IMBREX ENTERPRISES (PVT) LTD v STANBIC BANK ZIMBABWE LTD & ANOR
HIGH COURT, BULAWAYO
[Urgent Chamber Application HB 60-16]
February 23 and 25, 2016
MATHONSI J
Bank – Nature of banker-customer relationship.
Bank – Accounts – Summary closure of bank account by bank – Customer contracting out of right to reasons – Contract allowing for closure of accounts by bank on notice – Whether such period reasonable – Whether bank obliged to give reasons – Freedom of contract – Parties bound by their contract.
Bank – Money laundering – Suspicion of money laundering or terror financing – Section 31 (2) of the Money Laundering and Proceeds of Crime Act [Chapter 9:24] proscribes the notification by a bank to its client of a suspicion of money laundering or terror financing.
In dismissing an application impugning a bank's failure to provide its client with reasons for the closure of the client's accounts:
Held, that the banker-customer relationship is contractual. The parties are bound by the terms of their contract.
Held, further, that s 31 (2) of the Money Laundering and Proceeds of Crime Act [Chapter 9:24] proscribes the disclosure by a bank to its customer that a suspicion of money laundering or terror financing has been reported to the Reserve Bank.
Cases cited:
Bozimo Trade and Development Co (Pvt) Ltd v First Merchant Bank of Zimbabwe Ltd & Ors 2000 (1) ZLR 1 (H), referred to
Charuma Blasting & Earth Moving Services (Pvt) Ltd v Njainjai & Ors 2000 (1) ZLR 85 (S), referred to
Pereira v Marine and Trade Insurance Co Ltd 1975 (4) SA 745 (A), referred to
Printing Registered Co v Sampson (1875) LR 19 Eq 462, referred to
Universal Merchant Bank Zimbabwe Ltd v The Zimbabwe Independent & Anor 2000 (1) ZLR 234 (H), referred to
Washmate Motors Centre (Pvt) Ltd v City of Harare 2013 (1) ZLR 97 (H), referred to
Legislation considered:
Money Laundering and Proceeds of Crime Act [Chapter 9:24], ss 30, 31 (2)
Book cited:
Willis N Banking in South African Law (1981, Juta & Co Ltd, Cape Town)
P Chitsa, for the applicant
J Moyo, for the first respondent
Second respondent in default
MATHONSI J:
The applicant, a fuel monger operating service stations in Kwekwe and Redcliff, has four business accounts with the first respondent bank. Two bank accounts are United States dollars denominated while the other two accounts are in the South African rand currency. Quite substantial sums of money find their way into those accounts on a regular basis as they are very active accounts. According to the applicant it makes total deposits of between 30 and 50 million rands every month.
The applicant had to apply to the second respondent, on the advice of the first respondent, for permission to deposit its business proceeds denominated in rands, into those accounts. The second respondent gave the green light but in a letter dated 9 November 2015, it counselled caution on the part of the first respondent in the following words:
″The Unit has no objection to you accepting the deposits. Your bank should however, continue to apply the usual KYC/CDD requirements, in terms of understanding the nature of your client's business and any developments thereto, as provided for under the Money Laundering and Proceeds of Crime Act [Chapter 9:24] ('the Act').″
The applicant says that it tried to process a telegraphic money transfer from its account with the first respondent on 1 February 2016. The first respondent delayed processing it and eventually refused to do so. Without any warning and out of the blue, it then advised the applicant by letter of 5 February 2016 that it was closing all the banking accounts of the applicant on 14 days' notice. The letter reads in pertinent part thus:
{mprestriction ids=″1,2,3,4,5″}
″RE: ACCOUNT CLOSURE – IMBREX ENTERPRISES PRIVATE LIMITED
We wish to advise (of) our intention to close all your banking accounts with Stanbic Bank Zimbabwe. In line with a provision on closing of an account of our terms and conditions you are hereby given 14 days' notice from the date of this letter to terminate the relationship. The notice period will allow you to make alternative banking arrangements to ensure your operations are not disrupted. Only transactions related to account closure will be allowed through the account. Failure to close the account within the stated period will leave the bank with no option but to compulsorily close it. Kindly transfer all balances in the accounts to another bank by 22 February 2016. It must be noted that this decision is independent of the standing and/or conduct of operations of your company in our books. We would like to express our appreciation for the partnership we have enjoyed as we banked your business over the years. This information is given without the responsibility of the bank or any of its officials issuing it.″
The applicant has now come to court on a certificate of urgency seeking the following relief:
″TERMS OF FINAL ORDER SOUGHT
That you show cause to this Honourable Court why a final order should not be made in the following terms:
1. That the decision by the first respondent to close all applicant's bank accounts with it, be and is hereby declared to be unprocedural wrongful and unjustified and that it be set aside.
