Court name
Commercial Court of Uganda
Judgment date
12 December 2014

Nassali v Stanbic Bank Ltd & 2 Ors (Miscellaneous Application-2014/335) [2014] UGCommC 172 (12 December 2014);

Cite this case
[2014] UGCommC 172

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 335 OF 2014

(ARISING OUT OF CIVIL SUIT NO 315 OF 2014)

GORRETI NASSALI}.............................................................................APPLICANT

VS

  1. STANBIC BANK LTD}
  2. NAHAMYA P. TRADERS LTD}
  3. AMBROSE HIRYA STEPHEN WERE}......................................RESPONDENTS

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicant in this application is also the Plaintiff and the wife of the third Respondent who is the registered proprietor of LRV 1300 folio 18 plot 817 land at Namasuba. The property had been mortgaged to the first Respondent Messieurs Stanbic Bank Ltd. The Applicant alleges among other things that she was not aware of the mortgage of the property which she maintains is matrimonial property. The application is for a temporary injunction to restrain the Respondents/Defendants, their agents and workmen from evicting, selling and/or disposing off/alienating and/or interfering with the suit property described above in any manner whatsoever until disposal of the main suit. The Applicant further prays for costs of the application.

The grounds of the application are that the Applicant is a wife to the third Respondent who is the registered proprietor of the suit property. Secondly that the property comprises of the Applicant’s marital home/family home where she and her six children reside. Thirdly the Applicant was served with a letter dated 23rd of April 2014 giving her 7 days to vacate the suit property which letter was written by Great Links Agency. She was notified that the company was under instruction from Messieurs Stanbic Bank Ltd to sell the suit property due to failure of the second Respondent to settle/pay her loan obligations to Messieurs Stanbic Bank Ltd. The facts are that the Applicant’s husband acted as surety for the mortgage on the property and the property was pledged by the second Respondent to the first Respondent as security for a loan. The Applicant never dealt with the second Respondent and she never ever gave her consent to the second Respondent to use the property for a loan facility. She alleges that the use of the family property as security for a loan facility by the first Respondent to the second Respondent and third Respondents is wrongful and illegal. The Applicant asserts that she never assented or consented to the mortgage or use of her matrimonial home as security for a facility by the second and third Respondents from the first Respondent. The Applicant filed a civil suit which has a high likelihood of success. The Applicant will suffer irreparable damage if a temporary injunction is not granted by this honourable court restraining the Respondents. The balance of convenience is in favour of the Applicant and finally that it is just, fair and equitable that a temporary injunction issues as prayed for.

The application is supported by the Applicant’s affidavit in which she deposes that she is the wife of the third Respondent who is the registered proprietor of LRV 1300 folio 18 plot 817 land at Namasuba. The affidavit repeats the facts averred in the notice of motion and there is no need to repeat the contents thereof. In the affidavit she further deposes that she will suffer irreparable loss if the property is sold off or if she's evicted from her matrimonial home as she has lived in the premises for the last 25 years together with her children and they have no other home. Furthermore the balance of convenience is in her favour if the temporary injunction is granted.

In reply Mr Francis Niwagaba, the legal adviser CIB & GEFs of the first Respondent bank deposes an affidavit in which he asserts that he read the Applicant’s application and understood the contents. The facts are that prior to the execution of the mortgage agreement between the first and second Respondents, the Applicant voluntarily and freely give her consent to mortgaging of the suit property. She supplied her particulars to the first Respondent and copies of her consent together with voter's card are attached. The third Respondent made a statutory declaration to the effect that the Applicant whose consent was voluntarily obtained was the only spouse residing with him in the suit property and the statutory declaration is also attached.

In the premises he deposes that the matrimonial/property was lawfully used as security for the mortgage and that the intended sale or disposal of the suit property by the first Respondent is an exercise of its lawful remedy following the second Respondent’s default in payment of the outstanding loan amount. The second Respondent's loan with the first Respondent is clearly non-performing and by virtue of the Financial Institutions (Classification and Provisioning) Regulations, the first Respondent as a regulated financial institution is obligated to make provision for the ever accumulating arrears of the second and third Respondents which imposes on the first Respondent undue financial hardship and accordingly the first Respondent will suffer irreparable injury if the application is not granted. The Applicant’s application does not meet the conditions required for the grant of a temporary injunction in that there no disclosure of a prima facie case. Secondly she is not likely to suffer any irreparable injury and lastly the balance of convenience favours the first Respondent. In the premises the deponent concludes that the application is clearly misconceived, frivolous and an abuse of the process of court and it is in the interest of justice that the application is dismissed.

