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Stanbic Bank (Uganda) LTD vs Sino Africa Health Ltd (HCT-00-CV-CS-0137-2004) [2008] UGCommC 8 (5 February 2008)

.RTF of original document

IN THE REPUBLIC OF UGANDA
IN THE HIGH COURT O F UGANDA AT KAMPALA
CIVIL COURT DIVISION

HCT-00-CV-CS-0137-2004
STANBIC BANK (UGANDA) LTD ……..……………………………… PLAINTIFF

VERSUS
SINO AFRICA HEALTH LTD ……………………………. ……..… DEFENDANT
BEFORE: JUSTICE LAMECK N. MUKASA
JUDGMENT:
The Plaintiff, Stanbic Bank Uganda Limited, at all material times carried on banking business at their branch at Kireka and elsewhere. M/S Dr. Ssemugoma Joseph and Gwatiro Nursing Home maintained current accounts at the said branch. On 28th August 2003, the said Ssemugoma Joseph and Gwatiro Nursing Home drew cheques in the total sum of shs9,000,000/= payable to the defendant. Particulars of the cheques were:-

Date              Cheque No.                Amount            Drawer
28/8/03          000503            Shs4,500,000     Semugooma Joseph
28/8/03  000512            Shs4.500,000     Gwatiro Nursing Home

On 28th August 2003 the said Semugoma Joseph and Gwatiro Nursing Home by countermand notice of the same date ordered the plaintiff to stop payment of the said cheques.

The plaintiff’s claim against the defendant, Sino Africa Health Limited, is that on 1st September 2003 the plaintiff’s staff, inadvertently overlooking the said countermand, paid the said cheques to the defendant. The plaintiff contends that the sum of the 9,000,000/= is recoverable from the defendant as money paid under a mistake of fact. By the plaintiff’s advocate’s letter of 9th February 2004 the defendant was asked to refund the said sum but the defendant refused to do so. Thus this suit.

In defence, the defendant states that it entered into a contract with Gwatiro Nursing Home to supply it with a Dental Chair model CS300A for a total sum of Ugshs18,000,000/= of which the said buyer made a part payment by the two cheques. On 28th August 2003 the defendant deposited the cheques with its Bankers DFCU Bank. On 3rd September2003 the defendant checked its account and found the cheques had been honoured with payment.

 The defendant contends that the payment was consideration in regard to the said contract to supply a Dental chair. That it deposited the said cheques in good faith and in normal business practice. That the cheques were currently honoured and it was not at fault whatsoever.

Representation was Mr. Kanyemibwa for the plaintiff and Mr. Mukiibi Sentamu from the defendant.

At a Sheducling Conference held on 16th December 2004, before my brother Justice Sempa –Lugayizi, a Scheduling Memorandum signed by Counsel for both parties and filed on 24th October 204 was adopted. The following facts were therein agreed:-

1.      
The plaintiff is a banker.
2.      
Ssemugoma Joseph and Gwatiro Nursing Home were at all material times the plaintiff’s customers at its Kireka Branch.
3.      
On 28th August 2003 the said customers drew two cheques respectively for a total sum of Shs9,000,000/= in favour of the defendant pursuant to a contract between the defendant and the said customers.
4.      
On 28th August 2003 the defendant deposited the said cheques with its bankers M/s DFCU Bank for collection.
5.      
On 1st September 2003 the plaintiff debited the said customers’ accounts and released a sum of Shs9,000,000 to the defendant’s said bankers.
6.      
The plaintiff demanded from the defendant a refund the said sum as money paid under a mistake of fact but the defendant refused to do so.
The following issues were agreed upon for court’s determination:-
1.      
Whether on 28th August 2003 the plaintiff received a countermand notice in respect of the cheques issued by Gwatiro Nursing Home and Ssemugoma Joseph for a total sum of shs9,000,000/= in favour of the defendant.
2.      
Whether payment of the said cheques by the plaintiff on 3rdSeptember, 2003 was made under a mistake of fact. (Date should be changed to 1st September 2003)
3.      
Whether the defendant furnished consideration to the plaintiff’s said customers in respect of the cheques.
4.      
If so, whether the plaintiff is entitled to payment of the said sum from the defendant
5.      
Remedies

