Jonathan Buckley of Centurion in Pretoria may be the first South African in history to win six judgments against Standard Bank in one day. When the bank failed to comply with the court orders compelling it to release documents related to loans he had taken out, he sued the directors for contempt of court and tried to have them arrested. Here’s how it happened.
Jonathan Buckley of Centurion in Gauteng may be one of the few people in South Africa to win six judgments in one day against Standard Bank. And he did this arguing his cases alone, without legal representation.
The judgments, obtained in 2013 in the South Gauteng High Court, compelled Standard Bank to provide all documentation relating to a series of loans he had taken out with the bank in the preceding years. When the bank failed to comply, Buckley sued for contempt of court and asked that the court authorise the arrest of the entire board of Standard Bank.
Chutzpah, you might say, but Buckley insists he was applying the same standard as the banks do to customers. “Why is the law different for banks? If an ordinary South African citizen fails to comply with a court order, you can bet that the courts would issue an arrest warrant,” he argues.
So why isn’t the board of Standard Bank sharing a cell with reputed gangster Radovan Krejcir? Well, that’s a story in its own right, which we’ll get to in a minute.
Let’s backtrack a little bit. Like millions of people around the world, Buckley read Rich Dad Poor Dad by Robert Kiyosaki and came to the blinding realisation that assets are only valuable if they generate income. So Buckley started investing in properties and renting them out. The Kiyosaki business model was simple: if the rental income exceeded the bond repayments, you were a winner. Once the bond was paid off, you had income in perpetuity. Kiyosaki, who sold 26 million copies of the book (not counting the follow-ups), has been criticised for peddling bad financial advice and encouraging a stampede into questionable property transactions.
Buckley appears to have embraced the Rich Dad Poor Dad philosophy a little too enthusiastically. He ended up with eight properties by 2008 which, as we all know, was when the party came to an end and the financial hangover set in.
But 10 years ago the economy was pumping and property prices were rising at Olympian speeds. Any warnings of an impending speed wobble were drowned out by the chorus of salesmen flogging their wares. Banks were showering customers with easy credit, knowing full well the National Credit Act was about to put the brakes on all the fun. The Act came into force in 2007, but before then credit checks by the banks were sparse to non-existent. Banks were showering customers with easy credit, knowing full well the National Credit Act was about to put the brakes on all the fun.
Until 2008, the Kiyosaki business model was working perfectly for Buckley. His rental income, supplemented with a bit of money from his business, was sufficient to cover the bond repayments. For Standard Bank, he was a great customer. In 2006 the bank approached him with what seemed like a tantalising offer: throw all properties into a single pot with just one repayment a month, instead of eight. The bank was marketing the product under the Liberator brand.
This was an offer Buckley could not refuse. He did as the bank suggested. Then came the good news: the bank revalued the entire property portfolio and informed him that there was surplus equity of about R1,5 million which was his to use as he saw fit. In other words, the then market value of the properties exceeded the amount owing to the bank by R1,5 million. Buckley took the additional credit on offer and bought a ninth property.
In late 2008 the world economy had gone into meltdown. Buckley then ran an insurance brokerage for Liberty Life and lost most of his sales team in one fell swoop. His business was taking strain, so in 2008 he approached Standard Bank to warn them of trouble ahead. He might have difficulty meeting his monthly bond repayments, he told them. The bankers must not have heard what he was saying because after the meeting was over, they offered him yet more credit to purchase a vehicle, which Buckley graciously accepted.
His business continued to flounder and a few months later he placed himself under debt review.
Standard Bank accepted the revised schedule of repayments, but it still had to be sanctioned by the Magistrates Court in Pretoria. The court date was set down, but Standard Bank didn’t show up. The matter was postponed twice and, meantime, Buckley’s debt counsellor disappeared. “The whole debt review was up in the air. Were we under debt review or not?” says Buckley. But Standard Bank was behaving as if it had accepted the debt review, according to Buckley.
Then in 2010, Standard Bank approached Buckley with what it called a debt rehabilitation proposal which would reduce his monthly repayments. Buckley accepted the offer, but still the rental income from the properties was insufficient to cover the loan repayment. The point here is that Buckley says he was in constant discussions with the bank to manage his loan repayments and stay afloat. He has never denied that he borrowed money and fell into arrears. His main beef is with how the bank went about trying to recover its money.
