Sebasif Group Enterprises Limited v DFCU Bank Limited (Civil Appeal No. 28 of 2021) [2026] UGSC 15 (21 April 2026)

THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA Coram: Tuhaise, Musoke, Musota, Madrama I Bamugemereire, llSC CIVIL APPEAL NO.28 OF 2021 SEBASIF GROUP ENTERPRISES LIMITED APPELLANT VERSUS DFCU BANK LIMITED RESPONDENT (Appeal ngninst tlrc decision of the Court of Appenl in Cit il Appenl No. 83 of 20'16 before Kiryabruire, Mugenyi, llA and Kasule, Ag. lA deliuered on 22,t luly,2021) Judgment of Percy Night Tuhaise, |SC. I have had the benefit of reading in draJt the Judgment prepared by -y learned brother, Hon. Justice Stephen Musota, JSC. I agree with his analysis and decision. I also agree with the orders he has proposed. Decision of Court Since all members of the Coram agree with the lead judgement, this appeal is allowed with the orders as proposed in therein. Dated at Kampala, this etE9 day of .... 2026. t\ Percy Night Tuhaise Justice of the Supreme Court THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO. 028 OF 2021 SEBASIF GROUP ENTERPRISES LTD: : : : : : : I I : : :APPELLANT VERSUS DFCU BANK LIMITED RESPONDENT (Appeal and Cross Appeal from the decision of the Court of Appeal (Kiryabwire and Mugenyi,JJA and Kasule, Ag. JA) dated 22d July, 2021 in Civil Appeal No. 0083 of 2016) CORAM: HON. LADY JUSTICE PERCY NIGHTTUHAISE, JSC HON. LADY JUSTICE ELIZABETH MUSOKE, JSC HON. MR. JUSTICE STEPHEN MUSOTA, JSC HON. MR. JUSTICE CHRTSTOPHER MADRAMA TZAMA, JSC HON. LADY JUSTICE CATHERINE BAMUGEMEREIRE, JSC JUDGMENT OF ELIZABETH MUSOKE, JSC I have had the advantage of reading the judgment of my learned brother Musota, JSC and I concur with his conclusion, reasons given, and the proposed orders. aw Dated at Kampala this day of. ....2026. Elizabeth Musoke Justice of the Supreme Court r0 t5 20 THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO.O28 OF 2O2L (Arising from Court of Appeal Civil Appeal No.83 of 2016; Kiryabwire , Mugenyi ,JJ.A and l(asule AC. JA). SEBASIF GROUP ENTERPRJSES LTD: APPELLANT DFCU BANK LIMITED: RESPONDENT CORAM: TUHNSE; MUSOI(E; MUSOTA; MADRAMA; BAMUGEMERIIRE JJ.S.C JUDGMENT OF HON. JUSTICE STEPHEN MUSOTA, JSC Background of the A ppeal The Appellant (Sebasif Group Enterprises Ltd) as Plaintiff lodged Civil Suit No.437 of 2OO9 against DFCU Bank Limited (The Respondent) in the Commercial Division of the High Court of Uganda at Kampala. The claim was for breach of contract on the part of DFCU Bank Limited. The amended plaint in paragraph 3 stated the claim as follows; Page I of 87 VERSUS "3. The plaintiffs claim against the dekndant is for Special damages, General damages, interest at commercial rate and costs of the suit arising out of breach of contract of Motor Vehicle Leasing Agreement exeanted behueen the plaintiff and the defendant" The appellant claims to have fully paid the purchase price and the accrued interest for the period as agreed in the leasing agreement. However, the appellant a-lso claims that on a number of occasions the motor vehicle was impounded by the Uganda Police on grounds that it was suspected to have been stolen from another person. That one such occasion was in late 1999 when the Uganda Police impounded the motor vehicle and parked it at Kampala Central Police Station for seven months. 20 25 Page 2 of 87 The amended Plaint stated the facts giving rise to the cause of action that by lease agreement between the parties, the appellant purchased 5 Motor Vehicle Registration No. UAA 373U. Under the terms of ttre Ieasing agreement the Respondent was under obligation to finance the transaction with UShs. 50,000,000/= (Uganda Shillings Fifty Million) as capital on the purchase price for the Motor Vehicle for ttre plaintiffs benefit. This would be in addition to a charge of UShs. r0 2,235,OOO1= (Uganda Shillings Two Million Two Hundred and Thirty- Five Thousand) per month as rental fees inclusive of interest for the facility. All these sums were due and payable over a period of 30 months (two and a half years) starting in the second month after the date of the Agreement until payment in full. Immediately upon l5 execution of the agreement, the appellant took possession of the Motor Vehicle but the original log book was retained by the Respondent. 5 The appellant also claimed that because of this repeated and continuous disturbances by the Uganda Police, they had parked the motor vehicle at their parking yard at Spire Road from May 2006 and by the time of lodging the suit in the High Court the car was still parked there. The appellant further alleged that it was never given the original log book for the Motor Vehicle as well as the executed transfer to enable a transfer of the same into its narne. The appellant claimed that the respondent as at the time of lodging the suit had failed or refused to surrender the said documents despite several reminders and requests by the appellant. The appellant also claimed that the respondent had obstinately refused to surrender the origina-l logbook and to execute transfer instruments for the effective vesting of ownership of the said Motor Vehicle in the appellant because the Motor Vehicle had been irregularly and illegally registered with the Uganda Revenue Authority. That this was stated in the particulars of illegality in the amended plaint, together with the claim that ttte respondent had altered records of the department of Motor Registration and Leasing and that the respondent had fa-lsified Uganda Revenue Authorit;r records to indicate that the Motor Vehicle belonged to the Government of Uganda under Registration No. UC 0339 whereas not. The appellant accordingly claimed special damages of UShs 78,448,500/= (Uganda Shillings Sevent5r Eight million four hundred and forty eight thousand hve hundred shillings) being cost incurred on the loan facility inclusive of interest paid to the respondent, loss Page 3 of 87 r0 l5 20 ,q 5 or expense of UShs.3,000,00O/= (Uganda Shillings Three Million) per month on contract lost with Nile Breweries Ltd from October 1999 totaling to UShs.570,0O0,000/= (Uganda Shillings Five Hundred and Sevent5r Million) for a period of 12 years and UShs.1O,0O0,00O/= (Uganda Shillings Ten Million) as expenses on lawyers for among others, mediation attendances. The appellant further sought an order that the respondent repossesses the motor vehicle and pays general damages and interest at the rate of 30% to the appellant on all the above claimed sums from the date of filing the suit until payment in full. The appellant further claimed an order that the respondent doth deliver up to the appellant the original logbook for the motor vehicle with duly executed transfer forms in the names of Ismail Sebunya the actua-l owner thereof and pay costs of the suit to the appellant. In its Written Statement of Defence hled in the High Court Commercial Division on 7th December, 2009 the respondent denied the claim and stated that they are not liable for the reliefs prayed for by the appellant. In paragraph 4 of the Written Statement of Defence the respondent denied the allegations and contended that the transaction was not a sale as alleged by the appellant but rather a hnance lease. That the respondent denies a-11 the allegations that records were falsified or that the respondent had refused to hand over the logbook. That the appellant identified the truck on their own and took one of their sta-fI to inspect it while it was parked at the appellant's workshop in Jinja. That after inspection, the respondent offered and the appellant accepted the lease and executed the agreement on 7th July 1999. Page 4 of 87 l0 l5 20 25 5 That upon acceptance, the respondent proceeded to pay UShs 50,000,000/= (Uganda Shillings Fifty Million) to the seller of the truck, a one Charles Mutasingwa who had been introduced to the respondent by the appellant. That the appellant had at the time of the application for a lease facility, a-lready paid a deposit of UShs 10,O0O,OOO/= (Uganda Shillings Ten Million) to the seller and the paJrment was acknowledged by the seller at the time of raising the invoice for payment of the amount financed by the respondent. That to secure the pa5rment of the amount hnanced under the Lease Facility the Appellant executed in favor of the respondent a charge over land comprised in Kyaggwe Block 3O3 Plot 3O0 & 3O4 together with a further charge over four other trucks and personal guarantees of the Appellant's directors. That on 13th March 2OO7, t}:e appellant informed the respondent that the Bank of Africa (U) Ltd was taking over its debt and requested the respondent to hand over the certificates of title pledged as security to Bank of Africa. That upon the appellant's request and subsequent receipt of the amount outstanding on the lease facility, the respondent released to the Bank of Africa the mortgaged properties which had been pledged to secure the lease facility and thereby relinquished its interest in the leased vehicle(s) and property pledged to secure the amount hnanced. The Civil Suit was hnally heard by the Adonyo J. and judgment was rendered on 12th March 2015, finding as follows; Page 5 of 87 l0 l5 20 5 "It is the finding of this court that the plaintiff lns proued i/s case against the defendant to the leuel of proof required and the following orders are made: a. The defendant to refund UShs 78,448,500/= incurred by the plaintiff together uith UStts. 2,50O,00O/= being the cost of exercising the option to purchase the suit uehicle which uas paid to the defendant as the lease loan facilitg with interest at commercial rate of 27o/o from the date of filing this suit till paAment infull. b. The defendant is to pay to the plaintiff an amount being the difference between USLts 3,0O0,O00/= and UShs. 2,614,950/= which is UShs. 385,050/= per monthfor the loss incurred when the plaintiff had to hire another uehicle to take ouer a contract for uthich the lease of the motor uehicle Lnd in the first place been obtained from the month of October, 1999 tiV month of March" 2002 fushs. 10,369,350/=) and an amount of Usfrs. 3,OOO,OOO/ = per monthfrom the Month of April 2OO2 to the month haue had the leased uehicle as its own fushs. 286,396,350/=) when this suit uas filed in court the date of filing this suit with interest at the rate of 21o/o per annum. c. The defendant caused the otuners of the Plaintiff unnecessary anguish resulting from its unprofessional conduct in respect of the leasing agreement and would be condemned to pag general damages of a higher amount than prayed for amounting to UShs. Page 6 of 87 l0 l5 20 5 7O,O0O,0O0/ = would in my uieu be commensurate in the circumstances." d. The defendant is to pay exemplary damages of UShs 3O,OOO,0OO/ = onlg being leuied for its reckless belwuior towards the plaintiff. e. The suit motor uehicle is to be handed ouer to the Uganda Police at the cosfs o,f the defendant for its action to be rehtrned to its oiginal ou)ners or to be dealt uithin accordance with the laws. f. The defendantwould meetthe reasonable costs incurredbg the plaintiff in this matter." The respondent (DFCU Bank Limited) was dissatisfred with the decision of the High Court and lodged Court of Appeal Civil Appeal No.83 of 2016 DFCU Bank Limited vs Sebasif Group Enterprises Ltd on the following grounds; 1. The learned tial Judge ered in law and in fact when he failed to properlg appreciate the transaction between the Appellant and the Respondent as a Finance Lease and failed to apply the pinciples gouerning Findnce Leasing therebg arriuing at a urong decision. 2. The learned Trial Judge erred in law when he failed to appreciate and applg the roles, duties and rights accruing to the parties to the Finance Lease transactions and thereby aniued at wrong conclusion. Page 7 of 87 l0 t5 20 5 3. The learned Tial Judge erred in fact and law when he held that the Appellant must take full responsibility of Motor Vehicle No. UAA 373U on account that it did not ueify the same for road worthiness or genuineness before enteing into the lease transaction with the Respondent. 4. The learned Tial Judge erred in laut and fact when he treated the relationship between the appellant and the Respondent as one of the Banker-Customer Relationship therebg arriuing at a wrong decision. 5. The learned Trial Judge erred in law and fact when he inuoked and imputed a duty of professional tntst upon the appellant in fauour of the Respondent uhereas the said dutg does not exist under the lanl of Finance Leasing as bettaeen lessor and lessee. 6. The learned Trial Judge ered in law and fact when he imputed fraudulent conduct or knowledge of fraudulent acts in respect of the suit uehicle upon the Appellant whereas fraud was neither pleaded nor strtctlg proued against the Appellant. 7. The learned tial Judge erred in laut and fact when he imputed ciminal conduct on the part of the Appellant uhen the matter in lssue uas ciuil in nature and uithout euidence of ciminal charges, prosecution and conuictions against the Appellant's Directors or Representatiues in respect of the suit propertA. 8. The learned tial Judge misdirected himself when he ordered the Appellant to refund UShs. 78,OOO,0O0/ = (Uganda Shillings seuenty-eight million) together with UShs 2,5OO,000/= (Uganda Shillings Tuto Million Fiue hundred thousand) being the cost r0 l5 20 25 Page I of 87 5 incurred bg the Respondent on the lease transaction in total disregard of the Appellant's rights as lessor of the suit uehicle. 9. The learned Trial Judge ered in law and fact uhen he autarded the Respondent a total sum of USLLs. 286,396,350/ = together with interest as special damages to recouer its capital inuested in the refirns on inuestment for the income loss incurred uthen the plaintdf hired another uehicle to take ouer a contract in contrauention of the pinciples applicable in assessing and autarding such damages. 10. The learned Tial Judge erred in law and fact uhen te awarded the Respondent general damages of UShs. 70,000,000/= (Uganda Shillings seuentg million) against the Appellant for the unnecessary anguish resulting from its unprofessional conduct when the Respondent had prayed for only UShs. 1O,0O0,0O0/= (Uganda Shillings Ten Million). 11. Tlrc learned trial Judge erred in laut and fact when he anaarded the Respondent exemplary damages of UShs. 3O,OOO,OOO/= (Uganda Shillings Thirtg Mi\ion) uthen the same was neither pleaded nor sought bg the Respondent and in total disregard of the lau gouerning the award of such damages. 12. The learned tial Judge erred in law and fact uthen he directed that the suit uehicle should be handed ouer to the police at the Appellant's cost uhen the same was procured by the Respondent and released bg Police into the Respondent's anstody. l0 l5 20 Page 9 of 87 25 5 13. The learned Tial Judge erred in law and fact uhen he autarded the Respondent interest at 21o/o on the refunded sum from the date of filing this sui/ until pagment infull. 14. The learned Trial Judge erred in law and fact uhen he failed to properlg eualuate the euidence on record therebg reaching a u)rong conclusion." The Civil Appeal, was heard by the Court of Appeal and in their judgment dated 2oth Jttly 2021, unanimously found merit in the appeal on all grounds and in the fina-l result ordered that; 1. The appeal is allowed. 2. Costs of this Appeal and those in the Court belou are awarded to the Appellant. The appellant was dissatisfied with the decision of the Court of Appeal and subsequently lodged the instant Appeal. The Appeal. In the Memorandum of Appeal filed in this Court on 1", November 2027 the Appellant raised the following grounds of appeal, that; 7. The l*qnted Appellate Justices erred ln laut when theg exempted. the Respondent from ltabl$tg of breo,ch of contrqct. 2. The lea med Appellqte Justlces en'ed ln laut uthen theg leld that q court of laut cannot fortnulate and make a declslon ulxtn an un-pleaded issze. Page l0 of 87 l0 l5 20 5 3. The leqrned Appellate Justices erred ln laut uhen theg held that the Appellant had not pleaded fraud. 4. The leanted. Appellate Justlces erred ln lout uthen theg held that there uras no ealdence of fraud agalnst the Respondent. 5. The learned Appellate Justlces erred ln lqut when theg held that there uras no basis for the autard of speclal damages to the Appellant 6. The learned Appellate Justtces erred. in laut uthen theg held thqt the autard of both general @nd exemplory damages to the Appellant bg the trlql court utas unutarranted. The Appellant proposed that this Court grants orders that; a) The appeal be allouted b) The Judgment of the Court of Appeal and the orders be set aslde. c/ Costs of thts Appeal, Court of Appeal and Mal CoutA be proutded for. 10 l5 20 Page ll of87 5 Representations /apDearances: At the hearing of the appeal, Nakueira Musa together with Mator,'r.r Ronald appeared for the Appellant. Martin Kakuru together with Nyangoma Fiona appeared for the Respondent. At the hearing of this matter Court noticed that the parties had violated the rules on written submissions in the Supreme Court. Court ordered that the parties abridge their submissions to which they obliged. The appellant frled abridged written submissions on 28th March 2025. The Respondent filed on 7th April 2025. The appellant on lOrh April 2025 frled the submissions in rejoinder. The parties prayed and this Court agreed to consider the parties' written submissions in deciding the Appeal. This is a second appeal. It is therefore important for this court to remind itself of its duty as a second appellate court. In the case of Klfamunte Henry o. Uganda Crlmlnal Appeal No. 70 of 1997 the Supreme Court; on the duty of a first and a second appellate court held thus; uWe agtze that on o first oppeql, from a convlctlon bg a Judge the appellant ls entltled to haae tlw appellate Coutt's oun conslderatlon and aleurs oJ the eold.ence as q uthole and its own declslon thereon. The first appellate court hq.s a dutg to reuleut tlv euldence of the cose and to reconsld,er the materlals before tle trial Judge. Tl@ Page I2 of 87 r0 r5 20 Dutv ofthis court as a second appellate court. I appellate Coutt must tlrcn mcke up lts oun mlnd not dlsrcgardlng tle Judgment appealed. fron but carcfullg usetghlng qnd consldedng tt. Vlll,en tlv questlon crlses cs to uthlch urltness should fu belleved tztlwr tlu.n qnother ortd tlut questlon tunts on mo,nner and demcanour the appellate Court must be gutded bg the lmpresslons made on tle fud.ge who saut tle uritnesses. Houteaer, there may be othcr clrcumstonces qulte apart from the manner and. demeanou4 u.thlch mag shout uthetler a statemcnt Ls crcdlble or not uthlch nag urqtrant a court tn d{Jedng from tlrc &tdge eaen on a questlon of fact fitnrJng on crcdlbllltg of ultness whlch tlv appellate Coutt has not seen. See Pandga u. R [1957] EA 336, Okeno a. Republlc [1972] EA 32 and Charles Bltutlre u. Uganda Supremc Court Crlmlnal Appeal No. 23 of 7985 at page 5. l0 l5 Furth.ennore eaen where q tdql Court hos ert'ed thc appellate Court ulll lnter.fere uhere the enor has occasloned q mlscarrlaoe o lustlce: See S. 331il of the Crlminal Procedure Act. It does not seem to us that except 20 ln the clearest of cases. u)e ane reoulred to re-eaaluate the evldence ltke is d flrst appellate CourA so,ue ln Constltrttlonol ccses. On second aooeal tt is suffr.ctent to d.eclde whether the tlrst aooellate C ourt on aoproo.chino its task. apolled or falled to applg such pr'lnclples.' See P.R. Pandsa u. R (suprq.), Kalnt o. Usando 1978 HCB 723...." 