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VOLKSKAS LTD v JOHNSON

 

(CAPE PROVINCIAL DIVISION)

 

1979 August 9, 30   GROSSKOPF J

 

Banker-Relationship between banker and client-Nature of.

Banker-Cheque payable to a firm for the account of a specified person "only and not to his order-Cheque also crossed and marked "not negotiable"-Firm had endorsed the cheque to the specified person named therein-This person had endorsed it to another-Such other person had paid the cheque into her bank account-Drawer’s bank had paid out the cheque Thereby drawer’s account was overdrawn-Bank claiming amount from its client-Cheque failing within the provisions of s 6 (5) of Act 34 of 1964-Bank not entitled to claim the amount.

 

The relationship between a banker and his client embraces the bank carrying out its client's instruction to make payment as expressed in a cheque. If it does so it is entitled to debit the client's account with the amount of the cheque. There is included in this relationship that the banker may not make payment to a person other than that indicated by the client, at least, not for the account of the client.

 

The defendant had made out a cheque payable to "Tennant & Co (a/c I Abrahams)". The printed words "toonder" and "bearer" were struck out and above them the word ''only'' was written in clear print. The cheque was crossed with the words "not negotiable". Tennant & Co had endorsed the cheque with the words ''Pay to I Abrahams without recourse to us - Tennant & Co". The cheque was endorsed by Abrahams to SF. SF had paid it into her banking account at the B Bank and the plaintiff had paid the amount to the B Bank and the defendant's current account was debited therewith. The result was that the defendant's bank account was overdrawn and the plaintiff claimed this amount from the defendant. In a stated case in terms of Rule of Court 33,

 

Held, that payment should only have been made to Tennant & Co.

 

Held, further, that the words "not negotiable" were not in conflict with words which prohibited transfer.

 

Held, accordingly, that the cheque fell within the provisions of s 6 (5) of the Bills of Exchange Act 34 of 1964 and accordingly was not transferable.

 

Held, further, that the defendant had not granted authority for the cheque to be paid into the collecting bank of SF. Accordingly judgment had to be entered in favour of the defendant.

 

Stated case in terms of Rule of Court 33. The facts appear from the judgment.

 

G D Griessel for the plaintiff.

W G Thring for the defendant.

 

Cur adv vult.

 

Postea (August 30).

 

GROSSKOPF J: The facts in this case are set out in a stated case in terms of Rule of Court 33 and fall within a small ambit. The plaintiff, a commercial bank, claims from its client, the defendant, an amount of R3 357,95 which allegedly is owing on the defendant's overdrawn bank account. The debit balance on the defendant's account arose in that the plaintiff had paid out a cheque for R3 600 which was drawn on 15 July 1977 by the defendant and debited the defendant's account with the amount thereof. The question for decision is whether the plaintiff was entitled to do this and in particular whether the cheque was transferable to the person to whom payment had occurred.

 

The cheque is in an ordinary printed form with the printed words:

''Betaal _____ of toonder

Pay _____ or bearer''.

 

In the open space after the words "Betaal/Pay" the defendant wrote in the words in ink "Tennant & Co (a/c I Abrahams)". He struck out the printed words "toonder" and "bearer" and above them wrote "only" in clear print. Although the word "of" before "toonder" and "or" before "bearer" was not struck out, they have no sense in the indication of the person to whom payment must be made, and they can be left out of account (as was in fact done in para 2 of the stated case). The line concerned in the cheque reads as follows (I only use the English words which appear on the printed form):

 

"Pay Tennant & Co (a/c I Abrahams) only".

 

On the face of the cheque there is a crossing which was made with a stamp. This consists of two parallel lines across with the words "not negotiable'' between them.

 

The said Tennant & Co endorsed the cheque with the words: "Pay to I Abrahams without recourse to us - Tennant & Co". The I Abrahams in whose favour the cheque was endorsed is the same person to whom reference is made by the words "a/c I Abrahams" on the face of the cheque.

 

The said I Abrahams, according to the stated case, endorsed the cheque to a certain Sonia Feinberg. The original cheque, which was handed· in by agreement, shows that Abrahams had brought about a blank endorsement. Whatever the case may be, the cheque was eventually signed on the back on behalf of Sonia Feinberg, and paid into her bank account at Barclays National Bank. The plaintiff paid the amount of R3 600 to Barclays National Bank and debited the defendant's current bank account with this amount. It is common cause that the plaintiff could not have been under any misconception that Barclays National Bank was collecting the money for Tennant & Co. The relationship between a banker and his client embraces the bank carrying out its client's instruction to make payment, as expressed in a cheque. If it does so it is entitled to debit the client's account with the amount of the cheque., There is included in this relationship that the banker may not make payment to a person other than that indicated by the clients, at least not for the account of the client. The simple question in the present case is whether the plaintiff was entitled to pay the cheque, for the defendant's account, to any person other than Tennant & Co or somebody who acted for them.

