Court name
Supreme Court of Appeal of South Africa
Case number
599 of 2009

Bredenkamp and Others v Standard Bank of SA Ltd (599 of 2009) [2010] ZASCA 75 (27 May 2010);

Law report citations
2010 (4) SA 468 (SCA)
2010 (9) BCLR 892 (SCA)
[2010] 4 All SA 113 (SCA)
Media neutral citation
[2010] ZASCA 75

THE
SUPREME COURT OF APPEAL
OF SOUTH
AFRICA

JUDGMENT

Case No 599/09

In
the matter between:

JOHN ARNOLD BREDENKAMP First Appellant

BRECO INTERNATIONAL LTD Second Appellant

HAMILTON PLACE TRUST Third Appellant
INTERNATIONAL
CIGARETTE MANUFACTURERS

(PTY) LTD Fourth Appellant

and

STANDARD
BANK OF SA
LTD First Respondent

Neutral
citation: Bredenkamp
v Standard Bank
(599/09) [2010] ZASCA 75 (27 May 2010)

Coram: Harms
DP, Cloete, Ponnan and Cachalia JJA and Saldulker AJA

Heard: 06
May 2010

Delivered: 27
May 2010

Summary: Banker
and client – closing of account by bank – when justified
–exercise of a contractual right, which does not
involve any
public policy considerations or constitutional values, does not have
to be ‘fair’.

___________________________________________________________________

ORDER

___________________________________________________________________

On appeal from:
South Gauteng High Court (Johannesburg) (Lamont J sitting as court of
first instance):

The appeal is dismissed with costs, including the costs
of two counsel.
___________________________________________________________________

JUDGMENT

___________________________________________________________________

HARMS DP (CLOETE, PONNAN and
CACHALIA JJA and SALDULKER AJA concurring)

INTRODUCTION

[1] This
appeal relates to the right of a banker to close a client’s
account.1
The issue was presented as a constitutional issue because it was said
to be based on principles laid down by the Constitutional
Court (the
CC) in Barkhuizen v
Napier.2
The first proposition is that the benchmark for the constitutional
validity of a term of a contract is fairness; and the second
is that
even if a contract is fair and valid, its enforcement must also be
fair in order to survive constitutional scrutiny.3
The appellant’s case, as it unfolded during the course of the
proceedings, was based on the second but it will be necessary
to
consider both because in my judgment they are not to be found in the
CC judgment and are in any event unsound.

[2] The
appellants, who were the applicants in the High Court, are Mr John
Bredenkamp, two companies that ‘belong’ to
him, and a
trust that owns one of Bredenkamp’s many residences.4
Before us the case of the trust was abandoned, which means that we
are concerned only with Bredenkamp and his two companies, and
further
references to ‘the appellants’ will be to them. According
to the founding affidavit, the appellants are international

commodities traders that required banking facilities in order to
conduct business in this country. They also required Pound Sterling

and US Dollar denominated accounts to make and receive payment for
commodities bought and sold internationally. In addition, Bredenkamp

required personal banking facilities.

[3] The
appellants, consequently, opened a number of accounts with the
respondent, Standard Bank of SA Ltd, during 2002. Bredenkamp
held a
MasterCard credit card, a number of current accounts and two foreign
currency accounts. The one company held a current account
and the
other a money market account.

[4] On 8 December 2008, the Bank
notified the appellants that it had suspended the credit card
facilities and that it intended to
withdraw them on 6 January 2009.
One of Bredenkamp’s current accounts had an overdraft facility
attached, and that was likewise
suspended and was to be withdrawn on
the same date. As far as the other current accounts and the foreign
currency accounts were
concerned, the Bank requested the appellants
to make alternative arrangements because these were to be closed on
19 January 2009.
At the request of the appellants the Bank gave them
extensions from time to time. The detail is of no consequence.

[5] The
appellants approached the High Court as a matter of urgency for an
interim interdict restraining the Bank from cancelling
the contracts,
which underlie the banking facilities, and from closing the accounts.
The matter came in the first instance before
Jajbhay J (whose
untimely death occurred two days before the hearing of this appeal).
The learned judge granted the interim interdict
and his judgment is
reported.5
On the return day the matter came before Lamont J who found that the
appellants had not made out a case for an interdict and so
he
discharged the rule and dismissed the application. His judgment is
also reported.6
This appeal against his judgment is with the leave of this Court.

THE APPLICATION

[6] The
Bank sought to justify its right to terminate its relationship with
the appellants on two grounds. The first was that it
had the right in
terms of an express term of its contracts to close the accounts with
reasonable notice. It also relied on an implied
term with the same
effect, namely that an indefinite contractual relationship may be
terminated with reasonable notice.7
(An implied term is one implied by law into all contracts of a
particular nature (a naturale).
This means that it is a rule of law that can be varied or made
inapplicable by agreement. A tacit term is one that has to be implied

with reference to the presumed intention of the parties to a
particular contract.)

[7] The
Bank did not initially inform the appellants of its reasons for
termination. One would assume that in the ordinary course
of events
the motive of a party in exercising a right – contractual in
this case – is irrelevant.8
(A possible exception could be the abuse of rights.)

[8] The final relief sought in the
notice of motion was multi-pronged and wide-ranging. It was based
primarily on the supposition
that the contracts between the parties
did not contain the express term. Probably realizing that the term
could be said to be implied,
the appellants sought an order declaring
that the common-law rule is that an indeterminate contract may be
terminated only in the
event of a breach by the other party. In the
event, the affidavit of Bredenkamp, dealt with later, sought to make
out a different
case without an amendment of the notice of motion.

