Wakilii

Steel Rolling Mills Ltd & 3 Ors v Standard Chartered Bank (U) Ltd (Miscellaneous Application No. 829 of 2015)

High Court · [2016] UGCOMMC 35 · 2016 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for temporary injunction to restrain bank from foreclosing mortgaged properties and enforcing debenture, arising from Civil Suit No. 649 of 2015
Decision
Application for temporary injunction dismissed with costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Application for temporary injunction to restrain bank from foreclosing mortgaged properties and enforcing debenture dismissed. Court held that applicants failed to establish a prima facie case, as they admitted default on loan obligations and the bank had properly complied with statutory notice requirements under section 19 of the Mortgage Act 2009. Challenge to constitutionality of section 20 of the Mortgage Act found to be frivolous and vexatious, as the essence of pledging property as security necessarily implies a bank's power to realise its money upon default.

Outcome

Application for temporary injunction dismissed with costs

Facts

The first applicant obtained loan facilities totalling UGX 18,674,266,000 and USD 10,107,270 from the respondent bank between January and December 2014, secured by mortgages over properties belonging to all three applicants. The loan was for purchasing machinery for a Sponge Iron Plant with a repayment period of up to 96 months. The first applicant began defaulting on loan obligations from 2012. On 12 August 2015, the respondent issued a statutory notice recalling the entire outstanding loan of UGX 18,234,655,082 and USD 7,763,305.04 after the first applicant defaulted on monthly repayment obligations for 155 days. The applicants filed suit on 14 October 2015 challenging the facility letters, master credit agreement, and the constitutionality of the Mortgage Act provisions, seeking temporary injunction to restrain foreclosure. An interim injunction was granted on 4 November 2015.

Issues

  1. Whether the applicants disclosed a prima facie case with a likelihood of success warranting the grant of a temporary injunction.
  2. Whether the applicants would suffer irreparable damage if the temporary injunction is not granted.
  3. Whether the balance of convenience favours the grant of a temporary injunction.
  4. Whether sections 20(c), (d) and (e) of the Mortgage Act 2009 contravene article 26 of the Constitution.

Orders

  • Application dismissed.
  • Costs awarded to the respondent.

Rules and key headnotes

Civil Procedure — Temporary Injunctions — Requirements for Grant — Prima Facie Case
An applicant seeking a temporary injunction must prove by affidavit that there is a prima facie case or an arguable case that merits serious judicial consideration, not merely make general allegations of unlawfulness without disclosing facts constituting a cause of action.
Banking & Finance — Mortgage Default — Statutory Notice Requirements — Compliance
Where a mortgagee has properly served notice under section 19(2) of the Mortgage Act 2009 giving the mortgagor 45 days to rectify default, and the mortgagor admits default, the issuance of such notice cannot constitute grounds for a temporary injunction as it is a statutory right that cannot be challenged on its own.
Banking & Finance — Mortgage Security — Nature and Effect — Irreparable Damage
Where a borrower pledges property as security for a loan, the contemplated risk of sale upon default is inherent in the transaction and loss of such property cannot constitute irreparable damage that is inadequately compensable by an award of damages, as the property is valued before the transaction and the parties contemplate the possibility of sale.
Contract Law — Contractual Terms — Challenge to Agreed Terms — Clean Hands Doctrine
A borrower who willingly entered into a master credit agreement cannot, after defaulting on loan obligations, belatedly and baselessly claim unfairness in the contract provisions as a ground for injunctive relief, particularly where seeking an equitable remedy without demonstrating intention to pay outstanding amounts.
Constitutional Law — Protection of Property — Mortgage Act Provisions — Article 26 Challenge
A challenge to the constitutionality of sections 20(c), (d) and (e) of the Mortgage Act 2009 on grounds that they contravene article 26 of the Constitution is frivolous and vexatious, as the essence of pledging property as security by necessary implication gives power to the mortgagee to control the property for purposes of realising its money upon default, and this is the essential function of collateral used as security in the banking industry.
Civil Procedure — Temporary Injunctions — Balance of Convenience — Admitted Indebtedness
Where indebtedness is admitted and a reputable financial institution is capable of paying any amounts awarded against it, the balance of convenience tilts in favour of refusing an injunction, as the security would continue to be diminished by mounting redemption money whereas the financial institution would be able to satisfy whatever decree is passed against it.

Legislation cited (5)

Cases cited (15)

  • Kiyimba Kaggwa v Hajj Nasser Katende (High Court Civil Suit No. 409 of 1999)
  • American Cyanamid v Ethicon [1975] 1 All ER 504
  • Kakooza v Stanbic Bank (U) Ltd (Miscellaneous Application No. 614 of 2012)
  • Labelle International Ltd and Another v Fidelity Commercial Bank and Another [2003] 2 EA 535
  • Mugambi v Housing Finance Company of Kenya Ltd [2006] 1 EA 231
  • Liberty Construction Company Ltd and Another v Centenary Bank Ltd
  • Matex Supplies Ltd and Another v Euro Bank Ltd (in liquidation) [2008] 1 EA 216
  • Maithya v Housing Finance Company of Kenya and Another [2003] 1 EA 133
  • Green Skyways Agencies Ltd and Another v Bank of Africa (Miscellaneous Application No. 689 of 2013)
  • David Luyiga v Standard Bank (Miscellaneous Application No. 202 of 2012)
  • Miao Huaxian v Crane Bank Ltd and Another (Miscellaneous Application No. 935 of 2015)
  • Attorney General v Tinyefunza (Constitutional Appeal No. 1 of 1997)
  • Attorney General v Oluoch [1972] EA 392
  • Jeroj Shariff & Co v Chotai Family Stores (1960) EA 374
  • Corporate Insurance Co. Ltd. v. Nyali Beach Hotel Ltd [1995-1998] EA 7

Full judgment

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Steel Rolling Mills Ltd & 3 Ors v Standard Chartered Bank (U) Ltd (Miscellaneous Application No. 829 of 2015) [2016] UGCommC 35 (15 April 2016)
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.