25 Page I3 of 87 5 t0 Therefore, the duty of a second appellate court is to examine whether the principles which a first appellate court should have applied, (that is to re-examine and re-evaluate the evidence, and come to its own conclusion), were properly applied and if it did not, for it to proceed and apply the said principles. I shall abide by this duty as I resolve the issues in this appeal. Consideration of the Appeal I shall deal with the grounds of the appeal in the order in which they have been raised by the parties starting with ground 1 then grounds 2 and 3 together, ground 4, and hnally grounds 5 and 6 together. DETERMINATION OF THE APPEAL. Ground. 7 The l*arned Appellate.ftist{ces ened ln laut uhen theg exempted. the Respondent Jrom ltabllttg for breach of contract. t 5 ADpellants' Submissions 20 The appellant submitted that the learned Justices of Appeal erroneously exempted the respondent from liability yet the Respondent failed provide the appellant with quiet enjoyment and possession of the leased vehicle. That the Justices of Appeal rightly found that the appellant was entitled to quiet enjoyment but did not consider that quiet enjoyment was frequently interfered with, by the police, on allegations that the leased vehicle was stolen. That relying on Black's Law Dictionary 9t! Edition at page 42Othe covenant for quiet enjoyment is a guarantee against defective title or any Page l4 of 87 5 That a fundamenta-l term of a Contract as dehned in Smeaton Hanscomb & Co. vs Sassoon I. Setty, Son & Co. [1953] I W.L.R 1468 (Q.8.) is one that underlies the entire agreement. If such a term is breached the performance becomes something entirely different from what the contract contemplates. That in this case the respondent's primary obligation under the finance/equipment lease agreement was to provide the appellant with quiet enjoyment, possession, and use of the leased vehicle as stipulated in Clause 2C and 2D of the Master Vehicle Lease Agreement. That the respondent's tailure to fullill the obligation constituted a fundamental breach of the contract. That clause 2E(i) of the Master Vehicle Lease Agreement explicitly required the respondent to acquire good title and proper legal documentation for the vehicle, before leasing the vehicle to the appellalt. This obligation was critical to ensuring the appellant's quiet enjoyment and possession of the vehicle. That however, the respondent failed to veriff the ownership of the vehicle, leading to repeated police impounding and interference with the appellant's use of the vehicle. This failure to ensure good title was a direct breach of the respondent's contractual obligations. It was further submitted that I0 l5 )i 25 enjoyment, possession and use the obligation is an implied to provide term in all quiet lease Page l5 of 87 disturbances of title. That therefore this term is fundamental to any lease agreement, ensuring that the lessee can use and enjoy the leased property without interference. 5 agreements under finance/equipment leasing and that it is codified in Section 7(21 of the English Supply of Goods and Services Act 1982 Volume 39 Halsbury's Statute (4th ed) Sale of Good and Consumer Protection Pala 12.2 Part D of the Encyclopedia of forms and Precedents (supra) at P.408 and recognized internationally under Article 8(2) of the UNIDROIT Convention on International Financial Leasing (1988) and Article 16(1)(a) of the UNIDROIT Model Law on Leasing (2008). That an implied term is not included in a contract because it is an obvious term which gives business efficacy as espoused in Muljibhai Madhvani & Co. Ltd and Another vs Francis Mugarura & 35 Others SCCA No.13 of2OO6. That without proper acquisition documents of ownership of the leased vehicle prior to leasing the vehicle to the appellant the respondent was in fundamental breach of the agreement. That fundamental breach as defined by Stroud's Judicial Dictionary of Words & Phrases 15th Edition London Sweet and Marnnell at page 1065 means a breach of contract by one pa-rty which goes to the root of the contract. That in the instant case the repeated impounding by the police constituted a fundamental breach by the respondent as per the dictum espoused in the case of Lakhamshi Bros Ltd vs R Raja & Sons [1966] I EA 178. That the learned appellate justices found it to be so except that they occasioned a miscarriage of Justice when l0 l5 ZU Page I6 of 87 they decided to exempt the respondent from liability basing on Clauses sD(ii)(a) and 5F of the Master L,ease Agreement. That the decision to exclude liability was erroneous because exclusion clauses in agreements which seek to exclude liability for fundamenta-I breaches of contract are ineffective. That it is also settled law that a party cannot excuse himself or herself from performing obligations which are fundamental to a contract as espoused by Lord Denning MR's holding in the case of Harbutts "Plasticine" Ltd vs Wayne Tank and Pump Co. [197O1 L Q.B 447, [1970] 1 ALL ER 225 and in SDV Transami (U) Ltd vs Nsibambi Enterprises (2OO8) Uganda Law Reports at page 497 and, Security 2OOO LTD vs Cumberland Court of Appeal Civil Appeal No.916 of 2OL4at page 14to 16. That this principle is codified in section 17(21 &, (3) of the English Supply of Goods and Services Act 1982 afhrmed in Shankin Pier Ltd vs Detel Products Ltd [195U 2 KB 854 to the effect that a lessor cannot rely on an exclusion clause for providing quiet possession and enjoyment of leased property in case of breach stipulated in the above cited provisions and cases. That a party to an agreement cannot rely on an exclusion clause to exclude liability for breach of express terms. They can only do so in relation to implied terms as was the reasoning in Andrews Bros (Bournemouthl Ltd vs Singer & Co. Ltd [1934] KB 17 which principle has been codihed in our Section 19 and 67 of the Sale of Goods and Supply of Services Act 2017. Page l7 of 87 r0 l5 20 2S Page I8 of 87 That the rationale for this principle is that an exclusion clause which excludes liability for fundamenta,l breach is unfair as was held in Photo Production Ltd vs Securicor Ltd. An unfair contract is an unconscionable contract due to its one sided nature. It shocks the 5 conscience, is irreconcilable with what is right or reasonable and no man in his senses and not under delusion would make on the one hand and as no honest and fair man would accept on the other (See Muljibhai Madhvani & Co. Ltd & Anor vs Francis Mugarura & 35 Others SCCA No. 13 of 2OO6). That most unfair contracts are I0 standard form contracts such as the Master Vehicle Lease Agreement in the instant case which was used by the respondents in all its equipment lease agreements according to the testimony of DW2 in paragraph 8 of his witness statement. That this court has the authority to interfere in unconscionable t s contracts as was held in Stanbic Bank Uganda Limited vs Kalule Deo Court of Appeal Civil Appeal No.278 of 2OL6 at page 32 and the principles of the law must be applied to balance the inequality of bargaining powers and protect the vulnerable. That the misapprehension of the provisions of the unsigned Master 20 Lease Agreement and hnance leasing principles, ignoring explicit provisions in Clause 2C, 2D and 2E(i) of the agreement which placed the duty to verify ownership of the vehicle on the respondent leasing to the appellant. That the decision of the Court of Appeal goes contrary to the agreement and also the principles of equipment 25 leasing agreements. That therefore the respondent's failure to or 5 negligence in verifying ownership was fundamental breach. That the learned trial Judge's findings aligned with the operating principles of finance leases and the explicit terms of the Master Lease Agreement which highlight the respondent's liability. That the learned justices erred in law when they misconstrued the operating principles of hnance/equipment lease contract to exempt/exclude the respondent from liability of a fundamental breach of contract. That the learned appellate justices erred in law when they erroneously faulted the trial Judge for arriving at the correct decision that the respondent as lessor was in breach of its contractual duty. That the learned Justices of Appeal misapplied clause 5F of the Master Vehicle Lease Agreement which resulted in an unjust exemption of the respondent from Liability for its fundamental breach of the lease agreement. This misapplication denied the appellant a remedy against the respondent. That Clause 5F was unfair, unreasonable, and against public policy as it prevented the lessee from seeking redress for breach and strikes at the very core of the agreement. That such provision cannot be relied on to absolve the respondent from its non-performance of its fundamenta,l duties as the lessor. That Article 16(1)(a) and (3) of the UNIDROIT Model Law on Leasing 2OO8 clearly establishes that the sole remedy for a disturbance of quiet possession is an action for damages against the lessor. The lessor bears the responsibility for breach of quiet enjo5rment, l0 I5 20 Page l9 of 87 5 possession and use of the leased equipment and that the lessor is liable to pay damages to the lessee for such a breach. That the appellant was not pa-rty to the contract of sale of the leased vehicle between the respondent and the supplier and so it had no standing to sue the supplier directly. (See National Social Security Fund & Anor vs Alcon International Limited SCCA No. 15 of 2OO9). That even though the appellant were to be taken as the benehciary of the sale contract that led to the lease of the vehicle, it could not sue the vendor/supplier because it was not a party to the contract of sa-le of the leased vehicle. That the Appellate Justices erred when they relied on an exclusion clause to exempt the respondent from liability for its fundamenta-l breach of the finance equipment lease contract even though the respondent did not raise this clause in its memorandum as one of the grounds of appeal or in its written submissions. That the exclusion clause was never raised by the respondent during trial and the appellate court did not afford the parties an opportunity to address them on the issue of the exclusion clause, making its application unjust and procedurally improper. That the appellate justices violated the rules of natural justice by relying on the exclusion clause without rehearing the parties thereby violating Audi alteram Partem principle and Article 42 of tLre Constitution which demand that no person shall be condemned unheard. Page 20 of 87 t0 l5 20 5 That clause 11 and 10 of the Master Vehicle Lease Agreement specified the purchase price of the UShs. 2,5OO,OO0/=. That clause 12 of the agreement stipulated that the failure to exercise the purchase option would require the appellant to return the vehicle at their expense. That however, in the instant case it is undisputed that the appellant exercised the purchase option as per the evidence of DW2's testimony. Meaning the respondent was selling the vehicle and so they held out to have good title to it which turned out not to be the case. That in the case of Maier vs Kersten [2OO5] 1 EA 245 and Norattam Bhatia vs Crane Bank [2013] 1 HCB 76 emphasizes that selling property without title constitutes a breach of contract, rendering the sale illegal. Despite the appellant's exercise of the purchase option, the respondent never transferred ownership of the vehicle to the appellant up to date. This failure constitutes a fundamental breach of the sale agreement. That the learned appellate justices erred in law by absolving the respondent of liability for failing to transfer ownership, undermining the integrity of the sale agreement and violating statutory and common law principles. That the respondent's failure to transfer the ownership of the vehicle to the appellant constitutes a breach of a fundamental condition of the contract of sa1e, invalidating the purported sale and rendering the respondent's conduct illegal. Therefore, the respondent's failure to ensure the appellant's quiet enjoyment, possession and use of the vehicle, as required by both the lease and sale agreements constitutes a breach of fundamental obligations and the appellate justices erred in exempting the Page 2l of 87 t0 l5 20 )< respondent from liability for this breach. That this court should correct the error by finding merit in ground 1 of the appeal. Res ndents' Submissions The respondent's counsel submitted that the learned appellate s justices rightly found that the respondent did not breach the contract. That there is no law governing Finance Leasing in Uganda as was observed in Deluxe Enterprises vs Uganda Leasing Co. Ltd HCCS No. 1253 of 2fl)O where the court observed that in Uganda the common law principles on Finance Leasing apply pursuant to I o section A(2\ of the Judicature Act together with the general principles of contract law. 15 20 25 That the common law on finance leasing is reflected in Chitty on Contracts 27h Edition Vol II, 1994 paragraph 32-56 where it is stated that in a finance lease, the lessor (a frnance company) provides funds, acquires title to the equipment and allows the lessee to use it for all (or most) of its expected life. During the period of the lease, the usual risks and rewards of ownership are transferred to the lessee, who bears the risk of loss, destruction and depreciation of the leased equipment (fair wear and tear only excepted) and of its obsolescence or malfunctioning. The regular rental pa5rments during the rental period are calculated to enable the lessor to amortize its capital outlay and to make a profit from its finance charges. That at the end of the primary lease period, there will frequently be a secondar5r leasing period during which the lessee may opt to continue the lease at a nominal rental, or the equipment may be sold and a Page 22 of 87 5 proportion of the sale proceeds returned to the lessee as a rebate of rentals. That this definition and interpretation of a finance lease was adopted by the Court in Nassolo Farida vs DFCU Leasing Co. Ltd HCCS No.536/2OO7. That in summary therefore from the above the salient features of a Finance Lease at common law are; a) The lessee identihes and selects the equipment of his choice b) The lessee seeks hnancing from tJle lessor c) The lessor finances the purchase of the equipment on condition that the legal title to the equipment is in the lessor's name. d) The lessee takes possession of the equipment and uses it for its benefits e) The risks and benefits of ownership of the equipment lie on the lessee f) Having the legal title of the equipment in the lessor's name operates as a lien to prevent transfer of the equipment by the Iessee before the lessor has recovered its capital investment and a return on investment. g) Upon completion of the lease period, the lessee has an option of acquiring the legal title for the equipment by paying a nominal fee. The roie of the lessor is to hnance the acquisition of the equipment and secure payment of rentals to ensure recovery of its capital investment and a return on investment as held in Lombard North Central Plc vs Buttersorth [1984 L ALL DR267. r0 l5 )< Page 23 of 87 20 5 That it is an undisputed fact that the respondent was not a vendor of the vehicles. That the respondent was a leasing company at the time of entering into the finance lease with the appellant. That the Ieasing business was subsequently taken over by the respondent which is a financial institution. That the supplier of the vehicle was Mr. Charles Mutasingwa and not the Respondent. That it was the appellant's obligation to satisfy itself as to the credibility, road worthiness and fitness for purpose of the vehicle before seeking financing from the respondent. That as indicated in Clause SD(ii)(a) of the Master Lease Agreement is the indication that the respondent who was only the financier of the lease equipment could not be liable for the defect of want of title of the leased equipment. That as such the respondent was not liable for any representation warranty, covenant, or condition express or implied as to title, description or va-lue. That the Justices of Appeal correctly interpreted the provisions of the agreement. That the respondent did not breach any implied contractual obligation under the lease agreement. That implied terms are only intended to give business efficacy to the contract and are not specihcally stated in the contract or agreed upon by the parties. That where the term of the contract is expressly agreed upon and stated in the contract as was clause sD(ii)(a) of the Master Lease Agreement in the instant case, the duty of the Court is to enforce it. That it is not the duty of the court to rewrite the Contract. l0 l5 20 Page 24 of 87 5 That BP Refinery (trIesternport) Pty Ltd vs President, Councilors and Ratepayers of the Shire of Hastings lL977l52 ALIR 2o.,26 stated the conditions which must be satisfied for a term to be implied into a contract as follows; a) It must be reasonable and equitable; b) It must be necessar5r to give business efficacy to the contract, so that no term is implied if the contract is effective without it c) It must be so obvious that "it goes without saying"; d) It must be capable of clear expression and e) It must not contradict any express term of the contract. That however, in the instant case counsel did not invite the trial court or the Court of Appeal to imply into the contract, the term as to quiet enjoyment and possession of the suit motor vehicle. That as a result there was no such a term implied. Learned counsel for the respondent went on to submit that under Section 13(2)(b) of the Sale of Goods and Supply of Services Act 20 18 and section 13(b) of the repealed Sale of Goods Act Cap 82 an implied condition as to quiet enjo5rment, possession can only be implied in a contract for the sale of goods and not any other