THE REPUBLIC OF UGANDA
 

THE CENTRE FOR ARBITRATION AND DISPUTE RESOLUTION

[CADER]

CADER ARBITRATION CAUSE NO.27 OF 2012
 

NALONGO ESTATES LTD …………………………...……………. APPLICANT

V.

KAMPALA CITY COUNCIL AUTHORITY. ………………….. RESPONDENT

RULING

I have gathered the following facts from counsel for both parties.

1. That a Management Agreement was concluded between Kampala City Council and M/S Nalongo Estates Ltd (sic) for the management of Centenary Park, on 16^th May 2006.

2. A Memorandum of Understanding was concluded between three parties.   Nalongo Estates Ltd, Kampala City Council and Khadhar Investments Ltd on 4^th December 2008.

3. Both documents have dispute resolution clauses. 

4. The crucial difference arises from the stipulation in Clause 9 of the Memorandum of Understanding, that disputes may be referred to arbitration, in the event that amicable settlement fails. 

The Management Agreement dispute resolution clause is restricted only to amicable resolution.

5. Respondent Counsel argued that the Memorandum of Understanding only amended the acreage under the Management Agreement - not the dispute resolution clause!

6. What I am tasked to resolve, here, is whether or not the arbitration clause in the Memorandum of Understanding also fastened upon the Management Agreement.

7. The question then - is the subject matter in the Memorandum of Understanding correlated or tied in any way to the Management Agreement?

8. I find that the Memorandum of Understanding generally correlates to the Management Agreement, where it states:-

“WHEREAS

Nalongo Estates Limited has a Management Agreement dated May, 2006 to develop and manage Centenary Park and pursuant to that agreement prepared building plans that were approved by Kampala City Council and thereafter commenced construction.

AND WHEREAS

Khadar Investments Limited was allocated part of the land under the Management Agreement measuring approximately 2 acres and proceeded to obtain a Certificate of Title known as LRV 3677 Folio 17 Plot No.M822.

Kampala City Council confirms that the 2 plots 96A-100A Kitante Road and 5 Park Link have been surveyed and deed plans have been produced and Kampala City Council will cause preparation of lease documents and subsequent acquisition of the Certificate of Title by Nalongo Estates Limited.

In this last instance we see that the Management Agreement refers to plots 96-100 Kitante Road, as follows,

“Whereas the Council is the registered proprietor of Plots No. 96-100 Kitante Road …”

9. I, do find on the other hand, that the Memorandum of Understanding specifically relates to the Management Agreement, when it states that,

“8.  The management agreement shall be amended as hereunder;

1. The total area under the Management Agreement is reduced to 3.130 hectares from 5.32 hectares comprised in now Plot 34E-38E Jinja Road, save the road/channel reserve which remain the responsibility of Kampala City Council.
2. Nalongo Estates Limited shall submit new plans for approval by Kampala City Council, and shall proceed to with the constructions as per the plans for the Centenary Park.”

10. The provisions cited above in Paras.8-9 go to show that the Memorandum of Understanding is directly and by reference tied in to the Management Agreement.

11. The Applicant issued a Notice of Commencement of Arbitration proceedings dated 10^th September 2012. 

The Notice proposed that the Respondent either concur to the nominated arbitrators or proposes an alternative list for the Applicant’s consideration.

12. It is common knowledge that Kampala Capital City Authority (KCCA), is the successor to Kampala City Council.

13. KCCA replied, on 21^st September 2012, to the Notice of Commencement of Arbitration proceedings, as follows,

“The Contracts Committee of KCCA terminated the Contract for the management of Centenary Park by M/S Nalongo Estates Ltd and the KCCA informed your client on 28^th June 2012.

It is the position of the KCCA that the dispute in issue cannot be the subject of an arbitration proceedings because the Memorandum of Understanding pertains to the new demarcations of the Centenary Park and submission of new plans for approval by the KCC and construction as per plans submitted.

The dispute between KCCA and Nalongo Estates Ltd concerns much more than just un-submitted plans as stated hereinabove.  The management contract neither provided for arbitration but amicable settlement not amendment of the management contract.

In the alternative, notwithstanding the earlier submission, even if we were to suppose that the Memorandum of Understanding indeed amended the Management Contract, it restricted arbitration to disputes arising from demarcations and submissions of plans for consideration by the then KCC.  This would still leave two other fundamental breaches unaddressed.

We therefore oppose any attempts to draw us into an arbitration process and it is our proposal that you advise your client to peacefully hand over the property by the 1^st October 2012”.

14. The parties crafted a dispute resolution, within the Memorandum of Understanding, which reads,

“9.  The parties hereto have mutually agreed that in case of any dispute arising out of interpretation and implementation such disputes shall be amicably resolved between the parties, in case of failure to resolve the same dispute the same shall be referred to a mutually agreed upon arbitrator”.

15. The Respondent’s restricted interpretation, which concedes to arbitration, only when disputes arise from demarcations and submissions of plans for consideration by the then KCC, is not borne out in the arbitration clause 9.

I therefore find that the Respondent’s outright rejection of the Applicant’s proposal to institute an arbitral tribunal was erroneous. 

16. My conclusion is that Clause 9 arbitration is a general application provision, which applies in entirety to the Memorandum of Understanding.

17. In my humble opinion, the Memorandum of Understanding arbitration clause also applies to the Management Agreement.

18. I find merit in this Application and will answer the prayer to invoke the statutory power to effect the compulsory appointment of an arbitrator, in the affirmative.

19. I am bound by S.10(2) Arbitration and Conciliation Act[1], Cap.4 to appoint one arbitrator, given that the parties did not indicate the number of arbitrators to preside over the tribunal.

20. I hereby appoint Mr. Kafuko Ntuyo as the arbitrator in this matter. 

21. Should Mr. Kafuko Ntuyo decline this appointment under Section 12(1) ACA on grounds of impartiality then Mr. Stephen Musisi or Mrs. Rachel Kabala shall be deemed appointed in sequential order listed, to act as the replacement arbitrator.

22. I must mention before taking leave of this Application that I am grateful to both counsel, whose insightful and considered submissions, enhanced my clarity of mind when I read the both the Management Agreement and Memorandum of Understanding.

23. Each party shall bear its own costs.

Dated at Kampala on the 9^th day of October 2012.

………………………………………………………….

JIMMY MUYANJA,

EXECUTIVE DIRECTOR.