A man takes out a loan and secures it using his land. However, when the lender tries to sell the land after he defaults, the court stops the sale, saying the land is of a certain category. Upon appeal, the court finds that the lower court misclassified the land, but the lender still cannot sell it immediately.
Nshimiye J. answers this question in Centenary Rural Development Bank Limited v Kwesiga (HCT-05-CV-CA 59 of 2022) [2025] UGHC 69 (20 February 2025).
Facts
The appellant and respondent entered into a loan agreement on November 20, 2020, where the respondent borrowed UGX 25,000,000, secured by a sale of land agreement. Due to illness, the respondent defaulted in June 2021, leading the appellant to issue demand notices and later advertise the property for sale. The respondent challenged this action in court, seeking to halt the sale and review the mortgage agreement.
The trial court ruled that the appellant used the wrong procedure in selling the security without mediation and a court order, thereby halting the sale. However, it found no sufficient grounds to review the mortgage terms. Dissatisfied, the appellant filed an appeal, arguing that the trial magistrate erred in striking out its affidavit, accepting the respondent’s application, halting the sale based on an equitable mortgage, and requiring mediation. The appellant sought to to overturn the ruling in its favor.
Holding
The High Court has reaffirmed that a company’s principal officer—someone with knowledge of the facts of a case—can swear an affidavit on its behalf. This is in line with Order 29 Rule 1 of the Civil Procedure Rules S.I. 71-1.
In principle, a principal officer of a company who is knowledgeable of facts pertaining to a matter in court can swear an affidavit in reply based on the law in Order 29 Rule 1 Civil Procedure Rules S.I 71-1. In the same vein, any company can rely on any person to be its witness, and if the law requires affidavit evidence, the said witness may depone an affidavit in a matter before the court based on the law in Order 19 Rule 1 Civil Procedure Rules S.I 71-1.
The Court further affirmed that companies have the right to rely on any competent witness, provided that person can provide evidence in the required affidavit form under Order 19 Rule 1.
✅ The court confirmed that an officer like a Legal Manager can swear affidavits, and if there’s any doubt about their role, the opposing party should seek cross-examination instead of outright rejection.
In this specific case, the Trial Magistrate mistakenly ruled that a Legal Manager was not employed by the company he represented. The High Court found this was an error and held that the affidavit should not have been struck out.
✅The decision also addressed how matters should be brought before the court. While it is preferable to cite specific laws governing a case, failure to do so does not automatically invalidate an application—especially if no injustice is caused.
✅The court differentiated between an informal mortgage on customary land and an informal equitable mortgage on unregistered land. In this case, the latter applied, meaning the lender followed the correct procedure for enforcing its security.
The Court clarified the classification of mortgage interests under The Mortgage Act Cap 239:
✅Legal Mortgage registered land under the Registration of Titles Act
✅Unregistered Mortgage valid between parties but unregistered
✅Equitable Mortgage created by deposit of title or agreement
✅Informal Mortgage on Customary Land requires mediation and court order per Section 6 of The Mortgage Act
✅Informal Equitable Mortgage on unregistered land, including lawful/bona fide occupants under Section 29 of The Land Act Cap 236
The High Court found that the loan agreement in question created an informal equitable mortgage rather than an informal mortgage on customary land, rendering the Trial Magistrate’s reasoning flawed.
Court reasoned
A distinction was not made between an informal mortgage on customary land and an informal equitable mortgage based on an unregistered interest in land all provided in the definition of an informal mortgage in SECTION 1 OF THE MORTGAGE ACT CAP 239. In this case the transaction between the parties created an informal equitable mortgage based on unregistered interest in land. Ground 3 therefore succeeds.
Consequently, the appellant was entitled to enforce the mortgage per contract terms, without the need for mediation as required under Section 6 of The Mortgage Act Cap 239.
The court held that the transaction between the parties created an informal equitable mortgage based on an unregistered interest in land, not an informal mortgage on customary land, as previously determined by the lower court. It emphasized that the required mediation process applied only to customary land mortgages, making the trial court's reasoning incorrect.
The appeal succeeded on three of the four grounds. The court ruled that the appellant had followed the procedure agreed upon in the loan and mortgage agreements, allowing for the sale of the property. However, it noted that the appellant must reissue a fresh notice under Section 18(3) of the Mortgage Act if the respondent remains in default before proceeding with the sale.
Consequently, the court set aside the trial court’s ruling and orders, allowed the appeal, and ordered the respondent to pay half of the appeal costs to the appellant.
Key Takeaways for Legal Practitioners & Financial Institutions:
Affidavits by company officers with knowledge are valid unless challenged through cross-examination.
Applications by notice of motion are permissible where procedure is not prescribed, provided no injustice results.
Distinctions between mortgage types are crucial for determining applicable enforcement procedures.
Issues not raised in lower courts should not be introduced on appeal unless parties are given a chance to respond.
Financial institutions seeking mortgage enforcement should ensure compliance with statutory notice requirements before proceeding with remedies.
Read the full case
.jpg)
Comments