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[1991] ZASCA 190
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Indac Electronics (Pty) Ltd. v Volkskas Bank Ltd. (173/90) [1991] ZASCA 190; 1992 (1) SA 783 (AD); [1992] 1 All SA 411 (A) (29 November 1991)
Case No 173/90 /MC
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
Between:
INDAC ELECTRONICS (PTY)
LIMITED
Appellant
and
VOLKSKAS BANK
LIMITED
Respondent
CORAM:
JOUBERT, HEFER, VIVIER, GOLDSTONE
et
VAN DEN HEEVER JJA.
HEARD:
20 September 1991.
DELIVERED:
29 November 1991.
JUDGMENT
2.
VIVIER JA:
The appellant ("the plaintiff") instituted a delictual action for damages
against the respondent ("the defendant") in the Transvaal
Provincial Division.
The defendant excepted to the alternative cause of action set out in the
plaintiff's particulars of claim and,
in the alternative, applied for the
striking out of certain words in the particulars of claim. The exception was
upheld with costs
by ELOFF DJP who set aside the particulars of claim despite
the fact that the exception only related to the plaintiff's alternative
cause of
action, namely that based on negligence. With the leave of the Court a
quo
the plaintiff now appeals to this Court.
In its particulars of claim the plaintiff alleged that it was the true owner
of a cheque, dated 2
3/...
3.
May 1989, drawn by the defendant's Silverton branch in the sum of R58 218-00
in favour of the plaintiff or order (the payee being
specified as "Indac
Electronics"). The cheque was crossed and marked "not negotiable". The plaintiff
further alleged that it did
not indorse the cheque either in blank or specially
in favour of a certain M J le Roux. That notwithstanding, the defendant's
Wonderboom
South branch received the cheque for collection on 2 May 1989, not on
behalf of the plaintiff but on behalf of Le Roux, who was a
customer of the
defendant at the latter branch. It paid the proceeds of the cheque to him
despite the fact that he had no right to
receive such payment. The plaintiff
alleged that the defendant was aware, alternatively should have been aware of
the fact that Le
Roux was not entitled to payment of the proceeds of the cheque,
and that, in the
4/...
4.
circumstances, as the collecting banker, it owed a duty of care to the
plaintiff as the payee and true owner of the cheque to avoid
causing loss to it
by dealing negligently with the cheque. The plaintiff alleged that the defendant
acted in breach of this duty
and caused the plaintiff to sustain loss in the
amount of the cheque. The basis of the exception was that, in the absence of
actual
knowledge of its customer's defective title, there existed no legal duty
on the part of the defendant, as the collecting banker,
to-avoid dealing
negligently with the cheque. In upholding the exception ELOFF DJP regarded
himself bound by the decisions to that
ef f ect in the Witwatersrand Local
Division in
Yorkshire Insurance Co Ltd v Standard Bank of S A Ltd
1928
WLD 251
and
Atkinson Oates Motors Ltd v Trust Bank of Africa Ltd
1977(3)
SA 188(W).
The question which accordingly arises for
5/...
5.
decision at the exception stage of this case is whether a collecting banker
who negligently collects payment of a cheque on behalf
of a customer who has no
title thereto, can be held liable under the
lex Aquilia
for pure economic
loss sustained by the true owner of the cheque who is not its customer.
This
issue was long regarded as settled in favour of the collecting banker by the
decision in the
Yorkshire Insurance
case,
supra
. In recent years,
however, it has become a controversial one in South Africa, provoking a great
deal of academic discussion. This
was the result of the recognition by this
Court in
Administrateur, Natal v Trust Bank van Afrika Bpk
1979(3) SA
824(A) of Aquilian liability for pure economic loss caused negligently, and the
decisions of the courts in Zimbabwe recognising
such liability to the true owner
of a stolen cheque on the part of a
6/...
G.
negligent collecting banker in the following cases:
Rhostar (Pvt) Ltd v
Netherlands Bank of Rhodesia Ltd
1972(2) SA 703(R);
Philsam Investments
(Pvt) Ltd v Beverley Building Society and Another
1977(2) SA 546(R);
Zimbabwe Banking Corporation Ltd v Pyramid Motor Corporation (Pvt) Ltd
1985(4) SA 553 (ZSC) and
UDC Ltd v Bank of Credit and Commerce Zimbabwe Ltd
1990(3) SA 529 (ZHC). The question of the collecting banker's liability for
negligence was left open by this Court in
Trust Bank of Africa Ltd v Barnes
NO
1975(3) SA 1002(A) at 1011 B on the ground that the plaintiff' s case was
based not on negligence but on fraud.
Before dealing with the decision in the
Yorkshire Insurance
case,
supra
, I should refer to two
earlier decisions of our courts which
were referred to
in that case. In
Leal and Co v Williams
1906
7/. . .
7.
TS 554, (a case which did not concern a collecting banker's duties), a bank
draft, drawn by a bank in England on the Standard Bank
at Johannesburg in favour
of Williams, was posted to Williams, but was intercepted and stolen and
Williams's indorsement forged thereon.
