19991129 TZCA Dar es Salaam

j ' IN THE COURT OF APPEAL OF TANZANIA AT MWANZA (~: MAKAME,. J.A., KiiANGA,. J.A. 1 And OJ"!AR, fl.A.) j' CI'fIL APPEAL 'NO •. 11 OF 1988 NATIONAL BANK OR COMMERCE • • :. • • • APPELLilNT VERSUS PARMA SHOE COMP ANY• • • • • • RESPONDEN'r (Appeal: from Judgemenf -of t:he High Court of Tanzania at Mwanza) (Mwalusanya, J.) dated the 27th day of October, 19~7 ip Civil Case N~. S6 of 1983 JUDGEMENT 9F THE COURT t. I KISJ,NGA z J. A. : This appeal arises from the decislon of the High Court (Mwalusanys ,, .i.) allowing a claim for damages by the respondent company against the appellant bank for the loss of a cheque drawn in favour of the respondent company. The High Court awarded shs.·· 34,500/- being the a'llount stated on ~tJ ..~ the lbst cheque, and a further shs.50,000/- being compensation for the ·, depreciation in value of the former s).lm due to devaluation of the '!'•m~ Tanzania Shilling. The facts of the case were most.; scanty, but as far. as could be ascerta1ned from--the record they may be stated as follows: The Kashozi f .. \,,.'.:, '.Jranch of the appellant bank at Bukoba 1:1ccepted a country cheque for shs. 34,500/= deposited by the respondent company and cr3dited the ' respondent's account with the amount i;>f the cheque.. The b'lnk clnimed that ln the meantime it Sf'mt the cheq1::1e to its branch upcountry at Ngara 1 in the same region of Kagera, to be debited against the drawer who mai~tained an account there. After some 461 days the bank notified the respondent· that the cheque was lost whil~ in 'bransit·with the post office, and req~ired the respondent to ask the drawer . to issue a fresh cheque of an equi'!l •·amount. ..........___ .The respon..cnt on the other hand claimed that upon making enquiries,. it could not trace the drawer, addiag that in i'!hy case it was not obliged to look ,tor the drawer but rather it was the obligation of the bc1nk to do so. Whereupon the bank proceeded to debit the respondent's ..... -· •.• /2. , ...... - - r ,"'-._ • ·/ •·J•·. ' 2 account with the amount of the cheque, and hence the filing of the suit by the respondent. The High Court found that the bank had been guilty of negliqeo:::e in failing to notify the respondent promptly of the 1o_ss of the cheque • ,,.,,.,,...-, ..• In this,appeal the bank is representJct by Mr. J. :t. ~utabingwa while the respo~nt is represented by Mr. J. s. Rwer~mamu. Th,-3 same advocates had repres-:mted the respective parties at the trial in the High Court. In arguing th,, appeal, Mr. Rutabingwa cri tici s<:=d the trial judge for finding negligence on the part of th(~ bank. He contended that on the evidence the ch~gµ_c~ was .lost not by th,1 bank but by the post office while in transit; from Bukoba to Ngara, and thet in law the bank owed no duty of care to the respondent to promptly report to it the loss of the cheque. On the first limb of counsel's submissicn, it seems plain in the ciro~mstances\ of this case that th-a onus is on thQ bank to prove that the cheque was l~st not through its own negligence but by the post office. But the only evidence adduced on that point was that of D.W.l, '.:he Ka-shOzi branch manager, t"' the effect that the cheque .was sent to Ngar-:1 by regisb?red post No. 936 and th'it it WuS lost while in transit. Quite chrnrly such n bare assi!rtion was not at all sufficient to prove loss by the post nffice. No c~rtific1cte of posting from the post officl~ was produced to support the .,.ssertion thc1t the cheque Wos sent to Ngarn by registered mnil No. 936, nor did ~ anyone from the post office at Bukoba come to confirm the posting of t::' the alleged register. On the other hand it could well be that the alleged register containing the ch~que wos, in fact, post8d as 2ll~ged and reached Ngara, but no one was called from the Ngara brJ.nch to say that the cheqµ"e was .not.