(Being an Appeal from the Judgment in the Chief Magistrate’s Courts at Milimani, Nairobi by Hon. J.P.A Aduke dated and delivered on 30th May 2022 in Milimani Commercial Courts Civil Case No. E8323 of 2021.)
JUDGMENT
Background
1. The plaintiff (hereinafter the appellant) instituted his claim by a plaint dated 10th May, 2021 for inter alia damages; for breach of statutory duty of care, fraud and emotional distress, and losses arising from denial of a bank facility. The appellant alleges that he sought a loan facility with Prime Bank, only to be denied the facility due to a CRB report, a defaulted active loan, by the appellant, with the Respondent Bank.
2. However, the appellant maintains that at no point did he open or operate an account with the Respondent, leave alone procure a loan facility with them. After internal investigations by the Respondent, it was unearthed that the loan facility was obtained by an imposter, posing and presenting documentary particulars similar to the appellant.
3. The appellant’s position is that the respondent failed in its duty of care, pursuant to Sec 11(h) (A) and Sec 33(4) of the Banking Act, Rule 18 (5) of the Credit Reference Bureau Regulations of 2019, Sec 25 of the Data Protection Act, thereby perpetuating the fraud, which as a result the appellant incurred losses.
4. The defendant (herein the respondent) in his defence, acknowledged that there exists an account held with it in names similar to those of the appellant, and in respect of which it was furnished with the requisite identification and account opening documents at the time of opening of the account, as such they denies that it performed its functions in a fraudulent or reckless manner or the existence of conspiracy, fraud, premeditated abuse of power and/or utter failure to exercise due diligence and concealment of fraud; allegations which are baseless and unsubstantiated.
5. Similarly, the respondent did not owe an obligation to share with the Plaintiff confidential account information concerning the subject account, before competent government organs, or any duty of care in a manner as to potentially breach the fiduciary, statutory and regulatory obligations attaching to the subsisting account held with the respondent, as by the appellant’s own indication, there existed no Bank-Customer Relationship in existence between the parties herein.
6. The trial court having considered the rival arguments, evidence through trial and the relevant laws held thus in its judgment dated 30th May, 2022;
“From the documents available on record, I note that this is a dispute on identity theft involving a “credit information provider” within the meaning of the 2020 Credit Reference Bureau Regulations 2013 (sic)
Whereas the Defendant has in their written submissions admitted to the identity theft, and allegedly deferred the matter to Banking Fraud and Investigations Department for further investigations, I note that no such report is available on record as at the date of writing this judgment...
Lastly, and most importantly, I have not seen any annexures to the plaint on record in respect of findings emanating from regulation 35 (5) of the Credit Reference Bureau Regulations 2020 under Banking Act.
Where there is any dispute under the 2020 regulations, rule 72 (2) and (4) provides for a means of dispute resolution.
...In view of the above and on the strength of the above regulations, and there being an alternative statutory mechanism under regulation 35 (5) of the Credit Reference Bureau Regulations, 2020, and the plaintiff having failed to utilize the same, I find that the entire suit herein is premature and the court does not have jurisdiction to determine the dispute at this stage. “
7. The appellant being aggrieved with the judgment instituted this appeal by way of a Memorandum of Appeal on grounds;
a. The Honourable Court erred in law and fact by finding an alternative dispute resolution mechanism under the Credit Reference Bureau Regulations, 2020 where none exists.
b. The Honourable Court erred in law and in fact by finding the applicability of regulation 35(5) of the Credit Reference Bureau Regulations 2020 under Banking Act to this suit as an existing remedy whereas no such provision exists.
c. The Honourable Court erred in fact by failing to appreciate that at the point of filing the Plaint, the parties were no longer affected by the Credit Reference Bureau Regulations, 2020 as the Plaintiff’s name had been removed from the Credit Reference Bureau listing.
d. The Honourable Court’s judgment erred in law and in fact by failing to consider and/or interrogate the overwhelming evidence to find the Respondent liable for the tort of negligence.
e. The Honourable Court erred in fact and in law in failing to consider the views and submissions of the Appellant, which ultimately impeded the interrogation of issues of duty of care, breach of duty and injury suffered through no fault of the Appellant.
f. The Honourable Court erred in law in failing to appreciate the effect of its judgment on the rules of natural justice as affecting the rights of the Plaintiff.
g. The Honourable Court erred in law by declining jurisdiction under the exhaustion of remedies doctrine as there exists no other court or tribunal to hear and determine civil cases of tortious acts of negligence in the first instance.
h. The Honourable Court erred in law in misconstruing and misapplying the provisions of the Credit Reference Bureau Regulations, 2020.
