African Textile Mills Ltd v The Cooperative Bank Ltd and Ors Ruling - (HCT-00-CC-MA 226 of 2005) [2005] UGCommC 2 (19 January 2005)

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\jexpand\viewkind1\viewscale100\pgbrdrhead\pgbrdrfoot\splytwnine\ftnlytwnine\htmautsp\nolnhtadjtbl\useltbaln\alntblind\lytcalctblwd\lyttblrtgr\lnbrkrule\nobrkwrptbl\snaptogridincell\allowfieldendsel\wrppunct \asianbrkrule\rsidroot1335206\newtblstyruls\nogrowautofit \fet0\sectd \linex0\endnhere\sectlinegrid360\sectdefaultcl\sftnbj {\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang {\pntxta .}} {\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4\pnlcltr\pnstart1\pnindent720\pnhang {\pntxta )}}{\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (} {\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \qc \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid1335206 \fs24\lang2057\langfe1033\cgrid\langnp2057\langfenp1033 {\insrsid1335206 THE REPUBLIC OF UGANDA \par \par IN THE HIGH COURT OF UGANDA AT KAMPALA \par \par (COMMERCIAL DIVISION) \par \par HCT-00-CC-MA- 0226 OF 2005 \par \par (Arising from HCT-00-CC-C. S 0257 of 2005) \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid1335206 {\insrsid1335206 AFRICAN TEXTILE MILLS LTD APPLICANT \par \par }\pard \qc \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid10841314 {\insrsid10841314 VERSUS}{\insrsid1335206 \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid1335206 {\insrsid1335206 \par CO-OPERATIVE BANK LTD [In liquidation] RESPONDENTS \par THE LIQUIDATOR CO-OPERATIVE BANK LTD \par VINCENT KAWUNDE T/A OSCAR ASSOCIATES \par \par \par }{\b\ul\insrsid1335206\charrsid7089236 BEFORE THE HONOURABLE MR. JUSTICE FMS EGONDA-NTENDE \par }{\insrsid1335206 \par }{\b\ul\insrsid1335206\charrsid7089236 RULING \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\insrsid1335206 }{\insrsid4594768 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid1335206 \hich\af0\dbch\af0\loch\f0 1.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar\jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid4803834 { \insrsid1335206 The applicant, Ms African Textile Mills Ltd, is seeking a temporary injunction from this court to restrain the defendants from selling the chattels found on the property comprised in Leasehold Register Volume 785 Folio 12, Plot 78-96, Palisa Road, Mbale pending the hearing and disposal of the head suit}{\insrsid12022384 , in which, inter alia, the applicant seeks a permanent injunction to restrain the respondents from continuing with the acts complained of. }{\insrsid1335206 At the commencement of the hearing of th}{\insrsid12022384 at}{ \insrsid1335206 application, Mr. Phillip Karugaba, learned counsel for the respondents raised a preliminary objection and }{\insrsid12022384 that objection is the}{\insrsid1335206 subject of this ruling. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid12022384 \hich\af0\dbch\af0\loch\f0 2.\tab}}{\insrsid12022384 Mr. Phillip Karugaba basically submitted that this suit is res judicata, and is therefore barred from being entertained by this court. The applicant had previously filed Hig h Court Civil Suit No. 184 of 2002, which had been fully and finally concluded by a consent judgement agreed to by both parties. He referred to Section 7 of the Civil Procedure Act, and in particular to explanation note 4 thereof. The issue in this suit w hether or not the chattels in question formed part of the mortgaged property was an issue that ought to have been put forth in the previous suit, and the applicant having chosen not to do so, was precluded from raising}{\insrsid4803834 the same}{ \insrsid12022384 by way of fresh suit. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid12022384 \hich\af0\dbch\af0\loch\f0 3.\tab}Mr. }{\insrsid10841314 Augustine}{\insrsid12022384 Kibuka Musoke}{\insrsid6306459 , learned counsel for the applicant}{\insrsid4803834 ,}{ \insrsid6306459 replied that it is true that the applicant had filed the suit referred to by Mr. Karugaba but that the current claim was not a matter that was litigated upon in that suit. He submitted that the mortg ages executed by the applicant referred only to land and buildings and did not include machinery or chattels as part of the mortgaged property. In any case}{\insrsid4803834 ,}{\insrsid6306459 he continued}{\insrsid4803834 ,}{\insrsid273054 }{ \insrsid9724358 chattels as security is governed by the Chattels Transfer Act, under which the }{\insrsid4803834 instrument covering the }{\insrsid9724358 chattels in question would have been registered, which was not the case. }{\insrsid10841314 The}{ \insrsid273054 first suit was limited to land and buildings and the second suit is limited to chattels. He therefore submitted that the second suit is not res judicata. Second ly Mr. Kibuka Musoke submitted that the present suit was not between the same parties as the previous one. This current suit is against three defendants whereas the previous suit was against one defendant only.