Pensioners to finally be compensated after Sharemax adviser loses eight-year battle against ombud ruling
In a breakthrough for at least three Sharemax investors — all pensioners — the Financial Sector Tribunal has after an eight-year legal battle dismissed the appeals with costs against financial adviser Deeb Risk and his financial advice company, D Risk Insurance Consultants.
In a scathing media release on the tribunal’s decision, the ombud for financial advisory and intermediary services said the legal costs have by far outweighed the capital lost by complainants, and the insurers and individual financial services providers driving the litigation should consider whether they are not throwing good money after bad simply to make a point.
“While we support a fair judicial process, the time has come to ask whether the continuous appeals of decisions of this office are in the best interest of consumers and the FSPs [financial services providers] who religiously pay premiums for professional indemnity cover. This especially applies where issues brought and decided on by various fora continue to be questioned, without merit,” the ombud said in its release.
The pensioners lodged complaints with the ombud about the losses they suffered investing on Risk’s advice in troubled property-syndication scheme Sharemax. In 2012 the ombud ordered Risk to repay R300,000 and R815,000 respectively to complainants Lionel and Catherine Oldacre, pensioners from Margate in KwaZulu-Natal, and Jannet Ann Schott Bujok, a pensioner from Westdene in Johannesburg.
Risk had professional indemnity insurance through Santam subsidiary Stalker Hutchinson Admiral. Instead of the insurance being used to pay compensation to the poorly advised pensioners, the insurer funded the adviser’s series of legal challenges, including those in court where the pensioners were unable to afford lawyers to defend their cases.
In a series of appeals at the board of appeal, the high court, and back to the ombud for reconsideration, Risk refused to accept the ombud’s recommendation and in response, according to the ombud, filed voluminous amounts of paper as additional evidence.
When the matter was referred back to the ombud, it concluded during December 2017 that the evidence presented was not persuasive enough to warrant the determinations being changed and, as such, the previous determinations stood.
Risk yet again filed an application for leave to appeal the decision. The ombud’s office dismissed the application and Risk and his lawyers argued that the office had mistakenly dealt with the matter as an application for leave to appeal and should instead have treated it as a continuation of a previous appeal, the ombud said.
The matter ended up on appeal at the tribunal.
The tribunal pointed to obvious risks attached to the Sharemax investments and concluded this week that in both instances, Risk was negligent when he rendered the advice to the Oldacres and Bujok, and dismissed the appeal with costs.
The ombud has many outstanding property-syndication complaints and said while it is dealing with each on its merits, continuous appeals such as those in the Risk case are hampering its work, it said.
In all, about 33,000 people invested about R5bn in Sharemax property-syndication schemes.