TALP Advocates v Bayport Financial Services (U) Limited (Miscellaneous Cause 5 of 2022) [2022] UGCommC 191 (10 August 2022)

**THE REPUBLIC OF UGANDA**

**IN THE HIGH COURT UGANDA AT KAMPALA**

**(COMMERCIAL DIVISION)**

**Miscellaneous Cause No. 005 OF 2022**

**(Arising Out of Arbitration Cause No. 10 of 2021)**

**TALP ADVOCATES::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT**

**VERSUS**

**BAYPORT FINANCIAL SERVICES (U) LTD ::::::::::::::::RESPONDENT**

**BEFORE: HON. LADY JUSTICE CORNELIA KAKOOZA SABIITI**

**RULING**

This application was brought under **Section 98 CPA, Section, 34(1), (2) and 38 of the Arbitration and Conciliation Act, Rules 13 of the Arbitration and Conciliation Rules,** seeking orders that; the award in CAD/ARB/10/2021 be set aside, the respondent is guilty of breach of contract, the applicant is entitled to reimbursement of expenses incurred in the performance of the contract between the parties and costs of the application be provided for.

The grounds for this application are listed in the chamber summons and amplified in the affidavit in support together with a supplementary affidavit to the application of **Agenorwot Peace Pricilina**, briefly the grounds are; the award is tainted with glaring contradictions, biases and ambiguities especially on the finding that the respondent’s refusal to comply with the contractual clauses was a mere omission and yet it is what is held by the arbitrator to have been the root cause of the dispute which he held against the applicant. The arbitrator decided with bias and partiality when he ruled that failure to comply with Clause 2 (a) and (d) of the agreement of the parties dated 23rd January 2022, by the respondent was a mere omission therefore rendering the award unlawful. The arbitrator’s finding that failure to comply with a contractual clause was a mere omission not breach of contract is not only bias and injudicious but a deliberate denial of the applicant’s right to the principles of fairness and natural justice.

That the arbitrator acted on misdirection of law when he rendered an award which is vague and ambiguous therefore making it unjust and against public policy. The award is premafacie bad as it contradicts and violates the rules of natural justice. That it is just and equitable that the award so given be set aside and a finding that the applicant is entitled to recover its disbursement expenses from the respondent be given.

The application was opposed by an affidavit in reply of **Nankunda Dorothy,** the Senior Legal & Compliance Officer of the respondent. She briefly states that; the applicant commenced arbitration proceedings demanding UGX 87,159,243/= which was based on the invoice served on the respondent on the 18th January, 2021. That the arbitrator dealt with the claim without any bias. That the arbitrator made a judgment on admission of UGX 482,671/= which was 13% of 3,712,855/= that the applicant was entitled to as per the legal service agreement in place as amended. That the arbitrator was right in his findings, the applicant was only entitled to commission of 13% on recoveries made and the applicant cannot seek for renumeration under the Advocates (Remuneration and Taxation of Costs) (Amendment) Regulations. That the applicant has not demonstrated anything that warrants setting aside the arbitral award. The award is not against any public policy.

That this court does not have the mandate to grant the other orders sought because the applicant seeks this court to do a fresh summary hearing. She prayed that the application is dismissed with costs.

The applicant filed an affidavit in rejoinder rebutting the respondent’s averments and reiterating its averments as per the affidavit in support.

**Representation**

The applicant represented itself (**Talp Advocates**) and the respondent was represented by **KOB Advocates and Solicitors**. Both parties’ written submissions are on file.

**Resolution.**

The applicant in its submissions raised three issues for determination;

1. Whether there are any grounds to justify setting aside the award? 2. Whether the honourable court can in the circumstances make orders as sought for in the chamber summons? 3. What remedies are available to the parties?

