KCB Bank Uganda Limited v Tusingwire (Originating Summons 28 of 2023) [2024] UGCommC 158 (12 April 2024)

| 5 | THE REPUBLIC OF UGANDA | |----|----------------------------------------------------------| | | IN THE HIGH COURT OF UGANDA AT KAMPALA | | | [COMMERCIAL DIVISION] | | | ORIGINATING SUMMON NO. 0028 OF 2023 | | | IN THE MATTER OF LAND A LEGAL MORTGAGE | | 10 | AND | | | IN THE MATTER OF LAND COMPRISED IN KYADONDO BLOCK 121 | | | PLOT 925 KYADONDO EAST KANSANGATI, NANGABO CELL, WAKISO | | | DISTRICT | | | AND | | 15 | IN THE MATTER OF AN APPLICATION FOR FORECLOSURE AND SALE | | | OF THE MORTGAGED PROPERTY |

**BETWEEN**

| 20 | KCB BANK UGANDA LIMITED | | ] | PLAINTIFF | |----|----------------------------|--------|---|-----------| | | | VERSUS | | | | | ELIAB TUSINGWIRE ELIAKANAH | | ] | DEFENDANT |

25 **Before: Hon. Justice Thomas Ocaya O. R**

## **JUDGEMENT**

## **Background**

- 30 The Plaintiff, a limited liability Banking company brought this suit under Order 37 Rules 4,8, 9, and 12 of the Civil Procedure Rules S. I 71-1 as Amended by S. I 33 of 2019, Sections 20, 24, and 26 of the Mortgage Act against the Defendant for determination of the following questions: - a) Whether the Plaintiff is entitled to foreclosure and sell the Mortgaged property of the - 35 mortgagor to recover all the sum of money due in respect of the principal debt, interest, and other incidental charges?

- 5 b) Whether the Defendant should be ordered to give vacant possession of the mortgaged property for the Plaintiff to sell upon foreclosure in accordance with the law? - c) Whether the Defendant is liable to meet additional costs upon an order to foreclosure and sale of the Mortgaged property. - d) Whether the Plaintiff should be granted costs of the suit. - 10

The brief facts of the summon are stated in the affidavit in support deponed by Mr. Timothy Nabaala, a Senior Manager of recovery and collections of the Plaintiff and he stated that on the 4th October 2022 the Defendant approached the Plaintiff bank for a

loan facility which was granted to the tune of UGX 100,000,000 and the same was secured 15 with property comprised in Block 121 Plot 925 at Kyadondo East, Kansangati Nangabo Cell in Wakiso District and the Defendant breached the terms of the said mortgage by defaulting on payment and a Notice of Default was served onto him on the 16th December 2022.

That a second and third notices of default/demand notice were served on the Defendant on 6th 20 January 2023 and 27th March 2023 respectively which were acknowledged but ignored by the Defendant and continued to be in breach of the Mortgage agreement. A communication of intention to enter possession of the Mortgaged property was communicated to the Defendant through Katongole, Yiga & Masane Advocates/Solicitors but the Defendant denied the Plaintiff access.

The Plaintiff filed this summons in court on the 4th March 2024 and when the matter came up for hearing on the 26th March 2024, the Defendant was absent, and counsel for the Plaintiff submitted that the Defendant was served and there is an affidavit of service on Court record by Mr. Lubega Nasser detailing the service on the defendant.

30 Counsel for the Plaintiff submitted that efforts have been made to serve the Defendant but he has not been responsive and prayed that the matter proceed ex parte.

Court being satisfied that the Defendant hand been served and failed to enter appearance granted the order to proceed ex parte.

### 5 **Representation:**

The Plaintiff was represented by the law firm of M/s Katongole, Yiga & Masane Advocates/ Solicitors while the Defendant did not enter appearance and was not represented.

### 10 **Issues:**

The Plaintiff raised the following issues for the Court's determination.

- 1. Whether the Plaintiff is entitled to foreclosure and sell the Mortgaged property of the mortgagor to recover all the sum of money due in respect of the principal debt, interest, and other incidental charges? - 15 2. Whether the Defendant should be ordered to give vacant possession of the mortgaged property for the Plaintiff to sell upon foreclosure in accordance with the law? - 3. Whether the Defendant is liable to meet additional costs upon an order to foreclosure and sale of the Mortgaged property. - 20 4. Whether the Plaintiff should be granted costs of the suit.

