Flood of claims may hit Land Bank

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

For more business news in Afrikaans, go to Sake24.com.

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