Last week, the High Court Commercial Division issued an execution order attaching Uganda Supreme Council properties in different parts of the country, to recover sh19 billion being claimed by businessman Justus Kyahabwa.
The Mufti, Sheikh Ramadhan Mubajje while reacting to the ruling, accused the court of favoring those with money. Uganda Muslim Supreme Council was making a last-minute attempt to block Kyahabwa from claiming a refund of sh3.5 billion and interest amounting to sh9 billion.
What transpired in court and the events that have followed continue to generate debate. Legal experts have indicated to URN that the application by the Uganda Muslim Supreme Council was bound to fail, going by the arguments by its legal team while applying for unconditional leave to appear and defend the council in a civil suit.
Equally, revelations of the details from the sale agreement have put the Uganda Muslim Supreme Council under Sheikh Mubajje in the eye of the storm.
It has emerged that the Mufti and former Supreme Council Chairperson, Dr Abdul Kadir Balonde signed a sale agreement for a two-square-mile land located in Sembabule district to Justus Kyahabwa through Arthur Kayanja on 24th June 2020. Justus Kyahabwa paid sh3.5 billion shillings for the said land that had some encumbrances.
Questions why UMSC did not seek legal advice when drafting the now controversial sales agreement are emerging. The other concern in the public eye is why the purchaser and seller insisted that the agreement would be kept secret and confidential.
There is no explanation why the Uganda Muslim Supreme Council would sell the land to Kyahabwa when the same land had been sold to M/s Enterprise Handling Services Limited as per documents on the court’s records.
The latest saga involving the sale of Uganda Supreme Council properties rekindles the memories of 2008 when the Mufti and members of his executive Mubajje were accused of illegally selling off properties that included land and buildings in Kampala.
That disagreement led to the breakaway faction now headquartered at Kibuli mosque and headed by the Supreme Mufti Sheikh Shaban Galabuzi.
URN has secured Lady Justice Harriet Grace Magala’s ruling in which Uganda Muslim Supreme Council was seeking to be granted unconditional leave to appear and defend civil suit no. 0505 of 2023.
What did the judge base on to dismiss the UMSC application?
On August 7, 2023, Commercial Court judge Harriet Grace Magala declined to allow an application by the Uganda Muslim Supreme Council-UMSC seeking orders granting them unconditional leave to appear and defend civil suit no. 505 in which one Justus Kyabahwa wanted to recover about sh19 billion.
Kyahabwa bought the said land at sh3.5 billion even when knowing that it had some encumbrances.
Documents indicate that a caveat had been filed on the title to the property by M/s Enterprise Handling Services Limited. Enterprise Handling Services Limited had allegedly bought the land in dispute in 2017 at sh280 million.
The Uganda Muslim Supreme Council had promised it would secure and hand over the property to the purchaser in not more than 60 days.
Both parties had agreed that they shall endeavour to use all lawful means possible and to assist each other in carrying into effect the purpose for which this agreement was entered into except if the vendor fails or refuses to comply with or the purchaser fails to obtain possession or transfer of the property within a period of 150 days.
They further agreed that the Uganda Muslim Supreme Council would refund all sums paid together with interest of 12% per month from the date of execution hereof.
The agreement also states that before the transaction kicked off it had been authorised by all the relevant organs of UMSC. The agreement also states that all disputes arising out of the transaction shall be resolved through court but after exhausting arbitration in accordance with the Arbitration and Conciliation Act.
The purchaser, Kyahabwa went ahead and paid Uganda Shillings Three Billion, Five Hundred and Eighty-Four Million only inclusive of all taxes payable in respect of this transaction (price of UGX 3,584,000,000/=)
When UMSC failed to transfer the land as agreed, Kyahabwa went to the commercial court on 13th June 2023 and sought a declaration to have him attach properties of UMSC in order to recover the sh3.5 Billion and 12% interest per month from the date of execution.
Kyahabwa is altogether demanding sh19 billion shillings.
Uganda Muslim Supreme Council (UMSC) on the other through its lawyers applied to the Commercial Division of the High Court seeking leave to allow it to appear and defend the suit which was proceeding experte in the Commercial Division of the High Court.
The judge, Harriet Grace Magala based her ruling on the sale agreement between the Uganda Muslim Supreme Council and Arthur Kayanja on behalf of Justus Kyahabwa as a basis to determine the issue at hand.
Among some of the arguments by the Uganda Muslim Supreme Council was that it entered into the contract without the help of an advocate. The judge ruled that that did not amount to a defence that would render the contract void. She wholly dismissed the application for lack of merit and said UMSC should proceed and pay Kyabahwa close to 19 billion shillings. She further held that UMSC had a spectacularly frivolous case that had no legs to stand on.
“The Applicant [UMSC] has failed to show the court that she has any triable issues that warrant the grant of unconditional leave to appear and defend the suit. The triable issues presented by the applicant are frivolous. Had the applicant made a refund of the purchase price upon coming to the realization that the contract could not be performed as a result of claims and interest in the property by M/s ENHAS and the court decision in Civil Suit no. 20 of 2020 the matter would not have come before the court,” said the judge.
