THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

COMMERCIAL DIVISION

CIVIL SUIT NO 518 OF 2007

AGNES BAINOMUGISHA)…..............................................PLAINTIFF

VERSUS

DFCU LTD)….................................................................DEFENDANT

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA

JUDGMENT

The plaintiff’s suit against DFCU the defendant herein is for declarations that the
mortgage agreement between the plaintiff’s husband and the defendant is null
and void as it contravenes the law in that no consent of a spouse under section 39
of the Land Act cap 227 had been obtained before mortgaging the suit land; for
orders directing the Registrar of Titles to cancel the mortgage on the land
comprised in Plot 15 Block 18 Folio 8 Volume 2514 Kashari Mbarara under
mortgage instrument 326234; for a permanent injunction restraining the
defendants from selling or claiming an interest in respect of the that land, general
damages and costs of the suit. The defendant denies that the mortgage is invalid
and contends in its written statement of defence that the mortgage was executed
with the full participation of the plaintiff who is the spouse of the registered
proprietor. The defendant further contends that the plaintiff is estopped from
questioning the validity or legality of the mortgage the plaintiff had endorsed as a
director/secretary on the ground of lack of consent of a spouse.

Kenneth Kakuru represented the plaintiff while Kabito Karamagi represented the
defendant. When the case came for hearing before me, the counsels agreed on all
the relevant facts and documents in their joint scheduling memorandum in which
they also agreed that there was no need to call witnesses as the facts of the
dispute were not in contention.
1
Agreed Facts:

The agreed facts and documents in the joint scheduling memorandum are as
follows:

a. The plaintiff has at all material times been a director and secretary in a
company known as Bainebitamazire Mixed Farm Ltd (hereinafter referred
to as 'the company'). Mr Frank Bitamazire Bainomugisha, the plaintiff’s
husband is her only co‐director in the said company.

b. The board of the said company convened on 3rd of July 2002 and authorised
the company to apply and subsequently obtained an investment loan
facility of Uganda shillings 150 million from the defendant.

c. The company agreed to secure the repayment of the said facility by

creating the following securities in favour of the defendant:

i. Legal mortgage dated 5th July 2002 in respect of land and

developments comprised in LRV 2514 folio 8 plot 15 Kashari block
Mbarara (the suit property) as well as land and developments
comprised in LRV 1727 folio 12 plot 330 Kibuga block 23 at Kampala.

ii. Debenture deeds dated 5th July 2002 over all the movable assets of
the company;

iii. Personal guarantees of the directors including the plaintiff.

d. The plaintiff’s husband and co‐director in the company being the registered
proprietor of the said land executed a power of attorney authorising the
company to mortgage the said land to the defendant.

2
 e. The plaintiff being a director and secretary in the company duly executed
the resolution authorising the borrowing as well as the mortgage and
debenture deeds on the company's behalf.

f. The company defaulted on its repayment obligations and upon receipt of a

final demand dated 1st October 2005, the plaintiff and defendant co‐
operated in the disposal of the security comprised in LRV 1727 folio 12 plot
330 Kibuga block 23 in January 2006 and the proceeds there from applied
towards the settlement of its outstanding loan monies.

g. The company still failed to pay the balance of its loan after the sale of the
above described security whereupon on 30th October 2006, the defendant
enforced its rights in the debenture and the mortgage deeds by appointing
a receiver/manager to realise its securities.

h. The receiver/manager advertised the sale of the property in the Monitor

Newspaper of 3rd November 2006 whereupon the plaintiff commenced this
suit.

i. The plaintiff placed a caveat on the property dated 19th December 2006
vide instrument number 375160 of 2nd January 2007.

j. The property has since been disposed of following this court's ruling in
miscellaneous application number 435 of 2007 and miscellaneous cause 13
of 2010 as well as the Court of Appeal ruling in civil appeal number 63 of
2007.

In addition the parties agreed on the documents to be relied on as exhibits these

are:

i. Board resolution dated fifth of July 2002

ii. Personal Guarantee executed by the plaintiff
iii. Mortgage deed executed by the company dated fifth of July 2002
iv. Debenture deeds dated fifth of July 2002
3
 v. Kampala attorney and solicitors letter dated 21 October 2005
vi. Defendants letter dated fourth of November 2005
vii. Kampala attorney and solicitors letter dated fourth of November 2005.
viii. Capital outdoor advertising company Ltd letter dated the 2 January
2006.
ix. Advertising in the daily monitor newspaper of 3rd November 2006
x. plaintiffs caveat dated 19th of December 2006
xi. High Court ruling in miscellaneous cause 13 of 2010 – DFCU Ltd versus
Agnes Bainomugisha
xii. Court of Appeal ruling in civil appeal number 63 of 2007 Agnes
Bainomugisha versus DFCU Ltd.

Agreed issues

a) Whether the plaintiff was required to give spousal consent to give effect to
the creation of the mortgage and, if so, whether the same was obtained.

b) Remedies available.

As far as the agreed issues are concerned, I will deal with the first issue first as its
outcome will determine what kind of remedies and for which party the remedy if
any may be ordered.

Whether the plaintiff was required to give spousal consent to give effect to the
creation of the mortgage and, if so, whether the same was obtained

Plaintiffs Submissions:

The plaintiff’s written submissions in support of the suit as I have understood is

that the Defendants main defence is that the mortgage deed in issue was
executed with the full and active participation of the plaintiff who signed as a co‐
director and secretary of the company. The plaintiff position on the other hand is
based on the interpretation of section 39 of the Land Act which provides:

S.39 (1) (a)

4
 "no person shall sell, exchange, transfer, pledge, mortgage or lease any
land;

(b) enter into any contract for the sale, exchange, transfer, pledging,
mortgage or lease of any land;

39 (1) (c) (ii) “ in the case of land on which a person ordinarily resides with
his or her spouse, children… And from which they derive sustenance,
without the prior written consent of response ".

Referring to the case of Salmon v Salmon (1877) AC 22 the plaintiff’s counsel

contends that a company is a separate and distinct legal entity from its
shareholders. This even has a statutory basis under section 15 of the Companies
Act cap 110. In the case of Standard Chartered Bank of Uganda Ltd versus Ben
Kavuya and Barclays Bank (Uganda) Ltd High Court MA No. 350 of [2006] HCB
Volume 1 at page 134 the principle of law that a company owns its own property
separate from its members and its liability cannot ordinarily be enforced against
individual shareholders and vice versa is spelt out. He further referred to the
definition of a legal person by Hon. Mr. Justice Bamwine in the case of Major
Ronald Kakooza Mutale vs. Attorney General and Inspector General of
Government Misc Application No. 665 of 2003 which case describes what a legal
fiction of personality can do such as suing, in its own name and having rights and
obligations, owning property etc and because it is a status conferred by law and it
need not have all the attributes of a natural person.

