THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA
(COMMERCIAL DIVISION)
CIVIL APPEAL No. 0300 OF 2021
5 (Arising from Civil Suit No. 1085 of 2020)
HOUSING FINANCE BANK LIMITED …………………………………… APPELLANT
VERSUS
10 1. SILK EVENTS LIMITED }
2. ELVIS SEKYANZI WAVAMUNO } ………………………… RESPONDENTS
Before: Hon Justice Stephen Mubiru.
JUDGMENT
15
a. Background.
The 1st respondent obtained a loan from the appellant in the sum of shs. 348,000,000/= on 12th
November, 2018 to finance its operations. The 2nd respondent, who is also a director of the 1st
20 respondent, too obtained a personal loan in the sum of shs. 500,000,000/= on 1st August, 2017 for
home purchase. The 1st respondent executed a corporate guarantee to secure the 2nd respondent’s
borrowing. As security for both loans, the 2nd respondent mortgaged his property comprised in
Kayadondo Block 264 plot 2183. The respondents having defaulted on the loan, the appellant
advertised the mortgaged property for sale.
25
The respondents jointly and severally sued the appellant seeking declarations that three credit
facility arrangements between them and the appellant had been frustrated by the promulgation of
the Covid-19 Control Regulations, which banned public gatherings. In the alternative, they sought
declarations that the appellant’s refusal to restructure the respondents’ loans and its attempt to sell
30 off the respondent’s mortgaged property provided as security for those loans is illegal. They
consequently sought multiple orders and a permanent injunction restraining the appellant from
disposing of the respondents’ property. The appellant counterclaimed shs. 81,248,687/= and shs.
556,221,357/= respectively from each of the respondents.
1
Pending the disposal of the suit, the respondents sought a temporary injunction restraining the
appellant from disposing of the 2nd respondent’s property. The learned Assistant registrar granted
the application but declined to subject the respondents to the requirements of Regulation 13 of The
Mortgage Regulations, 2012 which provides that the court may adjourn a sale by public auction
5 to a specified date and time upon payment of a security deposit of 30% of the forced sale value of
the mortgaged property or outstanding amount.
b. The appeal.
10 This appeal seeks to set aside the order of the Assistant Registrar on grounds that it was erroneous
of her; - not to have decided the question whether or not the 1st respondent had locus standi in
filing the application; when she disregarded the fact that the 2nd respondent had not filed an
affidavit in support of the application; when she declined to require the respondents to pay a
security deposit of 30% of the forced sale value of the mortgaged property or outstanding amount
15 as a condition for the grant of the order; when she found that the respondents’ default had occurred
after promulgation of the Covid-19 Control Regulations; when she decided the application on the
basis of the balance of convenience; and when she awarded the respondents the costs of the
application.
20c. Submissions of counsel for the appellant.
M/s Kyagaba and Otatiina Advocates argued that the injunction was granted in contravention of
Regulation 13 of The Mortgage Regulations. Injunctions under Order 41 of The Civil Procedure
Rules are given by judicial discretion and should be in accordance with written. The court found
25 that the respondents are in default. The applicant could be compensated in damages hence there is
no irreparable injury. The third criteria is considered when the court in in doubt. In Giella v.
Cassman Brown & Co. Ltd. [1973] EA 358. The court found that the bank is secured but the
interest could exceed the value of the property. The sale was contemplated at the beginning of the
transaction.
30
2
The second applicant did not file an affidavit in support. He filed on behalf of the 1st respondent.
The applicant was required by the rule to file an affidavit. There were two separate facilities, one
of the individual and the other for the company. The company was a guarantor of the individual
loan. The court was not furnished with facts to support the application. They had conflicting
5 interests. There was need for the distinction. There was no cause of action by the second respondent
in the application. There was no basis for making the finding of irreparable loss.
Regulation 13 of The Mortgage Regulations required after finding the respondent in default and
the application was in essence to stop a sale, the regulation is mandatory. The Assistant Registrar
10 cited Ganafa Peter Kisawuzi v D.F.C.U Bank Limited, CA Civil Appeal 64 of 2016 which she
argued was binding. The property was valued at the beginning of the valuation and stated in the
offer letter of Sekyanzi as annexure “A”. It was shs. 925,000,000/= The amount owing is always
in issue and this would be a bad precedent.
