Musinguzi v Centenary Rural Development Bank Limited (Miscellaneous Appeal 23 of 2021) [2024] UGCommC 284 (26 March 2024)

Full Case Text

## THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCIAL DIVISIONI

# MISCELLENEOUS APPEAL NO. 23 OF 2O2I ARISING FROM MISCELLANEOUS APPLICATION NO. II83 OF 2O2I ALL ARISING FROM CIVIL SUIT NO.606 OF 2O2I MUSINGUZI MARTIN: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : APPLICANT/APPELLANT VERSUS

CENTENARY RURAL DEVELOPMENT BANK LTD ::::: RESPONDENT

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

This Appeal is brought by way of Notice of Motion under Section 98 of the Civil Procedure Act, Order 44 Rule I (u) and Order 50 Rule 8 of the Civil Procedure Rules S.l 71-l for orders that the Ruling and Orders of the Leamed Registrar dated 2nd December 2021 dismissing Miscellaneous Application No. 1183 of 2O2l be reviewed and set aside, Miscellaneous Application No. 1183 of 2021 be placed before the Leamed Trial Judge and for costs of the Appeal.

The Appeal is supported by the affidavit of Mr Musinguzi Marrin, the Appellant. The Respondent on the other hand relied on the affidavit in reply of Mr Ronald Sekidde, the Manager Litigation of the Respondent.

#### Background of the Appeal

The Appellant, having been an employee of the Respondent Bank, took a salary loan that would be repaid through monthly deductions on his monthly salary. The

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Appellant contended that the Respondent dismissed the Appellant from employment on 3'd September 2021 and that the parties are in a labour dispute before the Labour Officer, and that any decision in that dispute has material implication on the outcome of the main suit Civil Suit No. 606 pending before this Honourable Court. That the Appellant filed Miscellaneous Application No. I 183 of 2021 seeking injunctive reliefagainst the Respondent pending disposal ofthe said labour dispute and the main suit.

That the Learned Registrar dismissed that Application on grounds that the Appellant had not demonstrated willingness to deposit 30oh of the forced sale value of the suit subject in accordance with Regulation 13 of the Mortgage Regulations 2012. The Appellant contends that the said provision was outlawed by a recent Constitutional Court decision in Fuelex (U) Lld V Ugondo Revenue Authority Constitulionol Petition No. 3 of 2009. Therefore, that the Registrar's decision was based on obsolete law, and that he did not pronounce himself on the rest of the grounds of the application, hence occasioning a miscarriage ofjustice. He prayed that the Registrar's Orders be set aside and the injunctive relief be granted staying the Respondent's foreclosure and recovery attempts until the main suit and labour dispute are heard and disposed of.

In reply, the Respondent in their affidavit in reply contend that this Appeal was filed on 8'h December 202 I which was sealed by the Court on 13th December 202 1 but served on the Respondent on 13th June 2022, six months later, beyond the 21 days. Therefore, that the Appeal is bad and barred in law, and should be dismissed with costs. Without prejudice, the Respondent contends that since the Appellant has filed a labour dispute challenging his termination, he is precluded liom raising the same questions before this Court. He added that the Appellant was dismissed following all due process under the law for breach ofthe Respondent's policy for

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approval of large loans. That the Appellant's alleged 'tort of breach of mortgage contract' is not known in law.

The Respondent added that the labour dispute does not affect the Respondent,s contractual and statutory right to foreclose the mortgage security furnished by the Appellant. In regard to Regulation 13 of the Mortgage Regulations, counsel contends that the application was dismissed because the Applicant had not paid the 30% security deposit.

In rejoinder, counsel for the Appellant contends that the Affidavit in reply was filed out of time without leave and ought to be struck out. without prejudice, the Appellant rejoins that after filing his appeal on 8'h December 2021, it mysteriously disappeared from the court Registry and that his advocates continued following up until 41h May 2022 when the main suit was coming up for mention before the Learned Registrar and his counsel sought the Registrar's indulgence after several letters had been written about the same. He concluded that the Notice of Motion could not be served since it had not been returned for onward service, and that upon discovery of the file, court renewed the summons and issued a hearing notice.

He added that since the labour dispute and civil Suit No 606 of 2021 are so intertwined, he had applied to have them consolidated or in the alternative to have the suit stayed pending disposal of the labour dispute. He reiterated their submissions on Regulation l3 of the Mortgage Regulations.

