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[2013] ZAWCHC 121
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Coetzee v Financial Planning Institute of Southern Africa (Association Incorporated in terms of S21) and Others (20986/2012) [2013] ZAWCHC 121 (5 September 2013)
Republic of South
Africa
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
Case no: 20986/2012
In the matter between:
ELIZABETH COETZEE
....................................................................................
Applicant
and
FINANCIAL PLANNING
INSTITUTE OF SOUTHERN
AFRICA (ASSOCIATION
INCORPORATED
IN TERMS OF S21)
..............................................................................
First
Respondent
RN KING
.........................................................................................
Second
Respondent
E VENTER
..........................................................................................
Third
Respondent
J LOURENS
.....................................................................................
Fourth
Respondent
J MAREE
.............................................................................................
Fifth
Respondent
M LOUW
.............................................................................................
Sixth
Respondent
Court
:
Judge Louw
et
Judge Cloete
Heard
: 2
August 2013
Delivered
:
5 September 2013
JUDGMENT
CLOETE J
:
Introduction
This is an application
brought under the common law for the judicial review of the decision
of the first respondent, a domestic
tribunal sitting as an appeal
body (‘
the FPI’
) which confirmed the applicant’s
guilt on two counts and suspended her as a member of the FPI for a
period of two years.
The second to sixth respondents are cited in
their capacities as members of the FPI appeal body.
The matter has a long
history but may briefly be summarised as follows. The applicant is a
financial services professional. She
is a certified financial
planner as well as a qualified cost and management accountant. The
FPI is a leading independent representative
body of professional
financial planners in South Africa. Membership is voluntary but
members are contractually bound by the FPI’s
articles of
association, its disciplinary rules, its code of ethics and its
professional responsibility and generally accepted
planning practice
(‘
GAPP’
). At all material times the applicant was
a member of the FPI and thus subject to the aforementioned articles,
rules, code and
practice.
The applicant provided
financial advice to the complainant, the Wagener Familie Trust (‘
the
Trust’
), duly represented by a Mrs M Wagener (‘
Wagener’
)
in respect of a financial transaction which occurred on 23 August
2005. On 4 July 2006 Wagener laid a complaint against
the
applicant with the FPI which I will deal with below. The FPI
instituted disciplinary proceedings against the applicant on
9 January 2007. The disciplinary enquiry (chaired by members of
the FPI) was held over four days during June and August
2007 and
resulted in the applicant being found guilty on three counts. The
sanction imposed was suspension from the FPI for a
period of ten
years together with payment of a fine of R10 000.
The applicant applied
for leave to appeal and the disciplinary tribunal granted leave on
one count but refused leave on the other
two counts. The applicant
then approached this court to review the disciplinary tribunal’s
decision to refuse leave on
these counts. The review application was
launched on 10 March 2008 and heard by Olivier AJ in June 2010.
On 5 January
2011 the learned acting judge found in favour of
the applicant and set aside the disciplinary tribunal’s
refusal to grant
leave.
The appeal tribunal
hearing followed on 16 May 2011 and 21 and 22
November 2011. The appeal tribunal handed down
its findings on
25 July 2012. It upheld the convictions on two of the three
counts and altered the sanction imposed by the
disciplinary tribunal
to suspension from the FPI for a period of two years. The applicant
now asks this court to review and set
aside the appeal tribunal’s
findings as well as the altered sanction imposed.
Background and
grounds for review
On 23 August 2005
Wagener furnished the applicant withwritten instructions to sell
shares to the value of R30 million
owned by the Trust and to
appropriate the proceeds thereof by investing equal amounts in the
Stanlib Managed Flexible Fund and
the Stanlib Multi-Manager High
Equity Fund. Of the amount of R30 million about R25 million
represented the ‘
profit’
that had been made on
the Trust’s share portfolio during a period of 29 months
leading up to January 2005. At that time
Wagener had informed the
applicant that she feared losing this profit; that she had seen how
the share market could fall and
that this had happened when her late
husband had managed the portfolio himself; and that the worry of
such a large share portfolio
was keeping her awake at night. Wagener
had three children and her wish was that R30 million of the
total value of the portfolio
at the time, namely R60 million,
should be invested in such a way that the Trust would be protected
from a loss.
The written mandate
furnished to the applicant reflects the Trust’s requirements
as follows:
‘
Kliënt
wil wins neem op aandeleportefeulje om kapitaal verliese te beperk
indien beurs sou val. Risikoprofiel tans is te aggressief.
Kliënt
verlang meer diversifikasie in beleggingsportefeulje met meer
konstante bestuur en monitor van portefeulje deur kenners.’
