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[2020] ZAGPJHC 259
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Spar Group Limited v Absa Bank Limited (74870/2019) [2020] ZAGPJHC 259 (14 August 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 74870/2019
In
the matter between:
SPAR
GROUP
LIMITED Plaintiff
And
ABSA
BANK
LIMITED
Defendant
Delict
-
common law developed to extend a legal duty to banks to avoid
economic loss to a third party not to reverse EFT payments without
doing more.
Where
bank has a discretion to reverse a payment, it has a legal duty to a
beneficiary/payee of an EFT payment to verify, or to
make enquiries,
or to investigate, or to inform or report instructions given by its
customer -particularly compelling where suspicious
or unusual
circumstances present giving rise to a reasonable doubt about whether
the instructions had been given lawfully and/or
in good faith and/or
for the reasons advanced by its customer.
JUDGMENT
KATHREE-SETILOANE
J,
[1]
The plaintiff, Spar Group Limited (“Spar”) claims payment
of R2 464 856.32 from the defendant, ABSA Bank Ltd (“Absa”)
as a consequence of certain reversals of debit order payments
effected by Absa which had previously been credited to Spar’s
bank account held with First National Bank (“FNB”).
[2]
From 25 May until 3 July 2009, Trifecta Trading 61 (Pty) Ltd, trading
as Atterbury SuperSpar (“Trifecta”), a retail
customer of
Spar, made certain payments to Spar by Electronic Funds Transfer
(“EFT”) in terms of a written debit order
instruction
which Trifecta gave in favour of Spar. Trifecta held an Absa bank
account.
[3]
During the period 1 to 8 July 2009 Absa reversed nine of the
above-mentioned payments, and as a result, Spar’s account
with
FNB was debited and Trifecta’s account with Absa was credited
in the total sum of R 2 464 856.32. The reversals took
place between
2 and 37 days after the relevant payment dates. As a result of the
reversals, Trifecta’s overdraft debt with
Absa was settled to
the extent of the credits.
[4]
Spar alleges, in its particulars of claim, that it was subsequently
unable to obtain payment of the sum of R2 464 856.32 from
Trifecta
and seeks to hold Absa liable for payment of this amount. Spar claims
damages in delict for the recovery of pure economic
loss. Absa denies
liability and that Spar was unable to obtain payment from Trifecta.
Background
[5]
Spar conducts a wholesale business. It supplies merchandise including
groceries to retailers who do business under the “SPAR”
banner. Spar’s business and its relationship to retailers is a
“franchise type” one. Trifecta was one of its
retailers.
It owned and managed the Atterbury SuperSpar at the Atterbury Value
Mart, in the east of Pretoria.
[6]
Spar sells its goods to retailers on credit. Spar provides the
retailers with weekly statements. The terms of credit require
the
retailers to make payment of the amounts reflected on the weekly
statements within a period of either 19 or 31 days from the
date of
each weekly statement. These statements are sufficiently detailed to
enable the retailers to easily identify all the deliveries
made
during the particular week on which the statement is based. Retailers
may purchase merchandise directly from Spar’s
distribution
centres and/or from other suppliers. Merchandise that Spar supplies
to the retailers from its distribution centres
are referred to as
“warehouse transactions”. The merchandise that retailers
purchase from other suppliers are for Spar’s
account. They are
referred to as “dropshipments”. The retailers pay Spar
for this merchandise in due course.
[7]
The retailer has up to 19 days from date of statement (for warehouse
transactions) or 31 days from date of statement (for dropshipment
transactions) to check the statements for accuracy and to raise a
complaint (this procedure is regulated contractually) regarding
short
delivery, or quality of goods etc. before payment is to be made.
[8]
Trifecta applied for a credit facility with Spar. In respect of the
credit sought, it offered security by way of a suretyship
given by
its only shareholder and director, Mr Tobie Schoeman (“Mr
Schoeman”), and a bank guarantee for R600 000.00,
to be given
by its bank, Absa. Although Trifecta’s application for a credit
facility was successful, Spar sought additional
security which it
established by way of a general notarial bond for R1.5 million over
all Trifecta’s movable property. This
notarial bond was
registered on 31 October 2005. Spar subsequently obtained more
security and a second general notarial bond for
R2 million was
registered on 7 September 2006.
[9]
Spar
obtains a debit order instruction or authority from each retailer in
order to ensure prompt payment. The debit order instruction
which
Spar receives, enables it to withdraw money from the retailer’s
nominated bank account every Wednesday and Friday.
These debit
transfer transactions are known as the “
pull
”
transactions.
[1]
Trifecta
provided Spar with a debit order instruction on 24 August 2005. Its
salient terms were as follows:
‘
I/we hereby
request, instruct and authorise you to draw against my/our account
with the abovementioned bank [Absa], variable amounts
for payment of
weekly purchases due in respect of dropshipment and warehouse
transactions on the Monday and Wednesday of each and
every week. All
such withdrawals from my/our bank account by you shall be treated as
though they had been signed by me/us personally.
‘
I/we understand
that the withdrawals hereby authorised will be processed by computer
through a ‘Payment and Collection System’
[2]
known as PACS, and I also understand that the details of each
withdrawal will be printed on my bank statement or on each
accompanying
voucher.
…
This authority may be
cancelled by me/us giving you thirty days’ notice, in writing,
sent by prepaid registered post. I/we
understand that I/we shall not
be entitled to any refund of amounts legally owing to you, which you
have withdrawn while this authority
was in force.’
[3]
[10]
According to Spar’s records, payments collected from Trifecta
were, from time to time, returned to Spar unpaid. This
became more
prevalent towards the end of 2008, albeit that two debit order
payments were returned unpaid “payment stopped”
on
respectively 8 March 2007 and 25 February 2008. Four payments were
returned “payment stopped” on, respectively,
23 July, 27
August, 8 October and 19 November 2008. This continued into 2009 and
by 11 May 2009, a further six debit order payments
had been returned
“payment stopped”. Seven returns “not provided for”
occurred in the period from 4 May
2009 to 19 June 2009. By the end of
May 2009 Trifecta was R3 336 488.26 in arrears on its warehouse
account and at least R1 167
355.91 on its dropshipment account. By
the end of June 2009, before the reversals at issue herein had
occurred, Trifecta owed Spar
R6 951 298.07 on the two accounts in
aggregate. Trifecta, in addition, owed Spar a further sum exceeding
R5 million.
[11]
Absa was, apart from Spar, Trifecta’s other substantial third
party creditor. Absa provided overdraft facilities of R2
million to
Trifecta.
[12]
Spar, despite the debit order payment returns, continued to supply
merchandise to Trifecta on credit by way of warehouse deliveries
and
dropshipments until June 2009, while still attempting to make twice a
week recoveries via the EFT Debit Pull payment system.
This was
because Trifecta was in financial difficulties and wanted to sell the
Atterbury Superspar. Spar, in assisting to facilitate
the sale, took
the view that the best option was for the business to be sold as a
going concern, as this would retain its identity
as a Spar retailer.
[13]
Mr Schoeman brought a buyer to the table who offered a purchase price
of R8 million. Spar rejected the purchaser but introduced
Mr
Schoeman, in June 2009, to Mr Giannacopoulos, whose company,
Tayegetos Supermarket (Pty) Limited (“Tayegetos”),
was
willing to buy the business for a purchase price of R5 million. Mr
Schoeman was left with no choice but to accept Tayegetos’
offer
to purchase the business. Trifecta and Tayegetos concluded an
agreement of sale on 18 June 2009. The agreed purchase consideration
was R5 million in respect of the goodwill and equipment of the
business, payable on Monday, 29 June 2009, plus the value of the
stock-in-trade to be determined on Sunday, 28 June 2009, by a joint
stocktaking, payable in three monthly instalments from the
end of
July 2009.
[14]
Tayegetos took possession of the business, on Monday 29 June 2009,
and started trading as a Spar retailer for its own account.
Trifecta’s stocktaking provided a figure of R2.8 million for
the stock. However, on Tayegetos calculation it was R2.1 million
and
it refused to accept the R2.8 million stock-figure. This led Mr
Schoeman to believe “… that I have paid much too
much
for the stock that was apparently in my business”. In other
words, he believed that Spar was not entitled to the payments
from
Trifecta’s account which, in the recent past, Spar collected
via the EFT payment system.
[15]
Mr Schoeman telephoned Mr BW Botten (“Mr Botten”), who at
the time was the Provisional Managing Director of the
North Rand
Division of Spar, to complain. Mr Botten, however, advised him to
accept the figure. On the basis of his unhappiness
at the stock value
which Tayegetos was prepared to pay, he telephoned Ms Claire Koen
(“Ms Koen”) at the Centurion branch
of Absa, where
Trifecta’s account was based, and conveyed to her that “there
was a huge problem with the values of
the stock and deliveries”
and instructed her to “send back as many debit orders as the
system would allow her to do”.
[16]
Trifecta’s bank statement for Tuesday, 30 June 2009, the day on
which Mr Schoeman spoke with Ms Koen, shows a credit
of R297 783.76
under the caption “
Acb debiet terug
”. This related
to a Spar initiated EFT debit pull transaction on the account on the
previous day, 29 June 2009. Mr Schoeman’s
instruction to Ms
Koen, resulted in Absa processing returns of 9 payments that had been
collected by Spar from Trifecta’s
bank account through the EFT
Debit Pull payment system, via Bankserv. The R297 783.76 first
credited to Trifecta’s account
in this regard reflected as a
debit on Spar’s account with FNB on 1 July 2009 under code
“04”, i.e. “
payment stopped
”. Two
further prior EFT debit pull debits on Trifecta’s account were
also returned on 30 June 2009. The one, for R222
247.04 related to a
debit against the account on 25 May 2009 and the other, for R295
568.42 to a debit on 1 June 2009. These were
returned to Spar’s
account under code “34”, i.e. “
Authorisation
cancelled
”.
[17]
Three further EFT debit pull debits were returned from Trifecta’s
account on the following day, 1 July 2009. These were
for R295
568.42, R109 708.17 and R311 875.03. These related to prior EFT debit
pull transactions initiated by Spar and debited
on Trifecta’s
account on 8 June 2009, 12 June 2009 and 15 June 2009, respectively.
These payments were returned under return
code “34”
“
Authorisation cancelled
”.
[18]
Two further prior debits for R249 418.60 and R434 533.98
respectively, were returned from Trifecta’s account on 2 July
2009. These related to prior EFT debit pull transactions initiated by
Spar and debited on 22 June 2009 and 26 June 2009, respectively.
The
payments were returned under return code “34”
“
Authorisation cancelled
”.
[19]
The final return, for R361 765.56, related to a Spar initiated debit
on Trifecta’s account on Friday, 3 July 2009. It
was returned
on Tuesday, 7 July 2009. The return reflected on Spar’s FNB
account on Wednesday, 8 July 2009 (within four business
days of the
action date) under code “04”, “
payment stopped
”.
These codes in respect to all nine reversal incorrectly refer to the
nature of the returns which were neither “authorisation
cancelled” nor “payment stopped”.
[20]
It is common cause that Mr Schoeman did not provide Trifecta’s
instructions to Absa in writing. Ms Koen (who did not
testify)
confirmed, in an affidavit dated 22 June 2012, that Mr Schoeman’s
instructions were not given in writing, but were
given
telephonically. She stated that she acted on the basis of the
“written authorisation that Trifecta had given to Absa
to act
on Mr Schoeman’s telephonic instructions”. The document
referred to is the “Mandate and Indemnity in Respect
of E-mail,
Faxed and/or Telephone Instructionss (ACBB) which Trifecta gave to
Absa. Absa had consulted with Ms Koen but elected
not to call her to
testify at the trial.