8. By the parties’ consent and directions of the court, the appeal was canvassed by way of written submissions, specifically, dated 14th February, 2024 by the appellant, and dated 11th March, 2024 by the Respondent, which divisive arguments, the cited persuasive authorities and position of law, I have considered and I hereby determine as hereunder.
Analysis and determination
9. This is a first appeal. That being the case, this court is mandated to re-evaluate and re-analyse the evidence tendered before the trial court and come to its own conclusion. See Selle & another vs Associated Motor Boats Co. Ltd. In addition, considering that this court is the first appellate court, I am alive to the principle that a court will not normally interfere with a finding of fact of the trial court unless the same is based on a misapprehension of the evidence or that the trial court is shown to have acted on wrong principles in reaching the findings. See Jabane vs Olenja [1986] KLR.
10. Based on the issues raised by the parties in their extensive submissions, from the onset this court is called to determine;
• Whether the trial court had jurisdiction to adjudicate on the appellant’s suit on merit?
11. The trial court in its determination based its ratio decidendi on the position that the dispute revolved around identity theft, by a credit information provider within the meaning of the Credit Reference Bureau Regulations, 2013 and as such without a report from the Banking Fraud and Investigations Unit, and a credit report guided under regulation 35 (5) of the Rules, the dispute ought to be canvassed, on priority, under rule 72 (2) and (4) of the Rules.
12. Rule 35 (5) of the Rules, 2013 now, Rule 37 (5) of the Credit Reference Bureau Regulations, 2020, provides as follows;
37. (1) A customer has a right to know what information the institution has submitted to the Bureau regarding that customer.
(2) A customer shall be entitled to access credit reports relating to the customer that are kept in a database administered by a bureau.
(3) A customer shall be entitled to a copy of his credit report from each bureau, or its agents, at no charge, in the following cases —
(a) at least once per year;
(b) within thirty days of receiving an adverse action notice issued under regulation 63 (1) (c); and
(c) once in every six months after making a request to a bureau to have inaccurate information corrected.
(4) Where a customer requests a credit report under paragraph (2), the bureau shall, within five working days after receiving the request and such particulars as the bureau may reasonably require to enable it identify the customer, provide to the customer a copy of all customer information relating to the customer held by the bureau.
(5) Where the customer knows or has reason to believe that the information contained in the database is inaccurate, erroneous or outdated, the customer may notify the bureau in writing of the information disputed.
13. A ‘customer’, ‘credit information’ and ‘credit report’ are defined under Rule 2, of the Rules as follows;
"Customer" means any consumer of services or products who has or had a formal engagement to receive services or products on agreed terms and conditions from an institution or a third party and includes a person who seeks to open an account with an institution
"Credit information" means any positive or negative information bearing on an individual's or entity's credit worthiness, credit standing, credit capacity, to the history or profile of an individual or entity with regard to credit, assets, and any financial obligations;
"Credit report" means an electronic, written or other communication of any information by a credit reference bureau, relating to a person's creditworthiness, credit standing, credit capacity, character or general reputation which is used or collected to serve as a factor in establishing that person's eligibility for credit or other service or product provided by an institution or for such other purposes as may be permitted or required by law or contract;
14. From the foregoing, it is apparent that the appellant is not a customer of the Respondent within the meaning of the Credit Reference Bureau Regulations, 2020. It is not uncontroverted that the dispute herein stems from an alleged impersonation of the appellant’s identity, where the impersonator obtained facilities with the Respondent Bank, facts which the Respondent acknowledges.
