Navidas (Pty) Ltd v Essop; Metha v Essop

• Jurisdiction: South Africa
• Judge: Corbett CJ, Hefer JA, Kumleben JA, Nicholas AJA, Mahomed AJA
• Judgment Date: 01 June 1994
• Citation: 1994 (4) SA 141 (A)
• Hearing Date: 25 February 1994
• Court: Appellate Division
• Docket Number: 426/1992 and 427/1992

Hefer JA:

These appeals were heard together and may conveniently be dealt J with in one judgment.

Hefer JA

A The appellants, to whom I shall refer as 'Navidas' in the one case and 'Metha' in the other, were the plaintiffs in the Court a quo where their claims for provisional sentence were dismissed with costs. The summonses were substantially identical: in each it was alleged that the plaintiff was the holder in due course, alternatively the holder, of a cheque drawn B by the respondent which was duly presented for payment but dishonoured after the respondent had countermanded payment. In each case the respondent denied that the cheque had been properly presented and in the Navidas matter he also denied that the plaintiff was the holder or the holder in due course. The trial Court found that the cheques had not been C properly presented and dismissed the claims but granted the plaintiffs leave to appeal to this Court.

As appears from the report of the trial Court's judgment in Navidas (Pty) Ltd v Essop 1992 (3) SA 797 (D), the dispute about the presentment of the cheques arose from a system ('the clearing house system') followed by some of the commercial banks with a view to the rapid processing and collection D of cheques. It is common cause that the system is correctly described as follows in Malan et al Provisional Sentence on Bills of Exchange, Cheques and Promissory Notes at 105:

'In some areas, certain cheques deposited for collection are sent via the clearing house to a central processing office of the drawee. This processing office is computer linked with the branches on which the E cheques are drawn. The implementation of this process makes it unnecesary to physically present cheques at the drawee branch for payment. Whether sufficient funds are available for payment and whether payment has been countermanded are matters that can be determined at the processing office through the computer link. If it is discovered that there is a ground on which payment should be refused, the cheque is then returned directly to F the collecting bank. It follows that these cheques are never physically presented for payment at the bank branch on which they are drawn.'

It is also common cause that the cheques with which we are presently concerned were never physically presented at the Westville Mall, Durban branch of Nedbank on which they were drawn; they were merely sent via the clearing house to Nedbank's central processing office and returned to the G collecting bank marked 'payment stopped'.

What we have to decide first is whether the Court a quo's finding that this did not constitute due presentment is correct.

In terms of s 45(1)(a) read with s 71 of the Bills of Exchange Act 34 of 1964, as amended ('the Act'), a cheque is dishonoured by non-payment if it H is duly presented for payment and payment is refused or cannot be obtained. In order to discover what due presentment is, one has to turn to s 43 (bearing in mind that a cheque is defined in s 1 as a bill drawn on a banker payable on demand). This section commences with a direction that, subject to the provisions of the Act, a bill must be duly presented for I payment in accordance with the provision of ss (2). Subsection (2) contains a number of rules relating to (1) the time when, (2) the place where, (3) the person by whom and (4) the person to whom presentment is to be made. The relevant provisions read as follows:

'(2) A bill is duly presented for payment if it is presented in accordance with the following rules, namely -

(a)

J . . .

Hefer JA

(b)

A . . .

(c)

presentment must, subject to the provisions of ss (5), be made by the holder, or by some person authorised to receive payment on his behalf, at a reasonable hour on a business day, at the proper place within the meaning of ss (4), either to the person designated by the bill as payer, or to some person authorised to pay or refuse payment on his behalf, if with the exercise of reasonable diligence such person can be found there; B

(d)

. . .

(e)

. . . .'

Subsection (4) provides that

C '(a) bill is presented at the proper place if -

(a)

when a place of payment is specified in the bill, the bill is presented there'.

Apart from these requirements reference should be made to s 50(4), which reads as follows:

'(4) When a holder of a bill presents it for payment, he shall exhibit the bill to the person from whom he demands payment, and when a bill is paid, D the holder shall forthwith deliver it up to the party paying it.'

