Luyimbazi v Stanbic Bank Uganda Limited (Civil Appeal 2 of 2019) [2022] UGSC 24 (22 March 2022)

THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA

CIVIL APPEAL NO. 2 OF 2019

$\mathsf{S}$

[CORAM: OPIO-AWERI; TIBATEMWA-EKIRIKUBINZA; MUHANGUZI; TUHAISE; CHIBITA; JJSCI

BETWEEN

LUYIMBAZI SULAIMAN:::::::::::::::::::::::::::::::::::

AND

STANBIC BANK UGANDA LIMITED:::::::::::::::::::::::::::::::::::: 20

[*Appeal from the judgment of the Court of Appeal in Civil Appeal No. 50 of 2004 before (Hon. Justices: Owiny-Dollo, DCJ; Egonda-Ntende and Obura, JJA) dated* 17^th *January* 2019.]

- pleadings challenging validity of a sale by a mortgagor-Summary: whether the issue was raised in pleadings- where there is discordance between what is pleaded and the evidence or submissions, the cardinal rule that a party is bound by their pleadings still applies. - Representation: The appellant was represented by Mr. Bazanya Fayid holding 25 brief for Mr. William Kyobe of M/S KAL Advocates.

The respondent bank was represented by Mr. Albert Byamugisha of M/S J. B. Byamugisha & Co. Advocates.

There was no representative official from the respondent bank in Court.

$\mathcal{L}_{\text{max}}$

$L$

$\mathbf{1}$

JUDGMENT OF PROF. TIBATEMWA-EKIRIKUBINZA, JSC. $\overline{5}$

Background

The facts as accepted by the lower courts are that the appellant-Luyimbazi Sulaiman –was a guarantor of J. W Victoria Agro Industries for an overdraft facility from the respondent bank worth

10 million Uganda shillings. The facility was secured with a $10$ mortgage of the appellant's house on land comprised in LRV 1561 Folio 24 Block 262 Plot 444 at Makindye.

J. W. Victoria Agro Industries defaulted in its payment of the loan. The appellant as guarantor came to know of the default notice sent

- by the respondent bank through the Local Council II office at 15 Makindye which he presided over at the time. He thereafter offered to settle the outstanding loan by payment through cheques. He also offered to have the amount settled over a period of $6$ (six) months. The respondent bank rejected the offer claiming that the settlement - period proposed by the appellant was long. The respondent bank $20$ made a counter offer to the appellant and asked him to immediately draw a cheque of two (2) million Uganda Shillings and clear the balance within 7 days. The appellant failed to abide by the payment schedule. - On $2^{nd}$ June 1999, the appellant received a letter from the bank's 25 Senior Manager Legal services dated 14^th May 1999 stating that the mortgaged land had been sold on 30^th April 1999.

Consequently, the appellant sued the respondent bank in the High Court contending that the mortgage document was not properly

- executed and it was therefore null and void. On this point, he 30 specifically argued that the document did not contain his name as the borrower but that of J. W. Victoria Agro Industries Ltd. He further argued that the name of the company indicated as the borrower in the mortgage document was a non-existent one because - the correct name of the company was J. W. Victoria Agro Industries 35 Limited and not J. W. Victoria Industries. The appellant prayed for mesne profits and general damages.

$1$ $1$

- On the other hand, the respondent bank contended that the $\mathsf{S}$ mortgage was properly executed in that representative officials from the company physically signed the loan documents and that the $\overline{a}$ sale was properly done upon the borrower and its guarantor defaulting in repaying the loan. - The Bank further argued that no power of attorney was required 10 where the proprietor of the security signed the mortgage document by himself. Further still, the Bank argued that misspelling of the borrower's name on the mortgage document did not invalidate the mortgage. That in fact the borrower had affixed its stamp with the - proper name "J. W. Victoria Agro Industries Ltd" on the document as 15 the beneficiary of the loan.

The trial Judge (Arach-Amoko, J- as she then was) agreed with the respondent Bank and held, among other things, that the mortgage was valid and could not be avoided by the appellant.

- Regarding the issue whether demand was ever made directly to the 20 appellant, the trial Judge held that prior to the sale, demand notices were issued to the appellant although they were not a prerequisite according to clause 5 of the executed mortgage document. - In conclusion, the trial Judge dismissed the appellant's case with 25 costs to the respondent bank.

