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[2014] ZASCA 205
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Coetzee v Financial Planning Institute of South Africa (Association Incorporated Under Section 21) and Others (1079/2013) [2014] ZASCA 205; 2015 (3) SA 28 (SCA) (28 November 2014)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
No 1079/2013
In
the matter between:
ELIZABETH
COETZEE
..................................................................................................
APPELLANT
and
FINANCIAL
PLANNING INSTITUTE OF
SOUTH
AFRICA (ASSOCIATION INCORPORATED
UNDER
SECTION
21)
......................................................................................
FIRST
RESPONDENT
R
KING
..........................................................................................................
SECOND
RESPONDENT
E
VENTER
........................................................................................................
THIRD
RESPONDENT
J
LOURENS
..................................................................................................
FOURTH
RESPONDENT
J
MAREE
...........................................................................................................
FIFTH
RESPONDENT
M
LOUW
............................................................................................................
SIXTH
RESPONDENT
Neutral
citation:
Coetzee v Financial
Planning Institute of SA
(1079/13)
[2014] ZASCA 205 (28 November 2014).
Coram:
Navsa ADP, Leach, Saldulker, Swain JJA
et
Mocumie AJA
Heard:
12 November 2014
Delivered:
28 November 2014
Summary:
Disciplinary hearing – charge not requiring same degree of
formality as criminal trial – particularity of factual
information underlying allegations required – test whether
information sufficient to enable accused to know what case to
meet –
appellant adequately informed of particulars of charge – appeal
dismissed.
ORDER
On
appeal from:
The Western Cape High
Court, Cape Town (Louw and Cloete JJ, sitting as court of first
instance):
The
appeal is dismissed with costs.
JUDGMENT
Swain
JA
(Navsa ADP, Leach, Saldulker JJA
et
Mocumie AJA concurring):
[1]
This appeal has its origin in disciplinary proceedings instituted by
the first respondent, the Financial Planning Institute
of Southern
Africa (FPI), against one of its members, the appellant, Ms Elizabeth
Coetzee, as long ago as 19 June 2007.
[2]
Those proceedings culminated in a finding that Ms Coetzee had
contravened certain sections of the code of conduct of FPI with
the
result that her membership of FPI was suspended for ten years. She
was also sentenced to a fine of R10 000.
[3]
Aggrieved at the outcome, Ms Coetzee appealed to the appeal tribunal
of FPI, which set aside the findings of the disciplinary
committee
but substituted those findings with a finding that she was guilty on
two of the charges advanced against her. The sanction
imposed was
varied to the suspension of her membership in FPI for a period of two
years. The second to sixth respondents were the
members of the appeal
tribunal.
[4]
Ms Coetzee’s dissatisfaction with the appeal tribunal’s
finding resulted in the institution of review proceedings
before the
Western Cape High Court. In this application she sought an order
reviewing and setting aside the findings of the appeal
tribunal and
its substitution with an order that she was not guilty on these
charges. The High Court (Louw and Cloete JJ) dismissed
the
application with costs.
[5]
Ms Coetzee then sought and was granted leave to appeal to this court
on the ground that one of the charges which formed the
basis for her
conviction before the appeal tribunal, had not been drafted with
sufficient particularity. As a consequence she alleged
that in the
absence of a properly formulated charge she had not had a proper
hearing, neither before the disciplinary committee
nor the appeal
tribunal. An order is sought in the present appeal setting aside the
decision of the court a quo and substituting
the order of the appeal
tribunal with an order that she is not guilty on all of the charges.
As will become apparent, the validity
of the second charge is
inextricably linked to the validity of the charge which is challenged
on appeal.
[6]
The issues before this court are: whether the charge on which the
appellant was found guilty was properly put to her and whether
she
was afforded the opportunity to defend herself on that charge.
[7]
Before examining the charges advanced against Ms Coetzee, it is
necessary to examine the historical background to the disciplinary
proceedings to place them in context.
[8]
The complainant in the disciplinary proceedings, Ms Wagener, is an
elderly widow who at the time of the institution of proceedings
was
77 years of age. It is clear from the record of the disciplinary
proceedings that she has no business acumen or experience
and spent
her life as a wife and mother to her children. She left financial
matters in the hands of her late husband who passed
away in 2002. He
had, by all accounts, successfully managed the investments of the
Wagener Family Trust (the Trust) in the form
of a share portfolio. Mr
Sparg, a chartered accountant, who gave evidence before the
disciplinary committee described the portfolio
as consisting of ‘blue
chip’ shares. They had been held by the trust for a long time,
made up a diversified share portfolio,
and were all producing tax
favourable dividends that comfortably funded the beneficiaries’
monthly requirements. According
to Mr Sparg the structure of the
investments in these shares was ideal from a tax point of view and as
a long term investment.
