Public Protector v SA Reserve Bank

Personal indemnity exceeded and Constitutional Court confirmed that the Public Protector acted in bad faith and held that in any event, the ambit of the immunity afforded under section 5(3) is expressly limited to “anything reflected in any report, finding, point of view or recommendation made” and that it was doubtful whether this includes the Public Protector’s exercise of her investigating powers, her conduct during the investigation, or the litigation associated with the final report.

“The Public Protector either failed entirely to deal with the allegations that she was irresponsible and lacking in openness and transparency, or, when she did address them, offered contradictory or unclear explanations. She gave no explanation as to why there were no transcripts of the meetings with the Presidency and the State Security Agency and why the vulnerability of the Reserve Bank was discussed with the State Security Agency. No explanation was provided for the meeting with the Presidency on 7 June 2017. Instead, another meeting with the Presidency, held on 25 April 2017, was disclosed for the first time by the Public Protector in her answering affidavit in the High Court.

There is no merit in any of the grounds of appeal advanced by the Public Protector to justify this Court’s interference in the High Court’s exercise of its true discretion to order that the Public Protector pay 15% of the Reserve Bank’s costs in her personal capacity. There was no material misdirection on the part of the High Court in relation to the personal costs order. The personal costs order must stand.” [paras 217 and 218]

Essence

Personal indemnity exceeded in that Public Protector Act only indemnifies her to the extent that she does not act in bad faith and is also confined to certain circumstances as well.

 

 

Decision

(CCT107/18) [2019] ZACC 29 (22 July 2019).

Order

  • The Public Protector’s application for leave to appeal is granted.
  • The appeal against the judgment of a full bench of the high court dated 16 February 2018 is dismissed with no order as to costs in this Court.
  • The Reserve Bank’s application for leave to cross-appeal is dismissed with no order as to costs in this Court.

Judges

Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ, Khampepe J, Mhlantla J, Petse AJ and Theron J.

Judgments: Mogoeng CJ (dissenting): [1] to [130] – see separate post
Khampepe J and Theron J (majority): [131] to [250]

Heard on: 27 November 2018

Decided on: 22 July 2019

Reasons

“Regard must be had to the higher standard of conduct expected from public officials, and the number of falsehoods that have been put forward by the Public Protector in the course of the litigation. This conduct included the numerous “misstatements”, like misrepresenting, under oath, her reliance on evidence of economic experts in drawing up the report, failing to provide a complete record, ordered and indexed, so that the contents thereof could be determined, failing to disclose material meetings and then obfuscating the reasons for them and the reasons why they had not been previously disclosed, and generally failing to provide the court with a frank and candid account of her conduct in preparing the report. The punitive aspect of the costs order therefore stands.” [para 237]

Court summary

‘Public Protector Act 23 of 1994 — personal costs — punitive costs — representative litigant — personal indemnity exceeded —accountability”

Media Summary

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Monday 22 July 2019 at 10h00, the Constitutional Court handed down judgment in the Public Protector’s application for direct leave to appeal against the personal and punitive costs order made against her by the High Court of South Africa, Gauteng Division, Pretoria (High Court). The High Court ordered the Public Protector, Ms Busisiwe Mkhwebane, to personally pay 15% of the costs of the South African Reserve Bank (Reserve Bank) on a punitive attorney and client scale, including the costs of three counsel. This order followed from litigation between the Reserve Bank and the Public Protector in which the Reserve Bank was successful. In the event that direct leave to appeal was granted to the Public Protector, the Reserve Bank sought conditional leave to cross-appeal against the High Court’s refusal to declare that the Public Protector had abused her office in conducting an investigation pertaining to the Reserve Bank.

On 19 June 2017, the Public Protector published her final report regarding the financial assistance of R1.125 billion that was provided by the Reserve Bank to Bankorp Limited between 1985 and 1991. The remedial action recommended by the Public Protector directed the Chairperson of the Parliamentary Portfolio Committee to take steps to amend the Constitution in order to strip the Reserve Bank of its primary object of protecting the value of the currency and to amend its consulting obligations with the Minister of Finance. The Reserve Bank successfully brought an urgent application before the High Court seeking to review and set aside this remedial action. The Public Protector’s final report further required the Special Investigating Unit to approach the President to take certain steps to recover the ostensibly misappropriated public funds from ABSA Bank Limited who had purchased Bankorp Limited in 1992. Pursuant to a second review application brought by the Reserve Bank, the High Court set aside the Public Protector’s remaining recommended remedial action. It was in the second review that the High Court granted the personal and punitive costs order which is the subject of this appeal.

In a majority judgment penned by Khampepe J and Theron J (Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Mhlantla J and Petse AJ concurring), the Constitutional Court held that there was no sound basis to justify an interference with the High Court’s exercise of its true discretion to award personal and punitive costs against the Public Protector. The Constitutional Court held that personal costs orders against public officials, like the Public Protector, whose bad faith conduct falls short of what is required of them, constitute an essential, constitutionally-infused mechanism to ensure that they act in good faith and in accordance with the law and the Constitution. The Constitutional Court held that the need to hold government to the duty of proper court process is sourced in the Constitution itself, and that personal costs orders are not granted against public officials who conduct themselves appropriately. They are granted when public officials fall egregiously short of what is required of them.

Furthermore, the Constitutional Court upheld the High Court’s finding that the Public Protector had acted in bad faith and agreed that she had exceeded the bounds of her potential indemnification under the Public Protector Act. The Constitutional Court held that the Public Protector’s entire model of investigation was flawed, and that she was not honest about her engagements during the investigation. In addition, she failed to engage with the parties directly affected by her new remedial action before she published her final report. Furthermore, the Constitutional Court held that the Public Protector had failed to explain why she had not disclosed any of her meetings with the Presidency in the final report, or why, contrary to her general practise, she did not produce transcriptions of her meetings with the Presidency or the State Security Agency. Moreover, the Constitutional Court found that the Public Protector had put forward a number of falsehoods in the course of litigation, including misrepresenting under oath before the High Court that the economic analysis which underpinned the final report was based on expert economic advice, which it was not. In the Constitutional Court, the Public Protector’s various explanations of her conduct were found to be contradictory. The Constitutional Court concluded that the punitive aspect of the costs order against the Public Protector must stand in light of the standard of conduct expected from public officials and the number of falsehoods put forward by the Public Protector in the course of the litigation. It was for these reasons that the Public Protector’s appeal was dismissed.

In relation to the Reserve Bank’s conditional cross-appeal, the Constitutional Court held that in light of the High Court’s decision not to deal with the merits of the declarator, the Constitutional Court did not have the benefit of any other courts’ judgments on this matter. The Constitutional Court further held that it may be that the circumstances of this case justify the granting of a declaratory order sought by the Reserve Bank, but this order should not be granted in the absence of the Public Protector having had sufficient opportunity to respond to the request for the declarator. The Reserve Bank’s application for leave to conditionally cross-appeal was accordingly dismissed.

Minority judgment

The minority judgment, penned by Mogoeng CJ (Goliath AJ concurring), held that the High Court judgment should have been set aside because not only was no harm shown to exist but the basic personal costs’ definitional requirements of gross negligence and bad faith were not shown nor were they met. The minority judgement held that it was ironic that the High Court found it extremely reprehensible that the Public Protector did not know what the High Court said she should have known when the High Court itself did not know what she should have known.

The minority judgment asserted that substantive justice requires that no litigant ought to be left exposed to undeserved ruination just because they did not expressly plead non compliance with basic legal requirements that have clearly not been complied with. Costs on an attorney and client scale are to be awarded where there is fraudulent, dishonest, vexatious conduct and conduct that amounts to an abuse of court process.

The minority judgment held that courts exist not to crush or destroy, but to teach, caution or punish constructively. The order for costs against the Public Protector would, according to the minority, predictably ruin her financially and possibly shipwreck her occupation.

The minority judgement held that an order for personal costs against a representative litigant ought to bear a demonstrably clear correlation to the gravity of the wrongdoing that it is said to have occasioned. The minority judgement further held that it cannot be seriousness or a mark of displeasure in a vacuum that is not supported by the danger that flows or could flow from the impugned conduct.

