Chongquing International Construction Corporation v Zeintaka Corporation (Japan ) and Another (Miscellaneous Civil Application No. 1122 of 2020) [2021] UGCommC 129 (15 February 2021)


THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT DIVISION)

MISCELLANEOUS APPLICATION No. 1122 OF 2020 (ARISING OUT OF CIVIL SUIT No. 854 OF 2020)

CHONGQING INTERNATIONAL CONSTRUCTION CORPORATION:::::::::::::::::::::::::::::::::::::::::::::: APPLICANT

VERSUS

- 1. ZENITAKA CORPORATION (JAPAN) - 2. HYUNDAI ENGINEERING & CONSTRUCTION CO. LTD (JOINTLY T/a ZENITAKA-HYUNDAI JOINT VENTURE) ::: RESPONDENTS

BEFORE THE HON. MR. JUSTICE RICHARD WEJULI WABWIRE

RULING

Chongqing International Construction Corporation *(the Applicant)* filed this application under Sections 64 and 98 of the Civil Procedure Act, Section 33 of the Judicature Act Cap 13, Order 40 Rules 1 (1) (b) & 2, Order 41 Rules 7 and 9 and Order 52 Rule 1 of the Civil Procedure Rules S. I 71-1 against Zenitaka Corporation (Japan) and Hyundai Engineering & Construction Co. Ltd *(the Respondents)* seeking for orders that:

- i) The Respondents furnish security in a sum or bank guarantee of United States Dollars USD 473,319.514/= (United States Dollars Four Hundred Seventy-Three Thousand Three Hundred Nineteen point Hundred Fourteen) and UGX 170,060,613.7 (Uganda Shillings One Hundred Seventy Million Sixty Thousand Six Hundred Thirteen point Seven) - ii) An order to attach by way of garnishee before judgment the sum of money due to the Respondent from Uganda National Roads Authority arising from the contract executed between the Respondents and Uganda National Roads Authority for the civil works in respect of construction of the new Nile Bridge across the River Nile at Jinja.

The basis upon which this application is premised are contained in the affidavit in support deponed by Yangchun Duan, a director of the Applicant. The grounds as set out in the affidavit are;

- i) The Applicant filed Civil Suit No. 854 of 2020 against the Respondents herein which is pending determination, - ii) The Applicant's civil suit has high probability of success. - iii) The Respondents are in advanced stages of the project and are expected to wind up works by March 2021 - iv) Upon conclusion of the works the Respondent being foreign entities their directors are likely to leave the jurisdiction of Court without finally resolving the disputes in HCCS No. 854 if 2020 thus rendering the suit nugatory - v) There is a reasonable probability that the Applicant/Plaintiff in Civil Suit No. 854 of 2020 will be obstructed or delayed in the execution of any decree that may be passed against the Respondent/Defendants - vi) The Respondents are foreign companies with no known assets and registered offices in Uganda.

In Reply, the Respondents through an affidavit deponed by Masami Ishikawa opposed this application and challenged the grounds on which the Applicant premised her application. Mr Ishikawa stated that the Applicant failed to adduce irrefutable evidence that the Respondents are about to leave the jurisdiction of court purposely to avoid the possibility of a judgment against them. He also stated that the Respondents have movable and immovable assets in Uganda valued in Billions of Shillings and the same are known to the Applicant. He further stated that the funds allegedly due to the Respondent from Uganda National Roads Authority are part of the consolidated fund which cannot be attached in satisfaction of debts. Mr Ishikawa raised issue with this application and stated that the Application is improperly before Court as the agreements in issue are subject of binding arbitration.

Agaba Solomon, an Engineer in charge of procurement with the Applicant deponed an affidavit in rejoinder in which he stated that the Respondents do not have any known assets or resident directors within the Republic of Uganda and that all its company vehicles were sold off in preparation for departure from Uganda upon expiry of the defects liability period.

At the hearing of this Application Counsel John Bosa represented the Applicant while the Respondent was represented by Counsel Michael Agaba.

