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Canaf Group Inc (Formerly Uganda Gold Mining Limited) v Kilembe Mines Limited (Miscellaneous Cause 47 of 2023)

High Court · [2025] UGCOMMC 546 · 2025 Application Granted — Award Set Aside AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to set aside arbitral award under Arbitration and Conciliation Act
Decision
Arbitral award set aside and matter remitted to a different arbitrator for fresh adjudication

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court set aside an arbitral award in its entirety on the ground that the arbitrator determined the dispute on the basis of illegality of the underlying contract, an issue neither pleaded by the parties nor framed for determination, thereby exceeding the scope of the reference to arbitration and violating natural justice. The court found that the arbitrator's determination of illegality after the close of hearings, without adequately informing the parties that this issue would dispose of the case, denied them a fair opportunity to present their case. The court rejected grounds challenging the arbitrator's treatment of hearsay evidence and exercise of discretion in assessing witness testimony, holding these fell within the arbitrator's broad discretion under the Arbitration and Conciliation Act and UNCITRAL Rules.

Outcome

Arbitral award set aside and matter remitted to a different arbitrator for fresh adjudication

Facts

The applicant and respondent entered into a mineral exploration and feasibility study agreement on 27 September 2004. A dispute arose concerning the respondent's alleged breach of contractual obligations, which was referred to arbitration under the agreement's arbitration clause. Mr Didas Nkurunziza was appointed as arbitrator. Seven issues were framed for determination, the first being whether the respondent breached the agreement. After the conclusion of oral hearings, the arbitrator by letter dated 1 February 2023 invited parties to address various provisions of the Mining Act in their submissions, without expressly indicating their potential impact on the validity of the contract. In his award delivered on 26 April 2023, the arbitrator found that the agreement was illegal and unenforceable ab initio due to the respondent's lack of an exclusive prospecting licence required under applicable mining laws. The arbitrator also found that the testimony of both parties' sole witnesses was hearsay and based his decision primarily on documentary evidence. The applicant received the award on 26 April 2023 and filed this application on 26 May 2023 seeking to set aside the award.

Issues

  1. Whether the arbitral award dealt with a dispute as to illegality which was not contemplated by and did not fall within the terms of reference to arbitration.
  2. Whether the arbitral award was contrary to the non-derogable right to a fair hearing by holding the applicant's witness testimony inadmissible as hearsay.
  3. Whether the arbitral award was not in accordance with the Arbitration and Conciliation Act and UNCITRAL Rules by disallowing oral evidence and proceeding on documents only.
  4. Whether the arbitral award disregarded the adversarial principle by adopting an inquisitorial approach.
  5. Whether the arbitral award was not in accordance with section 28(4) of the Arbitration Act requiring the arbitrator to decide according to considerations of justice and fairness.

Orders

  • The arbitral award dated 24th April 2023 is set aside in its entirety.
  • The dispute is remitted to a different arbitrator for fresh adjudication in accordance with the agreement of the parties.
  • Costs of the application to be borne by the respondent.

Rules and key headnotes

Setting Aside Arbitral Awards — Scope of Reference — Determination of Issues Not Contemplated by Parties
An arbitral award may be set aside under section 34(2)(a)(iv) of the Arbitration and Conciliation Act where the arbitrator determines a dispute not contemplated by or not falling within the terms of reference to arbitration. Although an arbitrator is not strictly confined to the list of framed issues and may consider legal matters arising from the pleadings or evidence, this discretion must be exercised in a manner consistent with natural justice. Where an arbitrator determines the legality of a contract as the dispositive issue after the close of hearings, without expressly framing illegality as an issue or setting out its consequences for determination, and without giving the parties full and informed opportunity to present their case on that matter, the award deals with a matter beyond the scope of the reference and violates the principles of natural justice and fairness.
Natural Justice — Adequate Notice of Issues — Transformation of Dispute
Where an arbitrator transforms a dispute from a question of performance (breach of contract) to one of enforceability (illegality rendering the contract void ab initio), without adequately informing the parties that the legality of the contract is in contention or that this issue will dispose of the case, the arbitrator denies the parties a fair opportunity to fully present their case and violates natural justice. Mere citation of statutory provisions without expressly framing illegality as an issue is insufficient notice.
Severability of Awards — Inseparable Determinations
Under section 34(2)(a)(iv) of the Arbitration and Conciliation Act, where a court sets aside part of an arbitral award that dealt with matters beyond the arbitrator's jurisdiction, the section preserves the enforceability of valid portions if they are separable. However, where the arbitrator's determination on an issue beyond jurisdiction forms the foundation of the entire award, it cannot be severed from the rest of the decision, and the award must be set aside in its entirety.
Admissibility of Evidence — Arbitrator's Discretion — Assessment of Hearsay
Under section 19(3) of the Arbitration and Conciliation Act and Article 17(3) of the UNCITRAL Arbitration Rules, an arbitrator has broad discretion to determine the admissibility, relevance, materiality and weight of any evidence. Where an arbitrator hears oral testimony from both parties' witnesses but assesses that testimony as lacking weight due to its indirect hearsay nature and proceeds to base the decision primarily on documentary evidence that has been properly tendered, this falls squarely within the arbitrator's discretion and does not amount to a denial of a fair hearing or violation of public policy. It is not misconduct for an arbitrator to assess evidence conservatively, provided the parties were heard.
Justice and Fairness — Section 28(4) Arbitration Act — Limits of Discretion
Section 28(4) of the Arbitration and Conciliation Act grants an arbitral tribunal discretion to determine disputes based on considerations of justice and fairness without being bound by rules of law. However, this discretion is not unfettered and does not empower the arbitrator to disregard foundational public policy considerations or to enforce contracts tainted with illegality. Justice and fairness must be balanced with overarching principles of public order and good conscience. An arbitrator is not precluded from applying legal norms but is permitted to temper strict legalism with equitable considerations where appropriate.
Time Limits — Application to Set Aside Award — Computation of Time
Under section 34(3) of the Arbitration and Conciliation Act, an application for setting aside an arbitral award must be made within one month from the date the party making the application received the arbitral award. Time runs from the date of actual receipt of the award by the party or its legal representative, as evidenced by acknowledgment of receipt.

Legislation cited (16)

Cases cited (2)

  • Roko Construction Ltd v Kobusingyc Janet (Miscellaneous Cause No. 22 of 2021)
  • Smile Communications Uganda Limited v ATC Uganda Limited (Arbitration Cause No. 4 of 2022)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Canaf Group Inc (Formerly Uganda Gold Mining Limited) v Kilembe Mines Limited (Miscellaneous Cause 47 of 2023) [2025] UGCommC 546 (10 June 2025)
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.