Erimu Company Limited and Others v Seroma Limited and Others (Miscellaneous Application No. 390 of 2025) [2025] UGCommC 173 (13 June 2025)

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] MISCELLANEOUS APPLICATION NO. 390 OF 2025 [ARISING FROM MISCELLANEOUS APPLICATION NO. 304 OF 2022]** 10 **[ALL ARISING FROM CIVIL SUIT NO. 673 OF 2016] 1. ERIMU COMPANY LIMITED ] 2. MOSES KYAYISE ] APPLICANTS 3. BETTY NABAKIIBI ]** 15 **VERSUS 1. SEROMA LIMITED ] 2. ROBERT BELL SEKIDDE ] RESPONDENTS**

20 **3. MARGARET SSEKIDDE ]**

**Before: Hon. Justice Ocaya Thomas O. R**

# **RULING**

# **Introduction**

The Applicant brought this application under the provisions of Section 98 of the Civil Procedure Act ["CPA"], Order 24 Rule 3 of the Civil Procedure Rules ["CPR"] and Order 52 Rules 1 and 3 of the CPR for the following orders:

- 30 1. The Respondent be cited for contempt of the court order dated 9th May 2022. - 2. The 2nd and 3rd Respondents being directors of the 1st Respondent be committed to civil prison for contempt of the court order dated 9th May 2022. - 3. The Respondents do jointly and severally pay to the Applicants Shs 1,700,000,000 as damages for contempt of court and resultant loss. - 35 4. The Respondents do jointly and severally pay Shs 100,000,000 as a fine for contempt of court.


5 5. The costs of this application be provided for.

### **Applicants' Case**

The background of the matters leading to the present suit, according to the Applicants is briefly as below. The Applicants contend that they filed HCCS 673 of 2016 ["The Main Suit"]

10 for inter alia illegal and fraudulent sale of securities comprised in Kyadondo Block 254 Plot 233 at Kansanga, Kyadondo Block 216 Plots 1303, 3697 and 4087 at Ntinda and Kibuga Block 17 Plot 215 at Nalukolongo.

On 18 February 2022, this court delivered judgment and ordered inter alia that the 3rd, 4th 15 and 5th Defendants were Bonafide purchasers for value of Kyadondo Block 254 Plot 233, Kyadondo Block 216 Plots 1303,3697 and 4087 and Kibuga Block 17 Plot 215.

The Applicants filed HCMA 304 of 2022 praying that execution or enforcement of the orders relating to Kyadondo Block 254 Plot 33, Kyadondo Block 216 Plots 1303, 3697 and 4087, 20 Kibuga Block 17 Plot 215 be stayed until the determination of the Appeal to the Court of Appeal. The court issued an interim order of stay of execution pending the determination of the application for stay and adjourned the matter for hearing to 27 May 2022 to enable the 1st Respondent herein file a reply to the application for stay of execution.

- 25 The said Interim Order was on 27 May 2022 extended until the determination of the application for stay of execution and the Learned Judge gave directions for filing of written submissions in the application for stay of execution. The 1st Respondent, in its affidavit in the application for stay of execution led evidence that status quo was that the property was being occupied by the 1st Respondent and is being used for storage and as a parking lot. When the - application came up for hearing on 29th 30 January 2025, counsel for the 1st Respondent applied to file a supplementary affidavit to present new evidence which raised the 2nd Applicant's suspicions and accordingly, he did a check at the Land Office and was shocked to discover that the on 20 September 2023, the 2nd and 3rd Respondents as directors of the 1st Respondent had violated the interim order and altered the status quo by transferring - 35 Kyadondo Block 254 Plot 2333 to DL Properties Limited.

- 5 The Applicants contend that the status quo has been altered by the actions of the Respondents transferring Kyadondo Block 254 Plot 2333 to DL Properties Limited, the current registered proprietor of the same. The Applicants charge that the Respondents are guilty of contempt of court and for those reasons should be cited by; - 1. The 2nd and 3rd Respondents being committed to civil prison for contempt of court. - 10 2. The Respondents jointly and severally being ordered to pay UGX 1,700,000,000 as damages for contempt of court. - 3. The Respondents jointly and severally being ordered to pay a fine of UGX 100,000,000 as a fine for contempt of court.