The draft was tendered to Leal and
Company in payment for goods purchased by the thief. Leal and Company received
payment of the
draft from the Bank of Africa. It handed the proceeds to the
thief less the amount owed for the price of the goods. Williams, as
the true
owner of the draft, sued Leal and Company to recover the amount thereof. In
giving judgment against Williams, INNES CJ pointed
out, at 557, that had the
action been brought in England, Williams might have succeeded by ah application
of the doctrine of conversion.
At 558 he quoted the following definition of that
doctrine
8/...
8.
appearing in an English case: "Any person who, however innocently,obtains
possession of the goods of a person who has been fraudulently
deprived of them
and disposes of them, whether for his own benefit or that of any other person,
is guilty of conversion". INNES CJ
went on to say, at 558-559, that in our law
the remedy available to the true owner of stolen property was the
rei
vindicatio
, provided the property was still in
esse
. He might also
bring the
actio ad exhibendum
to recover the property or its value
(should it have been sold or consumed) against the thief or his heirs or against
any person who
received it with knowledge of the tainted title. The fact that
these were the only remedies allowed by our law is inconsistent with
the
doctrine of conversion, which allowed the true owner to sue a
bona fide
intermediary. INNES CJ concluded with the passing remark that "something might
possibly
9/...
9.
be made of the case on the ground of negligence", but said that counsel for
Williams had not. seriously pressed that point.
The case of
Standard Bank
v Estate van Rhyn
1925 AD 266
, which was specifically relied upon by TINDALL
J in the
Yorkshire Insurance
case,
supra
, dealt with the liability
of the drawee or paying banker. One Schultz, the agent of the executor in a
deceased estate, drew a cheque
on the estate account intending to misapply the
proceeds. The drawee banker paid the cheque, which did not comply in form with
the
statutory direction to executors. It was held that since the bank was not
privy to the intended misapplication, it incurred no liability
to its customer
by paying the cheque.
This brings me to the
Yorkshire Insurance
case,
supra
. The
facts of that case, briefly stated,
10/...
10.
were the following. One Harris was the trustee in various insolvent estates
and the liquidator of certain insolvent companies. He
opened bank accounts in
the name of the estates with Barclays Bank while he had his own personal account
with Standard Bank. He proceeded
to steal 19 cheques representing payments due
to the estates, which he presented for payment into his personal account. He
furthermore
drew 45 cheques in favour of himself on the estate accounts at
Barclays Bank which he presented for payment into his personal account
with the
Standard Bank. The Yorkshire Insurance Company, having guaranteed Harris's
fidelity, made good the losses suffered by the
estates and took cession of their
rights. It thereafter sued Barclays Bank as the drawee banker in delict under
the
lex Aquilia
for the losses, alleging actual knowledge by Barclays
Bank of the breach of trust. (
Yorkshire
11/...
11 .
Insurance Co Ltd
v Barclays Bank (Dominion
,
Colonial
and Overseas)
1928 WLD 199).
That case was decided on
exception, GREENBERG J upholding an objection to the plaintiff's main cause of
action (on a point not relevant
for present purposes) and dismissing the
exception against the alternative cause of action. In the course of his judgment
GREENBERG
J said at 206-207 that if it could be established that Barclays Bank
acted with full knowledge of Harris's breach of trust, it would
be liable in
delict under the
lex Aquilia
on the basis of the decision in
Matthews
v Young
1922 AD 492
ie for loss caused by an intentional infringement of the
legal rights of another. Yorkshire Insurance Company thereafter brought
a second
action under the
lex Aquilia
, this time against the Standard Bank as the
collecting banker in respect of all the cheques. It alleged that the
12/...
12.
Standard Bank knew that Harris was misapplying trust funds, alternatively
that the Bank acted negligently and in breach of a duty
of care to enquire
whether Harris was entitled to the proceeds of the cheques received by him f or
the estates and whether he had
authority to draw the cheques which he drew on
the estates in his own favour. At the conclusion of the trial TINDALL J held,
with
regard to the main cause of action, that it had not been established that
the Standard Bank had knowledge that Harris was misapplying
trust funds.
With
regard to the alternative cause of action based on negligence, TINDALL J held
that in our law a bank collecting payment of a
cheque, whether crossed or not,
on behalf of a customer who has no title thereto, is not liable to the true
owner for any loss sustained
by him on the ground of negligence,
13/...
13.
either at common law or under sec 80 of the Bills of Exchange Proclamation 11
of 1902(T). Sec 80 of both the Cape and Transvaal Statutes
provided that where a
banker in good faith and without negligence receives payment for a customer of a
cheque crossed generally or
specially to himself and the customer has no title
or a defective title thereto, the banker shall not incur any liability to the
true owner of the cheque by reason only of having received such payment. TINDALL
J referred to English cases which were decided under
the corresponding section
(sec 82) of the English Statute from which sec 80 in both the Transvaal and Cape
Statutes was taken almost
verbatim. He pointed out, at 278-279, that under
English common law a collecting banker was liable to the true owner of the
cheque,
not by reason of any duty he owed the true owner, but under the doctrine
of conversion. He said
14/...
