A High Court in London has absolved dfcu bank and its directors of blame in the alleged connivance with Bank of Uganda to sell the now-defunct Crane bank.
This is according to an October 7, 2022 ruling delivered by His Honour Judge Pelling QC of the High Court of Justice Business and Property Courts of England and Wales Commercial Court (KBD).
Lord Pelling exonerates both dfcu and BoU of wrongdoing saying BoU is justified in performing their oversight role enshrined in Uganda’s constitution especially following several red flags and warnings it had brought to Crane Bank’s notice against wrong doings.
Crane Bank Limited (“CBL”) was, until 2016, one of Uganda’s largest commercial banks. It was regulated by Uganda’s central bank, the Bank of Uganda (“BoU”). 5.
In 2016-2017, the BoU, in exercise of its statutory and regulatory powers, took over management of CBL, then closed it and sold off some of its assets and liabilities to the 1st defendant.
The claimants (CBL and some of its shareholders) contend that this sale, together with various side agreements, was a sale of CBL’s assets and liabilities at a “gross” undervalue in furtherance of a corrupt scheme carried into effect by the BoU using its statutory and regulatory powers in the way I have described.
In these proceedings, the claimants allege against the defendants both that they participated in an unlawful means conspiracy and provided dishonest assistance in breach of trust and/or of fiduciary duty.
In addition, the claimants allege unconscionable receipt against the 1st defendant. The claims are quantified at over £170m. The claimants accept that their claims are all governed by Ugandan law.
The applicants are respectively the purchaser of CBL’s assets and liabilities (1st defendant), its parent company (2nd defendant) and certain former or current directors of the 1st defendant (the 3rd to 5th defendants).
The remaining defendants were directors of, or direct or indirect shareholders in, the 1st defendant.
Mr Smouha KC characterises the claim in his skeleton submissions as being “… essentially an allegation, by a Ugandan bank, that the Central Bank of Uganda acted contrary to Ugandan law in the way it exercised its statutory and regulatory bank resolution powers, which should have been exercised in the public interest but instead were exercised to benefit certain individuals in the BoU and those associated with them …” and submits that in consequence the claim is bound to fail by application of the common law foreign Act of State rule.
Judge Pelling says in this case, the three broad issues that arise are (a) whether the acts complained of by the claimants as actions by the BoU were acts by the Ugandan executive; (b) whether those acts are sovereign or governmental acts and (c) whether any of the limitations or exceptions relied on by the claimants apply.
It is alleged by the claimants, therefore, that the BoU exercised its powers first to weaken CBL, then to take over its management and then to close it and sell its assets and did so unlawfully as part of a corrupt scheme.
The applicants submit that (i) the BoU is part of the executive of the Ugandan state, (ii) the claim against them in unlawful means conspiracy, dishonest assistance and knowing receipt is for alleged wrongs by the BoU against CBL in exercise by it of its statutory powers and regulatory functions in its own jurisdiction and (iii) the claim against them cannot succeed unless this court concludes that the BoU’s acts were unlawful as a matter of Ugandan law.
They submit therefore that this claim is bound to fail applying Rule 1, because none of the exceptions and limitations on which the claimants rely are realistically arguably of any application to the facts as alleged by the claimants.
“In my judgment, therefore, whether a claim in conspiracy could succeed would depend on the detailed facts, as would the applicability of the MCA Records Principle, assuming that it applies to conspiracy at all. So far as this last point is concerned, there are at least two reasons why it is at least realistically arguable that it should not,” the Judge ruled.
He said where a claim is started concerning property seized by the government of the foreign territory in which it is situated (and that is what in substance is alleged in this case), the court will not examine whether the foreign government concerned acted validly or not within that government’s own domestic laws.
“For the reasons set out above, the applicants’ applications succeed on the foreign Act of State issue. In consequence it is unnecessary for me to decide the remaining issues. Had I concluded that the foreign Act of State issue should be resolved in favour of the claimants, I would have dismissed the applications made by reference to the other issues that arise, for the reasons I have summarised above.”
