Mwongeli v Stanbic Bank (A Member of Standard Bank ) [2023] KEHC 25978 (KLR)

Mwongeli v Stanbic Bank (A Member of Standard Bank ) (Civil Case 266 of 2015) [2023] KEHC 25978 (KLR) (Civ) (1 December 2023) (Judgment)

Neutral citation: [2023] KEHC 25978 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Case 266 of 2015

AN Ongeri, J

December 1, 2023

Between

Victoria Mwongeli alias Mwongeli Wambua

Plaintiff

and

Stanbic Bank (A Member of Standard Bank )

Defendant

Judgment

1. The plaintiff Victoria Mwongeli Wambua filed this suit against CFC Stanbic Bank Ltd (hereafter referred to as the plaintiff and the defendant respectively) seeking damages for breach of contract general damages for defamation and punitive damages on account of the defendant’s failure to honour payments in respect of a visa/debit card issued to the plaintiff by the defendant.

2. The plaintiff averred as follows in her plaint dated 3/8/2015;

3. That on or about the 24th May, 2010 the plaintiff presented visa card no. 406905…..1267 at a point of sale transaction namely Tusker Mattresses Ltd – Tuskys T-Mall Branch off Langata road, when the defendant in breach of the said contract failed, refused and/or neglected to honour payment of the plaintiff’s transaction made at the plaintiff’s instance and request as she was purchasing a fridge and its accessories.

4. Further, that the defendant declined to honour the said transaction and instead printed the defamatory words “Insufficient Funds’ and the fridge had to be carted away and the accessories returned after the card had been swiped severally and declined causing a lot of shame and embarrassment to the plaintiff, as there were very many people in the queue and getting restless as the plaintiff was holding the queue for an indefinable long time.

5. That in further breach of the aforesaid contract the defendant despite failing to honor the said transaction on 24th May 2010 still went ahead and debited the plaintiffs account with the sum of kshs.40,995/= and further maliciously continuously withheld the same for a continuous period of several months and the plaintiff was without justification denied use of her funds and also subjected to unnecessary procedures to regain the same coupled with extensive rigorous follow-up before the defendant reverted the funds to her account and or made the same available to the plaintiff.

6. Further on or about the 4th August, 2014 the plaintiff presented her visa/debit card no. 0100….9402 at a point of sale transaction namely Nakumatt Holdings Ltd ie Nakumatt Mega- Uhuru Highway in Nairobi as she was purchasing assorted goods and upon presentation of the said card, the defendant declined to honour the transaction and instead printed the defamatory words “Payment Declined”. The payment was thereby declined causing extreme embarrassment and shame from onlookers who were agitated as the plaintiff held the queue at the counter for a very long time.

7. The plaintiff who was then heavily pregnant was subjected to enormous fatigue and shame and was highly inconvenienced as she asked the cashier to swipe the card several times to no avail. The manager even came to the counter as he enquired on why the queue was so long and he brought another PDQ machine, but the card was still not honoured. The plaintiff was then put aside with the goods and taken to the customer service desk where the card was tried severally to no avail.

8. That the plaintiff was further subjected to extreme humiliation when she was told to give up the goods. Her frantic phone calls to the defendant customer service to rectify the situation also bore no fruit and as such she was highly inconvenienced as she had to seek funds elsewhere and returned to make the payment for the same.

9. That in further breach of the foresaid contract on or about the 18th January, 2015 the plaintiff presented vis card no. 0100….9402 at Haveli restaurant Ltd i.e Capital Center Mombasa Road in Nairobi when the defendant in the first 3 or so attempts declined to honour a transaction made at the plaintiff’s instance and request when she had presented the said card for payment of a meal but instead it printed the defamatory words “No Response”.

10. That the defendant without cause declined to honour the transaction in the first 3 instances but later accepted after occasioning enormous sheer embarrassment on her as she had created a scene when the cashier stood at her table swiping her card severally and even walked with her to the counter across the restaurant, to try swipe the cared severally. Despite the fact that the transaction was eventually honoured, the plaintiff had to bear embarrassing stares from patrons who were equally waiting for the PDQ machine and were getting agitated.

