As Kirstey Horsey and Professor Erika Rackley begin their book, ‘Tort Law, 3rd Edition’, consider the following examples: a pedestrian is knocked down and is seriously injured by a speeding motorist, an office worker suffers psychiatric injury after being subjected to a campaign of bullying by his supervisor. What cause of action accrues to each of these persons?
The question of what ‘Tort’ law is, is exemplified in the questions asked above. Tort law is a civil wrong for which remedy is provided by law. The general principle of ‘there is no wrong without remedy’ is popularized by the Latin maxim “Ubi Jus Ibi Remedium”. The basic construction of the law of tort is that, if any person has a right of any form, he or she must have a means to enforce and maintain such a right. In tort law, vengeance and vindication is of the Law and not the Lord. Tort law therefore is a collection of legal wrongs and the cause of action provided for remedy in Law.
Among all the possible wrongs tort serves as a grab-bag for, one of my favourites is ‘The Tort of Negligence’. As a matter of fact, it is argued by some scholars that more tort law claims are brought in the tort of negligence than in any other tort and thus negligence has both defined and influenced our understanding and interpretation of tort law in general.
The authorities seem to align on the principles that, for a claimant to succeed on a negligent claim, one must prove that there exists a legal duty owed him or her and that that duty had been breached which resulted in damages, almost the golden inseparable triad. The interesting argument about damages under negligence is that unlike trespass torts which are actionable per se– that is, the claimant need not show that they have suffered any loss for their claim to succeed-liability in negligence can only be established where the defendant’s breach of a duty owed has resulted in harm. To quote Greer LJ in Haynes v Harwood [1935] at 152, “Negligence in the air will not do; negligence, in order to give a cause of action, must be the neglect of some duty owed to the person who makes the claim.”
The law does not provide remedy for every loss therefore, the question is what is legally recognized. The English case of D v. East Berkshire Community NHS Trust [2005] at page 100 puts this better, in the words of Lord Rodger: “The world is full of harm for which the law furnishes no remedy”. So, for a young man reeling from a broken heart who wakes up at 2am to scream ‘heerrrrrrr’, although maybe clinically depressed as a consequence of the fine babe’s rejection, she did not quite owe him a duty, at least not under law (Breach of promise to marry is a completely different conversation for another day).
Now to banking. Let us start with Lord Denning MR in the case of United Dominions Trust Ltd v Kirkwood, where the central question was what constituted the definition of a bank within law in order for the plaintiff to recover a loan made by it to the defendant. The Court of Appeal holding that Dominion qualified as a bank within the meaning of law had this to say, “So we see that Parliament has conferred many privileges on ‘banks’ and ‘bankers’ but it has never defined what is a ‘bank’ and who is a ‘banker’. It has said many times that a banker is a person who carries on ‘the business of banking,’ but it has never told us what is the business of banking. It has imposed penalties on persons who describe themselves as a ‘bank’ or ‘bankers’ when they are not, but it has never told us how to decide whether or not they are bankers.”
The essential characteristics of a bank however is that it collects money by receiving deposits which are repayable as and when expressly or impliedly agreed upon and then utilizing the money collected by it for lending. A bank therefore trades on the arbitrage between depositors and lenders. Justice Diplock in the Dominion case supra concluded; “what I think is common to all modern definitions of banking and essential to the carrying on of the business of banking is that the banker should accept from his customers loans of money on deposit, that is to say, loans for an indefinite period on running account, repayable as to the whole or any part thereof on demand by the customer.”
In Ghana, Section 23 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) has proscribed the use of the word ‘Bank’ by any entity other than entities licensed to perform the business of banking and thus it appears, no bank is allowable, other than a licensed entity, not even banks that hold the swimming tracks for unborn babies can be called banks (funny, I know). The law reads,
“Except as otherwise provided for in this Act, a person, other than a company holding a banking licence, shall not hold itself out as a bank or use the word “bank” or any of its derivatives in any language, or any word that sounds like “bank” in the description or title under which that person is carrying on financial services business in Ghana, or make a representation to this effect in any billhead, letter, paper, notice, advertisement or in any other manner.”
