savings and finance commercial bank ltd vs rhino homes ltd another 2015 tzhc 2072 16 december 2015

IN THE HIGH COURT OF TANZANIA (DAR ES SALAAM DISTRICT REGISTRY) AT DAR ES SALAAM CIVIL CASE NO 43 OF 2008 SAVINGS AND FINANCE COMMERCIAL BANK LIMITED......................................................................... ...PLAINTIFF VERSUS RHINO HOMES LIMITED.............................................1st DEFENDANT JAMES PETER RUGEMBE............................................ 2nd DEFENDANT 17/11 &18 /1 2 /2 0 1 5 JUDGMENT MWANDAMBO, 3: In this suit the Plaintiff, abank duly licenced to carry on banking business in the country has instituted a suit for recovery of Tshs 560,020,32.0/06 from the Defendants said to have been paid by mistake on diverse dates between 14th June and 8 July, 2.005. I'o put the record in its proper perspective, the suit was filed in the name of Savings and Finance Bank Limited but it subsequently changed its name to NIC Bank Tanzania Limited vide certificate of change of name No. 25848 issued by the Registrar of Companies on 5 October 2010 and filed in court on 6 August 2012 . The facts relevant to this judgement are fairly straight forward. The 2nd Defendant was at all material times a Managing Director of the 1st Defendant and in that capacity he (the 2nd Defendant) was a signatory to two bank accounts opened on behalf of the 1st Defendant with the Plaintiff i at its branch in Dar es Saiaam. It is alleged that on three different occasions, the 2nd Defendant presented three cheques drawn in the 2nd Defendant's favour by two different drawers. The first cheque is said to have been drawn by A&K Holdings from Standard Chartered Bank, shoppers Plaza Branch in Dar es Salaam for an amount of Tshs. 289,000,000/=. The other two cheques are shown to have been drawn by Apex Promotion from CRDB Bank, Kijitonyama Branch, for Tshs 172,458,000/= and Tshs 98,562,320 respectively. It is to be noted that the said cheques are said to have been presented through cheque deposit slips annexed to the plaint. According to the evidence of PW1 supported by a bank statement of the 1st Defendant (exh. PI) the Plaintiff credited the proceeds of thethree cheques to the 1st Defendant's account and in the process, the 1st Defendant was allowed to withdraw money from that account through the 2nd Defendant. The withdrawals were by way cash and bankers cheques and by 8th July 2005, the Defendants appear to have exhausted the proceeds of the three cheques presented for payment by the 2nd Defendant. Although the pleadings as well as the evidence tendered do not. show if the said cheques went through the normal clearing process, it occurred later that the true owners had reported to their respective bankers that the cheques went missing and thus the said banks stopped payment. As a result, the drawers' accounts were not debited with the amount shown in the cheques and thus the Plaintiff did not obtain credit of the cheques which she could credit to the 1st Defendant's account. Since the 1st Defendant had already parted with the proceeds of the cheques, the 2 Plaintiff could not reverse the entries in the account and hence the suit for recovery of the said amount together with interest and costs. The Defendants did not file their written statements of defence within the prescribed time following service and their attempts to file them out of time were put to rest by my brother (Amour, J) in his ruling delivered on 15 December 2014. That ruling resulted in the Plaintiff being allowed to prove its case ex parte. Perhaps it is not completely out of the way to mention in passing that hearing started with Hassan Rashid Singano (PW1) before Amour,J who for compelling reasons could not finish the trial and hence the reassignment to me. During hearing, the Plaintiff produced three witnesses namely; Hamis Rashid Singano (PW1), Donata Severin (PW2.) and Godfrey Nimrod Sigalla (PW3). PW1 testified as an Assistant Credit Manager of the Plaintiff and produced a bank statement_(exh. PI) whereas PW2 and PW3 testified on behalf of CRDB Bank and Standard Chartered Bank respectively. Each of the two witnesses tendered in evidence letters said to have been written to the Plaintiff on 25 and 29 July 2005 respectively informing the latter of their decision to stop payment of the cheques following report by theirtrue owners that they went missing. The court admitted the two letters as exhibits P2 and P3 respectively. In his closing submissions, Mr. Pascal Kamala, learned Advocate for the Plaintiff invited the court to enter judgment as prayed because the Plaintiffs had proved case on