This evidence was not challenged by Ms
Coetzee.
[9]
Ms Wagener testified that after the death of her husband she was
approached by the mother of Ms Coetzee, a Ms Swanepoel, who
told her
she was not to worry as they would look after her. She had known Ms
Swanepoel for fifteen years and said the latter had
given her late
husband good advice. At the time of her husband’s death the
family trust had been administered by PSG, but
Ms Swanepoel advised
her to replace PSG with Sanlam for whom she was an agent, which Ms
Wagener did.
[10]
A representative of Sanlam then advised her to sell a portion of the
Richemont shares held by the trust and replace them with
Anglo
American shares, which she did. As a result the income of the trust
almost doubled, and she left the administration of the
trust to Ms
Coetzee. Ms Coetzee then advised her that Liberty had approached her
to join them. According to Ms Wagener, Ms Coetzee
then said that she
wanted to sell R30 million worth of the shares and reinvest the money
in low risk investments such as property
linked investments. This was
because the share market was going to correct sharply downwards in
the future.
[11]
The version of Ms Coetzee, however, was that she had established from
representatives of Old Mutual that although the market
would still
grow, they expected that at some stage there would be a correction.
Ms Wagener was worried by this information which
caused her to have
sleepless nights. Ms Coetzee then advised Ms Wagener to use R25
million of the profit made by the trust to diversify
the investment
of the trust either with Stanlib or Bastion. Ms Wagener then chose to
invest an amount of R30 million in the Stanlib
Managed Flexible Fund
and the Stanlib Multi Management High Equity Fund. According to Ms
Coetzee, Ms Wagener told her that she
was no longer worried about the
trust losing money. Ms Coetzee admitted that she received a
commission of R900 000 for investing
the trust’s funds in
the Stanlib policies and that her continuing commission on the
investment increased to 0,5 per cent
per annum. Previously it had
been 0,15 per cent per annum, when the portfolio was transferred to
Sanlam. Simply put, the volatility
of the equity market was a risk
she sought to avoid and it was in this regard she sought Ms Coetzee’s
advice.
[12]
Problems, however, arose when, according to Ms Wagener there was no
drop in the share market and her auditors advised her that
only R12
million had been reinvested in low risk investments. The rest of the
money was in investments which did not have a lower
risk profile than
the shares originally held by the trust. A complaint was then laid
with FPI by Ms Wagener in an affidavit, in
which she alleged that Ms
Coetzee had advised her to invest in less risky assets, specifically
property investments, but had then
indirectly reinvested the majority
of these funds in the share market.
[13]
Ms Wagener’s complaint was dealt with in terms of clause 4.7 of
the disciplinary regulations of FPI which provide that
in the event
of a complaint being laid against a member, the chief executive
officer ‘shall cause to communicate the essence
of the
complaint or charge to the member involved and request him to respond
thereto within 21 days . . . ‘. Should a disciplinary
hearing
follow the regulations make no provision for the presentation of a
formal charge to the member involved. The regulations
simply provide
that the duly appointed disciplinary tribunal ‘shall determine
the procedure to be followed’. It is,
however, obliged to hear
the evidence against the accused member first and thereafter the
evidence for the accused member. The
tribunal is also obliged to
allow cross-examination and re-examination of witnesses.
[14]
As a result the FPI, in compliance with clause 4.7 of the
regulations, addressed a letter dated 4 July 2006 to Ms Coetzee
advising her of the formal complaint and stating:
‘
The
complaint deals in detail with the advice given to Ms Wagener
regarding the reinvestment of the gains from the increase in the
Sanlam Private Investment share portfolio into less risky assets,
specifically property investments. These funds allegedly [was]
not
invested in a property investment by you, but reinvested in the
Johannesburg Stock Exchange.’
[15]
By letter dated 9 January 2007, FPI formally advised Ms Coetzee that
she would have to appear before a disciplinary hearing.
