The High Court in Kampala has ordered Centenary Rural Development Bank Limited to pay Shs5 million in general damages to a borrower after finding that the bank unlawfully foreclosed on and sold her land in Wakiso District without properly serving her with a statutory notice of default.
However, the court declined to cancel the sale, ruling that the buyer, Sekyanzi John, was a bona fide purchaser for value who had no knowledge of the bank’s failure to properly serve the borrower.
Justice Anna B. Mugenyi of the High Court’s Commercial Division delivered the ruling on October 6, 2026, in a dispute involving Nagujja Agnes, Centenary Bank and Sekyanzi over land comprised in Busiro Block 269, Plot 1698, at Kavumba in Wakiso District.
The dispute arose from a Shs30 million loan that Centenary Bank advanced to Nagujja in July 2022, secured by both her kibanja at Buloba and the land at Kavumba.
Nagujja subsequently defaulted on the loan after making only about three instalments, prompting the bank to initiate recovery proceedings and eventually sell the Kavumba property to Sekyanzi for Shs56 million on September 28, 2023.
Nagujja challenged the transaction, arguing that she understood that only her kibanja had been pledged as security and that the loan documents had not been properly explained to her.
Justice Mugenyi rejected the argument that the mortgage was invalid, finding that the loan agreement expressly listed the Kavumba property as security.
“The documentary evidence is unambiguous, and is, if anything, reinforced by her own testimony,” Justice Mugenyi said.
The judge noted that Nagujja had personally handed the property’s certificate of title to the bank on the day she signed the loan documents to facilitate the transfer and registration of the mortgage.
“I find that she had sufficient understanding of what she was executing to defeat non est factum,” Justice Mugenyi ruled.
The court also found that the mortgage had been validly created and perfected after Nagujja became the registered proprietor of the land on July 26, 2022, followed by the registration of the bank’s mortgage on August 18, 2022.
However, while upholding the validity of the mortgage and the buyer’s title, the court found that the bank had seriously breached the law in the manner in which it conducted the foreclosure.
The court established that Nagujja had not provided a postal address in the mortgage documents to which statutory notices could properly be sent.
Instead, the bank’s postal records showed that both the notice of default and the notice of sale had been sent to P.O. Box 1892, Kampala, which the evidence indicated was the bank’s own postal address.
“On the face of its own postal record, the Bank not only addressed the notices to two different addresses but also ended up posting both notices to itself,” Justice Mugenyi observed.
The judge said that, under Regulation 6 of the Mortgage Regulations, the bank should have published the notice of default in a newspaper of wide circulation because Nagujja had not provided an address in the mortgage documents.
“It is not that the Plaintiff was given too little time on a notice that reached her, but that no notice of default was ever served on her in either of the two modes Regulation 6 permits,” Justice Mugenyi ruled.
She added that a borrower’s default does not automatically entitle a mortgagee to sell the mortgaged property without complying with the statutory requirements.
“A mortgagor’s admitted default does not, without more, trigger a valid power of sale,” the judge said, emphasising that the mortgagee must still serve the required statutory notice.
The court consequently declared that Centenary Bank’s foreclosure of the land was unlawful as between the bank and Nagujja.
However, it found that the irregularity did not invalidate Sekyanzi’s purchase or his registration as the property’s proprietor.
Sekyanzi told the court that, before purchasing the land, he inspected the loan documents, demand notices, sale advertisement and mortgage endorsement on the title. He also visited the property, spoke to a neighbour and the area LC1 chairperson, and obtained written confirmation regarding the land.
Justice Mugenyi described him as a genuine purchaser who had conducted due diligence.
“A purchaser exercising reasonable diligence cannot be expected to interrogate a mortgagee’s internal postal records,” she ruled.
The court therefore declined to set aside the sale or disturb Sekyanzi’s title.
Instead, Centenary Bank was ordered to pay Nagujja Shs5 million in general damages, with interest at 10 per cent per annum from the date of judgment until payment in full.
The judge said the bank’s breach had deprived Nagujja of the fair opportunity that proper notice was intended to provide.
“The Plaintiff was entitled to expect better of a regulated financial institution and was, at the least, deprived of the fair opportunity that proper notice is designed to secure,” Justice Mugenyi said.
At the same time, the court found Nagujja liable to Sekyanzi for continuing to occupy and cultivate the land after he became its registered proprietor.
Sekyanzi had sought Shs100 million in damages, but the court awarded him Shs15 million, finding that the amount claimed was unsupported by evidence of specific, quantifiable loss and was disproportionate given that the land was undeveloped.
“Doing the best I can on the material before me, I award the Counterclaimant general damages of Ugx. 15,000,000/=,” Justice Mugenyi ruled.
The court ordered Nagujja to vacate the property and hand over vacant possession to Sekyanzi within 30 days.
She was also permanently restrained from interfering with Sekyanzi’s possession and enjoyment of the property and ordered to pay his costs of the counterclaim.
The court dismissed Nagujja’s claims seeking cancellation of the mortgage, reversal of the sale, and damages for fraud and misrepresentation. It also dismissed Sekyanzi’s counterclaim against Centenary Bank.
Under the final orders, Centenary Bank must pay Nagujja Shs5 million, together with interest, while Nagujja must pay Sekyanzi Shs15 million, along with any applicable interest and the costs ordered by the court.
