Visare Uganda Limited & Another v Grant Thonton Management Limited (Miscellaneous Application 384 of 2024) [2024] UGCommC 108 (11 March 2024)


# **IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA COMMERCIAL DIVISION**

Reportable Miscellaneous Application No. 0384 of 2024

In the matter between

# **1. VISARE UGANDA LIMITED**

### **2. M/s NAMBALE, NERIMA AND Co. ADVOCATES APPLICANTS**

**And**

# **GRANT THONTON MANAGEMENT LIMITED RESPONDENT**

**Heard: 06 March, 2024. Delivered: 11 March, 2024.**

*Civil Procedure - execution - accrual of interest on a decretal sum subject to a freezing order issued by court - It is trite that the judgement debtor's liability to pay interest on the decretal amount does not cease until the debt is paid in full - payment may be made to the judgment creditor personally or to a duly authorized agent, on the judgment creditor's behalf, provided that such agent has authority to receive payment.*

# **RULING**

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# **STEPHEN MUBIRU, J.**

Introduction:

[1] On or about 24th February, 2017 the applicant obtained a loan from KCB Bank Uganda Limited for facilitating the completion of the construction of a block of condominium residential apartments on its land comprised in LRV 2651 Folio 9 Plot 65A located along the Lugogo Bypass in Kampala. As security for the loan, the applicant executed a mortgage over the title to the same land in favour of the bank. The applicant constructed a total of forty-four (44) units of residential condominium apartments but defaulted on the loan. Upon default on the obligation to pay the US \$ 1,930,813 as agreed, the Bank initiated a process of foreclosure. The applicant filed HCCS No. 898 of 2019 to challenge the foreclosure and sale of the property by KCB Bank Uganda Limited.

- [2] In order to raise part of the funds outstanding due under the mortgage, the applicant had on 31st December, 2019 signed an agreement with the M/s Grant Thornton Management Limited, selling twelve (12) out of the forty-four (44) units to M/s Grant Thornton Management Limited at the price of US \$ 2,400,000. M/s Grant Thornton Management Limited paid US \$ 500,000 to the bank in satisfaction of the condition for stay of the sale as ordered by court. It was agreed that in the event the applicant was unable to raise the balance outstanding by 31st December, 2020 then M/s Grant Thornton Management Limited was to raise an additional US \$ 1,900,000 in order to redeem the applicant's mortgage. - [3] Subsequently, a tripartite memorandum of understanding between the applicant, M/s Grant Thornton Management Limited and KCB Bank was executed on 28th February, 2020 by which it was agreed that the mortgage would be redeemed upon payment of US \$ 1,930,813. It is on that basis that on 26th March, 2020 a consent judgment had two days before been entered in the suit between KCB Bank Limited, M/s Grant Thornton Management Limited and the applicant. Eventually the court signed and sealed the consent judgment/decree on 31st August, 2020 whereby part of the loan repayment was to be financed by the third-party M/s Grant Thornton Management Limited. While the applicant reserved the right of redeeming the 12 units by 31st December 2020, M/s Grant Thornton Management Limited reserved the right to cause transfer of the 12 units into its name or sell the security in the event of the applicant's default.

