DI Giulio v First National Bank of South Africa Ltd

• Jurisdiction: South Africa
• Citation: 2002 (6) SA 281 (C)

DI Giulio v First National Bank of South Africa Ltd
2002 (6) SA 281 (C)

2002 (6) SA p281

Citation	2002 (6) SA 281 (C)
Case No	A1080/2001
Court	Cape Provincial Division
Judge	Hlophe JP and Van Zyl J
Heard	June 14, 2002
Judgment	June 19, 2002
Counsel	D L van der Merwe for the appellant.; H L du Toit for the respondent.

Flynote : Sleutelwoorde F

Banker — Relationship between banker and client — Payment of cheque not bearing authorised signatures — Bank acting outside client's G mandate — In principle not entitled to debit client's account — Client and bank free to agree to deviate from authorisation requirements expressly or tacitly, or subsequently ratify any deviation — Bank may, at own risk, honour ostensibly unauthorised cheques in expectation of approval or ratification of payment — Such conduct, though constituting H breach of mandate, not per se invalidating payment.

Principal and surety — Action against surety — Onus — Plaintiff must prove at outset existence of contract of suretyship and that causa debiti one in respect of which defendant undertook to be liable — If defendant should place amount of claim (composition or calculation) in issue, plaintiff to supply necessary I evidence to substantiate amount — If defendant should admit liability or amount of claim, not necessary for plaintiff to lead evidence in respect thereof — Should surety raise 'special' defence such as illegality, fraud, lack of contractual capacity or lack of authority, required to present evidence in support. J

2002 (6) SA p282

Principal and surety — Surety — Discharge of — Prejudice to surety — Principle that prejudicial conduct releasing surety subject to A qualification that prejudice must be result of breach of legal duty emanating from principal agreement or deed of surety — Alleged prejudice should, in light of considerations of justice, fairness, reasonableness, good faith and public policy, constitute real and substantial prejudice resulting in undue increase of contractual burden of surety. B

Headnote : Kopnota

The true nature of the relationship between banker and client is, insofar as the client instructs the bank to render banking services when required, and the bank agrees to carry out these instructions, one of mandate. Though it is true that the rights and obligations arising from this form of mandate may be of a complex nature, this does not C justify its classification as a contract sui generis. (Paragraph [20] at 289D - F.)

Authorisation to sign a cheque on behalf of a client must be contained in the contract of mandate underlying the relationship between banker and client. If a list of persons with such signing powers is furnished to the bank, it becomes part of the mandate. Should a cheque then not bear an authorised signature or signatures, the bank would be acting in D breach of the terms of the mandate should it decide to honour such cheque. (Paragraph [22] at 290B - C/D.) A deviation from the list of organised signatories does not, however, mean that payment of the cheque is necessarily invalidated. (Paragraph [24] at 290E/F.) The parties to a contract of mandate are free to amend or deviate from authorisation requirements relating to the signing of cheques, provided E such amendment or deviation is consensual. This may be done formally, orally, or tacitly (by conduct in the form of acts or omissions). If there should be no such consensus, the parties may subsequently ratify any deviation from the terms of the mandate. In any event the bank may, at its own risk, honour ostensibly unauthorised cheques in the expectation that their payment will be approved or ratified. This may, in essence, constitute a breach of the mandate, but F it will not per se invalidate the payment of the cheque. (Paragraph [25] at 291A/B - C.)

In any claim against a surety the plaintiff must, at the outset, prove the existence of a valid contract of suretyship. He must then prove that the source of indebtedness (causa debiti) of the agreement is one in respect of which the defendant undertook to be liable. Finally he must prove that the indebtedness is due and payable. G If the defendant should place the amount of the claim, that is its composition or calculation, in issue, the plaintiff must present the evidence required to substantiate the amount of the claim. If the surety should admit liability under the suretyship agreement, the plaintiff would not be required to lead evidence in this regard. If the amount of the claim should likewise be admitted, no evidence of its composition or calculation would be required. If the surety should, H however, deny liability on the basis that the principal debt was not due, the principal would have to prove that it was. On the other hand, if the surety should raise a 'special' defence such as illegality, fraud, lack of contractual capacity or lack of authority, he would be required to present evidence in support thereof. Once the party bearing the onus of proof has made out a prima facie case, his opponent is burdened with an onus of rebuttal. I Should he fail to discharge this onus, prima facie evidence would be regarded as sufficient evidence for purposes of discharging the main onus of proof, a fortiori if he should have personal knowledge of acts or information relevant to the discharge of such onus, but fails or refuses to testify. Under such circumstances an adverse inference may be drawn against him. (Paragraphs [28] and [29] at 291F - J.) J