14.
that sec 82 of the English Statute was designed to afford a protection to the
collecting banker, and that the frame of sec 80 of our
former Statutes was,
similarly, not that of a section designed to impose a liability where none
existed before, but to afford a protection.
In view of the fact that the
doctrine of conversion formed no part of our common law, sec 80 was superfluous,
and did not alter the
Roman-Dutch common law principles. (The Bills of Exchange
Amendment Act 25 of 1943 repealed sec 80 of our former Statutes and substituted
a new sec 80, the precursor to sec 81 of the Bills of Exchange Act 34 of 1964,
which afforded a remedy to the true owner of certain
lost or stolen
instruments.) TINDALL J proceeded, at 281-283, to consider the question whether,
according to Roman-Dutch Law, the
collecting banker owed a duty of care to the
true owner of a cheque not to act
15/...
15.
negligently. After referring to certain authorities dealing with a duty of
care in general terms, he said that the Roman-Dutch authorities
dealt
specifically with the case of a person who innocently received stolen property
and parted with it innocently. Such a person
is not liable to the true owner for
the value of the property, as he would be under English law. The Roman-Dutch
authorities, dealing
with the
actio ad exhibendum
, stated expressly that
the purchaser who buys and disposes of stoien property in good faith is not
liable on any ground, whether
ex
delicto
, upon contract or
quasi
-contract or in natural equity. TINDALL J said that he was unable to
find any trace in the Roman-Dutch authorities of negligence as
a ground of
liability, and concluded as follows on this aspect at 283:
16/...
16.
"The law, therefore, being clear in the specific case of the
bona fide
purchaser that he is not liable on the ground of mere negligence, that, in my
opinion, is the iaw which I must apply; and if it applies
in the case of a
bona fide
purchaser, it applies a
fortiori
to the defendants who
were for all purposes relevant to this question, mere agents of
Harris."
TINDALL J added that this view put the
liability of the collecting banker on the same footing as that of the paying
banker. That seemed
to him to be a satisfactory result to arrive at, because the
different positions of the paying and collecting banker respectively
in Engiand
was due to the development of the common law in that country in regard to the
doctrine of conversion and the action for
"money had and received".
TINDALL J thus equated the position of a
17/...
17.
collecting banker, dealing in good faith with a stolen cheque, with that of
an ordinary
bona fide
purchaser of movable property who innocently bought
stolen property and then parted with it innocently. He furthermore considered
that the question of the delictual liability of the intermediary through whose
hands stolen property has passed was exhaustively
dealt with by the Roman-Dutch
writers under the rubric of the
actio ad exhibendum
in its delictual
aspect. It followed, so he held, that there was no room for invoking the
lex
Aquilia
to hold the intermediary liable on the ground of negligence. See the
commentary of Prof D V Cowen in his L C Steyn Memorial Lecture:
"The liability
of a bank in the computer age in respect of a stolen cheque",
1981 TSAR 193
, at
202-206.
In the
Rhostar
case,
supra
,decided in 1972,
18/...
18.
GOLDIN J held that the test for liability of a collecting banker adopted in
the
Yorkshire Insurance
case,
supra
, should no longer be applied
in modern times. He upheld a claim against a collecting banker based on
negligence under the
lex Aquilia
by the drawer of a cheque. The plaintiff
company in that case required two signatures on all cheques drawn by it on its
bankers,
The Standard Bank. It was customary for one director to sign cheques in
blank which were crossed and marked "not negotiable - a/c
payee only" and to
give them to a trusted employee, one Paterson, who had authority to complete the
cheques, add his signature and
pay trade creditors. Paterson fraudulently, and
with the intention of stealing from the plaintiff, filled in the name of one
Henriques
on the cheque in question, struck out the words "or bearer" and
deposited the cheque for collection into
19/...
19.
his own personal account with the Netherlands Bank. The plaintiff was not
indebted to Henriques. The drawee bank (The Standard Bank)
paid the Netherlands
Bank and debited the plaintiff's account with the amount of the cheque. The
plaintiff sued the Netherlands Bank,
as the collecting banker, for the amount of
the cheque on the ground of negligence. The Netherlands Bank denied that it owed
any
duty of care to the plaintiff. GOLDIN J commenced his judgment on this issue
by saying that the decision in the
Yorkshire Insurance
case,
supra
, was no doubt correct on the evidence before that Court having
regard to the duties and functions of a collecting banker which prevailed
at
that time. He added, however, that:
".... the practice and theory of banking
differ from age to age The nature of
a
banker's business cannot, of course,
alter
20/...
20.
the common law, but the application and relevance of a principle of common law
to a particular type of business or conduct, as the
position is here, can vary
with the changing nature of the business in question" (at 714
H).
GOLDIN J pointed out, at 715 B-E, that, while
there is no contractual relationship between the drawer of a cheque and a
collecting
banker, the latter, by acting on behalf of its customer to collect
the proceeds of the cheque from the paying banker, assumes and
accepts
obligations relating to third parties. He is aware that his failure to act in a
reasonable manner can result in loss to the
drawer of the cheque accepted for
collection. The collecting banker is the only one who is in a position to know
whether or not the
cheque is being collected on behalf of the person who is
entitled to receive payment.
