REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI HIGH COURT CIVIL APPELLATE DIVISION
(Coram: Andayi W. F., J.)
CIVIL APPEAL NO. E149 OF 2022
DAMARIS WANGUI RUHI.............................................................................. APPELLANT
VERSUS
COOPERATIVE BANK OF KENYA LIMITED.........................................RESPONDENT
(Being an Appeal against the judgment and decree of Hon. Kagoni E. M. (P.M) delivered on 17 th February 2022 in Milimani Magistrates Commercial Court Case No. E1157 of 2020)
JUDGMENT
1. The appellant, Damaris Wangui Ruhi is a customer of the respondent, Cooperative Bank of Kenya Limited. The appellant operates a Bank Account No. 0110910...900(other particulars withheld) held at the respondent’s Buruburu branch. In the month of July 2018 an aggregate sum of KShs 140,027/= was withdrawn from the appellant’s said account. The details of the withdrawals are contained in the appellant’s statement of account produced in court as exhibit. The amounts were withdrawn between 20:39 Hours on 8 th July 2018 and 06:49 Hours on 9 th July 2018.
2. The appellant thus sued the respondent alleging breach of contract of banker and customer relationship and negligence in handling her account. The trial court however, in a judgment delivered on 17 th February 2022 found that the appellant had not proved her case on a balance of probability and dismissed it with costs.
3. Dissatisfied with the decision the appellant appealed to this court through a memorandum of appeal dated 15 th March 2022 on grounds that:
a. The learned magistrate erred in law and misdirected himself as to the extent and nature of the respondent’s negligence committed against the appellant and thereby erred in law in his assessment of the remedy that should have been accorded the appellant;
b. The learned magistrate erred in law and misdirected himself in failing to take cognizance of the appellant ‘s testimony that she neither registered nor consented to the use of mobile banking, mere ticks on the personal/joint account application form should not have been considered as registration for mobile banking;
c. The learned trial magistrate erred in fact by failing to take account of the respondent’s witness testimony that despite there being fifteen (15) irregular transactions made through the appellant’s bank account held with the respondent on 8 th and 9 th July 2018, the appellant was neither notified nor was her bank account flagged as is the bank’s procedure.
d. The learned magistrate erred in law and was biased by solely relying on the respondent’s testimony and submissions as to have found that the respondent was not culpable in how they failed to remedy the tort of negligence committed against the appellant;
e. The learned magistrate erred in failing to recognize that the respondent did not conduct investigations as should have been and ultimately ended up failing to offer remedy to the tort occasioned against the appellant.
f. The learned trial magistrate erred in law and in fact in failing to appreciate and find that the appellant had proved her case on a balance of probability and that the respondent’s evidence and testimony was of no probative value to the matters at hand.
g. The learned trial magistrate erred in law and in fact in awarding costs despite the appellant having lost all her life savings as a result of negligence by the respondent and thus took into account extraneous matters; and
h. The learned trial magistrate erred in his assessment of the damages that would have been awarded to the appellant as the same was based on wrong principle.
i. The learned magistrate erred in failing to find that the amount of KShs 140,027/=lost by the appellant as a result of the respondent’s failure to exercise duty of care should have been refunded and conversely arrived at a wholly erroneous finding that is likely to injure the body politik.
4. The appellant therefore prays to this court that the appeal be allowed and the judgment of the trial court be set aside with costs to the appellant.
5. The appellant’s case before the magistrate’s court was presented through her plaint dated 16 th December 2020 and supported by her witness statement of the same date, her testimony in court and documents produced as exhibits being bank statement dated 1 st August 2018 for the period 1 st January 2018 to 1 st August 2018, Safaricom M-Pesa statement for account number 0723 777 203 for the period 1 st June 2018 to 31 st July 2018, her correspondences with the respondent among others. Her case was that the money was withdrawn from her said account without her authority or consent.
6. The appellant averred in her plaint that persons unknown to her hacked her details and managed to register her into the respondent’s mobile banking platform whereupon fraudulent transactions were made in her account.
7. She claimed that the money was withdrawn through mobile phone money transfer yet she had never signed for mobile money banking with the respondent nor issued it with instructions through the internet or any other mode. Yet again the various transactions of the withdrawals do not appear on her M-Pesa statement which she produced to court as exhibit. She also says she did not receive any bank alerts of the transactions. Accordingly, the appellant alleged that these withdrawal transactions were fraudulent.
8. There were two mobile phone beneficiary numbers of the funds from the appellant’s account with the respondent No. 0722570704 in the name of Chepkoech Mercy and 0718 631 249 in the name of Chekorir Sagit.
9. When she reported the incident to the respondent, she was informed by the officials that they suspected a sim swap but offered no further assistance towards recovery of the funds.
10. The appellant claimed that the respondent was in breach of contract in the discharge of its duty of care towards her to have allowed the money to be withdrawn from her said account in such a manner by the respondent acting on instructions not emanating from her. According to the appellant, the respondent as a reasonable banker had reason to believe that the instructions on her account were fraudulent and in continuing to execute them without inquiry the respondent was negligent and in breach of contract.
11. She therefore claimed from the respondent restitution of the said sum of money together with interest at court rates and costs.
