Court name
Commercial Court of Uganda
Judgment date
23 May 2012

Kanyeihamba & Ors v Nzeyi & Ors (Miscellaneous Application-2012/150) [2012] UGCommC 53 (23 May 2012);

Cite this case
[2012] UGCommC 53

THE REPUBLIC OF UGANDA

 

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

 

MISCELLANEOUS APPLICATION NO. 150 OF 2012

(Arising out of HCCS No. 361 of 2010)

 

HON. JUSTICE PROF. KANYEIHAMBA & OTHERS :::::::                                                                                                                            APPLICANTS

 

VERSUS

 

AMOS NZEYI & OTHERS    :::::::::::::::::::::::::::::::::::::                                                                                                                                      RESPONDENTS

 

 

R U L I N G :

 

This is an application made under Section 98 of the Civil Procedure Act (CPA) and Order 41 rules (1), (2) and (9) of the Civil Procedure Rules (CPR) for the issue of a temporary injunction.

 

The details of the orders prayed for are to be found in the chamber summons filed by the applicants. In general terms the orders sought are to restrain the respondents and or agents from dealing with the properties and business of the company otherwise known as the National Bank of Commerce (NBC). It also seeks to restrain the respondents from dealing in any way with the said bank’s shares.

 

The summons are supported by the affidavit of Hon. Justice (Rtd) Prof. Dr. G. W. Kanyeihamba, a shareholder of the bank. It is contested by the affidavit of Mr. Amos Nzeyi, the Vice Chairman of the Board of Directors of the Bank.

 

At the direction of court the Central Bank, that is Bank of Uganda (BoU) was made amicus curiae to court in their capacity as regulators of the commercial banks in Uganda. The role of Bank of Uganda in this case is as an independent organization to inform court as to the law relating to supervision of commercial banks in Uganda, so that it does not make a wrong decision. The scope of an amicus curiae is, as Mr. Masembe for Bank of Uganda put it, can be found in the Court of Appeal decision in IGG and Another vs Blessed Construction Ltd CA No. 21 of 2009 and is in line with the direction of this court.

 

At the heart of this application are three points:

  • First is the existence of a shareholder dispute that is arising from the head suit (HCCS No. 361 of 2010)
  • Secondly is a bank which the Bank of Uganda has intervened in on the 21st March 2012 under Section 86 of the Financial Institutions Act (FIA) 2004 and inter alia has appointed an Advisor to management.
  • Thirdly a direction by Bank of Uganda to the bank that it should recapitalize in order to meet statutory requirements by Friday 25th May 2012 or be subject to further intervention.

 

The most critical point for this application is the issue of the capitalization which will involve dealing with the shares of the bank which is one of the prayers that the summons seek to prevent. It is the case of the applicants that the bank has been mismanaged and therefore those who have it should not be allowed to deal in its shares to avoid further harm and loss.

 

It is the case for the respondents that if the re-capitalization is not allowed and presently there are people willing to re-capitalize the said bank, then the bank will not meet the Bank of Uganda directions and probably fail.

 

Bank of Uganda through its lawyers as amicus curiae have addressed court that in order to comply with the Financial Institutions Act (FIA) 2004 the bank has to re-capitalize by this Friday the 25th of May 2012. The court also at the request of the parties heard further submissions in chambers, given the sensitive matter of the bank.

 

It was agreed by the parties that the court address its mind to the summons and the affidavits for and against it. It was also agreed that court take into account the various submissions and papers/documents presented to it and arrive at a decision. This I have done and I am grateful to all for their assistance to court.

The grant of a temporary injunction in law is now well settled. Perhaps the most relied on case is that of Kiyimba – Kaggwa vs Haji Katende (1985) HCB 43 [decision of Odoki. J. as he then was]. There in it was stated that the grant of a temporary injunction is an exercise of judicial discretion and the purpose of granting it is to preserve matters in status quo until the questions to be investigated in the suit can finally be disposed off. That is the primary concern of the court. This can be tested against certain conditions which are also well enumerated in the Kiyimba – Kaggwa case (Supra).

 

To my mind the primary consideration in this case which involves a bank and therefore stakeholders beyond the shareholders who are party to it are the bank’s depositors. Any preservation of the status quo must also take them into consideration even though they are not a party.

 

I have read the affidavit for and against the summons and taken on board the information of the amicus curiae, I find that the status quo is best preserved by ensuring the continuing existence of the bank. That the parties too agree. The dispute in the head suit is one of governance and not capitalization, but that too I shall take into account and order as follows:

 

  1. That the bank National Bank of Commerce (NBC) be allowed and is hereby allowed to re-capitalize in order to meet the Bank of Uganda statutory requirements by Friday 25th May 2012. In this regard it may freely sell shares if need be.
  2. In accordance with the directions of Bank of Uganda (BoU) which has been brought to the courts attention that the bank i.e. National Bank of Commerce (NBC) appoint a new board of directors and senior management team immediately after re-capitalization; should re-capitalization be successful by 25th May 2012, then this court further orders;
  3. A shareholders meeting be held on the 1st June 2012 to appoint a new board of directors of National Bank of Commerce (NBC)
  4. That the meeting be held at Kabale at a venue to be designated by Bank of Uganda (BoU).
  5. That this meeting be made incorporating this order of court by notice to the shareholders and radio and print-media.
  6. That all parties to this head suit shall desist from engaging with the media during the pendence of the main suit which shall be under the supervision of the trial Judge.
  7. That the court accordingly declines to grant the prayers in MA No. 150 of 2012 and in it its discretion substitutes them with the orders made herein.
  8. That each party bears its own costs of MA No. 150 of 2012.
  9. The head suit shall come up for further mention on 12th July 2012.

 

 

…………………………

Geoffrey Kiryabwire

JUDGE

23/05/2012.