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[2013] ZAGPPHC 313
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Potgieter v Howie NO and Others (50574/12) [2013] ZAGPPHC 313; 2014 (3) SA 336 (GP) (29 October 2013)
REPORTABLE
NORTH
GAUTENG HIGH COURT PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
CASE NO: 50574/12
DATE: 29/10/2013
In
the matter between:
POTGIETER
ANTON
DANIEL
..................................................................
FIRST
APPLICANT
HERBST
JAMES
CHARLES
.............................................................
SECOND
APPLICANT
AND
HOWIE
CT NO
….................................................................................
FIRST
RESPONDENT
PEMA
JD
NO
.................................................................................
SECOND RESPONDENT
BROOKING
DL
NO
….........................................................................
THIRD
RESPONDENT
JOHANNESBURG
SECURITIES EXCHANGE
..............................
FOUTH RESPONDENT
LIMITED
BAQWA
J
Summary
This
is an appeal from a decision of the Johannesburg Stock Exchange in
terms of which the appellants had been fined five million
rands each
for contravening the JSE Listing Requirements.
The
appeal to a Board set up in terms of the Financial Services Board Act
was upheld. The JSE decision was set aside. The Appeal
Board
thereafter substituted its own decision finding the appellants to be
in contravention of the Listing Requirement and imposing
a fine of
three million rands on each of the appellants.
The
issue
Whether
the Board had acted ultra vires in that section 26B (15) OF THE
Financial Services Board Act 9 of 1990 does not provide
a power [A]to
substitute’” the Board’s own decision.
[2]
The applicants seek to review and set aside the decision in
paragraphs 3 and 4 of the awards of the Appeal Board. These relate
to
the sale by applicants of certain single stock future contracts (‘The
SSFs”) to Watermark Securities which in turn
on-sold the SSFs
to Huge Group Limited.
[3]
The first respondent was the Chairman of the Appeal Board, the other
members of which were the second and third respondents.
The members
of the Appeal Board do not oppose the application for review whilst
the fourth respondent opposes the review.
The
law
[4]The
Appeal Board is established under section 26B of the FSB Act and its
authority is set out in section 26B (15) of the Act
which provides:
“
The
Appeal Board may-
(a
Confirm, set aside or vary the decision under appeal, and order that
any such decision of the Appeal Board be given effect to;
or
(b)
Remit the matter for reconsideration by the decision maker concerned
in accordance with such directions, if any, as the Appeal
Board may
determine.”
In
considering the actions of or the decisions of the board in casu the
Board’s considerations or deliberations have to be
weighed
within the parameters set within the statute.
[5]
This action arises out of the alleged contravention of the
Johannesburg Stock Exchange Listing Requirements relating to Single
Stock Futures Contracts. The nature and terms of an SSF contract are
set out in a brochure which the JSE publishes. In the brochure
the
JSE describes an SSF Contract as follows:
“
SSFs
are futures contracts on individually listed shares. A futures
contract is a legally binding agreement that gives the investor
the
right to buy or sell an underlying listed share at a fixed price on a
fixed date. ”
Whilst
the purchase of an SSF Contract provides the holder of an SSF
Contract with the right to buy or sell a share in a company
at a
future date, it does not equate to a share in a company.
Upon
an investor purchasing an SSF contract the JSE brochure provides
that:
“
A
contract holder can exit a Futures Contract before the expiry date
(this is called closing your position) or keep the contract
until the
expiration date.”
[6]
“Futures” are more eloquently described in the judgment
of my brother Mr Justice Classen in the unreported judgment
of Absa
Bank Ltd v Ukwanda Leisure Holdings (Pty) Ltd case number 2009/35416
56 HC at para 1 where the following is stated:
‘
[1]
The case concerns the exchange trade of “derivatives” and
“futures" securities in the form of corporate
shares on
the ALT-X exchange. This type of trading has been explained as
follows: ‘Futures and commodity options, trading
is among
humanity’s more impenetrable concepts. It involves selling what
one does not own and, as a rule, buying what one
does not want. It is
deeply shrouded in terminology that conceals its meaning. It operates
in an arena where opinion is everything,
where supply and demand are
hard to distinguish from supposition and doctrine, and where inherent
uncertainty has spawned an endless
holy war between two
religious-sounding antagonists, the "fundamentalists” and
the “chartists”, not to mention
the new breed of
computer-dependent faithful. Into this world comes the general
public, eager to enjoy its riches and often unprepared
to become its
poor.’
