Wakilii

Absa Bank (Uganda) Limited v Dr John Khauka and Another (Civil Appeal No 115 of 2014)

Court of Appeal · [2025] UGCA 268 · 2025 Appeal Allowed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Civil appeal from a judgment of the High Court (Commercial Division)
Decision
Appeal allowed; High Court judgment set aside, with the appellant ordered to pay only the uncontested UGX 6,000,000 general damages.

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Cited — treatment unverified cited in 1 (treatment unverified) Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

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Holding

The Court of Appeal held that a cheque is not money but an order to pay; since the drawer (IFAL) had no funds to meet the cheques, the bank had no obligation to pay the respondents their value and was entitled to reverse the mistaken credit. The sum was not money had and received because neither the estoppel-from-denial criterion nor the held-funds criterion was satisfied, and the debit was not wrongful. The award of aggravated damages was set aside as unsupported by evidence or principle. The appeal succeeded and the trial judgment was set aside, save that the uncontested award of UGX 6,000,000 general damages was allowed to stand.

Facts

The respondents held a joint current account with the appellant bank (then Barclays). On 30 March 2009 they banked two cheques totalling UGX 18,000,000 drawn by IFAL, another customer of the bank, as rent. The bank immediately credited the respondents' account. About three months later, on 26 June 2009, the bank debited the account by the same amount on the ground that the cheques were unpaid. IFAL's statement of account showed it never had sufficient funds to meet the cheques at any material time, leaving its account in deficit after the notional debits. The bank attributed the delay in reversing the credit to a system integration following its merger with Nile Bank. No notice of dishonour was given to the respondents; the bank advised them to pursue IFAL. The respondents sued, alleging the debit was wrongful and fraudulent and that the sum was money had and received for their use; the trial court found for them. The bank appealed.

Issues

  1. Whether the respondents were entitled to the value of cheques drawn by IFAL where IFAL's account lacked sufficient funds to meet them.
  2. Whether the sum debited from the respondents' account was money had and received by the bank for the respondents' use.
  3. Whether the appellant bank wrongfully debited the cheque sums from the respondents' account.
  4. Whether the trial judge properly awarded aggravated damages without applying the principles governing such an award.

Orders

  • The judgment of the High Court is set aside.
  • The appellant shall pay UGX 6,000,000/= to the respondents as general damages for the inconvenience caused, with interest at court rate from the date of judgment in the lower court till payment in full.
  • Each party shall bear their costs both in this court and in the court below.

Key headnotes

Banking & Finance — Cheques — Nature of a cheque as distinct from money
A cheque is not money but an unconditional order in writing to a person holding the drawer's funds to pay the holder; crediting a cheque to a payee's account does not entitle the payee to its value where the drawer's account lacks sufficient funds to meet it.
Banking & Finance — Banker-customer relationship — Obligation to pay limited to customer's funds
A bank borrows money from its customers and can only pay according to what a particular customer has placed on the account; it is under no obligation to pay the value of unpaid cheques out of its own funds where the drawer had no money to meet them.
Banking & Finance — Money had and received — Criteria for the claim
A claim for money had and received requires both a definite sum which the recipient is estopped from denying receiving, and funds in the defendant's hands which the defendant agreed to hold for the plaintiff; depositing dishonoured cheques the drawer could not fund satisfies neither criterion.
Banking & Finance — Mistaken credit — Right to reverse and recover money paid under mistake of fact
A bank that mistakenly credits a customer's account is entitled to reverse the entry and recover money paid under a mistake of fact; the absence of notice of dishonour and lapse of time do not defeat recovery where the customer has not altered his position to his detriment.
Bills of Exchange — Dishonour by non-payment — Recourse against the drawer
Where a cheque is dishonoured by non-payment because the drawer's account lacks funds, notice of dishonour is due to the drawer and the holder's recourse for the value of the cheque lies against the drawer, not against the collecting bank.
Damages & Quantum — Aggravated damages — Requirement of oppressive conduct and proof
Aggravated damages, though compensatory, may be awarded only where the defendant's conduct is oppressive, arrogant, high-handed or outrageous, and must be founded on proven facts; mere reluctance to settle and inconvenience to a foreign-resident plaintiff do not justify such an award.

Legislation cited (5)

  • Bills of Exchange Act s.2(1)
  • Bills of Exchange Act s.46
  • Bills of Exchange Act s.47
  • Bills of Exchange Act s.72(1)
  • Court of Appeal Rules (SI 10-13) rule 30(1)

Cases cited (12)

  • Kifamunte Henry v Uganda (Criminal Appeal No. 10 of 1997)
  • Serwano Byabasajja Byaruhanga v Barclays Bank of Uganda Ltd [1978] HCB 15
  • United Overseas Bank v Jiwani (1976) 1 WLR 964
  • Joachimson v Swiss Bank Corporation [1921] 3 KB 110
  • Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1979] 3 All ER 522
  • Betty Tinkamanyire v Bank of Uganda (Civil Appeal No. 12 of 2007)
  • Zabwe v. Orient Bank (supra)
  • Obongo v Municipal Council of Kisumu [1971] EA 91
  • Uganda Revenue Authority v Wanume David Kitamirike (Civil Appeal No. 43 of 2010)
  • Farley v Skinner [2001] UKHL 49; [2001] 3 WLR 899
  • Conway v Irish National Teachers Organisation [1991] 2 IR 305
  • Watts v Morrow [1991] 1 WLR 1421
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.