[9] In
the alternative, the appellants sought to attack the validity of the
implied term and by implication the express term. Apart
from a
generalized attack on the basis of both being contra
bonos mores, the
constitutional attack was particularized with reference to a breach
of the following rights contained in the Bill of Rights,
viz:

‘section
9 (equality); section 10 (human dignity); section 14 (privacy);
section 15 (freedom of religion, belief and opinion); section
16
(freedom of expression); section 18 (freedom of association); section
22 (freedom of trade, occupation and profession);
section 25 (property); section 32 (access to information); section 33
(just administrative action); [and] section 34 (access to
courts).’

[10] There was also a prayer for
review of the Bank’s decision in terms of administrative
justice principles on the basis
that the appellants were entitled to
a hearing before the decision to close the accounts was taken. The
appellants have abandoned
this leg of their case. However, they
harked back to a right to be heard (not a right to a hearing) in
another context.

[11] The
crucial relief sought was for an order that the Bank had to ‘maintain
the accounts’ – presumably until
the appellants were to
commit a breach of contract. The apparent basis for the relief was
that the term was invalid or that it
flowed from the new common-law
rule that was to be developed.

THE REASONS FOR TERMINATION

[12] The Bank disclosed its reasons
for termination in its first set of affidavits. The decision came
about because of the listing
of Bredenkamp and a number of entities
owned or controlled by him as ‘specially designated nationals’
(SDNs) by the
US Department of Treasury’s Office of Foreign
Asset Control (OFAC) on 25 November 2008. OFAC administers and
enforces economic
and trade sanctions based on US foreign policy and
national security goals. The Bank became aware of the listing on 26
November.

[13] MasterCard, a US company, is not
permitted by US law to conduct any business directly or indirectly
with any listed person
or entity and the Bank, by virtue of its
relationship with MasterCard, could not permit an SDN to use a
MasterCard. The Bank was,
accordingly, obliged to cancel the
MasterCard account and Bredenkamp accepted before us that he was not
entitled to any relief
in relation to this account.

[14] The
reason why Bredenkamp was listed by OFAC is because he was said to be
a ‘crony’ of President Mugabe of Zimbabwe
and that he had
provided financial and logistical support to the ‘regime’
that has enabled Mugabe ‘to pursue
policies that seriously
undermine democratic processes and institutions in Zimbabwe’.
Bredenkamp disputed these allegations.
The Bank in turn did not
suggest that the grounds for his listing were factually correct or
justified and this Court, too, is not
called upon to determine
whether they are.

[15] An
on-line report at the time alerted the Bank to the fact that
Bredenkamp was allegedly involved in various business activities,

including tobacco trading, grey-market arms trading and trafficking,
equity investments, oil distribution and diamond extraction.

[16] Bredenkamp
was clearly not an ordinary client. On one bank form he indicated
that his monthly income was R500 000 during 2002.
He was reputed to
have been one of the 100 richest persons in the UK. He owned
residences in several parts of the world. It is
accordingly not
surprising that the Bank, immediately after the listing (which in
itself was evidence of his prominence and wealth),
made internal
inquiries and discussed his case at the level of senior executives
and managers.

[17] The Bank’s first concern
was that if it were to maintain its relationship with the appellants,
‘domestic and foreign
onlookers might reasonably believe or
suspect that accounts held at Standard Bank would or could be used to
facilitate unlawful
and/or unethical acts’ and its association
‘might well undermine a bank’s hard-won and fragile
national and international
reputation’.

[18] The
Bank was also apprehensive of the possibility that any continued
relationship with the appellants would create material
business
risks. Although the Bank itself is not bound to comply with the
listing, many financial institutions with which it conducts
business
internationally are. These financial institutions impose stringent
obligations in respect of the correspondent accounts
they offer to
banks such as the respondent. Any misstep by the Bank concerning a
client who is an SDN could lead to the seizure
of funds transferred
in bulk on behalf of a number of clients, to a closure of accounts or
to an adverse report to OFAC. It follows
that it was not only the
Bank’s reputation that it felt was at risk but that there were
also material business risks.

[19] Subsequently,
but while the termination was suspended and before the filing of the
answering affidavit, the Bank made further
inquiries about Bredenkamp
and established that, apart from his listing, he had an unenviable
and dubious reputation locally and
internationally.9
The allegations included the following: He was a sanctions buster not
only of US but also of UN arms embargoes; he smuggled cigarettes
and
thereby circumvented customs and tax laws; he benefitted from the war
in the Congo; he was the subject of serious fraud investigations
in
the UK and of police raids and tax evasion investigations in South
Africa; his Dutch citizenship had been withdrawn; and that
he was a
‘paymaster of irregular commissions to SA government
officials’. Once again, it must be assumed, as the Bank
did,
that these allegations may not be true: unfortunately, reputation is
not necessarily based on fact but often on perception.

[20] To
add to Bredenkamp’s woes the UK soon followed the US and
Bredenkamp was placed on a consolidated list of financial
targets in
relation to the Zimbabwe ‘regime’. The European Union
followed suit on 20 February 2009. Bredenkamp has
launched review
proceedings in relation to the EU listing but there is nothing on the
papers to indicate that he has taken any
formal steps to set aside
the other listings.

THE CASE BEFORE LAMONT J

[21] The appellants’ case as
argued before Lamont J was much narrower than that envisaged in the
papers. It is important to
understand the downsizing because it
impacts on the argument eventually presented to this Court.

