First National Bank of South Africa Ltd v Budree

• Jurisdiction: South Africa
• Citation: 1996 (1) SA 971 (N)

First National Bank of South Africa Ltd v Budree
1996 (1) SA 971 (N)

1996 (1) SA p971

Citation	1996 (1) SA 971 (N)
Case No	161/95
Court	Natal Provincial Division
Judge	Page J
Heard	September 22, 1995
Judgment	September 24, 1995
Counsel	R J Seggie for the plaintiff (excipient).; J A Booysens SC for the defendant (respondent).

Flynote : Sleutelwoorde

Banker — Cheques — Wrongful dishonour of — Damages — Scope of — Client having based claim on breach of contract — Client entitled to recover from bank such patrimonial loss as occasioned by breach and within G contemplation of parties — Only patrimonial loss recoverable — When credit essential element of client's business, rebuttably presumed that dishonour occasioned him such loss by damaging his credit — Client accordingly not required to allege specifically that he is businessman or trader, but only H that his occupation such that credit essential element in conduct of his business and that such credit injured by dishonour — Damages to be determined in light of all circumstances of case even though client unable to prove actual loss — Client also entitled to recover damages by way of actio legis Aquiliaor actio injuriarum provided conduct of bank answering to requirements for liability under said actions, and if claims brought in I same proceedings as claim for breach of contract, they are separately pleaded — In casu, client having alleged that she was 'insulted and humiliated and suffered damages in her good name, business and professional reputation' — Said allegations constituting forms of injuria J and damages not recoverable on basis of breach of contract.

1996 (1) SA p972

Headnote : Kopnota

A The plaintiff (excipient) instituted an action against the defendant (respondent) in which it claimed payment of various sums of money allegedly lent to the respondent. The defendant raised several defences in her plea, including reliance on a claim in reconvention for damages. In the said claim she alleged that she was a practising attorney; that she kept her trust account with the plaintiff; that it was a term of the B agreement between her and the plaintiff that plaintiff would honour cheques properly drawn on the account if there were sufficient funds available to meet them; that plaintiff dishonoured a cheque drawn on the account despite the fact that there were sufficient funds available to meet it; that as a result of the plaintiff's failure to meet the cheque the payee (an attorneys' firm) issued summons against her and reported her to the Law Society; that the plaintiff knew that attorneys' trust accounts had to be treated with circumspection; that defendant was (as set out in C para 21.2 of her claim in reconvention) 'greatly insulted and humiliated and suffered damages in her good name, business and professional reputation as a result of plaintiff's behaviour'; and that 'as a result of the breach of contract by the plaintiff, the defendant . . . suffered damages in the amount of R50 000'. The plaintiff brought an exception to the claim in reconvention on the grounds that the respondent was claiming sentimental damages for breach of contract without averring (a) that she was a businesswoman or trader or (b) facts establishing injuria, and that in the premises the defendant did not disclose a cause of action in her D claim. The Court pointed out that it was clear from the allegations in the claim that it was based solely upon breach of contract and not upon delict. (At 975E/F.) Counsel for the respondent relied upon the contention that there was a rule of South African law that if a plaintiff could establish 'that his occupation is such that credit is an essential element in the conduct of his business, a bank which injures his credit by refusing to honour cheques when funds are available would be liable in damages without proof of actual loss'. (Barclays Bank v Giles 1931 E TPD 31 at 35.) The said rule, which is of English origin, was followed in a fairly long line of Supreme Court decisions. It was, however, also frequently criticised by those who felt that it imported a parasitic element of tort into a claim for damages for breach of contract. The Court found itself in accord with the approach adopted by counsel for the defendant in Klopper v Volkskas Bpk 1964 (2) SA 421 (T), viz that the only damages which could properly be awarded for breach of contract or an actio ex lege Aquilia for the negligent breach of a duty of care by wrongfully F dishonouring a cheque were damages in the sense of patrimonial loss (damnum) and not damages for an injuria comprising an impairment of the customer's person, dignity, or reputation. It had there been argued that the prior cases in which damages were awarded without proof of actual loss were reconcilable with this fundamental principle of Roman-Dutch law on the basis that they were applying a presumption that a trader whose cheques were dishonoured suffered actual patrimonial loss to his business G credit. While this presumption relieved the plaintiff of the burden of having to prove the actual patrimonial loss, it did not alter the fact that it was indeed patrimonial loss which was being recovered. If the acts attributed to the bank also amounted to an injuria as recognised in our law, they could give rise to a claim based on that cause of action, which would then have to be fully and separately pleaded. (At 979E-H, 980I/J-981A.)

