NATIONAL BANK OF COMMERCE v DAR ES SALAAM EDUCATION AND OFFICE STATIONERY 1995 TLR 272 (CA)

NATIONAL BANK OF COMMERCE v DAR ES SALAAM EDUCATION AND OFFICE STATIONERY 1995 TLR 272 (CA)

Court Court of Appeal - Dar Es Salaam

Judge B Omar JJA, Mnzavas JJA and Lubuva JJA

Civil Appeal No 16 of 1995

November 24, 1995

C (From the decision of the High Court of Tanzania at Dar es Salaam, Bubeshi, J)

Flynote

Civil Practice and Procedure - Temporary injunction - When applicable - Order 37

Rule 1 of the Civil Procedure Code.

D Civil Practice and Procedure - Temporary Injunction - Order of injunction sought

to set aside the sale of a house - Whether proper.

Civil Practice and Procedure - Temporary injunction - Whether may be issued against

strangers to the suit.

Banking Law - Securities - Mortgages - Mortgage deed empowering mortgagee to sell

the mortgaged property - Whether and under what circumstances Court may

interfere with such sale. E

-Headnote

The respondent borrowed money from the appellant bank. As security, a house was

mortgaged in favour of the appellant. Upon failure to repay the loan which had

swollen more than seven fold the appellant exercised its right under the mortgage F

deed and sold the house. After the sale of the house the respondent filed a suit

followed by, on the next day, a chamber application filed under 0.37 R.1 and ss 48 and

95 of the Civil Procedure Code for an order of temporary injunction restraining the

NBC and Registrar of Titles from transferring title of the house and preventing

eviction of tenants therefrom. The judge who heard the application issued an order G

that the sale of the house be set aside, and that NBC and the Registrar of be restrained

from transferring the title to the house and further prevented eviction of the tenants.

Aggrieved the appellant appealed against the decision of the High Court arguing, inter

alia, that the order to set aside the sale of the house was not properly given under 0.37

R.1, temporary injunction may not be issued against strangers to the suit, and that the

court had no power to interfere with the appellant H while exercising its power

under the deed of mortgage.

Held:

(i) Where a mortgagee is exercising its power of sale under a mortgage

deed the Court cannot interfere unless there was corruption or collusion with the

purchaser in the sale of the property; I

1995 TLR p273

OMAR JA

(ii) Order 37 Rule 1 was inapplicable in the circumstances of the case A

because there was no court decree in execution of which the house was sold;

(iii) Order 37 Rule 1 would not be applicable in this case on account of the

fact that the house was mortgaged in which case it could be sold in execution of the

mortgage without resort to a court decree; B

(iv) Since the order setting aside the sale of the house was a nullifying act it

could not be obtained in an application for temporary injunction under Order 37 Rule

1.

(v) A temporary injunction cannot be issued against strangers to a suit.

Case Infomation

Appeal allowed.

Case referred to: C

(1) Garden Cottage Food Ltd v. Milk Market Board

Uzanda for the appellant.

Maira for the respondent. D

[zJDz]Judgment

Omar, JA delivered the following considered judgment of the Court:

This appeal was brought by Mr Uzanda, learned Counsel for the appellant, National E

Bank of Commerce, to oppose the High Court order (Bubeshi, J) which set aside the

sale of a house on plot No 5 Block 3A Kinondoni, Dar es Salaam. The order also

restrained the NBC and the Registrar of Titles from transferring Title No 22576 of this

house to any person, and also prevented eviction of tenants from this house. F

In 1986 the respondent, Dar es Salaam Education and Office Stationery, decided to

gain liquidity at the appellant bank (that is National Bank of Commerce, Bank House

Branch) where it held an account. The directors of this company applied for an

overdraft facility first of Shs 400,000/= in February 1986 to be followed by another

overdraft of Shs 1,000,000/= in August 1986 and lastly of Shs 2,000,000/= in March

1987. G

The Director of respondent company, Mr Omari Mgeni, deposited the title deed of his

own house situated at Kinondoni as security for the second overdraft of Shs

2,000,000/=. In May 1994, seven years later, the appellant bank informed the H

respondent company that the debt had risen to Shs 15,371,538/20/= and that if not

settled the house so mortgaged to them would be sold. It was sold which gave rise to

the first application to the High Court by the respondent company to set aside the sale

and it was duly set aside for reasons given by the court and now appealed against by

Mr I

1995 TLR p274

OMAR JA

A Uzanda, counsel for the bank, who made the following submissions: That the

application was made and filed one day after the sale, that is on 30 November 1994,

under Ord 37 rule 1 and ss 48 and 95 of CPC for a temporary injunction. The object of

Ord 37(1) CPC 1966 is preventative, the whole purpose is to prevent or restrain so as

to preserve the subject of the suit in status quo for the time being. B He cited vol III

6th ed page 3966 Chitley and Rao which explains that any order which has the effect

of changing or disturbing or altering the status quo is not covered by Ord 37 rule (1).

