Summit Projekt Limited v Standard Chartered Bank (u) Limited (Civil Miscellaneous Application No. 12 of 2023) [2023] UGCA 64 (23 February 2023)

THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA CIVIL MISCELLANEOUS APPLICATION NO.12 OF 2023 Arising from Civil Application no.14 OF 2023 (arising from Civil Appeal No. 007 of 2023)

SUMMIT PROJEKT LIMITED .....................................

VS

STANDARD CHARTERED BANK(U) LIMITED :::::::::::::::::::::::::::::::::::: RESPONDENT

RULING BY CHRISTOPHER GASHIRABAKE, JA. (SINGLE JUSTICE)

This application was brought under Rules $2(2)$ , $6(2)$ (b), 43 and 44 of the Judicature (Court of Appeal Rules) Directions, SI No. 13-10. The applicant seeks an interim order of injunction against the respondent to:

a) Maintain the status quo and restrain the respondent and any other persons acting on their behalf or claiming interest through them, from continuing to advertise for sale, selling, disposing off, auctioning, taking possession of, or taking any action likely to alienate or interfere with the applicant's interest in property comprised in *Mengo Block 197 plot 505 kitetika*, *LRV 2274 Folio* 4 plot 12 Bazalabusa Drive Kampala, LRV 2273 Folio 23 Plot 1B Mbuya Road Kampala, LRV 392 Folio 14 plot 1084 block 269 Lubowa estate, Kyadondo Block 237 Plot 517 Mutungo and Luzira, Kyadondo Block 243

$10$

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plot 2383 Luzira & Kyadondo Block 243 plot 2382, until thc disposal of thc substantive application for temporary injunction pcnding in this court.

b) Provide lor costs of this application .

15 REPRESE,NTATION

At the hearing, Counsel Joscph Kyazze and Irclix Ampaire appearcd lor thc applicant. Mr. David Mischcrcko, I)ircctor of thc applicant was prcscnt. Counscl Micheal Mafabi appcarcd for thc respondcnt. 'l'hcre was no rcpresentativc of thc respondent company.

20 GROUNDS

'l-he grounds of thc application are sct out in the notice of motion and the affidavit in support sworn by Mr. Mischereko David, one of the Directors of the applicant company.

'l'he grounds are that:

- a) the applicant and thc rcspondent cxccutcd credit facility agreements which were sccured by thc applicant's propctlics described abovc. - b) 'l'he applicant challengcd its liability on ground of brcach of contract by thc respondent and sucd in I Iigh Court Civil Suit No. 392 of 2018(commcrcial Division) secking orders that mortgagcd propertics be releascd. - c) 'fhe applicant was unsuccessful and has appealed. - d) He avers that the respondent has started the process of foreclosure on the mortgaged propcrties by advcrtising thc propcrtics for scll bcforc thc substantive application and thc appcal arc dctcrmincd. - e) fhe respondcnt opposcd thc application through an affidavit in rcply sworn by Itichard Ssuna, Manager Spccial Assets Managcment in thc rcspondcnt Bank. I Ic contcnds that thc application is in violation of thc Mortgagc

Regulations which compel an applicant who sccks a stoppagc or adjournmcnt of salc to first dcposit 30o/o of thc fiorccd salc valuc of thc mortgagcd propcrtics or 3Oo/o of thc outstanding loan amount. 'l'hc rcspondcnt admits that it advertised the mortgaged properties lor salc by public auction in exercise of the rights of a mortgagee to foreclosc on thc sccuritics on grounds of pcrsistent dcfault by the mortgagor. A copy of thc advcrliscmcnt was annexed as I] 1 to 85. The respondent stated that the application had no mcrit.

Consideration by Court

45 Itulc 6(2)(b) of thc Judicature (Court of Appcal Itulcs) Dircctions, providcs that thc ... Courtmay:

> "ln any civil procccdings whcrc a nolicc ol' appcal has bccn lodgcd in accordancc with rulc 76 of thcsc rulcs, ordcr a stay ol'cxccution, an injunction or a stay of procccdings on such tcrms as thc court may think just"

- 50 'l'he grounds for grant of interim order of injunction havc becn considcred in various cases. See Hwong Sung Industries Ltd Vs Tojdin Hussein & 2 others SCCA 19 of 2008, Hon. Theodore Ssekikubo & others Vs the Attorney Generql & others SCCCA 004 of 2014.'lhe grounds arc: - ¹. l'he subsistencc of a compctent noticc of appcal - 2. 'fhe cxistcncc of a substantive application lor injunction pending determination by thc court. - 3. Proof of an cminent thrcat of exccution/alicnation.

In applications grounded on mortgages, court has to determine the applicability of the requirement fior dcposit of 30oh of the lorced sale value or outstanding debt whichever is higher. I will start with this qucstion bccause thc rcspondent averred in paragraph 7 of thc affidavit in reply, that courl cannot invokc its equitable


jurisdiction to grant an interim ordcr stopping or adjourning a salc whcn thc applicant has not complied with thc law on dcposit of 30o/o. 'fhe respondent contended that the amount outstanding is L-lgx. 6,642,167,5281: and USD 211, 498.17.

