Court name
Commercial Court of Uganda
Judgment date
14 December 2015

GT Bank Ltd v Richline International Ltd & Anor (HC OS-2014/10) [2015] UGCommC 176 (14 December 2015);

Cite this case
[2015] UGCommC 176




HC OS NO 10 OF 2014










  2. RICHARD MUHANGI}.....................................RESPONDENTS/DEFENDANTS



The Applicant’s application was commenced by Notice of Motion under section 98 of the Civil Procedure Act and seeks to have the Plaintiff’s case reopened to allow the Applicant tender new evidence and for costs of the application to be provided for.

The grounds of the application are that the Applicant advanced a credit facility to the Defendant (Mortgagor) who has since neglected or failed to honour his repayment obligations despite service of requisite notices. Secondly during the trial the Defendant’s in their submissions informed court that they had received the credit facility but the loan had been written off. Thirdly when the presiding judge made a ruling on the matter, a number of orders were made inter alia calling witnesses by both parties to be examined as there were a number of issues that could only be determined by calling witnesses. Fourthly when the Defendant appeared in court for cross examination he entirely denied having collected and/or received the loan facility but the Applicant insisted that he got.

The Applicant can only prove that the Respondent got the credit facility and even collected the money through reopening its case to enable her tender evidence to that effect according to the attached annexure. Lastly it is in the interest of justice that the application is allowed in order to avert a miscarriage of justice.

The application is supported by the affidavit of Grace Karuhanga, the Legal Manager of the Applicant/Plaintiff. Her deposition is that when the matter came up for hearing on 8 October 2015 the second Defendant testified that the Defendants never received the loan and overdraft monies from FINA bank. This was a departure from the admission in their submissions that the Plaintiff had written off the first Defendant's indebtedness. She deposes that the Defendants applied for and were granted a loan facility of Uganda shillings 100,000,000/= and an overdraft facility of Uganda shillings 80,000,000/=. The first Defendant through its directors/officers withdrew the loan monies which had been credited on its current account number 1540000061 according to copies of cheques which are annexed. The first Defendant failed or refused to pay up the loan and overdraft facilities despite a number of reminders according to communications to that effect attached to the affidavits. The Defendant promised to pay and requested for more time to pay the loan. Copies of communications to that effect are also attached. The second Defendant wrote to the bank of Uganda through family care hospital which is one of his enterprises complaining about the Plaintiff’s rejection of this payment proposal and bank of Uganda replied and informed them that the second Defendant was still indebted to the Plaintiff according to communications attached. The Defendant’s lawyers wrote to the Plaintiffs lawyers offering a payment schedule which communications is also attached. In those premises Grace Karuhanga deposes that it is in the interest of justice that the above evidence is adduced in court to show that the second Defendant was not telling court the truth when he alleged that the first Defendant did not receive any loan or overdraft.

The Respondent/Defendant did not file any affidavit in opposition to the application. However Counsels addressed the court in written submissions.

The crux of the Applicant’s submissions in support of the application is that at the trial after the Applicant's and Respondents witnesses had testified, the Applicant filed this application to reopen its case because during cross-examination of the Respondents witness, he denied ever receiving the loan money. He submitted that the allegation that the Applicant did not receive the loan money was never in contention at the beginning of the trial. Secondly the Respondents witnesses did not tell the court the truth when he alleged that the Respondent did not receive the loan money. The court should protect the judicial oath it administers. It would not prejudice the Respondent if the case is reopened on new evidence is tendered.

On the other hand the Respondent’s Counsel made a preliminary objection on points of law. The first point is that under Order 7 rule 14 (1) of the Civil Procedure Rules where a Plaintiff sues upon a document in his or her possession or power, he or she shall produce it in court when the plaint is presented and shall at the same time deliver the document or a copy to be filed with the plaint. He contended that the Applicant filed an originating summons on 21 August 2014 and at the time of presenting the application; the Applicant ought to have complied with the requirements of the law and delivered copies of the documents. The cheques and correspondences in the application did not constitute annexure to the affidavit in support of the originating summons neither were they listed as required by the law. The documents were in the power and disposition of the Applicant. He contended that the Applicant ought to have known that they would be relevant before the trial. Allowing the Applicant produce these documents after realising their case is weak without such documentation would prejudice and embarrass the Defendants. On these premises the application ought to fail.

