Miao Huaxian vs Crane Bank

7/25/2019 Miao Huaxian vs Crane Bank

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THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO

935

OF

2015

(ARISING FROM CIVIL SUIT NO 743 OF

2015)

MIAO HUAXIAN} APPlICANT

VS

1. CRANE BANK LTD}

2. FIT AUCTIONEERS COURT BAILlFFS} ............................. RESPONDENTS

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicant filed this application for a temporary injunctive order to issue

restraining the Respondents, their agents, servants or anybody deriving authority

from them from foreclosing and/or selling the Applicant's mortgaged property

comprised in LRV 2744 Folio of 25 Plot 47 Nabugabo Road and LRV 2339 Folio 19

Plot 53 Mackenzie Vale, Kololo, Kampala and for costs of the application to be

provided for.

The grounds of the application are that the Applicant filed HCCS 743 of 2015

against the Respondents challenging among others the sanction letter and

resultant mortgages as null and void and unenforceable for contravening the

Illiterates Protection Act Cap 78. Secondly the suit discloses substantial issues for

court to investigate and has a high likelihood of success but is yet to be fixed for

hearing and determination. Thirdly the first Respondent through its agent the

second Respondent advertised the Applicant's mortgaged property for sale and

the sale is slated for 15 November 2015. Fourthly if not restrained by the orders

sought in the application, the Applicant shall be exposed to irreparable loss for

which no amount of monetary compensation shall avail and prosecution of the

Decision o/Holl.

Mr.

Jtstice Christo~ ?1ta.dramll /zum a *, *-7+:

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main suit shall be rendered trifle. Fifthly the balance of convenience is in favour of

the Applicant for the grant of the orders sought in the application. Lastly that it is

fair, urgent and in the interest of justice that the interim injunctive orders sought

in the application is granted.

The application was fixed for the 13 April 2016 at 9:30 AM for hearing. However

in High Court Miscellaneous Application Number 936 of 2015 the Applicant

sought for and obtained an interim order from the registrar of this court on 12

November 2015 stopping the sale of the mortgaged property. The order was

supposed to remain in force until 10 February 2016 when Miscellaneous

Application Number 935 of 2015 was to be heard.

The Applicant is represented by Messrs Muwema and Company Advocates while

the Respondent is represented by Messieurs MMAKS Advocates.

Subsequently in a letter dated

is

of November 2015 Messieurs MMAKS

advocates wrote to the registrar seeking an earlier hearing da'te for the main

application than that fixed in the interim order.

I have carefully considered the matter and it is apparent from ground 3 of the

chambers summons that the Applicant in the interim order got the main remedy

of stopping the sale of the mortgaged property which was slated for 15 November

2015. When Counsel Masembe Kanyerezi of MMAKS advocates appeared in open

court in the absence of the Applicant's Counsel some days later he sought for an

earlier date on a complaint that the interim order was not properly issued. I

directed that an earlier day be fixed for hearing the parties and a hearing notice

was extracted for the is of December 2015 much to the displeasure of the

Applicant's and Counsel which displeasure is reflected in a letter protesting fixing

an earlier date for hearing the. main application. The letter addressed to the

registrar is dated

io

December 2015.

On the is of December 2015 Counsel Friday Robert Kagoro appeared for the

Applicant and Counsels Masembe Kanyerezi appeared for the Respondent.

D eci sto n

of H on . Mr. Jus tice

ChrislO~

?1ta -dr am a /zum a

**_7+:


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I made reference to the Mortgage Regulations 2012 and Regulation 13 thereof on

sale of mortgaged property and Office Instruction No.1 of 2014 issued by the

Principal Judge as a guide to registrars on issuance of interim orders.

Both Counsels of the parties agreed to have the application adjourned to

is

of

December 2015 to make an attempt at amicable settlement of the application.

The application for adjournment was granted and the parties did make an

attempt to resolve the problem amicably. However on 18 December 2015 when

Counsels appeared to report on the matter, it transpired that attempts to have

the matter resolved amicably failed.

At the hearing the Applicant was represented by Counsel Charles Nsubuga

assisted by Counsel Andrew Oluka and the Respondent represented by Counsel

Masembe Kanyerezi assisted by Counsel Earnest Sembatya when the parties

reported that negotiations to have the matter resolved amicably failed. I

requested Counsel to address the court specifically on the provisions of the

Mortgage Regulations 2012 particularly regulation 13 which deals with

adjournments of sale and the stoppage of sale of mortgaged property on the

request of or application of the Mortgagor.