In her founding
affidavit the applicant acknowledged that ‘
beskerming teen
verliese indien die effektebeurs sou val, een van kliënt se
behoeftes is, maar nie die enigste een nie’.
On the applicant’s
advice the funds to be reinvested were ultimately placed in the
aforementioned Stanlib portfolios. Fifty
percent was placed in the
Stanlib Managed Flexible Fund which is described in its ‘
fact
sheet’
as consisting of ‘
a mix of listed
securities and non-equity securities’
with its share
component (referred to as ‘
value equities’
)
comprising 30.20% of the entire portfolio. The other fifty percent
was placed in the Stanlib Multi-Manager High Equity Fund
which is
described in its ‘
fact sheet’
as consisting of
‘
high exposure equities’
with its share component
(referred to as ‘
equities’
) comprising 74.22% of
the entire portfolio.
Wagener’s
subsequent complaint to the FPI was essentially two-fold. First, she
believed that she had not been fully informed
by the applicant of
the financial consequences at the time of placement of these two
investments. Second, she did not believe
that the commission earned
by the applicant for the transaction (i.e. 3% or R900 000) was
commensurate with the level and
quality of financial planning given
to her.
The disciplinary
regulations of the FPI provide that its appeal tribunal shall
consist of five members who are certified financial
planner
licensees, of which two shall be members of the board of the FPI. It
is not in dispute that the appeal tribunal was properly
constituted
and that its members and in particular its chairperson, Mr Ronald
King are experts in the financial advisory
service industry.
In reaching its findings
the appeal tribunal accepted that the applicant’s mandate had
been to protect the R30 million
against a fall in the share
market. It also accepted that the applicant had considered other
alternatives before recommending
the two Stanlib portfolios to the
Trust; and that she had made “full disclosure” to the
Trust. The tribunal found
that the only issue which needed to be
determined on this score was whether the two Stanlib portfolios
would have been able to
protect the investments against a fall in
the share market.
The tribunal found that
although ‘
hierdie aspek nie aan die
[applicant]
gestel
is nie’
the answer was one that the tribunal itself could
provide, given the information contained in the record of the
proceedings and
the qualifications and expertise of the members
themselves. It concluded that having regard to the manner in which
the R30 million
had been invested, it would have been clear to
anyone who knew something about investments that it would have been
impossible
for the applicant to have fulfilled her mandate in
recommending the Stanlib Multi-Manager High Equity Fund and, to a
lesser degree,
the Stanlib Managed Flexible Fund. The tribunal thus
found that the applicant had failed to execute her mandate properly,
diligently
and professionally and that she had accordingly breached
Principle 201 of the FPI’s code of conduct which stipulates
that
‘
an advisor shall exercise reasonable and prudent
professional judgement in providing financial services and at all
times act in
the interest of the client’.
The tribunal also found
that, given that the applicant had placed 50% of the R30 million
in a high risk portfolio (i.e. the
Stanlib Multi-Manager High Equity
Fund), a more appropriate commission would have been fifty percent
of the total earned of R900 000.
It thus concluded that the
applicant had breached Principle 304 of the code of conduct which
stipulates that remuneration charged
must be ‘
fair and
equitable for the client and the member’.
The applicant’s
grounds for review are as follows:
15.1. The appeal tribunal
exceeded its powers in that: (a) it made findings not based on the
record and therefore without the applicant
having been given an
opportunity to be heard; and (b) it confirmed the finding of guilty
on the commission issue when a conviction
on that count was not even
ultimately sought in the disciplinary proceedings (it being contended
that there was no evidence placed
before the disciplinary tribunal or
before the appeal tribunal in respect of that count);
15..2. Alternatively and
in any event the appeal tribunal reached a conclusion that no
reasonable decision maker would have reached;
15.3. The findings on the
two counts together amount to an improper splitting of charges in
that the applicant was found guilty
on two charges on the same set of
facts and no reasonable tribunal would have followed such an
approach.
The legal position
The onus rests upon the
applicant to establish on a balance of probabilities that she was
not afforded a fair hearing before the
appeal tribunal: see
Pretorius v Graham NO
1953 (4) SA 300
(NPD) at 304C.
Article 6 of the FPI’s
articles of association which appears in both the original and
amended versions provides that:
‘
the Board
of Directors shall have the right and authority to regulate by way of
regulation, the suspension or termination of a Member’s
Membership and further, to prescribe all the investigative and
procedural aspects (taking the rules of natural justice into account)
with regard to such investigation and procedures to be followed by
the nominated committee.’
