Wakilii

Housing Finance Bank & Anor v Musisi [2011] UGSC 26

Supreme Court · 2011 Appeal Allowed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Second appeal to the Supreme Court from a Court of Appeal decision allowing the mortgagor's appeal against the High Court's dismissal of his suit challenging a mortgage sale.
Decision
Appeal allowed; Court of Appeal judgment set aside, the mortgage sale upheld as lawful and the award of general damages reversed; first appellant to pay the respondent the balance of the sale proceeds after deducting the loan, interest and expenses.

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Cited — treatment unverified cited in 3 (treatment unverified) Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions — always read the source judgment before relying on it.

Holding

The Supreme Court allowed the appeal and upheld the mortgage sale as lawful. Where a mortgage is repayable by installments, the power of sale arises once an installment falls due and is unpaid, and the whole loan then becomes immediately due; the mortgagor cannot discharge his liability by paying only the arrears. The first appellant's acceptance of late or arrears payments was not a waiver of its right to sell, as waiver must be express or implied by contract. The respondent, having failed to pay the whole sum due before sale, lost his equity of redemption, and the impugned mortgage clauses were not a clog on redemption. There was no connivance, the statutory notice was served, and no general damages were warranted.

Facts

In 1995 the respondent borrowed UGX 40,000,000 from the first appellant and secured it by a mortgage over his property at Kibuga Block 28, Plot 256, Makerere Kavule, repayable in monthly installments over ten years. The respondent was frequently in arrears. After statutory notice and newspaper advertisement, the first appellant instructed the second appellant, an auctioneer, to sell the property by public auction on 18 January 2002. Early that morning the respondent paid arrears of shs. 5,300,000, which were receipted, and he presented the receipts and a letter at the auction asking that the sale be stopped; these were rejected and the sale proceeded. The property was sold to the respondent's tenant, Med-Net, for shs. 170,000,000. The respondent had earlier introduced Med-Net as his tenant under an arrangement to help retire the loan. He sued, contending the sale was unlawful.

Issues

  1. Whether the Court of Appeal erred in holding that, at the time of sale, the respondent was not in default of his mortgage repayments so as to justify the sale.
  2. Whether acceptance of the respondent's arrears by the first appellant amounted to a waiver of its right to sell the mortgaged property.
  3. Whether the statutory notice was served on the respondent.
  4. Whether there was a prior common interest or connivance between the first appellant and the respondent's tenant to dispossess the respondent.
  5. Whether the respondent had lost his equity of redemption at the time of sale and whether the mortgage clauses constituted a clog on that equity.
  6. Whether the Court of Appeal erred in setting aside the concluded sale and ordering return of the certificate of title unencumbered.
  7. Whether the respondent was entitled to an award of general damages.

Orders

  • Appeal allowed.
  • Judgment of the Court of Appeal set aside; the sale of the mortgaged property upheld as lawful.
  • Award of general damages of shs. 100,000,000 to the respondent set aside.
  • Respondent to pay the appellants the costs of the appeal in the Supreme Court and in the two courts below.
  • First appellant to pay the respondent the balance of the money realised from the sale after deducting the loan, interest and expenses.

Key headnotes

Mortgage — Power of Sale — Repayment by Installments
Where mortgage money is payable by installments, the mortgagee's power of sale is exercisable once an installment has become due and payable but remains unpaid.
Mortgage — Default — Acceleration of Whole Debt
On default in payment of an installment the whole amount of the loan and interest becomes immediately due and payable, and the mortgagor cannot discharge his liability by paying only the arrears.
Waiver — Requirement of Express or Implied Contract
A waiver must be founded on a term, express or implied, of a valid contract; a mortgagee's forbearance or acceptance of late or arrears payments does not by itself constitute a waiver of its right to enforce the security.
Mortgage — Equity of Redemption — Clog on Redemption
A mortgagor who fails to pay the whole amount due before sale loses his equity of redemption; mortgage clauses preserving the lender's rights are not a clog on the equity of redemption unless they render the security practically irredeemable.
General Damages — Lawful Mortgage Sale
A mortgagor whose property has been lawfully sold under the mortgage is not entitled to an award of general damages for loss of use or rent of the property.

Legislation cited (4)

  • Mortgage Decree
  • Auctioneers Act (Cap 270) s.2
  • Stamps Act s.3
  • Stamps Act s.42

Cases cited (5)

  • Payne v Cardiff Rural District Council [1932] 1 KB 241
  • Nurdin Bandali v Lombank Tanganyika Ltd [1963] EA 304
  • Dacney Vs London, Chatham and Dover Railway Co. (1867), L.R. 2H.L 43, 60
  • Knightsbridge Estates Trust Ltd v Byrne [1939] 1 Ch 441
  • Stanley v Wilde [1899] 2 Ch 474
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.