1
[7]
The listing requirements regulate the buying and selling of shares
between companies listed within the JSE. I proceed to set
out
hereunder the provisions of the relevant listing requirements in the
present case.
7.1.
Section 5.69 provides:
"REQUIREMENTS
FOR SPECIFIC AUTHORITY TO REPURCHASE SECURITIES (SPECIFIC PURCHASE)”
5.69
In respect of specific repurchases ............... an applicant may
only make a specific repurchase subject to the following
....
(b)
Approval being given in terms of a special resolution of the company
by securities holders excluding, in the case of a specific
offer, any
shareholder and its associates that are participating in the purchase
7.2.
Section 5.82 provides
‘’
DERIVATIVE
TRANSACTIONS RELATING TO THE REPURCHASE OF SECURITIES (GENERAL
AUTHORITY)
5.82
Issuers who enter into derivative transactions that may or will
result in the repurchase of securities in terms of their general
authority must comply with paragraphs 5.67 to 5.81...”
7.3.
The terms of the shareholders’ resolution in respect of a
specific purchase are dealt with in section 5.67(a) which provides
that the repurchase must be:
“
On
terms that are approved by the securities holders in general meeting
in respect of that particular repurchase (‘a specific
repurchase of securities’)...”
6.4.
Section 5.67(b) which deals with the general authority provides:
‘’
Generally
approved by securities holders by giving of a renewable mandate....
to the directors of a company to repurchase its securities
subject to
the requirements of the JSE and to any other restrictions set out in
the mandate (!a general repurchase of securities’).
”
The
facts
[8]
Huge Group Limited ("Huge”) was a public company listed on
the JSE and Anton Daniel Potgieter and James Charles Herbst
(the
applicants) were directors of that company.
SSFs
relating to Huge Shares could be traded on the JSE. They were
physically settled SSFs meaning they were contracts whereunder
the
buyer would become obliged to take delivery thereof in three months
time against payment of an agreed price. Upon entering
an SSF
contract a buyer could gear himself up having to pay only an initial
margin and pay or receive, whatever the case may be,
daily margin
payments equalling the daily fluctuations in the price of the Huge
Shares.
[9]
The applicants had taken large positions in respect of Huge Shares on
the JSE Futures Market. Watermark acted as broker for
the applicants
and Huge whilst Standard Bank acted as Clearing Bank for Watermark.
[10]
As between Standard Bank, as the clearing bank and Watermark as the
broker, Standard Bank could call for payment by Watermak
of an
additional margin in any amount. On 15 October 2008 Standard Bank
called upon Watermark to pay an additional margin on the
SSFs
relating to Huge Shares up to 250 percent of the initial margin.
As
between the applicants and Watermark, Watermark could only call for
payment of additional margin up to 100 percent of the initial
margin.
[11]
Despite this being the position on 15 October 2008 Watermark called
upon the applicants to pay an additional margin of 250
percent of the
initial margin which the applicants refused to do. On 16 October 2008
Watermark purported to ‘'close out”
the applicant’s
positions by taking over about half of the applicant’s SSFs. By
so doing Watermark assumed R30 million
of applicant’s financial
obligations and each of the applicants became entitled to repayment
of over R1.6 million in respect
of their variation margin accounts.
[12]
On the same day Watermark purported to sell the SSFs to Huge at a
price which according to applicants was based on a price
of 362 cents
per Huge Share, but which with finance costs came to 371 cents and
372 cents per Huge Share. This was in any event
above the Market
price of 307 cents per Huge Share on that day. The acquisition of the
SSFs resulted in Huge suffering large losses
in excess of R25
million.
