David Luyiga v Stanbic Bank (U) Ltd
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THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
MISCELLANEOUS APPLICATION NO 202 OF 2012
(ARISING FROM CIVIL SUIT NO 152 OF 2012)
DAVID LUYIGA}................................................................................ APPLICANT
STANBIC BANK (U) LTD}.............................................................. RESPONDENT
BEFORE HONOURABLE JUSTICE CHRISTOPHER MADRAMA
The Applicant’s application cites the enabling law under which it was brought as order 41 rules 1 and 9 of the Civil Procedure Rules and section 101 of the Civil Procedure Act. It is for orders that a temporary injunction is issued against the Respondent, its servants, and/or agents restraining them from auctioning off, advertising, foreclosing or in any manner disposing of the Plot 158 Block 8 Mengo Kampala, Plot 85 Block 338 Kiwatule, Kyengera – Wakiso, Plot 723 Block 33 Mutundwe – Kampala, Plot 383 – 391 Sekiunga – Wakiso until the final disposal of the suit and for costs of the application to be provided for.
The ground of the application is that the Respondent, its servants or agents intend to unlawfully auction the described property despite the Applicant satisfactorily servicing his loan. Further grounds of the application are detailed in the affidavit in support deposed to by the Applicant. The Applicant avers and repeats that the Respondent bank, its servants and/or agents intend to unlawfully auction his property despite the fact that he had been satisfactorily servicing the loan. If no order is issued, he would suffer irreparable damage because the suit property will be sold unjustifiably. He avers that the suit has a high likelihood of success and the balance of convenience favours him. The affidavit in support was filed on court record on 20 April 2012. On 8 June 2012, the Applicant further filed an additional affidavit in support of the chamber summons. The facts in the additional affidavit are that the Applicant introduced an intending buyer to the Respondent’s officials interested in buying Block 8 Plot 158 at Mengo – Kampala to reduce his indebtedness and clear any arrears on the loan facility with the Respondent but the Respondents officials frustrated the purchase and insisted that the Applicant settles the entire loan amount. Secondly the circumstances that resulted in the default of the Applicant on the loan repayment where caused by the Respondent when it irregularly increased interest on the loan which in turn dramatically spiralled the monthly instalment from Uganda Shillings 63,000,000 to 89,000,000/=. The Applicant’s request to extend the loan repayment period to reduce the amount of monthly instalment payments was turned down by the Respondent’s officials.
The Respondents rebuttal is contained in the affidavit of its legal officer Mr Jamil Mpiima Ssenoga. The facts in the affidavit are that by a facility letter dated 14 January 2011, the Respondent advanced the Applicant an amalgamated loan sum of Uganda shillings 2,750,000,000/= with interest to be repaid in 60 successful monthly instalments of Uganda shillings 63,831,925/= each. The interest rate offered in the facility letter is 3% per annum above the Respondents Uganda Shillings Prime Rate prevailing from time to time. The Respondent had expressly reserved the right to amend the interest margin and the prime rate if market conditions necessitated it. Between July 2011 and March 2012 the Central Bank Rate changed on several times and the Applicants monthly instalments were adjusted upward accordingly. On 11 July 2011 the interest rate was between 17.5% and 19.5% per annum. In August 2011 the interest rate was between 19.5% and 20.5% per annum. On 19 September 2011 interest rates were between 20.5% and 23.5% per annum. On 25 November 2011 interest rates were between 27.5% and 29.5% per annum. On 23 February 2012 interest rate was reduced to 28.5% per annum. Finally on 29 March 2012 interest rate was reduced to 27.5% per annum.
The Respondent holds further charges and legal mortgages over securities listed in affidavits in support of the application in the relation to the facility. The Applicant defaulted in servicing the facility by failing to pay the November 2011 instalment on the due date and thereafter defaulted in payment of all five monthly instalments for the months of December 2011 up to April 2012. By reason of the default the Respondent issued a statutory demand for payment. The Respondent further contends that the Applicant does not deny the default and any default results in the entire loan amount falling due. The property pledged by the Applicant as security for borrowing was of a known value whose disposal to recover the Respondent’s money cannot cause irreparable damage or injury to the Applicant.