15. The claim herein, if I understand it correctly as particularized by the appellant, is over alleged fraud, negligence and want of duty of care by the Respondent to wit an account was opened and operated in the name of the appellant, by a person other than himself, whereby a loan facility was procured, issued and defaulted. Which nexus caused the appellant’s listing with the CRB, thereby incurring losses arising from denial of a bank facility. In a nutshell, the trial court had jurisdiction to interrogate and determine the suit on merit. Consequently, I shall proceed as hereinafter.
• Whether the Respondent owed the appellant a duty of care?
16. In Beyond Kenya Limited & another v Gulf African Bank Kenya Limited [2019] eKLR, Makau J. observed that: -
“The bank in carrying out its core business of deposit taking, it is required to open and maintain bank accounts. In discharging its mandate, it is its duty to satisfactorily establish and verify the customer’s true identity and in doing so, it must be alert to the even present danger that after opening of the account, may be used for fraudulent purposes.”
17. Customer due diligence; specifically, customer identification and verification, is provided for under clause 5.6.2 of Part V of the CBK Prudential Guidelines, 2013, which states thus;
In all circumstances, any business entity operating within the financial sector requires basic information on its customers. The nature and extent of this information will vary according to the type of business. It shall also depend on whether the business is being introduced by a financial intermediary and the type of customer involved.
An institution should establish to its satisfaction that it is dealing with a person that actually exists. It should identify those persons who are empowered to undertake the transactions, whether on their own behalf or on behalf of others.
18. It is a mandatory requirement that an institution is required to identify its customer inter alia when establishing initial business relations. For face-to-face customers; on personal accounts or transactions for individual persons, the minimum mandatory requirements are; a birth certificate; or Passport; or National identity card; or Drivers licence. Additional due diligence measures that may be used to verify the identity of the customer include: address of current residence verified by a referee, a utility bill i.e. electricity or water bill, verified employment and/or source(s) of income; and where applicable, written confirmation from customer’s prior bank attesting to customer’s identity and history of account relationship (bank referee).
19. In the instant, the respondent submitted that it is its normal practise as financial institution to require the customer to provide the relevant documents which include the National Identity Card, Kenya Revenue Authority PIN, Passport Photo and duly filled account opening form containing various declarations by the customer as to the correctness of the information provided, as at the time of opening an account. All which are provided by State agencies responsible for registration of persons and issuance of the various official records.
20. As earlier stated, it is not in dispute that the impugned account was opened and operated with the respondent bank, in the name and relevant particulars or documentation similar to the appellant, by another, other than the appellant. This notwithstanding, pursuant to the CBK Prudential Guidelines, the respondent was provided with sufficient documentation, leave alone minimum mandatory requirements required in opening an account, necessary in identifying and verifying the customer.
21. The appellant’s argument on the respondent’s breach of duty of care, is that the latter violated his right to privacy and right to own property and enjoy its usage; including access to credit in contravention of Article 31, Article 40 of the COK, and Section 25 of the Data Protection Act, 2015. Thus, the use of the appellant’s ID, KRA Pin and his private mobile phone number to open and maintain Account Number 0100006879599 at the Respondent bank without the Appellant’s knowledge and consent amounts to an infringement of his right to privacy.
22. According to Black's Law Dictionary, 11th edition, a fiduciary duty is:
“A duty of utmost good faith, trust, confidence, and candour owed by a fiduciary (such as an agent or a trustee) to the beneficiary (such as the agent’s principal or the beneficiaries of the trust; ...a duty to act with the highest degree of honesty and loyalty toward another person and in the best interest of the other person-…Also termed as duty of loyalty, duty of fidelity; duty of faithful service; duty to avoid conflict of interest.”
23. In Civil Appeal 571 of 2012 Equity Bank Limited & another v Nairobi Robert Chesang [2016] eKLR the court stated thus,
“…The bank is also under a contractual duty to diligently handle accounts of a customer, to ensure that funds-deposited on account are available when required by the customer. Any deviation from that understanding without justifiable reasons which should be communicated to the customer well in advance or immediately, the bank is in breach of a contract with the customer and is liable in damages.”
Further, the court quoted the Encyclopedia of Banking Law C.21 Selangor United Rubber Estate Ltd V Cradock (No.3) [1968] 2 ALL ER 1073) where it was stated:
“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 contracts with its customers. The duty to exercise reasonable care and skill extends over the whole range of banking business within the contract with the customer. Thus, the duty applies to interpreting, ascertaining and acting in accordance with the instructions of the customer.”
