Vide an amended 3rd November2020 the Appellant sued the Respondents herein seeking orders that judgment be entered against the Respondents jointly and severally for
a. General Damages
b. B. An order/ Declaration that debit of Kshs. 520,000/=on the Appellant’s account with the 1st Respondent and consequent payment of the same to the 2nd Respondent was fraudulent and unlawful
c. Compensation of the amount fraudulently withdrawn
d. Refund of Kshs. 520,000/=
e. Costs of this suit
f. Interest on a & b above at court rates from the date of loss
g. Any other relief the court deemed fit to grant in the circumstances
The suit was defended and after the Appellant gave evidence in chief the Respondents called three witness who gave evidence against the Appellant’s claim
Upon consideration of the evidence on record for the parties the Trial Magistrate found that allegations of fraud and negligence on the part of the bank had not been proved and the suit lacked merit and was dismissed with costs.
The Appellant was aggrieved by the judgment and an appeal was lodged vide an amended Memorandum of Appel dated 15th May 2024 on the following grounds:-
The Honorable Magistrate erred in law and in fact by failing to appreciate that the Plaintiff is a legal body with capacity to sue on its own accord and not that of its directors.
2. The Honorable Magistrate erred in law and in fact by failing to appreciate that the holder of the bank account number I 68446422 is the Plaintiff in its own legal capacity and that any withdraws and deposits made to the account was supposed to be approved by it.
3. The Honorable Magistrate erred in law and in fact by failing to take into account that no document was adduced as evidence to show that the Plaintiff had instructed and given authority to the Director, John Marwa to engage in business deals with the 2nd Defendant.
4, The Honorable Magistrate erred in law and in fact by failing to take into account and appreciate that the 2nd Defendant did not adduce any evidence in support of his claim that he was engaged in business deals with the Plaintiff.
5. The learned Magistrate erred in law and in fact by failing to appreciate that no evidence was adduced to show that the Plaintiff had business dealings with the 2nd Defendant and thus a stranger to the dealings between the 2nd Defendant and the directors John Marwa at a personal level.
6. The Honorable Magistrate erred in law and in fact by failing to appreciate the Plaintiff did not authorize a sum of Ksh. 520,000 be debited from its account and be credited in the Ft Defendant's account and subsequently to the 2nd Defendant's account.
7. The learned Magistrate erred in law and in fact by failing to take into account that the monies withdrawn from the Plaintiffs bank account in favour of the Defendant was not procedurally withdrawn as the Plaintiff had not issued any authority to do so.
8. The Honorable Magistrate erred in law and in fact by failing to appreciate that the JSI Defendant had a duty of care towards the Plaintiff who was its customer and had failed to exercise its duty by allowing the Plaintiffs money to be withdrawn from its bank account in favor of the Defendant by the 20dl Defendant Without the authority of the Plaintiff.
9. The Honorable Magistrate erred in law and in fact by failing to take into account that the Defendant owes a duty of care to the Plaintiff as its customer and protect it from fraud of agents which let the Plaintiffs monies be withdrawn from the Plaintiffs account into the 2nd Defendant's account.
1(), The Honorable Magistrate erred in law and in fact by failing to take into account that there exists a binding contract between the Plaintiff and the 1 st Defendant and the Defendant was in breach of the said contract by allowing monies be withdrawn from the Plaintiff account 'in favour of the Defendant without the knowledge and authority of the Plaintiff.
I I. The Honorable Magistrate erred in law and in fact by failing to appreciate that the 1 st Defendant had a duty of confidentiality towards the Plaintiff but the Defendant failed to uphold the said duty by giving access of the Plaintiff accounts details to the 2nd Defendant not as its agent but on personal level.
12. The Honorable Magistrate erred in law and in fact by failing to take into account that the 2nd Defendant misled the Plaintiffs representative by advising him to sign on a blank cheque having undertaken to assist the Plaintiffs representative who was not familiar with bank transactions.
13. The learned Magistrate erred in law and in fact by failing to make any finding on vicarious liability on the part of the pact of the 1st Defendant as regards the 1st Defendant in the suit, when the '2nd Defendant within his scope of work had deceived the Plaintiffs representative to sign a blank cheque and thereafter the 2nd Defendant drew the said cheque in favour of the 1st Defendant and subsequently the said money into his personal account.
14. The learned Magistrate totally misdirected herself in delivering the judgement in favor of the Defendants and against the Plaintiff by failing to consider and appreciate the evidence on record.
15. The learned Magistrate erred in law and in fact by failing to that the 2nd Defendant was acting as an agent of the Defendant at the time when he was attending to the Appellants’ director.
16. The learned Magistrate erred in law and in fact in failing to appreciate that the 1st Defendant was in clear breach of Contract and acting contrary and in breach of bank/customer relationship in proceeding to credit funds into an account of its own manager contrary to clear instructions indicated in the Cheque.
17. The Respondent failed in its duty and responsibilities in proceeding to debit an account of the Appellant and crediting an account of the 2nd Respondent without instruction and authority of the Appellant.
18. The learned Magistrate erred in law and in fact by failing take into account that the cheque of Kshs. 520,000 was not procedurally processed on basis that on the face of the cheque the same was drawn 'in favour of the 1 5t Defendant and on the back of the said cheque and different instructions,
19. The learned Magistrate erred in law and in fact by dismissing the suit against the 1st Defendant despite the evidence showing that the Ft Defendant was in breach of fiduciary duty towards the Appellant for failing to reach out to the Appellant when they noted that the cheque had contradicting instructions.
20. The Magistrate erred in law and 'in fact in dismissing the suit against the Defendants despite the said having failed to adduce the forensic audit report in the matter to prove that they were exonerated from the fraud claim.
21. The learned Magistrate erred in law and in fact in holding that the Appellant and the 2nd Defendant had business dealing despite the evidence of the 2nd Defendant that the tender projects to Francis and Muhingira and the 2nd Defendant did not hand the money to the Appellant.
22. The learned Magistrate erred in law and in fact appreciate the evidence of the 2nd Defendant that the cheque was drawn in favour of the 1st Defendant and that the 2nd Defendant had illegally and unprocedurally expedited the process to have the money credited in his account without following the due process,
23. The learned Magistrate erred in law and in fact by failing to put into account that the Appellant's representative, Mr. John Marwa is an illiterate and wholly relied on the 2nd Defendant's directions and advise in confidence that the said 2nd Defendant would help him.
