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[1994] ZASCA 186
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Eskom v First National Bank of Southern Africa Ltd. (380/93) [1994] ZASCA 186; 1995 (2) SA 386 (AD); [1995] 2 All SA 65 (A) (30 November 1994)

Case No 380/93
IN THE SUPREME COURT OF SOUTH
AFRICA
(APPELLATE DIVISION)
In the matter between:
ESKOM
Appellant
and
FIRST NATIONAL BANK OF SOUTHERN
AFRICA
LIMITED
Respondent
CORAM
: CORBETT, CJ, E M GROSSKOPF, NESTADT
EKSTEEN, HARMS, JJA
HEARD
: 11 NOVEMBER 1994
DELIVERED
: 30
NOVEMBER 1994
JUDGMENT E M GROSSKOPF. JA
2
This judgment concerns the protection granted
to
bankers by sec 79 of the Bills of Exchange Act, no 34
of 1964 ("the Act").
The appellant is a juristic person created
by
statute. It issued summons in the Witwatersrand
Local
Division against the respondent ("the Bank"). The
appellant's main claim was one for breach of contract.
There was also an alternative claim based on delict
which, as
will be seen, plays no part in the present
appeal. The allegations in the particulars of claim relating to the main
claim may be summarised as follows.
The appellant was a long standing customer of the Bank at its North City
Branch, Johannesburg. In terms of the contract between the
parties, the Bank
undertook to honour all cheques properly drawn on the appellant's account and to
pay, and only to pay, such cheques
according to their tenor.
In order to pay for services rendered to it by a
3 third
party, the appellant drew a cheque dated 14
December 1990 on the Bank in the sum of R375 653,16.
This cheque is described as follows in the Particulars
of Claim:
"5.1 the payee was described as
'Construction
Equipment Services';
5.2 the cheque was expressed to be payable 'only to' Construction Equipment
Services;
5.3 the words 'or order' did not appear after the name of the
payee;
5.4 the cheque was crossed and marked 'not
transferable'."
Construction Equipment Services was the name
under
which a company called Rodan Machines
(Proprietary) Limited conducted its business. The cheque was posted to
Construction Equipment
Services but was stolen. A certain Madalo opened an
account at the Bank's Life Centre Branch, Johannesburg, in the name of a
nonexistent
close corporation called Construction Equipment Services CC. He then
deposited the cheque at the Bank's Market Street Branch, Johannesburg.
The Bank
honoured the cheque, debited the appellant's account
4 and credited
the account of the non-existent close
corporation. The appellant alleged that these actions
were in
breach of the Bank's mandate in terms of the
banker-client
relationship "to pay only the named
payee, Construction Equipment Services, and not to
transfer the cheque". Before the fraud was discovered
all but R176 561,07 had been withdrawn from the close
corporation's account. In March 1991 the Bank credited
the appellant's account with this amount. In the result
the appellant suffered a loss of R199 092,09, being the
difference between the amount of the cheque and the
amount recovered. The appellant claimed this amount,
with interest and costs, from the Bank.
The Bank excepted to the appellant's claims on a
number of grounds. The exception to the claim based on
delict was dismissed. As regards the main claim based
on breach of contract, the exception was that the claim
lacked averments necessary to sustain a cause of
action. This exception was based on two grounds. One
5
was dismissed by the court a quo. The other was
the
only ground of exception which was upheld by the
court
a quo. This ground of exception was that sec 79 of
the
Act was an implied term of the mandate given by
the
appellant to the Bank; that the appellant did not
plead
averments to the effect that the Bank was not
protected
from liability to the appellant by the provisions
of
sec 79; and that without such averments,
the
appellant's claim against the Bank could not
be
sustained.
With the leave of the court a quo (Botha J)
the
appellant now appeals against the order upholding
the
exception.
To appreciate the parties' arguments it is
necessary to have regard to some of the provisions of
the Act dealing with crossed cheques. Sec 75 deals with
the manner in which a cheque is crossed, and
distinguishes between general crossings and special
crossings. In the present case the cheque was crossed
6
generally.
The effect of a crossing is set out in sec 78
which
provides inter alia (in subsection (1)):
"If a cheque is crossed generally, the banker on whom it is drawn shall not
pay it to any person other than a
banker."
Sec 79, in so far as it is relevant, then reads
as
follows:
"If the banker on whom a crossed cheque is drawn, in good faith and without
negligence pays it, if crossed generally, to a
banker
...the banker paying the cheque,
and, if the cheque has come into the hands of the payee, the drawer shall
respectively be entitled
to the same rights and be placed in the same position
as if payment of the cheque had been made to the true owner thereof."
