ATHE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
COMMERCIAL DIVISION
MISCELLANEOUS APPLICATION NO 39 2011
(ARISING FROM CIVIL SUIT NO 22 OF 2011)
WALUMANYIRA.H. Y GULOBA} ……………………………………..………….APPLICANT
VERSUS
BANK OF BARODA} ………………………………………………………………… RESPONDENT
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA
RULING
The applicant’s application is brought under section 38 of the Judicature Act, section 98 of the Civil Procedure Act and order 41 rule 1 (a) and 9 of the Civil Procedure Rules, for orders that a temporary injunction issues restraining the defendant, its servants, agents, employees and/or any person acting for the defendant from entering, alienating, disposing of or otherwise interfering with the suit land until the main suit is disposed of and for costs of the application to abide the outcome of the suit.
The grounds of the application are that:
1.
That the suit land was never offered by the applicant to the respondent as security and the purported mortgage with the resultant guarantees are void ab initio and therefore unenforceable.
2.
That the suit land belonging to the applicant has been wrongfully advertised for sale by the respondent due to take place on Friday 21st January, 2011 and court bailiffs from midway enterprises and court bailiffs have given eviction to the applicant.
3.
That the applicants shall suffer irreparably if the court declines to grant the injunction in so far as the applicant’s suit land shall be wrongfully sold by the respondent and the main suit shall be rendered nugatory.
4. That it is just and equitable that injunction be granted in order that the status quo be preserved until the main suit is disposed of.
The application is supported by the affidavit of the applicant sworn to on 20th day of January 2011. The applicant avers that he is the registered proprietor of land comprised in block 121 plots 238, 249, 259 and 333 in Kasangati Nangabo. That the respondent offered a loan facility to Nile College on the 17th of June, 2009 repayable in 24 equal installments per term which the school paid for five terms but the respondent has now prematurely recalled the loan which was secured by titles comprised in the plots 249 and 333 but that the advertised school is built on the plots 259 and 238 which the deponent had not mortgaged.
That the planned sale of the suit property is unlawful as it was not pledged as security for a loan. In paragraph 6 the applicant avers that he is advised by his lawyers that the mortgage which the respondent executed is void ab initio. The applicant further avers that the respondent through Midway Enterprises and Court Bailiffs has issued an eviction notice to the school and that he would suffer irreparably if the planned sale is allowed to proceed unless the eviction is stopped.
For its part the respondent avers that the applicant is the proprietor/director of Nile College School which was granted a loan facility on the strength of securities comprised in legal mortgages on block 121 plots 249 and 333 together with personal guarantees of the applicant and another. But the school defaulted by failing to pay the installments per term and a formal demand was made. After the demand was made both the applicant and the school made several undertakings to pay the amount due which undertakings were never fulfilled. That the loan facility was properly secured by the properties advertised for sale upon the default of the institution.
At the hearing of the application, learned counsel Candia Alex represented the applicant, while learned counsel Mugerwa Kiggundu appeared for the Respondent.
Counsel Candia submitted that the grounds of the application are that: The applicant is the registered proprietor of plot 238, 249, 259 and 333 situate at Nangabo in Kasangati and that the Respondent offered a loan facility to Nile College secured by the applicant’s plots 249 and 333. The Respondent recalled the loan and advertised the school for sale on 22nd December 2010. Eventually an eviction notice was served on the applicant on 13th January 2011. He noted that the entire schools structures are situate on plots 238 and 259. The applicant filed High Court Civil Suit No 22 of 2011 challenging the impending sale on the ground that the mortgage and the resultant guarantee are void ab initio and therefore unenforceable. The applicant contents that the advertisement of the school is improper for it to advertise plots 249 and 333. The advertisement shows a photo of the school yet the school is on an entirely different plot hence the filing of this application. He submitted that order 41 rule 1 (a) of the Civil Procedure Rules gives the court powers to grant temporary injunctions where property in dispute is in danger of being alienated by a party to a suit. The court may grant a temporary injunction to restrain a party from alienating the property. He summarized the principles upon which courts grant injunctions as follows:
1.
The applicant must show by affidavit a prima facie case. At this point court is not required to go into the merits of the main suit but must be satisfied that the main suit is not frivolous or vexatious or illegal. And that the court is required to investigate a serious issue in the main suit.
2.
Secondly that the applicant shall suffer irreparably if the application is declined.
