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Barnabas Samuel Aliku and Another v Housing Finance Bank Ltd and Others (Civil Suit No. 21 of 2019)

High Court · [2026] UGCOMMC 261 · 2026 Judgment for Plaintiffs — Sale Set Aside ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
First instance civil suit challenging the lawfulness of a mortgagee sale and seeking cancellation of the purchaser's title
Decision
Sale set aside, purchaser's title cancelled, plaintiffs reinstated as registered proprietors with mortgage remaining as valid encumbrance

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Holding

The High Court held that while the plaintiffs defaulted on their mortgage loan, the mortgagee bank's subsequent sale of the property was unlawful, negligent, and fraudulent. The bank breached its statutory duty of care by failing to properly serve notices, relying on a stale valuation, selling at gross undervalue while ignoring a higher offer, and conducting a non-transparent auction. The sitting tenant who purchased through a corporate vehicle had actual knowledge of the plaintiffs' rights and acted in bad faith. The sale was set aside, the purchaser's title cancelled, and the plaintiffs reinstated as registered proprietors with the mortgage remaining as a valid encumbrance.

Facts

In 2009, the plaintiffs purchased property at Najeera for UGX 115,000,000 and executed a mortgage with Housing Finance Bank for UGX 119,000,000 repayable over 20 years. Following financial hardship from 2010, they defaulted on monthly instalments. In July 2012, they leased the property to the 2nd defendant as tenant. By March 2013, the plaintiffs had identified a buyer willing to pay UGX 235,000,000 to redeem the mortgage. However, they discovered the bank had already sold the property two weeks earlier for UGX 135,000,000 to the 3rd defendant, a company in which their sitting tenant (2nd defendant) was director and majority shareholder. The plaintiffs alleged they never received statutory notices, the property was sold at gross undervalue, and the defendants colluded to defraud them.

Issues

  1. Whether there was a default in payment of the loan?
  2. Whether the 1st Defendant's sale of the mortgaged property was lawful?
  3. Whether the Plaintiffs are indebted to the 1st Defendant?
  4. Whether the 2nd and 3rd Defendants fraudulently and in bad faith acquired the suit property with knowledge of the Plaintiffs' rights, thereby rendering the sale invalid as against them?
  5. What remedies are available to the parties?

Orders

  • Declaration that the sale of the suit property comprised in Kyadondo Block 219 Plot 1138 (Najjera) by the 1st Defendant to the 3rd Defendant was unlawful, negligent, and tainted by fraud.
  • Foreclosure and sale of the suit property set aside for failure to comply with mandatory statutory procedures and the mortgagee's duty of care.
  • Registrar of Titles directed to cancel the registration of the 3rd Defendant (Speke Uganda Holidays Ltd) on the certificate of title for Kyadondo Block 219 Plot 1138 and reinstate the Plaintiffs as the registered proprietors.
  • 3rd Defendant, its directors, agents, and servants ordered to grant vacant possession of the suit property to the Plaintiffs within sixty (60) days from the date of judgment.
  • Mortgage executed on 7th September 2009 reinstated as a valid encumbrance on the Plaintiffs' title. The 1st Defendant remains a secured creditor for the principal sum and legitimate interest, subject to provision of an updated and accurate loan statement.
  • Special Damages awarded to the Plaintiffs against the 1st Defendant in the sum of UGX 3,000,000/=.
  • General Damages awarded to the Plaintiffs against the 1st Defendant assessed at UGX 20,000,000/=.
  • Punitive Damages awarded to the Plaintiffs against the 1st Defendant in the sum of UGX 5,000,000/=.
  • Interest on special and general damages at 18% per annum from date of filing suit until payment in full. Interest on punitive damages at 6% per annum from date of judgment until payment in full.
  • 1st Defendant's Counterclaim for alleged outstanding balance of UGX 15,578,579.93/= dismissed.
  • Costs of suit awarded to the Plaintiffs, to be paid jointly and severally by the Defendants.

