[2023] UGCommC 172

## THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPAU (coMMERCTAL DIVISION) crvrL surr No. 0129 0F 2020

## THE NEW PARK LOCK UP OWNERS ASSOCIATION LIMITED PLAINTIFF

### VERSUS

1. M/S TTBETNGANA & CO ADVOCATES 2. DEOX TIBEINGANA 3. M/S NUMBERS FINANCE & INVESTMENT LIMITED :::::::::::::::::::::::::::::::::::::::::: DEFENDANTS

### (Before: Hon. Justice Patricia Mutesi)

#### JUDGMENT

#### lntroduction

The plaintiff filed this suit against the L't and 2nd defendants seeking the recovery of its L7 condominium certificates of title, a decla ration that the said defendants breached the Deed of Understanding entered into with the plaintiff on the 3'd day of February 2076, declarations that the defendants acted fraudulently andthat the conduct of the defendants amounts to unjust enrichment and fraud, an order that the defendants pay general and punitive damages for breach of the deed of undertaking, plus interest thereon and costs of the suit. The 3'd defendant herein filed an application seeking to be joined as a defendant in the suit, and with court's leave it was joined as a defe ndant.

The brief facts of this case are that the plaintiff is the registered proprietor of land comprised in plots 15A, 1A-7A, 9A-11A Mackay Road and plots 34- 54 Namirembe Road. The plaintiff obtained a loan facility from DFCU bank

to which it pledged the said title as security. The plaintiff later resolved to create a total of 1,021 (One thousand and twenty one) condominium units with titles for its members. DFCU agreed to the creation of the said titles from the plaintiff's mother title on condition that the process of creating the condominium titles would be done by the 1't & 2nd defendants. Accordingly the plaintiff executed a Deed of Understanding with the 1st and 2nd defendants under which the defendants were required to create the condominium titles and hand them over to the plaintiff. Whereas the plaintiff performed its obligations under the deed, the 1't and 2nd defendants handed over all except 17 condominium titles which they have failed to hand over despite several demands from the plaintiff. The plaintiff later discovered that the 1st & 2nd defendants had mortgaged the rest of the condominium titles to the 3'd defendant.

#### Representation and hearing

The plaintiff was represented by Mr. Martin Muhumuza while the 3'd defendant was represented by Mr. Emmanuel Byamugisha. The 1't and 2nd defendants did not appear and they were not represented in court. Furthermore whereas court issued directions as to the filing of a joint scheduling memorandum, trial bundles and witness statements the 3'd defendant did not file any of these documents as directed. However the plaintiff and 3'd defendant filed their respective witness statements and the plaintiff also filed a trial bundle.

When the suit came for hearing on the L2th September 2023, the court made an order that it proceeds exporte against the 1't & 2nd defendants who did not appear and were not represented in court. The plaintiff and 3'd defendants witnesses testified on oath but the 3'd defendant opted not to cross examine the plaintiffs. The 3'd defendant counsel also opted not to file any written submissions in the matter. I have considered the pleadings and evidence, plus the plaintiff's submissions which were filed.

lwill consider and resolve the issues as schedu ling memorandu m. presented in the pla intiff's

## lssue No. 1: Whether the 1't and 2nd defendants breached the deed of undertaking entered into between them and the plaintiff.

PW1 John Rogers Tusingize the Vice chairperson of the Plaintiff company's board testified that the plaintiff is the registered proprietor of land comprised in plots 15A, 1A-7A, 9A-L1A Mackay Road and plots 3A-5A Namirembe Road. That the plaintiff obtained a loan facility from DFCU bank to which it pledged its certificate of title for the said land as security and that after developing its above land, it resolved to create a total of 1,021 (One thousand and Twenty one) condominium titles for each unit. The plaintiff engaged DFCU bank who agreed to the creation of condominium units but set conditions for the same to the effect that the process of creating the condominium titles had to be done by a law firm and advocate chosen by it whereupon it chose the L't and 2nd defendants. The plaintiff agreed to the above terms and the parties entered into a deed of undertaking on the 3'd day of February 2016.

He stated that under the Deed of Understanding, the plaintiff had obligations to meet all costs associated with the scope of work in the memorandum & to avail fully executed transfer forms in respect of each borrower to the 2nd defendant. On the other hand the 1st & 2nd defendants had obligations to do a lease extension, subdivision, creation of L,O2l condominium titles, to effect transfers of the condominium titles, to submit directly to the bank all the condominium of titles created out of the subdivision. The defendants were required to do all the above within ^a period of 2 (two months). He stated that the plaintiff company paid to the L't and 2nd defendants all the money that was necessary for the execution of the assignment but that after the lapse of the prescribed timeline they did not receive the titles as agreed. That subsequently after several requests, the said defendants handed over all but 17 condominium titles, which the plaintiff has never received to date. However the plaintiff later

learnt that the said defendants mortgaged its condominium titles to the 3'd defendant s security for a loan worth UGX 1,000,000,000/= (Shillings One Billion). The 3'd defendant opted not to cross examine PW1 on his testimony, and it is therefore ta ken that it does not dispute the said testimony.