The minority judgment concluded that the High Court should not have mulcted the Public Protector, as a representative litigant, in punitive costs purely for opposing all three applications to the end. The minority judgment held that in doing so, the High Court was influenced by wrong principles and a misdirection on the facts, resulting in a decision which could not reasonably have been made by a court properly directing itself to all relevant facts and principles.

Quotations from judgment

Note: Footnotes omitted and emphasis added

KHAMPEPE J and THERON J (Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Mhlantla J and Petse AJ concurring):

[131] This matter calls for the adjudication of two core issues. First, whether this Court should interfere with the discretion exercised by the Full Court of the High Court of South Africa, Gauteng Division, Pretoria (High Court) to award punitive costs in favour of the South African Reserve Bank (Reserve Bank) against the incumbent Public Protector, Ms Busisiwe Mkhwebane, in her personal capacity. Second, whether the Reserve Bank is entitled to the declaratory order it seeks to the effect that the Public Protector abused her office in conducting the investigation that gave rise to her impugned report.

[132] We have read the judgment penned by our brother Mogoeng CJ (first judgment). Regrettably, we are unable to agree with the first judgment’s reasoning and proposed order.

Context

[133] The first judgment has adequately set out the background of this matter. It is not necessary for us to repeat this and we state the facts only insofar as is necessary.

[134] On 19 June 2017, the Public Protector published a final report in which she made adverse findings against numerous persons including the Reserve Bank. The final report and the Public Protector’s investigation had its genesis in a complaint submitted to the Public Protector by Mr Paul Hoffman (Hoffman complaint). The Hoffman complaint was founded on a report produced by CIEX, an asset recovery agency based in the United Kingdom (CIEX report). CIEX had undertaken to advise the South African Government on the recovery of a debt which CIEX alleged was owed by ABSA Bank Limited (Absa) and other entities to the Reserve Bank.

The alleged debt arose from financial support that the Reserve Bank had provided ostensibly under its function as a lender of last resort, from 1985 to 1991, to a number of small banking financial institutions that were in financial distress, including Bankorp Limited (Bankorp). This financial assistance has become known as the so called “lifeboat”. A series of lending agreements were concluded between the Reserve Bank and Bankorp, with specific dates for the repayments of several loan amounts extended over many years. In 1992, Absa purchased Bankorp for R1.23 billion. The CIEX report concluded that corruption, fraud and maladministration had been committed in relation to the financial assistance that had been provided by the Reserve Bank.

[135] In 1998, the President issued a proclamation directing the Special Investigating Unit to investigate the financial assistance provided by the Reserve Bank to Bankorp (1998 SIU Proclamation). The Special Investigating Unit was required to investigate “the granting, the terms and conditions and the repayment of the loan or loans and any other special assistance by the Reserve Bank to Bankorp to rescue Bankorp from bankruptcy”. In its final report, the Special Investigating Unit concluded that the financial assistance given by the Reserve Bank to Bankorp was a simulated loan transaction which was in fact a donation. The Special Investigating Unit was of the view that any attempt to recover the donation may lead to a serious run on the banking sector in general, as well as specifically on Absa.

[136] Pursuant to the Hoffman complaint, the then Public Protector, Ms Thuli Madonsela, investigated the financial support that was provided by the Reserve Bank to Bankorp and other financial entities. The Public Protector interviewed officials of the Reserve Bank in September 2013. In August 2016, the Reserve Bank received a request from the Public Protector to furnish certain information relating to Bankorp. Another meeting was held between the Reserve Bank and the Public Protector on 8 September 2016 which was also attended by the former Governor of the Reserve Bank, Dr Christian Stals.

[137] On 17 October 2016, the incumbent Public Protector, Ms Mkhwebane, assumed her duties. She alleges that by this time the investigation into the Hoffman complaint was already well under way and that a provisional report had already been drafted.

[138] On 20 December 2016, the Public Protector sent a provisional report to various parties in order to provide them with an opportunity to respond to the findings made in the provisional report, including to the finding that the South African Government and the Reserve Bank had improperly failed to recover funds from Absa. The provisional report also proposed certain recommendations for remedial action, including that—

(a) National Treasury and the Reserve Bank must recover the money still allegedly owed by Absa, being an amount of R1.125 billion;
(b) National Treasury and the Reserve Bank must put in place systems, regulations and policies to prevent “this anomaly in providing loans/lifeboats to banks in future”; and
(c) the President must consider whether it is necessary to appoint a commission of inquiry in terms of section 84(2) of the Constitution to investigate alleged apartheid era corruption as outlined in the CIEX report.

[139] The President, the Reserve Bank and Absa responded in writing to the Public Protector’s preliminary report. The President stated that the power to appoint a commission of inquiry is vested in the President who is, in any event, not bound to accept the advice of such a commission. Both the Reserve Bank and Absa responded by raising serious concerns about the correctness of the provisional factual findings made by the Public Protector, and cautioned that the remedial action was unlawful in numerous respects. They further submitted that they were severely prejudiced by the provisional report and demanded to be given forewarning of the publication of the final report so that they would be empowered to make further comments or take steps to protect their rights.

In this regard, the Reserve Bank warned the Public Protector that:

“The errors in the report are so serious that if they remain in the final report, they will likely bring instability to the South African financial markets and will require the Reserve Bank to take immediate urgent action in the courts to prevent the implementation of the remedial action pending a review of the final report.”

[140] On 19 June 2017, the Public Protector published the final report. The final report found that the South African Government had improperly failed to implement the CIEX report and, together with the Reserve Bank, had failed to recover R3.2 billion from Bankorp or Absa. The Public Protector further concluded that the South African public was prejudiced by the conduct of the South African Government and the Reserve Bank.

[141] The remedial action recommended by the Public Protector in the final report differed substantially from that which had been recommended in the provisional report.

The final remedial action consisted of two key aspects.

  • First, it directed the Chairperson of the Parliamentary Portfolio Committee (Parliamentary Committee Chairperson) to take steps to amend section 224 of the Constitution in order to strip the Reserve Bank of its primary object of protecting the value of the currency and to change the Reserve Bank’s consulting obligations with the Minister of Finance.
  • Second, the final report required the Special Investigating Unit to approach the President to re-open and amend the 1998 SIU Proclamation in order to recover misappropriated public funds unlawfully given to Absa in the amount of R1.125 billion.

[142] The release of the final report caused severe harm to the South African economy. This included a significant depreciation in the Rand and a sell off by non resident investors of R1.3 billion worth of South African government bonds. The Reserve Bank launched an urgent application in the High Court to review and set aside the remedial action insofar as it related to the amendment of section 224 of the Constitution. The urgent application was not opposed by the Public Protector and the High Court reviewed and set aside, among others, this aspect of the remedial action.

[143] The Reserve Bank launched a second review application in the High Court in respect of the second aspect of the remedial action in the final report (second review), namely, the re-opening and amendment of the 1998 SIU Proclamation. In its replying affidavit, the Reserve Bank sought further relief, namely a personal costs order against the Public Protector and a declarator that she had abused her office in conducting the investigation.

The High Court upheld the second review, set aside the remaining remedial action report and made the disputed costs order. The High Court refused to grant the declaratory relief.

Legal principles

[144] An important principle in this appeal is that courts exercise a true discretion in relation to costs orders. A true discretion exists where the lower court has a number of equally permissible options available to it. An appeal court will not lightly interfere with the exercise of a true discretion. Ordinarily, it would be inappropriate for an appeal court to interfere in the exercise of a true discretion, unless it is satisfied that the discretion was not exercised judicially, the discretion was influenced by wrong principles, or a misdirection on the facts, or the decision reached could not reasonably have been made by a court properly directing itself to all the relevant facts and principles. There must have been a material misdirection on the part of the lower court in order for an appeal court to interfere. It is not sufficient, on appeal against a costs order, simply to show that the lower court’s order was wrong.

[145] An appeal court should be slow to substitute its own decision simply because it does not agree with the permissible option chosen by the lower court.