# 15 **Respondent's Case**

The Respondents opposed this application. The Respondents contend that they have never been guilty of contempt of any order of court. The 2nd and 3rd Respondents contend that they were never party to the proceedings in HCCS 673 of 2016 or any applications arising therefrom and consequently, they were not parties to any orders arising from the suit and 20 application and could not have disobeyed the same.

The Respondents contend that they were never served with the order of stay of execution dated 9 May 2022 (Annexure C to the affidavit in support) and that the individual named Edwin Muhumuza and mentioned in the order as a company secretary of the 1st Respondent

- 25 has never been company secretary of the 1st Respondent or an officer of the 1st Respondent. The 1st Respondent has never therefore violated the order of stay of execution of the said decree. - It is also contended that the decree in HCCS 673 of 2016 declared the 1st Defendant and 30 others as Bonafide purchasers for value and accordingly, the decree did not contain any order that was capable of being executed. The order of stay of execution prohibited the execution of the decree, which itself did not prohibit the 1st Respondent from dealing with its property or conducting its business. Additionally, the sale and transfer of the suit land was not done by the 1st Respondent in execution of the decree but within its rights as the registered 35 proprietor of the said land and therefore, the same cannot be held to be in contempt of the

5 order of stay of execution. Accordingly, the Applicants have not presented any evidence in this application to show that the orders of court were violated by anyone and the present application should be dismissed with costs.

#### **Applicants' Rejoinder**

- 10 In rejoinder, the Applicants contended that: - 1. The 1st Respondent company has always been a party to HCCS 673/2016 and HCMA 304/2022; - 2. The 2nd and 3rd Respondents being directors of the 1st Respondent, are responsible for appointing advocates who represented the 1st Respondent in the above stated 15 suits as well as acting on behalf of the 1st Respondent company as its directors, managing its affairs and making decisions on its behalf. In exercise of their duties as directors, the 2nd and 3rd Respondents signed the impugned transfer forms on behalf of the 1st Respondent.

- 3. Owing to the fact that the 1st Respondent has at all times been party to the above mentioned suits and was represented by advocates engaged by the 2nd and 3rd 20 Respondent, it is false to say that the 2nd and 3rd Respondents have never been aware of the above order. Additionally, the 2nd and 3rd Respondents have been involved in the above proceedings by testifying on behalf of the company. - 4. When HCMA 304 of 2022 was served on the 1st Respondent's counsel who did not 25 enter appearance. When the Application came up on 9 May 2022, a one Edwin Muhumuza introduced himself as company secretary of the 1st Respondent and accordingly, it is the Respondents who sent Edwin Muhumuza to represent them. - 5. The said Edwin Muhumuza sought an adjournment to enable the 1st Respondent file a reply and that in his presence as representative of the 1st Respondent, the court 30 issued an interim stay of execution and granted the Respondents two weeks from 9 May 2022 to file a reply to the application for stay of execution and the order of 9 May 2022 was extracted and filed in the ECCMIS system. - 6. Thereafter, the 1st Respondent responded by filing an affidavit in reply on 27 May 2022 in purported compliance with the leave granted on 9 May 2022.

Page **4** of **19**

7. The 2nd 5 and 3rd Respondents were aware of the said court order and knew that transferring the suit land was in contempt of court. The 2nd and 3rd Respondents could not execute the decree in HCCS 673 of 2016 since the same had not been stayed by order of court. The rights of the 1st Respondent in dealing with the suit land couldn't extend to transferring the suit land to 3rd Parties and the Respondents already in 10 possession of the suit land took advantage of the same contrary to the court order, intending to deny the Applicants a fair trial.

#### **Representation**

The Applicants were represented by M/s Banenya-Mugalu & Co. Advocates while the 15 Respondents were represented by M/s Arcadia Advocates.

#### **Evidence and Submissions**

The Applicants led evidence by way of an affidavit in support of this application and an affidavit in rejoinder both deponed by the 2nd Applicant on behalf of all Respondents. The 20 Respondents led evidence by way of an affidavit in reply deponed by the 3rd Respondent on behalf of all Respondents. On Application by the Applicants, the 3rd Respondent was cross-

examined on oath.

All parties filed submissions in support of their respective cases, which the court has read 25 and reviewed prior to returning the decision below. For purposes of brevity, the Court has not found the need to repeat the contents of the parties' submissions herein.

