Big Dutchman (South Africa) (Pty) Ltd v Barclays National Bank Ltd

• Jurisdiction: South Africa
• Judge: Philips AJ
• Judgment Date: 13 June 1978
• Court: Witwatersrand Local Division

Big Dutchman (South Africa) (Pty) Ltd v Barclays National Bank Ltd
1979 (3) SA 267 (W) [*]

1979 (3) SA p267

Citation	1979 (3) SA 267 (W)
Court	Witwatersrand Local Division
Judge	Philips AJ
Heard	June 1, 1978; June 2, 1978; June 3, 1978; June 4, 1978; June 5, 1978; June 6, 1978; June 7, 1978
Judgment	June 13, 1978

Flynote : Sleutelwoorde F

Company — Management of — Managing director — Persons dealing with managing director entitled to assume he has the powers he purports to have — Subject to proviso that they have not seen or heard anything to put them on their inquiry.

G Banker — Duty of customer to his bank — Such a limited one — No duty owed to bank to check bank statements.

Banker — Customer company's mandate to bank stating against what signatures bank entitled to credit customer's account — Customer's H accountant fraudulently making out and signing a form on behalf of customer for payment eventually into his own company instead of to customer's creditors — Each such form accompanied by a cheque signed by customer's authorised signatory in favour of bank — Form directing what creditor to be paid — Mandate construed as requiring authorised signature to form also — Bank failing to establish ostensible authority arising from course of conduct — All requisites of estoppel required to establish such defence and bank failing to

1979 (3) SA p268

establish either — Bank not entitled to debit customer's account and directed to credit it with amount of its loss. A

Headnote : Kopnota

The principle that persons dealing with the managing director of a company are entitled to assume that he has the powers he purports to have is subject to the proviso that the person relying on such authority of the managing director has seen or heard nothing to put him on enquiry as to the validity of his assumption as to that authority.

A customer's duty to his banker is a limited one. Save in respect of B drawing documents to be presented to the bank and in warning of known or suspected forgeries he has no duty to the bank to supervise his employees, to run his business carefully, or to detect frauds.

A customer of a bank has no duty to the bank to check his bank statements.

In order to pay its creditors outside South Africa, plaintiff company needed the permission of the Exchange Control authorities and it effected payment of those parties by means of bank drafts purchased from its bank C in South Africa, the defendant, or telegraphic transfers effected by the defendant. In terms of plaintiff's mandate to the bank, the bank was only authorised at act on the signature of the managing director or the sales manager. In the case of a company in Holland of which it was a subsidiary and from which it purchased most of its equipment, payment often took the form of a telegraphic transfer, in which case the cheque would be signed by the managing director and would be accompanied by the customary D documentation and also by a "form 24". This was a request, or instruction, to the defendant to advise its branch or agent at a specified bank in Amsterdam by telegram or cable at the plaintiff's sole risk and expense, in terms of instructions contained in the form. The managing director had taken on one C as her accountant, in whom she had misplaced total confidence, and he had managed fraudulently to get monies paid to a bank in South Africa for the account of a fictitious company of his own by getting the managing director to sign the cheques in respect of shipping E documents which he said were from a supplier and then signing the form 24 himself. Plaintiff now sued the defendant for the amount of its loss, claiming that the defendant had contravened its mandate by paying out against the signature of C on the form 24, on which his was an unauthorised signature in terms of the mandate. Defendant raised three defences, accepting that the onus of proof was on itself, viz (1) that the F effect of the mandate was that the defendant was authorised to debit the plaintiff's account provided that it did soon the strength of a cheque signed by an authorised signatory; (2) that C had been given actual authority by virtue of a tacit variation of the contract; and (3) that plaintiff was estopped from denying that C had been authorised to sign form 24's, in that he possessed ostensible authority to do so arising out of a long course of conduct.

G Held, as to (1), that a signed cheque alone in favour of the defendant obviously could not be an instruction to the defendant to transfer funds to a third party: it was only the transfer on the strength of the form 24 which resulted in the debiting of the customer's account, and the mandate required an authorised signature for that.