From the foregoing, it is not disputed that the plaintiff entered a Deed of undertaking with the 1't and 2nd Plaintiffs in which the latter were obliged to create and handover 1,021 condominium titles to the plaintiff. Breach of contract has been defined to mean 'the breaking of on obligotion which o controct imposes ond which confers o right of oction for domoges on the injured porty.'(See Mogas Uganda Limited v Benzina Uganda Limited, High Court Civil Suit No.88 of 2013). PW1's undisputed evidence shows that whereas the plaintiff duly performed its obligations under the Deed including payment of the necessary costs for execution of the process, the said defendants have failed to hand over 17 of the processed titles.

Itherefore find that the L't and 2nd Defendants breached the Deed of Undertaking when it failed to fulfil its obligation to hand over ¹⁷ condominium titles to the plaintiff within the contractually agreed timeline.

# lssue No.2: Whether or not there is a valid morteaee created on the plaintiffs titles in issue between the 2"d & 3'd defendants

lssue No.3: Whether or not the 3'd defendant lesallv holds the condominium certificates of title in issue

^Iwill consider lssues 2 and 3 jointly.

The 3'd Defendant did not dispute that it holds the plaintiff's condominium titles which were handed to it by the 2nd defendant to hold as collateral for a loan. ln his witness statement DW1 Mr, Twine Collin a director in the 3'd defendant company stated that the 2nd defendant pledged to it 11 (eleven) condominium certificates of title registered in the names of the plaintiff.

The plaintiff submitted that under Section 3 of the Mortgage Act 2009 it is only a person holding land under any form of land tenure, who may mortgage his or her interest in the land. He also cited the case of Lucy Nelima & Others Vs Bank of Baroda; Civil Suit No. 55 of 2015 for this position. He argued that since the condominium certificates of title are registered in the plaintiff's names, no other person can legally mortgage them. During cross examination, DW1 admitted that the 2nd defendant had no powers of attorney from the plaintiff in respect of the titles, and he conceded that the company does not hold any legal mortgage over the said titles which are registered in the names of the plaintiff. When asked by court as to whether the 3'd defendant was ready to hand over the said titles to the plaintiff, DW1 replied in the affirmative.

Itherefore find that there was no valid mortgage created on the plaintiff's titles between the l.'t and 2nd defendant on one hand and the 3'd defendant aon the other, and the 3'd defendant is illegally holding the said titles. Accordingly the plaintiff is entitled to recovery of the said titles which are in the custody of the 3'd defendant.

## lssue No. 4: Whether or not the defendants acted fraudulently towards the plaintiff?

The plaintiff argued that the 1't and 2nd defendants acted fraudulently to it by not handing over 1-7 of the condominium titles created out of the plaintiff's mother title and mortgaging the plaintiff's titles to a money lending institution as security. lt was submitted that the 3'd defendant acted fraudulently in accepting the certificates of title as security from the 2nd defendant without the plaintiff's authorization, yet it was aware that the titles in issue belonged to the plaintiff. The plaintiff relied on the case of Dan Kyobe Vs Daniel G. B Kibuuka-Musoke & Anor; Civil Suit No. 108 of 2021, where this court relied on decision of the Supreme Court in Fredrick J. K. Zaobwe Vs Orient Bonk Ltd. ond Others. Civil Appeal No. 04 ol 2006 where fraud was defined as;

"lntentional perversion ol truth for the purposes of inducing another in reliance upon it to port with some valuable thing belonging to him or to surrender a legol right. A false representotion of o motter of foct, whether by words or by conduct, by false or misleading allegations, or by conceolment of thot which deceives ond is intended to deceive another so thot he shall act upon it to his legal injury. Anything colculoted to deceive, whether by o single oct or combinotion, or by suppression of truth, or suggestion of whot is false... A generic term, embracing oll multiforious, means which human ingenuity con devise, ond which ore resorted to by one individual to get advontage over another by folse suggestions or by suppression of truth..."

From the undisputed evidence on record, it is clear that the L't and 2nd defendants falsely concealed from the plaintiff the fact that they had pledged its condominium titles as security. This deception was calculated to allow the defendants benefit financially from the said titles, and was to the detriment of the plaintiff. Therefore the L't and 2nd defendants acted fraudulently to the pla intiff.