[13]
To protect shareholders against directors causing their company to
repurchase its own securities, the Listing Requirements
(Section
5.69) require repurchase of securities to be authorised by a special
resolution of shareholders. They also require derivate
transactions
which will or may result in the repurchase by a company of its own
securities, to be authorised by a special resolution
of shareholders
(section 5.89) thus making section 5.69 applicable to derivate
transactions.
[14]
The JSE found the applicants to be in breach of section 5.69 and
fined them R5 million each. The decisions of the Appeal Board
included a decision upholding the appeal and setting aside the
decisions of the JSE. Further, the Appeal Board made a decision
to
substitute different findings in place of those which had been set
aside and to impose a penalty on each of the applicants of
R3
million.
[15]
It is these decisions which the applicants seek to have reviewed and
set aside. They are articulated in paragraph 3 and 4 of
the award.
These are:
15.1.
The finding that Huge and applicants breached section 5.69 read with
section 5.82 of the listing requirements in that Huge
represented by
the appellants entered into derivative transactions that might or
would result in the repurchase by Huge of its
securities without
complying with section 5.69 of the listings requirements in that the
approval of the shareholders in terms of
a special resolution of Huge
was not given for such transactions and;
15.2.
The imposition of a fine of R3 million.
[16]
Counsel for the fourth respondent has argued strenuously for the
upholding of the decision by the Board and dismissing the
application
for review whilst applicant’s counsel has pursued the relief
sought with vigour.
The
law
[17]
The Appeal Board’s authority is set out in section 26B (15) of
the FSB Act as follows:
The
Board has authority to “confirm, set aside or vary the decision
under appeal… [or] remit the matter for reconsideration
by the
decision maker.”
Upon
a proper examination of the parameters within which the Board
operates, its decision, namely, that the applicants contravened
section 5.69 read with 5.82 of the listing requirements was a
decision the Board had no authority to take in terms of the
provisions
quoted above. The JSE had never charged the applicants
with a contravention of section 5.69 read with section 5.82 of the
listing
requirements. The JSE charged and found the applicants guilty
of contravening the provisions of section 5.69 of the listing
requirements.
[18]
Section 6 of the Promotion of Administrative Justice Act 3 of 2000
(PAJA) deals with judicial review of administrative action.
18.1.
At 6(2) (f) (i) it provides:
“
A
court or tribunal has the power to judicial review an administrative
action if-
(a)....
(b )....
(f)
The action itself-
(i)
Contravenes a law or is not authorised by the empowering provision;
This
section requires that there be a source of the authority for the
administrative action and that the taking of such action must
remain
within the limits provided for in such source of authority.
18.2.
The above section must be read with section 6(2)(a)(i) which
provides:
‘’
A
court or tribunal has the power to judicially review an
administrative action if- (a) the administrator who took it-
(i)
Was not authorised to do so by the empowering provision”
This
section deals with the authority of the administrator who takes the
decision whilst the other section quoted (supra) relates
to the
decision itself.
On
a proper reading of both subsections of section 6, the decision of
the Board does not pass muster. The board is a creature of
statute
and it cannot go beyond the parameters under which it operates.
[19]
Even if one were to assume that the Board had the power to consider a
contravention of section 5.82 by the applicants, it would
have had to
apply the
audi alteram partem
principle by giving the
applicants notice as provided for in section 3(2)(b)(i) of PAJA which
provides:
“
(b)
In order to give effect to the right to procedurally fair
administrative action, an administrator, subject to subsection(4)
must give a person referred to in subsection(1)~
(i)
Adequate notice of the nature and purpose of the proposed
administrative action. ”
Failure
to give notice to the affected party results in procedural unfairness
which renders the administrative action reviewable.
[20]
The imposition of a fine of R3 million by the Board has equally to be
weighed in terms of the PAJA provisions. In particular
section
6(2)(e) (iii) of PAJA provides:
20.1.
"(2) A court or tribunal has the power to judicially review an
administrative action if-
CO.....
