[2023] UGCommC 272

**THE REPUBLIC OF UGANDA**

**IN THE HIGH COURT OF UGANDA AT KAMPALA**

**(COMMERCIAL DIVISION)**

**CIVIL SUIT NO. 593 OF 2022**

**NIWAMANYA ROSELINE::::::::::::::::::::::::::::::::::::::::::: PLAINTIFF**

**VERSUS**

1. **TWESIGYE GREGORY** 2. **KCB BANK (U) LTD** 3. **EXODUS SACCO LTD** 4. **COMMISSIONER LAND REGISTRATION::::::::::::: DEFENDANTS**

**Before: Hon. Lady Justice Cornelia Kakooza Sabiiti**

**JUDGMENT**

**Introduction**

1. The Plaintiff brought this suit against the Defendants for recovery of land/property comprised in Kibuga Block 2 Plot 217 land at Namirembe (hereinafter referred to as the suit property), declarations that the 1st and 2nd mortgage deeds be declared a nullity, that the eviction, sale and transfer of the suit property being matrimonial property to the 3rd Defendant was illegal, fraudulent and it be set aside, orders for cancellation of the certificate of title from the 3rd Defendant and re-instating the name of the Plaintiff, special damages, general damages, mesne profits, interest and costs of the suit 2. The Plaintiff’s case is that as the wife to the 1st Defendant, they jointly acquired the suit property as their matrimonial house, among other properties, and resided there with their children. That 1st Defendant together with the Plaintiff on 2nd September 2010, applied and obtained credit facilities from the 2nd Defendant and were servicing the said loan until when they failed and the loan was recalled and the suit property put on sale. That the 1st Defendant in connivance with the 2nd Defendant put the suit property on sale without involving the Plaintiff at all and fraudulently sold the same to the 3rd Defendant without the consent of the Plaintiff. 3. That the plaintiff in a bid to redeem her matrimonial property, made several pleas to delay its sale and obtained an offer from ABC Capital Bank Ltd on the 11th February 2014 but the 2nd defendant lied to the plaintiff that the property had already been sold whereas the property was actually sold later on the 25th February 2014. That despite several pleas not to transfer the suit land to the 3rd defendant, the 4th defendant rejected all of them and went ahead to transfer the same without due regard and consideration of the equity of redemption. 4. The 1st Defendant in his written statement of defence, denied the Plaintiff’s claims and averred that the Plaintiff was always apprised of the mortgage transactions by the 1st and 2nd Defendants without any connivance at all. Upon default and failure to repay the loan, the 1st defendant consented to the sale for not less than UGX 600,000,000/= to meet his contractual obligation. That the 1st Defendant was able to redeem the plaintiff's outstanding loan with the 2nd defendant from the proceeds of the sale of the suit property and as such rescued her properties. The Plaintiff had no collateral at all to secure the monies and there was no connivance between the 1st and 2nd defendants to frustrate the plaintiff in her efforts. 5. The 2nd Defendant in their written statement of defence, denied the Plaintiff’s claims and averred that the 1st Defendant obtained a credit facility from the 2nd Defendant on the 31st August 2010 of UGX 350,000,000 and again on 28th September 2012 obtained a further credit facility of UGX 100,000,000/= as an overdraft on top of the earlier existing mortgage of UGX 350,000,000/= bringing the 1st Defendant's loan exposure to UGX 450,000,000/=. The 1st Defendant defaulted on his loan obligations and was issued with a default notice on the 23rd December 2013. The 1st Defendant wrote to the 2nd Defendant requesting for 45 days in which to find a buyer for his mortgaged property. That the 1st Defendant presented the 3rd Defendant as a potential purchaser of his property and approved the sale of the suit property at a minimum price of UGX 600,000,000/= in order to discharge his indebtedness and that of the Plaintiff as the balance from the proceeds of the sale were utilized to clear her loan obligations and her securities were returned to her. That the Plaintiff had made several proposals to pay off the loan that were not successful. The Plaintiff was given notice to vacate the suit premises and the suit property was sold off to the 3rd Defendant. 6. The 3rd Defendant in their written statement of defence, denied the Plaintiff’s claims of fraud and averred that they do not have any knowledge of any claims or encumbrances on the suit property and are bonafide purchasers. 7. In reply to the written statement of defence of the 1st Defendant, the Plaintiff averred that the 1st and 2nd Defendants lured her to sign the spousal consent and did not show her the contents of the mortgage deeds. 8. In reply to the written statements of defence of the 2nd and 3rd Defendants, the Plaintiff averred that there was no legal sale of the suit property and that the Defendants fraudulently connived in the illegal sale of the suit property.

