[1999] UGCA 37

### THE REPUBLIC OF UGANDA

IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

HON. MR. JUSTICE G. M. OKELLO, J. A. CORAM: HON. MR. JUSTICE S. G. ENGWAU, J. A. HON. MR. JUSTICE A. TWINOMUJUNI, J. A.

# CIVIL APPEAL NO. 20 OF 1998

#### **BETWEEN**

GENERAL PARTS (U) LTD. :::::::::::::::::::::::::: APPELLANT

**AND**

THE NON PERFORMING ASSETS RECOVERY TRUST :::::::: RESPONDENT

(An appeal from the decision of the High Court (Ntabgoba, PJ) dated $12/5/98$ in<br>H. C. C. S. No.386/1993)

### JUDGMENT OF TWINOMUJUNI, J. A.

I have read the judgment of Engwau, J. A. in draft. I am in full agreement with the reasoning and the conclusions arrived at therein. I agree that the appeal has no merits and should be dismissed with costs here and in the court below to the respondent.

Dated this $1.9$ . day of May 1999.

A. THE MOMUJUNI<br>JUSTICE OF APPEAL

# THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA HOLDEN AT KAMPALA

## CORAM: HON. MR. JUSTICE G. M. OKELLO, J. A.; HON. MR. JUSTICE S. G. ENGWAU, J,A. AND; HON. MR. JUSTICE A. TWINOMUJUNI, J. A.

## CIVIL APPEAL NO. 20 OF I998

### BETWEEN

### GENERAL PARTS (U) LTD::::::::::::::::::::::::::::::::::::::::;:::APPELLANT

#### AND

#### THE NON. PERFORMING ASSETS RECOVERY TRUST::::RESPONDENT

(Appeallrom the decision of the Hon. Pincipal Judge Mr. Justice J. H. Ntabgoba, dated 12/5/98 in Kampala, High Court civil suit No. 386 oJ 1993)

## JUDGMENT OF ENGWAU. J. A.

The Uganda Commercial Bank (U. C. B.) instituted in Kampala High Court ^a suit against the appellant company (General Parts (U) Ltd) in which it was seeking inter alia a declaratory judgment that U. C. B. had properly appointed ^a Receiver/Manager; an order that the Receiver/Manager should execute the power conferred upon them by U. C. B.; costs of the suit, interest thereon and any relief which court may deem fit.

The background to the suit is that the appellant company was a large debtor of the Uganda Commercial Bank in 1990-1991. The Uganda Commercial Bank had extended loan facilities to the appellant which the appellant company

secured by executing a Debenture Deed in favour of U. C. B. thereby creating ^a floating charge over all assets, goodwill and property whatsoever and also with mortgages of several properties. The copy of the Debenture Deed was admitted in evidence as Exhibit D6.

The appellant company found diffrculty in paying the loan and it made ^a proposal contained in Exhibit Dl I to U. C. B. The proposal outlined inter alia ^a mode in which the appellant company would want to pay the loan to U. C. B. As a result, a special meeting of the Board of Directors of U. C. B. with the Managing Director of the appellant company, Haji Haruna Semakula and the company advocate, Paulo Sebalu was convened on2215191. The purpose of the meeting was to consider the proposal submitted by the appellant company which was heavily indebted to U. C. B. In that meeting, no concrete decision was reached but both the advocate and the Managing Director of the appellant company were informed that the Board would consider their submissions and advise them of the Bank's decision at a later stage. The minutes of the meeting are contained in Exhibit D3.

The Board then considered all the proposals put forward by the appellant company at yery great length and in their letter Exhibit P5, dated 14/6191 communicated the decision of the Bank to the appellant. The Managing Director of the appellant company, DWl, objected to the contents of Exhibit P5 on the ground that short term loan and long term loan were not split therein. As ^aresult of that objection, another letter Exhibit P6 dated l9l7l9l was written to the appellant splitting the loan into short-term loan and long term loan. In addition to the Debenture and Mortgage already executed by the appellant company, the appellant was required to deposit additional securities and give personal guarantee to cover the entire facility. The letter concluded by asking

the Managing Director of the appellant company to sign and return the duplicate thereof as an acceptance of the terms and conditions set therein which he did on l9l7 l9l.

Subsequently, the appellant company failed to meet some of its obligations under the restructuring agreement. Although the appellant provided the additional securities required in the rescheduling agreement it did not pay the instalments stipulated in the agreement. However, it was and it is still the appellant's contention that under the rescheduling agreement, the company was entitled to more additional funding as the only way the appellant company could service the loan.