#### **Decision**

The starting point in resolving this matter is for this court to explore what type of contempt 30 the Respondents are accused of. There are two types of contempt citations; criminal contempt which constitutes acts that obstruct justice or attack the integrity of the court. Proceedings of criminal contempt have a largely punitive objective. Whereas it is true that all types of contempt generally undermine the integrity of court and administration of justice, criminal contempt deals with acts for which this is the prime motivation rather than the

35 necessary result of some other acts. Civil contempt on the other hand deals with non-

5 compliance with an order issued by court. The key distinction between the two is that criminal contempt typically happens in the presence of the court by acts which obstruct the administration of justice or attack the integrity of the court while civil contempt typically happens outside of the court when court orders are contravened/disobeyed.

See **Ssempebwa & Ors v Attorney General (2019) 1 EA 546, George Okwonga & Anor v** 10 **Okello James HCMA 132/2021**, **Betty Kizito vs Dickson Nsubuga & 6 others SCC Nos.25 & 26 of 2021**

It follows that the contempt alleged herein is civil contempt.

- 15 In **Richard Odoi Edone v UEGL HCMA 1088/2022** court defined contempt of court thus: "In law, contempt of court is defined as an act or omission tending to "unlawfully and intentionally violate the dignity, repute or authority of a judicial body, or interfering in the administration of justice in a matter pending before it. Wilful disobedience to any judgment, decree, direction, order or other process of a court or wilful breach of an undertaking given - 20 to a court or the publication (whether by words, spoken or written, or by signs, or by visible representations, or otherwise) or any matter or the doing of any other act whatsoever which scandalises or tends to scandalise, or lowers or tends to lower the authority of, any court; or prejudices or interferes or tends to interfere with, the due course of any judicial proceeding; or interferes or tends to interfere with, or obstructs or tends to obstruct, the administration - 25 of justice in any other manner, will constitute contempt of court."

To be found in contempt, it must be proven that the party accused: (i) knew the order existed, (ii) had the ability to comply with the order but violated it knowingly, and (ii) lacks just cause or excuse for the violation. Civil contempt is a strict liability violation; all that must be proved

- 30 is that the order was served on the respondent, and that a prohibited action (or a failure to carry out an order) occurred. Once the applicant has proved noncompliance with the court's order, by showing the existence of the order and the respondent's noncompliance, the burden then shifts, and the potential contemnor must prove inability to comply or justifiable cause. - 35 This means that even in civil litigation all of the elements of civil contempt must be proved beyond a reasonable doubt rather than the usual civil standard of balance of probabilities."


#### 5 **Existence of an Order**

The position of the law is that court orders must be observed and complied with as long as they remain in force. See **Ekau David v Dr Jane Ruth Aceng HCMA 746/2018, Jane Sempebwa v Ndibalekera Magdalena HCMA 176/2019**

10 Court orders are not suggestions; they are commands which require compliance. It does not matter that a party considers the order null or irregular. See Goyal v Goyal (2009) 2 EA 143, Hajjat Amina Mulagusi v Constance Pade HCCA 28/2010

For contempt proceedings to lie, there must be a valid order capable of being disobeyed. It 15 follows that where an order is stayed, no contempt proceedings can lie since a stay operates to suspend the operation and application of an order, depriving it of its status as a mandatory command. See Black's Law Dictionary, 7th Edition, P.1548, **Erasmus Matsiko v John Imaniraguha & Ors HCMA 1481/2016**, **Bishop Patrick Baligasiima v Kiiza Daniel & Ors HCMA 1495/2016**

In the instant case, the order which is the result of these pleadings is the order for stay of execution, and not the decree. It is common ground that on 9 May 2022, this court issued an order of interim stay of execution which was extended on various dates as already mentioned above. It is also common ground that, as at the date of sale and transfer of the suit property,

- 25 the order of interim stay of execution was in force, the matter as to whether the 2nd and 3rd Respondents were aware of the same being another matter altogether which will be considered by this court a little later in this ruling. Additionally, the question as to whether the order of stay of execution would prevent the transfer of the suit property will also be considered a little later. Regarding this element, the court is interested in establishing - 30 whether the order alleged to be contravened was in existence and effect. It is common ground that the stay was issued and was in effect, the same having not been discharged at the time.

