Weldetinsae v Bekunda & Another (Miscellaneous Cause 9 of 2024) [2024] UGCommC 134 (15 May 2024)

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) MISC. CAUSE NO. 009 OF 2024**

## 10 **TOMAS YAQOB WELDETINSAE ::::::::::::::::::::::::: APPLICANT**

#### **VERSUS**

#### **1. MAGDALENE BEKUNDA**

# **2. HIYAB REAL ESTATE COMPANY LIMITED ::::::::::::: RESPONDENTS** 15

#### **BEFORE: HON. LADY JUSTICE PATIENCE T. E. RUBAGUMYA**

20 **RULING**

Introduction

This application was brought by way of Chamber Summons under **Section 6 (1) of the Arbitration and Conciliation Act, Cap.4 and Regulation 13**

**of the Arbitration Rules**, seeking orders that:

- 1. An interim measure of protection doth issue by way of an injunction order restraining the Respondents or any of their agents or successors in title from evicting, attempting to evict or otherwise interfering with the Applicant's quiet enjoyment and possession of - 30 the property comprised in **Kyadondo Block 245 Plots 74 and 79, land at Kiuliriza** until the final determination of the arbitration proceedings which the Applicant has commenced against the Respondents; and - 2. The costs of this application abide the outcome of the arbitration 35 proceedings which the Applicant has commenced against the Respondents.

# 5 Background

The background of the application is contained in the affidavit in support deponed by the Applicant, and is summarized below:

- 10 1. That by a Lease Agreement dated 29th January, 2021, the Applicant let the property comprised in Kyadondo Block 245 Plots 74 and 79, land at Kiuliriza from the 1st Respondent for a fixed ten-year period commencing on 1st February, 2021 and expiring on 31st January, 2031 for the known and agreed purpose of operating a lounge, bar 15 and restaurant styled "Mash-Up Lounge." - 2. That the Agreement provides under clauses 7.1 and 10 that it cannot be terminated before the natural expiry of the ten-year lease term on 31st January, 2031 and that if the Landlord contemplates a pre-20 mature termination, the same can only be done upon further mutual agreement to pay the Applicant the agreed compensation by way of payment of; (i) the capital injection with interest thereon at a commercial rate, (ii) damages for the lost profit and opportunity, and (iii) all costs incidental to the premature termination. - 3. That the Agreement also provides that in the event of sale of the property by the 1st Respondent, any buyer thereof shall as the 1st Respondent's successor in title be bound by all the terms of the Agreement. - 30

4. That the Agreement also contains a valid and binding arbitration clause which requires that all disputes and differences arising between the parties be referred to arbitration under the Arbitration and Conciliation Act.

- 5 5. That in or about July, 2023, the 1st Respondent began contemplating the sale of the property and identified the promoters and shareholders of the 2nd Respondent Company as potential buyers. - 6. That in light of the impending sale of the property to the 2nd 10 Respondent, and well aware of clauses 7.1 and 10 of the Agreement which provides that the lease cannot be determined before its natural expiry on 31st January, 2031 without a mutual agreement to compensate the Applicant for his sunken costs and lost profits and opportunity, the Respondents entered into negotiations with the 15 Applicant to determine the value of the compensation due to him. - 7. That although the Applicant estimated and still estimates his projected loss to be in excess of USD 250,000, he indicated to the Respondents that he would be willing to accept the heavily 20 discounted figure of USD130,000 as consensual compensation for a proposed mutual pre-mature termination of the lease. - 8. That as per the 1st Respondent's request, the above offer was put in writing and delivered to the Respondents. - 9. That the 1st Respondent sold the property to the 2nd Respondent for a disclosed sum of UGX 2.2Bn and caused a transfer of the property to the 2nd Respondent in October, 2023 although no formal communication of the change in proprietorship was made to the 30 Applicant as he discovered the fact of the transfer on 5th January, 2024 upon making inquiries at the Lands Registry. - 3 10. That the 1st Respondent's allegations of breach of the Agreement in form of permanent alterations to the property are unfounded as all 35 the adjustments were made with her knowledge and consent and for the obvious purpose of rendering the property suitable for the

- 5 agreed user of operating a lounge, bar and restaurant without diminution and additionally, the 1st Respondent and her agents have to-date continued to visit, inspect and use the Applicant's services on the property and are estopped from denying their approval of any and all adjustments which were made to the 10 property. - 11. That the Applicant has by clause 13 of the Agreement and the Arbitration and Conciliation Act, served the Respondents with a Notice of Commencement of Arbitration. - 12. That pending the appointment of an arbitrator, the Applicant is facing an imminent threat of eviction from the property in clear violation of the Applicant's rights under the Agreement which would cause him irreparable harm through the shutting down of his thriving business 20 before the effluxion of his ten-year term, render the arbitration nugatory yet specific performance of the Agreement is the primary remedy sought, upset the status quo before final determination of the dispute, and otherwise occasion a great injustice to the Applicant. - 25

13. That it is just and equitable that this application is granted.

#### Representation

The Applicant was represented by Counsel Martin Mbanza Kalemera of 30 M/s Birungyi, Barata & Associates while the Respondents were not represented.