 

In commerce there are standing methods according to which clients of a bank clothe their instructions. At present this subject is to a large extent codified in the Bills of Exchange Act 34 of 1964. For present purposes especially s 6 is of importance. According to this a bill (which also includes a cheque) must either be payable to bearer. or to order to be negotiable (ss 1 (1)). The present cheque was not made out to bearer - indeed the printed words ''toonder'' and·''bearer'' were struck out. The question is then whether it was payable to order. To be payable to order it had either to be stated payable in this manner, or had to be stated payable to a particular person and should not have contained words which prohibited transfer or from which an intention appeared that it would not be transferable (ss (3)). If a bill contains words which prohibit transfer or from which an intention appears that it will not be transferable, it is valid between the parties to the bill, but not negotiable (ss (5)). The word "negotiable" in the latter sub-section stands equal to transferable. Where the sub-section is applicable no person except the payee can obtain the right to payment of the bill, ie become the holder thereof. See Standard Bank of SA Ltd v Sham Magazine Centre 1977 (1) SA 484 (A) at 493H: OK Bazaars (1929) Ltd v Universal Stores Ltd 1972 (3) SA 175 (C) at 180.

 

The cheque in the present case contains an instruction to pay to the payee "only". The insertion of the word "only", which here goes together with the striking out of the words "toonder" and "bearer", is an acceptable manner prohibiting transferability. See Paget Law of Banking 8^th ed at 235; Holden The Law and Practice of Banking vol 1 2^nd ed at 297; Byles on Bills of Exchange 23^rd ed at 75; Gering "Crossed Cheques inscribed 'a/c payee' or 'not transferable'" (1977) 94 SALJ 152 at 158; Cowen "Negotiability of Cheques" (1977) 40 THRHR 19at 38; R Barkhan Finance Corporation v Dabros (Pty) Ltd 1968 (2) SA 686 (A).

 

Despite the striking out of the words ''toonder'' and ''bearer'' and the addition of the word "only", Mr Griessel, for the plaintiff argued that the cheque in its entirety did not let an intention appear that it would not be transferable within the meaning of s 6 (5) of the Bills of Exchange Act.

 

His point of departure was that such an intention must appear clearly and unambiguously - see the Sham Magazine case supra at 503.

 

The first aspect touched upon by Mr Griessel, was the words "a/c I Abrahams" which appear in brackets after the name of the payee, Tennant & Co. These words, according to the argument, show an intention that the amount of the cheque must be applied for the benefit of I Abrahams. In fact the cheque was endorsed to I Abrahams and the drawer's aim was thus achieved.

 

I cannot agree with this argument. The defendant's instruction to the plaintiff was to pay to Tennant & Co. The insertion of the words "a/c I Abrahams" was in my view clearly an instruction to Tennant & Co as to the manner in which the money had to be used by them. Had it in fact been the defendant's intention to benefit I Abrahams with the amount of the cheque, he tried to accomplish this in a manner by which the money (and not only the cheque) would pass through the hands of Tennant & Co. It is however mere speculation to assume that there was an intention to benefit I Abrahams. The true purpose of the cheque and the role which I Abrahams plays in the matter, was presumably known to the drawer and the payee of the cheque, but was hidden from the Court and the plaintiff bank. Both the Court and the bank can but only give execution to the wording of the cheque which in my view clearly indicates that payment had only to take place to Tennant & Co.

 

Then Mr Griessel referred to the crossing with the words ''not negotiable''. In terms of s 78 (1) of the Bills of Exchange Act the crossing had the effect that the plaintiff could not pay the cheque to anybody else other than a bank. There is a possible contradiction between a prohibition on transferability and an instruction to pay only to a bank. See in this regard Gering (op cit at 158). In the Sham Magazine Centre case supra HOLMES JA, who gave the judgment of the Court, however had no problem in reconciling words prohibiting transferability with a crossing - see his remark at 504-505. This passage, it is true, is obiter, but carries the authority of the Full Bench of the Appellate Division. Although the learned Appellate Judge did not expressly indicate how the two concepts must be reconciled, there are various possibilities. Firstly there is authority that clear words which prohibit transfer are sufficient for the purposes of s 6 (5) of the Act, even should there be other words which recognise the possibility of transfer. See Cowen (op cit at 40-41); Aboobaker v Gableite Distributors (Pty) Ltd 1978 (4) SA 615 (D). If this point of view is correct the striking out of "bearer" and the insertion of "only" would be decisive, even if the crossing was an indication that the drawer intended that the cheque should be transferable. The crossing is however in my opinion not an indication to that effect. In my opinion the bank can carry out its client's apparently contradictory instructions by paying to a bank which acts as agent of the payee. See Sinclair 1977 Annual Survey of South African Law at 365.

 

Finally Mr Griessel referred to the words ''not negotiable'' in the crossing. The legal consequences of these words are set out in ss 80 and 81 of the Bills of Exchange Act. A crossing with the words "not negotiable'' appears inappropriate on a cheque which is not transferable although s 81 could possibly afford protection under particular circumstances to the true owner of such a cheque. Whatever the case may be, the words "not negotiable" are in my opinion not in conflict with words which prohibit transfer. See Cowen (op cit at 42).

 

On account of the afore-mentioned I think that the cheque concerned falls within the provisions of s 6 (5) of the Bills of Exchange Act and was accordingly not transferable. From this it follows, in my view, that the defendant gave instruction to the plaintiff to pay the amount of the cheque to the payee, Tennant & Co, or, on account of the crossing, to the payee's collection bank. I do not have to decide which of these methods of payment would have been correct, because the plaintiff did not follow either of them. The plaintiff paid to Sonia Feinberg's collection bank and the defendant in my opinion granted no authority for this.

 

Owing to the afore-mentioned, judgment is given in favour of the defendant with costs.

 

Plaintiff's Attorneys: D P de Klerk & Van Gend. Defendant's Attorneys: Syfret, Godlonton & Low.

 

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