Dissatisfied with the decision of the trial Judge, the appellant appealed to the Court of Appeal.

The Court of Appeal found that the appellant received the requisite notice and could not turn around to claim that he never received a 30 demand notice to pay the overdraft on the premise that he came to learn of the notice through the office of the Local Council II. The Court therefore held that the capacity in which the appellant received the notice was fortuitous.

On the issue of fraudulent sale by the Bank, the Court of Appeal 35 held that the appellant failed to prove fraud as alleged in the plaint.

Regarding the alleged illegal/ premature sale of the appellant's property, the Court of Appeal held that the issue was not raised in

LTE

the appellant's pleadings. That the only remotely connected $\mathsf{S}$ averment in the plaint was paragraph 7 which was to the effect that after the bank accepted the appellant's proposals for repayment and having received eight (8) million Ushs, the purported sale was illegal.

The Court of Appeal dismissed the appeal and upheld the trial 10 Judge's findings.

The appellant was still dissatisfied with the Court of Appeal decision. He appealed to this Court on the following grounds:

- 1. The learned Justices of Appeal erred in law and fact when they held that the issue of whether the suit property was validly sold was not raised at the trial or in the pleadings of the appellant. - 2. The learned Justices of Appeal erred in law and facts when they held on the issue of whether the trial Judge had misdirected herself in relying on unsubstantiated evidence that the property was advertised and valued before sale. - 3. The learned Justices of Appeal erred in law when they upheld the holding of the trial Judge that the appellant 25 had not proved particulars of fraud and or bad faith against the respondent.

Prayers

The appellant prayed that this Court allows his appeal, sets aside 30 the judgments of the High Court and the Court of Appeal and that costs in this appeal as well as those in the lower courts be granted to him.

Ground 1

Appellant's submissions 35

Counsel submitted that the issue of validity of the sale of the suit property was raised both at the trial and on appeal. At the trial Court, the appellant challenged the sale of land comprised in LRV

$\overline{4}$

$\mathcal{L} \mathcal{L}$

Volume 1561 Folio 24 Block 262 Plot 444 Mobutu Road Makindye in paragraph 3 of his plaint on grounds that it was actuated by bad faith and was fraudulent.

On appeal, it was raised under issue no.2-whether the property was validly sold and or whether the property was advertised and valued before sale.

Furthermore, that the appellant went ahead to pray for a declaration that the sale was null and void and prayed for its cancellation.

Premised on the above, counsel invited this Court to resolve ground 1 in favour of the appellant. 15

Respondent's reply

$\mathsf{S}$

The respondent's counsel supported the finding of the Court of Appeal that the appellant did not challenge the sale of his property in absence of a re-advertisement notice. That the Court of Appeal

was therefore correct in not granting the appellant a relief which $20$ was not pleaded. In support of this submission counsel relied on the case of John Bwiza vs. Patrick Yowasi Kadama¹ where Justice Tuhaise, JSC held that:

"... courts cannot give relief beyond the prayer made in the

pleadings, that founding a court decision or relief on an unpleaded 25 matter or issue not properly placed before it for determination is an error of law."

Ground 2

Appellant's submissions

Counsel submitted that the sale was actuated by bad faith and 30 fraud because it proceeded without advertisement. That the finding by the trial Court to the effect that the property was advertised before sale, which was upheld by the Court of Appeal, was not supported with evidence. He argued that the respondent did not


^&lt;sup>1</sup> SCCA No.16 of 2018.

adduce the advertisement notice to back its assertion that the property was advertised in October 1998.

In light of the above, counsel relied on the authority of Kifamunte Herny vs. Uganda² where it was held that on a second appeal, a second appellate court may question the findings of fact of the trial Court if there is no evidence to support those findings.

Respondent's reply

Counsel supported the findings of the Court of Appeal that this ground was never pleaded at the trial and was therefore incompetent.

Ground 3 15

Appellant's submissions

Counsel submitted that there was overwhelming evidence adduced by the appellant to prove that the respondent bank acted fraudulently and in bad faith. He listed the following aspects:

- 1) The failure to notify the appellant of the borrower's failure to 20 pay the overdraft. - 2) Failure to make a demand as required by the mortgage deed. - 3) Pre-mature appointment of auctioneers. - 4) Eviction of the plaintiffs tenants without his knowledge and or consent. - 5) Backdating of correspondences addressed to the appellant. - 6) Conducting of the sale after payment of 8m by the appellant. - 7) Under valuation of the suit property. - 8) The sale of the property was to one of the respondent bank officers or relations. - 30

9) Continued representation to the appellant that he could proceed to repay as proposed and not making any unequivocal notice of refusal until after 10th March 1999.

