[2024] UGCommC 150

# 5 **THE REPUBLIC OF UGANDA**

# **IN THE HIGH COURT OF UGANDA AT KAMPALA**

## **COMMERCIAL DIVISION**

## **MISCELLANEOUS CAUSE NO. 0048 OF 2023**

# **(Arising from Arbitration Award dated 2nd May, 2023)**

## 10 **CAIRO BANK UGANDA LIMITED ::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

## **VERSUS**

# **CADS VENTURES LIMITED :::::::::::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT**

# **BEFORE HON. LADY JUSTICE HARRIET GRACE MAGALA**

## **JUDGMENT**

## 15 **Background**

This is an application to set aside the Award of the Arbitrator in **CADS Ventures Ltd. Vs Cairo Bank Uganda Limited ADH/ARB [009/2022]** that was delivered on the 2nd May 2023. The Application was brought under Order 52 rules 1 and 3 of the Civil Procedure Rules as amended, section 98 of the Civil Procedure Act, section 34 of

20 the Arbitration & Conciliation Act and section 33 of the Judicature Act.

The grounds for setting aside the Award are that:

1. The arbitrator erred in law and fact by delivering the award based on issues that were not framed at the commencement of the hearing; and

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5 2. The arbitrator further erred in law and fact by delivering the award in total disregard of the Applicant's case, submissions and proper evaluation of the evidence on record.

The Applicant therefore seeks the following orders:

- 1. That the arbitral award delivered on 2nd May, 2023 by Irene Nambatya be 10 set aside. - 2. Costs of this application be provided for.

The Affidavits in support of the application and rejoinder to the Application were deposed by Stella Ladona Wattanga, the Head Legal & Company Secretary; and Larya Catherine Victoria, the Assistant Legal Manager. The affidavit in reply

15 opposing the application was deposed by Ronald Namara, the Managing Director of the Respondent.

# **Representation and appearance**

The Applicant was represented by M/s KSMO Advocates while the Respondent was represented by M/s CMS & Co. Advocates. Both parties filed their written 20 submissions which have been duly considered by court together with their pleadings to determine the matter.

## **Issues for determination**

- **1. Whether the Arbitral Award in CADS Ventures Ltd. Vs Cairo Bank Uganda Limited ADH/ARB [009/2022] should be set aside** - 25 **2. What remedies are available to the parties?**

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# 5 **Determination**

# **Preliminary point of law**

The Respondent raised a preliminary point of law by submitting that the Applicant failed to follow the court directives in filing their written submissions by 12th January 2024. That as a result of which, under *Order 17 Rule 4 of the Civil*

10 *Procedure Rules S. I No.71-1 as amended***,** court should proceed to determine the application without the submissions of the Applicant.

The wording of *Order 17 Rule 4 CPR is such that,* the court has discretion to proceed with a matter where time has been granted but a party still fails to produce any evidence, cause attendance of witnesses or perform any other act necessary to the

- 15 further progress of the suit. In the matter before court, the Respondent's argument was premised on the fact that the Applicant failed to file their written submissions on time as per the court directives. In addition to the provisions of the Civil Procedure Rules, the Commercial Division requires strict adherence to court orders and directives. According to **Rule 7 of the Constitution (Commercial Court)** - 20 **(Practice) Directions S. I Constitutional 6;**

# *"7. Noncompliance of parties*

*Failure by a party to comply in a timely manner with any order made by the commercial judge in a commercial action shall entitle the judge, at his or her own instance, to refuse to extend any period of compliance with an* 25 *order of the court or to dismiss the action or counterclaim, in whole or in part, or to award costs as the judge thinks fit."*

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- There is a letter on the court record dated 16th 5 January, 2024 from the Applicant's lawyers informing court that counsel in personal conduct of the matter had left the Firm without leaving a record of the court directives on the file. That the Applicant's Lawyers were only made aware of the Court directives through an email dated 12th January, 2024. This was an oversight that should not be visited - 10 on the Applicant. The Applicant's lawyers explained to court why the delay was occasioned and went ahead to file their submissions to progress the determination of the Matter. The preliminary point of law is hereby over ruled. The matter shall be determined on its merits taking into consideration the parties' pleadings and submissions. - 15 **Issue 1: Whether the Arbitral Award in CADS Ventures Ltd. Vs Cairo Bank Uganda Limited ADH/ARB [009/2022] should be set aside**