The Applicant was represented by Counsel Godfrey Kibirige while Counsel Masembe Kanyerezi assisted by Counsel Bwogi Kalibala represented the Respondent.
Submissions the Applicant’s Counsel
After citing the relevant laws learned Counsel for the Applicant submitted that the suit arises as a result of the increase of interest on the loan consequent upon which the Applicant failed to service the loan. The Applicant is a long standing customer of the Defendant. It was after the increase in interest that the Plaintiff failed to service the loan. Learned Counsel submitted that the Plaintiff tried to talk to the Defendant to decrease his outstanding loan amount by some properties for which he had introduced buyers to the Respondent. The loan amount went up and as a result even the instalment payments went up. Consequently the Applicant contests the amounts the Respondent wants him to pay. Because of the refusal to allow the Plaintiff to reduce his loan, the amount due increased. The Applicant has a likelihood of success in the main suit because the Defendant’s acts prevented the Plaintiff from servicing his loan. Moreover the Applicant took property buyers to the bank to buy the property so that he could reduce his loan. Learned Counsel submitted that the Applicant will suffer irreparable harm if the injunction is not granted. The applicant’s property is worth about 5 billion Uganda shillings and there is a valuation report to this effect and he will suffer irreparable harm due to the loss of property. The Applicant will have no money left and would even be unable to pay his lawyer’s fees.
Learned Counsel further submitted that at this stage of the proceedings affidavit evidence was not good evidence to determine whether the increase was justified. He relied on the case of Americans Cyanamid Company vs. Ethicon LTD  1 ALL ER 504 for the proposition that where the legal rights of the parties depend on the facts that are in dispute, the final dispute as to facts should be resolved when the main suit is determined on the merits.
Submissions of the Respondent’s Counsel
In reply learned Counsel Masembe submitted that the application lacks merit and ought to be dismissed. The grounds of the application are that the Respondent bank intends to auction the property despite the loan being serviced. In the affidavit in reply the key clauses of the contract attached is that the sum borrowed was 2.7 billion Uganda shillings which is a very substantial amount. Clause 5.1 indicates that interest rate is at 3% above the banks’ prime borrowing rate. Clause 5.3 provides for the right of the bank to amend the prime rate and interest rates. In paragraph 5 of the affidavit in reply, the evidence is that there is a change in market conditions. At the time interest was 18% 63,000,000 was sufficient to repay the loan in 5 years. The interest rates changed for reasons beyond control. That would change the amount contractually. The contract was signed by the Applicant and the question is also whether the Applicant was paying. Annexure “B” shows the rate at which the Applicant was paying. Learned Counsel further submitted that the Plaintiff first borrowed in the year 2011 and is a new customer. Secondly he has never serviced the loan since January 2012. Consequently learned Counsel contended that it is not a case of someone who is willing to pay. He further submitted that the default clause is contractual and the bank has been patient. The repayments had been late but the Applicant stopped paying altogether. On a contractual and factual basis there is no ground for saying that he has been paying.
As far as the law is concerned learned Counsel referred to the case of Kiyimba Kaggwa vs. Katende  HCB 43 for the principles for grant of temporary injunctions. The Applicant’s case is that the charging of interest was unlawful. Learned Counsel contended that this is not true because the charging of interest is contractual. As far as the irreparable harm is concerned when property is mortgaged, the property becomes a commodity that can be monetised by the bank as a means of paying for the loan. Learned Counsel further referred to the case of Pan African Commodities Limited and Aya Biscuits Uganda Ltd vs. Barclays Bank PLC HCMA No. 0385 of 2007 arising from HCCS No. 0528 of 2007 where the court accepted the principle in the case of American Cyanamid (supra) that where damages in the measure are recoverable under common law and would be an adequate remedy and where the Defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted however strong the Plaintiffs claim appears to be at this stage. The property can be monetised and Stanbic bank has the means to pay if it loses the case. Learned Counsel referred to the Kenyan case of Maithya vs. Housing Finance Company of Kenya And Another  1 EA 133 were it was held that securities provided for the loan were valued before the lending and the loss of the properties by a sale is clearly contemplated by the parties even before the security is formalised. Damages would therefore be an adequate remedy. Furthermore learned Counsel referred to Matex Commercial Supplies Ltd and another vs. Euro Bank Ltd (In Liquidation)  1 EA 216 for the principle that any property whether a matrimonial or spiritual house which is offered as security for a loan/overdraft is made on the understanding that it stands at the risk of being sold by the lender if default is made on the payment of the debt secured. Where a party feels that the property is suitable for purposes of security, it means that the party has destroyed, defaced or degraded the sanctity and spirituality of the matrimonial home. Finally learned Counsel Masembe submitted that the Applicant fails the first test of a prima facie case. He prayed that the application for temporary injunction is dismissed with costs.
