KAMPALA – City tycoon Sudhir Ruparelia has put the central bank on the spot in the case in which it claims that the business mogul allegedly fleeced his own bank of Shs397 billion in fraudulent transactions.
Mr Ruparelia through his lawyers of Kampala Associated Advocates contends that when Crane Bank went into receivership, it lost its powers to “sue” and to “be sued”, rendering its suit against him and Meera Investments Company a nullity.
In their submissions before the Commercial Court judge David Wangutusi., stated that the Receiver has no locus to file the suit and the Financial Institution in Receivership (Sudhir) has no right of audience before any court of law in Uganda according to the Financial Institutions Act.
Mr Sudhir’s lawyers, while citing the decision of the Supreme court in M/S Tatu Nayiga and Co Emporium v Verjee Brothers Ltd SCCA 8 of 2000, said that court held that the directors in a limited liability company are the only persons allowed to commence any actions on behalf of the company.
Bank of Uganda on October 20, 2016, placed Crane Bank under statutory management for being under-capitalized and according to Governor Tumusiime Mutebile, to stem infection of the country’s financial system.
However, Mr Ruparelia who is the Plaintiff in this case through his lawyers states that when BOU places a financial institution under statutory management, the board of directors of the financial institutions are suspended and their role is taken over by the statutory manager.
Under Section 89(8) of the FIA (Financial Institutions Act) it is provided that: “Upon appointment of a statutory manager, the board of directors shall stand suspended.”
“The Plaintiff was placed under receivership as envisaged under Section 94 and the subsequent provisions of the FIA under which the Plaintiff has no power to sue or be sued,” the lawyers submitted.
They explained that a financial institution under receivership is, therefore, a closed financial institution and when it is placed under receivership the statutory manager’s powers cease from that day and for all intents and purposes the institution is closed and the powers of the receiver are enumerated in Section 95 of the FIA.
Court also heard that when the legislature does not grant an express power to a statutory entity to sue then that entity simply cannot sue and this was determined by the Supreme Court of Uganda in Gordon Sentiba and Ors v Inspectorate of Government S.C.C.A No 6 of 2013.
The Supreme Court held that one cannot just infer rights that are not enumerated expressly in the Statute.
“In the present case, one cannot just infer the right for the Receiver to sue. If the legislature had wanted the Receiver to sue, it would have said so expressly in the FIA,” the lawyers explained.
The lawyers stated that the Supreme Court in essence was saying that this Honourable Court must look only at the laws governing receivership of a financial institution (in this case the FIA) and it cannot confer or infer any powers that are not specified in the Financial Institutions Act which does not grant an institution in Receivership a right to sue.
“It would be wrong for courts to confer corporate status upon the applicant when parliament in its wisdom did not find it necessary to do so. It is not the function of the court to confer corporate status or legal capacity or legal capacity or similar powers on public institutions or bodies when the same is not specified in the parent or enabling laws,” the Supreme Court held.
The lawyers have asked court order the Bank of Uganda to pay the costs of the suit incase it finds it in favour Mr Ruparelia Since the receiver ended, then the receiver-Bank of Uganda-should be held liable for the costs.
Full transcript below:
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
MISCELLANEOUS APPLICATION NO. 320 OF 2019
[Arising from Civil Suit NO. 493 OF 2017]
- SUDHIR RUPARELIA
- MEERA INVESTMENTS :::::::::::APPLICANTS/ DEFENDANTS
CRANE BANK LIMITED (IN RECEIVERSHIP):::::::::::::::::::::::::::::::::::::::::::RESPONDENT
This is an application that seeks to dismiss HCCS 493 of 2017 on the basis that the Respondent has no locus to bring the suit, no cause of action against the Applicants and that the suit is barred in law against the Applicants.
In an application of this nature we are supposed to limit ourselves to the plaint. This was the position in Mukisa Biscuits Manufacturing Co. Ltd v West End Distributors Ltd (1969) 1 EA 696, (Page 3 of the case bundle) wherein it was held that:
” So far as I am aware, a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.”
A preliminary objection is in the nature of what used to be a demurer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or what is sought is the excise of judicial discretion…….”
In Attorney General versus Oluoch  EA 392 (Page 5 of the case bundle) it was held that the question of whether a plaint discloses a cause of action is determined upon perusal of the plaint and attachments thereto with an assumption that the facts pleaded or implied therein are true.
The Applicants case is that the instant suit should be struck out with costs because;
- The Plaintiff has no locus standi to bring the suit
- The suit is barred by law against the 2nd Defendant
- The Plaintiff has no locus standi to bring the suit
According to Black’s Law Dictionary, 8th Edition, (Page 8 of the case bundle) locus standi is defined to mean:
“The right to bring an action or to be heard in a given forum.”
In Fakrudin Allibhai Kapasi and Anor V Kampala District Land Board and Anor HCCS 570 of 2015, (Page 18 of the case bundle)it was held that:
By locus standi is meant the legal capacity of a person which enables him or her to invoke the jurisdiction of the court in order to be granted a remedy. Locus standi is intrinsically related with the cause of action in any given suit to enable a plaintiff to move court.
It is emphasized that the unfailing requirement is that locus standi to institute a suit, by whatever mode prescribed, and must be established at the time the suit is filed. This is done by expressly pleading facts that give the plaintiff the legal standing to institute the suit. It should not be left to the court to guess where a plaintiff derives the locus standi to file the suit. It must be expressly clear on the facts pleaded; particularly those that give rise to the cause of action in the plaint or counterclaim.
The basis upon which the Plaintiff filed the suit is stated in Paragraph 2 of the Plaint. Paragraph 2 of the plaint states;
“On the 20th October 2016 BoU took over the management of the plaintiff pursuant to S.87 (3) and 88 (1) (a) & (b) of the Financial Institutions Act 2004 ..and on the 20th of January 2018 the BoU placed the Plaintiff under receivership pursuant to S.94 of the FIA.”
The suit was filed on the 30th day of June 2017, when Crane Bank Limited was in Receivership. At issue therefore is whether a suit can be filed by a financial institution in Receivership. Our submission is that the Receiver has no locus standi to file the suit and the Financial Institution in Receivership (Plaintiff) has no right of audience before any court of law in Uganda according to the Financial Institutions Act.
