THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

REPORTABLE
CASE NO 359/2001
In the matter between

THE STANDARD BANK OF SOUTH AFRICA LIMITED

Appellant

and

GLEN WILLIAM HARRIS NO

First Respondent

HARRY KAPLAN NO

Second Respondent

JA DU TOIT INCORPORATED

Intervening Party

________________________________________________________________________

CORAM:
NIENABER, CAMERON, BRAND, CONRADIE  JJA  et
LEWIS AJA
________________________________________________________________________

Date Heard:
22 Augustus 2002

Delivered:
13 September 2002

Delictual liability of collecting bank - cheque drawn on same bank - not in itself
ground for bank's immunity - cheque crossed 'not transferable' collected for
attorney's trust account - not unlawful if authorised by payee.
________________________________________________________________________

J U D G M E N T
________________________________________________________________________

BRAND JA

BRAND JA
[1] This appeal concerns the Aquilian liability of a collecting bank.    The
respondents are the joint liquidators ('the liquidators') of a company in
liquidation, Demodig Plant (Pty) Ltd ('Demodig').   The appellant is a
commercial bank ('the bank').   Prior to the liquidation of Demodig, the bank
collected payment of a cheque drawn in the sum of R397 657,82 in favour of
the company as payee.   The liquidators contended that the proceeds of the
cheque had never reached the payee.   They therefore brought an action in
the Transvaal Provincial Division in which they sought to recover the
proceeds of the cheque from the bank.
[2] The mould of the liquidators' action is readily identifiable from their
particulars of claim.   It is the one recognised by this Court in the following
dictum of Vivier JA in Indac Electronics (Pty) Ltd v  Volkskas Bank 1992
(1) SA 783 (A) at 797A-D:

'There can now be no reason in principle why a collecting bank 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.'

[3] As will presently appear in more detail, the bank, upon collection of
the cheque, credited the proceeds thereof to an account in the name of  'JA
du Toit Inc Trust - Demodig Plant (Pty) Ltd'.   The 'JA du Toit Inc' referred
to is an incorporated company of attorneys with Mr JA du Toit ('Du Toit') as
its only member.   When the liquidators brought their action against the bank
the latter instituted third party proceedings against JA du Toit for an order
declaring the third party to be liable to indemnify the bank against any
amount of damages awarded in favour of the liquidators.   In his plea Du
Toit denied not only that the bank was liable to the liquidators, but also, and

in any event, that he was obliged to indemnify the bank.     Pursuant to an
agreement between Du Toit and the bank prior to the hearing of the matter
before the trial Court, the third party proceedings were postponed sine die
pending the finalisation of the action between the liquidators and the bank.
[4] Upon consideration of the evidence the trial Court (De Klerk J) held
that all the requirements for the liability of a collecting bank, as formulated
in the Indac case, had been established.   Accordingly it found for the
liquidators.   With the leave of this Court the bank now appeals against that
judgment.
[5] Shortly before the hearing of the appeal, Du Toit brought an
application for leave to intervene in the proceedings before this Court.   In
support of his application Du Toit explained that he has since been advised
that in the event of the bank's appeal being unsuccessful, he would be liable
to indemnify the bank and consequently, he contended, that both his denial

of such liability on the pleadings and his agreement to postpone the third
party proceedings until after the finalisation of the main action were ill-
considered.   He sought no substantive relief or any order as to costs.   All he
asked for was that his counsel should be allowed to file heads of argument
and to present oral argument in support of the bank's case at the hearing of
the appeal.   Rule of Court 11(1)(b) affords this Court a discretion to grant
the relief sought.   The Court decided to exercise this discretion in Du Toit's
favour for the following reasons:   First, the application was not opposed by
any party involved in the appeal.   Secondly, the relief sought would not in
any way prejudice any party or inconvenience the Court.   Thirdly, it was
apparent that Du Toit's fate was bound to that of the bank and that he
therefore had a substantial interest in the outcome of the appeal.
Consequently the application to intervene was granted.

