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[2015] ZASCA 96
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Financial Services Board v Barthram and Another (20207/2014) [2015] ZASCA 96; [2015] 3 All SA 665 (SCA); 2018 (1) SA 139 (SCA) (1 June 2015)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Case no:
20207/2014
DATE: 01
JUNE 2015
Reportable
In the matter
between:
FINANCIAL SERVICES
BOARD
...................................................................................
APPELLANT
And
PERCY GEORGE
EDWARD
BARTHRAM
..................................................
FIRST
RESPONDENT
DISCOVERY LIFE
LTD
..............................................................................
SECOND
RESPONDENT
Neutral citation:
Financial Services Board v Barthram
(20207/2014)
[2015] ZASCA 96
(1 June
2015)
Bench:
Ponnan,
Cachalia and Leach JJA and Dambuza and Gorven AJJA
Heard: 19 May 2015
Delivered: 1 June
2015
Summary:
Financial Services Advisory and Intermediary
Services Act 37 of 2002 – debarment in terms of s 14(1) –
precludes representative
from rendering financial services on an
industry-wide basis.
ORDER
On appeal from
:
Gauteng Division of the High Court,
Pretoria (Makgoba J, sitting as court of first instance):
In the result:
(1) The appeal by the
Financial Services Board is upheld and the order of the court below
is set aside and replaced with the following:
‘
The interim
order issued against the second respondent, the Financial Services
Board, on 18 September 2012 is set aside and the
application against
it is dismissed.’
(2) The appeal by Mr PGE
Barthram is upheld with costs, such costs to be paid by Discovery
Life Ltd and the order of the court
below dismissing his application
against Discovery Life Ltd is set aside and replaced with the
following:
‘
(a) The
decision taken by the first respondent, Discovery Life Ltd, to debar
the applicant, Mr PGE Barthram, purportedly in terms
of
section 14(1)
of the
Financial Advisory and Intermediary Services Act 37 of 2002
,
is set aside.
(b) The first
respondent is ordered to pay the costs of the application, such costs
to include those occasioned by the urgent application
of 18 September
2012.’
JUDGMENT
Ponnan JA
(Cachalia and Leach JJA and Dambuza and Gorven AJJA . . . ):
[1] On 15 September
2009 Mr Percy Barthram and Discovery Life Limited (Discovery), an
authorised Financial Services Provider (FSP)
as defined in the
Financial Services Advisory and Intermediary Services Act 37 of 2002
(FAIS),
[1]
concluded a written ‘contract of
employment’, in terms of which the former was appointed:
‘a full-time employee
to market and sell the products and
policies and to provide Financial services in relation to the
Products and Policies to existing
and prospective clients of
Discovery.’ In terms of clause 6 of the agreement, the
applicant warranted that ‘[he] was
aware of the Applicable
Legislation having relevance in [his] capacity as a representative as
defined in FAIS’.
[2]
Clause 7 of the agreement provided:
‘
7.1
It is a mandatory requirement that the Consultant complete the NQF60
credits level or RFP2 examination as indicated in the fit
and proper
requirements as per the FAIS Act on signature of this Agreement or
during 2006.
7.2
The Consultant shall further ensure that they do all things necessary
to achieve and maintain the above qualifications and fit
and proper
requirements imposed by law or regulation or as such other
qualifications and requirements as required by Discovery,
and any
changes thereto from time to time.
7.3
The Consultant acknowledges that Discovery shall be entitled to
terminate the Consultant’s employment, if the Consultant
fails
to meet, achieve and maintain the qualifications and requirements as
set out in 7.1 and 7.2 above.
7.[4]
Discovery conducts business in the financial services sector in which
the qualities of honesty and integrity are integral
to the reputation
of Discovery and to this contract of employment. Accordingly, the
Consultant undertakes to act with honesty and
integrity. The
Consultant undertakes to refrain from conducting themselves, either
during working hours or outside working hours,
in a manner which
compromises the trust relationship between the parties or causes harm
to Discovery or its reputation.
7.[5]
The Consultant undertakes to conduct their personal financial affairs
in a responsible way.’
