[2023] UGHC 440

### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA HOLDEN AT RUKUNGIRI

## **MISCELLANEOUS APPLICATION NO.39 /2022**

## (ARISING FROM ARBITRATION CAUSE NO.1 OF 2017)

GESES UGANDA LTD::::::::::::::::::::::::::::::::::::

#### **VERSUS**

# RUBABO PEOPLES COPERATIVE SAVINGS AND CREDIT SOCIETY ::::::::::RESPONDENT

### BEFORE: HON. JUSTICE TOM CHEMUTAI

#### **RULING**

This is an application brought by motion by the Applicant, Geses Uganda Ltd under Article 28 of the 1995 Constitution of Republic of Uganda, Section 34 of the Arbitration and Conciliation Act, Section 33 of the Judicature Act, Section 98 of the Civil Procedure Act Cap 71 and Order 52 rules 1,2 & 3 of the Civil Procedure Rules against the Respondent, for the following orders;

- Time be extended to within which to hear and argue the application. i. - The Arbitration award made on the 2^nd October, 2018 against the Applicant be set ii. aside and costs of the application be provided.

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#### iii. Cost of the Application be provided for.

The grounds of this application are that:

- a. That the Arbitrator exercised a jurisdiction illegally or with material irregularity or injustice when he proceeded to decide the case without according the Applicant a fair hearing. - b. That the Applicant was never served with the Arbitral proceedings and a copy of the award itself. - c. That the Arbitral award is unconscionable on ground that the arbitrator mentions other agents of the Respondent who are liable to pay such as the former Treasurer, Chairman, Manager and site supervisor who are not being demanded/asked to pay by the Respondent. - d. That the arbitral award is unconscionable on ground that the arbitrator applied in Paragraph (b) of the orders 20% interest on interest which is contrary to law. - e. That consequently the arbitral award is illegal and should be set aside. - f. That the interest of justice favours the grant of this application as there is sufficient cause for extension of time within which to hear this application.

This application is supported by the affidavit of Peter Nkurunungi, the Managing Director of the Applicant.

The Respondent filed his affidavit in reply sworn by Twinomugabe Joseph, the Chairperson, Board of Directors and opposed this application. He prayed that the same is dismissed with costs.

### **Background**

The brief background to this Application is that, The Respondent a Co- Operative Society contracted the Applicant company to construct its Head office building at Nyarushanje Sub-County in Rukunqiri Distrtict. The parties entered into contract agreement on 15^th June 2013 to do the construction works at an agreed a price of $160,000,000/$ = (One Hundred Sixty Million). The Applicant started the construction work and before completion of the work, the Respondent realized that there were shoddy works done on the building. This led to a dispute between the parties and the parties failed find an amicable solution. The Respondent filed a Civil Suit-vide No. 43/2015 at the High Court of Uganda at Kabale. The High Court realized that there was an arbitration clause in the parties' agreement and consequently referred the matter to arbitration and accordingly Rev. Bikangiso Ezrah was appointed to hear the matter. The tribunal heard the parties and delivered its award on 2^nd October, 2018. A decree of the award was registered in the Court and the Respondent proceeded with the execution process. The Applicant was served notice to show cause why warrant of arrest should not be issued in execution and thereafter it filed this application seeking for extension of time to file an application and to set aside the arbitration award.

#### Representation

During the hearing of this application, the Applicant was represented by counsel Muhanga Simon from M/s KRK Advocates and Counsel Twesigye Allan from M/s Lubega & Co. Advocates was for the Respondent.

Counsel for the Applicant proposed the following three issues for determination of this application, where adopted by the counsel for Resplendent.

- 1. Whether time to hear the application should be extended. - 2. Whether the arbitration award dated 2^nd October, 2022 should be set aside. - 3. Whether costs of the application should be provided.

Whether time to hear the application should be extended.

Counsel for the Applicant submitted that an application for setting aside the arbitral award may not be made after one month has elapsed from the date on which the party making that application has received the arbitral award as per Section 34 of the Arbitration and

Counsel averred that the impugned award was issued on 2^nd October, 2018 and the resultant decree was endorsed on 16^th December, 2021 and a notice to show cause why a warrant of arrest should not issue was issued on the 21st March, 2022. That the applicant came to learn about the award when it was served with the notice to show cause sometime

Counsel for the applicant averred that the Applicant was unaware of the award, even though its Director, Mr. Peter Nkurunungi was in engagement with the Respondent on settling the matter out of Court.

