Irba applies to appeal Sharemax disciplinary committee member recusal order

The Independent Regulatory Board for Auditors (Irba) has applied for leave to appeal a high court judgment ordering two members of its disciplinary committee hearing the case against the former auditors of Sharemax to recuse themselves.

However, the former Sharemax auditors – Danie Dreyer, Jacques Andre van der Merwe and Petrus Johannes Jacobus Bekker, who were all directors of ACT Audit Solutions Incorporated at the time the alleged contraventions of the Irba code were committed – have applied for leave to cross-appeal to the Supreme Court of Appeal, or alternatively a full bench of the High Court in Pretoria, against the non-granting of their main relief and the fact they only succeeded with the alternative relief in terms of the judgment handed down by Judge Jabulani Nyathi on 20 December 2023.

Read: Irba members in former Sharemax auditors case ordered to recuse themselves

In terms of their main application, the former auditors applied to review and set aside the Irba disciplinary hearing against them on the grounds that there had been a material infringement of their right under Section 34 of the Constitution to a fair hearing from an independent and impartial committee.

The auditors were only granted an order reviewing and setting aside the decision of Irba’s disciplinary committee refusing their application for the recusal of Suren Sooklal and Horton Griffiths, two members of the disciplinary committee hearing the case, and substituting it with an order that these two members be recused.

Read:
Former auditors of Sharemax lodge high court review application
Irba: Former Sharemax auditors’ review application ‘incompetent’ and ‘premature’

The auditors’ cross-appeal application is conditional on Irba’s leave for appeal application being successful.

Court ‘erred’, says Irba

Irba, in its grounds for its application for leave to appeal the judgment, said the court erred in granting the auditors the review relief for a number of reasons.

These were that:

• The review is brought midstream, before the pending disciplinary proceedings have been completed;

• The court upheld the review relief without engaging with the grounds of review pleaded by the auditors;

• The court held that Sooklal’s “conduct, attitude, remarks, utterances and visible disrespect towards the practitioners and to some extent towards [Professor Harvey] Wainer who testified on behalf of the practitioners has not been denied in any discernible way” and granted the review relief when this finding is factually incorrect in the papers;

• There is a reasonable prospect another court would come to a different conclusion, and refuse the review relief; and

• There are compelling reasons to grant leave to appeal due to the public importance of this matter.

Expanding on its argument regarding the latter, Irba said it has a statutory responsibility to take disciplinary action against registered auditors, where this is warranted, to protect the public from practitioners’ improper conduct.

“This court’s findings … that the recusal of two committee members was warranted, have implications for those individuals as well as Irba as an institution.

“Further, the court’s substitution order impacts the ongoing disciplinary proceedings.”

Irba added that the general approach is that the courts should only be approached with review applications after the finalisation of the process sought to be reviewed, in this case the disciplinary proceedings. The high court will not in general interfere with uncompleted proceedings and will intervene only in rare cases, where grave injustice would otherwise result, it said.

Irba said the high court did not find this was a rare case where grave injustice would result unless a midstream review was entertained and, in any event, this is not, on the facts, such a case.

“The court therefore ought to have held that the application could not be entertained until the disciplinary proceedings had been completed,” it said.

Irba further claimed that to succeed with the recusal relief, the auditors were required to show that the disciplinary committee’s recusal decision was either unlawful, unreasonable or the product of a procedurally unfair process.

“The court does not make any finding in this regard. Moreover, on the facts, the grounds of review were not established. Therefore, the court erred in granting the review relief,” it said.

Read: Three former Sharemax auditors, 413 improper conduct charges

Irba added that from the portions of the transcript quoted in the auditors’ papers, Sooklal clearly stated that he made statements in jest, and apologised if the impression of bias had been created.

“On the facts, a finding of actual bias cannot be sustained. In any event, the court did not make any similar findings in relation to Mr Griffiths. There is accordingly no basis on which to order his recusal,” it said.

Cross-appeal

In the auditors’ cross-appeal, they said the court should have found the evidence conclusively demonstrated that:

• Irba, in Part A of the charge sheet, published serious, sensationalist, wildly speculative and unfounded allegations previously made in the media against the auditors;

• Irba presented Part A of the charge sheet to the disciplinary committee as relevant, true and the correct factual background to the charges against the auditors, although it, at the time, had absolutely no evidence in support of this narrative;

• The narrative presented in Part A of the charge sheet was that the syndication schemes were fraudulent, pyramid or Ponzi schemes in which the auditors did not perform an independent professional role but in which they were an important cog in the Sharemax machinery;

• The opening address on behalf of Irba in the disciplinary proceedings constituted a continuation of the same false narrative as that presented in Part A of the charge sheet, resulting in further adverse media articles that prejudicially affected the auditors and the continuation of the same previously mentioned narrative; and

• The disciplinary committee was not immune from or insulated against this ongoing false narrative.

The auditors claimed the court should have found that:

• None of the explanations provided by Irba in respect of Part A of the charge sheet and/or the opening address by the complainant constituted a cogent, credible or rational explanation;

• The only inference that could be drawn from the presentation of the false narrative both in Part A of the charge sheet and in the opening address is that it was calculated to improperly influence the disciplinary committee; and

• The previously mentioned objective to improperly influence the disciplinary committee was manifestly achieved.

The auditors added that in correctly finding that Sooklal and Griffiths demonstrated clear bias against the auditors, the court should further have found that the clear biased conduct irreparably compromised the auditors’ constitutional rights to a fair hearing.

They further claimed that on the evidence as a whole, the court should have found that:

• There has been a material and most serious violation of the auditors’ rights to a fair hearing as envisaged in Section 34 of the Constitution;

• If the tainted disciplinary proceedings are permitted to continue, justice will not be seen to be done, and faith in the proceedings will be irreversibly undermined as the auditors already had, and will for months, continue to suffer financial and reputational prejudice;

• A continuation of the tainted proceedings will be so subversive of Section 34 of the Constitution, and so contrary to the rule of law, that in the interests of justice this ought not to be countenanced or allowed; and

• Irba’s conduct is so irregular, improper, prejudicial and disgraceful that it should never be tolerated by the court.

The auditors said the court in the circumstances should have granted the main relief they sought.

Read:
Independence of Irba’s expert witness at Sharemax hearing questioned
Objection to witness evidence delays former Sharemax auditors’ disciplinary hearing

Veronica Vurgarellis, head of commercial litigation and member of the management board of Lawtons Africa, Irba’s attorneys, said a date has not yet been secured for arguing the leave to appeal application and a date is unlikely to be secured in the first term of the high court.

The first term ends on 31 March 2024, with the second term commencing from 15 April 2024.

Wim Cilliers, a partner at Clyde & Co, the attorneys for the auditors, said last week that the parties have now tentatively agreed to argue the application on either 10 or 11 April 2024.