- [4] The applicant having defaulted and there being no independent titles yet to the 12 condominium units, M/s Grant Thornton Management Limited subsequently on or about 30th April, 2021 applied for attachment and sale of the entire land comprised in LRV 2651 Folio 9 Plot 65A, on account of the applicant's default. The applicant challenged the attachment in execution vide Civil Appeal No. 722 of 2021. In a decision delivered on 11th January, 2022 the set aside that warrant of attachment on ground that by virtue of Order 22 rule 14 (4) of *The Civil Procedure Rules,* an order of attachment should affect only such portion of the property, the proceeds of which would be sufficient to satisfy the claim of the decree. - [5] Following that decision, the 1st respondent undertook a valuation of the entire property the result of which revealed, in a report dated 20th October, 2022 that the Market Value of this property is in the sum of US \$ 12,250,000 while its Forced Sale value is in the sum of US \$ 8,000,000. On that basis, the court issued a warrant of attachment and sale of the following; twelve (12) 3-bedroom units valued at US \$ 182,000 each, hence a total of US \$ 2,184,000 all comprised in Bock "B"; and ; fifteen (15) 3-bedroom units valued at US \$ 182,000 each, hence a total of US \$ 2,730,000 and one 2-bedroom unit valued at US \$ 170,000 all comprised in Bock "C", rendering the total value of the property attached as US \$ 5,084,000 for the recovery of the then decretal sum of US \$ 5,501,540 exclusive of the costs of recovery. - [6] Attempts at securing a buyer of only two out of the three blocks having been unsuccessful and with potential buyers / bidders expressing interest only in the entire property inclusive of Block "A," the 1st respondent sought a variation of the order of 11th January, 2022 that required the Registrar to attach only such portion of the property as may seem necessary to satisfy the decree. Consequently, upon a reference to this Court from the Deputy Registrar, the order was by a ruling delivered on 23rd January, 2023 varied and leave was granted for the sale of the entire property.

- [7] Following that decision, the 1st respondent on 27th February 2023 caused publication of a notice of sale in "The New Vision" newspaper for a sale by public auction due on 30th March 2023. On 13th March, 2023 counsel for the judgment creditor lodged the duplicate certificate of title and original valuation report by M/s Byokusheka and Company dated 20th October, 2022 with the Court. The Acting Assistant Registrar upon examining the duplicate certificate of title directed counsel for the 2nd respondent to retain it in view of the terms of the consent judgment/decree. Following the sale of the suit property, the 1st respondent filed a return in court on 17th April, 2023 showing that the property was sold to the 3rd respondent at the price of US \$ 9,000,000. The proceeds of the sale in excess of the decretal sum less my taxed costs were to be paid to the applicant within 14 days from the date of the ruling ascertaining the costs recoverable. Following the sale of the suit property, the 1st respondent filed a return in court on 17th April, 2023 showing that the property was sold to M/s Yi Hai Property Servicing Company Ltd, at the price of US \$ 9,000,000. - [8] The 1st applicant then filed an application seeking orders that; (i) the sale and transfer of Leasehold Volume 265 I Folio 9, Plot 65, 4 Lugogo Road Kampala by the 1st respondent to the 3rd respondent be cancelled and set aside; (ii) the Commissioner for Land Registration do reinstate the applicant as the registered proprietor of Leasehold Volume 2651 Folio 9, plot 65A Lugogo Road Kampala; (iii) the respondents be restrained from alienating or dealing with Leasehold Volume 2651 Folio 9, plot 654 Lugogo Road Kampala; (iv) In the alternative to the foregoing, the 1", 2nd and 3rd respondents do jointly and severally pay to the applicant the market value of the property less the lawful decretal sum, interest and costs. The application was heard on 16th May, 2023. Pending the delivery of the decision, the Court issued a freezing order in the following terms;

The court is empowered to make a freezing order to prevent the frustration or inhibition of the court's process by seeking to meet a danger that a judgment, order or prospective judgment or order of the court will be wholly or partly unsatisfied, by a party hiding or otherwise unjustifiably dissipating those assets. The purpose of a freezing order is to prevent frustration or abuse of the process of the Court, not to provide security in respect of a judgment or order. It is an interim remedy granted to ensure that the court process is effective. For that reason, until after the delivery of the ruling in this application or further order of the Court, the 1st respondent must not remove from his account or in any way dispose of, deal with or diminish the amount now standing to the credit of M/s Quickway Auctioneers & Court Bailiffs on Diamond Trust Bank account No. 0101301001, being the proceeds of sale of the land comprised in LRV 2651 Folio 9 Plot 65A located along the Lugogo Bypass in Kampala.

