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Finance Trust Bank (U) Ltd v Lugazi Community Day and Boarding Primary School Limited and Others (Civil Suit No. 739 of 2020)

High Court · [2026] UGCOMMC 7 · 2026 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of outstanding loan balance following foreclosure and sale of mortgaged property; defendants counterclaimed challenging the validity of the sale
Decision
Outstanding loan balance of UGX 133,803,970 plus contractual interest and costs awarded to plaintiff; defendants (borrower and guarantors) remain jointly and severally liable; foreclosure sale upheld as lawful

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the foreclosure and sale of mortgaged property by Finance Trust Bank was lawful. The court found that all statutory requirements under the Mortgage Act were satisfied: proper demand and default notices were served, the property was valued within the prescribed timeframe at a forced sale value of UGX 145 million, the sale by public auction was properly advertised, and three competitive bids were received. The sale price of UGX 155 million exceeded the forced sale value. Defendants failed to prove that the bank acted in bad faith, failed to take reasonable care to obtain the best price reasonably obtainable, or that the sale was at an undervalue. The defendants as borrower and guarantors remain jointly and severally liable for the outstanding balance of UGX 133,803,970 plus contractual interest at 23.6% per annum from the date of filing suit. Counterclaim challenging the sale dismissed.

Outcome

Outstanding loan balance of UGX 133,803,970 plus contractual interest and costs awarded to plaintiff; defendants (borrower and guarantors) remain jointly and severally liable; foreclosure sale upheld as lawful

Facts

In June 2015, Finance Trust Bank advanced UGX 250 million to Lugazi Community Day and Boarding Primary School Limited, secured by two mortgaged properties and personal guarantees from five directors. The borrower defaulted and by December 2017 owed UGX 18,272,000 in arrears. The bank issued statutory demand and default notices. After the borrower failed to remedy the default, the bank served a notice of sale in March 2018. One mortgaged property (LRV 1525 Folio 3, Lugazi) was valued at a forced sale value of UGX 145 million in May 2018. The property was advertised for sale by public auction in The Monitor newspaper on 2 May 2018, with the auction date set for thirty days after the advert. The sale was conducted on 4 October 2018, receiving three bids. The highest bid of UGX 155 million was accepted from Isaac Kasirivu. After applying the sale proceeds, an outstanding balance of UGX 133,803,970 remained.

Issues

  1. Whether the defendants are indebted to the plaintiff
  2. Whether the mortgage property comprised in LRV 1525 Folio 3 land at Lugazi was sold in accordance with The Mortgage Act and Regulations
  3. Whether the property comprised in LRV 1525 Folio 3 land at Lugazi was part of the mortgaged property
  4. What remedies are available to the parties

Orders

  • Judgment entered for the plaintiff against the defendants jointly and severally.
  • Defendants ordered to pay UGX 133,803,970 as the outstanding amount on the loan.
  • Interest thereon at the rate of 23.6% per annum from 17 September 2020 until payment in full.
  • Costs of the suit awarded to the plaintiff.
  • Counterclaim dismissed with costs to the plaintiff.

