Dolamite Engineering Services Limited v Board of Governors, James Ochola Memorial S.S.S Tororo & Another (Civil Suit 413 of 2013) [2024] UGCommC 277 (22 February 2024)

#### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCIAL DIVISIONI

#### CIVIL SUIT NO.4I3 OF 2OI3

## DOLAMITE ENGINEERING SERVICES LTD::::::::::::: PLAINTIFF VERSUS

## I. BOAR. D OF GOVERNORS

#### JAMES OCHOLA MEMORIAL S. S. S. TORORO

### 2. ATTORNEY GENERAL: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : DEFENDANTS

## BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI JUDGMENT

#### PLAINTIFF'S CASE

The plaintiff brought this suit against the defendants jointly and severally for damages for breach of a building contract, in the altemative for orders that the building contracts be reinstated and soughtjudgment in its favor for special damages of Ugx 104,439,2691:, interim payment certificate of Ugx 32,378,8501=, general damages for breach ofcontract and loss ofprofit, interest at 30 oh on special damages and interim cerlificate from the date of breach till payment in full and costs of the suit.

The plaintiff contends that about July I 5'r' 201 I , the school advertised for bids for construction of its facilities under support to Universal Post Primary Education and Training (UPPET/ APLI) Project Phase 2, and consequently paid Ugx 200,000/- to the school being the cost of the bid document which contained the technical specifications of the works, including drawings and bills of quantities.

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The plaintiff subsequently put in a bid for the construction of 10 classrooms, 1 administration block, 1 library and 3 (5) stance lined latrines at a total cost of Ugx 445,474,000/=. On 4<sup>th</sup> November 2011, the school notified the plaintiff that it had been awarded the contract and invited the plaintiff to sign a formal contract and on 22<sup>nd</sup> November 2011, the school executed the contract with the plaintiff after approval of the Solicitor General. On 29<sup>th</sup> November 2011, the school handed over the site to the plaintiff and it cleared the site in preparation for works, excavated the site and set up the buildings lay out on the ground, ordered for some materials and had some materials delivered on site and mobilized other materials in the area including labor. The materials mobilized or delivered included 100,00 clay burnt bricks, 180 trips of lake sand, 180 trips of plaster sand, 60 trips of aggregates, 70 trips of hardcore and 500 pieces of timber all valued at Ugx 87,100,000/ $=$ .

On 9<sup>th</sup> December 2011 the plaintiff executed a performance security with Excel Insurance Co. Ltd for the due performance of the contract and paid Ugx $1,336,423/=$ , and on 6<sup>th</sup> February 2012, the plaintiff executed an advance payment security with Excel Insurance Co. Ltd to secure 20% advance payment of the contract price at a cost of Ugx 2,672,846. The plaintiff continued demanding for advance payment in accordance with the General Conditions of Contract 51.1 but no money was advanced.

In spite of failure to receive advance payment the plaintiff continued to carry out construction works on the site and on 8<sup>th</sup> June 2012 the project manager approved the first interim payment certificate of the executed works at $Ugx$ 32,378,850/= but no payment was effected. On 24<sup>th</sup> August 2012, pursuant to clause 26.1 of the General Conditions of Contract the plaintiff referred the dispute to the Uganda Institute of Professional Engineers (UIPE) for adjudication but the defendants ignored the adjudication process. On 17<sup>th</sup> September 2012, the school terminated the contract contrary to the requirement in the Special Conditions of Contract that demanded that the matter be adjudicated upon; and on 3<sup>rd</sup> December 2012, the Ministry of Education re-advertised the contract.

The plaintiff contends that the defendants rescinded the contract and as a result the plaintiff has suffered loss to wit; cost of the bid documents Ugx 200,000/=; cost of insurance premiums Ugx 4,009,269/=; technical evaluation of the bid document Ugx 6,130,000/=; cost of the bid security Ugx 7,000,000/= and cost of materials Ugx $87,100,000/$ =. The plaintiff claimed general damages for loss of profit from performance of the contract being 30% of the contract price of Ugx 133,642,200/=

and for breach of contract of Ugx 44,547,400/: being approximately 10% of the contract price.