The second and third Respondents also filed affidavits in reply. The third Respondent Mr Ambrose Hirya Stephen Were deposes that he is the registered proprietor of the suit property where he lives with his family including the Applicant. He pledged the property as security for a loan from the first Respondent bona fide and without any fraud or illegality. He is interested in having the debt paid and properly released from the mortgage because it is where he lives with his family. He deposes that he has never received a demand notice from the first Respondent indicating that the second Respondent had failed to pay the mortgage debt save for a notice to vacate from Messieurs Great Links Agency who are the first Respondent's agents. Based on the advice of his lawyers, the third Respondent deposes that the essence of the temporary injunction is to maintain the status quo until the determination of the main suit. Secondly he would like to have the matter resolved and the grant of the application will not cause a miscarriage of justice.

Furthermore the second Respondent Nahamya Pauline deposes that she is a partner with Messieurs Nahamya P. Traders and agrees that the suit property was pledged as security for a loan from the first Respondent bona fide and without any fraud or illegality. She is interested in having the debt paid and the property released from the mortgage. She has never received the demand notice from the first Respondent indicating that the second Respondent had failed to pay the mortgage debt save for a notice to vacate from Messieurs Great Links Agency, the first Respondent's agents. Again on the basis of advice from the lawyers, she believes that the essence of the temporary injunction is to maintain the status quo until the determination of the main suit. She would like to have the matter resolved and the grant of the application would not cause a miscarriage of justice.

The Applicant is represented by Counsel Alex Kabayo of Messieurs Birungi and Company Advocates. The first Respondent is represented by Counsel James Nangwala assisted by Richard Bwayo of Messieurs Nangwala, Rezida and Company Advocates. Finally the second and third Respondents are represented by Counsel Akankwasa Edward of Messieurs Lubega, Babu and Company Advocates.

Prior to having the application resolved on the merits, there were several appearances in which the second and third Respondents with the concurrence of the Applicant intimated to court that they would like to have the matter resolved. Consequently the application came for hearing on 9 July 2014 wherein the parties were given leave to file replies to the application and furthermore an interim injunction issued by the registrar on the 12th of May 2014 maintaining the status quo was extended until 17 September 2014. On 17 September 2014 the matter was adjourned to negotiate on the implications of the Mortgage Regulations 2012, regulation 13 thereof on the ground that the second and third Respondents sought time to negotiate terms with the Respondent. The application was adjourned to 14 October 2014. The court was informed that the proposal of the second and third Respondents was not acceptable to the first Respondent whereupon a schedule was given for the filing of written submissions to have the matter determined on the merits.

I have duly considered the Applicants written submissions. The Applicant submitted under three headings namely whether the Applicant's suit discloses a prima facie case. The second issue is whether the Applicant will suffer irreparable damage if the temporary injunction is not granted by this honourable court against the Respondent's. Thirdly the last issue is whether the balance of convenience favours the Applicant in the event that the court is in doubt on the first two grounds.

The Applicant relies on the cases of Kiyimba Kaggwa versus Hajji Nasser Katende (1985) HCB 43 and Giella versus Cassman Brown and Company Limited [1973] EA 358 for the principles applied by courts in applications for a temporary injunction. The first principle is that the Applicant must show a prima facie case with a probability of success. Secondly injunctions will normally not be granted unless the Applicant might otherwise suffer irreparable damage which cannot be adequately compensated for by an award of damages. Thirdly if the court is in doubt on the first two principles, the application will be decided on a balance of convenience.

The question is whether the Applicant meets the conditions in the above two cases. As far as the status quo is concerned, the subject matter of the main suit and the application is the suit property described above registered in the names of the third Respondent, a husband of the Applicant. The property is matrimonial property and the Applicant is faced with imminent eviction from the first Respondent according to the notice dated 25th of January 2013 brought to the attention of the Applicant. The Respondent was only restrained by an interim order of the court from the intention to sell the suit property. A temporary injunction ought to be granted. There is a threat to sell and eviction of the Applicant and her family and need to maintain the status quo.

