Ntalo v Stanbic Bank (Labour Dispute Claim 176 of 2014) [2022] UGIC 82 (25 March 2022)

Full Case Text

# **THE REPUBLIC OF UGANDA IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA LABOUR DISPUTE CLAIM NO. 176/2014 ARISING FROM HCCS 135/2014**

### **BETWEEN**

**NTALO MOHAMMED CLAIMANT**

**5**

**10 VERSUS**

**STANBIC BANK RESPONDENT**

### **Before**

**15** 1. The Hon. Head Judge, Ruhinda Asaph Ntengye

## Panelists

1. Ms. Adrine Namara

2. Ms. Suzan Nabirye

**20** 3. Mr. Micheal Matovu

## **AWARD**

#### **Brief Facts**

**I**

- **25** The Claimant was an employee of the Respondent and at the time he was terminated he was stationed at Luwero branch as Manager. According to the memorandum of claim, an inter account transfer (IAT) of 52,000,000/= in respect of a one Nakyobe Lucy holder of an account at Garden City branch was brought to Luwero branch. This money was to be transferred to an account of - **30** one Tumusiime Enock. The IAT application was received by one Ezekiel Muwanga who referred it to one Nafula Claire for processing. According to the claimant since the IAT was not presented by the account holder, Nafula sought guidance from one Bazirakakye Evans, the executive banker at Garden city branch, where Lucy Nakyobe's account was operated from. Once Bazirakakye

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**35** confirmed she had talked to the account holder the claimant endorsed the transaction.

According to the Respondent's defence filed in court in response to the memorandum of claim, the Claimant between 1st and 20th 2012 while at Luwero as Head of the branch authorized payments to a total tune of

**40 45** 98,000,000/= in respect to an application purportedly signed by one Nakyobe to transfer the said sum of money to two accounts operated by one Allan John Stone Walega and one Tumusiime Enock respectively. After investigations it was discovered that the transfer was fraudulent leading to loss of the money by the respondent bank. The Claimant was subjected to a disciplinary hearing and after being found culpable he was terminated.

#### **Issues**

- 1) Whether the Claimant's employment was lawfully terminated - 2) What remedies are available to the parties.

#### **Representation**

**50** The Claimant was represented by Mr. Dhobuazi Richard as his agent while the respondent was represented by Mr. Walukaga Isaac from MMAKs Advocates.

#### **Evidence adduced.**

The claimant adduced evidence from himself alone while the respondent adduced evidence from a one Mr. Katutu, Credit manager of the respondent.

- **55** Both parties tendered in Court documents in support of their case. The evidence of the Claimant was to the effect that when one Muwanga Ezekiel received the IAT application he verified it against the bank system and considering it was from an executive branch customer he referred it to his supervisor one Nafula Gloria who was the branch consultant and second in - **60** command at the branch. Having originated from an Executive branch customer, yet brought in by a walk in customer, Nafula consulted Mr. Bazirakakye Evans who was the Execution Banker in Charge of the account in Garden City who advised her to scan and send copies of the IAT together with the ID document. Eventually according to the witness, the said Bazirakakye - **65** authorized the payment when he informed Nafula that he had talked to Nakyobe on phone.

The evidence of the Respondent witness was to the effect that it was a requirement under the procedures for processing IAT that all applications were to be presented by account holders or authorized agents. According to the

**70** witness having realized that the application was presented by non-other than the account holder, it was not necessary calling the execution banker.

## **SUBMISSIONS**

The agent of the claimant submitted that there was no evidence to show that there was any interview or interrogation of the owner of the account to show

- **75** that she did not authorize the payment on her account. According to Mr. Dhobuazi, the agent of the Claimant, the allegations of committing an offence while serving a warning letter and of the Claimant being grossly negligent in his duties when he did not adhere to IAT procedures were smuggled into the termination letter since they had not been brought to his attention. - **80** The agent submitted that the master minders of the fraud who amended the information on the Executive profile of the owner of the account so as to reflect that of the fraudster were not fired.

Relying on various cases, Mr. Dhobuazi argued that the claimant was not accorded a fair hearing as he noted that the disciplinary committee

**85** recommendation for termination was based on particulars different from the ones read over to the claimant during hearing. Mr. Dhobuazi contended that the Claimant was not availed the investigation report to enable him prepare for defence while in terminating him the respondent relied on the same.

**90** It was contended for the claimant that the suspension of the Claimant was unlawful since it was beyond the stipulated time under **Section 63(1) of the Employment Act.** Mr. Dhobuazi argued that it was discriminative to terminate the Claimant for the reason that he did not follow IAT procedures but exonerate Bazirakakye.

**95** In response to the above submission, counsel for the Respondent argued strongly that the Claimant did not discharge the burden of proof of having been unlawfully terminated. Relying on Barclays Bank of Uganda Vs Godgrey Mubiru S. C. C. A 1/1998 counsel submitted that the Claimant was not only terminated in accordance with the written agreement between himself and the respondent but also in accordance with the law. He argued that the

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**y**

100 contract provided for termination subject to notice or payment thereof and the claimant was at the same time accorded a fair hearing in accordance with court's decision in Benon Kanyangoga & others Vs Bank of Uganda, LDC 80/2014 and Ogwiko Deogratious Vs Britania Allied Industries LDC 18/2016.

