About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2017
>>
[2017] ZASCA 115
|
|
Odifin (Pty) Ltd v Reynecke (906/2016) [2017] ZASCA 115; 2018 (1) SA 153 (SCA) (21 September 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 906/2016
In
the matter between:
ODINFIN
(PTY)
LTD
APPELLANT
and
PIETER
REYNECKE
RESPONDENT
Neutral
citation:
Odinfin
(Pty) Ltd v Reynecke
(906/2016) ZASCA
115 (21 September 2017)
Coram:
Bosielo and Petse JJA and Plasket,
Tsoka and Rogers AJJA
Heard:
25 August 2017
Delivered:
21 September 2017
Summary
:
Delict – Pure economic loss – Loss
suffered as a result
of debarment in terms of s 14 of the Financial Services Advisory and
Intermediary Services Act 37 of 2002
– Whether conduct of
employer in debarring employee without complying with the provisions
of Promotion of Administrative
Justice Act 3 of 2002 was wrongful and
gave rise to damages.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Louw J sitting as court of first instance):
1
The appeal is upheld with costs,
2
The order of the court below is set aside and replaced with the
following:
‘
The
plaintiff’s action is dismissed with costs.’
JUDGMENT
Tsoka
AJA (Bosielo and Petse JJA and Plasket and Rogers AJJA concurring):
[1]
The narrow issue in this appeal is whether an employer, who is a
registered financial services provider in terms of the Financial
Advisory and Intermediary Services Act 37 of 2002 (FAIS Act), acted
wrongfully, in the delictual sense, in debarring an employee
who was
a representative in terms of s 14 of the FAIS Act without
affording him procedural fairness as required by s 3
of the
Promotion of Administrative Justice Act 3 of 2000 (PAJA) and whether
such non-compliance entitled the latter to delictual
damages.
[2]
The facts giving rise to the appeal are common cause. On 12 August
2010 the respondent, Pieter Reynecke (Reynecke), and the
appellant,
Odinfin (Pty) Ltd (Odinfin), a registered financial services provider
(FSP), entered into a written employment contract
in terms of which
the former agreed to render financial services as a representative on
behalf of Odinfin. Three years later Reynecke,
so he alleged, became
disillusioned with the conditions of his employment and sought new
employment with Nedbank Limited (Nedbank),
also a registered FSP,
without prior written approval of Odinfin. On 15 April 2013, whilst
still employed by Odinfin, he entered
into a written employment
agreement with Nedbank. Although his position was described as
‘Financial Planner’, his duties
were similar to those he
rendered to Odinfin. As such he remained a representative in terms of
the FAIS Act.
[3]
Unknown to Reynecke, on 8 May 2013 Odinfin learnt that he was
undergoing an induction with Nedbank. Odinfin confronted him with
this information but, instead of owning up, Reynecke denied that he
was seeking employment with Nedbank. Instead he falsely
misrepresented
to Odinfin that he was in Heidelberg writing and
selling new policies on behalf of Odinfin when, in fact, he was
attending the
induction. As Odinfin was aware that this information
was incorrect, it requested him to furnish proof that he was indeed
in Heidelberg,
which he refused to do. Odinfin then contacted Nedbank
to verify the information it had received with regard to his
employment.
Nedbank confirmed the information and in addition
confirmed that Reynecke was in fact attending an induction programme.
[4]
Satisfied with the information received from Nedbank, Odinfin
suspended Reynecke and commenced disciplinary proceedings against
him. On 10 May 2013 it served on him a notice of a disciplinary
hearing to answer three charges, namely dishonesty, competing with
his employer and conflict of interest, all stemming from the conduct
summarised above. The disciplinary enquiry was scheduled for
16 May
2013 at 10h00. In response Reynecke tendered a letter of resignation
effective from 13 May 2013. Odinfin immediately replied,
pointing out
to him that in terms of his employment agreement it was entitled to a
four weeks’ notice period with effect
from the 13 May 2013.
