Hunter v Financial Sector Conduct Authority and Others

• Jurisdiction: South Africa
• Citation: 2018 (6) SA 348 (CC)

Hunter v Financial Sector Conduct Authority and Others
2018 (6) SA 348 (CC)

2018 (6) SA p348

Citation	2018 (6) SA 348 (CC)
Case No	CCT 165/17; [2018] ZACC 31
Court	Constitutional Court
Judge	Mogoeng CJ, Cachalia AJ, Dlodlo AJ, Froneman J, Goliath AJ, Jafta J, Khampepe J, Madlanga J, Petse AJ and Theron J
Heard	September 20, 2018
Judgment	September 20, 2018
Counsel	GM Budlender SC (with F Ismail and A Milovanic) for the applicant.; W Trengove SC (with H Rajah) for the first and second respondents.; MC Maritz SC (with T Manchu) for the third and fourth respondents.; JJ Gauntlett SC QC (with FB Pelser) for the fifth respondent.; B Winks for the second amicus curiae, Right2Know Campaign.

Flynote : Sleutelwoorde

Financial institution G — Financial Services Board — Whether constitutional duty to investigate alleged irregularities in cancelling of registration of retirement funds.

Headnote : Kopnota

In recent years, many employers moved from their stand-alone retirement fund, H to an umbrella fund — a single fund for multiple employers.

The consequence of this was that thousands of the original stand-alone funds ceased to have properly constituted boards and often no assets.

In response, the then deputy registrar of pension funds initiated a cancellations project, which resulted in the cancelling of the registration of nearly 7000 funds from 2007 – 2013.

When I Ms Hunter was appointed deputy registrar of pension funds at the Financial Services Board (now the Financial Sector Conduct Authority), she probed into and raised concerns about the cancellations.

This brought her into conflict with her colleagues and resulted in disciplinary complaints being lodged against her.

Ultimately the registrar appointed forensic accountants (Gobodo) to investigate J her conduct.

2018 (6) SA p349

Hunter later alleged their investigation was unjustified and gave rise to considerable A expenditure, and that the Board was guilty of financial misconduct for not investigating its commissioning. She therefore requested the Minister of Finance to intervene pursuant to Treasury reg 33, but he declined to do so.

Hunter later lodged an internal complaint with the Board (the first complaint), which raised concerns about alleged unlawful conduct in the cancellations. B

In response, the Board appointed Justice O'Regan to chair an inquiry.

Justice O'Regan in her report, recommended the Board appoint auditors to investigate a sample of funds, to determine the likelihood of prejudice, due to the way the cancellations were carried out.

Pursuant thereto, the Board appointed KPMG.

Hunter then lodged a second internal complaint, which was about the Board's C failure to properly deal with her allegations against the registrar.

Meanwhile, KPMG proceeded to investigate a sample of funds, and reported.

The Board was dissatisfied with both the investigation and the report, and conveyed this to KPMG.

KPMG's suggestion was that the report be referred to Justice O'Regan for her review. D

The Board duly approached the Justice but she declined to review the report, recommending rather that the Board approach counsel specialised in pension law.

The Board then appointed an attorney who specialised in pension law, as well as an assistant, a pension-fund actuary, to review the report, and to advise it on how to proceed. E

In his first report, the attorney concluded there was no evidence of material financial prejudice being sustained by any member, beneficiary or creditor of the funds assessed.

In his second report, he found there was no indication that any trustee or authorised representative who had facilitated a cancellation had conferred an improper benefit on the fund administrators concerned. F

In his third report, he found there was an ongoing effort by administrators to trace the beneficiaries of unclaimed benefits.

Hunter ultimately approached the High Court.

She sought an order compelling the Board to investigate the matters in her first complaint; and compelling the Board, alternatively the Minister, to investigate the matters in her second complaint. G

The High Court's holding was that Hunter lacked standing to claim the relief she sought, and dismissed her application.

Hunter then applied to the High Court for leave to appeal, but this was refused; and she thereon approached the Supreme Court of Appeal. It, likewise, refused her application for leave to appeal. H

She then applied to the Constitutional Court for leave to appeal.

There, she asserted the Board had a duty to investigate the alleged irregularities in the cancellations; that the Board's investigations had been inadequate; and that the court should order the Board to conduct a further investigation (see [23]).

