IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
CASE NO: 65/2000
In the matter between:
COLUMBUS JOINT VENTURE
Appellant
and
ABSA BANK LTD
Respondent
BEFORE:
Vivier ADCJ, Olivier JA, Cameron JA, Cloete AJA and
Brand AJA
HEARD:
7 September 2001
DELIVERED:
28 September 2001
Banker’s duty of care to owner of cheque — opening of new account —
for existing customer — verified details of such customer serving as
disincentive to fraudulent use of new account — where circumstances
do not put bank on notice of impending fraud, and adequate explanation
given for use of account in name other than that of customer, further
inquiries not required — bank not required to undertake duty of being
amateur detective
JUDGMENT

CAMERON JA:
[1] Between November 1993 and April 1996 an employee of the
appellant, Bertolis, deposited 39 cheques and caused a telegraphic
transfer to be made into a cheque account that he had opened with the
respondent bank (“the Bank”).  The appellant had drawn all the cheques
on its banking account.  The transfer was likewise from its account.  The
scheme was a fraud Bertolis conceived and perpetrated on the
appellant, which suffered substantial losses.  These the appellant (“the
plaintiff”) sought to recover in an action against the Bank.  It alleged that
the Bank was negligent in opening the account Bertolis used to effect
the deposits and the transfer.  The Bank defended the action, and the
parties presented a stated case in terms of Rule 33(1) to the trial Court
(Malan J).  It set out certain agreed facts and questions for decision, and
recorded the parties’ contentions in regard to them.
[2] The Bank raised a number of defences to the claim.  The first was
that the plaintiff had not remained owner of the cheques.  This the trial
Court rejected.  The second, that the Bank was not negligent in opening
the account, he upheld;1  this is an appeal with his leave against that
finding.  Although that disposed of the matter, the parties had requested
Malan J to answer also the remaining questions.  He did so, favourably
to the plaintiff.  The view I take makes it unnecessary to address those
questions.2
[3] The agreed facts the parties placed before the Court below are set

1Columbus Joint Venture v Absa Bank Ltd 2000 (2) SA 491 (W).
2Malan J’s rejection (512H-I) of the Bank’s contention that the plaintiff was vicariously liable for
Bertolis’s conduct was however quoted with approval in ABSA Bank Ltd v Bond Equipment (Pretoria)
(Pty) Ltd 2001 (1) SA 372 (SCA) 382-3.

out fully in its reported judgment3 and do not require repetition.  The
salient aspects are these.
(a)  Bertolis opened an account with the Bank’s Allied division.  (b) The
account was not in his own name, but under the name “Stanbrooke &
Hooper”.
(d)  At the time the Bank opened the account for Bertolis, he was in two
respects an existing customer of its Allied division:  (i) he held a personal
cheque account at another branch, and (ii) he also had an existing
account secured by a mortgage bond in respect of a property loan.
(e) The Bank official opening the account noted “has existing account”
on the application form, together with the correct number of Bertolis’s
personal cheque account.
(f) The  personal details Bertolis furnished the Bank in opening the
Stanbrooke & Hooper account included (i) his name; (ii) his identity
number;  (iii) a true copy of his identity document;  (iv) his home
address; (v) his home telephone number; (vi) his work telephone
number.
(g) These details were all authentic.
(h) Against “type of business” on the application form Bertolis indicated
“legal advice CC”.
(i)  In opening the account, he presented to the Bank a typed document
purporting to be a “franchise agreement” between “Stanbrooke &
Hooper”, as franchisor, and himself, as franchisee.
(j) The “franchise agreement” reflected that Stanbrooke & Hooper was a
firm of solicitors specialising in European Community law in Brussels,
Belgium.  (k) A firm of European Community lawyers in Brussels, so
named, did in fact exist.
(l) But the “franchise agreement” was a fraud, and no entity called

32000 (2) SA 491 (W) 495-9.

Stanbrooke & Hooper ever authorised Bertolis to conduct and control a
banking account under that name.
(m) The franchise agreement further reflected that Bertolis was “an
attorney admitted as such in the Republic of South Africa”.
(n) In fact Bertolis had been struck off the roll of attorneys, but the
plaintiff, which employed him as its group legal advisor, did not discover
this until after the fraud had been perpetrated.
[4] Regarding the plaintiff’s ownership of the cheques, Malan J held
that the transactions Bertolis engineered, which led to his acquiring the
cheques, were void from their inception, and not merely voidable.  The
plaintiff thus retained ownership of the cheques.  On appeal counsel for
the Bank was unable to challenge this finding with conviction and could
not advance any basis for impeaching the trial court’s conclusion.  The
plaintiff plainly did not intend to transfer ownership in the cheques to
Bertolis in his guise as the operator of the “Stanbrooke & Hooper”
account, and it is enough to say that for the reasons Malan J gave I
agree that ownership remained with the plaintiff.4
[5] Regarding the second question, this Court held in Indac
Electronics (Pty) Ltd v Volkskas Bank Ltd5 that a collecting banker owes
the owner of a cheque a duty of care not to collect its proceeds
negligently on behalf of one not entitled to payment.  This duty was
developed6 and accepted7 in a number of first instance decisions as

