[2024] UGCommC 140

## 5 **THE REPUBLIC OF UGANDA**

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

#### **[COMMERCIAL DIVISION]**

#### **CIVIL SUIT NO. 0115 OF 2018**

#### **NATHAN MWESIGYE RUBANGURA :::::::::::::::::::::::::::::::::::::::::::::: PLAINTIFF**

#### 10 **VERSUS**

#### **ICEA GENERAL INSURANCE COMPANY LIMITED ::::::::::::::::::::::::::: DEFENDANT**

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

#### **RULING ON PRELIMINARY OBJECTION**

#### **Background**

0n 27th 15 November, 2017, the Plaintiff entered into a contract of insurance under policy number 980-A2-105102-17 for comprehensive insurance of his two Sino Truck Motor Vehicles Registration No. UAZ 831K and UAZ 754K for a period of one year, from 27th November, 2017 to 26th November, 2018. The Policy was attached as **annexure "A"** to the Plaint. The Plaintiff filed this suit on 24th August, 2021 20 claiming that the Defendant was in breach of a contract of insurance for which the Plaintiff seeks specific performance or payment of special damages of UGX. 197,157,435/= as the cost of the assessed damage and premiums paid, general damages for the loss and inconvenience caused to the Plaintiff and costs of the suit. On 4th December 2017, the Plaintiff entered into an Insurance Premium Financing 25 Agreement with Equity Bank which was attached and marked as **annexure "B"** to the Plaint**.** The Bank released Ugx. 40,701,235/= to the Plaintiff which attracted

5 interest and penalties due to delay in payments as the trucks had mechanically broken down as a result of the accident and the delay to repair the trucks by the Defendant. The money released by the Bank was premium for the said insurance policy and the same was paid through Equity bank by debiting the Plaintiff's account a sum of UGX. 40,701, 235/= and transferred the same to the Defendant's 10 account as the total chargeable premium for the entire period of one year.

On the 14th December, 2017, the Plaintiff's trucks were involved in an accident in the course of their day to day business at Kikongo Rugendabara along Kasese Fort Portal road. The accident was reported to police under Divisional Police Headquarters Hima Division REF No. TAR 65/2017 and the accident was also

15 reported to the Defendant. The Defendant acquired the police report about the accident and came up with quotations of the assessed damage. The Plaintiff endlessly requested the Defendant to compensate him as per the Insurance Policy but was not successful hence this suit.

In their written statement of defense, the Defendant raised a preliminary

- 20 objection as to the competence of this suit on grounds that it is an abuse of court process and that the honorable court lacked the jurisdiction to entertain the claims in the suit. The Insurance Policy out of which the Plaintiff's claim arose required the parties to resolve any outstanding disputes through arbitration proceedings as per Clause **10 of the conditions** of the Insurance Policy/Contract. - 25 The Defendant therefore prayed that the suit should be dismissed or struck off with costs.

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## 5 **Appearance and representation**

The Plaintiff was represented by M/s GM Kibirige & Co. Advocates and M/s Jambo & Co. Advocates following the notice of joint instructions filed in court on the 28th March, 2024 while the Defendant was represented by M/s Katende, Ssempebwa & Co. Advocates. When this matter came up for mention on 12th March, 2024, the

- 10 Defendant's Counsel raised a preliminary point of law that the parties had expressly adopted arbitration as the agreed mode of dispute resolution. The Parties prayed to court the they be allowed to make written submissions on the preliminary objection. Their prayer was granted. The Defendant filed her written submissions on the same on 20th March, 2024 and the Plaintiff filed his written submissions on 28 15 th March, 2024.

## **Issues for determination**

- 1. Whether the dispute in HCCS No. 0115 of 2018 should be referred to arbitration - 2. What remedies are available to the parties? - 20 **Determination**

# **Issue 1: Whether the dispute in HCCS No. 115 of 2018 should be referred to arbitration**

# **Defendant's submissions**

It was the Defendant's submission that the Plaintiff's cause of action as stated

25 under paragraph 3 of its plaint is premised on the comprehensive insurance policy signed between the parties. Counsel submitted that the parties preferred

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5 reference to disputes arising therefrom for arbitration instead of Courts of judicature, pursuant to **Clause 10 of the conditions of the Insurance Policy**.

