IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Reportable
Case Number: A75/2025
In the matter between:
GILES ALEXANDER POWER MAYNARD Appellant
and
CARRICK WEALTH (PTY) LIMITED Respondent
CORAM: SHER J, MANGCU-LOCKWOOD J, et JONKER AJ
Date of hearing: 21 January 2026
Date of judgment: 4 March 2026
Summary: Appeal against dismissal of application to halt debarment proceedings in
terms of s 14 of the FAIS Act - appellant transmitted confidential information to a
competitor employee - settlement agreement concluded before debarment notice
issued - leave to appeal confined to two factual grounds: whether respondent had a
duty to initiate proceedings, and whether ulterior motive established - interpretation
of ss 14(2) and (3): provisions prescribe mandatory procedural steps forming an
integrated scheme with the substantive duty to debar in s 14(1); the duty to initiate is
implicit in, and a necessary incident of , the peremptory language of ss 14(2) and (3)
read purposively with s 14(1); a contrary interpretation would frustrate the Act’s
protective purpose - objective threshold for initiating proceedings met - statutory
duties imposed in the public interest cannot be displaced by private agreement
regardless of timing - ulterior motive not established on the papers - appeal
dismissed with costs.
ORDER
___________________________________________________________________
1. The appeal is dismissed.
2. The appellant shall pay the respondent's costs of the appeal, including
the costs of two counsel, with senior counsel's fees to be taxed on scale C
and junior counsel, where employed, on scale A.
JUDGMENT
JONKER AJ (SHER J et MANGCU-LOCKWOOD J concurring):
INTRODUCTION
[1] This is an appeal against the judgment of Janisch AJ, delivered on 15
November 2024, dismissing the appellant's application for declaratory and final relief
aimed at halting debarment proceedings initiated against him by the respondent. The
respondent is a financial services provider (FSP), under section 14 of the Financial
Advisory and Intermediary Services Act 37 of 2002 (‘the FAIS Act’).
[2] On 20 December 2024, Janisch AJ expressly granted leave to appeal on two
narrow factual questions: (i) whether, on the facts of this case, the respondent had a
duty to initiate debarment proceedings, which duty could not be compromised by
agreement; and (ii) whether the respondent's alleged ulterior motive was established
on the papers.
THE UNDISPUTED FACTS
[3] The essential facts are comprehensively set out in the judgment a quo and
are not in material dispute. The facts are as follows:
[4] The appellant was a representative of the respondent until 31 October 2023.
On 11 October 2023, while still in the respondent's employment and during his notice
period, he sent an email to a Ms. Lategan, which contained confidential client
information. Ms. Lategan was a former employee of the respondent who, at the time,
was working for a direct competitor of the respondent in th e financial services
industry.
[5] The information transmitted included a list of the names of approximately 80
clients of the respondent, together with certain confidential details pertaining to them,
including and principally the total value of their assets under management. Included
in the list were the names and details of about 20 clients who were acquaintances,
friends and family members of the appellant, who he was servicing on behalf of the
respondent, whom he claimed he wished to buy out.
[6] The appellant did not obtain the consent of any of the clients before disclosing
their confidential information.
[7] Following a letter of demand from the respondent's attorneys, the parties
entered into negotiations that culminated in a settlement agreement on 7 November
2023.
[8] The settlement agreement included restraint provisions, confidentiality
undertakings, and a full and final settlement clause. It expressly permitted the
appellant to service 15 specified clients immediately and a further 6 clients from 1
January 2024.
[9] On 8 November 2023, a day after the settlement agreement was concluded,
the respondent delivered a Notice of Enquiry under section 14(3)(a) of the FAIS Act,
notifying the appellant of its intention to debar him and commencing the statutory
debarment process which is provided for in the FAIS Act.
[10] The appellant thereafter launched an application for declaratory and final relief
aimed at halting debarment proceedings initiated against him by the respondent. It
was dismissed.
AMBIT OF THE LEAVE TO APPEAL
[11] The appellant sought leave to appeal on various grounds, two of which were
unsuccesful: Firstly, that another Court might find that there was no duty on a FSP
to initiate debarment proceedings, and therefore that it could not be concluded that
an agreement not to initiate was necessarily incompetent.
[12] Secondly, that another court might take a different view as to the threshold
test for when such a duty arose.
[13] Janisch AJ did not consider there to be a realistic prospect of another court
finding that where it an FSP had a duty to debar, it did not have a corresponding
duty to commence the debarment proceedings and furthermore, that there was no
reasonable prospect that another court could find that it was competent to c ontract
out of the duty to initiate the proceedings where a duty to debar existed. Leave to
appeal was accordingly refused on both these grounds.
[14] Despite the refusal , the appellant contends that this Court can entertain
points of law beyond those for wh ich leave to appeal was granted. In support of this
submission, the appellant relies on Minister of Safety and Security v Mohamed 1 in
which the following was said:
’[18] The principle above was stated in relation to this court as it had
jurisdiction to extend the grounds on which leave to appeal was granted. The
1 2012 (1) SACR 321 (SCA).
court a quo had no such jurisdiction. If the appellants, for example, were not
satisfied with the fact that Same la AJ granted leave to appeal on one ground
alone, they had to direct a petition to this court, not the full court, to extend the
grounds. Thus, even if any of the parties asked the court a quo to extend the
grounds of appeal – other than when a point of l aw arose – it had no
jurisdiction to do so. Harlech-Jones Treasure Architects CC & Others v
University of Fort Hare 2002 (5) SA 32 (ECD) at 51I -52B and Queenstown
Girls High School v MEC, Department of Education, EC 2009 (5) SA 183 (Ck)
at 186G-187A.’