As already stated this case concerns the interpretation of sec 79, and in
this respect three questions were raised and argued before
us, viz,
1. Who bears the onus in regard to sec 79? Must a person claiming from a
bank show that the bank is not protected by the section,
or must the bank invoke
the
7 section and prove its applicability? The court a quo
found in favour of the Bank that the appellant was
burdened with the onus.
2. Does sec 79 apply where (as happened in
the
present case) a cheque is drawn on one branch of a
bank
which pays the cheque to another branch of the same
bank? The court a quo answered this question also in
favour of the Bank, holding that the section does apply
in such circumstances.
3. Does sec 79 apply to a crossed cheque which is
marked "not
transferable"? This point was not dealt
with by the learned judge a
quo and was apparently not
argued before him.
I propose dealing with these three questions in turn.
First question: Which party is burdened by the onus of proof?
Although this question was argued before us in general terms, it seems to
me that there is a
8
possible ground of distinction between some of the
requirements of sec 79. The section operates
where
payment was made in good faith and without
negligence
to a banker. The requirement that payment be made to
a
banker merely repeats, in effect, the
general
obligation laid down by sec 78(1). Failure to
comply
with it may give rise to a claim by the true owner
of
the cheque in terms of sec 78(4). The
further
requirements of sec 79, viz, that payment be made
in
good faith and without negligence, are different.
They
pertain specifically to the protection granted by
sec
79. There may accordingly be a difference in
the
incidence of the onus in respect of these
different
issues. It is only in regard to the last
mentioned
requirements that the incidence of the onus has to
be
determined in the present matter. The facts bearing
on
the question whether payment was made to a banker
are
set out in the particulars of claim and must
for
present purposes be accepted as correct. If the onus is
9
on the appellant it has made all the
necessary
averments. The only issue which remains concerning
payment
to a banker is the legal one which is reflected
in the second question to be answered in this judgment.
The pertinent point raised by the exception in respect
of onus is accordingly whether it was incumbent on the
appellant to allege and prove that payment was not made
in good faith and without negligence. What follows is
directed only at that question.
We are here dealing with onus in its "true
and
original sense. . . namely, the duty which is cast
on the
particular litigant, in order to be successful, of
finally satisfying the Court that he is entitled to
succeed on his claim, or defence, as the case may be
..." (Pillay v Krishna and Another
1946 AD 946
at 952-
3). Onus in this sense is a matter of substantive law.
See Pillay's case, supra, at 951; Neethling v Du Preez
and Others; Neethling v The Weekly Mail and Others 1994
(1) SA 708 (A) at 761C.
10 It will be recalled that the Bank contended in
its
exception that sec 79 of the Act "is an implied term
of
the mandate" given by the appellant to the Bank. In
the
court a quo the appellant, according to the judgment,
"did not deny that the provisions of sec 79 formed part
of the contract between the parties" and the case was
decided on that basis. The court attached importance to
the agreed contractual nature of the section in finding
that it was the plaintiff (appellant) which bore the
onus of proof. The argument before us did not display
the same unanimity. Counsel for the appellant
questioned whether sec 79 was necessarily incorporated
in the contract between a bank and its customer, and
contended that, even if it were, the bank bore the onus
of proving that it was protected by the section. On
behalf of the Bank it was contended that the approach
of the court a quo was correct. The status of sec 79 as
a part of the contract, the contention proceeded, meant
that it was the customer who had to exclude the
11
application of sec 79 when suing a bank in
connection with a crossed cheque.
In my view much of this debate was misconceived.
Sec 79
provides a statutory protection for bankers in
certain
circumstances. It is true that sec 79 affects
the rights and
obligations of parties to a crossed
cheque and thus, in a sense,
modifies the parties'
contract. A banker who is, in terms of sec 79, "entitled to the same
rights and . . . placed in the same position as if payment of
the cheque had
been made to the true owner thereof" may debit his customer's account with the
amount of the cheque even although
payment may have been made to somebody who
was not the holder. This does not, however, arise from consensus between the
parties.
It arises from a legislative act. If the statutory origin of sec 79
were kept firmly in mind, no great harm would be done by regarding
it as
creating an implied term in the banker-customer relationship. Nothing is gained,
however, by so
12 regarding it, and it may tend to mislead, as
happened
in the present case. Whether or not sec 79 is deemed to
form
a part of the contract between the parties, its nature and effect must be
ascertained by the ordinary processes of statutory
interpretation. The section
cannot have a different effect depending on whether it is regarded, on the one
hand, as a statute applying
to the contract, or, on the other hand, as a
contractual term imposed by statute.
