OK Bazaars (1929) Ltd v Universal Stores Ltd

• Jurisdiction: South Africa
• Judge: Corbett J
• Judgment Date: 12 February 1973
• Citation: 1973 (2) SA 281 (C)
• Court: Cape Provincial Division

Corbett, J.:

The pleadings in this matter and the issues raised thereby appear fully from a previous judgment given by me upon an application to C amend defendant's plea (see O.K. Bazaars (1929) Ltd v. Universal Stores Ltd., 1972 (3) SA 175 (C)). When the matter came to trial (on 6th June, 1972) there were before the Court -

(a)

an application by defendant for the postponement of the trial; and

(b)

D an application by plaintiff for the striking out of certain portions of defendant's plea or, alternatively, for an order that a certain point of law be determined before any evidence be led.

Application (a), although initially opposed, was in the end granted by consent and an order was made postponing the trial of the action to a E date to be fixed by the Registrar, the wasted costs of the application for postponement being directed to stand over for determination at the trial. Thereupon argument was heard on application (b) and judgment was reserved. Subsequently (on 12th September, 1972) further argument was heard at the request of the Court upon a number of specified points. I propose now to deal with the merits of this application.

F As appears more fully from the above-mentioned judgment, it is alleged by plaintiff in the pleadings:

(1)

that during the period 1st April, 1965, to 27th February, 1969, some 108 cheques, totalling R19 421,22, were drawn by plaintiff upon its bankers, the Standard Bank of SA Ltd.;

(2)

G that at the time of signature each of these cheques was drawn in favour of a creditor of plaintiff and in respect of an amount due to such creditor;

(3)

that at the time of signature each cheque was made payable to the named payee 'or order' and was crossed 'not negotiable';

(4)

H that after signature each cheque was altered by plaintiff's accounts clerk, Bosch, by the insertion of the words 'W. Bosch c/o' before the name of the payee in a space especially left for this purpose by Bosch when making out the cheque for signature by plaintiff's branch manager and accountant;

(5)

that thereafter Bosch, instead of delivering each cheque to the creditor to whom it had originally been made payable, stole and 'negotiated' it to defendant;

(6)

that the amount of each cheque was paid by plaintiff's bank upon being presented for payment by defendant's bank, Barclays Bank

Corbett J

Ltd., plaintiff's account with its bank being debited accordingly, and that in so doing plaintiff's bank acted in good faith and without negligence; and

(7)

A that plaintiff subsequently paid the debts in respect of which the cheques were drawn in full and, accordingly, suffered loss in the sum of R19 421,22.

Plaintiff's claim for payment of this sum of R19 421,22 from defendant is based upon the provisions of sec. 81 of the Bills of Exchange Act, 34 of 1964.

B In addition to placing various factual matters in issue, defendant's plea raises a number of defences, to which for the sake of convenience I shall refer as 'estoppels'. These are fully set out in my previous judgment (see pp. 176D to 177A). In essence these estoppels - which are to the effect that plaintiff is precluded from alleging that when defendant acquired each of the cheques it was drawn in favour C of a creditor of the plaintiff or that plaintiff was the true owner thereof, or that Bosch stole the cheques - are based upon two sets of factual allegations, viz -

(a)

that as a result of plaintiff's negligence defendant was induced D to believe that Bosch was in each case the payee of the cheque and entitled to negotiate it (see para. 1 (d), read with paras. 1 (h) and 2 (d) of the plea); and

(b)

that, inasmuch as each of the cheques acquired by defendant from Bosch was duly met by plaintiff's bank, defendant was throughout the whole period referred to in para. (1) above induced to E believe that Bosch was the true owner of the prior cheques so acquired from Bosch and by reason thereof continued to acquire the cheques from Bosch from time to time, thereby altering its position to its prejudice (see para. 3 of the plea).

It is to be noted that the negligence referred to in (a) above is not detailed or otherwise elaborated in the plea itself; nor is there any F allegation of negligence on the part of the plaintiff in respect of the facts referred to in (b) above. After the close of pleadings and in response to a request by plaintiff for further particulars for the purposes of trial in regard to the respects in which it was alleged that plaintiff was negligent, defendant made the following averments:

G 'The negligence was the following:

1.

