THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case no: 781/2020

In the matter between:

THE OMBUD FOR FINANCIAL
SERVICES PROVIDERS
APPELLANT

and

CS BROKERS CC                                                   FIRST RESPONDENT
EMILE STORM                                                 SECOND RESPONDENT
HIS LORDSHIP MR JUSTICE OF
APPEAL RETIRED, L T C HARMS N O           THIRD RESPONDENT
Z MABHOZA N O                                             FOURTH RESPONDENT
G MADLANGA N O                                               FIFTH RESPONDENT
J B WALLACE                                                       SIXTH RESPONDENT

Neutral citation: Ombud for Financial Services Providers v CS Brokers CC
and Others (Case no 781/2020) [2021] ZASCA 117
(17 September 2021)

Coram:
PONNAN,
MATHOPO,
MOLEMELA,
MBATHA
and
GORVEN JJA

Heard:
2 September 2021

Delivered: This judgment was handed down electronically by circulation to
the parties’ representatives by email, publication on the Supreme Court of
Appeal website and release to SAFLII. The date and time for hand-down is
deemed to be 09h45 on 17 September 2021.

Summary: Review – Financial Advisory and Intermediary Services Act –
application under s 27(3) for hearing of oral evidence or referral to court –
Ombud’s discretion – no discretion exercised at all – decision not to allow
application reviewable.

_____________________________________________________________
ORDER
________________________________________________________________________
On appeal from: Gauteng Division of the High Court, Pretoria (Fabricius J,
sitting as court of first instance):
The appeal is dismissed with costs, such costs to include the costs of two
counsel, wherever so employed.
_____________________________________________________________
JUDGMENT
_____________________________________________________________
Gorven JA (Ponnan, Mathopo, Molemela and Mbatha JJA concurring)

[1] On 19 November 2009, the sixth respondent on appeal, Mr J B Wallace
(Mr Wallace), invested a sum of R730 000 with a company known as
Sharemax; R600 000 of this was money entrusted to Mr Wallace by his
mother, a pensioner based in the United Kingdom, to invest on her behalf. The
balance came from his own funds. At the time, one Mr Marais was his
financial advisor. Mr Marais informed Mr Wallace that he was unable to
advise him on an investment with Sharemax and referred him to the second
appellant (Mr Storm). Mr Storm functioned as an authorised representative of
the first appellant, CS Brokers CC (CS Brokers). I shall refer to them jointly
as CS Brokers unless it is necessary to distinguish them. CS Brokers was an
authorised Financial Services Provider under the Financial Advisory and
Intermediary Services Act 37 of 2002 (FAIS).

[2] Mr Wallace, Mr Marais and Mr Storm met more than once. The
investment in Sharemax resulted from these meetings. Sharemax offered a
number of investments which were essentially property syndications. Some
of the funds of Mr Wallace and his mother were placed in the Villa
Development and the balance in the Zambezi Development. Each had its own
prospectus. There are differing versions as to how this came about. In her
determination, the appellant, the Ombud for Financial Services Providers
appointed under FAIS (the Ombud), noted that there was a factual dispute as
to whether either Mr Storm or Mr Marais had advised Mr Wallace to invest in
Sharemax. She notes that Mr Storm and Mr Marais said that Mr Wallace had
already decided to do so prior to meeting Mr Storm. These disputes, of course,
go to the heart of the claim of Mr Wallace. CS Brokers points to other factual
disputes in addition to those noted by the Ombud.

[3] Despite Mr Wallace expecting income from the investments, by
September 2010, no income had been received. Mr Wallace approached
Mr Storm and alleged that Mr Storm assured him that the capital was safe, but
that there had been a delay in income due to internal problems. On
9 November 2010, Mr Wallace wrote to Mr Storm requesting the return of the
capital amount invested. A meeting took place on 19 November 2010 but no
money was forthcoming. Mr Wallace then lodged a complaint with the
Ombud. The complaint was supported by an unsworn statement and
responded to by CS Brokers in like manner.

[4] The complaint was laid with the Ombud on 10 December 2010. She
posed certain questions to CS Brokers, to which she received a response. On
9 May 2011, CS Brokers applied to the Ombud under s 27(3) of FAIS to hold

a hearing or to refer the complaint to a court. The motivation was that it was
a matter requiring oral evidence and cross-examination to resolve factual
disputes as well as expert evidence. On 11 May 2011, the Ombud in effect
refused that application. She went on to deal with the matter on the material
before her. Some five years later, on 26 April 2016, the Ombud made a
determination. She ordered CS Brokers to pay Mr Wallace the sum of
R730 000 along with interest. CS Brokers applied to the Ombud for leave to
appeal, which was refused.

