Wakilii

Vantage Mezzanine Fund 11 Partnership and Another v Simba Properties Investment Company Limited and Others (Miscellaneous Cause No. 91 of 2021)

High Court · [2023] UGCOMMC 16 · 2023 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for interim measures of protection pending arbitration proceedings under the Arbitration and Conciliation Act
Decision
Application allowed against the 1st-4th Respondents with interim injunctions granted; claims against 5th and 6th Respondents stayed pending arbitration

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court granted interim measures of protection under section 6(1) of the Arbitration and Conciliation Act, restraining the 1st-4th Respondents from completing a refinancing transaction with KCB Banks and from pursuing transactions that would impair the Applicants' credit and security interests under a Mezzanine Term Facility Agreement pending arbitration. The Court found the Applicants established a prima facie case, would suffer irreparable injury, and the balance of convenience favoured them. Claims against the 5th and 6th Respondents were stayed for six months pending arbitration.

Outcome

Application allowed against the 1st-4th Respondents with interim injunctions granted; claims against 5th and 6th Respondents stayed pending arbitration

Facts

The Applicants and 1st-4th Respondents entered into a Mezzanine Term Facility Agreement dated 11 December 2014 with security documents and protections in the Respondents' Articles of Association, including appointment of two Applicant-nominated directors and requirements for their participation in board decisions on borrowing exceeding USD 50,000. The 1st-4th Respondents defaulted on loan obligations due in December 2019. The Respondents then purportedly amended their Articles of Association without the Applicants' consent to remove these protections and pursued a refinancing transaction with KCB Banks worth USD 44,628,000 without the Applicants' participation or consent, in alleged breach of contractual undertakings. The Applicants commenced arbitration proceedings to challenge the amendments and sought interim measures to preserve their security interests pending arbitration.

Issues

  1. Whether the Applicants have made out the grounds for the grant of reliefs sought in this application?
  2. What remedies are available?
  3. Whether the 1st Applicant has the legal capacity to institute these proceedings?
  4. Whether this Honourable Court has jurisdiction to entertain this application?
  5. Whether the affidavit in support of this application contains contentious matters and ought to be struck out?
  6. Whether this application is an abuse of Court process?

Orders

  • The 1st-4th Respondents are restrained from completing an impending transaction among them and KCB Bank Uganda Limited and KCB Bank Kenya Limited.
  • The 1st-4th Respondents are restrained from pursuing any other transaction that would impair or otherwise prejudice the Applicants' credit and security interests in the Mezzanine Term Facility Agreement executed on 11th December 2014.
  • The claims against the 5th and 6th Respondents are stayed for a period of six months pending the conclusion of the arbitration proceedings.
  • The pending arbitration proceedings shall be concluded in the next six months from the date of this Order.
  • Costs of this application shall abide the outcome of the arbitration proceedings.

Rules and key headnotes

Arbitration & ADR — Interim Measures — Court's Power Under Section 6(1) Arbitration and Conciliation Act
Under section 6(1) of the Arbitration and Conciliation Act Cap 4, a party to an arbitration agreement may apply to the court before or during arbitral proceedings for an interim measure of protection, and the court has jurisdiction to grant that measure.
Arbitration & ADR — Interim Measures — Third Parties Not Party to Arbitration Agreement
Where third party claims are involved, courts may stay litigation with regard to third party matters not governed by the arbitration agreement for the estimated time it would take the principal parties to complete their arbitration, when it appears just and equitable to do so, even though the court has no jurisdiction to order third parties to submit to arbitration.
Civil Procedure — Injunctions — Test for Grant of Interim Injunction
The grounds for granting an interim injunction are: (i) the applicant must establish a prima facie case with a probability of success; (ii) the applicant will suffer irreparable injury that may not be adequately compensated by an award of damages; and (iii) if the court is in doubt, the application is decided on a balance of convenience.
Civil Procedure — Injunctions — Prima Facie Case
A prima facie case is a claim that is not frivolous or vexatious and presents serious questions to be tried. The court need not determine the merits conclusively at the interim stage but must be satisfied that there are serious questions requiring determination.
Civil Procedure — Injunctions — Irreparable Injury
Irreparable damage does not mean that there must be no physical possibility of repairing injury, but means that the injury must be a substantial or material one, that is, one that cannot be adequately compensated for in damages.
Civil Procedure — Injunctions — Balance of Convenience
The balance of convenience means an examination of which party would stand to lose more if the injunction is denied. Where the applicant would suffer greater loss if the injunction is refused than the respondent would suffer if it is granted, the balance of convenience favours the applicant.
Company Law — Articles of Association — Contractual Protections for Lenders
Where parties to a facility agreement have incorporated protections in a company's Articles of Association requiring lender participation in board decisions on borrowing above specified thresholds, and the company purports to amend those Articles without the lender's consent in breach of contractual undertakings, the court may grant interim relief to preserve the lender's security interests pending arbitration of the dispute.

Legislation cited (5)

Cases cited (11)

  • The Fort Hall Bakery Supply Co. v Frederick Muigai Wangoe (1959) E.A 474
  • Krone Uganda Limited v Kerilee Investments Limited (HCMA No. 306 of 2019)
  • American Cyanamid Co. v Ethicon Ltd [1975] A.C 396
  • Pan Afric Impex (U) Ltd v Barclays Bank PLC & ABSA Bank Ltd (HCMA No. 0804 of 2007)
  • Guangdong Hao He Engineering & Construction Company (U) Limited v Britam Insurance Co. (U) Ltd & Capital Shoppers Limited (Miscellaneous Cause No. 37 of 2020)
  • Attorney General & Uganda Land Commission v James Mark Kamoga & James Kamala (SCCA No. 8 of 2004)
  • Robert Kavuma v Hotel International Ltd (SCCA No. 8 of 1990) [1993] KALR 188
  • E.L. T Kiyimba Kaggwa v Haji Abdu Nasser Katende (1985) HCB 43
  • Scales and Software Limited v Web Commercial Systems Limited & ABSA Bank Kenya PLC (CS No. E532 of 2020) [2021] eKKLR
  • Sunstone Limited v Nakamya Robinah & Another (HCMA No. 1674 of 2017)
  • Rem Publishers & Anor v Uganda National Bureau of Standards (Miscellaneous Cause No. 171 of 2019)

Full judgment

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Vantage Mezzanine Fund 11 Partnership and Another v Simba Properties Investment Company Limited and Others (Miscellaneous Cause No. 91 of 2021) [2023] UGCommC 16 (29 March 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.