[6] This brings me to the facts.   The only witness called to testify on
behalf of the liquidators was Mr GW Harris, who himself is one of the joint
liquidators.   From his evidence it is apparent that he knew very little about
the facts germane to the issues.   Ultimately his contribution amounted to
little more than the identification of certain relevant documents and the
confirmation of certain facts that were not in dispute.   Most prominent
among the relevant documents was the cheque itself.   As indicated, it was
drawn in favour of Demodig as payee for the sum of R397 697,82.   It was
dated 17 September 1998 and drawn on the bank itself, at its Isando branch,
by Barlow Tractor Co (Pty) Ltd ('the drawer').   It was also crossed and
marked 'not transferable'.   A further document identified by Harris was an
invoice addressed by Demodig to the drawer which appears to indicate that
the cheque was issued in part payment for certain plant and machinery
purchased by the drawer from Demodig.   Included among the undisputed

facts confirmed by Harris were (a) that the two directors of Demodig were
Messrs Cross and Hutchinson and (b) that the cheque was collected by the
bank's Randburg branch on 18 September 1998 for an account held at that
branch in the name of 'JA du Toit Inc Trust - Demodig Plant (Pty) Ltd'.
[7] Two witnesses were called to testify on behalf of the bank.   First, Ms
N Lavagne who was employed by the bank at the time as an assistant to the
manager of its Randburg branch and, secondly, Du Toit.   The essential part
of their version, which remained largely uncontroverted, appears from what
follows.
[8] Du Toit testified that prior to the liquidation of Demodig, he
occasionally acted as attorney for the company.   On 18 September 1998 one
of Demodig's directors, Cross, brought the cheque to Du Toit's offices with
the direction that the proceeds thereof be deposited in Du Toit's trust account
pending further instructions from his co-director, Hutchinson.   Since Du

Toit did not know for what period the money was to remain in his trust
account, so he testified, he decided not to deposit the cheque in his general
trust account where the client would earn no interest, but in a separate trust
savings account, as authorised by s 78 (2A) of the Attorneys Act, 53 of
1979, where the interest earned on the proceeds would enure for the benefit
of Demodig.   He therefore sent the cheque to the bank's Randburg branch,
along with the following written request:
'Investment account in terms of Section 78 (2A).   Please open the following
Investment Account in terms of Section 78 (2A) ...
Account name:  JA du Toit Inc Trust - Demodig Plant (Pty) Ltd. ...
Please deposit the attached cheque in the amount of R397 657,82 into the
account.'

Some days later, Du Toit testified, he received an instruction from
Hutchinson to transfer the proceeds of the cheque to an entity known as
Botzamo.   Since Botzamo was also one of his clients, Du Toit kept the
money in the same trust savings account until it was eventually disbursed in

accordance with directions he received from Botzamo.   According to Du
Toit the proceeds of the cheque were transferred to Botzamo in settlement of
a genuine debt owing to it by Demodig.   As to the cause of this debt, Du
Toit's testimony became inordinately vague.   Ultimately he contended that
he was prevented from divulging the nature of the debt by Botzamo's claim
of privilege.
[9] Lavagne confirmed that she received the cheque from Du Toit,
together with his written request that the proceeds thereof be deposited in a
separate trust savings account, to be opened for that purpose in the name of
'JA du Toit Inc Trust - Demodig Plant (Pty) Ltd', and that she complied with
this request.   She had no reason to believe that it would be irregular to do so
since Du Toit was known to her as an attorney who held similar separate
trust accounts on behalf of other clients at the same branch.   Moreover, she
testified, Du Toit's request was in accordance with the practice prevailing

among other attorneys who were clients of the bank.   For the same reasons
she also found it unnecessary to make enquiries from Demodig about Du
Toit's authority to act on its behalf or, for that matter, from the drawer about
the crossing.
[10] In this Court a defence was raised by counsel appearing for Du Toit
which had not been raised in the Court a quo.   In fact, when it was raised in
this Court, it was expressly disavowed on behalf of the bank.    The
gravamen of this defence was that since the cheque was drawn on the bank
itself, albeit at a different branch from the one collecting it, the bank cannot
be held liable as a collecting bank on the basis recognised in the Indac case.
The argument in support of this defence went as follows.   Different
branches of the same bank are not different banks.   They are all part of the
same entity.   Consequently, the paying bank cannot be said to collect from
itself.   When it debits the account of the drawer and credits the account of

