Ownership of funds deposited into the customer’s account.
In Trustees, Estate Whitehead (“Whitehead”) v Dumas and Another (“Dumas”) 2013 (3) SA 331 (SCA) Whitehead conducted an investment scheme.
A few days after Dumas invested R 3 million in the scheme – depositing money into Whitehead’s banking account – Dumas established that the scheme was an unlawful pyramid scheme. Dumas then sought the return of his money from Whitehead’s bank, Absa Bank (“Absa”), where the funds were credited.
The court held that:
- in general, where money is deposited into a bank account of an account holder – here Whitehead – it mixed with other money in the account and, by virtue of commixtio, became the property of the bank regardless of the circumstances in which the deposit was made or by whom it was made;
- the account holder – here Whitehead – had no real right of ownership of the money standing to his credit, but acquired a personal right to payment of that amount from Absa arising from their bank-customer relationship. This was also the case where no money in its physical form was in issue and the payment by one bank to another, on a client’s [Dumas] instructions, was no more than an entry in the receiving bank’s account. The bank’s obligation, as owner of the funds credited to the customer’s [Whitehead] account, was to honour the customer’s payment instructions [i.e. Dumas]. Where the depositor (Dumas) was not the account holder, he relinquished any right to the money and could not reverse the transfer without the account holder’s [i.e. Whitehead] consent;
- as between Whitehead and Dumas [the account holders] no personal rights were transferred. Dumas’s personal right to the credit was extinguished on transfer to Whitehead of the funds and a new personal right in favour of Whitehead was created against Absa for the deposit. Therefore, Whitehead, as a customer of Absa Bank, immediately acquired the new right to the money in his account, which was enforceable against Absa when ownership passed to it, despite the absence of a valid underlying agreement. Absa Bank then had both a duty to account and a corresponding liability to Whitehead, its customer, Whitehead, and, on his sequestration, to the trustees of his insolvent estate;
- Absa was therefore not enriched by the amount of Dumas’s deposit to Whitehead’s account and no enrichment action lay against Absa. Dumas had only a delictual claim against Whitehead arising from the fraudulent misrepresentation that induced the transfer of the money and, on the latter’s sequestration, a claim against Whitehead’s trustees.