Mercantile Bank and others v Surve and others
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Manoim JP, Mlambo AJA and Spilg AJA |
| Judgment Date | 17 July 2023 |
| Citation | 2023 JDR 2694 (CAC) |
| Docket Number | 206/CAC/Oct22 |
| Court | Competition Appeal Court |
Manoim JP (Mlambo AJA concurring):
Introduction
In this matter three banks seek to set aside an interim relief order made by the Competition Tribunal that obliges them, variously, to reinstate or not to close bank accounts, with firms comprising part of what is known as the Sekunjalo Group. The practice complained of is referred to in competition law parlance as a ‘refusal to deal’.
When it brought its application for interim relief the Sekunjalo Group sought relief against nine banks. The Tribunal granted relief against eight of the nine. [1] Although eight banks were implicated in the Tribunal’s order, only three have sought to set it aside in this matter. I have referred to the
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Sekunjalo Group as a single entity because it is a useful shorthand for discussing some of the issues. However, there were 36 entities that brought the application to the Tribunal comprising of individuals, trusts, and firms. [2] Nevertheless all made common cause and were represented by one legal team both in the Tribunal and before this court. It is also accepted that they form part of the same control group and are all identified as black owned firms.
This is not a case where all the entities banked with all the banks. The two banks which provided services to most of the entities are Nedbank and ABSA, but they are not appellants. The three appellants only provided some services to some of the entities. The first appellant, Standard Bank Ltd served three entities, whilst the second appellant, Mercantile Bank and the third appellant, Access Bank Ltd, served only one each. [3]
The Tribunal found that in refusing to deal with the Sekunjalo entities all eight banks had contravened section 4(1)(a) and sections 8(1)(c) and 8(1)(d)(ii) of the Competition Act 89 of 1998 (“the Act”). Put more simply in refusing to deal, the banks were found to have acted in co-ordination with one another, and to have acted unilaterally as dominant firms, to abuse a dominant position. The Sekunjalo Group had also sought relief in terms of section 4(1)(b) and 5(1) of the Act based on the same facts but this relief was not granted by the Tribunal.
Each appellant bank has both appealed and reviewed the Tribunal’s order. (For simplicity I refer to the banks simply as ‘appellants’ and where necessary by name). This leads to the first issue we have to decide in this case. The appeals and reviews largely traverse the same issues. The Sekunjalo Group’s first challenge in opposing the relief sought by the appellants is procedural. It asserts that the banks should not succeed on either route.
The Act gives both applicants and respondents in interim relief proceedings before the Tribunal, the right to appeal. However, while that right is unrestricted for the applicant before the Tribunal it is restricted for a respondent, which may only appeal an order that has “a final or irreversible effect.” The appellant banks were the respondents in the Tribunal proceedings. Hence, they needed to show that the Tribunal order had a final or irreversible effect. The Sekunjalo Group argues that they have not and hence the appeals should fail.
But the appellants have also brought a review. Although the Act provides for reviews of interim relief orders without, as in an appeal, distinguishing between an applicant and a respondent, Sekunjalo argues that nevertheless the review right should be construed narrowly for respondents, otherwise there is a danger that it becomes a form of disguised appeal. Put differently, the right to review should not permit an unsuccessful respondent before the Tribunal to recast a case as a review, which would otherwise be impermissible for it as an appeal.
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The second range of issues concerns whether a prima facie case has been made out both in fact and law against the banks. Each appellant makes out a similar argument here that no prima facie case of an infringement has been made out against them and hence they should succeed in setting aside the order.
Finally, each bank makes out a narrower case for relief based on facts specific to the particular bank. Here the argument is that the Tribunal erred in throwing all the banks into the same pot for relief and thus failing to consider the individual differences.
For reasons I explain later I will first deal with the prima facie case and then the issue of appeal and review although ordinarily one would deal with these issues first.
