Nedbank met its match on Friday when it was outright defeated by a retired judge who took the bank to court after he had been denied his right to shut down his own companies’ accounts and move their funds to Absa.
The bank, which is one of South Africa’s four major banks, and with the power to do as they wish with their clients’ banking facilities, suffered a major blow when it lost a case brought by retired Judge Kees van Dijkhorst to the North Gauteng High Court in Pretoria, and again lost an appeal on the same matter at the Supreme Court of Appeal on May 9.
The clients who defeated Nedbank are Houtbosplaas (Pty) Ltd and TBS Alpha Beleggings (Pty) Ltd owned by Dijkhorst, who had spent 21 years on the bench of the same court, before he retired.
The two companies successfully sued Nedbank at the high court for damages caused by the bank’s refusal to give immediate effect to their instructions to close their bank accounts.
Concurring with the high court, the Supreme Court of Appeal deputy president Judge Xola Petse, and his colleagues, held that bank customers have a right to summarily terminate their banker contractual relationship and close their accounts within a reasonable notice period.
Both Houtbosplaas and TBS, which were incorporated in 1973 and 1978 respectively with Dijkhorst as their sole director, had held several banking accounts with Nedbank for decades. The companies have four Trusts, which were named after Dijkhorst’s four daughters.
Dijkhorst successfully approached the high court, seeking relief payments of R66 814.68 for Houtbosplaas and R114 288.63 for TBS, with an interest of 10.25% on both figures for unfair treatment, and delaying to grant his request to move his companies’ funds to Absa.
The dispute that led to Dijkhorst’s two companies deciding to terminate their relationship with Nedbank started in 2016, when the latter demanded that Dijkhorst should submit certain documented information as per the Financial Intelligence Centre Act (Fica) of 2001’s provision.
Such documents included copies of the trust deeds of the four trusts together with copies of the letters issued by the Master of the High Court appointing Dijkhorst as the sole trustee of the four trusts. But Dijkhorst instructed the companies’ auditors to provide only three of the trust deeds and said demanding the fourth trust deed constituted an unjustifiable intrusion into the trusts' right to privacy.
However, at the end of 2016, Dijkhorst succumbed a little to Nedbank’s demands, by showing two bank representatives a copy of the fourth trust deed and also offering them to take a photo of the document, which he had refused to hand to them. The two bank officials declined to take a picture as they wanted the actual document.
Nedbank believed the documents would prove its claim that each of the four trusts held 25% of the shares in the two companies. But the two companies insisted that each held 22% of their shares.
Dijkhorst argued that since his trusts were not Nedbank’s clients they were not obliged to provide the trust documents to the bank.
As a result of the deadlock over the shares held by the trusts, Dijkhorst had, on January 20, 2017, given Nedbank a written notice that his companies were terminating their accounts with an intention of transferring all funds to Absa.
But Nedbank refused to shut down the accounts and to also transfer the funds on the basis that Dijkhorst had refused to comply with its demand. After the Banking Ombudsman had failed to resolve the matter in February 2017, the two companies succumbed in June 2017 by providing the outstanding document, which led to Nedbank finally closing down the account and transferring the funds to Absa.
But Dijkhorst did not back down, as he then lodged legal proceedings seeking relief against Nedbank’s unjustifiable and unlawful conduct.
Among its defence argument in both courts, Nedbank had argued that closing the accounts and transferring funding without obtaining all the documents it required would have defeated its obligations to Fica to identify the proceeds of unlawful activities, combat money laundering and financing of terrorists and related activities.
After lengthy deliberations, Judge Selewe Mothle ruled in favour of Dijkhorst saying: “Each one of the four trusts did not exercise 25% of the voting rights at general meetings of the companies. Clients of a bank were under no statutory obligation under Fica to provide documents to a bank for verification purposes upon request to do so by such bank.”
In agreement with Mothle, Petse added that Fica did not apply when Dijkhorst was seeking to shut down his companies’ accounts as a “ business relationship (between Nedbank and Dijkhorst) was already in existence when Fica took effect.”
“In these circumstances, both Houtbosplaas and TBS Alpha were rightfully entitled to (high court) judgment in the amounts claimed, representing more interest calculated from January 20, 2017 (ie the date of demand), to July 10, 2017 (ie the date on which effect was given to their instruction to close the accounts and pay over the various funds held in those accounts to Absa Bank),” read the Supreme Court of Appeal judgment.