[2023] UGHCLD 221

# THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA

# **LAND DIVISION**

#### CIVIL SUIT NO 389 OF 2016

**KABAGAMBE MATHIAS....................................** $\mathsf{S}$

#### **VERSUS**

# KAHIRE NOBERT ....................................

## **RULING ON A PRELIMNARY OBJECTION:**

The defendant/counterclaimant Mr. Kahire Robert is the registered owner of the land comprised in **block 29, plot 105 at Mulago**.

$15$

At the preliminary stages of the trial he raised an objection, contending that the plaint discloses no cause of action against him. That the only transaction between him and the plaintiff was that of a loan transaction for a sum of $Ugx$ $50,000,000/=$ .

Furthermore that he pledged the title for the suit land as security for the loan, signed transfers as a condition for advancing the money from the plaintiff, on same day issued several cheques to the plaintiff for that objective.

The condition for the loan was for the defendant to sign the transfer forms and hand over the original certificate of title, his photograph and a duly signed transfer form before the loan was advanced to him.


He therefore regarded as false the plaintiff's argument that there was a sale or receipt of the amounting to money semblance of the same $or$ $Uax.100,000,000/=$ .

According to him, no sale agreement was made between them since the transaction between them was purely a money lending transaction which the $\mathsf{S}$ plaintiff fraudulently chose to take advantage of.

The second objection was based on the participation by plaintiff's counsel in the transaction which was a subject of the dispute, barring him from representing his client in relation to this suit, as he was likely to be a witness in this case.

#### Consideration of the issue: 10

$25$

# Objection No. 1: Whether there was any agreement for the purchase of land

It is trite law that in all civil matters, the onus rests on the plaintiff who must adduce evidence to prove his or her case on the balance of probabilities if she is to obtain the relief sought. (Ref: Sections 101-103 of the Evidence Act, Cap.43.

The plaintiff in this case was under obligation to prove that there was an oral contract which subsisted between him and the defendant.

Section 10(1) of the Contracts Acts 2010 defines a contract as an agreement made with a free consent of parties with the capacity to contract, for a lawful $20$ consideration and with a lawful object, with the intention to be legally bound.

It is now settled law that once a contract is valid, it automatically creates reciprocal rights and obligations between the parties thereto and when a document containing contractual terms is signed, then in the absence of fraud, or misrepresentation the party signing it is bound by its terms. (See: William Kasozi versus DFCU Bank Ltd High Court Civil Suit No.1326 of 2000).

Ombit

According to Section 42(1) and Section 67 of the Contract Act 2010, a contract is to be performed either within a reasonable time or at that time provided by the applicable trade usage/ practice to the contract in question.

A contract therefore means an agreement enforceable at law and the implication is that for it to be valid and legally enforceable, there must be capacity by the parties to contract, intention to contract, consensus *ad idem*; valuable consideration, legality of purpose and sufficient certainty of terms.

$\mathsf{S}$

If in a given transaction any of the above is missing, it could as well be called something other than a contract. (Greenboat Entertainment Ltd vs City Council of Kampala, Civil Suit No. 0580 of 2003).

Breach of a contract on the other hand refers to a situation where one party to a contract fails to carry out a term of the said contract. It occurs when a party neglects, refuses or fails to perform any part of its bargain or any term of the contract, written or oral, without a legitimate legal excuse. (See: Ronald

15 Kasibante vs. Shell Uganda Ltd HCCS No. 542 of 2006 [2008] ULR 690.

It follows therefore that when one party to a contract fails to perform his or her obligations or performs them in a way that does not correspond with the agreement, the guilty party is said to be in breach of the contract and the innocent party is entitled to a remedy.

The plaintiff in his claim states that in 2012 he was approached by the defendant 20 who was well known to him. That he offered to sell the suit land to him which he inspected with the view of purchasing it.

The two after negotiations entered into an agreement by which a sum of $Ugx100,000,000/$ = was paid as purchase price for the suit land which was occupied by squatters.

The money was paid in cash to the defendant at his home in Kololo Kampala, upon which the defendant had signed the transfer forms, given passport

$\overline{3}$

Nubag

photographs to him and handed over the title to enable him transfer the suit land into his names.

