On 29 November 1989, Saambou Nasionale Bouvereniging Beperk drew a crossed cheque marked "nie verhandelbaar nie" (not negotiable) for R420,000.00 in favor of Ons Beleggings BK (the respondent) on Volkskas Beperk (the bank). Mr. Ferreira received the cheque as the respondent's agent. Instead of depositing it into the respondent's account at the Lynnwoodridge branch, Ferreira signed the back of the cheque with the words "vir ONS/SJA" and deposited it into the account of SJA Bemarking on 30 November 1989. The respondent claimed this action by Ferreira was unauthorized and unlawful. Most of the R420,000 was transferred on the same day to SJA Konstruksie (Pty) Ltd, a company in which Ferreira had a direct interest. The respondent sued the bank for R420,000 as damages based on breach of banker-client relationship, alternatively on delict. Ferreira had suffered a serious brain injury before trial which caused significant memory problems. The respondent closed its case without calling any witnesses, including Mr. Olivier, the sole member of the respondent company.
The appeal was allowed with costs. The order of the court a quo was set aside and replaced with: "Absolution from the instance with costs is granted."
A plaintiff claiming damages against a collecting banker for negligent collection of a cheque must prove all elements of delictual liability, including: (1) that the collecting banker received payment on behalf of someone not entitled thereto; (2) that the collecting banker acted negligently and unlawfully; (3) that the conduct caused the true owner to sustain loss; and (4) that the damages claimed represent proper compensation for such loss. The face value of a cheque does not automatically represent the quantum of damages suffered by the payee. Where a plaintiff fails to adduce evidence to prove damages, the claim must fail even if negligence is established. A collecting banker acts negligently when it collects a cheque with an endorsement that is facially defective and could not constitute proper endorsement by the payee, even where the bank may have accepted similar transactions previously.
The Court observed that the words "nie verhandelbaar nie" (not negotiable) forming part of the crossing on a cheque do not prevent further transfer of the cheque and play no role in determining the appellant's possible negligence (applying Standard Bank of SA Ltd v Sham Magazine Centre 1977(1) SA 484 (A)). The Court noted that the term "true owner" in the context of cheque ownership does not bear any specialized or technical meaning and the word "true" does not qualify the ordinary legal sense of "owner" - referring to First National Bank of SA Ltd v Quality Tyres (1970) (Pty) Ltd 1995(3) SA 556(A). The Court also remarked on the unexplained agreement between parties that the onus to begin rested with the appellant as defendant, which was unusual.
This case is significant in South African banking law as it illustrates the elements that must be proven in a claim against a collecting banker for negligent collection of a cheque. While confirming that a bank can be negligent in collecting a cheque where there is no proper endorsement (even where the endorsement is facially defective), the case emphasizes that all elements of delictual liability must be proven, particularly damages. It demonstrates the importance of leading evidence to prove one's case, especially regarding the quantum of damages, and that the face value of a cheque is not automatically equivalent to damages suffered. The case also illustrates that where there are indications of internal business arrangements between parties, and the plaintiff fails to adduce evidence to clarify the true nature of transactions, the claim will fail for want of proof of loss.