He asserted that the claimant having admitted that he was given a notification

105 of hearing and also a hearing itself, and having admitted that he was notified of the charges and allowed to defend himself, he was estopped from denying the fairness of the hearing.

According to counsel, the gist of the complaint was that the claimant processed an IAT delivered to the Luwero Branch by a 3rd party that was a

110 stranger to the account and that the IAT should not have been processed at all given that the claimant was aware of the IAT procedures.

## **Decision of Court**

The duty of a banker to a customer was clearly expressed in the case of Barclays Barclays Bank of Uganda Vs Godgrey Mubiru S. C. C. A 1/98

115 When the court stated

*"Managers in the banking business have to be particularly careful and exercise a duty of care more diligently than managers ofmost businesses. This is because banks manage and control money belonging to other people and institutions, perhaps in their thousands and therefore are in a special fiduciary relationship with their customers whether actual or potential."*

In the case of **Anyango Beatrice Vs Kenya Commercial Bank, Labour Dispute Reference No. 325/2015** this court at page 7 of the Award observed that one of the roles of a bank manager was to *"Keep the banks funds safe and avoid any kind ofloss throughfraud or otherwise." The court went on to say*

125 *"Obliviously this was (is) a daunting taskfor anyone in the position ofthe Claimant given the nature ofHuman beings and thefraudulent minds that are always targeting personal enrichment."*

Consequently, the court cannot be oblivious of the existence of fraudsters who may not be detected at all by Bank managers despite a very genuine effort to prevent the fraud or the loss. The liability of a Banker therefore depends on

the extent to which he uses all means available to prevent the loss and these

means do not have to be written down but extend to what a reasonable banker would do in the circumstances.

135 In the instant case the claimant was a manager of a branch that processed an inter account transfer that later on was found to be fraudulent and exposed the bank to loss of funds. The rules were very clear that such a transfer could only be effected by either the account operator or his/her known agent. The Inter Account Transfer application was contrary to procedure presented by a third party and all the participating officers at the branch including the

140 claimant were aware of the procedure. In cross examination the claimant stated:

*"It was irregularfor an application drawn on Garden city to be brought to Luwero. Its majorly the Account holder with the mother branch who are supposed to handle the account. The only problem is that these guys who were at the branch they were treating the customer as a preferential customer and that is why they decided to refer to the main branch "*

The evidence on the record is clear that it was Nanfula Claire who, on discovering that the IAT was delivered by a third party and that it was in respect to an executive banking client who had an account at Garden City that decided to consult one Bazirakakye Evans who was the relationship manager of the executive client, Nakyobe. Both talked on phone and Bazirakakye advised her to scan the same application and send to her which she did in the following

terms:

*"As per our telephone conversation attached is transfer instruction for the above client delivered to us by another person not the owner of the account. Kindly authorize and confirm payment."*

In reply to the above communication, Bazirakakye replied

*"Kindly effect transfer, I talked to the Client Lucy on 0702283477 and she confirmed the transfer. Don't hesitate to get back to me on my mobile, our system at Garden city has been offfor the last two days."*

The minutes of the disciplinary committee in the Respondent trial bundle show that the committee noted the following mitigating factors in Bazirakakye's case:

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- " *She was supposed to use and used the system customer details in her attempt to confirm. There was no way of detecting the fraudulent change of the customer's telephone number on the system.* - *She hadjust taken over a portfolio of500 customers and she was doing her best to manage it despite personal health issues which she was going through.* The committee noted though that: - *She should havefollowed the procedure and done due diligence on receipt of the emails from Luwero, especially in relation to delivery of IAT to Luwero branch by a third party"*

175 180 As the forensic investigation report seems to suggest, the account of Nakyobe Lucy was targeted by fraudsters within and outside the respondent bank. The committee did not find Bazirakakye culpable for going ahead to confirm an IAT that she knew had been presented to a branch by a third party contrary to procedure only because there was no way for her to detect the fraudulent change of the customer's telephone number. However it is clear that she was flouting the procedure because the IAT was drawn on an account of an Executive Banker who in the words of the Claimant was entitled to

## *"preferential treatment".*

| | that In the manner the Nafula aware IAT had been same Claire, | |-----|---------------------------------------------------------------------------------------------------------| | | with treatment, the customer the preferential presented by same same | | 185 | that of the aware customer's and Bazirakakye was in charge same | | | the account, consulted Everything possible she said Bazirakakye. was | | | to In our done the customer. view when being executive assist she | | | the entitled to authorized transfer, the claimant were Nafula believe and | | | that the from a genuine customer there IAT was genuine, and was no | | 190 | to after mishandle or disappoint the executive customer need | | | if verification. different story would both The have been Bazirakakye and | | | were Nafula handling a none executive customer. | | | case of In the recent similar Muwanga Ezekiel Vs Stambic Bank, LDC | | | thereforefind 19 of 21/2014 court the "We this at Award stated no page | | 195 | claimantfor tofault after the and paying the basis processing IAT his | | | after Nafula to referred supervisor, whom the IATS Claire he | | | that not or applicant holder her establishing the was the account |

