Execution of Deeds and Instruments under the Registration of Titles Act Cap 230. A critical Review of Case Law

Introduction "Who did this more than bloody deed?" asks someone in Macbeth: a sentiment echoed by lawyers who discover – sometimes too late – that the way a document has been executed means that it is not an instument after all[1]. Instruments under the Registration of Titles Act Cap 230 (RTA) are used to pass or confirm the passing of an interest, property or a right, or to create or confirm the creation of a binding obligationThey are often highly important documents, and in some cases nothing less than an instrument will do. Getting it wrong can be disastrous[2]. The possibility of making a mistake stems largely from the fact that deeds require more formality than other legal documents. This article focuses on the practice and the law on execution of instruments by a corporate body under the RTA. A company may execute a document as an instrument by either affixing its common seal or by signature of two officers. The RTA and the Companies Act Cap 110 provide a dual system of execution by a company; (a) by affixing its common seal as provided under section 132(1) of the RTA. This preserves the method of execution by corporation under common law, (b) whether a company has a seal or not the Act allows that a company may execute a document by signature of a director and a secretary of a company (or whoever is authorized by the articles of association). Such a document has the same effect under the RTA as if executed under the common seal of the company. This dual system has been fortified by section132 (1) of the RTA.

Execution under a Seal

The impugned provision provides thus; 132 Seal of corporation substituted for signature (1) A Corporation, for the purpose of transferring or otherwise dealing with land under the operation of this Act, or any lease or mortgage, may, in lieu of signing the instrument for such purpose required affix to the instrument its common seal.” Ordinarily under the Companies Act, affixing the seal has to be accompanied by any necessary formalities prescribed by the Company’s articles of association. And traditionally (model Table A) the articles have required, in addition to the affixing of the seal, the signature of a director and a secretary or of two (2) directors. However, section 132(2) RTA made an exception and allowed to affix the seal without the other requirements under the articles or companies Act. Probably this was meant to do away with additional investigations into the authority of the signatories to execute which might call for unwarranted interference into standard transaction.

Attestation.

Under Section 147 (1) of the RTA instruments and powers of attorney signed by any person and attested by one witness is held to be duly executed. There are divergent opinions among legal practitioners as to whether a company that has executed its instrument under Section 132(1) of the RTA by affixing the seal need witness the document. Section 147 (1) of the RTA reads; “147. Attestation of instruments and power of attorney (1) Instruments and powers of attorney under this Act signed by any person and attested by one witness shall be held to be duly executed, and that witness may be- (a) within the limits of Uganda (ii) a justice of peace (iii) an advocate (iv) a notary public (v) a bank manager (vi)…….” [Emphasis mine]

One view held is that a person referred to in the impugned section is an individual not a company. That where a company executes an instrument under section 132 (1) of the RTA, section 147 of the RTA does not apply. That witnessing of the company seal is not a question of the RTA but rather of the companies Act. With due respect to those who hold that view, they are not buttressed in any of the provisions of the Act. First restricting the interpretation of the word “person” in section 147 RTA to an individual is unacceptable. It is well known to every law student that a company is an artificial person. Section 2(uu) of the Interpretation Act Cap 3 defines a person to “include any company or association or body of persons corporate…” definitely a person referred to in this section 147 includes a company.

Secondly the reading of section 147 does not (at least expressly) exclude a company that has executed its document under section 132 of the RTA. Regardless of the practice, the interpretation of the RTA is decisive of the issues at bar. Does the fact that a mortgage by a company sealed with the company’s seal under section 132 (1) of the RTA extinguish the requirement for attestation under section 147 of the RTA? The language is not out of ordinary, it requires the instrument o be signed by any person and attested by one witness (who qualifies under the same provision) to be duly executed. Thus until the mortgage is both signed ant attested in the manner prescribed by the Act it is not valid. The provision requires, not that the instrument be attested by one witness, but in the presence of an authorized witness under Section 147 (1) of the RTA which includes an advocate and a bank manager. It is when these combined requirements are met that the Act makes the mortgage valid. In the American jurisdiction the witness must be disinterested. This imports the connotation of an independent person. In the case of Lankford State Bank Com’r vs first National Bank of Lawton 1919 OK 216, 75.159,183 Sharp, J stated that this requirement of an interested witness was to meet the evil of permitting parties to act as witnesses to chattel mortgages in which they were substantially interested. In that case witnessing by a person who had an interest in the company was held to be ineffectual which rendered the mortgage invalid.

