The unilaterally closing of an individual bank account by a South African Bank – the Gupta-saga.

The Gupta family has been in the media for meddling with the South African Government through their close relationship with President Jacob Zuma, they are being accused of allegedly trying to capture the state. Between December 2015 and April this 2016. Four major banks in South Africa, namely: Standard Bank, Nedbank, Barclays Africa and FirstRand Bank, terminated the accounts of companies controlled by the Gupta family without making their reasons public. The Gupta family requested the then Finance Minister Pravin Gordhan to intervene with the decision of the banks to close their bank accounts. The Minister filed an application to court asking a court to declare that he could not interfere with the decisions by the banks. FirstRand’s court filing is in support of the application by Finance Minister Pravin Gordhan and Barclays and Nedbank followed with filing legal applications similar to FirstRand’s application.

FirstRand Bank was the first bank to close the accounts of Oakbay Investments a company controlled by the Gupta brothers, FirstRand bank base their decision for closing the bank accounts of the business family linked to allegations of influence in President Jacob Zuma’s government on suspicions of money laundering.

In an affidavit dated 29 November that was files in court, FirstRand Chief Executive Officer Johan Burger said his company had closed Oakbay bank accounts to comply with international regulations.

“These practices and standards require us to take steps to prevent FirstRand being used for money-laundering and other unlawful activities,” Burger says in the court papers.

The four banks gave the Gupta family more than a month’s notice and citing the need to comply with international banking rules when dealing with customers and concern over their reputations as the reasons for the closure of their accounts. In his court application Pravin Gordhan included a document from South Africa’s Financial Intelligence Centre listing 72 reports of suspicious transactions totaling R6.8 billion that implicated members of the Gupta family and their companies. This seems to be the basis of the allegations of the Gupta families’ money laundering accusations and the need for the four banks to comply with international regulations.

Relationship between a bank and its customer

The relationship between a bank and its customer is based on contract, the types of contracts that a bank may enter into with its customer is one of mandate, loan for use, deppositum and deposit taking. I will give an example through the case of Bredekamp v Standard Bank that will be discussed below. The customer held a number of current accounts with Standard Bank, It is trite that the type of contract which underlies a current account, is that of mandate. In terms of this contract of mandate, the customer lends money to the bank on current account, the bank undertakes to repay it on demand by honouring cheques drawn on it, and to perform certain other services for the customer, such as the collection of cheques, the payment of stop and debit orders, and the keeping and accounting of the customer’s accounts with the bank.

One of the requirements for a contract is consensus, therefor the bank and the customer need to reach consensus with regards to the contract. Therefore the contract may be terminated in the same way as any other consensual contract. No contract can continue perpetually against the will of either of the parties.

A bank is required to give notice to its customer before terminating the contract; the bank or customer may terminate the contract unilaterally, but cannot necessarily be terminated without giving prior notice to the other party. In the light of the fact that the common-law principles of the law of contract apply to the bank-customer relationship, a bank may, in the absence of a cancellation clause (ie, a lex commissoria) only resile from the contract if the breach of contract by the customer is serious.

Schulze explains terminating a contract between a bank and customer as follows:

“I have already pointed out that the underlying contract between a bank and the holder of a current account is that of mandate. The duties of a party to the contract of mandate include the duty not to cause damage to the other party. I believe that where a customer of a bank conducts his business in a way, which poses operational, and business risks to the bank, the latter can validly argue that the mandatory (ie, the customer) acts in conflict with this duty (Joubert Die Suid-Afrikaanse Verteenwoordigingsreg (1979) 190 et seq). Such conduct would probably satisfy the test of seriousness and will allow the bank to cancel the contract unilaterally, also in the absence of a lex commissoria.”

In this regard it is safe to argue that a bank may terminate its contract with a customer based on the contract or common law. The customer may breach the contract in any other way or cause disrepute to the bank and that would be a valid reason to terminate the contract unilaterally by the bank. The bank may also terminate the contract due to compliance of national or international regulations, an example is the Bedenkamp case discussed below.

Supporting case law and articles

The main question of whether a bank has the right to cancel a contract between it and its customer unilaterally? Was put before the court in the matter of Bredenkamp v Standard Bank South Africa ltd (2010 4 SA 468 (SCA); 2010 4 ALL SA 113. Before the matter was heard at the SCA, two lower courts also had to make a decision based on the same question.

