Wakilii

Afro Motors Limited and 2 Others v Barclays Bank Uganda Limited (CIVIL SUIT 189 OF 2010)

High Court · [2017] UGCOMMC 259 · 2017 Suit Dismissed — Costs Awarded to Plaintiffs AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for redemption of mortgaged securities, taking of accounts, and recovery of property value
Decision
Suit dismissed but defendant penalized by costs order for negligent failure to communicate and account for the sale

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court found that the plaintiffs had not repaid the mortgage before the sale and the defendant bank had the right to sell the mortgaged properties. However, the sale was negligently conducted because the defendant failed to provide notice of the 2007 sale, failed to value the properties, failed to account for sale proceeds, and maintained a wall of silence throughout the debt recovery process. While the suit was dismissed, the defendant was ordered to pay costs for failing in its duty to communicate regularly with the plaintiffs and provide proper accounting.

Outcome

Suit dismissed but defendant penalized by costs order for negligent failure to communicate and account for the sale

Facts

In 1995, the first plaintiff obtained an overdraft facility of UGX 10 million from Nile Bank Limited, secured by a mortgage over land in Kyadondo Block 212 Plots 154, 183 and 201 at Kyebando owned by the second plaintiff. The first plaintiff defaulted and by September 1995 owed UGX 12,302,496. Nile Bank instructed auctioneers in the 1990s and some plots were sold to bibanja holders realizing UGX 9,950,000. In 2007, Nile Bank (whose assets and liabilities had been acquired by Barclays Bank Uganda Ltd) sold the remaining properties by private treaty to Vincent Kawunde for UGX 15,000,000, subject to bibanja holder interests. The plaintiffs were not notified of this 2007 sale and claimed the properties were sold unlawfully at undervalue. At the time of sale, the debt had grown to UGX 45,204,010 due to accruing interest. The plaintiffs brought suit seeking redemption, account of transactions, and damages.

Issues

  1. Whether the mortgage was paid by the plaintiffs prior to the sale.
  2. Whether the sale of the property was lawful.
  3. Whether the sale of the suit properties was at an undervalue price.
  4. What remedies are available to the parties.

Orders

  • Suit dismissed.
  • Defendant to pay costs to the plaintiffs.

Rules and key headnotes

Banking & Finance — Mortgages — Duty of Mortgagee — Obligation Not to Act in Secret
A mortgagee selling mortgaged property must not act in secret and must not conceal what he is doing from the mortgagor, as acting in secret may expose the mortgagee to suspicion of not having acted in good faith.
Banking & Finance — Mortgages — Duty of Mortgagee — Duty to Obtain Reasonable Price
A mortgagee owes a dual duty to act in good faith and to take reasonable care to obtain the true market value of the mortgaged property at the moment he chooses to sell it, as the proximity between mortgagee and mortgagor makes them neighbours in the Donoghue v Stevenson sense.
Banking & Finance — Mortgages — Sale Procedure — Distinction Between Public Auction and Private Treaty
Where a mortgagee sells by private treaty rather than by public auction, it is incumbent upon the mortgagee to take particular care to ensure that the mortgagor's interests are amply protected, as private treaty lacks the competitive bidding that a public auction provides.
Banking & Finance — Mortgages — Statutory Requirements — Pre-Sale Valuation
A mortgagee is required, before selling mortgaged property upon default, to value the property to ascertain the current market value and the forced sale value, and the valuation should not be made more than six months before the date of sale.
Banking & Finance — Banker-Customer Relationship — Duty to Communicate During Debt Recovery
The duty of effective communication which is the cornerstone of the banker-customer relationship continues even during debt recovery, and failure to provide regular updates of pending debt and to issue demand notes acts as a bar stopping creditors from claiming accumulating outstanding balance, particularly where no further demands for payments are made and no account is given for sale of mortgaged properties.
Contract Law — Damages — When Damages Are Earned
Damages are earned and are not automatic; for damages to be awarded they must be reasonably foreseeable as naturally arising from a breach of contract and should be such as may fairly and reasonably be considered either arising naturally according to the usual course of things from such breach or as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract.
Banking & Finance — Mortgages — Costs — Costs as Remedy for Breach of Duty of Care
Where a mortgagee bank is negligent in its duty of care to provide information about the sale of mortgaged properties and to account for monies due, the court may penalize the mortgagee by ordering it to pay the mortgagor's costs even where the substantive suit is dismissed.

Legislation cited (5)

Cases cited (11)

  • Yosiya Sajabi v Musa Umar Amerliwalla and Matia Wamala (Civil Appeal No. 72 of 1955)
  • Cuckmere Brick Co Ltd and another v Mutual Finance Ltd [1971] (2) All ER 633
  • Reliance Permanent Building Society v Harwood-Stamper ([1944] 2 All ER 75 at 76, 77, [1944] Ch 362 at 364, 365)
  • Greenland Bank Ltd (In Liquidation) v Wasswa Birigwa and Another (HCCS No. 26 of 2004)
  • National Bank of Commerce Ltd and 2 Others (HCCS No. 496 of 2003)
  • Moses Jim Jjagwe v Standard Chartered Bank (U) Ltd (HCCS No. 37 of 2004)
  • Malayan Banking Bhd -Vs- Hwang Rose and others [1997] 3 LRC 224
  • Waring (LORD) Vs London and Manchester Assurance Company ltd and Others (1934. W 3168)
  • Warner Vs Jacobs
  • Mubiru v Uganda Credits and Savings Bank [1978] HCB 109
  • Bank of Uganda vs. Masaba [1999] 1EA 2

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Afro Motors Limited and 2 Others v Barclays Bank Uganda Limited (CIVIL SUIT 189 OF 2010) [2017] UGCommC 259 (31 May 2017)
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.