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[2017] ZAGPPHC 812
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Ombud for Financial Services Providers v Harms NO and Others (46293/15) [2017] ZAGPPHC 812 (22 February 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 46293/15
Date:
22/02.2017
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
OMBUD
FOR FINANCIAL SERVICES
PROVIDERS
Applicant
and
LTC
HARMS
NO
First
Respondent
SHAREMAX
INVESTMENTS (PTY) LIMITED
Second
Respondent
GERHARDUS
ROSSOUW
GOOSEN
Third
Respondent
JOHANNES
WILLEM
BOTHA
Fourth
Respondent
DOMINIQUE
HAESE
Fifth
Respondent
ANDRE
DANIEL
BRAND
Sixth
Respondent
JUDGMENT
Tuchten
J
:
1.
The case before me began as a review by the applicant to set aside a
decision of an appeal panel ("the Panel") constituted
under
the Financial Services Board Act
[1]
upholding appeals against determinations of the applicant. The
applicant is the Ombud under the Financial Advisory and Intermediate
Services Act (FAISA).
[2]
The applicant thus sought to review a decision made on appeal setting
aside (in part) the applicant's own decision.
2.
In the present case, the first respondent, the chair of the Panel,
submitted the record which had served before the Panel but
otherwise
abided the decision of the court. The second respondent took no part
in the proceedings. The third respondent delivered
a notice stating
that he supported the arguments of the respondents in their answering
affidavits but did not appear at the hearing.
The fourth to sixth
respondents opposed the review and filed papers and each appeared to
argue the matter through counsel. For
convenience, I shall refer to
the respondents collectively as such unless the context requires
otherwise. For a proper appreciation
of how the present proceedings
arose, I must give some background.
3.
Section 20 of FAISA creates the office of the Ombud for Financial
Services Providers (the Office). The functions of the Office
are
performed by the Ombud for Financial Services Providers. The present
Ombud is the applicant. The objective of the Ombud is
to consider and
dispose of
complaints,
a
term which is defined in FAISA, in a procedurally fair, informal,
economical and expeditious manner and by reference to what is
equitable in all the circumstances, with due regard to the
contractual arrangement or other legal relationship between the
complainant
and any other party to the complaint and the provisions
of FAISA.
[3]
4.
Complaint
is
defined
[4]
to mean
subject
to section 26 (1) (a) (iii)
[5]
,
a specific complaint relating to a financial service rendered by a
financial services provider or representative to the complainant
on
or after the date of commencement of this Act, and in which complaint
it is alleged that the provider or representative-
(a)
has contravened or failed to comply with a provision of this Act and
that as a result thereof the complainant has suffered or is
likely to
suffer financial prejudice or damage;
(b)
has wilfully or negligently rendered a financial service to the
complainant which has caused prejudice or damage to the complainant
or which is likely to result in such prejudice or damage; or
(c)
has treated the complainant unfairly.
5.
Section 26 confers powers on the
Board
to make rules in
respect of different categories of complaints or investigations by
the Ombud. The Board is that created under the
Financial Services
Board Act which provides for the establishment of a board to
supervise compliance with laws regulating financial
institutions and
the provision of financial services and connected matters. Of
relevance for present purposes are ss 26(1)(a)(iii)
and (iv).
6.
Section 26(1)(a}(iii) empowers the Board to make rules regarding the
type of complaint justiciable by the Ombud, including a
complaint
relating to a financial service rendered by a person not authorised
as a financial services provider or a person acting
on behalf of such
first-mentioned person.
7.
Section 26((1)(a)(iv) empowers the Board to make rules regarding the
rights of a complainant to submit a complaint to the Ombud.
8.
A set of Rules on Proceedings of the Office of the Ombud for
Financial Services Providers (the Rules) duly came into force.
[6]
Rule 4 provides, under the heading "Type of Complaint to be
submitted to the Office", amongst other things that the
complaint must fall within the ambit of FAISA and the Rules and, in
rule 4(a)(ii):
the
person against whom the complaint is made must be subject to the
provisions of the Act (hereafter referred to as "the
respondent").
9.
The Rules prescribe in significant detail what is required of a
"respondent" as identified in rule 4(a)(ii). For example,
such a respondent is specifically subject to obligations in relation
to the complaint.
[7]
Both
the complainant and "any other party to the complaint",
which I read as a reference to such a respondent, are expected
to
give their fullest cooperation to the disposal of the complaint
within a reasonable time.
