THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
HIGH COURT MISCELLANEOUS APPLICATION NO 865 OF 2014
(ARISING FROM HCCS NO 681 OF 2014)
HENRY KAZIRO LWANDASA}...............................................................APPLICANT
KYAS GLOBAL TRADING CO. LTD}....................................................RESPONDENT
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA
The Applicant seeks an order of a temporary injunction to restrain the Respondent Company or its servants, agents, assignees or any person claiming to have authority to act on its behalf from evicting him from his matrimonial property comprised in Kyadondo Block 217 plot 1282 at Kiwatule until the disposal of the main suit. Secondly the Applicant seeks an order of a temporary injunction to restrain the Respondent, its agents and servants from further transferring or dealing with the land comprised in Kyadondo block 217 plot 1282 in anyway until the disposal of the main suit and the costs of the application to be in the cause.
At the hearing of the application the Applicant was represented by Senkumba Ahmed of Messieurs Senkumba and Company Advocates while the Respondent is represented by Hilary Nziga of Messieurs Nzige Jamero and Company Advocates. The court was addressed in written submissions.
The facts are sufficiently contained in the written submissions which are considered below.
As far as the Applicant is concerned the grant of a temporary injunction is an exercise of judicial discretion to preserve the status quo until the question to be investigated in the suit can finally be disposed of after the parties have had opportunity of adducing evidence on the merits with the right of cross examination. The Applicant’s Counsel relies on the case of Kiyimba Kaggwa versus Hajji Abdul Nasser Katende  HCB 44 for the principles applied by the courts in applications for a temporary injunction. The principles are that the application should disclose a prima facie case with a probability of success or disclose that there are serious questions to be tried. Secondly an injunction will not be granted unless the Applicant might otherwise suffer irreparable injury which would not be adequately compensated for by an award of damages. Thirdly if the court is in doubt, it will decide the application on the balance of convenience. The Applicants Counsel further relies on the case of Asante Aviation Ltd versus Stanbic Bank (U) Ltd and another HCMA 670 of 2014 for the same principles.
As far as the first ground of disclosure of a prima facie case with a probability of success or serious questions to be tried is concerned, the Applicant needs to show that the claim is not frivolous or vexatious and that there are serious questions to be tried. He submitted on the nature of the transaction which concerns an agreement between the parties to which the Plaintiff insists that he negotiated and intended to enter into a loan transaction with the Respondent whereas the Respondent asserts that the transaction was of a sale of land and nothing more. The Applicants Counsel contends that the agreement was designed in such a way as to disguise the sale and it was misrepresented to the Applicant that he was signing a loan agreement.
Counsel further examined the provisions of the loan agreement to support his argument of a disguised sale. Pursuant to the agreement the Plaintiff/Applicant was supposed to pay 18% interest for the first two months which translates into 18,000,000/= and 10% for the remaining 10 months which translates into Uganda shillings 12,000,000/=. On 12 July 2014 the Plaintiff paid Uganda shillings 18,000,000/= to the Respondent as interest for the first month of July 2014 and it was received by the Respondent according to annexure "A3". The Respondent denies having executed a loan agreement and insists that this suit is a scheme by the Plaintiff to defraud it of its money. The Applicant deposes that he informed the Respondent’s Company Secretary about his financial problems and inquired whether the company would extend to him a further loan of Uganda shillings 32,000,000/= to enable him make a breakthrough in his business. The Applicant was constantly in communication with the Respondent’s Company Secretary to whom he disclosed his intention of obtaining a mortgage loan from his bankers to help him pay off the Respondent’s loan and the Respondent’s Company Secretary encouraged and even offered verbal advice on how to effect the transaction. However on 23 September 2014, while the Applicant had embarked on the mortgage process with Equity Bank, he discovered that his property had been transferred into the Respondent's name. The Applicant believes that the Respondent acted against its promise and there was misrepresentation, fraud and dishonesty on the part of the Respondent.
The Applicant secured the loan obtained from the Respondent with the suit property and in essence a mortgage was created. The Applicant’s Counsel relies on section 8 (1) of the Mortgage Act 2009 for the provision of the law that the property offered as security shall not operate as a transfer of any interest or right in land from the mortgagor to the mortgagee. Paragraph C of the recitals of the purported sale agreement makes it is apparent that it originated from a loan obtained by the Applicant from the Huadar Guangdong Chinese Company Ltd from whom the Respondent bought the loan. It is therefore apparent that it was a loan created after buying out of the loan of the earlier mortgagee.
The Applicant’s Counsel submitted that the Respondent elected to purchase a loan and cannot at the same time be buying the property. Furthermore there are serious questions for determination with a high likelihood of success to justify the grant of a temporary injunction. Counsel relies on the case of American Cyanamid versus Ethicon Ltd (1975) AC at 407 for the holding of Lord Diplock to the effect that it is not the function of the court to conclusively consider the evidence at this stage. Furthermore Counsel relied on the case of Muhwezi Aston versus Irene Number One and Another HCCA No 066 of 2009 where the issue was whether a document dated 16th of April 2007 was really a sale agreement or a security for the loan and Justice Andrew Bashaija held that there was a prima facie triable issue which required judicial consideration. There is a need for the court to investigate the issue and come up with a determination after both parties have adduced evidence.
