MEDIA SUMMARY– JUDGMENT DELIVERED IN SUPREME COURT OF APPEAL

From: The Registrar, Supreme Court of Appeal

Please note that the media summary is intended for the benefit of the media and does not form part of the judgment

Standard Bank Ltd v PWS Peens and others

The Supreme Court of Appeal today upheld an appeal by the Standard Bank against a judgment of the Pretoria High Court that had absolved sureties for liability arising from a massive cheque fraud scheme.The SCA held that the sureties were liable.

The case arose from an enormous cheque ‘kiting’ or ‘round-tripping’ fraud, in which companies associated with the defendants (members of the Peens family, who were directors of all or some of the companies concerned) drew cheques on ABSA and deposited them with Standard and vice versa. None of the cheques could be met – but for a time an illusion of credit was created, during which millions of rands were fraudulently siphoned off.

Standard Bank initially honoured the cheques, but when it discovered the fraud tried to dishonour them (ie, refuse to pay them). But ABSA blocked Standard’s attempt to dishonour the cheques because it was outside the time limits allowed in terms of the banks’ clearing house rules. ABSA’s objection was thus valid. Then Standard Bank reinstated the original debits. But the Pretoria High Court held that it could not do so.