[2023] UGCommC 231

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) CIVIL SUIT NO. 0568 OF 2OI9 NYIRABASHITSI SARAH MATAKA: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : PLAINTIFF

#### VEITSUS

## R. L JAIN LIMITED DEFENDANT

### BEFORE HON. LADY JUSTICB ANNA B. MUGENYI

#### JUDGMENT

The Plaintiff brought this suit against the Defendant for a declaration that the Defendant has no valid mortgage over her land comprised on Block 396 plot 766 Kajjansi, wakiso District, a perrnanent injunction restraining the Defendant from disposing of the land, general damages, and costs of the suit.

The brief facts constituting the Plaintifls case are that in 201 3, she obtained loans from the late R. L Jain, which loans she cleared. That in 2013 when the deceased demanded for payment, she disputed and requested for details which were not provided until in 2016 when the Plaintiff started demanding for payment. That she received a notice of eviction together with a notice of sale of the suit premises as well as an advertisement of the same.

The Ptaintiff avers that the intended sale is illegal as she has never mortgaged the property to the Defendant or dealt with them; and that she had cleared her debts

N\ \$r

with the deceased. That this has caused her inconvenience and suffering, hence this ^suit.

The Defendant filed their written statement of Defence (wsD) wherein they aver that the Plaintiff obtained four loans from the late R. L Jain between 20ll and 2013, and' that she surrendered her certificate of title for the suit property as security for repayment on 3'd January 2013. That she defaulted on repayment and that upon several demands by the deceased and threats to institute legal proceedings against her, she made a commitment to pay but still failed.

That on l't May 2015, the deceased executed a deed of assignment wherein he relinquished all his interest and rights on the four loans in favour of the Defendant, upon which the Defendant issued a demand notice and a Notice of Default demanding for the payment of UGX 2go,2oo,ooo/. The Defendant admits to instructing Nile General Auctioneers to advertise and sell off the property as the Plaintiff had refused to repay. The Defendant said their actions were legal therefore they deny causing the Plaintiff any anguish, and prayed that the suit be dismissed with costs.

The Defendant also filed a counterclaim for a declaration that the counter defendant breached the loan contracts with the deceased, a declaration that the counterclaimant is the lawful assignee of the loans, for an order for sale of the mortgaged property and or payment of the outstanding loan by the counter Defendant, general damages, interest and costs of the counterclaim. The counterclaimant relies on the deed of assignment executed by the late R. L Jain before his death, relinquishing all his rights and interests in the four loans to the Defendant. That Rajnish Jain, a son to the deceased was the one managing the counter Defendant's loan file and that he did not receive any payment from her

w^{

despite numerous wamings; which has caused inconvenience, business setbacks, loss of valuable time, and stress among others.

In her reply to the WSD and Counterclaim, the Counter Defendant/Plaintiff avers that she was not indebted to the deceased and that he had failed to provide details of the loans before he passed on. She further questions the legality and enforceability of the deed of assignment as it did not confer rights on the Defendant since it was executed after the death of the deceased' She therefore added that advertising her property was not in good faith as she is not liable to pay any debts, and that Rajnish Jain did not receive any money as she was paying directly to the deceased. She prayed that the Counterclaim be dismissed with costs.

During the hearing, the plaintiff was PW1 while the defendant presented Rajnish Jain as DW1. Counsel for the parties agreed to file written submissions which have been considered in this Judgment.

#### REPRESENTATION

At Trial, the Plaintiff was represented by M/s Obed Mwebesa & Associated Advocates while the Defendant by IWs Magellan Kazibwe & Co. Advocates

#### JUDGMENT

In their Joint Scheduling Memorandum, the parties agreed on the following issues to be determined by Court:

- 1. Whether the Defendant has any valid mortgage over the suit property? - 2. Whether the Plaintiff is indebted to the Defendant? - 3. What remedies are available to the parties?

,\$.0 )

# Issue One: Whether the Defendant has any valid mortgage over the suit property?

As to whether the Defendant has any valid mortgage over the suit property, Counsel for the Plaintiff submitted that the Plaintiff executed a legal mortgage with the deceased in respect of only the last loan of UGX 4,400,000/, and not several loans as the Defendant claims. Counsel then gave the definition of a mortgage and also referred to the fact that the Defendant's main witness confirmed during cross examination that the mortgage was between the deceased and the Plaintiff. He added that the mortgage did not have the mortgagee's signature in violation of Section 3 ( I ) and (4) and the 2nd Schedule of the Mortgage Act.