-dul-y received th-,fr-e~ In the circumst,J.nccs, therefore, it has not been established that the cheque w~s lost by the post office, and in the absence of ;iny other explan!'ltion, the bank was rightly found to have lost the cheque through n~glig~ncc. Submitting on th0. second limb on thi~ issue of negligence~, learned counsel contended that a collecting b~nker's liability in negligence i_s limited to two si tu;_itions only, namely: ( 1) At th::: time of opening a customer's account when the bank has to Jx:orcise care in order to be s;:itisfied as to the char'l.Cter of the custorn0r, and (2) At the time of paying the~ proceeds of the cheque wh~n the bank must ensure that it does not pay the same to strangers. He ,. / {> \.>, ,, i ·L :1 stro_ngly maintained that thee liability in n,igligence of a collecting J ~ I ' 11 ' bankers, which is whnt his client was, has not ~een ext-,mdad bGyond these limits. The "trial judge addressing hi\llsetf at great l,mgth to I • this aspect 'Jf the cas<~, had held thnt th,, b~nk':owed a duty of c2-re ~ i.'· ' I; . t<'> the respondent to promptly report to it tpe loss of the cheque, and that th~ bank was in br·,~ach of that duty 7 In coming to th3t conclusion, the learned judg•J reviewed a num~er: of d1~cisions from various jurisdictions of the°CommonwGalth. ~e ~ited,-c1mong others, the decision of the House of Lords in Anns v!l M~rton London .•~O_f.?Y.9h. ,. " Council (1978) A.C. 728, restating the tesd to ibe applied ~hen deciding • [I I whether or not a duty of care arises in 2. patticuL'3r si tu:ition, nnd the I! , c:-,judgement of the Supr..;me Court of Nigeria iniiAg~onmagbe Bank Lt..9-t....Y.L..C.F.A.O. ( · (1966 I ALB Comm. 238; Alan Milner and Susnn:Ab ahams - Modern Afric1:.n 7 Banking Cases 1973 Ed. p.190) in which it wa~ held that the bank owed its customer a duty of promptly sending him notice 'I of ! dishonouring of chcqu€s - drawn in his favour. The; l,~arned j~-~9e_ also;JI st,it.~d th,,t h·::? saw no ' I policy consider:itions which required that thl~ scope of the duty so ,1 ' !I imposed on the collecting bank ought to ~e limited or qualifi;do For, i ' in his view, such 13 duty wili' not throw the· banking system into disorder •I : O.t' prove socially hc1znrdous. We think thilt, : the l•·!nrn<,d judge properly 11 : dir0.cted himself in the mntter. We cannot agre," with Mr. ~ut.,bin£Wtl 'j I I, I thnt the collecting bnnker's liability in n~dligence is limited only i i to the two situations as set out in his subm~ss~on. We 3r-3 firmly j I Jf the view that where, as in this case, 13 cJst9mer dep~sits ~ country\ ......... :(..._ .... ~::,, ;heqm:> with a collecting bank ,md th~:> cheque '[lg~\s lost, th" b-,mk owes ----------- a duty of care to thf.: customer to inform him llprdmptly of such loss so l1 '" that the customer may til.b= the appropriate steps th3t might be open ,; 1: to h.:.m to avert 13ny or further consPqu•mc,:;s rest.(lting frOrn such loss. That duty we think, existo,}~Jhether the cheque w~:s lost by tha bcnk itse::lf or by a third party having possession \th~r,,of on b,.ih:ilf of the . bun,c. \ Like the trial judge, we are :1lso of fhe view th:it th2 impositic~ :J j of such a duty of care will not throw the barikin~ system into disordt=:;r er Ii I prc·,e socia1Ly h,,.za.r::dous. On thti contrary -w~' thlink that the im·,)Osition. cf !I • that duty wiil serve to re-affirm and enhancc~,i the confidence of the public • . if I in the banking system in as much as it seeks ~o ensure a gr3:it~~ degre~ cf .I I, se,:uri t-y· for the customer's money 13t the bank'~ . . . ... /4. f:' ',-! ,._ -~ 1 ... ·~_ii~~-- ... 