NIC Bank has been ordered to pay a law firm Sh76 million for dishonouring a cheque 14 years ago, a decision that the law firm of Harit Sheth Advocates says hurt its business.
The lender merged with Commercial Bank of Africa to form NCBA. Justice Alfred Mabeya ruled that the lender breached its duty of care by dishonoring the cheque. The law firm says the decision made it lose a client and work that would have earned them Sh56 million in fees.
While ordering the lender to pay Mr Harit Sheth and Mr Richard Kariuki Sh5 million each, the judge said there was no justification in declining payment of the cheque as it was duly drawn and executed as per the mandate held by the bank.
“More-so, there was sufficient funds to effect payment of the cheque. There was no good reason to decline payment and the defendant failed to properly exercise its duty of care to the plaintiffs by failing to carry out the plaintiffs’ instructions,” the judge said.
Other than the Sh5 million each, the judge directed the lender to pay the law firm Sh56.3 million for special damages. The court was informed that the law firm drew and signed a cheque for Sh13.2 million to be paid to Mark Properties on April 4, 2009, for sale of some property they were developing.
At the time, the law firm’s bank account had Sh29 million.
In returning the cheque, the lender inscribed number ‘80’ and signed in red and returned it to the payee’s bank, which the court ruled was defamatory.
The lender said it was the primary duty of the customer to comply with the bank’s conditions of operating the account. “…this court finds that the defendant breached the banker-customer contract, and that the marking of the bankers cheque ‘80’ meaning “refer to maker” or “refer to drawer” was defamatory of the plaintiffs,” the judge said.
