Wakilii

National Bank of Commerce Ltd v Saad Trading Co (HCT-00-CC-CS 496 of 2003)

High Court · [2005] UGCOMMC 38 · 2005 Judgment for Plaintiff (Reduced Amount) AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of balance on mortgage loan after sale of mortgaged property
Decision
Plaintiff's claim reduced from Shs.19,920,000 to Shs.3,002,572 on account of mortgagee's failure to obtain proper market value through reasonable care in sale process

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

A mortgagee exercising power of sale over mortgaged property owes a duty to take reasonable care to obtain the true market value at the time of sale. Where the mortgagee fails to advertise adequately, provides insufficient property description, and conducts a private sale without competitive bidding or reasonable care, the mortgagor and guarantors are entitled to credit for the amount the property should have realised. Judgment entered for the reduced balance reflecting proper valuation.

Outcome

Plaintiff's claim reduced from Shs.19,920,000 to Shs.3,002,572 on account of mortgagee's failure to obtain proper market value through reasonable care in sale process

Facts

In February 2002, the Plaintiff bank granted the 1st Defendant an overdraft facility of Shs.35 million for one year, secured by mortgage over two plots in Kampala. The 1st Defendant defaulted and the debt accumulated to Shs.45 million. The Plaintiff exercised its power of sale and sold the mortgaged property for Shs.25 million. The property was advertised once in one newspaper with minimal detail and a 14-day notice period. The planned auction on 28 November 2002 failed when landlords rescinded their offer to renew the lease. The property was ultimately sold by private treaty to Kalungi Estates Ltd for Shs.25 million on 7 May 2003, despite one plot having been valued at a forced sale mortgage value of Shs.30 million. The Plaintiff sued for the balance of Shs.19,920,000. Defendants contested that the sale was grossly undervalued and that the Plaintiff failed to obtain true market value.

Issues

  1. Whether before the sale of the mortgaged property the Plaintiff attempted to obtain the true market value of the property that would have offset the whole loan.
  2. Whether the Plaintiff is entitled to the suit sum.

Orders

  • Judgment for the Plaintiff against the Defendants in the sum of Shs.3,002,572.
  • Interest of 25% per annum from the date of filing till payment in full.
  • Plaintiff to have half the taxed costs of the suit.

Rules and key headnotes

Banking & Finance — Mortgages — Mortgagee's Power of Sale — Duty of Care
A mortgagee exercising the power of sale is not a trustee for the mortgagor and may choose when to sell, but owes a duty to take reasonable care to obtain the true market value of the mortgaged property at the date of sale.
Banking & Finance — Mortgages — Sale of Mortgaged Property — Advertisement Requirements
A mortgagee who decides to advertise mortgaged property for sale must give it adequate publicity to attract as many potential bidders as possible and provide sufficient detail to arouse interest of potential buyers. A single advertisement in one newspaper with minimal description may constitute negligence.
Banking & Finance — Mortgages — Private Sale — Duty to Mortgagor and Guarantors
Where a mortgagee conducts a sale by private treaty without competitive bidding and without reasonable care to realise the assets to best advantage, the mortgagor and guarantors are entitled in equity to an allowance and should be given credit for the amount which the sale should have realised if reasonable care had been used.
Banking & Finance — Mortgages — Liability for Shortfall — Assessment of Proper Value
Where a mortgagee fails to obtain the true market value of mortgaged property through lack of reasonable care, the mortgagor's liability for any shortfall is limited to the difference between the mortgage debt and the amount the property should have realised through proper sale process, not the actual sale price obtained.

Cases cited (4)

  • Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] 2 All ER 633
  • Mubiru v Uganda Credit & Savings Bank [1978] HCB 109
  • Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54
  • Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938

Full judgment

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

National Bank of Commerce Ltd v Saad Trading Co (HCT-00-CC-CS 496 of 2003) [2005] UGCommC 38 (11 July 2005)
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.