12. The respondent through its a amended defence dated 28 th January 2021, the evidence of DW 1, Wycliffe Tong’i and his testimony in court and the documents produced as exhibits denied the appellant’s claim, save that the appellant held an account with it as stated in the plaint.
13. According to the respondent, the appellant opened her account with the respondent on 18 th February 2013 at the respondent’s Buruburu branch and officially enrolled her phone number 0723...203 for mobile banking services. Further that all the withdrawal transactions foe the sum of KShs 138,550/= which were disputed by the appellant were initiated by her said M-Pesa number and authorized by her PIN on the mobile banking platform. The money went to the two numbers indicated by the appellant above.
14. According to the respondent, the appellant is responsible for safeguarding her bank details, mobile banking credentials and should not disclose them to a third party as per the Bank’s terms and conditions for use of its mobile banking transactions.
15. It was the respondent’s case that appellant owed the respondent a duty of care to exercise reasonable skill and care when handling her bank details and not to share them with a third party. That on its part, it has taken due care and attention to ensure that the appellant’s account details are secure and safe.
16. It was the respondent’s contention therefore that the impugned transactions in the appellant’s account were caused by the appellant’s own negligence and want of care in so far as the security of her bank details and PIN number were concerned. It outlined the alleged particulars of the appellant’s negligence.
17. The case was heard on 25 th November 2021 when each party offered one witness each who testified and produced the documents listed in their respective lists and filed with the pleadings as exhibits. There is no dispute on any of those documents.
18. Upon considering the material placed before it and the submissions by learned counsels, the learned trial magistrate in his decision found that the appellant had failed to prove her case on a balance of probability because she had not offered any credible evidence to prove the claim and therefore dismissed it. The trial court found that in fact, the appellant had signed for mobile banking by ticking some check boxes contained in her application form for banking services with the respondent.
19. The appeal was canvassed by way of written submissions filed by learned counsels for both parties.
20. The appellant has raised the following issues for determination:
a. Whether there was negligence on the part of the respondent.
b. Whether the respondent was in breach of its duty towards the appellant as its customer.
c. Whether the appellant was entitled to the reliefs sought.
21. The appellant submits that she never registered for mobile banking transactions and the mere fact of her ticking a check box for mobile banking capabilities did not mean she was registered for the same. She had also never used such services in her transactions prior to the incident the subject of this case. That even as the fraudulent transactions were being done, she never received any messages from the respondent notifying her of the same. Therefore, according to her, the respondent breached its duty of care towards her as its customer which included implementing adequate security measures to prevent unauthorized transactions.
22. The appellant cited what should be authorities to support her submissions. She did not however make available copies of the authorities relied on. Unfortunately, my search of all of them on the Kenya Law database has not yielded even a single one of them. I would greatly appreciate if learned counsel would supply copies of those authorities for future reference.
23. The respondent on its part submits the following issues for determination:
a. Whether the magistrate erred in determining the respondent’s negligence and the appropriate remedy.
b. Whether the magistrate considered all evidence presented by both parties.
c. Whether the magistrate erred in awarding costs.
d. Whether the appeal should be allowed.
24. The appellant submits that the relationship of banker and customer gives rise to a contractual relationship and they each owe the other a duty of care both in contract and tort as held in the case of Eric Omuodo Ounga v Kenya Commercial Bank Limited [2017] KEHC 2842 (KLR) . Learned counsel also cited the case of Andrew Kiriti Gathii v Equity Bank Limited [2017] KEHC 3239 (KLR) which carries an elaborate discussion of this relationship. It is clear from the authorities that the bank’s duty of care entails exercise of “reasonable care and skill,” in carrying out its part with regard to operations within its contract with its customer and the standard of that reasonable care and skill is an objective standard applicable to bankers. So that the bank is not required to engage in impractically extensive inquiry, nor it it to be held to a standard of perfection (see the case of Brazafric Enterprises Ltd v Julius Lumumba Tsikhutsu & another [2019] KEHC 7867 (KLR) where the Canadian case of A&A Jewellers Ltd -vs- Royal Bank of Canada (2001) Can L11 2040 (On CA) is cited discussing this matter.
25. On whether the appellant showed that the respondent breached its stated duty of care, learned counsel submits that the learned trial magistrate was correct in his determination that the appellant was registered to the bank’s mobile banking platform by ticking the relevant box in the account opening form which then acted as a binding agreement between the appellant and the respondent. According to the respondent, the bank in registering the appellant for mobile banking acted in accordance with her instructions and fulfilled its obligations towards her.
26. Learned counsel submits that the appellant did not demonstrate that the bank failed to notify her of the impugned transactions because they originated from her mobile phone number and they were authorized, leading to the conclusion that somebody got hold of her mobile banking credentials. That in that case, the appellant and not the bank was negligent for not safeguarding her credentials. For that reason, there was no alarm raised in the respondent’s bank system of any irregular transaction.
27. Learned counsel submits that the bank conducted investigations into the issue once raised by the appellant and concluded that the transactions originated from the appellant’s number.
28. Learned counsel submits that the learned trial magistrate considered and weighed the evidence tendered by both parties and concluded that PW 1 was not a truthful witness.
