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Commercial Justice

Sebalu & Lule Advocates barred from representing BoU and dfcu bank against Sudhir over, unprofessionalism and conflict of interest

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Justice Paul Gadenya of the Commercial Court, has dismissed city law firm, Sebalu & Lule Advocates from representing dfcu bank in a case in which billionaire businessman Dr.Sudhir Ruparelia is suing the bank over breach of contract.

The commercial court judge found that the law firm broke several rules in the Advocates (Professional Conduct) Regulations and therefore found them in conflict.

CMS’s lawyers, Joseph Kyazze and Nasser Sserunjogi of Magna Advocates being congratulated by the Ruparelias

In miscellaneous application No.1047 of 2018 (Crane Management Services vs. Sebalu & Lule Advocates and Dfcu Bank Limited), the businessman, accused the law firm of conflict of interest and breach of the Advocates (Professional Conduct) Regulations, since the law firm that was previously CMS’ lawyers and as such in possession of confidential information would use this privileged information against CMS.

In an affidavit sworn by Rajiv Ruparelia, one the directors of CMS, the real estate firm contended that Sebalu & Lule Advocates had overtime received instructions from CMS “including instructions to cause a thorough review of the applicants then existing tenancies which form the foundation” of the main suit.

The Ruparelias address the media outside the Commercial Court

In the main suit (HCCS No.109 of 2018), CMS sued dfcu for severally breaching various tenancy agreements in respect to 13 properties in Kampala and Mbale. CMS is demanding for USD385,728 and UGX2,998,558,624 as rental arrears. This is before interest, general damages, interest on general damages and costs of the suit.    

 “In view of the advocate-client relationship between the applicant (Crane Management Services Ltd) and the 1st respondent (Sebalu & Lule advocates), the latter’s continued participation as defence counsel for the 2nd respondent (Dfcu bank) herein, which is the defendant in High Court Civil Suit (HCCS) No. 109/2018 against the applicant/plaintiff, is prejudicial to the applicant’s head suit,” CMS’s petition reads in part. 

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CMS prayed that court issues a permanent injunction restraining the law firm from “appearing in and or acting as counsel for dfcu Limited in HCCS No 109 and all applications arising therefrom.”

Unprofessional and conflicted

Delivering his ruling, Justice Paul Gadenya said that Crane Management Services (CMS) had successfully proved that the law firm are “in possession of confidential information which is relevant, current and related to the head suit in HCCS No 109 of 2018 what would make them conflicted to act as counsel for the 2nd respondent against the applicant.”

“For the record, the engagement of the 1st respondent (Sebalu & Lule) as counsel for the 2nd respondent (dfcu) violated Regulation 4, 9 and 10 of the Advocates (Professional Conduct) Regulations,” he further ruled, in a ruling read for him by the Commercial Court registrar Festo Nsenga.

“The application is allowed with the following orders: an injunction shall issue against the 1st respondent from representing the 2nd respondent in all matters in HCCS 109 of 2018. The respondents will pay the costs of this application,” he ordered.

Rule No.4 of the Advocates (Professional Conduct) Regulations stipulates that advocates shouldn’t prejudice former clients.

Rule 9 forbids an advocate from “appearing before any court or tribunal in any matter in which he or she has reason to believe that he or she will be required as a witness to give evidence, whether verbally or by affidavit; and if, while appearing in any matter, it becomes apparent that he or she will be required as a witness to give evidence whether verbally or by affidavit, he or she shall not continue to appear.”

Rule 10 stops advocates from using their privileged relationship with their clients to their own personal advantage. It requires advocates to disclose to their clients any personal interest that they may have in transactions being conducted on behalf of those clients.

In yet another big blow to Sebalu Lule & Advocates, the judge also agreed with CMS’s lawyers that the law firm can also not represent Bank of Uganda and or Crane Bank in Civil Suit No. HCCS 493 of 2017 (Sudhir Ruparelia vs. MMAKS Advocates, AF Mpanga Advocates (Bowmans Uganda), Crane Bank Limited (In Receivership) and Bank Of Uganda)  since CMS, the Ruparelia Group and Crane Bank are “one and the same.”

