Secfin Bank Ltd v Mercantile Bank Ltd and Others

• Jurisdiction: South Africa
• Judge: Goldblatt J
• Judgment Date: 05 October 1992
• Citation: 1993 (2) SA 34 (W)
• Court: Witwatersrand Local Division

Goldblatt, J.:

This application concerns the nature and 'negotiability' of a Treasury bill.

The applicant claims delivery from the first respondent of a Treasury bill having a face value of R1 million which it alleges is its property and was stolen from it.

F The first respondent opposed such claims on the basis that it acquired the bill in good faith and for value and that it accordingly has a better title to the bill than the applicant.

The instrument in question is in the following form:

'This Treasury bill entitles G
* __________________________________________________ or order
* If not completed this bill will be paid to bearer to payment of one million rand at any branch of the South African Reserve Bank out of the revenues and assets of the Republic on _______________
Due Date _____________________ H
______________________________; for Accountant-General Treasury H	______________________________; for Secretary to the Treasury'

It was common cause between the parties that a negotiable instrument may either be such an instrument as defined in the Bills of Exchange Act 34 of I 1964 ('the Act') or such an instrument by custom of trade. In regard to the latter type of instrument Halsbury's Laws of England 2nd ed at para 1004 says:

'It must be in a form which renders it capable of being sued on by the holder of it pro tempore in its own name; and it must be by the custom of trade transferable, like cash, by delivery. Failure to comply with either of these requirements prevents the instrument being a negotiable J instrument at all.'

Goldblatt J

A The parties were further ad idem that a negotiable instrument in the sense used above would mean that a bona fide holder for value would obtain good title to the instrument notwithstanding the title or want of title of the transferor thereof.

Each week the Reserve Bank, on behalf of the Treasury, issues Treasury bills having a total face value of R300 million to successful tenderers B therefor. The bills are sold at a discount to maturity, which discount depends on the money market rates then applicable. The issue by the Treasury of these bills constitutes the primary market in the bills. There is, however, a secondary market in the bills created by the various financial institutions which deal in them. In this latter market the C transactions are normally entered into telephonically and delivery of the bill sold is made against payment therefor. The bills are almost invariably in bearer form. This means that the transferor does not have to verify an endorsement on the bill and makes for ease of transferability.

At any given time there are Treasury bills worth billions of rand in D issue and such bills are traded on a daily basis between financial institutions and also between such institutions and the Reserve Bank which is prepared to redeem the bills at a discount to face value.

It is thus clear that Treasury bills are frequently and commonly transferred between parties by mere delivery thereof, without any investigation into the title of the transferor of the bills. E

On the basis of these facts the first respondent, supported by the third respondent, submitted that Treasury bills were by custom of trade and by their form to be regarded as common law negotiable instruments or promissory notes.

The applicant submitted that the first respondent had not gone far F ...