KIU Loses Court Application to Stay Collection of Ugx 47Bn by Housing Finance

The Commercial Division of the High Court has declined to stay the execution of an order seeking to recover 47 billion Shillings from Kampala International University. 

In his ruling, Justice Steven Mubiru, observed that KIU which is owned by businessman Hassan Basajjabalaba, had failed to prove that if it were to be successful in an appeal lodged in the court of appeal, Housing Finance Company Limited of Kenya will not be able to pay back the 47 billion Shillings it will have recovered. “The applicant has not shown that execution will affect the merits of the grounds and arguments proposed to be raised on appeal, and neither has it demonstrated a reasonable basis to support the belief that there is a real prospect that it will not be possible for the Court of Appeal by its orders to restore the status quo if the applicant succeeds in its appeal. 

The Court of Appeal would ordinarily order the restoration of the status quo ante by directing the respondent to refund money recovered in execution of the decree,” the ruling reads in part. KIU had sought an order staying the execution of orders of the High Court in consolidated Arbitration Causes No. 38 and 46 of 2024, including the enforcement in Uganda, of the Final Arbitral Award handed down in Nairobi, Kenya, by an arbitrator, Collins Namachanja, on 19 September 2019. These orders were also reaffirmed by the Uganda High Court last month.

KIU argued that if the order of execution is not stayed, this would render useless their appeal in the High Court if they are successful. According to court records, in 2010, KIU commenced a project to expand existing facilities and construct new ones, including lecture rooms, administration blocks, hostels, dining facilities, library and staff accommodation at its campus in Kajidao in Kenya. It sought $ 15 million from the Housing Finance Company of Kenya to partly finance the project.

However, the financing company could only afford $ 10 million. It persuaded KIU to revise the scope of works to fit within the available $ 10 million. As security, the university mortgaged its 62-acre land on which it sits. The loan repayment was scheduled for 15 years. However, along the way, the two entities developed a misunderstanding over the amount of money paid in interest and how much the financing company had given KIU. 

At that time, the financing company had already given the university $ 11.3 million. The two parties agreed to go for arbitration in Kenya. In resolving the matter, the single arbitrator indeed discovered that the university had been overcharged in interest, but that the financing company had outstanding money that had not been paid. When added to the $ 11.3 million already disbursed, it amounted to $13,817,270.87, which also continued to attract interest and other associated charges. In the end, the tribunal subtracted $ 1.049 million that had been overcharged and then ordered the university to pay the finance company $ 12,767,508.33. It is this amount that KIU objected to and decided to file a suit first in a Kenyan court and eventually in the Ugandan High Court. 

This suit was dismissed last month, and the court reaffirmed the tribunal ruling.

After the defeat, KIU ran to court again to try and stop the execution of the order of recovery of the money until its appeal had been determined. But Justice Mubiru was not convinced about KIU’s arguments.  “Courts are more likely to grant a stay of execution when there is a strong possibility that the execution of the decree will render the appellant unable to afford the costs of the appeal, or otherwise cripple their ability to pursue their case, thereby paralysing the exercise of their right of appeal…The Court has not lost sight of the fact that the applicant is a private university. Although the decretal sum is a significant amount and there is no doubt it has the potential of affecting the normal operations of the applicant if drawn at a go, I am not satisfied that it’s recovery will cripple the applicant’s ability to pursue its appeal, thereby paralysing the exercise of its right of appeal,” the judge ruled adding that, save for the argument that the over 30,000 students of KIU would be inconvenienced if the university were to close after the recovery of 47billion Shillings, KIU had not offered evidence to show that execution will cause significant difficulty, expense or disruption, beyond that which every judgment debtor is subjected to when he or she loses his or her case. 

The arbitral proceedings revealed that the applicant stopped servicing the loan sometime during the year 2016. More so, there is no evidence to show that over five years since the award was handed down, the applicant has made any effort to repay the sum borrowed, yet it does not deny having borrowed from the principal sum. In the circumstances, if an order of stay is granted, it is likely to inflict greater hardship as it would disproportionately harm the respondent who would, as a result, be unfairly deprived of its right to benefit from the fruits of an Arbitral Award delivered in its favour.” Mubiru ruled.