[2025] UGHC 192

# **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT MASAKA CIVIL APPEAL NO. 24 OF 2022 (Arising from Chief Magistrate's Court of Masaka Civil Suit No.107 OF 2010) LWEBUGA ISMA :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: APPELLANT VERSUS NANNYANZI PROSCOVIA :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT**

### **Before: HON JUSTICE LAWRENCE TWEYANZE**

# **JUDGMENT**

#### **Introduction.**

1. This is an appeal in which the Appellant being dissatisfied with the Judgment and orders of His Worship Charles Yeteise, Chief Magistrate at the Chief Magistrates Court of Masaka in Masaka Civil Suit No. 107 of 2020, brought this appeal seeking orders that the appeal be allowed, the that the judgment and the decree be set aside, and that the costs of this appeal and in the lower Court be borne by the Respondent.

#### **Brief Background to the Appeal.**

- 2. The background as per the lower Court is that the Respondent/Plaintiff instituted Civil Suit No. 107/2010 against the Appellant/Defendant seeking for orders of recovery of her Plot located at Kirumba B Katwe / Butego Masaka City, eviction orders, permanent injunction, repossession, general damages and special damages and costs of the suit. She alleged that at all material times, she has been in possession of the Plot in dispute. That around 2010, the Defendant unlawfully stepped on her Plot of land harshly attacked her tenants and forced them out of the house and occupied it himself. That he made bricks on her Plot and partitioned the premises thereon and cultivated thereon hence the suit. - 3. In defence, the Appellant as Defendant denied the allegations in the Plaint and averred that he purchased the suit Plot from the Plaintiff and he paid the full purchase price. The Trial Magistrate found in favour of the Respondent/Plaintiff. The Appellant being dissatisfied with the said Judgment filed this appeal.

#### **The Grounds of Appeal.**

- 4. The Appellant raised two (2) grounds of appeal in his Memorandum of Appeal namely that: - *1. That the Learned Trial Magistrate erred in law and fact when he decided that the transaction that gave rise to the suit was a loan agreement not of a sale agreement which decision occasioned a miscarriage of justice.*

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*2. That the Learned Trial Magistrate erred in law and fact when he failed to evaluate the evidence on record more so the evidence in the 2 agreements.*

### **Representation and hearing.**

5. The Appellant was represented by M/s Kawanga & Kasule Advocates while the Respondent was self-represented. Court directed the parties to file written submissions but only Counsel for the Appellant filed submissions. There are no submissions from the Respondent and if any was filed, then the same was not brought to my attention at the time of this Judgment. Therefore, the Judgment is made without submissions from the Respondent.

## **Duty of the first appellate Court.**

6. The duty of a first Appellate Court is to scrutinise and re-evaluate the evidence on record and come to its own conclusion and to a fair decision upon the evidence that was adduced in a lower Court. **See:** *Section 80 of the Civil Procedure Act Cap 282 (Revised edition)*. This position has also been re-stated in a number of decided cases like **J.***F. Zaabwe vs Orient Bank Ltd CACA No. 4 of 2006*. In case of conflicting evidence, the appellate Court has to make due allowance for the fact that it has neither seen nor heard the witness, it must weigh the conflicting evidence and draw its own inference and conclusions (*See Lovinsa Nankya Vs Nsibambi (1980) HCB 81).*

# **Determination of the Appeal.**

7. I will resolve grounds 1 and 2 of appeal together since they relate to one thing.

*That the Learned Trial Magistrate erred in law and fact when he decided that the transaction that gave rise to the suit was a loan agreement not of a sale agreement which decision occasioned a miscarriage of justice.*

*That the Learned Trial Magistrate erred in law and fact when he failed to evaluate the evidence on record more so the evidence in the 2 agreements.*

- 8. I have read the record of the lower Court, the judgment, pleadings, witness statements and submissions by the Appellant to this appeal. This Court is required under Section 80 of the Civil Procedure Act Cap 282 to scrutinise and re-evaluate the evidence on record and come to its own conclusion and to a fair decision upon the evidence that was adduced in a lower Court. See: *F. Zaabwe vs Orient Bank Ltd CACA No. 4 of 2006*. - 9. I shall therefore proceed to re appraise the evidence and come to my own conclusion as required by law. In so doing, I am of the view that although the Memorandum of Appeal sets forth 2 grounds, they actually relate to the following two questions a determination of which will dispose off this appeal:

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*1. Whether the transaction that gave rise to the suit was a loan agreement not of a sale agreement? 2. What remedies are available to the parties?*

