[2024] UGHC 823

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT ARUA

## **MISCELLANIOUS APPLICATION NO. 0038 OF 2023**

## ARISING FROM CIVIL SUIT. NO. 024 OF 2022 AND MISC. APPLICATION NO. 082 OF 2022

## 1. KCB BANK UGANDA LIMITED::::::::::::::::::::::::::::::::::::

#### **VERSUS**

#### 1. JASCO ENTERPRISES LIMITED

- 2. OZUU BROTHERS ENTERPRISES LIMITED - 3. EJIDRA SAMUEL::::::::::::::::::::::::::::::::::::

### **BEFORE HON. JUSTICE COLLINS ACELLAM**

### **RULING**

#### **Brief Introduction**

This is an application brought by way of Notice of Motion under section 33 of the Judicature Act Cap 13, Section 79(1), (b) & section 98 of the Civil Procedure Act, cap 71 and Order 50 Rule 8 of the CPR for orders that;

- 1. The learned Registrar's decision of 31^st March, 2023 issuing an order of Temporary Injunction restraining the Appellant, her agents, servants, assignees and legal representatives and all those claiming under it from collecting and demanding repayment of the loan facility agreement until final disposal of the main suit be set aside. - 2. The learned Registrar's decision of 31^st March, 2023 granting the 1^st Respondent cost of Mis. Application No. 082 of 2022 be set aside - 3. Costs of this Appeal be provided for.

#### **Background**

It is contended that on the 27^th October, 2022, the 1^st Respondent filed civil suit No. 024 of 2022 against the Appellant, 2^nd and 3^rd Respondent jointly and severally inter-alia for Breach of Contract, specific performance, Trespass to land, Permanent Injunction, General damages, interest and costs of the suit. On 18^th November 2022, the Appellant filed its defence against the suit averring inter-alia that the 1^st Respondent is not entitled to the reliefs sought on grounds that the Plaint did not raise any actionable right against the Appellant as the suit is misconceived, frivolous, vexatious, an abuse of court process and legally untenable. The Respondent then went ahead to further file Misc. Application No. 082 of 2022 seeking for inter-alia, a temporary Injunction restraining the Appellant from collecting and demanding repayment of the loan facility until final disposal of the main suit. On 31^st March, a ruling in Misc. Application No. 082 of 2022 was delivered by the learned Registrar of this court thereby granting the 1^st Respondent's application as prayed for with costs on grounds that there is a pending suit before court and issues raised therein require the intervention of court. The Applicant now brings this Application seeking court to set aside the above orders.

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## Grounds of the Application

The grounds on which this Application is based on the Affidavit of LEILA LINDA NAJJEMBA deponed on the 6^th April 2023 where she briefly states that the Applicant advanced UGX. 2,400,000,000/= to the $1^{st}$ Respondent for purposes of an intended purchase by the $1^{st}$ Respondent of property comprised in LRV 4014 Folio 25 Plot 39 Adumi Road and LRV 3230 Folio 22 Plot 41 Adumi Road, Arua. That upon Advancement of the Loan amount, the Appellant discovered that the titles to the property were riddled with encumbrances such as an Order of attachment registered and another to maintain the status quo, virtually making it impossible for the Appellant to register its Mortgage over the property. The 1^st Respondent instituted a suit against the Appellant, the 2^nd and 3^rd Respondents jointly and severally inter-alia for Breach of Contract, specific performance, Trespass to land, Permanent Injunction, General damages, Interest and costs of the suit on 27^th October, 2022 vide Civil Suit No. 024 of 2022.

The Applicant contends that on the 31^st March 2023, the Registrar issued a temporary Injunction order restraining the Appellant, her agents, servants, assignees and legal representatives or all those claiming under it from collecting and demanding repayment of the loan facility and interest under the loan facility agreement until final disposal of the main suit. That the above order of injunction altered the status quo for which they ought to have been maintained which justice demands should be reversed.

## Grounds in Opposition

In opposition, the Managing director of the 1^st Respondent, HARVINDER SINGH JHASS vide his affidavit in reply deponed on the 22^nd day of May 2023 contends that he applied to this honourable court to maintain the status quo until the main suit is disposed off so that he doesn't lose the suit land. He adds that grant of an order of Injunction is discretionary, and grounds raised by the Respondent are matters of evidence which need to be investigated in the main suit on merits thus the Appellant has no grounds of appeal against the decision. The 1^st Respondent concludes that it is just, proper, logical and fair that this Appeal be dismissed with costs for lack of merit and being Frivolous and vexatious.

