Absa Bank Ltd v Lombard Insurance Company Ltd, Firstrand Bank Ltd v Lombard Insurance Company Ltd (629/2011, 684/2011) [2012] ZASCA 139; 2012 (6) SA 569 (SCA); [2012] 4 All SA 485 (SCA) (28 September 2012)

Absa Bank Ltd v Lombard Insurance Company Ltd, Firstrand Bank Ltd v Lombard Insurance Company Ltd (629/2011, 684/2011) [2012] ZASCA 139; 2012 (6) SA 569 (SCA); [2012] 4 All SA 485 (SCA) (28 September 2012)

The Supreme Court of Appeal held that when stolen funds are paid into a thief's bank accounts and used to discharge overdraft, credit card, and home loan debts, those debts are extinguished. The banks, acting in good faith and without knowledge of the theft at the time of receipt, were entitled to appropriate the funds to settle the debts. The principle of suum recipit applies: a creditor who receives payment of a debt is not enriched, as the payment merely replaces one form of wealth with another. The condictio ob turpem vel iniustam causam does not entitle the owner of the stolen funds to recover amounts used to discharge the thief's debts from the banks. The banks are only liable to...

Citation
[2012] ZASCA 139
Parties
Appellant: Absa Bank Limited; Appellant: Firstrand Bank Limited; Respondent: Lombard Insurance Company Limited
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
28 September 2012
Case Number
629/2011, 684/2011
Procedural Posture
Civil Appeal / Appeal From South Gauteng High Court, Johannesburg
Outcome
Appeal upheld. The banks are not liable to restore stolen funds used to discharge the thief's debts; only credit balances remaining in the thief's accounts are recoverable.
Judges
Mthiyane DP, Cloete JA, Malan JA, Pillay JA, Petse JA
Legal Topics
Unjustified Enrichment, Condictio Ob Turpem Vel Iniustam Causam, Suum Recipit, Electronic Funds Transfer, Discharge of Debt
Banking and Finance Civil Procedure Unjustified Enrichment Condictio Ob Turpem Vel Iniustam Causam Suum Recipit Electronic Funds Transfer Discharge of Debt

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Parties

Absa Bank Limited

Appellant

Firstrand Bank Limited

Appellant

Lombard Insurance Company Limited

Respondent

Procedural Posture

Civil Appeal / Appeal From South Gauteng High Court, Johannesburg

Legal Issues

  1. 1 Whether stolen funds paid into the thief's bank accounts and used to discharge overdraft, credit card, and home loan debts extinguished those debts.
  2. 2 Whether the banks holding the accounts were enriched by receipt of stolen funds used to settle the thief's debts.
  3. 3 Whether the owner of the stolen funds (Lombard Insurance) can recover from the banks amounts used to discharge the thief's debts.

Ratio Decidendi

The Supreme Court of Appeal held that when stolen funds are paid into a thief's bank accounts and used to discharge overdraft, credit card, and home loan debts, those debts are extinguished. The banks, acting in good faith and without knowledge of the theft at the time of receipt, were entitled to appropriate the funds to settle the debts. The principle of suum recipit applies: a creditor who receives payment of a debt is not enriched, as the payment merely replaces one form of wealth with another. The condictio ob turpem vel iniustam causam does not entitle the owner of the stolen funds to recover amounts used to discharge the thief's debts from the banks. The banks are only liable to...

Court Disposition

Appeal upheld. The banks are not liable to restore stolen funds used to discharge the thief's debts; only credit balances remaining in the thief's accounts are recoverable.

Orders

  • The appeal of Firstrand Bank Limited (684/2011) is upheld with costs. The application against the first respondent is dismissed with costs.
  • The appeal of Absa Bank Limited (629/2011) is upheld with costs including the costs of two counsel, save that Absa is ordered to pay the respondent's costs up to the time of filing of Absa's heads of argument.