- 10. Court shall proceed to answer the above questions in turn. 1. *Whether the transaction that gave rise to the suit was a loan agreement not of a sale agreement*? The Appellant claims that the transaction that gave rise to the suit was a sale agreement and not a loan agreement as found by the Trial Magistrate. - 11. In coming to this conclusion that the transaction that gave rise to the suit was a loan agreement not of a sale agreement, the Trial Magistrate considered the evidence of both parties, and both documents, PEX1, the loan agreement and PEX the sales agreement, and the evidence of the parties presented in Court. The Appellant as Defendant did not object to both documents at Trial. This implies that the Trial Magistrate considered the evidence on record and the testimonies before coming to a conclusion. The documents that the Trial Court relied on to reach its conclusion are PEX1-the loan agreement and PEX2-the sales agreement and their English translated versions are reproduced hereunder:

#### "TRANSLATION KIRUMBA 'B' VILLAGE L. C. I LOCAL ADMINISTRATIVE UNIT KATWE BUTEGO DIVISION P. O. BOX 1898, MASAKA

Date 28/11/09

#### LOAN AGREEMENT

I, Nannyanzi Prossy, resident of Kanyanya, Kawempe Division, have pledged as security to Mr. Ismael Rwebuga a resident of Nakayiba, Nyendo-Ssenyange my Plot developed with a house situate in Kirumba "B" L. C. I Katwe Butego Division. He has lent to me One Million two Hundred Thousand Shillings (Shs. 1,200,000) will pay him an interest of Shs. 480,000/= after a period of Six (6) months. I will then pay a total of Shs. (1,680,000) One Million Six Hundred Eighty Thousand.

The sale agreement we have executed will then be torn by the chairperson (Mrs. Sarah Kizito) It is neighboured by the people below Kawuma

Those present Nnyanzi George William Mwamiini Namiiro Nanziri Specioza Mrs. Sarah Kizito C/person 0782808468

The borrower Nannyanzi Prossy. The Lender Lwebuga Isma

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#### TRANSLATION KIRUMBA 'B' VILLAGE L. C. I LOCAL ADMINISTRATIVE UNIT KATWE BUTEGO DIVISION P. O. BOX 1898, MASAKA

Date 28/11/09

#### SALE AGREEMENT

1, Nannyanzi Prossy, resident of Kanyanya, Kawempe Division, have sold my Plot to Mr. Ismael Rwebuga a resident of Nakayiba, Nyendo-Ssenyange. My Plot is developed with a house situate in Kirumba "B" L. C. I Katwe Butego Division. I have sold it at Shs (1,680,000) One Million Six Hundred Eighty Thousand. I have sold it willingly and conscientiously. It is neighboured by the people below Kawuma

The Seller Nannyanzi Prossy The Buyer Lwebuga Isma Those present Nnyanzi George William Nanziri Specioza Mrs. Sarah Kizito C/person Mrs. Sarah Kizito C/person 0782808468"

- 12. In order to determine whether or not the agreement between the parties was a loan or a sale agreement, I will refer to *Sections 2 and 10(1) of the Contracts Act* which define a contract as an Agreement made with the free consent of parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention to be legally bound. Generally, the Claimant must show: (i) the existence of a contract and its essential terms. A legal contract is an agreement between two parties that creates mutual, legally enforceable obligations. A contract can be in writing, be made orally, be inferred by conduct or formed using a combination of all three. A valid contract requires that all the following exist between the parties: (i) communication of an offer; (ii) communication of mutual acceptance of the terms; (iii) capacity to contract; (iv) valid consideration; (v) legality of the subject matter; and (vi) mutual intent that the contract be legally binding. (*See Pimer vs. Bakayana and 4 Others (Civil Suit 319 of 2019) [2022])*. - 13. The most basic rule of contract law is that a legal contract exists when one party makes an offer and the other party accepts it. The core of a legal contract is the agreement between the parties. It is trite that multiple writings relating to each other can be combined to show that a single contract exists. Any memorandum or writing that contains the necessary elements will suffice. (See *Green Boat Entertainment Ltd vs. City Council of Kampala (HCT-00-CC-CS 580 of 2003) [2007]***).** In this case, the two agreements executed by the parties on 28th November 2009 namely the loan agreement (PEX1) and the sale agreement (PEX2) must be scrutinised together to ascertain the true nature of the transaction. It is a well-established legal principle that multiple documents executed contemporaneously and relating to the same subject

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matter may be construed as constituting a single contract, provided they collectively reflect the parties' mutual intent (see *Green Boat Entertainment Ltd vs. City Council of Kampala* (Supra).

