On 28 June 2001, Absa's Tzaneen branch transmitted approximately R5.9m to its Brooklyn branch for credit of attorney Potgieter's trust account on instructions from Redelinghuys. On 2 July, Potgieter deposited a cheque for approximately R5.7m drawn on his trust account at an Absa Cape Town branch for credit of Morgan Brothers CC. Absa immediately entered a provisional credit electronically in Morgan's account and a provisional debit against Potgieter's account, subject to a ten-day hold period. On the same day, Redelinghuys had second thoughts and Potgieter attempted to countermand payment. On 3 July, Rawlins (an asset adviser at Tzaneen branch) instructed the Rosebank branch not to release the amount provisionally credited to Morgan's account. On 6 July, a sheriff served Burg Trailers' writ of attachment for R1.65m on Absa Rosebank early in the day. Despite the hold, later that day Rawlins overrode the holds and transferred the R5.7m by bank cheque to Redelinghuys's account. The nature of the dealings between Redelinghuys and Morgan was not disclosed.
The appeal was dismissed with costs, including the costs of two counsel, to be borne by the appellants (Burg Trailers and Morgan Brothers) jointly and severally.
The binding legal principles established are: (1) Payment by cheque is a bilateral juristic act requiring a meeting of minds between payer and payee; (2) When a bank acts as both drawee bank and collecting bank, it cannot simultaneously intend to pay on behalf of one client while intending not to pay on behalf of another - it can only have one intention as a single juristic entity; (3) Bank entries may be provisional or final, and provisional entries do not create an unconditional liability by the bank to the customer; (4) A ten-day hold period on cheque deposits means the bank is not unconditionally liable during that period and the credit may be reversed; (5) Banking practices regarding hold periods do not conflict with contractual terms that merely give banks the right to withhold payment until clearance; (6) A stop payment instruction accepted during the provisional credit period prevents the credit from becoming unconditional; (7) Entries in bank books constitute prima facie evidence but courts can look behind such entries to discover the true state of affairs; (8) A judgment creditor can only attach a customer's claim or right of action against the bank, not money itself, and can only attach unconditional credits.
The court made observations about the ACB (Automatic Clearing Bureau) rules, noting that these inter-bank rules apply only between banks and do not create rights for clients. The court also observed that Absa applies these rules internally between branches, but that this practice is confidential and not intended to create enforceable rights for clients. Banks may decide inter se not to enforce the rule and clients have no recourse if that happens. The court noted, somewhat suspiciously, that neither Redelinghuys nor Morgan was prepared to divulge the nature of their dealings. The court also observed that it is no longer always true that the bank-customer relationship regarding credit balances is a loan without interest, since banks sometimes pay interest on current accounts. The court commented that Rawlins (or other Absa employees) clearly did not have authority to draw cheques against Morgan's account, though this unauthorized action was explained by systems limitations rather than indicating the credit had become unconditional.
This case is significant in South African banking law as it clarifies the distinction between provisional and final bank entries, particularly in the context of cheque payments and the ten-day hold period applied by banks. It establishes important principles regarding when a bank becomes unconditionally liable to a customer for amounts provisionally credited to an account. The case is also important for judgment creditors seeking to attach bank accounts, as it confirms that only unconditional credits can be attached. The judgment reinforces that the legal relationship between a bank and customer with a credit balance is one of debtor and creditor, and that a judgment creditor can only attach the customer's claim or right of action against the bank, not money itself. The case also addresses the interplay between express contractual terms and banking customs, and confirms that courts can look behind bank entries to determine the true legal position.