Worcester Advice Office v First National Bank of Southern Africa Ltd

• Jurisdiction: South Africa
• Citation: 1990 (4) SA 811 (C)

Worcester Advice Office v First National Bank of Southern Africa Ltd
1990 (4) SA 811 (C)

1990 (4) SA p811

Citation	1990 (4) SA 811 (C)
Court	Cape Provincial Division
Judge	Van Niekerk J and Comrie AJ
Heard	August 17, 1990
Judgment	September 10, 1990

Flynote : Sleutelwoorde

Bills of exchange — Cheque — Liability of B collecting banker — Liability to true owner of cheque — Although there are good reasons for extending Aquilian liability so that collecting bankers owe a duty of C care to the true owners of cheques, it has been settled law in South Africa for the past 60 years that there is no such duty of care — If duty of care recognised, vigilance and expertise which collecting bankers would be called upon to exhibit would be colossal.

Bills of exchange — Cheque — Liability of collecting banker — D Liability to true owner of cheque — Effect of cheque being marked 'not transferable' — Cheque may not be collected on behalf of anyone other than designated payee and whom collecting banker believes to be the true payee whether or not he is in fact the true owner or payee — Marking does not cast on collecting banker a wider duty such as a duty E reasonably to be satisfied that the customer who deposits the cheque for collection is in fact the true payee and owner.

Headnote : Kopnota

Although there are good reasons for extending Aquilian liability so that a collecting banker would owe a duty of care to the true owner of a cheque, whether crossed or uncrossed, it has been settled law in South F Africa for the last 60 years that there is no such duty of care on collecting bankers. To place such a duty of care on them the vigilance and expertise which they would be called upon to exhibit would be colossal.

The plaintiff was the payee of a cheque in the amount of R30 000 which was lost or stolen from plaintiff. The cheque was crossed and within the crossing marked 'not transferable'. A person or persons unknown to the plaintiff opened a savings account at the defendant's Worcester branch G in the name of the plaintiff and deposited the cheque into the account. Some nine days after the cheque had been deposited the amount of R29 950 was withdrawn from the account by a person or persons unknown to the plaintiff. The plaintiff had not given anyone authorisation to open or operate an account in its name. The plaintiff instituted action against the defendant, alleging in its particulars of claim that it suffered loss and damages in the amount of R29 950 and that this was brought about by the defendant's failure to take care. The defendant excepted to H the claim, contending inter alia that the claim was bad in law in that the defendant as collecting banker did not owe the plaintiff any duty of care. Applying the principle set out above, the Court upheld the exception (and the other exceptions raised by the defendant). The Court held further, as to the effect of the marking of the cheque 'not transferable', that the cheque could not be collected otherwise than on behalf of a person who claimed to be the designated payee and whom the I collecting banker believed to be the true payee, but the marking did not cast any wider duty on the banker such as a duty reasonably to be satisfied that the customer who deposited the cheque for collection was in fact the true payee and owner.

Case Information

Exception to particulars of claim. The nature of the pleadings appears J from the reasons for judgment.

1990 (4) SA p812

A A J Smit SC (with him O L Rogers) for the defendant (excipient).

J C Marais for the plaintiff (respondent).

Cur adv vult.

Postea (September 10). B

Judgment

Van Niekerk J et Comrie AJ:

Before Us are Exceptions Taken by the Defendant Bank to the Plaintiff's Amended Particulars of Claim on the Ground that the Particulars of Claim Lack Averments Necessary to Sustain a Cause of Action. for Convenience We Shall Refer to the Parties as c Plaintiff and Defendant.

Annexed to the pleadings is a copy of a cheque dated 27 July 1988 and drawn payable to the plaintiff for the sum of R30 000. The cheque is crossed and, within the crossing, marked 'not transferable'. It is not marked 'not negotiable'. The plaintiff alleges that it was the true owner of the original cheque which was lost or stolen between 29 July D and 8 August 1988. On about 8 August 1988, the plaintiff alleges, a person or persons unknown to it opened a savings account at the defendant's Worcester branch and deposited the cheque for collection. Several days later, on 17 August, a person or persons unknown withdrew the sum of R29 950 from the savings account. The person or persons who E opened and operated the account in the plaintiff's name had not been authorised by the plaintiff to do so. The plaintiff avers that in breach of an alleged duty owed by the defendant to the plaintiff, the defendant or its officers or employees were negligent:

(a)

in allowing the unknown person or persons to open the savings F account without plaintiff's authority;

(b)

in allowing the unknown person or persons to operate the savings account without plaintiff's authority;

(c)

in failing to take reasonable and practical steps to avoid loss to the plaintiff (the steps are not specified); and

(d)

G in allowing and facilitating the unknown person or persons to perpetrate a fraud on the plaintiff.

