Litigation and key cases: A welcome decision on mortgage suits

By way of a brief background, NBC filed a summary suit to recover outstanding amounts on loan and overdraft facilities against National Chicks Corporation Limited (“National Chicks”) and its the guarantors (together, “the respondents”). The respondents secured leave of the Court to defend the summary suit and then filed a joint written statement of defense, along with a notice of preliminary objections (POs), one of which was that the Commercial Division of the High Court had no jurisdiction to try a mortgage suit as a commercial case. On this PO, the presiding High Court Judge (Hon. Nyangarika, J) held that the Commercial Division of the High Court lacked jurisdiction to entertain the suit since the suit concerned mortgaged property and there is the Land Division of the High Court.

Sitting as a bench of three, the CAT started with a discussion on the general mandate of the High Court and the historical background and role of the two divisions, and subsequently ruled in NBC’s (Appellant’s) favour, stating that a cause of action emanating from a mortgage transaction or a commercial contract, irrespective of effect to the mortgaged property (landed property), is not inevitably a land matter just because it results from a commercial transaction and thus can be adjudicated by the Commercial Division—and not only by the Land Division, except if the nature of the transaction is a conveyance. NBC’s claim arose from a loan agreement which gave rise to a contractual relationship between NBC and the National Chicks and the guarantors and over which the Commercial Division of the High Court had jurisdiction.

The CAT noted that the Commercial and Land Divisions were created to accelerate the adjudication of respectively, commercial and land disputes. Noting further that land and commercial suits are of a sensitive nature, the CAT called on the responsible authorities to find a way to ensure that future litigants are well advised on how to file their cases not specifically designated to a particular division of the High Court. But what if a suit does not relate to a specific division’s specialization and is filed in another division, should the suit be dismissed for lack of jurisdiction? No. The CAT directed that in such a situation the parties should be advised to withdraw the suit and re-file it in another Court with jurisdiction to adjudicate it, or failing that, the suit should be heard and determined to its conclusion.

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Litigation and key cases: A welcome decision on mortgage suits

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