Wakilii

Zimu Construction Company Limited v Centenary Rural Development Bank (U) Limited and Another (Miscellaneous Application No. 1188 of 2026)

High Court · [2026] UGCOMMC 365 · 2026 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for leave to appeal and stay of execution of an eviction order arising from mortgagee sale proceedings
Decision
Leave to appeal granted; stay of eviction refused; 2nd Respondent restrained from alienating suit property pending appeal

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that leave to appeal is granted where the intended grounds raise arguable questions of law on mortgagee sale by private treaty and purchaser protection under the Mortgage Act. However, stay of eviction is declined because loss of possession by guarantor directors from mortgaged property realised upon uncontested default is not substantial or irreparable loss, being quantifiable in money and the natural consequence of the mortgage bargain. The 2nd Respondent is restrained from alienating the suit property pending appeal to preserve the efficacy of restitution should the appeal succeed.

Outcome

Leave to appeal granted; stay of eviction refused; 2nd Respondent restrained from alienating suit property pending appeal

Facts

The 1st Respondent bank extended credit facilities of UGX 2,070,000,000 to the Applicant company in March 2021, secured by legal mortgages over Plot 312 Block 458 Katale, Wakiso and other property, a debenture over company assets, and personal guarantees of the Applicant's directors. The Applicant defaulted. The 1st Respondent issued notices of default and sale, advertised the property, and sold it to the 2nd Respondent on 30 December 2024 for UGX 212,000,000. The property was transferred to the 2nd Respondent on 15 May 2025. The Applicant challenged the recovery process in Civil Suit No. 607 of 2023, which remains pending. By Miscellaneous Application No. 1362 of 2025, the respondents sought and obtained vacant possession on 13 May 2026, with a sixty-day deadline expiring 13 July 2026. The Applicant then sought leave to appeal and stay of execution.

Issues

  1. Whether the application should proceed ex parte against the 2nd Respondent on the basis that she filed no affidavit in reply.
  2. Whether the Applicant should be granted leave to appeal against the ruling in Miscellaneous Application No. 1362 of 2025.
  3. Whether execution of the orders for vacant possession and eviction in Miscellaneous Application No. 1362 of 2025 should be stayed pending determination of the intended appeal.
  4. Whether the 2nd Respondent should be restrained from alienating the suit property pending the appeal.

Orders

  • Leave to appeal against the ruling and orders in Miscellaneous Application No. 1362 of 2025 granted.
  • Application for stay of execution of the orders for vacant possession and eviction declined; those orders remain in force.
  • Pending determination of the appeal, the 2nd Respondent is restrained from selling, transferring, exchanging, subdividing, mortgaging or otherwise encumbering Plot 312 Block 458 Katale, Wakiso.
  • The restraint order to be entered on the certificate of title as an encumbrance.
  • Miscellaneous Application No. 1455 of 2026 closed as overtaken by events.
  • Costs of the application to abide the outcome of the intended appeal.

Rules and key headnotes

Civil Procedure — Affidavits in Interlocutory Applications — Order 1 Rule 12 and Order 19 Rule 3
An affidavit in reply is evidence, not an act of appearing, pleading or acting for a co-party. Its competence is measured by Order 19 rule 3, which asks whether the deponent speaks to facts within his own knowledge. Where an officer of a corporate party depones to facts known to him in that capacity and the co-party is represented by the same advocates who filed the affidavit and submissions for both, the co-party is not deemed absent and the application does not proceed ex parte.
Civil Procedure — Leave to Appeal — Test for Grant of Leave
Leave to appeal is granted where the applicant shows that the intended appeal has a reasonable chance of success or raises arguable grounds that prima facie merit serious judicial consideration, and that the applicant has not been guilty of dilatory conduct. An application for leave is not the appeal itself; the court must resist the temptation to determine the appeal but must assess whether there is anything that deserves the attention of the appellate court.
Banking & Finance — Mortgage Enforcement — Mode of Realisation by Private Treaty
Whether a mortgagee may realise mortgaged property by private treaty and how Section 26 of the Mortgage Act and Regulation 11 of the Mortgage Regulations interact are questions of construction of general application in mortgage enforcement, and an authoritative pronouncement by the Court of Appeal on the point would be to the public advantage.
Land & Property — Mortgagee Sale — Purchaser's Title — Effect of Pending Litigation
A purchaser's title under Section 29(1) of the Mortgage Act read with Section 59 of the Registration of Titles Act is defeasible only on proof of fraud or dishonest conduct attended by notice. The doctrine of constructive notice does not fix a purchaser with notice of every claim on foot against the property absent a caveat, an injunction or some other entry or order with legal force. The reach of statutory purchaser protection where litigation challenging the sale is pending is a question of law of general application meriting appellate consideration.
Civil Procedure — Stay of Execution Pending Appeal — Conditions
A stay of execution pending appeal requires proof that there is a pending or imminent non-frivolous appeal, that substantial loss will result unless the stay is granted, that the application has been made without unreasonable delay, and that security has been or is offered for the due performance of the decree or order. A stay is an exercise of discretion for sufficient cause shown, not a reflex action that follows the filing of a notice of appeal.
Banking & Finance — Mortgage Enforcement — Substantial Loss — Eviction of Guarantor Directors from Mortgaged Property
The eviction of guarantor directors from mortgaged property realised upon an uncontested default is not irreparable or substantial loss upon which a stay of execution may be founded. Such eviction is the natural and foreseeable consequence of the bargain they struck. Property that cannot be sold and surrendered is no security capable of conventional mortgage. Where the loss is quantifiable and compensable in money and the mortgagee is a licensed financial institution with no verified financial soundness concerns, the inconvenience of relocation does not constitute substantial loss.
Civil Procedure — Stay of Execution — Restraint Against Alienation Pending Appeal
While eviction from mortgaged property following a regular sale may not constitute substantial loss where it is compensable in money, the court may restrain the registered purchaser from alienating the property pending appeal where such alienation could place the property in the hands of bona fide purchasers for value, rendering restitution impracticable should the appeal succeed. Such an order preserves the efficacy of the appeal without suspending enforcement of the decision below, and strikes the balance between the appellant's right to prosecute the appeal effectually and the respondents' entitlement to the fruits of the court's decision.