29. Learned counsel submits that the trial court correctly exercised its discretion in finding that the appellant was to bear the costs of the suit and that on principle, this court should not lightly interfere with that exercise of discretion.
30. I have considered the grounds of appeal raised in the memorandum of appeal, the record of appeal and the submissions by learned counsels for the parties.
31. This being a first appeal, the duty of this court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. This is the position as held in Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A at page 126 on a first appeal from the High Court to the Court of Appeal that:
“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270 )”.
32. In the contractual relationship of a banker and customer there exists a duty of care between them. Each owes a duty of care to the other (see the case of Andrew Kiriti Gathii v Equity Bank Limited [2017] KEHC 3239 (KLR) ).
33. The issue for determination, being a summary of those raised by both parties, then is the scope of the respondent’s duty of care towards the appellant and whether the same was discharged and therefore whether the learned trial magistrate erred in law and fact in finding that the respondent had not breached its duty of care towards the appellant.
34. In the banker and customer relationship the banker has a large portion of control as regards the transactions in the customer’s account. For instance, the bank has to sanction the release of money from the account to the customer’s or any authorized third party. In this case the appellant’s position is that she was not operating mobile phone banking transactions from her account with the respondent as she had never signed for one. I have found that assertion to be correct. Yet it was the bank’s position that the transactions were initiated by the appellant, presumably, through her phone number because she was operating the mobile banking service. The respondent did not however tender evidence to show how the transactions were initiated from the appellant’s phone number in view of her denial that she had ever been registered for mobile phone banking.
35. It is apparent that the learned trial magistrate misapprehended the case put forward by the appellant. The appellant’s case was not a denial per se that she had expressed interest in mobile banking by ticking the relevant box in the application form. The relevant part of the application form had the following sub-heading, “I also need the following additional bank services: (Tick appropriately) (Applicable for personal accounts only, not joint accounts). She indeed ticked the check box for mobile banking capabilities. However, there was more to that because beside the check box, more information was required where it was stated: “Register My Mobile Number” beside which there were spaces (more check boxes) to enter the mobile number. The appellant left this space blank. This supports her assertion that she was not interested in mobile banking services because if she was she should have entered her number in that space, which, according to me may not necessarily have been the one she had provided earlier as part of her address. So, the respondent cannot hold onto the appellant’s details of the general number provided as part of her address to assert that it was her mobile banking number when the appellant expressly failed to fill the spaces provided in the form for registration of a mobile phone banking number.
36. Furthermore, the appellant was categorical that she never completed any forms for mobile banking facilities. That means, besides the general account opening form, there were other forms specifically for mobile banking facilities and this she never completed. The respondent never denied that in fact that was the correct position. That form was not made available to court as evidence. Therefore, the information in the account opening form that she would require additional services of mobile banking capabilities was a mere invitation for her to express interest after which she would then complete the process of mobile banking through the requisite forms which she was categorical that she did not and the evidence on record bears her out. Indeed, the respondent has stated that the appellant shared her PIN with fraudsters but without even confirming that it ever issued such a PIN to the appellant. Such a PIN could only be issued after the appellant had completed the requisite mobile banking forms. It appears that the learned trial magistrate was mistaken to think that the said PIN was the M-Pesa PIN issued by Safaricom.
37. Under section 112 of the Evidence Act, and in view of the denial by the appellant that she ever sanctioned the impugned transactions, only the respondent had the special knowledge of where the transactions were initiated. It therefore had the obligation to adduce evidence on those issues which it failed to. Therefore, the answers can only be that they were initiated by somebody who had access to the respondent’s banking system and to the appellant’s account.
38. The question that emerges is, who had access to the appellant’s account details with the bank to know that she had money in his account that could be withdrawn? It was held in the case of Barclays Bank of Kenya Limited v Diana Sambo Mwasela [2020] KEHC 7569 (KLR) that:
“The Appellant seems to suggest that the Respondent is liable for the lost suit amount since the withdrawals were enabled by the Personal Identification Number that was only privy to the Plaintiff. I have a difficulty with the Appellant. This is because the Appellant only alleged that the Respondent caused the money to be withdrawn since her pin was used in the process of withdrawing such monies. There are other persons other than the Respondent which may have access to the Appellant’s details and this includes the bank employees, directors among others. Secondly, the bank ought to have other mechanisms to trace the exact person who withdrew the said monies without the Appellant’s authorization such as CCTV. If such mechanisms are not in existence, then many customers are at risk of losing their money through unauthorised transactions.”
39. I am persuaded to follow this decision and find that there are persons within the respondent’s establishment such as employees, directors among others, who may have access to the respondent’s database of its customers and therefore have details of the customers and these can be fraudulently applied to cause transactions on unsuspecting customers’ accounts such as the case herein. In that case the banker is in breach of its duty of care and must be held to account for any loss arising.
40. Furthermore, there is evidence by the appellant and supported by DW 1 that since opening her account, the appellant had never made any mobile phone bank transactions and that supports her evidence that she was not interested in the same and was not using it.
41. Moreover, the appellant’s evidence that even as the fraudulent transactions were being done, she never received any messages from the respondent notifying her of the same was not countered by the respondent and that is further evidence that she was not registered for that service and that she was not utilizing it at all.
