“Please note that I regard the time estimate for the suggested prereading of 1 day as likely to be wholly inadequate: I note that the witness statements listed run to over 200 pages and yet the (amended) particulars of claim (to which the amendments to the defence are said to respond) is omitted from the suggested prereading. I will expect counsel to take me to relevant documents during the hearing and not to assume that I will have time to read and digest all the documents listed in advance of the hearing on the parties list.”
“among other matters, severe undercapitalisation, liabilities in excess of assets, failure properly to classify and provision for non-performing loans, and insider dealings, together with potential illegal extractions of cash by CBL shareholders.”
“The claimants realistically do not generally object to those amendments that plead the PWC reports as facts: that PWC was instructed, that they reported as they did, and the consequences that that fact would have for the actions or reactions of the Bank of Uganda, an honest and reasonable central bank regulator in the position of the Bank of Uganda, or third party prospective purchasers of CBL’s business.”
“33. I have considerable concern about those paragraphs, which seem to me to introduce a dangerous ambiguity. On the one hand, they are introduced as providing further details not of matters that are alleged to have been true but of matters that are alleged to have been credible, and one reading of “matters identified” would be in that spirit. That is supported by aspects of the detail that is given. For example, it is not said that there was misrepresentation, but simply that there “was evidence of misrepresentation”, and it is not said that IT staff had been instructed to withhold information or delete emails, but that PWC “understood” that had happened. On the other hand, some of the terms in which they are pleaded suggests that they are being put forward as allegations not simply that PWC reached conclusions, but that those conclusions were correct, and one reading of “matters identified” would be not merely that PWC reached a conclusion, but that it had discovered a truth. So, for instance, paragraph 24.4.2 frequently uses the expression “in reality” (though it also says that it describes what “PWC concluded”), and paragraph 24.4.3 appears to consist simply of allegations of fact. Moreover, later cross-references in DFCU’s defence to paragraph 24 is in terms (by reference to “facts”) or in contexts (where one would have thought that it is the true position, not simply PWC’s conclusions about it) that suggests that what might be intended is an allegation that PWC had not simply reached conclusions, but that the facts were as PWC had concluded.”
“I am concerned that, lurking only barely below the surface of this application, there is an incipient case management issue. On the one hand, Mr Ford is clearly correct that the financial condition of CBL and the accuracy of its audited accounts is a relevant issue in the case, and issue joined on the pleadings about that. How far, however, it will be open to DFCU to advance, at trial, specific allegations about particular aspects of CBL’s management and financial position, and how that will be done, offers fertile ground for ongoing debate. It may be that DFCU or its experts will either want or need to focus on some matters which are covered by the PWC reports, and that DCFU will seek to prove them as primary facts. As things stand, it is probable that if and when it does so, it will be met by the objection that it has not given adequate notice of that, and equally likely that it will respond—as Mr Ford did—by contending that it has already done enough. But, whatever the rights and wrongs of such arguments (which cannot sensibly be addressed in a vacuum and are not before me now), I do not think that they can be fairly resolved by the indiscriminate incorporation of the substance of both reports in the form that was before me, and it will be for the experienced solicitors and counsel on both sides to decide how next to proceed. I therefore grant permission only to the extent that I have indicated and otherwise refuse it.”
“if there is an alteration to the case and the amendments respond to that alteration, it does not stop them being consequential if they also are responding to the original case.”
“Some criticism having been directed in the course of debate to the word consequential, a definition was, we understand, found acceptable to both sides in the formula that if the right to amend is limited, the extent to which it is limited is that it does not permit amendments of the defence which relate only to those allegations or contentions contained in the statement of claim that are not affected by amendments to the latter.”
“Neither party was able to point to any authority on what the term “consequential” meant for the purposes of the 2019 Order. I consider that the word should be given its ordinary meaning and applied consistently with the overriding objective. Applying that approach, I agree with Mr Drake that, in the circumstances of these applications at least, it would be inappropriate to parse, line by line, every change made in the RAD and ask whether each amendment was “necessary” in the light of corresponding changes made in the RAPC. The RAPC represented a significant change in the way SPIN chose to put its case. Faced with such a significant change, the Defendants should be permitted to make correspondingly significant changes to the way they choose to defend the claims. Applying that approach, I am satisfied that all of the changes set out in the RAD were “consequential” on the amendment to the RAPC.”