Accordingly, this court is satisfied that the first element is made out.

#### 5 **Knowledge of the said Order**

For a party to be held to be in contempt of court, it must be shown that the order alleged to be contravened was brought to their attention.

See **Janet Rubadiri & Ors v Charles Mutungi HCMA 17/2023, Betty Kizito vs Dickson Nsubuga & 6 others SCC Nos.25 & 26 of 2021**

Whereas the court typically prefers evidence of actual knowledge of the order on the party accused of contempt, such as by service of the order or the reading of the order in the presence of the person accused of contempt, in some instances knowledge of the order may be inferred, such as in cases of "willful blindness" to the order or conduct and circumstances 15 that show awareness of the order.

# See **Beatrice Achola v Nancy Wilson Oryema HCMA 89/2021, Welmond Plastics Limited & Ors v Sathick Sahul & Anor HCMA 2844/2023**

It was contended that the Respondents were not made aware of the order, and that the 20 person who appeared in court for the 1st Respondent was not known to it. First, there is no evidence to justify the absence of the 1st Respondent in court, if the version of events advanced by the 3rd Respondent is to be believed, and the 1st Respondent cannot be heard to claim ignorance of a court order pronounced at a hearing which the 1st Respondent was obliged to attend.

Additionally, the averments by the 3rd Respondent to the effect that Edwin Muhumuza is not known to the 1st Respondent is not believable. Whereas the Respondents adduced evidence that Mr. Muhumuza was not the company secretary, there is no evidence to explain how the said Mr. Muhumuza came to be aware of the court date for the above captioned matter and

30 how he came to appear in that matter specifically. It is also noteworthy that the Respondents did not adduce any evidence of any actions taken against the alleged impostors. See **Colleb Katoroogo & Anor v GROFIN SGB Uganda Limited HCMA 534/2023**

Even more to note is that whereas the 3rd Respondent testified that the Respondents were not aware of the Order, the 3rd Respondent in cross-examination testified that the 3rd 35

5 Respondent observed the Order; either the 1st Respondent was aware of the Order and complied or it was not aware of the Order. It could not have been both cases at once.

The above makes it more likely than not that the 1st Respondent was aware of the said order by way of Mr. Muhumuza, who though not being the 1st Respondent's company secretary was

10 more likely than not an agent of the 1st Respondent. In any case, even if the contrary was to be believed, the 1st Respondent is deemed to have been aware of the orders issued in the hearing which they did attend and did not provide any reasons for the same.

The Applicant led unchallenged evidence that on account of their role as directors of the 2nd 15 and 3rd Respondents, the 2nd and 3rd Respondents were involved in the litigation resulting in the Order alleged to have been contravened and that they testified for the 1st Respondent. It follows that the Respondent were aware of the Order of stay of execution.

#### **Order Compelled the Respondents**

20 The next matter to be considered is whether a party was obliged to comply with a court order. It must be noted that whereas court orders must be complied with, there are orders in rem and orders in personam.

An order in rem is an order compelling its observance by the entire world, including by non-25 parties to the Order. An Order in personam is one that compels observance from only the parties to it. See **Samuel Kamau v Alan L Zukas & Ors HCMA 291/2021**

The position of the law, as I understand it, is that parties cannot be held to be in contempt of orders in personam if they were not parties to litigation, except that if the provision of such

30 order compels observance by the alleged contemnor, inspite of it being an order in personam and the alleged contemnor being a non-party to proceedings from which it arose. See **Samuel Kamau v Alan L Zukas & Ors HCMA 291/2021**

The order of Interim Stay is an order in personam as it did not provide a comprehensive 35 determination of the rights of the parties resulting in an Order enforceable against the whole world. In the instant case, the 2nd and 3rd Respondents rightly contended that they were not parties to the order for Interim Stay. Does that excuse non-compliance in this case?