11. The defendant entered appearance and filed a defence dated 10/9/2015 denying the plaintiff’s claim.

12. The hearing proceeded by viva voce evidence. The plaintiff who testified as PW 1 adopted her written witness statement dated 28/2/2002 in which she stated that she is holder of current account No. 0001 0048294/01 0000039402 with the defendant bank at their International Life House Branch. On 24/5/2010 she proceeded to Tusker Mattresses Ltd — Tuskys T-mall Branch to purchase a fridge and fridge guard. She had done her prior window shopping and budgeted Kshs.40,995 for the fridge and extra for the fridge guard.

13. Prior to going to the supermarket, PW1 said she confirmed that she had sufficient money in the bank to purchase the same. On arrival at the top of the queue she presented her card and swiped the same only to be informed by the cashier that she did not have money. There we curious on lookers looking at the computer screen and where it read insufficient funds. The scene and stares were even worse when the supermarket attendant asked me "Huna Pesa nirudishe" (You don't have money should I return it).

14. She said that the cashier even called the manager, but still the transaction was declined despite the same having sufficient funds. After about an hour of holding up the queue, at the counter/ cashier and annoying other shoppers, the fridge was returned causing an embarrassing scene at the counter.

15. Thereafter she continued to do various transactions and to her surprise she realized that despite the transaction on 24/5/2010 being declined the funds were debited from her account. the amount remained unavailable to her for the ensuing months. There was no reason for the defendants to withhold her money and in turn thus breached their contract.

16. Further on 4/8/2014 she needed to purchase but this time she decided to go to the ATM first to make sure that she had money and printed a balance slip. She proceeded to Nakumatt Mega, Mombasa Road. After picking a few items, she was tired and had to leave. She proceeded to the counter swiped the card and it was rejected. This time round it printed out the words "Payment Declined". The counters were full with long queues. She asked the cashier to run the card several times to no avail. The embarrassment was awful. Shoppers were getting agitated and others even threatening to leave the queue saying "if you don't have money don't waste our time"

17. On 18/1/2015 after having lunch at Havelis restaurant, along Mombasa Road the plaintiff said she presented her card and it was rejected severally. The waiter stood there with his machine and stated the Card Has Been Rejected. It printed out the words "No Response." She had to withstand stares and glances at my table because the waiter stood there for so long and other people also needed the PDQ machine top pay their bills. Eventually, it cleared but she had suffered enough embarrassment for the transaction.

18. In cross examination PW 1 said she was issued with the visa/debit card by the defendant. She said the defendant failed to honour three transactions and that she suffered humiliation.

19. The defendant called one witness, DW 1, Edward Mwangi Wanjohi who adopted his witness stated dated 10/5/2023 in which he stated that the process for payment by debit or credit card via a Point of Sale ('I POS") device is as follows:a.The customer makes payment at a merchant's point of sale (POS/PDQ) using the bank card.b.The payment must be authorised by the issuing bank (Stanbic Bank). This involves checking that the card is active, the account has sufficient funds and has no restriction with respect to debits on the account. This request is sent from the POS/PDQ machine to the acquiring bank POS Switch, then to Visa network, then to the Stanbic bank POS/ATM switch and finally to the core banking system to validate the account. The response goes back the same route. All these devices are connected by various internet service providers.c.If the account is sufficiently funded and there is no restriction on the account, the transaction is authorised, and the transaction amount is reduced from the customer account available balance ( clause 3. 1 page 9). If the account is not sufficiently funded, the card is invalid or there is a restriction on the account, then the payment is not authorised.d.The acquiring bank is then expected to make claim of the transaction amount within a few days of the payment. At this point, the Stanbic Bank customer's account is debited and funds forwarded to the acquiring bank (Merchants bank).e.Upon making of a claim for the transaction amount by the merchant's bank, the issuing bank will do the following: -i.Debit the customer account with the transaction amount and at this point the customer will be able to see the transaction on their account statement.ii.Release the lien placed on the account on the transaction day. When such lien is placed on a customer account, the customer does not have access to the funds for this period.

