[2025] UGCommC 136

# 5 THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) CIVIL SUIT NO. 1273 OF 2023

# 10 PLANBUILD TECHNICAL SERVICES LIMITED…………PLAINTIFF

#### VERSUS

ATTORNEY GENERAL……………………………………. DEFENDANT

# BEFORE: HON. LADY JUSTICE SUSAN ODONGO

#### RULING

#### Background

- 20 The Plaintiff instituted this suit against the Defendant for declaratory orders and financial redress, as follows: - a) A declaration that the Defendant breached its obligations under a construction contract relating to the Government Priority Rural Electrification Schemes implemented through the Rural Electrification 25 Agency (REA), as it then was, under the Ministry of Energy and Mineral Development, - b) special damages of Ugx 209,183, 258/- being retention monies, - c) general damages,


- 5 d) interest, and - e) costs of the suit.

The facts as inferred from the pleadings and annextures is that on the 7th day of October 2010, the Plaintiff entered into a contract with the Government of Uganda, represented by REA within the Ministry of Energy and Mineral 10 Development, for the construction of Government Priority Rural Electrification Schemes in the districts of Bushenyi and Rukungiri. The plaintiff did not attach the said contract but attached an addendum dated 28th December 2011 to the said contract. According to the plaint, the contract sum was UGX 6,774,764,395/=, a figure which the Defendant disputes in their Written 15 Statement of Defence.

The Plaintiff asserts that they fully performed their contractual obligations and duly handed over the completed works to REA. Notwithstanding this, the Defendant has failed or refused to release the retention monies withheld, amounting to UGX 209,183,258/=, and has not issued the completion 20 certificate.

The Plaintiff further avers that although the contract contains an arbitration clause, the subject matter of the present suit falls outside the scope of that clause, and is therefore properly before this Honourable Court.

In response, the Defendant contends that the Plaintiff did not complete the 25 works in accordance with the contractual specifications as such there was no handover of the works. That the plaintiff failed to supply the Project Manager with a detailed account of the total amount that the plaintiff considers payable under the Contract before end of the Defects Liability Period and the claims for retention after Defects Liability Period did not accrue. The contract stipulated


5 that project closure activities would commence upon the issuance of the final accounts, a step the plaintiff failed to undertake.

#### Representation and Hearing

When this matter was called on for hearing, the plaintiff was represented by Counsels, Mr. Brian Kalule and Mr. Emmanuel Wasswa. The defendant was 10 represented by Ms. Brenda Igune, State Attorney in the Attorney General's Chambers.

Recognizing that jurisdiction was at issue, the court directed the parties to first address the scope of the arbitration clause in the contract. The plaintiff made oral submissions which the court noted and considered. The defendant did not

15 make any submissions on the matter, but prayed that the court exercises its discretion.

## Issue for determination

The singular issue for determination is Whether the claim in this suit falls within the arbitration clause under the contract as such governed by the Arbitration and

20 Conciliation Act.

## Court's determination

# *Whether the claim in this suit falls within the arbitration clause under the contract as such governed by the Arbitration and Conciliation Act.*

This issue raises the question of jurisdiction, a fundamental challenge that strikes 25 at the heart of the matter. The Arbitration and Conciliation Act, Cap. 5, a law relating to arbitration in Uganda, has adhered to the underlying intent of the principle of party autonomy in arbitration, by precluding court involvement in matters governed under the Act *(see: section 9).* The courts have just as well pronounced that the unlimited jurisdiction of the High court cannot override the


5 Arbitration and Conciliation Act. (see: *Babcon (U) Ltd vs Mbale Resort Hotel (Civil Appeal 87 of 2011)*).

Jurisdiction is the first test in the legal authority of a court and its absence disqualifies the court from exercising any of its powers. Jurisdiction means and includes any authority conferred by the law upon the court to decide or

10 adjudicate any dispute between the parties or pass judgment or order. A court cannot entertain a cause which it has no jurisdiction to adjudicate upon. (see: *Miscellaneous Application 0001 of 2016 Koboko District Local Government v. Okujjo Swali)*

The original and unlimited adjudication powers of this Court is couched in the 15 language of Article 139(1) of the Constitution as follows:-

*Jurisdiction of the High Court*

*139*

*(1) The High Court shall subject to the provisions of this Constitution, have unlimited original jurisdiction in all matters and such appellate and other* 20 *jurisdictions as may be conferred on it by this Constitution or other law.*

The language used in Article 139(1) above demonstrates that the unlimited jurisdiction of the High Court is not absolute but subject to statutory limitations, in this particular case, those created by arbitration agreements. Current trends in jurisprudence and contemporary legal practice embrace Alternative Dispute 25 Resolution grounded on the recognition that dispute settlement by arbitral tribunals enjoy parity with courts in resolving disputes. The rationale here being to recognize Party Autonomy in Arbitration, a tenet that acknowledges the parties' conscious agreement to settle disputes outside of court.

