[1997] UGSC 10

## IN THE SUPREME COURT OF UGANDA

## AT MENGO

(CORAM: ODOKI, J. S. C., ODER, J. S. C., AND KAROKORA J. S. C) CIVIL APPEAL NO. 23 OF 1995

## **BETWEEN**

OIL SEEDS (UGANDA) LTD ............... APPELLANT

AND

UGANDA DEVELOPMENT BANK .....................

(Appeal from the Ruling and Orders of the High Court of Uganda at Kampala (Kityo J) dated 14.2.95

$in$

Miscellaneous Application No. 4 of 1993)

## JUDGEMENT OF ODOKI J. S. C.

I have had the advantage of reading in draft the judgement of Oder J. S. C., and I agree with it, and the orders he has proposed.

The learned judge errored in law in declining to consider the merits of the application to remit or set aside the arbitrators award, on the ground that the award was final and conclusive. Clearly sections 11 and 12 of the Arbitration Act conferred jurisdiction on the Court to review the award and either set it aside or remit it to the arbitrator for reconsideration. The application must therefore be heard on the merits.

$.../2$

it did not release all the funds. Consequently the appellant could not procure all the materials and services required for the project. A dispute erupted. The appellant applied to the High Court for appointment of an arbitrator in accordance with section $6.05$ of the L. A. which said:

"Section 6.05:

Any dispute or difference which may arise touching the meaning of this Agreement or the rights or obligations of parties hereunder or any other matter or thing in connection with this agreement shall be subject to arbitration the provisions of the under Uganda Arbitration Act or any Statutory modification $\alpha$ $re$ enactment then in force."

However on 10.2.1993 with the consent of both counsel for the parties, Mr. J. N. Mulenga, S. C. was appointed the sole arbitrator.

The evidence accepted by the arbitrator was to the effect that the appellant made the application for the loan in June 1987. The application was accompanied by a feasibility study (a copy of which was produced before the arbitrator as Exhibit C.19). Because the respondent was to fund the project out of a standing line of credit availed to it by the Arab Bank for Economic Development in Africa (BADEA) the application was forwarded to BADEA on 25.6.1987 for approval. The approval was not given until after more than thirteen months on 17.7.1988. By a letter dated 24.8.1988 (Exh. C.2) the respondent made a formal loan offer of US. $$978,250$ on terms and conditions set out therein. On 9.9.1988 the appellant accepted the offer. The acceptance was signified by an endorsement on a copy of the letter which was returned to the respondent together with a bankdraft for Ug. sha. $1,467,375/$ as required under the terms and conditions of the loan offer. This amount was supposed to be 1% commission payable to the respondent on acceptance of the offer. It however turned out to be short by U. shs. 35,217,06. The shortfall was subsequently made good by an additional cash payment of Us1.

$\overline{2}$

$40.000/=$ on 1.12.1988.

On 21.11.1988 the appellant and respondent executed a full loan agreement (L. A.) (Exh. C.34). The project to be funded was described as consisting of "the establishment and operation of the Borrower's Vegetable Cooking Oil Manufacturing Mill to be located at Bulemezi county Luwero District. The loan was to be applied in only financing "a portion of the project", in terms of the respondent's letter of offer, which was agreed to form part of the L. A. In the letter or offer it was stipulated that the loan was to be utilised for financing the following items: Extraction Plant, Refinery Plant, Milling Equipment, 1 lorry and 3 tractors. In the agreement the appellant covenanted, inter alia, to ensure that the goods procured with the loan Funds were used exclusively for the project. Disbursements of the loan were to be made in US Dollars at a bank or banks in a place or places designated from time to time by the appellant. Each such disbursement was to be requisitioned by the appellant in writing, specifying the amount to be disbursed. The agreement provided, however, that the respondent could, by thirty days notice in writing to the appellant, suspend or cancel the appellant's right of disbursements in any of five sets of circumstance set out therein.

In addition to the commission mentioned above, the appellant was liable under the agreement to pay a commitment fee of 1% p.a of such amount of the loan offered but not yet disbursed as well as interest at the rate of 35% p.a on the balance of the loan from time to time outstanding.

Although the loan was to be disbursed in US Dollars, repayment was to be in Uganda shillings. Repayments were scheduled over a period of five years to commence after a grace period of two years from the date of acceptance of the offer. They were to be made quarterly on the 9th September, December, March, and June each year, starting on 9.9.1990. Both the commitment fee and interest were chargeable and payable

offer" interest which was chargeable on the balance of the loan from time to time outstanding, must have been indented to start to accrue after the first disbursement.

Lastly, the appellant was required under the L. A. to provide the following securities; a first legal mortgage on unmovable property; a first floating debenture on its assets; personal guarantees by its directions; a comprehensive insurance policy on all its assets; and such additional, collateral security as the respondent right require "to adequately secure the loan." The guarantee, mortgage on debentures were all executed on 23.11.1988 copies thereof were also produced before the Arbitrator as Exhs C.3B, C 3C, and CBD respectively.

After execution of the L. A. and the three securities the appellant looked for suppliers of the required machinery. It obtained quotations from three overseas firms. On the basis of the lowest quotation which fitted within the limit of the loan amount, Empire Enterprises Ltd of London (Empire) was selected. The quotations and selection were forwarded to the respondent to make its independent procurement analysis and grant approval of the selection. By a letter dated 17.2.1989 (a copy of which was produced as Exh. C.5) the respondent intimated its approval and gave the appellant the go ahead to negotiate a supply agreement which would have to be approved by the respondent. Negotiations were concluded and a Supply Agreement (S. A.) between Empire and the appellant (a copy of which was produced as $Exh$ . C.3E) was signed on 24.2.1989. It was forwarded to the respondent on 28.21.1989 No formal approval was communicated to the appellant but the respondent subsequently acted on the S. A.

A few features of the S. A. were relevant to the arbitration and should be summarised here. Empire agreed to supply and the appellant agreed to purchase "equipment, materials accessories and services" ("goods and services") erected and commissioned at Kasirize at the contract price of US. \$ 971,000. Payment of the contract price, under the S. A. was segmented into three parts.

First there was to be a down payment of 30% to confirm the order and make the S. A. operational. Empire was to draw this segment against a simple receipt accompanied by a prepayment Bank Guarantee equivalent to 30% of the contract price and valid "till successful commissioning of the plant." The second segment was 60% of the contract price. This was to be payable against shipping documents described and listed in the S. A. The third and last segment of 10% was "to be paid after a Completion Acceptance Certificate."

The S. A. did not directly stipulate on a time frame within which Empire was to perform its part of the contract. Instead, it left it to be determined by Empire alone. The relevant article stipulated that within 30 days after receipt of the down payment, Empire was to submit a detailed time schedule of delivery, erection and commissioning, describing how the contract was to be executed, and thereupon the time schedule was to be of essence of the contract. As it happened, according to Mr. Charles Twagira, Managing Director of the respondent who gave evidence, as CW1, Empire never submitted any time schedule. He was not asked and he did not give any explanation why the appellant did not demand for the time schedule much as it appears to have been crucial, if one was to ensure that the repayment schedule out in the L. A. was estimated to start after commissioning of the plant.