42000 (2) SA 491 (W) 499J-500F.
51992 (1) SA 783 (A) (per Vivier JA).  It was observed in First National Bank of SA Ltd v Quality Tyres
(1970) (Pty) Ltd 1995 (3) SA 556 (A) 568D-H that it is unnecessary in this context to refer to the
owner of the cheque as being the “true” owner.
6KwaMashu Bakery Ltd v Standard Bank of South Africa Ltd 1995 (1) SA 377 (D) (PC Combrinck J) .
7Powell and another v ABSA Bank Ltd t/a Volkskas Bank  1998 (2) SA 807 (SE) (Melunsky J).

encompassing an obligation to take reasonable care when receiving and
processing an application to open a new banking account through which
cheques belonging to another are subsequently collected for payment.
The Bank accepted that unless it had opened the Stanbrooke & Hooper
account under Bertolis’s control the plaintiff’s loss would not have
occurred.  This approach was correct, for as was pointed out in ABSA
Bank Ltd v Bond Equipment (Pretoria) (Pty) Ltd,8 on its own a cheque
theft in circumstances such as those Bertolis’s fraud created brings
about “only a potential loss”.9  The plaintiff’s practice was to draw only
cheques crossed and marked “not transferable”.  All 39 cheques, which
at Bertolis’s contrivance had been made out to “Stanbrooke & Hooper”,
were so crossed and marked.  Without the cheque account in that name
the fraudulent scheme could not have come to fruition.
[6] This Court recently confirmed the bank’s duty to the owner of
cheques subsequently cleared through an account it opens when in an
impromptu judgment it upheld the decision in Energy Measurements
(Pty) Ltd v First National Bank of SA Ltd.10  In dismissing the bank’s
appeal, Hefer ACJ11 declined to lay down general guidelines, but quoted
with approval the trial court’s statement that when opening a new
account “the very least that is required of a bank is to properly consider
all the documentation that is placed before it and to apply their minds
thereto”.12

82001 (1) SA 372 (SCA) 383E-F (Harms JA).
9To the same effect is KwaMashu Bakery Ltd v Standard Bank of South Africa Ltd 1995 (1) SA 377
(D) 395I (compare 390B) and Energy Measurements (Pty) Ltd v First National Bank of SA Ltd 2001
(3) SA 132 (W) par 114.2 (Reyneke AJ).
102001 (3) SA 132 (W).
11Judgment of 24 August 2001 (Olivier, Cameron, Mpati and Mthiyane JJA concurring).
122001 (3) SA 132 (W) par 134.4. This Court quoted with approval also pars 135, 136, 137 and 139.

[7] The question then is whether the Bank breached this duty in
opening the Stanbrooke & Hooper account.  The grounds of negligence
the plaintiff alleged in its particulars of claim were that the Bank erred —
(a) in not establishing whether the “franchise agreement” was authentic
and the information in it correct;
(b) in not satisfying itself that “Stanbrooke & Hooper” existed and had
authorised Bertolis to open and control an account in its name;  and
(c) in not establishing whether the information in Bertolis’s application
form was correct.
Except for that relating to the “franchise agreement”, the information
Bertolis furnished was in fact all correct.  Hence the asserted negligence
necessarily focussed on the way the Bank dealt with the “franchise
agreement” Bertolis placed before it.
[8] As Malan J pointed out, the stated case severely limits the facts
and circumstances on which a finding of negligence can be made.13  No
expert or other evidence was tendered about bank practice in opening a
new account for an existing customer; nor (more pertinently to the
grounds of negligence the plaintiff advanced) was there any evidence
regarding how the Bank should have appraised or dealt with the
“franchise agreement” placed before it.  Proceeding on the basis only of
the stated case, Malan J after surveying the English, Canadian and
Australasian law concluded that the distinguishing feature of the case
was that Bertolis was an existing client of the Bank:
“Where a stranger requests that an account be opened for him the circumstances are quite
different from those when an existing client applies.  An existing client asking for further
facilities or another account is known to the bank and his personal particulars are, if not
known to the official, ascertainable.”14

132000 (2) SA 491 (W) 510C.
142000 (2) SA 491 (W) 510F-G.

