How SA slept through the BEE revolution

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

When the term Black Economic Empowerment (BEE) first floated into the South African business and political lexicon in the early 1990s, there was some hopeful discussion that it would last just 20 years and then be phased out.

Well, 20 years have come and gone, and if anything, BEE has morphed into something more oppressive and outrageous than even the original architects could have imagined.

In the foreward to Anthea Jeffery’s book BEE: Helping or Hurting?BEE Helping or Hurting, author Rian Malan writes that most journalists missed the most important story of the post-apartheid era. “By the time I reached the halfway mark I was trembling with outrage and bombarding friends with distressed SMSes and emails. Are you aware, I said, that the ANC government has drawn up a ‘final policy proposal’ allowing it to expropriate 50 per cent of farmland without compensation being paid to the farmers concerned? And that the Constitutional Court has already given its indirect blessing to such a move?”

South Africans of every colour need to face up to some harsh realities: white South Africans need to admit that they unfairly benefited from apartheid race laws that kept blacks out of the race; black South Africans need to recognise that the laws being drafted by this government in their name have the capacity to destroy our society “just as surely as the Xhosa nation was destroyed by the Great Cattle Killing of 1856 to 1857.”

Is there a better tax system than the monstrosity currently in place?

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Is there a better tax system than the monstrosity currently in place?

Our-Land-our-rent-our-jobs-book-cover-1-500x361Stephen Meintjes, analyst at Momentum SP Reid Securities, and the late Michael Jacques, authors of Our Land, Our Rent, Our Jobs certainly seem to think so. What if we could replace income tax, VAT, customs duties, excise, sin taxes, fuel levies, the Unemployment Insurance Fund (UIF), skills development levies and every other ‘tax it if it moves’ impost with a simple-to-collect tax based on land value?

There is so much invested in the current tax system that it is hard to imagine an alternative. The cost of administering SA revenue systems is about R10 billion a year, and there are an estimated 2 000 registered tax professionals lumping another R1 billion on top of that as fees. A far greater cost is the combined hours and expense incurred by companies, executives, lawyers and the courts dealing with tax matters. That’s a stubborn oak to cut down. But cut it down we must if we want to unleash the true potential of the economy, say the authors.

White expat South Africans returning in record numbers

Written by Ciaran Ryan. Posted in Journalism

passport photoMore than 400,000 white expat South Africans have returned to the land of their birth since the apex of the financial crisis in 2009, according to research by Free Market Foundation economist Loane Sharp. This is based on extensive analysis of job candidates on the database of the country’s largest recruitment firm, Adcorp.

Sharp says SA’s white population of working age (15 to 64 years) peaked at 5.9 million in 1973, but declined steadily to 3.9 million in 2009. Since then, the white population has risen to 4.3 million, a net gain of 400 000 over six years. That’s a substantial brain gain for the country, since most of these returnees bring vast international experience in finance, engineering, medicine and other professions.

Some employment agencies are specifically targeting expatriate South Africans to fill highly skilled positions in sectors such as engineering, mining and construction, and that is accounting for some of the migration back to SA.

The story of SA in two depressing charts

Written by Ciaran Ryan. Posted in Journalism

Two charts tell the story of South Africa Inc. One shows that SA companies cannot invest outside the country fast enough, and the other shows that the JSE All Share index, measured in US dollars, is unchanged since 2007.

Old Mutual economist Rian le Roux put together the following chart which shows SA companies invested abroad to the tune of R80bn in 2014, and more than R60bn on a rolling, cumulative basis up to the second quarter of 2015. Back in 2012 the figure was zero.

Capital flight from SA

JSE ALSI in USD
Old Mutual chief investment strategist David Mohr says the rate at which SA companies are investing abroad suggests they are nervous about the current operating environment in SA, and see better returns elsewhere.

Lessons for SA from South America

Written by Ciaran Ryan. Posted in Journalism

Two South American countries – Colombia and Venezuela – offer lessons in governance that we would do well to heed. Colombia is now one of the fastest growing economies in South America. Venezuela, ravaged by a drop in oil prices and poor leadership, is moving in the opposite direction.

