South Africa is running abuzz with questions around mistaken bank deposits after a student is said to have accidentally received R14 million in her bank account.
The student from the Walter Sisulu University is reported to have already spent more than R800 000 of the money mistakenly deposited to his/her account by a company which administers National Student Financial Aid Scheme (NSFAS) transfers.
Walter Sisulu University spokesperson Yonela Tukwayo was quoted saying that the deposit was made in error. “We are also looking at the NSFAS rules of which the child (sic) did sign an agreement to adhere to the rules in terms of how that money should be used. So the student will be liable to repay every cent of the money spent even if it takes 20 years to do so.”
What does the law say?
ProBonoMatters went searching for answers:
The critical questions are:
What recovery options does a person who deposits money into a wrong account have?
The victim can ask the bank to reverse the transaction. But the bank cannot simply reverse the transaction without the consent of the concerned account holder.
What legal recourse does the depositor have where the account holder has withdrawn and spent the mistakenly deposited money?
What happens in a case where the concerned account holder has no means to repay the concerned monies?
What happens if the concerned account holder refuses to play ball, does not give consent to the bank to reverse the transaction?
The following article, written as a reaction to a different case, provides some useful insights. The piece was written about 18 months ago by Stephen Tuson, back then titled as Adjunct Professor at Wits University and is a practising attorney at the Wits Law Clinic.
In this week’s newspapers, we hear of a worker who received payment in error of an amount of R500 000 into his bank account from his employer.
The employer intended to pay the worker the sum of about R5000,00 (five thousand rand) but mistakenly left out the comma resulting in the amount of R500 000 being paid into the worker’s bank account.
When notified of the mistake, the worker allegedly refused to pay back the money, and transferred most of the money into his wife’s bank account.
The hapless employer had to approach the courts on an urgent basis to freeze the bank accounts of the employee and his wife, pending a determination by the court as to what should happen to the money.
Intuitively, it seems obvious to us that the worker should have to pay back the money. And if the worker transferred the money to his wife’s account, she should be made to pay back the money. But is he be guilty of theft?
Things are not always as simple as they seem.
In days gone by, the law maintained that only corporeal things could be stolen. These are things which are real and tangible, which one could feel and touch like cows or carts or gold coins. But money “paid” into your account is a credit entry. It is not corporeal, and was under our old common law not capable of being stolen.
Another complication was the idea of “commixtio”. According to this Roman law rule, when money (coins or notes) was stolen, the coins and notes became the property of the thief, because they mixed with his own money and it was impossible to distinguish which coins were the thief’s original coins and which were his victims’. The same idea applies to coal or wheat that was stolen and mixed with the thief’s own.
If it was proved that the thief took the money, he could be charged with and convicted of theft and the owner of the money could pursue a civil action in court for the return of the same value of money or coal or wheat. If the thief had spent the money and was a man of straw – penniless – the victim was left with a paper judgment which was practically unenforceable. But in this case, the worker did not take the money – it was paid into his account as a credit.
In banking law, when a deposit is made into a person’s bank account, the money actually belongs to the bank and not the account holder. The bank has an obligation to pay to the account holder whatever money is to his credit, on demand.
So what happens to the money in the worker’s bank account, and in his wife’s bank account, and what are the consequences of the worker keeping the money?
The employer cannot simply demand that the worker or his wife’s bank pay back the money. The employer’s bank, following instructions from the employer, paid the sum of R500 000 into the workers bank account. The worker’s bank cannot simply reverse it without the consent of the worker.
The worker may argue for reasons only known to him that he was entitled to the money. If the worker refuses to pay back the money then the employer would need to sue for the return of the money, alleging that it was paid in error, and that the worker had no entitlement to it because he was unjustifiably enriched.
This action would in all probability succeed.
Our courts have also over time decided that a person who receives money to which he is not entitled into his bank account, and spends it, is guilty of theft.
Even though legally the money strictly belongs to the bank, the person who suffers the loss is the employer (in our example) and so our courts have decided that the money was stolen from the employer and not from his bank.
Our courts have also decided that even though credit in an account is strictly speaking an incorporeal (not tangible) it is capable of being stolen and so the worker could also be found guilty of theft.
And his wife? If she knew that the money was stolen she may be guilty as an accessory after the fact to the crime of theft. She assisted her husband in concealing the money from the employer.
If the money was frozen in her bank account pending a determination of the true facts, it is likely that the court will order that she or her bank return the money to the employer.