[9] I agree with this approach;  but it is important to determine
precisely why the fact that an existing client is known to the bank
differentiates the circumstances.  It is obviously not because existing
bank customers, as a group, are by nature more trustworthy or less
likely to commit fraud than other members of the public.  Nor is it
because they may have assets or even (as in this case) fixed property.
The situation is different because existing customers generally have
verified identities and confirmed work and residential contact details, and
because should the account be used for fraud the customer can be
traced and brought to book.  In addition, the location of the customer’s
assets may be known or be traceable through the details furnished.  The
pre-eminent
consequence
is
heightened
accountability,
which
substantially diminishes the possibility of the account being used with
impunity for fraud.  There exists then a significant disincentive to
fraudulent use of the account, which is absent in the case of a new
customer whose identity and location and other details have not been
verified.  It is this that bears upon the bank’s duty in opening an account.
[10] Energy Measurements was a case of a new account for a
company that claimed to be establishing a new business.  Its sole
director, shareholder and authorised signatory was completely unknown
to the bank.  No banking details were available for him.15  The fraudster
had, it appears, quite literally walked in off the street.16  The identity he
tendered to the bank was false.  The result was that when he walked out
after performing his last transaction, he disappeared from view.  He

152001 (3) SA 132 (W) par 122.
16 KwaMashu Bakery Ltd v Standard Bank of South Africa Ltd 1995 (1) SA 377 (D) 380-1 appears
similarly to have been a case where persons completely unknown to the bank opened a new account.

became (again literally) unaccountable, and this is where the aggravated
risk lay.  The absence of disincentive to fraud accentuates the duty of
reasonable care resting upon a banker opening an account for a
customer whose details are unverified.
[11] What is more, the account in Energy Measurements was to
operate in the name of neither the company nor its supposed director (I
return later to the relevance of this in the present case).  It is evident that
in such circumstances a bank is under a duty to take reasonable
measures to ascertain and verify the new customer’s identity and
trustworthiness, for without the disincentive that verification of the
relevant details provides, the risk that the account could be used for
fraudulent purposes looms large.
[12] Bertolis in opening the Stanbrooke & Hooper account furnished the
Bank with an identity number and occupation and residential address,
together with other personal particulars.  These were all authentic.  So
was his disclosure to the official opening the account that he was an
existing customer.  That, in turn, served as a assurance of the
authenticity of the other details, since a comparison was available that
would have brought any discrepancy to light.  Most importantly, the
details meant that in case of fraudulent use of the new account the
customer could be traced and held accountable.
[13] As it happened, this did not deter Bertolis from committing the
defalcations at issue.  His fraudulent scheme seems in fact to have
prospered for about 30 months.  But eventually it was revealed, and at
that point his identity and work and residential locations had been known
to the Bank for some time.  The stated case does not reveal what

ensued, but that the discovery had consequences at least for Bertolis’s
employment and residence and accessible assets — and presumably
also for his personal liberty — cannot be doubted.  Disincentives to fraud
may from time to time be ineffective, but that cannot render them
irrelevant in determining the standard of care required of bankers in
extending further facilities to customers with already authenticated
identity and work and residential details.
[14] The significant features of the stated case, upon which the plaintiff
based its contention that the Bank was negligent in opening the account,
are that the Bank could have obtained Stanbrooke & Hooper’s Brussels
telephone number by calling the South African operator’s international
inquiries service, and that a further call to the number so supplied would
in all likelihood have established that Bertolis was unknown to them and
that the “franchise agreement” was part of a fraudulent scheme.  The
Bank accepted that these calls could at comparatively small expense
and effort have been made, and that if made they would probably have
averted the plaintiff’s loss.
[15] The question is whether it has been shown that the circumstances
were such as to cause a reasonable and prudent banker, properly
considering the available information, to have a suspicion about the
customer’s bona fides.  In other words, should the Bank have been put
on warning?   Only if the answer is Yes does the second question — as
to the need for any inquiries made — arise.
[16] The primary inquiry is thus whether the calls should have been
made at all, for the fact that they would have been easy to make cannot
by itself translate into a breach of a duty to make them.  An omission to