## Grounds in Rejoinder

In Rejoinder, the Appellant refutes the assertions of the 1^st Respondent and reiterates that there is no threat of eviction whatsoever on the 1^st Respondent as the 1^st Respondent is in uninterrupted possession and usage of the suit property from which he collects monthly rent from the tenants who include the Appellant's Arua Branch. The Appellant adds that the property cannot be alienated, sold or mortgaged by any person during the existence of the court order dated 21^st April 2022 which is registered as an encumbrance over the suit property.

That the Appellant's recalling of the loan was justifiably made based on Clause 11 of the facility letter which provided for the mode under which the Appellant had to recall the loan. The Appellant concludes that they stand to lose a colossal sum of money to a tune of Ugx. 2, 678.035.121/= indebted by the 1^st Respondent.

## Representation.

During the hearing, the Appellant was represented by M/S H&G Advocates whereas the 1^st Respondent was represented by M/S Alaka & Co. Advocates.

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Before I proceed to the merits of the Application, I want to note that I have perused through the application and all their supporting documents/ affidavits and affidavit in reply, Both Counsel for the Applicant and Respondent filed their submissions which I have duly put into consideration to come up with this ruling. There were rejoinders made on record. I shall now proceed to enlist the issue in contention.

#### **Issues**

## Whether the orders of the Learned Registrar made on the 31^st March, 2023 can be set aside.

#### Determination

#### Submission of the Appellant.

Counsel contends that the learned Registrar erred in granting the temporary injunction restraining the Appellant from collecting and demanding repayment of the loan facility and interest yet the same have been overtaken by events and thereby reversing the status quo. He adds that the appellant herein had already issued demand notices for payment of the outstanding sums to the 1^st Respondent and the guarantors under the loan facility. The Applicant also recalled the loan by filling Civil Suit. No. 993 of 2022 at commercial Division of this honourable court and the same is yet to be determined.

Counsel for the Appellant submit that the grant of the temporary injunction was judicially unjustifiable because it altered the existing status quo as the Registrar did not put into consideration the facts pertaining to the existing status quo, the loan facility and the suit property thereby reaching a wrong conclusion in the granting the said orders. Counsel contends that the 1st Respondent was and is in possession and in unchallenged usage of the property and continues to collect rent therefrom without any threat from the Applicant or any of the other Respondents. Counsel adds that the Learned Registrar did not put into consideration the above facts pertaining to the existing status quo, the loan facility and the suit property thereby reaching a wrong conclusion in granting the orders in Miscellaneous Application No. 82 of 2022.

Counsel concludes that there was no prima facie case or injury, or risk of irreparable injury showed in the main suit to warrant the grant of the temporary injunction.

### Submission of the Respondent

Counsel for the Appellant Respondent submit that this Appeal is incompetent, bad in law, wrong, unlawful and illegal hence should be dismissed with costs as there is no Memorandum of Appeal filed by the Appellant. Counsel relies on Order 43 rule 1 of the Civil Procedure Rules which provides that every Appeal to the High Court shall be preferred to inform of Memorandum of Appeal signed by the Appellant or his or her Advocate and presented to the court or such officer as it shall appoint for that purpose.

Counsel adds that the Applicant has not produced any evidence to show that the 1^st Respondent did not prove the three essential elements required by law for grant of Temporary Injunction as the 2^nd and 3^rd Respondent did not oppose the Application for temporary injunction and have not appealed against the order for Temporary Injunction to date. Counsel further submit that the 1^st Respondent had ably adduced evidence that she would suffer irreparable damage if Temporary Injunction was not granted because she would be evicted by the 2^nd and 3^rd Respondent from the suit land and property. Counsel adds that it is the Appellant who failed to

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carry out proper due diligence search and transfer ownership of the suit land and property in her names after the 1^st Respondent paid her lawyers' fees. Counsel submit that the Appellant failed to disclose that she has conflict of interest over the suit property by being a sub lessee of the property which the 1^st Respondent purchased.

Counsel concludes the Appellant is a leading financial institution in Uganda hence the Appellant cannot in any way suffer irreparable loss if the loan facility is not paid till disposal of the main suit for the loan facility is a very small amount of money for the Appellant who is a leading Financial Institution thus it cannot make her suffer irreparable loss.

## Consideration of court.

Order 50 Rule 8 of the Civil Procedure Rules grants any aggrieved party by the decision of the registrar a right to appeal against the same to the Judge. The Appellants filed miscellaneous Application No. 0038 of 2023 appealing against the decision of the Registrar who granted an order of Temporary Injunction against the Appellant and halted the recalling of the loan facility advanced to the 1^st Respondent.

