THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case no: 83/03
In the matter between:
FJS PAINTING CC Appellant
and
ABSA BANK LIMITED Respondent
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Coram : HARMS, SCOTT, NUGENT, CLOETE et
HEHER JJA
Date of Hearing : 18 MAY 2004
Date of Delivery : 28 MAY 2004
Summary: Liability of a collecting banker for negligence – ownership
of cheque presented for collection – requirements – order in para 16
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JUDGMENT
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SCOTT JA/…
2
SCOTT JA:
[1] The appellant sued the responde nt (‘the bank’) for damages
in the magistrates’ court, Springs , alleging that it was the true
owner of four cheques which the bank had negligently collected for
the account of another. It founde d its claim both in delict and
contract. Its reliance on contract was based on the fact that it
operated a current account at th e same branch of the bank at
which the cheques had been depo sited. The claim succeeded in
the magistrates’ court but the judgment of t he latter was reversed
on appeal to the Pretoria High C ourt. The present appeal is with
the leave of this court.
[2] Only the appellant adduced evid ence at the trial. The facts
are not in dispute. The appellant, a close corporation, was
established in April 1993. Its sole member was Mr Frederick
Beytell. It carried on business as a contractor doing mainly painting
work. For this purpose it operated a current account at the bank’s
Springs branch. The account was in the name of ‘FJS Painting CC’
which is the registered name of the appellant. One of its main
clients was Sappi Manufacturing (P ty) Ltd (‘Sappi’). During 1993
and early 1994 cheques drawn by S appi on first National Bank,
Springs, (‘FNB’) for payment of work executed by the appellant
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were made out in favour of ‘FJS Painting Contractor CC’. Later
they were made out in favour of ‘FJS Painting Sheeting & Labour
Hire Contractor CC’. The appellant’s invoices produced at the trial
reflect the latter description of the appellant and it is likely that the
change in the name of the payee stated on the cheques reflected a
change in the wording of the appellant’s invoices. The cheques
were all crossed and marked ‘Not Transferable for Account Payee
Only’. This notwithstanding, th e cheques were collected by the
bank and credited to the account of the appellant.
[3] Sometime prior to October 1994, Ms Nicky Craythorne and
Beytell began living together as husband and wife. Beytell was in
the process of divorcing his wife to whom he was apparently
married in community of property. Craythorne, while living with
Beytell, attended to the book keeping of the appellant and on
occasions collected or delivered items such as paint for Beytell.
[4] This was the situation when, on 22 October 1994, Beytell
died in or as a result of an acci dent. He had previously executed a
will in terms of which Craythorn e, who was described as his
fiancée, was made residual heir s ubject to a bequest of R100 000
to the deceased’s children. Wh ether Craythorne would have
inherited Beytell’s member’s interest is unclear. This would have
4
depended on the size of the estate of which one half would in any
event have accrued to his spouse.
[5] What then happened is as fo llows. On 1 November 1994, ie
some 10 days after Beytell’s death, Craythorne opened an account
in the name of ‘The Sole Owner FJS Painting Sheeting’ at the
bank’s Springs branch, being the same branch at which the
appellant had its accoun t. At about the same time, probably a day
or two earlier, she wrote to Ms Deborah Farnaby, Sappi’s
commercial manager of the di vision concerned, advising of
Beytell’s death and stating that she and Beyte ll had been partners
and that she would be continuing with the business. She also had
a meeting with Farnaby at which she reiterated that ‘she was a
50% shareholder in the business an d was authorised to continue
operating [it]’. On the strength of what Craythorne told her,
Farnaby on 2 November 1994 drafted an internal memorandum
advising the staff of Beytell’s death and that the appellant had
been authorised by Sappi to complete three orders then in
progress and to execute 14 outst anding orders. Because Sappi
had a policy which required every contractor to go through an
approval process, Farnaby directed that no new ord ers were to be
placed until the standard of wo rk performed by the person whom
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Craythorne said the appellant would be employing, had been
monitored.
[6] The first of the four cheques fo rming the subject matter of the
appellant’s claim was dated 4 November 1994. It was in respect of
a progress payment and was for an amount of R31 381.92 drawn
on FNB. The payee, as before, wa s stated to be ‘FJS Painting
Sheeting & Labour Hire Contractor CC’. Presumably it was issued
on the strength of what Farnaby had been told. Craythorne took
delivery of the cheque and on 7 No vember 1994 deposited it in the
account she had opened seven da ys earlier. The second cheque
was dated 2 December 1994 and was for R40 287.60. The third
was dated 12 January 1995 and wa s for R24 808.68. The latter
two were similarly payable to ‘FJS Painting Sheeting & Labour Hire
Contractor CC’ and both were received by Craythorne and
deposited to the credit of the account she had opened.
