Absa Bank Ltd. v Natasha Investment Company (Pty) Ltd (614/94) [1996] ZASCA 59 (29 May 1996)

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Case no: 614/94 INTHE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the matter between:

ABSA BANK LIMITED

: Appellant

AND

NATASHA INVESTMENT COMPANY

(PTf) LIMITED

: Respondent

Coram:

BOTHA, HEFER, FH GROSSKOPF,

HARMS JJA et ZULMANAJA

Date of Hearing: 9 May 1996 Date of Judgment: 29 May 1996

JUDGMENT

2 ZULMANAJA:

AJA

This is an appeal against a judgment granted in the Witwatersrand

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Division against the appellant in favour of the respondent for pay nent of damages in the sum of R600 000,00 with interest and costs. An applicaiion to the trial Judge (Myburgh J) for leave to appeal was refused with costs. Thereafter, on petition to the Chief Justice, leave was grarted to the appellant to appeal to this Court and the costs of both applications for leave were ordered to be costs in the appeal.

The judgment under appeal was based in essence on the court aquofinding that the appellant had breached its duty of care to the respondent arising out of the appellant's acting as the collecting banker in reapect of a cheque for R600 000.00 of which the respondent was the drawer and the true owner. The following facts arc common cause:-

quo

1. On 22 March 1993 the appellant's Troyeville/Bertrams

3 agency received a cheque in an amount of R600 000,00

dated 20 March 1993 drawn by the respondent represented

by one Kilallides on the Standard Bank of South Africa Limited ("Standard Bank") in favour of Chemsteel Mineral Developments (Pty) Limited ("Chemsteel").

2. The cheque was received for collection on behalf of Marilor Properties and Investments CC ("Marilor"), which conducted a current account at the branch. The cheque did not bear any endorsement at the lime. The cheque was generally crossed without containing words such as "not negotiable" or "not transferable" or any other words with a similar meaning or effect. However, the printed words "of Toonder" "or Bearer" appearing on the face of the cheque were crossed out and the word "order" written in after the name of the

4 payee.

Consequent upon the deposit of the cheque and on 22

March 1993 the appellant's branch allowed Marilor to

withdraw the sum of R120 000,00 and thereafter to

withdraw further sums. By 26 March 1993 the full amount

of the cheque had been withdrawn.

4.

The appellant caused the cheque to be presented forpayment to Standard Bank, which paid the proceeds of thecheque to the appellant. The appellant in turn credited theaccount of Marilor.

5.

In effecting payment to the appellant, Standard Bank actedin good faith and without negligence, and debited theaccount of the respondent with the amount of the cheque,which it was entitled to do.

5 In argument before this Court counsel for the appellant did not

challenge the courta quo'sfinding that the appellant had breached its

a quo's

duty of care to the true owner of the cheque. The argument for the

appelant was confined to an attack on two specific findings of the court

a quo:

(a)

that the respondent had proved that it was the true owner of the cheque, and

(b)

that the respondent had proved that it had sustained a loss of R600 000.00 or at all.

The respondent called as its main witness one Levisohn, a charered accountant who was the local managing agent or officer of Chemsteel. the named payee of the cheque. His evidence can be summarised as follows. Chemsteel was incorporated in late 1989 and acquired two sets of mining claims. Chcmsiccl was wholly owned by a

6company based in the United Kingdom which used Chemsleel as a

company based in the United Kingdom which used Chemsleel as a

vehcile for the purchase of mineral claims Tor a price of between R8

millon and R9 million. It was Levisohn's function to administer the

Souh African affairs of Chemsteel Levisohn received all his instructions

in regard thereto from one Sherry in London. On 10 February 1993

Levsohn was instructed by Sherry to release information to one White

in connection with the possibility of White "or his interests" buying

Chemsteel's mining claims. On 5 March 1993 Levisohn met one Du Toit

with White, with a view to providing them with whatever information

they thought would be necessary in connection with the purchase of the

mining claims in question. Subsequent to the meeting, Du Toit made

several trips to London and was in direct contact wiih Sherry and his

delerate. one King, regarding negotiations for the sale of the assets of

Chemsteel.

7On 22 March 1993 Du Toit and While visited Levisohn at his

On 22 March 1993 Du Toit and While visited Levisohn at his

office. They showed Levisohn the cheque. They wanted Levisohn to

deposit the cheque into the account of Chemsteel and then to make

certain disbursements From those Funds which would not exceed the

am aunt of the cheque. The money had then to be paid out on behalf of

Du Toit and While. The disbursements to be made on the instructions of

Du Toit would not be disbursements for or on behalf of Chemsteel but

for he expense directed by Du Toit. Levisohn had certain concerns about

the recquest. According to Levisohn. his first problem was that he would

have to wait for the cheque to be cleared before he could deal with it.