21/...
21 .
GOLDIN J said that the evidence established that the paying banker has no
such knowledge and relies on the collecting banker to present
a cheque for
collection on behalf of a person to whom it is lawfully payable. The evidence
further showed that all bankers were fully
aware of this position and that
collecting bankers considered it their duty to ensure that they only presented a
cheque for collection
on behalf of a client who was entitled to receive payment
under it. GOLDIN J continued as follows at 715 E-P:
"In such a situation and in these cir= cumstances a duty of care arises and is
owed by the collecting banker to the drawer of the
cheque to take due and
reasonable care to prevent him from sustaining loss. The drawer has the right to
expect that the collecting
banker will not cause him loss by carelessly
collecting from his bank on behalf of a person who is not entitled to receive
payment."
22/...
22.
In support of his conclusion that a collecting banker owed a duty of care to
the drawer of a cheque, GOLDIN J relied upon two passages
from the judgments in
Cape Town Municipality v Paine
1923 AD 207
at 216-217 and
Peri-Urban
Areas Health Board v Munarin
1965(3) SA 367 (A) at 373 E-H. The effect of
those judgments is that a duty of care arises if a
diligens paterfamilias
would foresee the possibility of harm occurring and take steps to guard against
its occurrence. GOLDIN J pointed out (at 716 D-E),
that if no such a duty of
care is owed by a collecting banker, he need not examine or even look at a
cheque to ascertain to whom
it is payable. In this way he would ensure that he
had no knowledge of his customer's defective title and, on the authority of the
Yorkshire Insurance
case,
supra
, he would not be liable for
any
23/...
23.
loss incurred. Having found on the facts that the defendant had been
negligent, the Court gave judgment for the plaintiff.
The cases of
Paine
and
Munarin
referred to by GOLDIN J, dealt with liability
for negligence which had resulted in physical injury. GOLDIN J appears to have
overlooked
the fact that a claim against a collecting banker is one for pure
economic loss unrelated to damage to property or physical injury
to a person.
The fact that it is foreseeable that payment of a cheque to a person who has no
title to it may cause financial loss
to the true owner, is not sufficient to
give rise to a legal duty. As in all cases of Aquilian liability it must, in
addition, be
shown that the defendant acted unlawfully. As E M GROSSKOPF AJA
pointed out in
Lillicrap, Wassenaar and Partners v Pilkington Brothers (SA)
(Pty) Ltd
1985(1)
24/...
24.
SA 475(A) at 497 B-C, the element of unlawfulness
as a requisite. for
delictual 'liability is sometimes overlooked because most delictual actions
arise from acts which are,
prima facie
, clearly unlawful, such as the
causing of damage to property or injury to the person. This, it would seem, is
what happened in the
Rhostar
case,
supra
. The guestion of
liability for pure economic loss arising from a collecting banker's negligence
in dealing with a cheque handed to
him for collection was not given attention.
See the
Zimbabwe Banking Corporation
case,
supra
, at 562 G-I and
see also the comment on the
Rhostar
case,
supra
, by Prof P Q R
Boberg in 1972 Annual Survey of S A Law 130 at 136 and by Prof J Sinclair in
(1973) 90 SALJ 369
at 383.
The correctness of the judgment in the
Rhostar
case,
supra
, was
not challenged by either
25/...
25.
counsel who appeared for the defendants in the
Philsam
case,
supra
, with the result that NEWHAM J adopted the reasoning of GOLDIN J
(at 552-553). He did not consider the requirement of wrongfulness
in actions
under the
lex Aquilia
for pure economic loss.
In
Atkinson Oates
Motors Ltd v Trust Bank of Africa Ltd
,
supra
, which was the next
decision on the collecting banker's liability for negligence, FRANKLIN J
endorsed the finding in the
Yorkshire Insurance
case,
supra.
In
the
Atkinson Oates Motors
case five chegues, payable to "Atkinson Oates"
(four of which were crossed generally and one of which was crossed generally and
marked
"a/c payee only"), were stoien from the payee by one Williamson. She
altered the name of the payee on each cheque by the addition
of the initiai "J"
before the name of the payee in each case. She then deposited them in a savings
account with
26/...
26.
Trust Bank in the name of Janet Atkins-Oaks. Trust Bank accepted the cheques
for collection and collected the amounts thereof. Atkinson
Oates Motors Ltd sued
Trust Bank for the amounts of the cheques. Trust Bank excepted to the claim on
the ground that the collecting
banker owed no duty of care to the payee of the
cheque. In upholding the exception FRANKLIN J confessed to considerable
difficulty
in deciding whether to extend liabiiity for negligence causing pure
economic loss to the situation confronting him. He emphasised
the need to
exercise judicial caution and concluded, at 198 H, that there was no sound
reason to depart from the safe guide adopted
by TINDALL J in the
Yorkshire
Insurance
case,
supra
. In the course of his judgment FRANKLIN J dealt
with the contention of GOLDIN J in the
Rhostar
case,
supra
, that,
in the absence of a duty of care, a collecting banker need not look at the
27/...