However there is no evidence to show that the 3'd defendant acted fraudulently towards the plaintiff. DWL testified that on 7th November, 2018, the 2nd Defendant applied for and obtained a loan facility of UGX. 450,000,000/= from the 3'd defendant, and he pledged 2 condominium certificates of title for units No. 3 & 7 comprised on Plot 55 Block Chwa 1L road, Nakawa Division in Kampala as collateral security. That on 22nd November, 2018, the 2nd defendant approached the 3'd Defendant and requested for the release of the aforesaid 2 condominium certificates of title for perfection of security by way transferring the same into its names and registering an encumbrance in favour of the 3'd defendant. The 3'd defendant released the above mentioned 2 certificates of title and in turn the Defendant further handed over to the 3'd Defendant 11 (eleven) certificates of title duly registered in the names of the Plaintiff to take custody as substitute collateral until when the perfection of the original collateral is complete and returned to the 2nd defendant. That to date the

2nd defendant has never returned the original collateral security to the 3'd defendant as had been mutually agreed.

Whereas the 3'd defendant acted unlawfully in accepting the plaintiff's titles without proof that the 1't and 2nd defendant had powers of attorney to pledge them as security, they did not make any false or misleading claims or act in a manner calculated to deceive the plaintiff to his detriment. lnfact it appears that the 3'd defendant was a victim of deception and fraud when it was tricked by the 2nd defendant into exchanging his own mortgaged titles with the plaintiff's titles in the belief that he was going to return his t it les.

I therefore find that the 1st and 2nd defendant acted fraudulently against the plaintiff.

# 2. Whether or not the conduct of the defendants amounts to uniust enrichment

The plaintiff cited the case of Peninah Kensheka Vsrsus Uganda Development Bank; Civil Sit No. 459 of 2011 where Justice Kainamura defined u njust en rich ment to mea n 'o situation where the defendont hos been enriched by the receipt of a benefit ond this enrichment is ot the expense of the ptointiff.' The plaintiff submitted that the 1't and 2nd defendants were unlawfully enriched when they received a benefit from the titles belonging to the plaintiff and that the enrichment was unjust.

For there to be unjust enrichment a party must have received a benefit at the expense of the Plaintiff and receipt of such a benefit must be unjust. ln Cloth Link (U) Ltd v Africa Traders lnvestments Fund Ltd & Anor Civil Suit 234 of 2OLO it was held that; 'The principle of unjust enrichment requires; first that the Defendont hos been enriched by the receipt of o benefit; secondly that this enrichment is ot the expense of the Plaintiff and thirdly, thot the retention of the enrichment is unjust.'

The l.'t & 2nd defendant were contracted to create condominium titles for the plaintiffwho fully paid for the cost of this process. However the plaintiff failed to hand over 17 of the created titles to the plaintiff, and pledged 11 of them them to the 3'd defendant as security for a loan worth UGX 1,000,000,000 (One billion shillings). The mortgaging of the said titles was illegally done without the plaintiff's authorization. While the illegal 'mortgage' financially benefitted the 2nd defendant who enjoyed the loan proceeds, it was at the expense financial detriment of the plaintiff whose members conversely have not been able to use the said 17 condominium titles as security to obtain loans. I therefore find that the conduct of the 1st and 2nd defendants amounted to unjust enrichment.

### lssue No. 5: What remedies are available to the parties?

From the foregoing the plaintiff is entitled to recover its 11 condominium titles which were handed over to the 3'd defendant by the 2"d defendant. lt is also entitled to recover the other 6 condominium titles which the 1't and 2nd defendants failed to hand over as agreed under the Deed of Understanding.

The plaintiff also claimed for general damages for breach of contract, fraud and unjust enrichment. The plaintiff also prayed for costs of the suit against the 1't and 2nd defendants. General damages are awarded for the nonquantifiable loss or injury which a party suffers as a natural result of the breach of its rights. ln order to be eligible for general damages, the plaintiff should have suffered loss or inconvenience. PW1 testified that the members of the plaintiff company suffered grossly as they couldn't access the said titles which they wanted to use as security in banking institutions for working loans. The plaintiff is therefore entitled to general damages. Considering that the plaintiff was wrongfully kept out of possession of these titles since 2016 to date, I award the plaintiff the sum of UGX 70,000,000 /= as general damages for the loss and injury suffered due to the breach of contract, fraud and unjust enrichment by the 1't and 2nd defendants. I also award interest thereon of 70% per annum from the date

of judgment until payment in full. Since it is the successful party award the plaintiff costs of the suit as against the l.'t and 2"d defend prayed for. ,lal ants

Consequently I make the following orders;

- i. The 3'd defendant is directed to hand over to the plaintiff condominium certificates of title belonging to the plaintiff wh the ich a held in its custody. - ii. The 1't and 2nd defendants are directed to hand over to the plai remaining 6 condominium certificates of titles belonging to the which are still held in their custody. - iii. The 1st & 2nd defendants shall pay to the plaintiff the sum of To,ooo,ooo/= as general damages for breach of contract, fraud ^unju st enrichment. a - iv. lnterest shall be paid on general damages at the rate of 1. O % annum from the date of judgment until payment in full. - v. Costsofthe suit shall be paid bythe 1st & 2nd defendants.

?af^"^l--lC\*

Patricia Mutesi UUDGE)

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