IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL DIVISION, PIETERMARITZBURG
In the matter between:
THE SOUTH AFRICAN RESERVE BANK
PRUDENTIAL AUTHORITY
JOHANNES GEORGE KRUGER N.O.
and
ITHALA SOC LIMITED
ASSA BANK LIMITED
Appeal Case No: A 2025 - 091983
Case No: 19051/2023
FIRST APPELLANT
SECOND APPELLANT
MEC FOR ECONOMIC DEVELOPMENT, TOURISM
AND ENVIRONMENTAL AFFAIRS
FIRST RESPONDENT
SECOND RESPONDENT
TH IRD RESPONDENT
PREMIER OF KWAZULU-NATAL FOURTH RESPONDENT
ORDER
On appea l from: the KwaZulu-Natal Division of the High Court, Pietermaritzburg
(Ncube J, sitting as court of first instance):
1. The appeal is upheld.
2
2. The section 18(3) execution order issued on 9 May 2025 is set aside with
costs.
3. The first, third and fourth respondents to pay the costs of two counsel
employed in respect of each of the appellants on Scale C jointly and
severally the one paying the others to be absolved.
JUDGMENT
Nkosi DJP (Harrison J and Saks AJ concurring)
Introduction
[1] This is an appeal by the South African Reserve Bank Prudential Authority ("the
PA ") and Johannes George Kruger N.O. ("the RA") in terms of s 18(4)(ii) of the
Superior Courts Act 10 of 2013 ("the Act"). The appellants appeal the judgment and
order of Ncube J which was delivered on 9 May 2025.
[2] The following order forms part of this appeal:
'1. Mr Kruger in his capacity as Repayment Administrator, is granted leave to appeal
against this court's judgment and order of 13 November 2024, to the Supreme Court
of Appeal.
2. In terms of section 18 (3) of the Supreme Courts Act 10 of 2013, the orders granted by
this Court on 13 November 2024 in respect of lthala's counter application, shall
continue to operate, and be given effective to imm ediately, pending the outcome of an
appeal for which leave is given. For avoidance of doubt, those orders are the following:
2.1 It is declared that the appointment of the first respondent as Repayment Administrator
in terms of section 84 of the Bank Act 94 of 1990 does not affect the normal operations
of lthala SOC Limited which do not constitute deposit-taking as contemplated in section
1 read with section 84 of the Banks Act.
2.2 It is declared that the first respondent, in his capacity as Repayment Administrator does
not have operational and management control over the day-to-day operations of lthala
SOC Limited, which do not amount to the business of a bank or constitute deposit
taking activities.
3
2.3 It is declared that the first respondent, in his capacity as Repayment Administrator, has
no authority to take over the human resource, treasury, market, finance, and any other
operational functions of lthala SOC Limited, including the removal of lthala's authorised
signatories to the bank accounts used for purposes of these functions.
2.4 It is declared that notwithstanding the appointment of the first respondent as a
Repayment Administrator, the Board of lthala SOC Limited is not divested of its
management powers and responsibilities as contemplated in the Companies Act and
Chapter 6 of the Public Finance M anagement Act.
2.5 It is declared that the first respondent may not interfere with the management powers
of the lthala SOC Limited board save insofar as it is necessary to ensure that the assets
of lthala SOC Limited are not dissipated to prevent the Repayment Administrator from
performing his functions in terms of section 84 of the Banks Act.
3. Absa Bank Limited [Third Respondent'] is interdicted and restrained from refusing to
process any debit transactions in any of lthala's bank accounts relating specifically to
employees' payroll (such as salaries), pensions, medical aid, ill-health, disability
insurance and UIF and any other operational expenses relating to the business of
lthala SOC Ltd.
4. The Third Respondent is interdicted and restrained from refusing to accept instructions
from lthala SOC's authorised signatories to its bank accounts in respect of payments
in relation to the expenditure referred to in paragraph 2 above.
5. It is declared that pending the final outcome of the liquidation application, lthala is
entitled to continue conducting its business in the ordinary course [excluding prohibited
deposits as defined in section 1 of the Banks Act] and to pay expenditure relating to its
emp loyees and other operational expenditure in the ordinary course of business.
6. The first respondent [Repayment Administrator] is interdicted and restrained from
6. The first respondent [Repayment Administrator] is interdicted and restrained from
issuing any instructions:
6.1 To lthala bankers, including the Third Respondent, in connection with any bank
account held in the name of lthala for purposes of preventing debits from being
processed in these accounts.
6.2 To any service providers of lthala to cease performing any services currently_ provided
by them to the applicant under any contract to which the applicant is a party.
6.3 To the Third Respondent which have the effect of preventing lthala's ordinary debtors
from fulfilling their financial obligations to lthala.
7. All issues of costs are reserved for determination by the Supreme Court of Appeal.'
4
[3] The above order is a sequelae to a similar earlier order ("the main order") issued
on 13 November 2024 by Ncube J in which he ordered as follows:
'1. The Repayment Administrator's Application is dismissed with costs.
2. The lthala's Counter Application is granted, to the following extent:
2.1 It is declared that the appointment of the Applicant as repayment administrator
in terms of section 84 of the banks Act 94 of 1990 does not affect the normal
operations of ITHALA sac Limited which do not constitute deposit-taking as
contemplated in section 1 read with section 84 of the Banks Act.
2.2 It is declared that the Applicant, in his capacity as repayment administrator does
not have operational and management control over the day-to-day operations
of ITHALA sac Limited, which do not amount to the business of a bank or
constitute deposit-taking activities.
2.3 It is declared that the Applicant, in his capacity as repayment administrator, has
no authority to take over the human resource, treasury, marketing, finance, and
any other operational functions ITHALA sac Limited, including the removal of
lthala's authorised signatories to bank accounts used for purposes of these
functions.
2.4 It is declared that notwithstanding the appointment of the Applicant as a
repayment administrator, the Board of ITHALA SOC Limited is not divested of
its management powers and responsibilities as contemplated in the Companies
Act, Chapter 6 of the Public Finance management Act.
2.5 It is declared that the Applicant may not interfere with the management powers
of ITHALA sac Ltd board save insofar as it is necessary to ensure that the
assets of ITHALA SOC Limited are not dissipated to prevent the repayment
administrator from performing his functions in terms of section 84 of the Banks
Act.
3. The Applicant is ordered to pay the costs of this counter application, including the costs
of 3 counsel.'
[4] This court hears the matter in terms of s 18(4)(iii) of the Act.
Background
[4] This court hears the matter in terms of s 18(4)(iii) of the Act.
Background
[5] This matter contains the following historical and litigation background. The PA ,
who is a juristic person established in terms of s 32 of the Financial Sector Regulation
Act 9 of 2017 , would grant and issue exemption notices to the first respondent
5
("lthala"), a State-owned company established in terms of the KwaZulu-Natal lthala
Development Finance Corporation Act 5 of 2013 ("the IDFC Act"), to accept deposits
from customers in terms of s 1 (1 )(cc) of the Banks Act 94 of 1990 ("the Banks Act").
Pursuant thereto, lthala who is not a bank, has been accepting deposits from
customers for many years, which constitutes "the business of a bank".
[6] It is common cause that a Final Exemption Notice was issued to lthala on 22
July 2022 and which was to expire on 15 December 2023.1 In terms of the Notice,
lthala was advised that the notice was granted to afford lthala an opportunity to
regularise its affairs as required; and thereafter apply for authorisation from the PA to
establish a bank or mutual bank. lthala was also directed to maintain a separation
between lending activities and any deposit-taking activities. It appears to be an
established fact that lthala failed to comply with the conditions contained in the Notice.
