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Sekaziga & Anor v Church Commissioners Holding Company Ltd (Miscellaneous Cause No. 15 of 2013)

High Court · [2013] UGCOMMC 135 · 2013 Application Partly Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for interim measure of protection under Arbitration and Conciliation Act s.6 to restrain termination of consultancy contract pending arbitration
Decision
Interim measure of protection granted for a limited period of 40 days to preserve applicant's right of hearing before the arbitral tribunal on the notice of termination

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the applicant established an arguable case concerning whether the respondent's notice of termination for convenience was issued in good faith and in accordance with fair dealing principles. An interim measure of protection was necessary to preserve the applicant's right to be heard before the arbitral tribunal on the propriety of the termination notice before the 30-day notice period expired, as the right of hearing cannot be atoned for by damages.

Outcome

Interim measure of protection granted for a limited period of 40 days to preserve applicant's right of hearing before the arbitral tribunal on the notice of termination

Facts

The applicants, a firm of architects, entered into a consultancy contract dated 10 February 2011 with the respondent for the Church House Project. The applicants had worked on the project since 1975. On 22 May 2013, the respondent issued a notice of termination of the consultancy contract for convenience under clause 6.4.3, citing current circumstances surrounding the project. The applicants sought clarification on the grounds for termination but received no response from the respondent. The applicants commenced arbitration proceedings on 18 June 2013 under clause 6.18 of the contract and applied for interim measures of protection to restrain the respondent from terminating the contract and from appointing another consultant pending arbitration. The respondent argued that termination for convenience was a contractual right exercised in good faith and that the applicants' remedy lay in damages as provided in the contract.

Issues

  1. Whether the court should grant an interim measure of protection restraining the respondent from terminating the consultancy contract pending arbitration.
  2. Whether the applicant disclosed a prima facie case or arguable case.
  3. Whether the applicant would suffer irreparable injury that cannot be atoned for by damages.
  4. Whether the balance of convenience favours granting the interim measure of protection.

Orders

  • Interim measure of protection granted staying the operation of the notice of termination dated 22 May 2013 for a further period of 40 days from the date of this order.
  • Temporary injunction issued restraining the respondent from appointing or entering into other consultancy contracts with any third party in respect of the services envisaged under the consultancy contract dated 10 February 2011 until the hearing and determination of the arbitration, to last for a period of 40 days from the date of this order.
  • The arbitral tribunal directed to determine the dispute within the period of 40 days from the date of this order.
  • Costs of the application to be costs in the arbitration cause and to be decided upon by the arbitral tribunal.

Rules and key headnotes

Interim Measures of Protection — Application Before Commencement of Arbitration — Requirements Under Arbitration and Conciliation Act s.6
A party to an arbitration agreement may apply to the court for an interim measure of protection before commencement of arbitral proceedings under section 6 of the Arbitration and Conciliation Act. To establish a prima facie case, the applicant must show that there is an arbitration agreement and that the dispute is one contemplated for resolution through arbitration in the arbitration agreement. There is no requirement for a statement of claim or plaint where the application is made before commencement of arbitral proceedings.
Interim Measures — Test for Grant — Arguable Case and Irreparable Injury
Considerations for the grant of a temporary injunction apply to applications for interim measures of protection under the Arbitration and Conciliation Act. The applicant must demonstrate an arguable case or prima facie case that merits consideration by the arbitral tribunal, that the applicant would otherwise suffer irreparable injury which cannot be atoned for by an award of damages, and if the court is in doubt, the case should be decided on the balance of convenience.
Termination for Convenience — Exercise of Discretion — Good Faith and Fair Dealing
Termination for convenience clauses in construction and consultancy contracts give discretionary power to a party to terminate the contract. However, such discretion is subject to an implied obligation to exercise the right to terminate in good faith and in accordance with fair dealing. A party cannot terminate the contract for convenience simply to get a better bargain from another source, as this would constitute bad faith or an abuse of discretion.
Interim Relief — Right of Hearing — Preservation Pending Arbitration
Where a party has commenced arbitration proceedings to challenge a notice of termination, an interim measure of protection should be granted to preserve the party's right of hearing before the arbitral tribunal before the notice period expires. The right of hearing is a fundamental right that cannot be atoned for by an award of damages, and the arbitral proceedings would be rendered nugatory if the notice runs its full course before the arbitrator can determine its propriety.

Legislation cited (8)

Cases cited (7)

  • International Investment House LLC and Another v Amos Nzeyi and Others (Miscellaneous Cause No. 11 of 2012)
  • American Cyanamid Company Ltd v Ethicon [1975] 1 All ER 504
  • Kiyimba Kaggwa v Katende [1985] HCB 43
  • Questar Builders Inc versus CB Flooring LLC case number 03 -C - 003688
  • Performance Unlimited Incorporated versus Questar Publishers Inc, United States Appeals, sixth circuit court number 95 - 6271
  • Pan African Impex Versus Barclays Bank Plc and Another
  • Occidental Petroleum Corporation and the Republic of Ecuador ICCID case No. ARB 06/11

Full judgment

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

Sekaziga & Anor v Church Commissioners Holding Company Ltd (Miscellaneous Cause No. 15 of 2013) [2013] UGCommC 135 (31 July 2013)
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.