[15] I accept that our law has long recognised a residual power in an appellate
court to raise and decide, mero motu , a point of law that arises on the
established facts, even if the parties did not raise it and it was not covered by
the grounds of appeal. This principle is conceptually distinct from a party
seeking unilaterally to expand the grounds on which leave was gr anted. Read
in context, the qualifying phrase in Mohamed - ‘other than when a point of law
arose’ - is best understood as a recognition of this residual power: where a
legal issue emerges or becomes apparent during proceedings, a court may
address it without requiring the parties to commence fresh proceedings.
[16] Critically, however, this residual power does not avail the appellant. The
appellant is not confronted with a new or unforeseen legal issue that has
emerged during the hearing of this appeal. On the contrary, he seeks to re -
argue a specific legal question, whether an FSP has a duty in law to initiate
debarment proceedings and whether that duty may be waived by agreement,
on which Janisch AJ expressly refused leave to appeal. The proper remedy,
as the Supreme Court of Appeal made clear in Mohamed itself, was to petition
the Supreme Court of Appeal to extend the grounds of appeal. The appellant
did not do so.2
the Supreme Court of Appeal to extend the grounds of appeal. The appellant
did not do so.2
[17] Whilst debate was had about the powers of this court and the ambit of what
this court can do, both parties agreed that this court only has jurisdictio n on
appeal to determine issues that flow from the leave to appeal that was
2 As confirmed in Harlech-Jones Treasure Architects CC v University of Fort Hare 2002 (5) SA 32 (ECD).
granted. Accordingly, this Court is bound by the scope of the leave -to-appeal
order. We cannot revisit the legal conclusions reached by Janisch AJ
regarding the existence of a statutory duty to initiate debarment proceedings
or the impermissibility of contracting out of that duty. Those findings stand and
are not before us on appeal.
[18] In any event, counsel for the appellant conceded during argument that where
a legal duty to init iate debarment proceedings exists, that duty cannot be
contracted out of. This concession substantially undercuts the very legal
argument the appellant seeks to introduce and confirms that, even on his own
case, reopening the legal question would not avail him.
[19] The appeal is accordingly confined to the two grounds upon which leave was
granted.
THE ISSUES
[20] The issues that this Court must determine are: (i) whether, on the facts of this
case, the respondent had a duty to initiate debarment proceedings, whi ch duty could
not be compromised by agreement; and (ii) whether the respondent's alleged ulterior
motive was established on the papers.
[21] Once that is determined, this Court must consider whether the requirements
for a final interdict were met.
THE FINDINGS OF THE COURT A QUO
[22] The court a quo, f or present purposes, confirmed the following to be
applicable to the matter:
[23] An FSP has a statutory duty to debar a representative in the circumstances
set out in s 14(1) of the Act.
[24] There is an implicit but necessary duty to initiate debarment proceedings
where circumstances warrant.3
[25] Drawing on Viking Pony 4, that duty arises when the FSP becomes aware of
information which, if verified following the statutory process, could warrant a
debarment under section 14(1).5
[26] This does not mean that the merest hint, in the words of the Court a quo,
triggers the duty; rather, there must be ’ a reasonable degree of conviction that
information exists that may, in the circumstances of the case, warrant a debarment’6.
[27] The initiation of debarment proceedings, though not administrative action for
PAJA purposes, constitutes an exercise of public power subject to review under the
principle of legality.
[28] An exercise of public power is unlawful if undertaken for an ulterior purpose or
motive rather than the proper statutory purpose.
[29] The debarment process must not be used to satisfy contractual or other
grievances or be abused for an ulterior purpose.7
[30] The debarment regime exists to safeguard the investing public by ensuring
that only fit and proper persons serve as representatives.
[31] The requirements for final interdictory relief are well -established. The
appellant must demonstrate (i) a clear right; (ii) irreparable harm; and (iii) the
absence of an adequate alternative remedy.8
3 Para 84 of the judgment.
4 Viking Pony Africa Pumps (Pty) Ltd v Hidro-Tech Systems (Pty) Ltd 2011 (1) SA 327 (CC),
5 Para 87 of the judgment.
6 Id, para 88.
7 FSCA Guidance Note, para 3.5.1.
8 Setlogelo v Setlogelo 1914 AD 221 at 227.
ANALYSIS
The duty to initiate debarment proceedings:
[32] That in certain instances there is a statutory duty on an FSB to debar, was
confirmed by the Supreme Court of Appeal in Basson9 where Dambuza JA held as
follows:
’[23] Under s 14 of the FAIS, the FSPs bear the duty to debar representatives, who
do not meet the fit and proper requirement. Section 14(1)(a) provides that an FSP
must debar its representative and key individual if satisfied that he or she (the
representative and key individual) does not meet, or no longer complies with the
requirements set in s 13(2)(a), or has contravened any provision of the Act in a
material way.’