## **Evidence:**

The Plaintiff's evidence was adduced in the affidavit in support sworn by Mr. Timothy Nabaala, a Senior Manager of recovery and collections of the Plaintiff Company and the

25 Defendant did not enter appearance.

The affidavit and their subsequent annexures were considered in arriving at this decision by the court. The Plaintiff, with leave of court made written submissions in support of their case which I have read but I have not seen the need to reiterate the same below. I have considered

30 the same before arriving at my decision.

# **Analysis:**

Issues 1 and 2 shall be resolved concurrently because, in essence, they all touch the same issue of the Plaintiff's right to foreclosure and vacant possession.

- 5 Under Order 37 Rule 4 of the Civil Procedure Rules, any mortgagee, whether legal or equitable, may take out originating summons before a judge in chambers for such relief of the nature as may be specified by the summons and as circumstances of the case may require; that is a sale, foreclosure, delivery of possession by the mortgagor, redemption, reconveyance or delivery of possession by the Mortgagee. See **Guarantee Trust Bank v Dokwals Uganda** - 10 **& Anor HCCS 1/2021, Kulsumbai Gulamhussein Jaffer Ramji and another v. Abdulhussein Jaffer Mohamed Rahim, Executor of Gulamhussein Jaffer Ramji, Secretary, Wakf Commissioners, Zanzibar, and others [1957] E. A 699, Monica Kwesiga v Commercial Bank of Africa HCMA 1197/2021**

# 15 In **Stanbic Bank Uganda Limited v Munwe Enterprises Limited & Anor HCCS 1/2022**, this court held thus;

"This procedure entails the interpretation of documents, wills, deeds, enactments, or any other written instrument. It also involves the determination of any question of construction arising under the instrument and for a declaration of rights of persons interested. Where

20 there is no question of construction, the procedure by Originating summons is inappropriate, as pointed out in Lewis V. Green [1905] 2 Ch. 340 at 344. Where there are non-fundamental contestations over facts, the court may take advantage of its powers under Order 37 Rule 11 which provides thus;

*The Judge hearing an Originating summons may, if he or she thinks fit, adjourn the hearing into*

- 25 *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.* - 30 In this instant matter, the Defendant did not enter appearance and the matter proceeded ex parte under Order 9 Rule 20(1) upon the Plaintiff satisfying Court that several attempts were made to serve the Defendant but he refused to enter appearance.

A party who adamantly and voluntarily absents himself or herself from proceedings upon 35 being served and made aware of the proceedings cannot claim breach of fair hearing when 5 he or she fails to enter appearance when called upon to do so. See **Attorney-General of River State v. Gregory Obi Ude and 12 others, (1993) 2 NWLR(Pt.278) 638; (1993) 2 SCNJ 47.**

In the premises, the Defendant has put himself out of locus standi to contest the prayers made by the Plaintiff and as such, the Plaintiff's claim is uncontested. However, the Plaintiff still

10 bears the burden to prove to the Court that they complied with the statutory requirements under the Mortgage Act, 2009.

It is trite that in Civil proceedings, the burden of proof lies upon the party who alleges, and said party must prove their case on a balance of probability if they are to obtain the remedies sought. see *Lord Denning in Miller versus Minister of Pensions (1947)2 ALL ER 372 on page 373* and *Section 101 and Section 103 of the Evidence Act*.

In any application for foreclosure such as this, the three steps below have to be completed.

- (a) The completion of a loan agreement (whichever form it takes) - (b)The disbursement of the loan amounts - (c) The occurrence of default, and the failure to rectify the same entitling the 15 mortgagee to enforced recovery.

Counsel for Plaintiff cited the decision of Justice Boniface Wamala in Letshego Uganda Limited V Felix Kulayige High Court Commercial Division O. S No. 5 of 2020 that:-

"The first question, therefore, on the case before me is whether a mortgage agreement existed between the parties herein. Under Section 3 (1) of the Mortgage Act No. 8 of 2009,

20 a person holding land under any form of land tenure, may, by an instrument in the prescribed form, mortgage his or her interest in the land or a part of it to secure the payment of an existing or a future or a contingent debt or other money or money's worth or the fulfillment of a condition.

