Trustco Group Holdings Limited v Financial Services Tribunal and Another

Trustco Group Holdings Limited (Trustco) was listed on the JSE and Namibian Stock Exchange. Between 2015-2018, Trustco's CEO and major shareholder, Dr Van Rooyen, advanced loans of approximately N$546 million to Huso Investments, a related company he owned. After Trustco acquired Huso's shares, the loans were reclassified from equity to liabilities. Dr Van Rooyen then 'forgave' these loans, creating a N$546 million profit that triggered an 'earn-out' mechanism allowing him to acquire more Trustco shares. He later advanced and forgave a further N$1 billion loan, creating additional profits. Trustco also reclassified properties from inventory to investment property and reported a N$693 million profit from revaluation. The JSE reviewed Trustco's financial statements and, on advice from its Financial Reporting Investigation Panel (FRIP), determined the entries did not comply with International Financial Reporting Standards (IFRS). On 22 November 2020, the JSE directed Trustco to restate its financial statements for the year ending 31 March 2019. After the JSE dismissed Trustco's objection, Trustco applied to the Financial Services Tribunal (Tribunal) for reconsideration. The Tribunal panel comprised retired Judge Harms (chair), a practising advocate, and an attorney. The Tribunal dismissed the application on 22 November 2021. Trustco then sought judicial review in the High Court.

• Whether the JSE has the power to direct listed entities to restate financial statements under paragraph 8.65 of the JSE Listing Requirements and the Financial Markets Act 19 of 2012
• Whether a panel of the Financial Services Tribunal constituted under section 224 of the Financial Sector Regulation Act 9 of 2017 must include persons with financial expertise when dealing with accounting matters
• Whether the Tribunal chairman's appointment of the panel without financial experts constituted a failure to exercise discretion
• Whether the Tribunal improperly deferred to the JSE's decision instead of making an independent determination on the evidence
• Whether an administrative decision that was not directly challenged remains valid and effectual (Oudekraal principle)

The appeal was dismissed with costs on the attorney and client scale, including costs of two counsel where employed.

The binding legal principles established are: (1) Paragraph 8.65 of the JSE Listing Requirements, read with sections 10(2)(m) and 11(1)(g)(v) of the Financial Markets Act 19 of 2012, empowers the JSE to direct listed entities to restate their financial statements where they do not comply with International Financial Reporting Standards. (2) Sections 220, 224 and 225 of the Financial Sector Regulation Act 9 of 2017 do not require that a Tribunal panel constituted to hear a reconsideration application involving accounting issues must include persons with financial expertise or experience - a panel comprising only legal experts is properly constituted. (3) An administrative decision remains valid and effectual until set aside by a competent court (Oudekraal principle), and a party challenging such a decision must directly review that decision under PAJA rather than collaterally attacking it in subsequent proceedings. (4) A tribunal does not impermissibly defer to an administrative decision-maker merely because it explains the reasons for according weight to that decision-maker's expert evidence, provided it independently analyses the evidence and provides comprehensive reasons for its findings.

The Court made several non-binding observations: (1) It observed that panels comprising lawyers are 'eminently suited to adjudicate a reconsideration in evaluating facts and evidence', even in matters involving complex financial issues. (2) The Court noted that without the power to direct restatements, 'the JSE has in fact no teeth to correct the position to protect the public with the financial statements setting out the full picture', emphasizing the practical necessity of the JSE's powers. (3) The Court commented that in judicial review proceedings, it is the propriety of the process that resulted in the decision, and not the correctness of the findings, that must be considered. (4) The Court expressed disapproval of litigation conduct where parties vacillate regarding review grounds throughout proceedings and raise new issues in oral argument not foreshadowed in pleadings or written arguments, indicating such conduct may attract punitive costs orders. (5) The Court noted that even if a requirement for financial expertise on panels were imposed, it would not be unreasonable, though it is not legally required. (6) The Court emphasized that a party is required to make out its case in the founding affidavit and cannot mount a challenge to a decision for the first time in heads of argument or oral submissions.

This case is significant for South African financial regulation and securities law. It authoritatively confirms the JSE's broad regulatory powers to direct restatement of financial statements under its Listing Requirements and the Financial Markets Act, ensuring market integrity and investor protection. The judgment clarifies that the JSE's power to direct companies to 'publish or reissue' information includes the power to direct restatements of financial statements. The case also provides important guidance on the composition of Financial Services Tribunal panels under the FSR Act, confirming that panels comprising only legal experts are properly constituted even when dealing with complex accounting matters. The judgment reinforces the Oudekraal principle that administrative decisions remain valid until set aside by a competent court, and parties must directly challenge such decisions rather than collaterally attacking them in subsequent proceedings. It also illustrates proper standards for reviewing expert evidence and the boundaries of judicial deference in administrative reconsiderations. The punitive costs order sends a strong message about litigation conduct and parties' obligations to maintain consistent positions throughout proceedings.