Similarly, Section 18 of Act 930 also describes what activities are permissible by banks, among which are: acceptance of deposits and other repayable funds from the public; lending; financial leasing; investment in financial securities; money transmission services, issuing and administering of means of payment including credit cards, travellers cheques, bankers’ drafts and electronic money; guarantees and commitments, trading for own account or for account of customers in: money market instruments, foreign exchange, or transferable securities; participation in securities, issues and provision of services related to those issues, advice to undertakings on capital structure, acquisition and merger of undertaking; portfolio management and advice, keeping and administration of securities; credit reference services, safe custody of valuables; electronic banking; payment and collection services, bancassurance; etc.
Having laid the foundational principles for banking and tort of negligence, the facts of the case in issue as recounted by the Respected Lordship, Novisi Aryene JA are as follows. The decision of the Court of Appeal is dated 22nd July 2021 and marks an important precedent as well as an interesting expanse of the jurisprudence on negligence and banking.
Plaintiff/Respondent hereinafter referred to as plaintiff, is a company engaged in the sale and retail of pharmaceutical products in Accra and Kumasi. Defendant/appellant, hereinafter referred to as defendant, is a Bank with branches in Accra and Kumasi. Plaintiff is a customer of defendant Bank with accounts at defendant’s Abossey Okai Branch in Accra, and its Adum branch, Kumasi.
The gravamen of plaintiff’s claim is that between August 2015 and January 2016, it entrusted its employee, Clement Quansah with a total sum of Gh¢109,290.00, to be deposited in its account at defendant’s Adum branch in Kumasi. Deposit slips were issued to plaintiff as evidence of crediting the account. Plaintiff contended that sometime in January 2016, it noticed that it had not received the usual SMS text alerts from defendant for deposits made at the Adum Branch since August 2015, and a complaint was lodged with defendant. Investigations revealed that twenty-nine deposits meant for plaintiff’s accounts, were lodged into the personal account of the said Clement Quansah. The transactions involved four Tellers of Defendant’s Adum branch.
The plaintiff contended that, the Defendant’s employees failed to cross-check plaintiff’s name against plaintiff’s account number on the pay-in deposit slip completed by Clement Quansah and as result of such failure to cross-check plaintiff’s name against its account, defendant’s Tellers credited the wrong account (the personal account of Clement Quansah) with funds meant for the plaintiff’s account. The turning point in fact was that, whiles the original deposit slips contained details for Clement Quansah’s account, details on the duplicate deposit slip which plaintiff received contained plaintiff’s account details. Twenty-nine times was the account of Clement Quansah credited with funds meant for the plaintiff.
The defendant bank, United Bank for Africa (Gh) Ltd, of course denied liability and pleaded that the Plaintiff was vicariously liable for the conduct of its agent, rather interesting argument, yet in tort. By the judgement delivered on 12th November 2019, the Commercial Court Division of the High Court Accra, entered judgement in favour of plaintiff for the relief of declaration of negligence by the bank, general damages for negligence and recovery of sum paid into Clement Quansah’s account.
The court held that, the defendant’s tellers were negligent in not scrutinizing the deposit forms before signing same, and ruled that plaintiff was not vicariously liable for the fraud committed by its employee. On appeal the defendant bank made two arguments, one in contract and one in tort:
“that there is no contractual term, express or implied in banker/customer relationship that makes a banker liable for the criminal acts of a customer’s agent entrusted with funds by the customer to be deposited into the customer’s account with the bank neither is there any duty, express or implied owed by a banker to a customer by which the banker is required to take reasonable care to ensure that a customer’s agent entrusted with the customer’s funds by the customer to be deposited in the customer’s account with the bank, does not act in such a manner that the bank’s customer is defrauded.”
The bank further contended that the plaintiff failed to notify the bank that it did not receive the requisite alerts (normally issued to the bank’s customers after each deposit) and did not complain after twenty-nine deposits. The argument by the bank was to the effect that, the customer owed a duty to itself to take reasonable care to ensure that it did not suffer loss from the fraudulent acts of its employees such as promptly notifying the bank that it had not received the alerts or funds.
It is worth noting that the trial judge found as a matter of fact that, the account names and account numbers differed for both the original and duplicate deposit slips although they both bore the signature and stamp of defendant’s Tellers. The original deposit slip bore the name of Clement Quansah, the duplicate bore the name of the plaintiff and the funds were paid into the account of plaintiff’s employee, Clement Quansah. In a criminal proceeding, Clement admitted he only usually left the column on the duplicate blank and when stamped and signed he completed with the plaintiff’s details.