20. He stated that the alleged transaction of 24/5/2010 at Tusker Mattresses Ltd T-Mall Branch by the Plaintiff was received by the core banking systems on24th May 2010 at 19:38 hours and the transaction was successfully authorized. A lien (lock) was placed on the Plaintiffs account by the core banking system for an amount of Kshs.40995/=. This reduced the available balance on the customer account from Kshs.68,441. 55/= to Kshs. 27,446. 55/=. Thereafter, a response was sent back to the acquiring bank POS machine.

21. That this response may have failed to reach the POS machine due to a timeout or any other technical issue given that the response has to pass through multiple systems as well as routed via several internet service providers. This transaction was manually reversed on 16th June 2010 at 11:10 am, 24 days after the amount was locked.

22. The Defendant reversed the transaction within reasonable time. It is therefore unfair for the Plaintiff to claim that the said amount was maliciously withheld from her. Notwithstanding the foregoing, the Plaintiff brought an action against the Defendant with regards to the 2010 transaction more than 5 years after the alleged action of defamation. The statutory limitation of time for an action for defamation is 12 months. The action against the said transaction is therefore time barred.

23. He stated that the transaction of 4/8/2014 at the then Nakumatt Mega Uhuru Highway in Nairobi. The transaction did not reach any of the Defendant's core banking system for authorization and thus no funds were locked. Under the General Terms and Conditions, the Defendant was only obliged to make payments from the Plaintiffs account upon instructions from the Plaintiff. The Defendant was thus not liable for failing to honour a transaction that did not reach it for authorization.

24. As regards the transaction of 18/1/2015, the Plaintiff indicates that the transaction did not go through the first three times but that the same was later honoured. The failure to receive a request for authorization of a transaction was an indication of network issues which were beyond the Defendant's control.

25. The parties filed written submissions as follows; the plaintiff submitted that the action of withholding her funds was malicious because the defendant while admitting that the funds were locked, does not give any reason or an apology for why they were locked yet the transaction did not go through. If anything, the defendant unremorsefully says that the funds were reversed after a period of 24 days yet it was three months because as at 15/7/2010 the money had not been refunded.

26. The plaintiff submitted that there was no justification why the defendant withheld the plaintiff’s funds and by its actions the defendant breached its fiduciary, trust relationship that existed between it and the plaintiff. That upon being issued with a card the defendant is obligated to the plaintiff to honor a transaction.

27. The plaintiff submitted that the defendant claimed that it is not responsible for any loss arising from any failure, malfunction or delay of any EFTPOS unit or ATM or supporting networks, where applicable resulting from circumstances beyond its control. However, looking at the 1st transaction of 24/5/2010 the defendant admitted that the plaintiff made request at the point of sale/supermarket; the defendant authorized the transaction and the funds were locked.

28. The 2nd transaction was equally within the defendant’s control because the plaintiff on 4/8/2014 made a request at the point of sale/supermarket; the request to pay was then sent to the acquiring bank, then to VISA, then to the issuing bank(defendant). The issuing bank (defendant herein) then sent back the information through the same channel that “the payment declined”.

29. As regards the 3rd transaction, the plaintiff argued that whereas the same eventually went through she was indeed very embarrassed by the defendant because in three instances the defendant bank received the plaintiffs request via the PDQ machine but failed to respond. They printed the defamatory words "no response".

30. The plaintiff said she was shunned by right thinking members of the public from other tables and curious onlookers as the plaintiff was made to look like a person who could not meet her financial obligations. The defendant had no justification whatsoever to have denied to honor the transaction in first three attempts as that beats the essence and fabric of having a VISA Card.

31. On Quantum the plaintiff submitted that considering the humiliation, embarrassment and hurt occasioned to the plaintiff when her transactions were declined as well as her status in society as a practicing advocate and defender of Human rights. Coupled with the fact that in the second incident she was 8 months pregnant yet she was not treated with care at the supermarket but was tossed around by the cashier and the humiliation when the manger carted away her goods the plaintiff proposed that a sum of Kshs.5,500,000 will suffice being; Kshs. 2,000,000 as general damages for libel and breach of contract and Kshs 3,500,000 as punitive damages.

