Wakilii

Worldemicheal Sisay Bekure and Another v Kalpana Abe and Others (Miscellaneous Cause No. 54 of 2024)

High Court · [2025] UGCOMMC 170 · 2025 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for interim measures of protection pending arbitration under Section 6(1) and 9 of the Arbitration and Conciliation Act
Decision
Temporary injunction granted restraining removal of applicants as directors pending arbitration; other reliefs dismissed

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the arbitration clause in the company's articles of association is valid and enforceable, covering disputes arising from director obligations and company management. The court granted a temporary injunction restraining the respondents from removing the applicants as directors pending arbitration, finding that such removal would irreparably harm the applicants by preventing them from exercising management control. The court declined to grant injunctions regarding the change of business name, company account, and appointment of company secretary, finding that these matters had already been implemented through board decisions and that the balance of convenience favoured the respondents.

Outcome

Temporary injunction granted restraining removal of applicants as directors pending arbitration; other reliefs dismissed

Facts

The applicants incorporated the 4th respondent company in 2013 and operated a hospitality business under the brand name 'Hideout Bar and Lounge'. Following the COVID-19 pandemic, the 1st applicant proposed expanding the business to include a bowling and gaming centre. The 1st and 2nd respondents invested over USD 200,000 and acquired a 50% stake in the company, becoming directors in April 2023. Disputes arose between the parties regarding company management, financial accountability, and control. The respondents alleged that the applicants failed to provide proper accountability for company funds, did not remit rent to the landlord, and removed company property. The respondents changed the business name to 'Blackzone Recreation Club', opened a new bank account with Stanbic Bank, and appointed the 3rd respondent as company secretary. The respondents subsequently issued notice of their intention to remove the applicants as directors. The applicants sought interim measures of protection pending arbitration under the arbitration clause in the company's articles of association.

Issues

  1. Whether the arbitration clause in the company's articles of association is valid and enforceable in respect of disputes arising from the actions of parties as directors.
  2. Whether there is a serious question to be arbitrated.
  3. Whether there is an imminent risk of irreparable harm to the applicants.
  4. Whether the balance of convenience favours the grant of interim measures of protection pending arbitration.

Orders

  • An interim measure of protection by way of a temporary injunction pending arbitration doth issue against the Respondents, their agents, servants, employees, assignees or anyone else claiming or deriving authority from them, restraining them from removing the Applicants as directors and shareholders of the 4th Respondent until the adjudication and conclusion of arbitration proceedings and all proceedings therefrom are heard and disposed of.
  • The above order shall be in force for sixty (60) days from the date of this ruling which may be extended by the court.
  • The parties shall appear before this court within 10 days from the expiry of the above term and within 10 days from the expiry of any period of extension to show cause why the order should be extended.
  • Costs of this application shall abide the outcome of the intended arbitration proceedings between the parties.