Mr Uzanda further stated that status quo as defined in C Garden Cottage Food Ltd v

Milk Market Board (1) is the state of affairs existing immediately before the filing of

the application and injunction should be to maintain the existing status before

determination of the suit. The house was advertised to be sold on 7 September 1994

and it was sold on 29 November 1994 and the suit was filed on 30 November 1994.

The High Court issued the order that the sale be D set aside, this Mr Uzanda argued

was a nullifying act and not a restraining act and it cannot be made under Ord 37(1)

CPC. Not only was the chamber application incompetent but the order was without

legal authority. If only intended sale was under an execution of a decree but it was

not the case, this he quoted E from Chitley and Rao vol III 6th ed and he submitted

that the order of the High Court should be set aside. He further said that a temporary

injunction cannot be issued against a stranger to the suit. Registrar of Titles is a

stranger to the suit and he was by this order of Bubeshi, J restrained from changing

the name of the F owner in his books. Purchaser of this house is also a stranger to

the suit, he too was restrained by this order. Equity acts in personum not in rem.

Mortgagee, that is the Bank, had a mortgage deed which entitled the Bank to sell

without coming to G court. Section 48 CPC cannot be invoked because the

mortgagee (the Bank) sold it; it was not attached property. NBC was a mortgagee and

was exercising its power of sale under a deed of mortgage. Court cannot interfere

unless there was a corruption of collusion with the purchaser in the sale of property.

Unless the price is very much less so as to import fraud, corruption or collusion. The

High H Court, he argued, had no power to interfere with the sale. Temporary

injunction was issued without legal authority and it should be set aside in its entirety,

a declaration that the sale was valid and the costs to the appellant in both courts.

Mr Maira, learned Counsel for the respondent Dar es Salaam Education and

Stationery Office, stated in reply that the property was auctioned on 19 November

1994, the certificate of auction was I

1995 TLR p275

OMAR JA

dated 8 December 1994 and the Chamber Summons was presented for filing on 1 A

December 1994 it was meant to prevent or arrest the sale of this property in the

words NBC should not continue with the sale of this property or that its completion

should be arrested. Two houses were offered as security for this loan and the house

situated at Singida if sold would deprive its owner of the roof over his head. B Mr

Maira thereafter supported the ruling of the High Court and prayed that it should be

left undisturbed. Mr Uzanda in reply to Mr Maira's submissions stated that they were

all irrelevant. Even if the house had not been sold such order of setting aside a sale

could not have been made under Ord 37(1) CPC because the C house was not in

danger of being sold in execution of a decree, so the order could not be made at all.

Also the order could not be made against Registrar of Titles, because temporary

injunctions are not issued against strangers, purchaser of the house is also a stranger.

The applicant/respondent was not a party to the D contract guaranteeing the loan.

Mr Uzanda continued by saying that Mr Maira conceded that the respondent was

indebted under the banking facilities. He further said that s 95 CPC was mentioned as

an alternative to Ord 37(1) CPC; this is erroneous. A sale takes place when the

hammer falls and this took place on 29 November 1994 and 30 November 1994 was

the date of filing the application that E is why it was applied to be set aside.

Corruption or collusion were not pleaded therefore the court was not entitled to

interfere with the sale. Mr Uzanda said that Mr Maira had filed a suit for permanent

injunction. Now he has applied for setting F aside which is sufficient to dispose of

his matter, that is his remedy. Interlocutory order does not decide the rights of the

parties but this one of the High Court did decide the rights of the parties. Mr Uzanda

then prayed for this appeal to be allowed.

We have carefully considered these submissions. The central issue in this appeal G is

the propriety of the order of 30 December 1994 by Bubeshi, J. In that order, the sale

of House No 5 Block 3A Kinondoni, Dae es Salaam was set side. That was as a result of

a chamber application filed by the respondent, Dar es Salaam Education and Office

Stationery, under Ord 37 rule 1 and ss 48 and 95 of the Civil H Procedure Code. In

the main suit which is still pending before the High Court filed on 30 November

1994, the respondent who was the plaintiff was seeking for judgment and decree

against the appellant (NBC) as defendant for:

'an order for a permanent injunction to stop the sale of the property I

1995 TLR p276

OMAR JA

A situated on Plot No 5 Block 37A Kinondoni, Dar es Salaam until the facts in

dispute are resolved in full.'

Otherwise the respondent was not disputing the debt and was willing to settle it upon

the establishment of the extent of the debt. After the written statement was filed,

before the hearing of the suit started, the respondent filed a chamber B application

which sought to have the sale of the house on Plot No 5 Block 3A Kinondoni set

aside. From the affidavit deponed by one Omari Mgeni, the Executive Director of the

respondent Company and the submission by Mr Uzanda, C leaned Counsel for the

appellant, it is apparent that the house in question was sold on 28 November 1994

when the matter was still pending before the High Court.

