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[2022] ZAECQBHC 15
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Talhado Fishing Enterprises (Pty) Ltd v Firstrand Bank Ltd t/a First National Bank (1104/2022) [2022] ZAECQBHC 15 (19 July 2022)
IN
THE
HIGH
COURT
OF
SOUTH
AFRICA
EASTERN
CAPE LOCAL DIVISION, GQEBERHA
Case
no.:
1104/2022
Date
heard: 15 June 2022
Date
delivered: 19 July 2022
In
the matter between:
TALHADO
FISHING
ENTERPRISES
(PTY)
LTD Applicant
and
FIRSTRAND
BANK
LTD
t/a
FIRST
NATIONAL
BANK Respondent
JUDGMENT
BENEKE
A.J.:
Introduction
1
This is an urgent application wherein the applicant company
seeks to
interdict the respondent bank from closing its bank accounts pending
the outcome of a review of the respondent bank's
decision to close
those accounts.
2
At the initial appearance before Rawjee AJ, the parties
agreed to an
order which provided,
inter
alia, that, pending the outcome of
the urgent application, the respondent would not close the
applicant's bank accounts nor limit
the manner in which the accounts
are operated.
3
The matter came before me on 15 June 2022, with all of
the elements
of the urgent application remaining in issue.
Relief
sought
4
Part A of the application served before me. In this part,
the
applicant sought the following relief:
"1.
The applicant's non-compliance with the rules relating to
service and process is condoned and this application is permitted to
be
considered in an urgent basis in terms of Rule 6{12} of the
Uniform Rules of Court.
2.
The respondent is hereby interdicted and restrained from:
2.1
de-activating and/or closing the applicant's banking
accounts held with the respondent and more fully described in its
termination
notice of 18 February 2022 ("the termination
notice") and/or from terminating the banker customer
relationship between
the applicants and the respondent for the reason
stated in the
termination notice;
2.2
in any way limiting the manner in which the banking
accounts described in the
termination notice are
operated by the applicant so as to ensure that the applicant is
permitted to operate the banking accounts
in the same manner as it
did immediately
prior to
the termination
notice;
3.
The aforesaid relief is prayers 2.1
and 2.2
above shall operate as an interim interdict pending the
final
resolution of an application to be brought for final relief set out
in Part B below ("the Part B.application").
4.
A copy of this order together with .the notice of motion and
all affidavits exchanged between
the
parties
in
this
application
to
date
is
to be served
on
the
employees
of the applicant by
affixing
a copy thereof
to all notice
boards or
prominent spots situated
at
their
places
of
work
within 3 {three) days of
the
granting
of
this order.
5.
The respondent is ordered to pay the costs of this application
including the costs occasioned by the employment of three counsel,
alternatively that costs shall be reserved for determination when
determining the merits of the
Part B application.
6.
Grating the applicant such further and/or alternative relief
as may be just in the circumstances."
5
Part B of the application seeks the following relief, inter alia:
"7.
The applicant shall within 10 (ten) days of the grant of the Order
sought under Part A, launch
the review application against the
respondent/or such final relief as the applicant deems appropriate
concerning the validity or
otherwise of the termination notice,
failing which the relief forming the subject of Part A set out in
prayers 2.1 and 2.2 above
shall lapse."
Facts
6
The applicant is a fishing company amongst whose shareholders
are
companies that form part of what may conveniently be referred to as
the
"Sekunjalo Group".
This is a group of
companies related to one Dr Surve. Dr Surve and the Sekunjalo Group
have been mentioned in the Mpati Report.
This is the report of a
commission set up to investigate investments by the Public Investment
Corporation ("PIC").
7
The applicant, itself, is not implicated in the Mpati Report.
However, other members of the Sekunjalo Group, and especially one of
the applicant's shareholders (Premier Fishing), are. There
has also
been widespread media coverage of the alleged malfeasance by the
Sekunjalo Group. The respondent determined that its relationships
with the Sekunjalo Group, including the applicant - whose ultimate
beneficial ownership lies within that Group, posed a significant
reputational and business risk to the respondent and its
stakeholders.
8
Therefore, and despite at least a decade of banker-customer
relationship, the respondent, after confirming that the applicant
formed part of the Sekunjalo Group, and without any consultation
with
the applicant, advised the applicant on 18 February 2022 that it
would be terminating the applicant's bank accounts on the
basis of
"associated reputational and business risks".