Applicant’s submissions in rejoinder
In rejoinder learned Counsel for the Applicant submitted that the issue of whether the contract was breached is a matter to be determined in the main suit. Consequently he maintained that relying on the provisions of the contract at this stage is premature. This is because the court is not hearing the main suit. What learned Counsel for the Respondent is raising are technical issues meant for trial in the main suit and should not encumber the court’s discretion in granting a temporary injunction. He contended that the main controversy is that the interest which is charged was a lot and frustrated the Applicant from fulfilling his obligations to the bank. At this stage the court cannot determine what the rate should have been. The Respondent proved that a loan was obtained at a particular interest above the prime rate. It is not proved how it was raised. The increase in the interest rates ate into the capital of the Applicant and it disabled him from repaying the loan. Secondly the estate of the Applicant is a big estate and losing it would cause irreparable harm. He further referred to the case of American Cyanamid (Supra) for the principle that evidence in an interim injunction is incomplete and untested and should not determine the main suit. In those circumstances the court cannot evaluate the Plaintiff’s chance of success since the evidence has not been tested by cross-examination. He further disagreed that by the Plaintiff mortgaging his estate he had waived his right to plead irreparable harm on account of the sale of the same. He distinguished the case of Maithya vs. Housing Finance Company of Kenya and another (Supra) and contended that in that case the Applicant agreed that he borrowed and spent 9 years without paying. He was not contesting the loan. In the Applicant’s case in this application, the Applicant had just obtained the loan in the year 2011. Secondly learned Counsel submitted that the court should take judicial notice of the traders strike over interest rates. He prayed that the application is granted with costs in the cause.
I have carefully considered the submissions of learned Counsels in this application and I have had opportunity to read the pleadings in the main suit and in this application. There is no dispute as to the principles applied by Court for the grant of temporary injunctions. The grant of a temporary injunction is an exercise of the court’s discretion. An injunction is granted for purposes of maintaining the status quo until the question to be investigated in the suit is disposed off finally after adducing evidence which evidence may have been tested by cross – examination at the trial of the main suit. The principles for grant of a temporary injunction are summarised in the digest of the case of Kiyimba Kaggwa vs. Katende  HCB at page 43 holding number 2 thereof. Firstly the Applicant must show a prima facie case with a probability of success. The principle for the Applicant to show a prima facie case with a strong probability of success has been criticised in the case of American Cyanamid Co. Ltd v Ethicon  1ALL E.R. 504 where Lord Diplock at page 510 held that there is no requirement for the Plaintiff to establish a prima facie case or a strong prima-facie case. All the Plaintiff needs to show by his action is that there are serious questions to be tried and that the action is not frivolous or vexatious. The courts have since followed two lines of precedence. The first line is that the Applicant must show a Prima facie case with a strong probability of success. The second school of thought is that it is not necessary to establish a strong prima-facie case with a probability of success and it would be sufficient for the Applicant to show that there is an arguable case which merits judicial consideration. This second school of thought is concerned with the inconclusive and contested nature of the affidavit evidence in the interlocutory application. My task is to consider whether the Plaintiffs application discloses an arguable case which merits trial. This in a roundabout way incorporates elements of the prima-facie case principle. The court does not have to establish whether it is a strong prima-facie case but whether it discloses an arguable case. The second principle in the Kiyimba case (Supra) is that injunctions will normally not be granted unless the Applicant might otherwise suffer irreparable injury which may not be adequately compensated for by an award of damages. The third test is only applied where the court is in doubt on the first two principles and is that of the balance of convenience.