[33] In ss 14(2) and (3) of the FAIS Act, the procedure for debarment is prescribed as
follows:
“(2) (a) Before effecting a debarment in terms of subsection (1), the provider
must ensure that the debarment process is lawful, reasonable and
procedurally fair.
(b) If a provider is unable to locate a person in order to deliver a
document or information under subsection (3), after taking all
reasonable steps to do so, including dissemination through electronic
means where possible, delivering the document or information to the
person's last known e-mail or physical business or residential address
will be sufficient.
(3) A financial services provider must-
(a) before debarring a person-
(i) give adequate notice in writing to the person stating its
intention to debar the person, the grounds and reasons for the
debarment, and any terms attached to the debarment,
9 Associated Portfolio Solutions (Pty) Ltd and Another v Basson and Others 2021 (1) SA 341 (SCA).
including, in relation to unconcluded business, any measures
stipulated for the protection of the interests of clients;
(ii) provide the person with a copy of the financial services
provider's written policy and procedure governing the
debarment process; and
(iii) give the person a reasonable opportunity to make a submission
in response;
(b) consider any response provided in terms of paragraph (a)(iii), and then
take a decision in terms of subsection (1); and
(c) immediately notify the person in writing of-
(i) the financial services provider's decision;
(ii) the persons' rights in terms of Chapter 15 of the Financial
Sector Regulation Act; and
(iii) any formal requirements in respect of proceedings for the
reconsideration of the decision by the Tribunal.”
[34] The procedural steps prescribed in sections 14(2) and (3) are the mechanism
through which the substantive duty to debar in section 14(1) is to be discharged.
Accordingly, the duty to debar cannot be fulfilled without first initiating and completing
those procedural steps. The question is therefore not whether the statute expressly
provides a duty to initiate, but whether such a duty arises as a necessary incident of
the duty to debar. That question is one of statutory interpretation.
[35] The proper approach to the interpretation of s 14 is that set out by the
Supreme Court of Appeal in Endumeni10, where Wallis JA held in paragraph 18:
’Interpretation is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument, or contract, having
regard to the context provided by reading the particular provision or provisions in the
light of t he document as a whole and the circumstances attendant upon its coming
into existence. Whatever the nature of the document, consideration must be given to
10 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA).
the language used in the light of the ordinary rules of grammar and syntax; the
context in which the provision appears; the apparent purpose to which it is directed
and the material known to those responsible for its production. Where more than
one meaning is possible each possibility must be weighed in the light of all these
factors. The process is objec tive not subjective. A sensible meaning is to be
preferred to one that leads to insensible or unbusinesslike results or undermines the
apparent purpose of the document.’
[36] Applying the Endumeni framework, the following considerations are decisive.
[37] The lang uage of section 14 is consistently peremptory. Section 14(1)(a)
provides that an FSP must debar a representative who does not meet, or no longer
complies with, the requirements of fitness and propriety. Section 14(2)(a) provides
that the provider must ensure that the debarment process is lawful, reasonable and
procedurally fair. Section 14(3) provides that a financial services provider must give
adequate written notice, provide a copy of its debarment policy, and afford the
person a reasonable opportunity t o respond. The word must is used throughout. In
ordinary grammar and syntax, must imposes an obligation; it does not confer a
discretion. They are obligatory steps that an FSP is required to take before it may
effect a debarment.
[38] Section 14 must be read as a whole. Sections 14(1), (2) and (3) do not create
separate and independent obligations. They form an integrated statutory scheme.
Section 14(1) imposes the substantive duty to debar. Sections 14(2) and (3)
prescribe the procedural means by which t hat duty is to be discharged. The
procedural means cannot be engaged without initiation. It follows that the duty to
debar in s 14(1) necessarily encompasses a duty to commence the process that ss
14(2) and (3) prescribe. There was no need to state the d uty to initiate separately
because it is inherent in the mandatory language of ss 14(2) and (3), read in the
because it is inherent in the mandatory language of ss 14(2) and (3), read in the
context of s 14(1).
[39] The apparent purpose of s 14 is to protect the investing public by ensuring
that only fit and proper persons serve as repre sentatives of financial services
providers. That purpose, which is a matter of public interest, is achieved by requiring
FSPs to act when they become aware that a representative may no longer satisfy
the statutory requirements. An interpretation that ackno wledges a duty to debar but
recognises no corresponding duty to commence the process that leads to debarment
would frustrate that purpose entirely.
[40] Finally, Endumeni directs that a sensible meaning is to be preferred to one
that leads to insensible resul ts or undermines the apparent purpose of the provision.
If ss 14(2) and (3) impose no duty to initiate proceedings, then an FSP that is
satisfied, or has reasonable grounds to believe that a representative is unfit, could
simply decline to commence the debarment process. The substantive obligation in s
14(1) would be rendered meaningless, because the FSP would never be called upon
to make the decision that s 14(1) contemplates. That is a manifestly insensible
result. It would mean that the Legislature w ent to the trouble of enacting a detailed
procedural framework for debarment while leaving the activation of that framework
entirely to the goodwill of the FSP . No rational Legislature could have intended such
an outcome.
