THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 454/2022
In the matter between:
ILSE BECKER
FIRST APPELLANT

EUGENE BECKER
SECOND APPELLANT

FUSION GUARANTEES (PTY) LTD
THIRD APPELLANT

and

THE FINANCIAL SERVICES
CONDUCT AUTHORITY

FIRST RESPONDENT

THE HONOURABLE MINISTER
ENOCH GODONGWANA IN HIS
CAPACITY AS THE MINISTER
OF FINANCE
SECOND RESPONDENT

THE NATIONAL CREDIT REGULATOR

THIRD RESPONDENT

THE PRUDENTIAL AUTHORITY
OF SOUTH AFRICA
FOURTH RESPONDENT

Neutral citation: Ilse Becker and Others v The Financial Services Conduct
Authority and Others (454/2022) [2023] ZASCA 149 (10
November 2023)
Coram:
PETSE DP and MOTHLE and MEYER JJA and SIWENDU and
UNTERHALTER AJJA
Heard:

15 September 2023
Delivered:
10 November 2023
Summary:
Constitutional law – financial services regulation – whether ss
154, 167 and 231 of the Financial Sector Regulation Act 9 of 2017 (the Act)
unconstitutional and invalid – failure to observe procedural fairness in deciding
whether a person has contravened a financial sector law – challenge to constitutional
validity in terms of s 33 of the Constitution – subsidiarity – application of s 3 of the
Promotion of Administrative Justice Act 3 of 2000 (PAJA).

ORDER

On appeal from: Gauteng Division of the High Court, Pretoria (Ncongwane AJ,
sitting as court of first instance):
The appeal is dismissed with costs, such costs to include the costs of two counsel,
where so employed.

JUDGMENT

Unterhalter AJA (Petse DP and Mothle and Meyer JJA and Siwendu AJA
concurring):

Introduction
[1] The first and second appellants, Ms Ilse Becker and Mr Eugene Becker
respectively, (the Beckers) are the directors of the third appellant (Fusion Guarantees
(Pty) Ltd (Fusion)). Fusion is a company, the business of which is to offer guarantees
and sureties. The first respondent is the Financial Services Conduct Authority (the
Authority). The Authority was established in terms of s 56 of the Financial Sector
Regulation Act 9 of 2017 (the Act). Among its functions, the Authority is charged
with the power to regulate and supervise the conduct of financial institutions in terms
of the Act.

[2] At the behest of the Authority an investigation was conducted, in terms of s 80
of the Financial Institutions Act 80 of 1998, into the affairs of Fusion. Mr Panday
rendered an inspection report, dated 16 July 2019. He concluded that Fusion was in

contravention of the Short-Term Insurance Act 53 of 1998. On 12 February 2020,
Mr Dikokwe of the Authority gave notice to Fusion and the Beckers of the
Authority’s intention to take regulatory action against them. The notice stated that,
based on the findings of the investigation, the Authority was of the prima facie view
that Fusion, through the agency of the Beckers, was in contravention of certain
financial sector laws. The Authority indicated that it intended to impose an
administrative penalty of R200 million on Fusion, and make a debarment order in
respect of the Beckers for a period of 15 years. The notice set out the factors that the
Authority took into consideration in determining the regulatory actions the Authority
intended to take. Fusion and the Beckers were afforded an opportunity to make
submissions on the investigation report, the proposed administrative penalty, and the
proposed debarment.

[3] Fusion and the Beckers took up this invitation, and made detailed
submissions. They also made application to the Gauteng Division of the High Court,
Pretoria (the high court) to declare ss 154, 167, 230 and 231 of the Act (collectively,
the impugned provisions) unconstitutional and invalid. They cited, among others,
the Authority and the Minister of Finance as respondents. Before the high court, the
challenge to s 230 was not persisted with. The high court dismissed the application.
With its leave, Fusion and the Beckers now appeal to this Court. The Authority and
the Minister of Finance oppose the appeal and seek its dismissal. While this litigation
has been engaged, the Authority has not taken a final decision to impose an
administrative penalty or make a debarment order.

The issues on appeal
[4] In oral argument before us, counsel for Fusion and the Beckers,
commendably, simplified their challenge on appeal. First, they no longer challenge

the impugned provisions on the basis that they infringe s 22 of the Constitution.
Second, they draw a distinction between the finding of the Authority that there has
been a contravention of a financial sector law and the appropriate sanctions that
should be imposed, upon such a finding having been made.