In the Kenyan case of Eccon construction & Engineering Ltd vs Giro Commercial Bank Ltd & Anor [2003]2 EA 426, the plaintiff filed an application in the main suit seeking an injunction to retrain the defendants from registering a conveyance of land until the hearing and determination of the main suit. The plaintiff’s application hinged on the ground inter alia that the mortgage instrument was null and void for want of attestation. The mortgage deed had been affixed with the plaintiff’s seal in the presence of two directors who appended their signatures. Counsel for the applicant argued that the mortgage was not properly attested according to the requirements of section 59 of the Indian Transfer of Property Act. Section 69 of the said Act required that for the mortgagee to exercise power of sale, the mortgagor’s signature to the mortgage instrument must have been witnessed by an advocate. The court observed that, “In this instance case the mortgagor is a body corporate. A body corporate has no body; it can only act through the agency of a human person. In executing any document it can do so by affixing its seal on the relevant documents in the presence of designated officials. In the absence of any provision to contrary every instrument to which the seal should be affixed should normally be signed by a director and countersigned by the secretary or by a second director or some other person appointed by the directors for the purpose Eccon construction and Engineering was affixed in the presence of a director and another director who doubled up as a secretary. The signatures of these two company officials were merely for the purpose of the execution of the document by the company for the simple reason that they were executing a document as the company and for the company; and one cannot be a witness to oneself. That being so the execution of the document by the mortgagor was not witnessed as required by section 59 of the Indian Transfer of Property Act”

Regardless of the fact that it’s a Kenyan case, it is persuasive in as far as to whether a corporate mortgagor that has affixed a seal needs to witness the instrument. The answer is obvious. Much as one may argue that the Kenyan Act does not have the equivalent of Section 132(1) of the RTA, it’s my submission that that Section does not create any peculiar position. It just codified the common law position in as far as execution of corporate deeds is concerned.

Probably the pertinent question here is whether a company appending a seal on the instrument amounts to “signing” of a person with in the meaning of section 147(1) of the RTA. Unfortunately, the Act does not define what signing is. Does it only mean scribbling of sign by an individual? Can a Company sign a document? Section 1(4) of the UK’s Law of Property (Miscellenous Provisions) Act 1989 defines sign to include ‘making one’s mark on the instrument”. To exclude signing by a company, the commission recommended the section be amended to include the word “individual” sign the provision was targeting individual execution. In a Kenyan case of Kenon limited Vs Giro commercial Bank Ltd [1999] LLR 1287 the court stated that the company’s “signature” is its common seal. Thus a company signs a document by affixing a seal in a manner prescribed by the company’s constitution ie by being witnessed by its directors and secretary. Thus affixing a seal by a company under section 132 (10 of the RTA is signing an instrument within the meaning of section 147 of RTA. It is true that affixing of the seal under section 132 of the RTA does not require witnessing by the directors, but a special set of witnesses peculiar to RTA and in land conveyance has been introduced and that is under section 147 of the RTA. An instrument is duly executed under the RTA if it is signed by a person (a company may sign as provided under s.132 of the RTA) AND attested to by a witness qualified under the same provision. In the case Fredrick J.K Zabwe vs Orient Bank & Others SCCA No. 4 of 2006 Katureebe JSC stressed the fact of another option available to the company under section 132 of the RTA instead of directors signing but missed the opportunity of clarifying as to what happens if they pursue that option. But what is clear from his lead judgment is the fact that he stressed the need to comply with section 147 and 148 of the RTA.

