B & H Engineering v First National Bank of SA Ltd

JurisdictionSouth Africa
Citation1995 (2) SA 279 (A)

B & H Engineering v First National Bank of SA Ltd
1995 (2) SA 279 (A)

1995 (2) SA p279


Citation

1995 (2) SA 279 (A)

Case No

61/93

Court

Appellate Division

Judge

Botha JA, E M Grosskopf JA, Smalberger JA, F H Grosskopf JA and Van den Heever JA

Heard

September 22, 1994

Judgment

October 11, 1994

Flynote : Sleutelwoorde

Enrichment — Condictio sine causa — Banker having mistakenly paid out amount of cheque to payee after drawer had stopped payment thereof — C Action by banker against payee for recovery thereof — Cheque given by drawer to payee in consideration for the performance of payee's obligations in terms of contract between drawer and payee — Whether payee enriched depending on whether payment by banker had effect of D extinguishing debt owed by drawer to payee — Countermand of payment not destroying character of cheque as bill of exchange, but merely changing rights inter se of parties thereto — Thus, if stopped cheque paid according to its tenor, such payment is in due course and cheque is discharged — Nature and purpose of debt-extinguishing agreement between E drawer and payee (created when parties agree to payment by cheque) requiring that payment of cheque, even if countermanded, should have effect of extinguishing debt owed by drawer to payee — Acts and intent of bank, though neutral, to be seen in light of debt-extinguishing agreement — If such agreement provides that any payment by bank, even unauthorised one, would discharge debt, such agreement valid inter partes and fact that F bank neutral of no consequence — Payment by banker accordingly having extinguished debt — Payee not enriched by payment since receipt of payment balanced by loss of its claim against drawer — Banker's claim against payee under condictio sine causa failing — Semble: Bank in principle G having claim on ground of unjustified enrichment against drawer.

1995 (2) SA p280

Headnote : Kopnota

A The appellant, the payee of a cheque drawn on the respondent ('the bank') by S (Pty) Ltd, appealed against a judgment in a Provincial Division in which it was held that the bank was entitled to recover from the appellant the amount of the cheque, which the bank had mistakenly paid out to the appellant after the drawer had stopped payment. It was common cause that the appellant and S (Pty) Ltd had entered into a contract in terms of which the appellant was to manufacture certain goods for S (Pty) Ltd. The appellant complied with its obligations and delivered the goods to S (Pty) B Ltd. S (Pty) Ltd drew a cheque for R16 048 on the respondent and delivered it to the appellant, who accepted it in payment of the contract price. S (Pty) Ltd, however, unjustifiably stopped payment of the cheque before presentment. Unaware of the countermand, the appellant presented the cheque through a collecting bank. The respondent bank overlooked the countermand and negligently paid out the cheque. As it was not entitled to debit S (Pty) Ltd's account, the bank suffered a loss of R16 048, which it sought to recover from the appellant. Its claim was based on C unjustified enrichment. On appeal,

Held, that the appropriate remedy was the condictio sine causa specialis. The bank's claim was accordingly well founded if (1) the appellant was enriched by receiving payment of the cheque and (2) such enrichment was unjustified. (At 285B/C-C/D.)

Held, further, that the main point for decision in regard to the appellant's enrichment was whether the payment discharged S (Pty) Ltd's D debt, for if it did the appellant would have received payment of the R16 048 debt but lost its claim for that amount against S (Pty) Ltd, so that there would have been no enrichment; if it did not, the appellant would have received payment while still retaining its claim against S (Pty) Ltd, so that it would prima facie have been enriched. (At 285E/F, read with 285D-E/F.)

Held, further, that in order to decide whether S (Pty) Ltd's debt was discharged, one had to have regard to the effect the giving of the cheque had on the contractual relationship between the drawer and the payee. (At 285F.)

E Held, further, that for practical reasons it was not the payment of the cheque which was regarded as payment of the original debt, but the delivery of the cheque, conditional on its being met in due course: commercial sense required that the underlying debt should continue in existence until the creditor actually received the money. (At 286B-B/C and 285I/J.)

Held, further, that the fundamental point was that one was dealing with a F contractual relationship between the debtor and the creditor: once a creditor who agreed to accept payment by cheque received his money from the bank, the purpose of the agreement in terms of which the creditor and the debtor agreed on payment by cheque (the so-called 'debt-extinguishing agreement') was achieved, and it did not matter, as between debtor and creditor, what the arrangements were between the bank and the debtor. (At 286G/H and H/I-I/J.)

Held, further, that counsel for the bank's argument that the G debt-extinguishing agreement should be construed as providing that payment by cheque would only extinguish the original debt if such payment was at the time of payment authorised by the drawer (in other words, if there was countermand before payment, payment by the bank would not extinguish the debt), had to be rejected: an effective debt-extinguishing agreement achieved its purpose when the creditor (towards whom, as payee, the bank was under no contractual duty) received the money owing to him, and for this purpose it did not matter that payment was, as in the present case, H attended by breach of the contract between the bank and its customer, the drawer. (At 286I/J-287B/C summarised and 287F/G-G/H.)

