Ithala argued that before the PMB Order was granted, there were various meetings with the Prudential Authority, file image.
Ithala, the development finance organisation in KwaZulu-Natal, has through the court thwarted an attempt by an administrator appointed by the Reserve Bank (Prudential Authority) to oversee Ithala’s affairs, to have his powers extended.
By extending his powers the repayment administrator, Johan Kruger, one of SA’s leading investigators into Ponzi and pyramid schemes, would have been allowed to stop Ithala from taking deposits. Ithala has for some years being trying to get a banking licence, but has been taking deposits under an exemption.
In December, an order granted by Judge Robin Mossop in Pietermaritzburg (the PMB Order) provided for, among others, for Kruger’s application to be heard in camera; that Kruger to institute proceedings in terms of the Banks Act; and it empowered Kruger to recover and take possession of the bank’s assets.
A rule nisi was issued calling upon Ithala to show cause on March 19, 2024 as to why any assets recovered and which are in the possession of Kruger, should not remain in his possession.
Ithala subsequently made a reconsideration application, claiming Kruger had failed to place material facts and evidence before Judge Mossop, when he sought the PMB Order.
Ithala argued that before the PMB Order was granted, there were various meetings with the Prudential Authority following the Prudential Authority’s refusal of a further extension of Ithala’s exemption, which permitted Ithala to provide its various retail banking services.
Kruger had applied to the High Court Pietermaritzburg to extend his powers so he could act beyond the injunction of the Gauteng Division of the High Court, Ithala said in a statement Friday.
The Prudential Authority also wanted Kruger to start a process to pay its depositors back their money.
According to the statement, Ithala said during these meetings, the Prudential Authority expressed its intention to appoint Kruger as the repayment administrator. Ithala submitted to the court that it was advised by the Prudential Authority that the repayment administrator was merely a caretaker.
The Prudential Authority had also said salaries and remittances currently paid through Ithala would suffer no disruption and that the repayment administrator would ensure that such monies were received and released.
Ithala further contended that the Prudential Authority gave the assurance that Ithala would not be required to stop taking deposits and thus it continued with its deposit taking activities whilst under the supervision of the repayment administrator.
However, despite these discussions, Ithala instituted an urgent application against the Prudential Authority in the Gauteng Division of the High Court, in which it sought an order suspending the winding- down of its deposit taking activities and the appointment of Kruger as repayment administrator.
Ithala’s application was met by a counter urgent application from the Prudential Authority in which it asked that Ithala cooperate with the repayment administrator about further depositing activities.
Both applications were consolidated and eventually a consent order (the Pretoria Order) was taken between Ithala and the Prudential Authority on December 21 2023 to limit the powers of the repayment administrator.
“Meanwhile, the repayment administrator sought the PMB Order with the singular purpose to extend his powers so he could act beyond the injunction created by the Pretoria Order and imposed on him by consent with the Prudential Authority,” said Judge Veerasamy.
Judge Veerasamy said there was no explanation as to why information had not been sought by Kruger from the Prudential Authority, regarding the basis on which the Pretoria Order was obtained, more so because Kruger claimed that the Prudential Authority was an active supporter of his application.
The Judge said the PMB Order “created an injustice to the respondent (Ithala) because it was obtained in its absence on an urgent basis”.
“There was a material non-disclosure of facts which might have influenced the outcome of the application had Ithala been present,” Judge Veerasamy ruled.
He ordered that Judge Mossop’s order be discharged and Kruger’s application be struck from the roll. He was also directed to pay Ithala’s legal costs.
Dr Thulani Vilakazi, CEO of Ithala, said: “The government set up Ithala to mobilise financial resources and to provide financial and supportive services to the people of KwaZulu-Natal, especially the poorest of the poor in deep rural areas. The government, must, therefore do everything possible to support Ithala in fulfilling its mandate of banking the unbanked.”
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