DECISION OF THE COURT OF APPEAL IN MISCELLANEOUS APPLICATION 76 OF 2017; HABIB OIL LTD & 4 OTHERS V STANDARD CHARTERED BANK UGANDA LTD
The Court of Appeal, on the 29th December 2017, delivered a ruling in Miscellaneous Application 76 of 2017 in favour of Standard Chartered Bank Uganda Ltd, which was represented by Kampala Associated Advocates. The Court dismissed the application by Habib Oil Ltd and 4 others to stay the enforcement of the trial Judge’s ruling in their application for a temporary injunction in the High Court.
Habib Oil Limited and 4 others brought a suit against Standard Chartered Bank Uganda Limited seeking various declarations, among others, that the loan contract between the parties was frustrated and in the alternative, that the Bank’s loan recall and notices of sale of their mortgaged properties were premature.
The Plaintiffs also applied for a temporary injunction for orders to restrain the Bank and its agents from selling or enforcing the mortgage in respect of the various mortgaged properties. The trial Judge held that Habib Oil Limited, the 1st Applicant, had not proved that the contract between it and the Respondent had indeed been frustrated, since there were on record, several correspondences from both the 1st Applicant and ElectroMaxx, the 3rd party company responsible for making payments to the 1st Applicant, admitting that there were delays in making payments. The Court went further to note that even if the Applicants could prove that the contract was frustrated, this did not mean that the Respondent bank was unable to realize the securities in the event of default. The trial Judge dismissed the application for a temporary injunction for the above reasons. Habib Oil Limited then filed a notice of appeal against the trial Judge’s decision.
Court of Appeal
The Appellants also filed an application seeking orders of the Court of Appeal to stay the enforcement of the decision of the trial Judge and to restrain the Respondent bank or its agents from selling the Applicants’ mortgaged properties.
Counsel for the Respondent raised three preliminary objections to the effect that the Court of Appeal had no jurisdiction to hear the application, there was no order to execute and that the Applicants had not complied with the mandatory pre-condition to pay 30% of the forced sale value of the properties or the outstanding amount as provided for under the Mortgage Regulations.
Counsel for the Applicants opposed the objections and submitted that special circumstances existed that gave the Court of Appeal jurisdiction to entertain the application. He argued that mortgages being self-executing did not stop the courts from intervening in their operation. Regarding the mandatory payment of 30%, it was submitted that the provision of Regulation 13(1) of the Mortgage Regulations was unconstitutional as it infringed on the Applicants’ rights to a fair hearing and made an application for the question of its constitutionality to be referred to the Constitutional Court for interpretation.
Decision of the Court of Appeal
- The Judge stated that no special circumstances had been pleaded in the application justifying why it hadn’t been made in the High Court first. He held that the rule requiring such applications to be filed in the High Court first was a mandatory one which had been settled in numerous cases.
- Regarding the second objection, the Judge agreed that indeed there was no order on the file or attached to the application. He stated that the trial Judge had not made any orders for enforcement in his ruling and therefore the Applicants’ prayer to stay the enforcement of the trial Judge’s ruling was misplaced.
- The Judge stated that the Applicants did not deny that they hadn’t paid the 30% deposit and neither had they contested earlier decisions of the Court of Appeal that the rule was mandatory if one wishes to stop an intended sale of mortgaged properties. He also stated that the application of Regulation 13(1) of the Mortgage Regulations was grounded in procedural matters and no substantial question of law arose.
For the above reasons, the judge dismissed the application with costs to the Respondent.
The decision of the Court of Appeal reinforces previous decisions in relation to applications for stay of execution. The Court relied on previous decisions such as E.B Nyakaana & Sons Ltd v Beatrice Kobusinge & 16 others and Aids Health Foundation v Dr. Stephen Mirembe Kizito to emphasize the mandatory nature of Rule 42(1) of the Judicature (Court of Appeal) Rules, which requires an application to be made in the High Court before it can be made in the Court of Appeal. The need to plead and prove special circumstances in order for an application to be entertained by the Court of Appeal was also reiterated.
The Court also maintained its stance on the requirement to make a payment of 30% of the forced sale value of the mortgaged property or the outstanding amount where a mortgagor seeks to stop the mortgagee from exercising its statutory remedies in the event of default.
This decision is more good news for mortgagees and points to the Courts’ consistency in emphasizing compliance with statutory provisions.