[21]
Spar caused summons to be issued against Trifecta and Mr Schoeman on
3 July 2009. The claim was for the sum of R7 653
284.63 relating
to overdue dropshipment and warehouse accounts at that time. Mr
Schoeman was cited as surety and co-principal
debtor. Spar also
launched an urgent application to perfect its notarial bonds on the
basis that Tayegetos, who had been in possession
of the business
since 29 June 2009, had cancelled the agreement of sale and that the
business would, shortly, revert to Trifecta.
Trifecta opposed the
application and it was struck from the roll for lack of urgency.
Trifecta disputed that Tayegetos was entitled
to cancel the agreement
of sale.
[22]
Spar and
Trifecta reached a settlement on 17 July 2009. Tayegetos, Mr Schoeman
and Interactive Trading 351 (Pty) Ltd (“Interactive
Trading”)
[4]
were also
party to the settlement. The settlement agreement reinstated the
agreement of sale, now for the purchase price of R7.1
million, which
included the stock. It recorded Trifecta’s indebtedness to
various creditors: Spar for an agreed R14.7
million, Mr Schoeman
for R6 million, Interactive for R2.8 million, Absa for R1.5
million and miscellaneous creditors for R1
million.
[23]
In terms of the settlement agreement the proceeds of the sale of the
Atterbury Superspar were divvied up. Spar received the
full face
value of its notarial bonds in the amount R3.5 million. Spar also
received the benefit of the bank guarantee for R600
000.00 issued by
Absa pursuant to the agreement between Spar and Trifecta in 2005.
The remaining R3.6 million of the
purchase price of the
Atterbury Superspar was distributed among the notional “concurrent”
creditors, including Spar,
on the basis of a notional dividend of
16.44 Cents in the Rand, providing Spar with further recovery of
R1 743 000. Interactive’s
share of R450 000 was also
retained by Spar on the basis that it sold Mr Schoeman’s
suretyship to Interactive, and would
withdraw the action that it had
instituted against Trifecta and Mr Schoeman.
[24]
The balance of R1 407 000 was to go to Trifecta’s
attorneys for distribution among the remaining creditors, including
Absa and Mr Schoeman (the latter for some R993 000). Mr Schoeman
accepted full responsibility to settle the remainder of Trifecta’s
Absa account, as well as to settle with any of the miscellaneous
creditors who refused to accept the notional “dividend”.
Trifecta’s overdraft with Absa was settled
in full on 23 October 2009 and its overdraft facility was cancelled.
[25]
On 27 July 2009, Spar’s attorneys wrote to FNB demanding that
FNB credit its account with the R2 464 856.32 representing
the
aggregate of the nine EFT Debit Pull transactions that had been
returned. Further correspondence between FNB and the attorneys
followed, culminating in a letter dated 18 September 2009, in which
FNB reported the results of its investigations into the matter
to
Spar, as follows: “FNB therefore did not debit the Spar account
without Spar’s authority but rather the debit was
actioned by
Absa acting on its client’s instruction, through the EFT
system”.
[26]
On 13 July
2010, Spar wrote a further letter to FNB demanding payment and
stating that it regarded the dispute resolution in terms
of clause 17
of the CAMS Agreement (which it had entered into with FNB)
[5]
as inappropriate, for purposes of the dispute that had arisen. It
sent a copy of this letter to Absa. It also sent a letter to
Absa
demanding payment of the sum at issue, and recording that, failing
payment, it intended launching application proceedings
against Absa
and FNB. Spar, eventually, sued only Absa.
[27]
Although the issue of whether the nine payments in question were owed
by Trifecta to Spar was originally disputed, it became
common cause
as Spar’s witness, Mrs CJ Swanepoel (“Mrs Swanepoel”),
who was called to prove the debt owed by
Trifecta to Spar, was not
cross-examined on it. It is also common cause that Absa did not
provide Spar with prior notice before
effecting the reversals. Nor
did it obtain Spar’s consent to do so. It is likewise common
cause that Mr Schoeman did not
cancel his debit order instruction.
[28]
Spar called the following witnesses: Mr Botten (Provisional Managing
Director: North Rand Division of Spar), Mrs Swanepoel,
the Credit
Control Supervisor in the Debtor’s Department: North Rand
Division of Spar in 2009, and Dr GTD Holtzhauzen (“Dr
Holtzhauzen”), a banking expert. Absa called the following
witnesses: Mr CJ Erasmus (“Mr Erasmus”), a payment
specialist expert employed by Absa and Mr Schoeman (Managing Director
of Trifecta).
Issues
for Determination
[29]
Although Spar relies, in its particulars of claim, on both a
delictual claim against Absa for damages for the recovery of pure
economic loss and a quasi-vindicatory claim – at the hearing,
it relied only on the delictual claim for damages against Absa
as the
banker of Trifecta. Spar and Absa do not stand in a banker / customer
contractual relationship. FNB, through which the debit
order
collections were processed, was Spar’s banker.
[30]
This matter concerns a novel issue of delictual liability resulting
from a bank’s wrongful and negligent conduct in the
reversal of
EFT payments collected by debit order. The primary issues that arise
for determination are whether: (a) a legal duty
rested on Absa to act
reasonably towards Spar and whether Absa breached that duty; and (b)
Spar’s interests should be accorded
judicial protection against
Absa’s conduct in this particular type of situation.
Regulatory
Framework
[31]
Absa submits that its defences to Spar’s claim have to be
understood against the backdrop of the Payment Association
of South
Africa (“PASA”) Rules and the concept of a payment
system, more particularly, the payment system that exists
in terms of
the EFT Debit Pull PCH Agreement (“the Debit Pull payment
system”). PASA is an association of banks operating
in the
country that regulates the participation of its member banks and
other role players in the various payment systems that,
collectively
comprise the South African National Payment System.
[32]
Spar collected payments from Trifecta’s Absa account in terms
of the: (a) National Payment System Act, No. 78 of 1998;
(b) “Payment
Clearing House Agreement for the Clearing of EFT Debit Payment
Instructions (“EFT Debit Pull Agreement”);
(c) Rules
Governing the Clearing of Debit and Credit Electronic Funds Transfer
Payment Instruction (“EFT Rules”).
[33]
The South
African National Payment System is “a set of instruments,
procedures and rules that allow consumers, businesses
and other
organisations to transfer funds, usually held in an account at a
financial institution to one another.”
[6]
The South African Reserve Bank Act
[7]
mandates the South African Reserve Bank (“the SARB”) to
oversee the regulation of the National Payment System and ensures
its
safety, soundness and efficiency.
[8]
The National Payment System Act
[9]
(“the NPS Act”), in turn, provides the framework for the
SARB’s management, administration, operation, regulation
and
supervision of payment, clearing and settlement systems in South
Africa.
[10]
The NPS Act
defines a “payment system” as “a system that
enables payments to be effected or facilitates the circulation
of
money and includes any instruments and procedures that relate to the
system”. The Debit Pull payment system is a “payment
system” as defined. The SARB document entitled “Oversight
of the South African National Payment System” (“Oversight
Brochure”) describes the significance of the National Payment
System in the following terms:
[11]
‘
A payment system,
as defined by the Bank for International Settlements (BIS), consists
of a set of instruments, banking procedures
and interbank funds
transfer systems that ensure the circulation of money.
A national payment system
is one of the principal components of a country’s monetary and
financial system and is, therefore,
crucial to a country’s
economic development, since almost all economic transactions involve
some form of payment. Payment
and settlement systems thus play
a crucial role in a market economy, and central banks have always had
a close interest in them
as part of their responsibilities for
monetary and financial stability.
Well-designed and managed
payment systems help to maintain financial stability by preventing or
containing financial crises, and
help to reduce the cost and
uncertainty of settlement, which could otherwise act as an impediment
to economic activity. Financial
instability may be
characterised by banking failures, intense asset price volatility,
interest and exchange rate volatility, liquidity
problems, and
systemic risk, which are often manifested in the disruption of the
payment and settlement system.
Payment systems not only
entail payments made between banks, but encompass the total payment
process, including systems, mechanisms,
institutions, agreements,
procedures, rules and laws. Modern payment systems also involve
the settlement of substantial trade
in financial instruments such as
bonds, equities and derivatives.’
[34]
The EFT PCH Debit Pull Agreement and Payment Clearing House ("PCH")
Agreements and Clearing Rules issued by PASA
(“EFT Rules”)
were agreed to and issued under the auspices and authority of PASA.
All payment systems are governed
by PCH Agreements and EFT Rules
issued by PASA. The rules are required to be equitable, fair and
transparent in terms of the
National Payment System Act.
EFT
Debit Pull Transaction
[35]
The
Oversight Brochure defines an Electronic Funds Transfer or “EFT”
as a “…computer-based systems used
to perform financial
transactions electronically”.
[12]
EFT payments are governed by two distinct payment clearing house
agreements governing respectively, the inter-bank clearing of
EFT
credit
payment instructions and the inter-bank clearing of EFT
debit
payment instructions. EFT credit transactions are cleared in terms of
the “Payment Clearing House Agreement for the Clearing
of EFT
Credit Payment Instructions”. The Oversight Brochure explains
that an EFT credit occurs “… whenever a
customer of a
bank issues a payment instruction to his or her bank via various
delivery channels to make an electronic payment
to a third party,
accepting that such payment will not be made immediately, but either
later that day or on a future date”.
[13]
These transactions are also referred to as “credit push
transactions”, as it is the bank’s customer that
initiates
or “pushes” the payment from its account for
the credit of the account of the intended beneficiary.
[14]
[36]
By
contrast, an EFT debit, with which we are concerned in this matter,
is “a facility in terms of which somebody can collect
money
from another person’s bank account, without that person having
to do anything other than to give that person written
or recorded
voice approval to do so”. EFT debit transactions are processed
inter-bank (in the case where the user and the
payer are customers of
different banks participating in the relevant clearing house) in
terms of the EFT Debit Pull PCH Agreement.
Transactions in terms of
which such payments are obtained are also known as “EFT debit
pull transactions”, as these
transactions are initiated by the
user that “pulls” a payment, i.e. a debit, from the
paying bank account by instruction
to the paying bank issued through
the banking system, which payment is then eventually credited to the
user’s bank account.
This gives rise to a debt that the paying
bank (Absa in this case) owes the user’s bank (FNB in this
case) that is, after
being netted off against other transactions
between the participating banks in any given clearing cycle, settled
through the “South
African Multiple Option Settlement” or
SAMOS settlement system at the SARB, by book entry in the SARB’s
accounting
system.
[15]
EFT
Debit Pull Agreeement and the EFT Rules
[37]
As members
of PASA, FNB and Absa were bilaterally bound to each other in terms
of the Debit Pull PCH Agreement.
[16]
Absa and FNB bound themselves to the legal instruments referred to in
clause 5 of the EFT PCH Debit Pull Agreement (this
included the EFT
Rules and applicable conventions relating to clearing and settlement
as may be or become applicable to PASA and
its members. Absa was the
paying participant and Trifecta was the payee,
[17]
while FNB was the collecting participant
[18]
and Spar was the beneficiary.
[19]
[38]
The EFT Debit Pull PCH Agreement has to be read in conjunction “Rules
Governing the Clearing of Debit and Credit Electronic
Funds Transfer
Payment Instructions” (“EFT Rules”). Since the
rules are amended from time to time, two versions
of the EFT Rules
applied at the time of the reversal of the nine payments. The first
was version 2009/1 which came into effect
on 1 April 2009, and the
second was the 2009/2 version which came into effect on 1 July 2009.
