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[1995] ZASCA 65
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First National Bank of SA Ltd v Quality Tyres 1970 (Pty) Ltd (434/1993) [1995] ZASCA 65; 1995 (3) SA 556 (AD); [1995] 2 All SA 616 (A) (30 May 1995)
LL
Case No 434/1993
IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION
In the matter between:
FIRST NATIONAL BANK OF SA LTD
Appellant
and
QUALITY TYRES [1970] (PTY) LTD
Respondent
CORAM
: CORBETT CJ, BOTHA, EKSTEEN, HOWIE
et SCHUTZ JJA
HEARD
: 19 MAY 1995
DELIVERED
: 30 MAY
1995
JUDGMENT
BOTHA JA
:
2
This is an appeal, with the leave of the Court a quo, against a judgment
granted in the Witwatersrand Local Division against the appellant
("the
defendant") in favour of the respondent ("the plaintiff) for the payment of
damages in the sum of R954 371,00 with interest
and costs.
The plaintiffs claim rested basically on an allegation that the defendant
had breached its duty of care to the plaintiff arising out
of the defendant's
acting as the collecting banker in respect of a cheque of which the plaintiff
was the payee and allegedly the
owner. The cheque was dated 11 May 1989 and it
was drawn by Central Merchant Bank Limited ("Senbank") on Trust Bank of Africa
Limited
("Trust Bank") for the sum of R954 376,71. This amount was expressed to
be payable to the order of the plaintiff, but the cheque
bore two crossings: one
was printed on it, with the words "not negotiable", and the other, which had
been affixed by means of a stamp
next to and parallel with the first, carried
the words
3
"not transferable".
The cheque was deposited for collection
by Senbank at the Bree Street branch of the defendant in Johannesburg on 11 May
1989. Accompanying
the cheque was a credit transfer form which had been filled
in and signed by an employee of Senbank. It was addressed to the Parktown
branch
of the defendant, with the instruction to credit the plaintiff with the amount
of the cheque. In the space provided on the
form for filling in the "account
number" (obviously of the person to be credited), the number 8006109314 had been
inserted. That
number had been supplied to Senbank by one E D Philip, who was a
director of the plaintiff, and who had arranged with Senbank to
draw and deposit
the cheque. The number so supplied was not, however, the number of the
plaintiffs account at the defendant's Parktown
branch; in fact the plaintiff was
not a customer of the defendant at any of its branches. The number on the credit
transfer form
was the number of an account that was being
4
conducted at the defendant's Parktown branch under the name of the Philip
Children's Trust. The person who operated on that account
was the same E D
Philip.
When the cheque was presented for payment by the defendant
to Trust Bank, through the automated clearing bureau, it was honoured,
but the
proceeds never reached the plaintiff. They were credited by the defendant,
through its centralized bookkeeping centre, to
the Philip Children's Trust
account at its Parktown branch. At the time (11 May 1989) that account was in
overdraft to the tune of
R852 308,44. The credit of R954 376,71 liquidated the
overdraft and left a balance of R102 068,27, which was transferred at the
request
of Philip to an investment call account in the name of the Philip
Children's Trust on 13 May 1989. On 16 June 1989 the balance then
standing to
the credit of the account (R158 703,55) was withdrawn by Philip, ostensibly
acting on behalf of the Philip Children's
Trust, and the account was closed. It
was
5
only in January 1990 that the defendant at management level discovered
that the cheque in question had been the source of the funds
credited to the
account on 11 May 1989,
From the above resume of the salient facts (which are not in dispute) it
is apparent that Philip played a key role in the events,
linking as he did the
plaintiff with Senbank, Senbank with the defendant, and the defendant with the
Philip Children's Trust. It
will be necessary to examine his conduct somewhat
more closely, in the light of the evidence given at the trial. Before I do so,
however, it will be convenient to refer to the issues raised in this
appeal.
