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~
THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
MISCELLANEOUS APPLICATION NO
935
OF
2015
(ARISING FROM CIVIL SUIT NO 743 OF
2015)
MIAO HUAXIAN} APPlICANT
VS
1. CRANE BANK LTD}
2. FIT AUCTIONEERS COURT BAILlFFS} ............................. RESPONDENTS
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA
RULING
The Applicant filed this application for a temporary injunctive order to issue
restraining the Respondents, their agents, servants or anybody deriving authority
from them from foreclosing and/or selling the Applicant's mortgaged property
comprised in LRV 2744 Folio of 25 Plot 47 Nabugabo Road and LRV 2339 Folio 19
Plot 53 Mackenzie Vale, Kololo, Kampala and for costs of the application to be
provided for.
The grounds of the application are that the Applicant filed HCCS 743 of 2015
against the Respondents challenging among others the sanction letter and
resultant mortgages as null and void and unenforceable for contravening the
Illiterates Protection Act Cap 78. Secondly the suit discloses substantial issues for
court to investigate and has a high likelihood of success but is yet to be fixed for
hearing and determination. Thirdly the first Respondent through its agent the
second Respondent advertised the Applicant's mortgaged property for sale and
the sale is slated for 15 November 2015. Fourthly if not restrained by the orders
sought in the application, the Applicant shall be exposed to irreparable loss for
which no amount of monetary compensation shall avail and prosecution of the
Decision o/Holl.
Mr.
Jtstice Christo~ ?1ta.dramll /zum a *, *-7+:
1
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main suit shall be rendered trifle. Fifthly the balance of convenience is in favour of
the Applicant for the grant of the orders sought in the application. Lastly that it is
fair, urgent and in the interest of justice that the interim injunctive orders sought
in the application is granted.
The application was fixed for the 13 April 2016 at 9:30 AM for hearing. However
in High Court Miscellaneous Application Number 936 of 2015 the Applicant
sought for and obtained an interim order from the registrar of this court on 12
November 2015 stopping the sale of the mortgaged property. The order was
supposed to remain in force until 10 February 2016 when Miscellaneous
Application Number 935 of 2015 was to be heard.
The Applicant is represented by Messrs Muwema and Company Advocates while
the Respondent is represented by Messieurs MMAKS Advocates.
Subsequently in a letter dated
is
of November 2015 Messieurs MMAKS
advocates wrote to the registrar seeking an earlier hearing da'te for the main
application than that fixed in the interim order.
I have carefully considered the matter and it is apparent from ground 3 of the
chambers summons that the Applicant in the interim order got the main remedy
of stopping the sale of the mortgaged property which was slated for 15 November
2015. When Counsel Masembe Kanyerezi of MMAKS advocates appeared in open
court in the absence of the Applicant's Counsel some days later he sought for an
earlier date on a complaint that the interim order was not properly issued. I
directed that an earlier day be fixed for hearing the parties and a hearing notice
was extracted for the is of December 2015 much to the displeasure of the
Applicant's and Counsel which displeasure is reflected in a letter protesting fixing
an earlier date for hearing the. main application. The letter addressed to the
registrar is dated
io
December 2015.
On the is of December 2015 Counsel Friday Robert Kagoro appeared for the
Applicant and Counsels Masembe Kanyerezi appeared for the Respondent.
D eci sto n
of H on . Mr. Jus tice
ChrislO~
?1ta -dr am a /zum a
**_7+:
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I made reference to the Mortgage Regulations 2012 and Regulation 13 thereof on
sale of mortgaged property and Office Instruction No.1 of 2014 issued by the
Principal Judge as a guide to registrars on issuance of interim orders.
Both Counsels of the parties agreed to have the application adjourned to
is
of
December 2015 to make an attempt at amicable settlement of the application.
The application for adjournment was granted and the parties did make an
attempt to resolve the problem amicably. However on 18 December 2015 when
Counsels appeared to report on the matter, it transpired that attempts to have
the matter resolved amicably failed.
At the hearing the Applicant was represented by Counsel Charles Nsubuga
assisted by Counsel Andrew Oluka and the Respondent represented by Counsel
Masembe Kanyerezi assisted by Counsel Earnest Sembatya when the parties
reported that negotiations to have the matter resolved amicably failed. I
requested Counsel to address the court specifically on the provisions of the
Mortgage Regulations 2012 particularly regulation 13 which deals with
adjournments of sale and the stoppage of sale of mortgaged property on the
request of or application of the Mortgagor.