The factual background of the Bredenkamp case as provided for in Schulze (2011) 32 Obiter 211-223 is as follows:

On 25 November 2008 the American Department of Treasury’s Office of Foreign Assets Control (“OFAC”) listed Bredenkamp and the other applicants as “specially designated nationals” (“SFNs”). This meant that they became subject to the sanctions imposed and enforced by OFAC. On the following day Standard Bank became aware of Bredenkamp’s listing and that OFAC suspected Bredenkamp of “being involved in illicit business activities including tobacco trading, arms trafficking, oil distribution, diamond extraction and of being a confidant and financial backer of Zimbabwe’s Robert Mugabe”.

During December 2008, Standard Bank decided to terminate the relationship between it and Bredenkamp and to close the accounts, which Bredenkamp had with Standard Bank. There were three reasons why Standard Bank decided to close Bredenkamp’s accounts:

  1. The mere fact of the OFAC designation of Bredenkamp and the other three applicants;
  2. The risk that Standard Bank’s reputation may negatively be affected should it continue to have Bredenkamp as a customer; and
  3. There were certain business risks for Standard Bank should it carry on granting banking facilities to Bredenkamp and the business entities under his control because of his listing as a SFN.

Standard Bank argued that the contract between itself and Bredenkamp contained a clause, express or tacit, in terms of which itself had the right to terminate the contract for good cause, bad cause or no cause at all (hereinafter “the lex commissoria”).

Bredenkamp applied for an interim interdict to prevent Standard Bank from closing his bank accounts and thus to retain the status quo.

The question before the court was still whether Standard Bank had the right to terminate the bank-customer relationship (ie, the agreements between it and Bredenkamp) and to close Bredenkamp’s bank accounts unilaterally.

The court held that the decision by Standard Bank to terminate its relationship with Bredenkamp was not reasonable and granted the relief sought by Bredenkamp.

Some of the reasons for the court’s decision was that Standard Bank is one of the major banks in south Africa and have oligopoly in the market hence the Bank uses its position of power to impose standard – form contracts on their customers. Such powers would be exercised oppressively and there was undeniably an element of oppression when a bank decided to terminate the contract without good cause.

In the main application in Breedenkamp v Standard Bank the court rejected reasoning when allowing the interim application in the interlocutory application. In the main application, the court confirmed a bank’s right to terminate the relationship between it and its customer unilaterally, provided that certain requirements are met.

In this case the parties contracted in an equal footing despite the fact that the contract was a standardised contract of the bank. Bredenkamp is a well-established and influential businessman; he was an international commodities trader who represented a multi-national entity in great wealth.

The court further held that there is no evidence that the closing of Bedenkamp’s accounts with Standard left him stranded without another bank to use. As far as Bredenkamp’s integrity was concerned, the court held that a bank is entitled to rely on the integrity of its customers to conduct their business legally. A bank also has certain obligations and regulations to comply with, in terms of national and international legislation. Failure to comply with these regulations may have serious legal consequences for a bank.

The application was dismissed with costs, and Bredenkamp appealed to the SCA.

During the appeal Bredenkamp and others contended that the closing of their bank accounts was unfair because it was unlikely that they would be able to obtain other banking facilities. They relied on a Constitutional Court judgment of Barkhuizen v Napier (2007 5 SA 323 (CC)) for the proposition that a party is not entitled to use its contractual rights if it would be unfair to the other party. The court held that the appellants had misconstrued the Barkhuizen judgment; such an interpretation of the Barkhuizen case would lead to all types of absurdities and impracticalities. For example, a debtor would be able to argue that it would be unfair of a creditor to call up a loan on the due date because the debtor is unable to repay the loan and that enforcement could lead to the latter’s sequestration. The court concluded that in any event, the closing of the accounts was not unfair under the circumstances of the case, and the application was dismissed.

The banks were correct in closing their accounts with the Gupta family, as we can establish from the Bredenkamp case the banks can unilaterally terminate their contracts with a customer. The said banks are merely complying with the national and international regulations of which, if they decide to neglect will amount to illegal action by the banks. The Gupta family failed to prove that the closing of their accounts by the banks will result in them being unbanked, as that would be a strong reason for the banks not to terminate their contract with the said family.