In reply, Counsel for the Defendant submitted that DWI testified that the deceased duly executed a legal mortgage on 3'd January 2013., and that it was registered hence making it valid. He prayed that the first issue be resolved in the affirmative.

Under Section I (b) of the Mortgage Act 2009, a mortgage is defined to include:

"any charge or lien over land or any estate or interest in land in Uganda for securing the payment of an existing or future or a contingent debt or other money or money's worth or the performance of an obligation and includes a second or subsequent mortgage, a third party mortgage and a sub mortgage. "

The existence of a mortgage is premised on proof of registration pursuant to Section 3 G) of the Morlgage Act 2009, although an unregistered one is also enforceable under sub section 5 thereof.

It is not disputed by both parties that the Plaintiff executed a Legal mortgage (DE 10) with the deceased on the 3'd day ofJanuary 2013 in respect ofa loan sum of UGX 4,400,000/: although the deceased omitted to append his signature as ^a

s'\*\

mortgagee. The Plaintiff in DE 8, on 3'd January 2013 undertook to pay Mr. R. L. Jain on demand UGX 4,400,00/: received from him with interest at the rate of l0%o per month with monthly rests. Clearly, the Plaintiff herself undertook to borrow and repay loan sum from the lender therein after which the parties executed a legal mortgage in respect of the said loan sum wherein, among other things, the Plaintiff surrendered her certificate of title as security for the said loan. I, therefore, find the case of Lucy Nelima & Others v Bank of Baroda (Uganda) Ltd Civil Suit No.55 of 2015 cited by counsel forthe Plaintiff inapplicable in this matter. In any case, the Plaintiff herself signed both the undertaking to repay the loan sum in issue as well as every page of the Legal Mortgage and, in this case, the omission to sign the same by the mortgagee though it was witnessed by two persons is not fatal because no evidence was adduced to deny the said transaction.

The Defendant also relied on the Deed of Assignment (DE l7) to state that they have a legal mortgage over the property. ln Sweel and Marwell, "The Law of Real Eslate", 7h Edition, para 25-I4I at poge I173,

" ll'hen a sole legal mortgagee dies, the mortgage vests in his personal representatives in the usual way."

In this case, the Defendant adduced a Deed of Assignment (DE17) wherein it was explicitly stated, inter alia, that R. L. Jain had passed away on 6th July 2015 and that Rajnish Jain was appointed by the High Court of Uganda as the sole administrator of the estate of the late R. L. Jain on 2nd October 2015. Furtherthat the said Rajnish Jain assumed the full rights, interest, powers and authority in and over the four loans owed by the debtor. It can, therefore, be safely concluded that the loans/ mortgage in issue were vested in Rajnish Jain as the deceased's personal representative.

N. N

with regard to allegations by the Plaintiff of forgery of the Deed of Assignment, the Plaintiff appears to allege fraud perpetrated by the Defendant in respect of the said documentation. I agree with counsel for the Defendant that the said allegations were never pleaded by the Plaintiff in her plaint and cannot therefore form part of the Plaintiff s case at this point (see Kampala Bottlers Ltd v Damanico (u) Ltd (sccA No. 22 of l99l). In any case, the Deed of Assignment on court record indicates it was signed by Rajnish Jain (not R. L. Jain) and witnessed by A. K. Sinha on l5th July 2016, about a year after the deceased passed on. DWl confirmed the same position in court. No evidence was adduced whatsoever by the Plaintiff to prove that the Deed od Assignment was a forgerylfraudulent.

To this Court, therefore, the Deed of Assignment is valid and placed the Defendant in a position where it could legally demand for the recovery of the loans in issue by virtue of having assumed all rights and interests in the said loans.

