CIVIL SUIT NO.

226 OF 1992
IN THE MATTER OF GUOSTAR ENTERPRISES (U) LTD
AND
IN THE MATTER OF THE LAND COMPRISED IN KYADONDO BLOCK 244
PLOT 2809
ARISING FROM AN EQUITABLE MORTGAGE
BETWEEN
GOLD TRUST BANK (U) LTD (Now DFCU BANK LTD) ::::::::::::::::::::: PLAINTIFF
VERSUS
JOSEPHINE ZALWANGO NSIMBE, ADMINISTRATRIX
OF THE ESTATE OF SAM NSIMBE (Now Deceased) ::::::::::::::::::::: DEFENDANT

At first the suit was brought by Gold Trust Bank (U) Ltd as the Plaintiff. In the course of time, after the
institution of the suit, Gold Trust Bank (U) ceased business and its affairs were taken over by DFCU
Bank Limited, who thus became plaintiff.
There has also been change of Defendant. The Original Defendant was Sam Nsimbe. He unfortunately
died after institution of the Suit. The surviving widow, Josephine Zalwango Nsimbe, is now the
administratrix of the deceased’s estate and in that capacity she has become the Defendant to the Suit.
In the Suit, the plaintiff, claims to be a mortgagee, of the property comprised in Kyadondo Block 244
Plot 2809, land at Kisugu, Kyadondo, Kampala District. The said land is registered in the names of Sam
Nsimbe, now deceased, and was the original Defendant to the suit. The said Sam Nsimbe is alleged to
have executed a power of attorney in favour of Guo Star Enterprises, who, in turn, mortgaged the
property to the plaintiff.
The plaintiff applies for court to determine the following questions;-
a) Whether the Mortgagor has failed to pay the loan monies;
b) Whether the plaintiff as the mortgagee of the property is entitled to foreclose and sale off the said
property.
Before going into the merits of this case it is necessary to know that there are three other court civil
actions pending in this court, having a bearing to this suit.
1. The first of these is H.C.C.S No. 347 of 1997 at Kampala: Edward Kivumbi Mukasa V. Sam Nsimbe
Tomusange. In this case judgment and Decree was entered, on 18 th May 2000, against the Defendant
(Sam Nsimbe Tomusange) in favour of one Edward Kivumbi Mukasa for various amounts of money. In
execution of the Court Decree, the Judgment creditor applied to, and the court ordered, attachment
and sale by public auction, of the suit property. The attachment is still pending.
2. The second Civil action is High Court Miscellaneous Application No. 1039 of 2004: Josephine
Zalwango Nsimbe V. Edward Kivumbi Mukasa and DFCU Bank Ltd. In this application the applicant, now
Defendant in this suit, seeks a stay of execution of the Court Decree in C.S. No. 347 of 1997 until the
final disposal of this suit i.e 226 of 1992; on the ground that the DFCU Bank Ltd, is illegally holding the
title of Kyadondo Block 244 Plot 2809 because the same was mortgaged to the Bank Contrary to the
powers of Attorney granted to the Mortgagor. The holding of the title was depriving the applicant from
raising money to satisfy the court decree in Civil Suit No. 347 of 1997. An interim Order to stay
execution of the Decree in Civil Suit No. 347 of 1997, pending disposal of Civil Suit No. 226 of 1992 was
granted to the applicant by this court on 15 th December 2004.
