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.