**Issue 1: whether there are any grounds to justify setting aside the award?**

Counsel for the applicant submitted that circumstances that may warrant setting side arbitral awards were discussed in the case of **Prism Construction Co. Ltd Versus Dongil Construction Limited Misc. Application No. 91 od 2019** citing the decision of Mbale Resort Hotel Ltd Vs Babcon Uganda Ltd Misc. App. No. 265 of 2010 where Kiryabwire(as he then was) relied on M. A Sujan, The law Relating to Arbitration 2nd Edition, *The court can intervene and set aside the award if it is shown to be bad on the face of it or there has been some radically wrong or viscous in the proceedings amounting to a violation of natural justice.* Counsel submitted that the arbitrator acted with partiality when he chose to strictly interpret and apply contractual provisions as to the formula of remuneration. That the partiality and bias was seen in the arbitrator’s attempt to down play the itemized invoice with the sums therein without giving an alternative of what would have been the appropriate amount to counter what the applicant had claimed for.

That the arbitrator does not in anyway, in his award demonstrate the principle of natural justice and fairness especially when he acknowledges that the applicant performed the contract, but deliberately refuses to remedy this effort and simply dismissed it with plenty of evidence before him. Counsel asserted that an award which seeks to enforce an act which is against the established law is against public policy. That it is a principle of law that contracts are to be upheld. If parties are not sanctioned for breach of their own accords, it defeats the purpose of the law of a contract and therefore against public policy. Counsel cited the case of **Lakeside Diary Ltd Vs International Centre for Arbitration and Mediation Kampala & Anor Misc. Cause No. 021 of 2021**. That the award by the arbitrator points out non-compliance with contractual obligations but fails to sanction such breach as well acknowledges that one party performed the contract but fails to atone for the performance, against public policy and ought to be set aside.

In reply, counsel for the respondent disagreed majorly relying on the decision **of Mbale Resort Hotel Vs Babcon Uganda Ltd(supra)** and the case of **Kampala City Council Authority Vs Nnalongo Estates Ltd Misc. Cause No. 31/2013** on court’s scope in application to set aside an arbitral award. Counsel submitted that the applicant does not demonstrate any irrational, capricious or arbitrary act by the arbitrator but rather faults the arbitrator for making an erroneous, unconscionable decision with no legal basis. Counsel relied on the case of **NSSF Vs Alcon HC Arbitration Clause No. 4 of 2001 and NIC Vs Arconsults Architects (1984) 1 KALR**. That Section 34 of the Arbitration and Conciliation Act sets out limited grounds on which an award may be challenged and set aside by court.

That the applicant is merely aggrieved by the findings of the arbitrator and therefore inferring bias on the same. Counsel asserted that the arbitrator gave reasons for his findings and even if the findings are unreasonable in the eyes of the applicant or court, the court can not interfere with the award. The allegation of bias by the applicant are merely speculative and unfounded. The applicant being dissatisfied with the award of the arbitrator is attempting to have the court revisit the dispute and re-evaluate the evidence which court can not do in an application such as this.

I have carefully considered the above arguments by parties and the authorities they relied upon.

**Jurisdiction of this court.**

In the High Court decision of **Simbamanyo Estates Ltd Vs Seyani Brothers Company (U) Ltd, Misc. Application No. 555 of 2002**, Justice Stella Arach-Amoko (as he then was) held that; *When a Court is called upon to decide objections raised by a party against an arbitration award, the Jurisdiction of the Court is limited, as expressly indicated in the Act, and it has no jurisdiction to sit in appeal and examine the award on merits. See: Law Relating to Arbitration & Conciliation by P. C. Markanda P. 525.*

Having the above principle in mind, I shall determine this cause. I find it expedient to reproduce **S. 34 of the Arbitration and Conciliation Act** which provides that;