Learned Principal Judge held that no agreement was reached with the Board to give additional funds to the appellant company. Under the debenture it was specifically provided that in the case of the appellant company defaulting in repayment of the overdraft loan, U. C. B. was free to appoint ^a Receiver/Jvlanager of the appellant company's property at anytime after the principal monies secured became payable. The Uganda Commercial Bank in strict conformity with the provisions of the Debenture Deed, appointed M/S Key Agencies and Auctioneers as a Receiver/Manager of the appellant's assets and properties on 2l/7192. On the same day another letter was written by U. C. B. instructing the Receiver/Manager that all securities pledged by the appellant company by way of mortgage or debenture should be put on sale by public auction to recover all the appellant's outstanding loans with the Bank. Both letters were received in evidence as Exhibits Pl and PIA respectively. On 29/7 /92, the Receiver/Manager took possession of the appellant's property, but subsequently, the Managing Director of the appellant company denied access to the property when he chased the ReceiverAylanager away.

The Uganda Commercial Bank then filed the suit. In their Written Statement o1 Defence and Counter-claim thereoi the appellant company denied that money (loan) was due and payable and that the appointment of a Receiver/Manager was an interference with their business. The Learned Principal Judge, however, held for the Bank that the Receiver/Manager was properly appointed and that they should execute the orders of the Board. Hence this appeal.

There are nine grounds of appeal. Dr. Byamugisha, leamed Counsel for appellant preferred to argue grounds 1,2, ard 3 together in the first batch, followed by grounds 4, 5, and 6 and finally grounds 7, 8, and 9 in the last batch. However, before going into the merits of the appeal, it is important to note that the Uganda Commercial Bank in the course of the proceedings was struck-out for being non-existent. By Deed of Assignment dated 5e December 1995, U. C. B. in compliance with the provisions of the Non-Performing Assets Recovery Trust Statute No. I I of 1994, did assign to the respondent (The Non-Performing Assets Recovery Trust, NPART) all assets, rights and obligations attached to the said loans. Therefore, the respondent's right ofaction arises by assignment.

On grounds l, 2, arld 3 of appeal, the major issue is what was agreed upon by the parties which culminated in the restructuring of the loan. Dr, Byamugisha for appellant, on his part, submitted that the proposal for repayment of U. C. B. loan, was an application made by the appellant company to have the loan paid. The proposal split the outstanding loan into two, namely: a short-term loan and a long-term loan. Leamed Counsel submitted that in his view the appellant company would then require an additional working capital to service the loans

and that was the basis for the appellant company being required to provide further securities and personalguarantees.

Dr. Byamugisha further argued that as a result of the said proposal, a meeting was convened on22l5191 between the appellant's representatives and the Board of the Bank. Subsequently, the Bank communicated their decision on the proposal to the appellant's advocates in a letter dated 1516191. DWI objected to the terms on the ground that the loan was not split into a short-term loan and a long-term loan. Consequently, another letter was written by the Bank splitting the loan accordingly. DWI then signed the letter accepting the terms of rescheduling the loan. According to Dr. Byamugisha, that letter did not contain all that was agreed upon at the meeting of 2215191. In support of that argument, he relied on the evidence of John Bagabirwa, PW3, who admitted that it was possible that some matters agreed at the meeting were not recorded. He contended, therefore, that Exhibit P.6 was in itself inadequate to be the agreement. According to him, the terms agreed upon were wider. Therefore, the learned Principal Judge was wrong to limit the interpretation to it.

It should be noted that in the same breath Dr. Byamugisha submitted that before the appellant company signed it, it took it for granted that its proposal was wholly accepted by the Bank. In my view, this latter argument appears to contradict the preceeding argument.

Mr. Peter Nkuruziza, learned Counsel for respondent supported the decision of the learned Principal Judge who found inter alia that the overdraft loan account was converted into a loan by the rescheduling agreement which was concluded on l9l7/91 when the Managing Director of the appellant company, Haji Haruna Semakula, signed it. It advised the appellant thus: "If you are in agreement

with the above conditions, kindly sign and return to us the duplicate of this letter as an acceptance," which the appellant signed and returned the duplicate thereof to the Bank. Counsel for respondent submitted that the learned Principal Judge rightly held that it was an offer by the Bank and Semakula's signature of the same was an acceptance which concluded an agreement binding on both parties.

Mr. Nkuruziza submitted further that evidence of Mr. Max Ogang Oder, PW2, PW3 and Emmanuel Jaggwe PW4, also supports the finding of the learned Principal Judge. Evidence of PW2 is that he communicated the terms of the agreement to the appellant. PW3 testified that the decision to restructure the loan was made by the Board of the Bank following an appeal by the appellant company and the decision of the Board was communicated to the appellant. PW4 said that conditions of restructuring the loan were spelt out in Exhibit P6. The appellant company was required to provide further securities and make personal guarantee. The Managing Director of the appellant company complied with those conditions and signed the agreement. Learned Counsel submitted that the evidence on record is consistent with the decision taken by the Board which decision was limited to the conditions in Exhibit P6. In his view, therefore, no agreement between the appellant company and the Board was reached for further funding. In the circumstances, Mr. Nkuruziza submitted that it was futile for DWI to say that he took the whole of his proposal as having been accepted by the Board of the Bank. In his view, what was contained in Exhibit P6 was the sum total of the agreement. Therefore, grounds l, 2, and 3 ofappeal should fail.

