Wakilii

Byaruhanga Alex v Barugahare Brighton and Others (Civil Suit No. 235 of 2017)

High Court · [2021] UGCOMMC 203 · 2021 Judgment for Plaintiff (Partial) AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for rescission of contract and damages arising from sale of land vitiated by mistake
Decision
Contract rescinded. Plaintiff to receive refund of purchase price from Defendant. Defendant to receive refund from 1st Third Party. 2nd Third Party to indemnify 1st Third Party for difference in valuation.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the sale contract was vitiated by mistake where the land sold had developments but the actual plot was vacant. The contract was rescinded. The Plaintiff was entitled to a refund of UGX 105,000,000 from the Defendant. The Defendant was entitled to UGX 40,000,000 from the 1st Third Party (the bank). The 2nd Third Party (valuer) was liable to indemnify the 1st Third Party UGX 16,000,000 for negligent valuation of the wrong property. Both Plaintiff and Defendant were found negligent for failing to conduct proper due diligence.

Outcome

Contract rescinded. Plaintiff to receive refund of purchase price from Defendant. Defendant to receive refund from 1st Third Party. 2nd Third Party to indemnify 1st Third Party for difference in valuation.

Facts

The Plaintiff purchased land (Busiro Block 458 Plot 599) from the Defendant for UGX 105,000,000 based on a sale agreement stating the land had an incomplete storied building and pit latrine. The Defendant had earlier purchased the same land from the 1st Third Party (Guaranty Trust Bank) for UGX 40,000,000 following mortgage foreclosure. The bank relied on a valuation report from the 2nd Third Party (Reitis Limited) dated 30 September 2014 confirming developments on the land. After the Plaintiff took possession and deposited building materials, he was arrested for criminal trespass. A subsequent valuation on 28 February 2017 revealed that Plot 599 was actually vacant with no structural developments. The 2nd Third Party had valued the wrong property. The Plaintiff sued for rescission and damages. The Defendant joined the bank for indemnity, and the bank joined the valuer.

Issues

  1. Whether the sale of the suit land to the Plaintiff by the Defendant is vitiated by mistake?
  2. Whether the Defendant is entitled to contribution from the 1st Third Party and if so to what extent?
  3. Whether the 1st Third Party is entitled to contribution from the 2nd Third Party and if so to what extent?
  4. Whether the Plaintiff's claim against the Defendant is fraudulent?
  5. Whether the Plaintiff and the Defendant were negligent in the purchase of the suit land?
  6. Whether the 2nd Third Party is rightfully before this court?
  7. What remedies are available to the parties?

Orders

  • Declaration that the contract of sale of land known as Busiro Block 458 Plot 599 Katale between the Plaintiff and Defendant is vitiated by mistake.
  • Order rescinding the said sale contract.
  • Special damages of UGX 105,000,000 with interest of 7% per annum from the date of sale contract until payment in full to be paid by the Defendant to the Plaintiff.
  • The Defendant is entitled to get his purchase price of UGX 40,000,000 back from the 1st Third Party at interest rate of 7% per annum from date of sale until payment in full.
  • 2nd Third Party should indemnify the 1st Third Party UGX 16,000,000 at interest rate of 7% per annum from 2014 until payment in full.
  • The Plaintiff is awarded costs of the suit: 20% to be paid by the Defendant, 30% by the 1st Third Party and 50% by the 2nd Third Party.
  • The 2nd Third Party to pay the costs for the Defendant and the 1st Third Party.

Rules and key headnotes

Mistake — Common Mistake as to Subject Matter — Effect on Contract Validity
Where both parties to a sale agreement are under a mistake as to a matter of fact essential to the agreement, namely the identity and condition of the subject matter (land with developments versus vacant land), consent is obtained by mistake of fact and the agreement is void under Section 17 of the Contract Act 2010.
Indemnity — Right to Indemnity Arising from Sale of Wrong Property
A right to indemnity arises where the relation between parties is such that in law or equity there is an obligation upon one party to indemnify the other. Where a bank sells the wrong land to a purchaser based on an incorrect valuation report, the bank must refund the purchase price as the contract of sale was based on mistake.
Professional Negligence — Valuer's Duty of Care to Third Parties
Where a valuer knows or ought to know that his valuation report will be relied upon by third parties in the context of foreclosure and sale of mortgaged property, he owes a duty of care in tort to those third parties, provided there is a sufficiently proximate relationship. A valuer who negligently values the wrong property breaches this duty of care.
Professional Negligence — Extent of Valuer's Liability for Incorrect Valuation
Where a valuer negligently values the wrong property, the extent of indemnity owed to the party who relied on the valuation is limited to the difference between the false valuation and the correct valuation of the actual property.
Land Purchase — Duty of Purchaser to Conduct Due Diligence
A purchaser of land must conduct proper due diligence including physical inspection, inquiries from neighbours and local leaders, and independent boundary opening to ascertain the correct identity of the plot being purchased. Failure to do so constitutes negligence, and the purchaser bears the consequences of purchasing the wrong plot. A mere search on the register is not sufficient.
Fraud — False Declaration of Property Value for Stamp Duty
Where a plaintiff makes a false declaration on land transfer stamp duty payment by declaring a value lower than the actual purchase price, the plaintiff's hands are not clean and he is fraudulent in the transfer process. The equitable maxim 'he who comes to equity must have clean hands' applies.
Rescission — Effect of Rescission on Parties' Positions
Rescission involves setting aside the transaction so as to place each party in the position in which he would have been had he not entered into the contract. Where a sale contract is vitiated by mistake and rescinded, the purchaser is entitled to a refund of the purchase price.

Legislation cited (5)

Cases cited (14)

  • Solle vs. Butcher
  • Bell v Lever Bros [1931] ALLER 7
  • Eastern Shipping Co v Quah Benq Kee [1924] AC 177
  • Fredrick Zaahwe v Orient Bank and Others (Supreme Court Civil Appeal No. 4 of 2006)
  • Betty Kizito v David Kizito Kanonya and Others (Supreme Court Civil Appeal No. 8 of 2018)
  • Senkugu v Yqkob (Supreme Court Civil Appeal No. 35 of 2006)
  • Kampala Bottlers Ltd v Pamanico (U) Ltd (Supreme Court Civil Appeal No. 22 of 1992)
  • Blyth v Birmingham Water Works Co [1856] 11 Ex 781
  • Donoghue v Stevenson [1932] UKHL 100
  • Uganda Posts and Telecommunications v Lutaaga (Court of Appeal Civil Appeal No. 36 of 1995)
  • Provincial Insurance Co. of EA Ltd. vs. Mordekai Muianga Nandwa (1995-1998) EA 288
  • Dairy Development Authority v Ngarambe (High Court Civil Appeal No. 10 of 2011)
  • Benedito Musisi v Attorney General (High Court Civil Suit No. 708 of 1992)
  • Borham-Carter v Hyde Park Hotel [1948] 64 TLR

Full judgment

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Byaruhanga Alex v Barugahare Brighton and Others (Civil Suit No. 235 of 2017) [2021] UGCommC 203 (10 October 2021)
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.