“Because the Applicant was not vigilant and now finds herself in a position where the purchase price and interest on the same have to be paid from the time the respondent failed to take possession of the property and/or transfer the same into his names she is now clutching at straws,” the judge held.
The Court Case in their application seeking to join the suit as defendants, UMSC said the agreement that had been signed was null and void because the buyer had failed to pay stamp duty according to law.
In their application, UMSC, argued that it is a requirement of sections 3(1) and (2) of the Stamp Duty Act that a sale of land agreement must pay stamp duty and if the same is not paid, the sales agreement is not admissible in court as evidence.
Therefore, UMSC argued, the Kyabahwa suit should be dismissed on that ground. But the judge disagreed arguing instead that a technicality like that can’t block the court from serving justice.
“Clearly, non-payment of stamp duty is not fatal to the instrument or its admission in evidence. I therefore, agree that it is now settled that Court cannot dismiss a suit merely because the stamp duty has not been paid on the document relied upon to bring the claim” Said Magala “I believe this is also in line with the provisions of Article 126 (2) (e) of the Constitution which enjoins this Court to administer substantive justice without undue regard to technicalities. I accordingly, find there is nothing to try in the main suit regarding this contention,” she further ruled.
The judge also disagreed with UMSC over its argument that Kyabahwa was wrongly before the court because the agreement talked about arbitration first before any legal proceedings.
“This court finds that clause 9.0 of the agreement for the sale of land is inoperable and incapable of being performed. The clause is pathological or defective and it was poorly drafted. The clause implies or presupposes that parties must first refer the matter to arbitration and if the arbitration proceedings failed, the parties would resort to the courts of judicature. This is not how arbitration proceedings should be conducted as envisaged under the Arbitration and Conciliation Act,” Magala held. The judge also cut into pieces the argument by UMSC that they didn’t know whom to pay between Kyabahwa and Kayanja because the agreement was made with Kayanja but it was Justus Kyabahwa demanding. She said Uganda Muslim Supreme Council knew the exact bank account on which money moved to their own account.
“In the absence of evidence controverting the evidence on the court record the refund must be made to the Respondent. The Applicant did not prove or show that she received any payment from a one Kayanja Arthur thereby causing confusion or uncertainty,” the judge ruled.
The other issue that was and is still very continuous now was how 3.584 billion shillings that had been paid for the land ended up becoming 19 billion shillings in three years.
Uganda Supreme Council had also argued that the interest rate of 12% per month was untenable, against public policy, illegal and too harsh, and therefore shouldn’t be enforced by the court. The judge agreed with the argument by Justus Kyabahwa that the court can’t change an agreement between the parties.
“The applicant submitted that she entered into the contract without the help of an advocate. This does not amount to defense that would render the contract void. I am therefore persuaded by the arguments of the respondent that this court should enforce the clear intention of the parties. As such, the interest rate of 12% per month is not a triable issue,” the judge held.
She added that the moment, UMSC realised that it had failed to provide vacant possession of the land, it should have refunded Kyabahwa’s money within the stipulated 150 days to avoid the money from accumulating and then turning around to say the interest rate of 12 percent was excessive.
“It was incumbent upon the Applicant to immediately make a refund of the purchase price to the Respondent once it came to her realization that the Property could neither be transferred in the name of the Respondent nor could the Respondent take possession of the said property as a result of third-party claims by ENHAS to whom the Applicant had leased the disputed property for a period of fifteen (15) years from 2013 to 2028.
“The interest of the said entity in the disputed property also culminated into Civil Suit No. 20 of 2020 that was filed against Applicant by ENHAS and the court decided in favour of ENHAS…The applicant lost this case and filed an appeal which she chose not to pursue but rather consented to abide by the Orders of the High Court which necessitated transferring the Property into the name of M/s ENHAS and this is why the Respondent had to hand back the Duplicate Certificate of Title of the Property to the Applicant thereby rendering the Applicant incapable of performing the Contract,” the judge ruled.
Uganda Radio Network has seen a copy of the consent agreement that was signed between ENHAS and UMSC in which they agreed to operationalize the Masaka High Court ruling that favoured ENHAS as the owner of the land.
“The parties have thought it wise and proper that in the interest of mitigating the loss and the interests of all the parties, it is hereby agreed that; by consent; the parties compromise and or resolve the intended appeal in the following terms; the judgement of High Court dated December 2022 between the appellant and respondent be maintained and is hereby maintained,” the consent agreement signed by Mugalu on behalf of UMSC reads in part. The parties also agreed to terminate all proceedings in court against each other. UMSC had filed a notice of appeal in the Court of Appeal but had not done anything else to execute the appeal.
It has also emerged that the controversial sale between Uganda Muslim Supreme Council and Justus Kyahabwa was supposed to be kept confidential.
“The parties acknowledge and agree that all information concerning this transaction is confidential and shall be treated as confidential by the parties, their affiliates, officers, directors, shareholders, employees, agents, representatives, successors and assigns. No disclosure of such information may be made by one party without the prior written consent of the other party save as may be required by or to comply with the law,” clause 10.0 of the sales agreement reads in part.