Mandela Auto Spares Limited v Lawson (Miscellaneous Cause 47 of 2021) [2023] UGCommC 255 (15 September 2023)

THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCTAL DrVrSrONl MISC CAUSE NO 47 OF 2O2I

(ARISING FROM ICAMEK/REQt20r9lO04B)

MANDELA AUTO SPARES LTD: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :APPLICANT

VERSUS

BARKER BARTON LAWSON: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 3RESPONDENT

BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI

RULING

This application is brought under section 3aQ))aQ)@)(iv) & (vii) and l6(6) of the Arbitration and Conciliation Act and Rule 13 of the Arbitration Rules for orders that the Arbitration award in CADER/REQ 12019/008 dated 25th June 2021 and handed down on 22"d July 2021 be set aside and costs ofthe Application be provided for.

This cause is supported by the affidavit of Hajji Omar Ahmed, the managing director of the Applicant and opposed by the affidavit in reply of Roger Allen, a quantity surveyor working with the respondent.

BACKGROUND

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By a Memorandum of Agreement (MOA), the Applicant contracted the Respondent to provide quantity survey services and the services to be provided were broken down into pre contract services and post contract services with the post contract services to be rendered upon the Respondent entering into a construction agreement with a contractor. The MOA, in clause 3, stated that any variation thereof after the date of this agreement shall only be by written consent of the parties. No variation was made to the agreement. The Respondent performed some of the pre contract services and were paid. Uganda National Roads Authority (UNRA) took part of the land on which the Applicant intended to develop and consequently the continuation of performance of the MOA was suspended. No construction was ever commenced. The Respondent issued an invoice to the Applicant for work carried out i.e. obtaining tenders and obtaining quotations which was not paid. The Respondent then commenced Arbitration seeking the recovery of a sum of USD 12000 on the basis

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of works done within the scope of the agreement and in their rejoinder later claimed for their payment under quantum meruit.

The Arbitral Tribunal issued an award on 25 June 2022 and held that the disputed work by the Respondent fell outside the scope of pre-contract services and postcontract works as defined by the Appendix of the contract between the parties; and that the claimant had carried out work for the Respondent and with such work falling outside the pre-contract stage and the scope of the contract itself, they were not entitled to be paid under the contract.

The Arbitrator then went on to issue an award in favor of the Respondent in quantum meruit awarding them the entire amount claimed.

The Applicants filed an Application to this Court seeking for the Arbitral award to be set aside under sections 34(1),34(2)(a)(iv) & (vii) of the Arbitration and Conciliation Act.

REPRESENTATION

During the hearing of the Application, M/s MMAKS Advocates represented the Applicant and M/s Kalenge, Bwanika, Kisubi and Co. Advocates represented the Respondent.

RULING

I have read and considered the pleadings and submissions of the parties in this matter and shall rephrase the issues for proper resolution as below:

- 1. Whether the arbitral award was delivered in accordance to the Arbitration and Conciliation Act - 2. Whether the Arbitral award should be set aside for dealing with an issue that did not arise out of or contemplated in the agreement between the parties

Issue 1

Whether the arbitral award was delivered in accordance to the Arbitration and Conciliation Act

Section 31(1) of the Arbitration and Conciliation Act (Cap 4) provides for the time within which an arbitral award should be delivered and states that:

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"The arbitrators shall make their award in writing within two months after entering on the reference, or after having been called on to act by notice in writing from any party to the submission, or on or before any later day to which the arbitrators, by any writing signed by them, may, from time to time, enlarge the time for making the award".

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The above provision which is couched in mandatory terms implies that an arbitrator shall make the award within a prescribed time of two months and enlargement of time for making the same shall be in writing signed by him/ her.

In the instant case, the submissions for the parties were closed on the 28^th of October 2020 and the Arbitral award was issued on the 25^th of June 2021, way beyond the two months stipulated in the above Act.

The question which arises then is whether the Arbitrator lawfully extended the time for making the arbitral award within the award itself.

In paragraph 93 of the Arbitral award, the arbitrator stated that the Tribunal enlarged/extended time for the making of the award to the date of delivery of the award under section 31(1) of the Act and rule 40(4) of International Centre for Arbitration and Mediation in Kampala (ICAMEK) rules, of its own motion.

