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[2016] ZAGPPHC 486
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Reynecke v Odinfin (Pty) Ltd (86753/2014) [2016] ZAGPPHC 486 (21 June 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 86753/2014
DATUM:
21/6/2016
Reportable
Of
interest to other judges
Revised.
In
the matter between:
PIETER
REYNECKE
Plaintiff
and
ODINFIN
(PTY)
LIMITED
Defendant
JUDGMENT
J
W LOUW, J
[1]
The defendant is an authorised financial services provider (FSP) in
terms of the Financial Advisory and Intermediary Services
Act 37 of
2002 (the FAIS Act or the Act). On 10 August 2010, the plaintiff and
the defendant entered into a written employment
contract in terms
whereof the plaintiff was employed by the defendant as a
representative to render financial services to the defendant’s
clients. It was a term of the agreement that the plaintiff’s
employment would be subject to the provisions of the FAIS Act.
[2]
The relevant part of the definition of a ‘
representative
’
in s 1 of the Act is “
any
person
…..
who
renders a financial service to a client for and on behalf of a
financial services provider, in terms of conditions of employment
or
any other mandate …..”.
In
terms of s 13(3), an authorised FSP must maintain a register of
representatives, and key individuals
[1]
of such representatives, which must be regularly updated and be
available to the registrar for reference or inspection purposes.
Sec. 13(2)(a) of the Act provides that an FSP must –
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).
[3]
The phrase “
fit and proper requirements”
is
defined in s 1 as “
the requirements published under s 6A”
.
Section 6A provides that the registrar of FSP’s may determine
fit and proper requirements for FSP’s, key individuals
and
representatives. Such requirements were published by the
registrar in the Government Gazette of 15 October 2008.
Part II
of the publication bears the heading ”
PERSONAL CHARACTER
QUALITIES OF HONESTY AND INTEGRITY”
and,
inter alia,
provides the following:
2. (1) An FSP, key
individual or representative must be a person who is honest and has
integrity.
(2) In determining
whether an FSP, key individual or representative complies with sub-
paragraph (1), the Registrar may refer to
any information in
possession of the Registrar or brought to the Registrar’s
attention.
(3) Without prejudice
to the generality of subparagraphs (1), (2) and (4), any of the
following factors constitutes
prima facie
evidence that
an FSP, key individual or representative does not qualify in terms of
subparagraph (1), namely that the FSP, key individual
or
representative-
(a) has within a period
of five years preceding the date of application or the proposed date
of appointment or approval, as the
case may be, been found guilty in
any criminal proceedings or liable in any civil proceedings by
a court of law (whether
in the Republic or elsewhere) of having acted
fraudulently, dishonestly, unprofessionally, dishonourably or in
breach of a fiduciary
duty;
(b) has within a period
of five years preceding the date of application or the proposed date
of appointment or approval, as the
case may be, been found guilty by
any statutory professional body or voluntary professional body
(whether in the Republic or elsewhere)
recognised by the Board, of an
act of dishonesty, negligence, incompetence or mismanagement,
sufficiently serious to impugn the
honesty and integrity of the FSP,
key individual or representative;
(c) has within a period
of five years preceding the date of application or the proposed date
of appointment or approval, as the
case may be, been denied
membership of any body referred to in subparagraph (b) on account of
an act of dishonesty, negligence,
incompetence or mismanagement,
sufficiently serious to impugn the honesty and integrity of the FSP,
key individual or representative;
(d) has within a period
of five years preceding the date of application, or the proposed date
of appointment or approval, as the
case may be –
(i) been found guilty
by any regulatory or supervisory body (whether in the Republic or
elsewhere), recognised by the Board; or
(ii) had its
authorisation to carry on business refused, suspended or withdrawn by
any such body, on account of an act of dishonesty,
negligence,
incompetence or mismanagement, sufficiently serious to impugn
the honesty and integrity of the FSP, key individual
or
representative.
[4]
Sec. 14 of the Act provides for the debarment of representatives.
It reads as follows:
(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.
[5]
It is common cause that the plaintiff, during May 2013, attended an
induction programme with Nedbank with whom he was seeking
employment. It is also common cause that the plaintiff did not
disclose to the defendant that he was attending the induction
programme, but that he rather told the defendant that he was
attending at the premises of one of the defendant’s clients.
When the true facts came to the defendant’s knowledge, the
defendant initiated disciplinary proceedings against the plaintiff.
It sent the plaintiff a notice on 10 May 2013, instructing him to
appear at a formal hearing on 16 May2013. The alleged
misconduct of the plaintiff was “
dishonesty and/or competing
with employer and or conflict of interest”.
