Court name
Commercial Court of Uganda
Judgment date
20 August 2014

Rural Credit Finance Company Ltd & 2 Ors v Microfinance support Centre Ltd (Miscellaneous Application-2014/86) [2014] UGCommC 111 (20 August 2014);

Cite this case
[2014] UGCommC 111










LIMITED …………………………………………………APPLICANTS










This application was brought under SS. 33 and 38 Judicature Act, 0.41 rr 1 (a) and (9) of the C.P.R.  It seeks orders of this court to issue a temporary injunction to restrain the Respondent or its agents from advertising, interfering with, selling or otherwise disposing of the properties comprised in Block 147, Plot II, land at Kikoma, Wobulenzi and Kibugo Block 13 Plot 532, land at Kabowa, and also to restrain the Respondent from enforcing the debenture said to have been issued by the First Applicant in favor of the Respondent.  Costs of the application were also applied for.


The application was supported by the affidavit of Moses Kasasa, briefly on the following ground:-





  1. The First Applicant never executed the debenture sought to be enforced by the Respondent.


  1. There is no mortgage subsisting between the Applicants in respect of the described properties registered in the names of the Second and Third Applicants respectively and those Applicants never executed the said mortgage.


  1. The property at Kabowa is matrimonial property on which Second Applicant resides and therefore has emotional attachments to it.


  1. Excel Energy is about to acquire some shares in the First Applicant’s Company and the sums invested shall be used to pay off the debt due to the Respondent.


  1. The Applicants have a prima facie case with triable issues with a probability of success.


  1. If injunction does not issue, the Applicants will suffer irreparable damage.


There is an affidavit in reply deponed by Mariam Ndibuuza, Manager Legal Services of the Respondent Company.  The affidavit gives a brief background to the matter at hand to wit.


  • The Applicant applied to the Respondent for a loan of shs. 1,000,000,000/-; and it was approved and executed. The loan was secured by a mortgage of the properties at Wobulenzi and Kabowa already referred to in this application registered in the names of the Third and Second Applicants respectively.  A floating charge / debenture on the assets of the First Applicant was issued in favor of the Respondent.



It was contended by the Respondent that the loan agreement, mortgage and debenture were all executed in accordance with the law.


And when the Applicants failed to repay the loan and interest due as per the agreement and mortgage deed the entire loan became due and payable to the Respondent; and the Respondent had to exercise its powers to realize the security.


Notice of default was given to the First Applicant to repay the outstanding loan but no payments have been made hence the process to realize the security, started with further notice to the Applicants.


The Second and Third Applicants consented to the sale of the mortgaged property by private treaty.


Further that the application is meant to delay the meeting of the Applicant’s obligations to the Respondent and should not be granted as the Applicants have indicated willingness to repay the loan.


The suit filed by the Applicants has no likelihood of success as it is frivolous and vexatious and was commenced in bad faith.


That there is no likelihood of Applicants suffering irreparable injury as the properties have a monetary value and the Applicants can therefore be compensated by damages.


Otherwise the indebtedness of the First Applicant will rise to a level in excess of the value of the property thereby making the security inadequate.


The parties filed written submissions.  And the issue for the court to determine is whether this is a proper case for the grant of a temporary injunction.


The conditions for grant of a temporary injunction have been set down in a number of cases.  The court must before issuing the injunction be satisfied that:-


  1. The Applicant has a prima facie case with a probability of success.


  1. The Applicant might otherwise suffer irreparable damages not adequately compensatable by way of damages.


And where court is in doubt, the application will be decided on a balance of convenience.  – See case of Robert Kavuma vs. Hotel International Ltd SCCA 08/90 by Wambuzi C.J. as he then was.


While under 0.41 r 1 (a) C.P.R, an injunction may issue if disputed property in danger of being wasted, damaged or alienated by any party to the suit.


There is a suit pending between the parties HCCC 106/14 and the properties the subject matter of the suit have been advertised for sale by the Respondent.


What this court has to determine is whether the Applicants have established a prima facie case with a probability of success which has been defined to mean that “court must be satisfied that there are serious questions to be tried”.  However, courts have been enjoined to confine themselves strictly to the immediate objective sought and as far as possible abstain from prejudging the questions in issue or merits of the main suit. – See the case of Godfrey Sekitoleko and 4 Others vs. Seezi Peter Mutabazi and 2 Others CACA No. 05/2001 [2001 – 2005] HCB 80


It is the Applicants contention that the amount due for repayment is in dispute and it can only be ascertained in the main suit.  But Counsel for Respondents insists that the Applicants do not deny indebtedness and that it is clear from the affidavit in reply that amount claimed with interest at 13%.


Be that as it may, the Applicant just makes assertion in submissions that amount claimed is disputed.  The Applicant also claims to have made payments in respect of the sums due without stating how much was paid.  And adds that there was wrong computation although the agreed rate of 13% interest is not challenged.  There is therefore need to resolve the issue of the amount due and owing by computing using the agreed interest rate.


The agreement and debenture are also being challenged on the ground that they were not sealed with the Company Seal and were not witnessed by two directors or a director or Secretary and that this raises a serious question to be investigated.   The case of Alice Okiror and Michael Okiror vs. Global Capital Save 2004 Ltd and Ben Kavuya HCCS 149/2010 where the trial judge relied upon the case of  General Parts (u) Ltd vs. NPART SCCA 5/99 to determine how a company signs documents was relied upon.


However, Counsel for the Respondent insisted that the loan agreement, debenture and mortgagee deed were executed in accordance with the law. S.33(1) (a) of the Companies’ Act was cited in support since the documents were signed by the Executive Director and the Chief Credit Officer of the Respondent and were duly stamped and needed no Company seal – S.33 (1) (a) and 37 Company’s Act were cited in support.


