KAMPALA CAMPUS

BANKING COURSEWORK
LECTURER: MRS. AMAMYA NORAH
TUTOR: MR. STEPHEN KANWAGI
GROUP: ONE
Members:
1. Wamala Rebecca Nangoma KS19B11/313

2. Nabatanzi Juliet KS19B11/125

3. Nalunjogi Aisha KS19B11/144

4. Ssempijja Kevin KS19B11/198

5. Naalinya Jamimah KS19B11/

6. Nakawunde Flavia KS19B11/135

7. Amoding Gloria Loy KS19B11/026

8. Alarango Ruth Rhona KS19B11/022

9. Musiitwa Marvin Andrew KS19B11/

10. Atukunda Victoria KS19B11/034

11. Nabakka Rominah KS19B11/122

Table of Statutes

1. The Bank of Uganda Financial Consumer Protection Guidelines 2011

2. The Bills of Exchange Act Cap 68

Table of Cases

1. Abdul Aziz Vs Pioneer Agencies Ltd (1975) EA 479

2. Bank of Baroda (U) Ltd v Kamuganda (2006) 1 EA 11

3. Barclays Bank PLC v Quincecare [1992] 4 All ER 363

4. Benjamin Agi v Access Bank PLC (2014) 9 NWLR (Part 1411) 121-165

5. Commercial Bank of Scotland v John Rhind [1860] UKHL 1

6. Esso Petroleum Company versus Uganda Commercial Bank Civil Appeal No. 14 of

1992

7. Folley v Hill (1848) 2 HLC 28

8. Holland v Manchester and Liverpool District Banking Co. Ltd (1909) 2 5 TLR 386

9. Kakooza v Eco Bank Uganda Ltd [2016] UGCommC 89

10. Kavak Rubber Co. Ltd v Burden and Others No. 2 [1972] ALL ER 1210

11. Kornak Investment (U) Ltd v Stanbic (U) Ltd HCCS No. 166 of 2010

12. Lloyds Banks v Brook Bond Tea (1950)

13. London Joint stock Bank Ltd v Macmillan and Arthur [1919] UKHL 367

14. Rhind v Commercial Bank of Scotland 1860

15. Skyring vs greenwood & Gox (1925) B&C 281

Brief facts

Joyous Magol’s Account has been credited with 100m but he is ignorant about the source of the said money.

He withdraws 50m and DTD Bank, upon a tip off, debits his account with 5om to which he claims

disorganization of his account by the bank. Mponye has an account with Pride Microfinance (MDI) but forgets

his wallet in his room within which his ATM card is. Triza picks his card and withdraws 500,000 shillings.

Mponye blames the bank for not verifying the authenticity of the ATM order before releasing the money order

to Triza. On 3rd May 2022, Kasiki receives a cheque dated 2nd December 2021 from his tenant Opio and banks

it in Banko Bank Ltd, Kabaka-anjagala branch. It is dishonored with words “refer to drawer”. Opio is so bitter

after the cheque is returned to him because he is sure there are sufficient funds on his account to satisfy the

cheque.

Issues

1. Whether the bank rightfully debited Magol’s account?

2. Whether the bank is liable for breach of duty to the customer?

3. Whether the bank rightfully dishonored the cheque?

Law Applicable

1. The Bank of Uganda Financial Consumer Protection Guidelines 2011

2. The Bills of Exchange Act Cap 68

3. Case law

Resolution of Issues.

Issue 1: Whether the bank rightfully debited Magol’s account?

