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Uganda Judgment

Commercial Court of Uganda

Katusiime Elias v Arncy Holdings Ltd (HCT-00-CC-MA 272 of 2005) [2005] UGCommC 24 (23 May 2005)

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01

Holding and result

The court found that the applicant met the requirement for preservation of status quo, as the property had been advertised for sale and loss of possession would render the suit nugatory if successful. On the likelihood of success, the court noted the law favored the respondent regarding the money lending exemption and spousal consent, as evidence of consent was uncontroverted. The applicant's chances of success in the main suit were deemed slim. Regarding irreparable injury, the court held that the applicant's loss could be compensated by damages, except for inconvenience of relocation. On balance of convenience, the court determined that the harm to the applicant if the sale proceeded would outweigh any harm to the respondent from maintaining the status quo. The court exercised its discretion to grant the temporary injunction, ordering expedited disposal of the main suit within three months, and awarded costs to the respondent.

Court disposition

application allowed

Orders

  • A temporary injunction is granted restraining the respondent from disposing of or interfering with the suit property pending determination of the main suit.
  • The main suit shall be disposed of within three months from the date of this order, excluding court vacation, subject to circumstances.
  • The respondent shall have costs of this application in any event.

02

Material facts

Parties

Katusiime Elias

Applicant Counsel: Joseph Bossa, Bosco Ssozi

Arncy Holdings Limited

Respondent Counsel: Nangwala

Amounts and remedies

  • Loan Principal Amount: EUR 19,250
  • Loan Amount as at 1.4.2005: EUR 47,840
  • Amount Repaid by Applicant: UGX 15,000,000
  • Original Loan in Uganda Shillings: UGX 46,000,000

03

Procedural history

  1. Posture

    Miscellaneous Application / Ruling on Application for Temporary Injunction

04

Questions and positions

Legal issues

Party arguments

Applicant
The applicant contends he obtained a loan of UGX 46 million from the respondent secured by Kyadondo Block 196 plot 285, has paid UGX 15 million, and the respondent has advertised the property for sale despite no default. He argues substantial or irreparable loss will occur if the respondent is not restrained, as the property is in danger of being wasted, damaged, or alienated. He further alleges the mortgage contravenes Section 39 of the Land Act due to lack of spousal consent and that the respondent is not a registered money lender, rendering the terms illegal.
Respondent
The respondent asserts the applicant borrowed EUR 19,250 at 15% interest, which by 1.4.2005 had accumulated to EUR 47,840. A legal mortgage was executed with the applicant's consent, authorizing sale without court order. The applicant failed to repay, prompting advertisement for sale. The respondent claims spousal consent was obtained and attaches evidence. It invokes Section 21 of the Money Lenders Act, arguing the Act does not apply to transactions secured by legal or equitable mortgage. The respondent seeks judgment for the outstanding amount and interest by counterclaim.

05

Court’s reasoning

  1. 01

    Order 37 Rule 1 of the Civil Procedure Rules

    A temporary injunction may be granted where property in dispute is in danger of being wasted, damaged, or alienated, or wrongfully sold in execution of a decree.

  2. 02

    Ugandan case law and general principles for grant of injunctions

    The applicant must show preservation of status quo, a prima facie case with probability of success, and irreparable injury not adequately compensated by damages.

  3. 03

    Section 21(1)(c) Money Lenders Act, Cap 273

    Section 21(1)(c) of the Money Lenders Act exempts transactions secured by legal or equitable mortgage from the Act's requirements.

  4. 04

    Section 39(1)(a) Land Act, Cap 227

    Section 39(1)(a) of the Land Act requires spousal consent for transactions involving family land.

  5. 05

    General mortgage law principles

    Where a mortgage agreement expressly reserves the right to sell without court order, the mortgagee may exercise that right upon default.

