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Huvaz Investment Ltd and Others v Equity Bank Ltd (Miscellaneous Application 159 of 2023)

High Court · [2024] UGHC 955 · 2024 Application Granted — Suit Dismissed and Referred to Arbitration AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to dismiss main suit and refer dispute to arbitration, arising from Civil Suit No. 71 of 2022
Decision
Main suit dismissed; dispute referred to arbitration in Kenya under Clause 11 of the loan agreement

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a valid written arbitration clause existed in the loan agreement signed by the parties, referring disputes to arbitration in Kenya under Kenyan law. Section 9 of the Arbitration and Conciliation Act ousts the jurisdiction of Ugandan courts in matters governed by that Act. The arbitration agreement was not null and void, inoperative, or incapable of being performed. The court has no jurisdiction to hear the underlying suit. Civil Suit No. 71 of 2022 dismissed and the dispute referred to arbitration in accordance with Clause 11 of the loan agreement.

Outcome

Main suit dismissed; dispute referred to arbitration in Kenya under Clause 11 of the loan agreement

Facts

The respondent bank advanced a loan to the first applicant under an Eazzystock Financing Loan Form & Contract executed on 6 July 2021. The second and third applicants signed personal guarantees. The loan fell into default. The respondent sued in Civil Suit No. 71 of 2022 for recovery of UGX 98,894,109 being the outstanding balance. The applicants brought this application to dismiss the suit and refer the dispute to arbitration, relying on Clause 11 of the loan agreement. Clause 11 provided that disputes shall be referred to arbitration under the rules of the Arbitration (Amendment) Act 2009 of Kenya and that neither party shall commence an action in court until the matter is determined by arbitration. The respondent opposed the application, arguing that other documents (the Personal Guarantee and Key Facts Document) gave jurisdiction to Ugandan courts, creating a conflict of laws.

Issues

  1. Whether the matters raised in Civil Suit No. 071 of 2022 ought to be referred to arbitration within the confines of the Arbitration and Conciliation Act.
  2. What remedies are available to the parties.

Orders

  • The dispute between the parties ought to be referred to arbitration in accordance with Clause 11 of the general terms and condition of the Respondent's Eazzystock Financing Loan Form & Contract.
  • Civil Suit No. 71 of 2022 is dismissed.

Rules and key headnotes

Arbitration & ADR — Arbitration Agreement — Existence and Validity — Written Arbitration Clause in Contract
For a court to conclude that a matter is governed by the Arbitration and Conciliation Act, it must determine whether there is a written arbitration clause or agreement signed by the parties; whether the arbitration agreement is null and void, inoperative, or incapable of being performed; and whether there is any dispute between the parties with regard to the matters agreed to be referred to arbitration.
Arbitration & ADR — Jurisdiction of Courts — Ouster by Arbitration Agreement
Section 9 of the Arbitration and Conciliation Act expressly ousts the jurisdiction of courts in matters that the parties agree to be governed by that Act. A restrictive statute that limits the intervention of court in matters governed by the Arbitration and Conciliation Act ousts the jurisdiction of the courts to entertain disputes that fall under it.
Contract Law — Binding Effect of Contracts — Parties Bound by Agreements Freely Executed
Parties are bound by the agreements they freely execute. Where parties have executed agreements, they are bound by them and evidence of the agreement should be obtained from the agreement itself and not from extrinsic evidence.
Arbitration & ADR — Arbitration Agreement — Primary Loan Agreement Governs Dispute
Where a guarantor agreement is a separate agreement from the primary loan agreement, before invoking the guarantor agreement the liability would have been determined using the primary loan agreement. It is the primary loan agreement that is key in determining the dispute between the parties.
Civil Procedure — Stay of Proceedings — Referral to Arbitration under Section 5 of the Arbitration and Conciliation Act
Under Section 5(1) of the Arbitration and Conciliation Act, a matter which is the subject of an arbitration agreement shall be referred back to arbitration unless the court finds that the arbitration agreement is null and void, inoperative, or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.
Arbitration & ADR — Prematurity of Court Action — Duty to Exhaust Arbitration First
Where an arbitration clause provides that neither party shall be entitled to commence an action in a court of law upon any matter in dispute until the matter has been submitted and determined by arbitration, a suit filed before arbitration is premature and ought to be dismissed.

Legislation cited (10)

Cases cited (8)

  • British American Tobacco v Lira Tobacco Stores (Miscellaneous Application No. 924 of 2013)
  • Golf View Inn (U) Ltd v Barclays Bank (U) Ltd (Civil Suit No. 358 of 2009)
  • Vantage Mezzanine Fund II Partnership v Simba Properties Investment Co Ltd and Another (Miscellaneous Application No. 201 of 2020)
  • Power and City Construction Ltd v LTL Project (Pvt) Ltd (Miscellaneous Application No. 062 of 2011)
  • Huadar Guangdong Chinese Co Ltd v Damco Logistics Uganda Ltd (Civil Suit Nos. 4 & 5 of 2012)
  • David Kayondo v The Cooperative Bank Ltd (Supreme Court Civil Appeal No. 19 of 1991)
  • Babcon Uganda Limited v Mbale Resort Hotel Limited (Court of Appeal Civil Appeal No. 87 of 2011)
  • Fulgensius Mungereza v Africa Central (Supreme Court Civil Appeal No. 18 of 2002)

Full judgment

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

Huvaz Investment Ltd and Others v Equity Bank Ltd (Miscellaneous Application 159 of 2023) [2024] UGHC 955 (11 October 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.