(Hi)
because irrelevant considerations were taken into account or relevant
considerations were not considered;”
The
bringing in of section 5.82 by the Board when that had not formed
part of the JSE decision was bringing in an irrelevant consideration
which renders the decision reviewable.
20.2.
Similarly section 6(2)(f)(ii)(cc) is applicable in making an
administrative action reviewable if:
"(f)
The action itself-
(i) .............
(ii)
Is not rationally connected to-
(aa)…….
(cc)
the information before the administrator;”
A
rationality review is based on an absence of rationality between the
information before decision maker and which he relied on
to form the
basis of its decision. It does not refer to the rational connection
between reasons given and the decisions but rather
the information
upon which the decision is based.
Again,
the finding was based on the provisions of section 5.82 which had not
formed part of the original JSE decision. The decision
is therefore
rendered reviewable in terms of section 6(2)(e)(iii) and
6(2)(f)(ii)(cc) of PAJA.
[21] In Pharmaceutical Manufacturers
Association of SA: In re: Ex Parte President of the Republic of South
Africa
2000 (2) SA 647
paras 85 and 86 the Constitutional Court
approved rationality as a minimum threshold requirement applicable to
the exercise of
all public powers.
[22]
The SSF positions taken by the applicants started to unravel when
Standard Bank (the clearing member) demanded payment of an
extra
margin from Watermark (the broker). When Watermark tried to pass on
this demand by demanding payment of that margin from
applicants, the
latter refused to pay as the margin payable by them was contractually
limited to 100 percent. Watermark nevertheless
decided to take over
their positions even though they were not in default. Watermark
thereafter looked for a buyer. Huge, the company
in which applicants
were directors offered to buy and subsequently entered into a
contract with Watermark. This is what set the
cat among pigeons in
that the sale was effected amongst related parties without the
necessary authorisation in terms of the listing
requirements. The
transaction looked suspicious as it appeared as if applicants had
palmed off their risk to the company in which
they were directors.
[23]
Fourth respondent entered the fray as the regulator and pointed out
the possibility of an infringement of the listing requirements
to the
applicants. This was followed by copious correspondents which
included a rebuttal by the applicants of the allegations by
the
fourth respondent. This culminated in the decision by fourth
respondent to charge the applicants for contravening section 5.69
of
the listing requirements. The applicants were found guilty and fined
five million rands.
[24]
The applicants appealed the decision to the Appeal Board and the
Appeal Board rendered a decision part of which reads as follows:
"[47]
The next question is whether Huge, and consequently the appellants,
contravened section 5.69 by making a specific repurchase
of Huge's
securities. We think they did not. The L.R defines ‘
securities” ‘’as described in terms of the
(Act)”
and in the Act they are defined to include “derivative
instruments. ” The SSFs being derivative instruments,
it
appears at first blush that section 5.69, referring as it does to the
purchase of securities, thereby includes derivative instruments
in
its ambit. However, section 5.82 says-
"Issuers
who enter into derivative transactions that may or will result in the
repurchase of securities in terms of their general
authority must
comply with paragraphs 5.67 to 5.81 subject to the exemptions in
paragraph 5.83 and additions in paragraph 5.84.”
[48]
That provision sheds light on section 5.69 by distinguishing the
repurchase of securities from the conclusion of derivative
transactions. Huge’s purchase of the SSFs entailed derivative
transactions. Accepting, as we do, that it was clearly shown
that the
SSFs in question were physically settled, those were transactions
that might or would result in the repurchase of securities
in the
form of the underlying Huge shares but did not constitute such
repurchase in themselves. It follows that the appellants
did not
contravene section 5.69 in the respects found by the JSE. ”
[25]
Effectively this part of the Appeal Board decision appeared to
exonerate the applicants in the form of a successful appeal.