The second point of law is based on Order 7 rule 18 (1) and (2) of the Civil Procedure Rules which provides that a document which ought to be produced by the Plaintiff when the plaint is presented or entered in the list to be added or annexed to the plaint and which is not produced and entered accordingly, shall not without the leave of court be received in evidence on his behalf at the hearing of the suit. Counsel contended that the document ought to have been produced or listed in the documents to be produced. The application before the court is now seeking leave of court to receive in evidence documents contrary to the above rule. Secondly the application was brought under section 98 of the Civil Procedure Act which saves the inherent power of court. He contended that inherent powers of court cannot be invoked where there is a specific provision of the law.

The Respondent’s Counsel submitted that since the Respondent denied receipt of the money, the Applicant ought to have moved the court under Order 7 rule 18 (1) of the CPR to tender in documents not listed or annexed to the affidavit in support of the originating summons.

Without prejudice to the preliminary objection Counsel submitted on the merits of the application. He contended that the principles for the admissibility of additional evidence on appeal are applicable. The ground for admissibility of fresh evidence include the discovery of new and important matters of evidence which after the exercise of due diligence was not within the knowledge or could not have been produced at the time of the hearing of the suit by the party seeking to adduce the fresh evidence. Secondly it must be evidence that is relevant to the issues. Thirdly it must be evidence which is credible in the sense that it is capable of belief. Fourthly the evidence must be such that if given, it would probably have influence on the result of the case, although it need not be decisive. Fifthly the affidavits in support of an application to admit additional evidence should have attached the document. Lastly the application to admit additional evidence must be brought without undue delay.

The rationale for the principles includes consideration that there would be no end to litigation unless the court can expect a party to put up its full case before the court. The rest of the submissions elaborate on the grounds for admissibility of fresh evidence.


I have carefully considered the applicable law for the admissibility of fresh evidence. The applicable principles are those applied by appellate courts to admit additional evidence in the first appeal. In this case however, evidence had been led by the Plaintiff and then by the Defendant. No judgment of the court has been issued and the Applicant at the close of the defence case applied immediately to reopen the Plaintiffs case. Secondly this is not a trial by a jury but by a judge.

The genesis of this matter is that the Applicant which is a bank applied by originating summons for the determination of certain questions namely:

  1. Whether the Applicant as a legal Mortgagee is entitled to foreclose and sell the mortgaged property to recover the entire amount due to it in respect of the principal amounts, interest, costs and all other charges related arising from the first Respondent's loan?
  2. Whether the Applicant/Mortgagee is entitled to sell the property by private treaty or public auction?
  3. Whether the Applicant/Mortgagee is entitled to vacant possession of the property and if so, whether the Applicant/Mortgagee is entitled to evict the second Respondent and his tenants from the property and hand over vacant possession to a purchaser for value?
  4. Whether the Applicant/Mortgagee should be granted costs of this suit.

The Applicant sought to foreclose the right of the Mortgagor to redeem the suit property. Secondly it is for an order for the Mortgagee to be permitted to sell the mortgaged land upon foreclosure in accordance with the laws. Thirdly the Applicant/Mortgagee sought a declaration that is entitled to vacant possession of the property and to evict the second Defendant. The Applicant/Mortgagee also sought consequential orders of any other relief that the court may deem fit and equitable to grant.

The affidavit in reply to the originating summons is that of Jacqueline Muhangi a director in the first Respondent and a wife to the second Respondent who claimed to be authorised by the second Respondent to make the affidavit on his behalf. She deposes that it is not true that the Respondents owe any money or that they are indebted to the Applicant Mortgagee as alleged. Secondly it is not true that any demand notice or alleged documents were ever served on the Respondents as alleged since there is no indebtedness as claimed by the Applicant.

Thereafter Counsels for the parties addressed the court in written submissions. The main controversy was whether the loan had been written off. In fact in the ruling of the court dated 12th December 2012, it was held that there were contested facts. The basic facts in support of the suit which were not in issue were summarised at page 11 of the ruling:

“The background to this suit is mainly contained in the affidavit evidence attached to the originating summons deposed to by Credit Manager of the Plaintiff, Mr. Charles Elong.