## Order 41 Rule 1 provides for cases in which temporary injunction may be granted and states that:

affidavit Where in any suit it is proved by $\alpha$ r otherwise-(a) 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 (b) that the defendant threatens or intends to remove or dispose of his or her property with a view to defraud his or her creditors, 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 order

In Ndema Emanzi Rukandema v Mubiru Henry MA No. 225 of 2013, the Hon. Lady Justice held;

"Court's duty is only to preserve the existing situation pending the disposal of the substantive suit. In exercising this duty, Court does not determine the legal rights to property but merely preserves it in its actual condition until legal title or ownership can be established or declared"

In light of the facts, counsel for the Appellant argues that by the time the Application for temporary injunction was made, the Appellant had already issued demand notices for payment of the outstanding sums to the 1^st Respondent and guarantors under the loan facility, the Applicant had also recalled the loan by filling Civil Suit No. 993 of 2022 at Commercial Division and the 1^st Respondent was in possession and unchallenged usage of the property and continues to collect rent there from without any threat and continues to collect therefrom without any threat from the Applicant or any other Respondents.

In response, the 1^st Respondent contends that she had adduced evidence that she would suffer irreparable damage if Temporary Injunction was not granted because she would be evicted by the 2^nd and 3^rd Respondent from the suit property and the Appellant would force him to pay all the loan facility used partly to purchase the suit land yet it is the Appellant who failed to carry proper due diligence search and transfer ownership of the suit property in her names despite her paying fees to do so.

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I wish to relate to the Facility Agreement which relate to KCB Bank Uganda Limited and Jesco Enterprise Limited Liability Company who is the borrower of a sum of UGX. 2,400,000,000/=. The Purpose of the loan was to purchase a property on LRV 4014, Folio 25, Plot 39, Adumi Road and LRV 3230, Folio 22, Plot 41, Adumi Road, Arua which is the suit property.

The securities to be taken was legal mortgage of Ugx. 2,400,000,000/= over property on LRV 4014, Folio 25, plot 39, Adumi Road and LRV 3230, Folio 22, plot 22, plot 41, Adumi Road Arua etc.

Accordingly, Clause 11 of the facility letter which the 1^st Respondent committed to provides that in the event of the occurrence of any default described therein, the whole amount of the outstanding facilities and all the accrued interests or other amounts owing here under will become repayable forthwith on demand in writing made by the bank at any time, in addition the security held by the bank will become immediately enforceable.

# LOAN RECALL NOTICE

In the Banking world, when borrowers obtain loans, they enter into agreements with lenders, outlining the terms and conditions for repayment. However, in some situations, lenders may issue a loan recall notice, which can be a cause of concern and confusion for borrowers.

A loan recall notice is a formal communication from the lender requesting immediate repayment of the outstanding loan balance, often before the agreed-upon maturity date. This notice is typically triggered by specific circumstances, such as a breach of loan covenants, a significant change in the borrower's financial situation, or a violation of the terms of the loan agreement.

Loan recall notices are typically issued by lenders for specific reasons which include Breach of Loan Covenants which Loan agreements often include specific conditions or covenants that borrowers must adhere to. If a borrower fails to meet these conditions, the lender may issue a loan recall notice. Violation of Loan Agreement Terms may also trigger a loan recall.

## Status quo

Section 38 of the Judicature Act empowers court to grant an injunction to refrain a person from

Application for a temporary injunction is premised on O. 41 r.1 and 9 of the Civil Procedure

# Rationale behind the grant of Temporary Injunction.

The purpose of granting a temporary injunction is to preserve the matters in the status quo until the question to be investigated in the main suit is finally disposed of. The status quo considered by courts is the one prevailing at the time of filing the application. What is Status quo

It has been held by courts that:

"status quo is purely a question of fact and simply denotes the existing state of affairs existing before a particular point in time and the relevant consideration is the point in time at which the acts complained of as affecting or likely to affect or threatening to affect the existing state of things occurred." Per Legal Brains Trust Ltd v. AG (HCMA) 638/2014.

I note that by the time the 1^st Respondent filed Miscellaneous Application No. 082 of 2022, a notice of loan of recall was already issued by the Applicant .................................... issuance of the injunctive relief was already overtaken by events.

The notice of Recall was an exercise of a right which the 1^st Respondent committed to, the other issues pertaining the suit property is independent of rights curtailed under the Facility letter. The technical excuses advanced by the 1^st Respondent is in my opinion and evasion of responsibility under the facility letter, the issue of failure to exercise due diligence to carry out of search was in no way responsibility of the Bank but rather the 1^st Respondent, which duty was no way indicated

The Appellant being a reputable Financial Institution is no excuse for the 1^st Respondent to refuse to perform her obligation as monies advanced normally belongs to their customers, deriving a benefit and later evading performance is an illicit form of theft.

In light of the above, I hereby allow the Appeal and set aside the decisions of the Learned Registrar with no orders as to costs.

I so order.

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Collins Acellam

**JUDGE**

29th August 2024