Banks are clogging the system, says court

Written by Ciaran Ryan. Posted in Journalism

From GroundUp. This is Part 2 of a two-part series. Part 1 is here.

A full bench of the Pretoria High Court ruled last week that magistrates’ courts should be the first port of call for banks seeking judgment against their clients. On Wednesday we explained the arguments in the case that dealt with access to justice for distressed debtors. But another important part of the case was how these applications to the court by banks have clogged up the high courts. 

The Pretoria High Court judges said the number of new cases coming before the Pretoria High Court had increased to nearly 100,000 in 2016 from 74,000 in 2012. In the Johannesburg High Court the case load is more stable, increasing to nearly 50,000 in 2017 from about 48,000 in 2012.

The two courts had about the same number of judges: 40 permanent judges and 23 acting judges in Pretoria, and 38 permanent judges and 24 acting judges in Johannesburg. Judges sat in court almost every day and were forced to write judgments after hours or on weekends, the judges said.

“This results in inordinate delays in delivering judgments. Obviously this is an untenable situation that needs to be addressed in the interests of justice,” reads the Pretoria High Court judgment.

They said judges were also taking longer in trial preparation due to changes to court rules allowing for reserve prices to be set in cases where repossessed homes are sold at auction. All this resulted in delays of four to five months for cases to be heard. The problem was aggravated by banks bringing cases before the high court which should properly be heard in the magistrates’ courts.

The judgment says it becomes untenable for a single judge to hear 80 unopposed matters (where the defendants put up no opposition) in a day. This has now been limited to 60 matters per judge per day.

Another victory for distressed debtors – court tells banks “take your cases elsewhere”

Written by Ciaran Ryan. Posted in Journalism

From GroundUp. This is Part 1 of a two-part series. Part 2 is here.

The Pretoria High Court struck another blow on behalf of distressed debtors last week. A full bench of three judges ruled that magistrates’ courts should be the first port of call for financial institutions seeking judgment against their clients, where matters fall within the lower courts’ monetary jurisdiction.

This follows the ruling two weeks ago by a full bench of the Johannesburg High Court. That court ruled that repossessed homes must be sold with reserve prices at sheriffs’ auctions. This is to stop homes from being sold for a fraction of their market value.

Banks frequently go to the high courts for judgment against defaulting clients, even when relatively small amounts of money are owed.

The Judge President of the Pretoria High Court convened a full bench to decide whether the high court should entertain cases that should be heard by the lower courts just because both courts have jurisdiction under the law. He also asked the court to consider whether there is “an obligation on financial institutions to consider the cost implication and access to justice of financially distressed people” in deciding which court to use.

Why banks prefer suing in the high courts

A key reason why banks prefer suing in the high courts is to keep up pressure on a defaulting client. Armed with a high court judgment against a client in arrears, banks are able to keep alive the threat of sale in execution order, even if the borrower catches up on arrears. If they default a second time, the bank can sell the person’s home without again having to approach the court. This is less likely to happen in a magistrates’ court, where the order expires after a year.

The Pretoria High Court ruled that if banks brought their cases to the high courts when the lower courts had proper jurisdiction, the high courts could kick the cases down to the lower court. This would save legal fees for the debtor.

FSB whistleblower’s legal challenge hits the end of the road

Written by Ciaran Ryan. Posted in Journalism












This article first appeared in Moneyweb.

Pension fund whistleblower Rosemary Hunter’s campaign to force the Financial Services Sector Authority (FSCA), formerly known as the Financial Services Board (FSB), to investigate irregularities surrounding the cancellation of 4 600 pension funds was rejected in the Constitutional Court on Thursday (September 20).

Hunter achieved a few minor victories, including gaining access to the previously withheld reports by Judge Kate O’Regan and KPMG. She was also granted leave to appeal (though lost the actual appeal) and was found to have sufficient standing in court to represent the public interest. The court further softened the blow by refusing to grant a costs award against her.