[41] Counsel for the respondent point ed out that, whilst the wording of s 14(1)
explicitly states that an FSP must debar (if the circumstances in s 14(1)(a) or s
13(2)(a) are satisfied) , ss 14(2) and (3) are silent as to when proceedings to
debar must be initiated. He contended that if the Legislature intended there to be an
obligation to initiate, the statute would have said so expressly, and that such a duty
accordingly cannot be inferred. He submitted further that the situation under the
FAIS Act was to be distin guished from that in Viking Pony, where the legislation
explicitly stated what had to be done.
[42] In my view, the argument does not withstand scrutiny when tested against the
Endumeni interpretative factors set out above. The silence upon which the
Endumeni interpretative factors set out above. The silence upon which the
respondent relies is not a gap in the legislative scheme; it is the natural consequence
of the fact that the duty to initiate is already implicit in the mandatory procedural
language of ss 14(2) and (3), read purposively in the context of s 14(1). Sections
14(2) and (3) do not exist in a vacuum. They are the prescribed means of fulfilling
the s 14(1) obligation. When the Legislature enacted ss 14(2) and (3) using
peremptory language and prescribed a sequence of mandatory steps that an FSP
must take before deb arring a person, it necessarily presupposed that those steps
would be initiated whenever the substantive grounds for debarment are engaged.
There is accordingly no force in the contention that what the Legislature did not say
expressly it did not intend. There is equally no basis for distinguishing Viking Pony on
this ground, and the analogy drawn by Janisch AJ was, with respect, correct and
must be accepted.
[43] The appellant drew a distinction between certain tribunal decisions cited and
the present case. He submitted that cases such as Chaane11 were distinguishable as
they dealt with ex post facto settlements, that is, settlements concluded after
debarment proceedings had already been initiated.
[44] The appellant further submitted that the present case was distinguishable
because the settlement agreement had been concluded before the debarment
proceedings commenced. He contended that this was an a fortiori situation: if an
FSP cannot settle debarment obligations after proceedings have started, then surely,
with even stronger reason, it should be able to prevent such proceedings from ever
arising by settling beforehand.
[45] On appellant’s counsel’s own concession during argument, he accepted that if
there is a duty to initiate debarment proceedings, one cannot contract out of it.
However, he maintained that the a fortiori argument merited consideration.
[46] Though not without in itial appeal, this argument fundamentally
misunderstands the nature of statutory obligations and inverts the proper legal
analysis. Section 14(2) requires that the debarment process must be lawful,
reasonable and procedurally fair, which is achieved by adh ering to and complying
with section 14(3). As demonstrated above, the duty to initiate debarment
proceedings arises as a necessary incident of the duty to debar in section 14(1):
proceedings arises as a necessary incident of the duty to debar in section 14(1):
section 14(1) imposes the substantive obligation; ss 14(2) and (3) prescribe the
mandatory procedural means by which that obligation is to be fulfilled; and the
procedural means cannot be engaged without initiation. The duty to initiate is the
11 Chaane v NBC Holdings (Pty) Limited [2020] ZAFST 75.
logical and necessary precondition for the discharge of the express statutory duty.
The appellant’s a fortiori argument, which depends on the premise that the duty to
initiate is something distinct from and additional to the duty to debar, accordingly falls
away.
[47] The fundamental principle, as correctly identified by the court a quo12, is tha t
parties cannot by agreement achieve a result that a statute prohibits, or avoid
compliance with a statutory obligation. The timing is legally irrelevant to the question
of permissibility.
[48] Should the appellant’s submissions be upheld, it would permit FSP s and
representatives to insulate themselves entirely from regulatory consequences
through private negotiation, before any public interest scrutiny occurs.
[49] Also, if the appellant's a fortiori argument were to be accepted, settlement
agreements will be concluded in which FSPs will benefit commercially from not
pursuing their statutory duty and their employee representatives would avoid
regulatory consequences. Public interest would be sacrifice d for private commercial
gain.
[50] This is precisely the mischief that making such agreements impermissible
seeks to prevent.
[51] The tribunal dicta support impermissibility regardless of timing . In Thako v
African Bank Limited (FSP 7/2020), cited with approval in Chaane, the tribunal
stated:
‘These duties cannot be waived or settled especially since, if the debarment were to
be set aside by this Tribunal, the matter has to be referred back to the FSP for
reconsideration.’
[52] The tribunal was articulating a principle of general application.
12 Judgment paras 103-104.
[53] The correct legal principle is straightforward: statutory obligations imposed in
the public interest cannot be contracted out of, whether prospectively or
retrospectively.
[54] As stated in Cool Ideas13:
’Our law has long recognised that any act performed contrary to the direct and
express prohibition of the law is void and of no force and effect.’14
[55] This principle applies to agreements not to perform a statutory duty just as it
applies to agreements to do a prohibited act. The timing of the agreement does not
affect its validity or invalidity.
[56] The ex post facto versus a fortiori distinction is therefore legally irrelevant and
provides no basis for distinguishing the tribunal decisions or d eparting from the
fundamental principle that statutory duties cannot be compromised by private
agreement.
[57] In the circumstances the appellant's concession during argument, that one
cannot contract out of a duty to initiate debarment proceedings, where there is
clearly a duty to debar, was correctly made.
Threshold met?