In order to understand precisely what the parties had agreed upon under the rescheduling agreement, it is pertinent to note hereunder the relevant portions of Exhibit P6:

> "Following your request to the Board regarding rescheduling of the above facility and a number of correspondences from us, we wish to confirm that the request has been accepted and the facility is to be rescheduled along the following lines:-

[a] Shs. 1,059,577 ,3651: has been rescheduled such that monthly instalments of a minimum of Shs 38m/: plus interest shall be paid with effect from l't July, l99l . The above amount will remain on the Loan Account of General Parts (u) Ltd.

[b] The balance ofShs.700,000,000/: shall be repaid immediately after settlements of the amount stated in paragraph (a) except that the monthly interest of Shs. 22.5m/: accruing on this amount shall be paid simultaneously with the instalments in paragraph (a) above and the whole amount of Shs. 700m/: will be on the Loan Account of General Industries (U) Ltd. [c] Collateral securities are as detailed in our letter of 14fr June, 1990 (sic)

.lf you are in agreement with the above conditions, kindly sigr and return to us the duplicate of this letter as an acceptance."

It is not in dispute that Mr. Semakula, DWl, made proposals on how the appellant company would like to pay the loan and the Bank reacted by holding a special meeting on 22l5l9l with the appellant's representatives, including Semakula himself and the company lawyer. The decision of the Bank was communicated to the appellant company in their letter dated l516/91 which, in my view, shows that not all Semakula's proposals were accepted by the Bank. The Bank did not split the loan into a short-term loan and a long-term loan as proposed by the appellant. The company's refusal to accept conditions on that letter prompted the Bank to alter its terms of offer. The Bank agreed to reschedule the loan by converting the overdraft facilities into a loan account and splitting it into two accounts, namely: a short-term loan and a long-term loan which the appellant accepted by signing it. It is the only agreement that binds each party. It is (a) and (b) of Exhibit p6 that constituted the Bank,s obligation to the appellant company. Nowhere was it suggested that the Bank would further finance the business of the appellant company. A mere proposal by one party cannot be said to amount to an agreement unless the other party so reacts by accepting the proposal unequivocally. Like the learned principal Judge, I find that there is no condition or term in the agreement that requires the Bank to give further funding to the appellant. However, there is unchallenged evidence of PW2 to the effect that it had been agreed that when the appellant company defaulted on one instalment, it defaulted on the whole loan including

the long-term loan. Accordingly, grounds 1,2, and 3 of appeal are devoid of any merit.

I would like now to tum to the second batch which comprises grounds 4, 5, and 6. These grounds raise several questions as follows:

Firstly, was the Bank justified to appoint a Receiver?

Dr. Byamugisha contended that there was no justification for the Bank to appoint a Receiver because (a) the debt had not yet fallen due and (b) there was no lawful demand for payment of the debt. It was his contention that after the rescheduling agreement was made, the Bank was under a duty to provide further fi.rnding to the appellant company to enable it service the loans before any lawful demand for the debt could be made. In his view, the Bank had not yet fulfilled that obligation. Therefore, the debt has not yet fallen due and because of that it was premature to demand for payment of the debt. Consequently, there was no justification for the Bank to appoint a Receiver before the debt has fallen due and before any lawful demand was made for payment of the debt.

On the other hand, Mr. Nkuruziza submitted that demand was not made once but more than twice after rescheduling the loans. The first demand was made on ll7l9l by letter which was addressed to the Managing Director of the appellant company, stating inter alia: "Needless to say, the first instalment is expected to have been paid on the l't July, 1991." The Bank made the second demand on lll0l91 when the Board considered an application by the appellant for further facilities to import Motor spares but decided that no further financing could be considered especially when repayments under the schedule

agreed upon with the appellant in June l99l were not being made. According to Mr. Nkuruziza, those were unconditional demands to the appellant company urging them to bring their payments under the existing arrangements up-todate. Therefore, the learned Principal Judge was right in holding that once you fail to pay an instalment due then the whole debt becomes due.

In my view, the first default on the part of the appellant was during the period prior to the restructuring of the loans. The appellant had enjoyed fluctuating overdraft facilities to the extent that it became over ambitious and sank 700m1= into the bicycle manufacture venture. Meanwhile, the appellant company was no longer depositing sufficient funds to repay the overdraft account, which was split into a short-term loan and a long-term loan. Despite the rescheduling of the loans, the appellant defaulted a second time when it failed to pay the instalments stipulated in the agreement.

