THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL COURT DIVISION)
MISCELLANEOUS APPLICATION NO. 752
(Arising from Civil Suit No. 564 Of 2012)
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL COURT DIVISION)
MISCELLANEOUS APPLICATION NO. 752
(Arising from Civil Suit No. 564 Of 2012)
AQUA PLUMBING (U) LIMITED…………..…APPLICANT/PLAINT
BRISK ESTATES LIMITED………….RESPONDENT/DEFFENDANT
BEFORE HON. LADY JUSTICE HELLEN OBURA
This application was brought by chamber summons under Section 98 of the Civil Procedure Act Cap 71 and Order 41 Rule 1(a), 2(1) and 9 of the Civil Procedure Rules SI 71-1 seeking for orders that:
- A temporary injunction to restrain the defendant ,its transferees , assignees, agents, servants, employees, legal representatives and successors in property from interfering with the plaintiff and its tenants’ quiet possession of the suit property, evicting or attempting to evict the plaintiff and its tenants from the suit property, alienating the suit property, making any dispositions of the suit property, transferring the suit property, or in any way dealing with the suit property pending the determination of the main suit.
- The costs of this application be provided for.
The grounds for the application are that:
- The applicant entered into a sale agreement with the respondent of the suit property comprised in Mengo Kyadondo Block 245 Plot 321 at Kiwuliriza with a 3 storey commercial building.
- The respondent failed to pay the balance within one month from the date of signing the sale agreement as parties had agreed.
- The applicant repudiated the contract.
- The respondents tried to forcefully evict the applicant along with the tenants.
- The applicant filed a suit in this honorable court and has a high possibility of success.
- If the injunction is not granted and the applicant is evicted then the suit will be rendered nugatory.
An affidavit in reply sworn by Mr. Bhavesh Kanabar the respondent’s managing director was filed in which the deponent stated that the application is misconceived in law and in fact, it is blatant dishonesty, fraudulent and deliberately designed by the applicant to mislead this honorable court in the attempt to commit and aid illegalities. He averred that the bank advertised the applicant’s property and the respondent sought to ensure that the applicant benefits from the sale rather than directly purchasing it from the bank’s bailiffs and to that end, the applicant entered into a sale agreement with the respondent on free will. Furthermore, that the respondent has deposited a sum in excess of Shs.900, 000,000/= towards the purchase price of the suit property leaving only a balance of Shs. 150,000,000/= which is held as security for the applicants non compliance with the preconditions in the sale agreement which includes furnishing an accurate financial status report. He also deposed that as admitted in the applicant’s affidavit in support, it is the respondent who is in possession of the suit property under uncontested sale.
There was no affidavit in rejoinder filed to controvert the averments in the affidavit in reply. At the hearing, Mr. Brian Kaggwa appeared for the respondent and Mr. Patrick Mugisha appeared for the applicant. They both filed written submissions which have been considered in this ruling.
Counsel for the applicant submitted that on the 25th day of September 2012 the parties entered into a sale agreement for the sale of the suit property to the respondent at a sum of Shs.1, 051, 000,000/= whereupon the respondent paid the applicant Shs. 400,000,000/= and the balance of Shs. 650,000,000/= was agreed to be paid within one month from the date of the applicant granting the respondent possession of the suit property and furnishing an update account of the tenant’s status.
The applicant contended that on the 1st day of October 2012 he handed over the building to the defendant and notified all the tenants as well as furnished the defendant with the financial report and the transfer instruments and resolutions signed by the directors. However, by 30th October 2012 the defendant had not yet paid up the balance of the purchase price even after several demands. The plaintiff contends that this amounted to fundamental breach of contract which resulted into rescinding the sale agreement by the applicant on the 20th day of November 2012 and resumption of full occupation and control of the suit property.
Counsel for the applicant submitted based on the case of Yefusa Gulooba & Another vs. R.L. Jain High Court (Commercial Division) Misc. Application No. 334 of 2013, that it is trite law that a temporary injunction will be granted by the court where a plaintiff in a suit shows that he has a prima-facie triable suit, and is in possession of the suit property which is at risk of being alienated by the defendant in a manner that would cause damages to the plaintiff irredeemable by damages, and consequently render the suit nugatory.