3.
Thirdly if court is in doubt, it decides on the balance of convenience.
Counsel Candia submitted that the applicant’s case is that the mortgage executed by the Respondent is null and void and unenforceable because the Respondent contracted with Nile College which was not a legal entity. He however added that the proprietor signed.
Secondly he contended that the school was wrongfully advertised for sale when it was situated on different plots. That the advertisement of the school caused the applicant substantial losses in its business. According to the applicants counsel, the questions that the court has to investigate are whether the mortgage and the guarantee in question are valid and enforceable. Thirdly, whether the suit property was properly advertised for sale. As far as the above is concerned, counsel contended that there was a prima facie case.
On irreparable injury, counsel for the applicant submitted that all the applicant had to prove was that damages alone will not be adequate to compensate him. That the applicants pleading and affidavit indicate that the Respondent has already issued an eviction notice to evict the applicant from the suit premises and that there is a notice of sale. If the suit property is disposed of before the main suit is determined the applicant shall suffer irreparable injury. He submitted that under case law where land is involved irreparable injury ensures because of its strategic importance and other factors. He referred to Paulo Makumbi and 5 Others vs. Loius Ntale and 5 others HCMA 0104 of 2009, being the decision of Hon. Mr. Justice Lameck Mukasa.
As far as the balance of convenience is concerned, counsel contended that the applicant shall suffer more if the application is refused than the Respondent if the application is allowed. He submitted that the respondent may still go ahead and sell if it succeeds. Yet the applicant would have lost the suit property if the suit succeeds in his favor if the injunction is not granted. Lastly counsel submitted that the purpose of a temporary injunction is to preserve the status quo pending determination of the main suit. He prayed that the injunction be granted as prayed in the chamber summons.
Counsel Kiggundu Mugerwa opposed the application and based himself on the grounds set out in the affidavit in reply dated 7th March 2011. Referring to annexure A to this affidavit he contended that the property mortgaged is plot 249 and 333 which is also the property advertised for sale. Annexure “A” of affidavit is the mortgage deed and refers to block 121 plots 333, and 249. Counsel further referred court to annexure “B”, the 2 title deeds thereof of the properties referred to. He referred to the respective encumbrance pages which show that a legal mortgage was registered in favour of the respondent bank. Counsel further referred to paragraph 4 (b) and (c) of the plaint. He submitted that the net effect of this is that the plaintiff admits that there is a legal mortgage on the suit property. It is this suit property that is being advertised for sale. That the applicant having defaulted on the loan has no justification to stop the mortgagee from exercising its rights under the mortgage deed. The Respondent’s counsel submitted that under section 91 of the RTA, a mortgage like an interest in land can only be impeached by proving that there was fraud. He contended that a mortgage is cast in stone and cannot be avoided unless fraud is alleged and proved. He submitted that there is no allegation of fraud in the plaint. No fraud is alleged against the Respondent and therefore the mortgage cannot be impeached.
The Respondents counsel further contented that the applicant’s contention that Nile College is a nonentity is a submission from the bar because there is no affidavit evidence to that effect. The allegation is not supported by any evidence on record. On the other hand he submitted that the respondent has annexed the mortgage which the applicant executed and proven that the suit property is subject to a legal mortgage in favor of the Respondent and there has been a default of the mortgagor.
Moreover there is an undertaking annexure “F” to the affidavit in reply by the applicant to pay this money or make payments towards their indebtedness. Annexure “F” has two correspondences signed by applicants. The applicant referring to him personally states that he expected money on his account within 3 weeks and requested that he pays 50 million before the account is credited.
In paragraph 5 of affidavit in reply, he avers that several undertaking have been made by the applicant to settle and there has been default. Consequently he submitted that this application has no merit and does not meet the principles upon which courts can grant injunctions. The principle is that there has to be a prima facie case based on the plaint, without the WSD. That the plaint does not disclose a prima facie case as far as it attempts to impeach a mortgage without any allegation of fraud.
As far as irreparable damage is concerned the plaint puts a value as to damages at Uganda shillings 2 billion. In the event the temporary injunction is not granted they may recover damages. Counsel prayed for dismissal of the application.
