The court has overturned an earlier decision that had ordered Barclays Bank of Uganda (now Absa Bank) to refund more than Shs 8.5 million to its customer, Eron Kabachwamba, after she discovered that she had failed to properly safeguard her debit card and PIN.
On January 18, 2013, Shs 8.5 million was withdrawn from Kabachwamba’s account from Nairobi, Kenya, even though she was physically in Uganda at the time. She said she just received an SMS notifying her about the transaction.
Shocked by the withdrawals, Kabachwamba ran to the bank and alerted them. She denied authorizing the transaction.
However, the bank denied knowledge of the transaction and told Kabachwamba they could not refund her.
She sued the bank at the Mengo Chief Magistrate’s Court, arguing it had failed in its duty to protect her money from fraud.
The court agreed with her, saying there was “no conclusive evidence to show that the Kabachwamba’s VISA debit card was cloned in Kampala” and faulted the bank for relying on what it called an “inconclusive” internal investigation.
The magistrate’s court ordered the bank to refund the full Shs 8.5 million, plus interest at 24% per year from 2013 until payment.
Kabachwamba was also awarded Shs 2 million in general damages.
Aggrieved by the decision, Barclays appealed, arguing that Kabachwamba’s own negligence caused the fraud.
Through its lawyers, KSMO Advocates, Barclays told the High Court that Kabachwamba had exposed her card and PIN while using it at Emin Pasha Hotel in Kampala weeks before the fraud. They said she had left it with a stranger at the hotel, who possibly cloned it.
The bank insisted that “had it not been for Kabachwamba’s negligence, the loss would not have occurred.
Kabachwamba, represented by Kaddu and Partners Advocates, denied any wrongdoing, maintaining that she had protected her PIN carefully.
In court, her lawyers said she “used a sheet of paper to shield her PIN while transacting at the point of sale at the Emin Pasha hotel.
She also argued that there was no proof linking the earlier hotel transaction to the fraud in Nairobi, and described the bank’s investigation as inconclusive.
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Justice Stephen Mubiru re-examined all the evidence but came to a very different conclusion from the magistrates’ court.
He explained that in modern banking, both the bank and the customer share responsibility for preventing fraud.
“The safeguarding of funds on bank accounts is a shared responsibility,” he said, adding that customers must be vigilant in protecting their digital credentials, such as PINs.
Justice Mubiru found that the bank’s fraud detection system had actually worked properly because it flagged the unusual transactions in Nairobi and attempted to contact Kabachwamba, but failed because her phone was switched off.
“The last line of defence… was not failed by any glitch but rather by Kabachwamba’s unavailability,” Justice Mubiru said.
The court then turned to the key issue of whether Kabachwamba had been negligent.
Although there was no direct evidence that her card was cloned at the hotel, Justice Mubiru relied on circumstantial evidence.
He found it “more probable than not” that the fraudster accessed her card details after she left it with a hotel attendant during a transaction.
Her own testimony was described as evasive.
Justice Mubiru pointed to her statement, which was not clear. In her statement, Kabachwamba said her card had been retained at the hotel, although it was later handed back to her.
He concluded that allowing a stranger to handle the card amounted to “gross negligence.”
Justice Mubiru explained that once a debit card transaction is authorised, reversing it is not always possible, especially if the customer’s own negligence contributed to the loss.
In the end, he set aside the earlier ruling by the magistrates’ court and cancelled the earlier award of Shs 8.5 million to Kabachwamba.
So, the bank won based on Kabachwamba’s negligence.
