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[2021] ZAGPJHC 41
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Financial Sector Conduct Authority v JP Markets SA (Proprietary) Limited (16017/2020) [2021] ZAGPJHC 41 (6 April 2021)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
JOHANNESBURG
(1)
REPORTABLE: No
(2)
OF INTEREST TO OTHER JUDGES: No
Case No.:
16017/2020
In
the matter between:
THE FINANCIAL SECTOR
CONDUCT AUTHORITY
Applicant
and
J P MARKETS SA
(PROPRIETARY) LIMITED
Respondent
JUDGMENT
Gilbert AJ
1.
The respondent seeks to appeal the whole of my
judgment and order delivered on 7 September 2020 placing the
respondent under
final winding up in terms of section 38B of the
Financial Advisory and Intermediary Services Act, 37 of 2002 (“FAIS”)
and section 96 of the Financial Markets Act, 19 of 2012 (“FMA”)
with ancillary relief.
2.
Although soon after the delivery of the
application for leave to appeal, arrangements were commenced for the
hearing of the application,
the respondent applied to another court
for an order placing it under supervision and commencing business
rescue proceedings. The
parties requested that the application for
leave to appeal not be heard until the outcome of the business rescue
proceedings. I
am informed by counsel that the application for
business rescue was dismissed and that the respondent now wishes to
persist with
its application for leave to appeal. This explains the
delay from September 2020 until now.
3.
The respondent identified in its application for
leave to appeal as well as in its heads of argument various aspects
in respect
of which it submits that I erred and that accordingly I
should came to the opinion that an appeal would have a reasonable
prospect
of success as envisaged in
section 17(1)(a)(i)
of the
Superior Courts Act, 2013
. Challenged are both my legal findings as
to the interpretation and application of the relevant sections of and
interplay between
the FMA, FAIS and the
Companies Act, 2008
and my
factual findings.
4.
My
judgment is comprehensive and is fully reasoned in relation to each
of these aspects that the respondent submits constitute errors.
I
specifically enquired from the respondent’s counsel whether
there was any particular error that I had made and which features
as
a ground of appeal in relation to something that I had not reasoned,
such as whether I had overlooked some or other aspect or
feature but
which when brought to light would demonstrate that an appeal would
have a reasonable prospect of success. Other than
a minor ancillary
issue which would in my view not have affected the outcome,
[1]
the challenges to my judgment are not so much that I made an error in
any patent form but that there is a reasonable prospect that
another
court would come to a different decision on those issues in respect
of which I had made reasoned findings.
5.
It is
now settled that the threshold for the granting of leave to appeal
under
section 17(1)(a)(i)
is higher than what it was under the
previous Supreme Court Act, 1959. The Supreme Court of Appeal, for
example in
Notshokovu
v S
[2016]
ZASCA112 (7 September 2016) in paragraph 2 stated that an
appellant “
faces
a higher and stringent threshold, in terms of the present
Superior
Courts Act compared
to the provisions of the repealed Supreme Court
Act”.
To
similar effect is
Acting
National Director of Public Prosecutions and others v Democratic
Alliance in re: Democratic Alliance v Acting National Director
of
Public Prosecutions and others
[2]
where the Full Bench held that the
Superior Courts Act had
“
raised
the bar for granting leave to appeal
”,
referring with approval to the following passage from the judgment of
Bertelsmann J in
Mont Chevaux
Trust v Goosen
[3]
:
“
It is
clear that the threshold for granting leave to appeal against the
judgment of a High Court has been raised in the new Act.
The former
test whether leave to appeal should be granted was a reasonable
prospect that another court might come to a different
conclusion, see
Van Heerden v Cronwright and others
1985 (2) SA 342
(T) at 343H. The
use of the word ‘would’ in the new statute indicates a
measure of certainty that another court will
differ from the court
whose judgment is sought to be appealed against.
”
6.
Notwithstanding the difficulties in appreciating
what the contours are of the now more stringent test and applying
those in any
particular instance, I must proceed on the basis of
binding precedent that a greater measure of certainty of prospects of
success
on appeal is required than was previously the case.
7.
I am unpersuaded that such errors as have been
raised by the respondent enable me to form the opinion that an appeal
would have
a reasonable prospect of success.
