African Diamond Exporters (Pty) Ltd v Barclays Bank International Ltd

• Jurisdiction: South Africa
• Judge: Wessels ACJ, Rabie JA, Muller JA, Joubert JA and Trengove AJA
• Judgment Date: 30 May 1978
• Court: Appellate Division

Muller JA:

This is an appeal against a judgment of McEWAN J delivered on 19 October 1976 in the Witwatersrand Local Division in terms whereof the appellant was ordered to pay to the respondent a sum of R125 684,94 together with interest and costs. The judgment of the learned Judge, with the exclusion of the Judge's summary of the facts that gave rise to the respondent's claim, is reported in 1977 (1) SA 298 under the heading D Barclays Bank International Ltd v African Diamond Exporters (Pty) Ltd.

For the purposes of this appeal it is necessary to restate in brief the facts of the case. In doing so it will be convenient to refer to the respondent as the plaintiff and to the appellant as the defendant.

The plaintiff is a company incorporated in England with its head office in E London. It carries on business as a banker. The defendant is a private company incorporated in South Africa and carries on business in Johannesburg as a dealer in and exporter of polished diamonds. One Joseph Bronner, to whom I shall refer hereinafter simply as Bronner, is the principal shareholder and managing director of the defendant company and F acted for the company in the matters referred to hereinafter.

The Diamond Exchange Branch of Nedbank Ltd in Johannesburg, to which I shall refer as Nedbank, acted for the defendant in exporting diamonds overseas. At all times material the place of business of the defendant G company was in the same building as that occupied by Nedbank in Johannesburg.

During June 1972 a firm in California, United States of America, by the name of Antwerp Distributing Co (hereinafter referred to as Antwerp) enquired from the defendant whether the latter could supply the said firm with polished diamonds for resale in the United States. According to the correspondence received from Antwerp, the said firm was "headed by George H Kuetgens".

After making certain enquiries, Bronner decided to do business with Antwerp and a consignment of diamonds to the value of $7 379 (the equivalent of R5 903) was sent to Antwerp in August 1972. The defendant was duly paid for such diamonds. Following thereon a larger parcel of diamonds valued at $18 872 (the equivalent of R15 097) was sent to Antwerp in California on 5 September 1972.

There was some delay in obtaining payment of the amount due in respect

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of the last-mentioned consignment, but on 4 October 1972 Wells Fargo Bank of Los Angeles, in the United States, sent a telex message to the plaintiff in London to pay to the Johannesburg branch of the plaintiff $18 A 872 for the credit of the defendant. There was some delay in acting on the said instruction. This was due to the fact that the San Francisco test key was missing. The significance of the test key is explained as follows by the Judge a quo:

"It may be explained that in every telegraphic transmission of money the plaintiff uses a test number. This number is made up according to a key from a number of elements which include the date, the branch's number and B the amount transmitted. Unless the elements put together give rise to a number that corresponds with the number transmitted when deciphered by means of a key, the message is not regarded as being properly authenticated. Therefore, because the key was missing the message from Los Angeles could not be authenticated and the plaintiff was not prepared at that stage to act upon it."

C After enquiries from the plaintiff in London the test of the telex message was confirmed on 9 October 1972 and that confirmation was received by the plaintiff in London on the following day. The responsible officials in the plaintiff's London office then took the necessary steps for remitting the sum of $18 872 to South Africa. Transactions on behalf of the plaintiff in South Africa were normally handled by the Simmonds Street branch, in D Johannesburg, of Barclays National Bank Ltd. This branch was for convenience referred to at the trial simply as Barnat and I shall also refer to it as Barnat.

In remitting the said amount the plaintiff was entitled to deduct bank charges in a sum of $11,12 so that the nett amount to be transmitted was $18 860,88.

E The responsible official in the plaintiff's London office completed a telegraphic transfer order for the purpose of remitting the said amount to Barnat in South Africa. This order was made out in quadruplicate on self-carbonated paper known as Sanfold. Anything written or typed on the F original order while the other parts are still attached thereto is automatically reproduced, without the use of carbon paper, on the other parts. The second part, or first copy, in the set of four documents was used for the transmission of the telex message and the other copies were used for other bank purposes.

