One needs to be careful of the friends that you keep!

Mr Bredenkamp held a number of accounts at the Standard Bank (both personal accounts as well as accounts held in the name of various entities controlled by him). On 25 November 2008 the US Department of Treasury listed Bredenkamp as a "specially designated national" ("SDN") because of his association with President Mugabe, and because Bredenkamp was said to have provided financial and logistical support to "Mugabe's regime". The truth or otherwise of the relationship and allegations relied upon by the US Department of Treasury is unknown, and was not an issue for determination in the matter heard before the Supreme Court of Appeal (SCA) in the recently reported judgment of Bredenkamp vs Standard Bank 2010 (4) SA 468 SCA.

The purpose of listing anyone as a SDN is to enable the US Department of Treasury to enforce economic and trade sanctions based on US foreign policy and national security objectives. Many of the financial institutions with which Standard Bank conducts its business internationally are bound to comply with any SDN listing. A continued relationship with Bredenkamp therefore placed not only the banks reputation, but also certain material business interests, at risk. After properly considering the matter, but without first engaging with Bredenkamp, Standard Bank notified Bredenkamp that it had taken a decision to suspend his banking facilities, and that the same would be withdrawn.

Bredenkamp approached court for urgent relief, contending that the bank's decision to cancel his facilities was unfair and therefore invalid, being "unconstitutional". Simply put, Bredenkamp contended that the bank should at least have discussed the matter with him, before closing the accounts. The decision to terminate the banking relationship was, he contended, procedurally and administratively unfair.

Standard Bank, in terminating the banking relationship, was in a position to rely not only on an express term of its contracts permitting it to close accounts on reasonable notice, but also on an implied term to the same effect, namely, that any indefinite contractual relationship may be terminated on reasonable notice. Bredenkamp sought to suggest that those contractual terms could not be relied upon unless exercised fairly and reasonably. The consequences of Standard Bank's decision, so Bredenkamp argued, were not fair to him, as he could not, following Standard Bank's decision, establish alternate facilities with other bankers.

The SCA, in a well reasoned judgment delivered by Harms DP, concluded that "fairness" is not a freestanding requirement for the exercise by any party of a contractual right. There was no obligation on the bank to afford Bredenkamp a "hearing" before electing to terminate its banking relationship with the client. The bank's cancellation was not premised on the truth of the allegations underlying the SDN listing, but rather on the fact of the listing itself, and the possible reputational and commercial consequences of the listing for the bank. The bank had a contract, which gave it the right to cancel. The bank had exercised its right to termination in a bona fide manner. The termination, therefore, did not offend any identifiable constitutional value and was not otherwise contrary to any other public policy consideration.

The approach adopted by the SCA is to be welcomed. The introduction of any requirement for "fairness", in relation to the conduct of a party, when exercising any right held pursuant to a contract, would only serve to create the opportunity for a great deal of commercial uncertainty, no doubt prejudicial to good business practice.

Written by: Jonathan Witts-Hewinson, Director, Dispute Resolution: Litigation, Arbitration and Mediation at Cliffe Dekker Hofmeyr