The first Defendant obtained a loan facility of Uganda shillings 100,000,000/= and an overdraft facility of Uganda shillings 80,000,000/= with the consent of the second Defendant who is the registered proprietor of Kyadondo Block 192 Plot 1729 land at Buwate and referred to as the mortgaged or suit property. This relationship is evidenced by annexure A1” being a banking facility letter dated 10th August 2014 for a “demand Loan” of Uganda shillings 100,000,000/= duly executed by the Plaintiff as well as the directors of the Defendant Muhangi Richard and Jacqueline Muhangi.  Secondly there is a banking facilities letter annexure “A2” dated 29th of September 2011 for Uganda shillings 80,000,000/=, being an overdraft facility also duly executed by the parties.  In annexure “B1” to the affidavit in support the parties executed a mortgage deed for Kyadondo Block 192 Plot 1729 registered in the names of Richard Muhangi, the second Defendant.  The deed is executed by the Mortgagor, the principal debtor and the bank. Annexure “B2” is a further charge likewise duly executed.  There is a legal mortgage and further charge over the mortgaged property as security for the two loans.  The title deed is annexure “B3” and proves that the mortgage in favour of FINA Bank was registered under instrument KLA512341 on the 16th of August 2011 while the further charge was registered on the title deed on the 11th of January 2012 under instrument KLA530974.”

Secondly the Defendant’s defence as summarised by the court is found at page 13 – 14:

“The Defendants both in the affidavit in reply of Jacqueline Muhangi as well as in the submissions raise a preliminary point of law to the effect that the action is frivolous and vexatious. The basis of the objection is on their assertion of fact that the Plaintiff had written off the loan obligations of the Defendants. There was no attachment of any kind to the affidavit of Jacqueline Muhangi. Instead in the written submissions the Defendants Counsel relies on annexure "I" to the affidavit in support of the originating summons. The point can be made on the premises that there is no cause of action against the Defendants because no money is owed the Plaintiff.

I have carefully gone through annexure "I" which is a bank statement dated first of January 2012 to 25th of September 2013 and comprises of a statement of account for Messieurs Richline International Ltd, the first Defendant to this suit. The statement ends at page 6 but has handwritten additions after the printed statements indicating at the end of the statement that by the 31st of May 2014 the amount outstanding on the loan account of the first Defendant is Uganda shillings 290,921,763/=. At page 6 of the statement and without the handwritten notes, on 29 December 2012 there at the typescript words "write off" of Uganda shillings 94,543,941/=. Again on 29 December 2012 there are words in the description column "charge off" and the amount of Uganda shillings 94,543,941/= appears while the balance is indicated at 94,543,941/=. On the same day they are the words "write down" with an amount of zero and the balance at the end of the row is indicated as Uganda shillings 94,543,941/=. Below is a total and it is indicated as zero. However additional notes are written in handwriting and it is indicated that the principal amount by 29 December 2012 was Uganda shillings 94,543,941/=. The accrued interest is 33,278,437/= while penalty charges amount to Uganda shillings 5,496,352/=. In the handwriting further calculations are made which end up with the sums payable by the 31st of May 2014 being Uganda shillings 290,101,763/=. Whereas the bank statement is a computer printout, there is no information about the additional handwriting superimposed on the printout which allegedly has the outstanding amount.”

The problem faced by the court is captured at page 14 - 15 of the ruling:

“The affidavit of Jacqueline Muhangi paragraph 3 thereof deposes as follows:

"That in reply to paragraphs 2, 3, 8, 9, 10, 11, and 12, it is not true that the Respondents owe any money or that they are indebted to the Applicant Mortgagee as alleged."

The affidavit of Jacqueline Muhangi was filed on the court record on 29 September 2014. Subsequently the Plaintiff did not file any affidavit in rejoinder to that of Jacqueline Muhangi. In other words there is a controversy based on the bank statement Annexure "I" about the author of the handwritten notes which gives the indebtedness of the Defendant company. On the other hand the printout of the bank statement ends with a total of zero and the words "write off" have not been clearly explained in any affidavit in reply or rejoinder. None of the Counsel applied to cross examine any of the deponents and the court was addressed in written submissions. I have further critically considered the demand notices annexure "C". The printout of the bank statement stops on 29 December 2012 and the rest of the writings on the bank statement is under somebody's hand and got up to May 2013. Consequently in the absence of any explanation about the statement beyond 29 December 2012 which is not a printout, there is a very unsatisfactory state of affairs.”

