THE NATIONAL BANK OF COMMERCE v SAIDI ALLY YAKUT 1989 TLR 119 (HC)

 THE NATIONAL BANK OF COMMERCE v SAIDI ALLY YAKUT 1989 TLR 119 (HC)

Court High Court of Tanzania- Mwanza

Judge Mwalusanya J

20 July, l989 E

Flynote

Banking - Collecting banker - Bank allowing customer to draw against uncleared

effects - Bank manager representing to the customer that effects have been cleared -

Duty of the banker. F

-Headnote

At the instigation of a branch manager of the National Bank of Commerce, a country

cheque was drawn in favour of the defendant, deposited and effects withdrawn before

clearance. The bank wanted the customer to agree that the amount withdrawn be

treated as an overdraft. On the customer's refusal to so agree the bank sued him to

recover the G amount of the 'lost' cheque.

Held: (i) A collecting bank owes a duty of care to its customers in that it should

conduct its activities with care and circumspection;

(ii) from facts of the case the bank was either grossly negligently or acted H

deliberately to incur such loss.

Case Information

Judgment for the defendant.

Cases referred to. I

1. NBC v Parma Shoe Co. Ltd Ci v Appeal No. ll of l988 (unreported).

1989 TLR p120

MWALUSANYA J

Banturaki, for the Plaintiff A

Rugarabamu, for the defendant

[zJDz]Judgment

Mwalusanya, J.: The plaintiff the National Bank of Commerce, is claiming from the

B defendant Saidi Ally Yakut shs.283,684/40 which is an outstanding sum in the

defendant's current account by way of an overdraft at Karagwe Branch of the N.B.C.

It is said the defendant fraudulently obtained overdraft facilities at the said bank to

the tune of sum of money that is claimed. The defendant who was represented by

counsel Mr. C Rugarabamu denied that he ever made an application for an overdraft,

let alone a fraudulent application for an overdraft. The plaintiff was represented by

counsel Mr. Banturaki from the Tanzania Legal Corporation.

The sole witness for the plaintiff was Mr. Edward E. Mbogo (PW l) who is the current

branch manager of N.B.C. at Karagwe since May l985. Prior to that, the branch D

manager was one Mr. Madaha. It is common ground that the defendant has a current

account with the N.B.C. at Karagwe. According to the records in possession of PW 1

the defendant on 5/5/l984 deposited a sum of shs.279,500/= in his account using a

country cheque of that sum that was drawn by a customer having an account at

N.B.C. E Market Street, DSM. Then on 7/5/l984 the said defendant was allowed to

draw the shs.279,000/= from his account using his cheque which is Exh.D in court.

The witness said that they paid the defendant before his country cheque was cleared

in DSM; and that was because they trusted the defendant. F

Then the witness PW1 testified that they sent the country cheque to Market Street,

DSM for clearance. But it is said the said cheque never reached DSM, as it got lost.

According to para 6 of the plaint it is said: 'That the cheque mentioned above was G

destroyed at Karagwe Branch and never reached the paying Bank, Market Street,

DSM.' So we can't tell if it was sent to DSM or it was lost at N.B.C. Karagwe Branch.

Be that as it may, at the end of l985, it was decided to contact the defendant so that he

accepts that sum to be an overdraft. H

However the defendant refused to accept the sum of shs.279,500/= as an overdraft. So

that is why the bank filed this suit.

As earlier indicated the defendant in his defence emphatically denied that he ever

applied for an overdraft let alone a fraudulent application for an overdraft. He

testified that I throughout the transactions he dealt with the branch manager of the

bank one

1989 TLR p121

MWALUSANYA J

Mr. Madaha. He said that on 5/5/l984 the bank manager Mr. Madaha went to see him

A with his relative who was allegedly coming from Shinyanga. It is said this relative

of the bank manager was staying at the Guest House of the defendant in Room 5. It is

further stated that the bank manager revealed that his relative wanted some cash and

had a country cheque for shs.279,500/= drawn at the Market Street, N.B.C. DSM. The

B defendant said that he told the manager that he had then only shs.l00,000/= cash,

which he handed over to the manager, and the manager handed it over to his relative.

At the same time it is said that the bank manager deposited the shs.279,500/= in the

defendant's account vide paying-in-slip which is Exh.B in court. It is said two days

later, C that is on 7/5/l984 the bank manager phoned the defendant stating that the

country cheque he had deposited had been cleared in DSM and so he could come at

the bank and draw the shs.279,500/= and pay the relative of the manager the

outstanding sum of shs.l79,500/=. The defendant duly went to the bank and drew

shs.270,000/= vide his D personal cheque Exh.D. The said cheque was authorised for

payment by the bank manager and the bank accountant. After that it is said the

defendant duly handed over shs.179,500/= to the bank manager so that he could hand

over to his relative. E

The defendant further stated that at the end of 1985 he was surprised to learn that the

country cheque had been lost and that they wanted him to pay the bank the

shs.279,500/=. He said that he refused to accept the suggestion that shs.279,500/=

should be regarded as an overdraft. F

Counsel for the defendant Mr. Rugarabamu submitted that his client was not liable.

He said that the bank was negligent and so the blame lies squarely on them. He

contended that as the bank had allowed his client to collect the money before the

cheque was cleared in DSM and later the said country cheque was destroyed by the

bank, then the G bank was to blame. He said that plaintiff bank owed a duty of care

to the defendant not to destroy the country cheque or else they should not have

allowed the defendant to withdraw the money until the cheque was cleared. Mr.

Rugarabamu cited the case of National Bank of Commerce v Parma Shoe Company

Civil Appeal No. 11/l988 by H the Tanzania Court of Appeal (unreported) which was

a decision from an appeal in the case No. 56 of l983 which I decided at the High Court

Mwanza.

In my judgment I find that this claim has absolutely no legal basis. The collecting

bank I owes a duty of care to its customers, such that it conducts its activities with

care and circumspection.

1989 TLR p122

There is need for the banks to display vigilance when handling their customer's

financial A matters. Here is the case when the defendant was allowed to withdraw

the money from his account on the strength of the word of the bank manager that his

country cheque had been cleared. The bank manager is a senior officer of the bank

and so he B has to be trusted. It cannot be doubted that the defendant was so told, as

the plaintiff bank had no courage to call that bank manager as a witness so that he

could refute the word of the defendant. At the same time we are told that the country

cheque was destroyed by some bank officials at the N.B.C. Karagwe Branch - see para

six of the C plaint. In these circumstances how can the defendant be blamed for the

destruction of the country cheque which was destroyed by employees of the plaintiff

bank? The blame surely lies squarely on the plaintiff bank. The bank was grossly

negligent and the defendant had no hand in it. D

I agree with the defendant that at no time did he ever apply for an overdraft, let alone

made a fraudulent application for an overdraft. The loss to the bank was caused by the

employees of the bank, arising from their negligent or deliberate conduct. I am

surprised that the bank had the guts to come to court to seek relief in the mattet they

have presented it. E

In the event this suit is dismissed with costs. I enter judgment for the defendant.

F Order accordingly.

1989 TLR p122