### REPRESENTATION

The Appellant was represented by M/s Abaine-Buregyeye & company Advocates whereas the Respondent was represented by M/s Kyagaba & otatiina Advocates.

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## GROUNDS OF THE APPEAL

- 1. Whether the Learned Registrar erred in law and in fact when he dismissed the Application for failure to deposit the 30%o of the forced sale value. - 2. whether the Learned Registrar erred in law and in fact when he failed to indicate the forced sale value or the total outstanding value upon which the 307o would be ascertained. - 3. whether the Learned Registrar erred in law and in fact when he failed to pronounce himself on the other grounds of the Application for a temporary injunction.

#### RULING

Before I go into the merits of the Appeal, I will first handle a few issues raised by counsel for the Respondent on competence. The first was that Miscellaneous Application No. 1183 of 2021 was not heard and determined therefore the dismissal cannot be appealed against. In addition, and without prejudice, he submitted that this Appeal is prematurely before court as the summons were served out of time, six months after they were filed and that the Respondent received them in protest. He cited order 5 Rule 1 (b) and 2 of the civil procedure Rules for service of summons to be effected within twenty -one days from the date of issue except where time is extended upon application to the court within fifteen days after the expiration of the twenty-one days, upon showing sufficient reasons for the extension. He prayed that the suit be dismissed with costs pursuant to order 5 Rule 1 sub-rule 2 of the Civil Procedure Rules.

In their submission in rejoinder and in reply to the raised issues, it was submitted for the Appellant that whereas the parties consented to abandon Miscellaneous

Application No. 1 184 of 2021 which was the application for an interim order, they agreed to flrle written submissions for Miscellaneous Application No. 1 183 of 2O2l for the temporary injunction and that it was after filing submissions that the Leamed Registrar delivered the ruling dated 2nd December 2021 although with an arithmetic error in the application number. counsel invited court to invoke Article 126 (2) (e) of the Constitution to dispense justice without undue regard to technicalities. That it would be unfair to condemn an innocent litigant without control over the acts of a judicial officer.

I have considered the submissions by both counsel and find that Miscellaneous Application No. 1183 of 2021 was for a temporary injunction as evidenced by Annexure C to the Affidavit in support to the Notice of Motion, therefore it means that Miscellaneous Application No. 1184 of 2021 was for the interim order. However, Annexure E which is a ruling on the application for a temporary injunction as seen in the first paragraph, instead bears Application No. ll84 of 2021 which is the number for the interim order. It is therefore clear that it is an error curable under Section 99 of the Civil Procedure Act. However, since it is not this Honourable Court that delivered the ruling, I will leave it as is, and instead invoke Article 126 (2) (e) of the Constitution of the Republic of Uganda as well qs Section 98 of the Civil Procedure Act for the ends ofjustice to be met.

In addition, the administration ofjustice requires that the substance of all disputes should be investigated and the cases be decided on their merits; and that errors and lapses should not necessarily debar a litigant from pursuing his rights (See Essali and Ors v Solanki (1968) E. A 218). That being said, the ruling in Annexure E was in respect of the temporary injunction which ought to have been Miscellaneous Application No. I183 of 2021 not No. 1184 of 2021. Subsequently, Application No. I 183 for the temporary injunction was determined and therefore can be

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appealed against. In the premises, this Appeal rightly lies before this Court. The objection has no merit, and is ovemrled.

In relation to service of expired summons, Counsel for the Appellant laboured to explain that upon filing the Notice of Motion, the file got misplaced and that the Court was notified vide letters dated 27th April 2022 and 8s June 2022. He adds that the Court renewed its summons by issuing hearing notice on 8th J:ullle 2022. Order 52 of the Civil Procedure Rzles which talks about Motions does not have timelines for service of motions, however, Order 43 Rule 1l provides for the service of the notice ofappeal hearing date to be in the same manner as service of summons and provides thus:

"Notice of the day fixed for hearing of the appeal shall be served on the respondent or on his or her advocate in the manner provided for the service on a defendant ofa summons to enter appearance; and all the provisions applicable to that summons, and to proceedings with reference to the service of the summons, shall apply to the service of the notice. "

Service of summons is under Order 5 Rule I sub- rule 2 of the Civil Procedure /tzles which provides:

"Service of summons issued under subrule (l) of this rule shall be effected within twenty-one days from the date of issue; except that the time may be extended on application to the court, made within fifteen days after the expiration of the twentyone days, showing sfficient reasons for the extension."