As far as the prima facie case is concerned, the Applicants Counsel relies on the case of Uganda Development Bank versus ABA Trade International and others HCMA 568 of 2010 where it was held that a temporary injunction could be issued to protect a legal right of the Applicant who has made out a prima facie case before the court. What ought to be demonstrated is that there are serious questions to be tried and that the action is not frivolous or vexatious. The fact that the Applicant asserts that she is the wife of the third Respondent, who is the registered proprietor of the suit property and that the property is under threat of sale by the Respondent is sufficient. The Applicant was not aware of the mortgage and never consented to the transaction entered into by her spouse. The Applicant's case made out is that the dealings were without her knowledge and were fraudulent and unlawful. She has pleaded the particulars which include the use of the matrimonial home as security for a loan, failure to obtain proper spousal consent, failure to obtain an assented application documents by the Applicant as a spouse and failure to obtain evidence that the documents or forms used to grant the mortgage had been assented to by her.

As far as the evidence is concerned, the first Respondent's case in the defence and counterclaim is that the Applicant freely consented to the transaction. The evidence relied upon is the statutory declaration of the third Respondent as well as a form attached as evidence of spousal consent.

The Applicant denies ever consenting to the mortgage or dealing with the second Defendant in as far as the mortgage of the property is concerned. Doubt is cast on the correctness of the alleged spousal consent form attached. It is evident from the Applicant’s affidavit that she is not conversant with the English language in which the alleged consent was prepared. The first Respondent has not adduced any evidence to show that the consent presented was understood at the time of its purported execution by the Applicant.

The Applicant’s pleadings on record show that the Applicant has a case with a probability of success. The Applicant has also shown serious questions for determination such as whether the consent of the Applicant was properly obtained and whether the dealings of the first, second and third Respondents were fraudulent. In the premises the Applicant has established a plausible defence with a possibility of success and the court should grant her relief of a temporary injunction to protect her rights pending the hearing and determination of the main suit.

The Applicant further avers that she has lived in the premises for 25 years together with her children. It is the Applicants only home and she cannot easily be resettled in another home with her family. The Applicant has sentimental attachment to the property which cannot be atoned for by an award of damages. The Applicants Counsel relies on the case of Jane Francis Mpungu versus DFCU Bank HCMA 41 of 2003 where an injunction was granted when there was a threatened sale of matrimonial property.

On the reply of the first Respondent that it was bound to suffer irreparable damage in light of the non-performing nature of the second Respondents loan coupled with the first Respondents obligations under the Financial Institutions (Classification and Provisioning) Regulations, the provision required to be made by the first Respondent for the ever accumulating arrears of the second and third Respondents are quantifiable and can be atoned for and adequately compensated by an award of damages in the event that the main suit is decided in favour of the first Respondent.

As far as the balance of convenience is concerned, the Applicant's case is that it favours the Applicant who is in possession of the suit property where she is living with her children and with property is her matrimonial home according to the case of Jane Francis Mpungu versus DFCU Bank Ltd (supra). If the Applicants who was sold and she is evicted, she would suffer can be greatly inconvenienced which is not the case with the Respondent. The Respondent does not stand to suffer any loss as it still has an option of sale if the court rules in their favour.

As far as the prayer for the Applicant to deposit security of 30% of the forced sale value of the property, the Mortgage Regulations of 2012, do not presuppose a discretionary duty by the judicial officer. The Applicant was not aware of the dealings between the first Respondent and the second Respondent as far as the property is concerned. The Applicant did not consent to the mortgage of her matrimonial home by the second Respondent. Furthermore under the Financial Institutions (Credit Classification and Provisioning) Regulations 2005, the obligations of the first Respondent are to have sufficient security according to the classification of the assets and not payment of 30% of the forced sale value. The balance of convenience would be that the bank obtains goods security pending determination of this suit on the merits.

In reply the first Respondents Counsel submitted that the application is an abuse of court process and should ipso facto fail. The Applicant seeks a blanket order against all the three Respondents to restrain them or their agents and workmen from evicting, selling or disposing of the said property until disposal of the main suit. It would appear that the application was filed as a routine matter. There is no allegation of threatened sale of the property by the second and third Respondents. The question is why they were joined as parties to the application. The action was filed in collusion with some of the Defendants who stage-managed the dispute with the intention of defeating the rights of one of the Defendants. The disadvantaged Defendant is the first Respondent.

The first Respondents Counsel agrees with the principles for the grant of a temporary injunction and includes among the authorities the case of David Luyiga versus Stanbic Bank Uganda Limited HCMA 202 of 2012.

As far as the requirement for establishing a prima facie case is concerned, the Applicant is the spouse of the third Respondent and the third Respondent mortgaged the suit property to the first Respondent as security for repayment of a credit facility extended to the second Respondent. The Applicant’s main contention is that the property was mortgaged without her consent. However the first Respondent in the affidavit in reply through Francis Niwagaba asserts that the Applicant give a voluntary consent attached to the affidavit as "SB1". She supplied her identification attached as "SB2". Furthermore attachment "SB3" is a declaration that the third Respondent that the Applicant is his only spouse. These facts are not contested by the Applicant and on that ground alone the application must fail.

