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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-MA-0272 OF 2005
(Arising out of
HCT-00-CC-CS-0285-2005)
KATUSIIME ELIAS :::::::::::::::::::::: APPLICANT/PLAINTIFF
VERSUS
ARNCY HOLDINGS LIMITED :::::::::
RESPONDENT/DEFENDANT
BEFORE: THE HONOURABLE MR. JUSTICE
YOROKAMU BAMWINE
R U L I N G:
This
application was brought by way of chamber summons under 0.37 rr 1 and 9 of the
Civil Procedure Rules. It is prayed that an order
be made to restrain the
Respondent from disposing of or interfering with the Applicant’s land
comprised in Kyadondo Block 196
plot 285 land at Kumambogo.
The
application is supported by the affidavit of the Applicant. The Respondent also
filed an affidavit in reply through its Ag. Director
Corporate Services, one
Haruna Semakula. In the main suit, the Applicant/Plaintiff’s claim
against the Respondent/Defendant
is for breach of contract and for the
enforcement of the Plaintiff’s right in equity to redeem the mortgaged
property; for
a permanent injunction restraining the Defendant from disposing of
or interfering with the Plaintiff’s land; and costs of the
suit, among
other reliefs. In the alternative, the Plaintiff prays for a declaration that
the mortgage is a nullity, void and unenforceable
and an order for the release
of his certificate of Title.
Representation:
Mr. Joseph Bossa and Mr.
Bosco Ssozi for the Applicant.
Mr. Nangwala for the
Respondent.
Briefly, the Applicant’s case is that he obtained a
loan of Shs.46m from the Defendant against a security described as Kyadondo
Block 196 plot 285. That he has been paying off the said loan and to-date has
paid off Shs.15m. That the Respondent has now advertised
the Plaintiff’s
property for sale although the Plaintiff has not failed to pay the loan balance.
He contends that substantial
or irreparable loss will occur if the Respondents
are not restrained by Court from disposing or otherwise interfering with the
said
property. That the property is in danger of being wasted, damaged or
alienated by the Defendants and, finally, that it is just and
equitable that a
temporary injunction be issued to restrain the Respondent/Defendant from
disposing off the said property pending
the hearing of the main suit. From the
records, the main suit is yet to be fixed for hearing.
The above is
briefly the Applicant’s version of the events surrounding this case. Now
the Respondent’s version.
According to the Respondent, the Applicant
borrowed a sum of Euros 19,250 at an agreed interest of 15% which by 1.4.2005
had accumulated
to Euros 47,840. A legal mortgage was executed with the consent
of the Plaintiff authorising the Defendant to sell the property
without applying
to Court. The Plaintiff has failed to repay the loan which has prompted the
Defendant to advertise for sale of
the mortgaged property. in addition to the
remedies provided in the loan agreement, the Defendant is praying for Judgment
against
the Plaintiff by way of a counter claim for the said amount with
interest.
The Applicant has raised a number of issues. They include the
allegation that the mortgage transaction contravenes S.39 of the Land
Act, Cap
227, in that the spounse’s consent was not sought and the allegation that
the Respondent is not a registered money
lender and that its terms for lending
money are prohibitive and illegal. The Respondent argues that the
Applicant’s wife duly
consented to the mortgage transaction. As regards
lack of a money lending licence, the Respondent has evoked S.21 of the Money
Lenders
Act, Cap 273 and argued that the provisions in the Act regarding
interest and licence to lend are irrelevant if the money lending
transaction is
effected by a legal or equitable mortgage which are present in this
case.
I have very carefully addressed my mind to the arguments of both
counsel. 0.37 r 1 under which the application was brought provides:
“1. Cases in which temporary injunction may be granted.
Where in any suit it is proved by affidavit or otherwise –
(a). that any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree; or
(b). ...............................................................................................................
the Court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal or disposition of the property as the Court thinks fit until the disposal of the suit or until further orders.”
Under the above law, all the Applicant
needs to show is that the property in dispute is in danger of being wasted,
damaged or alienated
by any party to the suit. It is the paramount duty of a
Court to which an application of this nature is made pending the determination
of the suit to see that the suit, if successful, is not rendered nugatory.
Accordingly, grant of a temporary injunction is a matter
within the discretion
of the Court. The discretion must, however, be exercised
judicially.
Over the years, the Courts have evolved principles to
consider while determining whether or not to grant a temporary injunction.
For
record purposes, the Applicant must show:
1. That the purpose of the injunction is to preserve the status quo until the dispute is investigated in the suit and finally disposed of.
2. That he has a prima facie case with a probability of success.
3. That the Applicant would suffer irreparable injury which an award of damages would not adequately atone if the injunction is refused and later on he turns out to be the successful party in the suit.
If the Court,
after considering the above, is in doubt, it will decide on the balance of
convenience.
Firstly, the status quo.
That the suit property has been
advertised for sale is not an issue. The advertisement appeared in the Monitor
Newspaper of 3/5/2005.
The Applicant was given 30 days in which to pay or
forfeit the suit property. The thirty days expire on 3/6/2005, just 10 days
from now. If the property is hurriedly sold and the Applicant’s suit is
successful, the suit would be rendered nugatory and
the Applicant would have
been condemned unheard.
The property is said to have factory buildings on
it with equipment and residential quarters where some members of the
Applicant’s
family live. That would be no mean loss.
From the
pleadings, the Applicant is in possession. Denying the Applicant’s prayer
would change the status quo between the
parties with respect to who has
possession of the land and who holds title to the land. To that extent, I
‘m satisfied that
the case meets the first requirement for a grant of a
temporary injunction in that its aim is to maintain the status quo pending
a
decision of the issues raised in the main suit on the merits.