3. The third and last of the court actions is H.C.C.S No. 1043B of 1997: Gold Trust Bank Ltd V. Guo Dong
filed in the Commercial Division of the High Court, Kampala. The Plaintiff in this suit sues the Defendant
as guarantor of a loan of shs.81,000,000/= advanced to Guo STAR Enterprises (U) Ltd by Gold Trust
Bank Ltd, on 7 th July 1997, which loan the borrower failed to pay. The suit property was the security
tendered for repayment of this loan
The determination of the two questions stated in the Originating Summons in Civil Suit No.226/1992
depends on resolving the issue of whether or not one Guo Dong was vested with powers by the power
of Attorney, dated 13 th May 1997 granted to him by Sam Nsimbe Tomusange, to tender to Gold Trust
Bank Ltd as security, Kyadondo Block 244 Plot 2809, to guarantee repayment of a loan advanced to a
company, Guo STAR Enterprises Limited
By the said power of Attorney, Sam Nsimbe Tomusange, the donor, being Registered Proprietor of
Kisugu Block 244 Plot 2809, appointed, Nominated, ordained and authorized, Mr. Duo Dong of Guo
Star Enterprise, P.O.Box 4289 Kampala, to be his true and lawful attorney to execute the following:
i) To take possession of the Certificate of Title of the stated
ii) To pledge, mortgage or charge the said land to obtain a loan, overdraft, or any financial assistance
whatsoever from any Bank or Financial Institution in Uganda
iii) To sign or execute all documents and deeds that may be necessary or expedient in obtaining the
said loan
iv) To do any acts that may be necessary in executing the objects of the given powers.
The power of Attorney was duly witnessed and registered with the Registrar of Documents on 14 th
May 1997
On 30 th July 1997, the donor revoked the same; because the Donee had tried and failed to obtain a
loan/overdraft from any bank or financial institution in Uganda. The revocation was also registered
with the Registrar of Documents
A power of Attorney is an Instrument conferring authority of the principal to the agent where such
authority is required to be conferred by a deed, or where, in any other circumstances, it is desired
formally to appoint an agent to act for the principal in one transaction or a series of transactions, or
to manage the affairs of the principal generally. The person conferring the authority is the donor of
the power, and the recipient of the authority, the donee. A power of attorney is construed strictly
by the courts according to well recognized rules of construction: See: Halsbury’s Laws of England,
Fourth Edition: Re issue: Volume 1(2) Butterworth’s, paragraph 46
In applying the strict construction regard is first had to the recitals in the power of Attorney which show
the general object, and control the general terms in the operative part of the deed. General words are
construed as limited by reference to the special powers conferred.
Incidental powers necessary for carrying out the authority will be implied: (See Midland Bank Limited
V. Reckitt [1933] AC 1 at 16.)
The Privy Council in the case of BRYANT, POWIS, AND BRYANT LIMITED V. LA BANQUE DU PEUPLE [1893]
A.C.170 at 177 expounded the meaning of the phrase “Powers of Attorney are to be construed strictly.”
Their Lordships of the Privy Council stated:- “Nor was it disputed that powers of Attorney are to be
construed strictly ___ that is to say, that where an act purporting to be done under a power of attorney
is challenged as being in excess of the authority conferred by the power, it is necessary to show that on
a fair construction of the whole instrument the authority in question is to be found within the four
corners of the instrument, either in express terms or by necessary implication.” In Jacobs V. Morris
[1902] A.C.816, a case where a loan to an agent was made on the basis of a power of Attorney that
did not confer powers to borrow, and the principal was held not liable for the same, their Lordships of
the court of Appeal, England, expounded that there must be strict adherence to the authority
conferred by a power of Attorney. If the agent in pretended exercise of his authority acts in excess of
and outside the reasonable scope of his special powers, the third party will be unable to make the
principal liable.
Bearing the above principles in mind, the court will proceed to examine the power of Attorney, the
subject of this suit.
The subject matter of the power of Attorney is land comprised in Kisugu Plot 2809 Block 244, 0.10
Hectares.
The donor of the powers is Sam Nsimbe Tomusange of P.O. Box 125 Kampala; registered proprietor of
the land.
The donee is an individual person by the name of Duo Dong whose address is of Guostar Enterprises
of P.O. Box 4289 Kampala.