another client with the proceeds of the cheque, as happened in this case, the
bank is paying the cheque, not collecting it.   If the bank was negligent it
could therefore only be negligent as paying bank in which event it would be
liable in that capacity, since it would forfeit its protection under s 79 of the
Bills of Exchange Act 34 of 1964.   Once it was common cause, as it was in
this case, that the bank was not negligent in its capacity as paying bank, so
the argument concluded, there was no room for the further contention that it
could nevertheless be negligent in its capacity as collecting bank since the
same entity cannot at one and the same time and during the course of the
same transaction be both negligent and not negligent.
[11] The proposition that two branches of the same bank are part of a
single entity, is selfevident (see for example Netherlands Bank of South
Africa v Stern NO and Another 1955 (1) SA 667 (W) 669G-H).
Nevertheless, it was held by this Court in Eskom v First National Bank of

Southern Africa Ltd 1995 (2) SA 386 (A) 394E-397D (per EM Grosskopf
JA) that a bank, in its capacity as paying bank, may invoke the protection of
s 79 of the Bills of Exchange Act despite the fact that it also acted as the
collecting bank of the same cheque.   The contention by counsel for Du Toit
was, however, that the authority of the Eskom case should be restricted to the
issue that was pertinently decided; more specifically, that it cannot be
regarded as authority for the broader proposition that a bank which had
already been absolved from liability as paying bank under s 79, may still be
held liable as a collecting bank in respect of the same transaction.   I do not
agree that the authority of the Eskom case can be limited in this way.
Grosskopf JA expressly acknowledged that s 79, on a literal construction,
envisages a transaction involving two different banks while two branches of
the same bank cannot be regarded as two entities (at 394D-G).   Nonetheless

and despite these linguistic difficulties, he found s 79 to be applicable.   The
rationale for this finding he explained as follows (at 395A-D):
'The reason is a practical one.   If 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 s 78 of
our 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 ... .   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 s 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 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.'

And (at 396B):

‘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.'

[12] From these statements by Grosskopf JA it is apparent that for practical
reasons the same bank must in a case such as the present, where it is

instructed to collect a crossed cheque drawn on itself, be regarded as acting
in both the capacities of paying- and collecting bank.   Furthermore, it seems
to me that 'the rules concerning crossed cheques' referred to by Grosskopf
JA as forming a coherent whole must include the 'rules' relating to the
delictual liability of a collecting bank.   So, for example, when he states that
even where the collecting bank and the paying bank constitute one and the
same entity, it can be expected to ensure - in the exercise of its collecting
function - that payment is made to the right person, he must be saying also
that the bank is subject to delictual liability if it negligently fails to do so.
The contention by Du Toit's counsel that one entity cannot simultaneously
be both negligent and not negligent is true but inapposite.   The transaction
of collecting and paying a cheque involves a number of steps and different
legal acts.   Where all these steps are performed by the same entity, I can see
no conceptual difficulty in accepting that the entity is not negligent in

performing some of these steps but negligent in performing others.   This
being so, and once it is recognised that one bank can fulfil the functions of
both collecting bank and paying bank with regard to the same cheque, there
seems to be no difficulty in accepting that the bank can be negligent in the
performance of its collecting functions though it acts without negligence in
the performance of its functions as a paying bank.   In such circumstances it
would be most unfortunate if the bank were to derive absolute immunity
from liability in its capacity as a collecting bank solely by virtue of it being
exonerated from liability as a paying bank by the provisions of s 79.   In fact,
I believe that the acceptance of such immunity would fly in the face of the
reasoning which underlies the decision in the Eskom case.   It follows that in
my view the 'special defence' which is exclusively based on the fact that the
cheque under consideration was drawn on and paid by the bank itself, cannot
be upheld.

[13] This leads to the application of the requirements for the liability of a
collecting bank as formulated in the Indac case. In accordance with these
requirements the first issue for consideration, then, is whether it was
established by the liquidators that Demodig became the 'true owner' of the
cheque.   In a similar context it was held in First National Bank of SA Ltd v
Quality Tyres (1970) (Pty) Ltd 1995 (3) SA 556(A) 568A-F that the term
'true owner' bears no specialised or technical meaning and that, more
specifically, the reference to 'true' is not intended to qualify the ordinary
meaning of 'owner'.   In the result the enquiry in a matter such as this is
whether the claimant for damages has shown that he became the owner of
the cheque in accordance with the ordinary requirements of property law.
These requirements were succinctly formulated as follows by Botha JA in
the Quality Tyres case (at 568G-H):

'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. ...   Either party can, of course, act through
someone duly authorised to act on his behalf.'