He contended that the case revolves on resolution of whether or not the

defendant executed a valid legal mortgage in respect of land the suit property
comprised in leasehold register volume 2514 Folio 8 plot 15 Kashari block 18
Mbarara. He contended that it is not in issue that the said property was protected
by section 39 of the Land Act and it is not disputed that consent was necessary as
required by law. The plaintiff’s case is that there was no such consent and none
should be implied. Once the court finds that there was no consent as envisaged
by section 39 of the Land Act, the mortgage challenged in this suit would be
invalid. Specifically he contended that the suit property in contention here is only
the one of Kashari Mbarara referred to above as the other property referred to in
5
the same mortgage deed was sold with consent whereas not for the Kashari
property.

Counsel for the plaintiff acknowledged that the plaintiff as director and secretary
in the borrower company signed the mortgage deed on 5th July 2002 and other
supporting documents related to the loan transaction as stated in the agreed
facts but he contended that this did not comply with section 39 of the Land Act
contrary to the contention of the defendant that it did.

The plaintiff’s counsel submitted that in July 2002 the Land Act required prior
written consent before a mortgage could be executed and this prior written
consent had not been obtained. He contended that neither the plaintiff as an
individual nor her husband ever applied for a loan. The loan was applied for by a
limited company in which she was a director and it is in this context that she
signed the mortgage deed and not as a spouse. Therefore the signing of the
mortgage deed as the plaintiff did cannot even by stretching the language in any
way constitute prior written consent. He contended that prior to its amended
section 39 of the Land Act required a separate consent before a mortgage deed
could be signed. Nothing more and nothing less and that anything less than this
would contravene the law. That consent cannot be implied; it had to be express
according to the wording of the relevant provision cited above.

Counsel’s contention is that because no prior written consent was obtained, it

followed that the mortgage in respect of the suit land was void and issue number
1 should be answered in favour of the plaintiff.

Touching on issue number 2 which is relevant to issue number 1 on whether the

plaintiff is entitled to damages he contended that the transaction of mortgaging
the suit property was null and void and the court should declare it so. He referred
to the case of Kisugu Quarries Ltd vs. Administrator General S.C.C.A. 10 of 1998
[KALR 437] where it was held that:

“A court of law cannot sanction what is illegal because, ex turpi causa non
action oritur. No court should enforce an illegal contract or allow itself to
be made an instrument of enforcing obligations alleged to arise out of the

6
 contract or transaction which is illegal if the legality is duly brought under
section 2 of the land transfer providing that no lease may be obtained by a
non‐Africa without the consent of the Minister. In the instant case, the
appellant had failed to prove that the lease was obtained with the required
ministerial consent. Therefore, the subsequent lease was illegal and an
enforceable"

Secondly, he contended that section 177 of the RTA cap 230 gives the High Court
powers for the cancelation of a certificate of entry on the certificate of title in any
proceedings by the person registered as proprietors thereof.

He prayed for the remedies set out in the plaint.

The defendant’s written submissions in reply

That the plaintiff challenges the validity of the mortgage (DE2) registered under
instrument No. 326234 of 23rd of July 2002 on the ground that the same was
created without her consent as a spouse.

Submissions of the defendant on issue No 1 on whether the plaintiff was required

to give spousal consent, and if so, whether the same was obtained is set out
below.

That court has to interpret section 39 of the Land Act chapter 227 and establish
whether the section was complied with. After setting out the section counsel
submitted that in interpreting section 39 of the Land Act Cap to 227 the question
firstly was on who section 39 imposes a requirement to obtain spousal consent.
The defendants counsel disagreed that the mortgage of the suit land was void for
lack of spousal consent as stipulated under section 39 of the Land Act. He
emphasised the words: “"no person shall… mortgage… except with the prior
written consent of a spouse." He further contended that the head note of the
section shows that it relates to restrictions on transfer of land by family members.
He contended that the evidence on record and admitted facts indicate that the
mortgage (DE2) was created and executed by Bainebitamazire Mixed Farm Ltd as

7
mortgagor and it is not disputed that plaintiff’s spouse is Mr Frank Bitamazire and
not the company. Counsel agreed that a company is a distinct legal person from
its members and as such the plaintiff was neither the company’s spouse nor was
the company her family member.

It is therefore the defendant’s submission from the above premises that the
plaintiffs consent was not required before Bainebitamazire Mixed Farm Ltd could
mortgage the suit property to the defendant. He contended that the Court of
Appeal of Uganda considered this argument during the appeal in Civil Appeal 63
of 2007 being an appeal from an interlocutory judgment of Hon. Mr. Justice
Egonda – Ntende refusing to grant an interlocutory injunction. He referred to the
lead judgment in the appeal delivered by honourable Lady Justice C.K.
Byamugisha at page 6 and paragraphs 15 to 20 thereof which he quoted. The
Court of Appeal doubted whether the plaintiff/appellant was the
company’s/mortgagors spouse for purposes of section 39 of the Land Act. They
further observed that the appellant/plaintiff was the mind of the company that
mortgaged the suit property together with her husband. The court further
observed that a strict interpretation of section 39 of the Land Act did not include
the granting of powers of attorney as among those acts which required spousal
consent.

The defendants counsel submitted further that the plaintiff has not demonstrated
that she is the company’s spouse for purposes of section 39 of the Land Act.
Counsel prayed that I uphold the reasoning of the Court of Appeal that the
consent required would not relate to the company and was therefore
inapplicable. Without prejudice if court is inclined to find that a spouse’s consent
was required in this transaction, then they would address the question of
whether the consent was obtained.

He contended that in determining whether consent was obtained, it was

paramount to define the word consent. He referred to Osborne's Concise
Dictionary 9th edition at page 97 which defines consent as "agreement"; the
Oxford advanced learners dictionary 5th edition at page 244 which defines

8
consent as "to give agreement or permission" and furthermore alternative words
for “consent” in the Oxford compact thesaurus at page 85 which are:

"agreed to, comply, concur, accede, acquiesce, giving, permit, allow,

approve, authorise…"

The defendants counsel contended that according to the definition of consent

given above, any permission/approval/authorisation/agreement to something
would suffice as consent. He invited court to disregard the plaintiff’s submission
emphasising the words “prior written consent” and that a separate consent was
required. The word separate consent has not been used and should not be
implied. What is material is that the plaintiff appended her signature to various
documents relating to the mortgage and this signified her consent. He referred to
Oxford advanced learners dictionary 5th edition page 1100 that once a person has
endorsed a document with his or her signature, this would generally mean that
the person who endorsed agrees with what the document says. He further cited
Osborne's concise dictionary 9th edition which provides that:

"a document is signed when the relevant person writes marks something
on it in token of that person's intention to be bound by its contents".

The defendants counsel submitted that the plaintiff provided the said prior
written consent by appending her signature as the director/secretary of the
company on the documents exhibit DE1, DE2, DE3, DE4, and DE5A which relate to
the formal documents for obtaining the loan and the mortgage deed itself. That
the plaintiff consented to the creation of the mortgage (DE2) when she
approved/authorised/permitted/accepted the transaction to continue through
the following he endorsements on the agreed documentary evidence namely:

a. That as secretary of the company, the plaintiff called a board meeting

scheduled for 3rd of July 2002 to discuss the borrowing for the company and
providing for security for the loan;
b. Attending a board meeting one the 3rd of July 2002 which authorised the
company to apply for an investment loan facility from the defendant and
the pledging of security.