8.
But there is an alternate ground on which leave
to appeal can be granted, namely if I am “
of
the opinion that – (ii) there is some other compelling reason
why the appeal should be heard, including conflicting judgments
on
the matter under consideration
”.
9.
Counsel were agreed in their submissions that
even should I form the opinion that an appeal would not have a
reasonable prospect
of success, it was still incumbent upon me to
consider whether leave to appeal should nevertheless be granted
because there is
some other compelling reason. This is so as the
Supreme Court of Appeal has made this clear, including in the recent
decision of
Caratco (Pty) Limited v
Independent Advisory (Pty) Limited
2002 (5)
SA (SCA) which featured prominently in argument before me:
“
In order
to be granted leave to appeal in terms of s 17(1)(a)(i) and
s
17(1)(a)(ii)
of the
Superior Courts Act an
applicant for leave must
satisfy the court that the appeal would have a reasonable prospect of
success or that there is some other
compelling reason why the appeal
should be heard. If the court is unpersuaded of the prospects of
success, it must still enquire
into whether there is a compelling
reason to entertain the appeal.
”
[4]
10.
In the circumstances, I am obliged to consider
whether there is some other compelling reason to grant leave to
appeal.
11.
The
Supreme Court of Appeal in
Caratco
[5]
held
that a compelling reason includes “
an
important question of law or a discreet issue of public importance
that will have an effect on future disputes
”
but that “
here
too, the merits remain vitally important and are often decisive
”.
In that matter the SCA was not particularly impressed with the
arguments made on behalf of the applicant for leave to appeal,
finding them unmeritorious and extraordinary, and that in the
circumstances of that case the issue that the applicant for leave
to
appeal put forward as one of importance was found not to constitute a
compelling reason for leave to appeal to be granted.
12.
Nonetheless, it is clear from the judgment that
an important question of law or discreet issue of public importance
may but not
necessarily will constitute a compelling reason.
13.
In an earlier decision of
Minister
of Justice and Constitutional Development and others v South African
Litigation Centre and others
2016 (3) SA 317
(SCA) the Supreme Court of Appeal found that a compelling reason
would be that a new basis could be raised
on appeal which was not
raised and addressed by the lower court and that this may, at least
in certain circumstances, constitute
a compelling reason.
14.
In the present instance, there is no suggestion
that some or other issue that was not raised before me would be
advanced and argued
on appeal. The respondent intends arguing the
appeal on the same grounds that it placed before me but seeking to
persuade the appeal
court to come to a different conclusion.
15.
But
Minister
of Justice v SALC
further
provides that where “
an
issue of public importance
”
features, that is to be taken into account when considering whether
there is some other compelling reason why the
appeal should be heard.
The SCA cautioned though
[6]
that
merely because the High Court decides an issue on public importance
it does not follow that it must grant leave to appeal,
as the merits
of the appeal remain vitality important and will often be decisive.
16.
The respondent in its heads of arguments on leave
to appeal submit that the novelty of the issues is a compelling
reason why the
appeal should be heard. Unsurprisingly the respondent
refers to paragraph 2 of my judgment:
“
The
application raises issues that are
res nova
in that neither counsel for the parties were
able to refer me to any authorities in relation to these two sections
nor was I able
to find any. The issues that arise relate both to the
interpretation of these sections and the application of those
sections to
the facts.
”
17.
But as Mr Theron SC for the applicant (in
the main application), points out, mere novelty is insufficient to
constitute a compelling
reason.
Caratco
is an example as the novel issue to be decided in that matter was
whether
section 143
of the
Companies Act, 2008
that dealt with
the remuneration of a business rescue practitioner impliedly
prohibited a success fee if the company was successfully
rescued
where that success fee was paid by a third party. That issue,
although novel, was found not to justify leave to appeal.
Something
more is required.
18.
That something more, Mr Muller SC (assisted
by Ms Long) submits is that the matter is of public importance
as it has far
reaching consequences for the respondent, as well as
other businesses with the same business model as the respondent
operating
within the relevant industry and that accordingly my
interpretations of the relevant provisions of the various legislation
has
substantial industry-wide implications. Mr Theron SC’s
response is that many judgments have a wide effect on a range
of
persons, particularly where the court engages in an exercise of
statutory interpretation, and that this does not constitute
some
other compelling reason why an appeal should be heard.
