Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Uganda Telecom Limited v Hi-Tech Telecom Pty Ltd [2011] FCA 131

Citation: Uganda Telecom Limited v Hi-Tech Telecom Pty Ltd [2011] FCA 131
Parties: UGANDA TELECOM LIMITED v HI-TECH TELECOM PTY LTD (ACN 098 008 587); HI-TECH TELECOM PTY LTD (ACN 098 008 587) v UGANDA TELECOM LIMITED
File number: NSD 171 of 2010
Judge: FOSTER J
Date of judgment: 22 February 2011
Catchwords: ARBITRATION – international arbitration – enforcement of foreign award – whether an award made in Uganda pursuant to an arbitration agreement contained in a telecommunications contract between a Ugandan corporation and an Australian corporation should be enforced in Australia – arbitrator proceeded ex parte – no reason not to enforce the award – consideration of grounds for refusing to enforce a foreign award under the International Arbitration Act 1974 (Cth)
Legislation: Corporations Act 2001 (Cth)
International Arbitration Act 1974 (Cth), ss 2D, 3, 8, 39, 40, Pt II and Schedule 1
International Arbitration Act Amendment Act 2010, Schedule 1
Arbitration and Conciliation Act Cap 4 Laws of Uganda, 2000 Revised Edition, Pt VI, ss 1, 2, 3, 8, 10, 11, 12, 13, 14, 15, 19, 20, 21, 25, 31, 32, 35, 67 and 68  
Federal Court Rules, O 29 r 2(a)
Cases cited: Corvetina Technology Ltd v Clough Engineering Ltd (2004) 183 FLR 317 cited
Karaha Bodas Co, LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara 364 F 3d 274 (5th Cir 2004) followed
Parsons & Whittemore Overseas Co, Inc v Société Générale De L’Industrie Du Papier 508 F 2d 969 (2d Cir 1974) followed
Resort Condominiums International Inc v Bolwell [1995] 1 Qd R 406 cited
Date of hearing: 6 May 2010
Date of last submissions: 10 May 2010
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 142
Counsel for the Applicant/Cross-Respondent: Mr CP Carter
Solicitor for the Applicant/Cross-Respondent: Curwoods Lawyers
Counsel for the Respondent/Cross-Claimant: Mr A Cheshire
Solicitor for the Respondent/Cross-Claimant: Goldrick Farrell Mullan

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 171 of 2010

BETWEEN:

UGANDA TELECOM LIMITED
Applicant/Cross-Respondent

AND:

HI-TECH TELECOM PTY LTD (ACN 098 008 587)
Respondent/Cross-Claimant

JUDGE:

FOSTER J

DATE OF ORDER:

22 FEBRUARY 2011

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Within seven (7) days of the date of these Orders, the parties file and serve an agreed set of declarations, orders and directions designed to give effect to these Reasons for Judgment. 

2.In the event that agreement cannot be reached within the timeframe specified in Order 1 above, each party file and serve within ten (10) days of the date of these Orders its version of the declarations, orders and directions which it submits that the Court should make, together with a brief Written Submission of no more than three pages in length in support of its version. 

3.The form of relief will thereafter be determined on the papers.  

Note:    Settlement and entry of orders is dealt with in Order 36 of…

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Details
Case
[2011] FCA 131
Decision Date

CaseChat Overview and Summary

In the case of Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd, the primary dispute centered on the enforcement of an international arbitration award made in Uganda under a telecommunications contract between a Ugandan corporation, Uganda Telecom Ltd (UTL), and an Australian corporation, Hi-Tech Telecom Pty Ltd. The Federal Court of Australia was tasked with determining whether the award, which was made pursuant to an arbitration agreement contained within the contract, should be enforced in Australia.

The legal issues before the court included whether the arbitration agreement in the contract was sufficiently clear and complete, and whether there were any grounds under the International Arbitration Act 1974 (Cth) for refusing to enforce the foreign award. Hi-Tech argued that the arbitration clause was uncertain and thus void because it did not specify the seat of the arbitration, the identity of the arbitrators, the number of arbitrators, the service of documents, the resolution of disputes concerning the appointment of the arbitrators, and the rules governing the arbitration. Additionally, Hi-Tech contended that enforcement of the award without considering its claim for damages for conversion of equipment would be against public policy.

The court found that the arbitration clause was clear and enforceable under Ugandan law, as it mandated that all disputes under or in relation to the contract must be referred to arbitration. The court noted that while the clause did not specify certain procedural details, these could be filled in by the laws of Uganda. Furthermore, the court held that Hi-Tech's claim for damages for conversion of equipment did not provide grounds for refusing to enforce the award, as such claims could be pursued separately after enforcement of the award. The court concluded that there were no valid grounds under the Act for refusing to enforce the award.