MMAKS Advocates was originally also representing the Applicant but on 26th April, 2024, they filed a notice of withdrawal of instructions on ECCMIS.

# 5 Affidavit in reply

The Respondents did not file an affidavit in reply.

When the matter came up for hearing on 21st March, 2024, Court directed that the affidavit in reply be filed by the Respondents by 28th March, 2024. Court further gave schedules for filing written submissions and Counsel

- 10 for the Applicant was requested by Court to communicate the same to Counsel for the Respondents which he did vide the letter dated 25th March, 2024. An affidavit of service of the letter deponed by Mr. Tadeo Bbosa is on Court record. Delivery of the Ruling was fixed for 30th April, 2024, however, on that day Counsel for the Applicant appeared in Court and - 15 prayed that he proceeds ex parte since the Respondents did not appear in Court and neither had they filed an affidavit in reply. Accordingly, Court granted this prayer.

## Issue for Determination

Whether the application discloses sufficient grounds for the grant of an

20 interim measure of protection? Applicant's submissions

> In his submissions, Counsel for the Applicant first dealt with the fact that the Respondents did not file an affidavit in reply despite being served.

25 Counsel submitted that it is trite law that a defendant who fails to file a defence puts himself out of Court and cannot be heard and that therefore the application is unopposed and on that basis should be granted. Counsel referred to the case of *Energo Projekt Joint Stock Company Vs Brig. Kasirye Gwanga and Anor, HCMA No.558 of 2009*, wherein it was held 30 that where a Respondent fails to file an affidavit in reply, that is a clear indication that they do not intend to challenge the application and the facts in the affidavit in support are therefore admitted.

#### 5 Resolution

It is a cardinal principle of law as shown in the case of *Prof. Oloka Onyango and Others Vs Attorney General (Constitutional Petition No.6 of 2014)*, in which the Learned Justices while considering **Order 8 Rule 3 of the Civil Procedure Rules SI 71-1** found that, every allegation

10 in a plaint, if not specifically or by necessary implication denied in a pleading by an opposite party, shall be taken to be admitted. Therefore, failure to rebut a fact specifically traversed in an affidavit amounts to admitting that fact.

The above has been echoed in High Court decisions such as the case of

15 *William Akankwasa Vs Registrar of Titles HCMA No.33 of 2008*, in which **Hon. Lady Justice Percy Night Tuhaise** (as she then was) with the guidance of the case of *Samwiri Massa Vs Rose Achan [1978] HCB 297*, held that facts as adduced in the affidavit evidence of the Applicant that are neither denied nor rebutted are presumed to be admitted.

As a result, this application stands substantially unopposed. However, **Sections 101, 102** and **103 of the Evidence Act, Cap. 6**, place the onus upon the Applicant herein, to prove to this Court the necessary considerations for the grant of this application.

# Applicant's submissions

In his submissions, Counsel for the Applicant first relied on **Section 6 (1) of the Arbitration and Conciliation Act**, which empowers this Court to grant interim measures of protection in arbitration matters as was re-30 echoed in the case of *AC Yafeng Construction Limited Vs the Registered Trustees of Living Word Assembly Church and Anor, HCMA No.1 of 2021.*

- 5 Further that in the case of *Polat Yol Yapi Sanvetic SA Vs UNRA Misc. Cause No.003 of 2022*, the Court noted the following considerations to be applied by the Court in determining such an application: - 1. The nature and strength of the Applicant's case that is; whether 10 there is a serious question to be arbitrated, in respect of which the Applicant demonstrates a sufficient likelihood of success; - 2. Whether there is an imminent risk of irreparable loss, by considering whether damages are an adequate remedy to the perceived risk of 15 harm; and - 3. The course of action favoured on a balance of convenience that is, the cause of action that, results in a lower risk of injustice if the decision to grant the restraining order is incorrect. - 20 Counsel for the Applicant submitted on the above conditions as follows; - 1. Nature and strength of the Applicant's case/Whether there is a serious question to be arbitrated?

