Court name
Commercial Court of Uganda
Judgment date
7 November 2013

Muhekamu Enterprises Ltd v Eco Bank Uganda Ltd (Miscellaneous Application-2013/784) [2013] UGCommC 186 (07 November 2013);

Cite this case
[2013] UGCommC 186

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL DIVISION]

MISC. APPLICATION OF NO 784 OF 2013

[ARISING OUT C.S NO 512 OF 2013]

MUHEKAMU ENTERPRISES LTD :::::::::::::::::::::::::::::::                                                                                                       APPLICANT/PLAINTIFF

VERSUS

ECO BANK UGANDA LTD ::::::::::::::::::::::::::::::::::::::                                                                                                             RESPONDENT/DEFENDANT

 

BEFORE HON. JUSTICE B. KAINAMURA

 

RULING

This is an application brought under O 41 rr 1 and 9 of CPR and Section 98 of CPA. The application is seeking for orders that a temporary injunction does issues against the respondent, its agents, servants and anybody claiming title against it from evicting, attaching, alienating, advertising for sale or dealing or carrying out any transaction on property registered as Plot 78 Block 479 Nakonge - Nakawuka Busiro Country until the hearing and final disposal of the main suit.

The applicant further seeks costs for the application.

The grounds for the application are stated in the affidavit in support sworn by Anna Kamagara a Director of the applicant. Briefly they are that the applicant has filed Civil Suit No. 512 of 2013 wherein the applicant is challenging the amount of money that the respondent is claiming from it. The challenge is based on the fact that both parties are not agreed as to the exact outstanding balance on the loan. The applicant asserts that on 3rd September 2010 it entered into a contract finance facility with the respondent in the sum of Shs 850,000,000/= (shillings eight hundred and fifty million) for a period of 12 months. This facility was secured by various land and property including Plot 78 Block 479 land at Nkonge - Nakawuka Busiro County. On 20th April 2011 the respondent granted the applicant a loan extension for a period of 60 days from date of disbursement. On 29th June 2011 the facility was extended for a further term of 60 days effective from that date. By expiration of the credit facility i.e. 29th August 2011, the applicant had paid Shs 768,168,503/= out of the outstanding Shs 1,035,508,333/= leaving a balance of Shs 265,339,829/=. The applicant was therefore surprised when the bank statement of 21st August 2013 showed an outstanding balance of Shs 775,733,265/=. The respondent has now advertised for sale the mortgaged property.

The affidavit in reply is sworn by Annette Mwiriza the Company Secretary of the respondent. She doponed that the tenor of the loan in issue was initially for twelve months but was extended several times, that the balance on the loan takes into account the capitalization of interest, penal interest, that the supposed loss from the respondent sale of the property has been qualified and there will be no irreparable loss in the circumstances warranting the grant of the injunction order and that the property in issue does not belong to the applicant/plaintiff.

At the hearing of the application, Mr. David Bwabare represented the applicant and Mr. Joseph Luswata represented the respondent. Both Counsel filed written submissions.

In his submission Learned Counsel for the Applicant addressed the main issue as to whether the application meets the test for the grant of a temporary injunction. Learned Counsel contended that the purpose of a temporary injunction is to protect the legal rights to property of the applicant pending litigation and that in doing this the court does not determine the legal rights to the property but merely preserves it pending determination of the case. Counsel relied on the case of Godfrey Sekitoleko & 4 others Vs Seezi Peter Mutabazi &2 others (2001 – 2005) HCB    Vol 3. Counsel drew courts attention to the principles for the grant of a temporary injunction as:-

  1. The applicant must show a prima facie case with a probability of success.
  2. That the applicant will suffer an irreparable injury/damage which may not be adequately compensated for by an award of damages.
  3. When the Court is in doubt on the first two principles then the balance of convenience is considered.

Applying the above principles to the present case, Counsel relying on the affidavit in support pointed to the disagreement between the parties as to the expiration date of the loan facility, the amount actually due and outstanding on the loan.

Counsel further pointed to the apparent change in the contract terms by the respondent without the consent of the applicant as pointed out in the affidavit in support where under paragraph 15 the deponent contends that the payment terms were supposed to be draw down as opposed to a term loan where payments were supposed to be per month. Counsel concluded that all the above have to be investigated by court to determine the correct position and hence there is a      prima facie case which is not vexatious or frivolous and has a high likelihood of success.

On the second principle, Counsel pointed to the affidavit in support at paragraph 19 where it is deponed that the property in issue is still under occupation and ownership of Kamagara Herbert a Director of the applicant and under paragraph 21 that were the property to be attached and sold this would lead to irreparable loss to the applicant as the actual amount due has as yet to been ascertained by court and the sale would negate the entire suit.   

On the third principle Counsel contended that the balance of convenience is in his clients favour since if this application is granted and the suit is concluded and the actual amount due is ascertained then the applicant will pay. Counsel concluded by praying that the application be allowed and the suit be set down for hearing.

On his part Learned Counsel for the Respondent opposed the application arguing that the conditions for the grant of a temporary injunction had not been satisfied. He cited the case of Kabunga Herbert Vs Stanbic Bank Uganda Ltd Misc Appl No 159 of 2012 where the court decided that the properties that are mortgaged cannot be protected by an injunction on the ground that the applicant will suffer irreparable loss if the properties are sold as by mortgaging them, the applicant intended that they can be sold. Counsel further urged that the main case is based on a claim that is not supported by law or contract and as such the applicant cannot show a prina facie case that is likely to succeed. Counsel concluded by urging that on a balance of convenience, the respondent would be more inconvenienced than the applicant if it fails to sell the property so as to replenish the depositor’s funds.