Rules and key headnotes

Mortgages — Setting Aside Sale by Mortgagee — Grounds for Challenge
A sale by mortgagee may be set aside on the ground of material irregularity or fraud in publishing or conducting it, provided that the same has caused substantial injury to the applicant; however, a sale is not automatically illegal simply because some violation of a statute has been committed during the course of its performance; there is a distinction between a sale which has as its object the doing of the very act forbidden by statute under a penalty, and a sale whose execution involves an illegality only incidentally.
Mortgages — Mortgagee's Duty — Standard of Care in Exercising Power of Sale
In exercising the power of sale for its own benefit to enable it to realise its debt, a mortgagee is not entitled to act in a way which unfairly prejudices or wilfully and recklessly sacrifices the interests of the mortgagor; a mortgagee has the obligation in exercising the power of sale to bona fide endeavour to obtain the best price reasonably available in all the circumstances of the case; the burden of proof is on the mortgagor to show that the mortgagee failed to take reasonable care to obtain the best price reasonably obtainable.
Mortgages — Valuation — Requirement for Pre-Sale Valuation and Standard of Review
A valuation of the mortgaged property within six months of the sale is a mandatory requirement under Regulation 11(1) of The Mortgage Regulations to ascertain the current market value and the forced sale value; there has to be a manifest error to justify departure from the valuation; manifest errors are oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion; once the court finds no manifest error in the disputed valuation, there is no need to consider competing valuations or order another to be made.
Mortgages — Forced Sale Value Distinguished from Market Value
Market value as it is commonly understood has no applicability in the forced-sale context; it is the very antithesis of forced-sale value; forced sale value is the estimated amount that one would expect to achieve at a properly promoted, conducted, and attended auction sale; the criterion when determining adequacy of the price is the amount which may reasonably be received from the sale of a property within a time frame too short to meet the marketing time frame of the market value; the mortgagee may accept a bid even if it is below the forced sale value stated by the valuer, provided it is the best price obtainable in the circumstances.
Mortgages — Sale Procedure — Compliance with Statutory Requirements
Before exercising the power to sell mortgaged land, the mortgagee is required to serve a notice to sell in the prescribed form on the mortgagor and not to proceed to complete any contract for the sale until twenty-one working days have lapsed from the date of the service of the notice to sell; where a sale is to proceed by public auction, the mortgagee must ensure the sale is publicly advertised in advance by placing an advert in a newspaper of wide circulation specifying the place and date of auction, being no earlier than thirty days from the date of the first advert; failure to issue a notice of sale amounts to a serious violation of the express statutory procedure.
Guarantee — Joint and Several Liability of Guarantors and Principal Debtor
On the default of the principal debtor the guarantor is, apart from special stipulation, immediately liable to the full extent of his obligation without being entitled to require either notice of the default or previous recourse against the principal debtor; both the principal debtor and the guarantor are jointly and severally liable to pay the loan, meaning they can be pursued separately or together for any outstanding balance; the creditor may pursue all guarantors and the principal debtor jointly or separately in different kinds of proceedings.
Mortgages — Challenge to Sale — Evidentiary Burden on Mortgagor
To establish sale at an undervalue, the mortgagor must prove either undervalue coupled with impropriety or vice, or undervalue that is gross and disadvantageous as to raise a presumption of fraud; undervalue alone is not enough to vitiate the exercise of a mortgagee's power of sale; it must be shown that the sale was made at a fraudulent or gross undervalue and that the sale was conducted in bad faith or with collusion; if a mortgagee exercises the power of sale bona fide for the purpose of realising the debt and without collusion with the purchaser, the court will not interfere even though the sale be very disadvantageous, unless the price is so low as in itself to be evidence of fraud.

Legislation cited (27)

Cases cited (20)

  • General Parts (U) Ltd v Non-Performing Assets and Recovery Trust (Supreme Court Civil Appeal No. 5 of 1999)
  • Silven Properties Limited v. Royal Bank of Scotland [2003] EWCA Civ 1409
  • Standard Chartered Bank v. Walker [1982] 1 WLR 1410
  • Progressive Group of Schools Limited and Two Others v Barclays Bank of Uganda and Another (Court of Appeal Civil Appeal No. 349 of 2020)
  • Yosiya Sajabi v. Musa Umar Amerliwalla and Matia Wamala, (1956) 23 EACA 71
  • Cuckmere Brick Co v. Mutual Finance [1971] Ch 949; [1971] 2 All ER 633
  • Yorkshire Bank plc v. Hall [1999] 1 All E R 879
  • Sendagire Stephen and Nanyombi Gladys v DFCU Limited, Kabiito Karamagi and Kirumira Godfrey Kalule (High Court Civil Suit No. 26 of 2008)
  • Alp Investments Limited v Bank of India (U) Limited (High Court Civil Suit No. 1 of 2024 (OS))
  • Jeane Frances Nakamya v DFCU Bank Limited and Another (Court of Appeal Civil Appeal No. 105 of 2013)
  • BFP v. Resolution Trust Corp., 511 U.S. 531, 537 (1994)
  • Aodhcon LLP v. Bridgeco Limited [2014] EWHC 535
  • Nilrem Nominees Pty Ltd v. Karaley Ltd (2000) WASC 82
  • Aya Investments (U) Limited v Industrial Development Corporation of South Africa (High Court Miscellaneous Application No. 2908 of 2023)
  • Kennedy v. De Trafford (1897) AC 180
  • Pendlebury v. Colonial Mutual Life Assurance Society Ltd. 175 ER 1260; (1912) 13 CLR 676
  • Payne v, Cave (1789) 3 TR 148
  • Stanbic Bank Limited v Celular Galore Limited and Two Others (High Court Civil Suit No. 50 of 2010)
  • Moschi v. Lep Air Services Ltd [1973] AC 331; [1972] 2 WLR 1175; [1972] 2 All ER 393
  • Hadley v. Baxendale (1894) 9 Exch 341

Full judgment

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Finance Trust Bank (U) Ltd v Lugazi Community Day and Boarding Primary School Limited and Others (Civil Suit No. 739 of 2020) [2026] UGCommC 7 (13 January 2026)
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.