Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd

• Jurisdiction: South Africa
• Citation: 1995 (4) SA 510 (C)

Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd
1995 (4) SA 510 (C)

1995 (4) SA p510

Citation	1995 (4) SA 510 (C)
Case No	14378/90
Court	Cape Provincial Division
Judge	Selikowitz J
Heard	June 2, 1993; June 3, 1993; June 7, 1993; June 8, 1993; June 9, 1993; June 10, 1993; June 11, 1993; June 14, 1993; June 15, 1993; September 13, 1993; September 14, 1993; September 15, 1993; September 20, 1993; September 21, 1993; September 22, 1993; September 23, 1993; September 24, 1993; October 19, 1993
Judgment	February 10, 1995

Flynote : Sleutelwoorde B

C Banker — Relationship between customer and banker — Nature of — Relationship contractual one of debtor and creditor — Aspects of relationship regulated by law of agency — Open to parties to vary agreement by entering into special arrangements for specific dealings — D Customer, banker and third party entering into tripartite agreement to facilitate sale of shares by customer to third party — Banker, without authority of third party, crediting customer's account with amount from third party's account with banker — Banker acting as 'unauthorised agent' — In absence of ratification, unauthorised action having no legally binding effect — Accordingly, crediting of customer's account by debiting E third party's account not in law constituting payment by third party to customer — Banker entitled to reverse entries.

Prescription — Extinctive prescription — Interruption of — By service on debtor of process whereby creditor claims payment of debt — Prescription F Act 68 of 1969, s 15(1) — Simple summons claiming payment of amount lent on overdraft served in November 1990 — Declaration served in April 1991 giving details of overdraft agreement of February 1988 — Declaration amended in June 1993 claiming, not only balance of original amount advanced, but further amounts advanced in January 1989, March 1990 and G April 1990 — Each amount loaned on overdraft a separate debt, even though made pursuant to pre-existing overdraft agreement — Prescription beginning to run as soon as advance made — Process claiming balance of original amount advanced involving different facta probanda from process (ie amendment) also claiming three further advances — Amendment not replacing H existing cause of action, but adding further causes of action, albeit still totalling original amount claimed — Prescription of additional amounts claimed not interrupted by service of any process claiming payment thereof until June 1993 amendments — Claims for additional amounts prescribed.

I Interest — In duplum rule — Interest to stop running when it equals unpaid capital — Determination of amount of unpaid capital — Accepted practice of bankers to 'capitalise' unpaid interest by periodically adding it to unpaid balance — Whether interest thereby becoming part of capital and losing its identity as interest — In law, capitalised interest not losing J its character as interest —

1995 (4) SA p511

A 'Capitalisation' merely describing accounting method followed in banking practice to facilitate charging of compound interest and not affecting nature of debt.

Interest — In duplum rule — Interest to stop running when it equals unpaid capital — Determination of amount of unpaid capital — Appropriation of B payments by debtor — Overdrawn current account with bank-Normal rule, known as 'rule in Clayton's case', that credit items go to reduction of earliest debit items — Effect thereof that any payments would be appropriated first to reduce unpaid capital as oldest debt — Effect of rule in Clayton's case on appropriations when in duplum rule in effect would reduce interest recoverable by creditor to amount equal to C now-reduced capital amount — Such situation not tolerable — In absence of effective appropriation by customer or bank, rule in Clayton's case applying to current account for as long as account not affected by in duplum rule — For as long as in duplum rule suspends further running of interest, all credit to account to be appropriated to pay interest before D being applied to capital.