9
The respondent is under a legal obligation to manage risks,
including
reputational risks.
10 The
respondent relied on its private law contract right
to terminate the
accounts. There is, however, some dispute between the parties
regarding the terms of the contracts between them:
10.1
The respondent put up a contract whose terms and
conditions entitle it terminate its relationship with a customer if
it has reason
to believe that a continued relationship will expose it
to reputational and business risk. The applicant contends that it did
not
conclude that contract which entitled the respondent to terminate
the accounts unilaterally. The respondent contends, only in argument
and not in the answering affidavit, that, if the terms of the
contract are not as it alleges, there is, nevertheless, an implied
term that the contract may be terminated on reasonable notice.
10.2
The applicant, on the other hand, contends that it is an
implied term that a bank exercising a right to terminate accounts had
to
act reasonably and in good faith, which included the requirement
that the accounts only be terminated on good cause and after the
applicant was able to make representations. Where termination was
disproportionate to some perceived default, the termination would
be
in breach of public policy and thus unenforceable.
11
The termination notice issued by the respondent in February
2022 gave
the applicant two months' notice. The applicant initially only asked
for an additional month to allow it to move its
business and pending
the outcome of certain other litigation. However, later, the
applicant disputed the right of the respondent
to close its accounts
in the manner that it did.
12
The Sekunjalo Group has seen the progressive closure by a number
of
banks of the accounts of its constituent members. It has,
accordingly, sought relief before the Competition Commission and
Competition Tribunal, and before the Equality Court. The proceedings
in both the Equality Court and the Competition Commission are
still
pending, and both parties are party to both of those proceedings. An
order has issued out of the Equality Court interdicting
the closure
of the Group's accounts, including those of the applicant held with
the respondent, pending the outcome of the proceedings
in the
Equality Court. An application for similar relief is pending before
the Competition Tribunal, in respect of the proceedings
before the
Competition Commission.
13
The applicant, being a company with employees and which serves
an
international client base, cannot function if it does not have bank
accounts, especially those which allow it to trade in foreign
exchange. Because of the applicant's affiliation to the Sekunjalo
Group, the applicant is unable to procure alternative banking
services; all other banks which have been approached have declined to
contract with the applicant. Nedbank, with which the applicant
has a
number of accounts, does not allow the applicant to trade through
those accounts. Accordingly, the closure of its accounts
with the
respondent will mean that it will find it exceedingly difficult to
trade. This will apparently result in the collapse
of the company.
This, in turn, will negatively affect its employees and their
families.
14
The applicant and its attorneys did attempt to avoid litigation
by
corresponding with the respondent in order to overturn the decision.
This was, however, unsuccessful. The final refusal, by
the
respondent's Person of Interest Forum, occurred on 6 April 2022, some
two weeks before the termination was to be effective.
The application
was thereupon launched on 21 April 2022.
15
The applicant relies, for its grounds of review in Part B, on
its
contractual rights and upon the rules of natural justice, the
principle of legality, and the
Promotion of Administrative Justice
Act 3 of 2000
.
Primary
Issue
16
Fundamentally, the question that must be answered in this matter
is
whether or not the applicant is entitled to review the decision of
the respondent to terminate its bank accounts. All relief
is premised
on this contention.
17
The right
to review an impugned decision does not require any preservation
pendente
lite.
Therefore,
quite apart from the right to review and set aside an impugned
decision, the applicant must demonstrate a
prima
facie
right
that is threatened by an impending or imminent harm.
[1]
18
A
prima
facie
right
may be established by demonstrating prospects of success on
review.
[2]
The grounds of review
must be strong and likely to
succeed.
[3]
This means
that where there are no prospects of success on review, the
application for an interim interdict must fail.
[4]
19
The court
must therefore
"peek
into the grounds of review raised in the
main
review application and assess their strength."
[5]
20
In this
regard, the question to be answered is, on the facts before me, is
the applicant likely to succeed in the review?
This can be
determined by considering the facts as set out
by the
applicant, together with those set out by the respondent, which the
applicant cannot dispute, and whether the
applicant
would, on these facts, obtain final relief in the review
application.
[6]
The facts
set up in contradiction by the
respondent
should then be considered. If serious doubt is thrown upon the case
of the applicant, he could not succeed in obtaining
temporary relief,
for his right,
prima
facie
established,
may only be open to
"some
doubt". But if there is mere contradiction, or unconvincing
explanation, the
matter
should be
left to trial and the
right be
protected in
the
meanwhile,
subject of
course to
the
respective
prejudice
in the grant or refusal of
interim
relief.