**Section 34(2)(a) of the** *Arbitration and Conciliation Act Cap 4* is very clear on under what circumstances a party may move court to set aside an arbitral award. The party has to furnish proof that:

- 20 i) A party to the arbitration agreement was under some incapacity; - ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, if there is no indication of that law, the law of Uganda; - iii) the party making the application was not given proper notice of the 25 appointment of an arbitrator or of the arbitral proceedings or was unable to present his or her case; - iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on

- 5 matters beyond the scope of the reference to arbitration; except that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; - v) the composition of the arbitral tribunal or the arbitral procedure was 10 not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate, or in the absence of an agreement, was not in accordance with this Act; - vi) the arbitral award was procured by corruption, fraud or undue means or 15 there was evident partiality or corruption in one or more of the arbitrators; or - vii) the arbitral award is not in accordance with the Act;

The ACA also empowers the court under **section 34 (2)(b)** to set aside an arbitral award.

- 20 The Applicant submitted that at the commencement of the arbitration hearing, issues for resolution were not framed and agreed upon by the parties yet directions were given for filing of submissions. The Arbitrator delivered the award solely relying on the submissions emanating from the issues raised by the Respondent in total disregard of the Applicant's case. It was the Applicant's submission that her 25 evidence in Schedule A (7) of the agreement was not considered. The Respondent - was supposed to complete the instructions of debt recovery within 3 months. Clause 3 of the Agreement states that the scope of work to be covered by the Respondent was recovery of outstanding loan arrears but it failed to make any collections. Under Schedule C of the Agreement, was to the effect that collections

5 of arrears for secured loans of UGX. 1 Billion and above attracted a 4% commission on the part of the Respondent. Subsequently, the Respondent didn't make any collection as regards the instructions for debt recovery from Eco Petrol (U) Ltd to be entitled to the 4% commission, as the same was a precondition for recovery of the debt, negotiable and not fixed. Therefore, the sum of UGX. 1.5 Billion was 10 recovered through a consent judgment by M/s KSMO Advocates.

Furthermore, that Clause 3 does not provide for recovery through litigation as part of the scope of work to be covered by the Respondent which is why there was no role played whatsoever by the Respondent regarding the suit that was instituted against the Applicant. That the lawyers who prepared and participated in the court 15 matter were finally able to reach a consent judgment with the debtor. The Court ordered the debtor to pay UGX. 1,500,000,000/=, contrary to the Respondent's argument that the recovery was made due to their efforts yet none were seen during litigation which resulted into the recovery. Therefore, none of the above was put into consideration. The Arbitrator failed to properly and fairly evaluate the 20 evidence of both parties on record and thus the award of the Arbitrator was partial.

In reply, the Respondent submitted that the Application does not contain any of the grounds as laid out in section 34 of the Arbitration and Conciliation Act. That the grounds were drafted as though this were an appeal against the arbitral award. That whereas the Applicant claims that the issues at the commencement 25 of the arbitration proceedings were not agreed to, the Applicant's submissions

were in response to the said issues that she claims were not agreed to.

In addition to the above, the Applicant claims that the Arbitrator delivered her award in total disregard of the Applicant's evidence and submissions. The

- 5 Applicant didn't attach the statement of claim, statement of defence, rejoinder, witness statements, and submissions of the respective parties onto the affidavit in support of this application to support or prove their claim. Thus the application doesn't contain any grounds for setting aside an arbitral award and no evidence in support at all. - 10 It was further submitted for the Respondent that an arbitral award is not open to challenge on ground that the arbitrator reached a wrong conclusion or failed to appreciate facts/evidence. The Respondent cited and relied on the case of *Roko Construction Ltd vs. Kobusingye Janet (HCMA No. 0022 of 2021)*

It was submitted for the Applicant that the Arbitrator didn't consider their

15 submissions and evidence. The Applicant relied on the case of *Re Medicaments and Related Classes of Goods (No.2); Director General of Fair Trading vs. Proprietary Association of Great Britain and Proprietary Articles Trade Association [2001] 1 WLR 700,* to conclude that the Arbitrator's decision relied on the Respondent case and evidence, disregarding the Applicant's. This showed the 20 partiality of the Arbitrator and as such affected the award.

