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Vantage Mezzanine Fund II Partnership v Simba Properties Investments Co. Limited and Another (HC Miscellaneous Application No. 201 of 2020)

High Court · [2021] UGCOMMC 23 · 2021 Application Granted — Matter Referred to Arbitration AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to stay civil proceedings and refer dispute to arbitration under Arbitration and Conciliation Act s.5(1)
Decision
Matter referred to arbitration; underlying civil suit dismissed

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that where a valid arbitration agreement exists, the court must refer the dispute to arbitration under s.5 of the Arbitration and Conciliation Act. The arbitration clause in the Mezzanine Term Facility Agreement was valid, operative, and enforceable. Claims of duress and undue influence were unsupported by evidence. Questions regarding the validity of the main contract fall within the jurisdiction of the arbitral tribunal, not the court. The civil suit and all interlocutory proceedings were dismissed and the matter referred to arbitration.

Outcome

Matter referred to arbitration; underlying civil suit dismissed

Facts

The Applicant and the 1st Respondent entered into a Mezzanine Term Facility Agreement dated 11 December 2014 containing an arbitration clause at Clause 43. The Respondents filed Civil Suit No. 988 of 2019 in the High Court Commercial Division. The Applicant filed a defence and then applied under s.5 of the Arbitration and Conciliation Act to stay the proceedings and refer the dispute to arbitration. The Respondents opposed the application, arguing that the arbitration agreement was procured by undue influence, lacked certainty and consensus ad idem, and that the Applicant lacked legal capacity to contract as it was an unlicensed partnership conducting financial business. The Respondents also argued that the dispute involved public law rights that were not arbitrable.

Issues

  1. Whether the matters raised in HCCS No. 988 of 2019 ought to be referred to arbitration within the confines of the Arbitration and Conciliation Act.

Orders

  • The matter is referred to arbitration in accordance with Section 5 of the Arbitration and Conciliation Act.
  • Civil Suit No. 988 of 2019 and all legal proceedings and orders thereunder are dismissed and/or vacated or set aside.
  • Costs of this application, of HCCS No. 988 of 2019 and the proceedings thereunder are awarded to the Applicant against the Respondents.

Rules and key headnotes

Stay of Legal Proceedings — Concurrent Jurisdiction of Court and Arbitral Tribunal
Under the Arbitration and Conciliation Act, the court (under s.5) and the arbitral tribunal (under s.16) have concurrent jurisdiction to determine the existence and validity of an arbitration agreement. The determining factor is which forum the objection has been presented to.
Arbitration Agreement — Separability Doctrine
An arbitration agreement is separate and independent of the contract in which it is embedded. Invalidity of the main contract, whether for illegality or any other vitiating factor, does not automatically invalidate the arbitration clause.
Jurisdiction — Ouster of Court Jurisdiction by Statute
Section 9 of the Arbitration and Conciliation Act unambiguously ousts the jurisdiction of the court in matters governed by the Act except to the extent stated therein. The general provisions on the unlimited jurisdiction of the High Court under s.14 of the Judicature Act and Article 139 of the Constitution cannot override the express provisions of the Arbitration and Conciliation Act.
Validity of Main Contract — Jurisdiction of Arbitral Tribunal
Questions regarding the validity of the main contract, including claims of illegality or lack of capacity to contract, lie within the domain of the arbitral tribunal once a valid arbitration clause is established. Such questions cannot be the basis for divesting the arbitral tribunal of jurisdiction and investing it in the court.
Duress and Undue Influence — Test for Coercion of Will
In determining whether there was coercion of the will such that there was no consent, it is material to consider whether the person alleged to have been coerced protested at the time, whether they had an alternative course open to them such as an adequate legal remedy, whether they were independently advised, and whether after entering the contract they took steps to avoid it.
Freedom of Contract — Enforcement of Bargains
Courts have a duty to uphold and enforce legal bargains by parties and to avoid the appearance of rewriting terms of contracts. People who freely negotiate and conclude a contract should be held to their bargain, and contracts entered freely and voluntarily shall be held enforceable by the courts.
Stay of Proceedings — Effect of Referral to Arbitration
Upon a court finding that a valid arbitration agreement exists and referring a matter to arbitration under s.5 of the Arbitration and Conciliation Act, the proceedings in the underlying civil suit lapse together with any pending interlocutory proceedings and any orders that may have been issued thereunder, as they were entertained by the court without the requisite jurisdiction.

Legislation cited (9)

Cases cited (9)

  • British American Tobacco v Lira Tobacco Stores (HC Miscellaneous Application No. 924 of 2013)
  • Golf View Inn (U) Ltd v Barclays Bank (U) Ltd (High Court Civil Suit No. 358 of 2009)
  • Babcon Uganda Ltd v Mbale Resort Hotel Ltd (Court of Appeal Civil Appeal No. 87 of 2011)
  • Power and City Contractors Ltd v LTL Project (PVT) Ltd (HC Miscellaneous Application No. 62 of 2011)
  • Airports Company South Africa Limited Vs ISO Leisure OR Tembo (Pty) Ltd & Another (4), SA 642
  • Pao On & Others v Lau Yiu & Another [1979] 3 All ER 65
  • Balton v Armstrong [1976] AC 104
  • Printing & Numerical Registering Co. v Sampson (1875) LR 19 Eq 462
  • Stockloser v Johnson [1954] 1 All ER 630

Full judgment

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

Vantage Mezzanine Fund II Partnership v Simba Properties Investments Co. Limited and Another (HC Miscellaneous Application No. 201 of 2020) [2021] UGCommC 23 (16 June 2021)
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.