[2025] UGHC 314

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KABALE

### CIVIL MISC. APPLICATION NO.004 OF 2024

# (ARISING FROM ARBITRATION AWARD OF THE 12^TH MARCH. 2024 BY DAVID KAGGWA, FCI ARB, FICCP THE ARBITRATOR)

WAATUNGA DIDAS ::::::::::::::::::::::::::::::::::::

**VERSUS**

FINCA UGANDA LTD (MD1) ::::::::::::::::::::::::::::::::::::

#### RULING BY HON. JUSTICE KAROLI LWANGA SSEMOGERERE. 15

### **Brief Facts:**

This is an application filed on April 4, 2024 to set aside an Arbitral award made on March 12, 2024, by David Kaggwa, ("the Arbitrator") in a dispute between Waatunga Davis (the "Applicant") and FINCA Uganda Limited, a Micro-finance Deposit Taking Institution (the "Respondent"). The background, there was a loan in the amount of UGX 150,000,000 (One hundred fifty million only) procured by the applicant from the respondent on December 11, 2018, and a subsequent facility in the amount UGX

170,000,000 advanced to clear the first debt on November 11, 2019. There $\overline{25}$ is some contention on the interest rate attached to the facility and a long list of complaints by the applicant in respect of the disbursement, administration and collection efforts. These are deponed to in a 93-paragraph affidavit sworn by the Applicant attached to the application. The arrangement ended in a default and a claim by the respondent referred to in arbitration with a

final award made on March 12, 2024.



The arbitration final award was made under the Arbitration and Conciliation $\mathsf{S}$ Act, Cap 4 by a panel of one arbitrator (the "sole arbitrator") appointed under Clause 15 of the loan agreement inter-partes agreed to by the respondent, (claimant in the arbitration) on October 25, 2021 and the applicant (respondent) in the arbitration on October 27, 2021. The respondent's claim was for default of a loan in the amount of UGX $10$ 160,621,973 (One hundred sixty million, six hundred twenty-one thousand, nine hundred seventy-three shillings only). The respondent prior to the arbitration brought a civil suit in this court, against the applicant, FINCA $v$ Waatunga Didas, High Court Civil Suit No. 6 of 2021 which was referred to arbitration under Clause 15 of the Loan Agreement. 15

The arbitration ended with resolution of the claim as follows: (1) The arbitrator found the applicant had not repaid in the loan in full contrary to the terms of the loan agreement and was therefore in breach of contract; (2) The applicant owed the respondent UGX 123,024,176 (One hundred twenty three million, twenty four thousand one hundred and seventy six shillings) with interest at a rate of 24% per annum from February 20, 2020 until payment in full; (3) The arbitrator declined to award general damages for breach of contract, stating he did not have powers to do so under the loan agreement.

Relevant to this application were costs. In paragraph C of the award, the $25$ arbitrator stated that the parties had agreed to pay him a sum of UGX 14,000,000 (Fourteen million shillings only), and that the respondent had not paid the arbitrator's fees. In his decision, the arbitrator ordered the claimant to pay UGX 7,000,000 (Seven million shillings) to be recovered from the applicant. No other orders were made. 30

#### Grounds of the Application:

The Notice of Motion states the following grounds to challenge the arbitral award under Section 34 of the Arbitration and Conciliation Act, now Cap 5; Section 33 now Section 37 of the Judicature Act, now Cap 7 and Order 52

$\overline{2}$

Rule 1 and 3 of the Civil Procedure Rules $\delta$ .1. 71-1.

#### 5 These are:

- (1) That the arbitrator was manifestly partial in the conduct of the arbitration process and the award itself; - (2) That the arbitral award was against public policy and cannot be legally left to stand: - (3) The arbitral award was given out of time contrary to what the applicant had envisaged: - (4) The arbitrator failed to take into account, matters of great public policy in the banking tradition and the contract in itself hence an erroneous decision: and

(5)It is just and equitable that the application is granted.

#### **Representation:**

This application was argued on April 29, 2025 by Mr. Justus Muhangi for the Applicant and Mr. Masereka Godwin for the respondent. Parties were given a briefing schedule to file submissions which they complied with.