But the big fight – to force an investigation into the so-called cancellations project and any prejudice suffered by beneficiaries – was lost on the grounds that the FSCA had already launched investigations by engaging O’Regan, KPMG and pension funds attorney Jonathan Mort. In a minority judgment, three judges said it was “common ground that the cancellations project was infested with unlawfulness” and that “the FSCA had a lax approach to lawfulness in the cancellations project.”

Hunter, a former political activist, was appointed deputy registrar of pension funds at the FSB in 2013. Within a month of starting her three-year contract, she started raising red flags over the wholesale cancellation of pension funds which have been found to still have unclaimed benefits and other assets. Many fund administrators have established special purpose unclaimed benefits funds to receive transfer of these funds, though others have been accused of making little or no effort to find the beneficiaries.

Hunter became a thorn in the side of FSB management and was offered R6 million to leave. She declined, choosing to see out her full three years. She was subjected to disciplinary proceedings that were abandoned by the FSB after a day and a half. Several investigations were launched to pronounce on the legality of the cancellations project, and whether there were any unclaimed benefits in these cancelled funds. KPMG and Mort found there were indeed unclaimed benefits and other assets in some of these cancelled funds, based on a limited sample reviewed by them.

Sun City prisoners accuse staff of cheating them out of canteen money

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at GroundUp.

Inmates at Johannesburg’s “Sun City” prison say officials have stonewalled their attempts to open a fraud case against staff members for cheating them out of profits from the prison canteens.

They accuse the staff of profiteering at the expense of inmates and also of withholding profits from canteen sales supposed to go to the prisoners’ sport and recreational facilities.

Sun City prison has two canteens, one for staff and one for the nearly 3,000 inmates. Till slips from the two canteens appear to show that inmates are being charged 20% more than staff for the same items. Inmates say this is in contravention of Section 118 of the Correctional Services Act which prohibits any staff member deriving “any benefit or advantage from the sale or supply of any article to or for the use of any offender or correctional centre.”

Long-standing prison policy is to add a 5% mark-up on items sold at the inmates’ canteen, with this 5% profit going to sports and recreation. This is in addition to the 5% of total profits inmates are supposed to receive from the staff canteen.

However, it emerged in a recent South Gauteng High Court case that prisoners had not received any share of profits from the canteen since 2011.

Deputy chairperson of the inmates’ Participative Management Committee (PMC) at the prison, Lucas Mokholo, says a complaint was registered with the prison’s complaints official, and a request made to open a case of fraud against staff members for unlawfully profiting from goods sold through the inmates’ canteen. He says the complaint was met with silence from prison officials. The request to open a fraud case with SAPS (South African Police Services) has likewise been stonewalled, despite promises of assistance from prison officials.

In January this year Sun City inmates brought an action against prison officials in the South Gauteng High Court after it emerged that prisoners were going up to 20 hours between meals because of a shortage of manpower, the result of a labour dispute.

Prisoners were being fed both lunch and supper at 1pm each day, and had to wait till 8am the next morning for their next meal. Judge SM Wentzel handed down judgment in June with an order compelling prison officials to space meals throughout the day and serve “a hot meal of meat and vegetables in the evening to sustain them until breakfast the following mornings…”.

Police investigate Tubular directors for fraud and corruption

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

The Directorate for Priority Crime Investigation confirms that it is investigating various complaints against directors of Katenge Tubular Construction who are alleged to have illegally paid R25 million to the Industrial Development Corporation (IDC) in settlement of a loan facility owed by an unrelated company within the Tubular group. This was done without the consent of its board or the knowledge of its 30% BEE partner.

The Tubular group has recently been shrouded in controversy over claims of bribery and corruption related to Eskom and other contracts.