Counsel submitted that from the Plaintiff's pleadings, the insured's cause of action followed its objection to the assessment made by the Defendant in respect of the Plaintiff's claim. That the assessment which was objected to by the Plaintiff

10 was the subject of arbitration proceedings as per Clause 5 of the subject insurance policy and were clearly not intended to be subject of court proceedings under the ambit of **Section 5(1) of the Arbitration and Conciliation Act Cap 4 of 2008.**

Counsel for the Defendant submitted that the arbitration clause/agreement in the 15 subject insurance policy was admitted by Counsel for the Plaintiff and his only argument thereto was that the High Court had unlimited original jurisdiction, thus it has been demonstrated that there is a dispute, the dispute is arbitrable and the dispute is governed by a valid and enforceable arbitral agreement. Counsel further submitted that the present dispute between the parties is contractual,

20 involves private rights or claims of the parties and there is no law or public policy barring the reference of the current dispute between the parties to arbitration, thus there is a valid arbitration clause or agreement.

As to whether the arbitration clause was incapable of being performed, it was submitted for the Defendant that an arbitration agreement is inoperative if it is

25 no longer legally valid. That arbitration is commenced by the appointment of arbitrator(s) and it is only when parties fail to agree on the appointment, that the arbitral institution appoints one. The parties have not yet undergone the process of attempting to appoint an arbitrator and there is no evidence that it is

- 5 impossible that the parties will agree to the appointment of one pursuant to **Section 11(2) of the Arbitration and Conciliation Act**. That therefore, this suit is incompetently and improperly before this court owing to the existence of an arbitration clause/agreement in the insurance policy out of which the instant dispute arises while relying on the decision in the case of *ATC Uganda Ltd vs.* - 10 *Smile Communications Uganda Ltd HCMA No. 621 of 2023.*

Counsel also submitted that it does not matter the stage at which the arbitration clause and or requirement to refer the matter to arbitration is brought to the attention of the court. While relying on the decision in the case of *Delaware International Agricultural Enterprises Ltd vs. MUA Insurance (U) Ltd & AG-*

- 15 *Ploutos Company Ltd HCCS No. 524 of 2021,* submitted that in as much as the matter is the subject of an arbitration agreement, the Court shall refer the same for arbitration. That regardless of the period spent before court and the stage at which the matter is before this court, it is a fit and proper case to be referred to arbitration in accordance with the wishes of the parties under Clause 10. - 20 Counsel further submitted that this honorable court does not have jurisdiction to handle Civil Suit 0115 of 2018 as the Plaintiff's claim arises from an insurance policy which contains an arbitration agreement/clause. It was further submitted that a court's jurisdiction flows from the law and it ought to exercise its powers strictly within the jurisdictional limits and prescribed by the law while relying on the 25 decision in the case of *Kasibante Moses vs. Katongole Singh Marwaha & Property Consultants HCCR 4/2018.* Counsel submitted that the jurisdiction to entertain the instant dispute vests either with the Insurance Regulatory Authority in accordance

5 with the Insurance Act or with the Arbitrator mutually appointed by the parties in accordance with the subject Insurance policy.

#### **Plaintiff's submissions**

Counsel for the Plaintiff neither submitted on the existence of a dispute nor on whether there was a binding and enforceable arbitration agreement. The

- 10 Plaintiff's submissions were confined to whether the court had no jurisdiction in this matter in view of the arbitration clause. He cited and relied on the case of *Vantage Mezzanine Fund II Partnership vs. Simba Properties Investments Co. Ltd and Anor HCMA No. 201 of 2020.* Counsel submitted that when the dispute arose between the parties under their contract containing an arbitration agreement, - 15 the Plaintiff filed this suit before this court. That the Defendant's position to refer the suit to arbitration is not absolute, as such does lose the right to move court to halt proceedings and refer the matter to arbitration, if the doctrine of waiver, estoppel and acquiescence come into force. Counsel submitted that the Defendant already filed her initial Defense in 2018 and later an amended defense - 20 in 2024. The Defendant also entered into a partial consent through mediation where it repaired the Plaintiff's motor vehicle UAZ 754K and duly handed the same over to the Plaintiff. Learned Counsel for the Plaintiff also submitted that this court previously issued an order in mitigation of loss that the Plaintiff repairs his own vehicle and file the claim/resulting bill for court to assess the same as - 25 special damages, hence the reason for the amended Plaint.

