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[2009] ZAGPPHC 135
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Ban Konsult (Pty) Limited v Kruger NO and Others (48088/2008) [2009] ZAGPPHC 135 (5 November 2009)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
DATE:
05/11/2009
CASE
NO: 48088/2008
UNREPORTABLE
In
the matter between:
BAN
KONSULT (PTY) LIMITED APPLICANT
And
ERROL
MELVILLE KRUGER 1
ST
RESPONDENT
F.C.
KIRK-COHEN 2
ND
RESPONDENT
A
H JAFFER 3
RD
RESPONDENT
S
ZILWA 4
TH
RESPONDENT
JUDGMENT
PRINSLOO,
J
[1] In this review
application which came before me, Mr Mundell appeared for the
applicant and Mr Ginsburg SC assisted by Mr McNally
appeared for the
first respondent, which is the Registrar of Banks, duly designated as
such by the South African Reserve Bank in
accordance with the
provisions of section 4(1) of the Banks Act, 94 of 1990 (“the
Act”).
[2] The second, third and
fourth respondents constituted the Board of Review (“the
Board”), which was duly established
in terms of section 9(2) of
the Act, and the decision of which was challenged in the application
for review which came before me.
Background and Brief
Synopsis
[3] In February 2007, the
applicant applied to the first respondent (“the Registrar”)
in terms of section 12(1) of the
Act for authorisation to establish a
bank. The aim of the applicant was to conduct the business of a bank
through the medium of
a public company which was proposed to be named
the Production Bank Controlling Company Limited.
[4] This application
(“the February application”) was launched after an
earlier application in November 2005 (“the
November
application”) had been rejected by the Registrar.
For purposes of the
February application, the applicant appointed an agent, Deloitte en
Touche, to represent the applicant as agent
for purposes of
submitting the application.
[5] The February
application was also refused, and, in terms of section 9(1) of the
Act, the applicant sought a review of that refusal
by the Board.
[6] By a decision
published in April 2008, the Board refused the review and confirmed
the Registrar’s decision.
[7] It
is this decision of the Board which was challenged on review by the
applicant. In terms of the notice of motion, the applicant
seeks an
order in the following terms:
“
1. Reviewing and
setting aside the decision of the Banks Board of Review published on
23 April 2008 in terms of which:
1.1 The Board refused the
applicant’s review of the decision taken by the Registrar of
Banks to reject the applicant’s
application for authorisation
to establish a bank; and
1.2 The decision of the
Registrar of Banks was confirmed.”
Section 9(2A) of the
Act versus the Promotion of Administration Justice Act, 3 of 2000
(“PAJA”)
[8] Section 9(2A) of the
Act reads as follows:
“
In
any review under subsection (1), the board of review is, subject to
the provisions of subsection (8),
confined
to establishing whether or not, in the taking of the relevant
decision, the Registrar exercised his or her discretion properly
and
in good faith.
”
(Emphasis added)
[9] Subsection (8) does
not apply for purposes of this application.
[10] In its well reasoned
and comprehensive judgment, the Board placed on record that, at no
stage during the proceedings before
it, any reliance was placed upon
any absence of good faith on the part of the Registrar. It was
common cause that the Registrar
had acted in good faith.
[11] In the proceedings
before the Board, the applicant argued that the review and the
Registrar’s decision are both subject
to the provisions of PAJA
read with section 33 of the Constitution of the Republic of South
Africa, Act 108 of 1996.
[12] Accordingly, it was
argued on behalf of the applicant that the decision of the Registrar
was in contravention of sections 6(2)(d),
6(2)(f) or 6(2)(h) of PAJA.
In summary, it was argued, on the strength of these subsections,
that the decision was materially
influenced by an error of law, the
decision was not rationally connected to the purpose for which it was
taken, the purpose of
the Act, the information before the Registrar
or the reasons given for it by the Registrar and that the decision
was so unreasonable
that no reasonable person could have so exercised
the power or performed the particular function.