[2] On 31 May 2012 Mr
Barthram purported to terminate his employment with Discovery on 24
hours’ notice and he commenced employment
a day later with Old
Mutual Life Insurance Limited. Thereafter, on 1 June 2012, certain
employees of the forensic department of
Discovery called on Mr
Barthram’s office and demanded the return of all client files.
In his absence, his wife, Natalie,
handed over those files. On 12
June 2012 the Barthrams met with Messrs Mark Bamford and Warren
Allan, respectively, a forensic
investigator and compliance officer
in Discovery’s employ. At approximately 5 pm that evening, Mr
Allan telephonically informed
Mr Barthram that Ms Surina Meintjes,
Discovery’s Chief Compliance Officer, had taken the decision to
notify the Financial
Services Board (FSB) or more accurately the
Registrar of Financial Services Providers (the Registrar),
[3]
that the applicant ‘did not comply with the
requirements of the FAIS for continued appointment as a
representative of [Discovery].’
[3] On 13 June 2012,
Discovery withdrew Mr Barthram’s authority to act on its behalf
and removed his name from its register.
[4]
In its notice to the FSB, Discovery marked with an
‘X’ the block labelled ‘honesty and integrity’
as the
reason for the withdrawal of his authority to act. On receipt
of the notice from Discovery, Mr Barthram was listed on the FSB’s
website as a debarred representative. The reason given was that he
‘does not comply with personal character qualities of
honesty
and integrity’.
[4] After failing in his
quest to have his debarment lifted, Mr Barthram launched an urgent
application in the North Gauteng High
Court, Pretoria. Although both
Discovery and the FSB were cited as respondents, only the former
opposed the application. On 18
September 2012, Hiemstra AJ issued the
following interim order by agreement between Mr Barthram and FSB:
‘
1.
THAT the Second Respondent [FSB] be and is hereby [ordered] to
reinstate the Applicant as a representative of an authorized
financial service provider with immediate effect, should such an
application be received;
2.
THAT the FSB is to immediately enter the name of the Applicant in the
register referred to in Section 13(3) of the Financial
Advisory and
Intermediary Services Act 37 of 2002 (hereinafter “the Act”);
3.
THAT the FSB is to remove any mention of the debarment of the
Applicant by notice in the Government Gazette or by means of any
other appropriate public media in which it is presently published,
including its website;
4.
THAT the relief as set out in paragraphs 2 to 4 above, shall act as
interim orders pending the finalization of review proceedings,
reviewing, setting aside and/or varying the decisions and/or rulings
of the Respondents [Discovery and the FSB] to bar the Applicant
and
to publish such debarment, to be instituted within 30 days of the
hearing of this application;
5.
THAT costs shall be costs in the review.’
[5] On 16 October 2012, Mr
Barthram launched the review application envisaged in paragraph 4 of
the interim order. He sought an
order in the following terms:
‘
1.
Reviewing and setting aside the decision/s purportedly taken by the
First Respondent [Discovery], alternatively the Second Respondent
[FSB], alternatively both the First and Second Respondents on the
13
th
of June 2012, alternatively in the period from 13 June 2012 to 20
August 2012, to debar the Applicant, purportedly in terms of
section
14(1) of the Financial Advisory and Intermediary Services Act 37 of
2002 (hereinafter “the Act”);
2.
Reviewing and setting aside the decision of the Second Respondent to
update the register of debarred persons to include the name
of the
Applicant on 13 June 2012, alternatively in the period from 13 June
2012 to 20 August 2012;
3.
Exempting the Applicant in terms of section 7(2)
(c)
of the
Promotion of Administrative Justice Act No 3 of 2000 (hereinafter
“PAJA”) from the obligation to exhaust any
internal
remedies that may be provided for in the Act in respect of the first
decision or any decisions thereafter taken by the
Respondents,
insofar as it may be necessary;
4.
Extending the period of 180 days referred to in section 7(1) of PAJA
in terms of section 9(1)
(b)
of PAJA insofar as it may be
necessary;
5.
Directing the First Respondent and any other parties opposing the
matter jointly and severally to pay the costs of the application
on
the scale as between attorney and client;
6.
Granting further and/or alternative relief to the Applicant.’
