[2025] UGHCCD 16

# **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (CIVIL DIVISION) MISCELLENEOUS CAUSE: 045 OF 2024 BARIGYE INNOCENT HERBERT BAITWABABO::::::::::::::::::APPLICANT VERSUS**

**EQUITY BANK UGANDA LIMITED::::::::::::::::::::::::::::::::::::RESPONDENT**

# **BEFORE: HON. JUSTICE SSEKAANA MUSA**

# **RULING**

The Applicant brought this application Section 33 and section 38 of the Judicature Act Cap 16, Section 98 of the Civil Procedure Act cap 282, Order 52,rules 1,2 and 3 of the Civil Procedure Rules SI 282-1 seeking the following orders:-

- *a. An order directing the Respondent to unfreeze the Applicant's Account No.1027200288085.* - *b. An order directing the Respondent to pay the Applicant all his money held on Account No.1027200288085.* - *c. General damages* - *d. Costs of the application.*

The applicant's application is supported by the affidavit of MR. BARIGYE INNOCENT HERBERT BAITWABABO –the applicant and the grounds are briefly that;

1. The applicant sold 150 heads of cattle on the 16th day of July 2024 at a consideration of USD 59,500 (Fifty-nine thousand five hundred United States Dollars) and upon execution of the sales agreement, he received an initial cash payment of USD 40,500(Forty Thousand and Five Hundred United States Dollars).

- 2. The applicant, being a customer of the respondent, on the 18th day of July 2024, credited his personal current Account No.1027200288085 held with the Respondent with UGX.85,000,000/=(Eighty five million Ugandan Shillings). - 3. The applicant continued to make transactions on the above named account held with the respondent until the 20th July 2024 when respondent froze the applicant's above named account held with it without any justifiable cause and has since with impunity withheld the applicant's money staling his business and causing great inconvenience. - 4. That the applicant provided and or disclosed to the respondent all the information leading to the depositing of the money on its above mentioned account but in vain hence the respondent has breached its banker-customer relationship without any justifiable cause. - 5. That the applicant has since suffered great inconvenience and business losses due to lack of finances as his money is illegally withheld by the respondent without any justifiable cause hence the need for general damages against the respondent.

The respondent filed an affidavit in reply and the same was sworn by CHARLES OKELLO ADO-the Manager Financial Crime Investigation with the respondent contending that;

1. The applicant is indeed a customer of the respondent Bank and a holder of the aforementioned account and that on the 18th day of July 2024, the applicant deposited on his named account a sum of Ug.shs.85,000,000/=.(Eighty five million Ugandan Shillings).

- 2. That having analyzed all previous transactions on the particular account, the applicant's said account was flagged in accordance with the Bank's policies as approved by the Board and the applicant was required to furnish proof of the source of funds he deposited on his account. - 3. That the applicant, in response to the respondent's request furnished it with a Cow sale Agreement dated 16th July 2024 indicating that the Applicant had sold 150 (One Hundred Fifty) heads of cattle at a total consideration of USD 59,500 (United States Dollars Fifty Nine Thousand Five Hundred) to a one Egibarthi M. Myaka out of which the Applicant had received USD.40,500(United States Dollars Forty Thousand Five Hundred) upon execution of the agreement. - 4. That from the said agreement, it became apparent to the Respondent that the same was executed at Benako ward, Ngara District, Kagera Province in the Republic of Tanzania and when the Respondent asked the applicant for cattle movement permit for the said heads of cattle referred to in the agreement, the applicant was not in possession of the same. - 5. That the respondent also requested the applicant to furnish with them a declaration made to the Uganda Revenue Authority at the Tanzania-Uganda boarder by which the applicant could have crossed with such money exceeding 1,500 (One Thousand Five Hundred) currency points, the Applicant was not in possession of the same either. - 6. That from the aforegoing, it became apparent that the Applicant was not being truthful to the Respondent as to the source of the money deposited on his account and because of this, the Respondent

forwarded the matter for investigations by the Financial Intelligence Authority.

