FirstRand Bank Ltd v Spar Group Ltd

SCA considered case where funds were wrongfully misappropriated and decided that although disbursements from the bank accounts by a customer were not a breach of fiduciary duty they were plainly wrongful and the bank enabled the conduct of the customer by allowing him to operate the accounts well knowing that a third party had no claim to the credits reflected in the accounts and the bank was a joint wrongdoer owing a legal duty to Spar.


Funds wrongfully misappropriated by bank and claims had not prescribed because of the wilful non-disclosure of true circumstances by bank.


(SCA 1334/2019) [2021] ZASCA 20 (18 March 2021)


Disallowed appeal with costs against the full bench judgment of the high court dated 23 August 2019 which reversed the reported judgment of DS Fourie J dated 9 September 2016 in the high court.


Sutherland and Unterhalter AJJA (Cachalia, Dambuza and Makgoka JJA concurring)

Heard: 9 November 2020
Delivered: 18 March 2021


“[86] In summary, the law is as follows:

(1) Where a deposit, to the knowledge of the bank, is made into the bank account of a customer to which the customer has no entitlement, the bank cannot set off its customer’s indebtedness to the bank against the credit in the customer’s account deriving from such deposit. The third party whose moneys were deposited enjoys a claim against the bank for the amount so credited.

(2) A customer, with no entitlement to moneys deposited into their account, who knows that they enjoy no such entitlement, may not make disbursements from the account in respect of credits deriving from these moneys. To do so amounts to theft. A bank that knows that its customer enjoys no such entitlement and nevertheless permits its customer to make disbursements in these circumstances renders itself a joint wrongdoer. As such the bank owes a legal duty to the third party who was entitled to the moneys deposited and suffers loss as a result of the customer’s disbursements.”

Quotations from judgment

Note: Footnotes omitted and emphasis added


Court summary

“A bank which is aware that funds deposited by a third party into its client’s bank account to which the client has no legitimate claim may not appropriate such funds on the premise that the client has a claim to the funds and use them by way of set off to discharge the client’s debt to the bank – A bank which is aware that a third party has deposited funds into its client’s bank account and is aware that the client has no legitimate claim to the funds is under a duty to take steps to prevent harm to the third party by way of the misappropriation of those funds by its client – the bank’s failure to prevent harm to the third party renders it a co-wrongdoer with the client for the theft.”