Irreparable injury and the balance of convenience

The first Respondent’s Counsel submits that if the court is in doubt regarding the first two principles, it should determine the application on the balance of convenience. The burden of proving that the inconvenience the Applicant will suffer if the temporary injunction is denied is greater than that which the Respondent will suffer if the injunction is granted according to paragraph 766 volume 21 Halsbury’s laws of England third edition at page 366. The burden is an evidential burden and must be derived from the affidavit evidence.

The evidence is that the second Respondent as being in default of its obligations for which the third Respondent is a guarantor and for which he created a mortgage in favour of the first Respondent as security for repayment of the loan. The amount continues to accumulate interest. In the meantime the first Respondent must keep on making provision for the losses as required by the Financial Institutions (Credit Classification and Provisioning) Regulations, Statutory Instrument Number 43 of 2005.

Regulation 6 (1) thereof provides that the credit facility with a pre-established repayment schedule shall be considered non-performing if (a) the principal or interest is due and unpaid for 90 days or more. Finally regulation 11 (1) of the regulations provides that financial institutions shall maintain specific provision for all non-performing credit facilities. The first Respondent under the provisions is obliged due to the default of the borrower to make payment from its own sources to cover the non-performance of the borrower. If the injunction is granted, the inconvenience the first Respondent will suffer is far greater than that the Applicant shall suffer. The Applicant cannot keep the security without paying the money for which it was created. In the David Luyiga case (supra) the court invoked Order 41 rule 1 of the Civil Procedure Rules to import certain conditions for the grant of a temporary injunction. It was a demonstration that the commercial court should not be taken for granted by the Applicant. It is therefore submitted that should the court finds that there is a question to investigate at the trial, and the first Respondents Counsel submits that that is none; the court should restrain the sale of the property conditionally upon the amount due to the first Respondent being paid. The court could also be guided by regulation 13 (4) of the Mortgage Regulations, which imposes the condition or determination of the extent of the condition. The mortgagor or any other 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 value of the mortgaged property or the outstanding amount, whichever is higher.

Submissions on behalf of the second and third Respondents

On the question of whether the status quo should be preserved, the Applicant has contended that the property is matrimonial property. Both the second and third Respondents in the affidavits depose that there was no convenience to use the Applicant's matrimonial home as security for the mortgage from the first Respondent. There is no pending suit, waste, damage or alienation of the suit property by any of the Respondents. The first Respondent has not done any act that would warrant granting the application. Since he has the primary interests, the application is just speculative and should be rejected. The status quo is not about who owns the property but actual state of affairs prevailing prior to the filing of this suit.

In the instant case, the actual state of affairs is that the Applicant and her family are occupying the suit property and the Respondent either jointly or individually have not tried to sell the property or evict the Applicant. Consequently there is no status quo to maintain.

As to whether this suit establishes a prima facie case with a probability of success, the case law is that though the Applicant has to satisfy the court that there is merit in the case, it does not mean that it is one that should succeed. It means the existence of a triable issue or serious question to be tried and therefore which raises a prima facie case for adjudication. The Applicant avers in her supporting affidavit that she filed a case against the Respondents in this court. The third Respondent in this affidavit denies any wrongful dealing in respect of the suit property and the Respondents sought her consent to the transaction that she wants to have nullified. There are no serious questions to be tried or that is no prima facie case for adjudication.

On the question as to whether the Applicant would otherwise suffer irreparable loss or injury which cannot be atoned for by way of damages, if the injunction is not granted, irreparable injury does not mean that there must be physical possibility of repairing injury. It means that the injury must be substantial or material and one that cannot be adequately compensated in damages. The Applicant has not brought any evidence as to how she is likely to suffer injury. Damages would be sufficient adequately at home for the injury. Finally the second and third Respondents pray that the application is disallowed.

Ruling

I have carefully considered the Applicant’s application together with the reply and affidavit evidence for and against the grant of the application for a temporary injunction as well as submissions of Counsel and authorities cited.