27.
markings on cheques which it collects. FRANKLIN J sought to discount this
argument by invoking the principle that a person who, having
a suspicion that
something is wrong, deliberately shuts his eyes and refrains from making
enquiries so as not to have his suspicions
confirmed, will be deemed to have
knowledge. Cowen. op
cit
209 correctly points out, however, that "to
throw caution to the winds" because there is no legal duty to be cautious, is
not the
same thing as deliberately refraining from making enquiries after one's
suspicions have been aroused in a particular case.
In 1979 came the decision
of this Court in the
Administrateur, Natal
case,
supra
. I will
return to that case presently. In 1985 the decision in the
Rhostar
case,
supra
, was confirmed by the Zimbabwe Supreme Court in
Zimbabwe Banking
Corporation Ltd v Pyramid Motor Corporation (Pty) Ltd
,
supra
. The
facts
28/...
28.
were these. Pyramid drew a cheque in favour of one Morris on the Standard
Bank. The cheque was crossed with the addition of the words
"A/c payee only Not
negotiable and Co". The next day, despite the restrictions on the face of the
cheque, Zimbabwe Banking Corporation
received the cheque for collection, not on
behalf of Morris but on behalf of "Black Mona Lisa" and paid the proceeds to one
Mandunya.
Pyramid sued the collecting banker in an Aquilian action for
negligence, alleging a duty of care on the part of the bank. The latter
excepted
to the declaration on the ground that it owed no duty of care to Pyramid. In
dismissing the exception McNALLY JA referred
to a statement by Cowen, op
cit
, at 205 that a collecting banker does not in England owe any common
law duty of care to the owner of a stolen cheque to avoid loss
to that owner
through negligence in dealing with the
29/...
29.
cheque. He said, at 556 E-F, that although correct, the statement was without
significance, as the collecting banker in England had
an obligation under the
doctrine of conversion which is far wider than that which would arise under a
duty of care. McNALLY JA proceeded
to hold that a cheque, and more particularly
one such as that with which he was concerned, with its various restrictive
endorsements,
could not be equated with an ordinary piece of stolen property.
The endorsements on the cheque indicated that the drawer or a subsequent
endorser had given certain instructions to the bank on which it was drawn and
certain directions to the collecting banker. "Such
a cheque not only describes
itself in a way that a stolen car or watch does not. It also describes and
prescribes how it is to be
dealt with." The correct "handling of paper" is
fundamental to the whole system of negotiable
30/...
30.
instruments (at 558 G-J). To refer to the collecting banker as one of the
intermediate possessors of the cheque and a mere agent for
his customer was to
ignore his essential role in the banking system (at 559 G-J).
GUBBAY JA
delivered a separate concurring judgment in which he agreed with McNALLY JA that
"considerations of justice and convenience
warrant a recognition of a common law
duty of care on the part of a collecting bank to the owner of a stolen cheque to
prevent loss
by negligently dealing with that cheque" (at 568 D-F). Earlier in
his judgment GUBBAY JA pointed out (at 564 G-J) that in an action
based on a
cheque such as the one in that case the problem of indeterminate or limitless
liability for economic loss does not arise
since the potential plaintiffs are
limited to the drawer or the payee or persons holding title under him and the
loss is restricted
to the
31/...
31.
amount of the cheque. There is thus only a single loss with little, if any,
likelihood of a multiplicity of-actions. He said that
this proposition had
earned the approval of academic writers and referred to Boberg 1979 Annual
Survey of S A Law at 136; Tager (1979)
96 SALJ at 391; Malan 1979 De
Jure
at 38 and Waring (1980) 43
THRHR
at 420. He also referred to a passage in
Cowen's L C Steyn Memorial Lecture op
cit
at 207, n 55 to the effect that
"in practice it would be impossible for a large bank to predetermine the extent
of potential liability
in respect of all cheques passing through clearance even
on any one day, let alone during a longer period", and said, at 565 A-B,
that
while this may be true in a generalised sense, it underplayed the fact that each
potential claim will be finite, will arise
separately from any other and will be
related to a specific act on the part of the
32/...
32.
collecting banker. The bank will not be faced with the dilemma of a single
negligent act giving birth simultaneously to inestimable
loss from an
indeterminate class of potential victims launching an endless stream of
actions.
The decision in the
Zimbabwe Banking Corporation
case,
supra,
was followed in 1990 in
UDC Ltd v Bank of Credit and Commerce
Zimbabwe Ltd
,
supra
. The most recent South African case on the
subject is
Worcester Advice Office v First National Bank of Southern Africa
Ltd
, 1990(4) SA 811(C). The Court (VAN NIEKERK J and COMRIE AJ), although
recognising the "impressive set of reasons" for extending Aquilian
liability to
a collecting banker, in effect followed the decision in the
Yorkshire
Insurance
case,
supra
, and refused to impose such liability on a
collecting banker for negligence in dealing with a lost or stolen
33/...
33.
cheque.