I turn now to an interpretation of the section in order to determine
where the onus lies. Before analysing the wording itself it is
convenient to set
out the broader context in which the section operates. It is common cause that
the prime obligation of a banker
towards a customer who operates a cheque
account is to pay a cheque drawn on him according to its tenor (I assume that
the customer's
account is sufficiently in credit, or that sufficient overdraft
facilities have been granted). Included in this general obligation
is
13
a duty to pay to the correct person
designated by the
cheque, ie, to the holder thereof (defined in sec
1 of
the Act as "the payee or indorsee of a bill who is
in
possession of it, or the bearer thereof"). Where the
cheque is crossed there is an additional obligation on
the drawee banker to pay the amount of the cheque to a
banker. The drawee banker would accordingly be obliged
to pay to a banker (the collecting banker) acting on
behalf of the holder. Sec 79 disturbs this situation by
granting a drawee banker protection where he pays the
wrong collecting banker, i e, a collecting banker
acting for somebody other than the holder. In such a
case, if the drawee banker made payment in good faith
and without negligence, he is placed in the same
position as if he had made payment to the true owner of
the cheque.
It is against the above background that the
section must be read. Now, firstly, as emphasized by Mr
Thompson, who appeared for the appellant, the
14 requirements
of the section are stated conjunctively -
the payment must have been made "in good faith and
without
negligence". Good faith and absence of
negligence are different
concepts, and the legislature
contemplated that both should be present before the
banker is relieved from liability. However, the
contemplation that both should be shown to be present
presupposes that it is the banker who bears the burden
of showing this. If the intention had been to burden
the customer (drawer) with the onus the requirements
would have been expressed disjunctively. The drawer
would not have been required to disprove both
requirements but only one. The drawee bank would not be
entitled to the protection of the section if its
payment had been either negligent or in bad faith. If
the onus had been intended to be on the drawer one
would therefore have expected the section to provide
that the drawee bank would be relieved from liability
unless it acted in bad faith or negligently.
The
15
wording of the section therefore supports the
view that
the onus is on the banker to invoke the section and to
prove
its applicability.
A further feature which points in the same
direction
is that the facts which show that a banker
did or did not act in good faith and without negligence
are peculiarly within his own knowledge. It is
consequently reasonable to suppose that the legislature
would more readily impose on the banker the onus in
this regard than on the customer, who would normally have no knowledge of
the bank's internal workings. It has often been said that
determining the
incidence of the onus of proof "is merely a question of policy and fairness
based on experience in the different
situations". (Wigmore as quoted in Mabaso v
Felix
1981 (3) SA 865
(A) at 873C and During N 0 v Boesak and Another
[1990] ZASCA 51
;
1990 (3)
SA 661
(A) at 673A). As a matter of fairness and sound judicial policy it seems
reasonable that, where one party has the means of establishing
a
16
particular fact and his opponent not, the onus should
rather be on the former than on the latter. Although
this factor would not be conclusive it should, in my
view, be accorded some weight. It was taken into
consideration in Mabaso's case, supra, at 873E-F in
determining the onus in civil cases where a defendant
relies on self-defence as a justification for what
would otherwise be an assault.
In this regard we were referred to Gericke v Sack
1978 (1) SA 821
(A) which, it was contended, was in
conflict with what I have said above. This was a case
in which a defendant raised a plea of prescription to
a claim in delict. In terms of sec 12 (3) of the
Prescription Act, 68 of 1969
, such a debt is not
deemed to be due, and prescription does not commence
running, "until the creditor has knowledge of the
identity of the debtor and of the facts from which the
debt arises...". The defendant accepted that the
general onus of establishing his defence of
17
prescription rested on him. He
contended, however, that
the facts relating to the commencement of
prescription
were peculiarly within the knowledge of the
plaintiff,
and that the plaintiff should bear the onus of proving
those facts.
This court accepted (at 827 C-D) that it will
at
times be difficult for a debtor who pleads
prescription
to establish the date on which the creditor first
learned his identity, or, for that matter, when he
learned the date on which the delict had been
committed. The judgment then proceeded as follows (827
D-G):
"But that difficulty must not be exaggerated. It is a difficulty which
faces litigants in a variety of cases and may cause hardship
- but hard cases,
notoriously, do not make good law. it is not a principle of our law that the
onus
of proof of a fact lies on the party who has peculiar or intimate
knowledge or means of knowledge of that fact. The incidence of
the burden of
proof cannot be altered merely because the facts happen to be within the
knowledge of the other party. See
R v Cohen
,
1933 T.P.D. 128.
However,
the Courts take cognizance of the handicap under which a litigant may labour
where facts are within the exclusive
18
knowledge of his opponent and they have in consequence held, as was pointed
out by INNES, J., in
Union Government (Minister of Railways) v Sykes
.
