Crane Bank Ltd v DFCU Bank Ltd - Commercial Court Judgment

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  Crane Bank Ltd & Ors  v DFCU Bank Ltd & Ors [2026] EWHC 677 (Comm) (24 March 2026)

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[2026] EWHC 677 (Comm) | | |
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| | | Neutral Citation Number: [2026] EWHC 677 (Comm) |
| | | Case No: CL-2020-000859 |
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT

| | | Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL |
| | | 24/03/2026 |
B e f o r e :

DAME CLARE MOULDER DBE

Between:
| | (1) CRANE BANK LIMITED
(2) DR SUDHIR RUPARELIA
(3) MS JYOTSNA RUPARELIA
(4) MS MEERA RUPARELIA
(5) THE ESTATE OF MR RAJIV RUPARELIA
(6) MR TOM MUGENGA
(7) MS SHEENA RUPARELIA | Claimants |
| | - and - | |
| | (1) DFCU BANK LIMITED
(2) DFCU LIMITED
& 13 OTHERS | Defendants |

**Hannah Brown KC, Owain Draper, Ben Zelenka Martin and Lauren Hitchman (instructed by Greenberg Traurig, LLP) for the Claimants
Joe Smouha KC, Tom Ford and Jackie McArthur (instructed by Freshfields LLP) for the First Defendant

Hearing dates: 25-26 February 2026**

HTML VERSION OF JUDGMENT ____________________

Crown Copyright ©

3. This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:00 on Tuesday 24 March 2026.
6. Dame Clare Moulder DBE:
7. Introduction
8. This is the reserved judgment of the Court on the application of the First Defendant dated 9 December 2025 (the "Amendment Application") for permission to make certain non-consequential amendments contained in the Re-Re-Amended Defence served on the Claimants on 15 October 2025 (the "RRAD") and an order that the remaining amendments contained in the RRAD which are contested by the Claimants are consequential ones that the First Defendant already has permission to make (alternatively, that the Court grants permission for such contested amendments).
10. The Claimants have also made an application dated 18 December 2025 to strike out (the "Strike Out Application") the Disputed Amendments should the Court determine that they are consequential.
12. Since the Amendment Application was made, a number of the proposed amendments have been consented to by the Claimants. The outstanding issues in dispute relate to certain amendments contained within the proposed new Annex One to the RRAD. (The Claimants have agreed that cross-references in the main body of the RRAD will be to Annex One, in whatever form it takes once these applications have been determined by the Court). References in this judgment to the "Disputed Amendments" are to the outstanding issues as described below.
14. The Amendment Application was supported by the Fourteenth Witness Statement of Mr Thomas Clark of Freshfields LLP dated 9 December 2025 and his Sixteenth Witness Statement dated 3 February 2026.
16. The Claimants' evidence was set out in a witness statement from Masoud Zabeti of Greenberg Traurig, LLP dated 20 January 2026.
18. Given the volume of material that was put before the Court on the applications in writing this judgment I have relied largely on the documents to which the Court was taken in oral submissions. This accords with the direction which I gave prior to the hearing having received the pre-reading list as follows:
20. "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."
21. Background
22. Crane Bank Limited ("CBL" or the "First Claimant") was a retail and commercial bank in Uganda which was regulated by the Bank of Uganda ("BoU") the country's central bank. The Second to Seventh Claimants were at all material times shareholders of CBL.
24. dfcu Bank Limited (the "First Defendant") is a retail and commercial bank in Uganda and acquired certain assets and liabilities of CBL in January 2017. References in this judgment to "dfcu" are to the First Defendant and/or its parent company, as the context requires.
26. The case brought by the Claimants alleges that as at 31 December 2015, CBL had a strong balance sheet and was highly profitable. The Claimants allege that the Defendants together with the BoU were each party to a corrupt scheme the aim of which was to take control of a Ugandan bank and sell it (or its assets and liabilities) for corrupt purposes. The Claimants' case is that in July 2016 the BoU asserted that CBL was suffering from a serious capital deficit and then took a series of actions which led to CBL being placed into receivership followed by the sale of some of its assets and liabilities to the First Defendant pursuant to an agreement dated 25 January 2017.
28. The First Defendant's case has always been (paragraph 5 of its defence) that:
30. "The reality is that CBL had been mismanaged and was significantly undercapitalised with liquidity problems, and the need for Central Bank intervention became inevitable?".
31. The First Defendant has also always referred in its defence to a " forensic review " carried out by PricewaterhouseCoopers ("PWC") and an " inventory " of CBL's assets and liabilities once it had been placed in statutory management. (The First Defendant has now amended its defence to specify that PWC in this regard was a company and to refer to two versions of the forensic review dated 21 December 2016 and 13 January 2017 (together the "PWC reports") but neither of these matters are of themselves material to the issues which arise for determination on the Amendment Application).
33. Further, the First Defendant has always pleaded that PWC identified:
35. "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."
36. A case management hearing was held in November 2024 before Mr Stephen Hofmeyr KC. Directions were given for disclosure and expert evidence and the claim was listed for a 12-week trial from October 2026. The earliest start date for disclosure date ranges, for any issue, was 1 July 2015.
38. The First Defendant made an application on 21 March 2025 for permission to amend its defence. Following a hearing before Mr Paul Stanley KC in July 2025 ( [2025] EWHC 1915 (Comm)) the First Defendant was given permission by the deputy judge to amend its defence to allow it to plead (now at paragraph 31.7 of the RRAD) that the BOU would have been " reasonably entitled " to regard the matters identified in the PWC reports as " credible " and to support " a good faith belief " that, inter alia, CBL was significantly undercapitalised and that " wrongdoing, irregularities and poor corporate governance" were " prevalent " prior to it being placed into statutory management.
40. However it is important to note that the First Defendant was refused permission by the deputy judge for its proposed amendments to amend its defence to incorporate by reference findings in the PWC reports to allege that the findings of the PWC reports were true.
42. The deputy judge noted at [20]:
44. "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."
45. However the deputy judge was of the view that some of the amendments proposed by the First Defendant seemed to introduce " a dangerous ambiguity ". At [33] he said:
47. "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." [emphasis added]
48. The deputy judge gave permission for the amendments (now in paragraph 31.7) only on the basis that they alleged that the BOU would have been entitled to place reliance on the PWC reports and not that they were being alleged to be factual allegations. At [38] he said:
50. "For those reasons, I will not give permission for the words "The matters identified ?" or the sub-paragraphs to paragraph 24.4. I will, however, give permission for the body of paragraph 24.4 itself ? on the strict understanding that they allege, as I hold they do, merely that a central bank regulator would have been entitled to place reliance on the PWC reports and would have drawn certain conclusions from them, and not that DFCU is adopting those conclusions as factual allegations". [emphasis added]
51. It is relevant to the Amendment Application to note that the way in which the First Defendant sought to amend its defence at that time was (as the deputy judge commented at [35] and [36]) to incorporate " sometimes explicitly by referring to paragraphs, sometimes indirectly?many paragraphs and pages of the PWC reports " and the deputy judge held that " Their pursuit as claims would itself require precise and detailed pleading ".
53. I note that the deputy judge by his judgment did not preclude a further application to amend the defence. The deputy judge in his judgment acknowledged that the First Defendant might seek to rely on " specific allegations " as primary facts but in his judgment he refused that part of the application in front of him which he described as " the indiscriminate incorporation of the substance of both reports in the form that was before me ".
55. At [42] the deputy judge said:
57. "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." [emphasis added]
58. It was submitted for the First Defendant that " any objection " to the amendments is " misconceived " and that the Claimants had " invited " the First Defendant to produce additional particulars of the mismanagement relied upon.