24. First, as is the basis of this suit, there exists no contractual relationship between the parties, and as a ripple effect, in a general perspective, no obligation towards one another. This court has already established, as aided by both parties, that as at the time of opening the impugned account, the respondent had sufficient documentation, leave alone the minimum mandatory requirements required in opening an account, necessary in identifying and verifying the customer.
25. Based on the facts before me, I do not find that the respondent abdicated its duty to act in utmost good faith, trust, confidence and fidelity. In fact, it is not lost to me that, so much so, the respondent bank acting in its fiduciary duty, and in belief of the presumable genuineness of the impugned account and the bearer thereto, proceeded to grant a loan facility worth kshs.2,800,000/=. Quite a considerable risk, where as is now apparent, could be a hefty loss. It would follow that; I cannot impute negligence on the part of the respondent.
26. The appellant, further relied on the provisions of the Section 11 (h) (A) of the Banking Act, especially to the extent that it prohibits the Respondent from conducting its business or part thereof in a fraudulent or reckless manner or otherwise than in compliance with the provisions of the Act. Moreover, Rule 18(5) of the Credit Reference Bureau Regulations of 2019 that the Respondent had an obligation to ensure that credit information to the Credit Reference Bureau was complete and accurate.
27. In my view, the respondent bank was clearly acting within its normal cause of business, whereby, in the event of the default in the impugned account, the respondent was within its rights to forward the credit information to CRB, which was materially factual.
28. Having thus said, it would follow that the damages claimed are thereby disallowed.
29. Nevertheless, it is my considered view, that in light of the unfortunate circumstances herein, the financial lenders and community, especially in this wake of the digital era and artificial intelligence, the CBK Prudential Guidelines, ought to be reviewed to curb the menace that is identity theft.
Conclusion
30. I find that the appeal lacks merit and is hereby dismissed.
31. Costs of the appeal assessed at Khs.50,000 all-inclusive and are awarded to the respondent.
Dated, Signed and Delivered at NAIROBI Virtually this ……31ST………Day of JULY, 2024.
……………………
WENDY MICHENI
JUDGE
JUDGMENT
Background
1. The plaintiff (hereinafter the appellant) instituted his claim by a plaint dated 10th May, 2021 for inter alia damages; for breach of statutory duty of care, fraud and emotional distress, and losses arising from denial of a bank facility. The appellant alleges that he sought a loan facility with Prime Bank, only to be denied the facility due to a CRB report, a defaulted active loan, by the appellant, with the Respondent Bank.
2. However, the appellant maintains that at no point did he open or operate an account with the Respondent, leave alone procure a loan facility with them. After internal investigations by the Respondent, it was unearthed that the loan facility was obtained by an imposter, posing and presenting documentary particulars similar to the appellant.
3. The appellant’s position is that the respondent failed in its duty of care, pursuant to Sec 11(h) (A) and Sec 33(4) of the Banking Act, Rule 18 (5) of the Credit Reference Bureau Regulations of 2019, Sec 25 of the Data Protection Act, thereby perpetuating the fraud, which as a result the appellant incurred losses.
4. The defendant (herein the respondent) in his defence, acknowledged that there exists an account held with it in names similar to those of the appellant, and in respect of which it was furnished with the requisite identification and account opening documents at the time of opening of the account, as such they denies that it performed its functions in a fraudulent or reckless manner or the existence of conspiracy, fraud, premeditated abuse of power and/or utter failure to exercise due diligence and concealment of fraud; allegations which are baseless and unsubstantiated.
5. Similarly, the respondent did not owe an obligation to share with the Plaintiff confidential account information concerning the subject account, before competent government organs, or any duty of care in a manner as to potentially breach the fiduciary, statutory and regulatory obligations attaching to the subsisting account held with the respondent, as by the appellant’s own indication, there existed no Bank-Customer Relationship in existence between the parties herein.
