In a recent High Court decision, Safaricom PLC (the Appellant) was condemned to pay KES. 452,868/= to Mr Ronald Wilson Kafwa (the Respondent), one of its customers being part of the amount of money lost by the Respondent from his M-pesa account after the theft of his mobile phone.
Facts of the Case
The Respondent lost his mobile phone on 10th October 2021 and as would any prudent person, he called the Appellant’s call centre to block his M-pesa account which at the time held KES.
751,680/=. As fate would have it, the Respondent was a subscriber of the Appellant’s Advantage Hybrid Tarriff and therefore, his request to block his M-pesa Account could not be processed immediately. He was therefore advised to visit the Appellant’s nearest retail store to effect his request.
The Respondent proceeded to the Appellant’s retail store on Moi Avenue later that day in a bid to secure his M-pesa balance. The retail store agents in keeping to their rigorous training and to ensure that they were not being taken for a ride, asked the Respondent to avail proof of his identity or a police abstract before his request could be processed. Unfortunately, as the Respondent was retrieving his police abstract, the thieves were busy withdrawing KES.
298,812/= from the Respondent’s M-pesa account at an Equity Bank ATM.
The Respondent’s SIM Card was successfully blocked, and the Respondent breathed a sigh of relief, perhaps a little too soon, as a call was placed to the Appellant’s customer care representatives soon thereafter and access to the Respondent’s M-pesa Account was restored to the hands of the thieves who quickly withdrew a further KES 116,505. Indeed, when it rains, it pours!
The Respondent fuelled by what was left in his M-pesa account approached the Appellant for a second time and got his SIM Card blocked after verification of his identity, successfully killing the goose that lay the golden eggs, at least as far as the thieves were concerned.
Legal Analysis
It is trite law that terms and conditions of use of services constitute a valid and binding agreement between parties. The relationship between the parties in this case were governed by the M-pesa Terms and Conditions (M-pesa T & Cs) which provided the respective rights and obligations of the parties.
The Appellant argued that since KES. 418,331/= was withdrawn from the Respondent’s M-shwari’s account before finding its way to the thieves’ pockets, the Appellant could not be held liable since M-shwari was a third-party platform and under the M-shwari terms and conditions (M-shwari T & Cs), the Appellant was not responsible for ensuring the security of M-shwari as it is a service provided by NCBA to its customers.
The Appellant further argued that according to the M-pesa T & Cs, the Respondent was solely responsible for keeping his PIN secret confidential to prevent unauthorised access to his account. The Appellant therefore argued that the Respondent’s loss was on account of the theft of his mobile phone which led to the compromise of the security of his account which could not be blamed on the Appellant.
The Respondent on the other hand argued that his loss was occasioned by the Appellant’s laxity and double standards in their security protocols which allowed the unblocking of his M-pesa account, effectively granting access to his M-pesa account and M-shwari account in turn. The Respondent further relied on Clause 14.3 of the M-pesa T & Cs which provides that the Appellant can only be held liable for claims attributable to the Appellant’s wilful default.
Finding
The High Court affirmed the trial court’s decision and largely agreed with the Respondent, holding that the Appellant could not disassociate itself from the transactions on grounds that they were on M-shwari, a third-party platform. The court found the Appellant’s involvement indispensable whether a third-party was involved or not.
The court further found that the Appellant owed the Respondent a fiduciary duty of care to act with diligence after the Respondent reported the loss of his mobile phone and took the necessary steps to have his SIM Card blocked.
The court agreed with the trial court’s finding that the Respondent was only liable for the losses incurred before he reported the theft to the Appellant. To that end, the High Court dismissed the appeal by the Appellant with costs to the Respondent.
Implications and Recommendations
This decision buttresses consumer rights as set forth in Article 46 of the Constitution of Kenya 2010 (the Constitution) and further expounded in the Consumer Protection Act, 2012 (the Act).
Article 46 of the Constitution provides that consumers have inter alia, the right to, information necessary for them to gain full benefit from goods and services, protection of their economic interests and compensation for loss or injury arising from the defects in goods and services.
This decision highlights these three aspects by imposing an obligation on service providers to exercise utmost diligence in the provision of their services including by among other things, providing their customers with accurate and consistent information that allows them to secure their interests and exercising utmost diligence in protecting the economic interests of their customers.
In this particular instance, the Appellant being the service provider had a duty to act with utmost diligence as soon as they were notified by the Respondent of the loss of their handset by taking all necessary steps to block any further access to the Respondent’s account. This would have been achieved through thorough vetting and verification of any further activities in relation to the Respondent’s account including the subsequent attempts to re-instate access to the Respondent’s account. By failing to take the necessary steps, the Appellant failed to protect the Respondent’s economic interests and exposed him to loss necessitating the institution of the suit. The court’s finding in favour of the Appellant affirmed the consumer’s right to compensation for loss or injury arising from defects in goods or services as provided under Article 46 (1) (d) of the Constitution. We however note that the Appellant was not blamed for the entire loss as the Respondent did not take all necessary steps to mitigate the loss suffered.
In view of the above, we note that consumers have an obligation to mitigate any potential losses by among other things, taking all necessary steps to notify the service provider immediately they become aware of any actual or threatened infringement of their rights as provided under Article 46 of the Constitution and providing all possible assistance to the service provider to enable them take the steps necessary to protect the consumer’s interests and prevent loss or injury to the consumer.
Service providers on the other hand have a constitutional duty to protect the health, safety and economic interests of consumer and are required to act with utmost diligence upon notification of any actual or threatened infringement of the consumer’s rights including but not limited to taking all necessary steps to secure the consumer’s interests and prevent any loss or injury to the consumer failure to which the service provider may be liable for the loss suffered by the consumer as demonstrated above.
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Read the original publication at MWC Legal.