As I will show herein below, the question of controversial or disputed evidence does not arise in this application because the material facts are not in dispute and the suit will primarily be decided on questions of interpretation. Therefore the first test is whether the Applicant’s application discloses an arguable case that requires adjudication by the High Court.
Whether the application discloses an arguable case fit for trial.
The principle for disclosing an arguable case underlies the object of the law that where an arguable case is disclosed, the status quo should be maintained so as not to render the main suit nugatory. This is subject to the consideration of whether damages would be an adequate remedy to atone for a change in the status quo. The Applicants application was founded on order 41 rules 1 of the Civil Procedure Rules. Rule 1 (a) provides that where 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, or wrongfully sold in execution of a decree; or”, the court may grant an injunction to maintain the status quo. The applicable rule in this case is order 41 rule 1 (a) because the property of the Applicant is in danger of being sold or alienated pursuant to default in payment of the loan instalments.
It is not in dispute that the bank would like to exercise its contractual right to sell the Applicants property upon default of the Applicant in the repayment of the loan. Secondly it is not in dispute that the Applicant defaulted in loan repayments despite the pleading that the Applicant had been properly servicing the loan. Paragraph 7 of the affidavit in opposition avers that the November 2011 instalment payment was not made on its due date. Thirdly 5 instalments which became due between December 2011 and April 2012 have not been paid at all. Fourthly the Respondent issued a statutory demand notice for payment which has not been satisfied by the Applicant through payment. Annexure B1 is the statement of affairs of the account of the Applicant as far as loan instalment payments are concerned. It shows that the Applicants loan instalment payment became due for payment on the 14th of August, 2011 but was paid on the 15th of August, 2011 by a payment of 77,003,293/=. The due date for September was 14th of September, 2011 and was paid on the 7th of October, 2011 by the Applicant. It was overdue by 23 days and the payment amount is 76,979,260/=. For October the loan was due on the 14th of October, 2011 and paid on time. The Applicant paid 81,259,857/=. On the 14th of November, 2011 the next loan repayment was due but the Applicant paid on the 5th of December, 2011 and it was overdue by 21 days. The Applicant paid 81,259,857/=. The last instalment paid is undated but the table shows that it became due on the 14th of December, 2011. It shows that it was overdue by 156 days by the time payment was made and the Applicant paid 89,257,265/=.
I have duly considered the Applicants submissions on the issue of loan repayment. The crux of this submission is that the Applicant defaulted in payment because interest was increased unilaterally by the bank. At the same time the averments in the plaint lead to the assumption that the applicant is willing to pay a contractually agreed interest and seeks an injunction to restrain the bank from unilaterally increasing interest rates. Learned Counsel for the Respondent on the other hand submitted on the contractual position which allows the bank to increase the interest rate and sell the property upon default. Implicit in the submissions is the consideration that there is a main suit in which certain controversies have been raised and the court should refrain from discussing finally the merits of the suit. The court cannot however robotically ignore relevant facts for consideration of this application even if it partially determines the controversy in the main suit.
Paragraph 3 of the plaint shows that the Plaintiffs cause of action against the Defendant is for a permanent injunction to restrain the Defendant from increasing the monthly loan repayment instalment of 63,000,000/= in respect of the loan granted by the Respondent and received by the Plaintiff with effect from the 14th of January, 2011. Secondly the Plaintiff seeks an injunction to restrain the Defendant from evicting him from the suit property the subject matter of the injunction application. The suit property is mortgaged property to secure the loan repayment. The Applicant further seeks an injunction against the Defendant from auctioning off, advertising or foreclosing on the suit property.
