Equity Bank loses bid to overturn Sh450,000 fraud compensation awarded to client
Magistrate's court had found that bank breached its duty of care and trust by failing to investigate issue expeditiously leading to the respondent's loss of money.
Equity Bank has suffered a setback after the High Court threw out an appeal seeking to overturn a lower court’s ruling granting a client Sh450,000 in compensation for the loss of his money, which was illegally withdrawn from his account.
Peterson Kamunge Kagai had told the Kerugoya magistrate’s court that he opened an account at Equity Bank’s Mwea Branch in Kirinyaga County where he was issued with an ATM card, but on the evening of 25th February 2019, he lost and/or was robbed off his wallet which had the ATM.
As at 21st February 2019, his account balance was Sh 604,478.00. He reported this incident at Embu Police Station on 28th February 2019 and further at the appellant’s Embu Branch and Mwea Branch later.
Kagai stated that on 28th February 2020, he was issued with a bank statement in respect to his account which disclosed that his account had a balance of only Sh 72.00 from which he observed that his account experienced unlawful, illegal and unprocedural debits on 26th February 2019.
As a result, he said the bank breached its duty of care and trust leading to the respondent’s loss of money.
Kagai maintained that he notified the appellant (Equity Bank) of the said activities who promised to carry out investigations and compensate him but never acted as promised. His claim was thus for a refund of Sh604,226.00. He further sought interest, general damages, costs and interest.
The bank filed its statement of defence, dated 22nd January 2021 on 9th February 2021, and denied the averments set out in the plaint and accused the respondent of being negligent with his ATM and or security details of his account. It thus prayed that the suit be dismissed with costs.
In its judgment dated 28th September 2022, the magistrate’s court found that the bank was liable in negligence and awarded Kagai damages in the sum of Sh 450,726.00.
The claim for Sh 604,226.00 as well as general damages for breach of contract were dismissed. The court further awarded the respondent costs of the suit with interest from the date of filing suit.
Aggrieved by the findings, Equity Bank filed its memorandum of appeal dated 10th October 2022 that raised five grounds disputing the findings of the learned magistrate.
In its appeal, Equity Bank prayed that it be allowed and the judgment of the trial court set aside and substituted with an order dismissing the Kagai’s claim with costs.
However, High Court Judge Julius Ng’arng’ar dismissed the appeal and upheld the ruling by the magistrate’s court.
“I have considered the respondent’s written submissions, examined the record of appeal and analysed the law. As a first appellate court, I am duty bound to re-assess, re-evaluate and re-analyse the evidence on record and make my own independent conclusions bearing in mind that I do not have the advantage of hearing or seeing the witnesses and make due allowance in that respect,” the Judge said.
He noted that the magistrate’s court had sought to establish whether Equity Bank had acted negligently in investigating Kagai’s case upon notification, noting that it is on record that he reported the matter on 28th February 2019.
“However, investigations only commenced on 8th November 2019. The appellant did not explain why it took almost nine months to commence investigations. DW1 in fact stated that he was not aware that the respondent complained on 28th February 2019,” the judge noted.
“In finding them culpable, the trial court held in part: “Considering the nature of the claim it was required of them, to avail in evidence a detailed report of the investigation the bank did within their capacity, outside the role of the DCI. As it is, it seems like the bank did not take active steps with the urgency needed to recover any amounts they could from the trail left by the fraudsters.””
“The evidence shows that the investigation began slightly over 8 months later. Even then, the details of the investigations done by the bank on it (sic) own accord in evidence is scant. My analysis in the foregoing paragraphs, shows how the defendant owed the plaintiff a duty of care and how the (sic) breached it and (sic) as a result he suffered damages. I find that the bank was negligent in this regard,” Ng’arng’ar said.
“This court wholly agrees with that finding. The bank gave no explanation why a delay of almost nine months took place in conducting its own internal investigations. And when it did, the outcome left a lot to be desired. I therefore find that indeed the appellant was negligent to this extent and the respondent was entitle to damages,” he ruled.
In assessing the amount of damages sufficient, the trial court took into account the fact that the appellant did not make any efforts to trace and recover the several transactions that occurred on 26th February 2019 amounting to Sh450,000.00 together with the costs of transactions totalling Sh450,726.00.
“I find that this was a proper mode of assessment that adhered to the principles outlined and the law. The magistrate relied on the decision of Majanja, J. (as he then was) in Eric Omuodo Ounga vs. Kenya Commercial Bank Limited [2017] eKLR. which I find to be sound and applicable,” the Judge added
He further explained: “It is crucial to note that the said analysis was not challenged by the appellant. As stated above, as at the time of writing this judgment, the appellant did not impress me with its submissions. It therefore did not explain how the decision arrived at was erroneous,
“Be that as it may, I find that the trial magistrate made a fair and just assessment of the damages that the respondent was unequivocally entitled too. In view of my foregoing analysis, I do not hesitate to find that the present appeal lacks merit. It is hereby dismissed with costs to the respondent.”