## Discussion and Analysis:

It is important to state at the onset, that this application is of the genera that as a matter of judicial policy ought to be disposed of quickly, as its resolution is urgent for both parties. I must also note that an arbitration freely entered 25 into by contracting parties will be upheld by the courts. I find no reason to interfere with the earlier decision of this court in referring this matter to arbitration under Section 15 of the impugned loan agreement.

I will adopt the same grounds by both parties in resolution of the issues therein. $30$

From the onset, the grounds argued must meet the muster set forth in Section 34(1) of the Arbitration and Conciliation Act, Cap 5 (the "Act") which provides limited recourse to court against an award. An application to set


aside an award may only be made under the grounds in Section 34(2) and $5$ (3). The language is directive and mandatory.

> "Recourse to the court against an arbitral award may be made only by an application for setting aside the award under sub-sections 2 and 3."

[Emphasis mine].

Before disposing of the application, I must make the following findings as a 10 matter of law. First, the application is filed in timely manner. It was filed within one month from the date the applicant had received the arbitral award. Section 34(3) provides as follows:

> "An application for setting aside the arbitral award may not be made after one month has elapsed from the date on which the party making that application had received the arbitration award."

I find that the application is properly before this court, the arbitration award having been made March 12, 2024 and this application having been filed on April 4, 2024 within one month from the date on which the application had been received

Ground 1: That the arbitrator was manifestly partial in the conduct of the arbitration process and the award itself.

In support of this ground, the applicant states, the partiality of the arbitrator was exhibited by his statement at page 24 of the award to the effect that the applicant had not paid his fees of UGX 7,000,000. In addition, applicant $25$ stated this had blurred the arbitrator's judgment. The respondent disputes this assertion by stating the arbitrator evaluated the evidence before him and made an award based on the applicant's own admission of liability. The arbitrator substituted the respondent's claim of UGX 160,621,973 (One hundred sixty million, six hundred twenty-one thousand, nine hundred 30 seventy-three shillings) with that admitted by the applicant in the amount of UGX 123,583,214 (One hundred twenty-three million five hundred eightythree thousand two hundred fourteen shillings).


$20$

- It is important, that the allegation did not specify whether this was actual or $5$ apparent bias. This is important because the statement of non-payment was factual. This is admitted by both parties. Actionable bias, even on apparent grounds requires more, than a sweeping statement. An allegation must show justifiable doubts about the arbitrator's impartiality. I refer to a decision by - the UK Supreme Court, Halliburton v Chubb 2021 AC 1083, which stated the 10 following test:

"The applicable test, an objective one... is whether a fair minded and informed observer, having considered the facts would conclude there was a real possibility that the tribunal was biased."

The decision highlights many considerations in appointment of a sole 15 arbitrator. It observes, that experience of an arbitrator, the characteristics and mechanics of appointment of the same arbitrator. The applicant challenged court proceedings on the basis of an arbitration clause which court upheld. Second the applicant agreed with the respondent on appointment of a sole

arbitrator and fees to be paid. Infact, the fees were paid by a party whose 20 proposition lost.

The detailed record and observations by the arbitrator seem to contradict the ordinary meaning of the word, bias. According to three definitions in the dictionary.

The American Heritage Dictionary defines bias as: A preference or 25 inclination that inhibits impartiality; prejudice.

Webster's New Collegiate Dictionary defines bias as: To give a settled and often prejudiced outlook to a situation.

Webster's Desk Dictionary defines bias as: A predisposed point of view; partiality, preconception, prejudice 30

In the main action for arbitration, the complaints by the applicant resulted in reduction of the respondent's claim. The scope of review of an arbitration by court, is very limited, the merits of the claim are not included in the ground for setting aside an award under Section 34(2) of the Act.

Whereas Section 34(2)(vi) of the Act allows for an award to be set aside if $\mathsf{S}$ procured by evident partiality or corruption in one or more of the arbitrators, none was shown by the applicant in any material aspect.

I find the aspersions of the applicant in making this statement, a belated and feeble attempt to minimize the due process from which he benefited.