That the transaction was based on trust and respect and given the fact that the parties were from the same district, he did not bother to ask for a formal sale more so as the transfer forms and assessment of stamp duty were made and the transfer forms handed over to him, together with the duplicate certificate of title.

The process of transfer was however delayed by the computerization project that was going on at the time. The plaintiff was during this time however shocked to learn that the defendant had lodged a caveat forbidding any transaction on the land

$10$

$\mathsf{S}$

That in the caveat, the defendant does not deny ever selling the suit land to him nor did he explain the whereabouts of the title. He was denied access to the defendant home to establish his motive of lodging caveat after selling the suit land to him.

The plaintiff's claim therefore was that the transaction between him and the $15$ defendant was purely a contract of sale and not a loan agreement. He sought several orders against the defendant, including an order compelling the defendant to vacate a caveat lodged on the title; specific performance of the sale agreement; punitive and general damages for breach of contract; a permanent injunction restraining the defendants and agents from accessing the suit land; 20 among others.

The defendant on his part in para 14 of the amended WSD, claimed that he had obtained and paid for a friendly loan, upon which the plaintiff had handed over an envelope containing the defendant's documents.

It was not until later that he realized that both the title for the suit land and $25$ transfer forms were never handed back to him, acts by the defendant which the plaintiff considered to be fraudulent.

Nerforg 4

He claimed that when he discovered that the certificate was missing and all efforts to get the title had failed the defendant applied for the special certificate of title in $2013$ .

He refuted the claim that there was an underlying contract to constitute 5 *consensus ad idem* for the alleged sale which renders the suit in its entirety therefore frivolous.

His objection was therefore that the plaintiff's pleadings and prayers including specific performance did not disclose a cause of action against him as they refer to an agreement for the sale of land whereas none was executed between them and no such proof of sale was availed.

## Analysis by court:

The question whether or not a plaint discloses a cause of action must be determined upon perusal of the plaint with its attachments. (**Kebirungi vs Road** Trainers Ltd & 2 others [2008] HCB) (See also: Castelino v. Rodrigues $1(1972)$ E. A.223 (CA).

Where no cause of action is disclosed, court under order 7 rule 11(a) of the **Civil Procedure Rules** must reject the plaint.

In that case no inquiry is made into the merits of the main case. It would be an action in futility and courts are not meant to award moot judgments. (CRANE

Bank Ltd [in receivership] vs Sudhir Ruparelia and anor CACA No. 320 of $20$ 252 of 2019).

In Mulindwa Birimumaso vs Government Central Purchasing Corporation **C. A. C. A.** No. 3 of 2002 the court relying on the Supreme Court decision: Ismail Serugo vs Kampala City Council & Anor. - Supreme Court Constitutional **Appeal No. 2 of 1998** made a declaration to the effect that a cause of action is disclosed where there was existence of the plaintiff's right; violation of that right, and the defendant's liability for that violation. (Refer also to: Auto Garage vs

Motokov (No. 3) [1971] E. A. 514, at 519).

Julout 5

$10$

$15$

In the instant case, counsel for the plaintiff in his submissions argued that the **Contract Act** was the governing law, not **Registration of the Titles Act**, Cap. $230.$

He faulted counsel therefore for his alleged attempt to hood wink court by citing $\mathsf{S}$ the authority of *Ham Enterprises (U) Ltd & 2 Others vs Katende Steven and* others MA No. 717 of 2021 which to him was not applicable, wherein court discussed the supremacy of the said law. The said authority was not however availed to court.

In alignment with the above authorities, it is the plaintiff's contention in this case that the cause of action of action is based on the fact that he paid for the 10 suit land a cash sum of *Ugx 100,000,000/* $=$ as consideration and that because of the trust he had with the defendant, the agreement had not been reduced in writing.

Counsel for the defendant in his submissions heavily relied on the provisions of **section 10 (5) of the contract Act** which requires a contract the subject matter 15 of which exceeds *Ugx 500,000/=* (25 currency points) to be reduced in writing.