He then submitted that the applicant has filed a suit in this honorable court with a high chance of success if court finds in favour of the applicant on the issue whether the respondent was in breach of the contract and therefore whether the applicant was entitled to rescind the sale agreement as he did. He submitted that the applicant is in possession of the suit property since the full purchase price had not been paid but the respondent has made attempt to evict it from there. Counsel for the applicant argued that since the respondent fundamentally defaulted in the payment of the purchase price, it is not entitled to vacant possession or transfer of the suit property. Based on those circumstances, he contended that it is necessary to maintain the status quo by granting a temporary injunction until the suit is determined.
Counsel for the applicant also submitted that his client will suffer irreparable damages if the temporary injunction is not granted because the applicant stands to be evicted and the respondent will get an opportunity to alienate the suit property in any way it wants. Furthermore, that the applicant stands to lose the suit property and its entire business with no chances of ever recovering the same. On the whole, he argued that the balance of convenience favours granting a temporary injunction to maintain the status quo.
In reply, counsel for the defendant submitted that the applicant has not adduced any evidence in proof of the judicially settled conditions warranting the grant of a temporary injunction or shown any triable issue of fact or law to justify the granting of the application. He argued that despite the applicant’s instigated and deliberate breaches and fraudulent conduct to induce breach, the respondent has so far deposited a sum in excess of UShs. 900,000,000/= (Uganda Shillings Nine Hundred Million only) towards the purchase price leaving only a balance of UShs. 150,000,000/= (Uganda Shillings One Hundred Fifty Million only) outstanding. He contended that this sum is held as security for the applicant’s non-compliance with the preconditions of the agreement on the remittance of the balance which include provision of the financial status report of the property which term the applicant had breached by declining to provide the same.
It was further argued for the respondent that the applicant’s continued occupancy of the suit property was on the basis of a tenancy agreement (annexture B2 to the affidavit in reply) between the respondent as Landlord and the applicant as Tenant and nothing more, the applicant having disposed of its ownership rights and interest. According to the respondent, the applicant has neither equitable nor legal interest in the suit property. He argued that the only claim the applicant has is for the balance on the purchase price of UShs. 150,000,000/= which the respondent is willing to pay up at the submission of the documents by the applicant as agreed upon in the sale agreement or even to deposit in court for custody until the applicant satisfies his obligation under the sale agreement.
Counsel for the respondent also submitted that the applicant has no cause of action against the respondent and as such the plaint is frivolous, vexatious, premature and an abuse of court process motivated by dishonesty and greed to defraud the respondent and frustrate the sale agreement. The respondent also denied having ever attempted to evict the applicant and argued that the allegation of imminent danger is illusionary and a complete fabrication as there is no danger of evicting the applicant. It was contended that the applicant comes to court with tainted hands seeking to commit illegalities which do not entitle it to an equitable remedy that is sought. He referred to authorities on affidavits that contain falsehood and prayed that the affidavit in support of the application be struck out for containing falsehood.
Counsel for the respondent cited Order 41 rule 1 (a) and (b) which gives court power to grant a temporary injunction and discussed authorities that state the conditions for grant of a temporary injunction and submitted that the applicant has not met any of those conditions. He concluded that the grant of a temporary injunction to the applicant would amount to grave injustice and against the cardinal principles of equity and the law because the applicant has no locus standi to seek for a temporary injunction as he does not derive any interest in the agreement as regards the suit property save for the balance of the purchase price, hence the application ought to be dismissed with costs to the respondent.
In rejoinder, counsel for the applicant submitted that all the evidence provided by the applicant was not refuted by the respondent and prayed that it should be taken into account in considering this application as the respondent basically submitted on the merits of the main suit. He reiterated his earlier submission that in fact the respondent tried to evict the applicant without a court order which is unlawful and without having completed the payment for the suit property as agreed upon in the sale agreement. He prayed that any further attempts by the respondent should be halted by grant of a temporary injunction.
The conditions for grant of a temporary injunction are now settled as stated in the landmark case of Geila vs Cassman Brown and Co. Ltd  EA 358 where Spry J set out three conditions namely, that; an applicant must show a prima facie case with a probability of success, an applicant must also prove to court that failure to grant the injunction will cause irreparable damages that cannot be compensated in monetary term, and court may grant the injunction on the balance of convenience if it is in doubt of the other conditions.
