Africa-Press – Uganda. It is not illegal for loan defaulters to deposit in court 30 percent of the unpaid amount that is being challenged before cases can be heard, the Constitutional Court has ruled.
The court reasoned that the requirement to pay 30 percent of the outstanding amount is necessary to protect mortgagees from unnecessary adjournments or stoppage of sales that would result in satisfaction by defaulting mortgagors.
“Regulation 13(1) and (4) of the Mortgage Regulations No.2/2021 does not contravene and is not inconsistent with Articles 21, 28, 44, 126(1) and 128 of the Constitution. Regulation 13 (5) of the Mortgage Regulations No. 2/2012 does not contravene and is not inconsistent with Article 26 of the Constitution,” held Justice Cheborion Barishaki in the lead judgement.
In the unanimous decision, the court further ruled that the act of the courts or any other person or official enforcing Regulation 13(1) of the Mortgage Regulations is neither contrary nor inconsistent with Articles 21, 28, 44, 79 and 126(1) of the Constitution.
The other justices who agreed with Justice Cheborion are Frederick Egonda-Ntende, Catherine Bamugemereire, Muzamiru Kibeedi and Monica Mugenyi.
The court held: “Whereas a mortgagor may lose mortgaged property, such a loss will only occur where a mortgagee may exercise its remedies following a mortgagor’s default of their obligations, which, in my view, is consistent with Article 26 of the Constitution because the mortgagee also has interest in the mortgaged property which interest is protected as a proprietary right.”
Justice Cheborion reasoned that Regulation 13 strikes a balance between the competing desire of the mortgagee to realise the security following default and that of the mortgagor to have their day in court.
“In my view, although Article 26 of the Constitution protects the right of every person to own property, it was not promulgated for the purpose of addressing disputes between private parties arising out of contractual relationships,” he ruled, adding, “In the instant case, the rights of the parties are governed by the contractual document in this case the Mortgage Deed and as a result infringement of Article 26 of the Constitution does not arise.”
Ferdsult Engineering Services Limited and its director, Mr Ferdinand Mugisha, had petitioned the court against the Attorney General (AG). They challenged the legality of Regulation 13 (1) of the Mortgage Regulations No.2 of 2012. The provision requires a mortgagor, spouse, agent of the mortgagor, or any other interested party to pay 30 percent of the forced sale value of the mortgaged property or the outstanding amount before the sale can be adjourned or stopped.
Court heard that Regulation 13 (1) of the Mortgage Regulations was unconstitutional because the 30 percent of the deposit impedes the mortgagors constitutional right to access the courts for redress and to be accorded a fair hearing while in court.
This arose out of an ongoing court case in which the engineering firm challenged ABSA bank’s intended sale of their mortgaged property.
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