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A CRITICAL ANALYSIS OF THE STRENGTHS AND WEAKNESSES OF THE LEGAL
FRAMEWORK OF THE INTERESTS OF THE MORTGAGER.
Article 26(1) of the (Constitution of the Republic of Uganda, 1995) grants protection from
deprivation of property by stating that, “Every person has a right to own property either
individually or in association with others. “In this write up, I am to look at this property
specifically that that has been mortgaged, the laws providing mortgaging, the weaknesses and
strengths within these laws through which court has provided avenues for the mortgagor to attain
back this property and how they have failed.
Lindley M.R. in (Stanley v Wilde, 1899) provides that a mortgage is a conveyance of land or an
assignment of chattels as a security for the payment of a debt or discharge of some other
obligation for which it is given. He further added that the idea of a mortgage is that the security
is redeemable on the payment or discharge of such a debt or obligation, any provision
notwithstanding. In (Uganda Ecumenical Church Loan Fund Limted v Nankabirwa Harriet,
2006), Hon Judge Lameck N Mukasa defines a Mortgage to mean “any mortgage, charge,
debenture, loan agreement or other encumbrance, whether legal or equitable which constitutes a
charge over an estate or interest in land in Uganda or partly in Uganda and partly elsewhere
and which is registered under the Mortgage Act (Uganda, 1974)”. However in the (Uganda,
Parliament of the Republc of, 2009) under section 2, A mortgage includes any charge or lien
over land or any estate or interest in land in Uganda for securing the payment of an existing or
future or a contingent debt or other money or money’s worth or the performance of an obligation
and includes a second or subsequent mortgage, a third party mortgage and a sub mortgage. A sub
mortgage still under the same act is a mortgage of a mortgage.The Mortgage Act therefore
presupposes that any mortgage be it legal or equitable need be registered under the Act according
to Hon Justice Lameck N Mukasa in (Uganda Ecumenical Church Loan Fund Limted v
Nankabirwa Harriet, 2006, p. 11)i. The principle law which governs Mortgages in Uganda is
(Uganda, Parliament of the Republc of, 2009). In Uganda, the law regulating mortgages is
twofold that is to say; If the land mortgaged is regulated by the Registration of Titles Act, then
that Act applied and in the case of unregistered interest in land, the applicable law was the
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common law and the doctrine of equity (Uganda Ecumenical Church Loan Fund Limted v
Nankabirwa Harriet, 2006, p. 10)ii. Section 2 of the (Mortgage Act 8, 2009) defines a mortgagor
to mean a person who has mortgaged land or an interest in land or any person from time to time
deriving title under the original mortgagor or entitled to redeem the mortgage according to his or
her estate, interest or right in the mortgaged property. On the other hand, a mortgagee means a
person in whose favor a mortgage is created or subsists or it can be any person deriving title
under the original mortgageeiii. The power for the creation of a Mortgage is provided for under
section 3 of the (Mortgage Act 8, 2009) either for legal, equitable or Informal mortgages. A
person holding land under any form of land tenure in Uganda, may, by an instrument in the
prescribed form, mortgage his or her interest in the land or a part of it to secure the payment of
an existing or a future or a contingent debt or other money or money’s worth or the fulfilment of
a conditioniv. Section 3 further states the different items that are subject to being mortgaged
under Sub section 8 bestowing power of discretion over the borrower to offer to the lender an
item he or she wishes such as an informal mortgage, certificate of customary ownership,
certificate of title, a lease agreement or any other document which may be agreed upon
evidencing a right to an interest in land or any documents agreed upon to secure the payments.
As opposed to the previous laws such as The Registration of Titles Act Cap 205 clauses that
were limiting mortgages to only registered land under the act, the (Mortgage Act 8, 2009)
widened the scope to any document agreed upon. In (Commercial Micro Finance Ltd V Davis
Edgar Kayondo, 2006) where court was faced with the issue of whether a kibanja which was a
customary holding could be used to be a mortgage, Kiryabwire J using Section 2 of the
Microfinance Deposit Taking Institutions Act stated the facts under which the plaintiff is
licensed lays down the taking of collateral substitutes and unregistered land is one such
collateral, “I don’t think that the Act prohibits the use of unregistered land and indeed the
practice of Microfinance Institutions is to use it as collateral.” Hon Justice Lameck N Mukasa
defines what an equitable mortgage is with the help of Words and Phrases legally defined Vol. 3
at page 179 in (Uganda Ecumenical Church Loan Fund Limted v Nankabirwa Harriet, 2006, p.
9) as a charge which creates a charge on the property but does not convey any legal estate or
interest and that its operation is that of an executionery assurance which, as between the parties,
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and so far as equitable rights and remedies is equivalent to an actual assurance and is enforceable
under the Courts equitable jurisdiction. Hon. Percy Night Tuhaise in (Rehema Namuli v James
Mulwana & 3 Ors, 2013, p. 10) observed that Section 129 of the Registration of Titles Act
provided that an equitable mortgage of land may be made by deposit of the registered proprietor
of his or her certificate of title with intent to create a security thereon whether accompanied or
not by a note or memorandum of deposit, but every equitable mortgage shall be entered as a
caveat under section 139 of the same Act however this was repealed by Article 44(1)(b) of the
(Mortgage Act 8, 2009).
