Kanyankore & Another v Equity Bank (U) Limited & 2 Others (Miscellaneous Application 2536 of 2023) [2024] UGCommC 360 (24 September 2024)

Full Case Text

## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## [COMMERCIAL DIVISION]

## **MISCELLANEOUS APPLICATION NO 2536 OF 2023**

## (ARISING FROM CONSOLIDATED CIVIL SUITS NO 0950 OF 2017 AND 0341 OF 2018)

## 1. CHARLES KANYANKORE

## 2. KIKATSI DIARY FARMERS LTD::::::::::::::::::::::::::::::::::::

### **VERSUS**

## 1. EQUITY BANK (U) LTD

2. TWINE DAN

# 3. CHRISTIAN LIFE MINISTRIES::::::::::::::::::::::::::::::::::::

## BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI

### **RULING**

This application was brought by way of notice of motion under section 33 of the Judicature Act, section 98 of the Civil Procedure Act (CPA), order 43 rules 4(1), (2), (3), and (5) of the Civil Procedure Rules (CPR) for orders that the execution of the judgment and decree in consolidated civil suit no 0950 of 2017 and 0341 of 2018 be stayed pending the hearing and determination of the applicant's appeal to the Court of Appeal and the costs of this application be provided for.

This application was supported by the affidavit of Charles Kanyankore, the director of the 2nd applicant and opposed by the affidavit in reply of Charles Isiko for the 1st respondent, Twine Dan for the 2nd respondent, and Senyonga Jackson for the 3rd respondent.

The facts giving rise to this application are that the applicants filed a consolidated suit vide civil suit no 0950 of 2017 and 0341 of 2018 in this court against the respondents seeking, inter alia, that declarations and orders that the 1st defendant breached their

mmb

fiduciary duty to the $1^{st}$ plaintiff, the defendant undervalued the $1^{st}$ plaintiffs' property in Bugolobi, the 1st defendant inflated and fraudulently misrepresented the value of the property in Bugolobi to the 1st plaintiff during purchase and undervalued it during the sale, the mortgage transaction between the 1st plaintiff and the 1st defendant obtained was through fraud. deceit. and misrepresentation by the $1^{st}$ defendant and is therefore illegal.

On the 10/10/2023, this Court passed judgment in favor of the respondents and found that the $2^{nd}$ applicant was indebted to the $1^{st}$ respondent to the sum of USD 1,074,015,3/ $=$ . The applicants having been dissatisfied with the whole decision filed a notice of appeal and a letter requesting for certified record of proceedings on the $16/10/2023$ which was duly served to the respondent.

## **REPRESENTATION**

The applicants were represented by M/s ABNO Advocates, 1st respondent by M/s Katende Sempebwa & Co Advocates, 2nd respondent by M/s MACB Advocates and the $3rd$ respondent by M/s Sowali Katamba & Co Advocates.

## **DECISION**

I have carefully read the pleadings of the parties and listened to the submissions of counsel in this matter.

The spirit behind courts granting a stay of execution pending an appeal was discussed in the case of Lawrence Musiitwa v Itobu Margret HCMA No.0160 of 2022 where it was held that:

"An Application for stay of execution pending an appeal is designed to preserve the subject matter in dispute so that the right of the appellant who is exercising his undoubted rights of appeal are safeguarded and the appeal if successful is not rendered nugatory."

Order 43 rule 4(2) of the CPR provides that where an application is made for stay of execution of an appealable decree before the expiration of the time allowed for appealing from the decree, the court which passed the decree may on sufficient cause being shown order the execution to be stayed.

MMB

Parties seeking a stay of execution pending appeal should be prepared to meet the conditions set in Order 43 rule 4(3) of the CPR which provides that:

"No order for stay of execution shall be made under sub rule (1) or (2) of this rule unless the court making it is satisfied-

(a) That substantial loss may result to the party applying for stay of execution unless the order is made;

(b) That the application has been made without unreasonable delay; $and$

(c) That security has been given by the applicant for the due performance of the decree or order as may ultimately be binding upon him or her".

In the case of Ntege Mayambala v Christopher Mwanje HCMA 72/1991, it was held that all the conditions laid down by Order 43 rule 4 (3) of the Civil Procedure Rules must be fulfilled before execution can be stayed. The rationale for these conditions is to maintain the status quo and maintain that the purpose of the application is not to defeat justice by delaying tactics and to prove that the judgment debtor is serious with his application for stay of execution.

The above conditions for grant of stay of execution were expounded in the case of Hon Theodore Ssekikubo & others v Attorney General & others Constitutional Application No.03 of 2014 and these include:

- a) The Applicant must show that he lodged a Notice of Appeal - b) That substantial loss may result to the Applicant unless the stay of execution is granted - c) That the Application has been made without unreasonable delay - d) The Applicant has given security for due performance of the decree or order as may be ultimately be binding upon them.

Dmb

In the case of **Kyambogo University v Prof. Isiah Omolo Ndiege,** C. A. C. A No. 341 of 2013 Justice Kakuru (RIP) observed that in an application for stay, the applicant must prove in addition to other grounds:

- a) That there is a serious and imminent threat of execution of the decree or order and - b) That refusal to grant the stay would inflict greater hardship than it would avoid

Having taken cognizance of the above principles, I will proceed to apply the same in the determination of this application.