I highly recommend the Netflix series Narcos for some background on what Colombia has been through during the reign of drug kingpin Pablo Escobar. Also worth watching is the Spanish-language (with sub-titles) Palbo Escobar – El Patron del Mal (Pablo Escobar – The Lord of Evil). This provides some excellent context to the recent resurgence of Colombia as South America’s third largest economy.

This article first appeared in Moneyweb.

South AmericaColombia, once the drug den of the world and now one of its fastest growing economies, has a few lessons to teach SA. This is true also of its neighbour Venezuela, now the basket case of South America. In Venezuela’s case, the lessons are tragic.

Like most neighbours, Colombia and Venezuela haven’t always seen eye-to-eye. The two countries nearly came to war in 2009 when Colombia arrested four Venezuelan soldiers who crossed the border, and has repeatedly accused its neighbour of harbouring Marxist FARC guerrillas.

Relations have improved since then, but in most other respects the two countries are headed in entirely different directions.

Colombia, once the regional hub for drug traffickers and kidnappers, has undergone a remarkable transformation in recent years. Its economy is the fastest growing in the region after Bolivia, clocking an average 4.3% growth between 2001 and 2014. It also ranks second in the 2015 Economic Freedom Index, behind Chile, the result of vast improvements in labour, trade and investment freedoms.

How SAA shot down its rivals with taxpayer money

Written by Ciaran Ryan. Posted in Journalism

Competition never sat easy with SAA, which used R30 billion in taxpayer-funded bailouts over the last decade to shut down a string of competitors, from Sun Air to Trek and tiny Flitestar. No competitor was too small to overlook. Now its demons have come to haunt it in the form of two court challenges that could cost the airline over R6 billion in damages.

Noseweek Oct 2015 coverNational carrier SAA, amidst ongoing senior managerial disorganisation, is currently facing two massive claims, amounting to around R6 billion after tax, one for R1 billion by Comair and the other for R2.2 billion from businessman Robert Watson, owner of Rethabile, BEE minority shareholder of now-defunct Sun Air. Add interest to that lot and the claim could well exceed R6 billion. As we previously explained, the claim relates to charges that SAA conspired with Safair to take Sun Air out of operation, then gobble up its share of the market.

The alleged conspiratorial agreement between SAA and Safair only came to light years later, and forms a crucial component of Watson’s claim. What seems to have happened is that SAA purported to take majority control of Sun Air, baulked when it came to paying for its shares, and promptly shut it down. This, says Watson’s court documents, is one of several frauds committed by SAA.

How the banks are targeting black home owners in Cosmo City

Written by Ciaran Ryan. Posted in Journalism

The financial crisis has percolated down to first time home buyers in Cosmo City near Johannesburg, many of whom claim they have been evicted irregularly after having their homes repossessed. Scores of Cosmo City residents have been tossed out of their houses after falling into arrears on their bonds. Maxwell Dube of Cosmo City Chronicle decided to investigate and found 23 of these – all of them bonded with Absa – ended up in the hands of just one investor. The more he dug, the fishier the whole thing smelt.

Victor Zuma and Beverly Msibi of Cosmo City lost their house over R6,000 arrears

Victor Zuma and Beverly Msibi of Cosmo City lost their house over R6,000 arrears

Outrage is building in Cosmo City north of Johannesburg over dozens of repossessed homes that have ended up in the hands of just a few wealthy investors.

One of the investors scooped up 23 houses – all of them bonded to Absa – at auction prices which were well below market value, and then promptly sold some of them at a handsome profit. Another investor is reckoned to have bought another 40 houses at auction, also at knock-down prices. Some of the houses are being put on auction for arrears amounts as low as R6,000. Yet the banks insist they only take legal action “as a last resort” – something the residents of Cosmo City find hard to believe.

Ostrich farmer from Eastern Cape shows court his mortgage loan is now in Taiwan

Written by Ciaran Ryan. Posted in Journalism

SONY DSCAn ostrich farmer from Grahamstown has thrown the local court into a spin by apparently proving that his mortgage loan with Standard Bank has been on-sold to an investor in Taiwan. This is the first time a securitisation audit has been presented in a SA court. On the basis of the evidence presented, the farmer says Standard Bank has no right to be in court.