1913 A.D. 156
at p. 173, that
'less
evidence will suffice to establish a
prima facie
case where
the matter is
peculiarly within the knowledge of
the
opposite party than would under other
circumstances
be required.'
But the fact that less evidence may suffice
does
not alter the
onus
which rests on the
respondent
in this case."
It will immediately be apparent that this was not a case where the court
was called upon to determine de novo where the onus lay.
All participants
accepted that
as a matter of law the defendant had to prove his
defence of prescription. The only question was whether this situation was
changed
in respect of certain elements in his defence where the facts were
peculiarly within the knowledge of the plaintiff. That is why
the court
approached the question in issue as being whether the incidence of the onus
could be altered where the facts happen to
be within the knowledge of the other
party, and it answered this question in the negative.
19
Cohen's case, to which the court referred, was similar.
There the court held that the onus in a criminal
case
did not pass to the accused where the facts in
a
particular case were peculiarly within his
knowledge.
Clearly, as the court said in Gericke's case, it is
not
a principle of our law that the onus of proof of a
fact
lies on the party who has peculiar or
intimate
knowledge or means of knowledge of that fact.
The
incidence of the onus is determined by law. In
many
cases the person burdened by the onus as laid down
in
the sources of our law may be required to prove a
fact
which is peculiarly within the knowledge of
his
adversary. This does not, however, mean that a
court,
where the incidence of the onus of proof in
a
particular situation is uncertain and has to
be
determined, may not have regard, inter alia, to
matters
of practical convenience and fairness such as the
sources of knowledge available to the rival
parties.
There is accordingly no conflict between the cases
of
20
Mabaso v Felix and Gericke v Sack as suggested by
Hoffmann
and Zeffertt in The South African Law of
Evidence 4 ed (1988)
511-2.
In argument before us counsel for the Bank,
relying
mainly on Eagle Star Insurance Co Ltd v Willey
1956 (1) SA 330
(A) at 334D-H, contended that the
question of onus should be approached in the following
manner. The court should, he said, determine whether,
on the one hand,
sec 79
created an exception to the
banker's liability, or, on the other, it formed a part
of the definition of his liability. In the former case
the onus would be on the Bank, in the latter on the
appellant. In determining this matter the important
consideration was
"... whether the exception is as wide as the promise, and thus qualifies
the whole of the promise, or whether it merely excludes from
the operation of
the promise particular classes of cases which but for the exception would fall
within it, leaving some part of the
general scope of the promise unqualified."
(Munro, Brice & Company v War Risks Association Ltd and Others
(1918) 2 KB
78
at 88-9, followed in the Eagle Star
21 Insurance case at 334E.
In the present case, the
contention proceeded, the
exception is as wide as the promise. The
banker's
obligations are modified by
sec 79.
His duty is to
pay
a crossed cheque in good faith and without
negligence,
to a banker. We are accordingly not dealing with a
true
exception but with a part of the definition of the
banker's
liability, and the onus should be on the
appellant.
I do not agree. First, the Eagle Star case
dealt
with the interpretation of a written contract
of
insurance. I do not think the same considerations
necessarily apply to a statute which engrafts
qualifications onto a common law contract. Second, and
in any event, as is emphasized in the Eagle Star case
at 334H (para 5), a promise with exceptions can
generally be turned by an alteration of phraseology
into a qualified promise. One must consequently look at
the form in which the contract is expressed. In the
22
present case
sec 79
provides relief to a banker from
his normal obligations if certain features are present.
Prima facie this seems to me to create an exception.
This conclusion is fortified by the wording of the
section and the considerations of fairness discussed
above. The present is in my view eminently the type of
case to which the following passage from Pillay's case,
supra at 952, refers:
"Where the person against whom the claim is made
is not content with a mere denial of that claim, but sets up a special
defence, then he is regarded quoad that defence, as being the
claimant: for his
defence to be upheld he must satisfy the Court that he is entitled to succeed on
it."
I come to the conclusion therefore that the
onus
of proving, for purposes of sec 79 of the Act, that
payment was made in good faith and without negligence,
lay upon the Bank.
Second question: Does sec 79 apply where the collecting
bank and the drawee bank are branches of the same
institution?
23
Sec 79 applies only where "the banker on whom a
crossed
cheque is drawn ... pays it ... to a banker." This language is apposite to the
situation where two banks are involved. In
such a case the holder of the cheque
hands it for collection to the collecting bank; the collecting bank presents it
for payment
to the drawee bank; the drawee bank pays it to the collecting bank
and debits the drawer's account; and the collecting bank receives
the money and
credits the holder's account.
The language of the section does not, however, cover with equal felicity
the situation where one bank, whether in one or several branches,
acts both as
collecting banker and as paying banker. In such a case the procedure would, in
practice, simply be that the holder hands
the cheque for collection to his bank,
which is also the drawee bank; and that the bank then debits the drawer and
credits the holder.