[7] In about the middle of J anuary 1995, F arnaby ascertained
from the executor of Beytell’s es tate that at all times Beytell had
been the sole registered member of the appellant. On her
instructions a letter dated 17 January 1995 was addr essed to the
appellant cancelling with immediat e effect all orders placed with
the appellant. The letter concluded with the explanation:
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‘The decision has been taken by Sappi based on the information provided by
Syfrets that Mr F Beytell was the sole registered me mber of FJS Contractors
CC, and as such the concern forms part of the deceased estate.’
Nonetheless, a fourth cheque, dated 30 January 1995 and for an
amount of R36 386.06, was issued by Sappi for work done. As
before, the payee was stated to be ‘FJS Painting Sheeting &
Labour Hire Contractor CC’. As before, Craythorne took delivery of
the cheque and deposited it in the same account.
[8] All four cheques were crossed and marked ‘Not Transferable
For Account Payee Only’. This notwithstanding, they were all
collected by the bank for the credit of the account ‘The Sole Owner
FJS Painting Sheeting’. Craythorne died subsequently in 1995 or
1996. There was no credit balance in the account she had opened,
nor were there assets in her estate.
[9] In its particulars of claim t he appellant alle ged in respect of
each of the four cheques that it was the true owner, that in breach
of a legal duty owed to it by the bank, or in breach of its contract
with the bank, the latter had neg ligently collected the cheques for
the credit of the account opened by Craythorne and that as a result
the appellant had suff ered a loss in the amount of each cheque.
Each of these allegations was d enied by the bank. The first and
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main ground upon which the appellant sought to rely was that
recognised in Indac Electronics (Pty) Lt d v Volkskas Bank Ltd
1992 (1) SA 783 (A), namely the liabili ty under the lex Aquilia of a
banker, who negligently collects payment of a cheque on behalf of
a customer who has no title thereto, for pure economic loss
suffered by the owner of the cheque. To succeed on this ground
the appellant was obliged to estab lish that it was the owner of the
cheques concerned. The court a quo found that it had failed to do
so. The debate in this court ce ntred largely around the correctness
or otherwise of this finding.
[10] Although the expression ‘tr ue owner’ was used in the
pleadings (and in s 81 of the Bills of Exchange Act 34 of 1964), it is
common cause that in the contex t of the present case nothing
turns on the adjective ‘true’. The first owner of each cheque was,
of course, the drawer, Sappi. The question is whether the evidence
establishes a valid transfer of ownership from Sappi to the
appellant. The answer involves the application of the ordinary rules
of common law relating to the t ransfer of movable property.These,
in the context of a cheque, were stated as follows by Botha JA in
First National Bank of SA Ltd v Quality Tyres (1970) (Pty) Ltd 1995
(3) SA 556 (A) at 568F-H:
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‘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 tr ansfer of ownership of corporeal movables. There
must be a delivery of the thing, ie transfer of possession, either actual or
constructive, by the transferor to t he transferee, and there must be a real
agreement (in the sense of ”saaklik e 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 ….’
On the same page at I-J the learned judge added:
‘On the facts of this case there is no need to consider the transfer of the rights
flowing from the cheque, viewed as a contractual document; having regard to
the definitions of “delivery” and “issue” in s 1 of the [Bills of Exchange Act 34
of 1964], the transfer of the rights is inextricably tied up with the transfer of the
ownership of the cheque.’
The same is true of the facts in the present case.
[11] Counsel for the appellant so ught to invoke the assistance of
s 19(4) of the Bills of Exchange Act. He argued that because Sappi
was no longer in possession of the cheques it had to be presumed
in terms of the section that ow nership had passed to the appellant.
The section reads in part:
‘If a bill is no longer in possession of a party who has signed it as drawer … a
valid and unconditional del ivery by him is presum ed until the contrary is
proved.’
9
The same argument was raised but rejected in Absa Bank Bpk v
Coetzee [1998] 1 All SA 1 (A) at 4j where Eksteen JA said:
‘Hierdie betoog kan egter nie opgaan nie. Artikel 19(4) gaan nie oor die
oordrag van die eiendomsreg in ‘n tjek nie maar slegs oor die besit daarvan.
Dit skep ook nie die vermoede dat die tr ekker die besit aan die begunstigde
oorgedra het nie, maar sl egs dat hy die besit oorgedra het aan die persoon
aan wie hy dit oorhandig het.’
In the present case it is not in dispute that Sappi delivered all four
cheques to Craythorne a nd that it did so with the intention of
transferring ownership therein to t he appellant. What is in issue is
whether the appellant, through an agent or otherwise, took delivery
of the cheques with the intentio n of acquiring ownership. This is
what the appellant was obliged to establish on a balance of
probabilities.
