Dfcu loses court bid to withdraw case against Crane Bank, New Master Electronics

KAMPALA, UGANDA: The High Court’s Commercial Division in Kampala has rejected a move by the dfcu Bank to withdraw a case in which it had sued the commissioner of land registration and New Masters Electronics as the fight over property used as a mortgage to obtain loans totalling to a sh 14 billion from the now defunct Crane Bank.

However, in court documents filed by the directors of New Masters Electronics, they deny ever receiving the said loans as the two parties continue to be locked in a fight over the mortgaged property.

Despite Dfcu showing intent to follow through with the case on April 13, this year, the embattled bank entered into a consent judgement with Baker Mugaino, the Acting  Commissioner Land Registrar on a number of terms.

New Master Electronics, who had been listed as one of the respondents in the consent judgement opined that the dispute between dfcu and the commissioner of land registration had been settled.

In earlier court filings, the Commissioner Land Registration had insisted how it’s legally untenable to transfer Crane Bank mortgages to Dfcu, in the consent judgement, he contradicts that position.

“As advised by the Attorney General’s opinion set out in his letter dated August 25, 2022, addressed to the deputy governor of Bank of Uganda, and copied to the first defendant (commissioner of land registration) hereby acknowledges that the plaintiff (dfcu) is pursuant to the purchase of assets and assumption of liabilities agreement dated January 25, 2017, and the deed of assignment dated January 25, 2017, between the plaintiff (dfcu) and Bank of Uganda,” the consent judgement reads in part.

“As statutory receiver of Crane Bank Limited], the lawful assignee of all the Crane Bank Limited (CBL) mortgage charges and the plaintiff (dfcu) shall as such lodge for registration at the Lands Registry the deed of assignment of CBL mortgage portfolio duly stamped and pay the requisite registration fees thereon and thereupon be registered mortgages of all said CBL assigned mortgages charges,” the judgement adds.

The commissioner of land registration, according to the consent judgement, had agreed to recall the notice calling for a public hearing in which dfcu and the New Master Electronics directors were to face off.   

When the case came up on Wednesday, May 10, before Justice Stephen Mubiru of the Commercial Court, the lawyers for New Master Electronics led by Mr Fred Muwema and Mr Friday Roberts Kagoro contested the idea that dfcu was withdrawing the case after securing consent judgement with the commissioner of land registration. Mr Muwema ripped into the consent judgement, saying it prejudiced his clients. 

“This was collusion between dfcu and the commissioner of land registration without involving your clients and prejudiced their property,” Mr Muwema said. 

Mr Muwema also contended that by the time dfcu and the commissioner of land registration signed and filed the consent judgement on April 12, 2023, at 6:40 pm, they had received a notice from the directors of New Master Electronics objecting to it.  

“That by the time this honourable court admitted/signed the impugned consent judgement on April 13, 2023, at 4:29 am, this honourable court was already aware of the applicants’ grievance with the consent judgement,” Mr Muwema said.

He added; “That the impugned consent judgment was, therefore, procured dishonestly by the respondent (dfcu), who misled this honourable court to endorse it as a way of perfecting its grand scheme to defeat the public hearing before the commissioner for land registration.”   

In response, Mr Ernest Sembtya on behalf of dfcu’s lawyers insisted that New Master Electronics had no right to stop dfcu from withdrawing the case since the bank had filed the case.

“Our clients filed the case,” Mr Sembtya revealed, adding that “after reaching a consent judgement they have chosen to withdraw the case.”

The main claim by the directors of New Master Electronics is that the Lands Ministry should remove their mortgages on grounds that “they are maintained illegally on the land register” after Crane Bank, which got the securities, was declared by the Supreme Court to be non-existent. This was after it was taken over by Bank of Uganda (BoU) in 2017.    

Dfcu, on the other hand, says on January 25, 2017, BoU—in its capacity as the Crane Bank receiver—sold and assigned it the bank’s loan portfolio, mortgages and other securities. This included those of New Master Electronics yet the business entity went on to question its indebtedness to Crane Bank.

In his ruling, Justice Mubiru didn’t allow dfcu to withdraw the case but instead opted to give New Master Electronics more time to amend its defence and include reasons why it is opposed to the withdrawal.

“We can just rely on the technicality of a consent in case that affects other people who were not involved in the drafting of the consent judgement,” Justice Mubiru said, adding,“You must understand the orders we make have consequences. They affect people’s rights over property.”