*agents, went ahead to confirm with head office and authorized him to post it. It is ourfinding that byfollowing his supervisor's authorization he was not capable of violating the IATprocedures......."*

Although Bazirakakye may or may not have been a supervisor of the claimant, she was none the less the executive Banker who the claimant relied on when she confirmed having talked to the executive customer who authorized the payment. We have no doubt in our minds that executive customers of the respondent bank were held by the bank in a preferential manner. While holding the branch manager not culpable in **KCB Bank (U) Limited, Labour Dispute Appeal 16/2019** this court at page 12 of the Award stated

*"Having not been aware of thefraud at sixth street branch and having taken greatest care to identify the recipient, at her own branch, the respondent could not be blamedfor negligently authorizing the payment. The fraud was such that any reasonable bank manager would not detect it so as tofind it necessary to call the account holder in the sending branch ".*

215 220 In the same way the Claimant in the instant case having realized that the operator of the account was an executive customer, yet the IAT was irregularly presented by a third party, took the greatest care to consult the executive banker of the account operator and genuinely relied on her to pass payment. The fraud, just like in the above case was such that neither the claimant nor the executive banker could detect it. Accordingly, it is our finding that no negligence, later on gross negligence nor dishonesty was disclosed during the hearing and the termination was therefore unlawful.

225 The next and last issue is **what remedies are available to the parties.**

Relying on the fact that in cross examination the claimant did not know how much he was claiming or praying for in form of repatriation, severance or terminal benefits, counsel for the respondent argued that there was no legal basis to award the claimant any special damages since he did not prove any.

The Claimant in his memorandum of claim made a number of prayers. Since they were pleaded we shall discuss them as they were presented to court by the agent of the Claimant in his submission.

#### 235

#### **a) Repatriation**

**Section 39** of the Employment Act provides for repatriation but only for as long as the termination is effected under certain circumstances. The circumstances of termination in the instant case do not comply with the said Section just like those in the cases of **James Higaye Vs Eco Bank (U) Ltd LDR 06/2017 and Lubega Moses Vs Holly Cross Orthodox Hospital, LDR 118/2018** did not comply. Accordingly, this prayer is denied.

#### **b) Severance Allowance**

245 **Section 87 (a)** provides for severance allowance for a person who has worked for more than 6 months. The agent of the Claimant contended that the Stanbic Bank policy and the Union agreement provided for 3 months per salary per year worked. The claimant had a duty to highlight and show in his submission the provision either in the Union agreement or in the severance policy relating to severance. It is not the duty of Court to read

- 250 255 the whole policy so as to find the relevant provision. In the absence of guidance from the claimant, this court shall use the method, stipulated in the case of Donna Kamuli Vs DFCU Bank L. P 02/2015 to the affect that an employee is entitled to 2 months' pay per year worked. The claimant started working in 2003 and was terminated on 5/4/2012 and so he worked for 9 years. At the time of termination, he earned 1,952,245/= and so he

#### **c) Outstanding home loan**

shall be paid 17,570,205/=.

The recovery of any loan by an employee from an employer is only possible when the employee proves that the loan was wholy secured by salary installment payment and it was intended to be so by both the employer and the employee, (see **Florence Mufumba Vs Uganda Development Bank L. D. C 138/2014) which relied on Okello Nymlord Vs Rift Valley Railways C.s 195/2009.** In the absence of evidence of a salary loan agreement and in the absence of evidence that it was meant to be purely payable by salary installment, the prayer is denied.

# d) **General damages**

Mr. Dhobuazi argued on behalf of the claimant that the claimant would have worked until retirement since he was employed on permanent terms, if it were not for unfair termination. He asserted that as result of the

- 270 unlawful termination, the claimant suffered anxiety, loss of self-esteem emotional/ metal distress embarrassment and inconvenience for being deprived to tend for his family to which we agree. We also take notice of the fact that the claimant was on an illegal suspension for over 1 month contrary to **Section 63 of the Employment Act.** - 275 Taking into consideration all these factors we hereby Award the Claimant 30 million as general damages.

# **Interest:**

Because of the inflationary nature of money, we hereby grant a 15% per annum interest on the sum awarded from the date of the Award till payment in **full.**

**In** conclusion the claim succeeds with the following declarations/orders.

- a) The Clamant was unlawfully and wrongful terminated. - b) The Claimant shall be paid 17,570,205/= as severance allowance. - c) The Claimant shall be paid 30,000,000/= as general damages. - 285 d) The above sum shall attract interest at 15% per year from the date this Award till payment in full. - e) No order as to costs is made.

# **Delivered** & **signed by:**

**1.** Hon. Head Judge Ruhinda Asaph Ntengye

) •^290

# **PANELISTS**

- 1. Ms. Adrine Namara - 2. Mr. Michael Matovu - 3. Ms. Susan Nabirye

# **Dated: 25/03/2022**

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