Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (In Liquidation)

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Zulman JA, Mahomed CJ, Van Heerden DCJ, Harms JA, Plewman JA
• Judgment Date: 14 November 1997
• Citation: 1998 (1) SA 811 (SCA)
• Hearing Date: 25 August 1997
• Docket Number: 205/96
• Counsel: PB Hodes (with him LA Rose-Innes) for the appellant OL Rogers for the respondent

Zulman JA:

Introduction

A simple claim based upon an unpaid overdraft gave rise to litigation that began some seven years ago and, because of a number of spurious J

Zulman JA

defences raised, grew out of hand. It resulted in a reported judgment of nearly 70 pages, A raising some surprising points a number of which turned out to be irrelevant. The judgment is reported: 1995 (4) SA 510 (C).

The appellant initially sued the respondent in the Court a quo for payment of the sum then computed at R1 011 010,65 together with interest and costs. For the sake of convenience I B will hereinafter refer to the appellant as either 'the plaintiff' or 'the bank' and to the respondent as either 'the defendant' or 'Oneanate'.

The basis of the claim was that the amount was owing to the bank by Oneanate on overdraft. In the alternative the bank alleged that during March 1989 Oneanate acknowledged its indebtedness to the bank and undertook to liquidate the amount owing ('the March agreement'). C

Oneanate raised various defences to the claim. The first was that portion of the money, which it acknowledged having borrowed, had been 'repaid'. In this latter regard Oneanate relied upon a credit entry passed by the bank on 23 May 1988 to Oneanate's account in an amount of R627 079,69 which the bank subsequently reversed by debiting the account with R643 D 282,21 (being R627 079,69 plus interest). Oneanate contended that the bank was not entitled to reverse the entry. The second defence raised by Oneanate is that certain amounts which were debited to its account had prescribed. Further defences were raised by Oneanate which E related to the quantification of any amount for which Oneanate might be liable to the bank. These defences raise questions as to the bank's practice of capitalising interest monthly on the overdraft, on the effect of the in duplum rule in regard to the amounts claimed by the bank and the appropriation of payments made by Oneanate. Based upon its contention that the bank was not entitled to reverse the credit, Oneanate made a claim in reconvention for certain interest payments. F

The Court a quo (Selikowitz J) found in favour of the bank on the question of the reversal of the credit. It, however, found in favour of Oneanate in regard to the March 1990 agreement, certain portions of the plea of prescription, the capitalisation issue and the appropriation of payments. G

Thereupon Selikowitz J made a provisional order requiring the parties to calculate the amount which the defendant was to pay to the plaintiff, with regard to the findings made. The parties H were given an opportunity of agreeing on the amount in question and failing such agreement to again approach the Court a quo for further directions. The parties were unable to agree upon the amount and after further argument the Court a quo made a final order in terms of which the defendant was ordered to pay to the plaintiff the sum of R388 569,46 together with interest thereon at the rate of 15,5% per annum from the date of the judgment to date of payment. The defendant was also ordered to pay 70% of the plaintiff's costs subject to certain I qualifications which are not relevant to this appeal. The bank appeals, with the leave of the Court a quo, against its disallowance of part of its claim because of the findings in relation to the March agreement, prescription, the practice in regard to 'capitalisation' of interest, appropriation of payments, the application of the in duplum rule and the costs order. Oneanate cross-appeals against the Court a quo's findings concerning the reversal of the credit entry with the J

Zulman JA

consequent dismissal of its claim in reconvention, aspects of the prescription issue and also the A costs order.

It was common cause in the Court a quo that, if the bank was not entitled to reverse the credit entry, the defendant's liability on its overdraft would have been fully discharged by 25 January B 1989. It would follow from this that a finding favourable to the defendant on the issue would have resulted in the dismissal of the plaintiff's claims and the granting of judgment on the defendant's claim in reconvention.

The reversal of the credit entry

At the beginning of 1988 Oneanate was one of a number of companies effectively controlled C by one Gerald Lubner. Oneanate maintained a current account with the bank at its Long Street branch. Early in February 1988 the bank agreed to lend Oneanate an amount of R1,2 million on overdraft. It is common cause that the overdraft was to bear interest on the outstanding D balance at an annual rate of 2% above the bank's ruling prime rate of interest and that such interest would be calculated daily and debited monthly until repayment of the amount owed. The bank was also entitled to charge its customary bank fees and charges in respect of the account.

