Fast little loans
The North Gauteng High Court yesterday dismissed a legal challenge to the authority of the financial advice ombud and confirmed your right to use the ombud’s office to obtain a quick and easy remedy when you believe you have been given bad financial advice.
Judge Selby Baqwa said he was not persuaded the application brought by Deeb Risk, of D Risk Insurance Consultants, against Noluntu Bam, Ombud for Financial Services Providers, “was well founded” and dismissed it with costs.
The outcome of the court case will be a relief for the eight pensioners who complained to the ombud after Risk advised them to invest hundreds of thousands of rands in two now troubled Sharemax property syndication schemes. The pensioners, Finance Minister Pravin Gordhan and deputy ombud Stella Mathamela were named as respondents with Bam in the case.
Bam says the judgment vindicates consumers’ right to have their complaints resolved in a speedy, cost-effective and informal manner by her office.
“The judgment is a vote of confidence in the institutions, such as the Financial Advisory Intermediary Services (FAIS) ombud and the Appeals Board, created by the FAIS Act,” Bam says.
She says the judge could not find fault with the processes her office uses to investigate and make determinations on complaints, and it will continue to resolve complaints as mandated by the FAIS Act.
The ombud’s office has heard 30 000 complaints since it was established in 2004. Recently, many investors in failed property syndication schemes have been awarded compensation by the ombud.
Judge Baqwa dismissed the argument by Risk’s legal team that the ombud was bound by law to hear evidence on Risk’s cases as “extraordinary”, found no evidence that Risk’s constitutional rights had been infringed and said Risk had failed to exhaust the appeal process before coming to court.
Risk launched the court application after Bam asked him to respond to the pensioners’ complaints.
Risk disputed the pensioners’ versions of events and said the ombud should refer the cases to a court to hear evidence.
Had the cases been referred to court, the pensioners would have been faced with potential legal costs.
Bam refused to refer the cases to court and issued six determinations against Risk.
Risk then launched the court application with the help of his professional indemnity insurer, Stalker, Hutchison and Admiral, a subsidiary of Santam.
Risk argued that Bam was obliged to refer the complaints against him to court and, in refusing to, had denied him his constitutional right. He asked the court to either set aside Bam’s decision not to convene a hearing and then declare the determinations made against him invalid, or to declare unconstitutional the section of the FAIS Act that gives her the discretion not to allow a hearing.
The FAIS Act says the ombud “may on reasonable grounds determine that it is more appropriate that the complaint be dealt with by a court or through any other available dispute resolution process”.
Risk’s legal team argued that although the Act uses the word “may”, in this case the word should be interpreted to be obligatory, as “shall”. His lawyers said this would be consistent with the Constitution.
Judge Baqwa says interpreting the word “may” as “shall” “would be clearly an extraordinary interpretation which … cannot but distort the intention of the legislature and lead to an absurdity”.
Dealing with Risk’s team’s assertion that if the FAIS Act did not oblige the ombud to hold a hearing the Act was unconstitutional, Judge Baqwa says Risk and his team cannot ask the court to apply the provisions of the law and, when the outcome is adverse, ask the court to declare the law unconstitutional.
Judge Baqwa says Risk and his legal team cannot paddle two canoes at once.
The judge also says that, in constitutional matters, a court should not decide a constitutional issue unless it is necessary to do so.
Risk and his lawyers had failed to identify the constitutional issue that needed to be dealt with, he says.
He says the legislature’s intention in framing the FAIS Act is clear: it was to permit the ombud flexibility when dealing with complaints so that, depending on the circumstances of each complaint, the ombud may adopt procedures similar to those used in a court.
“The constitutional challenge is therefore either poorly formulated or simply does not arise.”
Judge Baqwa says Risk should have exhausted his right under the FAIS Act to appeal Bam’s determinations to the Appeal Board of the Financial Services Board.
The Appeal Board can hear an appeal in the fullest sense – it can conduct a complete rehearing, reconsideration and issue a fresh determination, he says.
The Promotion of Administration of Justice Act says no court or tribunal should review an administrative action unless any internal remedy has been exhausted, Judge Baqwa says.
He found no exceptional circumstances to condone Risk’s failure to appeal to the Appeal Board, and said it would not be in the interests of justice to exempt Risk from exhausting this appeal route.