[6] Once again only
Discovery opposed the application. In its answering affidavit, Ms
Meintjes on behalf of Discovery stated:
‘
21.10
The Applicant has failed to draw the vital distinction between what
is contained in sections 14 and 14A of the FAIS Act. Section
14 of
the Act, although styled “
Debarment
of Representatives
”
effectively allows for the removal by a financial services provider
(such as the First Respondent) of a representative (such
as the
Applicant) from the statutorily required register. The effect thereof
is that the representative can no longer represent
that particular
financial services provider in the rendering of any financial
services.
21.11
Conversely, section 14A of the FAIS Act deals with the debarment by
the Registrar of “
a person
” rather than a
representative. A section 14A debarment precludes a representative
from rendering any financial services on
behalf of any services
provider for a specified period. In effect, the debarment by the
Registrar of a person in terms of section
14A of the FAIS Act
precludes such person from rendering financial services on behalf of
any services provider whereas a debarment
in terms of section 14(1)
of the FAIS Act precludes the debarred representative only from
representing the particular services
provider who effects the
debarment.
21.12
In the result, the effect of the removal of the Applicant from the
First Respondent’s register (the debarment in terms
of section
14(1) of the FAIS Act) did not and will not preclude the Applicant
from rendering financial services on behalf of his
new employer, Old
Mutual. That prohibition could only arise from a debarment by the
Registrar as contemplated in section 14A of
the FAIS Act read
together with section 9(2) thereof – the withdrawal of the
Applicant’s licence to act as a financial
services
provider/insurance intermediary at all.
. . .
28.5
The First Respondent, as a registered financial services provider
with many thousands of clients, has a responsibility placed
upon it
by the provisions of the FAIS Act to ensure that only fit and proper
persons act as its representatives or intermediaries.
Once facts had
become available to me which confirmed that the Applicant was not so
fit and proper, I was compelled to act in terms
of section 14(1) of
the FAIS Act.
.
. .
31.4
I reiterate that, as clearly contemplated by section 14(1) of the
FAIS Act, the function of the First Respondent was no more
than to
convey to the Second Respondent its election to have the Applicant
removed from the First Respondent’s Register given
that, in the
First Respondent’s view (as determined by me), the Applicant
was no longer a fit and proper person to represent
the First
Respondent in the provision of financial advice to the public. The
steps to be taken by the Second Respondent following
thereon have
nothing to do with the First Respondent.’
[7] The review came
before Makgoba J who, on 19 November 2013, concluded that: (a) Mr
Barthram had ‘not made out a case for
the relief that he seeks
against [Discovery]’ and accordingly dismissed his application
as against it with costs including
the costs occasioned by the urgent
application; and (b) as the FSB did not oppose the application, the
‘interim relief obtained
against [it] on 18 September 2012 is
confirmed and made a final order of this Court.’
[8] The learned judge
reasoned:
‘
12.
A vital distinction should be drawn between what is contained in
section 14 and 14A of the FAIS Act. Section 14 of the Act allows
for
the removal by a financial services provider of a representative from
the statutory required register. The effect thereof is
that the
representative can no longer represent that particular financial
services provider in the rendering of any financial services.
In
addition, the consequence of such debarment is the removal of the
representative from the financial services providers section
13
register of representatives.
13.
In the context of this case the effect of a debarment in terms of
section 14(1) of the Act was that the applicant was thereby
precluded
from rendering any new financial service on behalf of the First
Respondent. This preclusion was achieved by removing
the Applicant’s
authority to represent the First Respondent and by removing the
Applicant’s name from the First Respondent’s
register.
However, the Applicant was still at liberty to render financial
services with other financial services providers, as
he continued
doing with Old Mutual.
14.
Conversely section 14A of the FAIS Act deals with the debarment by
the Registrar of a person. A section 14A debarment precludes
a
representative from rendering any financial services on behalf of any
services provider for a specified period. In effect, the
debarment by
the Registrar of a person in terms of section 14A of the FAIS Act
precludes such person from rendering financial services
on behalf of
any services provider whereas a debarment in terms of section 14(1)
of the FAIS Act precludes the debarred representative
only from
representing the particular provider who effects the debarment.