The (Mortgage Act 8, 2009) was assented to on 29th September 2009 and commenced on 2nd
September 2011 by Statutory Instrument 44 of 2011 and it was to “consolidate the law relating
to mortgages, repeal and replace the (Mortgage Act Chapter 229, 1974),to provide for the
creation of mortgages, for the duties of mortgagors and mortgagees regarding mortgages, for
mortgages of matrimonial homes; to make mortgages take effect only as security; to provide for
priority, tacking, consolidation and variation of mortgages; to provide for suits by mortgagors;
the discharge of mortgages; covenants, conditions implied in every mortgage; the remedies of
mortgagors and mortgagees in respect of mortgages; for the power of court in respect of
mortgages; and for related matters”.
In (Stanley v Wilde, 1899, pp. 474 - 475) the principle of law “once a mortgage always a
mortgage” makes the presence of a clog or fetter on the equity of redemption void where any
provision inserted prevents redemption on payment or performance of the debt or obligation for
which the security was given according to Lindley M.R. Lindley M.R. defines a clog or fetter
as something which is inconsistent with the idea of security and that a clog or fetter are in a
nature of a repugnant condition in (Stanley v Wilde, 1899, p. 475). The Courts of Equity had
fought for years to maintain that the security is redeemablev. Under the common law principle of
once a mortgage, always a mortgage, courts of law presume that the purpose of a mortgage is
never to have the security/property given as leverage to be taken in the end result. The courts
using this principle have tried to protect the mortgagor to get back his property. (John, 2002, p.
231)vi Source book of Uganda’s Land Law cites Dixon J in (Partridge V McIntosh & Sons Ltd
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(1933) 49 CLR 453, 1933, p. 466) “The statutory mortgage does not upon registration effect a
transfer to the mortgage of an estate in the land or confer on him an immediate right to
possession or to perception of the profits of the land. He has of course an interest in the land at
law but it is in the nature of a charge.”
To a larger extent therefore, the (Mortgage Act 8, 2009) has made great strengths in protecting
the interests of a mortgagor in the following ways;
Protection of the mortgagor’s interests on the property.
During the making of the mortgage, the interests of the mortgagor are not taken away and neither
are they during the period of payment. These interests are protected within the law thus an
avenue to regain back his or her property after payment of the loan. Section 8vii provides for a
mortgage to be a security not an actual transfer of land stating in (1) “…a mortgage shall have
effect as a security only and shall not operate as a transfer of any interest or right in the land
from the mortgagor to the mortgagee; but the mortgagee shall have, subject to this Act, all the
powers and remedies in case of default by the mortgagor and be subject to all the obligations
conferred or implied in a transfer of an interest in land subject to redemption.” A mortgage
containing the transfer of the property is held void under (2) and shall have no effect. In
(Mutambulire V Yusuf Kimera [1975] HCB, p. 150) court held that a mortgage is a mere
security for payment of a debt and does not operate as a transfer duty to disclose information.
The mortgagor remains the owner of the land subject fulfilment of his or her obligation under the
mortgage agreement. In (Samuel V Jarrah Timber & Wood Paving Corporation Ltd [1904] AC,
p. 323) where Timber company borrowed money on the security of its debenture stock with an
option to buy its stock within the next twelve days upon the default of the loan, House Lords
held that the option itself is void as it debars the mortgagor from redeeming his property back
upon the repayment of the principal.
Adequate time during the time allocated for payment and after default time
The law provides adequate time for the mortgagor to pay the loan and avails more time after
expiry of the date to attain back this property. Section 19(2)viii provides for a notice to be served
to the mortgagor of 45days to rectify the default. Section 24(1) provides for a notice of not less
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than 5 days of taking possession of the property after the 45days in the former. Section 26(2)
provides for notice of intention to sale the property after the 45days and the mortgagee cannot
sale the land before 21 days have elapsed. These time periods are set up by the law to avail the
mortgagor enough time to be able to pay back the loan and redeem his or land. In Erieza
Wamala V Musa Musoke1,Smith J “It is an old established rule that if money is lent on the
security of land, the lender will get security and nothing more.He will not be allowed to take
advantage of the necessities of the borrower so as to get the land for himself.Therefore,if the
borrower wishes to redeem the land within a reasonable time he will always be allowed to do
so, even though the due date is past.This rule is so strict that not even an express agreement will
be allowed to exclude the borrower and get an order from the court that unless the borrower
pays up in full within six months his right of redemption is to be barred.”
