FJS Painting CC v Absa Bank Limited

The appellant, FJS Painting CC, was a close corporation with Mr Frederick Beytell as its sole member. It operated a current account at Absa Bank Springs branch and did painting work for Sappi Manufacturing (Pty) Ltd. Sappi issued cheques in the name of 'FJS Painting Sheeting & Labour Hire Contractor CC'. Ms Nicky Craythorne lived with Beytell and attended to the appellant's bookkeeping. After Beytell died on 22 October 1994, Craythorne falsely represented to Sappi that she was a partner/50% shareholder in the business. On 1 November 1994, she opened a new account at the same bank branch in the name of 'The Sole Owner FJS Painting Sheeting'. Between 4 November 1994 and 30 January 1995, Sappi issued four cheques (totaling approximately R132,864.26) to 'FJS Painting Sheeting & Labour Hire Contractor CC', all marked 'Not Transferable For Account Payee Only'. Craythorne collected these cheques and deposited them into her own account, not the appellant's account. The bank collected the cheques for Craythorne's account. Craythorne subsequently died without assets. The appellant sued the bank for damages, alleging it was the true owner of the cheques which the bank negligently collected for Craythorne's account. The claim succeeded in the magistrates' court but was reversed on appeal to the Pretoria High Court.

• Whether the appellant acquired ownership of the four cheques drawn by Sappi
• What are the requirements for transfer of ownership of a cheque as movable property
• Whether a collecting banker is liable in delict for negligently collecting a cheque on behalf of a customer who has no title to it
• Whether the payee of a cheque must be the owner to establish liability of a collecting banker
• Whether section 19(4) of the Bills of Exchange Act creates a presumption of ownership transfer
• What intention must be present for delivery and transfer of ownership of a cheque
• Whether Craythorne acted as a messenger (nuntius), agent with mandate, or on her own behalf
• Whether the appellant's contractual claim against the bank could succeed

The appeal was dismissed with costs.

To establish liability of a collecting banker for negligently collecting a cheque under the principle in Indac Electronics, the claimant must prove it was the owner of the cheque. Ownership of a cheque as corporeal movable property is transferred only when there is: (1) delivery of possession (actual or constructive) from transferor to transferee, and (2) a real agreement (saaklike ooreenkoms) consisting of the intention of the transferor to transfer ownership and the intention of the transferee to acquire ownership. Where the sole member of a close corporation dies, the corporation lacks a controlling mind capable of forming the necessary intention to acquire ownership until an executor is appointed. The intention of the person taking physical delivery is relevant - if that person intends to acquire ownership for themselves rather than for the named payee, no transfer of ownership to the payee occurs. Section 19(4) of the Bills of Exchange Act 34 of 1964 creates a presumption only about delivery of possession, not about transfer of ownership or to whom delivery was made. A party claiming ownership must prove on a balance of probabilities that the transferee (or its representative) had the requisite intention to acquire ownership, and where competing inferences are possible, the party must show its preferred inference is the more natural or acceptable one.

Scott JA noted (without deciding) that he would assume that if Craythorne had acted as a 'caretaker' with intention for the appellant to acquire ownership, ownership would have passed to the appellant (paragraph 14). The court expressly declined to decide whether a mandate to represent a close corporation would survive the death of its sole member, as no argument was addressed on the point (paragraph 13). Scott JA acknowledged that Du Plessis J in Strydom NO v Absa Bank Bpk 2001 (3) SA 185 (T) had suggested the requirement of ownership as an essential ingredient of the action may become the subject of future debate, but the court declined to engage in such debate, noting that extending collecting banker liability to named payees who are not owners could have far-reaching and possibly inappropriate consequences (paragraph 16). The court also noted it was unnecessary to consider the obligations of a banker to its own client or the issue of the bank's negligence as a collecting banker, given the failure to establish ownership (paragraphs 17-18).

This case is significant in South African banking and property law for: (1) clarifying the requirements for establishing ownership of cheques as movable property, particularly the necessity of both delivery and intention (animus) by both parties to transfer and acquire ownership; (2) confirming that the liability principle established in Indac Electronics requires the claimant to prove ownership of the cheque; (3) establishing that a close corporation whose sole member has died lacks the capacity to form the necessary intention to acquire ownership until an executor is appointed; (4) distinguishing between a messenger (nuntius), an agent with mandate, and someone acting on their own behalf in the context of cheque collection; (5) confirming the rejection in Quality Tyres of extending collecting banker liability to named payees who are not owners; and (6) clarifying that section 19(4) of the Bills of Exchange Act 34 of 1964 creates a presumption only about delivery of possession, not transfer of ownership. The case demonstrates the strict application of property law principles to banking disputes and the importance of proving all elements of ownership transfer.