By Sanette Viljoen
What are the mutual obligations of a bank and its client when the client gives instructions that his money must be transferred? What are the bank’s obligations? What are the client’s obligations?
This question was asked in the case Absa Bank v Hanley (08/13)  ZASCA 183 in the Appeal Court. The Appeal Court examined the obligations of the client as well as the obligations of a bank because there was a possibility of negligence on both sides.
In a nutshell, the facts were that Mr Hanley, an Irish citizen and attorney, transferred an amount of $1 750 000 to an Absa account in South Africa. A written request, drawn up by himself, was submitted in terms of which the bank was requested to transfer $100 000 to another account.
An international syndicate of defrauders and swindlers was part of this transaction. Among other things, they were instrumental in the drawing up of the written instruction to the bank. Without Mr Hanley’s knowledge the syndicate altered page one of Mr Hanley’s letter of instruction to read $1 600 000.
On the second page they altered the amount of $100 000 fairly obviously to $1 600 000. The Appeal Court instructed Absa to refund Mr Hanley for his damages. Absa appealed.
The Appeal Court pointed out that a bank, in terms of the agreement between the bank and its client, had an obligation to transfer client transfers in time, in good faith and without negligence, while the client had an obligation to take reasonable care to make sure that fraud cannot be committed when the payment instructions are given. Both sides, therefore, have obligation.
The facts are fairly complicated, but eventually the Court found that Absa had to prove that any negligence or carelessness on the side of Mr Hanley was the direct cause of the deception that took place.
The Court further found that Mr Hanley’s efforts to have the payment instructions carried out without risks were not very effective and that in fact he did not discharge his contractual obligation to take reasonable care.
The Court further ruled that the Absa officials were definitely negligent in not paying more attention to the alteration of the amount on page two by not first ascertaining from Mr Hanley whether the amount was correct. When a bank official sees something like this ─ $100 000 changed to $1 600 000 ─ the bank should first call its client to make sure. It was therefore negligent. It is important to note that in this case there had been previous attempts to commit fraud with this account, of which Absa were aware.
The Court had to decide what the real cause of the deception was and found that the overall cause was Absa’s negligence. Absa’s appeal was denied and Mr Hanley’s damages had to be refunded.
Both the baks’s and the client’s obligatikons were made clear in this case.