***Application for setting aside arbitral award;***

1. *Recourse to the Court against an arbitral award may be made only by an application for setting aside the award under subsections (2) and (3)* 2. *An arbitral award may be set aside by Court only if (a) a party making the application furnishes proof that* 3. *a party to the arbitration agreement was under some incapacity.* 4. *the arbitration agreement is not valid under law to which the parties have subjected it or if there is no indication of that law, the law of Uganda.* 5. *The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was unable to be sent his or her case* 6. *the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, except that if the decisions on matters referred to arbitration can be separated from those not referred, only that part of the arbitral award which contains decisions on mattes not referred to arbitration may be set aside.* 7. *the composition of the arbitral tribunal or the procedure was not in accordance with the agreement of the parties unless the agreement was in conflict with a provision of this Act from which the parties cannot derogate or in absence of an agreement was not in accordance with this Act.* 8. *the arbitral award was procured by corruption, fraud or undue means or there was evident partiality or corruption in one or more of the arbitrators or the arbitrator award is not in accordance with the Act.*

*(b) The Court finds that*

* 1. *the subject matter of the dispute is not capable of settlement by arbitration under the law of Uganda or*

*(ii) the award is in conflict with the public policy of Uganda*

The learned author **M. A Sujan, in his book Law Relating to Arbitration and Conciliation Second Edition at page 517**, while commenting on the Indian Section 34 which is a replica of our S. 34 ACA, wrote that; *Section 34 refers to setting aside of the award… it may be noticed that S. 34 restricts the grounds for setting aside the award as listed therein.*

Other grounds for setting aside an arbitral award can be established from case law, I have noted that India’s provisions on arbitration are similar to ours and she has established a wide jurisprudence from case law on matters regarding arbitration proceedings over the years. The Supreme Court of India while discussing setting aside of an award, in the case of **Associated Engineering Co. Vs Govt of Andhra Pradesh (1991) 4 SCC 93(AIR 1992 SC 232)** observed that; *an arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract and his sole function is to arbitrate in terms of contract as his authority is derived from the contract…If he remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reason for the award disclosing an error on the face of it…the court can look into the question of as to whether the arbitrator has travelled beyond the scope of the contract as he derives his jurisdiction from the contract and if the arbitrator exceeds his jurisdiction the award can be set aside. An award can also be set aside in cases of misconduct apparent on the face of the ward. It can also be interfered with if the arbitrator has given reasons for the award disclosing an error apparent on the face of it. (emphasis is mine)*

The above authorities are very clear on what court will consider to set aside the arbitral award. Briefly in this case, the respondent contracted with the applicant on the 23rd January 2020, to provide professional legal services of debt collection and any other services that may require financial business. Parties later on the 11th August 2020 made an addendum to the agreement. By a letter dated 9th November 2020, the respondent terminated the contract. Following the respondent’s termination, the applicant issued an invoice of UGX 229,040,203/= to the respondent being 13% of UGX 1,761,847,721/= as the amount demanded from 68 votes/entities. The applicant later changed its claim to UGX 87,159,243/=. The respondent disputed the invoice stating that only a sum of UGX 3,712,855/= had been recovered from one vote and the applicant was entitled to UGX 482,671/=. The applicant took the matter for arbitration. The parties on 18th May 2021, agreed and appointed Mohmed Mbabazi as their arbitrator. The arbitrator heard the parties and with reasons awarded UGX 482,671/= representing 13% commission of the money that was actually recovered of UGX 3,712,855/=.

The applicant counsel argued that the arbitrator was partial, biased, unfair, against principles of natural justice and conflicted with public policy of Uganda while giving his award. I will now determine these averments.