In July, Moneyweb reported that BEE partners in a subsidiary of Tubular Holdings had applied for provisional liquidation of Tubular Technical Construction (TTC) for defaulting on settlement payments of R24 million. The application for provisional liquidation was brought by Revenue Management and Protection Solutions (RMPS), the 30% BEE partner in Katenge Tubular Construction. The balance of 70% is owned by TTC. Katenge was formed in 2009 as a BEE company to secure construction contracts under the Tubular umbrella, and succeeded in winning contracts from Exxaro, Murray & Roberts and the Kalagadi group.

The application for the liquidation of TTC, now before the Pretoria High Court, claims money that should have been paid out as dividends to shareholders was siphoned off to other companies in the Tubular group, or in settlement of liabilities that had nothing to do with Katenge.

The two directors in control of affairs at Katenge were Antonio (Tony) Trindade and Pieter Vorster. Mike Lomas was chairman of the Tubular Group.

NCR spares no expense getting rid of “insubordinate” employees

Written by Ciaran Ryan. Posted in Journalism























This article first appeared in Moneyweb.

At first glance, Thandile Gubevu’s dismissal from the National Credit Regulator (NCR) in March may appear a relatively trifling matter, the kind of thing that goes on daily in the South African workplace.

But on closer inspection, Gubevu’s story is far from an isolated instance. Several other former NCR employees were dismissed under similar circumstances in recent years, suggesting all is not well at the credit regulator. In Gubevu’s case, and those of other dismissed employees, senior counsel was brought in at considerable cost to dignify what seems on the face of it a dysfunctional human resources policy. All of this paid for by the taxpayer.

Gubevu was employed in 2012 at the NCR as a research and special projects consultant, a mid-level position. By all accounts, he was a diligent worker and well-liked by colleagues, though some of his seniors held an entirely different view of him.

In November 2017, seemingly out of the blue, he was hauled into a disciplinary hearing and charged with insubordination, disrespectful conduct and non-adherence to standard rules and procedures. In one instance, Gubevu apparently paged through a magazine during a departmental meeting and failed to answer emails from his line manager, Ngoako Mabeba. Then, in apparent violation of internal rules, Gubevu engaged the services of a firm of attorneys to represent him in his dispute with the NCR.

Hardly explosive stuff, but Gubevu was suspended in July 2017, pending a review by an internal disciplinary committee chaired by an independent legal firm appointed by the NCR. In November the committee found him not guilty on all charges and recommended his suspension be lifted with immediate effect.

Not satisfied with the outcome of the disciplinary hearing, the NCR rejected the findings and dismissed him outright. Gubevu felt he had no choice but to approach the Pretoria High Court and ask it to compel the NCR to accept him back at work. The court came to the same conclusion as the internal disciplinary committee, dismissed all the charges, and ordered that Gubevu be re-hired.

Judge Manamela went further, awarding punitive costs against the NCR, with the following words: “Counsel for the respondent (NCR) submitted that there was no basis for a punitive cost order as the respondent pursued a very legitimate interest in in this matter. I disagree. The respondent’s conduct no matter the noble or legitimate nature of the underlying motives as suggested by his counsel, does not trump the fact that there was no logical or reasonable basis for the interpretation of the impugned policies offered by the respondent.” Judge Manamela further charged the NCR with bad faith in its disclosure of facts related to its disciplinary policies. That’s two strikes against the NCR. Armed with a court order, Gubevu returned to work, receiving a hero’s welcome from colleagues. However, the NCR wasn’t done with him yet. It dragged its heels in reinstating him as per the court order. Gubevu was forced to take the matter back to court, this time before Judge AJ Strydom, who confirmed the earlier court order by Judge Manamela. Judge Strydom ordered that Gubevu be reinstated.

Banks slapped down over home repossessions in Joburg court

Written by Ciaran Ryan. Posted in Journalism










This article first appeared in Moneyweb.

A full bench of the Johannesburg High Court ruled on Wednesday that repossessed homes must be sold with a reserve price in all but exceptional circumstances. This puts an end to illegal bid-rigging by syndicates operating out of sheriffs’ auctions. It also means repossessed properties must be sold close to market price, rather than for R10 or R100, as has happened in the past.