The rule of thumb is that a board of directors exercise control and management over the corporate entity. The directors have the power individually and collectively to sue and commence litigation. This position was fortified by the decision of the supreme court in M/S Tatu Nayiga and Co Emprorium v Verjee Brothers Ltd SCCA 8 of 2000, Justice Kanyeihamba (Page 32 of the case bundle) held:
“That principal is that any director who is authorised to act on behalf of a company, unless the contrary is shown, has the powers of the board of directors to act on behalf of that company…it follows that PW2 had the authority to instruct counsel to act on behalf of the respondent company…with regard to ground 2 of the appeal, once ground 1 is disposed off in the manner I have suggested it follows that PW2 had the authority to instruct counsel to act on behalf of the respondent company. Confirming the findings of the trial judge, the learned Justice Okello, J.A., who delivered the lead judgment in the court of the appeal said,
“I cannot fault the learned trial judge on the above findings. He stated the position of the law regarding authority for filing a suit in the name of a company accurately. The decision in Bogere Coffee Growers Limited V Zulubabri Kikuyu 1970 EA 147 is no longer good law it has been overturned in United Assurance Company limited (supra). Any authorised director can give the necessary authority to institute such a suit.”
I agree that PW2 was clothed with the authority of the Respondent company to authorise advocates in Uganda to bring the suit in the name of the Respondent company.”
The rule of thumb therefore is that directors in a limited liability company are the only persons allowed to commence any actions on behalf of the company.
Section 133 (Page 53 of the case bundle) of the Financial Institutions Act states:
“For the purposes of any matter concerning financial institutions, this Act shall take precedence over any enactment and in the case of conflict, this Act shall prevail.”
Therefore, for purposes of this application only the FIA shall take precedence.
What happens when a financial institution is taken over by BOU
The FIA provides three ways in which BOU may take over and resolve a financial institution in distress. They are;
- statutory management,
- receivership, and
When BOU places a financial institution under statutory management, the board of directors of the financial institution are suspended and their role is taken over by the statutory manager. Under Section 89(8) of the FIA (Page 46 of the case bundle) it is provided that:
“Upon appointment of a statutory manager, the board of directors shall stand suspended.”
The effect of the suspension of the board is that the statutory manager takes over the responsibilities of the directors. Under Section 89(9) (Page 46 of the case bundle), it is provided that:
“A statutory manager appointed under paragraph (g) of subsection (2) of this section shall have the functions of the members of the board of directors collectively and individually, including the board’s powers of delegation and use of the seal until such a time as the Central Bank shall appoint an advisory board.”
Among the functions taken over by the statutory manager includes the power to sue. Under 89(1) (Page 45 of the case bundle) it is provided that:
The Central Bank shall, on taking over management of a financial institution under section 88 of this Act, have exclusive powers of management and control of the affairs of the financial institution.
The powers taken over include the power to sue as provided under Section 89(2)(e) (Page 45 of the case bundle):
“The powers referred to in subsection (1) of this section shall include power to—
(e) initiate, defend and conduct in its name any action or proceeding to which the financial institution may be a party;”
Therefore, once a bank goes into statutory management the legislature gives the statutory manager the powers of the board of directors including the power to sue and be sued.
The Plaintiff pleaded this statutory scheme in paragraph 2 of the plaint which states:
“On the 20th October 2016 BoU took over the management of the plaintiff pursuant to S.87 (3) and 88 (1) (a) & (b) of the Financial Institutions Act 2004 ..and on the 20th of January 2017 the BoU placed the Plaintiff under receivership pursuant to S.94 of the FIA.”
Paragraph 2 of the Plaint shows four things:
- On 20th October, 2016, the board of directors of CBL was suspended and therefore it could not and cannot institute a suit.
- From 20th October, 2016 to 20th January, 2017 the Plaintiff could institute a suit under Section 89 (1),(2)(e),(9) of the FIA. We shall submit that they lost that power on 20th January, 2017 when they placed the Plaintiff under receivership.
- The Plaintiff was placed under a receivership as envisaged under Section 94 and the subsequent provisions of the FIA under which the Plaintiff has no power to sue or be sued.
- This suit was instituted by the Plaintiff on the 30th day of June 2017, while under Receivership.
The basis of the Applicants objection is that a Commercial Bank placed under receivership cannot sue or be sued. There are four parts to this argument and we shall address them as listed below:
- The Financial Institutions Act (“FIA”) expressly outlines the powers of the Receiver, and deliberately omits from these powers the power to sue or have audience before the Courts of Law in the name of and on behalf of the Financial Institution under their control.
- By deliberate contrast, unlike the receiver, the FIA expressly grants the statutory manager and liquidator power to sue and be sued in the name of and on behalf of the Financial Institution under their control.
- The FIA prohibited the receiver from being sued and he cannot sue.
- The FIA specifically stated that only the liquidator has the power to sue the shareholders.
For those reasons we pray that this honourable court find that the Plaintiff had no locus to institute HCCS 493 of 2017. We shall briefly discuss each of the above parts below:
- The Financial Institutions Act (“FIA”) expressly outlines the powers of the Receiver, and deliberately omits from these powers the power to sue or have audience before the Courts of Law in the name of and on behalf of the Financial Institution under their control
A Receiver or Liquidator under the Financial Institutions Act is not the ordinary receiver or liquidator under the Companies Act, Bankruptcy Act or the Insolvency Act. This is a very specialised receivership, governing a specialised and highly regulated industry in the economy and the rules that govern it are those contained in the Financial Institutions Act. Section 133 (Page 53 of the case bundle) of the Financial Institutions Act states:
“For the purposes of any matter concerning financial institutions, this Act shall take precedence over any enactment and in the case of conflict, this Act shall prevail.”
S.94(1) (Page 49 of the case bundle)of the FIA provides;
(1) Subject to this section, the Central Bank may close a financial institution and place it under receivership.
A financial institution under receivership is therefore a closed financial institution. When a financial institution is placed under receivership the statutory manager’s powers cease from that day and for all intents and purposes the institution is closed. The powers of the receiver are enumerated in Section 95 of the FIA (Page 49 of the case bundle). The said Section provides:
(1) The Central Bank shall, within twelve months from the date of taking over as a receiver, consider and implement any or all of the following options either singly or in combination—
(a) arrange a merger with another financial institution
(b) arrange for the purchase of assets and assumption of all or some of the liabilities by other financial institutions;
(c) arrange to sell the financial institution;
(d) liquidate the assets of the financial institution.
The powers of the receiver are therefore limited, both in extent and in time. He can only exercise the four powers mentioned above and this has to be done within twelve months.