9
 c. Appending handwritten signature to resolution (D E1) on behalf of the
company to secure the repayment of the facility by executing the contested
mortgage, a debenture and personal guarantees.
d. Executing the mortgage (DE2), (D E3) and (DE5A) deeds of the company's
behalf by appending a signature as secretary/director
e. Executing a personal guarantee (DE4) undertaking personal liability for the
repayment of the loan sums by the company.
f. Participating in the disposal of the security comprised in LRV 1727 folio 12
plot 330 Kibuga plot 23 (that was mortgaged to the defendant and obtained
the now contested mortgage) in January 2006 when the company had
defaulted on its loan repayment obligations.

The defendants submitted that the by appending her signature to the various
documents listed above she signified her approval of the loan. That attempts by
the plaintiff to deny consent, was an afterthought aimed at frustrating the
defendant's recovery process.

Counsel further submitted that the plaintiff lied on oath in an affidavit in support
of the mortgage that she did not know the circumstances under which the
property had been mortgaged despite her personal participation in the creation
of the mortgage and her co‐operation in the disposal of one of the assets
mortgaged under the same security document. Counsel invited court to hold that
the plaintiff gave her consent and that to hold otherwise would be to prefer form
over substance.

As far as the intention of legislature is concerned the defendant’s counsel

submitted that in the event that the court holds that the participation of the
plaintiff in obtaining the loan did not amount to consent, the court should
examine the intention of legislature in enacting section 39. That section 39 of the
Land Act intended to prevent the disposal or mortgaging of a matrimonial home
by a spouse without the knowledge or consent of the other spouse. By executing
the relevant documents for the loan, the plaintiff exhibited knowledge of the
transaction from start to finish and she is not the spouse the law intended to
protect.

10
On the issue that the plaintiff signed as a director and not personally counsel for
the defendant submitted that the argument was incongruous and defies
biological dictates. It is the same as suggesting that the plaintiff possesses
different faculties, for use as a director and another for use as a spouse. In any
case, counsel submitted that the personal guarantee signed by the plaintiff
guaranteeing the loan was executed in her personal capacity.

He cited the case of Lennards Carrying Co. Ltd v Asiatic Petroleum Co. Ltd (1915)
AC 705 for the proposition that the company can only think and act through the
mind of its directors.

"A Corporation is an obstruction. It has no mind of its own any more than it
has a body of its own, it's active and directing mind must be sought in the
person of somebody…"

The plaintiff was the active and directing mind of the company together with her
husband. Counsel contended that to suggest that the plaintiff as an active and
directive mind of the company agreed to the transaction but as a spouse did not
agree is a desperate attempt to literally divide the plaintiff into two persons with
the two sets of completely different minds.

Counsel for the Defendant further referred me to MA No. 435 of 2007 the
decision of Hon. Mr. Justice Engonda Ntende in the application for a temporary
injunction by the plaintiff where he observed that the plaintiff and her husband
were the actual mind of the mortgagor which mind mortgaged the suit property.
Counsel further contended that the court of appeal upheld the interpretation of
Hon. Mr. Justice Egonda Ntende.

Rejoinder of the plaintiff

In rejoinder the plaintiff’s counsel asked me to disregard the submission of the

defendant on whether the company could not be the plaintiff’s husband as this
was not pleaded. That the WSD acknowledges that the mortgagor was the
plaintiff’s husband. Without prejudice he submitted that the plaintiff’s husband
remained the registered proprietor of the suit property bringing it under the
ambit of section 39 of the Land Act.
11
Plaintiff’s counsel submitted that a donee of a power of attorney had to fulfil all
the conditions that ought to be fulfilled by the donor and as held in the Supreme
Court case of Zzabwe versus Orient Bank and others SCCA No. 4 of 2006. That
the donee is an agent of the donor and acts on behalf of the donor. He cannot use
the power for his own benefit to the detriment of the donor. He submitted that to
suggest that by simply signing a power of attorney, a registered proprietor
defeats the intention and express terms of an act of Parliament is untenable. He
contended that if a donor of the power of attorney cannot mortgage without
prior written consent of a spouse then the donee too cannot do so. The plaintiff’s
husband as a donor could not grant the company, the donee, powers he himself
did not possess.

As far as prior written consent is concerned the plaintiff’s counsel submitted that
the consent must be in writing and must be obtained before the mortgage is
signed or even negotiated and the two must constitute two separate transactions
contained in two separate documents. That if both documents bear the same
date but does not indicate time, oral evidence would need to be adduced to
establish which of the two documents was written and signed before the other. In
this particular case this was not necessary as it is admitted that there was never
any separate written prior consent which in itself is an admission that the law was
not complied with.

Judgment

I have carefully read through the written submissions of the parties and the
authorities attached to the submissions.

On the first issue of whether the plaintiff was required to give spousal consent in
the circumstances of the case, and whether the same was obtained, two stages of
analysis may be involved. The first analysis addresses matters of law as to
whether in the circumstances there was failure to give prior written consent
which rendered the mortgage and subsequent transactions based on it null and
void and in contravention of section 39 of the Land Act before its amendment by

12
the Land Act amendment Act 2004. In the second instance, whether in actual fact
that consent was obtained or deemed to have been obtained. This is basically a
mixed question of fact and law. I must first point out that it is an admitted fact
that there was no controversy or disagreement about the sale of Land comprised
in LRV 1727 Folio 12 plot 330 Kibuga Block 23 at Kampala pursuant to obligations
of the parties under the impugned mortgage deed. The agreed facts are that the
“plaintiff and the defendant co‐operated in the disposal of the security comprised
in LRV 1727 folio 12 plot 330 Kibuga Block 23 in January 2006.” Secondly the
mortgage deed challenged in this suit as a nullity mortgages 2 properties in the
same deed namely LRV 1727 Folio 12 Plot 330 Kibuga Block 23, Kampala and
secondly, the suit property namely LRV 2414 Folio 8, Plot 15, Kashari Block 18,
Mabarara. With respect to the plot in Kampala, the plaintiff pleads at paragraph 4
(e) that her husband also owned other property including land comprised in
Leasehold Register Volume 1727, Folio 12, plot 3330, Kibuga Block 23, Kampala
which was sold off by the defendant as it was not their matrimonial home.” At
paragraph 4 (g) the plaintiff avers that she “became aware of the illegal
transaction when auctioneers came to the property and informed her that the
matrimonial home had been advertised for sale...”

On the other hand if it is the mortgaging of the property per se, the plaintiff does
not dispute the mortgage of the Kampala property or its sale under the
challenged mortgage deed on the ground that it is not matrimonial property but
does so with the Mbarara property.

