https://new.kenyalaw.org/akn/ke/judgment/kemc/2026/329

Wambugu v Equity Bank Kenya Ltd (Commercial Suit 4025 of 2018) [2026] KEMC 329 (KLR) (22 July 2026) (Judgment) Neutral citation: [2026] KEMC 329 (KLR) Republic of Kenya In the Milimani Commercial Chief Magistrate's Courts Commercial Suit 4025 of 2018 E Mulochi, SRM July 22, 2026 Between Patrick Kihara Wambugu Plaintiff and Equity Bank Kenya Limited Defendant Judgment Introduction 1.The Plaintiff’s claim, brought by way of a Plaint dated 16th April 2018, is for:a.An Order that the Defendant do refund/reverse to the account of the Plaintiff Kshs 872,026/= being net balance of the various amounts fraudulently withdrawn from the Plaintiff’s Account between 08/12/2016 to 03/04/2017.b.An Order that the Defendant fully compensate the Plaintiff with Kshs 338,486/= being the consequential loss by way of accrued interest income forgone/lost on a pro rata basis calculated on the Running balances on the Plaintiff’s Maney Market Account with CIC Group Limited following the fraudulent withdrawal of Kshs 3,000,000/= on 05/12/2016 which reduced the Running balance on the Plaintiff’s Account from Kshs 5,039,131.49/= to Kshs 2,039,131.49 during the period 05/12/2016 to 31/12/2017.c.An Order that the Defendant pay the Plaintiff damages in the nature of punitive, aggravated and exemplary damages for breach of Client/Customer fiduciary duties and responsibilities towards the Plaintiff.d.Costs of this suit.e.Interest on a, b, c and d above at court rates.f.Any other relief that this honourable court may deem appropriate. 2.In response, the Defendant filed a Statement of Defence dated 7th June 2018 in which it denied liability and prayed that the Plaintiff’s claim be dismissed with costs. Plaintiff’s Case 3.When the case came up for viva voce hearing, the Plaintiff, PW1, told the court that he maintains a personal/diaspora account number 0120190116765 with the Defendant at its Tom Mboya/Diaspora Branch. He opened the account in 2006. 4.On 28th November 2016, he migrated to Dubai/Afghanistan where he currently resides. 5.On 1st April 2017, he flew back home at the invitation of the Defendant. 6.In December 2016, while outside the country, his email address (samzkihara@yahoo.com) and the details of his account with the Defendant as well as his money market account with CIC Group Limited were hacked by parties unknown to him. 7.On 7th December 2016, the people believed to have hacked his email account and details of his accounts fraudulently transferred Kshs 3,000,000/= from his money market account number 00227-001-07264-002 with CIC Group Limited to his account number 01200190116765 with the Defendant. 8.After the transfer of the Kshs 3,000,000/=, various other withdrawals amounting to Kshs 1,067,802/= were subsequently made out of his account. 9.Among the Kshs 1,067,802/= withdrawal was a huge payment/withdrawal of Kshs 930,000/= which was purportedly in respect of a land conveyance transaction described in the account statement as first land installment for Thika, Kiambu C, to which PW1 is a stranger. 10.PW1 believes that the aforesaid transactions were the work of ‘insiders’ within the Defendant who must be well known to the Defendant. 11.After one week, PW1 called the Defendant to report the withdrawals. However, since reporting, the Defendant has never taken any action. PW1 finds the Defendant’s inaction conduct unbecoming of a banking institution. 12.On 27th March 2017, an official from the Defendant called PW1, while he was in Dubai, and requested him to come back home and report the matter to the Banking Fraud Investigations Unit of the Central Bank of Kenya. 13.Shortly after returning home, on 3rd April 2017, PW1 reported the matter to the Banking Fraud Investigations Unit. However, since then, there has been no serious follow-up by the Defendant. The Defendant is yet to furnish the Anti-fraud Unit with copies of the fraudulent emails to facilitate investigations. 14.Since the fraud took place, PW1 was denied access to his account which has regularly had running balances in excess of Kshs 2,000,000/=. 15.On Monday, the 15th January 2018, the Defendant finally allowed PW1 to access his funds. It released Kshs 2,169,000/= and a further Kshs 195,776/=. 16.The Kshs 195,776/= was a residual balance recovered from another account held by the Defendant and belonging to one Anthony Muturi Njogu, Account Number 0950160679424, into which the initial fraudulent Debit of Kshs 930,000/= had been credited on 10th December 2016. 17.Anthony Muturi Njogu is a stranger to PW1. PW1 believes that the fraudulent transactions through his account were perpetuated/facilitated by ‘insiders’ within the Defendant and these details must be within its knowledge. 18.Although his account had sufficient funds, the Defendant failed to honour PW1’s monthly Standing Order of Kshs 20,000/= which fell due in February, March and April 2017 in favour of one Leah Wahu Muturi. 19.As a result of the fraudulent activities conducted through his account, according to PW1, the employment services of at least two of the Defendant’s employees believed to have been complicit in the fraud, that is, Thomas K Cheboi and Perpetual Kabiru, were terminated. 20.Despite making several demands, the Defendant has refused to reverse the net amount of Kshs 872,026/= fraudulently transacted through his account. 