THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable
Case No: 906/2016

In the matter between:

ODINFIN (PTY) LTD
APPELLANT

and

PIETER REYNECKE
RESPONDENT

Neutral citation:
Odinfin (Pty) Ltd v Reynecke (906/2016) ZASCA 115 (21
September 2017)

Coram:
Bosielo and Petse JJA and Plasket, Tsoka and Rogers AJJA

Heard:

25 August 2017

Delivered:

21 September 2017

Summary:

Delict – Pure economic loss – Loss suffered as a result of
debarment in terms of s 14 of the Financial Services Advisory and Intermediary
Services Act 37 of 2002 – Whether conduct of employer in debarring employee without
complying with the provisions of Promotion of Administrative Justice Act 3 of 2002 was
wrongful and gave rise to damages.

____________________________________________________________________
ORDER
____________________________________________________________________

On appeal from: Gauteng Division of the High Court, Pretoria (Louw J sitting as court
of first instance):

1 The appeal is upheld with costs,
2 The order of the court below is set aside and replaced with the following:
‘The plaintiff’s action is dismissed with costs.’

______________________________________________________________________
JUDGMENT
______________________________________________________________________

Tsoka AJA (Bosielo and Petse JJA and Plasket and Rogers AJJA concurring):

[1] The narrow issue in this appeal is whether an employer, who is a registered
financial services provider in terms of the Financial Advisory and Intermediary Services
Act 37 of 2002 (FAIS Act), acted wrongfully, in the delictual sense, in debarring an
employee who was a representative in terms of s 14 of the FAIS Act without affording
him procedural fairness as required by s 3 of the Promotion of Administrative Justice
Act 3 of 2000 (PAJA) and whether such non-compliance entitled the latter to delictual
damages.

[2] The facts giving rise to the appeal are common cause. On 12 August 2010 the
respondent, Pieter Reynecke (Reynecke), and the appellant, Odinfin (Pty) Ltd (Odinfin),
a registered financial services provider (FSP), entered into a written employment
contract in terms of which the former agreed to render financial services as a
representative on behalf of Odinfin. Three years later Reynecke, so he alleged, became
disillusioned with the conditions of his employment and sought new employment with
Nedbank Limited (Nedbank), also a registered FSP, without prior written approval of
Odinfin. On 15 April 2013, whilst still employed by Odinfin, he entered into a written
employment agreement with Nedbank. Although his position was described as
‘Financial Planner’, his duties were similar to those he rendered to Odinfin. As such he
remained a representative in terms of the FAIS Act.

[3] Unknown to Reynecke, on 8 May 2013 Odinfin learnt that he was undergoing an
induction with Nedbank. Odinfin confronted him with this information but, instead of
owning up, Reynecke denied that he was seeking employment with Nedbank. Instead
he falsely misrepresented to Odinfin that he was in Heidelberg writing and selling new
policies on behalf of Odinfin when, in fact, he was attending the induction. As Odinfin
was aware that this information was incorrect, it requested him to furnish proof that he
was indeed in Heidelberg, which he refused to do. Odinfin then contacted Nedbank to
verify the information it had received with regard to his employment. Nedbank confirmed
the information and in addition confirmed that Reynecke was in fact attending an
induction programme.

[4] Satisfied with the information received from Nedbank, Odinfin suspended
Reynecke and commenced disciplinary proceedings against him. On 10 May 2013 it
served on him a notice of a disciplinary hearing to answer three charges, namely
dishonesty, competing with his employer and conflict of interest, all stemming from the
conduct summarised above. The disciplinary enquiry was scheduled for 16 May 2013 at
10h00. In response Reynecke tendered a letter of resignation effective from 13 May
2013. Odinfin immediately replied, pointing out to him that in terms of his employment
agreement it was entitled to a four weeks’ notice period with effect from the 13 May
2013. That meant that as at the date of the hearing he would still be Odinfin’s employee
and was expected to attend the enquiry.

[5] On the morning of the disciplinary hearing, he was reminded of the hearing. He
informed Odinfin that he was not interested and would not be attending the hearing. The
hearing proceeded in his absence. After hearing Odinfin’s witnesses the chairman of the
disciplinary enquiry found Reynecke guilty of the three charges levelled against him.
The chairman recommended that his employment agreement be terminated with
immediate effect. This Odinfin did.

[6] Section 13(3) of the FAIS Act imposes an obligation on FSPs to maintain a
register of their representatives. All representatives are required, inter alia, to comply
with the ‘fit and proper’ requirements set out in s 6A. These include ‘personal character
qualities of honesty and integrity’. In terms of s 14(1) read with s 13(3) an FSP is
required to remove the name of a representative from its register if, inter alia, he or she

is no longer a fit and proper person. In terms of s 14(3) the FSP must inform the
registrar of financial institutions of the debarring and the registrar may make known
such debarment and the reasons therefor by notice on the official web site or by means
of any other appropriate public media.