The correctness of the decisions in the
Yorkshire Insurance
and
Atkinson Oates
cases must today be considered in the light of the
subsequent development of our iaw. In the
Yorkshire Insurance
case,
supra
, the court, as I have already indicated, did not approach the
question of the collecting banker's liability for negligence squarely
on the
basis of Aguilian liability. It simply denied the existence of an action for
negligence under the
lex Aquilia
on the ground, firstly, that no trace of
such an action could be found in the Roman-Dutch authorities and, secondly, that
a
bona fide
purchaser who has negligently parted with property of another
could not be held liable to him for his loss. (See Tager, op
cit
387-388). As McNALLY JA put it in the
Zimbabwe Banking Corporation
case,
supra, at 560 C-D
34/...
34.
"the Courts had no choice but to fall back upon the inadequate
actio ad
exhibendum
."
Aquilian liability for pure economic loss caused negligently
was, however, recognised by this Court in 1979 in the case of
Administrateur,
Natal, supra
. In so doing it settled a controversy which had been simmering,
particularly in academic circles, but also in the courts, ever since
the
much-debated judgment of WATERMEYER J delivered 45 years before in
Perlman v
Zoutendyk
1934 CPD 151
(See CORBETT CJ in his Third Oliver Schreiner
Memorial Lecture: "Aspects of the Role of Policy in the Evolution of our Common
Law"
(1987) 104 SALJ 52.)
In the
Administrateur, Natal
case,
supra
, it was held that Aquilian liability could in principle arise from
negligent misstatements which caused pure financial loss. The
Court, however,
found (at 835) that the defendant was in the circumstances
35/...
35.
of that case not under a legal duty to exercise care in making the statement
which it did. See also
Siman and Co (Pty) Ltd v Barclays National Bank
Ltd
1984(2) SA 888(A). In the
Lillicrap
case,
supra
, the
question on exception was whether the breach of a contractual duty to perform
professional work with due diligence was
per se
a wrongful act for the
purposes of Aquilian liability. This Court held, mainly for reasons of policy,
that it was not desirable to
extend Aquilian liability to the duties subsisting
between the parties to such a contract for professional service.
In view of the decision in the
Administrateur, Natal
case,
supra
, the
Yorkshire Insurance
case,
supra
, can, in my
view, no longer be regarded as authority for the proposition that no delictual
action lies against a collecting banker
who has negligently caused loss to the
true owner of a cheque. There can now be no reason in principle
36/...
36.
why a collecting banker should not be held liable under the extended
lex
Aquilia
f or negligence to the true owner of a cheque, provided all the
elements or requirements of Aquilian liability have been met. See
the Proposals
for the Reform of the Bills of Exchange Act submitted by Malan, Oelofse and
Pretorius to the S A Law Commission at
586-637; De Beer, Die ware eienaar van
die tj ek en sy beskerming in geval van diefstal (1979, unpublished LLD thesis,
University
of Leiden); Malan and De Beer, Bills of Exchange, Cheques and
Promissory Notes in South African Law, para 354 at 325; Sinclair op
cit
at 385; Tager op cit at 392; Waring op
cit
at 418; Pretorius, 1987
Moderne Besigheidsreg 56 at 61 and Van Zyl, 1988 Moderne Besigheidsreg 79 at 85.
In a situation such as the
present a delictual action for damages would
accordingly be available to a true owner of a cheque who can establish (i) that
the
collecting banker
37/...
37.
received payment of the cheque on behalf of someone who was not entitled
thereto; (ii) that in receiving such payment the collecting
banker acted (a)
negiigently and (b) unlawfully; (iii) that the conduct of the collecting banker
caused the true owner to sustain
loss; and (iv) that the damages claimed
represent proper compensation for such loss. (Cf the minority judgment of
CORBETT JA in the
case of
Siman and Co
,
supra
, at 911 A-D).
In the case before us only the element of unlawfulness is presently in issue:
the exception has been taken solely on the ground that
the facts alleged by the
plaintiff do not give rise to a legal duty on the part of the defendant not to
act negligently, so that
the defendant's conduct as the collecting banker was
consequently not unlawful.
38/...
38.
In determining whether the defendant was under such a duty not to act
negligently (for without this legal duty there can be no unlawfulness)
the Court
is reguired to exercise a value judgment embracing all relevant facts and
involving considerations of policy. In the
Administrateur, Natal
case,
supra
, (at 833 D-F) RUMPFF CJ quoted the following passage from M A
Millner
Negligence in Modern Law
(1967) 26 on the unlawfulness element of
the duty of care concept, as distinct from the negligence (reasonable
foreseeability) element
(at 833 D-F).
"The duty concept, on the contrary, shows abounding vitality. The key to this
paradox is the utility of this concept as a device
of judicial control over the
area of actionable negligence on grounds of policy. Here
the
39/...
39.
ascertainment of liability is linked to the second of the two elements of duty
of care referred to above. This second element is
not at all concerned with
reasonable foresight; it is to do with the range of interests which the law sees
fit to protect against
negligent
violation."
RUMPFF CJ also quoted the
following passage
from Fleming
The Law of Torts
4th ed at 136 on the duty
element (at
833H - 834A).
"In short, recognition of a duty of care is the outcome of a value judgment,
that the plaintiff's invaded interest is deemed worthy
of legal protection
against negligent interference by conduct of the kind alleged against the
defendant. In the decision whether
or not there is a duty, many factors
interplay: the hand of history, our ideas of morais and justice, the convenience
of
40/...