I will deal further with the two
versions of the EFT Rules and their
applicability to the respective reversals later in the judgment.
EFT
Debit Pull Agreement and reversal of payments
[39]
A debit pull instruction that a user submits to Bankserv will in the
usual course, once processed through the system, give
rise to a
credit (or, more likely, part of a credit) on the user’s bank
account. Such a credit is not final. Paying banks
may, in specified
circumstances, reverse a debit entry on the payer’s account by
passing a credit. The return of EFT debit
pull transactions by paying
banks is underpinned by clause 14.4 the EFT Debit Pull PCH Agreement
which reads:
“
14.4 The
participants agree to conform to the following principles:
14.4.1
Any EFT debit payment instruction delivered by a collecting
participant to a paying participant will contain information
adequate
to enable the payer to identify the payment.
14.4.2
Notwithstanding the risk borne by the collecting participant as
contemplated in clause 5.2.1, the paying participant is obliged
to
accept for processing in accordance with the clearing rules all EFT
debit payment instructions sent to it by the collecting
participant.
For the purposes of this clause ‘processing’ includes all
validation and other procedures, but excludes
any obligation on the
paying participant to ensure that the payment instruction is
fulfilled in accordance with the mandate information
provided by the
payer. If these procedures are not successful, the paying
participant is obliged to return the EFT debit
payment instruction to
the collecting participant.
14.4.3
Where payment has been made by the paying participant and the
payment is subsequently (at any later time) refused or objected to
by
the payer on the grounds that the payment was unmandated or, if
mandated, was made contrary to the mandate information, the
paying
participant is obliged to return the EFT debit payment instruction to
the collecting participant.
14.4.4
The risk of non-payment due to customer error should ultimately be
carried by the respective customers of the participants, and not
by
the participants themselves. To assist the collecting participant in
managing the risks contemplated in clause 5.2.1, a returned
transaction should be accompanied by information adequate for the
collecting participant to advise the intended beneficiary of
the
identity of the intended payer, as well as the reason for the return
and, unless inappropriate, to transfer the risk of non-payment
to the
intended beneficiary or, in certain circumstances, indirectly to the
intended payer.
14.4.5.
… .’
20
How
the Reversal Happens
[40]
It is
Absa’s case that a paying bank (Absa) will pass instructions
regarding the reversal on to the user’s bank (FNB)
via Bankserv
and the user’s bank (FNB) will then debit the user’s
account.
21
Dr Holtzhauzen,
however, questioned the accuracy of this conclusion in his expert
report when he explained that because the whole
process was
automated, FNB did not debit Spar’s account. He stated that the
user bank (FNB) merely stands as a functionary
in the established
system. It does not have any say or control over whether or not to
apply a debit to an account where a reversal
has been processed by a
paying bank (Absa) - this all takes place by way of an exchange of
data packages which automatically process
debits and credits on the
relevant accounts.
[41]
Indeed, as I understood the testimony of Mr Erasmus, he rebutted
Absa’s version that it was FNB that applied the debit
to Spar’s
account in the reversal process, in explaining that when the debit
order payment is processed by way of the pull
transaction, there is
no human intervention at all, and that exactly the same automated
process is followed, in reverse, after
the payer (Trifecta) instructs
its bank (Absa) to effect the reversal. I accordingly accept Dr
Holtzhauzen’s evidence that
reversals take place as part of a
system-driven process which occurs by way of a series of codes passed
between the banks' systems.
The reversals and the resulting debits to
Spar were actioned by Absa through the EFT system. FNB played no
direct role in effecting
the reversals.
The
CAMS Agreement and the FNB User Manual
[42]
The EFT
Rules require that participating banks conclude “user
agreements” with their customers who wish to collect payments
by way of EFT debit pull transactions. The CAMS Agreement served as
the “user agreement” between Spar and FNB.
[20]
They entered into the CAMS Agreement in 2004. In terms of schedule 5
to the CAMS Agreement, FNB undertook to provide an “Online
Collection Service” to Spar, encompassing the transmission of
EFT debit pull transaction instructions received from Spar
to
Bankserv. In terms of clause 1.3.2 of schedule 5 to the CAMS
agreement, Spar undertook to FNB:
‘
... to refund to
the Bank or Customer’s Bank, as the case may be, any and all
amounts paid to the Users in respect of any
such debits if the
Customer at any subsequent time disputes the validity of the
transaction, provided that the Bank or the Customer’s
Bank has
given the Users notice of its intention to reverse the credit
concerned, or it has, in respect of debts less than R500
000,00,
within 30 days after processing reversed such credit and in the case
of debit exceeding R500 000,00, within 4 (four) days
after processing
reversed such credit.’
FNB’s
EFT User Manual is dated 22 July 2008 (“the FNB User
Manual”).
[21]
Its
purpose is “to guide FNB Users/Clients who are registered as
direct submission Users with Bankserv and who utilise the
Electronic
Funds Transfer service.” Spar was familiar with the FNB User
Manual as FNB had provided it with a copy.
[22]
Paragraph 3.4 of the FNB User Manual specifies, among other things,
under the heading “Mandates for Debits” that:
“
Mandates are
revoked under the following conditions:
·
Stop payment;
·
Direct Instruction from the customer to the User;
·
Terminated services;
·
Changes to the conditions under which the mandate was given;
·
If the debit order is unpaid on two consecutive occasions;
·
Account closed.”
[43]
Paragraph 3.9 of the FNB User Manual entitled “Disputed
Transactions (Debits or Credits)” states that:
‘
The Customer has
the right to dispute the transaction/s. Disputed items occur when a
customer declared a dispute with his/her Bank
in relation to payment
instruction which has been posted to his/her account. Disputed items
fall in two categories namely:
Where the dispute is
lodged within 40 calendar days of action date.
Where the dispute is
lodged after 40 calendar days of action date.
Within 40 calendar
days:
·
When a customer disputes a transaction within 40 calendar days after
the action date, the transaction will be returned
electronically
(immediately) to the User’s nominated account for one of the
following reasons:
o
The transaction is not mandated/ he/she did not authorise the
payment.
o
The transaction is in contravention of the mandate.
o
The mandate for the transaction has been cancelled.
o
The transaction has been previously stopped via a stop payment
advice.
After 40 calendar days
o
When the dispute is lodged later than 40 calendar days after action
date the customer’s bank shall give the User’s
bank 30
days written notice to that affect. If the User’s bank
fails within such period to prove to the satisfaction
of the
customer’s bank the validity of the relevant authorisation then
the customer’s bank shall immediately reverse
the debit to the
User’s account.
o
In the event where the User holds an electronic mandate participant
Banks will not be involved with any process to prove the existence
of
that mandate to their customers.
o
In the event of an entry, being reversed by a customer’s bank
other than in compliance with the aforesaid notice provision
then the
customers bank shall forthwith reinstate such payment instruction
upon resubmission thereof by the User’s bank to
the customer’s
bank, without prejudice to the customer’s bank to revert to the
above procedure on the prescribed basis.
o
Participating Banks cannot become involved in a dispute between their
client and a User.
Delictual
Claim
[44]
In order to
succeed in its delictual claim, Spar must prove conduct,
wrongfulness, fault, causation and damages.
[23]
Although physical injury to a person or property is prima facie
wrongful or unlawful, negligent conduct causing pure economic loss
is
not.
[24]
Spar must, therefore,
demonstrate that policy considerations require that it should be
recompensed by Absa for the loss suffered
as a result of its reversal
of the nine EFT payments made by Trifecta to Spar in the present
case.
[25]
Conduct
[45]
The requirement of conduct is uncontentious as it is common cause
that Absa, acting unilaterally and without the concurrence
of Spar,
reversed the nine payments totalling R2 464 856.32 with the
effect that the monies were removed from Spar’s
bank account
with FNB.
Wrongfulness
[46]
The question of wrongfulness has proved to be one of the most complex
and illusive issues in our jurisprudence. Setting the
boundaries of
delictual liability for pure economic loss (i.e. loss without injury
to person or property) has caused our courts
much concern. In claims
for pure economic loss the defendant will be held liable if it is
established that the possibility of loss
of this nature was
reasonably foreseeable to him, and that in all the circumstances of
the case he was under a legal duty to prevent
such loss.
[47]
In the
context of pure economic loss, wrongfulness is usually determined by
asking whether the defendant owed the particular plaintiff
a legal
duty not to cause patrimonial loss. Ultimately, the question is
whether it would be reasonable to impose liability on a
defendant for
damages flowing from specific conduct that caused pure economic harm,
assessed on the basis of considerations of
public and legal policy in
accordance with constitutional norms.
[26]
This must be determined by carefully balancing identifiable norms
against each other, rather than an intuitive reaction to a collection
of arbitrary factors.
[27]
[48]
Each case
must be assessed on its own facts and merits, with primary weight
being laid upon the policy of the law. The court must
consider
whether, paying due and proper regard to the notion of justice and
the interests of the litigants balanced against the
community as a
whole, it is socially desirable to impose liability in the particular
circumstances.
[28]
The enquiry
“focuses on conduct” and “whether the policy and
legal convictions of the community, constitutionally
understood,
regard it as acceptable.”
[29]
This requires the making of a value judgement. It is, however,
important to recognise that the potential considerations of
policy
would not, on their own, be conclusive. Nor is it possible to attempt
to define exhaustively the factors which would give
rise to a legal
duty, as new situations not previously encountered are bound to arise
and societal attitudes are not immutable.
[30]
[49]
Spar contends that Absa owed it a legal duty of care and should have
taken steps (that it contends a reasonable banker would
have taken)
to prevent Spar from suffering economic loss arising from the nine
payment reversals. Absa counters this with the contention
that the
EFT Debit Pull PCH Agreement and the EFT Rules operate on the
inter-bank agreed basis that a payer can, without providing
a reason,
cause a debit to be returned to the user’s bank by stopping
payment timeously. Such returns have to be effected
within four
business days of the actioning of the debits. If a payer disputes the
user’s authority, returns occur without
reference to the user
or the user’s bank up to 40 calendar days after the payment had
been actioned. Even subsequently there
is a risk, albeit a diminished
risk, that the user’s authority can be disputed. The
implication of Absa’s argument
is that within the first 40 days
the debit order payment remains conditional, because of the right
contained in the EFT Rules and
EFT User Manual for the customer of
the paying bank to give a “un-pay” instruction to the
paying bank.
[50]
It is, however, Spar’s contention that Absa was under a legal
duty to take reasonable steps to avoid patrimonial loss
to it, when
exercising its discretion to decide whether or not to reverse the
payments. It argues that even if Absa was obliged
to follow the EFT
Rules, it had to adopt additional measures to avoid the harm which
was so obviously foreseeable for Spar. The
question that arises,
however, is whether a paying bank in the position of Absa owes a
person who is not its customer, but is the
beneficiary/payee of an
EFT payment, a duty of care to avoid economic loss to such
beneficiary/payee by the negligent reversal
of the EFT payment.
Debit
Order Instruction
[51]
In a debit
transfer or debit order transaction, the authority of the debtor’s
bank (Absa in this case) to debit its account
rests on the debit
order instruction or mandate which the user (Spar) receives from the
payer (Trifecta). Needless to say,
without it, a debit order
transaction cannot take place. What is a debit order instruction? A
signed debit order instruction, such
as the mandate in this matter,
is a contract which allows a party to enter payment instructions into
the inter-bank EFT payment
system on behalf of the account
holder.