Counsel Nsubuga submitted inter alia that by consent of the Parties the

outstanding amount due to the Respondent is US 1,135,3898.94 and Uganda

shillings 2,626,871,564/-. In light of the provisions of the Mortgage Regulations

2012 the Applicant had proposed to pay Uganda shillings 4,000,000,000/= only by

the 14thof January 2016. The Applicant proposed to pay the balance by the

zs

of

February 2016. -

In reply Counsel Masembe submitted that the amounts owed to the Respondent

as of is December 2015 is US 1,290,807 and Uganda shillings 2,761,555,420/=.

In addition there were recovery charges which he did not quantify as it did not

affect the application. When the amount owed in US dollars is added to the

amount owed in Uganda shillings upon conversion of the US dollar to Uganda

shillings the total amount owed the Respondent by the Applicant is Uganda

shillings 7,279,379,920/=. He submitted that if the Applicant wants the interim

D ,ciSlon

o fH on .

M r.

Justice

ChrislO~?1tadrama Iz t rmE

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injunction to continue she will have to pay 50% of the outstanding amount to the

Respondent prior to the court order extending the injunction under regulation 13

(5) of the Mortgage Regulations 2012 and this amounts to Uganda shillings

3,639,689, 960/=. If they want the order to continue, the deposit should be made

by the close of business on Monday 21

st

of December 2015. The reason why the

Respondent should not continue harping on settlement is that the security would

be released. He prayed that in the absence of making that deposit the interim

injunction should be vacated leaving the Respondent free to realise its security in

the property.

Counsel Charles Nsubuga in rejoinder did not agree. He contended that the

securities held by the Respondent were 4 in total. The properties are prime

properties whose value is over and above what the Applicant owes the

Respondent. The Applicant expected to get refinancing from another bank to

offset what it owes the Respondent but only wanted a release of one security by

the Respondent to pledge to another bank (Orient Bank Ltd). The refinancing

would settle the outstanding amount.

With leave of Court Counsel Masembe rejected the proposal of release of security

on the ground that property securing an outstariding obligation of about 8 billion

Uganda shillings cannot be released on the payment of less i.e. half of what is

outstanding.

On whether the proposed refinancing bank could make an undertaking

guaranteeing settlement of the outstanding sums, both Counsels agreed that an

undertaking would work but the practical aspect within the limited time left for

the parties to resolve the Application amicable was doubted. The Respondent was

willing to release security upon an undertaking by another bank to pay the

outstanding loan amount. Because there was no undertaking the application was

adjourned for ruling on the terms of grating an injunction or vacating the interim

injunction order to the 21

st

of December 2015 at 9.00 am.

I have carefully considered the Application, and submissions of counsel. The

genesis is that a plaint was filed on the 9 of November 2015. Summons to file a

D eciato n afH on. Mr. Jist ice C hrh /op Mtt ?J ta.dr am a z um iJ -7+:

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defence was issued for service on the Respondent by the court on the

io

of

November 2015. The Applicant filed an application for an interim order of

injunction on the 10

th

of November 2015 and had it fixed for the iz of

November 2015 at 9.00 O'clock before the registrar. The main ground in the

application for an interim order was that the suit was advertised for sale on the

is

of November 2015. The advertisement to sell the property is annexure D to

the affidavit in reply of S. Ramachandran the Head of Credit of the Respondent

Bank. The suit property was advertised for sale in the New Vision Newspaper of

the is of October 2015 at page 57. The property was advertised for sale by

public auction after expiration of 30 days from the date of the advertisement. The

Respondent bank is the Mortgagee. An interim order was issued on the iz of

November 2015 restraining the Respondents from selling the suit property

comprised in LRV

2744

Folio

25

plot

47

Nabugabo Road and LRV

2339

Folio

19

Plot 53 Mackenzie Vale, Kololo Kampala. The order is to remain in force till the

io

of Feb

2016

when the application is to be heard. However the Application

was heard earlier. There was an attempt to object to the Application on the

ground that the interim order fixed the hearing for the io of February 2016. I

overruled the objection because the purpose of an interim temporary injunction

is to preserve the status quo so as to enable the Applicant present her application

before the trial judge. It was to preserve the right of hearing so that the

application is not rendered nugatory by the remedy sought in the application

being rendered useless. I.e. the property would have been sold and the buyer

would get a good title before the application to restrain the sale could be heard

(See Souna Cosmetics Ltd vs. the Commissioner General URA and Commissioner

General URA HCMA No

424

of

20rl;

Wilson vs. Church

(1879) 2

Ch. D

454

(cited

with approval by the Supreme Court of Uganda in Somali Republic vs. Anoop

Sunderial Trean SCCANo. 11 of 1988}).

