Stanbic Bank Uganda Limited v Kisolo (Civil Appeal No 11 of 2012) [2013] UGHC 259 (30 April 2013)

Full Case Text

# THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA AT KAMPALA

#### **CIVIL DIVISION**

### CIVIL APPEAL NO 11 OF 2012

(Arising from Mengo Civil Suit No. 1592 of 2009)

## **STANBIC BANK UGANDA LIMITED ::**

## **VERSUS**

**ROBERT KISOLO ::** PONDENT

### **BEFORE: HON. JUSTICE ELDAD MWANGUSYA**

#### **JUDGMENT**

This is an appeal from the judgment of Her Worship Juliet Nakitende, Magistrate Grade I delivered at the Chief Magistrate Court Mengo on 16th January 2012.

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The appeal is on the following grounds:-

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1. The learned trial Magistrate erred in law and fact when she failed to subject the entire evidence on record to scrutiny and found that the Appellant should refund UGX 2.300.000= to the Respondent.

2. The learned trial Magistrate erred in law and fact when she relied

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on an internal forensic report that was not approved but the

appellant's management to make the finding that the appellant refunds UGX 2.300.000= to the Respondent.

3. The learned trial magistrate erred in law and fact in awarding interest on UGX 2.300.000= at the rate of 25% from the 27th day of February 2009 until payment in full. '

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The appellant prayed that the appeal be allowed, judgment and orders of the lower court be set aside.and that the Respondent meets the costs, in this court and the court below. .

The background to this appeal is briefly that the Respondent maintained an Account at the appellant's Branch at IPS. On *ID* 27.02.2009 the Respondent went to the bank to withdraw some money and according to him found that a sum of shs 2.300.000= had been wrongly debited on his account. He immediately informed management of the branch who in turn referred him to the Headquarters of the Respondent where an investigation into his account revealed that an employee of the appellant was using the /J5 account to make fraudulent transfers onto the account. In appreciation of the information the Respondent had revealed, the appellant promised a gratuitous reward of shs 2.300.000= but declined to reimburse the plaintiff with the sum of 2.300.000= wrongly debited on his account which gave rise to this suit.

In their defence the appellants\* explained the transactions on the Respondent's Account stating that the Respondent's Account was fraudulently credited with a sum of shs 2.300.000= which was reversed with a debit of the same amount. At the trial the following issues were framed.

1. Whether the plaintiff has a cause of action against the defendant. . 2. Whether the defendant is liable to refund to the plaintiff the sum of shs 2.3 million debited from his account on 27.02,09. f 3. What remedies are available to the parties.

The first and second issues were resolved in favour of the plaintiff. The trial magistrate stated as follows:-

*"The first issue of cause of action was rightly pointed out by both parties that it was settled in favour of the plaintiff when the defendant raised a preliminary objection before the hearing ofthis matter.*

*On the second issue whether the defendant is liable to refund the sum of shs 2.3 million debited from the plaintiff's account on 27.02.2009.*

*Upon evaluation of the whole evidence on record, I do find that it is not in dispute that shs 2.3 million was debited from the plaintiff's account on 27.02.2009, see P. Exhibits*

*As per exhibit P.6 a'letter written to the plaintiff by the defendant legal advisor Mr. Elijah Omagor he stated in para 3 that:-*

*"it was our final position that your client was not ..entitled, to.the money,and the. bank.had. no. basis, for making the refund unless of course he could produce sufficient evidence to show that the money was regularly deposited into his account and he was not merely a beneficiary of a fraud against the Bank."*

*It was the evidence and finding of DW.2 Andruma Richard that at different times the plaintiff's account was credited with money exh. P.8 and Exhibit D.l.*

*As per exhibit D.l, DW.2 recommended the refund of shs 2.3 million to the plaintiff upon finding that he was not party to the fraudulent dealing of their own staff Ms Faridah Mayanja, in the same spirit I do find that the defendant should refund the plaintiff's shs 2.3 million that it debited from his account on 27.02.2009 "*

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After resolving the 1st and 2nd issues in favour of the plaintiff the trial magistrate ordered the defendant to refund the shs 2.3 million with interest at a rate of 25% from the 27.02.2009 till payment in full and cost to the suit. Hence this appeal.

