Banks defending disputed payment claims must prove funds reached the intended recipient rather than rely on internal processing records, the High Court in Nairobi has ruled.
The court said maker-checker approvals and payment schedules do not establish payment of the money.
The ruling arose from a dispute between Consolidated Bank and Muteithia Kibira Advocates LLP over legal fees for defending the lender in an employment case lodged by its former internal quality auditor.
The bank argued it had paid a Sh72,460 deposit requested by the law firm and that requiring it to pay the full fee note of Sh497,102 would amount to unjust enrichment. The advocates maintained they never received the deposit.
In determining the dispute, the court dismissed the bank's appeal and upheld a Small Claims Court judgment that awarded the advocates the full amount claimed after finding the lender failed to prove the disputed payment had been made.
The court held that once the advocates denied receiving the money, the burden shifted to the bank to demonstrate the funds had actually been transmitted and received.
"The proof of payment of legal fees is the receipt of the fees, not in the preparation of payment. Through the Maker Checker process, what the appellant has demonstrated is the preparation for payment," Justice Benard Murunga stated, reinforcing the importance of complete payment trails in commercial disputes.
The bank relied on an internally approved Deposit Request Note bearing maker-checker and finance approval stamps, together with an internal payment schedule listing the advocates among intended beneficiaries.
The court found those records merely documented internal approval processes rather than completed transactions.
"Both the Maker Checker and Payment Schedule are internal procedures. They do not necessarily demonstrate payment but only the approval process and an Internal Schedule. That is no proof," the court ruled.
The court said the bank could have produced stronger evidence, including remittance advice, electronic transfer records or other documents confirming the funds reached the advocates.
"In the age of Real Time Gross Settlements and Electronic Fund Transfers ... Remittance Advices are accepted," the judgment said, adding that banks should provide signed and stamped proof of transfers just as they do for cash or cheque deposits.
The court also rejected the bank's argument that paying the fee note would unjustly enrich the law firm. It said such a claim depended on first proving the disputed deposit had actually been received.
"To prove unjust enrichment, one therefore has to prove that the person received the payment and that being paid again would be double payment," it said. "Proof cannot be through internal documentation."
The court noted that the advocates had repeatedly demanded payment over several years. It said the bank never responded to those demands by producing evidence that the deposit had already been settled.
"That silence is inconsistent with the conduct of a debtor who has already discharged its payment obligation," the court said.
Although the court acknowledged the bank had attempted to trace records of the 2017 transaction, it found those efforts ultimately failed to produce evidence proving the disputed payment had reached the law firm.