42. It is inconceivable for DW 1 to allege the transactions herein were not suspicious and so their system could not and did not flag them as such. If such were not suspicious in this particular account, what would be? There was an account which was not registered for mobile money transactions yet it transacted as such, the said account had never transacted on mobile money yet on this particular night, it was doing so, the hours of day the transactions were conducted especially for an account that had never carried out such transactions and the frequency with which the transactions were being carried out would raise a red flag to any reasonable banker in the respondent’s position. The fact that the respondent failed to take action on the transactions which were clearly suspicious leads me to find that the respondent was negligent in the discharge of its duty of care towards the appellant. The learned magistrate’s position that the bank had no reason to be suspicious cannot be correct. There were all reasons for the bank to be suspicious and stop the transactions.
43. DW 1 stated that according to his investigations, the appellant authorized the transactions herself or she shared her M-Banking credentials with fraudsters who then took over her account and made the transactions. However, DW 1 did not however tender any report of the forensic investigations he carried out to arrive at that conclusion. I find it to be a bare assertion without any substance to be relied upon. Further, the same is discounted by the appellant’s evidence that the transactions do not appear in her M-Pesa statement which she produced in evidence and this was not challenged by the respondent. There was no evidence to support the assertion that the appellant had communication with the alleged fraudsters and shared her bank details with them. The assertion of sharing the details with fraudsters is mere speculation not backed by any concrete evidence.
44. I am further persuaded to arrive at this conclusion from the decision in the case of Simba Commodities Limited v Citibank N. A. [2013] KEHC 5859 (KLR) where the High Court made reference to the writings of the learned authors in Ross Cranston’s Principles of Banking Law 2 nd Edition at P. 187 where it is state that:
“There is long-established authority, in the context of bills of exchange, that a bank can be in breach of its duty of reasonable care and skill in failing to make inquiries. Certain transactions are so out of the ordinary course that they ought to arouse doubts and put the bank on inquiry. If the bank fails to inquire, it cannot be said to have acted without negligence in converting a bill. The Quincecare case applies the principle in another context – the care and skill the bank should exercise in paying money away from a customer’s account: it will be liable if it does so knowing that the instruction is dishonestly given by, for example, fraudulent directors of the borrowing company, shutting its eyes to the obvious fact of dishonesty, or acting recklessly in failing to make such inquiries as an honest and reasonable bank would make. Factors such as the standing of the customer, the bank’s knowledge of the signatory, the amount involved, the need for prompt transfer, the presence of unusual features, and the scope and means for making reasonable inquiries may be relevant”.
45. Having found that there was no evidence to show negligence on the part of the appellant in releasing her banking credentials to anyone who could have accessed her account in the manner that it was, I find that the respondent was negligent for leaving its system susceptible to fraudsters, who may include its own employees or other persons with access to its systems who managed to carry out the transactions for the withdrawal of the funds from the appellant’s account. As was held in Foley v Hill [1848] 2 H.L Cas 28, cited in Andrew Kiriti Gathii v Equity Bank Limited [2017] KEHC 3239 (KLR) , the bank must act only on the customer’s instructions. It must not by omission or action, be negligent. It has a primary duty to honour the customer’s instructions and make payment in accordance with the mandate issued by the customer. In this case, there was no mandate issued by the appellant to the respondent to transact any business on mobile money transfer.
46. In arriving at this conclusion, I am persuaded to follow the decision in the case of Karak Brothers Company Ltd –vs- Burden [1972] AII ER 1210, as cited in the case of Ombonya v Housing Finance Ltd & 3 others [2024] KEHC 869 (KLR) where it was held that:
“… a bank has a duty under its contract with its customer to exercise ‘reasonable care and skill’ in carrying out its part with regard to operations within its contract with its customer. The standard of that reasonable care and skill is an objective standard applicable to bankers. Whether or not it has been attained in any particular case has to be decided in the light of all the relevant facts, which can vary almost infinitely.”
47. From the foregoing analysis, I find that the duty of care owed by a banker to its customer was not attained by the respondent herein towards the appellant. I find learned trial magistrate was in error in failing to appropriately determine the issue of the banker-customer relationship and the duty of care of the respondent towards the appellant. He therefore failed to appropriately apply the law to the facts. I find that had he done so, he would have come to a different conclusion that the respondent was culpable for breach of its duty of care towards the appellant.
48. In the final analysis, I find that the respondent was wholly to blame for the loss of the funds from the appellant’s account and is liable to restore the appellant’s account with the full amount that was fraudulently withdrawn therefrom. Interest is payable on that sum at court rates from the date of filing the claim before the magistrate’s court.
49. Consequently, the appeal succeeds. The decision of the learned trial magistrate is set aside and substituted with a finding that the suit by the appellant before the lower court was proved on a balance of probability.
50. The appellant shall get the costs of the appeal and before the trial court.
51. Orders accordingly.
52. Dated, signed and delivered, on the Virtual Platform, Teams this 7 th day of September 2026.
ANDAYI W. F.
JUDGE
In the presence of:
Kimathi (Ms) for the Appellant.
N/A for the Respondent.
Ummu: Court Assistant.
ANDAYI W. F.