The receiver in implementing any of the options in Section 95(1) does so as a public duty and the rationale for these powers is set out in Section 95(2) (Page 49 of the case bundle) which provides:
(2) The Central Bank shall take the action described in subsection (1) which in the opinion of the Central Bank—
(a) is most likely to result in marshalling the greatest amount of the financial institution’s assets;or
(b) protects the interests of depositors including their interest in the unprotected deposit amounts; or
(c) minimises costs to the Deposit Protection Fund and losses to other creditors; or
(d) ensures stability of the financial sector.
Under Section 95(3) of the FIA (Page 49 of the case bundle) it provides for things the receiver must do in implementing his powers under Section 95(1). The Section provides:
(3) In determining the amount of assets that is likely to be realized from the financial institution’s assets, the receiver shall—
(a) evaluate the alternatives on a present value basis, using a realistic discount rate; or
- b) document the evaluation and the assumptions on which the evaluation is based, including any assumptions with regard to interest rates, asset recovery rates, inflation, asset holding and other costs.
Section 95 does not mention suing as one of the things he will do in the exercise of his powers.
Therefore, the receivership is heavily regulated under the FIA in the following way;
- What he can do and when he can do it is regulated by Section 95(1),
- Why he does it and the rationale is set out in Section 95(2),
- How he does it is set out in Section 95(3).
Under the FIA, the receiver cannot file a law suit.
When the legislature does not grant an express power to a statutory entity to sue then that entity simply cannot sue. This very point was determined by the Supreme Court of Uganda.
In Gordon Sentiba and Ors v Inspectorate of Government S.C.C.A No 6 of 2013 where it was held;
At Page 9 Paragraph 25 (Page 61 of the case bundle)
The main issue to determine in this ground of appeal is whether the respondent has legal capacity to sue and be sued. Other related sub issues are whether the respondent had locus standi to bring these proceedings.
At Page 13 Paragraph 20 (Page 65 of the case bundle)
There is nothing in the Article 227 or Section 2 of the Act [Inspectorate of Government Act] which confers on the respondent corporate status or legal capacity to sue or be sued. The Constitutional Court merely inferred corporate status by holding that Parliament vested that status in the respondent without saying so. If Parliament had wanted to confer corporate status on the respondent nothing could have stopped it from doing so, but it did not in its wisdom do so.
The Supreme Court makes the point that one cannot just infer rights that are not enumerated expressly in the Statute. In the present case, one cannot just infer the right for the Receiver to sue. If the legislature had wanted the Receiver to sue, it would have said so expressly in the FIA.
Page 14 Paragraph 10-30 (Page 66 of the case bundle)
Indeed there are other offices like the Administrator General on which Parliament has conferred the status of corporate sole and can sue and be sued in its capacity as Public Trustee. In this connection Section 2 of the Administrator Generals’ Act states:
“The Administrator General shall be a corporate sole by the name of the Administrator General of Uganda with perpetual succession and an official seal and, in all proceedings under the Act and in all legal proceedings he or she shall sue and be sued by that name and it shall be necessary to state and prove the Administrator General’s authority and title in the specific estate to which the proceedings may relate but not his or her general authority or appointment.”
The Constitutional Court further justified its decision on the ground that the respondent has an Appointment’s Board and can enter into contracts and be sued on those contracts. It is true that section 16(2) of the Inspectorate of Government Act provides that “All officers and employees of the Inspectorate other than the Secretary shall be appointed by the Board upon such terms and conditions as the Board may determine.” The Appointments’ Board is established under Section 7 of the Act but nowhere in the Section is the respondent given legal capacity to sue or be sued by its staff or any person.
The Supreme Court further makes it clear that the right to sue of an artificially created entity (even if the entity is recognized by statute) must be specifically granted by the enabling statute. In the present case, the FIA does not grant an institution in receivership the right to sue or be sued in its own name and neither does it grant the receiver the right to sue or be sued in its own name.
Page 15 Paragraph 15 (Page 67 of the case bundle)
There is no provision in the Constitution, the Inspectorate of Government Act or any other law which confers corporate status on the respondent and it would be wrong for the Court to confer such status on the respondent when Parliament in its wisdom did not find it necessary to do so for effective enforcement of the powers of the respondent. However, Parliament has power to review the matter and confer corporate status on the Inspectorate of Government.
The Supreme Court determined that it would be wrong for the Court to confer the right to sue, when Parliament in its wisdom did not find it necessary to do so.
Page 16 Paragraph 5 (Page 68 of the case bundle)
The respondent is a creature of the Constitution and Statute and its functions and powers are clearly laid down in those legal instruments. It is not the function of the Courts to confer corporate status or legal capacity or similar powers on public institutions or bodies which are not specified in the parent or enabling laws.
The Supreme Court in essence was saying that this Honourable Court must look only at the laws governing receivership of a financial institution (in this case the FIA) and it cannot confer or infer any powers that are not specified in the Financial Institutions Act. The Financial Institutions Act does not grant an institution in Receivership a right to sue. Court cannot infer such a right either.
The Sentiba case (supra) was followed in the case of Inspectorate of Government V UVETSO Association Limited and Ors HCMA 536 of 2014, (Page 92 of the case bundle)in which it was held that:
“It would be wrong for courts to confer corporate status upon the applicant when parliament in its wisdom did not find it necessary to do so. It is not the function of court to confer corporate status or legal capacity or legal capacity or similar powers on public institutions or bodies when the same is not specified in the parent or enabling laws. Conferring a special status does not amount to giving a corporate status. The applicant has argued that it has appeared in court in several cases as a party to bolster its argument that it has a corporate status. While that may be true, the issue of its legal capacity or locus standi was not raised and therefore the issue was not determined in those cases.
Much as the court of Appeal sitting as a Constitutional Court in Kikondwa Butema held that the respondent (IGG) is a body corporate with legal capacity to sue or be sued, the Supreme Court decision in Gordon Sentiba & others Vs The Inspectorate of Government 2010 by virtue of the supremacy of the Supreme Court is binding on all courts as enunciated in Article 132(4) of the Constitution. The Supreme Court is the highest court of record in Uganda and by virtue of that status, this court is bound to follow the 2010 decision and view of B.J Odoki C.J (as he then was) (supra).”
This case confirmed the established doctrine of precedent, under which this Honorable Court is bound by the findings of the Supreme Court on this issue not to infer or confer a right to sue when none has been granted by the enabling statute.