Under a certificate of urgency, on 1 December 1994, a chamber application was filed

under Ord 37 rule 1 of the Civil Procedure Code to set aside the sale of the house.

Order 37 rule 1 provides: D

'1.Where in any suit it is provided by affidavit or otherwise -

(a) that any property in dispute in a suit is in danger of being wasted,

damaged, or alienated by any party to the suit or suffer loss of value by reason of its

continued use by any party to the suit or wrongly sold in execution of a decree ...'

(Emphasis supplied.) E

On the basis of this provision, can it be said that in the instant case, the property, the

subject matter of the suit pending, was the property sold in execution of a court

decree? In our view, from the facts of the case, the answer is affirmatively in the F

negative. There was no court decree on the basis of which the house was sold. In that

case, we are, with respect, in agreement with Mr Uzanda, learned Counsel for the

appellant, that Ord 37 rule 1 was inapplicable in the circumstances of the case because

there was no court decree in execution of which the house was sold. G Furthermore,

it is our view that Ord 37 rule 1 would not be applicable in this case on account of the

fact that the house on Plot No 5 Block 3A Kinondoni was mortgaged in which case it

could be sold in execution of the mortgage without resort to the court decree.

H Next we address our minds on the sequence of events leading to the sale of the

house and the time when the order setting aside the sale was issued. If the sequence

of events was as set out by Mr Uzanda, learned Counsel for the appellant, which was

not controverted by Mr Maira, learned Counsel for the respondent, the question is

whether the order of injunction which sought to set aside the sale of the house was

proper. The sequence of events was that the I

1995 TLR p277

OMAR JA

house was sold on 28 November 1994, the main suit was filed on 30 November A

1994 and the chamber application, the subject matter of this appeal was filed on 1

December 1994. As indicated, if by 30 December 1994 the house had been sold, was

the application for a temporary injunction under Ord 37 rule 1 to set aside the sale on

1 December 1994 of any practical effect? It is common knowledge that the B purpose

of an order for a temporary injunction as set out under Ord 37 rule 1 is to preserve

and retain the status quo as obtains at the time immediately before the filing of the

application until the determination of the suit. In this case, the matter had already

been carried beyond the stage in which the restraining relief being sought would

serve any purpose. That is, the house had already been sold in C which case there

was nothing from which the appellant would be restrained to do. The sale having

taken place any measure aimed at preventing the sale from taking place would be an

exercise in futility. This was the object of the main suit. As for D the sale, the subject

matter of the chamber application, in this, with respect, we accept Mr Uzanda's

submission that in the instant case, it was not a restraining act but a nullifying act

which could not be sought in an interlocutory order under Ord 37 rule 1 of the Civil

Procedure Code. It being a nullifying act, it could not, in our view, properly be

obtained in an application for temporary injunction under Ord 37 rule 1. E

Mr Maira's submission that the High Court was entitled to make the temporary order

under Ord 37 rule 1 because, as he stated though the sale of the house by auction had

taken place, the legal formalities of conveyancing and transfer had not F been

completed, is with respect, untenable. It is our considered view that setting aside the

sale of the house not being a restraining act but a nullifying act, would appropriately

be dealt with in the course of determining the main suit and not in an application for

a temporary injunction. As it happened, with due respect to the G learned judge, the

order of 30 December 1994 setting aside the sale of the house on Plot No 5 Block 3A

Kinondoni pending the hearing of the main suit again renders the whole matter

ineffectual. This is because, as pointed out, the main purpose of the main suit was to

obtain a permanent order of injunction to stop the sale of the house until the facts are

resolved in full. But by 28 November 1994, the H matter was overtaken by events

when the house was sold. The sale could no longer be restrained.

Finally, we wish to make brief mention on the extent of the order of 30 December

1994. In that order, the Registrar of Titles was also I

1995 TLR p278

OMAR JA

A restrained from transferring Title No 22576 in respect of the house on Plot No 5,

Block 3A Kinondoni. The purchaser of the house was also restrained from evicting

the occupants of the house. As succinctly elaborated by the learned authors of Chitty

and Rao, 6th ed, vol III, it is common ground that a temporary injunction B cannot

be issued against strangers to the suit. In this case the Registrar of Titles and the

purchaser of the house were not parties to the suit in which case, we accept Mr

Uzanda's submission that it was not proper to have them included in the temporary

order of injunction on 30 November 1994.

C For these reasons, we are satisfied that the order for temporary injunction issued

to set aside the sale was without any legal basis. The matter had been overtaken by

events. It is accordingly set aside. We allow the appeal with costs to the appellant.

1995 TLR p278

E