Furthermore the Applicant’s Counsel submitted that the Respondent company contravened section 50 (1) and 55 of the Companies Act of 2012. He contended that a company may make a contract and a common seal or on behalf of the company but through a person acting under its authority expressly or implied. The sale agreement advanced by the Respondent was irregularly executed and it is a defective and invalid document. The signature next the Respondents name is not identified and witnessed by the seal of the company. Counsel relies on the case of General Parts (U) Ltd versus Non-Performing Assets Recovery Trust SCCA No. 5 of 1995 where honourable Justice Mulenga JSC expounded on how a limited liability company executes documents. Furthermore Counsel relies on the case of Alice Akiror and another versus Global Capital Save 2004 and another Commercial Court Case Number 149 of 2010 for the proposition that the common seal of the company ought to be affixed and where the signature is that of an agent, it should be stipulated clearly. Because no common seal was affixed anywhere on the purported agreement of sale of the property, Counsel submitted that the agreement was a nullity and incapable of having any legal effect. Furthermore the Applicant relies on the case of Makula International Ltd versus His Eminence Cardinal Nsubuga  HCB 11 for the proposition that a court of law cannot sanction an illegality and an illegality once brought to the attention of the court overrides all questions of pleadings. Consequently the Applicant has passed the first requirement of disclosing serious or arguable issues for trial or of a prima facie case with a probability of success.
On the second principle that the Applicant shall otherwise suffer irreparable injury which cannot be atoned for by an award of damages, the Applicants Counsel relies on the case of Daniel Jakisa vs. Kyambogo University HCMA 549 of 2013 for the definition of irreparable damage. Irreparable damage does not mean that there must not be a physical possibility of repairing injury but it means injury that is substantial or material and which cannot be adequately compensated for in damages.
Counsel submits that for the reason that the Applicant's family, comprising of his wife, children, grandchildren and extended family totalling 19 people have lived on the property for the past 30 years without interruption, an eviction would result into mental distress and anguish, loss of reputation and embarrassment among other effects submitted on which cannot be compensated for in damages.
Balance of convenience
The Applicants Counsel further submitted without prejudice that the balance of convenience favours the Applicant. He contended that the Applicant is in the occupancy of the suit property and has an interim order of maintaining the status quo. He further relies on Fellowes and another versus Fisher  All ER 829 and the judgment of Browne LJ that where other factors seem to be equally balanced, it would be prudent to take such measures as are calculated to preserve the status quo. The extent of disadvantages which will be occasioned to each party and which is incapable of been compensated is a significant factor in assessing where the balance of convenience lies.
If the property is sold or further transferred by the Respondent as it intends to do, great injustice would be occasioned to the Applicant in challenging the transaction in the main suit and damages would not be an adequate remedy. The Applicant stands to lose more if the injunction is not granted because it was both what he has so far paid in instalments and the property itself.
In reply the Respondents Counsel agrees with the principles for the grant of a temporary injunction.
On the first principle as to whether there is a prima facie case with a probability of success, he argued that the Applicant is required to show that there is a prima facie case with a probability of success in the pending suit and the court must be satisfied that the claim is not frivolous or vexatious and that there is a serious question to be tried according to the case of Victoria Construction Works Ltd versus Uganda National Roads Authority HCMA 701 of 2010. He submitted that the issue is whether the main suit establishes a prima facie case with a probability of success and the Applicant must demonstrate that there are serious questions to be tried in the main suit however there are no triable issues in the main suit before this court. The Applicants cause of action is for a declaration that there was a money lending contract for a loan facility with the Respondent. The Applicant attached a sale of land agreement with an option to purchase back as proof of a money lending/loan agreement. The Respondent on the other hand in paragraph 7 of the affidavit in reply states that there was a sale agreement between the parties with an option given to the Applicant to purchase back the property. The Respondent attached a copy of the sale agreement as evidence of the sale transaction between the parties and spousal consent. The Applicant in this affidavit in support of the chamber summons states that the Respondent advanced to the Applicant a loan of Uganda shillings 120,000,000/= payable with interest. But no such agreement is attached.
An agreement for sale with an option to purchase back is an agreement like any other agreement enforceable at law. Therefore the Respondent wonders why the Applicant refers to the agreement as a loan agreement. He submitted that the option to purchase contracts is discussed by Black's Law Dictionary Sixth Edition 1094. It defines an option as the right of election to exercise a privilege. It further states that an option contract is a promise which meets the requirements for formation of a contract. Counsel also relies on Yale Law Journal 643 (1913 -1914) page 644 for the proposition that an agreement giving an option to one of the parties is binding in case it is under seal or is based on consideration. Consequently the Respondent’s Counsel maintained that there are no serious triable issues disclosed.
Furthermore in the case of Wakanyira George David versus Kavuya Ben, Global Capital Save (2004) Ltd and Rutungu Properties Ltd HCCS 560 of 2006, the parties were in dispute as to the nature of the transaction that they had entered into. The Plaintiff averred that it had entered into a loan agreement while the Defendants stated that it was an agreement of sale but there was no evidence on record. The court held that the transaction in issue was a sale and not a loan.