10.
Two persons, Mrs Siegrist and Mrs Bekker, were aggrieved by the
conduct of financial services providers with whom they respectively
had a commercial relationship. They submitted complaints to the
Office. Their complaints were presented by the completion and
submission of a form (the complaint form) bearing the name and logo
of the Office. It is a fair inference that the complaint form
must
have been developed by the Ombud to enable the typical lay
complainant to provide the Ombud with the information she would
need
to deal with the complaint.
11.
Section B of the complaint form invites the complainant in terms to
submit details of the person against whom she is complaining,
including the name ("of person or company"), address and
phone and fax numbers. Section B also invites the complainant
to give
the Ombud details of the person with whom the complainant dealt when
she was buying the product.
12.
In both cases, the complainant provided particulars of the persons
against whom they were complaining. The persons against whom
Mrs
Siegrist and Bekker complained were, respectively, CJ Botha and AE
Carter-Smith.
13.
Section 27 prescribes what the Ombud must do when a complaint is
submitted to her. She must first establish that there had been
compliance with the Rules
[8]
and if not, act in accordance with the Rules.
[9]
If a submitted complaint complies with the Rules, she must officially
receive it if it qualifies as a complaint.
[10]
Unless a complaint so officially received is one identified ins
27(3),
[11]
the Ombud must then proceed to investigate it. But, under s 27(4),
the Ombud "must not proceed to investigate" a complaint
officially received unless the Ombud
a)
has in
writing informed every other interested party to the complaint of the
receipt thereof;
b)
is
satisfied that all interested parties have been provided with such
particulars as will enable the parties to respond thereto;
and
c)
has
provided all interested parties the opportunity to submit a response
to the complaint.
14.
The applicant decided to act under s 27(4). She sent notices to the
second to sixth respondents. The notice to the fourth respondent,
emailed to him on 21 November 2012, is representative of the notices
sent to these respondents. It read:
Attention:
Johannes Willem Botha - Director of
Sharemax Zambezi Retail Park Holdings Limited (Reg. No
2006/028220/06) formerly known as Brookfield
Holdings 21 Ltd.
Our reference: FAIS 0039 11/12 GP 1 -
Mrs G>E>J> Siegrist
- Zambezi Retail Park Holdings
Prospectuses 2 and 4 (email 7 of 8)
NOTICE IN TERMS OF SECTION 27 OF
THE FINANCIAL ADVISORY AND INTERMEDIATE SERVICES ACT 37 OF 2002
As you know, this Office received
numerous complaints with regard to Sharemax. These include the
attached complaint forwarded to
Sharemax during 2011 and 2012.
We request that you respond to the
following:
1. The broker in question, Mr CJ Botha
was one of FSP Network's t/a USSA ('USSA') Section 13 representatives
under supervision.
It appears from our investigation that USSA is an
extension of Sharemax, set up to create a broker network to market
Sharemax investments.
2. Kindly address us on why the
directors of Sharemax Zambezi Retail Park Holdings Limited should not
along with USSA be held responsible
in terms of Section 13 of the
FAIS Act for the advice given to complainant to invest in Zambezi
(prospectuses 2 and 4).
3. Kindly advise as to how investors
such as the complainant were paid interest of 12% whilst Zambezi and
the Villa were not generating
any income.
For the sake of completeness and
transparency, we attach the complaint and the responses received from
the following entities/persons:
Mr CJ Botha, the Key Individuals of
Sharemax and FSP Network.
Once our investigation has been
concluded, the matter may be referred to the Ombud in terms of
Section 28 of the FAIS Act for a
determination.
May we please have your response by
close of business 28
November 2012.
15.
The applicant's case was that these notices were sent out because she
regarded the recipients as interested parties. Counsel
for the
applicant submitted that the term
interested party
means
someone with a real and substantial legal interest in the complaint.
If that interpretation is correct, I do not see why the
respondent
recipients of the notices should have any such interest in the
complaint against the persons named in the complaints.
16.
Furthermore, it appears from the notice that although s 27 requires
the Ombud to conduct investigations pursuant to complaints,
she had
not done so; instead, officials in her Office did so.
[12]
They could only have done so on the instructions of the applicant and
pursuant to powers vested in her as Ombud. This appears to
have
conflicted with the provisions of s 27(4)(a) which provides that the
Ombud may not
proceed
with
the investigation until notice has been given. But for reasons which
follow, I need not decide these matters.