In Hon. Gerald Kafureka Karuhanga and Ors v The Attorney General and Ors, HCMC 060 of 2015, (Page 101 of the case bundle) it was held that:
It is common knowledge that the Judicial Service Commission is not a legal personality capable of suing or being sued in that capacity. As rightly pointed out by Mrs. Rwakoojo no one other than legislation can confer legal personality on the Judicial Service Commission. This position was enunciated in the often quoted Supreme Court case of Gordon Sentiba & 2 Others Vs The Inspectorate of Government, SCCA No. 6 Of 2008 followed in The Inspector General of Government Vs UVETSO Association Ltd & 3 Others High Court Misc. Application No.536 of 2014. where the Supreme Court held inter alia that it is not the function of courts or anybody to confer corporate status or legal capacity or similar powers on public institutions or bodies which are not specified in the parent or enabling laws. Therefore adding the Judicial Service Commission as a party to these proceedings was done illegally. Article 41 of the Constitution relied upon by the applicants does not confer corporate status on the Judicial Service Commission even if it is an organ or an agency of state. The second respondent will accordingly be struck out with costs.
Again the Court in this case acknowledged the precedents cited earlier and re-emphasized the principle that the right to sue and be sued is an express creature of statute and cannot just be inferred. Courts must confine themselves to the “four corners” of the Statute and must read nothing more than is stated in the enabling statute.
The powers of a Bank under receivership are a creature of statute. As a statutory body, the Respondent is expected to act within the four corners of the statute. In the book, “Public Law in East Africa” by Ssekana Musa (Page109 of the case bundle), as he then was, he states that:
a public authority must act within the four corners of its power or jurisdiction.
(Page 110 of the case bundle)
Acting outside the statute arises where there is total disregard of the law as it is in the law books.
The Receiver can only do that which the statute permits him to do. That which is not expressly permitted is prohibited. In this case, the Receiver has no right to sue and the institution in receivership has no right to bring a suit before the courts of law. The suit therefore is prohibited by law.
Once a Receiver acts outside its statutory duty, then like any other statutory body its actions are illegal. In Makula International Limited V His Eminence Cardinal Nsubuga and Anor, C.A.C.A. 4 of 1981, page 21 (Page 129 of the case bundle), was held: a Court of law cannot sanction that which is illegal……… illegality, once brought to the attention of the court, overrides all questions of pleading, including any admission made thereon.
This case makes the point that because the Plaintiff has no right to sue, a suit brought by it is an illegality and a nullity that must be rejected as soon as this fact is brought to the attention of the Court.
Parliament was clear on the powers of the receiver. It does not include a power to commence an action. If parliament had intended for the Receiver to have the power to commence a suit, it would have expressly said so as is the case for the statutory manager and the liquidator.
- By deliberate contrast, unlike the receiver, the FIA expressly grants the statutory manager and liquidator power to sue and be sued in the name of and on behalf of the Financial Institution under their control
We are fortified in this position (that the Plaintiff cannot sue or be sued) by the powers Parliament conferred on a liquidator and on a statutory manager. Parliament expressly gave the Central Bank power to commence and conduct suits under statutory management and liquidation.
S.89 (2) (e) (Page 45 of the case bundle) provides;
(2) The powers referred to in subsection (1) of this section shall include power to-
(e) initiate, defend and conduct in its name any action or proceeding to which the financial institution may be a party;
- 100 (1) (a) of the FIA (Page 51 of the case bundle) provides;
The liquidator may, with the approval of the Central Bank—
- bring or defend any action or other legal proceedings in the name and on behalf of the financial institution;
Therefore the express provisions of the FIA grant only the statutory manager and the liquidator the power to sue.
An institution under both Statutory Management and Liquidation can bring new suits and can defend new and existing suits before courts. In the case of Receivership, the FIA deliberately refused to grant the institution the right to bring any suit, and it absolutely prohibits any third party from bringing any suit or enforcement proceeding of any kind before the courts (without any exception of any kind). The legislative intention is clear. An institution in Receivership has no standing or right of audience before the Court. Any suit brought by an institution in Receivership is illegal and is a nullity.
We are fortified in this by a long line of authorities, and we shall highlight a few.
- In Makula International Limited V His Eminence Cardinal Nsubuga and Anor, C.A.C.A. 4 of 1981, page 21, (Page 129 of the case bundle) was held: a Court of law cannot sanction that which is illegal……… illegality, once brought to the attention of the court, overrides all questions of pleading, including any admission made thereon.
This suit having been brought illegally cannot be sanctioned by the Court. It must be dismissed and this illegality supersedes any other consideration that the Court may be inclined or urged by the Plaintiff to take into account.
- In Haj Kaala Ibrahim V The Attorney General and Anor HCMC 23 of 2017, (Page 136 of the case bundle) it was held that:
When power is not vested in the decision maker then any acts made by such a decision maker are ultra vires.
(Page 137 of the case bundle)
The activity which was the subject of regulation and concern did not fall in the docket of the Ministry of Trade, Industry and Cooperatives. The actions of the Minister of Trade, Industry and Cooperatives were ultra vires.
Applying this reasoning to the instant case, because the Plaintiff has no right to sue, then the suit it brought is a nullity as it is ultra vires the powers granted to a Receiver or an institution in Receivership under the FIA.
- In Thugitho Festo =versus=Nebbi Municipal Council, Arua High Court Misc. Application No. 15 of 2017 (Page 152 of the case bundle); the Hon. Justice Stephen Mubiru, held inter alia’ that:
“An action or decision may be illegal on the basis that the public body has no power to take that action or decision or has acted beyond its powers”.
As the above case shows, the Plaintiff’s suit is illegal because the plaintiff has no powers to bring this suit before this Honourable Court. As stated earlier illegality cannot be condoned by the Court. This suit should be dismissed with costs.
- In Mrs. Geraldine Ssali Busuulwa =versus=National Social Security Fund & Another, High Court Civil Division Misc. Cause No. 032 of 2016, (Page 184 of the case bundle) the Hon. Justice Stephen Musota defined illegality as follows:
“Illegality is when the decision making authority commits an error of law in the process of taking or making the act, the subject of the complaint”.
He went on to hold that: (Page 184 of the case bundle)
“acting without jurisdiction or ultra vires or contrary to the provisions of the law or its principles are instances of illegality”.
This case too shows that an institution in Receivership is deemed to have acted illegally when it brings a suit before the Courts without the statutory power to do so.