Subsequently, the Bank issued the frst demand notice on l/7/91 The second demand was made on l/l0i9l. The third demand for repayments of the loans was made by a letter dated 2ll4193 under Exhibit D7, almost 2 years after the rescheduling agreement was put in place. The Bank all that time did not order the sale of the appellant's securities or properties, but instead accommodated the appellant's financial problems to the point of rescheduling the overdraft loans. I have already noted that the Bank was not under a duty of providing further funding to the appellant company. In my view, it would be an illusion for any reasonable person to expect the Bank to continue sinking more money into the appellant company when the latter was not making payment of the existing loans. By failing to make payment of the stipulated instalments, the appellant has committed a breach of the rescheduling agreement. In the circumstances, the Bank was justified to appoint a Receiver.

Secondly, was the Receiver properly appointed?

(a) Under the Debenture Deed

It was the contention of Dr. Byamugisha that the powers given to the receivers by the instrument of appointment to sell the mortgaged properties by public auction, exceeded the powers of receivers in the Debenture Deed. Besides, locking up shops and impounding vehicles was not a power given to the Bank under the Debenture Deed. In his view, that was a breach of Clause 8 of the agreement under the debenture. In the circumstances, the ReceiverAvlanager was not properly appointed under the Debenture Deed.

Mr. Nkururziza did not agree. He submitted that the appointment of receivers was in conformity with Clause 8 of the Debenture Deed. According to him, locking up shops and impounding vehicles was impliedly covered under Clause 8 (g) of the debenture. In his view, the receiver has power to take possession of property and if he locks that property, his power was incidental to that property. He submitted that in the instant case, the receiver was not only appointed ^a receiver but also an auctioneer. In his view, the receiver was properly appointed and he did not exceed the powers conferred upon him in the debenture.

Looking at the Debenture Deed, it was specifically provided that in the case of the appellant company defaulting in payment of the loans, the Bank was free to appoint a Receiver of the appellant company's property at anytime after the principal monies secured became payable. The Bank in strict conformity with the clauses of the Debenture Deed, appointed M/S Key Agencies and Auctioneers on2ll7l92 as a Receiver of the appellant's assets and properties.

The instrument of appointment is as follows:-

"Acting on the powers bestowed upon us by Debenture Deeds executed by our customer M/S GENERAL PARTS (U) LTD where upon charges on all floating and fixed assets of the company were registered in favour of the Bank on 24 I 5 ^I89 and 26 l7 I 190 respectively, we hereby > appoint you Receiver and Manager of M/S GENERAL PARTS (U) LTD and instruct you to take the following steps to receive the money owed by the company to the Bank:-

- To take possession of, collect and get in all or any part of the property in the company's shops at Plot No. l4 South Street and Plot No 60 Witliam Street and other properties wherever they may be located. I - 2 To sell or concur in selling any property thereby charged or to be hereafter charged in such manner and generally on such terms and conditions as you shall see fit and to carry any such sale into effect by conveying in the names and on behalf of the company or otherwlse

To do all such other acts and things as may be considered being incidental or conducive to any of the matters and powers aforesaid and which the receiver can or may lawfully do as agent for the company. " 3

In my view, the above powers conferred upon the Receiver, are in strict conformity with Clause 8 (a), (b) and (g) of the Debenture Deed respectively. The Receiver and Manager was properly appointed when the appellant company had refused to comply and or neglected to pay the loans despite repeated demands. Locking up shops and impounding vehicles was impliedly covered under Clause 8 (g) of the debenture. I do not see any merit in the argument advanced by Dr. Byamugisha that powers conferred upon the Receiver by the instrument of appointment exceeded powers given to ^a Receiver in the debenture,

(b) Appointment under the Mortgage

Dr. Byamugisha challenged the validity of the mortgage. He submitted that the mortgage was not valid because under Section I 14 of the Registration of Titles Act, (R. T. A.), the proprietor of the mortgaged properties was required to sign it. In the instant case, the Mortgage Deed was simply signed by some people who called themselves "DIRECTOR" and "SECRETARY" respectively. Haruna Semakula who was the registered proprietor of most of the mortgaged properties did not sign the Mortgag e Deed. He cited General Industries (U) I-ttl. Vs Non-Perfitrmin g Asselt Recovery Trust, Civil An No. 5 of 1998, Supreme Court (unrewtrted) to support his proposition

dL-

Dr. Byamugisha further contended that Section I l5^R. T. A reOuires that a notice in writing should be served on the defaulting party to pay the debt or to rectifr the default before a Receiver could be appointed. According to him, as the Bank had failed to do so, it was in breach of the clear provisions of Sections wb-I 15 and I l6i R. T. A. In his view, the learned Principal Judge was, therefore, wrong to hold that the Bank had properly appointed a Receiver under the Mortgage Deed.