[58] What this Court must then ultimately determine is whether, on the particular
facts of this case, the requisite threshold was objectively met, which triggered the
respondent’s duty to initiate debarment proceedings.
[59] The appellant submits that the threshold was not met, advancing se veral
arguments. These arguments can be summarised as follows:
(a) The disclosure was an isolated incident in the context of settlement
negotiations regarding the appellant’s departure.
13 Cool Ideas 1186 CC v Hubbard 2014 (4) SA 474 (CC).
14 Para 53.
(b) The appellant’s purpose was legitimate viz to determine a buy-out price
for clients of the respondent he wished to take over.
(c) Ms. Lategan remained bound by her own confidentiality obligations to
the respondent.
(d) The settlement agreement's authorisation for him to service 21 clients
demonstrated that the respondent did not genuinely believe he was not
fit and proper to practice.
(e) The timing, by initiating debarment the day after settlement, evidenced
that no genuine concern existed as to his fitness, and was indicative
that this was simply any attempt by the respondent to get back at him.
[60] I am of the view that these arguments do not withstand scrutiny when
measured against the objective facts and the proper application of the Viking
Pony threshold test.
[61] I say so because: Firstly, the appellant’s conduct is not in dispute. The
appellant admits that he transmitted confidential client information, including names,
policy numbers and asset values, to a third party without the clients’ consent or that
of the respondent. On the face of it this constituted a breach of s 3(3) of the
General Code of Conduct for authorised financial services providers and
representatives, which provides as follows:
’A provider [including a representative] may not disclose any confidential
information acquired or obtained from a client... unless the written consent of
the client... has been obtained beforehand or disclosure of the information is
required in the public interest or under any law.’
[62] As the court a quo held, the General Code is binding on all representatives by
virtue of ss 1 a nd 15 of the FAIS Act. 15 A contravention of the Code is a
contravention of the Act for the purposes of s 14(1)(a)(iv).
[63] Secondly, the circumstances under which the unauthorised disclosure was
made, are significant. This was not merely a technical or inadvertent disclosure. The
15 Para 28 of the judgment.
information was sent to someone who was working for a direct competitor, precisely
the scenario the confidentiality provisions in the Code are designed to prevent. After
leaving the respondent’s employ the appellant took up employment with the
competitor.
[64] The disclosure extended to 80 clients, not the 20 or so friends and family the
appellant claims to have been negotiating about. The appellant provided no credible
explanation for why confidential information pertaining to the 60 additional clients
needed to be shared for the purpose he stated.
[65] The information included highly sensitive financial det ails, and the total value
of the client assets under management was considerable, and would be of obvious
competitive value.
[66] Most importantly, no client consent or that of the respondent was sought or
obtained.
[67] Thirdly, the appellant's subjective explanation does not eliminate the objective
threshold. The appellant says he shared the information to facilitate buy -out
negotiations and that it was once off. Even accepting this explanation at face value
for present purposes, it does not in itself render his conduct lawful or eliminate the
regulatory concern. The Code does not contain an exception for commercial
convenience or exit negotiations. If the appellant’s contentions were to be accepted,
it would create a significant loophole in client protection, wh ich is a primary concern
of the Act.
[68] Fourthly, Ms. Lategan's own confidentiality obligations are irrelevant. The
appellant's duty not to disclose confidential client information was personal to him.
He could not discharge that duty by asserting that the r ecipient also had obligations.
Moreover, Ms. Lategan was by then working for a competitor, a relationship that
created the risk of misuse. It is also important to note that Ms. Lategan’s employer,
Legacy Wealth, was engaging with appellant at the time, wit h a view to him joining it
Legacy Wealth, was engaging with appellant at the time, wit h a view to him joining it
as a shareholder and director, as he subsequently did. It had an obvious financial
interest in any clients and business of the respondent which he could bring across
with him, when he joined it.
[69] In the fifth place, the terms of the settlement agreement did not negate the
threshold. The appellant places great weight on the fact that the settlement
agreement authorised him to service 21 clients. This argument fundamentally
misunderstands the distinct nature of contractual relations and regulatory obligations.
[70] The settlement agreement resolved private disputes between the parties,
including disagreement over restraint of trade obligations, client ownership, and
contractual claims. It was entered into with the full knowledge and understanding of
their position.
[71] However, the debarment process serves an entirely different purpose. As was
elucidated by the Supreme Court of Appeal in Barthram16:
’[16] A representative who does not meet [fitness and propriety] requirements lacks
the character qualities of honesty and integrity... and thereby poses a risk to the
investing public generally. Such a person ought not to be unleashed on an
unsuspecting public’”
[72] The purpose of debarment is protection of the public, not vindication of private
commercial interests. The respondent could not settle its regulatory statutory
obligations any more than a prosecutor can agree not to prosecute in exchange for a
civil settlement. The two spheres are distinct.
[73] The FAIS tribunal has consistently recognised this distinction. I n Chaane,17 it
held that FAIS and employment proceedings are distinct from one another, and the
duties of an FSP cannot be waived or settled.