[7]
21
Fundamentally, both parties rely on a contractual provision,
express
or implied, that governs the termination of the contract. Over and
above this, the applicant contends that there the respondent
is
obliged to apply the rules of natural justice to the termination.
This is so, it contends, because of the unique position of
banks in
relation to their clients.
22
I thank both parties for their detailed arguments on this
issue. I
have had an opportunity to wrestle with the current legal position in
which banks and their clients find themselves. It
is apparent from
the able arguments of Ms Golden SC that that the banks wield
considerable power and that that power is often used
to ensure that
the contracts which they conclude favour them almost exclusively. It
is also apparent from her submissions that,
perhaps, it is time that
the legislature step in and ensure greater protection for the
consumers who are often woefully unequal
in bargaining power. The
role of the legislature was recognised by Wallis AJ (as he then was)
in
Den Braven SA
{Pty) Limited v Pi/Jay and another
[2008]
3 All SA 518
(D) at [34].
23
I am, however, constrained to apply the current legal
principles, as
set out by the Supreme Court of Appeal in the two matters of
Bredenkamp v Standard Bank of South Africa Ltd
2010 (4) SA 468
(SCA} and
Multichoice Support Services {Pty) Ltd v Calvin
Electronics t/a
Batavia Trading and another
[2021] JOL 51315
(SCA).
24
Whilst
Bredenkamp
is distinguishable in some respects
especially regarding the allegations regarding Bredenkamp himself,
the principles (from [55]
to [65]) are instructive and I apply them
as follows (with apologies to Harms DP for the use of his
phraseology, which ultimately
suits this matter also):
24.1
The applicant's case is this: It requires bank accounts
(especially forex accounts) to conduct business locally. The closing
of
a bank account is a serious matter. Other banks do not want to not
grant the applicant banking facilities. The result of the closing
of
its accounts, it says, leaves them effectively "unbanked".
This, however, has not been proved in respect of all available
banks,
but in only in respect of the limited few in the replying affidavit.
This is, accordingly, a case where private power approximates
public
power or has a wide and public impact.
24.2
Examining these submissions, the following is apparent: The
applicant accepts that in terms of the valid agreement the respondent
was entitled to terminate but they contend that the respondent may
only terminate on good cause and having complied with the principle
of
audi
alteram
partem.
This
would require a tacit term or the development of the common law. I
assume, without deciding, that there is such a tacit term.
But, the
appellant says, in this case the respondent cannot close the account
with a
bona
fide
reason because of
consequences to them that cannot be laid at the door of the
respondent.
24.3
The fact that the applicant as a business entity is entitled to
banking facilities may be a commercial consideration but one cannot
insist that the relationship should endure against the will,
bona
fide
formed, of the respondent. The applicant also has other
local accounts with Nedbank.
24.4
The
applicant also has a problem with causation. It is the
mention in
the Mpati Report of the shareholders of the applicant, and its
association with the Sekunjalo Group (fair or unfair)
that "unbanked"
it, and not the closing of the accounts.
The fact
that banks may not wish to provide the applicant with banking
facilities is unrelated to the fact that there are only a
few major
banks in the country. A proliferation of banks would not have made
any difference. The impact on the applicants was not
caused by the
decision to close the accounts; it was caused by the association with
the Sekunjalo Group. It is therefore not a
case of the abuse by the
respondent of private power that approximates public power.
In this
sense, the
action of
the respondent does not
fall to be
reviewed at common law (as in the
Jockey
Club
cases
[8]
).
24.5
It is not fair to impose upon the respondent the obligation to
retain the respondent simply because other banks are not likely to
accept that entity as a client. The applicant was unable to convince
me of a constitutional niche or other public policy consideration
justifying their demand.
24.6
The
applicant also submitted that the respondent's decision was
procedurally and substantively unfair. For this it relies on both
an
administrative law review and a development of the common law so that
a party who is entitled to cancel a contract has to give
the other
party a hearing before cancellation. The applicant, further, relies
on a tacit term to that effect. However, a hearing
in the form of a
discussion would not have had any effect and would have been an
exercise in futility. Even if the applicant had
produced evidence to
the effect that the implications in the Mpati Report were
unjustified, it must be borne in mind that the respondent's
cancellation was not premised on the truth of the allegations
underlying the Report; it was based on the fact of the membership
of
the Sekunjalo Group and the allegations in the Mpati Report, and the
possible reputational and commercial consequences of that
for the
respondent. In this regard, the respondent did not seek to rely on
the factual accuracy of the Report, but on the Sekunjalo
Group'
reputation itself. The respondent further, did not make any moral
judgment; it made a business decision to protect its reputation.