In response, Mr. Nkuruziza submitted that the validity of the mortgage was not an issue at the trial. In his view, the appellant carulot, at this stage, question the validity of the mortgage. In any case, this is not a substantive ground ofappeal. Leamed Counsel further submitted that the authority of General Industries ((U) Ltd Vs Non-Performine Assets Recoverv Trust (supril is irrelevant on the ground that the observation made by Mulenga JSC was obiter. He then distinguished the case of Grindlavs Bank (U) Ltd Vs Edward Boaz, Civil Aooeal No. 23 of 1992, Supreme Court (unreported) from the present case. In that case the auctioneer was not an appointed receiver. His actions were invalidated when he purported to carry out the functions of a receiver. In the present case, M/S Key Agencies and Auctioneers was a receiver or an auctioneer and his actions could not be invalidated.

of 1995, Suweme Court, (unreoorted). Similarly, he submitted that sections ^F I I 5 and I 1(R. T. A. do not apply to this matter. On the issue of a notice required under Section l15 VIq RTA, Mr. Nkuruziza contended that the Receiver in this case was not appointed under the mortgage. He was appointed under the Debenture Deed. Consequently, the Mortgage Decree does not apply. He relied on the authority of Grindlavs Bank (U) Ltd Vs Ueanda Bottlers Limited, Civil Aooeal No. 29

On the validity of the mortgage, it was neither an issue at the trial nor was it ^a substantive ground of this appeal. It was only raised in the submission of Dr. Byamugisha for the defendant/appellant. I agree again with Mr. Nkuruziza that Haruna Semakula, DWl, did not deny signing the mortgage nor did he deny executing the power of attorney. In fact, he executed both documents as the Managing Director of the appellant company. In either case, the properties and securities under the mortgage became the properties of the appellant company. Consequently, the appellant company executed the mortgage to the donee of the power of attorney which was executed by Haruna Semakula. The authority of General Industries (U) Ltd, (suprd, relied upon by Dr. Byamugisha, is irrelevant on the ground that the mortgage document was executed by the registered proprietor. Consequently, it is a valid mortgage.

As regards Dr. BVamuSi\$[ complaint that the Bank did not comply with the provisions of section I 153. T. A. which require that a defaulting party must first be given notice to pay or to recti8/ the aefault bffia receiver is appointed, non-compliance with the provisions of section I l5 R. T. A., in my view, would not be fatal because the section is not mandatory. In any case, evidence on record shows that notice was served on the appellant several times. The first such notice was dated ll7l9l and the second notice was dated l/10/91. In the premises, I would be inclined to conclude that section f f I#.e. \*u, ^t complied with by the Bank. Consequently, the appointment made under the mortgage was also proper. It follows that grounds 4, 5, and 6 have no merits.

Subsequently, in view of my holding in the preceeding grounds, it is not necessary for me to consider the last grounds 7, 8, and 9 of appeal. In the result, the appeal has no merit and it is dismissed with costs here and in the court below to the respondent.

Dated at Kampala this 14^th day of May 1999.

S. G. ENGWAU

$\cdot\cdot$

# **JUSTICE OF APPEAL**

## THE REPUBLIC OF UGANDA IN THE COU RT OF APPEAL OF UGANDA HOLDEN AT KAMPALA

#### HON. MR. JUSTICE G. M. OKELLO, J. A.; HON. MR. JUSTICE S. G. ENGWAU, J. A., AND HON. MR. JUSTICE A. TWINOMUJUNI, J. A. CORAM:

### CIVIL APPEAL NO. 20 0F 199s

#### BETWEEN

### GENERAL PARTS (UGANDA) LTD,: : :: :: : : : : : : : :: : : : : : : : : :APPELLANT

#### AND

### UGANDA COMMERCIAL BANKI : : : : : : : :: : : : : : : : : : : :: : : :RESPONDENTS NON-PERFORMINGASSETS ^I RECOVERYTRUST(NPART) ^|

(Appeal from ^adecision .of the High Court (Ntabogoba, P. J) dated I/^ Mav 1998 in HCCS No. 386 of 1993)

### JUDGNIENT OF OKELLO J. A.

I I

> I have had the opportunity to read in draft the judgrnent prepared by Engwau, J. A and I agree that the appeal must fail. I agree with his reasoning. I have a few comments to make as a matter of emphasis only.

> The facts giving rise to the appeal have been ably set out in the said judgment of Engwau, J. A and I need not repeat them. I shall go straight to the points on which I wish to comment.

The issue in the bloc of grounds 1,2, and 3 is whether Exh. P6, a letter dated 1717l9l from UCB to the Managing Director of General Parts contained all that was agreed upon at the meeting that was held between the Managing Director of the appellant company and its Lawyer on the one hand and the Board of Directors of UCB on the other hand on 22l5l9l over the appellant's proposals Exh. Dl1 for overdraft repayment.