The reason for this was explained by Moseneke DCJ in Florence:

“Where a court is granted wide decision making powers with a number of options or variables, an appellate court may not interfere unless it is clear that the choice the court has preferred is at odds with the law. If the impugned decision lies within a range of permissible decisions, an appeal court may not interfere only because it favours a different option within the range. This principle of appellate restraint preserves judicial comity. It fosters certainty in the application of the law and favours finality in judicial decision making.”

[146] This Court has previously granted de bonis propriis costs (costs which a party is ordered to pay out of her own pocket as a penalty for improper conduct) against individuals in their personal capacities where their conduct showed a gross disregard for their professional responsibilities, and where they acted inappropriately and in an egregious manner. The assessment of the gravity of the conduct is objective and lies within the discretion of the court.

[147] This Court recently affirmed the test for personal costs orders against public officials. In SASSA, it held:

“It is now settled that public officials who are acting in a representative capacity may be ordered to pay costs out of their own pockets, under specified circumstances. Personal liability for costs would, for example, arise where a public official is guilty of bad faith or gross negligence in conducting litigation.”

[148] In SASSA, the Minister of Social Development contended that personal costs orders against public officials like her are unconstitutional because they would breach the separation of powers. This Court rejected that argument and held that the Constitution itself is the source of the judicial power to order personal costs against public officials who are guilty of bad faith or gross negligence in conducting litigation and discharging their constitutional obligations. It reasoned that the Constitution endows courts with the responsibility to uphold and enforce the Constitution, and the imposition of personal liability for costs on public officials who act contrary to their constitutional obligations is an important tool to be used for this purpose.

Grounds of appeal

[149] We deal with each of the five grounds advanced by the Public Protector as to why this Court should interfere with the High Court’s costs order against her, in turn. These are—

(a) the personal costs award interferes with the independence of the Public Protector and will inhibit her from exercising her powers without fear, favour or prejudice;
(b) the Public Protector is immunised by section 5(3) of the Public Protector Act as she acted in good faith;
(c) the Public Protector was not afforded a sufficient opportunity to deal with the personal costs order as the Reserve Bank only prayed for the order in its replying affidavit;
(d) in making the personal costs order, the High Court was influenced by wrong principles of law; and
(e) the High Court misdirected itself on the facts.

Compromising the independence of the Public Protector

[150] The Public Protector submits that if personal costs orders are granted against her, then she will always operate in fear of personal adverse costs orders and will be hampered in the performance of her constitutional obligations. She contends that a personal costs order against her will be an “ever-present threat” to the Public Protector’s independence, impartiality and ability to act without fear, favour or prejudice. She says that these orders may open the floodgates for similar applications in other matters where her conduct is reviewed, and may undermine the credibility of the Public Protector in the eyes of the public.

The Public Protector submits that the High Court failed to properly consider the restraining effect that the personal costs order would have on the institutions established under Chapter 9 of the Constitution in the performance of their constitutional functions and obligations.

[151] The Office of the Public Protector is one of six Chapter 9 institutions established by section 181(1)(a) of the Constitution. In terms of section 181(2) of the Constitution, Chapter 9 institutions are independent and subject only to the law and the Constitution. This section further provides that the Public Protector must be impartial and exercise her powers and perform her functions without fear, favour or prejudice. Section 41(1)(c) of the Constitution further requires that the Public Protector, as an organ of State, provide effective and accountable government for the Republic as a whole. The Public Protector is also required to perform all her constitutional obligations diligently and without delay. In terms of section 195(1) of the Constitution, the Public Protector is bound by the basic values and principles governing public administration, including, amongst others—

(a) a high standard of professional ethics;
(b) the constitutional imperative to use resources efficiently, economically and effectively;
(c) accountability; and
(d) the constitutional imperative to foster transparency by providing the public with timely, accessible and accurate information.

[152] As mentioned, the source of a court’s power to impose personal costs orders against public officials is the Constitution itself. The Constitution requires public officials to be accountable and observe heightened standards in litigation. They must not mislead or obfuscate. They must do right and they must do it properly. They are required to be candid and place a full and fair account of the facts before a court.

[153] The purpose of a personal costs order against a public official is to vindicate the Constitution. These orders are not inconsistent with the Constitution; they are required for its protection because public officials who flout their constitutional obligations must be held to account. And when their defiance of their constitutional obligations is egregious, it is they who should pay the costs of the litigation brought against them, and not the taxpayer. This Court has repeatedly affirmed the principle that a public official who acts in a representative capacity may be ordered to pay costs out of their own pockets in certain circumstances.

[154] In Black Sash II, this Court held that the common law rules regarding the granting of personal costs orders are well grounded and buttressed by the Constitution. The traditional common law tests of bad faith and gross negligence must be infused by the Constitution.

Froneman J said that the question whether the conduct of a public official justifies the imposition of liability for personal costs can be answered by having regard to institutional competence and constitutional obligations. He went on to explain:

“From an institutional perspective, public officials occupying certain positions would be expected to act in a certain manner because of their expertise and dedication to that position. Where specific constitutional and statutory obligations exist the proper foundation for personal costs orders may lie in the vindication of the Constitution, but in most cases there will be an overlap.”

[155] The Public Protector falls into the category of a public litigant. A higher duty is imposed on public litigants, as the Constitution’s principal agents, to respect the law, to fulfil procedural requirements and to tread respectfully when dealing with rights. The need to hold government to the pain and duty of proper court process is sourced in the Constitution itself. This is because the Constitution regulates all public power and public officials are required to act in accordance with the law and the Constitution.

[156] In a concurring judgment in Matatiele Municipality, Sachs J held that the constitutional injunction for our democratic government to be accountable, responsive and open implies that candour is required from government officials when they are before the courts. This is also consistent with section 165(4) of the Constitution which requires organs of State to assist and protect the courts in order to ensure that they are effective. The Public Protector is therefore enjoined by the Constitution to observe the highest standards of conduct in litigation.

[157] Despite this clear authority that personal costs orders are constitutional and necessary in order to hold public officials to account when they fail, for example, to fulfil their constitutional obligations, the Public Protector argues for an exception in her case. There is no merit in the Public Protector’s contention that the independence of her office and proper performance of her functions demand that she should be exempted from the threat of being mulcted with adverse personal costs orders. On the contrary, personal costs orders constitute an essential, constitutionally infused mechanism to ensure that the Public Protector acts in good faith and in accordance with the law and the Constitution.

[158] The imposition of a personal costs order on a public official, like the Public Protector, whose bad faith or grossly negligent conduct falls short of what is required, vindicates the Constitution.

The Supreme Court of Appeal in Gauteng Gambling Board opined that public officials who act improperly in “flagrant disregard of constitutional norms” should be personally liable for legal costs incurred by the State. The Supreme Court of Appeal reasoned that the imposition of personal liability might have a “sobering effect on truant public office bearers” and would avoid the taxpayer ultimately having to bear those costs.

[159] The fears that the Public Protector has about the impact of a personal costs order on the institution of the Public Protector are unwarranted. Personal costs orders are not granted against public officials who conduct themselves appropriately. They are granted when public officials fall egregiously short of what is required of them. There can be no fear or danger of a personal costs award where a public official acts in accordance with the standard of conduct required of them by the law and the Constitution.

[160] Furthermore, granting a personal costs order in a case where it is warranted will not open the floodgates for further personal costs orders because, as this Court has emphasised, whether a personal costs order should be granted must be determined “in the light of the particular circumstances of each and every case”. The only relevant question is whether the High Court misdirected itself in concluding that the Public Protector did not act in good faith, and behaved in an unacceptable and secretive manner.

Immunity under section 5(3) of the Public Protector Act

[161] The Public Protector submits that section 5(3) of the Public Protector Act creates an indemnification in her favour which protects her against being held personally liable for the Reserve Bank’s costs.

Section 5(3) provides:

“Neither a member of the office of the Public Protector nor the office of the Public Protector shall be liable in respect of anything reflected in any report, finding, point of view or recommendation made or expressed in good faith and submitted to Parliament or made known in terms of this Act or the Constitution.”

[162] The immunity which the Public Protector enjoys against personal liability under section 5(3) is only triggered when she acts in good faith. The High Court held that the Public Protector exceeded the bounds of this indemnification in the present matter. To the extent that the Public Protector conducted herself in bad faith, the potential immunity she may otherwise enjoy under section 5(3) is of no assistance to her.

