Bredenkamp and Others v Standard Bank of South Africa Ltd

• Jurisdiction: South Africa
• Judge: Harms DP, Cloete JA, Ponnan JA, Cachalia JA and Saldulker AJA
• Judgment Date: 27 May 2010
• Citation: 2010 (4) SA 468 (SCA)
• Docket Number: 599/09
• Hearing Date: 06 May 2010
• Counsel: M Brassey SC (with K Hopkins) for the appellants. JJ Gauntlett SC (with RM Pearse) for the respondent.
• Court: Supreme Court of Appeal

Bredenkamp and Others v Standard Bank of South Africa Ltd
2010 (4) SA 468 (SCA) [*]

2010 (4) SA p468

Citation	2010 (4) SA 468 (SCA)
Case No	599/09
Court	Supreme Court of Appeal
Judge	Harms DP, Cloete JA, Ponnan JA, Cachalia JA and Saldulker AJA
Heard	May 6, 2010
Judgment	May 27, 2010
Counsel	M Brassey SC (with K Hopkins) for the appellants.; JJ Gauntlett SC (with RM Pearse) for the respondent.

Flynote : Sleutelwoorde B

Contract — Legality — Contracts contrary to public policy — Specific instances — Clause in contract between banker and client entitling banker unilaterally to cancel contract for no cause at all and without hearing client — Banker C cancelling contract on ground that client posing risk to bank's reputation — Fairness of exercising contractual rights not arising when involving no public policy considerations or constitutional values — Cancellation not unfair — Clause enforceable.

Contract — Remedies on breach — Defences — Exceptio doli generalis — Possible revival — View that recent case law having revived exceptio doli D generalis incorrect.

Banker — Relationship between banker and client — Contract between banker and client — Unenforceable stipulations — Clause in contract between banker and client entitling banker unilaterally to cancel contract for no cause at all and without hearing client — Banker cancelling contract on E ground that client posing risk to bank's reputation — Effect of cancellation to informally blacklist client within banking sector — Fairness of exercising contractual rights not relevant when involving no public policy considerations or constitutional values — Cancellation not unfair — Clause enforceable.

Headnote : Kopnota

F The appellants' accounts were closed by Standard Bank (the bank) after it became aware that the United States Department of Treasury's Office of Foreign Assets Control (OFAC) listed John Bredenkamp, the first appellant, as a 'specially designated national' because of his alleged ties to the Zimbabwean Mugabe regime. The rest of the appellants were legal entities in which first appellant had a controlling interest and were similarly 'listed'. G The bank also became aware that some international notoriety attached to the first appellant's activities as an international commodity trader.

Concerned with the reputational and business risks posed by a continued relationship with the appellants, the respondent terminated the agreements underlying appellants' banking facilities. Although it was an express term of H the underlying agreements that they could be cancelled with reasonable notice, the appellants had succeeded in obtaining an interim interdict preventing the bank from doing so in the absence of good cause shown.

Of the various grounds advanced for the relief sought, the only contention to survive concessions made by the appellants during the return-day proceedings, which saw the interim interdict discharged, was that the bank's I enforcement of its right to cancellation was unfair and therefore invalid for being unconstitutional. The appellants alleged that the cancellations were unfair, in that (1) no other banks would grant them facilities if they disclosed the reasons for the closure of their accounts and they would therefore be effectively unbanked; (2) it was procedurally and administratively so, since the bank should at least have discussed the matter with them J before closing the accounts; (3) the bank had less drastic steps available to

2010 (4) SA p469

it, such as obtaining undertakings from the appellants to reduce their risks A and; (4) it was based on moral considerations, being the first appellant's reputation.

The appellants' interpretation of the Constitutional Court judgment in Barkhuizen v Napier2007 (5) SA 323 CC (2007 (7) BCLR 691) (Barkhuizen), as authority for their contentions as to fairness, was endorsed at the proceedings granting the interim interdict, but not directly addressed by the court B a quo. On appeal to the SCA,

Held, that the appellants' acceptance of the provision of the contract, entitling the bank to terminate the contract on reasonable notice as fair and reasonable, and therefore not in conflict with any constitutional values, limited their complaint to the exercise of the admittedly 'fair' and valid contractual right. (Paragraph [27] at 477D.) C

Held, further, that our courts have always been fully prepared to reassess public policy and declare contracts invalid on that ground. Determining whether or not an agreement was contrary to public policy required a balancing of competing values, of which keeping contractual promises was but one. (Paragraph [38] at 480E - F.)