Ash Davenport, a 63 year-old ostrich farmer from outside Grahamstown in the Eastern Cape, may be about to make history in his effort to stave off attempts by Standard Bank to take possession of his 3,260ha farm over a R3 million loan he took out seven years ago.

Last week he threw the Grahamstown High Court into a spin when his attorney, Bev Carruthers of Port Elizabeth, plonked a securitisation audit in front of the judge. The securitisation audit suggests that his bank loan has been on-sold to a Taiwanese bank and is no longer owned by Standard Bank. That being the case, Standard Bank has no right to be in court. More than that, the audit suggests the bank has securitised (or on-sold) his bond for R5 million, not the R3 million he supposedly signed for.

Meet the man who tried to arrest the board of Standard Bank

Written by Ciaran Ryan. Posted in Journalism

Jonathan BuckleyJonathan 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.

Trouble ahead

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.

Absa gets snot-klapped in the Pretoria High Court by women’s army

Written by Ciaran Ryan. Posted in Journalism

Liebenberg sistersAbsa’s troubles in its mortgage division just got a whole lot worse. Barely two months after losing two similar cases in the South Gauteng High Court, Absa folded before throwing a punch in the Pretoria High Court against two sisters who made startling allegations of fraud and misconduct against the bank.

Absa’s troubles with its mortgage division have just got a whole lot worse. On Friday two Johannesburg sisters, Emmarentia and Monica Liebenberg, travelled to the North Gauteng High Court with several angry Absa clients in support to defend an attempt by the bank to obtain summary judgment against them for allegedly defaulting on a mortgage loan taken out in 2007.

This should have been a cut and dried case for Absa, just another run-of-the-mill summary judgment like the thousands of others it gets awarded by the courts each year.

Then the bank ran into the Liebenberg sisters, represented by Advocate Christian Harms. The case was similar in many aspects to the case we reported on in August, when Absa attempted to obtain summary judgment against James Grobbelaar and Kevin Jenzen on the grounds that they had allegedly defaulted on their mortgage loans. When asked to provide evidence of the loan agreements, Absa produced blank loan agreements – not the ones signed by the defendants – claiming the originals were destroyed in a fire. Like Grobbelaar and Jenzen, the Liebenbergs argue that these were definitely not the agreements they had signed. (Judge Roland Sutherland dismissed Absa’s case in the South Gauteng High Court two months ago and referred the matter to trial, basing his decision on the disputes of fact and disputed terms contained in the so-called agreements. He further stated that the evidence has to be tested at trial and refused the bank’s attempts to pursue summary judgment).

Absa folds before throwing a punch

This time, facing the two Liebenberg sisters, Absa folded before throwing a punch. “Do you really want to fight this?” Adv Harms asked of the bank’s counsel, who promptly packed up his papers and abandoned the fight.

The case was over before it started. Just a few days previously, Absa’s attorneys dismissed the sisters’ heads of argument and 130-page affidavit as “gibberish.” The bank will rue its arrogance, because now the matter must go to trial (if the bank doesn’t settle before then) and the sisters will get to question Absa staff on how they managed to swear under oath on three different occasions – presenting multiple different and unsigned mortgage loan agreements before the court – that each was the correct one. They will also get to question the bank on the legality of the alleged bond agreement which, they argue in their affidavit before the court, is fraught with numerous frauds and violations of the law.

The courts have tended to rubber-stamp these summary judgment applications from the banks, leading some legal experts to question whether South African courts are not just extensions of the banks

One wonders how the banks have been able to get away with this sort of nonsense for so long. The courts have tended to rubber-stamp these summary judgment applications from the banks, leading some legal experts to question whether South African courts are not just extensions of the banks. A summary judgment is one where there is supposedly no dispute of fact, and for this very reason is considered an extreme measure, not one to be lightly entertained by the courts. The very concept of fair justice demands that defendants be allowed to argue the charges brought against them. Yet hundreds, if not thousands, of such judgments are made by the courts each month, usually on behalf of the banks. Bank customers seldom question the bank’s accounting or the legality of their documents. That seems to be changing.