^&lt;sup>2</sup> SCCA No.01 of 1995.

In conclusion, counsel invited this Court to overturn the finding of $\mathsf{S}$ the Court of Appeal on this issue.

Respondent's reply

$\overline{a}$

$20$

Counsel supported the finding of the Court of Appeal that none of the particulars of fraud listed above was proved by the appellant.

In conclusion, counsel prayed that the appeal be dismissed with 10 costs.

Court's Consideration

In addressing the appeal, grounds 1 and 2 will be dealt with together and ground 3 will be dealt with separately.

Grounds 1 and 2

The appellant's counsel contended that the sale of the land by the respondent bank was raised in the trial Court and the Court of Appeal. The respondent's counsel on the other hand agreed with the Court of Appeal's finding that the appellant did not include the issue of illegal sale in his pleadings.

The Court of Appeal held as follows:

"it is contended that the learned trial Judge erred in law and fact in *holding that the suit property was validly sold ... It must be pointed*

- out that at the trial neither of the matters raised in the above grounds 25 were in issue. Neither had they been canvassed in the pleadings. The only averment in the plaint that is remotely connected thereto is paragraph 7. It states: The plaintiff shall contend that after accepting his proposal for repayment and receiving Ushs. $8,000,000/$ = by the - date of sale, the defendant's purported sale was either premature or 30 *ineffectual* or *illegal*.

The learned trial Judge found that the respondent had not accepted the appellant's proposal to liquidate the outstanding amount. The contention in paragraph 7 therefore remained unproved. There are no

other facts upon which it was alleged that the sale was premature. 35

*ineffectual or illegal other than those set out in this paragraph which* $\mathsf{S}$ *were found unproven. (My emphasis)*

$\mathcal{F}_{\bullet}$

I note that whereas the Court of Appeal made reference to only paragraph 7 of the plaint, the appellant's counsel made reference to paragraph 3 of the plaint which states as follows:

"*The plaintiff seeks declarations that the defendant's alleged sale of* 10 his house located on LHR Volume 1561 Folio 24 Block 262, Plot 444 Mobutu Road Makindye was null and void which should be cancelled and for special and general damages arising out of the said sale."

So it is on record that in paragraph 3 of his plaint, the appellant also challenged the sale of his property. 15

It is my finding that the Court of Appeal limited its scope of reevaluation regarding the issue of validity of the sale to only paragraph 7 of the plaint. Therefore, the Court of Appeal's conclusion that *there were no other facts upon which it was alleged*

that the sale was premature, ineffectual or illegal other than those set 20 out paragraph 7 was erroneous.

Be that as it may, a careful reading of paragraph 3 above shows that it is a general averment. The appellant did not go ahead to elucidate either in the evidence or submissions in what particular

ways the sale was alleged to be null and void to warrant the courts' $25$ intervention.

It was at the Court of Appeal, as shown by the record of proceedings that the appellant elucidated in what ways the sale was null and void under issue 2 of the submissions. The appellant argued that

there was no valid sale because the property was sold without 30 advertisement as is required by Section 28 (2) of the Mortgage Act.

Furthermore, the appellant argued that since the property was first advertised in October 1998 and yet the property was sold in April 1999, the respondent bank had to re-advertise the property before

proceeding with the sale. This is the same argument the appellant 35 raised in ground 2 of the appeal before this Court.

Similarly, on this aspect, the Court of Appeal held that the issue was not raised at the trial.

$\sqrt{E}$ I have looked at the record of the trial Court and the submissions which the Court of Appeal relied upon in determining the matter and find that indeed, at the High Court the plaintiff (now appellant) did not challenge the validity of the sale at all. He raised the following issues:

$(i)$ Whether the mortgage was valid or not.

- Whether the defendant made a demand on the plaintiff for $(ii)$ the overdraft and whether such a demand was necessary under the circumstances. - Whether there was fraud or bad faith. $(iii)$ - None of the issues reproduced above challenged the validity of the 15 sale on the basis that the property was sold without advertisement.