7. That there is reasonable suspicion that the source of the monies deposited on the Applicant's Bank Account is illegal and contravenes the provisions of the Anti -Money Laundering Act and the Respondent is duty bound to fulfill the obligations placed upon it by the Act.

The Respondents further filed a supplementary affidavit in reply sworn by a one CHARLES ISIKO, who is a Legal Officer at the Respondent's Bank.

He stated that after the court session in this matter held on the 16th day of August 2024, the Applicant reached out to a one COLLINS ONGIMA who is the Respondent's Channel Head Merchants, Cards, ATMs/CDMs and E-Commerce Por5tfolio for a recommendation to have his account released.

That the said COLLINS ONGIMA recommended the release of the Applicant's Account on ground that he was personally known to him by virtue of their interactions at the Respondent's Branch in Katwe and the lien over the said account was indeed lifted.

That it is the practice of the Respondent to lift such liens over customer's account upon recommendation of one of the Respondent's Senior Managers.

In rejoinder to both affidavits, the Applicant stated that he never reached out to a one Collins to have his account released and instead, it was the officials of the Respondent who called him and informed him that the lien on his account had been lifted and that he should withdraw the case before court.

That the Applicant ably furnished the Respondent with clear supporting documents with no discrepancies to the transaction as required by the Respondent but the Respondent negligently kept the account blocked until the 16th day of August 2024 after court had set down the case for mention.

## **Issues raised.**

- 1. Whether the Respondent's acts of freezing the Applicant's Account No.1027200288085 and withholding his money are lawful. - 2. What remedy is available to the Applicant.

The applicant was represented by *Mr. Alex Asiimwe Byaruhanga* and the respondent was represented by *Mr. Fahim Matovu*.

Both parties filed written submissions in this matter at this court has considered them in this ruling

# **Determination**

# *Whether the Respondent's acts of freezing the Applicant's Account No.1027200288085 and withholding his money are lawful.*

The applicant's counsel submitted that, a bank, by virtue of its contractual relationship with its customer has a duty to exercise reasonable care and skill in carrying out its duties. The banker –customer dictates that the banker must carry out the customer's payment instructions. That however, there exists circumstances when a banker is justified in denying the instructions of the customer and act contrary thereto. The same must however be justified.

The applicant's counsel submitted that the respondent froze his bank account without exercising reasonable due diligence or reasonable care into the alleged suspicious activity and unjustifiably held unto the account even after being availed with necessary documentation thereto.

That the account was frozen on the 20th day of July 2024 and continued to be frozen even after the applicant provided the respondent with all relevant information regarding the alleged suspicious transaction. The applicant had provided the respondent with the sale agreement marked annexure "A" to the affidavit in support and from this, it was evident that the source of the said suspicious money was sale of cattle and that at that point, the transaction ceased to be suspicious.

That the said agreement was executed at the boarder of Uganda and Tanzania and the Respondent's allegations that the same was executed in Tanzania has not been backed by any evidence. The applicant's counsel further submitted that if indeed the transaction was suspicious as stated by the Respondent in his affidavit in reply, the respondent is required under the Anti –Money Laundering Act Cap118 to report the same to Financial Intelligence Authority within 48 hours.

That the respondent reported the purported suspicious activity to the Financial Intelligence Authority 3 days after service of court process on the 5 th day of August 2024 and 16 days after freezing the account. That the alleged report marked annexure "C" on the affidavit is an afterthought and there is no evidence that the same was received by Financial Investigation Authority.

Counsel for the applicant further submitted that the Supplementary affidavit in reply sworn by ISIKO CHARLES is also full of material falsehoods intended to mislead court. Under paragraph 4 of the said affidavit, that after court on the 16th day of August 2024 at 11:00am, the applicant approached one of the managers of the Respondent for a recommendation on the release of his account. The said manager wrote the recommendation and sent the email at 10:46, this was much earlier than the court session and that there is no evidence that the applicant approached the manager for the release.