 I therefore concluded that the suit was not fit for trial in a summary manner and directed that further evidence be adduced. Subsequently Charles Elong the Credit Manager of the Plaintiff filed a witness statement while for the Defendant Richard Muhangi filed a witness statement in further support of the defence. Both witnesses were cross examined.

The controversy arose again on the basis of the witness statement of Richard Muhangi. In testified in writing in 6 paragraphs in answer to the originating summons as follows:  


  1. That in reply to paragraphs 2, 3, 8, 9, 10, 11 and 12, it is not true that the Respondents owe any money or that they are indebted to the Plaintiff Bank as alleged.
  2. That in reply to paragraph 5, 6, 7 and 8, it is not true that any Demand notice or alleged documents were ever served on the Respondents as alleged since there is no indebtedness as claimed by the Applicant.
  3. The contents of paragraph 13 are false.
  4. That the purported claim of the Applicant/Plaintiff is frivolous, vexatious and untenable at law and ought to be dismissed with costs to the Respondents and it is based on forged, fraudulent and fictitious documents.
  5. The Plaintiff is not entitled to the remedies sought.
  6. That I make this statement to oppose the suit which should be dismissed with costs.”

The matter which formed the basis of the Applicant’s application to adduce fresh evidence arose during examination of DW1. He testified that he never knew the facility documents namely annexure “J”, “J” “L” and “M” to the witness statement of PW1 Mr. Charles Elong. He testified that the documents “L” and “M” related to a bank statement of Guarantee Trust Bank which he did not know. They had applied for a Loan with FINA Bank which they never took. They applied for a loan but never took the loan.  When he was cross – examined by the Plaintiff’s Counsel he testified that the Defendants never took a loan. They got a statement and the loan had been written off. He was not aware that his company obtained a loan. He was not aware that FINA Bank (U) Ltd had changed its name to Guarantee Trust Bank. He further testified that the written submissions of the Defendants Counsel in defence to the originating summons that the bank had communicated a write off of the loan were not true.

In re-examination DW1 testified that the loan was given but never taken. They deposited their title deed but never took the loan. They applied to take back their title that is when there were confronted with a suit in court.

Thereafter the Plaintiffs Counsel prayed to reopen the Plaintiff’s case and filed an application. The OS itself had been fixed for submissions and judgment.

I have carefully considered the objections based on Order 7 rules 14 and 18 of the Civil Procedure Rules.  Order 7 rule 14 provides that where a Plaintiff sues upon a document, that document shall be attached.  The provision is inapplicable because the basis of the OS are the mortgage deed and further charge documents together with the facility documents which were attached to support the assertion that the Defendants were in default and the Plaintiff was entitled to sell the mortgaged property.  The documents attached to the OS were meant to prove the Defendant’s indebtedness. However the issue before the court is whether fresh evidence should be admitted owing to the contention that the Defendants never took the loan. Rule 14 cannot be applied to an application to adduce fresh evidence and the objection is overruled.

With regard to Order 7 rule 18 of the Civil Procedure Rules, rule 18 deals with inadmissibility of documents not attached to the plaint or listed. The rule cannot apply to a case where the Plaintiff seeks to reopen the suit on the ground that a new matter has been raised.

I must say that the Defendants defence is based on an affidavit in reply and witness statement. The affidavit in reply does not give the particulars of fraud alleged. It asserts that the documents of the Plaintiff are forged. Consequently when the second Defendant testified that they had not taken the loan, this was contrary to the previous submission that the loan was written off. At this stage the issue of whether the loan had been taken or not was not in contention. What was in contention is whether the money owed.  In support of the Plaintiff’s claim there is a bank statement, as well as correspondence and mortgage deeds and further charge on the mortgaged property.

The issue is therefore whether there are grounds for reopening the Plaintiffs case so that new evidence is adduced.   In the case of Kiama v Republic [2006] 1 EA 114 Tunoi, O’Kubasu and Githinji JJA of the Kenyan Court of Appeal held that the requirements for the admission of additional evidence in Kenya were stated in Mzee Wanjie and others v Saikwa and others [1982-1988] 1 KAR 462 that:

  1. It must be shown that it could not have been obtained by reasonable diligence before and during the hearing.
  2. That there is new evidence which would have been likely to have affected the result of the suit.
  3. The question of re-appraisal would be reserved for argument at the hearing of the appeal.”