G It was explained to the Court a quo that a mark made on the original order by a sharp instrument, such as a thumb nail, could be invisible on the original but, if made while the three copies are still attached to it, would, by the self-carbonating process, be reproduced of the copies. And that is precisely what happened in the instant case. The original telegraphic order was made out for $18 860,88 and this figure was H automatically reproduced on the annexed three copies of the order. At some stage thereafter and in a manner not known a mark in the form of a figure 1 must have been made on the original order which mark was automatically reproduced on the second part of the set of documents causing the figure on that part, which part was used for the purpose of transmitting the money, to read $188 601,88. This brought about that the amount actually transmitted was approximately ten times the amount that the plaintiff had been instructed to transmit.

It is convenient to explain at this stage that, according to the testimony

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of the officials employed by the plaintiff in London, the Sanfold forms had been used by plaintiff for many years and, although hundreds of telegraphic payments were made every day, no similar mistake had ever occurred. After the mistake had been discovered in the instant case A suitable precautions were taken to avoid the possibility of mistakes occurring in future.

Upon receipt by Barnat in Johannesburg of the telex from the plaintiff instructing payment to be made to the defendant of $188 601,88 the message was passed on to the Foreign Exchange Department of Barnat. In the said B department a clerk, Miss De Vries, prepared the necessary documents to effect transfer to Nedbank of the aforesaid sum for the account of the defendant. These documents were delivered to Nedbank on 12 October 1972. One of these documents, headed Credit Transfer, clearly indicated that the amount of $188 601,88 was "paid in" by Antwerp Diamond Co and was to be credited to the account of the defendant by virtue of a telegraphic C transfer from the plaintiff in London.

By reason of what is stated above an overpayment of $169 741 was made to Nedbank for the account of defendant.

Because of certain developments which took place shortly after the said overpayment was made, a matter which will be discussed more fully D hereinafter, the defendant, through Nedbank, caused the amount overpaid to be dealt with as follows:

(i)

$100 000 was transferred on 16 October 1972 to Wells Fargo Bank, Whittier, California, for the account of Antwerp.

(ii)

$55 385 was utilized as payment for a further consignment of E diamonds sent by the defendant to Antwerp on 18 October 1972.

(iii)

The balance was retained by the defendant and was later paid to the plaintiff on 4 August 1973, ie after action had been instituted.

Some time after the payment of $100 000 had been made to Antwerp and the further consignment of diamonds to the value of $55 385 had been received by the said firm, Mr Kuetgens of the said firm disappeared and neither the F money nor the diamonds could be recovered.

That being the position, the plaintiff, in a condictio indebiti, claimed a repayment of the full amount of the overpayment from the defendant. A number of defences were raised by the defendant at the trial, as to which G see the reported judgment of McEWAN J. On appeal to this Court only two main defences were argued on behalf of the defendant, namely

(a)

That on 13 October 1972 an employee of Barnat, a Miss De Vries, represented to one Van der Vliet of Nedbank, acting as the agent of defendant, that Barnat had been informed by the plaintiff's H office in London that, in transmitting the money to South Africa, no mistake had been made in London; that this was a misrepresentation and that it caused defendant to act to its prejudice in transmitting the $100 000 and forwarding the diamonds to Antwerp. The plaintiff, so it was contended, was therefore precluded from recovering the sums of $100 000 and $55 385 from the defendant. Alternatively, it was contended that the misleading statement made by Miss De Vries was of such a nature and so grossly negligent

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that the aforestated sums could not be recovered by a condictio indebiti.

(b)

That the plaintiff had failed to prove that the defendant was in fact enriched by the overpayment made to it.

A From the above it follows that the defendant did not on appeal persist in the following two defences relied upon at the trial, namely

(1)

The defence based on the Exchange Control Regulations, which matter is dealt with in the judgment of the Court a quo (1977 (1) SA 298 at 300D - 302D.

(2)

The defence based on the alleged gross negligence of the plaintiff's employees in its London office, which matter is dealt B with in the aforesaid judgment at 303A - 309B.

In order to deal with the first of the defences debated in this Court, C namely the defence based on alleged misrepresentation, it is necessary first to turn to the evidence. On this aspect of the case the following witnesses...