Boland Bank v Vermeulen 1993 (2) SA 241 (E)

Boland Bank v Vermeulen 1993 (2) SA 241 (E)

Issue: Whether a bank is entitled to exercise its right of set-off against a customer's deposit account to satisfy the customer's overdraft on a current account, even if the customer has instructed the bank not to do so.

Facts:

Vermeulen had a deposit account and a current account with Boland Bank. Vermeulen instructed the bank not to exercise its right of set-off against his deposit account to satisfy his overdraft on his current account.

Despite Vermeulen's instruction, the bank exercised its right of set-off and used the funds from Vermeulen's deposit account to satisfy his overdraft on his current account. Vermeulen then sued the bank for damages.

Held:

The Eastern Cape Division (ECD) held that the bank was entitled to exercise its right of set-off, even though Vermeulen had instructed the bank not to do so. The Court reasoned that a bank's right of set-off is a legal right that cannot be overridden by a customer's instruction.

Key Facts:

• A customer instructed his bank not to exercise its right of set-off against his deposit account to satisfy his overdraft on his current account.
• The bank exercised its right of set-off and used the funds from the customer's deposit account to satisfy his overdraft on his current account.
• The customer sued the bank for damages.

Reasons:

The Court reasoned that a bank's right of set-off is a legal right that cannot be overridden by a customer's instruction. The Court also reasoned that it would be unfair to allow customers to prevent banks from exercising their right of set-off, as this could put banks at risk of loss.

Conclusion:

The ECD's decision in Boland Bank v Vermeulen 1993 (2) SA 241 (E) is a significant case because it clarifies the law relating to the relationship between banks and their customers. The decision also emphasizes the importance of banks being able to exercise their right of set-off to protect their interests.