4 Mr. Rutabingwa further contended that even if th~ bank ho.d v. duty to promptly notify the re sponctent Of the loss of the cheque, the bank was not in breach of th;it duby. Ib will be rec.1 llP-d that the bank notified the loss after 461 days oft~~ issue of the cheque. Counsel claimed that the loss of~~~ aheque was detected only Lftcr what he described as the routing slip had travelled all the way from the Bukoba branch to the Central Clea1"'ing House in Dar es Sal.1JJT1, to the Ngara branch, back to the Central Clearing House in D'l.r es SQL::-,2m and then back to the Bukoba br;inch. He sb:ited that this long journey tock a long time because of the cornrnunic;:ition pr9blems with Ng:ir::1 which E::Xisted . at the time. However, there was not a shred of evidence adduced of any cotnmunicntion problems with NgRra existing at the time!. Nor wus evidence given of any routing-slip showing when it was dispatched 'I from the collecting bank at Bukoba and when,it was receiv~d b;ick there. In those circumstances the period of 461 da~s ~as clearli an inordinvte delay in reporting the loss of the cheque, ~nd the tri'l.l judg~ wns perfectly justified to hold the bank liablerin negligence. In another dimension counsel for the appellant bank t·:>Ok the view that the respondent compc1ny was itself ito bl 3me in the mJ.tter for having neglected to require th,e drawer ~f thre ch•=qu12 to issue a fresh cheque in place of the lost__c,_ne as provided for under section 69 of the Bills of Exchange Ordin,3nce (Cap. 2.15). That section provide:s:- "69. Where a bill has been lost before it is overdue, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the dr3wer if required to in1~mnfy him against all persons whatever in case the bill alleged to have been loct shall be found again. If the drawer on request as aforesaid r•-=fus(?S to give such duplicate bill he may be compell8d to do so." Learned counsel ~ontended that at the time the cheque was lost the respondent was the holcter of the cheque anti that thP. ch,""que itself w2.s not overdue. As such, ther~fore~ the respondent was in a plsition to take the necessary step in terms of the section to put the situation right. Mr. Rwey,~mamu for the respondent, howev,2r, submitted that at the time the cheque Wns lost the b,mk, not the respondent, was- the holder of the cheque, and that the ch~que itself was long overdue, in which case his client c0uld not validly be exp2cted ••o•ooo/5 5 or be called upon to take any steps in terms bf }he section in order tc 11 rectify the matter. i,i I; The tiial judge in his judgement had de aldwith the ·1u3stion who 1 i i was the holder of the cheque, and he c;ame to ithe conclusion thut it was I : • the bank. In th" course of dealing with that is$ue he considered, first, 1 I !' 1 the provisions of section 27 (2) of the Bills; of Exchange Ordinance (Cap.215) which provides that: i I "(2) Where value has at any time be~n given for a bill the holder is deemed to be a holderlfoi value as regards ·the acceptor and ·arr partiel t~ the. bill :I :, who became parties prior to such time. \I II 1: Applying that provision to the facts before h~m, :;the learn3d judge found that the bank had given value for the cheque !irit by crediting the I r I,, ~ respondent's account with the amount of the cheqtle and sec:)nd by ! :, impliedly agreeing that the respondent could 1raw, against the cheque i before the proceeds thereof were received. Mt. I Rutabingwa I · submitted I ,r that mere crediting of the respondent's account w'ith the am<)unt of the I ',i chl!que did not amount to giving value for the !lche'que. · In this respect 11 11 '' he referred, inter alia 1 to the~ English case tj,f A:·.L. Underwooa 1:J:.9..!!. I' ,: v. Bank of Liverpool and Martins ( 1924) l K.BJ at: page 805 where it was held that:- I\ :; :I 1! " •••••• the me ref fact that the bank ,lin ' ' their books enter the value of the cheques on the c.redi t side of the account on the day on which they! receive the cheques ,. for collection does not wi th<.)ut morel cohsti tute the 1~ 1· bank a holder for value. To constitute1value th3re ,1 I' must be