That meant that as at the date of the hearing he would still be
Odinfin’s employee and was expected
to attend the enquiry.
[5]
On the morning of the disciplinary hearing, he was reminded of the
hearing. He informed Odinfin that he was not interested and
would not
be attending the hearing. The hearing proceeded in his absence. After
hearing Odinfin’s witnesses the chairman
of the disciplinary
enquiry found Reynecke guilty of the three charges levelled against
him. The chairman recommended that his
employment agreement be
terminated with immediate effect. This Odinfin did.
[6]
Section 13(3) of the FAIS Act imposes an obligation on FSPs to
maintain a register of their representatives. All representatives
are
required, inter alia, to comply with the ‘fit and proper’
requirements set out in s 6A. These include ‘personal
character qualities of honesty and integrity’. In terms of
s 14(1) read with s 13(3) an FSP is required to remove
the
name of a representative from its register if, inter alia, he or she
is no longer a fit and proper person. In terms of s 14(3)
the
FSP must inform the registrar of financial institutions of the
debarring and the registrar may make known such debarment and
the
reasons therefor by notice on the official web site or by means of
any other appropriate public media.
[7]
After Reynecke’s dismissal Odinfin updated its register in
terms of s 14(1) read with s13(3) to reflect that
Reynecke
had lost the status of being a fit and proper person who was honest
and had integrity and that he was debarred from providing
any new
financial services on Odinfin’s behalf. As required by
s 14(3)(a), Odinfin notified the registrar accordingly.
The
registrar, as permitted by s 14(3)(b), published the debarment
by notice on the official website. At some stage thereafter
Nedbank
conducted a background check on Reynecke. This revealed that the
registrar had noted his debarment. Nedbank then also terminated
his
employment agreement. Reynecke approached the Commission for
Conciliation, Mediation and Arbitration for redress. The parties
settled the dispute on the understanding that Reynecke would approach
the court to review the debarment.
[8]
On 12 September 2013 Reynecke launched a review application in the
Gauteng Division of the High Court, Pretoria. Odinfin filed
a notice
to oppose the application which opposition was later withdrawn. The
basis of the application was that Odinfin, in discharging
its
mandatory obligation in terms of s 14 of the FAIS Act, was performing
an administrative act, which in terms of PAJA entitled
him to notice
and a fair hearing. He alleged that the debarment, having been done
without notice and a fair hearing, was procedurally
unfair and as
such had to be reviewed and set aside. Reynecke’s contention
that Odinfin’s debarment decision constituted
administrative
action accorded with this court’s subsequent decision in
Financial
Services Board v Bathram
.
[1]
In the
present case the high court, apparently without furnishing reasons,
reviewed and set aside the debarment. Thereafter Nedbank
re-employed
Reynecke but by that time he had been without employment and a salary
for nine months.
[9]
On 4 December 2014 Reynecke launched an action against Odinfin in the
court a quo seeking damages for loss of income. His contention
was
that Odinfin had owed him a duty of care not to proceed to debar him
without notice and a hearing. Odinfin filed a plea denying
the
existence of the alleged duty of care and contending that the alleged
loss was ‘caused by his own wrongdoing. . .’
[10]
The parties seemingly agreed on a separation of issues, with the
‘merits’ to be decided first. The precise terms
of the
separation do not appear from the record and the court a quo made no
formal order in terms of rule 33(4) of the Uniform
Rules of Court.
The trial proceeded before Louw J who at the end of the trial found
in favour of Reynecke and held that Odinfin
was liable for such
damages as Reynecke could prove plus costs. Dissatisfied with this
finding, Odinfin brought an application
for leave to appeal the said
order. The application was successful. This is the appeal before us.
[11]
Before dealing with the merits of the appeal, there is one issue that
need to be addressed. The issue concerns the separation
of issues in
terms of rule 33(4). Judges should not approve a separation just
because the parties have agreed to do so. And if
a separation is
approved, the court must ensure that its terms are clear. The facts
of this matter reveal that separation was inappropriate.
