This blog was co-authored by Felix Le Roux, Candidate Attorney.
On 15 August 2023, the Constitutional Court dismissed an application for leave to appeal brought by a financial services provider (FSP) against a judgment of the High Court in review proceedings instituted by the FSP in terms of the Promotion of Administrative Justice Act, 2000 (PAJA). The Court confirmed that the ambit of a PAJA review is limited to the review grounds available and raised by the applicant in terms of PAJA and that a court ought not to adjudicate the merits of the case that served before the administrator in question.
The matter arose from a complaint submitted by an elderly couple to the Ombud for Financial Services Providers, alleging that the FSP had wrongly provided them with bad investment advice that caused them to suffer a loss of R780 000. The Ombud upheld the complaint on the basis that the FSP’s advice was materially flawed and negligent, and that the complainants’ loss flowed naturally from the FSP’s conduct.
The FSP launched a PAJA review in the High Court seeking to set aside the Ombud’s findings and replace it with a decision dismissing the complaint or, alternatively, to set aside the Tribunal’s decision to refuse the FSP’s application for reconsideration. The review grounds in terms of PAJA were broadly that the decisions were tainted by bias or a reasonable suspicion of bias, procedural unfairness, an error of law, ulterior motives, irrelevant considerations, and a failure to consider relevant considerations, bad faith, and arbitrariness.
The FSP’s counsel proposed that the High Court decides separately at the outset of the hearing whether the FSP’s conduct caused the loss. The High Court took up the offer and made a ruling that the FSP was negligent in advising the complainants to make a high-risk investment, and that the loss was therefore caused by the FSP’s conduct. The FSP sought leave to appeal against this ruling.
The Constitutional Court highlighted that the High Court was engaged in a PAJA review application and not an action for damages, and that the issues of negligence and causation were irrelevant to the PAJA review. The determination of such merits-based issues properly fell within the ambit of the Ombud’s statutory powers. The court was only entitled and required to determine, with reference to the PAJA review grounds raised, whether the Ombud and the Tribunal acted lawfully, rationally and fairly when they upheld the complaint and dismissed the FSP’s application for reconsideration.
Given that the High Court’s ruling on negligence and causation was irrelevant to the review grounds and therefore irrelevant to the determination of the PAJA review, any ruling on appeal by the Constitutional Court would have been equally irrelevant. Accordingly, leave to appeal was refused and the Court expressed its hope that the parties would return to the High Court without delay to argue and determine the review grounds.
The ambit and limitations of PAJA review proceedings are frequently misconstrued. Adding this judgment to the extensive case law saying so will hopefully reinforce the point for those unhappy with administrative decisions, because by now the costs of this matter must have exceeded the amount lost by the complainants.