The Supreme Court in the United Kingdom has dismissed attempts by Uganda’s dfcu Bank and its shareholders, to block a ￡170 million (UGX825.8 billion) suit brought against them by shareholders of the defunct Crane Bank.
Crane Bank shareholders sued dfcu Bank, its holding company, dfcu Limited, as well as dfcu Bank’s former board chairman, Jimmy Mugerwa (now dfcu Limited Chairman), Juma Kisaame, the former dfcu Bank CEO. Also sued are dfcu’s majority shareholders at the time⏤CDC Group Plc, as well as Norfinance AS, Rabo Partnerships B.V., and Arise BV, as well as the respective directors of these shareholder companies, namely Stephen Caley, Michael Alan Turner, Albert Jonkergouw, Willem Cramer, Ola Rinnan and Deepak Malik.
Shareholders of the former Crane Bank allege that that senior former officials at the Bank of Uganda engaged in a corrupt scheme to take control of Crane Bank and sell its assets at a gross undervalue, while also syphoning off public funds. Along with its shareholders, Crane Bank claims that dfcu Bank and the other Defendants took part in this fraudulent scheme and purchased Crane Bank’s assets at a gross undervalue, while also effectively paying a bribe.
However, when the case first came up for mention dfcu Bank and its shareholders, separately challenged the jurisdiction of the London High Court on the case, arguing that the seizure and sale of dfcu was a sovereign act of the government of Uganda and therefore the claims before the court were debarred by the foreign act of state rule. The rule bars English Courts from adjudicating on the lawfulness of executive acts of a foreign state (Uganda), under the laws of that state and performed within its territory.
On 19 October 2022 High Court Judge, HH Pelling KC gave dfcu Bank a temporary win and ruled that the matter was bound by the foreign act state of rule and therefore out of his jurisdiction.
Crane Bank shareholders appealed this ruling and in a unanimous ruling on 26th July 2023, three London appellate court justices⏤ Sir Julian Flaux, Lord Justice Popplewell and Lord Justice Phillips overruled the High Court ruling and said that while the act of taking over Crane Bank and placing it under receivership by the Central Bank was a sovereign act, “the BoU, in acting as receiver, must be taken to have owed the usual common law and equitable duties to its principal (CBL) to act in good faith and to obtain a proper price for property under receivership”.
“Further, the sale to dfcu Bank, as set out in the Agreement, was a straightforward commercial transaction on standard commercial terms: indeed the parties expressly declared that it was a commercial contract,” the Court of Appeal in London ruled.
“I am of the view that it is well arguable, at the very least, that the sale by the BoU as the receiver was commercial activity, regardless of the purpose of the BoU in entering it and giving associated dispensations. It is therefore arguable that the claim is not barred by the foreign act of state doctrine and the jurisdiction challenge should therefore have been dismissed. I would accordingly allow the appeal on this ground,” Sir Julian Flaux ruled in his lead judgement.
Court also ordered dfcu Bank to pay shareholders of the former Crane Bank Limited (CBL), ￡1,875,000 (UGX8.8 billion) in court costs. Court also ordered that the quintet must refund, within 14 days, with 4.5% interest per annum, the ￡1,250,000 (UGX5.9 billion), that the CBL shareholders paid to them on 27 October 2022 as costs, when the High Court initially dismissed the main case brought up by CBL’s shareholders.
Dfcu bank and its shareholders, then proceeded to appeal the Court of Appeal ruling in the Supreme Court, which has now dismissed that appeal, clearing ground for the main case to start.
“After consideration of the applications filed on behalf of the Appellants seeking permission to appeal the order made by the Court of Appeal on 26 July 2023 and of the notices of objection filed by the Respondents, the Court ordered that permission to appeal be refused because the applications do not raise an arguable point of law which the court should consider at this time (i.e. before trial),” reads an extract from the 8th January 2020 ruling by Lord Lloyd-Jones, Lord Leggatt and Lord Burrows of the UK Supreme Court.
The Supreme Court has also ordered that “in each application the appellants pay the respondents’ costs, the amount of those costs to be assessed if not agreed”.
The latest win is one of many in a recent of many wins, Crane Bank shareholders have won against either dfcu Bank and or the Central Bank in Ugandan and UK Courts.