Description
Loan by way of a facility letter – third party notice – allegations that the third parties utilised the loan and that they were in communication with the lender – privity to a facility agreement – sale by public auction – allegations of breach of duty – sale of mortgaged property below the market value – no valuation report was tendered as evidence – current valuation report – valuations are not static – price obtained at a public auction – absence of any foul play – doctrine of precedents – Bank of Africa v. Rose Miyago – Juma Jaffer Juma v. Manager BPZ and 2 Others – pursuing the borrower for the balance – breach of duty in conducting sale – auctioneer’s fees for sale of a mortgaged property – interest of a higher rate.
- Loan by way of a facility letter – defendant (borrower) failed to repay the loan – when sued by the bank, the defendant contended that the third parties to the suit should be liable because they are the ones who utilised the loan and that they were in communication with the plaintiff – the court rejected that contention on grounds that there was no evidence that the proceeds of the overdraft facility were paid to the third parties; and that the third parties were not privy to the facility agreement (p. 6).
- Sale by public auction – allegations that the bank breached its duty by selling the mortgaged property below the market value – no valuation report was tendered as evidence – it was held that a price obtained at a public auction is taken to be the best price in the absence of any foul play (p.9).
- Doctrine of precedents – the court refused to follow the decision in Bank of Africa v. Rose Miyago because the attention of the judge in the latter decision was not drawn to the Court of Appeal decision in Juma Jaffer Juma v. Manager BPZ and 2 Others binding on the High Court (p. 9).
- The bank sold the mortgaged property below the market value and pursued the borrower for the balance – the court decided in favour of the bank to the effect that there must be evidence of negligence or breach of duty in conducting sale resulting into obtaining a price lower than the market value which will preclude the lender from pursuing the borrower for the balance (p. 9).
- According to this decision, in absence of negligence or breach of duty, a lender can sell the mortgaged property below the market price and pursue the borrower for the balance (p. 9).
- Allegations that a mortgaged property has been sold below the market must be supported by a current valuation report since valuations are not static. That finding was based on another decision of the High Court Commercial Division delivered in 2004 (pp. 10 – 11).
- A claim of TShs. 15,000,000/- as auctioneer’s fees for sale of a mortgaged property was disallowed on grounds that it represents a claim for specific damages which must be specifically pleaded and strictly proved, but the plaintiff had not done so (12).
- A claim of general damages was rejected since an award of interest would suffice (p. 12).
- A claim of interest on the decretal sum at the rate of 12% was rejected since there was no agreement between the plaintiff and the defendant to pay interest of a higher rate (p. 12).
