A. K. Detergents Limited and 4 Others v G. M. Combined Uganda Limited (Civil Appeal 17 of 1998)

Court of Appeal · [1998] UGCA 48 · 1998 Appeal Allowed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Civil appeal from a High Court judgment cancelling the first appellant's certificates of title and granting an injunction

Decision

Respondent's suit dismissed; trial judgment set aside; appellants awarded costs

The full judgment

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Holding

The Court of Appeal allowed the appeal. It held that a debenture registered at the Companies Registry but not at the Land Registry creates a legal mortgage under the Companies Act, not merely an equitable charge requiring a court order to enforce. Receivers/Managers, as agents and attorneys of the borrower under the debenture's power-of-attorney clause, could validly sell and transfer charged property without a separate power of attorney or foreclosure order. Fraud was not pleaded as an issue, was not proved by the respondent's evidence, and could not be found by implication; the burden lay on the respondent, not the purchaser. The first appellant was a bona fide purchaser for value whose title could only be impeached for fraud.

Facts

The respondent company owned seven leasehold properties at Mbuya, Kampala, and operated a soap factory financed by loans from the second and fifth appellants. The loans were secured by debentures executed by the respondent and registered at the Companies Registry but not at the Land Registry. The debentures empowered the holders to appoint Receivers/Managers on default and contained a clause appointing the holders and any receiver as attorneys of the borrower. On default, the second and fifth appellants appointed the third and fourth appellants as joint Receivers/Managers, who within three months sold the suit lands to the first appellant, which was then registered as proprietor. The respondent sued the first appellant for cancellation of title, damages for trespass and conversion, and an injunction, alleging fraud. The respondent's pleadings did not mention the loans or default. The High Court found fraud by implication and collusion and cancelled the first appellant's title.

Issues

Whether the transfer of the suit lands to the first appellant by the Receivers/Managers was effectual.
Whether debentures registered at the Companies Registry but not at the Land Registry create only equitable charges unenforceable without a court order.
Whether Receivers/Managers could sell and transfer the registered proprietor's land without a separate power of attorney or court order of foreclosure.
Whether fraud and collusion against the appellants were proved.
Whether the burden of proof was wrongly shifted onto the first appellant to show its registration was not fraudulent.

Orders

Appeals allowed.
Judgment and orders of the trial judge set aside.
An order dismissing the respondent's suit against the appellants substituted.
Appellants awarded costs in the Court of Appeal and in the High Court.

Key headnotes

Debentures — Registration at Companies Registry — Effect on Charge over Land

A debenture registered at the Registry of Companies but not at the Land Registry creates a legal mortgage under the Companies Act and not merely an equitable charge unenforceable without a court order.

Receivers/Managers — Agency and Power of Attorney — Power to Sell and Transfer Charged Land

Where a debenture contains a clause appointing the debenture holder and any receiver as the attorneys of the borrower, Receivers/Managers are agents and attorneys of the borrower and may validly sell and transfer the charged immovable property without a separate power of attorney or a court order of foreclosure.

Charge over All Assets — Sufficiency of General Description

A debenture creating a charge over all the borrower's immovable property, present and future, encumbers all such property including land not specifically itemised in the debenture.

Fraud — Pleading and Standard of Proof

Fraud must be specifically pleaded and strictly proved to a standard higher than a mere balance of probabilities; there is no constructive fraud and fraud cannot be found by mere implication.

Burden of Proof — Fraud Against Registered Purchaser

The burden of proving fraud rests on the party alleging it; a purchaser registered as proprietor is not obliged to prove that its registration was free of fraud.

Bona Fide Purchaser for Value — Impeachment of Title

The title of a bona fide purchaser for value can only be impeached on proof of fraud against that purchaser.

Additional Evidence on Appeal — Exceptional Cases

An appellate court may take additional evidence in exceptional cases where the evidence is relevant and vital for the proper determination of the issue and the interests of justice so demand.

Legislation cited (8)

Companies Act s.103(1)
Registration of Titles Act s.138
Registration of Titles Act s.154
Registration of Titles Act s.115
Registration of Titles Act s.91(2)
Evidence Act s.105
Evidence Act s.100
Civil Procedure Rules Order 6 rule 2

Cases cited (9)

Re B Johnson & Co (Builders) Ltd [1955] 2 All ER 775
Gomba Holdings (UK) Ltd v Timories Finance Ltd [1989] All ER 261
Household Centre Ltd v Achelis (Kenya) Ltd [1967] EA 823
Grindlays Bank (U) Ltd v Uganda Bottlers Ltd (Civil Appeal No. 29 of 1995)
Kampala Bottlers Ltd v Uganda Bottlers Ltd (Civil Appeal No. 16 of 1996)
Patel v Makanji [1957] EA 314
Okello v UNEB (Civil Appeal No. 12 of 1997)
Lubega v Barclays Bank (U) Ltd (Civil Appeal No. 2 of 1992)
Kampala Bottlers Ltd v Damanico (U) Ltd (Civil Appeal No. 22 of 1992)

Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.