Wakilii

Tropical Bank Limited v Mukiibi Livingstone and Another (Originating Summons No. 4 of 2015)

High Court · [2016] UGCOMMC 299 · 2016 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application by originating summons for foreclosure of equitable mortgage
Decision
Application allowed; plaintiff granted right to foreclose; defendants ordered to deliver vacant possession; 2nd defendant's caveat to be removed

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that an equitable mortgage is created by mere deposit of a certificate of title by the registered proprietor with intent to create security, regardless of whether a memorandum is executed or a caveat is lodged. The requirement to lodge a caveat under s.129(3) of the Registration of Titles Act is for the mortgagee's benefit to safeguard their interest, not a condition for creation of the mortgage. The 2nd defendant's subsequent caveat had no effect as the equitable mortgage was already perfected before it was lodged. The plaintiff was entitled to foreclosure where the 1st defendant defaulted on loan repayment totalling UGX 357,665,119.

Outcome

Application allowed; plaintiff granted right to foreclose; defendants ordered to deliver vacant possession; 2nd defendant's caveat to be removed

Facts

Tropical Bank advanced two credit facilities totalling UGX 300,000,000 to the 1st defendant: a term loan of UGX 150,000,000 on 4 August 2010 and an overdraft facility of UGX 150,000,000 on 21 September 2010. The facilities were secured by legal mortgages over several properties. When the 1st defendant defaulted, he proposed to withdraw one title and replace it with land comprised in Mawokota Block 90, Plot 115 at Kalumba Mpigi. The bank agreed and a memorandum of deposit was executed on 7 April 2011, creating an equitable mortgage. The 1st defendant was the registered proprietor at the time. The 2nd defendant later lodged a caveat on 8 September 2011, claiming ownership and alleging he had delivered the title to the 1st defendant and deposited UGX 70,000,000 into the bank. The 1st defendant continued to default despite multiple demand notices. Default judgment was entered against the 1st defendant. The total amount outstanding stood at UGX 357,665,119.

Issues

  1. Whether the 1st defendant is indebted to the plaintiff, and if yes, how much is owed to the plaintiff?
  2. Whether the 2nd defendant has an interest in the suit land?
  3. Whether the 1st defendant as an equitable mortgagor is in default of its payment obligation to the plaintiff, and if so, how much is owed?
  4. Whether the plaintiff has the right to foreclose?

Orders

  • The 1st defendant is indebted to the plaintiff in the sum of UGX 357,665,119.
  • The 1st defendant created an equitable mortgage secured by land comprised in Mawokota Block 90, Plot 115 at Kalumba and the 2nd defendant has no interest in the same.
  • The plaintiff is entitled to the right to foreclosure.
  • The 1st and 2nd defendants deliver vacant possession of the said security or mortgaged property.
  • The 2nd defendant removes the caveat on the mortgaged land.
  • Costs of this application shall be paid to the plaintiff.

Rules and key headnotes

Equitable Mortgage — Creation by Deposit of Title
An equitable mortgage is created by the mere deposit by the registered proprietor of his or her certificate of title with intent to create a security thereon, whether accompanied or not by a memorandum of deposit and regardless of whether a caveat is lodged.
Caveats — Purpose and Effect on Equitable Mortgages
The requirement under s.129(3) of the Registration of Titles Act for an equitable mortgagee to lodge a caveat is to safeguard the interest of the mortgagee and inform the world of that interest; failure to lodge a caveat does not invalidate the creation of the equitable mortgage.
Registered Proprietorship — Priority of Interests
Where an equitable mortgage is created by a registered proprietor before a third party lodges a caveat, the third party's caveat is of no effect against the prior equitable mortgage, and the third party cannot claim ownership or any interest in the land as against the mortgagee.
Foreclosure — Right of Mortgagee on Default
A mortgagee, whether legal or equitable, is entitled to the right of foreclosure under Order 37 rule 4 of the Civil Procedure Rules and s.8 of the Mortgage Act (Cap 229) where the mortgagor breaches the covenant to pay and defaults on loan repayment despite demands.
Bank-Customer Transactions — Third Party Payments
Payments deposited by a third party into a debtor's bank account without the bank's knowledge or formal arrangement do not extinguish the debtor's obligations to the bank and do not create any rights in the third party against the bank where the loan remains unpaid.

Legislation cited (15)

Cases cited (9)

  • Barclays Bank of Uganda v John Hilton Northcote and Another [1978] HCB 34
  • DFCU Bank Ltd v Dotways Marketing Bureau Ltd and Another (Originating Summons No. 6 of 2012)
  • How v Vigures (1628) 1 Ch Rep 32
  • Global Trust Bank Ltd v Mugisha (Originating Summons No. 5 of 2012)
  • Uganda Development Bank v Muganga Construction Co Ltd (High Court Civil Suit No. 169 of 1977)
  • Boyes v Gathure [1969] EA 385
  • ECLOF Ltd v Ways KM Ltd (High Court Civil Suit (Originating Summons) No. 4 of 2014)
  • Barclays Bank DCO v Gulu Millers Ltd (1959) 540
  • Namuli v Mulwana and 3 Others (Civil Suit No. 613 of 2004)

Full judgment

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

Tropical Bank Limited v Mukiibi Livingstone and Another (Originating Summons No. 4 of 2015) [2016] UGCommC 299 (20 December 2016)
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.