15.
The Applicant prays for the Court to review and set aside the
decisions of the Respondents to debar the Applicant and to publish
such fact, in terms of PAJA and the common law. The Applicant
contends that the First Respondent could not purport to debar the
Applicant in terms of section 14 of the Act, as the Applicant was no
longer in its employ when the First Respondent purported to
debar the
Applicant and therefore did not have the authority to act in terms of
section 14 of the Act.
The
Applicant further contends that even if the Court finds that the
Respondents acted within their authority and correctly in terms
of
section 14(1) of the Act, their actions are to be reviewed and set
aside on the basis that various of the other requirements
of PAJA and
common law are not satisfied especially reasonableness and
procedural fairness.
16.
As pointed out earlier in this judgment, I do not deem it necessary
to address the Applicant’s abovementioned contentions
or
arguments. This is so in the light of the legal and/or factual points
raised by the First Respondent with which I agree.
.
. .
20.
It is common cause that the Applicant is currently still in the
employ of Old Mutual and not the First Respondent. In the result
the
effect of the removal of the Applicant from the First Respondent’s
register (that is the debarment in terms of section
14(1) of the FAIS
Act) did not and will not preclude the Applicant from rendering
financial services on behalf of his new employ,
Old Mutual.’
[9] It was only after
the matter had been finally determined against it by the High Court
that the FSB chose to enter the fray.
It sought and obtained
condonation as also leave from Makgoba J to appeal to this court. The
learned judge further granted leave
to Mr Barthram to appeal against
the dismissal of his review application against Discovery. In the
result, before this court the
FSB has come to be cited as the first
appellant and Mr Barthram as the second. Discovery, who was cited as
the respondent, takes
no part in the appeal.
[10] Not having
participated in the proceedings before the High Court, the FSB now
seeks the leave of this court to adduce further
evidence on appeal.
On the narrow issue that we are called upon
to decide,
as the
intention
of the legislature is proclaimed in clear terms either expressly or
by necessary implication, in my view, it is not necessary
to rule on
the application.
I thus turn to a
consideration of the relevant legislative provisions without recourse
to the evidence sought to be adduced by the
FSB.
[11] The FSB contends
that the High Court erred in its finding that the effect of a
debarment of Mr Barthram by Discovery was that
he was only precluded
from rendering financial services to the public on behalf of the
latter. Upon a proper construction of the
provisions of ss 13 and 14
of FAIS, so the contention proceeds, the High Court should have
concluded that the effect of his debarment
by Discovery was to
preclude him from rendering financial services to the public on
behalf of any FSP. According to the FSB, the
interpretation by the
High Court of s 14(1) has significant industry-wide consequences
inasmuch as the judgment appealed against
has already formed the
basis of representatives who have been debarred in terms of s 14(1),
justifying their continued employment
by a different provider
notwithstanding that disbarment.
[12] In terms of s 7 of FAIS ‘a person may
not act or offer to act as a [FSP] unless such person has been issued
with a licence
under s 8, which authorises the rendering of those
services.’ Section 8(1) provides that an application for an
authorisation
must satisfy the Registrar
that
‘the applicant complies with the fit and proper requirements
determined for financial services providers . . . in respect
of
(a)
personal
character qualities of honesty and integrity;
(b)
competence;
(b
A
)
operational
ability; and
(c)
financial
soundness’.
In terms of s 16A
(2)
(a)
‘fit and proper requirements’ may include, but are not
limited to, appropriate standards relating to ‘personal
character qualities of honesty and integrity’.
Where
an application is granted, the Registrar may: impose such conditions
and restrictions on the exercise of the authority granted
by the
licence (subsec (4)
(a)
);
and issue a licence authorising such applicant to act as a FSP
(subsec 5
(a)
(i)).
Section 8A imposes an obligation on a FSP and representatives of such
FSP to continue to comply with the fit and proper requirements.