[12] Returning to the facts, it is clear that Craythorne represented
to Farnaby, and falsely so, that she was a member of the appellant
and that she was accordingly authorised to continue the
appellant’s business. She was no doubt aware that if the cheques
received from Sappi were depos ited in the appellant’s current
account she would be unable to withdraw the money. The
probabilities are overwhelming that either having satisfied Farnaby
that she was authorised to cont inue the appellant’s business, or
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possibility in anticipat ion of being able to do so, she opened the
account on 1 November 1994 in the name of ‘The Sole Owner FJS
Painting Sheeting’ with the expr ess purpose of depositing in that
account Sappi’s cheques once she received them. The obvious
inference (although not the only pos sible one) is that she intended
to acquire the cheques for herself, whether simply to withdraw the
funds from the account she had opened, or to run the business on
her own behalf as opposed to on behal f of the appellant (the latter
possibly being the more likely). If this had been the case, she
would not, of course, have taken del ivery with the intention of the
appellant acquiring ownership.
[13] Counsel for the appellant submitted that Craythorne was
merely a nuntius (messenger) and that her intention was therefore
irrelevant. There is, of course, a clear distinction between a
messenger who is no more than a conduit on the one hand and,
on the other, a pers on who represents anot her in the sense of
having a mandate to perform some or other juridical act binding on
the person he or she re presents. In the pres ent case the evidence
did not establish that Craythorn e had been given such a mandate
and it is unnecessary to consid er what the position would have
been had she had such a mandate. Nor do I wish to be understood
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as accepting that such a manda te would have survived the death
of the sole member of the appe llant. No argument was addressed
to us on the point. The difficult y with counsel’s submission that
Craythorne acted as a messenger is that until an executor was
appointed (who in terms of the will was entitled ‘om … enige
besigheid voort te sit’) the appellant would have had no controlling
mind and therefore would have been incapable of forming the
necessary intention. Once an ex ecutor was appointed only he (or
she) would have been c apable of forming an intention on behalf of
the appellant to acquire owners hip of the cheques. It was not
established when the executor was appointed, but what is clear is
that he (or she) had no knowled ge of what Craythorne was doing.
It follows that on the p remise that the factual inference in question
is correct, the appella nt would have failed to establish that
ownership of the cheques passed to the appellant.
[14] Another possible inference arising from the facts placed
before the trial court is that C raythorne assumed the role of a
‘caretaker’ of the appellant’s bu siness until such time as an
executor was appointed and in th is role took delivery of the
cheques with the intention of th e appellant acquiring ownership. I
shall assume without deciding that had this been the case,
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ownership in the cheques would have passed to the appellant.
Although not necessarily decisive , there are, however, factors
which tend to gainsay such an in ference. One is that Craythorne
made no attempt to inform the ex ecutor, once he (or she) was
appointed, of what she was doing. On the contrary, by mid January
1995 it would have been clear from the correspondence addressed
by Sappi to her that Beytell’s estate was being administered by
Syfrets. Nonetheless, she took possession of a further cheque
(dated 30 January 1995 ) and deposited it in the account she had
opened on 1 November 1994.
[15] In the circumstances, it canno t be said, in my view, that the
inference that Craythorne intended to act as a caretaker for the
appellant is the more natural or acceptable of the two possible
inferences considered above ( cf AA Onderlinge Assuransie-
Assosiasie Bpk v De Beer 1982 (2) SA 603 (A ) at 614H-615C). It
follows that the appellant fail ed to establish on a balance of
probabilities that it ever acquired ownership of the four cheques in
question.
[16] Arguing in the alternative, c ounsel submitted that the legal
duty of a collecting banker not to act negligentl y ought to be
extended to a named payee of a cheque even if the payee were
13
not the owner of it. A sim ilar submission made in the Quality Tyres
case at 570B was rejected as being ‘manifestly without merit’.
Nonetheless counsel referred to Strydom NO v Absa Bank Bpk
2001 (3) SA 185 (T) in which Du Pl essis J, although holding that
ownership of the cheque was an essential ingred ient of the action,
suggested at 194B-C that the re quirement may well become the
subject of debate in the future. The extension of a collecting
banker’s liability in this way co uld have far-reaching and possibly
inappropriate consequences, none of which were debated before
us. However, on the facts of the present case it is unnecessary to
become embroiled in such a debate.
[17] Turning to the claim in co ntract, if the appellant did not
acquire ownership of the cheques it may well be, depending on the
circumstances, that Sappi would have remained liable to it for
payment of the amounts in questio n. In that event, the appellant
would have suffered no loss and t he bank’s liability, if any, would
be to Sappi, the owners of the cheques, not to the appellant.
However, the appellant’s case was based throughout on the
allegation that it was the owner of the cheques and no evidence
was adduced to establish that it had suffered a loss on some other
basis. It is accordingly unnecessary to consider the obligations of a
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banker to its own client. It is also unnecessary to consider the
issue of the respondent’s negligence as a collecting banker.
[18] The appeal is dismissed with costs.
D G SCOTT
JUDGE OF APPEAL
CONCUR:
HARMS JA
NUGENT JA
CLOETE JA
HEHER JA