Lenasia demolition saga has wider implications for banks

The banking industry might be well advised to take active interest in the unfolding Lenasia housing saga because that matter may come with significant implications for the industry.

 This view can be formed from a statement made by Lerato Zikalala, associate at law firm Bowman Gilfillan. The statement released yesterday said the demolition of houses in Lenasia and subsequent court case could have wider implications for any lending institution that might have provided a loan against the security of immovable property in a similarly affected area, or to a property developer.

“As such, it is a good example of a case where the amicus procedure could be used to advance points of law or facts which are of interest to a bank, with minimal cost and involvement in the overall litigation process,” said the statement.

 “Every now and then courts are called to adjudicate upon cases which have wider implications for other parties not technically involved in the litigation,” said Zikalala.

 “As a means of providing participation in the judicial decision-making process, the High Court rules allow any entity to apply for admission into a matter in which it has an interest. Such an entity makes an application to become an amicus curiae, or a ‘friend of the court’. So when litigation affecting that entity arises, but in the ordinary course it is not a litigant to the proceedings, it can bring an application and, if admitted, place evidence or make arguments relevant to the matter before the court.

 “So to use the example of the demolition of houses in Lenasia, hypothetically, a bank may be well suited to make representations on how the demolitions undermine the security attaching to mortgage bonds, discouraging lending to people in certain areas or income brackets. That information would be of relevance to a court seeking to balance the interests of justice while also allowing the banking industry to be heard on an issue affecting their business.”

 Zikalala explained that an entity making an amicus application is not a party to the litigation and therefore does not have a direct interest in the outcome, but seeks admission into the matter because it believes it could provide assistance on a point of law or fact that is already before the court but that has not been properly canvassed by the parties to the litigation.

 She added that the amicus application is common in public interest litigation but is used less effectively in commercial matters.

 “As new legal issues arise from everyday situations and out of important legislation like the Companies Act and the Consumer Protection Act, effective use of the amicus procedure could ensure that any significant and wide ranging decision by the courts is not only confined to the narrow understanding and legal knowledge of the parties before that court.

 “Though prudent lawyers will always advise their clients to follow the path of least litigation, where relevant, advising the appropriate client to apply to court for admission as an amicus curiae may offer the opportunity to advance a point of law or fact which is of interest to the client, with minimal cost and involvement in the overall litigation process,” said Zikalala.

 A party making an amicus application is at the mercy of the court and is not automatically granted procedural rights. The court determines, once the application is granted, whether the party making the application can present oral evidence or argument before it.”

 While an amicus cannot be awarded costs in the matter, quite importantly, it will also not be liable for any of the costs of the other parties to the litigation. So a client considering making an application would be assured that the costs of the litigation are limited to own legal costs in making the application and appearing before the court.

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