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[2020] ZAEQC 1
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Coetzer v De Beer and Another (FAB52/2019) [2020] ZAEQC 1 (14 January 2020)
THE FINANCIAL SERVICES
TRIBUNAL
Case
№:
FAB52/2019
In
the matter between:
SOPHIA
ELIZABETH
COETZER
Applicant
t/a DOWNSTREAM TRADING
and
TASHA
CHRISTELLE
DE
BEER
First
Respondent
THE
FAIS OMBUD
Second
Respondent
Tribunal:
H
Kooverjie (chair), J Pema, L Makhubela
Hearing:
25
November 2019
Decision:
14
January 2020
Summary:
What
constitutes fair compensation in terms of Section 28(1)(b)(i) of the
FAIS Act.
DECISION
1.
This matter is before the Tribunal by
virtue of the Chair’s directive indicating that there was merit
in the application for
reconsideration.
The
directive recorded the following:
“
Leave
was granted.
There
are material factual disputes on the papers, and the conclusion of
the Ombud is subject to doubt.
It is not understood on what
basis the Ombud rejected or ignored the applicant’s
allegations
.”
2.
For the purposes of this decision the
parties will be referred to as set out in this application.
3.
The applicant challenged the determination
of the FAIS Ombud dated 26 March 2019, which ordered the applicant to
pay the first respondent
an amount of R750,000.00 together with
interest (“
the determination
”).
4.
According to Ms De Beer, the applicant
failed to render financial services in accordance with the FAIS Act
and the General Code
of Conduct (“
the
Code of Conduct
”), resulting
in her suffering financial loss.
5.
The applicant based her application on
three main grounds namely that:
5.1
the determination of the FAIS Ombud was
premature;
5.2
the first respondent had alternative
remedies by approaching court; and
5.3
the compensation awarded is not fair if one
has to take into consideration how it should be calculated.
6.
The application therefore is limited to the
determination on the quantum aspect.
In
particular, if and to what extent the first respondent suffered
damages?
7.
The complaint related to two “investments”
one of them being the investment in Unimin African Resources (Pty)
Ltd (Unimin
shares). According to the applicant
the
matter was already determined in court, under case number 80188/2014
(in the Pretoria High Court).
The
first respondent, a party in those proceedings, was cited as the
eighteenth respondent therein, claiming repayment of her investment
in the company, Unimin African Resources (Pty) Ltd.
8.
The applicant’s case is that De Beer
should have sought recourse by virtue of the relief granted as per
the court order.
It
was therefore argued the Ombud should have also taken cognisance of
the aforesaid and not made a fresh determination again.
9.
The first so called “investment”
related to “Platfields” shares.
It was argued that the amount in respect of
the “Platfields” shares of 150,000 should not form part
of the award as
she did not suffer such actual loss.
The circumstances around the Platfields
shares were set out and explained in detail by the applicant.
10.
In considering the matter we note from the
“determination”, the Ombud was aware of the aforesaid
facts and recorded
inter alia
the
following in the said determination:
10.1
During 2012 Ms De Beer requested the
applicant to assist her with selling her Unimin and Platfields
shares.
It was
only then that Ms De Beer became aware that the Unimin shares were
changed to ordinary shares which could not be sold and
at the time,
the Platfields shares were worth only R3,000.00, a fraction of the
R150,000.00 invested. Furthermore, the complainant
was unable to
access her funds.
10.2
In
the
determination
it
was
recorded
that
the
first
respondent
had
unclaimed
securities.
She
was contacted by the applicant.
The
applicant offered to assist the first respondent.
There was an agreed upon percentage of the
value of the unclaimed shares which the applicant would benefit from.
It was alleged that the applicant charged a
fee of 20% of the value of the transaction, being R178,000.00.
The applicant alleged that the first
respondent was given a discount in respect of services rendered by
the applicant, thus claiming
only R150,000.00 (paid in the form of
the Platfields shares). The applicant further claimed that she never
provided financial advice
to Ms De Beer. She merely directed the
first respondent to the Unimin’s website. It was the first
respondent who conducted
her own research into Unimin.
11.
The
Ombud
found
that
the
applicant
indeed
rendered
financial
advice
in
respect
of selling the Netcare shares and purchasing the Unimin shares.
In discharging these obligations towards
the first respondent, the applicant had a duty to comply with the
FAIS Act and the General
Code of Conduct.