Then the bombshell arrived. Without warning, the bank was awarded two judgments against Buckley for default on company overdrafts. Buckley managed to rescind one of the judgments on the grounds that the company in question no longer existed. The second judgment still stands. A third judgment was taken against him for the vehicle he purchased after the earlier meeting when he says he tried to warn the bank that he was in financial trouble. To date, he has not had sight of the judgment, nor the summons for the vehicle.
Then the bombshell arrived. Without warning, the bank was awarded two judgments against Buckley for default on company overdrafts
By this time Buckley was doing a crash course in consumer and banking law. He read up on the National Credit Act, the Consumer Protection Act and the Banks Act. It became apparent to him that he could not mount a defence against the bank without the documents that he purportedly signed at the time he took out the loans. So where were the documents, he asked his bankers?
Months went by without an answer. Buckley was getting anxious. He went a step further, serving letters of demand on the bank, delivered by the Johannesburg Sheriff’s office. Again, no response was received from the bank, so now he served it with a Notice of Motion, signalling his intention to have the South Gauteng High Court force the bank to supply the documentation for six different loan accounts.
Still the bank remained silent. It gave no indication it intended to defend the matter, so Buckley set the matter down on the unopposed roll for hearing in November 2013. Buckley had also served Absa with a letter of demand to supply documents relating to a credit card he had with the bank. This time he did receive a reply to the effect that the documents were destroyed in the famous Absa fires (see here and here for more on this).
Going it alone
But his main focus was on Standard Bank, since this is where his greatest indebtedness lay. Buckley appeared in court in November 2013, alone and unassisted by any legal professionals, and miraculously won seven judgments in two different courts, six against Standard Bank and one against Absa. The judgments compelled the banks to supply the missing documentation.
Still the bank failed to comply. It was time to strap on the knuckle duster. “I then informed the bank that I was applying for a contempt of court application. I asked the court to authorise the arrest of entire board of directors of Standard Bank for non-compliance with the court orders. You cannot arrest a company, you have to arrest the board.”
Standard Bank, now clearly scrambling to avert a potentially embarrassing scene, appointed attorneys Findlay Niemeyer of Pretoria to attend to the matter. Buckley was informed that the missing documents could be viewed at Findlay Niemeyer’s offices in Hatfield, Pretoria, but he was not allowed to take them away as they still had to be collated. Buckley had asked for the original wet ink documents, but what he saw appeared to be copies, and he informed the bank in writing that he was not satisfied that the papers he was allowed to view, but not carry away, were the originals.
All of a sudden, Norton Rose Fulbright appeared on the scene. It was time for a heavyweight law firm to spring the bank from its predicament. The bank applied for a rescission of the judgments previously won by Buckley. So now there were two cases running in parallel – Buckley’s urgent application for contempt of court against the bank, and the bank’s application to have the judgments rescinded. Norton Rose Fulbright wanted to have both sets of cases heard together, since they related to the same matters.
In February 2014, Buckley again appeared alone in the South Gauteng High Court before Judge Tshabalala. Arrayed against him were a senior counsel and six attorneys, no doubt an intimidating prospect for any judge. This also shows just how seriously Standard Bank was taking the matter. The judge deemed Buckley’s matter was not urgent and postponed it to a later date.
The bank’s decision to call in the heavyweights from Norton Rose appears to have been a good one. It eventually succeeded in its rescission application on 3 November 2014 on a technicality of the court process, in that Buckley had not properly notified it of the application to seek judgment against it. Buckley’s contempt case then fell away.
This must have been a relief for the directors of Standard Bank, who could sleep more soundly at night knowing they did not have to share a cell with Radovan Krejcir.
New attorneys appear on the scene
But the story was not over yet. Suddenly, out of nowhere, a new firm of attorneys (Newtons of Pretoria) appeared on the scene. The bank no doubt decided it was time to kill the beast once and for all and take judgment for its outstanding loan. Buckley says the new attorneys served three sets of papers to addresses where he would not receive them. Only later did he find out that the summons demanded repayment of an amount of R6,9 million, being the total sum owed on the Liberator facility with the bank. This time, the case was to be heard in the North Gauteng High Court, in Pretoria.
