ABSA Bank Limited and FirstRand Bank Limited v Lombard Insurance Company Limited

An employee of Lombard Insurance, Ms Manickum, fraudulently caused stolen funds from Lombard to be electronically transferred into her personal bank account at FirstRand Bank (FNB). At the time, she held several indebted accounts with FNB and ABSA Bank, including overdrafts, credit cards, and a home loan. The stolen funds were credited to her accounts and used to extinguish or reduce these debts, with some amounts also leaving credit balances that were later transferred. Lombard sought to recover from FNB and ABSA the portions of the stolen money that had been applied to settle Ms Manickum’s debts, relying on unjustified enrichment (condictio ob turpem vel iniustam causam).

The appeals by ABSA and FirstRand Bank were upheld. Lombard’s claims to recover amounts used to extinguish Ms Manickum’s debts were dismissed. ABSA was ordered to pay Lombard only the portion of stolen funds that remained as credit balances, while claims relating to discharged debts were rejected. Costs orders were made in favour of the banks, subject to specified limitations.

The case clarifies South African law on unjustified enrichment in the banking context, confirming that a creditor bank acting in good faith is not enriched when a debtor’s obligation is discharged with stolen funds. It reinforces the suum recipit principle and draws a clear distinction between credit balances retained by banks and payments that extinguish debts, providing certainty for banks handling electronic transfers and restitution claims.