Legislation cited (19)

Cases cited (25)

  • Herbert Kuteesa and Others v Emmanuel Mugerwa (Court of Appeal Miscellaneous Application No. 686 of 2022)
  • Sango Bay Estates Ltd and Others v Dresdner Bank A.G [1971] EA 17
  • Degeya Trading Stores (U) Ltd v Uganda Revenue Authority (Court of Appeal Civil Application No. 16 of 1996)
  • Bon Holdings Ltd v Busoga Growers Co-operative Union Ltd (Court of Appeal Civil Application No. 165 of 2011)
  • Hajji Numani Mubi Akulamusa v Friends Estate Ltd and Another (Court of Appeal Civil Application No. 241 of 2011)
  • G.M. Combine (U) Ltd v A.K. Detergents (U) Ltd (Supreme Court Civil Appeal No. 23 of 1994)
  • Centenary Rural Development Bank Ltd v Odongpiou Stanislau Emmanuel (Miscellaneous Application No. 1371 of 2022)
  • Attorney General v Kireka Estates Limited (Miscellaneous Application No. 2955 of 2023)
  • Herbert Sekandi t/a Land Order Developers v Crane Bank Ltd (Miscellaneous Application No. 44 of 2007)
  • Bridge Investments Limited v Middle East Hospital and Shopping Complex Limited (Miscellaneous Application No. 31 of 2019)
  • Swain v Hillman [2001] 1 All ER 91
  • Asiimwe Francis v Tumwongyeirwe Aflod (Court of Appeal Miscellaneous Application No. 103 of 2011)
  • Kampala Bottlers Ltd v Damanico (U) Ltd (Supreme Court Civil Appeal No. 22 of 1992)
  • Kawa Distributors and Suppliers Limited v ABSA Bank (U) Limited (Court of Appeal Civil Appeal No. 175 of 2015)
  • Lawrence Musiitwa Kyazze v Eunice Businge (Supreme Court Civil Application No. 18 of 1990)
  • Hwan Sung Industries Ltd v Tajdin Hussein and 2 Others (Supreme Court Civil Application No. 19 of 2008)
  • Dr. Ahmed Muhammed Kisuule v Greenland Bank (In Liquidation) (Supreme Court Civil Application No. 07 of 2010)
  • Kakooza Abdullah v Stanbic Bank (U) Ltd (Miscellaneous Application No. 614 of 2012)
  • Matex Commercial Supplies Ltd and Another v Euro Bank Ltd (In Liquidation) [2008] 1 EA 216
  • Maithya v Housing Finance Company of Kenya and Another [2003] 1 EA 133
  • Stanbic Bank Uganda Limited v Kesacon Services Limited and Another (Miscellaneous Application No. 724 of 2023)
  • Kesacon Services Limited v Stanbic Bank Uganda Limited (Miscellaneous Application No. 305 of 2024)
  • Luwa Luwa Investments v URA (Miscellaneous Application No. 1336 of 2022)
  • Beeline Travel Care v Finance Trust Bank (Miscellaneous Application No. 296 of 2023)
  • Robert Kavuma v Hotel International (Supreme Court Civil Application No. 8 of 1990)

Full judgment

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Zimu Construction Company Limited v Centenary Rural Development Bank (U) Limited and Another (Miscellaneous Application No. 1188 of 2026) [2026] UGCommC 365 (13 July 2026)
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