Bredenkamp v Standard Bank of SA Ltd

The appellants, Mr John Bredenkamp and his companies, held multiple accounts with Standard Bank which they opened in 2002. These included current accounts, foreign currency accounts, a money market account, and a MasterCard credit card. In November 2008, Bredenkamp was listed as a 'specially designated national' (SDN) by the US Department of Treasury's Office of Foreign Asset Control (OFAC), allegedly for being a 'crony' of President Mugabe and providing financial and logistical support to the Zimbabwean regime. On 8 December 2008, the Bank suspended and gave notice to close the appellants' accounts, citing concerns about reputational and business risks. The Bank was concerned that association with Bredenkamp might undermine its national and international reputation, and create material business risks, as many financial institutions with which it conducts business internationally are bound by OFAC listings. The appellants sought urgent interim relief to prevent the closure of accounts, claiming the Bank's decision was unfair and unconstitutional.

• Whether a bank has the contractual right to close a customer's account on reasonable notice for any reason, or only for good cause
• Whether the enforcement of a valid contractual right to terminate a banking relationship must be 'fair' as a constitutional requirement
• Whether Barkhuizen v Napier established fairness as an overarching constitutional requirement for the enforcement of valid contractual terms
• Whether the closure of bank accounts implicated any constitutional rights in the Bill of Rights
• Whether the bank's decision to close the accounts was procedurally or substantively unfair
• Whether the common law rule permitting termination of indefinite contracts on reasonable notice should be developed to require good cause

The appeal was dismissed with costs, including costs of two counsel. The interim interdict preventing closure of the accounts was discharged.

A banker is entitled to terminate an indefinite banking relationship on reasonable notice either by express contractual term or by implied common law term, without needing to establish good cause, provided the decision is made bona fide. The enforcement of a valid contractual right does not require constitutional scrutiny for 'fairness' unless the enforcement implicates an identified constitutional value or public policy consideration. Barkhuizen v Napier does not establish a general constitutional requirement that all exercises of contractual rights must be 'fair'; rather, it requires a two-stage inquiry: (1) whether the contractual term itself violates public policy or constitutional values; and (2) if not, whether enforcement in particular circumstances would unjustifiably limit an identified constitutional right. Where a party accepts that a contractual term is valid and does not identify any constitutional value implicated by its enforcement, constitutional fairness scrutiny does not arise. A bank's bona fide decision to close accounts based on legitimate reputational and business risk concerns does not offend public policy or constitutional values.

The Court made several obiter observations: (1) The exceptio doli generalis was not revived by Crown Restaurant CC v Gold Reef City Theme Park, and remains of limited application in South African law following Bank of Lisbon v De Ornelas. (2) Pacta sunt servanda is not a 'holy cow' but a fundamental principle of contract law, subject to public policy limitations rooted in constitutional values. (3) Fairness as a general principle does not subsume all other contractual doctrines such as mistake, misrepresentation, and cancellation. (4) The principle of legality requires that rules of law not be made overly discretionary or subject to vague value judgments, as this may be destructive of the rule of law. (5) A party has always had the right to justify a cancellation with objective facts unknown to that party at the time of cancellation. (6) While banks are not entitled to act on 'bad' reasons, which could amount to abuse of rights, the Bank's decision in this case was not an abuse. (7) It is doubtful whether administrative law concepts of procedural fairness (such as a right to a hearing before cancellation) apply to purely contractual relationships absent specific development of the common law or a tacit term.

This case is significant for clarifying the limits of constitutional fairness in private contractual relationships, particularly in banking law. It establishes that Barkhuizen v Napier does not create a general requirement that all exercises of contractual rights must be 'fair' as a constitutional matter. Rather, constitutional scrutiny of contract enforcement only arises where an identified constitutional value or public policy consideration is implicated. The judgment affirms the principle of pacta sunt servanda (agreements must be honoured) in South African law, subject to constitutional and public policy limitations. It confirms that banks have wide discretion to manage reputational and business risks by terminating customer relationships on reasonable notice, provided they act bona fide. The case also clarifies that contractual autonomy and freedom of contract remain important values underpinning South African contract law, even in the constitutional era, and that not all contractual disputes require constitutional analysis. It is important for banking law as it addresses when banks may lawfully close customer accounts and the limits of customers' rights to banking facilities.