, I

> According to Dr. Byamugisha, learned counsel for the appellant, Exh. P6 was in itself in adequate to be the agreement as in his view what was agreed upon was wider than what was contained in that exhibit. He relied on the evidence of John Bagibirwa (PW3), Executive General Manager in charge of Administration and Board Secretary in which he admitted that "it is possible there are some matters that were not recorded at the meeting." In counsel's view, provision of further funding to the appellant company formed part of the matters agreed on, as it was part of the proposals. He argued that that was the reason why the appellant provided further securities and personal guarantees of its Directors. Learned counsel reasoned that the appellant signed the letter because it took for granted that its proposals were wholly accepted. He relied on the evidence of the Managing Director (DWl) of the appellant company who testified that "when I left the meeting they had informed me that they accepted the proposal." It was the contention of counsel that UCB should not be allowed to deny that provision of further funding to the appellant was agreed on He cited Section 113 of the Evidence AcL He finally submitted that the learned Principal Judge was therefore wrong in holding that letter was the agreement between the parties

Mr. Nkuruziza, learned counsel for the respondent, on his part contended that what was reduced into the letter, Exh. P6, constituted a total agteement between the parties. He relied also on the evidence of PW3 who testified that the decision to restructure was made by the Board of the Bank following an application by the appellant. He conceded however, that certain matters were truly left out to be decided later by the management of the Bank but not necessarily with the appellant company. He argued that the request for restructuring had many branches including request for further funding. The Bank considered them all and took decision on them. Its decision was reduced in the letter, Exh. P5, which was rejected by the appellant and was replaced by Exh. P6. It did not include provision of further funding. The appellant nevertheless accepted it by signing that offer thereby constituting an agreement binding all the parties. Learned counsel submitted that the appellant's interpretation of Exh. P6 to mean that the Bank accepted the appellant's entire proposals can not be true. He reasoned that when the appellant rejected the first letter, it was not because it did not include further funding. It was because the loan was not split. Further funding was not included and the appellant was specifically advised that:-

> "lf you are in agreement with the above conditions, kindly sign and return to us the duplicate of this letter as an acceptance."

Despite the above advice and notwithstanding the omission of a provision for further funding, the appellant signed the offer signifying it's acceptance and returned the duplicate thereof to the Bank as requested. Learned counsel concluded that the evidence which the Principal Judge relied on supported his findings. The Principal Judge found that Exh. P6 was the only agreement that binds each party to it.

It is well established by authorities that a first appellate court has a duty to review the entire evidence on record and to draw it's own conclusions. See. Peters Vs Sunduv Post Limited fi958t EA 424.

The minute (Exh D3) of the meeting that was held between the Managing Director of the appellant company and its lawyer on the one hand and the Board of Directors of UCB on the other hand, on 2215191, over the appellant's proposals, indicated that at the close of the meeting, the Acting Chairman of the Board of Directors informed the officials of the appellant that "the Board would consider their submissions and advise them of the Bank's decision at a later stage. Thereafter the officials of the companv left the meetine."

It is clear from that evidence that the Bank did not take any decision on the appellant's proposals at that meeting in the presence of the appellant. It did so later and communicated it to the appellant by a letter through its lawyers. That letter was later replaced by another one splitting the loan into short and long term. That letter specifically advised the appellant that:-

"lf you are in agreement with the above conditions kindly sign and return to us the duplicate of this letter as an acceptance."

Appellant signed the letter and returned a duplicate thereof to the Bank as requested. It is to be noted that the letter set out the terms and conditions

upon which the Bank accepted the appellant's proposals for rescheduling lt became a counter proposal, which in effect meant, that the Bank did not accept the appellant's proposals in their entirety. It accepted them only in parts and on its own terms and conditions. When the appellant accepted those terms and conditions as it did, an agreement binding on it and the Bank was concluded. That agreement became effective from the date when the appellant signified its acceptance.

Dr. Byamugisha contended that what was ageed upon by the parties was wider than what was contained in Exh. P6. He criticised the trial Judge for holding that it was the only agreement that bound the parties. I am unable to agree with that criticism because at the close of the meeting, the Bank reserved its decisions to be communicated to the appellant at a later stage. This was eventually done. Therefore DWl's claim that when he left the meeting the Bank had told him that it had wholly accepted its proposals cannot be true.

Dr. Byamugisha further submitted that the Bank was estopped from denying that it had agreed to provide further funding to the appellant. The submission is untenable. There is no credible evidence that the Bank had held out itself to the appellant that it had accepted to provide further funding to it. The doctrine of estoppel is therefore not applicable to the facts of this CASC

I would accordingly dismiss grounds 1,2,and3.

As regards the second bloc comprising grounds 4, 5, and 6, two issues were raised namely:-

- tll Whether UCB was justified to appoint the Receiver,Manage\ - I21 Whether the Receiver/Manager was properly aPPointed: - ti] under the Debenture deed, and - [ii] under the Mortgage.

It was the contention of Dr. Byamugisha that UCB was not justified to appoint the receiver/manager by letter of 2l17l92 because there had been no default yet by the appellant after the rescheduling. In his view, there had been no demand for payment since the Bank had still to comply with the conditions of the rescheduling agreement before any demand could be made. He argued that the Bank was still to provide further funding to the appellant. He finally criticised the Principal Judge for finding that the Bank was lustified to appoint the receiver/manager.