[13] In its judgment, the
Board pointed out, correctly, that section 9(2A) of the Act was
introduced in terms of Act 19 of 2003,
three years after the passing
of PAJA in 2000. The legislature was obviously aware of PAJA when
this particular subsection was
enacted.
[14] The reasoning of the
Board, with which I am in respectful agreement, continues along the
following lines: section 9(2A) expressly
provides a limitation upon
the ambit of review. The legislature uses the word “confined”.
In the present instance,
where
bona
fides
is not an issue, the Board is therefore “confined to
establishing whether or not, in the taking of the relevant decision,
the Registrar exercised his or her discretion properly …”
in the words of the subsection,
supra
.
The word “confined”
is defined in the Shorter Oxford Dictionary and also the Oxford
English Dictionary as being “to
limit, restrict” and in
Webster’s New Universal Dictionary as ”restricted within
limits”.
This limitation is
underscored by the provisions of section 9(9) of the Act which
provides that the procedure at the review shall
be determined by the
Chairman of the Board of Review – “subject to the
provisions of subsection (2A)”. The Board
is not at liberty to
alter or relax that provision.
[15] The Board also
relied on the following remarks made by the learned judge in
Registrar
of Banks v Regal Treasury Private Bank Limited
2004 3 SA 560
(W) 567A:
“
The
effect of section 9(2A) is accordingly to limit the grounds upon
which the board of review may set aside or vary a decision
of the
Registrar.”
[16] Counsel for the
Registrar argued that this limitation of the ambit within which the
Registrar’s decision can be reviewed,
probably flows from the
fact that the provision deals with the review of a decision of the
Registrar operating in his specialist
capacity as Administrator of
Banks, having special expertise and experience in the administration
of banking matters.
The Registrar’s
decisions will in the circumstances not lightly be overruled by the
courts, and it is entirely understandable,
so the argument goes, that
the legislature would, in deference to the special expertise and
experience of the Registrar, have placed
limits on the permissible
ambit of any review of his decisions. In support for this argument,
counsel refers to Cora Hoexter with
Rosmary Lyster (edited by Iain
Currie), The New Constitutional and Administrative Law vol II:
Administrative Law (2002) at pages
31 to 32 para 1.7.2.2 and the
authorities there cited.
[17] Counsel for the
Registrar point out, correctly in my view, that the Registrar plays a
crucial role with regard to the stability
and soundness of the South
African Banking System. As such his role as “gatekeeper”
with regard to the authorisation
of prospective applicants to
establish a bank is paramount. The Registrar has a duty to ensure
that when an applicant ultimately
progresses to the stage of
consideration for registration as a bank, he can be content that he
has taken all reasonable steps to
assure himself that the bank will
operate successfully as such, and is unlikely to fail or conduct
itself in a manner which might
place the South African Banking System
at risk. These sentiments are in harmony with the provisions of
section 13(2) of the Act,
to which I shall shortly refer hereunder.
[18] In this regard the
Registrar, in his opposing affidavit, and with the necessary
humility, also makes the following submissions:
“
13. With
the greatest respect to this Honourable Court I and my Deputy
Registrars have an extensive and unparalleled understanding
and
knowledge of the banking system, both local and international, and of
the particular weaknesses in that system and, therefore,
the risks to
which it is particularly susceptible.
14. I have been the
Registrar since 1 November 2003, and before that I was the
Deputy Registrar for a period of two years.
In all, I have spent
some twenty years in the office of the Registrar of Banks, and Mr
Blackbeard thirteen years. (
Note
:
Mr Blackbeard is the Deputy Registrar who took the actual decision
which was also approved of by the Registrar).
19. The Registrar has
particular expertise and experience that enables it (
sic
)
to apply these principles reasonably, independently and in the
interest of the South African Banking System. As such, I
respectfully
submit that this Honourable Court should accord due
deference to decisions taken carefully and deliberately by the
Registrar.”