32. The defendant submitted that it was not disputed that the relationship between the Plaintiff and the Defendant was governed by the terms of the Defendant's general terms and conditions for the use of the Autobank Card.

33. The Plaintiff admitted during cross examination that she signed the terms and conditions and she agreed that she was bound by the terms and conditions for the use of the Autobank produced as Defendant's exhibit 6. Under Clause 7 of the said terms and conditions of the Autobank Card, the Defendant would not be responsible for any loss arising from any failure, malfunction, or delay of any point of-sale unit or its supporting or shared networks resulting from circumstances beyond its reasonable control.

34. The defendant submitted that it is not disputed that the alleged transactions of 24/5/2010, 4/8/2014 and 18/1/2018 that none of the point-of-sale devices belonged to the Defendant. The receipts evidenced by the Plaintiff show that the point-of-sale devices used belonged to Equity Bank and KCB Bank respectively. As such, the instant case is one where the Plaintiff presented her Stanbic bank card to point of sale devices belonging to KCB Bank and Equity Bank.

35. Further that it is important to note that since the devices are connected by various internet service providers, there are multiple hops between different systems. Some banks have multiple systems within their environments handling the same card transaction and that these hops introduce multiple points of failures.

36. On the transaction dated 24/5/2010 the defendant argued that when it was made aware of that the funds were locked and that the transaction did not go through, the Defendant urgently informed the Plaintiff to fill the application to reverse the transaction.

37. The transaction was manually reversed on 16/6/2010 at 11:10 am, 24 days after the amount was locked. The Defendant reversed the transaction within reasonable time and it is therefore unfair for the Plaintiff to claim that the said amount was maliciously withheld from her.

38. On the transaction dated 4/8/2014 the defendant contended that the said transaction, did not reach any of the Defendant's core banking system for authorization and thus no funds were locked. Under the General Terms and Conditions, the Defendant was only obliged to make payments from the Plaintiff's account upon instructions from the Plaintiff. The Defendant was thus not liable for failing to honor a transaction that did not reach it.

39. On the transaction of 18/1/2015 the defendant argued that seeing that the point-of-sale devices used in all the transactions belonged to different banks which are not in any way related to the Defendant, the Plaintiff's claim therefore emanates from transactions done through shared networks.

40. That having explained the process of shared networks and challenges that may arise, the Defendant relies on clause 7 of the terms and conditions of the autobank card and submit that it should not be blamed for failure of the shared networks since it was beyond its reasonable control.

41. The defendant further submitted that the words “Payment Declined” are not defamatory in nature. the Defendant did not publish or cause to be published the words as alleged by the Plaintiff. In any event, the alleged words are not defamatory on the face of them and the circumstances disclosed by the Plaintiff do not disclose how the said words can be understood to be defamatory. The said words were not calculated to disparage or were not capable of disparaging the Plaintiff professionally, socially or otherwise.

42. There is no evidence that was adduced to show that the plaintiff’s character and reputation was injured. The Plaintiff has failed to show that the alleged defamatory statements resulted in lowering her or being shunned by others.

43. That having established that there was no breach on the part of the Defendant, the Plaintiff is not entitled to any restitution. We submit that the Plaintiff has not suffered the alleged or any damage or loss as alleged or at all.

44. It is the duty of the plaintiff to prove her case to the required standard in civil cases which is on a balance of probabilities.

45. The issues for determination in this case are as follows;i.Whether the plaintiff’s suit is statute time barred.ii.Whether the plaintiff proved her case to the required standard.iii.Whether the plaintiff is entitled to the remedies she is seeking against the defendant.

46. On the issue as to whether the plaintiff’s suit is statute time barred, I find that the claim in respect of libel was filed after one year and the same is time barred.

47. Section 4(2) of the Limitation Act is in agreement with Section 20 of the Defamation Act states as follows;“An action founded on tort may not be brought after the end of three years from the date on which the cause of action accrued: Provided that an action for libel or slander may not be brought after the end of twelve months from such date.”

48. In the case of Wycliffe A swanya –vs- Toyota East Africa & another [2009] eKLR in which court held that;“….the limitation of actions Act cap 22 Laws of Kenya, …… says in case of libel or slander no action may be filed after the end of 12 months from the date the cause of action accrued and we understand this to mean from the date the slanderous remarks are made.”