She was also
informed of the relevant principles in the code of conduct of FPI,
which it was alleged she had contravened. A number
of charges were
advanced against her but for present purposes the relevant charges
are as follows:
‘
Kindly
take notice that, in terms of the Articles of Association of the
Financial Planning Institute of Southern Africa (“FPI”)
read with the Regulations, Code of Conduct and GAPP
[1]
thereof, the disciplinary committee of the FPI hereby accuse you of
contravening the Code of Conduct and/or GAPP in that you committed
one and/or some and/or all of the following:
1. Principle 201 of
the Code of Conduct: That you neglected to exercise reasonable and
prudent professional judgement in providing
financial services and at
all times act in the interest of the client, and in particular with
Me Margaret Wagener and/or the Wagener
Family Trust (“the
Complainants”), by
.
. .
1.2
Failing to execute the mandate of the Complainants properly,
diligently and professionally; and/or
.
. .
4.
Principle 304 of the Code of Conduct: That you failed to charge
remuneration that is fair and equitable for the Complainants
and
yourself, and without derogating there from, that you charged
R1,035,000 plus Value Added Tax as initial financial advisor
commission in circumstances where such amount is excessive, not fair
nor equitable.’
[16]
This letter clearly served the purpose of advising Ms Coetzee of the
charges formulated against her, based as they were upon
the complaint
made by Ms Wagener, the essence of which was contained in the earlier
letter from FPI.
[17]
In order to determine whether Ms Coetzee was properly informed of the
case she was called upon to meet, as set out in paragraph
1.2 of the
formal charges, the allegations made must not be considered in
isolation, but in the context of the initial letter which
set out the
essence of the formal complaint.
[2]
It would be artificial not to do so, because the enquiry is whether
Ms Coetzee had adequate knowledge of the facts forming the
basis for
the charge to enable her to answer that charge. There is authority
for the proposition that a charge sheet in a disciplinary
enquiry
does not have to be framed with the same particularity, or with all
the formalities of a charge in a criminal trial.
[3]
However, the better view is that although the same degree of
formality is not required, the same degree of particularity of the
factual information underlying the allegations made, is required to
enable the accused to know what case he or she has to meet.
This is
particularly so where the disciplinary body has the power (as in the
present case) to make findings with far-reaching consequences.
[4]
[18]
The factual information conveyed to Ms Coetzee on a reading of the
letter of complaint dated 4 July 2006, together with the
charges
advanced against her in paragraph 1 and 1.2 of the letter dated 9
January 2007, was as follows:
(a)
Ms Wagener was the complainant.
(b)
The complaint concerned advice Ms Coetzee had given to Ms Wagener
regarding the reinvestment of the gains from the increase
in the
Sanlam Private Investment Share portfolio.
(c)
The advice had been to reinvest these funds into less risky assets,
specifically property investments.
(d)
In providing this advice Ms Coetzee failed to exercise reasonable
and prudent professional judgment and act in the interests
of Ms
Wagener.
(e)
Ms Coetzee failed to execute the mandate of Ms Wagener to invest
these funds into less risky assets, specifically property
investments, properly, diligently and professionally because they
were reinvested in the Johannesburg Stock Exchange.
[19]
It is quite clear that the first charge comprises two components; the
correctness of the advice given by Ms Coetzee to Ms Wagener
to
reinvest the profits made, and the failure to carry out the mandate
given to her by Ms Wagener. The second charge dealing with
the
remuneration received by Ms Coetzee is inextricably linked to the
first charge. In short, it was alleged that an excessive
amount was
charged by Ms Coetzee for bad advice and for acting contrary to the
mandate.
[20]
It is common cause that there was only one occasion when Ms Coetzee
sold shares held by the trust and reinvested them. It must
have been
quite clear to Ms Coetzee that what was in issue was the reinvestment
of these funds, in the sum of R30 million in the
Stanlib Managed
Flexible Fund and the Stanlib Multi Management High Equity Fund on 23
August 2005.
[21]
In my view the particulars of the facts forming the basis for the
charge contained in paragraph 1.2 of ‘the charge sheet’
were sufficient to enable Ms Coetzee to know what case she had to
meet. If Ms Coetzee was uncertain of the nature of the charge
advanced against her, her legal representative, Mr Nieuwoudt, would
have been entitled to ask for particulars to the charge to
clarify
the position. The fact that the disciplinary regulations of FPI do
not make provision for a request for particulars to
a charge, because
no provision is even made for a formal charge to be framed, would not
in itself justify a refusal to furnish
particulars to the charge.