Issues No. 1 Whether on the 28th August 2003 the plaintiff received a countermand notice in respect of the cheques issued by Gwatiro Nursing Home and Ssemugoma Joseph for a total sum of Shs9,000,000/= in favour of the defendant.
PW2, Dr, Joseph Ssemugoma testified that he is the Medical Superintendent of Gwatiro Nursing Home, Hospital. He has an account at the plaintiff bank’s Kireka Branch. Gwatiro Nursing Home also has an account at the same branch. The witness is the sole signatory to both accounts. On 28th August 2003 he drew two cheques each in the sum of 4,500,000/= . One on his account and another on Gwatiro Nursing Home’s account. The cheques were payment to the defendant. Both cheques were drawn on the plaintiff bank’s Kireka Branch. The defendant’s witness Kong Dong Sheng, acknowledged having received payment by the two cheques for which he had issued a receipt, Exhibit D2. Photocopies of the cheques were received as Exhibit P1 drawn on Ssemugoma Joseph’s Account and Exhibit P2 drawn on Gwatiro Nursing Home’s Account.
PW2 testified that on the same date of issue, that is 28th August 2003, he wrote to the Bank Manager, Kireka Branch, a letter, exhibit P3, stopping payment of the said cheques. The witness stated that the letter was delivered by his Secretary and received by Teller No. 7 on 28th August 2003 at 12:47 p.m. That he also rang the Branch Manager who confirmed to him that she has received the letter.
Ssambya Benon, PW1 stated that at the material time he was working with the plaintiff bank at the Operation Processing Centre Department, at the Former UCB Building as a Team Leader. The witness leant about the two cheques when Stanbic Bank, Kireka Branch raised a complaint that cheques which had been stopped payment by Gwatiro Nursing Home and Ssemugoma Joseph had been paid. On investigating the complaint he found out that payment of the cheques had been stopped on 28th August 2003. The witness identified exhibit P3 as the countermand note and exhibits P1 and P2 as the photocopies of the cheques.

Exhibit P3, a letter dated 28th August 2003, written on the letter head of Gwatiro Hospital states:-
“Manager
Stanbic Bank (U)
Kireka Branch.
 Re: Requesting To Stop Cheques
I am requesting you kindly to stop the following cheques which are written under Sino Africa Company.
(1) Account under SSEMUGOMA JOSEPH No. 0140010022301
 Cheque No. 000503 ANF 009010000001
 Total 4,500,000/=

 (2)Account under GWATIRO NURSING HOME
No. 014001005051
Cheque No. 000512 ANF 009010000001

I will be happy in case you put my request under consideration.”

The letter is signed by Joseph Ssemugoma and bears the stamp of Gwatiro Nursing Home and stamped by a stamp indicating:
“Stanbic Bank Uganda Kireka Branch 28th August 2003 TELLER7.”
And there is a signature, above which is an endorsement “12.47 p.m.”

The Bills of Exchange Act Section 72 (I) defines a cheque as a bill of exchange drawn on a banker payable on demand. Section 74 of the Act provides:-

“The duty and authority of a banker to pay a cheque drawn on him or her by his or her customer are determined by
(a)     
Countermand of payment;
(b)     
Notice of the customer’s death.”
The Blacks Law Dictionary 7th Edition defines countermand as:
“An action that has the effect of voiding something previously ordered, a revocation.”
Section 2 of the Bills of Exchange Act defines a bill of exchange as “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to a person or to or the order of a specified person or to bearer.”
The cheques drawn by Ssemugoma Joseph and Gwatiro Nursing Home were their respective orders to the plaintiff to pay to the defendant in respect of each cheque a sum of Shs4,500,000/=. The letter, exhibit P3, was stopping payment of the two cheques. It was revoking the previous order to pay. Thus amounted to a countermand. Its author and signatory was Ssemugoma Joseph, the signatory in respect of the two accounts . There is clear evidence on Exhibit P3 that this countermand letter was received at the Plaintiff’s Kireka Branch by Teller No. 7 on 28th August, 2003 at 12:47 p.m. PW1 Ssambya Benon gave evidence that while investigating the complaint he discovered that the cheques had been stopped by countermand letter dated 28th August 2002. He identified Exhibit P3 as the letter. The above evidence shows that on the 28th August 2003, the plaintiff at its Kireka Branch received a countermand notice in respect of the two cheques. Therefore the first issue is answered in the affirmative.

Issue No. 2. Whether payment of the said cheques by the plaintiff on 1st September, 2003 was made under a mistake of fact.
Ssambya Benon testified that all the plaintiff’s branches are connected to the plaintiff’s computer system. They have a code within the system to stop cheques for payment. If a customer wants to stop a cheque from payment he can deposit the notice at any branch of the plaintiff convenient to the customer. The branch which gets the countermand is supposed to stop the payment of the cheque on the plaintiff’s computer system. The plaintiff’s evidence shows that the countermand notice was received by the plaintiff’s Kireka branch on 28th August 2003 at 12:47 p.m.
The witness further testified that he is a team leader in the plaintiff’s Operations Processing Centre. The Centre receives inward and outward cheques drawn on the plaintiff’s bank, verifies the signature and upon such verification debits the respective accounts and releases the funds. He testified that the cheques in issue were inward cheques. These are cheque issued by the plaintiff’s customer, banked by the payee in a bank other than the plaintiff bank. Such cheques go through the central clearing system at the Central Bank. The cheque is forwarded to the Processing Department of the plaintiff’s Operations Processing Centre. At the department cheques are processed and debited on the clients account. The following day the cheque is passed to the Bank Office Department of the Operations Processing Centre where the witness is the team leader. At the department the signature and debits are verified. Where payment of the cheque is stopped by a customer and is so endorsed it is sent back to the Processing Department where the debit entry is reversed. The cheque is thereafter sent back through the clearing system to the collecting bank. Where a cheque is stopped by a customer the bank acts on the countermand by marking on it “Cheque Stopped by Drawer.”

