ENSafrica ESG Webinar Series: Managing Reputational Risk ' The Right To Terminate A Customer Relationship For ESG Reasons

• Published date: 27 May 2022
• Law Firm: ENSafrica
• Author: &nbsp ENSafrica

Prior to the introduction of section 9 of the Conduct Standard for Banks in July 2021, absent a clause to the contrary in the agreement between the bank and its client, the relationship is terminable on reasonable notice, provided that the termination is not contrary to public policy or does not offend a constitutional value

2. Case Law:

• Bredenkamp v Standard Bank 2010 (4) 468 (SCA)
• Hlongwane v Absa Bank Limited (case I 75782/13 (GP) (10 November 2016))
• Minister of Finance v Oakbay Investments (Pty) Limited and others 2018 (3) SA 515 (GP)
• Annex Distribution (Pty) Limited v Bank of Baroda 2018 (1) SA 562 (GP)
• AB and Another v Pridwin Preparatory School and Others 2020 (5)
• Beadica 231 CC and Others v Trustees for the time being of the Oregon Trust and Others 2020 (5) SA 247 (CC)

Bredenkamp v Standard Bank 2010

• In 2008 the US Department of Treasury listed Bredenkamp as a ''specially designated national'' (SDN) because of his association with President Mugabe, and because Bredenkamp was said to have provided financial and logistical support to ''Mugabe's regime''.
• 3 initial reasons were advanced by the Bank for the closure
  • inclusion as a SDN
  • allegations might impair the Bank's reputation
  • certain business risks could arise should the Bank continue offering banking services to Breedenkamp
• The SCA held that it would not be fair to impose an obligation on the Bank to retain a client because other banks may refuse to bank that client.
• The Bredenkamp judgment confirmed that banks may unilaterally terminate contracts on reasonable notice.

Hlongwane v Absa Bank Limited (2016)

• Mr Hlongwane brought an application in terms of PAIA for all records relating to ABSA's decision to close his accounts.
• The Court dismissed Mr Hlongwane's application and held that the Bank's bona fides in closing Mr Hlongwane's accounts could not be questioned.
• The Court recognised that the Bank had no obligation to retain a client whose monitoring in terms of money laundering measures would be more onerous when compared with the benefit the Bank would receive from banking Mr Hlongwane.

Minister of Finance v Oakbay Investments (Pty) Limited

• Full bench of the Gauteng High Court confirmed that the bank may terminate the relationship, in its discretion, on reasonable notice to the customer, provided that the reasons for terminating the account do not violate public policy or constitutional values.
• The Gauteng High Court in this case also quoted with approval the Bredenkamp judgment.

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