Pursuant to section 17 (2) of the Mortgage Acr 2009, a mortgagee is allowed to transfer the mortgage at any time but he must give notice of the transfer to the mortgagor. It goes on to say that the transfer must be in the prescribed form. In this case, DWl, acquired letters of administration for the estate of the mortgagee, therefore, that places him in the position of the mortgagee in this case. pursuant to Section 17 (2) above, he rightfully transferred or assigned the mortgage to the Defendant in DE 17 as mortgagee.

whereas the Defendant was required to noti& the plaintiff of the transfer, the evidence of the Plaintiff indicates that she was aware about the demise of the mortgagee and, therefore, receiving demand notices from the Defendant who is represented by DWI who the Plaintiff knew as a son of the deceased, would not

^!, \il have caused any confusion as to whom or where the debt clearance should be made.

Therefore, to this Court, failure to notifu was not fatal in any way as there was no confusion created regarding whom to pay to and how much. In addition, DE ¹⁷ clearly stated that the mortgagee had passed on and that the administrator of his estate was assigning the loan to the Defendant.

In effect and from all the foregoing, I find that the Defendant has a legal mortgage over the suit property.

The first issue is answered in the affirmative.

## Issue Two: Whether the Plaintiff is indebted to the Defendant?

As to whether the plaintiff is indebted to the defendant, counsel for the plaintiff submitted the Deed of Assignment presented by the Defendant does not confer ^a right of claim against the Plaintiff as it was dated after the deceased had already passed on; so he invited court to disregard all evidence pertaining to it. In addition, he claimed that the Plaintiff paid the money which explains why she wrote to the deceased asking for an explanation of the alleged debt. He added that since the Defendant is a stranger to the contract, he has no locus standi to refuse to release the Plaintifls certificate of title or even to demand for the money.

In reply, counsel for the Defendant/counterclaimant submitted that DWI had adduced incontrovertible evidence that the Plaintiff was indebted to the Defendant, as the Plaintiff had defaulted to repay the loan and that she failed to adduce evidence of payment which explains why she did not redeem her certificate of title. He added that the Defendant has shown how they took over the four loans and that the Plaintiff s allegation of forgery of the deceased's signature is being smuggled

) o\$\r:

as it had not been pleaded, as well as privity of contract which was not pleaded. He said the Defendant has capacity to demand for the loan debts.

In rejoinder, Counsel for the Plaintiff submitted that a party can raise a preliminary objection at any time therefore that the Plaintiff is entitled to raise the objection. He added that Court cannot sanction illegalities brought to its attention.

Having considered the evidence adduced by both parties and submissions made on their behalf, and as it has already been established that the Deed of Assignment conferred the right to recover the loans obtained from the Defendant by the Plaintiff, the Plaintiff s argument on no locus standi does not stand. Therefore, I will specifically look at the Ptaintiff s indebtedness to the Defendant.

Section 6 of the Moneg l\*ndlng Act (Cap 297) provides for the form of the money lender's contract such as the date of repayment, principal sum and interest. DE I to DE 5 and DE 7 are applications forms for the various loans and acknowledgement of receipt of the money by the Plaintiff. All these show proof of borrowing which the Plaintiff does not deny, however, she claims to have repaid.

Whereas the Plaintiff claims to have cleared all her debts, she has not discharged the burden ofproofon a balance ofprobabilities that she did. Under section 101 of the Evidence Act (Cap 6), a party who asserts a fact must prove it unless it is admitted by the other party; simply put as 'he who alleges must prove. 'During cross examination of the Ptaintiff by Counsel for the Defendant, when asked for proof of payment, she failed to produce any documents in form of bank statements or receipts showing that she had paid the loans, instead, she claimed that she had not carried them.

This is the Plaintiff s case and she had enough time to prepare her evidence, including filing a trial bundle which she did but did not attach the said documents

s-\

or bank statements. Therefore, the presumption is that she did not pay, and that could explain why her certificate of title has never been released to her.

llnder Section 12 (a) of the Evidence Act Cap 6, when a right is in issue, any transaction by which the right was created, claimed, recognised, asserted or denied, or which was inconsistent with its existence is relevant. Further, under Section 63 of the Evidence Act, 'documents must be proved by primary evidence except in the ^cas es her e after ment ione d.'