The
matter however did not end there. The Board went on to state as
follows:
“
[49]
It was nevertheless required by section 5.82 that Huge had, in
entering into SSF transaction, to comply with section 5.69.
even
though, arguably, the purchase of the SSFs might not have resulted in
an eventual share repurchase, it was required that the
purchase of
the SSFs be approved by shareholders in terms of a special resolution
of Huge. No such resolution was obtained. In
at least that respect
there was non-compliance with section 5.69 both by Huge and, on the
basis discussed above, by the appellants
personally. The omission by
the JSE to find also a concurrent contravention of section 5.82 was
not a fatal irregularity. The case
pursued against the appellants was
throughout one that involved the failure, when the SSFs were acquired
by Huge, to obtain a shareholders’
resolution in compliance
with section 5.69. The fact that that was required by section 5.82
did not alter the nature of the case
or mislead the appellants.
[50]
It follows that the appellants were liable to an appropriate penalty
for having personally contravened section 5.69 in the
respect just
referred to.
[51]
For reasons already advanced it was within the jurisdiction of the
JSE to take into account any concomitant breach of the appellants’
fiduciary duty to ensure compliance by Huge with the LR.
[52]
As to the matter of penalty imposed on each appellant, we have
mentioned that counsel for the JSE fairly accepted that if the
case
were shorn of the sham aspect a significant reduction in the fines
would be appropriate. As we have said above, in no findings
which are
now on appeal did the JSE express or imply that there had been a
sham. The consequence of a sham not having been found
is that the
basis for holding that the purchase by Huge was from a related party
falls away. In any event the agreement between
the appellants and
Watermark imported application of the relevant default provisions of
the Derivative Rules which allowed Davis
to close out. Although he
could not have demanded the 250 percent increase from them the
appellants declined to pay him at all
and Davis would have been
entitled in terms of their agreement to regard that as default. In
those circumstances, and in the absence
of Davis having been
discredited, one cannot summarily brush aside the appellants’
assertation that Huge purchased the SSFs
from Davis pursuant to a
close out. In addition, not being legally empowered to enquire into
and punish in respect of the offence
of contravening section 85 of
the Companies Act, the JSE had no jurisdiction to find that that
offence had been committed by Huge
and the appellants were implicated
in its commission. Those factors warrant amelioration of the fines.
[53]
On the other hand even if the appellants did not positively enhance
their patrimony they must have known that this was not
a transaction
within the ambit of the company’s strategy but a piece of ad
hoc opportunism, without a shareholders’
resolution, by means
of which they reduced substantial financial risks to themselves and
countenanced their being foisted on Huge.
The purchase by Huge, if
not from related parties, was nonetheless in substance from related
parties and the appellants must have
been aware of that. Huge had not
settled the SSFs by the time the appeal was heard and had simply
”rolled them over”.
The acquisition cost Huge over R19
million even if one disregards the market-to-market losses on 16
October 2008 as of dubious
significance. We also think that the price
payable by Huge was not justifiable. It was appreciably more than the
day’s market
price. It was also not supported by the price paid
by Mokholo, which the record shows clearly enough was not market
related.
[54]
Balancing the features mentioned in the preceding two paragraphs, the
matter is still, in our view, one which falls for a substantial
fine
to be imposed on each of the appellants. We consider that the fine
which should be substituted for that imposed by the JSE
is R3 million
in respect of each appellant. ”
[26]
These findings were further encapsulated in the Board’s order
which reads as follows:
"[57]
The Board’s order is consequently as follows:
1.
The appeal is allowed with costs.
2.
The following findings by the JSE are set aside-
2.1.
That Huge acted contrary to the provisions of section 85 of the
Companies Act;
2.2.
That Huge and the appellants breached section 5.69 of the Listings
Requirements by way of Huge having effected a specific repurchase
of
its securities from related parties.
3.
Substituted for the finding set aside in 2.2 above is the finding
that Huge and the appellants breached section 5.69 read with
section
5.82, of the Listings Requirements in that Huge, represented by the
appellants, entered into derivative transactions that
might or would
result in the repurchase by Huge of its securities in terms of a
general authority without complying with section
5.69 in that
approval of shareholders in terms of a special resolution of Huge was
not given for such transactions.
4.
The penalty of R5 million imposed upon each appellant is set aside
and substituted therefore is a fine on each appellant of R3
million.
