Wakilii

Emerald Hotel Ltd & 3 Ors v Barclays Bank of Uganda Ltd & 4 Ors (HCT-00-CC-CS 170 of 2008)

High Court · [2016] UGCOMMC 58 · 2016 Partly in Favour of Plaintiffs AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for breach of contract, wrongful appointment of receiver, and improper sale of mortgaged property
Decision
1st Plaintiff indebted to bank but entitled to damages for unlawful receivership and sale; property to be restored to plaintiffs; defendants ordered to vacate; counterclaim judgment to be set off

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Holding

The court held that the bank lawfully recalled the loan due to the plaintiff's failure to pay principal and interest as agreed. However, the appointment of receiver over a different corporate entity rendered the takeover of the hotel property unlawful for failure to comply with statutory notice requirements. The purported sale to the fourth defendant at below forced-sale value and the subsequent management agreement were set aside as unlawful. The plaintiff was awarded special and general damages while the bank's counterclaim for UGX 4,800,000,000 was set off against the plaintiff's award.

Outcome

1st Plaintiff indebted to bank but entitled to damages for unlawful receivership and sale; property to be restored to plaintiffs; defendants ordered to vacate; counterclaim judgment to be set off

Facts

Emerald Hotel Ltd borrowed UGX 3,600,000,000 from Barclays Bank, secured by mortgage over land owned by third and fourth plaintiffs and debentures. The bank alleged default; plaintiffs alleged breach including failure to advance Phase II funds and imposition of punitive interest. Bank recalled loan and appointed Kabiito Karamagi receiver/manager on 16 June 2008. Receiver initially appointed for Christal Way Ltd (a different company sharing a former name with plaintiff) in error, then corrected by backdated documents. Receiver took possession 23 June 2008. Property advertised for sale; court granted interim injunction 15 July 2008. After injunction expired, property sold by private treaty 15 August 2008 to Shumuk Properties Ltd for UGX 2,200,000,000 (below UGX 2,650,000,000 forced sale valuation), with only UGX 100,000,000 deposit paid. Deposit later refunded. Shumuk entered into management agreement with receiver and operated hotel. Fifth defendant lodged caveat claiming registered proprietorship.

Issues

  1. Whether the 1st, 3rd and 4th Plaintiffs have a cause of action against the 4th and 5th Defendants
  2. Whether the 1st Defendant advanced the sum of UGX 3,600,000,000 to the 1st Plaintiff
  3. Whether the 1st Plaintiff obtained its loan from the 1st defendant through deception, manipulation and dishonesty
  4. Whether the 1st Plaintiff is indebted to the 1st Defendant and if so, by how much
  5. Whether the 1st Defendant wrongly recalled the loan facility
  6. Whether there was a breach of the loan contract between the 1st Plaintiff and 1st Defendant, and if so, by whom
  7. Whether the appointment of the 2nd Defendant as Receiver/Manager of the 1st and 2nd Plaintiffs was lawful
  8. Whether the 2nd Defendant's take over of the land and property comprised in LRV 2383 folio 17 Plot 3 Semiliki Walk and the Business and Assets thereon was lawful
  9. Whether the sale of the property comprised in LRV 2383, folio 17, Plot 3 Semiliki Walk to the 4th Defendant was lawful and effectual
  10. Whether the lodgment of a Caveat on the suit property by the 5th defendant was lawful
  11. Whether the Management Agreement executed between the 2nd and 4th defendants and the latter's takeover of the suit premises were valid and or lawful
  12. Whether the parties are entitled to any of the remedies prayed for

Orders

  • Judgment entered in favour of plaintiffs against defendants jointly and severally.
  • Declaration that appointment of 2nd Defendant as Receiver/Manager of 2nd Plaintiff was unlawful.
  • Declaration that 2nd Defendant's takeover of the property was wrongful and void.
  • Declaration that purported sale of suit property was wrongful and void; sale set aside and plaintiffs' equity of redemption restored.
  • Declaration that Management Agreement between 2nd and 4th Defendants was wrongful, illegal and void.
  • Declaration that 5th Defendant wrongfully lodged Caveat; Registrar of Titles ordered to cancel and remove Caveat.
  • 4th Defendant restrained from involvement in hotel affairs; ordered to vacate suit property and handover to 1st Plaintiff forthwith.
  • 2nd Defendant restrained from exercising Receiver/Manager powers until statutory process complied with.
  • 1st Plaintiff awarded special damages: UGX 14,000,000; UGX 6,537,503,408 for period 23/06/08 to 23/06/16; UGX 68,098,994 per month from 23/06/16 until defendants vacate.
  • General damages awarded: 1st Plaintiff UGX 982,725,510; 2nd Plaintiff UGX 100,000,000; 3rd and 4th Plaintiffs jointly UGX 60,000,000.
  • Interest at 23% per annum on special damages from respective dates until payment in full; court rate on general damages from judgment.
  • Costs of suit awarded to plaintiffs.
  • On counterclaim, judgment entered against 1st Plaintiff in favour of 1st Defendant in sum of UGX 4,800,000,000, to be set off from plaintiff's decretal sums.
  • 1st Defendant awarded nominal general damages UGX 100,000,000 for breach of loan agreement.