- [9] As a consequence of that order, the proceeds of sale were frozen on the bailiffs account for what eventually due to unfortunate circumstances that befell the trial Judge shortly thereafter, turned out to be about six months, during which interest in the sum of US \$ 7,910.41 was earned on it, from 1st May, 2023 to 15th February, 2024. Before that order, by a ruling dated 27th April 2023, the Deputy Registrar had ordered the bailiff to pay the respondent a sum of US \$ 6,012,066.6 in final satisfaction of the decree. On 28th April, 2023 the bailiff had remitted that sum to M/s Byamugisha Advocates, counsel for the respondent leaving a balance of US \$ 2,396,452.23 on his bank account. A bill of costs presentenced as a consequence of one post-judgment application decided in favour of the respondent was on 12th July, 2023 taxed and allowed at shs. 3,871,544/= while the other was on 18th October 2023 taxed and allowed at shs. 15,302,600/= - [10] The application seeking to set aside the sale was subsequently dismissed in a ruling delivered on 22nd November, 2023. Thereafter the bailiff remitted to the 2nd applicant, acting on behalf of the 1st applicant, the balance remaining after final execution of the decree, being the sum of US \$ 2,092,933.04 inclusive of the interest of US \$ 7,910.41 that had been earned on the US \$ 2,396,452.23 while it was frozen on his account. However, on 28th February 2024 the Deputy Registrar issued a garnishee *order nisi* in respect of the 2nd applicant's clients' account at Absa Bank to attach US \$ 668,422.94 being further interest on the decretal sum, and shs. 19,174,144/= being the taxed costs arising out of two post-decree applications.

### The application.

[11] The application by Notice of motion is made under the provisions of sections 34 and 98 of *The Civil Procedure Act*, 33 and 38 of *The Judicature Act*, and Order 52 rule 1, 2, and 3 of *The Civil Procedure Rules.* The applicant seeks an order setting aside the garnishee *order nisi* dated 28th February, 2024. It is the applicant's case that execution and recovery of the decretal sum and interest was completed and no further sums are due to the respondent under the impugned decree. The question of the sums due and payable has already been determined by court and any claim for further interest is barred by *res judicata* and the Registrar is *functus officio*. The applicants contend that the effect of the freezing order was to maintain the funds as a fixed sum, without addition or subtraction. When the trial judge lifted the freezing order on 22nd November, 2023, he did not order any further interest and the matter cannot be raised now.

### The respondent's affidavit in reply;

[12] In the respondent's affidavit in reply, it is contended that by the terms of the consent judgment, the 1st applicant count itself to pay the decretal sum with interest thereon at the rate of 4% per month from the date of payment of each instalment until payment in full. When the application seeking to set aside the sale in execution of the decree came up for hearing on 12th May 2023, the 1st applicant's advocates applied for a freezing order of the proceeds of sale until the determination of the said application. This court made the freezing order for the benefit of the 1st applicant. The respondent did not have access to the sum of US \$ 6,012,066.06 until after the court had determined the application. When the court granted the order, the respondent was unable to utilise the decretal amounts for that reason. By the ruling delivered on 22nd November, 2022 the Court set aside the order that had frozen the funds, being the proceeds of the sale, that had been kept on the bailiff's bank account. During the period from 12th May, 2023 when the proceeds of sale were frozen to 22nd November 2023 when the court set aside the freezing order, the judgment debt attracted further interest in the sum of US \$ 668,422.94. The respondent did not waive its entitlement to further interest under the consent judgment/decree.

### Submissions of counsel for the applicants;

- [13] Counsel for the applicants submitted that the attached property was sold on 14th April, 2023 and the bailiff made a return to the Registrar on 17th April, 2023. The Registrar made a ruling on 27th April, 2023 ordering the bailiff to pay the respondent Judgment Cerrito US \$ 6,012,066.6 in final statistician of the decree. The ruling is annexure "A." At page 8 and 9 are the final orders. The following date 28th April, 2023 the bailiff paid that sum to counsel for the judgment creditor. The RTGS is annexure "B" to the affidavit in support. The 1st applicant challenged the exercise and on 12th May, 2023 the proceeds of execution were frozen until on 22nd November, 2023. The application was dismissed and funds unfrozen. In February this year the judgment creditor filed a fresh application for execution by garnishee seeking to recover further interest on the decretal sum during the period the sum had been frozen on the account of the judgment creditor. A garnishee order nisi was issued 28th February, 2024 returnable 11th March, 2024. The law firm account is the garnishee in Absa Bank. - [14] The orders of the Registrar are erroneous; the Deputy Registrar is *functus officio* since the sum payable in final settlement of the decree. The ruling was based on the quantification by the Registrar. They are not stating that there was a mistake in the calculation. The judgment Creditor was paid on 28th April. 2023 when it was received by the advocate for the judgment Creditor. No further interest was ordered. Section 26 (2) of *The Civil Procedure Act*, interest accrues until payment. It was wrong to garnishee the funds since it is commingled with other funds. The certificates of taxation issued subsequent to the decree are conceded. The order was made in the interest of justice. R1 the bailiff accounted for the interest earned. ## Submissions of Counsel for the respondent;