It was in
fact inconvenient to deal with this matter piecemeal rather than all
at once. The quantum that was held over for later
determination was
modest and easily calculable. To dispose of this matter at once
rather than piecemeal would at most have extended
the trial into a
second day. In fact, proceedings only started in the court a quo at
11h23 (because copies had to be made of certain
documents) and
finished at 14h38. Had the trial been run efficiently, the evidence
on all issues would not have needed more than
one day. And as I have
observed, the terms of the separation were not properly recorded. For
example, at the hearing of the appeal
counsel were unclear whether
causation was part of the merits or the quantum. If Reynecke
correctly succeeded on the ‘merits’,
he might still have
been unable to prove that things would have turned out any
differently if Odinfin had complied with its procedural
obligations
under PAJA. Having disposed of the two preliminary issues, I turn to
the merits of the appeal.
[12]
That Reynecke’s claim is a delictual claim based on pure
economic loss admits no doubt. It being a delictual claim founded
on
the breach of the provisions of PAJA, for him to succeed with his
claim, he must prove:
(a)
Conduct,
(b)
Wrongfulness,
(c)
Fault,
(d)
Causation and
(e)
Damages
The
issue of damages having been held over, this need not detain us
further. I have already mentioned that it is unclear whether
causation also stood over. I shall assume it did. As to fault,
Reynecke did not allege that Odinfin’s alleged breach was
knowingly wrongful (dolus) or negligent (culpa) so on the merits he
had to show not only that the breach of procedural fairness
was
wrongful in the delictual sense but that it gave rise to strict
liability.
[13]
The test for determining wrongfulness in a delictual sense for
omissions was formulated by this court in
Van
Eeden v Minister of Safety and Security (Women’s Centre Trust
,
as
Amicus
Curiae
)
[2]
as follows:
‘
.
. . An omission is wrongful if the defendant is under a legal duty to
act positively to prevent the harm suffered by the plaintiff.
The
test is one of reasonableness. A defendant is under a legal duty to
act positively to prevent harm to the plaintiff if it is
reasonable
to expect of the defendant to have taken positive measures to prevent
harm. The court determines whether it is reasonable
to have expected
of the defendant to have done so by making a value judgment based,
inter alia, upon its perception of the legal
convictions of the
community and on considerations of policy. The question whether a
legal duty exists in a particular case is
thus a conclusion of law
depending on a consideration of all the circumstances of the case and
on the interplay of the many factors
which have to be considered . .
.’
[14]
It is trite that the legal convictions of the community and
considerations of policy are now determined by the normative values
contained in the Constitution.
[3]
[15]
In regard to an omission to comply with the requirements of PAJA, it
is apt to refer to what the Constitutional Court said
in
Steenkamp
N O v Provincial Tender Board, Eastern Cape
:
[4]
:
‘
However,
a concession that the tender board acted inconsistently with the
tenets of administrative justice is neither decisive of
the existence
of a duty of care nor is it of any avail to the applicant’s
case. In our Constitutional dispensation every
failure of
administrative justice amounts to a breach of a constitutional duty.
But the breach is not an equivalent of unlawfulness
in a delictual
sense. Therefore an administrative act which constitutes a breach of
a statutory duty is not for that reason alone
wrongful . . . Policy
considerations of fairness and reasonableness have to be taken into
account when imposing a duty of care
and ultimately liability to make
good the harm suffered by a claimant.’
