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Bank of Baroda (U) Ltd v Wilson Buyonjo Kamugunda

Supreme Court · [2006] UGSC 4 · 2006 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Second appeal from a Court of Appeal decision which had reversed the High Court and entered judgment for the plaintiff
Decision
Appeal dismissed; Court of Appeal judgment for the plaintiff upheld with the rate of interest varied downward

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Holding

The Supreme Court dismissed the bank's second appeal, agreeing with the Court of Appeal majority that a collecting banker owes a duty not to disregard the interest of the true owner of a cheque and must make inquiries where circumstances arouse suspicion. The bank was negligent in opening an account and collecting a large government compensation cheque for strangers introduced by one customer without verifying their identities. As the relevant facts were especially within the bank's knowledge under s.106 of the Evidence Act, the burden lay on the bank, which called no evidence; an adverse inference was drawn. Title to the cheque, admitted on the pleadings, was established. The award of interest at 26% was excessive and was varied to a graduated lower scale.

Facts

Two brothers owned land in Lake Mburo National Park which the Government compulsorily acquired, undertaking to compensate them. Both brothers died in 1988 before being paid. The plaintiff, son of one brother, obtained letters of administration. In 1996 a Bank of Uganda compensation cheque for shs 80m was issued in the names of the two deceased brothers. Strangers impersonating the dead brothers, assisted by one David Mukasa, were allowed by the defendant bank to open an account in the brothers' names, deposit the cheque, and withdraw the proceeds before disappearing. The plaintiff sued the bank for the shs 80m as special damages plus interest, based on negligence, conversion and fraud. The bank admitted collecting the cheque and crediting the account, claiming it acted in good faith and without negligence under the Bills of Exchange Act, and that the depositors had been introduced by Mukasa and had identified themselves. The bank, however, called no evidence at trial.

Issues

  1. Whether the bank was negligent in opening an account and collecting a cheque in the names of the named payees without verifying the identity of the persons who presented it.
  2. Whether the plaintiff adduced sufficient evidence to prove title to the cheque and its proceeds.
  3. Whether the burden of proving the manner in which the account was opened and operated lay on the bank.
  4. Whether the Court of Appeal's award of interest at 26% per annum was excessive.

Orders

  • Appeal dismissed with costs to the respondent in this Court and in the courts below.
  • The decree of the Court of Appeal varied as to the rate of interest.
  • Interest at 10% per annum from 1/1/1997 to 31/12/1998 prior to institution of the suit.
  • Interest at 8% per annum from 31/12/1998 (institution of suit) to 3/3/2004 (Court of Appeal judgment).
  • Interest at 6% per annum from the date of judgment until payment in full.

Key headnotes

Banking & Finance — Collecting Banker — Duty to the True Owner of a Cheque
A collecting banker owes a duty not to disregard the interest of the true owner of a cheque and must make inquiries where there is anything to arouse suspicion that the cheque is being wrongfully dealt with, including establishing the customer's identity and the circumstances in which the cheque was obtained.
Banking & Finance — Opening of Accounts — Verification of New Customers
A bank is negligent where it opens an account for new customers and collects a large cheque in their names without ascertaining their respectability through reliable references and without verifying the identity of the persons and of the customer introducing them.
Evidence — Burden of Proof — Facts Especially Within a Party's Knowledge — Evidence Act s.106
Where facts concerning the opening and operation of an account are especially within the knowledge of the bank, section 106 of the Evidence Act places the burden of proving those facts on the bank, and the plaintiff bears no burden to prove them.
Evidence — Adverse Inference — Failure to Produce Documents and Witnesses in a Party's Possession
Where a party fails, without explanation, to produce documents and call witnesses within its possession and listed in its pleadings, the court may draw an adverse inference that such evidence would have been unfavourable to that party.
Civil Procedure — Pleadings — Effect of Non-Admission Under the Civil Procedure (Amendment) Rules 1998
Pre-1998 authority that a non-admission in pleadings amounts to a denial casting proof on the opposing party must be read in light of Order 6 rule 1 of the amended Rules, which requires a party to summarise its evidence and list its witnesses; a denial is undermined where the party fails to adduce the evidence it undertook to lead.
Damages & Quantum — Interest — Discretion Under Civil Procedure Act s.26
Under section 26 of the Civil Procedure Act the award of interest is discretionary and must be exercised judicially; a rate of interest must be justified by the circumstances of the case, and an unexplained award of 26% per annum is excessive and liable to be reduced.

Legislation cited (6)

  • Bills of Exchange Act s.82
  • Bills of Exchange Act s.81
  • Bills of Exchange Act s.89
  • Evidence Act s.106
  • Civil Procedure Act s.26(2)
  • Civil Procedure (Amendment) Rules 1998 Order 6 r.1

Cases cited (3)

  • Joshi v Uganda Sugar Factory (1968) EA 570
  • Commissioner of Taxation v English, Scottish and Australian Bank Ltd [1920] AC 683
  • Milton Obote Foundation v Kennon Training Ltd (Civil Appeal No. 25 of 1995)
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.