Last Monday we published an article on the outcome of a FSCA Tribunal hearing with the following introduction:
“The findings of a hearing by the FSCA Tribunal in the Van Zyl case heard on 25 June 2019 should result in serious introspection by the office of the FAIS Ombud.”
“Whilst not directly addressing some of the grounds for appeal aired by counsel for the appellant, the findings appear to indicate that, in certain respects, the office of the Ombud may have operated beyond its stated objective, which requires it to “…consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner, and by reference to what is equitable in all circumstances.”
The two highlighted aspects again came to the fore in a new Tribunal finding in the past week.
Justice delayed?
The main reason why the office of the Ombud is allowed, by statute, to operate in an informal manner is to ensure that its workings are not delayed by legal red tape. Despite this allowance, its decisions carry the same weight as those of a High Court, which places a serious obligation on the Office to still operate within certain constraints.
Case No: FAB123/2018 (the “Impectus” case) was heard on 8 July 2019 and the decision published on 27 August 2019.
“A problem the Panel must address is the fairness and legality of the determination as far as the applicants for reconsideration are concerned to be held accountable after more than ten years and the delay of the Ombud’s office of nearly seven years.”
This has become the norm for most complaints relating to failed property syndication investments, mainly due to an appeal by the directors of Sharemax after the Ombud found against them despite the relevant complaints not being made against them.
Subsequent findings, after the successful appeal, all contained an explanation as to why there were such lengthy delays between the complaint being laid and the case being finalised. The reason given is that all such complaints were held in abeyance until such time as the appeal was finalised.
We pointed out last week that the Appeal Board already made a ruling in this regard on 10 April 2015. The explanation, therefore, does not really hold water today.
This view was confirmed by the Tribunal in the Impectus case.
“Moreover, it was not disputed that Mr Jonck (sic) had responded to the complaint already in 2012. A determination was wanting then already. This was before the uncertainty raised in the Siegrist and Bekker determinations came to light.”
“Between the receipt of the complaint by the office and the finalizing of such complaint, at least 5 years passed. The determination was only issued on 11 June 2018, being 7 years after the complaint was lodged.”
“The Ombud was duty bound by statute to deal with the matter informally and expeditiously. Due to the backlog of over 2000 complaints the office should have made provision for expediting the adjudication of the complaints. It had a statutory obligation to do so. Even though it is appreciated that the office of the Ombud has limited capacity, the office should have been mindful of its statuary obligations in terms of Section 20 (37 of the FAIS Act.)”
“…the explanation proffered by the office of the Ombud is unjustified for the aforesaid reasons.
“Insofar as prejudice is concerned, both parties have been disadvantaged in waiting over 7 years for a determination from the Ombud. We must be mindful that this is not in the interests of justice. Depending on the findings, an unsuccessful party’s opportunity to review the Ombud’s decision becomes compromised.”
Disputed disclosure documentation
“…the Ombud found that Mr Jonck failed to comply with Section 16(1) of the FAIS Act in that he failed to act “honestly, fairly, with due care, skill and diligence in the interest of clients and the integrity of the financial services industry”.
After scrutinising the disclosure documentation, the Tribunal disagreed.
“We therefore are unable to agree with the Ombud that the complainants were not aware of the risks in the Bluezone investment. The record of advice placed emphasis on the risk factor and that the capital could not be guaranteed. The Mullers benefitted from this investment for 4 years until December 2009.”
Conclusion
“In light of the aforesaid, we find that the decision of the Ombud should be set aside. In the premises we make the following order:
(1) The application for reconsideration is granted;
(2) The Ombud’s determination is set aside;
(3) The respondent’s complaint is dismissed.
It will be very interesting to see what flows from this Tribunal finding, both in terms of complaints not yet finalised by the Ombud, as well cases already determined.
Click here to download the Impectus case.
