Barclays Bank of (U) Limited v Katende (Civil Appeal 22 of 1993) [1994] UGSC 38 (11 February 1994)

# IN THE SUPREME COURT OF UGANDA

AT MENGO

CORAM: MANYINDO, D. C. J., ODOKI, J. S. C., & PLATT, J. S. C. CIVIL APPEAL NO. 22/93

## BETWEEN

::::::::::::::::::::::::: AFFELLANT. BARCLAYS BANK OF (U) LTD VERSUS-

<pre>:::::::::::::::::::::::: RESPONDENT</pre> LIVINGSTONE KATENDE LUTU

> (Appeal from the Ruling and Order of the High Court of Uganda at Kampala (Justice Hon. I. Mukanza) dated 4th June, 1993)

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## HIGH COURT CIVIL SUIT CASE NO. 658/92

JUDGMENT OF THE COURT

The Appellant Bank seeks to realise the security given by the Respondent Martgager. The learned trial Judge thought that the Mortgager ought to be protected, and granted the latter a temporary injunction against the Mortgagee. While we can under stand the Judge's feelings, the legal precepts employed by him were unfortunately not relevant.

Mr. Livingstone Katende Luutu the Flaintiff in the High Court (and now Respondent in this Court) brought a suit against Barclays Bank of Uganda Ltd. and Bearing Machinery Equirment Ltd., in order to obtain a declaration that the Bank's sale of the plaintiff's property is illegal, and to restrain by an injunction, the Bank from selling the plaintiff's property by public auction. The plaintiff also asked for instalments, by which he can pay off the debt. The suit illustrates what has taken place, as supported by an affidavit dated 23rd October, 1992. It appears that on 1st November 1990, the plaintiff entered into a transaction whereby he guaranteed the debt which Bearing Machinery Equipment Ltd owed the Ban

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As security the plaintiff mortgaged his own property Kibuga Block 5 Plot 601. Unfortunately Bearing Machinery equipment Ltd. defaulted in payment and the Bank looked to the guarantor for payment. The sum guaranteed had been shs. 5 m., of which shs. 4.5m was outstanding. The plaintiff admitted his liability under the guarantee for Bearing Machinery Equipment Ltd. His case was at best that he had been unaware that the latter Company had defaulted in payment and that he had not been served with a demand notice. He had suddenly found his property advertised for sale on 30th September, 1992 and 5th October, 1992. Having discovered this fact, he had started paying a monthly sum of shs. 500,000/=; but in all he had only repaid shs. $860,000/=$ . The plaintiff contends that the Bank ought to agree to instalments of shs. 500,000/= per month. Had the Bank come to the Court, it would have been possible to ascertain exactly what the outstanding loan was and ascertain the value of the morgaged property. The plaintiff's guess was that his property was worth shs. 120m. It would be an irreparable loss if his house were sold.

In support of the plaint filed on the 23rd October 1992, the plaintiff took an application for an injunction dated 23rd October, 1992. It was heard and decided on 4th June, 1993. The reasons given by the learned Judge have caused the Bank to be aggrieved and it would seem for good reason. He concluded:-

> "As regards the first condition the legal mortgage stipulated that the first defendant would proceed to sale by public auction the property in question without resort to Court. In a way, the jurisdiction of this Court would be ousted and the applicant would be condemned unheard. That would in my opinion violate the principle of natural justice. For this particular condition the applicant had shown a prima facie case with a probability of success."

The learned Judge went on to consider that in the case of land, a temporary injunction is usually granted.

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Thirdly the learned Judge was impressed by the discrepancy between the greater value of the subject matter than the loan; the outstanding loan would indeel be ascertained. Altogether he would suffer irreparable loss.