in such a cnse _a contract be twe~n banker and , 1 1 I customer, express or implied, that the bank will • -- -- ,1 ----- - · 11 before ·reCE:fipt of the proceeds honuur cheques of the customer dr~wn against the cheques. Su~h contract I\ I I' can be established by course of business and may be established by entry in the customer~ p~ss book, comrnunicat,1d to the customer and >1ct~d tipon by him. 11 ,, ' ' ' But the point ~s that in the instant case the tri~l judge found that the I bank did more than just crediting the respondent's account and the question is whether that finding was justified] 'I, I Ii i 1j ,' II It was common ground that .the bank had disci'.etion whether or !I 'i not to credit the respondent's account with thJ'I amlount , of the uncle:ared cheque. Then there was the evidence of the bra1nch: manager of the 'I I appellant bank (D.W.1) to the effect that for ~ go bd cust')mer the 1 I -. bank credits the account straightaway on depositing the cha(lftle, I ; but for a bad customer it does not. In this pa!rtiCular case, the ,I ;, witness said, the respondent was a good custome'r with no pr:)blcms !i lj \1 i l _____ :__., - 6 i i and so the bank credited its account straighf,awar with the am:)unt of the cheque. Indeed, the witness addf:!d:, the tl1ank1 hod receritly givc::n the 'i I· ~espondent a loan to develop its business. S~c~: evidence claarly I I 1 · suggests that the bank considered the respond,ent to be a reli.1bl•2 and II ' credi-tworthy customer to whom credit facility!~ . I cvuld I: be ext:::nded without difficulty. Again it was undisputed that aft'rr Crediting the rGsp 0 nc'ent' s account, ·the bank kept silent for a whole yea,r wryil,~ the r~spondent Ii '. continued to operate its account. For nll that ·1 period ,, there W.J.S no evidence of any restriction or limitation impq>se,j by the b:1nk on the respondent to make withdri'!w11ls against its ac4our\t to the ,=xtent of the 11 :' the uncleared cheque. By keeping silent for ~o \ongt!h · bank cLc1rly \ \' led the respondent to believe that nll was wel l a:nd that it could 1 proceed tc dr,3.w on its account to the extent ()f t~e cheque. The view II I I' . th.at the bi'!nk had given credit to th_e __ ~\?sponde'nt ',as aforesaid appears I I to be confirmed by a letter (Ex.B) which the b'ankl wrote to the respondent in the course of this matter. The part of that letter reads: 'i I; 11 CHEQUE NO. G.027808 OF SHs.·34,500/:k DEPOSI'rED 'I ·I INTO YOUR ACCOUNT ON 18.6.1982 . 1'1. i: 0n 18.6.1982 you deposited cl')eque NO~\. 027808 of Shs. 34,500/=. The cheque was drciwn by one · of your clients from Ngara. It has dome: to 1our attention that the chequ,::, got 10Jt oh transit. We cannot redOver our mone~ fibm the drawer of the cheque because it i;s n'ot debited to his a c e ~ with our Ngara, brach. We are intending to dr.::bi t your accoun 1F with Shs. 34,500/c on 1st October, 1983. ~ou'are 1 11 i required to obtain a fresh cheque from the . I , drawer and ask him to place stop-paym(,';'ntjorder with his bankers in Ngara for the lost cheque.II· :! I I! i' It would seem to us thatt the expression "We cannot recover ou_r money I I• from the drawer" is a clear admission that the bank' hari parted with · · -·-· · · ·· I I its money in favour- of .. the respondent, and it w~;s now facing :i difficulty in rec~vering the same. For, it is not possibl~ to[ talk of racuvaring something _when that thing was not lost or was not pkrted with in the ,\ i first instance. q · 1 1\ ! As stated earlier the trial judge in effec~ found that the bank hed impliedly allowed the respondent to draw against ',\the· uncl2ar3d cheque in 1, ' anticipation Of the proceeds thereof being recei~ect. , To that extent 1 the bank had given value for the cheque, thereby '!entitling it to have 1i a lien on the cheque. Then he went further and cens~r:lered the provisicns Of section 