The principles for the grant of a temporary injunction are not contentious and have been set out in the submissions of both Counsels. I particularly refer to the summary of the principles by this court in David Luyiga versus Stanbic Bank (U) Ltd HCMA 202 of 2012 arising from HCCS 152 of 2012 between pages 6 and 7:

The grant of a temporary injunction is an exercise of the court’s discretion. Secondly an injunction is granted for purposes of maintaining the status quo until the question to be investigated in the suit is disposed off finally after adducing evidence which evidence may have been tested by cross – examination at the trial of the main suit. The court considers whether Applicant has shown a prima facie case with a probability of success. However following the dictum of Lord Diplock in American Cyanamid Co. Ltd v Ethicon [1975] 1 All E.R. 504 at page 510, it has been held that there is no requirement for the Plaintiff to establish a strong prima-facie case. The Plaintiff should only demonstrate that there are serious questions to be tried and that the action is not frivolous or vexatious to fulfil the first basic condition for the grant of a temporary injunction. The rational for this is that controversies should not be finally decided on the basis of inconclusive and contested affidavit evidence which controversies of fact or law ought to be finally decided after the main hearing whose advantages include cross examination on factual matters and adequate address on and consideration of legal controversies. The task of the court is to establish whether the Plaintiff’s application discloses an arguable case which merits trial in the main suit.  The second principle is that injunctions will normally not be granted unless the Applicant might otherwise suffer irreparable injury which may not be adequately compensated for by an award of damages. The third test is in the alternative and where the court is in doubt on the first two principles whereupon the court decides in whose favour the balance of convenience lies if the application is granted or refused.

The first question to be considered is whether the Applicant's application discloses an arguable case or a serious question that ought to be tried on the merits. The flipside of the endeavour is to consider whether the action is or is not frivolous or vexatious and discloses a serious question or questions of fact or law that ought to be tried on the merits.

I agree with the submission that the serious questions of law or fact, if any, has got to be proved by affidavit or otherwise as prescribed by Order 41 rule 1 of the Civil Procedure Rules. Order 41 rule 1 (a) stipulates that where in any suit it is proved by affidavit or otherwise that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree the court may grant a temporary injunction to restrain the danger. Consequently grounds for the grant of a temporary injunction have to be proved by affidavit or otherwise.

In this case only affidavit evidence was adduced for and against the grant of the application. The Applicant deposes that the suit property is her matrimonial home where she and her 6 children reside and where she has been living for the last 25 years. The question of fact as to whether the property is matrimonial property is not denied by the Respondents. What is in controversy is whether the Applicant's consent was sought and obtained before the mortgage of the property by the second Respondent to the first Respondent. The third Respondent is the registered proprietor of the suit property and the deposition is that he is a surety for the borrowing by the second Respondent, a fact which is not in dispute.

In support of the imminent threat of eviction or sale of the property, the Applicant attached annexure "A" which is a letter dated 28th of April 2014 written by Great Links Agency addressed to the second Respondent Messieurs Nahamya P. Traders. The letter reads in part that the agency was acting on behalf of Messieurs Stanbic Bank which is a financial institution and the registered mortgagee. Under the instructions of the bank they demanded recovery or asked the second Respondent to peacefully exit the mortgaged property for defaulting on the loan payments. It is asserted in the letter that the second Respondent had repeatedly been called upon or reminded of her obligation to pay the money but she adamantly neglected or failed/refused to comply with the demands. The notice gives seven days to either amicably settle the indebtedness or give vacant possession of the premises because it had already been advertised in the newspapers for auction. A copy of the advert is attached to the letter. The letter is also copied to all occupants of the mortgaged property. Specifically the advertisement attached proves that at the time of the application, there was a real threat of sale whose evidence is notice of intention of sale by public auction or private treaty of the property registered in the names of the third Respondent. The date of the intended sale written in the advert was the 20th of May 2014. The advertisement was made in the Daily Monitor of 25 April 2014 at page 47 thereof. The application was filed on the 9th of May 2014. An interim injunction was issued by the registrar on the 12th of May 2014 and subsequently extended by this court with the consent of the parties.

There is no doubt that there was an imminent threat not only to evict the occupants of the suit property but also to have it sold by private treaty or public auction on account of the alleged persistent default of the second Respondent. The threat of eviction or sale of the property is not controversial and is not the bone of contention in this matter.

What is in issue is whether the Applicant has a prima facie case in terms of the requirement if any to obtain her consent before the mortgage was executed by the second and third Respondents. In the main suit the Applicant seeks the release of the property as security in the hands of the first Defendant/first Respondent Messieurs Stanbic Bank Ltd. She further seeks a declaration that the Plaintiff has never authorised the third Defendant to mortgage her matrimonial home to the first Defendant. On the basis of the allegation of fact she asserts that the mortgage/loan agreements executed between the first, second and third Defendant are illegal. The fact that she is the wife of the third Respondent who is the registered proprietor is also not controversial. The first Respondent answer to the question of whether there was due execution of the mortgage agreement on account of alleged want of consent of the spouse of the third Respondent is that the Applicant voluntarily and freely give a consent to mortgage the suit property according to documents attached.

