Visare Uganda Limited v Katerega & 3 Others (Miscellaneous Application 591 of 2023) [2023] UGCommC 213 (22 November 2023)


# **IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA COMMERCIAL DIVISION**

Reportable Miscellaneous Application No. 591 of 2023

In the matter between

**VISARE UGADA LIMITED APPLICANT**

**And**

- **1. FESTUS KATEREGA T/a QUICKWAY AUCTIONEERS** - **2. GRANT THONTON MANAGEMENT LIMITED** - **3. YI HAI PROPERTY SERVICING COMPANY LTD**

**4. THE COMMISSIONER LAND REGISTRATION RESPONDENTS**

**Heard: 16 May, 2023. Delivered: 22 November, 2023.**

*Civil Procedure - Execution of decrees - setting aside of a sale in execution of a decree - Where any immovable property has been sold in execution of a decree, the decree-holder, or the purchaser, or any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it - no irregularity in the process leading up to the sale should vitiate the sale unless the applicant proves to the satisfaction of the Court that he or she has sustained substantial injury by reason of such irregularity - There is a distinction between a settlement agreement and a consent judgment. A settlement agreement is purely contractual in nature. A consent Judgment is a judgment of the court in terms which have been contractually entered into by parties to the litigation, validated by Court. A party must first obtain a valid judgment before the settlement agreement can be enforced. On the other hand, a consent judgment is a final decision. This means that with a consent judgment all that remains for the Court to do is to enforce it as it stands until and unless it is set aside by the court - It is now settled law that a sale of immoveable property, which is carried out without first having the duplicate or special title thereto deposited in Court,* *is incurably defective; and Court has the powers to declare so, and set it aside - The purpose of section 48 of The Civil Procedure Act and Order 22 rule 51 (1) of The Civil Procedure Rules is therefore sufficiently served when, although the title deed may not be in actual physical custody of the court, the Court has constructive possession or disposing power thereof while it is in the physical custody of a public officer or an officer of the court empowered by the Court to hold the title deed - To invalidate a sale, the applicant must prove not only that the sale price "shocks the conscience" but also that some fraud was involved in the sale. Inadequacy of consideration alone is insufficient to set aside a fairly and lawfully conducted sale.*

## **RULING**

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#### **STEPHEN MUBIRU, J.**

#### Introduction:

[1] On or about 24th February, 2017 the applicant obtained a loan from KCB Bank Uganda Limited for facilitating the completion of the construction of a block of condominium residential apartments on its land comprised in LRV 2651 Folio 9 Plot 65A located along the Lugogo Bypass in Kampala. As security for the loan, the applicant executed a mortgage over the title to the same land in favour of the bank. The applicant constructed a total of forty-four (44) units of residential condominium apartments but defaulted on the loan. Upon default on the obligation to pay the US \$ 1,930,813 as agreed, the Bank initiated a process of foreclosure. The applicant filed HCCS No. 898 of 2019 to challenge the foreclosure and sale of the property by KCB Bank Uganda Limited. In order to raise part of the funds outstanding due under the mortgage, the applicant had on 31st December, 2019 signed an agreement with the M/s Grant Thornton Management Limited, selling twelve (12) out of the forty-four (44) units to M/s Grant Thornton Management Limited at the price of US \$ 2,400,000. M/s Grant Thornton Management Limited paid US \$ 500,000 to the bank in satisfaction of the condition for stay of the sale as ordered by court. It was agreed that in the event the applicant was unable to raise the balance outstanding by 31st December, 2020 then M/s Grant Thornton Management Limited was to raise an additional US \$ 1,900,000 in order to redeem the applicant's mortgage.

[2] Subsequently, a tripartite memorandum of understanding between the applicant, M/s Grant Thornton Management Limited and KCB Bank was executed on 28th February, 2020 by which it was agreed that the mortgage would be redeemed upon payment of US \$ 1,930,813. It is on that basis that on 26th March, 2020 a consent judgment had two days before been entered in the suit between KCB Bank Limited, M/s Grant Thornton Management Limited and the applicant in the following terms;

## CONSENT JUDGMENT/DECREE

- A. BY CONSENT of all the Parties, Grant Thornton Management Limited is hereby added as a Third Party to this Consent Judgment/Decree and the Consent Judgment/Decree shall bind all the Parties hereto. - B. FURTHER, BY CONSENT of all the Parties, it is hereby AGREED that the suit be and is hereby settled on the following terms namely: - 1. The Plaintiff defaulted on its loan obligations and the Defendant issued a notice of sale of the land comprised in Leasehold Register Volume 2651, Folio 9, Plot No. 65A. Lugogo By-Pass Road and the developments thereon (hereinafter referred to as the "suit properly") on the 16th September 2019 unless the outstanding sum on the loan facilities was paid. The facilities continue to accrue interest. Plaintiff challenged the sale and obtained an injunction against the Defendant. - 2. On 31st December, 20I9 the Plaintiff paid the sum of USD 50,000 (United States Dollars fifty thousand only) and the third Party and its associates paid the sum of USD 5d).000 (United States Dollars Five hundred thousand only) to the Defendant in fulfilment of the condition for the grant of a temporary injunction in Miscellaneous Application No. 993 of 2019, Visare Uganda Limited v KCB Bank Uganda Limited. - 3. Pursuant to the terms of the Memorandum of Settlement of Debt executed among the plaintiff, the Defendant and the third Party on 28th February, 2020 (hereinafter referred to as "The Agreement");

- a) On 28th February, 2020 the Plaintiff paid the sum of USD 30,000 (United States Dollars Thirty thousand only) and the Third Party paid the sum of USD 400,000 (United States Dollars Four Hundred thousand only) to the defendant receipt whereof the defendant hereby acknowledges, - b) On 20th March 2020 the Third Party paid the sum of USD 205,000 (United States Dollars two hundred and five thousand only) to the Defendant, receipt whereof the Defendant hereby acknowledges: and - c) The Third Party shall pay the sum of USD 1,295,000 (United States Dollars one million two hundred ninety-five thousand only) and the Plaintiff shall pay the principal accrued interest, if any, in excess of the said sum to the Defendant by 31st March, 2020 in full and final settlement of the suit. - 4. In the event of default of payment of the amount in Clouse 3 (c) above to the Defendant, the Plaintiff hereby consents to the sale by the Defendant of the suit property by private treaty with or without a fresh public notice, to recover the entire outstanding amount with interest until recovery in full together with all the amounts paid by the Third Party to the Defendant with interest thereon at the rate of 4% per month from the date of payment of each instalment until payment in full. - 5. In the event that the Plaintiff breaches the terms of the Agreement, the Plaintiff hereby consents to the sale by the Third Party of the suit property after 31st December, 2020 by public auction or private treaty without recourse to court to recover the entire amount paid by the third Party to the Defendant together with interest thereon at the rate of 4% per month from the date of payment of each instalment until recovery in full. - 6. The terms of this Consent Judgment/Decree have been explained to all the Parties by their respective legal counsel and have been understood by them before appending their signatures to this Consent Judgment/ Decree. - 7. All the rights and obligations of the respective Parties and all the terms as set out in the Agreement are hereby incorporated in this Consent Judgement/Decree and the Parties undertake to adhere to the same. - 8. This Consent Judgement/Decree is in full and final settlement of all disputes between the Plaintiff and the Defendant and they each hereby release and forever discharge each other from any and all claims, actions liabilities, costs or demands that they have or may have against each other arising

out of or in connection with the suit, whether past, present or future and whether or not known or contemplated at the dote of this Consent Judgment/Decree.