In the judgment of the Court a quo (DU PLESSIS J) reference
was made to the requirements for holding a collecting banker liable for
negligently causing loss to the true owner of a cheque, as stated in the
judgment of this Court (per VIVIER JA) in
Indac Electronics (Pty) Ltd v
Volkskas Bank Ltd
[1991] ZASCA 190
;
1992 (1) SA 783
(A) at 797A-D:
6
"There can now be no reason in principle why a collecting banker should
not be held liable under the extended Lex Aquilia for negligence
to the true
owner of a cheque, provided all the elements or requirements
of Aquilian liability have been met 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 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)
negligently 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."
Upon a consideration of the evidence the trial Judge held that all
these
requirements had been established and accordingly found for
the plaintiff.
(It may be noted in passing that the slight
discrepancy - which can be
seen above - between the amount of the
judgment and the amount of the
cheque is of no consequence: it
appears that the learned Judge took the
figure he put in the
judgment from the prayer in the plaintiffs particulars
of claim,
which was in turn derived from a misstatement of the amount
7
of the cheque in the body of the particulars.)
In this (Court
it was argued for this defendant that the Court a quo had erred on the grounds
that on the evidence the plaintiff had
failed to prove -
(a)
that it was the
true owner of the
cheque;
(b)
that the
defendant acted either unlawfully or negligently when it collected the
cheque;
(c)
that the
plaintiff suffered any loss, or, if it did, that such loss was legally caused by
the defendant's conduct.
The first issue to
be considered, then, is whether the plaintiff established that it was the true
owner of the cheque. Turning to
the evidence relevant to this point, it will be
convenient first to make some general observations about the evidence placed
before
the trial Court. Both parties called witnesses, the majority of whom were
managers (of various ranks) employed by Senbank or by the
defendant at the
relevant
8
times. Philip was not called to testify. Most of the evidence was
directed to the issues of unlawfulness and negligence. Such evidence
will be
referred to, when dealing with the first issue, only to the extent necessary to
follow the course of the events and to explore
the role played by Philip, which
is pivotal to the first issue. In this regard the facts given in evidence are
not in dispute in
any material respect. Consequently I shall set out the facts
in the form of a paraphrase without naming the particular witnesses
from whose
evidence they are taken; and in a few instances, where witnesses gave varying or
conflicting accounts on immaterial matters
of minor detail, I shall simply use
one version and ignore the other.
The plaintiff is represented in
this litigation by its liquidators. The company was placed under provisional
liquidation on 8 December
1989 and a final winding up order was issued on 9
January 1990. The company was a subsidiary in a group of which the holding
company
was
9
Quality Tyres Limited. This company ("the parent company"), which had
been listed on the Johannesburg Stock Exchange, was placed under
liquidation
simultaneously with the plaintiff. Philip was the financial director of the
parent company and a director of the plaintiff.
He was held in high esteem by
and enjoyed the confidence of the officials of both Senbank and the defendant
who dealt with him. One
of the witnesses described him as "'n gesiene sakeman".
His estate was also sequestrated in the beginning of 1990.
Before
its liquidation the plaintiff carried on business as a dealer in new and
retreaded tyres. It had traded in insolvent circumstances
for some time before
the liquidation. In fact, both the plaintiff and the parent company were
insolvent at all times since 1987.
But the shareholders and creditors did not
know this. The evidence showed that Philip had fraudulently manipulated the
books of account
and financial statements of the companies to create a false
impression of profitability, inter alia
10
by concealing that the plaintiff was indebted to bankers to the tune of
R40 million, by inflating the profits of the companies, and
by declaring and
paying dividends out of non-existent profits.
In November 1987 the
parent company and its trading subsidiaries entered into a written agreement
with Senbank in terms of which Senbank
placed bank acceptance credit facilities
to an amount of R4 million at the disposal of the subsidiaries. Philip signed
the agreement
on behalf of the parent company and on behalf of each of the
subsidiaries, including the plaintiff. Pursuant to the agreement the
plaintiff
could avail itself of the facility by means of drafts drawn by it on Senbank to
its own order and endorsed in blank, and
payable not more than 90 days after
sight. The credit was a revolving one intended to cover continuous drawings. On
acceptance of
the drafts Senbank, as the plaintiffs agent, would offer them for
discount at the ruling rate and account to the plaintiff by crediting
its
account at its commercial bank
11
with the net proceeds, i e their face value less acceptance commission,
discount charges and stamp duty. The plaintiff could meet
its liability by fresh
drafts drawn in replacement of those maturing or by repaying maturing drafts in
cash. The facility could only
be used against sales of new and retreaded tyres,
i e it was confined to financing the acquisition of trading stock. The plaintiff
was obliged during the currency of the agreement to furnish copies of its
audited financial statements as soon as they became available.
