High Court Clarifies that the 30% Security Deposit under Regulation 13 is Triggered by a Notice of Default, Not Just a Notice of Sale, and Clarifies the Scope of Spousal Exception, Such as Widowhood.

High Court Clarifies that the 30% Security Deposit under Regulation 13 is Triggered by a Notice of Default and Reaffirms Regulation 13(6) as an Equitable Safety Valve Permitting Waiver for Spouses Facing Irreparable Hardship

Introduction

The High Court of Uganda (Commercial Division) recently delivered a significant ruling in Kenya Commercial Bank (Uganda) Ltd v Olive Zaitun Kigongo & Allisson Gallagher (Miscellaneous Appeal No. 0007 of 2026). The appeal, presided over by Hon. Lady Justice Susan Odongo, addressed the mandatory 30% security deposit required under the Mortgage Regulations and the discretionary power of the court to waive this requirement for spouses.

Background Facts

The late Cedric Ndilima Babu obtained a USD 200,000 mortgage facility from Kenya Commercial Bank (Uganda) Ltd ("the Bank") in July 2023, secured against residential property at Plot 1, Fumu Lane, Kololo, Kampala. Following his death in May 2025, the loan defaulted, with an outstanding balance of USD 182,710. The Bank issued a formal Notice of Default on 30 October 2025.

The Respondents, the deceased's mother and widow, acting as Administrators of his estate, filed Civil Suit No. 1470 of 2025, alleging that the Bank had been negligent in allowing a mortgage protection insurance policy to lapse. They contended that Clause 7.17 of the facility letter placed an automatic obligation on the Bank to renew the policy, and that had it done so, the debt would have been extinguished upon the borrower's death.

While the injunction application was still pending, the Bank served a Notice of Sale on 9 February 2026. The Respondents filed a supplementary affidavit to bring this to the court's attention. The Registrar granted an unconditional temporary injunction on 23 February 2026, declining to impose the mandatory 30% security deposit under Regulation 13 of the Mortgage Regulations, 2012. The Bank appealed.

Issues

1. Whether the fresh evidence introduced by the Appellant on appeal was admissible without leave of court.

2. Whether the Supplementary Affidavit filed by the Respondents without leave was properly admitted and relied upon.

3. Whether Regulation 13 of the Mortgage Regulations, 2012 was triggered by the Respondents’ application.

4. Whether the Learned Registrar improperly descended into the arena by invoking the spousal exception under Regulation 13(6).

5. Whether there was sufficient evidence to justify waiver of the 30% security deposit.

Legal Representation

The Appellant was represented by Counsel Brian Kalule of M/s. AF Mpanga Advocates, while the Respondents were represented by Counsel Justinian Kateera of M/s Kateera & Co. Advocates.

Submissions of the Parties

The Appellant (Bank) Submitted that

1. The Registrar committed a procedural error by admitting the supplementary affidavit filed after closure of evidence and without leave, constituting trial by ambush contrary to Surgipharm (U) Ltd v Uganda Investment Authority.

2. Regulation 13 was triggered the moment the foreclosure process commenced upon the Notice of Default in October 2025, regardless of whether an auction date had been set, relying on I&M Bank Uganda Ltd v Nadia Manji and The Emin Pasha Ltd v Equity Bank Uganda Ltd.

3. The Registrar descended into the arena by invoking the spousal exception on her own motion, the Respondents applied as administrators, not as a spouse, and that theory was never pleaded or argued by any party.

4. There was no evidence of impecuniosity to justify the waiver; the 2nd Respondent deponed only to being a "former spouse," and the marriage certificate identified Kisukye Carol as the registered spouse at the time of the mortgage.

The Respondents Submitted that;

1. The supplementary affidavit was a necessary response to the Bank's shocking service of a Notice of Sale during the pendency of the application, conduct they characterised as bad faith and an attempt to render the main suit nugatory.

2. Regulation 13 was not triggered because the suit concerned contractual interpretation of the Bank's insurance obligations, not a mere attempt to stall a scheduled auction.

3. The 2nd Respondent's status as widow and spouse was a foundational fact deponed to from the very inception of the suit and corroborated by the Letters of Administration granted by the Family Division without objection from the Bank.

