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Last Updated: 19 March 2007
Alley Route Ltd-V-Uganda Development Bank Ltd-
HCT-00-CC-MA- 634-2006 [2007] UGCommC 9 (1st February
2007)
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT
KAMPALA
COMMERCIAL COURT DIVISION
HCT-00-CC-MA-
634-2006
(Arising from HCT-00-CC-CS-0553-2006)
ALLEY ROUTE LTD......................................................PLAINTIFF
VERSUS
UGANDA DEVELOPMENT BANK
LTD...........................DEFENDANT
1st
February 2007
BEFORE: HON. JUSTICE LAMECK. N.
MUKASA
RULING:
This is an application by the
Plaintiff in Civil Suit No. 553 of 2006, Alley Route Ltd, brought by
Chamber Summons under order 41
rules 1,2 and 9 of the Civil Procedure
Rules. The Applicant is seeking an order for a temporary injunction
restraining the Defendant/Respondent,
M/S Uganda Development Bank
Limited, from disposing or selling or in any other way interrupting
the Applicant’s use and enjoyment
of premises comprised in Plot No.
612 Block 17 Rubaga and Plot 307 a Block 148 Singo until further
Orders of the Court. The brief
back ground to this application, as
can be gathered from the plaint filed in Civil Suit No. 553 of 2006,
is that the Applicant applied
for a loan facility from the Respondent
to establish a biscuit manufacturing plant in Uganda. The application
was considered by the
Respondent and thereafter made a loan offer to
the Applicant whereby the Respondent was to extend a loan of US$
387,221 to finance
the following:-
(i) Machinery and equipment
(ii) Steel structure
(iii) Dyna truck
(iv) Generator set
(v) Working capital
(vi) Provision for contingency
A loan agreement was executed dated 27th
November, 1995. The Applicant in addition executed a legal mortgage
and a debenture in favour of the Respondent. Among the securities
for
the loan are the two pieces of land which are the subject matters of
this application. In its plaint the Applicant alleges several
incidents of breach of the Loan Agreement committed by the
Respondent. It is as a result of the alleged breach that the
Applicant
filed Civil Suit No. 553 of 2006 against the Respondent
whereby it seeks the following reliefs:-
(i) An Order for the release of the Plaintiff’s securities including the release of mortgages registered on:-
(a) Plot No. 612 Block 17 Rubaga, Nakukologo, Kampala.
(b) Plot 307A Singo Block 148 Mubende District.
(ii) An Order for the discharge of the debenture on the Plaintiffs properties and assets.
(iii) A declaration that the Defendant breached the loan and mortgage agreement plus the debenture entered into with the Plaintiff and made performance by the Plaintiff impossible; thus entitling the Plaintiff to treat the whole transaction as repudiated and or rescinded/discharged.
(iv) An Order that the Plaintiff is not liable to pay any monies to the Defendant.
(v) A permanent injunction restraining the Defendant or its agents from selling the Plaintiff’s property that forms part of the present suit.
(vi) General damages for breach of contract.
(vii) Interest and costs of the Suit.
Representation was Mr. Moses Ojakol for the
Applicant and Mr. Alex Rexida for the Respondent. The application is
supported by an affidavit
deponed to by Mr. Sam Mayanja, the Managing
Director of the Applicant Company. The Respondent filed an affidavit
in reply deponed
to by Mrs Priscilla Mugisha, the Bank Secretary of
the Respondent Bank. In response the Applicant filed an Affidavit in
Rejoinder
also deponed to by Mr. Sam Mayanja. I shall review the
affidavits in the course of this ruling.
Both Counsel were
agreed as to the law relating to grant of a temporary injunction
which is that the granting of an interim injunction
is exercise of
judicial discretion. Court must exercise that discretion judicially.
See Sargent vs. Patel [1949] 16 EACA 63. The conditions for
the Court to consider whether or not to grant a temporary injunction
are that first an Applicant must show that
he has a prima facie case
with probability of success. Secondly, an interlocutory injunction
will not be granted unless the Applicant
might otherwise suffer
irreparable injury, which would not adequately be compensated by an
award of damages. Thirdly if the Court
is in doubt, it will decide an
application on the balance of convenience. In this regard counsel for
the Applicant referred me to
Giella vs. Causman Brown & Co.
Ltd [1973] EA 358. See also E.A Industries vs. Trufoods [1972]
E.A 420 Robert Kavuma vs. Hotel International Ltd S.C.C.A No 8 of
1990 (unreported). The prime purpose for a temporary injunction
is to preserve the status quo pending the disposal of the Main Suit.
