Wakilii

Lubega v Barclays Bank (U) Limited (Civil Appeal 2 of 1992)

Supreme Court · [1992] UGSC 23 · 1992 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Civil appeal from a High Court judgment dismissing a detinue suit
Decision
Appeal dismissed; the High Court judgment in favour of the respondent bank upheld and the appellant's detinue claim fails

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Holding

The Supreme Court dismissed the appeal. A receiver appointed under the debenture was the agent of the debtor company, so the bank was not the proper party to be sued in detinue. The company's sale of the lorry breached an express debenture covenant prohibiting alienation without the bank's written consent, and contravened a Government transfer restriction; the floating charge crystallised on default and appointment of the receiver, so the company passed no title and the appellant acquired none. Though the trial judge misdirected herself by holding that unpleaded particulars of fraud were not fatal (particulars of fraud must be specifically pleaded), the decision rested on want of title, not fraud, so the misdirection did not invalidate the judgment.

Facts

Ssezibwa Estates Ltd, a coffee dealer and customer of the respondent bank, executed debentures charging all its assets to the bank. With loan funds advanced by the bank, the company bought a Tata lorry (UPF 818) allocated by Government, subject to a registration-card restriction barring transfer without Treasury consent and to a debenture covenant prohibiting alienation of charged property without the bank's written consent. The company defaulted on the loan. By a sale agreement dated 26 September 1989 it purportedly sold the lorry to the appellant for shs 11 million, handing over the log book and a transfer form. The appellant used the lorry for over a year before transferring it into his name on 19 September 1990. On 20 August 1990 the bank appointed a receiver; on 22 August 1990 the lorry was impounded and advertised for sale. The appellant sued the bank in detinue for release of the lorry and damages.

Issues

  1. Whether the appellant had a cause of action against the respondent bank, or whether the receiver and the debtor company were the proper parties to be sued.
  2. Whether the trial court could substitute defendants under Order 1 rule 10(2) of the Civil Procedure Rules.
  3. Whether the floating charge created by the debenture had crystallised before the company purportedly sold the lorry, so as to determine whether the company could pass title.
  4. Whether a sale in breach of an express covenant in the debenture, and contrary to the registration restriction, passed valid title to the appellant.
  5. Whether the respondent's failure to plead particulars of fraud was fatal to a finding of fraud.

Orders

  • Appeal dismissed.
  • Costs of the appeal and of the court below awarded to the respondent bank.

Key headnotes

Company Law — Receivers — Agency of receiver appointed under a debenture
Where a debenture so provides, a receiver appointed by the debenture holder is the agent of the debtor company and not of the debenture holder, so the debtor company, not the debenture holder, is the proper party to be sued for the receiver's acts.
Banking & Finance — Floating Charges — Crystallisation on default and appointment of receiver
A floating charge created by a debenture crystallises upon default by the company and the appointment of a receiver at the instance of the debenture holder, whereupon the company's liberty to deal with the charged assets ceases.
Company Law — Floating Charges — Dealing in the ordinary course of business restrained by express covenant
A company's ordinary liberty to deal with assets subject to a floating charge in the ordinary course of business is displaced where the debenture expressly prohibits alienation without the debenture holder's written consent; a sale in breach of such a covenant is invalid and passes no title.
Commercial Law — Sale of Goods — Title — Purchaser with notice of encumbrance
A purchaser who buys charged company property in breach of a debenture covenant, having been put on notice of the encumbrance by an endorsement on the registration document, acquires no title and cannot claim the protection of a bona fide purchaser for value; no one can pass a better title than he himself holds.
Civil Procedure — Pleadings — Particulars of fraud must be specifically pleaded
Under Order 6 rule 2 of the Civil Procedure Rules a party relying on fraud must plead the particulars of the alleged fraud with dates; failure to plead and particularise fraud is a fundamental defect of law that is not curable by evidence.
Tort Law — Detinue — Requirement of a superior right to possession
A claimant in detinue must establish a right to possession superior to that of the defendant; where the claimant's title to possess rests on an invalid sale, the claim in detinue cannot succeed.
Civil Procedure — Parties — Power to substitute defendants under Order 1 rule 10(2)
Order 1 rule 10(2) of the Civil Procedure Rules, read together with sub-rules 4, 5 and 6, confers a wide discretion that includes power to substitute defendants, and is not confined to merely adding or striking out parties.

Legislation cited (5)

  • Civil Procedure Rules Order 1 rule 7
  • Civil Procedure Rules Order 1 rule 10(2)
  • Civil Procedure Rules Order 6 rule 2
  • Sale of Goods Act s.24
  • Partnership Act s.40

Cases cited (9)

  • Gosling v Gaskell [1897] AC 575
  • Owen v Cronk [1895] 1 QB 265
  • Achelis (Kenya) Ltd v Nazarali and Sons Ltd [1967] EA 382
  • Household Centre Ltd v Achelis (Kenya) Ltd [1967] EA 823
  • Goerge Baker Ltd. v Eyon (197*0 IA S.R.9OO
  • Re B Johnson & Co (Builders) Ltd [1955] Ch 634
  • Wheatley v Silkstone & Co (1885) 29 Ch D 715
  • Dhanji Ramji v Rambhai & Co (Uganda) Ltd [1970] EA 515
  • Civil Appeal No. 12 of l9o? Okello v Uganda National examinations Board (unreported)
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