Counsel Nsubuga submitted inter alia that by consent of the Parties the
outstanding amount due to the Respondent is US 1,135,3898.94 and Uganda
shillings 2,626,871,564/-. In light of the provisions of the Mortgage Regulations
2012 the Applicant had proposed to pay Uganda shillings 4,000,000,000/= only by
the 14thof January 2016. The Applicant proposed to pay the balance by the
zs
of
February 2016. -
In reply Counsel Masembe submitted that the amounts owed to the Respondent
as of is December 2015 is US 1,290,807 and Uganda shillings 2,761,555,420/=.
In addition there were recovery charges which he did not quantify as it did not
affect the application. When the amount owed in US dollars is added to the
amount owed in Uganda shillings upon conversion of the US dollar to Uganda
shillings the total amount owed the Respondent by the Applicant is Uganda
shillings 7,279,379,920/=. He submitted that if the Applicant wants the interim
D ,ciSlon
o fH on .
M r.
Justice
ChrislO~?1tadrama Iz t rmE
-7+:
3
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injunction to continue she will have to pay 50% of the outstanding amount to the
Respondent prior to the court order extending the injunction under regulation 13
(5) of the Mortgage Regulations 2012 and this amounts to Uganda shillings
3,639,689, 960/=. If they want the order to continue, the deposit should be made
by the close of business on Monday 21
st
of December 2015. The reason why the
Respondent should not continue harping on settlement is that the security would
be released. He prayed that in the absence of making that deposit the interim
injunction should be vacated leaving the Respondent free to realise its security in
the property.
Counsel Charles Nsubuga in rejoinder did not agree. He contended that the
securities held by the Respondent were 4 in total. The properties are prime
properties whose value is over and above what the Applicant owes the
Respondent. The Applicant expected to get refinancing from another bank to
offset what it owes the Respondent but only wanted a release of one security by
the Respondent to pledge to another bank (Orient Bank Ltd). The refinancing
would settle the outstanding amount.
With leave of Court Counsel Masembe rejected the proposal of release of security
on the ground that property securing an outstariding obligation of about 8 billion
Uganda shillings cannot be released on the payment of less i.e. half of what is
outstanding.
On whether the proposed refinancing bank could make an undertaking
guaranteeing settlement of the outstanding sums, both Counsels agreed that an
undertaking would work but the practical aspect within the limited time left for
the parties to resolve the Application amicable was doubted. The Respondent was
willing to release security upon an undertaking by another bank to pay the
outstanding loan amount. Because there was no undertaking the application was
adjourned for ruling on the terms of grating an injunction or vacating the interim
injunction order to the 21
st
of December 2015 at 9.00 am.
I have carefully considered the Application, and submissions of counsel. The
genesis is that a plaint was filed on the 9 of November 2015. Summons to file a
D eciato n afH on. Mr. Jist ice C hrh /op Mtt ?J ta.dr am a z um iJ -7+:
4
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defence was issued for service on the Respondent by the court on the
io
of
November 2015. The Applicant filed an application for an interim order of
injunction on the 10
th
of November 2015 and had it fixed for the iz of
November 2015 at 9.00 O'clock before the registrar. The main ground in the
application for an interim order was that the suit was advertised for sale on the
is
of November 2015. The advertisement to sell the property is annexure D to
the affidavit in reply of S. Ramachandran the Head of Credit of the Respondent
Bank. The suit property was advertised for sale in the New Vision Newspaper of
the is of October 2015 at page 57. The property was advertised for sale by
public auction after expiration of 30 days from the date of the advertisement. The
Respondent bank is the Mortgagee. An interim order was issued on the iz of
November 2015 restraining the Respondents from selling the suit property
comprised in LRV
2744
Folio
25
plot
47
Nabugabo Road and LRV
2339
Folio
19
Plot 53 Mackenzie Vale, Kololo Kampala. The order is to remain in force till the
io
of Feb
2016
when the application is to be heard. However the Application
was heard earlier. There was an attempt to object to the Application on the
ground that the interim order fixed the hearing for the io of February 2016. I
overruled the objection because the purpose of an interim temporary injunction
is to preserve the status quo so as to enable the Applicant present her application
before the trial judge. It was to preserve the right of hearing so that the
application is not rendered nugatory by the remedy sought in the application
being rendered useless. I.e. the property would have been sold and the buyer
would get a good title before the application to restrain the sale could be heard
(See Souna Cosmetics Ltd vs. the Commissioner General URA and Commissioner
General URA HCMA No
424
of
20rl;
Wilson vs. Church
(1879) 2
Ch. D
454
(cited
with approval by the Supreme Court of Uganda in Somali Republic vs. Anoop
Sunderial Trean SCCANo. 11 of 1988}).
