[2022] UGCommC 59

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA

### (COMMERCIAL DIVISION) **CIVIL SUIT NO. 963 OF 2020**

# ERIC BUTIME KATABARWA:::::::::::::::::::::::::::::::::: **VERSUS**

# STANDARD CHARTERED BANK::::::::::::::::::::::::::::::::::::

# **BEFORE: HON. JUSTICE CORNELIA KAKOOZA SABIITI**

#### JUDGMENT

The plaintiff sued the defendant for declarations inter alia that the defendant breached the banker-customer contractual relationship, breached the duty of care owed to the plaintiff, that the defendant unlawfully debited the plaintiff's account with a sum of UGX 5,816,563/=, compensation of UGX 100,000,000/=, interests and costs of the suit.

The facts constituting the plaintiff's cause of action are that; the plaintiff is a customer of the defendant bank operating Account Number 0101403158500 at Speke Road Branch in the names of Eric Katabarwa Butime. That on Friday 21^st August 2020, a sum of UGX 5,816,563/ $=$ was unlawfully debited from the plaintiff's account and credited to the Account of Youth Services unknown to the plaintiff. On the 22^nd August 2020, the plaintiff having discovered the unlawful debit, reported the matter to the defendant Bank and requested it to reverse the disputed visa transaction but it did not heed. That although the defendant's officials confirmed receipt of the plaintiff's complaint and undertook to provide $\frac{C}{19}$ the plaintiff with response after the investigations that was to last 60 days they did not.

That on the 2l't October 2020, the plaintilf was distressed by the loss of his money in the challenging Covid pandemic, kept fbllowing up in vain. That in total disregard of its obligations towards thc plaintifl. the bank refi.rnded a sum of IJGX 5,816,563/: on the plaintill's account on 24th October 2020 afr.er a period of 2 months and having gained tiom use of the said money lbr profit making.

On the other hand. the def'endant bank fited its written statement of det-ence pleading thatl the plaintiffand the def'endant have enjoyed an affectionate bankercustomer relationship without incident over a period ol'time. That the plaintiff applied for and was granted a Visa card which he would use transact on his account with the def'endant. Following the applicant's complaint to the defendant in respect of improper debiting of his account with UCX Shs. 5,816,563/:, the defendant bank contacted Visa, rvhich investigated and later confirmed that it was a Visa Fraud where the plaintiff s details were used.

That there rvas a charge back from the merchant where the del'endant bank received the money which was fraudulently debited from Visa and paid the same to the plaintiffs account and there is no loss suff'ered by him. That the investigations were done within the timeline that Visa is expected to investigate complaints. That the plaintilTacted negligently or lraudulently when he made his Visa card details available to third parties who perpetuated the liaud of UGX 5.81 6.563i:.

The plaintifTfiled a reply to thc det'endants dclcnce denying the above allegations.

# Representation

The plaintiff was represented by M/s Springs Advocates while the defendant was represented by M/s Ligomarc Advocates. This court gave directives to OU purties in which they should file their submissions, however to date, it is only the , plaintifl's submissions on tlle. I have only taken regard of the same. t"j hl>L

#### Issues

The issues for determination are the fbllowing-

- i) Whether the plaintiff has a cause of action against the defendant? - ii) Whether the det'endant breached the Banker-Customer relationship? - iii) What are the remedies available to the parties?

#### Resolution

To prove his case, the plaintiff, Eric Butime Katabarwa, testilled as PWI while and the defendant called two witnesses: DWI Mike Lameck Sonko and DW2 Belinda Florence Nabaggala.

## Issue I : Whether the plaintiff has a cause of action against the defendant?

The plaintil'fs counsel submitted citing the Black's Law Dictionary 8th Edition at page 664 where causc of action was defined os o group of operative facts giving rise to one or more bases.for suing: a factual situation that entitles one person lo obtain a renrcdy- in court from another person He also rclied on the case of Auto Garage & Others Vs Motokov No. 3 (1971) EA 514 that a party to have a cause ofaction. proof must be shown that the plaintill'enjoyed a right, that right has been violated and the defendant is liable. He also relied on the case of Lucy Nelima & 2 Others Vs Bank of Baroda Uganda Limited Civil Suit No.55 of2015.

Counsel strongly submitted referring to the plaintifls plaint, that the plaintiffheld Ugx 5,816,563/= on his account No.0101403 158500 with the defendant to which he had a right to property, the right was violated by the fraudulent, unlawful or improper withdrawal ol'the said sum and the def-endant is liable as it concedes that it was an improper withdrawal, not authorized by the plaintili That the Ul4 plaintiff did not participate in fraud and the Bank owes a duty of care, fiduciary ^|"t h l;:ty and duty to safe guard the plaintiffs deposits.

