FELIX RUTAZENGELERA v CO-OPERATIVE AND RURAL DEVELOPMENT BANK 1996 TLR 382 (CA)

 FELIX RUTAZENGELERA v CO-OPERATIVE AND RURAL DEVELOPMENT BANK 1996 TLR 382 (CA)

Court Court of Appeal of Tanzania - Dar es Salaam

Judge Nyalali CJ, Makame JJA and Ramadhani JJA

B

CIVIL APPEAL NO 22 OF 1996

23 September 1996 C

(Appeal from judgment and decree of the High Court of Tanzania, Dar es Salaam,

Chua J)

Flynote

Evidence - Presumptions - Entries in bankers' books - Effect of s 77 of Evidence Act

1967 D

Banking - Negligence by banker - What constitutes - Failure to act on instructions of

customer where court order had frozen account

Banking - Effect of court order on deposit account

-Headnote

The appellant had instituted suit against the respondent bank in the High Court at

Dar es E Salaam claiming damages as a result of negligence by the respondent bank

in opening a deposit account as instructed by the appellant. The High Court dismissed

the suit and the appellant accordingly noted an appeal contending that the trial Judge

had erred in holding that the respondent was not negligent in failing to open the

deposit F account. It appeared from the evidence that the appellant was a customer

of the respondent bank and had deposited with the bank a personal cheque in an

amount of Shs 14 million drawn on his current account with another bank. The

money was part of a decretal sum paid to him by the High Court as a result of a suit in

another matter. One of G the judgment debtors in that matter appealed to the Court

of Appeal against the decision and on 29 December 1987, on the very day on which

the appellant deposited the amount into his current account, an application for stay of

execution was filed in respect of the pending appeal in that matter. The appellant

instructed the respondent bank to transfer the amount into a deposit account durable

for a month but the H respondent failed to comply with this instruction. On 20

January 1988 the High Court made an order that pending the application for stay of

execution, monies were to remain where they were and the status quo was to be

maintained. The respondent bank relied in part on a ledger card which made

reference to a block on the funds in terms of a court I order dated 6 January 1988.

Counsel for the appellant submitted that the presumption under section 77 of the

Evidence Act, 1967, applied only

1996 TLR p383

to matters in the ordinary course of banking business and that in the present case the

A presumption did not arise because it was not part of a banker's business to receive

court orders.

Held:

(i) While it was true that it was not part of a banker's business to receive

any court B orders, it was certainly the law that the account of a bank's customer

was liable to court attachment by garnishee order and the law in Tanzania was similar

to that applicable in England. The presumption concerning the relevant entries was

rebutted by two important factors, viz the court record produced at the trial disclosed

no court order prior to that of 20 January. Neither was there C any trace of either

the office file or the purported order mentioned in the bank's ledger card. In the light

of the available evidence there could be no other conclusion than that the respondent

bank received no court order prior to the order made on 20 January.

(ii) On the available evidence, the order must have been communicated to

the D respondent bank soon after it was made, ie on or about 20 January 1988.

(iii) The effect of the order was that the deposit account in favour of the

appellant was neither to be operated by the appellant nor to be utilized by the

respondent bank and the result was that it frustrated the contract between the

appellant and E the respondent bank before the date when the deposit account was

expected to mature. The appellant's claim was accordingly flawed.

Case Information

Appeal dismissed. F

Semgalawe for the appellant.

Kalunga for the respondent.

[zJDz]Judgment

Nyalali, CJ:

Felix Rutazengelera, hereinafter called the appellant, instituted a suit in the High

Court at G Dar es Salaam in respect of a sum of money which he had deposited with

the Cooperative and Rural Development Bank, hereinafter called the respondent

bank. The suit was for damages allegedly suffered by the appellant as a result of

negligence by the respondent bank in opening a deposit account as instructed by the

appellant. The High H Court, Chua, J dismissed the suit with costs. The appellant

was aggrieved by that decision, hence this appeal to this court. Mr Semgalawe,

learned counsel, appears for the appellant in this appeal, whereas Mr Kalunga, learned

counsel appears for the respondent bank. I

The memorandum of appeal contains two grounds which state as follows:

1996 TLR p384

NYALALI CJ

A `1. The Trial Judge erred in fact and in law in holding that the respondents

were not negligent in failing to open a deposit account for the appellant as they were

complying with court orders and therefore the appellant was not entitled to claim

damages and interest.