On the propriety of the appointment of the receiver/manager by a letter of 2117192, under the debenture deed, Dr. Byamugisha contended that the letter of appointment which instructed M/S Key Agencies and Auctioneer to sell the mortgaged properties by public auction undermined the powers of the receiver contained in the debenture deed. In his view, to appoint a receiver

to lock up shops and to impound vehicles was outside the powers given to the Bank under the debenture deed. Learned counsel submitted that those powers were contrary to the powers of a Receiver as contained in Clause ⁸ of the debenture deed. He concluded that the Receiver was not properly appointed under the debenture deed.

till As for the appointment under the Mortgage, Dr. Byamugisha also criticised it as being improper as no valid mortgage existed. His reason was that there was no compliance with Section I l4 of the Registration of Titles Act. This Section requires that a Mortgage be signed by the registered proprietor of the properties mortgaged. Counsel submitted that in the instant case, the Mortgage deed was signed by someone who called himself "Director" and "Secretary". Yet most of the mortgage properties belong to Haruna Semakula who is their registered proprietor but he did not sign the Mortgage Deed. He relied on General Industries (U) Ltd. Vs. Non-Per rmins Assets Recoverv Trust, Civil Aopeal No. S of 1998 (SC) unreoorted.

The second point of complaint raised by Dr. Byamugisha in this connection was that there was non-compliance with Section 115 of the Registration of Titles Act (RTA). This Section requires that notice be served on the defaulting party to rectifu the default before a Receiver could be appointed. He concluded that the appointment of the Receiver under Mortgage Deed was also improper for non-compliance with Sections I 15 and 116 of the RTA. He finally criticised the trial Judge for finding that the Receiver was properly appointed. In response, Mr. Nkuruziza contended that the Bank was justified to appoint the Receiver because default had already occurred when the appellant failed to effect payment after the first demand since the rescheduling agreement. He pointed out that the first demand after the rescheduling agreement was made by a letter dated 1/7/91 by UCB to the appellant stating that the first instalment had fallen due on 1/7/91. He named the second demand as being by a letter dated 1/10/91. Counsel pointed out also that DW1 himself admitted default in payment. Counsel concluded that the trial Judge was right to find that the Bank was justified to appoint a Receiver.

As regards the propriety of the appointment of the Receiver:

under the debenture Deed, Mr. Nkuruziza contended $[i]$ that the appointment was proper as the power given in that letter was in conformity with the general power in Clause 8 of the debenture deed. In his view, locking up of shops and impounding of vehicle could be covered under Clause 8 (g).

He submitted that M/S Key Agencies was not only appointed a Receiver but also an auctioneer. He relied on the evidence of PW1 who testified to that effect.

Under the Mortgage Deed, Mr. Nkuruziza responded that the $[ii]$ validity of the Mortgage was not in issue at the trial. He dismissed *Civil Appeal No.5 of 1998 – General Industries (U)* Ltd. Vs UCB and Non-Performing Assets Recovery Trust (supra) as un authoritative because the observation of Mulenga JSC there was made obiter.

He further distinguished Grindlays Bank (U) Ltd Vs. Edward Boaz, Civil Appeal No. 23 of 1992 (SC) unreported, from the instant case in that in Grindlays Bank's case, the auctioneer was appointed strictly as an auctioneer but not also as a receiver as was the case in the instant case. He actions as a Receiver was $\frac{4}{3}$ In the instant case, M/S Keys Agencies action invalidated. either as a receiver or as an auctioneer could not be invalidated because he had been appointed to both capacities.

On the question of notice under Section 115 of the RTA, Mr. Nkuruziza submitted that the Receiver in this case was appointed under the Debenture Deed. He contended that where a receiver is appointed under a debenture, the Mortgage Decree does not apply. He relied on Grindlays Bank Vs Uganda Bottlers, Civil Appeal No. 29 of 1995 & Civil Appeal No. 16 of 1996 (SC) (unreported). Finally he submitted that Section 115 and 116 of the RTA do not apply to this case.

The trial Judge dealt with the above issues in his judgment and made the following findings:-

> "In the circumstances the other part of issue Number 5 is answered that it was justified for the Plaintiff to appoint a Receiver/Manager."

(a) "theplaintiffproperlyappointed ^areceiver/I4anager who were IMIS Key Agencies & Auctioneer on 76 luly 1992."

Under clause 7 of the debenture deed, the principar amount secured under that deed can become due for payment on rawful demand being made by the Bank or under Clause 6

Either of these situations can justify the Bank to appoint a Receiver in term ofClause 7 ofthe debenture deed.