17.
The respondents served with the notices responded to them and raised,
amongst other things, issues relating to the applicant's
jurisdiction. But the applicant persevered with her investigation and
proceeded to issue determinations in relation to both complaints.
The
determination of Mrs Siegrist's complaint was dated 30 January 2013.
The determination of Mrs Bekker's complaint was dated
16 May 2013.
The determinations were made under s 27, which reads, in relevant
part:
1. The Ombud must in any case where a
matter has not been settled or a recommendation referred to in
section 27 (5) (c) has not
been accepted by all parties concerned,
make a final determination, which may include-
a.
the dismissal of the complaint; or
b.
the upholding of the complaint, wholly or partially, in which
case-
i. the complainant may be awarded an
amount as fair compensation for any financial prejudice or damage
suffered.
18.
In her determinations, the applicant upheld the complaints and
ordered a number of persons she described as respondents to pay
a sum
in compensation to the complainants. In each case those ordered to
pay compensation were the person against whom the complaint
was made
(ie CJ Botha in the complaint of Mrs Siegrist and AE Carter-Smith in
the complaint of Mrs Bekker) and also the second
to sixth respondents
as well as a company called FSP Network (Pty) Ltd.
19.
Section 30A of the Financial Services Board Act establishes an appeal
board to hear appeals from "decision-makers"
as defined in
the Financial Services Board Act. The applicant is such a
decision-maker. Rule 12 of the Rules provides for a party
against
whom the Ombud has made a determination to apply to the Ombud for
leave to appeal. The second to sixth respondents applied
for such
leave in relation to both determinations. The applicant refused
leave. The second to sixth respondents then applied for
leave to
appeal under rule 12{e). The appeal board then granted leave and
consolidated the two appeals as they concerned similar
issues of fact
and law.
20.
The appeal board then issued a directive calling upon the parties to
deal with certain preliminary issues. The merits of the
two appeals
were then postponed, pending the outcome of the adjudication of the
preliminary issues which had been identified. These
issues came
before the Panel which was chaired by the first respondent.
21.
These issues included, in essence, whether the Ombud had jurisdiction
in relation to a party who had not been a person identified
in the
complaint as the person against whom the complaint was made
[13]
and whether the procedure adopted in relation to the appellants was
legally competent and procedurally fair.
22.
Rule 12(j) provides that the Ombud does not take part in the appeal
unless requested by the "board of appeal". In
the present
case, the applicant took part in the appeal at the request of the
former chair of the appeal board. At the hearing,
her counsel said
that she was there... not to defend her determination but, more or
less, to act as friends of the Appeal Board.
[14]
23.
The Panel handed down a written judgment signed by the members of the
Panel on 10 April 2015. In its judgment, the Panel concluded
that the
Ombud should not have joined the second to sixth respondents as
parties to the complaint. It was not, thus the Panel,
legally
competent for the applicant to have done so.
[15]
As to the fairness issue, the Panel concluded that the notices did
not forewarn the second to sixth respondents of the factual
findings
which the applicant intended to make, especially those relating to,
inter alia,
allegations
of fraud and the existence of a pyramid (Ponzi) scheme; these
respondents, therefore, had not been treated fairly.
[16]
24.
The Panel proceeded to uphold the appeals and set aside the
determinations and consequent orders against the second to sixth
respondents. There was no order as to costs.
25.
By notice of motion dated 18 June 2015, the applicant applied to
review, correct and set aside the decision of the Panel. I
must quote
the relief sought in the notice of motion quite extensively. Prayers
1 to 4 read:
1.
Declaring that
1.1
the
first respondent's decision was materially affected by error of law
in that he misconstrued the provisions of [FAISA] dealing
with the
powers and functions of the Ombud;
1.2
the
first respondent failed to take into account relevant considerations
pertaining to the underlying objective and purpose of the
Office of
the Ombud as set out in [FAISA]. Specifically, the panel chair failed
to have due and proper regard to (1) the equity
jurisdiction vested
in the Ombud; (2)the Ombud's investigative powers; and (3) the
inquisitorial powers vested in the Ombud;
1.3
the
first respondent's decision is not rationally connected tothe purpose
of the empowering provisions of [FAISA]; and
1.4
the
first respondent's decision is not rationally connected to the
information that was placed before him.