60. In this regard Counsel for the Claimants in the course of submissions before the deputy judge in July 2025 submitted that:
62. "? we are not trying to close out the defendants from alleging mismanagement if they have the evidence to back it up?a practical solution would be that the timetable be extended to include dfcu putting together any further amendments to their defence which they wish to pursue, properly pleading and particularising any further allegations of mismanagement as an allegation of fact which they consider relevant to issues of causation and quantum, which I think is where they consider it relevant, and which they wish to pursue by reference to documents in their possession, and most obviously the results of their own due diligence. Such a solution, my Lord, would be in accordance with the overriding objective and fair to both sets of parties, whereas to allow the draft amendments in their current form would be disproportionate, contrary to the overriding objective, contrary to the need to ensure that litigation is conducted efficiently and at proportionate cost?". [emphasis added]
63. In my view the transcript of the hearing shows that the Claimants did accept that the First Defendant might seek to plead further specific allegations of mismanagement but the Claimants did not agree that such further allegations would be permitted as consequential or otherwise agreed. Those remarks therefore have no bearing on the Court's determination of the Amendment Application.
65. Pursuant to an order of Henshaw J dated 16 September 2025 (the "Henshaw Order"), the Claimants were permitted to file and serve the Re-Amended Particulars of Claim (the "RAPOC") by 15 September 2025.
67. The Henshaw Order also gave the Defendants permission to " file and serve any amendments to their Defences [or Amended / Re-Amended Defences] consequential on the amendments contained in the [RAPOC] " [emphasis added].
69. "Consequential" amendments
70. The First Defendant submitted (at paragraph 6.1 of its skeleton argument) that the Disputed Amendments constitute " consequential amendments " and are " covered by the Henshaw Order ".
72. However in its oral submissions counsel for the First Defendant submitted more broadly that, applying Squire v Squire [1972] Ch 391, the Court should allow the amendments as " consequential " (whether or not covered by the Henshaw Order) on the basis that consequential amendments were only " not consequential " if they arose solely out of the original pleadings.
74. What is a "consequential" amendment?
75. Counsel for the First Defendant relied on Squire for the proposition that:
77. "an amendment can be consequential if it is answering not only or responding to not only the new allegation, or the new pleading, but even if it also is addressing further the existing allegations. That is important, my Lady, in relation to approach. In other words, it will only be not consequential if it responds only to existing allegations ". [emphasis added]
78. Counsel for the First Defendant further submitted that:
80. "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."
81. However I note that even on the First Defendant's case as to what should be regarded as " consequential ", it still requires the First Defendant to show that it is " responding " to " an alteration to the case " or a " new allegation " (as well as responding to the original case).
83. Counsel for the Claimants submitted by reference to Squire and Alta Trading v Bosworth [2025] EWHC 91 (Comm) that there was:
85. "this requirement for causation or necessitation by the original amendment to justify the amendment in response as being a consequential amendment".
86. In Squire the parties had agreed a definition of " consequential " and the judgment is therefore of little assistance (other than in relation to the issue of amendments which relate both to the original pleading and the amendments). The court noted that:
88. "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."
89. In my view the Claimants arguably put the test too highly in contending for the response being one which is " necessitated " by the amendment. I do not find the remarks of a district judge in Hong Kong which cited no authority as persuasive in this regard (Advance Pacific Investments v Zen Chung Hei Hayley [2008] HKDC 312 at [8]).
91. It was submitted for the First Defendant that SPI North Limited v Swiss Post International [2020] EWHC 3268 (Ch) is authority for the proposition that:
93. "Where one party makes changes to how it is putting its case, fairness dictates that the other party is permitted to make changes (even if significant) to the way it chooses to defend the claim".
94. However the relevant passages show that the judge was making a decision on the facts of that case as to what was consequential, giving the word " its ordinary meaning ". At [55] and [56] the judge said:
96. "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.
97. 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." [emphasis added]
98. One dictionary definition of " consequential " is " happening as a result of something " and I accept the submission for the Claimants that there must be a causative link which is capable of being identified. In other words, in my view the First Defendant has to show that in substance the Disputed Amendments in the RRAD are responding to a change or alteration to the Claimants' case. This seemed to be accepted by the First Defendant by reference to Alta Trading at [52]: it was submitted for the First Defendant (paragraph 8 of its skeleton) that amendments are " consequential " if they can " realistically be construed as responding " to the other party's amendments.
100. An illustration of this approach can be seen in Alta Trading at [58] of the judgment:
102. "The Claimants in the present case say their amendments to the Reply are 'consequential' on the amendments to the Defence because they relate both to Mr Bosworth's and Mr Hurley's Defence to the alternative claim and to Mr Bosworth's and Mr Hurley's original defence to the fraud claim. I do not agree. The only respect in which Mr Bosworth's and Mr Hurley's Amended Defence added to their existing Defence was to deny any agreement to remit to Farahead all profits over and above the traders' bonuses. The amendments to the Reply are in no sense consequential upon that plea. Rather, they amount to (a) a new positive case of breach of an agreement or understanding that Mr Bosworth and Mr Hurley pleaded from the outset and whose existence the Claimants have always denied, and (b) new positive allegations in support of the Claimants' fraud case, despite the fact that the amendments to the Defence made no alteration to Mr Bosworth's and Mr Hurley's defence to the fraud case?".
103. Even though there was an amendment to the existing defence, Henshaw J found that the amendments to the reply were not " consequential " upon that amendment but were " new positive allegations " in support of the Claimants' existing case.
105. Are the amendments within the scope of the Henshaw Order?
106. CPR 17.3 (Amendments to statements of case with the permission of the court) states that:
108. "17.3(1) Where the court gives permission for a party to amend their statement of case, it may give directions as to?
109. (a) amendments to be made to any other statement of case; and
110. (b) service of any amended statement of case."
111. Therefore to fall within the scope of the Henshaw Order the Court has to determine whether the proposed amendments are " consequential on the amendments contained in the [RAPOC]. "
113. Amendments in the Reply
114. In oral submissions Mr Smouha KC took the Court to the Amended Reply and submitted that the Claimants had put in issue the truth of the matters in the PWC reports. It was submitted that the First Defendant's case that the BoU was entitled to rely upon and regard the findings in the PWC reports as credible was being expressly met by a case that the findings in the PWC reports were untrue and the First Defendant must be entitled to respond to that case at trial.
116. In the Amended Reply the Claimants have pleaded (paragraph 4):
118. "As to paragraph 5
119. ?
120. (b) 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)?". [emphasis added]
121. Paragraph 4 of the Amended Reply responds to paragraph 5 of the Amended Defence which reads:
123. "The reality is that CBL had been mismanaged and was significantly undercapitalised with liquidity problems, and the need for Central Bank intervention became inevitable?".
124. However as counsel for the Claimants submitted, the original Reply in March 2024 stated:
126. "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 their accuracy, findings and the allegations of wrongdoing contained in the PwC Forensic Review are denied? ". [emphasis added]
127. In my view the First Defendant cannot use the denial by the Claimants in the Reply that the matters in the PWC reports are true to advance a new positive case that the specific allegations now particularised in the Disputed Amendments are true. This is not in substance responding to an amendment made by the Claimants to their case.
129. There is a new paragraph 35A in the Amended Reply which responds to the new case advanced by the First Defendant at paragraph 31.7 of the RRAD. Whilst paragraph 35A cross refers to paragraph 4 of the Amended Reply, for the reasons set out above, in my view this does not amount to a new case being advanced as to the truth of the PWC reports entitling the First Defendant to introduce new specific allegations in the form of the Disputed Amendments.
131. Further, and alternatively, in my view, the First Defendant cannot rely on the amendments in the Reply to bring the Disputed Amendments within the express terms of the Henshaw Order since they are not " consequential on the amendments contained in the [RAPOC] ". [emphasis added]
133. In my view this formulation (which was a consent order) in the Henshaw Order reflects the purpose of a Reply which cannot bring in a new claim and to which there is no further reply without the permission of the Court.
135. Do the amendments in the RRAD respond to amendments in the RAPOC?
136. When the language of the Henshaw Order was raised by the Court, counsel for the First Defendant responded that the amendments:
138. "are consequential upon the amendments the Claimants made both to their particulars of claim in the RAPOC and in also in the reply".
