Nasser Galiwango Mukasa v Uganda Micro Credit Foundation Ltd and Others (Civil Suit No. 12 of 2018) [2025] UGCommC 383 (20 October 2025)

Key Facts

Transaction Type

Issues

• The court examined the validity and enforceability of the loan agreements dated 25th August 2016 and 21st October 2016, including the merged agreement of 31st March 2017. The plaintiff argued the agreements were invalid due to unconscionable interest rates and alleged forgery, while the defendant maintained the agreements were properly executed and enforceable under the law.
• The court assessed whether the plaintiff failed to meet repayment obligations under the loan agreements. The defendant claimed the plaintiff defaulted on payments, leaving an outstanding balance of shs. 88,643,407/=, while the plaintiff disputed the amount, arguing some payments were unaccounted for and the interest rates were excessive.
• The court determined if the plaintiff's unregistered land (kibanja) at Bulenga-Sumbwe was validly pledged as collateral. The defendant argued the land was part of an equitable mortgage, while the plaintiff contended it was never properly mortgaged, challenging the legality of the attachment.
• The court considered the plaintiff's claims for injunctive relief, interest rate reduction, and damages. It adjusted the unconscionable interest rate on one loan to 33.6% per annum, dismissed claims for fraudulent procurement of the merged agreement, and upheld the defendant's right to recover the outstanding principal and adjusted interest.
• The court evaluated the procedures followed by the defendant in selling the plaintiff's land, including compliance with notice requirements, public auction, valuation, and adherence to statutory frameworks. The plaintiff argued the sale was illegal due to procedural defects, while the defendant provided evidence of compliance with legal standards.

Holdings

• The 10% monthly interest rate (120% annual) on the 21st October 2016 loan was ruled unconscionable and reduced to 33% annual. The 36% annual rate on the other loans was upheld as not exorbitant given the collateral and risk.
• The 2nd, 3rd, and 4th counterdefendants are jointly and severally liable as guarantors. The 4th counterdefendant's claim of not signing the guarantee was disproven by her signature on the 2016 personal guarantee form and as a guarantor on the October 2016 loan agreement.
• The plaintiff breached the loan agreements by failing to repay the outstanding balance of shs. 50,465,650/= as of 31st March 2017, including unaccounted payments. The defendant proved the breach by a preponderance of evidence.
• The court rejected the plaintiff's non est factum defense, finding no evidence of forgery or negligence in signing the loan agreements. The plaintiff's claim that the 31st March 2017 agreement was forged was not substantiated, and his illiteracy was not shown to prevent understanding the documents.
• The sale of the plaintiff's unregistered land (kibanja) at Bulenga-Sumbwe was lawful. The equitable mortgage was valid, and the sale process (advertising, valuation, auction) complied with statutory requirements. The plaintiff's argument that customary land tenure required mediation was rejected.

Remedies

• The plaintiff's claim was dismissed with costs awarded to the defendant. The court found no basis for the plaintiff's allegations of fraud or unconscionability in the loan agreements.
• The defendant was awarded interest at a rate of 36% per annum on the outstanding amount of shs. 50,465,650/=, starting from 31st March 2017 until the debt is fully paid.
• The court ordered that the costs of the suit and the counterclaim be borne by the plaintiff, following the principle that costs follow the event under section 27(2) of The Civil Procedure Act.
• Judgment was entered for the defendant against the plaintiff for an outstanding loan amount of shs. 50,465,650/=. This includes the principal and accrued interest from 31st March 2017.

Contract Value

Monetary Damages

Legal Principles

• The court evaluated unconscionable interest rates (36% and 120% annual rates) under common law and statutory frameworks, reducing the 120% rate to 33.6% and 36% to 33% where substantively unfair terms were identified. Both procedural and substantive unconscionability were considered.
• Statutory interpretation principles governed the application of the repealed Money Lenders Act and the new Tier 4 Microfinance Act, emphasizing that substantive contract rights are determined by the law in force at the time of the agreement.
• Equitable mortgages were established through physical deposit of land sale agreements without formal registration, creating enforceable security interests under common law and The Mortgage Act.
• The non est factum defense requires the party claiming the signature was not their true assent to prove forgery or lack of consent through clear, positive evidence. The burden shifts to the plaintiff to demonstrate negligence or fraud in the signing process.
• Estoppel by conduct prevents a party from denying the truth of a matter if their actions caused the other party to believe it and act accordingly. The plaintiff's repeated defaults and failure to dispute terms early negated this defense.