49. In the case of Bosire Ogero V Royal Media Services (2015) eLK. The court said as follows;“The law of limitation of actions is intended to bar the Plaintiffs from instituting claims that are stale and aimed at protecting Defendants against unreasonable delay in the bringing of suits against them. The issue of limitation goes to the jurisdiction of court to entertain claims and therefore if a Matter is statute barred, the court has no jurisdiction to entertain the same. And even if the issue of limitation is not raised by a party to the proceedings, since it is a jurisdictional issue, the court cannot entertain a suit which it has no jurisdiction over. See the case of Pauline Wanjiru Thuo vs David Mutegi Njuru CA 2778 of 1998”.

50. I find that apart from the claim in respect of defamation being statute time barred, the plaintiff did not establish the elements of defamation which were stated in the case ofMusikari Kombo v Royal Media Services Limited [2018] eKLR as follows;“…a claimant in a defamation suit ought to principally establish in no particular order:i.The existence of a defamatory statement;ii.The defendant has published or caused the publication of the defamatory statement;iii.The publication refers to the claimant.

51. I find that there is no evidence of publication of any statement by the Defendant to any 3rd party.

52. However, the claim in respect of breach of contract is not statute time barred. There is evidence that on 24/5/2010, the defendant withheld the plaintiff’s funds which were locked when the transaction did not go through, until the Plaintiff filled a form to reverse the transaction.

53. The transaction was manually reversed on 16/6/2010 at 11:10 am, 24 days after the amount was locked.

54. The Defendant is liable for breach of contract for withholding the funds from the plaintiff unfairly.

55. I find that there were two subsequent transactions which occurred on 4/8/2014 and 18/1/2015. The Defendant is not liable on the said transactions since the plaintiff did not prove that her funds were withheld and therefore she did not prove that the Defendant was in breach of contract on those two subsequent transactions.

56. I find that the plaintiff has proved her case only on the first transaction which occurred on 24th May, 2010 when the plaintiff presented the visa card no. 406905…..1267 at a point of sale transaction namely Tusker Mattresses Ltd – Tuskys T-Mall Branch off Langata road for purchase of a fridge and its accessories.

57. Further, I find that after the defendant declined to honor the said transaction and printed the words “Insufficient Funds” and subsequently the vendor carted away the fridge and the accessories,

58. There is evidence that the Defendant still went ahead and debited the plaintiff’s account with the sum of kshs.40,995/= and further withheld the same for 24 days.

59. The defendant did not deny that they withheld the plaintiff’s funds after failing to honor the transaction.

60. The Defendants in their evidence said none of the point-of-sale devices belonged to them. They said that the receipts evidenced by the Plaintiff show that the point-of-sale devices used belonged to Equity Bank and KCB Bank respectively.

61. As such, the instant case is one where the Plaintiff presented her Stanbic bank card to point of sale devices belonging to KCB Bank and Equity Bank.

62. The Defendant also said that the plaintiff had signed the agreement that stated that in the process of shared networks and challenges that may arise, on clause 7 of the terms and conditions of the autobank card the Defendant should not be blamed for failure of the shared networks since it was beyond its reasonable control.

63. I find that the Defendant did not enjoin any 3rd party to this suit and therefore they are liable for breach of contract since they are the ones who issued the plaintiff with the visa card.

64. There was a delay of 24 days in reversing the transaction which was prejudicial to the plaintiff.

65. On the issue as to whether the plaintiff is entitled to the remedies she is seeking, I find that the plaintiff is entitled to damages for breach of contract but not to general damages for defamation.

66. I have considered the submissions by both parties and I find that the plaintiff is seeking Kshs.2,000,000 in respect of general damages for libel and breach of contract; and Kshs.3,500. 000 as punitive damages.

67. However, the plaintiff’s suit in respect of defamation is statute time barred and further the plaintiff did not prove the elements of defamation and the same is dismissed with no orders as to costs.