I have considered the above suhmissions by counsel. it is not in contention that the plaintifl is the def-endant's customer holding Account No. 0101403 158500 from 9'h March 2010. It is also unrcbutted that on the 2 l'r August 2022 money to a tune of UGX 5,816,563/= was debited liom the plaintills account to the Account of Youth Services without the plaintifls authorization. By virtue of the bank-customer relation there is a legal obligation that is owed or due to another that needs to be satisfied. In the case of Makua Nairuba Mabel Vs Crane Bank Ltd Civil Suit No.380 of 2009 the court cited the case ol'Simex International, Inc. v. Court of Appeals No. 88013, 19 March 1990, 183 SCRA 360 where it was held that " the bank is under obligarion to lreot the accounts of ils depositors with meticulous care, ohuays having in mind the fiduciary nature of lheir

relationship" The Bank owes a duty of care, fiduciary duty to the plaintiff. I find that the plaintiffhas establishcd a cause ofaction against the defendant.

# Issue 2: Whether the defendant breached the Banker-customer relationship?

With regard to the unauthorized/improper debiting of the plaintiff's account with a sum of UGX 5,816,563/:, counsel fbr the ptaintiffsubmitted that the plaintiff attached his Bank statement PEX I to prove that he held an account with the defendant bank. That the defbndant admitted that the plaintiff was a customer, there existed a contractual relationship between the plaintifT and the def'endant tiom which the defbndant debited UGX 5,816,563/: without the plaintitl-s mandate. That at the hearing, DWI and DW2 testified that IJGX 5.816,563/: was fraudulently and improperly debited liom the account and the plaintit'f neither initiated nor sanctioned the said transaction. That the two witnesses conlirmed that the contractual relationship between the plaintif'l'and the defendant had a duty ofcare, a fiduciary duty, a duty to act in good f'aith and a duty to safe guard the ua plaintif ls deposit account.

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Counsel lbr the plaintifl submitted that DW2 admitted that the Bank issued the plaintiffa Visa card. At all times the del'endant disclosed to the plaintiff that Visa International was its agent, the def'endant therefbre cannot deny liability yet Visa intemational acted on its behall Counscl prayed that the court tinds that the del'endant breached the Llank-customer relationship when it fbiled to saf'eguard the customer's deposits either by' itsell'or through Visa Intemational.

Counsel lirrther argued that the def-endant breached the Bank-customer relationship by not keeping the plaintitl' informed of either the progress of the investigations or the findings. That according to PEX2. the plaintiff reported the fraudulent transaction on 22nd August 2020. The defendant conllrmed receipt of the said complaint and undertook to respond to the plaintillwithin 60 days as per PEX3, that this did not happen. That it was until the plaintitfthreatened to escalate the matter to Police and lodge an oftlcial complaint with Bank of Uganda at the lapse of 60 days, then the def'endant refunded the sum of L.lGX 5,816,563/= to the plaintift.

Counsel f'urther asserted that DWI testified before court that the defendant is not liable to the plaintifTby virtue of clause 2l in the account opening forms DEXI at Page 5, but during cross examination he confirmed that the transaction contemplated herein must be by the customer, thc transaction in issue was not by the customer, the clause was no1 applicablc in the circumstances, that the plaintill' did not participate in the liaud that happened to his account. That court should find that the said indemnity clause cannot absolve the del'cndant ol liability.

I have carefully considered the above arguments. It has bcen led in evidence that on 2l't August 2022UGX 5.816,563 was debited liom the plaintills account No. 0101403 158500 to Youth Services without his authorization. The plaintiff wrote a complaint through an email (PEx.2) dated 22/08/2020 to the det'endant t"tlt/>z\_ ua

conceming the said unauthorized withdrawal. On the 2410812020 the delbndant bank replied to the same and I quote;

... Following your confirmation thaf the transactions were not authorized by yourself, the matter was raised to our frauds teom for immediate investigalion. The investigation is carried out teithin 60 days and at the conclusion of our investigation, we will contacl you immediately.

During cross-examination of DW l. he told court that the complaint was investigated. He said that Visa Incorporated investigations revealed that the plaintift-s Visa card details were stolen liom him by an unknown third party and were used to make an online transaction and payment to merchant Youth services. That the plaintiff made online transactions on several online sites where his credentials could have been accessed by a fiaudster. PWI during crossexamination, also told court that he transacts lrequently online. Following the investigations. it was established from DEX.5 that the customer's debit card details were stolen outside ol'their knowledge, the customer's debit card details were supplied to make online payments and online transactions were authorized without 3D verification. On the 24th October 2020 the plaintiffs money was refunded back to his account.

Justice Christopher Madrama in the case of Konark Investments (U) Ltd Vs Stanbic Bank Uganda Ltd Civil Suit No. l16 of 2010 observed that: It is an implied term of the contract befiveen the banker and the customer that the banker will observe reasonable skill and care in and aboul execuling the cuslomer's orders. Generally, that duty is subordinate to the banks other con/licting conlractual duties. Additionally, if a bank executes an order knotting it to be UU dishonestly given, or shut its eyes lo the obvious facl of the dishonesty, or acted recklessly infailing such enquiries as an honest and reasonable man would make, tltt/4

# the bank would plainly be lioble see Barclays Bank Versus Quince Care Ltd and Another (1992) for ALL ER page 331.

In this case, there is no evidence adduced that the Defendant bank took part in the fiaudulent transaction or it shut its eyes to the obvious fact that money had been fraudulently debited fiom the plaintitls account, or t'ailed to make any inquires. The moment the bank received the plaintifls complaint, it tbrwarded it to its tiauds team and investigations by Visa incorporated begun, insomuch so that it was discovered that the plaintiff did not take part of the transaction, his money was thereafter refunded. The investigations commenced on 24th August 2020 and it was communicated to the plaintill'that they would last for 60 days and on 24'h October 2020. exactly 60days alier, the plaintil'fs money was refunded back to his account. In my view, given the circumstances where the defendant bank was has not been proven to have participated in the fiaud, I establish no liability of the fiaud on the def'endant.

