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Solomon Champlain Lui & Anor v Stanbic Bank Uganda Ltd (Miscellaneous Application No. 766 of 2016)

High Court · [2017] UGCOMMC 24 · 2017 Application Partly Allowed (Conditional Injunction Granted) AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for temporary injunction restraining sale of mortgaged property arising from civil suit for alleged breach of loan facility and mortgage agreements
Decision
Conditional temporary injunction granted restraining sale of mortgaged properties pending deposit of security and final determination of the main suit

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held: A temporary injunction was granted restraining the respondent bank from selling the applicants' mortgaged properties, conditional upon the applicants depositing 30% of the outstanding debt (US$287,159.10) within 45 days. The court found triable issues regarding compliance with statutory notice requirements under sections 12 and 19 of the Mortgage Act 2009 and the need for fresh advertisement where a sale is adjourned beyond 14 days. The respondent's late affidavit in reply was validated because the applicants had filed a rejoinder and suffered no prejudice.

Outcome

Conditional temporary injunction granted restraining sale of mortgaged properties pending deposit of security and final determination of the main suit

Facts

The applicants obtained two loan facilities from the respondent bank totalling US$1,101,029, secured by mortgages over properties at Munyonyo. The bank disbursed US$981,494, withholding US$119,535. The applicants alleged breach of contract through unlawful interest charges and failure to fully disburse the loans, rendering the mortgage instruments unenforceable. After the applicants defaulted on repayment, the respondent issued a notice of default on 18 March 2015 requiring payment of US$957,197 within 45 working days. Following continued default, the respondent issued a notice of sale and advertised the properties for sale in July 2015. The applicants paid US$106,563 and undertook to make monthly payments, but again defaulted. The bank's lawyers demanded payment of arrears on 14 December 2015 and re-advertised the properties for sale in February 2016. The applicants filed this application for a temporary injunction on 7 February 2016, shortly before the scheduled sale in March 2016. An interim order issued by the registrar stopped the sale.

Issues

  1. Whether the respondent's affidavit in reply filed out of time should be struck out for non-compliance with Order 12 rule 3(2) of the Civil Procedure Rules.
  2. Whether the applicants have raised a prima facie triable issue in the main suit warranting grant of a temporary injunction.
  3. Whether the applicants would suffer irreparable injury which cannot be adequately compensated by damages if the temporary injunction is not granted.
  4. Whether the respondent bank was entitled to increase interest rates without giving 15 working days' written notice as required by section 12 of the Mortgage Act 2009.
  5. Whether the respondent complied with statutory requirements for notice of default and notice of sale under the Mortgage Act before proceeding to advertise the mortgaged properties for sale.
  6. Where the balance of convenience lies in granting or refusing the temporary injunction.

Orders

  • An injunction will issue on the condition that the Applicants shall deposit with the Respondent a sum of US$287,159.10 representing about 30% of the demand of the Respondent, which deposit shall be made within 45 days from the date of this order.
  • An injunction issues under the above condition restraining the Respondents, their agents, servants, workmen, or any person deriving authority or instructions from them from evicting the Applicants, selling, transferring, taking possession, advertising for sale or dealing in anyway whatsoever with the properties comprised in Kyadondo Block 257, Plot 944 land at Munyonyo and Kyadondo Block 257, Plots 920 and 921 land at Munyonyo pending final disposal of the suit or until such further orders of this court.
  • Should the Applicants fail to comply with the order in item 1 above, this injunction shall lapse and the Respondent shall be at liberty to re-advertise the property for sale and only after the lapse of the 45 days.
  • The costs of this application shall be borne by the Applicants.
  • The objection to the affidavit in reply is overruled and the affidavit in reply is validated by extension of time.