Before I proceed further with the merits of the application, the Applicant’s application leaves a lot to be desired. There only ground to the application states that the Respondents and its servants intend to unlawfully auction the suit property when the Applicant is satisfactorily servicing his loan. The application deceptively shows that the Applicant is not in default in the instalment payments under the facility.
A careful analysis of the Applicant’s position and the submission of his Counsel is that he is unable to service his loan due to the unilateral increase in the interest rates by the Respondent Bank. The Respondent as stated above submits that the increase in the interest rates is contractual. The court cannot at this stage decide on the merits of the application insofar as it touches on the main suit on the question of whether the interest in this matter was contractually and lawfully charged without determining the main suit altogether. However some comments must be made. The question is whether any arguable matters are disclosed in the main suit which merit judicial consideration.
It is not in dispute in the written statement of defence that the loan was supposed to be paid in instalments of Shs 63,831,925/= based on interest rates. It is also clear that the bank increased the interest rate hence the interest rates set out above increase the previous instalment of Shs. 63,831,925/= in the contract. In other words the facts of this matter are not in dispute at all. Consequently the Applicant’s suit will be resolved on matters of interpretation as to whether the bank was justified in raising the interest as stipulated in the contract. The way I see it, the question in controversy in the main suit is whether the bank should be stopped from auctioning the property of the Plaintiff on the basis of the unilateral increase in the instalment amounts payable by the Applicant due to increase in interest rates. Secondly, whether the increase was an undue and illegal profiteering as alleged in the plaint. For the court to determine whether there is a Prima facie case, should the court determine whether the Respondent has a right contractually as it may be under clause 5 of the agreement to increase the interest in the way that it did and in the circumstances? If the court finds that the Respondent has a right to sell the property because of the default of the Applicant, would it not be determining the merits of the main suit?
The second aspect for consideration is the assertion of the Applicant that it is satisfactorily meeting its obligations under the contract. It is established that the Applicant is in arrears of 5 months by April 2012. It can be concluded from the application and supporting affidavit itself that the Applicant is willing to pay Uganda shillings 63,831,925/= as stipulated in paragraph 3 of the plaint. The Applicants Counsel did not agree with this conclusion and submitted that the instalment payments were frustrated by the unilateral increase by the bank in the interest rates. It is an argument that has been countered by the counter argument that the increase in interest rates was first of all caused by the increase in lending rates by the Bank of Uganda due to prevailing economic conditions. Paragraph 5 of the Respondents affidavit in rebuttal shows that the Central Bank has on various occasions changed its Central Bank lending rate (CBR) as follows: On 11 July 2011 the interest rate was 17.5% to 19.5% per annum. In August 2011 the interest rate was 19.5% to 20.5% per annum. On 19 September 2011 interest rates were 20.5% to 23.5% per annum. On 25 November 2011 interest rates were 27.5% to 29.5% per annum. On 23 February 2012 interest rates was reduced to 28.5% per annum. Finally on 29 March 2012 interest was reduced to 27.5% per annum. This fact not been rebutted by the Applicant. The Central Bank rate is above the initial 15% contractual rate plus 3% which adds to 18%. It is only the interest rate of July 2011 which is below 18%. Paragraph 5.1.1 of the contract between the parties Annexure “A” to the affidavit in opposition provides that interest on the loan facility will be charged at “… 3% (three percent) per annum above the banks’ prime rate prevailing from time to time currently 15% per annum”. The wording of the provision does not give a fixed rate for the prime rate prevailing. Paragraph 5.1.2 defines “prime rate” as the publicly quoted basic rate of interest per annum ruling from time to time at which the bank lends in Uganda shillings. Last but not least paragraph 5.1.3 provides that the bank reserves the right to amend the interest margin and the prime rate including the method of calculating each of them at any time if market conditions necessitated such an amendment or if (in the bank’s opinion) the borrowers account conduct increases the bank’s risk regarding the facilities. Contractually therefore the interest rates are based on the necessities of the market condition prevailing at any material time. It therefore follows that the narrower controversy in this matter would be whether the market conditions prevailing at the time of the increase necessitated the increase in interest rates and hence the instalment payments the applicant has been asked to pay its contractual obligation.