In
Meyer v Law
Society, Transvaal
1978 (2) SA 209
(TPD) at 212H the court
explained the applicability of the principles of natural justice to
domestic tribunals as follows:
‘
The
principles of natural justice which have been recognised by the South
African Courts require a domestic tribunal to adopt a
procedure which
would afford the person charged a proper hearing by the tribunal, and
a proper opportunity of producing his evidence
and of stating his
contentions, and of correcting or contradicting any prejudicial
statements or allegations made against him;
to listen fairly to both
sides and to observe the principles of fairplay; to discharge its
duties honestly and impartially; and
to act in good faith (see
Turner
v Jockey Club of South Africa
1974
(3) SA 633
(A)
at
646 and the cases there cited).’
Procedural fairness
requires that a disciplinary tribunal must furnish the individual
appearing before it with any information
that may be prejudicial to
him or her so that he or she can effectively prepare and deal with
it: see
Mafongosi and Others v United Democratic Movement and
Others
2002 (5) SA 567
(Tk HC) at para [26], referring to
Heatherdale Farms (Pty) Ltd and Others v Deputy Minister of
Agriculture and Another
1980 (3) SA 476
(T) at 486D-G where it
was found that:
‘
It is
clear on the authorities that a person who is entitled to the benefit
of the
audi
alteram partem
rule
need not be afforded all the facilities which are allowed to a
litigant in a judicial trial. He need not be given an oral hearing,
or allowed representation by an attorney or counsel; he need not be
given an opportunity to cross-examine; and he is not entitled
to
discovery of documents. But on the other hand (and for this no
authority is needed) a mere pretence of giving the person concerned
a
hearing would clearly not be a compliance with the Rule. For in
my view will it
[not]
suffice
if he is given such a right to make representations as in the
circumstances does not constitute a fair and adequate opportunity
of
meeting the case against him. What would follow from the
lastmentioned proposition is, firstly, that the person concerned must
be given a reasonable time in which to assemble the relevant
information and to prepare and put forward his representations;
secondly he
must be put in possession of such information as
will render his right to make representations a real, and not an
illusory one.’
In
Huisman v Minister
of Local Government, Housing and Works (House of Assembly) and
Another
[1995] ZASCA 151
;
1996 (1) SA 836
(AD) the appellant had instituted review
proceedings in the court
a quo
alleging that further reports,
information and input had been obtained for the first respondent
prior to the latterconsidering
the appeal. He contended that the
first respondent had been obliged to inform him of the additional
submissions made and that
his failure to do so had been a procedural
irregularity that had resulted in a failure of justice. At 845F-H
the appeal court
found that there was no substance in the
appellant’s complaint, and reasoned as follows:
‘
Were new
facts
to
be placed before the “Administrator” which could be
prejudicial to an appellant, it would be only fair that the latter
be given an opportunity to counter them if he were able to do
so, more particularly were the matter one in which the extant
rights
of an appellant could be detrimentally affected. That is however not
what happened here. No extant rights of the appellant
were in danger.
He was seeking to have those increased. Mr
Buchanan
could
not point to any additional information contained in either the
written memorandum submitted by the Town Clerk in reply
to that
of the appellant, or the documentation in Dercksen's file, of which
the appellant had not been aware and with which he
had not dealt
earlier.’
Regulation 8.1.3 of the
FPI’s disciplinary regulations provides that the appeal
tribunal shall not hear any evidence except
where: (a) new
information becomes available and it would be impractical, in the
opinion of the appeal tribunal, to refer the
matter back to a new
disciplinary tribunal; and/or (b) a dispute arises as to a point of
procedure followed at the disciplinary
hearing and it is not
possible to ascertain from the record, in the opinion of the appeal
tribunal and on a balance of probabilities,
the process that the
tribunal followed (both have no relevance in the present matter).
Regulation 8.1.4 stipulates that the appeal
tribunal shall otherwise
decide the appeal by due consideration of the record of the original
hearing and the arguments presented
to it.
Regulation 8.2 provides
that the appeal tribunal shall, in its sole discretion, have the
authority to: (a) substitute any finding
of the tribunal at the
original hearing with a new finding; (b) impose any new appropriate
sentence; (c) confirm the finding
or findings of the tribunal; and
(d) refer the matter back for a rehearing by a new tribunal on all
or some of the original charges.
In
Minister of
Environmental Affairs and Tourism and Others v Phambili Fisheries
(Pty) Ltd; Minister of Environmental Affairs and
Tourism and Others
v Bato Star Fishing (Pty) Ltd
2003 (6) SA 407
(SCA) at para [52]
the Supreme Court of Appeal pertinently drew the distinction between
an appeal and a review in the following
manner:
‘
[52]
During the course of the argument for Phambili we were frequently
told that something that the Chief Director had done was
“wrong”.
