Wakilii

Nakasero Soap Works v Uganda Best Tea Ltd and Ors (HCT-00-CC-CS 25 of 2006)

High Court · [2007] UGCOMMC 100 · 2007 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Originating summons for foreclosure and sale of mortgaged property
Decision
Foreclosure granted; mortgagee permitted to sell the mortgaged land to recover debt

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that an equitable mortgage was created by deposit of certificate of title as security for credit extended. The second and third defendants acknowledged the debt of Ug.Shs. 5,907,400/= owed by the first defendant in a signed repayment agreement. Their attempt to disown liability by relying on corporate separation was rejected as a sham defence. Having found breach of the covenant to pay, the mortgagee's right to foreclose crystallised under section 8(1) of the Mortgage Act. Foreclosure was granted and the mortgagee was permitted to sell the mortgaged land.

Outcome

Foreclosure granted; mortgagee permitted to sell the mortgaged land to recover debt

Facts

Between July and September 2002, the second defendant Siira Amisi solicited credit from the plaintiff on behalf of the first defendant, Uganda Best Tea Ltd. As security, the third defendant Al Haji Musa Jamil Kamya (father of the second defendant) pledged his certificate of title for Block No. 110, Plot No. 2192 on 1 July 2002. The plaintiff lodged a caveat on 29 August 2002 and supplied goods on credit. The first defendant failed to fully pay, leaving an outstanding amount of Ug.Shs. 5,908,000/= as at 31 December 2003. On 18 April 2006, the second defendant signed a debt repayment agreement acknowledging the debt of Ug.Shs. 5,907,400/= and committing to full settlement by 5 July 2006. The defendants failed to pay and the plaintiff brought this action for foreclosure and sale of the mortgaged property.

Issues

  1. Whether the defendants should be foreclosed of their right to redeem the mortgaged property following default on payment of goods supplied on credit.
  2. Whether the plaintiff/mortgagee should be permitted to sell the mortgaged land upon foreclosure.
  3. Whether the plaintiff should be granted costs of the suit.

Orders

  • Foreclosure of the mortgagor's right to redeem the mortgaged property granted.
  • The mortgagee is permitted to sell the mortgaged land Block No. 110, Plot No. 2192 in accordance with the law.
  • Costs of the suit awarded to the plaintiff.

Rules and key headnotes

Mortgage Law — Equitable Mortgage — Creation by Deposit of Certificate of Title
An equitable mortgage is created by deposit by the registered proprietor of his certificate of title with intent to create a security thereon, whether or not accompanied by a note or memorandum of deposit, as provided under section 129 of the Mortgage Act Cap 229.
Mortgage Law — Foreclosure — Right to Foreclose on Breach of Covenant to Pay
Under section 8(1) of the Mortgage Act, a mortgagee may apply to court to foreclose the right of the mortgagor to redeem the mortgaged land at any time after breach of covenant to pay. Where there is default on payment as acknowledged by the mortgagor, the right to foreclose crystallises.
Corporate Veil — Reliance on Doctrine of Separate Legal Personality as Sham Defence
Where directors of a company personally acknowledge a debt owed by the company and witness a repayment agreement, they cannot subsequently disown liability by invoking the doctrine of corporate separation. Such reliance constitutes a sham defence when contradicted by the defendants' own conduct and signed acknowledgments.
Affidavit Evidence — Credibility — False Evidence in Affidavit
Where defendants depose by affidavit that they know nothing about a transaction, but have previously signed written acknowledgments of the debt arising from that transaction, they give false evidence which the court will reject as dishonest.

Legislation cited (2)

Cases cited (1)

  • Salomon v Salomon & Co [1897] AC 22

Full judgment

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

Nakasero Soap Works v Uganda Best Tea Ltd and Ors (HCT-00-CC-CS 25 of 2006) [2007] UGCommC 100 (6 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.