[5]
On the contrary, the record shows that Mr Nieuwoudt at the
commencement of the disciplinary proceedings stated the following:
‘
Ek
weet nie of u werklikwaar wil vereis dat die klagstaat gelees moet
word nie. As dit die procedure is dan moet dit gebeur, maar
ek kan u
verseker ons het die klagstaat gelees en my kliënt is gereed om
onskuldig te pleit op al die klagtes soos dit gestel
is. As die
procedure egter vereis dat dit gelees moet word, dan sal ons daarna
luister.’
In
essence he confirmed his client understood the case she had to meet.
[22]
I am fortified in my view that Ms Coetzee was fully aware of the
nature of the charge advanced against her in paragraph 1.2
of the
charge sheet and was not prejudiced in the preparation of her answer
to this charge, by a reference to the record of proceedings
of the
disciplinary hearing. Mr Nieuwoudt, before cross-examining Mr Sparg,
requested confirmation that the charges dealt solely
with the
transaction of 23 August 2005. This was confirmed by the evidence
leader.
[23]
In addition, Mr Nieuwoudt put to Ms Wagener that she told Ms Coetzee
that she was worried that all of her money was in the
stock market
and that if the stock market fell she would lose money. He also put
to her that she sought specific advice from Ms
Coetzee, the object of
which was to protect herself if the market fell. In other words, Ms
Coetzee’s legal representative
knew that what was in issue was
the nature of the advice given to Ms Wagener, the reason why the
advice was given and the object
the advice sought to achieve.
[24]
Mr Sparg gave evidence in the respects set out above, and added
that in August 2005 he would not have advised the sale
of the
existing blue-chip shares as they would have been able to
weather a drop in the market and their sale caused substantial
tax
complications for the trust and its beneficiaries. He added that even
if the shares were to be sold, the reinvestment of the
proceeds in
the Stanlib funds was poor advice as, first, it exposed the trust to
substantial capital gain tax and liability for
commission and,
second, approximately half the proceeds would thereby be reinvested
in the equity market and to that extent the
desired end of lessening
the trust’s exposure to the vagaries of the stock-market would
not be avoided. At the end
of his evidence Mr Nieuwoudt asked
for an adjournment to consult an expert in relation to what Mr Sparg
had testified, on the ground
that this expert evidence lay at the
centre of a number of the charges. At no stage thereafter did Mr
Nieuwoudt suggest either
that he and his client had been taken by
surprise by this evidence or that the charges did not encompass these
issues.
[25]
When cross-examining Ms Wagener, Mr Nieuwoudt referred her to her
affidavit where she complained that she was advised by Ms
Coetzee to
reinvest the gains in less risky assets, specifically property
investments, but had reinvested the majority of the funds
indirectly
in the Johannesburg Stock Exchange. It is clear that he knew
precisely what the gravamen of the complaint was.
[26]
Mr Nieuwoudt, when leading the evidence of Ms Coetzee, put it to her
that she had heard the view expressed in the evidence
that the
financial advice she had given was very poor, she had had a long time
to think about it and she was asked to express her
views on the
advice she had given. She replied that it was very good advice and
that diversification of the funds as invested was
a good option.
Again it is clear that she understood the nature of the charge
against her.
[27]
The appeal tribunal found that Ms Coetzee had received an instruction
from Ms Wagener to protect the share portfolio against
a drop in the
share market. It concluded that the advice given by Ms Coetzee to
invest in the Stanlib funds was not ‘reasonable
and
professional’ judgment because it did not achieve the mandated
objective. It is clear that the grounds for Ms Coetzee’s
conviction are clearly comprehended by the factual information
conveyed to her as set out above as part of the charge. There is
accordingly no basis for the ground of appeal.
[28]
During argument before us counsel for Ms Coetzee sought to expand his
argument beyond the issue upon which leave to appeal
was granted by
the court a quo. He submitted that the common intention of Ms Coetzee
and Ms Wagener was to protect the investment
of the trust against a
fall in the share market, but it had never been proved that the
Stanlib investments had not achieved this.
Ms Coetzee accordingly had
not been given the opportunity to deal with this aspect.