It is proposed to ask the court for ORDERS THAT:-
i. The appeal be allowed
ii. In the result, the judgment made by the learned Magistrate against the Appellant be set aside
iii. A declaration that a sum of Kshs. 520,000/= was not procedurally withdrawn from the Appellant’s account
iv. The 1s Respondent be ordered to refund the sum of Kshs. 520,000/= together with interest.
v. A declaration that the 2nd Respondent breached his fiduciary duty towards the Appellant and the 1st Respondent be held vicariously liable for the said actions
vi. The costs of the appeal and in the subordinate court be granted to the Appellant against the Respondents.
The Appellant/Plaintiff in the lower Court instituted a suit vide a plaint and amended plaint dated 03/1 W2020 seeking for a refund of Kshs. fraudulently and unlawfully withdrawn from its account number 168446422 with the Respondent/ 1st Defendant by 2nd Respondent/2nd Defendant without its knowledge and approval,
The Respondent/ 1st Defendant entered appearance and filed statement of defence and amended statement of defence dated 11/0 1/202 L In the said statement of defence the 1st Respondent/ 1st Defendant confirmed that the Appellant/Plaintiff was its customer with account number 168446422. It was the defence of the F t Respondent/1st Defendant that that Appellant/Plaintiff and the 2nd Respondent/2nd individually, jointly and severally withdrew funds from the Appellant/Plaintiff’s accounts with its approval by signing 2 cheques numbers 4 and 5 and denied that its alleged employee and/or official engaged in fraudulent activity in any transaction involving the Appellant/Plaintiff.
The 2nd Respondent/2nd Defendant also entered appearance and filed statement of defence dated 30/03/2021, In the said statement of defence the 2nd Respondent/2nd Defendant denied all the Appellant/Plaintiffs claim and no averments thereof,
PWI John Marwa Chacha adduced evidence as the Appellant’s witness and adopted his statement dated 03/11/202() and produced documents. It was his evidence that he used to be a businessman and director of Appellant/Plaintiff. That he is the managing director with his wife Ann Waisike Mwita and that the company was registered in the year 2015.
'Phat he knows the 1st Defendant as well as the 2nd Defendant herein. Kenya. Commercial Bank was the Company's bank where they saved their company monies. Thai they opened an account at Kehancha Branch A/C No. 1 168446422. The signatories him and his wife. The 2nd Defendant at the time was the Kehancha Kenya Commercial Bank Manager.
It was the evidence of PW I that the company had a contract with Kuria West Constituency CDF were they built culverts worth Kshs. 1,000,000 after taxes of Kshs. 852,000
It was the further the evidence of PW I that on 05/02/2016, while a home, he received a call from the 2nd Defendant to go to the bank as there people demanding money from him. That the 2nd Defendant directed him to go with his cheque book that upon arrival at the bank, PW I found his foreman, Gabriel Mungira who was accompanied by Francis Chacha. In attendance was also the Manager of the CDF. That the CDF Manager deposited the cheque of Kshs, 852,000 to the Company's account.
That PW I went to the Manager (2nd Defendant) and asked whether he Could cash in the deposited cheque that day. The 2nd Defendant confirmed that he could and asked PW I (o withdraw the money using 2 cheques namely numbers 4 and 5. It was further the evidence of PW I that the 2nd Defendant asked PW] to sign the said cheques. That in cheque no. 4, PW I just signed and did not fill any details as the manager directed that he would fill other details such as figures and names of payees himself as he was in a hurry to go to Kisumu and as such PW I signed the said cheque in confidence; and the 2nd Defendant filled Kshs. 90,000 and the payee being PW1.
PW I went on to testify that as for cheque number 5, PW I signed the same as cheque number 4 then the Manager called the Customer Care Officer at the bank and instructed him to help clear the cheque. The Manager asked PW I to sign on the cheque and leave him to fill other details. The manager them proceeded to date the said cheque 05/02/2016 and it was payable to Kenya Commercial Bank Kehancha for Kshs. 520,000 in letters and words all written by the 2nd Defendant. That he did not authorize the amount indicated and the payee. That he later discovered that the 2nd Defendant's signature was on top of the cheque, 2nd signature was PW 1 's while the 3rd signature was unknown to him but was later informed that the signature was for Euphrenus Mwita, the Customer Care Officer at Kenya Commercial Bank Kehancha. Behind the cheque was the signature and writings of someone unknown to PW I d but the signature on it was his.
That the Manager went away with the said cheque and told PWI that the systems had hanged so the cheque could not be cleared and asked PWI to return to the bank on 9.2.2016 That upon return on the said date, the 2nd Defendant illförrned PW1 that the cheque had still hanged and asked PWI to withdraw Kshs. 242,000 to clear the debts as Manager sorted out the balance later.
It Was the evidence of PW I that the cheque No. 5 was payable to Kenya Commercial Bank. That he did not have any dealings with Kenya Commercial Bank to pay them anything. The cheque was to be drawn to PW I as the payee. That PW I did don't know the owner of the account indicated on the back of the cheque No.5. That he had no debt of the 2nd Defendant at all and in the event he had any debt, he would have paid the cheque directly to the 2nd Defendant atid did not know why the 2nd Defendant wrote the cheque to Kenya Commercial Bank and payable to him personally, That PW I discovered the fraudulent dealings by the 2nd Defendant from the Kenya Commercial Bank Internal Auditing Investigations Teams.
PW1 went ahead to adduce evidence that the Manager duped him into signing open cheques. That he trusted the Manager and the bank to do the right thing. That Mwongera Gabriel worked with him in the project with CDF tender of building culverts and they did not sponsor the project at all and he did not have their debt at all.
[t was his evidence that 'in the event he had their debts as alleged, he would not have written the cheques in the names of Kenya Commercial Bank and he neither owed Francis Chacha nor did he agree to share the money with him. That he wrote to the bank and lodged a complainant about the payment through the letter from Agulo Odero dated 25.1.2017 but the bank did not respond. He further wrote to the bank again vide a letter dated 8.22017 and left a copy with the DCI Kehancha.
During Cross examination, it was the evidence of PW I that he opened the Kenya Commercial Bank Kehancha account in the year 2015. On 05/02/2016 he went to the bank as a representative of the Company. The Manager called him to the Bank using Gabriel fs phone number. That he used to know the 2nd Defendant as the Manager only and had never dealt with him on business other than bank business.