[31]
The party in
possession of the mandate, such as Spar in this instance, can then
either load payments directly into the EFT payment
system via
Bankserv or can instruct their own bank to process such payments. In
this case, Spar instructed FNB to process the payments
from Trifecta
pursuant to the debit order instruction.
[52]
In terms of
the debit order instruction which Trifecta gave to Spar, Trifecta
agreed that all withdrawals from its bank account
by Spar shall be
treated as though they had been signed by Trifecta personally.
[32]
Trifecta’s right to cancel the authority was subject to
Trifecta giving Spar 30 days’ notice, in writing, sent by
pre-paid registered post. Trifecta, therefore, clearly understood and
agreed that it shall not be entitled to any refund of amounts
legally
owing to Spar, which Spar had withdrawn while the debit order
authority was in force.
[53]
Central to Absa’s case, is the allegation that Trifecta had
conveyed to Absa (in the person of Ms Koen) that the debit
order
instructions were invalid and not authorised. Unfortunately, the
evidence does not bear this out. Crucially, Ms Koen was
not called by
Absa to testify, despite the fact that she had deposed to an
affidavit on behalf of Absa on 22 June 2012, in which
she says that
Mr Schoeman had telephonically instructed her to make the reversals.
It turns out that Absa’s legal representatives
had consulted
with Ms Koen, but elected not to call her to testify.
[54]
A further defect in Absa’s pleaded case is that its factual
witness, Mr Schoeman, testified that he did not convey to
Absa that
the debit order transactions had been invalid and unauthorised, but
rather that he had instructed Ms Koen telephonically
“to send
back as many debit orders as the system would allow her to do.”
In cross-examination, he testified that he
did not specifically focus
on any particular debit order payment and accepted that he had given
a so-called “shotgun instruction”
to reverse everything
that is capable of being reversed. In addition, when asked in
cross-examination whether he told Ms Koen in
the telephonic
conversation that there was a dispute about stock, he responded by
saying that: “I did tell her there was
a dispute of stock and
that was the reason why I asked her to send back these debit orders”.
However, on being asked: “[Did]
you tell her in respect of
which payments that had already been collected by Spar there was a
dispute, his answer was “No
-- I did not. She did not know
that? –No”. Predictably, Mr Schoeman accepted that the
effect of his reversal instruction
was that Trifecta, in effect,
recouped payments in excess of R2.4 million. Whereas the dispute he
raised regarding the value of
the stock, only related to
approximately R700 000.00.
[55]
Spar urges the Court to draw an adverse inference from Absa’s
failure to call Ms Koen to testify. Indeed, given the circumstances
of this case and, in particular, the weight of Mr Schoeman’s
evidence referenced above, it was expected of Absa to call Ms
Koen to
testify. What I infer from its failure to do so, is that although Ms
Koen was able to give material evidence, her evidence
would have been
damaging to Absa’s case. Thus, the net effect of Absa’s
election not to call Ms Koen to testify, is
that there is no evidence
to support its allegations that Trifecta had conveyed to Absa that
the debit order transactions were
neither valid, nor authorised.
[56]
Mr Schoeman’s evidence that there was no specific instruction
relating to any of the nine payments in issue, but simply
a blanket
instruction to reverse all payments capable of being reversed,
destroyed Mr Erasmus’ expert testimony that Absa
was under an
obligation, in terms of the banker and customer relationship and the
EFT Rules, to reverse the nine debits after it
had obtained
instruction to do so from Trifecta. Since his evidence was based on
the assumption that Trifecta had given instructions
to Absa (Ms Koen)
to reverse the nine payments specifically, he had to concede that
Absa was under no such obligation. Moreover,
in terms of clause 9 of
the Mandate and Indemnity in Respect of E-mail, Faxed and/or
Telephone Instructions which Trifecta gave
Absa, Trifecta agreed
“that Absa would not be obliged to act in response to any
telephonic instruction for any reason whatsoever
and that Absa’s
decision to act or not to act on such instruction is entirely at its
(Absa’s) own discretion”.
[57]
Consistent with this approach, is Dr Holtzhauzen’s testimony
that where the debit order payment has already been made
at the time
when the instruction to reverse is given, human interference would be
necessary to effect the reversal and a credit
manager at the bank (in
this case Absa) would have a discretion whether to reverse the
payments or not. It is clear from this that
Absa was not obliged to
effect the reversal of the nine payments on instructions of Mr
Schoeman.
[58]
On this
point, Dr Holtzhauzen added that the Code of Banking Practice,
which reflects conduct to be expected of reasonable
and prudent
bankers, affirms in accordance with sound banking practice, that a
debit order is to be cancelled by written notice
to a third party in
the position of Spar.
[33]
Both
Dr Holtzhauzen and Mr Erasmus (Absa’s expert witness) were in
agreement that, that which is common knowledge in the
banking
industry is reflected in the PASA website under “consumer
information guidelines”. Commenting on an extract
from these
guidelines on,
inter
alia
,
the process to be followed for disputing unauthorised debits, Dr
Holtzhauzen testified that it was sound banking practice to require
the customer who wishes to dispute an unauthorised transaction, first
to have recourse to the party in the position of Spar in
whose favour
the debit order was signed. He also confirmed that it was sound
banking practice to require that such customer may
only approach his
or her own bank (Absa in this case) to dispute the debit order if the
first course of action (i.e. the approach
to Spar) was
unsuccessful.
[34]
[59]
Mr Erasmus agreed, under cross-examination, that “at least
certain portions of the Code of Banking Practice accords with
good
banking practice”,
inter alia
, the provision that a
debit order must be cancelled by providing written or other
appropriate notification to the party in the
position of Spar.
However, when confronted with the logical implications of the Code of
Banking Practice, he attempted to describe
it as being purely
informational. That this did not signify its purport, was made clear
by Dr Holtzhauzen, who confirmed that banking
practice is governed by
a number of statutory instruments, inter-bank agreements, the Code of
Banking Practice and other instruments
such as the EFT Rules. He said
that the Banking Association of South Africa ("BASA")
produced a Code of Banking Practice
which is subscribed to by most of
the banks in South Africa. Although subscription to the Code is
voluntary and therefore not enforceable
as a legal rule, Absa
has pledged its commitment to the Code of Banking Practice. Having
done so, Absa endorsed the Code
as representing the standard of
practice expected of a banker. Mr Erasmus ultimately accepted that
employees of Absa should be
alive to, and aware of, the Code of
Banking Practice when accepting instructions to reverse debit order
payments. This means that
Ms Koen ought to have asked Mr Schoeman for
proof that Trifecta had notified Spar in writing that he was
cancelling the debit order.
[60]
Mr Erasmus also conceded that PASA informed bank customers through
its guidelines (referred to above) that, if they wanted
to dispute
transactions, their first recourse is to the party in Spar’s
position, and only if this course of action has proved
to be
unsuccessful, may the customer approach its bank to dispute the
order. He accepted, under cross-examination, that when Mr
Schoeman of
Trifecta had approached Ms Koen, she should have indicated to him
that he could only approach her if he had already
taken the matter up
with Spar. He also conceded that Ms Koen would have been aware that
the standard debit instruction has
a clause requiring
cancellation only upon thirty days written notice and that, in terms
of the PASA guidelines referred to above,
she should have asked Mr
Schoeman whether he had a copy of the mandate available.
[61]
Dr Holtzhauzen testified that in practice, a debit order instruction
is usually cancelled before a disputed payment is processed
from the
account holder's account. Commenting on the debit order instructions
(specifically during the period April 2009 to July
2009), Dr
Holtzhauzen confirmed, in his evidence in chief, that all banks, at
the time, were exposed to debit order instructions
and would have had
working knowledge of its essential terms.
[62]
He was of the view that the instruction to reverse payments which
have already been processed is unusual and may give rise
to suspicion
of irregular activity. He said that, despite Absa alleging that it
received instructions from Trifecta at the end
of June 2009, a
dispute existed and that payments should be reversed, Absa still
allowed various transactions to be processed from
Trifecta's account,
the last of which (item 9 on annexure B to the pleadings) was paid to
Spar on 3 July 2009, which was subsequent
to the alleged cancellation
of the retailer's authority. He said that if the cancellation of the
authority was indeed valid at
the time, and Absa had followed
standard protocols subsequent thereto, no further payments could have
been processed by Absa from
Trifecta’s account.
[63]
He said, over and above that consideration, and given the obvious
risk of financial harm to Spar, Absa should also not have
given
effect to the alleged instructions if the objective facts and
circumstances were such as to call for an investigation or
verification, for example, if the instruction on the face of it was
not lawful or was not given for
bona fide
purposes. The
considerable lapse of time of itself created the risk that Spar would
have continued to supply goods to the retailer
on credit in the
belief that it was being paid.
[64]
He said that the banks have protocols in place, for steps to be taken
if an account holder acts suspiciously,
inter alia,
where
debit orders are involved. In his opinion, a bank's representative
who thinks that there may be any suspicious activity involving
debit
order payments, has a positive obligation to report such activity to
his or her superior with a view to investigating such
conduct. He was
further of the view that multiple reversals of EFT debit order
payments constitute suspicious activity by an account
holder. On this
aspect, he emphasised that the banks have recognised the risk
involved in these instances and have, as a result,
put in place
a measure, that every reversed payment must be accompanied by a
specific instruction − record of which should
be retained by
the bank in question.
[65]
He testified that standard banking practice is for a bank always to
request a written or electronically recorded instruction
from their
client, before processing any reversal at the instance of the client.
He explained that, in terms of the EFT Rules in
effect during the
period April 2009 to 30 June 2009, only written reversal instructions
were accepted. And despite their
amendment from 1 July
2009 onwards, the banks almost uniformly still required written
reversal instructions from their clients
before processing any
reversal. He said that once a payment has been reversed due to
cancellation of the authority, no further
debit orders can be
processed from the account in question, to the recipient in question,
until a fresh debit order instruction
has been executed. He was of
the opinion that the processing of further debit orders by a creditor
would, in itself, be suspicious
in light of the client's notification
of cancellation of the debit order instruction.
[66]
Mr Erasmus was constrained to concede that Absa would have been aware
of the general content of debit order instruction in
question, as its
formulation was very similar to Absa’s one. He nevertheless
maintained that, on the strength of the Debit
Pull Agreement and the
EFT rules, Absa was permitted and obliged to give effect to
Trifecta’s reversal instructions. In retort,
Spar contends that
neither the Debit Pull Agreement not the EFT Rules should have any
effect in determining Spar’s claim
against Absa, because the
Debit Pull Agreement is an agreement between the banks only and Spar
is not a party thereto. Likewise,
so it contends, the EFT Rules are
made by PASA whose members are only banks.
[67]
The
evidence of Dr Holtzhauzen is instructive on this aspect. According
to him, the Debit Pull Agreement and the EFT Rules relied
upon by
Absa are made "by the banks, for the banks". External
parties, such as customers of the banks, generally have
no knowledge
of the contents of the inter-bank agreements and the EFT Rules, which
are usually closely guarded and are not disclosed
by the banks.
[35]
Mr Erasmus agreed in the experts’ joint statement. It is,
therefore, common cause that although the EFT Rules have
contractual
force between the participating banks, they are not intended to
create enforceable rights for their respective clients.
EFT
Rules on reversal of payments
[68]
However, to the extent that Absa contends that the EFT Rules are
applicable, it is important to deal upfront with why its reliance
on
them is ill-conceived. The EFT Rules which were effective until 30
June 2009 and which covered items 1 to 8, alternatively 1,
2 and 8 on
Schedule B, are:
(a) Clause 2.16 which
defines “item” to mean the same as transaction.
(b) Clause 2.42 which
defines “disputed item” to refer to:
“
an
item which the customer declares in writing that:
1.
