The Court of Appeal has ordered Muwema & Co. Advocates to provide security of $100,000 (Shs370 million), if it is to retain a stay of execution against Downtown Investments Ltd as the law firm pursues an appeal arising from a long-running dispute over rent arrears, ownership rights and possession of property in Kololo.

The order was issued by Justice John Mike Musisi in Civil Application No. 0844 of 2026, M/S Muwema & Co. Advocates v Downtown Investments Ltd, arising from Civil Suit No. 0621 of 2023 and High Court Miscellaneous Application No. 0380 of 2026.

Muwema & Co. Advocates had asked the Court of Appeal to stay all forms of execution of the High Court decree pending the hearing and final determination of its intended appeal.

The firm argued that execution would cause substantial and irreparable harm, particularly after Downtown Investments had already repossessed the premises from which the law firm operated and had pursued further execution measures, including attempts to attach properties belonging to individual partners and garnishee proceedings against the firm’s bank accounts.

Justice Musisi allowed the application, but only on strict conditions. The Court stayed execution of the monetary component of the High Court decree, including rent arrears, mesne profits, general damages, interest and costs, together with attachment, garnishee and taxation proceedings arising from the decree.

However, the Court made the continuation of the stay conditional on the law firm providing security of $100,000 within one month.

“The Applicant shall, within one month from the date of this order, provide security in the sum of United States Dollars One Hundred Thousand ($100,000), being a substantial part of the amount decreed as rent arrears,” Justice Musisi ordered.

The Court gave Muwema & Co. Advocates two options for providing the security. The firm may deposit the money in court or lodge with the Registrar an unconditional bank guarantee issued by a reputable commercial bank.

Any money deposited in court must be placed on an interest-bearing account, while a bank guarantee must remain valid until the intended appeal is finally determined or until the Court issues further orders.

The Court warned that failure to comply with the order within the stipulated one-month period would automatically terminate the protection granted to the law firm.

“In default of compliance with order 5 above within the stipulated period, the stay granted under order 3 above shall automatically lapse without further reference to this Court,” the ruling states.

The decision follows a legal battle dating back to a lease agreement signed between Muwema & Co. Advocates and Downtown Investments Ltd on December 15, 2014, concerning premises comprised in LRV 240 Folio 17, Plot 50, Windsor Crescent, Kololo.

Under the written lease, the agreed term was five years, with rent set at $5,500 plus VAT, payable one year in advance. The rent was to be revised upwards by 10 per cent every 12 months after the first 24 months.

Although the formal five-year lease expired on December 15, 2019 without the contemplated renewal being executed, the relationship between the parties continued. The High Court subsequently treated the lease as continuing on its existing terms.

At the centre of the dispute was Clause 5 of the lease, which gave Muwema & Co. Advocates a first option to purchase the property.

The clause provided for a floor price of $2 million if the transaction was concluded within 12 months of commencement of the lease. After that initial period, the ruling states that the purchase price was to be determined by the market.

This became the foundation of the law firm’s argument that it had exercised its option to purchase the property and that, as a result, its relationship with Downtown Investments Ltd had ceased to be that of landlord and tenant.

On August 2, 2021, Muwema & Co. Advocates wrote to Downtown Investments proposing to purchase the property for $1.05 million.

According to the evidence considered by the courts, the proposal contemplated payment of a 10 per cent commitment fee, amounting to $105,000, with the balance to be financed through a banking institution.

Downtown Investments’ then Managing Director acknowledged receipt of the proposal but indicated that the amount was below the company’s expectations and that he would consult other stakeholders.

No counter-offer or final acceptance followed before the Managing Director died in December 2021.

Muwema & Co. Advocates nevertheless maintained that its August 2021 letter amounted to an exercise of the option and that, from that point, it was no longer merely a tenant but an intending purchaser of the property.

Downtown Investments took the opposite position, arguing that the letter was simply an offer that had never been accepted and that rent therefore continued to accrue.

That disagreement eventually resulted in High Court Civil Suit No. 0621 of 2023.

Downtown Investments sued for rent arrears, vacant possession, eviction, mesne profits, general damages, interest and costs.

Muwema & Co. Advocates defended the claim and filed a counterclaim seeking declarations that it had exercised its option to purchase the property and that Downtown Investments was obliged to conclude the transaction, together with injunctive and other relief.

The High Court delivered its judgment on February 20, 2026.

Although the High Court found that Downtown Investments’ earlier attempt to cancel the purchase option in a March 31, 2016 letter was legally ineffective, it nevertheless rejected the law firm’s argument that the August 2021 offer had completed a purchase transaction.

The High Court held that Clause 5 did not oblige Downtown Investments to accept whatever price Muwema & Co. Advocates proposed.

Instead, the court found that the transaction remained subject to negotiation and free consent and that the $1.05 million offer had not been absolutely and unconditionally accepted.

Consequently, the court held that no sale had been concluded and that the parties remained in a landlord-tenant relationship, meaning that Muwema & Co. Advocates remained liable for rent.