In was Senbank's
policy to limit the total amount of the facility to one-quarter of the total
expected sales for the ensuing year.
In December 1988 the agreement
was replaced by a fresh one on the same terms as before. On 24 April 1989
Philip, purporting to act
on behalf of the parent company, approached Senbank
with a request to increase the amount of the existing facilities from R4 million
to R8 million. Senbank acceded to the request. At that time the total
amount
12
utilized by the group stood at R2,9 million. On 11 May 1989 Philip,
purporting to act on behalf of the plaintiff, approached Senbank
with a request
to draw a bill in terms of the agreement, for R2,5 million. Senbank again
acceded to the request. It prepared five
bills, each for half a million rand, in
the form provided for in the agreement, and Philip signed each as drawer and
endorser purportedly
for and on behalf of the plaintiff. Senbank accepted the
bills and caused them to be discounted. Under the agreement the proceeds
were to
be paid into the plaintiffs bank account, but Philip requested that the amount
be split, saying that he wished payment to
be made into two different accounts
of the plaintiff. Accordingly Senbank made out and signed two cheques, one of
which was the cheque
in issue in this case, and the amount of which, at the
direction of Philip, represented Rl million of the advance, less the deductions
provided for in the agreement. In respect of this cheque, as has been mentioned
before, Philip supplied Senbank with the number
13
supposedly relating to the plaintiffs account at the defendant's Parktown
branch, which Senbank filled in on the credit transfer form
it prepared, but
which in reality was the number of the Philip Children's Trust's account. The
defendant's Bree Street branch was
situated close to Senbank's premises and
Senbank customarily did its banking with the defendant there. And so the cheque
was deposited
at the Bree Street branch.
The credit transfer form
which accompanied the cheque (henceforth referred to for convenience as "the
deposit slip") consisted of
an original and three copies. The teller who
received the documents would have been able to check the name of the payee on
the cheque
against the name of the person to be credited on the deposit slip.
Whether or not that was done is unknown but irrelevant, for the
names were
identical; the cheque and the deposit slip were on the face of it complete and
regular, they matched, and there was no
apparent reason for
14
the teller not to accept the cheque for collection. But the teller had no
ready means by which to check the name of the payee and
the person to be
credited against the account number given on the deposit slip. At that time the
defendant's computerized system
did not allow for a teller at one branch (Bree
Street) to check the correctness of the account number supplied in respect of a
customer
at another branch (Parktown).
From Bree Street the cheque
and the original deposit slip were despatched to the defendant's centralized
bookkeeping centre. There
the slip was processed through a machine which caused
the account having the number on the slip to be credited with the amount of
the
cheque. Again there was no ready means for checking that that account belonged
to the person whose name appeared on the slip.
The cheque went to the automated
clearing bureau, and from there to Trust Bank, where, on being honoured, it was
retained to be returned
to Senbank. So the cheque was never seen by the Parktown
branch. The original deposit slip was,
15
however, sent by internal mail from the bookkeeping centre to the
Parktown branch. In the normal course of events it would have been
received
there a day or two after (he credit had been entered on the account on 11 May
1989, and it would have been filed away without
further ado.
The
account of the Philip Children's Trust ("the Trust") at the defendant's Parktown
branch had been opened on 17 December 1986. The
deed creating the Trust had been
executed some two months before by Philip's mother in favour of his children.
There were two trustees;
Philip was not one, but he held a general power of
attorney from the trustees to act on behalf of the Trust. This was filed at the
Parktown branch when the account was opened, together with a written authority,
addressed to the branch and signed by the trustees,
that Philip was authorized
to operate on the Trust account in all respects. The bank's signature card
reflected each of the trustees
and Philip as having signing
16
powers, but in fact only Philip seems to have operated on the account
throughout its currency.