The High Court found that the Public Protector acted in bad faith. This Court has no reason to interfere with this finding. Accordingly, this ground of appeal must be rejected. In any event, the ambit of the immunity afforded under section 5(3) is expressly limited to “anything reflected in any report, finding, point of view or recommendation made”. It is doubtful whether this includes the Public Protector’s exercise of her investigating powers, her conduct during the investigation, or the litigation associated with the final report.

Sufficient opportunity to be heard

[163] The Public Protector submits that the High Court erred in granting a personal costs order against her as the order was only sought by the Reserve Bank in its replying affidavit. According to the Public Protector, the Reserve Bank ought to have prayed for the personal costs order in its notice of motion, and its failure to do so deprived her of sufficient opportunity to deal with the issue in her pleadings.

[164] In Black Sash II, this Court held that if there is a possibility of a personal costs order against a State official, they must be made aware of the risk and should be given an opportunity to advance reasons why the order should not be granted. This accords with the fundamental principle in our law that no one should be condemned without a hearing.

[165] It is settled law that it is not necessary that there be formal notice of a request for a special costs order. The absence of a prayer for a personal costs order against a public official does not necessarily preclude the granting of such an order. It is sufficient that the party against whom this order is sought is informed that the order will be asked for and has an opportunity to advance reasons why the order should not be granted.

[166] In her written submissions in this Court, the Public Protector conceded that all the facts which underpin the High Court’s personal costs order against her were set out in detail by the Reserve Bank in its founding papers. There was thus ample opportunity for the Public Protector to deal with these facts in her answering affidavit before the High Court. The Reserve Bank’s supplementary founding affidavit in the High Court also specifically called on the Public Protector to explain her conduct in light of the seriousness of the allegations that were made against her. She was alerted to the importance of explaining her impugned conduct. As a public litigant, the Public Protector cannot be permitted to benefit from any decision which she made to forgo this opportunity to fully explain her conduct. She was also expressly notified by the Reserve Bank in its replying affidavit that it would seek a personal costs order against her.

[167] It is clear from the facts of this matter that the Public Protector was given sufficient opportunity to plead to the allegations against her which informed the bases of the personal costs order, and to advance submissions as to why the order should not be granted. The record reflects that this question was fully ventilated during the hearing in the High Court. There is accordingly no merit in the Public Protector’s submission that the High Court was precluded from granting the personal costs order against her in the absence of the Reserve Bank praying for that order in its notice of motion.

Wrong principle of law

[168] According to the Public Protector, the High Court conflated the principles of bias and audi alteram partem (to hear the other party) in granting the personal costs order against her. The Public Protector submits that the personal costs order is premised on the High Court’s finding that she was reasonably suspected of bias in terms of section 6(2)(a)(iii) of the Promotion of Administrative Justice Act (PAJA) as she failed to afford the Reserve Bank or Absa an opportunity to be heard before publishing the final report. According to the Public Protector, this implies that the High Court wrongly “found bias on an audi question”.

[169] In the second review, both the Reserve Bank and Absa successfully reviewed the final report on the independent grounds that the Public Protector was biased against them and that she had failed to conduct a fair investigation. In finding that the Public Protector was reasonably suspected of bias, the High Court had regard to various considerations, including the circumstances in which she had failed to afford either the Reserve Bank or Absa an opportunity to comment on the new adverse findings that were made against them in the final report.

The High Court found that the Public Protector had met with the Presidency and the State Security Agency to provide them with an opportunity to consult with her in this regard. The High Court also found that the Public Protector was perspicuously aware of her obligation under section 7(9) of the Public Protector Act to provide the Reserve Bank and Absa with an opportunity to respond to the adverse findings against them. The High Court also considered these circumstances to be relevant to the question whether the procedure adopted by the Public Protector in concluding the final report was fair.

[170] The fact that the Public Protector did not afford the Reserve Bank or Absa an opportunity to respond to the new adverse findings against them does not in itself justify an inference of bias. This is because procedural unfairness and bias are two independent grounds of review under PAJA.

It does not, however, follow that the High Court wrongly conflated these principles when it found that the Public Protector was reasonably suspected of bias in light of factors which are also relevant to procedural unfairness. The High Court was cognisant that it would be wrong “to assume that a fundamental breach of administrative justice necessarily indicates bias on the part of the administrator”. The context in which a public official conducts themselves in a procedurally unfair manner may, however, indicate bias on the part of that official. That the High Court used this as evidence of bias does not mean that it conflated the two grounds of review. In our view, the High Court did not conflate the principles of bias and audi alteram partem.

Misdirection on the facts

[171] According to the Public Protector, the High Court misdirected itself on the facts in imposing personal liability on her for the Reserve Bank’s costs. As mentioned, one of the grounds upon which an appeal court can interfere with the exercise of a discretion in relation to costs is where the discretion was influenced by a misdirection on the facts.

[172] The High Court held that the Public Protector had acted in bad faith; did not fully understand her constitutional duty to be impartial and perform her functions without fear, favour or prejudice; had failed to produce a full and complete record of the proceedings under rule 53 of the Uniform Rules of Court; and had failed to fulfill her obligation to be frank and candid when dealing with the court. These findings are underpinned by various factual findings made by the High Court regarding the conduct of the Public Protector during the second review and in the performance of her constitutional duties.

[173] The Public Protector challenges the facts relied upon by the High Court in reaching these findings. She especially challenges the findings made by the High Court regarding her meetings with the Presidency and the State Security Agency. She also submits that the High Court misdirected itself on the representations which she made in her pleadings regarding her ostensible reliance on expert economic advice in producing the final report.

Meetings with the Presidency and the State Security Agency

[174] By the end of February 2017, the Public Protector had received written responses to her provisional report from the Reserve Bank, Absa and the Presidency. The Public Protector proceeded to expand the reach of her investigation and held meetings with, among others, the Presidency and the State Security Agency.

[175] Despite the general practice within the Public Protector’s office of producing transcripts of all meetings conducted during an investigation, no transcripts of the Public Protector’s meetings with the Presidency or the State Security Agency have been furnished by the Public Protector.

[176] The Public Protector was obliged to provide a full and frank account of the impugned conduct. This required her to explain, in particular—

(a) why the final report did not disclose meetings that she had held with the Presidency shortly before it was issued;
(b) why she held meetings with the Presidency and the State Security Agency but not with the parties most affected by her new remedial action;
(c) why she discussed amending the Constitution to take away the central function of the Reserve Bank with the Presidency;
(d) why she discussed the vulnerability of the Reserve Bank with the State Security Agency; and
(e) why she recorded and transcribed other meetings held during the conduct of the investigation, but failed to record or transcribe the meetings with the Presidency and the State Security Agency.

[177] These explanations were called for because, as the Reserve Bank made plain in its papers, the engagements with the Presidency and the State Security Agency gave rise to a serious concern about whether the Public Protector had conducted the investigation independently and impartially. They also gave rise to a reasonable apprehension on the part of the Reserve Bank that the Public Protector was biased against it.

[178] The record contains handwritten notes of a meeting held between the Public Protector and the State Security Agency on 3 May 2017. These reveal that the vulnerability of the Reserve Bank was discussed. The Reserve Bank contended that this discussion with the State Security Agency about the vulnerability of the Reserve Bank was irregular. It said:

“It is unclear on what possible basis the vulnerability (and vulnerability to whom) of the Reserve Bank was relevant to the Public Protector’s investigation into the CIEX report.”

[179] The Reserve Bank expressed its concern that this discussion appeared to be aimed at undermining the Reserve Bank and indicated that by May 2017, the Public Protector’s investigation had turned from examining the question whether the government had implemented the CIEX report into an attack on the Reserve Bank.

[180] In her answering affidavit in the High Court, the Public Protector admitted to the meeting with the State Security Agency and confirmed that Minister Mahlobo had also been in attendance. The Public Protector, however, failed to explain why she discussed the vulnerability of the Reserve Bank at this meeting. In light of the serious adverse inferences which can be drawn from these facts, as well as the Public Protector’s heightened duty towards the Court as a public litigant, an explanation was clearly called for.