That he only signed the cheques and that is how the 2nd Defendant grounded him. That he had been dealing with the bank severally writing the cheques himself with the help of his wife. That his signature was on the cheque in dispute. That he did not write anything on it and the Manager was left to fill the writings inside. He wrote a bank cheque that day. [lc trusted the bank and just signed. It was the first time he had signed a bank cheque at the bank.
It was the evidence of PW1 that the 2nd Defendant had cheated him to withdraw the amount as he sorted the system problems for the other cash. The same day, Kshs. 142,000/= was deposited into the 2nd Account. That PW1 did not authorize the deposit into the 15t Defendants’ account of the Kshs 300,000 on 10/2/2016. not know that Kshs. 520,000 had been withdrawn from the Plaintiffs Account.
That on 09/02/2016, PW J reported the loss of money to Onyango and the Bank, the 1st Defendant's workers. They told me they could look into it. The Kenya Commercial Bank Investigators went to the Bank in the year 2017. That PW I waited for them and made follow ups through correspondences,
That he waited for long as the 2 Officers kept telling PWI to wait for them to handle the issue.
Lastly it was the evidence of PW1 that he signed the cheques on trust that Defendants could do the right thing. That He opened the account with his wife. That he signed the account opening documents. That he was not issued with the bank terms and conditions to know that he should not sign on open cheques. That he was visited by the bank's workers. That he is the custodian of cheque book and is responsible for the same. That he was not careless in handling the cheque and did not instruct the bank to pay itself through the' cheque and transfer the money to other account.
During re-examination, it was the evidence of PWI that there was no business dealing with Oliver or Gabriel in involvement in the money. The cheque in question cheque No, 5, for Kshs, 520,000. That he saw the 2nd Defendant’s bank statement from Kehancha Kenya Commercial Bank Account No. 1 104015285 which shows he received Kshs. 520,000/= on 05/02/2016. The cheque says to transfer the amount to Account No. 077230848815. These are 2 different accounts. That he did not know how the money ended up into 2nd Defendant's account. Both accounts belong to Oliver. They played games with the money. It is not possible for money to be paid into a different account other than that indicated in the cheque. The 2nd Defendant's account statement is in the 1st defendant's bundle of documents dated 6/7/2018 for Account No. 1104015285 for the period of 4/2/2016 to 10/2/2016.
it was further his evidence that he withdrew Kshs. 242000/= on 9/2/2016 and the same amount was deposited into 2nd Defendant's account. The name of the depositor is just stated as John. John could be anyone. PWI confirmed his name as John Marwa. Bank acted on his signature only and are not allowed to involve themselves in fraud.
DWI- Merema Yunvalis Mwita a banker at 1st Defendant bank, Kehancha branch testified and it was his evidence that he worked for the bank for 8 years and he was a Customer Service Consultant during the period in question.
It was his evidence that the procedure for opening an Account; one is given some documents to comply with. PWI was given documents to open a business account as he requested. The Plaintiff filled these forms. He provided the signature specimen, attached documents e.g. copy of identity card, certificate of business registration, KRA Pin, Board Resolution of the Directors. All these things, the Plaintiff availed. Plaintiff signed the terms and conditions spelling him how to operate the Account and cheque book. Plaintiff signed all these.
On 5/2/2016, in the evening around 5.00p.m. the Plaintiff operating the account, came to the bank and was accompanied with 2 people namely Gabriel Mwingira and Francis. That they welcomed them in the presence of the Manager 2nd Defendant herein. Normal banking hours are between 8.30 till all customers are served. They went to the Manager's Office. They stayed there for a while. John Marwa came to went at the Customer Care Desk. That he gave him (DWI) a cheque with Kshs. 520,000. He requested DWI to Clear the cheque. Before dealing with cheques, there are several things to consider:-
I) Date on the cheque. It must not be post dated
2) The signature must be authentic
3) The Payee and the instructions given in this case it was drawn to pay Kenya Commercial Bank Kehancha. At the back of the cheques, there was instruction to pay to an account.
4) In Such instructions, the account holder must sign on the instructions. In this case, the owner of the Account delivered the cheque personally.
It was the evidence of DW1 that he signed on the cheque as confirming all the requirements are met with a red pen. He signed on it. The signature of the Branch Manager must be on the cheque to clear. This confirms that in his capacity as the Manager was perfect in content.
It was further his evidence that the procedure of clearing the cheque was dully followed. That he was not aware of a personal relationship between John and the Manager, John did not declare this at all. That he would not thus know if a relationship was there.
[t was further the evidence John withdrew through the cheques Kshs. 520,000 John transferred the money to Oliver's account. It was DWI's testimony that on 9/2/2016, the Plaintiff went to his desk, checked his account balance, He assisted him on this day, he withdrew cash of Kshs. 242,000 at the Cashier. On the same day, he personally deposited Kshs. 228,000 into Oliver's account. In their systems, they do not narrate the whole names of the depositor, just one name. In Plaintiffs statement, the name Oliver Muhoni's is only indicated as Muhoni. The system captures a specific number of names.
The relationship between the Defendant and the Plaintiff continued. He made an application and was awarded a loan of Kshs.300,000. The Plaintiff made a complaint about Kshs. 520,000 on 30/12/2016. That he never received a complaint from him (PW l) since February, 2017.
It was further the evidence of DWI that in the terms and conditions, the mode of filing a complaint is set out clearly. The terms and conditions paragraph 17 it States, cheque books are issued subject to the following conditions:-
l) one agrees to look after and use it with utmost care
2) To ensure all uncompleted cheque forms are kept in custody of all forms
3) To inform the bank of any loss of cheque book leaf
The Plaintiff was thus negligent in handling his cheque book in this instant. That he blamed the Plaintiff for loss of his money. He failed to disclose personal dealings with the 1st Defendant. The bank acted on his instructions. The Plaintiffs claims arc thus untrue. The bank honored his instructions.
During cross examination it was the evidence of DWI that at the material time of this suit, the 2nd Defendant was the Branch Manager at the Bank. He was the head/overall of the bank overseeing every operation of the bank. The bank has obligations so does the customer and all dealings are in writing.