[15] Counsel for the respondent submitted that the costs have been taxed and the demand was made in January, 2024 in the sum of shs. 19,174,144/=. The interest sought to be recovered accrued during the time the funds were frozen. Since the judgment debtor moved the Court to make the order to benefit them, therefore it was not effective payment. There was no opportunity to place it on an interestbearing account.

## The decision.

- [16] A freezing order (or freezing injunction) is an injunction granted by the High Court to restrain one or more parties from disposing of, dealing with, or diminishing the value of, any of their assets, typically up to a certain monetary limit. The freezing of an account entails the placement of certain restrictions/ban on the account, thereby disallowing the account owner full access, use and enjoyment of same. A frozen account is a bank account that does not allow out-going or debit transactions. So, when an account is frozen, account holders cannot make any withdrawals, purchases, or transfers. However, they may be able to continue to make deposits and transfer money into it. In the same vein, interest-bearing accounts such as savings accounts or term deposits will continue to be credited with the interest, irrespective of the fact whether they are operational, frozen or dormant and the interest that accrues should be added to it on its forfeiture or release. A bank though must not permit a customer affected by a freezing order to draw down under its facility unless such draw down is used for a purpose allowed by such order. - [17] The purpose of a freezing order generally is to stop the injuncted party from dissipating or disposing of property which could be the subject of enforcement if the claimant goes on to win the case it has brought, and not to give the claimant security for his claim (see *JSC BTA Bank v. Solodchenko [2011] 1 WLR 888*). The

purpose is to preserve a defendant's assets, subject to dealings in the ordinary course of business so that, if and when a judgment is pronounced, the defendant still has assets to meet that judgment. A freezing order provides a fund from which the plaintiff's claim may ultimately be paid in competition with other unsecured creditors of the defendant. It only prevents a party from disposing of or dealing with its assets, otherwise interest on any underlying contractual or decretal obligation continues to accrue. Accrued interest is the interest being earned or accruing day to day on the decretal amount. When the decretal amount is paid, the amount payable will equal the aggregate of the sum decreed plus any interest which has been earned on that sum but has not yet been paid.

- [18] Like any document, a freezing order must be construed in its proper context, which includes its historical context (see *JSC BTA Bank v. Ablyazov [2015] UKSC 64*). The flexibility principle has no role in construing an order of the court. i.e. the court should not be tempted to interpret an order on the basis of the merits of either party's case. Thus, freezing orders must be construed strictly with the aim of ensuring clarity in their interpretation. A freezing order will be cast and construed as narrowly as practicable so as to avoid any unnecessary or disproportionate interference with the rights of the defendant or third parties (see *Lakatamia Shipping Co Ltd v. Su [2015] 1 WLR 291*). There is no provision in the freezing order that suspended the terms of the impugned consent judgment. - [19] A freezing order brings enforcement of a decree or other court orders to a standstill and therefore, depending on its terms and scope, it may have an effect similar to that of a stay of execution. While a stay of execution is in force, no substantive step may be taken in the proceedings. Just as filing an appeal does not automatically stay enforcement of a judgment by the court making the decision which is being appealed, a stay of execution does not automatically stop interest on any underlying contractual or decretal obligation from continuing to accrue. It is a well-established and generally recognised principle of law that any judgment compelling one party to pay to the other party a sum of money implies, in itself, the

obligation to pay that sum without delay. Bearing in mind that it is usually to the Judgment Creditor's advantage to receive immediately the sums which are decreed, interest for late payment will continue to accrue for the duration of the stay of execution. An order stopping further accrual of interest during the period of stay will be granted if it is warranted on the facts of the case, after considering the risks inherent in granting it or refusing the stay.