“17.3(1) Where the court gives permission for a party to amend their statement of case, it may give directions as to— (a) amendments to be made to any other statement of case; and (b) service of any amended statement of case.”
“The Disputed Amendments give further and better particulars of D1’s existing pleaded case and of matters which are already in issue in these proceedings (and have been from the very outset) concerning the alleged mismanagement of C1 (Crane Bank Limited (“CBL”)) by its former owners and management (including C2) before it was placed into statutory management in October 2016. The Disputed Amendments concern the contemporaneous forensic review work done and mismanagement findings made therein by PricewaterhouseCoopers Ltd (“PwC”), commissioned as part of the Bank of Uganda’s (“BoU”, the Ugandan State’s central bank) investigation into CBL (the “PwC Forensic Investigation”) which already forms part of D1’s pleaded case.”
“dfcu Bank’s case is that, in light of such matters, in the counterfactual: (a) the BoU would still have determined that the appropriate and most effective way to resolve CBL was through a sale of its assets and liabilities, as opposed to a sale of CBL itself; (b) a third party would not have pursued a purchase of CBL, as opposed to a purchase of its assets and liabilities; and (c) the BoU would not have permitted a partial sale of CBL whereby CBL continued as a going concern financial institution under the control of its previous management, or where the shareholders continued to have an ownership stake. Again none of this is in fact new: (a) dfcu Bank’s existing case has always been that the distressed financial position and mismanagement at CBL is important as to what would have happened in the counterfactual: see, for example, RRAD ¶¶114.2, 115.3.3, 115.4.2 and 116.1; and (b) the question of what considerations would apply to a decision to take CBL out of statutory management and return it to its former management and shareholders already forms the second agreed question for the CBP Experts, whilst issue 9 for the AVQ Experts asks: “What loss and damage (if any) has CBL suffered, including on a loss of profit basis?”
“In my judgment, there is essentially one rule on any application to amend. Parties should be allowed to amend their statements of case to bring forward intelligible and apparently credible claims or defences where the balance of injustice to the applicant if the amendment is refused outweighs the injustice to the other party and to litigants in general if the amendment is permitted. As to this: 11.1 I say intelligible and apparently credible, since the court ought not allow amendments that are liable to be struck out or against which the court would order summary judgment: Clarke v. Marlborough Fine Art (London) Ltd, The Times,5 July 2001 . 11.2 The timing of the application is an important factor: a) Plainly the earlier the amendment is sought, the more likely it is that the court will conclude that the applicant’s interest in being able to argue its full case outweighs any prejudice to the opponent or to litigants in general. b) Conversely, the later the amendment is made, the more likely it is that the court will find that the balance of injustice favours disallowing the amendment. Very late amendments that, if allowed, are likely to lead to the adjournment of a trial date are frequently disallowed not so much because there is some special rule in such cases but because the obvious prejudice to trial date often weighs more heavily in the balance than the prejudice to the applicant in refusing the amendment. 11.3 The consequences of allowing an amendment will also be important. Some late amendments do not call for any further disclosure or witness evidence and do not put the trial date at risk. Such amendments are more likely to be allowed even if made late since they are less likely to cause significant prejudice to the other party and to other litigants. 11.4 Late amendments ought to be properly particularised. Again, this is not some separate principle but recognition that the balance of injustice is likely to weigh against allowing a late amendment if it cannot be properly understood or met without further particulars. 11.5 In considering the balance of injustice, the court should have regard to the overriding objective, including the requirements to ensure that litigation is conducted efficiently and at proportionate expense and to ensure compliance with rules, practice directions and orders. As was famously recognised in Mitchell v. News Group Newspapers[2013] EWCA Civ 1537 , justice now means more simply than justice between the parties and the court will also consider the wider public interest in ensuring that other litigants can obtain justice efficiently and proportionately. These wider considerations should always be considered but will come into particular focus where the effect of a late amendment will be to cause a trial date to be adjourned.”
“…if needed, permission to amend would be granted by the court precisely because the amendments relate to matters that are already in issue and will be tried. There is no prejudice to the claimants, or at least no difficulty that cannot be case and trial-managed, so as to ensure that the claim is tried and determined in accordance with the overriding objective.”