It is not disputed that the original Notice of Motion was signed by the Registrar on 13s December 2021 for hearing on 15th April 2022, and that the same was not served on the Respondent until l3th June 2022 when it was served along with a hearing notice issued by the Court on 8th June 2022. I have seen the letters dated 22'd April 2022 and 8th June 2022 drawing to the attention of the Registrar the alteged loss of the file and their attempts to cause the endorsement of the Notice of Motion for onward service on the Respondent. Whereas the Notice of Motion had already been endorsed on 13t December 2021, it is not clear as to why the Appellant did not pick them for onward service although the letter says the file had been misplaced. If the file had not been misplaced, the Appellant ought to have applied for extension of time within which to serve the hotice of motion, however, since the file was misplaced and the Court issued a hearing notice dated Sth June 2022, I will start counting the days for service from then. Therefore, service on the Respondent on l3'h June 2022 was within the time for service. This issue also fails, therefore, I will proceed to determine the Appeal on its merits.

## GROUND I

## That the Learned Registrar erred when he dismissed the Application for failure to deposit the 30Yo ofthe forced sale value

It was submitted for the Appellant that the Leamed Registrar dismissed the Application with costs on ground that the Appellant had not deposited 30% of the forced sale value or the total outstanding loan amounts in accordance with the provisions of Regulation l3 of the Mortgage Regulations. He added that neither the forced sale value nor the total outstanding loan amount upon which to deposit the 30oh was certified to Court by either party. Therefore, that it was an error for the Leamed Registrar to require 30o/o of an amount unknown to them. In addition, that Regulation 13 of the Mortgage Regulations upon which he based his decision was declared unconstitutional in Fuelex (U) Ltd v Uganda Revenue Authority Constitutional Petition No.3 of 2009.

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In reply, it was submitted for the Respondent that constitutional petition No. 3 of 2009 that the Appellant relied on was misconceived or misinterpreted as the same did not repeal Regulation 13 of the Mortgage Regulations as alleged. He added that the said case was in respect to payment of 30yo of tax assessed and that a tax assessment is a creature of statute and yet the forced sale value is not defined by the law, but a creature of contract when the borrower and lender enter into a contract. Counsel added that the Appellant is also oblivious of the Supreme court decision of uganda Projects Implementation and Management Centre v ugonda Revenue Authority Constitutional Appeat No. 2 of 1999 which challenged the constitutionality of Section 3a (3) (c) of the Vatue Added Tax Act.

In rejoinder, counsel for the Appellant submitted that the cases cited by the Respondent are distinguishable from this one because unlike in those cases, the lender is accused of breach and that the borrower maintains that he is not liable for breach, and notjust the amount owing.

I have carefully looked at the submissions of both counsel and had the opportunity of reading both cases relied on. For me to consider whether this case is distinguishable from the cases cited as alleged by counsel for the Appellant because the Appellant maintains that he is not in breach as opposed to disputing the amount, I will need to look at both decisions in detail. ln Fuelex (u) Limited v uganda Revenue Authority Constitutional petition No. 3 of 2009, the contention was that Section 15 of the Tax Appeals Tribunal Act which requires a tax payer who has lodged a notice of objection to an assessment to pay 3o%o of the tax assessed or that part of the tax assessed not in dispute or whichever is greater, pending final resolution ofthe objection, contravenes Articles 2l and 126 (2) (a) of the constitution of the Republic of Uganda on fair hearing and equality of treatment before the law. By dissenting decision, the constitutional court held that

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the impugned provision of the Tax Appeals Tribunal Act contravenes provisions of the Constitution, and is unconstitutional and also noted that the Supreme court decision in uganda Projects Implementation antl Management centre v (lganda Revenue Authority Supreme Court Constitutional Appeal No. 2 of 2009, which binds the Constitutional Court found otherwise.

whereas the constitutional court in Fuelex (u) Limited v URA (supra) Justice Owiny-Dollo DCJ as he then was, noted in his judgement, the principle of ,stare decisis et non quieta movere' and noted that despite their findings, they were bound by the decision of the Supreme court, being a higher court of record. Similarly, and despite the fact the constitutional court decision by majority decision found Section 15 of the Tax Tribunal Act to be inconsistent with Article 44 of the Constitutional, the same did not repeal Regulation l3 (1) of the Mortgage Regulations which is in contention in the instant case. In addition, since this Honourable Court is also bound by the Supreme Court decision in Uganda Projects Implementotion (supra), the said decision binds this Court too.

