Thursday September 14 2017

Central Bank – Sudhir case: How day one went down

Businessman Sudhir Ruparelia arrives at th

Businessman Sudhir Ruparelia arrives at the Commercial Court in Kampala yesterday. PHOTO BY ABUBAKER LUBOWA 

By Anthony Wesaka & Betty Ndagire

Applicant’s skeleton submissions by counsel Bruce Musinguzi from Kampala Associated Advocates (KAA) representing the businessman took to the floor first. The heart of the dispute are the following legal questions;
1. Can the 1st and 2nd Respondents (MMAKS Advocates and AF Mpanga) appear both as counsel and as witnesses in this case?
2. Was there an advocate-client relationship between the applicant (Mr Ruparelia) and the respondents (law firms in question)?
3. If there was, are the respondents in possession of facts, which may be prejudicial to the applicant in HCCS 493 of 2017?
If the questions above are answered in the affirmative, then the court must exercise its power and prevent the advocates from continuing to act.
1. Apearing as counsel/witness
It is the evidence of the applicant (Mr Ruparelia) that both the 1st and 2nd respondents are (law firms in question)potential witnesses in HCCS 493 of 2017. The applicant (Mr Ruparelia) makes the following assertions on the basis of the following:
My Lord (presiding judge David Wangutusi), according to Regulation 9 of the Advocates (Professional Conduct) Regulations, SI 267-2(Page 4 of Applicant’s authorities), it is provided:
No advocate may appear before any court or tribunal in any matter in which he or she has reason tobelieve 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 becomesapparent 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; except that this regulation shall not prevent an advocate from giving evidence whether verbally or by declaration or affidavit on a formal or non-contentious matter or fact in any matter in which he or she acts or appears.
Reason to believe
In UDB v Kasirye Byaruhanga Advocates SCCA 35 of 1994(Pages 17 to 18 of Applicant’s authorities):
The expression ‘reason to believe that he will be required as a witness to give evidence’ presupposes that an advocate who acts or appears in a case should know whether or not he would be required as a witness. If so then hemust not appear before a court as an advocate in the case.”
Required to appear as a witness:
Order 6 Rule 2(Page 27 of Applicant’s authorities):
“Every pleading shall be accompanied by a brief summary of evidence to be adduced, a list of witnesses, a list of documents and a list of authorities to be relied on; except that an additional list of authorities may be provided later with the leave of Court.”
Rationale of Rule 9
In Henry Kaziro Lwandasa V KYAS Global Trading Co. Ltd H.C.M.A 865 of 2014(Page 37 of Applicant’s authorities), it was held:
What is apparent is that the law tries to avoid an advocate who owes a duty to court to see that justice is done also being personally involved as a witness in the case.
This is the import of the regulation and is enforceable. It may not be necessary to advance the intention of legislature in making regulation 9 of the Advocates (Professional Conduct) Regulations SI 267 – 2. Nonetheless, it may be suggested among other things that an advocate who is likely to be a witness will carefully select the evidence,which will only support his or her case strategy in theinterest of his or her client. The duty of the advocate to the court may becompromised.
The respondents filed a plaint, in which they attached excerpts of the Forensic Report that was dated as of November 2014. When we objected to the said date, then the respondent brought the 2017 Forensic Report.
This trend of actions is the reason that advocates should not be witnesses as they have a high likelihood of hiding facts that seem to destroy their names.
Below are the instances for which we submit that the 1st and 2nd Respondent shall be required as witnesses:
a) Technology Associates (TA)
According to paragraphs, 8, 9 and 10, of the affidavit in support, the applicant avers that in the Plaint he is alleged to have extracted $9.2 million using Technology Associates.
It is also alleged that he was a director/shareholder in the said company. In paragraph 22.4 to the Plaint, page 14 of the application, the 3rd Respondent attaches documents marked as annexure “H” to show the level of the extraction by the applicant (Sudhir).