139. The First Defendant submitted (at paragraph 4.2 of its skeleton argument) that the further particulars of the " specific matters of mismanagement " set out in Annex One are given " in response to the Claimants' amendments to the RAPOC ".
141. The First Defendant submitted (at paragraph 30 of its skeleton argument) that the RAPOC amended the Claimants' case in a " number of material respects " and then identified the following amendments (in summary):
143. i) paragraph 14 of the RAPOC, the basis of the adjustments to the capital position made by BoU;
144. ii) paragraph 29 of the RAPOC on the valuation of assets and liabilities;
145. iii) paragraphs 84B(iii) and 84C of the RAPOC introducing a new counterfactual case and a claim for damages based on loss of profits.
146. Since there is no cross reference to Annex One in the RRAD responding to paragraph 14 of the RAPOC there is no need to consider that further in this regard.
148. The first relevant paragraphs are therefore paragraphs 35.5 and 35.7 of the RRAD which respond to paragraph 29 of the RAPOC.
150. Paragraph 29 of the RAPOC addressed the value of the assets and liabilities of CBL in the Inventory compiled by PWC. The Claimants amended their pleading so that instead of referring to the non-performing loans being " fully secured " it now referred to those loans being " backed by good collateral ", and to the values of the non-performing loans and written off loans as a matter for expert evidence. It also referred to the value of " other of " CBL's assets in the Inventory being understated.
152. Paragraphs 35.5 and 35.7 of the RRAD purport to respond to the amendments in paragraph 29 and seek to incorporate by reference specific allegations from Annex One. Thus in paragraph 35.5 of the RRAD in response to very limited amendments by the Claimants as to the collateral for the loans the First Defendant seeks to introduce new specific allegations on the basis that in assessing the value to be given to the non-performing and written off loans the BoU would be entitled to have regard to " the evidence of CBL's deteriorated financial and risk position, and/or the evidence of irregular lending practices within CBL, and/or the evidence of systemic corporate governance failures within CBL? " and then by cross reference paragraphs 2(i), (iii), (vii) and (viii) of Annex One.
154. Paragraph 2(i) is now in agreed form. The remaining paragraphs 2(iii), (vii) and (viii) include (in essence) specific allegations of " irregularities concerning CBL's loans and lending practices ", allegations relating to the ownership and control of CBL's shareholdings and allegations that the BoU's investigation had been " impeded ".
156. In paragraph 35.7 of the RRAD in response to an amendment in the RAPOC which is dealing with the alleged undervalue of assets other than the non-performing and written off loans the First Defendant seeks to incorporate particulars of specific allegations in paragraph 2 (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii) of Annex One.
158. It was submitted for the First Defendant (inter alia) that:
160. "in response to the Claimants' amendments in the RAPOC in relation to the value that should have been given to the assets and liabilities of CBL, dfcu Bank specifically makes clear its case is that in assessing the value of CBL's loan book and other assets, the distressed financial position and mismanagement at CBL (alternatively, the rationally and reasonably believed existence of distress and mismanagement at CBL) was (and is) relevant?".
161. In my view the Disputed Amendments which the First Defendant seek to incorporate into paragraphs 35.5 and 35.7 are not responding to the amendments in the RAPOC. The amendments in paragraph 29 of the RAPOC are not in substance new allegations by the Claimants. One only has to attempt to summarise the specific allegations sought to be introduced " in response " to see how these allegations do not respond to any new case advanced by the Claimants in the RAPOC or substantive amendments by the Claimants in the RAPOC but are an attempt by the First Defendant to introduce wide ranging and specific allegations of mismanagement derived from the PWC reports.
163. The conclusion that these are not matters which are raised in response to the amendments made by the RAPOC is reinforced by the fact that the First Defendant had sought to introduce particulars from the PWC reports of largely similar allegations in its application before Mr Paul Stanley KC (prior to the RAPOC being filed) (albeit through cross referencing the PWC reports) and failed. This is evident from dfcu's skeleton for the hearing before the deputy judge:
165. "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." [emphasis added]
166. I further note that the value of the Inventory had been in issue since the Reply was filed in March 2024:
168. "As to the PwC Inventories, the Claimants believe that the value of CBL's assets in those documents was seriously understated".
169. Paragraph 115.4.2 of the RRAD responds to the counterfactual that CBL would have been permitted to continue as a going concern under the control of its previous directors and shareholders. The proposed amendment to allege that the counterfactual is inconsistent with " the specific matters set out in Annex One below " does not respond to any amendment in the RAPOC.
171. Paragraph 115.4A of the RRAD does respond to the new counterfactual introduced in the RAPOC that CBL would have been sold to a third party. However in my view the amendments in substance merely seek to introduce the new particulars of mismanagement in Annex One and as such cannot be said to be responding to or caused by the new counterfactual case advanced by the Claimants in the RAPOC. The proposed amendments in the RRAD to rely on Annex One are not consequential upon the new counterfactual but are new positive allegations in support of the First Defendant's case of alleged mismanagement which was pleaded from the outset.
173. This conclusion is bolstered by a footnote in the First Defendant's skeleton for this hearing in relation to the counterfactual which read as follows:
175. " 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?" [emphasis added]
176. I also note an amendment in paragraph 116.3 which responds to paragraph 84C of the RAPOC. At paragraph 116.3.5 the First Defendant introduces a new paragraph which cross refers to paragraphs 35.5 to 35.7 " as to the valuation of the Bad Books and CBL's other assets, with the relevant considerations including?the particular matters set out at Annex One below ".
178. Paragraph 84C of the RAPOC has been amended to reflect the additional counterfactual but otherwise the amendments to the value of the Bad Book do not change the Claimants' case in a way which would mean that the extensive allegations in Annex One can be said to be properly responsive to the amendments in the RAPOC.
180. The First Defendant submitted (at paragraph 4.2 of its skeleton argument) that the further particulars set out in Annex One were given in response to the Claimants' amendments to the RAPOC and
182. "in the context of the Claimants: (a) having put in issue in their pleadings (and now in their witness evidence) whether the BoU, as assisted by PricewaterhouseCoopers Ltd ("PwC"), had any proper basis when effecting the sale to dfcu Bank to consider that CBL had been mismanaged prior to being put into statutory management?". [emphasis added]
183. As discussed above, in my view the Claimants have not " put in issue " the truth of the matters in the PWC reports. It is clear that it is the First Defendant which seeks to advance such a case and the Claimants merely seek to deny that case in the Reply.
185. Is there a general right to make consequential amendments?
186. Counsel for the First Defendant also submitted relying on Squire that the principle is not that " there is only permission to make a consequential amendment if that has been set out in an order, but that there is an ability to make consequential amendments, provided that they are consequential as that term should be properly understood. "
188. I was not referred to any authority under the CPR to support that submission but even if correct, it does not address whether such a general right exists even where the position has been expressly dealt with by a court order. It would seem unnecessary to rely on any general right where permission has been given by an order and to rely on the general right in these circumstances would appear to seek to override the narrower provisions in the order. I cannot see why a Court would in effect disregard the express parameters of an order in reliance on any general principle which might entitle a party to make consequential amendments.
190. Even if I were wrong on that, for the reasons discussed above, in my view the Disputed Amendments are not consequential on the amendments by the Claimants to their pleadings.
192. Conclusion
193. For all these reasons, in my view, the Disputed Amendments do not fall either within the scope of the Henshaw Order or otherwise as " consequential " on the amendments to the pleadings and will require permission from the Court.
195. Should permission be granted for the amendments
196. The legal principles
197. It was submitted for the First Defendant citing Essex County Council v UBB Waste (Essex) Ltd [2019] EWHC 819 (TCC) at [11] that, in general:
199. "[p]arties 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".