The first point to be made is that the interim order issued by the registrar offends
the spirit of
Office Instruct ion No: of 2 4
issued by the Principal Judge for the
guidance of Registrars in issuing interim orders. It also violates the Mortgage
Regulations 2012.
Dsciston o /Hon. Mr. Jus tice
ChrhlO~ ?1tadraina
/Z oma -7+:
. . ~~ .- = : .J -,;-=: :~-- -.-.~~ :
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Office Instruction No.1 of 2014 was issued by the Principal Judge on the is of
December 2014 provides inter alia as follows:
The High Court does not encourage the practice of issuing ex parte interim
orders.
Secondly where pleadings have not been completed i.e. through the filing of
a defence; the court should refroin from entertaining any application in the
matter or even hearing any suit ex parte
Where, however, the circumstances of the case dictate issuance of an order
for the maintenance of the status quo in the interim, that is,for a limited
time only pending the disposal of the application for a temporary injunction
by the trial judge,
registrars are enjoined to act judiciously while presiding
over such applications so that their decisions are defendable and are in
accordance with the law.
Any such interim order ought to expire upon the hearing of both parties,
unless of course it is extended in their pre~ence for a just cause.
In this case the interim order was issued before the pleadings were completed as
no defence had been filed. In fact summons was issued on the
io
of November
2015. The same day a notice of motion application was filed and fixed for hearing
on the 12~.hf November barely two days later. It is to be appreciated that the sale
of the mortgaged property had been fixed for the 15
th
of November 2015 three
days after the
iz
of November 2015 when the application had been fixed for
hearing. The first problem with the interim order is that it fixed the main
application without consulting the trial judge who was to hear it and on the io
of Feb 2016 about 3 months later. Secondly it was not an injunction for a limited
time. In my opinion a limited time should not exceed 30 days unless there are
compelling reasons to do so which reasons must be given before the interim
injunction order is issued. Thirdly the interim injunction is not in accord with the
Mortgage Regulations 2012.
D ecision ojHon. Mr. Ju stice
Christo~
11 ta .dr am a /z u m a -7+:
6
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Rule 13 (1) of the Mortgage Regulations 2012 confers power on the courts to
adjourn a sale of mortgaged property. The wording of the rule is as follows:
(1) the court may on the application of the mortgagor, spouse, agent of
the mortgagor or any other interested party and for reasonable cause,
adjourn a sale by public auction to a specified date and time upon payment
of the security deposit of 30% of the forced sale value of the mortgaged
property or outstanding amount.
In this case was there an adjournment of the sale? No. There was a stoppage of
sale completely and the provisions of regulation 13 (1) the Mortgage Regulations
2012 may not have considered. It prescribes a deposit by the Mortgagor of 30% of
the outstanding amount or forced sale value of the property to adjourn the sale.
Before taking leave of the matter discretionary power is given to court under the
regulation whether to adjourn the sale or not. That discretion is exercised only
upon deposit of 30% of the outstanding amount or forced sale value of the
property. The facts are that the sale was stopped by way of an interim order of
injunction restraining the Respondent or any person deriving authority from it
from selling the property until
io
Feb 2016 when the court would hear the main
application for a temporary injunction. There was no order for deposit of
security by the Mortgagor.
In truth the main remedy sought was to stop the sale and this was done for a time
without rega rd to the statutory regulations for deposit of security.
Other provisions which are applicable to stopping or adjourning the sale are
regulations 13 (4) and (5) of the 'Mortgage Regulations 2012 which provide as
follows:
(4) where a sale is stopped or adjourned at the request of the mortgagor,
an agent of the mortgagor, the spouse of the mortgagor or any other
interested party, the mortgagor, agent or spouse of the mortgagor or that
interested party shall, at the time of stopping or adjourning the sale, pay to
the person conducting the sale, a security deposit of 30% of the forced sale
Deciston
o fH on .