I must first note that the Court of Appeal in Civil Appeal No. 63 of 2007 between
the same parties and on the same subject matter has partially interpreted section
39 of the Land Act upon which interpretation the resolution of the controversy in
this case revolves. Because this suit revolves on the interpretation of section 39 of
the Land Act, it is necessary to consider carefully what the Court of Appeal has
said about the matter before I proceed to deal with the controversy.

The plaintiff had previously appealed from the decision of Honourable Mr Justice
Egonda‐Ntende refusing to grant a temporary injunction on 20 September 2007.
Honourable Mr. Justice Egonda‐Ntende dismissed the plaintiff’s application for a

13
temporary injunction. Between pages 2 – 3 of his ruling in MA 0436 of 2007 he
observed that:

"Section 39 of the Land Act (chapter 227) as amended by the Land

(Amendment Act) 2004 bars, inter alia, mortgaging 'family land' without
consent of a spouse. Family land was substituted for the original phrase in
the chapter 227 which are referred to 'any land' or 'land on which the
person ordinarily resides with his or her spouse and from which they derive
their sustenance'. The input of this change is yet to be clear. And can only
be addressed I suppose after a full trial of the matter, to determine if the
suit land is indeed the nature of the land protected under the provisions of
the law."

When the honourable judge dismissed the plaintiff’s application for a temporary
injunction, the plaintiff appealed the decision to the Court of Appeal. The lead
judgment of the Court of Appeal in Civil Appeal No. 63 of 2007 was delivered by
Lady Justice C.K. Byamugisha J.A. In the judgment the she made some
interpretative comments on section 39 of the Land Act between pages 6 and 8 of
the judgement which I set out below. Hon. Lady Justice C.K. Byamugisha J.A. said:

"My understanding of the provisions of this section I have reproduced was

to impose restrictions on spouses from dealing with family land in the
manner described in this section without the consent of the other spouse.
Consent also involves knowledge. However I do not think that consent
under this section applies to a company even if the company is owned by
family members. The framers of the section did not envisage the company
having a spouse or owning family property/land. In my view this section can
only apply in circumstances where one spouse is going to deal with family
property/land with third parties. Such spouse would require consent of the
other spouse in accordance with the regulations. The transaction that is
now under dispute was entered into by a company called Bainebitamazire
Mixed Farm Ltd. The principal officers of the company who signed all the
documents were the appellant and her husband as the Director/Secretary
and Managing Director respectively. Normally company matters are

14
conducted through the officials of that company since a company is a legal
fiction.

The appellant and her husband convened a board meeting of the company
on 3 July 2002 and passed a resolution authorising the company to borrow
money and offer this suit property as one of the securities. The same
resolution authorising the Managing Director and another Director or
Secretary to execute the securities and all other relevant documents for
and on behalf of the company. On the strength of this resolution the
appellant and her husband signed the mortgage deed, a debenture and a
personal guarantee.

As the learned judge rightly observed, the appellant was the "mind" of the
company that mortgaged the suit property together with her husband. Both
of them ought to have sought consent on behalf of the company if any
consent was required.

Contrary to the allegations made by the appellant in the chamber summons

and supporting affidavits that it was her husband would mortgage the suit
property without her knowledge and consent, the evidence on record it
does show that the husband boarded the suit property or that she did not
know about the transaction. All that the husband did was to grant powers
of attorney as the registered proprietor of the suit property to the company
to mortgage the same to the respondent as security for the loan. Granting
powers of attorney is not mentioned in this section as requiring consent of
the spouse.

In order for the appellant was succeeded in her application she filed in the
High Court she had to plead and show prima facie that she is the spouse of
the mortgagor whose consent was required under section 39 of the land
act. As already pointed out the mortgagor was Bainebitamazire Mixed Farm
Ltd and I doubt whether the appellant is its spouse for purposes of this
section. This is a matter that would be determined at the trial.…" (Emphasis
added)

15
It is important to note that the lead judgment of the Court of Appeal left it open
for the High court trial judge to determine whether the plaintiff could be deemed
to be a spouse of Bainebitamazire Mixed Farm Ltd as envisaged under section 39
of the Land Act cap 227. The next judgment which also comments on section 39
of the Land Act is that of Hon. Lady Justice L.E.M. Mukasa – Kikonyogo DCJ and
should in my view be carefully considered in this matter. It in addition to the lead
judgment of the court it adds some additional interpretative remarks about
section 39 of the Land Act cap 227. In upholding the judgment of the High Court
dismissing the plaintiff’s application for temporary injunction the learned DCJ held
at page 2 of her judgment:

“The appellant having signed a personal guarantee for the loan and the
debenture cannot turn around and deny knowledge of the loan. Further, as
rightly pointed out by counsel for the respondent, the appellant signed the
resolution both as director and secretary. There were no triable issues. The
provisions of section 39 of the amended Land Act were complied with. The
circumstances in which the transaction was carried out did not necessitate
consent of the appellant. Both the appellant and her husband, called a
board meeting of the company and passed a resolution allowing the
company to borrow money and offer the suit property as one of the
securities. With regard to the remaining issues I concur with the conclusions
reached by Byamugisha J A in the lead judgement. (Emphasis added)

To a large extend therefore comments made by the Court of Appeal as regards

the interpretation of section 39 though binding on me are generally considered in
the context of an interlocutory application without prejudice to the trial of the
main controversy in this suit. As to whether I am free to examine all aspects of the
legal provision as suggested by Hon. Mr. Justice Egonda – Ntende judge of the
High Court as he then was and Hon. Lady Justice C.K. Byamugisha of the Court of
Appeal remains a narrow path in view of the comments of the learned Deputy
Chief Justice which comments should be given their due weight. My task is to
explore the law and see whether I will come to the same result as the Court of
Appeal in an understanding of the law and facts of the case. It must also be
emphasised that the resolution of the suit revolves on interpretation of section 39
16
of the Land Act and thus far, this section has not been conclusively interpreted for
purposes of the trial of the main suit and this is the only road I am entitled to walk
without desecrating the doctrine of precedence.

Delegation by Power of Attorney:

On the question of whether the mortgagor company was a spouse within the
meaning of section 39 of the Land Act, we need first to examine the nature of a
power of attorney. Firstly I have great sympathy for the submission of Counsel
Kenneth Kakuru that a power of attorney is a document that delegates powers
which submission is in the main valid and supported by authorities. For reasons of
precedence I will refer to authority of the Supreme Court on this matter. The
comments of the Court of Appeal as to whether the plaintiff can be deemed to be
a spouse of the mortgagor, a limited liability company, need to be put in context
in light of the nature of a power of attorney. Obviously a power of attorney must
be examined on its terms before other aspects of this matter can be analysed.
This is supported by the judgment of the Supreme Court in Frederick J.K Zzabwe
vs. Orient Bank and 5 Others Supreme Court Civil Appeal No. 4 of 2006 and
particularly the judgment attached of Justice Bart Katureebe JSC at page 4
thereof:

"the point to note here is that the donee of the power of attorney acts as
an agent of the donor, and for the donor. He cannot use the power of
attorney for his own benefit. The privy Council decision, on appeal arising
from the Supreme Court of Canada, in the case of Imperial Bank of Canada
versus Begley [1936] 2 ALL ER 367 is good authority for the principle that
where an agent, who has been given a power of attorney to do certain
things, uses the power to do something for a proper purpose, but the act
done is for the agent’s own purposes to the exclusion and detriment of the
principal, the actions of the agent will be outside the scope of the power of
attorney and are not even capable of ratification by the principal."