[5] CS Brokers then applied to the Chair of the Appeal Board under
s 26B(12) of the Financial Services Board Act 97 of 1990 (the Board Act).
Such an application is one to allow further oral and written evidence or factual
information and documentation not made available to the Ombud prior to the
making of the decision against which the appeal was lodged. The members of
the Appeal Board (the Board) are the third, fourth and fifth respondents in this
appeal. The Chair dismissed that application. CS Brokers then applied to the
Board for leave to appeal against the determination of the Ombud and were
granted leave to appeal on limited grounds, namely:
‘1.
Was Mrs Wallace a ‘complainant’ as defined in sec 1 of the FAIS Act and if not,
was the Ombud entitled to make an order in respect of her loss?
2.
Does the Plascon-Evans rule apply in inquisitorial investigations – and in that
context did the Ombud in deciding the disputes of fact use her inquisitorial powers
or did she decide the factual disputes on the counter-allegations only?
3.
Did the Ombud conflate the risk profiles of the three different investors?
4.
Was the advice at the time it was given negligent taking into account the extent to
which the risks were indicated? In this regard are the reasons of the Ombud in her
determination and her dismissal of the leave to appeal the same or materially
different?

5.
Would a reasonable FSP have reasonable grounds at the time of the advice to
suspect that the Sharemax scheme was a Ponzi scheme?
6.
Did the Ombud rely on ex post facts for her conclusion?
7.
Was the loss reasonably foreseeable at the time of the advice?’
After considering the record of the Ombud and forming its own view, the
Board dismissed the appeal against the Ombud’s determination in respect of
CS Brokers.

[6] This prompted an application by CS Brokers to the Gauteng Division
of the High Court, Pretoria (the high court), to review and set aside a range of
decisions. By the time the matter was argued, the following relief was sought:
‘1.
The decision by the First Respondent, alternatively the failure by the First
Respondent to make a decision not to grant the application brought by the Applicants in
terms of Section 27(3)(c) of the Financial Advisory & Intermediary Services Act 37 of
2002, to decline to entertain the complaint, is reviewed, set aside and substituted with the
following decision: “This office declines to entertain the complaint in terms of Section
27(3)(c) in that it would be more appropriate for the complaint to be dealt with by a Court
or through any other available dispute resolution process”.
2.
All actions of the First, Second, Third and Fourth Respondents, following upon the
First Respondent’s aforesaid impugned decision are as a consequence of the setting aside
of that decision, also set aside.
3.
It is recorded that should the Fifth Respondent institute action against the
Applicants, based on the facts contained in his complaint to the First Respondent, the
Applicants undertake not to raise prescription as a Plea, subject to such action being
instituted within a 6 (six) month period of the date of this order.
4.
The First Respondent is ordered to pay the costs of the Applicants.’

[7] The matter was heard by Fabricius J, whose order, properly construed
as agreed by the parties, reviewed and set aside all of the decisions of the

Ombud and the Board. These included: the refusal of the application under
s 27(3); the determination by the Ombud; the refusal of the Chair of the Board
of the application under s 26B(12) of the Board Act; and the dismissal of the
appeal by the Board. The Ombud then applied for leave to appeal, which was
refused. The appeal is before us as a result of this Court granting leave. As
was the case in the high court, the third to sixth respondents take no part in
the appeal.

[8] The parties agreed that the appeal stands or falls on whether the high
court should have granted the following order:
‘1.
The decision by the First Respondent, to decline to entertain the complaint in terms
of s 27(3)(c) of the FAIS Act, is reviewed, set aside and substituted with the following
decision: “This office declines to entertain the complaint in terms of Section 27(3)(c) in
that it would be more appropriate for the complaint to be dealt with by a Court or through
any other available dispute resolution process.”.’
The basis of the appeal is the submission that the Ombud properly exercised
her discretion when she refused the application in terms of s 27(3) of FAIS.
In argument, this was posed by the parties as the sole issue to be decided by
this Court.