Be that as it may, another long period elapsed before the next step was taken to activate the two agreement. On 14.6.1900 the Bank of Credit and Commerce International (BCCI) through the Uganda Commercial Bank submitted to the respondent the prepayment Bank Guarantee ("the guarantee) required to be furnished by Empire in order for Empire to draw the down payment on receipt of the guarantee, the respondent first requested BADEA to effect Then by a letter dated $27.6.1990$ the the down payment. respondent requested BADEA to issue a letter of undertaking in favour of Empire for 30% of the contract value. Both requests

respondent requested BADEA to issue a letter of undertaking in favour of Empire for 30% of the contract value. Both requests were complied with in August 1990. The 30% down payment was made on 9.8.1990 in the sum of US $$291,300$ . Then on 12.8.1990 BADEA issued the letter of undertaking ( copy produced as Exh. R.9). In it BADEA undertook to make direct payments to Empire upon the order of the respondent "for the amount of US #679,000 being 70% of the balance of the Supply Agreement dated 24.2.1989." The undertaking was made subject to the following conditions, namely, that:

- the item concerned is an approved purchase order under 1. the line of credit agreement (between BADEA and the Republic of Uganda): - the line of credit agreement remains in force; 2. - UDB abides by BADEA's disbursement procedures; $3.$ - UDB receives all the shipping documents set out in $\dot{4}$ . Article 17 of the relevant supply agreement; - UDB sends withdrawal application together with shipping $5.$ documents to BADEA not later than 30.10.1990;

At the request of the respondent made by teletex on 1.11.1990 condition No.5 was amended in a letter dated 13.11.1990 from BADEA to Empire (Edh. R.10) by extending the validity of the letter undertaking by 31.12.1990.

Following the down payment and issue of the letter of undertaking, Empire made two part shipments to the rotal value of US \$486,647 and forwarded the relevant shipping documents through BCC1 to the respondent. Copies were sent to the respondent. The first set was forwarded on 2.11.1990 and was received by the respondent on 5.11.1990. The second set was forwarded on 2.11.1990 and was received by the respondent on 8.11.1990. Each set included a Commercial Invoice. The first was for US \$276,447 and the second was for US\$ 210,000. Both invoices (Exh. R.2 and $\bar{\kappa}$ .3 respectively) were endorsed with the following instructions. "Kindly deliver documents only against payment and advise us by telex on 883095 BANCSE Co. on effecting of payment, advice nonpayment."

answered the description of the documents set in Article 17 of the S. A. However at some stage the respondent asserted that some of them were not originals and others were not signed.

Upon learning that the respondent had received the two sets of documents, the appellant on 9.11.1990 wrote a letter to the respondent (Exh. C.7) requesting the respondent to authorise payment of US\$ 486,647 to Empire. In the letter, the respondent intimated that it was satisfied that the items shipped were part of those under the S. A. The respondent, however, did not comply with the request. First there was a discussion between the appellant and the respondent on 12.11.1990 in the latter's offices. The contents and conclusions of the discussion were not disclosed in evidence. Then in a letter dated 15.11.1990 (Exh. C.3G) the respondent informed the appellant that it would not authorise payment unless an SGS. Clean Report of Findings (CRF) first obtained. This sparked of a disagreement which was ultimately led to a court suitkin the U. K. and to the arbitration before J. N. Mulenga, S. C. When the appellant notified Empire of the respondent's refusal to authorise payment and the reason given, Empire retorted that the CRF demanded was not. a requirement under the S. A. which both the respondent and BADFA had approved. The respondent however maintained its position and did not request BADEA to pay. There followed meetings and correspondence involving the appellant, the respondent, SGS, and Bank of Uganda, but a resolution of the conflicting stands was not forth coming.

In the meantime two impending events made such a resolution of the conflict a matter of urgency particularly from the point of view of the appellant and Empire. First, the ship carrying the goods was about to dock at Mombasa Port. Unless the respondent accepted the shipping documents and released them for prompt clearance of the goods, substantial costs in demurrage, storage and/or parking charges would be incurred. Secondly, BADEA's letter of undertaking was due to expire relatively soon. If this happened prior to the payment as well as prior to the

真義の理論を見たまた。 作品の

If this happened prior to the payment as well as prior to the shipment of the balance of the goods and payment therefor, the project would be put in jeopardy. Accordingly in a letter dated 21.11.1990 (Exh. C.8) the appellant wrote to the respondent pointing on these factors, relaying information that the ship was expected to dock 22.11.1990 and proposing a compromise, to the effect that the respondent's demand for a CRF be waived for the two part-shipments and be made to apply to the future shipments. The respondent did not accept the proposal and did not reply to But the appellant kept up the pressure and on the letter. 20.12.1990 the respondent released to it one set of the shipping documents to facilitate clearance and delivery of some of the goods. Regarding payment, however the respondent stuck to its position.

Eventually Empire obtained the CRF and submitted it to the respondent under cover of a letter dated 15.1.1991 (Exh. R.14). The respondent received it on 21.1.1991. Under cover of a separate letter dated 16.1.1991 (Exh. R.15) Empire forwarded two original certificates of insurance which were received by the respondent on the same date. Unfortunately for the project, however, by the date the respondent received these the documents not only BADEA's letter of undertaking had expired but also its line of credit had been suspended. The respondent therefore could not and did not request BADEA to effect payment.

As prospects for receiving payment remained bleak, Empire wrote to the appellant on 4.3.1991 intimating that it was reluctant to invest any more money in the project. In the letter (Exh, C.20) Empire authorised the appellant to sell off some or all the tractors already received to offset costs due to Intra ship and "a void further demurrage and interest charges" and also to settle expenses incurred "in laying foundations for the building supplied." Empire undertook to replace the tractors at its cost when the respondent finally released the rest of the loan amount. The following months, however Empire's solicitors wrote to the appellant in a different tone. In the letter dated 11.4.1991 (Exh. C.14) the solicitors protested against the

$\delta$

conduct of the appellant and the respondent in the handling of the matter. They accused the appellant of having obtained delivery of the goods by use of ungenuine documents because the respondent had denied parting with possession of the shipping documents. Under threat of taking out court proceedings in the U. K. they demanded that the appellant releases the goods received back to Intra-ship since it was not in a position to pay for them.