The plaintiff in his rejoinder to the defence admitted that there was no such contract made in writing as proof that a sum of $Ugx$ 100,000,000/= had been entered into by the parties. He attached to his pleadings a transfer form dated 24^th August 2012. Attached also is a title in the names of the defendant; and a notice of caveat dated 29^th February, 2016.

The defendant however maintained that this was a transaction for a friendly loan, and annexed to his defence was a memorandum of agreement between the two parties, dated 11^th July, 2012 for a loan of *Ugx 50,000,000/=*, which document was not in dispute.

$25$

$20$

That he pledged the title as security for advancing the loan and on the same day signed the transfer form and as further security for the repayment of the sum he signed postdated cheques: No. 002163, 002164 and 002165, all totaling

Muloos 6 *Ugx.50,000,000/=*. The three cheques were all attached, all in the names of the plaintiff and each of these dated 11^th July, 2012.

Court noted however that the transfer form was signed on 24^th August, 2012 more than a month after the agreement of 11^th July 2012 was signed. The letter to the plaintiff dated 16^th August, 2012 by the defendant's lawyer as a complaint

to him, indicates that the defendant had already received the loan even before the transfer form had been signed.

So it is not entirely correct that the signing of the transfer was a condition to obtaining the loan when the defendant had already received the money, moreso when the transfer form was signed after the loan had been granted.

But be that as it may, in a matter such as this, the nature of the transaction, the content and wording of the contract (where a written contract exists) would be useful indicators in establishing the intention of the parties.

The principle under **section 91 of the Evidence Act, Cap. 6** is that when terms of a contract or other disposition of property have been reduced in a form of a 15 document and in all cases in which any matter is required by law to be reduced in writing, no evidence shall be given in proof of the terms of such contract or disposition of property except the document itself or secondary evidence of its contents in cases in which secondary evidence is admissible. (Ref. URA vs Stephen Mabosi SCCA No. 26 of 1995). (emphasis added). 20

The Supreme court in that case also relied on another case: Fenekansi Semakula vs Ezekiel Mulondo Civil Appeal No. 4 of 1982 U/CA. Court in that case went ahead to disallow extrinsic evidence sought to be adduced on behalf of the defendant/appellant to prove that a statutory notice to quit had been withdrawn.

$25$

A perusal of *clause 2* of the agreement relied on by the defendant shows that he borrowed *Ugx 50,000,000/=* from the plaintiff which he had to pay back within a period of one month from date of execution of that agreement.


$\mathsf{S}$

It was his claim that upon clearing the loan, he had sought the next loan upon which fresh cheques had been issued.

In *clause* 5 that in case of default, the $1^{st}$ party was to pay 10% of the total sum advanced per month until full payment. The caveat lodged by him dated 8^th February, 2015 was also attached as *annexure AD*.

$\mathsf{S}$

$25$

In the affidavit supporting the caveat, the defendant claimed that he had been informed by his neighbor that the plaintiff had started to bring people to inspect the suit land with the intention of disposing it. He denied having sold or instructing the plaintiff to sell the land.

The plaintiff in his rejoinder however stated that these were different $10$ transactions and that the loan payment referred to by the defendant had already been cleared off.

In *clause* $\delta$ of the rejoinder to the WSD/ counterclaim the plaintiff claimed that the defendant had been heavily indebted. The cheques were paid to the company which however bounced.

That the plaintiff sympathized with the defendant and purchased the suit land to enable him clear his indebtedness to the company of which he is the Managing Director.

He presented several copies of cheques that had been issued in the names of a company by the names of *M/s Two and Two Investments Ltd*, as proof of the $20$ defendant's indebtedness to the company.

However, no documentary evidence was attached to the pleadings to show that the said company actually belonged to the plaintiff. There was nothing on record to show that the company had participated in, or had any prior dealings with the defendant relating to the suit land.

Unhalf

$\gamma$

The nature of the authority granted to the plaintiff by the company to transact with the defendant or handle other the matters, including the filing of this suit was not defined.

