20120620 TZHC Dr es Salaam

1 IN THE HIGH COURT OF TANZANIA AT DAR ES SALAAM CIVIL CASE NO. 302 OF 2002 INTERBEST INVESTMENT COMPANY LTD .. PLAINTIFF Versus EURAFRICAN BANK (TANZANIA) LTD . . . . DEFENDANT · Date of last order- 16/3/2012 - ··· Date of Judgment-20/6/2012 JUDGMENT Shangwa, J. On 16 th August, 2002, the Plaintiff Interbest · Investment Company Ltd lodged its claim against the defendant BANK OF AFRICA TANZANIA LTD formerly known as Eurafrican Bank (Tanzania) Ltd. At paragraph 3 of the plaint, the plaintiff states that on or about the 1st day of September, 1999 at the Development House, along Kivukoni Front/Ohio Street, 2 Dar es Salaam, the defendant negligently and in total disregard to the Banking Practices in Tanzania opened an account No. 200940008 in its name. At paragraph 4 of the plaint, the plaintiff states that on 0 diverse dates between the 1st day of September, 1999 and February, 2000, the defendant allowed, authorized and or caused the illegal operation of the afore said account to its detriment rendering it to suffer a loss of money exceeding Tshs.116,769,378/=. At paragraph 7 of the plaint, the plaintiff prays for a decree against the defendant as following:- (a) Payment of Principal sum of Tshs.116,769,378/=. (b) Interest on the Principal sum of 31 % per annum from September, 1999 to the date of judgment. 3 (c) Interest on (a) and (b) at the court's rate of 12% from the date of judgment to the date of final payment. (d) General damages to be assessed by the court. (e) Costs of the suit. The Plaintiffs suit 1s based on negligence. The particulars of negligence are indicated at paragraph 3 of the plaint. A few of them are worthy of being mentioned here. First, that the defendant Bank failed to verify the resolution authorizing the opening of account No.200940008 in the name of the Plaintiff. Second, that the defendant Bank failed to check the Company's Memorandum and Articles of Association. Third, that the Defendant Bank failed to verify the resolution designating the authorized signatories. Fourth, that the Defendant Bank failed to ensure that the documents presented are authenticated by the affixation of the Company's seal. 4 At the commencement of the hearing of this suit, four issues were framed and recorded ·for determination by this court. They are as follows:- 1. Whether the Defendant was negligent in opening the Plaintiff's account No.200940008 in its Branch. 2. Whether the operation of the aforesaid Bank Account .w~s proper. 3. Whether the Defendant . lS liable to pay Tshs.116,769,378/= to the Plaintiff. 4. To what reliefs are the parties entitled. Learned Counsel for the Plaintiff, Mr. Rutakyamirwa called one witness only namely Augustine Shija Masonga who is one of the Directors in the Plaintiff Company. In brief, this witness testified that in 1999, the Plaintiff Company imported electrical goods from China and supplied them to TANESCO. In return, TANESCO paid the 5 Plaintiff by cheque of Tshs.116,769,378/=. That one of the Plaintiff's Directors called Li Yong Cai went to TANESCO and collected the said cheque. That instead of depositing it in the Plaintiff's Bank Account No.65530001703 at NBC City Drive, Li Yong Cai opened a new Account with the Defendant Bank in the Plaintiffs name namely Account No.200940008. He opened it on 15 th September, 1999. That after doing so, Li Yong Cai started operating it alone contrary to Article 8 of the Plaintiff's Memorandum and Articles of Association which required that in operating the Plaintiffs Bank Account, the transaction should be done by two Directors. That Li Yong Cai made several withdrawals from the new · Account leaving a balance of Tshs.81,322.25cts. That Li Yong Cai did all that while he was serving a prison sentence at Keko and in doing all that he did not consult any of the Plaintiffs Directors. That after withdrawing the whole of Tshs.116,769,378/=, he disappeared from the Country. That he reported him to the 6 police for action·. That the new Account by Li Yong Cai was opened without a Board resolution and without any documents from the Plaintiff Company. Counsel for the defendant also called one witness namely Mhina Hamisi who 1s the Manager Domestic Operations. This witness told the court about the procedure which was being followed in 1999 and which is currently being followed in opening a Corporate Account at the defendant Bank. He said that a person who wishes to open a Corporate Bank Account, he has to produce the following items:- 1. A Business Licence. 