[9] A brief synopsis of the relevant legislation will assist. Section 20 of
FAIS created the office of the Ombud, whose functions are to be performed
by the Ombud. Sections 20(3) and (4) set out the objective of the Ombud as
follows:
‘(3) The Objective of the Ombud is to consider and dispose of complaints in a procedurally
fair, informal, economical and expeditious manner and by reference to what is equitable in
all the circumstances, with due regard to –

(a) the contractual arrangement or other legal relationship between the complainant and
any other party to the complaint; and
(b) the provisions of this Act.
(4) When dealing with complaints in terms of sections 27 and 28 the Ombud is
independent and must be impartial.’

[10] The Ombud was thus created as a mechanism for the speedy resolution
of disputes, which would otherwise be dealt with in court. A complainant has
an election to either utilise the Ombud or approach a court. Financial Services
Providers have no such election. They must meet the claim in whichever
forum is selected by the complainant. The powers of the Ombud are akin to
those of a court as seen in s 28. The relevant parts are contained in ss 28(1)
and 28(5).
Section 28(1), provides:
‘The Ombud must in any case where a matter has not been settled or a recommendation
referred to in section 27(5)(c) has not been accepted by all parties concerned, make a final
determination, which may include –
(a)
the dismissal of the complaint; or
(b)
the upholding of the complaint, wholly or partially, in which case –

(i) the complainant may be awarded an amount as fair compensation for any

financial prejudice or damage suffered;

(ii) a direction may be issued that the authorised financial services provider,

representative or other party concerned take such steps in relation to the complaint

as the Ombud deems appropriate and just;

(iii) the Ombud may make any other order which a Court may make.’
and s 28(5), which provides:
‘A determination –

(a) or a final decision of the board of appeal, as the case may be, is regarded as a civil
judgment of a Court, had the matter in question been heard by a Court, and must be so
noted by the clerk or registrar, as the case may be, of that Court;
(b) is only appealable to the board of appeal –
(i) with the leave of the Ombud after taking into consideration –
(aa)  the complexity of the matter; or
(bb) the reasonable likelihood that the board of appeal may reach a different
conclusion; or
(ii) if the Ombud refuses leave to appeal, with the permission of the chairperson of the
board of appeal.’

[11] The procedure for the Ombud to deal with complaints is set out in s 27.
Of relevance is s 27(3)(c) of FAIS, which provides:
‘(3) The following jurisdictional provisions apply to the Ombud in respect of the
investigation of complaints:
. . .
(c) 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, and decline to entertain the complaint.’
and s 27(5)(a), which provides:
‘(5) The Ombud –
(a) may, in investigating or determining an officially received complaint, follow and
implement any procedure (including mediation) which the Ombud deems appropriate, and
may allow any party the right of legal representation.’

[12] It can thus be seen that the Ombud is granted extensive substantive
powers. It was correctly conceded in argument by the Ombud that these are
akin to quasi-judicial powers rather than purely administrative ones. A
determination is regarded as a civil judgment of a court. In addition, the
Ombud is accorded a discretion as to the appropriate procedure. This includes

a discretion under s 27(3)(c) to decline to entertain the complaint on the basis
that a court, or some other dispute resolution forum, is the more appropriate
forum to decide the complaint. In addition, the procedural discretion allows
the Ombud to receive oral evidence, among other options.

[13] As indicated, the matter turns on whether the Ombud properly exercised
her discretion in dealing with the application of CS Brokers under s 27(3). It
requested her to decline to decide the matter and to refer it to court,
alternatively to hear oral evidence on the basis that factual disputes existed
which could only be resolved by following that procedure.

[14] There was much debate before us as to the nature of the discretion to
be exercised by the Ombud. This also occupied the high court. The Ombud
submitted that she had a broad discretion as to procedure and had properly
exercised her discretion against hearing oral evidence or declining to deal with
the matter on the basis that it should be dealt with by a court. CS Brokers, on
the other hand, contended that the discretion was one which was required to
be exercised judicially. Interesting though that debate may be, in my view it
does not arise in the present matter and need not detain us. That is because
this matter turns on the facts.

[15] As indicated, the application under s 27(3) was dated 9 May 2011, in
which the attorneys representing CS Brokers requested that the Ombud hold
a hearing or defer to the court in respect of the complaint. On 11 May 2011,

the Ombud responded by letter, saying simply: ‘this Office does not hold
hearings’.1

[16] During argument, counsel for the Ombud readily conceded that the
application required a specific ruling along with reasons. The reason given for
not holding a hearing with oral evidence is simply that the Ombud does not
do so. The response is one which clearly indicates that no discretion at all was
exercised on the application. Instead, a predetermined policy was applied,
without reference to the specific issues in the matter before her. This when the
Ombud is invested with a wide range of procedural options which can be
tailored to different situations and complaints. This does not constitute an
improper exercise of her discretion but an approach which, as the Board put
it in the appeal determination, ‘disregards her statutory obligation to exercise
her discretion’. With this statement, I can find no fault.