[74] The respondent says that the fact that it was prepared to permit the appellant
to service certain clients with whom he had personal relationships (family and close
16 Financial Services Board v Barthram 2018 (1) SA 139 (SCA)
17 Chaane v NBC Holdings (Pty) Limited [2020] ZAFST 75
friends) does not mean it accepted that he was fit to serve the general investing
public. The settlement represented a pragmatic commercial solution for it, as those
21 clients would likely have followed the appella nt in any event. This is
fundamentally different from certifying to the industry and the public at large that the
appellant meets fit and proper requirements.
[75] In the sixth place, the timing does not negate the objective threshold . The
appellant suggests t hat if grounds truly existed, the respondent would have acted
sooner. Whilst it may be so, it could be contended that it was not unreasonable for
the respondent to resolve the restraint and confidentiality issues first before
addressing its regulatory obli gations. The respondent was at liberty to first secure
contractual protections for its legitimate commercial interests before initiating
regulatory proceedings that served a different purpose.
[76] Also, the six -month limitation period in section 14(5) had onl y recently begun
to run from 31 October 2023. There was no urgency requiring immediate action
before settlement discussions concluded.
[77] Returning to the test articulated by the court a quo: did the respondent
become aware of information which, if verified through the statutory process, could
warrant debarment? The answer is plainly yes. The import of the information, which
the respondent had reflected there was:
(a) an admitted breach of a binding statutory code of conduct;
(b) transmission of confidential client information;
(c) to someone working for a direct competitor;
(d) covering 80 clients;
(e) without client or the FSP’s consent; which
(f) potentially evidenced lack of character qualities of honesty and
integrity.18
18 Financial Services Board Notice 194 of 2017, section 9.
[78] If these facts are verified and established through the debarment process, and
the appellant's explanations and mitigating circumstances are weighed, they could
potentially warrant a finding that he lacks the fit and proper requirements or has
contravened the FAIS Act in a material manner.
[79] That is the threshold. It is deliberately set at a relatively low level because s
14 provides for a full procedural process (notice, opportunity to make
representations, consideration of response, decision, right to tribunal
reconsideration, right to judicial review) before any debarment results. The threshold
asks only whether proceedings should be commenced, not whether debarment is
ultimately warranted.
[80] The appellant's arguments about context, explanation, and mitigation are
precisely the matters that should be ventilated in the debarment process itself. They
do not and cannot prevent that process from being triggered.
[81] Accordingly, I am satisfied that on an objective assessment of the facts, as
was held by the court a quo,19 the threshold test articulated in Viking Pony, was met
and the respondent had a duty to initiate debarment proceedings.
[82] This ground of appeal must accordingly fail.
Ulterior motive:
[83] The appellant sought final relief. The applicable Plascon-Evans20 standard is
well-established and was correctly articulated by the court a quo.21
‘To succeed, [the Applicant] must establish his case on the basis of the facts
put up by the Respondent, together with those facts averred by him that the
Respondent cannot deny. The factual version put up by the Respondent will
only be disregarded if, exceptionally, it can safely be rejected on the papers
alone.’
19 Para 124 of the judgment.
20 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] (3) SA 623 (A).
21 Id para 6.
[84] As the Supreme Court of Appeal c onfirmed in African National Congress v
Ezulweni Investments (Pty) Limited, 22 a respondent's version will only be rejected
where it is utterly untenable and without veracity and not capable of belief. 23
[85] The appellant referred to the robust approach arti culated in Soffiantini v
Mould 24 and Steyn v Hasse. 25
[86] However, even that approach does not permit a court to reject a respondent's
sworn evidence simply because certain circumstances raise suspicion. There must
be compelling objective grounds demonstrating that the respondent's version is false
or untenable.
[87] The question is whether, on the papers before us, the appellant has
established that the respondent initiated debarment proceedings for an ulterior
motive. Specifically, to suppress compet ition rather than to comply with its statutory
obligations and protect the investing public.
[88] In its answering affidavit, the respondent states under oath that:
(a) The appellant's conduct in sharing confidential client information was
serious and fell outside even the alleged rationale of determining a buy-
out price.
(b) The respondent faces potentially severe statutory penalties, including
criminal liability under s 36(a) of the FAIS Act, if it fails to comply with
its s 14 obligations.
(c) The respondent had no alternative but to institute debarment
proceedings in the face of the admitted disclosure of confidential client
information.
22 [2023] ZASCA 159.
23 Para 23.
24 1956 (4) SA 150 (E)
25 2015 (4) SA 405 (WCC).
(d) The allegation of anti -competitive motive makes no sense because the
respondent had already secured suitable restraint undertak ings in the
settlement agreement and had no need for any additional restraint.
(e) The 21 clients the appellant was permitted to deal with were essentially
close friends and family who, in all likelihood, would not have remained
with the respondent in any event.
[89] The appellant relies on circumstantial evidence to invite the Court to reject the
Respondent's stated motivation. Janisch AJ acknowledged that there was room for
doubt as to whether the respondent’s conduct was exclusively motivated by its
understanding that it was compelled by law to initiate debarment proceedings. The
circumstances relied upon by the appellant do raise concerns as to the appellant’s
stated motivation and are, on any fair reading, somewhat suspicious. They include
the following:
(a) The timing i.e. the issuing of the debarment notice a day after securing
the settlement agreement.
(b) The absence of any warning before settlement that debarment might
be pursued.
