King v Cohen Benjamin and CO

• Jurisdiction: South Africa
• Citation: 1953 (4) SA 641 (W)

King v Cohen Benjamin and CO
1953 (4) SA 641 (W)

1953 (4) SA p641

Citation	1953 (4) SA 641 (W)
Court	Witwatersrand Local Division
Judge	Steyn J
Heard	September 9, 1953
Judgment	September 9, 1953

Flynote : Sleutelwoorde

A Money counts — Condictio indebiti — Obligation to restore arises from rule of equity — No one to be enriched to detriment of another — Obligation does not extend beyond person who received payment.

Headnote : Kopnota

Where payment is made of money which is not owing, the person who B receives it bona fide is not a party to an agreement or delict, out of which an obligation to restore arises. This obligation arises merely from a rule of equity which prescribes that no one is to be enriched to the detriment of another, and it does not extend beyond the enrichment of the person who received the payment. C

Case Information

Action for the payment of a sum of money. The facts appear from the reasons for judgment.

R. S. Welsh, for the plaintiff: Benjamin knew when he received the cheque that the plaintiff intended it to be held in trust by the D defendants, who are accordingly liable to account to the plaintiff for the proceeds. Alternatively, even if the Court is not satisfied on the evidence that Benjamin had that knowledge, the condictio indebiti lies against the defendants for the recovery of the money. There was a payment of money by the plaintiff to the defendants; the money was not E due to the defendants; and the plaintiff made the payment in the erroneous but genuine and reasonable belief that it was due, that the defendants were the auditors of the company and that they administered a secured trust account into which the money would be paid. See Le Riche v Hamman, 1946 AD 648; Frame v Palmer, 1950 (3) SA 340; Union F Government v National Bank, 1921 AD 121 at p. 126; Wessels on Contract (2nd ed.), paras. 3688 - 3690. The onus is therefore on the defendants to prove circumstances which absolve them from liability to repay the money; Le Riche v Hamman, supra at p. 656.

G The belief of the defendants that they were entitled to pay the money to Pabst was occasioned by the fraud of Pabst and not by any negligence or breach of duty on the part of the plaintiff. See Halsbury Laws of England, Vol. 23 (2nd ed.,), para. 240; Larner v L.C.C., 1949 (1) A.E.R. 964; Durban Corporation Superannuation Fund v Campbell, 1949 (3) SA 1057; Wessels, paras. 3688 - 3690. The plaintiff owed no duty to H protect the defendants against the possibility that Pabst would commit this fraud: see Union Government v National Bank, supra at pp. 130 - 1, 138; Sprinz v Rayton Diamonds Ltd., 1926 W.L.D. 23 at pp. 37 - 8, 39 - 40; Broekman v T.C.D. Motors (Pty.) Ltd., 1949 (4) SA 418 at p. 425; Farquharson Bros. & Co v King, 1902 A.C. 325 at pp. 335 - 6; London Joint Stock Bank v Macmillan and Arthur, 1918 A.C. 777 at pp. 815 - 6; Slingsby v District Bank Ltd., 1932 (1) K.B.

1953 (4) SA p642

544 at p. 560. Nor have the defendants established a case of ostensible authority or estoppel. The plaintiff owed them no duty; nor did he hold Pabst out to them as the owner of the cheque; and Benjamin admits that he did not regard Pabst as the agent of the plaintiff for any purpose: A see Halsbury, Vol. 1 (3rd ed.), para. 480; Vol. 13 (2nd ed.), paras. 541, 546, 560 - 2, 568 - 9, 570 - 1; de Wet on Estoppel, Chap. IV; van Blommestein v Holliday, (1904) 21 S.C. 11 at p. 17; United SA Association v Cohn, 1904 T.S. 733; Hartogh v National Bank, 1907 T.S. 1902; Union Government v National Bank, supra; Morum Bros. Ltd. v. B Nepgen, 1916 CPD 392; Bold v Cooper, 1949 (1) SA 1195; Broekman's case supra.

Jones Ltd v Waring & Gillow Ltd., 1926 A.C. 670, is on all fours with the present case, save for the somewhat peculiar findings as to agency in that case. In the present case Pabst, if he was an agent at all, C merely had authority to deliver the cheque to the defendants and to inform them of the purpose of the payment. The plaintiff would not have been liable ex delicto for the fraud which, according to Benjamin, was perpetrated upon the defendants by Pabst: see Colonial Mutual Life Assurance Society Ltd v Macdonald, 1931 AD 412; Ravene Plantations D Ltd v Estate Abrey, 1928 AD 143 at pp. 153 - 4. Pabst had no actual authority to do what he did, nor can the defendants now rely upon ostensible authority, since Benjamin did not regard Pabst as the agent of the plaintiff or deal with him as such: see Monzali v Smith, 1928 E A.D. 382 at p. 385; Quinn & Co. Ltd v Witwatersrand Military Institute, 1953 (1) SA 155; Halsbury, Vol. 1 (3rd ed.), para. 476; Vol. 13 (2nd ed.), para. 556.

