THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT DIVISION)

MISC. APPLICATION NO. 334 OF 2013

(Arising from Civil Suit No. 446 of 2011)

1. YEFUSA GULOBA
2. PROSCOVIA NAMUSABI………………………………                                                                                                                                APPLICANTS

VERSUS

R. L JAIN………………………………………………………RESPONDENT

BEFORE: HON. LADY JUSTICE HELLEN OBURA

RULING

This is an application brought by Chamber Summons under the provisions of Order 41 rules 1 and 9 of the Civil Procedure Rules (CPR), section 33 of the Judicature Act and section 98 of the Civil Procedure Act (CPA) Cap. 71.  It seeks for the following orders:

1. That a temporary injunction doth issue restraining the respondent, his agents and persons acting through him from evicting the applicant from the suit land, selling or in any other way dealing with the land pending the hearing and determination of the main suit.
2. Costs of the application be provided for.

The main grounds of the application are that:

1.  the applicants are the owners of land comprised in Kyadondo Block 190 Plot 161 at Kito.
2. the respondent has issued an eviction notice against the applicants and has advertised the applicant’s property for sale under auction.
3. the respondent’s acts are prejudicial to the ongoing suit between the parties.
4.  it is in the interest of justice that a temporary injunction doth issue restraining the respondent, his agents and all persons acting through him from evicting the applicant from the suit land, selling or in any other way dealing with the suit land pending the hearing and determination of the main suit.

The application is supported by the affidavit and further affidavit of Proscovia Namusabi, the 2^nd applicant. In answer to the application is an affidavit in reply sworn by R.L Jain, the respondent.

By way of background to this application, it is alleged that between 06/05/2010 and 05/12/2010 the applicants obtained from the respondent fourteen different short term loans each for one month at the different rates of interest of 12% and 15% per month. It is also alleged that the parties executed formal loan agreements for all the loans. The respondent contends that the applicants pledged to the respondent their jointly owned land and developments comprised in Kyadondo Block 190 Plot 161 situate at Kito, Magere; their kibanja land and developments situate at Bulamu Deputy Zone, Nangabo, Kasangati, the second defendant’s school lands and developments comprised in Kyadondo Block 121; 238; 249; 259 and 333 situate at Nangabo, Kasangati, Wakiso district.

It is the respondent’s contention that the applicants also executed a legal mortgage in respect of their aforestated land at Kito, Magere. It is further alleged that the applicants deposited with the applicant their certificate of title, the kibanja land sale agreement and that as further security the respondent also received from the 1^st applicant and the Nile College Limited, (which is not party to these proceedings) 18 cheques drawn by the Nile College Limited. It is the respondent’s case that the applicants have refused to repay the total consolidated loan amount of Ushs. 1,108,115,000/=.  On the other hand the applicants deny liability and claim that all the amounts advanced to the 1^st applicant were cleared save for a loan of Shs. 8,000,000/= on which the respondent added interest of U. Shs. 960,000/=.

When this application came up for hearing, Mr. Ali Sebaggala represented the applicants while Mr. Magellan Kazibwe for the respondent was absent. This court directed both counsel to file written submissions in the matter which they did and have been considered in this ruling.

In his submissions, counsel for the applicants referred to the law on temporary injunction as was discussed by Justice Akiiki Kiiza in Sawuya Nalweyiso vs GKO Medicines & 2 others High Court Misc. Application No. 1048 of 2008 (Arising from Civil Suit No. 436 of 2008) where the Court considered the case of Robert Kavuma vs Hotel International SC Civil Appeal No. 8 of 1990 in which their Lordships stated the conditions that must be satisfied before grant of a temporary injunction.

The applicants’ counsel also relied on LD Cotton International vs African Farmers Associates BV & Another (1996) HCB 37 and Joseph Ndaula vs Allied Bank International  H.C. Misc. application No. 88 of 1998 where it was held that at this stage, there is no duty on the part of the applicants to show a possibility of success in the head suit.