In the Bank's terms and conditions running, the signature of the client/plaintiff is not on the terms and conditions to mean that they were brought to his attention. These terms are in the account opening form. There is no place for signing on the end of the terms and conditions pages. The bank is bound by statutes and regulations regulating the industry of banking. One of the duties of the bank is to keep the client's money as safe as possible.
It was the evidence of DWI that the cheque of Kshs. 520,000 dated 5/2/2016 is drawn in favour of Kenya Commercial Bank Kehancha. He did not know of any business the Client had with the bank to get paid for any dealings.
It was the testimony of DWI that Oliver signed the cheque in question. At the back of the cheque, there is a contrary instruction to transfer the money to a different account. Kenya Commercial Bank is the beneficiary. It did not authorize/sanction the transfer to a different account, The expected beneficiary as per the face of the cheque is Kenya Commercial Bank. This is the instruction given by the owner of the Account. There is no account called Kenya Commercial Bank. The instructions are usually at the back of the cheque. This is not a group account. There is a name appearing in the instruction note. If he wanted to pay Oliver directly, he had the option of sending to his Account directly other than through Kenya Commercial Bank.
It was the evidence of DWI that the drawer is the owner of the cheque. His signature is on the instructions and acted on them. The Account at the back of the cheque is 077230848815. Oliver's statement is account No. I04015285 reflects instead receiving the money. These are different accounts. The reason Why the money, was deposited in this Account is because both accounts belong to the same person. Kenya Commercial Bank updated the system from 07 to the current number I0. Hence the discrepancy in the account numbers. That he did not have the memorandum proving the system change at the moment. The account is the Manager's account.
It was the testimony of DWI that the bank verified the signature of the Plaintiff. An internal inquiry or forensic audit in this matter was conducted in 30/12/2016. It arose from this complaint. The letters of complaint are for 2017. The complaint was registered way before. The process of investigations had begun by 30/12/2016 since he was approached on this date. That he was not aware when the same was made. A complaint had no time limit. There is a role that exists at the bank 011 impartiality. That is why he was the one who signed that the cheque was okay before processing the same. That there is no requirement that if the Manager is benefitting from the dealings, he ought to have allowed another person to act entirely on the Cheque.
It was further the evidence of DWI that on 9/2/2016, John deposited Kshs.242,000 into Oliver’s account. That he did don't have the hard copies of the transaction slips to prove it is John the Plaintiff that deposited the money into Oliver's account today in Court, Johns are many. The loan granted to the Plaintiff of Kshs. 300,000 in the normal course of business.
That the bank is insured against losses by its workers. He did not know if Oliver was still working with the bank. That he did not know if Oliver was fired out of these dealings. The dealing of this cheque was not negligent in the circumstances.
During re-examination, it as the evidence of DWI that the terms and conditions of Account Opening/Operations are contained in the Account Opening Forms at the end. In page I declaration "form above", it states that the customer is bound by the terms and conditions. The declaration is on the Account Opening Forms. In 2016, the hank upgraded their systems. By the time the monies were being transferred to Oliver's the systems had changed into the current numbers. A bank has a time frame to act after a complaint has been made in paragraph 14 of the terms and conditions. That he did know when the complainant was made. He wrote his statement with the investigators on 30/12/2016.
DW2 Oliver Muhonda Alliangano the 2nd Defendant adopted his statement dated 4th June 2021 and testified that he knew John. That he used to work in Kenya Commercial Bank - Kehancha Branch as the Branch Manager. That he knew John through construction business. That he is the director of Tonsanse Construction Limited. That they did one business with John in late 2016.
It was the evidence of DW2 that he was approached by Muhingira and Francis to construct a culvert at Mumbiso Kuria West. They went to him with a proposal that they had been awarded a contract with the CDF Kuria West. They were to construct culverts along a river at Mumbiso area. That they told him they did not have money. They asked him to finance the project. They told him the contract was for Kshs. 900,000. They proposed he funds the project then they share the profit. That he sourced for a foreman Francis and Muhingira and were like supervisors to procure the sand and hardcore. It was further the evidence of DW2 that before they started the construction, Francis and Muhingiti introduced John to him. They told him that John was their cousin and they were using his company. That he funded the project. He sourced his foreman called Dominic Simiyu Wafula. The work took 5 weeks.
After completion of the work, the CDF confirmed the work was done and processed payment. He was not involved in the payment. Muhingira and Francis came with a Cheque of Kshs. 800,000/= (clear on the exact amount). It was deposited on Tonsanse Account. They withdrew Kshs, 90,000 stating for supervision of the project. They were John, Muhingira and Francis. John said that they do a cheque of KShs. 520,000 to him for part payment of what he had contributed. They agreed among themselves. The cheque was done in everyone’s presence. John took the cheque for processing. John later paid him (DW2) around Kshs. 200,000. John, Muhingira and Francis paid him all these money.
It was the evidence of DW2 that everyone went 'home happy. They did another contract with Tonsanse where he offered his professional advice. He approved their overdraft as the Bank Manager. No issues arose from the second contract. After these transactions, he stayed in the bank for I year. He said he did not fraudulently acquire money from the Plaintiff. He said he paid for the Plaintiffs project and they paid him back his money. That they agreed he finances the project, they paid him his dues. He said he was shocked to be called by Anti-fraud Kisumu. He knew Francis, Muhingira and John before this contract. It was gentlemen’s agreement.
During cross examination, it was the evidence of DW2 that he had been sued by Tonsanse Construction Company. He funded [he tender project for Francis and Muhingira. He did not have evidence of the tender documents. The tender was awarded to Tonsanse Construction Limited. That he did not have any lender awarded to Francis or Muhingira Gabriel. He was told the tender was for Kshs. 900,000. That he did not have agreement lending money to any of these people. That it was a gentlemen's agreement. That he personally limded the project on Kshs. 685,000
Evidence is in his statement showing that he bought murram and other construction items. He did not hand the money to Tonsanse Construction Limited. That he has no evidence lending the money to the Plaintiff. That his statement show that he paid Francis money,
It was the testimony of DW2 that he did not have the evidence of how the project was calculated not the numerical calculations of how the money was expanded. He had no writing of work out of the profits shared. The profit was Kshs. 125,000. That John got around Kshs. 25,000. That all the money paid of Kshs. 625,000 was his personal funding.
