Most Read Contributor in South Africa, September 2016
In the decision of Absa Bank Ltd v Ukwanda Leisure Holdings
(Pty) Ltd 2014 (1) SA 550 (GSJ), two of the issues
that the South Gauteng High Court (as it then was) was tasked with
whether the JSE Ltd (JSE) exercised administrative
action in terms of the Promotion of Administrative
Justice Act, 2000 (PAJA), when it expressed its view that
a particular trading member had not breached the exchange's
Derivative Rules; and
if it did constitute administrative action, whether Ukwanda
Leisure Holdings (Pty) Ltd (Ukwanda) was permitted to set
aside the decision indirectly, without reviewing the
In this case:
ABSA Bank Ltd (ABSA) instituted proceedings against Ukwanda for
payment of an amount of approximately R732 million.
In doing so, ABSA sought to recover losses
that it incurred as the clearing bank of Cortex, a trading member
of the JSE, when Ukwanda (Cortex's client) defaulted on payment
of the variation margin in respect of certain single-stock
Ukwanda's defence was that the margin call was unlawful, as
the failure by Cortex via ABSA to make certain prior payments
constituted a breach of the Derivative Rules.
Ukwanda had lodged a complaint with the JSE as
to the alleged breach of the Derivative Rules by Cortex but the
JSE's view was that Cortex was not in
The High Court referred to the elements set out in the
definition of "administrative
action" in PAJA. In regard to
whether or not a
been taken, the Court highlighted three requirements,
it must be a decision with finality;
it must be a decision of an administrative
it must be made under an empowering
The High Court emphasized that a
is taken when some form of considered process is
followed. This involves:
an application or request to initiate the
a compilation and evaluation of relevant
information relating to such request;
a conclusion being reached; and
an exercise of a statutory or public power
based on the conclusion reached. The existence of a process was
also found to be pertinent in regard to whether the decision was
"administrative in nature".
The High Court continued that the JSE exercises a public
power because it is under a statutory duty to act in the public
interest, including publishing and implementing rules to
ensure the integrity of the market. Essentially, the JSE regulates
the players in the market. The Court found that by evaluating
Ukwanda's complaint, the JSE was classically exercising a
public power/performing a public function.
The JSE, the court continued, acted in
terms of the Derivative Rules published under the (now
repealed) Securities Services Act. These rules constituted the
empowering provision under which the JSE was authorised to act,
noting that the JSE's obligations are both contractual and
administrative in nature.
The conclusion of the High Court was therefore
that the JSE's decision that Cortex had not defaulted
in terms of the Derivative Rules constituted administrative action
that was reviewable in terms of PAJA.
The High Court then went on to decide whether Ukwanda
could challenge the decision of the JSE:
without applying to review and set aside the decision;
pursuing its statutory rights in terms of the Securities
Services Act; or
persisting with declaratory relief against Cortex and
Instead, Ukwanda sought to challenge the JSE's decision in
an indirect manner in a dispute that was, in fact, between two
private parties and in which the JSE was not even joined.
The High Court stated that as administrative action, the
JSE's decision stood until set aside by a Court on
review. Outside a review application, there are very
limited instances where a party may indirectly or collaterally
challenge administrative action. The Court declined to extend a
collateral challenge beyond instances where a public authority
seeks to coerce a subject into compliance with an unlawful
The High Court thus concluded that "the JSE's
decision, which constitutes administrative action under the Act,
cannot be indirectly challenged by Ukwanda in these
proceedings." It granted judgment in favour of
ABSA and Ukwanda was ordered to pay ABSA the sum of R732
Given that all decisions taken or powers exercised by a
regulator do not necessarily constitute administrative action, this
case provides a useful precedent in regard to what type of
decisions by the JSE constitute "administrative
action". It also provides confirmation that if
administrative action is not set aside in an application instituted
against the JSE itself, one generally cannot challenge the
JSE's decision indirectly, in a dispute solely between private
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.
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