Wakilii

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

High Court · [2021] UGCOMMC 206 · 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 of sale of land and damages
Decision
Sale contract rescinded. Plaintiff awarded refund of purchase price from Defendant. Defendant entitled to refund from 1st Third Party. 1st Third Party entitled to partial indemnity from 2nd Third Party.

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 (with developments) differed from the mortgaged property (vacant land). The contract was rescinded. The Defendant was entitled to contribution from the 1st Third Party (the mortgagee bank) for the purchase price. The 1st Third Party was entitled to partial indemnity from the 2nd Third Party (the valuer) for negligent valuation. Both Plaintiff and Defendant were found negligent for failing to conduct proper due diligence. The Plaintiff was found fraudulent in understating stamp duty but was awarded a refund of the purchase price.

Outcome

Sale contract rescinded. Plaintiff awarded refund of purchase price from Defendant. Defendant entitled to refund from 1st Third Party. 1st Third Party entitled to partial indemnity from 2nd Third Party.

Facts

The Plaintiff purchased land described as Busiro Block 458 Plot 599 with an incomplete storied building from the Defendant for UGX 105,000,000. 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 had relied on a valuation report by the 2nd Third Party (Reitis Limited) stating the land had developments. After the Plaintiff took possession and deposited building materials, he was arrested for criminal trespass. A subsequent valuation revealed that Plot 599 was actually vacant land without any structures. The mortgaged property sold was not the correct plot. 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 characteristics of the land being sold, the agreement is void and consent is vitiated by mistake of fact under Section 17 of the Contract Act 2010.
Indemnity — Right to Indemnity — Vendor Selling 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 vendor sells the wrong property based on a mistaken valuation, the vendor is obliged to refund the purchase price to the purchaser.
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 a foreclosure and sale process, he owes a duty of care to those third parties to conduct the valuation with proper care, skill and due attention, and to ensure that the correct property is valued.
Professional Negligence — Valuer's Liability — Extent of Indemnity
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 Transactions — Purchaser's Duty of Due Diligence — Physical Inspection and Boundary Opening
A diligent purchaser of land must conduct thorough investigations including physical inspection, inquiries from neighbours and local leaders, and opening of boundaries to ascertain the exact identity of the plot being purchased. Failure to do so constitutes negligence and the purchaser bears the consequences of purchasing the wrong plot.
Fraud — False Declaration of Property Value for Stamp Duty
Where a purchaser makes a false declaration of the purchase price on land transfer documents to pay lower stamp duty than legally required, the purchaser's conduct is fraudulent and violates the equitable principle that he who comes to equity must have clean hands.
Rescission — Effect of Rescission — Restitution of Purchase Price
Rescission involves setting aside a 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 rescinded due to mistake, the vendor must refund the purchase price with interest.

Legislation cited (5)

Cases cited (14)

  • Solle vs. Butcher
  • Bell v Lever Bros [1931] ALLER 1
  • Eastern Shipping Co v Quah Heng Kee [1924] AC 177
  • Fredrick Zaabwe v Orient Bank and Others (Supreme Court Civil Appeal No. 4 of 2006)
  • Betty Kizito v David Kizito Kanunya and Others (Supreme Court Civil Appeal No. 08 of 2018)
  • Senkugu v Yakob (Supreme Court Civil Appeal No. 35 of 2006)
  • Kampala Bottlers Ltd v Damanico (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 Lutaaya (Court of Appeal Civil Appeal No. 36 of 1995)
  • Provincial Insurance Co. of EA Ltd vs. Mordekai Edwantia 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)
  • Bonham-Carter vs. 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 206 (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.