[7] Before the lapse of the Final Exemption Notice, lthala applied for a new
exemption as it could no longer accept deposits from members of the public. The PA
rejected lthala's application. _Thereafter, lthala brought an urgent application for an
interim interdict pending a review of the PA's decision to refuse to grant an extension,
which culminated in the judgment of Moshoana J who dismissed the application.2 The
review application brought by the KwaZulu-Natal provincial government relating to
conditions contained in the Exemption Notice was also dismissed (per Millar J). 3
[8] Despite the expiry of the Final Exemption Notice, lthala continued to accept
deposits from the public and failed to assure the PA, as requested, that it would cease
to do so. The PA then appointed the RA , in terms section 11 (1 ), read with section
12(1) of the South African Reserve Bank Act 90 of 1989, on 12 December 2023, to
undertake repayments of deposits collected unlawfully by lthala, and on 15 December
undertake repayments of deposits collected unlawfully by lthala, and on 15 December
2023, on which date it issued a directive in terms of s 83(1) of the Banks Act directing
lthala to repay all monies obtained contrary to the provisions of the Banks Act. On the
same date, the PA also bro~ght an urgent application against lthala in the North
1 Published under GN 1169, GG 47063, 22 July 2022 .
2 lthala soc Ltd v SA ReseNe Bank and Others [2022] ZAGPPHC 784.
3
MEC for Economic Development, Tourism and Environmental Affairs, KwaZulu-Natal and Another v
South African ReseNe {3ank Prudential Authority and Others [2023] ZAGPPHC 1182.
6
Gauteng High Court, Pretoria seeking a declaration that lthala is not entitled to
continue taking deposits from the public, and asking for other ancillary relief.
[9] On 20 December 2023, the parties reached an agreement which was made an
order of court, by consent between the parties ("the consent order"). The consent order
(per Leso AJ) provided for the lapse of the exemption on 15 December 2023; directed
that lthala was not entitled to continue to take any deposits; directed lthala not to deal
with any deposits already received other than under the direction of the RA , as
appointed by the PA , and any repayment plan put in place; and empowered the RA to
recover and take possession of all deposits taken by lthala from depositors or under
its control in terms of the Banks Act.
[1 O] Despite the aforesaid consent order, the RA brought an urgent application to
this court, on an ex parte basis and to be heard in camera, seeking leave to institute
proceedings against lthala in terms of s 84(1A)(b)(ii); to take possession of all the
assets of lthala in terms of s 84(1A)(b)(i); and act in accordance w ith s 84(4) read with
ss 84(5) and 84(8) of the Banks Act. On 22 December 2023, this court (per Mossop J)
granted the relief sought on an interim basis with a return date,.
[ 11] The interim order was subsequently reconsidered (per Veerasamy AJ) in terms
of Uniform rule 6(12)(c), the rule nisi was discharged and the application struck from
the roll with costs. On 20 February 2024, lthala sought an order in the North Gauteng
High Court, Pretoria which would allow it to take deposits from members of the public.
The application was made pursuant to paragraph 2.2 of the consent order on the basis
that if lthala ceased taking deposits, this will lead to its downfall. The application was
dismissed (per Makhoba J) with costs. The application for leave to appeal that order;
and the petition for leave to appeal to the Supreme Court of Appea l ("the SCA "), in
and the petition for leave to appeal to the Supreme Court of Appea l ("the SCA "), in
April 2024 and 26 June 2024 respectively, was unsuccessful. The application for
reconsideration of the special leave to appeal by the SCA, in terms of s 17(2)(d) of the
Act, is pending.
[12] On 10 April 2024 the RA re-enrolled the matter (on an urgent basis and on
amended papers) seeking similar relief that he be empowe red to recover and take
possession of all the assets of lthala in terms of the relevant provisions of the Banks
7
Act. lthala opposed the application and filed a counter-application for declaratory
orders.
[13) At the hearing of the matter, the court a quo analysed the provisions of s 84
(1A)(b)(i) in tandem with those ins 83(1) of the Banks Act and concluded that although
subsec (1A)(b)(i) entitles the repayment administrator to take possession of all the
assets of the person subject to relevant direction, both ss 83 and 84 are concerned
only with the repayment, management and control of money which was unlawfully
obtained. Put differently, the court found that the repayment administrator is entitled to
recover and take possession of only those assets which were acquired using money,
which was unlawfully obtained, or only those assets into which money unlawfully
obtained had been converted.
[14] The court considered money "unlawfully obtained" to refer to money which the
person obtains from the activities of running the business of a bank in contravention
of the provisions of the Banks Act, or without being authorised by the PA. The court
found that the RA must prove entitlement to assets acquired using money obtained
after 15 December 2023, which is the date on which the exemption granted came to
an end.
[15] The court also noted that the RA's letter of appointment by the PA excluded
lthala's assets and was confined to the repayment of the monies or the deposit-taking
activities of lthala. The court sourced support for its findings in the PA's letter to the
Chairperson of the Board of Directors of lthala, and the PA's affidavit in support of the
application in the Gauteng Division (which relates to the consent order) which only
refers to the deposit taking activities, and where it is clearly stated that other business
activities of lthala would remain unaffected.
[16] From the foregoing, the court a quo concluded that:
(a) it was not a mistake to exclude lthala's assets from the PA's appointment letter;
(b) the RA is a creature of statute and his powers are defined and determined by
(b) the RA is a creature of statute and his powers are defined and determined by
the statute which creates him ;
(c) the powers granted to the RA are stated in paragraph 2(b) of the Schedule
attached to his appointment letter; and
8
(d) the RA was precluded from taking lthala's entire business operations which do
not constitute deposit-taking activities and which were to remain unaffected.
[17] On some of the relief sought in the counter-application, the court concluded that
it closely related to the business of a bank as defined in the Banks Act and was
incompetent and could not be granted. Only the relief which entitled lthala to continue
with its normal business operations to which the RA had no powers to control i.e.
matters other than those set out ins 84(4)(a) and (b) of the Banks Act were granted.
[18] On 15 January 2025, the PA instituted a liquidation application against lthala.
Then, on 16 January 2025 the RA issued an instruction to Absa Bank to place an
immediate hold on all transactions flowing into and out of lthala's Absa accounts. As a
result, all transactions on lthala's Absa accounts ceased, causing lthala's customers
not to be able to transact on their accounts including making payments and receiving
their salaries as well as their Sassa grants.
[19] The RA also launched an application for leave to appeal the main order to the
SCA. In response, lthala launched an application for immediate implementation of the
counter order (mentioned in paragraph 3) granted against the RA in terms of s 18(1)
and (3) of the Act. lthala also filed an Amended Notice of Motion, dated 22 January
2025, to join Absa Bank as the third respondent, seeking certain interdictory relief
against it.
[20] The RA's leave to appeal and lthala's application for immediate implementation
of the counter order were heard together.
[21] The court a quo considered that ordinarily and in terms of s 18(1) of the Act, the
operation and execution of an order which is the subject of an appeal is suspended
pending the decision of the appeal unless an applicant, on a balance of probabilities
shows the existence of exceptional circumstances; and that it will suffer irreparable
shows the existence of exceptional circumstances; and that it will suffer irreparable
harm while the appellant will not suffer the same if the court orders should continue.
The court also considered that exceptionality must be fact-specific i.e. the exceptional
circumstances must be derived from the actual predicaments in which the litigants find
themselves.
9
[22] The court a quo traversed the difficulties which the RA's instructions had put to
bear on Ithala's business, its service providers and its customers as contained in the
affidavit deposed to by its CEO. The court found that the facts placed before it by lthala
were exceptional enough to warrant the relief sought, ostensibly on the basis that the
RA's actions had placed lthala in a very difficult position, making its future uncertain
and had interfered with its day-to-day business operations which do not constitute
deposit-taking activities, the conduct which was prohibited in terms of the main order
of 13 November 2024.
[23] The court also noted that lthala would be forced to shut its doors of business
with the following irreparable harm to incur:
(a) members of the public will suffer as poor Sassa grant recipients will not be able
to access their grants;
(b) customers, in general, will not be able to access their funds;
(c) lthala's employees might be forced to resign as they are not being paid their
salaries and cannot honour their monthly financial obligations including support
for their children;
(d) unpaid service providers might sue lthala for failing to pay them for services
rendered; and
(e) due to non-payment of rent, lthala stands to be evicted from its leased
premises.
[24] In comparison to the above-noted irreparable harm, the court found that the
appellants would suffer no irreparable harm. The court firstly noted that there was no
application for leave to appeal the main order by the PA. Secondly, the appellants can
still prosecute the appeal (on ·the main order) whilst lthala continues with its normal
business operations which do not constitute deposit-taking activities. Thirdly, the
Minister of Finance has promised to guarantee the deposits and therefore there is no
risk of deposits being depleted.