Rules and key headnotes

Arbitration Clauses — Scope and Enforceability — Directors' Disputes
An arbitration clause contained in a company's articles of association is valid and enforceable in respect of disputes arising from the actions of parties as directors, not merely shareholders, where the appointment of directors is premised on and effected under the articles of association, such that the arbitration clause forms part of their contract of service or is an implied term thereof.
Arbitration Clauses — Liberal Construction
Arbitration clauses should be construed liberally and presumptively to cover all disputes arising out of the commercial relationship between the parties, unless there is clear language to exclude certain matters.
Interim Measures — Jurisdiction of Court Pending Arbitration
Sections 6(1) and 17(1) and (3) of the Arbitration and Conciliation Act create concurrent jurisdiction between the court and an arbitral tribunal with regard to interim measures of protection. 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 may grant that measure. This shared power is an exception to the general rule that arbitrators have exclusive jurisdiction where there is a valid arbitration agreement.
Mandatory Injunctions — Test for Grant at Interlocutory Stage
In considering whether to grant a mandatory interlocutory injunction, the court must consider which course is likely to involve the least risk of injustice if it turns out to be wrong. An order requiring a party to take positive action at an interlocutory stage may carry a greater risk of injustice than an order which merely prohibits action. The court may consider whether it feels a high degree of assurance that the applicant will establish his right at trial, but even where the court is unable to feel such assurance, a mandatory injunction may still be appropriate where the risk of injustice if the injunction is refused sufficiently outweighs the risk of injustice if it is granted.
Directors — Removal — Irreparable Harm
The removal of directors from a company they incorporated and managed constitutes irreparable harm as it prevents them from exercising management control and being involved in the day-to-day affairs of the company. The role of directors in managing the business of the company is fundamentally different from the role of shareholders, whose rights are limited to information, participation in meetings, and ownership rights including dividends. Removal confines former directors to merely supervising the board as shareholders.
Internal Management — Court Reluctance to Interfere
Courts will be reluctant to interfere in the affairs of a company or review or reverse a company's decisions except in clearly provided for situations such as derivative actions or actions for oppression. Courts will not second-guess decisions of the company lawfully taken by appropriate institutions of the company such as the board or members' meeting, as companies are typically organized such that parties with the most financial risk hold higher decision-making power. In matters of a company, the memorandum and articles are supreme.
Interim Measures — Safeguards Against Indefinite Use
Where a court grants interim measures of protection pending arbitration before arbitration proceedings have commenced, the court should put in place sufficient safeguards to avoid misuse of the court's orders, such as providing for periodic review of the orders as arbitral proceedings continue, to prevent parties from utilizing interim preservatory orders in perpetuity by not commencing or completing arbitration proceedings.

Legislation cited (11)

Cases cited (26)

  • Vantange Mezzanine Fund II Partnership and Others v Commissioner Land Registration (HCMA No. 2484 of 2023)
  • Great Lakes Company NV v MSS Xsabo Power Limited and Others (HCMC No. 17 of 2021)
  • Captain Joseph Roy v D & D International Limited (HCMA No. 283 of 2018)
  • Guangdong Hao He Engineering & Construction Company v Britam Insurance Co. Ltd and Another (HCMC No. 37 of 2020)
  • Tomas Welditinase v Magdalene Bekunda and Another (HCMC No. 9 of 2024)
  • Garuga Musinguzi v Dr Chris Baryomunsi and Another (HCMA No. 817 of 2016)
  • Alley Route v UDB (HCMA No. 634 of 2006)
  • Giella v Gasman Brown 1973 EA 358
  • Cayne v. Global Natural Resources PLC [1984] I All ER 225
  • American Cyanamid Co v. Ethicon Ltd [1975] AC 396
  • Rashidi Abdul Hanali and Another v Suleiman Adrisi (HCMA No. 11 of 2017)
  • Nottingham Building Society v. Eurodynamics Systems plc, [1993] FSR 468
  • NWL Limited v. Woods [1979] WLR 1294
  • Morris v. Redland Bricks Ltd, [1970] AC 652
  • Attorney-General for the Dominion of Canada v. Ritchie Contracting and Supply Co Ltd [1919] AC 999
  • National Commercial Bank Jamaica Ltd v. Olint Corp Ltd (Jamaica) [2009] 1 WLR 1405
  • AMEC Group Ltd v. Universal Steels (Scotland) Ltd, [2009] EWHC 560 (TCC)
  • Francis Byaruhanga v Sari Consulting Limited (HCMA No. 740 of 2023)
  • Noble Builders Uganda Limited v Balwinder Kaur Sandhu (Civil Appeal No. 7 of 2009)
  • Fiona Trust v Privalov [2015] EWHC 527 (Comm)
  • Attorney General v Networth Consults Limited (HCMA No. 1830 of 2022)
  • Nile Breweries Limited v Lugogo Events and Entertainment Ltd (HCMA No. 1497 of 2022)
  • Proline Soccer Academy v Commissioner Land Registration (HCMA No. 494 of 2018)
  • Client Earth v Shell PLC & Ors [2023] EWHC 1137 (Ch)
  • MacDougall v Gardiner (1875) 1 ChD 13 (CA)
  • Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 (CA)

Full judgment

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Worldemicheal Sisay Bekure and Another v Kalpana Abe and Others (Miscellaneous Cause No. 54 of 2024) [2025] UGCommC 170 (2 May 2025)
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.