“Subject to what follows below, the PwC Forensic Review and separately, the PwC Abridged Inventory and PwC Detailed Inventory (together, the “PwC Inventories”) are admitted as documents, but accuracy, findings and the allegations of wrongdoing contained in the PwC Forensic Review are denied. The Claimants reserve the right to plead further to any of the findings and/or allegations if, and to the extent that, any of the same are properly pleaded against it.”
“… I also accept that the reply formally denies the accuracy of PWC’s conclusions. But in circumstances where none of them had been specifically adopted by DFCU (and the claimants expressly reserved their position if they were) I do not think that takes matters further…”
“Subject to what follows below, the PwC Forensic Review and the PwC January Report (together, the “PwC Reports”), and separately, the PwC Abridged Inventory and PwC Detailed Inventory (together, the “PwC Inventories”) are admitted as documents. However, it is denied that the PwC Reports were accurate and it is denied that the allegations of material wrongdoing contained in the PwC Reports were truthful (if that is the First Defendant’s case). In any event, it is denied that the BoU relied on any matters set out in the PwC Reports or the PwC Inventories in reaching a decision to sell CBL and/or its assets and liabilities (if that is the First Defendant’s case): by28 October 2016 (which is stated to be the date of PwC Ltd’s engagement letter in the covering letter in each of the PwC Reports) the BoU had already determined to sell CBL and/or its assets and liabilities, as is to be inferred from (at least) the matters pleaded at paragraph 16 of the APoC and paragraph 7.5.2 of the Defence; indeed by the date of PwC Forensic Review, bids for the acquisition of CBL’s assets and liabilities had already been submitted. In circumstances where the First Defendant has failed (properly or at all) toidentify which of the findings or allegations of wrongdoing contained in the PwC Reports (if any) that it adopts and avers,the Claimants only plead to the accuracy of those allegations to the extent necessary, principally at paragraphs 22, 27A, and 35A below. Save to the extent expressly set out there, no admissions are made. The Claimants reserve the right to plead further to any of the findings and/or allegations if, and to the extent that, any of the same are properly pleaded against it.”
“It is denied that the accounts did not reflect the full position and/or were materially misstated. While it is admitted that the PwC Forensic Review, the PwC January Report, and the PwC Detailed Inventory purported to identify as issues the matters set out in sub-paragraphs 17.3.1 to 17.3.4, it is denied that the purported findings were well founded and/or accurate and the allegations of wrongdoing are denied. Paragraph 4 above is repeated.”
“The [PWC reports] identified (inter alia) that…”
“….what we did in the hearsay notice -- … -- we have not served the entirety of the PwC reports under hearsay notice, but what …we have done…is to identify its specific findings, identifying the page in the report that they come from, and give pleading references to where they relate, in relation to those that we want to rely on as evidence of the truth of their contents.”
“The allegations are supported by various contemporaneous documents that have been disclosed, including (inter alia) the PwC Forensic Reports (with the final version the subject of a hearsay notice)…”
“The purpose of a pleading is to give notice of the primary facts that a party intends to prove at trial…The Commercial Court Guide asks for statements of case to be “as concise as possible” and that “evidence should not be included”…”
“iii. That there had been significant irregularities concerning CBL’s loans and lending practices, namely: a. A practice of CBL failing to have sufficient regard to credit risk and to the creditworthiness of borrowers, demonstrated by: (i) loans being granted at the instruction of the Second Claimant to business associates of the Second Claimant; (ii) loans being granted to newly formed companies without a financial history and/or established operations (such as…Infinity Investments Ltd) (iii) loans being granted to entities that were in financial difficulties, or had already defaulted on repayment obligations or were related to companies that were bad debtors…; and (iv) loans being granted without completion of the approval process provided by CBL’s credit policy.”
“There appear to have been no efforts to recover funds written off in 2014 and 2015. A review of some of the top written off accounts i.e. Infinity, Megabells and Ssebaggala shows minimal to no recovery efforts employed after the write off”
“The Claimants have repeatedly given factual evidence in their witness statements for trial asserting that all related party transactions were commercial terms, this is clearly an issue.”