Secondly the Applicant avers that there was fraud committed by the Respondent by luring the Plaintiff to sign a sale agreement, procuring transfer forms from the Applicant’s wife, expeditious transfer of property into his names and charging high interest rates. The Respondent in the affidavit in reply denies ever having been a moneylender and entering into any money lending contract. The property was transferred after two months upon the Applicant failing to exercise the option to purchase back the property. There is no affidavit attached from the spouse of the Applicant proving that her consent was procured by fraud and there is also no evidence to show that the transfer forms or any document was a forgery. The Applicant agrees that he paid Uganda shillings 18,000,000/= which the Respondent received. The attached receipt shows that it was an option to purchase back the property. Furthermore the Applicant alleges that he approached the Respondent and on July 2014 to pay Uganda shillings 10,000,000/= which the Respondent rejected and demanded for a full option fee. If the Applicant had paid the full purchase back consideration in the first month, he would have purchased back the property and no issue would have arisen. Under the agreement failure to exercise the option to purchase back for one month would be in breach of contract. However the Respondent waited for two months before it could transfer the property and the Applicant was informed of the intended transfer so no allegation of fraud can be sustained in the main suit. The Applicant’s case raises no triable issues or serious questions to be investigated and the application should be rejected with costs.
The Applicant in the affidavit in support further states that he had no money to purchase back the property and rushed to equity bank to obtain a loan using the suit property as security when the title for the same had been sold to the Respondent. How could the Applicant expect to purchase the property after he had failed to exercise the option to purchase back for the months of July, August and September? The conclusion is that the Applicant had no money to purchase back the property. In the premises the application ought to be dismissed with costs.
Furthermore there was an execution of the sale agreement. Arguments were advanced under section 50 (1) of the Companies Act 2012. The provision is however permissive and provides that a company may make the contract by execution under its common seal or on behalf of a company by a person acting under its authority express or implied. The provision is not mandatory. Furthermore section 50 (2) provides that contracts on behalf of a company may be made on behalf of the company in writing executed by any person acting under its authority, express or implied. The agreement was signed by Richard Michl, a director of the company. The company has not contested the agreement and in fact as to the agreement the company got registered on the title deed as proprietor. Furthermore the issue of legality of the agreement came up in submissions and is not in the affidavits in support or the plaint.
Furthermore Counsel submitted on the status quo. He contended that the purpose of an order for a temporary injunction is to preserve the status quo. It is granted to prevent the defeat of the ends of justice. The status quo is that the Applicant sold the property to the Respondent and the Respondent has already transferred the property into its names as part of the sale agreement. The Applicant only remained in the property because he had an option to purchase back the property which option he failed to exercise. The vendor admitted having received the money amounting to Uganda shillings 120,000,000/= from the Respondent and the status quo is that the Respondent bought the property and paid the full purchase price and the property in fact belongs to the Respondent.
On the question of whether the Applicant would suffer irreparable injury which cannot be atoned for by an award of damages, the Respondent’s Counsel submitted that the Applicant acknowledges having received Uganda shillings 120,000,000/= from the Respondent around June 2014. Secondly his wife consented to the sale of the property and there is a sale agreement executed between the parties. The Respondents Counsel contends that the Applicants argument that he resides in the suit property with his family is intended to defraud the Respondent of money paid to him because even if it was a money lending loan agreement where would he have shifted his family if he failed to pay? He further submitted that the Respondent has a counterclaim against the Applicant for continuously collecting rent from the tenants of the suit property which he cannot account for. It will be the Respondent to suffer irreparable damage if the temporary injunction is granted because the Respondent would be in danger of losing the benefit of Uganda shillings 120,000,000/= for the purchase of the property and all the rentals which the Applicant is collecting and will not be able to repay as he is a highly indebted person with no means to pay apart from continuous borrowing.
The Applicant has nowhere else to obtain the Uganda shillings 120,000,000/= he received from the Respondent as consideration even if he was to succeed in the main suit. If a temporary injunction is to be granted, it should be conditional upon the Applicant depositing the consideration he received before the hearing the main suit.
On the question of balance of convenience, the Respondent has already shown that it would be wholly inconvenienced if the temporary injunction is granted because he would have lost the consideration paid for the property. The facts show that the Applicant is an indebted man, and the Applicant is collecting all the rent from the tenants in the property which is supposed to be for the Respondent. Lastly the Applicant cannot be seen to take the money paid as consideration and also the suit property which will be a high level of injustice to the Respondent. The Applicant has not demonstrated anywhere that he has money to pay but was hoping to use the property as security for further borrowing. The Applicant cannot have the money paid to him as well as the property if he decided to sell therefore he is simply before the court for no other reason but to cheat the Respondent. In conclusion the Respondents Counsel submitted that the Applicant came before the court to buy time and inconvenience the Respondent and the suit is frivolous and vexatious and does not raise any serious questions to be tried and the temporary injunction ought to be refused and application dismissed with costs.
In rejoinder the Applicants Counsel contends that the submissions of the Respondents Counsel on whether the transaction was a sale transaction or a loan transaction are devoid of legal merit. It all applications for a temporary injunction it is settled that the Plaintiff need not establish a strong prima facie case but only needs to demonstrate that there are serious questions to be tried and that the action is not frivolous or vexatious.
According to Black's Law Dictionary Sixth Edition a pleading is frivolous when it clearly is insufficient on the face of it and the proponent can present no rational argument based upon the evidence or law in support of the claim and vexatious if it is instituted maliciously and without probable cause.
The Applicant demonstrated the problem faced with the transaction he thought he had entered into with the Respondent. The Plaintiff confirms that he entered into a loan transaction with the Respondent and the purported sale/purchase agreement was a disguise and solely designed by the Respondent to cheat the Applicant. The court cannot adequately establish exactly the nature of the transaction except by calling evidence.
The Applicants Counsel sought to distinguish the cases cited by the Respondents Counsel and I do not need to go into the details.