- [3] In short, the suit was finally settled on those terms when eventually the court signed and sealed the consent judgment/decree on 31st August, 2020 whereby part of the loan repayment was to be financed by the third-party M/s Grant Thornton Management Limited. While the applicant reserved the right of redeeming the 12 units by 31st December 2020, M/s Grant Thornton Management Limited reserved the right to cause transfer of the 12 units into its name or sell the security in the event of the applicant's default. - [4] The applicant having defaulted and there being no independent titles yet to the 12 condominium units, M/s Grant Thornton Management Limited subsequently on or about 30th April, 2021 applied for attachment and sale of the entire land comprised in LRV 2651 Folio 9 Plot 65A, on account of the applicant's default. The applicant challenged the attachment in execution vide Civil Appeal No. 722 of 2021. In a decision delivered on 11th January, 2022 the set aside that warrant of attachment on ground that by virtue of Order 22 rule 14 (4) of *The Civil Procedure Rules,* an order of attachment should affect only such portion of the property, the proceeds of which would be sufficient to satisfy the claim of the decree. - [5] Following that decision, the 1st respondent undertook a valuation of the entire property the result of which revealed, in a report dated 20th October, 2022 that the Market Value of this property is in the sum of US \$ 12,250,000 while its Forced Sale value is in the sum of US \$ 8,000,000. On that basis, the court issued a warrant of attachment and sale of the following; twelve (12) 3-bedroom units valued at US \$ 182,000 each, hence a total of US \$ 2,184,000 all comprised in Bock "B"; and ; fifteen (15) 3-bedroom units valued at US \$ 182,000 each, hence a total of US \$ 2,730,000 and one 2 bedroom unit valued at US \$ 170,000 all comprised in Bock "C", rendering the total value of the property attached as US \$ 5,084,000 for the recovery of the then decretal sum of US \$ 5,501,540 exclusive of the costs of recovery.

[6] Attempts at securing a buyer of only two out of the three blocks having been unsuccessful and with potential buyers / bidders expressing interest only in the entire property inclusive of Block "A," the 1st respondent sought a variation of the order of 11th January, 2022 that required the Registrar to attach only such portion of the property as may seem necessary to satisfy the decree. Consequently, upon a reference to this Court from the Deputy Registrar, the order was by a ruling delivered on 23rd January, 2023 varied and leave was granted for the sale of the entire property. It was decided as follows;

> The reason a variation is necessary in this case is that circumstances have arisen that render the order inoperative or impracticable; the practical reality is that potential buyers can only be found of the entire property and not only a part of it. By advancing the bid of a third party for the entire property rather than only a part of it, the applicant waived the purpose for which the direction had been given. ln any event, the interest of the applicant would still be protected by Order 22 rule 61 of *The Civil Procedure Rules* which permits the Court to sell the property attached only to the point at which the decree is fully satisfied, such that the applicant shall be entitled to the proceeds received in excess of the decretal sum. Consequently, the Assistant Registrar is directed to issue a fresh warrant for the attachment and sale of the entire property. Each party is to bear its own costs of this reference.

[7] Following that decision, the 1st respondent on 27th February 2023 caused publication of a notice of sale in "The New Vision" newspaper for a sale by public auction due on 30th March 2023. On 13th March, 2023 counsel for the judgment creditor lodged the duplicate certificate of title and original valuation report by M/s Byokusheka and Company dated 20th October, 2022 with the Court. The Acting Assistant Registrar upon examining the duplicate certificate of title directed counsel for the 2nd respondent to retain it in view of the terms of the consent judgment/decree. Following the sale of the suit property, the 1st respondent filed a return in court on 17th April, 2023 showing that the property was sold to the 3rd respondent at the price of US \$ 9,000,000. The proceeds of the sale in excess of the decretal sum less my taxed costs are to be paid to the applicant within 14 days from the date of the ruling ascertaining the costs recoverable, which ruling is still pending the decision of Court.

#### The application.

- [8] The application by amended Notice of motion is made under the provisions of sections 34 and 98 of *The Civil Procedure Act*, sections 33 and 38 of *The Judicature Act* and Order 52 rules 1, 2 and 3 of *The Civil Procedure Rules.* The applicant seeks orders; (i) the sale and transfer of Leasehold Volume 265 I Folio 9, Plot 65, 4 Lugogo Road Kampala by the 1st respondent to the 3rd respondent be cancelled and set aside; (ii) the Commissioner for Land Registration do reinstate the applicant as the registered proprietor of Leasehold Volume 2651 Folio 9, plot 65A Lugogo Road Kampala; (iii) the respondents be restrained from alienating or dealing with Leasehold Volume 2651 Folio 9, plot 654 Lugogo Road Kampala; (iv) In the alternative to the foregoing, the 1", 2nd and 3rd respondents do jointly and severally pay to the applicant the market value of the property less the lawful decretal sum, interest and costs. - [9] It is the applicant's case that the sale was illegally conducted without the duplicate certificate of title being first deposited in court, the decree and warrant of attachment were not registered on the title before the purported sale and transfer, the sale was conducted without a valid valuation of the property, the 1st respondent did not notify the applicant of any valuation of the property prior to the purported sale, the 1st respondent failed to deposit the proceeds of the purported sale in court, and that the sale is a sham perpetuated by the 1st, 2nd and 3rd respondents. The applicant contends that the consent judgement created a mere security in favour of the 2nd respondent, but not a judgement debt capable of realization by execution. Execution commenced when the 1st respondent was issued a warrant of execution of sale on 23rd February, 2022 which was later renewed on 27th March, 2023, while the warrants had no foundation in the decree in absence of prior proof of default or liability being ascertained by any court. The sale ensued by an

agreement dated 14th April, 2023. The 1st respondent in connivance with the 2nd respondent purported to illegally allow the 3rd respondent to withhold 6 % of the purchase price (US \$ 540,000) as withholding tax and remit it to Uganda Revenue Authority.

### The affidavits in reply;

- [10] In the 1st respondent's affidavit in reply, it is contended that by a consent judgment/decree dated 26th March, 2020 and sealed by court on 31st August, 2020, the parties agreed to a property sale in the event that the applicant breached the terms of their agreement. On 23rd January, 2023 the 2nd respondent obtained a ruling in Execution Miscellaneous Application No. 289 of 2022 to sell the entire property comprised in Leasehold Register Volume 2651 Folio 9, Plot No. 65A, Lugogo Bypass Road, Kampala, measuring 0.351 hectares and all developments thereon. On 23rd February 2023, the 1st respondent was appointed by this court to attach and sell the suit property to recover the judgment debt. The decree and warrant of attachment were registered on the original certificate of title. The 1st respondent on 27th February 2023 caused publication of a notice of sale in "The New Vision" newspaper for a sale by public auction due on 30th March 2023. On 13th March, 2023 counsel for the judgment creditor explained to the Acting Assistant Registrar that the duplicate certificate of title was in the 2nd respondent's possession having been received pursuant to the consent judgment/decree. Counsel for the 2nd respondent then lodged the duplicate certificate of title and original valuation report by M/s Byokusheka and Company dated 20th October, 2022 with the Court. The Acting Assistant Registrar upon examining the duplicate certificate of title directed counsel for the 2nd respondent to retain it in view of the terms of the consent judgment/decree. - [11] Following the sale of the suit property, the 1st respondent filed a return in court on 17th April, 2023. The property was sold to the 3rd respondent at the price of US \$ 9,000,000, which was US \$ 1,000,000 above the forced sale value. Out of that

sum, US \$ 53,000 was attached by garnishee order and paid out to M/s Gadala & Partners, Advocates and Solicitors. US \$ 6,012,066.06 was paid to the judgment creditor in satisfaction of the decree. The proceeds of the sale in excess of the decretal sum less my taxed costs are to be paid to the applicant within 14 days from the date of the ruling ascertaining the costs recoverable. That ruling is still pending the decision of Court.

