In Ndudane and Others v Financial Intelligence Centre, the Western Cape High Court, sitting as the Equality Court, dealt with an opposed interlocutory application for access to information ("the Information Application"). The applicants sought orders that the Financial Intelligence Centre ("FIC") be directed to provide information held by the FIC as set out in terms of section 40(1)(e) and section 41(d) and (e) of the Financial Intelligence Centre Act 38 of 2001 ("FICA")
In the main Equality Court application, the complainants are seeking, among other things, an order declaring that the decision by the respondent banks to terminate and/or refuse banking services and facilities to the complainants, or to give notice of such termination and/or refusal to provide services, constitutes unfair discrimination primarily on the ground of race and is therefore unconstitutional. The respondent banks are opposing the main Equality Court application.
The information sought by the applicants
In the Information Application, the applicants sought the following information from the FIC:
- The Risk Management and Compliance Programmes of ABSA Bank Ltd, First Rand Bank Ltd, Investec Bank Ltd, Nedbank Limited and The Standard Bank of South Africa Limited who are all respondents in the main Equality Court application.
- All reports of suspicious and unusual transactions made to the FIC by accounting institutions in respect of the applicants.
- All reports of suspicious and unusual transactions made to the FIC by accounting institutions in respect of Sekunjalo Investment Holdings (Pty) Ltd and the entities associated with the Sekunjalo Group. The Sekunjalo Group are complainants in the main Equality Court application.
- All reports of suspicious and unusual transactions made to the FIC by accounting institutions in respect of EOH Holdings and its subsidiaries, KPMG Services Proprietary Limited South Africa, Steinhoff International Holdings NV and Tongaat Hullet.
The FIC's main arguments
The FIC opposed the Information Application on the following grounds:
- Firstly, the applicants did not set out any factual or legal basis entitling them to the information sought.
- Second, the Information Application was a fishing expedition.
- Third, to the extent that the applicants relied on the constitutional right to access information, the principle of subsidiarity dictated that the applicants ought to have first complied with the provisions of the Promotion of Access to Information Act 2 of 2000 ("PAIA").
- Fourth, since the information sought was for litigation, after the commencement of that litigation, the Uniform Rules of Court governed access to the information.
- Finally, the applicants failed to join the banks and other affected entities, whose documents were sought.
The applicants' arguments
- Section 21(5) of PEPUDA
The applicants alleged that the Information Application was brought in terms of section 21(5) of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 ("PEPUDA"). Section 21(5) of PEPUDA provides that:
"21 Powers and functions of Equality court
(5)The court has all ancillary powers necessary or reasonably incidental to the performance of its functions and the exercise of its powers, including the power to grant interlocutory orders or interdicts."
The FIC disputed the applicants' reliance on section 21(5) of PEPUDA and argued that that no directions hearing had been convened as required by the PEPUDA Regulations, and accordingly, that the court did not have jurisdiction to hear the application. Even if the Court had the power to hear the application, the Court could not exercise that power in light of the procedures created by PEPUDA and the Regulations.
- Sections 40(1)(e) and 41(d) and (e) of FICA
The applicants alleged that the Information Application was brought in terms of section 40(1)(e) and section 41(d) and (e) of FICA, and that these provisions permitted any person to apply for a court order in order to access information reported, obtained or generated by the FIC. Section 40(1)(e) and section 41(d) and (e) of FICA provide as follows:
"40 Access to information held by Centre
(1) Subject to this section, the Centre must make information reported to it, or obtained by it under this Part and information generated by its analysis of information so reported or obtained, available to
(e) a person who is entitled to receive such information in terms of an order of a court"
"41 Protection of confidential information
No person may disclose confidential information held by or obtained from the Centre except-
(d) for the purpose of legal proceedings, including any proceedings before a judge in chambers; or
(e) in terms of an order of court."
The FIC argued that the applicable legislation did not permit access to information which included information which was sensitive, related to state security, and contained the personal information of individuals and entities, to be granted holus bonus to applicants in civil proceedings to enable them to attempt to find evidence which supported their complaints.
- Factual or legal basis for the information sought
In relation to the information sought, the applicants argued inter alia that:
- While the applicant's bank accounts were terminated purportedly on account of seeking to comply with the anti-money laundering laws as headlined by FICA, the banks had treated the applicants in a discriminatory and unequal manner when compared to other individuals and organisations which have had negative publicity during the determination of their risk appetite.
- The information sought would be important to see how the respondent banks and the FIC assessed, approached and "managed" the risk associated with the "white companies".
- The information would help in determining:
- Whether the applicants were discriminated against by the respondent banks or whether the respondent banks adopted consistent approaches in their risk management programmes;
- Whether the banks complied with FICA and international regulatory standards; and
- Whether in the termination of the applicants' banking services, the banks relied on and/or applied their risk management and compliance programs and the applicable regulatory prescripts.
The FIC argued that it did not direct the banks to close the applicants' bank accounts. In addition, the FIC argued that the applicants sought to obtain documents which they apparently needed to prove their case in the main Equality Court application by making the FIC, a third party, a respondent in the main Equality Court application, and then seeking against it a form of discovery which was not known in our law.