He/she did not authorise the drawing in question; or
2.
The drawing is in contravention of his/her authority, or
3.
He/she has instructed the user to cancel the authority.”
[emphasis added]
(c) Clause 3.1.4.2.1
provides:
‘
A
customer’s authority shall only be regarded as being in dispute
if he/she declares in writing that:
1.
He/she did not authorise the drawing in question; or
2.
The drawing is in contravention of his/her authority, or
3.
He/she has instructed the user to cancel the authority, or
4.
He/she has stopped payment of the instruction.’
(d) Clause 3.1.4.2.3
reads as follows:
‘
If
a Homing Bank [Absa] receives a complaint from a customer about an
allegedly unauthorised payment instruction to the customer
homing
account the Homing Bank is entitled to act as follows:
(1)
If the complaint is lodged within forty days after Action Date it
must reverse the debit immediately to the user’s nominated
account.”
On
reading clause 3.1.4.2.3 in the context of clause 3.1.4.2.1, it is
clear that the complaint must be in writing.
(e) Clause 3.1.11
entitled “Processing of disputed items including fraudulent
payment instructions that have entered the clearing
environment and
which are identified after payment” reads as follows:
‘
3.1.11.1
Disputed items must be returned to the Collecting Participant [FNB] …
3.1.11.2
An item may be declared a disputed item if one or more of the
following reasons are valid:
1.
The transaction is not mandated or authorised.
2.
Transaction is in contravention of the mandate or authority.
3.
The mandate or authority for the transaction has been cancelled.
4.
The transaction has been previously stopped via a stop payment
advice.”
[69]
The EFT Rules which came into effect on 1 July 2009 contain
provisions identical to those in clauses 2.16, 2.4.2, 3.1.4.2.3,
3.1.11 and 3.1.11.4 of the earlier version referred to above. The
only material amendment was effected to clause 3.1.4.2.1 which
reads
as follows:
“
If a Homing Bank
receives a complaint from a customer about allegedly unauthorised
payment instruction to the customer homing account
the Homing Bank is
entitled to act as follows:
If the complaint is
lodged within forty days after the Action Date it must reverse the
debit immediately to the user’s nominated
account …”
[70]
Despite the amendment of clause 3.1.4.2.1 which, in its prior
form, provided that “a customer’s authority
shall only be
regarded as being in dispute if he/she declares in writing that…”,
the definition of disputed item in
clause 2.4.2 has not been amended.
A “disputed item” remains “an item which the
customer declares in writing”
to be in dispute.
[71]
This definition creates an insurmountable challenge to Absa’s
case, as its defence is not that the reversal instructions
were
received by the retailer in writing or that the disputes were
communicated in writing. Its case is that it received oral
instructions from Trifecta advising that a dispute existed with
Spar regarding the amounts of the nine payments, and requesting
that
they be reversed. Thus, Absa’s principle defence that it was
obliged and entitled to act as it did in terms of the EFT
Rules is
unsustainable on a proper construction of the EFT Rules.
[72]
The reversals were not effected in accordance with the EFT Rules or
the EFT Debit Pull PCH Agreement relied upon by Absa, as
the pivotal
requirement that a dispute must be declared in writing was not
complied with. Crucially, Mr Schoeman’s communication,
on the
strength of which Ms Koen effected the reversals, was made
telephonically and not in writing. Moreover, any dispute purportedly
raised by Mr Schoeman was not valid as it did not comply with clause
3.1.11 of the EFT Rules because it was not based on any of
the four
specified reasons, namely that the payments to be reversed had: (a)
not been mandated or authorised; (b) been made in
contravention of
the mandate or authority; (c) been made in terms of a mandate or
authority which had been cancelled; or (d) been
previously stopped
via stop payment advice.
[73]
Mr Erasmus also agreed that in terms of the EFT Rules which applied
with effect from 1 April 2009, Absa was not obliged to
reverse the
debits in question as contended for in his expert summary, because
the rules required a written instruction,
whereas the instruction in
question was given telephonically. Thus, as alluded to above, Absa’s
pleaded case that Mr Schoeman
had conveyed to Ms Koen on three
separate occasions, being on or about 30 June 2009 and 1 and 2 July
2009, that he disputed the
validity of the debit order transactions,
was also not borne out by the evidence of Mr Schoeman. Put simply,
the evidence does
not establish that any of the reversals were
effected on the basis of disputed authority, contemplated in clause
3.1.11 of the
EFT Rules. Mr Erasmus, accordingly, accepted
that, on the common cause facts no dispute, as envisaged in the EFT
rules of
1 April 2009, came into being in respect of the debit order
payments in question. Absa was, accordingly, not entitled under the
EFT Rules or EFT Debit Pull PCH Agreement to reverse the nine
payments in issue in this matter.
Policy
Considerations
[74]
Thus having
regard to the facts of the case, the Court must decide whether as a
matter of policy Absa should be held liable for
the economic loss
claimed by Spar. Policy considerations applicable to the recognition
of a legal duty on a collecting bank towards
the owner of a stolen or
lost cheque, have application here.
[36]
I now turn to these considerations.
Potential
Multiplicity of Actions and Indeterminate Liability
[75]
Concerning
the potential of multiplicity of actions and indeterminate liability,
Absa contends that once an obligation is recognised
for an outsider
to a contractual obligation, to conduct itself without negligence in
relation to the purely economic interests
of another legal subject
arising from that party’s contract with a further legal
subject, the spectre of a multiplicity of
actions and indeterminate
liability will loom large. I disagree. It is common cause that
the loss in the present case is
finite and limited to the nine
payments which were reversed by Absa. The number of potential
plaintiffs is also limited, as Spar
is the only plaintiff. It is also
clearly identifiable. The objection of limitless or indeterminate
liability does not arise. Potential
claims will arise separately from
each other and relate to specific conduct of a bank.
[37]
[76]
Absa’s
floodgates argument is unsustainable for the further reason that it
is clear from Mrs Swanepoel’s evidence, that
contrary to her
experience where debit order payments are reversed between 2 to 4
days, this was the first time in her twenty-two
years of working for
Spar, that debit order payments were reversed after such a long lapse
of time.
[38]
The
Plaintiff’s Vulnerability to Risk and Ability to Protect its
Own Interests in the Circumstances
[77]
This
enquiry relates to whether a plaintiff could not reasonably have
avoided the risk of economic harm by other means. A finding
of
non-vulnerability on the part of the plaintiff is an important
indicator against the imposition of delictual liability on the
defendant.
In
Country Cloud Trading CC v MEC, Department of Infrastructure
Development
,
[39]
the SCA recognised that “[i]f the plaintiff has taken, or could
have taken steps to protect itself from the defendant's conduct
and
was not induced by the defendant's conduct from taking such steps,
there is no reason why the law should step in and impose
a duty on
the defendant to protect the plaintiff from the risk of pure economic
loss”. The plaintiff’s vulnerability
to harm from the
defendant's conduct is thus a prerequisite to imposing a legal
duty.
[40]
[78]
Absa’s point of contention is that Spar, of its own volition,
chose to use the EFT Debit Pull payment system as the means
to obtain
payment, twice a week, for variable payments due to it. In doing so,
Absa contends that Spar committed itself to an expressly
specified
contractual relationship with FNB in terms of the CAMS Agreement,
which was subject to FNB’s EFT User Manual. Absa
submits that
both the User Manual and the CAMS Agreement unequivocally pointed out
the possibility that EFT debit pull transactions
could be reversed at
the payers’ behest without much ado, a substantial period after
the action date. Absa, furthermore,
argues that Spar could have
avoided the risk altogether if it opted to use, the EFT Credit Push
payment system where the receipt
of payments are final and
irrevocable or, a “signed cheque book method” which would
have eliminated the risk of payments
being returned over a period
beyond a couple of days.
[79]
It is clear from its terms that, as a party to the CAMS Agreement,
Spar accepted the risk that, if a payer objected to a payment
debited
against its account on the grounds that it was unmandated or was made
contrary to mandate information or that the mandate
was cancelled,
the paying bank will be obliged to return the payment to the user’s
bank. In other words, it assumed the risk
of payment reversals where
the retailer disputed the transaction on permissible grounds. As with
the EFT Rules, the FNB User Manual
contemplates that before a payment
is reversed, it will be disputed in writing by the customer for one
of the following reasons:
(a) the transaction is not mandated as
he/she did not authorise the payment; (b) the transaction is in
contravention of the mandate;
(c) the mandate for the transaction has
been cancelled; (d) the transaction has been previously stopped via a
stop payment advice.
As I have already found, Mr Schoeman did not, in
writing, dispute any one of the nine transactions within 40 calendar
days after
the action date of the transactions. He simply instructed
Ms Koen, telephonically, to reverse as many payments as was possible.
By the same token, I reject the argument that Spar could have
avoided the risk altogether if it opted to receive payments
through
the EFT Credit Push payment system or “the signed blank cheque
book.” The risk of reversal in circumstances
where Absa was not
entitled to reverse the payments, is not what Spar consented to.
[80]
Spar’s vulnerability to the risk of economic loss is
established on the evidence. Since the nine reversals took place
without Spar’s knowledge or consent, there were no protective
measures available to it. In the circumstances, it was not
in a
position to take steps to protect itself from Absa’s negligent
conduct in reversing the nine payments.
The
Social and Economic Costs of Imposing Liability
[81]
Absa contends that the fundamental premise that underpins the EFT
Debit Pull payment system, contemplated in terms of the EFT
Debit
Pull PCH Agreement and the EFT Rules, is that the participating banks
should not become involved in or become party to disputes
between
payers and users about their contractual rights and obligations, i.e.
whether payments debited against payers’ accounts
were actually
due and payable or not. It argues that the banks adopted that premise
for obvious reasons – if a customer complains
to a bank that a
debit on its account is unauthorised, the bank has to reverse the
debit, unless it can show that the debit was
authorised. Absa argues
that if the banks have to, with a view to protecting the interests of
users, to satisfy themselves across
the board of the validity of
complaints made by payers about the validity of debit order debits on
their accounts, the convenience
and facility of operation of the EFT
Debit Pull payment system will be undermined and the costs of making
it available will escalate;
costs that will ultimately fall to the
public at large. Absa seeks to persuade the Court that it would be
unreasonable to expect
of banks to employ substantial resources to
establish systems to undertake investigative and adjudicative
functions, in respect
of the receipt of instructions from a
payer countermanding payment on a permitted ground, as banks are
ill-suited to do so
- hence the principle that if disputes arise
between payers and users, transactions should be returned to their
origin.
[82]
Absa’s seeks once again to obfuscate the true nature of its
negligent conduct in this matter. I reiterate, Absa (through
the
person of Ms Koen) did not receive an instruction/s from Mr Schoeman
countermanding payment, of the nine debit pull transactions,
on
permissible grounds. His instruction was unlawful and invalid and
Absa was under no obligation to act in accordance with it.
Absa was,
furthermore, under no obligation to act, and should not have done so,
as Ms. Koen had not obtained written instructions
from Mr Schoeman to
reverse any of the nine payments.
[83]
In relation to the contention advanced by Absa that the banks do not
involve themselves in disputes between their customers
and third
parties, Mr Erasmus conceded that Ms Koen would not have involved
Absa in any dispute between Trifecta and Spar if she
had asked Mr
Schoeman whether he had a copy of the mandate available or whether he
had first taken up the matter with Spar. It
is, furthermore, clear
that if she had said to Mr Schoeman, on the second or third occasion
that he had phoned her, that it is
strange that he was now disputing
nine payments to a value of R2.5 million and that some of these
payments had been made weeks
ago, she would not have been initiating
a dispute between Trifecta and Spar.
