Kizito Kanonya & 7 Ors v Kazito [2020] UGSC 32

Supreme Court · 2020 Appeal Partly Allowed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second appeal to the Supreme Court from a Court of Appeal decision upholding the High Court (Commercial Division) judgment against the mortgagee

Decision

Appeal partly allowed; finding that the appellant was not entitled to sell the property upheld, and general damages reduced from UGX 500,000,000 to UGX 200,000,000

The full judgment

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Holding

The Supreme Court held that a mortgagee's statutory power of sale is a drastic remedy whose conditions precedent must be strictly observed. The appellant Bank's notice of default failed to grant the mortgagor the mandatory forty-five working days to rectify the default required by Regulation 7(1) of the Mortgage Regulations 2012, rendering the notice defective and any sale invalid. The Court of Appeal was therefore correct to uphold the finding that the Bank was not entitled to sell the suit property. On general damages, the Court held that an appellate court interferes only where the trial court applied a wrong principle or the award is manifestly excessive; finding the UGX 500,000,000 award on the higher side because the sale never materialised, it reduced the award to UGX 200,000,000.

Facts

The first respondent, Bisimport (U) Ltd, obtained credit facilities from the appellant, Bank of Uganda. As security, the second respondent, Shumuk Properties Ltd, mortgaged its property comprised in LRV 2755 Folio 4 Plot 7 Nakasero Road to the Bank. The third respondent, Mukesh Shukla, was managing director of both companies and a guarantor. When the first respondent defaulted on repayment, the Bank advertised the mortgaged property for sale. The respondents sued in the High Court (Commercial Division) challenging the intended sale and seeking a declaration that the Bank was not entitled to sell, a permanent injunction, and general damages. The notice of default issued by the Bank did not grant the mortgagor the mandatory forty-five working days to rectify the default. The threatened sale never materialised and the respondents retained possession of the property throughout.

Issues

Whether the appellant complied with the mandatory statutory notice requirements under the Mortgage Act 2009 and the Mortgage Regulations 2012 before exercising its power of sale.
Whether the appellant was entitled to sell the mortgaged property.
Whether the award of general damages of UGX 500,000,000 was manifestly excessive and warranted appellate interference.

Orders

The appeal is partly allowed.
The finding that the appellant was not entitled to sell the suit property is upheld.
The award of general damages is reduced from shillings 500,000,000 to shillings 200,000,000.
Each party shall bear its own costs of this appeal, given that the appeal has partly succeeded.

Key headnotes

Banking & Finance — Mortgages — Statutory notice prior to exercise of power of sale

Before a mortgagee may exercise its power of sale, it must serve on a defaulting mortgagor a written notice requiring rectification of the default within forty-five working days as mandated by Regulation 7(1) of the Mortgage Regulations 2012; a notice that fails to allow this period is defective.

Land & Property — Mortgages — Strict compliance and validity of sale

The power of sale is a drastic remedy and statutory provisions enacted for the protection of mortgagors must be strictly complied with; where a mortgagee fails to comply with the mandatory statutory notice requirements, any sale or intended sale of the mortgaged property is invalid.

Damages & Quantum — General damages — Appellate interference with discretionary awards

General damages are awarded at the discretion of the trial court, and an appellate court will interfere only where the trial court acted on a wrong principle or where the award is so manifestly excessive as to represent an erroneous estimate of the loss.

Legislation cited (3)

Mortgage Act 2009 s.19
Mortgage Act 2009 s.26
Mortgage Regulations 2012 reg.7(1)

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.