Diana Nansikombi Bbosa -Versus- Stanbic Bank Uganda Limited & 2 Ors

This was a case decided in the High Court (Commercial Division) where we represented the plaintiff in whose favour judgment was entered on the following issues;

• The Mortgage deed as signed between the plaintiff and defendant was found by Court to be invalid for want of attestation. The form of a valid mortgage was discussed by the court as it is clearly provided for by the law.
• The sale of the mortgaged property located in Buziga ultimately derived from the Mortgage deed which was found not to have been duly executed, therefore, on this basis, the sale was also declared unlawful by the court.
•  The remedies available where there is an unlawful sale of mortgaged properties.

Background.
The 1st defendant (Stanbic Bank Uganda Limited) extended a loan facility to the Plaintiff on 11th February 2011, this loan was secured by a mortgage deed dated 17th February 2011 over land in Buziga, Plot 487. The plaintiff subsequently defaulted in repaying the loan facility, for which the 2nd defendant (Bemug Strict Auctioneers) acting on behalf of the 1st defendant advertised the suit property for sale on 8th April 2013 in the Daily Monitor newspaper. On 15th July 2013, the 1st defendant sold the property to the 3rd Defendant (Ssematimba Allan).

Judgment.
Court observed that the interest charged on the plaintiff’s account was lawful as it was agreed in the Home loan letter dated 11th February 2011 that interest would be amended by the bank at any time in line with the prevailing market trends. On the issue of notice, it observed that the change in lending rates had been duly advertised through print media by the Bank.

However, Court questioned the validity of the Mortgage deed signed between the Plaintiff and the Bank which it observed was not properly signed by the bank in its capacity as Mortgagee and was additionally not duly attested. The Registration of Titles Act in the 11th Schedule provides for these requirements which are to the effect that the Mortgage deed must be signed by the Mortgagor (Plaintiff) and Mortgagee (1st defendant) in the presence of a witness for each. In this case there was no witness for the Plaintiff and additionally the Bank’s signature was accompanied by the words “in the presence of….” which seemed like they were attesting to the Plaintiff’s signature and not signing in their capacity as Mortgagees. The Mortgage deed was on this basis found to be invalid.
Therefore, the sale of the mortgaged property located in Buziga ultimately derived from this invalid Mortgage deed and on this basis, the sale was also declared unlawful by the court as well.

The Court observed that where there is an unlawful sale of mortgaged property, there are remedies available to the successful parties in the suit (in this case the Plaintiff). It noted that the successful party is entitled to setting aside the sale and the certificate of title being returned to them free of encumbrance. In the instant case, the plaintiff was entitled to recovering the difference between the true market value at the time of the sale and the price realized from the sale because the 3rd defendant (Ssematimba) was a bona fide purchaser for value and the alleged fraud wasn’t proven by the plaintiff.

Conclusion.
Parties to a Mortgage deed have to ensure that it is duly attested for it to be legally valid. Attestation is commonly referred to as the act of showing that a given document is true, in this case and as is often but not always done witnesses are required to sign below the signatures of the contracting parties. Each signature is supposed to be attested. Therefore, parties have to adhere to the provided legal requirements to ensure that they are protected by the law in such transactions.
It should be observed that the law cannot aid/ further an illegality; therefore in circumstances where the Mortgage deed has been found invalid, the subsequent sale caused by default of payment on the loan will be declared unlawful by the court.