- In Amuron Dorothy V Law Development Center HCMC 42 of 2016, (Page 195 of the case bundle) it was held that
….“Illegality is when the decision-making authority commits an error of law in the process of taking or making the act, the subject of the complaint. Acting without jurisdiction or ultra vires, or contrary to the provisions of a law or its principles are instances of illegality. It is, for example, illegality, where a Chief Administrative Officer of a District interdicts a public servant on the direction of the District Executive Committee, when the powers to do so are vested by law in the District Service Commission…”
- In Fernandes V Kericho Liquor Licensing Court  E.A. 640 at 643 (Page 219 of the case bundle), in the aforementioned case, the appellant’s application for the renewal of a general retail liquor licence was refused by the Kericho Liquor Licensing Court on the ground that preference was given to Kenyan citizens. The appeal was brought on the ground that the Licensing Court had power to refuse the renewal only on the applicant’s suffering from one of the six disqualifications set out in s.16 Liquor Licensing Act, which did not include citizenship.
It was held:
It is quite clear that the renewal of the licence in this case was refused on the ground that the appellant was not a Kenyan citizen. That, however, is no disqualification for the purposes of the liquor licensing law. No other disqualification is imputed to the appellant. I, therefore, hold that the appellant’s application for a renewal of his licence was illegally refused.
In the present case, because the legislature was deliberate in denying the Receiver and entities in Receivership a right to sue, then any suit brought by such an entity is illegal and a nullity The FIA does not grant the Receiver a right to sue (as it expressly does for the Statutory Manager and the Liquidator). This right to sue cannot be inferred. The omission in granting this power in the case of the Receiver is deliberate because it is granted to the others. It goes against every cannon of legislative interpretation to infer a power that has been deliberately omitted in the Statute.
The power to sue is born at incorporation, it grows under statutory management, it dies under receivership and is resurrected under liquidation.
- The FIA prohibited the receiver from being sued and therefore he cannot sue
Not only is there no power granted to the receiver to sue, the FIA expressly prohibits the receiver from being sued. Our contention therefore is that the receiver can neither sue nor be sued.
S.96 of the FIA (Page 50 of the case bundle) provides;
Where a financial institution is placed under receivership—
- no other proceedings and no execution or other legal process may be commenced or continued against the financial institution or its property
The position of the law is clear. An institution in Receivership has no business in Court. It cannot be sued, and it cannot sue. The goal of the legislature is also clear; to completely resolve the affairs of the financial intuition within the statutory period of 12 months prescribed by law outside the courts of law.
If a party cannot be sued, it follows that that party cannot sue. We are fortified in this by the binding decision in the supreme court in the case of The Commissioner General Uganda Revenue Authority vs Meera Investments Limited SCCA 22 of 2007, (Page 236 of the case bundle) it was held;
Per Kanyeihamba JSC, Page 17 (Page 236 of the case bundle)
“In my view, he or she who is empowered to sue is also made liable by necessary implication to be sued.”
Page 20 (Page 239 of the case bundle)
“In any event, the reading of the statutes applicable show that the law permits the Commissioner General or his or her agent to sue expeditiously for taxes owed. Therefore, it is my view that the respondent should also have the corresponding right to sue without hindrances.”
Per Tsekokoko JSC, page 24 (Page 243 of the case bundle)
“In these circumstances I cannot find any legal basis in support of the view that the Commissioner General who can sue and maintain a suit in his/her official name cannot be sued in the same name in any competent court.”
It is our submission that it is now settled law, from the Supreme Court of Uganda, that he who can sue, can be sued and vice versa. In the present case, because the statute expressly prohibits the institution in Receivership from being sued, it follows that the institution cannot sue. No one can take it to court, and it was not given the right to go to court (that right having been reserved for institutions in statutory management and Liquidation). The intention of parliament couldn’t have been to protect the receiver from suits, while on the other hand allow the receiver to sue. Therefore:
- The statute does not give the plaintiff the power to sue,
- The statute does not allow the plaintiff to be sued,
- The instant plaintiff does not have locus standi to institute HCCS 493 of 2017 and the same should be dismissed with costs as against the Bank of Uganda.
Prior to the enactment of the FIA 2004, financial institutions were regulated by Cap 54 which was repealed. Even under Cap 54, only the statutory manager and the liquidator could sue. The Receiver could not. This history of regulation shows that it has always been the deliberate intention of the legislature that an institution under Receivership cannot sue or be sued. The position was not different under the old law, which makes the argument that it was just an oversight untenable.
Section 31(1), and (2)(e) of the FIA Cap 54 (Page 247 of the case bundle) provided:
Management of a seized financial institution
- The central bank shall, upon possessing a financial institution under section 30, be vested with exclusive powers of management and control of the affairs of the financial institution.
- The powers referred to in subsection (1) shall include power to
(e)Initiate, defend and conduct in its name any action or proceeding to which the financial institution may be a party.
Section 32 (5) FIA Cap 54 (Page 248 of the case bundle) provided:
Where a central bank decides to liquidate a financial institution it shall-
(b) Enforce the individual liability of the shareholders and directors of the financial institution;
No inference of mistake or oversight of the legislature can stand given the consistent legislative history on the matter. Even under Cap 54, when the central bank took over management he had the power to sue. But when the central bank appointed a receiver, under Section 32(2) and (3), the statute gave the receiver no power to sue. It was only when the central bank decided to liquidate the financial institution that the statute gave the central bank the right to enforce/sue shareholders and directors. If parliament intended to give the receiver the power to sue, it would have stated so in the 2004 amendment but this was not done.
- The FIA specifically states that only the liquidator had the power to take out enforcement against shareholders and directors. That power was not given to the receiver
The Plaintiff brings this action against the 1st Applicant owing to the fact that the 1st Applicant was a director and shareholder of the Plaintiff. Paragraphs 7,8 (8.1-8.9), 9 (9.1-9.4.3), 10, 11, 12 of the Plaint all set out in broad, prolix and dramatic terms that the 1st Defendant is a shareholder and director of the Plaintiff. The contention is the Applicant is liable for the allegations set out in the plaint on account of being a director and shareholder of the Plaintiff. In essence, the suit seeks to hold the shareholder / director liable to the plaintiff and for the plaintiff’s other obligations contrary to the express provisions of the FIA.
Under the S. 100(2)(h) of the FIA, the power to sue the directors and shareholders is only granted to the liquidator. This power does not reside in the Statutory Manager or the Receiver. It is the express preserve of the liquidator. S. 100 (2) (h) of the FIA (Page 52 of the case bundle) provides;
The Liquidator may; enforce the individual liability of the shareholders and directors of the financial institution
Therefore, only the liquidator is allowed to make claims against directors / shareholders as this suit seeks to do.
