11 September 2017

Uganda: We Have Never Worked for Sudhir - BOU Lawyers

Following tycoon Sudhir Ruparelia’s petition to the High Court on Wednesday seeking to throw out two prominent law firms that are representing Bank of Uganda and Crane Bank in receivership in a Shs397 billion dispute, MMAKS Advocates and AF Mpanga Advocates have filed an affidavit in reply, saying they have never worked for Sudhir.

Below are their responses.

I, William Kasozi, of 4th Floor Dfcu Building, 26 Kyadondo Road, P. 0. Box 1520 Kampala hereby make solemn oath and state as follows:

1. That I am an adult male Ugandan of sound mind and the managing partner of AF Mpanga, Advocates, the 2nd Respondent in the present application and I swear this affidavit in reply to those of the applicant and Azim Tharani, deponed on the 5th September 2017, which were filed in support of the Application.

2. That I am a lawyer by training and an advocate of the High Court of Uganda with over 20 years' experience in corporate and commercial matters and with a good understanding of the laws of evidence, the Civil Procedure Rules and the Advocates (Professional Conduct) Regulations SI 267 -3 (hereinafter "the Professional Conduct Regulations") and the ethics that govern professional legal practice. I am also particularly familiar with matters of the regulation of financial institutions and corporate governance by reason of my past experience as in-house counsel and board secretary in financial institutions.

3. That I have perused the application and the affidavits in support thereof. I am of the view that the affidavits make many false assertions about AF Mpanga, Advocates, in general, and my partner Mr David F. K. Mpanga, in particular. I am also of the view that many of the conclusions that are premised on these false assertions are based on a clear misapprehension of the applicable laws perhaps as a result of negligent legal advice.

4. That prior and without prejudice to my more detailed depositions below, I wish to state the following fundamental and immutable facts:

(a) At no time since its founding in 2003 has AF Mpanga, Advocates acted for the applicant. None of our partners or associates have ever been engaged or in any way executed any instructions for the applicant;

(b) It follows from the fact I have stated in (a) above, that we AF Mpanga, Advocates are not aware of any fact(s) which may be prejudicial to the applicant in the conduct of his defence of H.C.C.S. No. 493 of 2017 by virtue of his having been our client;

(c) All of the facts that we know about this case are as a result of being advocates for the 3rd Respondent upon the instructions of the 4th Respondent, who is the former's receiver; and

(d) The advocate-client relationship between AF Mpanga, Advocates and the 3rd and 4th Respondents in H.C.C.S. No. 493 of 2017 means that neither Mr David F.K. Mpanga, who has had direct and day-to-day conduct of this matter, nor any other partner or associate is a competent or compellable witness for the applicant on any of the matters that the applicant and Azim Tharani assert in their respective affidavits.

5. That I am familiar with the matters leading up to and the pleadings so far filed in H.C.C.S. No. 493 of 2017. AF Mpanga, Advocates' involvement in this matter begun on or about the 28th of October 2016 when we were instructed by the 4th Respondent, which had taken over management of the 3rd Respondent, to provide legal support to PricewaterhouseCoopers Uganda Limited (hereinafter "PWC") which was carrying out the forensic audit of the 3rd Respondent to establish the circumstances that led to its undercapitalisation and eventual takeover.

6. That I was part of a team that comprised about five lawyers, including Mr David F.K. Mpanga, which provided legal support to PWC. In our work we were giving our legal opinion on PWC's factual findings. We also assisted PWC in carrying out registry searches, perusing and explaining the legal implications of documents which PWC found in its audit, and in attending interviews of persons that PWC deemed important to its inquiries to enable us advise PWC on the legal implications of their evidence.

7. That PWC owns all the factual findings and conclusions in its Forensic audit report of 13th January 2017 subject to the limitation that it obtained legal advice from us in the process of compiling that report.

8. That In any trial if H.C.C.S. No. 493 of 2017, PWC and other witnesses will be called to testify to prove the factual assertions that PWC made its report and upon which the 3rd Respondent's claims against the applicant are based. The legal implications of such facts as may be taken to be proved will be matters of law to be determined by the honourable and learned trial judge after hearing submissions of counsel for both sides.

9. That in the premises, neither David F.K. Mpanga nor any other partner or associate in AF Mpanga, Advocates can be called as a witness for the applicant because we only dealt with and advised upon matters of law and our opinion was given to or for the benefit of the 3rd and 4th Respondents with whom we have an advocate-client relationship.