[7] After Reynecke’s dismissal Odinfin updated its register in terms of s 14(1) read
with s13(3)  to reflect that Reynecke had lost the status of being a fit and proper person
who was honest and had integrity and that he was debarred from providing any new
financial services on Odinfin’s behalf. As required by s 14(3)(a), Odinfin notified the
registrar accordingly. The registrar, as permitted by s 14(3)(b), published the debarment
by notice on the official website. At some stage thereafter Nedbank conducted a
background check on Reynecke. This revealed that the registrar had noted his
debarment. Nedbank then also terminated his employment agreement. Reynecke
approached the Commission for Conciliation, Mediation and Arbitration for redress. The
parties settled the dispute on the understanding that Reynecke would approach the
court to review the debarment.

[8] On 12 September 2013 Reynecke launched a review application in the Gauteng
Division of the High Court, Pretoria. Odinfin filed a notice to oppose the application
which opposition was later withdrawn. The basis of the application was that Odinfin, in
discharging its mandatory obligation in terms of s 14 of the FAIS Act, was performing an
administrative act, which in terms of PAJA entitled him to notice and a fair hearing. He
alleged that the debarment, having been done without notice and a fair hearing, was

procedurally unfair and as such had to be reviewed and set aside. Reynecke’s
contention that Odinfin’s debarment decision constituted administrative action accorded
with this court’s subsequent decision in Financial Services Board v Bathram.1 In the
present case the high court, apparently without furnishing reasons, reviewed and set
aside the debarment. Thereafter Nedbank re-employed Reynecke but by that time he
had been without employment and a salary for nine months.

[9] On 4 December 2014 Reynecke launched an action against Odinfin in the court a
quo seeking damages for loss of income. His contention was that Odinfin had owed him
a duty of care not to proceed to debar him without notice and a hearing. Odinfin filed a
plea denying the existence of the alleged duty of care and contending that the alleged
loss was ‘caused by his own wrongdoing. . .’

[10] The parties seemingly agreed on a separation of issues, with the ‘merits’ to be
decided first. The precise terms of the separation do not appear from the record and the
court a quo made no formal order in terms of rule 33(4) of the Uniform Rules of Court.
The trial proceeded before Louw J who at the end of the trial found in favour of
Reynecke and held that Odinfin was liable for such damages as Reynecke could prove
plus costs. Dissatisfied with this finding, Odinfin brought an application for leave to
appeal the said order. The application was successful. This is the appeal before us.

[11] Before dealing with the merits of the appeal, there is one issue that need to be
addressed. The issue concerns the separation of issues in terms of rule 33(4). Judges

1 Financial Services Board v Bathram (20207/ 2014 [2015] ZASCA 96 [2015] 3 All SA 665 (SCA) .

should not approve a separation just because the parties have agreed to do so. And if a
separation is approved, the court must ensure that its terms are clear. The facts of this
matter reveal that separation was inappropriate. It was in fact inconvenient to deal with
this matter piecemeal rather than all at once. The quantum that was held over for later
determination was modest and easily calculable. To dispose of this matter at once
rather than piecemeal would at most have extended the trial into a second day. In fact,
proceedings only started in the court a quo at 11h23 (because copies had to be made of
certain documents) and finished at 14h38. Had the trial been run efficiently, the
evidence on all issues would not have needed more than one day. And as I have
observed, the terms of the separation were not properly recorded. For example, at the
hearing of the appeal counsel were unclear whether causation was part of the merits or
the quantum. If Reynecke correctly succeeded on the ‘merits’, he might still have been
unable to prove that things would have turned out any differently if Odinfin had complied
with its procedural obligations under PAJA. Having disposed of the two preliminary
issues, I turn to the merits of the appeal.

[12] That Reynecke’s claim is a delictual claim based on pure economic loss admits
no doubt. It being a delictual claim founded on the breach of the provisions of PAJA, for
him to succeed with his claim, he must prove:
(a)
Conduct,
(b)
Wrongfulness,
(c)
Fault,
(d)
Causation and

(e)
Damages
The issue of damages having been held over, this need not detain us further. I have
already mentioned that it is unclear whether causation also stood over. I shall assume it
did. As to fault, Reynecke did not allege that Odinfin’s alleged breach was knowingly
wrongful (dolus) or negligent (culpa) so on the merits he had to show not only that the
breach of procedural fairness was wrongful in the delictual sense but that it gave rise to
strict liability.