In relation to the above cases being distinguishable from this instant cases because the Appellant disputes being in breach as opposed to only disputing the amount, Justice c. N. B. Kitumba in the Uganda Projects case stated that the Section on the requirement to pay the 30Yo of the assessed tax did not only apply to tax payers who do not dispute the taxes assessed but also to those who dispute the assessed taxes. Similarly, I disagree with counsel for the Appellant that since his client disputes being in breach, he should not be required to pay the 30o/o of the forced sale value under Regulation 13 is unfair and unconstitutional, unless the Constitutional Court pronounces itself on the same provision.

In the premises, I find that the first ground has no merit and therefore fails.

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## GROUND 2

Whether the Learned Registrar erred in law and in fact when he failed to indicate the forced sale value or the total outstanding value upon which the 30%o would be ascertained

It was submitted for the Appellant that neither the forced sale value nor the total outstanding loan amount upon which to deposit the 30Yo was certified to Court by both parties, and therefore that it was an error for the leamed Registrar to require 30o/o of an amount unknown to Court. In reply, it was submitted for the Respondent that the notice of default stated the ameunt demanded as UGX 281,782,2691 and therefore that the Appellant was aware of the amount, that they deliberately refused to deposit 30%o of the same. In rejoinder, Counsel for the Appellant reiterated that it was absurd to expect the Appellant to fumish 3Oo/o of an unknown amount.

Regulation 13 (1) of the Mortgage Regulations which the leamed Registrar relied on provides:

"The court may on the application of the mortgagor, spouse, agent of the mortgagor or any other interested party and for reasonable cause, adjourn a sale by public auction to a specified date and time upon payment of a security deposit of 30% ofthe forced sale value ofthe mortgaged property or outstanding amount. "

It is apparent from the above provision that the stoppage of sale is upon deposit of 30o/o of forced sale value of the mortgaged property or outstanding amount. In the premises, since the forced sale value of the property was not determined or submitted to Court, the Appellant could have deposited 30%o of the outstanding amount. It is therefore not true that the amount was unknown. I therefore find no error on the pan of the leamed Registrar.

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## GROUND 3

Whether the Learned Registrar erred in law and in fact when he failed to pronounce himself on the other grounds of the Application for a temporary injunction

Counsel for the Appellant submitted that the leamed Registrar did not pronounce himself on the other grounds of the application hence occasioning a miscarriage of justice. In reply, it was submitted for the Respondent that the requirement under Regulation 13 (1) is to pay then argue later, therefore that the payment is a prerequisite before Court considers the grounds for grant of an injunction. He added that the Court duly applied the law on interim injunctions before exercising its discretion, and added that the statutory provisions under the Mortgage Act and Mortgage Regulations must be applied prior to exercise of the discretion. He cited the case law in support.

In rejoinder, Counsel for the Appellant cited the Fuelex case (supra) where it was held that the question of whether or not to pay the 30% should only come after determination of whether or not the applicant is liable for the debt, and that requiring a party to pay 30%o of the money as determined by the adverse parfy places upon the objector at a disadvantage that the adverse party does not have. He added that since the proceedings in the main suit have been stayed pending disposal of the labour reference No. 245 of 2021, it would be great injustice and nugatory if the decisions in the two suits are decided in favour of the Appellant.

I have considered the submissions of both Counsel as well as the case law cited on whether the leamed Registrar erred in failing to consider the application on its merits for failing by the Applicant to comply with Regulation 13 (l) of the Mortgage Regulations.

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In the case of Ganafa Peter Kisawuzi v DFCU Bank Limited Civil Application No. 0064 of 2016, the Court of Appeal while citing Regulation 13(1) of the Mortgage Regulations, 2012, held that:

"The Applicant is in breach ofthe above provision ofthe law and as such, grant of an order of a temporary injunction stopping the intended sale is not available to him. IYe therefore decline to grant the same. lV'e do not find it necessary to consider the other conditions for grant of a temporary injunction as highlighted above.

In conclusion, we decline to grant an order for a temporary injunction and stay of execution. lVe accordingly dismiss the application with costs to the respondent. "

In the instant case, the Learned Registrar did not go ahead to consider the Application on its merits. Following what the Court of Appeal decided in the above case, I find that the leamed Registrar did not err when he failed to pronounce himself on the other grounds for an injunction. This ground fails accordingly.

In conclusion and from all the fore going, this whole Appeal fails with costs to be paid to the Respondent by the Applicant/ Appellant.

HON. LADY JUSTICE ANNA B. MUGENYI DArED......... ......e\*. Lil.m.1\*........