In rejoinder counsel Candia submitted that the applicant does not dispute the existence of the mortgage but only challenges it in the main suit. Furthermore he contended that the applicants case is that the manner in which the Respondent is exercising rights has caused a lot of loses by advertising the school. That at this level court does not go into the merits of the main suit. The question of fraud will be adequately settled in the main suit. Regarding annexure “F” the undertakings which were cited, he submitted that the applicant made undertakings as a guarantor believing that the mortgage was valid. The undertaking does not bar the applicant from challenging the validity of the mortgage in the main suit.
I have read through the pleadings of the parties in High Court Civil Suit No. 22 of 2011 and Miscellaneous Application No 39 of 2011 and attachments thereto. I have also carefully considered the submissions of the parties. In an application under order 41 rule 1 of the Civil Procedure Rules, the applicant has to prove by affidavit or otherwise that:
a.
The property in dispute in a suit is in danger of being wasted, damaged or alienated by a party to the suit or wrongfully sold in execution of a decree.
b.
That the defendant threatens or intends to remove or dispose of his or her property with the intention of defrauding his or her creditors.
The provision gives court discretionary powers to grant an injunction for the purpose of staying or preventing the wasting, damaging, alienation, sale, removal or disposition of the property as the court thinks fit until the disposal of the suit or until further orders of the court. The principles on which injunctions are granted are summarized by the Court of Appeal in Giella v Cassman Brown and Company Ltd [1973] EA 358. These are firstly that an applicant must show a prima facie case with a probability of success, Secondly, an interlocutory injunction would normally not be granted unless the applicant might otherwise suffer irreparable injury, which would not be adequately compensated by an award of damages and thirdly, if the court is in doubt, it will decide an application on the balance of convenience. Fourthly, as held in the cases of Noormohamed Janmohamed vs. Kassamali Virji Madhani [1953] EACA and Robert Kavuma v Hotel International Ltd Supreme Court Civil Appeal NO. 8 of 1990 reported in (1993) II KALR 73, that the purpose of an injunction is to maintain the status quo until the dispute to be investigated in the suit can be finally disposed of .
Philip Pettit in his textbook Equity and Law of Trusts 4th edition at page 407 gives the primary objective of an interlocutory injunction and quoting from the case of American Cynamide Company vs. Ethicon Ltd [1969] 2 ALL E.R 576.
“the object of an interlocutory injunction is to protect the plaintiff against injury by a violation of his right which he could not be adequately compensated in damages recoverable in the action if the uncertainty was resolved in his favour at the trial.”
The learned author further notes that the grant of injunctions by courts is a purely discretionary exercise of powers and there are no general rules upon which courts have exercised this discretionary power. At page 407
“an interlocutory injunction is, however, never granted as a matter of course; it is always a matter of discretion. From one point of view it is accordingly been said that whether an interlocutory injunction should be granted depends upon a great variety of circumstances, and it is utterly impossible to lay down any general rule about the subject, by which the discretion of the court ought in all cases to be regulated, but from another point of view, the discretion being, of course, a judicial discretion, it has been observed that in appropriate circumstances it is a matter “of right that upon proper terms the property shall be maintained in status quo pending the trial”. The current tendency seems to be to stress the discretionary element. Lord Diplock referred to in Hubbard vs. Vosper (1972) 1 ALL ER 1023 at page 1029 in the American Cynamid case observing with apparent approval that the court of appeal in the earlier cases had “expressly deprecated any attempt to fetter the discretion of the court by laying down new rules which would have the effect of limiting the flexibility of the remedy”. But though there may not be rigid rules, there are guiding principles for the courts to consider.”
I find the above passage persuasive for the proposition that the court should exercise its discretionary power in the interest of justice and general guidelines outlined by the counsels for the parties should not be inflexibly or rigidly applied. Counsel for the applicant contended that there was a prima facie case with a high probability of success in that the Respondent was threatening to alienate the property of the applicant and that there were serious issues to be tried in the pending suit. On the other hand the Respondents counsel contended that there was no prima facie case because the property advertised for sale was mortgaged property based on a legal mortgage which cannot be challenged without allegations of fraud under the Registration of Titles Act.
As noted above order 41 rules 1 of the Civil Procedure Rules requires the court to establish whether there is any property in dispute in the pending suit from which the application for a temporary injunction arises. The first two grounds of the chamber summons are worthy of mention. The first ground is that the suit land was never offered by the applicant to the respondent as security and that the mortgages and guarantees thereof are void ab initio. Secondly, that the suit land was wrongly advertised for sale by the Respondents, in a sale which was to take place in January 2011.