#### Whether there is a notice of appeal i.

A notice of appeal can be seen to be filed in this Court on the 16th October 2023 together with a letter requesting for a typed record of proceedings marked as annexures 'b' and 'c' respectively to the applicant's affidavit in support.

It is trite law that a notice of appeal does not constitute a validly filed appeal. An appeal is deemed to be filed when the memorandum of appeal is formally filed with the appellate court. In this case the applicant did not adduce any evidence to show that an appeal has been filed at the Court of Appeal but submitted that an appeal has been filed and given the number Civil Appeal No. 141 of 2024.

However, taking into account that this ground talks about a notice of appeal and there is one annexed to this Application, I therefore find that there is a notice of appeal that has been duly lodged in the High Court.

#### Whether the appeal is not frivolous and has a likelihood of ii. success

The applicants in this case have not attached any memorandum of appeal duly filed at the Court of Appeal to enable this Court

to assess whether they have any arguable case on appeal. It is only in their application and its supporting affidavit and during submissions that counsel for the applicants have spoken to the arguments they intend to raise on appeal which appear to relate to fraud, misrepresentation, and breach of fiduciary duty. It is therefore not possible to assess whether they have an arguable case on appeal or not with the information presented before this Court.

This ground therefore fails.

$\mathbb{H}^1$ .

5 | Page

#### iii. Whether the Application has been without made unreasonable delay

All the parties to this application concede and agree that this application has been brought without unreasonable delay. This ground is fulfilled.

### Whether there is a serious or imminent threat of execution iv. of the decree if the application is not granted

The applicants in this case contend that there is an imminent threat of execution as a decree has already been extracted and that the respondents might execute the same anytime.

The respondents all contend that this application is premature as no steps have been taken for the execution of the decree in the main suit. The 3rd respondent even contended further that they have not filled any bill of costs.

In the case of Baguma Paul T/A Panache Associates v Eng. Dv. Karuma Kagyina HCMA No.460 of 2020, Justice Musa Ssekana while citing the case of **Orient Bank Ltd v Zaabwe &** Others HCMA No 19/2006 stated that:

"The general rule is that courts should not order a stay where there is no evidence of any application for execution of the decree."

Further in the case of Formula Feeds Ltd v KCB Bank Ltd HCMA No 1647 of 2022 Justice Stephen Mubiru stated that:

"An order of stay will issue only if there is actual or presently threatened execution. There must be a direct and immediate danger of execution of the decree. There should be unequivocal evidence showing that unconditional steps as to convey a gravity of purpose and imminent prospect of execution of the decree, have been taken by the respondent. Steps that demonstrate a serious expression of an intent include; extracting the decree, presenting and having a bill of costs taxed, applying for issuance of a warrant of execution, and issuing a notice to show cause why execution should not issue."

In the instant case, the respondents have demonstrated that they have never extracted a decree from the judgment delivered in the main suit but it is rather the applicants who extracted the same for purposes of lodging the appeal. No evidence has been adduced by the applicants to prove that a bill of cost has been taxed, an application for execution of the decree has been filed by the respondents, and that a notice to show cause has been issued to the applicant in this matter. All the respondents in this matter aver that they have never started the execution procedure and this fact is not rebutted by the applicants through evidence and his pleadings.

I therefore find that there is no imminent threat of execution and this ground accordingly fails.

Whether substantial loss may result to the Applicant unless v. the stay of execution is granted Counsel for the applicants submitted that the applicants stand to lose the suit properties and further be condemned to pay USD 1,074,015 (One million, Seventy-Four thousand and fifteen dollars) yet they have an appeal where they have challenged the outcome of the decision. He also contended that the 2nd applicant is no longer operational in business and the 1st applicant who guaranteed the $2^{nd}$ applicant for the loan would suffer substantial financial and other losses if condemned to pay the loan.

The 1st respondent submitted that there is no eviction that will occur because the 2nd and 3rd respondents are in possession of the suit properties. Counsel further submitted that the award in this Court is monetary which is ascertained and the applicant cannot therefore allege that there is any irreparable damage which is not capable of being compensated by an award of damages.

The $2^{nd}$ respondent contended that the allegation that the applicant shall suffer substantial loss is merely speculative, unfounded, with no evidence and it lacks legal basis as they are in possession of the suit property and they are registered as the land title owners.

The 3rd respondent contended that the applicants have not demonstrated any loss that would be occasioned to them as the 3rd respondent is in actual possession of the property in Bugolobi and registered as the owner.

In the case of Tanzania Cotton Marketing Board v Coqecot Cotton Co. SA (1995-1998) 1 E. A 312 where Lubuva, J cited with approval the Indian case of **Bansidhav v Pribku Dayal AIR** 41 1954 it was stated that:

"It is not enough to merely repeat words of the code and state that substantial loss will result; the kind of loss must be specified, details must be given and the conscience of the court must be satisfied that such loss will really ensue. The words substantial loss cannot mean the ordinary loss to which every

7 | Page

judgment debtor is necessarily subjected when he loses his case and is deprived of his property in consequence. That is an element which must occur in every case and since the law expressly prohibits stay of execution as an ordinary rule, it is clear the words 'substantial loss' must mean something in addition to all different from that."

