Mbarara University of Science & Technology v Block Technical Services Limited (Miscellaneous Application 397 of 2022) [2023] UGHC 273 (10 May 2023)

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT MBARARA

## **MISCELLANEOUS APPLICATION NO.397 OF 2022**

ARISING FROM CIVIL SUIT NO. 101 OF 2022 FORMERL CIVIL SUIT NO.685 OF 2021

## **MBARARA UNIVERSITY OF SCIENCE**

AND TECHNOLOGY:::::::::::::::::::::::::::::::::::

#### **VERSUS**

**BLOCK TECHNICAL SERVICES LIMITED :::::::::: RESPONDENT**

# BEFORE: LADY JUSTICE JOYCE KAVUMA

#### RULING

Background

- This is an application made under Sections 5 and 9 of the $\lceil 1 \rceil$ . Arbitration and Conciliation Act, Cap 4, Section 98 of the Civil Procedure Act and Rule 13 of the Arbitration Rules seeking for the following orders: - That the dispute between the applicant/defendant i. and respondent/plaintiff in Civil Suit No.101 of 2022 is the subject to a valid, binding and enforceable arbitration agreement/clause within the premises of the Arbitration and Conciliation Act - li.

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Civil Suit No.101 of 2022 be dismissed.

#### Representation

The applicant is represented by M/S Ortus Advocates and the $[2]$ . respondent is represented by M/S Anguria & Co. Advocates.

#### The Application

The grounds for the application are stated in the affidavit in $[3]$ . support of the application sworn by **Patrick Twesigye** which I shall not reproduce here. The respondent replied in an affidavit in reply and a supplementary affidavit in reply by **Rugyero Innocent**. The applicant also made an affidavit in rejoinder to the respondent's reply.

#### Issues for determination

- $i.$ Whether there is an arbitration agreement between the parties and if so, whether the arbitration agreement is valid and enforceable against the parties? - What are the remedies to the parties? ii.

## Resolution of the Application

I have considered the submissions of both counsel and the pleadings of both parties in making this decision.

## Preliminary point of law

$[4]$ . Counsel for the respondent submitted that the applicant made a preliminary objection in the High Court of Uganda (Commercial Division) which was overruled by Hon. Justice Mubiru on 15<sup>th</sup> February 2022at High Court Commercial Division before the matter was transferred by the Principle judge. That the Respondent abouted toopy avail the certified copies of the record of proceedings between the parties at the commercial division vide CS. No.685 of 2021 and the same was filed in the respondent's supplementary affidavit. That in reference to pg. 4-6 of the certified record of proceedings, the Learned Justice Mubiru tasked the applicant's lawyers to show the court a binding enforceable arbitration clause in the contract to no avail. That these facts are within the knowledge of the applicant's lawyers. That His Lordship Justice Mubiru stated in Paragraph 5 of the certified record of proceedings that "You have provisions of procedure but there is nothing on submission for arbitration. These are all procedural clauses. I have not seen a clear submission for arbitration where the parties agree that in the event of specified disputes, they shall be referred to an arbitrator. Where is that sentence?" That the learned Justice never found any merit in the applicant's a preliminary objection based on the claim of an enforceable arbitration clause. Counsel for the respondent then prayed that this court overrules the instant application relying on the case of Yaya Farajallah v Obur Ronald & 3 ors Civil Appeal No.0081 of 2018 where Justice Mubiru stated that, the court has the discretion to dispose of a preliminary objection whether raised formally or informally at the commencement of the hearing, immediately or defer it's ruling until after the hearing the whole case.

Counsel for the applicant submitted that the respondent falsely alleged in his affidavit in reply that Justice Stephen Mubiru delivered a ruling in the subject matter on the arbitration agreement between the parties. That there has never been a ruling delivered on the same. That on the 14<sup>th</sup>/10/2021, the respondent instituted Civil Suit No.685 of 2021 (Now

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Civil Suit No. 101 of 2022) against the applicant, an application for a temporary injunction and an application for an interim injunction against the applicant. That both the applications were fixed for hearing on 11<sup>th</sup> November 2021 and the matter was referred to Justice Stephen Mubiru who adjourned the applications to 6<sup>th</sup> December. That on 6<sup>th</sup> December 2021, Justice Mubiru informed them that he had received a letter from the principal judge calling for the files and he could not proceed with the applications since he did not have the files and adjourned to a later date. That following an application by the applicant, the matter was transferred to Mbarara High court, since the subject matter was in Mbarara.

Counsel for the applicant in rejoinder submitted that in determining a preliminary point of law, the court looks at the pleadings on the court record. That the Hon. Justice Mubiru did not have the file and therefore could not peruse, through the record to determine the preliminary objection. He then prayed that court finds that the issues in this application have never been determined by court.