### DEFENDANTS'CASE

The defendants denied the plaintifls claim and contended that the plaintiff was awarded a tender to construct 8 classrooms, I multipurpose science block, a library and a 5 stance VIP latrine block at a total contract sum of Ugx 474,493,0001--. The plaintiff accepted to perform the contract subject to the terms and conditions of the contract and was well aware that the bidding instructions required all the construction works for the whole project to be completed within 15 weeks from the time the site was hand over to the contractor but the plaintiff abandoned work on the site from l3rh September 2012 for more than 28 days without any explanation which was a fundamental breach of the contract in accordance with clause 59.2 (a) of the contract.

The plaintiff was required under the contract to provide a valid advance payment guarantee of 20Yo of the contract sum and a performance bond of 10% ofthe contract sum before any advance payment could be made which the plaintiff failed to do even after being informed of the availability of funds on the school account. Further, the rate of progress of works at any time during the period of the contract was such that the completion of the works would, as measured against the then program, be delayed by a number of days for which the maximum amount of liquidated damages can be imposed.

The defendants denied liability for any damages sought ifat all, and contended that the same are too remote a consequence of govemment servants/ agents/ employees' actions and or omissions and further that liability if any does not rest on him.

### REPRESENTATION

The plaintiff was initially represented by M/s Rwakafuuzi & Co. Advocates, then M,/s Kyamanywa, Kasozi & Co. Advocates followed by IWs Masaba Advocates, Mr. Okello Oryem Alfred and finally by Mr. Jim Musinguzi himself. The defendants were represented by the Attorney General's Chambers.

### JUDGMENT

At the Scheduling conference ofthis suit, the parties agreed on the following issues for the determination of Court:

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## l. Whether the contract was breached? If so by who?

### 2. What remedies are available to the parties?

When the case came up for hearing of the defendants' witness on lOth January 2024, the plaintiff informed Court that he was representing himself and when the defendant's witness was called upon to make his testimony, the plaintiff claimed that he had lodged a complaint in the matter. When the Court insisted that the matter would proceed with hearing of the said witness, the plaintiff rudely and contemptuously stormed out of the Court locking himself out of the proceedings. The defendants' witness, Mr. okiring, testified in the matter and since the plaintiff was not in Coun to cross-examine him, the defendants closed their case and agreed to file written submissions which have not been filed to date.

During scrutiny of the pleadings in this matter, it became apparent to this Court that the contract for the construction of facilities in James Ochola Memorial S. S. under support to universal post primary education and training (UPPET/ APLII) projectphase 2 between the Ministry of Education and Sports and the plaintiff provided for dispute settlement under clause 24 of the General Conditions of Contract (page 27 of the joint trial bundle) wherein clause 24.1 provided that:

"lf the Contractor believes that a decision taken by the Project Manager was either outside the authority given to the Project Manager by the Contract or that the decision was wrongly taken, the decision shall be referued to the Adjudicator appointed under the contract within 14 days of the notification of the Project Manager's decision. "

The detailed procedure for the dispute resolution mechanism under Clause 25 ofthe Contract is thus:

## " Procedure for Dispules

25.1 UnlessotherwisespecifiedintheSCC,theprocedurefordisputesshallbeas speciJied in GCC 25.2 to 25.4.

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.

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25.3 The Adjudicator appointed under the contract shall be paid by the hour... 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 binding.

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

Clause 25.4 of the SCC states that "the arbitration shall be conducted in accordance with the Arbitration law of Uganda. Arbitration shall take place at Kampala" while clause 26.1 stated that the Appointing Authority for the Adjudicator is the President of the Uganda Institute of Professional Engineers.

In the case of USAFI Market Vendors Association Vs KCCA MA No. 674 of 2018 Honorable Justice Musa Ssekaana held that:

"The High Court has limited jurisdiction in arbitration matters as set out under the Arbitration and Conciliation Act. Section 9 expressly provides; No Court shall intervene in matters governed by the Act except as provided in the Act. This limited jurisdtction should be appreciated from the stand point that alternative dispute resolulion is a legal technique to resolye disputes out of the court room".