Key headnotes

Mortgage Law — Mortgagee's Duty of Care — Statutory Requirements for Lawful Sale
A mortgagee exercising a power of sale owes a statutory duty of care to the mortgagor to take all reasonable steps to obtain the best price as prescribed in the regulations. A lawful sale requires: (1) not acting in secret and acting in good faith; (2) valuing the property before sale to establish market and forced sale value; (3) advertising the property after notification to the mortgagor; and (4) ensuring the method of sale is competitive and transparent. Any deviation from these statutory and judicial guidelines renders the sale a legal nullity.
Mortgage Law — Service of Statutory Notices — Effect of Defective Service
Under Section 18 of the Mortgage Act, a mortgagee must serve a written notice of default on the mortgagor requiring rectification within forty-five working days before exercising the power of sale. Service by post to a stale address that the mortgagee knows the mortgagor is not monitoring, particularly when the mortgagee has been notified of a current address, constitutes defective service and defeats the mortgagor's equity of redemption. Belief that notices were sent is insufficient to discharge the mortgagee's burden of proof.
Mortgage Law — Valuation Requirements — Gross Undervalue
Under Regulation 11 of the Mortgage Regulations 2012, a mortgagee must value the property before sale and the valuation report must not be made more than six months before the date of sale. Where a mortgagee sells property at UGX 135,000,000 while ignoring a demonstrable offer of UGX 235,000,000 procured by the mortgagor, and relies on a valuation containing manifest errors, this constitutes a gross undervalue and breach of the duty of care. A mortgagee cannot claim a deficiency from its own negligent conduct.
Mortgage Law — Post-Sale Indebtedness — Effect of Unlawful Sale
Where a mortgagee breaches its statutory duty of care and sells mortgaged property at gross undervalue through a negligent and fraudulent process, it cannot enforce a deficiency judgment against the mortgagor. The alleged debt arising from such a sale is a nullity born of the mortgagee's own breach. A mortgagor is entitled to be credited with the difference between the negligent sale price and the true market value, and any resulting deficiency is an artificial loss created by the mortgagee's own hands.
Registration of Titles — Fraud — Bona Fide Purchaser for Value
Under Section 76 of the Registration of Titles Act, any certificate of title procured by fraud is void as against all parties or privies to the fraud. A sitting tenant who receives statutory notices intended for his landlords, conceals them, and then purchases the property through a corporate vehicle at gross undervalue while knowing the landlords are seeking a higher-paying buyer, has actual and constructive notice of irregularities and cannot claim protection as a bona fide purchaser for value without notice. Such conduct constitutes bad faith and fraud directly attributable to the transferee.
Registration of Titles — Cancellation of Title — Remedies for Fraudulent Sale
Where a mortgagee sale is found to be unlawful, negligent, and fraudulent, and the purchaser acquired title with actual knowledge of the mortgagor's rights and irregularities in the sale process, the court will set aside the sale, order cancellation of the purchaser's registration, and reinstate the original proprietors. The mortgage remains as a valid encumbrance, with the mortgagee retaining rights as a secured creditor subject to conducting a lawful realization process.
Breach of Contract — Banker-Customer Relationship — Duty of Care
A mortgage creates reciprocal rights and obligations between mortgagee and mortgagor. While a mortgagor who defaults is bound by the terms of the mortgage deed, the mortgagee is equally bound by its statutory and contractual duty of care. A bank that ambushes a mortgagor with a secret sale at gross undervalue while the mortgagor is actively seeking to redeem the property acts in bad faith and breaches the banker-customer contract. The law does not permit a bank to profit from its negligent realization by claiming a deficiency judgment.

Legislation cited (27)

  • Contracts Act Cap 284 s.9(1)
  • Mortgage Act Cap 239 s.1
  • Mortgage Act Cap 239 s.7(1)
  • Mortgage Act Cap 239 s.18(1)
  • Mortgage Act Cap 239 s.18(2)
  • Mortgage Act Cap 239 s.18(4)
  • Mortgage Act Cap 239 s.26(1)
  • Mortgage Act Cap 239 s.26(2)
  • Mortgage Act Cap 239 s.27(1)
  • Mortgage Act Cap 239 s.28(1)
  • Mortgage Act Cap 239 s.28(2)(c)
  • Mortgage Regulations 2012 Regulation 6(1)
  • Mortgage Regulations 2012 Regulation 8(4)
  • Mortgage Regulations 2012 Regulation 11(1)
  • Mortgage Regulations 2012 Regulation 11(2)
  • Mortgage Regulations 2012 Regulation 14(1)
  • Registration of Titles Act Cap 240 s.59
  • Registration of Titles Act Cap 240 s.76
  • Registration of Titles Act Cap 240 s.160(c)
  • Registration of Titles Act Cap 240 s.165
  • Registration of Titles Act Cap 240 s.176
  • Evidence Act Cap 8 s.101
  • Evidence Act Cap 8 s.102
  • Civil Procedure Act Cap 282 s.26(2)
  • Civil Procedure Act Cap 282 s.27
  • Civil Procedure Rules S.I 71-1 Order 15 rule 3
  • Interpretation Act s.35

