The High Court of Uganda has in Translink Limited v Standard Chartered Bank (U) Limited, High Court Civil Suit No 415 of 2019 re-examined the scope of a bank’s duty of care to its customer in the context of an online or digital transaction. The Court stated that a bank’s duty of care in a digital transaction is discharged when it successfully proves that a payment has been made in accordance with a customer’s instruction.
This is a timely decision considering the exponential growth in digital transactions. It clarifies the duty of banks faced with mistaken or fraudulent digital payment instructions from customers. The decision also demonstrates that the Courts now acknowledge the unique and instant nature of digital transactions, and the need to re‑evaluate the principles governing liability or attribution for loss suffered because of a mistake or fraud in digital payment instructions.
This alert analyzes the decision and highlights the key industry and practice takeaways as summarized below:
- a bank’s duty of care in digital transactions is being approached differently from a bank’s duty of care in traditional over-the-counter transactions. This distinction arises because the bank’s control over the movement of funds in digital transactions is extremely limited as such transactions are automated, initiated by a customer and happen instantly;
- to avert liability, a bank must demonstrate that the customer’s payment instruction was instant and as a result, the money was out of the control of the bank and the corresponding bank (i.e., the bank that processed the payment) at the time the customer issued a countermand instruction; and
- a bank should always keep a record of all correspondences with the customer in relation to the countermand instruction. This will help to avoid any allegation that there was a delay in processing the countermand instruction. Such correspondence will demonstrate that reasonable efforts were made by the bank to recover the funds.