Tororo Cement Industry Ltd v The Co-operative Bank Ltd (Civil Suit No. 205 of 1999) (Civil Suit No. 205 of 1999) [2002] UGHC 47 (28 January 2002)

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}{ \b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 \line IN THE HIHGH COURT OF UGANDA AT KAMPALA \line CIVIL SUIT NO. 205 OF 1999 }{\i\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 \line }{ \b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 TORORO}{\b\lang1033\langfe2057\langnp1033\insrsid9456231 }{\b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 CEMENT}{\b\lang1033\langfe2057\langnp1033\insrsid9456231 }{ \b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 INDUSTRY}{\b\lang1033\langfe2057\langnp1033\insrsid9456231 }{\b\lang1033\langfe2057\langnp1033\insrsid9456231\charrsid8415562 LTD:}{\lang1033\langfe2057\langnp1033\insrsid9456231 :::::::::: :::::::::}{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 :::::::::::::::::::::: }{\b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 PLAINTIFF \line VERSUS \line THE CO-OPERATIVE BANK }{ \b\lang1033\langfe2057\langnp1033\insrsid9456231\charrsid8415562 LTD:}{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 ::::::::::::::}{\lang1033\langfe2057\langnp1033\insrsid9456231 ::::::::}{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 ::::::::::::::::::::: }{\b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 DEFENDANT \line }{\b\ul\lang1033\langfe2057\langnp1033\insrsid9456231\charrsid8415562

BEFORE:}{ \ul\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 }{\b\ul\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 THE HON. MR. JUSTICE R. O. OKUMU WENGI. }{\b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 \line }{ \b\ul\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 JUDGMENT}{\b\ul\lang1033\langfe2057\langnp1033\insrsid9456231\charrsid8415562 :}{\b\ul\lang1033\langfe2057\langnp1033\insrsid9456231 -}{ \b\ul\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 }{\b\ul\lang1033\langfe2057\langnp1033\insrsid9456231 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid9456231 {\lang1033\langfe2057\langnp1033\insrsid9456231\charrsid9456231 The}{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid9456231 }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 plaintiff, a customer of the defendant Bank which is under statutory liquidation of Bank of Uganda, sued to recover the sum of Shs. 119,679,203/=. The money was lost by the plaintiff when it issued se}{\lang1033\langfe2057\langnp1033\insrsid9456231 veral cheques against which }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 bank drafts were requested for but so issued to the wrong payee, Frenaco General Electronics. The customer had intended the

payments to go to Uganda Revenue Authority but an accompanying request for drafts to be issued against the several cheques enabled payment by draft to be effected to the Franaco. It is the plaintiff\rquote s case that the Bank was liab}{\lang1033\langfe2057\langnp1033\insrsid9456231 le in contract and negligence. }{ \i\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 \line }{\i\lang1033\langfe2057\langnp1033\insrsid9456231 \par }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 The first defendant denied liability contending further that in making the payments the Bank complied with the }{\lang1033\langfe2057\langnp1033\insrsid9456231\charrsid8415562 customer \rquote s}{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 mandate. In the alternative first defendant contended that the plaintiff suffered loss due to its own negligence. The Bank of Uganda denied liability altogether a}{ \lang1033\langfe2057\langnp1033\insrsid9456231 nd pleaded lack of statutory }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 notice. \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid8415562 {\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 I must deal with B ank of Uganda at the outset. The suit was initially filed against the Co-operative Bank

Limited. Then at the beginning of the trial the counsel for the plaintiff sought for addition of }{\lang1033\langfe2057\langnp1033\insrsid9456231 the Bank of Uganda which was }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 granted under Order 1 rule 10 of the Ci vil Procedure Rules. It seems that at this point in time it was not clear how to sue a closed Bank and in case of doubt the Bank of Uganda got added. The point was indeed raised in the submissions that the case against the Bank of Uganda must be dismissed . I would however strike out Bank of Uganda altogether as its joinder was u}{\lang1033\langfe2057\langnp1033\insrsid9456231 ncalled for and no evidence }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 was led regarding its liability in the action. The legal issues raised in the submissions ought to have been raised also much earlier in the trial. In the circumstances I would strike out Bank of Uganda, for the reason that it became apparent at the time of its joinder that plaintiff was in doubt as to whom it was entitled to recover from whether the closed Bank or its }{ \lang1033\langfe2057\langnp1033\insrsid9456231 liquidator. In dealing with }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 this issue of parties I would also amend the description of the defendant to read \'93 The Co-operative Bank Ltd (In