. . It should .be .observed, that from the-judgment of the. trial- magistrate- . the source of the funds that were credited to the Respondent's account and then reversed was not addressed. An investigation into the - • circumstances under which the Respondent's account was credited and then debited with a sum of shs 2.300.000= was prompted by the Respondent's letter dated 28th February 2009 where para 2 and /O thereof states as follows:-

*of UGX account 15, "On 27th February 2009, there was unknown credit of UGX 2.300.000= to my account on the same date a debit of UGX 2.300.000= was passed and second debit 2.300.000= was again' passed reducing my balance by UGX 2.300.000=.*

*I expected my balance to UGX 3.723.202 as at 27th February, 2009. When I checked my balance on the ATM on 27th February 2009 only shriwed UGX^l,-733.202=-onlyas shortfall of UGX Z. SUU. U&G-.'\**

In his plaint 'the Respondent acknowledges that following investigations into what he describes as unauthoris ed transaction on his account the appellant Bank "unearthed fraudulent dealings by its own employee." The findings of the appellant's investigation in respect of the Respondent's account were contained in a report exhibited as g; Exh. DI where the following was recorded

*0140544607201 ^'kidolo Robert (i3'9sio b()d) - ^ Robert was self employed money lender; he revealed that he had' been lending money to Farida since April 2008 which she would promptly pay back with interest through his account. Recently he discovered suspicious transactions on his account which he had to report to Stanbic Bank for clarification. He did not know that Farida was paying him by fraudulent means. ^fi^er^aidy^. Feffrua^^^b^hicif^hd^h^^^^^^^tn^* **' . ». Ct-....- '. . . . ... ^eBlwar^20O9-;^3.**

*When interviewed, Farida admitted embezzling Bank income which she diverted to a friends'/relatives' account - " over a period of- time but could not recall the total-amount involved t/yhichshebrbm^ " (Annexture E).* 10m (ZAR 50,000) each which Farida's spouse issued in favour of the bank.

Farida was suspended from duty with effect from 27th February 2009 pending conclusion of the investigations and subsequent disciplinary hearing ......."

In his testimony the Respondent testified as follows:-

"I had discovered a suspicious transaction on my A/C on 25.02.2009 I drew cash from my account.

After the $2^{nd}$ withdrawal a debit advice slip I received showed that my A/C balance was in excess of 2.3 million shillings.

Again on 26.02.2009 I went to Auto Machine IPS Branch requested for a mini statement. After receiving the mini statement on 26.02.2009 I discovered that on top of the excess 2.3 million of 25.02.2009 another 2.3 million had been credited into my account on 26.02.2009 and thereafter 2.3 million shillings was debited/reversed twice from my A/C bringing back the normal balance at around 4 million shillings. The fact that it wasn't the first of its kind, it had occurred on my A/C on 21.01.2009 where 2.3 million shillings was credited and reversed on the same

day. As a former Banker, I became concerned to why my client (sic) was being credited and debited without knowledge.........."

In cross examination he stated as follows:-

"I discovered on 27.02.2009 had been taken away from my A/C. I went to the Manager IPS Branch who referred me to IBC. I didn't know who was tampering with my A/C. I am not telling lies.

The bank knows who was tampering with my A/C on top of the 2.3m/= in excess, there was another credit of $\mathbb{Z}$ $2.3m/$ = (26.02.2009) there were 2 debits of 2.3. the A/C come back to normal.

The letter was written by the defendant (P Exhibit 7) on 27.02.2009 the A/C was credited once but debited twice that means my money went away. On 15.05.2009 my A/C was credited with a sum of $2.3m/$ =...."

The investigation by the appellant revealed that the A/C of the Respondent was being used by a fraudster who according to the report fleeced them of UGX 13.950.000=. The transactions in which

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the figure of shs 2.300.000= features over a period of time involved crediting the Respondent's account which he accessed.