I have carefully considered the submissions of both counsels based on the affidavits of their respective clients as well as the authorities relied upon and I also had the opportunity to look at the pleadings in the main suit with the supporting documents. It is not in dispute that the parties herein entered into a sale agreement for the suit property and some payments have so far been made to the applicant. However, the parties do not agree on the amount so far paid and they are accusing each other of breaching the agreement. While the applicant contends that the respondent has only paid Shs. 400,000,000/= and defaulted on the balance of Shs. 651, 000,000/= which led to rescinding the contract, the respondent contends that it has paid a total sum of Shs. 900,000,000/= leaving only a balance of Shs. 150,000,000/= which is held as security for the performance of some preconditions by the applicant. I believe this will be one of the issues to be resolved in the main suit as oral evidence is required to elaborate on the documentary proof supplied by the respondent.
For the purpose of this application, the applicant is only required to satisfy this court that it meets the above conditions for grant of a temporary injunction. But before I consider those conditions it is pertinent that the status quo that is sought to be preserved is established first because the purpose of a temporary injunction is to preserve matters in status quo until the dispute to be investigated in the suit can be finally disposed of. I have observed some undisputed facts which I must point out at this juncture with the hope that they will assist in showing the status quo. I note that the applicant wrote a letter dated 1st October 2012 (annexture “B” to the affidavit in support) to all the tenants informing them that the applicant had sold the suit property to the respondent who was introduced as the new landlord for purposes of executing new tenancy agreements. Related to that, there is also a Tenancy Agreement between the respondent (as Landlord) and the applicant (as Tenant) dated 12th October 2012 by which the respondent let out a residential apartment in the suit property to the applicant.
I also note that under clause 2 (ii) of the sale agreement the vendor (applicant) was to submit the following documents to the purchaser (respondent’s) lawyers contemporaneously with payment of the first installment at the execution of the agreement:-
- certificate of title of the suit property;
- a duly executed transfer form by its authorized directors;
- resolution by the Vendor authorizing the sale among others;
- Release from M/S Bank of Baroda;
- 2 Passport photos of each of the directors;
- Passport copies of Vendor’s directors.
The applicant submitted that it furnished the respondent with all transfer instruments and resolutions at the time of executing the agreement and presently those documents as well as the certificate of title are in the hands of the respondent. To my mind, by all the above actions the intention of the parties was to pass ownership of the suit property from the applicant as vendor to the respondent as buyer and the equitable owner as they awaited completion of payment of the purchase price and effect transfer of the legal title and I am convinced that this was done. The applicant also concedes to this fact although it failed to acknowledge that it remained in occupancy as a tenant of the respondent. It instead alleged in paragraph 7 of the affidavit in support that it remained as the owner waiting for payment of the balance of the purchase price. This court does not agree with that position because it is not backed by the undisputed facts.
In view of the above glaring facts, what then would be the status quo that needs to be preserved if at all? To the applicant, the respondent fundamentally breached the agreement and it had no choice but to terminate the agreement for that reason and the status quo changed because the applicant retained its property.
It is noteworthy that whereas the applicant contends that it terminated the sale agreement due to non-payment of the full purchase price, the letter terminating the sale agreement (annexture “D” to the affidavit in support) does not attest to that fact. The relevant part of that letter reads:
“REF: Sale agreement for MENGO KYADONDO BLOCK 245 PLOT 321 DATED September, 25 2012.
We hereby write to inform you that due to some unavoidable circumstances we would like to retain the above referred property for which we had signed a sale agreement drawn by your lawyers…………………..
We are however very grateful for the assistance accorded to us by you. We have already made arrangements to pay back to you your funds all necessary costs as per clause 5 (s)……..We once again thank you for the assistance accorded.
Naran Ramji Halai AVINASH NARAN HALAI
Aqua Plumbing (U) Ltd Aqua Plumbing (U) Ltd”
I am convinced that if at all the reason for rescinding the sale agreement was non-payment of the balance on the purchase price the applicant would have clearly stated so in that letter moreover with emphasis. But the applicant merely talked of retaining the property due to some unavoidable circumstances which were never specified. It is possible that there could have been breach by the respondent which is yet to be proved by oral evidence but from the above letter I would find difficulty in believing that the applicant rescinded the agreement because of that alleged breach.
