Translink (U) Limited v Nile Bank (U) Limited (CIVIL APPEAL NO.39 OF 2002)
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Holding
The Court of Appeal held that the police internal memorandum relied upon by the bank was a progress report, not the conclusive written report required under Clause 2 of the Deed of Indemnity. Because criminal proceedings against employees of both parties were still ongoing, no conclusive report could yet exist, and it was premature for the bank to invoke the indemnity and confiscate the appellant's accounts. The bank was, however, entitled as a prudent banker to prevent operation of the accounts pending the conclusive report. The counter-claim consequently failed. The appeal was allowed and the status quo of 13 August 1996 restored, with each party bearing its own costs.
Facts
Translink (U) Ltd's employees deposited money into its account with Nile Bank. Translink claimed it deposited shs.30,000,000, but only shs.10,000,000 was credited. A dispute arose over responsibility for the missing shs.20,000,000. The parties executed a Deed of Indemnity dated 18 April 1995 under which the bank credited the disputed shs.20,000,000 to Translink's account, on the term that if Police Fraud Squad investigations proved conclusively in writing that the sum was never deposited, the amount would be treated as an interest-free overdraft. The matter was reported to police. A handwriting expert exonerated the bank in a memo, but two bank employees and two Translink employees were later charged and prosecution remained ongoing. When Translink sought to close its accounts in August 1996, the bank relied on a police progress report to invoke the indemnity and confiscate the accounts, then counter-claimed for the outstanding balance.
Issues
- Whether the police internal memorandum (Exhibit P.IV) amounted to a conclusive investigation report in writing by the Police Fraud Squad as envisaged by the Deed of Indemnity.
- Whether the respondent bank was entitled to invoke the provisions of the Deed of Indemnity and treat the disputed sum as an overdraft.
- Whether the respondent was entitled to confiscate or set off the appellant's accounts before any conclusive police report.
- Whether the respondent was entitled to the counter-claim.
Orders
- Appeal allowed.
- Status quo that existed on 13 August 1996 restored; accounts deemed to have remained open with the balances on them as at 19 September 1996.
- Respondent entitled to prevent operation of the accounts until the police issues a conclusive report.
- Any interest due deemed to continue to accrue until the matter is concluded in accordance with the Deed of Indemnity.
- Counter-claim fails.
- Each party to bear its own costs here and in the High Court.