Starting with the second ground, it should be noted that firstly the alleged threatened sale had been scheduled to take place in January 2011. Can this be stopped in March 2011 when the application was argued? This is because what is sought to be stopped is deemed to have taken place. No additional affidavits have been filed to inform court whether the threatened sale took place or not. I have perused Miscellaneous Application No. 40 of 2011 being an application by the applicant for an interim order which had been fixed for hearing on the 16th of February 2011. This application has never been heard and therefore it must be assumed that the threatened sale was not stopped by court. Consequently ground 2 of the chamber summons cannot be considered and should be taken to have been overtaken by events or brought too late for the court to intervene.
Be that as it may, the first ground of the application is that the suit land belonging to the applicant was wrongfully advertised for sale by the respondent which sale was due to take place on Friday 21st January 2011 and a notice of eviction had been given to the applicant. Notwithstanding my finding on ground 2 that the pleaded threatened sale cannot be stopped because its scheduled date has passed, we may still without prejudice consider this ground assuming the property has not been sold yet. Before I proceed with this assumption, I need to emphasize that under order 41 Rule 1 of the Civil Procedure Rules, an injunction is granted on the basis of proof by affidavit evidence. Consequently it was necessary for the applicant to have filed a further affidavit in support of the application informing court whether the threatened sale had taken place or not as the application was heard after the threatened sale could have taken place. In the absence of a further affidavit, the application is in danger of being unsupported by relevant evidence on that particular ground. Secondly the court will proceed on an assumption that the threatened sale had not taken place hence the interest of the applicant in the application.
Ground 1 of the chamber summons requires a scrutiny of the pleadings and affidavit evidence to establish prima facie whether the suit land was never offered by the applicant to the respondent as security. The applicant avers in paragraph 4 (a) of the plaint that the respondent on 17 June, 2009 offered a loan facility to Nile College school secured by the plaintiffs land situated at Nangabo Kasangati comprised in plot 249 and 333 block 121. The fact that the legal mortgage was not only executed by the plaintiff but also guaranteed by him is not disputed and should be taken to be proven. In other words the applicant as a question of fact did offer his land as security for the mortgage in question and went ahead to execute a mortgage deed and guarantee. The averment that the applicant did not offer his land as security for the mortgage is not tenable on a question of fact and from the applicants own pleadings.
In paragraphs 4 (c) of the plaint, the plaintiff avers that the school and its structures are built on plots 238 and 259 and not on plots 249 and 333. That having recalled the loan the defendant proceeded to advertise the suit land for sale in the Wednesday daily monitor dated 22 December 2010 and the sale was scheduled for 21st of January 2011. Furthermore that in a letter dated 13th of January 2011 the bailiffs gave the school notice of eviction unless the outstanding loan is paid within three days. The applicant further avers in the plaint that the mortgage executed between the school and the defendant is void and unenforceable in law and the same averment shall be made in respect of the personal guarantees that the plaintiff was obliged to give for the loan.
The applicant avers in paragraph 4 of his affidavit in support of the chamber summons that the loan was secured by titles comprised in plots 249 and 333 that the respondent has now advertised the school for sale which is entirely built on plots 259 and 238 when he had not mortgaged plots 259 and 238. In paragraph 5 thereof he avers that the planned sale of the suit property is unlawful since he did not offer the titles as security to the respondent for a loan and yet this sale was due to take place on Friday, 21 January 2011. Last but not least it is the submission of the applicants counsel that Nile college school was a nonentity by the time the relevant transactions were executed.
Annexure D which is the advert by Midway Enterprises and Court Bailiffs describes the property as follows "land/school with all developments comprised in block 121 plots 333 and 249 at Nangabo, Kasangati, Wakiso district.” On the left-hand inset is a photo of a building. As far as the Registration of Titles Act is concerned, land is identified by its description on the title deed. In this case the property that is advertised is Kyadondo Block 121 plots 249 and 333. Consequently as far as plots 259 and 238 are concerned, the applicant’s application with regard to preventing the sale of these plots fails because they have not been advertised for sale at all. Secondly the inset of a photo of a building does not amount to a valid threat to sell the building if the building is located in another plot namely plots 259 and 238. What it does is to mislead the public as to the developments in plots 249 and 333 which are the plots on which a legal mortgage have been registered. In other words there is no threat to sell the school building as advertised in the attached advert because the applicants pleadings is that it is located on plots 259 and 238. These plots have simply not been advertised for sale. Furthermore, the affidavit in reply sworn by one Joseph Meck and annexure “A” thereof describes the property which is the subject matter of the mortgage in which the Respondent has interest as Kyadondo Block 121 Plot 333 and Kyadondo block 121 plot 249.