$\mathcal{L}^{\text{max}}_{\text{max}}$

$\mathcal{L}_{\mathcal{A}} = \mathcal{L}_{\mathcal{A}} \mathcal{L}_{\mathcal{A}}$

In response the appellant's advocates wrote to the respondent on 30.4.1991, forwarding a copy of solicitor's letter and pointing out, inter alia, that it had no means to defend the threatened suit or to satisfy the judgment that might be given against it. The respondent was given seven days' notice to honour its obligation in default whereof the appellant would take such unilateral action as would leave only the respondent liable to satisfy any judgment against the appellant.

Apparently, the respondent wrote to the appellant demanding return of the shipping documents which had been released to it, contending that the appellant was aware that it was supposed to return them. The appellant's Advocates replied to the letter on 27.5.1991. In that letter (Exh. C.18) the Advocates pointed out that the documents had been passed over to the shipper's agents so that the goods could be delivered. In proof of this they forwarded copies of customs clearing documents and documents from insurance. They, however returned two original bills of lading representing goods which the appellant could not accept without assurances that other parts would be subsequently shipped. According to the oral evidence of CW1 the goods represented by those document were of the seed crushing and oil fitter section. He said however that these goods were subsequently delivered to the site. On 14.9.1991 the respondent wrote to Empire's solicitor in reply to the latter's letter which was not produced,. The respondent's letter(Exh. C.21) detailed "the circumstances leading and relating to the non-sellent" of Empire's bill. The thrust of the letter was to the effect that Empire's bill. The thrust of the letter was to the effect that payment could not be effected in time because when the shipping documents were received, they had discrepancies and by the time the discrepancies were rectified BADEA's Letter of undertaking and line of credit were not in force.

$\mathcal{L}_{\text{max}}(\mathcal{L}_{\text{max}})$

The former had expired and the latter was under suspension. The respondent assured that it was pursuing with BADEA the reactivation of the line of credit and renewal of the letter of undertaking. None of the assurances materialised. Empire was not paid and made no further shipment.

On 12.12.1991 empire commenced court proceedings in the U. K. for recovery of US\$ 195,347 being the difference between the price of the goods shipped and the 30% down payment. The suit was a gainst both the appellant and the respondent. On 9.1.1992 default judgement was entered against both defendants as a result of their failure (fortune) to take any steps in the proceedings.

On 7.2.1992 the appellant which, apparently, had been discussing possibility of a renegotiated supply agreement and was aware of the default judgement, wrote to the respondent disclosing that no agreement had been reached on a renegotiated agreement, withdrawal of the court proceedings or supply interest awarded by the court. The letter (Exh. R5) reads in part:

"We have however agreed in view of the fact that has how lifted suspension on this line of **BADEA** credit that we ask UDB Management to transfer the amount outstanding of US\$ 195,347 to the account of your solicitors in U. K. $\ldots$ to account OIL SEEDS (U) LTD/EMPIRE hold on the ENTERPRISES LTD. until such a time that an agreed renegotiated supply agreement and a time table on continuance and supply of the rest of the items has been agreed upon. We have agreed that $\mathrm{M}/\mathrm{S}$ Empire confirm this shall fax to Ltd. Enterprises agreement."

Before the respondent responded to this proposal, the

$\alpha_1\cdots\alpha_{N-1}$

adversing that Empire had changed position indicting that it was "not interested in a renegotiated supply agreement nor, indeed any supply," and that because of that development the appellant had instructed its solicitors in England to defend the court action. The respondent was requested to do the following:

> to return to Empire's Solicitors documents representing "part-shipment worth US\$ 210,200 because the respondent could no longer accept goods without assurance that other parts would follow;

> to demand refund of US\$ 14,853 being overpayment on the goods accepted whose invoice was given as US\$ 276,447; to advise their solicitors that some of the goods were shortlanded;

to defend and counter-claim in the suit; $4.$

$2.$

3.

to authorise the appellant to enter into negotiation 5. with an alternative supplier for the rest of items required for successful completion of the project.

The respondent however, did not oblige, save in respect of the 4th request.

On 14.2.1992 the respondent made an application for the default judgment to be set aside and for the action to be stayed. The application of both the appellant and the respondent came up for hearing on 1.5.1992 but took different turns. By consent order as between the appellant and Empire (Exh. C.17) the default judgment was set aside and the appellant was given unconditional leave to defend the action. For its part, the respondent asked for adjournment apparently to allow it time to respond to Empire's affidavit. Instead however, on 7.5.1992 empire and the respondent entered into agreement whereby the respondent agreed to pay US\$ 184,347 and to withdraw its application for setting aside the default judgment and staying the action. Pursuant to this agreement a consent order (Exh. C.6) was entered on 14.5.1992 whereupon the respondents applications were dismissed and default judgment against the respondent was ordered to stand in terms of the agreement.

The respondent's Finance Manager who gave evidence as RW2 explained that the deference of US\$ 16,000 between the amount due on the invoices (US\$195,347) and the principal amount payable under the consent order (US\$ 179,347) (US\$ 5,000 being costs) represented the amount over-invoiced by Empire according to findings by SAGS. She also testified that the said principal sum was paid to Empire through BADEA as part of the supply agreement contract price but that the costs were paid from the respondent's funds.

The appellant was not happy with the turn of events and made known through complainant apparently to the Minister it responsible for Finance. The respondent's Board of Directors on learning of the complaint set up a committee to inquire into all matters relating to the project. The sub-committee made a report with a recommendation that the loan be recalled. The Board accepted the recommendation and decided to recall the loan. Accordingly by a letter dated 7.9.1992 (Exh. R.19) the Managing Director of the respondent communicated the Board's decision to the appellant and intimated that the matter had been referred to the respondent's lawyers. A month later, on 7.10.1992, the lawyers wrote to the appellant demanding payment of principal, interest and legal costs. The total indebtedness was stated to have been U.shs. 485,817,522.35 as at 30.6.1992.

The appellant refused to pay the said amount or any part of It maintained in the arbitration that it was discharged it. from liability by the repondent's breaches of contract and demanded damages against the respondent instead.

The following issues were framed by consent of the parties and referred to the arbitrator for his determination:

- Did UDB fail to dis-burse the loan to Empire as agreed $"1.$ under the loan agreement? - Did Oil Seeds fail to fulfil any of its obligations $2.$ under the Loan, Agreement, the Mortgage Agreement or

the Debenture?"

3. If either issue $(1)$ or $(2)$ is answered in the affirmative what, if any, is the liability of the party against whom the issue is answered?

4. If both issues $(1)$ and $(2)$ are answered in the affirmative which, if any, of the parties is liable to the other?

If both issues $(1)$ and $(2)$ are answered in the negative $\epsilon \rightarrow 5...$ which, if any, of the parties is liable to the other.

In his award, the arbitrator could not, in my view, have made a more thorough consideration of the respective casas evidence, and submissions of the parties. It is the answers he gave to the issues and questions, and the award of damages made to the parties which the appellant was dissatisfied with, leading to an application to the High court.