**Issues:**

1. The following were the issues as agreed under the joint scheduling memorandum: 2. Whether the suit discloses a cause of action against each of the defendants. 3. Whether each of the defendants has a valid defence to the suit. 4. Whether the defendants connived to fraudulently sale the suit property. 5. What are the remedies to the parties?

**Witnesses**

1. Hearing was by witness statements in lieu of examination in chief and the witnesses were subjected to cross examination. The Plaintiff led evidence through two witness: PW1, Niwamanya Roseline Twesigye, the Plaintiff and PW2, Kasande Jane Mugenyi sister of the Plaintiff. The Defendants led two witnesses DW1, Twesigye Gregory, the 1st Defendant and DW2 Denis Baguma a former employee of the 2nd Defendant. The 3rd Defendant did not lead any witnesses while the 4th Defendant did not file any defence.

**Representation**

1. The Plaintiff was jointly represented by M/s Kabuga & Partners Advocates and M/s Tumwebaze Emmanuel Advocates & Solicitors. The 1st Defendant was represented by M/s Okello Oryem & Co Advocates. The 2nd Defendant was represented by M/s Sekabanja & Co Advocates. The 3rd Defendant was represented by M/s Geoffrey Namgumya & Co Advocates. The 4th Defendant did not file a defence to the suit and the case proceeded exparte against them.

**RESOLUTION**

1. The Plaintiff bears the burden to prove to the satisfaction of Court the averments in the Plaint as provided for under section 101 of the Evidence Act. This burden is on a balance of probabilities. Since the first three issues are inter-related they will be resolved together.

**Issues No. 1, 2 & 3:** ***Whether the suit discloses a cause of action against each of the defendants; Whether each of the defendants has a valid defence to the suit; and Whether the defendants connived to fraudulently sale the suit property.***