The first document attached by the first Respondent is annexure "SB1" which is the written consent to mortgage the property dated 22nd of December 2009 signed, sealed and delivered by the Applicant and duly registered on 4 January 2010. The consent to mortgage the property is accompanied by a voter’s card of the Applicant Annexure "SB2". The document “SB1” stipulates that:

"I Gorreti Nassali being the spouse of Ambrose Hirya Stephen Were, the registered proprietor of the above-mentioned land, do hereby give consent to mortgage the above described property by… For the benefit of Nahamya P. Traders to Stanbic Bank Uganda Limited."

Finally the first Respondent attached "SB3" which is a declaration by the mortgagor. The declaration is to the effect that he is the registered proprietor of the suit property and declared that the Applicant is the only spouse residing with him in the property in accordance with section 39 of the Land Act cap 27. On the basis of the said consent, the first Respondent asserts that it has the right to sell the mortgaged property.

I have duly considered the submissions of the Applicant’s Counsel to the effect that the Applicant denies ever consenting to the mortgage or dealing with the second Defendant in as far as the mortgage of the property is concerned. The Applicant’s Counsel submitted that the first Respondent led no evidence to show that the consent was executed by the Applicant in the presence of the deponent of the first Respondent or any other officer which therefore casts some doubt over the correctness of the alleged consent. He additionally submitted that based on the Applicant’s affidavit in support of the application, it was apparent that the Applicant is not conversant with the English language in which the written consent was prepared.

I have duly considered the Applicant’s affidavit in support of the application as well as the chamber summons. The assertion of fact in the chamber summons is found in ground (f) that the Applicant has never dealt with the second Respondent and neither has she ever given consent to the second Respondent to use the property. She makes no reference to the third Respondent who is her husband. The second averment in the chamber summons is in ground (h) that the Applicant has never assented/to the mortgage or use of her matrimonial home as security for a facility by the second and third Respondents from the first Respondent.

Further assertions of fact by affidavit are filed in paragraph 7, 8 and 9 of the Applicants affidavit in support of the application as far as is relevant to the question of consent. The Applicant deposes in the said paragraphs as follows:

"7. That I have never dealt with the second Respondent and neither have I ever granted consent to the second Respondent to use the property comprised in plot 817 as security for a mortgage with the first Respondent.

8. That I am not aware of any mortgage facility by the first Respondent to the second and third Respondents whereby consented that my matrimonial home was to be pledged as a security.

9. That the use of my family’s home for purposes of a facility by the first, second and third Respondent is wrongful and illegal."

The Applicant never filed an affidavit in rejoinder to rebut the evidence adduced by the first Respondent's officer Mr Francis Niwagaba to the effect that she executed a written consent for the mortgage of the property. It is therefore an admitted fact that the Applicant did execute a written consent attached as annexure "SB1" to the affidavit of Francis Niwagaba. This evidence is strengthened by the affidavit evidence of the third Respondent who is her husband and whose affidavit deposes that he pledged the property as security for a loan from the first Respondent bona fide and without any fraud or illegality.

The question of whether at the time she executed the written consent, the Applicant was not proficient in English is not in evidence. It is not averred in the affidavit in support of the application that she did execute any document or that it was done without her understanding of the contents of the document. It was necessary for the Applicant to rebut the evidence of the first Respondent in an affidavit in rejoinder.

Nonetheless there is a registered mortgage on the suit property and the issue that arises is whether the written consent of the Applicant was duly obtained. The issue cannot be resolved on the basis of the insufficient affidavit evidence because it is clearly averred in the particulars of fraud of the first Defendant that there was a failure to obtain the consent of the Applicant. I cannot say that the assertion is frivolous and vexatious. The assertion begs the evidence of what actually happened in light of the obvious written consent of the Applicant. It is averred among other things that there was failure to explain to the spouse of the mortgagor in the presence of an independent person, the terms and conditions of the mortgage which was being applied for. The particulars of fraud are contained in paragraph 7 of the plaint and contain other averments whose effect is that the Applicant was not aware or did not understand the transaction or at least she was not given the material particulars about the transaction. In the premises there is a prima facie case or a serious question to be tried in the main suit.

