Wakilii

Greenland Bank Ltd (In liquidation) v Wasswa Birigwa and Anor (HCT-00-CC-CS 26 of 2004)

High Court · [2007] UGCOMMC 108 · 2007 Counterclaim Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Counterclaim arising from action to recover loan arrears secured by mortgage; plaintiff's claim dismissed at trial
Decision
Counterclaim succeeded; defendants awarded damages for unlawful and fraudulent sale of mortgaged property

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the sale of mortgaged property was unlawful for failure to serve statutory notice under Registration of Titles Act s.116 before sale. The sale was also fraudulent, as the mortgagee declared the sale price as UGX 13,000,000 when the actual sale price was UGX 17,000,000. The mortgagee acted negligently by failing to obtain a pre-sale valuation and selling by private treaty. Defendant awarded UGX 37,000,000 representing the difference between true market value and declared sale price, plus 25% interest per annum from date of sale.

Outcome

Counterclaim succeeded; defendants awarded damages for unlawful and fraudulent sale of mortgaged property

Facts

Defendant no.1 borrowed money from plaintiff bank, secured by mortgage over property registered in defendant no.2's name. Defendant no.1 defaulted on loan repayments. Plaintiff instructed auctioneers to sell the mortgaged property without serving statutory notice on either defendant. Property was advertised in May 1998. In September 1998, property was sold by private treaty to PW2 and another buyer for UGX 17,000,000. Plaintiff declared the sale price to defendants as UGX 13,000,000 and credited only that amount to defendant no.1's account. Transfer deed also stated purchase price as UGX 13,000,000. At time of sale, property's open market value was UGX 50,000,000 according to valuation evidence. Plaintiff's suit for loan arrears was dismissed. Defendants counterclaimed for unlawful and fraudulent sale.

Issues

  1. Whether due statutory notice was served on defendant no.1 before sale of the mortgaged property.
  2. Whether the property was sold fraudulently.
  3. Whether the plaintiff made the correct declaration of the sale price.
  4. Whether the plaintiff acted negligently in the sale of the mortgage property.
  5. What damages, if any, were suffered by the defendant no.1.

Orders

  • Counterclaim allowed.
  • Plaintiff to pay defendant UGX 37,000,000 being the difference between the true market value (UGX 50,000,000) and the sale price declared to defendant (UGX 13,000,000).
  • Interest of 25% per annum on UGX 37,000,000 from 8th September 1998 until payment in full.
  • Claim for mesne profits dismissed.
  • Claim for general damages for pain and anguish dismissed.
  • Costs of the action awarded to the defendants.

Rules and key headnotes

Mortgage — Mortgagee's Power of Sale — Statutory Notice Requirement
Before a mortgagee may exercise a power of sale over mortgaged property, statutory notice under Registration of Titles Act s.116 must be served on the mortgagor. Service of this notice is mandatory, not discretionary. A sale conducted without statutory notice is unlawful.
Mortgage — Mortgagee's Power of Sale — Service of Notice
Service of statutory notice under Registration of Titles Act s.116 must be made in accordance with s.210A of the same Act. The mortgagee must ensure that the mortgagor is served personally and must obtain evidence of service.
Mortgages — Fraudulent Sale — Underdeclaration of Sale Price
Where a mortgagee sells mortgaged property for one price but declares a lower price to the mortgagor and credits only the lower amount, concealing the difference, this reveals a felonious intent to defraud the mortgagor and renders the sale fraudulent.
Negligence — Mortgagee's Duty of Care in Sale of Mortgaged Property
In effecting a sale of mortgaged property, a mortgagee owes a duty to act with reasonable care. The duty is not to obtain the best price possible but to obtain a reasonable price. A mortgagee acts negligently where it sells by private treaty without obtaining a pre-sale valuation and without the benefit of competition that a public auction provides.
Damages — Unlawful Sale of Mortgaged Property — Measure of Damages
Where a sale of mortgaged property is held to be unlawful or negligently carried out, the mortgagor is entitled to recover the difference between the true market value of the property at the time of sale and the sale price realised from the sale, plus interest.
Mesne Profits — Recovery Where Property Not Restored
A mortgagor who recovers damages representing the value of mortgaged property unlawfully sold is not entitled to mesne profits for the post-sale period. Mesne profits are recoverable only where the successful party seeks to revoke the sale and recover the property itself. To allow recovery of both the value of the property and mesne profits would result in double compensation.

Legislation cited (4)

Cases cited (1)

  • Mubiru v Uganda Credit and Savings Bank Ltd (Civil Suit No. 567 of 1965)

Full judgment

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

Greenland Bank Ltd (In liquidation) v Wasswa Birigwa and Anor (HCT-00-CC-CS 26 of 2004) [2007] UGCommC 108 (20 December 2007)
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.