- [12] In the 2nd respondent's affidavit in reply, it is contended that the applicant appeared in court on 22nd April, 2021 to show cause why a warrant of attachment and sale of the suit property should not issue. The proof of default and/or liability were determined by the court. The court issued a warrant of attachment and sale of the suit property in that application. On 23rd January 2023, the court ordered the attachment and sale of the entire suit property. This application has been brought in bad faith in order to deny the 2nd respondent lawful means to recover the sums it paid to KCB Bank to settle part of the applicant's indebtedness following its default in repaying its loans. - [13] In an affidavit by M/s Byokusheka and Company supportive of the 2nd respondent's case, it is contended that on 15th March, 2022, the firm carried out an inspection and survey of the land comprised in Leasehold Register Volume 2651 Folio 9, Plot No. 65A, Lugogo Bypass Road, Kampala, measuring 0.351 hectares and all developments thereon, in the presence of Mr. Vijay Reddy, a director of the applicant, and the applicant's employees Gorreti Katushabe and Consolate Iwutung. Thereafter, the firm prepared a report. The firm re-inspected the land on 18th October, 2022 and confirmed that the applicant had not made any alterations to the suit property. The firm prepared an updated report and, in its opinion, the values of the suit property had not changed. In the report, the firm set out in detail all the factors it took into account in arriving at the market value and forced sale value such as the size of the plot, services, tenure and developments on the suit property, amenities and fixtures thereon. The value of each apartment unit mentioned in the report takes into account the aforesaid factors. The firm does not give separate valuations for the common property and easements such as the swimming pool, elevators/lifts, 3 phase private transformers and Cummins 80 KVA standby generator, the swimming pool, gym and meeting/party hall. The market and forced sale values arrived at in the valuation report were for the entire property including the said amenities and fixtures. Both valuations were pegged to the United States Dollar. Any changes in the exchange rate did not affect the valuation of the suit property. The valuation was properly done and the values arrived at are accurate and reflect the true and current value of the property.

- [14] In the 3rd respondent's affidavit in reply, it is contended that on 27th February 2023, a notice was published of an intended sale of land comprised in LRV 2651 Folio 9 Plot No. 65 A, Lugogo Bypass Road measuring 0.351 Hectares by public auction on 30th March 2023. On or about 14th March 2023, the director of the 3rd respondent inspected the property together with the 1st respondent and established that the property was unoccupied save for one unit on Block "A" which was occupied by Mr. Vijay Reddy, a director of the applicant. The public auction was held on 30th March 2023 and the 3rd respondent submitted a bid to buy the entire property at US \$ 9,000,000 inclusive of tax. By letter dated 3rd April 2023, the bailiff informed the 3rd respondent that the two highest bidders had failed to comply with the terms of sale and that his offer was acceptable subject to compliance with the terms of sale. The 3rd respondent carried out a search at the land registry and confirmed that a court order and warrant of attachment arising out of HCCS No. 898 of 2019 were registered on the title. - [15] On 3rd April, 2023 the 3rd respondent transferred the sum of US \$ 2,250,000 being 25% of the purchase price for the property to the bailiff's bank account. On 14th April, 2023 the 3rd respondent executed a sale agreement with the bailiff. On 17th April 2023 the 3rd respondent paid the balance of US \$ 6,210,000 being 75% of the purchase price less 6% withholding tax of the gross amount of the purchase price in the sum of US \$ 540,000. The 3rd respondent subsequently on 17th April, 2023 paid withholding tax of shs. 2,014,335,000/= (i.e. US \$ 540,000 at the

exchange rate of shs. 3,730.25/=) directly to Uganda Revenue Authority in accordance with section 118 B (2) of *The Income Tax Act*. The 3rd respondent thereafter had the certificate of title transferred into its names. On 2nd May, 2023 the bailiffs were given keys and architectural drawings of the property. The bailiffs returned to the property on 4th May 2023 and were given vacant possession. Following the handover the 3rd respondent has undertaken repairs on the property including restoring the lower boundary wall that had collapsed due to neglect.

## Submissions of counsel for the applicant;

- [16] Counsel for the applicant submitted that section 48 (1) of the CPA requires the title to be deposited. The 2nd respondent in para 10 avers to the contrary. There is no cover letter or communication to that effect on record. The valuation report was lodged on 26th October, 2022. Para 9 of the reply claims lodgement was on 13th March, 2023 but there is no evidence to that effect. Para 11 refers to the Asst. Registrar authorising counsel to retain the title. The order is not attached. The order would be illegal. The provision is mandatory before a judicial sale. A judicial sale cannot take place without a title. It is a nullity if the sale is without a title *Sinba and others v. UBC, S. C. Civil Appeal No. 3 of 2014* the sale in execution was nullified on that ground. *Formula Feeds v. KCB and another, HC Misc. Application No.208 of 2020*; *Grace Ofwono v. Poland Uganda Ltd, HC. Misc. Application 69 of 2015*. It was an order of attachment - [17] None registration of the decree and warrant before the judicial sale. The RTA under section 135 provides for the procedure for registration of instruments under section 46 (3) of the Act such as a warrant of attachment. The instrument is presented with the duplicate certificate of title. The encumbrancer has no power of sale before that registration. Annexure ZH10 to the affidavit in reply of the 3rd respondent and the duplicate certificate is attached as of today. There is no encumbrance indicated on it. Search letters have been attached to show that the warrant was registered as an encumbrances; F3 to the affidavit in reply of the 3rd

respondent and HZ4 to that of the 3rd respondent. That was an illegality since it was not registered on the duplicate. It is only a caveat that can be registered without a duplicate.

- [18] There was no valid valuation before sale. Para 13 of the affidavit in support refers to that. This is contrary to regulation 16 (6) of *The Court Bailiffs' Rules, 2022*. Proof must be furnished at least 7 days before the sale. The valuation report was filed on 26th October, 2022 on ECCMIS. Some pages are missing. It is an exact replica of the report of 18th March, 2022. The exchange rate had changed is the only difference. Annexure "H" to the affidavit in support. At age 15 the rate 1:3,800 while in the report of March, 2022 the rate is 1:3,600. It could not have yielded the same value with different rates. The circumstances were different. In March the units were valued. In the impugned sale it was for the entire complex. In para 13 – 19 the effects of the entre land was never done. The valuer did not inspect the property. The applicant's director lived there until 5th May, 2023. The affidavit of Caroline Byokusheka claims to have carried out an inspection. The details are not furnished. They just copied and pasted that of March and changed the date to October. Before the Deputy Registrar on 10th March, 2022 annexure "I" to the affidavit in support at page 5 of the proceedings the value of land was not considered. They considered only units. - [19] The proceeds were not deposited in Court. Regulation 20 of the Court Bailiffs Rules require bailiff to deposit within seven days. The Registrar authorised the bailiff annexure F7 to the affidavit if the 1st respondent. At page 6 the Registrar did not find any injustice. She had no power to dispense with the requirements of the law. The sale was conducted in an illegal manner and is liable to be set aside. When Court orders sale by an officer the Court should protect its sanctity; *Lawrence Muwanga v. Stephen Kyeyune S. C. Civil Appeal 12 of 2001* and *Francoise Mukyo v. Rebecca Mawanda and another, C. A Civil Appeal No. 15 of 2008*. I pray that the funds on the account are frozen.

