Court orders Standard Chartered Bank to pay customer UGX15 Million in damages for illegally debiting his account

The High Court in Kampala has ordered Standard Chartered Bank Uganda to compensate its customer, a one Eric Butime Katabarwa with a sum of UGX15 million in damages for illegally debiting his account.

Complaint

Mr. Katabarwa sued Standard Chartered Bank for breach of the banker-customer contractual relationship, when it unlawfully debited his account with a sum of UGX 5,816,563/=

He says that his bank operating Account Number 0101403158500 at Speke Road Branch was on Friday 21st August 2020, debited with the said amount and credited to the Account of Youth Services unknown to him.

He says that the following day, he reported the matter to the defendant Bank and requested it to reverse the disputed visa transaction but it did not heed but would rather respond after the investigations that was to last 60 days.

The money was, however, refunded on 24th October 2020 after a period of 2 months.

Mr. Katabarwa, through M/s Springs Advocates, filed a suit seeking for damages in the sum of UGX 100,000,000/=, interest of 21% of UGX 5,816,563 from 21st August 2020 to 24th October 2020 when it refunded to the plaintiffs account.

He also wanted interest on damages at a rate of 30% from the date of filing till payment in full, costs of the suit and any other relief.

The bank, in defence noted that; they had enjoyed an affectionate banker-­customer relationship with the customer without incident over a period of time. They said that Katabarwa applied for and was granted a Visa card which he would use transact on his account. Following his complaint to the bank in respect of improper debiting of his account, the bank contacted Visa, which investigated and later confirmed that it was a Visa Fraud where the customer’s details were used.

They claim that there was a charge back from the merchant where they received the money which was fraudulently debited from Visa and paid the same to complaint’s account and that there is no loss suffered by him.

They noted that the customer acted negligently when he made his Visa card details available to third parties who perpetuated the fraud of UGX 5,816,563/=.

However, Mr. Katabarwa denied the allegation, noting that the Bank owes a duty of care, fiduciary and duty to safe guard his deposits, something that Justice Cornelia Kakooza Sabiiti agreed to.

“I have considered the above submissions by counsel, it is not in contention that the plaintiff is the defendant’s customer holding Account No. 0101403158500 from 9th March 2010. It is also unrebutted that on the 21st August 2022 money to a tune of UGX 5,816,563/= was debited from the plaintiffs account to the Account of Youth Services without the plaintiff’s authorization. By virtue of the bank-customer relation there is a legal obligation that is owed or due to another that needs to be satisfied. In the case of Makua Nairuba Mabel Vs Crane Bank Ltd Civil Suit No. 380 of 2009 the court cited the case of Simex International, Inc. v. Court of Appeals No. 88013, 19 March 1990, 183 SCRA 360 where it was held that “the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship ” The Bank owes a duty of care, fiduciary duty to the plaintiff. I find that the plaintiff has established a cause of action against the defendant.”

He, however, said that the award of UGX 100,000,000/= as general damages is rather on the higher side since general damages are not intended to better the position of the claimant.

“The plaintiff refunded the money within the 60 days following investigations by Visa International. The submission that the defendant abdicated its role by having Visa investigate the matter is unfounded since the fraudulent transactions took place under the Visa platform who were best placed to investigate and communicate their findings to the defendant. Given the circumstances of the case, I therefore award of UGX 15,000,000/= as general damages as sufficient for the breach of fiduciary duty of failure by the defendant to communicate to the plaintiff the outcome of the investigations,” he ruled.

In regard to the interest, the judge noted that the guiding principle on interest under Section 26 (2) of the Civil Procedure Act is that it is at the discretion of court which must be exercised judiciously taking into account the circumstances of each case.

“Given that the bank did not contribute to the fraud but took reasonable steps to investigate and refund the plaintiffs money within the stipulated 60 days, I find no justification to award interest on the sum of UGX 5,816,563 from 21st August 2020 to 24th October 2020 when it was refunded. However, interest at the court rate is awarded on the general damages from the date of judgment till payment in full.”

He also ordered the bank to pay all the legal costs Mr. Katabarwa has incurred.