The Court of Appeal has given Muwema & Co. Advocates one month to deposit $100,000 (about Shs370 million) or provide an equivalent bank guarantee if the law firm wants to stop Downtown Investments Ltd from enforcing a monetary decree of nearly $400,000.
The order was issued by Justice John Mike Musisi, who granted the law firm a stay of execution of monetary awards arising from a February High Court ruling.
The stay covers $148,300 in rent arrears, $224,000 in mesne profits, Shs50 million in general damages, interest and costs. It also temporarily stops attachment of property, garnishee proceedings and taxation proceedings.
However, the stay will automatically end if Muwema & Co. fails to provide the required $100,000 security within the one-month deadline.
Justice Musisi said the security could either be deposited in court or provided through an unconditional bank guarantee.
He explained that the requirement was intended to protect both parties while the appeal is being considered without forcing the law firm to pay the full decree before the dispute is finally determined.
The case stems from a 2014 lease agreement under which Muwema & Co. rented premises at Plot 50, Windsor Crescent in Kololo from Downtown Investments at $5,500 plus VAT per month, payable one year in advance.
The agreement gave the law firm the first option to buy the property. The purchase price was set at a minimum of $2 million if the option was exercised within the first year, after which the price would be determined according to the prevailing market value.
In August 2021, Muwema & Co. offered to purchase the property for $1.05 million. The firm proposed paying a 10 per cent commitment fee of $105,000 and financing the remaining amount through a bank loan.
Downtown Investments’ then-managing director acknowledged receiving the offer but indicated that the proposed price was below the company’s expectations. The parties never reached an agreement on a final price or completed the sale.
The disagreement later centred on whether Muwema & Co.’s purchase proposal brought the landlord-tenant relationship to an end.
The law firm argued that by exercising its purchase option, it had effectively become an intending buyer and should no longer have been treated as a tenant.
Downtown Investments, however, maintained that the $1.05 million proposal was merely an offer that it never accepted. It therefore argued that rent continued to accumulate.
The dispute eventually ended up in the High Court in 2023, with Downtown seeking payment of rent arrears, eviction, mesne profits and damages. Muwema & Co. filed a counterclaim seeking enforcement of what it considered to be its right to purchase the property.
In February, the High Court found that although the purchase option remained valid, it did not require Downtown Investments to accept the price proposed by the law firm.
The court found that the parties had not agreed on a market valuation, purchase price or completed sale. As a result, Muwema & Co. remained a tenant and was liable for the resulting obligations.
Downtown Investments regained possession of the Kololo property in March.
While seeking to suspend enforcement pending its appeal, Muwema & Co. argued that Downtown had already secured the most important part of the High Court decree by recovering possession of the property and that requiring additional security would be unnecessary.
Downtown, on the other hand, wanted the law firm to provide security covering the entire monetary award.
Justice Musisi rejected both positions and instead set the security at $100,000.
The judge said the amount represented a significant portion of the $148,300 rent arrears awarded by the High Court while ensuring that the security requirement did not make it unnecessarily difficult for the law firm to pursue its appeal.
He also noted that the $100,000 security was close to the $105,000 commitment fee that Muwema & Co. had itself proposed when it offered to purchase the property.
The Court of Appeal found that the intended appeal raises serious legal questions, including the effect of the purchase option, how subsequent payments should be treated and whether the award of $224,000 in mesne profits was justified.
The court also considered the potential consequences of Downtown’s enforcement efforts, including the threatened attachment and sale of property belonging to individual partners and the garnishment of the firm’s accounts at DFCU Bank, KCB Bank and Ecobank.
Justice Musisi found that such actions could cause losses that might not be adequately compensated even if Muwema & Co. eventually won its appeal.
The stay, however, does not affect Downtown Investments’ repossession of the Kololo premises.
Muwema & Co. must now provide the $100,000 security within one month. If it fails to do so, Downtown Investments will be free to resume enforcement of the monetary decree.