the required standard. The learned Advocate submitted that the 1st Defendant through the 2nd Defendant obtained credit which did not belong to it and withdrew money from the account out of 3 credit which was fraudulent following report by the true owners of the cheques that the same had been stolen. Upon examination of the evidence tendered, there is no dispute that the Plaintiff accepted the cheques in question presented by the 2ncl Defendant on behalf of the 1st Defendant for collection and once cleared, the proceeds of the cheques would be credited to th e lst Defendant's account for utilization. However, as indicated earlier, there isno evidence to prove that the Plaintiff caused the said cheques to be cleared in the normal clearance process before crediting the l sc Defendant's Account with the proceeds thereof. Needless to say, was the Plaintiff precluded from demanding recovery of the money from its customer upon discovery that the 1st Defendant had no title to the credits by way of proceeds from the fateful cheques? I will answer that question shortly. The question I have posed was considered and dealt with by the Court of Appeal in S ila y o V. CR D B (1 9 9 6 ) L td [2002] I E A 288 and accepted as sound principles of law developed by English courts beginning with the absolutist approach in K e lly V. S a la m i [ 1841] 9M and W54 and subsequent developments in A k e y jn a V. F a irb a irn Law son E tc L im ite d [1 9 4 3 ] 3 2 and W estd eustche La n d e sb a n k G izo re n tra le V. Is lin g to n London B orough C o u n c il [1966] 2 All. ER 961 on the right to recover money paid under mistake. Discussing the point further, the Court of Appeal stated: "'...In practice it is perfectly in order to credit a customer's account with amounts in un cleared cheques, ju st as it happened in the instant case. 4 Should the cheque be subsequently dishonored, the banker is entitled to reverse the entry and ask the customer to obtain a replacem ent cheque; in other words, the amount entered in the customer's account does not irreversibly accrue until the completion o f the clearing process: EIHnger an d Lom n icka M o d ern B a n k in g La w 1 9 9 4 a t 335. It is therefore recognized that mere crediting o f a customer's account does not give value to the cheque, nor does it, without more, indicate that he is perm itted to draw against the uncleared component o f the balance: AL Underwood Lim ited V Barclays Bank (1924) 1KB 775. But should the banker represent to the customer, either expressly or by conduct that he m ight treat the money as his own, or negligently fails to discharge his duty to the customer, as to lead the customer to change his position and act to his detriment, the banker will not be perm itted to recover money paid under a mistake...." (at page 293) It is glaringly clear in this case that the Plaintiff creditedthe 1st Defendant's Account with the amountson uncleared cheques and permitted her to withdraw but that in itself did not preclude the Plaintiff from seeking recovery of the amounts withdrawn following discovery that the cheques in question could not be paid after the true owners had reported their losses. Of course the Plaintiff is not entirely free from blame in the whole process but as discussed by the courts in K e lly V. S o la n (su p ra ) a n d A k e y jn a V .F a irb a irn Law so n E tc L im ite d (supra) negligence or recklessness on the part of the bank does not entitle the Defendant to unjust enrichment. Gladly, there is no defence in this case to the effect that the 1st Defendant was entitled to the proceeds of the cheques notwithstanding the defect in title thereto. In the circumstances, I am satisfied that the Plaintiff was entitled to recover the money paid to the 1st Defendant by way of a suit as it has done following failure to reverse the entries into the customer's account. Accordingly, judgment must be and is hereby entered for the Plaintiff against the 1st Defendant as prayed in the plaint. As for the 2na Defendant, it is clear that he was the Managing Director cum signatory of the account but that in itself did not make him personally liable in a contract between the Plaintiff and the 1st Defendant. In the absence of any evidence to link the 2nd Defendant with that contract I would be hesitant to find him liable. In the upshot, there will be judgment against the 1st Defendant for the amounts indicated in the plaint with costs. LJ.S MWANDAMBO JUDGE 16/ 12/2015 Delivered in court in the presence of Ms Esther Njau Advocate holding for Mr P. Kamala the Plaintiff this 18th day of December 2015. 6 LJ.S MWANDAMBO JUDGE