The account opened with a debit item of
R843 000,00 which was an amount that the defendant, at the request of Philip,
had agreed to
advance to the Trust for the purposes of making a loan to a third
party. As security for the advance the defendant took in pledge
two large
parcels of shares in the parent company, which were held by Philip in the name
of the Trust, and the market value of which
the defendant estimated to exceed R3
million. The advance was intended to provide bridging finance, it being expected
that the third
party would repay the loan within a short period of time. That
did not happen. Philip was tardy in paying the interest on the advance,
and
pressure had to be put on him time and again to do so. At one point the
defendant caused some of the pledged shares to be sold
to pay overdue interest.
There was much debate in the evidence as to whether this was a "problem
account". For present
17
purposes that may be left aside. In general, though, the defendant
regarded Philip as a "triple A" customer, signifying that he was
held in high
esteem by the bank and that the account controlled by him was not thought to be
a risky one. And in May 1988, when Parktown
branch reported to head office that
Philip had again failed to pay interest as promised and suggested that the loan
be called up
and the scrip sold, the defendant's general manager responded by
advising that the Philip family was involved in the parent company
which had
availed itself of large facilities at the defendant's Pritchard Street branch,
and that "we would not wish to take a hard
line at this stage for fear of
alienating the group". In October 1988 Philip approached the then manager of the
Parktown branch,
Mr Fillmore, and told him that negotiations were under way for
bringing about a merger between the parent company and Malbak Supertread
Division, which was described in the evidence as a division of one of "the very
biggest conglomerates" in the country. To enable
him
18
to carry through the proposed merger, Philip said, he required to have
the shares which had been pledged, and he wanted Fillmore to
release them to
him, in return for which he offered to furnish his personal suretyship for the
Trust's indebtedness. Fillmore turned
down the request and reported accordingly
to head office, recommending that the Trust's debt be called up. Head office
asked for
further information and for further discussions to be held with
Philip. Ultimately, on 2 March 1989 Fillmore, with the prior approval
of head
office, wrote to Philip advising him "that unless satisfactory arrangements can
be made to provide us with alternate full
firm security to cover the outstanding
debt or the overdraft is repaid in full, we are unable to accede to your request
in releasing
the Quality Tyres Limited shares by replacing them with your
guarantee in favour of the Trust".
On learning that he could not obtain the release of the scrip without
securing or paying the Trust's debt, Philip told Fillmore that
he
19
was arranging for finance from other sources to liquidate the liability.
Then, on 10 May 1989, Philip called Fillmore to say that
he had raised the
finance and would be depositing the funds shortly to repay the debt. As we know,
the account was credited with
the amount of Senbank's cheque on the next day.
Fillmore became aware of that when, in the ordinary course of the defendant's
practice,
the daily "large items report" was placed before him, reflecting inter
alia that credit. It would have been possible for him to trace
the source of the
deposit by calling for the deposit slip (which would not have been available
immediately), but it did not occur
to him to do so, for he felt no surprise nor
any concern, having been told to expect such a deposit and not having reason to
suspect
Philip's integrity. So the Trust's overdraft was wiped out and the
credit balance transferred to a call account. At the same time
(13 May 1989)
Philip requested in writing that the pledged shares be released to him. Since
the defendant no longer required the
security, the share certificates
20
were returned to Philip. About a month later, as has been mentioned, the
account was closed.
As far as the defendant is concerned, the Trust
account came up for consideration again for the first time in January 1990. The
senior
manager, in the course of an investigation into the affairs of the parent
company in connection with its dealings with the defendant,
called on the
defendant's branch network in Johannesburg for information about the activities
of the company and its personnel, as
a result of which the Parktown branch
produced the deposit slip in question from its records, and it was seen that it
had been made
out in favour of the plaintiff, and not the Trust. The manager
reported this to the liquidators. They investigated, and later the
present
litigation followed. In the meantime Senbank proved a claim against the
plaintiff in liquidation for payment of (inter alia)
the sum of R2,5 million,
based on its liability arising out of the five bills mentioned earlier. The
liquidators accepted the claim
and
21
Senbank was paid a dividend of R600 000,00.
