The Ombud for Financial Services Providers v CS Brokers CC and Others

Mr Wallace invested R730,000 with Sharemax in November 2009, including R600,000 of his mother's funds. Mr Storm, functioning as an authorised representative of CS Brokers CC (an authorised Financial Services Provider under FAIS), was involved in the investment advice. The investment was placed in two property syndications: the Villa Development and Zambezi Development. No income was received from the investments by September 2010. Despite assurances, Mr Wallace received no returns and requested return of his capital in November 2010. On 10 December 2010, Mr Wallace lodged a complaint with the Ombud for Financial Services Providers. There were factual disputes as to whether Mr Storm or Mr Marais advised Mr Wallace to invest in Sharemax, or whether Mr Wallace had already decided to invest before meeting Mr Storm. On 9 May 2011, CS Brokers applied under s 27(3) of FAIS for the Ombud to hold a hearing or refer the complaint to court, citing material factual disputes requiring oral evidence and cross-examination. On 11 May 2011, the Ombud refused the application simply stating 'this Office does not hold hearings'. The Ombud made a determination on 26 April 2016 ordering CS Brokers to pay Mr Wallace R730,000 plus interest. CS Brokers sought leave to appeal, which was refused by the Ombud. The Appeal Board granted limited leave to appeal but dismissed the appeal. CS Brokers applied to the High Court for review, which set aside all decisions. The Ombud appealed to the Supreme Court of Appeal.

• Whether the Ombud properly exercised her discretion under s 27(3)(c) of FAIS when refusing the application to decline to entertain the complaint and refer it to court
• Whether the Ombud properly exercised her procedural discretion under s 27(5)(a) when refusing to hold a hearing with oral evidence to resolve factual disputes
• Whether the Ombud's decision was reviewable when she applied a predetermined policy rather than exercising discretion on the specific facts

The appeal was dismissed with costs, including costs of two counsel wherever so employed.

Where an administrative decision-maker vested with a statutory discretion applies a predetermined policy without exercising discretion on the specific facts and circumstances of the matter before them, this constitutes a reviewable failure to exercise discretion. When the Ombud for Financial Services Providers is requested under s 27(3)(c) of FAIS to decline jurisdiction or under s 27(5)(a) to adopt particular procedures such as hearing oral evidence, the Ombud must exercise the discretion by considering the specific application and providing reasons, rather than applying a blanket policy such as 'this Office does not hold hearings'.

The Court noted that there was debate before it regarding the nature of the discretion to be exercised by the Ombud and whether it should be characterized as a 'judicial discretion' or a broader discretion, but stated this issue did not arise on the facts and need not be determined. The Court observed that the Ombud has quasi-judicial powers rather than purely administrative ones, as evidenced by determinations being regarded as civil judgments of a court under s 28(5). The Court noted that the Ombud was created as a mechanism for speedy resolution of disputes that would otherwise be dealt with in court, where complainants have an election to use the Ombud or approach a court, but Financial Services Providers have no such election and must meet claims in whichever forum the complainant selects. The Court commented that to say there were no material disputes of fact when parties disagreed on whether Mr Wallace had already decided to invest before meeting Mr Storm 'simply beggars belief'.

This case establishes important principles regarding the exercise of discretion by administrative tribunals with quasi-judicial powers. It clarifies that under FAIS, the Ombud has wide procedural discretion under s 27(5)(a) to determine appropriate procedures including hearing oral evidence, and substantive discretion under s 27(3)(c) to decline jurisdiction in favour of a court. The case emphasizes that when vested with discretion, administrative decision-makers must actually exercise that discretion on the specific facts of each case, rather than applying predetermined policies. A failure to exercise discretion at all, as opposed to improper exercise of discretion, is reviewable. The case also illustrates that attempting to provide reasons retrospectively in a final determination cannot cure an initial failure to exercise discretion. This judgment reinforces accountability for administrative decision-makers and ensures they properly consider applications before them, particularly where parties seek alternative procedures to resolve material factual disputes.