- [20] Clause 5 of the consent allowed sale without recourse to court. The cause is silent about custody of the certificate of title. The sale agreement clause 6.1 obliges the bailiff to hand over the certificate of title. EMA 149 of 2021 as an application for execution. HW Kisawuzi declared the applicant to be in breach. R3 on the affidavit of the 2nd respondent. The decretal sum was not assessed. EMA 7 of 2022 the decretal sum was assed at US \$ 4,720,000. EMA 289 of 2022 which was referred to the Judge where a fresh warrant was directed for the entire property. The decretal sum was not assessed. The assessment came after the sale; F7 to the affidavit of the 1st respondent. - [21] Vacating the property was not voluntary, it was by order of the DR under application 538 of 2023 by the 3rd respondent. The first Order was to deliver vacant possession. Correspondence from the lawyer was without prejudice. On discovery of the illegality, he can move to set aside. Gadala was paid by garnishee. Bona fide purchase does not apply to a judicial sale. The rationale for depositing the title is to enable the sale by the Court which cannot be done without title. An encumbrancer asserting right of sale, there should be registration on both the original and duplicate; s. 46 of the RTA. The duplicate should reflect what is on the original. The value of the apartments was US \$ 7.964 rounded off to US \$ 8,000,000. The method of determining the market value is not disclosed. Money is safer in the hands of the court than bailiff. The money is earning interest. The tax liability is subject to exemptions hence the court should have a say first. The freezing order should cover; US \$ 2,400,910.13 minus US \$ 4,457.15 and US \$ 200 and the sum of US \$ 6,012,066.06 be frozen. US \$ 2,396,452.23 is now on the bailiffs' account.

## Submissions of Counsel for the 1st and 2nd respondents;

[22] Counsel for the 1st and 2nd respondents submitted that the certificate was presented to the Assistant Registrar for purpose of endorsement of the order authorising sale. It was in custody of the 2nd respondent pursuant to the consent judgment. Its terms allowed the retention of the title. The purpose is to ensure that the property is transferred to the purchaser upon paying the price in full. It was achieved when it was transferred to the name of the 3rd respondent. *Sinba v. UBC* was based on an invalid consent judgment, it was not in the name of the judgment debtor, and on that basis the warrant was questioned. The other purpose is to prevent dealings. The lapses did not vitiate the sale. Non registration of the decree and warrant. It was duly registered and thus it is not fatal. The sale was by consent of the parties. The consent was with or without recourse to the Court. It was a sale by private treaty. We should not have filed the application for execution. We came in under section 34 of the CPA for determination of the question whether the applicant had breached. The Curt then issued a warrant.

[23] The valuation report of 18th March, 2022 from page 6 the details of the valuation are indicated. A page 15 the give the forced sale value of US \$ 8,000,000 at page 16 the apportionment is done for the units. The same approach was done in the report of October, 2022. The employees are named in paragraph 4 of the affidavit of Byokusheka. The valuation is not affected by the fluctuation in the exchange rate since I was done in dollars. The proceeds of sale not being in Court, a return was filed on 17th April, 2023 being one million above the forced sale value. On 20th April, 2023 he appeared to submit orally regarding the return. It was intended to promote commercial justice. Order 22 rule 61 permits Court to make such orders. *Mugisa Aziz Mateeba v. National Forestry Authority, S. C Civil Appeal No. 22 of 2020*. Annexure F8 the applicant directed on how the balance was to be applied. Paragraph 20 of the affidavit in support. The bailiff's costs have not been taxed. There is an application to transfer US \$ 2,000,000 to the account and leave US 400,000 to settle costs, nisi. They have used part of the proceeds to settle their debt such as US \$ 40,000 paid to advocate Gadala. Para 28 of the 1st respondent's affidavit, this is the 9th application by the applicant. Annexure R7 and Para 26 and 27 the applicant informed Court that they had failed to find a buyer. The available balance should exclude the amount.

## Submissions of Counsel for the 3rd respondent;

[24] Counsel for the 3rd respondent submitted that a director of the 3rd respondent inspected the property in response to an advert in the presence of the applicant's director. Search was done at the land registry. The warrants and order were reflect and on that basis the 3rd respondent put in a bid for US \$ 9,000,000 inclusive of taxes. It then paid. A sale agreement was executed and the transfer was done. Application for delivery of the property was filed. All parties involved were summoned on 27th April, 2023. The applicant then expressed willingness to hand over the property by 1st May, 2023. On 4th May, 2023 the director had left and the 3rd respondent took over. It is a bona fide purchaser for value. The Chief Government value valued it and the respondent had mortgaged other property to finance the transaction. The title was lodged in court. It does not require retention of the title. It was handed over by agreement of the parties. The Court is enforcing what was agreed upon. The Court did not have to determine whether or not the property was attachable. In the Simba case, was an extreme case. The principle applied to the peculiar facts of the case. It cannot apply to this case. In Grace Ofwono v Poland Uganda Ltd, HC. Misc. Application 69 of 2015 the rationale was stated. Failure to register the orders on the duplicate, no third party claim have arisen. The valuation was proper. The bid was one million above the forced sale value. It is the best offer that came up. 19th August, 2022 the best they could find in R5 was US \$ 8,800,000. The ruling of 27th April, 2023. The court director transfer to the judgment creditor. Act 13 of 2019 Section 118 (2) (b) of *The Income Tax Act* business asset. A withholding tax credit certificate was issued. They have taken benefit of the proceeds. It can be re-characterised as a private sale. Setting aside would only increase the cost of disposal.

## The decision.

[25] It is trite that any person whose immoveable property has been attached and sold in execution of a decree of court may apply to the Court to set aside the sale on the ground of for fraud, misconduct, a material irregularity involved in the process leading to the sale or in the sale itself, that the sale was improperly conducted, or that the property was sold for an unreasonably low price, or on any other good cause (see *Allen Nsubuga Ntananga v. Micro Finance Ltd and others H. C. Misc. Civil Application No. 426 of 2006* and *Maji Real Estates (U) Limited & Anor v. Aulogo Cooperatives Savings and Credit Society Limited, Adjumani, H. C. Miscellaneous Civil Application No. 28 of 2017)*.

- [26] Where any immovable property has been sold in execution of a decree, the decree-holder, or the purchaser, or any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it. For that matter, a judicial sale, unlike a private one, is not complete immediately it takes place. It is liable to be set aside on appropriate proceedings. If no such proceedings are taken or if taken and are not successful, the sale will then be made absolute (see *Lawrence Muwanga v. Stephen Kyeyune, S. C Civil Appeal No.12 of 2001*). - [27] Whereas an absolute sale is one where no application to have the sale set aside is made and where if such an application is made, it has been disallowed (see *Bancroft and another v. City Council of Nairobi and Another [1971] 1 EA 151and Sam Kaggwa v. Beatrice Nakityo [2001- 2002] 2 HCB 120*), no irregularity in the process leading up to the sale should vitiate the sale unless the applicant proves to the satisfaction of the Court that he or she has sustained substantial injury by reason of such irregularity. This is more so in light of section 49 of *The Civil Procedure Act* to the effect that where immovable property is sold in execution of a decree, the sale becomes absolute on the payment of the full purchase price to the court, or to the officer appointed by the court to conduct the sale. It is crucial to ensure the reliability and efficacy of sales in execution is upheld.

- [28] The interests of the applicant, on one side, have to be balanced against those of the judgment creditor and the purchaser of the property, on the other. A balance must be struck between the need to protect a judgment debtor who may be unfairly hounded to insolvency and homelessness, on the one hand, and the need to ensure that the judgment creditor, who has been forced to go to court to obtain satisfaction of his debt, secures just relief. In other words, the case must be determined on the basis of equities and balance of convenience. The policy of the Legislature seems to be that unless a purchaser is protected against the vicissitudes of the process leading to the sale, sales in execution would not attract buyers and it would be to the detriment of the interest of the judgment debtor and the creditor alike if sales were allowed to be impugned merely because of inconsequential irregularities involved in the process leading to the sale. Therefore, minor and inconsequential irregularities that could not have affected the outcome of the sale, will be disregarded as immaterial. - [29] Secondly, sales in execution cannot be undermined by ill refined and non-specific averments. The rights of third parties, who would have purchased properties from the bailiff, should be protected and cannot be defeated by fanciful arguments. For example, a sale will not be set aside and a resale ordered upon the mere expression of opinion that the property on a resale would bring a much higher price; it must be shown affirmatively that it will sell for a larger price. A litigant wishing to discharge this burden must be fully prepared with properly supported valuations of the property under consideration. These valuations must reflect the upper and lower limits of the suggested market price, so that the court might make a proper determination whether the price achieved is unreasonable, that is to say that it is substantially lower than would reasonably be anticipated, given the expected range of prices.