The plaintiff paid the money to the defendants as trustees, not as agents: he intended them to hold it adversely to the company on whose F behalf Pabst purported to act: see McCullogh v Fernwood Estate Ltd., 1920 AD 204 at p. 209. The fact that the defendants regarded themselves as Pabst's agents to receive the money on his behalf, and that they accounted to him for it under the erroneous belief that they were entitled and obliged to do so, is no defence to the plaintiff's G claim, for their mistake was not caused by a breach of duty on the part of the plaintiff. It is only where the recipient of the money is known to the plaintiff to be an agent for a third party in receiving it that the condictio indebiti against the agent is barred. The plaintiff made no payment either to Pabst or to the company and he cannot therefore H bring the condictio indebiti against either of them: see Dig. 12.6.49; Grotius, 3.30.5; Holl. Cons. 4. 351; Schorer, Note 456; Voet, 12.6.11; Wessels, paras. 3697 - 9; Frame v Palmer, supra; Sadler v Evans(1766) 98 E.R. 34; Buller v Harrison(1777) 98 E.R. 1243; Holland v Russell(1861) 121 E.R. 773; 122 E.R. 365; Bavins and Sims v London and South Western Bank, 1890 (1) Q.B. 270 at p. 278; Foundation Co. of Ontario Ltd v Bertram, 1947 (4) D.L.R. 901.

The fact that in the result the defendants have not been enriched

1953 (4) SA p643

by or profited from the transaction is immaterial. Save in the case of minors, the mere receipt of the money is a sufficient enrichment unless the plaintiff is in law responsible for the fact that the defendants have parted with it: see Grotius, 3.30.3 and 11. It is equitable that the loss which has been caused by the defendants' own act in paying the A money to Pabst should be borne by them rather than by the plaintiff.

W. Oshry, Q.C. (with him D. S. Levy), for the defendants: The plaintiff authorised Pabst to deliver the cheque to defendants on certain terms and conditions This constituted Pabst plaintiff's agent to deal with the B cheque within the limits of his ostensible authority. See Halsbury (3rd ed.), Vol. 1, para. 475; Spencer Bower Estoppel by Representation, p. 155; Lloyd v Grace Smith, 1912 A.C. 735; Uxbridge Permanent Benefit Building Society v Pickard, 1939 (2) K.B. 253; cf. Brocklesbury v Temperance Building Society, 1895 A.C. 181. The agent failed to C communicate the condition to defendants. Cf. Watson v Russel, 122 E.R. 16. Defendants could never have inferred a claim on the agreement against plaintiff to pay money to them in trust. (Cf. Kofman v Benjamin, 1951 (1) 886 (O).) Defendants were never principals in the D transaction. If money is paid indebiti to an agent the action would be against the principal. See Wessels, Vol. 2, para. 3697; Boylis v Linden, 1913 (1) Ch.B. 133; Morrison v London County Bank, 1914 (3) K.B. 386; Halsbury, supra, para. 522. See also Digest, 50.17.206. The onus of proof on enrichment is on plaintiff. See Trahair v Webb, 1924 E W.L.D. 227; Bell v Ramsay, 1928 NPD 275. See also Le Riche v Hamman, 1946 AD 656; Wessels, paras. 3635, 3697. Once a bona fide possessor alienates property he is not liable to the true owner. See van der Westhuizen v Macdonald, 1907 T.S. 933; Leal & Co v Williams, 1906 T.S. 577.

Welsh, in reply. F

Judgment

Steyn, J.:

This is an action for payment of a sum of £1,290, with interest a tempore morae. The plaintiff's main allegation is that on G 15th January, 1951, he handed his cheque for this amount to one W. B. Pabst for delivery to the defendants, that the proceeds thereof were to be held by them on the plaintiff's behalf, that Pabst delivered the cheque to the defendants, that they credited their current banking account with the proceeds of the cheque, knowing that they were to hold the same in trust for the plaintiff, that on 8th March, 1952, he H directed them to repay the proceeds of the cheque to him and that they wrongfully and unlawfully refused to do so.

There are various alternative allegations, but it is necessary to refer only to the allegation that the plaintiff paid the amount in question to the defendants in the reasonable and bona fide but erroneous belief that the defendants had agreed to administer a certain trust account into which this amount was to be paid, that

1953 (4) SA p644

Steyn J

the defendants were not aware of the purpose for which the payment was made, that there was in fact no cause for this payment, that no sum was due or payable by the plaintiff to the defendants, and that they are therefore bound to repay this amount to him.

A The defendants admit that they received the money, but deny that they knew of any trust or of any trust account into which the money was to be paid, and allege that the defendant Benjamin, when he received the cheque, reasonably believed...