The specific powers given to the attorney are:- i) To take possession of the certificate of title of the
land. ii) To pledge, mortgage or charge the land to obtain a loan, overdraft or any financial assistance
whatsoever from any Bank or Financial institution in Uganda. iii) To sign or execute all documents and
deeds that may be necessary or expedient in obtaining the said loan. iv) To do any acts that may be
necessary in executing the objects of the powers. The donor under took to ratify and confirm all that
the donee would lawfully do or cause to be done in execution of the powers given. The powers would
remain effective until expressly revoked.
The main specific power of the powers of Attorney is the one of the donee pledging, mortgaging or
charging the land as security to a Bank or Financial Institution in Uganda for the purpose of the donee
obtaining a loan, overdraft or financial assistance.
There is nothing in the power of Attorney vesting the Attorney with powers to tender as security the
land, the subject of the power of Attorney, to guarantee the repayment of a loan granted by the Bank
to some other third party, other than the Attorney.
The undisputed evidence on record is to the effect that on the 7 th July 1997 the donee tendered the
certificate of title of the land to the plaintiff as security guaranteeing the plaintiff to a limited liability
company, GUOSTAR Enterprises (U) Limited.
The said borrowing company failed to pay the loan and the plaintiff proceeded to dispose of the
security land by way of sale of same to recover the loan money. The defendant resists the sale of the
land contending the power of Attorney donated to the donee never authorized the donee
guaranteeing repayment of a loan taken by a third party from a bank.
Counsel for the plaintiff has contended that although the land was securing a borrowing by Guo Star
Enterprises (U) Limited, Guo Dong, the donee of the power of Attorney, was responsible for the loan.
He deposited the title on behalf of Guo Star and went further to execute a guarantee undertaking to
be liable for the full indebtedness of Guo Star. In the circumstances, counsel further submits, the
corporate veil of Guo Star Enterprises Limited should be lifted to show that the plaintiff Bank was
essentially dealing wish the same person Guo Dong of Guo Star who opted to conduct his borrowing
through Guo Star.
There are, with respect, serious flaws, in plaintiff Counsel’s above submission. The submission wrongly
assumes that Guo Dong, the individual, is the same as Guo Star, an unregistered entity, and Guo Star
Enterprises (Uganda) Limited, a company registered with limited liability, and thus a distinct legal
entity.
The Defendant, as donor, donated specific powers of the use of his land as security only to the donee,
Guo Dong, and only in respect of a loan or financial security advanced by a bank to Guo Dong, as an
individual. It is Guo Dong, as an individual borrower, and beneficiary of the loan/financial facility that
the Defendant trusted so as to give power regarding dealing with his land, and no one else. If the
Defendant intended that Guo Dong be able to use the land to guarantee repayment of other peoples’
loans, the power of Attorney would have expressly stated so. It did not.
It is contended for the plaintiff that since the power of Attorney provided that:- “ -------- Do Hereby
appoint, nominate, ordain and authorize Mr. Guo Dong of GUO STAR Enterprises of P.O. Box 4289,
Kampala, to be my true and lawful attorney ------“, the Defendant must be taken to have known, and
to have had it in mind, that Guo Dong was to borrow money through Guo Star Enterprises and not in
his personal capacity. This submission is not factually correct. There is no evidence that Guo Dong
borrowed any moneys through the name and style of Guo Star Enterprises. The borrowing was by a
distinct legal entity in the form of a Company with limited liability by the name of Guo Star Enterprises
(Uganda) Limited. Guo Dong together with one JING HONG guaranteed the repayment of this loan.