Further, in the case of Formula Feeds Ltd v KCB Bank Ltd (supra), Justice Mubiru stated that:

"The loss ought to be of a nature which cannot be undone once *The court has to balance the interest of the applicant inflicted.* who is seeking to preserve the status quo pending the hearing of the appeal so that his or her appeal is not rendered nugatory and the interest of the respondent who is seeking to enjoy the fruits of his or her judgment".

The trial Judge went on to find that:

"For that reason, execution of a money decree is ordinarily not stayed since satisfaction of a money decree does not amount to substantial loss or irreparable injury to the applicant, where the respondent is not impecunious, as the remedy of restitution is available to the applicant in the event the appeal is allowed. The respondent has not been shown to be impecunious nor the fact that execution of the decree will have any irreversible effect. The applicants have failed to prove this requirement too, as far as recovery of the monetary award is concerned."

In the instant case, the applicants' counsel submitted in rejoinder that there is no doubt that the respondents are in possession of the decreed properties. He however submitted that the decretal sum is more than a million dollars which will be humongous and unjust for his client to pay.

This Court is cognizant of the fact that the loss in question is monetary in nature and is one that can be compensated by an award of damages or the remedy of restitution. The contention that the applicants' business has declined and the money

$8$ | Page

awarded is high cannot be a ground for staying execution. In the circumstances, the respondents have not been shown to be impecunious.

I, therefore, find that the applicants will not suffer any substantial loss and if any, it can be compensated by an award of restitution or damages. This ground therefore fails.

## Whether security has been given by the applicant for the vi. due performance of the decree or order as may ultimately be binding upon him or her.

The applicants admit that they have not deposited any security of costs but are willing to deposit the same in reasonable amounts pending the determination of the appeal.

The 1st Respondent submitted that in case this Court is inclined to grant a stay of execution, it must be conditioned upon the 1st respondent depositing 30% of the decretal sum. The $2^{nd}$ respondent also submitted that the applicant should deposit security for due performance and the 3rd respondent contends that the applicant has not deposited any security for due performance of the decree and neither have they demonstrated how much money they will deposit.

Depositing security for due performance was addressed in the case of Kisaalu Joseph & 10 others v Nakintu May & Anor Miscellaneous Application No 105 of 2020 where Honourable Justice Victoria Nakintu stated that:

"The condition requiring an applicant to deposit security for due performance is established under Order 43 Rule 4 (3(c). Security for due performance has been interpreted to mean the entire decretal sum and it is intended to protect the judgment creditor in the event that the appeal is unsuccessful. Courts though have been reluctant to order security for due performance of the decree. Rather Courts have been keen to order security for costs because the requirement and insistence on a

9 | Page

$\mathbb{V}^{\mathbb{C}}_{\infty}$

practice that mandates security for the entire decretal amount is likely to stifle appeals."

Due to the complications associated with security for due performance as discussed above, courts have resorted to making orders for the award of security of costs.

The purpose of paying security for costs was discussed in the case of Shem Mpanga Mukasa & Anor v Kizza Clessy Barya, Miscellaneous Application No. 479 of 2021 by the Honorable Lady Justice Alexandra Nkonge Rugadya who stated that:

"The payment of security for costs is intended to operate as a shield against the filing of frivolous and vexatious appeals which may never succeed yet have an effect in escalating trial costs."

Security for costs or due performance of the decree therefore operates as an insurance cover that is meant to indemnify the judgment debtor in the event the appeal fails without recourse to vigorous processes of recovering such costs. (Wandera Michael v Baguma Samalie Miscellaneous Application No.

In the instant case, the applicants submitted that they are willing to deposit security of costs for a reasonable amount but did not deposit any security as required by law nor did they mention the amount they are willing to deposit.

I therefore find that the applicants have not fulfilled this requirement and this ground fails accordingly.

That refusal to grant the stay would inflict greater hardship vii. than it would avoid

Save for the averments that the applicants will suffer substantial loss if the decree is executed against them since the $2nd$ applicant is no longer operational in business with no activity, the applicants have not adduced any evidence to this shown that execution will difficulty/hardship or cause great disruptions beyond judgment debtor is subjected to when they lose a case. which every

10 | Page

As such, I therefore find that the applicant has also failed to demonstrate to this Court that the refusal to grant the stay would inflict greater hardship than it would avoid.

From all the fore going, I therefore find that the applicants have failed to satisfy the majority of the essential requirements for the grant of an order of stay of execution pending appeal.

Consequently, this application fails and is hereby dismissed with costs to the respondents.

Muhstatie..... HON. LADY JUSTICE ANNA B. MUGENYI

DATED...................................

$2578624$

Ged Batana - Asrd Repondents

Fahin. M- C/184 Reporter

the Rubing Monor

11 | Page