written contract including a Financing Lease as is in this case. That therefore there was no such implied term and as such there could not be any breach of such term by the respondent. That the issue on exemption clauses was never raised at trial or the Court of Appeal. That the appellant cannot be allowed to raise it at the Supreme Court for the first time. That notwithstanding the Page 25 of 87 r0 l5 20 25 respondent also submitted that the exclusion of liability contained in clause sD(ii)(a) of the Master Lease Agreement was conscionable and reasonable because the respondent as the lessor of the suit motor vehicle could not make any guarantee or representation, warrantlr, covenant or condition, as to title description, value of the same since it was not the seller or supplier of the suit motor vehicle. That as such the learned Justices of Appeal correcfly found that the respondent was excluded from liability to the appellant in respect of the suit Motor Vehicle in accordance with clause sD(ii)(a) of the Master Lease Agreement. The respondent further submitted that it had no contractual obligation to verify the ownership of the suit motor vehicle based on the clear provisions of the lease agreement between the parties. That this role does not ht within the framework of the features of a finance lease. That the role of a lessor is to finance the acquisition of the equipment and secure pa).rnent of rentals to ensure recovery of its capital investment and a return on investment. That the transaction as found by the Justices of Appeal is premised on the lessee's choice of item for lease, whereupon the lessor provides the funds and acquires title to the leased item. That the lessor acquires title to the Ieased property as security for the transaction such that in the event of default by the lessee, it would sell the property to recoup its investment and that the usual risks of ownership such as the risk of loss are borne by the lessee who in this case is the appellant. l0 I5 20 Page 26 of 87 5 The respondent further submitted that it is erroneous for the appellant to claim that it could not pursue the supplier of the motor vehicle because it was not privy to the contract between the respondent and the supplier of the motor vehicle because under a lease transaction there is no binding contract between the lessor and the seller of the leased equipment. That the contract of purchase is in actua-l sense between the supplier and the lessee. That the lessor's obligation is to provide the purchase price which is repayable through the agreed rentals out of the use of the equipment. That the lessor is like the nominal buyer but the actual buyer is the lessee who identihes and sources the suitable equipment for his or her business. That this is why clause sD(ii)(a) of the Master Lease Agreement is included. That Clause 5F of the Master Lease Agreement gives rights to the appellant to pursue a supplier in respect of the suit property provided it obtains assignment from the respondent. That whereas the appellant had this right it chose not to exercise it for reasons best known to it, as rightly found by the Justices of Appeal. That therefore this court should find that the Justices of Appeal correctly interpreted the provisions of the agreement including clause 5F and others and held in favor ofthe respondent. l0 l5 20 Page 27 of 87 5 Appellant's submissions in rejoinder. In rejoinder the appellant reiterated their submissions. They also submit that the respondent is misleading Court into believing that in this finance lease transaction the respondent as lessor was merely financing or facilitating the appellant's choice of vehicle whereas not. That however, the fact is that the respondent acquired the leased vehicle for its own commercial benefit with the intention of leasing the vehicle to the appellant for profit. That the respondent's purchase of the vehicle was therefore a central part of its business model, not a passive act following the appellant's identification of the asset for its logistics operations. That the appellant reiterates the common law principles governing finance and equipment leasing as well as the relevant provisions of clause 2C, 2D, and 2E(i) of the lease agreement. They also reiterate the provisions of Article 2 of the 2OO8 UNIDROIT Model Law on Leasing which is persuasive in interpreting the obligations under finance leases. That irrespective of whether the lessee identifies or selects the supplier, the obligation to acquire good and law{ul title to the leased equipment rests exclusively with the lessor. That this duty is Page 28 of 87 l0 20 )q That at the end of the lease period, the appellant was given the contractual right either to purchase the vehicle or to return it, in accordance with the option to Purchase and Redelivery of Vehicle 15 clauses specifically under clause 11 and 12 of the Master Lease Agreement. 5 fundamenta-l to ensuring the lessee's right to quiet possession, use and enjoyment of the leased equipment throughout the lease term. That as such the implied condition as to providing quiet enjo5rment, possession and use is applicable and enforceable in finance/equipment lease transactions and the respondent's submission that it is not applicable is erroneous. That the mere involvement of the lessee in identifying the supplier does not relieve the lessor of its principal obligation to ensure that the title to the leased property is valid and unencumbered. To hold otherwise would undermine the very essence of a finance lease in which ownership and the attendant legal risks remain with the lessor, with possession and use transferred to the lessee. That on the clear principles of common law, the UNIDROIT Model Law on Leasing and the provisions of the unsigned and undated Master Lease Agreement marked DEXI, the respondent bore the obligation to acquire proper title to the leased vehicle even if the appellant identified Mr. Mutasingwa Charles as the supplier. That the Respondent's failure to discharge this obligation constituted a fundamental breach of the lease agreement, particularly its duty to provide the appellant with unintern:pted possession use and emplo5rment of the vehicle. That the appellant had no duty to conduct due diligence regarding ownership of the leased vehicle. That the Court of Appeal erred in law and fact by misconstruing the fundamenta-l principles of a frnance/equipment lease and by disregarding the explicit obligations Page 29 of 87 r0 l5 20 25 s placed upon the lessor under clauses 2C,2D and 2E(i) of the Master Lease Agreement exhibit DEX1. That these clauses placed the burden of verifying and acquiring proper title of the leased equipment on the lessor who in this case is the respondent. Under the well-established framework of finance leases, the hnance company or lessor retains legal ownership of the leased equipment throughout the lease term. That the lessee merely obtains possession and the right to use the equipment in exchange for rental pa1rments, while bearing risks and rewards associated with use-not ownership. That this is seen in Clause 4 of the Master Lease Agreement which confrrms that the appellant, as lessee, did not acquire ownership rights and could not sell the leased vehicle without the respondent's consent. That the respondent retained ownership to protect its investment and secure its profits. That as such it was the respondent's contractual duty to acquire good title to the leased vehicle from the supplier. That the obligation is fundamental as it underpins the lessee's right to quiet possession and undisturbed use of the leased equipment. That the learned trial Judge was right in finding that the respondent breached its duty to conduct due diligence. That the Respondent's failure to; acquire clear title, surrender the logbook to police disclaiming ownership and its false reassurances to the appellant despite knowing of the ownership defect all amount to a fundamenta-l breach of contract. That as such the appellant is entitled to recission and consequential damages. r0 t5 20 25 Page 30 of 87 That the respondent conveniently avoided the question of fundamental breach of the hnance lease agreement by failing to provide the appellant with quiet enjoyment, possession and use of the leased vehicle, to acquire and verify good title to the leased vehicle as required by clause 2C, 2D, and 2E(i) of the Master Lease Agreement and to fulfill its contractua-l obligations, leading to repeated police impounding and rendering the leased vehicle unusable. That the respondent's reliance on exclusion clauses is untenable because exclusion clauses cannot absolve a party from liability for fundamenta-l breach or failure to provide quiet enjo5,.rnent, possession and use of the leased vehicle. That it is not true as claimed by the respondent in their submissron that the appellant did not during trial or at the Court of appeal raise the implied condition of the respondent providing quiet enjoyment, possession and use of the leased vehicle to the appellant. That the appellant at pages 83 and 84 of its submissions in the Court of Appeal contained in Vol 2 ofthe Record ofAppeal raised the issue. Whereas it is true as submitted by the respondent the Master Lease Agreement was unfair, unconscionable and not binding, this was due to the respondent's conduct at the trial Court as they did not rely on exclusion clauses to avoid liability for the fundamental breach of contract. That similarly in the Court of Appeal the respondent did not raise the argument about exemption clauses as a ground of appeal to fault the Tria-l Judge for having found it in breach of the finance lease contract. It was the Court of Appeal out of its own volition which r0 l5 20 25 Page 3l of 87 5 introduced the exemption clauses into the case. That however, it was neittrer pleaded or argued by the respondent as such, which took the Appellant by surprise thereby violating its non-derogable right to a fair hearing. That therefore the decision of the Court of Appeal was void ab inifio because it offended the rules of natural Justice on fair hearing. That therefore the supreme court is entitled to consider the issue of unreasonableness and unconscionability of the exemption clause. That this honorable court should in considering this note that the agreement was never signed by the parties, the exclusion clause was unfair and unconscionable, the respondent cannot rely on an unsigned agreement. That in rejoinder to the claim that there was no binding contract of sale between the lessor and the supplier of the leased vehicle the appellant submits that this argument is misconceived. The argument of the respondent also misrepresents both the commercia-l structure of a finance lease and the terms of the Master Lease Agreement. That the Respondent was not a mere conduit of funds. It actively acquired the leased vehicle to lease it to the appellant for profit. Under the agreement and common law leasing principles it bore the core obligation of acquiring proper title and ensuring the appellant's quiet possession and use of the vehicle throughout the lease term. That clause 5F of the Master Lease Agreement did not impose a mandatory duty on the appellant to seek an assignment of the respondent's rights against the supplier. That the clause merely Page 32 of 87 l0 l5 20 25 5 provided an optional remedy subject to the lessee's request and at its expense allowing the appellant's discretion to either seek assignment or hold the respondent directly accountable. That under the doctrine of privity of contract, the appellant not being a party to the sale agreement between the Respondent and the supplier had no legal standing to sue the supplier directly. The responsibility to pursue recourse against the supplier remained with the respondent. Determination of Ground 1 of the Appeal. I have carefully considered the submissions of the parties and the authorities cited therein. I think the problem in this appeal is that the parties baptized the agreement a standard contract name and yet deep down in their hearts they did not actua-lly intend to keep the standards. The parties called the agreement a Finance Lease which on the face of it would trigger certain expectations from anyone who would come across the contract. The same issue appears to keep arising in contracts referred to as Car Lease Agreements in Uganda as I have seen a similar problem in Stanbic Bank Uganda Ltd v Kalule (Civil Appeal No 278 of2O16) 2021 UGCA L32 125 February 202ll where Court of Appeal dealt with the question of whether the agreement or contract was (i) a leasing facility, (ii) a hire purchase agreement, (iii) loan agreement; or (iv) any other agreement? r0 l5 20 Page 33 of 87 5 In my understanding of the facts as presented at the tria-l Court and in the submissions of the parties, the dealing between the parties to the agreement was a Car Leasing Agreement with an option to purchase the motor vehicle by the lessee at the end of the Lease Term. A car lease is a long-term renta-l contract for a new car, in which the lessee can choose to buy the car at a predetermined price or return it to the dealership at the end of the lease term. Therefore, it is expected that in a car lease, the car must be new in the sense of the buyer being the hrst owner thereof. This takes us to the other problem or challenge in the dealings between the parties in this case, which is that whereas they refer to the agreement as a car lease, the subject of the contract was a used car whose ownership was not cleared or clarified before entering the agreement. If you asked an ordinary business man who is to blame for the failure to ascertain true ownership, that blame would, I believe, quickly be placed on the leasing company, given the defrnition of Car Leasing Agreements I have stated herein above. As I continue to break down the meaning of Car Lease Agreements in this Judgment the reasons for this quick conclusion will become clearer. The most common reason for choosing to take a Car Lease as opposed to a Car Loan or a Direct Purchase is that in common car leasing business, the car can come with lower monthly payments and the ability to upgrade to a new car every few years. So, in my assessment and business sense, it cannot be as claimed by the respondent in this case that the appellant entered the Car Lease Agreement l0 l5 20 25 Page 34 of 87 5 expecting it to have the same terms as a direct purchase or a car loan of which in both the later scenarios the respondent as a leasing company would not be needed to appear anywhere in the purchase transaction let alone in the title to the car as owner. Car leasing is a popular alternative to buying a car, especially for those who do not want to commit to a long-term loan. It therefore cannot make sense that the appellant chose a Car Lease just to be bound by terms similar or the sarne as a car Loan or a direct purchase. A Car lease itself as a contract allows the lessee to drive a new car for a predetermined amount of time, after which the lessee will return it to the leasing company or dealership. This mears the car actually has to belong to the Leasing Company or the Leasing Company has to have absolute control, power and authority over the car so as to even think of Leasing the Car to anyone, especially where an option to purchase is availed to the lessee in the contract as was in the instant case. In so far as I understand such transactions and the law, the Lessor in a leasing agreement must own the property leased. In the instant case that would be the respondent as a Leasing Company. The Car l,easing Contract will usuaJly stipulate that the lessee will make periodic pal,rnents on the car until the lease ends, and the lessee will not own it at the end of the term unless the lessee chooses a lease buyout option. As such the nature of Car leasing agreements cannot allow the argument of the respondent that their ownership of the vehicle was simply symbolic, or a guarantee and did not bestow l0 r5 20 )< Page 35 of 87 5 upon the respondent any responsibilities or duties towards the lessee as regards the true ownership of the vehicle. Tlv TYaffic and Road Safety Act Cap 347 provides for who owns a vehicle. Section 7 thereof dehnes the terrn "owner" to mean in the case of a vehicle which is for the time being registered under the Trafhc and Road Safety Act, the person or persons appearing as the owner or owners of the vehicle in the register kept by the Chief Licensing Officer under the Tra-ffic and Road Safety Act. It goes on in sectlon 27 of The Tru.ffic and Roq.d Safetg Act Cap 347 to provide for presumption of owrrer of vehicle stating as follows; "The personinuhose neme amotor uehicle, trailer or engineeing plant not subject to a hiring agreement, or a hire purchase agreement or a finance lease agreement is registered shall, unless the contrary is proued, be presumed to be the ouner of the motor uehicle or engineeing plant." Section 27 of The Tvalfic a,nd Road Sdfetg Act Cap 347therefore, allows a presumption of ownership by the person in whose narnes the vehicle is registered except where the vehicle is subject to certain agreements including a finance lease. The reason for this is simply because in finance leases the lessee exercises all rights of an owner before they are given title of ownership. That is why the law leaves it open for pulposes of traffic and road safety, such that if the lessee commits a Traffic Offence that liability is on him alone and cannot be extended to the leasing company. However, the lessor remains with Page 36 of 87 l0 l5 20 5 the legal title to the vehicle despite having assigned the possessory and usage rights to the lessee for a time called the lease term. In my view therefore the lessor remains the owner of the legal title to the vehicle and the lessee takes the user and possessory rights during the pendency of the lease term. It follows automatically that upon expiry of the lease term all the rights to legal title, possessory rights and user rights revert to the lessor unless the lessor transfers the vehicle into the names of the lessee. In the Income Tax Act Section 58 Cap 338 for purposes of the Income Tax the lessee is treated as the owner of the property and the lessor is treated as having made a loan to the lessee, in respect of which payments of interest and principal are made to the lessor equal in amount to tlee rental payable by the lessee. As it is clearly stated in that sectlon 58 of the Income Ta-x. Act Cap 338, the treatment of the lessee as owner in Finance Leases is only for Income Tax purposes. Page 37 of 87 20 25 The exemption of vehicles under Finance Leases from the t0 presumption of ownership under sectlon 27 of The TYa.ffic and Road Safetg Act Cap 347, in my view, is to protect the lessor from liability for the usage actions of the lessee who is in actual possession and use of the vehicle during the lease term. To me this provision does not mean the lessor or Leasing Company ceases to hold legal | 5 title over the Vehicle or ceases to have any responsibility to ensure that a lessee who exercises the option to purchase the vehicle gets good title. 