40.
administering the rule and our social ideas as to where the loss should fall.
Hence, the incidence and extent of duties are liable
to adjustment in the light
of the constant shifts and changes in community
attitudes."
See also the
Lillicrap
case,
supra
, at 498 G-I and the cases there cited;
Siman
's case,
supra
, at 913-914 and the majority judgment delivered by CORBETT CJ in
the as yet unreported case of
Bayer South Africa (Pty) Ltd v Frost
(case
no 105/89) at 41 -42. In
Dorset Yacht Co Ltd v Home Office
(1970) AC 1004
at 1039 B-D Lord Morris of Borth-y-Gest said the following about the value
judgment the court is required to make:
"I doubt whether it is necessary to say, in cases where the court is asked
whether in a particular situation a duty existed, that
the
41/...
41.
court is called upon to make a decision as to policy. Policy need not be invoked
where reason and good sense will at once point the
way. If the test as to
whether in some particular situation a duty of care arises may in some cases
have to be whether it is fair
and reasonable that it should so arise, the court
must not shrink from being the arbiter."
A
consideration of the question whether a collecting banker owes a duty of care to
the true owner of a lost or stolen cheque in circumstances
such as the present,
reveals the following.
42/...
42.
1. The objection of limitless or indeterminate liability usually raised
against the recoverability of pure economic loss does not
arise in a case such
as the present, since the extent of the potential loss incurred is finite (the
face value of the cheque) and
the potential claimants are easily predictable and
are limited to the drawer or the payee (or someone holding title under him).
Furthermore,
each potential claim will arise separately from any other and will
be related to a specific act on the part of the collecting banker.
In the
Worcester Advice Office
case,
supra
,
the Court said that although "the vigilance and expertise which coliecting
bankers wiil be cailed upon
43/...
43.
to exhibit, if the duty of care is recognised, may not seem too much to ask
in an individual case" cumulatively the task would be
colossal so that the
ensuing potential liability would be too great a burden to be placed upon
collecting bankers (at 819-820). In
the first place it is difficult to see how
the Court could have come to this conclusion in the absence of any evidence
before it
(that case was decided on exception in favour of the collecting
banker) and secondly the reasoning of the Court would seem to amount
to the
indeterminable liability argument in disguise. To say that a collecting banker
cannot be expected to take reasonable care
in dealing with a particular cheque
because that will mean that he will also have to take reasonable care in dealing
with a vast
number of other cheques, is not a valid argument. What the standard
of care should be is another matter.
44/...
44.
That will depend on a number of factors including the likelihood of loss and
the cost and practicability of taking measures to guard
against it.
2. It is
apparent from what happened to the cheque in the present case and, I may add,
from what happened to some of the cheques in
the other cases to which I have
referred, that there is an ever present risk in relation to a cheque in the
sense that payment can
be obtained by an unlawful possessor with relative ease.
See the report of the Review Committee on Banking Services Law in the United
Kingdom under the chairmanship of Prof Jack ("the Jack Report") para 7.27. There
is, therefore, a need for protection in the case
of the true owner of a cheque,
particularly as he relies on the collecting banker to look at the named payee on
the face of the cheque
before collecting and paying the cheque which his
customer has handed to him
45/...
45.
for collection.
3. Furthermore, the collecting banker undertakes in the
course of his professional services to collect other persons' cheques payable
to
his client and he should be aware that his failure to take reasonable care may
result in loss to the true owner of the cheque.
The collecting banker, by virtue
of his calling, possesses or professes to possess special skill and competence
in his field and
can, or ought to appreciate the significance of instructions
upon a cheque. He is thus able to reduce if not avoid loss to the true
owner by
exercising reasonable care in the collection of cheques. If there were no legal
duty to take reasonable care, it would mean
that the collecting banker need not
examine or even look at the cheque to ascertain to whom it is payable. The
crossing of a cheque
would be of little conseguence if no legal duty
46/...
46.
existed on the part of the collecting banker. 4. It must be accepted that the
business of banking has changed substantially in modern
times. This has resulted
in a change in the banker-customer relationship (see the Jack report, paras
2.16-2.19). In South Africa
the format ion of the Automated Clearing Bureau has
mechanised the collecting process. As a result the collecting bankers, while
accepting responsibility for collecting the correct amounts, apparently do not
regard it as their function to ensure that cheques
are collected for the correct
party unless they are put on notice to make enquiries in a specific case. The
collecting banker, however,
remains the only person who is in a position to know
whether or not a cheque is being collected on behalf of a person who is entitled
to receive payment, and the drawee bank has to rely on the collecting banker to
ascertain this
47/...
47. fact. The latter, is fully aware of this position and it might,
therefore, well be said that it is his duty to ensure that he
only presents a
cheque for payment on behalf of a client who is entitled tp receive payment of
the cheque.
5. The drawer or true owner of a cheque is unable to take any
steps to protect himself from the loss he will suffer if the collecting
banker
negligently collects payment on behalf of a person who is not entitled thereto.