Further the banks need to maintain their reputation in society, the other reason for the banks decision to terminate their contract with the Gupta family was to maintain their reputation, and manage to keep the existing clients they had, despite the saga occurring around the Gupta family.

Recent events

Considering recent events The National Assembly’s standing committee of finance has endorsed a National Council of Provinces amendment to the Financial Sector Regulation Bill to require banks and other financial institutions to give reasons for termination of products such as the closure of bank accounts. The Financial Sector Regulation Bill will give effect to the twin-peaks system of financial regulation, leading to the separation of prudential regulation of financial institutions from regulation of market conduct.

In terms of the amendment adopted by the National Council of Provinces select committee, the Financial Sector Conduct Authority will be able at its discretion to lay down rules for financial institutions to follow in refusing, withdrawing or closing financial products or financial services.

The authority will also determine the disclosures that has to be made to the customers and could oblige the financial institution to report any refusal, withdrawal or closure of a product or service to the financial sector regulator.

In terms of the amendment, the standards set by the authority will have to take into consideration international standards and practices and be subject to the requirements of the Financial Intelligence Centre Act and other the laws governing the financial sector.

These recent developments are said to be promulgated in order to protect the consumer, as some customers do not enter into these contracts in an equal footing with the bank, and the bank might use its power to unilaterally cancel the contracts with no reason given to the customer. The banks have a fiduciary duty to the customer and in so doing must always act in good faith.

By Konanani Tshivhase

Unlawfully obtained Facebook communication admissible in court In the matter between Harvey v Nieland and others

Imagine you are watching the sunset somewhere in a cozy environment, feet up, birds chirping, sounds of flowing waters etc. Imagine the urge to open your Facebook account to let the world know how rosy your life is. While at it and on your “private” account, you make certain allegations to your acquaintances and former clients about business prospects you are venturing into and you get carried away at times. At that moment, you even conspire and tell people to keep things on the hush because you know the subjective impact of the nudging you just did. Your attitude may be “what could possibly go wrong”, besides, this is my private social account, and so, you become nonchalant and do it anyway. Well, that attitude may reflect negatively on you in law. If you continue reading, you will notice how Nieland’s private Facebook messages which were unlawfully obtained were used against him in what seems a bizarre turn of events. I will further discuss how and why that was so, just in case you find yourself typing away on social media platforms.

The facts herein are pretty straightforward, Harvey and Nieland were business partners and had registered and traded in a Close Corporation called Huntershill Safaris CC. Harvey held a 51% members’ interest and Nieland 49%. Their core business it seemed was to sell hunting tours. Nieland was employed as a professional hunter and safari guide. Well, they parted ways with simmering tensions but Nieland remained a member of the Close Corporation nonetheless. Harvey suspected foul play that Nieland was sabotaging Huntershill but could not prove it. He suspected that since he joined another gaming house called Thaba Thala as a farm manager, he was going to or is pouching Huntershill clients and breaching his fiduciary duties towards Huntershill in terms of Section 42 of the Close Corporation Act 69 of 1984.

So, Harvey approached his lawyers who directed a letter to Nieland, safe to mention there was quite a ping pong effect of letters. Eventually, Harvey’s lawyers requested that Nieland desists from disparaging Huntershill business activities, that he is in breach of his fiduciary duties alternatively breach of his restraint of trade. Nieland’s lawyers responded by denying the allegations but recorded that they will instruct Nieland not to engage in such activities. So, back at the ranch, one of Harvey’s employees muffled that they knew Nieland’s Facebook password. Just what Harvey needed, a chance to snoop on Nieland. They accessed quite a large number of incriminating data from Nieland’s Facebook profile (the so-called Annexure “G” in court papers), needless to say, that was unlawful.

Based on this “evidence”, Harvey then instructed his lawyers to file an urgent application to the Eastern Cape Division in which he requested the court to order Nieland to stop his shenanigans. The matter was heard by Plasket J who then had to determine merits regarding three things: 1. Urgency of the application, 2. Whether or not to strike out Annexure “G” to the Founding Affidavit and 3. Decide whether or not the Applicant deserves the relief claimed by Harvey.