(c) The inconsistency between permitting the appellant to service 21
clients and s imultaneously viewing his conduct as being such as to
disqualify him entirely from acting as a representative .
(d) The allegedly greater commercial advantage of debarment compared
to the six-month contractual restraint.
(e) Differential treatment, as alluded to in supplementary affidavits, that
other employees who allegedly engaged in similar conduct did not face
debarment.
[90] I accept that the timing is troubling and understandably gave the court a quo
pause. The issuing of the debarment notice the very day after securing the
settlement agreement is, on its face, difficult to reconcile with a purely regulatory
motive. That said, the timing alone does not, in my view, compel the inference of
improper motive. As noted above, the respondent was entitled to resolve private law
improper motive. As noted above, the respondent was entitled to resolve private law
disputes before addressing regulatory obligations. These are separate spheres.
-
From a practical perspective, it is not implausible that the respondent would wish to
achieve contractual certainty before commencing a process that might strain
relations further or trigger hostile litigation, as indeed occurred.
[91] The respondent was not required to forewarn the appellant. The FAIS Act
does not mandate pre -notice consultation. Once the thresh old is crossed, the FSP
must issue the s 14(3)(a) notice and afford procedural fairness through that process.
[92] Once the respondent determined, whether on its own assessment or on legal
advice, that it had a duty to initiate proceedings, it properly did so through the formal
statutory notice process.
[93] The appellant’s argument that the settlement terms contradict the debarment
is not without some force. However, upon closer analysis, it does not establish the
ulterior motive contended for. As already explaine d, the 21 clients were friends,
family, and close connections who would likely have followed the appellant
regardless. Releasing them was commercially pragmatic.
[94] Moreover, the debarment process had not yet concluded. The respondent had
not yet formed a fi nal view on whether debarment was warranted, it had merely
concluded that the threshold for initiating the process was met. These are distinct
questions.
[95] The appellant submits that a successful debarment would provide greater
competitive protection than the six-month restraint, thereby exposing the true motive.
This argument is speculative. There is no certainty that the debarment process will
succeed. The appellant will have full opportunity to make representations, and the
determination of whether to deb ar him or not, will be made by independent senior
counsel, as the respondent undertook. The matter can thereafter also proceed to the
Financial Services tribunal for reconsideration on appeal and the courts, if warranted,
for review. The appellant can appl y to the tribunal for a stay of suspension pending
for review. The appellant can appl y to the tribunal for a stay of suspension pending
the outcome of any appeal and/or review process.
[96] Regarding other employees who have not faced debarment, the apparent
differential treatment is a cause for concern. The respondent’s evidence, however,
was that it was awaiting legal advice on those matters. Whilst this explanation is not
entirely satisfying, it is not so implausible or demonstrably false as to warrant
rejection on the papers. In any event, even differential treatment would not, without
more, prove ulterior motive in this case. Each case must be assessed on its own
facts.
[97] This evidence, taken at face value, provides a rational, lawful explanation for
the respondent's conduct: statutory compliance in the face of a serious breach. The
question, however, is whether, in light of the circumstances identified above, that
explanation can safely be rejected on the papers. It is to this question that I now turn.
[98] Does the objective facts and reasonable inferences necessarily compel the
rejection of the respondent's stated motivation as utterly untenable, palpably
implausible or far -fetched, leaving ulterior motive as the only or overwhelming
explanation?
[99] In my view the threshold has not been met. I wish to make clear that I do not
dismiss the appellant’s concerns lightly. The circumstances, viewed cumulatively,
give rise to legitimate questions about the respondent’s motivations, as the court a
quo acknowledged. However, suspicion, even well-founded suspicion, does not meet
the stringent standard required to reject sworn testimony on motion.
[100] The respondent has provided a rational explanation: it became aware of
serious conduct breaching the statutory code, determined that it had an obligation to
initiate proceedings, and did so.
[101] The appellant's case depends on inviting this Court to draw inf erences
contrary to the respondent's sworn evidence, based on circumstantial factors (timing,
settlement terms, lack of warning).
[102] This is precisely the situation in which the Plascon-Evans rule applies. The
respondent has provided sworn evidence offering a plausible explanation consistent
with the objective facts. The applicant's case depends on inviting the court to prefer
with the objective facts. The applicant's case depends on inviting the court to prefer
inferences pointing the other way. It is well -established that it is only where a
respondent’s version can be said to be palpably imp lausible or untenable, that it can
be rejected. The respondent’s version in this matter, however suspicious the
circumstances may be, cannot be so characterised.
[103] The court a quo grappled with these very considerations and reached the
correct conclusion:
‘Despite my concerns as expressed above, I do not think that I can safely
reject the Respondent's statements as to its purpose and motivation on the
papers alone. The Applicant's conduct in disclosing a client list with sensitive
information to a third par ty is, again without prejudging any aspect, not
insignificant.’26
[104] I respectfully agree. The learned acting judge correctly applied the applicable
legal standard and reached a conclusion that was justifiable on the papers.
[105] Moreover, even the robust approach invoked by the appellant does not assist.
Here, the objective facts and probabilities, whilst raising legitimate and serious
concerns, do not permit a clear conclusion that the respondent's stated motivation
was false. T hey raise troubling questions, but questions alone do not constitute
proof of bad faith on the papers. The appellant will be able to canvass this aspect
during the debarment process, at which he will have an opportunity, no doubt, to
tender evidence and to make submissions and to interrogate and refute any
evidence and submissions which are put up by the respondent.
