Standard Bank's closure a 'calamity'

The “calamity” that could be caused by Standard Bank’s closure of accounts belonging to Sekunjalo Group related companies including Independent Media was laid bare in court on Tuesday, with lawyers arguing that it would give rise to a number of constitutional contraventions.

Above the impact the bank’s decision will have on media freedom, the rights to freedom of speech and employees’ livelihoods were also at great risk, the court was told.

Advocate Muzi Sikhakhane SC said making such a decision was “callous insensitivity” to the Sekunjalo Group as its client who they had “proved no fraud or any wrongdoing” against.

“We are not being dramatic or engaged in hyperbole when we submit that the applicants and thousands of its employees and dependants face an imminent calamity on Friday – they face a calamity that anybody will face if we got letters today to say that our bank accounts will be closed. That’s the calamity. They face the calamity of any company that participates in the economy if they are told they can’t trade from tomorrow.

“You cannot trade without a bank account and we emphasise this point because one senses there is either a lack of appreciation of this catastrophe or callous insensitivity of the bite to those who will be affected by this closure,” argued Sikhakhane.

“The essence of the complaint says whatever it is they suspect applicants to have done, which is wrong, or what they have read about... the essence of their case is reputational issues because of negative media reports about the applicants or their association with Dr (Iqbal) Surve (Sekunjalo chairman). In fact in essence what they are saying is that the truth does not matter. They are saying ‘we don’t need evidence to close your accounts. We don’t need evidence of wrongdoing on your part’.

They are saying that we have read so much about you in the media... this media they rely on is the media who competes with Sekunjalo Group and they rely on this.

And the danger of relying on negative media reports, (is that) you run the risk of violating constitutional rights.”

The black-owned Sekunjalo Group turned to the Equality Court sitting in the Western Cape High Court for an interim interdict against the bank in a bid to save the livelihoods of its employees after Standard Bank served it with a notice to terminate its accounts.

The court intends to deliver its ruling this Friday, the same day Standard Bank had given the company as the deadline.

The “reputational risk excuse” which Standard Bank used as a basis against the Sekunjalo Group in their bid to shut down the bank accounts of its related companies was described as “flimsy, prejudicial and (comes with) political reasons”.

Further in their “flimsy” reasoning to have all bank accounts affiliated affiliated to the Sekunjalo Group shut down, the bank has now argued that if they do not do so, they would be in contravention of the Financial Intelligence Centre Act (Fica) – a “belated reliance” which Standard Bank – the group’s primary banker – had not used in the launching of their applications.

The furtherance of wanting to shut down the accounts would be an “abuse of dominance”, Sekunjalo’s legal team argued.

If the banks - who have relied on rival media reports to base their “reputational risk excuse” on – were allowed to go ahead with the closure of bank accounts affiliated to the group, it would be “precedent setting for anybody who holds a bank account if Standard Bank takes a stance of closing bank accounts without seeking to find out truth of its clients”, argued Sekunjalo lawyers.

Judge Judy Cloete presiding over the matter had asked about the option for a “structural interdict” rather than an interim interdict (as currently sought) pending the final outcome for relief “as the matter could go on for years”.

This suggestion was made as Judge Cloete said it had to be borne in mind the amount of interlocutory issues as well as cognisance of the amount of applicants and respondents, meaning that this “could go on for some time for the matter to become ripe” as there were still pending matters before other courts.

Standard Bank’s attorney, Robin Pearce submitted that Sekunjalo Group had “overstated” that the group would be unbanked in its entirety if the closures went ahead, arguing that the group could have approached other banks to continue their business.

“We would submit that self-creation and prejudice are to be viewed in the light of what we view as the unnecessary nature of this form of urgent relief. I have already mentioned that there are other banks and bank institutions that bank this group and those facilities should have been mentioned. The applicants don’t say in the answering affidavit that ‘these are the efforts that have been made’ (to not be unbanked).”

Pearse also claimed that the applicant companies had not fulfilled their Fica obligations.

“Standard Bank is not satisfied with the way the companies were operating their bank accounts,” he said, citing Sekunjalo’s investment deals and “suspicious” transactions between the companies.

Judge Cloete quipped that it would be unlikely that Nedbank and Absa would “welcome” the companies into their offices, open business accounts for them and offer them “fat overdrafts”.

In his rebuttal, advocate Vuyani Ngalwana SC for Sekunjalo, said for 22 of the 31 companies which had business current accounts with Standard Bank, “there is no alternative”.

All nine media companies banked with Standard.

“The applicants would not be able to approach the other banks, as they too have tried to unbank them,” he added.

Cape Times