The first point to be made is that the interim order issued by the registrar offends

the spirit of

Office Instruct ion No: of 2 4

issued by the Principal Judge for the

guidance of Registrars in issuing interim orders. It also violates the Mortgage

Regulations 2012.

Dsciston o /Hon. Mr. Jus tice

ChrhlO~ ?1tadraina

/Z oma -7+:

. . ~~ .- = : .J -,;-=: :~-- -.-.~~ :


6/12

Office Instruction No.1 of 2014 was issued by the Principal Judge on the is of

December 2014 provides inter alia as follows:

The High Court does not encourage the practice of issuing ex parte interim

orders.

Secondly where pleadings have not been completed i.e. through the filing of

a defence; the court should refroin from entertaining any application in the

matter or even hearing any suit ex parte

Where, however, the circumstances of the case dictate issuance of an order

for the maintenance of the status quo in the interim, that is,for a limited

time only pending the disposal of the application for a temporary injunction

by the trial judge,

registrars are enjoined to act judiciously while presiding

over such applications so that their decisions are defendable and are in

accordance with the law.

Any such interim order ought to expire upon the hearing of both parties,

unless of course it is extended in their pre~ence for a just cause.

In this case the interim order was issued before the pleadings were completed as

no defence had been filed. In fact summons was issued on the

io

of November

2015. The same day a notice of motion application was filed and fixed for hearing

on the 12~.hf November barely two days later. It is to be appreciated that the sale

of the mortgaged property had been fixed for the 15

th

of November 2015 three

days after the

iz

of November 2015 when the application had been fixed for

hearing. The first problem with the interim order is that it fixed the main

application without consulting the trial judge who was to hear it and on the io

of Feb 2016 about 3 months later. Secondly it was not an injunction for a limited

time. In my opinion a limited time should not exceed 30 days unless there are

compelling reasons to do so which reasons must be given before the interim

injunction order is issued. Thirdly the interim injunction is not in accord with the

Mortgage Regulations 2012.

D ecision ojHon. Mr. Ju stice

Christo~

11 ta .dr am a /z u m a -7+:

6

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7/12

Rule 13 (1) of the Mortgage Regulations 2012 confers power on the courts to

adjourn a sale of mortgaged property. The wording of the rule is as follows:

(1) the court may on the application of the mortgagor, spouse, agent of

the mortgagor or any other interested party and for reasonable cause,

adjourn a sale by public auction to a specified date and time upon payment

of the security deposit of 30% of the forced sale value of the mortgaged

property or outstanding amount.

In this case was there an adjournment of the sale? No. There was a stoppage of

sale completely and the provisions of regulation 13 (1) the Mortgage Regulations

2012 may not have considered. It prescribes a deposit by the Mortgagor of 30% of

the outstanding amount or forced sale value of the property to adjourn the sale.

Before taking leave of the matter discretionary power is given to court under the

regulation whether to adjourn the sale or not. That discretion is exercised only

upon deposit of 30% of the outstanding amount or forced sale value of the

property. The facts are that the sale was stopped by way of an interim order of

injunction restraining the Respondent or any person deriving authority from it

from selling the property until

io

Feb 2016 when the court would hear the main

application for a temporary injunction. There was no order for deposit of

security by the Mortgagor.

In truth the main remedy sought was to stop the sale and this was done for a time

without rega rd to the statutory regulations for deposit of security.

Other provisions which are applicable to stopping or adjourning the sale are

regulations 13 (4) and (5) of the 'Mortgage Regulations 2012 which provide as

follows:

(4) where a sale is stopped or adjourned at the request of the mortgagor,

an agent of the mortgagor, the spouse of the mortgagor or any other

interested party, the mortgagor, agent or spouse of the mortgagor or that

interested party shall, at the time of stopping or adjourning the sale, pay to

the person conducting the sale, a security deposit of 30% of the forced sale

Deciston

o fH on .