Regrading issue No.1 the arbitrator thought that it was not accurately framed, because what had been expressly agreed under the L. A. was not that the respondent would disburse the loan $\tau\sigma$ Empire, but it would disburse the loan to the order of the appellant. However, the essence of the question was whether the respondent failed to disburse the loan agreed. The arbitrator then said that the answer to that issue must be in affirmative because the respondent disbursed only 30% of the agreed loan. The arbitrator found that the learned counsel for the respondent in the arbitration, Mr. Kateera's contention that it was ready and willing to disburse the balance was untainable and that the recall of the loan was a breach of the contract. The arbitrator, therefore held that the respondent failed to disburse the loan as agreed.

The arbitrator also answered issue No.2 in the affirmative. There was no suggestion that the appellant had failed to fulfil any of its obligations under the Mortgage Agreement. Although it was alleged, but it was not proved, that the appellant failed

to fulfil any of its obligation under the Debenture. However the arbitrator held that the appellant failed to fulfil its obligations under the L. A. by refusing, neglecting and/or failing to service the loan.

Since both issues No.1 and No.2 were answered in the affirmative, the arbitrator held that it was not necessary for him to answer issues No.3 and 5, because they did not arise. Issues No.4 raised the question of which party, if any, was liable to the other in the light of the affirmative answers to issues No.1 and No2. On this, the arbitrator said that he did not have the advantage of pleadings as none were submitted. However, from the evidence before him, he could discern a claim or claims and a counter-claim. The evidence of CW1 enumerated the appellant's claims against the respondent as follows:

$\mathbb{R}^{\mathbb{Z}^{\mathbb{Z}}\times\mathbb{Z}^{\mathbb{Z}}\times\mathbb{Z}^{\mathbb{Z}}}$

U. shs. $335m/$ = being what was called preparatory expenses 1. in respect of the project. This was said to be based on a valuation report made by M/S Byokusheka & co., Chartered Surveyors in August, 1992. The amount claimed comprised three items, namely: the present value of old buildings assessed at U.shs. 15m/=, the present value of office building under construction assessed at U.shs. 30m/=, and the present value of the factory building assessed at U.shs. 290m/=. However, the valuation was not produced in evidence and the valuer was not called to give evidence.

U.shs. 1,507,375, being the 1% commission paid by the $\overline{2}$ . appellant to the respondent, on accepting the loan offer.

US\$ 48,912 being professional charges paid by the appellant 3. to Farmcons Ltd., for the feasibility study in respect of the project. CW1 testified that the charges were paid in September 1988 in several instalments but that the respondent never He -therefore did not produce any received acknowledgment. receipt to prove payment of any of the said instalments.

U.shs. 2.882 $bn/$ = being what was termed "cumulative loss" calculated on the basis of profits that were projected in the feasibility study.

U.shs. 1,043,644,800 $bn/$ = being what the arbitrator deduced 5. from the evidence of CW1 and the submissions of counsel of the appellant, as representing what was termed "Lost Opportunity." Under this head, there were two items claimed. The first was the difference between the contract price of the plaint in local currency and the amount the appellant would have to pay after the breach of the L. A. for the same plant, which difference was caused by variation in the rate of exchange of the US dollar to the Uganda shilling. This was calculated to be U.shs. 1,023,644,800/=. The second was U.shs. 20m/ claimed to be loss incurred by the appellant in its deal to sell land to the Uganda Investment Authority (UTA), which loss was allegedly caused by the respondent's attempt to stop the sale.

It appears that except for the fourth and the first item of the fifth item, the appellant's counsel abandoned the rest of the appellant's claims as listed above. In the arbitrator's opinion they were properly abandon because:

" First the Preparatory Expenses, the professional charges for feasibility study and the alleged loss in the deal for the sale of the land were not proved to the required standard. Secondly, the first, second and third, claims cannot constitute loss to Oilseeds. The Preparatory Expenses such as they may have been were in respect of buildings that remain the property of Oilseeds. UDB's breach of contract did not alienate that by any reason of the breach property. Nor was it suggested that by any reason of the breach the property was put to was to or was otherwise devalued. What is more, CWI testified that Oilseeds was reimbursed for at least some of the preparatory expenses, when Empire authorised it to sell the imported tractors. As for the commission, payment of which was not disputed, and the professional charges, if any were paid, I agree with Mr. Kateera that these were expenses which served their purpose, namely to

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get UDB to make the loan offer and eventually to execute the Loan Agreement. They therefore cannot be construed as loss. Thirdly the alleged loss in the deal for the sale of land is not relevant to this arbitration. It does not fall within the issues referred to me for arbitration. To my understanding, in this reference, I am required to determine, first, whether the parties or either of them failed to perform their (or its) obligations under the agreements between them. Secondly, I am to determine what liability if any, arises from such failure. In my opinion, UDB's interference in Oilseed's deal for sale of land cannot be construed as a failure on its part to perform its obligations under the Loan Agreement or under any of the other agreements. Instead, if it were not UDB's failure to adduce sufficient evidence it would have been within its rights to claim that Oilseeds had failed in its obligation under the Debenture when it decided to sell the land. Furthermore, the alleged loss in the deal cannot be construed to arise from a failure on UDB's part to perform any of its obligations under the agreements.

That leaves for consideration the fourth and the first itemin the fifth claims, namely the claims for cumulative loss (or loss of prospective profit) and "loss of opportunity."

The arbitrator then considered the said two heads of claims by the appellant and concluded that taking into consideration all that he had been said by the counsel for both sides on the matter and circumstance of the case, he would award shs.300m/= as reasonable compensation for the appellant.

With regards to the respondent's claims he found that the appellant was liable to pay, after deducting amounts that the arbitrator had disallowed, U.shs. 208,565,424/= plus interest calculated on the reduced amount for the period between 9.12.1991 to 1.9.1992. As answer to issue No.4 the arbitrator concluded.

"In conclusion my answer to issue No.4 is that the parties are liable to each other. UDB is liable to Oilseeds by way of general damages assessed in the sum

of U.shs. 300,000,0000/=. Oilseeds is liable to UBD by way of repayment of the loan disbursed in the sum of U.shs. 208, 565, 424/= and the uncalculated interest. If the latter is set off against the former the net result is that UDB is liable to Oilseeds in the sum of U.shs. $91,435,576/$ = less the amount of interest at the contractual rate prevailing at the material time to be calculated on the amounts and for the period aforesaid. I so award.

Both counsel did not address me on costs, and intimated they preferred to do after reading my finding."

Thereafter, at the request of the respondent as a party to the arbitration, the arbitrator caused the award to be filed in the High Court at Kampala under section 9(2) of the Arbitration Act (Cap 55) on 15.9.1994 as High court Miscellaneous Application No.4 of 1993.