15 Costs were awarded without giving reasons. Having found in favour of the bank and that it acted
reasonably in opposing the application, the costs should have been in the cause. The injunction
was onerous. The court did not direct on continuing payment. The bank now must pay to the
Central Bank. The facility was a demand facility. The default was before the lock down. The
company facility was a revolving line of credit. The loan agreement was not brought to court.
20
d. Submissions of counsel for the respondent.
M/s WEB Advocates and Solicitors argued that the 30% was not ordered and the reasons are at
page 10 .The amount owed is in dispute; see H.C. Misc Apcn. No. 986 of 2016 which said the
25 court cannot guess. The affidavit in reply indicated that after the notices D1 and D2 shows that
lots of money were deposited. The Bank statement is for the 1st applicant. The respondents
submitted supporting the amount the bank statements and acknowledgment of 9th November, 2020
annexure “E.” Other deposits were made after that letter. A substantial amount was paid. Notice
of sale was not given. Wills International v. DFCU Misc Apn No. 1000 of 2015 is to the effect that
30 if there is a prima facie case of non-compliance the court would not impose the 30%. Furthermore,
in North Bukedi Cop v. Housing Finance Bank Ltd Misc. Apn 173 2015 and in Proscovia Mukasa
3
v. Cooperative Bank Lt in liquidation H.C. Misc. 799 2014, it will not be granted if there is a prima
facie case of abuse of that power of sale.
There is a possibility of abuse of that power of sale in this case. The property was valued at over
5 shs. 1,200,000,000/= at the time of granting the loan facility and they devalued it at the time of
sale. A month to advert it was shs. 990,000,000/= There is no indication in the report as to the fall
in value. Regulation 11 (3) was not complied with. The photographs were not indicated in the
report. The different elevations. The guidelines of 14th April, 2020. The mortgage rules should not
apply to application of this nature. The Mortgage Act and rules have remedies; section 33 (1) (a)
10 – d 34 1 a – f and regulation 13 of The Mortgage Regulations. Frustration is one of the
considerations. The loan facility was frustrated by The Public Health Control of Covid Rules, 2020.
The repayment had to be from the core business; events management. The rules banned public
gatherings. It may not be proper to order the 30%.
15 The issue of default during Covid 19 is not contained in the ruling. The guidelines came in March
2020. There is no finding to the effect that the default was during that period. There was a prima
facie case and irreparable damage proved as required by Kiyimba Kaggwa v. Katende, 1985 HCB.
The Registrar followed and applied the principles. As regards costs, they follow the event. The
appeal is a broad challenge to the exercise of discretion. Three is no finding that the Registrar
20 staying the respondent’s application was supported by affidavit. It was an affidavit for both as it
has “I” and “we.” He swore in both capacities. An appeal is supposed to be based on issues of law,
fact or mixed law and fact. The appellant is only reopening the arguments before the Registrar.
The default was rectified after notice.
25 e. Submissions of counsel for the appellant in reply.
The applicant cannot argue both the indebtedness and the procedural aspect. The loss he can incur
is only money. What is at stake for both parties is money and nothing else. That notices were given
as per paragraph 12. The text of the notices required them to pay specified amount and in light of
30 the demand nature of the loan. That of 14th 2019 went to the company. Rectification required
payment of the entire outstanding amount. This was in 2019. Annexure “E” to the affidavit of the
4
respondent indicates they were in contact after the demand. The personal loan is not related to The
Covid 19 restrictions. Order 6 rule 10 of The Civil Procedure Rules forbids evasiveness. Section
14 of The Judicature Act. The Mortgage Act applies to all applications for stay of sales.
5 The decision.
Since the granting of an interlocutory injunction is a discretionary matter, appellate courts have
limited their role. The appellate court must not interfere with the exercise of discretion merely on
the ground that it would have exercised the discretion differently. There are two circumstances
10 where the appellate Court will interfere with the exercise of discretion namely; where the court at
first instance acted on wrong principles, and where the decision is manifestly absurd or
unreasonable that a misapplication of a wrong principle is inferred. To interfere, there must be a
clear mistake on the law or the evidence, or some other glaring error. The court will now proceed
to consider the multiple grounds of appeal raised under their respective sub-headings.
15
i. Failure to decide the question whether or not the 1st respondent had locus standi in
filing the application.
It was the appellant’s contention before the Registrar that the 1st applicant lacked locus standi in
20 preventing the sale since it is not the registered proprietor of the land advertised for sale. In her
ruling, the learned Assistant Registrar declined to consider that argument since it would impinge
on the merits of the suit, as to whether the 1st applicant had a cause of action, a matter that was to
be determined by the trial Judge. .