The
details provided of the alleged misconduct was the following: “
During
the period of 6 May 2013 to 9 May 2013 you signed up for training
and/or registered to be trained in order to sell/promote
Nedbank or
other policies, while you are contracted to Odinfin
(the
plaintiff);
These activities were not disclosed but rather
concealed to Odinfin Management and took place while you were
creating the impression
that you were rendering services to Odinfin,
as usual.
”
[6]
On the day that he received the notice, Friday 10 May2013, the
plaintiff gave the defendant written notice of termination of
his
employment with effect from Monday 13 May 2013. He did not
return to work on 13 May 2013 and did not attend the disciplinary
hearing. The hearing continued in his absence and he was found
guilty of all three charges. The chairperson of the
enquiry
recommended that the plaintiff be dismissed with immediate effect.
The plaintiff testified that he did not attend
the disciplinary
hearing as he had, in any event, resigned. His evidence was
that the defendant accepted his resignation.
[7]
Subsequent to the plaintiff leaving the defendant’s employ, the
defendant, without notice to the plaintiff, debarred the
plaintiff in
terms of s 14(1) of the Act and removed his name from its register of
authorized representatives. The defendant
informed the
registrar of the debarment and the registrar published the debarment
on its website, indicating as the reason that
the plaintiff “
does
not comply with personal character qualities of honesty and
integrity”.
[8]
The plaintiff had, in the meantime, taken up employment with
Nedbank. His evidence was that he had signed the employment
contract on 15 April 2013 but only started working on 15 May 2013 as
Nedbank first wanted to do a background check on him to see
if he had
any criminal record or financial problems which could jeopardise
Nedbank’s clients. Upon receiving
an anonymous call
on 11 July 2013 informing it of the plaintiff’s debarment,
Nedbank dismissed the plaintiff from its employment.
Subsequently, and in terms of a settlement reached during proceedings
which the plaintiff instituted in the CCMA, Nedbank reinstated
the
plaintiff but suspended him pending an application to be brought by
him to have his debarment set aside.
[9]
It is common cause that the defendant did not inform the plaintiff of
its intention or its decision to debar him. His
evidence was
that he first heard of his debarment from his manager when Nedbank
received the anonymous telephone call. The
plaintiff
thereafter, during August 2013 and through his attorneys, requested
reasons for the defendant’s decision to debar
him. It is
common cause that the defendant denied that it had debarred the
plaintiff in terms of s 14(1) of the Act and that
it declined to
furnish any reasons to the plaintiff. The defendant stated,
through its attorney, that it had “
merely reported the
findings and summary of the enquiry of the Chairperson of the
disciplinary hearing of your client and ours to
the relevant
governing body, as required from them”.
This
statement was untrue, and it must have been untrue to the defendant’s
knowledge as its attorney must have received his
instructions from
the defendant.
[10]
The plaintiff thereafter, during September 2013, launched an
application to review and set aside the defendant’s decision
to
debar him. His evidence was that if the defendant had advised
him that it intended to debar him, he would have opposed
such
decision if he had been given an opportunity to be heard. The
defendant initially opposed the application, but filed
a notice of
withdrawal of its opposition during December 2013. The
application was then enrolled and granted in the unopposed
motion
court on 14 March 2014. It must be accepted that the judge
hearing the application (Fourie J) considered the evidence
before him
and that he was satisfied that the plaintiff was entitled to the
relief sought.
[11]
The present action was then instituted by the plaintiff during August
2014 in which he claims damages from the defendant for
his loss of
income during the period July 2013 to March 2014 when he was
suspended by Nedbank and received no income. It is alleged
in the
plaintiff’s particulars of claim that the decision of the
defendant to debar him constituted an administrative act
as defined
in the Promotion of Administrative Justice Act 3 of 2002 (PAJA).
The plaintiff’s pleaded cause of action
is that, in terms of
PAJA, the plaintiff was entitled to fair administrative action and
that the defendant breached its statutory
duty in this regard by not
providing the plaintiff with adequate notice of the nature and
purpose of the administrative action
contemplated and by not
providing the plaintiff a reasonable opportunity to make
representations in regard thereto, such breach
alleged to be wrongful
and unlawful. The claim is therefore a delictual claim for
breach of a statutory duty. The quantum
of the plaintiff’s
claim was postponed
sine die
by agreement between the parties.
[12]
Mr. Stoop, who appeared for the defendant, conceded that the
defendant’s decision did constitute administrative action
as an
FSP had to exercise a discretion when deciding whether a
representative should be debarred. He also conceded that the
defendant would not be entitled to regard dishonesty of a trivial
nature as sufficient to debar a representative as item 2(3) of
the
Board Notice lists a number of factors which constitute
prima
facie
evidence that a representative does not qualify as a person
who is honest and has integrity, but that each of the factors require
a finding that the dishonesty in question is of “
a
sufficiently serious nature”
to impugn the honesty and
integrity of the representative. Mr. Stoop further conceded
that an FSP who intended to debar a
representative should take an
informed decision in that regard and that it was required to make a
value judgment if the dishonesty
in question was sufficiently serious
to conclude that the representative no longer complied with the fit
and proper requirements
prescribed in s 13(2)(a) of the FAIS Act.