[14] In applying these requirements to the facts under consideration, I
agree with the finding by the Court a quo that the liquidators had succeeded
in proving, on a balance of probabilities, that Demodig did in fact become
the owner of the cheque.   Of course, there was no direct evidence either of
physical delivery or that the constituent elements of a 'saaklike ooreenkoms'
were present.   None the less, the undisputed evidence appears to indicate,
first, that the cheque was delivered to Demodig by the drawer in payment of
a debt owing by the latter and therefore with the requisite intention to make
Demodig the owner thereof and, secondly, that Demodig took delivery of the
cheque through one of its directors, Cross.   As to the mental attitude of
Cross when he accepted delivery of the cheque, the proceedings in the Court

a quo were conducted throughout by both parties on the supposition that
Cross was acting on behalf of Demodig when he received the cheque and
handed it over to Du Toit.  In these circumstances the inference is in my
view justified that ownership of the cheque had been duly transferred to
Demodig.
[15] Despite the bank's attitude to the contrary in the Court a quo, it was
contended on its behalf in this Court that Demodig was not the owner of the
cheque.   From an analysis of the bank's argument in support of this
contention it is apparent, however, that it was presented on the alternative
basis that a further factual finding by the Court a quo might be adopted by
this Court.   This further factual finding was made with reference to the next
requirement for the liability of a collecting bank stipulated in the Indac case,
namely, that the proceeds of the cheque were received by the bank on behalf
of someone not entitled thereto.   The Court a quo concluded that this

requirement had also been satisfied.   The rationale for this conclusion
appears to have been based on the Court's finding that Botzamo was a
fictional entity and that the channelling of the proceeds of the cheque to this
fictional entity through Du Toit's trust account was part of an exercise by the
two directors of Demodig, with the assistance of Du Toit, to 'strip the
company of its assets'.   It follows, so the Court found, that the cheque was
collected for Du Toit's trust account, instead of an account in the name of
Demodig, as part of a dishonest scheme to deprive Demodig of these funds.
In the circumstances, so the Court found, neither the directors nor Du Toit
were acting in the interest of or on behalf of Demodig when they instructed
the bank to collect the cheque in the way it did.   According to the bank's
argument in this Court, this finding of fact cannot be reconciled with the
notion that Cross intended to render Demodig the owner of the cheque when
he accepted delivery thereof from the drawer.   An endorsement of this

finding, so the bank argued, would therefore inevitably lead to the
conclusion that Demodig never became the owner of the cheque.
[16] At face value the bank's argument is attractive in logic and seems to
be supported by the authority of First National Bank of SA Ltd v Quality
Tyres (1970) (Pty) Ltd (supra) 568G-I upon which it relies.   However, I do
not find it necessary to come to any final conclusion on its validity since I
cannot agree with the trial Court's factual finding that forms its basis.   Both
parties conducted their cases throughout on the basis that Du Toit was duly
authorised by Cross, who acted on behalf of Demodig, to receive the
proceeds of the cheque into his trust account.   Though Du Toit's evidence
leaves one with some suspicion with regard to the management of
Demodig's affairs, the trial Court's finding to the effect that the manner in
which the cheque was collected formed part of an 'asset stripping exercise'
by the directors of Demodig with the assistance of Du Toit, was never part

of the liquidators' case and it was never put to Du Toit when he testified for
the bank.   Ultimately it was not supported by the evidence.   On the
contrary, the only finding supported by the evidence was that Du Toit
received a mandate from the directors of Demodig, acting on behalf of the
company, to collect the proceeds of the cheque into his trust account pending
their further instructions.
[17] As a consequence of this finding it is to be accepted that when Du
Toit instructed the bank to collect the cheque for his trust account, he acted
as the agent of Demodig, duly authorised by a director.   It follows that when
the bank collected the proceeds of the cheque for the credit of an account
nominated by the agent of the payee, it did so in compliance with the payee's
instructions which were conveyed to it through the payee's duly authorised
agent.   Against the background of the requirements for the collecting bank's
liability, as set out in the Indac case, the question arises whether it can be