As far as the status quo is concerned, at the time of the Applicant's complaint to court, the status quo was that the Applicant is in possession of the suit land and the Respondent Company transferred the Applicant’s title into its name. The Respondents sought to evict the Applicant and the Applicant obtained an interim remedy from the court restraining the Respondent from evicting him. The Applicant wants the court to maintain him in the suit property as the de facto owner and restrain the Respondent from transferring further the suit property to another person until the court makes a conclusive determination of the suit. The grant of the temporary injunction would maintain the status quo as it is until the dispute is investigated and this suit finally determined.
On the question of irreparable injury, the Respondents Counsel submits that it is in danger of losing the benefit of Uganda shillings 120,000,000/= paid to the Applicant for the purchase of the property and all rentals the Applicant is collecting. Furthermore the Respondent in the alternative argued for the conditional grant of a temporary injunction if the court is inclined to grant the application.
In the entire transaction all that the Respondent was interested in was to have his principal sum of Uganda shillings 120,000,000/= and interest thereon repaid even the Applicant was willing to pay had it not been for the fraudulent transfer of the property. It ought to be noted that the Applicant whom the Respondent maintains has no means paid the second Respondent Uganda shillings 18,000,000/=. The intention of the Respondent was to make a profit and not to take possession of the property while that of the Applicant was to provide security for the borrowing and not to part with the property. The Respondent can easily be compensated.
On the other hand if the Applicant is thrown out of the suit property, he cannot be adequately compensated for by an award of damages unlike the Respondent.
Furthermore unlike other cases where the borrower does not dispute the validity of the transaction, in this case the Applicant disputes the transaction and faults the process taken by the Respondent in transferring his property. The conditional grant of a temporary injunction would not do.
As far as the balance of convenience is concerned, the Respondent’s Counsel submitted that it shall be highly inconvenienced if the temporary injunction is not granted because it would lose both in the consideration paid as well as the property and the rentals from the property itself. The balance of convenience favours the Applicant considering the circumstances of the case and is not in court simply to waste time or to cheat the Respondent.
I have duly considered the written submissions of the Applicant as well as the facts and circumstances of the case and the authorities cited.
A temporary injunction is an equitable remedy meant to maintain the status quo pending determination of the matters in controversy. The matters in controversy must relate in some way to the danger of property being wasted, damaged or alienated by any party to the suit or wrongfully sold in execution of a decree. The Applicant applied under the provisions of Order 41 rules 1 (a) and 9 of the Civil Procedure Rules which provides as far as is relevant 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, the court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and 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.
The ingredients of Order 41 rule 1 (a) of the Civil Procedure Rules are that there should first be a property in dispute in a suit between two or more parties. In this case the Applicant filed the main suit. In this suit the Applicants claim against the Defendant for declaration that the transaction executed between the Plaintiff and the Defendant was of money lending. Secondly it is alleged that the Defendant fraudulently transferred the Plaintiff’s land. Thirdly an order for cancellation of the Defendant's registration on the title and reinstatement of the Plaintiff, a permanent injunction restraining the Defendant from evicting the Plaintiff from his land and a declaration that the interest charged on the money lent by the Plaintiff was illegal, harsh and unconscionable as well as general damages and costs of the suit. I will in due course refer to the facts as averred in the affidavit in support of the application.
The second ingredient of Order 41 rule 1 (a) of the Civil Procedure Rules is to establish whether the property in dispute is in danger of being wasted, damaged, or alienated by a party to this suit or wrongfully sold in execution of a decree.
From the facts averred in the pleadings in the main suit as well as in the application it is not in dispute that the legal title has been transferred to the Defendant and the transfer is being challenged in the main suit. Secondly the Respondent in the affidavit in reply which we shall examine presently avers that it has sold the property to a third party and therefore it is evident that the Respondent wants to transfer the property to a third party. The property is in danger of being further alienated by a party to the suit according to the deposition of the Company Secretary of the Respondent in paragraphs 11, 17 and 18 of the affidavit in reply.
As far as the citation of section 38 of the Judicature Act is concerned, section 38 (1) of the Judicature Act gives the High Court powers to grant an injunction to restrain any person from doing any act as may be specified by the High Court. Secondly section 38 (3) (b) of the Judicature Act provides that where before or after the hearing of any cause or matter, an application is made for an injunction to prevent a threatened or apprehended waste or trespass, an injunction may be granted, if the High Court thinks fit whether the estate claimed by the parties or any of the parties are legal or equitable. Section 38 of the Judicature Act as gives the court powers to grant an injunction order to restrain any person from doing any act. Secondly an injunction may be granted to prevent a threatened or apprehended waste. The provisions define powers of the High Court and can be read together with Order 41 rule 1 (a) of the Civil Procedure Rules.
Finally as far as the principles for the grant of a temporary injunction are concerned the Applicant must show by his action that there are serious questions to be tried. Secondly he must demonstrate that the action is not frivolous or vexatious. Thirdly because of the inconclusive and contested nature of affidavit evidence the court should not at this stage resolve controversial issues of fact which require cross examination and matters of law which require detailed arguments but wait for final resolution at the trial of the main suit (See Kiyimba Kaggwa vs. Katende  HCB at page 43 and American Cyanamid Co. Ltd v Ethicon  1 ALL E.R. 504).
The Applicant is also required to show that it would otherwise suffer irreparable injury which cannot be adequately compensated by damages for any loss caused by the refusal to grant a temporary injunction. Where damages would be an adequate remedy and the Defendant would be in a financial position to pay, no interlocutory injunction should normally be granted even if there is a prima facie case with a high probability of success.