The High Court under Article 139 (l) of the Constitution has unlimited jurisdiction on all matters. However, in this case the parties entered into a Works contract that had an arbitration agreement. The Plaintiffs claim is based on the alleged breach of the building contract by the 1't defendant/ project manager which constituted acts/ omissions envisaged under the Arbitration Clause. The Plaintiff claims Ugx

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104,439,269/=, interim payment certificate of Ugx 32,378,850/=, loss of profit and general damages, among other things, all arising out of alleged delayed payments and alleged unlawful termination of the contract by the 1<sup>st</sup> defendant. The Plaintiff indicated that the matters in dispute were referred to Adjudication which appears to have never taken place and neither the said disputes ever referred for Arbitration in accordance with the provisions of the Contract.

In the case of Power and City Contractors v LTL Project (PVT) HCMA No. 0062 of 2011 the Honorable Justice Musota Stephen held that an arbitration agreement has a binding effect on the parties thereto. This position was emphasized by Hon. Justice Madrama in the case of Yan Jian Uganda Company v Siwa Builders **Engineers Ltd MA 1147 of 2014** where he held as follows:

"I wish to add that an arbitration agreement under the Arbitration and Conciliation Act has to be considered in the context of the said Act. An arbitration agreement is defined under section 2 (1) of the Arbitration and Conciliation Act to mean 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 relationship, whether contractual or not. Secondly section 9 of the same Act provides that except as provided under the Act, no court shall intervene in matters governed by the Act."

Similarly, in the case of Heyman and Another v Darwin's Ltd [1942] 1 All ER 337 quoted in the case of British American Tobacco Uganda Ltd v Lira Tobacco Stores (HCMA NO 924 OF 2013) Lord Macmillan at page 347 stated that:

"I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from the other clauses. The other clauses set out the obligations which the parties undertake towards each other hinc inde; but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both

parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. Moreover, there is this very material difference that, whereas in an ordinary contract the obligations of the parties to each other cannot in general be speciJically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts."

In the premises and being guided by the authorities above, I find that since the reference ofany dispute to adjudication/ arbitration relating to the disputes in issue was not an optional clause but a binding clause on the parties to the contract; compliance with the said clause is mandatory and the filing of the present suit was not necessary because a dispute resolution mechanism was provided for in the Contract. The dispute in this suit is referred for resolution through adjudication/ arbitration proceedings in accordance with clause 24 and 25 of the Conditions of Contract agreement between the parties.

In the case of British American Tobacco Uganda Ltd v Lira Tobacco Stores (supra) the Honorable Justice C. Madrama held that:

"... Lllhere the court orders the dispute embodied in the proceedings before court to be referred for arbitration, the pending suil lapses. In other words, the entire dispute is referred for resolution through arbitration in accordance with the contract of the parties. The High Court retains appellate and supervisory powers as far as arbitration proceedings are concerned. Under section l6 of the Arbitration and Conciliation Act, an arbitral tribunal upon ruling that it has jurisdiction in any matter, entitles the aggrieved party to apply to the court within 30 days of the ruling to decide the matter and the decision of the High Court shall befinal. (Jnder section 27, the arbitral tribunal or any of the parties with approval of the arbi\*al tribunal may request court assistance in taking evidence and the court may execute the request according lo the rules of taking evidence. An aggrieved party may also apply

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under section 34 of the Arbitration and Conciliation Act to set aside the arbitral award.

The exercise of the powers referred to above by the court leads to the conclusion that the intention of legislature was to give the Court appellate or supervisory powers over arbitral proceedings under the Act. This is made more cogent by section 9 ofthe Arbitration and Conciliation Act which provides that; "Except as provided in this Act no court shall intertene in matters governed by this Act." Consequently, a stay of proceedings in the High Court after commencement of an action by one of the parties to an arbitration agreement, serves no purpose after the dispute is referred to arbitration... "

I agree with the position of the Honorable Judge above and dismiss present suit accordingly since the matter has been referred for resolution by arbitration and can only retum to this Court in respect of different claims and remedies as provided by law and seen in the case above.

Having disposed of this matter as I have done above, I do not find it necessary to address the rest ofthe Issues raised by the parties.

I associate myself with the guidance of the Honorable Judge in British American Tobacco Uganda Ltd v Lira Tobacco Stores (supra) and direct that the costs occasioned by commencing the action in the High Court shall be determined by the institution agreed upon by the parties and the said issue is accordingly also referred to the said institution.

........1h\*.(.rlt HON. LADY JUSTICE ANNA B. MUGENYI DArED....... t:y.1.\*.l.y.tz