- 5 A company is an abstraction. It is a legal fiction in which a thing is conferred on legal personality akin to that which a natural person typically possesses. See **Halsbury's Laws of England, 5th Edition, Vol 14 P 137, Para 115 and P 342-343, Para 268, Lennard's Carrying Co. Lrd v Asiatic Petroleum Co. Ltd (1915) AC 705 & Export Trading Company Limited v OBN Produce and Supply Company Limited HCMA 1871/2024.** - 10

The law of contempt of court also however, cites nonparties to in personam orders that assist or enable contempt of court along with, or as conduits/stooges or actors on behalf of principal parties. This means that representatives, agents, or other third parties who, while knowing the existence of an in personam order, collaborate, assist or otherwise 15 facilitate/enable the violation of order cannot rely on the assertion that an order is in personam and does not affect them, and they too will be cited in contempt.

In the present case, the Applicant led uncontested evidence that the 2nd and 3rd Respondents in their capacity as directors of the 1st Respondent, undertook the sale and 20 transfer of the suit land into the name of DL Properties Limited. In my considered view, if this court were to find that the above stated action was in contempt of court, the 2nd and 3rd Respondents could not lawfully seek to excuse themselves from liability by contending that they were non-parties in the proceedings since they effectively were a collaborator and/or agent of the 1st Respondent.

The second question to ask is, whether, the 2nd and 3rd Respondents having been acting as directors of the 1st Respondent can be considered personally liable. Whereas as a general rule of law, principals are liable for actions of their agents, in my considered view, in cases of contempt, both principals and agents are liable.

As already noted above, contempt not only violates the dignity, repute, or authority of a judicial body, it also undermines the efficient administration of justice because parties improperly seek to alter matters on which the court has pronounced itself on, thereby controverting the ends of justice. Contempt of court is a serious matter, as it constitutes an 35 affront to the protections of a democratic, fair and just society, a key principle of which is rule

of law, enjoining everyone to observe the law, and by extension to respect, adhere to and

 - 5 uphold decisions of the courts. Contempt of court is a mechanism through which persons take "power unto their own hands". If this was allowed to continue, the protections and benefits of a just and fair society would be undermined, if not done away with. It follows that in cases of contempt of court, the court is empowered to hold all participants in the contempt proceedings, and not merely the beneficiaries or principal players thereto. This is because - 10 contempt proceedings punish defiance of court orders, irrespective of who put who up to the said defiance.

A court exercises its contempt power to uphold the dignity and process of the court, thereby sustaining the rule of law and maintaining the orderly, fair and impartial administration of 15 justice. "No society which believes in a system of even-handed justice can permit its members to ignore, disobey or defy its laws and its courts' orders at their whim because in their own particular view, it is right to do so. A society which countenances such conduct is a society tottering on the precipice of disorder and injustice". It is trite that the court's power to punish a party for contempt is an exercise of judicial power by the court to protect the due 20 administration of justice. The Court lacking the power to coerce obedience to its orders, or to punish disobedience of them, is a contradiction in terms. There is no doubt that if a party can make himself or herself a judge of the validity of orders which have been issued by court, and by his or her own disobedience set them aside, then the courts stand the danger of becoming fora for talk shows and judicial power would be a mere mockery. See 25 **International Development Corporation of South Africa v Aya Investments Limited HCMA 2863/2023**

In **Housing Finance Bank and another v. Musisi CACA 158 of 2010** the Court of Appeal held thus:

- 30 "The principle of law is that the whole purpose of litigation as a process of judicial administration is lost if orders issued by court through the set judicial process in the normal functioning of courts, are not complied with in full by those targeted and / or called upon to give due compliance. A party who knows of an order, regardless of whether, in the view of that party, the order is null or void, regular or irregular, cannot be permitted to disobey it, by - 35 reason of what that party regards the order to be. It is not for the party to choose whether or

- 5 not to comply with such Order. The Order must be complied with in totality, in all circumstances by the party concerned, subject to the parry's right to challenge the Order in issue, in such a lawful way as the law permits. This may be by way of revision, review or appeal. See Chuck v. Creemer (I Corp Jemp 342)." - 10 The power of courts to punish for contempt is thus a necessary and integral part of the independence of the judiciary, and is absolutely essential to the performance of the duties imposed on court by law. It was argued by counsel for the Applicants that they cannot be seen to comply with the order yet that have filed an appeal against it. It is trite that even a "very clearly wrong" court order is not void and must be obeyed if its operation is not stayed - 15 through orderly process. **See International Development Corporation of South Africa v Aya Investments Limited HCMA 2863/2023**

It follows that, if the allegations of contempt are made out, the 2nd and 3rd Respondents would be culpable notwithstanding that the order of Interim Stay was in rem and they were 20 not parties to the application/proceedings from which the order was issued.