The applicant's counsel finally prayed for general damages as a result of the inconvenience caused by the Respondent to the Applicant. That the applicant' business has suffered financial loss as well as emotional distress.

Counsel for the respondent submitted that orders (i) and (ii) as sought by the Applicant in their application have since been overtaken by events and as such, their determination by this Court would be moot and purely academic. He thus declined to make any submissions regarding the same. Counsel for the respondent further submitted he notes that the applicant attempts to sneak in a different relief in form of a declaration that the respondent's acts of freezing the Applicant's Account and withholding his money was unlawful.

That the applicant did not seek this particular relief and that his proposed issue 1 cannot stand and should be rejected. That parties are bound by their pleadings and Courts of law should restrain themselves from granting parties reliefs they have not prayed for in their pleadings.

Counsel for the respondent did not devolve on this particular issue and instead submitted on issue 2 regarding general damages and costs. He submitted that the applicant cannot seek general damages in such an application as such a claim can only be brought by way of a plaint. That the applicant has not pleaded any particular facts upon which court can assess the general damages sought. He prayed that the application be dismissed with costs to the Respondent.

## *Analysis*

A bank has a duty under its contract with its customer to exercise reasonable care and skill in carrying out its part with regards to the operations within its contract with its customers. The duty to exercise reasonable care and skill extends over the whole range of business within the contract with the customer. See *UBA Plc v G. S Ind (Nig) Ltd (2011) 8 NWLR (pt 1250) p. 590*

The relationship that exists between a banker and a customer is one founded on a banker and customer contract. It involves a species of contract with special usages with particular reference to monetary or commercial transactions. The role of bankers and their predominant business is the receipt of monies on current or deposit accounts and payment of cheques and instruments paid in by customers.

The applicant owned and operated a bank account with the respondent and this established a bank-customer relationship between them. The bank had an obligation to receive payments or proceeds on behalf of the applicant and as well honour any instructions of the applicant as its customer. The actions of the bank to block/freeze the bank account of the applicant have to be justified upon cogent evidence and not whimsically or casually.

The bank-customer relationship created by opening bank accounts in Uganda could not be subjected to extraneous decisions not supported by law. The respondent as a licensed financial institution must base its decision to freeze within the law with proper evidence.

The banker –customer dictates that the banker must carry out the customer's payment instructions. That however, there exists circumstances when a banker is justified in denying the instructions of the customer and act contrary thereto. The same must however be justified.

The respondent acted prudently and reasonably in questioning the transaction of the applicant which involved such huge amount of money and in view of the circumstances. The demand for further and better particulars sought about the transaction was justified since the deposit of Ug. Shs.85,000,000/= was not a small sum. The applicant after being questioned presented the necessary information or documents which should by any standard have ably answered the source of funds and circumstances that surrounded the cause.

A court of equity has never hesitated and would never hesitate to use the strongest powers to protect and preserve the interests of an individual customer or public against the bank when it is endangered by illegal activities of the bank of freezing the bank account without just cause. It is at the heart and concern of any court of equity to see that a stable banking system properly and efficiently supervised by the Central Bank or Anti-Money Laundering Agency to ensure that suspicious transactions are dealt with or cleaned from the system. This power to question transactions on suspicion of money laundering must strictly be done in accordance with the minimal standards set by the Central Bank and Financial Intelligence Authority within the law. See *Peter Sajjabi & Another v AG & Bank of Uganda Constitutional Petition No. 561 of 2013*

The respondent claimed to have frozen the applicant's account on suspicious transaction but the respondent failed in its duty to the applicant as its customer to carry out the expected due diligence in establishing that the transaction was not questionable. The applicant availed all the necessary i.e the cattle sales agreement upon which the transaction was hinged.

