Wakilii

Sendagire and Another (Both T A Bright Future Vocational Secondary School (HC Civil Suit No. 26 of 2008)

High Court · [2019] UGCOMMC 238 · 2019 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for breach of duty by mortgagee in exercising power of sale
Decision
Plaintiffs awarded damages totalling UGX 300,000,000 with interest; however, their claim for reinstatement as owners and eviction of 3rd Defendant dismissed

Observed later treatment

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Holding

The court held that the mortgagee's receiver sold the mortgaged property below forced sale value in breach of the duty of care owed to the mortgagor. The sale to the third defendant was conducted without transparency and without obtaining the best price reasonably obtainable. The plaintiffs were entitled to damages for the difference between undervalue and best price, plus compensation for movable property unlawfully retained by the third defendant.

Outcome

Plaintiffs awarded damages totalling UGX 300,000,000 with interest; however, their claim for reinstatement as owners and eviction of 3rd Defendant dismissed

Facts

The Plaintiffs, proprietors of Bright Future Vocational Secondary School, obtained credit facilities of UGX 315,000,000 from the 1st Defendant bank secured by a mortgage over their school property. Following default, the 1st Defendant appointed the 2nd Defendant as Receiver on 23 October 2007 with instructions to conduct a competitive bidding process for the sale of the mortgaged property. The valuation report dated June 2007 put the current market value at UGX 550,000,000 and forced sale value at UGX 330,000,000. An auction was advertised for 3 December 2007. Although the highest bid at auction was from Hared Petroleum for UGX 400,000,000, this bidder withdrew. The Receiver sold the property to the 3rd Defendant on 10 December 2007 for UGX 300,000,000 by private treaty without obtaining the 1st Defendant's consent as required, and the sale was not disclosed to the Plaintiffs until after completion. The 3rd Defendant took over the school in early 2008, removed movable property, and registered the property as undeveloped land. Evidence showed the 3rd Defendant had engaged with the Plaintiffs before the auction, offering to help them redeem the property.

Issues

  1. Whether the suit property was lawfully sold to the 3rd Defendant by the 2nd Defendant?
  2. Whether there were any movable properties belonging to the Plaintiffs at the suit property unlawfully taken over or retained by the Defendants jointly or severally?
  3. Whether the Plaintiffs are still indebted to the 1st Defendant and if so to what extent?
  4. What remedies are available to the parties?

Orders

  • The 1st Defendant to pay UGX 100,000,000 to the Plaintiffs as general damages.
  • The 3rd Defendant to pay UGX 200,000,000 to the Plaintiffs as general and punitive damages.
  • Interest at commercial rate 21% per annum from 2008 until payment in full.
  • Costs awarded against 1st and 3rd Defendants: 1st Defendant pays 40% and 3rd Defendant pays 60% of costs.

Rules and key headnotes

Mortgages — Duty of Care — Mortgagee's Duty When Exercising Power of Sale
A mortgagee exercising the power of sale owes a duty of care to the mortgagor to take reasonable precautions in the conduct of the sale so as to obtain the true market value or the best price reasonably obtainable for the property, even where statute or contract permits sale without recourse to court.
Mortgages — Sale of Mortgaged Property — Duty Not to Act in Secret
A mortgagee must not act in secret when selling mortgaged property. If the mortgagee conceals what he is doing from the mortgagor, he may expose himself to suspicion of not having acted in good faith.
Mortgages — Receiver — Duty to Document Sale Process and Establish Transparency
A receiver appointed to sell mortgaged property is under a duty to document the entire sale process and maintain a high level of transparency. Documentary evidence, not mere word of mouth, is required to demonstrate that the sale was conducted properly through competitive bidding and that the receiver acted reasonably in accepting a particular bid.
Mortgages — Sale by Private Treaty — Requirement for Mortgagee's Consent
Where the terms of appointment of a receiver expressly require that any sale by private treaty be conducted only with the prior consent of the mortgagee, and that payment be made directly to the mortgagee's account, a sale conducted in breach of these instructions is irregular and supports a finding of lack of transparency.
Banker and Customer Relationship — Investment Agreement — Enhanced Duty of Care
Where a banker enters into an 'investment agreement' with a customer giving the bank controlling interest in the customer's business, including a seat on the board with voting rights and participation in key management decisions, the relationship goes beyond the usual close proximity of banker and customer and amounts to a partnership with an enhanced duty of care.
Commercial Disputes — Weight of Documentary Evidence Over Witness Recollection
In commercial disputes, the best approach is to place little if any reliance on witness recollections of what was said in meetings and conversations, and to base factual findings on documentary evidence and inferences drawn from known or probable facts. Memory evidence about facts that happened years back is of limited utility compared to documentary evidence.
Damages — Measure of Damages for Negligent Exercise of Power of Sale
Where a sale of mortgaged property is held to be unlawful or negligently carried out because the mortgagee failed to obtain the best price reasonably obtainable, the successful party is entitled to recover as damages the difference between the true market value of the property and the sale price actually realised from the sale.

Legislation cited (7)

Cases cited (20)

  • Barclays Bank of Uganda v Livingstone Kakende (Civil Appeal No. 22 of 1993)
  • Jemeo Twase & 3 Ors v Attorney General & Benson Ninsiima (High Court Civil Suit No. 421 of 2002)
  • Epaineti Mubiru v Uganda Credit and Saving Bank (High Court Civil Suit No. 567 of 1965)
  • Roger Michael and others Versus Douglas Henry Miller and Another (2004) EWCA C.v. 282
  • Downsview Nominees Ltd & Another Versus First City Copr Ltd and Another (1993) 3 ALL ER 626
  • Yosiya Sajabi v Musa Umar Amerliwala and Matia Wamala (Civil Appeal No. 72 of 1955)
  • Cuckmere Brick Co Ltd and another v Mutual Finance Ltd [1971] (2) All ER 63
  • Reliance Permanent Building Society v Harwood-Stamper ([1944] 2, All ER 75
  • Afro Moto Ltd & 2 others v Barclays Bank Uganda Ltd (High Court Civil Suit No. 189 of 2010)
  • Gestmin SGPS SA Vs Credit SUISSE (UK) Ltd and another (2013) EWHC 3560 (Comm)
  • Hall brothers SC Co Itd Vs Young (1939) 1 KB 748
  • Dharamshi Vs Karan (1974) EA 41
  • Uganda Telecom vs Tanzanite Corporation (2005) EA 351
  • Provincial Insurance Co. of EA Ltd vs. Mordekai Mwanga Nandwa (1995-1998) EA 288
  • Diary Development Authority v Ngarambe (High Court Civil Appeal No. 10 of 2011)
  • Benedito Musisi v Attorney General (High Court Civil Suit No. 708 of 1992)
  • Borham-Carter vs. Hyde Park Hotel [1948] 64 TLR
  • Kyambadde vs. Mpigi District Administration [1983] HCB 44
  • National Bank of Commerce Ltd and 2 others (High Court Civil Suit No. 496 of 2003)
  • Moses Jim Jjagwe v Standard Chartered Bank (U) Limited (High Court Civil Suit No. 37 of 2004)

Full judgment

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Sendagire and Another (Both T A Bright Future Vocational Secondary School (HC Civil Suit No. 26 of 2008) [2019] UGCommC 238 (26 August 2019)
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.