It happened that on 25.02.2009 and 26.02.2009 the Respondent found that there were credits on his account which were reversed by the appellant. According to DW.2 the reverse was by Faridan before x. she was suspended from the Bank. If as the Respondent claims he knew nothing about these transactions my observation is that they are not relevant to the case and even if they were I would still find that the appellant was entitled to recover the funds. But in this case the transaction was reversed by the alleged fraudsten herself. This leaves the shs 2.300.000= which was debited on 27.02.2009 but according to the appellant was paid to the Respondent on 15th May 2009. According to the Respondent the said amount was paid to him as a reward which was promised to him by the appellant for the information that helped them unearth a fraud. In a letter from M/s Angeret & co Advocates 15 dated 12th June 2009 which was tendered as P. Exh. 6 this issue was raised and in particular para 3, 4 and 5 of the letter which I quote hereunder:-

"You also recall that $I$ and my client attended a meeting on the 7th floor on 27th May, 2009, which was attended by Mr. Oder, Mr. Kinamuka, Mr. Maxima and Mr. Omagar on behalf of the Bank. Buring the meeting we were informed that the sum of shs 2.300.000= credited to our client's account on $15th$ May, 2009 was in fact the appreciation which the Bank had promised and not a refund of the LD

amount wrongly debited from his account as we had thought. We were also advised that the Bank's position was that our client should recover the amount debited from his account from your former staff one Faridah.

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It was then agreed that the Bank would communicate this position in writing to us through the legal Department by Monday 1st June, 2009. However our Mr. Omagor several times on phone who promised to write but we have not received the letter so far.

This is therefore to remind you to send the letter as agreed to $\mathcal{L}$ enable us to advise our client on the recovery of shs 2.300.000= wrongly debited from his account."

The response from the Appellant was contained in a letter dated $15^{th}$ June, 2009 tendered as P. Exh. 7. The letter is signed by Elijah Omagor, Advisor Legal who according to P. Exh.6 had attended the 15 meeting in which the Respondent had been informed that the shs 2.300.000= credited on his account on 15.05.2009 was his reward and **not** arefund of the amount wrongly debited. In this response Mr. Omagor does not mention this position as allegedly agreed in the meeting. This is what was communicated by Mr. Omagor.

*\*'We make reference to your letter dated 12th June, 2009 which we respond as hereunder.*

/l.s *advised in our letter dated 24<h April 2009, the monies claimed by your client were fraudulently credited into your client's account. The Fraudster has since confessed that she , \ fyj) had a private money lending arrangement with your client and the money was being fraudulently diverted to his account to pay off her debts with your client.*

*It is therefore our final position that your client was not entitled to the money and the Bank had no basis for making the refund unless of course he could produce sufficient evidence to show that the money was regularly deposited into his account and was not merely a beneficiary of a fraud against the Bank.*

*That notwithstanding a payment of UGX 2.300.000— was made to Kisolo Bobert.*

*We hope that this puts the matter in its properperspective. "*

From the tone of this letter the appellant made a payment to the Respondent's account notwithstanding that the money had been fraudulently credited to his account. There is no suggestion from this letter that the money was a reward. I do not think that it is by coincidence that the amount deposited on the Respondent's account was the exact amount that had been debited on the account.

There is no evidence as to the decision that a reward was to be given 5 to the Respondent and how much? If the Respondent has any claim against the appellant the claim should be for a reward if at all because the payment to his account on 15.05.2009 settled this matter according to the letter from Mr. Omagor. This disposes of this appeal.

In conclusion I find merit in the appeal which is allowed. The judgment $\mathcal{L}$ of the lower court is set aside. Respondent will meet the costs of the appellant in this court and the court below.

**Eldad Mwangusya JUDGE** 30.04.2013

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**CLICE**

Delivered by the Deputy Registrar this ..30th.. day of.. April.. 2013

Asiimwe Tadeo **Ag. DEPUTY REGISTRAR**