Why AF Mpanga will be required as witnesses
1. David FK Mpanga on December 21, 2016, at page 145 of the application, wrote to Deirdre Dempsey informing her that he would call at the top of the hour. (Page 145 of the Application). David FK Mpanga is the author of the said email and his other partners are addressees in the email.
2. Following the above email, David F.K. Mpanga, Jacqueline Lule and Kasozi William had a conversation with Deirdre Dempsey and summarized the contents of the said conversation; which are very much in issue with regard to the claim in the Plaint. (Page 144 of the Application).
David FK Mpanga is the author of the email and it is addressed to Deirdre Dempsey, and the partners of the 2nd Respondent.
3. David FK Mpanga, Jacqueline Lule and Kasozi William had a conversation with Temenos regarding the work they did for the 3rd Respondent. They claim Dempsey said it was Temenos that supplied the software not TA. At page 63, Paragraph 121(f), the Applicant says their contract was given to T.A.
4. In the said conversation they discussed the involvement of Technology Associates with Temenos. The said relationship between the aforementioned companies is a subject of dispute.
5. David FK Mpanga and his other partners claim that during the conversation with Temenos, they were informed that they did not sub-license the product to the Bank. This is an issue that is in issue before the Court.
6. David FK Mpanga alleges that Temenos claims that they did not receive the $5.9 million. According to page 14 of the application, paragraph 22.4, it is alleged tha that USD 5.9 was not received by Temenos.
7. David FK Mpanga shall also be required to appear as a witness to testify on the fact that Temenos supplied or did not supply the T24 technology. He shall be required to come to Court and tender in annexure “B”.
8. Section 59(d) of the Evidence Act Cap 6(Page 128 of Applicant’s authorities) provides thus:
Oral evidence must, in all cases whatever, be direct; that is to say—if itrefers to an opinion or to the grounds on which that opinion is held, it must be the evidence of the person who holds that opinion on those grounds,
9. According to the evidence of William Kasozi, in paragraph 6 of his affidavit, he states that the firm of AF Mpanga provided the following role:
We also assisted PWC incarrying out registry searches, pursuing and explaining the legal implications of documents which PWC found in its audit, and in attendinginterviews of persons that PWC deemed important to its inquiries to enable us advise PWC on the legal implications of their evidence.
10. Part of the claim against the Applicant is that he was a director in TA. We shall need the partners of the law firm of AF Mpanga to come to court and inform this court what they found from the searches they conducted regarding the directorship. The said evidence shall be required to prove that the Applicant is in fact not a director or shareholder in TA.
11. David FK Mpanga shall also be required to give evidence on why they did not interview Timothy Masembe Kanyerezi who handled a case concerning the directorship and shareholding in TA.
12. David FK Mpanga shall be required as a witness to tender in the emails that he has attached and stated that he intends to rely on at the trial (Page 122 of the Application).
a)Implementation Agreement
In Paragraph 11 and 12 of the affidavit in support of the applicant, it is stated that on the 20th March 2017, the Applicant entered into a Confidential Release and Settlement Agreement (CSRA) with the 3rd and 4th Respondents. The Applicant also states that on the 4th April 2017, he entered into an Implementation Agreement that was negotiated, prepared, and signed by David FK Mpanga.
According to page 77 of the application, paragraph 6(q), the agreement was entered into by David F.K. Mpanga; on behalf of the 1st and 2nd Respondent. The said agreement set out the process of implementation of the CSRA and its breach is a foundation of the counterclaim by the Applicant.
According to Paragraph 6(z) to (gg), page 80 of the Application, the Applicants case in the counter claim is based on the breach by the 3rd and 4th Respondent of the terms of the Implementation Agreement.
b) Annexures (E-mails)
According to Paragraph 14, the Applicant avers that in order to reach a conclusion to the dispute over the CSRA, David FK Mpanga is a competent, compellable and necessary witness to the emails that he hasattached to the reply to the counterclaim and counter claim. The emails are all attached as annexure B2.
We shall need David FK Mpanga as a witness to specifically tender in the following documents, which are related to the implementation agreement that he attached to the reply to the counterclaim:

Forensic Audit
According to Paragraph 3 of the affidavit of Margaret Kasule, it is stated that:
The factual basis of this suit is the PWC forensic audit report issued on the 13th January, 2017 whichrevealed, inter alia shareholding irregularities, the above fraudulent caseextractions and misappropriation of immoveable assets by the Applicant.