In *Fulgensius Mungereza v Africa Central (Civil Appeal No. 34 of 2001),* Mpagi-30 Bahigeine, JA as he then was stated that;

> *"When seized of an action in a matter in respect of which the parties made an arbitration agreement referred to in Section 40, the Court shall at the request of one of the parties, refer the parties to arbitration, unless it finds that the agreement is null and void, inoperative or incapable of being performed"*.


# 5 This is our current *Section 5 of the Arbitration and Conciliation Act, Cap 5* and it provides as follows

*"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* 10 *the matter back to the arbitration unless he or 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."*

# 15 In *Smile Communications Uganda Ltd v. ATC Uganda Ltd & Anor (Arbitration Cause 4 of 2022) 2023 UGCommC 30,* court stated that;

"*Where there is a valid agreement to arbitrate, all matters that fall within the scope of that agreement are to be arbitrated. It is a well-known principle though that arbitration is not legally permissible if the subject matter of the dispute is not* 20 *arbitrable or if the dispute in question is not covered by a valid arbitration agreement*."

The provision in section 5 is couched in mandatory terms, directing the court to refer the matter back to arbitration where the proceedings before the court are subject of an arbitration agreement unless the court finds that the circumstances 25 fall within the exceptions provided under the section. The choice of the word *"if"* in the phrase *"if a party so applies after the filing of a statement of defence and both parties having been given a hearing"* introduces a condition but unlike the phrase *"when",* it commands a lesser degree of certainty and demonstrates that, irrespective of this condition, the court must proceed to act on its own initiative.

30 Essentially, in the proceedings before the court, there should already be a semblance of an arbitration agreement, and the court's only responsibility is to determine two key questions: whether a valid and operative arbitration agreement exists between the parties; and whether the dispute between the parties falls within the scope of that agreement.


5 *Sec 2 of the Arbitration and Conciliation Act, Cap 5* defines an arbitration agreement as 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.

This definition is structured in accordance with the *UNCITRAL Model Law* 10 *(1985, amended 2006).* The *ICAMEK (Arbitration) Rules* have adopted this definition *(see; Rule 2 of the ICAMEK (Arbitration) Rules*).

It is therefore trite that an arbitration agreement may cover not only "disputes" but also "disagreements" and "differences of opinion."

An arbitration clause was defined in the case of *Heyam and Another Vs Darwins*

15 *Ltd [1942] 1 All ER 337 at page 342*, by Viscount Simon L. C to mean a written submission agreed to by the parties to the contract, and, like other written submissions to arbitration, must be construed according to its language and in light of the circumstances in which it was made.

The guiding principle is that the language in the dispute settlement Agreement 20 should determine, inter alia, the dispute resolution body and the scope of the agreement.

In the suit before this Honourable Court, clauses 24 to 26 of the General Conditions (GCC) establish a robust dispute resolution mechanism under the contract while the Special Conditions of Contract (SCC) Clause sets out the final

25 negotiated and agreed position. Of specific concern, is *GCC clauses 24 to 25*. The provisions state as follows;

## "*24. Disputes*

24.1. *If the contractor believes that the decision taken by the project manager was either outside the authority given to the project manager by the Contract or that the* 30 *decision was wrongly taken, the decision shall be referred to any adjudicator*

 5 *appointed under the contract within 14 days of the notification of the project manager's decision*.

## *25. Procedure for Disputes*

25.1. *Unless otherwise specified in the SCC, the procedure for disputes shall be as specified in GCC 25.2 to 25.4*

10 25.2. *Any adjudicator appointed under the contract shall give a decision in writing within 28 days of receipt of a notification of a dispute, providing that he is in receipt of all the information required to give a decision*.

25.3. *Any Adjudicator appointed under the contract shall be paid by the hour at the rate specified in the SCC, together with reimbursable expenses of the types* 15 *specified in the SCC, and the cost shall be divided equally between employer and the contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an arbitrator within 28 days of the adjudicator's written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator's decision will be final and bidding.*

20 25.4. *Any arbitration shall be conducted in accordance with the Arbitration laws of Uganda, or such other formal mechanism specified in the SCC, and in the place shown in the SCC.*

The Special conditions provide that;

GCC 25.1. *The procedure for disputes shall be as specified in GCC 25.2 to 25.4*

25 GCC 25.4. *The arbitration shall be conducted in accordance with the Arbitration laws of Uganda. Arbitration shall take place at Kampala.*