[13] The test for determining wrongfulness in a delictual sense for omissions was
formulated by this court in Van Eeden v Minister of Safety and Security (Women’s
Centre Trust, as Amicus Curiae)2 as follows:
‘. . . An omission is wrongful if the defendant is under a legal duty to act positively to prevent the
harm suffered by the plaintiff. The test is one of reasonableness. A defendant is under a legal
duty to act positively to prevent harm to the plaintiff if it is reasonable to expect of the defendant
to have taken positive measures to prevent harm. The court determines whether it is reasonable
to have expected of the defendant to have done so by making a value judgment based, inter
alia, upon its perception of the legal convictions of the community and on considerations of
policy. The question whether a legal duty exists in a particular case is thus a conclusion of law
depending on a consideration of all the circumstances of the case and on the interplay of the
many factors which have to be considered . . .’

[14] It is trite that the legal convictions of the community and considerations of policy
are now determined by the normative values contained in the Constitution.3

2 Van Eeden v Minister of Safety and Security (Women’s Centre Trust, as Amicus Curiae) 2003 (1) SA
389 (SCA) para 9.

[15] In regard to an omission to comply with the requirements of PAJA, it is apt to
refer to what the Constitutional Court said in Steenkamp N O v Provincial Tender Board,
Eastern Cape:4:
‘However, a concession that the tender board acted inconsistently with the tenets of
administrative justice is neither decisive of the existence of a duty of care nor is it of any avail to
the applicant’s case. In our Constitutional dispensation every failure of administrative justice
amounts to a breach of a constitutional duty. But the breach is not an equivalent of unlawfulness
in a delictual sense. Therefore an administrative act which constitutes a breach of a statutory
duty is not for that reason alone wrongful . . . Policy considerations of fairness and
reasonableness have to be taken into account when imposing a duty of care and ultimately
liability to make good the harm suffered by a claimant.’

[16] In Mashongwa v Passenger Rail Agency of South Africa,5 the Constitutional
Court in deciding whether a failure of administrative justice amounted to a delict
reasoned thus:
‘To conclude that an incident of omission, particularly in relation to public duties, is wrongful and
impute delictual liability, is an exacting exercise that requires a reflection on a number of
important factors. Some of them are: whether the operating statute provides for a delictual claim
for damages; whether the legislation’s scheme is primarily about protecting individuals or
advancing public good; whether the public power conferred is discretionary; whether the
imposition of liability for damages is likely to have a ‘chilling effect’ on the performance of

3 Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA) para 17.
4 Steenkamp N O V Provincial Tender Board, Eastern Cape 2007 (3) 121 (CC) para 37.
5 Mashongwa v Passenger Rail Agency of South Africa 2016 (3) SA 528 (CC) para 22.

government functions; whether loss was foreseeable; and whether alternative remedies such as
interdict, review or appeal are available to claimant’ (Footnotes omitted)

[17] The issue of delictual liability for breach of a statutory duty was recently
considered by this court in Home Talk v Ekurhuleni Metropolitan Municipality,6 where
the relevant principles were summarised. I wish to quote two paragraphs from Ponnan
JA’s judgment (citation of authorities omitted):
‘19.  Undoubtedly, the appellants were entitled to proper administrative legal proceedings. But,
that did not mean that the breach of the administrative duties as set out in the particulars of
claim necessarily translated into private law duties giving rise to delictual claims. It must be
accepted that an incorrect administrative decision is not per se wrongful. It is thus unhelpful to
call every administrative error ‘unlawful’, thereby implying that it is wrongful in the delictual
sense, unless one is clear about its nature and the motive behind it. Administrative law is a
system that over centuries has developed its own remedies and, in general, delictual liability will
not be imposed for a breach of its rules unless convincing policy considerations point in another
direction. The breach of every legal duty, especially one imposed by administrative law, does
not necessarily translate into the breach of a delictual duty. If the legal duty invoked is imposed
by a statutory provision the focal question is one of statutory interpretation. Whether the
existence of an action for damages can be inferred from the controlling legislation depends on
its interpretation and it is especially necessary to have regard to the object or purpose of the
legislation. This involves a consideration of policy factors which, in the ordinary course, will not
differ from those that apply when one determines whether or not a common-law duty existed.
. . . .
22.  In considering the issue of wrongfulness in the delictual sense, the nature of the
Municipality’s functions certainly require close scrutiny. But it must be appreciated that the
nature of its functions is but one of the circumstances calling for consideration in the case. As
always, to determine the issue of wrongfulness, all the circumstances of the case fall to be
considered. One of the questions in this case is whether the legislature intended a claim for
damages in respect of loss caused in addition to the other administrative law remedies available
to the appellants. In Steenkamp (para 22), Harms JA observed:

6 Home Talk v Ekurhuleni Metropolitan Municipality (225/2016) [2017] ZASCA 77 (2 June 2017).

“It appears to me that if the breach of a statutory duty, on a conspectus of the statute, can give
rise to a damages claim, a common-law legal duty cannot arise. If the statute points in the other
direction, namely that there is no liability, the common law cannot provide relief to the plaintiff
because that would be contrary to the statutory scheme. If no conclusion can be drawn from the
statute, it seems unlikely that policy considerations could weigh in favour of granting a common-
law remedy.”’

