Public Protector v South African Reserve Bank

The Public Protector, Ms Busisiwe Mkhwebane, published a final report on 19 June 2017 making adverse findings against the South African Reserve Bank and others relating to financial assistance provided by the Reserve Bank to Bankorp Limited between 1985 and 1991 (known as the "lifeboat"). The investigation arose from a complaint by Mr Paul Hoffman based on a CIEX report that alleged corruption and fraud. The Public Protector's provisional report recommended recovery of funds and consideration of a commission of inquiry. After meetings with the Presidency and State Security Agency shortly before publication of the final report, the Public Protector substantially changed the remedial action to require: (1) amendment of section 224 of the Constitution to change the Reserve Bank's primary mandate; and (2) reopening of a 1998 SIU proclamation to recover R1.125 billion from Absa. The Public Protector did not afford the Reserve Bank or Absa further opportunity to comment before issuing the final report. The final report caused severe harm to the South African economy. The Reserve Bank successfully reviewed and set aside the remedial action. The High Court ordered the Public Protector to pay 15% of the Reserve Bank's costs personally on an attorney and client scale. The Public Protector appealed to the Constitutional Court.

• Whether the High Court erred in awarding personal costs against the Public Protector in her personal capacity
• Whether costs on an attorney and client scale against a representative litigant acting in official capacity were justified
• The test for awarding personal costs against public officials: gross negligence and/or bad faith
• Whether the Public Protector was immunised from personal liability under section 5(3) of the Public Protector Act
• Whether the Public Protector was afforded sufficient opportunity to respond to the request for personal costs
• Whether the High Court misdirected itself on the facts in granting the costs order
• Whether the High Court was influenced by wrong legal principles
• Whether the personal costs order would undermine the independence of the Office of the Public Protector
• Whether the Reserve Bank was entitled to declaratory relief that the Public Protector abused her office
• The standard of conduct required of public officials in litigation

The Public Protector's application for leave to appeal was granted. The appeal was dismissed with no order as to costs in the Constitutional Court. The Reserve Bank's application for leave to cross-appeal was dismissed with no order as to costs. The High Court's order requiring the Public Protector to pay 15% of the Reserve Bank's costs personally on an attorney and client scale was upheld.

The binding legal principles established are: (1) The Constitution is the source of courts' power to order personal costs against public officials who act in bad faith or with gross negligence in conducting litigation or discharging constitutional obligations. (2) Personal costs orders against public officials vindicate the Constitution and are necessary to hold public officials accountable when they breach their constitutional duties. (3) Public officials owe heightened duties in litigation, including obligations to be candid, transparent, and provide full and frank disclosure to courts. (4) Public litigants must produce complete rule 53 records including all documents relevant to proceedings under review. (5) The test for personal costs against public officials is bad faith or gross negligence, assessed objectively with reference to institutional competence and constitutional obligations. (6) Personal costs on an attorney and client scale constitute a form of double punishment requiring separate justification beyond grounds for ordinary personal costs. (7) Punitive costs on an attorney and client scale are justified only for extraordinary conduct warranting the court's rebuke, such as fraudulent, dishonest, vexatious conduct or abuse of court process. (8) The immunity under section 5(3) of the Public Protector Act applies only to conduct performed in good faith. (9) Appellate courts will not interfere with costs orders absent material misdirection, such as failure to exercise discretion judicially, influence by wrong principles, misdirection on facts, or reaching an unreasonable decision. (10) Personal costs orders do not undermine the independence of Chapter 9 institutions when properly applied to hold officials accountable for bad faith or grossly negligent conduct.

Mogoeng CJ's dissenting judgment contains significant obiter observations: (1) That accountability, equality before the law and transparency are foundational constitutional values requiring that no person or institution be exempt from scrutiny regardless of their power or resources. (2) That personal costs orders, if awarded too readily, could have a chilling effect on State functionaries' willingness to confront wrongdoing by the rich, powerful or well-connected. (3) That courts must make only "just and equitable" orders and should not allow litigants to suffer undeserved ruination due to legal technicalities. (4) That the Reserve Bank, despite its constitutional importance, must be held transparently accountable like all other institutions and should not enjoy untouchability or impunity. (5) Criticism of the High Court for apparently being unaware of the tests for personal costs established by the Constitutional Court in Black Sash II (June 2017), eight months before the High Court delivered judgment in February 2018. (6) Observations about the duty of judicial officers under their oath to administer justice without fear, favour or prejudice. (7) That the context and age of alleged wrongdoing should not exempt important institutions from investigation. (8) Criticism of what the dissent characterizes as exaggeration of the Public Protector's errors while downplaying the Reserve Bank's alleged impropriety involving R3.2 billion. The majority judgment contains obiter observations: (1) That experience shows decisions are more likely to be correct when more than one court considers the issues, reinforcing the principle against sitting as court of first and last instance. (2) That public officials who flout constitutional obligations egregiously should pay costs personally rather than burdening taxpayers. (3) Observations about the proper content and purpose of rule 53 records. (4) That central banks function as lenders of last resort to mitigate financial crises. Both judgments emphasize that each case must be decided on its particular facts and circumstances.

This case establishes important precedents on: (1) The constitutional foundation for personal costs orders against public officials, sourced in courts' duty to uphold and enforce the Constitution. (2) The tests for personal costs against public officials: bad faith or gross negligence in conducting litigation or discharging constitutional obligations. (3) The heightened standard of conduct required of public officials in litigation, including duties of candour, transparency, and full and frank disclosure. (4) The principle that personal costs orders vindicate the Constitution and do not undermine the independence of Chapter 9 institutions when properly applied. (5) That personal costs on an attorney and client scale constitute a form of "double punishment" requiring separate justification beyond grounds for ordinary personal costs. (6) The circumstances in which punitive costs may be awarded on an attorney and client scale: extraordinary conduct warranting the court's rebuke. (7) The extent of the Public Protector's immunity under section 5(3) of the Public Protector Act (limited to conduct in good faith). (8) Clarification that procedural unfairness and bias are independent grounds of review, though circumstances of procedural unfairness may evidence bias. (9) The obligation of public officials to produce complete rule 53 records including "every scrap of paper" relevant to proceedings under review. (10) That appellate courts will not lightly interfere with costs orders absent material misdirection. The case also highlights deep divisions within the Constitutional Court on the appropriate approach to costs orders against Chapter 9 institutions and the balance between accountability and protecting institutional independence. The majority emphasized accountability for constitutional breaches while the minority emphasized protecting institutional independence from chilling effects.