200. However this general statement from the judgment of Pepperall J in Essex County Council needs to be considered in light of what the judge then said in the remainder of that paragraph (which reflects in my view the principles set out in the earlier oft-cited authorities of Quah Su-Ling v. Goldman Sachs International [2015] EWHC 759 (Comm), CIP Properties (AIPT) Ltd v. Galliford Try Infrastructure Ltd [2015] EWHC 1345 (TCC) and Vilca v. Xstrata Ltd [2017] EWHC 2096 (QB) and to which Pepperall J made reference in his judgment). The relevant paragraph read in full:
202. "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:
203. 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.
204. 11.2 The timing of the application is an important factor:
205. 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.
206. 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.
207. 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.
208. 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.
209. 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." [emphasis added]
210. Submissions
211. The First Defendant submitted:
213. "?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."
214. The First Defendant submitted that:
216. i) the Disputed Amendments do not introduce new issues which fall outside the scope of the list of issues for trial, for the experts and for disclosure.
217. ii) the Claimants' amendments to the pleadings and the Claimants' witness statements highlight that the question of whether CBL was mismanaged is a matter that arises for the Court to consider as part of fairly determining the issues at trial.
218. iii) the Claimants' evidence does not properly engage with the responses regarding the specific case management concerns raised by the Claimants and the trial date would not be put in jeopardy.
219. It was submitted for the Claimants that:
221. i) it is " an erroneous analysis to say that because the general topic of CBL's management is within the scope of issues in the trial that means it is open to dfcu to pursue any or all of the allegations of wrongdoing contained in the PwC reports, spanning years, without proper notice to the Claimants by a properly particularised pleading for which it has permission, and following which disclosure has been given and evidence, factual and expert-led, and time permitted to determine those issues in the estimated length of trial. "
222. ii) the Disputed Amendments " would require the parties to revisit disclosure " and will require further factual evidence and expert evidence. The timetable " cannot accommodate further rounds of pleadings, further rounds of disclosure, factual evidence, expert evidence that these amendments would require to enable the Claimants properly to defend them, and to enable the trial judge properly to determine them."
223. iii) it would be " impossible to accommodate determination of these new allegations of wrongdoing [within the current 12-week trial] , a number of which would entail a trial within a trial. "
224. iv) the pleading " remains ambiguous and unparticularised?".
225. Do the Disputed Amendments relate to matters which are already "in issue"?
226. It is important to identify what is meant by " in issue " on the current pleadings and in particular the distinction which was made clear before the deputy judge between relying on the matters in the PWC reports as " credible " and relying on them for the truth of the matters contained in the PWC reports.
228. It was submitted for the First Defendant that the Disputed Amendments are matters " which the claimants and the defendants have, from the start, put in issue as to the truth of them ". It was further submitted that the Claimants have no difficulty pleading back to and pleading positive cases in relation to the findings in the PWC reports without needing particulars of which ones those are.
230. The First Defendant sought to make good that submission by relying on various paragraphs in the Amended Reply: paragraphs 4, 22, 27A, and 35A.
232. Paragraph 4 of the Amended Reply
233. The Claimants had specifically reserved their position in relation to the allegations in the PWC reports at paragraph 4 of the original Reply:
235. "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. " [emphasis added]
236. As the deputy judge concluded at [39]:
238. "? 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?" [emphasis added]
239. The Amended Reply still reserves the position of the Claimants and in my view merely responds to the case advanced by the First Defendant, denying the truth of the wrongdoing in the PWC reports " if that is the First Defendant's case ":
241. "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): by 28 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) to identify 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." [emphasis added]
242. Paragraph 22 of the Amended Reply
243. Paragraph 22 of the Amended Reply responds to paragraph 17.3 of the RRAD and subparagraph (b) reads as follows:
245. "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."
246. It was submitted for the First Defendant that the Claimants themselves are by these amendments saying that they will advance a positive case as to the inaccuracy/untruthfulness of PWC's findings which fall into these " buckets ".
248. It is clear that the First Defendant asserts in paragraph 17.3 of the RRAD that in light of the PWC reports CBL's accounts for 2015 did not reflect the full position and/or materially misstated the financial position of CBL. However subparagraphs 17.3.1 to 17.3.4 are introduced by the words:
250. "The [PWC reports] identified (inter alia) that?"
251. I note that at [33] the deputy judge described such a formulation as introducing a " dangerous ambiguity " and that on one reading was providing details not of matters that are alleged to have been true but of matters that are alleged to have been credible.
253. I reject the submission that the First Defendant has already put in issue the truth of the Disputed Amendments by reason of subparagraphs 17.3.1-17.3.4 of the RRAD. Paragraph 22 of the Amended Reply does not in my view help the First Defendant. Whilst in paragraph 22 the Claimants deny that the findings in the PWC reports were accurate, it cross refers back to paragraph 4 which as set out above refers to the failure by the First Defendant to identify which of the findings it adopts and avers.
255. Paragraph 27A of the Amended Reply
256. As to paragraph 27A of the Amended Reply, this responds to the matters identified by the BoU in 2015 and 2016 (as set out at paragraph 24 of the RRAD).
258. It was submitted for the First Defendant that the issues found by the BoU and referred to at paragraph 24.2 of the RRAD " directly overlap with ", the PWC " buckets " in 17.3.1 (material breaches of prudential requirements), 17.3.2 (the branches) 17.3.3 (false accounting entries), 17.3.4 (material deficiencies in the classification and documentation of loans).
260. Whether or not there is an overlap between the matters alleged at paragraph 24.2 and the matters identified in paragraph 17.3, paragraph 27A of the Amended Reply does not respond to matters in the PWC reports and therefore the truth of the matters in the PWC Report/Disputed Amendments cannot be said to be in issue by reason of paragraph 27A of the Amended Reply.
262. Paragraph 35A of the Amended Reply
263. Paragraph 35A of the Amended Reply responds to paragraph 31.7 of the RRAD which is the paragraph in which the First Defendant alleges that it was reasonable for the BoU to rely on the PWC reports. The First Defendant does not put in issue the truth of the matters in the PWC reports by paragraph 31.7 and the cross references to paragraphs 4 and 27A does not in my view mean the Claimants have " put in issue " the truth of the Disputed Amendments.
265. The hearsay notice
266. In considering whether the Disputed Amendments are adequately particularised, it is relevant to consider the hearsay notice which was said by counsel for the First Defendant to put " parts of " the PWC (January) report in as hearsay so it can be relied on as evidence at trial. Counsel for the First Defendant submitted that:
268. "?.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."
269. In its written submissions the First Defendant submitted that:
271. "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)?"
272. However, there is a line to be drawn between the pleadings and evidence. As the deputy judge noted at [14]:
274. "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"?"
275. The deputy judge went on to say at [15] that " drawing the line in any actual case is often a matter of pragmatic art " but he did note at [16] that:
277. "To serve its purpose as a tool for the parties ?a pleading needs to be unambiguous, and coherent: there should be no doubt what is being alleged".
278. In considering whether the Disputed Amendments are adequately particularised the Court had to decide whether the pleading is unambiguous and coherent. It is not sufficient if the allegations and the primary facts can be identified only by reference to the hearsay notice.
280. Witness evidence
281. There is a further general point which the First Defendant relied on which is that if, for example, Dr Ruparelia makes a statement in his evidence without dealing with " the specific findings in the PwC report which go to that " then he has chosen to do that and the First Defendant can cross examine him on it.
283. I do not accept that the contents of the witness evidence will determine the scope of the cross examination. The parameters must be set by the pleadings. A witness cannot be criticised for failing to deal with the " specific findings " in the PWC reports, nor can he be cross examined on allegations, unless they are allegations which are clearly particularised in the pleaded case.
285. Paragraphs 2(iii)(a), (d) and (e) of Annex One: Lending practices
286. I turn then to consider the detailed allegations in the Disputed Amendments, whether they are adequately particularised and the consequences for disclosure, evidence and the timetable for trial which the Claimants submitted would follow.