Held, further, that it was trite that the common law derived its force from the D Constitution and was only valid to the extent that it was congruent with the Constitution. (Paragraph [39] at 481C - D.)

Held, further, that since it was not the appellants' view that the right to cancel the agreement implicated any constitutional principle, compromised constitutional democracy, or their dignity, freedom or right to equality and the like, the instant case was about fairness as an overarching principle, and nothing E more. (Paragraph [30] at 478B - C.)

Held, further, that the view that recent case law revived exceptio doli generalis, was incorrect.(Paragraphs [32] - [35] at 478E - 479G.)

Held, further, that the dictum in Barkhuizen on which the appellants relied for the contention that the enforcement of contractual terms must also be reasonable, was only partly quoted and conveniently left out the F contextual phrase. (Paragraph [26] at 477B - C.)

Held, further, that Barkhuizen confirmed that our common law always recognised the right of an aggrieved person to seek the assistance of a court of law, and that a term in a contract which deprived a party of this right, was contrary to public policy. The question whether the clause was contrary to public policy, depended on whether it was inimical to the values of constitutional G democracy. (Paragraph [43] at 481I - 482A.)

Held, further, that Barkhuizen also confirmed that a contractual term which only limited a constitutional right, as opposed to one which deprived someone of it, was not necessarily contrary to public policy, but would be so if it were unreasonable and unfair. (Paragraph [44] at 482C - D.)

Held, further, that Barkhuizen meant that contracts that were prima facie H unconstitutional were unenforceable. Where the enforcement of a prima facie innocent contract implicated an identified constitutional value and such value was unjustifiably affected, the term should not be enforced. Similarly, if a contract imposed a limitation on a constitutional value within the meaning of s 36 of the Constitution, the court should assess whether, at the time of enforcement, the limitations were still fair and reasonable in the I circumstances. (Paragraphs [47] and [48] at 483A - D.)

Held, further, that Barkhuizen did not hold that the enforcement of valid contractual terms had to be fair and reasonable even if no public policy considerations found in the Constitution, or elsewhere, were implicated, nor were there any indications in the minority judgments of an overarching requirement of fairness. (Paragraphs [50] and [51] at 483E - G and 483H.) J

2010 (4) SA p470

A Held, further, that it was difficult to see how it could be fair to have an obligation imposed on a bank, that a client was to be retained simply because other banks were not likely to accept that entity as a client. There was no constitutional niche or other public policy consideration justifying such a demand. (Paragraph [60] at 486A.)

Held, further, that the submission, that the bank's decision to close the accounts B was procedurally and substantively unfair, was without basis. Procedures to establish the truth of the allegations underlying the account closures would in any event have been irrelevant since the closure was based not on the merits of the allegations, but on the fact of listing and the risks it posed for the bank. The same argument applied to the second appellant's reputation, where the bank relied on the fact of his reputation and not the truth of it. C As for the objection by the appellants that in respect of the second appellant's reputation, the bank had relied on facts only determined after closure of the accounts, our case law confirmed that party has always had the right to justify a cancellation with objective facts unbeknown to that party at the time when the cancellation took place. (Paragraphs [61] and [63] at 486B - E and 486F - 487A.)

D Held, further, that it was not for a court to assess whether or not a bona fide business decision, which on the face of it was reasonable and rational, was objectively wrong where, in the circumstances, no public policy considerations were involved. Appeal dismissed. (Paragraphs [65] and [66] at 487D - E.)

Cases Considered

Annotations E

Reported cases

Advtech Resourcing (Pty) Ltd t/a Communicate Personnel Group v Kuhn and Another2008 (2) SA 375 (C) ([2007] 4 All SA 1368): referred to

Amalgamated Beverage Industries Ltd v Rond Vista Wholesalers2004 (1) SA 538 (SCA) ([2003] 4 All SA 95): referred to

Bank of Lisbon and South Africa Ltd v De Ornelas and Another1988 (3) SA 580 (A): referred to F

Barkhuizen v Napier2007 (5) SA 323 (CC) (2007 (7) BCLR 691): applied

Breedenkamp and Others v Standard Bank of South Africa Ltd2009 (6) SA 277 (GSJ): confirmed on appeal

Breedenkamp v Standard Bank of South Africa Ltd2009 (5) SA 304 (GSJ) ([2009] 3 All SA 339): referred to G

Brisley v Drotsky2002 (4) SA 1 (SCA) (2002 (12) BCLR 1229; [2002] 3 All SA 363): referred to

Crown Restaurant CC v Gold Reef City Theme Park (Pty) Ltd2008 (4) SA 16 (CC) (2007 (5) BCLR 453): footnote 1...