See Noormohamed Jammohamed vs. Kasamali Virji Madhain [1953] 29
EACA 8, Erisa Rainbow Musoke vs. Ahamada Kezeraka [1987] HCB
81.
Order 41 rule 2 (1) provides:
"In any suit for restraining the Defendant from committing a breach of contract or other injury of any mind, whether compensation is claimed in the suit or not, the Plaintiff may , at any time after the commencement of the suit and either before or after judgment, apply to the Court for a temporary injunction to restrain the Defendant from committing the breach of contract or injury complained of, or any injury of a like kind arising out of the same contract or relating to the same property or right."
In paragraphs 10, 11 and 12 of the affidavit in
support Sam Mayanja avers that at a meeting of 22nd August
2006, the Respondent refused to reschedule the loan and demanded a
viable repayment plan by 6th September 2006. That pursuant
to the Loan Agreement, the decision of the Respondent is final and
according to the Mortgage and Debenture
Deeds, the Respondent can
appoint a receiver without recourse to Court. He asserts that a
refusal to reschedule and a demand for
a repayment plan is a
precursor to issuance of an event of default notice which is normally
immediately followed by appointment of
a receiver. In paragraph 8 the
deponent avers that the Applicants biscuit plant is situated at Plot
No. 612 Block 17 Rubaga, Nalukologo
Kampala, which land together with
that at Plot 307A Singo Block 14B Mubende District are the subject of
the legal mortgage for the
said loan and the subject of this
application. It the feared Respondent’s right to appoint a receiver
is exercised the expected
result would affect the Applicants rights
and interest in the biscuit plant and its right of redemption of the
mortgaged properties.
It is the status quo of such rights and
interests that the Applicant by this application seeks to preserve
pending the determination
of the Main Suit.
Regarding the
first test, whether the Applicant has a prima facie case with the
probability of success, it is now the general trend
for Courts in
Uganda to consider only whether there are serious questions to be
tried. See Napro Industries Ltd. Vs. Five Star Industries Ltd. &
Anor H.C Misc. App. No. 773 of 2004 (Comm. Court Division), ELT.
Kiyimba
– Kaggwa vs. Hajji Abdu Nasser Katende [1985] HCB 43.
So my investigation will be limited to whether the Applicant raises
prima facie triable issues in the Main Suit. In paragraphs 5,
7 and 9
of the plaint the Applicant pleads to various acts of breach of the
loan agreement allegedly committed by the Respondent
which he
contends entitled it to general damages for the injury suffered. In
paragraph 6 of the affidavit in support of this applicant
Sam Mayanja
particularly avers that by the said Loan Agreement the Respondent
undertook to extend a loan of US$ 387,221 to apply
in financing the
following:-
(i) Machinery and equipment
(ii) Steel structure
(iii) Dyna truck
(iv) Generator set
(v) Working capital.
And in paragraph 9 he avers that the Respondent failed to supply the following:-
(i) Full set of machinery and equipment.
(ii) Dyna truck
(iii) Generator set
(iv) Working Capital
(v) Provision for contingency.
In the Respondent’s affidavit in reply,
paragraphs 5 and 6, Mrs Priscilla Mugisha admits that the Respondent
financed the project
but contends that the Respondent never undertook
or purported to supply any of the project machinery or equipment. She
avers that
the Applicant sourced and the equipment and materials
itself. In its written statement of defence the Respondent denies any
form
of breach of the Loan Agreement.
In the Applicants
affidavit in rejoinder reference is made to Annexture ‘A’ to the
plaint, which is the Loan Offer letter dated
17th November
1996 and the Addendum thereto. The Applicant states that under that
letter the Respondent was under obligation to do the
following:-
(a) Ensure conclusion of the supply contracts with supplies approved by the Respondent.
(b) Ensure availability of Bank guarantee(s) if payment terms in the supply contract(s) so necessitated.
(c) Approve proforma invoices for the supplies.
(d) Pay the supplies through medium of Letters of Credit (L/CS).
The Applicant contends that at all times the
Respondent was in charge of approval of supplies, payment and
procurement processes.
All the above considered together raise
serious issues of interpretation of the Loan Agreement and the other
related documents to
determine the obligations there under each of
the parties. I therefore find that the first condition has been
satisfied.
The next issue is whether the Applicant would
suffer irreparable injury which an award of damages can not granted
and later the applicant
turned out to be successful in the Main Suit.