[181] The Public Protector’s explanation of the meeting with the State Security Agency is not only woefully late but also unintelligible. In the High Court, the Public Protector ignored the serious concern raised by the Reserve Bank that she was discussing its vulnerability with the State Security Agency. In this Court, no explanation was offered in her founding affidavit. In her replying affidavit, for the first time, she purports to explain this discussion, where she denies that the notes of the meeting with the State Security Agency indicate that she had discussed the vulnerability of the Reserve Bank with it. However, she goes on to say:

“The vulnerability aspect as entailed in the notes related to the meeting with SSA [State Security Agency], wherein Judge Heath’s media statement relating to his fear of ‘run on the banks’ was discussed to mean SARB’s [the Reserve Bank’s] vulnerability with regard to its mandate.”

[182] With due respect to the Public Protector, this makes no sense. This Court, like the High Court, is left with no clarity on why the vulnerability of the Reserve Bank was discussed with the State Security Agency during an investigation into government’s failure to implement the CIEX report.

[183] It is disturbing that there is no explanation from the Public Protector as to why none of her meetings with the Presidency were disclosed in the final report. This is especially so as the final report contained a section which listed the meetings that she held during her investigation. Evidence that the Public Protector had met with the Presidency surfaced for the first time in the record which she produced before the High Court under rule 53 of the Uniform Rules of Court.

The record contained handwritten notes which indicate that the Public Protector met with the Presidency’s legal advisors on 7 June 2017, twelve days prior to the publication of the final report. There are thus hand written notes for the meetings the Public Protector had with the State Security Agency and the Presidency on 3 May 2017 and 7 June 2017 respectively. The Reserve Bank has raised concerns about these meetings.

[184] The Public Protector confirmed in her answering affidavit in the High Court that she had also held a second, previously undisclosed meeting with the Presidency on 25 April 2017. She annexed correspondence regarding this meeting to her answering affidavit. These documents were not included in the rule 53 record she produced.

[185] The Public Protector was, however, required to produce a full and complete record of the proceedings under review in terms of rule 53 of the Uniform Rules of Court. This included “every scrap of paper throwing light, however indirectly, on what the proceedings were, both procedurally and evidentially.”

An essential purpose of this obligation is to enable a court to perform its constitutionally entrenched review function. This gives effect to the rights of the parties under section 34 of the Constitution to have justiciable disputes decided in fair public hearings with all the issues being ventilated. It also safeguards parties’ ability to enforce their rights under section 33 of the Constitution to administrative action that is lawful, reasonable and procedurally fair. The record was essential to enable the reviewing applicants to understand what occurred during the investigation that led to the impugned remedial action and to equip the court to ensure the proper administration of justice in the case.

[186] The record that was produced by the Public Protector was thrown together, with no discernible order or index, and excluded important documents. The Public Protector is wrong when she claims that she “filed the entire record”.

She did not. She omitted pertinent documents from the record, some of which were only put up for the first time as annexes to her answering affidavit in the High Court, and others, which were disclosed for the first time in this Court.

[187] The Public Protector’s failure to include these documents in the record, or to account for this failure, stands in stark contrast to her heightened obligation as a public official to assist the reviewing court.

[188] In the High Court, the Public Protector provided the following explanation of the meeting with the Presidency on 25 April 2017:

“From the discussion during our meeting, I became concerned that my draft remedial action to direct the President to establish a Judicial Commission may face similar difficulties as currently faced in the State of Capture report.”

The Public Protector alleged that this concern arose as there was already a “legal determination pending, in the review application of the State of Capture report, concerning whether [her] office can direct the President to establish a Commission of [I]nquiry”.

[189] It is, however, noteworthy that the Public Protector’s draft remedial action did not direct the President to establish a commission of inquiry. Instead, it only required the President to consider whether to establish a commission of inquiry. This demonstrates that the Public Protector had already taken account of the pending litigation regarding the State of Capture report (or at the very least had appreciated the underlying legal issue) when she issued her preliminary report for comment in December 2016.

It therefore could not have been “from the discussion during a meeting” with the Presidency on 25 April 2017 that she became concerned about directing the Presidency to appoint a commission of inquiry. By the time she met with the Presidency in April 2017, she had already ensured that her remedial action did not direct the President to appoint a commission of inquiry but rather to consider doing so. The meeting of 25 April 2017 remains shrouded in mystery. The Public Protector’s explanation of what was discussed is obscure.

[190] The Public Protector’s failure to deal pertinently and responsibly with the serious accusations made against her impartiality in light of these meetings meant that the High Court was left with only the handwritten notes as evidence of what was discussed at the meetings and no countervailing account from the Public Protector. This led the High Court to conclude that “the question remains unanswered as to why [the Public Protector] acted in such a secretive manner and she does not give an explanation for doing so”.

[191] In her founding and replying affidavits before this Court, the Public Protector has endeavored to explain the inadequacies of her explanation in the High Court. But this is too little too late. This Court is required to determine whether, on the facts presented to the High Court (and not those that have subsequently been volunteered), the High Court materially misdirected itself in granting personal costs against the Public Protector.

[192] The subsequent explanations ought, therefore, not to have a bearing on this appeal. However, even if this Court were to take them into account, they do not assist the Public Protector. Conversely, they compound the case against her.

[193] In her founding affidavit in this Court, the Public Protector sought to distance herself from the explanation which she provided to the High Court about her meeting with the Presidency on 25 April 2017. In this Court, the Public Protector claims that the meeting was a “meet and greet” with the President’s legal advisor.

In support of this claim, the Public Protector annexed further correspondence with the Presidency to her founding affidavit. She also claims that she was mistaken to describe the meeting in her pleadings before the High Court in a manner which “created the impression that it was more than an introductory meeting”. She explains this mistake as being—

“occasioned by the hurried manner in which [her] answering affidavit had to be prepared within the very tight timeframes set during the case management process thus putting pressure on [Ms Mkhwebane] and [her] legal representatives to study voluminous papers in three consolidated applications within a few days.”

[194] The Public Protector had, however, more than two months to answer the Reserve Bank’s supplementary founding affidavit in the High Court. Her explanation for the mistake which she made in her answering affidavit also does not account for her failure to be frank and candid with the High Court about her meetings with the Presidency. It follows that the High Court did not misdirect itself in finding that the Public Protector failed to either fully or genuinely disclose her meetings with the Presidency.

[195] The High Court also correctly found that the Public Protector was totally silent in her answering affidavit about her meeting with the Presidency on 7 June 2017. This conduct clearly falls foul of her obligation as a public litigant to be candid with the court and violates the standards expected of a Public Protector in light of her institutional competence.

The High Court was correct in holding that the Public Protector—

“failed to realise the importance of explaining her actions in this regard, more particularly the last meeting she had with the Presidency [on 7 June 2017]. This last meeting is also veiled in obscurity if one takes into account that no transcripts or any minutes thereof have been made available.”

[196] Before this Court, the Public Protector attempts to explain her failure to disclose the meeting with the Presidency on 7 June 2017 in the final report on the basis that the meeting was “covered by the Presidency’s response to the provisional report”. The Public Protector had annexed the response by the Presidency to her answering affidavit before the High Court. According to the Public Protector, the Presidency had requested a meeting with her in order to clarify its response to the provisional report.

[197] The Presidency’s response to the provisional report, however, neither requests a further meeting with the Public Protector nor makes any mention of the Presidency’s wish to clarify its response. It is also noteworthy that the Public Protector states in her founding affidavit before this Court that her meeting with the Presidency on 7 June 2017 concerned the new remedial action which she had proposed in the final report.

This contradicts her claim that the meeting concerned a request by the Presidency to clarify its response to the provisional report. The provisional report axiomatically did not contain the new remedial action proposed by the Public Protector. In any event, it is unclear how this meeting request by the Presidency could ever be capable of explaining the Public Protector’s failure to disclose in her final report that she had met with the Presidency on 7 June 2017.