Sebalu & Lule were hired by Bank of Uganda to replace MMAKS Advocates, AF Mpanga Advocates (Bowmans Uganda), who were kicked off the case by Commercial Court Justice Hon Justice David K Wangutusi in December 2017, also over conflict of interest and breach of the Advocates (Professional Conduct) Regulations.

In yet another big blow to Sebalu Lule & Advocates, the judge also agreed with CMS’s lawyers that the law firm can also not represent Bank of Uganda and or Crane Bank in Civil Suit No. HCCS 493 of 2017 (Sudhir Ruparelia vs. MMAKS Advocates, AF Mpanga Advocates (Bowmans Uganda), Crane Bank Limited (In Receivership) and Bank Of Uganda)  since CMS, the Ruparelia Group and Crane Bank are “one and the same.”

Sebalu & Lule were hired by Bank of Uganda to replace MMAKS Advocates, AF Mpanga Advocates (Bowmans Uganda), who were kicked off the case by Commercial Court Justice Hon Justice David K Wangutusi in December 2017, also over conflict of interest and breach of the Advocates (Professional Conduct) Regulations.

The dismissal of the three top law firms which are expected to be personifications of professionalism, is not only a commercial loss as the cases are believed to be worth several billions in professional fees, but is also a major reputational blow to the two law firms, each of which is affiliated to international law firms.

MMAKS Advocates is a member of Africa Legal Networks (ALN), an independent alliance of leading law firms in Africa while Bowmans Uganda is part of Bowmans Law one of Africa’s biggest law firms.

Sebalu & Lule is part of DLA Piper Africa Group.

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Commercial Justice

“Crane Bank has no basis to sue me; court should dismiss their case,” Sudhir tells court

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Dr Sudhir Ruparelia (right) with Kampala Associated Advocates' Senior Partner, Peter C. R. Kabatsi

Ruparelia Group Chairman, Dr Sudhir Ruparelia and Meera Investments Limited, one of his real estate companies, have applied to the Commercial Court, asking it to dismiss case HCCS 493 of 2017 brought against them by Crane Bank (in Receivership).

The applicants in Miscellaneous Application No. 320 of 2019 argue that Crane Bank (in receivership) has “no locus standi to bring the suit” against them and that the case is “barred by law.”

Black’s Law Dictionary, 10th Edition, defines locus standi to mean: “The right to bring an action or to be heard in a given forum.”

In HCCS 493 of 2017, Bank of Uganda through Crane Bank (in receivership) alleges that the businessman fraudulently took out up to $92.8m (about Shs334b) and another Shs8.2 billion of depositors’ money from Crane Bank for personal gain through various payments to two construction companies and a technology company.

Dr Sudhir Ruparelia interacts with Bank of Uganda’s legal team at the Commercial Court before the hearing started.

The companies alleged to have been used by Sudhir for these payments have since vehemently rejected the above claims and produced evidence to discredit BoU’s claims.   

BoU through Crane Bank (in receivership) also alleges that the entire land where Crane Bank had branches, was transferred to Meera Investments Limited, another company owned by Sudhir and subsequently leased the land to Crane Bank.

Crane Bank now wants back the 48 freehold certificates together with duly executed transfer deeds in respect of each one of them in favour of Crane Bank or its nominee.

A receiver cannot sue or be sued

In their preliminary objections before Hon Mr. Justice David K. Wangutusi, today, July 3, 2019 Sudhir through his lawyers, Kampala Associated Advocates, argued that a receiver or an entity in receivership- in this case Crane Bank cannot sue or be sued.

Kampala Associated Advocates was represented by Senior Partner, Peter C. R. Kabatsi, Managing Partner Joseph Matsiko and Partner Elison Karuhanga.

“The suit was filed when Crane Bank Limited was in receivership. At issue therefore is; can a suit be filed when a financial institution is in receivership? Our submission is that the receiver has no locus to file the suit,” argued the lawyers.