Conclusion
The effect of carrying two hats of witness and advocate is that the advocate must excuse himself from the case.
There is always a danger in having an advocate act as a witness. Many times rather than acting as officers of Court, they personalise the case to the detriment of justice.
2. The Advocate-client relationship as submitted by counsel Elson Karuhanga from KAA
Was there an Advocate Client relationship between the applicant and the respondents?
In the case of Tyrrell - v- Bank of London (1862) 10HLC26 at pp 39-40 Lord Westbury said: “...there is no relation known to society, of the duties of which it is more incumbent upon a court of justice strictly to require a faithful and honourable observance, than the relation between solicitor and client.”
The applicant seeks the protection of this court for that most solemn duty.
The Professional Code of Conduct:
The legal profession is governed by the Advocates Professional Conduct Regulations
Reg 4 provides;
An advocate shall not accept instructions from any person in respect of a contentious or noncontentious matter if the matter involves a former client and the advocate as a result of acting for the former client is aware of any facts which may be prejudicial to the client in that matter.
Reg 7 provides;
An advocate shall not disclose or divulge any information obtained or acquired as a result of his or her acting on behalf of a client except where this becomes necessary in the conduct of the affairs of that client, or otherwise required by law.
Reg 10 provides;
An advocate shall not use his or her fiduciary relationship with his or her clients to his or her own personal advantage and shall disclose to those clients any personal interest that he or she may have in transactions being conducted on behalf of those clients.

Was the Applicant (Mr Ruparelia) ever a client of MMAKS and AF Mpanga (Bowmans)?
The Applicant, in this application contends that MMAKS and AF Mpanga were his former lawyers and became aware of facts that may be prejudicial to his case in HCCS 493 of 2017 and are acting in breach of their fiduciary obligations.
The Applicant claims MMAKS Advocates are the longest serving lawyers of Crane Bank and have acted for him personally or for companies in which he has an interest like Goldstar Insurance, Meera Investments (2nd Defendant in the main suit), Speke (1996) Hotel Limited, Rosebud Limited to mention a few. Thus the firm have acted for him not just in the Bank but also in other businesses and therefore they are certainly his lawyers.

Counsel Timothy Masembe Kanyerezi submissions from MMAKS Advocates
Mr Masembe started with arguments opposing the Application by Dr Sudhir Ruparelia’s (SR) application alleging conflict of interest on the part of MMAKS Advocates and he in his capacity as an Advocate.
Mr Masembe submitted that the main suit filed in court is a case brought by Crane Bank (in receivership) against its majority shareholder, Sudhir for alleged extraction of moneys belonging to Crane Bank, now in receivership through secret and fraudulent schemes which caused the bank loss. Mr. Masembe conceded that at all material times, MMAKS has acted and continues to act for Crane Bank then and now, in receivership and not Sudhir in his personal capacity.
Mr Masembe noted that the issues before the court in the present Application are:
•Whether Dr. Sudhir is a client or former client of MMAKS Advocates.