25 The expression locus standi is defined as having the capacity to sue in a court of law in order to
enforce a legal right. It is the right to presently enforce a cause of action for the infringement of a
legal right belonging to some definite person. For any person to have locus standi, such person
must have “sufficient interest” in respect of the subject matter of a suit, which is constituted by
having; an adequate interest, not merely a technical one in the subject matter of the suit; the interest
30 must not be too far removed (or remote); the interest must be actual, not abstract or academic; and
the interest must be current, not hypothetical. The requirement of sufficient interest is an important
5
safe-guard to prevent having “busy-bodies” in litigation, with misguided or trivial complaints. The
person with locus standi is the actual person whose legal right has been infringed or is threatened
by infringement without justification or sufficient cause, as a result of which he or she has suffered
or is likely to suffer injury.
5
It is trite that while a court is not bound to agree with the submissions in arguments of counsel, the
court is nevertheless bound to consider the same before arriving at any conclusion in the case.
Although the court has a duty to consider all arguments and authorities relied on by the parties, it
has a right and indeed a duty not to apply particular authorities or parts of arguments if the issue
10 canvassed therein is inapplicable to the facts and law before it. Similarly, the court is not bound to
apply any authority it has considered in its judgment.
In the instant case, one of the criteria to be applied when considering whether or not to grant a
temporary injunction is disclosure by the applicant’s pleadings, of a “serious triable issue,” with a
15 possibility of success, not necessarily one that has a probability of success (see American
Cyanamid v. Ethicon [1975] AC 396; [1975] ALL ER 504 and Nsubuga and another v. Mutawe
[1974] E.A 487). A serious question is thus any question that is not frivolous or vexatious. As
long as the claim is not frivolous or vexatious, the requirement of a prima facie case is met. The
merits of the parties’ case and their relative strengths are not to be considered at this stage.
20 However, just like jurisdiction, locus standi is a threshold issue which requires early attention as a
gatekeeping mechanism for any court exercising judicial power. Subject-matter and personal
jurisdiction do not exist in the absence of locus standi. Not only may a defendant be disadvantaged
when court skips over some jurisdictional issues to allow a plaintiff to pursue a decision on the
merits, but also the decision may eventually turn out to be a nullity. It was therefore erroneous of
25 the Assistant Registrar to have deferred the consideration of this issue.
That notwithstanding, once the applicant has a right or vested interest to protect and enforce
legally, and this has been disclosed in the pleadings, the onus on him or her to establish locus
standi to sue would have been discharged. Having perused the plaint, I find that the 1st respondent
30 had a “sufficient interest” in respect of the subject matter of a suit, the mortgaged property, to the
extent that it secured the loan it obtained from the appellant. This ground therefore fails.
6
ii. Disregarding the fact that the 2nd respondent had not filed an affidavit in support of
the application.
The contents of a pleading and evidence in proof of allegations made in the pleading are two
5 distinct and separate terms. An affidavit is only a voluntary written declaration of facts on oath by
the deponent. Order 9 rule 2 (1) of The Civil Procedure Rules provides that “upon any application
evidence may be given by affidavit…” Normally no oral evidence will be adduced at interlocutory
stage. Confining evidence to the form of affidavits at the interlocutory stages is adopted mostly as
a measure of convenience because the Courts are concerned about a prima facie case. At that stage,
10 evidence through affidavits though stands equated to that of oral evidence. The normal procedure
on tendering evidence in a proceeding initiated by an application thus is by fling affidavits of
persons having personal knowledge relating to the matter in question. An affidavit can be received
as evidence in proof of a particular fact or facts necessary for adjudication.
15 Affidavits are mandatory where evidence of facts is necessary for adjudication of the application
or where the application is by law required to be supported by an affidavit. In such cases, it will
be an affidavit or affidavits of persons having personal knowledge, either by the applicant or by
the supporting affidavits of other persons. When required by law or the nature of the application,
the affidavit must be filed at the time of the initiation of the proceedings, i.e., at the time of the
20 fling of the application. If the applicant fails to do so, then the application is liable to be struck out.
The parties have a duty to call all credible and relevant witnesses but they are solely responsible
for deciding how to present their respective cases and choosing which witnesses to call. Although
the trial court may but is not obliged to question the parties in order to discover the reasons which
25 lead them to decline to call a particular person, the court is not called upon to adjudicate the
sufficiency of those reasons. The court cannot direct a party to call a particular witness. Save in
the most exceptional circumstances, the trial court should not itself call a person to give evidence.
