Indac Electronics (Pty) Ltd v Volkskas Bank Ltd

• Jurisdiction: South Africa
• Citation: 1992 (1) SA 783 (A)

Indac Electronics (Pty) Ltd v Volkskas Bank Ltd
1992 (1) SA 783 (A)

1992 (1) SA p783

Citation	1992 (1) SA 783 (A)
Court	Appellate Division
Judge	Joubert JA, Hefer JA, Vivier JA, Goldstone JA and Van den Heever JA
Heard	September 20, 1991
Judgment	November 29, 1991

Flynote : Sleutelwoorde G

Bills of exchange — Cheque — Liability of collecting banker — Liability of to true owner of cheque — No reason in principle why collecting banker should not be held liable under extended lex Aquilia for negligence to true owner of cheque, provided that all elements or H requirements of Aquilian liability met — Facts to be established in such an action set out — Prima facie indications of existence of duty on collecting banker to prevent loss to true owner might be rebutted at trial after an evaluation of the evidence.

Headnote : Kopnota

I In view of the decision in Administrateur, Transvaal v Trust Bank van Afrika Bpk1979 (3) SA 824 (A) the decision in Yorkshire Insurance Co Ltd v Standard Bank of SA Ltd 1928 WLD 223 can no longer be regarded as authority for the proposition that no delictual action lies against a collecting banker who has negligently caused loss to the true owner of a cheque. There can now be no reason in principle why a collecting banker should not be held liable under the extended lex Aquilia for negligence to the true owner of a cheque, provided that all the elements or J requirements of Aquilian liability have been met.

1992 (1) SA p784

A The above principle having been stated by the Court in an appeal from a decision upholding an exception to a claim by the true owner of a cheque against a collecting banker for the loss sustained by the owner of the cheque as a result of the collecting banker having paid the proceeds of the cheque to a person who was not entitled to receive it, the Court went on to discuss various factors in favour and against the recognition of the existence of a legal duty on the part of a collecting banker to the true owner of a lost or stolen cheque to avoid causing him pure B economic loss by negligently dealing with such cheque. The Court stated that, on balance, the factors favouring the recognition of such a duty prevailed, but, at the stage of deciding an exception, a final evaluation and balancing of the relevant policy considerations which the Court had mentioned should not be undertaken. The Court held that it was sufficient for the purpose of deciding the appeal to say, firstly, that the lex Aquilia provided a basis upon which a collecting banker might be held liable in negligence to the true owner of a lost or stolen cheque, C and, secondly, that there were considerations of policy and convenience in the present case which prima facie indicated the existence of a legal duty on the part of the collecting banker to prevent loss by negligently dealing with the cheque in question. The Court pointed out further that such prima facie indication might be rebutted by evidence which the defendant might lead at the trial, duly tested and evaluated in the light of countervailing evidence which the plaintiff might lead.

D In an appeal from a decision in a Provincial Division upholding the respondent's exception to the appellant's claim, the Court held that in a case such as the instant case (where the appellant had alleged that it was the true owner of a cheque, drawn by a branch of the respondent bank in favour of the appellant or order - the payee being specified as 'Indac Electronics' - and crossed and marked 'not negotiable'; that such cheque had not been indorsed either in blank or specially in favour of one L; that another branch of the respondent bank had received the E cheque for collection, not on the appellant's behalf, but on behalf of L, who was a customer at the latter branch; and that the latter branch had paid the proceeds of the cheque to L despite the fact that he had no right to receive such payment), a delictual action for damages would be available to a true owner of a cheque who can establish (1) that the collecting banker received payment of the cheque on behalf of someone who was not entitled thereto; (2) that, in receiving such payment, the collecting banker acted (a) negligently and (b) unlawfully; (3) that the F conduct of the collecting banker caused the true owner to sustain loss; and (4) that the damages claimed represent proper compensation for such loss.

Case Information

Appeal from a decision in the Transvaal Provincial Division (Eloff DJP). The issues appear from the judgment of Vivier JA.

N D G Maritz for the appellant: The respondent, as collecting banker, G was obliged (under a duty of care towards the appellant) to satisfy himself that it had a customer who corresponded with the ostensible holder ex facie the cheque, and that the cheque had been deposited for the account of such customer. See Worcester Advice Office v First National Bank of SA Ltd1990 (4) SA 811 (C), especially at 820B-C. Good H reasons exist for extending Aquilian liability so that a collecting banker would owe a general duty of care to the true owner of a crossed cheque to avoid causing loss to the true owner by dealing negligently with the said cheque. In Yorkshire Insurance Co Ltd v Standard Bank of SA Ltd 1928 WLD 223, Tindall J held that a collecting banker who receives payment of cheques, whether crossed or not, on behalf of a I customer who has no title thereto, is not liable to the true owner of the cheques for any loss sustained by him in consequence thereof on the ground of negligence only. At the time of this decision liability for negligence causing pure economic loss had not yet been recognised in our law, and this factor played a part in the reasoning of Tindall J. This Court accepted the existence of liability for negligence causing pure J economic loss in the matter of Administrateur, Natal v Trust