In determining this issue, I shall rely on the decision of Hon. Justice Mubiru Stephen in *Roko Construction Ltd vs. Kobusingye Janet (Supra) at pages 7, 8, 9,13 & 14,* where he stated that:

*"Partiality encompasses both an arbitrator's explicit bias toward one party* 25 *and an arbitrator's inferred bias when an arbitrator fails to disclose relevant information to the parties. Evident partiality may be manifested by: (i) "actual partiality or bias;" or (ii) an "appearance of partiality;" or a "reasonable impression of partiality…It means actual, discernable* 5 *inclination to favour one party; a predisposition to a particular point of view which might affect the result. There should be persuasive evidence of partiality, rather than mere speculation or possibility or a vague appearance of bias. Further that the test is whether the circumstances could properly cause a reasonably well-informed person to have a reasonable* 10 *apprehension of a biased appraisal or judgment by the arbitrator, however,*

*unconscious or unintentional it might be."*

In light of the above case, I am persuaded to find that simply because the Award was not in favor of the Applicant who believed the outcome was as a result of the Arbitrator ignoring their submissions and evidence did not amount to bias or 15 partiality.

Regarding the Arbitrator's award, in respect of the first issue, she found that:

*"The act of advertising the debtor's property for sale in the Daily Monitor newspaper influenced the debtor to file a suit, pendency of the suit would hinder the debt recovery process but the Respondent continued to engage* 20 *the debtor but wouldn't proceed with repossession /sale of debtor's property as to do so would cause avoidable liability to the bank. Halting the process of recovery due to pendency of the suit was an act done in good faith by the Respondent. The same suit led to a consent judgment of UGX. 1.5 Billion payments to the Applicant, therefore, the Respondent performed its* 25 *obligation and deserves payment of commission.*

While addressing the issue of periodic reports, the Applicant submitted that there was no strict adherence to obligations of filing periodic reports by Respondent as per the contract. The Arbitrator found that:

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5 "*there is no evidence that the Applicant objected nor opposed the form of reports filed at any time. The Applicant had acquiesced to the reporting form and standard, thus can't ignore it and then later complain about it".*

Regarding the second issue the Arbitrator found that:

*"The guarantee of payment of a commission is based on the concept of* 10 *effective cause. Effective cause is the causal link which persuades the debtor to pay up or the buyer to purchase the property, the means through which the efforts of an agent, a success recovery/sale is concluded and the agent therefore, entitled to a commission. The agent claiming commission, therefore, has to show that he made initial efforts and that his efforts further* 15 *continued to influence the debtor in its eventual decision to pay/ for the vendor to purchase. That when the Respondent advertised the debtor's property, a suit was filed. No further instruction was given to the Respondent by the Applicant and neither was there any notice to withdraw instructions to the Respondent. While making cross reference to Clause 2 of the* 20 *Agreement, she found that legal instructions to an advocate /law firm to institute/defend a suit is not the same as instruction to recover a debt with the promise to payment of commission. That pursuant to Clause 21 of the Agreement, the alleged termination or engagement of another law firm without prior notice to the Respondent, would not have an effect on the rights* 25 *and remedies of the contract that had accrued prior to the alleged termination. Therefore, the Respondent issued a demand notice, engaged the debtor, visited and inspected the debtor's properties and placed an advert in the Daily Monitor, created a remedy to the Applicant resulting from its partial*

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5 *fulfillment of the obligations under the contract, thus they were entitled to their commission as per Schedule C of the Contract."*

According to **Section 28(5) of the Arbitration and Conciliation Act Cap 4,**

*"In all cases, the arbitral tribunal shall decide in accordance with the terms of the particular contract and shall take into account the usages of the* 10 *trade applicable to the particular transaction***".**

It was the submission of the Applicant that the Award was inconsistent with the terms of agreement between the parties. In the case of **Re** *Medicaments and Related Classes of Goods (No.2); Director General of Fair Trading vs. Proprietary Association of Great Britain and Proprietary Articles Trade Association (Supra)***,** 15 Hon. Justice Stephen Mubiru stated that:

*"Significant guidance test is where the court always reserves judgment on every point until she has seen and fully understood both sides of the argument. Whereby they will take the trouble to inform herself on all matters that are relevant, put whatever she has read or seen into its overall social,* 20 *political or geographical context, is fair-minded and will appreciate that the context forms an important part of the material which she must consider before passing judgment."*

The Hon. Justice at page 19 of the *Roko Construction Ltd vs Kobusingye Janet (Supra),* further stated that; "*when an arbitration award resolving contract claims*

25 *is not based on the actual provisions of the relevant contract, but rather on an individual arbitrator's personal sense of "justice" and "public policy", it can be successfully challenged, and vacated by the courts".*

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- 5 I am guided by the above authorities and a reading of the Award to arrive at the conclusion that this Court cannot set aside the Award on grounds that it was inconsistent with the terms of the contract / agreement between the Parties. In my view, a fair-minded and well-informed observer can clearly see that the Arbitrator heard both parties and arrived at her decision based on the evidence before her. - 10 I therefore find that the Applicant has not satisfied the requirements set out in section 34 (2)(a) and (b) of the Arbitration and Conciliation Act. This is an application to set aside an arbitral award but a careful reading of the grounds of the application and affidavits in support shows that it is a disguised appeal and the applicant is asking this court to subject the evidence on record before the Arbitrator 15 to a fresh scrutiny, re-evaluation and assessment; and then arrive at a conclusion - as to whether this award should be set aside or not. If the Applicant's intention was to appeal the against the Award, she should have moved court as stipulated under **Section 38 (1)(b) and 2 of the Arbitration and Conciliation Act.** This provision is to the effect that a party may move to court to determine questions of law in a 20 domestic arbitration only if the parties have agreed. This is because the Applicant's grounds in this application are to the effect that Award should be set aside because the Arbitrator erred in law when she did not consider the Applicant's evidence and submissions; and when she determined the matter of issues not agreed to by the Parties. - 25 Lastly, the Applicant cannot be seen to raise objections in this application yet she had a chance to so during the arbitral proceedings. By virtue of section 4 of the Arbitration and Conciliation Act, she is estopped. She forfeited her rights then. **Section 4 of the ACA on Waiver of right to object** states that:

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5 *"A party who knows of any provision of this Act from which the parties may derogate or of any requirement under the arbitration agreement which has not been complied with and yet proceeds with the arbitration without stating his or her objection to the noncompliance without undue delay or, if a time limit is prescribed, within that period of time, shall be deemed to* 10 *have waived the right to object ".*

I therefore find that the Arbitrator conducted the proceedings fairly and impartially, heard the evidence of both parties and arrived at a decision after evaluation the evidence before her.

## 15 **Issue 2: What remedies are available to the parties?**

a) Enforcement of the Award

Having found that the Applicant has not satisfied the grounds for setting aside an arbitral award, **section 36 of the Arbitration and Conciliation** on enforcement is very instructive and clear and what should be done after an application such as 20 this is not determined in favor of the Applicant. The section states that:

> *"Where the time for making an application to set aside the arbitral award under section 34 has expired, or that application having been made, it has been refused, the award shall be enforced in the same manner as if it were a decree of the court".*

25 The Respondent can enforce the Award in **CADS Ventures Ltd. Vs Cairo Bank Uganda Limited ADH/ARB [009/2022]** as if it were a decree of court.

## $\mathsf{S}$ b) <u>Costs</u>

## **Section 27 (1) of the Civil Procedure Act states that:**

"subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of an incident to all suits shall be in the discretion of the court or judge, and the court or judge

$10$

shall have full power to determine by whom and out of what property and to what extent those costs are paid, and to give all necessary directions for *purposes of the aforesaid".*

Costs shall always follow the event unless the Court or judge shall for a good reason otherwise order as stated in the case of *Jennifer Behange, Rwanyindo*

15 Aurelia, Paulo Bagenze vs. School Outfitters (U) Ltd CACA No.53 of 1999. Having found for the Respondent, the costs of this application are awarded to the Respondent.

Signed and dated at Kampala this **27^th day of May 2024.**

$20$

Mercialiane<br>Harriet Grace MAGALA Judge

Delivered online (ECCMIS) this 29^th day of May 2024. $25$