Ani Engineering Limited and Anor v New Capital Bank Plc (1996/HP/18) [2000] ZMHC 3 (16 February 2000)

IN THE IIIGH COURT FOR ZAMBIA 1996/HP/18 AT THE PRINCIPLE REGISTRY AJLUSAKA (CIVIL JURISDICTION) ' I BETWEEN: ANI ENGINEERING LIMITED 1st Plaintiff ATLANTA ENGINEERING SERVICES LIMITED 2nd Plaintiff AND NEW CAPITAL BANK PLC Defendant BEFORE THE HONOURABLE MR JUSTICE PETER CHITENGl IN OPEN COURT THIS 16TH DAY OF FEBRUARY 2000. For tile Plaintiffs For tl,e Defendant : Mr. Mubonda D. H. Kemp & Company Mr. Mwananshiku Messrs Mung'omba Associates JUDGMENT Authorities referred: 1. Lord Charley: Law of Banking 6th Edition Page 24 The two Plaintiffs brought this joint action against the Defendant claiming some K58,000,000 which is the sum which stood to the two Plaintiff's accounts at the time the dispute among the parties arose and which two accounts the Plaintiffs allege the Defendant has unlawfully blocked so that the Plaintiffs cannot withdraw from them. The Managing Director of the Plaintiffs, Mr. Janamani Senior Mheta, gave evidence on behalf of the Plaintiffs. He testified that in 1989 he opened Current Accounts for the Plaintiffs with the Defendant bank. The Current Accounts were later changed to 7 days Notice Call Accounts. He was the signatory to both Accounts. The first Plaintiffs Account Number was 2008513 and the second Plaintiffs Account Number was 20016008 (see Document No.7 in the Plaintiffs Bundle of Documents). Around 1992/93 he wanted to withdraw the monies from the Plaintiff's Accounts and put it in treasury bills. However, one Mr. Sichiwe, who was an Accountant of the Defendant advised him to change the Accounts from Current to 7 Days Notice Call so that this could earn interest determined by the treasury bills, which he did. The Defendant did not confirm with him in writing about the conversion of the accounts to 7 days Notice Call. However, the Account Numbers now changed to 2008513101 and 2001608101 respectively and Mr. Sichiwe and the Branch Manager one Mr. Phiri told him that the figures 101 at the end of each Account Number denoted that Accounts were Call Accounts. On Call Accounts the Plaintiffs were getting high interest while on the Current Account there was no interest earned. Mr. Sichiwe and Mr. Phiri explained the interest regime to him. The interest was fluctuating because of the Treasury bill and at the end of the week interest would be paid at the average. He would depo~it or withdraw money from the Accounts on any day of the week without notice. However, when he was shown Document No.2 in the Defendant's Bundle of Documents he said that Accounts were 14 days Call but denied that he was required to give 14 days notice before he could withdraw money from the Accounts. The interest was being paid at 7 days rest and not 14 days rest. The first Defendant's Account is not overdrawn by K17,673,222.87 as stated in Document No.3 1n the Defendant's Bundle of Documents. And the second Defendant's account is not overdrawn by K786,960.16 as stated in Document No. 4 in the Plaintiffs Bundle of Documents. Mr. Sichiwc (In fact according to the documents the name is Sichizuwe) wrote these two letters. The Plaintiffs did not apply for overdrafts from the Defendant. The trouble started on 13th August, I 995 when the Defendant refused him to withdraw money from the Plaintiffs accounts. Mr. Sichizuwe, without explaining, told him there were problems on the accounts and referred him to the General Manager who was not in the office. As a result he went to see his lawyers who wrote the letter (Document No.7 in the Plaintiff's Bundle of Documents) to the Defendants. He is aware that at one stage the Defendant admitted that there were some internal irregularities in the bank. However, he does not know whether there were mistakes in the calculation of interest as shown in the schedule for alleged wrong calculations of interest (Document No.l in the Defendant's Bundle of Documents) from July 1993 to July 1995. He was not written to about these irregularities on calculation of interest. He became aware of the irregularities in August 1995 when the Plaintiffs' accounts were blocked and was written to in Documents Numbers 3 and 4 in the Defendant's Bundle of Documents. From July 1993 to July 1995 he used to receive Bank Statements relating to the Plaintiff's accounts and were reflecting correct balances and relying on them, he withdrew money from the Accounts. The accounts were blocked for over payment and frauds. The Plaintiff want their accounts unblocked and the balances as at 13111 August, 1995, restored with interest. The Plaintiffs claim damages for loss of business, loss of access to the accounts and costs. The Defendant called five witnesses who came to testify that in fact there was a fraud going on in the bank. Wrong interest rates were credited. For example, where interest was 30% it was credited as 100%. Two bank officials one Chiti Chola and one Aaron Mwanza were responsible for this. The matter was reported to Police. (Document No.3 in the Plaintiffs Bundle of documents confirms this). The bank reversed the over payments of interest to customers. Column