Additionally the principles are also dealt with in the case of Meek v Fleming [1961] 3 All ER 148 when the Court of Appeal considered at length the grounds for taking fresh evidence on appeal. They noted that there would be a constant succession of re-trials if judgments were to be set aside merely because something fresh that might have been material has come to light.

In this case there is no judgment as yet and to that extent the Applicant’s application is distinguishable because the Defendant would have a right to rebut the evidence through cross examination or any other legitimate means.

 In Meek v Fleming [1961] 3 All ER 148 Pearson LJ noted that the Defendants Counsel deliberately chose not to have revealed a material fact that the Defendant had been demoted from the rank of chief inspector to the rank of station sergeant (Page 157).

“with the consequence that the Defendant appeared to the judge and jury throughout the trial as a person still holding the rank of chief inspector, and therefore as a highly credit-worthy person, whereas in fact he had been demoted for an offence involving deception of a court. Whatever erroneous analogies may have prompted the decision, which was well-intentioned, it was, in my view, utterly wrong, and it had deplorable results. There was in the result at the trial of this action a deception of the court, and the Defendant in cross-examination was giving uncandid (and at one point false) evidence in order to preserve the concealment of the truth.”

The question of whether there was a loan or not is a fundamental question. Dismissing the Plaintiffs suit brought by way of an originating summons to determine certain questions will not discharge the registered mortgage and further charge. This is illustrated by section 125 of the Registration of Titles Act which provides for the way a mortgage may be discharged by the Mortgagee and it provides that:

“125. Discharge of mortgages.

Upon the presentation for registration of a release from any registered mortgage or charge in the form set out in the Twelfth Schedule to this Act signed by the mortgagee or his or her transferees and attested by one witness and discharging wholly or in part the lands or any portion of the lands from the registered mortgage or charge, the registrar shall make an entry of the release upon the original and duplicate certificate of title and upon the original mortgage and duplicate, if any, and on the date of such registration as defined in section 46(3) the land affected by the release shall cease to be subject to the registered mortgage or charge to the extent stated in the release.”

In other words The Defendants title is still encumbered by a mortgage and unless released the registered title of the Mortgagor is subject to the registered legal mortgage.

Order 37 rule 4 deals with a situation where the mortgage is not in issue and it provides as follows:

“Any Mortgagee or Mortgagor, whether legal or equitable, or any person entitled to or having property subject to a legal or equitable charge, or any person having the right to foreclose or redeem any mortgage, whether legal or equitable, may take out as of course an originating summons, returnable before a judge in chambers, for such relief of the nature or kind following as may be by the summons specified, and as the circumstances of the case may require; that is to say, sale, foreclosure, delivery of possession by the Mortgagor, redemption, re-conveyance or delivery of possession by the Mortgagee.”

In this suit the Plaintiffs seeks an order to prove that it is entitled to sell the mortgaged property and an order for vacant possession.  The originating summons was adjourned to court to hear evidence.  The ruling of the court inter alia adjourning the matter for hearing is that:

“In my opinion the matters raised in the affidavits contain insufficient facts to make the order prayed for in the suit. On the basis of the facts and controversies raised, as well as the submissions of Counsel, the suit is not appropriate for disposal in a summary manner.”

The Civil procedure Rules applicable are rules 10 and 11 which rules are reproduced for ease of reference:

10. Evidence and directions upon hearing of summons.

On the hearing of the summons, if the parties do not agree to the correctness and sufficiency of the facts set forth in the summons and affidavit, the judge may order the summons to be supported by such further evidence as he or she may deem necessary and may give such directions as he or she may think just for the trial of any issues arising upon the summons, and may make any amendments necessary to make the summons accord with existing facts, and to raise the matters in issue between the parties.”

Rule 10 envisages the parties not agreeing as to the sufficiency of facts and envisages the court directing the summons to be supported by such other evidence as may be necessary. The parties were directed to adduce further evidence on the loan and indebtedness of the Defendants. Thereafter there was a flaw in the order passed by adding a surplusage that the court will not dismiss the Originating summons but direct the adducing of evidence. The correct position is in rule 11. Rule 11 provides that the court may refuse to pass an order on the summons and instead dismiss it. The parties were required to have the matter tried as an ordinary suit and this is determined by Order 37 rule 10 but trying the suit as an ordinary suit never happened. No further pleadings were received from both parties. The matter therefore proceeded as under Order 37 rule 10 by calling witnesses for the Plaintiff and the Defendant. The parties merely filed witness statements and cross examined the witnesses. Rule 11 was not applied. In the premises the question is whether Order 37 rule 11 can be applied at this state. Order 37 rule 11 of the Civil Procedure Rules provides that:

“11. Powers of court upon hearing of summons.