288. Paragraph 2(iii)(a)
289. I note that paragraph 2(iii)(b) was agreed. [Day 2 p203]
291. The proposed amendment in paragraph 2(iii)(a) of Annex One reads:
293. "iii. That there had been significant irregularities concerning CBL's loans and lending practices, namely:
294. 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."
295. It was submitted for the Claimants that the language in paragraph 2(iii)(a)(i) " loans being granted at the instruction of the Second Claimant to business associates of the Second Claimant" was vague and unparticularised; that dfcu has failed to identify the loans in issue and what the level of involvement on the part of the Second Claimant is said to be, who the business associates were and what is the alleged relationship between them.
297. In relation to paragraph 2(iii)(a)(ii) the First Defendant has identified three companies in its draft pleading and has confirmed it is only going to rely on those three. However, it was submitted for the Claimants that the pleading is otherwise wholly unparticularised: when the alleged facilities were granted, the terms of the alleged facilities and the nature of the facilities.
299. It would appear from the PWC reports that the matters complained of in relation to one of the companies date back to advances originally made in 2010. The PWC reports then trace the renewal of the facilities in 2012 and 2014 and assert that it is a case where CBL " disregarded the inherent philosophy of their own credit policy ". None of the matters apparently relied on by PWC as " key events " appear in the pleading in paragraph 2(iii)(a)(ii) such that it is unclear in the pleading which matters taken from the PWC reports are relied upon to support the allegation of " failing to have sufficient regard to credit risk and to the creditworthiness of borrowers ".
301. It was further submitted for the Claimants that disclosure would have to be revisited and they would want factual evidence from, for example, the relevant managers or whoever approved the loans to explain their position, it would entail banking expert evidence and it is too late to undertake that exercise at this stage of the process.
303. It was submitted for the First Defendant that no further disclosure would be necessary: that all documents in customer files had been provided without using a start date and CBL no longer has access to data so cannot run further searches. Further, Freshfields have run additional searches on the borrowers mentioned in paragraph 2(iii) and are in the process of reviewing the small amount of additional disclosure and will provide any responsive disclosure in relation to that.
305. Even if no further disclosure can be done, in my view the pleading remains insufficiently particularised and would require further evidence, both factual and expert.
307. In relation to paragraph 2(iii)(a)(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 (such as the extension of credit facilities to ? despite the default of Infinity Investments Ltd?) ", it was submitted for the Claimants that the First Defendant has identified four accounts, but otherwise the allegations are wholly unparticularised as to when the loans were granted and on what terms; the pleading fails to identify the alleged relationship between the entities and fails to specify when and what were the nature of their alleged financial difficulties.
309. I accept those submissions.
311. It was further submitted for the Claimants that determining these allegations would require disclosure to be revisited, it requires factual evidence from the relevant decision-makers to explain the reasons for allowing the accounts to be opened or otherwise, and it would require banking expert evidence.
313. I accept that factual and expert evidence would be required.
315. Finally, as to paragraph 2(iii)(a)(iv) " loans being granted without completion of the approval process? " the Claimants submitted that there are no particulars of the loans in question.
317. Paragraph 2(iii)(d) related company loans
318. Paragraph 2(iii)(d) reads as follows:
320. iii. That there had been significant irregularities concerning CBL's loans and lending practices, namely:
321. ?
322. d. Related companies, or possible related companies, not being dealt with on arm's length terms, including through being granted below-market interest rates (as occurred in the case of ?), and/or write offs being made without proper justification and/or subject to a lack of adequate follow up or recovery actions by CBL (as in the case of the loans to Infinity Investments Ltd and?).
323. The First Defendant has confirmed they are only going to rely on the three specific accounts identified there.
325. It was submitted for the Claimants that the allegations are " hopelessly vague " and the Claimants cannot understand what case they are required to meet or how to address it.
327. It was submitted for the First Defendant that:
329. "it is clear the allegation that is being advanced in Annex One at (iii)(d) and those allegations are in particular supported by PwC forensic report findings and the corresponding hearsay notice?".
330. I note for example that the extract from the PWC (January) report in the hearsay notice to which the Court was referred sets out the interest rate for one of the companies and what it said to be the market rate. Another section (apparently relied on by the First Defendant in this regard) states:
332. "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"
333. In my view this subparagraph is insufficiently particularised, notably as to why these companies are or " may " be related (" possible related companies ") and how they were " dealt with " other than on arm's length terms. Write offs " without proper justification " is also insufficient as is " lack of adequate follow up " for the Claimants to understand the case they have to meet.
335. In my view it is not enough to refer to the PWC reports and the hearsay notice: a pleading is not coherent if it is reliant on facts which are scattered through the hearsay notice such that it is left to the Claimants to identify the specific allegations which are pleaded only in general and vague terms.
337. Even if the pleading were adequate or were amended to further particularise the allegations, there would be a need for further factual evidence including as to why particular steps were taken or not taken.
339. It was submitted for the First Defendant that:
341. "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."
342. The First Defendant referred to the evidence of:
344. i) Dr Ruparelia at paragraph 122 of his witness statement which deals with Infinity, one of the companies listed.
345. ii) the evidence of Mr Hindocha at paragraph 32 where the relevant statement appears to be as follows:
346. "?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?".
347. iii) the evidence of Mr Tharani at paragraph 75 where the relevant statement appears to be:
348. "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?"
349. I do not accept that the sparse references to related company loans in the evidence to which the Court was taken, obviate the need for the specific allegations to be fully and properly addressed by further factual evidence were the amendment to be permitted. I also do not accept that merely by referring in the manner set out above to certain matters in their evidence, the Claimants have accepted that the detailed allegations now sought to be pleaded in subparagraph 2(iii)(d) are " an issue ".
351. The Claimants further submitted that determination of the issue will require disclosure to be revisited and it will require factual evidence from the relevant decision-makers explaining what was done and why it was done, and again banking expert evidence.
353. I accept that there would also be a need for factual evidence on the reasons for the decisions as well as expert banking evidence as to whether the interest rates were " below market " for loans having the characteristics of the loans in question, the process for write offs and the appropriate " follow up " or recovery actions in the circumstances.
355. Paragraph 2(iii)(e)
356. Paragraph 2(iii)(e) reads:
358. "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 ?)." [emphasis added]
359. The Claimants submitted that this was " hopelessly vague and unparticularised " including the identification of the loans, the security and its value.
361. I agree with the Claimants that " inadequate collateral " begs the question as to what would have been " adequate " collateral in the circumstances and in my view that is a matter for expert banking evidence.
363. I further note that in the PWC reports under a heading of " Written off loans " and a subheading of " Megabells Electronics (U) Limited " there is reference to correspondence between lawyers and CBL relating to the perfection of security, dating back to 2011 and 2013. If this is the evidence on which the First Defendant may seek to rely in relation to this entity, the First Defendant has not sought to plead the primary facts which would set out a realistic case that it was the fault of CBL. No particulars are given in relation to the other three companies as to the primary facts relied upon.
365. Further and alternatively, given the dates of the correspondence identified in the PWC reports at least in relation to Megabells, it would appear that again the First Defendant wishes to rely on matters that occurred several years before the key events in 2016 and there has been no disclosure directed to these specific issues.
367. Conclusion on paragraphs 2(iii) (a), (d) and (e): " lending practices "
368. It was submitted for the First Defendant ( at paragraph 44 of its skeleton argument) that the value of the loan book has since the outset of the Claim gone to central aspects of the Claimants' case including the legitimacy of the BoU's actions in the summer of 2016. The First Defendant further submitted that the value of the loan book cannot be considered without considering the irregularities concerning the loan book and the lending practices, and paragraphs 2(iii)(a), (d) and (e) provide " particularisation for the experts and the Court ".
370. I accept the submission for the Claimants that there is a distinction between the exercise of valuing the loan book in 2016 and allegations that there was mismanagement when the loans were granted (or in their management thereafter). The value of the loans as at October 2016 (and January 2017) is at issue in this regard, not what may have occurred several years earlier which may have led to the value of certain loans being lower than it might otherwise have been.