The respondent being dissatisfied with the award, filed a Notice of objection to the Award. The Notice, dated 28.9.1994 contained fifteen grounds of objections. These grounds were repeated in a chamber summons, together with a supporting affidavit, which the appellant took out under sections 11 and 12 of the Arbitration Act and rule 7 of the Arbitration Rules, seeking to set aside in part and to remit in part the arbitration award in question. The present respondent (UDB) was joined as the respondent in the application by chamber summons. The chamber summons were in the following terms:

"LET ALL PARTIES CONCERNED attend the Judge in Chambers at the High court of Uganda at Kampala on the day 10/11/1994 at 9 O'clock in the forenoon or as soon thereafter as counsel for the applicant can be heard in application for orders that the award made between the parties to the above mentioned arbitration by J. N. Mulenga, the Arbitrator herein, dated 17.8.1994 be SET ASTDE IN PART and be REMITTED IN PART as follows:

1. The award of shs. $208,567,424/=$ and interest therein against the plaintiff/applicant (Oilseeds) in favour of the defendant/respondent (UBD) be set aside.

The award disallowing shs. $2,882,400,000/$ = claimed by the plaintiff/applicant as the correct measure of compensation for commutative loss or loss of prospective profits be remitted to the Arbitrator for reconsideration.

The award disallowing shs. 1,023,644,800/= claimed by the plaintiff/applicant as the correct measure of compensation for lost opportunity be remitted to the Arbitrator for reconsideration.

The costs of this application be provided for. $4.$

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THE GROUNDS of this application are contained in the annexed affidavit of CHARLES TWAGIRA, a director of the plaintiff/applicant company, and notice of objection also annext hereto, and both the affidavit and the objections will be read and relied on at the hearing of the application but the said ground in brief are:

- It is necessary in the interest of justice to interfere with $1.$ the award. - There is an error of law on the face of the record. $2.$ - The said arbitrator exceeded his authority by including in, 3. and basing the award to the defendant/respondent of shs. 208.567, $424/$ =, on the supply Agreement to which the defendant/respondent was not a party and which was not within the terms of reference to him. - The arbitrator's conclusions in law with regard to the parts $4.$ objected to in the award were not justified on his findings of fact. - There was an erroneous legal proposition which formed the $5.$ basis of the arbitrator's award that the supply Agreement had modified the loan agreement as to the made of disbursement of the loan. - There was erroneous legal proposition which formed the basis б. of the arbitrator's award that US\$ 291,300 (paid by the defendant/respondent without the authority of the plaintiff/applicant) constituted 30% of the US 978,250 (the loan amount) : [1]

The award was an erroneous legal proposition which formed the basis of the arbitrator's award that although the defendant/respondent breached its duty to tie plaintiff/applicant by paying 30% down payment without the bank guarantee no damages would be awarded against the defendant/respondent for such breach, but instead t.ne plaintiff/applicant would the 30% repay t.o t.ne. defendant/respondent.

8. There was an erroneous legal proposition which formed the basis of the Arbitrator's award that property in the two part-shipments legally passed to the plaintiff/applicant.

9.

- There was an erroneous legal proposition which formed the basis of the Arbitrator's award that the plaintiff/applicant's request to the defendant/respondent to authorise payment of US\$ 486,647 to Empire was a request to disburse part of the 60% segment - 10. There was an erroneous legal proportion which formed the basis of the Arbitrator's award that the refusal by the defendant/respondent to authorise payment when requested to do so by the plaintiff/applicant did not amount to repudiation of the contract discharging t.he plaintiff/applicant from performance. - 11. There was an erroneous legal proposition which formed the basis of the Arbitrator's award that failure by the defendant/respondent to return the shipping documents did not amount $t.o$ $\overline{a}$ breach $of$ the defendant/respondent's obligation t.o i: h e plaintiff/applicant. - 12. There was an erroneous legal proposition forming the basis of the Arbitrator's award that in regard to cumulative loss or losses of prospective profits cannot go by projections in feasibility study perse without regard to imponderables. - 13. That there was an erroneous legal proposition which formed the basis of the Arbitrator's award that the figure of shs.

$x_1$

1,023,644,800/= claimed by the plaintiff/applicant as the correct measure representing lost opportunity was not a specific sum claimed but intended as a guide."

The affidavit deponed to by Charles Twagira (a director of the appellant) on 28.9.1994 stated the facts giving rise to the dispute, the arbitrator's considering of the issues referred to him, his answers to the issues and the reasons for so answering. It was a long affidavit, consisting 27 paragraphs and 38 sub-In essence it was a repetition of what was set out paragraphs. in the chamber summons and the facts in the arbitrator's award. I consider that it is un necessary to reproduce the contents of the affidavit here. The notice of objection, filed by the respondent under order 7 of the Arbitration rules (S. I. 55-1), stated similar grounds of objection, as and what was stated in the affidavit supporting the application by chamber summons.

The application was heard by the late Kityo, J. on The learned counsel Mr. Paul Byaruhanga for the 8.12.1994. applicant then and the appellant now canvassed all the grounds set out in the chamber summons. The respondent's learned counsel the late, Mr. Kateera, opposed the application on several grounds which are not necessary to state her.

The decision of the learned judge was made in the following passage of his ruling:

"These proceedings must be confined to the law as is in S.12 Arbitration Act, this court will only interfere with award, if the Arbitrator is shown to have misconducted himself, but there is no such allegations or that the award that were made were improperly made or procured.

Thereafter and keeping in view the 4 principles in earlier decided cases and approved by the East African court of Appeal, I find no jurisdiction for this court to oust the award made by the arbitrator; Under the terms of Rule 8 of the Arbitration rules earlier cited.

The award in question which was made to the<br>respondent, arose out of the answers to questions<br>which were required to be answered by the arbitrator and he had answered affirmatively. See question No.4.

The refusal to award the cumulative loss to the tune of shs. 2.8 billion, nor error on the record or additional information shown not to have been considered by the Arbitrator.

Therefore to set aside the said award or to make order for further reference for an award already refused will tantamount to this court usurping the power reoposed in the arbitrator to conclusively determine the dispute, which tribunal was freely selected by the parties to the dispute.

For these reasons, I dismiss the application with costs to the respondent."

It is against that ruling which the appellant has appealed. Seven grounds of appeal are set out in the memorandum of appeal. They are to the effect that:

- The learned judge erred when he misunderstood and dismissed $1.$ the appellant's application without sufficiently, or at all, considering the grounds upon which it was based. - The learned judge erred when he failed to hold that it was 2. in the interest of justice to interfere with the award and that there were errors on the face of the record. - The learned judge erred when he failed to hold that the $3.$ arbitrator had exceeded his authority by including in, and basing the award to the respondent of, shs. 269, 791, $576/$ = on the Supply Agreement to which the respondent was not a party and which was not within the terms of the reference to him and consequently failed to set it aside. - The learned judge erred when he failed to hold that the US\$ $4.$ 291,300 was paid by the respondent outside the provisions of the loan and consequently erroneously failed to set aside the award of that amount to the respondent. - The learned judge erred when he failed to hold that the 5. Arbitrator's award to the respondent contradicted his (Arbitrator's) finding that the respondent had not disbursed the loan as agreed.