[22] I
deal first with the attack on the express term of the contract on
which the Bank relied to close the accounts. Bredenkamp,
in his first
affidavit which was supplementary to the founding affidavit, attacked
the express term on the basis that it was contained
in a
standard-form contract imposed by a powerful corporate entity upon a
vulnerable consumer, accordingly operated in an unbalanced
way, and
was unconstitutional. He added that he had been under the ‘definite
impression that my relationship with the bank
would be perpetual and
that it would not be terminated without good reason or, at minimum,
without first discussing with me the
reasons why the bank chose to do
so’.

[23] The
problem with the attack on the express term was that it took the case
nowhere because it provided no more than does the
implied term or
common-law rule, which entitles a party to terminate an indefinite
contractual relationship on reasonable notice.
This compelled the
appellants to attack the common-law rule. The attack was
constitutionally based with reference to the list of
values in the
Bill of Rights referred to earlier. Bredenkamp submitted that the
common law should be developed so as to require
that the decision to
close an account be preceded by a hearing and be based on rational or
reasonable grounds.

[24] The
appellants themselves scuttled these arguments. They accepted that
the agreement with the Bank entitled either party to
terminate the
relationship on reasonable notice for any reason10
and that this clause or the implied term did not offend any
constitutional value. It was accordingly valid. They also accepted

that due notice had been given and that a reasonable time had been
allowed.

[25] The
issue Lamont J was asked to decide was whether or not, in the
particular circumstances under which the Bank had closed the

accounts, any constitutional values were ‘offended’ (para
14). On the basis that any had, the appellants whittled down
the
relief sought. They now required an order prohibiting the Bank from
closing the accounts in the absence of good cause (because
the
contracts had already been closed a mandamus to the effect that the
closing was unlawful would have been more appropriate)
and
interdicting the Bank from closing the accounts unless and until good
cause arose (para 19). Lamont J recognized that the constitutional

values had to be identified (para 17) but eventually considered the
matter with reference, it would appear, to the constitutional
value
of ‘fairness’ (para 31). Since he quoted at length from
Barkhuizen,
one may assume that he proceeded from the assumption that this value
was recognised in that case.

THE CASE BEFORE THE SCA

[26] The
argument for the appellants before this Court did not differ much
from that before Lamont J. It took as its lodestar para
56 from the
majority judgment of Ngcobo J in Barkhuizen
which reads:

‘There
are two questions to be asked in determining fairness. The first is
whether the clause itself is unreasonable. Secondly,
if the clause
is reasonable, whether it should be enforced in the light of the
circumstances which prevented compliance with the
time limitation
clause.’

This dictum,
according to the argument, means that all contractual provisions have
to be ‘reasonable’. If they are not, they
are
unconstitutional. And even if they are reasonable, their enforcement
must also be reasonable. The contextual phrase ‘which
prevented
compliance with the time limitation clause’ was conveniently
glossed over.

[27] Consistent
with the approach before Lamont J the appellants accepted that the
common-law rule and the express term of the contract
were fair and
reasonable and therefore not in conflict with any constitutional
values. Their complaint was accordingly limited
to the exercise of
the admittedly ‘fair’ and valid contractual right. The
argument proceeded on the basis that Barkhuizen
stands as authority for the proposition that fairness is a core value
of the Bill of Rights and that it is therefore a broad requirement
of
our law generally. This would mean that any conduct (including
legislation), which is unfair, would be in conflict with the

Constitution and, accordingly void – a novel proposition, at
least for me. In any event, according to the argument, fairness
and
reasonableness have infused the law of contract to such an extent
that ordinary principles, such as those relating to mistake,

misrepresentation, cancellation and all else have been subsumed by
constitutional fairness.

[28] I
would be surprised if the judgment of Ngcobo J holds that an
agreement to pay a loan on demand or on a given agreed day requires

for enforcement an inquiry into the reasonableness of the creditor’s
decision to rely on the contractual right. It would
mean that the
debtor could argue that he needs time to pay; that the creditor does
not require the money on the given day; and
that enforcement could
lead to the debtor’s sequestration – all very unfair. I
shall attempt to demonstrate that the
CC did not do any such thing.
For once we were not referred to any foreign constitutional
jurisprudence with such far-reaching
consequences, presumably because
there is none.

[29] It
is important to underscore a number of issues. The first is that the
appellants specifically said before us that they do
not suggest that
the common law had to be developed. This came about when counsel was
unable to formulate the exception to the
implied term which would fit
his case. The problem that faced the appellants in this regard was
that it is inconsistent to accept
that a contract of indefinite
duration (including this one) may be terminated with reasonable
notice but at the same time to contend
that this one could not
without good cause. The two rules would be in conflict. This means
that the provisions of s 39(2) of the
Bill of Rights, which require a
court to promote the spirit, purport and objects of the Bill of
Rights when developing the common
law, do not arise. Another
consequence is that the relief now sought, which is identical to that
sought before Lamont J, is hardly
appropriate because it was based on
a development of the common law.

[30] The second is this: although the
appellants in the part quoted from the notice of motion recited
nearly every provision of
the Bill of Rights counsel stated that they
do not suggest that the exercise of the right to terminate
‘implicated’
any constitutional principle. It is
accordingly not their case that the closing of the account
compromised constitutional democracy,
or their dignity, freedom or
right to equality and the like, and the expansive interpretation of
the Bill of Rights does accordingly
not arise (s 39(1)). The case is
about fairness as an over-arching principle, and nothing more.