10. That I am aware that on or around the 18th of October 2012, AF Mpanga, Advocates received instructions to represent the 3rd Respondent as well as A.R. Kalan and Ajay Kumar, then the managing director and deputy managing director, respectively, of the 3rd Respondent, in constitutional application No. 40 of 2012 Humphrey Nzeyi v Bank of Uganda & 8 others.

11. That in the said application before the Constitutional Court, Humphrey Nzeyi, a shareholder in the defunct National Bank of Commerce (U) Limited, was seeking for a declaration that the 3rd Respondent and its then officers, A.R. Kalan and Ajay Kumar acted in contempt of an interim order issued by the Constitutional Court on the 28th September 2012 when the assets and liabilities of National Bank of Commerce (U) Limited were taken over by the 3rd Respondent, pursuant to a Purchase of Assets and Assumption of Liabilities Agreement executed by and between the 3rd and 4th Respondents on the 27th September 2012.

12. That the said instruction for the 3rd Respondents and its said officers was conducted by Mr David F.K. Mpanga and Mr Brian Kalule and the only issue in that case was whether the 3rd Respondents and its then officers were aware of the existence of the Interim Order of the Constitutional Court at the time when they took over the National Bank of Commerce's assets and liabilities. So at no time during the conduct of that case did Mr David F.K. Mpanga, Mr Brian Kalule or any other partner or associate of AF Mpanga, Advocates take instructions from the applicant about his shareholding, management or control of the 3rd Respondent nor indeed was there any hint of the facts behind the matters now in issue in H.C.C.S. No. 493 of 2017.

13. That I am aware that the 3rd Respondent's claims against the applicant essentially stem from the applicant's apparent inability to distinguish himself from the 3rd Respondent and include contentions that the applicant was using fronts to mask his ownership and control of the 3rd Respondent contrary to the provisions of the Financial Institutions Act 2004 (as amended) and the regulations thereunder. It is, therefore, not surprising that the Applicant still believes that when AF Mpanga, Advocates acted for the 3rd Respondent in a matter about contempt of court we acted for him. It is, however, disappointing that he is reinforced in that clearly false and legally untenable assertion by his legal advisers as he depones in paragraph 26 of his affidavit of the 5th September 2017.

14. That in January 2017, AF Mpanga, Advocates was instructed to act jointly with MMAKS Advocates in legal action against the applicant, based on the findings of the PWC forensic audit report of the 13th January 2017.

15. That Mr David F.K. Mpanga had primary day-to-day of the matter acting on instructions from officers of the 4th Respondent.

16. That all engagement by Mr David F.K. Mpanga in negotiations that culminated in the execution of the confidential settlement and release agreement of the 20th March 2017 (hereinafter "the CSRA") or meetings that were held subsequent to discuss its implementation and all correspondence by the firm in that regard, whether formally on AF Mpanga's letterhead or by email from Mr David F.K. Mpanga's official email account, was upon and in furtherance of client instructions from the 4th Respondent as the 3rd Respondent's receiver. We were acting as counsel and were and still are subject to an ongoing Advocate-Client relationship with the 3rd and 4th Respondents.

17. That the terms of the settlement which was agreed upon between the applicant and the 3rd and 4th Respondents were reduced into writing in the CSRA. The matters in contention which were subject of correspondence, some of which has been annexed to the pleadings, were matters of contested construction of the terms of the CSRA. The authorship of the correspondence attached to the pleadings is not contested. It is adduced to establish that it exists and that it was sent on a particular date with a view of a particular objective. It can be proved by calling several witnesses, including primary and secondary (copied) addressees.

18. That each party will be at liberty to call such witnesses as it deems necessary and appropriate to prove its own factual assertions in this case and the honourable and learned trial judge will make a decision as to the proper construction of the terms of the CSRA and whether acts purportedly done in pursuant thereto met released the parties of their mutual obligations to each other.

19. That in the premises, in this case, as in all litigious cases, neither party's counsel will be witnesses, for the parties they represent or for the parties that they have been instructed to represent. Each party's counsel shall lead the primary witnesses and adduce such admissible documentary evidence as is available to prove the case then make legal submissions. The court shall make an appropriate finding.