24.7
This leaves for consideration the question whether the respondent
had (in terms of the relief presently sought) good cause to close
the
accounts. The respondent had a contract, which is valid, that gave it
the right to cancel (on whichever party's version). It
perceived that
the association with the Sekunjalo Group created reputational and
business risks. It assessed those risks at a senior
level. It came to
a conclusion. It exercised its right of termination in a
bona
fide
manner. It gave the applicant a reasonable time to
take its business elsewhere. The termination did not offend any
identifiable
constitutional value and was not otherwise contrary to
any other public policy consideration.
24.8
The applicant's response was that, objectively speaking, the
respondent's fears about its reputation and business risks were
unjustified.
I, like the court in
Bredenkamp,
do not believe
it is for a court to assess whether or not a
bona fide
business
decision, which is on the face of it reasonable and rational, was
objectively "wrong" where in the circumstances
no public
policy considerations are involved. Fairness has two sides. The
applicant approaches the matter from its point of view
only. That, in
my view, is wrong.
24.9
Fundamentally, therefore, if there is a remedy for the applicant,
it would not be a review, but a contractual claim for breach of
contract.
25
The matter of
Multichoice
Support
Services
is also distinguishable on the facts, but clarifies the legal
position with regard to the cancellation of private law contracts:
"[14]
...
First it is trite that a decision by a contracting party to cancel
a contract concluded between two private parties, cannot form
the
subject of judicial review
-
the power of courts to review the
lawfulness, reasonableness and procedural fairness of decisions or
actions taken by public bodies.
The cancellation of the agreements by
MultiChoice had nothing to do with the control of administrative
power, or the
method of such control: judicial review
of administrative action.
[15] Second, the
decision by MultiChoice to cancel the agency and installer
agreements, was not "administrative action"
as defined in
PAJA. In
Grey's Marine
Nugent JA said:
"Administrative
action is ... in general terms, the conduct of the bureaucracy
(whoever the bureaucratic functionary might
be) in carrying out the
daily functions of the State, which necessarily involves the
application of policy, usually after its translation
into law, with
direct and immediate consequences for individuals or groups of
individuals."
Neither was the
decision to cancel the agreements conceivably the exercise of public
power other than administrative action, that
could render it subject
to review in terms of the principle of legality, sourced in the rule
of law, a founding value of the Constitution.
[16] Third, it was
clear from the relief sought in the review application
-
which
formed the basis of the interdict -that Calvin was not seeking the
review of an administrative decision. Instead, what it
sought was an
order:
"1. Reviewing,
setting aside the decision to terminate an agreement (Agency
agreement) between the Applicant and Respondent
in terms of a letter
of termination dated the 30th day of September 2019.
2. Reviewing, setting
aside and/or correcting the decision to terminate an agreement
(Accredited installer Agreement) between the
Applicant and Respondent
in terms of a letter of termination dated the 11th day of October
2019."
[17] Fourth, a simple
reading of the notices of termination and the agreements reveals that
what was in issue between the parties
was a contractual dispute
arising from the election by MultiChoice to exercise its contractual
right to terminate the agreements.
Clause 3.3 of the agency agreement
provided:
"MultiChoice shall
be entitled in its sole discretion, at any time, and for any reason
whatsoever, to terminate this Agreement
without liability by
providing the agent 30 days prior written notice."
Likewise, clause 5.4 of
the installer agreement read:
"MultiChoice shall
be entitled in its sole discretion, at any time, and for any reason
whatsoever, to terminate this Agreement
without liability. Where
MultiChoice elects to terminate this Agreement pursuant to this
clause 5.4, MultiChoice will give the
Accredited Installer 30
(thirty) days prior written notice to this effect."
Clause 17.5 provided:
"Notwithstanding the
above, MultiChoice shall have the right to cancel this Agreement with
the Accredited Installer upon 30
days' notice for any reason
whatsoever including but not limited to fraudulent activity by the
Installer."