[25] Accordingly, the court concluded that lthala stands to suffer irreparable harm if
[25] Accordingly, the court concluded that lthala stands to suffer irreparable harm if
the application to execute is not granted. Conversely, the court concluded that the
10
appellants would suffer no irreparable harm if the application is granted - hence the
order mentioned in paragraph 2 above.
[26] In terms of s 18(4 )(a)(i) of the Act the court advanced the following reasons for
its order:
'1. There is urgent need to resolve the impulse (sic) between lthala and the Prudential
Authority for the benefit of the lthala's banking community and the public at large.
2. The RA has stopped lthala's day to day business operations even those which do not
constitute deposit taking activities. If the situation is allowed to continue, lthala
business will collapse and that will be to the detriment of members of the public who
make use of this institution.
3. The embargo on the payment of salaries of staff has a devastating effect on their lives
and lives of their family members including children.
4. At the moment , lthala is .unable to meet its financial obligations to service providers
which might expose lthala to unnecessary litigation.
5. If the lthala issue is not resolved urgently, business as well as personal loans including
bonds will not be paid back to lthala.
6. lthala is paying rent in respect of some of its premises and if rent is not paid because
of frozen accounts, lthala is liable to be evicted from those premises.
7. lthala has a statutory obligation to make deductions from staff salaries and pay over to
SARS and other organisations like UIF and labour for payment of workmen 's
compensation. lthala is likely to be exposed to prosecution if it does not pay over those
contributions.
8. There is a need for the Supreme Court of Appeal to give a clear interpretation of
Section 84 (1A)(b)(i) of the Banks Act in respect of a financial institution, which is not
a ponzi scheme and not a "person" as defined in the Banks Act and where the letter of
appointment of the RA clearly excludes the assets.
9. There was no reason for the RA to put embargo on lthala's accounts with Absa in clear
9. There was no reason for the RA to put embargo on lthala's accounts with Absa in clear
disregard of this court's order of 13 November 2024. If the instruction to Absa was
given before this court's order was granted, such instruction had to be withdrawn after
the court order was handed down. Failure to withdraw the instruction is a clear
disrespect for the Rule of Law and it borders on contempt of court.'
[27] Absa Bank did not participate nor did it oppose the interlocutory relief sought
by lthala against it. It indicated that it wou ld abide the order of the court.
11
[28] On 24 May 2025, the PA was joined as a party to the proceedings. It made
common cause with the RA in opposing lthala's counter-application.
[29] This appeal is assailed by lthala. The third and fourth respondents (as
intervening parties) have been joined in the appeal by agreement between the parties
in terms of the order granted (per Poyo Dlwati JP). All parties have filed their heads of
arguments and presented oral arguments in the appeal as directed in the order.
Issues on appeal
[30) The issues in this appeal are:
(a) firstly, whether or not exceptional circumstances exist which warrant the
exercise of the courts' powers under s 18(1) and (3) of the Act;
(b) secondly, whether lthala proved the following:
(i) the presence of irreparable harm to lthala if the main order granted on
13 November 2024 was not put into operation with immediate effect; and
(ii) the absence of irreparable harm to the RA who seeks to appeal the main
order.4
[31] In University of the Free State v Afriforum and Another° the court made it clear
that prospects of success in the appeal remain a relevant consideration in deciding
whether or not to grant the exceptional relief.6
Appellants' submissions
[32] The appellants assail the judgment/execution order and the reasoning of the
court a quo. I will deal with their submissions together as they are intertwined and
4 See Knoop NO and Another v Gupta (Execution) [2020] ZASCA 149; 2021 (3) SA 135 (SCA) para 45;
lncubeta Holdings {Pfy) Ltd and Another v Ellis and Another 2014 (3) SA 189 (GJ) paras 16, 18, 22 and
24; Tshwane Metropolitan Municipality v Vresthena (Pty) Ltd and Others (2023) ZASCA 104; 2023 (6)
SA434 (SCA) para 14; and Ntlemeza v Helen Suzman Foundation andAnother[2017] ZASCA93; 2017
(5) SA402 (SCA ) paras 46-47.
5 University of the Free State v Afriforum and Another[2016] ZASCA 165; 2018 (3) SA428 (SCA ) paras
14-15 ("Afriforum").
6 See also Minister of Social Development Western Cape and Others v Justice Alliance of South Africa
and Another (2016) ZAWCHC 34 para 27.
12
interlinked. Those submissions which seem to argue the merits of the appeal of the
main order (to the SCA) w ill be jettisoned.
[33] The appellants subm it that Ncube J in the court a qua committed various errors
in his orders and reasoning in the following respects:
(a) lthala failed to establish exceptional circumstances and the absence of
irreparable harm to depositors. The Minister of Finance has not issued a
guarantee against deposits as this was the only basis for the finding of the
absence of irreparable harm to the PA or the public interest. The guarantee, it
is subm itted, is both a legal and factual fallacy because the details about
processing of the guaranteed funds by National Treasury (wh ich the Minister
undertook to secure as far as possible) will be provided after the liquidation
application has been finalised, and the M inister subsequently proposed to
provide a loan to the provincial government of KwaZulu-Natal, alternatively to
issue a guarantee to a registered bank so as to allow for the orderly transfer of
the entire depositors book of lthala to such a registered bank to facilitate the
repayment of the depositors' fund. Bearing in mind the processes and
procedures that ought to be followed prior to the issuing of a guarantee (in terms
of s 70 of the Public Finance Management Act 1 of 1999 ("the PFMA "), there is
no lawful or binding guarantee that can be issued by the Minister until the
process envisaged in s 70 has been comp leted.7 The aforesaid situation, it is
submitted, militates against the relief that was granted by the court;
(b) the s 18(3) application was an abuse of court process as it relates to the
freezing of deposits which was put into effect pursuant to the PA's liquidation
application and is completely unrelated to the application that culminated in the
main order now subject to an appeal. Consequently, the relief pertaining to the
lifting of the embargo on deposits does not fall under the rubric of s 18(3) and
lifting of the embargo on deposits does not fall under the rubric of s 18(3) and
lthala's application should have been dismissed on this basis;
(c) lthala's case presented in a supplementary founding affidavit (in the main
action) was not that the guarantee from the Minister of Finance was in place
but rather that there was an undertaking to issue a guarantee. Such an
undertaking to guarantee is unenforceable, it is analogous to an agreement to
7 Coma ir Limited v Sou th African Airways (pty) Ltd (2017] ZAGPJHC 10 para 17.
13
agree which have no enforceable effect.8 Thus, there is nothing that could
ameliorate the irreparable harm that the public interest will suffer as a result of
the execution of the order pending the appeal;
(d) the decision to freeze bank accounts containing depositors' deposits was taken
by the RA in terms of s 84(1A)(b) of the Banks Act and remains in place and
has binding consequences. The decision cannot simply be ignored and/or
interdicted, irrespective of lthala's views as to its legality, without the decision
being reviewed and set aside, which relief was not sought;9
(e) the judgment of the court goes against the banking regulatory framework and
the natural consequences of the conditions in the Final Exemption Notice. The
failure of lthala to comply with the conditions in that Notice, would result, firstly,
in the appointment of a repayment administrator to take control of lthala,
secondly, in the winding down of lthala's deposit taking activities. Contrary to
what the court found, the RA was appointed to deal with two categories of
deposits, firstly, deposits that were lawfully taken in terms of the Exemption
Notice up until 15 December 2023, and secondly, deposits that were taken by
lthala after the lapse of the Exemption Notice and contrary to the consent order
granted on 21 December 2023;
(f) the court failed to place sufficient weight on the fact that was common cause
i.e. contrary to the banking regulatory regime that lthala was authorised to
conduct deposit taking activities, it co-mingled its other funds and deposits from
depositors. The co-mingling of funds is so embedded that the accounts
dedicated for its operational and other expenses and those strictly for deposit
taking activities cannot be delineated. The effect thereof is that the uplifting of
the embargo on bank accounts, all of which contain deposits, heightened the
risk of a run on deposits, which run is not limited to depositors but includes
risk of a run on deposits, which run is not limited to depositors but includes
employees of lthala who would want to withdraw their deposits as soon as the
bank accounts are unfrozen, especially since there is a pending liquidation
application against lthala. So it is submitted, the relief sought by lthala and
8
Premier, Free State, and Others v Firechem Free State (Pty) Ltd 2000 (4) SA 413 (SCA); Letaba
Sawmills (Edms) Bpk v Majovi (Edms) Bpk 1993 (1) SA 768 (A).