2. The Trial Judge erred in law deciding that there is no merit in the

prayers of the appellant, one B being loss of profit in the appellant's business, the

reason being that the Trial Judge wonders as to why the appellant took no steps to

raise money from his other business to mitigate such a loss, and that the Trial Judge

was left with the impression that the appellant C had deliberately inflated the value

of the orders that the appellant missed and the profit that could have accrued if the

appellant had been able to supply the timber.'

In the course of hearing this appeal, the second ground was withdrawn by counsel for

D the appellant. From the proceedings both in this court and the court below, it is

apparent that the following matters are not in dispute between the parties. At the

material time, the appellant was a customer of the respondent bank, where he had a

current account at its Lumumba branch. He was also a customer of the National Bank

of Commerce where E he had another current account at its City Drive Branch. On

29 December 1987 the appellant deposited a sum of Shs 14,000,000/= by personal

cheque drawn on his current account with the National Bank of Commerce. The

money thus deposited was part of a decretal sum of Shs 16,474,176/70 paid to him by

the High Court at Dar es F Salaam, being the proceeds of a decree made in High

Court Civil Case No 92 of 1982, in which the appellant, using the name of Felix

Bwogi, was the decree holder. One of the judgment debtors in that case, namely the

Registrar of Buildings, appealed to the Court of Appeal against the decision of the

High Court. On 29 December 1987, that is the very G day when the appellant

deposited Shs 14,000,000/= in his current account at the Lumumba branch of the

respondent bank, an application for stay of execution was filed in the High Court by

the Registrar of Buildings in respect of the pending appeal. H

There is also no dispute that after depositing the cheque of Shs 14,000,000/= the

appellant instructed the respondent bank to transfer that money into a deposit

account durable for a month. The respondent bank failed to comply with the

appellant's instructions. On 20 January 1988, the High Court, Kyando, J made the

following interim I order in respect of the application for stay of execution:

1996 TLR p385

NYALALI CJ

A `The application for stay of execution is indeed filed so until it is determined,

monies are to remain where they are and status quo is to be maintained as Mr Kesaria

has prayed for.'

There is also no dispute between the parties that thereafter there was a series of

communications between the appellant and the respondent bank in the course of

which B the appellant was informed by the respondent bank to the effect that his

instructions were not complied with because of a court order. There is also no dispute

that the appeal by the Registrar of Buildings was eventually heard by the Court of

Appeal. The appeal was partly successful. On 7 December 1989, the High Court

directed the C respondent bank to transfer to the High Court a sum of Shs

16,474,176/70 standing to the credit of the appellant at the bank. The respondent

bank transferred only what it had in favour of the appellant, that is, the sum of Shs

14,000,000/=. D

With regard to matters which are in dispute between the parties to this appeal, it is

the appellant's case that the respondent bank was duty bound to comply promptly

with appellant's instructions to open a deposit account for the sum of Shs

14,000,000/=. It is E part of the appellant's case that there was no court order which

prevented the respondent bank from complying with the relevant instructions, but

the respondent bank negligently failed to do so thereby causing the appellant to suffer

material loss.

The respondent bank's case on the other hand is to the effect that soon after the

appellant had given instructions in respect of the deposit account, a court order was F

received blocking the appellant's current account, with the result that the respondent

bank was prevented from complying with those instructions.

The first important issue for consideration and decision in this case is whether the G

respondent bank received any court order prior to the order made by Kyando, J on 20

January 1988. This issue was raised at the trial and in his judgment, the learned Trial

Judge stated:

`Learned counsel for the plaintiff Mr Ukonga drew the attention of the court

to the fact that the defence H had failed to render in court the order that the High

Court had passed whose effect was to freeze the account of the plaintiff. I find the

omission to have been a serious slip on the part of the defence. Nevertheless the

omission was cured by the tendering of the court record which left no doubt at all on

the fact that the plaintiff had been awarded the sum of 16.4 million shillings and that

on 20 January I 1988 the High Court ordered that the money should be left where it

was ...'

