Uganda Court of Appeal reaffirms that a person without a legal interest in land cannot create a valid mortgage under Section 116 of the RTA — Orders refund to misled purchaser on equitable grounds

Waboga David
Aug 1
7 min read

Introduction

The law on mortgage transactions in Uganda requires that only a person with a registered legal interest in land may validly create a mortgage, as stipulated under Section 116 of the Registration of Titles Act. This provision is central to the Torrens system of land registration, which emphasizes the integrity of the land register and the protection of legal interests that are duly registered. Any attempt to mortgage land without such a registered interest is void ab initio and incapable of creating legally enforceable mortgage rights.

This principle has been emphatically reaffirmed by the Uganda Court of Appeal in the case of Stanley Mujjumbula v Andrew Babigumira and Another (Civil Appeal No. 330 of 2019) [2025] UGCA 250 (30 July 2025) where the Court held that the first Respondent, who had no registered title or registrable interest in the suit land, could not lawfully mortgage the property to Stanbic Bank. As such, the purported mortgage was declared invalid for contravening Section 116 of the RTA.

However, the Court went further to address the equitable consequences of the transaction. Although the mortgage was illegal, the Appellant had paid UGX 23,000,000/= to the 1st Respondent in the belief that he was acquiring an interest in the land. Rather than leaving the Appellant without a remedy, the Court applied the equitable doctrine of money had and received—a restitutionary remedy designed to prevent unjust enrichment. The Court ordered the Respondent to refund the full amount received from the Appellant, despite the void nature of the underlying transaction.

This judgment is a significant reaffirmation of the principle that no interest in registered land can arise through informal or unregistered dealings, but also a reminder that equity will not allow one party to retain a benefit unjustly at the expense of another, even in the face of illegality. The decision has far-reaching implications for lenders, purchasers, and intermediaries in Uganda’s land and mortgage market.

Background and Facts of the Case

This appeal arose from the judgment of the High Court in Civil Appeal No. 155 of 2006, where the trial court held that a purported loan/mortgage deed between the 1st Respondent and 2nd Respondent was illegal and unenforceable under Section 116 of the Registration of Titles Act (RTA), as the 2nd Respondent, not being the registered proprietor of the land at the time, lacked legal interest in the property to create a valid mortgage.

The suit land in question is Kyadondo Block 194 Plot 116. The 2nd Respondent had borrowed UGX 23,000,000/= from the 1st Respondent but defaulted. To prevent a threatened sale of the land, the Appellant — a kibanja holder and nephew to the 2nd Respondent — paid the debt in full to the 1st Respondent. He did so based on the understanding that the land title would be transferred to him.

The 1st Respondent had earlier acquired the land from the 2nd Respondent through a sale agreement made in August 2005, before the purported loan/mortgage transaction with the Appellant in October 2005. The existence of this prior sale was concealed from the Appellant.

Despite a pending injunction, the 1st Respondent fraudulently registered himself as the proprietor. The Appellant, claiming to have acted in good faith, sued for a declaration of ownership and cancellation of the fraudulent transfer, asserting both kibanja and equitable interests in the land.

Issues on Appeal

Upon consolidating the eleven grounds raised by the Appellant, the Court of Appeal framed three core issues:

Whether the agreement between the 1st and 2nd Respondents was illegal, and whether the agreement between the Appellant and the 1st Respondent was rescinded.
Whether the Appellant was a kibanja holder for the entire suit land.
Whether the Appellant was entitled to damages.

Resolution of the Preliminary Objection

The 2nd Respondent raised a preliminary objection, arguing that the Appellant had filed an Amended Memorandum of Appeal without leave of court, contrary to Rule 67(1) of the Court of Appeal Rules. It was also argued that both the original and amended memoranda were defective — the former for being prolix and argumentative (violating Rule 86(1)), and the latter for being improperly filed.

Court’s Ruling on Preliminary Objection

The Court agreed that leave had not been sought for the amendment and that the original memorandum was defective. However, it found that both Respondents had participated in conferencing based on the amended memorandum and had not raised objections at that stage.

The Court treated this as a waiver and ruled that the amended memorandum would be allowed to stand in the interest of justice and fair hearing.

Thus, this objection was overruled.

Submissions on the Merits

Appellant's Submissions

The Appellant argued that he acted in good faith and was unaware of any prior illegality or fraud between the Respondents.

He relied on equitable principles to assert that having paid UGX 23,000,000/=, he should be considered the rightful owner.

He further cited case law emphasized that courts should protect innocent parties misled into illegal agreements (e.g., Kagga v. Kiyimba, Uganda Development Bank v. Balondemu).

Asserted that the trial judge erred in finding him complicit in the illegality and in ignoring the Respondents' conspiracy to defraud him.

Respondents' Submissions:

The 1st Respondent maintained that the land was validly sold to him by the 2nd Respondent prior to any transaction with the Appellant.

The 2nd Respondent and his counsel asserted that the mortgage was void ab initio under Section 116 RTA, as one cannot mortgage land they no longer legally own.

Both Respondents emphasized that equity cannot aid a party who participates in illegality (“ex turpi causa non oritur actio”), citing Makula International Ltd v. Cardinal Nsubuga and others, and Silver Byaruhanga v. Fr. Emmanuel Ruvugwaho.