The learned judge erred when he failed to award shs 2,882,400,000/= (cumulative loss or loss of prospective profits) and shs. 1.023,664,800/= (lost opportunity) to the appellant, the appellant having proved these sums before the arbitrator.

$6.$

7. $\therefore$ In the alternative but without prejudice to the immediately foregoing ground the learned judge erred when he failed to remit the said claims for cumulative loss or loss of prospective profit and lost opportunity to the arbitrator for reconsideration.

It is then proposed in the memorandum of appeal to ask this court for orders that:

- (a) The Arbitrator's award of shs. 269,791,576/= made to the respondent be set aside. - Shs. 3,908,044,800/= as in ground 5 above be awarded to the $(b)$ appellant. - (c) In the alternative but without prejudice to the immediately foregoing the sum be remitted to the arbitrator for reconsideration. - (d) Costs of this appeal and in the court below be awarded to the appellant.

Mr Paul Byaruhanga, learned counsel for the appellant, took grounds one and two together. He submitted that section 11 of the Arbitration Act (the Act) confers on the court a discretion to remit from time to time an award for reconsideration of the arbitrator Under Section 12, the court also has discretionary powers to set aside an award where an arbitrator has misconducted himself, or an arbitrator, or award has been an improperly Learned counsel contend that this is a wide procured. discretion. Misconduct as used in section 12, it was contended, does not only mean bad behaviour or corruption, for instance. It also includes make errors on the face of the record. Further, learned counsel said, the party objecting to an award may within eight weeks after the filing of the award in court apply to court for the award to be remitted or set aside, as the case may The effect of these statutory provisions is that the court be. had jurisdiction to do what the appellant sought to do in the

instant case by its chamber summons application.

$\mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L}$

$\mathbf{m}_{\mathbf{r}_1} \mathbf{p}_1$

$\mathcal{L} = \mathcal{L}$

Moreover, it was said, just as statutory provisions do, case law also permits the courts to intervene in an award. This means that the finality of an arbitrator's award, which appears to stated in paragraph 8 of the First Schedule to the Act is rebuttable. Learned relied on Rashid v. Hoima Ginneries Ltd (1965) EA 645: and Tame Ltd V. Zagolities Ltd (1960) 370.

In the instant case, Mr. Byaruhanga contended, the learned judge ousted his own powers to look into the grounds put forward by the appellant in support of his prayers for the learned judge's intervention to remit or set aside the award.

In his reply in this connection, Mr. Tibaijuka, learned counsel for the respondent submitted that there was nothing in the learned judges's Ruling to indicate that he had misunderstood and dismissed the appellant spapplication without sufficient consideration. According the learned counsel, both parties urged their respective cases in the High court on the basis of the grounds on which the application had been made. In his ruling, it was contended, the learned judge was alive to there arguments and he reproduced them. It was not, therefore, correct to say that the leaned judge had misunderstood or dismissed the application without having sufficiently considered it. It was said that the learned judge, having reviewed the arguments, he proceeded to make in the passage of his Ruling set out above his own findings and conclusions on the matter. The passage in question shows, learned counsel contended, that the submissions made by the respondent before him were accepted by the learned judge.

Further, it was contend, that part of the passage reading: "The refusal to award the cumulative loss to the tune of shs. 2.8 billion no error on the record or additional information shown not to have been considered by the Arbitrator" means that cumulative loss of shs. 2.8 million was not awarded because no

cumulative loss of shs. 2.8 million was not awarded because no error was shown. As no error had been made on the face of the record, learned counsel contended, there was no basis for interfering with the Arbitrator's award. In the circumstances, grounds one and two of the appeal must fail, it was said.

With respect, I am unable to agree with the submissions of the learned counsel for the respondent in this regard. I think that the part of the learned judge's Ruling which the learned counsel has relied on in support of his contention does not bear the meaning he has attributed to it.

It is, indeed, correct that Mr. Paul Byaruhanga as counsel for the applicant argued all the grounds set out in the chamber summons application. Mr. Kateera, as counsel for the respondent equally did so in opposing the application. But, in my judgment, court ruling which followed consisted mostly of a the reproduction of the submissions by counsel and references to some statutory provisions and decided cases. The substance of the learned judge's decision, in my view, is contained in two parts of the passage I have referred to above. The first one is where he said:

"Thereafter and keeping in view the 4 principles in earlier cited cases and approval by the East African Court of Appeal, I have found no justification for this court to oust the award made by the Arbitrator under the terms of rule 8 of the Arbitration rules cited."

The second one is what he said in the last paragraph of the

Ruling:

the property

"Therefore to set aside" the said award to make an order for further reference for an award already refused, will tantamount to this court usurping the<br>powers reposed in the Arbitrator to conclusively determine the dispute which tribunal was freely by the parties in the dispute."

As I understand them, the two passages of the Ruling I have just referred to appear to mean this:

First that the award made by the Arbitrator was conclusive, because that was the tribunal to which the parties to the L. A. freely chose to refer their dispute. Rule 8 to which the learned judge referred is out of context of what he said in the first of the passage in question. Rule 8 of the Arbitration Rules is about hearning objections. It provides:

"8 The objections to the award and cross objections (if any) shall thereafter be set down for hearing and the original objectors shall occupy the position of plaintiff and the other parties that of defendant."

In my view, even what the learned judge must have had in mind when he said that to set aside the award or to make order for further reference for an award already refused will tantamount to "this court usurping the powers reposed in the Arbitrator to conclusively determine the dispute" was paragraph 8 of the First Schedule to the Act, which provides:

"8. The award to be made by the arbitrators or umpire shall be final and binding on the parties and the persons claiming under them respectively."

In my view this provision appears to be only one of the terms to be implied in a submission to arbitrators as the title "PROVISIONS TO BE IMPLIED IN SUBMISSIONS" would appear to suggest As I will endeavour to show shortly the provisions does not. I think, mean that an award by arbitrator is of necessity final or conclusive, and not subject to court's intervention. It is an implied term which can be expressly excluded, and is subject to law, statutory or otherwise.

The second meaning of the two passages read together, in my view, is that the learned judge had no jurisdiction to interfere with an award, as to do so would amount to usurpation of the arbitrators exclusive powers.

$2.5$

If what I have said above is what the learned judge meant, then, with respect, I think that he erred in law. First, because the relevant statutory provisions on the matter speak for themselves. Section 11 of the Act provides:

"(1) The court may, from time to time, remit the award for the reconsideration of the arbitrators or umpire.

$(2)$ Where an award is remitted under subsection (1), the arbitrators or umpire shall, unless the court otherwise directors, make a fresh award within three months after the date of the order remitting the award"

The effect of the provisions of this section, in my view, is that the court has a discretionary jurisdiction to look into an award and remit it to the arbitrator for reconsideration. Where an award is so remitted, the arbitrator shall make a fresh award unless the court directs otherwise.