20. That the engagement of counsel in: making demands on behalf of clients; negotiation of those demands with a view to an out-of-court settlement; drafting agreements to evidence the terms of any out-of-court settlement; meetings to assess or review parties' respective performance in implementation of an out-of-court settlement; and making demands in respect of perceived breaches of an out-of-court settlement do not, in and of themselves, render counsel witnesses in subsequent litigation.

21. That nothing Mr David F.K. Mpanga or any other partner or associate, said or did in pursuance of AF Mpanga, Advocates' instructions in this case entitle the applicant to claim him or any other partner or associate as a witness as alleged in the affidavits of the applicant and Azim Tharani or at all. Further nothing done by any of the partners or associates of AF Mpanga, Advocates legally or ethically disqualifies us from acting for the 3rd or 4th Respondent as alleged or at all.

22. That using my experience as counsel, this application appears to me to be an abuse of process and one in which the applicant seeks to overbear and handicap the 3rd and 4th Respondents by depriving them of capable, ethical and incorruptible counsel of their choice.

23. That the contents of this affidavit are true to the best of my knowledge.

Sworn by the said William Kasozi at Kampala on this 7th day of September 2017

Why Sudhir wants BoU lawyers out

Tycoon Sudhir Ruparelia has petitioned High Court, seeking to throw out two prominent law firms that are representing Bank of Uganda and Crane Bank in receivership in a Shs397 billion dispute.

After the Central Bank through MMAKS Advocates and AF Mpanga Advocates sued Mr Ruparelia and his Meera Investments Company seeking recovery of billions of Shillings, in his August 3 defence, the property mogul however, listed the BoU lawyers as his key witnesses and cited conflict of interest.

In a 14-page affidavit he filed in the Commercial Court on September 6, the businessman, who accuses BoU lawyers of conflict of interest, argues that MMAKS Advocates and AF Mpanga were representing Crane Bank before receivership and on account of "an advocate-client relationship and a fiduciary relationship" it will be incongruous for them prosecute their former client.

'Sudhir has never been a client of MMAKS Advocates'

I, Ernest Sembatya of c/o P. O. Box 7166 Kampala make solemn oath and state as follows:

1. That I am an advocate of the courts of judicature and a Partner of the 1st Respondent ("MMAKS Advocates"). I am familiar with the Advocates (Professional Conduct) Regulations SI 267-3 and the ethics that govern professional legal practice. I have read the above application and the affidavits of the applicant and Mr Azim Tharani sworn on the 5th September 2017 and respond to both on behalf of the 1st Respondent as follows;

2. That in his application the applicant (hereinafter also referred to as "SR") contends three (3) matters in relation to the 1st Respondent. Firstly, that he is a former client of the 1st Respondent; Secondly, that by virtue of having allegedly previously acted for him the 1st Respondent is privy to prejudicial facts relevant to the claims the subject of this suit and; Thirdly, that the 1st Respondent is a potential witness on his behalf in relation to issues to be tried in this suit. All three (3) above contentions by SR are made by him, knowing them to be false and/or by reason of conflating Crane Bank Limited with himself.

3. That in paragraph 26 of his Affidavit as the only proof of his being a former client of the 1st Respondent, SR states that he has been advised by his lawyers Kampala Associated Advocates and that he believes that advice to be true that by virtue of MMAKS Advocates having been the lawyers of the 3rd Respondent ("Crane Bank") in which he is a shareholder and director, MMAKS Advocates were also his lawyers. This is patently wrong legal advice and SR's belief is clearly mistaken. Further the question as to whether someone is your lawyer is a matter which a client should be able to immediately ascertain and should not necessitate seeking legal advice from another lawyer. SR is not and has never been a client of MMAKS Advocates.

4. That in paragraphs 27 to 38 of his Affidavit, SR states that the 1st Respondents were one of the panel lawyers of Crane Bank and provided advice to Crane Bank on various matters including the conducting of one of Crane Bank's Board trainings. This is conceded and the 1st Respondent shall add that it still continues to act for Crane Bank (albeit now in Receivership). The present suit against SR is one of the matters that the 1st Respondent has been instructed by Crane Bank to conduct.

5. That the present suit is an action by Crane Bank to recover from SR (its majority (sole) shareholder) five (5) distinct monetary sums in the total amount of $110,587,103 (plus interest) said to have been unlawfully extracted by SR from Crane Bank as well as to recover from Meera Investments Limited (SR's company) forty-eight (48) freehold certificates of title said to have been unlawfully transferred by SR from the names of Crane Bank into the names of Meera Investments Limited.