A power of attorney is a document that creates an agency with the donee

company as the agent while the principal is the donor. In this case the principal is
the husband of the plaintiff who also happens to be the registered proprietor of
17
the suit property at the time of the transactions in question. The first principle of
law from judicial precedent that is worthy of mention is that a principal or grantor
of a power of attorney is vicariously liable as a principal for the acts and even
frauds of the attorney who acts in his name and for him. In the case of Lloyd V
Grace, Smith & Company 1912 AC 716 it was held that a principal is liable for the
fraud of its agent acting within the scope of its authority, whether the fraud is
committed for the benefit of the principal or for the benefit of the agent.
Furthermore in the case of Percy V Glasgow Corporation 1922 AC 299, per the
decision of Viscount Haldane at page 306 last paragraph thereof it has been held
that the principles of vicarious liability operates in agent/principal relationships.

To conclude this point I agree with Counsel Kenneth Kakuru that a donor of a
power of attorney firstly cannot grant powers that he does not have. Secondly, a
donor of a power of attorney only expresses the power granted in an instrument
or deed which specifies the powers and perhaps limitations of the power granted.
The court examines the express terms of the power of attorney to determine
what it specifies to reach a conclusion as to what powers possessed by the donor
have been delegated to the attorney. The need to examine the power of attorney
to reach a conclusion is illustrated by the Privy Council cited below which case
also referred to in the Supreme Court case of Zzabwe above. This is the case of
Bryant Powis and Bryant vs. La Banque Du Peuple (1893) AC 170 at page 180.
Their Lordships of the Privy Council held at the last paragraph page 180 that:
whenever the very act of the agent is authorised by the terms of the power, that
is, whenever by comparing the act done by the agent with the words of the power,
the act is in itself warranted by the terms used, such an act is binding on the
constituent...”

It becomes necessary to examine the terms of the power of attorney. Though I

have not come across the power of attorney in the documents of the plaintiff or
the defendant there is evidence and it is an agreed fact that the company was
granted a power to mortgage the suit property by the registered proprietor.
Paragraph D of the agreed facts provides that: “the plaintiff’s husband and co‐
director in the company being the registered proprietor of the said land executed a
power of attorney authorising the company to mortgage the said land to the
18
defendant.” It is the only imperfect thing to do which is to find that the plaintiff’s
husband as the registered proprietor of the suit property granted a power of
attorney to Messrs Bainebitamazire Mixed Farm Limited (hereinafter referred to
as the company) to mortgage the property without the benefit of reading the
power of attorney. By a roundabout route it is my conclusion that the company
acted only for and on behalf of the plaintiff’s husband. In other words it was the
agent of the plaintiff’s husband by power of attorney and it exercised powers to
mortgage as if it had the same powers as that of the plaintiff’s husband which
powers were expressly delegated. I have no doubt in my mind that the power of
attorney was given by the husband of the plaintiff who was required to seek the
necessary consent to mortgage the property.

In other words the plaintiff’s husband Mr. Frank Bitamazire could not mortgage
the suit property without consent of his spouse. He therefore could not delegate
powers which he did not possess. His power to mortgage the property was
subject to the right of his spouses consent. The duty to seek consent should be
applied at the point of granting the power of attorney. It is my finding that the
company had no power to mortgage the property which power did not reside in
the plaintiff’s husband. This power granted to the company required the husband
of the plaintiff to first seek the consent of the plaintiff as his spouse before
delegating the power to mortgage. Behind this finding is the implied fact in the
agreed facts and submissions of the parties that the property in issue was
matrimonial property. The concern of the learned judge Hon. Mr. Justice Egonda
Ntende was about the changes in the wording of section 39 of the Land Act read
in context. Because of the implications of the submissions of the parties on
whether consent was given or not, there is no need to determine the question as
to whether suit property was protected by law as envisaged under section 39 of
the Land Act. It is assumed or implied by both parties that section 39 of the Land
Act applies to this property. Having held that the power of attorney only
delegated powers the plaintiff’s husband had, I have not yet resolved the
question as to whether the consent was necessary or deemed to have been given
in the circumstances of the cases. Before I do that I need to make some more

19
comments about the route taken by the Learned Justices of the Court of Appeal
whose decisions are binding on me.

The Court of Appeal examined the intention of legislature from the clear wording
of section 39 of the Land Act cap 227. Before I make these comments, I need to
determine which provision of section 39 of the Land Act applied at the material
time in question. Section 39 of the Land Act Cap 227 was amended by the Land
(Amendment) Act 2004. However the transaction in question concerning LRV
2514 Folio 8 plot 15 Kashari Block 18 Mbarara with registered proprietor as Mr.
Frank Bitamazire Bainomugisha, namely the mortgage deed was signed on the 5th
of July 2002. The mortgage deed also specifies in the preamble “A” that the
borrower company is the donee of powers of attorney dated 5th of July 2002
“from the registered proprietor FRANK BITAMAZIRE BAINOMUGISHA. It follows
that as far as the specific transaction is concerned, there is no need to examine
the Land Act (Amendment) Act 2004 which substitutes section 39 of the Act.
Furthermore what can only be in contention is the validity of the mortgage deed.
Once the mortgage is valid, the powers it grants the mortgagee to sell the
property would not be in issue. In any case section 39 (2) expressly provides and I
quote: “Subsection (1) shall not apply to any transfer of land by a mortgagee in
exercise of powers under the mortgage”.

The Court of Appeal approach is also influenced by the head note and wording of
section 39 (1) of the Land Act cap 227 Laws of Uganda 2000 edition. Section 39
provides as follows:

39. Restrictions on transfer of land by family members.

(1) No person shall—

(a) sell, exchange, transfer, pledge, mortgage or lease any land;

(b) enter into any contract for the sale, exchange, transfer, pledging,
mortgage or lease of any land; or

(c) give away any land inter vivos, or enter into any other transaction in
respect of land—

20
(i) in the case of land on which the person ordinarily resides with his or her
spouse and from which they derive their sustenance, except with the prior
written consent of the spouse;

(ii) in the case of land on which a person ordinarily resides with his or her
dependent children of majority age, except with the prior written consent
of the dependent children of majority age;

(iii) in the case of land on which a person ordinarily resides with his or her
children below the age of the majority, except with the prior written
consent of the committee;

(iv) in the case of land on which ordinarily reside orphans below majority
age with interest in inheritance of the land, except with the prior written
consent of the committee.