Cases cited (39)

  • Tibiri Jane Namudu v Tropical Bank Limited and Another (High Court Civil Suit No. 487 of 2022)
  • Afro Motor Ltd and 2 Others v Barclays Bank Uganda Ltd (High Court Civil Suit No. 189 of 2010)
  • Alps Investment Limited v Bank of India (Uganda) Limited (Originating Summons No. 1 of 2024)
  • Donoghue v. Stevenson AC 562
  • Mutebi Ronald and Another v Umeme Uganda Limited (High Court Civil Suit No. 0025 of 2024)
  • ALP Investments Limited v Bank of India (Uganda) Limited (Originating Summons No. 1 of 2024)
  • Aya Investments (U) Limited v Industrial Development Corporation of South Africa (Miscellaneous Application No. 2908 of 2023)
  • Bbaale Samuel Wakulira v Cairo International Bank Limited and 2 Others (High Court Civil Suit No. 149 of 2013)
  • Barclays Bank Limited v James Balyejjusa and Others (High Court Civil Suit No. 272 of 2008)
  • Fredrick J.K. Zaabwe v Orient Bank Limited and 5 Others (Supreme Court Civil Appeal No. 04 of 2006)
  • Longway Suitcase Manufacturing Co. Ltd v UAP Insurance (U) Ltd (High Court Civil Suit No. 417 of 2010)
  • Belex Tours & Travel Ltd v Crane Bank Ltd (Court of Appeal Civil Appeal No. 071 of 2009)
  • Eco Bank Uganda Limited v Prime IK Limited (High Court Civil Suit No. 577 of 2016)
  • Kisame Samson v Ali Kiyiniki and Budallah Baidye (Miscellaneous Application No. 0008 of 2008)
  • Payne v Cardiff Rural District Council 1 KB 241
  • Ben Kavuya and 2 Others v David George Wakanyira (Supreme Court Civil Appeal No. 31 of 2021)
  • Mathiya v Housing Finance Company of Kenya and another 1 EA 133
  • Cuckmere Brick Co. Ltd v Mutual Finance Ltd 2 ALL ER 633
  • Roger Michael & others v Douglas Henry Miller & Another EWCA Civ 282
  • Housing Finance Bank and Another v Edward Musisi (Supreme Court Civil Appeal No. 22 of 2010)
  • Kabeedi Wanume v Equity Bank Ltd (High Court Civil Suit No. 35 of 2010)
  • Miller v Minister of Pensions 2 ALL ER 372
  • Salomon V. Salomon & Co. (1897) A.C, 22
  • Jamal and Others v Uganda Oxygen Ltd and Others (Supreme Court Civil Appeal No. 64 of 1995)
  • David Sekajja Nalima v Rebecca Musoke (Supreme Court Civil Appeal No. 12 of 1985)
  • Haji Katende v Vithalidas Haridas Co. Ltd (High Court Civil Suit No. 84 of 2003)
  • Kampala Bottlers Ltd v Damanico (U) Ltd (Supreme Court Civil Appeal No. 22 of 1992)
  • Fazaal Saberallt v Joy Isabirye and Kamuli District Land Board (High Court Civil Appeal No. 12 of 2025)
  • Makula International v. Cardinal Emmanuel Nsubuga
  • Ssendagire Stephen v. DFCU Bank
  • Mashunga Enterprise v Opportunity Bank Ltd (High Court Civil Suit No. 0064 of 2022)
  • Epaineti Mubiru v. Uganda Credit and Savings Bank
  • Wanjigi & Another v. Bank of Africa Kenya Ltd
  • Etats Limited v Barclays Bank Limited (High Court Civil Suit No. 266 of 2009)
  • National Bank of Commerce Ltd v. Yorokamu Bamwine
  • Waimiha Saw Milling Co. Ltd v. Waione Timber Co. Ltd (1926) AC 101
  • Sam Mubiru & Another v. Byensiba & Another (1985) HCB 106
  • Luzinda Marion Babirye v Ssekamatte and Others (High Court Civil Suit No. 366 of 2017)
  • Uganda Development Bank v. Muganga Construction Co. Ltd HCB 35
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.