Mr.

Justice

ChrislO~ ?1tadrama bma -7+:

7


8/12

value of the mortgaged property or the outstanding amount, whichever is

higher.

(5) Where the sale is stopped or adjourned at the request of the mortgagor

for the purposes of redemption, the mortgagor shall at the time of stopping

or adjourning the sale pay a security deposit of 50% of the outstanding

amount.

The provision for the deposit of 30% or 50% upon the application or request of

the mortgagor is mandatory.

I have further considered the provisions of the Mortgage Act, Act 8 of 2009. It

gives the procedure for different case scenarios including the challenging of the

mortgage itself. The remedy of a Mortgagee under the Mortgage Act 2009 and

section 19 (1) thereof is that where money secured by a mortgage is made

payable on demand, a demand in writing shall create a default in payment.

Secondly under section 19 (2) where the Mortgagor is in default of any obligation

to pay the principal sum on demand or any interest or other relief payment or

part of it under a mortgage, or in the fulfilment of any common condition, express

or implied in the mortgage, the Mortgagee may serve to the Mortgagor notice in

writing of the default and require the Mortgagor to rectify the default within 45

working days. The notice is in the prescribed form (S.19 (3) of the Mortgage Act).

The Mortgagee upon default of the Mortgagor may require the Mortgagor to pay

all monies owing on the mortgage; appoint a receiver of the income of the

mortgaged land; lease the mortgaged land; enter into possession of the

mortgaged land or sell the mortgaged land. The Mortgagee sell the property

under section 26 of the Mortgage Act after expiry of the time provided for the

rectification of the default stipulated in the notice served on him or her under

section 19.

The court has powers to review mortgages on the application of a Mortgagor

under sections 34 and 35 of the Mortgage Act on the grounds inter alia that it was

obtained unlawfully through fraud, deceit, or misrepresentation by the

Mortgagor; or in a manner or containing a provision which is unlawful.

Decision of H on . Mr. Ju stic e Chrhto~ ?1ta .dr am a /zUmi3** -7+:

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9/12

As far as the power of sale is concerned the mortgagee is required to give notice

and serve a copy on the mortgagor. The sale may be by public auction unless the

mortgagor consents to a sale by private treaty. Where it is by public auction it has

to be advertised at least 30 days specifying the place of the auction, the date of

the action, being not earlier than 30 days from the date of the first advert. In the

circumstances of this case the intended sale was by auction and had been

advertised in the newspapers and to take place 30 days after the date of the

advertisement.

I have carefully considered the submissions on the deposit of security. Both

Counsels are in agreement that security be deposited. The contention is in the

timelines for the deposit of security. Counsel Masembe submitted that the

deposit is made prior to the stoppage of the sale. On the other hand the

Applicant's Counsel sought for more time to have the deposit made. Specifically

Counsel Charles Nsubuga prayed that the Applicant is given up to 14 January 2016

to deposit about 50% of the outstanding amount and the 50% amounts to about

Uganda shillings 4,000,000,000/=.

I have duly considered the Mortgage Regulations 2012 as we as the effect of the

interim order stopping the' sale until 10 February 2016. No other order can be

made until and unless the interim order issued by the registrar is set aside.

On the ground of non-compliance with the regulation 13 of the Mortgage

Regulations 2012, the interim interactive order restraining the Respondent, their

agents, servants or anybody deriving authority from them from foreclosing and/or

selling the Applicant mortgaged property described in the order dated iz of

November 2015 is hereby set aside for not having been issued in accordance with

the law.

That notwithstanding the sale of the mortgaged property had been advertised

and the advertised sale was not adjourned but stopped for an indefinite period

pending the hearing of the main application on 10 February 2016. -The main

application was subsequently fast forwarded to be heard earlier in December

2015. The law is that where an adjournment has been achieved under regulation

D eci st on

o f H on, MI', Jus tic e

Chr is lOpk.e :r. ?1Udrama /z um a

-7+:

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10/12

13 (7) for a period of more than 14 days, a fresh advertisement has to be issued in

accordance with regulation 8. Regulation 13 (7) of the Mortgage Regulations 2012

provides as follows:

(7) Where a sale is adjourned under this regulation for a period longer

than

14

days, a fresh public notice shall be given in accordance with

regulation 8 unless the mortgagor consents to waive it.