Secondly,
the application requires the Court to consider the likelihood of success on the
merits.
In the case before me, the Applicant has alleged that the
mortgage transaction which the Respondent seeks to enforce is a nullity
on
account of alleged non-compliance with mandatory provisions of the law. I have
understood counsel’s argument on this point
to raise at least three points
worthy of mention:
i. That the Respondent is not a licensed money
lender;
ii. That the transaction is barred by S.39 (1) (a) of the Land Act;
and
iii. That the Applicant has not exhausted his equity of
redemption.
I’m aware that this is a delicate area where if one is
not careful, one may end up delving into the merits of the case prematurely.
Since it is one of the factors I ought to consider, I will do my best.
It
is not clear from the pleadings as to whether the Respondent is a registered
money lender. Be that as it may, the parties executed
a mortgage in which the
loan was secured by the Applicant’s immovable property. Under S.21 (1)
(c) of the Money Lenders Act,
cap 273, the Act does not apply to any money
lending transaction where the security for the repayment of the loan and
interest on
the loan is effected by execution of a legal or equitable mortgage
upon immovable property or of a charge upon immovable property
or of any
bonafide transaction of money lending upon such mortgage or charge. The
exemption provided for in this section applies
whether the transactions referred
to above are effected by a money lender or not. This law appears to be on the
Respondent’s
side herein.
As to the transaction being barred by
S.39 (1) (a) of the Land Act, the Respondent has sworn an affidavit through one
Haruna Semakula,
its Ag. Director Corporate Services, that the mortgage was duly
executed after getting the consent of the Applicant’s wife
Nandawula
Bitijuma Katusiime. He has attached a copy of the said consent. I have not
seen the Applicant controverting that assertion
in a subsequent affidavit. The
attached copy of the purported consent bears a photo said to be that of
Applicant’s wife.
Again, the law here appears to be on the
Respondent’s side.
As to the Applicant not exhausting his equity of
redemption, the parties agreed that in the event of a default on the loan
payment,
the mortgage would be at liberty to realize his security. It is trite
that the right to sell can be exercised without recourse to
Court where such a
right is expressly reserved in the mortgage agreement. Otherwise, the sale must
be conducted with the sanction
of the Court. The law as I understand it is that
if the mortgagee has the power of sale without a Court order, the Court has no
power to order other remedy or post pone the sale. The only way the mortgagor
can redeem his land would be to repay the loan. It
is not clear from the
pleadings whether, and if so, how the Respondent is interfering with the
Applicant’s equity of redemption
or whether it has expired. Even then it
appears to me that the chances of the Applicant succeeding in the main suit are
slim. As
the evidence stands now, for him to succeed in the main suit, he will
have to fight harder than the Respondent as the law appears
to be more on the
Respondent’s side than the Applicant’s.
Thirdly, as to the
Applicant suffering irreparable injury, the law requires that the injury be a
substantial or material one, that
is, one that cannot be adequately compensated
for in damages. The Applicant mortgaged his property. The understanding must
have
been that upon default, the Respondent would sell it to realise its money.
If the value of the land far exceeds the amount at stake,
the difference would
be paid to him. I have honestly not seen what irreparable injury the Applicant
would suffer if this application
were denied, other than, perhaps, the
inconvenience he would suffer re-locating his family on secure ground. He ought
to have reasonably
addressed his mind to that at the time he entered into the
mortgage transaction.
Finally, as already indicated, in determining
whether the status quo should be maintained, it is well established that regard
should
be had to the balance of convenience.
The Respondent’s money was
secured by the suit property. Applicant’s title is already encumbered by
the Respondent’s
mortgage over the suit property. The effect of an
injunction would be to make the property available for sale or otherwise,
depending
on the outcome of the main suit. In the meantime, the
Respondent’s money continues to attract interest. What started as 19,250
Euros was, according to the Respondent, 47840 Euros by 1/4/2005. While the
Applicant, if he is not heard in the main suit and he
is successful stands to
lose a valuable asset, land, the Respondent stands to lose nothing given that
land in this country gains
value every day that passes. It has not been pointed
out to Court what burdens, if any, the Respondent is experiencing in preserving
the status quo to raise the inference that the same would increase unless the
remedy sought herein is refused. I am of the considered
view, on the balance of
probabilities, that the harm the Applicant would suffer if Court did not stop
the sale for now would outweigh
the harm that the Respondent would suffer if the
Court refused to grant the remedy sought herein. I would have come to a
different
conclusion if the parties had agreed that by a stated date the loan
should either be fully paid or the security realised.
I was invited to
order, in the event that I’m inclined to grant the remedy sought herein,
that the outstanding amount as at
1/4/2005, that is, Euros 47,840, be deposited
in Court as a means to reinforce the fact that the Applicant is not here to
waste Court’s
time and to abuse the commercial justice in this country.
After giving anxious consideration to this prayer, I’m inclined
to the
view that doing so wouldn’t be promoting fairness in the matter. This is
not an involved matter that would take a lot
of Court’s time. In view of
the objection launched against the intended sale, I’m of the opinion that
a commitment by
the parties to have the main suit disposed of expeditiously, say
within three months, would promote fairness in the case.
For the reasons
advanced above and on other equitable considerations, I would allow this
application. I would however order that
the main suit be disposed of within
THREE months from the date of this order excluding the forth coming Court
vacation, time and
circumstances allowing. In the event that the Applicant
exhibits lack of keenness towards completion of his case, this Court would
be
constrained to review this order.
The Respondent shall have costs herein
in any event. I so order.
Yorokamu Bamwine
J U D G E
23/05/2005
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