Debiting is the act of taking money out of the account.1 A bank has a duty to inform the customer about the

current status of his account, not to overcredit the customer’s account and not to induce the customer with

representations of a financial position of money they are not entitled to, and in the event a bank over credits

1
Downes J, ‘Dictionary of Finance and Investment Terms’ (5th Edition) As was cited in Odjers J, ‘Paget’s Law of
Banking’ (5th Edition, LexisNexis Butterworths Publications |2018) 137-138.
an account, it has a right to reverse the credit made in error immediately or within a reasonable time2. However,

where a customer is made to believe that the financial position presented by the statement of the bank is true,

and bases on such statement to determine his financial decisions by acting on such statement, the bank is

estopped from debiting the error.3 A bank cannot dishonour cheques drawn bonafide and without negligence

on the faith of an incorrect entry4 therefore, the bank loses its right to recover a drawn sum on a false belief of

a customer where they do not immediately correct such mistake.5 Alverstone CJ. stated three reasons; firstly,

the bank is liable for damage from misstated account, secondly, the bank cannot recover any money withdrawn

if the customer changed his position relying on the mistake and thirdly, the bank is estopped from going back

on the mistaken statement of account if the customer relied on it. A customer can plead estoppel where the

error made by a bank led the customer to have a false belief about his financial position6 and so the bank cannot

debit such customer’s account in the event that the customer acts with such belief.

From the given facts, Joyous Magol’s account was credited with 100m shillings and he withdrew 50m shillings.

The bank later debited his account with 50m shillings and because of this, Joyous can plead estoppel because

he relied on the bank’s representation to withdraw the money.

On the other hand, however, where a customer is aware about the mistake and takes advantage of it cannot

succeed where the bank decides to correct the error.7 In the facts given, Joyous acknowledged that he was

ignorant about the source of the funds but went on to withdraw the money. He therefore may not succeed

against the bank for an error that was clearly known to him.

Issue 2: Whether the bank is liable for breach of duty to the customer?

The relationship between the bank and the customer is contractual in nature giving rise to duties to each other,

failure of which amounts to breach of duty8 which is considered to be negligence9.

2
Commercial Bank of Scotland v John Rhind [1860] UKHL 1_Paterson _903
3
Lloyds Banks v Brook Bond Tea (1950)
4
Odjers J, ‘Paget’s Law of Banking’ (5th Edition, LexisNexis Butterworths Publications |2018) 755
5
Holland v Manchester and Liverpool District Banking Co. Ltd (1909) 2 5 TLR 386
6
Skyring vs greenwood & Gox (1925) B&C 281
7
Rhind v Commercial Bank of Scotland 1860
8
Esso Petroleum Company versus Uganda Commercial Bank Civil Appeal No. 14 of 1992
9
Bank of Baroda (U) Ltd v Kamuganda (2006) 1 EA 11
A customer has a duty to exercise the highest reasonable care regarding vital information of his or her accounts

in that if anything happens as a result of their carelessness regarding protection of his or her confidential

information, he or she will be liable for breach of duty to the bank.10 A customer is advised not to allow anyone

to use his or her ATM card, not to write the pin or keep a record of it with the card, not to use an “easy to

guess” pin code, to change the pin code regularly and also immediately report a missing card.11 Failure to do

this amounts to negligence on the part of the customer. In the given facts, Triza (who is not a customer to the

bank) got access to Mponye’s ATM card which he had left in the wallet on the table in his room and knowing

the right pin code, she withdrew UGX 500,000 from Mponye’s account. This amounts to breach of duty of

reasonable care on Mponye’s part in regard to the safety of his ATM card and ATM pin code.

The bank, on the other hand, has a duty to exercise reasonable skill and care in executing the customer’s

orders12 and to also honour the customer’s mandate. The bank exercises reasonable skill and care as it has a

responsibility to ensure that a negotiable instrument presented belongs to the customer (by requesting for a in

code), that the appearance and statement of contents present no suspicion and that the customer’s funds are

available.13 A bank has a duty to make inquiries in the event of any suspicion, which, in the case of ATM cards

only arises where a wrong pin code is given and such card is retained within the machine.14 With all these in

place, the bank will presume the money request is done by the customer. In the given facts, the ATM card was

presented to the bank’s ATM machine and a right pin code and therefore the presumption is that the customer

did that and invoked the bank’s duty to honour the “customer’s” mandate by issuing the requested money.

This thus implies breach on the part of the customer but not the bank.