[19] On this subject, it
is also appropriate, in my view, to revisit the words of O’REGAN
J, in
Bato
Star Fishing (Pty) Limited v Minister of Environmental Affairs
[2004] ZACC 15
;
2004 4 SA 490
(CC) at 514F 515B:
“
In
treating the decisions of administrative agencies with the
appropriate respect, a Court is recognising the proper role of the
Executive within the Constitution. In doing so a Court should be
careful not to attribute to itself superior wisdom in relation
to
matters entrusted to other branches of government. A Court should
thus give due weight to findings of fact and policy decisions
made by
those with special expertise and experience in the field. The extent
to which a Court should give weight to these considerations
will
depend upon the character of the decision itself, as well as on the
identity of the decision maker. A decision that
requires an
equilibrium to be struck between a range of competing interests or
considerations and which is to be taken by a person
or institution
with specific expertise in that area must be shown respect by the
Courts. Often a power will identify a goal to
be achieved, but will
not dictate which route should be followed to achieve that goal. In
such circumstances a Court should pay
due respect to the route
selected by the decision maker.”
[20] In the proceedings
before the Board, it was argued on behalf of the Registrar that this
limited review does not intrude into
the arena of whether the
Registrar’s decision was right or wrong, but is rather aimed at
the regularity of the proceedings
in terms of which the decision was
reached. The Board, in endorsing these submissions, referred to the
case of
S
v Mohamed
1977 2 SA 531
(A) where the Appeal Court was discussing a limited
re hearing and held, at 538E F, that, on review, the duty
of the
court is “… to determine not whether the decision
was right or wrong, but whether he (the deciding officer) exercised
his powers and discretion honestly and properly”.
Against this background,
the Board came to the following conclusion:
“
On
the facts of this case as analysed in this decision, read as a whole,
we are of the view that this is not an instance where the
provisions
of PAJA can or should supplant or extend the clear provisions of
subsection (2A).”
[21] It was within these
narrow confines that the Board was obliged to (and did) deal with the
review.
[22] At the commencement
of the proceedings before me, Mr Mundell, quite properly and
correctly in my opinion, announced that the
applicant was no longer
arguing that this approach adopted by the board was not the correct
one.
Sections
12 and 13 of the Act
[23] Broadly speaking,
the Act provides for a two stage process to be followed by an
applicant for registration as a bank: sections
12 and 13 deal with an
application for authorisation to establish a bank and sections 16 and
17 deal with the second stage, namely
the actual application for
registration as a bank, which may be launched within twelve months
from the date when the authorisation
was granted in terms of
section13.
[24] Section 12 provides
that an application for authorisation
shall
be made in the manner and on the form prescribed by regulation, and
shall
be accompanied by a statement containing the prescribed information.
It also provides that the Registrar may require an applicant
to
furnish him or her with additional information and documents or a
report by a public accountant or by any other knowledgeable
person
approved by the Registrar. (Emphasis added)
[25] Section 13 provides
that the Registrar may, after considering all the information and
documents and reports, grant or refuse
the application or grant the
application subject to such conditions as he or she may determine.
[26] Section 13(2) is
couched in peremptory terms and reads as follows:
“
(2) The
Registrar
shall
not grant an application made under section 12 unless he or she is
satisfied –
(a) That the
establishment of the proposed bank will be in the public interest;
(b) That the business the
applicant proposes to conduct, is that of a bank;
(c) That the applicant
will conduct the proposed business of a bank in the capacity of a
public company incorporated and registered
under the Companies Act;
(d) That the applicant
will be able to establish itself successfully as a bank;
(e) That the applicant
will have the financial means to comply, in the capacity of a bank,
with the requirements of this Act;
(f) That
the business of the proposed bank will be conducted in a prudent
manner;
(fA) That
every person who is to be a director or an executive officer of the
proposed bank is, as far as can reasonably be ascertained,
a fit and
proper person to hold the office of such director or executive
officer;
(g) That every person who
is to be an executive officer of the proposed bank has sufficient
experience of the management of the
kind of business it is intended
to conduct; and
(h) that the composition
of the Board of Directors of the proposed bank will be appropriate
having regard to the nature and scale
of the business it is intended
to conduct.” (Emphasis added)
[27] Before the Board it
was argued on behalf of the applicant that the provisions of section
13(2) should not be so peremptorily
or literally applied in the light
of the later provisions of sections 14 and 16 of the Act. This,
despite the clear wording
of section 13(2).
