Holdership in Due Course, Material Alterations and the Regularity of a Bill of Exchange. Melamed Finance (Pty) Ltd v VOC Investments Ltd [2006] SCA 75 (RSA)

Melamed Finance (Pty) Ltd v VOC Investments Ltd may turn out to be a very important decision. The facts are fairly straightforward: On 13 November 2000 VOC Investment's computer system generated four cheques in favour of a payee, Damelin Textiles. All the cheques were drawn on the Standard Bank of South Africa Ltd and bore that date. They were intended to be post-dated but the computer system used for printing the cheques could not produce post-dated cheques. Therefore the date on each cheque was altered in manuscript to reflect the intended date of payment. The alterations were signed by the same two signatories who were authorized to draw the cheques on behalf of VOC Investments. After the dates were changed the payee negotiated three of the cheques to Melamed Finance. One of the cheques was met on presentation but the other two were dishonoured because payment had been countermanded. It was common cause that Melamed Finance was indeed holder of the cheques. The only issue the court had to decide was whether Melamed Finance had become the holder in due course of the cheques, since a holder in due course holds a cheque “free from any defect in the title of prior parties, as well as from mere personal defences available to prior parties among themselves, and may enforce payment against all parties liable” on the cheque (s 36(b) of the Bills of Exchange Act 34 of 1964)