act does not constitute a breach of duty merely because the omitted
action would have been easy to take.  The answer must in my view be
found by asking whether there was anything in the application for further
account facilities that should have put the Bank on warning of the
impending fraud.  The “franchise agreement”, a photocopy of the original
of which was supplied to us on appeal, appears quite regular on its face.
It recites that Stanbrooke & Hooper has originated a business system
“for the purpose of establishing and operating a legal office specialising
in European Community Law and is the owner of certain intellectual
property rights used in conjunction with the business system”, and that
for his part the franchisee “desires to establish and operate an office on
European Community Law under the name Stanbrooke & Hooper and
for this purpose to use the franchisor’s business system and intellectual
property rights”.  All this is undeniably vague, but lawyers’ language
often is.  And it is fleshed out without evident implausibility in the rest of
the document, which purports to grant the franchisee a license for the
duration of the franchise “to operate the franchised business”.
[17] Its terms beg no further inquiry.  Indeed, scrutiny would have
revealed embedded in them the prescient requirement that the
franchisee conduct all business — including bank accounts — under the
name Stanbrooke & Hooper.  Counsel for the plaintiff was when pressed
unable to point to any aspect of the agreement that was unusual or that
could conceivably have put the Bank on inquiry.  He was obliged to
contend instead that it was somehow odd that a Brussels firm of
solicitors should want to lend their name to a Johannesburg franchisee;
and that Bertolis’s undertaking such a venture, employed as he was at
the plaintiff’s Middelburg head office (an aspect not mentioned in the
stated case, and which could be inferred only from the dialling code on

the work telephone Bertolis gave the Bank) was inherently suspicious;
and that the lawfulness or propriety or conventionality of such a venture
in self-employment on the part of one already employed full-time should
have aroused suspicion or at least triggered inquiries of Bertolis’s
employers or the supposed franchisor.
[18] I cannot agree.  The truth is that the fraud was not unskilful.  There
was nothing inherently untoward about the joint venture proposed, and
nothing in the terms supposed to embody it that suggested the necessity
for further inquiry.  The plaintiff harboured Bertolis within its own
systems, which he subordinated to his wiles, over some two and a half
years.  That is not to confuse the plaintiff’s liability, if any, which on the
view I take we do not reach, with that of the Bank:  it is only to
emphasise that successful frauds, perpetrated by accomplished
fraudsters, regrettably occur, and that the imposition in hindsight of
liability for the losses they cause is a notoriously unreliable craft.  The
Bank is under an obligation to take reasonable steps to ensure that its
clients are who they say they are, and to scrutinise with reasonable
caution documentation submitted to it in substantiation of the uses to
which they propose to put the accounts they open.  The plaintiff’s
argument seeks to go far further.  It would make the Bank the guarantor
of the probity of its customers, or at least of their dealings and doings, as
against all they injure by utilising banking facilities reasonably extended
to them.  It can do so only by imposing upon the Bank what Lord Wright
in Lloyds Bank Ltd v EB Savory & Co17 called “the duty of being amateur
detectives”.  That duty is too high, and nothing in the case before us
justifies its imposition on the Bank.

171933 AC 201 (HL) 239.

[19] Counsel was driven to contend that Bertolis’s prior history with the
Bank should have led to the denial of further facilities.  Attached to the
stated case was documentation indicating that Bertolis had indeed been
a less than ideal customer.  At least four personal cheques had been
returned because of insufficient funds in his account, and on an
overdrawn account he had at another division of the Bank before the
frauds occurred it had taken a default judgment against him in a not
inconsiderable sum (R20 702, 68).  The stated case did not specify
whether this information was available to the Bank official who opened
the Stanbrooke & Hooper account, and counsel for the plaintiff did not
contend that if it had not been this constituted negligence on the Bank’s
part.
[20] Malan J found that it had not been shown that, had the official
opening the account seen this documentation, the account would not
have been opened.  Nor had circumstances been shown indicating that
the official should have had access to the documents or called for them.
This conclusion is in my view unimpeachable.  The stated case does not
suggest that Bertolis was in fact an unsatisfactory client nor does the
attached documentation in my view warrant the conclusion that he was.
The question in any event is not whether Bertolis was a “satisfactory”
client, but whether in opening the new account he was a bona fide client;
and there was nothing in his previous dealings with the Bank to suggest
to it that he was not.  Certainly there is nothing to bear out the
suggestion of plaintiff’s counsel that Bertolis had a “suspect” banking
record.  As was pointed out during argument, Bertolis’s conduct of the
other accounts did not cause the Bank to close or even threaten to close
them, and counsel did not suggest that there were any circumstances to
indicate that the Bank should have closed them.  No plausible

