Keshwar versus FNB Determination

The most recent Ombud determination concerns a complaint against First National Bank by a businessman, Craig Keshwar, who placed funds for investment with a bank manager, De Ghee, employed by FNB. The misappropriated funds went directly into the bank manager’s personal account, or were paid over in cash to him.

This is the third case where a bank is involved as the respondent. The other two cases concerned complaints from Fiona Newlove, also against FNB, and the Tshitema case, where a complaint was made against Standard bank.

In these two cases, the clients were misled by financial advisors employed by the bank, whereas in the Keshwar case, it was a bank manager.

The determination lists at least 5 actions (see below) which should have warned the complainant that all was not well and concludes that “…the complainant cannot lay the blame for his misfortune on the respondent (FNB). Accordingly, the facts of the present matter clearly indicate that De Ghee, the respondent’s employee, acted outside the scope of his employment. He was on a frolic of his own and the respondent cannot be held liable for the complainant’s loss.”

“All things considered, the complainant was the author of his own misfortune.”

A previous complaint against FNB had a different outcome. The bank took the Newlove determination on referral to the Financial Services Board’s Appeal Committee, who rejected the appeal, but gave a lot more detail about the liability that an employer has for the actions of its employees.

A critical element in the determination concerns what the term “ostensible authority” comprises.

This matter is discussed in great detail in an appeal by FNB against a previous finding by the Ombud. Below are relevant extracts from the Appeal Board ruling:

In Glofinco v ABSA Bank Ltd t/a United Bank supra at p.492, Judge Nugent made a further qualification regarding an “ostensible authority”:

“By establishing branches for the conduct of its business, the bank represents to the public at large that the bank conducts its ordinary business from those branches and that its manager is authorised to conduct that business on its behalf. No doubt there are generally internal limitations placed upon the authority of the manager (as there were in this case) but, as pointed out by Nienaber JA, those limitations are immaterial if they are not brought to the notice of the public. Members of the public are thus entitled to assume, when they transact business at the branch which is of the kind that falls within the scope of the ordinary business of the bank that they are dealing with the bank and not with an unauthorised third party”.

Nugent JA., Glofinco v ABSA Bank Ltd t/a United Bank supra at p.493 further qualified that the public cannot be at the losing end if the Bank creates the impression:

“The public know what kind of business is undertaken by a bank and they are entitled to feel safe when they undertake business of that kind with a bank manager. They are not to know in what circumstances the bank considers it to be commercially desirable or beneficial to undertake a particular contract, or what will be inimical to its interests, and in my view they are not called upon to enquire. Members of the public who deal with a bank manager are entitled to assume that he knows what he is doing when he transacts business of the kind that one transacts with a bank. If in truth the transaction would not ordinarily have been concluded by the bank and was concluded only because its appointed agent went beyond his authority, I can see no reason why the loss should fall upon the innocent party who was ignorant of that fact and, in my view, that is what estoppel sets out to avoid”.

Once it is established that there were representations made by the Bank, it should be distinguished as to whether such representation can reasonably be expected to mislead clients who relied upon it. In Glofinco v ABSA supra at p.496 it was held:

“When a representation has been made that can reasonably be expected to mislead (as it was in this case), it ought to follow that a person who relies upon it will ordinarily be acting reasonably in doing so. The requirement that the reliance must be reasonable thus mirrors to a large extent the requirement that the representation must be one that is reasonably capable of misleading”.

In my view, it is on this latter issue where the Ombud found against the complainant.

  • The complainant’s own uncontested version stated that there was a time when De Ghee would show the complainant other FNB clients’ bank accounts. As a businessman, the complainant ought to have known that De Ghee’s conduct was not only unlawful, but improper and unethical.
  • The complainant kept quiet and failed to alert the respondent when De Ghee made a personal cheque of R25 000 from his (De Ghee’s) personal account and gave it to the complainant. As a businessman, complainant should have known that there was something amiss when a bank’s employee gives guarantees on behalf of a bank by issuing a cheque from his private account.
  • At some point De Ghee called a staff member and instructed him to link his personal account with the complainant’s own private account. With the full knowledge and acquiesce of the complainant, De Ghee became the beneficiary of the complainant’s account.
  • At various stages of their friendship, the complainant paid substantial amounts of money into the private and personal account of De Ghee. On other occasions, the complainant personally handed substantial amounts of cash to De Ghee.
  • The complainant never once brought to the attention of the respondent the improper conduct of De Ghee.

While it may be difficult to fault the Ombud’s finding on legal grounds, it is common knowledge that bank managers often play a large role in securing business for the bank, including investments. Clients place an inordinate amount of trust in their bank managers, but in this instance, it appears that there was more to the matter than just trust.

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