Only with some difficulty can this be regarded as payment by
a
24
banker to a banker.
Our legislation on bills of exchange was
modelled on that of England, and, in particular, on the Bills of Exchange Act,
1882. For
present purposes there is no material difference between our statute
and the English one. Nevertheless, and despite the linguistic
difficulties,
there is strong authority in England for the proposition that a bank may at the
same time be both collecting banker
and paying banker. See Gordon v London, City
and Midland Bank Ltd
(1902) 1 KB 242
at 274-5 and 281 and Carpenters' Co v
British Mutual Banking Co Ltd
(1938) 1 KB 511
at 537-539. English text-books
have followed these cases without criticism. See Ryder and Bueno, Byles on Bills
of Exchange 26 ed
(1988) 311-2; Guest, Chalmers & Guest on Bills of Exchange
14 ed (1991) 647 and 651; Hapgood, Paget's Law of Banking 10 ed (1989)
427,
452-453; and Halsbury's Laws of England, 4 ed Reissue vol 3(1) para 167 footnote
3, and 214. The reason is a practical one.
If
25
the drawer of a crossed cheque and the holder are both
customers of the same bank, what is the bank to do?
In
terms of sec 78 (1) of our Act (corresponding to sec
79
(2) of the English Act) the drawee banker "shall
not
pay it to any person other than a banker". If he
cannot
in effect act both as collecting banker and as
paying
banker he would have to insist that his customer,
the
holder, open an account with another bank to
enable
that bank to act as collecting banker (see
the
Carpenters' case, supra, at 538). Since
banking
business in England, as in this country,
is
concentrated in the hands of relatively
few
institutions, and it frequently occurs that the
drawer
and the holder are customers of the same bank,
a
literal interpretation of sec 78 (1) and its
English
counterpart would render the use of crossed
cheques
impractical. And the purpose of the rules
concerning
crossed cheques is served as well where the
collecting
bank and the paying bank constitute one entity as
where
26 they are separate ones. In both cases the holder
collects the payment through a bank, which can be
expected to ensure that payment is made to the right
person.
The English cases have been accepted as good law
in
South Africa by Cowen and Gering, Cowen on the Law
of Negotiable Instruments in South Africa 4 ed (1966)
424 where the following is stated:
"If a customer draws a cheque payable to another customer of the same bank,
and crosses it generally or specially to that bank, the
bank is both the paying
and the receiving bank, and pays to a banker within the meaning of the Act by
debiting the drawer and crediting
the payee. Similarly, where a crossed cheque
is drawn on one branch, and handed to another branch of the same bank for
collection,
payment to the collecting branch complies with the
Act."
This question has also been considered in two
cases in
South African courts, but for convenience I deal with
them later.
In argument before us Mr Thompson accepted on the
strength of the above authorities that, for purposes of
27
sec 78 (1) of the Act, it would be possible for a
single bank
to be both the collecting banker and the paying banker. He contended however
that in such a case the banker would not,
qua paying bank, be entitled to the
protection of sec 79.
The first point made in this regard was that there is a difference in the
wording between the two sections. Sec 78 (1) is expressed
in negative terms: a
banker is not entitled to pay a crossed cheque "to any person other than a
banker". Sec 79, on the other hand,
is expressed positively: protection is
granted if the banker "pays it to a banker". In my view nothing turns on this
difference.
Every person to whom payment may be made for purposes of sec 78 (1)
is either a banker or a person other than a banker (for brevity
called a
non-banker) . This classification is, by its very nature, exclusive. There
cannot in logic be a third category of persons
who are neither bankers nor
non-bankers. Accordingly, since a paying banker may not pay to a
28
non-banker, he must, if he pays anybody, pay to a
banker. It further follows that, if a banker acting
both as
collecting banker and as paying banker pays the
holder of a crossed
cheque, this can only comply with
sec 78 (1) if he is regarded as having paid a banker.
This is exactly the same enquiry as in section 79.
There also what must be ascertained is whether payment
was made to a banker. There is accordingly nothing in
the language to suggest that there is any difference in
this enquiry depending on which section is in issue.
Moreover it is clear that the sections of the
Act
dealing with crossed cheques form a coherent
whole.
Section 78 prescribes the duty of a banker regarding
the payment of crossed cheques. Section 79 grants
protection to a banker who complies with this duty in
good faith and without negligence. It would be a
strange anomaly if the two sections dealt with
different types of payment. At the very least such a
distinction would have required clear language, which,
29
as I have indicated, is not present here.