The mortgage in issue is executed by three parties and may be termed a tripartite agreement. In the tripartite agreement, the plaintiff is described as a surety and Nile College is described as the borrower as well as the second party. On the other hand, the respondent Messrs Bank of Baroda (U) Ltd is described as the bank. In addition the plaintiff executed personal guarantees guaranteeing the loan to Nile College. The personal guarantees are attached as annexure “C” to the affidavit of Joseph Meck. The respondent exercised the right to recall the loan owed by the school pursuant to a demand notice for Uganda Shillings 500,000,000/=.
The applicant does not deny executing a personal guarantee in further support of the loan facility to Nile College. For purposes of the guarantee document Nile College is referred to therein as the Customer. It is pertinent that I quote from paragraph 3 of the personal guarantee signed by the applicant and dated 12 June, 2009.
“if it shall so happen that the name of the customer herein before inserted is that of a firm or of a limited liability company or other corporation or of any committee or association or other unincorporated body any of the provisions herein contained which shall be primarily and literally applicable to the case of a single and individual customer only shall be construed and take effect so as to give the bank herein under a guarantee for the monies owing from such a firm and every member thereof or from such limited liability company or corporation or, committee or association or other unincorporated body as identical or analogous as mat be with or to that which would have been given for the monies owing a single individual if the customer had been a single individual. Any money shall be deemed to be so or not withstanding any defect informally or insufficiency in any borrowing powers of the customer or in the exercise thereof which might be a defence as between the customer and the bank. And further in the case of a firm this guarantee shall be deemed to be a continuing guarantee of all monies owing or incurred as aforesaid from or by the person or persons carrying on the business in the name of or in succession to the firm or from or by any one or more of such persons although by death or retirement of other causes the constitution of the firm may have been partially or wholly varied. And in the case of a limited liability company or other corporation any reference to bankruptcy shall be deemed to be a reference to liquidation or other analogous proceedings and the monies owing or incurred as aforesaid and hereby guaranteed shall be deemed to include any monies owing in respect of debenture stock of such limited liability company or other corporation held by or any behalf of the bank.
Firstly the mortgage agreement is a tripartite agreement between the applicant, Nile College and the bank. If Nile College is a nonentity as submitted by the applicants counsel can the agreement be narrowly construed as a personal agreement between two parties namely the applicant and the bank? Or, can it be said that the money given to the third party could not have been given because it is a nonentity? It is not denied that the applicant is a proprietor of Nile College. In fact he claims in the same suit that he is aggrieved by the advertisement of the school. This presupposes that the school and the applicant are one and the same in terms of legal rights to sue for injury to the school. Secondly no evidence has been adduced as submitted by counsel for the respondent showing the basis for the applicant counsel’s conclusion that the applicant’s Nile College is a nonentity. Would the agreement be binding on the applicant even if it was found that Nile College to which the applicant signed as a signatory was a nonentity?
What is noteworthy is that a question of fact that a loan was disbursed to the school or Nile College by the respondent. This is not disputed by the applicant who is also a signatory to the relevant documents. The applicant in his affidavit in support paragraph 3 thereof does not deny the loan and avers that that there was an agreement to pay this money in 24 equal installments per term and the school (presumably Nile College) had paid the installments for five terms. From this averment the controversy that comes to mind would not be on the legality of the mortgage agreement or whether it was executed by a nonentity but on the terms of repayment of the loan. The applicants case and the submissions of the applicants counsel is focused on a challenge to the validity of the mortgage deed and the guarantee executed by the applicant and false advertisement of the school for sale. I must add that I have considered the fact that the applicant avers that the loan was prematurely recalled.