In the instant case, a demand was made by exh.p7, a letter dated r/7/9r for the first instalment. The letter reads:-

> "Needless to say, the first instalment is expected to have been paid on the I st July.,,

Failure to comply with that demand turned the ,oan into a debt, which became due and the Bank immediately became justified to appoint ^a receiver. A further demand was made by another retter dated l /l 0/g l before the Bank finally appointed a receiver by a letter of 2117r92. The compraint that there was no demand therefore had no merits. The triar Judge was in my view, right in finding so.

on the propriety of the appointment of the receiver under the debenture deed, Dr. Byamugisha comprained that the powers conferred on the receiver,

were in excess of the powers contained in crause g of the debenture deed. The complaint was specifically related to the power to lock up shops and impound vehicles. counsel thinks that those powers were contrary to the powers contained in Clause 8 of the debenture deed,

I do not agree. property secured. reads:- Those powers are incidental to the power to possess the They fall under Clause 8 (g) ofthe debenture deed which

> "to do all such other acts and things as may be considered to be incidental or conducive to any of the matters and powers aforesaid and which the receiver can or may lawfully do as agent for the company."

The appointment of trre Receiver under the debenture deed was therefore proper

The next complaint is against the appointment of the Receiver under the mortgage deed. It was based on the ground that there was non-compliance with certain provision of the RTA.

^Iagree with Mr. Nkuruziza that the varidity of the mortgage was not an issue at the trial. The matter was raised by Dr. Byamugisha in his written submission. The gist of his argument then and now is that the mortgage document was not signed by Haruna Semakula, DW I , the registered proprietor of all except one of the properties mortgaged as required by

Section 116 of the RTA The mortgage document was signed by ^a "Director" and a "Secretary" He submitted that those signatures could not validate the mortgage in view of Section I l6 of the RTA.

That submission was not specifically responded to at the trial by counsel for the plaintiff though he repried generally to the written submission of Dr. Byamugisha.

The important points which Dr. Byamugisha appeared to have overrooked were:-

- tll that Semakula DWI admitted to have executed the power of Attorney; - I2l that Semakula DWI admitted to have signed the mortgage document.

He stated in evidence that:

"l signed the mortgage on 28l8l9l . We were required to produce a power of Attorney which we produced on l2lg/91 because it was the Bank which prepared the Power of Attorney."

clearly, the above evidence has adverse effect on the submission of Dr. Byamugisha. The effect of the power of attorney is that the donor thereof

has transferred his power to mortgage his registered properties referred to in the Power of Attorney to the donee. The donee would do so on behalf of the donor. Haruna DWI admitted that he executed a power of attorney. He also admitted to have signed the mortgage document on 2glg/91. He must have done so as an official of the Appellant company in whose favour the power of attorney was executed. The appellant company therefore executed the mortgage document as donee of the power of attorney executed by Haruna Semakula.

Dr. Byamugisha had relied on GeneraI Industri,ES Ltd SI' ro for the proposition that a mortgage document must be executed by the registered proprietor of the property mortgaged.

For me, I agree with Mr. Nkuruziza that that case is not authority for that principle. The observations made therein by Mulenga, JSC, about the manner the mortgage document was drawn and signed were obiter. The learned Judge himself left the matter hanging when he said:

> "However, I will not pursue the point any further since those concerned have treated the rnortgage as duly executed by the parties thereto."

In my view, the mortgage document was from the circumstances stated above, validly executed. Consequently, the mortgage is valid.

Another complaint raised by Dr. Byamugisha against the appointment of the Receiver under the Mortgage was that the appointment was made in violation of Section l15 of the RTA. He argued that this Section requires that notice must first be given to the defaurting party to rectify his default and it is only when he did not respond to the notice that a receiver can be appointed. He submitted that in the instant case, the above procedure was not followed.

section I I 5 of the RTA provides that when default continues for a month or for a period expressly fixed, the mortgagee or his transferee ..may serye on the mortgagor or his transferees notice in writing to pay the money owing on such mortgage or to perform and observe the aforesaid covenants as the case may be." That Section is clearly not mandatory. Non-compriance would therefore not be fatal. It would only be an irregularity.

The above notwithstanding, the evidence on record shows that such a notice was given more than once. The first one was by a letter dated ll7/91 . If it were argued that when that letter was issued, the default had iot yet continued for a month, then the second notice by a letter dated urorg, would cure the defect. The sum total is that section H5 of the RTA wa! duly complied with. consequently, the appointment of a receiver made under the mortgage deed was also properly effected. It foilows that the complaint has no merits. I would accordingly dismiss grounds 4, 5, and 6.

In view ofthe holding rn these grounds (4, 5, and 6) above, it would indeed be unnecessary to consider the next bloc comprising grounds 7 , g, and 9 .

In the result, I would dismiss the appeal. As Twinomujuni, JA also agrees, the appeal is dismissed on the terms proposed by Engwau, JA.

Dated at Kampala this 14^th May of May 1999.

G. M. OKELLO, **JUSTICE OF APPEAL**

$\rightarrow$