It can be concluded that the amount of about Uganda shillings 63,000,000 instalment payment the Applicant relies on is 3% plus 15% as stipulated in clause 5.1.3. The loan agreement terms are reflected in the facility letter Annexure “A” attached to the Respondents affidavit-in-reply. This narrows down the controversy between the parties in the main suit to whether the market conditions necessitated an amendment of the clause providing for interest chargeable on the loan facility unilaterally by the bank.
As far as facts are concerned the Bank of Uganda lending rate was generally above 18% and kept on increasing up to 27%. It prima facie shows that the market conditions prevailing were unfavourable to the bank charging interest at 15%. It shows that the bank would be receiving instalment payments at a rate that is below the rate at which it obtains money at Central Bank Rates for its business. In other words it would generally be operating at a loss though it may be argued that it loaned the money when the interest rates were below 18% and conditions were more favourable. Learned Counsel for the Applicant requested the court to take judicial notice of the question of volatility in interest rates in the prevailing market conditions. The court can take judicial notice of the prevailing market conditions where the Bank of Uganda has raised its lending rates.
I will not hazard a conclusion on the right of the bank to increase interest rates in the prevailing circumstances. In any case, the Plaintiff has pleaded hardship due to the increase in interest rates. The issue of the justification of the increase in the prevailing market conditions is an arguable controversy. The underlying concern is whether changing market conditions of the nature alleged should only give a right or remedy to the bank and not to the customer of the banker who operates under the same market conditions. Such a controversy is of public interest and must be given careful thought before reaching a conclusion. It should be preceded by proper evidence that has been tested by cross-examination upon which counsel have properly addressed the court.
The other concern should be what the appropriate remedy ought to be where a loan has been advanced under favourable market conditions but drastic economic hardships have made it hard for the customers of the bank to operate in the business. Whatever the case may be, the bank would rely on the ability of the customer to make a profit. The court in the trial would not ignore the issue arising from the fact that the bank has taken security by way of the mortgage of the Applicant’s property. In other words the bank has insulated itself contractually with security. In those circumstances, the Applicant has proved an arguable case that merits judicial consideration. As to what arguments would overcome the banks contractual right as far as market conditions are concerned is a matter on the merits of the suit.
The second aspect to consider is the arguments of learned Counsel for the Respondent that a person who pledges property as security has agreed that it will be sold upon default of the borrower. I generally agree with the persuasive principles enunciated in the cases of Matex Commercial Supplies LTD and another vs. Euro Bank Ltd (in liquidation)  1 EA at PP 216 that any property whether it is a matrimonial home or a spiritual house which is offered as security for a loan/overdraft is made on the understanding that the property stands at the risk of being sold by the lender if default is made on the payment of the debt secured. Secondly where a party agrees that a particular property is suitable for purposes of security, it cannot plead that the property has sentimental or spirituality value or sanctity. I am also persuaded by the authority in Maithya vs. Housing Finance Company of Kenya and another  1 EA at page 133. In that case it was held that securities are valued before lending and loss of property by a sale is contemplated by the parties even before the security is formalised. In such cases damages would be an adequate remedy.
In as much as I agree with the above authorities I am mindful of the pleading of the Applicant that it is servicing the loan. Secondly the cases do not address the question of the market conditions prevailing at any material time which might be relevant in the Plaintiffs case. If the bank is allowed to sell the property, the question is whether the Applicant would suffer irreparable loss that cannot be atoned for by an award of damages. The bank loaned the Applicant a colossal sum of money namely a sum of over 2.7 billion Uganda shillings. Instalment payments were over Uganda shillings 63,831,925 per month. The Applicant has defaulted in payment of instalments for several months. I do not agree with the Applicant’s submission that payment of interest at the rate of overUganda shillings 70,000,000 per month on the face of it and subject to evidence at the trial of the main suit could have frustrated the Applicants business. The Applicant was lent Uganda shillings 2,750,000,000/= secured by the various properties. It is inconceivable without evidence that payment of over Uganda shillings 70,000,000 per month would frustrate the business of the Applicant. The Applicants application does not adduce any evidence of the kind of business that he is carrying on. He does not give the prevailing market conditions of that business. He does not show that because of the prevailing market conditions it is facing a particular situation that may have frustrated its business undertaking. Last but not least it is the pleading of the Applicant that it was satisfactorily servicing its loan. This was factually incorrect as it has been proved by the Respondent that the Applicant defaulted in the loan repayment schedule. The submissions of learned Counsel for the Applicant were made from the bar on the question of inability to service the loan. Last but not least the dispute has not been channelled through the mandatory mediation procedure of this court. The court has a right to assume that the Bank of Uganda lending rates depicted the correct public policy position on the question of interest as far as fiscal economics is concerned.