“…Crane Bank’s management’s position was that the majority of the loans were not insider loans and, where they were, they had been on commercial terms and at arm’s length. The criticism of the management did not therefore concern us…”. iii) the evidence of Mr Tharani at paragraph 75 where the relevant statement appears to be: “I also note that in the Crane Bank 2015 audited financial statement, it is said that all related party transactions were on commercial terms and in the normal course of business…”
“e. A practice of CBL granting loans without appropriate valuation of security, or with inadequate collateral to secure the loan amount, or with the security not having been perfected (such as in the case of …Megabells…and …).”
“(ii) That the Second Claimant and persons associated with him effectively controlled at least 96% of CBL. In addition to the shareholdings held by the Second to Fifth and Seventh Claimants, White Sapphire Limited (“White Sapphire”), through which a Mr Rasiklal Kantaria was said to own 47.33% of CBL, was owned and/or controlled by the Second Claimant or persons associated with him. This was in contravention of sections 18, 21 and 24 of the FIA.”
“None of this is pleaded. If the allegation was to be permitted, then the claimants would be entitled to have the allegation properly pleaded against it… They would have to respond. Disclosure would be necessary. Disclosure going back to 2006 which predates the current earliest date for disclosure by almost a decade…Given this issue is not in the proceedings, it is nonsense to suggest that disclosure has been given. The fact that some documents that touched on the issue may have been disclosed does not answer the point. If dfcu seems to rely principally in saying there has been disclosure on the PwC report. That is not disclosure on this issue. We do not have the appendices.”
“The PwC Forensic Review, and the PwC Detailed Inventory and the PwC January Report identified (inter alia): 17.3.1. Material breaches of prudential requirements regarding shareholder control limits for financial institutions, through the use of related parties as nominee shareholders.”
“I also recall that the BoU later considered and approved the transfer of shares from Dr Kantaria to White Sapphire, which was a company wholly-owned by him.”
“That there were significant corporate governance failures within CBL…with those governance failures demonstrating that: a. the checks and balances intended to be created by restrictions on shareholdings pursuant to sections 18 and 24 of the FIA did not exist given that the Second Claimant and persons associated with him had significant ownership and/or control of CBL’s shareholdings.”
“iv. That CBL had been misrepresenting its performance and overstating its profits and retained earnings in its accounts, because: … (b) CBL had recorded balances in CBL’s Corporate Current – Interest Receivables account in 2013, that were not backed by any real asset, as a way to reconcile bringing onto CBL’s books liabilities amounting to UGX 204bn (USD 80m) that had previously been held off-book. The balances were then transferred to the Deutsche Bank USD Nostro account in October 2013 (the “DB Nostro Account”). To reconcile that account, in 2014 a total of around USD 74.3m was transferred by CBL to accounts held by two companies, Interdico (U) Limited (“Interdico”)and …, as fictitious payments for non-existent construction costs, and the majority of the funds were then debited and credited through a series of CBL accounts, and ultimately credited into the DB Nostro account. At least USD 1.8m of the balance transferred to the Interdico account was withdrawn as cash in 2013 and 2014, which did not have a legitimate explanation and could not be attributed to any work done by Interdico for CBL”
“dfcu Bank will contend that the below matters are individually and collectively relevant to: (a) the financial position of CBL and valuation of CBL’s assets and liabilities; and/or (b) the considerations that the BoU (or a Central Bank in its position), acting in good faith, rationally and reasonably, was entitled to take into account when determining how to proceed with the resolution of CBL; and/or (c) whether the alleged counterfactuals would have occurred but for the alleged tortious acts. Specifically: … (iii)That there had been significant irregularities concerning CBL’s loans and lending practices, namely: … (c) Failure by CBL to properly disclose insider lending to related companies, with the total amount of loans advanced to related companies exceeding 20% of CBL’s core capital as at October 2016. This was a breach of section 34 of the FIA, which prohibited a financial institution from granting loans equivalent to more than 20% of its core capital to affiliates or associates or related parties thereto. The insider lending included (at least) loans to …, with the existence of further undisclosed insider lending possible, including in relation to ...”