Counsel submitted that the Defendant did not file an application objecting court's intervention in entertaining this suit in view of arbitration clause. Counsel submitted that the Plaintiff filed several interlocutory applications and the

- 5 Defendant replied all of them and all this time no reference was made to the arbitration clause. It was argued that the Defendant participated in drawing a joint scheduling memorandum in March 2024 and the Defendant requested its appointed garage to hand over the Plaintiff's motor vehicle Reg. No. UAZ 831K. That the entire dispute has since substantially been resolved and what remains - 10 are assessment of special damages, general damages and an issue on contempt of court order, thus there was nothing to arbitrate about.

It was the Plaintiff's submission that the Defendant waived the arbitration agreement and his right to arbitrate by participating in the court proceedings for over 6 years from 2018 to date, thus the clause became inoperative in the terms

- 15 of Section 5 (1) (a) of the Arbitration and Conciliation Act. While relying on the case of *Agri-Industrial Management Agency Ltd vs. Kayonza Growers Tea Factory Ltd & Anor HCCS No. 819 of 2004, National Social Security Fund vs. Alcon International Ltd CACA No. 2 of 2008, and David St. John Sutton in Russell on Arbitration, (22nd Ed. Sweet & Maxwell) paragraph 2-119, page 80.* Counsel - 20 submitted that the Defendant has belatedly applied to invoke the arbitration clause and delay is one of the examples given where a party may abandon its right to arbitrate. Further that if this matter is dismissed, the Defendant might at the commencement arbitration raise an objection of limitation to bring the action, thus prejudicing the Plaintiff. Counsel submitted that the Defendant entering a - 25 partial consent judgment, filing pleadings and actively participating in this matter meant that the Defendant had elected to abandon its right to arbitrate and decided to proceed with court litigation, thus prayed the preliminary objection is overruled.

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# 5 **Determination**

The Court is alive to **Section 9 of the Arbitration and Conciliation Act, Cap 4 of 2008 (***the ACA)* which states that:

*"Except as provided in the Act, no court shall intervene in matters governed by this Act."*

10 In the same Act, **Section 5(1) of the Act,** states that:

*"A Judge or Magistrate before whom proceedings are being brought in a matter which is the subject of an arbitration agreement shall, if a party so applies after the filing of a statement of defence and both parties having been given a hearing, refer the matter back to the arbitration unless he or*

15 *she finds-*

*(a) that the arbitration agreement is null and void, inoperative or incapable of being performed; or*

*(b) that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration*.

20 It follows, therefore, that the Defendant ought to demonstrate to this court that there is a dispute between the parties, that there is a binding and enforceable arbitration agreement; and that this court has no jurisdiction to determine the matter as stated by Hon. Lady Justice Nkonge Alexandra Rugadya in the case of *James Simon Mpanga & Anor vs. Marvin Paul Sebugwawo & 2 Ors HCCS No. 436* 25 *2016 at page 2 [2023].*

As to whether there is a dispute between the Parties, this is not contested as seen from the background to this ruling. 5 The second requirement is that there is a binding and enforceable arbitration agreement. Learned Counsel for the Defendant submitted that **Clause 10 of the conditions of the Insurance Policy** contains the arbitration clause/agreement which was not objected to by Counsel for the Plaintiff during admission of the documents in court. At page 6 of the Insurance Policy Conditions, Clause 10 10 explicitly provides that:

## *"10. Arbitration*

*All differences arising out of this Policy shall be referred to the decision of an Arbitrator to be appointed in writing by the parties in difference or if they cannot agree upon a single Arbitrator to the decision of two Arbitrators one* 15 *to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties or in case the Arbitrators do not agree of an Umpire appointed in writing by the Arbitrators before entering upon the reference…"*

A reading of the Plaint clearly shows that the Parties entered into the contract of insurance on the 27th 20 November, 2017 and the same was attached as annexture A to the Plaint. This is a binding and enforceable arbitration agreement between the parties.

**Section 2 (1) (c) of the Arbitration and Conciliation Act Cap 4** defines an arbitration agreement to mean:

25 *"An agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not."*

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5 The wording of **Clause 10 of the Insurance Policy** is unambiguous and none of the Parties are disputing the validity of the arbitration agreement in the Policy.

The Plaintiff's only contest is whether this court is not clothed with jurisdiction to hear the matter. It was the submission of learned counsel for the Plaintiff that the Defendant did not file an application objecting to the court proceedings in 2018

- 10 when the suit was filed and only waited until March 2024. That the Defendant participated in the hearing and disposal of all interlocutory applications filed by the Plaintiff in respect of the main suit. And that the parties already entered into a partial consent to repair and release motor vehicle UAZ 754K to the Plaintiff in 2019, the Defendant also handed over motor vehicle UAZ 831K to the Plaintiff; - 15 thus the entire dispute had since substantially been resolved and what remained was the assessment of special damages, general damages and an issue on contempt of court order. Counsel also relied on a number of decisions to conclude that the Defendant's election to proceed with the civil suit in court in 2018, waived the arbitration agreement thus it became inoperative in accordance 20 with Section 5(1) (a) of the Arbitration and Conciliation Act.