9
Oudekraa/ Estates (Pty) Ltd v City of Cape Town and Others 2004 (6) SA 222 (SCA) para 26· Merafong
City v AngloGold Ashanti Ltd (2016] ZACC 35; 2017 (2) SA 211 (CC ) para 42. '
14
granted by the court, is incompetent and there are no safeguards for depositors
who stand to suffer irreparable harm;
(g) the interdictory relief granted by the court was unrelated to the s 18(3)
application and was also, on its own , incompetent as it interdicts and restrains
something that had already taken place by the time it was granted. Only a
review application could reverse that position;
(h) the PA has launched an application for the provisional liquidation of lthala in
terms of s 84(1A)(c) of the Banks Act as a result of the solvency report of the
RA. The order that was granted undermines the purpose of the liquidation
application since lthala accepts that it does not have resources to pay all
deposits. The liquidation is intended to enable an orderly repayment of
deposits. The s 18(3) judgment undermines the possibility of depositors
obtaining their full deposits which is accentuated by the fact that there is no
evidence of a guarantee being issued. The judgment and order irremediably
harms the interests of depositors, and this is relevant to the consideration of
harm under the interim interdict;
(i) the appellants do not represent their own interests under the Banks Act before
the court. They represent the interests of depositors and the financial system;10
0) in terms of s 341 (2) of the Companies Act 61 of 1973 ("the old Companies Act")
any disposition or transfer of lthala's property/assets in the face of the
application for provisional liquidation is void unless the court directs otherwise.
Therefore, by operation of law, the amounts sought to be paid from the frozen
accounts to employees and the service providers cannot be paid outside of the
liquidation process, as any payment would give undue preference to some
creditors over others. That may even lead to a run on deposits on lthala
because employees would want to take out all of their deposits given the
pending liquidation application - which would be detrimental to the depositors
pending liquidation application - which would be detrimental to the depositors
themselves and the country's financial systems because lthala will not be able
to satisfy such large withdrawals if depositors descended on its branches and
sought to make withdrawals;
10 Ntlemeza v Helen Suzman Foundation and Another [2017] ZASCA 93; 2017 (5) SA 402 (SCA) paras
46 and 47.
15
(k) the court conflated the execution of the main order with the decision to place
an embargo on the deposits. The relief pertaining to the unfreezing of deposits
was not supposed to be determined under s18(1) and (3) of the Act because
that issue was not before court when the main order was granted on 13
November 2024. Section 18(1) confines applications under s 18(3) to instances
where the operation and execution of a judgment and order, which is the subject
of an application for leave to appeal or of an appeal, is suspended pending the
decision of the application or the appeal. Section 18(3) reverses the default
position, wherein an order that is otherwise subject to an application for leave
to appeal or of an appeal, is under exceptional circumstances, put into
operation and execution pending the application for leave to appeal or the
appeal. On the other hand, the freezing of deposits is a self-standing exercise
of power by the RA. Section 18(1) and (3) therefore do not find any application
to the RA's decision to place an embargo on the deposits because that decision
arises from a completely unrelated event, i.e. the liquidation application;
(I) the s 18(3) application was devoid of merit as there were no exceptional
circumstances that warranted the granting of the relief. lthala knew what the
effect of its failure to obtain a banking licence would be. It would be the winding
down of its deposit taking activities and the RA taking control of its business
affairs. Consequently, if lthala has to shut down its deposit taking activities as
a consequence of its failures to act responsibly and ensure that it complies with
the banking regulatory framework, that eventuality is consistent with the rule of
law and lthala must lie in the bed it has made ; and
(m) lthala failed to meet the requirements of an interim interdict i.e. prima facie right
and irreparable harm. It failed to establish a prima facie right entitling it to the
and irreparable harm. It failed to establish a prima facie right entitling it to the
mandatory interdict sought. On the facts alleged by it together with the facts
alleged by the appellants wh ich cannot be disputed, lthala cannot obtain an
order that permits it to have control of deposits notwithstanding that it does not
have a banking licence or an exemption to conduct the business of a bank.11
The interim interdict impermissibly grants it such control of bank accounts that
contain deposits. Proof of a reasonable apprehension of irreparable harm and
imminent harm eventuating should the order not be granted is a crucial
11 Websterv Mitche/11948 (1) SA 1186 (W) .
16
requirement for the grant of an interim interdict as it is under s 18(1) and (3) of
the Act. Where there seems to be potential harm to both parties, the court will
weigh the balance of convenience cognisant of the normative scheme and
democratic principles that underpin the Constitution.12 The balance of
convenience favours the depositors.
lthala's submissions
[34] lthala's case is that, without the main order being rendered operative pending
the appeal, lthala will be destroyed by the unlawful conduct of the appellants and the
main order will be rendered nugatory. It is contended that the appellants were engaged
in the following unlawful conduct:
(a) the RA unlawfully took over management and control of certain parts of lthala's
business operations, inter alia, the management and control of its treasury
function, bank accounts, expenditure including approval and payment of its
service providers;
(b) the conduct is unlawful under s 66 of the Companies Act 71 of 2008 ("the new
Companies Act") and the PFMA;
(c) the conduct is prejudicial to the day-to-day operations of lthala ; and
(d) the conduct is prejudicial to the business of lthala and its relationship with its
customers, service providers, shareholders and other stakeholders.
[35] It is further submitted that the liquidation proceedings launched and the freeze
placed on all lthala's bank accounts at Absa were all part of an orchestrated plan to
circumvent the main order and render any appeal proceedings moot, leaving it with no
relief. The liquidation application is based on the solvency report produced by the RA
despite the Auditor General conducting a full audit on lthala and consulting with the PA
during the auditing process, finding lthala to be solvent.
[36] From the aforesaid, lthala argued that the institution of the liquidation
application:
12
Economic Freedom Fighters v Gordhan and Others (2020] ZACC 1 0; 2020 (6) SA 325 (CC) para 40.
17
(a) opened the door for the RA to freeze lthala's accounts and cite the liquidation
application as a basis for doing so; and
(b) provided the PA with an opportunity to formulate a contrived argument that the
RA's conduct is in line with the main order because he is allegedly protecting
depositors from a run on the bank.
[37) According to lthala, exceptional circumstances lie in the fact that:
(a) it will be left with no relief if the relief sought in this matter is not granted; will
cease to operate and will be unable to adequately oppose the appeal of the
main order;
(b) the RA is perpetuating an illegality in that he continues to act ultra vires and
contravenes the Banks Act, the Companies Act, the Pension Funds Act, the
Constitution, and the PFMA. His conduct also violates the rights of lthala's
employees under the Constitution and all applicable legislation;
(c) a significant number of lthala's customers, most of whom are from poor and
rural communities and who receive Sassa grants into their accounts, are left
un-banked and unable to access their funds;
(d) in light of the freeze placed on lthala's bank accounts by the RA, none of the
customers (numbering 328 704), many of whom are Sassa grant recipients, at
any of lthala's branches (a network of 38 physical branches throughout KZN,
located in urban, peri-urban and rural areas) currently have access to their
money. Furthermore, lthala's employees are also left to suffer by the RA who is
refusing to release payment of their salaries; and
(e) in addition, the service providers with whom lthala has long-term agreements
that were concluded pursuant to a competitive public process are not being paid
and this not only poses a risk to lthala, but to the business of those service
providers.