[198] In this Court, the Public Protector also endeavoured to overcome the deficiencies in her explanation in the High Court. She says that she confused the two meetings that she had had with the Presidency. The salient features of the Public Protector’s new explanation are these. When the Public Protector referred to the 25 April 2017 meeting in her answering affidavit in the High Court, she ostensibly meant to refer to the 7 June 2017 meeting because the meeting on 25 April 2017 was only a meet and greet with the Presidency. According to the Public Protector, the 25 April 2017 had nothing to do with the investigation.

[199] In addition, the Public Protector says in this Court that her 7 June 2017 meeting with the Presidency did relate to the investigation. According to Public Protector, it had been requested in the letter sent on 28 February 2017 by the Presidency to the Public Protector in response to the provisional report that had been received. According to the Public Protector, the request from the Presidency for the 7 June 2017 meeting was in order to clarify the President’s response to the provisional report. As, however, mentioned above, the President’s response to the provisional report made no request for a meeting.

[200] This prompted the Public Protector to file a replying affidavit in this Court, in order to explain, for a third time, the precise origin and content of the meeting with the Presidency on 7 June 2017. In her replying affidavit, the Public Protector says that there was an error in her founding affidavit in this Court.

She concedes that the President’s response to the provisional report did not request a meeting. She explains that she mistakenly referred to this document as containing the request by the Presidency for a meeting to clarify its response to the provisional report. She said she had meant to refer to the next document in the High Court papers.

[201] The document that the Public Protector, in her replying affidavit in this Court, contends is the request by the Presidency for the meeting to clarify its response to the provisional report, is the request for the 25 April 2017 meeting. This is the meeting that the Public Protector has already explained to this Court had nothing at all to do with the investigation. Thus, despite three successive explanations for the 7 June 2017 meeting with the Presidency, the Public Protector still has not come clean and frankly explained why the meeting was held.

[202] In this Court, the Public Protector’s explanations are contradictory. On the one hand, the Public Protector says that the meetings with the Presidency had “nothing to do with the substance of the content of [her] Report” and that they did not discuss the remedial action recommended in the final report before its publication. On the other hand, she confirms that the handwritten notes of the meeting of 7 June 2017 set out “what was discussed at the meeting”. The handwritten notes of the meeting with the Presidency on 7 June 2017 record that—

(a) the Public Protector and the Presidency discussed the 1998 SIU Proclamation, its re-opening through amendment and the inclusion of other matters like those involving Nedbank in the new proclamation. This included the new remedial action recommended in the final report;
(b) extensive details about the investigation into the CIEX report were discussed, including the interview with Dr Stals; and
(c) the Public Protector’s engagements with Mr Goodson were discussed. This included remedial action to change the Constitution around the central function of the Reserve Bank.

It is therefore clearly contradictory for the Public Protector to claim that the new remedial action was not discussed with the Presidency.

[203] The Public Protector’s dogged insistence that the substance of her remedial action in the final report was not discussed with the Presidency is contradicted by her own confirmation that the handwritten notes of the meeting held on 7 June 2017 reflect what was discussed. The two people from her office who attended the meeting with her have also confirmed under oath that the handwritten notes correctly reflect what was discussed at the meeting.

[204] The Public Protector’s explanation of the meeting of 7 June 2017 with the Presidency was, and still is, woefully inadequate. As mentioned, the handwritten notes of that meeting indicated that the Public Protector and the Presidency had discussed amending the Constitution to strip the Reserve Bank of its central function. It also reflected that the Public Protector had discussed her new remedial action of amending the 1998 SIU Proclamation with the Presidency. No other party had been given an opportunity to comment on the new remedial action.

[205] In this Court, the Public Protector has contended that the adverse findings made against her by the High Court were based on innocent errors on her part. The Public Protector’s persistent contradictions, however, cannot simply be explained away on the basis of innocent mistakes. This is not a credible explanation.

The Public Protector has not been candid about the meetings she had with the Presidency and the State Security Agency before she finalised the report. The Public Protector’s conduct in the High Court warranted a de bonis propriis (personal) costs order against her because she acted in bad faith and in a grossly unreasonable manner.

[206] The Reserve Bank, this Court and the public are entitled to know why the Public Protector discussed the new remedial action to amend the Constitution and the 1998 SIU Proclamation with the Presidency when she discussed it with no other affected party. The Reserve Bank, at the very least, is entitled to know why amending the Constitution’s provisions around the powers of the Reserve Bank was only discussed with the Presidency and not with the Reserve Bank. The Reserve Bank is also entitled to an explanation why its vulnerability was discussed with the security arm of the State. In the absence of an explanation from the Public Protector, it is not for this Court to consider various reasons why these discussions may have been held with the Presidency and the State Security Agency. This would entail speculation.

[207] The Public Protector’s entire model of investigation was flawed. She was not honest about her engagement during the investigation. In addition, she failed to engage with the parties directly affected by her new remedial action before she published her final report. This type of conduct falls far short of the high standards required of her office.

Reliance on expert economic advice

[208] The Public Protector submits that the High Court was mistaken in finding that she had “pretended” that she had relied on the advice of an economist, Dr Tshepo Mokoka, when she compiled the final report. In her answering affidavit in the High Court, the Public Protector relied extensively on a report compiled by Dr Mokoka which she annexed to her affidavit. In this affidavit, the Public Protector stated:

“where I make averments relating to economics I do so on the basis of advice received from economic experts during the course of the investigation of the complaint referred to below, which advice I accept as correct.”

[209] This is not a statement without significance in the context of the Public Protector’s investigation because the economic rationale of the so-called “lifeboat” was an important aspect of the investigation. What this passage sought to convey was that the statements by the Public Protector about economics were based on the advice she received from economic experts during the investigation. Dr Mokoka was, however, consulted by the Public Protector only after the second review was launched.

[210] There were numerous sections of the Public Protector’s answering affidavit that were directly replicated from Dr Mokoka’s report. This led the High Court to conclude that the Public Protector had

“failed to make a full disclosure when she pretended, in her answering affidavit, that she was acting on advice received with regard to averments relating to economics prior to finalising her report”.

[211] In her affidavits in this Court, the Public Protector contends that she did not misrepresent her reliance on Dr Mokoka’s report in the High Court. She says that she consulted Mr Stephen Mitford Goodson, a well-known author and former non executive director of the Reserve Bank during the investigation.

But Mr Goodson is not an economic expert and the Public Protector never sought to qualify him as one. She could not, therefore, have been referring to Mr Goodson when she said in the High Court that the averments in her affidavit relating to economics were based on the advice of economic experts received during her investigation. The only person she qualified as an expert was Dr Mokoka. The statements in the affidavit relating to economics ought not, therefore, to have included the input from Dr Mokoka because he was not consulted during the investigation.

[212] In her replying affidavit in this Court, the Public Protector further states that both Dr Mokoka and Mr Goodson’s views were taken into account in the preparation of the final report. In argument before this Court, counsel for the Public Protector submitted that this statement was clearly a good faith factual mistake and is a non sequitur (a statement that does not follow logically from, or is not clearly related to, the premises) in light of the rest of the contents of the Public Protector’s replying affidavit. If it is a “mistake”, it is one more in her basket of “mistakes”. In any event, it fails to advance her appeal.

[213] In a third affidavit before this Court, filed with her written submissions, the Public Protector explains that in the High Court she meant to say that she relied on Dr Mokoka’s evidence only as “corroborative evidence” for the purposes of responding to the review applications. That distinction was not made in the affidavits before the High Court. There was no careful delineation between the views that the Public Protector formed during her investigation based on the interview she had with Mr Goodson on the one hand, and the economic analysis of the “lifeboat” that she procured from Dr Mokoka after the investigation, on the other.

[214] Without this delineation, the affidavit in the High Court was misleading because it conveyed that the economic analysis that underpinned the report was based on expert economic advice, which it was not. The new explanation in this Court does not assist the Public Protector because her conduct still falls short of the standard expected of public officials in litigation. That standard is for full and frank disclosure. The Public Protector’s explanations are neither.

[215] This distinction was not disclosed by the Public Protector in the High Court and her explanation accordingly does not assist her. The Public Protector’s ostensible hidden intention, belatedly disclosed in this Court, is in our view incapable of disturbing the High Court’s finding that she pretended to have relied on Dr Mokoka’s report in investigating the complaint.