Where there is doubt as to the question of whether damages would be an adequate remedy, the application should be considered on the balance of convenience.
The grounds averred in the chamber summons are that the Respondent is involved in the business of money lending. Secondly the Respondent advanced a loan facility of Uganda shillings 120,000,000/= to the Applicant and payable in one year at an interest rate of 15% and 10% on 12 June 2014. Thirdly the transaction with the Respondent Company was purely a loan facility as opposed to a sale and purchase agreement. Fourthly the Respondent fraudulently transferred the Applicant’s property into its names on the basis of the fraudulent sale agreement on which the Applicant seeks the court intervention. Fifthly the Respondent has threatened the Applicant with a seven days written notice claiming to be the registered proprietor and that would cause irreparable damage to the Applicant. Sixthly the Applicant is now in danger of being evicted from his matrimonial house where he resides with his family. Seventhly it is in the interest of justice that an order of a temporary injunction is issued to restrain the Respondent from evicting the Applicant and further dealing with the property in anyway and to the hearing and determination of the pending suit against the Respondent. Ground number 8 is that the Applicant filed in this court civil suit in which he seeks the court intervention to determine the rights of both parties in the transaction which the suit shall be rendered nugatory if the temporary injunction is not issued. Ground number 9 is that the Applicant shall suffer irreparable damages if the Respondent disposes of the suit property unjustifiably and the balance of convenience favours the Applicant. The 10th ground is that the said civil suit has a high likelihood of success and there are serious questions to be tried by this court as the suit is neither frivolous nor vexatious. Ground 11 is that it is just and equitable that the application is granted.
In the affidavit in support of the application, the Applicant deposes that he had been the registered proprietor of the suit property. He had an outstanding loan obligation with Huadar Guangdong Chinese Co. Ltd in the amount of Uganda shillings 70,000,000/= secured by the said title deed and the lender had exercised the option of foreclosure. On 12 June 2014, when he was in the need of money to clear his debts, he approached the Respondent who is a well known moneylender for a loan facility to enable him to settle his loan obligations and to revamp his business which was facing serious financial challenges. The Respondent agreed to buy out the loan and further extend a loan facility of Uganda shillings 50,000,000/= to enable the Applicant to boost his businesses.
Accordingly the Respondent advanced the Applicant a loan of Uganda shillings 120,000,000/= repayable in the duration of one year subject to an interest rate of 15% for the first and second month and 10% monthly thereafter. During the loan negotiations it was agreed that the Applicant would pay the Respondent Uganda shillings 18,000,000/= as the instalments for the first two months of June and July 2014. For the remaining months he would be paying Uganda shillings 12,000,000/= per month only. The Applicant deposes that the total he was supposed to pay was Uganda shillings 156,000,000/= as full settlement of the entire loan covering the principal and interest.
Before the loan could be disbursed the Respondent sent the Applicant to his lawyers Messieurs Nzige Jamero and Company Advocates who signed the loan agreement but instead the lawyers gave him a document entitled "sale and purchase agreement" together with other forms. He was convinced that the drafting was only meant to ensure that customers comply with and meet their repayment obligations. The loan was secured by the Applicants property block 217 plot 1282 land at Kiwatule. The Applicant paid the first instalment of Uganda shillings 18,000,000/= and was issued with a receipt. The second instalment of July 2014 was due and the Applicant approached the Respondent to accept receipt of Uganda shillings 10,000,000/= before the end of the month but the Respondent declined to accept the same and demanded the whole amount of the monthly repayment instalment. At the beginning of August 2014, the Applicant informed the Respondent's lawyer Mr Isaac about his business proposal with a great profit margin that will enable him to pay his monthly repayments promptly, provided the Respondent made a top up of Uganda shillings 32,000,000/= to the Applicant.
The Applicant deposes that the director of the Respondent was not in the country but promised to inform him about the proposal and also demanded that the Applicant pays the instalment for July 2014. Because he was in need of the money, he approached Equity Bank, its bankers for a mortgage facility of Uganda shillings 300,000,000/= which had been cleared with the intention of utilising part of the amount to liquidate the entire outstanding loan obligation.
Through the diligence of Equity Bank, they established that the Respondent had fraudulently transferred the Applicant’s property into its names on 23 September 2014 under instrument number KCCA00010203. Thereafter he contacted the Respondent’s lawyers who informed him that the property was the Respondent’s property because the Applicant had failed to fulfil his loan obligations under the loan agreement. On 23 September 2014, the Respondent through Nzige, Jamero and Company Advocates threatened the Applicant with a notice of eviction and required him to vacate the suit premises within seven days from the date of the notice short of which the Respondent would forcefully evict the Applicant. Consequently the Applicant filed a civil suit in this court to challenge the alleged unlawful and fraudulent acts of the Respondent's agents.
The Applicant deposes that there is a substantial question to be investigated in this suit and the Applicant has a high chance of success in the main suit. That the Applicant and his family shall suffer irreparable damages and the main suit shall be rendered nugatory if the Respondent proceeds with the intended action of evicting him from the suit property. On the advice of his lawyers, the Applicant deposes that the court has jurisdiction to grant a temporary injunction restraining the Respondents from evicting him from his property until the suit is determined. He also believes that the balance of convenience favours him absolutely and the Respondent stands to lose when the court grants the temporary injunction.
