Wakilii

Exim Bank (U) Limited & 2 Others v Latigo (Miscellaneous Application 616 of 2023)

High Court · [2024] UGCOMMC 96 · 2024 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to refer civil suit to arbitration and dismiss claims amenable to arbitration under Arbitration and Conciliation Act
Decision
Dispute between respondent and 2nd and 3rd applicants referred to arbitration; main suit stayed pending arbitration; claims against 1st applicant to proceed after arbitration concludes

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that an arbitration clause in a company's Articles of Association binds only parties privy to it and does not extend to third parties. Where a suit involves both claims subject to arbitration and claims against non-parties to the arbitration agreement, the court may sever the claims. Claims between company members involving alleged resignation, share transfer and mismanagement were referred to arbitration. Claims against the bank regarding due diligence in honouring payment instructions were stayed pending arbitration as they were not amenable to arbitration but connected to the arbitrable dispute.

Outcome

Dispute between respondent and 2nd and 3rd applicants referred to arbitration; main suit stayed pending arbitration; claims against 1st applicant to proceed after arbitration concludes

Facts

In 2019, the Respondent, Habasa Nelson and Kiyemba Yasir incorporated Ukutulu Ltd (2nd Applicant), with shareholdings of 30%, 40% and 30% respectively. All three became directors and opened a bank account with Exim Bank (1st Applicant). In October 2022, a resolution was filed stating the Respondent had resigned as director and sold his shares. The Respondent claimed this was a forgery. In December 2022, through its remaining two directors, the 2nd Applicant entered a stone quarry agreement with Strabag International GMBH for USD 325,000, of which USD 275,000 was paid and withdrawn from the company account. The Respondent filed suit claiming he was fraudulently excluded to deny him proceeds from the agreement, and that the bank failed in due diligence by processing withdrawals without his consent. The 2nd and 3rd Applicants applied to refer the matter to arbitration based on Clause 76 of the company's Articles of Association.

Issues

  1. Whether Civil Suit No. 0912 of 2022 should be referred to arbitration based on the arbitration clause in the Articles of Association of the 2nd Applicant.
  2. Whether the arbitration clause binds all parties to the main suit including the 1st Applicant (Exim Bank).
  3. Whether the claims against parties not privy to the arbitration agreement can be severed from those subject to arbitration.

Orders

  • The dispute between the Respondent and the 2nd and 3rd Applicants in Civil Suit No. 0912 of 2022 is dismissed and referred to arbitration.
  • Civil Suit No. 0912 of 2022 is stayed pending the conclusion of the arbitration.
  • Costs of this application shall abide by the outcome of Civil Suit No. 0912 of 2022.

Rules and key headnotes

Arbitration & ADR — Scope of Arbitration Agreement — Privity to Arbitration Clause
An arbitration agreement or clause only binds parties who consent to it. Courts will not compel arbitration of claims that are outside the scope of an arbitration agreement, which scope is delimited by the nature of claims anticipated by, and the parties to, the arbitration agreement.
Company Law — Articles of Association — Arbitration Clause — Binding Effect on Members
An arbitration clause in a company's Articles of Association is binding and enforceable between the company and its members or their representatives for disputes arising out of their relationship as such, but does not bind third parties who are not privy to the Articles.
Civil Procedure — Applications — Failure to File Reply — Effect
Where a respondent is duly served with an application and fails to file an affidavit in reply, there is a presumption that the respondent is not challenging or opposing the application, and facts adduced by the applicant that are neither denied nor rebutted are presumed admitted. A respondent who fails to file a reply puts himself outside the realm of the court and loses the legal standing to make representations.
Arbitration & ADR — Referral to Arbitration — Severance of Claims — Mixed Claims
Where a suit involves both claims subject to an arbitration agreement and claims against parties not bound by that agreement, the court may sever the claims amenable to arbitration from those that are not, refer the former to arbitration, and stay proceedings on the connected claims pending the arbitration award.

Legislation cited (3)

Cases cited (4)

  • Kaahwa Francis v Commissioner Land Registration (High Court Miscellaneous Application No. 2 of 2012)
  • William Akankwasa v Registrar of Titles (High Court Miscellaneous Application No. 33 of 2008)
  • Wamala Abdu v Commissioner Land Registration (High Court Miscellaneous Case No. 16 of 2021)
  • AC Yafeng Construction Company Ltd v The Living World Assembly Ltd (High Court Civil Suit No. 739 of 2021)

Full judgment

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

Exim Bank (U) Limited & 2 Others v Latigo (Miscellaneous Application 616 of 2023) [2024] UGCommC 96 (30 April 2024)
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.