Wakilii

Lakeside Dairy Limited v International Centre for Arbitration and Mediation Kampala and Another (Misc Cause 21 of 2021)

High Court · [2021] UGCOMMC 181 · 2021 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to set aside an arbitral award arising from Arbitration Cause No. 4 of 2021
Decision
Application to set aside arbitral award dismissed with costs to the respondents

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the application to set aside the arbitral award. The distribution agreement containing the arbitration clause was valid: the marketing head who signed it had ostensible authority and the applicant subsequently ratified the agreement through its conduct. The arbitration clause, while lacking procedural detail, was not pathologically defective and could be given effect through the Arbitration and Conciliation Act's default provisions. The 1st respondent was properly designated as appointing authority under Legal Notice No. 4 of 2020. The applicant was given repeated opportunities to participate in the appointment of the arbitrator and the proceedings but deliberately refused to engage. The tribunal's decision to proceed ex parte was justified and did not violate natural justice. No ground under section 34 of the Arbitration and Conciliation Act was established.

Outcome

Application to set aside arbitral award dismissed with costs to the respondents

Facts

Lakeside Dairy Limited, a manufacturer of dairy products, entered into a distribution agreement on 21 September 2017 with Midland Emporium Limited, a Kenyan company, appointing it as exclusive distributor in specified Kenyan regions. The agreement contained an arbitration clause providing for arbitration to be held in Kampala, Uganda. A dispute arose when the parties accused each other of breaching the agreement. Midland referred the dispute to the International Centre for Arbitration and Mediation Kampala (ICAMEK) on 16 September 2019. ICAMEK appointed an arbitrator on 10 March 2020. Lakeside objected to the jurisdiction and composition of the tribunal but refused to participate in the proceedings despite repeated invitations and extensions of time. The arbitrator proceeded ex parte and delivered an award on 1 April 2021, finding Lakeside liable to pay USD 1,400 as special damages, USD 386,400 as general damages, interest at 18% per annum, and costs. Lakeside then applied to the Commercial Court to set aside the award.

Issues

  1. Whether the arbitration agreement was void due to the signatory lacking authority to bind the applicant company.
  2. Whether the arbitration clause was pathological and thus unenforceable.
  3. Whether the composition of the arbitral tribunal was irregular due to unilateral appointment of the arbitrator by the 1st respondent.
  4. Whether the arbitral tribunal wrongfully accepted jurisdiction despite the applicant's objections.
  5. Whether the applicant was denied a reasonable opportunity to present its case in the arbitration proceedings.
  6. Whether the arbitral award was contrary to public policy.

Orders

  • Application dismissed.
  • Costs awarded to the respondents.

Rules and key headnotes

Arbitration — Validity of arbitration agreement — Authority to bind company
Under section 52(1) of the Companies Act 2012, where a person deals with a company in good faith, the power of directors to bind the company is deemed free of any limitation in the company's constitution. A marketing head signing a distribution agreement within the company's ordinary business has ostensible authority to bind the company, and good faith is presumed unless proven otherwise.
Arbitration — Ratification — Implied ratification of arbitration agreement
Where a party's conduct demonstrates adoption of an unauthorised transaction, implied ratification occurs. Ratification deems the contract enforceable as if the agent had requisite authority all along. A company acknowledging the existence and terms of a distribution agreement in correspondence from its legal counsel constitutes implied ratification of the agreement including its arbitration clause.
Arbitration — Pathological arbitration clauses — Separability doctrine
An arbitration clause is separable from the main contract and its validity does not depend on whether the broader agreement remains in force. Courts will strive to uphold an arbitration clause and give effect to the parties' clear intention to arbitrate, even where the clause lacks procedural detail such as number of arbitrators or appointment procedure. The Arbitration and Conciliation Act provides default provisions to fill such gaps.
Arbitration — Appointment of arbitrator — Default mechanism under statute
Under section 11(3) of the Arbitration and Conciliation Act, where parties fail to appoint an arbitrator, the appointment must be made by the appointing authority. An institution designated by the Minister as appointing authority under section 2(1)(a) has lawful authority to appoint arbitrators. The existence of a pending court challenge to the institution's status does not affect its authority under a valid statutory instrument.
Arbitration — Natural justice — Right to be heard — Ex parte proceedings
Section 18 of the Arbitration and Conciliation Act requires that parties be treated equally and given a full opportunity to present their case. A party given repeated notice of proceedings, extensions of time, and invitations to participate but deliberately choosing to abstain cannot claim denial of natural justice. Arbitrators have inherent power to continue proceedings and render an ex parte award where a party refuses to participate.
Arbitration — Setting aside award — Limited grounds for court intervention
Under section 9 of the Arbitration and Conciliation Act, courts shall not intervene in matters governed by the Act except as provided. Section 34(2) sets out the limited grounds for setting aside an arbitral award. A court reviewing an arbitration award is not functioning as an appellate court but is merely deciding upon the legality and validity of the award. Save for specified circumstances, parties take their arbitrator for better or worse both as to decision of fact and decision of law.
Arbitration — Waiver of right to object — Conduct during proceedings
A party who fails to contest the authority of an arbitrator or raise jurisdictional objections during the course of arbitral proceedings waives its right to object. Active non-participation and deliberate refusal to engage with repeated procedural opportunities constitutes waiver, precluding subsequent challenge on grounds that could have been raised during the proceedings.

Legislation cited (21)

Cases cited (18)

  • Coppee-Lavalin SA/NV v Ken-Ren Chemicals and Fertilizers Ltd [1994] 2 All ER 465
  • Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
  • Pitochu Corporation v Johann M K Blumenthal GmbH & Co KG and Another [2012] EWCA Civ 996
  • Lovelock Limited v Exportles [1968] 1 Lloyd's Rep 163
  • Mangistaumunaigaz Oil Production Association v United World Trading Inc [1995] 1 Lloyd's Rep 617
  • Paul Smith Ltd v H and S International Holdings Inc [1991] 2 Lloyd's Rep 127
  • Walusinbi Nelson and Another v Uganda Law Society and Another (Civil Suit No. 207 of 2019)
  • Michael Wilson and Partners Ltd v Emmott [2011] EWHC 1441 (Comm)
  • ABB Ag v Hochtief Airport GmbH [2006] EWHC 388
  • Profilati Italia SRL v PaineWebber Inc and Another [2001] 1 All ER 1065
  • Networks Ltd v Econet Wireless International Ltd [2005] 1 Lloyd's Rep 192
  • London Underground Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC)
  • Drs G M Goel v Amega Limited [2010] EWHC 2454 (TCC)
  • Egerton v Earl of Brownlow (1853) 10 ER 359
  • Cooke v Turner (1845) 60 Eng Rep 449
  • Christ For All Nationals v Apollo Insurance Co Ltd [2002] 2 EA 366
  • Sinocore International Co Ltd v RBRG Trading (UK) Ltd [2018] 2 Lloyd's Rep 133
  • Oliver Wendell Holmes, Jr., The Common Law (1881) at p. 1

Full judgment

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Lakeside Dairy Limited v International Centre for Arbitration and Mediation Kampala and Another (Misc Cause 21 of 2021) [2021] UGCommC 181 (22 October 2021)
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.