The judge hearing an originating summons may, if he or she thinks fit, adjourn the hearing into court for taking evidence viva voce or hearing arguments; and, if it appears to him or her that the matters in respect of which relief is sought cannot properly be disposed of in a summary manner, may refuse to pass any order on the summons, and may dismiss it, referring the parties to a suit in the ordinary course, making such orders as to costs as may appear to be just.”

Having considered the manner in which the trial was conducted, the question is whether an order should be made on the summons (as there are no further pleadings) or whether the court should dismiss it and refer the parties to an ordinary suit.

The controversy that has arisen is catered for by the Mortgage Act, Act 8 of 2009. It gives the procedure for all case scenarios including the challenging of the mortgage itself. I will repeat the remedies available to the parties under the Mortgage Act 2009. Section 19 (1) of the said Act stipulates that where money secured by a mortgage is made payable on demand, a demand in writing shall create a default in payment. Secondly under section 19 (2) where the Mortgagor is in default of any obligation to pay the principal sum on demand or any interest or other relief payment or part of it under a mortgage, or in the fulfilment of any common condition, express or implied in the mortgage, the Mortgagee may serve to the Mortgagor notice in writing of the default and require the Mortgagor to rectify the default within 45 working days. The notice is in the prescribed form (S.19 (3) of the Mortgage Act). The Mortgagee upon default of the Mortgagor may require the Mortgagor to pay all monies owing on the mortgage; appoint a receiver of the income of the mortgaged land; lease the mortgaged land; enter into possession of the mortgaged land or sell the mortgaged land. 

All the above remedies assume that there is a valid mortgage which is not in issue in the trial. The Mortgagee may also sell the property under section 26 of the Mortgage Act after expiry of the time provided for the rectification of the default stipulated in the notice served on him or her under section 19.

On the other hand the court has powers to review mortgages on the application of a Mortgagor under sections 34 and 35 of the Mortgage Act on the ground that it was obtained unlawfully in terms prescribed under section 34 i.e. through fraud, deceit, or misrepresentation by the Mortgagor; or in a manner or containing a provision which is unlawful; the court may review the mortgage on application by the persons mentioned in section 35 in the interest of justice.

That being the remedies available and in light of the application to rebut evidence of the Defendant that they had not taken any loan, this is not a suit for hearing as originating summons even after directions to take further evidence. Furthermore the mortgage can only be discharged by the Mortgagee through release of mortgage or by the court. On the other hand there is insufficient material to rule that there was a valid mortgage hence the Applicants application.

That being the case I decline to make any order in the OS and deem it fit to have the Originating Summons dismissed as inappropriate to try the issue of validity of the mortgage. In any case where there is a statutory right of sale and the Plaintiff has the right to proceed on the basis of demand notice to deal with the property as enabled by the law. It is up to the Defendants to challenge the intended sale or management of the property.

Section 35 of the Mortgage Act envisages a suit by a Mortgagor, spouse or other interested person. The Mortgagee does not need an order of the court to foreclose the right of the Mortgagor as the foreclosure procedure under the Mortgage Act cap 229 has been repealed.

I considered the repeal of the foreclosure procedure in the case of Ecumenical Church Loan Fund Uganda Ltd vs. Ways Km Uganda Ltd CS (OS) 11 OF 2014. In that case I discussed the effect of the repeal of the Mortgage Act cap 229 by the Mortgage Act 2009 and held that foreclosure procedure has been abolished and has not been re-enacted by the Mortgage Act, Act 8 of 2009. This is what I said:

“Foreclosure procedure on the other hand is a procedure to sell the mortgaged land by an order of the court foreclosing the right of a Mortgagor to redeem the property and having the property vest in the Mortgagee as an absolute owner thereof before the sale. In the procedure, notice and opportunity is given to the Mortgagor to exercise the right or equity of redemption before the option to redeem is extinguished. According to Oxford Dictionary of Law 5th Edition, foreclosure is:

“A remedy available to a Mortgagee when the Mortgagor has failed to pay off a mortgage by the contractual date for redemption. The Mortgagee is entitled to bring an action in the High Court, seeking an order fixing a date to pay off the debt; if the Mortgagor does not pay by that date he will be foreclosed, i.e. he will lose the mortgaged property. If, after this order (a foreclosure order nisi) is made, the Mortgagor does not pay on the date and at the place named, the foreclosure is made absolute and the property thereafter belongs to the Mortgagee. However, the court has discretion to allow the Mortgagor to reopen the foreclosure and thereby regain his property.”