The conclusion to
be drawn from the facts recited above is clear, in my view: Philip defrauded
Senbank and the plaintiff and the defendant.
As far as Senbank is concerned, my
conclusion differs from that of the Court a quo. The trial Judge rejected an
argument for the
defendant that Philip had induced Senbank by means of a
misrepresentation to issue the cheque. His reasoning was as follows: while
"it
might well be" that Philip, when he requested Senbank to draw against the
facility, had already conceived the idea of diverting
the proceeds of the
cheque, it did not follow that the plaintiff was not entitled to draw against
the facility; on the evidence Philip
told Senbank that the plaintiff wished to
draw on the facility, Senbank considered the request and then allowed it; no
proven misrepresentation
affected that part of the transaction. I do not agree.
The probabilities are overwhelming that it was not the plaintiff that wished
to
draw on the facility, but Philip
22
himself in the pursuit of achieving his own ends - at least to the extent
of the cheque in issue (the fate of the other cheque was
not disclosed in the
evidence). To that extent Philip, by making the request, misrepresented to
Senbank that the plaintiff required
this funds for the purpose of acquiring
trading stock as contemplated in the agreement. He must have known that Senbank
would not
have issued the cheque if it had known that the proceeds would be used
to enable Philip to liquidate the Trust's indebtedness. Moreover,
it is obvious
that Senbank would never have parted with the cheque if it had known that Philip
had supplied a false number for entry
on the deposit slip and that the plaintiff
had no account at Parktown.
The trial Judge found that Philip defrauded the plaintiff by diverting
the proceeds of the cheque; and he observed, as has appeared
above, that "it
might well be" that Philip had conceived the idea of doing so before he
requested Senbank to draw against the facility.
In my view
23
it is not open to doubt that Philip had already decided upon his
fraudulent plan of action before he approached Senbank for the funds
on 11 May
1989. Quite possibly the scheme had already been conceived by as early as 24
April 1989, when Philip asked Senbank to increase
the limit of the facility from
R4 million to R8 million, for he had been trying to get hold of the pledged
shares since October 1988,
he learnt during March 1989 that he would be unable
to do so unless he secured or paid off the Trust's overdraft, and he then told
Fillmore that he would be procuring the required funds from other sources.
However that may be, his call to Fillmore on 10 May 1989,
when he told him that
the required funds would be deposited shortly, taken together with his conduct
thereafter, leaves no room for
doubt that his dealings with Senbank on 11 May
1989 constituted the execution of a plan to defraud the plaintiff which had been
carefully
and precisely preconceived.
Against this factual background the way is now clear for a
24
consideration of the issue of the true ownership of the cheque. In the
Court a quo the issue was dealt with in the following passage
of the
judgment:
"It was also argued on behalf of the Defendant that Senbank intended to
deliver the cheque to Plaintiff, while Philip, acting on behalf
of the
Plaintiff, intended the cheque to be delivered to the Trust. It follows, so the
argument went, that there was no consensus
ad idem, and ownership in the cheque
did not pass. The argument is certainly interesting, but incorrect. Philip
intended that ownership
in the cheque should pass to the Plaintiff. That was the
only way in which he could complete the fraud. By misrepresenting that the
account number is that of the Plaintiff, he managed to let ownership pass while
diverting the proceeds to the account of the Trust."
This reasoning in my opinion runs counter to the true nature and
scope of the fraud as planned and perpetrated by Philip. It seems to
me,
with respect, that the learned Judge was led into error by not
perceiving
that Philip's scheme encompassed a fraud on Senbank as well as on
the
plaintiff and that the detailed manner of execution of the scheme
must
25
have been firmly in place in Philip's mind before he approached Senbank.