Counsel submitted that on 29th January, 2021, the 1st Respondent executed a Tenancy Agreement with the Applicant over property comprised

- 25 in Kyadondo Block 245 Plots 74 and 79 land at Kiuliriza. That the said Tenancy was fixed for 10 years commencing 1st February, 2021 and was to expire on 31st January, 2031 as seen in clauses 1.1, 3.1,5.1, 6 (f), 7.1,10 and 12 of the Tenancy Agreement, of **annexure "A"** to the affidavit in support. - 30 Counsel further submitted that clause 7.1 of the Tenancy Agreement provides that;

"*This Tenancy shall only be terminated by either party after the 10-year tenancy period provided in the Tenancy Agreement, and* 35 *any pre-mature termination thereof shall be subject to payment of all compensation for loss (being the total capital injection so-far* 5 *made together with interest at the going commercial rate from the date of receipt/expending of the same until it is fully repaid, plus damages for lost opportunity unconvinced) and all incidental costs that shall have accrued from the premature termination of the contract*."

Furthermore, that clause 10 of the Agreement provides that;

"*This Tenancy is for a fixed period and can only be terminated in accordance with the terms herein set or in accordance with the* 15 *law*."

That in line with the above, clause 6.1 (f) of the Agreement ensured the Applicant's 10-year tenure by providing that;

"*In the event that the Landlord sells, transfers, bequests the premises to any other person during the subsistence of the term of* 20 *the Tenancy, the Tenants shall continue to occupy the premises without any change in the terms and conditions of the Tenancy Agreement*."

Counsel then while referring to paragraphs 6-16 of the affidavit in support, submitted that when the 1st Respondent commenced the selling of the

25 subject premises, she engaged the Applicant on compensation that was due and payable in the event a sale was made.

That due to the above events, the Applicant commenced Arbitration by serving on the Respondents a Notice of Commencement of Arbitration per

- 30 clause 13 of the Tenancy Agreement as reflected in paragraphs 17 and 18 plus **annexure "E"** to the affidavit in support. - 2. Whether there is an imminent risk of irreparable loss and whether damages are an adequate remedy to the perceived risk of harm?

- 5 Regarding the above condition, Counsel for the Applicant submitted that considering the highly reputational nature of the Applicant's business and the Applicant's evidence under paragraphs 21-23 of the affidavit in support, it is evident that the inevitable damage that the premature and unlawful termination intended by the Respondents cannot be quantified - 10 by payment of money, and cannot be readily calculated or estimated. Counsel further submitted that since it is evident that the sale and transfer have already been effected to the 2nd Respondent, the 1st Respondent has thus taken steps to create intervening adverse claims by the 3rd parties. - 15 Considering that the purpose of granting a restraining order is to preserve the parties' legal rights pending arbitration, the failure to grant the same will certainly compromise the Applicant's ability to assert his claimed rights.

In conclusion on this condition, Counsel submitted that the Applicant has 20 made out a case of unfair irreparable damage which is inevitable to his commercial reputation by an imminent enforcement of unlawful termination and eviction.

## 3. The course of action favoured on a balance of convenience:

25 Counsel contended that the Applicant relies on his unrebutted testimony in his affidavit in support and specifically paragraph 23 which details the fact that the balance of convenience is highly in the Applicant's favour, as he stands to lose an established business with his lifetime investment and savings if a restraining order is not granted to him. That the Applicant's 30 unrebutted evidence on Court record while compared to the Respondents' attempts to unlawfully terminate his tenancy, only leads to some inevitable impact; that is:

- 5 i. The harm will severely compromise the Applicant's financial position and prevent him from justly asserting his claim in arbitration. - ii. The Applicant's reputational restaurant, bar business and its location in the heart of Kansanga, have a unique value that damages will not atone. - 10 iii. The Applicant's premature eviction will have the effect of precluding the Applicant from tangible assets that he cannot easily use; - iv. The unlawful and premature termination and eviction are part of the 1st Respondent's inequitable scheme to enrich herself unjustly. - v. The Applicant has invested significant resources to pursue and grow 15 his business which is not capable of compensation. - vi. Compensation after termination and the subsequent arbitration will be obtained too late to rescue the Applicant's business; and - vii. The unlawful and premature eviction is only aimed to benefit the Respondents and will harm the Applicant in a manner incapable of

## 20 atonement.

## Analysis and Determination

I have considered the evidence of the Applicant adduced in the affidavit in 25 support of the application and the submissions, to find as hereunder:

As stipulated under **Section 9 of the Arbitration and Conciliation Act**, the Courts, except as provided by the Act, are limited from intervening in matters governed by the Act. To that effect, **Section 6 (1) of the**

30 **Arbitration and Conciliation Act** prescribes applications for interim measures of protection as one of the instances the Court may intervene in matters of arbitration. The Section stipulates that;

5 "*A party to an arbitration agreement may apply to the Court, before or during arbitral proceedings, for an interim measure of protection, and the Court may grant that measure*."

