B & H Engineering v First National Bank of SA Ltd

• Jurisdiction: South Africa

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...