It was further the evidence of DW2 that the cheque was dated 5/2/2016 was written in the name or the bank. The bank was the beneficiary of the cheque, That is how transaction is done through the bank. The cheque was not indicated in his name instead the details of his names were written behind. Tha
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a. General Damages
b. B. An order/ Declaration that debit of Kshs. 520,000/=on the Appellant’s account with the 1st Respondent and consequent payment of the same to the 2nd Respondent was fraudulent and unlawful
c. Compensation of the amount fraudulently withdrawn
d. Refund of Kshs. 520,000/=
e. Costs of this suit
f. Interest on a & b above at court rates from the date of loss
g. Any other relief the court deemed fit to grant in the circumstances
The suit was defended and after the Appellant gave evidence in chief the Respondents called three witness who gave evidence against the Appellant’s claim
Upon consideration of the evidence on record for the parties the Trial Magistrate found that allegations of fraud and negligence on the part of the bank had not been proved and the suit lacked merit and was dismissed with costs.
The Appellant was aggrieved by the judgment and an appeal was lodged vide an amended Memorandum of Appel dated 15th May 2024 on the following grounds:-
The Honorable Magistrate erred in law and in fact by failing to appreciate that the Plaintiff is a legal body with capacity to sue on its own accord and not that of its directors.
2. The Honorable Magistrate erred in law and in fact by failing to appreciate that the holder of the bank account number I 68446422 is the Plaintiff in its own legal capacity and that any withdraws and deposits made to the account was supposed to be approved by it.
3. The Honorable Magistrate erred in law and in fact by failing to take into account that no document was adduced as evidence to show that the Plaintiff had instructed and given authority to the Director, John Marwa to engage in business deals with the 2nd Defendant.
4, The Honorable Magistrate erred in law and in fact by failing to take into account and appreciate that the 2nd Defendant did not adduce any evidence in support of his claim that he was engaged in business deals with the Plaintiff.
5. The learned Magistrate erred in law and in fact by failing to appreciate that no evidence was adduced to show that the Plaintiff had business dealings with the 2nd Defendant and thus a stranger to the dealings between the 2nd Defendant and the directors John Marwa at a personal level.
6. The Honorable Magistrate erred in law and in fact by failing to appreciate the Plaintiff did not authorize a sum of Ksh. 520,000 be debited from its account and be credited in the Ft Defendant's account and subsequently to the 2nd Defendant's account.
7. The learned Magistrate erred in law and in fact by failing to take into account that the monies withdrawn from the Plaintiffs bank account in favour of the Defendant was not procedurally withdrawn as the Plaintiff had not issued any authority to do so.
8. The Honorable Magistrate erred in law and in fact by failing to appreciate that the JSI Defendant had a duty of care towards the Plaintiff who was its customer and had failed to exercise its duty by allowing the Plaintiffs money to be withdrawn from its bank account in favor of the Defendant by the 20dl Defendant Without the authority of the Plaintiff.
9. The Honorable Magistrate erred in law and in fact by failing to take into account that the Defendant owes a duty of care to the Plaintiff as its customer and protect it from fraud of agents which let the Plaintiffs monies be withdrawn from the Plaintiffs account into the 2nd Defendant's account.
1(), The Honorable Magistrate erred in law and in fact by failing to take into account that there exists a binding contract between the Plaintiff and the 1 st Defendant and the Defendant was in breach of the said contract by allowing monies be withdrawn from the Plaintiff account 'in favour of the Defendant without the knowledge and authority of the Plaintiff.
I I. The Honorable Magistrate erred in law and in fact by failing to appreciate that the 1 st Defendant had a duty of confidentiality towards the Plaintiff but the Defendant failed to uphold the said duty by giving access of the Plaintiff accounts details to the 2nd Defendant not as its agent but on personal level.
12. The Honorable Magistrate erred in law and in fact by failing to take into account that the 2nd Defendant misled the Plaintiffs representative by advising him to sign on a blank cheque having undertaken to assist the Plaintiffs representative who was not familiar with bank transactions.
13. The learned Magistrate erred in law and in fact by failing to make any finding on vicarious liability on the part of the pact of the 1st Defendant as regards the 1st Defendant in the suit, when the '2nd Defendant within his scope of work had deceived the Plaintiffs representative to sign a blank cheque and thereafter the 2nd Defendant drew the said cheque in favour of the 1st Defendant and subsequently the said money into his personal account.
14. The learned Magistrate totally misdirected herself in delivering the judgement in favor of the Defendants and against the Plaintiff by failing to consider and appreciate the evidence on record.
15. The learned Magistrate erred in law and in fact by failing to that the 2nd Defendant was acting as an agent of the Defendant at the time when he was attending to the Appellants’ director.
16. The learned Magistrate erred in law and in fact in failing to appreciate that the 1st Defendant was in clear breach of Contract and acting contrary and in breach of bank/customer relationship in proceeding to credit funds into an account of its own manager contrary to clear instructions indicated in the Cheque.
17. The Respondent failed in its duty and responsibilities in proceeding to debit an account of the Appellant and crediting an account of the 2nd Respondent without instruction and authority of the Appellant.
18. The learned Magistrate erred in law and in fact by failing take into account that the cheque of Kshs. 520,000 was not procedurally processed on basis that on the face of the cheque the same was drawn 'in favour of the 1 5t Defendant and on the back of the said cheque and different instructions,
19. The learned Magistrate erred in law and in fact by dismissing the suit against the 1st Defendant despite the evidence showing that the Ft Defendant was in breach of fiduciary duty towards the Appellant for failing to reach out to the Appellant when they noted that the cheque had contradicting instructions.
20. The Magistrate erred in law and 'in fact in dismissing the suit against the Defendants despite the said having failed to adduce the forensic audit report in the matter to prove that they were exonerated from the fraud claim.
21. The learned Magistrate erred in law and in fact in holding that the Appellant and the 2nd Defendant had business dealing despite the evidence of the 2nd Defendant that the tender projects to Francis and Muhingira and the 2nd Defendant did not hand the money to the Appellant.
22. The learned Magistrate erred in law and in fact appreciate the evidence of the 2nd Defendant that the cheque was drawn in favour of the 1st Defendant and that the 2nd Defendant had illegally and unprocedurally expedited the process to have the money credited in his account without following the due process,
23. The learned Magistrate erred in law and in fact by failing to put into account that the Appellant's representative, Mr. John Marwa is an illiterate and wholly relied on the 2nd Defendant's directions and advise in confidence that the said 2nd Defendant would help him.