Counsel also cited Section 2 of the Mortgage Act, 2009 that defines a Mortgage to include 25 any charged or lien over land or any estate or interest in land in Uganda for securing the payment of an existing or a contingent debt or other money or money's worth or the

5 performance of an obligation and includes a second or subsequent mortgage, a thirdparty mortgage and as sub mortgage.

Counsel submitted there is enough factual and documentary proof that a mortgage agreement existed between the parties because the Plaintiff is a Mortgagee subject to a loan of UGX 100,000,000/= advanced to the Defendant as a Mortgagor which loan was

10 secured on property comprised in Block 121 Plot 925 at Kyadondo East, Kasangati Nangabo Cell in Wakiso District.

Plaintiff's Witness in paragraphs 2 and 3 of the affidavit in support stated that Defendant handed over the Certificate of title(duplicate) to the above-described property to the Plaintiff who is still in the custody of the same which was dully perfected and registered

15 on the 3rd of October 2022 and the same was annexed as PEX 2; upon entering a loan facility agreement annexed as PEX 1.

Having perused the evidence of the Mortgage deed together with the loan facility documents entered into between the Plaintiff and the Defendant on the 13th of September 2022 as well as the mortgage encumbrance created on the duplicate

- 20 certificate for Block 121 Plot 925 Mengo, Kyadondo on the 3rd October 2022 at 10:17 AM in favor of KCB Bank Uganda Limited, the Plaintiff; I can only arrive at one deduction that there existed a subsisting mortgagee - Mortgagor relationship between the parties under Section 3(1) of the Mortgage Act and this Court's decision in **Letshego Uganda Limited V Felix Kulayigye** (supra) as cited by the Plaintiff. - 25 On Foreclosure, Counsel cited the decision of Justice Steven Mubiru in Housing Finance Bank Limited V Seninde Margaret and Another High Court Commercial Division O. S No. 7 of 2021 to define a foreclosure as, "the legal process that allows lenders to recover the balance owed on a defaulted loan by taking ownership of and selling the mortgaged property as collateral. Once obtained, the plaintiff obtains title to the property free and - 30 clear of the interests of the defendants and may therefore proceed to take possession or transfer the property to a purchaser. Through a suit for foreclosure, the mortgagee becomes the owner of the mortgaged property and those interests subsequent to the mortgage in priority will lose their interest in the mortgaged property"

5 Section 19 (1) of the Mortgage Act provides that where money secured by a mortgage is made payable on demand, a demand in writing shall create a default in payment.

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

- 10 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 template of the notice is provided as prescribed under Section 19(3) of the Act. - 15 Section 26 of the Mortgage Act provides that where the Mortgagor is in default of his or her obligations under the mortgage and remains in default after the expiry of the time provided for the rectification of the default stipulated in the notice served on him or her under section 19, a Mortgagee may exercise his or her power of sale of the mortgaged land.

20 Justice Christopher Madrama Izama (as he then was) in **Ecumenical Church Loan Fund Uganda Limited V. Ways KM Uganda Limited, CS-OS-11 of 2014** stated that "*I must note that the exercise of the power of sale by a Mortgagee under the Mortgage Act sections 19, 20, and 26 is not preceded by an order of the court but is a statutory power of sale based on compliance with the prescribed procedure. The prescribed procedure has inbuilt* 25 *statutory safeguards that ensures sufficient notice to interested parties and fairness"*

The Plaintiff's witness in paragraph 4 of the affidavit in support annexed a Notice of Default served on the Defendant and marked as PEX 3 which was received and acknowledged by way of signature on 2/06/2022. In paragraph 5, the witness adduced a second Notice of

30 Defaulted dated 6/01/2023, and the same was acknowledged by the Defendant and annexed as PEX 4; A third Notice of Default was annexed as PEX 5 dated 27/03/2023 which was equally acknowledged by the Defendant and annexed as PEX 6.