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The appeal must be allowed. It is one of those cases perhaps where it can be said that hard cases make bad law. The learned Judge must have sympathised with the plaintiff who had tried to help a friend and now would lose a great deal. The law firmly provides that business expediency is to be preferred, and if the mortgage document so provides. The mortgagee may sell without recourse of the Court. That agreement provides:-

> $"B)$ At any time after payment of the monies hereby secured has been demanded and the mortgagor or the Frincipal Debtor has made default in paying the same the Bank may in addition to any other powers enjoyed by it hereunder or under the Registration of Titles Act and the Mortgage Decree (No. 17 of 1974) or under the general law and without any previous notice or concurrence on the part of the Mortgagor."

Sell or concur with any other person in $1)$ selling the mortgaged property or any part or parts thereof in one or more lots of public auction or private treaty and subject to such terms and conditions as the Bank shall in its absolute discretion think fit and may by etc ... and the mortgagor hereby irrevocably consents to the carrying out of any such sale or resale by private treaty." (the rest is not applicable)

It follows that once demand has been made and the Mortgagor/ Principal Debtor had made default in paying the debt, the Bank may exercise its power of sale without recourse to the Court. This power conforms with Section 9 of the Mortgage Decree No. 17 of 1974. Section 9 provides:-

> "9. Where the mortgage gives power expressly to the mortgagee to sell without applying to Court, such sale shall be by public auction unless the mortgagor and incumbrances subsequent to the mortgagee, if any; consent to a sale by private treaty."

The Plaintiff seems to have laboured under the misconception that in all cases the mortgagee should apply to the Court for foreclosure (See Section 7 of the Decree No. 17 of 1974). The Mortgagor's right to redeem the land is confined to repayment of the loan; it the mortgagee has the power of sale without the Court ordering forecaosure.

The learned Judge thought that Section 9 of the Decree of 1974 must involve the ouster, of the jurisdiction of the Courts, and would therefore violate the principle of natural justice. It seems that perhaps the learned Judge has not expressed himself well, because there can hardly be a principle of natural justice which outshines a legislative provision. Sale without recourse to the Court having been agreed by the parties themselves, is sanctioned by Section 9 of Decree 17 of 1974.

The learned judge directed himself carefully, basing his approach to ordering a temporary injunction on GIELLA V CASMAN BROWN (1973) EA 358 & Other cases. On the ground chosen by the learned Judge there could be no possibility of success.

What the learned Judge might have explored is whether the plaintiff had received any demand to pay or the guarantee, as he claimed. But the Judge did not do so and there is neither a cross appeal nor a notice to confirm judgment on different grounds. What is before the Court is the appeal and that question the learned Judge's approach to the mortgage agreement. No question of natural justice arise on the basis of this agreement. It was not possible on that ground to say that there was a probability of the plaintiff succeding on his suit. The terms of the agreement had to be upheld and as a sale by public auction a private treaty had been agreed by the plaintiff that by itself could not be an irreparable loss.

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The Plaintif has of course been let down. The interest is extremely high at 41%. But there is no ground on which the Court can intervene to grant the Plaintiff the right to pay by instalments. That must be accepted by the Bank, if it so agrees. It is immaterial whether the property mortgaged is of greater value than the lan.

The result is that the appeal is allowed, and the orders of the High Court set aside. The Bank may wish to exercise its powers of sale, and if so, no doubt, it will make demand and do all such things as are required of it. The Plaintiff should perhaps study paragraph 2(viii) of the mortgage agreement as to how service is effected by post or service at the last known place of business or abode of the plaintiff. The plaintiff has had Image October 1992 until the present date to get this matter settled. The interest is mounting all the time, and prejudicing the balance payable to him. It is in his interests that he comes to terms with the agreement that he made as quickly as possible, and chooses the most beneficial course open to him.

The Appellant Bank will have the costs of this appeal and of the application in the High Court.

Dated at Mengo this ....................................

### S. T. MANYINDO DEPUTY CHIEF JUSTICE.

B. J. ODOKI JUSTICE OF THE SUIREME COURT.

I CERTIFY THAT THIS IS A TRUE COPY OF THE ORIGINAL. A. L. KYEYÜNE, for. REGISTRAR SUPREME COURT.

12.12.1994.

H. G. PLATT JUSTICE OF THE SUPREME COURT.

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