2. That the letter by the first respondent to the applicant dated 05th February 2016 be and is hereby declared to be null and void or of no force and effect.
3. That the first respondent be and is hereby ordered to bear the costs of this application at attorney-client scale.
INTERIM RELIEF GRANTED
Pending determination of this application, the applicant is granted the following relief:
1. That the first respondent (be) and is hereby ordered to immediately restore all of the applicant's bank accounts with the first respondent to a normal working/operating state.
2. That all impending closures or terminations or further suspensions of the applicant's business or banking accounts with the first respondent be and are hereby stayed or suspended.″
The applicant complains that no reasons were given for the first respondent's drastic action. It was not afforded an opportunity to make representations before the decision was taken. As it is now, the first respondent has gone ahead and frozen its accounts and it is no longer processing transactions. No investigations were carried out and no input was solicited from the applicant before the decision was taken, a decision which is very prejudicial to the applicant. Not only does it deposit the proceeds of its fuel business in those accounts, it also receives rentals and other payments from its debtors through those accounts. Closing the accounts has had the effect of paralysing its operations.
As a result, the applicant has run out of fuel as it cannot replenish supplies without transacting on its bank accounts. Its 60 (sixty) workers cannot be paid and will also be adversely affected. The unilateral decision of the first respondent is therefore wrongful. In our law, the contract between a banker and a customer is uberrimae fidei, of the utmost good faith. As such both the banker and the customer have a duty to each other to disclose any information which may be prejudicial to the other. In such contracts, the party prejudiced by a failure to fulfil an obligation of the utmost good faith may cancel the contract: See Pereira v Marine and Trade Insurance Co Ltd 1975 (4) SA 745 (AD).
In the words of the learned author Nigel Willis Banking in South African Law (1981, Juta & Co Ltd, Cape Town) at p 43:
″Fundamental to the relationship between a customer and a banker is mutual trust. The duty to advise all facts and consequences which may be prejudicial to the other party obviously should rest not only on the banker but also on the customer. The banks, enjoying immense prestige and power and being furthermore, in the position of a stronger party vis-Ã -vis a customer, should obviously bear a duty of displaying the utmost good faith to their customers. Conversely, although, as mentioned earlier, the legal position is that money deposited with a bank is owned by the bank, in an economic and moral sense when a banker lends a customer money he is lending the public's money, the banker acting, in effect, as the custodian of the public wealth. It is far from unreasonable that the customer should, in turn, owe the banker a special duty to disclose all facts material to his request for an overdraft and indeed to the conduct of his account generally.″
It is also true that the relationship between a banker and a customer arises from contract. One therefore has generally to start at the document governing the relationship between the parties in order to adjudicate over a dispute between the parties. In doing so it must be borne in mind that the parties have the freedom to contract between themselves as they please. In the seminal words of JESSEL MR in Printing Registered Co v Sampson (1875) LR 19 Eq 462 at 465:
″If there is one thing which more than any other, public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice. Therefore you have this paramount public policy to consider that you are not lightly to interfere with this freedom of contract.″
Mr Moyo who appeared for the first respondent submitted that the first respondent was entitled in terms of clause 10.2 of the contract of the parties not only to terminate the relationship upon the giving of reasonable notice to the applicant but also to withhold the reasons for such termination. He added that when applying to open the accounts the applicant had disclosed that it operates other bank accounts with CBZ Bank and BancABC. For that reason, the 14 days' notice given for the applicant to transfer its custom to another bank was more than reasonable. In any event, the applicant only requires 24 hours to open and operate a new bank account.
Mr Moyo submitted further that the first respondent is precluded by s 31 (2) of the Act which overrides the common law, from disclosing to its customer that a report concerning a suspected case of money laundering or financing of terrorism has been made. That, allied with the contractual right of the first respondent not to give reasons for the termination, means that the first respondent has acted within the confines of the law.