5 A car lease agreement therefore is ideally a legal contract between the lessee and the leasing company. In many cases, leasing a car is similar to renting an apartment or a house. The contract lays out the terms artd conditions of the lease, including the monthly costs, the length of the lease, restrictions, additional fees and more. At the end of the lease several options are made available to the lessee in the Lease Agreement which may include; 1. A trade it in option: where the lessee essentially decides to replace their expired lease with a new lease for a different car. 2. A wa-lk away option: where if the lessee does not want to lease a new vehicle right away, or where they would rather directly buy their next car, they can return the vehicle to the leasing company and simply walk away or 3. A buy the car option: where the lessee likes the car they have been driving and they want to purchase it, they can do that. Page 38 of 87 20 25 In the simplest terms, the dea-ler or leasing company buys the car and then the lessee agrees to pay for the time spent using the car inclusive in most cases of all ordinary costs an owner would have incurred for use of the car like car servicing, ordinary wear and tear l0 repair and other regular maintenance costs. That is why car leases world over are within the range of 3 years and for new cars. During the lease, the lessee makes regular pa5rments to the leasing company and since the lessee is not paying off the vehicle's full price, the pqrments will be lower than if the lessee bought the car and took out l5 a car purchase loan. 5 Where this option is availed in the agreement, the purchase price is expected to a-lready be provided in the vehicle lease agreement. The above is my understanding of Car Lease Agreements as opposed to Car Loan Agreement, Hire Purchase and Direct Car Purchase Agreements which I surmise the parties in the instant case appear to have grossly mixed up or could have attempted to create a hybrid, which is less likely, considering the submissions of the parties and the evidence on record before me. My extrapolation of what a Car Lease entails, is not by "ny standards far from what was explained in Lombard North Central plc a Buttenootth [1987] I All ER 267. ln Oto.ok Charles Vs Equltg Bank Uganda Ltd (HCCS 335 Of 2O1O) Court cited the case of Demqnd. Informatlon (In Admlnlstratlae Recelaershlp) and o,nother uersus Mlchael @rson (Flnonce) PIE and o,nother [2OOO] 4 ALL ER 734, a finance lease was defined as a lease that actually involved payment by lessee to a lessor of the full costs of the asset together with a return on the finance provided by the lessor. The Lessee has substantially all the risks and rewards associated with the ownership of the assets, other than the transferred. Under Section 58 of the Income Tax Act, finance Lease substantially transfers all the risks and rewards incidental to ownership. Title may or may not eventually be transferred. In a typical finance lease, the lessor, usually a balk, leasing company, or other financial Institution, (often a special-purpose entity formed by l0 l5 20 25 Page 39 of 87 5 the parties for the sole purpose of holding title to the asset), purchases the asset from a vendor and leases it to the user, or lessee. The lease agreement requires the lessee to pay the lessor periodic lease payments during the lease term. At the end of the term, the lessee may purchase the asset at a predetermined fixed purchase price. Alternatively, the lessor may sell the asset to a third party, with the lessee providing a first-loss gua.rantee in the form of a termination pa]ment. l0 ln Delu.x.e Enterprlses Ltmtted us Uganda l*aslng Co. Llmlted the Court relied on Chittg on Contracts (27th Ddition, Vol. II, 7994 on the proposition of law that: - "In a fi.nance lease, the lessee selects the equipment to be supplied by the manufacturer or dealer, but the lessor la ftnance companu) plovldes -fanda, acquires tltle to the l5 eouloment and. allows the lessee to use lt for all (or most) ZU of lts exoected useful llfe. During the peiod of the lease, the usual nsks and rewards of ownership are transferred to the lessee, who bears the rbk of loss, destruction and depreciation of the leased equipment (Jair uear and tear only excepted) and of its obsolescence or malfunctioning. The regular rental payments duing the rental peiod are calculated to enable the /essor amortize its capital outlag and to make a profit from its finance charges. At the end of the pimary lease peiod, there will frequentlg be a secondary leasing peiod duing whichthe lessee maA opt to continue the lease at a nominal renta| or the 25 Page 40 of 87 equipment maA be sold and a proportion of the sale proceeds returned to the lessee as a rebate of rentals..." A distinction ought to be drawn between a hnance leasing transaction and a hire purchase agreement. The two agreements are more s dissimilar than similar. Hire purchase is a purchase of an asset in which a customer makes down payment and finances the rest of the amount through financia-l institutions or banks. On the rest of the unpaid amount, he pays interest at a certain pre-determined rate. After making complete palment the assets become the legal right of l0 the customer. Lease on the other hand is an agreement of using asset for certain period and paying rent on it at a pre-determined rate of interest. It is a temporarSr acquiring of an asset just to use it. l5 20 Whereas in a hire- purchase agreement the hirer pays the owner of the equipment a series of rentals that are a composite of the price, in a finance lease the lessee is paying rentals to enable the lessor recoup its capital outlay and realize profrts from finance charges. Thus, while having met the insta-lment obligation of the contract ownership passes under hire- purchases, under finance lease merely meeting renta-l pqrments as and when they fall due does not give rise to transfer of ownership, a further contract.is required. The latter agreement is non-cancellable whereas the former maybe cancelled. The remedy of an owner under the hire purchase agreement is to recover the rental arrea-rs with interest for default while in finance lease the lessor is not only entitled to recover rental Page 4l of 87 5 arrears but to compensations that would place him in the position he would have been had the lessee performed the agreement. A finance lease agreement is likened more to a loan agreement than a hire purchase agreement. In a gpical finance lease transaction, the following tenets ought to be present; 1. An applicationfor the facilitg from the intended lessee. 2. An offer letter from the financing irrctitution, that is; the leasing companA or the bank. 3. A master lease agreement. This ordinarilg lags down the general terms of the agreement. 4. A lease schedule agreement. This agreement is an integral part of the master lease agreement bg incorporation, it lags doun the specific terms of the lease, the nature of the equipment financed, capital cost, rentals pagable and ang other condition precedent to performing the agreement like prouiding seanitg for payment of rentals, directors or personal guarantees, spousal consent in case of mortgaging familg propertA. 5. Proforma inuoices and other doanments in proof of purchase. 6. Supplg agreement from the supplier. 7. A sale and lease back agreement 8. The Lease Ledger maintained bg Lessor with the guiding lease accounting pinciples. Page 42 of 87 l0 r5 20 5 For avoidance of doubt, I wish to emphasize the holding of .l\Iichotts LI tn Lombard. North Central PIE o Butterutorth [1984 7 All DR 267 on the characteristics of a financial lease in discussing the additiona-l issue of the nature of a financial lease in terms of dehnition and who the legal owner of the capita-l asset leased is. Mcholls I^f stated in Lombard Nott.h Central PIE u Buttenoorth (supra) that it was the business of the plaintiff, to linance customers to acquire goods whether by hire purchase or lease. The financier purchases the goods chosen by the customer from the supplier and lets them to the customer on lease or hire. The lease agreement provides for pa5rment of rentals for the duration of hire/lease sufhcient to make a commercial proht on the money paid for the acquisition of the property. The lessee has the option to buy the goods at the end of the lease term for a nomina-l sum. The interest of the linancier upon repossession of the car is confined to reselling it at prevailing market rates and possibly at a time when the car has undergone some depreciation. It is crucial for the agreed installments to be paid promptly. Interest is calculated on the basis of instalment dates in order to have them paid regularly and promptly. Failure to pay promptly would make the arrangement unattractive and unprofitable and is likely to cause substantial loss to the hnancier. The defendant's objective is to use the goods while making instalment paJrments and at the end of the hire period to acquire ownership to the property. IVlcholls IJ in Lombard NorAh Central plc a l0 l5 20 ,( Page 43 of 87 5 Buttenoorth (supra) on analysis of the agreement found that failure to pay promptly amounted to a repudiatory breach of the agreement. He found that failure to pay triggers the right of the hnancier to terminate the agreement and take possession of the goods. In the context of financial leases, a breach in the pay.rnent of insta-lments goes to the root ofthe contract. Consequently, the legal consequence of the contract is that the frnancier would be entitled to claim damages for loss of the whole transaction. On the nature of a hnancial lease, the arrangement as reflected in the agreement of the parties is that the customer, such as the respondent to this appeal, identilies a capital asset for funding by the bank. He is required to pay a deposit of about 15olo of the total price of the capital asset. The bank or leasing company upon evaluation of the prospective dea-I, would have decided to finance the purchase of the capital asset but retain the legal ownership as security for the money advanced to the lessee. The terms of the lease agreement may reflect the fact that the lessee is entitled to ownership of the property by a transfer of title (legal ownership) upon the payment of a nominal fee agreed and stated in the contract pursuant to completing the rentals which take care of the monies advanced to the borrower for the purchase of the capital asset. Where there are breaches, the parties stipulate the consequences in the contract. The hnancial institution is secured by the capital asset remaining in its names as the legal owner thereof but in practical terms, the benehcial owner uses the property. These are legal devises t0 l5 20 )q Page 44 of 87 In the instant case I do agree with the respondent that there was no specific Statutory Law or Act of Parliament on Car Leasing Agreements in Uganda, specihc to Finance Leasing a-rrangements such as that in which the parties herein were involved. I also agree that finance leasing at the time the parties herein transacted was governed by the principles of common law which are invoked under sectlon 14(2fib)(l) of the Judlcqdre Act. Further I agree that in determining leasing disputes, reference is made to the agreed terms of the contract between the parties as well. Therefore, I think the summaqr of a Car Lease Agreement is as follows; Mr. "A" is desirous of engaging in business but is without sufficient financial capital. He approaches "B" a finance company, for t5 20 Page 45 of 87 by which the parties can exercise their rights and obligations in the acquisition of a capital asset. Legal ownership, does not give the bank the right to enjoy the property by generating money from the capital assets. For the contract to work, the capital asset should be able to 5 generate money for the borrower as well as service the renta-ls unless the borrower has another source of income to do so. It is the borrower who is the beneficial owner of the capital asset with obligations to service the loan in what is termed as "renta-ls". Where the borrower defaults in the pa)rment of the "renta-ls", the bank uses its lega1 title l0 of ownership to attach the capital asset and where there is failure to rectify the breach by the borrower, to sell the capital asset. Upon the sale, there is provision for reconciliation of accounts to establish who owes the other and how much. 5 money to purchase a specified chattel which he intends to put in use to produce regular income. "B" in this case a Bank or Leasing Company, pays "C" the dea-ler or manufacturer of the chattel, the purchase price or a substaltial part thereof. The chattel is thereafter registered in the names of "B" who retains the documents of title. The Chattel is however, released to "A" he takes possession of it and puts it to use. He bears the loss, the risk, and the depreciation. When all the money is paid back to "B" as per agreement in regular installments, "A" returns the chattel to B or is a-llowed to buy it on a nominal amount whereupon, it is transferred to "A"'s name and title passes on to him. In the event of default, the terms of agreement apply, including seizure and sale of the chattel by "8". It is never envisaged that "8" will fail to trarsfer tittle into "A"'s name upon exercising the option to purchase. However, in Stanbic Bank (U) Ltd os Nakangongl Deoelopment Assoclatlon (Nod.a) Ltd, Hlgh Court, Ctotl Sutt No. 737 OF 2072 in which Magezl and. Another as Ruprrrella [2OO5] 2 EA 756 was followed, this Court held that the intention of the parties to an agreement is to be determined from the words used in the agreement. It has been argued and held in many other cases before that parties are free to contract and what is required of a Court of law is simply to give effect to the intention of the parties. That the Court, will not improve a contract, which the parties have made themselves, no matter how desirable the improvement maybe. See: A Tampalln Steamshlp Co. Ltd as Anglo-Mexlcan Petroleum P"oducts CO. Ltd Page 46 of 87 l0 l5 20 25 But I must hasten to add that in reality freedom of contract is somewhat a myth. Every contract under the sun is regulated by law without exception. Therefore, parties must contract within the law. Every aspect of business is regulated by specific laws including chattel leasing, banking, hire purchase, sale of goods and a host of all such similar contracts. The reason why contracts are regulated is because, if left unregulated chaos would automatically follow. Whereas Courts of law acknowledge and uphold the doctrine of freedom of contract, we are nonetheless aware that, it is only applicable within the limits set out by the law. F\rther that, it is subject to the requirements of good faith, fair dealing and a host of mandatory rules established over time to regulate usage, custom and trade. Accordingly, the law intervenes to guide and regulate the conduct of parties in respect of the terms under which they can contract. The law therefore is employed to effectively balarlce the inequality of the parties bargaining powers and ensures optimum protection for the, vulnerable, the poor, the consumer and the general public who often have limited expertise in the subject matter of the contract. This is Page 47 of 87 l0 t5 20 [1916]2 AC 397. See also.' Trollope 87 Colls Ltd o North West Metropolltan Reglonal Hospltal Board [1993] 2 All ER 26O, for the proposition that, the Courts function is to interpret and apply the contract which the parties have made for themselves. The above is the age-old common law doctrine of freedom of contract. 