[84]
There was
no obligation on Absa to reverse the nine payments on the
instructions of Mr Schoeman. A prudent banker in the position
of Absa
would have first established from Mr Schoeman whether the mandate was
cancelled. It was open to Absa to take this protective
measure in
order to establish whether the mandate had been cancelled by
Trifecta, and to place the funds in a suspense account,
pending
resolution of any dispute which may have arisen.
[41]
Concerning this question, Mr Erasmus conceded that it would have been
possible in 2009 for Absa to reverse the debits in question
to a
suspense account, and that if this was done, the reversals would not
have been final. He agreed that this would not lead to
the collapse
of the EFT payment system.
[85]
In relation to the question of the ease with which the protective
measures could have been implemented, it would have been
fairly easy
for Ms Koen to request Mr Schoeman to provide proof that the mandate
had been terminated in writing. She would have
been aware that the
mandate required termination by 30 days’ notice in writing.
Although Absa denied that it had sight or
possession of the debit
order authority which Trifecta signed, Mr Erasmus accepted, under
cross-examination, that Absa knew that
such a debit order instruction
was essential for pull transactions to be effected, and that the
terms of the debit order instructions
would in all likelihood be
similar, if not identical, to Absa’s own specimen form.
Moreover, Mr Erasmus did not indicate
that there would be any
particular difficulty in placing the funds in a suspense account.
Erasmus, nevertheless, ventured the opinion
that if a duty of care to
investigate suspicious debit order payment reversal instructions is
to be imposed on banks that are participants
in the EFT system, to
investigate whether their customer’s dispute in relation to the
transacation is a valid one, and to
consider the potential impact
that reversal of prior debits on their customer’s accounts
might have on the clients of other
banks, with whom they have no
agreement or banker client relationship, the EFT system will not be
able to operate. He, however,
conceded that this proposition
was based purely on his understanding of the EFT Rules which make no
mention of a duty of
care to a third party.
[86]
On the question of the likelihood of success of such protective
measures, it is clear from Mr Schoeman’s evidence that
he had
not cancelled the mandate in writing. In the light of this, it is
obvious that he would have been unable to produce proof
that he had
cancelled the mandate in writing.
[87]
It is obvious that the protective measures outlined above, could have
been taken by Ms. Koen without any appreciable cost to
Absa. I,
therefore, remain unpersuaded that the financial and social
consequences of imposing liability on Absa will be associated
with
any particularly onerous burden on either itself, its customers, or
the the public at large.
Are
There are any Considerations of Equity, Fairness and Policy which
Favour a Denial of the Remedy?
[88]
I am aware
of no considerations of equity, fairness and policy that favour a
denial of the remedy. Of particular relevance to the
question of
whether to extend a duty of care to a third party not to reverse EFT
payments without doing more, is the decision of
Peterson
and Another NNO v Absa Bank Ltd,
[42]
where the court recognised that a bank has a legal duty to avoid loss
to customers and third parties when opening and subsequently
monitoring bank accounts.
[43]
The development of the law to extend a legal duty to avoid economic
loss to a third party not to reverse EFT payments without doing
more,
would not be out of step with the law as it currently stands.
[89]
The policy
considerations relied upon by the courts in finally recognising that
the collecting banker owes the true owner of a cheque
a legal duty
are of assistance in the present context. All the considerations
taken into account in
Indac,
[44]
for recognising a legal duty on the collecting banker vis-à-vis
the true owner of the cheque apply directly, or at least
by way of
analogy, to the present case. As is the case in relation to a cheque,
there is an ever present risk that payment can
be obtained by an
unlawful possessor with relative ease. Hence the need for protection
in the case of the true owner of a cheque.
In the present case, it
was not disputed that the banking business takes place in a high risk
milieu in which the risk of patrimonial
loss to,
inter
alia
,
third parties remains a constant concern.
[45]
Pertinently, in relation to the facts of the the present case,
is Mr Erasmus’ acknowledgement that a substantial risk
existed
that a debtor in financial trouble, as in this case, could easily
raise a bogus dispute as a pretext for giving instructions
to reverse
debit order payments. This underscores the need for the legal
protection of the interests of a third party, beneficiary/payee
of an
EFT payment, in the position of Spar.
[90]
It is also not an insubstantial consideration that at the time of the
reversals Trifecta was in debit with Absa by virtue of
the
substantial overdraft facilities it enjoyed. The net effect of Absa’s
reversal of the debit order payments in favour
of Spar was to prefer
Absa, as a creditor of Trifecta above Spar, by reason of the
reduction in Trifecta’s indebtedness to
Absa as a result of the
crediting of the reversed entries to Trifecta’s account with
Absa. Tellingly, Absa was putting pressure
on Mr Schoeman to settle
Trifecta’s R2 million overdraft. In an e-mail to Spar, on 1
July 2009, under the caption “Absa
Bank”, he states: “I
informed you that Absa has become jittery and was in the process of
placing increased pressure
on me to settle the R2 million overdraft
in full. I have noted today that they have sent back more debit
orders… .”
Under cross-examination, Mr Schoeman
indicated that his relationship manager at Absa had conveyed this to
him, on 1 July
2009, when it became clear that the purchase price of
R5 million from the sale of his business had not been paid. The funds
from
the sale of the business were to be used to settle the
overdraft.
[91]
As I see it, this is not a case where Absa acted legitimately and
with
bona fides
. It is about imposing a legal duty on Absa
where there was no justification for the reversals under the EFT
Debit Pull PCH Agreement
nor the EFT Rules. It is of particular
concern that Absa benefitted directly from its non-compliance. A bank
is, in general, not
obliged to blindly follow its customer's
instructions given pursuant to a banker-customer relationship. In a
situation where a
bank has a discretion to reverse a payment as Absa
did in this case, the bank would have a legal duty to a
beneficiary/payee of
an EFT payment, such as Spar, to verify, or to
make enquiries, or to investigate, or to inform or report
instructions given by
its customer. This would be particularly
compelling where there are suspicious or unusual circumstances, such
as we have here,
giving rise to a reasonable doubt about whether the
instructions had been given lawfully and/or in good faith and/or for
the reasons
advanced by its customer.
[92]
Absa, in my view, had a legal duty in the circumstances of the
present case to establish whether the debit order instruction
had
been cancelled in order to avert financial loss to Spar, which was
reasonably foreseeable if the instructions to reverse the
nine
transactions were to be carried out. Even though Absa did not have a
contractual relationship with Spar, it assumed a legal
duty to Spar
(as beneficiary/payee) to exercise its discretion, on the question of
reversing the nine payments, in a manner that
would not facilitate
the breach of Trifecta’s obligations to Spar.
[93]
The weight of the policy considerations that I have considered,
compel me to conclude that that Absa had a legal duty to prevent
economic loss to Spar through its’ negligence. In reversing the
nine payments Absa breached the legal duty it owed to Spar.
Absa
conduct was accordingly wrongful and unlawful.
Negligence
[94]
In
Kruger
v Coetzee
[46]
this court articulated the proper approach for establishing the
existence of negligence as follows:
‘
For the purposes
of liability
culpa
arises if -
(a)
a reasonable person in the position of the defendant -
(i) would foresee the
reasonable possibility of his conduct injuring another in his person
or property and causing him patrimonial
loss; and
(ii) would take
reasonable steps to guard against such occurrence; and
(b)
the defendant failed to take such steps.’
[95]
Negligence
must thus be evaluated in light of all the circumstances. Since it is
the plaintiff who bears the onus of establishing
the defendant’s
negligence on a balance of probabilities, to succeed it must show
that the defendant failed to adopt the
standard of skill, care and
diligence which one would expect from a reasonable prudent banker.
The standard against which the conduct
of the defendant must be
assessed is not the highest level of competence achievable by a
banker but is the degree of skill that
is reasonable, having regard
to the general level and skill and diligence possessed and exercised
by members of the banking profession.
[47]
The question then is whether a reasonable banker would have foreseen
the damage and taken steps to avoid it.
[96]
Dr Holtzhauzen testified that the banking business takes place in a
high-risk milieu in which the risk of patrimonial loss
to,
inter
alia
, third parties remains a constant concern. He said that if a
bank’s representative believes that there may be any suspicious
activity involving debit order payments, he or she has a positive
obligation to report such activities to his superiors at the
bank
with a view to conducting an investigation. His testimony on these
two aspects was not seriously contested. He furthermore
testified
that the “
cluster of reversals
” forming the
subject matter of this case was suspicious activity by Trifecta, and
contrary to the previous conduct on Trifecta’s
account. He was
of the opinion that a reasonably prudent banker in the position of
Absa would reasonably have foreseen financial
harm to Spar, as the
beneficiary of an EFT debit transfer, if it were to execute any
instructions received from the retailer, to
reverse a debit transfer,
and it subsequently transpired that the reversal instructions were
given erroneously or in bad faith.
The party to be adversely affected
by the requested reversal would be restricted and immediately
identifiable, namely Spar. Furthermore,
the risk of financial loss to
Spar in circumstances where the retailer had sold its business and
its bank account with Absa was
in debit, was relatively certain or
very likely.
[97]
Dr
Holtzhauzen was, furthermore, of the opinion that a reasonable banker
in the position of Ms Koen would have verified whether
the debit
order instruction had in fact been cancelled by requesting proof of
its cancellation and, pending verification of the
veracity of the
reversal instructions, not given effect to the instructions to
reverse any of the transactions, in order to guard
against the
occurrence of foreseeable harm to Spar.
[48]
In his view, a reasonable banker in the position of Absa would have,
in evaluating the reversal instructions of Mr Schoeman, taken
into
account the following considerations:
(a) the ever present risk
that payment reversal instructions can be given by an unscrupulous
debtor with relative ease, and that
the banker's failure to act in a
reasonable manner can result in a loss for the third party creditor;
(b) that a considerable
period of time had elapsed from the date of payment until the date of
the reversal instructions should have
aroused suspicion;
(c) that the value of the
individual transactions, as well as the combined value was such that
the instructions required verification;
(d) that Mr Schoeman had
provided no grounds for the belief that Trifecta was not owing the
amounts in question to Spar;
(e) that Absa enjoyed a
discretion to execute Trifecta’s instructions in terms of
the Mandate and Indeminity in
Respect of E-mail, Faxed and/or
Telephone Instructions (ACBB);
(f) the precarious
financial position of Trifecta and that Absa was pressurising it to
settle the overdraft;
(g) that the probable
consequence in the absence of taking precautionary measures would be
serious in that the amounts involved
were material and significant;
(h) not having been
informed of or consented to the reversal instructions, Spar was not
in a position to protect its own interests;
and
(i)
that Absa
had the means to avert the risk, and such precautionary measures were
not costly and could be implemented with relative
ease.
[49]
[98]
Needless to say, despite Absa foreseeing the economic loss that Spar
would suffer by exercising its discretion in favour of
reversing the
nine payments, it failed to take any of the reasonable steps
mentioned above. Absa was negligent in the manner in
which it managed
the affairs of Trifecta's account in circumstances where harm to a
third party, such as Spar, was reasonably foreseeable.
Crucially,
Trifecta's statements of account indicate that there were adequate
funds available to meet each of Spar’s debit
orders when they
were processed. There was also no written or recorded instructions in
Absa’s possession to confirm or verify
that the reversal
instructions were properly given by Trifecta or its representative.