•If so, whether by reason of acting in that capacity, Mr. Timothy Kanyerezi of MMAKS Advocates came into contact with any confidential information from Sudhir that would prejudice Sudhir in the present case before court, if Mr. Masembe appeared as trial Counsel.
In reply to the first issue, Mr. Masembe submitted that under the Advocates Act, a client is defined to include any person who, as a principal or on behalf of another, or as a trustee or personal representative, or in any other capacity, has power, express or implied, to retain or employ, and retains or employs, or is about to retain or employ, an advocate and any person who is or may be liable to pay to an advocate any costs.
He argued that for one to fit within this definition, he must show that he or she lawfully had power and authority to instruct, and indeed instructed the Advocate. He further stated that banks are not treated as ordinary companies under the law. They are special companies/entities established under the Financial Institutions Act(FIA).
A submission was made that in the instant case, Sudhir did not have such powers, at least not lawfully under the FIA.
He submitted that control is defined under section 1 of the (FIA) to mean the relationship between the parent undertaking and a subsidiary undertaking or similar relations between an individual and an undertaking or the power to determine the financial and operational policy of a financial institution pursuant to its charter or to an agreement, or direct or indirect influence by a person over decision making and the management of a financial institution.
Mr Masembe submitted that Sudhir did not have the control as defined under the FIA and was definitely the one who instructed MMAKS on the instructions alleged. He added that nowhere has Sudhir produced any evidence that he personally engaged MMAKS Advocates and Mr. Masembe in particular.
He concluded that MMAKS acts for Crane Bank and continues to act for Crane Bank in this matter. Sudhir was merely a non-executive Director, and was one of seven (7) Directors as stated in his own Affidavit. Therefore, the alleged breach of fiduciary duties in respect of the Advocates (Professional Conduct) Regulations do not arise because Sudhir does not fit within the definition of client under the Advocates Act.
In reply to the second issue, Mr. Masembe contended that neither he nor MMAKS Advocates is aware of any prejudicial information against Sudhir because he has never been their client.
He reasoned that the aspects pleaded by Sudhir concerning their involvement in Crane Bank such as instructions to draft mortgages and debentures in respect of Plots at Kawempe, due diligence on Technology Associates, the Infinity claim, and conducting Crane Board trainings are totally irrelevant in a suit by Crane Bank alleging extraction of its money through secret and fraudulent schemes.
Justice Wangutusi: does the plaint state so?
Masembe: That is where I was heading to and if can seek protection unless Mr Ruparelia can demonstrate instruction to fall in the former clients. It’s ridiculous to list the opposite counsel as witnesses, we must act in a professional manner.

David Mpanga submissions from AF Mpanga Advocates
Mr Mpanga submitted that it is not enough for lawyers to simply list opposite counsel as witnesses which in effect precludes them from acting as counsel in a case. It is a deeper inquiry that addresses core questions like; who is a witness and/or potential witness, and for whom?
Mr Mpanga further submitted that the involvement of AF Mpanga Advocates in the case started from a demand letter annexed to the Plaint, wherein Bank of Uganda (BoU) instructed AF Mpanga to make demands to Sudhir in respect of Crane Bank in receivership. The firm did not arrogate itself the responsibility to act, but rather, the service engagement is pursuant to a formal engagement by BoU as the regulator on behalf of Crane Bank in receivership.
Furthermore, the instruction referenced as conflicting AF Mpanga was in respect to a Constitutional Court case involving Crane Bank, National Bank of Commerce, Amos Nzeyi and Others on matters of contempt of a court order.
He further submitted that the matters in the Constitutional case have no bearing whatsoever with the case filed in court against Sudhir.

Mr Mpanga further submitted that at no point did AF Mpanga Advocates access any confidential information from Sudhir.
He clarified that the letter of 4th April 2017 and emails cited by Sudhir’s lawyers were all copied to BoU and its top officials for which he argued that are competent witnesses. On the issue of being a witness to the Technology Associates related cash extraction, Mr Mpanga submitted that principles ofTemeanos would be called to testify on the claim relating to the core banking system, so would the forensic auditors from PwC and other witnesses in Switzerland, who are more conversant with prices and types of banking systems. This does not require evidence of Counsel, he submitted.
On the issue of the Confidential Settlement and Release Agreement, he submitted that in recovery proceedings, counsel often act for parties tonegotiate agreements, draft the Agreements, ensure compliance in terms of enforcement, among other duties.
This is in the context of wider duties of lawyers to their clients. And thus, Sudhir cannot claim that lawyers who negotiated on behalf of clients must be called as his witnesses.
He added that in a fused legal system such as the one in Uganda, lawyers act as both solicitors and barristers and to prejudice them for performing either role would prejudice every lawyer advising or acting for clients.

advertisement