ABSA Bank Limited v Bond Equipment (Pretoria) (Pty) Limited

The respondent (Bond Equipment (Pretoria) (Pty) Ltd) was the true owner of thirteen crossed cheques endorsed either "not transferable" or "not negotiable". Steyn, an employee of the respondent, was duly authorized to collect cheques on behalf of his employer. Steyn stole the cheques and unlawfully deposited them into an account he conducted under the name "Bond Equipment (Pretoria)" (not the plaintiff company) with the appellant bank (ABSA). The bank negligently collected payment of the cheques for this account without proper endorsement by the respondent. The cheques were not reflected in the respondent's records as having been received, and the theft was only discovered between March and April 1996. The respondent instituted a delictual action against the bank based on its negligent conduct in collecting payment. The bank's defence was that it was absolved from liability because the respondent was vicariously liable for Steyn's conduct.

• Whether the respondent (plaintiff) was vicariously liable for the criminal actions of its employee Steyn who stole cheques from the employer
• Whether the bank's negligent conduct was the proximate cause of the plaintiff's loss
• Whether the bank could be held liable for negligence given Steyn's intentional wrongful conduct
• Whether an employer can be held vicariously responsible for an employee's theft of the employer's own property
• Whether the employee was acting within the course and scope of his employment when committing the theft and fraud

The appeal was dismissed with costs. The judgment of Willis AJ in the court a quo, granting judgment for the plaintiff for the full amount of its agreed loss (R219,783.74, being the face value of the cheques), was upheld.

An employer is not vicariously liable for an employee's theft of the employer's own property. For vicarious liability to be established, the wrongful act must have been committed within the course and scope of employment, which requires both: (1) a subjective intention by the employee to act on behalf of the employer, and (2) an objective link between the wrongful act and the employee's authorized functions. Where an employee steals his employer's property for his own benefit, he has completely disengaged from his employment duties and is engaged in a 'frolic of his own'. The act of stealing the employer's property is the antithesis of acting in the course and scope of employment. Where a bank and a dishonest employee are concurrent wrongdoers causing the same loss, the innocent employer-plaintiff can hold either fully liable and is not prevented from recovering against the negligent bank merely because the theft was committed by its own employee.

Harms JA expressly refrained from laying down a general principle that an employer can never be responsible for the intentional wrongful act of an employee which causes the employer loss, suggesting this question should remain open for future consideration in appropriate cases. The Court noted the influence of English law on South African vicarious liability principles but distinguished the position in English law, which appears to confine employer liability to situations where goods of a third party were entrusted to the employee, not where the servant steals goods belonging to the master. The Court also noted social policy considerations, stating it would not be sound social policy to hold an innocent master liable to a third party where his dishonest servant steals the master's own property, especially where there is no suggestion the master was negligent in selecting the employee. Zulman JA observed that even in English law, there appears to be no authority for holding an employer vicariously liable in circumstances such as those in this case.

This case is significant in South African law for clarifying the limits of vicarious liability in the context of employee theft. It establishes that an employer cannot be held vicariously liable for an employee's theft of the employer's own property, even where the employment provided the opportunity for the theft. The case confirms that for vicarious liability to arise, there must be both a subjective intention to act for the employer and an objective link between the wrongful act and the employee's authorized duties. The judgment reinforces the principle that an employee who steals from his employer has completely departed from the course and scope of employment. It also clarifies the position regarding concurrent wrongdoers and establishes that a negligent bank cannot escape liability by arguing that the plaintiff employer is responsible for its dishonest employee's theft of the employer's own property. The case has important implications for banking law, particularly regarding a collecting bank's duty of care and its liability for negligent collection of cheques.