12.
Consequently the Ombud found that there was
a contravention of Section 7(1) of the FAIS Act where it is required
that reasonable
and appropriate general explanation and the nature of
the transaction must be explained to the client and that full and
frank disclosure
of the investment should have been made. Furthermore
in terms of Section 8(1)(d) of the Code, it is required that where a
financial
product is to replace an existing financial product wholly
or partially, the financial services provider must fully disclose to
the client the actual and potential financial implications, costs and
consequences to such replacement.
13.
In respect of the quantum aspect, the
Ombud determined that the complainant invested R600,000.00 into
Unimin. The Ombud further
found that with regard to the R150,000.00
that was invested in Platfields, the Platfields listing on the JSE
had been terminated
and there was currently no reported share price.
14.
The Ombud’s reasoning as to why the
first respondent should be awarded compensation in the total amount
of R750,000.00 was
that it was unlikely that the first respondent’s
capital of R600,000.00 could be recovered in respect of her
investment in
Unimin as well as the R150,000.00 in respect of her
Platfields investment.
15.
Argument was proffered on behalf of the
applicant, that the Ombud failed to determine the actual losses
suffered by the first respondent.
By
virtue of the court order the first respondent was entitled to claim
repayment of her investment from Unimin.
There is no evidence before us as to
whether Ms De Beer pursued her claim by virtue of the court order.
It appears not.
However it was incumbent upon the office of
the Ombud to make such enquiry.
If
such enquiries were made, it was not recorded in the “determination”.
16.
Of relevance is Section 28(1)(b)(i) of the
FAIS Act which provides that a complainant is entitled to
fair
compensation as a result of financial prejudice or
damages
suffered
.
17.
The FAIS Act makes it clear that the Ombud
has jurisdiction where a complainant “has suffered or is likely
to suffer financial
prejudice or damage” or where the provider
or representative has acted in a way “which is likely to result
in
such prejudice or damage”.
[1]
18.
“
Financial
prejudice” is however not defined in the FAIS Act.
It
however refers to “pure economic loss”.
Loss
incurred essentially refers to the amount of money which had been
lost.
[2]
19.
It was argued that the Ombud should have
made enquiries to determine the current value of the shares issued to
the first respondent.
Such
value should have been set off against the actual investment made by
the first respondent.
20.
We particularly note that the relevant
facts were placed before the Ombud namely that:
20.1
The Ombud appears to have considered the
court order which ordered Unimin to repay the subscription of the
shares to shareholders.
The
first respondent’s explanation was recorded in the said
determination. The explanation tendered by the applicant was that
the
company, Unimin, was ordered to repay all subscriptions, including
the first respondent.
20.2
The Ombud further took cognisance of the
explanation proffered by the applicant that the complainant would be
refunded for her loss
and further that the applicant would appreciate
the opportunity to engage with the complainant or to explore a
settlement.
21.
We note however that the Ombud failed to
address on what basis the explanations furnished by the applicant
pertaining to the “investments”
were not upheld.
22.
We find that the Ombud’s reasoning
appears inconclusive in that the explanations proffered by the
applicant regarding the
quantum aspect were not addressed. In respect
of the Unimin shares the Ombud merely found that it was unlikely that
she would be
able to recover her capital and in respect of the
Platfields shares, there appeared no reported share price and
therefore little
likelihood or none that the capital can be
recovered.
23.
Having considered the determination and
contentions raised, it is our view that the matter be remitted to the
Ombud for reconsideration,
particularly to consider the quantum in
terms of Section 28(1)(b)(i) of the FAIS Act.
In particular, to determine to what extent
the first respondent suffered losses in respect of the two
“investments”.
24.
The following order is therefore made:
(1)
The matter is remitted to the FAIS Ombud for
reconsideration.
SIGNED
at
PRETORIA
on this
14
th
day
of
JANUARY 2020
on behalf of the Panel.
ADV H KOOVERJIE SC
With
the Panel consisting also of: J Pema
L
Makhubela
[1]
Section
1(1) (a) and (b) of the FAIS Act – definition of “complaint”
[2]
Indac
Electronics (Pty) Ltd v Volkskas Bank Ltd 1992(1) SA 783 A 797; Ries
v Boland Bank (Pty) Ltd
2000 (4) SA 955