[18] Reynecke’s pleaded case seems to be that Odinfin’s wrongful act was the breach
of s 3 of PAJA, albeit in relation to administrative action taken pursuant to s 14 of the
FAIS Act. Reynecke did not plead that on the facts his conduct did not provide grounds
for a conclusion that he no longer met the ‘fit and proper requirements’ referred to in
s 6A of the FAIS Act. The FAIS Act does not prescribe any procedure which an FSP
must follow before debarring a representative. Reynecke did not plead, nor does it
seem to be the case, that Odinfin breached any statutory duty imposed by the FAIS Act.

[19] The case thus reduces to the question whether administrative action which is
procedurally unfair in terms of s 3 of PAJA is delictually wrongful. The answer to that
question must turn not on the provisions of the legislation pursuant to which the
administrative action was taken (here, the FAIS Act) but on the provisions of PAJA
itself. There is nothing in PAJA to suggest that the lawmaker intended there to be a
delictual remedy for non-compliance with its provisions in general or its provisions
relating to procedural fairness in particular. On the contrary, PAJA deals at some length
with the rights of an aggrieved person affected by unfair administrative action, namely
judicial review in terms of s 6 and the remedies provided for in s 8. Here Reynecke
exercised his right of judicial review and obtained an order setting aside Odinfin’s

procedurally unfair administrative action. Although the matter was not formally remitted
to Odinfin for decision, Odinfin would have been entitled – perhaps obliged – to decide
the matter afresh after observing the requirements of procedural fairness.

[20] In exceptional circumstances a review court may, instead of remitting the matter,
make a substituted decision or may order the decision-maker to pay compensation
(s 8(1)(c)(ii)). This was not the remedy that Reynecke claimed and it is doubtful in any
event whether it was permissible, having regard to this court’s decision in Simcha Trust
v De Jong.7

[21]  The fact that PAJA does not afford a delictual remedy for damages does not
necessarily mean that unjust administrative action will not be delictually wrongful if there
was a breach of the statute pursuant to which the administrative action was taken and if
such statute on a proper interpretation confers a delictual remedy. In the instant matter,
however, Reynecke does not allege that there was a breach of the FAIS Act. And even
if there had been a breach of s 14 of the FAIS Act, I do not consider that the FAIS Act
envisages a delictual claim for damages. The primary aim of s 14 is not to protect the
interests of employed representatives such as Reynecke but to advance the public
good. Odinfin had no option but to debar Reynecke once it found him lacking honesty
and integrity. The imposition of liability for damages would have a ‘chilling effect’ on the
performance by FSPs of their statutory duty imposed by s 14 and on the administration
of the FAIS Act. There is no difficulty in imposing liability where the decision-maker acts

7 The Trustees of the Simcha Trust v De Jong & others [2015] ZASCA 45; 2015 (4) SA 229 (SCA) paras
25-26.

dishonestly or corruptly but our courts have been slow to find that statutes accord
delictual remedies for mere negligence.8 Here Reynecke wanted the court a quo to go
even further and impose strict liability.

[22] In the present matter, the interest of the public looms large. It is entitled to know
that representatives possess honesty and integrity, otherwise even rogue persons could
act as representatives without the public at large knowing. The victims would not only
be members of the public but financial institutions as well. A country which allowed
rogue persons to act as representatives would be poorer for it. To impose liability for
damages for the negligent performance of an administrative function would have a
chilling effect on the administration of the FAIS Act.

[23] I conclude that Odinfin’s breach of PAJA did not give rise to a delictual claim for
damages. Its actions, in the absence of any allegation or evidence of mala fides, were
not wrongful.

[24] Having regard to the aforesaid, the following order is made –
(a) The appeal is upheld with costs,
(b) The order of the trial court is substituted with the following –
‘The plaintiff’s action is dismissed with costs’.

8 See Simcha Trust fn 7 above para 30; South African Post Office v De Lacy & another 2009 (5) SA 255
(SCA) para 14.

_______________
M Tsoka
Acting Judge of Appeal

APPEARANCES:

For Appellants:

B C Stoop SC
Instructed by:

Barnard Inc, Centurion

c/o McIntyre van der Post, Bloemfontein

For Respondents:

D M de Bruyn
Instructed by:

De Bruyns Attorneys, Pretoria

Bezuidenhouts Inc, Bloemfontein