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National Social Security Fund and Another v Alcon International Limited (Civil Appeal No 15 of 2009)

Supreme Court · [2013] UGSC 29 · 2013 Appeal Allowed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Second appeal to the Supreme Court from a Court of Appeal decision upholding an arbitral award and the High Court's reference of the suit to arbitration
Decision
Appeal allowed; arbitral award and lower court orders set aside; matter remitted to the High Court for fresh trial

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AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions — always read the source judgment before relying on it.

Holding

The Supreme Court allowed the appeal and set aside the Court of Appeal judgment, the High Court orders and the arbitral award. It held that the respondent (Alcon Uganda) had no cause of action because it was not a party to the construction contract and the purported assignment from Alcon Kenya was invalid, lacking the employer's written consent required by Clause 17 and made fraudulently within the Hanspal family without NSSF's knowledge. An award procured by such fraudulent misrepresentation is illegal and contrary to public policy and may be set aside. The trial judge also erred in referring the matter to arbitration without any party's application, contrary to section 5 of the Arbitration and Conciliation Act. The case was remitted to the High Court for trial.

Facts

In July 1994 NSSF contracted with Alcon International Ltd (Kenya) to complete a partially built structure (Workers' House) on Plot 1 Pilkington Road, Kampala; W.H. Ssentoogo was the project architect. The contract was varied, a supplementary contract followed in 1996, and an extension of time was granted. NSSF gave notices of default and terminated the contract on 15 May 1998 under Clause 25. The respondent sued for wrongful termination (HCCS No. 1255 of 1998). The trial judge declined a temporary injunction and instead stayed the suit and referred it to arbitration under Clause 36. An arbitrator was appointed and made an award. It later emerged in Civil Application No. 50 of 2007 that the company that signed the contract was Alcon Kenya, while Alcon Uganda performed the works and litigated, the Hanspal family having internally arranged for Alcon Uganda to perform after Alcon Kenya won the tender. The Court of Appeal struck Alcon Kenya off the record and upheld the award; the appellants appealed.

Issues

  1. Whether the respondent, Alcon International Ltd (Uganda), had a cause of action against the appellants where it was not a signatory to the contract and relied on an assignment.
  2. Whether the assignment of the contract from Alcon International Ltd (Kenya) to Alcon International Ltd (Uganda) was valid absent the employer's written consent under Clause 17.
  3. Whether the arbitral award was obtained illegally or contrary to public policy by reason of fraudulent misrepresentation of the contracting company's identity.
  4. Whether the trial judge erred in staying the suit and referring the matter to arbitration without any party's application contrary to Order 47 Rule 1 and section 5 of the Arbitration and Conciliation Act.
  5. Whether the arbitrator misconducted himself, in particular in denying costs to the 2nd appellant.

Orders

  • Appeal allowed.
  • Judgment and orders of the Court of Appeal set aside.
  • Orders of the courts below, including the arbitral award, set aside.
  • Case (HCCS No. 1255 of 1998) remitted to the High Court for expeditious trial.
  • Costs of this appeal and of the courts below between the 1st appellant and respondent to abide the outcome of the trial.
  • 2nd appellant awarded costs in the Supreme Court and the courts below.

Key headnotes

Contract Law — Privity of Contract — Cause of Action
A person who is not a party to a contract has no cause of action to sue upon it, as a contract cannot confer rights or impose obligations on strangers to it.
Contract Law — Assignment — Prohibition Clause Requiring Consent
An attempted assignment of contractual rights or burden in breach of a contractual prohibition requiring the employer's consent is ineffective to transfer any contractual right to the assignee.
Contract Law — Assignment and Novation — Consent and Notice
The transfer of liability under a contract requires the consent of all parties and written notice to the party liable; an assignment arranged without the knowledge or consent of the other contracting party is invalid and amounts at best to an attempted novation that fails for want of the elements of a valid contract.
Arbitration & ADR — Setting Aside Award — Fraud and Public Policy
An arbitral award procured by fraudulent misrepresentation, including concealment of the true identity of the contracting party, is illegal and contrary to the public policy of Uganda and may be set aside under section 34 of the Arbitration and Conciliation Act.
Arbitration & ADR — Reference to Arbitration — Jurisdiction of the Court
A court may refer a matter to arbitration under Order 47 Rule 1 and section 5 of the Arbitration and Conciliation Act only upon the application of a party and after hearing the parties; the court cannot invoke its inherent jurisdiction to do so where an express statutory provision governs the matter.
Civil Procedure — Illegality — When It May Be Raised
Once an illegality is brought to the attention of the court it may be raised at any stage, including on appeal, because a court of law cannot sanction that which is illegal; and where a transaction is founded on fraud, the fraud taints the whole and postpones the running of limitation.
Civil Procedure — Costs — Exercise of Judicial Discretion
Costs are in the discretion of the court, but where the court declines to award costs to a party it must set out sufficient reasons in writing; reasons that are insufficient cannot justify denying a party its costs.

Legislation cited (16)

  • Arbitration Act (Cap 55) s.12
  • Arbitration Act (Cap 55) s.17
  • Arbitration Rules Rule 7
  • Arbitration and Conciliation Act (Cap 4) s.4
  • Arbitration and Conciliation Act (Cap 4) s.5
  • Arbitration and Conciliation Act (Cap 4) s.33
  • Arbitration and Conciliation Act (Cap 4) s.34
  • Civil Procedure Rules Order 47 Rule 1 (old Order 43 Rule 1)
  • Civil Procedure Rules Order 6 Rule 2
  • Civil Procedure Rules Order 6 Rule 3
  • Civil Procedure Act s.27
  • Judicature Act s.14(2)
  • Constitution of Uganda Article 126
  • Constitution of Uganda Article 139(1)
  • Penal Code Act s.94
  • Court of Appeal Rules Rule 2(2)

Cases cited (14)

  • Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
  • Fredrick Zaabwe v Orient Bank & Others (Civil Appeal No. 4 of 2006)
  • Farm International Ltd & Ahmed Farah v Mohamed Hamid Farih (Civil Appeal No. 16 of 1993)
  • Makula International Ltd v His Eminence Cardinal Nsubuga & Another (Civil Appeal No. 4 of 1981)
  • Active Automobile Spares Ltd v Crane Bank Ltd (Civil Appeal No. 21 of 2001)
  • Stephen Lubega v Barclays Bank (Civil Appeal No. 2 of 1992)
  • Christ for All Nations v Apollo Insurance Co. Ltd (2002) 2 EA 366
  • Alcon International Ltd v Kampala Associated Advocates (Civil Application No. 50 of 2007)
  • Yugasta Construction v Coffee Marketing Board (Arbitration Cause No. 1 of 1994)
  • Wellsford vs Watson Homes and Overseas Insurance (1870) 3 CH 257
  • Construction Engineers and Builders v Sugar Development Corporation (1985) LRC (Comm) 596
  • Suleiman Vaco v Lakhani and Co. (1957) EA 49
  • Prasun Roy v Calcutta Metropolitan Development Authority (1988) LRC (Comm) 596
  • Sheikh Jama v Dubat Farah (1959) EA 789
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