[29]
As pointed out by the court a quo, the appeal tribunal, which in
terms of the disciplinary regulations of FPI consisted of
five
members, all of whom were Certified Financial Planner Licensees,
relying upon its own expertise and having examined the Stanlib
policies, correctly concluded that they did not achieve the desired
objective to protect the trust against a drop in the share
market. In
this regard counsel for Ms Coetzee stressed that the appeal tribunal
correctly found that Ms Coetzee had never been
confronted with this
issue. That view is, however, not correct. Ms Coetzee for the reasons
set out above was well aware that the
gravamen of the complaint
against her was whether the Stanlib policies achieved the desired
objective.
[30]
It was common cause that a substantial portion of the reinvestment of
the funds via the Stanlib policies was in the share market.
It is of
significance that in the information furnished by Stanlib concerning
the Multi Management High Equity Fund under the heading
‘Investment
Strategy’ the following appears; ‘focus of the portfolio
is on capital appreciation rather than capital
preservation and this
is achieved through high exposure equities’. In the application
for review FPI in its answering affidavit
referred to this passage
and pointed out that in the summary which Ms Coetzee furnished to Ms
Wagener, setting out the details
of the Stanlib policies, translated
into Afrikaans, the whole of the section under ‘Investment
Strategy’ was set out,
but this sentence was pertinently
omitted. In her replying affidavit Ms Coetzee did not respond to this
allegation. The inference
is irresistible that this information was
expressly omitted so as not to alert Ms Wagener to the fact that a
substantial portion
of the investment was being invested in high
exposure equities. The only reason to conceal this information was
because Ms Coetzee
knew that the policy in question did not fulfil
the terms of the mandate.
[31]
The details of the Stanlib policies were placed before the appeal
tribunal by Ms Coetzee. Knowing that the object was to protect
the
trust against a drop in the share market, and that the complaint was
that the Stanlib policies did not achieve this objective,
it must
have been self-evident to Ms Coetzee in presenting details of the
Stanlib policies to the appeal tribunal that she should
attempt to
show how they achieved this objective, particularly where there was a
substantial investment in high exposure equities.
[32]
As pointed out by the appeal tribunal it would be clear to anybody
who knew anything about investments, confronted with a mandate
to
protect a portfolio against a fall in the market, that it was
impossible to fulfil that mandate by investing in the Multi
Management
High Equity Fund with its emphasis on high exposure
equities. It added that it could be argued that the mandate could be
achieved
by the Managed Flexible Fund. As correctly conceded by
counsel for FPI there would have been no complaint against Ms Coetzee
if
the funds had only been invested in this policy. There is
accordingly no basis for this argument. It is also self-evident that
the amount of R900 000 received by Ms Coetzee was excessive and
not fair or equitable, because her advice did not reduce the
risk of
a loss by the Trust in its investments, in the event of a sharp drop
in the share market. Moreover it burdened the trust
with substantial
capital gains tax and commission.
[33]
Although two counsel were employed by FPI in this appeal the issues
requiring determination were not sufficiently complex to
justify
their employment.
[34]
I grant the following order:
The
appeal is dismissed with costs.
_______________________
K
G B SWAIN
JUDGE
OF APPEAL
APPEARANCES:
For
the Appellant: W G Burger SC
Instructed by:
Muller and Juby
Attorneys, Somerset West
c/o
McIntyre & Van der Post, Bloemfontein
For
the Respondent: M Helberg SC, J E Ferreira
Instructed by:
Lombard Muller and
Vennote Inc, Pretoria
c/o
Christo Dippenaar Prokureurs, Bloemfontein
[1]
Generally
Accepted Planning Practice.
[2]
De
Villiers v Administrator OFS
1954
(3) SA 395
(O) at 408H.
[3]
Chislett
v Natal Tattersalls & others
1967 (3) SA 419
(D) at 426G.
[4]
Van
Wyk v Director of Education & another
1974
(1) SA 396
(N) at 400H;
Van
Rooyen v Dutch Reformed Church, Utrecht
1915
NPD 323
at 331.
Section 84
of the
Criminal Procedure Act 51 of 1977
provides inter alia, that a charge sheet must include such
particulars ‘as may be reasonably sufficient to inform the
accused of the nature of the charge’,
R
v Moyage & others
1958
(3) SA 400
(A) at 413C-D. The wording of s 35(3)
(a)
of the Constitution of the Republic of South Africa 1996 that ‘every
accused person has a right to a fair trial, which
includes the right
to be informed of the charge with sufficient detail to answer it’
embodies this principle.
[5]
Mhlambi
v Matjhabeng Municipality & another
2003
(5) SA 89
(O) para 12.