Upon close scrutiny of section 31(1) of the aforementioned Act, enlargement of time shall be done by any writing signed by the arbitrator from time to time. No such writing by the arbitrator was adduced by the Respondent and nowhere is it mentioned in the said section that time can be enlarged in the arbitral award itself which, in any case, was made outside the time prescribed by law.

I agree with the submission of counsel for the Applicant that the said section requires the arbitrator to extend the time for the making of the award within the two months or on the last day of the two months within which they are required to deliver an award. It follows, therefore, that time under this section cannot be extended after the expiry of the two months and any extension made after two months is irregular.

On perusal of the ICAMEK rules, Rule 42(4) provides for the extension of time as follows:

"The Arbitral tribunal may on application by any party or on its own motion or with the consent of all parties extend the time limit in part and shall notify the registrar and all parties of the extension".

Rule 42(4) above mentioned allows any party to the dispute, the arbitrator on their own motion and parties through consent to apply for an extension of time within which to issue an award upon which the registrar and all parties shall be notified of the extension.

In this case, there was no application by the parties for an extension of time and similarly, the parties did not enter a consent for extension of time. The arbitrator, however, extended time on her own motion but did not notify any of the parties or the registrar about the said extension in writing. Notice of the extension in issue was only given through a statement made within the arbitral award itself which as seen above is not provided for by law.

It is the firm view of this Court that the above action by the arbitrator was a clear violation of the Arbitration and Conciliation Act as well as the ICAMEK Rules.

I, therefore, find that the award was issued out of time provided by law and was not in accordance with the law as provided in section 34(vii) of the Arbitration and Conciliation Act.

The Arbitral award is accordingly set aside because is not in accordance to with Act.

Issue 2

Whether the Arbitral award should be set aside for dealing with an issue that did not arise out of or contemplated in the agreement between the parties

Section 9 of the Arbitration and Conciliation Act provides that except as provided in this Act, no court shall intervene in matters governed by this Act. This was addressed in the case of Simbamanyo Estates Ltd v Seyani Brothers Company (U) Ltd, Misc. Application No. 555 of 2002, where it was held that:

"When a Court is called upon to decide objections raised by a party against an arbitration award, the Jurisdiction of the Court is limited, as expressly indicated in the Act, and it has no jurisdiction to sit in appeal and examine the award on merits. The arbitrator is the final arbitrator of disputes between the parties and the award is not open to challenge on the grounds that the arbitrator has drawn his own conclusions or has failed to appreciate the facts. Where reasons have been given by the arbitrator in making the award, the Court cannot examine the reasonableness of the reasons. If the parties have selected their forum, the deciding forum selected must be conceded the power of appraisement of the evidence."

Therefore, this Court is not sitting as an Appellate Court in determining this matter but however, derives its authority to determine this matter from section 34(1) of the Arbitration Act which provides that recourse to the court against an arbitral award may be made only by an application for setting aside the award under subsections $(2)$ and $(3)$ of the said section.

Having clearly stated the above, I will now move to address the second issue having read the submissions and pleadings of both the parties.

As earlier stated, section 34 of the Arbitration and Conciliation Act sets out the grounds upon which an arbitral award can be set aside. More specifically, section 34 (2)(a)(iv) of the Arbitration and Conciliation Act which the Applicant has sought to rely on provides that the arbitral award may be set aside by the court only if-

"the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration; except that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside..."

It is not in dispute that the Arbitration agreement furnishes the source as well as prescribes the limits of the authority of the arbitrator. If the award goes beyond the scope of reference, it would be bad in whole or in part whichever the case.

The above finding is buttressed by the case of Associated Engineering Co. v Government of Andhra Pradesh 1992 AIR, 1991 SCR (2) 924 where the Court while observing that four claims mentioned therein were not payable under the contract and in fact, prohibited such payment therein held that:

1. "The arbitrator cannot act arbitrarily, irrationally, capriciously, or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has traveled outside the bounds of the contract, he has acted without jurisdiction. But if he has remained within the parameters of the contract and has construed the provisions of the contract, his award can not be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it.