06

Ratio, limits and disposition

Ratio decidendi

The court found that the applicant met the requirement for preservation of status quo, as the property had been advertised for sale and loss of possession would render the suit nugatory if successful. On the likelihood of success, the court noted the law favored the respondent regarding the money lending exemption and spousal consent, as evidence of consent was uncontroverted. The applicant's chances of success in the main suit were deemed slim. Regarding irreparable injury, the court held that the applicant's loss could be compensated by damages, except for inconvenience of relocation. On balance of convenience, the court determined that the harm to the applicant if the sale proceeded would outweigh any harm to the respondent from maintaining the status quo. The court exercised its discretion to grant the temporary injunction, ordering expedited disposal of the main suit within three months, and awarded costs to the respondent.

Obiter and limits

  • The court would have reached a different conclusion if the parties had agreed on a fixed date for full payment or realization of security.
  • A commitment to dispose of the main suit expeditiously promotes fairness rather than requiring deposit of the outstanding amount in court.
  • Land in Uganda generally appreciates in value, so the respondent stands to lose little by delay.

Court disposition

application allowed

  • A temporary injunction is granted restraining the respondent from disposing of or interfering with the suit property pending determination of the main suit.
  • The main suit shall be disposed of within three months from the date of this order, excluding court vacation, subject to circumstances.
  • The respondent shall have costs of this application in any event.

Source and reliance status

Commercial Court of Uganda

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Judgment text

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Source document

Commercial Court of Uganda

Judgment

[2005] UGCommC 24

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HCT-00-CC-MA-0}{\b\f36\fs28\insrsid11023325 272 OF 2005 \par (Arising out of }{\b\f36\fs28\insrsid4685050 HCT-00-CC-CS-0}{\b\f36\fs28\insrsid11023325 285}{\b\f36\fs28\insrsid4685050 -}{\b\f36\fs28\insrsid11023325 2005) \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\f36\fs28\insrsid11023325 \par \par }\pard\plain \s2\ql \li0\ri0\keepn\widctlpar\aspalpha\aspnum\faauto\outlinelevel1\adjustright\rin0\lin0\itap0 \b\f36\fs28\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 KATUSIIME ELIAS :::::::::::::::::::::: APPLICANT/PLAINTIFF \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b\f36\fs28\insrsid11023325 \par }\pard\plain \s3\qc \li0\ri0\keepn\widctlpar\aspalpha\aspnum\faauto\outlinelevel2\adjustright\rin0\lin0\itap0 \b\f36\fs28\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 VERSUS \par }\pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b\f36\fs28\insrsid11023325 \par ARNCY HOLDINGS LIMITED ::::::::: RESPONDENT/DEFENDANT \par \par \par BEFORE: }{\b\f36\fs28\ul\insrsid11023325 THE HONOURABLE MR. JUSTICE YOROKAMU BAMWINE \par \par }{\f36\fs28\insrsid11023325 \par }{\b\f36\fs28\ul\insrsid11023325 R U L I N G: \par

}{\f36\fs28\insrsid11023325 \par }\pard\plain \s15\qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 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\rquote s land comprised in Kyadondo Block 196 plot 285 land at Kumambogo. \par }\pard\plain \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\f36\insrsid11023325 \par 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\rquote s claim against the Respondent/Defendant is for breach of contract and for the enforcement of the Plaintiff\rquote s right in equity to redeem the mortgaged property; for a permanent injunction restraining the Defendant from disposing of or interfering with the Plaintiff\rquote 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. \par \par Representation: \par Mr. Joseph Bossa and Mr. Bosco Ssozi for the Applicant. \par Mr. Nangwala for the Respondent. \par \par Briefly, the Applicant\rquote s case is that he obtained a loa n 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\rquote 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 o f 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. \par \par The above is briefly the Applicant\rquote s version of the events surrounding this case. Now the Respondent\rquote s version. \par According to the Respondent, the Applicant borrowed a sum of Euros 19,250 at an ag reed 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 w hich 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 in terest. \par \par 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\rquote s consent was not sought and the allegation that the Respondent is not a registe red money lender and that its terms for lending money are prohibitive and illegal. The Respondent argues that the Applicant\rquote s wife duly consented to the mortgage transaction. As regards lack of a money lending licence, the Respondent has evoked S.21 of t he 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. \par \par I have very carefully addressed my mind to the arguments of both counsel. 0.37 r 1 under which the application was brought provides: \par }\pard\plain \s18\qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0 \i\f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 \'931. Cases in which temporary injunction may be granted.