[31] Thirdly,
lack of bona fides was not alleged nor was it argued that the Bank
was not bona fide in closing the accounts.11
Having read Dutch and German law on the subject of bona fides in
contract law, which derives not from any bill of rights but from

their codes, I also could not find any instance where a similar
defence was raised.

[32] Lastly,
the appellants also did not seek to rely on a revival of the exceptio
doli generalis.
Whatever its scope may have been, in the absence of another defence
it cannot be fraudulent, unconscionable or inequitable to
rely on a
valid right, in this case the right to terminate on reasonable
notice.12
It is unfortunately necessary to say something more about the
exceptio
because an obiter footnote in Crown
Restaurant13
read with Barkhuizen
has
given some14
the impression that the CC has revived the exceptio
doli generalis,
which was laid to rest by this Court in Bank
of Lisbon.15
The footnote states that it was generally assumed before Bank
of Lisbon
that the exceptio
doli generalis
provided a remedy against an unfair contract and against the unfair
enforcement of contracts. With all due respect, the statement

requires qualification.

[33] The
majority in Bank
of Lisbon,
using a historical analysis, found that the exceptio
had not been part of our law. It was part of the Roman law of
procedure and never a substantive rule, and was used to alleviate
the
strictness of contracts that were not based on bona fides. Since all
contracts in our law are considered to be bonae fidei,
the exceptio
had no purpose in modern law. The majority also pointed out (at
610F-611D) that according to the jurisprudence of this Court –

and lower courts – a party is bound by a contract provided the
contract is valid and untainted and that a party could not
raise the
exceptio
merely because one party has exercised a right conferred by the
contract.16
As Innes CJ already said:17

‘No
doubt the condition is hard and onerous; but if people sign such
conditions they must, in the absence of fraud, be held to them.

Public policy so demands.’

[34] Jansen
J was extremely sceptical about the exceptio
as a self-standing defence; and he found it difficult to envisage an
appropriate field of its operation.18
In this Court, too, he (as a judge of appeal) had rejected the
proposition that a party was not bound by the term of a contract

because it was unfair.19
In Bank
of Lisbon,
however, he relied in his minority judgment on a number of cases
where the exceptio
had been mentioned as a defence. But those cases were all covered by
clear rules such as rectification, mistake and estoppel.20
As in German law, the exceptio
was simply a convenient label for a number of rules but it had no
specific content.21

[35] The
disquiet about facts similar to those in Bank
of Lisbon
had led AS Botha J in an earlier judgment to adopt the exceptio
as a general principle.22
In
both cases a bank sought to use a deed of suretyship with a wide
wording to secure debts that had not been within the contemplation
of
the parties when the agreement was entered into. In other words, the
bank sought to rely on the deed for a purpose that was
never intended
at the time of execution. As Lewis has pointed out, the problem would
not have arisen if the deeds had been appropriately
interpreted. They
should have been interpreted contextually in their matrix.23
The result of a judgment is often determined by the issues defined by
the parties.24

FIRST PRINCIPLES

[36] It
is unfortunately necessary to say something about the much maligned
principle that contracts have to be respected. Davis
J, for instance,
took issue with ‘contractual autonomy’ because it
reflects in his view a libertarian view of the world
which is in
conflict with the spirit of the Constitution read as a whole.25
This led to a counter by Wallis J26
and a riposte by Davis J.27

[37] Much
has been said about pactum
sunt servandum as a
holy cow. It may have been one during Germanic and early Roman times
when the law ‘laboured under the tyranny of the
word and the
rule of formalism’.28
It has not been a holy cow nor has contractual autonomy existed since
the time of Justinian. The maxim was derived from Codex 2.3.7
where
in a particular context two Emperors had said that ‘pacti
conventionisque fides servanda est’.29
Codex 2.3.6, stated that it is a self-evident principle that
contracts (pacta) concluded contrary to laws, imperial
constitutions,30
or the boni mores are of no force or effect. See also Codex 2.3.29.31

[38] This
Court in Sasfin32
consequently restated the obvious, namely that our common law does
not recognize agreements that are contrary to public policy.
Our
courts have always been fully prepared to reassess public policy and
declare contracts invalid on that ground.33
Determining whether or not an agreement was contrary to public policy
requires a balancing of competing values. That contractual
promises
should be kept is but one of the values. Reasonable people,
irrespective of any philosophical or political bent, might
disagree
whether any particular value judgment was ‘correct’, ie,
more acceptable.34
Didcott J, for one, believed in relation to restraint of trade cases
that the sanctity of contract trumped freedom of trade whereas
AS
Botha J (a former member of this Court who also died recently)
together with Spoelstra AJ, thought otherwise while Vermooten
J
agreed with Didcott J.35
The view of Didcott J was eventually adopted by this Court in Magna
Alloys.36
The disagreement in Sasfin
between the majority and the minority did not affect the principle
but its application to particular clauses and severability.
Public
policy considerations are also not static and their weight may change
as circumstances change.

[39] Others
have spoken more eloquently about the interaction between the
Constitution and the common law, more particularly the
law of
contract, but I shall attempt to state the basics that have become
trite but may not always have been observed. The common
law derives
its force from the Constitution and is only ‘valid’ to
the extent that it complies or is congruent with
the Constitution.
Every rule has to pass constitutional muster. Public policy and the
boni mores are now deeply rooted in the Constitution
and its
underlying values. This does not mean that public policy values
cannot be found elsewhere. A constitutional principle that
tends to
be overlooked when generalized resort to constitutional values is
made is the principle of legality. Making rules of law
discretionary
or subject to value judgments may be destructive of the rule of law.