Rules and key headnotes

Loan Agreements — Events of Default — Failure to Pay Installments
Where payment of mortgage debt is payable by installments, the mortgagee has the right to recall the loan and sell when the mortgagor fails to pay any of the installments, and upon such default the whole of the monies payable shall be deemed forthwith due.
Mortgages — Third Party Mortgages — Validity and Consideration
A third party mortgage whereby registered proprietors mortgage their land to secure a loan advanced to a different corporate entity is valid where the mortgagee's grant of the loan constitutes consideration for the covenants undertaken by the mortgagors, and such third party mortgages are recognised under the Mortgage Act 2009.
Mortgages — Execution Requirements — Signature of Mortgagee
Under section 115 of the Registration of Titles Act it is the mortgagor who must sign the mortgage deed; execution by the mortgagee is not a statutory requirement, and once a mortgage has been registered it cannot be impeached on the ground that the mortgagee did not execute it, absent fraud or exercise of the court's powers under sections 184 and 185 of the Act.
Receivership — Appointment — Compliance with Statutory Notice Requirements
Where a receiver is appointed over the wrong corporate entity due to confusion of names, and the error is corrected by backdating appointment documents, the takeover of property before proper notice is given to the correct entity and before registration of the corrected appointment constitutes a failure of due process rendering the takeover unlawful.
Mortgagee's Power of Sale — Duty of Good Faith and Best Price
A mortgagee exercising a power of sale owes a duty to act in good faith and take reasonable precautions to obtain the true market value of the mortgaged property at the date of sale. Where a mortgagee sells property below the forced sale valuation, fails to re-advertise after a long adjournment, accepts minimal deposit payment, and sells in secret with knowledge that the validity of the sale is challenged on not prima facie unreasonable grounds, the mortgagee breaches this duty and the sale may be set aside.
Caveats — Lodgment Requirements — False Claims
Under section 139 of the Registration of Titles Act a caveator must claim an estate or interest in land to be entitled to lodge a caveat. A caveat claiming interest as registered proprietor when the caveator is not a registered proprietor constitutes an obvious falsehood and the caveat is unlawfully registered for failure to satisfy statutory requirements, particularly where the supporting statutory declaration is undated and contains false averments regarding payment.
Fraud — Standard of Proof — Elements
Allegations of fraud must be strictly proved, with a standard heavier than the ordinary balance of probabilities though not requiring proof beyond reasonable doubt. The party alleging fraud must demonstrate intentional deception whereby another is induced to part with something valuable or surrender a legal right, and such inducement must occur before and not after the contract is concluded.

Legislation cited (14)

Cases cited (27)

  • Auto Garage & Others v Moloko (3) [1971] EA 514
  • Tororo Cement Co. Ltd v Froronkina International Ltd. (2001) KALR 182
  • Fredrick J.K Zaabwe v Orient Bank Ltd. (Supreme Court Civil Appeal No. 4 of 2006)
  • Kampala Bottlers Ltd. v Damanico (U) Ltd. (Supreme Court Civil Appeal No. 22 of 1992)
  • JWR Kazzora v MLS Ruluba (Supreme Court Civil Appeal No. 13 of 1992)
  • Ratlal G Patel v Dalji Makayi [1951] EA 314
  • Harsald Ltd. v Globe Cinema Ltd. [1960] EA 1046
  • Olinda DeSounza Figueiredo v Kasamali Nanji (1962) EA 756
  • Coast Brick Works v Richard Ltd. [1964] EA
  • Yosiya Sajabi v Musa Umar Anireliwalla [1956] 23 EAC 7
  • Cuckmere Brick Co. Ltd. v Mutual Finance Ltd. [1971] Ch. 949
  • Moses Jim Jjagwe v Standard Chartered Bank (U) Ltd (HCT-00-CC-CS-375-2004)
  • Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54
  • Dunlop Pneumatic Tyre Co. v Selfridge & Co. Ltd. (1915) AC 847
  • Siminyu v Housing Finance Company of Kenya [2001] 2 EA 540
  • Housing Finance Bank Ltd. v Edward Musisi (Supreme Court Civil Appeal No. 22 of 2010)
  • Re Monolithic Building Co. [1915] 1 Ch 643
  • Sembule Investments Ltd. v Uganda Baati Ltd (Miscellaneous Application No. 664 of 2009)
  • Robinson v Hararwe (1848) 1 Exch 850
  • Co-operative Bank Ltd. in liquidation v Shell Kasese Service (HCT-00-CC-CS-140-2005)
  • Tweddle v Alison (1861)
  • Bank of Baroda v Panessor [1986] 3 All ER 751
  • Capital Finance Co. Ltd. v States [1968] 3 All ER 625
  • Macfay v United African Co. Ltd. [1969] 3 All ER 1169
  • McHugh v Vision Bank of Canada [1913] AC 299
  • Re The Mihalis Angelos [1971] 1 QB [1970] All ER 125
  • ECTA (U) Ltd. v Geraldine Namiriime (Supreme Court Civil Appeal No. 9 of 1999)

Full judgment

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Emerald Hotel Ltd & 3 Ors v Barclays Bank of Uganda Ltd & 4 Ors (HCT-00-CC-CS 170 of 2008) [2016] UGCommC 58 (15 July 2016)
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.