1996 TLR p386

NYALALI CJ

It is apparent that the learned Trial Judge found no evidence to suggest that a court

order A existed prior to the order made on 20 January 1988. In the course of hearing

this appeal, Mr Kalunga, learned counsel for the respondent, pointed to a document

produced at the trial as Exhibit D2, being a copy of a ledger card in respect of the

appellant's current bank account. The ledger card contains four significant

handwritten B entries at different positions which read as follows:

Care. No withdrawal refer to chief manager 6 January 1988

No withdrawal C

Block as per High Court Order Ref No MC/S/Gen1/25 dd 6 January 1988

BLOCKED

Account closed and balance remitted to the High Court of Tanzania Box 9004

DSM vide our BP/Cheque No BP/012929 dd 14 December 1989 D

Garnishee Order dd 7 December 1989 from High Court of Tanzania regarding

civil case No 92/82.

Mr Kalunga has submitted to the effect that these handwritten entries are evidence of

the E existence of a court order made on 6 January 1988 by virtue of the provisions

of s 77 of the Evidence Act, 1967 which states:

`Subject to this Act, a copy of an entry in a banker's book shall in all legal

proceedings be received as F prima facie evidence of such entry and the matters,

transactions and accounts therein recorded.'

Mr Semgalawe has counter submitted to the effect that the presumption under s 77

applies only to matters of ordinary course of banking business, and that in the present

case the presumption does not arise because it is not part of a banker's business to G

receive court orders.

With due respect, we think Mr Semgalawe's counter submission is misconceived.

While it is true that it is not part of a banker's business to receive any court orders, it

is H certainly the law that the account of a bank's customer is liable to court

attachment by Garnishee Order. The law in this country is similar to that applicable

in England. According to EP Ellinger and E Lomnicka in Modern Banking Law, 2nd

ed, p 339--340 the learned authors state: I

`At one stage there were doubts regarding the applicability of garnishee

proceedings to accounts maintained with banks. In the case

1996 TLR p387

NYALALI CJ

A of current accounts the doubts were based on the fact that payment was due

on demand ... The point was resolved in Joachimson v Swiss Bank Corporation, where

Bankers, L J observed that the service of the garnishee notice on the bank operated as

a demand.... From a commercial point of view, however, it is sound to enable a

judgment creditor to levy execution against the balance standing to B the credit of

his debtor's current account, as in practice the funds serve the same purpose as cash.'

The same learned authors state at p 340 in respect of deposit accounts: C

`... For the purpose of garnishee proceedings such accounts were traditionally

divided into fixed deposits maturing at an agreed time, and deposit and savings

accounts the balance of which was repayable subject to the giving of a minimum

period of notice by the customer.... There was authority D for the general view that

a debt owed by a bank to a customer and maturing at a given future date was `owing

and accruing' and could be garnisheed, but that the amount could not be claimed by

the garnishment creditor from the bank before the agreed maturity date ...'

That being the position, it is natural to expect a bank which receives a garnishee

order, E to make an entry in its books in respect of a customer's account which is

subjected to a garnishee order. The crucial point in this case, however, which ought

to have been addressed by counsel for the appellant, is whether the circumstances in

this case do F not rebut the presumption arising under s 77. We are satisfied that the

presumption concerning the relevant entries is rebutted by two important factors.

First, the court record which was produced at the trial disclosed no court order made

by the High Court before the order by Kyando, J. Second, there is no trace of either

the office file or the purported order Ref No MC/S/GEN1/25 dd 6 January 1988 which

is mentioned in the G bank's ledger card. In the light of the available evidence there

can be no other conclusion other than that the respondent bank received no court

order prior to the order made by Kyando, J and we so find.

The next important issue is whether the Order by Kyando, J was received by the H

respondent bank, and if so, what was its legal effect?