5 In the instant case the agreement between the parties has been referred to as the Master Vehlcle l*ose Agreemcnt a copy of which I found at page 153 of the Record of Appeal. In Clcruse 77 of Thc Master Vehlcle l*ase Agreementlhe option to purchase is provided for and it states as follows; If the Lessee shall haue duly obserued and performed all the stipulations and conditions contained in this Agreement on the part of the Lessee to be obserued and performed and shall haue in manner aforesaid paid the lessor all Rental sums pagable under Clause 3 aboue the Lessee shall haue the option to be exercised by the payment of the said sum on or before the last dag of the Lease Term but unless and until such option has been duly exercised the Vehicles shall be and remain the absolute propertg of the l,essor." Clearly the above quoted Clquse 71 of Th.e Master Vehlcle l*rrse Agreement shows that the respondent as lessor is the owner of the Motor Vehicle in issue and therefore carried the obligation to cause the transfer upon exercise of the option to purchase by the appellant which, it is not in dispute, they did in the instant case. Therefore, the argument that the Motor Vehicle was only registered in the names of the respondent Company for formality is untenable especially when it comes to matters relating to transfer of title upon exercise of the Page 48 of 87 l0 l5 20 25 more so in respect of "new tgpes of contracts" such as the subject matter of this appeal. -77. OPTION TO PT]RCHASD 5 option to purchase. Holding otherwise would not give the agreement business eflicacy and would destroy the intention of the parties which was for the appellant to pay and for the respondent to transfer the Motor Vehicle upon exercise of the option to purchase. The respondent's ownership responsibility and control of powers to transfer or withhold transfer can further be seen in Clause 14D(l)and(11) of The Master Vehlcle l*ase Agreement. The clause states as follows; "D i) The lessor shall be entitled at ang time to assign its ights, title and interest in, to and under this Agreement to ang third partA. ii) The Lessee sluzll not be entitled to assign, sublet or otherwise deal uith any of its rights, title and interest under this Agreement (or in respect of the Vehicles) nor agree to do ang such thing without the pior witten consent of the Lessor, which the Lessor mag uithhold at its absolute discretion." In my view therefore it follows that the duty to ascertain the owner of the vehicle ought to be on the respondent as the Leasing Company and registered owner. The Respondent paid UShs. 50,O0O,OOO/= to Charles Mutasingwa (see page 77O and 776 oJ the Record. of Appeal) and thereafter effectively got registered as owner (see page 785 and 786 of the Record. of Appeal). Having been registered as the owner the respondent ought to have used the same process to register the appellant as owner upon the appellant fulfilling their obligations under the agreement. Page 49 of 87 l0 l5 20 25 5 With the above cited facts on record and the evidence I would find that the respondent failed in its duty both under agreement and under law to transfer the Motor vehicle to the respondent which amounts to a breach of Contract. However, Clauses 77 and 74D(l)and(tt) of The Master Vehlcle I*ase Agreement have to be read together with Clauses SD(ll) and 5F of The Master Vehlcle l*ose Agreement which the respondent seeks to rely on to avoid liability. Clause SD(ll) of Tle Mq.ster Vehlcle lr'ase Agreement states as follows; J. D. The Lessee acknowledges and agrees that: - i) .. ii) the Lessor has not made nor slwll be deemed to haue made and there shall be hereby expressly excluded and the Lessor uill haue no liabilitg for: - (a) ang representation or walrantA or couenant or condition, express or implied, as to title, description, ualue, condition, design, qualitg, purpose, merchantabilitg, durability, operation or fitnessfor anA use or purpose ofthe Vehicles or anA part or as to the eligibility or suitability for ang particular use or couenant or condition of ang kind whether similar to any of the foregoing or not, express or implied, with respect to the uehicles or ang part;" Clauses 5F of The Master Vehlcle l*o,se Agreement states as follows; Page 50 of 87 l0 l5 20 5 "F. The lessor undertakes that, to the extent possible, at the request and expense ofthe Lessee, it utill assign to the Lessee all such ights (whether contrachtal, statutory or otherutise) as the .Lessor may haue against the Supplier. Subject to the.Lessort pior written consent and receipt of an indemnity in terms acceptable to the Lessor, the Lessor shall giue all such assistance in the prosecution of ang action against the Supplier as the Lessee maA reasonablg require. If, as a result of ang such action, the Lessee receiues anA moneAs, th.e Lessor slmll be entitled to reqtire that such moneAs shall be applied either towards rectifging or making good ang defect in the Vehicles or against fufure Rentals in such manner as the lessor shall consider appropriate. The prouisions of this subclause are in lieu of all other ights of the Lessee against the Lessor in relation to the Vehicles." r0 t5 In my view the lease agreement clauses the respondent seeks to rely on, do not apply to the instant case. The appellant seeks to enforce the contract by requiring the respondent to cause the transfer since the appellant fulfilled all the requirements for exercising the option 20 to purchase. I believe that a-fter a car lease ends, the leasing company has a duty to transfer the vehicle's title to the lessee if the lessee has exercised the option to purchase and has fulhlled their contractual obligations. Failure to do so in my view is a fundamental breach of the agreement for which the Leasing Company ought to be held 25 responsible. Page 5l of 87 5 The evidence on record shows that the respondent is currently registered as the owner of the Motor Vehicle (see page 785 and 786 of the Record of Appeal). A transfer cannot occur without the involvement of the respondent. As such the respondent's argument that the appellant ought to pursue the supplier is illogical and turns the agreement on its head. It is not an implied term of the agreement but rather it is an express term of the agreement under Clduse 77 of The Master Vehlcle l*ose Agreement that upon exercising the option to purchase by payrng the Option to Purchase Fee, the vehicle shall be transferred (cease to fu or remo:ln tlre, absolute propertg oJ the Le,ssor). It follows therefore that upon exercising the option to purchase, the Leasing Company ought to immediately cause the transfer. There is no need for any indemnity or liability or compensation or involvement of an exclusion clause here. Failure to cause the transfer in my view would entitle the Lessee to recover the Option to Purchase Fee or any such monies as he may have paid to acquire the vehicle in exercising the option. General or other damages awarded to right that wrong would not be unfounded either and would in my view be justifiable under the circumstances. Where there is a breach of a fundamental term, the innocent parff may sue for damages as well as repudiate the contract, and any exemption clause in the contract cannot avail to the party in breach against the innocent party. The Court of Appeal Justices found, in paragraph 26 of the Judgment @age 77 of the Record of Appeal) and I agree, that the hnancial l0 l5 20 25 Page 52 of 87 5 leasing is not akin to bank-customer relationship because of the provisions of the .Finonclal Instltr.ttlons Act urhere ln Schedule 2 financial leases are categor2ed as services offered by Iinance houses and which are designated as non-bank financia-l institutions. However, the learned Justices of Appeal go on to fault the trial Judge for wrongly imputing a duty to ascertain road worthiness on the respondent because under Clauses 5A and SDfify'(a) ofthe Mqster I*<rse Agreement categorically excluded the appellant from any liability for the mechanica-l condition of the lease vehicle or its suitability for the purpose for which it had been leased. As I have already discussed the Ctause 5A o.nd.SDfil)(a) of the Master l*ase Agreement relied on by the Court of Appea-l I will not repeat. I do not agree with the Court of Appeal on this position. On the issue of ownership, the Court of Appeal in its Judgment paragraph 34 thereof at page 20 of the Record of Appeal found and held as follows; "The supplier of the leased truck bore the dutg of transferring to the leasing companA the log book that confered good title. Giuen that a log book is proof of title, I uould not impute a duty upon Uganda Leasing to inquire into the authenticitg of the log book. Of course, it uould haue been the pntdent thing to do in order to auert reputational nsk and/or injury to the leasing companA. Tlnt might perhaps explain DW2's euidence that the legal department of Uganda Leasing did sometimes inquire into the cars proposed for lease finance. Howeuer, the need for such l0 t5 20 25 Page 53 of 87 pntdence uould not in itself confer a contractual duty upon the leasing companA to inquire into the leased truck's ownership giuen the succinct prouisions of the Master Lease Agreement." The Court of Appeal's reliance on Chitty on Contracts for the proposition that ownership by the lessor is only for purposes of sale in the event of default is also either unsustainable or inapplicable in the circumstances of the instant case. Because if the respondent can sale and transfer the car upon default to a third pafty, they can also with the same strength transfer ttre car to the appellant upon default to the appellant. If the respondent managed to cause the transfer of the Vehicle into its narnes the same skill and swiftness ought to be applied in transferring the vehicle into the appellant's narne upon exercise of the option to purchase. The respondent could not have 20 25 Page 54 of 87 Whereas the finding and holding of the learned Justices of Appeal s hereinabove quoted is logical it appears to have been arrived at without considering the provisions of Clcuse 77 of Tle ilIdster Vehlcle l*ase Agreement to the effect that upon exercising the option to purchase by paying the Option to Purchase Fee, the Vehicle shall be transferred (ceose to be or remaln the absolute propefty I o of tlv Lcssor). This was one of the succinct provisions of the Master Vehicle l,ease Agreement which the Court of Appeal ought to have taken into consideration because the dispute in this matter arose from failure of the respondent to cause a transfer to the appellant despite his election to exercise the option to purchase and fulhlling | 5 the conditions for the same fully. 5 had the power and skill to transfer into its name and at the same time not have the power to transfer into the name of the appellant. It does not make business sense neither does it foster business efficacy and by no means could it have been the intention of the parties in the Master Vehicle Lease Agreement as I have discussed the provisions hereinabove. The Court of Appeal also relied on Clause 5F to propose that the remedy available to the appellant is to obtain an assignment of the respondent's rights against the supplier to the appellant so that the appellant may pursue the supplier for the transfer. This could not have been the intention of the parties as the respondent was already registered on the Log Book by the time the appellant exercised option to purchase. The supplier effectively provided the Vehicle, the respondent successfully caused a transfer of that vehicle into their names, there has been no claimant of the Vehicle or complainant spoken of in all the evidence on record, what could possibly be the claim against the supplier. The property in the goods and title to the goods have effectively been passed to the respondent. Therefore, I find that it is an error and a misinterpretation of the agreement to hold that the remedy of the appellant is to claim against the supplier. In my view Clause 5F would be applicable if the supplier failed to cause transfer or deliver the motor vehicle. I agree with the submission of the appellant that the learned Justices of Appeal misapplied clause 5F of the Master Vehicle Lease Agreement which resulted in an unjust Page 55 of 87 l0 t5 20 2S Page 56 of 87 exemption of the respondent from Liability for its fundamental breach of the lease agreement. For the reasons I have given herein I hnd merit in ground 1 of the Appeal. The Learned Appellate Justices indeed erred in law when 5 they exempted the respondent from liability for breach of contract. The respondent fundamentally breached the contract between the parties. Ground 2 The leorned Appellate.llrstices erred ln law uth.en tleg held that a court, of laut cannotfonnulote qnd mo'ke a declslon l o upon o.n un-pleaded issue. AIVD Ground. 3 The leanted Appellate Justlces etted ln lqw uhen theg held that the Appellant ho,d not pleadedfiiud, Appellants' Submissions The appellant submitted that the trial Judge only raised two issues t 5 vide; Whether the Defendant breached the contract and whether the plaintiff is entitled to the reliefs sought. That however, in resolving the first issue the trial Judge found that the respondent had knowledge of fraudulent registration of the vehicle but concealed it from the appellant which finding the 20 appellant disputed. That the respondent raised this issue as a ground of appeal in the Court of Appeal claiming that the trial Judge erroneously imputed fraudulent conduct against the appellant, even though fraud had not been pleaded. That the Court ofAppeal upheld the argument but the trial Judge never framed an additional issue 5 regarding fraud before making the finding. That the Appellate Court erred by faulting the trial Judge for this and misinterpreted the role of the Court in framing issues. That according to O.15 of the Civil Procedure Rules it is the Court and not the parties responsible for framing issues. That the court and not the parties is responsible for framing issues. That the Court has the discretion to frame issues based on pleadings and evidence adduced as espoused in Odd Jobs vs Mubia (1970) E,A476 in which it was held that it is the trial Judge's duty to frame issues necessa-q/ for determining the disputes, even if they were not raised in the pleadings. That this principle was reiterated in Israel Kabwa vs Martin Banoba Musiga SCCA No.52 of 1995 at p.13 and Joselyn Barugahare vs Attorney General SCCA No.28 of 1993 cited with approval by the Court of Appeal in John Bwiza vs Patrick Yowasi Kadama CACA No.35 of 2O11at p.8 where the courts emphasized that a trial court can frame issues not explicitly pleaded as long as the parties have presented evidence on them. That the Court of Appeal's failure to follow this principle was a legal error as it ignored the trial Court's inherent power to determine all matters that go to the heart of the dispute. That this includes issues such as fraud even if they were not specifically pleaded as long as there is sufficient evidence. That the requirement to plead fraud specifically under 0.6 r.3 CPR. applies only when the party seeks to rely on fraud as a central issue Page 57 of 87 l0 l5 20 25 in the case. That in this case, the Court did not need to wait for formal pleading of fraud as a centra-l issue in the case. That in this case tl-re Court did not need to wait for a formal pleading of fraud if the evidence of fraudulent conduct had been adduced at trial. That the s Appellate Justices overlooked the trial Court's discretion to address fraud if it arises from the evidence, even if not explicitly pleaded, as confirmed in the case of SINBA (Kl Ltd vs Uganda Broadcasting Corporation SCCA No.3 of 2OL4. That by dismissing the trial Judge's findings on fraud the Appellate I 0 Justices failed to follow the settled position of the law and the binding precedent of this Court. That they improperly disregarded evidence on fraud which should have been addressed to resolve the controversy between the parties. That the tria-l court correctly exercised its discretion in considering l5 fraud and framing it as an additional issue to resolve the dispute in the interest of justice as outlined in Makula International Ltd vs Cardlnal Emmaauel Nsubuga [[1982] HCB 11. That the Appellate Court's failure to follow the Supreme Court's established position on framing and determining un-pleaded issues 20 violates mandatory constitutional provisions in Article 132(41 which mandates that lower courts to follow Supreme Court decisions. That therefore the Appellate Justices erred in law by holding that the trial Court could not frame and resolve an un-pleaded issue. That they accordingly pray this Court restores the correct legal position by 25 answering this issue in the affrrmative. Page 58 of 87 5 Respondents' Submissions The respondent's counsel submitted that the appellant's submission that the learned Justices of Appeal erred in law when they held that the appellant had not pleaded fraud. That the fact that the appellant pleaded illegality does not mean they also pleaded fraud. That in paragraph a(i) of the plaint the appellant pleaded illegality and not fraud. That the general provision regarding illegality is that once illegality is brought to the attention of the court it overrides all questions or all matters pertaining thereto as per Makula International Ltd vs His Eminence Cardinal Emmanuel Nsubuga and Another CACA No.4 of 1987. That the appellant's submission that a Court of Law is free to make a decision on a matter or an issue that is not pleaded before it, is misleading. That the respondent appealed to the Court of Appeal on ground that the learned trial Judge had decided the issue of fraud when the sarne was not pleaded nor proved as required by 0.6 r.3 of the Civil Procedure Rules. That it is a well settled principle of law that parties are bound by their own pleadings, that this was reafhrmed in Jani Properties Ltd vs Dar-es-Salaam City [19661 EA 281. That this Court in Interfreight Fomrarders (u) Ltd vs East African Development Bank CACA No.33 of L992 underscored the importance of correct drafting of documents and the consequences of departure from pleadings and noted as follows; l0 l5 Page 59 of 87 5 "The system of pleadings is necessar5r in litigation. It operates to dehne and deliver with clarity ald precision the real matters in controversy between the parties. A party will not be allowed to succeed on a case not set up by him/her and be allowed at trial to change his case or set up a case inconsistent with what he alleged in his pleadings, except by way of amendment of the pleadings." That fraud has to be pleaded because the allegations of fraud are so serious, the party against whom it is pleaded must be given an opportunity to respond to them. That the Sinba (K) Ltd vs Uganda Broadcasting Corporation case cited by the appellant is not applicable in the instant case because in that case the matters of fraud arose after trial but in this case they were raised by the trial Judge and the Court of Appeal had the mandate to evaluate the evidence and pleadings before the trial Judge and make its findings which it did. That it is not correct that the learned Justices of Appeal did not consider the evidence in relation to fraud adduced by the appellant. That this court should find that the learned Justices of Appeal correctly found that the appellant had failed to prove fraud against the Respondent. Aooellant' s submissions in reioinder In rejoinder the Appellant submits that they reiterate their submissions. That fraud is a t1rpe of illegality. That since the appellant pleaded illegality while referring to fraud it was sufficient pleading for the trial Judge to consider it. Page 60 of 87 I0 r5 20 25 5 That by the appellant pleading particulars of illegality, in essence the appellant pleaded particulars of fraud. That the appellant's pleadings under particulars of illegality clearly described fraudulent conduct of the respondent including falsified logbook entries and concea-lment of the vehicle's true ownership status. For this submission counsel relied on Hilda Wilson Namusoke & 3 Others vs Owalla's Home Investments Trust (E.A) Ltd & Another SCCA No. 15 of 2017. That this court held in Makubuya Enock William vs Umeme (U) Ltd SCCA No.l of 2019 at page 15 that it should be recognized that pleadings are not a fact-sifting mechanism and that attempts to force them to serve that purpose may only result in making the pleading increasingly complicated. That in this instant case the respondent was not prejudiced when the appellant pleaded particulars of illegality instead of fraud and it did not rebut the same in its submissions in reply. That the argument that parties must rely on their pleadings is correct but not relevant in this appeal because the appellant clearly pleaded fraud in paragraph 4 of the plaint. That accordingly the issue was not only pleaded but was also supported by evidence. That the trial Court was empowered under O.15 rr 1(5),3(b)(c) and 5 of the Civil Procedure Rules to consider issues not formally framed or pleaded if they arise from the proceedings and are essential to determining the rea-l controversy especially where a pa-rty adduces evidence on an issue, even where all particulars may not have been explicitly stated in the pleadings. Page 6l of 87 t0 l5 20 25 5 l0 l5 20 I have carefully considered the submissions of the parties and the authorities cited by the parties. The position of the law on this issue was considered in the case of MtS Fang Mln us Belex Tours qnd. Trauel Llmtted and C"ane Bank Ltmtted Supreme Court Ctttll Appeal No.O6 of 2013 where this Court emphasized the need for pleadings in civil proceedings to describe the respective cases for the parties and to define the issues in dispute for resolution by the Court. This court also stated that; ".. .the conect position of the law is that while an issue or ground of illegalitg or fraud not raised in the louer Court, mag be raised on appea| the parties must be giuen an opporfunitg to address Court on it before the Court makes a decision. Euen where the Judge wishes to consider an issue after the heaing has been concluded, the judge must giue the parties an opporfitnitg to address court on the issue" ln Interfrelght Forutarders (U) Ltd as East Afrtcon Deuelopment Bank Ctull Appeal IVo.33 of 1992 Oder JSC held that the system of pleadings is necessary in litigation. It operates to define and deliver clarity and precision of the real matters in controversy between the parties upon which they can prepare and present their respective cases and upon which the Court will be called upon to adjudicate Page 62 of 87 Determination of Grounds 2 and 3 of the Appeal. 