No.2 in Document No. l in the Defendant's Bundle of documents shows the correct interest with Column No.3 showing the over payment while Column No. l shows the inflated interest. The Bank Statements in the Notice to Produce dated 8th July, 1998 show that although there are four weeks in a month, interest payment was done five times a month ~d that interest payment were followed by cash withdrawals. The five defence witnesses were subjected to a somewhat lengthy cross examination by Mr. Mubondc4 learned Counsel for the Plaintiffs but their' evidence stood clear that there was fraud in the bank perpetrated by some bank officials and in some case or cases with the connivance of the customers. Counsel indicated they would file written submissions. I gave Counsel three weeks within which to file the submissions. Todate only Mr. Mubonda has filed his written submissions, even then he filed them long after the deadline. Mr. Mwananshiku has not filed his written submissions. I cannot delay the Judgment any longer and consequently I have written my Judgment without the submissions on behalf of the Defendant. After reciting the facts of this case the sum and substance of Mr. Mubonda's submissions amount to this: The relationship between customer and banker is that of creditor and debtor respectively - Law of Banking 6th Edition(]). Where a customer acts bone fide on mistakes of a bank as to alter his legal position, the bank will be estopped from claiming to have the mistakes put right, i.e. he (banker) will be treated as if the sum which he erroneously credited to the customer was in fact due to him-Page 172(ibid.). It was Mr. Mubonda's submissions that the Plaintiffs in this case were not aware of the wrong entries and the Plaintiffs were perfectly entitled to assume that the Defendant was calculating and posting correct interest to their Accounts. For two years the Plaintiffs had altered their position by committing the funds in their Accounts to their business in view of the balances in statements. Further, Mr. Mubonda submitted that the Defendant breached the customer banker relationship by debiting the Plaintiffs' accounts which were in credit thereby rendering them into overdraft. There should be Judgment for the Plaintiffs. I have carefully considered the evidence and submissions of Counsel and perused the documents on the file. There are not many issues in this case. The fact that there was over payment on the Plaintiffs' accounts is not in dispute. Columns (3) in Document Number(l) in the Defendant'' bundle of Documents clearly indicates that there were over payments of interests in excess of even the amounts pleaded in the Writ and Statement of Claim. The critical issue in this case is whether the Plaintiff is entitled to the monies in the so-called blocked account, which he claims. The Plaintiffs position appears to be this: It was not their duty to calculate the interest. For about two years they were receiving Bank Statements and were withdrawing money from the Account without any problems until 13th August 1995 when the irregularities came to light. But I must say here that the bank statements for the Plaintiffs' accounts were not ones, which attracted frequent large deposits, and, therefore, there was no basis upon which Mr. Mehta would expect such large sums of interest per week even assuming that the interest rate was high. Mr. Mubonda argued this case on the basis that there wfls a mistake and relied on the works of Lord Charley in his book Law of Banking particularly on the principles relating to mistake. Principles of mistake do not apply to this case and in that regard Mr. Mubonda's submissions are irrelevant because they are not supported by evidence. There is no evidence at all to the effect that the inflated interest was credited to the Plaintiffs' accounts by mistake. The undisputed evidence is that there was a huge fraud in which Mr. Mehta and some bank officials were investigated by the Police and from the evidence Mr. Mehta was exonerated by the Police and the bank officials were prosecuted. The outcome of the prosecution is not known. But whether the bank officials were convicted or acquitted it is irrelevant to this case just as the exoneration of Mr. Mehta is because on the evidence before me I find as a fact that the inflated interest found itself in the Plaintiff's accounts by fraud. The Plaintiffs are, therefore, not claiming money which has been taken from their Accounts by fraud of bank officials but are claiming money which is not theirs but which has been credited to their accounts by fraud of bank officials. It is an accepted principle in banking law that fraud unravels everything. The Plaintiffs cannot benefit from this fraud. The money is not theirs. To order that the Plaintiffs get the money, which was fraudulently put into their accounts, would be against the principles of equity as the Plaintiffs would be unjustly enriched. For the reasons I have given above, I dismiss the Plaintiffs' claim with costs to the Defendant to be taxed in default of agreement. DELIVERED IN OPEN COURT AT LUSAKA THIS 16™ DAY OF FEBRUARY 2000. 6