The Court a quo's failure to appreciate the full thrust of
the deceit is
illustrated, perhaps, as was argued by counsel for the defendant in this Court,
by the use of the expression "Philip,
acting on behalf of the plaintiff, in the
first sentence of the passage quoted above, instead of a phrase like "Philip,
ostensibly
acting on behalf of the plaintiff". (Counsel submitted also
that the learned Judge's rendering of the argument in the Court below
was
inaccurate.) As far as Philip's negotiations with Senbank concerning the cheque
in issue are concerned, Philip, while misrepresenting
to Senbank that he was
acting on behalf of the plaintiff, was unquestionably doing nothing of the kind.
He was acting purely and
simply in the furtherance of his own interests, and in
fraud of the plaintiff.
When proper regard is had to the true ambit
of Philip's planning and execution of the fraud there can be no warrant for a
finding
that he
26
intended ownership in the cheque to pass to the plaintiff. His intent,
which is to be inferred from the evidence as analysed above,
was from beginning
to end that neither the cheque itself nor its proceeds would
ever
reach the plaintiff. In truth it is a feature of the
cunningness of his scheme that it was based on the knowledge he had beforehand
that the cheque would not be delivered but would be deposited with a bank, thus
enabling him to bring about the diversion of its
proceeds, unbeknown to the
plaintiff. By the same token there is no justification as a matter of fact for
the trial Judge's remark
that it was only by ownership passing to the plaintiff
that Philip could complete the fraud. As a matter of law the proposition is
unsound, as counsel for the defendant argued and as will appear from what
follows. Consequently the Court a quo's reasons for holding
that the plaintiff
was the true owner of the cheque cannot be sustained.
In this Court counsel for the plaintiff sought to support the
27
Court a quo's conclusion along a different route. Philip's intention was
irrelevant, he argued; what had to be looked at was Senbank's
intention, on the
one hand, and the defendant's intention, on the other. As to Senbank, it was
contended that it believed that the
plaintiff was entitled to the proceeds of
the cheque; that it delivered the cheque to the defendant with the object of
enabling the
latter to collect the proceeds on behalf of the plaintiff; that it
did not intend to retain a right of possession or any other right
in respect of
the cheque; and that it accordingly intended the plaintiff to become the owner
of the cheque through its delivery to
the defendant. As to the defendant, the
contention was that it, too, intended ownership of the cheque to pass to the
plaintiff, because
by accepting the cheque for collection the defendant
undertook to act as the collecting agent for and on behalf of the payee named
in
the cheque, being the plaintiff. In this way, the argument concluded, the
delivery of the cheque by Senbank to the defendant was
effective to transfer
the
28
ownership to the plaintiff, who was the only party having any real
interest in the cheque and its proceeds.
In my view this argument
for the plaintiff is flawed in a number of respects and for a number of reasons.
Before I deal with these,
however, it will be convenient to make some general
observations about the nature of the enquiry with which we are
concerned.
When our courts have been called upon in the past to
decide the issue of the true ownership of a cheque, the most familiar factual
situations giving rise to the issue have been of the kind where the cheque was
stolen and then either cashed by the thief with a
third party (raising the
question of the latter's liability to the true owner under section 81 of the
Bills of Exchange Act 34 of
1964), or deposited for collection by the thief at
the bank of which he was a customer (raising the question of the bank's
liability
in delict to the true owner), and where potentially only the drawer
and the payee of the cheque could compete for the ownership of
29
the cheque. In the present case the facts present two unusual features:
the cheque was not stolen, and it was deposited for collection
by the drawer.
Despite these features, however, the fundamental question to be resolved here is
the same as it was in the familiar
situations I have mentioned, viz whether at
the material time the ownership of the cheque vested in the drawer or in the
payee. And
since the drawer was obviously the first owner of the cheque and
there can only be one owner at a time (in a context such as the
present), the
ultimately decisive question is whether the evidence establishes a juridical act
which had the legal effect of transferring
the ownership from the drawer
(Senbank) to the payee (the plaintiff).