On partiality, bias and unfairness; Justice Godfrey Kiryabwire (as he then was) in the decision of **Mbala Resort Hotel Vs Babcon (supra)** cited with approval the case of **Total Uganda Ltd Vs Buramba General Agencies (1997-2000) UCLR 412**, he held that; *The question of partiality of Arbitrators was reviewed in detail in case of Total (Uganda) Ltd (supra) by Justice James Ogoola (as he then was). He reviewed most of the authorities on the subject (and I agree with them) so I shall not repeat them here save for the learned Judge’s findings. The learned Judge (at P. 419) states “…the court is mindful of the cardinal principle expressed by various jurists and in court cases to the effect that an Arbitrator is not liable, under a charge of acting without impartiality, if he acts “honestly”, or acts “not in bad faith” or otherwise acts “without fraud … an action against an Arbitrator for want of skill, or for negligence, or for the like cause will not i.e. provided he acts, honestly, without fraud or collusion .. The learned Judge also goes further to find that innocent mistake would not amount to partiality. I agree with this restatement of the law. In this case, no evidence has been brought as Justice Ogoola would have put it (P. 420) that the Arbitrator has acted with dishonest, bad faith, ill motive, fraud, collusion or corruption to bring it anywhere near the ambit of the traditional areas of misconduct. An error or mistake in applying the law or legal principles without more cannot amount to impartiality or misconduct and so, I do not uphold that sub ground.*

For more clarity, instances that could indicate partiality and bias by an arbitrator were clearly elucidated by **Professor D. Mark Cato in his book Arbitration Practice and Procedure, Interlocutory and Hearing Problems, Third Edition at pages 183-196;**

*Arbitrator’s personal knowledge of one party, Arbitrator’s close personal connection with parties’ witnesses, Arbitrator’s partner has previously acted for the claimant, Arbitrator decided a previous dispute between the same parties, bias may arise either from a relationship between the arbitrator and one of the parties or relation between the arbitrator and the subject matter in dispute, Arbitrator’s personal knowledge of the facts in dispute, Arbitrator inquires of the health of one party in the absence of the other party, friend of arbitrator appointed as expert, arbitrator accused of bias towards a party’s advocate, An arbitrator who comes from the same chambers as the parties’ advocates.*

Depending on facts before court, should a party adduce evidence proving the above, then the arbitrator will be regarded non-impartial and, on that basis, the award thereon will be set aside. Counsel for the applicant arguing on partiality stated that the arbitrator would have found that the respondent was not compliant with contractual obligation or would have ordered the respondent to produce information in compliance with the contract else he was regarded partial, which in my view does not relate to partiality. I must state that neither on the face of the record, nor on scrutiny of the entire record can it be said that the arbitrator was partial or biased. None of the above discussed instances or arguments close to the same were proved in this matter. I therefore disregard the applicant’s argument that the arbitrator was partial or biased.

On principle of natural justice; **the Supreme Court of India in Ganges Water Proof Works (P) Ltd Vs Union of India AIR 1999 SC 1102** held that *the burden of substantiating the averment of violation of principles of natural justice by the arbitrator was on the petitioner.*

Counsel for the applicant argues that the arbitrator does not demonstrate the principle of natural justice in his adjudication of disputes but fails to adduce any evidence to substantiate the plea. Counsel says that the arbitrator acknowledged that the applicant performed the contract but refuses to remedy the efforts by dismisses it with plenty of evidence. In my view, claims against natural justice would be; if the applicant was not permitted to present its case before the arbitrator, if its submissions were not permitted before the arbitrator but the respondent’s were. Court in the case of **Krishan Lal Vs Union of India, AIR 1999 Punjab & Haryana 60**, wherein it held that; *An arbitrator who performs a quasi-judicial function is supposed to adhere to the principles of natural justice and should not make a farce of the inquiry before him. He must give full opportunity to the parties to file their claims/replies, if any, and allow them to adduce evidence in support of their respective pleas.*

The applicant does not contend that it was never accorded a chance to be heard. In fact, I have had an opportunity to peruse the record before the arbitrator. Both parties were equally and fairly heard, the applicant was allowed to file its claims on 7th June 2021, the respondent its defence on 18th June 2021 and the applicant to reply on 18th June 2021, Joint scheduling memorandum and trial bundles on 25th June 2021, witness statements scheduled on 30th June 2021 and the hearing of both parties’ witnesses. The parties were there after allowed to file written submissions in the schedules provided before the final award was given. At that, I have failed to find any prejudicial act by the arbitrator in the course of the hearing against natural justice practices.