The essential question for determination as set out by their Lordships was, “Whether or not in carrying out the duty of receiving money for payment into a customer’s account, the banker owes a duty to the customer to ensure that the funds received are lodged into that customer’s specified account?”
A good place to start answering this question is the decision in the case of Barclays Bank PLC v Quincecare Ltd, [1992] 4 ALL ER 363, it was held that the Bank was an agent of the customer and that as an agent, the Bank owe fiduciary duties to the customer. In that case, the learned justices referred to Bowstead on Agency (15 Edition) pages 156 to 160 and continued thus “Prima facie every agent for reward is bound to exercise reasonable care and skill in carrying out the instructions of his principal: Bowstead on page 144. There is no logical or sensible reason for holding that bankers are immune from such an elementary obligation. In my judgment, it is an implied term of the contract between the bank and the customer that the bank will observe reasonable skill and care in and about executing the customer’s orders.”
The law is long settled that, “by entering into the banker/customer relationship, the bank agrees to act as the customer’s agent in banking transactions and to exercise the degree of care and skill expected of an agent.”
The Court of Appeal held on the question that, the trial court’s finding of negligence is supported by the law and the evidence adduced at the trial and shall not be disturbed. For banks to fully appreciate their responsibility and liability for breaches especially in payments made by third parties for the benefit of its customers, the following cases must be considered.
In the celebrated case of Donoghue v Stevenson (1932) AC 562, 580, Lord Atkin stated the neighbour principle as follows “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour.” It has been held that there must be sufficient proximity between the parties or, the situation must be one in which the court considers it fair, just and reasonable that the law should impose a duty of care of a given scope on one party for the benefit of the other. Banks must understand that the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do is the true test for negligence.
Finally, on the question of contributory negligence of the customer, the court held that the determination of contributory negligence was a question of fact and law. The law in Davis v Swan Motor Co, [1949] 2 KB 291, where a man was injured riding in a dangerous position on the outside of a dust cart is good law. It was held that he failed to take reasonable care of his own safety. Denning LJ posited at page 326 that two principal criteria of responsibility; causation and blameworthiness must be taken into account in making a determination of contributory negligence.
Lord Denning delivered himself by saying, “Although those negligent acts were the cause of the collision, what was the cause of the damage to the deceased man? He was as the judge found, in a position which he must have known was a very dangerous position in defiance of the dictates of common sense. If he had not been in that position, he would not have been injured. His position was certainly one of the causes of the damage”. The Ghanaian case cited Lord Denning with approval in Kotiawusu v Goka [1992] 1 GLR 302 CA. The test for contributory negligence is whether or not the act or event complained of was reasonably foreseeable and whether the plaintiff acted reasonably in taking the risk leading to the event. The law thus remains as in Hawkins v Ian Ross (Castings) ltd [1970] 1 All ER 180, “a person is guilty of contributory negligence if he ought reasonably to have foreseen that if he did not act as a reasonable prudent man, he might be hurt himself and, in his reckonings, he must take into account the possibility of others being careless.”
For many, it may appear that the failure to inform the bank should constitute contributory negligence, and I have heard the argument time and over again why bankers want to use SMS alert as an excuse of their duty, this is what the law Lords had to say about that:
“It is our considered opinion that it cannot by any stretch of imagination, be said that by failing to check its SMS messages, plaintiff was contributorily negligent. The purpose of the messages which was intended to keep the customer informed on transactions on its account, is not a substitute for defendant’s common law duty of care owed plaintiff. We have come to this conclusion because the SMS messages were sent to plaintiff after the conclusion of the transaction at the bank. Accordingly, there is no correlation between the two. Applying the causation and blameworthiness test espoused by Denning LJ in Swan case (supra) to the evidence adduced at the trial, we rule that there is no nexus between the SMS alert messages and defendant’s failure to scrutinize the deposit forms. The appeal fails on this ground also.”
In conclusion, although the vicarious liability appeared interesting, the Court of Appeal held that, “A careful examination of the doctrine would reveal that a party cannot be vicariously liable to itself…Vicarious liability is a tool in the hands of the injured third party against the employer and does not avail a party who is not the injured or who has been found negligent as in the instant case.”
It appears the law is cast without ambiguity until a superior court has a say and as they say, a word to the wise is in the North. My name is Yaw Sompa. I am an Enterprise Risk Practitioner and a Lawyer. I am a member of the Institute of Directors-Ghana and an author of two books.
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