Disclosure of the terms of the mortgage
The law set up looks at protection of the mortgagor from unscrupulous agreements that might
prevent him or her from getting back the mortgaged property, this is seen mostly in cases
involving the power of attorney granted to a fraudulent individual and applies to the illiterate too
as a way of cub fraud.Section 4 of the Mortgage Act2 calls for a mortgage to be done in good and
honest faith by disclosing all relevant information.(2) subjects failure to do so as an
offence.Section 39(3) subjects the mortgagee who sells the mortgaged property in breach of the
agreement to conviction.Sections 2 and 3 of the Illiterates Protection Act3 protect the illiterate
people from signing documents they that have not been ably explained to them.In Florence
Muduwa V Charles Waniala & The Liquidator Co-op Bank 4 where the plaintiff executed a
power of attorney in favor of the 1st defendant to enable him borrow money on her behalf and
handed him the Certificate of Title to facilitate the process but did not receive any money.The
defendants on the other hand fraudulently mortgaged her land and disposed it off
illegally,Kawesa H.J held in the plaintiff’s favor ascenting to the declarations sought.A similar
case is Frederick JK Zaabwe V Orient Bank Ltd & 5 Ors 5 where court held the evction
1
(1920) 3 ULR 120
2
ibid
3
Chapter 78
4
(HCT-04-CV-CS 38 of 2009)[2017] UGHCLD 44 (14 February 2017)
5
(Civil Apeeal 4 of 2006)[2007] UGSC 21 (10 July 2007)
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off,mortgaging and selling of Frederick Zaabwe’s land by the defendants as fraudulent.Frederick
upon being indebted to the Law Council sought for assistance from Sewanyana to whose
company he gave the power of attorney over his land offering a Certificate of Title.The cheque
given to Frederick bounced back due to insufficient funds as the company mortgaged the
land,failed to pay and this land was sold.Frederick was evicted off the land.
Court Review
The law has provided court as an avenue to enable a mortgagor regain back his land even after
the elapse of time of payment and against fraudulent mortgages.Section 336 provides for court as
an avenue for remedies as per mortgages.Section 34 grants courts the power to review certain
mortgages such as fraudulent and unlawful mortgages.Court in Makula International V His
Eminence Cardinal Nsubuga and Anor 7stated “A court of law cannot sanction what is illegal
and illegality once brought to the attention of the court overrides all questions of pleadings
including admissions made thereon…”
However to a smaller extent, the Mortgage Act 2009 has faced some weaknesses in protecting
the interests of a mortgagor as illustrated below;
Adjustable interest rates
Section 12 (1)8 provides for variation in the interest payable. In most circumstances, the
mortgagees use this clause to their advantage to increase the interest rate. This leaves out a
mortgagor with no option than to let the security be taken due to the lack of sufficient money to
pay back.
Protection of a Bonafide purchaser
Section 29(1)9grants a Bonafide purchaser in a sale affected by a mortgagee a good title.
(3)describes a purchaser in this aspect as a person who purchases mortgaged land excluding the
mortgagee. This section provides a loophole for the mortgagor losing his land, since it does not
call for cancelation of the sale of the land except in cases of fraud. In Robert Lusweswe V
6
Mortgage Act of 2009
7
(Civil Appeal 4 of 1981)[1982] UGSC 2 (08April 1982)
8
ibid
9
Mortgage Act,2009
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G.W.Kasule & Anor10Justice Odoki stated“...once a registered proprietor has purchased in
good faith,his title cannot be impeached on account of the fraud of the previous registered
proprietor.A bonafide purchaser therefore obtains a good title even if he purchases from
proprietor who previously obtained by fraud.”
Bureaucratic tendencies by courts to handle matters.
Courts in Uganda have been known to generally have a delay and long process taken to handle
disputes.This amounts to a set back to the mortgagor whose land might be sold off or taken
within this time period.The Daily Monitor11 cited out examples of cases that have been in court
without being resolved suchas the Katanga Land Case that had lasted for 13years without being
looked into.The delay in conflict resolution by courts denies a mortgagor in pursuit to recover his
land justice.
10
C.S.No.1010 0f 1983
11
Justice Delayed:Cases shelved for decades October 29 2013
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i
In this case, the learned Judge observed that there was no registration of the transaction of any form and that although
the transaction was an equitable mortgage, it was not a mortgage under the provisions of the Mortgage Act so as to enjoy
the protection of section 21(I) (c) of the Money Lender Act.
ii
The defendant’s interest in the land was not registered under the Registration of Titles Act. Therefore, the requirement
of registration of the equitable mortgage under the act did not apply to this transaction. Also there is no evidence to show
or pleading that the land was registered under the Land Act therefore the requirement for registration of a mortgage with
the recorder under the Land Act did not apply to this transaction either.
iii
Under section 2 of the (Mortgage Act, 8, 2009)
iv
Section 3(1) ibid
v
(Stanley v Wilde, 1899) Lindley M.R.
vi
Source Book of Uganda’s Land Law Pp. 231
vii
(Mortgage Act 8, 2009)
viii
ibid