This is the language of appeal, not review. I do not think that the
word was misused, because time and again
it appears that what is
really under attack is the substance of the decision, not the
procedure by means of which it was arrived
at. That is not our job. I
agree with what is said by
Hoexter
(
op
cit
at
185):
“
The
important thing is that Judges should not use the opportunity of
scrutiny to prefer their own views as to the correctness of
the
decision, and thus obliterate the distinction between review and
appeal.” ’
A ‘
splitting of
charges’
occurs where: (a) the evidence necessary to
establish the one charge also establishes the other charge, i.e. the
‘
same evidence test’
; or (b) there are two acts,
each of which constitutes an independent offence, but only one
intent, and both acts are necessary
to realise this intent, i.e. the
‘
single intent’
test: see Hiemstra’s
Criminal Procedure
(Service Issue 6) at p14-5.
The appeal
tribunal’s first finding
In its findings the
appeal tribunal mentioned that its opinion on the nature of the two
Stanlib investments had not been put to
the applicant. However, from
what follows, it is clear from the record of the disciplinary
proceedings that the applicant was
well aware of the complaints
against her as well as the nature of the two investments and that
she was afforded a full and proper
opportunity to deal with them.
In the FPI’s
letter dated 4 July 2006 the ambit of the complaint was drawn to the
applicant’s attention as follows:
‘
The
complaint deals in detail with the advice given to Ms Wagener
regarding the investment of the gains from the increase in the
Sanlam
Private Investment Share Portfolio into less risky assets,
specifically property investments. These funds allegedly were
not
invested in a property investment by you, but reinvested in the
Johannesburg Stock Exchange.’
Wagener’s
evidencewas led with specific reference to the advice given to her
by the applicant. In her words the applicant
‘…
wil
daardie profyt neem en herbelê in lae risiko, minder riskante
beleggings,want hulle vermoed daar gaan ʼn insinking
in die mark
kom in 2006 en sy wil dit belê in lae riskante beleggings and
eiendomsverskanste beleggings…ek het goeie
aandele gaan
verkoop en ongelukkig het my ouditeure toe vir my gesê net
R12 miljoen van daardie beleggings was lae
risiko. Die res is
nie beter as wat ons gehad het nie’.
In cross-examination the
applicant’s legal representative put to Wagener that the
applicant ‘…
gaan sê dat u het vir haar gesê
dat hierdie portefeulje groei nou so mooi en u wil nie hê die
geld moet val
nie… ek bevestig maar net dat my kliënt
gaan sê u het vir haar gesê u bekommerd was dat u geld
gaan verloor
as die beurs sou val…’.
It was the applicant’s
own evidence that her mandate was to protect the R30 million
against a fall in the share market.
She testified that ‘
toe
het sy vir my gesê… ek is bekommerd want die aandele
groei en ek het al voorheen gesien hoe aandele ook kan val,
en haar
man se portefeulje het sy vir my gesê was op ʼn stadium
R60 miljoen en toe hy dood is was dit weer R40 miljoen.
So sy was
bekommerd… so ek het begin navorsing doen en ek het na
verskillende maatskappye toe gegaan en vir hulle gevra,
u weet, wat
is hulle siening… Hulle het vir my gesê dat die mark
kan nog groei, maar hulle verwag dat iewers daar
ʼn bietjie van
ʼn regstelling gaan wees’.
In cross-examination she
testified that ‘
Me Wagener het nie gehou daarvan as haar
aandele val nie meneer. Soos sy gesê het vir my baie keer, sy
het Skotse bloed
in haar en sy wil nie sien hoe die aandele wat
gegroei het weer terugval nie’.
The applicant also
testified at some length about the investigations that she had
undertaken concerning alternative investments,
in particular that
she had approached certain well-known leaders in the financial
advisory service industry. It was effectively
her evidence that she
had heeded their views when she had in turn advised Wagener.
However, and despite having been represented
throughout the
proceedings, the applicant declined to call any of these individuals
to testify in support of her defence and
her views on the
suitability of the investments.
In cross-examination it
was put to the applicant that she had defeated the purpose of her
mandate by advising Wagener to reinvest
in the two Stanlib
portfolios. That the applicant was well aware of the nature of the
complaint against her is highlighted by
her later testimony that
‘
daar is wel ʼn stuk aandele gedeelte, maar as jy gaan
kyk na die risikoprofile wat gedoen is, stem dit ooreen met die
risiko’.