It is proposed to ask the court for ORDERS THAT:-
i. The appeal be allowed
ii. In the result, the judgment made by the learned Magistrate against the Appellant be set aside
iii. A declaration that a sum of Kshs. 520,000/= was not procedurally withdrawn from the Appellant’s account
iv. The 1s Respondent be ordered to refund the sum of Kshs. 520,000/= together with interest.
v. A declaration that the 2nd Respondent breached his fiduciary duty towards the Appellant and the 1st Respondent be held vicariously liable for the said actions
vi. The costs of the appeal and in the subordinate court be granted to the Appellant against the Respondents.
The Appellant/Plaintiff in the lower Court instituted a suit vide a plaint and amended plaint dated 03/1 W2020 seeking for a refund of Kshs. fraudulently and unlawfully withdrawn from its account number 168446422 with the Respondent/ 1st Defendant by 2nd Respondent/2nd Defendant without its knowledge and approval,
The Respondent/ 1st Defendant entered appearance and filed statement of defence and amended statement of defence dated 11/0 1/202 L In the said statement of defence the 1st Respondent/ 1st Defendant confirmed that the Appellant/Plaintiff was its customer with account number 168446422. It was the defence of the F t Respondent/1st Defendant that that Appellant/Plaintiff and the 2nd Respondent/2nd individually, jointly and severally withdrew funds from the Appellant/Plaintiff’s accounts with its approval by signing 2 cheques numbers 4 and 5 and denied that its alleged employee and/or official engaged in fraudulent activity in any transaction involving the Appellant/Plaintiff.
The 2nd Respondent/2nd Defendant also entered appearance and filed statement of defence dated 30/03/2021, In the said statement of defence the 2nd Respondent/2nd Defendant denied all the Appellant/Plaintiffs claim and no averments thereof,
PWI John Marwa Chacha adduced evidence as the Appellant’s witness and adopted his statement dated 03/11/202() and produced documents. It was his evidence that he used to be a businessman and director of Appellant/Plaintiff. That he is the managing director with his wife Ann Waisike Mwita and that the company was registered in the year 2015.
'Phat he knows the 1st Defendant as well as the 2nd Defendant herein. Kenya. Commercial Bank was the Company's bank where they saved their company monies. Thai they opened an account at Kehancha Branch A/C No. 1 168446422. The signatories him and his wife. The 2nd Defendant at the time was the Kehancha Kenya Commercial Bank Manager.
It was the evidence of PW I that the company had a contract with Kuria West Constituency CDF were they built culverts worth Kshs. 1,000,000 after taxes of Kshs. 852,000
It was the further the evidence of PW I that on 05/02/2016, while a home, he received a call from the 2nd Defendant to go to the bank as there people demanding money from him. That the 2nd Defendant directed him to go with his cheque book that upon arrival at the bank, PW I found his foreman, Gabriel Mungira who was accompanied by Francis Chacha. In attendance was also the Manager of the CDF. That the CDF Manager deposited the cheque of Kshs, 852,000 to the Company's account.
That PW I went to the Manager (2nd Defendant) and asked whether he Could cash in the deposited cheque that day. The 2nd Defendant confirmed that he could and asked PW I (o withdraw the money using 2 cheques namely numbers 4 and 5. It was further the evidence of PW I that the 2nd Defendant asked PW] to sign the said cheques. That in cheque no. 4, PW I just signed and did not fill any details as the manager directed that he would fill other details such as figures and names of payees himself as he was in a hurry to go to Kisumu and as such PW I signed the said cheque in confidence; and the 2nd Defendant filled Kshs. 90,000 and the payee being PW1.
PW I went on to testify that as for cheque number 5, PW I signed the same as cheque number 4 then the Manager called the Customer Care Officer at the bank and instructed him to help clear the cheque. The Manager asked PW I to sign on the cheque and leave him to fill other details. The manager them proceeded to date the said cheque 05/02/2016 and it was payable to Kenya Commercial Bank Kehancha for Kshs. 520,000 in letters and words all written by the 2nd Defendant. That he did not authorize the amount indicated and the payee. That he later discovered that the 2nd Defendant's signature was on top of the cheque, 2nd signature was PW 1 's while the 3rd signature was unknown to him but was later informed that the signature was for Euphrenus Mwita, the Customer Care Officer at Kenya Commercial Bank Kehancha. Behind the cheque was the signature and writings of someone unknown to PW I d but the signature on it was his.
That the Manager went away with the said cheque and told PWI that the systems had hanged so the cheque could not be cleared and asked PWI to return to the bank on 9.2.2016 That upon return on the said date, the 2nd Defendant illförrned PW1 that the cheque had still hanged and asked PWI to withdraw Kshs. 242,000 to clear the debts as Manager sorted out the balance later.
It Was the evidence of PW I that the cheque No. 5 was payable to Kenya Commercial Bank. That he did not have any dealings with Kenya Commercial Bank to pay them anything. The cheque was to be drawn to PW I as the payee. That PW I did don't know the owner of the account indicated on the back of the cheque No.5. That he had no debt of the 2nd Defendant at all and in the event he had any debt, he would have paid the cheque directly to the 2nd Defendant atid did not know why the 2nd Defendant wrote the cheque to Kenya Commercial Bank and payable to him personally, That PW I discovered the fraudulent dealings by the 2nd Defendant from the Kenya Commercial Bank Internal Auditing Investigations Teams.
PW1 went ahead to adduce evidence that the Manager duped him into signing open cheques. That he trusted the Manager and the bank to do the right thing. That Mwongera Gabriel worked with him in the project with CDF tender of building culverts and they did not sponsor the project at all and he did not have their debt at all.
[t was his evidence that 'in the event he had their debts as alleged, he would not have written the cheques in the names of Kenya Commercial Bank and he neither owed Francis Chacha nor did he agree to share the money with him. That he wrote to the bank and lodged a complainant about the payment through the letter from Agulo Odero dated 25.1.2017 but the bank did not respond. He further wrote to the bank again vide a letter dated 8.22017 and left a copy with the DCI Kehancha.
During Cross examination, it was the evidence of PW I that he opened the Kenya Commercial Bank Kehancha account in the year 2015. On 05/02/2016 he went to the bank as a representative of the Company. The Manager called him to the Bank using Gabriel fs phone number. That he used to know the 2nd Defendant as the Manager only and had never dealt with him on business other than bank business.