said that in these circumstances the bank 'received payment of the cheque on
behalf of someone who was not entitled thereto'.   And the further closely
related question - can it be said that in these circumstances the bank acted
unlawfully vis-a-vis the payee in receiving such payment?   The Court a quo
held that when a bank collects a cheque crossed and marked 'not
transferable' for the credit of an account in the name of someone other than
the payee, the inference is justified that the proceeds were received for
someone 'not entitled thereto' and that such receipt was therefore unlawful.
As a matter of prima facie inference, I have no quarrel with this view.   On
the contrary, there is good authority for the proposition that the collection of
a cheque crossed 'not transferable' for an account in the name of someone
other than the payee, justifies the prima facie inference not only that the
bank acted unlawfully, but also that it was negligent in doing so.   (See eg
Volkskas Bank Bpk v Bonitas Medical Aid Fund 1993 (3) SA 779 (A) 791H-

J and Holscher v ABSA Bank en 'n Ander 1994 (2) SA 667 (T) 672E.)   The
question remains, however - does evidence that the bank acted on the
instructions of the payee rebuts the prima facie inference of unlawfulness?
I think it does.   It is true that a cheque marked 'not transferable' is 'not
negotiable' in terms of s 6(5) of the Bills of Exchange Act 34 of 1964.   This
means that the payee's rights derived from the cheque cannot be transferred
to anyone else.   Consequently no-one but the payee can enforce payment
thereof.   This does not mean, however, that the payee cannot authorise
someone else to receive the proceeds of the cheque.   As was pointed out in
African Life Assurance Co Ltd v NBS Bank Ltd 2001 (1) SA 432 (W) 441C
in similar context:
'ordinarily the payee of the cheque is free to deal with the proceeds thereof as it
chooses' -

It follows in my view that the payee can authorise the bank to collect the
proceeds of the cheque for any account of the payee's choice and as long as
the bank follows the instruction of the payee, it cannot be said to act
unlawfully.   Nor can it be said, where the payment of the proceeds of a
cheque were received in an account nominated by the payee, that such
payment was received 'on behalf of someone who was not entitled thereto'.
It was after all received into an account of the payee's choice and for no-one
other than the payee.
[18] My conclusion is, therefore, that since the bank's conduct was not
unlawful, vis-a-vis the payee it should not have been held liable to it and,
consequently, that the appeal must succeed.   That is really the end of the
matter.   We were, however invited, on behalf of the bank, to find, as a
matter of general principle that, in view of the provisions of s 78 of the
Attorneys Act 53 of 1979, it is neither unlawful nor negligent for a bank to

collect a cheque drawn in favour of a client for the credit of an attorney's
trust account which is 'earmarked' for the client, even where such collection
was not specifically authorised by the client as payee of the cheque.   During
the course of argument it became apparent that such a finding of general
principle would also apply to collections for the trust accounts of estate
agents and sheriffs, which are governed by provisions similar to those of s
78 of the Attorneys Act.   (See s 32 of the Estate Agents Affairs Act 112 of
1976 and s 22 of the Sheriff's Act 90 of 1986.)   In my view this invitation
should be declined.   Questions of unlawfulness and negligence are to be
determined on the particular facts of the cases in which they arise.   It has
been repeatedly said by this C1ourt that it is not prepared to answer
questions of an academic nature which are not necessary for the decision of
the case before it.   Particularly where, as in this case, such decisions will be
based on argument heard only from one side.   As was stated in Western

Cape Education Department and Another v George 1998 (3) SA 77 (SCA)
84E:
'(I)t is desirable that any judgment of this Court be the product of thorough
consideration of, inter alia, forensically tested argument from both sides on
questions that are necessary for the decision of the case.'

[19] For these reasons the following order is made:
(1)
The appeal is allowed with costs, including the costs
occasioned by the employment of two counsel.
(2)
The order of the Court a quo is set aside and for it is substituted
the following:
'Plaintiffs' claims are dismissed with costs'

_________________________
FDJ BRAND
JUDGE OF APPEAL
CONCUR:
NIENABER  JA
CAMERON  JA
CONRADIE  JA
LEWIS  AJA