Precedent Name

• Dodika Limited & Others v. United Luck Group Holdings Limited
• Multiservice Bookbinding Ltd v. Marden
• Bank of Montreal v. Duguid
• Phoenix Interactive Design Inc. v. Alterinvest II Fund L.P.
• Alice Okiror and another v. Global Capital Save and another
• 1468025 Ontario Limited v. 998614 Ontario Inc.
• Progressive Group of Schools Limited and two others v. Barclays Bank of Uganda and another
• Gadhri v. 0760815 B.C. Ltd.
• C F Asset Finance Ltd v. Okonji and others
• Sebuliba v. Cooperative Bank Limited
• Payne v. Cave
• Adams v. John Deere Co
• Juma v. Habibu
• M. Kibalya v. Kibalya
• Alp Investments Limited v. Bank of India (U) Limited

Key Disputed Contract Clauses

• The loan agreements listed the plaintiff's unregistered land at Bulenga-Sumbwe as collateral, which he claimed was never properly mortgaged. The defendant argued the land was secured via an equitable mortgage through physical deposit of the land sale agreement. The court affirmed the equitable mortgage's validity under common law and The Mortgage Act, enabling the defendant's lawful sale of the property.
• The March 2017 loan agreement (exhibit D. Ex.14) consolidated the August 2016 and October 2016 loans into one obligation of shs. 79,476,400/= with 36% annual interest. The plaintiff denied authorizing this merger and claimed the signature on the document was forged. The court rejected these claims, finding the plaintiff's signature authentic and the merger valid under the terms of the original agreements.
• The March 2017 loan agreement (exhibit D. Ex.14) and prior agreements included a clause (8.3) allowing the defendant to sell pledged assets, including land, without judicial intervention upon default. The plaintiff argued this violated statutory requirements for court-ordered sales, particularly for customary land. The court upheld the clause, ruling it a valid power of sale under equitable mortgage terms and statutory frameworks.
• The court analyzed the interest rate clauses in three loan agreements: 3% monthly (36% annual) for the August 2016 and March 2017 loans, and 10% monthly (120% annual) for the October 2016 loan. The plaintiff argued these rates exceeded legal limits and were oppressive, while the defendant justified them as standard for high-risk borrowers. The court reduced the 120% rate to 33.6% per annum under the 2024 Legal Notice but upheld the 36% rate as reasonable given the collateral.

Cited Statute

• The Money Lenders Act
• The Tier 4 Microfinance Institutions and Money Lenders Act, 2016
• The Interpretation Act
• The Companies Act
• The Mortgage Act
• The Land Act
• The Auctioneers Act
• The Civil Procedure Act
• The Registration of Titles Act
• The Contracts Act

Judge Name

Passage Text

• The court found the 10% per month (120% annual) interest rate in the October 2016 loan agreement to be 'manifestly predatory, oppressive, unfair, or overly harsh as to shock the conscience' and substituted it with a 33.6% annual rate per the 2024 Legal Notice.
• The court ruled the sale of the plaintiff's unregistered land (kibanja) was legal, noting 'an equitable mortgage is created by deposit of documents of ownership... and the plaintiff conferred a power of sale without recourse to court.'
• The judge rejected the plaintiff's non-est factum defense, stating 'the plaintiff's assertion of lack of understanding is unconvincing... he had the ability to review agreements and seek legal counsel' despite his illiteracy claims.

Damages / Relief Type

• Award of shs. 50,465,650/= principal and 36% annual interest from 31st March 2017 until payment in full
• 120% monthly interest rate (October 2016 loan) reduced to 33.6% annual rate as unconscionable under The Tier 4 Microfinance Institutions and Money Lenders (Prescription of Maximum Interest Rate) Notice, 2024
• Court ordered costs of the suit and counterclaim to be paid to the defendant