2002 (6) SA p283

In general terms a surety may be fully or partially released from his obligations in terms of the suretyship agreement if he is prejudiced by A an act of, or an omission by, the creditor. This rule has, however, been qualified by legal development. (Paragraph [30] at 292B - C.) When these authorities are considered it is clear that the rule relating to the release of a surety as a result of prejudicial conduct by the creditor is rooted in equity. Equity goes hand in hand with its natural concomitants, namely justice, reasonableness, good faith and B public policy. (Paragraph [38] at 294E/F - G/H.) The qualification of the general rule enunciated in ABSA Bank Ltd v Davidson 2000 (1) SA 1117 (SCA) in para [14], namely that the surety will be released only if 'the prejudice is the result of a breach of some or other legal duty or obligation', does not create any limitation to the applicability of the said values. On the contrary, it serves to illuminate the practical matrix within which the rule must apply. The C prejudice in question will, in general, emanate from a breach of either the principal agreement or the agreement of suretyship. Such breach cannot, however, be viewed in isolation, but must be assessed within the broader context of the relevant facts and circumstances as a whole. This may include a consideration of additional documentation or evidence relating to the allegedly breached agreement, and should not D be restricted to the strict parameters of the initial agreement. (Paragraph [39] at 294G/H - I/J.) An increase in the contractual burden of the surety will, generally speaking, be prejudicial to the surety. It may, however, be appropriate to add a rider that the increase in the surety's burden should be substantial, unreasonable or undue. Thus, the prejudice required for a successful defence of prejudicial conduct justifying release from a suretyship agreement may E be described as follows: with reference to all the facts and circumstances, and with due regard to considerations of justice, fairness, good faith and public policy, the alleged prejudice must constitute real and substantial prejudice that has the effect of unduly increasing the contractual burden of the surety. (Paragraphs [40] and [41] at 294J - 295C/D.) F

Cases Considered

Annotations

Reported cases

ABSA Bank Ltd v Davidson 2000 (1) SA 1117 (SCA): dictum in para [19] applied

ABSA Bank Bpk v Janse van Rensburg 2002 (3) SA 701 (SCA): referred to G

Bank of India v Trans Continental Commodity Merchants and Patel [1983] 2 Lloyd's Rep 298 (CA): dictum at 301 - 2 applied

Commissioner of Customs and Excise v Bank of Lisbon International Ltd and Another 1994 (1) SA 205 (N): dictum at 213H - 214C approved

Fry and Another v First National Bank of South Africa Ltd 1996 (4) SA 924 (C): dictum at 927G - 931J applied H

Galante v Dickinson 1950 (2) SA 460 (A): dictum at 465 applied

G S George Consultants and Investments (Pty) Ltd and Others v Datasys (Pty) Ltd 1988 (3) SA 726 (W): dictum at 735A - 736H approved

Hasselbacher Papier Import and Export (Body Corporate) and Another v MV Stavroula 1987 (1) SA 75 (C): dictum at 79F - 80C applied

Investec Bank Ltd v Lewis 2002 (2) SA 111 (C): dictum at 116G - 117C applied I

Kunneke v Eerste Nasionale Bank van Suidelike Afrika Bpk 1997 (3) SA 300 (T): dicta at 307B, 311B and 314B - C applied

Lazarus v Gorfinkel 1988 (4) SA 123 (C): dictum at 134B - 135C applied

Liebenberg v ABSA Bank Ltd t/a Volkskas Bank [1998] 1 B All SA 303 (C): referred to J

2002 (6) SA p284

London Intercontinental Trust Ltd v Barclays Bank Ltd [1980] 1 Lloyd's Rep (QB, Com Ct): dictum at 249 A applied

London Joint Stock Bank Ltd v MacMillan and Arthur [1918] AC 777 (HL): dictum at 789 applied

Minister of Community Development v SA Mutual Fire & General Insurance Co Ltd 1978 (1) SA 1020 (W): dictum at 1024A applied

Moreriane v Trans-Oranje Finansierings- en Ontwikkelingskorporasie Bpk 1965 (1) SA 767 (T): dictum at 769G B applied

New Zealand Construction (Pty) Ltd v Carpet Craft 1976 (1) SA 345 (N): dictum at 349G - H applied

Senekal v Trust Bank of Africa Ltd 1978 (3) SA 375 (A): dictum at 382H - 383F applied

Spur Steak Ranch Ltd v Mentz 2000 (3) SA 755 (C): dicta at 764B and 765D - I approved and applied C

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