Dr Sudhir (right) with son and Managing Director of the Ruparelia Group, Mr. Rajiv Ruparelia

Bank of Uganda on the 20th October 2016 took over the management of Crane Bank and pursuant to Sections 87 (3) and 88 (1) (a) & (b) of the Financial Institutions Act 2004 and on the 20th of January 2018 BoU placed the bank under receivership pursuant to Section 94 of the FIA.

Sudhir’s lawyers further argued that the FIA 2004 provides three ways in which BOU may takeover and resolve a financial institution in distress and these include: statutory management, receivership, and liquidation. They added that while the law allows the statutory manager and the liquidator to sue, it does not allow the receiver to sue or be sued.

“From 20th October, 2016 to 20th January, 2017 Bank of Uganda could institute a suit under Section 89 (1),(2)(e),(9) of the FIA. We shall submit that they lost that power on 20th January, 2017 when they placed the Plaintiff under receivership,” submitted the lawyers, adding: “A financial institution under receivership is therefore a closed financial institution. When a financial institution is placed under receivership the statutory manager’s powers cease from that day and for all intents and purposes the institution is closed.

Section 95 of the FIA 2004 only grants a receiver powers to:

  1. arrange a merger with another financial institution;
  2. arrange for the purchase of assets and assumption of all or some of the liabilities by other financial institutions;
  3. arrange to sell the financial institution;
  4. liquidate the assets of the financial institution.

But even then this must be done within 12 months of taking over as a receiver.

“The powers of the receiver are therefore limited, both in extent and in time. He can only exercise the four powers mentioned above and this has to be done within twelve months,” Sudhir’s lawyers submitted, adding: “Section 95 does not mention suing as one of the things he (the receiver) will do in the exercise of his powers.”

“Under the FIA, the receiver cannot file a law suit. When the legislature does not grant an express power to a statutory entity to sue then that entity simply cannot sue. This very point was determined by the Supreme Court of Uganda,” argued KAA Advocates.     

“If a party cannot be sued, it follows that that party cannot sue. We are fortified in this by the binding decision in the supreme court in the case of The Commissioner General Uganda Revenue Authority vs Meera Investments Limited SCCA 22 of 2007,” the lawyers further submitted.

Non-Ugandan citizens cannot own mailo or freehold land

KAA lawyers also submitted that BoU’s claim on Meera Investments’ land is barred by law since Crane Bank- by virtue of being majority owned by non-Ugandan citizens is a non-citizen and therefore barred from acquiring or holding mailo or freehold land in Uganda by Section 40 (1), (4), (7)(a)(d), and (8)(a) of the Land Act.  

“The majority shares in CBL are held by a company incorporated in Mauritius. A further 4% is held by Mr. Jitendera Sanghani, a British national. This would in effect mean that a total of 51.33% of the shares are held by non-citizens…..It is well settled that under no circumstances can a non-citizen hold freehold land and a number of authorities elucidate this Constitutional point.”                              

The lawyers also dismissed Crane Bank’s prayers to have the land held in trust for them by a designated nominee saying that doing so would “would defeat the express provisions of Article 237 of the Constitution” shich says that mailo land and freehold land cann only be owned by Ugandan citiznes.

“The purpose of this Court is to interpret the transaction in accordance with the law and not to side step the law with ingenious legal trusts. A trust is a creature of the doctrine of equity and the branch of law called equity and trusts. One of the maxims of equity is that: “equity follows the law and will therefore not allow a remedy that is contrary to the law”. The Court cannot construct this trust because it will be an illegal trust. A court of law cannot grant an illegal prayer,” closed the lawyers in their submissions.

Justice Wangutusi has set August 26, for a ruling on the objection.

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Commercial Justice

Bad and barred: Sudhir’s lawyers punch further holes in BoU’s case against businessman

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Dr. Sudhir Ruparelia surrounded by his lawyers Jet Tumwebaze (left) and Peter C. R. Kabatsi (right) of Kampala Associated Advocates address the press in December 2017 following court dismissal of law firms MMAKS Advocates and Bowmans Uganda from representing BoU against the businessman over conflict of interest.