[40] It
is now time to quote from the judgment of Ngcobo J in Barkhuizen
about the holy cow. He said (para 87):

‘Pacta
sunt servanda
is a profoundly moral principle, on which the coherence of any
society relies. It is also a universally recognised legal principle.

But, the general rule that agreements must be honoured cannot apply
to immoral agreements which violate public policy. As indicated

above, courts have recognised this and our Constitution re-enforces
it.’

THE BARKHUIZEN JUDGMENT

[41] Although
the judgment of the substantial majority (per Ngcobo J), with due
respect, appears to me to be clear and consistent,
some have
interpreted it differently. It is accordingly my unenviable task to
construe the judgment to the extent that it impacts
on this case.

[42] The case concerned the
constitutionality of a time limitation clause in a short-term
insurance policy.
It provided that the
insured had to institute any claim within three months after the
claim had been rejected by the insurer. The
case of the insured was
that the term limited his right of access to courts guaranteed by s
34 of the Bill of Rights.

[43] The
CC found that our
common law has always recognised the right of an aggrieved person to
seek the assistance of a court of law and that a term in
a contract,
which deprives a party of the right, is contrary to public policy
(para 34). Section 34 not only reflects the foundational
values that
underlie our constitutional order, it also constitutes public policy
(para 33). The question whether the clause was
contrary to public
policy depended on whether it was inimical to the values that
underlie our constitutional democracy ‘as
given expression to in section 34’
(para 36). (I emphasize the reference to the specific constitutional
value involved in view of the appellants’ admission
that they
do not rely on any particular value.) The CC applied the tests laid
down in Mohlomi,37
a
judgment dealing with a statutory limitation of the right of access
to courts, which implies that the application of constitutional

values to legislation and contract does not differ. (It is trite that
fairness is not the test for statutory constitutionality.)

[44] The
clause in question did not deny but only limited the right to seek
judicial redress (para 45). A limitation of this particular

constitutional right is not per
se
contrary to public policy but it would be if the limitation were
‘unreasonable or unfair’ (para 51). The CC then turned
to
consider the two quoted questions, namely whether the clause itself
was ex facie unreasonable and, if not, whether it should
be enforced
‘in the light of the circumstances which prevented compliance
with the time limitation clause’ (para 56).

[45] The
first question requires no further attention. About the second the CC
said this (para 58):

‘The
second question involves an inquiry into the circumstances that
prevented compliance with the clause. It was unreasonable to
insist
on compliance with the clause or impossible for the person to comply
with the time limitation clause. Naturally, the onus
is upon the
party seeking to avoid the enforcement of the time limitation clause.
What this means in practical terms is that once
it is accepted that
the clause does not violate public policy and non-compliance with it
is established, the claimant is required
to show that in the
circumstances of the case there was a good reason why there was a
failure to comply.’

This
reflects the approach our courts have taken in relation to the
enforcement of clauses
in restraint of trade. One considers, in the light of the
circumstances prevailing at the time of enforcement, whether or
not
it would be contrary to public policy to enforce the restraint.38

[46] The
public policy considerations that apply at the enforcement stage are
no different from those that apply at the first stage:
is the
limitation of the identified constitutional value – the right
of access to courts –fair and reasonable in the
circumstances?
Significantly, the CC referred to only one example of unfair
enforcement and that related to impossibility where
application of
the lex
non cogit ad impossibilia
rule could conceivably solve the problem. It did not raise simpler
examples of unfair enforcement such as that of an insured who
is
unable to afford a lawyer and therefore not able to comply with a
time limit.

[47] This
all means that, as I understand the judgment, if a contract is prima
facie contrary to constitutional values questions
of enforcement
would not arise. However, enforcement of a prima facie innocent
contract may implicate an identified constitutional
value. If the
value is unjustifiably affected, the term will not be enforced. An
example would be where a lease provides for the
right to sublease
with the consent of the landlord. Such a term is prima facie
innocent. Should the landlord attempt to use it
to prevent the
property being sublet in circumstances amounting to discrimination
under the equality clause, the term will not
be enforced.

[48] Similarly,
if the value is subject to limitation, such as the right of access to
courts or to practise a trade or profession,
and was ‘reasonably’
limited within the meaning of s 36, the court must assess at the time
of enforcement whether the
limitation is still fair and reasonable in
the circumstances.

[49] It
is evident from the judgment that if evidence is required to
determine whether a contract is in conflict with public policy
or
whether its enforcement would be so, the party who attacks the clause
at either stage must establish the facts (paras 66, 84-85
and 93).

[50] With
all due respect, I do not believe that the judgment held or purported
to hold that the enforcement of a valid contractual
term must be fair
and reasonable even if no public policy consideration found in the
Constitution or elsewhere is implicated.39
Had it been otherwise I do not believe that Ngcobo J would have said
this (para 57):

‘Self-autonomy,
or the ability to regulate one’s own affairs, even to one’s
own detriment, is the very essence of freedom
and a vital part of
dignity. The extent to which the contract was freely and voluntarily
concluded is clearly a vital factor as
it will determine the weight
that should be afforded to the values of freedom and dignity. The
other consideration is that all
persons have a right to seek judicial
redress.’

[51] It
is also not without significance that there is no indication in
either of the minority judgments of Moseneke ACJ and Sachs
J of an
over-arching requirement of fairness. Instead, both judgments dealt
with the matter as one of public policy as found in
the Constitution
and there is nothing in them that supports the appellants’
argument.