I have considered the assertion that the application was unnecessary or premature because there was no threat. This was the effect of the submissions of the Counsel for the second and third Respondents. The presence of the Respondents in the application leaves a lot to be desired because they seem to concede to the application when actually they are the defaulting borrowers or sureties. The second and third Respondents admitted being in default and also admitted having duly executed the mortgage on the suit property. They have no defence to the sale of the mortgaged property to recover monies owing to the first Respondent. I agree with the first Respondent's Counsel that there is a subtle collusion between the Applicant and the Respondents to obtain an injunction and delay the realisation of the first Respondent's security through the exercise of the remedies of the mortgagee against the mortgagor by sale of the property.

As far as irreparable loss is concerned, the Applicant avers and gives affidavit evidence to the effect that she has been living in the matrimonial property for the last 25 years and she has no other home. She is likely to suffer irreparable loss if the property is sold when she has no alternative. She would have lost her home and be obliged to look for another place of abode pending disposal of this suit. I agree that the first Respondent would be able to recover its money from the suit property if it succeeds. Both parties have not given evidence of the mortgage transaction in terms of how much money owes. The only evidence is in the main pleadings which remained a matter of pleading. The mortgages for the grant of Uganda shillings 150,000,000/= to the second Respondent. As to how much interest accumulated or how much has been paid off is not in evidence.

The conditions for the grant of a temporary injunction have been modified by the Mortgage Act, Act 8 of 2009, as well as the regulations made there under. Under this provision a temporary injunction can be granted to protect a legal right.

Before concluding the matter it is necessary to spell out the basic requirements for the exercise of a power of sale without losing sight of the fact that it is the mortgagor who is to be notified and this suit and the application being considered has been brought by a spouse of the mortgagor. In other words the question as to whether there was compliance with the requirements of the Mortgage Act in terms of notice are matters between the first Respondent and the second and third Respondent. However a spouse enjoys special rights under the Mortgage Act which rights include the right to apply for relief against exercise of the powers of the mortgagee under the Act.

Briefly powers of a Mortgagee are spelt out under Part V of the Mortgage Act. Particularly under section 19 (1) of the Mortgage Act, 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 and in the prescribed form of the default and require the Mortgagor to rectify the default within 45 working days.

The remedies of a Mortgagee are several and include under section 20 of the Mortgage Act upon default of the Mortgagor to comply with the notice, issued and served under section 19, the right to 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. Under section 26 of the Mortgage Act where the Mortgagor is in default of his or her obligations under the mortgage and remains in default after expiry of the time provided for the rectification of the default stipulated in the notice served on him or her under section 19, a Mortgagee may exercise his or her power of sale of the mortgaged land.

Section 20 (e) of the Mortgage Act gives the Mortgagee powers of sale as a remedy as well as making provision for the mortgages power of sale under section 26 of the Mortgage Act.

Where a spouse wants to challenge the intended sale on any ground provision is made under the Mortgage Act 2009. Particularly an application can be made to the court for relief against the exercise by the mortgagee of any of the remedies provided for under section 20 of the Act. The application may be made by a spouse or spouses of the mortgagor under section 33 (1) (c) or 35 (1) (c) of the Mortgage Act. An application may be made at any time after service of the notice under section 19, section 22 (2), section 23 (2) or section 24 (1) or section 26 (2) or during the exercise of the remedies provided for under the provisions. The court has power to review the mortgage on the grounds stipulated in section 34 which include fraud, deceit or misrepresentation by the mortgagor or for any unlawful provision in the mortgage agreement. The power of the court to review the mortgage on any ground permitted by the enactment means that an application can be made for an injunction to restrain the mortgagee from exercise of the powers under the mortgage pending review of the mortgage. Finally the Mortgage Regulations 2012 permits an interested party to have the sale of the mortgaged property stopped. Regulation 8 (2) provides that the mortgagee shall give notice of the public auction by advertising the intended sale in a newspaper of wide circulation. Annexure "A" to the Applicant's application attaches the advertisement in the Daily Monitor Newspaper. Finally regulation 13 of the mortgage regulations 2012 provides that the court may upon 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 a security deposit of 30% of the forced sale value of the mortgaged property or outstanding amount.

In this particular case there was no adjournment of the sale as such but an interim order was issued by this court and the intended sale was not conducted on the scheduled date. No alternative date was given and no deposit of security was made by the Applicant.

