Wakilii

Guaranty Trust Bank (U) Limited v Dokwals Uganda Limited and Another (Civil Suit Originating Summons 1 of 2021)

High Court · [2021] UGCOMMC 189 · 2021 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance originating summons for foreclosure and sale of mortgaged property
Decision
Foreclosure order granted; property to be sold by public auction; defendants to deliver vacant possession

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that where a mortgagor defaults on a loan secured by legal mortgage and fails to remedy the default after notice under section 19 of the Mortgage Act, the mortgagee is entitled to foreclosure and sale. Sale must proceed by public auction under section 28(1)(d) of the Mortgage Act and Regulation 8(1) of the Mortgage Regulations 2012 unless the mortgagor consents to private treaty. The mortgagee is entitled to vacant possession and costs.

Outcome

Foreclosure order granted; property to be sold by public auction; defendants to deliver vacant possession

Facts

On 25 October 2019, the first defendant obtained an overdraft facility of UGX 196,000,000 from the plaintiff bank at 23% per annum interest, repayable within twelve months, for business recapitalisation. The second defendant, a director of the first defendant, provided a personal guarantee and mortgaged land comprised in FRV 4364 Folio 25 Kiwafu Close Plot 20 in Entebbe Municipality as security. The plaintiff registered a legal mortgage over the property. The first defendant defaulted on the loan. The plaintiff issued a default notice dated 9 December 2019 under section 19 of the Mortgage Act requiring the defendants to rectify the default. Twenty-one months later, the defendants had made no effort to clear the outstanding amount and filed no defence to the originating summons.

Issues

  1. Whether the plaintiff (mortgagee) is entitled to foreclose and sell the mortgaged property of the mortgagor to recover all sums of money due in respect of the principal debt, interest and other incidental charges.
  2. Whether the mortgagee is entitled to sell the property by private treaty or public auction.
  3. Whether the plaintiff is entitled to an order of vacant possession of the suit property.
  4. Whether the plaintiff should be granted the costs of the suit.

Orders

  • The right, title and equity of redemption of both defendants to and in the mortgaged property described as FRV 4364 Folio 25 Kiwafu Close Plot 20 in Entebbe Municipality are hereby foreclosed for purposes of sale.
  • Sale of the said mortgaged property shall be by public auction in accordance with the relevant provisions of The Mortgage Act, 8 of 2009 and The Mortgage Regulations, 2012.
  • The defendants are ordered forthwith to deliver to the plaintiff or as the plaintiff directs, possession of the mortgaged property or of such part of it as is in the possession of the defendants.
  • Costs of the suit awarded to the plaintiff.

Rules and key headnotes

Banking & Finance — Mortgage Enforcement — Foreclosure — Conditions for Granting
A mortgagee is entitled to foreclosure and sale of mortgaged property where the mortgagor defaults on a loan secured by legal mortgage and fails to remedy the default after service of notice under section 19 of the Mortgage Act, and the defendants do not assert their right of redemption or challenge the foreclosure process.
Land & Property — Mortgage — Equity of Redemption — Foreclosure Effect
A final order of foreclosure extinguishes the mortgagor's equity of redemption and is valid against all defendants. Once obtained, the mortgagee obtains title to the property free and clear of the interests of the defendants and may proceed to take possession or transfer the property to a purchaser.
Banking & Finance — Mortgage Enforcement — Method of Sale — Public Auction Requirement
Under section 28(1)(d) of the Mortgage Act 2009 and Regulation 8(1) of the Mortgage Regulations 2012, a mortgagee exercising a power of sale must sell the mortgaged property by public auction unless the mortgagor consents to a sale by private treaty. Where the mortgage deed does not reserve a power of sale by private treaty and the mortgagor has not consented, sale must proceed by public auction.
Civil Procedure — Originating Summons — Appropriate Use — Mortgage Foreclosure
Originating summons under Order 37 rule 4 of the Civil Procedure Rules is the appropriate procedure for mortgage foreclosure proceedings where the dispute concerns matters of law and there is unlikely to be any substantial dispute of fact. The affidavits serve as the pleadings, with the affidavit in support serving as the plaint and the affidavit in reply serving as the defence.

Legislation cited (12)

Cases cited (2)

  • Housing Finance Bank Limited v Mugisha Charles Lwanga (Civil Suit Originating Summons No. 14 of 2014)
  • Barclays Bank of Uganda v Mugisha Joshua Wilber Musimani and Another (Civil Suit Originating Summons No. 6 of 2011)

Full judgment

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

Guaranty Trust Bank (U) Limited v Dokwals Uganda Limited and Another (Civil Suit Originating Summons 1 of 2021) [2021] UGCommC 189 (10 November 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.