2. VAT Registration number. 3. A Certificate of incorporation. 4. A certified .~copy of the Memorandum and Articles of Association of his Company. 7 5. The resolution of the Board of Directors. 6. Two Passport Photos of the authorized persons or signatories in respect of the Account intended to be opened. 7. Copies of passports of signatories to the Account in tended to be opened or . copies of their Identification Card. Mr. Mhina Hamisi, D. W. 1 told the Court also that a person who opens a Corporate Bank Account has to be interviewed by the Customer Service Manager and he has to fill the necessary forms which he takes to the Branch Manager and the Branch Manager sends the forms to the Head quarters for approval of opening a Corporate Bank Account by the Customer. He said, thereafter, the . Headquarters send a message of approval to the Branch Manager. He further told the Court that the Plaintiff followed the required procedure in opening Bank Account 8 No.200940008. He said, this Account was opened on 15 th September, 1999 and that on 5 th November, 1999, Li Yong Cai got special payment of Tshs.116,769,378/=. Upon the evidence on record, there is no dispute that on 15 th September, 1999, Li Yong Cai who was one of the Directors of the Plaintiff Company opened Account ' No.200940008 with the Defendant Bank and deposited a Cheque of Tshs.116,769,378/= which he received from TANESCO as payment to the Plaintiff Company for the supply of electrical goods imported from China. It i~ not in dispute also that on 5 th November, 1999, Li Yong Cai 4lt withdrew the aforesaid amount and disappeared from the Country. The pertinent issues which this court has been called upon to determine are whether or not the defendant Bank was negligent in opening Account No.200940008 in its Branch and whether the operation of the aforesaid Account was proper. 9 .• It 1s common knowledge that a Corporate Account such as Account No. 200940008 cannot lawfully be opened by a single individual. However, in this case, the defendant Bank allowed Li Yong Cai alone to open the afore said Account in the name of the Plaintiff Company and operate it without requiring him first to produce the Memorandum and Articles of Association and the Resolution by the Directors of the Plaintiff Company together with the Specimen Signatures of the persons appointed to be signatories to it. In that regard, the defendant Bank acted negligently. The defendant Bank also acted negligently by allowing Li Yong Cai alone to withdraw Tshs.116,769,378/= belonging to the Plaintiff Company which he withdrew from Corporate Account No. 200940008 and disappeared to its detriment. Had the defendant acted without negligence both in opening the aforementioned Account and in \ ' 10 .. operating it, the Plaintiff Company's money would not have been lost just like that. This disposes of the 1st and 2 nd issues which I have considered positively. On the rest of the issues, namely, issues 3 and 4, the court has been called upon to determine as to whether the - defendant is liaqle to pay Tshs.116,769,378/= to the Plaintiff Company and the reliefs which the parties are entitled thereto. In my opinion, the defendant Bank is liable to pay the said amount to the Plaintiff Company. This is much so because the defendant Bank acted negligently in opening Corporate Account No.200940008 in the name of the Plaintiff and in authorizing Special Payment of Tshs.116,769,378/= to one Li Yong Cai from the aforesaid account without following and observing the procedure for opening and operating Corporate Accounts. This disposes of the 3 rd and 4 th issues which I have as well considered positively. 11 / / ·• For these reasons, I enter judgment 1n favour of the Plaintiff. However, as the loss was caused by the fraudulent conduct of one of its Directors, I make no. order for general damages or interest. Each party to bear its own costs as well. ~ A.Shangwa .JUDGE 20/6/2012 Delivered 1n open Court in the presence of Augustine Masonga Managing Director of·the Plaintiff Company and in the absence of the defendant tl:iis 20 th June, 2012. ~ A.Shangwa JUDGE 20/6/2012