2.Reviewing,
correcting and setting aside the decision of the first respondent;
3.
Directing that the matter is remitted to the Appeal Board,
differently constituted, for a hearing on the merits of the appeal
that was lodged by the second to sixth respondents.
4.
Directing that the hearing of the appeal on the merits be held within
six (6) weeks or such other expedited period after the
Order of this
Court as this Court may consider reasonable.
25.
The founding affidavit in support of the relief sought makes the case
that the judgment of the Panel conflicts with a decision
of a panel
in the case of
Moore and
others v Black
[17]
composed of persons different to those who were on the Panel of which
the first respondent was the chair. She makes the point that
she as
Ombud is as a result confronted with uncertainty as to her powers and
functions. She makes it plain, as is her right, that
she favours the
interpretation of the panel in
Moore
and Others v Black.
26.
In
Moore and Others v Black,
Moore was a broker and the
person against whom the complaint was directed by the complainant.
The panel found that the claimant's
loss was caused by the
supervening fraud of the directors of a concern which the judgment
calls Blue Zone. Blue Zone, however,
was at the time the judgment was
delivered (12 November 2014) in liquidation and the Ombud had
apparently not even purported to
cite its erstwhile directors as
parties in the proceedings which led to the appeal. This, the panel
in
Moore and Others v Black
pronounced, could not
absolve them of their liability.
[18]
The panel in
Moore and
Others v Black
proceeded to
hold both Moore and a person only identified in the judgment as Van
Zyl and as a director of Blue Zone, liable jointly
and severally with
Moore to pay the claimant R100 000. It appears from the applicant's
founding affidavit that a review in
Moore
and Others v Black
is
pending. I shall thus refrain from commenting on the judgment in
Moore and Others v Black
except to say that if my
impression is correct, that Van Zyl was neither a person against whom
the complaint was directed nor a
party to the complaint or to the
appeal, then the ultimate conclusion in regard to Van Zyl's liability
is quite startling.
27.
Regardless of the merits of the judgment in
Moore
and Others v Black,
I have
some sympathy for the applicant's situation. It is troublesome for a
court or tribunal to have conflicting decisions on a
point affecting
its functions from a higher court or tribunal with appellate
jurisdiction. But that is the way of the legal world.
Judicial and
quasi-judicial officers have different approaches and views and in
our legal system it is not always possible to resolve
such a conflict
swiftly. Sometimes one simply has to wait for the right case to reach
a
court with sufficient
stature in the hierarchy of judicial authority to settle the matter.
This is because there is no right to
equality of outcomes.
[19]
28.
This consideration was raised by the respondents. In one of a number
of preliminary points, they contended that the applicant
had no
standing to review a decision on appeal from her own determination.
This point, and all the others taken by the respondents,
were
resisted by the applicant with some vigour.
29.
Shortly before the case was due to start before me, the respondents
submitted supplementary heads of argument in which counsel
drew my
attention to the decision of the SCA in
Registrar
of Pension Funds v Howie NO and Others.
[20]
In that case the Registrar adopted an adversarial position toward the
Appeal Board. The dispute was not between the Registrar and
an
outside party aggrieved by the Registrar's decision. It was held that
the registrar did not have standing in this situation.
30.
The present position is indistinguishable from that in
Howie
NO's
case. The applicant
seeks in the notice of motion to overturn a decision on appeal
partially reversing her own decision as decision-maker
of first
instance. She has manifestly sought to do so under the provisions of
PAJA
[21]
I therefore conclude that the respondents' point is well taken and
that the applicant has no standing to review the decision of
the
Panel.
31.
Alive to this difficulty, counsel for the applicant stated in open
court that the applicant would no longer pursue prayer 2
of the
notice of motion, but was persisting in prayers 1, 3 and 4. The
review was therefore abandoned. As to the remaining relief
sought,
the argument, not previously made, was that the High Court has the
power under s 21(1)(c) of the Superior Courts Act:
[22]
in
its discretion, and at the instance of any interested person, to
enquire into and determine any existing, future or contingent
right
or obligation, notwithstanding that such person cannot claim any
relief consequential upon the determination.
32.
Counsel for the applicant submitted that this discretionary power
should be invoked to issue the declaratory orders sought in
prayer 1
and to send the case back to the appeal board differently constituted
(presumably as consequential relief) in terms or
prayers 3 and 4
33.
