Stanbic Bank Uganda Limited v Kesacon Services Limited & Another (Miscellaneous Application 724 of 2023) [2023] UGCommC 244 (12 July 2023)

5 THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] MISCELLANEOUS APPLICATION NO. 724 OF 2023 [ARISING FROM CIVIL SUIT NO. 66 OF 2012]

STANBIC BANK UGANDA LIMITED ] APPLICANT

VERSUS

| 15 | 1.<br>KESACON SERVICES LIMITED | ] | RESPONDENTS | |----|--------------------------------|---|-------------| | | 2.<br>HADIDU NAMUBIRU | ] | |

Before: Hon Justice Thomas Ocaya O. R

20 Ruling

Background

The Applicant brought this application under the provisions of Section 33 Judicature 25 Act, Section 82 and 98 of the Civil Procedure Code Act ["CPA"] and Order 52 Rule 1 and 3 of the Civil Procedure Rules ["CPR"]. The Applicant's application seeks the following reliefs:

- (a) An order that the 1st Respondent gives vacant possession of property 30 comprised in Kibuga Block 38 Plot 537 at Wandegeya. - (b)In the event that the 1st Respondent declines to voluntarily give vacant possession of the suit property, an order be issued for eviction of the 1st Respondent and all its tenants occupying the suit property. - (c) An order vacating the caveat under instrument number KCCA-00089489 35 lodged by the 2nd Respondent on the suit property on 10th March 2022. - (d)Costs of this application be provided for.

- 5 According to the Applicant, the background to this application is that Kibuga Block 38 Plot 537 ["the suit property"] was initially owned by the Late Musa Ssebaduka. The property was transferred to Emmanuel Kisembo who later transferred it to the 1st Respondent. The 1st Respondent mortgaged the property to the Applicant as security for a loan which it eventually defaulted on. As a result, the 1st Respondent filed HCCS 10 66/2012 before this court accusing the Applicant of breach of contract and - contending that the mortgage deed between the parties was unenforceable. *Albeit* these facts were slightly mixed up by the Applicant.

Judgment was entered in favour of the Applicant and the 1st Respondent was directed 15 to pay UGX 476,381,200 to the Applicant. As a result, the Applicant and 1st Respondent sold the suit property to a one David Kageruka for UGX 560,000,000 with the Applicant receiving UGX 460,000,000 and the 1st Respondent UGX 100,000,000. The Applicant contends that when it sought vacant possession, the 1st Respondent declined to grant the same and the 2nd Respondent lodged a caveat.

For its part, the 1st Respondent contended that it did not consent to the sale of the suit property. The execution of the sale agreement in respect of the same was done by one of its directors who was not authorized to do so alone. The 1st Respondent also contended that it had filed an appeal against the decision in the main suit vide Civil

- 25 Appeal 109 of 2022 and allowing the Applicant's application would render the same nugatory. The 1st Respondent also contended that it had filed Civil Suit No. 379/2023 against its director Asiimwe Stephen and David Kageruka, the purchaser challenging the sale and Civil Suit 379 of 2023 against Asiimwe Stephen, David Kageruka and the Applicant seeking inter alia, a cancellation of the sale agreement. - 30

The 2nd Respondent neither filed an affidavit in reply nor entered appearance.

Representation

The Applicant was represented by M/s MMAKS Advocates while the 1st Respondent 35 was represented by M/s Musoke Suleman & Company Advocates.

5 Evidence and Submissions

The Applicant led evidence by way of an affidavit in support deponed by Andrew Mauso, the Applicant's head Legal Credit and Recoveries. The 1st Respondent adduced evidence by way of an affidavit in reply deponed by Ronald Kalema, a director of the 1st Respondent. Both parties filed submissions (including supplemental submissions

- 10 filed by the 1st Respondent) in support of their respective cases which I have read and considered before coming to my ruling below. It is trite law that submissions are not evidence and I do not feel the need to reiterate the contents of the same here, save to say that I have considered them. - 15 The 2nd Respondent neither led evidence or filed submissions.