In reply the Company Secretary of the Defendant/Respondent Company Counsel Atukunda Isaac deposed an affidavit in opposition to the application of the Applicant for a temporary injunction. In the affidavit in reply the Company Secretary of the Respondent deposes that around June 2014, the Applicant through the Respondent’s agent one Mugenyi Siraje approached the Respondents lawyers with a proposal to purchase the suit property at Uganda shillings 150,000,000/=. The firm of advocates carried out a search at the land registry and the physical verification of the property and confirmed that the Applicant was indeed the registered proprietor and the property was matrimonial property.
The law firm informed one of its clients who is the Respondent upon the opportunity of purchasing property which the Respondent duly accepted and negotiated the price with the Applicant and settled for Uganda shillings 120,000,000/= as the purchase price. The Applicant informed the Respondent that the property was above Uganda shillings 70,000,000/= which he owed to Huandar Guangdong Chinese Company Ltd which was about to sell the property at that price if he did not pay immediately. The Applicant suggested to the Respondent that it could buy the property at Uganda shillings 120,000,000/= and giving an option to purchase the same upon payment of option to purchase fee per month he would sell since he never had any readily available moneylender or buyer willing to purchase the same and paid the money owed to the above-mentioned company. The Respondent accepted the Applicant's proposal and on 12 June 2014, a sale of land agreement was signed between the Applicant and his spouse whereupon the Respondent paid the agreed purchase price which the Applicant duly acknowledged by signing the agreement according to a copy of the sale of land agreement and spousal consent and release of mortgage annexure "B".
It was a term of the agreement that for the Applicant to be granted an option to purchase the property, he must first pay the purchase back option fee to the Respondent every month if the Applicant intended to purchase back the property. The Respondent according to the agreement allowed the Applicant to stay in the property as long as the exercises the option to purchase back the property by paying the purchase back option fee every month but would vacate the premises within seven days upon failure to exercise the option. The Company Secretary further deposed that the Applicant for reasons known to himself did not to exercise the option to purchase of the property by neglecting to pay the purchase back option fee or consideration which was due on 12 August 2012 despite the constant reminders from the Respondent that if he has decided not to exercise the option the property would be sold to any other willing buyer. The Respondent in terms of the agreement after waiting for two months and upon the Applicant failing to exercise the option to purchase the property, transferred the property into its names according to the agreement and sold it to a third party. The Applicant’s affidavit is full of falsehoods in as far as the Applicant has never signed or had any negotiations with the Respondent. The Respondent has never and is not a moneylender but a commission agency company which buys and sells various properties according to a copy of the trading licence annexure "C". In order for the Applicant to defraud the Respondent, he filed this suit challenging the sale well knowing that he received Uganda shillings 120,000,000/= as the purchase price which he cannot account for even after failing to exercise the purchase back option. The Applicant’s action of filing a suit is an afterthought and the fraudulent scheme to defraud the Respondent of Uganda shillings 120,000,000/= which he received from the Respondent as consideration and the court should not sanction that act. The Applicant has continually and illegally occupied the said property, and collects monthly rent from the tenants for which the Respondent holds him accountable. Furthermore the Company Secretary deposes that the Applicant’s application for a temporary injunction is misconceived, fraudulent and overtaken by events as the Respondent is the registered proprietor of the suit property and has in fact sold the same to third party who is a bona fide purchaser. In the premises the court should be pleased to effect the sale of land agreement by ordering the Applicant to vacate the suit property with immediate effect to enable the Respondent obtain value for the purchase price paid to the Applicant. Furthermore the Applicant’s main suit discloses no cause of action and is not tenable and has no likelihood of success as the basis for the grant of a temporary injunction.
In rejoinder the Applicant deposes that he has thoroughly read the contents of the Respondent’s affidavit in reply to the chamber summons and with the help of his lawyers and has discovered that it contains several falsehoods.
He deposes that paragraph 2 of the Respondents affidavit in reply is false because he came to know about the Respondent through one Ahimbisibwe with whom they approached the second Respondent company with a proposal for a loan facility of Uganda shillings 120,000,000/= and not for purchase of the property. Secondly the Applicant deposes that he never approached the firm of advocates and the firm is the place of business of the company where the deponent and other people operate a business of money lending from where he negotiated the loan facility. Furthermore it was false of the Company Secretary of the Respondent to state that he informed the Respondent that his property was worth Uganda shillings 70,000,000/=. It only informed the Respondent that he wanted to settle the loan facility of Uganda shillings 70,000,000/= with the Chinese company and then use the balance for his business. Had he wanted to sell his property, he would have put up his property for sale. He never suggested to the Respondent that he was willing to sell his property neither did the request for an option to purchase the same.
The Applicant further denies the contents of paragraph 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of the affidavit in reply and asserts that the transaction in issue with the Respondent was for a loan facility which was repayable within one year and the issue of sale and purchase back option were not part of the negotiations. The Respondent’s agent who is the deponent to the affidavit in reply knows that the transaction was of money lending and not a sale. Because of their conviction that they were bond they resorted to acts of intimidation and arresting the Applicant for charges of obtaining money by false pretence yet the matters are before this court according to the photocopy of the police bond which is attached to the affidavit in rejoinder annexure "R1". HCCS 691 of 2014 was filed by the Applicant challenging the illegal and fraudulent actions of the Respondent who fraught with malice and dishonesty transferred his property into the Respondents name and is now seeking and threatening to evict him and his family from the matrimonial property. The issues in the main suit merit consideration by this honourable court and the application for a temporary injunction is not frivolous or vexatious or an abuse of the court process. Although the Respondent fraudulently registered itself on the title deed, the land is still in the names of the Respondent and the property has not been sold to any third party as alleged by the Respondent. However the Applicant believes that the Respondent is working very hard and seriously looking forward to dispose of the suit property which would render this suit nugatory.