It emerges clearly from these provisions that, when a place of payment is specified in a cheque, it must, apart from other requirements, be presented at the specified place in the manner prescribed in s 50(4). Where it is drawn on a particular branch of a bank the specified place is E obviously the place of business of the branch in question (Malan et al (op cit at 105); cf Discounting and Shipping Co (Pty) Ltd v Franskraalstrand (Pty) Ltd and Others 1962 (2) SA 559 (W) at 560F-561A). Bearing this in mind there can, in my view, be no doubt that the clearing house system, useful though it may be commercially, does not provide for presentment in accordance with the provisions of the Act, which plainly envisage the F physical exhibition of a cheque to the staff of the drawee bank at its place of business. In effect, the system involves no more than an electronic communication to the processing office that a particular cheque will or will not be met if and when presented. Seeking and obtaining that information, whether it be by electronic or by any other means, does not constitute presentment in terms of the Act. G

Faced with this difficulty, appellants' counsel argued that s 43 must be construed in accordance with what he called the established usage and practice of bankers, not only in this country, but in many others as well. 'Presentment' in s 43, he submitted, must mean presentment according to mercantile usage. This is indeed a bold submission because it requires in H effect that important provisions of the Act be ignored for no better reason than that they do not conform to what is said to be an established trade usage. This is not a case like the one postulated in Lonrho Ltd v Salisbury Municipality 1970 (4) SA 1 (RA) at 4A-D where the Legislature uses a term which has acquired a recognised technical meaning in a particular trade. (Even in such a case the technical meaning will only I prevail if it is clear that the term was used in that sense by the Legislature: Kommissaris van Doeane en Aksyns v Mincer Motors Bpk 1959 (1) SA 114 (A) at 119C-E.) As I understand the position, the practice with which we are presently concerned developed (at least in this country) after the passing of the Act as a result of the advance of modern J technology (cf F R Malan

Hefer JA

'The Liberation of the Cheque' 1978 TSAR 107 at 109). The line of reasoning in the cases just referred to can accordingly not apply. Moreover, the Legislature did not leave the word 'presentment' undefined. On the contrary, it provided an elaborate set of mandatory rules for the due presentment of a bill. These rules cannot simply be ignored and the Court cannot, under the guise of interpretation or in any other manner, negate their effect by recognising another form of presentment which does not comply with the Legislature's explicit directives. I accept that modern technology has revolutionised the banking industry and that there may be an urgent commercial need for giving legal effect to practices that have developed as a result thereof. However, this does not call for the abrogation by the Courts of the existing statutory provisions (Volkskas Bank Bpk v Bankorp Bpk (h/a Trust Bank) en 'n Ander 1991 (3) SA 605 (A) at 611I-J). It is, after all, not the function of a Court to legislate; the remedy obviously lies elsewhere.

D To this I wish to add that I am by no means convinced that the requirements of the Act for the due presentment of a cheque do indeed - as appellants' counsel insisted - constitute a serious impediment to the smooth functioning of the system followed by the banks. A cheque, it will be recalled, is payable on demand. Due presentment on any particular date E is accordingly not required and there is nothing to prevent presentment in the prescribed manner at the correct place after a 'dishonoured' cheque has been returned to a collecting bank by the clearing house. In every such case it is for the holder to decide whether the cheque should be properly presented in order to enable him to sue on it.

For these reasons I am of the view that the cheques were not properly presented in the present case.

F Appellants' counsel submitted as an alternative that presentment of the cheques was in any event not required. Before the validity of the submission is considered, it is necessary to deal with an application to amend the summons and the grounds of appeal in each case.

The grounds listed in the notices of appeal are directed at the Court a G quo's finding that the cheques were not properly presented. This is understandable since the possibility that presentment for payment might have been dispensed with was not mooted in that Court. After the appeals had been noted judgment was delivered in another case in the Durban and Coast Local Division which has since been reported sub nom Commercial H Union Trade Finance v Republic Bottlers of SA (Pty) Ltd t/a Booth's Bottle Store 1992 (4) SA 728 (D). Only when they became aware of this judgment did it occur to the appellants' legal representatives that presentment of the present cheques might not have been necessary. The result was that notices of motion were filed with the Registrar of this Court before the hearing of the appeals in which the respondent was informed that I application would be made at the...