Court name
Commercial Court of Uganda
Judgment date
16 November 2012

Alok Group Ltd & 2 Ors v Shawagi & 2 Ors (Miscellaneous Application-2012/272) [2012] UGCommC 141 (16 November 2012);

Cite this case
[2012] UGCommC 141

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 272 OF 2012

(ARISING FROM MISCELLANEOUS APPLICATION NO 267 OF 2012)

(ARISING OUT OF CIVIL SUIT NO 301 OF 2010)

  1. ALOK GROUP LTD }
  2. AKOL EMMANUEL AYII}
  3. AQUILA MALUTH MAM } .................................................                                                                                                                                      APPLICANTS

VERSUS

  1. CAPTAIN AHMED MUSTAPHA SHAWAGI AHMED}
  2. BAMULAMBE DAVID T/A SPIDER LINKS

AUCTIONEERS AD COURT BAILIFFS}

  1. HON. SAM ENGOLA} ......................................................                                                                                                                                              RESPONDENTS

 BEFORE HONOURABLE JUSTICE CHRISTOPHER MADRAMA

RULING

This ruling arises from a preliminary objection against hearing the application as against the 3rd Respondent. At the hearing of the application for a temporary injunction the applicants were represented by Counsel Martin Oloya while the 3rd respondent was represented by Counsel Sharon Tem.

The first objection is that the application for a temporary injunction does not arise from a pending suit. Counsel contended that for a temporary injunction to be granted, there should be a pending suit before the court from which the court would establish whether there were any triable issues disclosed or a prima facie case. Learned counsel contended that in the instant case there was no pending suit and consequently the application for a temporary injunction is premature. She contended that what is pending in court is application to set aside the judgment in the main suit. However the suit had already been determined. The subject matter is the consequence of the judgement in the main suit which had been determined about a year ago. The applicants have come to court to try to obtain a temporary injunction on a subject matter that that since been sold without necessarily setting aside the judgment in the main suit. The application for setting aside judgement has not been heard. Learned counsel relied on the case of Mohammed versus Uganda Commercial Bank [1980] volume 3 KALR at page 43 where the learned trial judge held that for a temporary injunction to be entertained, there must be a pending suit between the parties.

On the second objection, counsel contended that under order 22 rules 70 (2) of the Civil Procedure Rules where a purchase is made and a receipt therefore has been issued, the sale becomes absolute. Counsel further relied on order 22 rules 71 and for the submission that even with irregularities in the sale by court, the sale cannot be vitiated. In the applicant's case, the sale was conducted by public auction and there was no objection against conducting the sale. Secondly in the applicant's main application, no ground of fraud or irregularity of sale of the aircraft, the subject matter of the temporary injunction, is raised. In the main application, the applicants claim that the aircraft was sold at a price below its actual value. The sale was conducted in a public auction under the supervision of the court and the sale became absolute. Learned counsel further relied on the case of Beatrice Nakito vs Ronald Nganga MA 713 of 2003 arising from HCCS No. 274 of 2002 before Justice Lameck Mukasa. Under order 22 rule 71 of the Civil Procedure Rules, the remedy for an aggrieved person after a sale is to institute a suit for compensation in case they were aggrieved by any irregularity in the sale. Counsel prayed that the court follows the decision in Guangdong Chinese Company Ltd versus Marknities Ltd and others Civil Revision No. 11 of 2011. Counsel prayed that if the applicants are aggrieved, they should file a proper suit if they believe they have a case against the third respondent.

 

In reply the applicants counsel submitted that the head suit is HCMA No. 267 of 2012. This is an application for orders to set aside the judgement and secondly the application was brought under section 34 of the Civil Procedure Act under which there was no need to file a separate action. Counsel contended that a suit is defined by section 2 of the Civil Procedure Act as any civil proceedings commenced in any manner prescribed. Consequently the application to set aside the suit gives rise to the application for a temporary injunction and the objection of the 3rd respondent’s counsel is misconceived.

