High Court Clarifies Application of Regulation 13 of the Mortgage Regulations and Conditions for 30% Deposit on Interim Injunctions in Mortgage Foreclosure Proceedings

The Court clarified that interim stays of execution granted by appellate courts do not exempt trial courts from enforcing the mandatory 30% security deposit under Regulation 13 of the Mortgage Regulations when issuing injunctions or adjourning sales of mortgaged property.

Introduction

The law on mortgages establishes that the mortgagor has a primary duty to repay the secured debt by all lawful means, while the mortgagee is entitled to take any legal steps necessary to recover the money owed. This reciprocal relationship is founded on the mortgage agreement, which grants the mortgagee a security interest in the mortgaged property to secure the loan. However, when the mortgagor defaults on repayment obligations, the mortgagee is legally entitled to enforce the security through the process known as foreclosure.

In Uganda, the law governing foreclosure of mortgaged property is principally regulated under the Mortgage Act, Cap 239, and supplemented by the Mortgage Regulations, 2012. These laws provide a clear framework outlining the rights and responsibilities of both parties in the event of default, including the procedural safeguards aimed at balancing the interests of the mortgagor and mortgagee.

Of particular importance is Regulation 13(1) of the Mortgage Regulations, whose constitutional validity was upheld in the Constitutional landmark case of Ferdsult Engineering Services Limited and Another v Attorney General and Another (Constitutional Petition No. 18 of 2021). This regulation embodies the principle of “pay now, argue later,” mandating that a mortgagor seeking to adjourn or stop the sale of mortgaged property must first pay a security deposit of 30% of the forced sale value or outstanding amount.

The courts have consistently recognized Regulation 13(1) as a legislative measure designed to restrict the ability of mortgagors to use litigation or court processes to delay mortgagee sales through frivolous objections. This was underscored in the decision of Kingston Enterprises Limited and 3 Others v Standard Chartered Bank (U) Limited (HCCA No. 446 of 2021), where the High Court emphasized that Regulation 13 is a clear enactment of this “pay now, argue later” principle. The regulation thus serves as the benchmark of procedural safeguard ensuring that while mortgagors have access to the courts to raise legitimate disputes, they cannot indefinitely stall enforcement through mere litigation without providing financial security to the mortgagee.

In recent judicial pronouncements, the Ugandan High Court has reaffirmed and clarified the application of these provisions, especially the interplay between Regulation 11, which deals with property valuation before sale, and Regulation 13, which governs court orders that adjourn or stay the sale of mortgaged property pending litigation.

The Court emphasized that the discretion to grant interlocutory relief suspending a foreclosure sale is strictly conditional on the payment of the prescribed 30% security deposit and rejected attempts to circumvent this requirement through procedural or substantive technicalities.

In its recent decision of The Emin Pasha Limited and Others v Equity Bank Uganda Limited and Another (Miscellaneous Appeal No. 0049 of 2025) [2025] UGCommC 245 (9 August 2025), the High Court considered an appeal challenging the conditioning of an interim injunction on the prior payment of a 30% security deposit of the forced sale value of mortgaged property. The Appellants contested the propriety of this condition and the valuation basis used, as well as alleged that no notice of default had been issued.

The Court held that while the mortgagee must issue a notice of default before proceeding with foreclosure, failure to produce fresh valuation reports within six months prior to the sale does not invalidate the mortgagee’s right to require the security deposit when the sale is adjourned or stopped. The Court further clarified that interim injunctions restraining foreclosure sales are not exempt from Regulation 13’s deposit condition, regardless of whether they arise in trial courts or appellate proceedings.

This decision underscores the “pay now, argue later” principle entrenched in Ugandan mortgage law, affirming that courts will not stay foreclosure sales without the mortgagor providing security, thus protecting mortgagees’ interests while ensuring mortgagors have a fair opportunity to litigate their claims.

Brief Facts

The Appellants filed an appeal challenging the decision of the Learned Registrar in Miscellaneous Application No. 1469 of 2025, which granted an interim injunction to stop the advertised sale of mortgaged properties, conditional upon the Appellants depositing USD 2,730,000 within 30 days. The properties involved included several plots in Kyadondo and Nakasero.

The Appellants contended that the Registrar erred by imposing the 30% security deposit condition, arguing that the Respondent failed to comply with statutory requirements to value the mortgaged properties within six months before the sale, instead relying on valuation reports dated 14th January 2020, over five years prior to the sale date. They asserted that this rendered the valuation reports an improper basis for calculating the deposit, and the injunction should have been granted unconditionally.

The Appellants further relied on assurances from the Government of Uganda regarding payment of outstanding sums owed under a contract between the 2nd Appellant and the Ministry of Education and Sports, arguing these should have influenced the injunction terms.

The 1st Respondent opposed the appeal, detailing the history of three loan facilities granted to the Appellants, secured by mortgages and personal guarantees, and highlighting the Appellants’ repeated defaults and failure to comply with loan obligations. The Respondent maintained that the valuation reports were a lawful basis for computing the 30% deposit and that the Appellants had not complied with the Registrar’s order.