In the American case of Lankford State Bank Com’r vs first National Bank of Lawton 1919 OK 216, 75.159,183 and the Ugandan case of Fredrick J.K Zabwe vs Orient Bank & Others SCCA No. 4 of 2006 the specimen mortgage form set out in the schedules to the Statutes in question influenced the decisions of both courts. In Zabwe’s case it was observed that the specimen mortgage given under the 11th schedule should have been adhered to in as far as what it provided as requisite requirements for the valid mortgage. At no time has the legislature ever attempted to change this form or amend the section to do away with witnessing by corporate bodies that opt to affix the seal instead of the signature, but have seen it fit to permit it to stand in its original form. The specimen mortgage provides for a blank space for the witness. The UK has made several changes in its laws regarding execution of deeds and instruments by corporate bodies; specifically The Regulatory Reform (Execution of Deeds and Documents) Order 2005 (SI 2005/1906) Amendment of Section 36A of the Companies Act 1985, section 74 of the Law of Property Act 1925 and the Law of Property ( Miscellenous Provisions) Act 1989. Thus the UK Law has expressly made it clear that where a company has affixed a Seal on a Deed, it does not require witnessing. The previous position required the appending of the seal in the presence of one director and the clerk secretary or other permanent deputy of that company. Witnessing has since been expressly done way with, with the import of the new amendments. Definitely no similar provision is discernable in our RTA or Companies Act.

In the absence of the contrary provision, I think it will be erroneous to opine that when the company seals the instrument under Sec.132 (1) of the RTA, it need not witness the instrument. Section 147 does not make way for such interpretation but signing and witnessing remains two vital steps for the instrument to be valid. Thus its is very pertinent to the validity of an instrument under RTA especially the mortgage to be signed by the grantor (mortgagor, whether an individual or company) be duly witnessed by person authorized to witness such a document under S.147 and such signing must comply with section 148 of the RTA which require the names and signature to be in Latin characters.

While there may be some cases from other jurisdictions to the contrary, the weight of the authorities cited here clearly supports the interpretation in the foregoing opinion. Where under section 147 of the RTA, the attestation is an essential part of the instrument and necessary to its validity, it is clear that the attesting witness must be one authorized under the same provision. This definitely rules out the directors and/or secretaries of a company. This makes attestation of an instrument under the RTA unique and different from witnessing under the Companies Act. The legislature intended it to be that way. Thus instruments must be signed and witnessed as required under sec. 147 and 148 of the RTA for it to be duly executed. The mortgage or any instrument being invalid for want of due execution, its subsequent registration gives no efficacy.

Execution under power of attorney

One option for a company – especially when the appropriate officers are not going to be available at critical times - is to grant a power of attorney in favour of one or more individuals or another company in order that they may execute and deliver deeds on the appointing company's behalf. This is not a last-minute solution, as the power itself must be executed as a deed under section 146 of the RTA. The ability of a company to grant power of attorney to execute deeds on its behalf is generally said to be dependent on whether it has power to do so under its articles of association. However, the purpose of section 35 of the companies Act and Section 146(1) of the Registration of titles Act (which gives the company powers to grant powers) was merely to put beyond doubt the ability of a company to grant power of attorney to execute deeds outside Uganda and on transfers under the RTA respectively where there was no express power in the articles. This is a view taken by the Irish Supreme Court in Industrial Development Authority vs William T. Morn [1978] IR 159, on similar worded legislation (in pari metaria with section 35 of Uganda’s Companies Act and Section 36A of Companies Act 1985 of UK).

There is a popular opinion among the legal practitioners that if a company does not affix its common seal on the document, it must appoint attorney or attorneys to sign on its behalf. This opinion seems to find solace in the lead judgment of Mulenga JSC in General Parts Uganda Limited vs NPART SCCA No. 5 of 1999 after relaying section 132 of the Companies Act stated that; “for the appellant (a company) to duly execute the mortgage document as mortgagor whether in the capacity of the registered proprietor or done of power of attorney, it had to either affix its common seal to the document or to act by its attorney or attorneys, appointed for the purpose of signing the document..”. This opinion in effect implies that other than affixing the seal of a company, the only way to execute a deed by a company is to grant power of attorney to some individuals to sign on its behalf. My opinion is that such a finding is not only inconsistent with companies Act ant the RTA but also erroneous. Execution by a company must be distinguished from execution on behalf of a company. A company acts through its officials. To expect a director (s) and a secretary to get power of attorney from the company (other than a resolution) to execute a company deed is to destroy the whole strata of company law. A Company is not am amorphous structure; it acts through its officials especially the directors and secretaries who are the mind of the company and the shareholders who are the body. Thus where the directors have signed a document, it is the company that has signed not them in their individual capacity. In Kenon limited Vs Giro commercial Bank ltd [1999] LLR 1287 the court stressed the fact that the appending of signatures by the directors to a document is still part of the execution of a document by a body corporate. To require them to get power of attorney is to require a person to get power of attorney to sign his/her own documents, which is illogical and unsound. Section 132 (2) of the RTA should be restricted only to the circumstances therein. The import of section 146(1) of the RTA is to allow registered proprietors to grant power of attorney to another person to act for him or her in transferring land. Thus where a company gives authority to execute a an instrument or a deed on its behalf under section 146 of the RTA, that authority is a power of attorney and the instrument creating the power of attorney must itself be executed as a deed and registered with the registrar of documents in accordance with section 146 of the RTA.