27 (3) of Cap. 215 which says that:- i ',I ', ·1, I • • o • o/7 I II ----~- \..,- ·- I / 7 ,, '1 n(3) Where the h □ lder of a bill has a ~ie~ 0 n it arising either from c :mtract ct; by 0 implicc1tion cf law, h•= is deemed } 0 lle a holder for v;ilu•., to the extent \jlf. the sum for which he has a lien." :1 1 \I i 0 2 :e::~:: :::: :~:c:a::e w::n:c:::d:n:~:n d::m::~ t:f\:::::h: h:::e:u::r : : ~ : : I i of the cheque. We think thath his reasuning and i\cor:!clusions were s 0 unc:1;i It therefore follqws that Mr. Rutabingwa's submi~si~n that the responc:€nt ii ,1 • was to blame for failing or n<.,glecting to requirl th e dr3w.~r to issue 1 a fresh cheque in terms of section 69 of Cap. 215 mti'st fail bec2use the . · . Ii 1' • • re ~ponr!ent was not the holder of the chequ~ at tne material time, and sc I,\ ,: it could not rightly be asked to take the steps as ibntempl3t2d by that section. ,_,\ . '.i i ',. . 1 Mr. Rweyemamu' s second limb of this subm.1n1d:cn was that even :1 1 ·1 I ' ·, ·,I ussuming that the respondentw was the holder of the cheque at the ' '\ '1 material time, the respondent was not in a pusitipn ~o do a~ything . I I in terms of section 69 tc, secur,:, the issuing of n fresh ch:~que because the,drnwer of the chequ: could no lonqer__~e.tracep, ~nd the cheque itself was long overdue. We find some merit in this'.submission. P.W.1 ·, in his evidence stated that he tried by letter tO\coritact the drawer I . of the cheque but was tOld that he was out of the:1 country t-J ArcbL:.. ,J .• That evidence stood unchallenged. The defc,nce ne;yer:. adiuced ::my 11 ! evidence to show that the drawer of the cheque never",: l,:?ft th·~ CCluntry '\ I or that he left but returned afterwards. In th<~ birJumstances the b2nk cannot validly complain that the respvndenu faile& o~ ne.gl~cted to ' require th e d rawer t o issue · i not established a fresh cheque when iti is. 1 that the drawer himself was available. Ii I I iJ On the submission that the cheque was overd\lle, ,_:Mr. Rw3y"Jmarnu r0liEd lj i on th e provisions Cf section 40 (1) and (3) and sectfbn 45 of C2p. 215. Section 40 (1) and (3) provides that:- li 11 40.-(1) Subject to the nrovisions of is \ J 1 Ordinance, when a bill payable a:ter sight 1:. is negotinted, the holder must either :.I : 1 present it for acceptance or negotiate il within a reasonabl1? time. \ (2). I i (3) In determining what is a reason1blJ time within the meaning of this section, :regard shall be had to the nature of the bill, the .us"l.g'3 of trade with respect to similar bil 1 s ! ~nd I :the • f ac t s of the particular case. 11 :I ,i ••oo•/8' I :; ! i .----I,, ii' I: ,I !i j I G - I! 1,nd the relevant part of section 45 s:iys 1 :f I "45. Subject tu the pr-visions 1ofl!this ordin=ince a bill must be duly presented fJr payment if it be not so presented the drawer and I ind orsers shall be 1 discharged." ' Ii, '.1 Mr. Rweyemamu,_submi. tted that accO.i::d-ing . t o :I t h e.I se l)r( ,visions . . . th e c I·iecue . t in he present case ought tc have been presen'te. Ii Ii d. f t . th .. or paymen wi. in .I II reas0nable time. This, however, wa~ not don~ and consequdntly the drawer was thereby discharged. Sc t:hat e~en :[\if the respondent was the holder of the chequ(~ at the material time 'I I ['. thiat would be of no esVc'.l.l in as much as the chequ~-:-~·-stale then. ThJ di-~ficulty w,~ ar,'! fi:lcing ', '11 I' here is that no evidence wh~ver wa. s addt.ieed!i as to whnt is reusono.ble time for presenting the cheque~ payml!ntl nccording to th2 banking I, I P ractice in Tanzania. Mr. Rweyemamu was d!f the view that a chca.uc :1 11 becomes stale after six months from thP. date rf its issue. Mr. Rutabingwa, on the uther hand, ~sserte~ t~at once a ch~1uc is duly i! Ii stamped by the collecting bank, it can nev~r bea;rrne overdue ~r stale. 