It was the Defendant's submission this court cannot arrogate to itself jurisdiction exceeding that which is conferred upon it by law, thus court ought to exercise its powers strictly within the jurisdictional limits and prescribed by the law. Counsel concluded that the jurisdiction to entertain the instant dispute vests either with the 25 Insurance Regulatory Authority while making reference to the Insurance Act and the decision of the Hon. Lady Justice Henrietta Wolayo in **Leeds Insurance Ltd vs.**

**Insurance Regulatory Authority of Uganda & Kissule Astacio & Sons Ltd,** or vests

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5 with the Arbitrator mutually appointed by the parties in accordance with the subject Insurance policy.

In my considered opinion, the Court has established that the arbitration and agreement is binding and enforceable, but court has to determine whether the same is inoperative due to the Defendant waiving the right to arbitrate as claimed

10 by the Plaintiff.

The decision of Hon. Justice Mubiru Stephen in the case of *AC Yafeng Construction Co. Ltd vs Living World Assembly Ltd & 2 Ors HCCS No. 739 of 2021***,** while relying on the case of *Broken Hill City Council vs. Unique Urban Built Pty Ltd [2018] NSWSC 825***,** is instructive on what the term "inoperative" covers. In the said case, it was 15 stated that:

*"The term inoperative covers those cases where the arbitration agreement has ceased to have effect. The ceasing of effect to the arbitration agreement may occur for a variety of reasons, including;- where the parties have implicitly or explicitly revoked the agreement to arbitrate; where the* 20 *same dispute between the same parties has already been decided in arbitration or court proceedings (principles of res judicata); where the award has been set aside or there is a stalemate in the voting of the arbitrators; or the award has not been rendered within the prescribed time limit; where a settlement was reached before the commencement of* 25 *arbitration, and so on."*

In the present case, *Miscellaneous Application No.0550 of 2019, Miscellaneous Application No. 0895 of 2020* and *Miscellaneous Application No. 0242 of 2019* all arising out of this suit were filed by the Plaintiff and responded to by the

5 Defendant and the same were disposed of. A partial consent was entered into by the parties at Mediation in *Mediation Cause No. 0125 of 2018*. The Defendant filed their defence to the Plaint in *HCCS No. 0115 of 2018*, in 2018 and an amended Defense in March 2024. The motor vehicles have also since been returned to the Plaintiff by the Defendant. That is, motor vehicles registration numbers UAZ 754K and UAZ 831K in 2019 and 4th 10 April 2023 respectively.

The Court of Appeal in the case of *National Social Security Fund vs. Alcon International Ltd CACA No. 2 of 2008* relied on author David St. John Sutton in his book; **Russell on Arbitration, (22nd Ed. Sweet & Maxwell paragraph 2-119, page 80** where he stated that:

15 *"…a party may abandon its right to arbitrate for example by delay or inaction, or by commencing court proceedings in breach of an arbitration agreement. However, the courts are slow to find such repudiation or abandonment without very clear evidence of, an intention to abandon the right to arbitrate together with reliance by the other party to its detriment. Even if the right to* 20 *arbitrate a particular dispute has been abandoned, that does not necessarily mean that the arbitration agreement itself has been abandoned."*

I would like throw more light on why the Parties filed amended pleadings in March 2024. When this matter was cause listed for mention on the 4th April 2023, present in court was Mr. Mujurizi Jamilu David- Counsel for the Plaintiff and Mr.

25 Edwin Mugumya as Counsel for the Defendant. The Parties were not present in Court. The hearing of the suit could not proceed because *Miscellaneous Application No. 0550 of 2019: Nathan Mwesigye Rubangura vs ICEA General*

- 5 *Insurance Company Limited* had not yet been heard and disposed of. This was an application for orders that: - a) The Respondent be held in contempt of the Consent Court Order in Mediation Cause No. 0125 of 2018 arising out the Main Suit; - b) The Respondent pays the insured value of the motor vehicle registration 10 No. UAZ 831K to the tune of Ugx. 345,000,000= to the Applicant; - c) The Respondent pays exemplary damages to tune of Ugx. 100,000,000 and general damages of Ugx. 500,000,000/= to the Applicant for contempt of court; - d) The Respondent be directed to pay a penalty of Ugx. 50,000,000 into 15 court for violating its orders; - e) In the alternative but without prejudice to the above, the Respondent's Directors be committed to civil prison for contempt of court; and - f) Costs of the Application.

