By Valentine Mhungu
Mandament van spolie (spoliation) is an old common law remedy commonly used by a person who has been dispossessed of goods without following due legal procedure. This article seeks to answer the question whether the remedy of spoliation is available to a person who has been dispossessed of money, in the form of electronic funds, by his or her own bank. The situation arises when a person opens two accounts with the same bank and the bank unilaterally takes money from one account to settle a debt owed by the other account, belonging to the same person. It is common cause that in an instance where that person owes the bank, but has another account with a different bank, the bank would have to follow a procedure for claiming its money. However, as this article seeks to investigate, a bank may find it convenient to transfer money from one account to another without following the long established legal process. This article seeks to establish whether the aggrieved person may use mandament van spolie to claim back the funds that he or she has been dispossessed of by his or her own bank.
Relevant law
Spoliation
‘Spoliation’ is a word derived from the possessory remedy better known as mandament van spolie. The remedy is there to guard against instances when a person takes the law into his or her own hands and resorts to self help instead of using due legal procedure.
It is an established principle of law that where a person claims that his or her goods are in the possession of another person unlawfully, such an aggrieved person should not personally and by force take back the goods but use established legal procedure. Should the aggrieved person resort to self help by taking back his or her alleged property without a court order, a court may order that the person who resorted to self help return such property. A court may make this order regardless that the person to whom the property is being returned is a thief or a legitimate possessor.
A person who has been dispossessed of property without due legal procedure may apply to court to have the property returned to him. Before an application for spoliation is granted, the applicant must satisfy two elements. In the case of Yeko v Qana 1973 (4) SA 735 (A), it was held that an applicant for spoliation remedy must satisfy the court that –
The above mentioned requirements constitute both a requirement and defence for and against the remedy of mandament van spolie. A breakdown of this compound follows below.
Electronic money
Electronic money is monetary value registered in a person’s account after the bank receives either a cash deposit or a transfer of credit value on behalf of its client. The electronic monetary value is: Redeemable for cash on demand, transferable and can be used as a means of payment.
The relationship between a bank and its client
The main business of a bank is to accept deposits for and on behalf of its clients. Subject to certain fees being deducted, the same amount received by the bank for and on behalf of its client is payable to the client on demand.
Even though the legal nature of money is such, that the bank owns the money after it receives a deposit, the beneficiary of the deposit still remains a possessor of the rights referred to above, namely –
This constitutes a demonstrable right. The manifestation of the dispossession of the right in such a case will always entail the taking away of an externally demonstrable incidence, such as a use, arising from or bound up in the right concerned.
Whatever occurs to the electronic monetary value of the bank’s client is controlled by a contract between the bank and the client, as well as a mandate from the client. Thus, no funds can be transferred from the client’s account without the client’s instruction. An electronic fund transfer involves the movement of a credit balance from one bank account to another. This is brought about by the adjustment of the balances of the payer’s and payee’s accounts, after an instruction by a client to his or her bank to effect payment through an electronic medium. The instruction may be given by the bank’s client electronically via an ATM, a point-of-sale facility or a personal computer.
Possession of the property
Michael Brindle and Raymond Cox (eds) Law of Bank Payments 3ed (UK: Sweet & Maxwell 2010) hold that electronic funds transfers are not the same as transfer of property. They hold that that when electronic funds are transferred, separate property rights are adjusted against the person making the payment and the person receiving the funds.
In the case of Bon Quelle (Edms) Bpk v Munisipaliteit van Otavi 1989 (1) All SA 416 (A), it was held that since an incorporeal right cannot be possessed in the ordinary sense of the word, the possession is represented by the actual exercise of a right. Therefore, refusal to allow a person to exercise the right will amount to a dispossession of the right.
Possession need not have been exclusive possession. A spoliation claim will lie at the suit of a person who holds jointly with others. The client and his bank jointly control the funds in the client’s account. In Solar Mounting Solutions (Pty) Ltd vs Engala Africa (Pty) Ltd (FB) (unreported case no 3717/2014, 5-9-2014) (Wright AJ) it was held that: ‘Even though the applicant may not have had actual possession of the property complained of, it had a right of access to portions of the site’. Thus, there are instances in which use and enjoyment of a thing has an element of sufficient control to be said that the dispossessed person was in possession, which qualifies him or her to be protected through the application of mandament van spolie.
In matters concerning the dispossession of rights, the requirement of dispossession is satisfied by showing that a previously exercised utility has been disturbed. In that order, the emphasis of physical possession ‘involve[s] rather strained reasoning’. For example, when a tenant is locked out, it is regarded as dispossession because his or her access rights have been disturbed. The dispossession of a right will always be manifested by the deprivation of an externally demonstrable incidence, such as the use arising from or being integral to the right in question. The case of Tigon Ltd v Bestyet Investments (Pty) Ltd 2001 (4) 634 (N), clearly demonstrates this point. In casu, the court examined the juristic nature of the rights of a holder of shares in a company. This was in order to determine whether the removal of its name from the share register constituted dispossession for the purpose of being able to obtain relief in terms of the mandament van spolie. The court held that mandament van spolie was available, in such an instance, because the act of removing the name constituted dispossession for the purposes of spoliation remedy.