Voluntary
Assumption of Risk
[99]
Absa’s submissions under this head is a repetition of its
earlier argument that Spar, as a corporate entity, must have
had
knowledge of the inherent risk that utilising the EFT Debit Pull
payment system encompassed, and that in opting for the convenience
of
the system, Spar assumed and accepted the risk that payments could be
returned to it on the basis of instructions from retailers
to their
banks that Spar had not been entitled to debits “pulled”
from their accounts, even if payment had actually
been due. That
assumption of risk, so it argues, negatived any potential
wrongfulness on the part of paying banks, including Absa,
acting on
the instructions of their Spar retailer customers, for failing to
take steps to protect Spar’s purely economic
interests.
[100]
Absa bears
the onus to prove the special defence of voluntary assumption of
risk. I am, however, of the view that it has failed
to do so.
[50]
As repeatedly stated in this judgment, the risk that Spar assumed in
electing to use the EFT debit pull payment system to collect
payments
from its retailers, is not the risk that eventuated. That risk was
created by Absa’s wrongful and unlawful conduct
in reversing
the nine payments that were credited to Spar’s bank account
without complying with the Rules.
Contributory
Fault
[101]
Absa contends that by continuing to grant substantial credit to
Trifecta when it already owed Spar a large sum in unsecured
credit,
Spar failed to take reasonable precautions to protect its own
economic interests, but exposed itself to vulnerability that
payments
debited against Trifecta’s account could be returned on a basis
that the EFT Debit Pull payment system permitted
and would then be
irrecoverable.
[102]
There is no merit in this argument as the evidence clearly indicates
that the nine reversals were not made for reasons that
were valid and
lawful as contemplated in the EFT Rules, the EFT Debit Pull PCH
Agreement or the FNB User Manual. That there were
a series of payment
returns prior to the reversal of the nine in question, is also not an
indication of Spar’s contributory
fault. Those reversals (which
comprised mostly stop payments and debit order cancellations) were
made within the permissible bounds
of the instruments referred to
above. In these circumstances, it cannot be said that Spar
contributed to the loss it suffered as
a result of Absa’s
negligent reversal of the nine payments credited to Spar’s bank
account.
Causation
and Loss
[103]
Lastly, in
so far as causation is concerned,
it
is not in dispute that as a result of Absa’s reversal of the
nine payments by Trifecta to Spar, Trifecta’s debt to
Spar
increased by the same amount. It is also not disputed that Spar
eventually only recovered R1 743 000.00 of the
R11 200 000.00 unsecured debt which Trifecta owed to
it.
[51]
[104]
Absa, however, contends that Spar has advanced no evidence to prove
that it was unable to make recovery of the sum at issue
in these
proceedings. It argues that Spar, in any event, did make recovery of
16.44 Cents in the Rand (in respect of what it claims
from Absa) and
it could have made recovery of at least another R993 000.00 from Mr
Schoeman.
[105]
Relying for
support on the cases of
Minister
van Veiligheid en Sekuriteit v Japmoco BK h/a Status Motors
[52]
and Afrisure CC and Another v Watson and Another,
[53]
Spar maintains that it was not obliged to prove that it was unable to
recover the full sum of its damages (or part thereof) in
issue, from
Mr Schoeman or Trifecta in these proceedings. It argues that the fact
that it may have a claim in contract against
Mr Schoeman (as surety)
and/or Trifecta for payment of the sum in question or part thereof,
does not extinguish or reduce its claim
for damages against Absa.
[106]
In
Japmoco
,
Nienaber JA concluded, in a dissenting judgment, that multiple claims
for the same damage or part thereof do not result in a mutual
erasing
of claims.
[54]
There, a
second-hand car dealer claimed damages from the Minister of Police,
arising from the conduct of policemen who provided
false clearing
certificates for stolen vehicles without which the vehicles could not
be registered and resold. Eight of the vehicles
were sold to a
second-hand car-dealer (Pro-fit), who in turn sold them to Japmoco.
Japmoco then onsold seven of the vehicles at
a profit to various
members of the public. All eight vehicles were later seized by the
police. Six of the seven purchasers held
Japmoco liable in terms of
his commom-law implied warranty against eviction, and Japmoco was
forced to compensate each of them
by repaying the purchase price.
Japmoco brought a claim in delict against the Minister of Police for
repayment of the purchase
price which Japmoco had paid to purchasers
of the stolen vehicles. In addition to this claim, Japmoco also had a
claim for payment
of contractual damages against Pro-fit for breach
of its common law warranty against eviction of the vehicles, and a
delictual
claim against the policemen (“the thieves”).
One of the questions that arose was whether the Japmoco’s claim
against Pro-fit extinguished the claim that he had against the
Minister of Police and/or the thieves. Nienaber JA concluded that
it
did not as multiple claims in respect of the same damage (or part
thereof), do not result in the mutual erasing of the claims.
In doing
so, he endorsed the decision of the SCA in
Nedcor
Bank Ltd t/a Nedbank v Lloyd-Gray Lithographers (Pty) Ltd,
[55]
where Scott JA observed:
“
The argument
advanced on behalf of Nedbank was in essence the following. In
determining the loss suffered by the respondent in consequence
of
Nedbank’s wrongful conduct, the right of the respondent to
recover damages from S was an asset in the respondent’s
estate.
Accordingly, so it was contended, the respondent’s claim
against Nedbank fell to be reduced by the value of that
right and as
it was accepted that S had the financial means to satisfy the claim
in full, Nedbank was not indebted to the respondent.
…
Assuming the bank and the
thief to have been jointly and severally liable, the plaintiff would
have been entitled to sue either
wrongdoer for the full amount….if
for purposes of determining the plaintiff’s loss his right of
recovery against the
other wrongdoer had to be taken into account, it
would follow that, if both had financial means, each when sued could
point to
the plaintiff’s right to recover from the other so
that the plaintiff could recover from neither. Quite clearly, once it
is accepted that the full amount is recoverable from any one
wrongdoer, the plaintiff’s right to sue any other wrongdoer
must be disregarded when determining his loss.”
[107]
Although
Nienaber JA concluded that the same line of reasoning applied, he
accepted that the Minister of Police and Pro-fit were
not liable in
solidium (jointly and severally) to Japmoco as it would have been
able to recover more from Pro-fit than from the
Minister of Police
but the central principle applies, namely that if a buyer has a
contractual claim against his seller for his
eviction, it is not an
impediment to the buyer’s delictual claim against the thief who
sold the item to the seller. Nienaber
JA, however, went onto hold
that where the buyer (who was evicted) receives money from either the
thief or the seller in reduction
of his delictual or contractual
claim, that payment must be taken into account.
[56]
The majority in
Japmoco
did not concur with the judgment of Nienaber JA on the following
limited basis:
“
The wrongful acts
at issue caused the respondent [Japmoco] to purchase the motor
vehicles and its conclusion of those contracts
is the source of the
loss for which it now seeks to hold the police liable. The contracts
of purchase incorporated a right of action
against the seller in the
event of it being evicted which depending upon the financial standing
of the debtor, might be capable
of being converted into money thereby
avoiding any loss.
The question is whether
the value of that right of action (assuming that it is established)
must be taken into account in determining
whether the respondent
suffered damages. I do not think that
Nedcor Bank t/a Nedbank v
Lloyd-Gray Lithographers (Pty) Ltd
2004 (4) SA 915
(SCA) answers
that question, either directly or by analogy. The case considered the
position of concurrent wrongdoers in delict
who are jointly and
severally liable (in solidium) for the loss that they have caused,
and the reasoning is not necessarily applicable
to the present
problem.”
[108]
Five years later, the SCA in
Afrisure
endorsed the dicta
referred to above in both
Japmoco
and
Nedcor
, albeit in
the context of a guarantee. Brand JA stated there:
“
With reference to
the guarantee, the argument advanced by the appellants was in
essence, the following: the claims which Publiserve
raises against
the appellants are also claims which it would potentially have
against Medhealth, since each each of the payments
to Afrisure relied
upon was made with the knowledge and consent of Medhealth as
administrator of the scheme. By providing the R10
million guarantee,
so the argument went, Medhealth had indemnified Publiserve from any
loss it might have sustained as a result
of these payments and in
consequence Publiserve has suffered no actual loss.
This
argument is unsustainable. In my view it has already been answered in
this Court in
Minister van Veiligheid en Sekuriteit v Japmoco
…paras 18-25. What the answer amounts to is this. Insofar as
Medhealth was not a proved wrongdoer against Publiserve and
the
guarantee may have been given, not to avoid any existing liability,
but in order to protect the reputation of Medhealth, the
payment
under the guarantee would be regarded as
res inter alios acta
(see eg
Japmoco
para 24;
Santam Versekeringsmaatskappy Bpk
v Beyleveldt
…) In the event, such payments would in law
not be deductible from the amount owing by appellants. But even if
Medhealth
could be regarded as a jointwrongdoer against Publiserve
and therefore liable
in solidium
with the appellants, the
guarantee in itself will not entitle the appellants to any credit. It
is true that Medhealth’s obligation
under the guarantee
constitutes an asset in the Publiserve estate. Nonetheless, that
asset, unaccompanied by actual payment, cannot
as a matter of
principle, be taken into account in determining the liability of the
appellants. Only actual payments would perform
this function (see eg
Japmoco
para 21).”
The
SCA concluded by stating that the underlying reason for this
principle appears from the statement of Scott AJ in
Nedcor
at
921E-G which is quoted above.
[109]
Returning to the facts of this case, Absa and Mr Schoeman (as surety)
are concurrent wrongdoers. If Mr Schoeman is sued by
Spar, he would
be liable
in solidium
for damages in the same amount as Absa
(joint and several liability). That the claim against Mr Schoeman (as
surety) would be contractual,
and the claim against Absa is
delictual, is irrelevant. The principle in
Japmoco
and
Nedcor
(which was endorsed unanimously by the SCA in
Afrisure
) would
apply. Hence, that Spar may also have contractual claims against Mr
Schoeman (as surety) will not stand in the way of Absa’s
delictual claim currently before the Court for the full amount owing,
as a result of its negligent conduct in reversing the nine
payments.
Since the full amount is recoverable from Absa, Spar’s right to
sue any other wrongdoer must be disregarded when
determining its
loss.
[110]
The question that I turn to now, is whether the settlement amount
paid to Spar, pursuant to the Settlement Agreement between
Spar,
Trifecta, Tayegetos, Mr Schoeman and Interactive that was concluded
on 17 July 2009, would reduce Spars’ damages claim
against
Absa. The events leading up to the settlement are outlined earlier in
the judgment, so I do not repeat them. Mr Botten
who negotiated and
signed the agreement, on behalf of Spar, explained the rationale for
the settlement in his evidence in chief.
His testimony on this aspect
is uncontested as he was not cross-examined on it. In essence, the
purpose of the settlement agreement
was to keep the sale of the
business alive. It took the form of an “an informal
distribution scheme” to settle the
claims of the creditors. The
settlement agreement recorded that Trifecta was indebted to Spar in
the total agreed amount of R14
700 000.00 of which R4 100 000.00
was secured. Ultimately, Spar only received R1 743 000.00 of the
unsecured debt of
R11 200 000.00 from Trifecta, which included the
value of the nine payments that were reversed by Absa.
[111]
In the premises, the settlement agreement does not pose an impediment
to Spar recovering the full amount of its damages from
Absa. So too
is the question of whether Spar may have a contractual claim for
damages against Trifecta and Mr Schoeman for the
shortfall, as that
must be disregarded in determining Spar’s loss.
[112]
The last argument raised by Absa is that if payment 1 to 7 in Spar’s
schedule of reversals had not been effected, Trifecta’s
Absa
account would have been pushed beyond its overdraft limit and
payments 8 and 9 would, as a matter of probability, have been
returned “not provided for” in any event. I dismiss this
contention out of hand as Absa has led no evidence to prove
it.