At this point some comment is called for, I think, on the concept of the
"true owner" of a cheque. The expression is used in section
81 of the Bills of
Exchange Act 34 of 1964 ("the Act"), to which reference was made above. In that
setting the expression bears a
specialized meaning
30
derived from the context of the legislative enactment in which it occurs
and its historical origins. But in the context of a case
such as the present,
where the decisive issue is simply whether ownership was transferred from the
drawer to the payee, it seems
to me that the specialized meaning of "true owner"
as used in the Act has no impact and that the word "true" does not serve to
qualify
the ordinary meaning of "owner" as used in legal parlance; it serves
merely to signify that party, of the two parties who are the
potentially
competing claimants to ownership, who is found to be the owner in fact. It is in
a similar sense, I consider, that the
expression "true owner" was used in the
judgment of this Court in the
Indac Electronics
case supra
[1991] ZASCA 190
;
(1992 (1) SA
783).
In that case the Court was not concerned with the issue of true ownership
arising from potentially conflicting claims to ownership
as between the drawer
and the payee of the cheque. It was considering the claim of a payee against a
collecting bank based inter
alia on an allegation that the bank had
31
collected the cheque on behalf of a customer who had presented the cheque
for collection but who had had no right to receive the proceeds
(see at
788I-789A). In such a situation it seems to me that the function of the
expression "true owner" is no more than to point
to the person who was the owner
as opposed to the person who purported to be but was not. This contrast is
reflected, I think, in
the formulation of the general principles of liability in
the passage of the judgment quoted earlier (at 797A-D) - "true owner" as
opposed
to "someone who was not entitled thereto". In any event, in setting out, in the
passage cited, the general considerations
governing the collecting bank's legal
duty of care (in the sense explained at 797E-798C) as against the "true owner",
this Court
did not, in my opinion, intend the expression "true owner" to bear
any specialized or technical meaning; in particular, "true" does
not qualify the
ordinary legal sense of "owner". As a matter of terminology, it seems to me that
the word "true" is strictly unnecessary
in the present context and
32
might as well be dispensed with.
The ownership of a cheque,
viewed as a piece of corporeal movable property, can be transferred only in
accordance with the general
requirements of the law regarding the transfer of
ownership of corporeal movables. There must be a delivery of the thing, i e
transfer
of possession, either actual or constructive, by the transferor to the
transferee, and there must be a real agreement (in the sense
of "saaklike
ooreenkoms") between the transferor and the transferee, constituted by the
intention of the former to transfer ownership
and the intention of the latter to
receive it (see e g
Air-Kel (Edms) Bpk H/A Merkel Motors v Bodenstein en 'n
Ander
1980 (3) SA 917
(A) at 922E-H). Either party can, of course, act
through someone duly authorized to act on his behalf. This is what the plaintiff
was required to establish in evidence to substantiate its claim to the ownership
of the cheque. On the facts of this case there is
no need to consider the
transfer of the rights flowing from
33
the cheque, viewed as a contractual document; having regard to the
definitions of "delivery" and "issue" in section 1 of the Act,
the transfer of
the rights is inextricably tied up with the transfer of the ownership of the
cheque. Nor is there any need to consider
the question raised in argument
whether Philip's fraud rendered the underlying contract (in terms of which
Senbank undertook to advance
the funds) void or voidable; whatever the answer
might be, it would not affect the reasoning which follows.
I revert
now to the argument for the plaintiff as summarized earlier. The first point on
which it must fail is the submission that
Senbank intended the plaintiff to
become the owner of the cheque. The submission is not justified by way of
inference from the facts
advanced by counsel in support of it, as recited
earlier. The argument confuses the proceeds of the cheque, to which Senbank
believed
the plaintiff to be entitled and which it wished the plaintiff to
receive, with the cheque itself
34
and the ownership of it. To achieve the channelling of the funds into the
plaintiffs account there was no call for Senbank to transfer
the ownership of
the cheque, and there are facts pointing to the inference that Senbank did not
intend to do so. In the written agreement
which created the bank acceptance
credit facilities for the plaintiff it had been specifically provided that
Senbank would account
to the plaintiff for the net proceeds of the discounted
bills by crediting its account at its commercial bank. It was not contemplated
that a cheque would be delivered to the plaintiff itself. The arrangement
reached between Senbank and Philip on 11 May 1989 conformed
exactly to the
procedure laid down in the agreement. Senbank was not paying over the amount of
the advance by issuing the cheque
to the plaintiff. By drawing the cheque and
depositing it to the credit of what was thought to be the plaintiffs account
Senbank
was merely using a mechanism to cause the funds to reach the plaintiffs
coffers, a procedure of which it was no part that the plaintiff
would
35
acquire any rights to the cheque. In these circumstances an inference
that Senbank intended the plaintiff to become the owner of the
cheque is
unwarranted.