- i. Whether the consent judgement created a mere security in favour of the 2nd respondent, but not a judgement debt capable of enforcement by execution; - ii. Whether the warrants of attachment and sale of the property had no foundation in the decree, in absence of prior proof of default or liability being ascertained by any court. - [30] The first two issues arise from counsel for the applicant's contention that in absence of prior proof of default or liability being ascertained by any court, issuance of the warrants of attachment and sale of the property, and the resultant sale, was not based on any enforceable decree. This argument calls for a determination as to whether the parties' document was a mere settlement agreement or rather a consent judgment. - [31] There is a distinction between a settlement agreement and a consent judgment. A settlement agreement is a private document and its terms can be kept confidential, while a consent decree is a public document that can be accessed by anyone. Non-compliance with the terms of the consent decree results in contempt of court, while failure to comply with a settlement agreement is simply a breach of contract. Because a consent decree is a court order, the issuing court has the inherent power to enforce it. The parties are able to return to the issuing court to enforce the decree. On the other hand, enforcement of a settlement agreement requires the filing of a suit to prove its breach. While settlement agreements are not held to any requisite level of particularity such that parties are free to incorporate other documents by reference, in contrast, the operative provisions of a consent decree must be stated in reasonable detail and cannot incorporate other documents by reference, even publicly available court records. - [32] Parties can reach a private agreement, a form of contract, to settle an existing dispute even without bringing it to court. But if a court does not get involved in reducing such an agreement to an enforceable judgment, that is not a "consent decree." One party can sue the other for breach of that agreement. With a settlement agreement, the parties may need to appear in court for an additional trial of the case is the terms of the agreement are not fulfilled.

- [33] On the other hand, a consent decree is one way of settling and resolving a dispute, by agreement between the parties, after that dispute has already been brought to a court. A consent Judgment is a judgment of the court in terms which have been contractually entered into by parties to the litigation, validated by Court under Order 50 rule 2 and Order 25 Rule 6 of *The Civil Procedure Rules* (see *Brooke Bond Liebeg (T) Ltd v. Mallya [1975] E. A 266*). A consent judgment once recorded or endorsed by the Court, becomes the judgment of the Court and binding upon the parties. It is however unique in that it is not a judgment of the Court delivered after hearing the parties. It is an agreement or contract between the parties. The parties thereby enter into a binding final judgment incorporating the particular terms of their agreement which the court may be required to enforce in the future. Signing and sealing the agreement converts the contractual terms into court-mandated duties and authorise the court to enforce the agreement through execution or the use of its civil contempt power. - [34] A settlement agreement and a consent judgment both contain contractual terms mutually agreed upon to bring legal proceedings or disputes to an end. The main legal distinction between a settlement agreement and a consent judgment involves the finality of the case. A settlement agreement is purely contractual in nature. Unless the case is dismissed, a settlement agreement is not a final decision. A party seeking to enforce a settlement agreement is generally confined to filing civil proceedings for breach of the agreement. In other words, a party must first obtain a valid judgment before the settlement agreement can be enforced. On the other hand, a consent judgment is a final decision. This means that with a consent judgment all that remains for the Court to do is to enforce it as it stands until and unless it is set aside by the court.

- [35] By the consent decree of 26th March, 2020, the applicant's right of alienation of the entire property was curtailed until full satisfaction of the decree. Clauses 4 and 5 of the Consent decree states that; - 4. In the event of default of payment of the amount in Clouse 3 (c) above to the Defendant, the Plaintiff hereby consents to the sale by the Defendant of the suit property by private treaty with or without a fresh public notice, to recover the entire outstanding amount with interest until recovery in full together with all the amounts paid by the Third Party to the Defendant with interest thereon at the rate of 4% per month from the date of payment of each instalment until payment in full. - 5. In the event that the Plaintiff breaches the terms of the Agreement, the Plaintiff hereby consents to the sale by the Third Party of the suit property after 31st December, 2020 by public auction or private treaty without recourse to court to recover the entire amount paid by the third Party to the Defendant together with interest thereon at the rate of 4% per month from the date of payment of each instalment until recovery in full. - [36] The two clauses in essence attached the entire property pending full payment of the decretal sum by 31st March, 2020 in full, satisfaction of which the property would then be discharged. The property was not to serve as mere security for the due performance of a settlement agreement, it is a consent judgment attaching the entire property in which all that remained for the Court to do was to enforce it as it stands. It is the beneficiaries themselves who were to decide whether the applicant was in breach and so seek enforcement. The beneficiary's application for enforcement serves as *prima facie* evidence of that breach. Triggering the enforcement of this decree required no more than the 2nd respondent, as judgment creditor, stating that the applicant had breached the terms of the agreement, in which event a notice to show cause why execution should not issue, would be served upon the applicant. The burden would then fall upon the applicant to show that it was not in breach.

[37] Indeed, a notice to show cause why execution should not issue was served upon the applicant and in the proceedings of 30th April, 2021 before the Registrar, H. W. Erias Kisawuzi, Counsel for the 2nd respondent asserted that the applicant was issued with a notice of default on 15th February, 2021 requiring it to remedy within 14 days which it ignored and another notice of rescission of agreement of 10th March, 2021 whereupon a refund was made. Counsel for the applicant replied that the agreement between the parties was that the 2nd respondent would take possession of 12 units out of the 44 units to recover its monies in event the judgement debtors failed to pay. In his ruling delivered on 6th May, 2021 the learned Registrar held that;

> By consent of all the parties it was agreed that in event that the respondent breached the terms of agreement, the respondent consented to the sale of the suit property after 31st December, 2020 by public auction or private. treaty without recourse to court to recover the entire amount paid by the applicant to KCB Bank Limited together with interest thereon at the rate of 4% per month from the date of payment of each instalment until recovery in full……...the respondent has continued to be in breach of the agreement and being the case, there is nothing to stop this court to issue a warrant of attachment and sale of the suit property to satisfy the consent judgement/ decree.

[38] Execution thus commenced when the 1st respondent was issued a warrant of execution of sale on 23rd February, 2022 which was later renewed on 27th March, 2023. For some unclear reason, in proceedings of 10th March, 2022 before another Registrar, H. W. Flavia Nabakooza, Counsel for the 2nd respondent asserted that the judgment debtor had failed to comply with terms of the agreement. Counsel for the applicant retorted that the judgment debtor had never breached the terms of the consent as provided under paragraph 5 of the consent. He asserted instead that in fact the Judgment Creditor who had breached the terms of the consent because the 12 units that were sold to the judgment creditor had always been available. The parties were in effect re-opening litigation I respect of a matter over which Court had previously made a finding that the applicant had "continued to be in breach of the agreement."

[39] I find therefore that when counsel for the applicant contended that three was no prior proof of default or liability being ascertained by any court to justify issuance of the warrants of attachment and sale of the property, and the resultant sale was not based on any enforceable decree, he employed a false correlation of consent decrees with settlement agreements, as regards their enforcement. That argument is clearly misconceived. The decree is capable of enforcement by execution and the warrants of attachment and sale were justifiably issued for that purpose.