### **Intentional Contravention of the Order**

A contempt of court is not a wrong done to another party to the litigation. It is an affront to the rule of law itself and to the court. The applicant must state exactly what the alleged 25 contemnor has done or omitted to do which constitutes a contempt of court with sufficient particularity to enable the respondent meet the accusation. Where committal is sought for breach of the order, it must be made clear what the Respondent is alleged to have done and that constitutes a willful (rather than casual, accidental or unintentional) breach of an order or undertaking by which a person is bound and of which the person has notice. The test to

30 be applied in determining whether or not the conduct constitutes a contempt of court is the tendency of that conduct to obstruct the administration of justice. There is no need of proof of actual obstruction resulting from an act, but only the character of the act done and its direct tendency to prevent and obstruct the discharge of judicial duty. See **Australasian Meat Industry Employees Union v. Mudginberri Station Pty Ltd (1986) 161 CLR**, 35 **International Development Corporation of South Africa v Aya Investments Limited HCMA 2863/2023.**


5 In the **Odorne Case (above)**, the Court further held thus:

"A deliberate commission or omission that is in breach of the court's order will constitute wilful disobedience of the order unless it is casual, accidental or unintentional. It is trite that an order issued by a court with jurisdiction over the subject matter and person must be obeyed by the parties until it is reversed by orderly and proper proceedings (see *Wild Life*

- 10 *Lodges Ltd v. County Council of Narok and another [2005] 2 EA 344*). Although an intentional act or omission that is, in fact, in breach of a clear order of which the alleged contemnor has notice is enough to establish a contempt of court, casual, accidental or unintentional acts of disobedience under circumstances which negate any suggestion of contumacy, should ordinarily not render the contemnor liable to punishment. A party acting due to - 15 misapprehension of the correct legal position and in good faith without any motive to defeat or defy the order of the Court, should not be liable to a contempt proceeding."

A party acting due to misapprehension of the correct legal position and in good faith without any motive to defeat or defy the order of the Court, should not be liable to a contempt 20 proceeding. But when an act or omission in breach of a court order is done or made consciously, voluntarily and unaffected by any mistake i.e. not casually, or accidentally or unintentionally, it is immaterial that the breach was committed in reliance on a third party's advice, even legal advice.

- 25 Whereas contempt is wrongful conduct committed by someone that lowers, challenges, or diminishes the Court's superior authority, and the act that is in breach of the court's order must be intentional, an intention to prejudice or interfere with the due administration of justice, is not an element of contempt. What needs to be established is a "willful" breach; an intention to do an act that has a clear objective or tendency to interfere with the 30 administration of justice. A careless disregard as to whether a court order is adhered to, can - add up to a "willful" breach. It must be shown beyond reasonable doubt that the conduct was a deliberate breach of the order. The applicant bears the onus of establishing that the alleged contemnor did something or failed to do something that he or she could have otherwise done. The court is free to presume the intention of the person through his or her acts or omissions.


# 5 See **International Development Corporation of South Africa v Aya Investments Limited HCMA 2863/2023, George Okwonga & Anor v Okello James HCMA 132/2021**,

It must be a deliberate act undertaken or omission by the alleged contemnor, with the actual knowledge that the taking of or failure to take such action would, or would be reasonably 10 expected to, breach the order. Willfulness includes being reckless, i.e. not caring whether an act or omission constitutes or results in breach of the order, taking a deliberate risk that an act or omission could constitute or result in breach of the order, and shutting one's eyes to the possibility that the act or omission constitutes or results in breach of the order. See **International Development Corporation of South Africa v Aya Investments Limited** 15 **HCMA 2863/2023, George Okwonga & Anor v Okello James HCMA 132/2021**

In the instant case, two questions fall to be determined:

(a) Was the order violated?

- (b) If so, was the violation deliberate? - 20

Counsel for the Respondents contended that the determination of the court in the decree from which the application for contempt of court arose was that the Respondents were bonafide purchasers for value. It is common ground that the Respondents were in occupation of the suit premises and that they were registered proprietors at the time of the decree.