[13] In terms of s 13
(1)
(a)
,
a person may not carry on business by rendering financial services to
clients for or on behalf of any person who is not authorised
as a
financial services provider (or exempted from the application of the
Act). And in terms of s 13(1)
(b)
,
no person may act as a representative of an authorised FSP,
unless such person:
‘
(i)
prior to rendering a financial service, provides confirmation,
certified by the provider, to clients-
(aa)
that
a service contract or other mandate, to represent the provider,
exists; and
(bb)
that
the provider accepts responsibility for those activities of the
representative performed within the scope of, or in the course
of
implementing, any such contract or mandate; and
(iA)
meets the fit and proper requirements . . .’
An
authorised FSP must in terms of s 13(2),
[5]
at all times be satisfied that its representatives
are, when rendering a financial service on its behalf, competent to
act and comply
with the fit and proper requirement. To that end, s
13(3) requires an authorised FSP to maintain ‘a register of
representatives,
and key individuals of such representatives, which
must be regularly updated and be available to the Registrar for
reference or
inspection purposes.’
Such
register must, according to s 13(4): ‘
(a)
contain every representative’s or key
individual’s name and business address, and state whether the
representative acts
for the provider as employee or as mandatory;
and
(b)
specify the categories in which such representatives are competent to
render financial services.’
The
Registrar relies, inter alia, on the register contemplated in
subsection (4) to maintain and continuously update a central register
of all representatives and key individuals (subsec 5).
[14] Section 14, which lies
at the heart of the appeal and is headed ‘debarment of
representatives’, reads:
‘
(1)
An authorised financial services provider must ensure that any
representative of the provider who no longer complies with the
requirements referred to in section 13(2)
(a)
or has contravened or failed to comply with any provision of this Act
in a material manner, is prohibited by such provider from
rendering
any new financial service by withdrawing any authority to act on
behalf of the provider, and that the representative’s
name, and
the names of the key individuals of the representative, are removed
from the register referred
to
in
section 13(3):
Provided
that
any
such
provider must
immediately
take
steps to ensure that
the
debarment does not prejudice the interest of clients of the
representative, and that any unconcluded business of the
representative
is properly concluded.
(2)
For
the
purposes
of
the
imposition
of
a
prohibition
contemplated
in
subsection (1),
the
authorised
financial services provider must have regard to information regarding
the conduct of the representative as provided by
the registrar, the
Ombud or any other interested person.
(3)
(a)
The authorised financial services provider must within a period of 15
days after the removal of the names of a
representative
and
key
individuals
from the register as
contemplated
in subsection (1), inform the registrar in writing thereof and
provide the registrar with the reasons for the debarment
in such
format as the registrar may require.
(
b
)
The registrar may make known any such debarment and the reasons
therefor by notice on the official web site or by means of any
other
appropriate public media.’
[15] Sections
13(2)
(a)
and
(b)
,
as also s 14(1) and (2), are couched in peremptory terms. Failing
compliance with those provisions the FSP itself is liable to
sanction.
[6]
FAIS requires an authorised FSP not just to be
authorised and licenced as such by the Registrar, but also to
exercise oversight
in respect of the initial and continuing fitness
of its chosen representatives. The FSP having itself gone through a
vetting process
at the hands of the Registrar is eminently suited to
subject its representatives to a similar initial vetting and
thereafter to
exercise oversight in respect of them. The Registrar
would only get to learn of a representative’s employment or
appointment
by an FSP in consequence of the updating of the FSB’s
central register by such FSP pursuant to s 13(5). A debarment of a
representative in terms of s 14(1) is complete when the FSP has
withdrawn the representative’s authority to act on its behalf
and has removed such person’s name from its own register in
terms of s 13(3). Moreover, the Registrar only gets to learn
of a
representative’s debarment, after the event, on being informed
of such by the FSP in terms of s 14(3). Upon removal
of the
representative’s name from the FSP’s register, the FSB’s
central register is correspondingly updated.
[16] The court below
appears to have misinterpreted the legal effect of a debarment in
terms of s 14(1) in holding that it precludes
the representative from
acting as such only in respect of the debarring FSP. The absurdity of
such an approach is patent. The debarment
of the representative by a
FSP is evidence that it no longer regards the representative as
having either the fitness and propriety
or competency requirements. A
representative who does not meet those requirements lacks the
character qualities of honesty and
integrity or lacks competence and
thereby poses a risk to the investing public generally. Such a person
ought not to be unleashed
on an unsuspecting public and it must
therefore follow that any representative debarred in terms of s
14(1), must perforce be debarred
on an industry-wide basis from
rendering financial services to the investing public.
