Owembabazi Nasimolo v Non - Performing Assets Recovery Trust (Miscellaneous Application 5 of 1997) [1997] UGPPDPAAT 1 (20 March 1997)

## THE REPUBLIC OF UGANDA

IN THE NON-PERFORMING ASSETS RECOVERY

#### TRIBUNAL AT KAMPALA

(CORAM: JUSTICE J. W. N. TSEKOOKO, CHAIRMAN, C. O'BOKK, MEMBER)

MISCELLANEOUS APPLICATION NO.<sup>5</sup> OF 1997

(Arising from Tribunal Case No.38/96)

BETWEEN

## JENINA OWEMBABAZI ZARAMBA NASIMOLO APPLICANT

AND

# NON-PERFORMING ASSETS RECOVERY TRUST RESPONDENT to

#### RULING:

The Jenina Owembabazi Zaramba Nasimolo has and 19 of to have in To are applicant instituted this chamber summons under order 7 Rule 11 (d) the Civil Procedure Rules seeking tohavethe plaint Tribunal Case No.38 of 1996 struck out for being barred by law. The summons is supported by an affidavit sworn on 29/1/1997 by John Kihika, an advocate. To that affidavit are annexed a number of documents. Mr Kwikiriza, Legal Manager of the Respondent swore an affidavit on 21/2/1997 in reply to Kihika's affidavit. Kwikiriza1s affidavit are attached the plaint, original mortgage deeds and subsequent mortgage deeds. There is also an affidavit sworn on 24th February 1997 by Jimmy Kijjambu, the Managing Director of Kika Agencies Ltd, Court Auctioneers who in 1996 sold certain properties belonging to the applicant.

two grounds set out in the summons. The application is based on The grounds state -

1. 1996 Plot 2080 the That the plaintiff Respondent on 17th June, sold the property known as Block 244 and Block 249 Plot 356 which defendant/Applicant had mortgaged to UCB the

plaintiff <sup>1</sup>s/Respondent's predecessor to secure a building loan made to the applicant by UCB.

2 . That by virtue of the afore-mentioned sale, the plaintiff/applicant is barred in law and in equity from bringing action on the mortgage for any part of the money secured thereby because it has irrevocably disabled itself from being able to reconvey the properties to the defendant/Applicant.

purpose. . The background to this application is this. During 1989 and <sup>I</sup>'D subsequent years the applicant as an employee of UCB obtained a loan or loans under the UCB staff mortgage housing scheme to construct a house. The loan was secured by mortgage over the plot and the house to be constructed thereon. The mortgage deed(s) and loan offer letter contained certain terms regarding the repayment of the loan. The applicant allegedly defaulted in servicing the loan which was declared a Non-performing asset. By virtue of the provisions of the Non-Performing Assets Recovery Trust Statute, 1994, (statute 11 of 1994) the loan was transferred to the Respondent. The Respondent eventually advertised two properties of the applicant for auction and one property plot 2080 was sold for 63,000,000/- on 17/6/1996. The other property plot 356 was sold on 1/8/96 for shs.3,700,000/-. This money was not sufficient to clear the loan because after the sale, there was a balance of about 68m/- to be paid by the applicant. Consequently the respondent, filed Tribunal case No.38 of 1996 to recover that balance from the respondent. The applicant contends that in law and in equity the respondents are now barred from recovering the balance of the loan, i.e. .shs.68,677,396/-. She instituted this chamber summons for that

0.7 Rule 11(d) reads as follows

The plaint shall be rejected in the following cases - "0.7 R.ll(d).

(d) Where the suit appears from the statement in the plaint to be barred by any law."

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The respondent admits the sale of the two properties but contends that there is no statutory bar to the action now filed against the applicant. Mr Byenkya counsel for the applicant 15 contended that the sale created a statutory bar. That by the sale, the respondent has disabled itself from reconveying the property back to the applicant. Accordingly the respondent cannot institute a case upon the mortgage to recover the balance. That this is inequitable. That this Tribunal administers law and IS equity because of s.16(2) (b)(1) of Judicature Statute, 1996.

Learned counsel referred us to the old case of <u>Kinnaird Vs.</u> Trollope (1888) 39 Ch.630 at pages 641, et seq. to support his arguments that the respondent is barred from instituting a suit on the mortgage to recover the balance. Mr Byenkya stated on the $20$ basis of the same case that the respondent would have been in order if it sued the applicant before it sold property. Learned counsel also referred us to S.5, 2, 7 and 9 of Mortgage Decree, 1974.

For the respondent, Ms Basaza, submitted that the case $2\mathcal{L}$ against the applicant is not barred by any law whatsoever or any That the case of Kinnaird (supra) doctrines of equity. $\verb|is|$ inapplicable; that if a mortgagor exhibits absolute inability to pay, her right of redemption ceases in the same way the right to recovery of the property ceases. She referred to Singh Vs. 30 Bhatt (1962) EA 759 in support of her arguments.