25 Counsel submitted that the decree was a negative order from which, effectively, no stay was possible.

In **Kare Distributors Ltd & Anor v NCBA Bank Uganda Limited CACA 100/2023**, the Court of Appeal held that once an order from which an application for stay of execution arises

30 from, that brings the competence of such application into question. The Court of Appeal further held:

"Given that the order, which is sought to be stayed in the present application, is negative and therefore not executable, I equally find that this application is incompetent. I would therefore up hold the preliminary point of law raised by

35 the Respondent."

5 In **Charles Ssemwanga v Nazziwa Aisha & Ors CACA 20/2022**, also cited by Counsel for the Respondent, the court held thus:

"What the Applicant has before this court for stay of execution is a negative order of dismissal of the Plaintiffs suit in the Chief Magistrates Court. There was no order capable of execution which can be stayed. An application for stay of execution

- 10 presupposes that there is an order capable of execution which may be stayed. ln this application such a notion is erroneous because there is no order that is capable of being executed as the order setting aside the decision of the chief Magistrate resulted in a dismissal of the Applicant's suit. The situation is that there is no suit in existence. " - 15 A negative order is one from which no positive command can be deduced. See **Exclusive Estate Limited vs. Kenya Posts and Telecommunications Corporation and Another [2005] 1 EA 53 (CA), Aya Investments Limited v International Development Corporation Of South Africa HCMA 3063/2023** - 20 In the present case, the decree of the court declared 1st Respondent a bonafide purchaser for value. This decree declared the rights of the 1st Respondent. It follows that it is not a negative order, since it effectively barred the entire world from contesting the 1st Respondent's ownership, except on different facts than in the main suit. It follows that, contrary to submission of counsel, the above was not a negative order.

Even so, it is not proper for a court considering a contempt application to inquire into the merits of the proceedings from which an order alleged to have been breached was issued. That is the territory of appeal or review. In my considered view, it is not enough for a party to allege in defence to contempt proceedings that the order was wrongly given. If they were

30 aggrieved, they should have challenged the said order as provided for by law. The court may only inquire into the order if the same is ambiguous and cannot be the basis of contempt proceedings, but other than that the court's inquiry in contempt matters is to establish existence of the order, its being in force, its being violated and that that violation was deliberate or negligent/reckless.

- 5 In the present case, the purpose of an order of stay is to preserve the status quo. The status quo was that the 1st Respondent was the registered proprietor. That status quo is no longer what is the position today. An alteration of the status quo in contravention of an order requiring that the status quo be maintained is an affront of the said order. See **Bishop Patrick Baligasiima v Kiiza Daniel & Ors HCMA 1495/2016** - 10

I am aware that the lis pendens rule, prohibiting dealing in property being the subject of proceedings in court does not apply in Uganda, and that parties to litigation can dispose of their property. See **Kazoora v Rukuba SCCA 13/1992**

15 This however does not apply where the court has issued an order that property not be dealt with, to maintain the status quo, or for any reason whatsoever. In my view, the issuance of the Order of stay meant that the Respondents could not deal with the property at all.

Whereas the decree had declared the 1st Respondent the lawful proprietor of the land, the 20 stay of execution the **stay of execution temporarily nullified** the 1st Respondent's ability to act on the decree. By **transferring** the land, the Respondents **contravened the status quo** the court was protecting; their **status as bona fide purchasers** under the decree was **not absolute** once a stay had been granted as it reverted the parties to their positions prior to litigation, with the important command that that position should not be altered, 25 notwithstanding that the 1st Respondent was the proprietor of the suit land and could ordinarily deal with it in the manner impugned.

The stay effectively froze the legal consequences of the decree. It prohibited any steps to enforce or benefit from the decree until the stay was lifted or the appeal resolved. By 30 transferring the property to a third party, the Respondents: (a) acted on the strength of the decree (by assuming they had unrestrained rights to deal with the property) and (b) took steps that undermined the very purpose of the stay — to preserve the status quo pending the appeal.

35 The question that now arises is whether this was deliberate. The Respondents led no evidence that the sale in contempt was not deliberate. There is no evidence for example that 5 they wrongly assumed that the order of stay did not prohibit the sale. From the evidence on record, it has been sufficiently established that the sale was deliberately to undermine the order of stay and I find as so.