6. The trial court having considered the rival arguments, evidence through trial and the relevant laws held thus in its judgment dated 30th May, 2022;
“From the documents available on record, I note that this is a dispute on identity theft involving a “credit information provider” within the meaning of the 2020 Credit Reference Bureau Regulations 2013 (sic)
Whereas the Defendant has in their written submissions admitted to the identity theft, and allegedly deferred the matter to Banking Fraud and Investigations Department for further investigations, I note that no such report is available on record as at the date of writing this judgment...
Lastly, and most importantly, I have not seen any annexures to the plaint on record in respect of findings emanating from regulation 35 (5) of the Credit Reference Bureau Regulations 2020 under Banking Act.
Where there is any dispute under the 2020 regulations, rule 72 (2) and (4) provides for a means of dispute resolution.
...In view of the above and on the strength of the above regulations, and there being an alternative statutory mechanism under regulation 35 (5) of the Credit Reference Bureau Regulations, 2020, and the plaintiff having failed to utilize the same, I find that the entire suit herein is premature and the court does not have jurisdiction to determine the dispute at this stage. “
7. The appellant being aggrieved with the judgment instituted this appeal by way of a Memorandum of Appeal on grounds;
a. The Honourable Court erred in law and fact by finding an alternative dispute resolution mechanism under the Credit Reference Bureau Regulations, 2020 where none exists.
b. The Honourable Court erred in law and in fact by finding the applicability of regulation 35(5) of the Credit Reference Bureau Regulations 2020 under Banking Act to this suit as an existing remedy whereas no such provision exists.
c. The Honourable Court erred in fact by failing to appreciate that at the point of filing the Plaint, the parties were no longer affected by the Credit Reference Bureau Regulations, 2020 as the Plaintiff’s name had been removed from the Credit Reference Bureau listing.
d. The Honourable Court’s judgment erred in law and in fact by failing to consider and/or interrogate the overwhelming evidence to find the Respondent liable for the tort of negligence.
e. The Honourable Court erred in fact and in law in failing to consider the views and submissions of the Appellant, which ultimately impeded the interrogation of issues of duty of care, breach of duty and injury suffered through no fault of the Appellant.
f. The Honourable Court erred in law in failing to appreciate the effect of its judgment on the rules of natural justice as affecting the rights of the Plaintiff.
g. The Honourable Court erred in law by declining jurisdiction under the exhaustion of remedies doctrine as there exists no other court or tribunal to hear and determine civil cases of tortious acts of negligence in the first instance.
h. The Honourable Court erred in law in misconstruing and misapplying the provisions of the Credit Reference Bureau Regulations, 2020.
8. By the parties’ consent and directions of the court, the appeal was canvassed by way of written submissions, specifically, dated 14th February, 2024 by the appellant, and dated 11th March, 2024 by the Respondent, which divisive arguments, the cited persuasive authorities and position of law, I have considered and I hereby determine as hereunder.
Analysis and determination
9. This is a first appeal. That being the case, this court is mandated to re-evaluate and re-analyse the evidence tendered before the trial court and come to its own conclusion. See Selle & another vs Associated Motor Boats Co. Ltd. In addition, considering that this court is the first appellate court, I am alive to the principle that a court will not normally interfere with a finding of fact of the trial court unless the same is based on a misapprehension of the evidence or that the trial court is shown to have acted on wrong principles in reaching the findings. See Jabane vs Olenja [1986] KLR.
10. Based on the issues raised by the parties in their extensive submissions, from the onset this court is called to determine;
• Whether the trial court had jurisdiction to adjudicate on the appellant’s suit on merit?
11. The trial court in its determination based its ratio decidendi on the position that the dispute revolved around identity theft, by a credit information provider within the meaning of the Credit Reference Bureau Regulations, 2013 and as such without a report from the Banking Fraud and Investigations Unit, and a credit report guided under regulation 35 (5) of the Rules, the dispute ought to be canvassed, on priority, under rule 72 (2) and (4) of the Rules.
12. Rule 35 (5) of the Rules, 2013 now, Rule 37 (5) of the Credit Reference Bureau Regulations, 2020, provides as follows;
37. (1) A customer has a right to know what information the institution has submitted to the Bureau regarding that customer.
(2) A customer shall be entitled to access credit reports relating to the customer that are kept in a database administered by a bureau.