That he only signed the cheques and that is how the 2nd Defendant grounded him. That he had been dealing with the bank severally writing the cheques himself with the help of his wife. That his signature was on the cheque in dispute. That he did not write anything on it and the Manager was left to fill the writings inside. He wrote a bank cheque that day. [lc trusted the bank and just signed. It was the first time he had signed a bank cheque at the bank.
It was the evidence of PW1 that the 2nd Defendant had cheated him to withdraw the amount as he sorted the system problems for the other cash. The same day, Kshs. 142,000/= was deposited into the 2nd Account. That PW1 did not authorize the deposit into the 15t Defendants’ account of the Kshs 300,000 on 10/2/2016. not know that Kshs. 520,000 had been withdrawn from the Plaintiffs Account.
That on 09/02/2016, PW J reported the loss of money to Onyango and the Bank, the 1st Defendant's workers. They told me they could look into it. The Kenya Commercial Bank Investigators went to the Bank in the year 2017. That PW I waited for them and made follow ups through correspondences,
That he waited for long as the 2 Officers kept telling PWI to wait for them to handle the issue.
Lastly it was the evidence of PW1 that he signed the cheques on trust that Defendants could do the right thing. That He opened the account with his wife. That he signed the account opening documents. That he was not issued with the bank terms and conditions to know that he should not sign on open cheques. That he was visited by the bank's workers. That he is the custodian of cheque book and is responsible for the same. That he was not careless in handling the cheque and did not instruct the bank to pay itself through the' cheque and transfer the money to other account.
During re-examination, it was the evidence of PWI that there was no business dealing with Oliver or Gabriel in involvement in the money. The cheque in question cheque No, 5, for Kshs, 520,000. That he saw the 2nd Defendant’s bank statement from Kehancha Kenya Commercial Bank Account No. 1 104015285 which shows he received Kshs. 520,000/= on 05/02/2016. The cheque says to transfer the amount to Account No. 077230848815. These are 2 different accounts. That he did not know how the money ended up into 2nd Defendant's account. Both accounts belong to Oliver. They played games with the money. It is not possible for money to be paid into a different account other than that indicated in the cheque. The 2nd Defendant's account statement is in the 1st defendant's bundle of documents dated 6/7/2018 for Account No. 1104015285 for the period of 4/2/2016 to 10/2/2016.
it was further his evidence that he withdrew Kshs. 242000/= on 9/2/2016 and the same amount was deposited into 2nd Defendant's account. The name of the depositor is just stated as John. John could be anyone. PWI confirmed his name as John Marwa. Bank acted on his signature only and are not allowed to involve themselves in fraud.
DWI- Merema Yunvalis Mwita a banker at 1st Defendant bank, Kehancha branch testified and it was his evidence that he worked for the bank for 8 years and he was a Customer Service Consultant during the period in question.
It was his evidence that the procedure for opening an Account; one is given some documents to comply with. PWI was given documents to open a business account as he requested. The Plaintiff filled these forms. He provided the signature specimen, attached documents e.g. copy of identity card, certificate of business registration, KRA Pin, Board Resolution of the Directors. All these things, the Plaintiff availed. Plaintiff signed the terms and conditions spelling him how to operate the Account and cheque book. Plaintiff signed all these.
On 5/2/2016, in the evening around 5.00p.m. the Plaintiff operating the account, came to the bank and was accompanied with 2 people namely Gabriel Mwingira and Francis. That they welcomed them in the presence of the Manager 2nd Defendant herein. Normal banking hours are between 8.30 till all customers are served. They went to the Manager's Office. They stayed there for a while. John Marwa came to went at the Customer Care Desk. That he gave him (DWI) a cheque with Kshs. 520,000. He requested DWI to Clear the cheque. Before dealing with cheques, there are several things to consider:-
I) Date on the cheque. It must not be post dated
2) The signature must be authentic
3) The Payee and the instructions given in this case it was drawn to pay Kenya Commercial Bank Kehancha. At the back of the cheques, there was instruction to pay to an account.
4) In Such instructions, the account holder must sign on the instructions. In this case, the owner of the Account delivered the cheque personally.
It was the evidence of DW1 that he signed on the cheque as confirming all the requirements are met with a red pen. He signed on it. The signature of the Branch Manager must be on the cheque to clear. This confirms that in his capacity as the Manager was perfect in content.
It was further his evidence that the procedure of clearing the cheque was dully followed. That he was not aware of a personal relationship between John and the Manager, John did not declare this at all. That he would not thus know if a relationship was there.
[t was further the evidence John withdrew through the cheques Kshs. 520,000 John transferred the money to Oliver's account. It was DWI's testimony that on 9/2/2016, the Plaintiff went to his desk, checked his account balance, He assisted him on this day, he withdrew cash of Kshs. 242,000 at the Cashier. On the same day, he personally deposited Kshs. 228,000 into Oliver's account. In their systems, they do not narrate the whole names of the depositor, just one name. In Plaintiffs statement, the name Oliver Muhoni's is only indicated as Muhoni. The system captures a specific number of names.
The relationship between the Defendant and the Plaintiff continued. He made an application and was awarded a loan of Kshs.300,000. The Plaintiff made a complaint about Kshs. 520,000 on 30/12/2016. That he never received a complaint from him (PW l) since February, 2017.
It was further the evidence of DWI that in the terms and conditions, the mode of filing a complaint is set out clearly. The terms and conditions paragraph 17 it States, cheque books are issued subject to the following conditions:-
l) one agrees to look after and use it with utmost care
2) To ensure all uncompleted cheque forms are kept in custody of all forms
3) To inform the bank of any loss of cheque book leaf
The Plaintiff was thus negligent in handling his cheque book in this instant. That he blamed the Plaintiff for loss of his money. He failed to disclose personal dealings with the 1st Defendant. The bank acted on his instructions. The Plaintiffs claims arc thus untrue. The bank honored his instructions.
During cross examination it was the evidence of DWI that at the material time of this suit, the 2nd Defendant was the Branch Manager at the Bank. He was the head/overall of the bank overseeing every operation of the bank. The bank has obligations so does the customer and all dealings are in writing.
In the Bank's terms and conditions running, the signature of the client/plaintiff is not on the terms and conditions to mean that they were brought to his attention. These terms are in the account opening form. There is no place for signing on the end of the terms and conditions pages. The bank is bound by statutes and regulations regulating the industry of banking. One of the duties of the bank is to keep the client's money as safe as possible.