The High Court further found that the law firm had paid the demanded rent up to December 15, 2021 but subsequently fell into arrears.

It treated a $50,000 payment made on June 8, 2023, following a demand for payment, as part-payment of rent arrears and accepted Downtown Investments’ computation that $148,300 remained outstanding.

The court rejected the firm’s argument that payments made after August 2, 2021 should instead be treated as payments towards the purchase of the property.

The High Court also rejected Muwema & Co. Advocates’ counterclaim relating to approximately $186,000 allegedly spent on renovations.

The court found that the expenditure had not been sufficiently proved through receipts, bank transfers or other supporting documents and that the required contractual approvals had not been demonstrated.

The resulting decree ordered Muwema & Co. Advocates to pay $148,300 in rent arrears, Shs50 million in general damages and $224,000 in mesne profits for the period from May 29, 2023 to January 31, 2026, in addition to interest and costs.

The High Court also granted Downtown Investments vacant possession and the right to evict the law firm.

Muwema & Co. Advocates lodged a Notice of Appeal on February 23, 2026 and requested the certified record of proceedings.

It subsequently applied to the High Court for a stay of execution on March 3, 2026.

However, before that application was determined, Downtown Investments regained possession of the premises on March 6, 2026.

The law firm described the repossession as a summary and unlawful eviction carried out with the assistance of police and media personnel, while Downtown Investments disputed that characterization and maintained that its re-entry was lawful.

Justice Musisi expressly declined to determine the legality of the repossession in the stay application.

The High Court eventually dismissed the application for a stay on June 25, 2026.

The trial judge found that Muwema & Co. Advocates had lodged its Notice of Appeal without unreasonable delay and had disclosed an arguable appeal.

However, the High Court declined to stay execution, reasoning that the orders concerning vacant possession and eviction had already been overtaken by events and that the law firm had not demonstrated that the remaining monetary component of the decree would cause substantial and irreversible loss.

The matter then moved to the Court of Appeal.

Muwema & Co. Advocates had actually filed its Court of Appeal application on June 23, 2026, two days before the High Court delivered its ruling.

Downtown Investments challenged the competence of the application on that basis, arguing that the High Court had not yet determined the stay application when the matter was filed.

Justice Musisi rejected that objection.

The Court noted that the law firm had first approached the High Court and had waited for nearly four months while execution continued, including the repossession of the premises and further execution measures.

The Court found that the circumstances justified the law firm’s decision to approach the Court of Appeal before the High Court delivered its ruling.

“The requirement that relief ordinarily be sought first in the High Court is intended to regulate the orderly exercise of concurrent jurisdiction; it is not to be applied so rigidly as to leave an Applicant without effective protection while execution proceeds,” Justice Musisi held.

The Court then considered whether the law firm had satisfied the legal requirements for a stay of execution pending appeal.

Justice Musisi said an applicant must demonstrate a prima facie or arguable case, show that irreparable damage would result or that the intended appeal would be rendered nugatory if a stay was refused, establish where the balance of convenience lies where necessary, and show that the application was filed without undue delay.

On whether Muwema & Co. Advocates had an arguable appeal, the Court identified several substantial issues that could properly be considered by the appellate panel.

These included the legal effect of Clause 5 of the lease, whether the law firm’s August 2021 communication constituted an effective exercise of an option to purchase, whether the relationship between the parties changed after that communication, how subsequent payments should be characterized, and whether the award of $224,000 in mesne profits was properly pleaded and proved.

The intended appeal also raises questions over the High Court’s treatment of the firm’s counterclaim, the application of Section 36 of the Land Act and the order for immediate eviction.

Justice Musisi emphasized that the Court of Appeal was not, at this stage, deciding whether Muwema & Co. Advocates would ultimately win its appeal.

“The intended appeal will require the appellate panel to determine whether the clause created a true option capable of unilateral exercise, a contractual right of first refusal, or some other preferential right,” the judge said.

He added that the appellate court would also have to determine whether exercising the option when the purchase price was to be determined by the market could have changed the relationship between the parties before the price and other terms of sale were settled.

“These are questions fit for full argument on the record, not for conclusive determination on affidavits in an application for stay,” Justice Musisi ruled.

The Court nevertheless cautioned that finding the appeal arguable should not be interpreted as an endorsement of the law firm’s position.

Justice Musisi observed that no accepted counter-offer, agreed valuation or concluded purchase agreement had been presented to the Court and that the proposed 10 per cent commitment fee had not been shown to have been paid.

The Court also noted that the parties disagreed over whether payments made after August 2021 were rent or purchase money.

Despite those weaknesses, the Court found that the issues were neither frivolous nor vexatious and therefore constituted an arguable appeal deserving full consideration.

On irreparable harm, however, the Court drew a distinction between the property that had already been repossessed and the ongoing monetary execution.

Justice Musisi held that the Court could not restore possession through a prospective stay order because Downtown Investments had already regained the premises.