(2) Subsection (1) shall not apply to any transfer of land by a mortgagee in
exercise of powers under the mortgage.

(3) Where consent is required to be given by a person other than the

committee under subsection (1), the consent shall be given to the
committee by the person giving the consent.

(4) Where any transaction is entered into by a purchaser in good faith and
for value without notice that subsection (1) has not been compiled with,
the transaction shall be void; but the purchaser shall have the right to claim
from any person with whom he or she entered into the transaction any
money paid or any consideration given by him or her in respect of the
transaction.

(5) A consent referred to in subsection (1) shall not be unreasonably

withheld.

(6) Where the consent referred to in subsection (1) is withheld, a person

aggrieved by the withholding of the consent may appeal to the land
tribunal; and the tribunal shall require the spouse or children of majority

21
 age or the committee, as the case may be, to show cause why they cannot
give consent and may, in its discretion, dispense with the consent.

(7) The spouse or children of majority age, not being the owners of any land
to which subsection (1) applies, may lodge a caveat on the certificate of
title or certificate of customary ownership of the person who is the owner
of the land to indicate that the property is subject to the requirement of
consent under subsection (1).

(8) The committee may, on behalf of the children below majority age or
orphans below majority age and not being owners, take action similar to
that described in subsection (7).

(9) In this section—

(a) “notice” means actual or constructive notice;

(b) “purchaser” means a grantee, lessee, sublessee, assignee, mortgagee,

chargee or other person who acquires an estate or an interest or right in
the land.”

The head or side note of section 39 gives an indicator of the intention of

parliament. It deals with restrictions on the transfer of land by family members.
The amendment of 2004 introduces a subtle change to this section. It provides
“restrictions on transfer of family land”. The amendment can be applied to any
body in addition to family members. However as noted above the amendment
does not apply to this case as the transaction was executed by deed before the
amendment came into force. It is only section 39 before amendment which
applies and will be examined in this judgment. Section 39 (2) provides that the
restriction of family members to transfer land without consent does not apply to
a mortgagee exercising powers under the mortgage. In this case however the
issue is whether the mortgage itself was valid. Furthermore to conclude the above
point section 39 of the Land Act bars family members from mortgaging property
without consent of the other spouse. The property affected by the bar in section
39 (1) is defined by section 39 (1) (c) (i) of the Land Act as:

22
 “in the case of land on which the person ordinarily resides with his or her
spouse and from which they derive their sustenance, except with the prior
written consent of the spouse;”

The court of Appeal premised its definition within the intent of the Act that the
provision bars family members and the company cannot by any stretch of the
imagination be a family member barred by the section. I agree for the reasons
that the plaintiffs spouse who granted the power of attorney had to seek the
consent of his wife/plaintiff before donating a power to mortgage property falling
under the statutory protection or bar in section 39 of the Land Act. However it is
now open to me as advised by the Judgment of Hon. Lady C.K Byamugisha J.A to
conclude whether the company can be a spouse required to obtain consent as
envisaged by section 39 (1) of the Land Act. I have already held that a power of
attorney is an instrument that delegates powers. It cannot delegate more than
the giver has. Moreover a husband cannot delegate his rights or some of his
obligations as a spouse to a legal fiction. For purposes of consistency with the
remarks for the Court of Appeal, it is my humble finding that it is not the company
which is restricted but the husband of the plaintiff who was restricted. It followed
that the act of granting a power of attorney should be the act to be subjected to
scrutiny and censorship in the circumstances of this case. I say this because the
plaintiffs spouse cannot say in a manner of speaking that: “Since I cannot
mortgage without my spouses consent, let me give a power of attorney to another
company to mortgage on my behalf in order to do away with the requirement for
consent”. Such a position would clearly contravene section 39 of the Land Act cap
227 before its amendment in 2004. Where a spouse is restricted from mortgaging
or selling the family property protected by section 39 of the Land Act cap 227,
such spouse cannot escape liability by circumventing the law and delegating
through power of attorney to a non member of his or her family or even to a
company to transact on family land in a manner barred by section 39 of the Land
Act. It is my humble conclusion that if the delegate escapes liability, the spouse
cannot yet the delegate only acts on behalf of the principal. This is also consistent
with the doctrine of vicarious liability.

23
My holding does not yet take care of the core issue in this case as to whether the
transaction challenged in the suit which transaction is the mortgage of property
protected by section 39 of the Land Act is void. A finding on the core issue
requires an examination of all the facts and circumstances of the case.

The thrust of the submissions of the plaintiff’s counsel is that section 39 of the
Land Act prescribes prior written consent of a spouse before the property can be
mortgaged. He further submits that the consent has to be in writing. He relies on
the phrase, “except with the prior written consent of the spouse” under section
39 (1) (c) (i) of the Land Act cap 227. Without such prior written consent he
submits that the transaction is void for illegality. He goes on to submit that the
mortgagor company is a legal person which a distinct and separate legal existence
from that of its members. That the resolutions of the board of Bainebitamazire
Mixed Farm Limited consisting of the plaintiff and her husband only and the
various documents she signed as director/secretary in support the mortgage did
not amount to consent as stipulated by section 39 of the Land Act.

On the other hand the defendant submitted that section 39 of the Land Act
imposes a duty on a spouse or bars only a spouse from mortgaging family
property without the other spouse's consent. The plaintiff is not a spouse of the
company which mortgaged the property. Consent of the plaintiff was not required
before Bainebitamazire Mixed Farm Ltd could mortgage the property.

The defendant further submitted that it is the ruling of the Court of Appeal that
the plaintiff cannot be a spouse of the company.

Alternatively the defendant submitted that the consent was obtained. He went on
to define what consent was and that consent meant to “concur, to agree, accede
to, and acquiesce”. That there was no need for a separate consent to be given in
the circumstances of the case. That by appending her signature to all the
documents involved in obtaining the loan, the plaintiff had consented to the
mortgaging of the suit property. Particularly the plaintiff had actively participated
in the following transactions namely: As secretary of the company, called board
meeting and on 3rd of July 2002 as a director with her spouse co‐director they
authorised the company to apply for an investment loan facility from the
24
defendant and to use the suit property as security. She went ahead and signed on
the board resolution, mortgage deed, debenture deed and personal guarantee for
the loan. She participated in selling one of the securities under the mortgage
deed.

Counsel for the defendant submits that the strong evidence on court record
shows that the plaintiff appended her signature to the documents signifying
approval of the creation of the mortgage, before and during its execution, it will
be fallacious suggest that there was no written consent to the transaction.