I have carefully reviewed the evidence and pleadings to determine the question as to whether the Applicant's application discloses serious questions for trial or whether the claim of the Applicant is frivolous and vexatious.
The main defence of the Respondent to the claim of the Applicant that the transaction in question was a loan transaction is that it was a sale transaction based on the agreement executed by the parties on 12 June 2014.
The agreement expressly in recital "C" provides that the Respondent would purchase the loan obligations of the Applicant of Uganda shillings 70,000,000/=. Secondly in recital “D” the Respondent agreed to purchase the loan on an understanding that the property the subject of the agreement is sold to it at Uganda shillings 120,000,000/=. In the recital "E" it is written that the purchaser has given the vendor an option to purchase back the property at a consideration of Uganda shillings 138,000,000/= if the option is exercised within one month from the date of the agreement. In recital "F" it is further provided that the purchaser has given the vendor an option to renew the right to purchase back the property after the first month after payment of Uganda shillings 18,000,000/= as an option to purchase back fee which may be paid for the second month after the first month in case the vendor intends to renew his option to purchase back. The vendor shall pay Uganda shillings 12,000,000/= as purchase back option fee every month after the first two months in case he is still interested in purchasing back the property. In the recital "G" it is provided that the option to purchase back fee shall not form part of the party’s agreed consideration. It shall be paid every month whenever the vendor intends to retain the option to purchase back the property. The parties further agreed that in the month that the vendor intends to exercise the purchase back option, he shall pay both the purchase back consideration and the option to purchase back fee. The option to purchase back can only be exercised for one year upon payment of the fees failure of which the purchaser shall be at liberty to sell to any other party or transfer the property into its names.
The suit property is described as Kyadondo block 217 plot 1282 measuring approximately 0.151 ha.
The purchase back option fee was paid by the Applicant on 12 July 2014 according to the receipt annexure "A3" attached to the Applicants application. The Applicant paid Uganda shillings 18,000,000/=. It was indicated that the option was for the period 12 July 2014 to 12 August 2014. In the affidavit in support of the application the Applicant deposes that it was a loan and the option to purchase was the first instalment. In paragraph 12 of the affidavit in support he deposes that in July 2014 he approached the Respondent to accept a receipt of Uganda shillings 10,000,000/= but the Respondent declined to receive the same and demanded the whole amount. At the beginning of August 2014 he informed the Respondents lawyers that he needed a top up of Uganda shillings 32,000,000/= to enable him to revamp his business in order to pay back promptly.
Thereafter the Applicant approached Equity Bank for a mortgage facility whereupon equity bank established that the property had been transferred to the Respondent on 23 September 2014 under instrument KCCA 0001 0203.
The apparent controversy is not based on the written agreement between the parties. The agreement is clear that it was a purchase agreement with an option to purchase back by the vendor. The vendor paid the option to purchase back fee. Thereafter if he was to renew the option to purchase back the property, he would have to pay Uganda shillings 12,000,000/= each month as an option to purchase fee. The option to purchase fee did not form part of the purchase back price which was Uganda shillings 138,000,000/=.
If the Uganda shillings 12,000,000/= were to be taken as interest, it amounted to an interest of 10% per month on the amount of Uganda shillings 120,000,000/= excluding the first option to purchase back fee of Uganda shillings 18,000,000/=.
The agreement speaks for itself and provides that the Respondent had purchased the property. It was up to the Applicant to exercise the option of purchasing back the property. He had to renew the option every month. That would have been the end of the matter because the Applicant was in breach of the express terms of the agreement and does not deny being in breach.
Secondly the stumbling block to the Applicant’s argument is recital "H" which provides as follows:
"The parties have agreed that the month the vendor intends to exercise to purchase back, he shall pay both the purchase back consideration and the option to purchase back fee".
The Applicant never paid back the consideration together with the option to purchase back fee but paid the option to purchase back fee in the first month. Secondly the option to purchase back fee accrued each month for up to a year if the Applicant wanted to exercise the option to purchase back fee.
Using the Applicant’s argument that it was a loan, it would have been the payment of interest at a monthly 10% per month. That interpretation is however contrary to the express agreement of the parties. In paragraph 2 of the agreement the Applicant agreed to assign all his legal and equitable interest and title to the land for Uganda shillings 120,000,000/= which was the consideration. He further acknowledged receipt of Uganda shillings 120,000,000/= out of which Uganda shillings 70,000,000/= was paid to Haudar Guangdong Chinese Co. Ltd. He further agreed to hand over the duplicate certificate of title and any other documents that may be necessary for the transfer of the property into the names of the purchaser. Furthermore it was provided in paragraph 3.1 (b) that the Respondent may elect immediately upon failure to exercise the purchase back option by failing to pay the purchase back fee to transfer the property into its names.
This is what the Respondent did upon the failure of the Applicant to pay the option to purchase fee.
Finally the question is whether the Applicant’s application and the suit is frivolous or vexatious. The Applicant argues that it was a loan agreement disguised as a sale agreement. This does not appear from the wording of the agreement. To make matters worse the Respondent proved in the affidavit in reply a fact which is not in dispute that it got the consent of the spouse of the Applicant pursuant to the Land Act cap 227.
