Wakilii

Meera Investment Limited v DFCU Bank Limited and Another (Civil Suit 948 of 2017)

High Court · [2023] UGHCLD 340 · 2023 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for declarations concerning illegal transfer and trespass on leasehold properties
Decision
Plaintiff's suit succeeds against both Defendants. DFCU Bank ordered to vacate 48 properties and hand over vacant possession to Meera Investments within 3 months. Leasehold titles cancelled.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the transfer and taking of possession of 48 leasehold properties by DFCU Bank without the lessor's prior written consent required by statute and contract was illegal and fraudulent. Under Registration of Titles Act s.36(2), lessor's rights are protected by statute, not merely contract. Financial Institutions Act does not authorise statutory transfers in disregard of lease covenants. Acquisition was by ordinary sale and transfer, not statutory transfer. The covenant requiring consent was binding on the transferee. Lack of consent rendered transfer void ab initio. DFCU Bank's refusal to recognise Meera Investments as lessor, non-payment of ground rent, and denial of lessor's title rendered DFCU Bank a trespasser. Leasehold titles cancelled and vacant possession ordered. Commissioner Land Registration acted illegally but not fraudulently in effecting transfers without consent.

Outcome

Plaintiff's suit succeeds against both Defendants. DFCU Bank ordered to vacate 48 properties and hand over vacant possession to Meera Investments within 3 months. Leasehold titles cancelled.

Facts

Meera Investment Limited, registered proprietor of 48 Mailo and freehold properties, leased them to Crane Bank Limited under lease agreements requiring lessor's prior written consent for any parting with possession. In January 2017, Bank of Uganda, as receiver of Crane Bank Limited (in receivership), sold and transferred the leasehold interests to DFCU Bank under a Purchase and Assignment Agreement without obtaining Meera's consent. DFCU Bank took physical and legal possession and was registered as proprietor of all 48 leasehold properties. Meera was not paid ground rent and DFCU Bank refused to recognise Meera as lessor. DFCU Bank relied on clause in the Purchase Agreement stating properties were sold subject to lease covenants, but argued consent was not required as this was a statutory transfer under Financial Institutions Act. The Commissioner Land Registration effected the transfers without requiring lessor's consent. Meera sought declarations of illegality and fraud and orders for cancellation of titles and vacant possession.

Issues

  1. Whether the 1st Defendant required prior written consent from the Plaintiff as the registered proprietor of the Freehold/Mailo titles before taking possession of, and causing a transfer of the leasehold interest to itself?
  2. Whether the 1st Defendant acted illegally and fraudulently in taking possession of and transferring the leasehold interests, without the prior written consent of the Plaintiff, as the registered proprietor of the Freehold/Mailo titles/interests?
  3. Whether the 2nd Defendant acted illegally and fraudulently in effecting a transfer of the leasehold interest in the suit property into the names of the 1st Defendant, without the consent of the Plaintiff?
  4. Whether the said leasehold certificates of title, registered in the names of the 1st Defendant are liable to be cancelled on account of fraud and illegality?
  5. What remedies are available to the parties?

Orders

  • A declaration that the Plaintiff, as the registered proprietor of the freehold/Mailo interests in the suit properties, had the right to consent or otherwise to any taking of possession and transfer of the leasehold interest to the 1st Defendant.
  • A declaration that the transfer of the leasehold interests in the suit properties from Crane Bank Limited into the names of the 1st Defendant was tainted with illegality and fraud and is therefore invalid.
  • A declaration that the transfer of the leasehold interests in the suit properties to the 1st Defendant and taking of possession of the same by the 1st Defendant, without the prior consent of the Plaintiff rendered the leases illegal and invalid.
  • A declaration that there are no valid leases in respect of the suit properties. The said leases are therefore declared to be invalid and absolutely determined on account of breach and illegality.
  • A declaration that the occupation and continued utilization of the suit properties by the 1st Defendant constitutes trespass.
  • A declaration that the Plaintiff as the registered proprietor of the freehold/Mailo interest in the suit properties is entitled to vacant possession of the suit properties within 3 months from Judgment date.
  • The 2nd Defendant is hereby ordered to cancel the registration of the 1st Defendant as proprietor of the leasehold interests in respect of all the suit properties.
  • The 2nd Defendant is hereby ordered to cancel the leasehold titles in respect of the suit properties.
  • The 2nd Defendant is hereby ordered to cancel the entry of the suit leases, lease variations and lease extensions registered as encumbrances on the Mailo and freehold titles of the Plaintiff.
  • The 1st Defendant is hereby ordered to vacate all the suit properties and give vacant possession to the Plaintiff within 3 months.
  • An order of a permanent injunction is hereby issued restraining the 1st Defendant, its agents and servants from continued trespass on the suit properties.
  • The Plaintiff is awarded general damages in the sum of UGX 2,400,000,000 payable by the 1st Defendant. The said sum shall carry interest at 8% per annum from the date of this judgement till payment in full.
  • Mesne profits not awarded.
  • The Plaintiff is awarded costs of the suit against the Defendants.