There is no evidence that the Defendant was aware, let alone consented having his land used as
security by way of guarantee to repay a loan taker by a third party over whom the Defendant, as donor
of the power of Attorney, could not exercise any powers with regard to obligations to repay the said
loan
It is submitted by plaintiff’s counsel, albeit without requisite evidence such as memorandum and
Articles of Association, or any company Returns, that Guo Dong is a shareholder and Director of Guo
Star Enterprises (U) Ltd; and that therefore the Defendant knew while granting’s the power of Attorney
that the loan would be advanced to Guo Star Enterprises (Uganda) Limited. In the considered view of
this court this submission is not tenable. First, there is no evidence from which to conclude that the
Defendant knew the loan was to be advanced to the company. The Defendant himself, in his affidavit
in reply of 7 th July 2000, paragraph 9 thereof, emphatically denies ever giving power to the company
to use his title to borrow money or for any other purpose. Secondly, Guo Dong, the individual, is
separate and different from Guo Star Enterprises (U) Ltd, the company
The effect of registration of a company is that from the date of incorporation, evidenced by issuance
of a certificate of incorporation, the members of the company form a body corporate by the name
contained in the Memorandum, capable of exercising all the functions of an incorporate company,
having perpetual succession and a common seal. An incorporated company is a legal person separate
and distinct from its share holders. See: MACAURA V. Northern Assurance Co. Ltd [1925] AC 619. The
property of the company belongs to the company itself; and not to the individual shareholders or
directors. Thus the company’s debts are the obligations of the company alone and cannot be enforced
against individual shareholders or directors. Likewise debts of individual shareholders/directors in
their individual capacities cannot be automatically passed over to the company merely by virtue of
one being a shareholder/director in the Company: See Underwood Ltd V. Bank of liver pool and Martins
Ltd [1924] 1KB 775.
For the above reasons, plaintiff Counsel’s above submission cannot be accepted by Court
Plaintiff’s Counsel then makes another submission. In paragraph 1 of “Plaintiff’s Reply to Defendant’s
submissions” dated 4 th March 2005, Counsel invites the court to lift the corporate veil of Guo Star
Enterprises (Uganda) Limited so as “to show that the plaintiff bank was essentially dealing with the
same person Guo Dong of Guo Star who opted to conduct his borrowing through Guo Star.” Learned
Counsel for the plaintiff does not explain whether in submitting as he does, the entity “Guo Star”
means and is the same thing as “Guo Star Enterprises (Uganda) Limited.”
In the considered view of the court the two cannot be one and the same thing. “Guo Star” or “Guostar
Enterprises” (which is mentioned in the Power of Attorney) may be the name and style of some
unincorporated entity with no corporate status. The same however cannot be said of Guostar
Enterprises (Uganda) Limited, a company duly incorporated with limited liability and with corporate
status. While the lifting of the corporate veil would apply in case of Guostar Enterprises (Uganda)
Limited, a corporate body, it cannot apply in cases of “Guo Star’ or “Guo Star Enterprises” which are
unincorporated entities. Lifting the veil is to disregard the corporate entity of the company and go to
the individual members owning the company, or in case of a controlling company, to the individual
companies under the controlling company.
Courts will lift the veil if a corporate personality is being used as a cloak for fraud or improper conduct,
where agency can be established to ascertain whether the acts of agents have been ratified, in criminal
or quasi-criminal cases, where the acts are contrary to public policy or where in the circumstances it
is necessary to lift the Corporate veil.
The court finds that the circumstances of this case do not warrant that the veil be lifted. It is not denied
that the loan was given to a limited liability company, Guostar Enterprises (Uganda) Limited. The power
of attorney is clear in its language and description as to who the donee of the same is. There is no
instance of fraud, deceit, Criminality or being against public policy against the donor of the power of
Attorney. There is no evidence that the Defendant in any way used incorporation of Guostar
Enterprises (Uganda) Limited as a cloak for fraud, criminality or against public policy. See: SALIM JAMAL
& TWO OTHERS V Uganda Oxygen Ltd & 2 others: [1997].