[18] Lastly, the orders
directing MultiChoice forthwith to grant Calvin access to its
systems, and interdicting and restraining
MultiChoice from preventing
Calvin from utilising its equipment or facilities or performing its
obligations as a service provider,
was directly at odds with what the
parties had agreed upon, expressed in plain language. The effect of
these orders was to nullify
MultiChoice's contractual remedies, amend
the agreements, and to improve Calvin's position.
[19] In the result the
appeals must succeed. On a proper appreciation of the nature of
dispute between the parties, and the defences
raised by MultiChoice,
Calvin was not entitled
to any relief.
"
[Footnotes omitted]
26
I am of the view that the circumstances in this matter
mirror those
in the Multichoice Support Services matter: Here there is a dispute
about the exact contractual term relevant to the
termination of the
accounts, as well as the exact content, interpretation, and
enforcement of that term. Part B is, after all,
expressly aimed at
assessing the validity of the termination notice. This, read together
with the principles enunciated in Bredenkamp,
clearly point to the
fact that this type of matter relates to the interpretation of
contracts, rather than some or other purported
exercise of public
power or something equal to it. I am therefore of the view that PAJA
does not find application, nor does any
common law right of review,
whether in terms of the Jockey Club cases or based upon the principle
of legality.
27
I am aware that in
Annex
Distribution
(Pty)
Ltd
and Others
v
Bank
of
Baroda
[2017] ZAGPPHC 639 Makgoka
J saw fit to grant an interdict. However, I am of the view that the
matter of
Annex
Distribution
(Pty)
Ltd
and
others
v
Bank
of
Baroda
2018 (1)
SA 256
(GP) (per Fabricius J) is more carefully considered and
more
appropriate in the instant matter.
28
The applicant also seeks to rely on
Trustees for the time being of
the
Legacy Body Corporate v Bae Estates and Escapes
(Pty) Ltd and Another
[2022)
1 All SA 138
(SCA) and
Beadica
231
CC
and Others v Trustees, Oregon Trust and Others
2020 (5) SA 247
(CC). However, I am of the view that the facts in
those matters are too far removed from those in the instant matter so
as to make
them of little assistance.
29
Given what is set out above, I am of the view that the
applicant has
chosen the incorrect form of relief for Part B. This means that there
are no prospects of success on review. Accordingly,
the application
for an interim interdict must fail.
Costs
30
Both parties were ad idem that the costs should follow
the result,
with at least the costs of two counsel being awarded.
Order
31
Accordingly, the following order shall issue:
1.
The application is dismissed with costs, including the
costs of two
counsel.
MBENE
JUDGE
OF THE HIGH COURT (ACTING)
Appearances:
For the Applicant:
Adv. T. Golden SC, with
Adv. C. Bester and Adv. Moodley (Adv. T. Ramogale assisted in
drafting the Heads of Argument)
Instructed by Adriaans
Attorneys c/o Goldberg & De Villiers Inc
For
the Respondent:
Adv. Bham SC, with Adv.
P. Bosman
Instructed by Norton Rose
Inc c/o Smith Tabata Inc
[1]
National
Treasury
&
Others
v Opposition
to
Urban Tolling
Alliance
&
Others
2012
(6) SA
223
(CC)
at
[SO].
[2]
SA
Informal Traders Forum and Others v City of Johannesburg and Others
2014
(4) SA 371
(CC) at
[25] -
[28].
[3]
Economic
Freedom
Fighters
v
Gordhan
and
Others;
Public
Protector
and
Another
v
Gordhan
and
Others
2020
(6)
SA 325
(CC) at [42].
[4]
Olympic
Passenger
Service
{Pty)
Ltd
v
Ramlagan
1957
(2)
SA
382
(D)
at
3830-G;
Simunye
Developers
CC
v Lovedale
Public
FET
College
and
Another
(3059/2010)
[2010]
ZAECGHC
121
(9
December
2010).
[5]
Economic
Freedom Fighters v Gordhan and Others; Public Protector and Another
v Gordhan and Others
2020
(6) SA 325
(CC) at
(42].
[6]
MEB
Energy
(Pty)
Ltd
v
Ndlambe
Loco/
Municipality
and
Another
(466/2020)
(2020]
ZAECGHC
16
(5
March
2020)
(466/2020)
(2020]
ZAECGHC 30 (28 April
2020).
[7]
Webster
v Mitche/11948
(1) SA
1186 (W) at 1188.
[8]
Commencing with
Turner
v Jockey Club of South Africa
[1974]
4 All SA 52
(A);
1974 (3) SA 633
(A).