It was pointed out on
behalf of the applicant that once authorisation had been granted in
terms of sections 12 and 13, the applicant
has twelve months within
which to satisfy the Registrar (before the section 16 second stage
procedure) that the proposals contained
in the application for
authorisation have been met. In the result, and because
authorisation to establish a bank in terms of section
13 does not
confer on the applicant the right to conduct the business of a bank,
that authority does not expose either the public
or the banking
industry to any risk.
Inasmuch as this may
have been an attempt to water down the peremptory requirements of
section 13(2), this argument was, correctly
in my view, rejected by
the Board. The Board concluded that the force and effect of the
peremptory provisions of section 13(2)
are not altered or to be read
subject to the provisions of any of the later sections of the Act.
In particular, so the Board held,
there is no question of a lesser
standard of proof at the section 13 stage.
The main thrust of the
Applicant’s submissions
[28] I
have already pointed out that one of the applicant’s arguments,
namely that the Board erred in confining its approach
to the
limitations imposed by section 9(2A),
supra
,
to the exclusion of the wider PAJA review grounds, was abandoned for
purposes of the proceedings before me.
[29] What was left,
stated in very basic terms, was an argument that the Board had erred
in endorsing a decision by the Registrar,
when considering the
section 12 application, to insist on proof that the relevant or
required capital had been paid into or was
held in a trust account
before the application could be considered further and that the funds
had been verified by an auditor as
fully complying with the
requirements of the
Financial Intelligence Centre Act, 38 of 2001
and
the Regulations issued in terms thereof.
[30] The main submissions
on behalf of the applicant can perhaps be summarised along the
following lines: at all material times
the applicant intended to
conduct the business of a bank through the medium of a public company
which was proposed to be named
the Production Bank Controlling
Company Limited.
Although it was the
applicant that applied for authority in terms of
sections 12
and
13
,
it was never intended that the applicant would itself conduct the
business of a bank. The applicant was only intended to be a
minority
shareholder. The proposed bank intended to focus its activities
exclusively on investment and/or merchant banking activities
and
never sought to supply retail banking services. The motivation
behind the application was that the retail banking sector in
South
Africa was adequately provided for through the existing four
mainstream banks. In an environment in which the active involvement
of black South Africans in all aspects of commerce and business had
expanded exponentially, a bank owned and controlled by blacks
targeting the rapidly burgeoning fixed domestic expenditure programme
was conspicuous by its absence.
[31] Some of the forms
required to be completed for purposes of a
section 12
and
13
application,
could
not be completed as certain potential shareholders of the banks
controlling company would only consider participation once
an
indication had been received that the authorisation to establish a
bank would be granted
.
(Emphasis added)
In my view, this was one
of the main difficulties which hampered the progress and prospects of
success of the application, as will
be illustrated more fully
hereunder.
[32] Only when the
authority had been granted in terms of
section 13
, will the public
company be registered and will interested shareholders be entitled to
take up their interests. In the circumstances
it was proposed that
registration of both the bank and the bank controlling company would
only occur once authorisation to register
a bank had been granted.
[33] After considering
the application, exchanging correspondence with the applicant and
holding meetings with representatives and
proposed shareholders, the
Registrar concluded that the application was incomplete and
inadequate. The Registrar’s decision
was founded on what he
describes to be the two cornerstones of banking:
1. The identification,
fitness and propriety and financial strength of the ultimate
shareholders of the bank; and
2. The nature and
availability of the required capital.