}{\insrsid12022384 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid6816600 \hich\af0\dbch\af0\loch\f0 4.\tab}}{\insrsid6816600 The brief facts so far as}{\insrsid10841314 they}{\insrsid6816600 relate to the decision in this case are not in dispute. The applicant is the registered proprietor of the land comprised in Leasehold Register Volume 785 Folio 12, Plot 78-96, Palisa Road, Mbale. It mortgaged the said lands to the first defendant before the defendant w e}{\insrsid2100929 nt into liquidation. On }{\insrsid6816600 4}{\super\insrsid6816600\charrsid6816600 th}{\insrsid6816600 }{\insrsid10835010 January}{\insrsid6816600 2002 Defendant No. 1 }{\insrsid11485234 issued}{\insrsid9599774 }{\insrsid2100929 to the applicant }{\insrsid9599774 a}{\insrsid2100929 statutory}{\insrsid9599774 notice of sale of the mortgaged property}{\insrsid2100929 under Section 9 of the Mortgage Act}{\insrsid9599774 . The applicant then filed a suit in the High Court of Uganda seeking to stop such sale. This was HCCS}{\insrsid11485234 }{\insrsid9599774 No. 184 of 2002. }{\insrsid2100929 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid2100929 \hich\af0\dbch\af0\loch\f0 5.\tab}The parties started talking exploring resolution of the matters in issue on terms agreeable to both parties. Disagreement struck. And on 30}{ \super\insrsid2100929\charrsid2100929 th}{\insrsid2100929 April 2004 Defendnat No. 1 instructed Oscar Kawunde to advertise the mortgaged p roperty for sale. Kawunde caused to be published an advert in the press notifying that a sale of the mortagaged property will take place on 8}{\super\insrsid2100929\charrsid2100929 th}{\insrsid2100929 June 2004. It read in part as follows;}{ \insrsid13912459 \par }\pard \ql \li1440\ri1440\widctlpar\aspalpha\aspnum\faauto\adjustright\rin1440\lin1440\itap0\pararsid13912459 {\i\fs20\insrsid2100929\charrsid11887556 \'93\'85}{\i\fs20\insrsid806403\charrsid11887556 NOTICE OF SALE BY PUBLIC AUCTION/PRIVATE TREATY UNDER (CAP 205 REGISTR ATION OF TITLES ACT) AND THE MORTGAGE DECREE LEASEHOLD REGISTERVOLUME 786 FOLIO 17 PLOT 78-96 PALLISA ROAD, MBALE MUNICIPALITY MEASURING APPROX. 9.19 HEACTARE S . REG. PROP/MORTGAGOR: AFRICAN TEXTILE MILL LTD OF PO BOX 96 MBALE }{\i\fs20\insrsid2100929\charrsid11887556 On the instructions of }{\i\fs20\insrsid806403\charrsid11887556 Messers Adriko & Karugaba Advocates, on behalf of their client The Cooperative Bank Limited (IN LIQUIDATION) MORTGAGE I shall sell by public auction/private treaty after the expiry of thirty days from the d ate of this notice the above mentioned property unless the Mortgager pays in full all monies owing under the mortgage before the date of the sale.}{\i\fs20\insrsid11887556 }{\i\fs20\insrsid806403\charrsid11887556 Developments include a textile mill and a number of other factory buildings and stores, workers quarters for both junior and senior staff all located within the municipality of Mbale.\'94}{\i\fs20\insrsid2100929\charrsid11887556 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid806403 \hich\af0\dbch\af0\loch\f0 6.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar\jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid4803834 { \insrsid806403 The applicant filed a}{\insrsid13912459 n}{\insrsid806403 interlocutory application to stop this sale. The head suit}{\insrsid13912459 ,}{\insrsid806403 and I presume the interlocutory application}{\insrsid13912459 ,}{\insrsid806403 were}{\insrsid13912459 then}{\insrsid9599774 settled by consent judgment}{\insrsid13912459 setting out the terms of the payment of the decretal amount}{\insrsid9599774 . It appears that the decretal amount in the said suit has never been satisfied by the applicant.}{\insrsid273054 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid9599774 \hich\af0\dbch\af0\loch\f0 7.\tab}}{\insrsid9599774 Defendant No.1, acting as }{\insrsid10841314 a }{\insrsid9599774 mortgagee, then caused a new notice of sale to be published in the media on March 14}{\super\insrsid9599774\charrsid9599774 th}{\insrsid9599774 2005 advertising for sale on the 14}{\super\insrsid9599774\charrsid9599774 th}{\insrsid9599774 April 2005. The notice reads in part,}{\insrsid5329879 \par }\pard \ql \li1440\ri1440\widctlpar\aspalpha\aspnum\faauto\adjustright\rin1440\lin1440\itap0\pararsid5329879 {\insrsid9599774 }{\i\fs20\insrsid9599774\charrsid11485234 \'93\'85 . I shall sell by public/private treaty after the expiration of thirty (30) days from the date of this notice the above mentioned mortgaged property unless the mortgagor pays in full all the monies owing under the mortgage before that date of sale. }{ \i\fs20\insrsid5329879\charrsid11485234 }{\i\fs20\insrsid9599774\charrsid11485234 Developments include a textile mill and a number of other factory buildings and stores, workers quarters for both junior and senior staff all located within the municipality of Mbale. The factory comprises nominal 24,000 spindles spinning plant with a weaving section}{\i\fs20\insrsid6433684\charrsid11485234 of 132 looms, a processing and finishing plant comprising of a complement of machines, a print studio equipped for rotary screen printing application etc.