CAPE TOWN – As South African commercial banks rely heavily on the Supreme Court of Appeal (SCA) judgment in Bredenkamp & Others v Standard Bank, 2010, the court ruled in a ban by Bredenkamp, that the banks had too much power.
South Africa’s commercial banks generously cite the verdict in the case, as a loophole to escape responsibility, in their closure of corporate bank accounts across the country.
The SCA said: “This power is being exploited by banks to impose standard form contracts on their customers and these powers would be exercised in an oppressive manner, and there was undeniably an element of oppression when a bank decided to terminate the contract. without cause.”
The most notable and common use of this general remedy relates to the termination of banking facilities for Sekunjalo Investment Holdings (SIH) and other associated companies, which have become collectively known as Sekunjalo Group (Sekunjalo) .
The case has set a dangerous precedent and a precedent that Sekunjalo is challenging at various levels of the South African legal system, including the Equality Tribunal and the Competition Commission.
Because applying the Bredenkamp judgment means that Sekunjalo, his companies, their managers and even their shareholders have a similar character.
Who is John Bredenkamp?
John Bredenkamp, a South African-born businessman who held South African and Zimbabwean nationality, was an influential business tycoon suspected of involvement in illicit business activities including the tobacco trade, arms trafficking, oil distribution, diamond mining, and being a confidant and financier. support of former Zimbabwean President Robert Mugabe.
Why was he listed and his bank account closed?
In 2008, the US Treasury Department’s Office of Foreign Assets Control (OFAC) classified Bredenkamp and the other applicants (companies and trusts he owns) as “Specially Designated Foreign Nationals” (SFN). The listing resulted from the “alleged illicit businesses”.
Bredenkamp v Standard Bank
Following the listing, Standard Bank decided to end the relationship between her and Bredenkamp, which he naturally disputed. However, Standard Bank argued that “the bank’s reputation could be adversely affected if it continued to have Bredenkamp as a customer, and there were certain unclear business risks for the bank if it continued to provide banking facilities to Bredenkamp and business entities under its control. because of its registration as an SDN.
Standard Bank also noted that Mastercard, being a US entity, also prohibited the bank from dealing with an SDN, and the bank was obligated to cancel that facility.
The case ended with the court ruling in the main motion that the banks had the right to unilaterally terminate the relationship between her and her customers, resulting in Bredenkamp’s loss.
It is essential to note that without any test of merit or application of the constitutional principle of “innocence until proven guilty”, Standard Bank had relied on the so-called “reputational risk” clause to justify its termination of the contract with Bredenkamp.
It should also be noted that Bredenkamp had a long list of allegations against him – locally and internationally. In its investigation, the bank found he was a breaker of not only US sanctions but also UN arms embargoes; he smuggled cigarettes and thus circumvented customs and tax laws; he profited from the war in the Congo; he has been the subject of serious fraud investigations in the UK and police raids and investigations for tax evasion in South Africa; his Dutch nationality had been withdrawn; and that he was a “payer of irregular commissions to officials of the South African government”.
Sekunjalo vs. Banks
No such allegations have been made or found against Dr. Iqbal Survé, or any of the companies currently involved in what is being called a “David vs. Goliath” battle.
However, the oppressive power wielded by the banks continues to wage war on citizens and, just like in the Bredenkamp case, the banks base their reasons for terminating the bank accounts of Sekunjalo-linked companies on the so-called “risk of reputation, claiming their reputation and their international reputation”. suffer irreparable harm if they continue to trade with the group.
Instead of hard facts, they cited negative media reports – allied to the Mpati commission of inquiry report – as an excuse to disassociate themselves and used contract law as a reason to summarily end the group’s ability to trading.
Sekunjalo and some 43 companies have filed cases with the Equality Tribunal, and several of the companies have approached the Competition Commission and Competition Tribunal among other legal interventions.
In an article entitled: “The Sources of South African Law”, written by Professor Wilhelm Georg Schulze of the University of South Africa, Schulze argued that: “The contract between a bank and its customers must satisfy all the general requirements of validity, performance and termination of a contract”.
He further held that: “The duties of a party to the agency contract include the duty not to cause harm to the other party, and that if the conduct of a party satisfies the test of the seriousness of any prejudice, the contract may be terminated unilaterally with the reasons provided.The absence of such communication could easily be interpreted as an absence of good faith, or even worse, as a possible abuse of contractual rights by the bank.
However, in the case between Sekunjalo and the banks, no substantive reason was provided other than mention of the untested and often exaggerated “reputational risk” for the closure of accounts.
Schulze also argued that: “The termination of the accounts must not prejudice any identifiable constitutional value, and the decision to terminate the agreement must not conflict with any other public policy consideration. For example, the reason for terminating the contract must not constitute an act of discrimination based on sex, race and culture.
However, Survé was of the view that the banks took the plunge as there was no evidence of illicit dealings by Sekunjalo and its related entities. “Bredenkamp and his colleagues had previously been flagged by the US Treasury’s Office of Foreign Assets Control as Specially Designated Foreign Nationals. There was therefore reason to reasonably suspect that Bredenkamp was involved in illicit transactions.
Echoing other voices speaking out against banks’ conduct, Ambassador Bheki Gila, who is a lawyer, wrote an article titled: “Bankers’ inequities and Portia’s ruth as Sekunjalo pleads his case” .
He argued that the Court of Equality must keep the scales of justice in solid balance and set a fair new standard governing the contractual relationship between banks and their customers.
He said: ‘Banks have always been wriggling and wriggling, trying hard to escape this scrutiny. To their collective sigh of relief, in 2010 the Supreme Court of Appeals granted them the “Bredenkamp” exception, which they were seeking to do as they pleased with customer contracts without liability, it seems.
On the reputational risk argument, he said: “With the explosion of stories about individuals and companies resulting from the vortex of the social media universe, everyone is susceptible to having their reputations challenged, in particular by the malevolence of a faceless lynching.It would be absurd in the extreme for the bank to always act unilaterally to put an end to the rights acquired at the slightest suspicion of discord on the righteousness or not of the morality of one of its customers “.
He concluded by stating that “irresponsible banks may tend to permanently disrupt the order of life of the less powerful.”
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