[106] This ground of appeal accordingly also fails.
FINAL INTERDICT REQUIREMENTS:
Clear right?
[107] As already demonstrated in the discussion of the duty to initiate proceedings,
the settlement agreement could not displace the respondent's statutory obligations.
26 At para 143.
[108] The Court a quo was correct to find that the appellant did not establish a clear
right.
Irreparable Harm
[109] I cannot find that the appellant has shown that irreparable harm would ensue.
The statutory scheme in the Act provides comprehensive protection. The appellant
has the right to make representations in accordance with s 14(3)(a), which affords an
opportunity to resist a debarment.
[110] The respondent furnished an undertaking that an independent senior counsel
will conduct the debarment enquiry , which will provide additional fairness.
[111] As previously pointed out, in the ev ent there is a decision to debar the
appellant, he has the right to approach the tribunal for reconsideration thereof, in
accordance with s 230 of the Financial Sector Regulation Act 19 of 2017, a process
which may include a full re -hearing of the merits, including the ulterior motive
allegations. This will entail a substantive reconsideration, not mere rubber -stamping.
If debarment is upheld by the tribunal, the appellant has the right to review it before a
court, in terms of PAJA.
[112] The appellant submit s that being hauled through debarment proceedings will
cause irreparable reputational harm. However, if the appellant is fit and proper, the
process should vindicate him, not harm him. The setting aside of a debarment order,
particularly one found to have been based on an ulterior motive, would vindicate the
appellant. I accept that debarment proceedings, by their nature, carry some
reputational risk, but this does not amount to irreparable harm where comprehensive
procedural safeguards exist.
Alternative remedy
[113] Regarding the final interdict sought the appellant seeks to shut down the
debarment process entirely at this preliminary stage. However, he has multiple
alternative remedies that are specifically designed to address the very concerns he
raises.
[114] The appellant has the right under s 14(3)(a)(iii) to make written
representations addressing the notice of intention to debar. He has not yet done so,
instead, he launched urgent litigation to halt the process. He can (and should) make
full repres entations addressing both the substantive conduct and any procedural
concerns, including allegations of ulterior motive.
[115] Given the existence of these comprehensive alternative remedies, which are
specifically tailored to the debarment process and provide for expert adjudication, it
would be inappropriate to grant the drastic relief of shutting down statutorily -
mandated proceedings at this preliminary stage.
[116] As the court a quo observed:
‘The contention that the respondent was motivated by ulterior purposes of self -
interest rather than a bona fide concern that a debarring offence had occurred is
something that can and should be fully ventilated in the section 14(3) process...
Moreover, if there is a debarment, the question can be referred to the Trib unal for
reconsideration, and the same issue can again be tested.’27
[117] And further:
‘Given the public interest purpose of section 14, this Court should not be quick to
shut down debarment proceedings on the basis of alleged ulterior motive, except in
the very clearest of cases. Where there is doubt, it is generally preferable to have the
point tested through the statutory structures and processes.’28
[118] As Steyn CJ held In Ismail 29:
“A Superior Court should be slow to intervene in unterminated proceedings in a court
below, and should, generally speaking, confine the exercise of its powers to ‘rare
27 Judgment para 144.
28 Id para 146.
29 Ismail & Ors v The Additional Magistrate, Wynberg 1963 (1) SA 1 (A) para 5
cases where grave injustice might ensue ? or justice might not by other means be
attained.’”
[119] The court a quo’s findings are sound and reflect proper judicial restraint. This
is not a case warranting intervention by the High Court at this stage.
CONCLUSION: A SUMMARY
[120] The respondent objectively had a duty to initiate debarment proceedings
based on the threshold test established in Viking Pony.
[121] The appellant has not established on the papers, on a balance of
probabilities, that the respondent was motivated by ulterior purpose rather than by its
regulatory obligations.
[122] The appellant has also not satisfied the requirements for a final interdict.
[123] The court a quo cannot be faulted for dismissing the application. The appeal
must consequently be dismissed.
COSTS
[124] I see no reason to deviate from the ordinary rule that costs follow the result.
The respondent has been successful and is entitled to its costs. The matter was of
sufficient complexity to warrant the employment of two counsel, and senior counsel's
fees should be taxable on Scale C, and junior counsel on scale A.
ORDER
[125] In the result, I propose the following order be made:
1. The appeal is dismissed.
2. The appellant shall pay the respondent's costs of the appeal, including
the costs of two counsel, with senior counsel's fees to be taxed on
scale C and junior counsel on scale A.
________________________
E JONKER
ACTING JUDGE OF THE HIGH COURT
I agree, and it is so ordered.
________________________
M SHER
JUDGE OF THE HIGH COURT
I agree.
________________________
N MANGCU-LOCKWOOD
JUDGE OF THE HIGH COURT
APPEARANCES:
Appellant’s counsel: J Muller SC
Appellant’s attorneys: Cowan-Harper-Madikizela Attorneys
Respondent’s counsel: G Leslie SC and M van der Berg
Respondent’s attorneys: Mcaciso Stansfield Inc.