From my evaluation of the affidavit evidence from both parties, it is apparent that there is a pending suit between the parties vide Civil Suit No. 854 of 2020 seeking for recovery of USD 473,319.514/= (United States Dollars Four Hundred Seventy-Three Thousand Three Hundred Nineteen point Hundred Fourteen) and UGX 170,060,613.7 (Uganda Shillings One Hundred Seventy Million Sixty Thousand Six Hundred Thirteen point Seven).

Counsel for the Applicant submitted that the Applicant made out a strong case for issuance of orders for attachment before judgment because the New Nile bridge was already commissioned in 2018 and the Respondent is only still around until the expiry of the Defects Liability Period. Counsel

argued that the Respondents are foreign owned companies based in Japan and South Korea with no known assets in Uganda and prayed that this honourable Court be pleased to grant the orders sought.

In Reply counsel for the Respondents submitted that the Respondents have no intention of leaving Uganda and that they still have a number of projects to complete in the country. He then raised a preliminary point of law that the parties herein agreed to resolve any dispute arising between them under the contract through amicable settlement failing which the dispute shall be referred to arbitration. He cited Section 40 of the Arbitration and Conciliation Act Cap 4 to buttress his argument that where there is an arbitration clause, court is not to entertain the matter but refer it to arbitration on request by one of the parties.

Counsel referred this honourable Court to the case of Shell (U) Limited vs. Agip (U) Limited SCCA No. 49 of 1995 where Court held that, *" In cases where there is an arbitration clause, it is my judgment the more necessary that full scale argument should not be permitted. The Parties have agreed on their chosen tribunal and a defendant is entitled, prima facie to have the dispute decided by the tribunal in the first instance to be free from intervention of the Courts until it has been so decided."*

He then submitted that this Application and Civil Suit No. 854 of 2020 are prematurely before this honourable Court and the same should be referred to arbitration as agreed by the parties in the subcontract.

In the Alternative Counsel for the Respondents submitted that before ordering attachment of property before judgment or furnishing security, there has to be real evidence that the Defendant is about to leave the country, sell the property and obstruct or delay justice. To support this argument, he cited the case of Ivan Samuel Sebaduka vs. Warid Telecom Limited HCMA No. 204 of 2014.

Counsel for the Respondents further argued that the Applicant has not furnished undisputed evidence that the Respondents are about to leave Uganda. He contended that the Respondents have both movable and

immovable property worth billions, and all comprised in the infrastructure of the company, the machinery and many other properties that are well within the knowledge of the Applicant.

He also submitted that the money to the Respondent from UNRA cannot be attachment because funds of the Authority are part of the consolidated fund which cannot be attached in satisfaction of debts. He cited the case of Mahmoud Saad Said & Anor vs. Attorney General HCMA No. 1023 of 2015 in support of his argument. He argued that the Applicant failed to make a case upon which court could exercise its discretion to grant the order for security or attachment by way of garnishee. He requested Court to dismiss the application with costs.

Decision of Court

In this Application, the Applicant who is also Plaintiff in Civil Suit No. 854 of 2020 is seeking for an order directing the Respondents/Defendants in the above suit to furnish security for appearance. An application for security for appearance is an interlocutory application. *Halsbury's Laws of England fourth edition Volume 37 para. 326* aptly sums up the function of interlocutory applications as follows:

*"To enable the court to grant such interim relief or remedy as may be just or convenient. Such relief may be designed to achieve one or more of several objectives."*

The objective of an order to furnish security for appearance is to ensure that there is a fair balance between the parties and afford them due protection while awaiting the final outcome of the proceedings.

I have carefully considered the evidence adduced both parties by way of affidavit and the submissions of both counsel in this matter. I am also alive to the preliminary objection raised by Counsel for the Respondents that this matter should not entertained by this Court but rather be referred for arbitration in accordance with the arbitration agreement contained in the subcontract between the parties and Section 5 of the Arbitration and Conciliation Act Cap 4.