The parties are responsible for the running of the case and the court will often not have sufficient
information to determine whether a witness ought to be called. The court will not know what
30 evidence the witness may give or whether the witness is reliable. The court risks derailing the trial
with collateral issues if it calls a witness or decides, without evidence, to draw an adverse inference
7
from a decision by a party not to call a particular witness. A decision of a party not to call a
particular person as a witness will only constitute a ground for setting aside the decision if, when
viewed against the conduct of the trial taken as a whole, it is seen to give rise to a miscarriage of
justice.
5
Therefore, where parties appear jointly in a suit in respect of which they share a common legal
interest, based on the same facts of which the parties have similar personal knowledge, there is a
danger of time consuming, verbose testimony if not outright repetition of facts already canvassed
by other witnesses. To require each of the parties to swear an affidavit in such circumstances would
10 be a decision in utter disregard of economy of time. Moreover, testimony that is unnecessarily
repetitive of the other evidence (duplicative) has little or no probative value (see Whitehorn v. R
(1983) 152 CLR 657). Evidence proving a fact need not be that of all parties, one of them or even
a witness called by any of them, if credible, may by direct evidence prove any fact in issue. If the
witness’s evidence is likely to be unimportant, cumulative or inferior to what has already been
15 adduced, or where the un-led evidence would simply have supported the unchallenged evidence
of another witness such a witness need not testify.
Having perused 2nd respondent’s affidavit sworn on behalf of the 1st applicant in support of the
joint application, I find that both respondents share a common legal interest, based on the same
20 facts of which the parties are most likely to have similar personal knowledge. The averments in
the affidavit ably and sufficiently advanced the 2nd respondent’s interests as well. This ground too
therefore fails.
iii. Finding that the respondents’ default occurred after promulgation of the Covid-19
25 Control Regulations.
In the course of analysing the pleadings and arguments of counsel, the learned Assistant Registrar
adverted to the fat that the 2nd respondent had averred that default by both respondents was
occasioned by the covid-19 outbreak and the resultant nationwide lock-down. The learned
30 Assistant Registrar observed that although notices of default were issued to the respondents before
that outbreak, they had attempted to rectify the default by making payments to the applicant. She
8
concluded that the question therefore whether or not that outbreak constituted a frustrating event
was left open for determination at trial. Nowhere in the ruling have Ii found the finding of fact
attributed to her. This ground therefore is misconceived and must fail.
5 iv. Deciding the application on the basis of the balance of convenience;
In her ruling, the learned Assistant Registrar found that the respondents had established to the
required standard that there were serious issue for determination raised in the suit. She however
found that although the property in issue being residential, the 2nd respondent would not suffer
10 irreparable damage if it were to be disposed of by the mortgagee before determination of the suit,
since that outcome was contemplated from the very beginning as a possibility in the event of
default. Having found in favour of either party with regard to two of the three criteria, her worship
was obviously left in doubt and understandably had to resort to the balance of convenience to
decide the ultimate issue.
15
This means that the learned Assistant Registrar had to consider the relief requested by the
applicants in the context of the potential harm it would do to the appellant, and decide on that basis
if it is fair and necessary in all of the circumstances. In determining the balance of convenience, it
was necessary to compare the cases of each of the parties, and found the comparative mischief or
20 inconvenience which was likely to ensue from withholding the injunction would be greater than
which is likely to arrive from granting it. She therefore cannot be faulted on her findings. This
ground of appeal too fails.
v. Failure to impose the requirement of payment of a security deposit of 30% of the
25 forced sale value of the mortgaged property or outstanding amount as a condition
for the grant of the order.
Since the promulgation of The Mortgage Regulations, 2012 the question has arisen as to whether
a temporary injunction should be granted conditionally and specifically upon a deposit of 30% of
30 the forced sale value of the mortgaged property or outstanding amount, where the effect of the
injunction is to stop the sale of the mortgaged property, as it will be in almost all applications for
9
temporary injunctions involving mortgaged property. Regulation 13 of The Mortgage Regulations,
2012 provides as follows;
13. Adjournment or stoppage of sale.
5 (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 a security
deposit of 30% of the forced sale value of the mortgaged property or
outstanding amount.
10 (6) Notwithstanding sub-regulation (1) where the application is by the spouse of
a mortgagor, the court shall determine whether that spouse shall pay the thirty
percent security deposit.