Mr.
Justice
ChrislO~ ?1tadrama bma -7+:
7
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value of the mortgaged property or the outstanding amount, whichever is
higher.
(5) Where the sale is stopped or adjourned at the request of the mortgagor
for the purposes of redemption, the mortgagor shall at the time of stopping
or adjourning the sale pay a security deposit of 50% of the outstanding
amount.
The provision for the deposit of 30% or 50% upon the application or request of
the mortgagor is mandatory.
I have further considered the provisions of the Mortgage Act, Act 8 of 2009. It
gives the procedure for different case scenarios including the challenging of the
mortgage itself. The remedy of a Mortgagee under the Mortgage Act 2009 and
section 19 (1) thereof is that where money secured by a mortgage is made
payable on demand, a demand in writing shall create a default in payment.
Secondly under section 19 (2) where the Mortgagor is in default of any obligation
to pay the principal sum on demand or any interest or other relief payment or
part of it under a mortgage, or in the fulfilment of any common condition, express
or implied in the mortgage, the Mortgagee may serve to the Mortgagor notice in
writing of the default and require the Mortgagor to rectify the default within 45
working days. The notice is in the prescribed form (S.19 (3) of the Mortgage Act).
The Mortgagee upon default of the Mortgagor may require the Mortgagor to pay
all monies owing on the mortgage; appoint a receiver of the income of the
mortgaged land; lease the mortgaged land; enter into possession of the
mortgaged land or sell the mortgaged land. The Mortgagee sell the property
under section 26 of the Mortgage Act after expiry of the time provided for the
rectification of the default stipulated in the notice served on him or her under
section 19.
The court has powers to review mortgages on the application of a Mortgagor
under sections 34 and 35 of the Mortgage Act on the grounds inter alia that it was
obtained unlawfully through fraud, deceit, or misrepresentation by the
Mortgagor; or in a manner or containing a provision which is unlawful.
Decision of H on . Mr. Ju stic e Chrhto~ ?1ta .dr am a /zUmi3** -7+:
8
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As far as the power of sale is concerned the mortgagee is required to give notice
and serve a copy on the mortgagor. The sale may be by public auction unless the
mortgagor consents to a sale by private treaty. Where it is by public auction it has
to be advertised at least 30 days specifying the place of the auction, the date of
the action, being not earlier than 30 days from the date of the first advert. In the
circumstances of this case the intended sale was by auction and had been
advertised in the newspapers and to take place 30 days after the date of the
advertisement.
I have carefully considered the submissions on the deposit of security. Both
Counsels are in agreement that security be deposited. The contention is in the
timelines for the deposit of security. Counsel Masembe submitted that the
deposit is made prior to the stoppage of the sale. On the other hand the
Applicant's Counsel sought for more time to have the deposit made. Specifically
Counsel Charles Nsubuga prayed that the Applicant is given up to 14 January 2016
to deposit about 50% of the outstanding amount and the 50% amounts to about
Uganda shillings 4,000,000,000/=.
I have duly considered the Mortgage Regulations 2012 as we as the effect of the
interim order stopping the' sale until 10 February 2016. No other order can be
made until and unless the interim order issued by the registrar is set aside.
On the ground of non-compliance with the regulation 13 of the Mortgage
Regulations 2012, the interim interactive order restraining the Respondent, their
agents, servants or anybody deriving authority from them from foreclosing and/or
selling the Applicant mortgaged property described in the order dated iz of
November 2015 is hereby set aside for not having been issued in accordance with
the law.
That notwithstanding the sale of the mortgaged property had been advertised
and the advertised sale was not adjourned but stopped for an indefinite period
pending the hearing of the main application on 10 February 2016. -The main
application was subsequently fast forwarded to be heard earlier in December
2015. The law is that where an adjournment has been achieved under regulation
D eci st on
o f H on, MI', Jus tic e
Chr is lOpk.e :r. ?1Udrama /z um a
-7+:
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13 (7) for a period of more than 14 days, a fresh advertisement has to be issued in
accordance with regulation 8. Regulation 13 (7) of the Mortgage Regulations 2012
provides as follows:
(7) Where a sale is adjourned under this regulation for a period longer
than
14
days, a fresh public notice shall be given in accordance with
regulation 8 unless the mortgagor consents to waive it.