5 between them. It thus serves the double purpose of informing each party what is the case of the opposite party which will govern the interlocutory proceedings before the tria-l and when the Court will have to determine at trial. See Bullen and Leake and Jacobs Precedents of Pleading, L2'o Edition page 3. Thus, issues are framed on the case of the parties so disclosed in the pleadings and evidence is directed at the tria-l to the proof of the case so set and covered by the issues framed therein. A party is expected and bound to prove the case as alleged by him and as covered in the issues framed. He will not be a-llowed to succeed on a case not set up by him and be a-llowed at the trial to change his case or set up a case inconsistent with what he alleged in his pleadings except by way of amendment of the pleadings. It is an error for the Court of Appeal to grant reliefs which were not sought by the respondent. Or make a case not pleaded by the parties in High Court or in the Court of Appeal save for illegality or fraud as was the holding in National Social Security Fund and Others vs Alcon International. This exception has to be applied with the cautions stated in If. Singh us SS Dhiman (7957) 78 DACA 75 where it was held that; "...although it is the ight and duty of the Court of Appeal to consider illegality at ang stage get, uthen it has not been pleaded and not raised in the Court below, or at best only raised at the late stage, an appellate court must be cautious and must consider uhether the alleged illegality is sufficiently proued and must be r0 l5 20 Page 63 of 87 25 satisfi"ed that if there are matters of suspicion in the plaintiffs case an opporfiinitg was giuen for explanation and defence" The Court concluded; "there is no doubt that all authoities cited bg counsel for the appellant emphasize the need to hear both sides on a crucial point in case before deciding the case one waA or the other. And this is properlg emphasized bg clause (1) of Article 28 of the Constihttion uhich prouides for fair heaing" The right to a fair hearing is non-derogable constitutiona-l right it must be observed even where illegality or fraud is being considered on appeal or at tria-l. ln Attonteg General as Poul Ssemogerere & Zachary Olum, Constlttttlonal Appeal No.3 of 2OO4 (SC) Mulenga JSC stated that "it is a cardinal pinciple in our judicial process that in adjudicating a suit, the tial Court must base its decision and orders on the pleadings and the issues contested before it. Founding a Court decision or relief on un-pleaded matter or issue not properlg placed before it for determination is an error of law...Likewise on appeal, matters that were not raised and decided on in the tial Court cannot be brought up as fresh matters. The Court would be urong to base its decision on such matters that utere not raised as issues and determined by the trial Court." In NSSF & Others vs Alcon International it was held that r0 15 20 Page 64 of 87 5 "One of the pinciples of laut stated in Malcula International case is that as long as there is an illegalitg, it can be raised at anA time as a Court of Lau cannot sanction that uthich is illegal." Counsel for the appellant maintains that the arbitral award was proanred by fraudulent means uhich is an illegalitg which this court must act upon. I do agree, and hold that due to the fact that fraud utas discouered on appeal, the appellants were not baned from raising it in this Court. Tlrc Alcon Managers and Directors knew this fact which is whg they concealed it. This conduct cannot be angthing but deliberate concealment of pertinent information." In the instant case the amended plaint on record stated in paragraph 4(i) particulars of illegality as follows; "a) BA altering the records of the department of Motor Vehicle Registration and Licensing of Uganda Reuenue Authoity to appear as though one Matouu Hassan tuas the registered ou)ner in Uganda for the said Motor Vehicle., whereas the authentic Uganda Reuenue Authoitg records indicate that the first ou)ner was Uganda Gouernment uith Registration Number UC 0339. (b) BA falsifying the Uganda Reuenue Authoitg records so to indicate that the suit Motor Vehicle which is an ISUZU LORRY originally belonged to Uganda Gouentment with registration number UC 0339 tahereas not, as Motor Vehicle Registration number UCO339 is a Mercedes Benz Cross Country and is still l0 l5 20 -)( Page 65 of 87 5 owned, possessed and mouing. The plaintiff shall rely on Motor Vehicle Registration from the Ministry of Works in confirmation of this state of affairs hereto attqched and marked annextttre "G". (c) TLnt bg reason of matters aforesaid, it is practically impossible for the defendant to execute the requisite transfer instruments in fauor of the plaintiff to enable it haue the suit motor uehicle transferred into its name. @) Trc plaintiff states that it has been desirous of disposing off the said Motor Vehicle by wag of sale but all the interested bugers haue declined to purchase as the same is sfrll in the names of Uganda Leasing Company Limited." With this kind of pleading which states illegality but particularkes fraud I do not think the trial Judge can be faulted for having found fraud and dealt with it. In the case of Htlda Wllson Namusoke & 3 Otlvrs us Ota,ollo's Home Inuestments Trust (E.A) Ltd & Another Supreme Court Ctull Appeal lVo.I5 of 2017 it was held that since fraud is a subset of illegality, the reference to particulars of illegality instead of particulars of fraud was merely a misnaming and did not negate the fact that fraud was pleaded. A misapplication of terminologr does not alter the essence of the claim as espoused by Odgers on Pleadings and Practice 2Oth Edition as cited in St. Mary Academg Llmtted & Another us Grdce NJerl Mukord & Anor Hlgh Coutt, Kenga Clutl Appeol No.S of 2O2O. I agree that whereas 0.6 r.3 of the Ciuil Procedure Rules requires particulars of fraud to be pleaded it does Page 66 of 87 r0 l5 20 ?5 5 not necessa-rily require the ritualistic incantation of the word fraud in order make the particulars of fraud acceptable. To require that would in my view amount to giving undue regard to technicalities which would be inconsistent with Artlcle 126(2)(e) of the Constlttttlon of the Republtc of Uganda. I therefore find merit in grounds 2 and 3 of this appeal. Ground 4 The learned Appellate Justices en'ed. lnlaut uhentheg held thot there u)as no euldence of fraud agolnst tllc Respondent. A ellants' Submissions The appellant did not particularly submit on this ground of appeal in their submissions. Respondents' Submissions The Respondent's counsel submitted that the appellant had abandoned this ground of appeal and so accordingly chose not to submit on it. Appellant's submissions in rejoinder In rejoinder the Appellant submits that they have not abandoned this ground of appeal and it ought to be considered. l0 r5 20 Page 67 of 87 The record of appeal shows that PW1 (Haji Ismael Ssebunya) testified and stated that the respondent gave him a log book of the car which he used to verify with what Uganda Revenue Authority had in its records. That what came out was totally different from what was represented on the log book copy he had been given by the respondent. That when he got a print out of the information from Uganda Revenue Authority (Exhibit P7) he was advised to go to Ministry of Works to conhrm the information which he did. That the Ministry of Works gave him information which was showing that the Motor Vehicle UC 0339 was a Mercedes Benz Cross Country and not Isuzu trrrck and that vehicle was still under President's Office and not yet boarded off. The cross exarnination by counsel for the respondent did not offer any explanations for these inconsistencies in the record of ownership of the vehicle. Instead, what came out in cross examination is that the appellant informed the respondent that Police had impounded the vehicle on claims that it had been stolen. PW2 (Mukoova Prossy) testihed that the appellant had no log book at the beginning of the transaction so as to verifr ownership. That at the Uganda Revenue Authority one has to go with a copy of logbook Paqe 68 of 87 l0 l5 ,n Determination of Grounds 4 of the Appeal. In the spirit of fairness, since the respondent has not made submissions on this ground of appeal, I will not consider any of the submissions of the parties on this issue but will never the less resolve s the issue based on the record of appeal. to veri$r ownership. That the Motor vehicle is not in the appellant company's narne. PW4 No.35691D ICPL Kibwikamu Reuben made a report PEX 1 1 and stated in his testimony in cross examination that DFCU was involved in creation of the documents and forged it and the person who forged it was named in the report and is available in DFCU. That his investigations showed forgeries in URA and DFCU participated in it by issuing the documents. That DFCU is the current owner of the vehicle. If there were no forgeries it would not have obtained the transfer. That there was a case at Buganda Road with a person charged being Matol,u Hassan charged with receiving goods stolen outside Uganda. That no DFCU officer was charged with forgery. No URA official was charged with forgery and that the logbook has not been cancelled by URA. That the complainant was a Kenyan. The criminal case was dismissed for want of prosecution. In reexamination he stated that the Chief Mechanical Engineer disowned the note on the 1"t transfer. That the original logbook of the vehicle is in Ministry of Works. DWl (Sakwa Perez Mausho) noted in cross exarnination that here was arl inconsistency in the registration number in the logbook and the computer print at URA. They were different. All other defence witnesses did not really clarify why there were inconsistencies and how they managed to register the leasing company on the log book despite these inconsistencies in ownership. Page 69 of 87 I0 I5 20 The learned trial Judge at page 71 of the record of appeal recognizes this evidence and finds that it points to the probability that the respondent knew about these fraudulent issues of ownership of the motor vehicle but having known decided to conceal it and continued with business as usual when it decided to proceed with the leasing arrangements yet it should have taken the only option of cancelling the same and cooperating with the authorities concerned to bring any culprits including its staff to book. The Court of Appeal in its Judgment at page 25 of the record states that it found nothing in the annexures to the plaint or the exhibits which bring home the irregularities in registration and ownership to the respondent. That instead it was DW2's evidence that it was the duty of the supplier to transfer ownership of the leased truck to Uganda Leasing. That there was no proof of the appellant having had a hand in either the transfer of ownership issues relating to the motor vehicle or prior registrations. Page 70 of 87 l0 l5 20 With all the above evidence before the tria-l Judge I find that there was evidence of fraud before the Judge. The evidence, as a whole, shows that the leasing company had knowledge of all these inconsistencies in ownership but instead showed the appellant that 5 the transaction was okay and that they were capable of transferring the vehicle whereas not. I however, think the learned Justices of Appeal misunderstood the trial Judge's finding. His finding was that the respondent facilitated 2s the fraud by concealing these anomalies up to the end of the 5 transaction yet the appellant had informed them of the alleged impounding of the vehicle. The respondent did not take any steps to remedy that situation neither did it extend any real assistance to the appellant to resolve it. It appears to me this is dishonesty intended to cause the appellant follow through with its obligations in the transaction without capacity to cause a real transfer at the end. Despite all these issues the respondent even allowed the Appellant to exercise the option to purchase and pay all the dues for that part of the transaction as well. Then the respondent turned around and said it has no obligation whatsoever to deal with matters relating to transfer of ownership. I find this to be dishonest and evidence of fraud. I accordingly find merit in ground 4 of the appeal. Ground 5 Tlv learned Appellate Justlces en'ed.ln law uthen theg held thot there was no basls for the qutord oJ spectal damages to the Appellant. AND Ground 6 The leanred Appellate.Itrsttces en'ed ln laut uth.en theg held thqt the auard of both general and exemplary d.amages to the Appellant bg the trlal court utas unutorranted. The appellant submitted that the learned Justices of Appeal erred in setting aside the trial Judge's award of general, special and exemplarlr damages. The respondent's fundamental breach of the contract (failure to provide good title and quiet possession of the r0 l5 Page 7l of 87 20 Appellants' Submissions 5 leased vehicle) entitled the appellant to these remedies under the principles of restittttio in integntm, ubi jus ibi remedium and unjust enrichment. That fundamental breach of the lease agreement warranted refund of the rental payments of (UShs 78,448,500) and Purchase price (2,500,OOO) for total failure of consideration by the respondent's failure to secure good title. That appellant was deprived of contractual right to quiet enjoyment rendering the contract frustrated and entitling the appellant to restitution. That UNIDROIT Model Law on L,easing (2008) Article 16(3) a lessor's breach of warranty for quiet enjoyrnent possession entitles the lessee to damages. That in the spirit of restitutio inintegrum the trial Judge applied this doctrine to restore the appellant to its pre-contract position. That in Charterhouse Credit Co. vs Tolly [19631 2 QB 683 it was held that the hirer (lessee) recovered all payments after the owner's breach. That in the case of Livingstone vs Rawyards Coal Co. (188O) 5 AC 259 it was heid that damages must place the injured party in the position they would have been in had the contract been performed. Page 72 of 87 r0 20 ,< That Quid Pro Quo Failure occurred in this case. That the appellant fully performed by paying rentals and this is an agreed fact that the t s appellant fully paid and so it needed no further proof. That the respondent's non-performance (no title transfer) negated the contract's reciprocity, warranting refunds as stipulated under section 53 of the Sa-le of Goods Act Cap 82. 5 That justice demands restitution in order to avoid the respondent's unjust enrichment and fraudulent conduct which must not be condoned. That PW1's evidence was uncontroverted stating that ttre leased vehicle was repeatedly impounded until the appellant abandoned it due to the respondent's defective title. That the learned trial Judge rightly awarded the non-pecuniaqr damages of 70,00O,0007= 1o. inconvenience and anguish cause by the respondent's breach as Court has the discretion to award such darnages as held in Robert Coussens vs AG SCCA alL999. That the learned Justices of Appeal misdirected themselves when they erroneously found that no breach occurred yet they had earlier on found that the respondent had defective title and had breached the contract. That Special damages of 286,396.350 were specifically proved and pleaded as loss of income from Nile Breweries Ltd at the rate of 3,OOO,O0O per month due to the vehicle's impounding. That these were proved by PW 3 and Exhibit PE8 delivery notes. That the Court of Appeal erred to find that the appellant's claim had no basis for the computation and erroneously disregarded the tria-l Court's reliance on PW1-PW3's evidence and documentar5r evidence on record. That exemplary damages of UShs 3O,OOO,0O0/= were warranted due to the respondent's fraudulent conduct. That in Rookes vs Barnard [1964] AC 1129; Exemplary damages apply to "calculated proht- seeking breaches." In Royal Bank of Canada vs W.Got & Page 73 of 87 I0 l5 20 25 The Appellate Court limiting exemplary damages to government servants was a narrow view/interpretation and misapplied Rookes v Benard. This Court should align with modern jurisprudence pronounced in Royal Bank of Canada vs W. Got & Associates where punitive damages were upheld for a bank egregious breach in a commercial dispute. The respondent's fraud demands similar condemnation. l0 I5 Page 74 of 87 Association [1999] 3 SCR 4O8, the Canadian Supreme Court upheld the award of punitive damages by the tria-l court for egregious commercial misconduct to deter the Bank from ever engaging in such conduct. The circumstances of this case warranted the award of such 5 damages because of the respondent's concealing the surrender of the logbook to police (Exhibit P4) and inducing the appellant to continue making payment despite knowing it could not provide the appellant with quiet enjoyment, possession and use of the leased vehicle and a-lso transfer title to the appellant. That interest of 2loh was justified and in the case of Premchandra Shenoi vs Maximov [2OO5l 2 DA 2AO (SCU| and Dr. Karuhanga vs NIC [2OO8] HCB 151 it was held that interest can be awarded when 20 the defendant has taken and used the plaintiffls money and benefited. Consequently, the defendant ought to compensate the plaintiff for the money with interest. 