[17] It follows that
the FSB’s appeal must succeed. As to costs: It is so that in
approaching this court the FSB is acting
in its regulatory capacity
in the public interest. Moreover, it has succeeded in overturning the
decision of the court a quo. In
those circumstances it ought,
ordinarily at any rate to have been entitled to its costs on appeal.
As against that, it ill-advisedly
chose not to participate in the
proceedings before the High Court. That court was thus denied the
benefit that such participation
would have brought. Had it
participated, it could possibly have influenced the outcome of those
proceedings. In that event an appeal
may not have been necessary. In
those circumstances Counsel for the FSB was constrained to accept
that in the event of its appeal
succeeding there should be no order
as to costs.
[18] Turning to Mr
Barthram’s appeal: Although the court a quo dismissed his
application to review Discovery’s decision
to debar him, it
arrived at that conclusion without entering into the merits of the
matter. There was a dispute on the papers as
to whether Mr Barthram
was still in the employ of Discovery when the decision was taken to
debar him. From the Bar in this court,
however, his counsel accepted
that we should approach this aspect of the matter on the factual
footing that he was still in Discovery’s
employ at the relevant
time.
[19] In support of the
review application, Mr Barthram stated:
‘
I
agree that the First Respondent [Discovery] has a responsibility to
ensure that only fit and proper persons act as its representatives
or
intermediaries. I deny that I was not a fit and proper person and
specifically deny that the First Respondent was entitled to
act in
terms of Section 14(1) of the FAIS Act as alleged or at all. The
decision taken by the First Respondent was unwarranted
and this would
have been clear had the First Respondent afforded me an opportunity
to represent myself and to present my case.’
He accordingly complained
that:
‘
there
was not a proper disciplinary hearing and furthermore whether the
First Respondent had used the correct process, both in terms
of the
FAIS Act, common law, PAJA and the rules of natural justice when it
took the decision to debar me. It will be argued on
my behalf at the
hearing of this matter that there is nothing before this Honourable
Court to prove that I am not a fit and proper
person to act as a
legal representative.’
In opposing the application
Ms Meintjies stated:
‘
23.1
My decision, as the First Respondent’s Chief Compliance
Officer, to invoke the provisions of Section 14(1) of the FAIS
Act
and to report to the Registrar the First Respondent’s election
to debar the Applicant as one of its authorised representatives
followed on consultations that I held with Messrs Mark Bamford (a
forensic investigator in the First Respondent’s employ).
23.2
I was furnished by Messrs Bamford, Allan and Hudson with certain
reports which formed part of my report to the Second Respondent.
Those reports form part of annexure “PB14” to the
Applicant’s founding affidavit. It was on the strength of the
facts contained in the annexed reports and what was conveyed to me by
Messrs Allan and Bamford of their meeting with the Applicant
(referred to below) that I made my decision.
.
. .
23.4
The contents of the aforesaid reports warranted the conclusion that
the Applicant was not a fit and proper person to function
as a
representative of the First Respondent in the provision of financial
advice to members of the public as defined in the FAIS
Act. It was
that fact which was reported by me to the Registrar on 13 June 2012.’
[20] The meeting between
the Barthrams and Messrs Bamford and Allan was thus an important
feature of Ms Meintjies’ decision.
A transcript thereof served
before the High Court. To the extent relevant for present purposes,
it reads:
‘
Mr
Bamford: We are recording the interview for record keeping purposes
and obviously it is just so that we can reflect back on our
notes,
what we have said what was discussed. You are more than welcome to
speak in Afrikaans. I am going to speak in English, if
you are
comfortable with that, and Warren will address you in whatever
language he is comfortable in. And then we have just got
a few
concerns that we are going to present to you and try and get your
input on what our concerns are if that is okay. Do you
object to
having the meeting recorded?
.
. .
Mr
Barthram: I actually resigned the Thursday . . .
.
. .