Current status of the orders
The interim relief orders against the three banks operated for a period of six months. [4] The orders were granted on 16 September 2022 and would have expired on 15 March 2023. However, the orders were extended for a further period of six months until mid-September 2023. The extension of the orders for this further period was not opposed by the three banks. Whether an interim relief order can be extended more than once is a matter of contention but not one this court is called upon to decide now. The fact that the orders are still extant till at least September 2023 means the proceedings before us are not moot.
Background
The Sekunjalo Group is a group of companies operating in a variety of different markets but all ultimately part of the same control structure. The first applicant is Dr Iqbal Survé, who deposed to the founding affidavit, and in his personal capacity was the first applicant in the Tribunal proceedings. Dr Survé is the executive Chairperson of the Group and sits on some of its boards. He explains in his founding affidavit before the Tribunal that the label Sekunjalo Group is a descriptive term not a legal entity. What they have in common is that Sekunjalo Investment Holdings (“SIH”) has either a direct or indirect associate interest in the companies. The Group identifies itself as a black controlled company and many of its entities are new entrants into the markets they operate in. The Group extends beyond the 34 applicants and comprises 200 companies. These companies have interests in a wide ranging number of markets. Dr Survé identifies some as media, information technology, health services, fishing, and aquaculture.
The Group’s troubles in obtaining banking services started in March 2020 when a government Commission of Enquiry into allegations of corruption at the Public Investment Corporation (PIC) published its report. The Commission was led by the former President of the Supreme Court of
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Appeal, Justice Mpati, and hence its name, the Mpati Commission. The Commission inter alia concerned itself with the relationship between the Sekunjalo Group and the state owned PIC. Amongst the findings were that:
“In light of the above, the Commission recommends that PIC must conduct a forensic review of all the processes involved and all transactions entered into with the Sekunjalo Group. Ensure that the PIC obtains company registration numbers of every entity to be able to conduct a forensic investigation as the flow of monies out of and into the group.” [5]
These findings had an immediate impact on the banking sector. On 27 August 2020, ABSA which was the Sekunjalo Group’s primary banker, gave notice that it would close its accounts. ABSA then closed several of the Group’s accounts on 27 February 2021. Over the next fifteen months subsequent to the decision made by ABSA, all eight banks either closed accounts of some of the Sekunjalo entities, or refused to onboard new accounts, or indicated that the accounts were under review.
The banks allege that their concerns emanate originally from the findings of the Mpati Commission, and the consequent publicity, including one on an industry website known as the World Compliance Report. [6]
The banks explained that as registered financial entities they are subject to strict regulatory requirements under a number of statutes. [7] Most placed emphasis on the provisions of the Financial Intelligence Centre Act 38 of 2001 (“FICA”) which obliges banks in certain circumstances to terminate a banking relationship with a client. [8] They also relied on their common law right to terminate a contract with a client unilaterally for reasons that include reputational risk which was recognised by the Supreme Court of Appeal (SCA) in Bredenkamp v Standard Bank of South Africa. [9]
The various banks maintained that the findings by the Mpati Commission and the considerable media attention they attracted, placed an obligation on them to reconsider, or in the case of new clients to consider, their reputational and regulatory risk if they continued or commenced a relationship with entities in the Sekunjalo Group. Much publicity attached to these decisions which some of the late deciding banks considered in their decisions i.e., an admitted awareness of what the other banks were doing.
As some banks closed the doors to them, so the entities in the Sekunjalo group sought banking services from banks they had not previously had any dealings with. Thus, in the case of two of
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the appellants, Mercantile and Access, although only banking for one of the Sekunjalo entities at the time, they were later each approached to provide services for other entities in the Sekunjalo Group.
Faced with the prospect of being “unbanked” with the doors of financial institutions apparently closing on it sequentially, the Sekunjalo Group embarked on a series of legal actions against various banks to interdict them from closing its entities accounts or to restore them. The court was advised at the time of the hearing before us that these applications were still pending. Thus, the application to the Competition Tribunal...
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