5.
The following cost orders are made-
5.1.
The costs awarded in this order will include the costs of two
counsel.
5.2.
The appellants are ordered to pay the costs of the application to
supplement the grounds of appeal.
5.3.
The JSE is ordered to pay the wasted costs of the hearing on 3 March
2011.
6.
The JSE is ordered to ensure the publication of the terms of this
order in SENS.”
[27]
The applicants seek a review of paragraph 3 and 4 of the Board’s
order mainly on two grounds:
27.1.
As stated (supra) the Board acted ultra vires by substituting its own
determination on a matter or matters which had not formed
part of the
decision appealed against.
27.2.
The applicants had not been afforded the benefit of the
audi
alteram partem
principle in that their right to be heard had been
denied with regard to the charge of contravening section 5.82 of the
Listing
Requirements. This was not in accordance with the law as
stated in PAJA (supra).
[28]
Mr Cilliers S.C, for the fourth respondent has argued that the Board
is entitled to vary the decision appealed against by substituting
its
own determination and that by so doing it acted within the powers
conferred on it by section 26B(15) of the FSB Act.
Mr
Unterhalter S.C for the applicants argues to the contrary.
[29]
It is common cause that the JSE did not charge the applicants with a
contravention of section 5.69 read with section 5.82 of
the Listings
Requirements and did not find the applicants guilty of that charge or
any charge involving section 5.82 of the listing
requirements. The
JSE charged and found the applicants guilty of section 5.69 of the
listing requirements.
[30]
Section 6(2)(f)(i) read with section 6(2)(a)(i) of PAJA requires that
there be a source of the authority for the taking of
administrative
action and that the taking of such action must remain within the
limits provided for in such source of authority.
[31]
There had also been no reference at all to a contravention of section
5.82 in the correspondence between the JSE and the applicants
prior
to the applicants being found guilty by the JSE. The raising of
section 5.82 in the Board deliberations was part of the argument
by
appellants who raised it as a matter that ought to have been
considered by the JSE. For the board to turn around and create
a ‘new
charge’ was quite an unexpected event.
The
Appeal Board also recognises this omission in its own judgment when
it states at paragraph 49:
‘
The
omission by the JSE to find also a concurrent contravention of
section
5.82
was not a fatal irregularity. ”
The
Appeal Board, despite this observation goes on to find in the
substituted order that ‘The appellants breached section
5.69
read with section 5.82 of the Listing Requirements”
[32]
What is clear to me is that it is the JSE that lays the charge for
any contravention of the Listing Requirements and that it
is also the
JSE that would after the appropriate investigations find the culprit
guilty.
The
person or entity found guilty then has the right to take the matter
by way of appeal to the Appeal Board. It does not seem to
me to be
proper to circumvent this established procedure by simply deeming a
failure to charge appropriately as a non fatal omission
and going on
to substitute a charge and find the persons or entity involved guilty
after making the substitution. It does not seem
to me that this is a
correct interpretation of the word ‘’vary” in the
FSB Act. A variation of the original decision
must be a variation
within the four corners of that decision and not by an importation of
new charges into the decision appealed
against.
The
variation occurs within the scheme of the decision which was made.
This seems to me to be the basis of section 26B(15)(B) which
enjoins
the Appeal Board to remit the matter for reconsideration by the
decision-maker concerned in accordance with such directions
as the
Appeal Board may determine.
[33]
Whether an administrator’s action is authorised is a question
which must be answered with reference to the empowering
statute.
See Harris v Minister of Education
2001(8) BCLR 796(T) at 807F808C
Mr
Unterhalter for the appellants has argued, and I accept, that the
Appeal Board does not have an inherent jurisdiction to expand
the
‘’decision under appeal” nor does it have the
jurisdiction to make a finding in respect of a matter which
does not
constitute the ‘’decision under appeal.”