The court thus finds no basis for lifting the corporate veil of Guostar Enterprises (Uganda) Limited for
the purpose of making the Defendant liable for what he did not expressly or implied by authorize in
the power of attorney
One of the issues the court is asked to determine is whether the Mortgagor has failed to pay the loan
monies. The mortgagor is Guostar Enterprises (Uganda) Limited. In order to resolve the above issue it
is necessary to examine the evidence availed to court as regards the loan said to have been advanced
by the plaintiff to Guostar Enterprises (Uganda) Limited in respect of which loan the Defendant’s land
is purported to have been mortgaged
According to the affidavit of Opio Anna, credit manager, of the plaintiff, dated 3 rd March 1999, and
the statement of account showing the transactions of the loan annexure “D” to the said affidavit, a
sum of shs. 252, 000,000/= was credited to the debtor’s i.e. Guo Star Enterprises, account with the
plaintiff by UCB inward cheque No. 832635 on 16 th July 1997. However the said same amount was
debited from the same account by way of return of the same cheque in the same amount on 17 th July
1997. On the face of it therefore no loan money was ever passed over to the borrower because what
was credited on 16 th July 1997 was debited from the same account on 17 th July 1997. The plaintiff
has not given any explanation to throw light on this transaction. A memorandum of deposit of title by
the borrower, Guo star Enterprises (Uganda) Limited, of P.O. Box 4289 Kampala, to the plaintiff bank is
stated to have been executed on 7 th July 1997. The same is annexure “B” to the affidavit of Opio Anna.
The Memorandum is “signed, sealed and Delivered by the said Guo Dong and JIng Hong in the presence
of Guostar Ent. (U) Ltd.”
If it is taken that Guo Dong and Jing Hong signed, sealed and delivered the Memorandum for and on
behalf of Guo Star Enterprises (Uganda) Limited, then it is the same company that also witnessed its
execution of the Memorandum because the space on the memorandum for the advocate to witness
the execution is blank. There is also nothing in the Memorandum of Deposit to show that what was
deposited to the plaintiff Bank was the Defendant’s land title comprised in Kyadondo Block 244 Plot
2809, land at Kisugu. The space where such particulars should be filled up in the Memorandum is blank
and empty.
The said “Memorandum of Deposit” on its page 2, first paragraph, third sentence states;
“And I/we hereby declare that the document now deposited is all that is in my possession or control
relating to the property or properties mentioned in the schedule here under and that I am/we are the
owner(s) of the property or properties which is/are not charged or encumbered in any way
whatsoever.” The above quoted part of the Memorandum of Deposit is false in two significant aspects.
First, as already pointed out, there was no property mentioned in the schedule to the Memorandum of
Deposit. Second, Guostar Enterprises (Uganda) Limited either through the power of Attorney or
otherwise, never owned the Defendant’s land, which the plaintiff Bank claims to have been the subject
of the “Memorandum of Deposit.”
On the same day of 7 th July 1997, Guo Dong and Jing Hong executed a guarantee to the plaintiff bank
the payment and satisfaction of any loan money not exceeding Shs. 250,000,000/= that may be loaned
to Guostar Enterprises (Uganda) Limited. This guarantee does not in any way refer to the suit land of
the Defendant being used as security for the guarantee. Indeed the guarantee states on its page one
paragraph five, that:- “This Guarantee is to be in addition and without prejudice to any other securities
or guarantees which you may now or hereafter hold from or on account of the Debtor -----“
The court deduces from the above that the quaranteeing of the loan repayment by Guo Dong and Jing
Hong was a decision taken by the two, independent of a consideration that the Defendant’s land was
to be used as security for the quarantee. Were it to be otherwise, the guarantee document would have
stated so
It has been further submitted for the Defendant that the plaintiff cannot rely on the Memorandum of
deposit of title and the Guarantee because the two documents were not registered under the stamps
Act, cap 342.
To this submission counsel for the plaintiff has submitted to court a copy of the guarantee duly
stamped under the stamps Act, cap. 342. He has also counter argued that failure to stamp a document
is not fatal as the document can be stamped any time, depending on the directions of the court
The court is satisfied that stamp duty was paid in respect of the guarantee. As regards the
Memorandum of deposit of title deed, the same, is part and parcel of the alleged contract of guarantee
consisting of two documents: the memorandum of deposit of title and the Guarantee. To the extent
that the two documents constitute the same contract, the law deems the guarantee contract to be
duly stamped: See section 42 (c) Stamps Act, cap. 342.
