Court overturns sh10m award against Stanbic Bank
The High Court ruled that Stanbic Bank was not liable for the loss because it had successfully processed Muhwezi's instructions and transferred the money to the intended recipient's account in Japan.
Court overturns sh10m award against Stanbic Bank
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The High Court in Kampala has overturned a sh10m compensation award that had been granted against Stanbic Bank Uganda Limited in a dispute arising from a failed motor vehicle purchase transaction.
Justice Bernard Namanya of the High Court Civil Division set aside the judgment of the Chief Magistrate's Court of Mengo, which had ordered the bank to pay its customer, Deus Kamunyu Muhwezi, $2,815 (about sh10m) and sh2m in general damages after finding that the bank had negligently handled a telegraphic transfer.
The High Court ruled that Stanbic Bank was not liable for the loss because it had successfully processed Muhwezi's instructions and transferred the money to the intended recipient's account in Japan.
Justice Namanya held that although the bank mistakenly entered the name of the recipient, Reiji Katagawa, as both the sender and recipient of the funds, the error did not affect the completion of the transaction.
“The appellant discharged its duty of care when it successfully processed the transfer to Katagawa’s account. The appellant’s error in entering the sender’s particulars was immaterial because it did not prevent the transaction from being processed, credited and withdrawn,” Justice Namanya ruled.
The dispute arose after Muhwezi instructed Stanbic Bank on October 20, 2009, to transfer $2,800 to Katagawa at Bank of Tokyo UFJ in Japan to facilitate the purchase of a motor vehicle from Star Trade Japan.
However, Muhwezi later complained that the transaction had not been properly executed after the intended recipient allegedly denied receiving the money.
He accused the bank of negligence, arguing that the incorrect recording of the sender's details affected the transfer and caused him financial loss.
Muhwezi sued the bank in the Chief Magistrate's Court of Mengo, which found in his favour and ordered Stanbic Bank to refund $2,815, pay sh2m in general damages and meet the costs of the suit.
Dissatisfied with the decision, Stanbic Bank appealed to the High Court, arguing that it had acted on the customer's instructions and that the error in recording the sender's details did not prevent the funds from reaching the beneficiary.
The bank told the High Court that the money was credited to Katagawa's account at the Bank of Tokyo Japan and was later withdrawn by him.
Justice Namanya agreed with the bank, saying evidence before the court showed that the funds had been successfully transferred, received and withdrawn by the intended recipient.
“The respondent adduced no evidence that Katagawa had not received $2,800, nor did he show that he confronted Katagawa after the two banks confirmed receipt and withdrawal of the funds,” Justice Namanya said.
The court observed that Muhwezi appeared to have been a victim of an online fraud scheme involving a person who allegedly posed as a motor vehicle seller.
Justice Namanya said Stanbic Bank could not be held liable for the fraud because the bank's responsibility was limited to carrying out the customer's lawful payment instructions.
He explained that once a customer gives clear instructions, a bank is required to process the transaction and is not expected to assess the risks or wisdom of the customer's decision.
The judge said the lower court had therefore erred in finding that Stanbic Bank breached its duty of care and awarding damages against the bank.
As a result, Justice Namanya allowed Stanbic Bank's appeal and set aside the entire judgment and decree of the Chief Magistrate's Court of Mengo in Civil Suit No. 1060 of 2012, which had been delivered on December 15, 2020.
The judge further ordered that each party bear its own costs of the appeal and the proceedings in the lower court, considering that Muhwezi had been a victim of what appeared to be an online fraud.