5 The foregoing notices are all in the prescribed form under section 19(3) and comply with the statutory requirements under sections 19(1) and (2) of the Mortgage Act and the Mortgagor was given adequate time to rectify the default which he did not comply with.

Section 20(e) of the Mortgage Act provides for the remedy of sale and gives the Mortgagee 10 powers of sale as a remedy with provisions of sale under Section 26.

The remedy of sale cannot be exercised through the Court without establishing a default and the time period of 45 days for ratification of the default. The remedy of foreclosure can only be granted where a suit has been commenced by Originating summons where clear evidence 15 of compliance with the statutory provisions is adduced to the Court's satisfaction.

In **Ecumenical Church Loan Fund Uganda Limited V. Ways KM Uganda Limited** (supra) Justice Christopher Madrama Izama (as he then was), when faced with a similar scenario where the Defendant upon service of summons did not enter appearance; declined to grant

20 the Plaintiff's prayers for foreclosure and Sale of the Mortgaged property under Originating summons for failure to adduce evidence of compliance to section 19 of the Mortgage Act.

I find that, in this case the Plaintiff has adduced sufficient evidence to warrant the grant of the order of foreclosure by taking possession of the Mortgaged property and selling the same

25 to redeem the Mortgage.

# **Issue 3: Whether Defendant is liable to meet additional Costs upon an Order to foreclose and sale of the Mortgaged Property.**

Counsel for the Plaintiff submitted that the Defendant is liable to meet the additional 30 costs incurred by the Plaintiff in the course of foreclosure and sale of the Mortgaged Property. Counsel relied on paragraph 15 of the Mortgaged deed annexed as PEX 1 which provides verbatim under the heading "Costs" that:-

*"The Mortgagor shall meet all costs, charges, and expenses as shall or may be incurred by the Bank in relation to the creation of this legal Mortgage or as a result of the occurrence of any*

35 *breach of the terms and conditions of this mortgage or which may otherwise be deemed necessary by the Bank for the purpose of Protecting or defending its interest and rights in the* 5 *Mortgaged Property or any rights conferred under this Legal Mortgage or the Loan Documents."*

Counsel further cited Section 33 (1) of the Contracts Act No. 07 of 2010 which provides that parties to contract shall perform or offer to perform, their respective promises.

In light of the fact that the Defendant refused to enter appearance and in doing so put themselves out of locus to contest the Plaintiff's claim or adduce evidence in court that proves or explains that for a good legal cause, they could not perform their promise under the contract. It is trite that the Court cannot interfere with the performance of a contract

15 except for illegality or any irregularity that does not follow the ingredients of Section 10 of the Contracts Act.

When interpreting a Contract, the Court should be mindful of the fact that it is not the function of the Court to improve the parties' bargain. See **Wood v. Capita Insurance**

# 20 **Services Ltd, [2017] 4 ALL ER 615.**

In the premises, the Defendant is liable to meet the additional costs incurred by the Plaintiff in the course of foreclosure and sale of the Mortgaged property as agreed under the Mortgage deed.

#### 25

# *Costs:*

**Section 27 of the Civil Procedure Act** provides that costs follow the suit unless there is a strong reason to suggest the contrary and are awarded at the court's discretion. See, *Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd, [1951] 1 All ER 873.*

The instant case, I find that had it not been for the Defendant's default in servicing the Mortgage, the Plaintiff would not have pursued Court for orders of foreclosure and sale of the mortgaged property and as such I award costs of the suit to the Plaintiff.

## 35 **In Conclusion:**

I accordingly make the following orders,

- 5 a) The Plaintiff is entitled to foreclosure and sell the Mortgaged property of the mortgagor to recover all the sum of money due in respect of the principal debt, interest, and other incidental charges. - b) The Defendant should give vacant possession of the mortgaged property to the Plaintiff to sell upon foreclosure. - 10 c) The Defendant is liable to meet additional costs in the course of foreclosure and sale of the Mortgaged property. - d) Costs of the suit are awarded to the Plaintiff.

I so order.

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Delivered electronically this\_\_\_\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2024 and uploaded on ECCMIS. 12th April

**Ocaya Thomas O. R Judge, 12th April, 2024.**

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