The language used is mandatory, meaning that the arbitrator to whom an award has been remitted is bound to make a fresh award unless the court otherwise directs.

If arbitrators' awards were final and conclusive, as the learned judge in the instant case appears to have decided, section 11 of the Act, in my view, could not have given the court such discretionary powers to remit awards for reconsideration.

Section 12 of the Act states: "12. Where an arbitrator or umpire has misconducted himself, or an arbitration has been improperly procured, the court may set aside the award"

What I have said in respect of section 11 of the Act equally applies to section 12. The section would not have given the court discretionary powers to set aside an award on the conditions specified therein if the jurisdiction of the arbitrator on the matter were conclusive, final and binding.

cases have said t.hat. in certain Secondly decided circumstances the court may intervene in an award or it may set it aside under section 12 of the Act, and similar laws in other $\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{L}^{\text{max}}_{\text{max}}(\mathcal{$ $\mathcal{P} = \mathcal{P} \mathcal{P} = \mathcal{P} \mathcal{P}$ $\mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal{A}} = \mathbb{P}^{\mathcal$ jurisdictions. $\mathcal{L} \subset \mathcal{L} \subset \mathcal{L}$

In the case of The A. G. for Manitoba V. Kelly and others (1922) All E. R. 69 (Privy council), Lord Parmoor said on page 74:

" Wherever there is a difference of opinion between parties as to the authority conferred on an umpire under an agreed submission the decision rests entirely with the courts and not with the umpire: Produce Brokers, Co. Ltd V. Olympia Oil and Cake Co. Ltd $(1916)$ AC pp. 327 - 29. It would be impossible to order an umpire to arrogate to himself jurisdiction over a question which, on the true construction of the submission was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that matter which he effects to decide is within the submission of the parties."

Further on page 78 Lord Parmoor said:

"Where a question of law has not specifically referred to an umpire, but is material in the decision of the matters which have been referred to him, and he makes a mistake, apparent on the face of the award, an award can be set aside on the grounds that it contains an error of law apparent on the face of the award."

The appeal in W. Tame Ltd. V. Zagoritis Estates Ltd. (1960) E. A. 370 arose out of an arbitration agreement for sale of property in Tanganyika between the respondent and the first appellant. The agreement contained an arbitration clause. But when differences between the parties regarding the transaction arose, they entered into a fresh agreement to refer the differences to arbitration, and the respondent filed it in court for the award to be set aside on the ground that there was an The judge held that error of law on the face of the award. although there was such an error he could not set aside the award since the error was on a point of law specifically referred to the arbitrators and on that account the court had no power to set aside the award. On appeal it was argued, inter alia, that in the instant case the question referred to the arbitrator's was

$-27$

PROBACT TO CONTINUES. not a specific question of law but involved findings of fact. The Court of Appeal for East Africa held that (i) having regard to terms of the reference as a whole the question submitted to the arbitrator was by its terms a question of law and if that were the only question in issue, the decision of the judge was correct;

$(ii)$ however, on a true construction of the arbitration agreement the question stated to have been referred; to a legal officer never arose and ought not to have been referred, a mistake as to the territorial law applicable is such an error of law as will justify the court in setting aside the award; (iii) (Per Gould, J. A.), the arbitrators went outside the terms of the submission and made a fundamental error in answering (wrongly) a question, whether one of law or of mixed law and fact, which was not referred to them at all, ie.there the law of Kenya or Tanganyika applied. The appeal was allowed and the award set aside.

Sir Alastair Forbes $V-P$ said from page 371:

"There is no doubt that"an arbitration award can be set aside by the court if an error of law appears on the face of the award (Absalom Ltd V. Great Western Garden Village Society Ltd. (1933) AC 592). There is however an exception to this rule, and that is where the parties have specifically referred a question of law to arbitration (Re King and Duveen (3) (1913) 2KB 32; Absalom Ltd V. Great Western Garden village Society (supra), and the learned judge held that this exception applied in this case. $\ldots \ldots$ I think a mistake as to the territorial law which is applicable under the arbitration agreement is such an error of law as will justify the court in setting aside the award."

The other members of the court, Gould and Windham, J. JA agreed with Sir Alastair forbes; V - P.

Rashid Moleding & co. (Mombasa Ltd and others V. Hoima Ginneries Ltd. (1967) RA 645 is another case where Court of Appeal enumerated some of the circumstances in which the court may act under statutory provisions similar to sections 11 and 12

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of our Arbitration Act. In that case, the respondent contracted to deliver coffee to the appellants on certain dates in 1964. The respondent, being in short supply, attempted to settle its obligations to the appellants by negotiations, without success. The respondent failed to supply any coffee on specific dates to third parties with whom the respondent was also under contract. The appellants, expecting a failure by the respondent to deliver under its contract with them, declared that the respondent by its conduct had repudiated the contracts. The matter went to arbitration under the Kenya Arbitration Act and an award was made which on appeal, was in effect, confirmed by the Appeal By originating summons under rr. 7 and 17 of the committee. Arbitration Rules, made under the provisions of the Arbitration Act, the High court was asked to remit for consideration or to set aside the award under ss. 11 and 12 of the Act, the relevant parts of which read:

" 11 (1) The court may, from time to time, remit the award to the reconsideration of the arbitrator or umpire ..............."

"12. Where an arbitrator or umpire has misconducted himself, or an arbitration has been improperly procured, the court may set aside the award."

The High court was asked to consider whether the arbitrator was correct on the fact in concluding that the appellants were justified in treating the respondent's conduct as sufficient to amount to a repudiation of their respective contracts. The High court set aside the award and remitted it to the Appeal On appeal to the court of Appeal, two main issues committee. were argued:

- Whether, having regard to the terms of the award the High $(a)$ Court judge had any jurisdiction to set aside or remit the award to the Appeal Committee; - Whether on the facts found in the award, the arbitrator was $(\dot{a})$ in law justified in his alternative findings that either the respondent had repudiated the contracts made with the

appellants or that the respondents conduct entitled each of the appellants to infer that the respondent did not intend to implement his obligations under each of the contracts with the appellants.

The E. A. Court of Appeal held that:

the courts will be slow to interfere with the award in an arbitration: but will do so whenever this becomes necessary in the interests of justice and will act if it is shown that the arbitrators in arriving at their decision have done so on a wrong understanding or interpretation of the law **...............**

$(v)$ in this case there were sufficient facts to support the award, and the appeal was allowed.

