The response to my opinion questioning the validity of bank notes signed by the late Governor, Professor Tumusiime Mutebile, which was made by Dr. James Akampumuza on the 11th of February,2022, demonstrated a limited appreciation of the intricacies of the legal nature of paper money. What my colleague and others of his persuasion need to know is that the acceptance of money as signed legal tender was the subject of a lot of litigation in the United States of America under what came to be known as the legal tender cases, which included Knox vs. Lee, 79.US 457 (1870).
Those cases caused a lot of controversy back then because private banks, among others, used to issue their own bank notes until the Federal Reserve Act of 1913 was enacted to create the Federal Reserve System in which the issuance of paper currency was regulated under one central authority. Since then, it has become a requirement that bank notes operating as legal tender bear the signatures of living people. I will not delve deeper into the legal history of money as legal tender because I need to keep the discussion focused on the Ugandan bank notes.
Although my colleague has done better than many people who have a preponderance of hurriedly commenting without any prior encounter with any knowledge on the subject, he failed to draw a distinction between the process of issuing money as legal tender and the company law principles of perpetual succession. This failure of distinction has driven his opinion outside the acceptable realms of jurisprudence on the money subject.
Any legal practitioner with a sufficient grasp of company law should certainly know that, under the principle of perpetual succession, there is a presumption of continuity of the business of the company. As such, contracts signed by an officer of a company continue to bind the company even after the demise of the official. I explained this in my earlier opinion when I stated that the late Governor’s signature on any BOU contract would continue to convey proprietary rights to and against the bank. I added, however, that the same signature on the bank notes would not convey proprietary rights to the bank or users when the maker passed on. I’ll say it again: money is a sovereign legal instrument that can’t be used to apply the rules that apply to other fungible goods traded in the market by any stretch of the mind.
At the risk of repetition, I must emphasise that the principle of perpetual succession does not apply to bank notes, which must be duly signed and authenticated at the material time they are tendered. If this principle were applicable, then we would still have bank notes signed by former Governors like Leo Kibirango (1981–1986), Suleman Kiggundu (1986–1990) and Charles Kikonyogo (1990–2000). There would be no rationale for issuing new bank notes signed by a new governor if it was possible to retain previously signed bank notes.
We cannot ignore the common best practise of withdrawing bank notes signed by former governors from circulation by the central bank. This practice, which is worldwide, gives effect to the law. For those in doubt, this practise must be viewed as a fundamental extrinsic aid in arriving at the correct statutory interpretation of the BOU Act in relation to the issuance of money as legal tender.
The reason why BOU has always replaced bank notes signed by a governor or bank secretary who is no longer in office is that the term “legal tender” is used in the present continuous tense. There is no room for a past governor or bank secretary to sign a bank note that qualifies to be legal tender today when they are not physically present in office.
S.3 of the BOU Act, which mandates the Governor to sign and authenticate bank notes, also provides for the deputy Governor to sign in his absence. It should be understood that a reference to the holder of an office under S.3 Interpretation Act Cap 15 is construed to mean the person for the time being lawfully holding, acting or performing the functions of that office. In that sense, therefore, a bank note can only be treated as legal tender if it is signed by the Governor lawfully holding, acting, or performing the functions of that office. As we all know, the late Tumusiime Mutebile, like any other former Governor, is no longer the Governor of the central bank and, therefore, he cannot otherwise issue any legal tender today or at all.
It is surprising that my colleague did not even attempt to explain why the law would provide for another person to sign for the Governor in his absence, if indeed his signature is supposed to stand in perpetuity. According to S.69 of the Electronic Signatures Act of 2011, the late Governor’s signature on the bank notes is an electronic signature that can be revoked under that law.So on what basis can anyone claim that his electronic signature can be held in perpetuity? This claim of perpetuity, rather than my opinion, is the real absurdity.
I wish to end by stating that our continued use of the bank notes signed by the late Governor does not make them legal tender. We are all using these illegal bank notes under a state of compulsion because we don’t have any other mode of exchange available. Whereas all Ugandans who continue to use these illegal bank notes under such compulsion are excused from any form of liability, it is incumbent upon us as a country to cause the redemption of our currency by calling for the appointment of a new Governor to sign on the new bank notes without delay. Our national currency is the life blood of our economy. We cannot afford to saddle it with avoidable legal uncertainties for this long.
Fred Muwema
Managing Partner
Advocates of Muwema & Co.
Director, Legal & Corporate Affairs
Africa Anti-Counterfeit Network