JUDGE
milimani HCCA No. e149/202213/bank electronic money transfer fraud_SCC
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI HIGH COURT CIVIL APPELLATE DIVISION
(Coram: Andayi W. F., J.)
CIVIL APPEAL NO. E149 OF 2022
DAMARIS WANGUI RUHI.............................................................................. APPELLANT
VERSUS
COOPERATIVE BANK OF KENYA LIMITED.........................................RESPONDENT
(Being an Appeal against the judgment and decree of Hon. Kagoni E. M. (P.M) delivered on 17 th February 2022 in Milimani Magistrates Commercial Court Case No. E1157 of 2020)
JUDGMENT
1. The appellant, Damaris Wangui Ruhi is a customer of the respondent, Cooperative Bank of Kenya Limited. The appellant operates a Bank Account No. 0110910...900(other particulars withheld) held at the respondent’s Buruburu branch. In the month of July 2018 an aggregate sum of KShs 140,027/= was withdrawn from the appellant’s said account. The details of the withdrawals are contained in the appellant’s statement of account produced in court as exhibit. The amounts were withdrawn between 20:39 Hours on 8 th July 2018 and 06:49 Hours on 9 th July 2018.
2. The appellant thus sued the respondent alleging breach of contract of banker and customer relationship and negligence in handling her account. The trial court however, in a judgment delivered on 17 th February 2022 found that the appellant had not proved her case on a balance of probability and dismissed it with costs.
3. Dissatisfied with the decision the appellant appealed to this court through a memorandum of appeal dated 15 th March 2022 on grounds that:
a. The learned magistrate erred in law and misdirected himself as to the extent and nature of the respondent’s negligence committed against the appellant and thereby erred in law in his assessment of the remedy that should have been accorded the appellant;
b. The learned magistrate erred in law and misdirected himself in failing to take cognizance of the appellant ‘s testimony that she neither registered nor consented to the use of mobile banking, mere ticks on the personal/joint account application form should not have been considered as registration for mobile banking;
c. The learned trial magistrate erred in fact by failing to take account of the respondent’s witness testimony that despite there being fifteen (15) irregular transactions made through the appellant’s bank account held with the respondent on 8 th and 9 th July 2018, the appellant was neither notified nor was her bank account flagged as is the bank’s procedure.
d. The learned magistrate erred in law and was biased by solely relying on the respondent’s testimony and submissions as to have found that the respondent was not culpable in how they failed to remedy the tort of negligence committed against the appellant;
e. The learned magistrate erred in failing to recognize that the respondent did not conduct investigations as should have been and ultimately ended up failing to offer remedy to the tort occasioned against the appellant.
f. The learned trial magistrate erred in law and in fact in failing to appreciate and find that the appellant had proved her case on a balance of probability and that the respondent’s evidence and testimony was of no probative value to the matters at hand.
g. The learned trial magistrate erred in law and in fact in awarding costs despite the appellant having lost all her life savings as a result of negligence by the respondent and thus took into account extraneous matters; and
h. The learned trial magistrate erred in his assessment of the damages that would have been awarded to the appellant as the same was based on wrong principle.
i. The learned magistrate erred in failing to find that the amount of KShs 140,027/=lost by the appellant as a result of the respondent’s failure to exercise duty of care should have been refunded and conversely arrived at a wholly erroneous finding that is likely to injure the body politik.
4. The appellant therefore prays to this court that the appeal be allowed and the judgment of the trial court be set aside with costs to the appellant.
5. The appellant’s case before the magistrate’s court was presented through her plaint dated 16 th December 2020 and supported by her witness statement of the same date, her testimony in court and documents produced as exhibits being bank statement dated 1 st August 2018 for the period 1 st January 2018 to 1 st August 2018, Safaricom M-Pesa statement for account number 0723 777 203 for the period 1 st June 2018 to 31 st July 2018, her correspondences with the respondent among others. Her case was that the money was withdrawn from her said account without her authority or consent.
6. The appellant averred in her plaint that persons unknown to her hacked her details and managed to register her into the respondent’s mobile banking platform whereupon fraudulent transactions were made in her account.
7. She claimed that the money was withdrawn through mobile phone money transfer yet she had never signed for mobile money banking with the respondent nor issued it with instructions through the internet or any other mode. Yet again the various transactions of the withdrawals do not appear on her M-Pesa statement which she produced to court as exhibit. She also says she did not receive any bank alerts of the transactions. Accordingly, the appellant alleged that these withdrawal transactions were fraudulent.
8. There were two mobile phone beneficiary numbers of the funds from the appellant’s account with the respondent No. 0722570704 in the name of Chepkoech Mercy and 0718 631 249 in the name of Chekorir Sagit.
9. When she reported the incident to the respondent, she was informed by the officials that they suspected a sim swap but offered no further assistance towards recovery of the funds.
10. The appellant claimed that the respondent was in breach of contract in the discharge of its duty of care towards her to have allowed the money to be withdrawn from her said account in such a manner by the respondent acting on instructions not emanating from her. According to the appellant, the respondent as a reasonable banker had reason to believe that the instructions on her account were fraudulent and in continuing to execute them without inquiry the respondent was negligent and in breach of contract.
11. She therefore claimed from the respondent restitution of the said sum of money together with interest at court rates and costs.
