Overview:
Commercial High Court rules for Equity Bank in sh34.4 million fraud suit. Justice Rubagumya cited the customer's lack of due diligence.
The Commercial Division of the High Court has ruled that Equity Bank Uganda is not liable for the loss of UGX 34.4 million that was fraudulently withdrawn from a customer’s account using the bank’s mobile banking platform.
Justice Patience Rubagumya delivered the decision on Nov. 21, reversing a lower court ruling that had found the bank responsible for the loss. Rubagumya ruled that the evidence did not prove negligence on the part of Equity Bank.
The dispute stemmed from a suit filed by customer Augustine Bamwite Muhindo, who holds an account at the bank’s Church House branch in Kampala. Court records show that UGX 34.4 million was withdrawn from Muhindo’s account through the bank’s Eazzy mobile platform between Dec. 22 and Dec. 25, 2022.
Muhindo had previously told the court that his MTN phone number registered to the account had been blocked on Dec. 17, 2022, after he reported his phone stolen.
He argued that the illegal debits were a result of the bank’s negligence and breach of its duty to the customer. The customer only discovered the transactions on Jan. 2, 2023, when he tried to withdraw funds at the bank’s Kasese branch.
The Mengo Chief Magistrates’ Court, presided over by Magistrate George Kunihira, had initially agreed with Muhindo, ruling that the bank failed in its duty of care and awarding the customer a full refund, general damages, and interest. Equity Bank, represented by lawyer Fahim Matovu, then appealed that decision.
Equity Bank argued that Muhindo never informed the bank of the loss of his phone, and that its system had sent one-time passwords to the registered number during the mobile banking registration, suggesting the line was active. The bank maintained that its mobile platform allows customers to check balances but does not allow transactions without a personal identification number.
In her ruling, Justice Rubagumya stated that Muhindo failed to exercise due diligence by not promptly reporting the loss of his phone and SIM card to the bank before the contested transactions occurred.
“In my view, considering that Muhindo had not notified the appellant (Equity Bank) about the loss of his phone and SIM card, the bank’s primary mandate was to obey its customer’s orders,” Rubagumya wrote. “Therefore, the respondent failed to exercise reasonable due diligence… and this negligence cannot be attributed to the appellant.”
She said that the magistrate erred in finding the bank negligent and in breach of its customer relationship, allowing the appeal and setting aside the previous orders.