Wakilii

Natty Ntare v Equity Bank(U) Ltd & Anor (Miscellaneous Cause No. 16 of 2015)

High Court · [2015] UGCOMMC 200 · 2015 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for review of a mortgage under the Mortgage Act 2009 and for a declaration that the mortgage is void for lack of spousal consent.
Decision
Application dismissed against the first Respondent bank with costs. Application succeeds in part against the second Respondent, who is held liable to the Applicant for the value of the property if sold.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that where a mortgagee bank complies with regulation 3 of the Mortgage Regulations 2012 by obtaining a statutory declaration from the intending mortgagor that she is not married, the bank discharges its duty under section 5(2) of the Mortgage Act 2009 to take reasonable steps to ascertain marital status, notwithstanding that the declaration was false. The mortgagor spouse who made a false declaration is liable under section 39(1) of the Land Act and section 4(2) of the Mortgage Act 2009. The mortgage is not void as against the bank, which acted in good faith, but the applicant spouse may recover the value of the property from the mortgagor spouse.

Outcome

Application dismissed against the first Respondent bank with costs. Application succeeds in part against the second Respondent, who is held liable to the Applicant for the value of the property if sold.

Facts

The applicant and the second respondent (his wife) married on 24 December 1988 and acquired land in 1989, which was later registered in the wife's name in 2012. In 2012, the wife mortgaged the property to Equity Bank (U) Ltd to secure a loan of UGX 145,000,000 to Xtra Trucking (U) Ltd. The wife executed a statutory declaration stating she was not married and that the property was not matrimonial property. The applicant was unaware of the mortgage. In February 2015, the applicant discovered the mortgage when the bank contacted him and subsequently advertised the property for sale after default. The applicant lodged a caveat and filed this application seeking to have the mortgage declared void for lack of spousal consent under section 39 of the Land Act. The second respondent did not participate in the proceedings.

Issues

  1. Whether a mortgage of matrimonial property executed by a spouse without the consent of the other spouse is void under section 39(1) of the Land Act.
  2. Whether the mortgagee bank discharged its duty under section 5(2) of the Mortgage Act 2009 to ascertain the marital status of the mortgagor and whether the property was matrimonial property.
  3. Whether the mortgage should be declared void under section 36 of the Mortgage Act 2009 for having been obtained in an unlawful manner.

Orders

  • The circumstances of the mortgaging of Kyadondo Block 220 Plot 602 do not justify having the mortgage declared void in terms of section 36(2) of the Mortgage Act 2009.
  • The Second Respondent is liable under section 39(1) of the Land Act Cap 227 as amended and section 4(2) of the Mortgage Act 2009 for not seeking the consent of the Applicant and lying to the first Respondent Bank that she is not married.
  • The Applicant is entitled to recover the value of the property from the second Respondent for purposes of getting another matrimonial home.
  • The application succeeds in part against the second Respondent but fails against the first Respondent bank.
  • The application against the first Respondent is dismissed with costs.
  • Costs shall be realised from the mortgaged property, and if the mortgaged property is not sufficient to satisfy both the outstanding amount and the costs, it shall be borne by the second Respondent as undertaken in her guarantee.

Rules and key headnotes

Mortgage Law — Matrimonial Property — Duty of Mortgagee to Ascertain Marital Status — Compliance with Mortgage Regulations 2012
Under section 5(2)(a) of the Mortgage Act 2009, an intending mortgagee is required to take reasonable steps to ascertain whether an intending mortgagor is married and whether the property to be mortgaged is a matrimonial home. A mortgagee discharges this duty by complying with regulation 3 of the Mortgage Regulations 2012, which requires the mortgagee to obtain a statutory declaration from the applicant stating whether he or she is married and, if not married, confirming that fact in a statutory declaration.
Family Land — Restrictions on Transfer — Liability for Breach of Spousal Consent Requirement
Under section 39(1) of the Land Act as amended by the Land (Amendment) Act 2004, a spouse who mortgages family land without the prior written consent of the other spouse acts in breach of statutory duty. Where such a spouse additionally makes a false statutory declaration to the mortgagee that she is not married, she commits an offence under section 4(2) of the Mortgage Act 2009 and is personally liable to the non-consenting spouse for the consequences of the transaction.
Mortgage Law — Review of Mortgages — Validity Where Mortgagee Acts in Good Faith
Section 39(3) of the Land Act excludes the prohibition in subsection (1) from applying to a mortgagee exercising power of transfer under a mortgage. Where a mortgagee complies with the statutory requirements under the Mortgage Act 2009 and Mortgage Regulations 2012 to ascertain the marital status of the mortgagor, the acts of the mortgagee are not illegal and the mortgagee is protected, notwithstanding that the mortgagor made a false declaration. A mortgage obtained in such circumstances will not be declared void under section 36 of the Mortgage Act 2009.
Matrimonial Property — Rights of Non-Owning Spouse — Entitlement to Compensation
Where matrimonial property is mortgaged and sold by a mortgagee without the consent of the non-owning spouse, but the mortgagee has complied with all statutory requirements, the non-owning spouse is entitled to recover the value of the property from the mortgagor spouse for purposes of acquiring another matrimonial home on which both spouses would have the same interests as they had prior to the mortgage.
Good Faith — Duty to Disclose Information in Mortgage Transactions
Section 4 of the Mortgage Act 2009 imposes a duty on both mortgagee and mortgagor to act honestly and in good faith and to disclose all relevant information relating to the mortgage. The duty to act in good faith is the linchpin that ensures that mortgage transactions comply with the law and avoid breach of section 39(1) of the Land Act. It protects financial institutions from fraud perpetrated by spouses who collaborate to declare that they are not married and that the property is not matrimonial property.

Legislation cited (14)

Cases cited (1)

  • Wamono Shem v Equity Bank (High Court Miscellaneous Application No. 600 of 2010)

Full judgment

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Natty Ntare v Equity Bank(U) Ltd & Anor (Miscellaneous Cause No. 16 of 2015) [2015] UGCommC 200 (25 September 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.