The need to interpret of any statute arises only where the language of a statutory provision is
15 ambiguous, not clear or where two views are possible, or where the provision gives a different
meaning defeating the object of the statute. When interpreting that provision, one line of authorities
has taken the view that the word “may,” as used therein, refers to the discretion whether or not to
adjourn the sale but not the requirement of payment of security deposit in the event of an adjourned
sale. Should the court exercise its discretion by adjourning the sale, the mortgagor is mandatorily
20 required to pay the said security (see for example Haji Edirisa Kasule and another v. Housing
Finance Bank Ltd and two others, H. C. Misc. Application No. 667 of 2013; Guaranty Trust Bank
(U) Ltd v. Ankole Riverline Hotel Ltd, H. C. Civil Appeal No. 28 of 2014 and Paunocks Enterprises
Ltd and others v. Stanbic Bank (U) Ltd, H. C. Miscellaneous Application No. 1113 of 2014).
25 The decisions in effect state that applications for temporary injunctions involving mortgaged
property have to be dealt with in conformity with the statutory provisions for mortgages under The
Mortgage Act, 2009. The statutory requirements under the Mortgage Regulations thereby override
traditional considerations for the grant of a temporary injunction (see Willis International
Engineering and Contractors Ltd and another v. DFCU Bank, H. C. Miscellaneous Application
30 No. 1000 of 2015 and Miao Huaxian v. Crane Bank Limited and another, H. C. Misc. Application
No 935 of 2015).
10
This position is buttressed by the Court of Appeal decision in Ganafa Peter Kisawuzi v. DFCU
Bank Ltd, C. A. Civil Application No. 64 of 2016 where the Court refused to grant an order of a
temporary injunction to the applicant holding that the remedy was not available to him on the
ground that the applicant had not complied with regulation 13 (1) of The Mortgage Regulations
5 2012, which required him to deposit 30% of the forced sale value of the mortgaged property or the
outstanding amount before stoppage of sale. In that case, Counsel for the respondent submitted
that the applicant had not deposited 30% of the value of the mortgaged property contrary to The
Mortgage Regulations. Counsel for the applicant conceded this but submitted that the applicant
was willing to deposit the said amount if ordered by the court. The Court of Appeal therefore did
10 not have the occasion to specifically state this as a general principle.
On the other hand, another line of authorities has taken the view that the requirement is not
mandatory and the court has the discretion whether or not to require the deposit as a pre-condition
to the grant of an injunction, especially where; the validity of the mortgage or the amount
15 outstanding is being challenged; or where there is a procedural irregularity in the statutory notices
prior to the advertisement for sale of the mortgaged property; or where there is no credible evidence
of the current market and forced sale value of the mortgaged property (see for example G.S Royal
Hardware and Industries Ltd and another v. Equity Bank (U) Ltd and another, H. C. Misc.
Application No. 721 of 2015 and Parul Ben Barot v. Victoria Finance Company Ltd, H. C. Misc.
20 Application No. 319 of 2017 and Alpha2 Business Company Ltd v. Diamond Trust Bank Ltd and
two others, H. C. Misc. Civil Application No. 71 of 2016).
The Mortgage Regulations 2012 were prescribed by the Minister of Lands under section 41 (1) of
The Mortgage Act, 2009 which gives the Minister powers, by regulations, to prescribe anything
25 which may be prescribed under The Mortgage Act and generally for the better carrying into effect
of the purposes and provisions thereof. The dominant purpose of construction of any statutory
provision is to ascertain the intention of the legislature and the primary role is to ascertain the same
by reference to the language used. For the purpose of interpretation, courts have to take into
account various internal and external aids. The legislative intention assimilates two perspectives;
30 the perspective of “meaning” on the one hand, and the perspective e concept of “purpose,”
“object,” “reason,” or “spirit” pervading through the statute, on the other.
11
Regulation 13 is headed “Adjournment or stoppage of sale.” Headings in a statute or Regulations
may be taken as very broad and general indicators of the nature of the subject matter dealt with
thereunder. They can be taken into consideration in determining the meaning of the provision
where that provision is ambiguous, and may sometimes be of service in determining the scope of
5 the provision. But where the enacting words are clear and unambiguous, the title and headings
must give way, and full effect must be given to enactment. If there is any doubt in the interpretation
of the words of the section, the headings certainly help the court to resolve the doubt (see Chaudhri
Thakur Das and Others v. Chaudhri Jairaj Singh (Allahabad), [1903] UKPC 77). A heading
cannot control the interpretation of a clause if its meaning is otherwise plain and unambiguous,
10 but it can certainly be referred to as indicating the general drift of the clause and affording a key
to a better understanding of its meaning.