Why the sudden change to Pretoria, when all his previous cases were heard in Johannesburg? It could be argued that as he lives in Centurion, the Pretoria court has jurisdiction, but Buckley suspects foul play. If so, this is not the first time a banking client has been wrong-footed in this way (see Jonn Basson’s story here).
Newtons argued in its papers that these addresses were the ones they had on record. Buckley had pre-arranged with Norton Rose Fulbright to receive papers by email or at the address of a legal advisor he was then using. Obviously, this news was not shared with the new attorneys, who managed to serve three sets of papers, all of which miraculously missed their intended target. They then stood in court unopposed (because Buckley says he did not receive the summons), and obtained judgment for R6,9 million.
The first Buckley knew about this was when he got an unsolicited call from a liquidator offering help in light of the recent unfortunate judgment against him.
“What?” said Buckley. “What judgment?”
He thought there must be some mistake as he knew nothing about this particular court case. He raced over to the offices of the bank’s attorneys, who charged him R2,900 for a copy of the judgment. Nothing is for free these days.
Buckley says he still does not have the documents he needs to mount a proper defence and is considering a Constitutional Court challenge on the grounds that a fair trial requires full access to all documentation related to a banking transaction. While he does not dispute the loans, he wants to see what terms he apparently agreed to. For example, did the loan agreements include an acceleration clause? Many bank agreements pre-2009 did not include these clauses, which means the bank can only claim the arrears, not the full amount of the loan. But banks have been getting away with this and executing on customers’ houses when all they are entitled to claim are the arrears.
The fight goes on
In any event, Buckley is now preparing to apply for rescission of the judgment based on the technical issue of “no service” (ie. he was not properly served the summons). He is also challenging the bank’s locus standi, arguing that his loan has been securitised, or on-sold to investors, and the bank has no right to be in court. Standard Bank denies it has securitised Buckley’s mortgage bond and accuses him of embarking on a “fishing expedition”.*
Buckley recently dug up 96 random bonds on Windeed, the online deed search facility. Only one of these (an Absa bond) had been ceded to the new owner, which is evidence of securitisation. Based on the banks’ own figures for securitisation, it was expected that at least 20% of these would have been ceded to new owners (ie. securitised). The point being that when a loan is securitised, the bank loses all legal title to it.
So what appears to be happening is that the banks are securitising loans but not reporting them as having been ceded to new owners as required by law. When challenged on securitisation by customers, the banks can stand in court and hold up the title deed, pointing to the lack of “endorsement” or cession on the title deed as supposed proof that they remain the lawful title holders. New research coordinated by Advocate Douglas Shaw suggests something more sinister is afoot. A team of researchers dug up several hundred mortgage bonds and so far, only one of about 600 has been ceded to a new owner. As we previously reported, an expert statistician has deemed this to be a statistical impossibility. Shaw says this points to widespread and systematic fraud by the banks, and the Commercial Crimes Unit has called for more information.
Buckley’s fight is far from over. He wants to apply for rescission of judgment against the bank in the Pretoria court, and plans to appeal the rescission application won by Standard Bank because of its failure to supply all the documents underpinning his loans.
“I still do not have the documents I need to mount a proper defence,” he says. “How can there be justice against the banks when customers have to battle as I have done to get the right documents? I had to go to court at huge expense to myself just to get the bank to obey the very laws under which they are expected to operate.”
He adds that the documents belatedly supplied by the bank are incomplete. Buckley is a game opponent who seems to enjoy tweaking the noses of the brass at Standard Bank. “I don’t dispute the debt. What I want to establish is what are the rights of banking customers in these situations? What has happened to all these securitised mortgage bonds? How is it that the courts have yet to hold the banks to account for this deception where they have sold the loans yet still pretend they are the owners?
“Now we have evidence that the banks are hiding from the courts the fact that they no longer own these loans. It’s about time someone put a stop to all this bullshit.”
* The article has been updated to reflect the fact that Standard Bank, in its papers before the court in this matter, denies it has securitised Buckley’s mortgage bond. In support of this claim, it refers to a Windeed search which apparently shows the bank is still the registered owner of the mortgage bond. Adv Shaw argues that this proves nothing of the sort in light of the research referred to above. The only way to resolve this issue is to force the banks to disclose their securitisation registers, which in any event is required in terms of Section 69 of the National Credit Act.
This article first appeared at Acts Online.