Counsel prayed that the court accords the Applicant the opportunity to address those legalities if it finds that the applicant was aware of the notice more than the prescribed month before filing the application to set aside the award.

Counsel for the Respondent submitted that the law prohibits making an application to set aside an arbitral award after expiry of one month from the date on which the party making the application has received the arbitral award. He cited Section 34 (3) of the Arbitration

Counsel contended that the arbitral award was made on 2^nd October, 2018 and endorsed as a decree of this Court on 16^th December, 2021. That the award was read in an open court in the presence of one Birungi representing the Applicant. He added that the Applicant's director Mr. Nkurunungi was engaged in various meetings with the Respondent to find an amicable way of settling the matter.

Section 34 (3) of the Arbitration and Conciliation Act, provides that;

"An application for setting aside the arbitral award may not be made after one month has elapsed from the date on which the party making that application had received the arbitral award, or if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral award."

Upon perusal of the record of proceeding of the arbitration, I note that the award was read in an open court in the presence of counsel Allan Tumwesigye for the Plaintiff, Mr. Twinomugabe Joseph Kabanza and Ms. Justine Tushemereirwe for the Respondent were present and one Birungi represented the Applicant.

Furthermore, there were engagements between the parties trying to settle the matter amicably after delivery of the award on 2^nd October, 2018. Therefore, it is not true that the applicant learnt of award on 21st March, 2022, when a notice to show cause why a warrant of arrest should not issue was issued on it.

This could ordinarily dispose of the application, but in the interest of justice, I will proceed and determine the merits of the application.

# Whether the arbitration award dated 2^nd October, 2022 should be set aside.

Counsel contended that under section S.3 I (1) of the Arbitration and Conciliation Act, an arbitrator is required to make the award within 2 months after entering on the reference.

That the arbitration proceedings began on 17 /03/17 and lasted until 03/03/18 when the applicant closed its case and directions for submissions and the date for the award were given, nearly one whole year.

He contended that the award was later made on 02/10/18. He added that the arbitrator did not extended the time as required by S.31(1) of the Act and that the arbitrator made the award when the time had expired and there is no valid award.

Counsel contended that Mr. Nkurunungi Peter was not served with the date of the final award and contended that the award was in violation of S.31 (8) of the Act and accordingly S.34 (2) a (iii) on failure to give proper notice of arbitral proceedings.

The applicant also contended that he was not given the opportunity to have legal representation and also present his witnesses hence failure to accord the applicant a fair hearing, which was a violation of \$.34(2) a (iii), thereby rendering the award a candidate for setting aside.

Counsel contended that the arbitrator awarded shs $182,544,403$ which was never pleaded by the Respondent and also awarded 20% interest on the refund which award is illegal, unconscionable and contrary to public policy and we pray that the same should be set aside as the arbitrator went beyond the scope under Section 34(2) b(ii).

Counsel submitted that the arbitrator awarded general damages of shs 50,000,000= to the respondent for inconveniences which was outside the scope of the arbitrator's power and the order was made outside the provisions of the Act.

Counsel for the Respondent submitted that the Arbitral awards are not usually subject to review for legal error in the same way the lower court judgments are scrutinized in a hierarchical national legal system.

Counsel submitted that the award is final and binding on all parties and cannot be set aside or modified by the court (for errors of law or otherwise) except upon the limited grounds provided by Section 34 of The Arbitration and conciliation Act.

Counsel for the Respondent submitted that Applicant was given a fair hearing and that it presented it one witness and closed its case.

Counsel submitted that the arbitrator in awarding Ug. shs. 182,544,403 / = relied on the evidence presented which indicated that the building was not habitable and liable to be demolished, and that the ward of interest on interest was a typographical error which does not go to the root of setting aside the award.

Counsel submitted that the arbitrator in awarding Ug shs. 50million was due to suffering and inconvenience the Respondent and its agents went through out the arbitral proceedings and that the building was constructed not in accordance with the specifications agreed upon.

Counsel for the Applicant in rejoinder submitted that the impugned award was delivered without according the applicant the right to proper legal representation or allowing the applicant to call its witness and the award of Shs $182,544,403$ = which was never pleaded for by the Respondent.

That the award also contained an oppressive and unconscionable sum shs. $50,000,000=$ (fifty million) given as general damages against the applicant.

Counsel further contended that the award also contained an award of interest on interest to which the respondent averred was a typographic and added that the respondent never applied to correct error in accordance with section 33 of the Act.

