustries Ltd, and considering his role as a director of the guarantor company, the latter can be hetd tiabl.e for the [oan. Moreover, PW1 signed the debenture and guarantee documents as ^a director of East African Foam Ltd. As noted in Yeoman Credit Ltd Vs Latter 10 - and Another (C. A.) ('1961) 2 ALt ER 294 at296 Hotroyd Pearce L. J hetd that a guarantor's duty is to ensure the debtor futfiLs obtigations to the creditor. This was echoed in Moschi vs Lep Air Service Ltd and others, 0973) AC ³³¹ 348 where Lord Drptock set out the duties of a guarantor which is to: guarantee the performance by a debtor of his obligations to a creditor 15 - arising out of a contract (and) gives rise to an obligation on the part of the guarantor to see to it that the debtor performs his obligations to the creditor. 20

ln the absence of the defautting borrower, particutarly given its status as ^a non-entity, East Africa Foam Ltd is accountabte for repaying the [oan. AdditionaLty, the appettant's attempt to evade tiabitity based on the execution of agreements by East African Foam Ltd does not exonerate them, as these documents were executed by PW1, who was intrinsicatLy [inked to the company. 25

Directors of a company are the brains and Limbs of the company. ln HL Botton Co. Vs T. J. Graham and Sons [1956] 3 Att E. R 62L,Lord Denning stated at p. 630 that; a company may in many ways be likened to a human body' They have a brain and a nerve centre whrch controls what they do. They also have hands which hotd the tools and act in accordance with directions from the centre. This recognizes that a company as a [ega[ fiction can onty act through its official.s. The intention of the directors and their actions are the intent and actions of the company. The wrong name used by PW1, who 30 35

5 apptied for a loan and signed a Debenture and Mortgage for East Africa Foam Ltd, reftects the actions of his company as a whote otherwise he may be hetd personatty liabte for the disbursed loan.

ln Corporate lnsurance Company Limited v. Savemax lnsurance Brokers Ltd [2002] I EA 41, the High Court of Kenya articul.ated the circumstances under which the corporate veiI may be tifted, al. Lowing for actions against directors if they misuse the corporate structure for personaI purposes.

ln conctusion, I have considered the facts on which the appeal. is based and one director is notabty impLicated in acquiring the loan and guaranteeing but presents the veit of incorporation in an attempt to escape tiabitity. Unfortunatety, his signature is signed against att the material transactions which give rise to the ctaim of the 2nd respondent.

ln the premises, I concur with the judgm JSC, and agree with a[[ the orders she ha ent of my learned sister Musoke, s proposed.

> Dated at Kampata tneSrfJy of F,la"e), ²⁰²⁵

)n

a

Christopher Madrama lzama

Justice of the Supreme Court

#### THE RTPUBLIC OF UGANDA

# IN THE SUPREME COURT OF UGANDA AT I{AMPALA

# CIVIL APPEAL NO. ()2 OF 2022

(Aising out of the decision of the Court of Appeal (Kiryabuire, Mugengi, JJA and Kasule, Ag. JA) in Ciuil Appeol No. 0216 of 2013)

#### CORAM: TTIHAISE; MUSOKE; BAMUGEMEREIRE, JJSC MUSOTA; MADRAMA;

### EAST AFRICAN FOAM LIMITED APPELLANT

#### VERSUS

- 1. ATTORNEY GENERAL - 2. THE EASTERN AND SOUTHERN AFRICAN TRADE AND DEVELOPMENT BANK - 3. FULGENCE MIINGERENZA : : : : : : :: : : : : : : : : : : : : :: RESPONDENTS

#### JUDGMENT OF STEPHEN MUSOTA. JSC

I have had the benefit of reading in draft the judgment by my sister Elizabeth Musoke, JSC.

I agree with her analysis, conclusions and the orders she has proposed.

Dated this z t-lday of Wax-ch Ao\*r2e\*

wilT/"f1 @

Stephen Musota JUSTICE OF THE SUPREME COURT

### THE REPUBLIC OF UGANDA

# IN THE SUPREME COURT OF UGANDA AT KAMPALA

(CORAM: Tuhaise, Musoke, Musota, Madrama & Bamugemereire, JJSC)

### CIVIL APPEAL NO. 02 OF 2022

EAST AFRICA FOAM LTD APPELLANT

#### VERSUS

# 1. ATTORNEY GENERAL 2. THE EAST AND SOUTHERN AFRICAN TRADE AND DEVELOPMENT BANK 3. FULGENCE MUNGEREZA RESPONDENTS

(Appeal against tlrc decision of the Court of Appeal in Cirtil Appeal No. 216 of 2013 before Kiryalnoire, Mugenyi, llA and Kasule, Ag. lA)

# Iudgment of Percy Night Tuhaise ISC

I have had the benefit of reading in draft the Judgment prepared by \*y learned sister, Hon. Lady Justice Elizabeth Musoke, JSC. I agree with her findings and decision. I also agree with the orders she has proposed.

Since all members of the Coram agree with the lead judgement, this appeal is dismissed with the orders proposed in the lead judgment.

Dated at Kampala this Z dayof... M 2025.

Percy Night Tuhaise

]ustice of the Supreme Court

#### THE REPUBLIC OF UGANDA IN THE SUPREME COURT IOF UGANDA AT KAMPALA CIVIL APPEAL NO. 02 OF 2022

### Tuhaise, Musoke, Musota, Madrama, Bamugemereire JJSC

EAST AFRICA FOAM LIMITED ::::::::::::::::::::::::::::::::::::

#### **VERSUS**

#### 1. ATTORNEY GENERAL

CORAM:

2. EAST AND SOUTHERN AFRICAN DEV'T BANK

3. FULGENCE MUNGEREZA:::::::::::::::::::::::::::::::::::

#### JUDGMENT OF CATHERINE BAMUGEMEREIRE JSC

I have had the benefit of reading in draft, the judgment of my learned sister Eizabeth Musoke, JSC and I agree with it.

I particularly agree with our learned sister's reasoning that the $2^nd$ respondent advanced a loan to a non-existent, EFIL which loan was secured by a mortgage on land and a debenture. It is a fact that the terms for the mortgage and the debenture were set out in respective agreements signed by one Silas Majyambere. I would not fault the lower courts for finding the appellant, East Africa Form Limited, liable for the loans advanced.

I would dismiss all grounds of the appeal with costs here and in the courts below.

**Catherine Bamugemereire** Justice of the Supreme Court

Delivered this 8rd day of March 2025<br>Rogerar SC