Wakilii

Panyimur Rural Cooperative Savings and Credit Society Limited & 5 Ors v The Microfinance Support C (MISCELLANEOUS CIVIL APPLICATION No. 0014 OF 2014)

High Court · [2017] UGHCCD 88 · 2017 Matter Remitted to Arbitration AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for unconditional leave to appear and defend in a summary suit for loan recovery
Decision
Suit stayed and parties referred to arbitration as required by the dispute resolution clause in their loan agreements

Observed later treatment

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Holding

Where parties to a loan agreement have expressly provided for arbitration of disputes with a sequential dispute resolution mechanism requiring attempted amicable resolution followed by arbitration before court proceedings, the court must give effect to their intention. A suit filed without first exhausting the agreed arbitration process is premature and must be stayed pending arbitration, consistent with the constitutional duty to promote reconciliation and alternative dispute resolution.

Outcome

Suit stayed and parties referred to arbitration as required by the dispute resolution clause in their loan agreements

Facts

The Microfinance Support Centre filed a summary suit against Panyimur Rural Cooperative Savings and Credit Society Limited and five personal guarantors to recover shs. 452,234,932 outstanding on four loan agreements executed between September 2009 and April 2012. The total loans advanced were shs. 750,000,000 at 9% per annum interest, repayable within twenty-four months. The applicants sought unconditional leave to appear and defend, arguing that the dispute required reconciliation of accounts and that two guarantors signed only in their official capacities which had since ended. The four loan agreements contained a common clause 15 requiring disputes to be first resolved amicably within 30 days, then referred to arbitration under Ugandan arbitration laws, with courts having jurisdiction only if arbitration failed. The parties had not attempted arbitration before the suit was filed.

Issues

  1. Whether the suit was premature given the arbitration clause in the loan agreements requiring disputes to be referred to arbitration before resort to courts.
  2. Whether the applicants should be granted unconditional leave to appear and defend the summary suit.

Orders

  • The parties are hereby referred to arbitration.
  • The suit is stayed pending the results of the arbitration.
  • The parties are to report to court the progress or results of the arbitration on 11th October 2017 at 9.00 am.

Rules and key headnotes

Arbitration Clauses — Effect on Court Jurisdiction — Premature Suits
Where parties to an agreement have provided for arbitration as a precondition to court proceedings, the court must give effect to their intention and a suit filed without first exhausting the agreed arbitration process is premature and must be stayed pending arbitration.
Dispute Resolution Clauses — Sequential Mechanisms — Courts' Duty to Enforce Parties' Agreement
It is the duty of court to carry out the parties' intention as expressed in their agreement, and where parties have agreed to a sequential dispute resolution mechanism requiring amicable resolution followed by arbitration before court proceedings, courts must enforce that sequence.
Arbitration Agreements — Effect on Court Jurisdiction — Stay of Proceedings
Where an agreement provides for arbitration, the jurisdiction of court is ousted until after the matter is referred to arbitration, and in the meantime the suit will be stayed.
Judicial Authority — Article 126(2)(d) — Duty to Promote Reconciliation and ADR
Article 126(2)(d) of the Constitution requires courts in exercising judicial authority to promote reconciliation between parties and to be guided by principles of alternative dispute resolution including arbitration, and courts cannot be said to be promoting ADR when they readily entertain disputes which ought to be resolved in other forums.
Arbitration Clauses — Definition of Dispute — When Dispute Arises
Once parties by agreement agree to refer all disputes of fact and law to arbitration, both are bound to submit to arbitration in case of dispute, and a dispute arises where one party to an agreement construes a clause differently from what the other party believes to be the correct construction.

Legislation cited (1)

Cases cited (6)

  • Bemba Ruth and Another v Departed Asians Property Custodian Board (High Court Bulletin 1988-90, p.139)
  • Farm Land Industries Limited v Globe Exports Limited (High Court Bulletin 1991, p.77)
  • Sebuguluse George and Cook Semugabi v National Insurance Corporation (High Court Bulletin 1972, p.234)
  • Multi Construction Limited v C.M. L. K. Ntende (High Court Bulletin 1971, p.298)
  • Kayondo David B. v Co-operative Bank Limited (High Court Bulletin 1988-90, p.82)
  • Uganda Posts and Telecommunications Company v East African General Insurance Company Limited (High Court Bulletin 1983, p.36)

Full judgment

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

Panyimur Rural Cooperative Savings and Credit Society Limited & 5 Ors v The Microfinance Support C (MISCELLANEOUS CIVIL APPLICATION No. 0014 OF 2014) [2017] UGHCCD 88 (15 June 2017)
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.