12. The respondent through its a amended defence dated 28 th January 2021, the evidence of DW 1, Wycliffe Tong’i and his testimony in court and the documents produced as exhibits denied the appellant’s claim, save that the appellant held an account with it as stated in the plaint.
13. According to the respondent, the appellant opened her account with the respondent on 18 th February 2013 at the respondent’s Buruburu branch and officially enrolled her phone number 0723...203 for mobile banking services. Further that all the withdrawal transactions foe the sum of KShs 138,550/= which were disputed by the appellant were initiated by her said M-Pesa number and authorized by her PIN on the mobile banking platform. The money went to the two numbers indicated by the appellant above.
14. According to the respondent, the appellant is responsible for safeguarding her bank details, mobile banking credentials and should not disclose them to a third party as per the Bank’s terms and conditions for use of its mobile banking transactions.
15. It was the respondent’s case that appellant owed the respondent a duty of care to exercise reasonable skill and care when handling her bank details and not to share them with a third party. That on its part, it has taken due care and attention to ensure that the appellant’s account details are secure and safe.
16. It was the respondent’s contention therefore that the impugned transactions in the appellant’s account were caused by the appellant’s own negligence and want of care in so far as the security of her bank details and PIN number were concerned. It outlined the alleged particulars of the appellant’s negligence.
17. The case was heard on 25 th November 2021 when each party offered one witness each who testified and produced the documents listed in their respective lists and filed with the pleadings as exhibits. There is no dispute on any of those documents.
18. Upon considering the material placed before it and the submissions by learned counsels, the learned trial magistrate in his decision found that the appellant had failed to prove her case on a balance of probability because she had not offered any credible evidence to prove the claim and therefore dismissed it. The trial court found that in fact, the appellant had signed for mobile banking by ticking some check boxes contained in her application form for banking services with the respondent.
19. The appeal was canvassed by way of written submissions filed by learned counsels for both parties.
20. The appellant has raised the following issues for determination:
a. Whether there was negligence on the part of the respondent.
b. Whether the respondent was in breach of its duty towards the appellant as its customer.
c. Whether the appellant was entitled to the reliefs sought.
21. The appellant submits that she never registered for mobile banking transactions and the mere fact of her ticking a check box for mobile banking capabilities did not mean she was registered for the same. She had also never used such services in her transactions prior to the incident the subject of this case. That even as the fraudulent transactions were being done, she never received any messages from the respondent notifying her of the same. Therefore, according to her, the respondent breached its duty of care towards her as its customer which included implementing adequate security measures to prevent unauthorized transactions.
22. The appellant cited what should be authorities to support her submissions. She did not however make available copies of the authorities relied on. Unfortunately, my search of all of them on the Kenya Law database has not yielded even a single one of them. I would greatly appreciate if learned counsel would supply copies of those authorities for future reference.
23. The respondent on its part submits the following issues for determination:
a. Whether the magistrate erred in determining the respondent’s negligence and the appropriate remedy.
b. Whether the magistrate considered all evidence presented by both parties.
c. Whether the magistrate erred in awarding costs.
d. Whether the appeal should be allowed.
24. The appellant submits that the relationship of banker and customer gives rise to a contractual relationship and they each owe the other a duty of care both in contract and tort as held in the case of Eric Omuodo Ounga v Kenya Commercial Bank Limited [2017] KEHC 2842 (KLR) . Learned counsel also cited the case of Andrew Kiriti Gathii v Equity Bank Limited [2017] KEHC 3239 (KLR) which carries an elaborate discussion of this relationship. It is clear from the authorities that the bank’s duty of care entails exercise of “reasonable care and skill,” in carrying out its part with regard to operations within its contract with its customer and the standard of that reasonable care and skill is an objective standard applicable to bankers. So that the bank is not required to engage in impractically extensive inquiry, nor it it to be held to a standard of perfection (see the case of Brazafric Enterprises Ltd v Julius Lumumba Tsikhutsu & another [2019] KEHC 7867 (KLR) where the Canadian case of A&A Jewellers Ltd -vs- Royal Bank of Canada (2001) Can L11 2040 (On CA) is cited discussing this matter.
25. On whether the appellant showed that the respondent breached its stated duty of care, learned counsel submits that the learned trial magistrate was correct in his determination that the appellant was registered to the bank’s mobile banking platform by ticking the relevant box in the account opening form which then acted as a binding agreement between the appellant and the respondent. According to the respondent, the bank in registering the appellant for mobile banking acted in accordance with her instructions and fulfilled its obligations towards her.
26. Learned counsel submits that the appellant did not demonstrate that the bank failed to notify her of the impugned transactions because they originated from her mobile phone number and they were authorized, leading to the conclusion that somebody got hold of her mobile banking credentials. That in that case, the appellant and not the bank was negligent for not safeguarding her credentials. For that reason, there was no alarm raised in the respondent’s bank system of any irregular transaction.
27. Learned counsel submits that the bank conducted investigations into the issue once raised by the appellant and concluded that the transactions originated from the appellant’s number.
28. Learned counsel submits that the learned trial magistrate considered and weighed the evidence tendered by both parties and concluded that PW 1 was not a truthful witness.