Notwithstanding the mortgage agreement, the guarantee document is made without prejudice to any legal formalities of incorporation of the borrower under clause 3 of the guarantee agreement. The effect of the applicant’s assertion is that if, the customer which is Nile College was a nonentity, then the transaction in question would be void. In other words his agreement with the bank would not stand and his property would not be subject to sale. It is therefore my finding on the basis of the submission of the parties and the evidence on record that:
The applicant signed a tripartite agreement with the Respondent bank and with Nile College as the borrower and the applicant the surety; (b) the applicant signed the mortgage deed on the security of Kyadondo Block 121 and plots 333 measuring 0.681 Hectares and 249 measuring 0.81 hectares. The applicant signed the mortgage deed both on his own behalf and on behalf of Nile College. The seal of Nile College of P.O. Box 16318 is affixed next to his signature. See page 14 of annexure “A” to the affidavit of Joseph Meck. The other signatory of Nile College in the mortgage deed is one J.B. Rubahamya; (c) The applicant signed a personal guarantee dated 12th June 2007 and to pay 250,000,000/- in the default of the borrower to repay the loan. Another guarantee signed by the applicant is dated 29th June 2009 making himself liable to pay 460,000,000/= to the respondent should the borrower fail to repay the loan; (d) Annexure “F” to the affidavit of Joseph Meck in opposition to the application is a letter written on behalf of Nile College on a Nile College letter head dated 17th of June 2010 addressed to Messrs Muwema and Mugerwa counsel for the respondent and signed by the applicant as director. The applicant states “on behalf of Nile College Ltd we have so far paid shs 52,000,000/= and expect to pay shs 25,000,000/- by end of October and another 25,000,000/= by end of December 2010;” (e) Another letter also annexure “F” to the said affidavit as above dated 29th November 2010 is signed by the applicant on behalf of Nile College pledging to pay 50,000,000/= immediately his account is credited. In this latter letter the school is not described as a limited company but just Nile College.
The applicant has used the names Nile College and Nile College Ltd interchangeably whatever the merits of counsel’s submission that Nile College is a non entity. On the question of whether the loan was recalled prematurely, the applicant has made an undertaking in writing either on behalf of the school or on his own behalf pursuant to a demand for the school to pay 500,000,000/= Uganda shillings.
It is my firm view that a temporary injunction is an equitable remedy and he who comes to equity must come with clean hands. The applicant admits signing the mortgage deed and guarantee. He admits receiving the money and paying on behalf of Nile College or Nile College Ltd. The allegation that Nile College is a nonentity on the basis of which the applicants wants to backtrack on his obligation and under his own signature cannot be entertained to grant an equitable remedy. The applicant actively presented to the respondent an entity known as Nile College and to which he is a signatory. The mortgage executed by the applicant on behalf of the school or college has been registered on the applicants title deeds for plots 249 and 333 above cited. The mortgages are duly registered as attached to the affidavit of Joseph Meck.
There is grave danger that an application of this nature would delve into the merits of the main suit. This is because the grounds in the application revolve on the assertion that the mortgage and guarantee executed by the applicant are void ab initio. However the applicant submitted that a prima facie case has been disclosed. It is not proper in an interlocutory application based on affidavit evidence to comment on facts or matters in controversy in the main suit. This principle is stated in the American Cynamide Co. v Ethicon [1975] 1 ALL E.R. 504 per Lord Diplock at 510 paragraphs d – f that “It is not the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the status of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.”
In this case there is no conflict of facts based on affidavit evidence. The fact that a mortgage has been registered is not disputed. I have been requested by the respondents counsel to look at the relevant provisions of the RTA to establish whether the plaint discloses a prima facie case. I must note that this is a classic case where the doctrine that it is better to establish whether triable issues are raised rather than whether a prima facie case has been established becomes more persuasive. However both parties addressed me on whether a prima facie is disclosed and I will oblige.
