Wakilii

Naigaga v Orient Bank (U) LTD (Civil Suit No. 464 2013)

High Court · [2015] UGHCCD 22 · 2015 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for refund of purchase price and damages following breach of contract of sale
Decision
Plaintiff's suit substantially allowed; Defendant ordered to refund purchase price, pay general damages, costs and interest; Plaintiff's title cancelled

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

A mortgagee bank selling property through an auctioneer is bound by the auctioneer's undertaking to provide vacant possession, as the auctioneer acts as the bank's agent. Failure to deliver vacant possession when the buyer has paid the full purchase price constitutes substantial breach of an essential term. The buyer is entitled to a refund of the entire purchase price including sums paid to the auctioneer, general damages for inconvenience, and interest at commercial rates.

Outcome

Plaintiff's suit substantially allowed; Defendant ordered to refund purchase price, pay general damages, costs and interest; Plaintiff's title cancelled

Facts

The Defendant Bank mortgaged property to Emmanuel Tamale. Upon default, the Bank instructed auctioneers to sell the property. The Plaintiff was the successful bidder and paid UGX 50,000,000 to the Bank and UGX 8,000,000 to the auctioneers. The sale agreement required the auctioneers to assist in evicting occupants and delivering vacant possession. Title was transferred to the Plaintiff but the occupants refused to vacate. Despite paying for eviction services, the Plaintiff could not obtain possession. After nearly two years without vacant possession, the Plaintiff sued for refund of the purchase price, special damages for interest on money borrowed to finance the purchase, and general damages.

Issues

  1. Whether the Defendant's failure to grant vacant possession amounted to a breach of contract of sale
  2. Whether the parties are entitled to the remedies claimed

Orders

  • Refund of UGX 58,000,000 being the purchase price and the sum paid to the Auctioneer to facilitate eviction
  • General damages of UGX 10,000,000
  • Interest on the refund at 22% per annum from 12 September 2011 until date of judgment
  • Interest on general damages at 6% per annum from date of judgment until payment in full
  • Title of the Plaintiff in the Property is hereby cancelled
  • Plaintiff is directed to surrender the title deed to the Defendant Bank
  • Bank is at liberty to take necessary steps to recover the premises and get indemnity from the Third Parties
  • Plaintiff is granted three quarters of the taxed costs together with interest at 6% from date of judgment until payment in full

Rules and key headnotes

Agency — Auctioneer as Agent of Mortgagee Bank — Authority and Liability
Where a mortgagee bank sells property through an auctioneer, the auctioneer is the agent of the bank and the bank is bound by all undertakings made by the auctioneer in the course of effecting the sale, including undertakings to deliver vacant possession.
Agency — Ratification — Principal's Liability for Agent's Acts
Where a principal endorses an agreement in which its agent makes undertakings, the principal ratifies all obligations of the agent and is bound to honour them. The principal cannot later disclaim responsibility on the ground that the agent acted as a sub-agent.
Sale of Land — Vacant Possession — Essential Term
An obligation to give vacant possession of property on completion of sale is an essential term of the contract. Where a mortgagee undertakes to deliver vacant possession and fails to do so within a reasonable time, this constitutes substantial breach entitling the buyer to recover the purchase price.
Mortgage Sale — Application of Purchase Money — Agent's Fees
Where a buyer pays the full bid price in two portions — one to the mortgagee bank to settle the debt and another directly to the auctioneer for services including eviction — and the auctioneer is held out as the bank's agent with authority to conclude the contract, the buyer is entitled to recover both sums from the bank upon breach of contract.
Money Lending — Excessive Interest — Unenforceability
Under the Money Lenders Act, interest charged at a rate exceeding 24% per annum is unconscionable and excessive. A court will not enforce a contract or award damages based on an illegal interest rate of 60% per annum.
Breach of Contract — Restitution and General Damages
Where a vendor fails to deliver vacant possession after receiving full payment, the buyer is entitled to a refund of the purchase price, general damages for inconvenience and disappointment, and interest at commercial rates reflecting the commercial nature of the transaction.
Mitigation of Loss — Duty to Evict Occupants
A buyer who has paid the vendor's agent specifically for eviction services is not required to embark on separate litigation against occupants to mitigate loss. The duty to mitigate does not oblige the injured party to undertake complicated litigation against third parties where the vendor undertook to deliver vacant possession.

Legislation cited (10)

Cases cited (23)

  • Direct Domestic Appliances Ltd v Nile Breweries Ltd (HCCS No. 471 of 2006)
  • Kampala General Agency Ltd Vs Mody's (EA) Ltd [1963] EA 549
  • Nile Bank Vs Translink [2005] 2 EALR 237
  • Yeung & Another Vs Shangai Banking Corporation [1980] 2 ALL ER 599
  • Cook Vs Taylor [1942] 2 All ER 85 at 87; [1942] CH 349
  • Kariuki Vs Wang'ombe [2005] 1 EA 107 (CAK)
  • Hirji Vs Alibhai [1974] 1 EA 314
  • Dingle Vs Hare [1859] 7 CBNS 145
  • Ingel Vs Finch [1869] LR 4 QB 659
  • Dr. Dennis Rwamafa Vs Attorney General [1992] KALR 21
  • Edmund Schulster & Co. (U) Ltd Vs Patel [1969] EA 239
  • Active Automobile Spare Limited v Crane Bank Ltd & Another (SCCA No. 21 of 2012)
  • Stone & Rolls Vs B. Moore Stephens [2008] EWCA CIV 713, [2009] 2 WLR 351
  • Frost Vs Knight
  • Stroms Vs Hutchinson [1905] AC 515
  • Bhadelia Habib Ltd Vs Commissioner General of URA [1997-2001] UCL 202
  • Bank of Uganda Masaba & Others [1999] 1EA
  • Chande and others v East African Airways Corporation [1964] EA 78
  • Haria Industries Vs JP Products Ltd [1970] 1 EA 367 (CAN)
  • Pilkington Vs Wood [1953] CH 770
  • Jennifer Rwanyindo Aurelia & Another v School Outfitters (U) Ltd (CACA No. 53 of 1999)
  • Crescent Transportation Co. Ltd v B.M Technical Services Ltd (CACA No. 25 of 2000)
  • Star Supermarket (U) Ltd v Attorney General (CACA No. 34 of 2000)

Full judgment

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

Naigaga v Orient Bank (U) LTD (Civil Suit No. 464_2013) [2015] UGHCCD 22 (7 April 2015)
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.