The grounds of setting aside an arbitral award are provided for under section 34 (2) of The Arbitration and conciliation Act.

## "34. Application for setting aside arbitral award

(1) Recourse to the court against an arbitral award may be made only by an application for setting aside the award under subsections (2) and (3).

(2) An arbitral award may be set aside by the court only if—

(a) the party making the application furnishes proof that—

(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 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 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 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 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;

(b) the court finds that—

(i) the subject matter of the dispute is not capable of settlement by arbitration under the law of Uganda; or

(ii) the award is in conflict with the public policy of Uganda.

It is worth to note the Court has power to modify or correct an award in the following circumstances;

- 1. Where it appears that a part of the award is upon a matter not referred to arbitration, and that part can be separated from the other part and does not affect the decision on the matter referred. - 2. It can also be modified where the award is imperfect in form, or contains any obvious error which can be amended without affecting the decision. - 3. It can be modified where the award contains a clerical mistake or an error arising from an accidental slip or omission.

Upon perusal of the record, it is clear that the applicant was fully represented during the proceeding, the applicant was presented by Peter Nkurunungi, its Managing Director who gave evidence in chief and thereafter was cross examined. I had earlier in this ruling, noted the award was delivered by the Arbitrator in the presence of a representative of the Applicant.

Therefore, I find that there were proper proceedings of the tribunal which led to the award and the applicant was legally presented and it participated in the arbitration.

### The award.

Counsel for the applicant contended that the arbitrator awarded shs $182,544,403$ which was never pleaded by the Respondent and Counsel for the Respondent submitted that the arbitrator in awarding Ug. shs. 182,544,403 / = relied on the evidence presented which indicated that the building was not habitable and liable to be demolished.

I have perused the record of proceedings of the tribunal and I note that PW1, Semakula William and PW 2, Tushemereirwe Justine tendered to the tribunal, evidence of receipts of payment made to the applicant. They included the 1^st receipt dated 7^th August, 2013 which is for 25 million, 22^nd August, 2013, receipt for 65, 780,710/=, Receipt dated 8^th Novermber, 2013 for **30 million** and the receipt dated 15^th July, 2013 is for **62,250,693/=.**

From the above receipts, the total payment made to the applicant by the Respondent was $182,544,403$ which is the same amount that the Arbitrator award to the Respondent.

I find that amount of Ug. Shs 182,544,403/= was legally awarded to the Respondent based evidence of payment receipts presented to the tribunal.

### The interest of interest of 20% per annum.

Counsel for the Applicant submitted that the interest was illegally awarded to the Applicant and counsel for the Respondent contended that it was a typographical error which does not go to the root of setting aside the award.

It is a settled position of the law that the expression "mistake or error apparent on the face of record" refers to an evident error which does not require extraneous matter to show its incorrectness. It is an error so manifest and clear that no court would permit such an error to remain on the record. It may be an error of law, but law must be definite and capable of ascertainment; Attorney General & Others vs. Boniface Byanyima HCMA No. 1789 of 2000, Levi Outa vs. Uganda Transport Company [1995] HCB 340.

I hold the same view with counsel for the Respondent that the award of interest of 20% was as result of a typographical error and I hereby set it aside and replace with interest rate of 10% which I believe is fair given the circumstance of the case.

### The award of General damages of $50,000,000/=$ .

I find the award of 50,000,000/ $=$ as general damages as high and excessive and I therefore set it aside and award 10,000,000/ $=$ as general damages for inconveniences suffered by the Respondent.

The rest of the orders and awards by the Arbitrator are hereby maintained.

Therefore, I allow partially allow the application with the following order:

- i. The Applicant is to refund all the money he was paid for the construction of the office building which was recommend for demolition and be built afresh plus the money he was over paid which all totals to $182,544,403/=$ - That an interest of 10% per annum from the time the case was filed in Court 2015 ii. until payment in full. - The Respondent is awarded general damages of $10,000,000/$ = to cater for the iii. inconvenience suffered. - A ward 3/4 of the costs taxed to the Respondent as its workers/ servants were iv. negligent in paying the Respondent without a certificate of completion & paying advances contrary to the construction agreement. - That the tribunal sat for 10 times at the rate of $300,000/$ = per sitting. This money ν. shall be paid by the Applicant but it will be part of the money she will claim against the Respondent. - Each party to bear its own costs. vi.

It is so ordered.

| Ruling read and delivered at Rukungiri this | | |---------------------------------------------|--|

| TOM CHEMUTAI | |--------------| | JUDGE |