What the Applicant alleges is inadmissible evidence under the provisions of section 91 of the Evidence Act cap 6 laws of Uganda. The application of the Evidence Act is something that can be considered from a mere perusal of the pleadings of the parties. The Applicant attached the agreement as annexure "A2". On the other hand the Respondent in the affidavit of its Company Secretary attached the agreement together with the consent of the Applicant’s spouse. In the affidavit in rejoinder the Applicant denies the intention to sell the property.
Section 91 of the Evidence Act provides as follows:
“91. Evidence of terms of contracts, grants and other dispositions of property reduced to form of document.
When the terms of a contract or of a grant, or of any other disposition of property, have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence, except as mentioned in section 79, shall be given in proof of the terms of that contract, grant or other disposition of property, or of such matter except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained.”
Exceptions to the exclusion of oral testimony to vary the terms of a written contract are found under section 92 of the Evidence Act. Section 92 provides as follows:
“92. Exclusion of evidence of oral agreement.
When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to or subtracting from its terms; but—
(a) any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto, such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration or mistake in fact or law;
(b) the existence of any separate oral agreement as to any matter on which a document is silent, and which is not inconsistent with its terms, may be proved. In considering whether or not this paragraph applies, the court shall have regard to the degree of formality of the document;
(c) the existence of any separate oral agreement, constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved;
(d) the existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant or disposition of property may be proved, except in cases in which that contract, grant or disposition of property is by law required to be in writing or has been registered according to the law in force for the time being as to the registration of documents;
(e) any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description may be proved if the annexing of the incident would not be repugnant to, or inconsistent with, the express terms of the contract;
(f) any fact may be proved which shows in what manner the language of a document is related to existing facts.”
The law expressly quoted above forbid the admissibility of any oral agreement or statement as between the parties for the purpose of contradicting, varying or adding or subtracting to the terms of an agreement that has been proved in accordance with section 91 of the Evidence Act. In other words I am forbidden from considering the Applicants statement as contradicts the express terms of the agreement between the parties. The law supports the doctrine of freedom of contract. A person of sound mind will be held to be bound by his own agreement written while in a sound state of mind. Adults are free to contract away their property rights for whatever consideration. Consideration need not be adequate. In most cases the courts would uphold the freedom of contract which is the basic foundation of commerce.
It was imperative for the Plaintiff to aver that there are grounds for the exclusion of the terms of the written agreement in terms of section 92 of the Evidence Act. In other words under section 92 (a) of the Evidence Act, any fact may be proved which would invalidate any document. Such facts include fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want of or failure of consideration or mistake of fact or law. In other words the Plaintiff has to prove the grounds which would invalidate a contract between the parties which grounds would be the same for setting aside a consent judgement. How was the Applicant misled into signing an express agreement and also obtaining the consent of his wife to the transaction? What was the deception? What were the lies? To make matters worse, the Applicant complied with the terms of the contract by paying Uganda shillings 18,000,000/= after its execution. Secondly the Applicant had received the whole consideration agreed at Uganda shillings 120,000,000/=. Possibly if the law was not considered, one might suggest that the agreement is unfair. The Applicant does not deny signing the agreement. In fact paragraph 9 of the affidavit in support of the application tells the whole story where he deposes as follows:
"The Respondent before the loan could be disbursed sent me to its lawyers M/s Nzige, Jamero & Co. Advocates at Plot 7 & 9 Industrial Area to sign the terms of the loan and the lawyers give me a document that purported to be a 'sale and purchase agreement' together with other forms and I was convinced that the drafting was only meant to ensure that customers comply and meet their repayment obligation."
In other words the Applicant was aware of the terms of the agreement but only thought that it was meant to ensure that he fulfilled his repayment obligations. That may well be true but he agreed to execute the agreement even though its express terms were very unfavourable to him. The fact that the agreement was a disguised loan is plausible if the provisions of the Evidence Act are ignored. Moreover the Applicant had been reported to police for obtaining the money by false pretence.
The issue of the Respondent not having duly executed the agreement under the Companies Act section 50 is neither pleaded nor averred in the affidavit in support of the application. I further agree with the Respondents Counsel that the issue as raised by the Applicant’s Counsel can be determined by holding that the provision in question is discretionary and not mandatory.
In the affidavit in support of the chamber summons the Plaintiff does not plead any fraud or any ground for vitiating the agreement. The fraud pleaded relates to the transfer of the property into the names of the Defendant/Respondent. However the transfer was the entitlement of the Respondent under the express terms of the agreement.
In the premises the first ground for the grant of a temporary injunction which is for the Applicants to demonstrate that there are serious questions of law to be considered is not evident. As I have noted above it is imperative in the plaint to demonstrate that the express agreement between the parties was invalid and the facts for the invalidity have to be averred in the plaint or in the application. It may be contended that it was sufficient for the Applicant to say that he was lured into execution of the agreement. Let that be a matter for trial. I am not in doubt and in the exercise of the discretionary powers of this court, let the Applicant exercise other options but not seek the equitable remedy of a temporary injunction.
In the meantime the law is that an express agreement cannot be varied by oral statements except as is admitted to prove invalidity of the agreement or the circumstances of execution of the agreement. Otherwise the agreement speaks for itself.
On the basis of that, the Applicant’s application stands dismissed with costs.
Ruling delivered in court on the 13 March 2015
Christopher Madrama Izama
Ruling delivered in the presence of:
Boaz Wandera: Court Clerk
Senkumba Ahmed together with Kigingo Kassim for the Applicants
Hilary Nzige for the Respondent
Applicant in court
Isaac Atukunda Company Secretary of the Respondent in court.
Christopher Madrama Izama