\par Where in any suit it is proved by affidavit or otherwise \endash \par }\pard\plain \qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\i\f36\insrsid11023325 (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 \par (b). \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85}{\f36\insrsid11023325 \par }\pard\plain \s18\qj \li720\ri720\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin720\lin720\itap0 \i\f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 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.\'94 \par }\pard\plain \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\f36\insrsid11023325 \par 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. \par \par 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: \par }\pard \qj \fi-720\li720\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0 {\f36\insrsid11023325 1.\tab That the purpose of the injunction is to preserve the status quo until the dispute is investigated in the s uit and finally disposed of. \par }\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\f36\insrsid11023325 2.\tab That he has a prima facie case with a probability of success. \par }\pard \qj \fi-720\li720\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0 {\f36\insrsid11023325 3.\tab 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. \par

}\pard \qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\f36\insrsid11023325 \par If the Court, after considering the above, is in doubt, it will decide on the balance of convenience. \par \par Firstly, the status quo. \par 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\rquote s suit is successful, the suit would be rendered nugatory and the Applicant would have been condemned unheard. \par \par The property is said to have factory buildings on it with equipment and residential quarters where some members of the Applicant\rquote s family live. That would be no mean loss. \par \par From the pleadings, the Applicant is in possession. Denying the Applicant\rquote 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 \lquote 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. \par \par Secondly, the application

requires the Court to consider the likelihood of success on the merits. \par \par 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\rquote s argument on this point to raise at least three points worthy of mention: \par i.\tab That the Respondent is not a licensed money lender; \par ii.\tab That the transaction is barred by S.39 (1) (a) of the Land Act; and \par iii.\tab That the Applicant has not exhausted his equity of redemption. \par \par I\rquote 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. \par \par 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\rquote s immovable property. Under S.21 (1) (c) of the Money Lenders Act, cap 273, th e 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\rquote s side herein. \par \par 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 \rquote 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 \rquote s wife. Again, the law here appears to be on the Respondent\rquote s side. \par \par 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 secu rity. 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 t hat 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\rquote 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 suc ceed in the main suit, he will have to fight harder than the Respondent as the law appears to be more on the Respondent\rquote s side than the Applicant\rquote s. \par \par Thirdly, as to the Applicant suffering irreparable injury, the law requires that the injury be a substanti al 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 fami ly on secure ground. He ought to have reasonably addressed his mind to that at the time he entered into the mortgage transaction. \par \par 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. \par The Respondent\rquote s money was secured by the suit property. Applicant\rquote s title is already encumbered by the Respondent\rquote 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\rquote 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 Applican t, 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 w ould 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 dat e the loan should either be fully paid or the security realised. \par \par }\pard\plain \s15\qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 I was invited to order, in the event that I\rquote 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\rquote s time and to abuse the commercial justice in this country. After giving anxious consideration to this prayer, I\rquote m inclined to the view that doing so wouldn\rquote t be promoting fairness in the matter. This is not an involved matter that would take a lot of Court\rquote s time. In view of the objection launched against the intended sale, I\rquote 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. \par }\pard\plain \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\f36\insrsid11023325 \par }\pard\plain \s15\qj \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 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 e xcluding 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. \par }\pard\plain \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\f36\insrsid11023325 \par }\pard\plain \s15\qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 The Respondent shall have costs herein in any event. I so order. \par

}\pard\plain \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\f36\insrsid11023325 \par Yorokamu Bamwine \par }\pard\plain \s1\qj \li0\ri0\sl360\slmult1\keepn\widctlpar\aspalpha\aspnum\faauto\outlinelevel0\adjustright\rin0\lin0\itap0 \b\f36\fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\insrsid11023325 J U D G E \par }\pard\plain \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\f36\insrsid11023325 23/05/2005 \par \par \par }}

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Authorities

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Order 37 Rule 1 Civil Procedure Rules

Legislation

Legislation referenced in the available case record.

Section 39(1)(a) Land Act, Cap 227

Legislation

Legislation referenced in the available case record.

Section 21(1)(c) Money Lenders Act, Cap 273

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