- 14. The loan agreement explicitly states that the Respondent pledged the suit land as security for a loan of UGX 1,200,000, with an interest of UGX 480,000 payable after six months, totaling UGX 1,680,000, and includes a clause stipulating that the sale agreement would be torn upon repayment of the said loan. This provision unequivocally indicates that the sale agreement was contingent upon the loan agreement and not intended as an independent, enforceable transaction. Thus, the preponderance of evidence supports the conclusion that the primary transaction was a loan secured by the land, with the sale agreement serving as a collateral mechanism rather than a bonafide transfer of ownership. Whereas it is not clear whether or not the loan was repaid by the borrower, the intention of the parties was to create a borrower/lender relationship and not a seller/purchaser one. What gives me confidence in deciding the way am doing is that the alleged lender was and is not claiming any balance on the loan. - 15. It should be noted further that the characterisation of this transaction as a loan agreement, rather than a sale, is further reinforced by considerations of public policy and equity. Transactions disguised as sales but designed to secure loans, particularly with exorbitant interest rates, are increasingly recognised as unconscionable and contrary to the public interest, especially when they exploit vulnerable individuals. The interest rate of UGX 480,000 on a principal of UGX 1,200,000 over six months equates to an annual interest rate exceeding 80%, which raises serious questions about its legality under the Money-Lending regime. Even if one would consider it as a sale, the purported sale price of UGX 1,680,000 for a developed Plot with a house and banana plantations in Kirumba "B" L. C. I, Katwe Butego Division, Masaka City is strikingly disproportionate to the property's apparent value, undermining the credibility of the sale agreement as a genuine commercial transaction. Whereas it is true that under freedom of contract, parties may agree on any price, Courts are dutybound to intervene and to protect the vulnerable and unsuspecting members of the public against such money hungry and loan sharks where such agreements are manifestly unfair and illegal. Accordingly, the Appellant cannot derive legal benefit from a transaction that is both unconscionable and potentially illegal, thereby affirming the Trial Magistrate's finding that the sale agreement lacks legal enforceability. - 16. Upon a meticulous re-evaluation of the evidence, it is evident that the parties entered into the loan agreement with full awareness and free consent, satisfying the essential elements of a valid contract as outlined in *Pimer vs. Bakayana and 4 Others* (Supra) namely, offer, acceptance, consideration, capacity, legality, and intent to be bound. The loan agreement's terms, including the security arrangement and the conditional

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nature of the sale agreement, reflect a clear intention to create a borrower/lender relationship rather than a seller/purchaser relationship.

- 17. The clause mandating the destruction of the sale agreement upon repayment of the loan further underscores that the sale was not intended to be a final or binding transfer of title but rather a contingent instrument tied to the loan's repayment. Additionally, the Appellant's failure to demonstrate compliance with legal requirements for operating as a Money Lender such as obtaining a license under the Tier 4 Microfinance and Money Lenders Act, 2016 renders the loan transaction itself suspect. Consequently, the sale agreement must be deemed void ab initio for lack of genuine intent to transfer ownership, aligning with the Trial Magistrate's reasoned conclusion that the transaction was fundamentally a loan agreement not a sale. - 18. This analysis disposes of the Appellant's contention that the Trial Magistrate erred in characterising the transaction or inadequately evaluating the evidence. The record reveals that the Trial Magistrate duly considered the testimonies, the two agreements, and the surrounding circumstances, arriving at a finding amply supported by the evidence. The re-appraisal conducted by this Court, as mandated under *Section 80 of the Civil Procedure Act*, confirms that the transaction was an illegal loan agreement rather than a sale, given its unconscionable terms and potential non-compliance with Money-Lending laws. The Appellant's reliance on the sale agreement as evidence of ownership is untenable, as it was subordinated to the loan agreement and lacked the requisite intent to effect a permanent transfer. Accordingly, no miscarriage of justice has occurred, and the Trial Magistrate's judgment withstands the appellate's Court scrutiny. - 19. The above findings consequently dispose-off all the grounds of appeal. This appeal fails and is hereby dismissed with costs awarded to the Respondent. Therefore, the judgment and orders of the Trial Magistrate are upheld. I make the following orders: - a. This appeal fails and is hereby dismissed. - b. The judgment and orders of the Trial Magistrate are upheld. - c. Costs of this Appeal are awarded to the Respondent.

It is so ordered.

Judgment signed and delivered electronically at Masaka this 20th day of April, 2025

…………………………………… **LAWRENCE TWEYANZE JUDGE. 20th April, 2025.**