As one observer commented afterwards: “After this case, the gates of hell have just opened for Absa and the banks. The courts have been letting them get away with fraud and deception for so long, because they do not bother to look at the contracts that customers are being forced to sign.”

“Absa had tried to bully us into submission, by threatening legal costs and expenses and by pursuing a wrongful summary judgment application knowing full well the massive disputes involved. They wanted us to back off this case no matter what and even tried to strong-arm us but we refused and I believe they got the message now. We will see them at trial,” say the sisters.

After this case, the gates of hell have just opened for Absa and the banks. The courts have been letting them get away with fraud and deception for so long, because they do not bother to look at the contracts that customers are being forced to sign

In cases such as these, Absa typically relies on a so-called standard agreement, not the one signed by the customer, because it claims the originals were destroyed in a fire. Several Absa customers have attempted to investigate this fire, only to be brushed off with a press release (which the courts have unquestioningly accepted as evidence). Even if the hard copy originals were destroyed in a fire, the law requires banks to keep electronic copies. But even these are not available when requested because, some believe, the mortgage loans have been securitised (in other words, sold on to new owners). Well, there’s nothing wrong with that, just that you have to get the consent of the borrower. Hence the secrecy.

Here’s another aspect of the Liebenberg case that does not bode well for Absa: the sisters admit that they fell into arrears on their bond repayments, but when originally summonsed by the bank they offered to settle the R180,000 arrears claimed by the bank in full provided Absa withdrew the summons. No chance. Absa wanted the full amount outstanding of R661,000. What actually happened is that the sisters were paying what they thought was the required monthly repayment, but because the bank stopped sending monthly statements, they inadvertently fell into arrears, not realising that the monthly repayment amount had increased.

This looks like an innocent enough mistake, but Absa did what the banking manual says to do – call in the legal department. Then came the summons.

Bring in the legal team

What on earth was the bank thinking? The Liebenberg sisters decided at this point they better start putting up a more robust defense against the bank, which by now they reckoned to be beyond reason or compromise. Then they started to investigate the outstanding amount claimed by the bank. What they found shocked them: according to their affidavit, the bank not only inflated the interest rate, it also loaded additional charges and fees to which they had never agreed (and which are disallowed by law). In most of these cases, the bank gets some clerk to pull up a computer record as evidence of the amount outstanding and then attest by way of a sworn certificate of balance that this is the amount outstanding. South Africans are beginning to wake up to this by doing their own calculations, and the discrepancies can run into hundreds of thousands of rands. In some cases, the discrepancies are so large, customers are claiming the banks owe them (as in Damon Greville’s case against Sasfin).

There is another little legal technicality you may not know about, known as the “acceleration” clause. This allows the bank to claim the full amount outstanding in the event of a default. Just about every bond agreement has this clause. The problem is that this clause should be legally unenforceable because it relies on another document, the original loan agreement, which usually does not have this clause (again, that violates Section 90 of the National Credit Act). The sisters argued that Absa was only entitled to claim the arrears, and not the full amount of the loan. “We wonder how many thousands of people have lost their houses not knowing these legal technicalities,” says one obersver.

Still to be tested in the courts is how these acceleration clauses stand up to Constitutional scrutiny, specifically Section 25 and 26 which protect property rights, bearing in mind that it is an actuarial certainty that borrowers will run into some financial difficulty at some point during the 20 year life of a mortgage bond. Should people be stripped of their primary asset – their home – after a single default? The Constitutional Court will likely get to decide this in the very near future.

Another point to bear in mind: nearly one in two South Africans have a bad credit rating. At 10% or 15% bad credit rating, one could argue that is the fault of the borrowers. At close to 50%, it is without doubt the fault of the banks (just look at African Bank, now under curatorship, extending new loans to pay old loans). The law has a term for this: reckless lending.