Held, further, that, to the extent that the abovementioned line of Supreme H Court decisions went beyond the limits postulated in the above approach, they were in conflict with the basic principles of South African law, which was in itself adequately equipped to deal fully and fairly with the consequences which could result from the wrongful dishonouring of a cheque: the engrafting of additional and incompatible remedies onto those already available in South African law was not only unnecessary but wrong in principle. (At 981A/B-C.)

Held, further, that, on this approach, a client whose cheque had been I dishonoured by his bank in breach of its contractual obligations was entitled to recover from the bank such patrimonial loss as was occasioned by the breach and was within the contemplation of the parties to the contract. When credit was an essential element in the conduct of the client's business, it had to be presumed that the dishonour occasioned him such loss by damaging his credit, and the court would then be obliged to award him an amount in respect of such loss which it had to determine in the light of all the circumstances of the case, even though the client was J unable to prove his actual loss. (At 981C/D-E.)

1996 (1) SA p973

A Held, further, that there was no reason why the above presumption should not be a rebuttable one: it was not necessary for it to be rebuttable in order to fulfil the equitable purpose set forth above, while an irrebuttable presumption could well result in injustice, since it might preclude the bank from showing that the client had no credit, or that his credit had not in fact been impaired by the dishonour, and so result in the bank being condemned to pay damages which the client did not actually suffer. (At 981F-G.)

B Held, further, that it followed from this approach that only patrimonial loss was recoverable for this form of breach of contract (as was the position with any form of breach of contract, with the possible exception of breach of promise of marriage), and in particular that no damage could be recovered for injured feelings or humiliation suffered as a result of the breach. (At 981H.)

Held, further, that although the pleading under attack in the present matter was expressly confined to breach of contract as a cause of action, C nothing prevented a client from claiming, in addition to patrimonial loss for breach of contract, those forms of damages which were recoverable by way of the actio legis Aquilia and/or the actio injuriarum or an action for defamation, subject only to two provisos: the first was that the conduct of the bank in dishonouring the cheque had to answer to the requirements of liability under these respective actions, viz wrongfulness and culpa for the lex Aquilia and wrongfulness and animus injuriandi for D the actio injuriarum or defamation; and the second was that, if claims based upon one or more of these causes of action were brought in the same proceedings as a claim for breach of contract, they had to be entirely separately pleaded, since the requirements for liability for each, and the types of damages recoverable under each, were different. (At 981I-982B.)

Held, further, as to the exception raised in the present case, that the effect of the defendant's allegations was that the damages allegedly E suffered were the result of those consequences of the breach specified in para 21.2 of her claim in reconvention (viz that she was greatly insulted and humiliated and suffered damages to her good name, business and professional reputation as a direct result of the breach), and that there was no room, in this context, for an interpretation that the damages allegedly suffered resulted from any other possible consequence of that breach. In particular, there was no allegation, express or implied, that F the amount alleged constituted or included patrimonial loss suffered as a result of injury to the defendant's credit in consequence of the breach. (At 982H/I-J.)

Held, further, that in cases such as the present, where the form of nexus between the breach and the damages (viz the consequences set out in para 21.2) was specified, it was not open to a defendant to lead evidence to establish a different form of nexus between such breach and the damages claimed. (At 983C/D.)

Held, further, that the mere fact that the defendant did not allege that G she was a businesswoman...