Decision:

*Preliminary Point of Law: Locus Standi*

- The 1st Respondent contended that the Applicant doesn't have locus standi to pursue 20 the reliefs sought having sold the property to Mr. Kageruka. It cited the decision of Sharif Omar v Hajji Haruna Mulangwa SCCA 38/1995. Whereas I find the procedure of filing supplemental submissions both strange and improper, I will entertain the preliminary objection for purposes of completeness. - 25 In King's College Budo Staff Savings Scheme Limited v Zaverio Samula & Ors HCCS 26/2020 locus standi was defined thus:

"Locus standi was held to mean a right to appear in court, and conversely to say that a person has no locus standi means that he/she had no right to appear or be heard in a specified proceeding."

A person must have locus standi to bring an action or seek relief, in order to avoid court being flooded by actions of "busy bodies". In Dima Dominic Poro v Inyani Godfrey & Anor HCCA 16/2016, the court held thus on this issue;

"It is trite that save in public interest litigation or except where the law expressly 35 states otherwise, such as article 50 (2) of The Constitution of the Republic of Uganda, 1995 which confers on any person or organisation the right to bring an action against

- 5 the violation of another person's or group's human rights, for any person to otherwise have locus standi, such person must have "sufficient interest" in respect of the subject matter of a suit, which is constituted by having; an adequate interest, not merely a technical one in the subject matter of the suit; the interest must not be too far removed (or remote); the interest must be actual, not abstract or academic; and the interest - 10 must be current, not hypothetical. The requirement of sufficient interest is an important safe-guard to prevent having "busy-bodies" in litigation, with misguided or trivial complaints. If the requirement did not exist, the courts would be flooded and persons harassed by irresponsible suits."

See also Cwezi Properties v UDB HCMA 1315/2022

Whereas I agree that, on sale of property, the whole of the vendor's interest passes to the purchaser (save if otherwise provided by law or agreement) as held in the Sharif Omar case (above), I find that the 1st Respondent's objection is besides the law.

- 20 The Applicant sold the suit property as a mortgagee with the mortgagor's consent. It follows that they had an obligation to hand over quiet possession to the purchaser or be in breach of their agreement with the purchaser. See Mariam Naigaga v Orient Bank HCCS 464/2013. - 25 Accordingly, the Applicant has locus to bring this application as it seeks reliefs to enable it perform its contract with the purchaser and finalise the recovery of its lent monies by conclusion of the disposal of security (the merits of which this application will determine). - 30 I therefore find that the Applicant has locus standi to bring this application.

The Applicant prays for distinct orders against each Respondent. Against the 1st Respondent, it prays for an order of vacant possession of the suit property and an order of eviction in the event that the 1st Respondent declines to give vacant 35 possession. The Applicant also prays for an order of eviction against the tenants of the 1st Respondent.

5 Against the 2nd Respondent, the Applicant prays for an order vacating the caveat filed by the 2nd Respondent in respect of the suit land.

*Vacant Possession and Eviction*

The Applicant's application is principally founded on Section 98 of the Civil 10 Procedure Act which provides thus;

> "Nothing in this Act shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court."

See Tullow Uganda Limited & Anor v Jackson Wabyona & Ors HCMA

15 443/2017and Green Meadow Limited v Patrice Namisono HCMA 1368/2022, Kagumaho Musana v Rama and 3 Others HCMA 933 of 2019

In my view, the key question for determination herein is whether this is a proper case for the exercise of the court's inherent question. Put differently, is it in the interest of

20 justice, or against abuse of court, that the orders sought by the Applicant should be granted?

The Respondent contended that the sale which the Applicant seeks to effect by way of this application was only authorized by one director and that two civil suits are 25 presently pending before this court (High Court) to determine the validity of the same.