5 The respondent's counsel submitted that the Court of Appeal correctly found that the appellant was not entitled to genera-l damages, as there was no breach ofcontract by the respondent. That it is key to note that the refund of rental payments covered the entire 3O-month lease period yet the vehicle remained in the appellant's possession until it was voluntarily parked by the appellant's Managing Director in 2006. That PWl Hajji Ismail Ssebunya's witness statement paragraphs 16 and 17 prove this. That additionally the purchase price refund was unjustihed as the appellant never exercised the option to purchase the leased vehicle. That this was rightly found by the Justices of appeal. That the appellant is not entitled to special damages because there was no evidence to show how the said amount claimed was arrived at. That the exhibits PEXS delivery notes alluded to by the appellant to evidence the sum of UShs 286,396,35O as special damages do not equate the amount claimed. As such the learned Justices of Appeal rightly found that the appellant is not entitled to special damages. That on exemplarSr damages, the respondent's counsel submits that they agree with the learned Justices of Appeal that the appellant is not entitled to exemplaqr damages. That the object of exemplarSr damages is entirely punitive. That exemplary damages are awarded where there is oppression, arbitrary or unconstitutional action by the government and where the defendant's conduct was calculated to procure him or her some benefrt at the expense of the plaintiff. That t0 l5 20 25 Paqe 75 of 87 ResDondents' Submissions this was the position laid down by this Court in Fredrick Zaabwe vs Orient Bank Ltd & 5 Others SCCA No.4 of 2o,o6. Appellant's submissions in rejoinder In rejoinder the appellant reiterates the earlier submissions and emphasizes that the learned trial Judge correctly awarded the appellant damages because the respondent fundamentally breached the lease contract. That it was admitted fact in the Joint Scheduling Memorandum that the appellant performed its contractual obligations, exercised the option to purchase and paid the purchase price. That so the respondent cannot claim otherwise. This is a classic case of approbation and reprobation. That the respondent has failed to address the appellant's core a-rgument that the respondent breached l5 20 Page 76 of 87 That in the instant case, the nature of transaction between the appellant and the respondent was contractual and it did not call for 5 an award of damages. That the respondent is not a government entity susceptible to oppressive or arbitraqr conduct. That this was the position rightly stated by the Justices of appeal in this case. On interest the respondent's counsel submits that they agree with the learned Justices of Appeal that the appellant is not entitled to the l0 award of interest because the claims were unsuccessful. That this Court should find that the appellant is not entitled to the award of interest. 5 That the claim of lack of evidence for special damages is misconceived. That evidence of special damages need not always be documentar5r. That the case of Roolces os Beno,td [19641 AC 7729 establishes categories of exemplary damages including oppressive conduct by government servants (broadly construed, including local authorities), profit-driven misconduct by defendant and statutorily authorized awards. That the case of Obongo and Another vs Municipal Council of Kisumu [197U 1 EA 91 confirms that exemplaqr damages may apply where a breach involves a tort (for exarnple deceit or trespass). That in the instant case the respondent's breach was accompanied by deceit as it concealed the surrender of the logbook to police, misleading the appellant into continuing payments while depriving it of contractual rights. That in the Royal Bank of Canada vs I[I. Got & Assoc. [19991 3 SCR 4O8 demonstrates that egregious commercial misconduct which warrants exemplary damages to deter future abuses. That the trial Judge's award of UShs 30,0O0,OO0/: was thus justihed and the Court of Appeal's reversal of the award was erroneous. That on interest the appellant is entitled to compensation for being kept out of its money. That the appellant is entitled to interest at 2lY:o l0 l5 20 25 the lease contract by denying the appellant quiet possession, enjoyment and use of the leased vehicle. That due to the respondent's repeated breaches the appellant's logistics business was affected directly. Page 77 of 87 5 from the date of filing as respondent's total failure of consideration unjustly deprived the appellant of its funds. Accordingly all awards must be reinstated. And the Judgment of the Court ofAppeal set aside. Determination of Grounds 5 and 6 of the Appeal. I have carefully considered the submissions of the parties and the authorities cited by the parties. The triat Judge handted the issue of remedies at page 74-79 of the record of appeal. I o For special damages the Judge states that he is convinced that the plaintiff has made out a case for special damages for loss of 3,0O0,O00/= income which it incurred from October 1999 till the date of the Judgment because they had to hire another motor vehicle to meet its obligations with Nile Breweries Ltd. That this would amount rs to 78,448,5O0/= together with 2,500,00O/= being the cost of exercising the option to purchase the suit motor vehicle which was paid to the defendant. For general damages the trial Court found that the appellant had prayed for general damages to the tune of 1O,O00,0OO/= for mental anguish suffered and financia-l set back 20 occasioned therefrom for which he was tended to believe. The learned trial Judge held that the plaintiff was entitled to more than the 1O million claimed and awarded an amount of 70 million as general damages. For exemplar5r damages, the learned trial Judge stated that he would condemn the appellant to pay an exemplar5r damage of Page 78 of 87 5 3O,O0O,00O/= to make it handle matters which come before it in a professional manner. And the respondent as defendant was to pay costs of the suit. However, the Court of Appeal set aside the award of special damages and stated that there is no proof on record of the amount of 3,000,000 and how the trial Judge arrived at it. That there is a-lso no basis for the dates against which the monies arrived at were computed. That the option to purchase was not exercised so the appellant cannot be entitled to the award of special damages as the leasing company was under no duty to transfer ownership of the vehicle. That in any case as of March 2OO7 the lease had been taken over by Bank of Africa (u) Ltd. On the general damages there was no averment at all in the plaint claiming the 10 million which the learned trial Judge stated was claimed by the appellant. That the sum arose in para 5(c) as an additional claim for special damages. That general damages are compensatory in nature, seeking to provide recompense to a pa-rty that has suffered loss from the unlawful acts of another. That having found no breach of contract by the appellant, the award of general damages would be unwarranted. On the award of exemplar5r damages, the Court of Appea-l found that exemplary damages are punitive in nature not reformatory as depicted by the trial Judge. That in any case the respondent does not fit within the classification of servants of government that are deemed to be susceptible to oppressive, arbitrary or unconstitutiona-l actions so as to be condemned in exemplarSr damages. That given the nature of finance leases the court was unable to impute mala fide conduct to Page 79 of 87 r0 l5 20 25 5 the respondent so as to warrant the award of exemplary damages against it. In the recent decision of the Supreme Coutt in Civil Appeal No. 1l of 2O2O Surgipharm Uganda Ltd vs Anatoli Batabane this court observed that a person who repudiates a contract can be held liable for damages for breach of contract. That it is trite law that the general remedy for breach of contract is damages. The remedy to the party affected by the repudiation of the contract is a right to pursue an action for compensation by way of damages from the breaching party. The damages are based not on the rights arising out of the repudiated contract but from the fact that there was a wrong committed against the party seeking compensation. Therefore, the appellant is entitled to damages. With the above stated principles in mind I will go ahead to assess the remedies available to the appellant. Generally, damages as defined in Halsbury's Lauts of England,4th Ed Vol. 12 (1) Paragraph 8O2is The pecuniary recompense given by process of law to a person for the actionable wrong that another person has done to him or her. Lord Greene M.R ln Hall Brothers Steomshlp Compang Ltd a Young (1938) 43 Com Cos 284, defined damages as follows: the sums payable by way of damages are sums which fall to be paid by reason of some breach of duty or obligation, whether the duty or obligations are imposed by contract, by the General laws, or legislation. r0 I5 20 Page 80 of 87 5 According to Lord. Macnaghtenln Stroms o Hutchlnson [7905] AC 5I5 general damages are those damages as the law would presume to be the direct natural or probable consequence of the act complained of. In Supreme Court in Civil Appeal No.ll of 2O2O Surgipharm Uganda Ltd vs Anatoli Batabane it was stated and I agree that the Court in awarding general damages under a repudiated contract is guided by the value of the contract at the time of its performance. It is a-lso trite law that an Appellate Court will not interfere with an award of damages by a trial court unless the trial court has acted upon a wrong principle of law or that the amount is so high or so low as to make it an entirely eroneous estimate of the damages to which the plaintiff is entitled see Robert Coussens as Attonteg @neral SCCA .l\Io.8 of 7999 and Croutn Beuerages Ltd as Sendu Edutard SCCA No.I of 2OO5. I0 l5 ln Klbtmba Rlce Llmlted as Umar Scrtim SCCA No. I7 of 7992 this Court held that in assessing the quantum of damages courts are Page 8l of 87 The amount of the general damages to be awarded to a plaintiff is a matter of judicial discretion. General damages in a breach of contract claim are what a Court may award when the Court cannot point out any measure by which they are to be assessed except the opinion and 20 judgment of a reasonable man see Asumon Mutekangq. u Quator Growers (U) Ltd SCCA No.OT of 7995. 5 guided by the value of the subject matter and the economic inconvenience that a party may have been put through. In the case of Fredrick J.K Zaabwe vs Orient Bank & Ors, S.C.C.A No.4l of 20,06 this Court guided on the difference between general and exemplary damages as follows: "The distinction is not alwags easg to see and is to some ertent an unreal one. It is well established that when damages are at large and a court is making a general award, it mag take into account factors such as malice or arrogance on the part of the dekndant and this injury suffered bg the plaintiff, as for example, by causing him humiliation or distress. Damages enhanced on account of such aggrauation are regarded as still being essentially compensatory in nafire. On the ottrcr hand, exemplary damages are completely outside the field of compensation and, although the benefit goes to the person who u)as Lurorlged, their object is entirelg punitiue." Punitive or exemplar5r damages are ar exception to the rule that damages generally are to compensate the injured person. These are awardable to punish, deter, express outrage of Court at the defendant's egregious, highhanded, malicious, vindictive, oppressive and/or ma-licious conduct. In cases of breach of contract, the position of the law has tended to be that punitive/exemplary damages are awardable in respect of a breach of contract, where the breach involves a tort in the course of or in relation to the breach. r0 l5 20 Page 82 of 87 5 See Uganda Revenue Authority Vs Wanume David Kitamirike SCCA No.3 of 1993. I agree with the Court of Appeal that on record there is no sufficient evidence to prove specific extent of loss incurred by the appellant for special damages to be granted. The fact they managed to get another vehicle to perform their obligations in the contract with Nile Breweries creates a probability they actually may have profited from the contract. There needed to be more specihc evidence tending to prove the actual loss. I agree that the appellant's claim for special damages was not sufficiently proved. On the claim for general damages considering my findings on the grounds of appeal especially ground 1, I would find that there is sufficient basis for award of general damages. I have considered the principles and the evidence on the record and I find that the award of 70,00O,0OO was sufficient and appropriate. I would uphold it. On the matter of exemplary damages, I agree with the Justices of Appeal that indeed there was no proof of any action by the respondent that warranted punitive or exemplar;r damages. All their actions were normal business actions which in my view cannot attract exemplar;r damages. I would accordingly set aside the award of exemplary damages. Regarding interest, in Supreme Court Civil Appeal No. 11 of 2O2O Surgipharm Uganda Ltd vs Anatoli Batabane, it was stated and I Page 83 of 87 l0 l5 20 agree that section 26 l2l of the Civil Procedure Act guides on the award of interest and states as follows; 5 (1) Wltere an agreement for the paAment of interest is sought to be enforced, and the court is of opinion that the rate agreed to be paid is harsh and unconscionable and ought not to be enforced by legal process, the court mag giue pdgment for the pagment of interest at such rate as it may think just. l0 monet4, the court mag, ln tlte decree, order lnterest at such rate as the coura deems reqsonable to be po:ld on thc prlnclpol sum ad.ludsed from the date of the sult to the date of tle decree, ln odditlon to anu lnterest adludqed on such pri,ncloal sum for ana pe rl.od orlor to the lnstlhttlon t5 of the sult. utlth further lnterest at such rate as the coura deem.s reasonable on the qqe reqate sum so odJudqed. from the d.ate of the decree to the date of oaument or to such earller date as the court thtnks ftt. 20 (3) Where such a decree is si/enf utith respect to the payment of further interest on the aggregate sum specified in subsection (2) fromthe date of the decree to the date of pagment or other earlier date, the court shall be deemed to haue ordered interest at 6 percent per year." Page 84 of 87 "26. Interest (2) Where and lnsofar as a decree ls for the paument of 5 The above provision specifically subsection (2) thereof shows that interest can be awarded at the court's discretion. In Premchandra Shenoi & Another vs Maximor SCCA No.31 of 2OO3 this court stated the principle on award of interest on damages as follows; "In consideing what rate of interest the respondent slwuld haue been awarded in the instant case, I agree that the In Mukisa Bisuits Manufacturing Co. Ltd v West End Distributors Ltd (No.2) [197()] EA 469 at page 475 Spry V.P held that interest on special damages is awarded lrom the date of hling of the suit until paJrment. In contrast interest on general damages is awarded from the date of judgment until payment in full. The court had this to say about the matter; ". . .uhere a person is entitled to a liquidated amount or to specific goods and has been depriued of them through the urongful act of another person, he should be awarded interest from the date of filing the suit. WTtere, hatueuer, damages haue been assessed by the court, the ight to those damages does not aise until theg are assesse d and therefore interest is only giuen from the date of judgment. [See also: Hlrfl a Modessa [1967] DA 724 (CA)]" On the issue of the rate of interest to be awarded, it is left to the discretion ofthe court. However, that discretion ought to be exercised t0 l5 20 Page 85 of 87 pinciple applied by this court in Siefco's case is to the effect that it is a matter of the court's discretion is applicable..." 5 judicially or judiciously by giving reasons for the award made and an assessment of supporting evidence presented before it. I would award interest on the general damages at the rate of 60/o per annum from the date the Judgment of the High Court until payment in full because general damages do not fa-tl due until the date of Judgment. They are a creature of the Judgment. The appeal having succeeded I would award the appellant costs in this Court, the Court of Appeal and the High Court. For the reasons I have given I would allow this appeal with the following orders; I so order. Page 86 of 87 t0 20 Conclusion. 'I 5 7. The appeal succeeds and ls allouted 2. The Jud.gment and orders of the Hlgh Court ond Court of Appeal are substltuted bg thc Judgment of thls Coutt. 3. The Appellant ls ouarded TO,OOO,OOO (Uganda Shiltlngs Seaentg Mllllon) as general damages for breach of contract 4. The Appellant ls autarded lnterest on the generol damages at 60/o lnterest per dnnum from the date of the Jud.gment of the Htgh Court untll pagment in falt. 5. The Appellant ls autard.ed. the ta-xed costs o.f thts appeal qnd ln the courts belout. l Dated this At* day of #Par- 2026 5 Stephen Musota JUSTICE OF SUPREME COURT Page 87 of 87 5 THE REPUBLIC OF UGANDA, IN THE SUPREME COURT OF UGANDA AT KAMPALA (CORAM: ruHAISE, MUSOKE. MUSOTA, MADRAMA, BAMUGEMEREIRE, JJSC) CIVIL APPEAL NO 28 OF 2O2I 10 SEBASIF GROUP ENTERPRISES LTD} APPELI.ANT VERSUS RESPONDENT (Appeal against the of Justice of the Court of Appeal in Court of Appeal, per Kiryabwire, Mugenyi, JJA and Kasule, Ag. JA in Civil Appeat No. 18 OF 20ta JUDGMENT OF CHRISTOPHER MADRAMA IZAMA, JSC 30 The acquisition fottowed a recommendation by the Respondent's director, Juma Kisame, who identified the used vehicte as suitabte and "in good condition". The Respondent financed the UGX 50,000,000 purchase price, 15 I have read in draft the judgment of my learned brother Stephen Musota, JSC and I concur with the judgments and grounds of the judgment as wet[ as the proposed orders I woul.d, however, add my words on some of the 20 rssues 25 I agree with the facts and background in the judgment of Stephen Musota, JSC but for purposes of my judgment I witl reproduce the material facts The dispute arose from a Motor Vehicte Leasing Agreement executed on Juty 14, 1999, between Sebasif Group Enterprises Ltd (the AppettantAessee) and Uganda Leasing Company Limited, the predecessor to DFCU Bank Limited (the Respondent/Lessor). The AppeLtant sought to acquire an lsuzu truck (Reg. No. UAA 373U) to futfrLa hrgh-vatue transportation contract with Nite Breweries Lrmrted 1, DFCU BANK LTD} 5 paying it directl.y to a third-party supptier, one Mr. Chartes Mutasingwa. The Respondent retained the originaL togbook as a [ien white the Appettant paid monthty rentats of Uganda shil.tings 2,235,0001= over a 30 months' term period. Four months into the Lease term, the truck was repeatedty impounded by the Uganda Potice on suspicion of being stoten. lnvestigations eventuatty revea[ed a fataI fail.ure in titte for executing the transaction. lt was estab[ished that the vehicte was actuatly an lsuzu truck stoten from Kenya. The registratron number of the vehicl.e UAA 373U was fraudulently obtained The Uganda Revenue Authority and the Ministry of Works records discLosed that the vehicle beLonged to a green Mercedes Benz station wagon owned by the Government of Uganda (therefore it had fatse number pl.ates). White the lease was subsisting and instatment payments were being made, the Respondent's [egaI department issued a letter to the potice stating that the bank had "no interest" in the vehicl.e. Upon compteting payment of atL the rentats and paying the "0ption to Purchase" fee of Uganda shittings 2,500,000/-, the Respondent faited to transfer a vatrd titLe to the appeLl.ant because it maintarned that it hetd no [egrtimate proprietary interest to pass. 2. Whether contractual exemption ctauses (CLauses 54, 5D, 5F) protect a lessor from tiabitity regarding defective titte in a tripartite finance [ea se. 3. Whether "particulars of ittegatity" pteaded in the pLaint were sufficient to sustain a f inding of fraud. 