[16]
In
Mashongwa
v Passenger Rail Agency of South Africa
,
[5]
the
Constitutional Court in deciding whether a failure of administrative
justice amounted to a delict reasoned thus:
‘
To
conclude that an incident of omission, particularly in relation to
public duties, is wrongful and impute delictual liability,
is an
exacting exercise that requires a reflection on a number of important
factors. Some of them are: whether the operating statute
provides for
a delictual claim for damages; whether the legislation’s scheme
is primarily about protecting individuals or
advancing public good;
whether the public power conferred is discretionary; whether the
imposition of liability for damages is
likely to have a ‘chilling
effect’ on the performance of government functions; whether
loss was foreseeable; and whether
alternative remedies such as
interdict, review or appeal are available to claimant’
(Footnotes omitted)
[17]
The
issue
of delictual liability for breach of a statutory duty was recently
considered by this court in
Home
Talk v Ekurhuleni Metropolitan Municipality
,
[6]
where the
relevant principles were summarised. I wish to quote two paragraphs
from Ponnan JA’s judgment (citation of authorities
omitted):
‘
19. Undoubtedly,
the appellants were entitled to proper administrative legal
proceedings. But, that did not mean that
the breach of the
administrative duties as set out in the particulars of claim
necessarily translated into private law duties giving
rise to
delictual claims. It must be accepted that an incorrect
administrative decision is not
per
se
wrongful.
It
is thus unhelpful to call every administrative error ‘unlawful’,
thereby implying that it is wrongful in the delictual
sense, unless
one is clear about its nature and the motive behind it.
Administrative law
is a system that over centuries has developed its own remedies and,
in general, delictual liability will not
be imposed for a breach of
its rules unless convincing policy considerations point in another
direction.
The
breach of every legal duty, especially one imposed by administrative
law, does not necessarily translate into the breach of
a delictual
duty. If the legal duty invoked is imposed by a statutory provision
the focal question is one of statutory interpretation.
Whether the
existence of an action for damages can be inferred from the
controlling legislation depends on its interpretation and
it is
especially necessary to have regard to the object or purpose of the
legislation. This involves a consideration of policy
factors which,
in the ordinary course, will not differ from those that apply when
one determines whether or not a common-law duty
existed.
. . . .
22. In
considering the issue of wrongfulness in the delictual sense, the
nature of the Municipality’s functions
certainly require close
scrutiny. But it must be appreciated that the nature of its functions
is but one of the circumstances calling
for consideration in the
case. As always, to determine the issue of wrongfulness, all the
circumstances of the case fall to be
considered. One of the questions
in this case is whether the legislature intended a claim for damages
in respect of loss caused
in addition to the other administrative law
remedies available to the appellants.
In
Steenkamp
(para
22), Harms JA observed:
“
It
appears to me that if the breach of a statutory duty, on a conspectus
of the statute, can give rise to a damages claim, a common-law
legal
duty cannot arise. If the statute points in the other direction,
namely that there is no liability, the common law cannot
provide
relief to the plaintiff because that would be contrary to the
statutory scheme. If no conclusion can be drawn from the
statute, it
seems unlikely that policy considerations could weigh in favour of
granting a common-law remedy.”’
[18]
Reynecke’s pleaded case seems to be that Odinfin’s
wrongful act was the breach of s 3 of PAJA, albeit in relation
to administrative action taken pursuant to s 14 of the FAIS Act.
Reynecke did not plead that on the facts his conduct did
not provide
grounds for a conclusion that he no longer met the ‘fit and
proper requirements’ referred to in s 6A
of the FAIS Act.
The FAIS Act does not prescribe any procedure which an FSP must
follow before debarring a representative. Reynecke
did not plead, nor
does it seem to be the case, that Odinfin breached any statutory duty
imposed by the FAIS Act.
[19]
The case thus reduces to the question whether administrative action
which is procedurally unfair in terms of s 3 of PAJA
is
delictually wrongful. The answer to that question must turn not on
the provisions of the legislation pursuant to which the
administrative action was taken (here, the FAIS Act) but on the
provisions of PAJA itself. There is nothing in PAJA to suggest that
the lawmaker intended there to be a delictual remedy for
non-compliance with its provisions in general or its provisions
relating
to procedural fairness in particular. On the contrary, PAJA
deals at some length with the rights of an aggrieved person affected
by unfair administrative action, namely judicial review in terms of
s 6 and the remedies provided for in s 8. Here Reynecke
exercised his right of judicial review and obtained an order setting
aside Odinfin’s procedurally unfair administrative action.