[34] The applicant argued
that the Registrar had misdirected himself by adopting this attitude:
One of the forms to be
completed in an “application for authorisation to establish a
bank or registration as a bank”
is form DI 002. In
section 4(x)
thereof is required “a report by a public
accountant, as defined in section 1 of the Public Accountants’
and Auditors’
Act, 1991 (Act 80 of 1991), on funds received
from anticipated shareholders and held in a trust account”.
It was argued on behalf
of the applicant that section 4(x) only comes into operation in
circumstances in which such funds are held
in trust. In that event
the Regulations required a report by a public accountant.
It was argued that
neither section 12 nor section 13 of the Act contains the requirement
that an applicant who seeks authorisation
to establish a bank is
required to have paid any capital sum into a trust prior to
submitting the application. It was also argued
that support for the
Registrar’s approach cannot be found in the Regulations either.
It was also argued that
the Registrar, erroneously, insisted on compliance with the
requirements of section 70 of the Act, at the
section 12 application
stage whereas it only came into play during the second (section 16)
stage. This section is aimed at regulating
a minimum amount of
primary and secondary unimpaired reserve funds in the Republic which
must be available to the bank at any given
stage.
[35] Another ground of
review advanced on behalf of the applicant was that the Board had
erred in paying regard to an argument on
behalf of the Registrar that
the applicant, in its section 12 application, had failed to comply
with the peremptory requirements
of section 13(fA), 13(g) and 13(h),
supra
.
As appears from the wording of these subsections, quoted above, they
deal with certainty having to be provided with regard to
the fitness
of directors, executive officers and the composition of the board of
directors.
This objection by the
Registrar flows from the total uncertainty as to the identity and
capacity of proposed shareholders and directors
and executive
officers of the proposed bank.
It was argued on behalf
of the applicant that this objection is “an afterthought”
and was not raised initially by the
Registrar prior to refusal of the
application.
[36] With regard to the
main attack, namely that the requirement for funds to be deposited in
advance is not provided for in the
enabling legislation, Mr Mundell,
if I understood him correctly, relied on the provisions of section
6(2)(e)(iii) of PAJA. This
is an attack on the administrative action
which was taken “because irrelevant considerations were taken
into account or relevant
considerations were not considered”.
In view of the
concession regarding the section 9(2A) argument, I find it difficult
to understand on what basis Mr Mundell could
revert to an argument
based on this subsection of the section 6 PAJA review grounds. As I
understand the record, this argument
was also not advanced before the
board where reliance was placed on sections 6(2)(d)(f) and/or (h) of
PAJA. Perhaps because of
the concession made, none of these
subsections were relied on during the proceedings before me.
The main thrust of the
arguments advanced on behalf of the Registrar
[37] As part of the
proceedings before the Board, the Registrar submitted a lengthy and
comprehensive affidavit deposed to by Mr
Blackbeard, the Deputy
Registrar, and supported fully by the Registrar in a verifying and
supporting affidavit in which the Registrar
states that he also
considered, prior to each of the rulings having been taken by
Blackbeard, the first and second applications
as submitted by the
applicants for purposes of an authorisation to establish a bank
controlling company and a bank. He agreed,
for the reasons set forth
in the Blackbeard affidavit, with the rulings made by Blackbeard in
respect of each of the applications.
[38] I have referred,
briefly, to the fact that the attitude adopted by the applicant was
that authorisation in terms of sections
12 and 13 first had to be
obtained before shareholders and potential executive officers would
commit themselves to the proposed
bank.