[52] The
appellants sought to bolster their argument in respect of a general
doctrine of unfairness with reference to a number of
instances that,
they say, establish fairness as the basis of all our law. The cases
concerned extortion and restraint of trade,
and there was also a
general reference to Sasfin
where the court had struck down a contract as being contra
bonos mores.
It is difficult to understand the relevance of these instances. They
all dealt with contracts that were contra
bonos mores
and were consequently invalid. Here the appellants have conceded the
validity of the contractual term. They also relied on three
judgments
that deal with unlawful boycotts or blacklisting.40
These cases related to claims in delict. It escapes me how they can
be of any assistance in deciding the principles applicable
to this
case and so does the argument that administrative justice principles
of fairness somehow ‘inform’ contract
law.

FAIRNESS

[53] In the light of my conclusion
that fairness is not a free-standing requirement for the exercise of
a contractual right it is
strictly unnecessary to consider the facts
relating to fairness but because of the way the matter was argued it
is preferable to
deal with the issue.

[54] Fairness remains a slippery
concept as was illustrated by the fact that Jajbhay J found that the
closing of the account was
unfair while Lamont J, on basically the
same facts, found otherwise. I am in general agreement with the
approach of Lamont J.

[55] The
appellants’ case in simple terms is this. They require bank
accounts to conduct business locally. The closing of a
bank account
is a serious matter. If they were to approach one of the remaining
three major banks in the country for an account
they would have to
disclose the fact of closure. Those banks would then establish from
them the reason for closure.41
When informed, they would not grant the appellants banking
facilities. The result of the closing of their accounts, they say,
effectively ‘unbanked’ them (a term coined by counsel).
This is due to the fact that the banking industry is in the
hands of
few who enjoy significant market power. It is accordingly a case
‘where private power approximates public power
or has a wide
and public impact’ when everyone ‘is entitled to
effective relief in the face of unjustified invasion
of a right
expressly or otherwise conferred by the highest law in our land’.42

[56] The
appellants’ argument is in many respects circuitous,
self-destructive and, in any event, without merit. They accept
that
in terms of the valid agreement the Bank was entitled to terminate
without any cause but they ask for an order that the Bank
may only
terminate on good cause. This would require a tacit term or the
development of the common law, both of which they eschew.
But, they
say, in this case the Bank cannot close the account with a bona fide
reason because of consequences to them that cannot
be laid at the
door of the Bank.

[57] The
fact that the appellants as business entities are entitled to banking
facilities may be a commercial consideration but it
is difficult to
see how someone can insist on opening a banking account with a
particular bank and, if there is an account, to
insist that the
relationship should endure against the will, bona fide formed, of the
bank. There is also a factual issue. The
use put by the appellants of
their accounts shows without doubt that they do have other accounts,
although maybe none locally.
The second appellant, which is the
commodities trader, does not hold a foreign currency account with the
Bank. There is no indication
that it uses its current account as a
trading account. The fourth appellant, which appears to be a
manufacturing company, only
has a money market account with the Bank
and not a business account.43
And Bredenkamp’s accounts were used for mundane matters only.

[58] The
appellants also have a serious problem with causation. It is the
listing (fair or unfair) that ‘unbanked’ the
appellants,
and not the closing of the accounts. Ms Ina Steyn of Absa Bank
testified that the fact that the account of an aspirant
customer was
closed by another financial institution is an important factor to
consider when deciding whether or not to accept
the client. However,
it is the reason rather than the fact of closure that would be its
concern. Absa, she said, regards an applicant’s
status on a
credible SDN list as a critical factor in reaching its decision. In
the ordinary course of events Absa checks whether
an applicant is an
SDN. She mentioned that Absa had already refused the appellants
banking facilities in view of the listing.44
There is no suggestion that this was done because the accounts were
closed.

[59] The fact that banks may not wish
to provide listed entities with banking facilities is unrelated to
the fact that there are
only a few major banks in the country. A
proliferation of banks would not have made any difference. The impact
on the appellants
was not caused by the decision to close the
accounts; it was caused by the listing. It is therefore not a case of
the abuse by
the Bank of private power that approximates public
power.

[60] I
find it difficult to perceive the fairness of imposing on a Bank the
obligation to retain a client simply because other banks
are not
likely to accept that entity as a client. The appellants were unable
to find a constitutional niche or other public policy
consideration
justifying their demand. There was, accordingly, in the words of
Moseneke DCJ no ‘unjustified invasion of a
right expressly or
otherwise conferred by the highest law in our land’.45

[61] The
appellants also submitted that the Bank’s decision was
procedurally and substantively unfair. This argument was built
on
quicksand because they abandoned an administrative law review; they
do not suggest that the common law must be developed so
that a party
who is entitled to cancel a contract has to give the other party a
hearing before cancellation; and they do not rely
on a tacit term to
that effect.46
Furthermore, a hearing in the form of a discussion would not have had
any effect and would have been an exercise in futility. Bredenkamp

presumably would have told the Bank that the listing was not
justified, and he may have produced evidence to that effect. But the

Bank’s cancellation was not premised on the truth of the
allegations underlying the listing; it was based on the fact of
the
listing and the possible reputational and commercial consequences of
the listing for the Bank.

[62] The next submission was that the
Bank had less drastic steps available: It could have asked for
undertakings from the appellants
to reduce its risks or could have
kept their accounts under surveillance for questionable transactions.
Whether these options were
viable is doubtful but they cannot be
related to the relief presently sought, namely that the Bank may not
cancel without good
cause.