In further support
of his distinction between sec 78(1) and 79 Mr Thompson submitted that only
Gordon's case, supra, dealt specifically
with the English counterpart to sec 79
(sec 80 of the English Act) and that there is also authority to the contrary in
Lacave &
Co v Credit Lyonnais
[1897] 1 QB 148.
I do not agree that the
latter case supports the appellant's contention. The facts there were as
follows. The defendant bank in that
case had two branches, one in London and one
in Paris. A cheque was drawn on the branch in London in favour of the
plaintiffs. After
various vicissitudes the cheque came into the hands of a
certain Ponce, who handed it to the Paris branch of the bank for collection.
The
London branch paid the Paris branch which in turn paid Ponce. The plaintiffs,
who admittedly were the true owners of the cheque,
then sued the bank for
conversion, i e, for dealing unlawfully with their property (for a discussion of
the
30
principles of conversion in English Law and a
comparison with our law, see Leal & Co v Williams
1906 TS 554
; John
Bell & Co Ltd v Esselen
1954 (1) SA 147
(A) at 152C-154H). The bank defended
the action and contended "that, so far as their conduct is impugned by reason of
their having
cashed or paid in London a cheque, crossed, and so drawn on them,
and coming to them from another bank, they are within the protection
of the 80th
section of the Bills of Exchange Act. . ." (p 153). This defence was upheld (p
153-4) and the court proceeded to consider
(at p 154) "whether there is any
other part of the conduct of the defendants which can be made the subject matter
of an action in
England". This obviously entailed problems of conflict of laws
with which we are not concerned. The final conclusion was that the
actions of
the Paris branch amounted to conversion for which the defendant bank could be
held liable in England. Thus, to sum up,
qua paying bank the defendant was
protected by sec 80 of the English Act,
31
but qua collecting bank it was unprotected and had to
pay.
This is a clear recognition that a bank can properly act in both capacities
without losing its protection under sec 80 of the
English Act.
I
turn now to the two South African cases on this point. The first was Allied Bank
Limited v Standard Bank Limited, an unreported
judgment delivered by Stegmann J
in the Witwatersrand Local Division on 8 October 1992. In this case it was held
that where a bank
acts both as collecting banker and as paying banker it is not
protected by sec 79 of the Act. Stegmann J came to this conclusion
without
reference to authority. In Hollandia Reinsurance Co Ltd v Nedcor Bank Ltd
1993
(3) SA 574
(W) Goldblatt J expressed doubts about the correctness of the
judgment in the Allied Bank case but found it unnecessary to come to
a definite
decision on the point.
The position may be summed up as follows. The language of sections 78 and
79 suggests that the
32
sections require payment of a crossed cheque to be made
by one bank to another. On the other hand, it would not place an
intolerable strain on the language to permit one bank to be both
collecting
banker and paying banker and the exigencies of commerce would be best served by
such a construction. The English courts
have consistently over a long period
followed the practical course by recognising such a dual capacity, and this has
been approved
without question by the authors and editors of standard
text-books, in England as well as here. The only authority to the contrary
is
the judgment in the Allied Bank case, in which, as I have said, no previous
authority on this point was considered. Not only is
our Act for present purposes
the same as that in England, but our commercial and banking systems also do not
differ materially. In
these circumstances I consider that we should follow the
English authorities, which in my view provide a reasonable and practical
answer
to this problem.
33
My view is accordingly that the Bank, which
acted
both as collecting banker and as paying banker in
the
present case, did not thereby forfeit the protection of
sec 79 of the Act.
Third question: Does sec 79 apply to a crossed cheque ,
which is marked "not transferable"?
The effect of marking a cheque "not
transferable"
derives from sec 6(5) of the Act, which
reads:
"If a bill contains words prohibiting transfer, or indicating an
intention that it should not be transferable, it is valid as between
the parties
to the bill, but is not negotiable."
The word "negotiable" is used in different senses in
the Act. See Cowen & Gering, op cit, 5 ed Vol 1 3-4,
Standard Bank of S A Ltd v Sham Magazine Centre 1977
(1) SA 484 (A) at 493E-H . In sec 6(5) it means
"transferable" (Sham Magazine case, loc cit).
Consequently, "... if the drawer wishes to render a
cheque completely non-transferable ... he could boldly
write or print across the face of the cheque the words
34
'not transferable', so that he who runs may read."
(Ibid
504H-505A). Since the cheque is not transferable, the drawee bank would act
contrary to its customer's instructions if it were
to pay the cheque to any
person other than the named payee, see Volkskas Bpk v Johnson
1979 (4) SA 775
(C).