In addition to that counsel for the applicants cited Godfrey Ssekitoleko & 4 others vs Seezi Peter Mutabazi & 2 others UCA Civil Appeal No 65 of 2001 where their Lordships stated:

“The Court had a duty to protect the interest of parties pending the disposal of the substantive suit. The subject matter of a temporary injunction is the protection of legal rights pending litigation. In exercising its jurisdiction to protect legal rights to the property from irreparable or serious damage pending the trial, the court does not determine the legal rights to property but merely preserves it in its actual condition until legal title or ownership can be established or declared”

Their Lordships further stated:

“When granting a temporary injunction the court has to confine itself strictly to the immediate object sought. It is enjoined as far as possible to abstain from pre-judging the question in issue of the merits of the head suit.”

Counsel for the applicants submitted that applying the above principles to this application the applicants have shown that they have a claim over the suit property as registered proprietors and are in possession thereof.

With regard to the respondent’s claim that he has a right to foreclose even when the matter is before Court, the applicants’ counsel submitted that the issue of the mortgage and claimed amounts are still a subject of determination for this Court and so the respondent’s exercising the right to foreclose is a misconception of the legal principles. It was argued for the applicant that the respondent has to wait for the conclusion of the court hearing before he can exercise any of the alleged rights under the mortgage as the rush to sell off the suit property points to ill motive meant to defeat the suit.

As to whether the respondent sold off the mortgaged property to Stephen Kayemba for Ug. Shs. 150,000,000/=, counsel for the applicants referred to the 2^nd applicant’s evidence that she lodged a caveat on the property on 2^nd May 2013. It was submitted for the applicants therefore that the caveat is still lodged on the property and the property is still registered in the names of the applicants and the 2^nd applicant is in actual possession. It is the applicant’s contention that the aforesaid alleged sale is a fiction by the respondent to try to defeat the applicants’ interest in the property and that if there is any such sale it is vitiated by the caveat and the alleged purchaser cannot get any better rights.

In answer to those submissions, counsel for the respondent referred to Order 41 rule 1(a) of the CPR and pointed out that any property in dispute in a suit must be in danger of being wasted, damaged or alienated; that there must be danger that the property is about to be sold off or alienated and lastly that the order for temporary injunction is intended to restrain or prevent the sale or alienation. In relation to that counsel for the respondent submitted that in the instant case the property was already sold off on 31/05/2013 and so there is no need for a restraining order to prevent what was done.

The respondent’s counsel reiterated the principles governing the grant of temporary injunctions as laid down by Lord Diplock in American Cyanamid Co. vs Ethicon Ltd (1975) AC 396 which were followed in the case of Robert Kavuma (supra).

In relation to a prima facie case with a high probability of success, the respondent’s counsel contended that there is no chance at all for the applicants to win HCCS No. 446 of 2011 because there is neither contention on the mortgage in the main suit nor evidence of payment of the sum claimed or substantial part thereof annexed to the defence or to this application. It was also argued for the respondent that the applicants have no counter claim in the main suit. In addition that the subject matter in the main suit is recovery of Ug. Shs. 1,108,115,000/= but not sale of the mortgaged property.

On irreparable damage, counsel for the respondents cited Kiyimba Kaggwa vs Katende [1985] HCB 43 for the definition of irreparable injury. He submitted that the applicant averred in her affidavit that she will suffer irreparable loss and damages if not granted the order without adducing any iota of evidence on the kind of loss or damage she has suffered or will suffer. He noted that Order 41 r 1(a) of the CPR is clear to the effect that the applicant must prove by affidavit or otherwise that she will suffer loss or damage for the order of temporary injunction to be granted. Counsel also contended that the applicants never filed a counterclaim to protect their property which they mortgaged and so they do not deserve any protection at this stage.

It was submitted for the respondent that since the applicants have failed to prove that they fully paid off their debts and were entitled to a release of the mortgage and return of their title, they cannot be legally entitled to protection from foreclosure by the mortgagee. The respondent’s counsel further argued that even if the applicants proved how they will suffer irreparable injury, loss or damage, the said evidence will be superfluous since the property is no longer in the hands of the respondent but in those of the purchaser, Stephen Kayemba, who is not a party to the application.

