Wakilii

Odora & 3 Ors v Diamond Trust Bank & Anor (Miscellaneous Application No. 891 of 2016)

High Court · [2017] UGCOMMC 28 · 2017 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for temporary injunction restraining sale of mortgaged properties pending disposal of main suit
Decision
Limited injunction granted to secure compliance with statutory procedures for mortgagee sale; applicant may redeem property by paying prescribed deposit before sale

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that while the applicants failed to establish irreparable injury (as mortgaged property is contractually subject to sale on default), a limited temporary injunction was warranted to ensure compliance with mandatory statutory procedures. The Mortgage Act requires fresh notice to the mortgagor, spouse(s), surety, and other statutory persons, and re-advertisement where a sale is adjourned beyond 14 days. The bank must obtain a current valuation and issue fresh statutory notice before proceeding with the sale.

Outcome

Limited injunction granted to secure compliance with statutory procedures for mortgagee sale; applicant may redeem property by paying prescribed deposit before sale

Facts

The applicants obtained a loan facility from Diamond Trust Bank secured by four properties in Gulu. The bank advertised the properties for sale in April 2016 and threatened eviction of tenants. The applicants alleged they were still servicing the loan and that the sale was premature and in breach of contract. After the initial sale advertisement, the parties entered into a memorandum of understanding in which the first applicant acknowledged indebtedness of UGX 2,953,546,107 and agreed to repay in instalments between June 2016 and September 2017, with the bank postponing the sale. The memorandum stipulated that on default, the bank could proceed with sale without further notice. The applicant defaulted on the agreed payment schedule, paying only UGX 290,000,000 out of the agreed amounts. The second, third and fourth applicants had transferred their interests in the properties to the first applicant or granted powers of attorney. The sale had been delayed beyond 14 days from the original advertisement.

Issues

  1. Whether the applicants had standing to bring the application for temporary injunction.
  2. Whether the applicants established a prima facie case with a probability of success.
  3. Whether the applicants would suffer irreparable injury which could not be atoned by damages.
  4. Whether the balance of convenience favoured granting the temporary injunction.
  5. Whether the bank was required to issue fresh statutory notices before proceeding to sell the mortgaged properties after the memorandum of understanding and subsequent default.

Orders

  • A limited temporary injunction is granted to ensure compliance with the Mortgage Act and Mortgage Regulations 2012.
  • The sale shall not take place until a fresh statutory notice of sale is issued and the property is re-advertised after obtaining a valuation less than six months previous to sale.
  • The sale shall be notified in the press as prescribed by the Mortgage Regulations 2012.
  • The applicant may stop the sale by paying the prescribed deposit under regulation 13 of the Mortgage Regulations at any time before sale.
  • The application succeeds only to secure compliance with the statutory process of sale.
  • The rest of the application is dismissed.
  • Costs of the application are awarded to the respondents and shall be borne by the applicants.

Rules and key headnotes

Banking & Finance — Mortgagee's Power of Sale — Procedural Requirements — Fresh Notice After Adjournment
Where a mortgagee has adjourned an intended sale for more than 14 days, whether by agreement with the mortgagor or otherwise, fresh statutory notice must be given to the mortgagor and all persons entitled to notice under section 26(3) of the Mortgage Act 2009 before proceeding with the sale, and the property must be re-advertised in accordance with regulation 8 of the Mortgage Regulations 2012.
Banking & Finance — Mortgage — Variation by Memorandum — Effect on Notice Requirements
A memorandum of understanding between mortgagor and mortgagee that varies repayment terms and postpones sale does not waive the mortgagee's statutory obligation to comply with the notice and advertisement requirements of the Mortgage Act 2009 and Mortgage Regulations 2012 when subsequently proceeding to exercise the power of sale after default under the memorandum.
Banking & Finance — Mortgage — Notice of Sale — Mandatory Recipients
Under section 26(3) of the Mortgage Act 2009, a mortgagee must serve notice of sale not only on the mortgagor but also on (a) any spouse or spouses of the mortgagor in respect of a matrimonial home, (b) a surety (including a guarantor as defined in section 2), (c) the independent person as provided under the Act, and (d) in the case of customary land, the children and spouse or spouses. These requirements are mandatory.
Banking & Finance — Mortgage — Valuation Before Sale — Currency Requirement
A mortgagee exercising a power of sale must obtain a valuation of the mortgaged property that is not more than six months previous to the sale, as required by regulation 11(2) of the Mortgage Regulations 2012.
Civil Procedure — Temporary Injunction — Irreparable Loss — Sale of Mortgaged Property
The general rule is that the sale of property pledged as security in a loan agreement or mortgage cannot lead to irreparable loss per se, because any property offered to a bank as security for a loan is made on the understanding that it stands the risk of being sold by the lender if there is default on the payment schedule and amounts of repayment of the debt secured.
Civil Procedure — Affidavit Evidence — Advocate as Deponent — Contentious Matters
Regulation 9 of the Advocates (Professional Conduct) Regulations does not forbid an advocate from giving evidence by affidavit in a contentious matter where he or she will not appear as counsel in court. An advocate having conduct of the matter may file an affidavit on the client's behalf based on documents and information provided by the client, provided the advocate will only appear as a witness and not represent the client in the matter.
Civil Procedure — Temporary Injunction — Locus Standi — Co-Applicants Without Independent Interest
Where co-applicants in an application for temporary injunction have transferred their interests in the suit properties to another applicant or have no independent legal interest in the properties, they lack standing to pursue the application in respect of those properties.

Legislation cited (16)

Cases cited (7)

  • Giella v Cassman Brown and Company Limited [1973] EA 358
  • American Cyanamid Company Ltd v Ethicon [1975] 1 All ER 504
  • Yusuf Gani v Fazal Garage (1955) 28 KLR 17
  • Auto Garage v Motokov [1971] EA 514
  • Kakooza Abdullah v Stanbic Bank (U) Ltd (Miscellaneous Application No. 614 of 2012)
  • Matex Commercial Supplies Ltd v Euro Bank Ltd (in Liquidation) [2008] 1 EA 216
  • Maithya v Housing Finance Company of Kenya [2003] 1 EA 133

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Odora & 3 Ors v Diamond Trust Bank & Anor (Miscellaneous Application No. 891 of 2016) [2017] UGCommC 28 (12 April 2017)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.