City Businessman and billionaire Dr Sudhir Ruparelia, has applied to the Commercial Court to dismiss a case brought against him and his real estate firm, Meera Investments Ltd by Bank of Uganda through Crane Bank (in receivership).

In Miscellaneous Application No. 320 of 2019 the businessman wants Civil Suit No. 493 of 2017- Crane Bank (in receivership) vs. Sudhir Ruparelia & Meera Investments Ltd, dismissed arguing that the applicant (Crane Bank) has no locus standi, as a company under receivership cannot sue and be sued.

Locus standi, is a law term used to mean the ability, right or capacity of party to bring an action or to appear in a court and or participate in a case.

LEGAL WALL: Sudhir surrounded by his Kampala Associated Advocates. The top city law firm has punched major holes in Crane Bank’s/BoU case against the businessman

In HCCS 493 of 2017, Bank of Uganda through Crane Bank (in receivership) allege that the businessman fraudulently took out up to $92.8m (about Shs334b) and another Shs8.2 billion of depositors’ money from Crane Bank for personal gain through various payments to two construction companies and a technology company.

Some of the companies alleged to have been used by Sudhir for these payments have since vehemently rejected the above claims and produced evidence to discredit BoU’s claims.    

Crane Bank also accuses Sudhir of failing to remit more than Shs52 billion in workers’ contributions to the National Social Security Fund (NSSF) and wants him to pay the amount. 

It is also alleged that the entire land where Crane Bank had branches, was transferred to Meera Investments Limited, another company owned by Sudhir and subsequently leased the land to Crane Bank. Crane Bank wants the land back.

BoU Deputy Governor Dr. Louis Kasekende (left) and Governor Prof Emmanuel Tumusiime Mutebile appear before Parliament’s COSASE last year. The COSASE probe and the Auditor General have also found that the seizure and subsequent sale of Crane Bank and 6 other banks breached several provisions of the Financial Institutions Act (2004) and want the owners of the banks compensated by BoU.

However the businessman, through his lawyers, Kampala Associated Advocates, in an application to court argues that “H.C.C.S 493 of 2017 is expressly barred by law as the respondent (Crane Bank) has no power to sue or be sued.”

The lawyers also argue that Crane Bank cannot sue for “the recovery, transfer and return of freehold property when the respondent is a non-citizen within the meaning of the law”- since 51% of the bank is owned by non-Ugandans.

The Ugandan Constitution and the Land Act, bars none Ugandans from owning freehold property. The lawyers therefore argue that Crane Bank is not capable of holding the suit property in its names and therefore cannot sue for it.

The lawyers also hold that Crane Bank is not “permitted by law to institute or commence actions against its shareholders and hence the instant suit (H.C.C.S 493 of 2017 ) is barred by law.”

They also want the NSSF claims against Sudhir dismissed arguing that the claim for the National Social Security Fund should have been made against Crane Bank and not its shareholders, as the shareholders were not involved in running the bank.

Sudhir’s lawyers also say, the case brought against the businessman “does not disclose a cause of action against the applicant (Sudhir)” as provided for by Order 6 Rule 29 of the Civil Procedure Regulations.

The businessman, through his lawyers want the entire H.C.C.S 493 of 2017 dismissed with costs.  

The case will first be heard on 3rd July 2019.

Shaky BoU Case

This recent application further threatens BoU’s case following a December 2017 dismissal by the Commercial Court of BoU’s lawyers- MMAKS Advocates and Bowmans Uganda from representing Bank of Uganda.  

Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) and the Auditor General have also found that the seizure and subsequent sale of Crane Bank and 6 other banks breached several provisions of the Financial Institutions Act (2004) and want the owners of the banks compensated by BoU.