In my view, these concessions were correctly and properly made.
[13]
It was further conceded on behalf of the defendant that its decision
to debar the plaintiff without notifying him of its intended
decision
and giving him an opportunity to be heard amounted to unfair
administrative action which fell to be reviewed and set aside.
[14]
In
Steenkamp
NO v Provincial Tender Board, Eastern Cape,
[2]
the
Constitutional Court noted
[3]
that ordinarily a breach of administrative justice attracts public
law remedies and not private law remedies. The court said
the
following in para [30] of the judgment:
“
Examples of
public remedies suited to vindicate breaches of administrative
justice are to be found in s 8 of the PAJA. It is indeed
so that s 8
confers on a court in proceedings for judicial review a generous
jurisdiction to make orders that are 'just and equitable'.
Yet
it is clear that the power of a court to order a decision-maker to
pay compensation is allowed only in 'exceptional cases'.
It is
unnecessary to speculate on when cases are exceptional. That question
will have to be left to the specific context of each
case. Suffice it
for this purpose to observe that the remedies envisaged by s 8
are in the main of a public law and not private
law character.
Whether a breach of an administrative duty in the course of an honest
exercise of a statutory power by an organ
of State ought to be
visited with a private law right of action for damages attracts
different considerations ............”
[15]
The claim in
Steenkamp
was a delictual claim for payment of damages. The pivotal
question which the court had to decide was whether a successful
tenderer whose tender award is subsequently set aside by a court on
review, may claim damages from the relevant tender board for
out-of-pocket expenses incurred in reliance on and subsequent to the
award.
[4]
The court said the
following in paras [41] and [42] of the judgment with regard to the
question of wrongfulness:
“
[41]
Therefore, shortly stated, the enquiry into wrongfulness is an after-
the-fact, objective assessment of whether conduct which
may not be
prima facie wrongful should be regarded as attracting legal sanction.
In Knop v Johannesburg City Council
[5]
the
test for wrongfulness was said to involve objective reasonableness
and whether the boni mores required that 'the conduct
be regarded as
wrongful'. The boni mores is a value judgment that embraces all the
relevant facts, the sense of justice of the
community and
considerations of legal policy, both of which now derive from the
values of the Constitution.
[42] Our Courts -
Faircape
[6]
,
Knop
[7]
,
Du Plessis
[8]
and Duivenboden
[9]
- and courts in other common-law jurisdictions readily recognise that
factors that go to wrongfulness would include whether
the
operative statute anticipates, directly or by inference, compensation
of damages for the aggrieved party; whether
there are
alternative remedies such as an interdict, review or appeal; whether
the object of the statutory scheme is mainly to
protect individuals
or advance public good; whether the statutory power conferred grants
the public functionary a discretion in
decision-making; whether an
imposition of liability for damages is likely to have a 'chilling
effect' on performance of administrative
or statutory function;
whether the party bearing the loss is the author of its misfortune;
whether the harm that ensued was foreseeable.
It should be kept in
mind that in the determination of wrongfulness foreseeability of
harm, although ordinarily a standard for
negligence, is not
irrelevant. The ultimate question is whether on a conspectus of all
relevant facts and considerations, public
policy and public interest
favour holding the conduct unlawful and susceptible to a remedy in
damages.”
[16]
In the present matter, it is conceded that the defendant’s
decision to debar the plaintiff without notifying him of its
intended
decision and without giving him an opportunity to be heard amounted
to unfair administrative action. However, as
was pointed out in
Steenkamp
[10]
,
a breach of a constitutional duty is not the equivalent of
unlawfulness in the delictual liability sense. Whether the
defendant’s
conduct is to be regarded as wrongful in the
delictual liability sense depends on whether the
boni
mores
would
regard the defendant’s conduct as such.
[17]
Mr. Stoop submitted that the
boni mores
would not require that
the defendant’s conduct be regarded as wrongful for the
following reasons. Firstly, that s 14(1)
of the FAIS Act places
an obligation on an FSP to prohibit a representative who no longer
complies with the requirements of s 13(2)(a)
from rendering any new
financial service by withdrawing any authority to act on behalf of
the FSP and to remove the name of such
representative from the
register. The Act does not bestow an FSP with a discretion –
it must debar the representative.
The reason why the Act
imposes this obligation on an FSP is because a representative who no
longer meets the fit and proper requirements
ought not to be
unleashed on the unsuspecting public.