Counsel for the respondent relied on the case of Kakooza Abdullah vs Stanbic Bank U) Ltd High Court Misc. Application No. 614 of 2012 (Arising From HCCS No. 455 of 2012 where Madrama J. held that the general rule is that sale of property which is pledged as security in a loan agreement or mortgage cannot lead to irreparable loss per se and submitted that when the applicants executed a mortgage they accepted the sale of their property upon default.

It was submitted for the respondent that the balance of convenience is in the respondent’s favour since the respondent is likely to suffer greater inconvenience to reverse a sale which has already occured and yet the property is owned by a one Stephen Kayemba who is not party to this application.

In a brief rejoinder, counsel for the applicants maintained that any party to suit and not just the plaintiff only may file an application for a temporary injunction to preserve the suit property pending the hearing and determination of the main suit.

I have had the opportunity of reading the pleadings in this matter with the relevant documents attached. I have also given due consideration to the submissions made by both counsel. It is trite that the purpose of a temporary injunction is to preserve matters in status quo until questions to be investigated in the suit can be finally disposed of. See Kiyimba Kaggwa (supra). The conditions for grant of an interlocutory injunction as set out by Spry VP in the leading case of Geilla v Cassman Brown and Co. Ltd [1973] EA 358are as follows;

 (1)    An applicant must show a prima facie case with a probability of success;

 (2)    An interlocutory injunction will not be granted unless the applicant might otherwise suffer irreparable injury which would not be adequately compensated for by damages;

(3)     If the court is in doubt, it will decide the application on a balance of convenience.

Before I delve into these conditions, I would like to first deal with the issues raised by counsel for the respondent that this application was brought by the defendants who do not even have a counterclaim and the property is not in dispute as stipulated by Order 41 rule 1 (a) of the CPR. First of all, it is noteworthy that much as the applicants are the defendants in the main suit they are not precluded from applying for a temporary injunction because the rule does not say the applicant must be a plaintiff.

Secondly, upon perusing the pleadings, I find that much as the property is not directly in dispute, the entitlement of the respondent to recovery the alleged loan which in effect would justify sale of the property as part of the recovery process is yet to be determined in the main suit. This is because in his amended plaint, the respondent claims a total consolidated loan amount of Ushs. 1,108,115,000/= inclusive of interest. The loan sums were allegedly lent to the applicants between 06/05/2010 and 05/12/2010 in form of fourteen different short term loans each for one month at the different interest rates ranging between 12% and 15% per month. 

According to the demand notice issued to the applicants the total principle loan sum accumulated to Shs. 67,200,000/= but the interest pushed the figure to Ushs. 1,108,115,000/=. It is also alleged that the 1^st defendant/applicant pledged as security certificate of title for land and a residential home comprised in Kyadondo Block 190 plot 161 situate at Kito, Magere which is jointly owned with the 3^rd defendant who allegedly gave her consent to mortgage the land title by execution of a mortgage deed.

On the other hand the applicants in their written statement of defence deny liability  and claim that on several occasions the 1^st applicant obtained personal loans from the respondent which he paid back before he could be advanced further loans and that in the event of any outstanding loans then such amounts would be included in the new loan. The 1^st applicant only admitted an outstanding balance on the loan of Shs. 8,000,000/= on which the respondent allegedly added interest of Shs. 960,000/=.

The defendants also contend that the respondent is not entitled to charge the interest he allegedly charged because he is not a licensed money lender and as such all the money lending transactions where interest were charged are null and void. The 1^st applicant denies execution of a mortgage deed and alleges further in the written statement of defence that he was made to sign black documents.

From the above pleadings, the cause of action in the main suit is for recovery of money allegedly lent to the applicants. Much as there is mention of a mortgage deed executed by the parties, the pleadings were silent on the steps taken by the respondent/plaintiff in enforcing the rights conferred by the same. It was only during the pendency of this suit that the respondent’s lawyer gave the applicants notice of default and intention to sale off the said land and developments thereon. This was shortly followed by an advertisement of the property for sale in the newspaper and an eviction notice to the occupants of the property issued by the auctioneer duly instructed by the respondent.