[216] The argument that the High Court was mistaken when it found that the Public Protector was not candid with the Court about her reliance on expert economic advice cannot be sustained.

Conclusion on personal costs order

[217] The Public Protector either failed entirely to deal with the allegations that she was irresponsible and lacking in openness and transparency, or, when she did address them, offered contradictory or unclear explanations. She gave no explanation as to why there were no transcripts of the meetings with the Presidency and the State Security Agency and why the vulnerability of the Reserve Bank was discussed with the State Security Agency. No explanation was provided for the meeting with the Presidency on 7 June 2017. Instead, another meeting with the Presidency, held on 25 April 2017, was disclosed for the first time by the Public Protector in her answering affidavit in the High Court.

[218] There is no merit in any of the grounds of appeal advanced by the Public Protector to justify this Court’s interference in the High Court’s exercise of its true discretion to order that the Public Protector pay 15% of the Reserve Bank’s costs in her personal capacity. There was no material misdirection on the part of the High Court in relation to the personal costs order. The personal costs order must stand.

Punitive costs order

[219] The High Court ordered that the Public Protector must pay the Reserve Bank’s costs on a punitive attorney and client scale. The High Court reasoned that a punitive costs order was justified by reason of the same circumstances which warranted the imposition of personal costs.

These circumstances included:

  • (a) the Public Protector’s failure to fully understand her constitutional duty to be impartial and perform her functions without fear, favour or prejudice;
  • (b) the Public Protector’s failure to disclose in the final report that she had meetings with the Presidency on 25 April 2017 and 7 June 2017;
  • (c) the Public Protector’s silence in the High Court about her meeting with the Presidency on 7 June 2017;
  • (d) the Public Protector’s failure to meet with the reviewing parties;
  • (e) the Public Protector’s failure to realise the importance of, and failure to make, full disclosure; and
  • (f) the Public Protector having pretended that she had acted on advice from economic experts in compiling the final report.

The High Court’s judgment on this aspect reads:

“Having regard to all the above considerations, we have to conclude that this is a case where a simple punitive costs order against her in her official capacity will not be appropriate. This is a case where we should go further and order the Public Protector to pay at least a certain percentage of the costs incurred on a punitive scale.”

[220] It does not follow that a punitive costs order will always be justified in circumstances where a personal costs order is warranted. An order for personal costs against a person acting in a representative capacity is in itself inherently punitive. The imposition of costs on an attorney and client scale is an additional punitive measure. This could, as pointed out in the first judgment, be viewed as “double punishment”. While the test for awarding a personal costs order or costs on a punitive scale may overlap, an independent, separate enquiry should be carried out by a court in respect of each order. Both personal and punitive costs orders are extraordinary in nature and should not be awarded “willy-nilly”, but rather only in exceptional circumstances.

[221] This Court has endorsed the principle that a personal costs order may also be granted on a punitive scale. The punitive costs mechanism exists to counteract reprehensible behaviour on the part of a litigant. As explained by this Court in Eskom, the usual costs order on a scale as between party and party is theoretically meant to ensure that the successful party is not left “out of pocket” in respect of expenses incurred by them in the litigation. Almost invariably, however, a costs order on a party and party scale will be insufficient to cover all the expenses incurred by the successful party in the litigation. An award of punitive costs on an attorney and client scale may be warranted in circumstances where it would be unfair to expect a party to bear any of the costs occasioned by litigation.

[222] The question whether a party should bear the full brunt of a costs order on an attorney and own client scale must be answered with reference to what would be just and equitable in the circumstances of a particular case. A court is bound to secure a just and fair outcome.

[223] More than 100 years ago, Innes CJ stated the principle that costs on an attorney and client scale are awarded when a court wishes to mark its disapproval of the conduct of a litigant. Since then this principle has been endorsed and applied in a long line of cases and remains applicable. Over the years, courts have awarded costs on an attorney and client scale to mark their disapproval of

  • fraudulent, dishonest or mala fides (bad faith) conduct;
  • vexatious conduct; and
  • conduct that amounts to an abuse of the process of court.

[224] In Eskom, this Court emphasised that a costs award falls within a court’s discretion and that there are limited grounds for an appellate tribunal to intervene. The punitive costs order in that matter was held to have been justified as the applicant had abused the High Court’s processes, misled the Court, and caused severe prejudice to the respondent.

In AB, the Minister of Social Development challenged a punitive costs order which the High Court had granted against her in her official capacity. This Court held that the High Court decision was justified in light of the Minister’s flagrant disregard of her duty to ensure that all relevant evidence was timeously placed before the Court and the dilatory manner in which she conducted the proceedings in almost every step she was required to take.

This Court held that “[t]he High Court’s exercise of discretion on costs cannot, in these circumstances, be interfered with”.

[225] In Plastic Converters Association of South Africa, cited with approval by this Court in Limpopo Legal Solutions I, the Labour Appeal Court held, in the context of non-constitutional matters, that—

“[t]he scale of attorney and client is an extraordinary one which should be reserved for cases where it can be found that a litigant conducted itself in a clear and indubitably vexatious and reprehensible conduct. Such an award is exceptional and is intended to be very punitive and indicative of extreme opprobrium.”

[226] A punitive costs order is justified where the conduct concerned is “extraordinary” and worthy of a court’s rebuke. In SS, the “extraordinary” conduct included compromising the best interests of a minor child and this Court’s integrity by failing to comply with an order of this Court.

Similarly, in Mtuze, it was the conduct of the applicant which justified a costs award against him on an attorney and own client scale, de bonis propriis. The double punitive award (personal costs on an attorney and client scale) made in this matter by the High Court, while rare and extraordinary, is not unprecedented.

[227] As stated above, the award of costs is a matter in respect of which courts exercise a true discretion. The question is whether the High Court materially misdirected itself in granting the punitive costs order. The Public Protector, while taking issue with the “punitive personal costs” order, does not set out any independent grounds why the punitive aspect of the costs order constituted a material misdirection on the part of the High Court.

[228] The burden of proof rests upon the Public Protector to satisfy this Court that the High Court, in awarding costs on a punitive scale, failed to exercise its discretion judicially.

[229] In this Court, the Public Protector seeks among others an order setting aside paragraph 4.3 of the order of the High Court. Paragraph 4.3 of the order reads:

“The first respondent, in her personal capacity, is ordered to pay 15% of the costs of the South African Reserve Bank on an attorney and client scale, including the costs of three counsel, de bonis propriis.”

[230] The Public Protector refers to punitive costs in a number of passages in her founding affidavit in this Court. She says that the High Court’s finding that she was biased in conducting the investigation “was a material consideration in [its] decision to award a punitive costs order against” her. She goes on to allege that the High Court erred in finding that a “simple punitive costs order” against the Public Protector in her official capacity, would not be appropriate and she should be directed to pay a percentage of the costs incurred on a punitive scale.

[231] Further arguments about the punitive costs order are made in the written submissions filed on behalf of the Public Protector. It is recorded that the only substantive issue in this matter is whether the costs incurred in the High Court should be borne by her personally and on a punitive scale. The contention is made that the punitive personal costs order against the Public Protector will compromise the independence and effectiveness of her office. It is further alleged that the costs order would have, and has had, the unintended result of attacks against her by powerful and well-resourced persons who may be the subject of an investigation by her office and facing possible remedial action.

Such unintended results were cautioned against by this Court in Economic Freedom Fighters I:

“[The Public Protector’s] investigative powers are not supposed to bow down to anybody, not even at the door of the highest chambers of raw state power. The predicament though is that mere allegations and investigation of improper or corrupt conduct against all, especially powerful public office bearers, are generally bound to attract a very unfriendly response. An unfavourable finding of unethical or corrupt conduct coupled with remedial action, will probably be strongly resisted in an attempt to repair or soften the inescapable reputational damage. It is unlikely that unpleasant findings and a biting remedial action would be readily welcomed by those investigated.”