However, with all due respect to counsel for the Respondents, this honourable Court has jurisdiction to entertain this Application by virtue of Section 6 (1) of the Arbitration and Conciliation Act Cap 4 which provides that 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. In Swabri Ali Abubaker Mukungu vs. Kobil Uganda Limited HCMC No. 41 of 2015 Justice Christopher Madrama held that *"…section 6 (1) of the Arbitration and Conciliation Act enables a party to an arbitration agreement to apply to a court of law either before or during arbitral proceedings for an interim measure of protection. Secondly it gives the court discretionary powers whether to issue an order of interim measure of protection or not..."*

Premised on the foregoing, the preliminary objection raised by counsel for the Respondents, that this court cannot entertain this application by virtue of the arbitral clause in the parties' agreement, is overruled.

Merits

The conditions which the Applicant must satisfy before this Court can grant the order directing the Respondents to pay security for costs are set out in Order 40 Rules 1 and 2 of the Civil Procedure Rules S. I 71-1. Under rule 1, the Applicant has to satisfy the court that;

- i) That the Respondents with intent to delay the Applicant or to avoid court process or to obstruct or delay execution of any decree that may be passed against has absconded or left the jurisdiction; - ii) That the Respondents are about to abscond or has disposed of property or any part thereof; - iii) That the Respondent is about to leave the jurisdiction and - iv) That the Applicant will be prejudiced in the execution of any decree that may be passed against the respondent.

*In Welt Machinen Engineering Ltd v Chine Road & Bridge Corporation & 2 Ors HCMA No. 51 of 2015 Justice Wolayo held that "…while the applicant has not shown that the 1 st respondent is about to leave the jurisdiction, the latter has not assured this court that it has the capacity to satisfy any decree that may be passed against it. It is therefore fair that the 1st respondent be ordered to furnish security to satisfy any decree that may be made against it."*

In the instant case the Applicant averred that the Respondents are in the final stages of execution of the work at the New Nile Bridge and will be leaving Uganda very soon and that there are no known assets belonging to the Respondents that can be attached in satisfaction of the orders issued in the event the Plaintiff succeeds in her claim. The Respondents in their affidavit evidence and in the submission of their counsel claimed to have known assets in Uganda but did not provide clear details of the assets claimed and their whereabouts.

This is a deserving case for this Court to exercise its discretion to order the Respondents to furnish security for appearance.

The Respondents are accordingly ordered to furnish this honorable Court with a Bank Guarantee in the sum of USD 473,319.514/= (United States Dollars Four Hundred Seventy-Three Thousand Three Hundred Nineteen point Hundred Fourteen) and UGX 170,060,613.7 (Uganda Shillings One Hundred Seventy Million Sixty Thousand Six Hundred Thirteen point Seven) within a period of 7 working days from the date of this ruling.

In the event that the Respondents do not comply with the above order as directed, the payments sufficient to satisfy the sum in the above order due under the contract between the Respondents and UNRA are hereby ordered to be attached and deposited in this honorable court pending the determination of the dispute between the parties.

I allow the application and make the following orders:

- 1. The Respondents shall furnish to this honorable Court a Bank Guarantee in the sum of USD 473,319.514/= (United States Dollars Four Hundred Seventy-Three Thousand Three Hundred Nineteen point Hundred Fourteen) and UGX 170,060,613.7 (Uganda Shillings One Hundred Seventy Million Sixty Thousand Six Hundred Thirteen point Seven) within a period of 7 working days from the date of this ruling. - 2. In the event the Respondents fail to comply with the order to furnish a bank guarantee in the sums stated above within the time so stipulated, the payments sufficient to satisfy the sums in the above order due to the Respondents under the contract between the Respondents and UNRA shall be attached and deposited in this

honorable court pending determination of the dispute between the parties

3. Costs shall be in the cause.

Delivered at Kampala and signed copies for the parties placed on file this 15th day of February, 2021.

………………………………………………………

RICHARD WEJULI WABWIRE

JUDGE