Accordingly, this ground must fail. 10

Grounds 2 and 4 were argued together.

Ground 2: That the arbitral award was against public policy and cannot be legally left to stand.

15 Ground 4: The arbitrator failed to take into matters of great public policy in the banking tradition and the contract in itself hence an erroneous decision.

This ground has two legs, first is the award itself, and second in the applicant's brief, the issue of compound interest and award of costs. There are other collateral issues relating to interpretation of the agreement by the arbitrator, namely non-application of the force majeure causes. The respondent generally

opposed the applicant's arguments.

I find that the arrangements between the two parties entirely contractual. Statements about interest awards and costs are nothing but a disguised appeal. No specific provision of Section 34(2) is cited by the applicant in support of

these grounds. The arbitrator correctly noted the applicant did not seek 25 specific reliefs that may have been available to him, during the Covid pandemic.

These grounds must fail as a matter of law.

Ground 3: The arbitral award was given out of time contrary to what the 30 applicant had envisaged.



The applicant in support of this proposition states that the award was made $\mathsf{S}$ outside the two months period stipulated under the Act. Respondent does not contest this delay, but justifies the delay as due to the applicant's failure to pay the arbitrator's fees as agreed upon by the parties.

Section 31(1) of the Act states as follows:

- "The arbitrators shall make their award in writing within two months 10 after entering on the reference, or after having been called on to act by notice in writing from any party to the submission, or on before any later day to which the arbitrators, by any writing signed by them may enlarge the time for making the award." (Emphasis mine) - Applicant accepted the role on November 16, 2021 and made the award on 15 March 12, 2024.

This ground presents a novel issue, what is the effect of non-payment of fees on the requirement under the Act to deliver a timely decision.

The effect of non-payment fees is contractual. Strictly speaking, the arbitrator would have withheld his services entirely from both parties. It is unrebutted $20$ evidence, that the arbitrators' demands for payment of his fees went unresponded to, up to the point of making an award.

Nonetheless, I find that the correct action by the arbitrator would have been timely and prompt cancellation of the arbitration, rather than rendition of his

services. I find that he for reasons in his discretion enlarged the time within $25$ which he made the award. That is permissible under Section 31(1) of the Act.

I also find that a failure to render a timely decision in Section 31(1) of the Act. is not actionable in an application to set aside an award under Section 34(1) of the Act. To find otherwise, would be to amend the express language of the $Act.$

A different action would find this action or fault by the arbitrator a basis for denying his fees altogether, but not this motion which can only succeed on specific grounds to set aside an arbitral award.

> Scanned with CS CamScanner^®

# Comment:

$5$

The law governing arbitration in Uganda seeks to promote efficiency in adjudication of commercial disputes, which often are of a specialized nature. In arbitration, the role of the High Court is merely oversight, rather than entertaining and hearing disputes afresh. In the instant application, applicant only reached the merits of his application in paragraphs 74 and 75 when he alleged statutory grounds, namely non-payment as a cause of the delay in rendering a decision. Paragraph 80 of the application alleged time again, without clearly stating whether this was a ground for setting aside an arbitral award under Section 34(1) of the Act.

In some jurisdictions, failure to pay arbitration fees within statutory deadlines leads to one forfeiting their rights. In others, any extension to pay fees must be agreed upon by the parties, the law does not allow, an arbitrator to remedy a party's late payment in the form the arbitrator did. See the recent

decision by the California Court of Appeals in *Hohenshelt v. Superior Court* 20 of Los Angeles County (2024) 318 Cal. Rptr.3d 475, where the Appeals Court stated the law does not allow for any extension of time of the due date absent agreement by all the parties. Section 31(1) of the Act provides the opposite, allowing an arbitrator to enlarge time, with the accompanying ambiguity as to how this is achieved. This calls for amendment of the law to avoid this

25 absurdity.

### Findings and Conclusion:

This application raises no points of law for determination by this Honourable Court. 30

This application fails.

Costs are awarded to the respondent.



DATED AT KABALE THIS ......... DAY OF MAY 2025.

pempaene SSEMOGERERE, KAROLI LWANGA JUDGE.