The complaints arises from two failed investments into Grey Haven Riches 11 Ltd, a property syndication scheme promoted by Purple Rain Properties 15 (Pty) Ltd t/a Realcor Cape pursuant to the advice of respondent. Both investments were made on 9 September 2009, one of R1 030 000 for the late Mrs Anna Elizabeth Johanna Rosslee and one of R120 000 for Anna Elizabeth Johanna Pieterse, being mother and daughter, respectively. The complaints were brought by the daughter, Mrs Pieterse (then recorded as the first complainant) against respondents. Mrs Rosslee, (originally the second complainant) died while the complaint was still pending before this Office. At the time of advice Mrs Rosslee, 88 years of age at the time, had already retired while Mrs Pieterse was 55 and working.
The complaints were lodged against Huis Van Oranje Finansiele Dienste BPK (Huis van Oranje), a company duly incorporated and registered in terms of South African law, and its representative Stephanus Johannes van der Walt. Huis Van Oranje Finansiele Dienste BPK was an Authorised Financial Services Provider (FSP), with license number 687. The registrar’s records, however, confirm that first respondent’s licence lapsed in July 2011.
Respondent advised that the investment was to be in Realcor’s Blaauwberg Strand Hotel and referred to it as the best investment. He is alleged to have also informed the complainants that the investment was guaranteed. Complainants had also been informed by respondent that the commission attracted by both investments would be paid from the scheme’s coffers and not from their capital, and that they could withdraw their capital after one year. The monthly income payable to Mrs Pieterse was R1 200 and to Mrs Rosslee R10 300.
At the end of September 2010, the complainants’ monthly income was not paid. Attempts to obtain an explanation from respondent proved futile. By this point, Mrs Rosslee, who was already at
advanced age and dependent on the Realcor investment for sustenance, experienced severe health challenges. Mrs Pieterse then took early retirement to look after her ailing mother, who eventually passed away on 27 June 2017.
The gist of the Ombud’s findings against respondent is that the respondent failed to appropriately advise complainant. This is supported by:
- Respondent’s failure to identify that the prospectuses of Grey Haven 9 and 11 and Iprobrite violated Notice 459 of Government Gazette 28690. This Notice was sanctioned by the Minister of Trade and Industry to prevent unfair business practices in property syndication schemes. He was therefore unable to advise his client
- Respondent had absolutely no legal basis to recommend this investment to his clients and his conduct in recommending same was offensive to the General Code of Conduct (the Code), and amounted to breach of his contractual duty to appropriately advise complainant
- Respondent also failed to explain how it was possible for Realcor to pay 15% interest (much higher than market related rates); 7% commission (also much higher than markets); pay fees to Realcor (firstly as the agent of MSI, secondly, as manager of investor funds) and fund the development of the hotel.
- None of the risks involved in this product were ever drawn to complainants attention. The application forms signed by complainants cannot assist respondent, as nowhere in the forms are the illegalities dealt with.
The Ombud found that respondent’s conduct caused complainants’ loss, a loss that was foreseeable at the time of advising complainant. This was a breach of respondent’s contractual duty.
The Ombud ordered respondents to pay amount of R120 000 to the complainant in respect of her own investment; and an amount of R800 0001 to the complainant in her capacity as executor of the late Mrs Rosslee’s estate.