19.
I have carefully considered whether there is some
other compelling reason why an appeal should be heard while being
conscious of
not succumbing to hubris that my judgment is
unassailable on appeal, albeit that a higher threshold is now
required for leave to
appeal to be granted on the merits. There were
many facets to the respective parties’ arguments and the issues
are of considerable
complexity, as is demonstrated by the length of
my judgment.
20.
What has swayed me to find that there is some
other compelling reason why the appeal should be heard is that my
judgment does operate
in a regulatory environment and more
particularly the regulation of the unlicensed conducting of the
business of an OTC derivative
provider, and how that is advanced by
granting a winding-up order.
21.
I state as follows in my judgment:
“
215.
I do not
intend setting a precedent that wherever a service provider
is
unlicensed it is to be placed under winding-up in terms of either of
the two sections. Each case must be considered on its merits.
As
appears above, it is not only the failure of the respondent to have
been licensed to conduct the business of an OTC derivative
provider
but also the other factors that I have described above that persuade
me that a winding-up order is to granted. To the
extent that my
findings may have a broader effect on the regulation of the
unlicensed conducting of the business of an OTC derivative
provider,
particularly given the assertions that the others may similarly be
conducting such unlicensed business, each case would
have to be
considered on its own merits.
216.
Nonetheless
section 96
of the FMA expressly refers to a winding-up to
achieve the objects of that Act and section 38B of the FAIS Act
similarly provides
that the court may take into account whether the
liquidation of a respondent is reasonably necessary for the integrity
and stability
of the financial sector. To the extent that this
judgment may advance the regulation of the business of a OTC
derivative provider,
then that is a factor to be taken into account
when deciding whether to grant a liquidation order. This court is
specifically empowered,
if not enjoined by the FMA and the FAIS Act,
to consider interests wider than those of the respondent such as for
the integrity
and stability of the financial sector as a whole.”
22.
Given that I found that I am specifically called
upon to look at interests beyond those of the respondent, which
include the integrity
and stability of the financial sector, I am of
the opinion that there is some other compelling reason why the appeal
should be
heard, as provided for in section 17(1)(a)(ii). My
judgment operates not only in relation to the other OTC derivative
providers
who are apparently also unlicensed but also the many
thousands of customers that transact with those traders.
23.
Counsel were agreed in their submissions that
should leave to appeal be granted, it be granted to the Supreme Court
of Appeal. Should
I have erred, in relation to my interpretation and
application of the various legislation, then I would have erred in
respect of
a question of law, and which is one of importance because
of its general application. An appeal to the Supreme Court of Appeal
is therefore warranted as provided for in
section 17(6)(a)
of
the
Superior Courts Act.
24.
An order is granted as follows:
24.1.
The respondent in the main application is granted
leave to appeal to the Supreme Court of Appeal.
24.2.
The costs of the application for leave to appeal
are costs in the appeal.
Gilbert AJ
Date of
hearing:
30 March 2021
Date of judgment:
6 April 2021
For the
Applicant:
E Theron SC
Instructed
by:
Mamatela Attorneys Inc, Johannesburg
For the
Respondent:
J
Muller SC and P R Long
Instructed
by:
Hanekom Attorneys,
Cape Town
[1]
The
respondent contends that I erred in considering as a factor to be
taken into account in deciding whether to grant a winding-up
order
the availability of
section 26
of the
Insolvency Act, 1936
to set
aside transactions that may be void as the winding-up application
was not brought on the basis that the respondent was
unable to pay
its debts. Apart from this factor not being decisive to the outcome,
it may be that the correct legal position
is not whether the
respondent was wound up because of an inability to pay its debts,
but whether the respondent is able to pay
its debts when the section
is invoked: see the commentary in
Henochsberg
on the
Companies Act 71 of 2008
LexisNexis, October 2020 – SI24, at APPI - 16(1) and (2)
[2]
[19577/09] [2016] ZAGPHC489 (24 June 2016), at para 25.
[3]
2014 JDR 2325 (LCC).
[4]
In
para 2.
[5]
In para 2.
[6]
In para 24.