Wakilii

Stanbic Bank Uganda Limited v Sarick Construction Limited and Others (Originating Summons No. 15 of 2023)

High Court · [2024] UGCOMMC 441 · 2024 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance originating summons seeking orders for foreclosure and sale of mortgaged property
Decision
Mortgagee granted foreclosure and sale by public auction; defendants to deliver vacant possession

Observed later treatment

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Holding

The High Court Commercial Division granted the plaintiff bank's originating summons for foreclosure and sale of mortgaged property. The court held that where a mortgagor defaults on loan repayment obligations despite receiving statutory notices and proposes but fails to meet payment plans, the mortgagee is entitled to foreclose and sell the mortgaged property to recover outstanding amounts including principal, interest and costs. The court ordered sale by public auction, granted vacant possession, and awarded costs to the plaintiff bank.

Outcome

Mortgagee granted foreclosure and sale by public auction; defendants to deliver vacant possession

Facts

Stanbic Bank granted Sarick Construction Limited lease loan facilities totalling US$416,792 and UGX 200,000,000 in April 2020 to finance equipment purchase and insurance premiums. As security, the company directors (2nd and 3rd defendants) mortgaged two properties at Sekiunga, with mortgage deeds registered in May 2019 and August 2020. The 1st defendant also mortgaged chattels. The borrower inadequately serviced the loans and frequently defaulted despite extensions. The bank issued notice of default in January 2023 requiring rectification within 45 working days. The defendants did not rectify their default but requested stoppage of sale and proposed a payment plan which was conditionally accepted. The defendants failed to meet the payment plan timelines. As of August 2023, the outstanding debt stood at UGX 13,955,652,553 (later updated to UGX 14,357,098,702 by January 2024). The bank issued notices of sale and advertised the properties for public auction in September 2023. The defendants and their agents blocked the bank from accessing the property. The 2nd defendant acknowledged the debt in an email dated 18 May 2023.

Issues

  1. Whether the Plaintiff, as the legal mortgagee, has the right to foreclose and sell the mortgaged property to recover the total amount owed, including principal, interest, costs, and other charges arising from the 1st Defendant's loan.
  2. Whether the Plaintiff, as mortgagee, has the right to sell the property via private treaty or public auction.
  3. Whether the Plaintiff is entitled to vacant possession of the property, and if so, whether the Plaintiff can evict the Defendants and their tenants to provide vacant possession to a bona fide purchaser.
  4. Whether the Plaintiff should be awarded the costs of the suit.

Orders

  • The Plaintiff is permitted to exercise their power of sale over the mortgaged property comprised in Busiro Block 392 Plot 1270 land at Sekiunga to recover the outstanding sum of UGX 14,357,098,702.
  • The Plaintiff is granted an order of vacant possession of the mortgaged land in order to execute the sale.
  • The sale shall be by public auction and in accordance with the provisions of the Mortgage Act and the Mortgage Regulations.
  • The outstanding sum shall attract interest at the rate agreed in the loan offer letters and the Mortgage Deeds from the date of first default till full recovery of the principal sum.
  • The costs of the suit are awarded to the Plaintiff.

Rules and key headnotes

Mortgage Enforcement — Mortgagee's Right to Foreclose and Sell
A mortgagee who has complied with the statutory notice requirements under Section 19 of the Mortgage Act may exercise the power of sale and foreclose the mortgaged property to recover outstanding principal, interest, costs and charges where the mortgagor has defaulted and failed to rectify the default within the prescribed period.
Mortgage Law — Validity and Registration Requirements
Under Section 3(1) and 3(4) of the Mortgage Act, a mortgage created to secure payment of debt only takes effect when registered; registration is a condition precedent to enforceability.
Mortgage Enforcement — Order for Foreclosure Where Property Value Insufficient
A court will order foreclosure where it appears the value of the mortgaged property is unlikely to satisfy the plaintiff's claim; where the total secured amount is substantially less than the outstanding debt, foreclosure is an appropriate remedy.
Mortgage Sale — Method of Sale and Mortgagee's Duty
Under Section 28(1)(d) of the Mortgage Act and Regulation 8(1) of the Mortgage Regulations, where a mortgagee becomes entitled to exercise the power of sale, the sale must be by public auction unless the mortgagor consents to sale by private treaty; the mortgagee owes a duty of care to take all reasonable steps to obtain the best price.
Originating Summons — Mortgagee's Right to Relief
Under Order 37 Rule 4 of the Civil Procedure Rules, a mortgagee may take out an originating summons as of course for relief including sale, foreclosure, delivery of possession by the mortgagor, and such other relief as the circumstances require.
Mortgage Default — Effect of Proposed Payment Plan Failure
Where a mortgagor proposes a payment plan after notice of default which is conditionally accepted by the mortgagee but the mortgagor subsequently fails to meet the timelines under the payment plan, the mortgagee remains entitled to proceed with sale of the mortgaged property.

Legislation cited (10)

  • Mortgage Act No. 8 of 2009 s.3(1)
  • Mortgage Act No. 8 of 2009 s.3(4)
  • Mortgage Act No. 8 of 2009 s.19
  • Mortgage Act No. 8 of 2009 s.20(e)
  • Mortgage Act No. 8 of 2009 s.26
  • Mortgage Act No. 8 of 2009 s.27(1)
  • Mortgage Act No. 8 of 2009 s.28(1)(d)
  • Mortgage Regulations S.I No. 2 of 2012 Regulation 8(1)
  • Civil Procedure Act s.27
  • Civil Procedure Rules Order 37 Rule 4

Cases cited (1)

  • Guaranty Trust Bank v Dokwals Uganda Limited and Another (Originating Summons No. 1 of 2021)

Full judgment

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

Stanbic Bank Uganda Limited v Sarick Construction Limited and Others (Originating Summons No. 15 of 2023) [2024] UGCommC 441 (14 June 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.