It was the evidence of DWI that the cheque of Kshs. 520,000 dated 5/2/2016 is drawn in favour of Kenya Commercial Bank Kehancha. He did not know of any business the Client had with the bank to get paid for any dealings.
It was the testimony of DWI that Oliver signed the cheque in question. At the back of the cheque, there is a contrary instruction to transfer the money to a different account. Kenya Commercial Bank is the beneficiary. It did not authorize/sanction the transfer to a different account, The expected beneficiary as per the face of the cheque is Kenya Commercial Bank. This is the instruction given by the owner of the Account. There is no account called Kenya Commercial Bank. The instructions are usually at the back of the cheque. This is not a group account. There is a name appearing in the instruction note. If he wanted to pay Oliver directly, he had the option of sending to his Account directly other than through Kenya Commercial Bank.
It was the evidence of DWI that the drawer is the owner of the cheque. His signature is on the instructions and acted on them. The Account at the back of the cheque is 077230848815. Oliver's statement is account No. I04015285 reflects instead receiving the money. These are different accounts. The reason Why the money, was deposited in this Account is because both accounts belong to the same person. Kenya Commercial Bank updated the system from 07 to the current number I0. Hence the discrepancy in the account numbers. That he did not have the memorandum proving the system change at the moment. The account is the Manager's account.
It was the testimony of DWI that the bank verified the signature of the Plaintiff. An internal inquiry or forensic audit in this matter was conducted in 30/12/2016. It arose from this complaint. The letters of complaint are for 2017. The complaint was registered way before. The process of investigations had begun by 30/12/2016 since he was approached on this date. That he was not aware when the same was made. A complaint had no time limit. There is a role that exists at the bank 011 impartiality. That is why he was the one who signed that the cheque was okay before processing the same. That there is no requirement that if the Manager is benefitting from the dealings, he ought to have allowed another person to act entirely on the Cheque.
It was further the evidence of DWI that on 9/2/2016, John deposited Kshs.242,000 into Oliver’s account. That he did don't have the hard copies of the transaction slips to prove it is John the Plaintiff that deposited the money into Oliver's account today in Court, Johns are many. The loan granted to the Plaintiff of Kshs. 300,000 in the normal course of business.
That the bank is insured against losses by its workers. He did not know if Oliver was still working with the bank. That he did not know if Oliver was fired out of these dealings. The dealing of this cheque was not negligent in the circumstances.
During re-examination, it as the evidence of DWI that the terms and conditions of Account Opening/Operations are contained in the Account Opening Forms at the end. In page I declaration "form above", it states that the customer is bound by the terms and conditions. The declaration is on the Account Opening Forms. In 2016, the hank upgraded their systems. By the time the monies were being transferred to Oliver's the systems had changed into the current numbers. A bank has a time frame to act after a complaint has been made in paragraph 14 of the terms and conditions. That he did know when the complainant was made. He wrote his statement with the investigators on 30/12/2016.
DW2 Oliver Muhonda Alliangano the 2nd Defendant adopted his statement dated 4th June 2021 and testified that he knew John. That he used to work in Kenya Commercial Bank - Kehancha Branch as the Branch Manager. That he knew John through construction business. That he is the director of Tonsanse Construction Limited. That they did one business with John in late 2016.
It was the evidence of DW2 that he was approached by Muhingira and Francis to construct a culvert at Mumbiso Kuria West. They went to him with a proposal that they had been awarded a contract with the CDF Kuria West. They were to construct culverts along a river at Mumbiso area. That they told him they did not have money. They asked him to finance the project. They told him the contract was for Kshs. 900,000. They proposed he funds the project then they share the profit. That he sourced for a foreman Francis and Muhingira and were like supervisors to procure the sand and hardcore. It was further the evidence of DW2 that before they started the construction, Francis and Muhingiti introduced John to him. They told him that John was their cousin and they were using his company. That he funded the project. He sourced his foreman called Dominic Simiyu Wafula. The work took 5 weeks.
After completion of the work, the CDF confirmed the work was done and processed payment. He was not involved in the payment. Muhingira and Francis came with a Cheque of Kshs. 800,000/= (clear on the exact amount). It was deposited on Tonsanse Account. They withdrew Kshs, 90,000 stating for supervision of the project. They were John, Muhingira and Francis. John said that they do a cheque of KShs. 520,000 to him for part payment of what he had contributed. They agreed among themselves. The cheque was done in everyone’s presence. John took the cheque for processing. John later paid him (DW2) around Kshs. 200,000. John, Muhingira and Francis paid him all these money.
It was the evidence of DW2 that everyone went 'home happy. They did another contract with Tonsanse where he offered his professional advice. He approved their overdraft as the Bank Manager. No issues arose from the second contract. After these transactions, he stayed in the bank for I year. He said he did not fraudulently acquire money from the Plaintiff. He said he paid for the Plaintiffs project and they paid him back his money. That they agreed he finances the project, they paid him his dues. He said he was shocked to be called by Anti-fraud Kisumu. He knew Francis, Muhingira and John before this contract. It was gentlemen’s agreement.
During cross examination, it was the evidence of DW2 that he had been sued by Tonsanse Construction Company. He funded [he tender project for Francis and Muhingira. He did not have evidence of the tender documents. The tender was awarded to Tonsanse Construction Limited. That he did not have any lender awarded to Francis or Muhingira Gabriel. He was told the tender was for Kshs. 900,000. That he did not have agreement lending money to any of these people. That it was a gentlemen's agreement. That he personally limded the project on Kshs. 685,000
Evidence is in his statement showing that he bought murram and other construction items. He did not hand the money to Tonsanse Construction Limited. That he has no evidence lending the money to the Plaintiff. That his statement show that he paid Francis money,
It was the testimony of DW2 that he did not have the evidence of how the project was calculated not the numerical calculations of how the money was expanded. He had no writing of work out of the profits shared. The profit was Kshs. 125,000. That John got around Kshs. 25,000. That all the money paid of Kshs. 625,000 was his personal funding.
It was further the evidence of DW2 that the cheque was dated 5/2/2016 was written in the name or the bank. The bank was the beneficiary of the cheque, That is how transaction is done through the bank. The cheque was not indicated in his name instead the details of his names were written behind. Tha
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