- In a nutshell therefore, other than the indebtedness as demonstrated by the cheques, in the company's names there was no documentary evidence to $\mathsf{S}$ establish the actual basis as may be required to support the connection between the defendant as vendor on the one hand and the company itself or its MDs on the other hand, so as to lead to the conclusion that there was a sale between them. - 10 As a matter of fact, the transfer form as duly noted by court was not in the names of the company but those of the plaintiff. It is not clear why the plaintiff believed he could rely on the said cheques which showed the defendant's indebtedness to the company as extrinsic proof of the alleged sale transaction between him and the defendant. - 15 The plaintiff's claim cannot therefore succeed, for a number of reasons:

In the first place, contrary to what his counsel wished court to believe, the plaintiffs sought remedies in the nature of a breach of contract, that is, an order compelling the defendant to vacate a caveat lodged on the title; specific performance of the sale agreement; punitive and general damages for breach of contract; a permanent injunction restraining the defendants and agents from accessing the suit land; among others.

He could not therefore convince this court therefore that the applicable law was that of the RTA, rather than the *Contract Act* under which the remedy of specific performance can rightly be awarded as a relief for breach of contract.

Secondly, even if court were to believe that this was a sale agreement, the $25$ consideration far exceeded the 25 currency points, which implied that the contract should have but was never reduced into writing.

Aulorg

The purported agreement not only failed to meet the criteria as spelt out under section 10(5) of the Contract Act but also contravened section 91 of the *Evidence Act, Cap. 6;*

Thirdly, as observed earlier the cheques he presented in his rejoinder were issued in the names of the company. Again even if this court were to believe that the $\mathsf{S}$ plaintiff was the MD of *M/s Two and Two Investments Ltd*, and that a resolution authorizing him to transact was granted by the company to allow him to transact on its behalf, the cheques could not provide the proof which he needed that the consideration of *Ugx 100,000,000/* $=$ had been agreed upon as purchase price, and payments made by him and that the said sum had been $10$ acknowledged as received by the defendant to meet the intended objective.

The cheques could only serve as evidence of indebtedness by the defendant to the company which, from the plaintiff's pleadings, was not a plaintiff, a party to any of the agreements in this suit or in the very least, a complainant in this suit.

This instead strengthened the defendant's line of argument that a loan had been 15 extended to him to meet his obligations. Whether or not the money was fully paid $lot$ and in time was not for this court since it does arise from the plaint. There was no manifestation of the defendant's intention to sell that land.

Finally, the pleadings do not guide court as to any single date on which the oral agreement is known by the plaintiff to have taken place. What is clear is that the 20 cheques in the company's names bear the dates between 21^st February, 2012 up to 20^th June, 2012 that is, prior to the signing of the loan agreement of 7^th July, 2012.

$25$

Another cheque of *Ugx 16,500,000/*= was also issued on 20^th July, 2012 almost two weeks after the loan agreement had been signed. Within the spirit of **section 91** of the Evidence Act, nothing from the record was presented to court by way of documentary or extrinsic evidence if at all, to show that the sale alluded to occurred any earlier than the date when the transfer form was signed. The

Stechard J.

suggestion would also be equally absurd in my view, that the transfer was possibly made even before the sale was concluded.

One would also therefore wonder how the two transactions: the one for the loan and the other for a sale, could have been made concurrently, using the same security.

$\mathsf{S}$

What comes out clearly is that even when the sums appearing on the cheques are to be added, they do not tally with the figure of $Ugx$ 100,000,000/= alleged to have been the consideration paid for the sale.

The documented evidence on record is that for indebtedness to the plaintiff and agreement for a friendly loan facility and indeed no specific reference was made 10 to any terms or conditions to be met by the parties or time of execution of the agreement to indicate that there was a meeting of the two minds.

No receipts were issued for the said consideration as proof of the sale as opposed to a friendly loan transaction. In conclusion therefore, this court finds that there was no valid contract and therefore, no cause of action has been disclosed by $\bigcirc$ the plaint against the defendant.

Court on those grounds therefore upholds the first objection which renders the determination of second objection of no consequence.

Costs to the defendant.

$25$

Alexandra Nko

Judge

27^th July, 2023

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