68. The plaintiff is not entitled to any general damages for defamation.

69. Had the plaintiff proved her case, I would have awarded her general damages of kshs.2,000,000/= in respect of defamation and none in respect of punitive damages.

70. On the issue of damages for breach of contract, it is trite law that general damages are not payable for breach of contract.

71. in in the case of Consolata Anyango Ouma vs. South Nyanza Sugar Co. Ltd [2015] eKLR the court explained why general damages cannot be awarded in cases of breach of a contract as hereunder;“The next question is whether the appellant was entitled to damages as a result of the breach. As a general principle, the purpose of damages for breach of contract is, subject to mitigation of loss, the claimant is to be put as far as possible in the same position he would have been if the breach complained of had not occurred. This principle is encapsulated in the Latin phrase restitution in integrum (see Kenya Industrial Estates Ltd v Lee Enterprises Ltd NRB CA Civil Appeal No. 54 of 2004 [2009] eKLR, Kenya Breweries Ltd v Natex Distributors Ltd Milimani HCCC No. 704 of 2000 [2004] eKLR). The measure of damages is in accordance with the rule established in the case of Hadley v Baxendale (1854) 9. Exch. 341 that the measure of damages is such as may be fairly and reasonably be considered arising naturally from the breach itself or such as may be reasonably contemplated by the parties at the time the contract was made and a probable result of such breach (see Standard Chartered Bank Limited v Intercom Services Ltd & Others NRB CA Civil Appeal No. 37 of 2003 [2004] eKLR). Such damages are not damages at large or general damages but are in the nature of special damages and they must be pleaded and proved (see Coast Bus Service Ltd v Sisco Murunga Ndanyi & 2 others, NRB CA Civil Appeal No. 192 of 92 (UR) and Charles C. Sande v Kenya Co-operative Creameries Ltd, NRB CA Civil Appeal No. 154 of 1992 (UR))”.

72. However, the Defendant in their submissions in this case have proposed on a without prejudice basis to pay the plaintiff nominal damages of Kshs. 20,000.

73. The Defendants relied on the case of East African Standard Vs Gitau (1970)EA 678 where the court awarded Kshs.24,000 for damages and Kshs. 15,000 for nominal damages.

74. The Defendant also relied on Anson’s Law of Contract 28th Edition at page 589 which states that;(1)Every breach of contract entitles the injured party to damages tor the loss he or she has suffered”

75. Further, at page 590 where the Author states that;“Damages for breach of contract are designed to compensate for the damage, loss or injury the claimant has suffered through that breach. A claimant who has not, in fact, suffered any loss by reason of the breach, is nevertheless entitled to a verdict, but the damages recoverable will be purely nominal…”

76. In the current case I find that the plaintiff has proved that her visa card was declined and subsequently her funds were locked without justification for 24 days.

77. I find that the plaintiff is entitled nominal damages. In the case of Nyamogo & Nyamogo Advocates v Barclays Bank of Kenya [2015] eKLR, the Court of Appeal held as follows;“As for nominal damages, in the decision in Gibbons versus West Minister Bank Limited [1939]3ALLER 577, It was held inter alia that“The plaintiff not being a trader was entitled only to nominal damages in respect of the wrongful dishonor of a cheque by her bank.”Grabbe JA. in the case of Kanji Naran Patel versus Noor Essa and another [1965]EA484 at page 487 paragraph G-I had this to say:-“Nominal damage is a technical phrase which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgment because your legal right has been infringed. But the term nominal damage does not mean small damages. The extent to which a person has a right to recover what is called by the compendious phrase damages but may also be represented as compensation for the use of something that belongs to him, depends upon a variety of circumstances and it certainly does not in the smallest degree suggest that because they are small, they are necessarily nominal damages.”

78. I award the plaintiff nominal damages of Kshs. 1,000,000 for breach of contract.

79. Judgment be and is hereby entered in favor of the plaintiff against the Defendant in the sum of Kshs. 1,000,000 plus costs and interest from the date of this Judgment until payment in full.

Orders To Issue Accordingly.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 1ST DAY OF DECEMBER, 2023. ………….…………….A. N. ONGERIJUDGEIn the presence of:……………………………………... for the Plaintiff……………………………………… for the Defendant