- [20] It is trite that the judgement debtor's liability to pay interest on the decretal amount does not cease until the debt is paid in full. Order 22 rules 1 and 2 of *The Civil Procedure Rules* specifies the modes of paying money under a decree, one of which is payment into the court whose duty it is to execute the decree. Even where decretal amount is deposited in the executing court, the judgement debtor's liability to pay interest does not cease until notice to the decree holder contemplated under sub-rule (2) of Rule 1 of that Order is given (see *Delhi Development Authority v. Sardar Singh & Sons, 2009 (1) ARB L R 446 (Delhi*). The fact of judgement debtor's depositing the sum in a court to purchase peace by way of stay of execution of the decree on terms the decree holder can draw it out on furnishing security, does not pass the title to the money to the decree holder, even where the decretal amount is deposited in the executing Court. - [21] The mere deposit of the decretal amount in the court in those circumstances can never amount to "payment" within the meaning of Order 22 rule 1 of *The Civil Procedure Rules* (see *Delhi Development Authority v. Sardar Singh & Sons, 2009 (1) ARB L R 446 (Delhi*). The real effect of deposit of money in the court is to put the money beyond the reach of parties pending disposal of the appeal (see *Stanbic Bank Uganda Ltd v, Atabya Agencies Ltd, S. C. Civil Appeal No. 3 of 2012*). The decree holder can only take it out on furnishing security, which means that the payment is not in satisfaction of the decree and security could be proceeded against by the judgment debtor in the case of success in appeal pending determination of the same. Such money is beyond the reach of the judgement Creditor.

- [22] Similarly, in *Stanbic Bank Uganda Ltd v. Atabya Agencies Ltd, S. C. Civil Appeal No. 3 of 2012*, the appellant became liable as surety for the performance of a decree of the High Court. He unsuccessfully appealed to the Court of Appeal and thereafter to the Supreme Court. He in the meantime applied to the Supreme Court for a stay of execution of the decree, pending the determination of the appeal, which application was granted on condition that he deposited the sum of shs. 1,110,595,410/= with the Registrar of the Supreme Court within thirty days, which amount consisted of the decretal sum plus interest which had accrued from the date of judgement in the High Court as at 22nd December, 2004. The appellant's appeal was also unsuccessful in the Supreme Court. - [23] The respondent then collected the money deposited with the Registrar of the Supreme Court. The respondent's lawyers wrote a letter to the appellant dated 23rd March, 2006, demanding a further sum of shs. 148,031,294/= being additional interest for the period from 22nd December, 2004, when the money was deposited in court up to 23rd March, 2006 when the judgment was delivered. The appellant refused to pay arguing that during that period the decretal sum plus interest had been deposited into court, it should not attract interest. It was held that the decree in the original suit had been passed with orders of interest "till payment in full" and "till settlement in full." The Court held that further interest accrued because those were the terms of the decree. While the money was deposited with the Court, the respondent continued to be denied the benefit of his decree wherefore he was entitled to payment of the decretal amounts with interest till payment in full. - [24] Generally, once a money claim has been reduced to judgment, barring any inequitable or dilatory conduct on the part of the judgment creditor, it carries interest until it is paid. Absent an unconditional tender of payment of a judgment, post judgment interest continues to accrue. The accrual of this interest is not tolled when the judgment debtor posts an undertaking in order to secure a stay pending appeal. In the same vein, if such a stay of execution is granted, it will not toll the accrual of interest on those amounts should the decree withstand appellate review.

