Big Win For Sudhir as Court of Appeal in London Finds DFCU Liable for Fraudulently Buying Crane Bank

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The Court of Appeal from the High Court of Justice Business and Property Courts in England has issued a judgement quashing an earlier decision by the lower court exonerating DFCU bank and its shareholders from fraudulently taking over Crane Bank.

The Court of Appeal contends with Sudhir Ruparelia and 7 other applicants that DFCU bank and its shareholders bought Crane Bank Limited (CBL) through a well-crafted corruption scheme involving the officials of Bank of Uganda.

The Court also recommends that Bank of Uganda officials at the centre of the transaction should be prosecuted for corruption.

The ruling comes against a backdrop of a lower court judgement in which a High Court of Justice of England and Wales on October 19, 2022, Lord Pelling QC sitting in London absolved both DFCU and BoU of wrongdoing in $211 million litigation.

Judge Pelling based the ruling on grounds that, there was no serious issue to be tried, declaring that the Court has no jurisdiction to try the appellants’ claims against the respondents and setting aside service of the Claim Form on them.

The Judge rejected the appellants’ arguments that their claims, or some of them, fell (or arguably fell) within one or more of the exceptions to the foreign act of state rule.

However, 3 judges of the Court of Appeal ruled that the High Court should have found that there was at least a serious issue to be tried which include that the sale by BOU to DFCU was commercial rather than sovereign and all of the executive acts in question engaged the English public policy of combatting and not giving legal protection to bribery and corruption, therefore falling outside the foreign act of state rule (“the Public Policy Exception”).

The 3 judges include Justice Phillips, Justice Popplewell and Sir Julian Flaux heard that the Appeal raised issues as to the scope and application of the foreign act of state rule and of the limitations and exceptions to which it is subject.

“The first appellant, Crane Bank Limited (“CBL”), was formerly a major commercial bank in Uganda. The second to seventh appellants are shareholders in CBL. In these proceedings the appellants assert that from about Spring 2016, senior Ugandan government officials and officials of the Bank of Uganda (“the BoU”) engaged in a corrupt scheme to take control of CBL, making improper use of statutory and regulatory powers to do so, and then to sell its assets for the benefit of the parties to the scheme. The appellants allege that the first respondent (“DFCU Bank”), another Ugandan commercial bank, joined the corrupt scheme as the purchaser of CBL’s assets from the BoU (acting as a receiver of CBL), that purchase being at a gross undervalue. DFCU Bank’s holding company (the second respondent) and certain current and former executives and directors of DFCU Bank (the third to fifth respondents) are also alleged to have joined the scheme.’

As a consequence, the appellants claim damages above £170 million for conspiracy to injure by unlawful means and/or an account of profits alleged to have been made by the respondents (and all other defendants) by their dishonest assistance of the corrupt scheme or equitable compensation. The appellants further claim that DFCU Bank is liable to account for sums received based on knowing the receipt of assets transferred in breach of fiduciary duty. It is common ground that all these claims are governed by Ugandan law.”

Ruling

“I would allow the appeal on the ground that there are serious issues to be tried as to whether part or all of the appellants’ claims fall within the Commercial Activity Exception and/or the Public Policy Exception.” LORD JUSTICE PHILLIPS ruled.

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