Barclays Bank of Zambia v Sky FM Limited and Anor (APPEAL NO. 66/2004; SCZ Judgment No. 10 of 2006) [2006] ZMSC 56 (14 March 2006)

SCZ Judgment No. 10 of2006 APPEAL NO. 66/2004 IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: BARCLAYS BANK OF ZAMBIA APPELLANT AND SKY FM LIMITED GEOFFREY HAMBULO 1 sr RESPONDENT 2ND RESPONDENT CORAM: LEW ANIKA, DCJ, CHIBESAKUNDA, SILOMBA, JJS. On 6th April, 2005 and 14th March, 2006. For the Appellant: For the Respondents: J. CHASHI ofMweemba Chashi & Partners E. B. MWANSA ofEBM Chambers JUDGMENT LEW ANIKA DCJ, delivered the judgment of the court. Authorities referred to: 1. 2. 3. GRINDLA YS BANK INTERNATIONAL (Z) LIMITED VS NAHA INVESTMENTS, 1990-92 ZR.86 BANK OF ZAMBIA VS ATTORNEY GENERAL, 1974. ZR.24 UXBRIDGE PERMANENT BENEFIT BUILDING SOCIETY VS PIKARD, 1939, 2KB 114 In this appeal, we shall refer to the Appellant as the Defendant and the 1st and 2nd Respondents as the 1st and 2nd Plaintiffs, which is what they were in the court below. The 1st and 2nd Plaintiffs had instituted proceedings against the Defendant in the court below claiming inter alia:~ 1. US $18,247.77 being money fraudulently withdrawn from the 1st and 2nd Plaintiffs accounts; 2. US $9,700.00 being expenses incurred by the Plaintiffs to discover the frauds and apprehend the accused persons; 3. US $1,132.67 being interest on money borrowed by the Plaintiffs from the Defendant. The evidence on record and which is not in dispute is that the 151 and 2nd Plaintiffs had two accounts with the Defendant bank at its Roma Prestige Branch. These accounts were in US dollars and were maintained primarily to develop and complete the installation of the radio station. The equipment for the radio station was to be air lifted from Johannesburg to Lusaka and the 2nd Plaintiff had set aside money for freight, insurance and duty. There was more than US$14,000.00 in the 1st Plaintiff's account and about US$6,000.00 in the 2nd Plaintiffs account. In the first week of November, 2000 the 2nd Plaintiff received notification from Paradise Cargo Services in Johannesburg that the equipment was ready for shipment upon remittance of 115 the money for the same. The 2nd Plaintiff then requested the Defendant to send the sum of US$726 l .64 by telegraphic transfer to Paradise Cargo Services. The Defendant accepted the request and stamped the remittance slip on 3rd November 2000 showing that the money had been remitted. In the normal course of business a telegraphic transfer to South Africa would take about 48 hours to reach the beneficiary but up to 22nd November, 2000 the same had not been received by Paradise Cargo Services. During this period the 2nd Plaintiff kept checking with the Defendant bank but was informed by the Branch Manager that there was a breakdown of conununication at Head Office. On 22nd November 2000 the 2nd Plaintiff wrote to the Defendant to cancel, the telegraphic transfer and issue an international money order for the same ammmt in favour of Paradise Cargo Services. The International Money Order was issued on the same day to the 2nd Plaintiff who sent it by Fedex to the said beneficiary. Paradise Cargo services sent back the money order because they were advised by their bankers that the funds could only be credited to their account 21 days after depositing. Upon receipt of the international money order the 2nd Plaintiff went back to the Defendant and requested the manager to issue another telegraphic transfer using a swift code to allow quick transfer of the money. 116 It was only then that the manager of the Defendant bank gave the 2nd Plaintiff a print out of the 1st Plaintiff's account which showed that by 15th November, 2000 the account had been overdrawn by US$5 .50 and on the day that the telegraphic transfer was issued, there was only US$324.00 in the account. The 2nd Plaintiff then realized that a fraud had been committed and reported the matter to the police. There was also evidence on record that the 2nd Plaintiff had earlier on written a letter to the Defendant authorizing his accountant, one Mrs. Mwamba Musukwa NGANDU authorising her to collect bank statements, make deposits and any other requests to the bank but she had no authority to issue cheques and was not a signatory to any of the accounts. It was common cause that the investigations which were carried out revealed that monies had been drawn from both accounts by the use of forged cheques. The total sum withdrawn from both accounts was OS$18,247.77 and the prime suspect was the 2nd Plaintiffs accountant who had disappeared and had destroyed all records at the 2nd Plaintiff's office such as cash books, cheque books etc. It was also common cause that there were no loan or overdraft facilities with the Defendant on these accounts. 117 The 1st and 2nd Plaintiffs demanded to be reimbursed by the Defendant for the money fraudulently withdrawn from their accounts which the Defendant refused to do, leading to these proceedings. The learned trial Judge on the evidence adduced before him awarded the Plaintiffs the sum of US $18,247.77 with interest at the rate of 12% per annum from the date of issue of the writ to payment. He also awarded the Plaintiffs the swn of US$1,132.67 being interest on borrowed money from the defendant. The learned trial Judge however, disallowed the Plaintiff's claim for US$9,700.00 being expenses they allegedly incurred to discover the fraud and apprehend the accused persons. The Defendant has appealed against the awards granted to the Plaintiffs and filed two grounds of appeal namely:- 1. that the trial court misdirected itself in both law and fact in distinguishing this case from the case of GRIND LAYS BANK INTERNATIONAL (Z) LIMITED VS NAHAR INVESTMENTS LTD (1) and the case of BANK OF ZAMBIA VS THE ATTORNEY GENERAL (2) purely on the facts of the case thereby disregarding the laid down principles of law in these cases; 2. that the trial court misdirected itself in both law and fact in not finding for the Appellant on the authority of the cited precedents simply because the Appellant had pleaded the defence of contributory negligence. 