Issue 3: Whether the bank rightfully dishonored the cheque?

A cheque is a bill of exchange drawn on a banker and payable on demand.15 The rationale is that since the

relationship between the bank and customer is that of debtor-creditor, the debtor is bound to repay upon

10
London Joint stock Bank Ltd v Macmillan and Arthur [1919] UKHL 367
11
Guideline 7(b) of the Bank of Uganda Financial Consumer Protection Guidelines 2011
12
Barclays Bank PLC v Quincecare [1992] 4 All ER 363
13
London Joint stock Bank Ltd v Macmillan and Arthur [1919] UKHL 367
14
Bank of Baroda (U) Ltd v Kamuganda (2006) 1 EA 11
15
Section 72(1) of the Bills of Exchange Act Cap 68
demand by the creditor.16 However, for a cheque to be valid, it must follow the requirements under Section

4(4) must be; dated, specify given value and place of drawing or cashing. The cheque must be properly drawn.

This is one of the reasons why a cheque is returned to the drawer for rectification, the customer must have

properly drawn the cheque.17 According to the instant facts, the drawer argues that there were sufficient funds.

When a bill (such as a cheque) has been dishonoured, notice must be given to the drawer or endorser18 and a

reason ought to be given for the dishonour either by nonacceptance or nonpayment.19 Court found “refer to

drawer” to be an insufficient explanation20 and thus a cause of contention as the drawer needs to know why a

cheque is dishonoured, it is trite law that a bank is bound to honour cheques drawn on it by a customer provided

there are sufficient funds standing to the credit of the customer.21 Notice ought to be given by the person

entitled to call for payment and must be conveyed to the drawer,22 otherwise, where no notice is given in

accordance to Section 48 of the Bills of Exchange Act, the drawer is discharged of his liability.23 In the given

facts, Opio’s cheque was dishonoured with the words “refer to drawer” which is not does not amount to notice

and this indeed caused contention as he was sure there was enough money in the bank to satisfy the cheque.

On the other hand, however, the time of presentment of the cheque is an issue. According to the facts, the

cheque was drawn 2nd December 2021 and was banked on 3rd May 2022. A cheque may be dishonoured by

nonpayment when presentment is excused and the bill is overdue and unpaid.24 Where this occurs, an

immediate right of recourse against the drawer and endorsers accrues to the holder.25 A cheque presented for

payment on demand, its presentment must be made within a reasonable time after its issue in order to render

the drawer liable26 otherwise it will be dishonoured by nonpayment except if its delay for presentment or

nonpresentment corresponds to Section 45 of the Bills of Exchange Act.

16
Folley v Hill (1848) 2 HLC 28
17
Odjers J, ‘Paget’s Law of Banking’ (5th Edition, LexisNexis Butterworths Publications |2018) 755
18
Section 47 of the Bills of Exchange Act Cap 68
19
Section 48(e) of the Bills of Exchange Act Cap 68
20
Kakooza v Eco Bank Uganda Ltd [2016] UGCommC 89
21
Kornak Investment (U) Ltd v Stanbic (U) Ltd HCCS No. 166 of 2010 and also Kavak Rubber Co. Ltd v Burden
and Others No. 2 [1972] ALL ER 1210
22
Abdul Aziz Vs Pioneer Agencies Ltd (1975) EA 479
23
Section 47 of the Bills of Exchange Act Cap 68
24
Section 46(1)(b) of the Bills of Exchange Act Cap 68
25
Section 46(2) of the Bills of Exchange Act Cap 68
26
Section 44(3)(b) of the Bills of Exchange Act Cap 68
BIBLIOGRAPHY
Textbooks
1. Downes J, ‘Dictionary of Finance and Investment Terms’ (5th Edition)

2. Odjers J, ‘Paget’s Law of Banking’ (5th Edition, LexisNexis Butterworths Publications |2018)

Websites
1. https://www.linkedin.com/pulse/bankers-liability-loss-money-through-use-atm-michael-
dugeri accessed on 11/10/22 at 00:35.