The circumstances should be such that if the Court does not issue the
injunction the
Applicant would suffer irreparable loss even if he
subsequently succeeds in the action. See Napro Industries vs. Five
Star Industries Ltd (Supra).
While submitting on this
condition Mr. Rexida argued that in a case of breach of contract,
like this one, the Applicant if successful
would be entitled to an
award of general damages. He contended that the Applicant had in its
pleadings prayed for general damages,
which he argued fundamentally
negatives the grant of an injunction. Counsel submitted that once a
damage feared can be atoned for
by an award of damages then a
temporary injunction should not be granted. General damages are
intended to compensate the party for
the loss occasional to him as a
result of the alleged breach. In paragraphs 11 and 12 of its
affidavit in support the Applicant expresses
fear that the Respondent
might exercise its rights under the Loan Agreement, Mortgage and
Debenture Deeds to appoint a receiver without
recourse to Court. In
its written statement of defence and its counter claim the Respondent
contends that it is the Applicant in
breach of the Loan Agreement.
Therefore there is a triable issue as to who of the two parties is in
breach of the Loan Agreement.
The Applicant’s contention is that if
it had defaulted in any payment, that was due to the Respondents
failure to execute its obligations
under the Loan Agreement, Mortgage
and Debenture Deeds and the other Annexed documents and discovered
that in the event of default
the Respondent, has powers under the
Mortgage Deed and the Debenture Deed to appoint a Receiver whose
powers including taking possession
of the mortgaged or charged
properties and to sell the same.
On the issue of irreparable
damage the catch word is "adequately atoned". Injury
which an award of damages can not adequately atone. In Tonny
Wasswa vs. Joseph Kakoza [1987] HCB 85 irreparable injury has
been held to be injury which is substantial and can not be adequately
remedied or atoned by damages. In paragraph
5 of the Applicant’s
affidavit in support it is averred that the loan was acquired for the
proposes of setting up a biscuit manufacturing
plant and in paragraph
8 it is averred that the biscuit plant is situate on Plot No. 612
Block 17 Rubaga, which is subject of this
application. If the feared
appointment of a Receiver is done and sale takes place that would
extinguish the Applicants asserts including
capital, good will and
the anticipated business acknowledgement and development. These are
losses which are substantial and can not
be adequately atoned by
monetary damages. The second condition is therefore satisfied
therefore considering the circumstances of
this application I find
that if the Respondent was to exercise its right of appointment of a
Receiver and sale it might cause the
Applicant irreparable loss which
can not be adequately atoned by the award of monetary damages.
In
the Respondents affidavit in reply it is averred that the Applicant
has persistently defaulted on its obligation to repay the loan
and
the asserts which from the security for the loan stand a risk of
alienation/cannibalisation or being hidden under cover of an
injunction thereby leading the Respondent to irreparable loss.
I
have already stated hereinabove that the prime propose of a temporary
injunction is to preserve the status quo pending the disposal
of the
Main Suit. Where an order of injunction issues it equally binds both
parties to the suit. The Applicant will be equally bound
by the
order.
The last test is that in the case of doubt the Court
should decide whether or not to grant a temporary injunction on the
balance of
convenience. The Applicant is a limited liability Company
and as such with a legal entirely separate from its founders,
promoters,
shareholders or directors. No evidence has been adduced in
this regard on behalf of the Applicant. Mr. Sam Mayanja’s averment
as
to sentimental attachments to the plant at Nalukolongo are
personal to him and his family. Thus irrelevant for the purposes of
the
Applicant’s application. However the test of convenience is
resorted to when Court is in doubt with regard to any of the first
two issues or both. My finding on the first two issues have been in
the affirmative. Therefore I need not consider the issue of
convenience.
In the final result this application is allowed
and I make the following orders:-
1- A temporary injunction do hereby issue restraining the Respondent for disposing or selling or in any other way interrupting, the Applicants use and enjoyment of the premises comprised in Plot No. 612 Block 17 Rubaga and Plot 307A Block 148 Singo until further orders of this Court.
2- An inventory of all the asserts, machinery and equipment at the plant at Plot 612 Block 17 Rubaga be jointly taken by the officials of the Applicant and of the Respondent and a copy thereof, signed by the respective parties officials and lawyers be filed in Court within 7 days for the date hereof.
3- The order as to costs in the Main Suit shall bind the costs of this application.
.................................
Lameck
N. Mukasa
JUDGE
1/02/07
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