FirstRand Bank Ltd v Nedbank Ltd

FT Group Holdings (Pty) Ltd (FT) concluded an Invoice Discounting Agreement (IDA) and a Deed of Pledge and Cession (Security Cession) with Nedbank in September 2012. Under the IDA, FT sold and ceded its existing and future book debts to Nedbank by way of out and out cession, transferring full ownership to Nedbank as and when schedules of debts were delivered. Separately, FT had earlier ceded its book debts to FirstRand Bank Ltd as security for lending facilities by way of a cession in securitatem debiti. FT later committed fraud by double discounting the same debts and selling fictitious claims. Upon discovering the fraud, Nedbank cancelled the IDA in July 2013. At that time, Nedbank held unpaid book debts worth approximately R93 million that had been sold and paid for under the IDA. FirstRand contended that upon cancellation of the IDA, these debts reverted to FT and thus fell under FirstRand’s security. Nedbank maintained that cancellation did not affect its accrued ownership rights in the debts.

The appeal by FirstRand was dismissed with costs. Nedbank’s cross-appeal was upheld with costs. The order of the high court was set aside and replaced with an order dismissing FirstRand’s application with costs, including the costs of two counsel.

The case affirms the distinction in South African law between out and out cession and cession in securitatem debiti, and confirms that cancellation of a contract does not affect rights that have already accrued. It provides authoritative guidance on the interpretation of invoice discounting and security cession arrangements in banking practice, reinforcing commercial certainty in the treatment of ceded book debts upon cancellation.