Where a cheque has no endorsement affecting its payment, the same is cleared and filed as paid. The witness gave evidence that there are set rules of clearance. Inward cheques take four days after which the proceeds will be available on the payee’s account with the collecting bank. In this case that was the defendant’s account with DFCU Bank.

The witness testified further that at the Operations Processing Centre cheques are received by a Ledger Clerk. At the material time the Ledger Clerk was Percy Anywar. Normally the Ledger Clerk is supposed to pass the cheques to the Team Leader, who at the material time was the witness. When he received the complaint and started the investigations he discovered that the cheques were each endorsed “Cheque Stopped by Drawer” yet they had not been passed to him as team leader for reversal. He explained that when a cheque so endorsed is passed to him, he initials it and passes it over to the Processing Department for reversal. The cheques had been stamped as received by the collecting bank, DFCU Ltd, on 28th August 2003. They went through the Clearing House on 29th August 2003 and also had the plaintiff banks stamp dated 1st September 2003. Between 28th August 2003 and 1st September 2003 the witness had not handled the cheques. The clearing days had already lapsed so the cheques were already time barred. When the witness realised the mistake he immediately contacted DFCU Bank Manager but the DFCU Bank refused to receive the back the cheques as they were already time barred. The bank statement of Gwatiro Nursing Home, exhibit P4, show that on 1st September 2003 it was debited with cheque No512 in the sum of shs4,500,000/=. Also the bank statement of Ssemugooma Joseph, exhibit P5, show that it was on the same date debited with cheque No. 503 in the sum of Shs4,500,000/=.
The plaintiff’s Kireka Branch had received the countermand notice on 28th August 2003. The plaintiff’s Operations Processing Centre received the cheques on 29th August 2003 from the defendant’s bank, DFCU Bank Ltd, According to PW1, the said department receives inward and outward cheques drawn on the plaintiff bank, verifies the signatures and debits the drawer’s account. By the time the plaintiff’s Operations Processing Centre received the cheques its Kireka Branch had already received the countermand notice. When Percy Anywar, the Ledger Clerk at the OPC department, received the cheques instead of passing them to PW1 who was her team leader, she filed them away. As a result the normal process took its course and by the time the plaintiff’s Kireka Branch raised a complaint with the department as to the payment of the said cheques which had been stopped, the same had already been debited on the drawers’ /clients’ accounts and funds released to the collecting bank, DFCU for the account of the defendant. In the circumstances Counsel for the plaintiff submitted that the sum of shs9,000,000/= was paid by the plaintiff from the accounts of Gwatiro Nursing Home and Dr. Joseph Ssemugoma under a mistake of fact.

One of the bankers basic obligations is to honour his customer’s cheques, provided there are sufficient funds in the account. Another equally basic obligation of the banker is to obey his customers instructions to countermand payment. A banker who pays a cheque in defiance of notice of countermand, pays without authority and without mandate. See Section 74 (a) of the Bills of Exchange Act. When the plaintiff bank paid the cheques after receipt of the customer’s instructions to countermand payment of the cheques it acted without the drawers authority. The plaintiff acted under a mistake that it had the mandate to pay whereas not. Therefore the second issue is also answered in the affirmative.


Issue No 3 Whether the defendant furnished consideration to the plaintiff’s said customers in respect of the cheques.
The cheques were drawn by Gwatiro Nursing Home and Dr. Joseph Ssemugoma towards part payment for a dental chair to be supplied by the defendant pursuit to an Agreement dated 27th August 2003. The agreement, Exhibit D1, states:-
“ CONSIDERATION
(a)     
The Vendor hereby supplies to the Purchaser the said goods at the agreed purchase price of UgShs18,000,000/= (eighteen million shillings only).
(b)     
The sum of UgShs9,000,000/= (nine million only) to be paid as down payment upon the execution of these presents immediately on signing the agreement receipt whereof the vendor hereby acknowledges .
(c)     
The sum of Ugshs 9,000,000/= (Nine Million shillings) to be paid in instalments of Ugshs1,500,000/= (one million five hundred thousand shillings) per month for a period of six months.”
Dr. Ssemugooma Joseph testified that they signed the agreement on 27th August 2003. The defendant informed him that they were to deliver the dental chair on 28