When asked to fumish evidence, it was her submission that the bank statements were not attached on file. One then wonders the grounds on which the Court's indulgence was sought if no evidence was attached to the file for an issue that directly touches the gist of the matter. The plaintiff has failed to prove the payment of the suit debts and as such, until proven otherwise, the four suit debts are still owed to the deceased.

ln Sebulibo V Basalidde Civil Suit l7 of 2014, it was held that regarding money lending cases the onus to prove a matter is on the one alleging the matter and in the instant case, the plaintiffhas not adduced evidence regarding the payment ofthe 4 debts.

In order to proceed with resolving this issue, it is important to determine the nature of the transaction or debt because Counsel for the Plaintiff submitted that these were money lending contracts govemed by the Money Lender's Act and that the suit was barred by limitation. On the other hand, Counsel for the Defendant submitted that whereas they were money lending transactions, they were secured by a legal mortgage and therefore that the Money Lender's Act did not apply.

at\lt\ \U

First, I find it pertinent to note that the legal mortgage in respect of UGX 4,400,000/ is governed by the Mortgage Act. It is only the first three loans that are purely money lending transactions that were govemed by the Money Lender's Act'

Whereas the Mortgage Act does not provide for limitation meaning that mortgage transactions are govemed by the Limitation Act which provides for l2 years which an action may be brought, Section 19 (l) of the Money Lenders Act gives ¹² months as the limitation of time for proceedings of recovery from the date when the cause of action accrued.

In this case, therefore, the first three loans governed by the Money Lender's Act are time barred because the cause of action accrued in 2012 yet the suit (Counterclaim) was filed in2017.

However, the claim in respect ofthe legal mortgage executed in respect ofthe loan sum of UGX 4,400,000/: is not time barred and since the Plaintiff has not produced any proof of payment, I find that she is liable to the Defendant for the said sum and the accrued interest in respect ofthe said loan.

The second issue is also answered in the affirmative in respect of the legal mortgage.

## Issue Three: What remedies are available to the parties?

On the remedies available to the parties, since the Plaintiff failed to prove her case the suit stands dismissed.

The Counterclaim succeeds in part, in respect of the legal mortgage, and the following orders are made:

.\I^\

- l. There is a legal mortgage befween the Plaintiff/ counter defendant and Defendant/ counter claimant and the Defendant / counter claimant rightfully advertised the sale of the mortgaged property. - 2. The Plaintiff/ counter defendant is indebted to the Defendant/ counter claimant in the sum of UGX 4,400,000/ as the loan sum on the legal mortgage. - 3. The Plaintiff/ counter defendant is ordered to pay UGX 4,400,000/= to the Defendant/ counter claimant failure of which the Defendant/ counter claimant is free to sell the mortgaged property in accordance with the law and as requested by the Plaintiff in DE 7 and as agreed in the Legal Mortgage dated 3'd January 20123. - 4. The Defendant/ counter claimant prayed for interest at the rate of l0o/, per month on the outstanding loan debt from the date of filing the suit until full settlement. However, the Legal Mortgage indicates that loan facility of UGX 4,400,000/- was for a term of one month at an interest rate of lDoh per month. The accrual of interest at the rate of l0%o per month after the duration ofone- month term was not agreed upon and I accordingly decline to award the same as prayed. I, however, award interest at court rate on the outstanding sum from the date of filing the suit till payment in full. - 5. It is trite law that the award of general damages is a discretion of the Court, and the purpose is to reinstate the Plaintiff/ counter claimant in the position that they would have been in had they not suffered the inconvenience caused by the other party (See Uganda Commercial Bank V Deo Kigozi 120021 E. A 293, and James Fredrick Nsubuga v. Attorney

Generol, High Court Civil Suit No. I3 of 1993). In this case, the Plaintiff kept the Defendant out of the use of its monies for close to l0 years yet it could have been put to more profitable use by the Defendant. I am of the considered view that general damages of UGX 50,000,000/: is sufficient compensation for the Defendant / counterclaimant and the same are awarded accordingly.

6. It is trite law that costs follow the event and having no good reason to decline awarding the same to the Defendant/ counter claimant, costs of the Counterclaim are to be paid by the Plaintiff/ counter defendant.

t 4

## HON. LADY JUSTICE ANNA B. MUGENYI

DATED:28/312023