In Amuron Dorothy V Law Development Center HCMC 42 of 2016, (Page 195 of the case bundle) it was held that
….“Illegality is when the decision-making authority commits an error of law in the process of taking or making the act, the subject of the complaint. Acting without jurisdiction or ultra vires, or contrary to the provisions of a law or its principles are instances of illegality. It is, for example, illegality, where a Chief Administrative Officer of a District interdicts a public servant on the direction of the District Executive Committee, when the powers to do so are vested by law in the District Service Commission…” (Emphasis Ours)
The above case shows that it is an illegality for the Receiver to initiate a suit that is the legal preserve of the liquidator. The power to bring this kind of suit is vested by law in the Liquidator. The suit having not been brought by the Liquidator (or the entity in liquidation) is null and void as it violates an express provision of the Financial Institutions Act, which is the enabling Act governing suits of this kind.
In Smart Protus Magara and 138 Ors V Financial Intelligence Authority H.C.M.A 215 of 2018, (Page 258 of the case bundle) it was held that:
“Court cannot legislate under the guise of interpretation against the will expressed in the enactment itself. It is not open to the court to usurp the functions of the legislature. Nor is it open to the court to place unnatural interpretation on the language used by the legislature and impute to it an intention which cannot be inferred from the language used by it by basing itself on ideas derived from other laws.”
The legislature was clear. The power to sue the 1st Defendant/Applicant in his capacity as shareholder/director to enforce liability to the Plaintiff is limited to a liquidator. Court cannot extend this power to the Receiver when the legislature did not give it to the Receiver. Therefore, the instant plaintiff (being an entity in receivership) does not have locus to institute HCCS 493 of 2017 and the same should be dismissed with costs as against the Bank of Uganda. On this ground alone the suit ought to be dismissed with costs against the Bank of Uganda.
Lastly, it should be noted that in the pleadings it is stated that the Receivership started on 20th January, 2017, and under Section 94 the receivership was meant to last for 12 months. By operation of law, receivership expired. The suit itself expired. There is therefore no Crane Bank in receivership. To the extent that this offends Section 94, and to the extent that you cannot maintain a suit with a nonexistent person, it is our prayer that the court dismisses the suit on this basis. This illegality is one that the court cannot ignore. See Makula International
- The suit is barred by law against the 2nd Defendant
Paragraph 6 of the plaint, which is at page 3 of annexure B of the affidavit in support of the application, states;
The Plaintiffs claim against the 2nd Defendant is for;
Delivery up of the freehold certificate of title to 48 properties comprising the Plaintiff’s countrywide branch network, together with duly executed transfer deeds in respect of each one of them in favour of the Plaintiff, or its nominee, which properties, were purchased and/or developed using the Plaintiff’s monies and were fraudulently transferred, under the 1st Defendant’s direction and/or with his knowledge and in breach of his fiduciary duty as a director of the Plaintiff into the names of the 2nd Defendant and then purportedly leased back to the Plaintiff.
Paragraphs 25-29 of the Plaint, at page 17 of annexure B of the affidavit in support, detail the averments against the 2nd Defendant. Paragraph 27.6 of the Plaint states;
27.6 The purported reason for the sale and leasebacks was that the Plaintiff which was classified as a non citizen under S.40 of the Land Act was prohibited from holding freehold land in Uganda. In fact, there was no good reason for such transactions:
27.6.1 28 of the plots had initially been acquired by the Plaintiff as leasehold properties. The Plaintiff then spent time and money to convert the leaseholds into freeholds.
27.6.2 The Plaintiff could have readily surrendered the erroneously converted freeholds to the original institutional lessors and been re-granted leases at an appropriate rent, alternatively appointed a nominee to hold the freeholds and grant 99 year leases on a nominal rent..
27.6.4 In any event, for the reasons set out in paragraphs 8 & 9 above, the 1st Defendant was the sole beneficial owner of the Plaintiff and therefore the sale and leasebacks were unnecessary because the Plaintiff was not a non citizen...”
After setting out its allegation, the Plaintiff made the following prayers against the 2nd Defendant in Paragraph 43.2, page 24 of annexure B of the affidavit in support,:
43.2 The 2nd Defendants interests in the land are held in trust for the Plaintiff.”
My Lord, the Plaintiff starts its plaint by saying it wants delivery of a title and transfer forms, in its name duly signed, for freehold and mailo titles as its cause of action against the second defendant. In the middle of the plaint it realises it has a problem with Section 40 of the Land Act, and then states that its holding freehold and mailo titles would have been erroneous. It then admits that it could have gotten leases. My lord it is worth pointing out that the Plaintiff has leases. By the time the Plaintiff concludes the plaint it no longer has the courage to ask for its freehold and mailo interests; instead it prays that the 2nd Defendant continues to hold the freehold but in trust for the Plaintiff. My lord, with great respect, this is a plaint without a purpose. The plaintiff can only have what the Plaintiff has: A LEASE.
None the less, my Lord, the Pleadings against the 2nd Defendant give rise to two issues:
- Whether the Plaintiff can hold mailo and freehold land?
- Whether 2nd Defendants present interests can be held in trust for the Plaintiff as prayed for?
- Whether the Plaintiff can hold mailo and freehold land?
It is submitted that the Plaintiff cannot hold mailo and freehold land by virtue of the fact that the Plaintiff is a non citizen, as it has pleaded itself, within the meaning of the Constitution and the Land Act.
Article 237 (1) of the Constitution of Uganda (Page 264 of the case bundle) provides that:
“Land in Uganda belongs to the citizens of Uganda and shall vest in them in accordance with the land tenure systems provided for in this Constitution.”
Article 237(2)(c) of the Constitution (Page 264 of the case bundle)provides that:
“Notwithstanding clause (1) of this article— (c) noncitizens may acquire leases in land in accordance with the laws prescribed by Parliament, and the laws so prescribed shall define a noncitizen for the purposes of this paragraph.”
So under the Constitution a non citizen can only hold lease hold land. Parliament has operationalised Article 237 by passing the Land Act cap 227.
Section 40 (1), (4), (7)(a)(d), and (8)(a) (Page 267 and 268 of the case bundle) and of the Land Act provides that:
(1) Subject to article 237(2)(c) of the Constitution, a noncitizen may acquire a lease in land in accordance with this section.
(4) Subject to the other provisions of this section, a noncitizen shall not acquire or hold mailo or freehold land.
