Nicolene Schoeman-Louw, SchoemanLaw Inc
We often read about banks, clients and scams. Often we see litigation between the bank and its Client. So, where does the reciprocal duty start and end?
In Firstrand Bank Ltd v Kgethile (M370/2018) , ZANWHC 63 (31 August 2021), considered this. Although not a binding decision, still extremely useful to consisder.
In this case, on 30 August 2010 client entered into a written agreement in which the bank (applicant) would open a banking account termed a Smart Account for the Client.
The bank alleged that the Client was grossly negligent or fraudulent by using the account as an overdraft facility. The Client visited an internet café and received a pop-up screen message informing him he had won money. The message asked for the respondent to provide his banking details.
Bank claimed based on breach of contract and alternatively fraud.
Court's finding and why it matters
Court reemphasise the symbiosis of the relationship between banks and clients. Such symbiotic relationship embraces a reciprocal duty of care: between the bank for its clients; and clients for the bank.
In restating common law position: duty of care is owed to persons whom one can reasonably anticipate may suffer harm due to one's actions or inaction. But such damage has to be foreseeable. Banks must adhere to the customer's instructions and perform their duties with the required degree of care in good faith and without negligence. The bank must act only on the proper instructions of the respondent and not on fraudulent instructions.
The fact that the Client was negligent cannot justify a finding that this negligence summarily entitles the bank to damages for any consequences flowing from this specific negligent act. Moreover, the loss did not occur from the breach alone. The bank was also negligent regarding its contractual obligations in terms of the agreement.
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