- 5 From paragraph 8 of the Plaintiff's plaint, it is apparent that the existence, validity and operation of the arbitration clause are not in controversy. The issue before this Honorable court is whether the present dispute falls within the scope of the arbitration clause. - The plaintiff contends that the subject matter presently before the Court does not 10 fall within the scope of issues contemplated to be referred to arbitration. Counsel for the plaintiff submitted that the scope of the arbitration clause is limited exclusively to disputes arising from determinations made by the project manager which is not the case with the present dispute. That the present disputes concern the employer's failure to remit retention monies due and owing to the contractor. - 15 I note that the main thrust of the plaintiff's claim, as detailed in paragraph 4 of the plaint, is a demand for retention money from the defendant. According to paragraph 4(c) the retention money was 10% of the contract amount by which 5% was payable at commissioning of the works and another 5% at the end of the Defects Liability Period. The plaintiff duly performed the works but the 20 defendant has refused or neglected to pay retention money withheld and has not issued a project completion. That the defendant informed the plaintiff that the claim could not be paid as there was no closure of project activities (paragraph 4(f)). - In opposing the claim, the defendant asserts in paragraphs 6 to 9 of the written 25 statement of defense that the retention money was not payable after the Defects Liability Period, since the plaintiff breached his contractual obligation having failed to complete work in accordance with the contract, and having failed to submit to the project manager, in accordance with GCC 57.1, a detailed account of the total amount claimed under the Contract prior to the conclusion of the


5 Defects Liability Period. That this step by the plaintiff is necessary to initiate the formal closure of the project.

The GCC clause 1.1 (q) defines the *"Employer" as the party named in the Agreement, who employs the Contractor to carry out the Works and means the Procuring and Disposing Entity.* GCC 1.1(y) defines the "*Project Manager*" as *the person*

10 *named in the SCC (or any other competent person appointed by Employer and notified to the Contractor, to act in replacement of the Project Manager) who is responsible for supervising the execution of the Works and administering the contract.*

Retention money is provided for under GCC 48 and particularly GCC 48.1 and 48.2 which relate to the claim, state:

15 *48.1 If so stated in the SCC, the Employer shall retain from each payment due to the Contractor the proportion stated in the SCC until Completion of the whole of the Works.*

*48.2 On completion of the whole of the Works, half the total amount retained shall be repaid to the Contractor and half when the Defects Liability Period has passed* 20 *and the Project Manager has certified that all Defects notified by the Project Manager to the Contractor before the end of this period have been corrected.*

> *SCC 48.1 provides that the proportion of payments retained is 10%, 5% to be paid to the contractor on commissioning of works and 5% to be retained through the defects liability period.*

25 From the above contract clauses and the plaint, it is evident that the payment of the final retention money was subject to completion of works.

According to GCC 55.1, it is the responsibility of the Project Manager, as the supervisor of the execution of the Works and administrator of the contract, to


- 5 assess and conclude that the work is completed. Whereas the Employer plays a key role in procuring the contractor, he/she is not involved in the supervision of the Works, the certification of interim certificates or the issuance of completion certificates. The Project Manager is the authorized person mandated to handle this component and is accountable to the Employer. Therefore, if the completion - 10 certificate is not issued, it indicates that the Project Manager has not confirmed that the contractor has substantially completed the works as required under the contract.

As stated by both the plaintiff and the defendant, the retention money has not been paid because the defendant has not issued the completion certificate 15 (Paragraph 4(i) of the plaint). The defendant's reason being that the plaintiff has not complied with his contractual obligations which include completion of the works and submission of final accounts all which are to be verified by the Project Manager.

It is clear that the authority to issue the certificate of completion is vested 20 exclusively in the Project Manager as per the terms of *GCC 55.1*. The letter by the Permanent Secretary, Ministry of Energy and Mineral Development dated 9 th November 2021 (*Annexture B* to the plaint), addressed to the plaintiff, by which it is stated that the money claimed cannot be paid since project closure was not carried out, is in my view a decision of the Project Manager. This 25 constitutes a determination falling within the ambit of *GCC Clause 24.1*. Consequently, any dispute arising from such determination is subject to the dispute settlement mechanisms set forth under *GCC Clauses 25.2 to 25.4* of the contract agreement, thereby rendering the matter arbitrable.

Where the parties have evinced a clear intention to settle any dispute by 30 arbitration, the court should give effect to such intention, even if certain aspects


- 5 of the agreement may be ambiguous, inconsistent, incomplete or lacking in certain particulars… so long as the arbitration can be carried out without prejudice to the rights of either party and so long as giving effect to such intention does not result in an arbitration that is not within the contemplation of either party.(See: *Insigma Technology Co Ltd v Alstom Technology Ltd [2009] SGCA 24).* - 10 As stated above, the law empowers the court to interfere with arbitration clauses in circumstances where the arbitration agreement is null and void, inoperative or incapable of being performed or where it found that there is no dispute between the parties with regard to the matters agreed to be referred to arbitration. It is my determination that the arbitration clause at issue is valid and - 15 capable of being executed with respect to the subject matter/dispute currently before this Honourable Court. The issue is, therefore, answered in affirmative.

I hereby order that the suit is stayed and the parties are directed to resolve the dispute by arbitration in accordance with the dispute settlement clause under the Agreement.

Dated, signed and delivered electronically this 15th 20 day of June, 2025.


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