The key issue before the court was whether the Learned Registrar erred in law and fact by conditioning the interim injunction on payment of the security deposit based on the 2020 valuation reports.

Issue:

Application of Regulation 13(1) of the Mortgage Regulations, 2012, on the requirement of a 30% deposit when granting interim injunctions restraining foreclosure sale of mortgaged property, and the effect of notice of default on triggering the foreclosure process.

Court's Findings

1. Introduction of New Issues on Appeal Is Improper

The Court reaffirmed the principle that a party cannot raise new issues on appeal that were neither pleaded nor argued at the trial level without leave of the appellate court (Betuco (U) Ltd & Anor v Barclays Bank Uganda Ltd, SCCA No. 1 of 2017).The appellants’ claim that no notice of default was issued was a new matter not argued before the Learned Registrar and thus inadmissible on appeal.

2. Notice of Default is a Prerequisite to Foreclosure

The Court confirmed that the foreclosure process begins with the issuance and service of a notice of default or demand notice to the mortgagor or interested parties.The appellants had themselves pleaded and annexed the notice of default, contradicting their claim otherwise.

3. Regulation 13(1) Requires Payment of 30% Deposit When Sale Is Stopped or Adjourned

1. The Court clarified that the requirement to pay a 30% security deposit arises once the foreclosure process has commenced and the order sought would stop or adjourn the sale.

2. This condition applies irrespective of whether the injunction is interim, temporary, or of another nature.

3. The nomenclature of the application or order does not affect the obligation to pay the deposit if the order restrains or delays the foreclosure sale.

   
   

4. Distinction Between Appellate Stays and Trial Injunctions

1. The Court distinguished the decisions in Woodmore Energy Consultancy Ltd & 3 Ors v Guaranty Trust Bank (U) Ltd and Haruna Sentongo v I&M Bank (U) Ltd, clarifying that these cases concern interim stay of execution applications in appellate courts.

2. These rulings are isolated and contextual and do not alter the established jurisprudence on the application of Regulation 13 to injunctions granted by trial courts.

3. The appellate court must apply a different approach when dealing with stays pending appeal compared to injunctions pending trial.

   
   

5. Use of Valuation Reports for Computing the 30% Deposit

1. The appellants argued the 30% deposit could only be computed based on a fresh valuation done within 6 months before sale, as required under Regulation 11(2).

2. The Court held that Regulation 11(2) relates specifically to valuations for purposes of sale, not necessarily for adjournment or postponement of sale under Regulation 13.

3. Regulation 13 does not require a fresh valuation as a precondition to ordering the deposit; the forced sale value may be based on the original or any subsequent valuation.

4. The Court upheld the Learned Registrar’s reliance on the January 14, 2020 valuation reports as a fair and lawful basis for computing the deposit, noting it was more lenient to the appellants.

   
   

6. No Discretion to Grant Adjournment Without Security Deposit

1. The Court emphasized that while it has discretion to adjourn or postpone a sale, any adjournment must be conditioned on payment of the security deposit.

2. An unconditional injunction restraining sale without the deposit is not contemplated under Regulation 13 and thus not legally available.

   
   

7. Disputes Over Outstanding Loan Amount Do Not Excuse Deposit Payment

1. The Court rejected the contention that a dispute over the loan amount exempts payment of the deposit, citing Morjaria Maheshwery Purshotam v Stanbic Bank Uganda Ltd.

2. The mortgagee’s claimed outstanding amount at the time the suit is filed should be taken as the amount for computing the deposit, preventing abuse by raising frivolous disputes.

   
   

8. Government’s Assurances to Pay Debt Do Not Affect Mortgagee’s Rights

1. The Court noted that outstanding payments owed by Government to the 2nd Appellant do not legally offset liabilities owed to the mortgagee under the doctrine of privity of contract.

2. However, in the interest of justice, the Court extended the time for payment of the 30% deposit by 60 days to allow the appellants to pursue payment from Government and sustain the interim injunction.

   
   

Orders

1. The appeal largely fails.

2. The conditional interim injunction will continue in force for 60 additional days (until October 10, 2025) for the appellants to source and pay the 30% security deposit.

3. Costs to abide the outcome of the substantive suit.

   
   

Practical Takeaways

1. Mortgagees should ensure proper issuance and service of a notice of default to commence foreclosure.

2. Mortgagors seeking to halt foreclosure sales by injunction must expect the court to require a 30% deposit of the forced sale value under Regulation 13 once foreclosure has begun.

3. Trial courts retain discretion whether to adjourn or stop sale but must condition such orders on payment of the security deposit.

4. A fresh valuation is not mandatory for computing the deposit under Regulation 13, which may rely on earlier valuations.

5. Disputes over outstanding loan sums do not excuse compliance with Regulation 13 deposit requirements.

6. Government or third-party assurances to pay debts do not legally alter mortgage enforcement rights, though courts may exercise discretion to accommodate practical realities.

   
   

   Read the full case below

The Emin Pasha Limited and Others v Equity Bank Uganda Limited and Another 2025 UGCommC 24.

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