Category: Banks

Smack down for Absa Bank in Joburg High Court


Absa bank was handed a stunning defeat in the South Gauteng High Court last week when its attempt to obtain summary judgment against two home owners was slapped down by the judge.

The matter must now go to trial for oral evidence, which will take a year or two.

Absa was attempting to obtain summary judgment against the home owners, James Grobbelaar and Kevin Jenzen, on the grounds that they allegedly defaulted on their loans. But when asked to provide evidence of the loan agreements, Absa produced a standard loan agreement – not the one signed by the defendants.

The bank claimed the original documents had been destroyed in a fire – as they have done in scores if not hundreds of other similar cases. Instead of attaching the loan agreement to its court papers, Absa relied on a so-called “standard agreement” and claimed the originals were no longer available due to a fire which supposedly destroyed thousands of bank documents in 2009.

Securitisation experts have long argued that the prevalence of fires within the Absa group is highly suspicious, particularly as these fires seem to occur with abnormal frequency whenever a client seeks to ascertain whether or not their loan has been securitised. Securitisation is the practice of bundling loans together and on-selling them to investors as a way of freeing up capital by the banks. In doing so, banks lose legal title to the loans and in theory cannot then bring legal action against the borrower, though they have managed to side-step the law by drawing a veil of secrecy over this activity. Banks typically issue a bare-faced denial when borrowers ask whether their loans have been securitised, or they demand that borrowers provide proof of securitisation – a virtual impossibility, given the banks’ secrecy surrounding this practice.  

Justice Roland Sutherland issued judgment against the bank, arguing that Rule 18(6) of the court rules requires a plaintiff to produce the relevant documents when seeking to press their case. Absa had not done so. “There is no doubt that a failure to annex the loan agreement constitutes non-compliance with this rule,” said Justice Sutherland.

Advocate Douglas J Shaw, who represented Mr Grobbelaar, argued that the bank had to prove that the documents were in fact destroyed in a fire, something that can only be done in a trial in a year or so, and not in the quick process (summary judgment) that Absa sought to use.

Adv Shaw also spoke of “The Myth of the Standard Agreement”. In its court papers, Absa had attached the agreement that they say is the one they usually use, the so-called “standard agreement”. Adv Shaw held up four different Absa agreements, one with 18 clauses and another with more than 100. He pointed out there were many more variations of the so-called “standard agreements” being used by the bank. It was therefore impossible to ascertain what were the contents of the loan agreement signed by the defendants.

Absa‘s own documents also revealed discrepancies. The interest rates charged the homeowners were disputed, casting further doubt on the bank’s cause of action, and the standard agreement did not correspond with the mortgage bond that had allegedly been lodged with the deeds office.

“Many people who have already received summary judgments or default judgments from Absa can now join an appeal through the court process,” says Adv Shaw.

The judgment reads in part (Absa was the plaintiff in this case, and Grobbelaar and Jenzen the defendants): “In my view, these arguments inspired by the missing loan agreements have in large measure touched upon an important consideration but have obscured the critical point. The starting place must be to recognise that what is critical in legal proceedings is dictated by the relief sought. In summary judgment proceedings, to defeat the plaintiff’s application a defendant must put up a basis why the plaintiff cannot get judgment without the merits of a defence being tested. Whilst a classical defence might contradict the facts upon which the plaintiff relies, it also remains open to a defendant to merely demonstrate that the plaintiff’s averments, where the facts are peculiarly within the knowledge of the plaintiff, need to be proven and an opportunity to test the substance of those averments is appropriate.

“In my view, it would be inappropriate to pre-judge the merits of the defendants’ allegations, and the plaintiff should extricate itself from its regrettable predicament on trial, not by way of summary judgment.”

Justice Sutherland cautioned that while there was a “very real prospect of professional debtors exploiting the processes of the law to unduly delay and obfuscate litigation,” this was an occupational hazard and a fair adversarial litigation system ought to leave this door open. “The essence of the present controversies lies in the realm of marshalling evidence, and the responsibility to construct cases in ways to meet such a challenge is what the legal profession is for.”

A new movement representing people who have been adversely affected by Absa’s fire story has been launched. Stay tuned for more details. Advocate Shaw is an adviser to this group.