Defences against spoliation
It does not follow that every claim of mandament van spolie will always be successful. A respondent has some defences available to him to avert a spoliation claim. One of these defences include ‘impossibility of return to status quo ante’. The spoliation remedy is primarily a possessory one and if repossession of the identical property is not possible (either because the thing was destroyed or because it had subsequently been alienated to a third party) the application for the remedy may not end in success.
Lawfulness
Included in one of the limited defences against the remedy of mandament van spolie is the defence of lawfulness. Where dispossession is effected by virtue of common law, a statutory instrument or contract, a claim for spoliation remedy will not be successful. Where a client opens a second account with the same bank, some banks conclude a contract with such a client which provides that, where one account is in arrears, the bank is allowed to transfer credit from the account with funds to the account in arrears. This kind of agreement is also similar to the common law operation of set-off.
A client is considered a creditor to the bank when there are funds in the client’s account. The bank can also be a creditor when it grants a loan to its client. Set-off occurs whereby two persons who are mutually indebted to each other, extinguish their debts partially or wholly. Where the debts are of the same amount, the two parties’ debts cancel each other. But where the amounts of the two debts differ, the bigger debt extinguishes the smaller one, as proportionally owed. Set-off can only be invoked when both claims are liquidated. It needs to be noted that where a client owes a bank it does not mean that the bank’s claim against the client is always liquidated. A liquidated debt is one that is capable of speedy and easy proof (Treasurer-General v Van Vuren 1905 TS 582 at 589 and Fatti’s Engineering Co (Pty) Ltd v Vendick Spares (Pty) Ltd 1962 (1) SA 736 (T) at 738 (F – G)). Set off can also be excluded by agreement in the contract between the bank and its client.
Identifiable
One of the common defences against spoliation is that the subject of dispute is no longer in existence or unidentifiable. Where such subject is mixed with other things such that it is no longer identifiable, it is referred to as commixtio. Commixtio, in the case of money, refers to instances whereby funds are mixed in a manner that renders it impossible to determine in whom the separate funds vest. A bank may also rely on the rule that once money is mixed with other money, without the owner’s consent, ownership of it passes by operation of law. However, one should not lose sight of the fact that under the spoliation remedy, the question of ownership is not in issue but the means through which dispossession takes place.
In Fredericks and Another v Stellenbosch Divisional Council 1977 (3) SA 113 (C), despite the fact that dwellings had been destroyed together with the building material and such a situation posing a perfect defence of impossibility of restoration, the court ordered restoration. The court relied on Zinman v Miller 1956 (3) SA 8 (T) and Jones v Claremont Municipality 1908 (25) SC 651 to come to the conclusion that the remedy could be used in instances where restoration required something to be done in addition to repossession of the subject of dispute. The court in Fredericks went to the extent of ordering that if the original sheets of corrugated iron could not be found, the respondent should use sheets of similar size and quality as the original ones. Thus, the remedy does not only provide for restoration of the thing, sometimes repossession can require restoration of the thing to its former state. It is asserted that the remedy should not be absolutely precluded in instances where the property was suspiciously destroyed or alienated, so as to ensure that repossession could not take place; and ultimately to specifically exclude the possibility of instituting the remedy in those instances. Allowing such can have dire consequences for banks’ clients because it can open avenues to unfair practices. Accordingly, I submit that if the property is fungible and can in principle easily be replaced as was illustrated in Fredericks, the application of the mandament should not be completely barred.
Determination
In matters concerning the dispossession of rights, the requirement of dispossession is satisfied by showing that a previously exercised utility has been disturbed. Thus, when a bank decides to transfer a client’s funds without having followed the demand procedure, the client’s rights to transfer the previously held credit, making payments and redeeming the credit for cash on demand, are disturbed. In other words, dispossession occurs. The remedy of spoliation should be granted to the client to allow an investigation of the facts of the dispute.
However, as highlighted above, the relationship between a bank and a client is also governed by the law of contract. If the underlying contract provides that the bank may consolidate two separate accounts, where the client owes the bank in one account, the client may not be granted the spoliation remedy on the basis of the contract as well as by operation of set off (provided set off has not been expressly excluded).
Also, the defence that once the money has been transferred and mixed with the bank’s monies cannot be identified, involves a rather strained reasoning considering what was held in the Fredericks case. In casu, it was held that the destruction of the spoliated property does not take away the availability of the spoliation remedy. Sometimes repossession can mean restoration of the subject of dispute to its former state and not necessarily the restoration of the exact thing but the original form. In that case, impossibility of restoration is not an absolute bar to the remedy. This applies in instances where property is deliberately aberrated to defeat this remedy. Thus, in instances involving property that can be easily replaced, as was illustrated in Fredericks, the application of the mandament van spolie should not be completely barred.
In all, the spoliation remedy can be used only as a temporary measure pending the determination of the facts in dispute. For a client who wishes to recover his money permanently, I submit that the route of actio Pauliana and the condictio sine causa (the essence of which is beyond the scope of this article) should be followed as was held in the case of Commissioner of Customs and Excise v Bank of Lisbon International Ltd and Another 1994 (1) SA 205 (N).
Conclusion
The application of the above arguments can be used to protect the integrity of the banking system. It can also assist other regulatory authorities in providing consumers with adequate protection from unfair practices, fraud and financial loss.
Valentine Mhungu LLB (WSU) LLM (UKZN) is a candidate attorney at Mbatha and Associates in Durban.
This article was first published in De Rebus in 2015 (Oct) DR 36.