Although the matter was not formally remitted to Odinfin for
decision, Odinfin would have been entitled – perhaps obliged
–
to decide the matter afresh after observing the requirements of
procedural fairness.
[20]
In exceptional circumstances a review court may, instead of remitting
the matter, make a substituted decision or may order
the
decision-maker to pay compensation (s 8(1)(c)(ii)). This was not
the remedy that Reynecke claimed and it is doubtful in
any event
whether it was permissible, having regard to this court’s
decision in
Simcha
Trust v De Jong
.
[7]
[21]
The fact that PAJA does not afford a delictual remedy for damages
does not necessarily mean that unjust administrative action
will not
be delictually wrongful if there was a breach of the statute pursuant
to which the administrative action was taken and
if such statute on a
proper interpretation confers a delictual remedy. In the instant
matter, however, Reynecke does not allege
that there was a breach of
the FAIS Act. And even if there had been a breach of s 14 of the
FAIS Act, I do not consider that
the FAIS Act envisages a delictual
claim for damages. The primary aim of s 14 is not to protect the
interests of employed
representatives such as Reynecke but to advance
the public good. Odinfin had no option but to debar Reynecke once it
found him
lacking honesty and integrity. The imposition of liability
for damages would have a ‘chilling effect’ on the
performance
by FSPs of their statutory duty imposed by s 14 and
on the administration of the FAIS Act. There is no difficulty in
imposing
liability where the decision-maker acts dishonestly or
corruptly but our courts have been slow to find that statutes accord
delictual
remedies for mere negligence.
[8]
Here
Reynecke wanted the court a quo to go even further and impose strict
liability.
[22]
In the present matter, the interest of the public looms large. It is
entitled to know that representatives possess honesty
and integrity,
otherwise even rogue persons could act as representatives without the
public at large knowing. The victims would
not only be members of the
public but financial institutions as well. A country which allowed
rogue persons to act as representatives
would be poorer for it. To
impose liability for damages for the negligent performance of an
administrative function would have
a chilling effect on the
administration of the FAIS Act.
[23]
I conclude that Odinfin’s breach of PAJA did not give rise to a
delictual claim for damages. Its actions, in the absence
of any
allegation or evidence of
mala fides,
were not wrongful.
[24]
Having regard to the aforesaid, the following order is made –
(a)
The appeal is upheld with costs,
(b)
The order of the trial court is substituted with the following –
‘
The
plaintiff’s action is dismissed with costs’.
_______________
M
Tsoka
Acting
Judge of Appeal
APPEARANCES:
For
Appellants:
B C Stoop SC
Instructed
by:
Barnard Inc, Centurion
c/o
McIntyre van der Post, Bloemfontein
For
Respondents:
D M de Bruyn
Instructed
by:
De Bruyns Attorneys, Pretoria
Bezuidenhouts
Inc, Bloemfontein
[1]
Financial Services Board v
Bathram
(20207/ 2014
[2015] ZASCA 96
[2015] 3 All SA 665
(SCA) .
[2]
Van
Eeden v Minister of Safety and Security (Women’s Centre Trust
,
as
Amicus
Curiae
)
2003 (1) SA 389
(SCA) para 9.
[3]
Minister of Safety and
Security v Van Duivenboden
2002 (6) SA 431
(SCA) para 17.
[4]
Steenkamp N O V Provincial
Tender Board, Eastern Cape
2007 (3) 121 (CC) para 37.
[5]
Mashongwa v Passenger Rail
Agency of South Africa
2016 (3) SA 528
(CC) para 22.
[6]
Home
Talk v Ekurhuleni Metropolitan Municipality
(225/2016)
[2017] ZASCA 77
(2 June 2017).
[7]
The Trustees of the Simcha
Trust v De Jong & others
[2015]
ZASCA 45
;
2015 (4) SA 229
(SCA) paras 25-26.
[8]
See
Simcha Trust
fn
7 above para 30;
South
African Post Office v De Lacy & another
2009
(5) SA 255
(SCA) para 14.