On the second point, the Supreme Court has a decision on the matter of an application brought under section 34 of the Civil Procedure Act to avoid the issue of res judicata and multiplicity of suits. Counsel promised to avail the relevant authority. (The relevant case supplied is that of Francis Micah vs Nuwa Walakira SCCA No. 24 of 1994)

Counsels further submitted that notwithstanding the authorities submitted by his colleague, the applicant had taken the right steps. The matters under order 22 rules 70 of the Civil Procedure Rules are distinguishable from the circumstances of this case. Secondly the applicant’s have raised the issue of fraud in the main suit and this is borne out in all the affidavits.

Ruling

I have carefully considered the two objections to the applicant's application. The first objection gives rise to the issue of whether an application for a temporary injunction would be incompetent where the suit has been determined as in the circumstances of this case. The second issue is whether the applicant's main application and application for a temporary injunction are incompetent in so far as the property the subject matter thereof was sold by the court in a public auction and the third respondent is a purchaser of the suit property in that auction.

As far as the first matter is concerned, the applicants application is for a temporary injunction to restrain the respondents and their representatives from transferring, alienating or in any way disposing of Aircraft Boeing 737 – 232 serial number 23098 Mark (5X – SKA) wrongfully sold in execution of the decree in civil suit number 301 of 2010 to the third respondent until after the hearing and determination of miscellaneous application number 267 of 2012 relating to the property. The grounds of the application are that the aircraft is the subject of sale in the decree of court in HCCS No. 301 of 2010 and was grossly undervalued and sold off for US$200,000 only. Since then the applicants filed MA No. 267 of 2012 seeking to set aside the ex parte judgement and decree leading to the execution and attachment of the aircraft. Thirdly although the aircraft is still packed at Entebbe airport, the third respondent has already applied for and obtained a vesting order from court and could dispose of the aircraft rendering the pending application/suit nugatory.

In reply the third respondent avers that he was not a party to the civil suit and had no knowledge of the parties and as such the applicants application is an abuse of the court process as the applicants have not claim whatsoever against him. In paragraph 6 of the affidavit in reply the respondent avers that he has already sold the aircraft to Nitso Airlines Ltd which has since been registered as the owners of the aircraft.

As far as the first objection is concerned, it is not true that there is no suit pending between the parties. This is not to say that the suit pending has merit. The applicant applied by notice of motion to set aside the ex parte judgement and decree passed against the applicants on 15 September 2010. Furthermore that execution of the decree and the purported sale conducted thereafter is set aside and the applicants are given a chance to defend the suit.

The first objection of the respondents cannot be determined without looking at the merits of the suit itself. I agree with learned counsel for the applicant's that a suit as defined by section 2 of the Civil Procedure Act includes "all civil proceedings commenced in any manner prescribed." The words "prescribed" is also defined to mean "prescribed by the rules". The applicant's application against all the respondents is filed under enabling laws/rules namely order 9 rules 12 and 27 and order 52 rules 1, 2 and 3 of the Civil Procedure Rules. Miscellaneous application number 267 of 2012 is a civil proceeding commenced in a manner prescribed by the rules against the respondents. Having said that, it is doubtful whether it is competent as against the third respondent who was not a party to the suit. The third respondent is a stranger in that he is a purchaser from the court in which a decree was passed. In conclusion the first objection cannot be upheld without considering the merits of the applicant’s application to set aside the decree and judgement as against the 3rd Respondent. Secondly the issue of whether there is a cause of action against the third respondent is on the merits and can be handled in the second objection. In the premises, the first objection is overruled.

The second objection is that upon the purchase of the property the subject matter of the application by the third respondent, the sale became absolute and the remedy of any aggrieved party is to file a suit. I have carefully reviewed the authorities referred to. The case of Guangdong Chinese Company Ltd versus Marknities Ltd and others Civil Revision No. 11 of 2011, referred to by the third respondents counsel is inapplicable in that it deals with revision or the grounds of review. I have further considered the Supreme Court Case of Francis Micah vs Nuwa Walakira SCCA No. 24 of 1994 in which the court considered the provisions of section 35 (section 34 revised edition) of the Civil Procedure Act. The court did not hold that a suit can be filed against a third party not being a party to the proceedings before the court. The question of whether a suit can proceed against a third party within the suit itself is determined by section 34 itself. Section 34 deals with a suit between the parties to the decree. In such cases there is no need to file a separate action as any application under the section is treated as a suit and additional evidence may be taken. In this case there is an express provision namely order 22 rule 71 of the Civil Procedure Rules which prescribes the procedure applicable where there has been a sale of movable property. This can be read in conjunction with section 19 of the Civil Procedure Act which provides that every suit shall be instituted in such manner as may be prescribed by the rules.