[34]
It would seem to me that a correct interpretation of the word "vary”
in section 26B(15) of the FSB Act is to cater
for situations where
the decision-maker has a multi-faceted decision which the Appeal
Board believes is in part correct and in
part incorrect. In that case
where an Appeal Board decides to uphold several, but not all facets
of the multi-faceted decision,
that would constitute a variation of
the decision on appeal. Such a variation must however not result in a
decision which goes
beyond the decision under appeal.
[35]
In this context it bears mentioning that there are numerous statutes
in our law where the legislature grants an appeal body
the power to
substitute its own decision in place of the decision-maker. In that
regard the power is bestowed on the Appeal Body
expressly and not
tacitly or by implication.
See
section 35(5)
of the
Occupational Health and Safety Act 85 of 1993
;
Section
46(2)
of the
National Ports Act 12 of 2005
and
Section
30(6) of the Private Security Industry Relation Act 56 of 2001
[36]
It is therefore logical to accept that the absence of an express
provision empowering the Appeal Board with the jurisdiction
to
substitute its own decision in place of the decision of the JSE is an
indication that the Appeal Board cannot assume such powers
on its
own. The Appeal Board could therefore not substitute its own decision
in place of the decision appealed against. Put in
another way section
26B(15) does not empower the Appeal Board to reconsider the matter.
It is left to the original decision maker
(the JSE) to reconsider the
matter. To that end, the Board may exercise the power of remittal.
[37]
Consequently, I have come to the conclusion that it was beyond the
power of the Appeal Board to find that the applicants had
contravened
section 5.69 read with 5.82 of the listing requirements.
Procedural
unfairness and natural justice
[38]
The applicants submit in this regard that a contravention of section
5.69 read with section 5.82 of the listing requirements
was taken in
a procedurally unfair manner in that the charge was not put to the
applicants by the Appeal Board (or the JSE) and
that the applicants
were not afforded an opportunity to put facts before the Appeal Board
to deal with the new charge.
[39]
Mr Cilliers for the fourth respondent submits with reference to
several passages in the appeal record that section 5.82 was
debated
at length before the Appeal Board. He submits that applicants can
therefore not be heard to say they were not given an
opportunity to
make submissions with regard to a charge in terms of section 5.82.
[40]
Mr Unterhalter, who did not appear in the Appeal Board proceedings
concedes that indeed 5.82 was debated but goes on to explain
the
context in which such debate took place.
it
was the contention of the applicants that the JSE had wrongly charged
them in terms of section 5.69 of the listing requirements
and that a
correct charge ought to have been preferred under section 5.82.
[41]
As can be seen from the decision of the Board (supra) the Appeal
Board upheld the applicants appeal and set aside the finding
of the
JSE with regard to the charge under section 5.69.
[42]
Mr Cilliers has argued that putting the charge under section 5.82 was
immaterial in that the applicants would not have had
a valid defence
against such charge. In essence this submission assumes that the
outcome would have been the same whether such
charge was put to the
applicants or not. This has been sometimes referred to as the ‘’no
defence principle.”
[43]
In this regard, Mureinik
1985 SAJHR 48
is quoted in the case of
Administrator, Transvaal and Others v Zenzile and Others 1991(1) SA
21(A) by HoexterJA at 36J-37E as follows:
"...
perhaps pre-eminent amongst the qualities of a power that attracts
natural justice is its susceptibility to be characterised
as
"disciplinary” or "punitive”.
The
learned author explains that the reasons for this are rooted both in
history and in principle; but that the latter are crucial.
At 50-1 he
summarises the reasons of principle thus:
‘
Where
the power is disciplinary, all the usual reasons for importing
natural justice generally apply, and generally apply with more
than
the usual vigour: the gravity of the consequences for the individual,
consequences both concrete and such as affect his reputation;
the
invasion of the individual's rights; that fairness postulates
inquiry; and so on. But more than this, there is a reason of
principle peculiar to disciplinary or punitive proceedings: that even
if the offence cannot be disputed, there is always something
that can
be said about sentence. And if there is something that can be said
about it, there is something that should be heard...