If a cheque is crossed generally, the drawee bank may not pay
it to any person other than a banker, as has been discussed above. Therefore,
if
a cheque is crossed generally, and in addition bears the words "not
transferable", the drawee bank is instructed:
(a)
to pay the
cheque only to the named payee;
and
(b)
to pay the cheque to
a banker.
The drawee bank can comply with
both these instructions by paying to a banker acting on behalf of the payee
(Volkskas Bpk v Johnson,
supra, at 779G, Sinclair, 'Liability of a Drawee Banker
on a Non-transferable Cheque', 1979 Annual Survey 324 at 326, Pretorius,
'A
Transferable 'Non-transferable' Cheque?'
1984 SAW 250
35 at 251-2).
For present purposes I need not consider
whether a bank may also properly (or, at any rate, with
impunity) pay such a cheque to the true owner or his
agent personally, as suggested by Malan (assisted by De
Beer) in Bills of Exchange, Cheques and Promissory
Notes in South African Law (1983) para 349.
What then is the position if the payee bank pays such a cheque to a
banker who does not act on behalf of the payee? Is the drawee
bank then
protected by sec 79?
This question arose for decision in Gishen v
Nedbank Ltd
1984 (2) SA 378
(W). In that case Goldstone
J held (at 382 F-G):
"In my opinion there is nothing in s 79 which renders its provisions
inapplicable to a nontransferable cheque and no reason occurs
to me for giving
the words thereof a restrictive meaning."
He added (at 382G)
"... the customer using the device of crossing a cheque can hardly
complain if the provisions of the Act in relation to such a crossing
are applied
according to their tenor."
Although the correctness of this decision has been
36
questioned (see e g Cowen & Gering, op cit, 5 ed Vol 1
210) nobody has disputed that it does give effect to
the
clear language of the section (cf Pretorius, op
cit, at 253 and, in a publication prior to the decision
in Gishen's case, Oelofse, 1982 Modern Business Law vol
4 52). In Bonitas Medical Aid Fund v Volkskas Bank Ltd
and Another
1992 (2) SA 42
(W) at 47 D-F, the court,
although doubting whether sec 79 was intended to cover
the situation where a cheque is marked "not
transferable", nevertheless held that the plain wording
of the section served to protect a bank in such a
situation. The doubts about the applicability of sec 79
in such cases are consequently based, not on the
language of the section, but on the anomalous results
that are said to flow from its application.
The main authority quoted by counsel for the
appellant as support for his contention that Gishen's
case was wrongly decided, was Oelofse, op cit.
Oelofse's contribution was a review of the text-book
37
Wisselreg en Tjekreg by Malan and De Beer (a version in
Afrikaans of the work quoted above). At p 52 Oelofse
writes:
"Die skrywers is van oordeel ... dat a 79 ook op die nie-oordraagbare tjek
van toepassing is. Die skrywers staan nie alleen in hierdie
opvatting nie en
indien a 79 letterliik beskou word, kan 'n mens ook tot geen ander
gevolgtrekking kom nie."
The learned reviewer then
considers some of the
anomalies flowing from the application of sec 79 to
non-transferable cheques (to which I return shortly)
and concludes (ubi sup):
"Dit lyk of die wetgewer nooit die nie-oordraagbare tjek in gedagte gehad
het met die verordening van art 79 nie. Hierdie aspek is
een
van die wat die hersiening van die wisselwetgewing nodig maak."
Oelofse's view, expressed before the decision in
Gishen's case, consequently does not seem to be that
sec 79 is inapplicable to non-transferable cheques, but
rather that de lege ferenda it should be rendered
inapplicable. This does not provide any real support
for the contentions advanced on behalf of the
38
appellant.
A fuller critical discussion of Gishen's case is
to
be found in the article by Pretorius (op cit at
253). He commences by saying
"The finding that s 79 of the [Act] is applicable to a 'non-transferable'
cheque is probably correct on a strict interpretation of
the
section."
As authority for this proposition he quotes
the above
mentioned English version of Malan and De Beer's work
at para 334 where it is stated
"Section 79 governs the payment of all crossed cheques, including those that
are 'non-transferable'."
From this point of departure
Pretorius then considers
various issues that arise from the application of sec
79 to non-transferable cheques. For present purposes I
propose concentrating on the anomalies pointed out by
the learned author.
