Wakilii

Aisha Nakayi v DFCU Bank (U) Limitbd [2024] UGHC 1357

High Court · 2024 Judgment for Defendant AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for declaration that sale of mortgaged property was premature and for damages, with counterclaim for debt recovery
Decision
Suit dismissed; judgment for defendant on counterclaim for debt and continuing contractual interest

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the plaintiff's suit challenging a mortgage sale, holding that the doctrine of frustration does not apply where a mortgagor acknowledges ongoing debt and seeks restructure rather than discharge. Performance becoming more difficult does not constitute frustration. The plaintiff failed to prove COVID-19 made performance wholly impossible or that she took reasonable steps to mitigate, having maintained payment capacity and requested restructure. Penal interest rates agreed freely are not unconscionable. Judgment entered for the defendant/counterclaimant for UGX 736,405,215 plus contractual interest.

Outcome

Suit dismissed; judgment for defendant on counterclaim for debt and continuing contractual interest

Facts

On 1 August 2018, the plaintiff mortgaged plots 1262 and block 249 at Bunga to the defendant bank to secure a loan of UGX 850,000,000 repayable in monthly instalments. The plaintiff made consistent payments from 2018 to 2020. In May 2021, during COVID-19 restrictions, she began defaulting. The defendant issued a Notice of Default on 4 June 2021 requiring payment of arrears of UGX 31,683,625 within 45 days. On 30 March 2022, the defendant issued a Notice of Sale requiring payment of the entire outstanding loan of UGX 796,819,766 within 21 days. The defendant granted the plaintiff until 23 April 2022 to settle arrears and redeem the property, which she failed to do. The mortgaged property was advertised for sale in August and October 2022. The plaintiff made part payments reducing the debt to UGX 736,405,215 as at 9 November 2022. She claimed business upheavals due to COVID-19 lockdowns frustrated the contract and sought to prevent the sale.

Issues

  1. Whether the home loan facility was frustrated by COVID-19 restrictions and business difficulties
  2. Whether the penal interest rates are harsh and unconscionable
  3. Whether the defendant is entitled to payment of UGX 736,405,215 with interest thereon in the counterclaim
  4. What remedies are available to the parties

Orders

  • Plaintiff's suit dismissed with costs to the defendant.
  • Judgment entered in favor of the defendant in the sum of UGX 736,405,215 as at 9th November 2020 with interest accruing thereon at contractual facility rate till payment in full.
  • Costs of the counterclaim awarded to the defendant/counterclaimant.

Rules and key headnotes

Frustration — COVID-19 pandemic — Requirements for establishing frustration
For a contract to be frustrated by COVID-19 or related restrictions, the affected party must prove that performance was wholly impossible, the event was beyond reasonable control, there was a nexus between the frustrating event and inability to perform, and reasonable steps were taken to avoid or mitigate the consequences. The outbreak of COVID-19 in itself is not a frustrating event; its specific effects on contractual performance must be demonstrated.
Frustration — Difficulty of performance distinguished from impossibility
Where contractual obligations become more difficult or expensive to perform but not radically different or wholly impossible, there is no frustration. An alteration in the manner of performance or impossibility affecting only one party does not constitute frustration of the contract.
Mortgage — Frustration doctrine inapplicable where mortgagor seeks restructure
The doctrine of frustration does not apply where a mortgagor explicitly acknowledges the debt, expresses willingness to pay, makes partial payments, and requests loan restructure. The remedy for frustration is discharge of both parties from their obligations, which is inconsistent with a borrower seeking to continue performance under modified terms.
Penal interest — Freedom of contract — Unconscionability
Interest rates, including default or penal interest, freely agreed to by parties are not harsh or unconscionable where the borrower serviced the loan for an extended period without raising any objection to the rates, admitted freely agreeing to them, and made payments including penal interest without dispute.

Legislation cited (2)

Cases cited (5)

  • Life FM 93.8 Limited v Emamba Esazire United Brothers Company Limited (Miscellaneous Application No. 58 of 2021)
  • Mogas (U) Ltd v Benzina (U) Ltd (Civil Suit No. 88 of 2013)
  • Taylor v Caldwell (1863) 3 B. & S 826
  • Davis Contractors Limited v Fareham Urban District Council [1956] AC 696
  • Blackburn Bobbin Co. Ltd v Allen (TW) & Sons Ltd [1918] 1 KB 540

Full judgment

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

Aisha Nakayi v DFCU Bank (U) Limitbd 2024 UGHC 1357 (26 March 2024)
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.