The defendant also submitted that the intention of legislature in enacting section
39 of the land act was to prevent property being mortgaged without the other
spouse’s knowledge. They submitted that the plaintiff had knowledge of the
transaction and actively participated in it. They also submitted that the plaintiff’s
personal capacity and her mind were not separate from that of the company
which is a fiction. That a company cannot do what an individual can do but can
only do such acts through its own directors. Referring to the case of Lennards
Carrying Co. Ltd v Asiatic Petroleum Co. Ltd (1915) AC 705 where it is noted that:

"A Corporation is an abstraction. It has no mind of its own any more than it
has a body of its own, it's active and directing mind must be sought in the
person of somebody…"

I have carefully considered these submissions and the documents signed by the
plaintiff. It is necessary to go through the said documents for an appreciation of
the argument and to answer the question how to separate the mind and will of an
individual director/secretary of a company from the mind and will of the
individual herself i.e. as a spouse of the registered proprietor. We also need to
examine a more absurd proposition to the effect that since the company is
separate from the directors, and it had powers from one of the directors, it
needed consent of the family spouses to mortgage the property in the
circumstances of this case.

The board resolution exhibit DE 1 of the defendants documents, of a board

meeting convened on July 2002 is signed by the plaintiff as director/secretary.

25
Paragraph 3 thereof provides that the loan facility shall be secured by inter alia
Leasehold Register Volume 2514 Folio 8, plot 15 Kashari Block 18 Mbarara and
also the personal guarantees of the directors. It should be noted that this was
firstly to obtain a loan a first ranking legal mortgage, and secondly to secure the
repayment thereof by the suit property and a personal guarantee.

The second document is a mortgage deed exhibit DE2 of the agreed defendant’s
documents. It is dated 5th July 2002. The preamble thereof notes that the
borrower Bainebitamazire mixed Farm Ltd is the donee of power of attorney
granted by Frank Bitamazire Bainomugisha. The company intended to borrow 150
million Uganda Shillings. Should be noted that the property which is mortgaged
are two but include LRV Volume 2514 folio 8 Plot 15, Kashari Block 18, Mbarara
the subject matter of the suit. The plaintiff signed as director/secretary of the
company.

The third document is the debenture exhibit DE3 dated 5th July 2002 between the
company and the defendant. Paragraph 6.0 thereof recognises that the defendant
has a first fixed charge over the suit property and it is also signed by the plaintiff
as a director/secretary of the company.

Of further scrutiny and interest is exhibit DE 4 entitled “Personal Guarantee” and

dated 3rd or 5th of July 2002 (the number 3rd is written in such a way as to
mistaken to be the 5th . however no prejudice is occasioned whether it is the 5th or
3rd ). In the preamble it provides and I quote: “(b) as part of the said Agreement I,
MRS AGNES MIREMBE BITAMAZIRE (“the Guarantor”) a Director in the Borrower,
am required to execute a guarantee in respect of my assets.” It guarantees the
prompt payment of dues under the loan agreement between the company and
DFCU Bank. Paragraphs 3 and 4 of the personal guarantee by the plaintiff are
worthy of special mention and are quoted below:

“3. As a separate stipulation, unconditionally agree that if for any reason a sum
is not recoverable by DFCU under the foregoing guarantee, it shall
nevertheless be recoverable on the basis that I am sole or principal debtor;
and”

26
“4. Agree that I shall whenever required by DFCU execute a proper transfer of
such assets as are capable of being transferred together with the Power of
Sale and all other necessary powers for securing and enforcing the payment
of the said loan; and;”

“5. Waive any right I may have of first requiring DFCU to proceed against the
borrower;”

The plaintiff signed the mortgage deed as director and secretary. She signed the
mortgage deed. She was aware that her husband had given a power of attorney
to the company in his personal capacity. This is because the mortgage deed
specifically quotes the power of attorney to mortgage the suit property by the
company issued by Frank Bitamazire, her spouse. The mortgage deed further cites
the property secured which property is the suit property. The debenture deed
also cites the suit property. Last but not least, I need to mention the personal
guarantee document. Paragraph 3 of the personal guarantee documents notes
that the personal guarantee contract is a separate contract as if the plaintiff is the
principal debtor under the loan agreement with the bank in case of default by the
principal borrower (the company in which she is a director). Paragraph 4 binds the
plaintiff as a guarantor to sign whatever is necessary to be signed in exercise of
the power of sale of DFCU under the loan agreement. This power of sale is found
under the mortgage deed which mortgages the suit property to the
Bank/Defendant paragraph 11 thereof. Last but not least the guarantor/plaintiff
waived any right to first ask the mortgagee to proceed against the company. The
mortgagee would proceed directly against her.

As far as the doctrine for the personal guarantee is concerned, a guarantee is a

contract by which the guarantor undertakes responsibility to the creditor for the
liability of the principal debtor to the creditor. (Croswell Encyclopaedia of
banking Law, E‐securities par.2001). A guarantee agreement is also defined as a
secondary agreement in which a person (the guarantor) is liable for the debt or
default of another (the principal debtor) who is the party primarily liable for the
debt. (The Oxford Dictionary of Law, 6th Edition at page 246). Hon. Mr. Justice
Lameck Mukasa In the case of PAN AFRICAN INSURANCE COMPANY LTD VS

27
INTERNATIONAL AIR TRANSFER ASSOCIATION HCCS NO.0667/2003 defined it as
a contract to pay a debt owed by a third party who notwithstanding remains
primarily liable for such payments. In YEOMAN CREDIT LTD VS LATTER AND
ANOTHER (C.A.) (1961) 2 ALLER 294 at 296 HOLROYD PEARCE L.J defined a
contract of guarantee as a contract to answer for the debt, default or miscarriage
of another who is to be primarily liable to the promise.

There therefore cannot be a contract of guarantee unless there exists an

obligation of the principal debtor to which the guarantee is ancillary or secondary.
It follows that the personal guarantee of the plaintiff supports and agrees with
the mortgage deed and consents to it. Secondly it is a guarantee in a personal
capacity and has nothing to do with the veil of incorporation. In other words the
plaintiff as an individual and a spouse of the donor of the power of attorney to
the company guaranteed the mortgage loan and gave it her full blessing and even
agreed to become personally liable for it. The case of Moschi V Lep Air Service
ltd and others, (1973) AC 331 348 Lord Diplock laid down the duty of the
guarantor under the contract of guarantee as

“the contractual promise of a guarantor to guarantee the performance by a

debtor of his obligations to a creditor arising out of a contract gives rise to
an obligation on the part of the guarantor to see to it that the debtor
performs his obligations to the creditor”.

As far as section 39 of the Land Act cap 227 before its amendment in 2004 is
concerned, it puts restrictions on family members. This means that the issue of
mortgaging has to be raised against a spouse. If we followed the arguments of the
plaintiff, what the concerned spouse/husband of the plaintiff did was to grant a
power of attorney to the plaintiffs company to mortgage. He did not mortgage
directly. It is an agreed fact that the plaintiff and her husband were the only
directors of the company. In other words the plaintiff as the director/secretary of
the mortgagor had the duty if any to seek the consent to mortgage the property
from herself. This is simply because her husband who granted the power of
attorney to the company was the principal or donor of powers of attorney to
mortgage the property. The company had to seek consent if necessary from the

28
plaintiff and to make this position clearer; it is the plaintiff who should have
sought the consent as director from herself. No position could be more absurd or
untenable in law or in equity. I agree with the defendants submissions that the
plaintiff by appending her signature to the mortgage and more so to the personal
guarantee document did not have to ask herself for consent to mortgage the
property in question.