Rules and key headnotes

Leasehold Property — Lessor's Statutory Rights — Registration of Titles Act s.36(2)
Under Registration of Titles Act s.36(2), every certificate of title to leasehold land is subject to the rights and powers of the lessor. The rights and powers of a lessor are not merely contractual but are expressly reserved and protected by statute. Any transaction concluded having the effect of transferring legal and physical possession of leasehold properties in a manner that avoids the reserved rights and powers of the lessor amounts to breach of statute and is illegal.
Lease Covenants — Consent to Part with Possession — Binding on Transferee
A covenant in a lease requiring the lessee's prior written consent before parting with possession binds not only the original lessee but also any transferee of the leasehold interest. Where a transferee purchases leasehold property expressly subject to lease covenants, the transferee is bound to comply with those covenants including the covenant to obtain lessor's consent before taking possession.
Leasehold Property — Possession — Meaning
Possession in the context of leasehold land includes both legal and physical possession. A proper construction of the phrase 'not to part with possession' in a lease covenant covers both legal and physical possession and extends to transfer of title. A lessee parts with possession if it completely grants its rights in the lease and demised premises to another to the extent that such grant wholly ousts the lessee from legal possession.
Breach of Lease — Transfer without Consent — Voidness
A transfer of leasehold property concluded without obtaining consent required under the lease covenant and by statute is void ab initio and illegal. A contract for entering into possession of land before the required consent is given is prohibited by law and is void; nothing done subsequently can legalise or render such contract enforceable.
Financial Institutions Act — Receiver's Powers — No Statutory Transfer Power
Section 95(1)(b) of the Financial Institutions Act authorises a receiver to arrange for purchase of assets and assumption of liabilities by another financial institution. This does not constitute a statutory transfer by operation of law. The acquisition of leasehold properties by a purchaser from a receiver is an ordinary sale and transfer governed by Registration of Titles Act and the law of contract, not a statutory transfer that overrides lease covenants or lessor's statutory rights.
Lessee Denying Lessor's Title — Trespass
Where a lessee or purported lessee denies the title of the lessor, refuses to recognise the lessor, refuses to be bound by lease covenants, and refuses to pay ground rent, such lessee becomes a trespasser on the property and the lessor is entitled to an order of vacant possession.
Pleadings — Makula International Principle — Limits
The Makula International principle that a court may determine illegality whether pleaded or not does not apply where the alleged illegality is premised on material facts that require evidence to be adduced by the party alleging illegality. Where alleged illegality requires detailed factual investigation, it must be pleaded with particulars and evidence led to enable the adversary party to plead and adduce evidence in rebuttal. A party may not raise at trial or submissions stage factual points available at pleadings stage but not pleaded.

Legislation cited (15)

Cases cited (21)

  • Miller v Minister of Pensions [1947] 2 ALL E R 372
  • Makula International v Cardinal Nsubuga
  • Fang Min v Belex Tours and Travel Ltd (Supreme Court Civil Appeal No. 6 of 2013)
  • Bitarabeho v Kakonge (Civil Appeal No. 4 of 2000)
  • Ruparelia and Meera Investments Limited v Crane Bank Ltd (in Receivership) (High Court Miscellaneous Application No. 320 of 2019)
  • Crane Bank Limited (in Receivership) v Meera Investments Limited and Sudhir Ruparelia (Civil Suit No. 493 of 2017)
  • Civil Appeal No 252 of 2019
  • SCCA No. 07/2020
  • Babigumira v Magezi (High Court Miscellaneous Application No. 538 of 2013)
  • Lam Kee Ying Sdn v Lam Shes Tong and Another [1974] 3 ALLER
  • Byaruhanga v Ruvugwaho (Civil Appeal No. 9 of 2014)
  • Ikuya v Mbarak (Civil Appeal No. 87 of 2012)
  • Deo & Sons Properties Limited v UBC and Others (Civil Suit No. 326 of 2011)
  • Broadways Construction Co. v Kasule [1972] 1 EA 76
  • Kampala District Land Board v National Housing and Construction Corporation (Civil Appeal No. 2 of 2004)
  • Commissioner Land Registration v Lukwaiiu (Civil Application No. 12 of 2016)
  • Transroad Uganda Limited v Commissioner Land Registration (Civil Suit No. 621 of 2017)
  • Law Development Centre v Serufusa (Civil Suit No. 724 of 2003)
  • 3wm Uganda Limited v Loadwell Freight Logistics Ltd (Civil Suit No. 299 of 2015)
  • Johnson v Agnew [1979] 1 All ER 883
  • Sulaiman v Stanbic Bank (U) Ltd (Supreme Court Civil Appeal No. 2 of 2019)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Meera_Investment_Limited_v_DFCU_Bank_Limited_and_Another_(Civil_Suit_948_of_2017)_[2023]_UGHCLD_340_(24_October_2023)
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.