There
were two sets of employees.
It
was their nefarious activities that caused the plaintiff to clash
with the fifth defendant - two parties that otherwise had no
relationship between them. The one pair of employees was employed by
the plaintiff (hereafter referred to as the “pension
fund”).
The other pair was employed by the fifth defendant (hereafter
referred ...
There
were two sets of employees.
It
was their nefarious activities that caused the plaintiff to clash
with the fifth defendant - two parties that otherwise had no
relationship between them. The one pair of employees was employed by
the plaintiff (hereafter referred to as the “pension
fund”).
The other pair was employed by the fifth defendant (hereafter
referred to as 'the
Bank').
For
more than three years, the pair employed by the pension fund was
stealing from their employer, the pension fund. For more than three
years, the pair employed by the Bank
was conniving with the pair from the pension fund to store the stolen
funds in fictitious bank accounts opened by them with the Bank.
The
modus
operandi
was this.
The
pension fund pair would identify pensioners to whom lump sum benefit
payments were due. They would forward the details to the bank pair.
The bank pair would “…, during
the scope and course of their employment…,”
with the Bank,
open “…, fraudulent
bank accounts…,”
in the names of the pensioners, at one of the Banks'
branches. The Bank
pair would then illicitly facilitate the storage of the stolen monies
in those “…, fraudulent…,
accounts…,.”
Afterwards, the pension fund pair, with the assistance of the Bank
pair, would then withdraw the loot and share it amongst the four of
them.
The
amount involved was US$926,392=72.
The
pension fund's summons was against its own pair, as first and
second defendants; the Bank
pair, as third and fourth defendants; and the Bank,
as fifth defendant. From the declaration, the cause of action against
the Bank,
as I understood it, was twofold.
(i)
The first was based on vicarious liability. It was pleaded this way:
“2.6
Fifth Defendant is liable, vicariously, for the mismanagement of its
business by First and Second [Defendants] which resulted in Plaintiff
being defrauded as particularised in Paragraphs 2.4 and 2.5 above.”
(ii)
The second cause of action, pleaded in the alternative, was based on
negligence. It was put this way:
“2.7
Alternatively, and in any event, Fifth Defendant was negligent in
that it failed to take requisite measures which include:
(a)
Verifying and/or ensuring the verification of the identity of its
customers and the capacity in which its customers will (sic) be
acting when they transact.
(b)
Establishing internal reporting structures to deal with suspicious
acts of money laundering.
(c)
Having in place adequate policies and procedures and internal
controls that promote high ethical and professional standards and
prevent its institutions from being used, intentionally or
unintentionally, by criminal elements.
(d)
Having in place a sound Know Your Customer ('KYC') policy and
procedure.”…,.
I
now consider the claim against the exception.
(a)
Is
the bank vicariously liable to the pension fund for the theftuous
actions of the employees concerned?
An
employer is liable for the wrongs done by his employee to another
person in the course and scope of that employee's employment:
Mkize
v Martens 1914 AD 382; Feldman
(Pty) Ltd v Mall 1945 AD 733; South British Insurance Company v Du
Toit 1952 SR 239;1952 (4) SA 313; Nott v Zimbabwe African National
Union (Patriotic Front) 1983 (2) 208; Fawcett Security Operations
(Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2) ZLR 291 (SC);
Minister van Veiligheid en Sekuriteit v Japmoco BK h/a Status Motors
2002 (5) SA 649 (SCA); Commissioner for the South African Revenue
Service & Anor v TFN Diamond Cutting Works (Pty) Ltd 2005 (5) SA
113 (SCA); and Minister of Finance & Ors v Gore NO 2007 (1) SA
111 (SCA).
That
an innocent employer should be liable for the wrongs committed by his
employee during the course and scope of that employee's employment
is a matter of public policy: Commissioner for the South African
Revenue Service & Anor v TFN Diamond Cutting Works (Pty) Ltd 2005
(5) SA 113 (SCA).
The
rationale is that the employer's work is done “by the hand of the
employee.” The employer creates a risk of harm to others should the
employee prove to be negligent, inefficient or untrustworthy. The
employer is therefore under a duty to ensure that no injury befalls
others as a result of the employee's improper or negligent conduct
in carrying on his work: Feldman (Pty) Ltd v Mall 1945 AD 733…,.
The
employee's wrongful act can either be culpa (negligence), or dolus
(intention), or both. In Commissioner for the South African Revenue
Service & Anor v TFN Diamond Cutting Works (Pty) Ltd 2005 (5) SA
113 (SCA), PONNAN JA said:
“Counsel
for the defendant conceded that had Matshiva been negligent in
safeguarding the contents of the safe there would have been no doubt
that his employer would have been vicariously liable for any loss
occasioned in consequence thereof. Negligence is but a form of fault.
So, too, is intention. If liability were to attach to the defendant
in consequence of Matshiva's negligent failure to safeguard the
diamonds, why, it must be asked, would it escape liability if he
acted intentionally?”