Consequently, the court declined to defer enforcement of the award due to Hi-Tech's offsetting claim and ordered that the award be enforced by making an appropriate order for payment in US dollars, including interest up to the date of the order. The court also directed the parties to file and serve agreed declarations, orders, and directions to give effect to the judgment. If the parties could not reach an agreement, they were to file their respective versions within a specified timeframe, after which the court would determine the form of relief. Hi-Tech was ordered to pay the costs of the proceeding.

Orders

Orders of the court

1. Within seven (7) days of the date of these Orders, the parties file and serve an agreed set of declarations, orders and directions designed to give effect to these Reasons for Judgment.

2. In the event that agreement cannot be reached within the timeframe specified in Order 1 above, each party file and serve within ten (10) days of the date of these Orders its version of the declarations, orders and directions which it submits that the Court should make, together with a brief Written Submission of no more than three pages in length in support of its version.

3. The form of relief will thereafter be determined on the papers.

Background

Background to the litigation

Hi-Tech also claims that it has an entitlement to damages for conversion of certain equipment owned by it which remains in Uganda. It asserts that UTL has wrongfully seized and converted that equipment to its own use and that the value of that equipment exceeds the amount awarded in the Award. It submits that it is entitled to the benefit of a set-off of greater value than the amount of the Award which must be brought to account against the total amount awarded against it by the arbitrator in the Award. Hi-Tech argues that the Court should not enforce the Award until its offsetting claim has been heard and determined and brought to account as a deduction from the amount awarded in favour of UTL in the Award. This submission relies upon the requirement for leave contained in the earlier version of s 8(3) of the Act and upon s 8(7). Hi-Tech argues that enforcement of the Award without bringing to account the offsetting claim would be against public policy. BACKGROUND On 15 November 2007, UTL and Hi-Tech entered into a written agreement, entitled “Telecommunication Service Contract” (the Contract) for the supply by UTL of telecommunications switching services and facilities to Hi-Tech in order to facilitate the conduct of its international telecommunications traffic to UTL and to other destinations in Uganda. The Contract was signed on behalf of UTL by its Managing Director, Mr Abdulbaset Elazzabi, and its Company Secretary/Legal Counsel, Donald Nyakairu. The signatories on behalf of Hi-Tech were Mr Amadu Yahaya, its Chief Executive Officer, and Mr James Dinh, its Secretary. Articles 4, 5, 12, 14 and 15 of the Contract relevantly provided:ARTICLE 4: OBLIGATIONS OF THE PARTIES4.1Hitech agrees to:-Bear the cost of 50% (Fifty Percent) of the cost of internet bandwidth.- Send via UTL a guaranteed minimum monthly volume of 2,000,000 minutes (send or pay) per month once the link is ready for service and following the Ramp Up Period. -HITECH shall upon execution of the contract submit a StandBy and Irrevocable International Letter Of Credit as a Guarantee from an International Bank in the amount of USD 100,000. The bank guarantee shall be according to the terms outlined at schedule. (Annex 4)-Reach the targeted ramp up volumes as per Annex 2.- Provide to UTL the equipment to allow the commencement of the service. - Pay all the costs due to the importation and the installation of the equipment. - Ensure the training of the staff on the supplied equipment.4.2 UTL agrees to:- assist HITECH engineers to install the equipment, [and to provide certain operational guarantees to Hitech]…4.4 The equipment is and shall remain the property of HITECH but shall be transferred to UTL in case HITECH defaults on payment. ARTICLE 5: BILLING AND PAYMENT 5.1 Billing:On the 1st day of every month or nearest possible working day to the 1st of the month, UTL will generate an invoice based on the traffic generated by HITECH and on the current rates applied for the services provided according to the present contract. The said invoice will be established in function of the duration in minute of the routed calls according to the present contract. The invoice will include the traffic by destination, the tariff by destination and the total of the invoice. The calls durations will be captured in seconds. Total monthly durations per destination will be converted into minutes for invoicing purposes.5.2Payment… The total amount due from HITECH under the present contract is payable to UTL in US$, in available funds, within fourteen (14) calendar days after the issuance of UTL invoice. In case of non-payment of the invoice by the due date, UTL reserves the right to call in the payment guarantee given to UTL and to stop service. 5.3 Invoices AdjustmentsRequests for billing adjustments must be made within fourteen (14) days of the invoice. Any amount which is determined to be in error will be credited against the next invoice. Such request for adjustment shall not be cause for delay in payment of the UTL invoice. If any dispute or claim can't be resolved, then the matter goes to arbitration as per 14.2 below.ARTICLE 12: NOTICE12.1All notices, requests or other communications according to the present contract must be in writing, addressed to the parties as follows:FOR HITECH:Physical Address: Suite 24, Level 11, 809 Pacific Highway, Chatswood, Sydney NSW 2067 AustraliaPhone:+61 2 8484 8800Fax: +61 2 8484 8811E-mail-address: admin@hitech-telecom.com…12.2The notices mailed by registered shall be conclusively deemed to have been received in a conclusive manner by the addressee on the 5 business day following the mailing of sending thereof. Those sent by fax or telex shall be conclusively deemed to have been received when the delivery confirmation is received by first class stamped mail. The party who wishes to modify the address to which their correspondence is sent may do so by providing the new address in writing to the other party.ARTICLE 14: GOVERNING LAW ARBITRATION14.1The present contract is governed, interpreted and applied in accordance to the laws of the Republic of Uganda including all concerns of construction, validity and performance. In the case where an action or procedure occurs affecting the present contract, the party to take advantage of such an action agrees to cover the costs, legal or other.14.2Any lawsuit, disagreement, or complaint with regards to a disagreement, must be submitted to a compulsory arbitration. ARTICLE 15: ENTIRE AGREEMENT15.1The present contract, as well as annex, destinations and tariffs, represent the entire agreement between the parties related to the business indicated in the present contract an [sic] replacing all the earlier concluded verbal and written agreements by both parties. The present contract can only be modified in writing by both parties.15.2The present contract may be signed in multiple copies, and each will be reputed to be an original.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I therefore decline to defer enforcement of the Award because of the alleged offsetting claim.CONCLUSION Hi-Tech has failed in all of its defences to UTL’s arbitration claims. Accordingly, I will make a declaration of validity in respect of the Award and will enforce it by making an appropriate order for payment. That order for payment is to be expressed in US dollars and is to include interest up to the date upon which the order is made at the rates determined by the arbitrator. I decline to defer enforcement of the Award and, therefore, will not stay the order for payment which I propose to make. I will make interlocutory directions for the disposition of Hi-Tech’s Cross-Claim, should it wish to pursue that Cross-Claim. Hi-Tech must pay the costs of the proceeding to date. The only orders which I will make at the moment are that, within seven (7) days of the date of this judgment, the parties are to file and serve an agreed set of declarations, orders and directions designed to give effect to these Reasons for Judgment. In the event that agreement cannot be reached within that timeframe, each party is to file and serve within ten (10) days of the date of this judgment its version of the declarations, orders and directions which it submits that I should make together with a brief Written Submission of no more than three pages in length in support of its version. I will then determine the form of relief on the papers. There will be orders accordingly.