[17] In argument, the Ombud referred to the final determination to attempt
to demonstrate that reasons were given. What is said in the determination is:
‘Storm’s attorneys criticize this office for not holding hearings to resolve “material factual
disputes”. This office does not have a policy that prohibits the holding of hearings. Where
it is appropriate, a hearing will be held. In this case there are no material disputes of fact
that require such a hearing.’
This clearly contradicts the refusal at the time on the basis that ‘this Office
does not hold hearings’. It is the latter statement by which the Ombud

1 The full response was: ‘Your application that the matters involving your clients be referred to court is
inappropriate as that is the decision of the Ombud. We add that there is nothing distinguishing the matters
involving your clients to the hundreds of matters handled by this office. Once again, this Office does not hold
hearings’.

responded to the application. In any event, the reasons given in the
determination do not address the factual disputes noted by the Ombud herself
which go to the heart of the claim of Mr Wallace. It suffices to say that it is
difficult to discern which factors weighed and occupied her mind when she
gave her decision. To say that there were no material disputes of fact when
the parties disagreed whether Mr Wallace had already decided to invest in
Sharemax when he met with Mr Storm simply beggars belief.

[18] It is therefore unnecessary to address the manner in which the discretion
of the Ombud should be exercised and the test for interference with it on
review. If no discretion is exercised, when the Ombud was indeed vested with
a discretion, that has to be the end of the matter. As was agreed by the parties
before us, the entire appeal turns on this single issue. It is clear in these
circumstances that the appeal must fail.

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

__________________
T R GORVEN
JUDGE OF APPEAL

Appearances

For appellant:

S Shangisa SC (heads prepared by V

Ngalwana SC and S Shangisa SC)
Instructed by:

Ramushu Mashile Twala Incorporated,

Sandton.
Claude
Reid
Inc
Attorneys,
Bloemfontein.

For First and Second respondents:
P F Louw SC (with him E Van As)
Instructed by:

Bieldermans Incorporated, Sandton.

Honey Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
17 September 2021
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal.

The Ombud for Financial Services Providers v CS Brokers CC and Others
(Case no 781/2020) [2021] ZASCA 117

Today the Supreme Court of Appeal dismissed an appeal from the Gauteng Division
of the High Court, Johannesburg (per Fabricius J). The Ombud for Financial Services
Providers, appointed under the Financial Advisory and Intermediary Services Act 37
of 2002 (FAIS), dealt with a complaint lodged by Mr J B Wallace (Mr Wallace) against
CS Brokers CC and Mr Storm, who was a financial services provider functioning
through CS Brokers (together referred to as CS Brokers). The complaint related to
two investments made by Mr Wallace through CS Brokers in two of the investment
schemes formed by a company known as Sharemax. Mr Wallace felt that he had
been promised interim payments which did not eventuate and lodged a claim for
repayment of the monies invested. This claim was not met.

The Ombud has extensive substantive and procedural powers under FAIS. A
determination is akin to a civil judgment of a court and the Ombud is accorded wide
discretions as to the procedure of determining a complaint. Amongst other things,
the Ombud may refer a complaint to a court and may receive oral evidence.
CS Brokers applied under s 27(3) of FAIS to the Ombud to either refer the complaint

of Mr Wallace to court or to receive oral evidence. This application was simply
responded to by a letter which, as regards the application to receive oral evidence,
said ‘this Office does not hold hearings’. The Ombud then made a determination
ordering CS Brokers to repay the amount of the investment to Mr Wallace. An appeal
to the Board constituted to deal with such appeals also failed.

CS Brokers approached the Gauteng Division of the High Court, Pretoria to review
the refusal of the Ombud to receive oral evidence and for relief setting aside the
subsequent decisions. Fabricius J granted the relief sought. The Ombud, not
satisfied, appealed to the Supreme Court of Appeal on the basis that she was vested
with a wide discretion and had exercised it appropriately. A debate ensued
concerning the nature of the discretion to be exercised in the circumstances. The
Supreme Court of Appeal held that it was unnecessary on the facts of that matter to
decide that debate. Whatever test one applied, the Ombud had clearly responded to
the application with a predetermined policy not to hold hearings without exercising
any discretion at all. In the circumstances, the appeal of the Ombud was dismissed
with costs.