Mr Semgalawe, learned counsel for the appellant has submitted to the effect that

there is no evidence to suggest that the court order made by Kyando, J on 20 January

1988 was received by the respondent bank. With due respect we think there are two

pieces of I circumstantial evidence to the effect that the court order must have

1996 TLR p388

NYALALI CJ

been received by the respondent bank. The first piece relates to the circumstances and

A the nature of the court order itself. The order was interlocutory and was made

pending the hearing of the application for stay of execution of court decree, pending

appeal. Furthermore, the order was made in respect of money which was apparently

moving B fast. According to the documents in the court record produced at the trial

as exhibit D2, the appellant was paid the sum of Shs 16,474,176/70 on 24 December

1987 as per payment voucher No 127/12 in response to his letter dated 23 December

1987. Between C the date of that payment to the date of the application for stay of

execution filed on 29 December 1987, that money moved from the High Court to the

National Bank of Commerce and thence, a substantial part of it, to the respondent

bank. It is obvious that the order by Kyando, J was a matter of urgency. We have

asked ourselves whether under those circumstances it is likely that the order by

Kyando, J would not be D communicated to the respondent bank.

The second piece of evidence concerns the conduct of the appellant. In his letter

dated 22 June 1990 (Exhibit 7F) addressed to the Chief Manager of the respondent

bank, the E appellant apparently conceded that the order by Kyando, J influenced

the conduct of the parties. The fifth paragraph of that letter states:

`I only honour the court order issued by Kyando, J and this clearly means that

all the transactions that took place from 31 December 1987, to the date of the

aforesaid order were illegal, as far as two F accounts above referred were concerned.'

Furthermore, in the last paragraph but one, the appellant wrote:

`Finally, I refer to your letter of 24 May 1988 under ref No

CRDB/General/TBM which to me was a G confession of your own negligence,

because there was no instruction or order before 20 January 1988. I also refer you to

my letter dated 21 May 1988, in which I asked you to give me a certificate of my fixed

deposit account, but you neglected to do so.' H

We have carefully evaluated these two pieces of circumstantial evidence, and we are

satisfied in our minds that the order by Kyando, J must have been communicated to

the respondent bank soon after it was made-that is-on or about 20 January 1988. I

We turn now to the legal consequences of that order. It is established law that the

relationship between a bank and its customer is

1996 TLR p389

NYALALI CJ

contractual. As stated by E P Ellinger and E Lomnicka in their Modern Banking Law,

2nd A Ed, p 108:

`The essence of the contract of banker and customer is, therefore, the bank's

right to use the money for its own purposes and its undertaking to repay an amount

equal to that paid in, with or without B interest, either at call or at a fixed time.'

Under the circumstances of this case, we have no doubt that a contract existed

between the appellant and the respondent bank since 29 December 1987 in respect of

Shs C 14,000,000/= in a deposit account which was to mature in a month's time. The

question arises whether the deposit account matured as agreed or whether it was

frozen as asserted by Mr Kalunga, learned counsel for the respondent bank.

Unfortunately the expression `freezing a bank account' does not seem to have been

D judicially defined. However, we are certain in our minds that the terms of the

order made by Kyando, J that `... the monies are to remain where they are and status

quo is to be maintained ...' means that the deposit account in favour of the appellant

was neither to be operated by the appellant nor to be utilised by the respondent bank.

E

That being the position, we are of the considered opinion that the effect of the court

order was to frustrate the contract between the appellant and the respondent bank

before the date when the deposit account was expected to mature on or about 29

January 1988. F The principle of frustration of contract is of course well-known

under the common law. That principle has not been abolished in this country by the

Law of Contract Ordinance, Cap 433, which appears not to cover all aspects of the law

of contract. The question which arises here is what was the fate of the appellant's

rights in the money deposited G under the frustrated contract? We are of the view

that the appellant's rights in the principal sum and in any interest that may have

accrued, were attached by the garnishee order. This means that from 20 January 1988,

all that money standing to the credit of the appellant but not exceeding the sum of

Shs 16,474,176/70 was subject to further directions of the court. Those directions

came on 7 December 1989 when the H money was required to be remitted to the

High Court. There is no evidence to show that there was any other money not

covered by the court orders.

It is thus evident that appellant's claim is flawed. This appeal must fail and we hereby

dismiss it in its entirety with costs. I

1996 TLR p390

A