1. What amounts to a cause of action has been settled in the case of ***Auto Garage Vs Motokov (No.3) 1971 EA at page 51***, cited in the case of ***Ainomigisho Winfred & 8 Ors Vs Fatuma Dusto Nalumansi & 3 Ors H. C (Kampala-Land Division) M. A No. 2084 of 2016***; wherein it was held that for a suit to disclose a cause of action, it must show that the plaintiff enjoyed a right; the right was violated and it is the defendant who violated the right. 2. In the instant case, counsel for the Plaintiff submitted that it is not disputed by the 1st Defendant that he obtained credit facilities from the 2nd Defendant using the suit that was their matrimonial property and that the Plaintiff has a right over the suit property as a spouse to the 1st defendant. That the plaintiff having consented to the loans therefore had a legal right to redeem her property by virtue of her being a spouse. That the 2nd Defendant refused the Plaintiff's offer of UGX 600,000,000/= from ABC Capital Bank which came before the property was sold to the 3rd Defendant and instead lied to her that the property had been sold off whereas not, which was a clog or fetter to her legal right of redemption of her property. 3. Counsel for the 1st Defendant submitted that the spousal consent to mortgaging of the matrimonial home was obtained from the plaintiff as required by the law and admitted by the Plaintiff. That the Plaintiff’s pleas for more time to redeem the suit property were all addressed to the 2nd Defendant and not to the 1st Defendant who did not have the powers to accept or reject the plaintiff's plea. That the 1st Defendant had no fault on his part in as far as the equity of redemption is concerned. 4. Counsel for the 2nd Defendant submitted that the Plaintiff gave her consent to first and the further mortgage of the suit property that was their matrimonial home. That the 1st Defendant was the sole registered proprietor of the suit property and that he used the suit property to obtain credit to run the Plaintiff's and 1st Defendant’s business that they were running business together. Counsel for the 2nd Defendant further submitted that the moment the Plaintiff and 1st Defendant pledged the suit property to the 2nd Defendants it ceased being matrimonial property as it was pledged for commercial purposes. That it is also not disputed by the Plaintiff that the 1st Defendant defaulted on his loan obligations with the 2nd Defendant bank. That 1st Defendant was notified in October 2013 that he was in default of his loan obligations. That on 12th November 2013, the 1st Defendant wrote to the 2nd Defendant bank introducing the 3rd Defendant as an interested buyer and was willing to buy the suit property at UGX 600,000,000. That when the arrangement between 1st Defendant and 3rd Defendant did not materialize as expected the 2nd Defendant issued out Default Notices to the 1st Defendant and the Plaintiff as his spouse since she had consented to the property being mortgaged. That following the default notices, the Plaintiff wrote to the 2nd Defendant bank on the 17th of December 2013 committing herself to deposit a sum of UGX 189,619,267/= by the 20th of December 2013 and that in the event that she fails to honor the commitment, the normal recovery process should continue. That this proposal did not materialize and the 1st Defendant then brought back the 3rd Defendant as a purchaser and authorized the sale of the suit property to him by private treaty. 5. Counsel for the 2nd Defendant submitted that whereas the Plaintiff was allowed to present repayment proposals that did not materialize, the right of redemption is preserved for the Mortgager and not for 3rd parties. That the Plaintiff is estopped from denying that she was aware of the sale of the suit property when she authorized the foreclosure to proceed if she failed to raise the money she had committed by 20th December 2013. 6. From the evidence adduced (DEX. 7 & DEX. 8) it is clear that the Plaintiff provided spousal consent to the credit facilities obtained by the 1st Defendant from the 2nd Defendant in respect of the suit property. It is also clear that by October 2013, the 1st Defendant was in default of his loan obligations. Both the Plaintiff and the 1st Defendant made proposals to pay off the outstanding loan which did not materialize. The 2nd Defendant accordingly served the 1st Defendant with a Notice of Default (PEX.2) dated 23rd December 2013, in accordance with the provisions of Section 19 of the Mortgage Act. The Plaintiff acknowledged receipt of the Default Notice in writing on 24th December 2013. The Notice of Default indicated that the total outstanding amount was UGX 414,466,888 gave 21 days to rectify the default. However, no further payments were made and the default was not rectified by the mortgager. 7. The Plaintiff in the instant case is alleging to be aggrieved by the sale process and that she was denied an opportunity to redeem the suit property. However, I find that the Plaintiff was not vigilant in ensuring that she acted reasonably within time to redeem the suit property. The first repayment proposal from the Plaintiff was on 17th December 2013 when she committed in writing to pay UGX 189,619,267 by 20th December 2013 and she stated that the foreclosure could proceed if she failed to raise the money. Under cross examination the Plaintiff attempted to deny that it was her handwriting and signature but failed to adduce any evidence to prove this. 8. The second repayment proposal by the Plaintiff was sent through her lawyers in a letter to the 2nd Defendant Bank on 27th January 2014 (after the notice of default period had expired) where a proposal was made to pay the outstanding loan by 28th February 2014. It is noted that this letter from the Plaintiff’s lawyers had a draft unsigned Memorandum of Understanding attached and claimed that the Plaintiff and her husband were ready to sign the MOU but the letter was not even copied to her husband as the Mortgagor and it did not contain any specific details of how she intended to fulfill this commitment. 9. It is noted that after the expiry of the 21 days under the Notice of Default, on 20th January 2014 a Notice to Vacate (DEX.20) was issued to the Plaintiff with a notice period of five days. However, this Notice was not complied with and on 6th February 2014 the court bailiffs obtained an Order from the High Court (DEX. 23) of vacant possession of the suit land order to evict the occupants in the presence of Uganda Police Force. This was in accordance with Section 24 (2) (c) of the Mortgage Act. 10. The Plaintiff’s third repayment proposal was on 13th February 2014 after she had approached ABC Capital Bank Ltd and pleaded for a period on one month to process the loan from ABC Capital Bank who wrote to the 2nd Defendant bank seeking clarification on the status of the securities deposited with them. From the evidence adduced of the Sale Agreement (DEX.12) dated 26th February 2014, it is clear that the 2nd Defendant’s told lies about the sale of the suit property in their letter dated 12th February 2014 to ABC Capital Bank Ltd. However, it is noted that this response by the 2nd Defendant was after the expiry of the Notice of Default period and after the Court Order for vacant possession. Further the 1st Defendant/Mortgagor had earlier on 6th January 2014 (DEX.11) already consented to the sale of the suit property by private treaty. I find that whereas the 2nd Defendant did not act ethically when they told lies about the sale having already occurred, this does not constitute fraud to invalidate the sale since the Mortgagor had already authorized the sale of the suit property. 11. Under Section 20 (e) of the Mortgage Act, upon such default by the Mortgager, the Mortgagee is entitled to an order of sale of the mortgaged property so as to recover the outstanding sum under the mortgage. It is evident that at this point the Plaintiff was acting on her own since she did not copy any of her repayment proposals to her husband as the Mortgagor for them to agree on a joint plan to redeem the suit property. I agree with counsel for the 2nd Defendant that the right of redemption is with the Mortgagor. However Section 26 (3) (b) required the Mortgagee to serve notice of the sale of matrimonial property to the spouse of the Mortgagor. In the present case I find that the Plaintiff was fully aware of the impending sale of the suit property and had even given a go ahead to the foreclosure process in December 2013 if she failed to deposit money on the outstanding loan amount. The Plaintiff having been notified of the impending sale of the suit property should have acted in concert with the Mortgagor and more importantly should have raised the required amount before the Notice of Default had expired since time was of essence. I therefore find that the Plaintiff’s assertion that she was prevented from redeeming the suit property is unfounded. 12. Counsel for the Plaintiff submitted that the 1st and 2nd Defendants fraudulently sold the suit property because it was not valued before being sold to the 3rd defendant as required under Regulation 11 of the Mortgage Regulations. That it was the 1st defendant who proposed the figure of UGX 600m and that there was no negotiation of the same, it was simply paid by the 3rd defendant. 13. Under Section 28(1) (d) of the Mortgage Act, where a mortgagee becomes entitled to exercise the power of sale, that sale may be by public auction, unless the mortgagor consents to a sale by private treaty. Regulation 10 of the Mortgage Regulations S. I No. 2 of 2012 makes provision for consent by the mortgagor to a sale by private treaty. It provides as follows:

*“Sale by private treaty*

1. *A mortgagee exercising a power of sale under the Act may, with the****consent of the mortgagor****, sell the mortgaged property by private treaty. (2) For purposes of sub-regulation (1) consent of the mortgagor shall, subject to section 26 of the Act, be* ***by written notice****. (3) For the avoidance of doubt, a mortgagor’s consent shall not be retrospective.”* 2. In the instant case, the sale of the suit property to the 3rd Defendant was by private treaty. The 1st Defendant testified that he introduced the 3rd Defendant to the 2nd Defendant bank as a potential purchaser in October 2013. Under Section 27 of the Mortgage Act, a Mortgagee has a duty of care towards the Mortgagor to ensure that all reasonable steps are taken to obtain the best price. 3. On 6th January 2014 the 1st Defendant as the Mortgagor on (DEX.11) signed the Mortgagor’s Approval and Consent Form authorizing the sale of the suit property by private treaty and it was witnessed by an Advocate. This written consent waived all the legal requirements for advertising and revaluing the suit property provided that the suit property is not sold below UGX 600,000,000. I therefore find that the 1st and 2nd Defendants did not act fraudulently when they sold the suit property to the 3rd Defendant by private treaty since it was not done retrospectively and the requirement for advertisement and re-valuation was waived by the Mortgagor. The Mortgagor therefore waived the duty of care imposed on the Mortgagee with regard to valuation of the suit property. 4. Counsel for the Plaintiff submitted that the action by the 2nd Defendant inserting a value of UGX 430m as the consideration on the transfer form of the suit property when in actual sense it was sold at UGX 600m as per the sales agreement dated 25th February 2014, this was an element of fraud intended to cheat Government of its taxes and this court should not allow these illegalities to stand even after being brought to its attention. He cited the case of ***Samuel Kizito Mubiru & Another v W. Byensibe & Another HCCS No. 513 of 1982*** where the plaintiff had inserted UGX 5m in the sale agreement as the value of the land where as he had paid UGX 2.4m, and it was held by Justice H. Kawesa, that the mode of acquisition of the title was with fraud and illegality because the definition of a bonafide purchaser included without fraud or without participation in wrong doing. 5. The case of ***Samuel Kizito Mubiru & Another v W. Byensibe (supra)*** is clearly distinguishable from the instant case since the insertion of a different figure from the consideration was the action by the 1st Defendant and not the 3rd Defendant who was the purchaser. Fraud has to be atrributable to the transferee. In the Supreme Court case of ***Betty Kizito vs Dvid Kizito Kanonya and 7 Others SCCA No. 8 of 2018***, Lady Justice Tibatemwa Ekirikubinza held that a buyer is not bonafide when they insert a lesser figure on the transfer form as consideration. I nthis case it was the seller who inserted the lesser figure and no evidence was led to show that the buyer was aware or participated in this action. 6. Under ***Section 59 of the Registration of Titles Act*** it is provided that no [certificate of title](https://ulii.org/akn/ug/act/ord/1922/22/eng%402011-09-02#defn-term-certificate_of_title) issued shall be impeached or defeasible by reason or on account of any informality or irregularity in the application or in the proceedings previous to the registration of the certificate. In the instant case the insertion or declaration of a less amount of consideration on the transfer form cannot be attributed to the buyer to invalidate the sale or transfer of title on the grounds of fraud. 7. The Plaintiff counsel submitted that the 3rd Defendant are not bonafide purchasers since they did not undertake a valuation of the land although they had written to the Chief Government Valuer. In the instant case, the sale being by private treaty, the 1st defendant as the Mortgagor had consented to it and had waived any requirement to re-value it. While it is prudent, there is no legal requirement for the purchaser to value a property before purchase therefore any failure or omission by the 3rd Defendant to value the suit property before purchasing it cannot be said to be fraudulent. 8. I therefore find no basis to impeach the title of the 3rd Defendant. In any case the 1st Defendant as the Mortgagor was the sole Registered Proprietor of the suit land and the plaintiff while being the spouse of the Mortgagor has no locus to pray for orders that the certificate of title be cancelled from the 3rd Defendant and be re-instated in her names when it was never registered in her names in the first place. 9. The Plaintiff did not adduce evidence that the 4th Defendant connived with the other defendants to prevent the registration of her caveat as an encumbrance on the certificate of title of the suit property. The testimony of the Plaintiff that a number of written notices to the Commissioner Land Registration to register the caveat went unanswered is not sufficient to prove the standard required fraud or collusion.