Mr
Bamford: Okay. So obviously we are in this, when that type of thing
happens, we then just go and do an audit just to make sure
that
everything that you have left behind for us to deal with, is in order
and that is obviously where Warren come in and where
I come in.
Mr
Barthram:Yes, I understand.
Mr
Bamford: You understand that? Okay. So during that process there were
certain things that I have picked up in the file which
I do not
believe are correct, but perhaps you can just shed some light on the
concerns that I have and I think we should just jump
straight in.
Mr
Barthram: Sure.
Mr
Bamford: Warren, is there anything else that you want to . . .?
Mr
Allan: No, I (inaudible) under that, I will just ask one or two
questions regarding some replacements.
Mr
Bamford: Okay, that is good.
Mr
Barthram: Do you have some paper and pen for me as well so that I can
also just make some . . .
Mr
Bamford: Like I said, the files that I have got here, is just a
sample of what we found and I believe if you can explain what
has
happened here, then it will pretty much apply to what has happened in
the other cases.
.
. .
Mr
Barthram: . . . If you want to nail me, you can.
Mr
Bamford: No, the idea is not to nail you, Percy, the idea is to ask
you questions.
Ms
Barthram: I get the feeling it is.
Mr
Bamford: No sir, the idea is to ask you questions. We have picked up
some irregularities, we need to ask you questions.
.
. .
Mr
Bamford: Okay, that is what we have to do. It is a question and
answer session, that is all. We had some concerns just around
the
documentation that was just incomplete, been signed, and I just want
to just show you, just as an example. Okay, so just, we
got this
incomplete information here, all right, incomplete information. The
(inaudible) is not completed.
.
. .
Mr
Bamford: Percy, we, I just want to come back to you. This is, we are
asking questions, that is all. I had a job to do, you understood
that, you acknowledged that I had a job to do, to go through your
files. I found irregularities on the files and I am just asking
you
for information on these files.
.
. .
Mr
Bathram: Ja, I understood.
Mr
Barthram: . . . So what is going to happen now?
Mr
Allan: Well, what will happen is, Mark will draft his findings or
whatever and then it will go through to compliance, Sorina
there, the
head of compliance and that, and they will just either make notes.
From a risk point of view for Discovery, we may have
to report
certain things to the FSB, just to say we have reported this, the
advisors are no longer in our employ, but we are just
notifying them
that these are the files and we will correct the error or whatever
the case may be. That they will have to take
up.
Ms
Barthram: Okay, what we are looking here . . . (intervenes)
Mr
Bamford: Need to be remindful, that is not our decision whether to
debar or not to debar, that is the FSB’s . . . (intervenes)
.
. .
Mr
Barthram: So the next call I will get is from the FSB?
Mr
Bamford: Not necessarily, no. That is the really negative side, a way
of looking at it, but Percy, thank you very much for coming
through.
I am going to switch the recording off now . . . (intervenes)
Mr
Barthram: Ja.
Mr
Bamford: So anything you say after this is off the record.
Mr
Barthram: Okay.’
[21] There was some
debate on the papers as to whether the power that Discovery exercised
when debarring Mr Barthram was reviewable
under PAJA
.
It seems to me that it is unnecessary
to enter into that debate for the purposes of this case because even
in our pre-constitutional
era, our courts generally accepted that
certain principles of procedural fairness would find application in
an instance such as
this.
In
Heatherdale
Farms (Pty) Ltd v Deputy Minister of Agriculture
1980 (3) SA 476
(T) at 486E-G, Colman J put it thus:
‘
It
is clear on the authorities that a person who is entitled to the
benefit of the
audi
alteram partem
rule need not be afforded all the facilities which are allowed to a
litigant in a judicial trial. He need not be given an
oral
hearing, or allowed representation by an attorney or counsel; he need
not be given an opportunity to cross-examine; and he
is not entitled
to discovery of documents. But on the other hand (and for this no
authority is needed) a mere pretence of giving
the person concerned a
hearing would clearly not be a compliance with the Rule. For in
my view will it suffice if he is given
such a right to make
representations as in the circumstances does not constitute a fair
and adequate opportunity of meeting the
case against him. What would
follow from the lastmentioned proposition is, firstly, that the
person concerned must be given a reasonable
time in which to assemble
the relevant information and to prepare and put forward his
representations; secondly he must be
put in possession of such
information as will render his right to make representations a real,
and not an illusory one.’