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Learned counsel further referred us to the Law of Mortgages by Fisher and Lightwood at page 273; Gordon Grant & Co. Vs. Boose (1926) A. C. 781 and Coast Realities Ltd Vs. Nollan (1972) 20 D. L. R. 96, to support the proposition that the respondent $3\zeta$ acted properly in instituting a case to recover the balance of the loan. Learned counsel submitted that the sale in this case was carried out under S.9 of Mortgages Decree, 1974 and S.5(b) and S.12(6) & (7) of statute 11 of 1994. She referred to Charles Mayambala Vs. U. C. B., High Court Misc. Application No.160 of 1981 4

to support the view that a mortgagee can enforce his rights either under the Mortgage Decree, 1974 or under the Mortgage Deed Covenants, in this case clause 4.2.2 of the Mortgage Deed.

The question to be answered in these proceedings is whether having sold the mortgaged property outside court, the respondent can enforce repayment of the balance of the loan by suit in this Tribunal.

It is true that the respondent had a contractual right to sell the mortgaged property under clause 4.2.2 of the mortgage Deeds because of the applicant's default in paying any of the ip instalments due under the mortgage. So does that sale debar the plaintiff from bringing this suit on the authority of Kinnaird Vs. Trollope? We think that the facts of Kinnaird case are in a way distinguishable from the case before us. A study of Gordon Grant & Co. Ltd. Vs. F. L. Boos (1926) AC.781 shows that the ıS respondent in this application can bring action to recover the In that case the privy council state: balance.

"In Lockhart V. Hardy (1) the then Master of the Rolls treated the matter as one of some doubt. In that case, the mortgagee had sold the property fairly and had by the sale realized less than the debt. However, in the long run, the judge came to the same conclusion and held that the estate of the deceased mortgagor was not liable.

But, if the mortgagee does not use the remedy of fore-closure but sells under a power of sale given to him by the mortgage deed and brings into account the whole sum thus received and then proceeds to sue his debtor for the balance and the balance only, there is no question of double payment, and there would seem to be no reason in principle why he should not recover the balance.

When he has foreclosed the estate, no one can tell what it is really worth; and it is for this reason that he is precluded from suing at law, because it cannot be ascertained that there is any residue due

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$25$

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even to him. The estate which he has taken under his foreclosure may be equal in value to or even greater in value than his debt. But when he sells, if he received more than his debit, he pays the balance to the mortgagor? if Ke Has just received the value of his debt, he cries quits. Why, then, should he not, if he has received less than the vale of his debt, pursue his other, remedies for the balance?

This conclusion, which seems sound, is stated by Fisher in his Law of Mortgages (section 1969) and by Halsbury in the Laws of England (vol.21, pp.271 and . <sup>3</sup> 08) , and is supported by the authority of the case of Rudge v. Richens (2) and must be taken to be established.

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a he, when he asks the if Now, if instead of the mortgagee exercising power of sale given to him in the deed, brings an action to enforce his security, Court for a sale instead of a foreclosure, why should not the same principle apply? The sale ascertains the value of the property, the mortgagee gets no more from the property than what the sale brings to him. If the property realizes more'than what is due to him, the mortgagor gets the balance. If the property realizes less, the mortgagee is pro tanto unpaid and should be allowed to sue on the personal covenant.

he added a a 50 In this connection it is interesting to note that when in the case of Perry V. Barker (1) Lord Erskine said that he had consulted Lord Redesdale, that he was told that the practice in Ireland was to grant a decree for sale /instead of adecree for foreclosure, and that if the sale produced more than the debt, the surplus went to the mortgagor, but if less the mortgagee had the remedy of an action for the difference. This\*seems consonant to reason."

favour of Indeed even the c^se of Mayambala is in respondent. the

In the result we dismiss this application but costs will be in the cause.

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Delivered at Crusader House this day of $\mathcal{A}.\mathcal{V}.\mathcal{A}.\mathcal{B}$ . 1997.

JUSTICE J. W. N. TSEKOOKO Chairman

$\mathbf{c}^{\perp}$ O'BOKK

Member.

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## THE REPUBLIC OF UGANDA IN THE NON PERFORMING ASSETS RECOVERY TRIBUNAL AT KAMPALA M1SC. APPLICATION NO. 5 OF 1997 (Arising from Tribunal Case No. 38 of 1996)

jenina owembabazi nasimolo APPLICANT / DEFENDANT

## VERSUS

NON - PERFORMING ASSETS RECOVERY TRIBUNAL PLAINTIFF/ RESPONDENT

## **ORDER**

(Application to strike out the plaint)

UPON an application by Mr. Ebert Byenkya counsel for the applicant injhe presence of Ms. Patricia Basaza counsel for the respondent on the ./^L.... day of 1997 before His Lordship Tsekooko J. S. C, Mr. C. O'bok;

IT LS HEREBY ORDERED and decreed as follows

1] That the application is dismissed.

2] That the costs of this application shall be in the cause.

1997. GIVEN under my hand and the seal ofthe court the /./.. day of

REGISTRA

WE APPROVE

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KALfeNGE, BWANIKA , KIMUL1 & CO. ADVOCATES. (COUNSEL FOR THE RESPONDENT

BYENKYA, K1HIKA CO. ADVOCATES (COUNSEL FOR THE APPLICANT)

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