”
It
is trite, furthermore, that the fact that an errant employee may have
little or nothing to urge in his own defence is a factor
alien to the
inquiry whether he is entitled to a prior hearing. Wade
administrative Law 6th ed puts the matter thus at 533-4:
‘
Procedural
objections are often raised by unmeritorious parties. Judges may then
be tempted to refuse relief on the ground that
a fair hearing could
have made no difference to the result. But in principle it is vital
that the procedure and the merits should
be kept strictly apart,
since otherwise the merits may be prejudged unfairly.'
The
learnerd author goes on to cite the well-known dictum of Megarry J in
John v Rees
[1970] Ch 345
at 402:
‘
As
everybody who has anything to do with the law well knows, the path of
the law is strewn with examples of open and shut cases
which,
somehow, were not; of unanswerable charges which, in the event, were
completely answered; of inexplicable conduct which
was fully
explained; of fixed and unalterable determinations that, by
discussion, suffered a change. ’
[44]
The issue of the rules of natural justice is further traversed in
Yates v University of Bophuthatswana and Others 1994(3) SA
815 at 835
F-J as follows:
"It
is to be welcomed that the principles of natural justice escalate
with increasing strength. Basically they constitute the
forthright
values of ‘those fundamental principles of fairness which
underlie and ought to underlie every civilised system
of law.’
Basically people have an instinctive reaction to what is fair and
unfair. To put it differently and in a pragmatic
fashion, there is a
folk saying ‘right was right and wrong was wrong and you did
not have to talk about it.’ The requirements
of natural
justice that I have referred to are germane to a general duty to act
fairly. ”
According
to Baxter Administrative Law at 540:
‘
The
principles of natural justice are considered to be so important that
they are enforced by the Courts as a matter of policy,
irrespective
of the merits of the particular case in question. Being fundamental
principles of good administration the enforcement
serves as a lesson
for future administrative action. But more than that, and whatever
the merits of any particular case, it is
a denial of justice in
itself for natural justice to be ignored. The policy of the Courts
was crisply stated by Lord Wright in
1943:
"If
the principles of natural justice are violated, in respect of any
decision, it is, Indeed, immaterial whether the same
decision would
have been arrived at in the absence of the departure from the
essential principles of justice. The decision must
be declared to be
no decision. ”
The
Courts have therefore nearly always taken care to distinguish between
the merits of a decision and the process by which it is
reached. The
former cannot justify a breach in the standards of the latter, the
isolated decisions which have overlooked this have
seldom received
subsequent judicial endorsement."
[45]
Counsel on either side have made submissions for an order for and
against remittal to the Appeal Board. As matters stand, it
is the JSE
that lays and prosecutes charges and not the Appeal Board.
Consequently to remit the matter to the Appeal Board would
not serve
any purpose. Effectively an order setting aside paragraph 3 and 4 of
the Board’s award would leave the matter in
the hands of the
JSE to take any further steps it may deem necessary.
[46]
For the reasons set out above I have come to the conclusion that
paragraph 3 of the award should be reviewed and set aside.
Consequently the decision in paragraph 4 of the award falls to be set
aside.
[47]
In the circumstances, the applicants have succeeded and the following
order is made:
47.1.
The decision of the first to third respondents (the Appeal Board) set
out in paragraphs 3 and 4 of the Appeal Board’s
decision dated
3 July 2012 is hereby reviewed and set aside.
47.2.
The applicants are awarded the costs of the application which shall
be paid by the fourth respondent and which shall include
costs of two
counsel.
S.A.M BAQWA
(JUDGE
OF THE HIGH COURT)
Counsel
for the appellants: Adv D Unterhalter SC
………………………………
Adv
IP Green
Instructed
by: Norton Rose South Africa
Counsel
for the respondents: Adv SA Cilliers SC
…………………………………
Adv
B Berridge SC
Instructed
by: Cliffe Dekker Hofmeyer fnc
1
PM
Johnson & TL Hazen, Commodities Regulation (2nd ed, Little Brown
and Company, 1989)
Volume
111 at p. 155. As a matter of interest, the Enron scandal in America
occurred as a result of Enron trading energy futures.