On Public Policy; **M. A Sujan in Arbitration and Conciliation book(supra)** cites **Pullock & Mulla’s Contract & Specific Relief Acts(11th Edition) Vol. 1 at Page 348**, where it is stated that*… Lord Brougham defines public policy as the principle which declares that no one can lawfully do that which has a tendency to be injurious to public welfare. Public Policy comprehends only the protection and promotion of public welfare.*

The Author goes on to illustrate that; anywhere *in the world action of interested parties seeking to corrupt ministers would be against public policy or public good*. I have failed to find merit in applicant counsel’s assertion that the award pointed the non-compliance to the contractual obligation but fails to sanction the breach amounts to acts against public policy. Giving an over review of the applicant’s argument, I am inclined to believe the respondent’s contention that the applicant attempts this court to carry out a fresh hearing, or revisit and re-evaluate the evidence which it is not mandated to. *An application is not appeal in the ordinary sense from an award of an Arbitrator* as per Justice Godfrey Kiryabwire in the decision of **Mbala Resort Hotel Vs Babcon (supra)**.

I must state that the arbitrator was alive to the fact that he had to decide the matter in accordance with the contract between the parties. It was agreed by the parties under Clause 4.0 of the addendum executed on 11th August 2020 that professional fees would be 13% commission on all the money that the applicant recovers during the debt collection and banks to the respondent’s bank. This was ably determined by the arbitrator in his award that Ugx 3,712,855/= was recovered and the applicant was entitled to Ugx 482,671/=. The Arbitrator determining the applicant’s professional fees on the basis of the Advocates Remuneration Rules as argued by the applicant would be going beyond his scope or jurisdiction because the same was not provided for under the contact. For these reasons, this ground or issue is answered in negative.

**Issue 2: Whether the honourable court can in the circumstances make orders as sought for?**

Counsel for the applicant contended that the application was brought under the spirit of clause 17.4 of the agreement between parties dated 23rd January 2020, which states; However, nothing will prevent either party to approach a competent court for purposes of obtaining interim relief pending the finalization of any arbitration proceedings. An arbitral decision and/or award shall not be final. Any party to the agreement shall have recourse to the courts of law to challenge the arbitration process and its attendant outcome. Counsel cited Section 38(1) & (2) of the Arbitration and Conciliation Act. Counsel contended that this court is enjoined with discretion in accordance with the agreement of the parties and the law to appraise itself with the facts, evidence and the law and come up with its findings regarding the dispute at hand. The current application is rightly before the court.

Clause 17.4 referred to by applicant counsel is in relation to parties seeking interim reliefs in the course of arbitration procedures. These are well elaborated in the Arbitration and Conciliation Act. According to his statement of claim before the arbitrator, the applicant only sought for recovery of sum UGX 87,159,243/= as payment for legal services, general damages for breach of contract, and costs. The issues were; whether the claimant’s demand for payment is lawfully sustainable, whether the respondent is by contract liable to reimburse the claimant? And remedies. The applicant in this cause seeks among other; orders that the respondent is guilty of breach of contract, the applicant is entitled to reimbursement of expenses incurred in the performance of the contract and entitled to payment of the work done in performance of the contract between the parties.

The applicant herein seeks orders that were never before the arbitrator for consideration. This court can not entertain new causes of action at this stage. Discretion by court is exercised subject to the law. This court cannot determine or grant orders that were never subject to the arbitration process, this would be an injustice to the respondent.

I therefore find no merit in this issue.

**Issue 3: What remedies are available to the parties?**

After a careful consideration of the case before me, I have found that the award contains the honest decision of the arbitrator after a full, impartial and fair hearing of the parties. This Court therefore has no authority to interfere with it. In the circumstances therefore, this application is void of any merit. It is therefore dismissed with costs to the respondent.

It is so ordered.

**CORNELIA KAKOOZA SABIITI**

**JUDGE**

**Date: 10th August 2022**