“(iii) That there had been significant irregularities concerning CBL’s loans and lending practices, namely: … (f) A practice of CBL disguising performance through instances of holders of loans being permitted to use overdraft facilities to make payments in relation to outstanding loans, or using loans to related parties to do so, and/or CBL restructuring facilities at risk of default through enhancing limits and extending maturity periods. … (vi) That, from December 2012 to October 2015, CBL sold the freehold and Mailo ownership to various plots of land to MIL, a related entity owned by members of the Ruparelia family, for consideration determined without regard to the plot’s size or location, and in an arrangement that was financially beneficial to MIL, and disadvantageous to CBL. The sale and lease back arrangement lacked business efficacy, was unnecessary, added no proper value to CBL, and resulted in high annual rent costs for CBL. Namely, CBL made a loss on the sale of these plots: the total consideration paid by MIL to CBL for the plots was significantly less than the total cost to CBL of acquiring title to the land and/or developing the land. Further, each plot had then been leased back to CBL by MIL on short leases of 25 years and with MIL having rights to terminate the leases and restrictions on transfer. CBL paid MIL a premium of UGX 100m for each plot, as well as USD 6,000 per year as ground rent for each plot, regardless of the size and location of the plot and regardless of whether CBL actually had branches on the plot.”
“24.2 Serious issues in relation to the financial position, management and risks surrounding CBL had been identified by the BoU through reviews carried out by KPMG (CBL’s statutory auditors) and/or by the BoU’s supervisory team in 2015 and during Spring to Summer 2016, and/or during previous on-site examinations. On their face, these were matters which supported, and were consistent with, the BoU’s reasons as given in the public notice for intervention, and it would not be irrational or in bad faith for the BoU to have concluded that the issues identified (individually and/or collectively) justified intervention. These matters included that, in the period prior to placing CBL into statutory management, the BoU had identified and/or assessed that: … 24.2.2 CBL appeared to have an improper practice of issuing loans and advances to entities associated with companies that held NPLs with CBL, which advances then appeared to have been used to settle the NPLs, thereby transferring the NPLs in a process known as “evergreening”. … 24.2.4 There had been a transfer of titles of the Bank’s land in various locations to a company owned by certain of the shareholders, Meera Investments Ltd (“MIL”), for no or minimal consideration, in December 2012. Moreover, CBL appeared to have paid rent to MIL for non-occupied premises, as well as settling other expenses on behalf of MIL and M/s Redfox Forex Bureau. CBL had also been found to have made donations to a foundation related to certain of the shareholders, the Ruparelia Foundation, and appeared to have paid for utility bills on behalf of other entities related to certain of the shareholders.”
“this is the finding of PwC that CBL has sold the freeholder Mailo ownership to various plots of land to a company related to members of the Ruparelia family and, amongst other things, that was a disadvantageous transaction to CBL and that each plot could then be leased back to CBL by Meera on short leases, with Meera having the right to terminate the leases and restrictions on transfer.”
“dfcu Bank will contend that the below matters are individually and collectively relevant to: (a) the financial position of CBL and valuation of CBL’s assets and liabilities; and/or (b) the considerations that the BoU (or a Central Bank in its position), acting in good faith, rationally and reasonably, was entitled to take into account when determining how to proceed with the resolution of CBL; and/or (c) whether the alleged counterfactuals would have occurred but for the alleged tortious acts. Specifically: … (v) That funds had been extracted from CBL in 2013 by CBL making unjustified payments to Technology Associates (“TA”) (amounting to around USD 9.27m in 2013), by overpayments and/or payments for licences, products or services that were not in fact provided by TA, including licences and software for CBL’s Core Banking System (“CBS”). The major suppliers to CBL of the CBS were, in fact, Misys International Banking Systems (“Misys”), who supplied the “Branch Power” and “Bank Master”
“In Vilca v. Xstrata Ltd[2017] EWHC 2096 (QB) , Stuart-Smith J cited and endorsed the summaries in both Quah Su-Ling and CIP Properties, although he said that he did not agree with Coulson J that there “must” be a good reason for delay. I agree with that caveat. As Stuart-Smith J observed, at paragraph 29, the lack of a good explanation is not of itself fatal to the application to amend but the presence or absence of an explanation which justifies the delay is one of the factors that must be considered in deciding where to strike the balance.”