372. Even if some or all of the allegations are relevant to the position in 2016, they are not in my view adequately particularised as discussed above. Further the question of whether to grant permission has to be considered in light of the need for further disclosure and evidence, including expert evidence.
374. Paragraphs 2(ii), 2(iv)(a) and (b) and 2 (vii)(a)
375. It was submitted for the First Defendant (paragraph 52 of its skeleton argument) that the matters of mismanagement (whether the Second Claimant has breached shareholder control limits and whether there had been false accounting entries and unlawful extraction of cash) are directly relevant to the BoU's decision making as to how to effect the resolution of CBL and how a purchaser or valuer would assess the value of CBL's assets.
377. The "White Sapphire" allegation (paragraph 2(ii))
378. The relatively brief particulars in paragraph 2(ii) read:
380. "(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."
381. However, it appears that the First Defendant is indirectly seeking to rely on a section in the PWC report (December 2016 version) under the heading " Summary of findings of wrongdoing " and a subheading " Shareholding irregularities " since the section states that there was a contravention of sections 18, 21 and 24 of the Financial Institutions Act. The " finding " by PWC was that Mr Kantaria was " most likely to be a front " for Dr Ruparelia's interest in CBL and the " evidence " identified in the PWC report in this section referred to 6 matters including:
383. i) the purchase of shares by Mr Kantaria in 2006 and 2010 and the tracing of funds for the purchase in 2010 through various entities and individuals;
384. ii) the tracing of dividends since 2006 to a number of sources somewhat imprecisely identified as " Ruparelia Group companies and associates "; and
385. iii) queries from the auditor addressed to CBL officers seen in a " number of emails recovered through computer forensics ".
386. I note the general statement in the PWC report at paragraph 1.5:
388. "We have set out a summary of the findings from our review below. This summary of findings must be read together with our detailed findings and appendices which provide more context and information on the summarised findings...".
389. I understand that those appendices have not been made available to the Claimants.
391. As to the detailed findings which are set out in the body of the report, the PWC report runs to some 8 pages concerning the " Shareholding irregularities ". This section gives details of the alleged source of funds for the purchase of shares in 2010 from a company " associated with Dr Ruparelia ". The report states that " an elaborate layering scheme was employed in the movement of the funds to and from the accounts " and that this included " use of multiple accounts and the splitting of the funds ".
393. A further subsection deals with the dividends paid to Mr Kantaria from 2006 to 2014 and purports to trace the funds back to the Ruparelia Group companies and associates or to internal CBL accounts.
395. It was submitted for the Claimants that:
397. "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."
398. It was submitted for the First Defendant that the particulars of mismanagement i.e. the breach of shareholder control limits is already pleaded at paragraph 17.3.1 of the RRAD and is already addressed in Dr Ruparelia's witness statement.
400. Paragraph 17.3.1 merely states without providing any detail:
402. "The PwC Forensic Review, and the PwC Detailed Inventory and the PwC January Report identified (inter alia):
403. 17.3.1. Material breaches of prudential requirements regarding shareholder control limits for financial institutions, through the use of related parties as nominee shareholders."
404. In my view this proposed amendment is not sufficiently particularised. It is wholly unclear what matters the First Defendant is relying on in support of its broad allegation that White Sapphire " was owned and/or controlled by the Second Claimant or persons associated with him ".
406. Further, to the extent that the First Defendant seeks to rely on any of the matters set out in the PWC reports, if this amendment were to be permitted it would require further witness evidence.
408. In his witness statement Dr Ruparelia addresses his relationship with Dr Kantaria and states inter alia that:
410. "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."
411. The First Defendant also relied on the section of Dr Ruparelia's evidence where he denied wrongdoing in relation to the " legal notice" which was a notice sent by law firms acting for the BoU dated 24 January 2017.
413. "One allegation was that I controlled 96% of Crane Bank, which included my shareholding, the shareholding held by White Saphire and the shareholding held by my family (which I understood to be covered by the term "associates"). The legal notice claimed that this supported the other allegations of dishonesty and improper conduct made against me and its conclusions about my dominant role. It claimed that I exercised day-to-day control over Crane Bank, which meant I was personally responsible for the losses at the bank. This was of course completely untrue and unsupported by over 20 years of strict regulatory scrutiny. All Crane Bank's significant shareholders had always been vetted and approved by the BoU. They had all been put through a thorough investigation process often over a few months to confirm that they were not fronts for any other person. I deny that I was the beneficial owner of the shares of Dr Kantaria or White Sapphire."
414. I do not accept that to date Dr Ruparelia has responded (or should have been expected to respond) to the detailed allegations raised in the PWC reports in this regard in his evidence which the First Defendant now seek to introduce through the Disputed Amendments.
416. The complexity of what is alleged to have occurred leads to an inference that a detailed investigation would need to take place in order to respond to the matters raised. I accept the submission for the Claimants that it would seem likely, given the evidence relied on by PWC of tracing and the assertion of an " elaborate layering scheme " that expert forensic evidence would be required.
418. As to further disclosure, counsel for the First Defendant submitted that the Claimants should have ensured that their disclosure searches, including date ranges, caught such relevant documents. I find that a surprising submission noting from the DRD that the date ranges were " agreed " and reflected in the order of Mr Hofmeyr KC dated 7 November 2024. In my view further searches may well be necessary.
420. Paragraph 2(vii) (a) and (c)
421. The Claimants accepted the introductory paragraph and subparagraph 2(vii)(b).
423. However, the Claimants objected to subparagraph (vii)(a) which reads as follows:
425. "That there were significant corporate governance failures within CBL?with those governance failures demonstrating that:
426. 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."
427. I accept the submission for the Claimants that in effect this is the " White Sapphire " allegation and the same objections apply concerning the lack of adequate particularisation and the need for further evidence as discussed above.
429. The Claimants have accepted subparagraph (vii)(c) subject to removal of the words " with the credit and loan committees frequently bypassed ".
431. It was submitted for the First Defendant that this allegation was " clearly and expressly supported by the hearsay notice ".
433. I do not accept that this allegation is adequately particularised. Even if it were sufficient in this instance to refer to the hearsay notice the allegation remains unclear with the extract from the PWC reports referring as it does to the committee being bypassed in " numerous cases " and leading to " unacceptable numbers of non-performing loans ", without any greater particularisation.
435. Paragraph 2(iv)(a)
436. This paragraph was agreed other than in relation to the date.
438. It was submitted for the Claimants that at paragraph 2(iv)(a), the loans referred to should be for the period 1 July 2016 to 20 October 2016 and not from 1 December 2015. It was further submitted that the language of the allegation, is that " CBL had failed to accurately classify and provision loans and advances in accordance with the provisions of the [FIA] Regulations... resulting in CBL's loan book having had an overstated value and inadequate provisioning " and that the relevant period that the experts are looking at is 1 July 2016 to 20 October 2016.
440. The parties have agreed that the issue of " CBL's financial, including in particular its capitalisation, position in the period from 1 July 2016 to 20 October 2016 " is in issue in the proceedings (LCGI, Issue 2) and a matter for expert evidence (AVQ Expert Terms of Reference, Question 1).
442. It was submitted for the First Defendant that the Claimants place reliance on CBL's accounts as of the December 2015 year end, to which the First Defendant responded at paragraph 17.3.4 of the RRAD. It was also submitted that in paragraph 2(i)(b) of Annex One, the First Defendant relies on internal reports produced by CBL in April 2016 concluding that provisions and classifications of advances were not being done by CBL's credit department in accordance with the requirements of the Financial Institutions Regulations 2005.
444. In my view the date of 1 December 2015 should be retained. Since this paragraph was otherwise agreed I do not consider it further as a "Disputed Amendment".
446. Paragraph 2(iv)(b): Interdico payments
447. The Disputed Amendment reads:
449. "iv. That CBL had been misrepresenting its performance and overstating its profits and retained earnings in its accounts, because:
450. ?