[63] The
appellants objected to the Bank’s reliance on Bredenkamp’s
reputation. The first objection was that the facts
were not true but,
as indicated, the Bank did not seek to rely on the factual accuracy
of the reports but on Bredenkamp’s
reputation itself. Their
other complaint was that a bank is not entitled to take moral
considerations into account when deciding
to close an account. The
answer is that the Bank did not make any moral judgment; it made a
business decision to protect its reputation.
The appellants then said
that banks are inconsistent because some banks do deal with SDNs. The
problem with the submission is that
it is destructive of the
appellants’ whole case. It indicates that a listed entity or
someone with a bad reputation is not
for that reason necessarily
unbanked. Lastly, in this context, the appellants object to the
Bank’s reliance on facts determined
after its decision to close
the accounts. There is no merit in the objection. A party has always
had the right to justify a cancellation
with objective facts
unbeknown to that party at the time when the cancellation took
place.47
Counsel could not give a reason why the rule does not apply or
whether and how it should be developed.

[64] This
leaves for consideration the question whether the Bank had (in terms
of the relief presently sought) good cause to close
the accounts. The
Bank had a contract, which is valid, that gave it the right to
cancel. It perceived that the listing created
reputational and
business risks. It assessed those risks at a senior level. It came to
a conclusion. It exercised its right of
termination in a bona fide
manner. It gave the appellants a reasonable time to take their
business elsewhere. The termination did
not offend any identifiable
constitutional value and was not otherwise contrary to any other
public policy consideration. The
Bank did not publicise the closure
or the reasons for its decision. It was the appellants who made these
facts public by launching
the proceedings and requiring the Bank to
disclose the reasons.

[65] The
appellants’ response was that, objectively speaking, the Bank’s
fears about its reputation and business risks
were unjustified. I do
not believe it is for a court to assess whether or not a bona fide
business decision, which is on the face
of it reasonable and
rational, was objectively ‘wrong’ where in the
circumstances no public policy considerations are
involved. Fairness
has two sides. The appellants approach the matter from their point of
view only. That, in my view, is wrong.

[66] The appeal is accordingly
dismissed with costs, including the costs of two counsel.

_____________________

L T C Harms

Deputy President

APPEARANCES: M
Brassey SC (with him K Hopkins)

APPELLANTS: Instructed
by Wertheim Becker Inc, Johannesburg

E G Cooper Majiedt Inc, Bloemfontein

1st
RESPONDENT: J J Gauntlett SC (with him R M Pearse)

Instructed
by Deneys Reitz Attorneys, Johannesburg

Webbers, Bloemfontein

1
The complex relationship between a bank and its
customers was discussed by Moseneke AJ in Standard
Bank of SA Ltd v Absa Bank Ltd [1995]
1 All SA 535, 1995 (2) SA 740 (T) at 746G-747E.

2
2007 (5) SA 323 (CC)[2007] ZACC 5; , 2007
(7) BCLR 691 (CC).

3
Breedenkamp v Standard Bank of SA Ltd 2009 (5) SA 304, [2009]
3 All SA 339 (GSJ) (the Jajbhay J judgment). The incorrect spelling
of Bredenkamp in the law reports comes from this judgment.

4
The second appellant is Breco International Ltd;
the third is Hamilton Place Trust; and the fourth is International
Cigarette
Manufacturers (Pty) Ltd.

5
The Jajbhay J judgment.

6
Breedenkamp v Standard Bank of SA Ltd 2009 (6) SA 277
(GSJ).

7
Putco Ltd v TV & Radio Guarantee Co (Pty)
Ltd 1985 (4) SA 809 (A); ([1985] 2 All
SA 533 (A)); Amalgamated Beverage
Industries Ltd v Rond Vista Wholesalers
2004 (1) SA 538 (SCA); [2003] 4 All SA 95 (SCA).

8
Compare National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009
(2) SA 277 (SCA), [2008] 1 All SA 197 (SCA) para 37-38; Jansen
van Vuuren & ano NNO v Kruger 1993 (4) SA 842 (A), [1993] 2
All SA 619 (A).

9
Lamont J judgment para 25.

10
I do not necessarily subscribe to the appellants’
submission that the entitlement extends to ‘bad’
reasons,
at least by the Bank. This could amount to an abuse of the
Bank’s rights.

11
South African Forestry Co Ltd v York Timbers
Ltd 2005 (3) SA 323 (SCA), [2005] 4
All SA 168 (SCA) paras 28-34 expands on Brisley
v Drotsky [2002] ZASCA 35; 2002 (4) SA 1 (SCA); 2002
(12) BCLR 1229 (SCA). See also F D J Brand ‘The role of good
faith, equity and fairness in the South African law of contract: The
influence
of the common law and the Constitution’ 126 (2009)
SALJ 71.

12
Universal Stores Ltd v O K Bazaars (1929) Ltd
1973 (4) SA 747 (A) at 762G-H.

13
Crown Restaurant CC v Gold Reef City Theme
Park (Pty) Ltd [2007] ZACC 2; 2008 (4) SA 16, 2007
(5) BCLR 453. (CC) fn 1.

14
A J Kerr ‘The defence of unfair conduct on
the part of the plaintiff at the time the action is brought: The
exceptio doli
generalis and the replicatio doli in modern law’
125 (2008) SALJ
241.