Mr Chitsa for the applicant retorted that no notice whatsoever was given in this case considering that the applicant tried to make a telegraphic transfer on 1 February 2016 in the sum of R941 720 which transfer was refused even before any notice was given. It means that the first respondent suspended this account before purporting to give notice and even during the tenure of the notice period the applicant was not allowed to transact on the accounts. That cannot be reasonable notice.
The relief that the applicant seeks takes the form of an interdict preventing the first respondent from proceeding with the closure of its accounts and directing it to continue doing business with the applicant against its will. The applicant must therefore establish all the traditional essentials for the grant of a temporary interdict namely, a prima facie right; a well-grounded apprehension of irreparable injury; the absence of an ordinary remedy and the balance of convenience favouring the grant of the interdict. See Charuma Blasting & Earth Moving Services (Pvt) Ltd v Njainjai & Ors 2000 (1) ZLR 85 (S) 89E-H; Universal Merchant Bank Zimbabwe Ltd v The Zimbabwe Independent & Anor 2000 (1) ZLR 234 (H); Bozimo Trade and Development Co (Pvt) Ltd v First Merchant Bank of Zimbabwe Ltd & Ors 2000 (1) ZLR 1 (H) at 9F-G.
The requirements for the grant of an interdict must all be established before the court grants the interdict. Where one of the essentials is missing, the application must fail. Where the applicant for an interdict fails to establish a prima facie right, even if it is open to doubt, then the application must fail: Washmate Motors Centre (Pvt) Ltd v City of Harare 2013 (1) ZLR 97 (H) at 103A.
Has the applicant established a right Clause 10 of the contract of the parties provides:
″10 Closing of account
10.1 We will close your account on receipt of a request in writing signed by you to do so, but the closure will not be effected until you have returned any unused cheques and bank cards and all cheques or other items deposited have been paid.
10.2 We will close your account on reasonable prior notice and shall not be obliged to give reasons for such action.″
This is a provision which the applicant signed for. It may be true that the issue of reasonableness of the notice may be debatable but sight should not be lost on the fact that the applicant has other accounts elsewhere. It can therefore transfer its wealth to those accounts. Most of what it complains about is inconvenience as opposed to impossibility.
Clearly the applicant contracted out of being given reasons for the closure of the account and cannot now cry foul over a contract it went into with its eyes very wide open. Apart from that, the first respondent relies on the provisions of the Act, an Act of Parliament promulgated to suppress the abuse of the financial system among other reasons. Section 30 of the Act requires financial institutions that suspect that any property is the proceeds of crime or linked to terrorism to report to the Bank Use, Promotion and Suppression of Money Laundering Unit of the second respondent.
Where that has been done, the provisions of s 31 of the Act are triggered. Section 31 provides:
″31 Inapplicability of confidentiality provisions and prohibition against tipping-off
(1) No secrecy or confidentiality provision in any other law shall prevent a financial institution or designated non-financial business or profession from fulfilling its obligations under section 30 or the other provisions of this Act.
(2) No financial institution or designated non-financial business or profession, nor any director; partner, officer, principal or employee thereof, shall disclose to any of their customers or a third party that a report or any other information concerning suspected money laundering or financing of terrorism will be, is being or has been submitted to the Unit, or that a money laundering or financing of terrorism investigation is being or has been carried out, except in the circumstances set forth in subsection (3) or when otherwise required by law to do so.
(3) A disclosure may be made to carry out a function that a person has relating to the enforcement of any provision of this Act or of any other enactment, or, in the case of a legal practitioner or accountant, when seeking to dissuade a client from engaging in illegal activity.″
Whatever it is that has forced the first respondent to throw away the applicant's millions must be huge indeed. Suddenly that money has raised such a stink that the bank does not desire to have anything to do with it and has sent the applicant packing. Both the law and the agreement between the parties allow it to do so without giving reasons. The applicant has no right of recourse in the circumstances.
Accordingly, the application is hereby dismissed with costs.
Mkushi, Foroma & Maupa c/o Dube-Tachiona & Tsvangirai, applicant's legal practitioners
Calderwood, Bryce Hendrie & Partners, first respondent's legal practitioners
{/mprestriction}