#### Resolution

I agree with counsel for the respondent that court has the $[5]$ . discretion to dispose of a preliminary objection whether raised formally or informally at the commencement of the hearing, immediately or defer it's ruling until after the hearing the whole case. However, in the instant case, on perusing the record of appeal of this case in the High Court of Kampala, the proceedings seem to have stopped halfway because the judge did not have the file. The Learned Justice Mubiru in


fact stated on pg. 6 of the record of proceedings that he could not proceed on the issue without the files and that the file would have to first be returned before he could proceed. The file was then transferred to this court. I will then proceed to determine this application on, its merits:

## **Merits of the application**

Issue 1: Whether there is an arbitration agreement between the parties and if so, whether the arbitration agreement is valid and enforceable against the parties?

Counsel for the applicant submitted that there is a valid, binding $[6]$ . and enforceable arbitration clause between the parties and that any dispute arising between the parties ought to be resolved in accordance with their agreed dispute resolution mechanism. That Clause 34.1 of the General Conditions of the contract (GCC) provides that unless otherwise specified in the Specific Contract Conditions (SCC), the procedure for dispute shall be specified in GCC 34.2 to 34.4. That under the SCC at page 4 of annexure B to the affidavit in support of the application, the parties agreed that the procedure for settling the disputes shall be CADER and that the arbitration shall be conducted in accordance with the Arbitration and Conciliation Act in Kampala. That the SCC are meant to supplement the GCC and that whenever there is a conflict, the SCC provisions shall prevail.

Counsel for the applicant also argued that CADER is established under part vi of the Arbitration and Conciliation Act as an arbitration forum with functions that include arbitration proceedings. That the parties'

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intentions for adopting CADER was for arbitration purposes and not any other purposes. He relied on the case of Panyimur Rural Cooperative Savings and others v The Microfinance Support Center M. A. No. 14 OF 2014 at Page 2 where it was held that it is the duty of court to carry out the parties' intention and that once the parties agree to refer all disputes of fact and law to arbitration, both are bound to submit to arbitration in case of dispute.

Counsel for the respondent in response submitted that clauses 34.1-34.4 GCC should be read and construed tandem with clause 33.1 of the GCC and SCC which give the scope and nature of disputes. Clause 33.1 titled "Disputes" states that "If the contractor believes that a decision taken by the project manager was either outside the authority given to the project manager the contract or that the decision was wrongly taken, the decision shall be referred to any adjudicator appointed under the contract within 14 days of the notification of the project manager's decision. Counsel for the respondent argued that 33.1 requires the contractor to express belief that a decision taken by the project manager was either outside the authority given to them by the contractor or that it was wrongly taken. That the provisions of sub clause 34.1 GCC relate to the decisions of the project manager who under GCC 1.19 (z) was appointed by the applicant to be responsible for execution of the works and administering the contract. Counsel then submitted that the cause of action in the main suit is breach of contract and no mention of the decisions of the project manager which would have triggered adjudication under GCC 34.1 was made since there is no promanager decision in this case. Further that GCC 34.4 **Trisaged**

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arbitration arising only from the decision of the Adjudicator and the court cannot enforce a purported arbitration clause when the same is vague and/or defective. He also submitted that the applicant's insistence on having the matter referred to the arbitrator would amount to usurpation of **clause 33.1** which renders parties to the adjudicators jurisdiction for disputes arising from the contract agreement. Further, that the arbitration agreement in clauses 34.3 and 34.4 GCC only exists in appellate capacity and not as a dispute resolution process.

Counsel for the applicant also argued that the respondent was trying to disregard the intention of the parties and the binding clauses in the SCC which must be read together with the General Conditions. That the SCC is clear that the procedure for settling disputes shall be CADER. (it should be read with the GCC and the GCC says that the disputes being referred to are those arising out of the contract agreement/ project manager's decisions. So, when it comes to that, the procedure shall be CADER). The adjudicator is as to CADER as per GCC 35.1 and not arbitration. He also further argued that by the parties expressly adopting CADER as a forum and the Arbitration and Conciliation Act as the governing law, they are bound by the doctrine of incorporation by reference. That in a contract where the parties make reference to a document or specific Act, the parties are bound by it.

#### Resolution

From the pleadings and submissions above, the assertion made by $[7]$ . the applicant is that the contract agreement-has a valid and enforceable

Page 7 of 12 arbitration clause and that the parties ought to be referred to arbitration as required by law in Section 5 and 9 of the Arbitration and Conciliation Act. On the other hand, the respondent argues that according/to the contract agreement, the parties can only go for arbitration after they have received the decision of an adjudicator and that the arbitration clause is inoperative since it makes no reference to a particular clause for arbitration.

The dispute clauses in the contract agreement state that:

## "33. Disputes

33.1 if 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 referred to any Adjudicator appoints under the contract within 14 days of the notification of the Project Manager's decision.

## 34. Procedure for Settling Disputes

34.1 Unless otherwise specified in the SCC, the procedure for disputes shall be specified in GCC 34.2 to 34.4

34.2 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.