[39] After sketching, in
some detail, the inability of the applicants to furnish names and
details of proposed shareholders and
executive officers, Blackbeard
says the following:
“
53. In
the light of these responses and the obligation imposed upon the
Registrar to satisfy himself with regard to various matters
which
relate to an application for authorisation made under section 12 of
the Act, I came to the conclusion that it was impossible
for me to
satisfy myself, as I was required to do in terms of section 13(2) of
the Act that:
53.1 Every person who was
to be a director or executive officer of the proposed bank was a fit
and proper person to hold office
of such director or executive
officer; or
53.2 Every person who was
to be an executive officer of the proposed bank had sufficient
experience of the management of the kind
of business it intended to
conduct, or that the composition of the board of directors of the
proposed bank would be appropriate
having regard to the nature and
scale of the business it intended to conduct.
54. Paragraphs (l), (n)
and (x) of Part 4 of Form DI 002 call for certain financial
information required to satisfy me of the
ability of the applicant to
establish itself as a bank, and not of its financial means to do so.
It is apparent from paragraph
(x) that Form DI 002 contemplates
the attachment of a report by a public accountant that funds have
been received from anticipated
shareholders and are held in a trust
account.
55. This requirement is
fundamental to any application for authorisation to establish a bank
in
circumstances where the capital adequacy of the proposed bank cannot
otherwise be established
.
(Emphasis added)
56. It is a striking
feature of the applicant’s application for authorisation that
no information whatsoever is provided upon
which I would be in a
position to form any responsible view as to whether the proposed bank
will have the financial means to comply
with the requirements of the
Act, or will be able successfully to establish itself as a bank. In
addition the applicant did not
include, in its application, completed
forms DI 300 (liquidity risk) and DI 400 (capital
adequacy).
56.1 The financial
viability of the proposed bank is dealt with in the supporting
schedule attached to the applicant’s application.
In the
executive summary (page 3) it is dealt with as follows:
‘1.8 Financial
viability
The production bank’s
capital will comprise a combination of ordinary share capital, share
premium and preference shares alike
as indicated in Part 6 of the
supporting schedules. The bank
is
seeking to raise
some R12 billion from
various
sources
.
In this regard,
negotiations
are presently in progress
in terms of which:
- Finance
will
be availed
to the BEE entities for purposes of contributing to their share of
the equity;
- Several institutions
have
expressed interest
in equity participation in the bank; and
-
Certain
European government supported institutions, known to be anxious to
broaden support to African project development, have also
indicated
their interest
in funding the bank’s operations. Provided the opportunities
presented by the new bank are appropriately marketed through
a series
of well constructed presentations to potentially interested
parties,
there
is no reason
why other international agencies, whose concentration is on emerging
markets and Africa in particular cannot participate …’
(The emphasis is that of the author Blackbeard)
56.2 In the section
headed ‘risk management’ liquidity risk is recognised and
dealt with, but on an entirely theoretical
basis. There is no
indication of the actual funding available to the proposed bank.
56.3 Solvency (capital
adequacy) risk is also dealt with, but again it is dealt with in
general terms and there is no indication
of the level of capital
which will actually be available to the proposed bank.
56.4 In section 10 of the
schedule (commencing at page 51 thereof), which is headed ‘five
year financial projections’
the ‘capital structure’
of the proposed bank is discussed. However, it is discussed in vague
and general terms setting
out only what the bank ‘is seeking to
raise’ and what is ‘envisaged’. There is no hard
evidence of the
availability of capital at all.
56.5 The ‘capital
raising strategy’ is set out at page 42, but it is a
theoretical strategy which provides no information
which might serve
to verify that the strategy will in fact succeed.
57. Although certain
financial information and projections were included in the
application, these did not comply with the requirements
of the DI
forms and in any event did not address my concerns regarding the
capitalisation of the proposed bank and the identification,
fitness
and financial strength of the ultimate shareholders of the bank.
