Wakilii

Reynolds Construction Company (N) Limited v The Attorney General & 2 Others (Miscellaneous Cause 127 of 2023)

High Court · [2024] UGCOMMC 275 · 2024 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for interim measures of protection pending arbitration under the Arbitration and Conciliation Act
Decision
Application for interim measures dismissed; arbitration proceedings between applicant and second respondent to continue

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the application for interim measures of protection was dismissed. The court found that there was no arbitration agreement between the applicant and the third respondent (the bank) regarding the performance guarantee dispute. The disputes subject to arbitration between the applicant and the second respondent concerned only prolongation claims and liability for remedial works, not the legality of cancelling or cashing the guarantee. Furthermore, the performance guarantee had been cancelled in breach of contract when the applicant instructed cancellation based on certificates signed by the Supervisor's Representative rather than the Supervisor as required by the contract. The applicant did not come with clean hands and the existing guarantee had already been cancelled, rendering the orders sought nugatory.

Outcome

Application for interim measures dismissed; arbitration proceedings between applicant and second respondent to continue

Facts

The applicant entered into a contract with the Ministry of Finance for reconstruction of the Mbarara-Ntungamo-Kabale-Katuna Road. A performance guarantee of EUR 6,580,855.81 was issued by the third respondent bank. The applicant claimed the works were completed and the defects liability period expired in February 2018. The bank cancelled the guarantee in 2018 on the applicant's instructions after being provided with a final acceptance certificate and final statement of account signed by the Supervisor's Representative (COWI). However, the contract required these documents to be signed by the Supervisor (UNRA), not the Supervisor's Representative. Damage to the road occurred in May 2018 after the defects liability period allegedly expired. In 2021, the second respondent demanded the bank cash the guarantee to pay for remedial works. The bank refused, stating the guarantee had been cancelled. Conciliation attempts failed and the applicant commenced arbitration in November 2023, then sought interim measures to restrain cashing of the guarantee.

Issues

  1. Whether this is a proper case for issuance of interim measures of protection by way of mandatory injunction restraining respondents from cashing a performance guarantee pending determination of arbitral proceedings.
  2. Whether the conciliation process contemplated by the contract had failed, entitling the applicant to proceed to arbitration.
  3. Whether there is an arbitration agreement covering the dispute regarding the performance guarantee between the applicant and the third respondent.
  4. Whether the applicant came to court with clean hands, having cancelled the performance guarantee based on certificates not signed by the Supervisor as required by the contract.

Orders

  • Application dismissed with costs to the first and second respondents.

Rules and key headnotes

Arbitration & ADR — Interim Measures — Jurisdiction — Existence of Arbitration Agreement
A court may only grant interim measures of protection under section 6 of the Arbitration and Conciliation Act where there is an arbitration agreement between the parties and the dispute is a dispute contemplated within the arbitration clause which would be the subject matter of the arbitration proceedings.
Arbitration & ADR — Conciliation — Failure of Conciliation Process — Commencement of Arbitration
Where parties to a contract providing for conciliation fail to reach a settlement within the maximum time period of 120 days from the notification requesting conciliation, the conciliation procedure is considered to have failed and a party may proceed to arbitration in accordance with the contract.
Contract Law — Performance Guarantees — Release and Cancellation — Contractual Requirements
A performance guarantee governed by a construction contract may only be released in accordance with the specific conditions stipulated in the contract. Where the contract requires presentation of a final acceptance certificate and final statement of account signed by the Supervisor and Contracting Authority, cancellation of the guarantee based on documents signed only by the Supervisor's Representative constitutes a fundamental breach of contract.
Civil Procedure — Interim Injunctions — Clean Hands Doctrine — Breach of Contract
A temporary injunction is an equitable remedy and an applicant seeking this remedy must come with clean hands. Where an applicant has engaged in blatant breach of contract by procuring cancellation of a performance guarantee through presentation of improperly signed documents, the court will not grant interim relief restraining the beneficiary from demanding payment under the guarantee.
Civil Procedure — Temporary Injunctions — Preservation of Status Quo — Purpose and Scope
The purpose of a temporary injunction is to preserve the existing state of affairs pending litigation and to protect property from being wasted, damaged, alienated, sold, removed or disposed of. Where the alleged threatened action has already occurred and there is no property to protect, granting a temporary injunction would not preserve the status quo and the application will be dismissed.
Contract Law — Construction Contracts — Supervisor and Supervisor's Representative — Authority and Distinction
In a construction contract, the Supervisor's Representative carries out day-to-day supervision and checking of works but has no authority to agree any claim from the Contractor or relieve the Contractor of obligations under the contract. Where the contract requires documents to be signed by the Supervisor for the release of a performance guarantee, documents signed only by the Supervisor's Representative do not satisfy the contractual requirement.

Legislation cited (5)

Cases cited (2)

  • John Sekaziga and another v Church Commissioners Holding Company Ltd (Miscellaneous Cause 15 of 2013)
  • Byaruhanga & 2 others v Kabagahya (Miscellaneous Application 564 of 2016)

Full judgment

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

Reynolds Construction Company (N) Limited v The Attorney General & 2 Others (Miscellaneous Cause 127 of 2023) [2024] UGCommC 275 (31 January 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.