Held, further, that in the scheme of the Bills of Exchange Act 34 of 1964, countermand of payment did not destroy the character of the instrument as a bill, but merely changed the rights inter se of the parties thereto: if payment was countermanded, the authority of the banker to pay the cheque was terminated (s 73(a) of the Act) and presentment for payment was I dispensed with (s 44(2) of the Act); if the cheque remained unpaid, it was dishonoured and the holder entitled immediately to sue the drawer without giving notice of dishonour (s 45(2) read with s 48(2)(c) of the Act); on the other hand, the cheque remained a bill in terms of the Act, with the consequence that if it was paid according to its tenor, payment was in due course and the cheque was discharged. (At 289D-E/F, read with 288G/H.)

Held, further, that in the instant case the cheque was accordingly J discharged when the bank paid it. (At 290J.)

1995 (2) SA p281

A Held, further, that the next question was whether the payment by the bank had the effect of extinguishing the debt owed by S (Pty) Ltd to the appellant: this depended upon the exact nature of the debt-extinguishing agreement between S (Pty) Ltd and the appellant, and, in particular, whether the debt was to be extinguished only where payment by the bank was authorised by S (Pty) Ltd. The finding that the payment of the cheque by the bank, even if unauthorised, discharged the cheque, was relevant to this issue. (At 291A-B/C.)

B The Court proceeded to analyse the nature and purpose of the debt-extinguishing agreement from the perspectives of the payee, the drawer and the banker and came to the conclusion that the rule that payment was conditional on the cheque being paid or honoured by the bank accorded with commercial practice, and that the further qualification suggested on behalf of the bank, namely that payment had to be authorised by the drawer, was not only unnecessary for the purposes of the C debt-extinguishing agreement, but would lead to anomalous and inequitable results. (At 292B/C-D.)

Held, further, that where parties accordingly agreed to make and accept payment of a debt by cheque, the debt was extinguished when the bank paid the cheque to the payee (creditor), whether or not payment was at that stage authorised by the drawer (debtor). (At 292D-D/E.)

Held, further, that although it was true that the bank was a neutral D payment functionary and that the acts and intent of the bank, by themselves, could not result in the payment of the debt by the payee, they formed only part of the picture, and had to be seen in the light of the debt-extinguishing agreement as it was that agreement which defined the purpose for which the cheque was given, and for which payment was to be received from the bank. If that agreement provided that any payment by the bank, even an unauthorised one, would discharge the debt as between E debtor and creditor, such an agreement would be valid inter partes, and the fact that the bank did not know or care what the purpose of its payment was did not matter - the debtor was paying his own debt through the instrumentality of the bank. (At 293D/E-F/G and G/H.)

Govender v Standard Bank of South Africa Ltd 1984 (4) SA 392 (C) followed.

Barclays Bank Ltd v Simms Son & Cooke (Southern) Ltd and Another [1979] 3 All ER 552 (QB) not followed.

Held, further, that, the debt having been discharged when the bank paid F the cheque to the appellant despite the fact that payment was countermanded, the appellant was not enriched by such payment since its receipt of the amount of the cheque was balanced by its loss of a claim against S (Pty) Ltd, so that its net financial position was unchanged. (At 294H/I-I/J.)

Held, accordingly, that the bank's claim under the condictio sine causa specialis should not have succeeded in the Court a quo. (At 294I/J.) Appeal allowed.

Semble: The bank would, however, have a prima facie claim in enrichment G against the drawer: as a result of the bank's payment to the appellant, S (Pty) Ltd was released from its obligation to the...