I therefore come to the conclusion that although the appellant made general averments in paragraphs 3 and 7 of his plaint challenging the sale of his property, he did not substantiate his averments on

the issue of sale without advertisement at the trial Court. The first 20 time he raised the issue was at the appellate court.

It is a cardinal rule that a party is bound by their pleadings and it is not open to the court to base its decision on an unpleaded issue.

Even where there is discordance between what is pleaded and the evidence or submissions, such that either the submissions or 25 evidence cover up for a defect in the pleadings, the cardinal rule still applies. This is because the defence would otherwise be denied an opportunity to make a reply to the new allegations raised and hence the ends of justice will not be served.

- I also note that both Rules 98 of the Rules of this Court and 102 30 (a) of the Court of Appeal Rules prohibit the raising of a new ground or argument on appeal except with the leave of Court. Similarly, Order 6 rule 7 of the Civil Procedure Rules bars parties from departing from their original pleadings. - Arising from the foregoing analysis, I hold that grounds 1 and 2 35 should fail.

レイミ

Ground 3

The question which arises under this ground is whether the learned Justices of the Court of Appeal erred in upholding the trial Judge's finding that the appellant did not prove the alleged particulars of fraud or bad faith.

The burden to prove an allegation of fraud lies on the party who asserts that a transaction was tainted with fraud.³ In discharging the said burden, the standard of proof required is above a balance

$\overline{5}$

of probabilities although not beyond reasonable doubt. In essence, fraud must be strictly proved⁴; mere suspicion and speculation that fraud occurred is not sufficient.⁵

The Court of Appeal held that the 9 particulars of fraud set out by the appellant were not proved. This was in tandem with the finding of the trial Judge.

I note that both lower courts made a concurrent finding that fraud was not proved and it is a trite principle of law that an appellate court should not interfere with the concurrent findings of two lower courts except where the finding is premised on wrong principles of

law. [See:Erisafani Mudumba vs. Wilberforce Kuluse⁶; 25 Lutaaya vs. Attorney General⁷; Milly Masembe vs. Sugar Corporation and Another⁸ and Banco Arabe Espanol vs. Bank of Uganda⁹.

Both the Court of Appeal and the trial Court relied on the wellknown principles governing fraud some of which I have reproduced

^&lt;sup>3</sup> Yakobo M. N. Senkungu & 4 Ors vs. Cresensio Mukasa SCCA No.17 of 2014.

^&lt;sup>4</sup> Fredrick. J. K. Zaabwe vs. Orient Bank Ltd & Others SCCA No. 141 of 2006 and Kampala Bottlers ltd vs. Damanico (U) Ltd SCCA No. 22 of 1992

^&lt;sup>5</sup> Yakobo M. N. Senkungu (footnote 3)

^&lt;sup>6</sup> SCCA. No. 9 of 2002.

^&lt;sup>7</sup> SCCA No. 10 of 2002.

^&lt;sup>8</sup>SCCA No. 1 of 2000.

^&lt;sup>9</sup> SCCA No. 8 of 1998.

above. I therefore find no reason to depart from the finding of the two lower courts that the appellant failed to prove fraud.

Consequently, Ground 3 of the appeal also fails.

Count to day

Conclusion

Having found that all the grounds of the appeal should fail, I would order the appeal to be dismissed and the judgment of 10 the Court of Appeal upheld.

I would also order that the respondent be granted costs of this appeal as well as those in the courts below.

Dated at Kampala this. $\frac{1}{2}$ day of $\frac{M\alpha}{2}$ . $\frac{1}{2}$ . 15

> In usalemme.

PROF. LILLIAN TIBATEMWA-EKIRIKUBINZA JUSTICE OF THE SUPREME COURT.

$\leq$ $\mathbb{A}$

Belivered as directed by the Hom.