The sub-heading shows, in my opinion, that the enactment of Regulation 13 was intended to define
the conditions upon which a sale by a mortgagee, may be either be stopped or adjourned. Where a
15 general statute and a specific statute relating to the same subject matter cannot be reconciled, the
special or specific statute ordinarily will control. The provision more specifically directed to the
matter at issue prevails as an exception to or qualification of the provision which is more general
in nature (see Warburton v. Loveland, (1824-34) All ER Rep 589). Since stoppage or adjournment
of a sale is governed by special legislation, it prevails over the general requirements for the grant
20 of temporary injunctions specified in Order 41 of The Civil Procedure Rules. If it is not constructed
in that way the result would be that the special provision would be wholly defeated.
Aside from the internal aids to interpretation of the provision, account must be taken of the object
of the enactment in light of the statement of Lord Denning in Escoigne Properties Ltd v. Inland
25 Revenue Commissioners [1958] 1 All ER 406 (BL) at 414D that:
A statute is not passed in a vacuum, but in a framework of circumstances, so as to give
a remedy for a known state of affairs. To arrive at its true meaning, you should know
the circumstances with reference to which the words were used; and what the object
was, appearing from those circumstances, which Parliament had in view. That was
30 emphasised by Lord Blackburn in River Wear Comrs v. Adamson ((1877) 2 App Cas
743 at 763-5 and by the Earl of Halsbury LC in Eastman Photographic Materials Co
v. Comptroller-General of Patents [ 1898] AC 571 at 575, 576 in passages which are
worth reading time and again.
12
It follows that even in an area regulated in detail by legislation, policy may be a factor in the court's
decisional process; although the policy ascertained and applied may be that which is deemed to
have been the legislature's, rather than the court's, conception of the wisest rule. Policy, in the
5 sense of the motivating equitable and practical reasons behind the development of legal principles,
plays a constant although usually imperceptible role in the decisional process. Policy, in the sense
that justice is the aim and intent of all legal system and procedures, is the spirit vitalising the letters
of the law. A statute therefore is to be construed so as to suppress the mischief in the law and
advance the remedy (see Heydon’s case (1584) 3 Co. Rep. 7a). The rule means that where a statute
10 has been passed to remedy a weakness in the law, the interpretation which will correct that
weakness is the one to be adopted.
Regulation 13 of The Mortgage Regulations, 2012 is in effect an enactment of the principle “pay
now, argue later.” It was enacted in reaction to suits brought by unscrupulous mortgagors who
15 initiate litigation solely to delay recovery by the mortgage thereby buying time. It is designed to
restrict the ability of the mortgagor to use litigation or the courts, to vexatiously delay the
realisation of money due to the mortgagee. Since the interlocutory injunction may be granted on a
mere probability of success on the merits, generally the applicant must demonstrate confidence in
his or her legal position by posting 30% of the forced sale value of the mortgaged property or the
20 outstanding amount before stoppage of the sale, which the law considers sufficient to protect his
or her adversary from loss in the event that the underlying proceedings prove that the injunction
issued wrongfully. That deposit, in effect, is the applicant’s warranty that the law will uphold the
issuance of the injunction.
25 That deposit is intended to reduce the number of frivolous objections to sales by a mortgagee and
guarantee that the mortgagee will not be unnecessarily prejudiced by the delay in payments,
inevitably occasioned by litigation. It discourages plaintiffs who would otherwise use a temporary
injunction application as a viable but ultimately meritless litigation tactic against the defendant. It
ensures that the mortgagees are not left out of pocket due to the time that lapses over the course of
30 litigation, while on the other hand encouraging a mortgagor to hasten the progress of litigation so
13
as to improve on its ability to expand its business, or pay debts, or to mitigate any detrimental
effect imposition of the condition may have had on the mortgagor’s liquidity.
The requirement applies to all situations where a dispute arises between the mortgagor and the
5 mortgagee regarding their respective rights under the mortgage, before the mortgagee can exercise
their power of sale or foreclosure. Although payment of loan instalments is not suspended pending
a suit, unless directed otherwise, the practical reality is that litigation has tended to have that
consequence. This provision therefore strikes a balance between the competing desire of the
mortgagee to realise the security following default and that of the mortgagor to have his or her day
10 in court on questions regarding the legality or propriety of events triggering that process, whilst
the mortgagor pursues his or her various remedies.