In this particular case the court is in doubt as to what conclusion it must reach to do justice in the circumstances of the case. The balance of convenience is that the controversy should be given a chance to be resolved after argument and evidence has been adduced. The right of the applicant to address this controversy should be taken into account as a matter which has serious repercussions in the banking business. Such a controversy should not be determined in an interlocutory application. The above notwithstanding, the court has powers to impose such conditions as it deems fit in the interest of justice if it chooses to grant a temporary injunction. Order 41 rule 1 of the Civil Procedure Rules provides that:
“… 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.”
If the Applicant is to save his property in the meantime, he should pay all arrears of instalments calculated at the bank of Uganda lending rates without prejudice to the rights of the bank under the contract to charge a higher rate of interest above the Bank of Uganda lending rates. The regulatory authority has deemed it fit to raise interest rates in the prevailing market conditions and the court takes cognizance of this fact. As to whether it is only the applicant to suffer the loss in the prevailing market conditions is a separate consideration on the merits of the suit. The payments to be made by the applicant are set at Bank of Uganda lending rates without prejudice and this payment should be made up to the month of June 2012. Further payments should also be made in due time after 20th of July 2012. In that case, the controversy of whether the bank is entitled to raise interest rates can be disposed of as an issue of interpretation subject to the requirement for adducing evidence of the market conditions if necessary. The trial of the main suit can be conducted expeditiously and I direct that the suit be heard in September 2012 expeditiously. In those circumstances the following orders shall issue:
- The Applicant shall deposit with the Respondent bank instalment payments under the loan facility agreement calculated at bank of Uganda lending rates from the time of default up to June 2012 by the 20th of July 2012
- The Applicant will continue servicing the bank loan at the Bank of Uganda lending rates until after determination of the main suit when the actual rights and liabilities of both parties have been established.
- The Applicant may negotiate with the bank to retire any of the secured properties to meet its current or agreed obligations without prejudice to the suit. The parties are not precluded from resolving the dispute in any agreed manner.
- Should the Applicant default to make the above ordered payments or make any subsequent default on the instalment payment after that of 20th of July 2012, the bank shall be at liberty to exercise its contractual rights by the end of July 2012 without prejudice to the suit.
- An interlocutory injunction is issued subject to the above to conditions of payment to the Respondent bank restraining the Respondent bank, it’s servants, and/or agents from auctioning off, advertising, foreclosing or in any manner disposing of plot 158 block 8, Mengo Kampala, plot 85 block 338 Kiwatule, Kyengera Wakiso, Plot 732 Block 33Mutundwe – Kampala, Plot 6250 Block 383-391 Sekiunga – Wakiso until the final disposal of the suit.
- The suit shall be fixed for hearing in September 2012 without prejudice to mediation proceedings.
- Between the date of this order and the date of hearing of the main suit, the matter is referred to a mediator under the rules of this court.
- The costs of this application shall abide the outcome of the main suit.
Ruling delivered in open court this 6th day of July, 2012
Hon. Justice Christopher Madrama
Ruling delivered in the presence of:
Bwogi Kalibala for the Respondent
Godfrey Kibirige for Applicant
Jamil Mpiima Senoga representative of the bank
Ojambo Makoha Court Clerk
Hon. Justice Christopher Madrama
6 July, 2012.