58. As a result of the
lack of real evidence put up in the application, I concluded that
there was insufficient information for
me to satisfy myself of the
various matters referred to in section 13(2) of the Act. I
accordingly requested the applicant to
attend a meeting with me, and
to provide proof that sufficient capital had been paid into and is
held in a trust account, and that
the funds so paid in complied fully
with the requirement of the
Financial Intelligence Centre Act 38 of
2001
and the Regulations issued in terms thereof. I refer in this
regard to my letter of 18 April 2007 (annexure MB10
hereto).
59. In response to my
query, I received from the applicant a document entitled ‘Memorandum
to the Registrar of Banks regarding
the establishment of the
Production Bank of South Africa’. A copy of the memorandum is
annexed hereto marked MB12.
60. In my view, the
details of the memorandum failed again to provide sufficient
information to enable me to satisfy myself either
that the applicant
would have the financial means to comply with the requirements of the
Act, or that the directors and executive
officers of the proposed
bank would be fit and proper to hold office as such, and would have
sufficient experience of the management
of the business of the
proposed bank.
60.1 In relation to the
applicant’s financial means, the memorandum set out merely the
expectations of the applicant and provided
no evidence that those
expectations would be met. Having set out the basis of its
‘anticipation’ and ‘expectation’
in relation
to the initial capitalisation of the proposed bank in the amount of
R12 billion, the memorandum concludes with
the paragraph headed
‘minimum capital levels’ as follows:
‘
The
founders have indicated that they consider it critical the new bank
should be adequately funded. Though they accept that the
sum of
R12 billion is considerable, nevertheless in the circumstances
of a new bank and one that is controlled by shareholders
with a
modest understanding of banking requirements, they believe it is
important to encourage investors by demonstrating a strong
underlying
balance sheet.
In addition, and though
they accept that the new bank’s capital adequacy ratio far
exceeds the minimum requirements laid down
by the Reserve Bank, they
are concerned to be able to show investors that prudence is a key
attribute of the production bank.
In these circumstances,
they will be reluctant to proceed in the event the capital raising
exercises deliver less than R8 billion.’
In this regard it is
appropriate to record that the capital adequacy requirements are not
laid down by the “Reserve Bank”
but in terms of section
70 of the Act. The minimum requirements are R250 million or 10%
of risk weighted assets, whichever
is the greater.
60.2 As to the attributes
of the management personnel, the memorandum states the following
under the heading ‘Management’:
‘
The
selections of suitably qualified personnel to fill the critical
positions of non executive chairman and chief executive
have not
been concluded. The appointment to these posts will determine the
acceptability of the new bank to potential investors
and to the
manner in which the new bank will develop an acceptable culture and
style.
Though discussions are
ongoing with potential candidates for both positions, it follows that
no such appointments will be made without
the express prior approval
of the Registrar.’
61. Because of my
continuing dissatisfaction with the tangible content of the
information I have received, I met with Mr Gelink
of Deloitte and
Touche, Mr Phalatse of the applicant and a number of individuals
representing some of the proposed shareholders
of the applicant on
26 April 2007. I put my concerns to the representatives of
the applicant.
62. It was clear from the
responses to my concerns that none of the proposed shareholders would
be able to supply the required capital
and it was acknowledged that
the capital of the proposed bank would have to be borrowed. There
was nothing put to me which reasonably
satisfied me that the
applicant or the proposed shareholders would be able to borrow
capital to the extent required. In any event
borrowed capital, on
its own, is not acceptable and it is a requirement that there be a
certain proportion of unencumbered capital
as start-up capital
…
I formed the view that I would not be in a position to satisfy
myself of the financial viability of the proposed bank
unless
appropriate capital was made available and placed in trust prior to
my exercising my discretion as to whether to grant or
refuse the
application for authorisation
.
(My emphasis)
63. In addition and in
relation to the suitability of those persons who were proposed as
directors or executive officers of the
proposed bank, a number of
names, well known in commercial circles, were suggested in the
first application as the type of
potential directors or executive
officers of the proposed bank. Among the names suggested were those
of … (some well known
names are mentioned).