**Issue No.4: *What are the remedies available to the parties***

1. Under the plaint the Plaintiff sought declarations that the 1st and 2nd mortgage deeds be declared a nullity; that the eviction, sale and transfer of the suit property to the 3rd Defendant, being matrimonial property, was illegal, fraudulent and it be set aside; orders for cancellation of the certificate of title from the 3rd Defendant and re-instating the name of the Plaintiff, special damages, general damages, mesne profits, interest and costs of the suit. 2. From the evidence adduced I find that the Plaintiff has failed to prove her case against the Defendants that the matrimonial property in Kibuga Block 2 Plot 217 at Sir Apollo Kaggwa, Old Kampala that was mortgaged to the 2nd Defendant was sold off illegally and fraudulently transferred to the 3rd Defendant. The Plaintiff was at all times aware that as the spouse of the 1st Defendant she had given the statutory consent to the credit facilities granted to her husband who was the Mortgagor and that he had failed to service the said loans and they were both served with the statutory notices of Default and Eviction which clearly indicated that the consequence of non-payment of the outstanding loan arrears within the stipulated periods was the taking over of physical possession and sale of the suit property. The suit property was sold under private treaty with the consent of the Mortgagor who waived the requirements for re-advertisement and re-valuation. The Mortgagor and Registered Proprietor provided written consent to the sale of the property by private treaty at a specified market value. Further, the Plaintiff was a beneficiary from the proceeds of the sale of the suit property and was able to redeem her two certificates of title. 3. The action of the Plaintiff challenging the repayment of the loan from the proceeds of the sale from which she has admitted that she benefitted is against the principle of equity prohibiting one from “accepting” and “rejecting” at the same time. This position is well described by ***Scrutton J in Verschures Cremaries Ltd Steamship Co. Ltd (1921) 2 K B 608 at 612*** in these words;

*“It is a well-known principle of equity that one cannot approbate and reprobate all at the same time. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that “a person cannot say at one time that a transaction is valid and thereby obtain an advantage to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for purpose of securing some other advantage”*

1. In the instant case the acceptance by the Plaintiff of her two certificates of title released by the 2nd Defendant after the deposit of the proceeds from the sale of her matrimonial home as well her written permission to the 2nd Defendant to proceed with the foreclosure process in the event she fails to make a deposit by a specific date has estopped her from challenging the sale. 2. The special damages claimed by the Plaintiff with regard to the damage to the household items and lost items at the time of eviction. It is trite law that special damages must not only be strictly pleaded but also proved as held in the case of ***Margaret Kato & Anor versus Nuulu Nalwoga SCCA No. 03 of 2013***. The special damages are therefore denied. 3. The Plaintiff did not lead any evidence of the damage she alleges to have suffered to warrant the award of general damages. According to ***Halsbury's Laws of England 4th Edition Volume 12****(1)* ***and paragraph 812*,** general damages are those losses which are presumed to be the natural or probable consequence of the wrong complained of. The Plaintiff having consented to the mortgaging of her matrimonial home should have expected that the consequence of defaulting on the loan obligations would result in the sale of the said property to recover the amounts owed. In conclusion all of the Plaintiff’s prayers are therefore denied and this suit is dismissed. 4. Section 27 of the Civil Procedure Act provides that a successful party is entitled to costs unless for good cause court orders otherwise. The Defendants are successful however, it is noted that the events in this case were compounded by the strained marital relationship between the Plaintiff and 1st Defendant. Given the long history of this case and to avoid further acrimony between the Plaintiff and the 1st Defendant who share children, it is ordered that all the parties should bear their own costs.

It is so ordered.

**CORNELIA KAKOOZA SABIITI**

**JUDGE**

**Date: 20th October 2023**