I must also point out that the applicant has indicated that the issue for determination in the main suit is the alleged breach and whether the applicant was justified in rescinding the contract on that basis. I do not see how the applicant can assert at this point that the status quo changed from it being a tenant of the respondent to an owner when the legality of its act of rescinding the agreement is yet to be determined by this court in the main suit. To my mind, the status quo is that the applicant is the tenant of the respondent until court finds that there was repudiatory breach of the contract by the respondent which justified rescinding it. If this court is to make any order for a temporary injunction then that would be the status quo to be preserved.
However, since the applicant is seeking an order to preserve a status quo that does not exist I would not be inclined to even consider the conditions for grant of a temporary injunction. Be that as it may, I will proceed to consider them just in case I came to a wrong conclusion on the status quo.
As regards the first condition, the questions to be tried in the main suit include the allegation of breach of the sale agreement by the applicant as well as the allegation of fraud and dishonesty by the respondent. I do not have to delve into the merits of the case at this point save for purposes of determining whether there is a prima-facie case. In any case, there is no requirement for the applicant to establish a strong prima facie case. All that is needed to be shown is that there are serious questions to be tried and the action is not frivolous or vexatious.
From the facts of the instant case as highlighted above, I am satisfied that the main suit raise triable issues and so the first condition is met.
On irredeemable loss, it is contended by the applicant that if this application is not granted it would tantamount to issuing an eviction order against the applicant and in effect rendering further proceedings in this suit nugatory. Furthermore, that the applicant would be evicted from the suit property which serves as home for its business and dwelling home for its directors and the respondent would alienate it in any way it wants and the applicant would stand to lose the property and its entire business with no chance of ever recovering the same.
I have not found the above arguments convincing for a number of reasons. First of all, there is no way declining to grant this application can tantamount to issuing an eviction order. The relationship between the applicant and the respondent is governed by a contract with clear provisions on as and when the respondent can evict the applicant without recourse to court. I believe the respondent is mindful of that clause in the agreement.
Secondly, by that argument the applicant is implying that this court has no choice but to grant this application. This would be contrary to the well established principle that grant of a temporary injunction is a judicial discretion which must be exercised judiciously.
Thirdly, the applicant had intended to dispose of its property by way of sale and duly executed a sale agreement to that effect. It therefore goes without saying that the applicant knew very well that it would have to vacate both its offices and the dwelling home of its directors without suffering the so called irredeemable loss. I therefore do not see any irredeemable loss which will be suffered by the applicant since the value of the property was well known to the parties as at the time of executing the agreement which value was stated to be the purchase price.
For the above reasons, there is no irreparable loss which the applicant will suffer that cannot be compensated by damages if this application is not granted. In the event that the applicant is the successful party in the main suit the court will be able to assess the appropriate damages and ward it accordingly.
Before I consider the last condition, I would like to address the contention of the respondent that the applicant has come to court with tainted hands and therefore it is not entitled to an equitable remedy because the court of equity demands that you come with clean hands. I have noted that the applicant wanted to hide some pertinent facts regarding the steps the parties took subsequent to signing the sale agreement. For example the applicant never indicated that it signed a tenancy agreement with the respondent and yet this information is important in determining the status quo. In the premises, I agree with the respondent that the applicant is coming to seek equitable remedy with unclean hands and therefore equity cannot come to its aid.
Finally, having carefully considered the facts and circumstances of this case as highlighted above, I find that the balance of convenience does not favour granting it. In any event, the status quo sought to be preserved does not exist.
In the result, the order for a temporary injunction sought in the application is denied and the application is dismissed with costs.
I so order.
Dated this 3rd day of October 2014.
Ruling delivered in chambers at 3.00 pm in the presence of:
- Mr. Mpata Khalid holding brief for Mr. Brian Kaggwa for the respondent
- Mr. Amos Arinaitwe a Legal Assistant from M/S Mwesigye Mugisha & Co. Advocates on a watching brief for Mr. Patrick Mugisha.
- Mr. Bavesh Kanabar Managing Director of the respondent company.