With the guidance of court and by the Consent of the Parties, Miscellaneous

20 Application No. 0550 of 2019 was settled and disposed of when the Court made the following orders:

- a) That motor vehicle registration No. UAZ 831K, Sino Howo Dump Truck be released to the Plaintiff; - b) That before the vehicle is released to the Plaintiff, a joint inspection of the - 25 vehicle should be carried out by the Parties to assess the damage if any that has been occasioned to it as a result of it being in the garage without moving since 2019 to date;

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- 5 c) That a report of the joint inspection exercise should be signed off by both parties and it should include among others points of agreement and disagreement; - d) That the cost of all repairs made by the Plaintiff of the vehicle should be documented and formally shared with the Defendant and Court. - 10 Since the application was settled as a result of the above orders, it was then agreed that the main suit could now be heard and that the parties amend their pleadings which was done. To this end a joint scheduling memorandum was also prepared and duly executed by the legal counsel of both parties was filed in court on the 7th March 2024. - 15 I am in agreement with learned counsel for the Plaintiff that the arbitration agreement between the parties whereas valid, it is at this stage inoperative by the implicit and express conduct of the Parties. Four miscellaneous applications were filed and disposed of, a partial consent was entered between the parties, as result of consenting to Misc. App 0550 of 2019; parties agreed to amend their pleadings 20 and file pre-trial documents (the joint scheduling memorandum, trial bundles and witness statements). This is a suit that was filed in this court in 2018 and five years later it has not been disposed of. It has inordinately delayed. In addition to the Defendant stating in their defence that the dispute was the subject of an arbitration agreement, once the pleadings were closed in 2018, the Defendant should have 25 immediately filed an application to move court to refer the dispute to arbitration. This was not done. But instead the Defendant actively participated in the court

proceedings as already stated above since 2018 to date.

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5 In addition to the above, I also find that the arbitration agreement is not only inoperative but the Defendant waived her rights to subject the dispute to arbitration. The *Black's Law Dictionary, 9th Edition at page 1717* defines waiver as:

*"The voluntary relinquishment or abandonment express or implied of a legal* 10 *right or advantage".*

Needless to mention that on the 23rd September 2020, HCCS No. 0115 of 2018 and Miscellaneous Application No. 0550 of 2019 were dismissed. The Applicant filed Miscellaneous Application No. 0895 of 2020 seeking for orders that the Order dismissing the main suit and miscellaneous application be set aside, the

- 15 matters be reinstated and heard on their merits; and costs. The Defendant participated in the hearing of the application to reinstate the main suit and application. At this point the Defendant should have prayed to court to submit the dispute to arbitration as opposed to reinstating the main suit and hearing it on its merits. The Court in its decision delivered on the 5th January 2022 - 20 reinstated the main suit and the miscellaneous application. The Defendant is therefore estopped from raising their objection to submitting the dispute to the jurisdiction of this court. The *Black's Law Dictionary, 9th Edition at page 629 defines estoppel as:*

*"A bar that prevents one from asserting a claim or right that contradicts* 25 *what one has said or done before or what has been legally established as true."*

In the case of *Select Garments Ltd vs. Old Stanley Hotel Ltd HCCS No.674 of 2014, t*he **Hon. Lady Justice Patience T. E Rubagumya** found that the Defendant actively

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- 5 participating in a suit filed in 2014 and never raising the issue of arbitration until 1 st December 2023 and only raised it during the hearing of the defence case, was deemed very late and a waiver. The court further found that the Defendant had elected to abandon its right to arbitrate and decided to proceed with court litigation. - 10 In conclusion, I find that the Defendant waived her right to invoke the arbitration agreement and instead submitted to the jurisdiction of court to adjudicate the dispute. The preliminary objection is overruled and the parties are hereby directed to file and serve the remaining pre-trial documents not later than the 28th June 2024. - 15 No order shall be made as to costs.

**Signed and dated at Kampala this 2nd April 2024.**

**Harriet Grace MAGALA**

²⁰ **Delivered online (ECCMIS) this …………day of May 2024.** ²²