It was upon those steps being taken by the respondent that the 2^nd applicant lodged a caveat on the property and brought an application for an interim injunction as well as this application for a temporary injunction. To my mind sale of the property cannot be divorced from the main suit because the right to sell the same can only accrue when the loan is proved. In the event that the applicants become the successful party in the main suit then sale of their property would not be justified.

As regards the first condition for grant of a temporary injunction, gleaning from the above pleadings and the documents attached, it is my firm view that the plaintiff/respondent’s case and the defendants/applicants’ defence raise triable issues that include proof of the loan advances and the agreed interest rate as well as whether that interest rate is conscionable and ascertainment of the amount outstanding.  That would in my view satisfy the requirement of the first condition and this court would be inclined to grant this application on that basis alone.

As for the second condition, it was the 1^st applicant’s case that she shall suffer irreparable loss/damage and the main suit shall be rendered nugatory if the respondent, his agents and all persons acting through him are not stopped from evicting the 1^st applicant from the suit land, selling or in any way dealing with the suit land. On the other hand it is the respondent’s submission that the sale of the mortgaged property by the respondent was contemplated by the parties upon the applicant’s default on the 14 loans and so it cannot lead to irreparable loss.

The test that is applied for irreparable injury was laid down by Lord Diplock in American Cyanamid Co. v Ethicon Ltd (supra) and the principles have been followed in a number of cases in Uganda. It is to the effect that if damages in the measure recoverable at common law would be an adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted however strong the plaintiff’s case appears at this stage.

In the instant case it is not in dispute that the property is a residential home to the applicants. Loss of residential home in my view would cause an irreparable damage that cannot be compensated by damages because of the sentimental values attached to it. For that reason, I would find that the balance of convenience favours granting this application and preserving the status quo until the issues in the main suit are conclusively determined. I would therefore be inclined to grant this application.

In coming to the above conclusion, I also considered the respondent’s contention that the property had already been sold to a third party. It is the firm view of this court that sale subject to a caveat is not absolute sale. Absolute sale is defined in Black’s Law Dictionary 7^th Edition as;

“A sale in which possession and title to the property pass to the buyer immediately upon the completion of the bargain”.

In Frederick K. Zaabwe vs. Orient Bank Ltd & Others Civil Appeal No. 4 of 2006, where land was also sold subject to a caveat lodged by the registered proprietor, Kaureebe, J. in the lead judgment stated;

“Be that as it may, the caveat on the title was still subsisting at the time when the third party, one Ali Hassan purchased the property and signed a sale agreement with the 1^st respondent………..How can a purchaser who buys property subject to a caveat claim not to have had notice, the merits or demerits of the caveat notwithstanding. In my view, Ali Hassan bought property that was subject of a caveat. He cannot be a bona fide purchaser without notice. In the circumstances, the transfer to him is defeated by fraud”.

My understanding of the above authority is that sale subject to a caveat is not absolute. The sale can be successfully challenged because the buyer cannot claim to be a bona fide purchaser of value without notice when the caveat clearly gave that notice.

In the instant case, the 2^nd applicant deposed in the further affidavit in support of the application that she lodged a caveat on the property on 2^nd May 2013. She attached a copy of the caveat and the supporting affidavit which confirm that the same was registered before 31^st May 2013 the appointed date of sale of the property and the date when the purported sale agreement was executed. I am therefore convinced that the respondent cannot rely on the alleged sale to deny the applicants the right to have the status quo prior to the purported sale preserved pending disposal of the main suit.

On the whole, this court is satisfied that this is a proper case that merit preservation of the status quo and since this application meets all the conditions for grant of a temporary injunction it is accordingly allowed.

In the result, a temporary injunction is issued restraining the respondent, his agents, and all persons acting through him from evicting the applicants from Kyadondo Block 190 Plot 161 Land at Kito, selling or in any other way dealing with the land pending the hearing and determination of the main suit.

Costs of this application shall be in the main cause.

I so order.

Dated this 7^th day of November 2013.

Hellen Obura

JUDGE

Ruling delivered in chambers at 3.00 pm in the presence of Mr. Ali Sebaggala for the applicant and Mr. Magellan Kazibwe for the respondent. Both parties were absent.

JUDGE

07/11/13