'l'he above condition is drawn lrom I{cgulation l3(l) of the Mortgagc Rcgulations 2014 which provides that:

"Adjoun-rmcnt or stoppagc of'salc

I . 'l'hc cou( may on application of thc mortgagor, spousc and agcnt o[ thc mortgagor or any othcr intcrcstcd party and lbr rcasonablc causc, adjourn a salc by public auction to a spccil'rcd datc and timc upon paymcnl ol- a sccurity dcposit of 30% o[ thc lbrccd salc valuc of thc mortgagcd propcrty or outslanding amount"

'fhe rcspondent submitted while quoting thc casc ol Ganofa Peter Kisuwuzi Vs DFCU Bank Limited, Civil Applicotion No. 64 ttf 2016, that thc Court of appcal disrnisscd an application of a similar naturc whcrc thc applicant was found in brcach of regulation I 3( I ) above. Counscl statcd that the paymcnt was mandatory and was ^a condition precedent. 75

In their submissions in rcjoindcr the applicant contcndcd that thc conditional paymcnt is not prescribcd in thc court oIappcal rulcs. Counscl rclicd on thc casc ol'Woodmore

Energy Consultuncy Limited and 3 others Vs Guarunty Trust Bank Limited CACA 270 of 2016, which hc submittcd takcs prcccdcncc over thc Ganafa casc. In this case court dcnicd thc rcspondcnt's praycr to ordcr dcposit ol- 30oh bclorc granting thc applicant's praycr lor an interim ordcr. 'l'hc applicant lurthcr rclicd on thc casc of Fuelex (U) Ltd Vs (IRA, Constitutionsl Petition No. 3 rtf 2009 in which the Constitutional Court hcld that requiring a pafly to dcposit moncy or sccurity in court 80 85

before accessing court is unconstitutional and would bc a denial of the right to flair hearing enshrined in Articlc 28 of the 1995 Constitution of lJganda, which right is non derogable as provided in Articlc aa@).

90 95 100 CaSe I have taken into account thc cvidcnce, cases citcd and the submissions by thc parties. Annexurc C to thc affidavit in support (mcmorandum of appcal) shows that the applicant disputes liability and sccking orders of this court to sct asidc the I Iigh Courl dccision. In the Ganafa case citcd by thc rcspondent, thc Justiccs of Appcal wcrc handling thc main application for tcmporary injunction and not the intcrim application which is subjcct of this ruling. Sccondly, thc valuc of the propcrty at stakc was not in dispute becausc a valuation rcporl was alrcady on rccord and thc applicant's contcntion was that hc was not awarc of thc regulatory rcquircmcnt. In this case, thcre is no valuation report of the propcrty upon which court would apply the 30oh. Secondly, liability is disputcd. I am thcrcfore in agrcement with the applicant that regulation 13(l) above is not applicablc to thc circumstanccs of this

I now turn to thc conditions fior grant of an intcrirn ordcr

Oround Onc--Subsistcncc of a compctcnt notice of Appeal.

I have considered the pleadings, evidence, and the submissions filed by both partics. 'fhe respondent does not dispute the subsistencc of a competent notice of appcal. In paragraph 3 of the affidavit in reply, the dcponcnt statcs that paragraphs 1,2 and3 of the affidavit in support are true. Paragraph 3 of the affidavit in support which the rcspondent concedes, and annexurc Ill thcrcto, arc proof thc notice of appeal. Section 57 of the Ilvidence Act providcs that l-acts adrnitted nced not be provcd, cxcept where court at its discretion rcquircs proof additionalto thc admission. In this


110 case, the notice was filed and a substantive appeal also filed. 'l'hc first ground is proved.

Ground two-Pending substantive application for injunction.

115 L20 In paragraph 1 and 9 of thc affidavit in support, thc applicant avcrs that thcrc is a pending substantive application for an ordcr of injunction. 'l'he rcspondcnt in paragraph 3 of his affidavit in reply conccdcd to thc truthfulness of paragraph I of the affidavit in support, but in paragraph 17 of thc samc aflidavit hc made ^a contradictory averment that thcre is no ascertainablc substantivc application. Section 55 of the Ilvidence Act provides that facts judicially noticeablc nccd not bc provcd. Iloth thc applicant and thc respondcnt in thc titlcs to thcir rcspcctivc plcadings and affidavits indicate that the application lor intcrirn ariscs lrom Civil Application No.

l2 of 2023. 'l'his quoted application is formally in court rccords and is judicially noticcablc. No lurtherproof ol'its existcncc is ncccssary.'l'he 2"d ground is provcd.

Ground 3-Proof of an emincnt thrcat of execution/alienation.

125 130 Both the applicant and thc rcspondent agrce that the mortgaged propcrty was advertised for scll. Paragraph I I of the affidavit in support and annexurc D thereto, and paragraph 6 of thc affidavit in rcply with annexurc B I arc the advertiscmcnt lor scll. l'he advertisement was published in daily monitor of lgtr' Dcccmber 2022. In Wood More Energy Consultoncy Ltd & Ors Vs Gusranty Trust Bank (U) Ltd (GT Bonk) Miscelluneous Applicotion 270 of 2016, Justicc Ilellcn Obura, JA, held that a rcal threat to dispose of propcrty is cstablishcd whcrc propcrty subjcct of thc application is alrcady advcrtiscd for scll. In this casc thc rcspondcnt in paragraph 4 of the affidavit in rcply admits hcr intention to scll thc applicant's propcrty on account of the applicant's allegcd failurc to pay thc dcbt. Ground 3 is provcd.

(+urn

The applicant has met the conditions for grant of an interim order of injunction, and the same is granted to maintain the status quo and to prevent alienation of the 135 properties described above pending determination of Civil Application No. 12 of 2023.

The costs of the application shall abide the outcome of the main application.

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Dated at Court of Appeal Kampala this .................................... ... Day of February 2023

Christopher Gashirabake JUSTICE OF APPEAL