[5] Third, the challenge they make is directed, in the first place, to the scheme of
the Act in terms of which the Authority makes a finding of a contravention of a
financial sector law. Fusion and the Beckers contend that the Act does not permit
them a hearing in respect of this finding. That, they contend, is unfair and constitutes
an infringement of s 33 of the Constitution.

[6] Fourth, when the Authority comes to decide upon the appropriate sanctions
that should be imposed upon persons found to have contravened a financial sector
law, here a different kind of unfairness arises. The Authority is not an impartial and
independent tribunal, and hence the power of the Authority to impose an
administrative penalty and order disbarment offends s 34 of the Constitution.

[7] Fifth, if we do not find that the challenge, predicated upon s 33 of the
Constitution, is valid, then Fusion and the Beckers do not persist in their challenge
under s 34.

The fairness challenge
[8] Fusion and the Beckers challenge the constitutional validity of the powers
enjoyed by the Authority, in terms of the Act, to make a debarment order and impose
administrative penalties. Section 154 sets out the consultation requirements with
which the Authority must comply, before making a debarment order in respect of a
natural person. The Authority must give a draft of the debarment order to the person

affected; provide reasons and other relevant information about the proposed
debarment; and invite the person to make submissions ‘on the matter, and give the
person a reasonable period to do so’. Section 154(3) then provides as follows:
‘In deciding whether or not to make a debarment order in respect of a natural person, the
responsible authority must take into account at least –
(a) the submissions made by, or on behalf of, the person; and
(b) any advice from the other financial sector regulator.’

[9] Section 167(1) of the Act empowers the Authority to impose an administrative
penalty upon a person if they have contravened a financial sector law. Section 167(2)
sets out the matters that the Authority must, and those that they may, have regard to
in determining an appropriate administrative penalty for particular conduct. The
Authority must have regard to ‘any submissions by, or on behalf of, the person that
is relevant to the matter, including mitigating factors referred to in those
submissions’ (s 167(2)(a)(iii)).

[10] The constitutional challenge of Fusion and the Beckers, regarding the power
of the Authority to make a debarment order and impose an administrative penalty,
has undergone some refinement. Their challenge was ultimately cast in the following
way. Sections 154 and 167 afford a right to those who might be subject to sanction
to make submissions to the Authority, and the Authority is required to consider those
submissions before deciding whether or not to exercise its powers of sanction. But
this is inadequate protection. Section 33(1) of the Constitution provides that
everyone has the right to administrative action that is lawful, reasonable and
procedurally fair. While ss 154 and 167 provide for those at risk of sanction to make
submissions before the Authority determines whether to impose a sanction, there is
no like procedural fairness that is accorded to persons under the Act whose conduct

has been found by the Authority to have contravened a financial sector law. Such a
finding is the jurisdictional predicate for the exercise of powers by the Authority to
impose a sanction, whether by imposing an administrative penalty or making a
debarment order. Yet, so it was contended, the competence of the Authority to decide
whether a contravention of a financial sector law has taken place is unconstrained
by the obligation to invite submissions from the person who is alleged to have acted
in contravention of the law, and only then to determine whether there has been a
contravention, taking account of these submissions. This want of constraint upon the
exercise of the Authority’s power is an infringement of the rights of Fusion and the
Beckers to procedural fairness, recognised in s 33(1) of the Constitution.

[11] Counsel for the Minister of Finance submitted that the constitutional
challenge made by Fusion and the Beckers was not open to them because the
principle of constitutional subsidiarity provided a complete answer to their
challenge. The Promotion of Administrative Justice Act 3 of 2000 (PAJA) was
enacted to give effect to the rights protected in s 33 of the Constitution. Where a
statute confers power to take administrative action, such action is made subject to
the disciplines of PAJA, unless the statute excludes its application or is otherwise
inconsistent with PAJA. Absent such exclusion or inconsistency, a statute cannot be
directly challenged for its inconsistency with s 33 of the Constitution because
whatever administrative action the statute empowers, it is subject to the protections
of PAJA which, in turn, gives effect to the rights in s 33 of the Constitution.