The court also ruled that when banks bring legal action against defaulting clients, the money judgment and sale in execution order (allowing the property to be sold at auction) must be issued at the same time. Some banks argued that these should be split, though for reasons that were not always clear – other than that it suits the banks’ lawyers to milk a case for as much in fees as possible by having the same facts heard twice.

Standard Bank in its court papers argued that the money judgment issued separately from the sale in execution (SiE) order placed pressure on the defaulting client to catch up on arrears. The court took a different view and wants the matters heard together. This reduces the legal costs for consumers, but may make it more difficult to delay justice.

As Moneyweb previously reported, Gauteng judge president Dunstan Mlambo ordered a full bench of the High Court to decide on four cases involving Standard Bank and Absa. The full bench of three judges was asked to decide on several issues, including the setting of reserve prices to avoid homes being sold at auction for a trifling amount, and whether banks should be awarded a money judgment at the same time as an SiE order.

Court rules were recently changed to allow for judges to set reserve prices. However, some judges applied the new rules while others did not. This case was about setting a standard across the entire court.

Advocate Douglas Shaw, one of the architects of the recent change in court rules allowing for the imposition of reserve prices, says the ruling is a major victory for bank clients: “It is unbelievable in this day and age that the banks would continue to argue for the right to sell repossessed properties without a reserve price, but this is what they have done. This ruling changes that by forcing judges to impose reserve prices except in exceptional circumstances.

“A second major victory for mortgage bond holders is that once you pay off your arrears, your mortgage contract automatically revives, and this is not something that is at the discretion of the banks.”

In its papers before the court, the Lungelo Lethu Human Rights Foundation (LLHRF), which defends people against eviction, says in hundreds of cases it has seen, there is nothing left for clients once a property is sold at sheriffs’ auctions. The practice of allowing properties to be sold without a reserve price meant these auctions became nesting grounds for bid-rigging syndicates, who have been able to pick up properties for a pittance and then on-sell them for massive profits. Once the lawyers had taken their share of the spoils, the plate was licked clean, leaving nothing for the dispossessed homeowner.

The court ruled that the power to reinstate a credit agreement lies with the consumer, not the credit provider, once the arrears and “reasonable” costs have been settled.

King Sibiya, co-founder of the LLHRF, says the ruling will make it extremely difficult for banks to evict clients from their primary residences. Eviction, be it voluntary or by force, is the inevitable consequence of an SiE order. He says upwards of 100 000 families have been evicted from their homes since the Constitution came into effect. “In their papers before the court, the banks claimed they use sale in execution orders only as a last resort. We say they are lying, and we presented abundant evidence to prove they are lying.”

The court also dismissed the banks’ claims that by setting a reserve price, there would be less interest from prospective buyers. “A reserve price will balance the misalignment between the banks and the debtors where execution orders are granted,” says the court ruling. “It ensures that the debtor is not worse off due to unrealistically low prices being obtained and accepted at sales in execution.”

Says Sibiya: “This ruling makes it more difficult to evict people from their primary residences, and the setting of reserve prices means they get to keep most of the equity in the home that they have built up over the years.”

The Legal Resources Centre, which represented the LLHRF in the case, says in a statement “we are hopeful that the setting of reserve prices in sales in execution will stop the practice of homes being sold on auction for next-to-nothing and create the possibility of a debtor recovering some money from the sale.”

Though the ruling applies to the South Gauteng High Court, other courts around the country will be under pressure to apply the same judicial standards.

The court made no ruling on at what level reserve prices should be set, other than to say that information about market valuations must be placed before the court when a bank is seeking judgment against a client. The reserve price will be based on all relevant information placed before the court.

Judges grill banks on home repo practices

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.












