Nedbank Limited v Jose Manuel Pestana

On 4 February 2004, a client of Nedbank, Joseph Michael Pestana, instructed the Carletonville branch to transfer R480 000 from his account to the account of the respondent, Jose Manuel Pestana, who had banked at the same branch since 1969. The transfer was duly effected and the respondent’s account was credited. Earlier that same day, SARS had sent a notice to Nedbank’s head office in terms of s 99 of the Income Tax Act 58 of 1962, appointing the bank as agent for Joseph Michael Pestana and requiring it to pay over funds held on his behalf to satisfy a substantial tax debt. The branch was unaware of this notice at the time of the transfer. Once informed later that day, the bank unilaterally reversed the R480 000 credit from the respondent’s account without his authority and paid funds to SARS. The respondent sued, contending that the bank was not entitled to reverse a completed transfer without his consent.

The appeal was dismissed with costs, including the costs of two counsel.

The case authoritatively clarifies the limits of a bank’s powers under s 99 of the Income Tax Act and affirms the principle that a completed and unconditional credit to a customer’s account cannot be unilaterally reversed absent recognised exceptions. It is a leading decision in South African banking law on electronic and book-entry transfers and taxpayer garnishment by SARS.