Counsel invited court to dismiss the application with costs.

In his submission in rejoinder, Counsel for the Applicant contended that even properties under Mortgage can be protected by an injunction because granting an injunction is a matter for courts discretion. Counsel disagreed with the position taken in Herbert Kubunga case (supra) and contended that the mere fact that someone has mortgaged his/her property does not mean that person has signed a warrant for its sale. Counsel cited the case of Kyagulanyi Coffee Ltd Vs Francis Senabulya Civil Appeal No 41 of 2006 (unreported) for the proposition that the rule of equity is for protection of a mortgager against unscrupulous or unfair treatment by a mortgages. Counsel concluded by stating that the applicant will definately suffer an irreparable damage if the property is sold off and the respondent has not indicated anywhere that it has the capacity to compensate the applicant. Counsel called upon court to allow the application with costs.  

I have given due consideration to the application and reviewed the supporting affidavits and the submissions by Counsel. The only issue for determination is whether a temporary injunction should be granted pending the determination of HCCS No 512 of 2013. The grant of on interlocutory injunction is an exercise of judicial discretion but legal principles upon which court exercises its discretion to grant a temporary injunction have evolved over time. An applicant for a Temporary Injunction must prove that:

  1. He wants to preserve the status quo
  2. He has a prince facie case with chances of success
  3. He will suffer irreparable damage/injury if the injunction is not granted and
  4. If the court is still in doubt, the issue will be settled on the balance of convenience

(see Robert Kavuma Vs Hotel International SCCA No 8 of 1990 reported in (1993) 11 KALR 73

It should also be noted that at this stage all the applicant/plaintiff needs to show, is that there are serious questions to be tried and the action is not frivolous or vexatious the applicant does not have to establish a strong prime facie case (see American Cynamide Co Vs Ethicon [1975] 1 ALL E R 504) and Kiyimba Kagwa Vs Haji Nassar Katende (1988) HCB 43)

That the applicant wants to preserve the status quo is in no doubt. Under paragraph 13 of the affidavit in support it is deponed that the respondent has through its agents advertised for sale the property in issue but under paragraph 19 of the same affidavit it is shown that the property is still in occupation and ownership of one of the Directors of the applicant.   

On the question of whether there is a prima facie case, as I have indicated above, what is relevant at this stage is whether there are triable issues to be investigated at the hearing of the main suit which are not frivolous or vexatious. The applicant’s contention is that the parties have disagreed as to the expiration date of the loan facility and the amount actually due and outstanding on the loan brought about the alleged change by the respondent in the contract terms. On the other hand the respondent contended that a prima facie case has not been made out since the applicant’s claim is not supported by law or contract. I have looked at both affidavits i.e in support and in reply, what strikes me is that the affidavit in reply does not in any way answer to the issues raised in the affidavit in support. As indicated above, the applicant raised issues which it seeks to be investigated by court at the hearing of the main suit. I don’t find them frivolous and vexatious, rather i find that the applicant has raised issues which need to be investigated and looked into at the trial. Accordingly the second consideration is resolved in the affirmative.

The next issue is whether the applicant has proved that it will suffer irreparable damaged/injury if the injunction is not granted. The applicant needs to demonstrate that it has a claim in the main suit which even if awarded damages would not be adequately compensated for by the loss it was to suffer if the injunction is not granted. Irreparable injury does not mean that there must not be physical possibility of repairing the injury but rather means that the injury must be substantial or material as cannot be adequately compensated for in damage (see Kiyemba Kagwa Vs Katende 1988 HCB 43)

The applicant contends that its Managing Director is still in occupation of the property and the property has been advertised for sale by the respondent. It is further stated that the respondent has already sold 3 other houses of the applicant and that the applicant will suffer irreparable damage as the property would be sold on uncertain terms to satisfy a claim that is still under dispute. On his part Learned Counsel for the respondent relying on the Kabuga Herbert Case (supra) urged that properties that are mortgaged cannot be protected by an injunction. I am of the view that the applicant has failed to show the irreparable damage it will suffer were the injunction not granted.

However to my mind what is in issue in the main suit is to what extent the applicant is still indebted to the respondent. In her affidavit in support of the Notice of Motion, Anna Kamagara deponed under paragraph 12 that the balance due to the respondent is Shs 267,339,829/=. She does not indicate what arrangement the applicant has made to offset the debt.

I note that the strict application of the position taken by the court in the Kabuga Herbert Case (supra) will be harsh on the applicant especially considering that the balance of convenience is that the controversy should be given a chance to be resolved after due process in court.

But that said, I am also alive of the fact that the court has powers to impose such conditions as it deems fit in the interest of justice, were it to grant a temporary injunction. O 41 r 1 CPR reads:-

“……. The court may by orders grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal, or disposal of the property as the court thinks fit until the disposal of the suit or until further orders.”    

Accordingly I am of the view that if the applicant is to save its property in the meantime, then it should pay to the respondent the sum of Shs 267,339,820 /= which it acknowledges it still owes.

In circumstances in the exercise of my discretion I will allow the application and the following orders shall issue.

  1. The applicant shall within a period of two months pay to the respondent Shs 267,339,829/= outstanding on the loan.
  2. Subject to the above condition of payment to the respondent of the sum the applicant acknowledges as still owed to the respondent a temporary injunction is issued restraining the respondent its agents servants and anybody claiming title under it from evicting, attaching, alienating, advertising for sale or dealing or carrying out any transaction on property registered as Plot 78 Block 479 at Nakonge Nakawuka Busiro County until the hearing and final disposal of HCCS No 512 of 2013.    
  3. The costs of this application shall abide the outcome of the main suit.

 

 

B. Kainamura

7.11.2013

Judge