[232] It is also alleged, in the written submissions, that after the Public Protector’s investigation in this matter, she took what she believed was appropriate remedial action and in the public interest and despite this, the High Court ordered punitive personal costs against her. It is further denied that she acted in bad faith. It is suggested that the Public Protector may have acted with unbridled zeal but contended that zealousness in the recovery of public funds is to be applauded and not met with punitive personal costs orders. The statement is made that the Public Protector may well in the future be required to investigate the Reserve Bank and, with a punitive personal costs order hanging over the head of the Public Protector, it is likely that her independence and impartiality will be questioned.

[233] These are the sum total of the Public Protector’s pleadings and submissions made on her behalf, in regard to the punitive costs order.

[234] The purpose of pleadings is to define the issues for the other party and the Court, and for the Court to adjudicate those issues in dispute. In Mighty Solutions, this Court held that an application for leave to appeal must be adjudicated on whether and how the court below erred. As mentioned, a party seeking to appeal against a costs order must demonstrate that the discretion was not exercised judicially, influenced by wrong principles or a misdirection on the facts or the decision reached could not have reasonably been made by a court properly directing itself to all the relevant facts and principles. The Public Protector has not pleaded any of these grounds in relation to the punitive element of the costs order.

[235] While the High Court reached the conclusion that a punitive costs order was called for, it is not clear from the judgment whether it conducted an independent enquiry in this regard or whether its conclusion was based on the same facts it relied upon for the imposition of the personal costs order. There are certain instances where the court may, of its own accord, raise a question of law, but this question must fully emerge from the evidence, and be necessary for the court’s decision. A court may only adjudicate an issue of law of its own accord if this involves no unfairness to the party against whom it is directed. This question was neither pleaded nor ventilated at the hearing of this matter. In these circumstances, this Court is not in a position to decide this question.

[236] In this Court, the Public Protector’s argument focused on the personal nature of the costs order, rather than its punitive nature. In any event, whether the punitive aspect of the costs order was challenged separately to the personal aspect, or jointly with the personal costs order, the five grounds on which the appeal is based do not hold any water, as set out in detail above.

[237] Regard must be had to the higher standard of conduct expected from public officials, and the number of falsehoods that have been put forward by the Public Protector in the course of the litigation.

This conduct included the numerous “misstatements”, like misrepresenting, under oath, her reliance on evidence of economic experts in drawing up the report, failing to provide a complete record, ordered and indexed, so that the contents thereof could be determined, failing to disclose material meetings and then obfuscating the reasons for them and the reasons why they had not been previously disclosed, and generally failing to provide the court with a frank and candid account of her conduct in preparing the report. The punitive aspect of the costs order therefore stands.

Declaratory relief

[238] In the High Court, the Reserve Bank sought a declaration that the Public Protector had abused her office during the investigation that led to the final report. This relief was only sought at the stage when the Reserve Bank filed its replying affidavit. The High Court was of the view that the declarator sought may well be warranted.

It reasoned:

“The Public Protector did not conduct herself in a manner which should be expected from a person occupying the office of the Public Protector . . . She did not have regard thereto that her office requires her to be objective, honest and to deal with matters according to the law and that a higher standard is expected from her. She failed to explain her actions adequately. There may be a case to be made for a declaratory order.”

[239] Nevertheless, the High Court refused to grant the order on the basis that the Reserve Bank had failed to apply for an amendment of its notice of motion and had only requested the order in its replying affidavit. The High Court was particularly concerned with the prejudice which may have been occasioned to the Public Protector by granting such declaratory relief in the absence of a formal amendment. The Reserve Bank has filed a cross appeal in this Court which is conditional upon leave to appeal being granted to the Public Protector regarding the costs order.

[240] As mentioned, the Reserve Bank indicated for the first time in its replying affidavit that it would be seeking declaratory relief. This request stated that it would be seeking “a declaratory order from [the High Court] that [the Public Protector] has abused her office. The request for the declaratory order should not come as a surprise to the Public Protector.”

[241] The replying affidavit concludes by requesting that the final report be set aside and alleging that the Public Protector’s conduct deserves serious censure. The censure proposed is that the High Court should indicate “its displeasure at this improper and unreasonable conduct, with an order of de bonis propriis costs against Ms Mkhwebane”.

[242] While the replying affidavit contained an allegation that the Reserve Bank would be seeking a declarator that the Public Protector had abused her office, this declarator was not formally included in the relief sought. Instead, the replying affidavit expressed the relief sought by the Reserve Bank as follows: “the Reserve Bank persists in seeking an order in terms of the notice of motion including costs of three counsel on an attorney and client scale, to be paid de bonis propriis by Ms Mkhwebane”. The relief sought by the Reserve Bank in the High Court in its notice of motion and replying affidavit did not expressly include the declarator.

[243] The Reserve Bank, however, relies on Economic Freedom Fighters II where this Court held that its power to grant a just and equitable order in terms of section 172(1)(b) of the Constitution “is so wide and flexible” that Courts are empowered to grant relief that has not been pleaded.

In Economic Freedom Fighters II, Jafta J, writing for the majority, put the matter thus:

“The power to grant a just and equitable order is so wide and flexible that it allows courts to formulate an order that does not follow prayers in the notice of motion or some other pleading. This power enables courts to address the real dispute between the parties by requiring them to take steps aimed at making their conduct to be consistent with the Constitution.”

[244] The Reserve Bank submits that the declarator ought to have been granted by the High Court because formal amendments for declaratory relief under section 172(1)(a) of the Constitution are not required if the relief sought is adequately addressed on the papers before the court.

[245] In Merafong, this Court held that section 172(1)(a) of the Constitution contemplates that a court may decline to decide a matter because the challenge is not warranted in the particular proceedings before it. The Reserve Bank’s replying affidavit was the last set of pleadings filed in the High Court. Dissimilarly from the personal costs order, the Public Protector has not conceded that all the facts which underpin the declaratory relief sought by the Reserve Bank were set out in the papers before the High Court. The Public Protector has not been afforded the opportunity to respond and plead facts in answer to the Reserve Bank’s case for the declaratory relief. It may be so that the circumstances of this case justify the granting of a declaratory order under section 172(1)(a) of the Constitution, but this order should not be granted in the absence of the Public Protector having had sufficient opportunity to plead to the Reserve Bank’s case.

[246] Given that the matter came directly from the High Court, and the High Court chose not to deal with the merits of the declarator, we do not have the benefit of any other courts’ judgments on this matter. Our jurisprudence emphasises that this Court functions better when it is assisted by a reasoned judgment (or judgments) on the relevant issues in dispute. This Court has on numerous occasions expressed itself on the undesirability of sitting as a court of first and last instance. 

In Fleecytex, this Court stated:

“It is, moreover, not ordinarily in the interests of justice for a court to sit as a court of first and last instance, in which matters are decided without there being any possibility of appealing against the decision given. Experience shows that decisions are more likely to be correct if more than one court has been required to consider the issues raised. In such circumstances the losing party has an opportunity of challenging the reasoning on which the first judgment is based, and of reconsidering and refining arguments previously raised in the light of such judgment.”

[247] The cross-appeal undoubtedly engages the jurisdiction of this Court. Section 172(1)(a) of the Constitution requires courts to declare any law or conduct that is inconsistent with the Constitution invalid to the extent of its inconsistency. In Merafong, Cameron J described the section as an injunction to courts to vindicate the supremacy of the Constitution.

In addition, the findings endorsed and made by this Court appear to inescapably lead to the conclusion that the Public Protector breached her constitutional obligations in terms of section 181(2) of the Constitution to act independently and impartially. But this is not enough. Leave to appeal will be granted only if it is in the interests of justice to do so.

[248] The Public Protector did not have an opportunity to respond to the request for the declarator and place relevant facts before the High Court. In any event, even if this Court were to adjudicate the cross-appeal on the basis of the evidence before us, it would do so without the benefit of a judgment of any other court. For these reasons, it is not in the interests of justice for this Court to hear the Reserve Bank’s cross-appeal.

Costs

[249] The dictates of fairness and equity require that no order as to costs in this Court should be made.

Order

[250] The following order is made:

1. The Public Protector’s application for leave to appeal is granted.
2. The appeal is dismissed with no order as to costs in this Court.
3. The Reserve Bank’s application for leave to cross-appeal is dismissed with no order as to costs in this Court.