, PLEASE USE THIS DOCUMENT AS A GUIDE ONLY
A) Carefully read the case below, from your prescribed reading list, and answer the following
questions: Joint Stock v Absa Bank 2008 (4) SA 287 (SCA)
1. Briefly outline the key facts of the case
The appellant, Joint Stock Company Varvarinskoye, was a Kazakhstani company involved in
establishing a gold and copper mine (the Varvarinskoye Project) in Kazakhstan. It appointed MDM
Ferroman (Pty) Ltd as lead contractor for the project.¹ To ensure subcontractors were paid and the
project remained on schedule, the contract (specifically sub-clause 14.4) provided for a dedicated
account to be used for payments to subcontractors.²
The sixth respondent, Metallurgical Design & Management (Pty) Ltd, held an account (account 1313)
with Absa Bank. Although this account was held by the sixth respondent, it was used as a
"warehousing" account for funds deposited by the appellant to pay MDM and its subcontractors. The
bank was made aware of the arrangement and the specific purpose of the account, and knew that
withdrawals could only be made upon compliance with prescribed procedures that did not involve
the sixth respondent's control.³
On 10 December 2005, Absa appropriated R28,244,780.59 from account 1313, using set-off against
debts owed to it by the sixth respondent and MDM (who had cross-suretyship agreements with Absa).
At the time of appropriation, the sixth respondent had an overdrawn account of R60,150,608.36.⁴
The appellant claimed the money "belonged" to it and demanded repayment, which Absa refused.
The appellant then applied to the Johannesburg High Court for a declaration that the money vested in
it and for repayment. Willis J dismissed the application, leading to this appeal.⁵
2. What were the main arguments by the concerned parties
The central issue was whether the appellant had a legitimate claim to the money appropriated by
Absa from account 1313, or whether Absa was entitled to apply set-off against the funds in that
account on the basis that money deposited into a client's bank account becomes the property of the
bank, and only the account holder (the sixth respondent) had any right to contest the appropriation.⁶
More specifically, the court had to determine:
(1) whether a third party (the appellant) could assert a proprietary claim to money in a bank account
held in another party's name;
(2) whether the bank's knowledge of the source and purpose of the funds was relevant to its right to
effect set-off; and
(3) whether the arrangement between the appellant, the sixth respondent, and Absa constituted an
agreement that the funds were held for a specific purpose, thereby precluding the bank's right to
set-off.⁷
¹ LML4807, Study Guide, p 90. This case is prescribed reading and forms part of lesson 5 dealing with the bank-customer relationship.
² Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 4-8.
³ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 12-15.
⁴ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 19.
⁵ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 22, 28.
⁶ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 23-24.
⁷ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 31-36.
A) Carefully read the case below, from your prescribed reading list, and answer the following
questions: Joint Stock v Absa Bank 2008 (4) SA 287 (SCA)
1. Briefly outline the key facts of the case
The appellant, Joint Stock Company Varvarinskoye, was a Kazakhstani company involved in
establishing a gold and copper mine (the Varvarinskoye Project) in Kazakhstan. It appointed MDM
Ferroman (Pty) Ltd as lead contractor for the project.¹ To ensure subcontractors were paid and the
project remained on schedule, the contract (specifically sub-clause 14.4) provided for a dedicated
account to be used for payments to subcontractors.²
The sixth respondent, Metallurgical Design & Management (Pty) Ltd, held an account (account 1313)
with Absa Bank. Although this account was held by the sixth respondent, it was used as a
"warehousing" account for funds deposited by the appellant to pay MDM and its subcontractors. The
bank was made aware of the arrangement and the specific purpose of the account, and knew that
withdrawals could only be made upon compliance with prescribed procedures that did not involve
the sixth respondent's control.³
On 10 December 2005, Absa appropriated R28,244,780.59 from account 1313, using set-off against
debts owed to it by the sixth respondent and MDM (who had cross-suretyship agreements with Absa).
At the time of appropriation, the sixth respondent had an overdrawn account of R60,150,608.36.⁴
The appellant claimed the money "belonged" to it and demanded repayment, which Absa refused.
The appellant then applied to the Johannesburg High Court for a declaration that the money vested in
it and for repayment. Willis J dismissed the application, leading to this appeal.⁵
2. What were the main arguments by the concerned parties
The central issue was whether the appellant had a legitimate claim to the money appropriated by
Absa from account 1313, or whether Absa was entitled to apply set-off against the funds in that
account on the basis that money deposited into a client's bank account becomes the property of the
bank, and only the account holder (the sixth respondent) had any right to contest the appropriation.⁶
More specifically, the court had to determine:
(1) whether a third party (the appellant) could assert a proprietary claim to money in a bank account
held in another party's name;
(2) whether the bank's knowledge of the source and purpose of the funds was relevant to its right to
effect set-off; and
(3) whether the arrangement between the appellant, the sixth respondent, and Absa constituted an
agreement that the funds were held for a specific purpose, thereby precluding the bank's right to
set-off.⁷
¹ LML4807, Study Guide, p 90. This case is prescribed reading and forms part of lesson 5 dealing with the bank-customer relationship.
² Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 4-8.
³ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 12-15.
⁴ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 19.
⁵ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 22, 28.
⁶ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 23-24.
⁷ Joint Stock Company Varvarinskoye v Absa Bank Ltd 2008 (4) SA 287 (SCA) para 31-36.