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Commercial Justice

OPINION: Conflicted and unprofessional lawyers; time for legal fraternity to act on their prodigal sons

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Left- Right: Bowmans' David F.K Mpanga, MMAKS Advocates' Masembe Kanyerezi and Sebalu & Lule's James Mukasa Sebugenyi. The Commercial Court has faulted the three top law firms for conflict of interest and breach of advocates professional regulations, further casting a shadow on a profession that is facing increasing complaints from the public.

Lawyers, the world over, would love us to call them learned friends.

By deduction, senior lawyers are perceived to be ‘more learned’ than their other colleagues; but when senior lawyers cannot tell something as simple as conflict of interest, then you begin to wonder whether it is a genuine mistake or rather overt professional greed.

Yesterday, April 29th 2019, Commercial Court’s Hon Justice Paul Gadenya ruled that another top city law firm, Sebalu & Lule Advocates, was severally in breach of the Advocates (Professional Conduct) Regulations when they agreed to represent dfcu Bank in a case brought against the bank by Ruparelia Group, yet the law firm knew, that having acted for the Group before, they were in possession of confidential information that would be detrimental to their former client’s interests.

In his ruling, Justice Gadenya, did not mince his words, he told them: “For the record, the engagement of the 1st respondent (Sebalu & Lule Advocates) as counsel for the 2nd respondent (dfcu) violated Regulation 4, 9 and 10 of the Advocates (Professional Conduct) Regulations.”

Rule No.4 pertains prejudicing former clients.

Rule 9 forbids an advocate from “appearing before any court or tribunal in any matter in which he or she has reason to believe that he or she will be required as a witness to give evidence.

 Rule 10 stops advocates from using their privileged relationship with their clients for their own personal advantage.  

On this basis, Justice Gadenya barred Sebalu & Lule Advocates against acting for dfcu and Bank of Uganda against the Group.

Gadenya’s ruling is similar and related to another Commercial Court ruling by Hon Justice David K Wangutusi who in December 2017 disqualified two other law firms MMAKS Advocates and Bowmans Uganda from representing Bank of Uganda in a case the Central Bank brought against city businessman Sudhir Ruparelia’s on the grounds that the two law firms have previously acted for the businessman and were therefore in possession of privileged information.

Significant as these two rulings are for justice, it is not every day that you will meet a Sudhir Ruparelia with enough clout and legal literacy to take on the law firms and beat them at their own game. One then wonders, who will then save the largely gullible and vulnerable public from predatory and professional greedy lawyers?  

According to a 2017 Uganda Law Society (ULS) report, there was a 32.6% increment in complaints against advocates from 150 complaints to 199 complaints. For the registered 774 law firms in 2017 according to the Ministry of Justice, this represents a complaints to law firms ratio of 25.7% which is on the very high side. Given that the Disciplinary Committee was able to dispose of only 35.2% (70) of the complaints, the amount of pain being visited on the public by the same people who purport to be guardians of the law becomes so evident.  

So does the need for an urgent intervention from the regulators of the profession such as the Department of Law Council as well as Uganda Law Society!

Bank of Uganda obsession with these 3 law firms

As if this is not disturbing enough, another question lingers over Bank of Uganda’s excessive obsession with the above named 3 law firms that the central bank will risk everything to work with them.

MMAKS has been for ages the retained external law firm for Bank of Uganda, which is principally okay, but not when they have been severally named in a number of questionable dealings- but most importantly for providing what is now believed to be substandard legal services during the takeover and sale of a number of defunct banks; advice whose quality has been questioned by both the Attorney General and parliament.

But somehow the Central Bank is still holding onto them- even when the Governor has raised a red flag over excessive bills!

Another questionable decision by the Central Bank is why they have up to now maintained the services of Sebalu & Lule Advocates even when in the early stages of their appointment a red flag on conflict of interest was raised. Did BoU have to wait for this long to dismiss the law firm, even when the writing was on the wall- especially after the December 2017 ruling by Wangutusi on MMAKS and Bowmans?

In his closing remarks to COSASE, Prof Tumusiime Emmanuel Mutebile, the BoU Governor committed to bring about sweeping reforms- the public is waiting.  

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