THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
MISC. APPLICATION NO. 298 OF 2014
(ARISING FROM CIVIL SUIT NO. 477 OF 2013)
ASSIMWE JUSTINE ...................... APPLICANT/ 5th DEFENDANT
VERSUS
UGANDA ECUMENICAL CHURCH LOAN FUND LIMITED
...................................................... RESPONDENT/PLAINTIFF
BEFORE: HON. LADY JUSTICE FLAVIA SENOGA ANGLIN
RULING
By this application, the Applicant sought leave of this court to file a defence.
Costs of the application were also applied for.
The brief background to the application is that the First Defendant to the
suit, that is Kalibaimukya Co-operative Savings and Credit Society Ltd,
borrowed shs. 85,000,000/- from the Respondent. The loan was secured
by depositing with the Respondent the certificate of title for the land
comprised in Freehold Register Volume 488 Folio 3 Plot 24, Block 331, land
at Kibaale measuring 95.5 hectares.
The land was guaranteed by Directors of Kalibaimukya Cooperative Savings
and Credit Society Ltd namely Ssekate Julius, Alituna Jackline, Assimwe
Justine (Applicant) and Francis Kasumba.
The First Defendant (The Credit Society Ltd) defaulted in payment of the
loan, and the Respondent instituted a summary suit against it and the
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guarantors for the sum of Shs. 96,613,000/- as principal and interest plus
costs of the suit.
The Defendant did not seek leave to appear and defend the suit. A decree
was accordingly entered against them on 24.01.14 in the said suit, with
interest and costs. On 23.04.14, the Applicant obtained an order in HC MA
2010/2014 setting aside the decree and hence this application seeking leave
to defend on the grounds interalia that the Respondent had other remedies
under the Mortgage Act which ought to have been exhausted before filing
the suit.
The issue for court to determine is whether this is a proper case for
grant of leave to defend.
The parties filed written submissions. Counsel for the Applicant went
through the facts of the case and then contended that the Respondent
having been given security in form of the title deed already described in this
ruling, as well as a guarantee from the Applicant and her Co directors ought
to have exercised its options under the Mortgage Act 2009, before filing the
suit.
Counsel reproduced the provisions of S. 20 and 21 of the Act under the
subheading “Remedies of the mortgage” indicating the remedies that
were open to the Respondent.
Commenting about what was said to be a consent judgment attached to the
affidavit in reply, Counsel argued that this was an abuse of court process as
the purported judgment was no judgment at all. He emphasized a consent
judgment could not have been entered into on 17.03.14 when a default
judgment had already been entered into on 06.11.13.
And that it was irregular and contemptuous of court to make the Applicant
sign such a document and it should be declared a nullity by court.
In response, the Respondent also went through the facts of the case,
pointing out that when the summary suit was filed and default judgment
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entered, the Applicant filed Miscellaneous Application 803/13 but never
pursued it.
When warrant of arrest was executed, the Applicant made part payment on
the account of the Respondent and then consented to pay the judgment
debt in four equal installments.
That the application should accordingly be dismissed with costs as the
Mortgage Act did not apply to the circumstances of the present case as no
legal mortgage was ever registered.
Further that the Applicant had failed to provide any possible defence to the
suit and the application is only intended to deter the Respondent from
claiming what is due to it. – The case of Zola and Another vs. Ralli
Brothers Ltd and Another [1969] EA 691 page 691 was cited in
support.
Also that the Applicant consented to pay the judgment debt and paid part
of it by depositing Shs. 5,000,000/- on the Respondent’s account and
therefore does not deny liability, only claiming that certain legal
requirements were not followed.
Counsel then prayed for dismissal of the application with costs and orders
reinstating earlier orders and judgment against the Applicant.
Decided cases have repeatedly stated the principles upon which
unconditional leave to appear and defend a suit can be granted. That is the
Applicant has to show that there is a “good defence to the suit on the
merits; or that a difficult point of law is involved; or that there is a
dispute as to the facts which ought to be tried; or a real dispute as
to the amount claimed which requires taking an account to
determine or any other circumstances showing reasonable
grounds of a bonafide defence” - See Bhasker Kotecha vs. Adam
Mohammed C.A C.A 48/2001 [2002] IEA 112 where the English
authorities of Saw vs. Hakim 5 TLR 72 and Ray vs. Barker 4 EX DI
279 were referred to.
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In the present case, it is apparent from the submissions and the affidavit in
support that the loan was secured by property in Kibaale; which security
was not realized before enforcing the guarantee. While Counsel for the
Respondent contends that the mortgage was not registered.
The arguments of both Counsel raise issues as to whether the
Respondent acted in contravention of the Mortgage Act, 2009,
whether such unregistered transaction is governed by the
Mortgage Act, or whether such transaction is enforceable between
the parties.
There are also questions as whether notice of default was issued to
the mortgagor by the Respondent requiring rectification of the
default within the time provided by law; whether the suit was
properly filed. That is whether liability against the guarantors
could be enforced by the Respondent without having made a
demand on the Applicants or other guarantors.
Court finds that all the above are triable issues that cannot be properly and
effectively determined without evidence being adduced by both parties. As
they stand now, they cannot be determined basing on affidavit evidence
alone.
There is also an issue as to whether the consent judgment entered into by
the Applicant was properly entered into.
For all those reasons, the application is allowed. The Applicant to file a
defence within 10 days from the date of this ruling. Costs of the application
are granted to the Respondent.
FLAVIA SENOGA ANGLIN
JUDGE
12.01.15
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