Wakilii

National Social Security Fund & Anor v Alcon International Ltd (Civil Appeal 15 of 2009)

Supreme Court · [2013] UGSC 4 · 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; decisions of the Court of Appeal and High Court and the arbitral award set aside; matter remitted to the High Court for fresh trial.

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Cited — treatment unverified cited in 2 (treatment unverified) Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

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. The building contract was signed by Alcon International (Kenya), not the respondent Alcon International (Uganda), and the purported assignment to the Uganda company was ineffective: assignment of the burden of a contract requires the other party's consent, which NSSF never gave, and an assignment in breach of the contractual prohibition is void. The respondent therefore had no cause of action. The arbitral award had been procured by the respondent's deliberate concealment and fraudulent misrepresentation of its identity, rendering it illegal and contrary to public policy; fraud may be raised at any time and postpones limitation. The trial judge had also wrongly referred the suit to arbitration without an application under section 5. The award and lower decisions were set aside and the case remitted to the High Court.

Facts

In July 1994 NSSF contracted with Alcon International (Kenya) to complete a partly built structure (Workers' House) on Plot 1 Pilkington Road, Kampala, with Ssentoogo & Partners as project architect. The contract, on an East African Institute of Architects model, contained an arbitration clause (Clause 36) and a clause (17) prohibiting assignment without NSSF's consent. After variations and disputes, NSSF terminated the contract in May 1998. The respondent sued for wrongful termination. The High Court declined a temporary injunction and instead stayed the suit and referred the matter to arbitration, which produced an award favouring the respondent. It later emerged, in Court of Appeal Civil Application No. 50 of 2007, that the company that signed the contract was Alcon (Kenya), while Alcon (Uganda) had performed the works and prosecuted the suit and arbitration, the two companies being controlled by the Hanspal family. NSSF had deliberately chosen Alcon (Kenya) for its track record and had rejected Alcon (Uganda) at tender; the switch was arranged within the family without NSSF's knowledge or consent.

Issues

  1. Whether the respondent (Alcon International Uganda) had a cause of action against the appellants when it was not a party to the building contract and any assignment of that contract was made without NSSF's consent.
  2. Whether the arbitral award should be set aside as having been obtained illegally or contrary to public policy by reason of the respondent's fraudulent misrepresentation of its identity.
  3. Whether the trial judge erred in staying the suit and referring the matter to arbitration without an application or agreement by the parties.
  4. Whether the arbitrator misconducted himself, including 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 remitted to the High Court for expeditious trial.
  • Costs of this appeal and of the courts below between the 1st appellant and the respondent to abide the outcome of the trial.
  • 2nd appellant awarded costs in the Supreme Court and the courts below.

Key headnotes

Contract Law — Assignment — Transfer of the burden of a contract requires the other party's consent
The burden of a contract cannot be unilaterally assigned; a party may transfer its liability under a contract only with the consent of the other contracting party, failing which the purported assignment is ineffective and any transfer of liability amounts at most to a novation requiring the consent of all parties.
Contract Law — Privity and Assignment — Assignment in breach of a contractual prohibition is void
An attempted assignment of contractual rights in breach of a contractual prohibition against assignment is ineffective to transfer those rights to the assignee, since to hold otherwise would defeat the legitimate commercial purpose of ensuring the original parties are not brought into direct contractual relations with strangers.
Civil Procedure — Cause of Action — Non-party to a contract without valid assignment
A claimant who was not a party to the contract sued upon and who holds no valid assignment of it has no cause of action against the other contracting party, notwithstanding that it may have performed the contractual works.
Arbitration & ADR — Setting Aside an Award — Award procured by fraud and contrary to public policy
An arbitral award procured by corruption, fraud or undue means, or which is in conflict with the public policy of Uganda, may be set aside; an award obtained through deliberate fraudulent misrepresentation of a party's identity is both illegal and contrary to public policy.
Civil Procedure — Illegality — Illegality may be raised at any time
A court of law cannot sanction that which is illegal; once an illegality is brought to the court's attention it overrides all questions of pleading and may be raised at any stage, even where the appeal would otherwise be incompetent.
Civil Procedure — Limitation — Fraud postpones the running of time
Where a transaction is founded on fraud, the original vice continues to taint it however long the matter is pursued; fraud or fraudulent breach of contract postpones the commencement of the period of limitation, so a party is not barred from raising fraud discovered after judgment.
Arbitration & ADR — Reference by the Court — Statutory conditions for staying a suit and referring to arbitration
A court may stay a suit and refer a matter to arbitration only on the application of a party after a defence is filed and after both parties are heard, as required by statute; the court's inherent jurisdiction cannot be invoked to refer a matter to arbitration where an express statutory provision governs the matter.

Legislation cited (14)

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

Cases cited (14)

  • Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85; [1993] 3 All ER 417
  • 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
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.