A full bench of the Johannesburg High Court sat last week to deliberate on how and when reserve prices should be applied before repossessed homes are sold at sheriffs’ auctions. The three judges presiding in the case wanted to know why the banks habitually arrive in court without proper paperwork and expect to be given judgments against clients in arrears.

For several legal and human rights groups admitted as friends of the court, this is a pivotal case to decide whether the banks’ right to recover a loan supersedes constitutional protections to dignity and property.

Things did not go well for the banks, who were berated by the judges for arriving in court without proper paperwork, expecting the courts to grant judgments against clients who were behind on their mortgage payments. This follows a number of cases where homes were repossessed by banks for as little as R10 and then on-sold at auction for a substantial profit, leaving the defaulting client with a shortfall to the bank.

The judges wanted to know why the banks habitually arrived in court expecting a sale in execution judgment (allowing the property to be sold at auction) without sufficient information to allow the courts to make an informed decision, such as whether the home was a primary or secondary residence, who lived in the house, and what steps the bank had taken to reach an accommodation to allow the customer time to catch up on the arrears. The banks have repeatedly insisted they apply for sale in execution orders only as a last resort.

Gauteng judge president Dunstan Mlambo ordered a full bench of the High Court to decide on four cases involving Standard Bank and Absa. The full bench of three judges was asked to decide on several issues, including the setting of reserve prices to avoid homes being sold at auction for a pittance, and whether banks should be awarded a money judgment at the same time as a sale in execution (SiE) order.

Advocate Steven Budlender appeared for Standard Bank and advocate Wim Trengrove for Absa. The banks argued that reserve prices should only be set by judges in exceptional circumstances, and want the court to split the awarding of the money judgment from the sale in execution order. Budlender argued that the reason for this was that once a money judgment was awarded against a defaulting client, this placed pressure on the client to catch up on arrears. Experience shows that very few homes in arrears end up being sold at sheriffs’ auctions, usually because defaulting clients reach an accommodation with the banks.

The arguments in court were largely technical, but several legal and human rights groups admitted as friends of the court seem baffled by the banks’ insistence on splitting the money judgment from the SiE order. It would save them time and money if both were granted at the same time. One observer suggests the banks are putting up a faux fight by insisting on reserve prices only in exceptional circumstances, and on terms decided by themselves. He says what they really want is a money judgment since this triggers a financial benefit to the banks in terms of credit default swaps. These are a type of insurance policy which protect bondholders against default. A large percentage of mortgage bonds in SA are securitised, meaning they are packaged into a bond and on-sold to investors. This point was not argued in court.

The banks’ counsel was further grilled by the full bench on their defective paperwork when approaching the court, resulting in a large percentage of cases being postponed. The banks attempted to remedy this by filing supplementary affidavits in the four cases mentioned above and to address the issues raised by Mlambo.

The war between environmentalists and coal miners in Mpumalanga

Written by Ciaran Ryan. Posted in Journalism












This article first appeared in Moneyweb.

Environmental groups determined to block a coal mining project on protected land have had to step up security for their employees.

South Africa has a shocking history of mines scarring the landscape and then being abandoned by the owners and left to nature’s slow but inexorable healing.

No more, says a group of eight environmental organisations, led by the Centre for Environmental Rights (CER), which is attempting to stop Atha-Africa Ventures, backed by Indian investors, from commencing underground coal mining on a protected environmental area in Mpumalanga.

The Yzermyn Colliery in the Mabola Protected Environment, near Wakkerstroom in Mpumalanga, was due to commence underground mining more than a year ago, until the CER applied to the Pretoria High Court for an interdict to freeze activity until the mining group had complied with various laws. CER claimed Atha-Africa did not have a valid environmental authorisation, nor did it comply with the Spatial Planning and Land Use Management Act, in terms of which the proposed mining site could only be used for agriculture and conservation.

