Wakilii

Mbale Resort Hotel Ltd v Babcon Uganda Ltd (HCMA 265 of 2010)

High Court · [2011] UGCOMMC 43 · 2011 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to set aside arbitral award under the Arbitration and Conciliation Act
Decision
Application partly allowed with two portions of the arbitral award set aside

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court partially set aside an arbitral award. The award of special damages of Shs.1,272,700,857 was set aside for lack of proof. The award of general damages of Shs.100,000,000 for punitive purposes was set aside as an error of law. The court held that an arbitral award should ordinarily be upheld unless shown to be bad on the face of it or to violate natural justice, but colossal sums claimed as special damages must be properly proved and general damages cannot be awarded for punitive purposes. The remainder of the award remained intact.

Outcome

Application partly allowed with two portions of the arbitral award set aside

Facts

Mbale Resort Hotel Ltd entered into a construction contract with Babcon Uganda Ltd on 14 June 2006 for construction of an annex building at Mbale Resort Hotel. The contract sum was Shs.666,337,984 with practical completion set for 30 October 2007. The applicant terminated the contract on 2 October 2007. The parties referred the dispute to arbitration before Hon. Justice A. Karokora (Rtd). On 8 April 2010, the arbitrator made an award requiring the applicant to pay Shs.1,712,880,153.34 comprising claims for design modifications (Shs.132,585,395.34), wrongful termination (Shs.1,272,700,857), various outstanding certificates and valuations (Shs.207,593,901), and general damages (Shs.100,000,000). The applicant applied to set aside the award on grounds that it did not accord with the Arbitration and Conciliation Act, was perverse with errors on its face, and reflected arbitrator misconduct.

Issues

  1. Whether the arbitral award was made in accordance with the Arbitration and Conciliation Act
  2. Whether the arbitrator applied the terms of the building contract when making the award
  3. Whether the arbitrator properly assessed special damages of Shs.1,272,700,857
  4. Whether the arbitrator was guilty of misconduct or exhibited partiality
  5. Whether the award of general damages for punitive purposes was proper

Orders

  • Special damages of Shs.1,272,700,857 set aside
  • General damages of Shs.100,000,000 set aside
  • Remainder of arbitral award remains intact
  • Applicant awarded one-third of its taxed bill of costs

Rules and key headnotes

Setting aside arbitral awards — Standard of review — Finality principle
The award of an arbitrator is ordinarily final and conclusive and courts should approach the award with the desire to support it if reasonable rather than destroy it. The court's role is one of superintendence not substitution of decision-making, and it will only intervene where the award is shown to be bad on the face of it or there has been something radically wrong or vicious in the proceedings amounting to a violation of natural justice.
Arbitral awards — Interpretation of contract — Mistake of law or fact
Where an arbitrator makes a mistake of law or fact and there is no court of appeal from the arbitrator, the mistake cannot be remedied by the court unless it can be shown that there was misconduct on the part of the arbitrator. Where there are several possible views, the view taken by the arbitrator will prevail if the arbitrator has applied his mind to the pleadings, evidence, and terms of the contract.
Arbitral procedure — Appointment of experts — Discretion of arbitrator
The appointment of an expert by an arbitral tribunal is discretionary under Section 26 of the Arbitration and Conciliation Act. Unless the parties agree otherwise, the arbitral tribunal may appoint experts to report on specific issues. The arbitrator is not obliged to appoint an expert where the parties have not agreed to do so and have not raised it during proceedings.
Special damages — Burden of proof — Arbitral awards
Special damages must be strictly proved even in arbitration proceedings. A colossal sum claimed as special damages cannot be upheld merely because it was not challenged by the opposing party. Where no supporting documentation exists and the witness statement does not refer to the claimed sum, the award of such damages is unreasonable and unsafe and must be set aside.
Arbitrator misconduct — Partiality — Standard of proof
An arbitrator is not liable under a charge of acting without impartiality if he acts honestly, not in bad faith, and without fraud. An action against an arbitrator for want of skill, negligence, or similar causes will not succeed provided the arbitrator acts honestly without fraud or collusion. An innocent mistake in applying law or legal principles does not amount to impartiality or misconduct.
General damages — Punitive versus compensatory — Error of law
The grant of general damages for punitive purposes as opposed to compensatory purposes is an error of law on the face of the record. Such an error is sufficiently glaring that it is unsafe to allow it to remain on the record and it must be set aside.

Legislation cited (9)

Cases cited (6)

  • Total Uganda Ltd v Buramba General Agencies [1997-2000] UCLR 412
  • Contact Graphics Ltd v Vivilan Metal Products Ltd (Misc. Application 520 of 2006)
  • Chevron Kenya Ltd & Anor v Dagare Transporters Ltd (Misc. Application 490 of 2008)
  • Kilembe Mines Ltd v B M Steels Ltd (Misc. Application 002 of 2005)
  • Associated Engineering Co. V Govt of Andara Pradesh [1991) 4 SCC 93 [AIR 1992 SC 233] Supreme Court
  • Oil & Natural Gas Ltd. V Saw Pipes Ltd [2003) (5) SCC 705

Full judgment

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Mbale Resort Hotel Ltd v Babcon Uganda Ltd (HCMA 265 of 2010) [2011] UGCommC 43 (2 May 2011)
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.