A High Court judge has ordered Centenary Rural Development Bank to pay Agnes Nagujja Shs5 million in damages after finding that the bank unlawfully foreclosed on her land without serving the required statutory notice of default.
The ruling, delivered on October 6, 2026, by Justice Anna B. Mugenyi of the High Court’s Commercial Division in Kampala, faulted the bank’s handling of notices before the sale of land in Kavumba, Wakiso District, but stopped short of cancelling the transaction.
The judge upheld the validity of the mortgage and protected the title of the purchaser, John Sekyanzi, who bought the land at an auction. She also ordered Nagujja to pay Sekyanzi Shs15 million in damages and vacate the property within 30 days.
The decision draws a distinction between a bank’s duty to follow the law when enforcing a mortgage and the rights of a purchaser who buys property without knowledge of defects in the sale process.
“A mortgagor’s admitted default does not, without more, trigger a valid power of sale,” the court stated.
The dispute began with a Shs30 million loan that Centenary Bank advanced to Nagujja on July 15, 2022. The facility was repayable over 36 months at an annual interest rate of 28 per cent, with monthly instalments of approximately Shs1.24 million.
The loan was secured against two properties: a kibanja at Kalambi-Kiwumu in Buloba and land at Kavumba, registered as Busiro Block 269, Plot 1698.
Nagujja had agreed to buy the Kavumba property for Shs76 million and approached the bank for financing to complete the purchase. The title was transferred into her name on July 26, 2022, and the mortgage was registered on August 18 that year.
She made about three loan repayments before falling into default for more than six months.
The bank subsequently began recovery proceedings, issuing a notice of default dated December 5, 2022, followed by a notice of sale dated May 26, 2023. The property was eventually sold to Sekyanzi for Shs56 million on September 28, 2023.
But the court found a fundamental problem with the bank’s proof that it had properly served the notice of default.
The postal receipts produced by the bank recorded Centenary Bank, at P.O. Box 1892 in Kampala, as both the sender and the recipient. The documents also contained inconsistencies in the addresses used, while the bank could not satisfactorily explain how the notices had reached Nagujja.
The judge noted that Nagujja had not provided a postal address in the mortgage documents. Under Regulation 6 of the Mortgage Regulations, 2012, the bank was therefore required to publish the notice of default in a newspaper of wide circulation in the area where the property was situated.
It did not do so.
Instead, the bank relied on other attempts to deliver the notices, including leaving a copy of the default notice with Nagujja’s father at her Buloba residence. The bank also said the notice of sale had been sent through WhatsApp and served on an independent adviser.
The judge found that these steps did not satisfy the statutory requirements.
“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.
She added that the bank’s witness had offered no coherent explanation of how mail addressed in that manner could have reached Nagujja.
The court also rejected the suggestion that the passage of time before the auction could cure the defect. The problem, the judge explained, was not simply that Nagujja had been given too little time to pay. It was that the required notice had not been served through either of the legally prescribed methods.
“The defect here is anterior and of a different order,” the judgment stated. “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.”
The judge said the bank’s failure to comply with the mandatory notice requirement breached a precondition to exercising its power of sale.
“I find that the foreclosure of the suit land was, as between the Plaintiff and the 1st Defendant, unlawful,” she ruled.
The court also criticised the bank’s handling of the independent-advice documentation used in the mortgage process.
Nagujja had argued that she believed only her kibanja was being offered as security and that the loan documents had not been properly explained to her in Luganda. She also challenged the mortgage on the ground that she was not yet the registered owner of the Kavumba land when the documents were first executed.
The judge rejected her attempt to invalidate the mortgage, finding that the security documents clearly included both properties and that Nagujja had handed over the title to facilitate the transfer and registration of the bank’s security.
However, the court raised concerns about a form presented as evidence that she had received independent advice.
The document was headed “Independent Advice on the Terms and Conditions of a Mortgage of Your Matrimonial Home” and included a “Borrower/Spouse’s Declaration”, despite Nagujja being an unmarried woman mortgaging property in her own right.
The judge also noted inconsistencies between parts of the form said to have been written by Nagujja and her signature elsewhere in the bank’s records. The bank’s witness could not point to independent evidence confirming that she had appeared before the named adviser, John Paul Omony.
“I do not treat that certificate as reliable proof that independent advice specific to this transaction, still less an oral explanation in Luganda as required by clause 8(1)(d) of the Bank of Uganda Financial Consumer Protection Guidelines 2011, was in fact given,” Justice Mugenyi wrote.
The court found that the bank had failed in its duty to deal fairly and transparently with Nagujja before she signed the loan documents. That failure justified an award of damages, but did not invalidate the mortgage itself.
The judge also declined to set aside the auction sale or cancel Sekyanzi’s registration as proprietor.
Sekyanzi told the court that he bought the property after reviewing documents presented by the auctioneers, visiting the site and making enquiries with a neighbour and the local council chairperson. He paid Shs56 million and was registered as proprietor on October 19, 2023.
Despite the registration, he had not obtained peaceful possession because Nagujja remained on the land and continued to cultivate it.
The judge found no evidence that Sekyanzi had colluded with the bank or knew that the notice of default had not been served in accordance with the law. The defect was not apparent from the documents presented to him, and the court held that he could not reasonably have been expected to investigate the bank’s internal postal records.
The law protects a bona fide purchaser for value in those circumstances, the judgment said. The court therefore preserved Sekyanzi’s title, leaving Nagujja to seek compensation from the bank for the unlawful foreclosure.
The court declared Sekyanzi the lawful registered proprietor and entitled to quiet possession of the land. It issued a permanent injunction restraining Nagujja and those acting through her from interfering with his ownership and ordered her to vacate and deliver vacant possession within 30 days.
Nagujja was also ordered to pay Sekyanzi Shs15 million in general damages, with interest at 10 per cent a year from the date of judgment until payment. The judge declined to award the Shs100 million he had sought, finding the amount excessive and unsupported, and rejected his claim for interest at 24 per cent.
Centenary Bank, meanwhile, was ordered to pay Nagujja Shs5 million in general damages, also attracting interest at 10 per cent a year from the date of judgment until payment.
The judge dismissed Sekyanzi’s counterclaim against the bank, finding no evidence that the bank had guaranteed him vacant possession or undertaken to remove Nagujja from the property before the sale.
On costs, each party was ordered to bear its own costs in the main suit between Nagujja and the bank. Nagujja was ordered to pay Sekyanzi’s costs in the main suit and his counterclaim, while Sekyanzi was ordered to pay the bank’s costs of the counterclaim.
The judgment leaves the mortgage and auction sale intact while holding the bank accountable for failing to follow the statutory procedure required before exercising its power to sell the secured land.
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