While on the one hand the court should be alive to the potential of the mortgagee abusing this
provision by invoking the power of sale maliciously or unlawfully, it should at the same time be
15 mindful of the purpose of this provision being undermined by a disgruntled mortgagor making
unfounded assertions of illegality, dispute over the amount outstanding, the value of the property,
and so on, purposely to avoid or delay the sale. While the potential abuse by the mortgagee is
mitigated by the fact that the amount paid by the mortgagor will eventually be refunded with
interest by the mortgagee when the court establishes that the mortgagee’s computation of the
20 disputed outstanding amount or value of the property was incorrect, if the “pay now, argue later”
rule were not enacted, there would be an incentive for a mortgagor to dispute a sale, which the
mortgagor would not otherwise have done.
The considerations underpinning the “pay now, argue later” concept enacted in Regulation 13 of
25 The Mortgage Regulations, 2012 include the public interest in obtaining full and speedy settlement
of commercial disputes and the need to limit the ability of recalcitrant debtors to use objection and
appeal procedures strategically to defer the payment borrowed funds. It was argued by counsel for
the appellant that a dispute over the legality of the mortgage, the procedure of its enforcement or
the amount outstanding is reason enough not to impose the 30% deposit requirement. If this were
30 to be adopted as a valid reason, then the entire purpose of the provision would be defeated. All it
takes is for the mortgagor to raise such a claim in the plaint, however frivolous. The legislative
14
intent on the other hand can be achieved by interpreting “amount outstanding,” to mean the amount
as claimed by the mortgagee at the time the suit is filed.
Similarly, it is equally disingenuous to seek to defeat the purpose of the provision by adverting to
5 Regulation 11 (2) of The Mortgage Regulations, 2012 which requires a valuation report to be made
not more than six months before the date of sale. That requirement is specific to the value at the
time of sale by the mortgagee, not necessarily for purposes of the adjournment or postponement
of a sale. For the purposes of Regulation 13 (1), the value of the property at the time of execution
of the mortgage would suffice. This is more so since it is a pre-dispute value that was agreed upon
10 by the parties.
It is only under Regulation 13 (6) of The Mortgage Regulations, 2012 that discretion is conferred
on the court to determine whether or not the 30% requirement should be imposed. Under that
provision, “where the application is by the spouse of a mortgagor, the court shall determine
15 whether that spouse shall pay the thirty percent security deposit.” The court may then take into
account such factors as; - how long the spouses were cohabitating before the default; the financial
resources of the spouse applying; the availability of alternative accommodation; whether there are
children of the relationship; the amount of debt involved, the risk of dissipation of the property by
the mortgagor during the period of suspension; whether the applicant is able to provide adequate
20 security for the payment of the amount involved; whether the payment of the amount involved
would result in irreparable financial hardship to the applicant; whether fraud is involved in the
origin of the dispute, etc. This may be propelled by the fact that the property in issue also serves
as the matrimonial home or family land.
25 In Nakayaga v. FINA Bank and another, H. C. Misc Application No 471 of 2014, the applicant was
the wife of the mortgagor who had mortgaged the title deed to land constituting their matrimonial
home to FINA Bank Ltd for a loan. She filed a suit protesting the imminent sale of that property
on grounds that she never granted consent to the mortgage variation between her husband and the
bank and that she had not obtained independent advice in respect of the mortgage of the
30 family/matrimonial property. She contended therefore that the intended sale was unlawful and
illegal. When she sought a temporary injunction pending the disposal of that suit, the learned Judge
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declined to order the applicant to deposit 30% of the forced sale value of the suit property as
security on grounds that Regulation 13 (1) of The Mortgage Regulations, 2012 presupposes that
the mortgagee’s right to foreclose is not in dispute. The learned trial Judge did not avert to
Regulation 13 (6) which in my view was the one applicable.