Denied any conspiracy and argued that the Appellant was fully aware of the circumstances and was attempting to unlawfully convert a loan repayment into land ownership.

⚖️ COURT'S HOLDING

The mortgage agreement between the 1st and 2nd Respondents is void and of no legal effect.

The Appellant, although a party to an illegal transaction, is entitled to recover UGX 23 million from the 1st Respondent on equitable grounds.

The Appellant is not a bona fide occupant of the entire land but only of a 0.007-acre portion.

No general damages were awarded, and the Appellant was not entitled to costs in full.

Court’s Determination

On Illegality of the Transaction:

The Court reaffirmed that under Section 116 of the RTA, a person without a legal interest in land cannot create a valid mortgage. Since the 2nd Respondent had already sold the land to the 1st Respondent before the purported mortgage, he had no legal interest at the time.

The Court held the mortgage and subsequent registration of the 1st Respondent as illegal and void ab initio.

The Appellant, although not directly involved in the initial illegality, could not acquire valid title through an invalid mortgage arrangement.

The Court affirmed:

“A mortgage under Section 116 of the Registration of Titles Act is void ab initio where the mortgagor did not have registered title at the time of execution.”

Further, the Court held that:

“The Appellant, though not aware of the prior sale between the Respondents, cannot acquire title through an invalid mortgage deed executed by someone lacking title.”

Consequently, the purported mortgage was declared void, and the Appellant could not benefit from it

On Equity and Refund

Although the Appellant could not benefit from the illegal transaction, the Court found that equity demanded he not suffer unjust enrichment at the hands of the Respondents.

It therefore ordered the 1st Respondent to refund the UGX 23,000,000/= to the Appellant under the doctrine of “money had and received.”

The appellate court agreed with the High Court’s findings on the survey and locus visit, concluding:

“Evidence including the site inspection revealed that the Appellant occupied only approximately 0.007 acres of the suit land, despite his claims of long-term occupation over the entire parcel.”

The Court therefore held that the Appellant only had bona fide occupancy over a small portion (0.007 acres), not the entire land.

Issue 3: Entitlement to Damages (Ground 9)

While refusing general damages, the Court applied the equitable doctrine of money had and received, stating:

“Although the mortgage was illegal, fairness compels restitution – the Appellant paid UGX 23,000,000/= expecting to gain land ownership. In equity, he must be refunded.”

Thus, the Appellant was awarded a refund of UGX 23,000,000/= with 15% interest.

Final Disposition:

Appeal allowed in part.
Title reverted to the 2nd Respondent.
1st Respondent ordered to refund UGX 23,000,000/= to the Appellant.
No order as to costs.

📌 KEY TAKEAWAYS

Illegal Mortgage Deed Rendered Void
The Court of Appeal upheld the High Court’s finding that the purported mortgage deed between the 1st and 2nd Respondents was illegal ab initio, having been executed contrary to Section 116 of the Registration of Titles Act, Cap 230. The 1st Respondent had no registered interest in the land and could not validly mortgage it. Therefore, the mortgage to Stanbic Bank was null and unenforceable.
Equitable Restitution Despite Illegality
Although the transaction was illegal, the Court ordered the 1st Respondent to refund UGX 23,000,000/= to the Appellant as money had and received. This was grounded in equity to prevent unjust enrichment, applying principles from Tumwine v Magara, and Shenoi v Maximov (2005) EA 280. The amount is to attract 15% interest per annum from the date of judgment.
Limited Bona Fide Occupancy Proven
The Appellant was recognized as a bona fide occupant only in respect of 0.007 acres, based on a court-supervised survey. His additional developments on the land during trial were not protected, as they occurred after the dispute arose and undermined his credibility.
Interlocutory Rulings Not Binding at Trial
The appellate court declined to rely on Justice Bashaija’s earlier ruling in M.A No. 1833 of 2017, which described the 1st Respondent’s conduct as a "deceitful ploy". The Court held that such interlocutory observations are not binding determinations on the merits.
No Award of General Damages
The Appellant’s claim for general damages for fraudulent misrepresentation was dismissed. The Court reasoned that awarding damages would indirectly enforce an illegal transaction and instead granted equitable restitution only.

🧠 LEGAL PRINCIPLES HIGHLIGHTED

Section 116, Registration of Titles Act – A person without legal interest in land cannot create a valid mortgage.
Doctrine of Unjust Enrichment / Money Had and Received – Equity intervenes to restore parties to their original positions where an illegal transaction would cause one party to unjustly benefit.
Section 29, Land Act (Cap 227) – Bona fide occupancy must be evidenced by settled occupation before 1995 or 12 years of peaceful occupation.
Fernandes v Noroniha [1969] EA 506 – Emphasizes the importance of a judge’s participation in a locus in quo.

📍 PRACTICAL IMPLICATIONS

Parties must exercise due diligence when purchasing or financing land, ensuring registered ownership and compliance with land laws.
Courts will not enforce illegal contracts but may award restitution to avoid unjust enrichment.
Proving bona fide occupancy requires credible evidence.
Interlocutory orders, while informative, are not conclusive on final merits.

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