29. Learned counsel submits that the trial court correctly exercised its discretion in finding that the appellant was to bear the costs of the suit and that on principle, this court should not lightly interfere with that exercise of discretion.
30. I have considered the grounds of appeal raised in the memorandum of appeal, the record of appeal and the submissions by learned counsels for the parties.
31. This being a first appeal, the duty of this court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. This is the position as held in Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A at page 126 on a first appeal from the High Court to the Court of Appeal that:
“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270 )”.
32. In the contractual relationship of a banker and customer there exists a duty of care between them. Each owes a duty of care to the other (see the case of Andrew Kiriti Gathii v Equity Bank Limited [2017] KEHC 3239 (KLR) ).
33. The issue for determination, being a summary of those raised by both parties, then is the scope of the respondent’s duty of care towards the appellant and whether the same was discharged and therefore whether the learned trial magistrate erred in law and fact in finding that the respondent had not breached its duty of care towards the appellant.
34. In the banker and customer relationship the banker has a large portion of control as regards the transactions in the customer’s account. For instance, the bank has to sanction the release of money from the account to the customer’s or any authorized third party. In this case the appellant’s position is that she was not operating mobile phone banking transactions from her account with the respondent as she had never signed for one. I have found that assertion to be correct. Yet it was the bank’s position that the transactions were initiated by the appellant, presumably, through her phone number because she was operating the mobile banking service. The respondent did not however tender evidence to show how the transactions were initiated from the appellant’s phone number in view of her denial that she had ever been registered for mobile phone banking.
35. It is apparent that the learned trial magistrate misapprehended the case put forward by the appellant. The appellant’s case was not a denial per se that she had expressed interest in mobile banking by ticking the relevant box in the application form. The relevant part of the application form had the following sub-heading, “I also need the following additional bank services: (Tick appropriately) (Applicable for personal accounts only, not joint accounts). She indeed ticked the check box for mobile banking capabilities. However, there was more to that because beside the check box, more information was required where it was stated: “Register My Mobile Number” beside which there were spaces (more check boxes) to enter the mobile number. The appellant left this space blank. This supports her assertion that she was not interested in mobile banking services because if she was she should have entered her number in that space, which, according to me may not necessarily have been the one she had provided earlier as part of her address. So, the respondent cannot hold onto the appellant’s details of the general number provided as part of her address to assert that it was her mobile banking number when the appellant expressly failed to fill the spaces provided in the form for registration of a mobile phone banking number.
36. Furthermore, the appellant was categorical that she never completed any forms for mobile banking facilities. That means, besides the general account opening form, there were other forms specifically for mobile banking facilities and this she never completed. The respondent never denied that in fact that was the correct position. That form was not made available to court as evidence. Therefore, the information in the account opening form that she would require additional services of mobile banking capabilities was a mere invitation for her to express interest after which she would then complete the process of mobile banking through the requisite forms which she was categorical that she did not and the evidence on record bears her out. Indeed, the respondent has stated that the appellant shared her PIN with fraudsters but without even confirming that it ever issued such a PIN to the appellant. Such a PIN could only be issued after the appellant had completed the requisite mobile banking forms. It appears that the learned trial magistrate was mistaken to think that the said PIN was the M-Pesa PIN issued by Safaricom.
37. Under section 112 of the Evidence Act, and in view of the denial by the appellant that she ever sanctioned the impugned transactions, only the respondent had the special knowledge of where the transactions were initiated. It therefore had the obligation to adduce evidence on those issues which it failed to. Therefore, the answers can only be that they were initiated by somebody who had access to the respondent’s banking system and to the appellant’s account.
38. The question that emerges is, who had access to the appellant’s account details with the bank to know that she had money in his account that could be withdrawn? It was held in the case of Barclays Bank of Kenya Limited v Diana Sambo Mwasela [2020] KEHC 7569 (KLR) that:
“The Appellant seems to suggest that the Respondent is liable for the lost suit amount since the withdrawals were enabled by the Personal Identification Number that was only privy to the Plaintiff. I have a difficulty with the Appellant. This is because the Appellant only alleged that the Respondent caused the money to be withdrawn since her pin was used in the process of withdrawing such monies. There are other persons other than the Respondent which may have access to the Appellant’s details and this includes the bank employees, directors among others. Secondly, the bank ought to have other mechanisms to trace the exact person who withdrew the said monies without the Appellant’s authorization such as CCTV. If such mechanisms are not in existence, then many customers are at risk of losing their money through unauthorised transactions.”
39. I am persuaded to follow this decision and find that there are persons within the respondent’s establishment such as employees, directors among others, who may have access to the respondent’s database of its customers and therefore have details of the customers and these can be fraudulently applied to cause transactions on unsuspecting customers’ accounts such as the case herein. In that case the banker is in breach of its duty of care and must be held to account for any loss arising.
40. Furthermore, there is evidence by the appellant and supported by DW 1 that since opening her account, the appellant had never made any mobile phone bank transactions and that supports her evidence that she was not interested in the same and was not using it.
41. Moreover, the appellant’s evidence that even as the fraudulent transactions were being done, she never received any messages from the respondent notifying her of the same was not countered by the respondent and that is further evidence that she was not registered for that service and that she was not utilizing it at all.