The applicant clearly indicated under paragraphs 5,6,7 and 8 of the affidavit in support that his account with the respondent was frozen on the 20th day of July 2024 and at the time of filing this application the applicant had availed the respondent with the cattle sales agreement indicating the source of funds. This in my opinion was enough explanation from the application regarding the issue of source of funds.

The respondent's allegation that the account remained frozen because the same was executed in the Republic of Tanzania cannot also stand because the respondent has not furnished any evidence in support of that allegation.

The respondent tried to justify their actions by citing some provisions of the law on Anti-Money Laundering Act which empower them to look into any transactions that are considered suspicious. The same law and regulations which empower the respondent also create a duty on the bank to report such suspicious transaction to Financial Intelligence Authority. The respondent never reported to Financial Intelligence Authority within 48 hours as required by the law.

## *Section 9 of the Anti-Money Laundering (Amendment) Act, 2017* is in respect of -Reporting of suspicious transactions.

*1. An accountable person shall report to the Authority if it suspects or has reasonable grounds to suspect that a transaction or attempted transaction* *involves proceeds of crime or funds related or linked to or to be used for money laundering or terrorism financing, regardless of the value of the transaction.*

- *2. An accountable person shall make the report under section (1) without delay but not later than two working days from the date the suspicion was formed.* - *8) Where a supervisory authority or an auditor of an accountable person suspects or has reasonable grounds to suspect that information in its possession concerning any transaction or attempted transaction may be—* - *a) related to the commission of any offence under this Act or the offence of terrorism financing;* - *b) relevant to an act preparatory to the offence of financing of terrorism;* - *c) an indication of money laundering or the financing of terrorism, the supervisory authority or the auditor shall, as soon as practicable after forming that suspicion or receiving the information, but not later than two working days, report the transaction or attempted transaction to the Authority.*

*Regulation 39 of the Anti-Money Laundering (Regulations), 2015* is in respect of accountable person to report suspicious activities and certain cash transactions.

- *1. An accountable person shall, upon investigating and being fully satisfied that the transaction or activity is suspicious, notify the Authority of any suspicious activity or transaction which indicates possible money laundering or terrorism financing.* - *2. The notification under sub regulation (1) shall be made as soon as is practicable but in any case, not later than forty-eight hours after the occurrence of the suspicious activity or transaction, using Form B in the Schedule.*

The respondent failed to comply with the above provisions. The respondent instead purported to have reported the alleged suspicious activity to the Financial Intelligence Authority 3 days after service of court process on **them and 16 days after freezing the account**. It is my humble view that the respondent attempted to justify their illegal actions by citing the law they never complied with in the first place. The respondent held onto the money of the applicant longer than the period stipulated under the law which required them in respect of suspicious transactions.

In addition, the decision of the respondent's action of later on unfreezing the account because of intervention from one of their senior staff member-COLLINS ONGIMA as per the respondent's supplementary affidavit in reply cannot rectify an already illegal act of freezing the applicant's account without just cause.

The actions of the bank were in total breach of the law and the bankcustomer relationship. The bank made baseless efforts to sanitize their illegal actions by claiming that the transaction was questionable whereas there was nothing suspicious about the transaction. The respondent was given all the necessary documentation and any questions or queries from the respondent could be established without causing the applicant the continued hardship of being denied access to the funds already deposited on his account on a clear transaction.

The respondent is in breach of the contract and the continued freeze of the applicant's account No.1027200288085 and withholding of the applicant's money was unjustified and thus illegal.

## *What remedies are available to the plaintiff?*

- 1. The court issues a declaratory Order that the freezing of the applicant's account was illegal and a breach of contract. - 2. This court did not find it fit to determine the issue of general damages for the wrongful continues freeze of the applicant's Account. The applicant is at liberty to file a substantive suit to prove the general damages or inconvenience suffered with proper evidence.

3. The applicant is awarded costs of the application.

**I so order.**

*SSEKAANA MUSA JUDGE 14th February 2025*