4. Requiring a widow with minor children to deposit USD 56,550 before her case of bank negligence could be heard would effectively shut the doors of the court, contrary to Nakato Margaret v Housing Finance Bank Ltd.

Court's Findings

Preliminary. Objection

Admissibility of fresh evidence on appeal

The learned judge clarified that Order 43 Rule 22 of the Civil Procedure Rules restricts the introduction of additional evidence on appeal unless the lower court wrongly refused it, or the High Court requires it for a substantial cause. Her Ladyship found that the Bank had been the authors and custodians of the very documents, spousal consent forms and marriage certificates, which it sought to introduce through Annexures A, B, and C. Those documents had formed part of the Bank's own mortgage file since July 2023, and the 2nd Respondent had described herself as the deceased's spouse from the very first affidavit filed in the injunction proceedings.

The court reaffirmed that a condition for receiving fresh evidence is that it could not have been obtained with reasonable diligence for use at the hearing below, applying the principle from Ladd v Marshall [1954] 1 WLR 1489. The court accordingly struck out Annexures A, B, and C and all paragraphs relying on them.

Ground 1

Supplementary affidavit admitted without leave

The learned judge found that the Respondents' supplementary affidavit, filed on 13 February 2026, two days after the closure of evidence on 11 February 2026, was filed in clear violation of Order 8 Rule 18 of the Civil Procedure Rules. Her Ladyship held that even supervening facts of material importance must be introduced through a formal application for leave.

The court reaffirmed, following Surgipharm (U) Ltd v Uganda Investment Authority (HCMC No. 65 of 2021), that admitting evidence after the trial schedule has closed is not a mere technicality; it amounts to a breach of the right to a fair hearing enshrined in the Constitution. The Registrar's reliance on the unauthorised filing to bypass Regulation 13 was held to be an error of law. The supplementary affidavit was struck off the record.

Ground 2

Applicability of Regulation 13 — 30% security deposit

The learned judge clarified the precise trigger point of Regulation 13 of the Mortgage Regulations, 2012. Her Ladyship found that the foreclosure process commenced on 30 October 2025 when the Bank issued a formal Notice of Default under Section 18 of the Mortgage Act. The court reaffirmed, following I&M Bank Uganda Ltd v Nadia Manji (Misc. Appeal No. 0018 of 2023) and Performance Furnishings (U) Ltd v Diamond Trust Bank (U) Ltd (HCMA No. 278 of 2020), that any application filed after that date seeking to restrain the mortgagee from "selling, auctioning, or foreclosing" is, in substance, an application to stop or adjourn the realization of security. The court rejected the Registrar's reasoning that Regulation 13 was inapplicable merely because no auction had yet been scheduled, holding that to do so would allow mortgagors to bypass the 30% rule by filing before a specific auction date is fixed, effectively rendering the Mortgage Regulations a dead letter.

The Court observed that Regulation 13(6) the equitable safety valve

Notwithstanding sub-regulation (1), where the application is by the spouse of a mortgagor, the court shall determine whether that spouse shall pay the thirty percent security deposit.

Ground 3

Whether the Registrar descended into the arena

The learned judge found that the Registrar did not manufacture her own case by invoking Regulation 13(6). Her Ladyship reaffirmed that the 2nd Respondent's marriage to the deceased was a foundational fact deponed to from the very inception of the proceedings, not a new theory conjured in the ruling.

The court observed that the Letters of Administration were granted on the very basis of spousal status, a legal determination the Bank had never challenged before the Family Division. Her Ladyship further held that to penalise a widow for failing to explicitly title her plea as a "spousal application" when her marriage and her children's residency were the very heart of the evidence would be to elevate form over substance, contrary to Article 126(2)(e) of the Constitution. By invoking Regulation 13(6), the Registrar was fulfilling a mandatory statutory duty rather than pursuing an inquisitorial function outside the pleadings.

Grounds 4 & 5

Evidence of spousal status and hardship

The learned judge found that the evidentiary record amply supported both the 2nd Respondent's spousal status and the exercise of discretion to waive the 30% deposit. Her Ladyship noted that Allisson Gallagher had explicitly deponed to her marriage in both her affidavit in support and her affidavit in reply; this was corroborated by the deceased's own mother.