(7) For the purposes of this section, “noncitizen” means—
(a) a person who is not a citizen of Uganda as defined by the Constitution and the Uganda Citizenship Act;
(b) in the case of a corporate body, a corporate body in which the controlling interest lies with noncitizens;
(d) a company in which the shares are held in trust for noncitizens;
(8) For purposes of subsection (7), “controlling interest” means—
(a) in the case of companies with shares, the majority shares are held by persons who are not citizens;
The import of the constitution and the land act is that:
- Non-Citizens cannot hold free hold or mailo land;
- For a company to be a citizen it must satisfy all the requirements of citizenship imposed by law. These are:
- It must be incorporated in Uganda
- The majority shares must be held by citizens
- Its articles and memorandum must have a prohibition on transfer of a majority of its shares to non-citizens.
If any of the above requirements is not met, then the company is a non-citizen and cannot hold freehold and mailo land.
In Paragraph 8.1 and 8.2 of the plaint it is stated that:
“8.1 The 1st Defendant has at all times been a substantial shareholder in the Plaintiff. The 1st Defendant is presently registered as the legal and beneficial owner of 28.83% of the Plaintiffs issued shares.
8.2 The 1st Defendant is presently the beneficial owner of, and/or controls, a further 47.33% of the Plaintiff’s issued shares (99,398,250) registered in the name of White Sapphire Ltd (hereinafter referred to as “White Sapphire”, a company incorporated in Mauritius and nominally owned by Rasiklal Chhotalal Kantaria (hereinafter referred to as “Kantaria”)”
8.3 The first defendant is presently the beneficial owner of and or/controls a further 4% of the Plaintiffs issued shares registered in the name of Mr. Jitendera Sanghani……….
It is pleaded that the majority shares in CBL are held by a company incorporated outside Uganda in Mauritius, whose owners and directors are non-Ugandans. A further 4% of the shares is held by Mr. Jitendera Sanghani, a British national. This would in effect mean that a total of 51.33% of the shares are held by non-citizens. It is not in dispute that the majority shares are held by this foreign entity (whose record shareholders and directors are also foreigners), and a British national.
The Land Act is clear, if majority of shares are held by a non-citizen it is a foreign company. The Land Act is not concerned with the beneficial ownership of the shares. A Ugandan citizen who purportedly hides behind a foreigner cannot own free hold land. In this particular case, the largest single shareholder in the Bank is a company incorporated in Mauritius. A company incorporated in Mauritius even if owned by a Ugandan citizen cannot be said to be a Ugandan company.
The author of the plaint also stated in Paragraph 27.6.2, that the land should have been held as a lease from the original lessors. Indeed the author of the Plaint was alive to this reality that is why he prays that freehold land is held in trust for the Plaintiff. A clear admission that the Plaintiff is a non-citizen.
On the face of it, it is irrelevant for the Plaintiff to allege that it spent money converting these leases to Mailo / Freehold as such conversion would be illegal and therefore null and void, and the Plaintiff cannot found a cause of action on an illegality.
It is also illegal for the Plaintiff to seek the transfer of the Mailo / Freehold titles to itself (being a non-citizen) or to its nominee, or continue to be held by the Defendant in Trust for the Plaintiff (as the resulting trust would be an illegal trust).
The Plaintiff’s purported cause of action, having been founded on illegality must be rejected by the Court.
It is well settled that under no circumstances can a non-citizen hold freehold land and a number of authorities elucidate this Constitutional point. All these cases demonstrate one clear point. Regardless of any other considerations of fact or law, the overriding consideration in matters of this nature was illegality in holding freehold or mailo land. In all these cases, various mitigating and other equitable concerns were argued, but the Courts consistently have held that there is no cause of action and there can be no recovery in the case of a non-citizen purporting or claiming to hold freehold or mailo land. Such a claimant’s position is not only unconstitutional, but also violates the Land Act under which the claimants based their alleged causes of action.
Examples of these cases include the following:
- In Lakeside City Ltd V Sam Engola and Ors H.C.C.S 251 of 2010, (Page 285 of the case bundle) it was held that:
Page 17 to 18; (Page 285 of the case bundle)
Out of the 125 shares of the 2nd Defendant, 100 shares are owned by Bharati Chandrakant Patel, Javahir Chandrakant Patel and Parul Chandrakant Patel who are British Citizens and thus, the 2nd defendant is not a citizen in accordance with the Constitution and the Uganda Citizenship Act.
On the 11th day of August, 2009, the suit land was registered in the names of the 2nd defendant. Thereafter, on 27th day of August, 2009, the suit land was registered in the names of the 1st Defendant who is a Ugandan Citizen, following a sale by the 2nd Defendant to the 1st defendant.
(Page 286 of the case bundle)
However, the 2nd Defendant was reinstated on the titles on the 9th day of July, 2010. The 2nd defendant’s registration as proprietor of the Freehold land, contravenes Section 40(4), (7) (a), (b) and (e) and Section 40(8)(a) of the land Act, being a non-citizen. Its registration is therefore, illegal.
On the 5th February, 2010, the 3rd Defendant filed its returns which showed that the British citizens had 1oo shares while the Ugandans had 25 shares. Regarding the aforementioned facts, the Court held that:
Page 24, (Page 292 of the case bundle)
“This was certainly in contravention of the companys’ resolutions as mentioned above. The resultant effect of this made the 2nd Defendant a non-citizen company as from the 5th day of February, 2010, since its controlling interest (shareholding) as from the date was in the hands of non-citizens. I agree with Counsel for the plaintiff that as from that date, the 2nd Defendant became incapacitated from acquiring or holding freehold land. Its reinstatement on the land by the Commissioner Land Registration was therefore illegal. The Commissioner Land Registration…. is a senior lawyer with vast experience in land matters was expected to comply with the law as enshrined in Section 40 of the Land Act, Cap 227. He/she should not have effected such changes in the Register Book, which changes resulted into illegalities since they were contrary to the law.” (emphasis ours)
Page 27 (Page 295 of the case bundle)
“Section 40(4) of the land act supersedes the registration of Titles Act as far as acquisition or holding of freehold land by non-citizens is concerned. The said Section is an express enactment flowing directly from the Constitution. It is an enactment which specifically prohibits non-citizens from acquiring or holding freehold land.”