[38) lthala submitted that it would suffer irreparable harm in that it:
(a) is unable to pay its employees and service providers. This makes it susceptible
to legal proceedings brought against it by its employees and service providers,
to legal proceedings brought against it by its employees and service providers,
which would constitute irregular expenditure in terms of the PFMA;
(b) stands to be evicted from its leased properties;
18
(c) may be unable to adequately oppose any legal proceedings against the
appellants, rendering the main order moot;
(d) may be unable to prosecute its appeal in the SCA;
(e) may be liquidated despite significant evidence proving it to be solvent; and
(f) its board may face possible criminal sanctions under the PFMA.
[39] Conversely, the argument that the appellants would suffer no irreparable harm
if the relief sought is granted, is based on the following:
(a) the RA will still be. in a position to challenge the main order, while lthala is
allowed to continue with its lawful business;
(b) the order of Leso AJ serves as a means to avoid any irregularities insofar as
the PA is concerned; and
(c) there is no suggestion that the Minister of Finance and the provincial
government will renege on their undertakings to support lthala. There is a
binding undertaking to guarantee all deposits issued by the Minister for all
lthala's depositors, notwithstanding that there is no credible audit report that
shows that depositors are at risk.
[40] It is further argued by lthala that the interdictory relief sought against Absa is a
natural consequence of the relief granted in the main order to continue operating
because Absa had not complied with the main order and subsequent to the main order
Absa had been given unlawful instructions by the RA which it followed. Therefore,
lthala has no alternative other than to seek the interdictory relief against Absa .
[41] lthala submitted that in terms of the interdictory relief being sought against
Absa:
(a) it has a clear, alternatively prima facie right granted by the main order to be
implemented and transact on its bank accounts for purposes of performing
operational functions such as the human resource, treasury, marketing, finance,
and any other operational functions;
(b) lthala's irreparable harm has been set out above;
(c) the balance of convenience favours the granting of the order in that it will merely
(c) the balance of convenience favours the granting of the order in that it will merely
ensure that the main order is lawfully executed, instead of Absa continuing to
follow the unlawful instructions of the RA ; and
19
(d) lthala has no alternative relief other than the interdictory relief sought to ensure
that Absa complies with the main order.
[42] Furthermore, since Absa did not oppose the application, it is therefore not for
the appellants to contend otherwise. Absa has not appealed the interdict against it,
instead the appellants argue Absa's cause and purport to protect its interests.
[43] Insofar as the argument is raised by the appellants in regards to them freezing
lthala's accounts to ensure that lthala's assets are not dissipated and to avoid a run
on the bank that would have been caused by the PA's liquidation application, as well
as their claim of entitlement to act contrary to the main order because of an application
for leave to appeal, lthala submitted in rebuttal thereof that:
(a) lthala has never sought to dissipate assets to frustrate the RA from performing
his functions and there is no evidence of any attempts nor are there any credible
factual allegations made to that effect. In fact, for 13 months while the RA has
been involved with lthala, there have been no instances of dissipation of assets
by lthala;
(b) lthala has been operating under the RA for 13 months without any threat of a
depositors run. The appellants orchestrated the possible threat of a depositors
run by instituting the liquidation application and immediately placing a freeze on
its bank accounts;
(c) the plan was orchestrated and executed for purposes of circumventing the main
order. This unlawful conduct was correctly censured by the court a quo in the s
18(3) order; and
(d) notwithstanding the institution of the liquidation application, no evidence is
proffered to support the allegation that the pending liquidation (which is
opposed by various parties including the provincial government which has
provided a substantial guarantee) is likely to result in a run on lthala . More so,
considering it is an adequately capitalised financial institution and has never
considering it is an adequately capitalised financial institution and has never
experienced a run before; the provincial government issued a R300 million
cashback guarantee; the Minister of Finance/Treasury has undertaken to
provide a guarantee for lthala's depositors; and lthala's shareholders have the
means to cover any shortfall that may exist.
20
[44] Further to the above, it is argued that although the RA appealed the main order,
it does not grant him carte blanche to avoid the order and engage in self-help while
the issues are pending before court. The RA has arrogated to himself the power to
ignore the main order and anticipate the outcome of this appeal, the SCA appeal and
the liquidation application.
[45] On the issue of the RA having taken a "statutory decision" to freeze lthala's
bank accounts, which decision the appellants argue is valid until reviewed and set
aside, lthala argued that (as the court a quo found) such conduct was unlawful as the
RA cannot merely take a new unlawful decision and then claim that it is lawful because
it has not been set aside or reviewed. Such conduct flies in the face of the right against
self-help. Furthermore, this "statutory decision" is of no force and effect in accordance
with the principles outlined by the SCA in Oudekraal. The RA's conduct remains
unlawful unless overturned on appeal.
[46] On the issue of the co-mingling of operational expenditure and deposits, as well
as on the guarantee, lthala stated that:
(a) it has clearly set out which bank accounts are used to pay employees and
service providers - which are not affected by deposits;13
(b) the Minister of Finance is empowered bys 70 of the PFMA to issue a guarantee
and has elected to exercise that power for purposes of securing lthala's
depositors;
(c) the third respondent has confirmed under oath the binding effect of the
guarantee issued by the Minister of Finance. Therefore, there is no threat to
depositors as lthala merely seeks to pay its employees and service providers,
which is in the best interest of itself and all of its customers (both deposit and
non-deposit taking customers); and
( d) even if the form of the guarantee was in dispute, that does not affect the binding
effect of the undertaking made by the Minister of Finance. All that needs to
effect of the undertaking made by the Minister of Finance. All that needs to
happen is that the Minister can be asked to furnish the guarantee in the correct
form and that would be more appropriate than the total destruction of lthala by
the appellants.
13 SeeAnnexure "PA1 ", volume 21, pages 2062-2063.
21
Submissions of the third and fourth respondents
[47] The third and fourth respondents contend that the court a quo plainly exercised
a discretion in deciding the execution application and interference by a court of appeal
is permissible only in narrowly circumscribed circumstances, namely where the
discretion w as not exercised judicially; the discretion was influenced by wrong
principles or a misdirection on the facts, or the decision reached could not reasonably
have been made by a court properly directing itself to all the relevant facts and
principles.14
[48] They further submitted that significant, immediate and irreparable prejudice
would arise relating to the provincial government's constitutional obligations regarding
economic and rural development; and interference with the requirement of inter
governmental co-operation in terms of s 41 of the Constitution, if the execution order
were to be set aside.
[49] lthala is established in terms of the IDFC Act to facilitate the extension of credit
for urban and rural economic development. Its functions are not confined to the taking
of deposits. The deposits received are merely one source of funds to be used in the
extension of credit.
(50] The third and fourth respondents submit that the actions of the RA in seizing
control of lthala's assets and effectively of all its operations prevent lthala from carrying
out its lawful function which falls outside the purview of the PA , and thus impedes the
performance by the provincial government of one of its key constitutional functions.
The actions, even if found to be well-intentioned, give rise to a constitutional crisis that
undermines the very structure of the South African state. In particular, the RA's actions
contravene s 41 (e), (f), (g) and (h) of the Constitution.15
14 Public Protector v South African Reserve Bank [2019) ZACC 29; 2019 (6) SA 253 (CC) para 144;
Minister of Social Development Westem Cape and Others v Justice Alliance of South Africa and Another
[2016) ZAWCHC 34 (" Justice Alliance").
15 Maccsand (Pty) Ltd v City of Cape Town and Others [2012] ZACC 7; 2012 (4) SA 181 (CC) para 47.
22
[51] The further submission was that lthala stands in a different position to the class
of persons ordinarily subject to directives issued in terms of s 83(1) of the Banks Act.
Therefore, in granting the s 18(3) order the court a quo acted in upholding the
Constitution and restraining the unconstitutional action of the appellants.
[52] The contention of the third and fourth respondents is that the need to take
control of lthala's assets on the basis that this is needed to safeguard depositors and
to protect the concursus creditorium overlooks the fact that, if lthala is ultimately
liquidated, there is a statutory guarantee of its liabilities (and thus no irreparable harm
would ensue). Furthermore, lthala will not fall under the control of the liquidator upon
winding-up (ss 32(1) to (3) of the IDFC Act). There is no evidence in the record that
the IDFC would be unable to settle lthala's liabilities to depositors.