42. It is inconceivable for DW 1 to allege the transactions herein were not suspicious and so their system could not and did not flag them as such. If such were not suspicious in this particular account, what would be? There was an account which was not registered for mobile money transactions yet it transacted as such, the said account had never transacted on mobile money yet on this particular night, it was doing so, the hours of day the transactions were conducted especially for an account that had never carried out such transactions and the frequency with which the transactions were being carried out would raise a red flag to any reasonable banker in the respondent’s position. The fact that the respondent failed to take action on the transactions which were clearly suspicious leads me to find that the respondent was negligent in the discharge of its duty of care towards the appellant. The learned magistrate’s position that the bank had no reason to be suspicious cannot be correct. There were all reasons for the bank to be suspicious and stop the transactions.
43. DW 1 stated that according to his investigations, the appellant authorized the transactions herself or she shared her M-Banking credentials with fraudsters who then took over her account and made the transactions. However, DW 1 did not however tender any report of the forensic investigations he carried out to arrive at that conclusion. I find it to be a bare assertion without any substance to be relied upon. Further, the same is discounted by the appellant’s evidence that the transactions do not appear in her M-Pesa statement which she produced in evidence and this was not challenged by the respondent. There was no evidence to support the assertion that the appellant had communication with the alleged fraudsters and shared her bank details with them. The assertion of sharing the details with fraudsters is mere speculation not backed by any concrete evidence.
44. I am further persuaded to arrive at this conclusion from the decision in the case of Simba Commodities Limited v Citibank N. A. [2013] KEHC 5859 (KLR) where the High Court made reference to the writings of the learned authors in Ross Cranston’s Principles of Banking Law 2 nd Edition at P. 187 where it is state that:
“There is long-established authority, in the context of bills of exchange, that a bank can be in breach of its duty of reasonable care and skill in failing to make inquiries. Certain transactions are so out of the ordinary course that they ought to arouse doubts and put the bank on inquiry. If the bank fails to inquire, it cannot be said to have acted without negligence in converting a bill. The Quincecare case applies the principle in another context – the care and skill the bank should exercise in paying money away from a customer’s account: it will be liable if it does so knowing that the instruction is dishonestly given by, for example, fraudulent directors of the borrowing company, shutting its eyes to the obvious fact of dishonesty, or acting recklessly in failing to make such inquiries as an honest and reasonable bank would make. Factors such as the standing of the customer, the bank’s knowledge of the signatory, the amount involved, the need for prompt transfer, the presence of unusual features, and the scope and means for making reasonable inquiries may be relevant”.
45. Having found that there was no evidence to show negligence on the part of the appellant in releasing her banking credentials to anyone who could have accessed her account in the manner that it was, I find that the respondent was negligent for leaving its system susceptible to fraudsters, who may include its own employees or other persons with access to its systems who managed to carry out the transactions for the withdrawal of the funds from the appellant’s account. As was held in Foley v Hill [1848] 2 H.L Cas 28, cited in Andrew Kiriti Gathii v Equity Bank Limited [2017] KEHC 3239 (KLR) , the bank must act only on the customer’s instructions. It must not by omission or action, be negligent. It has a primary duty to honour the customer’s instructions and make payment in accordance with the mandate issued by the customer. In this case, there was no mandate issued by the appellant to the respondent to transact any business on mobile money transfer.
46. In arriving at this conclusion, I am persuaded to follow the decision in the case of Karak Brothers Company Ltd –vs- Burden [1972] AII ER 1210, as cited in the case of Ombonya v Housing Finance Ltd & 3 others [2024] KEHC 869 (KLR) where it was held that:
“… a bank has a duty under its contract with its customer to exercise ‘reasonable care and skill’ in carrying out its part with regard to operations within its contract with its customer. The standard of that reasonable care and skill is an objective standard applicable to bankers. Whether or not it has been attained in any particular case has to be decided in the light of all the relevant facts, which can vary almost infinitely.”
47. From the foregoing analysis, I find that the duty of care owed by a banker to its customer was not attained by the respondent herein towards the appellant. I find learned trial magistrate was in error in failing to appropriately determine the issue of the banker-customer relationship and the duty of care of the respondent towards the appellant. He therefore failed to appropriately apply the law to the facts. I find that had he done so, he would have come to a different conclusion that the respondent was culpable for breach of its duty of care towards the appellant.
48. In the final analysis, I find that the respondent was wholly to blame for the loss of the funds from the appellant’s account and is liable to restore the appellant’s account with the full amount that was fraudulently withdrawn therefrom. Interest is payable on that sum at court rates from the date of filing the claim before the magistrate’s court.
49. Consequently, the appeal succeeds. The decision of the learned trial magistrate is set aside and substituted with a finding that the suit by the appellant before the lower court was proved on a balance of probability.
50. The appellant shall get the costs of the appeal and before the trial court.
51. Orders accordingly.
52. Dated, signed and delivered, on the Virtual Platform, Teams this 7 th day of September 2026.
ANDAYI W. F.
JUDGE
In the presence of:
Kimathi (Ms) for the Appellant.
N/A for the Respondent.
Ummu: Court Assistant.
ANDAYI W. F.
JUDGE
milimani HCCA No. e149/202213/bank electronic money transfer fraud_SCC