FNB Homeloans took legal action and a judgment against me in 2009 without me receiving the summons

FNB Homeloans took legal action and a judgment against me in 2009 without me receiving the summons – I only found out when debt restructuring agencies started calling me. Recently there was a similar case where the constitutional court gave judgment against standardbank with cost.
How can I get the same judgement against FNB – I do not have thousands of rands to pay upfront for legal help?

Court rules for First National Bank in racism case

Johannesburg – The North Gauteng High Court in Pretoria ruled in favour of First National Bank (FNB) after bond recalculator Emerald van Zyl made claims of racism against the bank, Business Day reported on Wednesday.

The court found the claim of racism was unfounded and that Van Zyl showed a malicious disregard for the facts and an overriding desire to continue his vendetta against FNB.

Van Zyl had claimed that Saambou Bank (later taken over by FNB) charged black people a higher interest rate than white people.

He alleged that FNB was a racist bank.

During his campaign against the bank, he involved the African National Congress Youth League, Parliament as well as the Human Rights Commission.

Van Zyl claimed to represent 400 claims ceded to him by people who entered into loan agreements with Saambou Bank.

He alleged that Saambou, and later FNB, overcharged them with interest in excess of what they were obliged to pay in terms of the relevant loan agreements.

Acting Judge Louis Vorster found that Saambou had not acted incorrectly nor unreasonably in making interest rate changes to its home-loan accounts.

As such there was no claim for any damages against FNB for former Saambou home-loan customers.

The judge agreed with a request by FNB for a punitive costs order against Van Zyl, who had waged a widespread campaign against the bank through the media.

Bank 'fiddled home loans to boost flagging profits'

Saambou bank deliberately manipulated interest rates on its bond accounts to increase profits at a time when the bank was undergoing a “squeeze on its profit margins”.

These are the allegations made by forensic accountant Gregory Johnson, in a report submitted to the North Gauteng High Court in an ongoing case between bond recalculator Emerald van Zyl and FNB, the bank which took over Saambou’s home loan book after Saambou was placed under curatorship in 2002.

Van Zyl alleges that FNB owes former Saambou bond holders millions in incorrect and illegal interest charges.

In 2006, FNB recalculated all the Saambou bonds, and paid back R154 million to clients, but Van Zyl claims this is just the tip of the iceberg.

For the court matter, eight bond accounts were chosen as test cases. In analysing the interest charges on these accounts, Johnson found that:

Six of the eight account holders were originally charged the Saambou base interest rate on their accounts. The other two were charged the base rate, minus 0.75 percent, and the base rate plus 0.25 percent respectively.

Between 1990 and 1999, Saambou started to increase the rates it charged these clients. By 1999, all eight were being charged rates between 0.5 and 3.5 percent higher than the base rate.

Of the eight account holders, only three missed bond payments.

Some of the increases in rates occurred before they missed payments.

The interest rate changes could therefore not have been as a result of a change in the risk profile of the clients.

The analysis of the overcharges runs until 2004, two years after FNB took over the loan book.

Johnson says the reasons for the manipulation had little to do with the risk profile of the clients and more to do with the bank’s profitability.

In an affidavit made by Dawid Botha, a former member of the Saambou board of directors, it emerged that to get more people to deposit their money with the bank, Saambou offered higher and more attractive interest rates.

However, this then put a “squeeze” on profit margins, which needed to be managed by increasing the amount of interest paid by home loan clients.

“Increases in the bond debtors’ rates above the base rate had nothing to do with how the debtor managed his/her account, or the risk associated with the account. These increases were all related to Saambou’s own profitability and Saambou’s risk profile, which deteriorated in the late 1990s,” Johnson said.

When the bank was placed under curatorship in 2002, about 80 000 home loans were taken over by FNB.

A separate analysis of more than 77 000 Saambou bonds, also done by Johnson, indicates that:

White bond holders paid an average interest rate of 15 percent.

Indian clients paid an average rate of 15.5 percent, and coloured clients an average of 16.5 percent.

Black bondholders were charged an average interest rate of 18 percent.

FNB chief marketing officer Bernice Daniels said: “All matters incidental relating to Saambou will be dealt with thoroughly in the appropriate forum, being the court.

“FNB strongly rejects any allegations that race plays any role in determining the rates applicable to mortgage bonds.”

In previous statements, the bank has stated that “the claim of racial discrimination is based on wholly inappropriate and insufficient information for any legitimate conclusion to be drawn”.