The drawing and/or signing of the cheques in a careless manner by permitting a substantial space before the name of the payee thus facilitating unauthorised amendments. This carelessness continued for some four years in regard to a very large number of cheques.

2.

The drawing and/or signing of two cheques in respect of each single indebtedness to a creditor each cheque being for the full amount of H such indebtedness. This negligence continued for some four years in regard to a very large number of cheques thus facilitating fraudulent dealing with the proceeds of each extra cheque.

3.

Employing a dishonest accounts clerk and/or failure to supervise her activities and conduct in a proper manner.

4.

Failure to discover the above irregularities notwithstanding that they were not isolated instances but part of a regular system of fraud on the part of Mrs. Bosch which continued for almost four years, and/or failure to discover that each creditor was being paid in respect of one cheque only and that the extra cheque was being appropriated fraudulently by Mrs. Bosch.

Corbett J

5.

Failure to have an effective audit which would have led to the discovery and cessation of these irregularities and/or the permitting of an inefficient system of accounting to operate.

6.

Failure to discover over a period of years that unauthorised amendments had been made by Mrs. Bosch to the said cheques and/or A that she had been and was converting the proceeds to her own use and/or inability notwithstanding warning to put a stop to the irregularities.

7.

Permitting the said cheques to be signed year in and year out and/or to be paid year in and year out without taking precautions to ensure that they were properly drawn and completed and/or that each payee whose name was written therein was the authorised payee entitled to receive payment and/or that plaintiff was liable to pay the said cheques.

Defendant will be in a position to give this information more fully B after full and adequate discovery and reserves the right to add to or change the above grounds of negligence upon such discovery.'

It is not clear to me whether these alleged grounds of negligence are all related solely to the averments referred to in (a) above; or whether some of them, at any rate, (e.g. grounds 4, 5, 6 and 7) do not relate C also to the averments in (b) above. I shall nevertheless proceed on the assumption which, on my view of the law, is favourable to the defendant - that the latter construction of the further particulars for trial is the correct one.

The application with which I am now concerned is for an order striking D out those portions of the plea which raise these estoppels as being irrelevant, argumentative and vexatious on the ground that any such defence is excluded by the fact that all the cheques were crossed and marked 'not negotiable'; or, alternatively, for an order, in terms of Rules 33 (4) and (5) or 39 (20), determining that the estoppel defences E are excluded by reason of the fact that the cheques were crossed and marked 'not negotiable'.

Initially defendant's counsel raised some objection to this application from the procedural point of view but in the end it was agreed that it was in the interests of the parties that the legal validity of the estoppel defences should, if possible, be determined at this stage. This I now proceed to do.

F It was submitted by Mr. Knight, on behalf of the plaintiff, that there were two main reasons why the estoppel defences were unsound in law. These were:

(i)

that the drawer of a cheque owes no duty of care to the world at G large as to how he draws his cheques or runs his business and that the particular complaints listed in defendant's further particulars for trial could thus not ground a case of negligence against plaintiff; and

(ii)

that, in any event, the crossing of a cheque 'not negotiable' amounts to a disclaimer of responsibility to any third person H who takes the cheque and thus there was no duty owed by plaintiff to defendant in this case.

Strictly, the first of these reasons would appear to fall outside the scope of plaintiff's application, which is concerned with the point raised by reason (ii). Nevertheless, both reasons were fully argued by counsel as if raised by the application and I shall treat the application as comprehending both.

In reply to the submission of plaintiff's counsel Mr. Dison, who appeared upon behalf of the defendant, submitted that the so-called estoppel

Corbett J

defences were based upon one or more of the following principles:

(1)

that a party cannot complain of damages which he has brought upon himself by his own default; and/or

(2)

the principle of unconscionable or inequitable action exemplified in the exceptio doli; and/or

(3)

A the estoppel of modern law.

He contested the contention that these defences could not be raised upon the facts of the present case or that they were in any way excluded by the fact that the cheques were crossed 'not negotiable'.

It is convenient to first consider the viability of these defences upon B the principles of estoppel. The classic exposition of the general principle of estoppel, as practised in English Law, is that contained...