Wakilii

Stanbic Bank Uganda Limited v Munwe Enterprises Limited & Another (Civil Suit 13 of 2022)

High Court · [2024] UGCOMMC 24 · 2024 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Originating summons by mortgagee bank seeking possession and foreclosure of mortgaged property following borrower's default on restructured loan facility
Decision
Mortgaged property foreclosed and ordered to be sold by public auction; defendants ordered to deliver possession to the plaintiff or face eviction

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the restructured loan agreement of 24 March 2020 was a contract modification and not a substituted contract or accord and satisfaction, and therefore did not extinguish the original loan agreements. The plaintiff validly issued notices of default and the references to earlier notices did not invalidate them. The 2nd defendant's creation of a tenancy agreement without the plaintiff's consent breached the mortgage deed terms. The plaintiff's rejection of the tenancy and part payment did not constitute oppressive conduct. The court granted the plaintiff's application for possession and foreclosure of the mortgaged property.

Outcome

Mortgaged property foreclosed and ordered to be sold by public auction; defendants ordered to deliver possession to the plaintiff or face eviction

Facts

The 1st defendant obtained credit facilities from the plaintiff bank in 2016, secured by a mortgage over property owned by the 2nd defendant. Additional facilities were extended in 2018. The 1st defendant defaulted on repayment, accumulating substantial arrears. In March 2020, the loan was restructured into a single term loan of UGX 896,000,000 repayable over 180 months at 14% interest per annum. The 1st defendant again defaulted on the restructured facility. The plaintiff issued a notice of default in December 2021 demanding payment of arrears of over UGX 1 billion within 45 days. The plaintiff granted a 90-day moratorium, later extended to 120 days, for the defendants to settle the debt or hand over possession. Before the deadline, the 2nd defendant entered into a 5-year tenancy agreement with a third party without the plaintiff's consent and received rent of UGX 50,220,000, which was deposited into the 1st defendant's account but later rejected by the plaintiff. The defendants failed to settle the debt or deliver possession by the agreed date.

Issues

  1. Whether the plaintiff is entitled to delivery of possession of the mortgaged property by the mortgagors, their agents, servants, employees, or contractors as provided under section 24(2)(c) of The Mortgage Act 2009.
  2. Whether the plaintiff as mortgagee is entitled to an order to enter possession of the mortgaged property as one of the remedies availed to the plaintiff under section 20(d) of The Mortgage Act 2009.
  3. Whether the plaintiff as mortgagee is entitled to an order of eviction to enable it enter possession of the mortgaged property.
  4. Whether the restructured loan agreement of 24 March 2020 completely resolved and extinguished the terms of the previous loans.
  5. Whether the plaintiff's referencing of two earlier default notices dated 12 November 2019 and 24 December 2019 in the notice of default dated 2 December 2021 invalidated that notice.
  6. Whether the plaintiff's rejection of the 2nd defendant's tenancy agreement with Kifle Bilen Monasy without the plaintiff's consent constitutes oppressive and unfair conduct on the part of the plaintiff.
  7. Whether the plaintiff's rejection of the defendants' part payment constitutes oppressive and unfair conduct on the part of the plaintiff.

Orders

  • The right, title and equity of redemption of both defendants to and in the mortgaged property described as LRV 4548 Folio 3 Plot 8760 Kyadondo Block 273, land at Nakinyuguzi, in Kampala, are hereby foreclosed for purposes of sale.
  • For the purposes of that sale, the defendants are ordered forthwith to deliver to the plaintiff or as the plaintiff directs, possession of the mortgaged property or of such part of it as is in the possession of the defendants, failure of which they shall forthwith be evicted therefrom.
  • Sale of the mortgaged property shall be by public auction in accordance with the relevant provision of The Mortgage Act 2009 and The Mortgage Regulations 2012.
  • Costs of the suit awarded to the plaintiff.

