Reportable

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Case no:  506/1999

In the matter between

VAN HULSTEYNS ATTORNEYS
APPELLANT

and

THE GOVERNMENT OF THE REPUBLICOF SOUTH AFRICAFIRST
RESPONDENT
FIRST NATIONAL BANK OF
SOUTHERN
AFRICA LTD
SECOND RESPONDENT

CORAM:
HEFER ACJ,  NIENABER, SCHUTZ, CAMERON JJA, BRAND
AJA

HEARD:
8 November 2001

DELIVERED:    19 November 2001

Stolen cheque - posssession through a collecting bank for purposes of liability in terms of sec 81 of
the Bills of Exchange Act.

JUDGMENT

HEFER ACJ

[1] Section 81 of the Bills of Exchange Act 34 of 1964 entitles the true
owner of a crossed cheque marked “not negotiable” which is stolen or lost
and subsequently paid by the bank upon which it is drawn to recover any
loss he may have suffered from any person who possessed  the cheque
after the theft or loss and either gave consideration for it  or took it as a
donee.

[2] The present case relates to a cheque drawn on 11 October 1994 by
the Department of Customs and Excise in favour of  OTK (Kooperatief)
Beperk (“OTK”) or order. It  was crossed and marked “not negotiable” and
posted to OTK but stolen en route. The appellant is a firm of attorneys
practising in Johannesburg. On 28 October 1994, in a manner that will
presently be described,  the stolen cheque found its way into the
appellant’s trust bank account at the second respondent’s Sandton City
branch. The account was credited with the amount in question and the
cheque was subsequently presented for payment and paid by the drawee
bank.

[3] After discovering what had happened the first respondent instituted
action in the Transvaal Provincial Division of the High Court for the
recovery of the loss it had allegedly suffered. Its main claim was against
the appellant and based on the provisions of s 81. To this was added an
alternative delictual claim  against the  second respondent as collecting
bank. Eventually,  in a  judgment reported as  Government of the Republic
of South Africa v Van Hulsteyns Attorneys & Another [1999] 2 All SA 29
(T), Le Roux J upheld the claim against the appellant and dismissed the
claim against the  second respondent .   With  the necessary leave the

appellant has now appealed to this court.

[4] There is no need to examine the requirements for a successful
invocation of s 81 because the appellant has made a number of admissions
so that the single question remaining  for decision is whether the appellant
possessed the stolen cheque as envisaged in s 81. Since counsel are largely
agreed on the applicable law and the facts are also common cause the
dispute is about the application of the law to the  facts.

[5] On 14 October 1994 Mr Carl Boden, a partner in the appellant firm,
received a telephone call from  a person who introduced himself as Roy
Laasen. (I will refer to this person  as Laasen although it is not known
whether that was indeed his name). Laasen professed to be a Zimbabwean
businessman who intended investing in South Africa and wished to engage
the appellant as his attorneys. He intimated that the firm would inter alia
be required to channel funds through its trust account to certain  nominated
recipients. Boden agreed but told Laasen that he would require written
instructions and that nothing would be paid from the trust account until the
incoming funds had been cleared.

Thereafter Boden had several further telephone discussions with
Laasen. On 20 October 1994, when the latter informed him that funds
would soon become available to be deposited, he gave Laasen the number
of the firm’s trust bank account. Later the same day Laasen sent him a fax
containing particulars of an account with a bank in Durban into which he
was required  to pay the funds.

On a date,  probably between 28 October and 2 November 1994,
Laasen informed Boden that a deposit had been made and gave him the
amount thereof. Upon checking with the second respondent Boden learnt
that a cheque issued by Customs and Excise had indeed been deposited.

He telephoned Laasen, confirmed the deposit and promised to make
payment into the designated Durban account once the cheque had been
cleared. On 8 November 1994, having allowed what he regarded as a
reasonable time for clearance, Boden paid the full amount deposited less
his fee into the designated account.  During December 1994 he was
informed that the Customs and Excise cheque had been stolen. He tried to
telephone Laasen but found that the Zimbabwean number he had used in
the past was no longer functioning.

Investigations after the discovery of the theft revealed that the stolen
cheque was not deposited in the conventional manner.  The second
respondent did discover a deposit slip purporting to reflect the deposit of
the cheque to the appellant’s account on 28 October 1994; but what
purported to be bank stamps on the slip were forgeries and it became clear
that the slip could not have passed through a teller’s hands. There is only
one feasible explanation: cheques and deposit slips received by the tellers
after passing scrutiny were collected in courier bags and conveyed in
batches to the bank’s Centralized Bookkeeping Centre (the “CBC”) for
processing. The stolen cheque and deposit slip must have been placed
surreptitiously into one of these bags and conveyed to the CBC where the
cheque was credited to the appellant’s account.