[53] Furthermore, the powers which the RA purports to exercise in terms of s 84(1A)
of the Banks Act insofar as these relate to taking control of all of lthala's assets and in
effect its operations, conflict with the provisions of the IDFC Act. That is why the court
a quo distinguished the facts of this case from those set out in Kruger v Joint Trustees
of the Insolvent Estate of Paulos Bhekinkosi Zulu and Another.16
[54] They submitted further that, to the extent that there is a conflict that cannot be
resolved through reading down the provisions of s 84 of the Banks Act, then the
provisions of the IDFC Act pertaining to lthala carrying on the business of a credit
provider for or on behalf of the IDFC, and in order to give effect to urban and rural
development within KwaZulu-Natal, must prevail. That it be so, is because the IDFC
Act only subjects lthala to the regulation of the first appellant and the Banks Act insofar
as its deposit taking operations are concerned. lthala's other businesses are not
subject to regulation under the Banks Act.
subject to regulation under the Banks Act.
[55] Therefore, it cannot be said that legislation authorising a repayment
administrator to take control of all of lthala's assets and other aspects of its business.
16 Kruger v Joint Trustees of the Insolvent Estate of Paulos Bhekinkosi Zulu and Another [2017] 1 All
SA 1 (SCA) ("Zulu").
23
beyond those pertaining to its deposit-taking activities, falls within the scope of matters
contemplated in s 146(2) and (3) of the Constitution.
Evaluation and analysis
[56] I now turn to do the evaluation and analysis of the matter. The history and
submissions given were extensive and comprehensive.
[57] It is common cause that lthala is not a bank as defined in and registered under
the Banks Act. Instead, it operated and conducted deposit-taking activities by virtue of
a series of exemption notices, promulgated by the PA and its predecessor-in-title, the
Registrar of Banks, which stipulated that such activities shall be deemed to be the
business of a bank. That regulatory regime ended after the PA issued a Final
Exemption Notice on 12 July 2022. This notice contemplated that lthala would wind
down its deposit-taking activities, alternatively transfer same to a registered bank or
apply for a banking licence.
[58] Paragraph 4.8 of the Final Exemption Notice contemplated the appointment of
a repayment administrator if lthala failed to:
'(a) comply with all of the conditions or requirements in this Notice and not remedy the
same within 48 hours or if the Prudential Authority withdraws this Notice; or
(b) obtain authorisation to establish a bank or mutual bank by 30 June 2023.'
[59] The lapse of the Final Exemption Notice had the effect that lthala was not
permitted to continue with its deposit-taking activities beyond 15 December 2023.
[60] In granting lthala the s 18(3) relief (the execution order) it is evident that the
court a quo granted further relief (as contained in paragraphs 3, 4, 5 and 6 of the order
above) pending the appeal of the main order. It seems to me that the court thus went
beyond the parameters of s 18(1) and (3) in making the order.
[61] I hold that view for the following reasons:
24
(a) paragraphs 3, 4, 6.1 and 6.3 of the execution order, are directed at Absa.
However, Absa was not a party to the proceedings that culminated in the
judgment and order of 13 November 2024;
(b) paragraph 5 of the order serves as an interim interdict pending the liquidation
proceedings, which does not form part of the appeal proceedings or the main
application or the counter-application;
(c) paragraph 5 of the order serves as an anticipatory breach of s 2 of the
Insolvency Act 24 of 1936, read with s 341 (2) of the old Companies Act, in that
the order facilitates the disposition of lthala's property, after the winding-up has
commenced and after the RA has been appointed to take possession and
control of all of lthala's assets in terms of s 84(1A)(b)(i) of the Banks Act; and
(d) paragraph 6.2 serves as a final interdict against the RA , vis-a-vis the service
providers and the continuation of their services.
[62] It is necessary to have regard to the factors to be considered before any such
order in terms of s 18(3) of the Act can be granted which is summarised as follows:
(a) the suspension of the court order pending an appeal is the norm;
(b) an execution order pending an appeal is extraordinary relief for which an
applicant has to make out a case on the facts; and
(c) this requires the applicant to:
(i) demonstrate that exceptional circumstances exist which warrant a
departure from the norm; and
(ii) prove, on a balance of probabilities, that it will suffer irreparable harm if
the execution order is not granted, and the respondent will not suffer
irreparable harm should the execution order be granted.
[63] Failure on the part of the applicant to prove any one of these requirements is
fatal to the application. Facts may be relevant to both the requirements of exceptional
circumstances and irreparable harm. The position as to whether the court retains a
discretion to grant the relief and the role of prospects of success in the exercise of that
discretion to grant the relief and the role of prospects of success in the exercise of that
discretion remains unsettled. However, it would seem as though prospects of success
does not take centre stage in the determination of an application for an execution order
25
in terms of s 18(1) and (3) of the Act, albeit that the excerpt in Afriforum adopting the
reasoning of the full court in Justice Alliance was obiter.17
[64] Even though the comments in Afriforum are to be regarded as obiterdicta, they
hold persuasive power, and I am in agreement that the approach of the full court in
Justice Alliance be followed. Moreover, Afriforum confirmed that the exceptionality of
an order in terms of s 18(1) and (3) of the Act is underscored by the wording of s 18(4),
and that a heavy onus rests on an applicant to satisfy the requirements.
[65] Having regard to the peculiar facts of this matter, counsel for lthala drew this
court's attention to the following facts which he submitted met the threshold of
exceptional circumstances and irreparable harm:
(a) the RA's conduct in placing an embargo on lthala's accounts has placed it in a
position in terms of which it cannot pay wages to its employees or pay its service
providers;
(b) lthala will cease to operate and will be unable to oppose the RA 's appeal of the
main order and the appeal will be rendered moot;
(c) it will cause lthala to breach its statutory obligations under, inter alia, labour and
social security legislation; and
(d) a significant number of lthala's customers, most of whom are from poor and
rural communities and who receive Sassa grants into their bank accounts, will
be left un-banked and unable to access their funds.
[66] This is to be considered against the backdrop of the intervention of the
provincial government, and its purported guarantee or promised guarantee of lthala's
liabilities. The provincial government did not rely on this alleged guarantee and this
was not pursued in argument by its counsel, save that he submitted that upon any
liquidation of lthala, its assets, liabilities, rights, duties and obligations, including any
unspent portion of funds received, would fold back into lthala Development Finance
Corporation Limited, in terms of s 32(3) of the IDFC Act.
Corporation Limited, in terms of s 32(3) of the IDFC Act.
17 University of the Free State v Afriforum and Another [2016] ZASCA 165; 2018 (3) SA 428 (SCA ) paras
14-15.
26
[67] lthala, however, relied on this alleged guarantee for the purposes of
establishing the second leg of the test, namely that the appellants would not suffer
irreparable harm. Even if one foregoes the issue of whether it actually constitutes a
guarantee or simply constitutes a promise or undertaking, it cannot be considered a
competent guarantee upon a consideration of s 70 of the PFMA. The guarantee is not
one that:
(a) binds the National Revenue Fund (s 70(1)(aJ); or
(b) binds a national public entity referred to in s 66(3)(cJ, in respect of a financial
commitment to be incurred by that entity.
[68] A further problem is that the order facilitates the perpetuation of lthala's illegal
operation as a deposit-taking institution. lthala has not taken deposits since the RA
placed an embargo on its accounts in January 2025, and that position has remained
because, notwithstanding the main order of 13 November 2024 and the s 18(3) order
granted on 9 May 2025, the RA (as well as the PA) have been granted leave to appeal
against the main order to the SCA and they have noted an automatic appeal against
the s 18(3) order to this court, in terms of s 18(4) of the Act. That has served to suspend
the operation of those orders.
[69] If the appeal is dismissed, lthala will operate under the regime created by the s
18(3) order which does not prohibit lthala from taking deposits. Paragraph 2 of the
main order is framed in declaratory terms, namely that the RA may not, generally
speaking, interfere with lthala's operations and management, save for deposit-taking
activities. The order, however, does not interdict lthala from actually accepting
deposits.