Talking about sections 11 and 12 of the Kenyan Arbitration Act above referred to Duffus J. ( as he then was) said:

"These sections are in some respect similar to ss. 22 and 23 of the English Arbitration Act, 1950. There are very few authorities on the interpretation of the Arbitration Act of Kenya and the only decision of this court to which we were referred was that of Sohan Lal V. East African Builders Merchants (1951) 18 E. A. C. A. 50 which, although helpful, was a reference made by an order of the court to arbitrators under the Civil Procedure (Revised) Rules 1948. The courts are given wide powers to remit or set aside arbitration. The not laid down any particular legislature has circumstances which would restrict the power of the court to remit under S.11 while under S. 12 the power to set aside the award may be exercised when the arbitrator has misconducted himself or the arbitration has been improperly obtained. In England the word<br>"misconduct" has been given a liberal interpretation and includes cases where arbitrators have made a mistake in law or in fact.

Generally speaking the courts will be slow TO. interfere with the award in an arbitration having regard to the fact that the parties to the dispute have chosen this method of setting their dispute and have agreed to be bound by the arbitrator's decision, but the courts will do so whenever this becomes necessary in the interest of justice, and will act if it is shown, as it is alleged in this case, that the arbitrators in arriving at their decision have done so on a wrong understanding or interpretation of the law. In this respect I would like to refer to the following

passage from the judgment of Moulton L. J.in the case of <u>Re Baxters & Midland Ry Co. (190) 95 L. T. 20</u> which was accepted by the Court of Appeal in England in the case of <u>Universal Cargo Carriers</u> V. Citati (1957) 2,<br>All E. R. 70; (1957) 1 WELR. 979 and which in my view correctly sets out the powers of the courts when acting under the provisions of SS. 11 or 12 of the<br>Arbitration of Kenya (95 L. T. at p. 23):

"The jurisdiction of the court is statutory and cannot be increased or cut down in that way. The reported decisions of the court only show the principles which have guided the court from time to time in exercising its jurisdiction, and, though they may afford a valuable guidance i.e. they do not restrict either the jurisdiction of the court in deciding other cases, or the duty of the court to look at the facts in each particular case. When the facts of any particular case before the court are the same as the facts in the cases cited, no doubt the court will follow those But it must not be supposed that reported CASAS. decisions prevent the court from deciding whether in the interest of justice it ought to send the matter back to the arbitrator."

I find the authorities. I have referred to above of great persuasive value in the interpretation and application of sections 11 and 12 of our Arbitration Act. They indicate clearly that the court may remit or set aside an arbitrators award in certain circumstances in the interest of justice.

In the instant case the appellant objected to the award of the arbitrator under consideration, and applied to the High Court to remit the award to the arbitrator for his reconsideration or to set it aside, giving fifteen grounds for doing so. The learned judge, as I have endeavoured to discern from his Ruling, declined jurisdiction to exercise his discretion under sections 11 or 12 of the Act on the ground that the arbitrator's award was final. By doing so he, with respect, committed error in law, as I have already said.

In the circumstances, I uphold the submissions of the learned counsel for the appellant under ground one and two. The two grounds of appeal must, therefore, succeed.

# IN THE SUPREME COURT OF UGANDA

AT MENGO

(CORAM: ODDKI JSC, ODER JSC & KAROKORA JSC)

CIVIL AFFEAL NO. 23 OF 1995

#### **BETWEEN**

OIL SEEDS (UGANDA) LTD APPELLANT

AND

UGANDA DEVELOPMENT BANK **RESPONDENT**

> (Appeal from the Ruling and Orders of the High Court of Uganda at Kampala (Kityo, J) dated 14 . 2 . 95

> > in

Miscellaneous Application No.4 of 1993)

### JUDGMENT OF KAROKORA, JSC:

$\mathbb{C}$

I have had the advantage of reading in draft the Judgment of Oder, JSC and I do agree with it and the Orders he proposed.

I would however, add that there is no doubt in my mind that the Learned Judge having heard arguments on each of the grounds he should have disposed of each of the grounds; but instead, he dismissed the application on the ground that he had no jurisdiction to interfere with the award given by the Arbitrator, because doing so would be tantamount to usurping the powers reposed in the arbitrator to conclusively determine the dispute by the tribunal which was freely selected by the parties to the dispute.

With respect, I am unable to agree with the Learned Judge when he declined jurisdiction, because Section 11 of the Arbitration Act (Cap 55) provides:

$.../2$

(1) "The Court may from time to time remit the award for the reconsideration of the arbitrator or umpire.

The remedy, therefore, would be to order a Retrial before the High Court as proposed by Oder, JSC.

Dated at Nengo this

14th day of April 1997. A. N. Karokora

JUSTICE OF SUPREME COURT.

### THE REPUBLIC OF UGANDA

## IN THE SUPREME COURT OF UGANDA

#### AT MENGO

(CORAM: ODOKI, J. S. C. ODER, J. S. C. AND KAROKORA, J. S. C.)

## CIVIL APPEAL NO. 23 OF 1995

### BETWEEN

OIL SEEDS (UGANDA) LTD.

### **EXECUTE: SET : : : : : : : : : : APPELLANT**

#### Ñ D

UGANDA DEVELOPMENT BANK

**EXECUTIVE STRESS ONDENT**

(Appeal from the Ruling and orders of the High Court of Uganda at Kampala (Kityo, J.) dated 14.2.1995 in Miscellaneous Application No. 4 of 1993)

### JUDGMENT OF ODER, J. S. C.

This appeal arises out of a dismissal by the High Court of the appellant's application by Chamber summons objecting to an award which had been made by an Arbitrator between the appellant and the respondent on 17.8.1994.

The arbitration award arose out of a dispute between the appellant and the respondent under a loan agreement between the two parties with a provision for reference of such a dispute to an arbitrator. The dispute was, indeed, referred to an arbitrator, who made his award on 17.8.1994. The appellant was dissatisfied with the award and lodged its objection to it in the High court. In his ruling dated 14.2.1995, Kityo, J. dismissed. the objection application. Hence this appeal.

The facts of the case are that by a Loan Agreement $(L\lambda)$ dated 21.11.1988 made between the appellant and the respondent the respondent agreed to lend the appellant US $\$$ 978,250 for funding the establishment of an oil mill factory at Kasirize in Mukono District, Uganda. The project was not accomplished. The respondent released some of the funds it had agreed to lend, but

This, in my view, disposes of the appeal, with the result that consideration of the remaining grounds of appeal is not necessary. In the circumstances a decision of this court on the respondent's Notice of grounds for affirming the decision of the High court also does not arise.

In the result, I would allow this appeal with costs to appellant here and in the court below. I would set aside the order of the learned judge dismissing the application by chamber summons. I would order that the application be heard de novo by another judge of the High court.

DATED at Mengo this ....................................

$\mathbb{Z}$ A. H. O. ODER, $\sim$

JUSTICE OF THE SUPREME COURT.

14/4/97. Muitement Nameto Juve Regp.<br>Mui Bygnihe of du de Angelle A Mr. Emine maname cont clere adport delivered as<br>rected $(4/4)$