1 We do nut fet~l justified to decide this islue lpurely on th~~ basis of 'I the statements made from the Bar. We are ~atier I ,, inclined to defer our decision in the matter to a future date whJn ~ suitabl~ case comes up . . I n'1duced. in which the necessary evidence shall h.-we been il It should be !( 1: noted, however, that our decision on this point was not essentiQl for --·; . ,I I the dehfrminatlon· of this appeal. It is clear from the pr8ceding p;:,ges ,..i •! of this judgement that the appeal is disp0Jer.1l1e on other grounds. ! I I We are tht.:!refore unable to uphold MrJ Ru~abingwa's submission '1 11 that the respondent was to blame for failinb c 'r neglecting to tc1kc 1 steps under section 69 to require the draw~,~ o~ t'.1e o:ieque t,::> issue 1 a ·new cheque. Like the trial judge we fin,Ji th 13t the bank, and not .I t, the respondent, was the holder of the cheque at the t:Lrae th::i cheque waa-~repurted lost. i1s such the respondent L)u~d not, ~-n terms of j 11 section 69, require the drawer of th<?. cheque tt? issue a fresh cheque. We also agree with Mr. Rweyemamu' s submissiln ·Jhat the taking of steps . ,_ Ii . [t. , , by the resp•Jndent under sect1.,m 69, as submitted by counsel for ·chc ~ppellant bank, apptiars to have been renc\er~d ~mpracticablc by the I 1• I fact that the drr.1wer of the cheque could no11o~ger be traced 3s he '~ I' was said to be away in Arc!bia. The learnedjjudge, therefore, wu.s justified in finding ag,1inst the appellant JlianJ en the br1sis of I\ 1, negligence, and we can see no reason to interfeire. ii 'I I • • o/9 ~'!e ' i\ :1 1I 1-r 11 ( 9 Mr. Rutabingwa also cumplain~d abOJ tJ. part cf the award relating ' i le Shs. so,000.00 and said that there was! n0!ground on which it was b2sed. I ,, I ,: In awarding that sum the trial judge took; info account the element cf depreciation of muney due to the devaluat~on ilcf our shilling. The !] ;1 • rQspGndent h,,d been deprived of the use of hj,is m·.:mey for a pGn.od of four years fr'Jm 1983. ,\t the end of t!i-3t 1 I ,:period his money would i i fetch· less goods because of its diminished pu'rchnsing power. Th2 ll:arm d I 'I judge, therefore, made· the award in order :Ito :1compensate the r~spond12nt such that as far as possible it could be in .. :. ---·. . 'I JII position to buy the same amourft of g·oods· as it would have bou~ht ;j had it not been deprived of its money. We think that the learned jJudgE.:, m.'!de the 3.w3.rd on a I :I corrE::ct principle. He was entitled to take ihto account the ch,:lngcs 'I in the purchasing power of money due to d,~'preciation i and ci:?v:ilu:ction 'I , o.f the shilling. Ti-iat was a practical ?.S;)7ct:i of life which we think it would have been unrealistic to i~nore. 'IAlihough he did not set ~ :! out any mathematical formula on which he cGmputed the award, we think :1 J so as to warrant that the sum of Shs. so,000.00 was not excess~ve interferc~nce. I i '~ After a careful consideration 0f the,' iss'ues i involved in this '•1 , I i1.ppeal anr1 the engaging arguments by counsel lfir bvth sides, W8 nre satisfied that the lr::arned judge properly 1lirclted himself ;:in th2 issues before him and came to the right conclusionis ■ Admittedly the fv.cts as .,.. :I adduced at the trial were must scanty. In it-he: whole sase -=>11ly two 1 witn ess e s gave ev id ence, o ne f or th e p 1 ain f :11 and one f or the ck f enccnt. · t~ff m , II :.1 -'-heir evidence w,,s very brfof, hardlY, -~ .. _pagf e ch. Th13t w,rn not f~1ir 1 for a case Tnv.:;1ving Issues Of this lliagnitulile. i However, the trL,l judge did his very best in the circumstancel a~d, on the evidence 1 before him, his decision cannot be faultect. .1 I~.1 the result the ' i1ppe':ll f:iils and {it is dismissed with costs.·! !I:1 ~ : ,j ,l DATED at MWANZA this ~. 2.,e#i !'.f_ay of iiJ' 0 '. '1 f ~ '",r- 19'33. !i I :1 I'4KAME :I 0,F APPEAL i'I ii 11 R. H~I KI:SANGA i JUSTIQE /\PPEAL