“Whatever view is ultimately taken of the lawfulness of that repossession, a matter this application is not the appropriate vehicle to resolve, the fact of possession having passed cannot be undone by an order of this Court operating, as a stay necessarily does, prospectively,” the ruling states.

The Court therefore refused to treat the already completed eviction as grounds for restoring the law firm’s occupation.

However, it took a different view of the threatened attachment of individual partners’ properties and the freezing of the firm’s operating bank accounts.

The Court found that the threatened sale of specifically identified properties belonging to the law firm’s individual partners was qualitatively different from an ordinary monetary decree, particularly because the partners were not themselves judgment debtors in the original suit.

Justice Musisi also found that the continued freezing of the firm’s operating accounts at three banks could interfere with the continued operation of the legal practice in a way that a later refund of money would not fully remedy.

“I am not satisfied that the Respondent’s assurance of financial capacity, however genuine, adequately answers this particular species of harm, which is qualitative and not merely quantitative,” the judge held.

The ruling further noted that Muwema & Co. Advocates had told the Court that its operating accounts with DFCU Bank, KCB Bank and ECO Bank had been affected by a garnishee order nisi.

There was also a pending application seeking attachment and sale of properties belonging to individual partners of the law firm.

The Court considered these measures sufficiently serious to justify protection pending the appeal, while stressing that Downtown Investments also had a legitimate interest in enjoying the fruits of the judgment it had obtained after a full trial.

This balance became particularly important when the Court considered security.

Muwema & Co. Advocates had argued that Downtown Investments should not be given further security because it had already achieved the most important part of the decree by taking possession of the property.

Downtown Investments, on the other hand, argued that the law firm had offered no meaningful security and urged the Court to require security for the entire decretal amount, which it said approached $400,000 once rent arrears, mesne profits, general damages, interest and costs were combined.

Justice Musisi rejected both extremes.

He held that although Downtown Investments had recovered possession, that did not satisfy the monetary aspects of the decree.

At the same time, requiring the entire decretal amount could place a disproportionate burden on Muwema & Co. Advocates and potentially stifle the intended appeal.

“The requirement of security is not an inflexible or jurisdictional precondition to the grant of a stay,” the judge said, noting that courts retain discretion to determine whether security should be required and, if so, what amount would be fair in the circumstances.

The Court settled on $100,000 because it represented a substantial portion of the $148,300 rent arrears awarded by the High Court while remaining proportionate to the issues still contested on appeal.

Significantly, Justice Musisi observed that the amount also approximated the $105,000 commitment fee that Muwema & Co. Advocates itself had proposed when it offered to purchase the property for $1.05 million in 2021.

“I consider it just and proportionate to require the Applicant to furnish security for $100,000,” Justice Musisi ruled.

The Court emphasized that the security was not intended to force Muwema & Co. Advocates to pay the entire decree before its appeal is heard.

Instead, it was designed to provide Downtown Investments with meaningful protection against further delay while preserving the law firm’s right to challenge the High Court judgment.

The Court consequently stayed execution of the monetary component of the decree, including rent arrears, mesne profits, general damages, interest and costs, as well as attachment, garnishee and taxation proceedings arising from it.

But the stay does not reopen the eviction.

“For the avoidance of doubt, this order does not disturb, and shall not be construed as reversing, the orders for vacant possession and eviction already implemented,” Justice Musisi ordered.

The judge added that any complaint concerning the legality of the repossession would have to be pursued through the appropriate proceedings and could not be determined in the present stay application.

The Court ultimately found that Muwema & Co. Advocates had established that its intended appeal was arguable, had been brought without undue delay and raised substantial questions deserving determination by the appellate court.

However, it rejected the firm’s claim that payment of the rent arrears and mesne profits would, by itself, cause irreparable harm or render the appeal nugatory, noting that the money could be recovered if the appeal eventually succeeded.

The Court instead found irreparable harm in the threatened attachment and sale of the individual partners’ properties and the continued garnishment of the firm’s operating accounts.

The Court of Appeal therefore allowed the application on conditions, discharged the interim protective order that had previously been granted on July 6, 2026, and replaced it with the new orders.

Muwema & Co. Advocates must now provide the $100,000 security within one month.

If the firm fails to do so, the stay protecting it from further monetary execution, attachment, garnishee and taxation proceedings will automatically lapse without the need for Downtown Investments to return to court.

The costs of the application will abide the outcome of the intended appeal.

The ruling therefore leaves the central dispute between the parties unresolved.

The Court of Appeal has deliberately refrained from deciding whether Muwema & Co. Advocates validly exercised its contractual option to purchase the Kololo property, whether subsequent payments should be treated as rent or purchase money, and whether the High Court was correct to award $224,000 in mesne profits.

Those questions will now fall to the appellate panel hearing the substantive appeal, while the law firm faces a one-month deadline to secure $100,000 if it is to retain the protection against further execution.