Wakilii

Najjuma v Khasakhi Cooperative Savings & Credit Society Limited (Miscellaneous Application 278 of 2023)

High Court · [2023] UGCOMMC 262 · 2023 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for stay of execution of default judgment pending disposal of application to set aside judgment
Decision
Application dismissed as irregular and illegal for want of prior referral to arbitration as required by the parties' loan agreement and applicable legislation

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the application for stay of execution on the ground that the underlying civil suit was irregularly and illegally before the court. The dispute between the cooperative society and its member arose from a loan agreement containing an arbitration clause, which required referral to arbitration. Section 55AAA of the Cooperative Societies Amendment Act 2020, read with Part X of the Cooperative Societies Act and the Arbitration and Conciliation Act, mandates referral to arbitration, not court adjudication. The court held that where an illegality is brought to its attention, it overrides all pleadings.

Outcome

Application dismissed as irregular and illegal for want of prior referral to arbitration as required by the parties' loan agreement and applicable legislation

Facts

The applicant, a member of the respondent cooperative society, obtained a loan in 2017. After several defaults, the respondent filed Civil Suit No. 655 of 2021 seeking recovery of UGX 68,000,000. The applicant did not file an application for leave to appear and defend, and a default judgment was entered in favour of the respondent. The applicant then filed two applications: one to set aside the judgment and this application to stay execution of the decree pending disposal of the setting-aside application. The applicant contended she was not properly served with summons. The loan agreement between the parties contained a dispute resolution clause (clause 16) requiring amicable settlement and, failing that, referral to arbitration. The applicant argued that the respondent should have invoked arbitration before filing suit.

Issues

  1. Whether this is a proper case for granting an order for stay of execution pending an application for setting aside judgment in the main suit
  2. Whether the dispute between the parties should be referred to arbitration in accordance with the arbitration clause in their loan agreement
  3. Whether section 55AAA of the Cooperative Societies Amendment Act 2020 requires court adjudication or appointment of an arbitrator

Orders

  • Application dismissed.
  • No order as to costs.

Rules and key headnotes

Arbitration Agreements — Mandatory Referral — Cooperative Societies
Where parties to a loan agreement with a registered cooperative society have agreed to refer disputes to arbitration, and the Cooperative Societies Amendment Act 2020 section 55AAA read with Part X of the Cooperative Societies Act and the Arbitration and Conciliation Act requires referral to arbitration, a court must refer the matter to arbitration and cannot adjudicate the dispute.
Statutory Interpretation — Section 55AAA Cooperative Societies Amendment Act 2020
Section 55AAA of the Cooperative Societies Amendment Act 2020, which states that disputes involving loan defaults shall be referred to courts, does not confer jurisdiction on courts to adjudicate such disputes. Rather, it requires the registrar of the court to prescribe qualifications of arbitrators and activate arbitral proceedings in accordance with Part X of the Cooperative Societies Act.
Arbitration and Conciliation Act — Role of Courts
Under section 5 of the Arbitration and Conciliation Act, when proceedings are brought before a judge in a matter subject to an arbitration agreement, the judge shall refer the matter to arbitration unless the arbitration agreement is null and void, inoperative, incapable of being performed, or there is no dispute to necessitate reference to arbitration. Section 9 of the Act provides that except as provided in the Act, no court shall intervene in matters governed by it.
Illegality — Effect on Proceedings
Once an illegality is brought to the attention of a court, it overrides all pleadings and the court cannot condone the same. A suit that should have been referred to arbitration in accordance with the parties' agreement and applicable legislation is irregular and illegally before the court.
Arbitration Clauses — Enforcement of Contractual Terms
It is the duty of a court to enforce an arbitration agreement freely entered into by parties. Where parties have contractually agreed to refer disputes to arbitration, the court must give effect to that agreement.

Legislation cited (9)

Cases cited (1)

  • Makula International v His Eminence Cardinal Nsubuga and Another (1982) HCB 11

Full judgment

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

Najjuma v Khasakhi Cooperative Savings & Credit Society Limited (Miscellaneous Application 278 of 2023) [2023] UGCommC 262 (28 September 2023)
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.