- 2. An Arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialized branch of the law of agency. He commits a misconduct if by his award he decides matters excluded by the agreement. A deliberate departure from contract amounts to not only manifest disregard of his authority or misconduct on his part but it may tantamount to a malafide action. A conscious disregard of the law or the provisions of the contract from which he derived his authority vitiates the award... - 3. A dispute as to the jurisdiction of the Arbitrator is not a dispute within the award but one which has to be decided outside the award. An Arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says, he is bound by it. It must bear his decision and he cannot travel outside its bounds. If he exceeded his jurisdiction by doing so, his award would be liable to be set aside..."

Further, in the case of V. G George v Indian Rare Earths Ltd, Si Anr AIR 199 SC 1409 on 8 April 1999, the Supreme Court of India held that:

"The law is well settled that if the award is a non-speaking award the court can look into the question as to whether the arbitrator has traveled beyond the scope of the contract as he derives his jurisdiction from the contract and if this arbitrator exceeds his jurisdiction the award can be set aside. An award can also be set aside in case of misconduct apparent on the face of the award. It can also be interfered with if the arbitrator has given reasons for the award disclosing an error apparent on the face of it"

It is therefore axiomatic that the arbitrator being a creature of the agreement must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the Agreement (New India Civil Erectors (P)Ltd v Oil and Natural Gas Corporation, (1997)11 SCC 75: AIR 1997 SC 980).

In the instant case, the memorandum of agreement which is the contract between the parties provided for Arbitration as follows:

'If any dispute of any kind whatsoever arises between the client and the Quantity surveyor in connection with or arising out of the contract whether before or after

the termination of the contract, the matter in dispute shall be governed by a mutually agreed upon Arbitrator".

This therefore means that in order for any matter to be referred to Arbitration, it must be in connection with or arising out of the contract (memorandum of agreement) that the parties signed.

In the Arbitral Award, the arbitrator in paragraphs 45 and 46 noted that the disputed work done by the Respondent fell outside the scope of pre-contract services and post-contract works as defined by the Appendix of the contract between the parties. In paragraph 48 of the arbitral award, the claimant's Mr. Allen admitted in crossexamination that the disputed works fell outside the scope of Appendix C of the contract in issue.

Further, the arbitrator found as seen in paragraph 51 of the award, that while the Arbitral Tribunal found that the claimant had carried out work for the Respondent, with such work falling outside the pre-contract stage and the scope of the contract itself, the claimant was not entitled to be paid under clause 1.5 of the memorandum of agreement(contract).

Clause 1.5 of the memorandum of agreement(contract) between the parties required that payments for any additional works will be negotiated. Clause 3 of the said memorandum of agreement provided that the contract and the conditions of engagement constitute the agreement between the parties and that any variation after the date of this agreement shall only be by written consent of the parties and in clause 56 of the Award, the Arbitral Tribunal found no evidence of a signed variation of the contract.

For the Arbitral Tribunal to introduce the issue of Quantum Meruit which was pleaded by the Respondent in their rejoinder and issue an award in respect of it was, in my considered view, out of the contemplation of the memorandum of agreement between the parties. It therefore fell outside the scope of what the parties agreed to in the agreement. To bring the aspect of payment under Quantum Meruit into the sphere of the memorandum of agreement between the parties required an amendment to the agreement through a variation or drafting of a new agreement as clearly required by clause 3 of the parties' agreement.

As clearly held in the case of Associated Engineering Co. v Government of Andhra Pradesh (supra), the sole function of the arbitrator is to arbitrate according to the terms of the contract. He has no power apart from what the parties have given

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him under the contract. If he has traveled outside the bounds of the contract, he has acted without jurisdiction.

Applying the above authorities to the present case, by the arbitrator dealing with the issue of Quantum Meruit which was not part of the parties' contract, the arbitrator in this case had traveled outside the bounds of the contract from which her authority is derived and hence acted beyond her jurisdiction.

I find that the Arbitrator dealt with a dispute beyond the scope of reference to arbitration when she issued an Arbitral award under Quantum Meruit while aware that work carried out by the Respondent fell outside the pre-contract stage and the scope of the contract itself and thus was not entitled to be paid under the contract.

The Arbitral award is therefore set aside in accordance with section 34 $(2)(a)(iv)$ of the Arbitration and Conciliation Act.

All in all, this Application is allowed and costs of the same are awarded to the Applicant.

Ombiative

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> HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................