On the other hand, when a collecting banker
does act negligentiy, is held liable
and pays damages to the true owner, he would aiways have a claim for
reimbursement against his
customer who deposited the cheque for collection. If
that customer is unable to pay, that is a situation in which it would be more
appropriate to visit liability on the banker who chose to accept his customer's
business than on an innocent true owner. Furthermore,
it may well be established
at a trial that a collecting banker by
48/...
48.
obtaining insurance cover could, relatively inexpensively, protect himself
against such loss. The cost of such insurance would presumably
depend on the
frequency of such occurrences. At the exception stage the court does not have
the factual material with which to reach
any decision on this aspect.
Prof
Cowen is the only one of our academic writers on the subject who does not favour
the extension of Aquilian liability for negligence
to the collecting banker. He
states (op
cit
214) that while there is undoubtedly force in the policy
considerations mentioned by GOLDIN J in the
Rhostar
case,
supra
,
to which I have referred, there are other policy considerations which have to be
taken into account, and when they are duly evaluated
"the balance comes down in
favour of not recognising the alleged duty or element of unlawfulness". Earlier,
in an article in
1977 THRHR 19
at 34, Prof Cowen said that "In logic, and from
the point of view of economic policy, the
49/...
49.
reasoning of GOLDIN J is attractive; and it is increasingly gaining academic
support". The main considerations which Cowen regards
as militating against a
legal duty on the part of the collecting banker are firstly, that there is
insufficient reason to warrant
a departure in the case of bankers from the
general rule of our law applicable to the ordinary intermediary. For the reasons
stated
by McNALLY JA in the
Zimbabwe Bankinq Corporation
case,
supra
, at 558-559, to which I have already referred, I cannot agree with
the learned author. For the reasons which I have stated above
I also cannot
agree with his second contention
viz
that the test of' liability for a
collecting banker laid down in the
Yorkshire Insurance
case,
supra
, should not be disturbed. In this regard Cowen also contends that
when the new sec 80, which is the precursor to the present sec
81 of Act 34 of
1964, was introduced in 1943, the Legislature specifically exempted the
collecting banker from liability to the
50/...
50. true owner of a stolen cheque, provided the banker does no more than act
as an agent for collection (as distinct from being a
purchaser) of a stolen
cheque. To hold that the collecting banker has a legal duty to the true owner
would thus be in direct conflict
with the policy of Parliament. The short answer
to this contention is that at the time of its introduction in 1943, the new sec
80
(now sec 81) was considered in the light of the then existing law in terms of
which the collecting banker was not liable for negligence
to the true owner of a
stolen cheque. It cannot be said, therefore, that Parliament legislated for the
collecting banker when the
new sec 80 was introduced in 1943.
Another factor mentioned by Cowen as militating against the recognition of a
legal duty on the part of the collecting banker is the
effect such a decision
would have on existing banking procedures. He states that there would be a
slowing down of the
51/...
51 .
flow of cheques through the clearing system and a significant increase in the
cost of banking services which could have serious effects
on the economy. He
contends that the public has an overriding interest in a speedy and inexpensive
payment system and that attempts
to ensure complete safety for the true owner of
a cheque by imposing the relevant duty of care on the banks may well be
recognised
as involving too high a cost. The correctness or otherwise of the
factual basis for these considerations are matters which will require
to be
evaluated in the light of such evidence as may be led at the trial. They relate,
I might add, not only to the issue of unlawfulness
but also to that of the
standard of care, an entirely distinct issue which will also, no doubt, concern
the trial Court.
On balance, the factors which I have mentioned above, in my view, operate in
favour of
52/...
52.
recognising the existence of a legal duty on the part of a collecting banker
to the true owner of a lost or stolen cheque to avoid
causing him pure economic
loss by negligently dealing with such cheque. However, at the stage of deciding
an exception a final evaluation
and balancing of the relevant policy
considerations which have been mentioned above should not be undertaken. It is
sufficient for
present purposes to say, firstly, that the
lex Aquilia
does provide a basis upon which a collecting banker may be held liable in
negligence to the true owner of a lost or stolen cheque
and, secondly, that
there are considerations of policy and convenience in the present case which
prima facie
indicate the existence of a legal duty on the part of the
collecting banker to prevent loss by negligently dealing with the cheque
in
question. This
prima facie
indication may be rebutted by the evidence
which
53/...
53.
the defendant might lead at the trial, duly tested and evaluated in the light
of any countervailing evidence which might be led by
the plaintiff. It cannot,
therefore, at this stage be found that the defendant's conduct was not
unlawful.
Counsel for the defendant submitted that the question of liability
in this branch of the law is more properly a matter for Parliament
than for the
courts. I do not agree. The issue is one of law. The policy considerations are
of a nature which is not infrequently
the concern of courts of law.
For the
reasons I have stated the Court a
quo
erred in allowing the
exception.
In the result the appeal succeeds with costs. The judgment of the
Court a
quo
is altered to read: "The exception is dismissed with
costs."
W. VIVIER JA.
JOUBERT JA )
HEFER JA )
Concur.
GOLDSTONE JA)
VAN DEN HEEVER JA)