The main anomaly is that, if sec 79 is applicable
to non-transferable cheques, a drawer would be better
39
protected by an uncrossed non-transferable cheque than
by a crossed one. The drawee bank is obliged to pay an uncrossed
non-transferable cheque to the named payee and only to him. On the
other hand,
if the cheque is crossed, the bank is protected by sec 79 if it pays to a bank
which is not acting for the payee, provided
the paying bank acts in good faith
and without negligence. This same anomaly was mentioned by Oelofse (loc cit). I
do not think this
anomaly is as serious as is suggested. A drawer who marks his
cheque "not transferable" has the advantage that the drawee bank should
pay only
to the named payee. If the cheque is not crossed such payment may be made over
the counter. Indeed, there is a school of
thought that such a cheque may not be
paid to a collecting bank, but must be paid to the payee personally (Sinclair,
op cit, 326,
Pretorius, op cit, 254)). A drawer may therefore cross his
non-transferable cheque to ensure that it is paid only through a bank,
thus
providing some assurance that
40
payment will be made to the correct payee. If sec 79
is
applicable he will lose his absolute right to insist on payment
to the correct payee, but he may consider that he is compensated for
this loss
by the practical consideration that in the ordinary course his cheque will be
paid properly and that he may be saved disputes
with his bank over whether an
uncrossed cheque was paid to the right person.
In this regard Goldstone J commented in the passage quoted above that it
is the customer who chooses to cross his cheque and thereby
to accept the
advantages and disadvantages of such a crossing. This proposition was criticized
by Pretorius (op cit, p 255) who points
out that, in terms of sec 76(2) of the
Act, the holder of an uncrossed cheque may cross it. The payee of a
non-transferable cheque
may therefore cross it and thereby (through the
operation of sec 79) erode the intention of the drawer that only the named payee
should be paid.
41 I do not think this criticism is valid.
Although
it would be competent for a payee of a
non-transferable
cheque to cross it, this would happen so seldom
in
practice as to be hardly worthy of consideration. And
if it were to happen, I do not think the drawer would
be
concerned about any erosion of his intention. The
payee cannot cross
the cheque unless it has come into
his hands. If he then crosses it, and if sec 79 were to
be applied, "... the drawer shall ... be entitled to
the same rights and be placed in the same position as
if payment of the cheque had been made to the true
owner thereof." The payee would accordingly have
received the cheque and in law he would be deemed to
have been paid in accordance with the wishes of the
drawer. If the payee was not in fact paid, e g because
the cheque was stolen after he had crossed it, he would
only have himself to blame if the drawer and the paying
banker are protected by sec 79.
Finally, in assessing the weight of the anomaly
42 which I
have been discussing (viz, that if sec 79 were
applied also to a non-transferable cheque a drawer
would be
better served by leaving it uncrossed), it
must be emphasized that the banker is not protected if
he acts negligently. And in determining whether the
paying
bank was negligent one cannot leave out of
account, I consider, that the paying bank was dealing
with a non-transferable cheque. See Cowen and Gering,
op cit 5 ed Vol 1 213, Malan and De Beer, op cit, para
349, Pretorius, ubi sup, p 254.
A further point made by Pretorius (at p 256-7 -
see
also Sinclair,op cit, 325) is that sec 79 was
intended primarily to protect the drawee bank against
forged endorsements. Since there is no real possibility
of a forged endorsement on a non-transferable cheque,
there is, it would seem, not the same reason to protect
the paying bank from the consequences of payment to the
wrong person. This may well be correct, but it does not
follow that a bank would never need protection against
43
paying a person falsely pretending to be the payee of
a non-transferable cheque, as the facts of the present case
illustrate.
To sum up, the language of section 79 is clear and
unambiguous. The only reason suggested from departing for it is the existence of
certain anomalies. The main anomaly lies in the difference in the rights of the
drawer depending on whether the non-transferable
cheque is crossed or not.
However, the remedy is in his own hands - he need not cross the cheque if he
wants to exclude the protection
of sec 79. And, in any event, for the reasons
set out above, I do not consider that the anomalies mentioned are so serious as
to
amount to an absurdity or as to indicate with sufficient certainty that the
language of the section does not reflect the intention
of the legislature (see e
g Summit Industrial Corporation v Claimants against the Fund Comprising the
Proceeds of the Sale of the
MV Jade Transporter
1987 (2) SA 583
(A) at
596G-597B; S v
44 Tieties
[1990] ZASCA 4
;
1990 (2) SA 461
(A) at
463C-464F).
I consider therefore that sec 79 does apply to crossed cheques marked
"not transferable".
In the result the first question has been answered in favour of the
appellant but the other two in favour of the Bank. Nevertheless
it is clear that
the appellant has achieved substantial success before us, since the question on
which he has succeeded (relating
to the incidence of the onus of proof) is
fundamental to the fate of this appeal. It follows that the exception should
have been
dismissed in the court a quo.
The following order is made:
(a)
The appeal is
upheld with costs.
(b)
The
order of the court a quo is set aside and the following
substituted:
45 "The exceptions are
dismissed with costs."
E M GROSSKOPF, JA
CORBETT, CJ NESTADT,JA EKSTEEN, JA
HARMS, JA Concur