Ratio Decidendi

Legal Principle Established

On 24 February 2010, Curwoods Lawyers filed an Application in this Court on behalf of UTL. In that Application, UTL claimed an order granting leave to UTL to register the Award as a final judgment of the Commonwealth of Australia pursuant to s 8 of the Act, a declaration that Hi-Tech comply with the Award and a declaration that the Award is enforceable. In the alternative, it claimed equitable or common law compensation as well as interest and costs. CONSIDERATIONIssues (a), (b) and (c)—The Issues Concerning the Scope and Effect of Cl 14.2 Under this heading, I shall deal with issues (a), (b) and (c) described at [22] above. The Contract is governed by the laws of Uganda (cl 14.1). Clause 14.2 is infelicitously expressed. However, in my view, the meaning of the clause is clear: All disputes under or in relation to the Contract must be referred to arbitration. Hi-Tech submitted that cl 14.2 was uncertain and thus void because the clause did not address the following matters:(a)The seat of the arbitration;(b)The identity of the arbitrator(s);(c)The number of arbitrators;(d)The service of documents by which the arbitration was initiated;(e)The manner in which any dispute concerning the appointment of the arbitrator(s) was to be resolved; and (f)The rules that were to apply to the arbitration. Hi-Tech also submitted that cl 14.2 was uncertain because it did not specify the law which was to govern the arbitration. It was also submitted that the Court could not fill these alleged gaps by resort to the law governing the implication of contractual terms. In the event that cl 14.2 is held to be void, UTL’s claims to enforce the Award must fail. The Contract was made in Uganda. It is governed by the laws of Uganda. It concerns the provision of services in Uganda. One of the parties to the Contract (UTL) is incorporated in Uganda. Payments under the Contract were required to be made to UTL in Uganda. Hi-Tech’s submissions focussed on alleged omissions from cl 14.2 rather than on ambiguities or uncertainty in the language of cl 14.2. Hi-Tech’s case was that the parties had simply failed to reach agreement on a raft of important matters. As already mentioned at [63] above, I think that the meaning of the clause is clear. The questions for present purposes are: Are at least some of the matters listed at [64] above not covered by cl 14.2 and the laws of Uganda? If so, are the omissions so serious as to render the clause void for uncertainty? The UAA applies to both domestic arbitrations and international arbitrations which take place in Uganda (s 1). The arbitration in the present case was a domestic arbitration in Uganda. Clause 14.2 is an arbitration agreement within the meaning of the UAA. Section 2(1)(c) defines arbitration agreement as follows:“arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not;