Atha-Africa defended the action, claiming it had secured its licence before the Mabola Protected Environment, a portion of which covers the proposed mining site, was declared a protected environment. It also pleaded that the mine was designed to ensure minimal damage to the environment, with surface infrastructure located away from environmentally protected areas

The outcome of this case was that Atha-Africa agreed to give CER three weeks’ notice before commencing any mining activities in the area. More than a year later, mining has still not commenced, but the environmental groups are determined to make this a test case for environmental versus mining rights. If they fail in this case, they believe the door is thrown wide open for other mining groups to trample environmentally sensitive areas.

Atha-Africa argues that it is providing nearly 600 jobs, benefiting many more dependents, and will benefit the economy by selling a portion of the coal to Eskom, with the balance being exported.

“The impact of the unlawful commencement of mining activities on the Mabola Protected Environment and surrounding areas will be environmentally catastrophic and will cause irreparable harm to the environment and local communities,” said the CER in an affidavit to the court. The Mabola Wetlands was proclaimed a protected environmental area in 2014, in recognition of its importance in feeding the Limpopo, Tugela, Vaal, Usutu and Pongola Rivers. The environmental groups say the Mabola Wetlands is a strategic water source generating critical water supplies for downstream agriculture, industrial and human uses. It also falls within the National Freshwater Ecosystem Priority Area, and has been deemed a ‘high importance’ biodiversity area.

Questions over the ease with which mining licence was granted

How then, did Atha-Africa manage to get a licence to mine coal in such a sensitive area?

It’s a question that has environmentalists scratching their heads. The reported backlog of mining licence applications at the department of mineral resources seems to have presented little trouble to Atha-Africa, which secured mining and water use licences with evident ease under then mines minister Ngoako Ramatlhodi.

At a press briefing in Johannesburg yesterday, CER executive director Melissa Fourie said Atha-Africa had allocated just R5.7 million for mine rehabilitation, which was nowhere near enough to remediate the expected damage to the surrounding water systems through acid drainage. Mining would also drain the wetlands and impact farming in the area.

The CER has launched a string of legal challenges against the mining group, including:

– appealing the department of mineral affairs’ decision to grant it a mining licence

– appealing the water tribunal to revoke the issue of a water use licence, and

– a judicial review of the decision by the ministries of environmental affairs and mineral resources to allow mining in a protected area.

Threats against environmental activists 

Fourie says the CER has stepped up security for its staff after heated exchanges between pro- and anti-mining activists, both physical and online. On one occasion a group of pro-mining activists were bussed in to the site and disrupted an environmental briefing. Some members of the pro-mining group apparently became threatening, claiming the environmentalists were preventing jobs from being created in the area. The threats have been reported to the Minerals Council of SA. Environmental activism has its dangers: Pondoland community activist Sikhosiphi ‘Bazooka’ Rhadebe was gunned down two years ago by unknown assailants, which some environmentalists believe was related to his opposition to mining mineral sands in the Eastern Cape.

An ecological assessment by Natural Scientific Services recommended against proceeding with the mining project, based on the threat to surface water resources and potential groundwater contamination. The damage would extend far beyond the proposed mining area, due to the likely dewatering of wetlands and acid mine drainage seeping into the water system.

The CER argues that the damage to water resources and farming in the area and downstream far outweighs any potential benefits from mining. “The organisations opposing this particular mine do so because the proposed mine would be inside a declared protected area and a strategic water source area,” says the CER in a statement. “It will threaten water security not only in the local area, but in the region. The damage that this mine would do to water resources cannot be undone. All these organisations are deeply committed to job creation and improving the quality of life of local people, but we also know that coal mining has devastated the lives, health and well-being of communities across the highveld.”

Says one environmentalist: “We haven’t seen one community that has benefitted after 150 years of coal mining in SA.”

The country has seen many coal mines come and go, but the environmental scabs they leave behind are often left for others to tend. The profits are privatised, the environmental costs are socialised. That may be about to end, if the CER and the eight environmental groups its represents have any say in the matter.