Lessons from Civil Appeal E162 of 2022 – UBA Bank Kenya Ltd vs Top Image Africa Ltd

Background of the Case

In Civil Appeal E162 of 2022, the High Court ruled on a foreign currency exchange between UBA Bank Kenya Limited and its customer, Top Image Africa Limited.

Between February 9 and March 26, 2018, Top Image Africa (the respondent) converted Nigerian Naira (NGN) 123,000,000 to Kenya Shillings through its bank, UBA (the appellant). The conversion was executed in two tranches. Communication between the bank and the company was primarily through email correspondence.

Here is what happened:

· On 28 February 2018, UBA informed Top Image of a demand for NGN 50 million and offered to convert it at a rate of 0.18, which the company accepted. The equivalent Kshs 9 million was credited to Top Image’s account.

· On 26 March 2018, a similar offer was made for the remaining NGN 73 million, again at a rate of 0.18. This resulted in Kshs 13.14 million being credited to Top Image’s account.

However, Top Image later disputed the rate, arguing it had been misled. According to the company, the rate communicated (0.18) was erroneous and that the Central Bank of Kenya’s indicative rate was closer to 1.18, meaning the company lost Kshs 12.3 million.

The company sued for fraud, misrepresentation, and withholding of material information. The trial court agreed and awarded Kshs 12.3 million in damages, holding that the transaction was unconscionable and in violation of consumer protection standards.

UBA appealed. The High Court allowed the appeal and overturned the trial court’s decision based on the following:

· Email exchange created a contract: The court found that the parties had freely negotiated and agreed to the exchange rate of 0.18 through emails. There was no fraud, coercion, or undue influence, and therefore, the agreement was valid and binding.

· Indicative rates are not binding: The Central Bank’s indicative forex rates are just that; indicative, not mandatory. They serve as estimates of market trends, but exchange rates are ultimately determined by market forces and mutual agreement.

· Burden of proof lies with the claimant: Top Image failed to prove that the CBK rate at the time was 1.18 or that UBA's conduct amounted to fraud. They relied on printouts from online sources rather than official CBK documents.

· No breach of duty of care: Since Top Image voluntarily agreed to the rate and instructed the conversion, UBA was not found to have withheld any material information or breached any duty.

Why This Case Matters for SMEs

1. Be cautious when agreeing to terms via email: Once you accept an offer, even informally via email, it may be considered legally binding. Always clarify unclear terms and review rates or figures carefully.

2. Forex and financial services are subject to negotiation Unless expressly pegged to a regulatory rate, rates such as forex are generally not fixed and can fluctuate based on market supply and demand.

3. Documentation matters: In commercial disputes, whoever asserts must prove. If you claim fraud, error, or loss due to misleading practices, you'll need official documents and evidence, not just screenshots from websites.

4. Contracts can be simple, but still enforceable: You don’t need a formal printed contract. If your emails contain an offer, acceptance, consideration, and mutual intent to create legal relations, you have likely formed a contract.

Practical Tips for SMEs

· Always document financial transactions clearly and maintain records of any agreed rates, terms, or conditions.

· When dealing with foreign exchange, cross-check rates using multiple reliable sources, including your own bank and CBK (where applicable).

· If unsure, seek legal advice before concluding significant transactions.

Conclusion

This case underscores the importance of clear communication and due diligence when transacting with banks and financial institutions. For SMEs, it’s a timely reminder that digital correspondence is legally recognised, and errors in judgment, or lack of verification, can be costly.

Contact us today to ensure your business is protected in every transaction. (law@cmsmelub.com)

Published on April 7, 2025, 2:43 p.m.