Analyses: Liability of Drawee Bank in Respect of Cheques Altered Without Authority

• Jurisdiction: South Africa
• Author: JT Pretorius
• Published date: 25 May 2019
• Date: 25 May 2019
• Citation: (1999) 11 SA Merc LJ 390
• Pages: 390-399

390



(1999) 11 SA Merc LJ

Liability of Drawee Bank in Respect of

Cheques Altered Without Authority

JT PRETORIUS

University of South Africa

1 Introduction

In recent years there has been a spate of cheque frauds and thefts where

the thieves intercept cheques in the post. To get their hands on the

proceeds of the cheques, the cheats alter the original order of the drawer

and substitute, alter, or add to the name of the original payee. In many

instances there is also an increase in the amount for which the cheque was

originally drawn in order to make the enterprise more lucrative. The

cheque is then paid into a bank account that has been opened some time

before and that has been kept on ice for the right occasion. What is

particularly disturbing for the banking industry, is that the criminals

are getting more sophisticated and that the alterations to cheques are

sometimes so skillfully done that it is not possible to detect it by an

ordinary examination of the cheque in question. In

Momentum Life

Assurers Ltd v First National Futures (Pty) Ltd

(1995

Commercial Law

Digest

458 (W)) the Court was dealing with such an alteration and the

judge remarked (at 461) that he had 'carefully studied the cheque . . . and

even with the aid of a magnifying glass was unable to discern the

obliteration of the original or the removal of the original payee's name

from the cheque'. In other words, it is quite possible with modern

technology that the alteration on the cheque would be 'perfect' so that it

would not be 'obvious' or even 'apparent' from the document itself.

The question to be considered in this analysis is where the loss should

fall in the event of a fraudulent 'perfect' alteration of a cheque. I have

previously dealt with certain aspects of the alteration of cheques (see

JT

Pretorius 'Altered Cheques and the Collecting Bank' (1997) 9

SA Merc

LJ

365 (Pretorius 'Altered Cheques')). The purpose of that contribution

was to set out in general terms the legal position between the

drawee bank

and the

collecting bank

in the event of an unauthorised alteration of a

cheque. In this contribution I will attempt to highlight and further explain

and examine some of the views I put forward there, but I will at the same

time focus specifically on the legal position of the drawee bank in the event

of an unauthorised alteration of the cheque.

2 The Bank and Customer Relationship

The starting point is the basic principles of our law. The relationship

between a customer and his bank is contractual in nature (see FR Malan

& JT

Pretorius 'Enrichment in Triangular Situations, Interest and the

In Duplum Rule, and Personal Liability and Company Names' (1996)

(1999) 11 SA Merc LJ 390

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