The advertised sale was supposed to take place on 15 November 2015. This
application was heard on 18 December 2015 more than a month after the date.
Furthermore the sale was stopped before the event of public auction took place
and the order was issued on
12
November
2015
three days earlier. In the
premises I have considered Regulation 8 of the Mortgage Regulations 2012. It
provides that a mortgagee exercising a power of sale under the Act shall subject
to the Act and Regulations, sell the mortgaged property by public auction. It
further provides that a sale shall not take place before the expiration of
21
working days from the date of service of the notice as specified in section 26 of
the Act. Any person who contravenes Regulation 8 commits an offence.
This ruling will be read on 21 December 2015. Thereafter if the Respondent is to
re-advertise the property for sale, the sale shall be in January
2016.
The practical
effect of the period of notice is that the proposal of the Applicant to deposit
Uganda shillings
4,000,000,000/=
is the most practical way to comply with the law
if the injunction application is refused. In other words the Applicant can still
deposit the amount of money to stop the sale for purposes of redemption of the
property under regulation 13 (1), (4) or (5) of the Mortgage Regulations. In such
casesthe person conducting the sale namely the second Respondent upon getting
a deposit of money as prescribed by the regulations of
30%
for adjournment or
50% for redemption of the property is obliged to stop the sale. 21 working days
from the
21
st
of December
2015
will exclude Christmas Day which is the
zs
and
the zs and 2ih of December 2015, the 1
st
of January 2016, the 2
nd
and 3
rd
of
January 2016 as well as the 9
th
and io of January 2015. This comes to about 29
calendar days. In other words any re-advertisement of the property for sale
implies that it would not take place before the
14th
of January
2016.
In the
Dl1cislon ofHon, Mr. Justice Chri5lO~ ? ? tadram a /Z t I m B . -1+:
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premises even if the application was not allowed both parties would not suffer
any further prejudice.
I have further considered the regulations to the effect that under regulation 13 (1)
the court may adjourn the sale upon an application being made. The other
requests for adjournment or stoppage can be made direct to the person
conducting the sale of the mortgaged property. At this point in time there is no
advertised date and place of sale and therefore there is no new date and place for
conducting a public auction of the mortgaged property. There is nothing to
adjourn.
In the circumstances and using the traditional jurisdiction of the Court in granting
injunctions as an equitable remedy I hold that the purpose of the application can
e
be met by giving a conditional injunction restraining the Respondents, their
agents or servants or anybody deriving authority from them from conducting a
sale of the mortgaged property upon deposit of security with the Respondent
bank as proposed by the Applicant's Counsel. Such an order ensures that before
the Respondent can lawfully conduct a sale after the requisite advertisement
prescribed by the Mortgage Regulations 2012 and specifically Regulations 13 (7)
and regulation 8, the Applicant would have had time to deposit the proposed
amount.
In the premises the following orders are issued:
1. The Applicant shall deposit a sum of Uganda shillings 4,000,000,000/= with
the Respondent bank by 14 January 2016.
2. A temporary injunction issues restraining the Respondent, their agents,
servants or anybody deriving authority from them from selling the
Applicant's mortgaged property comprised in LRV2744 Folio of 25 Plot 47
Nabugabo Road and LRV 2339 Folio 19 Plot 53 Mackenzie Vale, Kololo
Kampala for the period to be-specified.
Deciston o fHon . Mr. Ju stic e
C h r h l O p kt:.
?1Cadr am a /zuma *A*-7+:
11
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3. In the event of failure to deposit the sum of money indicated above, the
injunction shall lapse.
4. Upon the deposit of the sum of money in order 1 above by the Applicant,
the injunction shall last for 50 days from the date of this order unless
otherwise the period is extended by this court from time to time or by
consent of the parties.
5. In the circumstances of this case, the costs of this application shall be borne
by the Applicant.
Ruling delivered in open court on 21 December 2015
Christopher Madrama Izama
Judge
Ruling delivered in the presence of:
Counsel Masembe Kanyerezi for the Respondent
Mr. Ramachandran Head Credit Applicant in court
Counsel Friday Robert Kagoro for the Applicant
I
Ms Winnie appears in court on behalf of Applicant
Charles Okuni: Court Clerk
Christopher Madrama Izama
Judge
21 12 2 16
Decision
o fH on .
Mr.
Justice
Chri;IO~
?1t a .dr am a
/zOmE -7+ :
2