[12] The principle of subsidiarity was central to the reasoning that led the
high court to dismiss the constitutional challenge. Before us, the application of the
principle of subsidiarity was debated, and, in particular, the holding of the
Constitutional Court in Zondi v Member of the Executive Council for Traditional

and Local Affairs & Others (Zondi).1 Zondi requires that before a statute can be
found to be inconsistent with s 33 of the Constitution, the statute must be read with
PAJA. Generally, PAJA will be of application to any administrative action that the
statute empowers, and hence, no s 33 inconsistency can arise, unless PAJA is itself
deficient in some way in giving effect to the rights in s 33.

[13] What Zondi requires is that we read the Act with PAJA. Fusion and the
Beckers contend that the Act excludes their right to procedural fairness when the
Authority determines whether they have contravened a financial sector law. Whether
that is the correct interpretation of the Act is a matter to which I will come. However,
that is the cause of action upon which they rely. If the Act is interpreted as Fusion
and the Beckers submit it should be, then the Act would be subject to a direct
challenge under s 33 because PAJA would have been found to be of no application
to the exercise of powers by the Authority in determining whether there had been a
contravention of a financial sector law. The principle of subsidiarity does not obviate
the need to consider the interpretation of the Act that Fusion and the Beckers contend
for. Rather, Zondi requires us to engage that interpretative question. And I turn to
this issue.

[14] Fusion and the Beckers recognise that the Act does provide them with a right
to make submissions. Section 154 requires the Authority, before making a
debarment order, to provide reasons for the proposed debarment. The Authority must
invite the person who may be debarred to make submissions ‘on the matter’, and
afford a reasonable time within which to do so. Plainly, the obligation to provide
reasons is intended to allow the person who may be subject to sanction to make

1 Zondi v Member of the Executive Council for Traditional and Local Affairs & Others [2004] ZACC 19; 2005 (3) SA
598 (CC); 2005 (4) BCLR 347 (CC) paras 99 and 103.

informed submissions. These submissions must be considered before the Authority
decides whether or not to make a debarment order.

[15] I do not understand Fusion and the Beckers to contest this understanding of
what s 154 requires of the Authority. Their contention is that these duties of fairness
are of application before the Authority decides whether or not to make a debarment
order. The Act does not extend these duties to the decision of the Authority as to
whether a person has contravened a financial sector law. Section 153(1)(a) provides
that the Authority may make a debarment order if the person concerned has
contravened a financial sector law. And so the finding of a contravention is a
jurisdictional predicate for the exercise by the Authority of its power to sanction by
recourse to the making of a debarment order. However, if the Authority is not
required to invite and consider submissions from the person who has been
investigated, as to whether they have contravened a financial sector law, before
deciding this issue, then the Act fails to respect the constitutional right to procedural
fairness, which s 33(1) of the Constitution entrenches.

[16] This legislative omission, it was submitted, gives rise to considerable risk for
the Beckers. Should the Authority make a debarment order, s 230 provides that
persons aggrieved by that decision may apply to the Financial Services Tribunal
(the Tribunal) for a reconsideration of the decision. However, the process to secure
a reconsideration takes time. In the interim, the debarment is enforced, with its
drastic consequences for the Beckers, both as to what they may not do and the public
opprobrium they will suffer. This is so because s 231 provides that neither an
application for a reconsideration of a decision, nor the proceedings that follow,
suspend the decision of the Authority, unless the Tribunal so orders. The Beckers
complain that the first stage in the process by which sanctions may be visited upon

them lacks procedural fairness. That renders invalid the competence of the Authority
to impose sanctions, as also the enforcement of these sanctions, pending their
reconsideration by the Tribunal. Put simply, if the exercise of competence by the
Authority requires no procedural fairness so as to decide whether a person has
contravened a financial sector law, then no decision as to sanctions predicated upon
a finding of contravention is valid, whatever adherence to procedural fairness the
Authority then demonstrates.

[17] The same challenge is directed at s 167 of the Act. The Authority may impose
an appropriate administrative penalty upon a person who has contravened a financial
sector law. As I have explained, s 167(2)(a)(iii) of the Act requires that in
determining an appropriate penalty, the Authority must have regard to any
submissions ‘relevant to the matter’, made by or on behalf of the person who might
be sanctioned. Fusion submitted that procedural fairness accorded to a person at the
stage of sanction cannot cure the absence of procedural fairness when the Authority
determines whether a contravention of a financial sector law has taken place. The
imposition of an administrative penalty is rendered invalid by the failure to observe
procedural fairness in determining that a contravention took place.