[70] The s 18(3) order, in other respects, emasculates the RA in his ability to deal
with deposits, both deposits currently held and those which will be made in the future,
by virtue of the interdictory relief contained in paragraph 6 thereof. Paragraph 6.3 of
the order specifically interdicts the RA from issuing any instructions to Absa which will
the order specifically interdicts the RA from issuing any instructions to Absa which will
have the effect of preventing lthala's ordinary creditors from fulfilling their financial
obligations (i.e. making payments to lthala by depositing funds by electronic transfer,
debit orders or cash deposits as the case may be).
27
[71] The order, therefore, countenances and facilitates lthala's deposit-taking
activities, notwithstanding the expiry of the Final Exemption Notice. The order has the
practical effect of reducing the RA's role to an oversight functionary without any power
to deal with the deposits. This undermines his statutory obligation under ss
84(1A)(b)(i), 84(4)(a), (b) and (d) of the Banks Act and, therefore, contradicts the
statute.18
[72] It is important to bear in mind that payment (by creditors or the provincial
government or the IDFC) is a bilateral juristic act requiring the agreement or co
operation of both parties.19 The detailed definition of a deposit in s 1 of the Banks Act
only serves to underscore this.
[73] lthala cannot adopt a position that it does not actively seek to continue taking
deposits, as opposed to the positive act of instructing its bankers to prevent any
deposits from being accepted into its bank accounts. It has secured the protection of
the s 18(3) order to legitimise and facilitate the continuation of its deposit-taking
activities. It may not actively market for, or take positive steps to encourage such
deposits; however, such deposits (e.g. those from its creditors or from the provincial
government) will be made without any further actions on its part.
[74] It must follow that this illegality should have played a factor in the court a quo's
consideration into whether either exceptional circumstances existed, which warranted
a departure from the norm or whether the RA and the PA , respectively, would suffer
irreparable harm should the execution order be granted, facilitating the continuation of
such illegal deposit-taking activities. Accordingly, the implementation of the execution
order would result in such an illegality. It is this factor, which the appellants referred to
when they submitted that the court failed to consider the public interest factor. This
invokes the maxim ex turpi causa non oritur actio. The rule is absolute with no
invokes the maxim ex turpi causa non oritur actio. The rule is absolute with no
exceptions even if there has been partial performance in the past.20
18 Knoop NO and Ano ther v Gupta (Execution) (2020] ZASCA 149; 2021 (3) SA 135 (SCA ) paras 27
(d)] and 33-34.
19 Vereins -und Westbank AG v Veren Investments and O thers 2002 (4) SA 42 1 (SCA ) paras 11 and
38. See also R Sharrock The Law of Banking and Payment in South Africa (2016) at 195.
20 Jajbhay v Cassim 1939 AD 537.
28
[75] Counsel for lthala sought to persuade this court that the public interest, in this
instance, is the dire consequences that will eventuate to lthala's customers,
pensioners and grantees who draw their pensions and grants, respectively, from their
lthala bank accounts, lthala employees and its service providers. However, the public
interest must be more broadly framed and must, of necessity, include the rule of law
and that any order granted in terms of s 18(3) of the Act must, as a matter of principle,
respect the rule of law and not facilitate or perpetuate an illegality.21
[76] Much of what has been argued by the respondents in this matter amounts to
setting out the circumstances which they contend constitute exceptional
circumstances however, and fundamentally, they fall foul of the principle of ex turpi
causa and the condictio ob turpem vel iniustam causam as enunciated in Cool Ideas
1186 CC v Hubbard and Another.22 Fairness and convenience are not grounds to
enable the respondents to sacrifice the principle of legality to enable lthala to continue
with any activity wh ich would amount to unlawful conduct.
[77] Exceptional circumstances do not arise in the situation where the exceptional
circumstance will result in an unlawful act. The court a quo, unfortunately, failed to
consider this when granting the order.
[78] To the extent that there is a concern about the financial consequences of
upholding the appeal, the following considerations are relevant and should be taken
into account:
(a) section 84(1A)(b)(ii) of the Banks Act places a moratorium on all legal
processes;
(b) the provincial government promised to honour lthala's obligations;
(c) lthala could have finalised arrangements with the RA to transfer deposits across
to a third party bank to ring-fence it from becoming co-mingled with its other
funds, if any; and
(d) lthala has known that this situation would come about upon receipt of the Final
(d) lthala has known that this situation would come about upon receipt of the Final
Exemption Notice, which made it abundantly clear that lthala's deposit-taking
21 Ntlemeza v Helen Suzman Foundation and Another [2017] ZASCA 93; 2017 (5) SA 402 (SCA) paras
46 and 47.
22 Coo/ Ideas 1186 CC v Hubbard and Another[2014] ZACC 16; 2014 (4) SA 474 (CC ).
29
activities would come to an end on 15 December 2023, and that it needed to
make provision for this eventuality.
[79] lthala adopted a supine approach as to such an eventuality and it now seeks to
rely on the consequences of this approach as the grounds for exceptionality and
irreparable harm.
[80] Having found that it is necessary to consider the prospects of success of the
respective applications in the appeal, I now turn to deal with this.
[81] It is necessary to firstly consider the provincial government's submissions, in
that it has raised a collateral challenge to the proceedings. It alleges that the
appointment of the RA was invalid. However, the provincial government did not refer
to any evidence serving before this court, save to allege in its heads of argument that
it has raised a frontal challenge to the validity of the RA's appointment under s 84 of
the Banks Act. Reference was made to a review; however, the details of this review
were not furnished to this court.
[82] This is to be considered against the backdrop of lthala's review proceedings in
the North Gauteng High Court (per Moshoana J ) which was dismissed with costs.
Secondly, the provincial government instituted its own review proceedings in the North
Gauteng High Court (per Millar J) which was also dismissed with costs.
[83] This, of course, is academ ic because it is trite that even where an administrative
act, such as the appointment of a RA , is invalid, it still has lawful consequences which
courts will respect until such time as the appointment has been set aside.23
Accordingly, there is simply no basis upon which it could be contended that either the
court a qua or this court should take into account the prospects of any review
proceedings, in arriving at a decision as to whether the execution order should be
granted. A final death knell to this contention, is that the consent order, which
23 Oudekraal Estates (Pty) Ltd v City of Cape Town and Others 2004 (6) SA 222 (SCA ) para 26;
23 Oudekraal Estates (Pty) Ltd v City of Cape Town and Others 2004 (6) SA 222 (SCA ) para 26;
Merafong City v AngloGold Ashanti Ltd [2016] ZACC 35; 2017 (2) SA 211 (CC) paras 41-44.
30
confirmed the appointment of the RA and specifica11y declared his entitlement to take
steps as contemplated ins 84 of the Banks Act, is extant and not subject to any appeal.
[84) Whilst lthala's application is pending in respect of the Gauteng proceedings,
what is not in dispute is the consent order of Leso AJ. What is furthermore not in
dispute is that lthala had no right to continue taking deposits beyond 15 December
2023 when the Final Exemption Notice expired.
[85) It is also necessary to bear in mind that the present predicament and
circumstances in terms of which the parties find themselves is not a situation which
comes as any surprise to lthala's board. The affidavits and arguments presented
suggest that the present circumstances arise out of the machinations of the RA
appointed by the PA.
[86) The inflammatory language used is misdirected as lthala's board knew full well
for approximately 20 years that the South African Reserve Bank (through its
functionary - the then Registrar of Banks and his successor in title, the PA) required
lthala to not only ring-fence the deposit-taking portion of its business, but also to set
up a separate independent entity which could be registered as a bank.
[87] Notwithstanding such advice, over that period, lthala's board either through its
arrogance or hubris simply ignored the injunctions of the Reserve Bank and PA and
continued to operate as a deposit-taking institution. The board knew that the
exemptions were going to end and could be under no illusion as to the finality (and the
insistence by the PA) that the exemptions would end. The exemption granted in July
2022 clearly set out that this was to be the final exemption and that after December
2023 there would be no further exemptions.