118 At the hearing of the appeal Counsel for the Defendant said that he was relying on the heads of argument filed herein save that he wished to add that in line with the decision in the case of BANK OF ZAMBIA VS THE ATTORNEY GENERAL (2), that when there is a forged instrument which the bank pays out, the basis of the bank's liability is not negligence but that the money has been paid out without authority of the customer. That even if issues of negligence were pleaded, they should be precluded and the court should have determined the issue as to whether there was authority from the customer. He submitted that if the court had concentrated on the issue of authority, it would have found for the Defendant as the forged instrument was facilitated by an employee of the Plaintiffs who was a known agent of the Plaintiffs. He further submitted that had the learned trial Judge concentrated on the issue of authority, he would have found for the Defendant as the employee was clothed with the authority to deal with the accounts. As to the second ground of appeal, Counsel submitted that contributory negligence is not a complete defence by itself and neither is it an admission. He said that even where the parties have pleaded negligence, the court should ignore the pleadings. 119 In reply, Counsel for the Plaintiffs likewise said that he would rely on his heads of argument as well as his submissions in the court below save that he wished to add that the known agent did not have authority to sign on the cheques which were forged and she was not a signatory to the accounts. That she was not even allowed to withdraw the monies from the accounts as her authority was limited to collecting the bank statements, depositing cash and cheques in those two accounts. That she cannot be said to have been given authority to withdraw or forge the cheque. As to the second ground of appeal, Counsel submitted that negligence was pleaded and evidence was adduced in support of contributory negligence by the Defendant and the 2nd Plaintiff also gave evidence to show how the bank or its employees played a greater role in hiding the fraud from its clients. He further submitted that the parties are bound by their pleadings and urged us to dismiss the appeal with costs. We have considered the submissions of Counsel for the Defendant and for the Plaintiffs as well as the evidence on record. In the view that we take of this matter we shall consider the 1st and 2nd grounds of appeal together as they are interrelated in any case. 120 It is common cause that the monies paid out of the plaintiff's accounts were paid out on the strength of forged cheques. We are also satisfied on the evidence that the cheques were most probably forged and encashed by one Mwamba Musukwa NGANDU who was employed by the Plaintiffs as a cashier. We are also satisfied on the evidence that the said Mrs. NGANDU's mandate was limited to depositing cash and cheques and collecting bank statements and that she was not a signatory to either of the accounts. We are also satisfied on the evidence that the Defendant through its servants or agents knew or were aware that there were no funds to meet the telegraphic transfer which they issued on 3rd November, 2000 or the international monetary Order issued on 22nd November, 2000 and they did not appraise the 2nd Plaintiff of this fact. It is also common cause that the 2nd Plaintiff was only informed of the status of his bank accmmts after the international monetary order had been returned by the beneficiary. During the intervening period the Defendant by its conduct bad misled the 2nd Plaintiff into believing that he had sufficient funds in the accounts to meet the telegraphic transfer and international monetary order and that the delay in remitting the same was occasioned by a breakdown in communication. In the case of BANK OF ZAMBIA VS ATTORNEY GENERAL (2) we held, inter alia, that:- 1. the basis of a bank's liability where it has paid on a forged instrument is not negligence but because money has been paid out without the authority of the customer; 2. the absence of negligence on the part of a bank can at best only be relevant if a prima facie case of estoppel or adoption has been made out against the customer and the latter seeks to rely on negligence by the bank to meet such defence; 3. it is necessary to distinguish between conduct of a customer which induces his bank to pay on a forged instrument and conduct which prejudices the opportunity of the bank to recover the money so paid. In each case the conduct must be shown to be the proximate cause of the particular loss in respect of which estoppel is being set up; 4. even gross carelessness by the customer in the care of its cheque forms and stamp is too remote to found a defence of estoppel on the basis of conduct inducing the bank to pay. As we see it, the issue before the learned trial Judge was to dete1mine whether on the evidence adduced before him the Plaintiffs had conducted themselves in such a way as to induce a belief in the Defendant that the said Ms NGANDU had authority to cash the cheques. After analyising the evidence before him, the learned trial Judge found at page 9 of the judgment, 'since it is established that Mrs. NGANDU had no fluthority to issue or sign the Plaintiffs' cheques, it logically follows that the Defendant had no 122 authority to honour the cheques with the forged signature of the 2"d Plaintiff.' In other words, the learned trial Judge made a finding that money had been paid out without the authority of the customer, i.e. the Plaintiffs'. The issue of negligence was raised by the Defendant itself when it pleaded contributory negligence in paragraph 8 of its defence. Having pleaded contributory negligence, the learned trial Judge was duty bound to consider it, which he did and dismissed it. The Plaintiffs' case was not founded on negligence. For the foregoing reasons, we find no merit in the Defendant's appeal which we dismiss with costs. The costs are to be taxed in default of agreement. D. M. Lewanika DEPUTY CHIEF JUSTICE L. P. Chibesakunda SUPREME COURT JUDGE S. S. Si1ornba SUPREME COURT JUDGE