[113]
For all these reasons, I consider Spar to have proved its delictual
claim against Absa for pure economic loss on a balance
of
probabilities.
Order
[114]
In the result, the Defendant is ordered to pay the Plaintiff:
(i) The amount of R2 464
856.32;
(ii) Interest
a
tempore morae
at the rate of 15.5% per annum on the amount of R2
464 856. 32 from the date of service of this summons until date
of payment
in full;
(iii) Costs of the action
which are to include the costs of two counsel.
________________________________________
F
KATHREE-SETILOANE
JUDGE OF
THE HIGH COURT
GAUTENG LOCAL
DIVISION, JOHANNESBURG
Counsel
for the Plaintiff: Mr JP Vorster SC with Mr FP Strydom
Instructed
by: Moss Marsh & Georgiev
Counsel
for the Defendant: Mr F Barrie SC with Mr C.Bothma
Instructed
by: Edward Nathan Sonnenbergs Inc
Date of Judgment: 14
August 2020
[1]
Before electronic banking and debit orders became prevalent, Spar
agreed contractually with its retailers to provide it with
a cheque
book of blank cheques made out to Spar and signed by the retailer.
This enabled Spar to fill in the amount on the cheque
and present it
for collection. There are indications in the case law that a debit
order is in the nature of an electronic cheque.
[2]
A “Payment and Collection System” is described later in
the judgment.
[3]
Emphasis
added.
[4]
Mr Schoeman was a director and shareholder of Interactive. It
was a creditor of Trifecta.
[5]
The
CAMS Agreement will be dealt with more fully later in the judgment.
[6]
South African Reserve Bank: Starter Pack for Participation within
the National Payment System (2009) p. 943.
[7]
No.
90 of 1989.
[8]
Section
10(1)(c)
of the
South African Reserve Bank Act, 1989
provides that
the
SARB may perform such functions, implement such rules and procedures
and in general, take such steps as may be necessary to
establish,
conduct, monitor, regulate and supervise payment, clearing or
settlement systems.
[9]
No.
78 of 1998.
[10]
The SARB’s role in this regard is specified in various
sections of the NPS Act (see ss 3, 4A, 6, 10 & 12).
Section 12 provides for the SARB to issue legally binding
directives regarding a payment system or the application of the
provisions of the NPS Act.
[11]
Oversight Brochure at para 1. Mr Erasmus, Absa’s expert
witness, confirmed the contents of the Oversight Brochure
in
evidence.
[12]
Oversight Brochure, fn 9.
[13]
Oversight
Brochure,
fn 28.
[14]
See
Oversight Brochure, fn 18.
[15]
Schedule 2 of the EFT Debit Pull PCH Agreement specifies its scope
under the heading “Payment Instructions and Transactions
Governed by this Agreement”. It states that:
“[o]nly EFT debit payment instructions issued by a participant
in the PCH or by its customer, and EFT debit payment instructions
issued in respect of the return of such EFT debit payments
where
same are unpaid, may be cleared through this payment clearing
house.”
[16]
Clause 3.1 of the agreement provides that: ‘3.1 The parties,
by entering into this contractual relationship, hereby establish
and
become participants in the PCH, and agree that the rights and
obligations contemplated herein shall govern the clearing of
EFT
debit payment instructions between them”
[17]
Clause
2.2.20 of the EFT PCH Debit Pull Agreement.
[18]
Clause
2.30 of the EFT PCH Debit Pull Agreement.
[19]
Clause
2.2.3 of the EFT PCH Debit Pull Agreement.
20
Own emphasis.
21
Settlement
of the debt arising between the user’s bank and the payer’s
would again have taken place at the SARB, on
the instructions of
Bankserv.
[20]
Since the CAMS agreement was signed in 2004 between FNB and Spar,
its terms are not ad idem with the operation of the EFT Debit
Pull
payment system and EFT Rules that applied in 2009. This presumably
stems from whatever the rules and practices were at the
time that
the CAMS agreement, a standard form document, was drafted. Clause 14
of the CAMS agreement, entitled “Compliance
with the User
Manual”, however, provides that:
“
The
parties shall adhere to the rules, standards and procedures
governing the operation of the System as published in the relevant
User manuals and any amendments thereof as notified in writing to
the Users from time to time. The Bank shall make itself
available to discuss the consequences of such amendments with the
Users.”
[21]
Appendix C to FNB’s EFT User Manual lists the “
Reason
Codes for Return Transactions”
.
In doing so, it specifies the categories under which paying banks
return EFT debit pull transactions to users’ banks.
Returns are identifiable in relation to numerical codes that serve
to inform the user’s bank, as well as the user, of the
reason
for the return of the transaction. A distinction is drawn,
among others, between “Unpaid Reason Codes”
and
“Disputed Transaction Codes”. An EFT debit pull
transaction would, for example, be returned as an “unpaid
item” by the paying bank under code 02 if the payer does not
have sufficient funds available in its account or a sufficient
credit facility to meet the payment. A further basis upon which a
previously processed EFT debit pull transaction can be returned
to
the user’s bank as an “
unpaid
item
”
is under code 04 signifying “Payment stopped (by A/C holder)”.
“Disputed transaction Codes” apply
when the payer has
objected (to its bank) to a payment on the grounds that the payment
was unmandated or contrary to the mandate
information (as
contemplated in terms of clause 14.4.4 of the EFT Debit Pull PCH
Agreement). Code 30 signifies “no
authority to debit”;
code 32 “debit in contravention of payer’s authority”;
code 34 “authorisation
cancelled” and code 36
“previously stopped via stop payment advice”.
[22]
Mrs Swanepoel confirmed this in her evidence.
[23]
Odinfin
(Pty) Ltd v Reynecke
2018 (1) SA 153
(SCA) par 12.
[24]
Fourway
Haulage SA (Pty) Ltd v SA National Roads Agency Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA);
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2014
(2) SA 214
(SCA);
Itzikowitz
v ABSA Bank Limited
2016
(4) SA 432
(SCA) par 8;
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2015 (1) SA (1) (CC).
[25]
Steenkamp
N.O. vs Provincial Tender Board, Eastern Cape
2006
(3) SA 151
(SCA) par 1.
[26]
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2014
(2) SA 214
(SCA) para 21.
[27]
Minister
of Safety and Security v van Duivenboden
2002
(6) SA 431
(SCA) para 21.
[28]
Zimbabwe
Banking Corporation Limited v Pyramid Motor Corporation (PvT)
Limited
1985
(4) SA 553
(ZS) at 564 C - D.
[29]
Loureiro
and Others v Imvula Quality Protections (Pty) Ltd
2014 (3) SA 394
(CC) para 53.
[30]
E
Abrahams & Co v Gross and Cohen
1991
(2) SA 301
(C) at 309
.
[31]
Evidence of Dr Holtzhauzen. See also clause 2.2.8 of the EFT Debit
Pull PCH Agreement defines an ‘EFT debit payment instruction’
to mean “an electronic payment instruction to a paying
participant to make a payment, issued by the collecting participant
or by its customer on behalf and ostensibly under the mandate of the
customer of a paying participant.
[32]
Absa pleaded that Trifecta did not have the intention to make
payment of the nine payments in question (with the implication
that
those payments did not, as a matter of law, take place). This
defence has fallen away rightly so, as there was no suggestion
in
the evidence of Mr Schoeman, who at all relevant times represented
Trifecta, that Trifecta did not have the intention to make
payment
of the nine payments. He, in fact, acknowledged in his testimony
that, in terms of the debit order instruction, Spar
had an “
open
cheque
”
to take an amount according to what they perceived the value of that
order was. The debit order instruction given by the
Trifecta to Spar
made it clear that Trifecta need not have knowledge of, or concur
in, the payment being effected.
[33]
Clause 9.4.1 of the Code of Banking Practice provides that a
customer “must cancel a
debit
order
by
providing written or other appropriate notification to the third
party whom you authorized to make the deductions (ie. the
party in
the position of Spar).
[34]
Dr Holtzhauzen also confirmed that it was consistent with the
requirements that such customer identify himself or herself by
means
of an identification document, and should also present the debit
order mandate if possible.
[35]
Notably, Mrs Swanepoel, who was employed by Spar (North Rand
Division) in 2009 as the Credit Control Supervisor in the Debtor’s
Department testified that she was not aware of the EFT Rules –
neither the 1 April 2009 version nor the 1 July 2009 version.
[36]
Indac
Electronics (Pty)Ltd v Volkskas Bank Ltd
1992
(1) SA 783 (A).
[37]
Indac
Electronics
at
798 D –
E.
[38]
Dr
Holtzhauzen also testified that in the ordinary course payment
reversals occur in the first four days.
[39]
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2014
(2) SA 214
(SCA) at par 30 (referred with approval to the dictum of
McHugh J in
Perre
v Apand (Pty) (Ltd)
[1999] HCA 36
;
(1999) 198 CLR 180
(HCA) at par 118).
[40]
Country
Cloud
(SCA)
at par 30.
[41]
See:
Spar
Group Limited v Firstrand Bank Limited
(Case
No. A145/17) GPD, 23 August 2019.
[42]
Petersen
and Another NNO v Absa Bank Ltd
2011 (15) SA 484
(GNP).
[43]
Indac Electronics (Pty) Ltd v Volkskas Bank Limited 1992 (1) SA
783 (A).
[44]
Indac
at 798
G – H and see 800 G – J.
[45]
Indac
at
para 57.
[46]
Kruger
v Coetzee
1966
(2) SA 428
(A) at 430E-H;
Langley
Fox Building Partnership (Pty) Ltd v de Valence
1999
(1) SA 1
(A) at para 12;
Sea
Harvest Corporation (Pty) Ltd v Duncan Dock Cold Storage (Pty) Ltd
2000
(1) SA 827
(SCA) par 21 where it was emphasised that the true
criterion for determining negligence is whether in the particular
circumstances
the conduct complained of falls short of the standard
of the reasonable person.
[47]
Powell
and Another v Absa Bank Ltd t/a Volkskas Bank
1998
(2) SA 807
(SE) at 819C-820C.
[48]
While Dr Holtzhauzen accepted that the risk referred to would also
be present in every case where there is a reversal on the
basis of
disputed authority, the evidence did not establish that any of the
reversals were effected on the basis of disputed
authority.
[49]
Although Absa cross-examined Dr Holtzhauzen on this aspect of his
expert testimony, Absa did not present any cogent evidence
to
counter his opinion. Dr Holtzhauzen’s evidence on this aspect
stands uncontested. Mr Erasmus, did not, in his expert
report,
address the conduct to be expected of a reasonably prudent banker
when effecting the reversals of debit order payments.
[50]
Castell
v De Greef
1994
(4) SA 408.
[51]
Clauses 3.5 and 3.7.2 of the Settlement Agreement between Spar,
Trifecta, Tayegetos Supermarket, Mr Schoeman and Interactive
Trading 351 (Pty) Ltd t/a Total Elardus Park (“Interactive”)
[52]
Minister
van Veiligheid en Sekuriteit v Japmoco BK h/a Status Motors
2002
(5) SA 649
(SCA) paras 18-22.
[53]
Afrisure
CC and Another v Watson NO and Another
2009
(2) SA 127.
[54]
Japmoco
at
para 21.
[55]
Nedcor
Bank Ltd t/a Nedbank v Lloyd-Gray Lithographers (Pty) Ltd
2000 (4) SA 915
(SCA) at 920G-H.
[56]
Japmoco
at
para 21.