1992 (1) SA p785

A Bank van Afrika Bpk 1979 (3) SA 824 (A). The approach of Tindall J in the Yorkshire Insurance case supra was followed by South African Courts in the following decisions: Atkinson Oates Motors Ltd v Trust Bank of Africa Ltd1977 (3) SA 188 (W); Worcester Advice Office v First National Bank of SA Ltd (supra). The Courts in Zimbabwe have, however, held that a collecting banker does have a general duty of care to the true owner B of a cheque. See Rhostar (Pvt) Ltd v Netherlands Bank of Rhodesia Ltd 1972 (2) SA 703 (R); Zimbabwe Banking Corporation Ltd v Pyramid Motor Corporation (Pvt) Ltd 1985 (4) SA 553 (ZS); UDC Ltd v Bank of Credit and Commerce Zimbabwe Ltd 1990 (3) SA 529 (ZH). The question has also been the subject of debate by academic writers. See Prof Cowen in his L C C Steyn Memorial Lecture 'The Liability of a Bank in the Computer Age in Respect of a Stolen Cheque' 1981 TSAR 193; Prof Pretorius 'Professionele Aanspreeklikheid, Die Invorderingsbank en Regshervorming' (1987) 9 Moderne Besigheidsreg 56; Malan et al Bills of Exchange, Cheques and Promissory Notes; Prof Tager 'The Collecting Banker's Liability to the True Owner of a Lost or Stolen Cheque' (1979) 96 SALJ 372; Malan 1978 De D Jure 326; Malan 1979 De Jure 31. Good reasons exist for the extension of the Aquilian liability to recognise a duty of care on the part of a collecting banker towards the true owner of a cheque in the circumstances of the instant case, alternatively to recognise a general duty of care by a collecting banker towards the true owner of a crossed cheque. In this regard reference is made to the arguments advanced in E support of the recognition of such a duty of care in the Zimbabwe Court decisions referred to above, and in the decision in the matter of Worcester Advice Office (supra).

A W Mostert SC (with him H T Venter) for the respondent: In upholding F the respondent's exception to the appellant's claim, Eloff DJP felt himself bound to follow the decision in Atkinson Oates Motors Ltd v Trust Bank of Africa Ltd1977 (3) SA 188 (W), holding that he could only depart from it if he could state that it was clearly wrong. In the circumstances, he found himself unable to conclude that the judgment in the latter case was clearly wrong. The Court in Atkinson Oates followed the decision in Yorkshire Insurance Co Ltd v Standard Bank of SA Ltd G 1928 WLD 223, which was recently confirmed in Worcester Advice Office v First National Bank of SA Ltd1990 (4) SA 811 (C). The Court a quo declined to follow the Zimbabwe cases in which it was held that a collecting bank owes a duty of care to the true owner of a lost or stolen cheque to collect payment without negligence. The Zimbabwe cases H are the following: Rhostar (Pvt) Ltd v Netherlands Bank of Rhodesia Ltd 1972 (2) SA 703 (R); Philsam Investments (Pvt) Ltd v Beverley Building Society and Another 1977 (2) SA 546 (R); Zimbabwe Banking Corporation Ltd v Pyramid Motor Corporation (Pvt) Ltd 1985 (4) SA 553 (ZS); UDC Ltd v Bank of Credit and Commerce Zimbabwe Ltd 1990 (3) SA 529 (ZH). The I matter is discussed by the following authors: Pretorius 'Professionele Aanspreeklikheid, die Invorderingsbank en Regshervorming' (1987) 9 Moderne Besigheidsreg 56; De Beer 'Die Aanspreeklikheid van die Invorderingsbankier teenoor die Ware Eienaar van 'n Tjek' (1984) THRHR 360; Malan 'Professional Responsibility and the Payment and Collection of Cheques' 1987 De Jure 326; 1979 De Jure 31 and 363; Sinclair J 'Fictitious and Non-existing Payees - the English

1992 (1) SA p786

A Heritage' (1973) 90 SALJ 383; Tager 'The Collecting Banker's Liability to the True Owner of a Lost or Stolen Cheque' (1979) 96 SALJ 372; Van Zyl 'Tjekretensie in die Suid-Afrikaanse Wisselreg' 1988 Moderne Besigheidsreg 15 and 79, 85.

The decision in Yorkshire Insurance should only be departed from if it B is clearly wrong. For more than 60 years this decision has been followed and acted upon: adhering to this...