Court has ordered Kampala law firm Sebalu & Lule Advocates to steer off the case in which Crane Management Services (CMS) Limited sued Dfcu Bank for breach of various tenancy agreements in respect to 13 properties in Kampala and Mbale.
CMS is the property managing entity of Ruparelia Group in charge of properties developed and owned by Meera Enterprises, a sister company.
Sebalu & Lule Advocates worked for Ruparelia Group and as such there is Advocate-client relationship, between the two which means it cannot represent Dfcu Bank in the case where CMS has sued the lender.
In the case, CMS is demanding US$385,728 and Shs2, 998,558,624 as rental arrears. This is before interest, general damages, interest on general damages and costs of the suit.
At the time of Dfcu taking over Crane Bank, CMS had existing contracts with Crane Bank that were automatically inherited by Dfcu as it took over Crane’s assets and liabilities.
CMS argues that after taking over Crane Bank assets and liabilities, Dfcu acknowledged being party to the existing agreement and assumed rights and obligations of the tenancy agreements.
“They took occupation of the premises and continued to operate from them, they removed all Crane Bank branding, adverts and notices, substituting them with their own, an indicator that they were the new tenant.”
Dfcu also paid arrears on part of the properties to the tune of US$81,408 (about Shs219 million), an indicator that they acknowledged occupancy of the premises.
However, on April 30, 2017, Dfcu vacated 13 properties or spaces that Crane Bank previously rented from CMS for use as bank branches, staff accommodation and ATMs in some cases without paying arrears especially covering the period between October 2016 when the central bank put Crane Bank under administration and January 2017 when BoU handed over Crane Bank to Dfcu.
On some properties where rent was prepaid, Dfcu did not bother to meet any of its obligations and continued occupying the premises till they elected to vacate the premises at the end of April 2017.
However, vacating the properties without serving the three months notice as stipulated in the contract was tantamount to breach. In so doing, DFCU was walking out of long term fixed rental contracts without renegotiating them.
“The plaintiff prays for judgement against the defendant for recovery of the sums of US$385, 728 and Shs2, 998,558,624 as rental arrears. Interest on the sum aforementioned at the prevailing commercial rate from the date the defendant was in default until payment in full, General Damages, interest on general damages and costs of the suit,” reads the plaint.
Plot 9 Market Street had rent prepaid up to September 2016 but by the time the central bank took over in October 2016 and eventually handed it over to Dfcu on January 27, there were rental arrears of four months. Dfcu continued to occupy it till April 2017–a total of 7 months–, thus amassing rent arrears of US$28, 730, which they did not pay.
In another case, Plot 1-13 Jinja Road was rented out for a fixed period of 5 years at a monthly US$9,800.34 payable one year in advance with 7 percent annual increment compounded and payable one year in advance.
By the time Crane Bank was put into receivership in October 2016, the one-year prepaid rent had just expired. For the period between October 2016- April 2017 that both the Central Bank and Dfcu occupied it, they never paid rent to CMS and when Dfcu closed that particular branch of Crane Bank and walked away, there were seven months of rent arrears and an unexpired period off the 5-year contract of 24 months amounting to total of US $242, 812.32.
In another rental agreement Crane Bank rented 38 apartments for staff on Plots 22, 24, 26 Kampala Road at a monthly Shs53,928,000. The contract was fixed for five years with a 7 percent interest. By the time Dfcu vacated the premises in April 2017 without renegotiating the contract, the unexpired period on the contract made them liable for Shs2, 873,246,953.
In the case of Mbale Branch, which Crane Bank was renting for US$8,361.77 per month, Dfcu left two months rental arrears and an unpaid three months’ notice period, altogether being liable for US $27,678.01.
“The defendants said nonpayment of rental arrears has not only caused the Plaintiff losses, deprived it of use of its money and interest, caused it more suffering and grave inconvenience, but it has also adversely affected the Plaintiffs’ businesses for which the Plaintiff claims general damages,” CMS’s suit reads in part.
CMS says that Dfcu has been notified of their grievances and demand notices sent to them but they have blatantly refused to pay up.
On top of $385,728.54 and Shs2, 998, 558,624, CMS has prayed to court to also grant it interest on the aforementioned sum at prevailing commercial rate until the arrears are cleared.