[88) Section 84 of the Banks Act has as one of its primary injunctions, that "the
repayment administrator shall recover and take possession of all the assets of the
person subject to the relevant direction ... ". Both in the court a quo and before us, it
person subject to the relevant direction ... ". Both in the court a quo and before us, it
has been argued that the taking of possession relates only to the deposit-taking portion
of the business of lthala and such other business as conducted by lthala can and
should be separated.
31
[89] In making this distinction, lthala and the court a quo sought to distinguish and
differentiate the assets of lthala on the basis of a Ponzi scheme, whereas lthala's
deposit-taking activities have been legal, up to 15 December 2023. The SCA in Zu/u24
clearly set out that the words "all assets" in s 84(1A)(b)(i) of the Banks Act is conclusive
regarding this issue, and it stated:
'Regarding the contention, by Mr Zulu, that only assets acquired through the operation of the
illegal scheme were liable to attachment, this argument flies in the face of the provisions of
section 84(1A)(bJ(i) of the Banks Act. The dictionary meaning of "all" is: "The whole amount,
extent, substance, or compass of; all that is possible; [t]he entire number of, without
exception". The use of the words "all assets" in section 84(1A)(bJ(i) is conclusive on the issue.
There is no basis for distinguishing between assets acquired through the operation of the
unlawful banking business and those acquired innocently. The source and manner of
acquisition is immaterial. In fact, it seems to me that even section 84(4)(b) does not exclude
honestly acquired assets from consideration for realisation for purposes of raising repayment
funds. The section merely sets out, as one of the duties of the repayment administrator, the
taking of reasonable steps to expedite repayment of money . Such steps may include
liquidation of the assets into which money unlawfully obtained had been converted. But such
a step may not be necessary where repayment funds are readily available.' (Footnote omitted.)
[90] Both in the court a quo and before us, lthala has sought to distinguish the Zulu
matter and the instant case based on a Ponzi scheme and an exemption. This
argument ignores the fact that after December 2023, lthala took deposits and thereby
invoked and breached the relevant section of the Banks Act. It makes no difference
whether the deposit-taking was pursuant to a Ponzi scheme o,r a failed attempt to
whether the deposit-taking was pursuant to a Ponzi scheme o,r a failed attempt to
obtain an exemption. Once deposit-taking is performed by an entity which has no
exemption or licence, then it is operating an unlawful banking business.
[91] This is precisely what lthala has been doing. The so-called distinction is
artificial. lthala cannot contend for the right or take deposits without a licence. It matters
not whether it is a Ponzi scheme or not. The breach is of the Banks Act and the
unlawful taking of deposits.
24 Kruger v Joint Trustees of the Insolvent Estate of Paulos Bhekinkosi Zulu and Another [2017] 1 All
SA 1 (SCA) para 36.
32
[92] lthala is not insulated from the operations of the Banks Act, simply because it
is a government entity regulated by its laws. The wording used in s 84 of the Banks
Act is "recover and take possession of all assets" which mirrors the language of s 391
of the old Companies Act where the words used are "recover and reduce into
possession all the assets".
[93] Zulu concerns itself with the notion of "all assets", however, when it comes to
recovery and taking possession of such assets, the intention of both the Banks Act
and the old Companies Act is clear, namely that this is recovery in possession to the
exclusion of all others. This is a continuing and ongoing duty and to that end, the RA
has an ongoing statutory duty to retain the bank accounts in his possession. The re
opening of the bank accounts and their operation whether it was pursuant to the failure
to obtain an interim order or whether it was due to the s 18(1) and (3) application is
irrelevant.
[94] The obligation to secure assets into his possession is a continuing and ongoing
obligation of the RA and the continued operation of the bank accounts for other
purposes defeats the object of the statute.
[95] The prospects of success on appeal must be considered in the paradigm of this
statutory framework, in particular, the statutory obligation on the part of the RA to
recover and take possession of all assets, both legally and illegally acquired, which is
an overriding, ongoing and definitive one. Accordingly, there can be no serious
argument to be made that the RA was not entitled to take steps under s 84 of the
Banks Act to secure the assets and take steps to repay the deposits as contemplated
in the section.
[96] Accordingly, there are cogent and more than reasonable prospects of success
in the appeal for the RA and the PA, respectively. This ought to have been taken into
account in the melting pot of considerations and factors to be considered as to whether
or not the execution order should have been granted.
or not the execution order should have been granted.
[97} Consequently, the s 18(3) execution order cannot stand.
33
(98] This finally brings me to the status quo ante. The outcome of this appeal should
not sound a death knell to lthala as contemplated. lthala is not supposed to die and
should not be left to die pending the final outcome of the SCA appeal. It undeniably
serves an important purpose in the province of KwaZulu-Natal.
[99] The status quo which existed before the main order appealed can be revived
without the illegality which would have ensued upon the lapsing of the Final Exemption
Notice on 15 December 2023. I say so for the following reasons:
(a) in terms of the consent order (paragraph 2.2) which remains extant, lthala was
not entitled to continue any deposit-taking activities and to deal with any
deposits already received "otherwise than under the direction of a repayment
administrator appointed by the Prudential Authority and any repayment - plan
put in place";
(b in paragraph 2.3 of that order, the RA is only empowered to recover and take
possession of all the deposits taken by lthala (not control of all the assets of
lthala). So, in terms of this order, the RA 's powers were limited to the
preservation of deposits;
(c) in terms of paragraphs 3.2 of the order, lthala and the RA were to co-operate
and work jointly towards devising a plan for the repayment of deposits to
depositors (an alternative plan of action as contemplated by s 84(1) of the
Banks Act); and
(d) lastly, in terms of paragraph 3.3 of the order, the RA was to repay deposits to
depositors in accordance with the agreed repayment plan.
[100] If this order is genuinely put into operation, lthala should be able to continue
operating its normal business with the RA in control of the deposits taken by lthala with
the necessary co-operation at delineation of the accounts co-mingled. Perhaps the
migration of deposits to another bank would help lthala's cause. In short, lthala has to
work with the RA until the outcome of the SCA appeal.
Order
[101] The following order is therefore issued:
1.The appeal is upheld.
34
2.The section 18(3) execution order issued on 9 May 2025 is set aside w ith
costs.
3. The first, third and fourth respondents to pay the costs of two counsel
emp loyed in respect of each of the appellants on Scale C jointly and
severally the one paying the others to be absolved.
SaksAJ
CASE INFORMATION
DATE OF HEARING
DATE OF JUDGMENT:
APPEARANCES
COUNSEL FOR THE FIRST APPELLANT:
COUNSEL FOR THE SEC APPELLANT:
COUNSEL FOR THE FIRST RESPONDENT:
35
25 JULY 2025
15 AUGUST 2025
ADV. NGWAKO MAENET JE
SC/ MBUSO MAJOZI
(Instructed by WERKSMANS
ATTORNEYS
The Central
96 Rivonia Road
Sandton
Tel: 011 535 8145/011 535
8196
Email:cmanaka@werksmans .
corn)
ADV. ETIENNE THERON SC/
LE COMBRINK SC
(Instructed by BOWMAN
GILFILLAN INC
22 Bree Street
Cape Town
Tel: 021 480 7800
francois.trichardt@bowmansla
w.com)
ADV. SANDILE KHUMALO
SC
(Instructed by Thabethe
MALAT Jl &CO ATTORNEYS
COUNSEL FOR THE SEC RESPONDENT:
COUNSEL FOR THE THIRD AND FOURTH
RESPONDENT:
36
5TH Floor, The Ridge
1 Discovery Street and Rivonia
Road
Sandton
Tel: 011 072 2600
Email:
tmalatji@mcinc.africa/bmasia
@mcinc.africa)
NO APPEARANCES
(Instructed ASSA BANK
LIMITED
7th Floor, ASSA Towers West
15 Troye Street
Johannesburg
Tel: 011 350 4313
Marthinus.JanseVanRensburg
@absa .africa)
ALASTAIR DICKSON SC/
GRIFFITHS MADONSELA SC
ANDREW CHRISTISON /
TONI PALMER
(Instructed by MATTHEW
FRANCIS INC
Suite 4, 1 st Floor, Block A
21 Cascades Crescent,
Montrose
Pietermaritzburg)
Tel: 033 940 1497
Email: yuri@mfilaw.co.za