Without delving into the merits of those cases, and without determining them, it is important in my view to explore the overriding principles of corporate authorization. Section 50(2) of the Companies Act provides thus;

30 "Contracts on behalf of a company may be made as follows—

(a) a contract which if made between private persons would by law be required to be in writing, signed by the parties to be charged with, may be made on behalf of the company in writing executed by any person acting under its authority, express or implied;"

Section 53 of the Companies Act provides thus

5 "A party to a transaction with a company is not bound to enquire whether it is permitted by the company's memorandum or as to any limitation on the powers of the board of directors to bind the company or authorize others to do so."

D. J Bakibinga in his book Company Law in Uganda at page 124, the author posits that;

"Nevertheless, an individual director may be able to bind the company in transactions with outsiders on the basis of the application of the constructive notice as modified by the indoor management rule or the rule in Royal British Bank Vs Turquand"

15 As a general rule, a person contracting with a person authorized, or ostensibly authorized to bind the company is under no obligation to ensure that all the necessary corporate rules of the company have been complied with in respect of the transaction. See CTM Uganda Limited v Almuss Properties HCMA 806/2015, Monitor Publications v KCCA HCCS 460/2015, NIS Protection (U) Limited v Nkumba 20 University HCCS 604/2004

Further, barring applicable exceptions, a single director can bind a company. See D. J Bakibinga in his book Company Law in Uganda at page 124, Halsbury's Laws of England, 5th Edition, Vol 14 P 137, Para 115 and P 342-343, Para 268

The 1st Respondent contended that;

- (a)It has filed Civil Appeal 109 of 2022 and allowing the Applicant's application would render the same nugatory. - (b)It had filed Civil Suit No. 379/2013 and Civil Suit 379 of 2023 both challenging 30 the sale which the Applicant seeks to enforce.

As far as Civil Appeal 109/2022 is concerned, it is agreed by both sides that there has been no grant of stay of execution. It is trite law that an appeal by its self does not operate as a stay of execution.

The decision in the main suit was a money judgment. It is the position of the law that money judgments should be enforced rather than stayed since money is returnable. 5 See UMEME Limited v Jane Nankabirwa HCMC 154/2021, Luwa Luwa Investment v URA HCMA 1336/2022, China Henan International Cooperation Group Company Limited v Justus Kyabahwa CACA 101/2021

In my view, the pendency of the appeal has no effect on the instant application since 10 this application seeks to pass over property transferred in execution of a payment judgment.

Let me now consider the impact of the pendency of Civil Suit 379/2013 and Civil Suit 379/2023.

First, I note that Civil Suit 379/2013 has been pending in the Land Division for ten (10) years. It is not clear why the suit has stalled for so long and no party led evidence to this effect. I note that a party has a duty to diligently follow up their claim or defence to ensure that adjudication over it is completely within a reasonable period of time.

20 See Femisa International Limited & Anor v Equity Bank (U) Ltd HCMA 357/2022, Fred Byamukama & Anor v Micheal Katungye HCMA 772/2022

I also note that Civil Suit 379/2023 was filed in this court, and it relates to the same transaction and, on the face of it, similar issues. It is not clear why a new suit was filed 25 while a matter raising similar questions was pending in another division of this court.

The role of the Commercial Court in my view is to ensure that there is expeditious disposal of suits to avoid thrombosis in commerce occasioned by a backlog of an unresolved commercial claims or disputes. This is more so where the claims are for

30 money. It must be recalled that money is an asset and a lengthy period of its retention means credit will become more expensive as lenders are precluded from putting their monies to use and will shift to prefer institutional borrowers that are unlikely to default as opposed to other borrowers. This has the effect of raising the cost of money and making it difficult, if not impossible, especially for domestic borrowers to access

35 credit.

- 5 To ensure that a lot of money is not unnecessarily rendered unusable because it is tied down in long winding litigation, the resolution of disputes between lenders and borrowers, as well as the resolution of dispute relating to securities, should be done quickly and fairly. Moreover, with respect to disputes regarding securities for lending, if the processes of realizing securities is marred with lengthy delays, third parties may - 10 begin to shun purchase of loan securities from lenders, thereby making it difficult to liquidate securities and recover sums lent. This is on top of the fact that deposit/investment taking lenders can easily go under if loan/security recoveries face the bottleneck of lengthy and winding litigation. - 15 It is of course not helpful if the process is so fast that ignores all concerns for justice. But the process must also not be too slow that lenders cannot recover their monies or realize their securities. Specialized commercial dispute institutions like the Commercial Court are charged with achieving this balance. - 20 Section 98 of the Civil Procedure Act provides thus "Nothing in this Act shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court. "What would be the justice of this case? I have already established that it wouldn't be just to deny this application on the basis - 25 of the pendency of an appeal, except if there is a stay of execution.