It was furthermore the
applicant herself who introduced the two Stanlib investment ‘
fact
sheets’
as evidence that she had indeed carried out her
professional responsibility. It is the FPI’s contention that
if regard
is had to the aforementioned documents alone, the
applicant did not fulfil her mandate on her own version, given that
one of
the investments had an exposure of 75% in the share market
and the other an exposure of 30% therein. It must also be borne in
mind that it was the applicant who willingly agreed to have her
performance judged by experts in the financial services industry
when she became a member of the FPI.
In addition the
questions put to the applicant during the appeal tribunal hearing
show that her attention was repeatedly drawn
to the issues at hand
and that she was given more than sufficient opportunity to respond
thereto. The record of the aforementioned
proceedings also reflects
that the applicant was prepared to answer the concerns raised and
herself referred to passages in the
disciplinary record where she
had dealt with the same issues.
It was also never the
applicant’s case that she was inexperienced or ill-equipped to
have furnished the advice to Wagener
that she did. On the contrary,
the tenor of her evidence was that she considered herself to be an
expert in the field of financial
planning; and indeed, in her
founding affidavit in the present proceedings she set out in detail
her own professional views on
why she considered the two Stanlib
funds to have been suitable.
It is against this
background that the only reasonable conclusions to be drawn are
that: (a) the appeal tribunal did not make
its findings on the basis
of new facts as alleged by the applicant but instead on the record
of the proceedings of the disciplinary
tribunal coupled with its own
expertise; and (b) the requirements of the
audi alteram partem
rule were met. There is also little doubt that the appeal
tribunal applied the standard of a reasonable professional in
considering
whether the applicant had executed her mandate properly,
diligently and professionally. Indeed one of its findings was that
the
applicant had failed to meet even the minimum standard required;
and it thus follows that this ground for review must fail.
Insofar as the applicant
contends that the appeal tribunal reached a conclusion that no
reasonable decision maker would have reached,
it is only necessary
to refer to what the Supreme Court of Appeal had to say in
Bato
Star Fishing
(
supra
) at para [53], namely that ‘
Judicial
deference is particularly appropriate where the subject-matter of an
administrative action is very technical or of a
kind in which a
court has no particular proficiency. We cannot even pretend to have
the skills and access to knowledge that is
available to the Chief
Director. It is not our task to better his allocations, unless we
should conclude that his decision cannot
be sustained on rational
grounds. That I cannot say.’
In my view these sentiments
apply equally in the present matter.
The appeal
tribunal’s second finding
The applicant is correct
that there was no suggestion in the evidence before the disciplinary
tribunal that the actual percentage
levied as commissionwas
excessive. However, the applicant overlooks two important factors.
First, whilst the main
criterion in Principle 304 is that whatever remuneration is charged
must be fair and equitable to both
the client and the member, it
also stipulates that ‘
an advisor may be remunerated in
various ways depending on the level of advice that he or she is
rendering…’
. The source of the complaint was the
level of advice furnished by the applicant to the Trust, and not the
percentage levied of
3%, which, it appears, is of itself not
excessive in the industry.
Second, whether or not
the case putter had pressed for a conviction on this count in the
disciplinary proceedings is irrelevant.
The appeal tribunal has the
power, in its sole discretion, to confirm the finding or findings of
the disciplinary tribunal in
terms of regulation 8.2.
It is clear that the
appeal tribunal confirmed the finding of the disciplinary tribunal
on its own independent evaluation of the
record of the disciplinary
proceedings which led it to conclude that the quality of the advice
furnished by the applicant fell
far short of the standard required.
It must also be remembered that the matter before us is a review and
not an appeal. The decision
made by the appeal tribunal can only be
assailed on the basis that it cannot be sustained on rational
grounds or an irregularity
in the procedure by means of which it was
arrived at. I am not persuaded that the decision was irrational or
that there was any
procedural irregularity on the part of the appeal
tribunal in making the finding that it did and it follows that this
ground
for review must also fail.
Splitting of
charges
It is the applicant’s
contention that the appeal tribunal erred in relying upon the same
facts in order to find that she
had contravened two separate
principles of its code of conduct. The evidence necessary to
establish the first charge that she
did not carry out her mandate
properly, diligently and professionally differs from the evidence to
establish the second charge
that she did not charge a fair and
equitable remuneration. There was also no single intention to commit
the two contraventions.
The intention to give unprofessional advice
is not the same as the intention to charge remuneration that is
excessive.
Conclusion
In the result the
following order is made:
The application is
dismissed with costs.
__________________
J I CLOETE
LOUW J
:
I agree.
__________________
W J LOUW