The Court's main findings
- Jurisdiction Argument
The Court held that Equality Court has the power to deal with applications for interlocutory orders as an ancillary power necessary or incidental to the performance of its functions and the exercise of its powers. The Information Application was an application for such an interlocutory order.
- The legal basis for access to the information
The Court held that section 32(1) of the Constitution (the right to access information), and section 40(1)(e) read with 41(d) and (e) of FICA are the sources of the rights of the applicants to the information that they sought from the FIC.
- The principle of subsidiarity
The Court held that the FIC's argument that the principle of subsidiarity dictated that the applicants ought to have first complied with the provisions of PAIA was without merit. In this regard, the Court referred to Minister of Finance v Oakbay Investments (Pty) Ltd and Others; Oakbay Investments (Pty) Ltd v Director of the Financial Intelligence Centre ("Oakbay"), where the Court made the following remarks in relation to the application against the FIC launched by Gupta associated, Oakbay applicants:
"[46] The Oakbay applicants were not unreasonable in launching the FIC application as contended by the director of the FIC. Section 41(1)(e) of the FIC Act, on which the FIC application is premised, provides the scope for the FIC to make available to any person information held by the FIC in terms of a court order.
[48] ... There was a live dispute between the director of the FIC and the Oakbay applicants in respect of information the latter sought to access from the former. The FIC contended that the Oakbay applicants were not entitled to it. Hence it did not agree to their request. The Oakbay applicants contended that they were entitled to the information. Under these circumstances, section 41 (1 )(e) of the FIC Act provides the only mechanism by which the Oakbay applicants may obtain the information. For that reason, the Oakbay applicants did not bring the FIC application to vex the FIC. There is also no suggestion that the application was driven by malice.
[49) Although the FIC application is based on the FIC Act and not on the Constitution, to the extent that the application relates to access to information, it is intended to enforce an entrenched constitutional right, namely, the right of access to information. The application also relates to the exercise of statutory duties by an organ of state. The conduct of the Oakbay applicants in bringing the FIC application was therefore not unreasonable."
In Oakbay, the Court dealt with a number of applications including an application brought by several entities that were part of the Gupta associated, Oakbay Group, against the Director of the Financial Intelligence Centre ("the Director of the FIC"), for an order compelling the Director of the FIC to disclose to the applicants certain information relating to reports made to the FIC by the applicants' erstwhile bankers. This application was premised on section 40(1)(e) of FICA. The Oakbay applicants withdrew their FIC application because their applications to strike out certain material from the Minister's founding and replying affidavits were granted. Consequently, the Court in Oakbay only dealt with the issue of legal costs consequent upon the withdrawal of the FIC application. Interestingly, in the recent Western Cape High Court judgment (sitting as the Equality Court), the court placed significant reliance on the Oakbay judgement, in circumstances, where the Court in Oakbay did not deal with the merits of the Oakbay applicants' FIC application, but was only tasked with dealing with the question of costs in relation to that application.
- Nexus between the applicants' cause of action in the main application and the information sought from the FIC?
The Court found that the information sought by the applicants directly related to the main reasons for termination of their banking relationship, namely, reputational and business risk as well as legal and regulatory obligations applicable to anti-bribery laws.
- The non-joinder argument
The Court held that the subject matter of the litigation was the disclosure by the FIC to the applicants of confidential information held by the FIC. The information sought was reported information submitted by the accountable institutions to the FIC for assessment and analysis by the FIC. On this basis, the Court held that it was not necessary to join to the proceedings every party that appeared in the reports made by the accountable institutions to the FIC.
The Court ultimately found the constitutional right to equality will be diminished and hollowed if constitutional institutions, upon request, do not supply information on any measures relating to the achievement of equality including where appropriate, compliance with legislation, codes of practice and programmes within their jurisdiction, in instances where such access did not threaten state security or destabilise the nation's financial system. In these circumstances, the Court held that the applicants had established their right to the information and that fairness, equity and the constitutional values of openness and transparency, favoured that the applicants be granted access to the information.
The FIC was accordingly ordered to provide the applicants with all the documents requested in prayers 1 to 5 of the applicants' notice of motion, within twenty (20) days of the date of the order. The FIC was also ordered to pay the costs of the application, including the costs of two counsel where so employed.
Key-takeaway
Section 32(1) of the Constitution, the right to access information, and section 40(1)(e) read with 41(d) and (e) of FICA may give rise to a legal right to access information reported, obtained or generated by the FIC. A court may be sympathetic to such an application for information and may order access to that information in the interests of the constitutional values of openness and transparency. It is, however, surprising that the court did not give more credence to the non-joinder argument as the order clearly would have an effect on the respondent banks and also the other parties about which the banks were making reports to the FIC. Furthermore, it is also surprising that the order made no provision for a confidentiality regime. If these reports end up in the wrong hands, they could be used to circumvent the fight against money laundering and anti-terrorism funding and it could also make it more difficult for South Africa to have itself removed from the FATF greylist.
The Sekunjalo Group has hailed this judgment as a victory for them, although the judgment was not granted in their favour, but in the favour of the intervening parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