Rules and key headnotes

Interlocutory Applications — Reply Affidavits — Time Limits — Validation
Where an affidavit in reply to an interlocutory application is filed outside the 15-day period prescribed by Order 12 rule 3(2) of the Civil Procedure Rules but the applicant files a rejoinder responding to all material issues without objecting before filing the rejoinder, and suffers no prejudice, the court may validate the late filing by extending time and admit the affidavit in reply.
Temporary Injunctions — Principles for Grant
For a temporary injunction to be granted, the applicant must show: (i) that there is a prima facie case raising triable issues that are not frivolous or vexatious; (ii) that the applicant would otherwise suffer irreparable injury which cannot be adequately compensated by damages; and (iii) if the court is in doubt on the first two grounds, that the balance of convenience favours granting the injunction.
Mortgage Law — Variation of Interest Rates — Notice Requirements
Where a mortgage agreement expressly reserves to the mortgagee bank the right to amend interest rates in line with prevailing market conditions, the issue of whether the mortgagee must nonetheless comply with the 15 working days' written notice requirement under section 12(1) of the Mortgage Act 2009 before exercising that power raises a triable issue warranting determination at full trial.
Mortgage Law — Default and Sale Procedure — Fresh Notices After Rectification
Where a mortgagor has rectified a default following service of notices under section 19 of the Mortgage Act 2009, and subsequently defaults again, fresh statutory notices — including a fresh notice of default and a fresh notice requiring rectification — must be served before the mortgagee may proceed to sell the mortgaged property. The mortgagee cannot rely on earlier notices that preceded the rectified default.
Mortgage Law — Public Sale — Fresh Advertisement After Adjournment
Where a scheduled sale of mortgaged property is adjourned or stopped for a period longer than 14 days, a fresh public notice of sale must be given in accordance with regulation 8 of the Mortgage Regulations 2012, unless the mortgagor consents to waive it. The mortgagee cannot proceed on the basis of an advertisement that has lapsed.
Temporary Injunctions — Mortgage Sales — Security Deposit Condition
Where a temporary injunction is sought to stop or adjourn the sale of mortgaged property at the request of the mortgagor, regulation 13(4) of the Mortgage Regulations 2012 mandates payment of a security deposit of 30% of the forced sale value of the property or the outstanding amount, whichever is higher. The court may grant the injunction conditionally upon payment of the required deposit.
Loan Agreements — Partial Disbursement — Effect on Repayment Obligation
Where a lender disburses the bulk of a loan facility but withholds a relatively small portion, the borrower's obligation to repay the amounts actually disbursed is not avoided by the lender's failure to disburse the full amount. Repayment commences from the date of first drawdown and continues for amounts received, and the partial shortfall does not constitute a defence to default on the repayment obligation.

Legislation cited (11)

Cases cited (12)

  • Stop and See (U) Ltd v Tropical Africa Bank Ltd (Miscellaneous Application No. 333 of 2010)
  • Noormohamed Jamamohamed v Kasamali Virgi Nadhaim (1953) 29 EACA 8
  • Edward Sargent v CJ Patel (1949) 16 EACA 63
  • Kiyimba Kaggwa v Hajji Nasser Katende (1988) HCB 13
  • American Cyanamid Co v Ethicon Limited [1975] AC 396
  • Siminyu v Housing Finance Co of Kenya (2001) 2 EA 540
  • Western Uganda Cotton Company Limited v Dr George Asaba & 3 Others (High Court Civil Suit No. 353 of 2009)
  • Mukasa Anthony Harris v Dr Bayiga Michael Philip Lulume (Election Petition Appeal No. 18 of 2007)
  • Campbell Discount Co v Bridge (1961) 2 All ER 97
  • Peter Bibangamba v Kapkwata Wood Works Limited (Commercial Court Civil Suit No. 714 of 2012)
  • Miao Hua Xian v Crane Bank & Anor
  • Kiyimba Kaggwa v Katende (1985) HCB 43

Full judgment

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

Solomon Champlain Lui & Anor v Stanbic Bank Uganda Ltd (Miscellaneous Application No. 766 of 2016) [2017] UGCommC 24 (6 March 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.