Thus,
the theftuous conduct of an employee can render the employer liable
for the loss suffered by the victim of the theft. In Fawcett Security
Operations (Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2) ZLR 291
(SC),
GUBBAY
CJ said…,:
“It
was formerly thought that an employer could not be held vicariously
liable for a theft committed by his employee on the ground that the
act of stealing necessarily took the employee out of the course of
his employment. Dishonesty or fraud by the employee for his own
benefit did not render the employer liable.
This
view of the law no longer prevails.
It
is now recognised and accepted that theft by an employee to whom the
goods concerned have been entrusted is, in fact, an improper and
dishonest mode of performing what he is employed to do, namely, to
take care of the goods. In such circumstances, the employee is
acting, nonetheless, in the course of his employment, and so the
employer is vicariously liable for the loss of the goods.”
There
are several limitations to the scope of vicarious liability. The one
relevant to this case is that stated by the learned Chief Justice in
Fawcett
Security Operations (Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2)
ZLR 291 (SC).
At p 295 E–F he said:
“Where
an employee has committed a theft, the test to be applied is to
enquire whether the goods stolen had been entrusted
to his care by his employer. If they had not, the theft is outside
the scope of his employment and the employer is not vicariously
liable. The theft is the act of the employee pursuing his own selfish
ends – something he has done entirely on his own account.”
In
my view, it will be ridiculous to stretch vicarious liability to the
kind of theftuous actions disclosed in this case. It was not the
Bank's
employees that were stealing from the pension fund. It was the
pension fund's own employees. Understandably, the Bank
retorted that for more than three years the pension fund had failed
to detect the theft in its own backyard, by its own people, and that
instead of suing it, the pension fund was better advised suing its
own auditors who had let it down.
The
pension fund retorted back saying it was none of the Bank's
business to advise it who to sue.
But,
I guess, if the pension fund is suing it then the Bank
may be justified in deflecting the blow elsewhere.
The
basis of the pension fund wanting vicarious liability extended to the
Bank
in the circumstances of this case was that but for the facilitation
provided by the Bank
employees, the pension fund employees would not have been successful
in their theftuous enterprise.
I
do not agree.
The
theft by the pension fund employees was perfecta
by the time the loot was transferred and stored in the Bank.
Theft may be a continuing offence, and,
as already pointed out, an employer may be liable for the theft of
goods by its own employees. But there is a world of difference
between the circumstances under which an employer may be liable for
the theft of someone's goods by his employees and the circumstances
of this case. In Fawcett
Security Operations (Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2)
ZLR 291 (SC),
it was stressed that the liability of the employer attaches where the
goods had been entrusted
(emphasis by the Chief Justice) to the thieving employee.
This
was not the case in this case.
The
Bank
pair neither stole monies entrusted to them nor stole from the
pension fund at all. All they did was to provide storage facilities
for the funds stolen by the pension fund's own employees. There can
be no vicarious liability in such a situation.
In
Fawcett
Security Operations (Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2)
ZLR 291 (SC),
the victim of the theft was a supermarket. The culprit was a security
guard employed by the security company that the supermarket had
contracted to provide security services. The security guard not only
stole from the supermarket himself, but he also allowed other people
to steal from it. On vicarious liability, the Supreme Court held that
it could not be said that the goods in the supermarket had been
entrusted
to the thieving guard. In order for an employer to be liable under
such circumstances the goods must, in some way or other, have been
entrusted
into the possession or charge of the employee.
As
was stated by SALMON LJ in Morris
v C W Martin & Sons Ltd [1965] All ER 725 (CA)…, (quoted by
GUBBAY CJ in Fawcett Security Operations (Pvt) Ltd v Omar Enterprises
(Pvt) Ltd 1991 (2) ZLR 291 (SC)…,.);
“The
mere fact that the master, by employing a rogue, gives him the
opportunity to steal or defraud does not make the master liable for
his depredations.”…,.
I
am mindful that in the passage in Fawcett
Security Operations (Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2)
ZLR 291 (SC)…,
part of which I have quoted above, the learned GUBBAY CJ went on to
say this:
“The
employer may, of course, be liable on the ground of his negligence in
selecting the employee, or because the theft was induced by his own
negligence, or because of the negligence of some other employee to
whom the charge of the stolen property had been committed.”
Certainly,
the Supreme Court did find the supermarket's claim, based on the
negligence of the security company, not
excipiable…,. In Fawcett
Security Operations (Pvt) Ltd v Omar Enterprises (Pvt) Ltd 1991 (2)
ZLR 291 (SC)
there was a contractual relationship between the parties. The
negligence sought to be pleaded was contractual, not delictual as in
the present case.
However,
there is still a world of difference with the present case.
In
the circumstances, I find that there is no principle of law that
extends the concept of vicarious liability to the Bank
in this matter.