\'94}{\i\fs20\insrsid9599774\charrsid11485234 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid6433684 \hich\af0\dbch\af0\loch\f0 8.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar\jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid4803834 { \insrsid6433684 It is the threat to sale the factory equipment which has brought the applicant to this court seeking relief on the grounds that this equipment was not subject to the mortgage, and could not in fac t be part of the mortgage, as its use as security is governed by an entirely different law, the Chattel Transfer Act. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid6433684 \hich\af0\dbch\af0\loch\f0 9.\tab}Initially I formed the impression that the preliminary objection had merit but on a further scrutiny of the matter, I am satisfied that th e objection must fail. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid6433684 \hich\af0\dbch\af0\loch\f0 10.\tab}In the first suit the applicant acted to deal with the defendant No.1\rquote s threat to realise the money due to him from the applicant by enforcement of defendant No.1\rquote s rights as a mortgage}{\insrsid5329879 e}{\insrsid6433684 over land and buildings on the property referred to above. There was no threat}{ \insrsid1007439 at the time to chattels found on those lands and buildings as clearly these could not form part of the mortgaged property not being land or buildings. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid1007439 \hich\af0\dbch\af0\loch\f0 11.\tab}And no such threat to chattels could exist in law founded upon a mortga ge as a mortgage is an interest only in land and buildings thereon. See Section 1 (b) of the Mortgage Act, which states, }{\insrsid11485234 \par }\pard \ql \li1440\ri1440\widctlpar\aspalpha\aspnum\faauto\adjustright\rin1440\lin1440\itap0\pararsid4803834 {\i\fs20\insrsid1007439\charrsid4803834 \'93}{\i\fs20\insrsid11485234\charrsid4803834 \lquote }{\i\fs20\insrsid1007439\charrsid4803834 mortgage}{ \i\fs20\insrsid11485234\charrsid4803834 \rquote }{\i\fs20\insrsid1007439\charrsid4803834 means any mortgage, charge, debenture, loan agreement or other encumbrance, whether legal or equitable which constitutes a charge }{ \b\i\fs20\insrsid1007439\charrsid4803834 over an estate or interest in land}{\i\fs20\insrsid1007439\charrsid4803834 in Uganda\'85 and which is registered under the Act.\'94}{\i\fs20\insrsid6433684\charrsid4803834 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid1007439 \hich\af0\dbch\af0\loch\f0 12.\tab}}\pard \ql \fi-360\li720\ri0\sl360\slmult1\widctlpar\jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid4803834 { \insrsid1007439 As no threat existed at the time}{\insrsid13912459 of filing the previous suit to chattels in question now}{\insrsid1007439 the issue of restraining the defendant No. 1, could not have arisen at t he time the first suit was filed against the defendant No.1. It is now that the defendant No.1}{\insrsid10835010 ,}{\insrsid1007439 purpo}{\insrsid10835010 r}{\insrsid1007439 ting to act as a mortgagee realising the security available under the mortgage} {\insrsid10835010 ,}{\insrsid1007439 has now threatened specifically to sell the chattels }{\insrsid10841314 in question}{\insrsid1007439 . }{\insrsid5329879 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid10841314 \hich\af0\dbch\af0\loch\f0 13.\tab}}{\insrsid10841314 Defendant}{\insrsid5329879 No.1 has opted to proceed under the mortgage between it and the applicant, and not in execution of the decree in the earlier suit. This option opens up this kind of challenge, given that on the face of it, it is a proceeding beyond matters that are gove rned by the Mortgage Act. A new and different cause of action,}{\insrsid10841314 in trespass and conversion,}{\insrsid5329879 from the one in the previous suit, seems to be availed to the applicant, to bring the current action. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid1007439 \hich\af0\dbch\af0\loch\f0 14.\tab}}{\insrsid1007439 In my view, the applicant is entitled to come to court and contest the matter. The matter is not res judicata.}{\insrsid10835010 The preliminary objection is overruled.}{\insrsid1007439 \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid4671798 {\insrsid11485234 \par }{\insrsid4671798 Dated }{\insrsid11485234 a}{\insrsid4671798 t Kampala this 20}{\super\insrsid4671798\charrsid4671798 th}{\insrsid4671798 day of January 2005}{\insrsid10835010 \par }{\insrsid4671798 \par \par \par \par \par FMS Egonda-Ntende \par Judge \par }}