The remedy and procedure for the relief of foreclosure is provided for under the repealed Mortgage Act cap 229 under section 2 thereof allowing the Mortgagee upon default of the Mortgagor to sue the Mortgagor on the covenant.  Under the repealed Mortgage Act cap 229 section 3 (c) thereof, the Mortgagee may realize his or her security by foreclosure among other prescribed remedies. Sale by foreclosure is expressly provided for under section 8 and 9 of the repealed Mortgage Act cap 229. Section 8 of the repealed law is pertinent and provided as follows:

                        “8. Foreclosure

(1) A Mortgagee may apply to the court to foreclose the right of the Mortgagor to redeem the mortgaged land anytime after the breach of covenant to pay.

(2) Upon an application by the Mortgagee under this section, the court shall determine the amount due to the Mortgagee and may fix a date, not exceeding six months from the date of the failure to pay, within which the Mortgagor shall pay the amount due.

(3) If the Mortgagor fails to pay on the date fixed by the court under subsection (2), the court shall order that the Mortgagor be foreclosed of his or her right to redeem the mortgaged land and that the land be offered by the Mortgagee for sale in accordance with section 9.”

This procedure has been repealed by section 44 of the Mortgage Act 2009, Act 9 of 2009 which section repeals the Mortgage Act cap 229. The result of the repeal is that with the statutory safeguards in place, a statutory power of sale may be exercised by a Mortgagee who need not come to court. It is the other parties who are entitled to notice who usually come to court. There is no foreclosure procedure under the Mortgage Act 2009. Though the court has power to order sale of mortgaged property, the use of the term foreclosure presupposes use of the procedure under section 8 of the repealed Mortgage Act cap 229 which term can be misleading. Furthermore the circumstance under which the court may order sale of mortgaged property in other proceedings need to be further explored but that exploration is not necessary in these proceedings. Suffice it to note that the power of the court to order sale of mortgaged property can arise in other proceedings which may not necessarily be between a Mortgagee and a Mortgagor. I.e. in a winding up of a company or bankruptcy proceedings, mortgaged property can be ordered to be sold subject of course to priority ranking stipulated in the law for secured creditors.

Where the court uses its powers to order sale of mortgaged property in proceedings between a Mortgagee and Mortgagor, the court has to ensure that the Mortgagee has complied with the provisions of section 19, 20 and 26 of the Mortgage Act 2009. Last but not least the current statutory provisions have sufficient safeguards in the exercise of a statutory power of sale by a Mortgagee without prior intervention of court to protect interested persons. A sale by a Mortgagee for example shall be by Public Auction unless sale by private treaty is agreed to by the Mortgagor while a sale by order of court may be conducted in the manner directed by the court in according to regulations 8 and 9 of the Mortgage Regulations 2012 respectively.”

I still agree with the above ruling that the foreclosure procedure where the court makes the orders have been repealed. Instead an opportunity is given to the Mortgagor of 45 days to rectify any default in payment of the loan. After that notice the Mortgagee may exercise without coming to court the statutory right of sale which has adequate safeguards for the Mortgagor. Moreover the burden shifts on the Mortgagor or interested persons to challenge in court the exercise of the Mortgagee’s right of sale on any lawful grounds. In the premises the Applicant’s application serves no further useful purpose. Furthermore the orders sought in the Originating Summons cannot be granted in this suit and the originating summons stands dismissed as inappropriate without prejudice to other lawful procedure. The dismissal is not on the merits and each party shall bear its own costs occasioned so far.

Ruling delivered in open court on the 14th of December 2015


Christopher Madrama Izama


Ruling delivered in the presence of:

Asa Mugenyi for the Plaintiff

Gumisiriza Innocent Counsel for the defendant

Grace Karuhanga Legal Manager of Plaintiff in court

Charles Okuni: Court Clerk


Christopher Madrama Izama