The court thus accepts the Memorandum on deposit of title and the guarantee as proper documentary
evidence.
Counsel for the Defendant has contended that the power of Attorney had already been revoked by the
time the plaintiff bank received the title of land as security. Counsel bases this argument on the fact
that the deed of revocation of the powers of Attorney was executed on 30 th July, 1997, lodged and
registered with the Registrar of Documents on the 30 th October, 1997, under Instrument No. X
167965. The plaintiff bank registered the caveat on the title on the 5 th November 1997, Under
Instrument Number 192056 after the deed of revocation had already been registered
From the evidence on record (paragraph 2 of Opio Anna’s affidavit of 3 rd March, 1999) which is not
controverted, the certificate of title of the Defendant’s land was deposited as security with the plaintiff
bank on 7 th July 1997. By this date the power of Attorney had not yet been revoked. The caveat by
way of mortgage on the land title was registered on the 5 th November, 1997, after the deed of
revocation had been registered on the 30 th October, 1997. Section 54 of the Registration of Titles Act,
Cap 230 provides, in as much as it is relevant to this case, that:-
“No instrument until registered in the manner herein provided shall be effectual to pass any estate or
interest in any land ------- - or to render the land liable to any mortgage; but upon such registration the
estate or interest comprised in the instrument shall pass or ----------- the land shall become liable in
the manner and subject to the covenants and conditions set forth and specified in the instrument ----
----------“.
Section 146 of the Registration of Titles Act requires every power of Attorney, like the one in this suit,
to be registered in accordance with the Registration of Documents Act, and once so registered the
same is presumed to be in force at the time of its registration unless its revocation has been previously
registered under
It follows from the above provisions of the law that as between the plaintiff bank and the Defendant,
by the time the purported mortgage was registered by way of caveat on 5 th November 1997, so as to
affect the interest of the Defendant in the suit land, the power of Attorney, upon which the mortgage
was based had already been revoked on 30 th October 1997. The Defendant was no longer under
obligation to be bound by the Attorney.
The court is now in a position to answer the two questions of these Originating Summons.
1. As to the question whether the mortgagor has failed to pay the loan monies, this Court leaves this
issue to be resolved in H.C.C. S. No. 1043 B of 1997: Gold Trust Bank Ltd V. Guo Dong, now pending for
resolution in the Commercial Division of this court; and/or in some other suit in which the mortgagor
is a party to the suit. The Mortgagor is not a party to this suit and therefore this court cannot determine
any issue concerning him. For reasons already stated, the finding of this court is that at the material
time and given the powers stipulated in the power of Attorney, no mortgage could have been created
with the Defendant’s suit land as security on the basis of the said power of Attorney executed by the
Defendant in favour of one Guo Dong.
2. The second question of whether the plaintiff bank as the mortgagee of the property is entitled to
foreclose and sell off the Defendant’s land, the answer is that this court finds that the power of
Attorney never authorized Guo Dong to use the Defendant’s land as security to guarantee a loan to a
third party. The plaintiff ought to have found out this from the deed of the power of Attorney itself.
Thus this court holds that no valid mortgage was ever created with the Defendant’s land as security
on the basis of the said power of Attorney between the plaintiff and Guostar Enterprises (Uganda)
Limited.
Further, but independent of the above, the court holds that, at any rate, by the time the mortgage was
registered by way of caveat so as to affect the interests of the Defendant in the suit land, the power of
Attorney had already been revoked, and the revocation duly registered, thus fixing the plaintiff with
notice of the revocation.
The plaintiff is thus not a legitimate mortgagee of the property and as such is not entitled to foreclose
and sale off the said property.
The end result of the holdings of this court is that the plaintiff has no legitimate right to have
possession of the defendant’s title to the land comprised in Kyadondo Block 244 Plot 2809.
This court orders that he relinquishes the same to the Defendant free of any encumbrances by him
(plaintiff) on the basis of the alleged mortgage