The bank has also said Van Zyl stands to benefit financially from any amounts recovered if his legal action is successful.

“Since giving interviews to various media, Emerald van Zyl issued a letter to FNB demanding that FNB pay him R1.8m, as well as waive his debt to FNB of R400 000 owed to the bank for legal costs due to the postponement of the trial in November 2011.

“He has threatened to go to the media with further allegations should we not agree to his demands,” Daniels said in a previous statement.

Weekend Argus (Sunday Edition)

The risk of playing banker – The National Credit Act

The risk of playing banker - The National Credit Act
The risk of playing banker – The National Credit Act

Purchasers have increasing difficulty to obtain financing for the purchase of farms and other agricultural land. Many sellers of these properties consider granting the purchaser a bond for the purchase amount, to be paid off over a period of time. Worse, some accept an acknowledgement of indebtedness and consent to judgment as sufficient protection, prior to shaking hands and signing off on the transfer agreements.

Previously, the mere registration of the bond or the notice confirming the instalment sale of a property registered at the Deeds Office was sufficient. Together with the required written agreement it constituted protection to the incidental money lender in the event of a defaulting purchaser.

The National Credit Act has changed everything. The Act provides, inter alia, that in any credit agreement where the credit amount exceeds R500 000 (five hundred thousand Rand), the lender is to be registered as a credit provider. This includes the occasional private farm seller, even if it is a once-off arrangement with no intention by the seller to provide credit to any other person ever again. Failure to register as a credit provider prior to a transaction that can be defined as a “credit transaction” is a transgression of the Act.

Should the credit provider not be registered and the purchaser defaults on the payment agreement, section 89(5) of the National Credit Act is unequivocally prescriptive on how the courts are to deal with such circumstances. The credit agreement is void as from the date it was entered into. The credit provider must refund all payments made in terms of the agreement together with stipulated interest. Most importantly, all purported rights of the credit provider to recover any money paid or the goods that were delivered to the consumer, are cancelled, or the property forfeited to the state, unless a court finds that such forfeiture will unjustly enrich the purchaser.

Many sellers, and even attorneys, are either unaware of this provision or blatantly flaunt the requirement as they “trust” the purchaser and “know” that the full repayment will be made, including the interest. The problem only manifests when the worst case scenario does occur and the well-known and trusted purchaser defaults on the payments. Many of the sellers who acted as credit providers relied on such repayments and interest either to fund another farm purchase or worse, their retirement.

The Constitutional Court recently considered the validity of this section of the National Credit Act and specifically of the clause relating to forfeiture of the property to the state in the light of the Bill of Rights, regarding the right not to be arbitrarily deprived of property and the so-called Limitation clause. J van der Westhuizen delivered a majority judgement on 10 December 2012 which declared the arbitrary forfeiture of property to the state prescribed in section 89(5)(c) of the National Credit Act to be inconsistent with section 25(1) of the constitution, and thus invalid.

This judgement should, however, sound an urgent alarm to any and all unregistered credit-providing farm sellers. The intention of the National Credit Act is to discourage the provision of credit outside the framework set by the legislature. The Act thus has to punish those that do not comply with the requirements thereof, and the punishment is severe.

Should the farm seller therefore not have registered as a credit provider, and the purchaser defaults on his payments, such seller is at risk – a very real and serious risk. Unless a court orders that the circumstances will unjustly enrich the purchaser, such seller may not only forfeit all payments and interest, but will have to obtain a court order that the seller is entitled to recover the farm from the defaulting purchaser.

If the credit agreement is unlawful as from inception in terms of the National Credit Act, the agreement cannot be enforced and the defaulting party cannot be compelled to perform. In our law, pursuance of such agreement must then be made in terms of unjustified enrichment, and specifically the conditio ob turpem vel iniustam causam. In short, the requirements are that the ownership must have passed with transfer, transfer must have taken place in terms of an unlawful agreement, and the claimant must tender back everything received.

However, to be successful the claimant must be able to prove that he acted free of turpitude and show that the actions were not dishonourable. The banker-playing credit-providing farm seller might not forfeit the farm as the court’s discretion has been unconstitutionally curtailed in section 89(5)(c), but is still far from the position he could have been in had he simply registered as a credit provider.

Civil obedience regarding the legislation of the country creates a stable, safe, just and equitable society with a strong economy and an affinity with investors. Compliance with the National Credit Act not only ensures confidence in immovable property as an investment, but will protect those who want to play banker.