[18] The challenge that Fusion and the Beckers make rests on a single proposition:
that the Act does not require the Authority to invite a person to make submissions,
nor to consider their submissions, before it decides whether this person has
contravened a financial sector law. If the proposition is correct, this would constitute
an infringement of the right to procedural fairness, entrenched by s 33(1) of the
Constitution, and would render the power of the Authority to impose sanctions in
terms of ss 154 and 167 invalid, as also the interim imposition of the sanction
pending a reconsideration that s 231 enjoins. Implicit in this submission is the

following interpretation of the Act: the power of the Authority to decide whether a
person has contravened a financial sector law, though administrative action, is not
subject to obligations to observe procedural fairness imposed by s 3 of PAJA.

[19] But is the proposition correct? Section 154(1), as we have observed, requires
the Authority to invite submissions before making a debarment order. The Authority
must give the person affected the draft debarment order ‘along with reasons for and
other relevant information about the proposed debarment’. The reasons for, and
relevant information concerning, the proposed debarment order must necessarily
traverse why the order is required. As a matter of law, a debarment order can only
be required if there has been a contravention of a financial sector law. The reasons
must therefore engage why it is that the Authority considers there to be a basis to
conclude that such a contravention has taken place. The reasons are given to permit
a person against whom a debarment order may be made to offer informed
submissions. Section 154(1) refers to a proposed debarment. The Authority has not
made a decision to make a debarment order when it invites submissions. It may do
so, but only once it has invited submissions and considered them, before taking a
decision.

[20] Since a contravention of a financial sector law is the essential premise upon
which any sanction may be required, I interpret s 154(1) to mean that the
submissions that are invited, and must be considered, concern every matter relevant
to making a debarment order. The text of s 154(1) says so. It refers to submissions
‘on the matter’. No matter is more central to such a decision than the issue as to
whether a contravention of a financial sector law has taken place. It would also be a
perverse incongruity if s 154(1) required the Authority to provide reasons that
engage the issue of contravention, but exclude from submission, and hence

consideration, what might be said by a person as to why no contravention had taken
place or that the contravention is of a lesser kind or degree.

[21] I find that the correct interpretation of s 154(1) does not exclude from
submission or consideration the issue as to whether a person has contravened a
financial sector law. On the contrary, this lies at the very heart of the matter. It
follows that, properly understood, when the Authority comes to consider whether to
make a debarment order, it cannot have made a final decision as to whether there
was a contravention of a financial sector law. As occurred in this matter, the
investigation may have led the Authority to conclude that there is a prima facie
evidence of a contravention. Any decision on the issue, however, must await the
submissions of the person alleged to have contravened the financial sector law, and
the Authority’s consideration of those submissions.

[22] Once this is so, the Act permits no want of procedural fairness as to the making
of a debarment order. On the contrary, it requires that the Authority provide reasons
for its proposed order, and these reasons must traverse the issue of contravention.
Furthermore, it requires the Authority to invite submissions that engage this issue.
The constitutional challenge of the Beckers, who face a proposed debarment order,
cannot succeed. The challenge to s 231 of the Act was framed as an entailment of
the invalidity that was said to attach to the debarment order. It must therefore also
fail.

[23] For like reasons, the challenge of Fusion to s 167 must also fail. Although its
wording and structure differ somewhat from s 154, as we have observed, it requires
the authority to have regard to submissions ‘relevant to the matter’. Nothing is more
relevant to the matter than the issue as to whether a person has contravened a

financial sector law, the very predicate upon which any imposition of an
administrative penalty rests. It follows, then, here too, that the Authority can make
no final decision as to whether a contravention has taken place until it has considered
the submissions of the person alleged to have contravened a financial sector law.
Thus, for the reasons given, the Act permits of no want of procedural fairness in
conferring a power upon the Authority to impose an administrative penalty.