(3) A customer shall be entitled to a copy of his credit report from each bureau, or its agents, at no charge, in the following cases —
(a) at least once per year;
(b) within thirty days of receiving an adverse action notice issued under regulation 63 (1) (c); and
(c) once in every six months after making a request to a bureau to have inaccurate information corrected.
(4) Where a customer requests a credit report under paragraph (2), the bureau shall, within five working days after receiving the request and such particulars as the bureau may reasonably require to enable it identify the customer, provide to the customer a copy of all customer information relating to the customer held by the bureau.
(5) Where the customer knows or has reason to believe that the information contained in the database is inaccurate, erroneous or outdated, the customer may notify the bureau in writing of the information disputed.
13. A ‘customer’, ‘credit information’ and ‘credit report’ are defined under Rule 2, of the Rules as follows;
"Customer" means any consumer of services or products who has or had a formal engagement to receive services or products on agreed terms and conditions from an institution or a third party and includes a person who seeks to open an account with an institution
"Credit information" means any positive or negative information bearing on an individual's or entity's credit worthiness, credit standing, credit capacity, to the history or profile of an individual or entity with regard to credit, assets, and any financial obligations;
"Credit report" means an electronic, written or other communication of any information by a credit reference bureau, relating to a person's creditworthiness, credit standing, credit capacity, character or general reputation which is used or collected to serve as a factor in establishing that person's eligibility for credit or other service or product provided by an institution or for such other purposes as may be permitted or required by law or contract;
14. From the foregoing, it is apparent that the appellant is not a customer of the Respondent within the meaning of the Credit Reference Bureau Regulations, 2020. It is not uncontroverted that the dispute herein stems from an alleged impersonation of the appellant’s identity, where the impersonator obtained facilities with the Respondent Bank, facts which the Respondent acknowledges.
15. The claim herein, if I understand it correctly as particularized by the appellant, is over alleged fraud, negligence and want of duty of care by the Respondent to wit an account was opened and operated in the name of the appellant, by a person other than himself, whereby a loan facility was procured, issued and defaulted. Which nexus caused the appellant’s listing with the CRB, thereby incurring losses arising from denial of a bank facility. In a nutshell, the trial court had jurisdiction to interrogate and determine the suit on merit. Consequently, I shall proceed as hereinafter.
• Whether the Respondent owed the appellant a duty of care?
16. In Beyond Kenya Limited & another v Gulf African Bank Kenya Limited [2019] eKLR, Makau J. observed that: -
“The bank in carrying out its core business of deposit taking, it is required to open and maintain bank accounts. In discharging its mandate, it is its duty to satisfactorily establish and verify the customer’s true identity and in doing so, it must be alert to the even present danger that after opening of the account, may be used for fraudulent purposes.”
17. Customer due diligence; specifically, customer identification and verification, is provided for under clause 5.6.2 of Part V of the CBK Prudential Guidelines, 2013, which states thus;
In all circumstances, any business entity operating within the financial sector requires basic information on its customers. The nature and extent of this information will vary according to the type of business. It shall also depend on whether the business is being introduced by a financial intermediary and the type of customer involved.
An institution should establish to its satisfaction that it is dealing with a person that actually exists. It should identify those persons who are empowered to undertake the transactions, whether on their own behalf or on behalf of others.
18. It is a mandatory requirement that an institution is required to identify its customer inter alia when establishing initial business relations. For face-to-face customers; on personal accounts or transactions for individual persons, the minimum mandatory requirements are; a birth certificate; or Passport; or National identity card; or Drivers licence. Additional due diligence measures that may be used to verify the identity of the customer include: address of current residence verified by a referee, a utility bill i.e. electricity or water bill, verified employment and/or source(s) of income; and where applicable, written confirmation from customer’s prior bank attesting to customer’s identity and history of account relationship (bank referee).
19. In the instant, the respondent submitted that it is its normal practise as financial institution to require the customer to provide the relevant documents which include the National Identity Card, Kenya Revenue Authority PIN, Passport Photo and duly filled account opening form containing various declarations by the customer as to the correctness of the information provided, as at the time of opening an account. All which are provided by State agencies responsible for registration of persons and issuance of the various official records.
