More Guidelines on the Negligence of the Collecting Bank

• Jurisdiction: South Africa
• Author: JT Pretorius
• Pages: 359-368
• Published date: 25 May 2019
• Date: 25 May 2019

More Guidelines on the Negligence

of the Collecting Bank

JT PRETORIUS*

University of South Africa

When, some years ago, we commented on the future potential liability

of a collecting bank to the owner of a lost or stolen cheque, we predicted

that such liability will focus on the question of negligence.' A collecting

bank should exercise reasonable care in the collection of a cheque and

when it opens a new account for a prospective client.

2

Recent cases dealt

with both aspects.

Energy Measurements (Pty) Ltd v First National Bank of South Africa

Ltd

3

deals with the duties of the collecting bank when it opens a new

account for a prospective client. There can be little doubt that this is an

important judgment — it may yet prove to be very influential because

of the important guidelines it contains. After a fairly extensive review of

the relevant South African and English case law,

4

the court identified the

following 'compelling' considerations for the imposition of a duty of care

on a collecting bank when it opens a new account for a prospective client:

(a)

The risk that an account may be opened for fraudulent purposes to

serve as a conduit for stolen cheques is clear and recognized Once an

account has been opened, channeling a stolen cheque through such

an account becomes relatively easy.

(b)

Opening an account is a

necessary prerequisite to obtain payment in respect of stolen cheques

which are drawn in favour of a specific payee

s

and marked non-

transferable. The absence of an account which can serve as a conduit for

such cheques would make it extremely difficult to obtain the proceeds of

their theft.

(c)

A bank is free to accept or decline the custom of a client.

By opening an account and making the facilities of the bank available to

the customer, it creates a potential risk to the public, especially to owners

of cheques, if that account is later misused for fraudulent purposes.

(d)

Unlike the time constraints under which collecting banks have to

operate when they process high volumes of cheques, they do not operate

under such constraints or pressure when they have to decide whether or

* Blur (Pret) LLB (Natal) LLM (UCT) LLM (London) LLD (RAU). Professor in Banking

Law in the Department of Mercantile Law, University of South Africa.

FR Malan & JT Pretorius 'Liability of the Collecting Bank: More Clarity?' (1994) 6

SA Merc

LJ

218 at 224.

2

See

Malan on Bills of Exchange, Cheques and Promissory Notes in South African Law

3 ed

(1997) by FR Malan & JT Pretorius para 248 pp 441-444 ('Malan').

3

[2000] 2 All SA 396 (W).

4

At 421-422.

5

Unfortunately, the court referred to the 'drawee' in stead of the 'payee' (at 422d).

359

(2000) 12 SA Merc LJ 359

© Juta and Company (Pty) Ltd