5
Despite that, it seems to me that Regulation 13 (6) of The Mortgage Regulations, 2012 is intended
to allow the court, on a case by case basis, where the property mortgaged is a matrimonial home
or family land, to balance the interests of the mortgagee and the mortgagor’s spouse’s right of
occupancy of the matrimonial home guaranteed by section 39 (1) of The Land Act. In a deserving
10 case, the court may find that the right of the spouse to have access to and live in the matrimonial
home or on family land should unconditionally prevail over the prospect of the mortgagee’s cash
flow being interrupted and hence the mortgagee being out of pocket during the litigation. Needless
to say, payments and when they are due are a crucial factor in any arrangement of borrowing but
so are the rights and remedies available to a spouse when either the mortgagee or mortgagor, or
15 both, have prima facie failed to follow the correct process for mortgaging such land.
It is noteworthy that the provision conferring that discretion is prefixed by a non obstante clause
“notwithstanding sub-regulation (1).” Quite often a legislative text will contain conflicting rules,
and it is important to make clear which rule prevails in a specified situation. “Notwithstanding” as
20 an obstante clause, is one of the expressions that helps to do that. The expression “notwithstanding”
is a preposition used to indicate that the provision that follows is limited by or an exception to
another provision. It means “despite” something; or “without regard to”; or “not prevented by”; or
“in spite of the fact that.” It is therefore not difficult to argue that a sub-section inserted
notwithstanding another provision, was intended to operate in deviation from the other provision.
25 Often, a drafter uses that expression to protect and distinguish a significant provision against a
conflicting provision. The expression is used when the application of another provision in the
statute, relating to the same subject matter, could impede implementation of the provision in which
that expression has been used. It means that the provision following that expression operates as an
exception to an earlier provision.
30
16
It is well settled that the expression “notwithstanding” is in contradistinction to the phrase “subject
to,” the latter conveying the idea of a provision yielding place to another provision or other
provisions to which it is made subject. “Notwithstanding” looks back to the main rule. It is used
in a sub-section that is to take priority over or operate as an exception to another provision, in the
5 given situation. It tells the reader that the subject clause overrides or is an exception to the
provision(s) to which it refers. It follows then that since provisions following the word
“notwithstanding” are actually exceptions, if the latter provision confers a discretion, the
implication then is that the former provision in respect of which the drafter sought to exempt it,
does not allow for the exercise of such discretion.
10
The correct interpretation then is that despite the main rule in Regulation 13 (1) not allowing for
discretion, and hence being mandatory, exercise of discretion can still occur in situations where
the application is “by the spouse of a mortgagor.” Although Regulation 13 (1) contains a
mandatory provision that is applied whenever court is to make an order whose effect is to suspend
15 a sale of montaged property by a mortgagee, Regulation 13 (6) has carved out an exception that
allows for the exercise of discretion. In short, it means that exercise of discretion where the
application is “by the spouse of a mortgagor,” is “not prevented by” the fact that Regulation 13 (1)
is mandatory. Where the application is “by the spouse of a mortgagor,” Regulation 13 (6) in effect
overrides Regulation 13 (1) which does not permit or prevents the exercise of such discretion.
20
A statute must be so construed so as to effectuate its object and purpose, and not to defeat the same
(see Whitney v. Commissioner of Inland Revenue [1926] AC 37). Since a construction which would
defeat the very object of the legislative intent should be avoided, I come to the conclusion that
decisions which have hitherto interpreted Regulation 13 (1) of The Mortgage Regulations, 2012
25 as allowing for the exercise of discretion in situations where the validity of the mortgage or the
amount outstanding is being challenged; or where there is a procedural irregularity in the statutory
notices prior to the advertisement for sale of the mortgaged property; or where there is no credible
evidence of the current market and forced sale value of the mortgaged property, took into account
matters that are extraneous to the provision. That approach has resulted in defeating the object and
30 purpose of the provision.
17
To the contrary, decisions which have held that save for applications “by the spouse of a
mortgagor” which allow for the exercise of discretion by the court, all applications for temporary
injunctions involving mortgaged property which result in adjournment or postponement of a sale,
require the applicant to deposit 30% of the forced sale value of the mortgaged property or the
5 outstanding amount, as a precondition to the grant of the temporary injunction order, have
effectuated its object and purpose.
It follows therefore that the leaned Assistant Registrar misdirected herself when she failed to
condition the grant of the temporary injunction upon the appellant’s deposit of 30% of the amount
10 outstanding, as claimed by the appellant in the main suit. However, since the injunction is already
in place and the period of advertisement for sale has elapsed, I find it serves no useful purpose to
set aside the injunction on that account. For that reason the appeal is dismissed and the costs will
abide the result of the suit.
15 Dated this 22nd day of April, 2021 …………………………..
Stephen Mubiru
Judge,
22nd April, 2021.
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