- [25] The essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. The purpose of awarding the interest is to fully compensate a plaintiff for the loss of the use of funds to which he or she was legally entitled, not to penalize a defendant for wrongdoing. It may be regarded either as representing the profit he might have made if he had had the use of the money, or, conversely, the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation (see *Riches v. Westminster Bank Ltd [1947] 1 All ER 469 at p 472; Jefford and another v. Gee [1970] 1 All ER 1202* and *Tate & Lyle Food and Distribution Ltd v. Greater London Council and another [1981] 3 All ER 716 at p 722*). - [26] The basis of an award of interest is that the defendant has kept the plaintiff out of his money; and the Defendant has had the use of it himself. So, he ought to compensate the plaintiff accordingly. Consequently, a judgement debtor cannot claim that the interest in terms of the decree has stopped running from the date of deposit in Court. Accordingly, the judgment debtor can be called upon to pay interest on the amount deposited in the court at the rate directed in the decree till the date of actual payment. Of course, if the amount deposited with the court also earns interest during the time of deposit, such amount will enure for the benefit of the judgment debtor. - [27] A non-appealing judgment debtor can stop interest on the decretal sum by paying the sum to the judgment creditor directly or by making an unconditional tender of the funds to the Court in satisfaction of the judgment (see *Vooys v. Turner, 49 S. W.3d 318*). Otherwise, the judgment debtor is to pay interest of the decretal amount at the rate declared by Court in the decree from the date of judgment until full and final payment. Where substantial delays in the payment of the decretal sum have occurred, by reason of post-judgment litigation or otherwise, the award should be interpreted in such a way as to preserve the value of the money as capital and as an adequate compensation of the judgment creditor and not to erode and the value of the money. Without a presumption that interest will be charged on

the amounts owing, judgment debtors would have no or little incentive to pay outstanding decretal amounts, other than the risk of an adverse cost award as a result of frivolous post-judgment litigation designed to delay or avoid payment the judgment creditor's claim. The award and computation of interest, both before and after judgment, provides incentive for judgment debtors to pay the decretal sum, much as it also compensates the judgment creditor for having to wait to receive any money owed to him/her.

- [28] It is therefore settled law that interest accrues on a decree until payment in full or until otherwise ordered by the Court. Within the meaning of Order 22 rule 1 of *The Civil Procedure Rules,* payment may be made to the judgment creditor personally or to a duly authorized agent, on the judgment creditor's behalf, provided that such agent has authority to receive payment. In *Stanbic Bank Uganda Ltd v. Atabya Agencies Ltd, S. C. Civil Appeal No. 3 of 2012*, deposit of the decretal amount in the court was held not to constitute "payment" to the judgment creditor, not simply because the judgment creditor did not have access to the funds, but because the Court was not the judgment creditor's agent with authority to receive payment on his behalf and moreover the payment into Court did not constitute an unconditional tender of the funds in satisfaction of the judgment, but rather it was as a condition for securing the judgment creditor peace by way of stay of execution of the decree. - [29] In the instant case, the respondent's entitlement to receive interest was for the period commencing from the date of the decree i.e. 31st December, 2020 until the payment of the decretal amount on 28th April, 2023 and this was factored into the actual payment made in the sum of US \$ 6,012,066.6 out of the proceeds of sale in execution. Therefore, by the payment made to the respondent's counsel by the bailiff on 28th April, 2023, who was an agent with authority to receive payment on the respondent's behalf, the 1st applicant as judgment debtor fully discharged the principal amount adjudged and the accrued interest amount payable under the Decree, save for the costs of shs. 19,174,144/= arising out of the two post-judgment applications, which costs are still outstanding. The respondent's claim for further

interest in the sum of US \$ 668,422.94 is unfounded and the order made by the Deputy Registrar allowing its recovery as part of the ongoing garnishee proceedings is hereby set aside.

[30] The payment made to the respondent's counsel by the bailiff on 28th April, 2023 constituted an unconditional tender of the funds to the respondent in full and final satisfaction of the decree. By the time the freezing order was made on 16th May, 2023 the funds had been with counsel for the respondent for approximately eighteen (18) days, enough time to arrange for deposit on an interest-bearing account. That Counsel was unable to deposit the same on an interest-bearing count therefore cannot be blamed on the freezing order.

## Order:

[31] In conclusion, the only sum recoverable under the *decree nisi* is shs. 19,174,144/=. In order to bring finality to the execution process of the decree, each party is to bear its costs of this application.

> Stephen Mubiru Judge.

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Appearances;

For the respondent : M/s J. B. Byamugisha Advocates.