Court orders Muwema law firm to deposit $100,000 in Kololo property fight

• The Court of Appeal has stayed enforcement of a nearly $400,000 decree against Muwema & Co. Advocates.

• The law firm must deposit $100,000 or provide an equivalent bank guarantee within one month.

• The dispute centres on rent arrears, mesne profits and Muwema & Co.’s attempt to buy a Kololo property from Downtown Investments.

• The stay will lapse if the firm fails to provide the required security.

The Court of Appeal has ordered Muwema & Co. Advocates to deposit $100,000 or provide an equivalent bank guarantee within one month to stop Downtown Investments Ltd from enforcing a decree worth nearly $400,000.

The order gives the law firm temporary relief from attachment, garnishee and taxation proceedings arising from a February High Court judgment. However, the stay will lapse if the firm fails to provide the required security within the deadline.

Justice John Mike Musisi stayed enforcement of monetary awards that include $148,300 in rent arrears, $224,000 in mesne profits, Shs50 million in general damages, interest and costs.

“Whether furnished by a deposit in Court or by an unconditional bank guarantee, the security will preserve the parties’ respective positions without amounting to advance satisfaction of the decree or prejudging the merits of the intended appeal,” Musisi ruled.

The dispute dates back to December 2014 when Muwema & Co. rented premises at Plot 50, Windsor Crescent in Kololo from Downtown Investments.

The law firm agreed to pay $5,500 plus VAT, with rent payable one year in advance.

The lease also gave Muwema & Co. the first option to buy the property. It set a minimum price of $2 million if the purchase happened within the first year. After that period, the price was to depend on the market value.

In August 2021, Muwema & Co. offered $1.05 million for the property. It proposed paying a 10 per cent commitment fee of $105,000 and financing the balance through a bank.

Downtown’s then-managing director acknowledged the offer but said it was below expectations. The two sides did not reach a final agreement on the sale price.

Muwema & Co. argues that once it exercised the option to buy, the landlord-tenant relationship ended and it became an intending purchaser.

Downtown disputes that position. It says the $1.05 million proposal was only an offer that it never accepted and that rent continued to accumulate.

The dispute reached the High Court in 2023. Downtown sought rent arrears, eviction, mesne profits and damages. Muwema & Co. counterclaimed and asked the court to enforce its claimed right to buy the property.

In February, the High Court found that the purchase option remained valid but did not force Downtown to accept the law firm’s proposed price.

The court found there was no agreed market valuation, accepted purchase price or completed sale. It therefore ruled that Muwema & Co. remained a tenant.

Downtown regained possession of the Kololo property in March.

Muwema & Co. later asked the Court of Appeal to halt enforcement of the monetary decree pending appeal.

The firm argued that Downtown had already secured the most valuable part of the judgment by recovering possession of the property. It therefore opposed any further security requirement.

Downtown wanted security covering the full monetary decree.

Musisi rejected both positions and fixed the security at $100,000.

He said the amount represented a substantial part of the $148,300 rent award without imposing a burden that could frustrate the appeal.

The judge also noted that the sum was close to the $105,000 commitment fee Muwema & Co. had proposed when it sought to buy the property.

The Court of Appeal found that the intended appeal raises arguable issues over the effect of the purchase option, subsequent payments and the $224,000 award in mesne profits.

The court also considered the risk of attachment and sale of properties belonging to individual partners.

It noted that garnishment of the firm’s accounts at DFCU Bank, KCB Bank and Ecobank could cause harm that a later refund might not fully address.

The stay does not affect Downtown’s repossession of the Kololo property.

Muwema & Co. must now provide the $100,000 security within one month. If it fails to do so, Downtown will be free to resume enforcement of the monetary decree.