Headnote : Kopnota

Early in February 1988 the plaintiff bank had agreed to lend to the defendant on overdraft the sum of R1,2 million. The loan was expected to be of short duration. Pursuant to the agreement the plaintiff had advanced to the defendant the sum of R1 100 127 on 9 February 1988. On 15 February E a written agreement was concluded between, on the one hand, the defendant and a trust as sellers and, on the other hand, two brothers as purchasers for the sale of certain shares. The precise number of shares to be sold had not been fixed, but the purchase price was expected to be approximately R600 000. The purchasers nominated a company ('MR') as the vehicle through which the shares would be acquired and through which payment would be made to the defendant. The plaintiff was approached to assist the purchasers to pay for the shares. A current account in the name F of MR was duly opened at the branch of the plaintiff at which the defendant banked. An overdraft facility of R600 000 was arranged for MR on security provided by the purchasers and the defendant. The only authorised signatories to the MR account were the purchasers and their sister. On 22 May 1988 L, who effectively controlled the defendant, instructed the plaintiff's branch manager to debit the MR account and credit the defendant's account with R600 000, together with certain interest. The G instruction was carried out the following day without reference to the purchasers. When the purchasers discovered that the MR account had been so debited, they requested that the transaction be reversed immediately since none of the MR signatories had authorised it. By that stage, no agreement had been reached between the sellers and purchasers as to how many shares were being sold or what the final price would be; no shares had been delivered to the purchasers; and the purchasers had already taken steps to H cancel the sale agreement. L instructed the branch manager not to reverse the debits. After a second demand by the purchasers that the debit be reversed and that the MR account be closed, the branch manager's superiors instructed him to transfer the MR overdraft plus accumulated interest back to the defendant's account.

In an action by the plaintiff for payment by the defendant of the sum of R1 654 889,66 on the basis that the amount had been lent to the defendant I on overdraft, one of the defences raised was that the money had been repaid: the defendant contended that the plaintiff had not been entitled on 1 July 1988 to reverse the credit to the defendant's account of R627 097,69 made on 23 May 1988. (It was common cause between the parties that, if the debit reversing the credit had not been lawful, then the defendant was not indebted to the plaintiff at all.) In support of that contention it was argued that (a) the entry of 23 May 1988 had not involved a mistake either of a clerical kind or of any other kind, in that the branch manager had laboured under no erroneous belief since he had not J understood L to be representing MR or to have

1995 (4) SA p512

A the authority to represent MR; (b) even if the defendant was not entitled to retain the benefit of the credit, the bank had not been entitled to resort to self-help and to correct the matter by reversing an entry: it should, instead, have utilised the only appropriate remedy for recovering a mistaken payment, namely to sue by way of condictio; and (c) that the conduct of the purchasers and their representative in opening the MR account after the conclusion of the sale agreement and up to 23 May 1988 had been consistent only with their having authorised the plaintiff to B debit the MR account.

Held, that the evidence established that a tripartite agreement had been agreed upon in terms of which the plaintiff had agreed to lend MR a sum of approximately R600 000 to enable it to pay the purchase price to the defendant, and that the plaintiff had been prepared to enter into that agreement because the transaction would lead to a reduction of the defendant's overdraft, repayment of which was by then overdue in terms of C the original overdraft agreement of early February 1988. (At 530D-E/F.)

Held, further, that the law treated the relationship between banker and customer as a contractual one of debtor and creditor, aspects of which were regulated by the law of agency: as between a bank and its customer a payment by cheque was governed primarily by the law of agency, whether or not the customer's current account was in credit. (At 530G and 531G-H, paraphrased.)

Held, further, given the contractual nature of the relationship between D bank and customer, that it was open to the parties to vary their agreement and to enter into special arrangements for specific dealings. (At 532D/E.)

Held, further, that in this instance MR and the defendant had entered into a tripartite agreement with the plaintiff containing specific terms to facilitate their particular transaction: the plaintiff had agreed to lend MR R600 000 on overdraft, subject to the required securities, for the specific purpose of paying the money to the defendant in terms of the share sale agreement; and the money lent to MR had to be used to reduce E the defendant's overdraft. (At 532E-G.)

Held, further, that it had been a further term of the tripartite agreement that payment by MR to the defendant could not be effected unless and until it had been authorised by MR; and that this tacit term had arisen from the fact that MR had opened a normal current account with the plaintiff and had filed a resolution nominating signatories to the account. (At 532G-H.)

F Held, accordingly, that at no stage, either in terms of the tripartite agreement or in terms of the direct banker and customer...