~,.

.,

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
restraining
from

filed

this application

the Respondents,

them

comprised

from

foreclosing

for

temporary

order

to issue

their agents, servants or anybody deriving

authority

and/or

property

selling the Applicant's

in LRV 2744 Folio of 25 Plot 47 Nabugabo

Plot 53 Mackenzie

injunctive

mortgaged

Road and LRV 2339 Folio 19

Vale, Kololo, Kampala and for costs of the application

to be

provided for.

The grounds

of the application

against

Respondents

the

resultant

mortgages

Illiterates

Protection

court to investigate
hearing

challenging

and has a high likelihood

Thirdly

advertised

in the application,

which

no amount

Decision

o/Holl. Mr.

Jtstice

others

the

HCCS 743 of 2015

sanction

letter

and

for contravening

the

Act Cap 78. Secondly the suit discloses substantial

issues for

of success but is yet to be fixed for

Respondent
mortgaged

2015. Fourthly

the Applicant

of monetary
Christo~

the first

the Applicant's

the sale is slated for 15 November

sought

among

filed

as null and void and unenforceable

and determination.

second Respondent

are that the Applicant

through
property

if not restrained

its agent the

for sale and
by the orders

shall be exposed to irreparable

compensation

?1ta.dramll /zuma *, *-7+:

shall avail and prosecution

loss for
of the

.'

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
On the

is" of

io" December

2015.

December 2015 Counsel Friday Robert Kagoro appeared for the

Applicant and Counsels Masembe Kanyerezi appeared for the Respondent.

Deciston

ofHon. Mr. Justice

ChrislO~ ?1ta-drama /zuma *'*_7+:

2

'

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.

is" of

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

December 2015 to make an attempt at amicable settlement
The application

for adjournment

of the application.

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.

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

Mortgage

Regulations

adjournments

2012

particularly

regulation

13 which

deals with

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 14th of January 2016. The Applicant proposed to pay the balance by the
February 2016.

zs" of

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
shillings 7,279,379,920/=.
D,ciSlon

is Uganda

He submitted that if the Applicant wants the interim

ofHon. Mr. Justice ChrislO~?1ta.drama IztrmE "'-7+:

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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 21st 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 21st 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
Deciaton afHon. Mr. Jistice

Chrh/opMtt ?Jta.drama

!zumiJ *'*-7+:

defence was issued for service on the Respondent by the court on the
November 2015. The Applicant
injunction

filed an application

for an interim

io"

of

order of

on the 10th 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
November 2015 restraining

the Respondents from

iz"

of

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 Instruction No: 1 of 2014 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.

Justice ChrhlO~

?1tadraina /Zoma *'*-7+:

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

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~.h
of November barely two days later. It is to be appreciated that the sale
of the mortgaged property had been fixed for the 15th 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.
Decision

ojHon. Mr. Justice

Christo~ 11ta.drama /zuma

*'*-7+:

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, ,

Rule 13 (1) of the Mortgage

adjourn a sale of mortgaged
"(1) the court

property.

or any other

The wording

property

deposit

or outstanding

sale completely

party

reasonable

cause,

amount

whether

of the sale? No. There was a stoppage

of regulation

13 (1) the Mortgage

or forced sale value of the property

to adjourn

discretionary

the sale or not.

of 30% of the outstanding

restraining

the Respondent

from selling the property

until

for a temporary

of

Regulations
of 30% of

to adjourn

the sale.

power is given to court under the

That discretion

amount

The facts are that the sale was stopped

application

and for

It prescribes a deposit by the Mortgagor

Before taking leave of the matter

injunction

spouse, agent of

amount."

and the provisions

the outstanding

property.

of the rule is as follows:

of 30% of the forced sale value of the mortgaged

2012 may not have considered.

upon deposit

on the courts to

of the mortgagor,

interested

In this case was there an adjournment

regulation

power

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

of the security

2012 confers

may on the application

the mortgagor
adjourn

Regulations

is exercised only

or forced

sale value of the

by way of an interim

or any person deriving

authority

io" Feb 2016

when the court would

injunction.

There was no order

order of
from

it

hear the main

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
Other

rega rd to the statutory

provisions

regulations

which

regulations

are applicable

for deposit of security.

to stopping

13 (4) and (5) of the 'Mortgage

or adjourning

Regulations

the sale are

2012 which

provide

as

follows:
(4) where

a sale is stopped

an agent

of the

mortgagor,

the spouse

at the request

party, the mortgagor,

interested

party shall, at the time of stopping

ofHon. Mr. Justice ChrislO~

of the mortgagor,

of the mortgagor

interested

the person conducting

Deciston

or adjourned

or any other

agent or spouse of the mortgagor

or adjourning

or that

the sale, pay to

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

?1tadrama /bma "'-7+:

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

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

Decision

ofHon. Mr. Justice Chrhto~

?1ta.drama

/zUmi3 *'*-7+:

by the

-',

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
Deciston

ofHon,

MI',

Justice ChrislOpk.e:r. ?1Udrama

/zuma *'*-7+:

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/=
if the injunction application

is the most practical way to comply with the law

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
cases the 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 21st of December 2015 will exclude Christmas Day which is the zs" and
the zs" and 2ih of December 2015, the 1st of January 2016, the 2nd and 3rd of
January 2016 as well as the 9th 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~ ??tadrama

/ZtImB. *'*-1+:

10

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
requests for adjournment

being made. The other

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
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
servants

injunction

or anybody

issues restraining the Respondent, their agents,

deriving

authority

from

them

from

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 for the period to be-specified.

Deciston

ofHon. Mr. Justice ChrhlOpkt:. ?1Cadrama /zuma *A*-7+:

11

3. In the event of failure

injunction

to deposit the sum of money indicated

above, the

shall lapse.

4. Upon the deposit

the injunction
otherwise

of the sum of money in order 1 above by the Applicant,

shall last for 50 days from

the period

is extended

the date of this order

by this court

from

time

unless

to time or by

consent of the parties.

5. In the circumstances

of this case, the costs of this application

by the Applicant.
Ruling delivered

in open court on 21 December 2015

Christopher Madrama

Izama

Judge
Ruling delivered

in the presence of:

Counsel Masembe
Mr. Ramachandran

Kanyerezi for the Respondent

Head Credit of 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

21/12/2016

Decision

ofHon. Mr. Justice Chri;IO~

?1ta.drama /zOmE*'*-7+:

12

:.:..:.:-.~ '.~'-,-'.

-_

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shall be borne