When Can A Bank Reverse A Credit Transfer Without Customer Consent?

The South African Supreme Court of Appeal ("SCA") recently delivered judgment in the matter of FirstRand Bank Limited v The Spar Group Limited. The SCA held that:

1. A customer with no entitlement to money deposited into its account and who knows that it enjoys no such entitlement, may not pay out money against the credit to the account. Doing so amounts to theft.
2. A third party whose money is deposited into the customer's account will have a claim against the customer's bank for the amount credited, if the bank is aware that the money belongs to the third party; and
3. A bank that knows that its customer has no entitlement to funds deposited into the customer's account, but still allows the customer to pay out those funds, renders itself a joint wrongdoer. In these circumstances, the bank owes the third party whose funds were wrongly paid into the customer's account, a legal duty and the third party can claim any loss suffered as a result of the bank permitting the