451. (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"
452. The Claimants submitted that it pleads:
454. "albeit wholly inadequately, and quite frankly unintelligibly, a complex fraud alleged to have happened in 2013".
455. It was further submitted for the Claimants that it is impossible to imagine how the parties can prepare for, or the court manage, a trial which might have to turn to the detail of these allegations relating to events in 2013 to January 2014, before any disclosure search dates, which concerned an elaborate alleged fraud which would require precise and detailed pleading, disclosure, factual evidence from those involved and expert evidence and it would be likely to produce a long and complex trial in its own right, which simply cannot be accommodated within the current trial.
457. It was submitted for the Claimants that Dr. Ruparelia briefly addressed the allegation in the context of what was in the legal notice but that he was not addressing the PWC report because he did not have it at the time and briefly explains why the allegation did not make sense. It was further submitted that the Claimants would want to take statements from the people alleged to have been involved in the relevant transactions.
459. The matters referred to in the subparagraph appear to be taken from the PWC report which has a section headed " Accounting misstatements and the 2014 overstatement of fixed assets. ". Extracts appear in the hearsay notice including that PWC have noted " certain trends " that " suggested that the Bank may have misrepresented its performance " including a " spike " in the value of buildings in 2014. In the PWC (January) report there is then a more detailed subsection headed " Spike in Land and Buildings in 2014-Interdico ". There follows an analysis of some 10 pages of the payments said to have been made to Interdico and to a Mr Vekaria, relying both on interviews with individuals and the use of " computer forensics " to recover invoices. There are allegations in the PWC (January) report (reproduced in part in the hearsay notice), by reference to interviews apparently conducted by PWC with officers and employees of CBL (including the Head of International, employees within the finance department and a cashier) and officers of Veksons, that officers of CBL committed criminal offences, that payments " may have been made? to evade paying VAT and/or income tax " and apparent " acknowledgments " that " cash must have been withdrawn by Mr Vekaria ".
461. It was submitted for the First Defendant that the Claimants' assertion that the allegations lack clarity " ignores the context " and the " key findings in the PWC report ". It was further submitted that the Second Claimant had previously considered the allegations in responding to the legal notice so he was not taken by surprise.
463. I do not accept that the First Defendant can rely on " key findings " in the PWC reports without pleading which key findings it relies upon, which it has not done. Further, it is no answer to suggest that the Claimants have previously considered the allegations: responding to the legal notice is not the same as knowing the case which is being advanced in these proceedings.
465. In my view the allegations in paragraph 2(iv)(b) would require further factual and expert evidence. The factual evidence would need to address the various allegations made in reliance on the individuals identified, I infer directly from those individuals, as well as expert forensic accountancy evidence concerning the alleged flow of funds.
467. Paragraph 2(iii)(c): Insider lending
468. The Claimants object to the underlined language below in paragraph 2(iii)(c) which reads in context:
470. "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:
471. ?
472. (iii)That there had been significant irregularities concerning CBL's loans and lending practices, namely:
473. ?
474. (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 ..."[emphasis added]
475. It was submitted for the Claimants that by the use of language " included " they do not know if dfcu will seek to prove that other loans were insider loans.
477. In my view that objection is clearly well founded.
479. It was submitted for the First Defendant (paragraph 56 of its skeleton argument) in relation to the second phrase to which objection was taken, that it was not seeking to prove that there was further insider lending but that the BoU was entitled to believe in light of the insider lending identified that there was the possibility that further insider lending remined undisclosed.
481. The allegation, read in context, is that certain matters are relevant to the financial position (in 2016) and the considerations that the BoU was entitled to take into account when determining how to proceed and in this regard the BoU was entitled to take into account that:
483. "there had been significant irregularities concerning CBL's loans and lending practices, namely:
484. ?
485. (c) Failure by CBL to properly disclose insider lending to related companies
486. The allegation of irregularity to be taken into account is of a failure to disclose insider lending. It is too vague in my view to allege that, in effect, there " may have been " further undisclosed insider lending.
488. Paragraphs 2(iii)(f) and 2(vi): " evergreening " and properties
489. Paragraphs 2(iii)(f) and 2(vi) read as follows:
491. "(iii) That there had been significant irregularities concerning CBL's loans and lending practices, namely:
492. ?
493. (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.
494. ?
495. (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."
496. The proposed amendment is to be contrasted with the pleading of " evergreening " at paragraph 24.2.2 and the branches at paragraph 24.2.4:
498. "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:
499. ?
500. 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".
501. ?
502. 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."
503. It was submitted for the First Defendant (paragraph 58 of its skeleton argument) that their inclusion in Annex One is appropriate " to confirm that these matters are averred to be true? ".
505. The Claimants resist the inclusion of paragraph 2(iii)(f) in Annex One on the basis that it is duplicative of allegations elsewhere in the RRAD and the Claimants are left not knowing whether it is the same allegation or a different allegation and which accounts are in issue.
507. Similarly in relation to paragraph 2(vi) the Claimants objected that the language of paragraph 2(vi) differs from the way it is pleaded in paragraph 24.2.4: at 24.2.4, the allegation is that they were transferred for " no or minimal consideration " whereas in paragraph 2(vi) the allegation is that CBL sold the freehold titles " in an arrangement that was financially beneficial to MIL, and disadvantageous to CBL " and it is alleged that " the total consideration paid by MIL to CBL for the plots was significantly less than the total cost to CBL of acquiring the title to the land and/or developing the land ".
509. If the distinction intended is that the First Defendant now seeks to assert that these matters are true it nevertheless seems undesirable that they should be expressed in different terms. It was submitted for the First Defendant that the " greater particularity " in the Annex is intended to avoid disputes as to what the complaints are.
511. In my view the allegations are not adequately particularised given the open-ended nature of the allegations to support the alleged " practice " of " disguising performance " and the allegations in relation to plots of arrangements that lacked " business efficacy " and added " no proper value ". Counsel for the First Defendant submitted that:
513. " 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." [emphasis added]
514. However it is unclear from the pleading why these matters are said to have lacked business efficacy and added no proper value and to the extent that the description is inconsistent with the allegation in 24.2, it does not provide " greater particularity ".
516. The allegations would in my view also require expert evidence on the value of the transactions and the allegation that it "added no proper value".
518. Paragraph 2(v): payments to Technology Associates
519. Paragraph 2(v) in summary alleges that " unjustified payments " to Technology Associates in 2013 are relevant to the financial position of CBL and the considerations that the BoU was entitled to take into account when determining how to proceed. The proposed amendment reads:
521. "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:
522. ?
523. (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" CBS, and Temenos Africa (PTY) Ltd ("Temenos"), who supplied the "T24" CBS. Further: (i) such payments had been approved by, amongst others, Ms Valentina Ajay, the Second Claimant's personal assistant; and (ii) TA was until 2014 associated with the Second Claimant and from 2014 was owned by a business associate of the Second Claimant, Mr Nair. dfcu Bank will rely in particular on:
524. a. a payment from CBL to TA in or around March 2013, in the amount of USD 930,000, purportedly for the purchase of "HP Advance Management" software;
525. b. a payment from CBL to TA on 21 June 2013, in the amount of USD 1.7 million, purportedly for the extension of licences for the "Bank Master" and/or "Branch Power" CBS licences;
526. c. a payment from CBL to TA on 19 September 2013, in the amount of USD 700,000, purportedly for the purchase of "Electra Monitor" and "Electra Wire" software upgrades; and
527. d. three payments totalling USD 5.94m made on 30 October, 12 November and 11 December 2013, purportedly for Temenos' "T24" CBL software.