The after he would have to retain the funds pending instructions from

Sherry in London as to whether Sherry was aware of the transaction and

ast whether Levisohn was authorised to receive the cheque and pay out

the money. Levisohn would further have to establish wilh Sherry the

8

reason why the cheque was drawn and the nature of the transaction which existed between the drawer of the cheque and Chemsteel. Levisohn also needed to know, from an accounting point of view, what the nature of the transaction would be, whether it would be a loan or part of a purchase consideration "or whatever". Levisohn was led to understand that there was some urgency in regard to the disbursing of the funds. After Levisohn had managed to consult with his partners in Johannesburg he indicated to Du Toit and White that he could not accept the cheque without instructions from Sherry. Thereupon Du Toit and Whrite advised Levisohn that they could probably make other arrangements and they left with the cheque. The time period within which Levisohn would be able to eventuallv determine whether he could made the disbursements was unacccptably lengthy. Levisohn advised Du To that should he not be able to make any alternative arrangements he

9 could again approach him and Levisohn would see what he could do.

Levisohn indicated in his evidence that he did not know whether or not

Sherry would have instructed him to deal with the cheque as requested

by Levisohn.

Of some significance is the fact that during the course of

Levisohn's evidence it appeared that he at no stage thought that he

needed to consult with the drawer of the cheque, the respondent, as to

whether he was entitled to comply with the request made to him by Du

Toi . notwithstanding the fact that the cheque was not made payable to

Du Toit but to Chemsteel. Indeed during the course of cross-examination

by counsel for the appellant Levisohn agreed with the suggestion that it

must have been apparent to him that the proceeds of the cheque, as far

as 1 u Toit was concerned, were not for Chemsteel, but for expenses as

directed by Du Toit. This did not seen, upon the face of Levisohn's

10

evicence to trouble him in any way. In his evidence in chief there wa some indication that had his principal said "look, we do not know abou this cheque, but you can take it" he would have made the disbursemcr requested if he had received instructions from his principals to do so.

The respondent also called as witnesses four bank official employed by the appellant who concerned themselves with certai investigations which took place subsequent to the presentation of th cheque and the debiting of the appellant's account with Standard Ban). There evidence is of no material assistance in resolving the issues in th appeal raised by the argument of the appellants' counsel.

Apart from the evidence of Levisohn, the respondent offered n evidenee to chart the course of events from the time that the cheque wa drawn on 20 March 1993 until it was received by the appellant a xxx banker on 22 March 1993. Of particular significance is the fatc

11

that the respondent declined to call as a witness Kitallides, the respondent's officer who had drawn the cheque on its behalf, it being cor mon cause that he was present in court during the trial and available to give evidence. Nor was any other evidence tendered to explain how or why Du Toit came to be in possession of the cheque.

The appellant closed its case without leading any evidence.

It was correctly accepted by counsel for the respondent that the onu/. rested throughout upon the respondent to establish that it was the who of the cheque at the lime when Du Toit dealt with it. In order to discharge the onus in the circumstances of this case, it was incumbent on the espondent to prove that when it delivered the cheque to Du Toit its miction was not that the ownership would thereby be transferred to Du Toit but that it intended to retain the ownership until the cheque was xxxx by Du Toit to Chemsteel who would then become owner of it.

12

In concluding that the respondent had established that it was the

owner of the cheque at the relevant time. Myburgh J found as follows:-

"The plaintiff's intention at the time it gave Du Toit the cheque can be gleaned from the cheque itself. The payee was Chemsteel or order. In the express terms of the cheque, the plaintiff intended ownership in the cheque to pass to Chemsteel or order and it intended Chemsteel or order to obtain payment of the sum of R600 000,00."

If the learned judge was intending by the aforesaid remarks to

formulate a general principle that one can infer, in all cases, an intention

to pass ownership in a cheque to the payee thereof, merely from the

express terms of the cheque, that would be erroneous. Although some

probility may arise as to the intended ownership of the cheque from

the tenor of the instrument, such a probability may well be

courerbalanced or neutralised by the facts of a particular case. In this

case the evidence of Levisohn which I have outlined above, clearly

neutralised such a probability. This is plainly so if regard is had to the

fact hat Levisohn did not even know of the existence of the cheque until

13 Du Toit showed it to him; he had no reason for expecting any payment

to be made by the respondent to Chemsteel he had no knowledge of the

xxxxx of the cheque or why Chemsteel was the named payee. The

respondent led no evidence to explain these important facts.

In considering the question whether the drawer of a cheque intended ownership of the cheque to be transferred to the named payee one must be careful not to confuse the proceeds of the cheque which the drawer might or might not have wished the payee to receive, with the cheque itself and the ownership of it (cfFirst National Bank of S A Limted v Quality Tvres (1970) (Ptyl Limited1995(3) SA 556(A) at 569))

First National Bank of S A Limted v Quality Tvres (1970) (Ptyl Limited

In my view the reasoning of the courta quo, which led it to xxxxxx that the respondent had discharged the onus winch rested upon it. was based upon unwarranted speculation, as opposed to justifiable

a quo

14 inference from the proved facts.