## iii. Whether the sale was illegally conducted due to the duplicate certificate of title not having been first deposited in court;

- [40] Section 48 of *The Civil Procedure Act* forbids Court from proceeding with the sale of any immovable property under a decree of execution, until there has been lodged with the court the duplicate or special certificate of title to the property. Order 22 rule 51 (1) of *The Civil Procedure Rules* requires the Court to order the judgment debtor to deliver up to the court the duplicate certificate of title to the property. It is now settled law that a sale of immoveable property, which is carried out without first having the duplicate or special title thereto deposited in Court, is incurably defective; and Court has the powers to declare so, and set it aside (see *Sinba (K) Ltd and others v. Uganda Broadcasting Corporation, S. C. Civil Appeal No. 3 of 2014*; J*ulius Okwi v. Moses Kirunda. C. A. Civil Appeal No. 35 of 2008*; *Rosemary Eleanor Karamagi v. Angoliga Malimoud, H. C. Misc. Application No. 733 of 2005*; *James Kabateraine v. Charles Oundo and another, HCCS No. 177 of 1994, [1996] 1 KALR 134*; *Grace Ofwono v. M/s Poland Uganda Ltd. H. C. Misc. Application No. 699 of 20*15 and *Kibuuka Nelson and another v. Yusuf Ziiwa, H. C. Misc. Applications No. 72 and 225 of 2008*). Such a sale is illegal, null and void. - [41] The requirement of section 48 of *The Civil Procedure Act* is premised on the fact that upon a sale of real property, the purchaser is substituted to, and acquires all the right, title, interest, and claim of the judgment debtor thereto. For that reason the Court should be in position to cause a transfer of the title into the name of the

purchaser. In order for the bailiff or other officer who made the sale, his successor, or some other person appointed by the court for that purpose, to make the purchaser, or the party entitled thereto, a transfer deed of the real property sold, the duplicate or special certificate of title ought to be in the Court's possession the time of sale. It is also intended to prevent the judgment debtor from engaging in further dealing with the land before conclusion of the execution proceedings, with the end in view of safekeeping and preservation of the property.

- [42] The expression "lodged with the court" is very elastic and may mean actual custody, or physical detention, or a mere power, legal or physical, of directing or of taking manual possession. "Lodgement" refers to the direct depositing of a document with a Court for safekeeping, or for its consideration, but not for filing in the official court record, so the court can return the document after consideration. It carries with it the idea of the duplicate or special certificate of title being within the immediate direct care and control of the Court to whose custody it is subjected, or under the Court's immediate charge and control, and not its final, absolute control of ownership. It means temporarily placing or depositing a document with the court but not filing. It implies the court taking responsibility for the protection and preservation of the title deed deposited. For the protection and preservation of the title during a sale, the court need not take physical custody of the title. It suffices if the court entrusts it to a person subject to directions issued by the Court. The title deed becomes *custodia legis* in the hands of an officer of Court authorised by court to keep it. - [43] Looking at the policy of the provision which plainly is to protect the sanctity of the Court whose enforcement orders are to be given utmost deference, to protect the legitimacy of the process of sale and not for the direct benefit of the parties to the litigation, a sale in execution of a decree does not automatically become illegal simply because some violation of a statute has been committed during the course of its performance. There is a distinction between a sale which has as its object the doing of the very act forbidden by statute under a penalty, such as failure to

conduct the sale in the only way in which the statute allows it to be performed, and a sale whose execution involves an illegality only incidentally. A judicial sale is rendered illegal if it is not performed in the only way it can be carried out. On the other hand, the failure to comply strictly with provisions of statute which are directory and not obligatory will not nullify the resultant sale.

- [44] The object of the legislature and the Rules Committee was to prohibit a sale without the Court first having the duplicate or special title thereto in *custodia legis*. The sale should proceed only after the title deed has been lawfully taken, by authority of legal process, and retained in the possession of a public officer, or an officer of the court empowered by the Court to hold the title deed. The object of the provisions is not to vitiate the sale itself, but only to render it voidable in the event that the title deed is not in *custodia legis* at the time of sale*.* The purpose of section 48 of *The Civil Procedure Act* and Order 22 rule 51 (1) of *The Civil Procedure Rules* is therefore sufficiently served when, although the title deed may not be in actual physical custody of the court, the Court has constructive possession or disposing power thereof while it is in the physical custody of a public officer or an officer of the court empowered by the Court to hold the title deed. When the title deed is in *custodia legis*, the court is competent to issue necessary orders and directions on its officer. The Court would thus has constructive custody of the title deed. - [45] In the instant case, it was averred by the 1st respondent that on 13th March, 2023 counsel for the judgment creditor explained to the Acting Assistant Registrar that the duplicate certificate of title was in the 2nd respondent's possession having been received pursuant to the consent judgment/decree. Counsel for the 2nd respondent then lodged the duplicate certificate of title with the Court. The Acting Assistant Registrar upon examining the duplicate certificate of title directed counsel for the 2nd respondent to retain it in view of the terms of the consent judgment/decree. I have not found any reason to doubt the veracity of these averments. Normally counter-affidavit by a party controverting the allegations in the affidavit produced

by his adversary is a sufficient indication of an intention to controvert the facts set out in the affidavit, usually followed by a requirement that the deponent appears in the witness-box for his cross-examination. That is not the case here yet the averments are not so outrageous as not to be believed. This is evidence which, if accepted, is sufficient to establish a fact unless rebutted by acceptable evidence to the contrary.

[46] Upon that direction of the Acting Assistant Registrar, the 2nd respondent became an officer of the court concerning custody of the duplicate certificate of title, holding possession of the title deed for the court that authorised him. I therefore find that the sale was not conducted illegally since the duplicate certificate of title had been lodged with the court and was at all material time in physical custody of an officer of the court empowered by the Court to hold the title deed.

## iv. Whether the decree and warrant of attachment were not registered on the title before the sale and transfer;

[47] Once a warrant of attachment is issued, it does not create a charge or lien upon the attached property, it does not confer any title on the judgment creditor; it merely prevents and avoids private alienations of the land. The Judgment Creditor acquires, by virtue of the attachment, a right to have the attached property kept in *custodia legis* for the satisfaction of his debt. Land lawfully attached by virtue of legal process is deemed to be in *custodia legis* and that of itself prevents further dealings in the land without the leave of Court. Registration of a decree does not create an estate or charge upon the land. This is because under section 135 (1) of *The Registration of Title Act* a decree of execution does not in itself bind, charge or affect any land, lease or mortgage; but the registrar on being served with a copy of such decree of execution issued out of any court, accompanied by a statement signed by any party interested or his or her advocate or agent, specifying the land, lease or mortgage sought to be affected by the decree, enters it in the Register Book; and after the land, lease or mortgage so specified has been sold under such decree, the registrar, on receiving a transfer thereof, registers the transfer.

- [48] According to Order 22 rule 51 (1) of *The Civil Procedure Rules*, where the property to be attached is immovable, the attachment is made by an order in terms of Form 23 of Appendix D of *The Civil Procedure Rules*, prohibiting the judgment debtor from transferring or charging the property in any way, and all persons from taking any benefit from the transfer or charge and ordering the judgment debtor to deliver up to the court the duplicate certificate of title to the property. Such order has to be affixed on a conspicuous part of the property and at the court house. Such order of attachment issued by the court, is a registrable instrument and once registered secures the judgement debt and interest thereon and its beneficiary takes priority over unsecured creditors. Registration prevents the Judgment Debtor from selling the land without paying what is owed to the Judgment Creditor. The Judgment Creditor can sell the land subject to the charges, liens and equities to which it was subject in the hands of the Judgment Debtor. - [49] Subject to *The registration of Titles Act*, the warrant of attachment and sale binds the land when it is received by the bailiff. However, according to section 54 of *The registration of Titles Act*, no instrument until registered in the manner provided by the Act is effectual to pass any estate or interest in any land under the operation of the Act or to render the land liable to any mortgage; but upon such registration the estate or interest comprised in the instrument passes or, as the case may be, the land becomes liable in the manner and subject to the covenants and conditions set forth and specified in the instrument. A warrant of attachment upon registration takes the character of a charge on the land. A charge creates no interest in or over the land, but is only a security for the payment of money. By registration of a decree therefore, the Judgment Creditor acquires a right to have the attached property kept in c*ustodia legis* for the satisfaction of his debt. Registration of the decree helps to protect the Judgment Debtor's right of recourse to the land for recovery of the judgment debt against claims by third parties and also gives the bailiff the right

to dispose of the land or equity after the period of advertisement specified in the warrant. The protection created by registration of the decree will remain in force so long as the warrant of attachment remains valid in the hands of the bailiff and is kept alive by renewal.