528. As to the above payments: (i) the HP and Electra software which was purportedly purchased by the payments at (a) and (c) were not deployed by CBL; (ii) of the payment at (b), only USD 245,000 was transferred from TA to Misys, and the remainder was withdrawn from TA's account in cash; and (iii) the "T24" licenses, software implementation and support services were in fact supplied by Temenos under a direct contract between Temenos and CBL." [emphasis added]
529. The relevant section in the PWC (January) report appears to be Section E " Cash extraction through fraudulent IT payments ". Although the specific payments identified in the subparagraph relate to 2013 it would appear from the PWC report that PWC's reasoning as to why the USD 1.7m payment " is likely to be unjustified " included reference to payments " in the past " which I infer relates back to payments identified in 2003, 2005 and 2006. It is unclear whether the First Defendant intends to rely on these earlier payments which predate the key period in issue in these proceedings by over 10 years and thus would require examination of issues from over 20 years ago.
531. The First Defendant seeks to allege that:
533. "TA was until 2014 associated with the Second Claimant and from 2014 was owned by a business associate of the Second Claimant".
534. The pleading is not adequately particularised: it is unclear what is alleged by the term " associated with " or what is being alleged by reason of it being owned by a " business associate ".
536. It is also unclear how far back the enquiry (and thus the disclosure and evidence) into the relationship between TA and the Second Claimant would have to go: the PWC report refers to TA being renamed in 2005 and implies that the company existed prior to that date.
538. There are also allegations which would require further witness evidence. Thus the First Defendant seeks to allege that:
540. "the HP and Electra software which was purportedly purchased by the payments at (a) and (c) were not deployed by CBL".
541. In the PWC report (December 2016 version) this statement is attributed to a Mr Mutunga, the CBL IT manager.
543. The First Defendant also refers to payments having been authorised by, " amongst others, Ms Valentina Ajay, the Second Claimant's personal assistant ".
545. It seems likely that evidence would need to be sought not only from Ms Ajay but also the other individuals who are identified in the PWC reports in this regard namely Mr Kalan and Mr Kumar.
547. Paragraph 2(viii): " impeding " the investigation
548. In context the proposed amendment in paragraph 2(viii) reads:
550. "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:
551. ?
552. That CBL's management and the family of the Second Claimant had been involved in seeking to impede the BoU's investigation in 2016 of irregularities and wrongdoing with evidence (i)?". [emphasis added]
553. It was submitted for the Claimants that it is " simply impermissible to plead a primary allegation premised on equivocal particulars, especially a primary allegation of such seriousness. "
555. It was submitted for the First Defendant that:
557. "?the allegation is clear and again expressly supported by the hearsay notice".
558. The section of the hearsay notice to which the Court was referred sets out PWC's " understanding " that they had been instructed by senior Finance staff to not disclose information to the investigating team and that there was missing information " some of which we understand was deliberately deleted " a few months before the review.
560. The use of the formulation " with evidence " was singled out for criticism by the deputy judge at [33] of his judgment as being ambiguous as to whether the First Defendant's case was that information was withheld and information deliberately deleted or merely that PWC understood that to be the position.
562. I concur with the conclusion of the deputy judge at [34] that the formulation of this allegation is inconsistent with the objective of a pleading to give clear notice of the case that the recipient must meet.
564. Conclusion on whether to grant permission for the Disputed Amendments
565. The Court has to balance the prejudice to the First Defendant if the Disputed Amendments are refused against the injustice to the Claimants if the Disputed Amendments are allowed.
567. Counsel for the First Defendant submitted that:
569. "The position now is that the Claimants accept that as a consequence of the positive case that they make as to CBL's financial condition and as to the case they make as to the historic issues of under-capitalisation and mismanagement and in relation to the condition of its loan book, at least those parts, those particular matters in Annex One, which are ?not disputed, must now be tried and determined as a question of fact in order to determine the Claimants' own case on liability, causation and loss. So the question for your Ladyship then is why should the position be any different for those other sub-paragraphs which are objected to?". [emphasis added]
570. In my view it does not follow from the fact that the Claimants have agreed that they are able to respond to some of the allegations in the RRAD that they are able to respond fairly to the Disputed Amendments and will not be prejudiced if the Disputed Amendments are permitted.
572. Further I do not accept the submission that because " mismanagement " is in issue in these proceedings, the Court should necessarily permit the First Defendant at this stage of the proceedings to bring allegations of wrongdoing regardless of the complexity of the new allegations, the time periods to which they relate and the " case management " consequences for the remaining period to trial.
574. As to the prejudice to the Claimants, firstly there is a lack of adequate particularity as discussed above. As the deputy judge observed at [16]:
576. "To serve its purpose as a tool for the parties and the court to prepare for trial a pleading needs to be unambiguous and coherent: there should be no doubt what is being alleged and the pleading should make sense?".
577. It was submitted for the First Defendant that the Claimants have been able to respond to the allegations as they have been able to deny them. I do not accept that the "response" in the Amended Reply means that the allegations have been adequately particularised for the reasons discussed.
579. The Court has to weigh the respective prejudice to the parties in permitting or refusing the Disputed Amendments. Fairness dictates that for the parties to be on an equal footing the Claimants should be able to respond to the allegations not only in terms of understanding the case which is being alleged but also in the further factual evidence which, as discussed above, in my view would be required. The fact that the First Defendant can point to sections of the Claimants' witness statements which refer to the issue of whether CBL was mismanaged does not mean that no further evidence is required on the specific allegations that the First Defendant now seeks to bring forward.
581. The First Defendant submitted that there is no further disclosure to be made, where the Claimants' position in relation to the disclosure they have given is that they do not have more documents. I do not accept that further disclosure would not be necessary. PWC clearly rely on certain documents in their report in support of the various allegations which predate the time periods of the searches to date and I infer were not within the scope of the current disclosure such that further searches would be required.
583. As to the areas of expert evidence, I reject the submission for the First Defendant that these are matters which can be dealt with by the existing experts within the scope of the issues that have already been agreed. They may be broadly within the issues which have been agreed but the experts will in my view require additional specialist input as referred to above and doubtless the First Defendant would wish to instruct its own experts. The need for expert evidence adds to the scale of the task which would need to be accomplished within the time remaining to trial.
585. As to the timetable for the trial itself, it was submitted for the First Defendant that it was for the First Defendant to decide how to manage its time at trial but that it should not be cut out from cross examining on the issues.
587. However in my view fairness dictates that on their side the Claimants should have adequate time to make submissions and cross-examine (I infer the experts if not the Defendants' factual witnesses) on the allegations brought by the First Defendant and without knowing which issues the First Defendant might seek to prioritise, the Claimants would be seeking to cover the new allegations in their entirety.
589. Given the extensive and complex nature of the allegations which can be inferred from the detail in the PWC reports, it is difficult to see how the current time estimate for trial could accommodate not only the allegations that the First Defendant chooses to focus on but also the response from the Claimants. The Claimants should be able to prepare for trial knowing the allegations that are being pursued.
591. The Court is also entitled to take into account whether there is a good reason for the delay. I note Pepperall J in Essex County Council at [10] referring to Xstrata:
593. "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." [emphasis added]
594. As set out at the outset, the First Defendant has already tried to amend its defence to incorporate by reference to the PWC reports many of the same allegations that are contained in the Disputed Amendments and failed to secure permission. Whilst the First Defendant was not precluded by the judgment of the deputy judge from bringing another application to amend, the time now left before the trial starts for the issues to be satisfactorily addressed has shortened considerably to a point where in my view the extensive and complex allegations now sought to be introduced cannot be adequately dealt with, bearing in mind that as discussed above, there would need to be better particularisation, further searches, factual evidence would need to be sought from a variety of new witnesses as well as existing witnesses and expert evidence expanded and new experts instructed.
596. Further, in my view, for the reasons discussed above, the Disputed Amendments could not be accommodated within the current trial timetable. A trial of this length cannot easily be extended or rescheduled.
598. For all these reasons, in my view, the prejudice and thus the injustice to the Claimants of permitting the Disputed Amendments outweighs the injustice to the First Defendant in refusing permission for the Disputed Amendments and permission is accordingly refused.
600. In light of my conclusions on the Amendment Application, the Strike Out Application does not require determination.

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