Wakilii

Sajabi v Wamala and Another (Civil Appeal No. 72 of 1955)

East African Court of Appeal · [1950] EACA 71 · 1950 Appeal Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from High Court of Uganda decision dismissing claim against second respondent and awarding limited damages against first respondent
Decision
Appellant awarded damages of Sh. 120,000 against both respondents with declaration that mortgage debt discharged

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

A mortgagee who sells mortgaged premises by private treaty without lawful notice acts unlawfully. Where the purchaser knows or ought to know from the register that no lawful notice could have been given, and proceeds with the purchase in secret, collusion is established. Both mortgagee and purchaser are liable in damages measured by the value of the land at the time of sale less the mortgage debt, even where subsequent innocent purchasers have acquired registered titles making restitution impracticable.

Outcome

Appellant awarded damages of Sh. 120,000 against both respondents with declaration that mortgage debt discharged

Facts

The appellant mortgaged his mailo land at Namirembe to the first respondent to secure Sh. 45,000 at 24% interest with monthly rests. The first respondent transferred the mortgage to Pioneer General Assurance Society Limited, which gave notice of intention to sell in April 1952. The appellant obtained an injunction and the matter was settled with Pioneer agreeing not to sell. In September 1952, after the mortgage was retransferred to him, the first respondent gave notice of intention to sell while not yet registered as mortgagee. He sold the land by private treaty to the second respondent for a stated consideration of Sh. 63,000, though the contract price was Sh. 60,000. A witness named Walusimbi had deposited Sh. 60,000 and was willing to pay up to Sh. 150,000 for the land. The land was subsequently sold to innocent third parties who obtained registered titles.

Issues

  1. Whether a mortgagee's sale by private treaty without lawful notice under section 115 of the Registration of Titles Ordinance is permissible.
  2. Whether collusion between mortgagee and purchaser was established.
  3. Whether notice of intention to sell given by a registered mortgagee enures to the benefit of a transferee of the mortgage.
  4. What is the proper measure of damages where unlawful sale has been followed by subsequent registered transactions in favour of innocent third parties.

Orders

  • Appeal allowed with costs.
  • Judgment and decree of the High Court set aside.
  • Declaration that the mortgage debt is discharged.
  • Damages of Sh. 120,000 awarded against both respondents.
  • Costs of the suit awarded to the appellant.

Rules and key headnotes

Mortgages — Mortgagee's Power of Sale — Duty to Sell in Good Faith
Although a mortgagee who sells mortgaged premises is not a trustee for the mortgagor, he must sell in good faith and at a reasonable price and must not take a lower price than he knows to be obtainable.
Mortgages — Sale by Private Treaty — Suspicion of Impropriety
A sale by private treaty by a mortgagee is not unlawful per se but is extremely unusual and will, if conducted in secret and with knowledge that the validity of the notice of sale is challenged, attract suspicion of not having acted in good faith.
Registration of Titles — Section 117 Protection — Collusion
If a proposing purchaser can see from an inspection of the Register of Titles that it is highly unlikely that lawful notice under section 115 could have been given, he may still be protected by section 117 if he has not acted collusively, but suspicion of collusion is inevitable where he proceeds with the purchase.
Mortgages — Notice of Sale — Requirement of Registration
A mortgagee who is not the registered mortgagee at the time of giving notice under section 115 of the Registration of Titles Ordinance gives an invalid notice and has no legal right to sell the land.
Measure of Damages — Unlawful Sale by Mortgagee
Where a mortgagee sells land unlawfully and collusively and subsequent registered interests have been created in favour of innocent third parties making restitution impracticable, the measure of damages is the value of the land at the time of the unlawful sale less the amount of money due on the mortgage at that date.
Assessment of Damages — Land Subject to Prior Contract of Sale
Where land unlawfully sold by a mortgagee includes a portion which the mortgagor had validly contracted to sell to a third party, the value of that portion must be included in assessing damages, as the unlawful sale rendered the mortgagor unable to perform the contract and liable in damages to the third party.

Legislation cited (3)

Full judgment

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Sajabi v Wamala and Another (Civil Appeal No. 72 of 1955) [1950] EACA 71 (1 January 1950)
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.