20. As earlier stated, it is not in dispute that the impugned account was opened and operated with the respondent bank, in the name and relevant particulars or documentation similar to the appellant, by another, other than the appellant. This notwithstanding, pursuant to the CBK Prudential Guidelines, the respondent was provided with sufficient documentation, leave alone minimum mandatory requirements required in opening an account, necessary in identifying and verifying the customer.
21. The appellant’s argument on the respondent’s breach of duty of care, is that the latter violated his right to privacy and right to own property and enjoy its usage; including access to credit in contravention of Article 31, Article 40 of the COK, and Section 25 of the Data Protection Act, 2015. Thus, the use of the appellant’s ID, KRA Pin and his private mobile phone number to open and maintain Account Number 0100006879599 at the Respondent bank without the Appellant’s knowledge and consent amounts to an infringement of his right to privacy.
22. According to Black's Law Dictionary, 11th edition, a fiduciary duty is:
“A duty of utmost good faith, trust, confidence, and candour owed by a fiduciary (such as an agent or a trustee) to the beneficiary (such as the agent’s principal or the beneficiaries of the trust; ...a duty to act with the highest degree of honesty and loyalty toward another person and in the best interest of the other person-…Also termed as duty of loyalty, duty of fidelity; duty of faithful service; duty to avoid conflict of interest.”
23. In Civil Appeal 571 of 2012 Equity Bank Limited & another v Nairobi Robert Chesang [2016] eKLR the court stated thus,
“…The bank is also under a contractual duty to diligently handle accounts of a customer, to ensure that funds-deposited on account are available when required by the customer. Any deviation from that understanding without justifiable reasons which should be communicated to the customer well in advance or immediately, the bank is in breach of a contract with the customer and is liable in damages.”
Further, the court quoted the Encyclopedia of Banking Law C.21 Selangor United Rubber Estate Ltd V Cradock (No.3) [1968] 2 ALL ER 1073) where it was stated:
“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 contracts with its customers. The duty to exercise reasonable care and skill extends over the whole range of banking business within the contract with the customer. Thus, the duty applies to interpreting, ascertaining and acting in accordance with the instructions of the customer.”
24. First, as is the basis of this suit, there exists no contractual relationship between the parties, and as a ripple effect, in a general perspective, no obligation towards one another. This court has already established, as aided by both parties, that as at the time of opening the impugned account, the respondent had sufficient documentation, leave alone the minimum mandatory requirements required in opening an account, necessary in identifying and verifying the customer.
25. Based on the facts before me, I do not find that the respondent abdicated its duty to act in utmost good faith, trust, confidence and fidelity. In fact, it is not lost to me that, so much so, the respondent bank acting in its fiduciary duty, and in belief of the presumable genuineness of the impugned account and the bearer thereto, proceeded to grant a loan facility worth kshs.2,800,000/=. Quite a considerable risk, where as is now apparent, could be a hefty loss. It would follow that; I cannot impute negligence on the part of the respondent.
26. The appellant, further relied on the provisions of the Section 11 (h) (A) of the Banking Act, especially to the extent that it prohibits the Respondent from conducting its business or part thereof in a fraudulent or reckless manner or otherwise than in compliance with the provisions of the Act. Moreover, Rule 18(5) of the Credit Reference Bureau Regulations of 2019 that the Respondent had an obligation to ensure that credit information to the Credit Reference Bureau was complete and accurate.
27. In my view, the respondent bank was clearly acting within its normal cause of business, whereby, in the event of the default in the impugned account, the respondent was within its rights to forward the credit information to CRB, which was materially factual.
28. Having thus said, it would follow that the damages claimed are thereby disallowed.
29. Nevertheless, it is my considered view, that in light of the unfortunate circumstances herein, the financial lenders and community, especially in this wake of the digital era and artificial intelligence, the CBK Prudential Guidelines, ought to be reviewed to curb the menace that is identity theft.
Conclusion
30. I find that the appeal lacks merit and is hereby dismissed.
31. Costs of the appeal assessed at Khs.50,000 all-inclusive and are awarded to the respondent.
Dated, Signed and Delivered at NAIROBI Virtually this ……31ST………Day of JULY, 2024.
……………………
WENDY MICHENI
JUDGE