21.He denied initiating the transactions that saw funds salted out of his account. The Defendant’s Case/Response 22.Fortunatas Ngondi Karuki, who works with the Defendant as a client services superviser for Diaspora Services, testified as DW1. 23.It was his evidence that PW1 maintains a personal/diaspora account number 0120190116765 with the Defendant at its Tom Mboya/Diaspora Branch. 24.At some point, the Defendant received a complaint from PW1 regarding alleged unauthorized transactions in PW1’s account with the Defendant. On receiving the complaint, the Defendant advised PW1 to report the matter to the Banking Fraud Investigations Unit of the Central Bank of Kenya. 25.PW1’s complaint was that his email account and details of his account with the Defendant were hacked and Kshs 3,000,000/= transferred from his Money Market Account Number 00227-001-07264-002 with CIC Group Limited to his account with the Defendant. 26.To prevent unauthorized and fraudulent transfers, the Defendant has put in place a variety of measures. One such measure is that, before a transaction is effected, the customer is required to key in their password and confirm OTP (One Time PIN) Delivery Mode which is either by SMS or via email to log into the platfom. 27.On processing a transaction, the OTP Delivery Mode is strictly via SMS. The said credentials and password are confidential information only known to the customer. 28.The alleged transactions complained of by PW1 were conducted in the ordinary course of business using PW1’s log in credentials and password. The transfers were, therefore, made either by PW1 or with his collusion. 29.According to DW1, if in the unlikely event the sums were transferred by 3rd parties from PW1’s account, the same could only have been done under the fraudulent direction or with the collusion of PW1 or as a direct and foreseeable result of gross negligence on his part. 30.Consequently, it is DW1’s position that PW1 is not entitled to any of the reliefs sought in the Plaint or at all. The Defendant prays that this suit be dismissed with costs. Analysis and Determination 31.From my reading of the evidence and defence on record plus submissions by both parties, the issues that have filtered themselves for determination are:i.Whether the faulted transactions were fraudulent and authorized by PW1.ii.Whether the Defendant breached its duty of care.iii.Whether the Defendant is liable for the loss PW1 sustained. Whether the faulted transactions were fraudulent and authorized by PW1 32.According to PW1, he had nothing to do with the fraudulent transactions. He termed the transactions as fraudulent and the work of ‘insiders’ within the Defendant. As a result, he wants the Defendant held liable and ordered to compensate him for the loss he sustained. 33.In seeking to have the Defendant held liable, PW1 cited a number of cases including William Kabogo Gitau vs George Thuo & 2 others [2010] 1 KLR 526 and Anne Wambui Ndiritu vs Joseph Kiprono Ropkoi & another [2005] 1 EA 334. 34.In response, the Defendant denied authorizing the impugned transactions. It told the court that the transactions were actually authorized by PW1 and it should not be blamed for what transpired. Among others, the Defendant referred this court to the case of Anne Wambui Ndiritu vs Joseph Kiprono Ropkoi & another [2005] 1 EA 334. 35.It is a general principle of law that he who alleges ought to prove the veracity/validity of his/her allegations. In this regard, sections 107, 108 and 109 of the Evidence Act, Chapter 80 of the Laws of Kenya, state that: 107.“(1)Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.(2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.” 108.The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side. 109.the burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. 36.The Court of Appeal added its voice to this when, in Mbuthia Macharia v Annah Mutua & Another [2017] eKLR, it held that:“The legal burden is discharged by way of evidence, with the opposing party having a corresponding duty of adducing evidence in rebuttal. This constitutes evidential burden. Therefore, while both the legal and evidential burdens initially rested upon the appellant, the evidential burden may shift in the course of trial, depending on the evidence adduced.” 37.From the foregoing legal provisions and holding by the Court of Appeal, the burden of convincing this court that his version of the story is the more probable one lies with PW1. The question that this court must, therefore, ask itself and answer is whether PW1 has discharged the burden of proving that the Defendant is to blame for the fraudulent transactions that occasioned him loss. 38.In an attempt to demonstrate that the Defendant authorized the transactions, PW1 told the court that the money involved was in the Defendant’s custody and that the Defendant was aware that PW1 was out of the country. For this reason, PW1 wants the Defendant to shoulder the blame of authorizing the transactions and be ordered to compensate him. 39.However, and in responding to PW1’s position, the Defendant denied being at faut in authorizing the transactions. 40.The Defendant told the court that there was nothing unusual with the transactions considering that the even the largest transction of them all, that is Kshs 930,000/=, was below Kshs 1 million. Therefore, the Defendant had no reason to doubt and to reach out to PW1 to confirm whether he initiated it. 41.From the record, PW1 told the court that his email address was hacked. He also told the court, in cross-examination, that the instructions to make the payments ‘came from [his] hacked email and Kenyan number.’ 