10 15 20 30 35 0n the basis of the proceedings at the High Court and Court of Appeat, the foltowing issues were framed for final determination: zs 1. Whether the Respondent f undamentalty breached the lease agreement by faiting to provide quiet possession and faiting to transfer good titte upon exercise of the purchase option. 2 5 4. The appropriate quantum of speciat, generat, and exemptary damages. I wit[ conf ine my judgment to issues ] and 2. The Appettant's CounseI submitted lnter alia that the Respondent breached a fundamentaI term by faiting to provide "quiet enjoyment" and faiting to transfer titte after the option was exercised. They contended that the bank had an implied statutory duty to ensure the asset was legitimate and that exctusron ctauses cannot shietd a party from a fundamental breach that vitiates the core of the contract. 0n the other hand, the Respondent's Counsel. submitted rn repty that the transaction was a strict[y tripartite f inance [ease where the lessee assumes atl risks. The Respondent relied on CLause 5D(ti)(a) of the Master Lease Agreement, to argue that the Lessor made no warranties regarding title or condition because the Lessee setected the supplier. The Respondent asserted that the Appetl.ant's onty remedy was to seek an assignment of rights to sue the supptier under Ctause 5F of the Master Lease Agreement The genesis of the dispute is that the High Court Adonyo, J gave judgment for the Appel.tant, after finding a breach of "professionaI trust." The court awarded ref unds of att the rentals, amounting to Uganda shitl.ings 286,000,000/- as speciaI damages, Uganda shittings 70,000,000/- as generaI damages, and Uganda shil'tings 30,000,000/= as exemptary damages. The Respondent to this appeal was aggrieved and appealed to the Court of Appeat which overturned the decision of the High Court in its entirety and heLd that as a financrer, DFCU had no duty to verify title and was ful.Ly protected by the exclusion ctauses rn the Master Lease Agreement. I agree with the rssues set out and the decision of my Learned brother Stephen Musota, JSC and wish to conf ine my decision to a few major areas. FirstLy, I wouLd tike to note the distinction between proprietary risk and mechanical risk as perceived from an interpretation of the Master Lease Agreement. The Court of Appeat exonerated the Respondent Bank targel.y 10 15 20 25 30 3 5 because the Appetl.ant "setected the vehicte and the suppLier". The Court of Appeat erred by merging mechanicaL defects and [ega[ defects into one. ln a tripartite finance lease, whiLe the Lessee exclusivety assumes the mechanicaI and technicaI risk namety the suitabil.ity of the vehic[e and its roadworthiness, because they setected the equipment, the lessor retains the proprietary risk. The "Setection of Equipment" ctause does not absolve the [essor of its primary, non-detegabte duty as a financter acquiring vaLid tegat titte which is the tegat springboard for the transaction. This proprietary titte is essentiat to hotd out to the world as having the capacity to [ease and to be hetd accountable as enjoying rights and duties as a [essor. Whil.e the [essee takes the risk of the truck breaking down, the lessor takes the risk of the transaction's [egat vatidity. "Setection of Equipment" does not absotve the [essor of its primary non - detegabte duty as a f inancier of acquiring tegal. titte. Without a proprietary right, the lessor has no [ega[ anchor to execute a [ease agreement or receive renta[s. The Appetl.ant rntroduced the setter but this did not, in the absence of any fraud of the appettant, excuse DFCU from verifying the URA logbooks and acquiring vaLid ownershrp. Thrs leads to the second point lwould [ike to emphasise. 15 20 25 White I agree that there was a faiture of DFCU to transfer titte at the end of the lease term in terms of ctause 11 to the appet[ant, there is another point that is associated that the lease was fundamentatLy void ab initio. This is based on the etementary but fundamental doctrine reflected in the Latin Maxim Nemo Dat Ouod Non Habet. According to the Oxford Dictionary of Law, the Ierm nemo dat quod non habetis Latin for the expression'. no one can give what he has not got. lt encapsulates the basic rute that a person who does not own property, such as a thref, cannot confer titte of the stoten property to another except with the true owner's authority. There are exceptions to this rute which we need not examine in this case as they are not retevant as disctosed from the section reproduced betow. This doctrine has statutory basis in Uganda. The parties executed this contract in 1999 under the then Sate of Goods Act cap 82, revised Laws of Uganda, 2000. Section 22 lhereof stiputated that: 30 35 4 10 5 22. Sate by person not the owner ('l) Subject to this Act, where goods are soLd by a person who is not the owner of the goods and who does not se[[ them under the authority or with the consent of the owner, the buyer acquires no better titte to the goods than the setler had, unLess the owner of the goods is by his or her conduct precluded from denying the setler's authority to seLt. (2) Nothing in this Act shatl affect- (a) the provisions of any enactment enabLing the apparent owner of goods to dispose of them as if he or she were the true owner of the goods, (b) the vaLidity of any contract of sa[e under any speciaL common Law or statutory power of sa[e or under the order of a court of competent jurisdiction. This provision has been reproduced in section 29 (1) of the Sate of Goods and SuppLy of Services Act, Cap 292 whrch stipuLates that: 29. Sal.e by person not owner (1) Subject to thrs Act, where goods are sold by a person who is not the owner of the goods, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better tit[e to the goods than the selter had, untess the owner of the goods is by his or her conduct prectuded from denying the setler's authority to seLt. The Respondent's defence is defeated by the fundamentat property maxrm Nemo dat quod non habet as codif ied in section 22 of lhe repeated SOG Act or Section 29(1) of the current Sa[e of Goods and Suppty of Services Act Cap 292. Because the vehicte was stoten and the URA togbook was fal.sif ied, the supptier had no titte to pass. ConsequentLy, the Respondent acquired no proprietary interest from which it coul.d grant a right to exctusive possession. The purported lease was a nuttrty ab initio as far as the proprietary rnterest was concerned. The [essor had no proprietary capacity to confer a vaIid lease or transfer a vatid titte. Thirdl.y, lagree with my learned brother Stephen Musota, JSC that there were repeated potice impoundments of the AppetLant's vehicte leading to the DFCU shirking responsibiLity The Appettant's nght to quiet possession 20 2S 30 35 5 10 15 5 was breached. This was through repeated potice actions of impounding the leased vehicle in direct breach of the mandatory statutory warranty of quiet possession under the repealed section 13 (b) of the SOG Act (supra) which stiputated that: 13. lmptied undertaking as to tit[e, etc ln a contract of sate, unless the circumstances of the contract are such as to show a different intention, there is- (a) an impLied condition on the part of the se[[er that in the case of a sate he or she has a right to seLt the goods, and that in the case of an agreement to seL[ he or she wiL[ have a right to setl the goods at the time when the property is to pass; (b) an imptied warranty that the buyer sha[[ have and enjoy quiet possession of the goods; (c) an imptied warranty that the goods shatt be free from any charge or encumbrance rn favour of any third party, not dectared or known to the buyer before or at the time when the contract is made. The Appel.l.ant has ful'fitted its part of the bargain by paying att the rentats and had even exercised the option to purchase truck but the interference by authorities due to titte defects constituted a fundamental disturbance of the lessee's right to use the goods By faitrng to secure a ctean titte, the Respondent was in continuous, active breach of the statutory warranty [ong before its fail.ure to transfer the [ogbook. Further, with regard to the exemption ctauses, the Respondent cannot rely on Ctauses 5D or 5F to escape lrabr[rty. My Learned brother hetd that the exemption ctauses do not appl.y and I agree. I wish to add that the exemption ctauses in issue have a Legat Limit in that they assume the existence of a vatid [ease agreement or contract. The clauses, which attempt to make rentaI payments irrevocabte, assume the existence of a vatid contract. Under section 13 of the SGA (supra), there is an impLied condition that the lessor has the tegal. right to lease the goods. Because the Respondent purported to lease property that bel.onged to a stranger, there was a total faiture of consideration because it coul.d not fuLfil. the terms of the lease. lt 10 15 20 30 6 25 5 had no capacity, either to lease or transfer a vaLid titte. lt is therefore settled that exemption clauses cannot protect a party that fatts to provide the very core of the bargain which is the tegal right to use the asset Further the Respondent purported to have the right to receive rentats and at the same time disclaimed a right to ownership. These two things are irreconcitable. 10 ln the premises, the Respondent fundamentatLy breached the contract by faiting to provide quiet possession and faiting to transfer titte. Further the Respondent cannot contract out of the Nemo Dat Ouod Non Habetprinciple or the statutory obLigation to hotd vatid titLe rendering the exemptton ctauses unenforceab[e. I therefore concur with the Judgment of my [earned brother Stephen Musota, JSC that the appeat be a[towed with the orders he has proposed. Dated at Kampala the 19th of February, 2026 15 20 Christopher Madrama lzama Justice of the Supreme Court Delivered in open court on ,n" AS., ot A?'rt[ 2925 By 25 Name and Titte: "Laro Tunutplo COrtrt 7 Q*n t REPUBLIC OF UGANDA IN THE SUPREME COURT Otr'UGANDA AT I(AMPALA Civll Appeal No. O28 of 2O2l CORAM: {Tv.halse, Musoke, Musota, Madrama, Bamugemerell€ ..f,rSCl SebaslfGroupEnterprisesLtd........... Appellant Versus DFCU Bank Limited Respondent lAppeal against the decision of the CourT of ApryaL Kiryabuire & Mugengi JJ.A, Kasule Ag. JA, in Ciuil Appeal No. 83 of2016l JUDGMENT (CONCURRING) CATHERINE BAMUGEMEREIRI JSC 1] I have had the benefit of reading, in draft, the judgment of my learned brother, Stephen Musota JSC, and I fully agree with his reasoning, conclusions, and the proposed orders. I nonetheless find it necessary to elaborate on two principles of law at the heart of this appeal: the doctrine of nemo dat quod non habet and the covenant of quiet possession. Both principles are firmly grounded in statute and common law, and their application in this case will bring ciarity. I. The Dockine of Nemo dat quod non habet 2] The common law principle that no one can transfer a better title than he himself possesses was, ipso facto, codified by section 29 of the Sale of Goods ancl Supply of Services Act, Cap. 82, which provides as follows: "\rVhere goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had." 3] As previously indicated, although the Act was enacted subsequent to the kansaction in question, the underlying principle predates the statute and is a longstanding component of English corrunon law. Judicial authorities have historically developed common law principles that underpin legislation. I am mindful, however, that the nemo dat rule is not exclusive. The law recognises several exceptions-such as sales under statutory authority, sales under voidable title, sales by mercantile agents, estoppel, and other statutory protections - which permit a transferee in good faith to acquire a better title than the transferor possessed. These exceptions reflect the competing policy of protecting commercial transactions and ensuring trade certainty. 4] It was within the above legal and historical contexts that Lord Denning LJ, as he was then, famously remarkedl, "ln the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held sway for a long time, but it has been modifietl by the common law itself and by statute so as to meet the needs of our own times." 5] Lord Denning's statement brings into sharp focus the competing interests which the exceptions to the nemo dat rule reflect. On the one hand lies the fundamental policy of protecting property rights, ensuring that ownership cannot be undermined by unauthorised transfers. On the other hand lies the equally important policy of protecting commercial transactions, recognising that trade depends upon certainty and the confidence of bona fide purchasers. These two principles sometimes often pull in opposite directions. They allow the law to safeguard property while ensuring that markets function smoothly and that innocent purchasers are not unduly penalised. In this way, Denning's observation encapsulates the delicate balance the law must strike between individual rights and collective commercial certainty. 6l This case starkly illustrates the ascendancy of the former principle, the protection of property, embodied in nemo dat. The leasing bank, having acquired a stolen vehicle, held no valid title to it. It therefore could not pass title to the lessee, however innocent or diligent the lessee may have been. The proprietary risk remained with the lessor until the final payment under the lease was made. The 1 Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322 at 336,337 Court of Appeal erred in iaw and in fact by conllating the tripartite financing lease with the lessee's assumption of all risks, including the risk of defective title. Title cannot be conjured out of nothing; it must rest upon ownership. 7j This transaction had no exceptions, and the appeal therefore succeeds under the doctrine of nemo dat quod non habet, which holds that the lease transaction was void ab initio and incapable of conlerring enforceable rights. II. The Covenant of Quiet Possession 8]The second principle is the covenant of quiet possession, often expressed as a contractual term but recognised at law as an implied condition in leases and sales. Section 13(2Xb) of the Sale of Goods and Supply of Services Act reinforces this principle: "The buyer will enioy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed or known to the buyer." 9] I am fully cognizant that the events of this appeal predate the Sale of Goods Law. The law here is offered to prove that it simply codified an existing legal principle. The essence of this covenant is that the buyer or lessee's possession must not be disturbed by defects in the lessor's title. In the present case, the respondent bank failed to conduct due diligence to verify ownership of the motor vehicle, despite the availability of official registration records. That failure constituted a breach of its statutory and legal obligation to ensure good title. 10] The defect was not incidental; it struck at the core of the transaction. Throughout the invesfigation into the vehicle's authenticity, authorities repeatedly impounded it. Despite being informed of this, the lessor failed to ensure the lessee's quiet possession. Consequently, the lessee's possession was disrupted not by mechanical issues, which could be contractually assigned, but by a fundamental defect in the title. 11] The Court of Appeal erred by conllating these distinct concepts. Mechanical defects may be remedied or apportioned by agreement; title defects are protected by statute and remain the responsibility of the party purporting to pass ownership. 12] The respondent bore the proprietary risk and failed to discharge its non- delegable duty to acquire and pass good title and to grant quiet possession to the lessee. It is my considered view that: 1. A lessor or seller cannot pass a better title than he possesses. lAlhere the goods are stolen, no title passes, and any transaction founded on such defective title is void ab initio. 2. The covenant of quiet possession imposes a statutory and legal duty on the lessor to ensure that the lessee's possession is not disturbed by defects in title. Repeated impounding of the vehicle by the authorities, coupled with the lessor's failure to act, constitutes a breach of this duty. 3. Mechanical defects and title defects are two distinct legal categories. The former may be contractually allocated; the latter is an implied statutory protection and remains the responsibility of the party purporting to hansfer ownership. In conclusion, I concur with my esteemed colleagues; I observe that the Court of Appeal erred in law and fact. No one can pass a better title than he himself possesses. The respondent Bank, lacking a valid title to the vehicle, was therefore incapable of passing such a title to the appellant. The lease transaction was void ab initio. The appeal is hereby allowed, with costs awarded in this Court and the courts below. Signed and Dated this 14tt'Day of April 2026 Catherine Bamugemereire Justice of the supreme court Ja*w*) fj a," Prg'*^, tf^;, E)r) Aq Sc-- ZD7L,