The advertised sale was supposed to take place on 15 November 2015. This

application was heard on 18 December 2015 more than a month after the date.

Furthermore the sale was stopped before the event of public auction took place

and the order was issued on

12

November

2015

three days earlier. In the

premises I have considered Regulation 8 of the Mortgage Regulations 2012. It

provides that a mortgagee exercising a power of sale under the Act shall subject

to the Act and Regulations, sell the mortgaged property by public auction. It

further provides that a sale shall not take place before the expiration of

21

working days from the date of service of the notice as specified in section 26 of

the Act. Any person who contravenes Regulation 8 commits an offence.

This ruling will be read on 21 December 2015. Thereafter if the Respondent is to

re-advertise the property for sale, the sale shall be in January

2016.

The practical

effect of the period of notice is that the proposal of the Applicant to deposit

Uganda shillings

4,000,000,000/=

is the most practical way to comply with the law

if the injunction application is refused. In other words the Applicant can still

deposit the amount of money to stop the sale for purposes of redemption of the

property under regulation 13 (1), (4) or (5) of the Mortgage Regulations. In such

casesthe person conducting the sale namely the second Respondent upon getting

a deposit of money as prescribed by the regulations of

30%

for adjournment or

50% for redemption of the property is obliged to stop the sale. 21 working days

from the

21

st

of December

2015

will exclude Christmas Day which is the

zs

and

the zs and 2ih of December 2015, the 1

st

of January 2016, the 2

nd

and 3

rd

of

January 2016 as well as the 9

th

and io of January 2015. This comes to about 29

calendar days. In other words any re-advertisement of the property for sale

implies that it would not take place before the

14th

of January

2016.

In the

Dl1cislon ofHon, Mr. Justice Chri5lO~ ? ? tadram a /Z t I m B . -1+:


11/12

premises even if the application was not allowed both parties would not suffer

any further prejudice.

I have further considered the regulations to the effect that under regulation 13 (1)

the court may adjourn the sale upon an application being made. The other

requests for adjournment or stoppage can be made direct to the person

conducting the sale of the mortgaged property. At this point in time there is no

advertised date and place of sale and therefore there is no new date and place for

conducting a public auction of the mortgaged property. There is nothing to

adjourn.

In the circumstances and using the traditional jurisdiction of the Court in granting

injunctions as an equitable remedy I hold that the purpose of the application can

e

be met by giving a conditional injunction restraining the Respondents, their

agents or servants or anybody deriving authority from them from conducting a

sale of the mortgaged property upon deposit of security with the Respondent

bank as proposed by the Applicant's Counsel. Such an order ensures that before

the Respondent can lawfully conduct a sale after the requisite advertisement

prescribed by the Mortgage Regulations 2012 and specifically Regulations 13 (7)

and regulation 8, the Applicant would have had time to deposit the proposed

amount.

In the premises the following orders are issued:

1. The Applicant shall deposit a sum of Uganda shillings 4,000,000,000/= with

the Respondent bank by 14 January 2016.

2. A temporary injunction issues restraining the Respondent, their agents,

servants or anybody deriving authority from them from selling the

Applicant's mortgaged property comprised in LRV2744 Folio of 25 Plot 47

Nabugabo Road and LRV 2339 Folio 19 Plot 53 Mackenzie Vale, Kololo

Kampala for the period to be-specified.

Deciston o fHon . Mr. Ju stic e

C h r h l O p kt:.

?1Cadr am a /zuma *A*-7+:

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3. In the event of failure to deposit the sum of money indicated above, the

injunction shall lapse.

4. Upon the deposit of the sum of money in order 1 above by the Applicant,

the injunction shall last for 50 days from the date of this order unless

otherwise the period is extended by this court from time to time or by

consent of the parties.

5. In the circumstances of this case, the costs of this application shall be borne

by the Applicant.

Ruling delivered in open court on 21 December 2015

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Counsel Masembe Kanyerezi for the Respondent

Mr. Ramachandran Head Credit Applicant in court

Counsel Friday Robert Kagoro for the Applicant

I

Ms Winnie appears in court on behalf of Applicant

Charles Okuni: Court Clerk

Christopher Madrama Izama

Judge

21 12 2 16

Decision

o fH on .

Mr.

Justice

Chri;IO~

?1t a .dr am a

/zOmE -7+ :

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Miao Huaxian vs Crane Bank

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