[6] In order to decide whether the appellant, on these facts, possessed
the cheque as contemplated in s 81, two observations are called for.
(a)
The liability for the true  owner’s loss attaches in terms of s
81(1) to persons who were in actual possession of the cheque
after its theft or loss and is extended in ss (2) to persons who
are deemed in certain circumstances to have been in
possession thereof. Because it  is trite that a statute must as far
as possible be construed in accordance with the common law
and there is no indication in the provision or any other relevant

part of the Act that this is not how ss (1) should be construed,
it may safely be accepted that the possessor envisaged therein
is the possessor in terms of the common law concept of
possession.
(b)
From this it follows that full effect must be given in the
application of ss (1) to the recognition at common law of
mediate possession.  The appellant’s counsel was accordingly
quite correct in accepting that a bank holding  a cheque for
collection only, does not possess it for purposes of s 81 (since
the mental element of common law possession is lacking); but
that the customer on whose behalf it is to be collected, does.
(Barlow Motors Investments Ltd v Smart 1993(1) SA 347 (W);
Malan and Pretorius: “Holders, Collecting Banks and
Payment” 1993 TSAR 456).

[7] The only ground advanced by the appellant’s counsel for submitting
that his client did not possess the cheque as envisaged in s 81(1) is the
irregular manner in which it was introduced into the second respondent’s
system. The deviation from the normal procedure was so gross, he argued,
that the second respondent’s officials cannot be said to have intended to
hold the cheque for the appellant.

[8] I do not agree.  The second respondent’s officials at the CBC  must
have seen the deposit slip for it was plainly on the strength of it   that the
appellant’s account was credited. And, having seen the deposit slip and
having been unaware of any irregularity or of any other person who might
have been involved, the intention could only have been to hold the cheque
for the person reflected in the slip as the depositee.  Moreover, the second
respondent’s officials presented the cheque for payment. Since the
appellant’s account had already been credited with the proceeds the

intention could only have been to present it on the latter’s behalf.  The
conclusion is unavoidable that second respondent held the cheque for the
appellant and that the latter was accordingly in mediate possession thereof.

[9] The appeal must accordingly be dismissed. But before I make an
order to that effect two further matters have to be mentioned.   Both relate
to costs.

(a)
The first respondent was represented in the appeal by senior
and junior counsel but the  appellant’s counsel submitted that
the fees of two counsel should not be allowed. In my judgment
the employment of two counsel was perfectly reasonable
bearing in mind the amount involved and the importance of the
matter to all the parties.

(b)
(i)
After receipt of the summons the second respondent served a
third party notice on the appellant claiming a declaration that the
latter was liable to indemnify the second respondent against any
amount that it might be ordered to pay to the first respondent.  When
the first respondent’s claim against the second respondent was
dismissed the entire third party procedure became redundant and the
only order that the trial judge made in that regard was to direct the
second respondent to pay the costs of the third party notice.
(ii)
After the appellant had obtained leave to appeal the
respondents by agreement obtained an order granting the
first respondent leave to appeal against the dismissal of
its claim against the second respondent,  and granting the
latter leave to appeal against “that portion of the
judgment whereby judgment in favour of [the second
respondent] against the third party is refused with costs.”

The second respondent soon had second thoughts and
abandoned its appeal. The first respondent on its part
failed to file a notice of appeal and was compelled to
submit an application for condonation. This placed the
second respondent in an invidious position in view of the
possibility that the appellant’s appeal might succeed. It
accordingly (1) decided  to oppose the appellant’s
appeal; (2) filed papers opposing first respondent’s
application for condonation and requesting (as a
conditional counter-application)  that the matter be
remitted to the trial court in the event of the application
for condonation and the appellant’s appeal both
succeeding and (3) eventually appeared through counsel
at the hearing of the appeal. The second  respondent’s
counsel addressed us on the allocation of costs between
the respondents inter se but declined to present argument
on the merits of the appellant’s appeal.
(iii) Since the appellant’s appeal must fail no order is
required on the application for condonation and the
counter-application. But there remains the costs relating
to both applications and to the  second respondent’s
costs of appeal.
(iv) It is perfectly clear that the  second respondent’s actions
were brought about by the first respondent’s application
for condonation. It will only be reasonable  to direct the
latter to pay the attendant costs.

[10] For these reasons the following order is made:

1.
The appeal is dismissed with costs including the costs of two
counsel.
2.
The first respondent is directed to the pay the appellant’s and the
second respondent’s costs relating to the application for condonation
and the second respondent’s costs of appeal including the costs of
the counter-application.

JJF HEFER

Concur:
Nienaber JA
Schutz JA
Cameron JA
Brand AJA