34.3 ... 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.

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34.4 Any arbitration shall be conducted in accordance with the Arbitration and Conciliation Act 2000 or such other formal mechanism specified in the SCC, and in the place shown and in the place shown in the SCC.

... SPECIAL CONDITIONS OF CONTRACT

The following Special Conditions of Contract (SCC) shall supplement the General Conditions of Contract (GCC). Whenever there is a conflict, the provisions herein shall prevail over those in the GCC.

| GCC 34.1 | The procedure for settling disputes shall | |----------|-------------------------------------------| | | be CADER | | GCC 34.4 | The arbitration shall be conducted in | | | accordance with the Arbitration AND | | | Conciliation Act 2000 OF Uganda. | | | Arbitration shall take place at: | | | Agreed premises in Kampala Uganda. | | GCC 35.1 | The Appointing Authority for the | | | Adjudicator is: PDE & Contractor shall | | | agree at the time. |

I agree with counsel for the respondent that is clear that GCC 33.1 $[8]$ . requires the contractor to express belief 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" as

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was held in the case of Dott Services Ltd v Uganda National Roads Authority & Anor (Miscellaneous Cause No. 228 of 2017) which can be compared to this case. In the **Dott case** very similar contract provisions were before the court and the court held that in effect, the reference to adjudication need only be premised on the contractor's belief. In the same case, the parties who had agreed to use an adjudicator in case of a dispute regarding a belief that the decision made by the project manager was outside his or her authority or wrong. It was also held in that case that, the SCC did not make provision for disputes where the procedure shall not be outlined in clauses 25.2, 25.3 and $25.4$ . These clauses are almost identical to clauses 34.2, 34.3 and 34.4 GCC. It was also held that clause 25.1 is distinct from Clause 24.1 because, it is the general provision for reference of disputes, which are not specified in the SCC. Again, those clauses are almost identical to Clause 33.1 and $34.1.$

In the instant case before this court, Clause 33.1 is clearly a general provision for reference of disputes which are not specified in the SCC. This view is reinforced by clauses 34.2 and 34.3 which specifically mention "any adjudicator appointed under the contract." In the **Dott** case, the phrase "under the contract" was found to be wider approach that that in clause 24.1 (which is identical to clause 34.1 GCC). It was held that the adjudicator was to preside over all other contractual disputes arising from the contract agreement and that the applicant was at liberty to seek the appointment of an adjudicator for any other

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dispute arising from the contract agreement under clause 25.2 to 25.3 (which are identical to clause 34.2 to 34.3 GCC).

I therefore find that the clauses 34.1-34.4 GCC allow for an adjudicator to be appointed in any other disputes other than the ones in **clause** 33.1 to do with the Project Manager. Further, I agree with counsely for the respondent and the Learned Justice Mubiru's initial statements in the certified record of proceedings that the contract has provisions of procedure but not specific submission on arbitration where the parties agree that in the event of the specified disputes, they shall be referred to an arbitrator. Court can only refer the dispute to another body for arbitration if there is a clear arbitration clause of which in this case there is none in the contract causing the court to refer the case for arbitration or preventing court from interfering.

Issue 1 is resolved in the negative.

## Issue 2: What are the remedies to the parties

$[9]$ . Given that issue I has been resolved in the negative, ordinarily the application ought to be dismissed and the parties continue on with the main suit where the parties will appear for scheduling. Order 12 rule (1) of the Civil Procedure rules however provides that the court shall hold scheduling conference to sort out points of agreement and $\overline{a}$ disagreement, the possibility of arbitration, mediation and any other form of settlement. Both parties have expressed a willingness to settle the matter out of court and the court could refer the parties to settle the matter using Alternative Dispute Resolution methods. Counsel for the respondent stated in his submissions that the respondent has no

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reservations against court referring the parties for arbitration. This means that if both parties agree, the matter can be referred to arbitration by order of court as per Order 47 of the Civil Procedure Rules.

$[10]$ . Since **clauses 34.1- 34.4 GCC** gave the parties an opportunit to each appoint an arbitrator, an opportunity they did not take. It is my considered opinion and in the interest of justice that should the parties so decide, the instant dispute can be referred and handled by International Center for Arbitration and Mediation (ICAMEK) which is a body of professional arbitrators.

I therefore dismiss this application with the following orders:

- 1. Should the parties so decide, this matter can be referred for arbitration to the International Center for Arbitration and Mediation (ICAMEK) in accordance with clauses 34.1-34.4 GCC to be concluded within 90 days of such decision. - 2. The costs of the suit shall abide the outcome of the Arbitration. - 3. Each party shall bear their own costs of the instant application.

It is so ordered.

Dated, delivered and signed at Mbarara this. $.2023.$ ∴dav of

Joyce Kavuma Judge

| | DEPUTY REGISTRAP MBARARA | |-------------------|--------------------------| | $\cap \text{ATE}$ | |

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