Liquidation).\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid9456231 \par }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 At the trial itself the plaintiff called two witnesses while the defendant called one. The core issue in this case is whether the}{\lang1033\langfe2057\langnp1033\insrsid9456231 instruction issued and }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 signed by the plaintiff\rquote s Paul Masaba was valid to entitle the bank to issue bank drafts against the cheques properly drawn according to mandate. Firstly I am satisfied that all the cheques exhibited in this court were duly sign ed and issued payable to the Bank. This was authority for the Bank to pay them. There was no evidence to show that the cheques were not signe}{\lang1033\langfe2057\langnp1033\insrsid9456231 d by the authorised signatory. }{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 I did believe the evidence of DWI David Senoga who gave candid testimony in the brutal character of auditors. He was able to compare the exhibited cheques and the mand}{ \lang1033\langfe2057\langnp1033\insrsid9456231 ate, and he detailed the entire }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 circumstances of the failed payments to Uganda Revenue Authority which were diverted to benefit a third party. He put to rest the possible

questioni}{\lang1033\langfe2057\langnp1033\insrsid9456231 ng of the signatures on the }{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 instruments when the subject of a handwriting exper}{\lang1033\langfe2057\langnp1033\insrsid9456231 t had been raised during his }{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 investigations. He also identified Paul Masaba as the writer of the cheques and also of the request forms for the bank drafts. Ac cording to this witness the forms instructing issuance of bank drafts were not mandatory forms. That the writing of the supplementary forms was sufficient for the}{\lang1033\langfe2057\langnp1033\insrsid9456231 bank to pay by draft to the }{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 person named in the supplementary form. \line }{\lang1033\langfe2057\langnp1033\insrsid9456231 \par }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 The role of Paul Masaba came out in the evidence of PWI Kanji in which he stated that Paul Masaba was the plaintiff\rquote s clerk/messenger entrusted to write out cheques and instructions including requisition for}{\lang1033\langfe2057\langnp1033\insrsid9456231 ms for drafts. His role was }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 also attested to by the second witness for the Cement Industry Mr. Chohan. \line

}{\lang1033\langfe2057\langnp1033\insrsid9456231 \par }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 In this case we are not concerned with the cheques that were improperly issued or whose authority was forged in any way. We are dealing with instruments not being cheques under which pay}{ \lang1033\langfe2057\langnp1033\insrsid9456231 ments were made by the banker }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 to a third party not intended to receive the payment. The evidence is that Paul Masaba wrote the draft requisition forms (and the cheques) and he was for the purpose authorised to do so and did so on behalf of the customer who is the plaintiff here. His discovery of the loophole went undetected even by the customer in which case the Banker could itself not }{\lang1033\langfe2057\langnp1033\insrsid9456231 have known about it. He was }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 able to divert payments not once but in a serial way over a period of time. But he had handwritten cheques for the plaintiff\rquote s proper signatures and he had filled out bankdraft requisition forms and the banker knew that this was his authority. It is surprising except that the defendant\rquote s second witness conceded to being overwhelmed with work, that the diversions by Paul Ma}{\lang1033\langfe2057\langnp1033\insrsid9456231 saba were

never detected }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 earlier. I am not sure why the plaintiff did not require immediate receipt evidence from Uganda Revenue Authority that payments had been made to the authority. In these circumstances it is difficult to hold the banker liable in negligence. There was also no breach of contract with the mandate and the issuance of the bankers drafts were according to }{\lang1033\langfe2057\langnp1033\insrsid9456231 authorised routine known by }{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 both the banker and customer. It seems to me that the}{\lang1033\langfe2057\langnp1033\insrsid9456231 plaintiff and others in its }{ \lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 category would have the benefit of fidelity insurance policies as the genius stroke of Paul Masaba and his street legal breach of confidence can have common place occurrence. A larger insider generated conspiracy with other could not also be overruled. But the banker i n this case was covere}{\lang1033\langfe2057\langnp1033\insrsid9456231 d. In so saying I must dismiss this suit with costs. \line \par }{\b\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 R. O. OKUMU WENGI \line JUDGE \line 28/01/2002. \line }{\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 \par }\pard\plain \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid8415562 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\lang1033\langfe2057\langnp1033\insrsid1789775\charrsid8415562 \par }}