With regard to the issue of not keeping the plaintiff informed, the plaintiff told court that the defendant communicated to him only once on email in the period of60 days and a phone call. That on the eve olthe deadline ofthe 60 days he wrote a reminder email to the del-endant. That the Defendant on 24th October 2020 without any communication. closure report or apology in disregard of his complaints. credited his account with UGX 5,816.563/=.

During cross examination, DWI told court that after investigations of 60 days are done, the outcome is either the customer did not take part in transaction in which case a refirnd is made or the investigations may show that the customer took part in the transaction in which case no rct'und is made. DWI further testilled that none of these outcomes from the investigation were directly communicated to the customer/plaintil'f.

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# The Black's Law Dictionary 7^th Edition at page 523 defines the term fiduciary

**duty** as a duty of utmost good faith, trust, confidence and condor owed by a fiduciary to the beneficiary. A duty to act with the highest degree of honesty and loyalty toward another person and in the best interest of the other person. In the instant case, I cannot fault the bank for not communicating during the 60 days of the investigation since the plaintiff was put on notice of the time period the investigations would take. However, I fault the Defendant bank for not communicating the outcome of the investigations to the plaintiff as part of their duty of care to their customer who only got to now of the outcome of the investigations in court. I find that the bank breached its fiduciary duty to the plaintiff by concealing or omitting to notify him of the outcome of the investigations.

With regard to the indemnity clause in the account opening, during crossexamination plaintiff counsel referred DW1 to DEX1, the account opening details at paragraph 21 which states; *the bank will take no responsibility whatsoever for any loss incurred as a result of use of the visa card by customers over internet for* any transactions or for any other purposes.' DW1 confirmed to court that investigations revealed that the plaintiff did not initiate the transaction. Therefore, the indemnity clause does not apply to the plaintiff in this case.

#### **Issue 3: What are the remedies available to the parties?**

The plaintiff sought for damages in the sum of UGX $100,000,000/$ =, interest of 21% of UGX 5,816,563 from 21^st August 2020 to 24^th October 2020 when it refunded to the plaintiff's account. Interest on damages at a rate of 30% from the date of filing till payment in full, costs of the suit and any other relief.

It is trite law that "measurement of the quantum of damages is a matter for the $\frac{c}{19} \frac{d}{12}$ discretion of the individual Judge which of course has to be exercised judicially with the general conditions prevailing in the country and prior decisions that are

# relevant to the case in queslion". Rcf'cr kr Moses Ssali a.k.a, Bebe Cool & Others Vs Attorney General & Others HCCS 86/2010.

In my view, the award of UGX 100,000,000/: as general damages is rather on the higher side since general damages are not intended to better the position of the claimant as was held in the case of Uganda Commercial Bank v. Kigozi ¹²⁰⁰²¹I EA 305.'Ihe plaintitTretunded the money within the 60 days following investigations by Visa Intemational. The submission that the del'endant abdicated its role by having Visa investigate the matter is unlbunded since the lraudulent transactions took place under the Visa platfbrm who werc best placed to investigate and communicate their lindings to the defendant. Given the circumstances of the case. I therelore award of LJGX 15,000.000/: as general damages as sufflcient lbr the breach of fiduciary duty ol'lailure by the defendant to communicate to the plaintiff the outcome of the investigations.

With regard to the interest prayed lbr, the guiding principle on interest under Section 26 (2) of the Civil Procedure Act is that it is at the discretion of court which must be exercised iudiciously taking into account the circumstances of each case. Given that the bank did not contribute to the fiaud but took reasonable steps to investigate and retund the plaintifls money within the stipulated 60 days. I find no justification to award interest on the sum of UGX 5,816,563 tiom 2l't August 2020 to 24'h October 2020 when it was rel'unded. However, interest at the court rate is awarded on the general damages liom the date of judgment till payment in full.

With regard to costs, it is the established principle ol law under section 27 (2) of the Civil Procedure Act that "costs of any aclion, cause or matler shall follow the event unless Court for good cause orders othenuise". The Plaintif'f being the successful party in this case is therefore entitled to costs of the suit and they allowed.

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In the result, Judgment is entered for the Plaintitf against the Delbndant on the following terms;

- i) The PlaintifT is awarded general damages of UGX 15,000.000/:. - ii) Interest is awarded on the general damagcs at the court rate liom the date ofiudgment until payment in full. - iii ) Costs of the suit are arvarded to the plaintill.

It is so ordered

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# CORNELIA KAKOOZA SABIITI JUDGE

Date: lgthJuly 2022