#### **Claim for Damages/Fine**

- 10 Once a court determines that a party has not complied with its order, it may impose both coercive and compensatory sanctions. The court should consider the character, nature, magnitude of the harm occasioned or threatened by the continued contempt and the probable effectiveness of the suggested sanction. The law of contempt is quasi-criminal and it results in penal consequences. The sanctions that may follow a finding of contempt are; (i) - 15 imprisonment: a person found guilty of civil contempt may be sentenced to simple imprisonment for a term that may extend to six months. The court may also impose a fine as an additional penalty; (ii) payment of a fine: in addition to or instead of imprisonment, the court may direct the payment of a fine. The amount of the fine is within the discretion of the court, and it may vary based on the circumstances of the contempt; (iii) compensation: the - 20 court may order the contemnor to compensate the party affected by the contempt. This compensation is intended to remedy any losses or damages suffered due to the contemptuous act; and (iv) purging contempt: contemnors have the option to purge contempt by complying with the order or undertaking that they previously violated. See **International Development Corporation of South Africa v Aya Investments Limited**

### 25 **HCMA 2863/2023, George Okwonga & Anor v Okello James HCMA 132/2021**

In the present circumstances, the Applicants proposed that the Respondents be fined, pay compensation and be committed to civil prison. In my considered view, commitment of a contemnor to civil prison, especially where other modes of sanction are available, should be

- 30 confined to such brazen or malevolent contempt that other sanctions would be sufficient. Additionally, court should, in such cases consider whether to impose other sanctions to contemnors, failing which they may be committed to civil prison. It must be recalled that court is empowered to commit both individuals and principal officers of companies to civil prison for contempt of court. See **Bin-It Services Limited v Kampala Capital City** - 35 **Authority (KCCA) and Executive Director, KCCA Miscellaneous Application No.593 of**


# 5 **2019,** *Wong To Yick Wood Lock Ointment Ltd v Yue Hwa Cosmetic Ltd & Anor [2024] HKCFI 1868,* **Olympic Council of Asia v Novans Jets LLP (2023) EWHC 276**

In the present case, I note that the suit property was transferred and the purchaser, D. L Properties Limited is not a party to these proceedings, has not been heard and may well turn

10 out to be a bonafide purchaser.

Additionally, the Applicants pray that Respondents pay Shs 1,700,000,000 as damages for contempt of court and resultant loss. It is trite law that matters of contempt are between the court and the contemnor, and any claims for damages by an applicant should be supported 15 by actual loss suffered. The Applicants have not shown that they suffered loss of UGX

1,700,000,000.

Accordingly, this court finds that, in the circumstances of this case, the prejudice suffered by the Applicants, and the affront on the orders of the court, is that a property subject to the

20 jurisdiction of this court in the proceedings subject to the stay has been effectively taken out by the Respondents who sold it to a third party. A mechanism must be employed to effectively compensate for such wrongful actions, and a sanction should be imposed for the actions of the Respondent. This court does not accept the view that this is a case in respect of which arrest and commitment of the 2nd and 3rd Respondents to prison for contempt of court is 25 necessary as a first option.

#### **Conclusion**

On the whole, this court makes the following orders:

- 30 1. The Respondents are found guilty of contempt of court. - 2. The Respondents jointly and severally are ordered to tender into this court a security for the entire purchase price of the suit property by way of either an unconditional payment security or an unconditional payment guarantee within thirty (30) days of this ruling. The Respondents should tender in a copy of the purchase agreement with 35 DL properties within thirty (30) days of this ruling. - 3. The Respondents jointly and severally are ordered to pay a fine of UGX 100,000,000

- 5 as a fine for contempt of court within thirty (30) days of this ruling. - 4. In the event that any of the above orders are not complied with, the 2nd and 3rd Respondents, together with the Principal Officers comprising of the controlling mind of the 1st Respondent shall be committed to civil prison for a period of six (6) months except if cause is shown as to why any of them should not be so committed. The said 10 persons herein shall be heard on proceedings to show cause why they should not be - committed for contempt of court prior to any such committal. - 5. The Respondents shall meet the costs of this application.

I so order.

**Dated** this\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_2025, delivered electronically and uploaded on **ECCMIS** 13th June

20 **Ocaya Thomas O. R Judge**

**13th June 2025**