BoE Limited
Share Code : BOE
ISIN Code : ZAE000014890
In BoE's 2000 financial statements we noted a contingent liability in
respect of a fraud committed by the manager at the Kempton Park branch of
NBS during 1995/6. NBS is now a division of BoE Bank Ltd, a subsidiary of
BoE Ltd. The note read:
"In 1996, the manager of the Kempton Park branch of NBS, acting without
authority, issued certain letters of undertaking on NBS stationery, on the
strength of which certain building contractors borrowed bridging finance
directly from investors. The investors' cheques were given to an attorney
who deposited them into his trust account with NBS and paid the proceeds
directly to the developers. NBS is facing claims of approximately R125
million plus interest and costs and has obtained opinions from senior
counsel which indicate that NBS has a strong defence against claimants.
Lloyds Underwriters have been notified as a precautionary step and provision
has been made for the insurance excess. The directors are of the opinion
that no loss will be incurred."
The amount of the capital claims comprising this fraud are as follows:
R'm
SA Eagle 25,0
Cape Produce 30,6
Various claims at the amounts 21,4
that have been settled (below
the original capital amount)
Other outstanding claims 29,3
TOTAL CAPITAL CLAIM 106,3
The original ruling given on 22 April 1999 by the Witwatersrand Local
Division of the High Court went in favour of NBS in the case of SA Eagle. On
21 May 1999 the Witwatersrand Local Division of the High Court ruled in
favour of Cape Produce. Both rulings were appealed. However, the Supreme
Court of Appeal last week ruled that NBS was responsible for the actions of
its branch manager. It stated further that NBS was required, in the case of
Cape Produce and SA Eagle, to pay the amount of the claims, interest (at the
prescribed legal rate of 15,5%) and costs.
Soon after the fraud was discovered the insurers confirmed the insurance
cover and provision was made for the shortfall and potential costs and
interest. In confirming BoE's provisioning last year, BoE had assumed the
worst case scenario on all cases except for the SA Eagle case where we
assumed we would not be liable. This was decided on the basis that we had
already had a judgement in our favour and our legal advisors were confident
that the judgement would stand. We therefore kept our provisions intact
which provided for potential losses on all the other claims in full after
deducting the amount of R100m cover for the Bankers Blanket Bond Insurance
that was in place at the time of the fraud.
As a result of the above and assuming a worst case scenario on cases yet
unheard, our after tax exposure that has not been provided for amounts to
approximately R30m, comprising the R25m claim, interest thereon and costs
less the tax effect, of the SA Eagle claim.
Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information.