Practical considerations

The consequences of failing to comply with execution requirements are plain and well known. The document will be invalid and unenforceable. It is not clear from the authorities whether or not such a document might be enforceable as a simple contract, and that is likely to remain a question for the courts to decide on a case-by case basis. However what is clear from Nile Bank Ltd vs Richard Desmond Kaggwa SCCA No 7 of 2004, the mortgagee can foreclose as an equitable mortgage if the requirements of Section 139 of the RTA are prevalent.

(a) Signatories and authority. In executing the instruments under RTA especially the mortgage, the names of the signatories and the capacity in which they are signing must be given. The signature must be in Latin characters according to the section 148 of the RTA. The rationale behind Sec.148 requiring a signature to be in Latin character must be to make clear to everybody receiving that document as to who the signatory is so that it can be ascertained whether he had the authority or capacity to sign. The mortgagor must also disclose his name and describe himself as the registered proprietor. This is to prevent fraudulent persons from executing mortgages over property that are not theirs. It not only enables the registrar to ascertain that the mortgagor is indeed the registered proprietor, but also enables 3rd parties to know that it was properly executed with authority. For a corporate body, a board resolution authorizing them to sign for the company in that particular transaction is preferable though directors are endowed with powers to bind the company. A certified copy of the company’s articles and memorandums of association may also be helpful together with the recent particulars of company officials. (b) Attestation. The witnesses who sign must disclose their names and capacity to witness the instrument as required under sec. 147 of the RTA. As the Supreme Court put it, how would the registrar know that the persons who signed the mortgage deed on behalf of the company had authority to execute that deed? Or that the attesting witness had authority and legal capacity to do so? The witness must be those authorized under Section 147 of the RTA ie a bank manager or an advocate among others. If it’s a company, whether it has affixed its seal or its directors signed, still the instrument must be attested to. (c) Power of attorney. In the ordinary course of business, banks routinely accept to lend on the basis of security granted through power of attorney. Thus the donee of a power of attorney acts as an agent of the donor and for the donor. The law does not permit a grantee of power of attorney to derive personal benefits from its exercise or discharge whether personal or corporate when connected with the interests or business of the grantor unless it expressly provides so. Thus the lender (especially the bank) must take the following precautions; The bank would have to satisfy itself that the power of attorney was duly given in accordance with S.146 of the Registration of Titles Act. Sec 146 stipulates that the power of attorney given by the proprietor of land must be registered with the registrar of documents. The bank must also satisfy itself that the mortgage subsequently executed is so executed in accordance with the provisions of the Act, including S.148. The bank must satisfy itself that the donee of the power of attorney acts strictly within the power granted in the deed.

The names of the signatories and the capacity in which they are signing must be given. The witnesses who sign must disclose their names and capacity to witness the deed as required under sec. 147 of the RTA. Persons authorized to witness are, an advocate, notary public, a bank manager The body of the mortgage deed ought to disclose the authority by which a person purporting to mortgage property not registered in his name is acting. Conclusion Much as it has been the practice among some legal practitioners not to attest mortgages and transfer instruments sealed with a corporate seal and sometimes it has gone un noticed in courts or law, its given the statutory provisions and the arguments herein, its more compelling than the practice to believe that all instruments under the RTA must be attested by a qualified witness under section 147 of the RTA. Arinaitwe Patson Wilbroad November, 2008

[1] Extracted from an article by Simon Howley and Gary Green [2] There are many cases where court has held that security documents were invalid or void for want of proper execution, recent example being Fredrick Zabwe vs Orient Bank & Ors SCCA No.4 of 2006