The reversal of electronic payments under South African law: Possible guidance from recent developments in European Un-ion law

• Jurisdiction: South Africa
• Pages: 22-50
• Author: Schulze, W.G.
• Date: 19 January 2021
• Published date: 19 January 2021

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THE REVERSAL OF ELECTRONIC PAYMENTS

UNDER SOUTH AFRICAN LAW: POSSIBLE

GUIDANCE FROM RECENT

DEVELOPMENTS IN EUROPEAN UNION

LAW

WG SCHULZE*

Professor in Banking Law, University of South Africa

Abstract

It is generally accepted that the development of and growth in

electronic banking, and particularly the growth in electronic payments,

has raised a number of burning legal issues in South African banking

law. One of the hitherto unresolved issues concerns the circumstances

under which an electronic transfer can be reversed. In terms of the

standard bank–client agreement, a credit transfer can be reversed only

with the consent of the recipient of the money. Such an arrangement is

clearly flawed and impractical. With fraud, for example, it is not fair

towards the party who has been defrauded for it, or its bank, first to

obtain the fraudulent recipient’s consent before the transfer can be

reversed. This article considers South African case law in which the

reversal of an electronic payment was scrutinised. It further considers

recent developments in European Union law regarding the notification

and rectification of unauthorised, or incorrectly executed, payment

transactions. Some observations are made about the possible guiding

role that European Union law may play in formalising the South

African law regarding electronic payments, should such initiative be

undertaken by either the banking and payment community or the

South African legislature.

I INTRODUCTION

(a) General

Payment systems and different payment methods have evolved over

many centuries—from barter to precious metals, such as gold and silver,

to paper money and metal coins, to negotiable instruments. The latest

* BLC LLB (Pret) LLD (Unisa).

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and most profound development has been that of payment by comput-

erised electronic transfer. This, in turn, has aided the emergence of a vast

array of new electronic payment platforms and systems. The constant

evolution of electronic technology, more than anything else, has resulted

in a dramatic change in the nature of banking in the last four decades.

The most signif‌icant, and for purposes of the present discussion the

most relevant, of these changes was the growth and increased impor-

tance of electronic banking.

1

Electronic banking involves various aspects of banking law. Payment

is one of them. Despite the constant excitement about new electronic

methods of payment and payment platforms, including payment appli-

cation platforms (‘apps’) administered by mobile telephone companies,

it is important to state that electronic banking, particularly electronic

1

The rise of electronic banking is also ref‌lected in the large number of specialised

academic works which deal with this topic, as well as the inclusion of lengthy chapters in

standard texts on banking law. For a small sample of the available text books, reports and

theses which contain materials on electronic banking and payments, see Visser, Die

Regsbetrekkinge by Bankoutokaarte (unpublished LLM dissertation, Rand Afrikaans Univer-

sity, 1987); Arora & McKenzie (eds), Electronic Banking and the Law (IBC Publishing 1997);

Baker, Brandel & Pannabecker, The Law of Electronic Fund Transfer Systems – Legal and

Strategic Planning (Loose leaf) 3 ed (AS Pratt & Sons 2013); Anon, Electronic Funds Transfer

(Anon EFT) (Trade Practices Commission Workshop, 15 June 1989, Sheraton Hotel,

Melbourne) (1989); Anon, Electronic Funds Transfer (Report by the Treasury and the Trade

Practices Commission on the Operation of the EFT Code of Conduct, July 1990) (1990);

Reed, Electronic Finance Law (Pearson Professional Education 1991); Weerasooria & Wallace,

Banker-Customer: Resolving Bank Disputes (Longman Business & Professional 1994) 229–256;

Lawack-Davids, Aspects of Internet Payment Instruments (unpublished LLD thesis, University

of South Africa, 2000); Geva, Bank Collections and Payment Transactions (Oxford University

Press (OUP) 2001); Horn, Legal Issues in Electronic Banking (Kluwer International 2002);

Munir, Internet Banking: Law and Practice (LexisNexis 2004); Ellinger, Lomnicka & Hooley,

Ellinger’s Modern Banking Law 4 ed (Oxford University Press (OUP) 2006) Ch 13; Gkoutzinis,

Internet Banking and the Law in Europe (Cambridge University Press (CUP) 2006); Howard,

Masef‌ield (gen eds) & Chuah (ass ed), Butterworths Banking Law Guide (LexisNexis 2006)

264–280; Tyree, Weaver & Weerasooria, Weerasoria’s Banking Law and the Financial System in

Australia 6 ed (LexisNexis 2006) 97ff; Moorcroft assisted by Raath, Banking Law and Practice

(LexisNexis 2009) Ch 20; Malan, Pretorius & Du Toit, Malan on Bills of Exchange, Cheques and

Promissory Notes 5 ed (LexisNexis 2009) 275–294; Wild, Weinstein, MacEwan & Geach,

Electronic and Mobile Commerce Law (University of Hertfordshire Press 2011) 231–292;

Cresswell, Blair, Hill, Hooley, Phillips & Wood, Encyclopaedia of Banking Law Binder 1

(Butterworths Law 2013) Div D1; Volker, Essential Guide to Payments (Veritas 2013); Tuba,

Electronic Methods of Payment and Money Laundering: Exploring the Difficulties of Prevention

by Banks (unpublished LLM dissertation, University of South Africa, 2013); Perlman, Legal

and Regulatory Aspects of Mobile Financial Services (unpublished LLD thesis, University of

South Africa, 2013); Schulze, ‘A South African Code of Electronic Payments’ in Visser &

Pretorius (eds), Essays in Honour of Frans Malan (LexisNexis 2014) (Schulze ‘Code’) 295–319;

Roestoff in Sharrock (ed), The Law of Banking and Payment in South Africa (Juta 2016) Ch 7 at

273–310; Van Heerden in Sharrock (ed), The Law of Banking and Payment in South Africa

(Juta 2016) Ch 8 at 367–387; Tyree, Banking Law in Australia 9 ed (LexisNexis 2017) Ch 9–10;

and Geva, The Law of Electronic Funds Transfers (Loose leaf) (LexisNexis 2019).

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