[18]
What this argument loses sight of, is that before an FSP becomes
obliged to debar a representative, there has to be a finding
that the
representative does not comply with the fit and proper requirements.
For that decision to be made, a fair administrative
process has to be
followed.
The
defendant has conceded that a fair administrative process was not
followed and its decision to debar the plaintiff was reviewed
and set
aside after it withdrew its opposition to the application.
[19]
The next argument was that the object of s 14(1) was mainly to
protect individuals and to advance the public good. That
may be
so, but it cannot justify the debarment of a representative without a
fair administrative process having been followed resulting
in a
finding that he or she does not comply with the fit and proper
requirements. If a proper process had been followed,
the
plaintiff’s conduct may have been found not to have been
sufficiently serious to justify debarment.
[20]
It was further submitted that the imposition of delictual liability
would have a chilling effect on an FSP when it is required
to
implement s 14(1) of the Act. If an FSP knew that it could be
held liable in delict if it incorrectly decided to debar
a
representative, it may, in order to avoid that possibility, simply
terminate the employment of a representative who it considered
did
not meet the fit and proper requirements. The representative
would then be free to continue working as a representative
for
another FSP.
[21]
I do not agree with the submission. If an FSP acts responsibly
and follows a fair administrative process before making
a
bona
fide
finding that a representative does not comply with the fit
and proper requirements and thereafter debars the representative, it
is unlikely that such representative will succeed with a damages
claim against the FSP. But if it debars a representative
without following a fair administrative process and thereby
potentially causes serious financial harm to the representative, the
boni mores
would not, in my view, require that the FSP be
protected from delictual liability.
[22]
It was further submitted that the plaintiff was afforded a remedy in
terms of s 8(1)(c)(ii) of PAJA to claim payment of compensation
from
the defendant. But that remedy does not preclude an aggrieved
representative from relying on a delictual claim for damages
and
would have required of the plaintiff to prove that his case was
“
exceptional”.
[23]
It was lastly submitted that a representative who suffers damage
would be the author of his or her own misfortune because he
or she
failed to pursue the ordinary remedies afforded by PAJA or the common
law. Ordinarily, so it was argued, an aggrieved
representative
would approach the court on an urgent basis for interim relief
pending the review and setting aside of the unlawful
administrative
action so that the question of damages would not arise. It is not
clear what interim relief was being referred to,
but if the defendant
had not responded to the demand of the plaintiff’s attorney to
provide reasons for the debarment by
denying that it had debarred the
plaintiff and refusing to provide reasons, and had rather conceded at
that early stage that its
decision to debar the plaintiff had been
unlawful, the matter could have been speedily resolved.
Instead, it opposed the
plaintiff’s application to have its
decision reviewed and set aside and only withdrew its opposition at a
very late stage.
[23]
Having regard to all the relevant facts, the sense of justice of the
community and considerations of public policy, I am of
the view that
the
boni mores
would require that the defendant’s
conduct be regarded as wrongful for the purposes of delictual
liability.
[24]
As to the requirement of negligence, I find that a
diligens
paterfamilias
in the position of the defendant would have
foreseen the possibility of its conduct causing the plaintiff
patrimonial harm and would
have taken reasonable steps to guard
against such loss by informing the plaintiff of its contemplated
action and by affording the
plaintiff an opportunity to be heard
before taking the decision to debar the plaintiff. That
negligence was clearly the cause
of the plaintiff’s loss.
The plaintiff did, of course, have an obligation to mitigate his
loss. That is something
to be decided in the next round of the
litigation.
[25]
In the result, I grant the following order:
[a] It is declared that
the defendant is liable for the damage which the plaintiff is able to
prove that he suffered as a result
of the defendant debarring him as
a representative in terms of the
Financial Advisory and Intermediary
Services Act 37 of 2002
.
[b] The defendant is
ordered to pay the plaintiff’s costs of the action to date.
Counsel
for plaintiff: Adv. A Loubser
Instructed
by: De Bruyns Attorneys, Pretoria
Counsel
for defendant: Adv. B C Stoop SC
Instructed
by: Barnard Inc. Attorneys, Centurion
[1]
Section 1 of the FAIS Act contains a definition of the phrase “
key
individual”
.
It is not necessary for present purposes to refer thereto.
[2]
2007 (3) SA 121 (CC)
[3]
At para [29]
[4]
See para [31] of the judgment.
[5]
1995 (2) SA 1 (A).
[6]
Premier,
Western Cape v Faircape Property Developers (Pty) Ltd
2003
(6) 13 (SCA).
[7]
See fn 5 above.
[8]
Du
Plessis v Road Accident Fund
2004
(1) SA 359 (SCA).
[9]
Minister
of Safety and Security v Van Duivenboden
2002
(6) SA 431 (SCA).
[10]
In para [37] of the judgment.