According to the case of *Great Lakes Energy Company NV Vs MSS Xsabo*

- 10 *Power Limited & 4 Others, HCMA No. 1041 of 2023*, Court defined an interim measure as any temporary measure by which, at any time before issuance of the award by which the dispute is finally decided, the arbitral tribunal or Court orders a party to either (a) maintain or restore the status quo pending determination of the dispute or (b) take action or refrain from - 15 taking action to prevent imminent harm or prejudice to the arbitration process itself or (c) provides means of preserving assets, out of which a subsequent award may be satisfied or (d) preserve evidence that may be relevant to the resolution of a dispute. - 20 The above orders aim at achieving the fundamental objective of the legal system, the preservation of the parties' legal rights pending arbitration but it is not aimed at determining the said rights.

As submitted by Counsel for the Applicant, **Hon. Justice Stephen Mubiru**

- 25 in the case of *Polat Yol Yapi Sanvetic SA Vs UNRA (supra)* listed the considerations in determining such an application. I agree with the above considerations and therefore, I shall apply the same in the determination of this matter. - 30 1. Nature and strength of the Applicant's case/ Whether there is a serious question to be arbitrated?

In the instant case, the Applicant seeks an order of interim measure of protection by way of an injunction order restraining the Respondents from evicting the Applicant from the property comprised in Kyadondo Block 245

5 Plots 74 and 79 land at Kiuliriza pending arbitral proceedings between him and the Respondents.

The application is premised on the background that on 29th January, 2021, the Applicant and the 1st Respondent herein executed a Lease 10 Agreement whereby the 1st Respondent let the property in issue to the Applicant for 10 years from 1st February, 2021 to 31st January, 2031, to operate a lounge, bar and restaurant. In evidence, he attached **annexure**

**"A"** to the affidavit in support.

- 15 However, that in October, 2023, the 1st Respondent sold the property to the 2nd Respondent and caused a transfer of the same, without formal communication to the Applicant. The Applicant discovered the transaction on 5th January, 2024. - 20 That according to clauses 7.1 and 10 of the Agreement, the lease cannot be terminated before its expiry on 31st January, 2031 without a mutual agreement to compensate the Applicant. However, in the instant case, it is the Applicant's assertion that they have failed to agree on the compensation.

Therefore, following clause 13 of the Agreement, the Applicant vide **annexure "E"** to the affidavit in support, commenced arbitration proceedings and served a Notice of Commencement of Arbitration to the Respondents seeking specific performance or compensation among other

30 reliefs.

Considering the above facts and the evidence adduced, I find that there is a serious question to be arbitrated regarding each parties' obligations and their performance in the Agreement. Therefore, I find that there is a serious

35 question to be arbitrated.

5 2. Whether there is an imminent risk of irreparable loss? In determining this condition, Court has to consider whether damages are an adequate remedy to the perceived risk or harm.

In the case of *Proline Soccer Academy Vs Commissioner Land* 10 *Registration HCMA 494 OF 2018*, irreparable damage was defined as follows:

"*By irreparable injury it does not mean that there must not be physical possibility of repairing the injury, but it means that the injury or damage must be a substantial or material one, that is one* 15 *that cannot be adequately atoned for in damages*."

The Applicant contends that he has made out a case to his commercial reputation to the extent that the damage that the premature and unlawful 20 termination and eviction intended by the Respondents, cannot be quantified by payment of money and that thus the intended harm cannot be readily calculated or estimated.

From the above, I agree with Counsel for the Applicant that damage to 25 reputation is an irreparable injury that cannot be atoned with money. In the circumstances, this consideration is answered in the affirmative.

3. The course of action favoured on a balance of convenience:

In the instant case, as reflected under paragraph 23 of the affidavit in 30 support, the Applicant contends that the balance of convenience is highly tilted in his favour as he stands to lose an established business with his investment and savings if this application is not granted. That the said harm will severally compromise his financial position and prevent him from justly asserting his claim in arbitration.

Considering the above, based on my findings in the first two conditions, I find the balance of convenience in favour of the Applicant who might suffer

5 irreparable damage if the arbitration is rendered nugatory. Accordingly, this condition is also found in the affirmative.

I therefore find that the Applicant is more likely to suffer the most harm if this application is denied. Accordingly, the application is granted. Costs of

10 the application shall abide the outcome of the arbitration proceedings.

I so order.

Dated, signed and delivered electronically this **15th** day of **May**, **2024.**

Patience T. E. Rubagumya **JUDGE** 15/05/2024 7:45am

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