42.Much as PW1 told the court that the Defendant was aware that he was out of the country, it is not clear as to whether whenever he came back to the country he always notified the Defendant. Without clarity on this issue, the inescapable inference is that the Defendant was never alerted whenever PW1 returned to the country. 43.In addition, it is also clear, from the record that, although PW1 was out of the country, his Kenyan number was still active. If this was not case the instructions would not have come from the said number. 44.Did PW1 report the hacking of his email address to the service provider? The answer to this question should be in the negative in light of what is on record. Did the instructions to pay the funds in question come from PW1’s email and his Kenyan phone number? The answer to this question is in the affirmative in view of the evidence and defence on record. 45.Had the Defendant put in place any security measures to cushion its clients against fraudulent activities? From what is on record, the answer to this question is in the affirmative. According to the Defendant, one such measure is that before a transaction is effected, the customer is required to key in their password and confirm OTP (One Time PIN) Delivery Mode which is either by SMS or via email to log into the platfom. 46.Considering that the instructions to pay came from PW1’s email address and phone number, can it be said that the Defendant was complicit in allowing the transactions? I do not think so. The instructions came from PW1’s email and phone number, to which the OTPs were most likely sent. It would, therefore, be somewhat misplaced to fault the Defendant for the transactions to which PW1 was alerted. Did the Defendant breach its Duty of Care to PW1? 47.In the opinion of PW1, the Defendant breached its duty of care to him. It is PW1’s argument that it is the Defendant’s duty to ensure the security of transactions. 48.PW1 further argued that the occurrence of large withdrawals under suspicious circumstances without detection or intervention by the Defendant is prima facie evidence of negligence and Breach of duty owed to PW1. 49.He is faulting the Defendant for failing to remit Kshs 20,000/= through a Standing Order on diverse dates in March and April 2017 to PW1’s beneficiary. 50.For this reason, PW1 is seeking compensation. 51.In response, and citing the case of Tai Hing Cotton Mill Ltd vs Liu Chong Hing Bank Ltd [1986] AC 80, the Defendant is of the view that PW1 cannot impose on it duties higher than those imposed by the law. 52.Explaining why it did not honour the Standing Order, the Defendant told the court that its action was due to the report of fraud made by PW1 and a security measure. 53.Indeed, PW1 told the court that he reported the fraud to the Defendant. 54.In light of PW1’s report, was it then reasonable for the Defendant to put in place security measures to halt any further actions of fraud? 55.In the opinion of this court the Defendant’s action not to honour the Standing Order was informed by the need to prevent possible actions of fraud on PW1’s bank account. 56.That said I find no good reason to conclude that the Defendant breached its duty of care to PW1. Is the Defendant liable for the Loss PW1 Sustained? 57.With regard to liability, it is PW1’s argument that the transfer of Kshs 930,000/= to the account of one Anthony Muturi was an in-house job. The Defendant, according to PW1, should have followed up on this issue to unravel the fraudulent scheme and establish crucial links thereto. 58.PW1’s position is, however, disputed by the Defendant. In the opinion of the Defendant, PW1 did not report the hacking of his email to the service provider (Yahoo). In addition, he did not alert the Defendant on receiving the first unexplained OTP on his phone number. 59.These omissions/inactions by PW1, according to the Defendant, were individually and cumulatively, the proximate causes of whetever losses he may have sustained. 60.Already, this court has found that PW1 did not adduce sufficient evidence to satisfy it that he did not authorize the impugned transactions. In view of this finding and the reasonable arguments by the Defendant, I decline to find the Defendant Liable for the alleged loss. Who should Bear the Costs? 61.It is a general principle of law that costs follow the event. However, in Rai & 3 others v Rai & 4 others (Petition 4 of 2012) [2014] KESC 31 (KLR) (4 March 2014) (Ruling), the Supreme Court held that:“Although there is eminent good sense in the basic rule of costs - that costs follow the event- it is not an invariable rule and, indeed, the ultimate factor on award or non-award of costs is the judicial discretion. It follows, therefore, that costs do not, in law, constitute an unchanging consequence of legal proceedings - a position well illustrated by the considered opinions of this Court in other cases.” 62.Considering the position of PW1 and the loss he may have suffered, I do not think this is an appropriate case for costs to follow the event. For this reason and invoking the discretion of this court, I rule that each party will bear its own costs. DATED SIGNED AND DELIVERED VIRTUALLY AT NAIROBI ON THIS 22ND DAY OF JULY 2026EDWIN MULOCHISENIOR RESIDENT MAGISTRATEC/A: Serene Kemunto