Sections 37 (1) of the Judicature Act gives the High Court jurisdiction to grant an order of an injunction in all cases where it appears to be just and convenient to do so. Section 37 (1) of the Judicature Act is couched in the same words as the Supreme Court Judicature (Consolidation) Act, 1923, s. 45 (1) of the UK which provides that:

"‘The High court may grant a mandamus or an injunction  ... by an interlocutory order in all cases in which it appears to the court to be just or convenient so to do”.

The provision is in pari materia with section 37 (1) of the Ugandan Judicature Act and was considered in the case of Montgomery vs. Montgomery [1964] ALL E.R. 22  when Ormrod J at page 23 held that it was a fundamental rule under the provision that the court will grant an injunction only to support a legal right. In the case of Margaret, Duchess of Agyll (feme Sole) v Duke of Argyll and others [1965] 1 ALL E.R. 611 at page 634 it was held that the jurisdiction was exercised under the above quoted section “to prevent what the court considered and treated as a wrong, whether arising from the violation of unquestionable right or breach of contract or confidence.

The question is therefore whether the status quo should be preserved so that the question as to whether the remedy prayed for by the Applicant should be granted is first determined by the court on the merits. According to the case of Noormohamed Jan Mohamed v Kassamali Virji Madhani (1953) 20 EACA 8, the purpose of an injunction is to maintain the status quo until the question to be investigated in the suit can finally be disposed of.

Though not expressly stated, the Applicant has applied as a spouse of the mortgagor in an environment where the Mortgage Act 2009 gives her statutory rights to do so. In the exercise of that right, any sale by the mortgagee would render the remedy she seeks of preventing the mortgagee from exercising the power of sale nugatory.

In the case of Souna Electronics versus Commissioner URA HCMA 424 of 2011, I considered a similar matter where there was a threatened sale of confiscated goods and summarised the judicial precedents on protection of a litigant’s right to a hearing and to the exercise a legal right. The object of the order is primarily to prevent that exercise of the right being rendered nugatory:

“The principles for preserving the right of appeal or the rights of hearing were stated in the case of Wilson V. Church (1879) vol 12 Ch D 454 where it was held that:

As a matter of practice, where an unsuccessful party is exercising an unrestricted right of appeal, it is the duty of the court in ordinary cases to make such order for staying proceedings in the Judgment appealed from as will prevent the appeal if successful from being rendered nugatory.”

This holding was approved and followed in the Supreme Court case of Somali Democratic Republic V. Anoop Sunderial Trean C.A.C.A No 11 of 1988 before Manyindo DCJ Odoki J.S.C and Oder J.S.C. The Supreme Court held that where an unsuccessful party is exercising a right of appeal, it is the duty of the appellate court to prevent the appeal from being rendered nugatory.”

Whereas the matter before the court is not an appeal, the Applicant has in the suit challenged the right of the mortgagee to sell the mortgaged property. The grounds of her challenge cannot be handled on the merits for the reasons stated in the first ground and should await trial in the main suit. This is because there is a prima facie case or serious questions to be tried. The remedy provided for by the Mortgage Act 2009 includes the power of the court to review the mortgage on the ground of fraud, deceit, misrepresentation by the mortgagor or for containing a provision which is unlawful is provided for under section 34. Furthermore under section 35 an application for review may be made by a spouse as is the Applicant. Upon the exercise of powers under section 34, section 36 provides that the court may declare the mortgage void. This is the remedy being sought in the main suit. If that remedy is granted, the Applicant would be entitled to a discharge of the suit property as security for the loan transaction between the second Respondent and the first Respondent bank. In order not to render the intended remedy nugatory and because the court has not found the suit to be frivolous or vexatious, an injunction will be granted to preserve the legal right of review of the mortgage by a spouse on statutory grounds and that the Mortgage Act, Act 8 of 2009.

In the premises an injunction issues restraining the first Respondent/Defendant, their agents and workmen from evicting, selling and/or disposing off/alienating and/or interfering with this suit property comprised in LRV 1300 4018 plot 817 land at Namasuba in any manner whatsoever until the disposal of the main suit or until such further orders of the court.

The application against the second and third Respondent cannot be granted because there is no evidence that they have the power to do anything having mortgage the property to the first Respondent. The application against the second and third Respondents is incompetent and stands dismissed. However the costs of this application shall abide the outcome of the main suit.

Ruling delivered on the 12th day of December 2014

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

James Nangwala for the first Respondent

Akankwasa Edward for the second Respondent

Alex Kabayo for the plaintiff

Plaintiff and third Respondent

Charles Okuni: Court Clerk

 

 

Christopher Madrama Izama

Judge

 12/12/2014