Supreme Court Clarifies That Mortgages Are Governed by Contractual Terms; Regulation 13 of the Mortgage Regulations No. 2 of 2012 Complements Rather Than Overrides That Relationship.

Introduction

In Ferdsult Engineering Services Limited and Another (Consitutional Petition 18 of 2021) [2023] UGCC 105 (6 October 2023), the Petitioners challenged the constitutionality of Regulation 13(1) of the Mortgage Regulations, S.I. No. 2 of 2012. This regulation requires a party seeking to stop or adjourn the sale of mortgaged property to first deposit either 30% of the forced sale value or the outstanding loan amount.

The Petitioners contended that the regulation violated constitutional rights to equality, non-discrimination, a fair hearing, and property ownership. They further argued that the provision usurped judicial powers and undermined the independence of the judiciary.

However, the Constitutional Court dismissed the Petition, holding that Regulation 13(1) strikes a fair balance between the mortgagee’s right to enforce their security and the mortgagor’s right to challenge an unlawful sale.

The Court emphasized the contractual nature of mortgage transactions and upheld the Regulation as a necessary safeguard against frivolous injunctions that could prejudice mortgagees.

Nevertheless, in a significant later development, the Supreme Court in Haruna Sentongo v I & M Bank (U) Limited (Civil Application 3 of 2025) [2025] UGSC 17 (9 May 2025), has cautioned against the rigid application of Regulation 13 of the Mortgage Regulations, S.I. No. 2 of 2012.

The Court has clarified that where property valuation is disputed or strict compliance would prejudice the right of appeal, Regulation 13 must yield to equitable and constitutional considerations.

Legal brief of the case of Haruna Sentongo v. I & M Bank (U) Limited Civil Appeal No. 3 of 2025 arising from Civil Application No. 3 of 2025.

Duration

The decision was rendered on 9th May 2025.

Area of Law

Civil Procedure & Mortgages

Court

Supreme Court of Uganda

Representation of Parties

Applicant (Haruna Sentongo): GEM Advocates

Respondent (I & M Bank (U) Limited): KAA Advocates

Overview

The Supreme Court has reaffirmed its commitment to administering substantive justice by granting a stay of execution, despite the applicant bypassing the Court of Appeal. In doing so, the Court exercised its discretionary power to grant interim relief, ensuring the preservation of the subject matter of the appeal.

This decision also highlights that procedural gaps should not undermine the fundamental right to appeal, particularly in high-value commercial cases.

The Supreme Court further clarified that Section 33 of the Judicature Act and the Mortgage Act especially Regulation 13 must be applied in a manner that upholds justice rather than exceeds it.

The Court stressed that rigid enforcement, such as requiring a 30% repayment before an appeal, must not override fairness, especially in cases where valuation remains unclear or contested.

Background of the Case

The respondent, I & M Bank, obtained a judgment from the High Court against Sentongo for loan recovery. Sentongo, dissatisfied with the outcome, filed an appeal in the Court of Appeal. However, complications arose when the case was administratively closed by the appellate court due to a misinterpretation of procedures under Regulation 13 of the Mortgage Regulations (concerning payment of 30% of the decretal sum before appeal).

Sentongo then approached the Supreme Court directly seeking an interim injunction and stay of execution.

Issues Raised

1)      Whether the Supreme Court entertain an application for a stay of execution not first filed in the Court of Appeal?

2)      Whether denying the stay would render the appeal nugatory and infringe upon the applicant’s right to appeal?

3)      Whether the non compliance with Regulation 13 of the Mortgage Regulations invalidated the Appeal?

Highlights

1)      Technicalities should not defeat substantive justice. Court relied on the case of John Lukyamuzi v AG and John Lukoma v Registered Trustees of the Missionaries of Africa, supporting the view that appellate courts can issue interim protective relief even where procedural steps are imperfect.

2)      The 30% payment required under Regulation 13 of the Mortgage Regulations is not deemed absolute.

3)      Failure to first apply to Court  of Appeal is not fatal

4)      The Supreme Court under Rule 41(2) of the Supreme Court Rules has inherent jurisdiction and discretion to entertain and grant the application to safe guard the right of appeal.

Resolution of issues

Issue 1: Whether the Supreme Court entertain an application for a stay of execution not first filed in the Court of Appeal?

The Court emphasized that procedural technicalities should not override substantive justice, reaffirming this principle in John Lukyamuzi v Attorney General. In this case, the Court reinforced the view that substantive justice must prevail over rigid procedural requirements.

The Court held that it has the jurisdiction to hear the application directly, exercising its discretionary powers to prevent injustice. It cited John Lukoma v Registered Trustees of the Missionaries of Africa, supporting the stance that appellate courts can grant interim protection even when procedural steps are imperfect.

Further, the Court reaffirmed its discretion to grant a stay of execution, even in cases where the application was not first filed in a lower court. It upheld the view that courts must safeguard the right to appeal, ensuring that justice is not obstructed by procedural omissions.

The issue was answered in affirmative.

Issue 2: Whether denying the stay would render the appeal nugatory and infringe upon the applicant’s right to appeal?

The Respondent argued that the application was procedurally flawed and barred due to a pending proceeding. On the other hand, the Applicant maintained that enforcing execution would defeat the right to appeal, particularly since previous attempts to seek relief had been blocked by procedural hurdles.

The Court exercised its inherent jurisdiction under Rule 41(2) of the Supreme Court Rules to entertain and grant the application. It held that executing the judgment before the appeal was heard would cause irreparable harm and could nullify the appeal’s purpose.

By granting the stay, the Court reinforced the principle that procedural barriers should not override the right to appeal, ensuring that justice is preserved.

The issue was answered in negative.

Issue 3: Whether the non compliance with Regulation 13 of the Mortgage Regulations invalidated the Appeal?

Regulation 13 mandates a 30% repayment of the decretal sum before an appeal can be heard. While this requirement was deemed absolute, the Court clarified that it should not be applied rigidly. The Court emphasized that enforcing the 30% repayment rule without proper property valuation, coupled with procedural irregularities, could lead to injustice. It ruled that the regulation must be interpreted contextually, ensuring that it serves justice rather than frustrates the right to appeal.

The issue was answered in negative.

Ruling

1)      The Supreme Court dismissed/overruled the preliminary objections raised by the Respondent in the interest of substantive justice.

2)      It granted a temporary injunction and stay of execution for four months or until the appeal is heard, whichever comes first.

3)      The costs of the application were to follow the outcome of the appeal.

Conclusion

The Supreme Court’s decision in Haruna Sentongo v I & M Bank (U) Limited brings a shift in the interpretation of Regulation 13 of the Mortgage Regulations 2012. While the Constitutional Court previously upheld the provision as constitutionally sound in Ferdsult Engineering Services Ltd v Attorney General, the Supreme Court has now injected a necessary nuance, emphasizing that rigid application of the 30% repayment requirement must not obstruct access to justice or undermine the constitutional right to appeal.

This ruling affirms the Court’s commitment to substantive justice and the preservation of the appellate process, particularly where strict procedural compliance would result in unfairness. It reinforces the principle that procedural safeguards must be applied contextually and equitably, especially in high-stakes commercial litigation where valuation disputes and timing are critical.

Overall, the decision underscores the court's constitutional duty to prevent the foreclosure of justice through technicalities. It will likely influence future mortgage enforcement actions and appeals, encouraging lower courts to exercise procedural rules with flexibility and a strong regard for fundamental rights.

 By Nandawula Sylivia

Corporate Law Enthusiast