 I have carefully considered the relevant provisions of law. Order 22 rule 70 (2) of the Civil Procedure Rules deals with sale of movable property sold in a public auction. They third respondent bought in a public auction. Order 22 rule 70 (2) provides:

"On payment of the purchase money, the officer or other person holding the sale shall grant a receipt for the purchase money, and the sale shall become absolute."

The provision is very explicit that the sale shall become absolute upon granting a receipt for the purchase money and upon payment of the purchase money. A condition precedent is that the movable property should have been sold by public auction. The price is payable at the time of the sale or as soon thereafter as the officer or other person holding the sale directs. If there is default of payment the property shall immediately be resold. In this case there is no controversy about the fact that the sale was made and the purchaser paid money. The contention of the applicants is that the value that had been realised in the aircraft was too low i.e. US$200,000. The provision that the sale shall become absolute is given a further meaning by the subsequent provision rule 71. Order 22 rule 71 of the Civil Procedure Rules provides as follows:

            "71. Irregularity not to vitiate sale, but any person injured may sue.

No irregularity in publishing or conducting the sale of movable property shall vitiate the sale; but any person sustaining any injury by reason of the irregularity at the hand of any other person may institute a suit against him or her for compensation, or (if that person is the purchaser) for the recovery of the specific property and for compensation in default of the recovery."

What the above rule 71 does is to prescribe the procedure for any aggrieved party to follow to seek redress if they are aggrieved where there has been a sale. The rationale for this is that rule 70 which is the preceding rule provides that the sale shall become absolute upon payment of the purchase price in a public auction by the purchaser. Simply put, it's a legal provision indicating that property passes to the purchaser upon payment of the purchase price and being issued with a receipt in a sale by public auction. It must be taken into account that a sale by public auction is ordered by the court under order 22 rules 61 of the Civil Procedure Rules. Secondly unless otherwise prescribed every sale in execution of a decree is conducted by an officer of the court or by a designated person appointed by the court for that purpose and is supposed to be by public auction in a prescribed manner. (See rule 62 of order 22). What is even crucial is order 22 rules 63 (2) of the Civil Procedure Rules which provides that the court shall draw up the public notice and advertisement and settle the terms of the public notice and advertisement without reference to the decree holder or judgment debtor. In other words, the public is not concerned with who the parties to the action in which there is a decree in execution and an order of sale of property to satisfy the decree are.

Consequently the third respondent was under no obligation to inquire into the merits of the suit in which an order to sell property was made. The rules therefore assume the purchase is made without fear of what occurred between the parties to the action in which the decree was extracted. However in the case of any irregularity, the purchaser may be sued in a separate action under rule 71 of order 22 Civil Procedure Rules. This leaves room for any aggrieved party to sue the purchaser for recovery of the property or for compensation. I have further considered section 34 of the Civil Procedure Act. Section 34 of the Civil Procedure Act applies to applications or suits between the parties to the suit in which the decree was passed or their representatives. It does not deal with suits against purchasers. This is because any cause of action against the purchaser arises after a decree has been issued against one of the parties to the action. And it is assumed that the purchaser has nothing to do with the suit. Even if the purchaser had something to do with the suit, it would be a ground to vitiate the sale in a separate action. In the premises ground 2 of the third respondent’s objection to the application for a temporary injunction and the application to set aside the decree and execution is sustained. The applicant's application as against the third respondent in miscellaneous application number 272 of 2012 and miscellaneous application number 267 of 2012 is incompetent and is hereby struck out as against the third respondent only with costs.

 

Ruling delivered in open court this 16th day of November 2012.

 

Hon. Christopher Madrama

Judge

Ruling delivered in the presence of:

Martin Oloya for the Applicant

No representative of Applicant in court

Sharon Tem for 3rd respondent absent

Charles Okuni Court Clerk

 

Hon. Christopher Madrama

Judge

16th November 2012