The Court of Appeal has put an end to the tendency of money lenders to lend money and also secure such transactions by signing transfer forms for such properties. This creates confusion as to the true nature of transactions that was entered, as the borrower walks away thinking he has obtained a loan while the lender knows that he has bought the mortgaged properties.
The loan shacks complicate the repayment of the loan to ensure that the mortgaged property is not redeemed. These lethal money lenders have amassed a lot of wealth from such transactions.
The Court of Appeal in Wakanyira George David v Ben Kavuya and 2 others Civil Appeal No. 36 of 2010 addressed this confusion. Richard Buteera, DCJ, Cheborion Barishaki and Hellen Obura, Justices of Appeal, heard the appeal and the issue in contention was whether there was a straight sale and not a loan agreement.
It was the contention of Ben Kavuya, that Wakanyira George sold his properties upon execution of a sale agreement and signing of transfer forms of the suit properties. Whereas Wakanyira claimed that he signed the above documents as security for a loan from Global Capital save 2004 Ltd, a company where Ben Kavuya is a managing director, it was contended that no loan agreement was executed between the parties.
It was contended for the plaintiff that Wakanyira David did not want his properties to be sold by Housing Finance Bank where he had a loan and therefore accepted to sign the sale agreement and other four blank papers as a pre-condition of getting the loan. The titles in the bank were meant to be further security for the payment of the loan of 172,000,000/=.
Justice Cheborion Barishaki in his lead judgment was alive to the fact that even without the loan agreement on record, upon evaluation all evidence adduced as a whole, he concluded that Wakanyira signed the land sale agreement, transfer forms and powers of attorney with the sole understanding that the transaction that he was entering into with Ben Kavuya and the money lending company was a loan transaction. The Judge observed that the suit properties and documents signed were only meant to act as further security should the borrower have failed to repay the loan.
The learned Justice further elaborated on the essentials of a valid contract where he stated that it is now settled law that one of the essentials for a valid contract to exist is that there must be an intention to create legal relations which the parties must manifest as reiterated under section 10(1) of the Contracts Act 2010.
In the instant case, despite the transfer forms being executed, Wakanyira never intended to enter into a legal contract of sale of his properties. The Judge noted that this goes beyond the signing of documents, it goes to the root of why the parties entered into that legal relation.
It so happens that the would -be rescuers to Wakanyira turned out to be worse than the Bank where he was running from. The court held that the conduct of asserting that the transaction was a sale in total disregard of the parties understanding and the subsequent dealings with the loan securities in a way inconsistent with what was intended and agreed to by the parties, was not only illegal but also marred with fraud.
It was found that none of the respondents obtained good title from Wakanyira to the suit properties and the transfer was thus unlawful. It was declared that the transaction was a loan transaction, that transfer was illegal and fraudulent rendering the transaction null and void, that the titles of the suit properties be rectified and be transferred back into Wakanyira’s names. It was also ordered that Wakanyira refunds the 170,000,000/= to the money lending company as being the money advanced to him.
This case safeguards the interest of borrowers from loan shacks whose intention is to take the securities securing the loan. Had the Court of Appeal ruled differently, many money lenders would have continued robbing people of their properties in broad day light without recompense since there is no evidence of a loan transaction but rather a sale agreement;
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