The contention that the defendant when it accepted the
cheque for collection intended the plaintiff to become the owner of it is also
unsupported by the evidence. Counsel relied on the opinion expressed in general
terms by some of the defendant's witnesses that a
collecting bank can act only
on behalf of the payee named in the cheque. Suffice it to say that that evidence
patently does not bear
out the contention.
Finally, the cardinal fallacy underlying the whole of the argument for
the plaintiff is that it overlooks that there was never any
delivery of the
cheque by Senbank to the plaintiff, as was required for the passing of
ownership. Counsel argued that delivery to
the defendant constituted
constructive delivery to the plaintiff, on the ground that the defendant was
acting as the collecting agent
for the plaintiff. The
36
insuperable obstacle in the way of this argument is that the plaintiff
never authorized the defendant to receive delivery of the cheque
on its behalf,
whether in ownership or otherwise. The plaintiff was, in fact, a stranger to,
and absent from, the whole transaction
between Philip, Senbank and the
defendant. Counsel was constrained to invoke the presence of Philip, despite his
earlier submission
that Philip's intention was irrelevant, arguing that an
authorization by the plaintiff to the defendant was to be found in Philip's
mandate to Senbank to deliver the cheque to the defendant and Senbank's ensuing
mandate to the defendant to take delivery on the
plaintiffs behalf. But Philip's
fraud prevented his act from being effective to draw the plaintiff into the
transaction; counsel
rightly conceded that where, in circumstances like the
present, a director purports to act on behalf of his company but in reality
acts
only in his own interests, the act is unauthorized. Moreover, and in any event,
as was pointed out earlier, Philip as a matter
of fact never had any
intention
37
that the plaintiff was to become the owner of the cheque.
Two further points raised on behalf of the plaintiff can be
briefly
disposed of. In the written heads of argument it was
submitted that a
collecting bank's legal duty of care extends to the
named payee of a
cheque, whether or not he is the owner of it. In
argument before this
Court counsel said that he was not pursuing the submission. Suffice it
to
say that counsel's decision was right, for the submission is
manifestly
without merit. The other point was based on a passage in
Cowen's
Law
of Negotiable Instruments in South Africa
(4th edition) at 436-7,
the gist
of which reads as follows:
"It would seem that the essence of the concept of being a 'true owner'
for the purposes of section 81 is being entitled to possession
of the instrument
and to the enjoyment of an interest therein."
Counsel submitted that the plaintiff fell within this definition of a
"true
owner". The learned author was dealing with the specialized meaning
of
38
"true owner" in the context of the provisions of section 81 of the Act,
which, as I have already indicated, is not applicable to the
resolution of the
issue in this case. Indeed, the inappropriateness of invoking
Cowen
's
definition here was demonstrated in the course of the argument, when counsel was
asked whether the plaintiff would have fallen
within the definition while the
cheque remained in the possession of Senbank. Counsel said no, because it had
not yet been delivered.
The answer was inevitable, and it highlighted the fatal
defect in the plaintiffs case.
In my judgment, therefore, the
plaintiff failed to prove that it was the owner of the cheque, and thus failed
to establish the first
ingredient of its alleged cause of action. That being so,
there is no occasion for this Court to consider the other issues raised
in the
appeal.
The order of the Court is as follows:
1. The appeal is allowed with costs, including the costs of two
counsel.
39
2. The order of the Court a quo is set aside and there is
substituted for it the following order:
"The plaintiffs action is dismissed with costs, including the costs of
two counsel".
A S BOTHA JA
CORBETT CJ
EKSTEEN JA
CONCUR
HOWIE JA
SCHUTZ JA