For further reading see National Credit Regulator vs Fillippus Albertus Opperman and others, case number CCT34/12 [2012] ZACC 29 and case law quoted by both the majority judgement and descending judgment written by J Cameron.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. —

Suid Afrikaanse Bankbase vir miljoene gedagvaar

Mnr. Piet Liebenberg, voorheen voorsitter van Die Sakebank en mnr. Willem Boshoff, voorheen uitvoerende hoof van die bank, is die afgelope week in twee hofgedinge weens die beweerde bedrieglike of roekelose hantering van sake by Die Sakebank gedagvaar.

Die eise deur twee PSG-filiale, Axiam en Capitec, bedra R147 miljoen plus rente.

Verdere dagvaardings teen bekende sakelui, wat ook na bewering betrokke was, word nog voorberei.

Liebenberg en Boshoff het Die Sakebank op die been gebring met die slagspreuk “goeie etiek is goeie sake”.

Toe die bank in 1998 genoteer is, was daar ‘n stormloop om sy aandele te bekom, glo vanweë Liebenberg se groot aansien onder beleggers.

Liebenberg is ook ‘n bekende in kerkkringe en het in 1999 op die nasionale kerkeberaad gesê sakeleiers het “Bill Clintons” geword deur weg te draai van die basiese waardes van die Bybel .

Die Sakebank het vir die jaar tot einde Maart 1999 ‘n wins van R45 miljoen getoon met aandeelhouersgeld van R474 miljoen.

Die PSG-groep het Die Sakebank in 2000 oorgeneem. Kort daarná is bevind dat die sake van Die Sakebank “chaoties” was. Pleks daarvan dat die verwagte netto batewaarde R150 miljoen bedra het, was die maatskappy niks werd nie.

Die aandeelprys was in dié stadium 5c teenoor sy hoogtepunt van R17,00.

Mnr. Alec Erwin, minister van handel en nywerheid, het mnre. Mervyn King en Harvey Wainer verlede jaar opdrag gegee om ondersoek in te stel na verskeie moontlike ongerymdhede by Die Sakebank wat tot sy mislukking kon gelei het. Destyds is gesê daar sal na die finansiering van aandele-opsies vir direkteure en Die Sakebank se betrokkenheid by die mislukte Macmed gekyk word. Ander mense wat destyds in verband met die ondersoek genoem is, sluit in mnr. Desmond Smith, gewese uitvoerende hoof van Sanlam en waarnemende voorsitter van Die Sakebank se ouditkomitee, asook ‘n lid van sy vergoedingskomitee, en dr. Malesela Motlatla en mnr. Leonard Fine, albei lede van die oudit- en vergoedingskomitee.

‘n Verslag is voltooi, maar dit is nog nie bekend gemaak nie.

Die Sakebank is sedert 1998 tot TBBH, Axiam en toe Capitec Bank herdoop.

In die eerste saak teen Liebenberg en Boshoff beweer Axiam dat Liebenberg en Boshoff in 1998 en 1999 hul pligte wederregtelik verontagsaam het deur lenings van R60 miljoen aan mnr. Jan Louw toe te staan. Die lenings is na bewering nie terugbetaal nie.

Louw was die stigter en baas van ProEquity, ‘n batebestuurder, wat betrokke was by die aanvanklike mislukte hotelprojek by Oudekraal in die Kaap.
Die Sakebank het ProEquity oorgeneem en Louw het ‘n direkteur van Die Sakebank geword. Sedertdien is ‘n vonnis van R160 miljoen teen Louw verkry.

In die tweede saak beweer Capitec dat Liebenberg en Boshoff, as direkteure van Capitec Bank, in 1999 bedrieglik of roekeloos opgetree het deurdat hulle toegelaat het dat sekere aandele as sekuriteit vir ‘n gerief van R50 miljoen van Absa Bank dien, wetende dat dié aandele onderhewig was aan ‘n ooreenkoms wat dit verbied.

Capitec beweer dat mnr. Richard Foyn, ‘n direkteur van Capitec Bank, die gerief met Absa beding en die aandele aan Absa oorgedra het. Foyn is ook ‘n verweerder in die tweede saak.

Voordat hy Die Sakebank gestig het, het Liebenberg verskeie poste in die bankwese beklee.

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