Upon the basis of the evidence led, it became necessary to

specalate what the intention of the drawer of the cheque was when it was

handed to Du Toit. The facts cried out for evidence from the respondent

as to thecausafor the issue of the cheque, why and for what purpose

causa

Chemsteel had been named as payee, how or why Du Toit was in

possession of the cheque, whether Du Toit was lawfully entitled to be in

possession of the cheque and to bargain with the payee as to the

utiliation of its proceeds or not. whether on 22 March 1993 and

then after the respondent or Du Toit was the true owner of the cheque,

and .vhether receipt of the proceeds of the cheque by Marilor at the

appament instance of Du Toit and the consequent debit to the respondent's

acccount occasioned the respondent any loss. The respondent was easily

able to supply the answers to these questions and eliminate the need for

15 any speculation by calling Kitallides (and possibly other witnesses) to

give evidence to elucidate these matters. It declined to do so. In these

circumstances, and particularly having regard to the fact that it was the

res ondent itself which tendered the evidence of Levisohn the inference

fall to be drawn that had Kitallides been called to give evidence, his

evidece would have been adverse to the respondents case (cf Elgin

cf Elgin

Fireclays Limited v Webb1947 (4) SA 744(A)at 749-750,Galante v

1947 (4) SA 744(A)

Galante v

Dicxinson1950 (2) SA 460(A)at 465). There was no duty upon the

1950 (2) SA 460(A)

appelant on the other hand, which bore no onus in the matter, to call Du

Toi to give evidence.

In the particular circumstances of this case it is equally reasonable

to postulate that the true explanation for the drawing of (he cheque lay

in private arrangement made between the respondent and Du Toit

without reference to Chemsteel. It was therefore unsafe to assume that

16 the writing on the cheque was, without more, definitive of the

respondent's intention to transfer the ownership of the cheque to

Chemsteel, either on the date of its drawing, or at any date thereafter.

In the course of his judgment the trial Judge remarked that Du

Toits conduct was highly suggestive of a person who was acting

dishonestly. But I agree with the argument advanced by counsel for the

appellant that it was improbable that Du Toit would take the cheque to

Levisohn and show him that it was drawn in favour of Chemsteel and yet

ask him to deposit it and then disburse some or all of the proceeds to

him. if Du Toit believed that he had no claim to the cheque and if he

was in the process of stealing the cheque or its proceeds from the

respondent or Chemsteel. The trial Judge's further observation that Du

Toit would have asked Levisohn to endorse the cheque in his favour if

Du oit really supposed he was the owner of it ignores the fact that

17 Levisohn had told Du Toit and While that he had no authority to receive

the cheque or to deal with it. Levisohn was only prepared to hold the

cheque in trust whilst he made various enquiries and investigations. The

time lapse which would be involved was not acceptable to Du Toit and

White who told Levisohn that in those circumstances they would make

other arrangements.

A proper consideration of the evidence led, including that of

Peters, one of the appellants' officials called by the respondent, on whose

evidence counsel for the respondent sought to rely, docs not establish

upon a balance of probabilities that Du Toit was behaving dishonestly.

There is nothing in the evidence which was inconsistent with a

probability that the cheque and the proceeds thereof were intended by the

respondent to go to Du Toit. In addition, there was nothing to gainsay

the pobability. which was put in cross-examination to Peters by counsel

18 for he appellant, that Du Toit was the owner of a beneficial interest in

Marlor and had its agreement to deal with the cheque after it had been

pair into the account of Marilor.

There being nothing in the evidence which was inconsistent with

a probability that the cheque and its proceeds were intended by the

respondent to go to Du Toit and that Du Toit nominated Chemsteel as an

account of convenience believing that he could arrange with Chemsteel

to et cash the cheque and disburse the proceeds to him, the inference was

not warranted that the respondent remained the owner of the cheque and

interded to pass ownership of it to Chemsteel by delivery through Du

Toit.

In all the circumstances the court a quo should have found that the

respondent had failed to discharge the onus of proving that it was the

own of the cheque at the material time.

19

It accordingly becomes unnecessary to consider the second issue

namely whether the respondent established that it had suffered a loss or

the quantum of such loss.

The order of this court is as follows:-

1.

The appeal is allowed with costs, including the costs of two counsel.

2.

The order of the courta quois set aside and there is substituted for it the following order:

"Absolution from the instance is granted with costs."

R H ZULMAN AJA

BOTHA JA

HEFER JA CONCUR

FH GROSSKOPF JA

HALMS JA