Who is responsible when a banking glitch results in a R2.6m debt?

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A routine banking error rarely ends in the sequestration of a customer’s estate. Yet, that is precisely what unfolded in this matter.

IP Van Zyl (respondent), applied for a private banking account with Investec Bank Limited (bank) on 7 May 2021. His application was approved and the initial credit limit was R50,000.

On 1 February 2025, the respondent submitted another application, requesting the bank to increase his limit, which at that time stood at R150,000. However, this request was declined by the bank on 4 February 2025.

Shortly thereafter, an internal system change by the bank inadvertently disabled balance checks for certain tokenised transactions, allowing transactions to be processed through a token rather than directly using card details.

Practically speaking, this meant that transactions could be processed even if the account lacked sufficient funds or exceeded its credit limit. What then followed was extraordinary.

Multiple online betting transactions

As a result of the banking glitch, between 5 and 11 February 2025, the respondent (or his wife using his account, as the respondent later alleged) made multiple online betting transactions on the Hollywood Bets platform. An amount of R2,601,609.86 in online betting transactions was processed through the respondent’s account.

Each transaction triggered an automated SMS notification from the bank. By the time the error was discovered by the bank, the account balance had unfortunately ballooned far beyond the authorised credit limit of R150,000.

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The bank’s response – provisional sequestration

At first, the bank demanded payment of the outstanding balance. The respondent initially did not dispute the debt and even proposed a repayment plan extending till 1 April 2028. However, this proposal was rejected.

Instead of merely bringing a delictual claim for the respondent’s unlawful enrichment, the bank applied for provisional sequestration of the respondent’s estate in terms of the Insolvency Act.

The respondent’s defence – reckless credit

The respondent later denied liability for the R2,601,609.86 and argued that the transactions constituted reckless credit under the National Credit Act; therefore, if the bank had allowed transactions exceeding his credit limit without conducting an affordability assessment, the bank was responsible for effectively extending his credit unlawfully.

The court was not persuaded by this defence. The central difficulty with the respondent’s defence was that it relied on the very proposition that his own version of events undermined.

On one hand, the respondent argued that the excess transactions amounted to an extension of credit by the bank. However, on the other hand, he maintained that the account was never authorised to exceed the R150,000 limit and that the transactions occurred because the system failed to enforce that limit.

In the court’s view, these conflicting positions could not coexist.

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The court found that the excess transactions were not the result of a deliberate decision by the bank to extend the respondent’s credit. Instead, they were the product of a temporary system malfunction.

Crucially, the bank had already refused the respondent’s request to increase his credit limit just days earlier. Thus, there was no factual basis for suggesting that the bank had subsequently decided to grant him millions of rands in additional credit.

The court also emphasised that sequestration proceedings are not ordinary debt-enforcement actions. Their purpose is not to compel payment, but to set the mechanisms of insolvency law in motion.

As a result, the protections of the National Credit Act, more specifically those relating to reckless credit, did not manifest in the same way as an ordinary action.

Sequestration might benefit creditors

The court instead approached the matter through the framework of the Insolvency Act, where a creditor seeking provisional sequestration must establish three elements on a prima facie basis: a liquidated claim, an act of insolvency or factual insolvency, and reason to believe that sequestration will benefit creditors.

The court found that these requirements had been met: firstly, the bank clearly had a liquidated claim of R2,601,609.86. Even if this amount were ignored, the respondent remained liable for the authorised credit limit of R150,000.

Secondly, the respondent’s own correspondence revealed acts of insolvency in terms of the Act. By proposing payment arrangements and indicating his inability to pay the demanded amount, he had effectively acknowledged financial distress.

Thirdly, the court was satisfied that sequestration might benefit creditors.

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Additionally, the respondent went as far as to suggest that the gambling transactions were carried out by his wife without his knowledge. The court was not persuaded by this.

Not only would the respondent have received SMS notifications for each transaction, but he had also initially acknowledged the debt. In light of this, the attempt to lay the blame at his wife’s door was regarded as unconvincing.

Although the respondent argued that little would be recoverable through insolvency proceedings, the court reiterated a long-established principle: it is not necessary to prove that assets already exist – it is sufficient if an investigation by a trustee might uncover assets or recover value for creditors.

Against this background, the court granted a provisional sequestration order in favour of the bank.

Conclusion

Ultimately, this case offers several important lessons.

First, in an era where banking happens mostly on our smart phones, this decision confirms that simple technical failures can have consequences in millions, and claiming reckless credit will not always bail you out.

This segues into the second lesson, being that the protections of the National Credit Act are not limitless. When a dispute moves from credit enforcement to insolvency proceedings, the legal frameworks shift massively.

Finally, and perhaps most importantly, the decision signals that courts are unlikely to treat the exploitation of an obvious banking error as a shield against liability. A system glitch may explain how the transactions occurred but does not quite absolve those who knowingly take advantage of it.