Cape Town - A flood of claims could be instituted against
the Land Bank should the court decide in favour of five plaintiffs who are
accusing the Land Bank of miscalculating the interest on their loans.
The amount claimed is R7m.
In their heads of argument submitted to the North Gauteng
High Court in Pretoria the group of plaintiffs alleges that the Land Bank has
unlawfully debited their accounts.
A decision is expected within the next couple of days.
The Land Bank has admitted that administrative fees were
charged in error, but is opposing the basis of the claims.
In this test case the court was asked to decide whether the
claims had prescribed, or whether the Land Bank had been authorised to levy
compound interest and whether it had acted unreasonably in unilaterally
adjusting interest rates.
The claimants had first become aware of the possibly
erroneous interest calculation after reading an article by their attorney,
Schalk Botha, and had asked him to scrutinise their paid up accounts in the
Land Bank for possible faulty interest calculations.
The fact that they had blindly trusted the Land Bank was
evident from the statement by one of the claimants.
It said that the claimants had grown up looking upon Land
Bank to be a valuable, upright and constitutional bank that at all times could
be trusted in any negotiations, whether written or oral. It was an institution
for which they, as farmers, had tremendous respect.
The claimants argue that they became aware of the possibly
faulty calculations only when Botha had had their accounts examined. According
to them, they had acted within the prescribed time after becoming aware of the
faulty calculations, and the claims had not prescribed as alleged by the Land
Bank.
The second point of contention is the question of whether
the agreement between the Land Bank and the claimants made provision for the
bank levying compound interest, or whether simple interest was required. “A
change in the application of simple to compound interest has a significant
impact and is in violation of the agreements,” is the contention.
The Land Bank’s legal representatives state that it is
general business practice to capitalise interest and simple interest is highly
unusual.
The claimants believe that the Land Bank was unreasonable in
adjusting the interest rates. The bank did not follow the pattern of commercial
banks by adjusting interest rates according to the movements of the prime rate.
The result was that the interest on loans had been
determined arbitrarily, said the claimants, and with a view boosting the Land
Bank’s profitability.
Expert witness Dawie Roodt, chief economist of the Efficient
Group, told the court that the Land Bank had in 1999 changed its practice of
adjusting rates in tandem with the prime rate. In his research he had been
unable to find any market-related reason for doing so.
“The only reason for the Land Bank’s interest rates
deviating from the expected and historical trend has to be linked to the Land
Bank’s profitability,” he testified. “This arises from alleged mismanagement
and corruption within the bank, as reported by Deloitte.”
In reaction Dr Japie Jacobs, until recently adviser to the
Land Bank, said there were other reasons why the Land Bank’s reserves had
contracted and it had become necessary to increase rates.
Jacobs further testified that the Land Bank wanted to
increase its profit to bolster reserves and he maintained that there had also
been external factors forcing the Land Bank to raise interest rates. These
related to, inter alia, the abolition of the agricultural credit and marketing
boards.
- Sake24
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