NATIONAL BANK OF COMMERCE v PERMA SHOE COMPANY 1988 TLR 224 (CA)

The respondent presented his cheque to the appellant bank for collection. The bank credited the customer's account on 18.6.1982. More than a year later the appellant informed the respondent that the cheque was lost in transit and required it to get a fresh cheque from the drawer. It was not possible to get another cheque from the drawer since he had left the country. The respondent sued the appellant claiming damages for loss of the cheque and compensation for depreciation in value of the shilling due to devaluation of the Tanzania shilling. 

The High Court decided in favour of the respondent allowing damages and compensation. On appeal, the appellant challenged the decision of the High Court arguing that the bank had no duty of care towards the customer in respect of the cheque presented for collection. The amount of compensation in the sum of shs. 50,000/= for depreciation was attacked as being excessive. 

Held: 

(i) Where a customer deposits a country cheque with a collecting bank and the cheque gets lost, the bank owes a duty of care to the customer to inform him promptly of such loss so that the customer may take such appropriate steps that might be open to him to avert any or further consequences resulting from such loss; 

(ii) that duty exists whether the cheque was lost by the bank itself or by a third party having possession thereof on behalf of the bank; 

(iii) the imposition of such a duty of care will not throw the banking system into disorder or prove socially hazardous; 

(iv) the trial judge made the compensation award on a correct principle. He was entitled to take into account the changes in the purchasing power of money due to depreciation and devaluation of the shilling. 

Appeal dismissed.