15
Bank of Lisbon and SA Ltd v De Ornelas 1988
(3) SA 580 (A).

16
See also Union
Government v Vianini Ferro-Concrete Pipes (Pty) Ltd
1941 AD 43 at 50.

17
Wells v South African Alumenite Co
1927 AD 69 at 73.

18
North Vaal Mineral Co Ltd v Lovasz
1961 (3) SA 604 (T) at 607F-608F.

19
Paddock Motors (Pty) Ltd v Igesund
1976 (3) SA 16 (A) at 28F-G. See also Magna Alloys and
Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A) at
893H-894B.

20
Carole Lewis ‘The demise of the exceptio
doli: Is there another route to contractual equity?’ 107
(1990) SALJ
26 at 33.

21
Zimmermann & Whittaker Good
faith in European contract law (2000)
pp 19 and 29.

22
Rand Bank Ltd v Rubenstein
1981 (2) SA 207 (W).

23
KPMG Chartered
Accountants SA v Securefin
Ltd 2009 (4) SA 399 (SCA), [2009] 2 All SA 523 para 39. See also
South African Forestry Co Ltd
v York Timbers Ltd 2005 (3) SA 323
(SCA) paras 28-34.

24
Dikgang Moseneke ‘Transformative
constitutionalism: Its implications for the law of contract’
20 (2009) Stell LR 3
at 11.

25
Advtech Resourcing (Pty) Ltd t/a Communicate
Personnel Group v Kuhn 2008 (2) SA 375
(C), [2007] 4 All SA 1368 para 30.

26
Den Braven SA (Pty) Ltd v Pillay & another
2008 (6) SA 229 (D), ([2008] 3 All SA 518).

27
Mozart Ice Cream Franchises (Pty) Ltd v
Davidoff 2009 (3) SA 78 (C).

28
Aquilius (FP van den Heever) ‘Immorality and Illegality in
Contract’ 58 (1941) SALJ 337 at p 339.

29
There is a more generalized statement in Codex
4.54.8 but read in context, especially Codex 4.54.4 which contains
an early example
of estoppel, it does not pretend to provide the
last word on the subject.

30
I used the rendition of W G Hiemstra and H L
Gonin’s Trilingual Legal
Dictionary 2 ed sv ‘pacta’.

31
For a detailed discussion see Edouard
v Administrator, Natal 1989 (2) SA 368
(D).

32
Sasfin (Pty) Ltd v Beukes
1989 (1) SA 1 (A) at 7I-9H.

33
A good example is Hurwitz
v Taylor 1926 TPD 81 declaring
marriage brokerage contracts invalid in spite of the Roman Dutch law
that recognised them.

34
Brisley v Drotsky
[2002] ZASCA 35; 2002 (4) SA 1 (SCA) para 8.

35
See the discussion in National
Chemsearch (SA) Pty Ltd v Borrowman and Another 1979
(3) SA 1092 (T) at 1100H-1101B.

36
Magna Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA
874 (A).

37
Mohlomi v Minister of Defence [1996] ZACC 20; 1997 (1) SA 124 (CC), (1996
(12) BCLR 1559).

38
National Chemsearch (SA) Pty Ltd v Borrowman
1979 (3) SA 1092 (T) at 1107E-H; Magna
Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A)
at 895D-I.

39
Employment contracts are affected by the right to fair labour
practices: Murray v Minister of Defence [2008] ZASCA 44; 2009 (3) SA 130,
[2008] 3 All SA 66 (SCA) para 11; Nakin v MEC, Department of
Education, Eastern Cape 2008 (6) SA 320, [2008] 2 All SA 559
(CkHC) para 36. The CC did not subject the
arbitration agreement in Lufuno
Mphaphuli & Associates v Andrews
2009 (4) SA 529, 2009 (6) BCLR 527 (CC) or its enforcement to the
fairness test.

40
Murdoch v Bulloch
1923 TPD 495; Hawker v Life Offices
Association of SA 1987 (3) SA 777,
[1987] 2 All SA 100 (C); Wolmarans v
ABSA Bank Ltd 2005 (6) SA 551 (C).

41
It is not suggested that the Bank would have
disclosed the reason for closing the accounts to other banks. That
would have been
a breach of confidentiality. The Bank did not even
disclose its reason to the appellants and if the appellants had,
before forcing
the Bank to divulge its reason, approached other
banks the foundation of the appellants’ case would have fallen
away.

42
Dikgang Moseneke loc cit.

43
An affidavit of Mr Bezuidenhout filed by the Bank
refers to a current account held by the fourth appellant with number
023390778
which was once used to transfer a large amount to a bank
account held by the second appellant in Switzerland. The current
account
has not been referred to in the notice of motion or in the
relief now sought. Its status is unknown.

44
The appellants filed affidavits by Mr Marius Nel
who is also an Absa employee. His evidence is somewhat different but
it is clear
that he is not qualified to speak about these matters.
Furthermore, to the extent that his evidence is different, her
evidence
has to be referred on ordinary motion principles.

45
Dikgang Moseneke loc cit.

46
Such a tacit term was found to exist in the
circumstances in De
Lange v ABSA Makelaars (Edms) Bpk [2010] ZASCA 21 (23 March
2010).

47
Matador
Buildings (Pty) Ltd v Harman
1971 (2) SA 21 (C); [1971] 1 All SA 381 (C); Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd
1985 (4) SA 809 (A) at 832; Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
[2000] ZASCA 82; [2001] 1 All SA 581 (A), 2001 (2) SA 284 (SCA) para 28.