[50] In the instant case, it was averred by the 1st respondent that the decree and warrant of attachment were registered on the original certificate of title. A copy of the statement of search as at 16th March 2023 is annexed to the affidavit and its shows the following two encumbrances;

> WARRANT OF ATTACHMENT UNDER EMMA NO. 07 OF 2022 ARISING OUT OF 898 OF 2019 IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) REGISTERED ON 19TH DAY OF MAY 2022 AT 10:17 AM UNDER INSTRUMENT NO. KCCA-00092024.

> COURT ORDER IN RESPECT OF WARRANT OF ATTACHMENT SUIT NO. 289 DATED 31/AUG/2020 BY THE HIGH COURT OF UGANDA AT KAMPALA COMMERCIAL DIVISION REGISTERED ON 24TH DAY OF FEBRUARY 2023 AT 12:36 PM UNDER INSTRUMENT NO. KCCA-00102036

[52] The above memorials entered onto the original title show that at the time of sale on 14th April, 2023, the land comprised in LRV 2651 Folio 9 Plot 65A located along the Lugogo Bypass in Kampala was the subject of a lien securing the judgement debt and interest thereon, upon which the execution issued. I therefore find that the decree and warrant of attachment were duly registered on the title before the sale and transfer of the lad to the 3rd respondent. The fact that those entries were not reflected on the duplicate certificate of title, most probably because it was never submitted to the Commissioner Land Registration at the time of lodgement of those instruments as required by section 46 (3) of *The Registration of Titles Act*, is an irregularity. No irregularity in the process leading up to the sale should vitiate the sale unless the applicant proves to the satisfaction of the Court that he or she has sustained substantial injury by reason of such irregularity. It has not been demonstrated that this irregularity had any effect on the sanctity of the sale nor caused an adverse effect on the applicant. It is therefore an immaterial irregularity that will not vitiate the sale.

- v. Whether the sale was conducted without a valid valuation of the property; - vi. Whether the applicant was notified of the value of the property; - [53] The purpose of the sale in execution of a money decree is to obtain the best price possible so that the judgment debt, court fees, enforcement fee and judgment interest can be paid in full (any surplus will be returned to the judgment debtor). Public auctions are normally the most effective method of achieving a good price. The objective is achieved mainly through obtaining a proper valuation and making an effective public advertisement of the property before the sale. - [54] It follows that an advertisement which inadequately describes the property is no advertisement at all. The purpose of properly describing the property is not merely to identify it. What must be inserted in the advertisements are the main characteristics of the property, giving sufficient details of the nature and characteristics of the property enabling potential purchasers to get a clear appreciation of the property. It is intended to inform the public of that which is being sold, with the aim of attracting the interest of potential purchasers to the auction, for it is in the interests of the judgment debtor, and probably in the interests of creditors, that the property to be sold should obtain as high a price as possible. - [55] On the other hand, Rules 14 (3) and 16 (1) of *The Judicature (Court Bailiffs) Rules, SI 53 of 2022* require a court bailiff, after attachment, to present a valuation report and seek the permission of court, where a sale of property that has been attached is envisaged, before a sale can be effected. The bailiff is thereafter under a legal obligation, in the case of a sale, to obtain the best price in accordance with the valuation so conducted (see Rule 14 (8) thereof). For purposes of promoting transparency and in order to prevent the machinery of judicial sales from becoming

an instrument of oppression, the bailiff is required, in all cases, to notify the judgment debtor of the value of the property and furnish to court, proof of the notification at least seven days before the property is sold (see Rule 16 (6) thereof). This enables the judgment debtor, if not satisfied with the value attached to the property, to cause a review and determination of the true value of the property attached (see Rules 16 (3) and (6) thereof).

- [56] It is was submitted by counsel for the applicant that the valuation report filed on ECCMIS on 26th October, 2022 is an exact replica of the report of 18th March, 2022 yet it could not have yielded the same value since the circumstances were different. The valuer did not inspect the property. Although Caroline Byokusheka claims to have carried out an inspection, the details are not furnished. They just copied and pasted that of March and changed the date to October. In March valuation was based on the units yet in that of October it was for the entire complex. The value of land was not considered. They considered only units. - [57] It is trite that the value of real property can be influenced by many factors, such as location and type of use; however, when valuers make/render an opinion of market value, they must also take into consideration how typical buyers and sellers are responding in the market. Valuers emulate what informed buyers and sellers will do in an open market. The concept of highest and best use requires that each property be appraised as though it were being put to its most profitable use (highest possible present net worth), given probable legal, physical, and financial constraints. This entails identifying the most appropriate market and the most profitable use within that market. The highest and best use must be a use that is allowed by government. The proposed or existing use must fit the size, shape, topography, and other specific characteristics associated with the parcel or location. - [58] Property is valuable because of the future benefits it is expected (anticipated) to provide. A property's value may be defined as the present worth of the rights to all

prospective future benefits, tangible and intangible, accruing to the ownership of real property. Therefore, investors buy income-producing properties today for the future benefits, or income, that is anticipated they will produce in the future. One of the responsibilities of a valuer is to interpret attitudes of persons trading in the real estate market. Thus, a valuer is obligated to consider both the likelihood of future trends and the impact that such trends will have on buyers, sellers, and tenants, as expressed in present market transactions. The highest and best use though must not be too speculative. There must be a demand for the use in the market that will generate and sustain sufficient income to cover the costs of construction, to have enough money for maintenance during the economic life of the property, and to provide both a return of and a return on the investment.

- [59] Consideration ought to be taken of the interaction between the supply of goods and the demand for goods which establishes both the price and the quantity of goods demanded. Similarly, the principle of substitution which states that the upper limit of value tends to be set by the cost of acquiring an equally desirable substitute, assuming no untimely delays. A prudent investor would pay no more for an income-producing property than it would cost to build or purchase a similar property. Buyers and sellers tend to set the price or value of a good based on the supply of a good and the demand for that good. All properties, no matter how diverse their physical attributes or how varied in geographic location, are substitutable economically in terms of service utility or in income productivity. When several commodities or services with substantially the same utility or benefit are available, the one with the lowest price attracts the greatest demand and widest distribution. - [60] Other principles to take into account include; changes in socioeconomic patterns (the transition though growth: a period during which the area gains in public favour or acceptance; stability: a period of equilibrium without significant gains or losses; decline: a period of diminishing demand and acceptance; and renewal: a period of rejuvenation and rebirth of market demand), conformity (maximum value is

realised when a reasonable degree of architectural homogeneity exists and land uses are compatible. Reasonable similarity, not monotonous uniformity, tends to create and maintain value), contribution or marginal productivity (the value of a property component is measured in terms of its contribution to the value of the total property rather than as a separate component), increasing and decreasing returns (the point at which added cost in improvement of the property may not result in added value commensurate with the cost – this would be the point of decreasing returns), and balance in land use and development (maximum value is achieved and maintained when all elements in the agents of production are in economic balance).

