The Commercial Division of the High Court in Kampala has directed DFCU Bank to pay Crane Management Services, owned by city businessman Sudhir Ruparelia, billions in rent arrears and interest on the same.
In 2018, Crane Management Services Limited dragged DFCU Bank to court accusing the commercial bank of “breach of contract and or in the alternative, unjust enrichment,” according to court documents seen by The Pearl Times. Crane Management Services asked court to compel DFCU Bank to pay it USD $ 385,728.54 and UGX. 2,998,558,624 being rental arrears, interest on the said sums, general damages, interest on general damages and costs of the suit.
But in an interesting twist, DFCU Bank denied the allegations of breach of contract and unjust enrichment, making a counterclaim against Crane Management Services Limited and Meera Investments.
Crane Management Services Limited is the property letting agent of Meera Investments Limited, the registered proprietor of several prime properties in the capital Kampala, including those that were the subject of the suit.
DFCU Bank asked court to order Crane Management Services Limited and Meera Investments to pay it USD $ 55,390.07 being pre-paid rent reportedly by Crane Bank Limited for two of the suit properties, vide Kyambogo warehouse and 6th Street industrial area.
THE PROPERTIES RENTED OUT
Crane Management Services Limited averred that it had rented out several properties to Crane Bank Limited for its operations. These included Plot 9, Market Street (Crane Bank Branch) at USD $ 4,205.52 per month payable one year in advance; and Plot 9 Market Street (Crane Bank at the rent of USD $4,205.52 per month payable one year in advance.
Other properties rented to Crane Bank Limited were: Plot 1-13, Jinja Road for a fixed duration of five (5) years at USD $9,800.34 per month payable one year in advance with seven per cent annual increment compounded; Plot 47, Republic Road, Mbale for a duration of 10 years at USD $ 8,361.77 per month, payable one year in advance.
Crane Management Services Limited also rented out Speke Hotel (1996) Limited (Crane Bank ATM) at the rent of USD $ 4,583.24 per month payable one year in advance; Plot 19, Cooper Road, Crane Plaza, Apt No. 305, at USD $600 per month, payable one year in advance; and Plot 20 Kampala Road, (Crane Bank ATM) at USD $4,283.40 per month payable one year in advance.
The other properties that Crane Management Services Limited rented out to Crane Bank Limited included apartments at Bombo Road, Kiira Road, William Street, Market Street and Nkrumah Road to CBL at USD $12,830.94 per month payable one year in advance; and Plot 28, Luwum Street, (Crane Bank Unit UG – 31&33) at UGX 12,100,000/= per month payable one year in advance.
Also on the list of properties that Crane Management Services Limited rented out to Crane Bank were: Plot 1, Sinay Bin Amir Street (Crane Bank Staff – 8 apartments) at UGX 9,600,000/= per month payable one year in advance; Plot 22, 24, 26, Kampala Road (Crane Bank Staff Flats 1 Apartment) at UGX 1,200,000/= per month payable one year in advance.
The others were: Plot 22, 24, 26, Kampala Road (17 apartments for Crane Bank Staff Flats) for a fixed duration of Five (5) years at UGX 23,112,000/= per month, payable one year in advance, with a seven per cent annual increment; Plot 22, 24, 26, Kampala Road (21 apartments for Crane Bank Staff Flats) for a fixed duration of Five (5) years at UGX 30,816,000/= per month, payable one year in advance, with a seven per cent annual increment.
FROM CRANE BANK TO DFCU BANK
It should be remembered that on July 20, 2016, Bank of Uganda (BOU) took over management of Crane Bank Limited before placing the same financial institution under receivership on January 24, 2017 and executing a Purchase of Assets and Assumption of Liabilities Agreement with DFCU Bank shortly after.
The agreement meant that the central bank had all of Crane Bank Limited’s assets and liabilities to DFCU Bank. Days later, after the transfer became public, on January 27, 2017, DFCU took over the suit premises which Crane Bank had rented from the Crane Management Services. It changed the premises’ branding, erasing Crane Bank Limited and replacing it with DFCU Bank Limited.
Court records indicate that once DFCU Bank took over the premises previously occupied by Crane Bank Limited, it paid Crane Management Services Limited “some of the arrears of rent,” previously incurred by CBL to the tune of USD $ 81,408 and UGX 219,210,728 in respect of some of the suit properties and other properties managed by Crane Management Services.