The entry of the relevant mortgages memorials is signed by the Registrar of Lands and entered with instrument numbers. An entry of a memorial under section 51 of the Registration of titles Act is required to be received as conclusive evidence in court as to the matters stated in the memorial and that it was duly registered. Section 52 of the RTA provides for this position it reads:
“Whenever a memorial of any instrument has been entered in the Register Book, the registrar shall thereupon enter the like memorial on the duplicate certificate of title unless the production of the duplicate is dispensed with as provided in section 69; and he or she shall endorse on every instrument registered a certificate of the entry of the memorial on the folium of the register on which the same is entered and shall authenticate the certificate by signing his or her name to it; and that certificate shall be received in all courts as conclusive evidence that the instrument has been duly registered.” (Emphasis added)
The mortgage documents adduced in evidence in this court are deemed to be duly registered. The applicant’s plaint in the main suit challenges the validity of the mortgage and guarantees but does not give the grounds therefore or the facts in support of the submission that the transaction is void ab initio. Counsel for the respondent asked me to find that without an allegation that the mortgage deed was procured fraudulently, there is no cause of action. I can only say that section 176 of the RTA permits a mortgagee to impeach the title of the registered proprietor in an action. I will however limit my findings on perusal of the plaint to establish whether there is a prima facie case against the registered mortgage. As far as a prima facie case is concerned, a plaint is required to state all facts in support of a cause of action such as the pleading in this case that the mortgage is void ab initio. That the necessary facts in support of a cause of action must be alleged in the plaint itself was held in AG V Oluoch 1972 EA 392; Sullivan V Ali Mohamed Osman (1959) EA 239 and Jeroj Shariff & Co Vs Chotai Family Stores (1960) EA 374. The possible ground that Nile College was a nonentity was submitted from the bar and is not supported by affidavit evidence or averment in the plaint. Paragraph 5 of the plaint in the main suit avers “The plaintiff shall aver that the mortgage executed between the School and the Defendant is void and unenforceable in law and the same averment shall be made in respect of the personal guarantees that the plaintiff was obliged to give for the loan”. No facts are given in support of this alleged cause of action. Secondly it is clear that Nile College is a privately owned school and it must be presumed that it operates lawfully to manage the business of a school.
A private school cannot operate without a license. Secondly a private school is supposed to be registered and classified by the authorities. Any person who establishes or maintains any school which is not classified and registered in accordance with The Education (Pre – Primary, Primary and Post – Primary) Act, 2008 commits an offence. This Act establishes a special system for the management of schools. Some salient provisions are that under section 44 (4) thereof every school owner shall establish for his or her school a board of directors or management committee in accordance with regulations under the Act made by the Minister. Secondly, section 50 (1) provides that no organization or agency shall transact or allow the transaction of any business with or in any school without the prior sanction of the relevant board. Last but not least under section 58 (2) regulations set out in the third schedule apply to the management of post primary educational institutions other than universities or other tertiary institutions whether government or privately owned. It is therefore hard at this stage to conclude that there may be a void transaction such as the borrowing of money committed by the applicant or the school based on nullity of the institution contrary to the above Act. For me to find that the applicant operated a school without due classification or registration or on the basis of a nonentity would not if done (which I have not) favour the applicant.
I therefore find that the applicant has not established a prima facie case for impeachment of the mortgage or the guarantees whose deeds were executed between himself and the respondent. In any case it is inequitable for the person who presents an entity known as Nile College to the respondent to be permitted to raise the legality of that entity when the “entity” has admittedly borrowed money. It amounts to the applicant saying that “the entity known as “Nile College” which I used to sign a mortgage with you and for which I secured money is not a legal entity and therefore I cannot pay the loan”. As I said earlier a temporary injunction is an equitable remedy and at this stage the applicant in my view is not entitled to it. Let him establish his case of nullity, if any, in the main suit.
I am strengthened in this position by the fact that the school building which forms a substantial part of the suit is not in danger of being sold under the certificate of title advertised for sale. The school building is simply on other plots which have no threat of being sold in any way. If the display of the school building in the newspaper advert has injured the school, it can seek damages or appropriate remedies separately. Secondly the parents of the school children can be notified that the school is not being sold. If the letters signed by the applicant at one stage describing the school as Nile College Ltd imply that it is company, then it is not a party to this application or suit and no remedy can be granted to it. Even if it is not a limited liability company, should the applicant bring an action on behalf of the school in his own names? If he can, then he cannot challenge the transaction involving the mortgage deed to which he is a signatory. In other words a nonentity cannot be injured it simply does not exist. But if the school is injured, the fact that the applicant can plead in its own behalf only presupposed that the applicant is also liable for its acts.
In view of my findings above, there is no need for me to consider the other principles upon which temporary injunctions may be granted. Consequently exercising my discretion in this matter, I dismiss the applicant’s application for a temporary injunction with costs.
Signed and delivered in open court the 25th day of March 2011.
Hon. Mr. Justice Christopher Madrama
Judge
Delivered in the presence of:
Hon. Mr. Justice Christopher Madrama
Judge