The court in
Howie NO
was
astute to restrict the ambit of its conclusion which, the court
said,
[23]
related only to a narrow area where the Registrar disagreed with a
decision of the appeal board overturning one of her decisions.
I
shall therefore assume, without deciding the point, in favour of the
applicant that the applicant could approach the court for
a
declaration of her rights, powers and obligations under s 21(1). The
question is whether it would be appropriate to do so in
the present
proceedings before me. In my view, it would not.
34.
The application before me was designed as adversarial review
proceedings. The clear purpose of the application was to overturn
the
decision of the Panel and to clear the way for the obtaining of an
order from the appeal board upholding the applicant's original
decision. The notice of motion did not identify the specific areas in
which the applicant was experiencing difficulties in the
performance
of her functions. An application for a declaration in this regard
would have to be preceded by notice to the participants
in the
financial services industry.
[24]
Any declaratory order would thus in the present proceedings have to
be made in the form of a rule identifying specific concerns
of the
applicant and inviting interested parties to put their views before
the court. This procedure would be unjustifiably unwieldy.
If the
applicant is so minded, she can bring an application for declaratory
orders shorn of its adversarial element, on proper
notice and with
precise identification of the relief sought.
35.
I therefore decline to exercise in the applicant's favour the
discretion conferred on the court in relation to declaratory orders.
36.
There remains the question of costs. In submitting that costs should
not follow the result, counsel for the applicants submitted
that the
second to sixth respondents had acted inappropriately in raising
preliminary issues and in placing before this court the
entire record
of the proceedings before the Panel. I have found for the respondents
on one of the very preliminary issues raised
by them and I cannot
find that the other preliminary points are without merit. The
argument before me was not prolonged by any
preliminary point without
substance. The record, I was informed, was placed before the this
court by the first respondent. Costs
must therefore follow the
result. Costs of both senior and junior counsel are justified by the
importance and complexity of the
case.
37.
I make the following order:
1. The application is dismissed.
2. The applicant must pay the costs of
the fourth to sixth respondents, including the costs consequent upon
the employment, where
such was the case, of both senior and junior
counsel.
_________________
N
B Tuchten
Judge
of the High Court
20
February 2017
For
the applicant:
Adv
V Ngalwana SC, Adv S Shangisa and Adv M Mbelle Instructed by Ramushu
Mashile Twala Inc
Sandton
For
the fourth respondent:
Adv
CE Puckrin SC and Adv E Muller
Instructed
by Potgieter Marais
Pretoria
For
the fifth respondent:
Adv
JJ Brett SC and Adv D Mahon
Instructed
by Faber Goertz Ellis Austin
Bryanston
For
the sixth respondent:
Adv
L Balance
Instructed
by Van Zyl's Inc
Centurion
[1]
97 of 1990
[2]
37 of 2002.
[3]
Section 20(3). All references in this judgment to statutory
provisions are to those in FAISA unless otherwise stated.
[4]
Section 1
[5]
My emphasis
[6]
The Rules were promulgated by GN 1453 in GG 24079 dated 15 November
2002 and were amended in 2004
[7]
Rule 6
[8]
Section 27(1)(a).
[9]
Section 27(1)(b).
[10]
Section 27(1)(c).
[11]
The complaints of Mesdames Siegrist and Bekker did not fall to be
dealt with under s 27(3).
[12]
See the second last paragraph of the quoted notice: ...
referred
to the
Ombud ..."
[13]
The Panel put it like this in para 5 of its judgment:• ...
the jurisdiction of the Ombud against a party who was not
cited as a
"wrongdoer" by a complainant, i.e. whether the procedure
adopted in relation to the appellants was legally
competent ..."
[14]
Para 8 of the judgment of the Panel.
[15]
Para 52 of the judgment of the Panel.
[16]
Para 53 of the judgment of the Panel.
[17]
FAIS case no. 0110-10/11 WC1
[18]
Paragraph 55 in the judgment of the panel in
Moore
and Others v Black.
[19]
For an extreme example of this situation, see
Van
der Walt v Metcash Trading Ltd
[2002] ZACC 4
;
2002
4 SA 317
CC.
[20]
[2016] 1 All SA 694
SCA
[21]
The
Promotion of Administrative Justice Act, 3 of 2000
.
[22]
10 of 2013
[23]
Para 25
[24]
Often called stakeholders in modern parlance.