Rules and key headnotes

Originating Summons — Appropriate Use — When Substantial Dispute of Fact Exists
The practice of originating summons is to enable simple matters to be settled by the Court without the expense of bringing a suit in the usual way, where there are no serious disputes as to facts. Where there is no question of construction the procedure by originating summons is inappropriate.
Accord and Satisfaction — Essential Elements — Requirement of New Consideration
The consideration for an accord is often the resolution of a disputed claim. The compromise of a dispute between parties will serve as consideration for an accord and satisfaction when the dispute is bona fide. There must be new consideration independent of the original consideration, something the debtor has no legal obligation to do, or a refrain from doing something the debtor has a legal right to do, to support an accord and satisfaction.
Contract Modification — Distinction from Substituted Contract — Effect on Original Agreement
A contract modification merely replaces some of the terms of a valid and existing agreement while keeping those not abrogated by the modification in effect. The contract remains in effect but certain terms or obligations are modified. A substituted contract, in contrast, replaces the original contract completely, discharging the terms of the original contract. If a variation is so substantial that it undermines the original purpose of the contract, the court will consider the original contract to have been terminated and replaced by the new agreement.
Mortgages — Right of Redemption — Notice Requirements — Protection from Oppressive Conduct
The entire regime of notices to the debtor before exercise of the power of sale is intended to buttress and preserve the mortgagor's entitlement to redeem the mortgage. Giving ineffective or inadequate notice to rectify, of default or of sale would have such an effect due to the resultant denial of a fair opportunity to the mortgagee to redeem the property. It is trite that a mortgagee may not act toward the mortgagor in an oppressive, harsh, unjustly burdensome, unconscionable manner, or in breach of reasonable standards of commercial practice. Courts therefore have an inherent power in equity to intervene, exceptionally, if the terms of the loan are oppressive or the lender has acted in an oppressive way.
Mortgages — Mortgagor's Power to Lease — Requirement of Mortgagee Consent — Effect of Unauthorised Lease
Although at common law both a mortgagor and mortgagee have the power to lease the mortgaged land, this is only as far as a contrary intention is not expressed by the mortgagor and mortgagee in the mortgage deed or otherwise in writing. Where the mortgage deed expressly requires the mortgagee's prior written consent for any lease, a tenancy or lease created by a mortgagor without such consent is void as against the mortgagee and the mortgagee is not bound by it. The tenant has no entitlement to remain in occupation and is a trespasser.
Loan Agreements — Part Payment Accompanied by Statement of Full Settlement — Creditor's Options
When a debtor offers to settle a claim by paying a smaller amount accompanied by a statement that the claim is disputed and the payment is offered in full settlement of the account, if the creditor appropriates the amount paid, the account will be deemed satisfied. The creditor's choice is either to accept the offer on its terms or reject it and return the payment. A creditor cannot appropriate the payment while attempting to preserve the right to collect any balance.
Mortgages — Remedies of Mortgagee — Cumulative and Alternative Nature
The mortgagee's remedies are cumulative and alternative. A mortgagee is not bound to select any one of the remedies and pursue that particular remedy exclusively. A mortgagee is at liberty to employ one or all of the remedies to enforce payment, and in no particular order. Being cumulative, none of them is in exclusion of the others.

Legislation cited (20)

Cases cited (14)

  • Kulsumbai Gulamhussein Jaffer Ramji and Another v Abdulhussein Jaffer Mohamed Rahim and Others [1957] EA 699
  • Lewis v Green [1905] 2 Ch 340
  • Pinnel's Case [1602] 5 Co Rep 117a
  • British Russian Gazette and Trade Outlook Limited v Associated Newspapers Limited [1933] 2 KB 616
  • Phenny Mwesigwa v Petro Uganda Limited (Supreme Court Civil Appeal No. 10 of 2019)
  • Saraswat Trading Agency v. union of India (2002), AIR 2002 Cal 51
  • Barbarich v. Chicago, Milwaukee, St. Paul & Pacific Railway, 92 Mont. 1, 9 P.2d 797 (1932)
  • GT Bank Ltd v Richline International Ltd and Another (High Court Civil Suit No. 10 of 2014)
  • Ecumenical Church Loan Fund Uganda Ltd v Ways Km Uganda Ltd (High Court Civil Suit No. 11 of 2014)
  • Employers Assurance Association Ltd v Union Land and House Investors Ltd [1937] Ch 313
  • Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362
  • Kapurchand Godha v. Mir Nawab Himayatalikhan Azamjah, AIR 1963 SC 250; (1963) 2SCR 168
  • Snow View Properties Ltd. v. Punjab & Sind Bank, AIR 2010 Cal 94
  • Union Carbide Corpn v. Union of India (1991) 4 SCC 584; AIR 1992 SC 31

Full judgment

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Stanbic Bank Uganda Limited v Munwe Enterprises Limited & Another (Civil Suit 13 of 2022) [2024] UGCommC 24 (3 January 2024)
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.