foundation therefore exists for the contention that the Bank should have
denied him new facilities for the purpose for which he sought them.
[21] Counsel for the plaintiff rightly laid emphasis on the fact that the
new account was not to operate under Bertolis’s own name, but under a
completely different name.  That accounts operated under names other
than those of the client may be used for fraud is an evident danger,18 and
Malan J correctly observed that the use of a name other than a
customer’s own in opening account “lends itself to misuse and calls for
some explanation”.19  The question is what explanation should be
required, and how extensive the bank should require it to be.  In the
present case the “franchise agreement” provided the complete
explanation.  There is no suggestion in the present case that any
existing South African entity (whether partnership, joint venture, firm, or
corporation) existed or traded as “Stanbrooke & Hooper”.  That
doubtless was part of Bertolis’s cunning in devising the scheme, and it
deprives the plaintiff’s argument of any basis for suggesting that the
Bank should have been on inquiry with regard to existing entities who
may have been injured by the use of the account in that name.
[22] Malan J’s general conclusion was that in questioning a customer a
“right balance” should be struck: “a bank should inquire where it is put on
inquiry or the transaction is out of the ordinary”.  Without dissenting from
the conclusion, I have misgivings about the path Malan J took to reach it,
particularly his suggestion that a bank “should also be careful not to
inquire where inquiries might offend the customer and invade his

18As illustrated by the KwaMashu and Energy Measurements decisions (above).
192000 (2) SA 491 (W) 511E-F.

privacy”.20
[23] Amidst current conditions where fraud is rife —  an undoubted fact
that rightly informed both parties’ argument — anxiety about a
prospective or existing customer’s sensibilities seems to me to be
misplaced.  The approach Malan J adopted may be traced to the
judgment of Diplock LJ in Marfani & Co Ltd v Midland Bank Ltd,21 which
emphasised the difficulties a bank official questioning an intending
fraudster was likely to encounter:
“It may be that a searching interrogation would reveal inconsistencies or improbabilities in his
story, but a bank cannot reasonably be expected to subject all prospective customers to a
cross-examination, which cannot fail to give the impression that the bank doubts their
honesty, and which would be understandably resented by the 999 honest potential
customers, on the off-chance of detecting the thousandth dishonest one.”
This led Diplock LJ to conclude that it did not constitute lack of
reasonable care to refrain from making inquiries unlikely to lead to
detection of a dishonest purpose, “and which are calculated to offend
him and maybe drive away his custom if he is honest”.22
[24] But as Diplock LJ himself stated in that case, which was decided
more than thirty years ago:
“Cases decided thirty years ago, when the use by the general public of banking facilities was
much less widespread, may not be a reliable guide to what the duty of a careful banker, in
relation to inquiries and as to facts which should give rise to suspicion, is today.”23
Not only were banking facilities less widespread in South Africa thirty
years ago, but so was the incidence of fraud.  More apt to current

202000 (2) SA 510I-J.
21[1968] 2 All ER 573 (CA) 581G-I.
22[1968] 2 All ER at 582E-F.
23[1968] 2 All ER at 579D-E.

conditions in South Africa, though even older, are in my view the
observations of Scrutton LJ in A L Underwood Ltd v Bank of Liverpool:24
“If banks for fear of offending their customers will not make inquiries into unusual
circumstances, they must take with the benefit of not annoying their customer the risk of
liability because they do not inquire.”
[25] If circumstances should put a bank on inquiry in extending new
facilities to an existing customer or creating facilities for a new customer,
the necessary inquiries must be made, and fear of offending the
customer cannot inhibit performance of that duty.  In the present case,
as I have indicated, there is no basis for concluding that inquiries that
should have been made were omitted.  As far as the conduct of the
account in a name other than his own was concerned, Bertolis had an
explanation in the “franchise agreement”, whose provisions included a
term obliging him to use the name he specified.  As already indicated,
nothing else in that agreement put the Bank on warning of its impending
dishonest use.
[26] Given that Bertolis was an existing customer, with verified details,
and given the plausibility of the ruse he used to trick the Bank, there
seem to me to have been no circumstances putting the Bank on further
inquiry and requiring it to undertake further investigations, despite the
admitted ease with which this could have been done.  In all these
circumstances I am unable to find any basis for concluding that the Bank
failed in the duty it owed the plaintiff, and the appeal must therefore be
dismissed with costs.
E CAMERON
JUDGE OF APPEAL

24[1924] 1 KB 775 (CA) 793, quoted by Reyneke AJ in Energy Measurements 2001 (3) SA 132 (W)
par 133.2.

VIVIER ADCJ
)
OLIVIER JA
) CONCUR
CLOETE AJA
)
BRAND AJA
)