Pursuant to the agreement and on 9 February 1988 the bank advanced the sum of R1 100 E 127 to Oneanate. On 10 February 1988 a further amount of R100 000 was advanced. The amounts advanced were paid out on Oneanate's directions and debited to its account with the bank.

On 15 February 1988 a written agreement was concluded between Oneanate and the Karen F Lubner Trust as sellers, on the one hand, and Union Discounting Corporation (Pty) Ltd as duly authorised agents for Jeffrey Hirsch Lurie and Kalman Isaac Lurie as buyers. In terms of this agreement ('the Agserv agreement') the sellers sold 'not less than four million shares and not more than 4,75 million ordinary shares' in a company known as Agserv to the Luries at a price of 14 cents per share. The purchase price was, therefore, somewhere between R560 G 000 and R665 000. No evidence was led as to precisely how many shares were in fact sold to the Luries and consequently the final purchase price cannot be determined. The purchase price was to be paid by way of a credit note for R250 000, with the balance together with interest to be paid on or before 28 February 1989. The agreement also provided that, if the sellers did H not wish to receive a credit note, they could, on 14 days' notice, call upon the purchasers to make payment in cash. It was recorded in the agreement that in this event the Luries would be obliged to borrow the purchase price from a financial institution and Oneanate undertook to sign as surety and co-principal debtor in respect of such borrowings.

Shortly thereafter, and after an introduction by Lubner, the Lurie brothers arranged with the I bank's Long Street branch for a loan on overdraft of R600 000 for which Oneanate would sign as surety. At the same time they applied to open a current account in the name of Mooi River Valley Farm (Pty) Ltd ('Mooi River'). Formal resolutions by Mooi River to open the current account at the bank were duly lodged. These resolutions provided that the signatories on the Mooi River account J

Zulman JA

would be any one of its three directors, namely the two Lurie brothers and their sister, a Mrs A Burman. The bank was fully apprised of the Agserv agreement and the purpose for which the Lurie brothers were seeking the loan of R600 000. Jeffrey Lurie, who testified at the trial, stated that the purchasers were never called upon to pay for the shares. It is probable from the B evidence that the shares were, in fact, never delivered to the Luries. Lurie also testified that at no time was anyone authorised to debit the bank account of Mooi River and that Lubner was not advised that the account could be so debited.

One Erlank, who was at the time in question the manager of plaintiff's Long Street branch, C testified that on 22 May 1988 Lubner telephoned him and instructed him to debit the Mooi River account and to credit the Oneanate account with R600 000 together with certain interest thereon. Erlank proceeded to cause the Mooi River account to be debited and the Oneanate account to be credited. He says that he did so because he trusted Lubner and because ''n D kliënt wat goed is kan ek nie sy woord in twyfel trek nie'. He assumed that Lubner and the Luries had a good relationship and he had no reason to doubt Lubner's authority. The credit to the Oneanate account was effected on the following day, 23 May 1988, by means of a general purpose credit. The interest of R27 079,69 which was credited was calculated by Erlank as E being half of the interest that had been charged by the bank on the account for the period 9 February 1988 to 25 April 1988. Erlank's understanding was that he was to transfer half of the Oneanate overdraft of R1,2 million together with half of the accumulated interest to the Mooi River account. Erlank made no effort to contact the Luries before giving effect to Lubner's F instruction that the Mooi River account be debited and the Oneanate account credited. In a letter dated 27 May 1988, Erlank wrote to Lubner personally, advising him of the amount owing on the Oneanate account, as well as the amount owing on the Mooi River account. In the letter he also 'confirmed',

'that, should it be necessary for us to have to take legal action for the recovery of their overdraft or any G amount owing to us we would first of all proceed against Mooi River Valley Farm (Pty) Ltd failing which we would proceed against K I Lurie and Mr J H Lurie and only finally against Messrs Oneanate Investments (Pty) Ltd should this be necessary'.

The first time that Erlank communicated with the Luries about the debit to the Mooi River H account was in a letter dated 2 June 1988 addressed to their agent, one Strydom. In the letter Erlank asked how the overdraft would be repaid. Upon receipt of Erlank's letter from their agent the Luries immediately telexed the bank asking how the figure of the overdraft was arrived at and upon what authority the amount had been debited. The bank then telexed...