So, without delving into the technicalities attached to the application itself, the court agreed with the urgency therein. Secondly, the court turned its focus to the infamous Annexure “G”. The court agreed that accessing Nieland’s Facebook page without authorization was a violation of his privacy (refer to Section 14(d) of the Constitution of 1996). I must say, Nieland’s answering affidavit must have made a meal of this assertion but there was a critical aspect that the court made reference to which tipped the scales in this matter. Section 86(1) of the Electronic Communication and Transaction Act 25 of 2002 (hereafter the Act) states:

(1) Subject to the Interception and Monitoring Prohibition Act, 1992 (Act No. 127 of 1992), a person who intentionally accesses or intercepts any data without authority or permission to do so, is guilty of an offence.

The shortcoming of the Act is that it is silent on the admissibility of such evidence as obtained through unscrupulous means. That said, the discretion then fell squarely on the court to make the decision in terms of common law and particularly, in civil cases irrespective of how the “evidence” was obtained. To add salt to injury, the answering affidavit where Nieland denied his activities together with his letters propelled a particular interest to the court. Consider the following if this picture is still murky, in civil proceedings, both parties are at liberty to choose the material they wish to discover in order to advance their case and in some instances, that material could be detrimental to their case. However, in criminal matters, the defendant does not have to discover anything. So this choice in civil matters further assisted Harvey’s case. Eventually, the court frowned at the attitude of Nieland, who had denied under oath such activity but now “proven” by this Annexure “G” and further hid behind the privacy clause in the Constitution. At the outset, it must be said that privacy is not an absolute right especially where you expose yourself to business and social interactions. As you can imagine, the privacy defense fell hollow and could not hold in light of the data contained in Annexure “G”. The court also considered what other legal options Harvey could have followed and opined they too, could not have assisted him for example, he could have sought Anton Pillar orders or filed the same application without Annexure “G”, sued damages arising from breach of fiduciary duties.

In the end, when confronted with an issue pertaining to allegations of impropriety relating to social media utterances, one ought to be circumspect before denying anything out of hand as there may be incriminating evidence that your opponent may have up their sleeve. There was brilliance in this instance to launch an application instead of action proceedings, possibly to circumvent speaking to the authenticity of the infamous Annexure “G”. So, the court literally looked at what Nieland had done by luring Huntershill clients through his posts in violation of his fiduciary duties, he lied in his answering affidavit contrary to Annexure “G” and ordered the admissibility of Annexure “G” despite the privacy clause defense, ordered costs against him and further interdicted Nieland to continue engaging in activities which amongst others violated his fiduciary duties to Huntershill. So, be careful what you say on Facebook and other similar channels of social media while idling with nothing much to do.

By Phalen Selibi

Grandparents’ duty to support

In the unreported case, N v B, a grandmother applied for an order to review and set aside a directive issued by a Maintenance Officer in terms of regulation 3(4) made in terms of the Maintenance Act 99 of 1995.


The couple involved in the above matter was married with two minor children born of the marriage. They lived in a home worth slightly in excess of R3 million bonded with a remaining balance of R600 000.00. They were involved in acrimonious and protracted divorce proceedings. Although Mrs was the prime caregiver and regardless of the fact that Mr had fallen on hard financial times, she did not apply for interim maintenance in term of rule 43. Mrs earned a modest income and lived in the former matrimonial home. Mrs eventually lodged a complaint with the Maintenance Officer against the grandparents of the minor children for their maintenance and proceeded to set out her assets, means and needs of the minor children in the prescribed claim form. She also disclosed her interest in the matrimonial home and its value. Mr also earned a modest income.

The Maintenance Officer then issued a directive in terms of regulation 3(1) of the Maintenance Act of 1995 in which he directed both grandparents referred to in the act as “Persons against whom a maintenance order may be made to appear before the Maintenance Officer and to produce certain documentation listed in the directive. The directive further informed the grandparents of the possibility of an enquiry being instituted in respect of the maintenance court enquiry.

The grandfather raised an objection to this joinder on the basis that he was not the natural father of the husband to Mrs and that he and the grandmother were not married in community of property and on that basis no maintenance order could ever be made against him.

