The commercial court ordered Stanbic Bank to pay more than 400 million shillings after some of its senior officials set up a shell company which they used to sell several plots of land belonging to a client.
Judge Richard Wejuli Wabwire, in his ruling on Friday, said he could not turn a blind eye when Stanbic Bank employees circumvented the law to the detriment of their valued customers.
The disadvantaged customer is Macdowel Food and Beverages. The client will receive over Shs400m in general and punitive damages.
The bank’s employees, who have formed a shell company called Myriad Investment Club, are Lawrence Kaweesa, Allan Muhinda, Daisy Nitwe, Emmanuel Rukeeba, Kenneth Kitungulu, Maureen Kembabazi Katwebaze and Thaib Lubega.
“It is very clear from the evidence in the record contained in the affidavits in support of this claim and the reply that the shareholders of the 2nd defendant (Myriad Investment Club) … are employees of the 1st defendant (Stanbic Bank) on February 3, 2020, opportunistically incorporated a shell or intermediary company on behalf of the 2nd defendant (Myriad), with a hidden motive to purchase the securities, of the plaintiff (Macdowel), ”Judge Wejuli ruled.
He continued: “It is my conclusion that the 2nd Defendant (Myriad) which was incorporated after an auction advertisement of the Plaintiff’s securities is a creature of the employees of the 1st Defendant (Stanbic Bank) as a ploy by a sham, a mask that the employees of the 1st defendant who are also directors and shareholders of the 2nd defendant, chose to display shamelessly on their faces in an attempt to circumvent the provisions of section 30 of the Mortgage Act of 2009. This would create a absurd if this court allowed the respondents to get away without scot.
This case arose in March 2019 when Macdowel Foods and Beverages sued Stanbic Bank and Myriad Investment over a loan that went wrong.
On April 4, 2019, Stanbic Bank filed a defense, challenging the allegations raised by Macdowel as an abuse of legal process.
But on August 20, 2019, Macdowel and Stanbic Bank agreed to settle the loan dispute out of court with a consent judgment.
In the consent judgment, it was agreed that Macdowel would pay Shs1b to Stanbic Bank in a monthly installment of Shs30m.
It was also agreed that if Macdowel was not to make a payment in whole or in part to clear his loan, Stanbic would advertise and sell his titles of four plots located at Works Close in Luzira.
In February 2020, based on the terms of the consent judgment, the bank sold the Macdowel securities to Myriad Investment, which was the highest bidder.
Myriad Investment was formed by the aforementioned Stanbic staff barely a month after the announcement of the sale of the securities and sold the Macdowel plots, a decision which Macdowel later challenged in court as illegal, with the court being agree with them.