Held, as to (2), as the defendant had failed to prove that the managing director had been aware of what was happening and accepted it, that it had failed to establish the course of conduct between plaintiff and defendant on which it relied.

H Held, further, that the mandate stated that no one could have the powers of the board to amend it; only the managing director and the sales manager could do so. Accordingly, the plaintif could not rely on the principle that persons dealing with the managing director of a company were entitled to assume that he had the powers he purported to have.

Held, further, that, in order to establish its second defence, defendant had to establish all the requisites of an estoppel, which it had failed to do.

Held, therefore, that both defences (2) and (3) also failed and that the defendant should be directed to credit the plaintiff's account with the amount claimed, which amount it had not been entitled to debit to plaintiff's account.

1979 (3) SA p269

Case Information

Action for a declaratory order. The facts appear from the reasons for judgment.

S W Kentridge SC (with him J H Coetzee SC) for the plaintiff.

B O'Donovan SC (with him P Solomon) for the defendant. A

Cur adv vult.

Postea (June 13).

Judgment

B Philips AJ:

The plaintiff company is a subsidiary of the company known as Big Dutchman International AG which carries on business in Holland. The plaintiff carries on business in Edenvale, Transvaal, as a supplier of equipment for automation of the poultry and livestock industry. For this purpose it obtained most of its supplies from Big Dutchman International C and some from Rowlands Engineers Ltd, which I shall refer to as "Rowlands", and some from Broiler Equipment Co (which I shall term "BEC") in England.

There were other minor creditors - in the United States of America - but I do not need to specify them.

For the purposes of its business, the plaintiff maintained a bank account D with the Edenvale branch of the defendant bank. Whenever, in the course of this judgment, I shall refer to the defendant, I shall intend the reference to be to the Edenvale branch of the bank.

In order to pay its creditors outside South Africa, plaintiff needed the permission of the exchange control authorities and it effected its payments to those parties by means of bank drafts purchased from the E defendant or telegraphic transfers effected by the defendant.

On 17 February 1972 the plaintiff conferred a mandate upon the defendant, whereby it continued its banking account with the defendant. The material terms of the mandate are contained in the defendant's form 25 Dual, and read as follows:

"We hereby inform you that at a meeting of the directors of (the F plaintiff) held at Wezep, Holland, on 9 November 1971, it was resolved 'That an account be continued at the Edenvale branch of (the defendant) and that the said bank be hereby authorised and requested to pay all cheques, bills of exchange, promissory notes and other negotiable instruments purporting to be signed, made or accepted on behalf of the company, and to debit the same to the account to be kept with them by the company, whether such account be in credit or otherwise, to hold the company liable on all cheques, bills of exchange, promissory notes, G other negotiable instruments and all agreements, indemnities and documents in connection with all the usual banking transactions, including amongst others the lodging and withdrawal of moneys on deposit or savings accounts, the pledging by the company of any of its property, the issue of letters of credit, drafts and telegraphic transfers, provided that such cheques, bills, promissory notes or other documents are signed for the company by officials duly appointed by resolution of directors from time H to time and advised to you on the appropriate bank form; that a copy of this resolution be furnished to the said bank at the said branch; and that it remain in force until the receipt by the said bank at the said branch of a copy of a resolution of the board of directors rescinding or amending the same, such copy to be certified by a director and the sales manager.

We accordingly hand you herewith:

(1)

Copy of our memorandum and articles of association.

(2)

A full list of the present persons authorised to sign with their respective signatures.

(3)

The last balance sheet and report of the company."

1979 (3) SA p270

Philips AJ

This mandate was signed by Mrs E Sheldon as director and by Mr J Sheldon A as sales manager. A further document was annexed giving the names of the persons authorised to sign under the resolution, and enclosing specimens of their respective signatures. It added that all documents would be signed by any one director or manager alone and the names of the persons specified as having authority to sign were "Mrs Estelle Sheldon - managing director" and "John David George Sheldon - sales manager".

B This form, which was also a printed form, prepared by the defendant and described as "Form 25 (Supp) Dual", was also dated 17 February 1972 and signed by the same persons as had...