DFCU Bank Limited v Rocktrust Contractors (U) Limited & Another (Miscellaneous Cause 43 of 2023)

Observed later treatment

No later-treatment classification is recorded for this judgment.

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

Holding

The High Court granted temporary injunctions restraining both respondents from diverting contract proceeds assigned to the applicant bank as security for loan facilities. The court held that the applicant had a strong case for arbitration, that there was a real risk the arbitral award would be rendered moot if the assigned proceeds were not preserved, and that the balance of convenience favoured protection of the security pending arbitration. The costs were reserved to abide the outcome of arbitration.

Outcome

Temporary injunctions granted restraining both respondents from diverting assigned contract proceeds pending arbitration

Facts

DFCU Bank Limited provided loan financing to Rocktrust Contractors (U) Limited to finance the execution of a contract with Uganda National Roads Authority (UNRA) for mechanized maintenance of unpaved roads. By deed of assignment dated 6 January 2022, Rocktrust assigned to DFCU Bank all contract proceeds receivable from UNRA as continuing security for loan facilities. The bank claimed that Rocktrust was indebted in the sum of UGX 12,367,378,986 as at 10 October 2022. After the bank notified UNRA of the assignment on 14 November 2022, Rocktrust instructed UNRA to divert contract proceeds to other banks (Centenary Bank and Stanbic Bank) instead of paying them into Rocktrust's accounts held with DFCU Bank as required by the deed of assignment. DFCU Bank became aware that UNRA was processing a payment of UGX 2,700,000,000 to be paid through another bank in violation of the assignment. A dispute arose between the parties over entitlement to the contract proceeds, and an arbitrator was appointed to resolve the dispute. DFCU Bank applied for interim measures to preserve the assigned contract proceeds pending arbitration.

Issues

1. Whether the Applicant satisfied the conditions for the grant of interim measures of protection pending arbitration.
2. Whether the Applicant had a strong case to be presented to the arbitrator.
3. Whether there was an imminent risk of irreparable loss to the Applicant if interim relief was not granted.
4. Whether the balance of convenience favoured the grant of interim measures.

Orders

• A temporary injunction is issued restraining the 1st Respondent, its servants, agents or any other person acting under its direction or authority from diverting contract proceeds to any other bank account or receiving any money constituting contract proceeds under the Contract Agreement other than to the 1st Respondent's accounts held with DFCU Bank Ltd until the final determination of the arbitration proceedings or repayment in full.
• A temporary injunction is issued restraining the 1st Respondent from performing or directing any other action which would prejudice or compromise the Applicant's rights as Assignee of the contract proceeds.
• A temporary injunction is issued restraining the 2nd Respondent, its servants, agents or any other person acting under its authority from effecting payment of contract proceeds to any bank account other than the 1st Respondent's accounts held with DFCU Bank Ltd until the final determination of the arbitration proceedings or repayment in full.
• A temporary injunction is issued restraining the 2nd Respondent from recognizing, complying with, aiding or abetting any instructions to transfer contract proceeds to any other bank account until the determination of the arbitration proceedings or repayment in full.
• The costs of this application shall abide by the outcome of the arbitration.

Rules and key headnotes

Legislation cited (5)

• Arbitration and Conciliation Act Cap 4 s.6(1)
• Arbitration and Conciliation Act Cap 4 s.71(d)
• Civil Procedure Act Cap 71 s.98
• Judicature Act Cap 13 s.33
• Civil Procedure Rules S.I. 71-1 Order 8 rule 18(2)

Cases cited (2)

• AC Yafeng Construction Limited v The Registered Trustees of Living Word Assembly Church and Another (High Court Miscellaneous Application No. 1 of 2021)
• Kiyimba Kaggwa E.L.T. v Haji Abdu Nasser Katende [1985] HCB 43

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