Subsequently Mrs instituted action for relief in that regard.

On the 17 March 2014 Judge Yekiso granted a declaring order that the directive issued against the grandfather was a nullity but declared further that the declaration did not affect the directive insofar as it related to the grandmother.

The grandmother responded and appeared before the Maintenance Officer, produced the required documentation and presented the following arguments:

  1. regulation 3(1) of the Maintenance Act permits a directive to be issued in respect of any person against whom a maintenance order may be made. The applicant is not a person against whom a maintenance order may be made (relying on the judgment by Kgomo J in De Klerk v Groepie and others). It was argued that the Mrs was required to obtain a court order against the other parent prior to invoking the duty of support of a grandparent, alternatively the liability of a grandparent cannot be invoked until and unless the parents are completely unable to support the minor children;


  1. the Maintenance Officer could thus not issue a directive under regulation 3(1) of the Maintenance Act and further is it unlawful and prejudicial to proceed against one grandparent alone. It is trite that the grandparents jointly are liable for the maintenance of a grandchild when that duty can be invoked, but in this case Mrs (wife) was proceeding against one grandparent;


  1. for the preceding reasons the issuing of the directive was beyond the powers of the Maintenance Officer and was unlawful. This directive must also be subjected to a review under the provisions of the Promotion of Administrative Justice Act 3 of 2000 (PAJA), alternatively it would be ultra vires in terms of the relevant principles under common law.

Application of law to facts

As mentioned earlier, the court established that the grandmother’s above arguments relied on the decision in De Klerk v Groepie and others.

1st Argument:

It was further established that the grandmother also based her argument on the matter of Miller v Miller in which the court held:

In my view the duty to support falls upon parents, grandparents, children and brothers and sisters only becomes operative so as to give rise to a claim at law where it is proved that the husband is dead or unable to afford support. Primarily the duty falls upon the husband and it is only when he is dead or unable to provide support that a right to claim support from a parent or child, brother or sister arises.’

In De Klerk v Groepie and others Judge Kgomo stated that:

‘It is a well-established principal of the common law that although grandparents may have a reciprocal duty to support their grandchildren, such a duty does not come into operation or gives rise to a claim in law, unless and until it is established that the parents of those minor children are deceased or are unable to support them

A dependant may thus not claim support from a more remote relative such as grandparent before he / she has gone against the closer relative, in this case their father, FW de Klerk Jnr.’

Judge Butler in the present case held that:

‘Apart from the absence of authority for the proposition relied on (by Kgomo J), I have difficulty comprehending the logical basis for the conclusion reached. If it were correct, it would mean that in instances where one or other parent is already financially destitute and obviously unable to maintain a child, it would nonetheless be necessary to go through the process of issuing proceedings against the parent and obtaining judgment before being able to proceed against the grandparent. There would be an inevitable waste of costs, a delay and the possibility of the process being regarded as an abuse of court. The draining of financial resources in that way would also not be in the interests of the child.’

The present court disagreed on the basis of the above reasons with the conclusion in the De Klerk v Groepie and others case and declined to follow it.

2nd Argument / in the alternative

It was argued that a grandparent cannot in law be liable unless a parent is unable to maintain a grandchild. Mrs, when seeking the directive disclosed that she had assets in excess of R3 million which were bonded only to the extent of R600 000. Based on these facts the grandmother argued that she cannot be a person against whom a maintenance order ‘may’ be granted. The present court agreed that if a parent has a valuable capital assets this might be a strong indication that the parent is not indigent. While the parents might have an equity capital of R2,4 million, it is clear from the facts that is the dispute between the parents that stands in the way of realising the assets and therefore delaying the finalisation of the divorce. It may well be that the grandmother was well resourced and readily able to support the children at least on a temporary bases.

3rd Argument:

I was argued that it is improper and unfair to proceed against the grandmother as the sole grandparent, given that the liability of the grandparents is coextensive. The present court acknowledged that the liability of the parents was coextensive but understood why the maintenance officer issued the directive to one grandparent. The court concluded that the decision was made by the Maintenance Officer on the basis of the information available at that time. The court found that the Maintenance Officer did not act unlawfully when issuing the directive.

This application subsequently failed.

By Abi Matjila