“The Defendant [DFCU] also paid the outstanding utility charges previously incurred by CBL in a sum of UGX 410,303,436= to the Plaintiff [Crane Management Services]. The Defendant occupied and operated from the suit premises up to end of April and beginning of May 2017,” court documents further indicate.
“Thereafter, the Defendant undertook to pay restoration costs of USD$ 531,000 for the suit premises. These were the same premises hitherto occupied by CBL. In its letter dated 2nd of May 2017 admitted as Exh. DE-9, three months after occupation and utilization of the premises, the Defendant [DFCU] indicated to the Plaintiff that it had already vacated the suit premises between 28th of April and 1st of May 2017, with the exception of 11 apartments which would be vacated in June 2017.”
Yet while DFCU Bank told Crane Management Services that “it had offset” up to UGX 228,600,000/= and USD $ 373,618 against the agreed restoration costs “to cater for pre-paid rent,” Crane Management Services Limited vehemently objected the bank’s decision to deduct “pre-paid rent and yet there were outstanding rent arrears which were never discussed and agreed to.”
Indeed, following up on its decision, DFCU Bank demanded a refund of USD $ 162,964.90 as prepaid rent from Crane Management Services on 3rd November 2017, which sum was disputed by Crane Management Services Limited on January 31, 2018. Crane Management Services also demanded rent arrears, but DFCU Bank “ignored” the claim.
It was against this background that Crane Management Services Limited sued DFCU Bank seeking to recover USD $ 385,728.54 and UGX. 2,998,558,624 in rent arrears.
“The defendant equally counterclaimed for prepaid rent to a tune of USD $ 55,390.07 hitherto paid by CBL under the subsisting tenancies to the Plaintiff prior to the takeover by the counterclaimant. The Counterclaimant alleges that prior to the takeover of CBL, CBL had, under the old tenancy agreements for Kyambogo Warehouse and 6th Street Industrial area, paid rent for one year in advance up to July and August 2017 respectively,” court documents seen by The Pearl Times indicate.
“That subsequent to the takeover, on the 1st of February 2017, new tenancy agreements for these properties were executed whereof the counterclaimant paid rent under the new tenancy agreements despite the outstanding rent previously paid by CBL.”
COURT JUDGEMENT
Lady Justice Harriet Grace Magala identified five issues for determination in the matter. The first issue was whether upon the execution of the Purchase of Assets and Assumption of Liabilities Agreement (P&A Agreement) and by DFCU Bank’s conduct, the commercial bank “became bound by the terms and conditions of the tenancy agreements/arrangements” between the Crane Management Services Limited and Crane Bank Limited in respect of the suit properties.
The second was whether DFCU Bank breached the terms of the subject tenancy agreements/arrangements, and if so, whether DFCU Bank is liable to pay the sums claimed Crane Management Services Limited.
Other issues were whether the tenancy agreements previously entered into between Crane Bank Limited and Crane Management Services Limited were “effectively terminated” by Bank of Uganda; whether the Counterclaimant (DFCU Bank) is entitled to the pre-paid rent which was transferred to the Counter Defendant by Bank of Uganda; and what remedies are available to the parties.
In the end, Lady Justice Magala ruled that Crane Management Services Limited’s claim “wholly succeeds and the Defendant’s [DFCU Bank’s] counterclaim fails.” Dismissing DFCU Bank’s counterclaim with costs payable to the counter defendants, Lady Justice Magala ordered DFCU Bank to pay USD$ 385,728.54 and UGX 2,998,558,624/= being rental arrears inclusive of unpaid rent, interest on unpaid rent, rent for unexpired periods and payment in lieu of notice of termination to Crane Management Services Limited.
“The Defendant shall pay interest on the sums awarded in item (a) above i.e. US$ 385,728.54 and UGX. 2,998,558,624/= at a rate of 10% of the decretal sum from 15th February 2018, which is the date of filing of the suit, until payment in full,” she further ruled, according to a full judgement a copy of which The Pearl Times has obtained.
“The Defendant [DFCU Bank] shall pay UGX. 400,000,000/= as general damages to the Plaintiff. The Defendant [DFCU Bank] shall pay costs of the suit to the Plaintiff.”
Without factoring in interest from 2018, DFCU Bank is expected to pay about Shs4.8bn, which sum will increase when interest is included.
Please Follow our Whatsapp Channel for More Stories HERE.