Nearly one in two South Africans have a bad credit rating. At 10% or 15% bad credit rating, one could argue that is the fault of the borrowers. At close to 50%, it is without doubt the fault of the banks

Here’s another strange aspect to the Liebenberg case. The sisters live in Johannesburg, so it seemed logical to set the matter down for hearing in the South Gauteng High Court (in Johannesburg). The matter was then mysteriously withdrawn by the bank and then – even more mysteriously – moved to the Pretoria court. This is in violation of the National Credit Act which stipulates that cases must be heard in the court with geographical jurisdiction – in this case, Johannesburg.

The sisters accused the bank of “forum shopping” by re-filing their case in Pretoria after withdrawing the original case from the Johannesburg court, “being aware of the additional cost implications to all parties and especially the respondents (the sisters), as well as additional inconvenience caused …due to distance.”

If the bank’s objective was to find a “soft” jurisdiction, it just got handed its head on a plate.

Months of waiting

“It took months of waiting. Absa’s attorney tried to get us to settle but we stuck it out like we warned them we would so that our voices could be heard. We could have easily settled this matter to save us the stress, but we discovered during our own fight that we are just one of thousands of people to whom this happens each year. These poor people don’t even know that they have been victims and most of them already lost their homes, not knowing that the bank is often bringing these applications to the courts illegally. We have evidence that this was done to many families with children, elderly people, single mothers and people who would never be able to afford legal assistance or knowledge to have found this if they had to fight this on their own. Many did not even try to fight back because they were told no-one wins against the banks. The result is that they lost everything they worked so hard for. These people lost their homes to a bank without a conscience,” said the sisters after the case.

Some years ago Absa boasted that it financed one in three homes in South Africa. Considering that more than 10,000 homes are repossessed in South Africa each year, it’s safe to assume that Absa is responsible for the biggest share of this. Bear in mind also that these homes are sold at auction, usually for a fraction of their value. The bank then comes after the defaulting borrower for the shortfall. The legality of this is about to be tested in court.

The bank, under CEO Maria Ramos, has been trying to rebuild the bank’s image after losing more than one million retail and several thousand business clients in 2013. Barclays, which is the majority shareholder in Absa, has been embroiled in several international scandals and hit with multi-million dollar fines for their questionable dealings around the globe. In a memo sent to their staff worldwide, Barclays PLC’s chief executive Anthony Jenkins stated: “I will not tolerate any circumstances in which our clients are lied to or misled and any instances I discover will be dealt with severely. The success of our business depends crucially on our clients being able to rely absolutely on our honesty and integrity.”

No doubt Jenkins will now be looking to put heads on pikes in Absa Bank’s mortgage and legal departments, as he promised he would.

The Liebenberg sisters and a group of friends assisted by researchers, attorneys, advocates and others have now set up a support group to help others fight their cases with the banks: “People who end up in this situation usually are desperate. They don’t know what to do. They don’t know court rules or legislation, and more importantly they usually trust their bank not thinking there might be foul play. Most people don’t have money to fight these court cases. It is true when they say the law only protects either the very rich or the very poor. We were forced to fight the majority of this case on our own and we truly struggled to get attorneys to even keep their doors from closing in our faces, much less listen to us when we told them we were fighting the bank. As we demonstrated today however, the bank customer does have rights and they need to know what these rights are and they should not be scared to fight back. Those that need help can now contact the support group,” says Emmarentia Liebenberg.

The famous Absa fires

“Absa claims that just about every home loan agreement signed prior to 2009 has been destroyed in the fire at the Docu-file storage facility. I think every Absa home loan customer should phone their bank immediately and ask for a copy of their mortgage contract. See what the bank says. They will probably be told these documents were destroyed in a fire. That is not an excuse. The bank must then produce the electronic copy. Don’t just re-sign any old agreement they ask you to sign either. Make sure first that it was definitely the same agreement with the same terms therein which you had originally agreed on. People need to start demanding that banks deliver these contracts and keep their copies safe because false agreements are currently being used to bring bogus legal claims which steal the assets of ordinary South Africans daily. This is enough! The injustice stops here,” says one of the members of the support group that has been set up after this case.

Their new website will launch soon at www.iknowmyrights.co.za aimed at informing South Africans of their rights when under legal threat from the banks.

Originally published at Acts Online.