In my view, the allowing of the orders sought against the 1st Respondent would not impede the matters by it because:

- (a) The 1st Respondent is free to pray for preservation/injunctory orders in those - 30 matters where a judicial officer handling the same would be able to assess and determine such prayers relative to the justice of the case. - (b)The purchaser of the suit property, who is the beneficiary of the Applicant's application is already a party/can be made a party to those proceedings and an order preventing further transfer of the property can be granted by the 35 applicable court.

- 5 (c) If the sale to the purchaser is overturned, the 1st Respondent can have the suit property returned to them. - (d)The suits filed by the 1st Respondent are unlikely to be determined until after a significant period of delay, as evidenced by the ten (10) year delay in Civil Suit 379/2013. - 10

I find myself persuaded by the decisions of the Indian Supreme Court in Bank of Rajasthan Limited v. VCK Shares & Stock Broking Services Limited CIVIL APPEAL NOS.8972-8973 OF 2014, Indian Bank vs Abs Marine Products Pvt. Ltd Appeal 10074-10075 of 2003. In this cases, the court found that a party 15 commencing other actions outside of a dispute resolution process aimed at achieving expedited resolution of disputes regarding debts to banks did not prevent or impair proceedings under the expedited process.

In my view, the reliefs sought by the Applicant against the 1st Respondent are not 20 inconsistent and can exist side by side with the 1st Respondent's actions against it.

*Vacation of Caveat*

The Applicant prayed for an order vacating the 2nd Respondent's caveat. I have read 25 the caveat and statutory declaration supporting the same adduced by the Applicant. The 2nd Respondent claims an interest in the suit property as part of the estate of the Late Hajji Musa Ssebaduka. My mind has also been drawn to a Consent Settlement Order between the Applicant, the 1st Respondent and Masitula Ssebaduka, an administrix of the estate of the Late Hajji Musa Ssebaduka, Abu Ssebaduka, a 30 beneficiary of that estate and the Commissioner Land Registration in which the estate confirms that they have no interest in the suit property.

The Applicant led evidence that the property was mortgaged to it and it sold it David Kageruka. This evidence was not disputed by the 2nd Respondent. Where an averment 35 in an affidavit is not disputed, it is deemed accepted. See Energo Projekt v Brig. 5 The Applicant has demonstrated that the estate under which the 2nd Respondent claims has no interest in the suit property. This evidence has also not been disputed or impeached in anyway by the 2nd Respondent.

I find that the Applicant is entitled to the reliefs sought against the 2nd Respondent.

Conclusion

On the whole, the Applicant's application succeeds. I make the following orders:

- (a) An order that the 1st Respondent gives vacant possession of property 15 comprised in Kibuga Block 38 Plot 537 at Wandegeya within sixty (60) days from the date of this ruling. - (b)In the event that the 1st Respondent declines to voluntarily give vacant possession of the suit property, an order is issued for eviction of the 1st Respondent and all its tenants occupying the suit property. - 20 (c) Before evicting the tenants of the 1st Respondent, the Applicant shall serve on all tenants a thirty day notice of eviction and no eviction shall be conducted except after the expiry of thirty days from the date of the notice. - (d)An order vacating the caveat under instrument number KCCA-00089489 lodged by the 2nd Respondent on the suit property on 10th March 2022. - 25 (e) The Applicant is also awarded costs of this application. Each Respondent will bear half of the Applicants' costs for this application.

I so order.

30 Delivered electronically this\_\_\_\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 2023 and uploaded on ECCMIS. 12th July


35 Judge,

¹²th July 2023