[24] Sections 154 and 167 cannot be interpreted to exclude submissions
concerning whether a person has contravened a financial sector law from the remit
of the submissions that the Authority must invite an affected person to make.
However, even if ss 154 and 167 could be read on the basis that they do not, in terms,
expressly require the Authority to invite such submissions (contrary to the
interpretation I consider to be correct), the interpretative outcome is no different.
Section 91 of the Act stipulates that PAJA applies to any administrative action taken
by the Authority. Whether the Authority’s decision as to whether a person has
contravened a financial sector law is a discrete action, as the Beckers and Fusion
contend, or whether it forms part of what the Authority determines when deciding
whether to impose a sanction, it is administrative action on the part of the Authority
to which PAJA applies. Hence, the duty of the Authority to observe procedural
fairness is inescapable and the Act, on this score, suffers no constitutional defect.

[25] As I understood the position of counsel for Fusion and the Beckers, if their
challenge on the grounds of procedural fairness, in terms of s 33(1) of the
Constitution, failed, then, they do not pursue their challenge to the Act based upon
the proposition that the Authority is not an independent tribunal or forum, and thus
its power to make a debarment order or impose an administrative fine offends against
the protections of s 34 of the Constitution. I have found that the procedural fairness

challenge cannot prevail, and hence, say nothing more of the challenge of Fusion
and the Beckers in terms of s 34.

Remedy
[26] For these reasons, the appeal of Fusion and the Beckers must be dismissed.
Although the appeal raises issues of some constitutional import, this litigation has
been pursued by Fusion and the Beckers to defend themselves against a regulatory
imposition. That is of course their right. But having not prevailed, in my judgment,
they should bear the costs of this appeal.

[27] In the result: the appeal is dismissed with costs, such costs to include the costs
of two counsel, where so employed.

__________________________
D N UNTERHALTER
ACTING JUDGE OF APPEAL

Appearances

For the appellants:

A R G Mundell SC (with D van Niekerk)
Instructed by:

Cowan-Harper-Madikizela Attorneys, Sandton

Bezuidenhouts Inc., Bloemfontein

For the first respondent:
A Cockrell SC
Instructed by:

Mothle Jooma Sabdia Inc., Pretoria

Matsepes Inc., Bloemfontein

For the second respondent:
L Gcabashe SC (with P Jara)
Instructed by:

The State Attorney, Pretoria

The State Attorney, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

10 November 2023
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal
Ilse Becker and Others v The Financial Services Conduct Authority and Others
(454/2022) [2023] ZASCA 149 (10 November 2023)

Today the Supreme Court of Appeal (SCA) handed down judgment in an appeal in which ss 154, 167
and 231 of the Financial Sector Regulation Act 9 of 2017 ( the Act) were challenged on the basis that
these provisions infringed the appellants’ right to procedural fairness guaranteed in terms of s 33 of the
Constitution.

An investigation was conducted into the affairs of the appellants. The investigation concluded in a report
that the appellants had contravened the Short-Term Insurance Act 53 of 1998. The Financial Services
Conduct Authority (the Authority) gave notice to the appellants that it was prima facie of the view that
the appellants were in contravention of certain financial sector laws and that it proposed to impose an
administrative penalty of R200 million and make a debarment order against two of the appellants. The
Authority invited the appellants to make submissions on the investigative report and the proposed
administrative penalty and proposed debarment.

The appellants made comprehensive submissions, but also challenged the constitutional validity of the
powers enjoyed by the Authority, in terms of the Act, to make a debarment order and impose an
administrative penalty. Their challenge did not prevail in the high court.

In their appeal before the SCA, the appellants contended that while ss 154 and 167 afforded the
appellants a right to make submissions to the Authority concerning the sanctions that might be imposed
upon them, the Act did not provide the appellants with procedural fairness in respect of the Authority’s
finding that the appellants had contravened certain financial sector laws. And since this finding was a
necessary stage of decision-making by the Authority before it could decide upon any sanction, the Act
was constitutionally invalid.

The SCA dismissed this challenge. Upon a proper interpretation of ss154 and 167, the appellants
enjoyed the right to make submissions and have those submissions considered by the Authority both
as to the issue of the contravention of certain financial sector laws and any possible sanctions that
might follow. The Authority cannot make any final decision as to the contravention of certain financial
sector laws before inviting the appellants to make submissions on this issue and considering those
submissions. Sections 154 and 167, the SCA found, are not invalid for want of procedural fairness and
the appeal was accordingly dismissed.

~~~~ends~~~~