Topic: Bank's Liability for Employee Actions

Your customer, Kwame Kumchacha, is an importer of second-hand shoes from China. He is illiterate but has made a fortune out of the business which he has operated for several years. Kwame Kumchacha operates a Sole Proprietorship Account styled Kumchacha Enterprise. The account of the Sole Proprietorship is at the Spintex Road Branch of your Bank. Today, you received a letter from Ebito Chambers, a law firm, claiming they had been instructed by Kwame Kumchacha to sue your Bank for losses of GHS 2.5 million incurred by him following the negligent advice given to him by the Manager of your Spintex Road Branch, Serwaa Broni. The law firm explained that the Branch Manager advised Kwame Kumchacha to buy a house at Dzorwulu which was put up for sale by Kofi Brokeman, who also banked with the same Spintex Road Branch of your Bank. Kofi Brokeman had overdrawn his account by GHS 800,0000 and the Head Office has been putting pressure on Serwaa Broni to ensure the position was regularised. In giving the advice, Serwaa Broni, the Branch Manager, assured Mr. Kumchacha that the price of the house was good and that if the customer bought it, she would get the Bank to lease it for the use by the Dzorwulu Branch Manager. Based on this assurance by the Branch Manager, Kwame Kumchacha invested GHS 2.0 million of his working capital in the purchase of the house. The payment was made directly into the bank account of Kofi Brokeman at the Spintex Road Branch. When Mr Kumchacha approached the Bank with an offer for a leasehold interest by the Bank in the property, the Bank said it did not need the property. The property has now become unsaleable due to the general economic hardships in the country, and Mr Kumchacha now has his working capital tied up. The letter from the law firm concluded that if the Bank did not respond in 10 days, they had their client’s instruction to sue the Bank for the negligent advice of Serwaa Broni. What are the legal issues for the Bank in this case? Is the Bank liable for Mr. Kumchacha’s losses? (20 Marks)