Fraud charges taint BoB, Collins Newman law firm
Mpho Mokwape | Thursday March 24, 2016 11:47
BoB as the regulators of the collapsed bank have emerged victorious in Justice Zein Kebonang’s recent judgment following a successful bid to rescind a default judgment granted to EBC Guernsey. The default judgment had been granted after it emerged that the attorneys from Collins Newman on behalf of their client, BoB, had failed to file an appearance to defend EBC’s writ of summons against BoB, to recover their losses after the collapse of the Kingdom Bank. Instead BoB and Collins Newman were accused of fraud through forging a court stamp.
Despite the tainted image, Kebonang said he exercised his discretion, consequently setting aside the default judgment and writ of execution issued by the Registrar on July 15, 2015 and that merits of the case and the defence could only be ascertained at a trial. However this was just a minor victory on the part of the BoB as EBC will still want to recover its losses, which had been filed in the sum of about P28 million.
EBC believes among others that the bank at all material times had consistently failed to exercise its powers under the Banking Act, to prevent the insolvency of the Kingdom Bank and the consequent loss to the depositors.
The EBC’s main argument was that the Bank had failed to observe, notice or ascertain the irregularities taking place at the bank and in so doing failed to exercise the care, skill and diligence expected of a reasonable Central Bank.
According to the court documents, EBC said BoB as per the Banking Act was empowered to revoke the license of any bank where the bank in question appears to be carrying on banking business in a manner, which was contrary to or detrimental to the interests of its depositors or the public. “From approximately December 2013 to February 16, 2015 Kingdom Bank Africa, a registered and licensed bank within Botswana contravened the provisions of the Banking Act in numerous respects resulting ultimately in the Bank’s insolvency and depositors losing their investments. Then the defendant was or ought to have been aware of the transgressions committed by the collapsed bank and ought to have acted in terms of its powers by revoking the Bank’s license and thereby preventing the insolvency of the Bank and the consequent loss of the depositors’ funds,” said EBC.
EBC had further contended that during or about August 2014, firm offers were made for the purchase of the bank by Dolberg Capital Ltd and Afgri Ltd, which included a guarantee of depositors’ funds as the purchasers were aware that the Bank was in financial difficulties.
Kebonang on the other hand explained that with regard to the EBC’s claim, he had to apply himself to the questions that were raised by the BoB. The judgment reads: “When one has a regard to the EBC’s claim the following questions arise, should the claim by EBC’s not lie with the liquidators of the Kingdom Bank instead of the BoB; was EBC’s loss a direct consequence of the applicant’s failure to discharge its monitoring functions, in other words was it foreseeable; is the EBC’s cause of action contemplated by either the Banking Act or common law and what is the extent of the BoB’s duty of care towards the EBC.”
Finally, Kebonang said it could not be said when one considers the questions objectively, that the BoB had no arguable case or that its defence does not have sufficiency to establish the fact that all had been in good faith.
He explained that the merits or otherwise of the defence could only be ascertained at a trial.
Meanwhile at the background of the matter, since EBC instituted a writ of summons against the BoB regarding the collapsed bank, there have been controversies one after the other between the two parties.
Allegations have been levelled against BoB as a result of their attorney at Collins Newman being accused of fraud and lying under oath, after what appeared as if the law firm on behalf of the bank, had failed to file an appearance to defend.
In that instance, BoB and Collins Newman law firm emerged with a tainted image when Kebonang said it was clear that the Deputy Governor of the Bank, Moses Pelaelo and Collins Newman’s Bokani Machinya both lied under oath and opened themselves to perjury.
“Ms Machinya as an officer of this court should also have known better, while Mr Pelaelo on the other hand, blindly trusted his attorney, ignored all the warning signs and allowed himself to be the victim of the deceit perpetrated by his attorney. The conduct of Ms Machinya deserves to be censored by her peers and accordingly refer her conduct to Law Society for investigation,” he said.