Page 33, (Page 301 of the case bundle)
“In the result, I find that the 1st preliminary objection is a point of law as emphasised under Order 15 rule 2 of the Civil Procedure rules. The 2nd defendant is composed of majority shareholding of non-citizens. The 3rd and 5th defendants, their Articles of Association do not contain a clause to restrict the transfer of shares to non-citizens; and to that extent they qualify to be non-citizens. Accordingly, therefore, the transfers by the 2nd defendant to the 3rd defendant and by 3rd defendant to the 5th defendant and their registration on the suit certificates of titles which are freehold are prohibited under Article 237 of the Constitution of the Republic of Uganda and Section 40 of the land Act, Cap. 227 as amended. Wherefore, I answer the 1st preliminary objection in the affirmative.”
- In Formula Feeds and Anor vs KCB Bank Limited HCCS 289 of 2014 this court held;
Page 4, (Page 329 -330 of the case bundle)
I respectfully disagree. The legal position on ownership of land by non-citizens is well settled by the Constitution and the Land Act. Article 2372(c) of the Constitution 1995 provides that non-citizens may acquire leases in land in accordance with the laws prescribed by Parliament, and the laws so prescribed shall define a noncitizen for the purposes of this paragraph. This position is reiterated by Section 40(1) of the Land Act Cap 227.
A non-citizen is defined by Section 40(7)(b) and (C) of the land Act as a person who is not a citizen of Uganda and in the case of a corporate body, one in which the controlling interest lies with non-citizens. These descriptions aptly describe the 1st and 2nd Plaintiff. That the 2nd Plaintiff is a Kenyan with controlling interest in the 1st Plaintiff is also not in dispute.
Page 5 (Page 330 of the case bundle)
The import of these sections is that the Plaintiffs who are foreigners cannot acquire any interest in mailo land as they purportedly did in the instant case.
Page 7 (Page 332 of the case bundle)
The relevant provisions of the law regarding ownership of land by non-citizens have already been clearly extracted earlier and there is no ambiguity about them in relation to ownership of land by non-citizens.
The conclusions to be drawn from the foregoing analysis is that, the mortgage deed being challenged by the Plaintiff is a nullity and is hereby declared so.
Page 18 (Page 340 of the case bundle)
This court is unable to make a declaration on foreclosure as that would be a remedy arising from the impugned mortgaged deed that has been found to be illegal and unenforceable.
- In Jumbe Kiwe Sebunya V Mukuye Isaac and Ors HCCS 63 of 2014, (Page 364 of the case bundle)it was held that:
Paragraphs 5 to 16 of Exhibit P18 in respect of transfer and transmission of shares have no provision on restriction on transfer and transmission of shares. It means that the 4th defendant company is construed under the law as a non-citizen, and therefore cannot hold title in respect of the suit land which is mailo land. Much as this may not par se be evidence of fraud, the registration of the 4th defendant on the suit land which is restricted by law without doubt constitutes an illegality.
As was held in Makula International vs. His Eminence Cardinal Nsubuga CACA No. 4 of 1981, an illegality once brought to the attention of court cannot be condoned as it supersedes all other facts including pleadings and admissions. It cannot be left to stand. The 1st – 4th defendants at various stages mentioned got registered as proprietors on the suit land illegally and through fraud. Issue No.1 is answered in the affirmative.
- In Kaggwa Michael V Olal Mark and Ors H.C.C.A 10 of 2017, (Page 385 of the case bundle) it was held that:
Being refugees and hence non-citizens of Uganda, the third to the seventh respondents are precluded by article 237 (2) (c) of The Constitution of the Republic of Uganda, 1995 and section 40 of The Land Act, from holding land in Uganda under customary tenure. They are restricted to holding land under leasehold tenure only. It was therefore erroneous of the court below to have decided in their favour when the land in dispute is held under customary tenure.
It is our contention therefore that as long as the majority of shares are held by non-citizens as admitted and elaborated in the plaint, then the company cannot hold freehold or mailo land.
All the above authorities are clear on this point. Because the Plaintiff is a non-citizen within the meaning of the Constitution and the Land Act, it cannot hold mailo or freehold land. It therefore has no cause of action to the extent that it seeks to hold mailo or freehold land titles (as by law, it is prohibited from holding such titles).
In an attempt to circumvent the Constitution and the Land Act, the Plaint then seeks to enjoin the Court in an act of fraud, by praying that the second defendant should continue to hold the Mailo or freehold interest in the land in trust for the Plaintiff (who legally and constitutionally cannot hold such title). This would amount to an illegal trust and this court cannot sanction an illegal trust.
- Whether 2nd Defendants present interests can be held in trust for the Plaintiff as prayed for?
In order to bypass the clear provision of the Constitution and the Land Act, the plaint makes two illegal prayers:
- In paragraph 6, that the title and transfer forms be given to the Plaintiffs nominee,
- In paragraph 43.2, that the mailo or freehold interest should be held in trust for a non-citizen plaintiff
The prayer therefore acknowledges the constitutional impediment that the Plaintiff faces. However, in an attempt to bypass the impediment and to undermine the Constitution of Uganda, the plaint then seeks to obtain orders from this Honourable Court to have a non-citizen own freehold land as a beneficiary of a trust.
Such a trust or nominee for the benefit of the Plaintiff is illegal and void abinitio. No Court in Uganda can lawfully grant such an order whose net effect is to undermine and circumvent the Constitution of Uganda.
The intention of the legislature can be seen in Section 40(7)(d) (Page 267 and 268 of the case bundle) which provides:
“For the purposes of this section, “noncitizen” means—
(d) a company in which the shares are held in trust for noncitizens;”
Therefore, the Plaintiff cannot be the beneficiary of a trust to hold freehold land. To do so would defeat the express provisions of Article 237 of the Constitution. The purpose of this Court is to interpret the transaction in accordance with the law and not to side step the law with ingenious legal trusts. A trust is a creature of the doctrine of equity and the branch of law called equity and trusts. One of the maxims of equity is that: “equity follows the law and will therefore not allow a remedy that is contrary to the law”. The Court cannot construct this trust because it will be an illegal trust. A court of law cannot grant an illegal prayer.
It is our prayer, that if the Court finds in favour of the Applicants then it should order the Bank of Uganda to pay the costs of the suit. In Kyaninga Royal Cottages Limited vs Kyaninga Lodge Limited HCMA NO. 551 OF 2018), (Page 396 and 397 of the case bundle)it was held by this Court that:
In my view it is this Managing Director of the nonexistent “company” who instructed the Advocates to file the suit. He must have been the one who paid the court fees.
He was in my view the person who was behind the Plaint. It is he therefore who should pay the costs. It is so ordered.
Since the receiver ended, then the receiver-Bank of Uganda-should be held liable for the costs.
We so pray.
Kampala Associated Advocates