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52 practice notes
  • Reflections on the Sine Causa Requirement and the Condictiones in South African Law
    • South Africa
    • Juta Stellenbosch Law Review No. , August 2019
    • 16 August 2019
    ...i n D 12 5 635 See Govender v Stand ard Bank of SA Ltd 1984 4 SA 392 (C) 396; B&H Engineering v First National Bank of SA Ltd 1995 2 SA 279 (A) 28536 See general ly Lotz/Bra nd LAWSA 9 para 22 0; Eiselen & Pienaa r Unjustifie d Enrichment 152; Son nekus Unjustifi ed Enrichment in SA L aw ch......
  • Commissioner for Inland Revenue v Cactus Investments (Pty) Ltd
    • South Africa
    • Invalid date
    ...at 531D—H applied Arnold v Viljoen 1954 (3) SA 322 (C): referred to B and H Engineering v First National Bank of Southern Africa Ltd 1995 (2) SA 279 (A): referred to D Bellairs v Hodnett and Another 1978 (1) SA 1109 (A): referred to Bernitz v Euvrard 1943 AD 595: dictum at 602 applied Bolan......
  • Absa Bank Ltd v Lombard Insurance Co Ltd
    • South Africa
    • Invalid date
    ...Bank of SA Ltd 1998 (1) SA 242 (SCA) ([1997]4 All SA 673): dictum at 251G–H appliedB&H Engineering v First National Bank of SA Ltd 1995 (2) SA 279 (A):dictum at 287A appliedBurg Trailers SA (Pty) Ltd and Another v ABSA Bank Ltd and Others 2004(1) SA 284 (SCA): referred toColumbus Joint Vent......
  • MN v AJ
    • South Africa
    • Invalid date
    ...Afrisure CC and Another v Watson NO and Another 2009 (2) SA 127 (SCA): referred to B & H Engineering v First National Bank of SA Ltd 1995 (2) SA 279 (A): E referred Barkhuizen v Napier 2007 (5) SA 323 (CC) (2007 (7) BCLR 691; [2007] ZACC 5): dictum in para [28] applied Benson and Simpson v ......
  • Request a trial to view additional results
40 cases
  • Commissioner for Inland Revenue v Cactus Investments (Pty) Ltd
    • South Africa
    • Invalid date
    ...at 531D—H applied Arnold v Viljoen 1954 (3) SA 322 (C): referred to B and H Engineering v First National Bank of Southern Africa Ltd 1995 (2) SA 279 (A): referred to D Bellairs v Hodnett and Another 1978 (1) SA 1109 (A): referred to Bernitz v Euvrard 1943 AD 595: dictum at 602 applied Bolan......
  • Absa Bank Ltd v Lombard Insurance Co Ltd
    • South Africa
    • Invalid date
    ...Bank of SA Ltd 1998 (1) SA 242 (SCA) ([1997]4 All SA 673): dictum at 251G–H appliedB&H Engineering v First National Bank of SA Ltd 1995 (2) SA 279 (A):dictum at 287A appliedBurg Trailers SA (Pty) Ltd and Another v ABSA Bank Ltd and Others 2004(1) SA 284 (SCA): referred toColumbus Joint Vent......
  • MN v AJ
    • South Africa
    • Invalid date
    ...Afrisure CC and Another v Watson NO and Another 2009 (2) SA 127 (SCA): referred to B & H Engineering v First National Bank of SA Ltd 1995 (2) SA 279 (A): E referred Barkhuizen v Napier 2007 (5) SA 323 (CC) (2007 (7) BCLR 691; [2007] ZACC 5): dictum in para [28] applied Benson and Simpson v ......
  • Absa Bank Ltd v Moore and Another
    • South Africa
    • Invalid date
    ...CC and Another v Watson NO and Another 2009 (2) SA 127 (SCA) ([2008] ZASCA 89): discussed B&H Engineering v First National Bank 1995 (2) SA 279 (A): referred to Barnard v Nedbank Ltd [2014] ZAGPPHC 723: referred to Bousfield v Divisional Council of Stutterheim (1902) 19 SC 64: referred to I......
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12 books & journal articles
  • Reflections on the Sine Causa Requirement and the Condictiones in South African Law
    • South Africa
    • Juta Stellenbosch Law Review No. , August 2019
    • 16 August 2019
    ...i n D 12 5 635 See Govender v Stand ard Bank of SA Ltd 1984 4 SA 392 (C) 396; B&H Engineering v First National Bank of SA Ltd 1995 2 SA 279 (A) 28536 See general ly Lotz/Bra nd LAWSA 9 para 22 0; Eiselen & Pienaa r Unjustifie d Enrichment 152; Son nekus Unjustifi ed Enrichment in SA L aw ch......
  • The Relevance of the Plaintiff’s Impoverishment in Awarding Claims Based on Unjustified Enrichment
    • South Africa
    • Juta Stellenbosch Law Review No. , August 2019
    • 16 August 2019
    ...ppliers even t hough he was not impoverished57 1984 4 SA 392 (C)58 408-409 Af ter B & H Engin eering v First Nat ional Bank of SA Ltd 1995 2 SA 279 (A), the bank’s clai m would have failed, b ecause there was a va lid legal ground for th e defendant’s enrichm ent59 1984 (4) SA 392 (C) 408E-......
  • Case Notes: The use of stolen funds to discharge a debt and enrichment: Absa Bank Ltd v Lombard Insurance Co Ltd
    • South Africa
    • Juta South Africa Mercantile Law Journal No. , May 2019
    • 25 May 2019
    ...for example, Saambou-Nasionale Bouverenigingv Friedman 1979 (3) SA 978 (A) 993A-B; B & H Engineering v FirstNational Bank of SA Ltd 1995 (2) SA 279 (A) 286J–287F; De Wet & VanWyk op cit 5 and 263; Van der Merwe et al op cit at 440), it deservesmentioning that this construction is open to st......
  • The Protesting Dominus: A Reconsideration in the Light of German Law
    • South Africa
    • Juta Stellenbosch Law Review No. , August 2019
    • 16 August 2019
    ...as Govender v St andard Bank of South Afr ica Ltd 1984 4 SA 392 (C) and B & H Engineering v First National Bank o f South Africa Ltd 1995 2 SA 279 (A)520 STELL LR 2009 3 © Juta and Company (Pty) contractua l obligations vis-à-vis its client.36 In other words, this was really a case of a mal......
  • Request a trial to view additional results

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