The plaintiff alleges that in consequence it suffered loss and damages in the sum of R29 950. It is not alleged that the plaintiff was a customer of the defendant. The first exception puts in issue the H existence of the duty of care allegedly owed by the defendant, as the collecting banker, to the plaintiff as the true owner of the cheque. The second exception attacks the sufficiency of the allegations regarding loss and damage.

Plaintiff's alternative cause of action is set out at para 4 of the amended particulars of claim. It is based on s 81 of the Bills of Exchange Act 34 of 1964. That section affords rights of recourse to the I true owner of a crossed cheque which is lost or stolen against subsequent possessors under certain circumstances. As against a collecting banker the recourse is somewhat limited (s 81(5)). One of the requirements for liability in terms of the section is that the cheque, when it was lost or stolen, bore upon it the words 'not negotiable'. OK Bazaars (1929) Ltd v Universal Stores Ltd 1972 (3) SA 175 (C) at 178G. J We have already said that the cheque in question

1990 (4) SA p813

Van Niekerk J et Comrie AJ

A was not so marked. The third exception is that, in the absence of the required marking, s 81 is inapplicable. Further requirements for liability are that the cheque

'was paid by the banker upon whom it was drawn, under circumstances which do not render such banker liable in terms of this Act to the true B owner of the cheque...'.

(Section 81(1).) The particulars of claim do not allege that the drawee banker either paid the cheque, or did so under circumstances which did not render him statutorily liable to the true owner. The fourth exception is that, in the absence of such allegations, the alternative claim fails to disclose a cause of action.

C We intend to dispose of the third and fourth exceptions immediately because plaintiff's counsel (who was not the author of the particulars of claim or of plaintiff's heads of argument) conceded before us that the exceptions were good, and in our view correctly so. There is a clear distinction between the marking 'not negotiable' on a cheque and the D marking 'not transferable'. The former means that a crossed cheque is transferable by the drawee (and subsequent holders) but subject to equities. The latter means that the cheque is not transferable at all, and that a purported transferee does not become the holder of the cheque and cannot sue upon it. See s 80 of Act 34 of 1964; OK Bazaars (1929) Ltd v Universal Stores Ltd (supra); Standard Bank of SA Ltd v Sham Magazine Centre 1977 (1) SA 484 (A); Aboobaker v Gableite Distributors E (Pty) Ltd 1978 (4) SA 615 (D); Volkskas Bpk v Johnson 1979 (4) SA 775 (C); Gishen v Nedbank Ltd 1984 (2) SA 378 (W); Impala Plastics (Pty) Ltd v Coetzer 1984 (2) SA 392 (W).

If a cheque bears both markings, it is not transferable. Aboobaker's F case; Johnson's case, both supra. It is clear to us that the expression 'not negotiable' in s 81(1) of the Act is intended by the Legislature to bear the same meaning as in s 80, namely transferable subject to equities. In our view it cannot be extended so as to include 'not transferable' which is a different and more restrictive marking. As the cheque in question was not marked 'not negotiable', it follows that the plaintiff cannot bring itself within the ambit of s 81 and that it G enjoys no cause of action thereunder against the collecting banker (the defendant) or any other possessor.

The liability of a possessor under s 81 is alternative to the liability of the drawee banker. Section 81(1) spells this out. It is consequently necessary for the true owner of a lost or stolen cheque, H which was crossed and marked 'not negotiable', to allege and prove: (i) that the cheque was paid by the drawee banker, and (ii) that such banker is not statutorily liable to him by reason of the payment. Wanting these essential allegations, the plaintiff's alternative claim fails to disclose a cause of action under s 81. The omission to plead such obviously necessary allegations creates a doubt as to what actually I happened to the cheque. Was it presented to the drawee banker for payment and, if so, was it met? We will return to this when we consider the second exception.

The first exception

As we have indicated, the first exception raises the question whether J according to South African common law a collecting banker owes a duty

1990 (4) SA p814

Van Niekerk J et Comrie AJ

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