Wakilii

Mohammad Razi v Commercial Bank of Africa and Another (Miscellaneous Application No. 264 of 2022)

High Court · [2022] UGCOMMC 29 · 2022 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Objector proceedings arising from execution of a consent decree in Civil Suit No. 973 of 2016
Decision
Property transfer set aside as fraudulent conveyance; property remains liable to attachment and sale in execution

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the objector's application and set aside the transfer of property from the judgment debtor to the objector as void against creditors. The transfer bore multiple badges of fraud: it was made shortly after a consent decree was entered, the instrument of transfer remained unregistered three and a half years later, the judgment debtor remained in physical possession, the transaction was between business associates rather than at arm's length, and the mortgage release was never registered. The court held that the transaction was a scheme to circumvent the judgment debtor's civil liability and to delay, hinder or defraud creditors.

Outcome

Property transfer set aside as fraudulent conveyance; property remains liable to attachment and sale in execution

Facts

The judgment creditor obtained a consent decree against the judgment debtor on 13 November 2018 in Civil Suit No. 973 of 2016. On 31 December 2018, the judgment debtor purportedly sold three properties to the objector, a business associate, for US$1,670,000. The objector claimed to have transferred US$1,599,990.80 to the judgment debtor on 4 January 2019. The instrument of transfer was executed on 31 December 2018 but was never registered. Standard Chartered Bank issued a mortgage release on 28 January 2019, but this too was never registered and the mortgage remained on the title. The judgment debtor remained in physical possession of the property. The judgment creditor filed for execution on 12 April 2019 and attached the property on 28 April 2021. The objector filed the present application on 23 May 2022 claiming ownership. The objector claimed he was in Pakistan when the attachment occurred and only returned to Uganda in February 2022.

Issues

  1. Whether the property attached in execution was in the possession of the judgment debtor or in the possession of the objector on account of or in trust for the judgment debtor.
  2. Whether the transfer of the property from the judgment debtor to the objector was a fraudulent conveyance made with intent to delay or defeat creditors.

Orders

  • The transfer of the property by the judgment debtor to the objector is set aside as void as against the respondent and other creditors.
  • The property is liable to attachment and sale being the property of the judgment debtor.
  • The application is dismissed with costs to the respondent.

Rules and key headnotes

Civil Procedure — Objector Proceedings — Test for Release from Attachment
In objector proceedings under Order 22 rule 57 of the Civil Procedure Rules, the sole question to be investigated is one of possession. The court must determine whether the property was in the possession of the judgment debtor or in the possession of the objector on account of or in trust for the judgment debtor. Questions of legal right and title are not relevant except insofar as they affect the decision on possession.
Civil Procedure — Execution — Property Liable to Attachment
Under section 44 of the Civil Procedure Act, property liable to attachment and sale in execution of a decree includes all saleable property, movable or immovable, belonging to the judgment debtor, or over which or the profits of which the judgment debtor has a disposing power which he or she may exercise for his or her own benefit, whether the property be held in the name of the judgment debtor or by another person in trust for him or her or on his or her behalf.
Contract Law — Fraudulent Conveyances — Voidability at Option of Creditor
A transfer of immovable property made with intent to delay or defeat the creditors of the transferor is voidable at the option of any creditor so defeated. No one has power over his property to such extent that he can, whilst using his right of alienation of property, delay, defraud or hinder his creditors.
Contract Law — Fraudulent Conveyances — Badges of Fraud
Badges of fraud are accompanying circumstances tending to excite suspicion and distrust as to the bona fides of a challenged conveyance which, standing unexplained, may warrant an inference of fraud. In evaluating the existence of fraud, courts look to the judgment debtor's entire course of conduct and no particular badge is essential or determinative. A concurrence of several badges makes a strong case for fraud.
Contract Law — Fraudulent Conveyances — Indicators of Fraudulent Intent
Suspicious circumstances which courts may characterise as badges of fraud include: secrecy surrounding the transaction; no change of possession after conveyance; transfer to a non-arm's-length person; transfer of substantially all of the debtor's assets; transfer effected with unusual haste; grossly inadequate consideration; benefit retained by the transferor; transfer made in the face of potential or threatened litigation; knowledge of the creditor's claim; and lack of accurate documentation supporting the transaction.
Contract Law — Fraudulent Conveyances — Presumption of Intent
Debtors are presumed to intend the natural consequences of their acts, and the natural consequence of a purported transfer would, at a minimum, delay or hinder recovery of a judgment debt. A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for other than a present, reasonably equivalent value, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent.

Legislation cited (2)

Cases cited (8)

  • Khakale E t/a New Elgon Textiles v Banyamini W (in the matter of Mugunjo) [1976] HCB 31
  • Kasozi Ddamba v M/s Male Construction Service Co [1981] HCB 26
  • Attorney General v Twyne and Pearce (1601) 76 ER 809
  • Partridge v Gopp (1758) 28 ER 647
  • Bank of Montreal v Vandine (1953) 1 DLR 456
  • Prodigy Graphics Group Inc v Fitz-Andrews (2000) OJ No 1203
  • Ferguson v Lastewka (1946) OR 577
  • Evans v Trude 193 Or 648 (1952)

Full judgment

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Mohammad Razi v Commercial Bank of Africa and Another (Miscellaneous Application No. 264 of 2022) [2022] UGCommC 29 (20 May 2022)
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.