New case deals with a South African who lost over R800,000 in a fake email scam

South Africa’s Supreme Court of Appeal recently handed down judgement on a case which centred on fraudulent emails.

According to Nerisha Besesar, a partner at law firm Shepstone Wylie, the case focused on a man who had given a written mandate to his financial advisors to act as his agent and invest money with Investec Bank on his behalf.

The written mandate stipulated that all instructions must be sent by fax to a specified number and a specified email ‘with client’s signature’, said Besesar.

The money was to be invested in a corporate cash manager account in the name of the client at Investec and the advisors would invest and manage that account on his behalf.

In August 2016, the client’s Gmail account was hacked by fraudsters and, by using his authentic email credentials, they sent three emails to his advisors requesting the transfer specified amounts into the accounts of third parties at First National Bank.

“Two of the three emails ended with the words “Regards, Nick” while the third ended with “Thanks, Nick”. None of the emails had a form of any electronic signature and none of them had attachments,” said Besesar.

In accordance with three emails, the advisors paid a total R804,000 from the client’s investment account to third parties. Once the client became aware of this he notified his advisors that the emails had not been sent by him.

He subsequently claimed payment from his advisorson the basis that it had paid out contrary to its written mandate.

Court case 

“The issue before the court was to determine whether Global had breached its mandate in terms of which it was authorised to invest and manage money entrusted to it by (the client)  by releasing funds in response to fraudulent emails ostensibly sent by the client,”said Besesar.

The advisors relied on the fact that the emails came from the client’s legitimate email address and that the emails contained his typed written name at the foot of the emails to the extent that it satisfied the signature requirement in light of section 13(3) of the Electronic Communications and Transactions Act (“ECT Act”).

The advisors also argued that by using the word “Nick”, it would constitute the client’s  electronic signature as he always ended his emails in that manner. However, the client argued that the instruction did not bear his signature, whether it be manuscript or electronic.

“After consideration of the facts and relevant case law, the court held in order to resort to section 13(3) of the ECT Act, (the advisors) would have had to show that in terms of the mandate an electronic signature was required,” said Besesar.

“In this instance, the word “electronic” was conspicuously absent from the mandate. Accordingly, the court held that the instruction ostensibly from (the client) was not accompanied by a signature and the funds were transferred without the proper instructions and contrary to the mandate”.

Previous case law 

The advisors had placed reliance on Spring Forest Trading 599 CC / Willberry (Pty) Ltd t/a Eco-Wash and Another 2015 (2) SA118 SCA which concerned the validity of cancellation of agreements by way of exchange of emails.

The court distinguished the present matter from Spring Forest given in that instance, the person who actually wrote and sent the emails was not an issue.

In the Spring Forest decision, there was no dispute regarding the reliability of the emails, accuracy of the information communicated or the identities of the persons who appended their names to the emails.

In this instance however, given that the emails in issue were in fact fraudulent, they were not binding on the client. The appeal was accordingly dismissed with cost.

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New case deals with a South African who lost over R800,000 in a fake email scam