The court reaffirmed, applying the multi-factor standard from Nakato Margaret v Housing Finance Bank Ltd (HC Misc. Appeal No. 0687 of 2021), that the following circumstances collectively justified the waiver: the property was a matrimonial home occupied by the widow and three minor children; the deceased had been the primary breadwinner; a deposit of USD 56,550 would have the practical effect of shutting the doors of the court; and the main suit raised a serious question of bank negligence regarding the lapsed insurance policy.

The court also observed that widowhood, in and of itself, underscores financial vulnerability and that the length of bereavement is a relevant factor in assessing whether a surviving spouse has had sufficient opportunity to reorganise her affairs. The Bank's reliance on Kakooza Abdulla v Stanbic Bank Uganda Ltd, to the effect that loss of mortgaged property can never be irreparable, was rejected, the court distinguishing the loss of a primary family residence as an irreparable injury beyond the property's market value.

Holding

Appeal Dismissed in its Entirety

Grounds 1 and 2 of the appeal were allowed to the extent that: (a) the supplementary affidavit filed on 13 February 2026 was struck off the record; and (b) Regulation 13 of the Mortgage Regulations, 2012 was held to have been triggered upon the issuance of the Notice of Default on 30 October 2025.

Grounds 3, 4, and 5 were dismissed. The waiver of the 30% security deposit was upheld as a proper and judicious exercise of judicial discretion under Regulation 13(6), grounded in uncontroverted evidence of spousal status, three minor children, absence of alternative accommodation, and a prima facie case of bank negligence regarding the lapsed insurance policy.

The Ruling and Orders of the Registrar in HCMA No. 2911 of 2025 granting an unconditional temporary injunction pending the hearing and determination of the main suit are upheld. Costs of the appeal were awarded to the Respondents under Section 27 of the Civil Procedure Act.

Read the full case

Kenya Commercial Bank (Uganda) Ltd v Olive Zaitun Kigongo and Another 2026 UGCommC 218 (30.

Download • 3.95MB

Key Takeaways

1. Regulation 13 is triggered by the Notice of Default, not the auction date

   A mortgagor's application to restrain a lender from "selling, auctioning, or foreclosing" falls within Regulation 13 of the Mortgage Regulations, 2012 the moment a Notice of Default has been issued, regardless of whether a specific sale date has been advertised. Framing the application as a "temporary injunction" or a "contractual dispute" does not insulate it from the mandatory 30% deposit requirement.

2. The spousal exception (Regulation 13(6)) is a genuine discretionary haven

   Where an application is brought by or on behalf of a spouse of a mortgagor, the court retains an unfettered discretion to determine whether the 30% deposit should be paid. Relevant factors include: length of cohabitation; financial resources; availability of alternative accommodation; presence and welfare of children; size of the debt; and whether payment would cause irreparable hardship. Widowhood, in particular, is a compelling basis for the exercise of that discretion.

3. Spousal status need not be explicitly pleaded as a separate ground

   A court does not descend into the arena by invoking Regulation 13(6) where the applicant's status as spouse is clearly and consistently deponed to in the affidavit evidence, even if the Notice of Motion does not specifically invoke the spousal exception as a discrete legal heading. Elevating the form of a pleading over its substantive content is contrary to Article 126(2)(e) of the Constitution.

4. Supplementary affidavits filed after evidence closure require leave of court

   Filing a supplementary affidavit after the closure of evidence — even in response to a supervening event such as a fresh notice of sale — is a procedural violation absent leave of court. The correct remedy is an urgent application under Order 8 Rule 18(2) of the Civil Procedure Rules. Courts will not cure the illegality by relying on the filing, regardless of its materiality.

5. Fresh evidence on appeal must satisfy the reasonable diligence test

   Documents that were within a party's possession and control at the time of the hearing below, including a lender's own mortgage file, cannot be introduced on appeal on the ground of surprise. The Ladd v Marshall conditions (the evidence could not have been obtained with reasonable diligence; it is credible; and it would probably have had an important influence on the result) remain the applicable standard in Ugandan courts.

6. Loss of a primary family residence constitutes irreparable harm

   The court declined to apply the principle in Kakooza Abdulla v Stanbic Bank Uganda Ltd (to the effect that the sale of mortgaged property is never irreparable loss, as it was contemplated at the outset). Where the property is a widow's matrimonial home occupied with minor children and there is no alternative accommodation, the logistical and social harm to the family goes beyond the property's measurable market value.