A statutory provision cannot be interpreted in this fashion neither should the

court permit a provision of the law to be used as an instrument of fraud. To hold
otherwise would open financial institutions and banks to frauds by family
members. As in this case, the husband and his wife are the sole directors of the
company. They as the company decide to mortgage the family property. They
brazenly admit that the company owed the bank but that consent of a spouse has
not been obtained. This spouse happens to be a director of the company and a
mind of the company. I agree with the court of appeal that the plaintiff as director
was the will of the company though the veil or incorporation may be applied in
appropriate cases. The veil of incorporation cannot be used to defraud a bank and
its customers of their money.

It is the plaintiff and her husband who as directors acted as the mind/will and
nerve centre of Bainebitamazire Mixed Farm Limited to obtain a loan. They admit
as directors/secretary that they defaulted in the repayment of the loan. They
admit pledging family property on the basis of a power of attorney authorising
mortgaging. A very strict interpretation of the law would put the duty of seeking
consent on the husband/spouse of the plaintiff. The plaintiff has not deemed it fit
to sue her husband. The husband is somewhere in the background waiting to see
the outcome of their strategy and technical and robotic interpretation of section
39 of the Land Act.

Before I wind up this matter we need to further show how inequitable the kind of
strategy used by the plaintiff is. Agreed document paragraph 7 (xi) of the joint
scheduling memorandum is the caveat of the plaintiff. It is marked in the
defendants documents attached to the submissions as Exhibit DE 8 and is dated
19th December 2006 and provides that the plaintiff claims an interest under

29
section 39 of the Land Act. It caveats the suit property. In the affidavit in support
the plaintiff swore that she had been given notice to vacate the suit property. In
paragraph 3 thereof she avers that she has never consented to any contract of
sale, exchange, transfer, pledging, mortgage or lease of the above described land.
She further avers in paragraph 4 of her affidavit in support of the caveat that it is
her husband Mr. Bitamazire Frank Bainomugisha who mortgaged the property to
the defendant. Finally where the matrimonial home is sold off illegally she would
suffer irreparable loss.

It is a rule of equity applied by the English courts that courts will not allow a
statute to be used as an instrument of fraud. In the case of Rochefoucauld v
Boustead [1897] 1 Ch 196 the claimant sold land to the defendant who had orally
agreed to hold the land in trust for the claimant. The defendant later argued that
because the purported trust was not evidenced in writing, according to the
Statute of Frauds there was no valid trust. The Court of Appeal refused to allow
the statute to be used as an instrument of fraud and held that it is a fraud for a
person who has knowingly had land conveyed to him as trustee to later deny the
trust and claim the land for himself. In such cases, oral evidence will be allowed to
establish a trust. Lindley LJ held and I quote:

It is further established by a series of cases, the propriety of which cannot

now be questioned, that the Statute of Frauds does not prevent the proof
of a fraud; and that it is a fraud on the part of a person to whom land is
conveyed as a trustee, and who knows it was so conveyed, to deny the
trust and claim the land himself. Consequently, notwithstanding the
statute, it is competent for a person claiming land conveyed to another to
prove by parole evidence that it was so conveyed upon trust for the
claimant, and that the grantee, knowing the facts, is denying the trust and
relying upon the form of conveyance and the statute, in order to keep the
land himself.

The plaintiff should not be allowed to use the veil of incorporation to mask the
transaction which she knowingly entered into as a director/secretary of the
company. The plaintiff by the personal guarantee agreed with the transaction and

30
I will follow the reasoning of Hon. Lady Justice Mukasa – Kikonyogo that it was not
necessary to obtain a written consent in the circumstances of the case. I also
agree with the submissions of the defendant that the plaintiff and her husband as
the only agreed two directors of the company cannot hide behind the cloak of
incorporation to defraud a bank by a technical approach to the interpretation of
section 39 of the Land Act. The issue here is not that the banks have a duty to
inquire but the fact that the plaintiff to whom a right could have resided
participated actively in mortgaging the property. She further lied on oath that the
property was mortgaged without her notice. The mind of the plaintiff cannot by
any conceivable fiction of law be separated from the mind of the director she was
when she signed the mortgage deed as a director/secretary and when she further
supported the mortgage with her own personal guarantee.

I agree with the dictum in Lennards Carrying Co. Ltd v Asiatic Petroleum Co. Ltd
(1915) AC 705 that a corporation is an abstraction without a mind of its own and
that its active mind should be sought in someone else. I wish to add the words of
Lord Denning in HL BOLTON CO V TJ GRAHAM AND SONS [1956] 3 ALL ER 624,
Lord Denning said at page 630:

A company may in many ways be likened to a human body. They have a

brain and a nerve centre which controls what they do. They also have
hands which hold the tools and act in accordance with directions from the
centre. Some of the people in the company are mere servants and agents
who are nothing more than hands to do the work and cannot be said to
represent the mind or will. Others are directors and managers who
represent the directing mind and will of the company, and control what
they do. The state of mind of these managers is the state of mind of the
company and is treated by the law as such.”

The plaintiff had no need to go and seek permission or consent from herself. She
was one of the minds of the company and the fiction of corporate personality
cannot be taken to absurdity to separate her acts as a director from her acts as a
spouse in the sense of her knowledge and agreement to the transaction. In any
case she and her husband cannot be permitted to hide behind the veil of

31
incorporation to avoid liability for a loan had and admitted on the grounds of
section 39 of the Land Act before its amendment by the Land Amendment Act
2004. The spirit of article 126 (2) (e) of the Constitution of the Republic of Uganda
1995 is that substantial justice shall be administered without undue regard to
technicalities. To stretch the fiction of artificial legal personality the way it has
been done by the plaintiff to separate her mind as director to a family company
from her mind as a spouse would be an undue technicality. Finally section 39
before amendment put a duty on the spouse who together with the plaintiff
executed the necessary documents mortgaging the suit property and not on the
company Messrs Bainebitamazire Mixed Farm Ltd. I wholly follow the holding of
theCourt of Appeal in Civil Appeal No. 63 of 2007 between the parties and on the
same subject matter of interpretation of section 39 Land Act cap 227 before its
amendment as aforesaid.

For the reasons given above, there is no need for me to consider the submissions
of the parties on the second issue of available remedies. I accordingly dismiss the
plaintiff's suit with costs.

Judgment read and delivered in court on the zo" of May 2011.

Hon. Mr. Justice Christopher Madrama

Judgment delivered this zo" day of May 2011 in the presence of:
Patson Arinaitwe for the defendant,

Counsel for the plaintiff Mr. Kenneth Kakuru being absent and in Mbarara, but the
plaintiff Mrs Agnes Bainomugisha in court:

Hon. Mr. Justice Christopher Madrama

32