Further that without any proof of fraud, the Applicant is estopped from disputing the enforceability of the loan agreement upon which he appended a rubber stamp and since he admits having executed and received the loan agreement.  The cases of Pan African Insurance Co. (U) Ltd vs. International Air Transp__ Association HCCS 677/2003 and Building Trust Construction (U) Ltd vs. Marttia Rugas__ HCCCS 288/2005 were cited in support.


To go into these issues at this stage would amount to prejudging the merits of the main suit – See Godfrey Sekitoleko and 4 Others vs. Seezi Peter Mutabazi and 2 Others (Supra).


The other issue raised by the Applicant is whether the mortgage is enforceable at law as against the Second and Third Applicant when the provisions of S. 148 RTA were not complied with.  He relied upon the cases of General Parts (U) Ltd vs. NPART SCCA 05/99, Frederick J.K Zaabwe vs. Orient Bank Ltd and 5 Others SC. CA 4/2006 and Alice Okiror and Another vs. Global Capital Save 2004 Ltd and Another                  (Supra).


Counsel for the Respondent insisted that the loan agreement, mortgage and debenture were all exercised in accordance with the law, arguing that the cases referred to above that were relied upon by Counsel for the Applicant were all distinguishable from the circumstances of the present case.


Suffice it to say that all issues raised by both Counsels’ arguments can only be effectively dealt with during the trial of the main suit.  They are triable issues that merit judicial consideration.


This leads us to the main issue, whether Applicant will suffer irreparable damage.


The principle of law is that the burden of proof is upon the Applicants to convince court that if a temporary injunction is not granted, they are likely to suffer irreparable damage.  – See City Council of Kampala vs. Donoziio Musisi Sekyaya C.A C.A 3/2000.


Counsel for the Applicants submitted that the intended sale will have disastrous effects on the Applicants since there is a third party willing to help First Applicant to recover from the financial difficulty.  If the third party withdraws the offer, the proposed payment plan will be affected.  The Respondent’s plan will cause panic leading to the others withdrawal of funds and the Second Applicant will lose his matrimonial property to which he has emotional attachment and for which no amount of damages can compensate the loss.


However, it was Counsel for the Respondent’s argument that Applicants can be adequately compensated by award of damages since the property has a monetary value and the Respondent is a financial institution capable of adequately compensating the Applicants.  Secondly that the Second Applicant declared that he is unmarried and therefore property is not matrimonial home.


As pointed out in Counsels’ arguments, the irreparable injury relates to the loss of the pledged security – i.e. the land – which the Respondent intends to sell.  The general rule is that “the sale of property pledged as security in a loan agreement or mortgage cannot lead to irreparable loss parse – See case of David Luyigu vs. Stanbic Bank (U) Ltd HCMA 202/12.


Secondly, decided cases have established that “ where a party agrees that a particular property is suitable as security, it cannot plead that the property has sentimental or spiritual value or sanctity – See Matex Commercial Supplies Ltd and Another vs. Euro Bank Ltd (in Liquidation) [2008] IEA Page 216.


Court is persuaded by the arguments of Counsel for the Respondent.  The sale of property by the mortgagee cannot lead to irreparable loss, since it is the contractual arrangement or intention of the parties expressly provided for in the loan agreement or mortgage deed.


The only avenue available in such circumstances as the present case, is to cause the ascertainment of the right value between the market price and forced sale value of the property, and no irreparable lose can arise.  On the other hand, loss of value can be atoned for by an award of damages as already pointed out.


However, since the Applicants are challenging the legality of the loan agreement, mortgage and debenture upon which the intended sale is premised, the court will decide the application on the balance of convenience, taking into account the interests of both parties in order to reach a fair decision.  – See American Cyanamide Co. vs. __ [1975] IALL ER 504


In the present case, Counsel for the Applicant states that First Applicant is willing to pay but only requests for a reasonable time to improve its financial position. (See paragraph 4 supporting affidavit).  To support the argument, the case of David Luyiga vs. Stanbic (U) Ltd (Supra) where court stated that “an injunction would be granted in the event that the Applicant was willing to pay and had plausible prospects of payment.” Was cited.


Counsel for the Respondent disputed the assertion that the Applicants were willing to pay, pointing out that since the loan was advanced, the Applicant have not made any effort to pay, even after being given reminders, and therefore have no commitment pay.


Further that if the injunction issues, the loan amount due will exceed the value of the property.  In the alternative, Counsel suggested that if court is inclined to give the relief sought, the Applicants should be directed to deposit 30% of the amount due as required by Regulation 13 of the Mortgage Regulations 2012.


Since the Applicants are still in possession of the suit properties and the intended sale is not yet in advanced stages, the value of the properties has not been established, the value of the current market value of the properties has not been established and the Respondent still holds the title of the mortgaged property, debenture – and having found that there are triable issues established, which court cannot effectively determine until the main suit is heard, the balance of convenience will be tilted in favor of the Applicants and the injunction will issue upon the Applicant meeting the following conditions:-


  1. The Applicants to deposit 30% of the amount claimed by the Respondent in court within 2 weeks from the date of this ruling.


  1. The parties sit and agree the amount actually due – which is contested by Applicant.


  1. Thereafter, the parties will sit and agree upon reasonable installments to be paid by the Applicant on the agreed sum.


  1. Upon failure by Applicants to meet the conditions – all the moneys due shall become due and payable to the Respondent.


Costs of the application are granted to the Respondent.