It held, that the matter, concerning, inter alia, the constitutional duties of a public I functionary, to investigate allegations of irregularity in the performance of its constitutional mandate, was within the court's jurisdiction; and that Hunter, who was seeking redress for members of cancelled funds, had standing in the public interest (see [29] – [30]).

In addition, the matter raised an important constitutional issue — the existence of a constitutional duty to investigate the alleged irregularities; and the J

2018 (6) SA p350

application A had reasonable prospects of success. It was thus in the interests of justice to grant leave to appeal (see [31]).

Arising for consideration, firstly, was whether public functionaries had a general duty to investigate irregularities (see [37]).

Held, that the Constitution did not impose a general duty on functionaries to investigate irregularities in the exercise of public power (see [38]).

However, B in Khumalo, [*] in the special circumstance of the case, the Constitutional Court held that public officials had a duty to investigate unlawfulness (see [40]).

Here, though, it was unnecessary to go into whether Khumalo applied, or whether the Board was dutied to investigate alleged irregularities in the cancellation of the funds (see [41]).

This C because the Board had always recognised it was responsible to investigate alleged irregularities and had acted in accordance with this responsibility whenever required (see [42]).

Indeed, here it had discharged the responsibility, by instituting a process that could yield a fair outcome (see [44] – [45]).

The D second issue was whether PAJA review was the appropriate cause of action (see [37]).

This raised whether the registrar's cancellation of the funds was administrative action (see [48]).

Held, that it was, and therefore that PAJA applied. This, unless the review was brought by a public functionary against its own decision (see [49]).

Here, E Hunter was not acting for the Board but on behalf of the public, any member of which could challenge administrative action using PAJA (see [49]).

Given, as Hunter stood in such member's shoes, PAJA applied (see [49]).

Thus, if Hunter thought the registrar's decision was unlawful, the remedy was PAJA review, not further investigation (see [50]).

She F had taken the wrong approach, and therefore her appeal had to fail (see [51]).

The third issue concerned the impugned commissioning of the Gobodo report and the Minister's failure to intervene (see [14], [37] and [52]).

Held, that the decision to commission was administrative action and stood until set aside. Hunter had not sought to review it, and it would be inappropriate G to allow her to attack it in the Constitutional Court (see [52]).

Given this, the third issue should not be engaged with (see [52]).

Ordered, inter alia, that leave to appeal be granted, but that the appeal be dismissed (see [61]).

Froneman J, dissenting, concluded that:

•

H The Board had a duty to investigate potential unlawfulness (see [76] – [77] and [80]).

•

The duty was sourced in the Constitution (s 195), Financial Sector Regulation Act 9 of 2017 (s 58) and case law (see [85] – [86] and [90] – [91]).

•

The duty required that if an irregularity came to a public functionary's I attention, the functionary was obliged to investigate it to an extent that was proportionate to its seriousness and basis (see [62], [81] – [82] and [84]).

2018 (6) SA p351

•

Hunter had to review the Board's failure to investigate, by means of A legality review (see [99], [101] and [106] – [107]).

•

The Board was dutied to investigate each cancellation (see [132] – [133]).

He would have upheld the appeal, set aside the High Court's order, and replaced it with one compelling the Board, inter alia, to investigate all the cancelled funds, and to rectify mistaken cancellations (see [137]). B

Cachalia AJ would have refused leave to appeal (see [139] and [184]).

This, as Hunter's case in the Constitutional Court was not a case she made in the High Court. (Her case for investigation in the High Court was unlawfulness of the cancellations. In the Constitutional Court it was systemic irregularity.) (See [139] – [143], [167], [171] and [180] – [181].)

Cases cited

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AD and Another v DW and Others (Centre for Child Law as Amicus Curiae; Department for Social Development as Intervening Party) 2008 (3) SA 183 (CC) (2008 (4) BCLR 359; [2007] ZACC 27): referred to D

Albutt v Centre for the Study of Violence and Reconciliation, and Others 2010 (3) SA 293 (CC) (2010 (5) BCLR 391; [2010] ZACC 4): referred to

Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency, and Others 2014 (1) SA 604 (CC) (2014 (1) BCLR 1; [2013] ZACC 42): referred to E

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