64. The Registrar
telephoned Messrs … (some of the well known names) to
confirm with them that these individuals had
been approached by the
applicant, and that they were considering the position of director or
executive officer of the proposed
bank. Although certain of these
individuals had had general discussions of one kind or another with
representatives of the applicant,
they had certainly not agreed or
made any commitment to becoming actively involved in the business of
the proposed bank at all,
still less in the capacity of director or
executive officer. These individuals were not only surprised, but
taken aback by their
names being used in support of the application.
A supporting statement by the Registrar accompanies my statement. …”
[40] Mr Blackbeard’s
conclusions, at the end of his statement, are crafted along these
lines:
“
66. On
the basis of my consideration of the applicant’s application,
and my interaction with representatives of the applicant,
I was
satisfied that the applicant had applied its mind to the requirements
of in respect of which I would have to satisfy myself
in order to
authorise the applicant to establish a bank. The applicant had
sought, by way of the various memoranda submitted simultaneously
with
its application, and in response to certain particular queries, to
provide theoretical solutions to those requirements. The
applicant
had singularly failed to provide any evidence whatsoever that the
requirements would in fact be satisfied.
67. In considering what
attitude to take to the applicant’s application, I was mindful
both of my duties in terms of the Act,
and of my experience, while in
the office of the Registrar, of difficulties experienced by certain
registered banks in recent years.
In particular I was aware of the
fact that weakness in the banking system of South Africa can threaten
financial stability within
the country as a whole.
68. In the light of my
experience with difficulties in the banking sector in recent years,
and of my understanding of the protective
role which the Registrar
must play in seeking to ensure, in accordance with the dictates of
the Act, that only viable banks are
permitted into the market, I
formed the view that the applicant’s application was inadequate
and incomplete.
In
particular, I was satisfied that the applicant had not placed
sufficient information before me to enable me to satisfy myself
of
the various requirements set out in section 13(2) of the Act
(emphasises added).
69. In the circumstances,
I submit that my ruling is proper and justifiable, and that there is
no basis for a review thereof. I
submit that, insofar as it is held
that my ruling constituted a decision as contemplated in section 9 of
the Act, I exercised my
discretion properly and in good faith in
taking such decision.”
[41] From the aforegoing
it is clear, in my view, that the applicant failed to satisfy the
Registrar that the peremptory requirements
of section 13(2) had or
could be met. This includes the requirements relating to the fitness
of proposed directors or executive
officers as stated in section
13(2)(fA), (g) and (h).
[42] It is also obvious,
in my view, that the Registrar did not adopt the attitude that it is
a requirement of all applications
of this nature that sufficient
funds should be deposited in trust in advance. This requirement was
only set in the Registrar’s
discretion in view of the failure
of the applicant
in
this particular case
to provide any tangible or reliable information or proof both as to
funding and staffing of the proposed bank. (My emphasis)
[43] The Board, in its
comprehensive and well reasoned judgment, came to the same
conclusions. I see no basis for interfering
with the findings of the
Board, particularly where the review proceedings were conducted,
correctly, within the confines of the
section 9(2A) limitations,
supra
.
[44] In
the result, I have come to the conclusion that the review application
must fail.
The Order
[45] I make the following
order:
1. The application is
dismissed;
2. The applicant is
ordered to pay the costs of the first respondent, which is to include
the costs flowing from the employment
of two counsel.
W
R C PRINSLOO
JUDGE
OF THE NORTH GAUTENG HIGH COURT
I
agree
JUDGE
OF THE NORTH GAUTENG HIGH COURT
48088/2008/sg
Heard
on
: 14
August 2009
For
the Applicant
:
Adv A R G Mundell
Instructed
by
:
Messrs Edelstein-Bosman Inc, Pretoria
For
the Respondents
: Adv
P Ginsburg SC with Adv J P V McNally
Instructed
by
: Messrs
Werksmans, Pretoria
Date
of Judgment
: 05
November 2009