- [61] It was averred in the supportive affidavit by M/s Byokusheka and Company that in their report, the firm set out in detail all the factors it took into account in arriving at the market value and forced sale value such as the size of the plot, services, tenure and developments on the property, amenities and fixtures thereon. The value of each apartment unit mentioned in the report takes into account the aforesaid factors. Separate valuations for the common property and easements such as the swimming pool, elevators/lifts, 3 phase private transformers and Cummins 80 KVA standby generator, the swimming pool, gym and meeting/party hall were not stated because the market and forced sale values arrived at in the valuation report were for the entire property including the said amenities and fixtures. - [62] It was averred further that on 15th March, 2022, the firm carried out an inspection and survey of the land in the presence of Mr. Vijay Reddy, a director of the applicant, and two of the applicant's employees. The firm re-inspected the land on 18th October, 2022 and confirmed that the applicant had not made any alterations to the suit property. Although the two valuations were seven months apart, both were pegged to the United States Dollar such that any changes in the exchange rate did not affect the valuation of the suit property. The valuation was properly done and the values arrived at are accurate and reflect the true and current value

of the property and, in its opinion, the values of the suit property had not changed. Having examined the report and considers the circumstances surrounding its compilation and submission, I am inclined to believe the respondents that the sale was based on a proper valuation of the property.

- [63] So far as judicial sales are concerned, they by necessary implication involve an unwilling seller and a buyer or buyers who buy with knowledge of the disadvantage of the seller. "Market value, as it is commonly understood, has no applicability in the forced-sale context; indeed, it is the very antithesis of forced-sale value" (see *BFP v. Resolution Trust Corp., 511 U. S. 531, 537 (1994*). Therefore, the criterion when determining adequacy of the price is the amount which may reasonably be received from the sale of a property within a time frame too short to meet the marketing time frame of the market value which is the price that would be agreed on between a willing buyer and willing seller, with neither being required to act, and both having reasonable knowledge of relevant facts. A forced sale price is the estimated amount that one would expect to achieve at a properly promoted, conducted, and attended auction sale. Use of the criterion of "fair and reasonable forced sale value" in cases where the property is disposed of for a lesser than fair market value, holds promise of tempering the extremes of both inflated and depressed market prices. And, so far as judgment creditors are concerned, it offers some assurance that they will not be saddled with more than the amount of their obligations. - [64] It is the 1st respondent's case that the property was sold to the 3rd respondent at the price of US \$ 9,000,000, which was US \$ 1,000,000 above the forced sale value. There is no factual basis for challenging this as not being a fair and reasonable forced sale price. It was only insinuated in the submissions of counsel for the applicant that the value stated in the valuation report of October, 2022 may have been inadequate. Since the determination of market value is not an exact science in which prices can be ascertained with mathematical certitude, and considering the fact that persons will differ in opinion as to the adequacy of any

particular yardstick of value, a judicial sale of real estate will not be set aside for inadequacy of price unless the inadequacy be so great as to shock the conscience or unless there be additional circumstance against its fairness (see *Graffam v. Burgess, 117 U. S. 180 (1886)*; *Van Graafieland v. Wright, 286 Mo. 414* and *Gelfert v. National City Bank, 313 U. S. 221 (1941*). Equity will intervene in individual cases where it is palpably apparent that gross unfairness is imminent. To invalidate a sale, the applicant must prove not only that the sale price "shocks the conscience" but also that some fraud was involved in the sale. Inadequacy of consideration alone is insufficient to set aside a fairly and lawfully conducted sale.

- [65] The general rule is that the mere inadequacy of price upon sale under a decree is not sufficient ground for setting aside the sale and ordering a resale, in the absence of any showing of fraud, collusion, unfairness, or oppression, or unless the inadequacy is so gross as necessarily to raise the inherence of fraud or imposition; or in the absence of evidence tending to show bad faith, unfairness in the conduct of the sale, the deterring of bidders, an undue advantage taken of the ignorance or weakness of the persons whose property rights are affected by the sale, or other circumstances tainting the transaction with fraud, and entitling the parties injuriously affected to equitable relief. While mere inadequacy of price under judicial sales has rarely been held sufficient to justify the setting aside of a judicial sale of property, courts will not be slow to seize upon this or other circumstances impeaching the fairness of the transaction as cause for vacating such judicial sales, especially if the inadequacy be so gross as to shock the conscience (see *Schroeder v. Young, 161 U. S., 334*; *Byers v. Surget, 19 Howard, 303* and *Pacific Railroad Company v. Ketchum, 101 U. S., 289*). Those circumstances have not arisen in the instant case. - [66] That notwithstanding, there is no evidence to show that the bailiff notified the applicant as judgment debtor of the value of the property and furnished to court, proof of the notification at least seven days before the property was sold as is required by rule 16 (6) of *The Judicature (Court Bailiffs) Rules,* which omission is

an irregularity. However, it has not been demonstrated that this irregularity had any effect on the sanctity of the sale nor caused an adverse effect on the applicant. It has not been shown that the omission resulted in inadequacy of the value, or some unfairness, or that as a result some undue advantage was taken of the applicant, or that for any other reason the applicant was surprised or misled to lull her into security and thus prevent her from redeeming her property sold in execution within the period allowed, or to take measures for the prevention of the property going for a song. It is therefore an immaterial irregularity that will not vitiate the sale.

- vii. Whether the 1st respondent's failure to deposit the proceeds of the sale in court renders the sale a sham perpetuated by the 1st, 2nd and 3rd respondents. - [67] Following the sale of the suit property, the 1st respondent filed a return in court on 17th April, 2023 showing that the property was sold to the 3rd respondent at the price of US \$ 9,000,000. Out of that sum, US \$ 53,000 was attached by garnishee order and paid out to M/s Gadala & Partners, Advocates and Solicitors. US \$ 6,012,066.06 was paid to the judgment creditor in satisfaction of the decree. The learned Deputy Registrar directed that the proceeds of the sale in excess of the decretal sum less my taxed costs are to be paid to the applicant within 14 days from the date of the ruling ascertaining the costs recoverable. Citing rule 20 (1) of *The Judicature (Court Bailiffs) Rules, 2022*, which requires a bailiff to pay out the proceeds of his or her execution to the Court immediately but in any case, not later than seven days from the date of the execution, in a ruling delivered on 27th April, 2023 the learned Deputy Registrar decided as follows;

This Court's view is that this sale resulted from a consent executed between the applicant and the Respondent on the 31st of August, 2020. It is not a sale emanating from a conventional execution proceeding as envisaged under order 22 rule 51 of *The Civil Procedure Rules*. On this basis, the Court did not see the need to require the Bailiff to comply with Regulation 20 (1) of *The Judicature (Court Bailiffs) Rules, 2022*. In any case, the Court can still exercise its mandate to direct the distribution of the sale proceeds. I do not see any injustice that will be occasioned to the Judgment Debtor because the law protects their interest. The Respondent is entitled to proceeds received in excess of the decretal sum...... A Bailiff is simply an agent of the executing Court and is thus accountable to the Court. The risk associated with transferring money from one account to another far outweighs the need to do so.

[68] According to Order 22 rule 61 of *The Civil Procedure Rules,* any court executing a decree may order that any property attached by it and liable to sale be sold, and that the proceeds of the sale, or a sufficient portion of the proceeds, be paid to the party entitled under the decree to receive them. For practical reasons, the Court opted to authorise the 1st respondent to retain the funds and since in its view it can still exercise its mandate to direct the distribution of the sale proceeds. I have not found any evidence suggesting that the sale was a sham perpetuated by the 1st, 2nd and 3rd respondents.

## Order:

.

[69] In the final conclusion, there are no justifiable grounds for setting aside the sale. This application therefore fails and is accordingly dismissed with costs to the respondents. Consequently, the order freezing the funds, being the proceeds of the sale, currently kept on the 1st respondent's bank account is hereby set aside.

> Stephen Mubiru Judge.

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## Appearances

For the applicant : M/s Nambale, Nerima & Co, Advocates. For the 1st and 2nd respondents : M/s J. B. Byamugisha Advocates. For the 3rd respondent : M/s K & K Advocates, (formerly Kiwanuka & Karugire Advocates)