[22] Here none of the
principles alluded to by Colman J were observed by Discovery in their
dealing with Mr Barthram. If anything,
it appears that he was
positively misled as to the true nature and purpose of his meeting
with Messrs Bamford and Allan. It must
follow that his review
application as against Discovery ought to have succeeded before the
court a quo. Insofar as the costs are
concerned: In dismissing Mr
Barthram’s application, the High Court ordered him to pay
Discovery’s costs, including
the costs of the urgent
application launched by him on 18 September 2012. That order
obviously cannot stand. It was necessary for
Mr Barthram to approach
this court to vindicate his rights. Discovery’s conduct
prompted the litigation and it has now been
found to have acted
unlawfully. Notwithstanding the fact that Discovery elected not to
participate in the appeal, it should be
held liable for Mr Barthram’s
costs both in this court and the one below.
[23] In the result:
(1) The appeal by the
Financial Services Board is upheld and the order of the court below
is set aside and replaced with the following:
‘
The interim
order issued against the second respondent, the Financial Services
Board, on 18 September 2012 is set aside and the
application against
it is dismissed.’
(2) The appeal by Mr PGE
Barthram is upheld with costs, such costs to be paid by Discovery
Life Ltd and the order of the court below
dismissing his application
against Discovery Life Ltd is set aside and replaced with the
following:
‘
(a) The
decision taken by the first respondent, Discovery Life Ltd, to debar
the applicant, Mr PGE Barthram, purportedly in terms
of
section 14(1)
of the
Financial Advisory and Intermediary Services Act 37 of 2002
,
is set aside.
(b) The first
respondent is ordered to pay the costs of the application, such costs
to include those occasioned by the urgent application
of 18 September
2012.’
V M Ponnan
Judge of
Appeal
APPEARANCES:
For
First Appellant: E C Labuschagne SC
Instructed
by: Rooth & Wessels Inc., Pretoria
Phatshoane
Henney Attorneys, Bloemfontein
For
First Respondent: J R Minnaar
Instructed
by: Peet Delport Attorneys, Pretoria
Honey
Attorneys, Bloemfontein
[1]
In terms of
s 1
of FAIS a financial service provider means ‘any
person, other than a representative, who as a regular feature of the
business
of such person-
(a)
furnishes advice; or
(b)
furnishes advice and renders any intermediary service;
or
(c)
renders an intermediary service’.
[2]
In terms of
s 1
of FAIS a
representative
means any ‘person . . . who renders a
financial service to a client for or on behalf of a FSP in terms of
conditions of
employment or any other mandate, but excludes a person
rendering clerical, technical, administrative, legal, accounting or
other
service in a subsidiary or subordinate capacity . . .’.
[3]
In terms of
s 2
(1) the executive officer referred
to in s 1 of the Financial Services Board Act
97 of 1990
is the registrar of financial services providers and
has the powers and duties provided for by or under FAIS.
[4]
In terms of s 13(3) an authorised FSP must
maintain a register of representatives, and key individuals of such
representatives,
which must be regularly updated and be available to
the Registrar for reference or inspection purposes.
[5]
Section 13
(2) provides:
‘
An authorised financial services
provider must-
(a)
at all times be satisfied that the
provider's representatives, and the key individuals of such
representatives, are, when rendering
a financial service on behalf
of the provider, competent to act, and comply with-
(I) the fit and proper requirements;
and
(ii) any
other requirements contemplated in subsection (1)
(b)
(ii);
(b)
take such steps as may be reasonable
in the circumstances to ensure that representatives comply with any
applicable code of conduct
as well as with other applicable laws on
conduct of business.’
[6]
In terms of s 36, any person who inter alia contravenes ss 7(1) or
(3), 13(1) or (2) and 14(1), is guilty of an offence and liable
on
conviction to a fine not exceeding R10 million or to imprisonment
for a period not exceeding 10 years or to both such fine
and
imprisonment.