6. That in addition to fact that SR has never been a client of MMAKS Advocates, the factual basis for the five (5) monetary and one (1) property claims by Crane Bank against him, set out in in paragraph 5 above, only came to light subsequent to and by reason of a forensic audit commissioned by Crane Bank and the 4th Respondent, conducted by Pwc and issued on the 13th January 2017.

These facts had been fraudulently concealed by SR and were not known by anyone other than SR and his associates/co-conspirators prior to the issuance of Pwc's forensic audit report. It cannot therefore be said and neither does SR aver in his Affidavit that he disclosed to the 1st Respondent any matters pertaining to this fraud. Accordingly the contention that the 1st Respondent is privy to prejudicial facts relevant to the extraction claims the subject of this suit and obtained other than from the Pwc forensic audit report is untrue.

7. That in relation to SR's contentions contained in paragraphs 34 to 36 of his Affidavit with regard to the report by the 1st Respondent on the Companies Registry search of Crane Bank's shareholding attached as "K" to SR's Affidavit this was a report compiled on Crane Bank's (and not SR's) instructions and merely stated what the Companies registry filings indicated as to the registered shareholding in Crane Bank. The registered shareholding in Crane Bank is not in contention as this suit relates to the undisclosed ultimate beneficial shareholding by SR in Crane Bank which was revealed by the Pwc forensic report and which SR in any event denies. The 1st Respondent cannot testify on this matter being the lawyers of Crane Bank who bring this suit against SR.

[A copy of Crane Bank's instruction letter to the 1st Respondent based on which the search report was compiled is attached as "A"]

8. That in relation to SR's contentions contained in paragraphs 39 to 46 of his Affidavit that the 1st Respondent shall be required to testify on his behalf in relation to the cash extraction allegation pertaining to Infinity Investments Limited, the 1st Respondent avers that it acted for Crane Bank (and not SR) in relation to drawing and registering the mortgage and debenture security deeds and subsequently in issuance of Notices of Default and Notices of Sale in relation to the securities which had not been released. No sale or recovery was however achieved.

Subsequent to the takeover of Crane Bank, Pwc through its forensic audit, established that Infinity Investments Limited's loan disbursement was onto accounts operated by SR through his close associates, that valuable securities were released without the loan having been paid off and that the remaining securities were worthless. None of these facts were known to anyone other than SR and his associates/co-conspirators and these facts were not known to the 1st Respondent and neither does SR allege that they were. Accordingly the 1st Respondents who were the lawyers of Crane Bank and for whom they still act on this recovery, cannot be said to be witnesses for SR in claim made against him by Crane Bank.

9. That the 1st Respondent has on various occasions acted against entities owned by SR including Meera Investments Limited as for instance in H.C.C.S No. 185 of 2006 Meera Investments Limited vs AG, UIA and LIRA which continued for ten (10) years and was only disposed of on the 25th February 2016 and in which the 1st Respondent acted for UIA against Meera Investments Limited.

[A copy of the pleadings and Judgment in the above case are attached as "Bi" to "Biii"]

10. That in relation to the Affidavit of Azim Tharani, the question of whether SR extracted the USD 80,000,000 sum the subject of the falsified Nostro account is a matter to be determined at trial based on the Pwc forensic audit report and the testimony that will be given by them on the detailed evidence disclosed in the report. The matter will not be determined based on hearsay oral evidence as to what was allegedly said on a telephone call. Neither the 1st nor 2nd Respondent as lawyers for the 3rd Respondent can testify on that matter.

11. That the Advocate-Client relationship between MMAKS Advocates and the 3rd and 4th Respondents in H.C.C.S. No. 493 of 2017 means that no lawyer of MMAKS Advocates is a competent or compellable witness for SR on any of the matters that he and Azim Tharani assert in their respective affidavits.

12. That it is not for SR to choose which law firm or lawyers to act for entities that sue him and it is a party's right to have their matters conducted by counsel of their choice. This Application is a clear abuse of process and a sinister attempt by SR to control which Counsel will conduct this litigation against him with the hope that the contest will not be conducted by capable, ethical and incorruptible counsel of the 3rd and 4th Respondents' choice.

13. That I swear this Affidavit in opposition to this Application.

14. That what is stated herein is true to the best of my knowledge.

Sworn at Kampala by the said Ernest Sembatya this 8th day of September 2017

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