$35 - 03 - 9055$

27 Ligioner.

$\mathcal{L}^{\alpha}$

THE REPURLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA

(CORAM: OPIO-AWERI, TIBATEMWA-EKIRIKUBINZA, MUHANGUZI, TUHAISE; CHIBITA JJSC)

CIVIL APPEAL NO. 2 OF 2019

BETWEEN

<table> LUYIMBAZI SULAIMAN ::::::::::::::::::::::::::::::::::::

AND

STANBIC BANK UGANDA LIMITED::::::::::::::::::::::::::::::::::::

{Appeal from the decision of the Court of Appeal at Kampala (Owiny Dollo, DCJ, Egonda-Ntende and Obura JJA). Dated 17^th January, 2019 in Civil Appeal No. 50 of 2004.}

JUDGMENT OF HON. JUSTICE OPIO-AWERI, JSC

I have had the benefit of reading in draft the Judgment of my learned sister Hon. Justice Prof. Tibatemwa-Ekirikubinza, JSC. I agree with her decision that this Appeal should be dismissed for the reasons she has given in her Judgment. I also agree with the Orders she has proposed.

As all the members on the Coram agree, this Appeal is hereby dismissed on the terms as proposed by the learned Justice.

Dated at Kampala this ....................................

OPIO-AWERI JUSTICE OF THE SUPREME COURT

THE REPUBLIC OF UGANDA

IN THE SUPREME COURT OF UGANDA AT KAMPALA

Cora m : O pio-Awe ri, Ti bote mwo- Ekiri ku b i nzo, M u ho ng uzi, Tu ho ise, Chibito, JJ. SC

CIVIL APPEAL NO. 2 OF 2019

LUYIMBAZI SULAIMAN APPETLANT

VERSUS

STANBIC BANK UGANDA LIMITED RESPONDENT.

(Appeol orising from the judgment of the Court of Appedl of Ugqndq in Civil Appeql No. 50 of 2004 before Owiny-Dollo, DCJ, Egondo-Ntende, Obura, llA doted 2oth Msrch,2o2o)

JUDGMENT OF MUHANGUZI JSC

I have had the benefit of reading in draft the judgment of my learned sister Hon. Justice Prof. Lillian Tibatemwa-Ekirikubinza, JSC-

lagree with her analysis, findings, decision and orders proposed. Dated at Kampa la this -r -:-N !Mtr day of .......2022.

Ezekiel Muhanguzi JUSTICE OF THE SUPREME COURT.

IN THE SUPREME COURT OF UGANDA AT KAMPALA

CORAM: OPIO-AWERI, TIBATEMWA- EKIRIKUBINZA, MUHANGUZI, TUHAISE AND CHIBITA JJ. SC

CIVIL APPEAL NO.02 OF 2019

LUYIMBAZI SULAIMAN:::::::::::::::::::::::::::::::::::

VERSUS

STANBIC BANK UGANDA LIMITED::::::::::::::::::::::::::::::::::::

[Appeal arising from the judgment of the Court of Appeal of Uganda in Civil Appeal No. 50 of 2004 before Owiny-Dollo, DCJ, Engonda – Ntende, Obula, JJA dated 20^th March 20201

JUDGMENT OF TUHAISE, JSC.

I have had the benefit of reading the lead judgment of Hon Justice Prof Lilian Tibatemwa-Ekirikubinza, JSC.

I agree with her analysis, findings, decision and orders proposed.

$\frac{1}{\sqrt{2}}$ day of $\frac{W_{\alpha}V_{\alpha}}{1}$ day of $\frac{1}{\sqrt{2}}$ Dated at Kampala, this -

Percy Night Tuhaise JUSTICE OF THE SUPREME COURT

THE REPUBLIC OF UGANDA

IN THE SUPREME COURT OF UGANDA AT KAMPALA

(CORAM: OPIO. AWERI; TIBATEMWAEKIRIKUBINZA; MUHANGUZI; TUHAISE; CHIBITA J. S. C.)

a.

CML APPEAL NO: 02 OF 2019

LIryIMBAZI SULAIMAN : : : : : : : : : : : : : : : : : : : : : : : : : : : APPELLANT

AND

STANBIC BANK UGANDA LIMITED :::::::::: RESPONDENT

[Appeal arising from the judgment of the Court ofAppcal at Kanpala (Owiay-Do11o, DCI; Egonda-Ntende; Oburq ilA) dated 2d Manb, 2020 in Ciuil Appeal No. 50 of2}OlJ

JUDGMENT OF CHIBITA, JSC.

I have had the advantage of reading in advance the judgment prepared by my learned sister, Hon. Justice Prof. Lillian Tibatemwa-Ekirikubinza, JSC.

I agree with the orders she has proposed.

Dated at Kampala this ay of V...tp,trt ²²

\-lDt

Hon. Justice Mike J. ¹ta JUSTICE OF THE SUPREME COURT