Secondary

Debarment under the Loop

A recent finding in a high court case in Port Elizabeth, serves as a timely reminder to Key Individuals and Compliance Officers to be very circumspect when debarring a representative.

A representative, who believed that his services were unlawfully terminated, applied for the debarment to be uplifted. Respondents to this appeal were the FSB as first respondent, and the FSP, Nationwide Funeral Services CC, as second respondent.

Central to this application is the requirement that an application to have a representative debarred should be accompanied by reasons for the debarment, plus supporting documentation, in the format required by the Registrar. The Registrar is then obliged to publish details of the debarment, and the reasons therefore, in an appropriate form of public media.

The prescribed document which has to be submitted reads: “Full reasons for the debarment must be provided, and the information and documentary evidence in support of the reasons must be attached.”

It then proceeds to list examples of such documentary evidence:

  • Evidence and information supporting the reasons for the debarment
  • A copy of the service contract or mandate between the FSP and the debarred representative
  • A transcript of the disciplinary hearing and
  • A forensic/investigation report (if any)

The court was called upon to determine whether the second respondent had lawful reason to debar the representative without complying with the above provisions and directives. It also had to determine whether the FSB acted lawfully in effecting the debarment.

The debarment request was accompanied by a “notice of motion” without any founding affidavit as supporting evidence for the debarment request. The judge pointed out that “Such a document does not set out the facts upon which an applicant relies…“. It should be accompanied by at least one affidavit containing the facts supporting the relief claimed.

The judge found that the FSB had “…failed to act lawfully by debarring applicant without determinable reason and exacerbated the situation by undertaking what I view as an inexplicable excursion to search for reasons post effecting the debarment.”

He further points out that the contents of the notice of motion made it evidently clear that the motion had nothing to do with the debarment. “The relief sought therein was totally unrelated to the applicant’s conduct for purposes of the FAIS Act.” The judge further states: “First Respondent could not have misconceived the relief sought and it eludes me as to how he could continue in his papers to make this assertion. He also states that the notice of motion was not in the possession of the FSB on 5 November 2012 when the debarment was effected.

The judge then avers to the Promotion of Administrative Justice Act 3 of 2000 which provides that administrative action, which materially and adversely affects the rights or legitimate expectations of any person, must be procedurally fair. It provides that an affected person must be given

  • Adequate notice of the nature and purpose of the proposed administrative action
  • A reasonable opportunity to make representations
  • A clear statement of the administrative action and
  • Adequate notice of any right of review or internal appeal…

A further consideration concerns setting aside the debarment:

The judge agreed with the FSB that this could only be done via a court review.

“Although an act may be unlawful and thus invalid, our law acknowledges that pending a declaration of invalidity, the unlawful act carries factual effect… and it is necessary to secure a Court Order to obtain reparation or prevent the harm.”

In plain language: If you feel that you have been unlawfully debarred, you will have to go to court to get it reversed. The FSB cannot do so of its own will, according to this judgment.

The judge upheld the application and nullified the debarment. It instructed the FSB to re-instate the applicant to the central representative register. The Regulator was also ordered to pay the cost of the application.

There will no doubt be a tightening of the screws at the FSB when it comes to future debarment applications. The latest guidelines for on-line submission make provision for the addition of documentary proof. Please click here to access the document.

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