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[2014] ZAGPJHC 396
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KZN Talk radio (Pty) Limited v Independent Communications Authority of South Africa and Another (41672/12) [2014] ZAGPJHC 396 (5 August 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION JOHANNESBURG)
Case
No: 41672/12
DATE:
05 AUGUST 2014
KZN
TALK RADIO (PTY)
LIMITED
...................................................
Applicant
And
INDEPENDENT
COMMUNICATIONS
AUTHORITY
OF SOUTH AFRICA
.........................................
First
Respondent
ONE
GOSPEL KNI FM (PTY) LIMITED
............................
Second
Respondent
JUDGMENT
FRANCIS
J
Introduction
1.
The applicant, KZN Talk Radio (Pty) Limited (KZN Talk) brought an
application to review and set aside two decisions made by the
first
respondent - the Independent Communications Authority of South Africa
(ICASA), after it had awarded a single commercial sound
broadcasting
licence on the FM frequency 103 MHz in the Durban area to the second
respondent – One Gospel KNI FM (Pty) Ltd
(One Gospel) and the
granting of the Durban licence to One Gospel. KZN Talk’s
application for a broadcasting licence
was
2.
unsuccessful.
It relies on four grounds of review and seeks to have the
decisions
reviewed and set aside and to have the matter remitted to ICASA for
reconsideration.
2.
The application was opposed by One Gospel on the grounds that there
is no
merit in the application and should
the application succeed, that the relief sought should not be
granted.
The
background facts
3.
On 27 March 2009, ICASA published and “Invitation to Apply”
(ITA) for individual commercial free-to-air sound broadcasting
service licenses in certain markets. The closing date for the
submission of applications was 30 September 2009 which was
later
extended to 30 November 2009. The ITA included amongst others a
list of FM and AM frequencies that were available for
commercial
sound broadcasting services in the three primary markets of Gauteng
and the metropolitan areas of and surrounding Cape
Town and Durban.
4.
On 28 July 2009, ICASA clarified and amended the ITA, stating that it
would only issue one FM licence in each of the three primary
markets. The three available FM frequencies were 98.9 MHz
(Gauteng), 103 MHz (Durban) and 90.4 MHz (Cape Town).
5.
KZN Talk applied to ICASA on 30 November 2009 for a single commercial
3.
sound
broadcasting service licence in the Durban area. Section 2 of
the ITA document, dealing with corporate status, lists
and describes
KZN Talk’s shareholders at the time of the application. Amongst
other things, it reflected that Primedia has
a 24.9% shareholding in
the company and MSG Afrika has a 20% shareholding in the company.
Since then, Imbewu Capital Partners
(Pty) Ltd (Imbewu) has disposed
of its 10.5% shareholding in the company. These shares were
reimbursed
pro rata
to the remaining shareholders with the
exception of Primedia.
6.
On 14 June 2010 ICASA gave notice that it had received 14
applications in response to the ITA. It listed the particulars
of the applications in a schedule to the notice and invited
interested parties to submit written representations by 7 September
2010 which was extended to 21 September 2010. On 21 October
2010, ICASA published the dates for the public hearings in respect
of
the licence applications. The hearings were held at ICASA’s
offices from 15 to 18 November 2010.
7.
On 15 December 2011, following a lengthy adjudication process, ICASA
awarded the broadcasting licence to One Gospel. ICASA
furnished
written reasons for its decision on 21 May 2012. ICASA issued
the licence to One Gospel on 25 May 2012.
8.
ICASA found that certain requirements – such as limitations
imposed by section 64, 66(2) and 66(3) of the Electric Communications
Act 36 of 2005
4.
(the
ECA) and the employment of historically disadvantaged persons were
satisfied. Other aspects of the application –
including
but not limited to programming; format; new; current affairs; demand,
need and support; and
financial means,
business records and commercial viabilities were recorded.
9.
KZN Talk’s application for a licence was rejected by ICASA for
two reasons. ICASA found that section 2(v) of the
ECA enjoins
it to ensure that commercial and community broadcasting licences,
viewed collectively, are controlled by persons or
groups of persons
from a diverse range of communities in the Republic. It said
that KZN Talk was deemed to be controlled
by Primedia which already
controls four other commercial radio services in South Africa. In
addition MSG Afrika which has
a controlling interest in another FM
radio station, is also a shareholder in KZN Talk. In ICASA’s
assessment, if the
commercial FM radio broadcasting service licence
for Durban were to be granted to KZN Talk, this would not contribute
to a diversity
of ownership of broadcasting services in South Africa
and, given that FM frequencies are in scarce supply, would limit the
scope
for the ownership of radio services to be diversified in
future. Primedia and MSG Afrika have 24.9% and 20% shareholding
in KZN Talk respectively. Primedia’s shareholding in KZN Talk
was deemed to constitute control and given that Primedia already
controls the four FM broadcasting service licences in South Africa,
if KZN Talk were to be awarded the Durban radio licence, it
would by
virtue of its Primedia’s shareholding, be in breach of section
65(2)(a) of the
ECA. KZN Talk was
deemed to be controlled by Primedia. MSG Afrika was
5.
deemed
to control KZN Talk on the basis of its 20% shareholding.
10.
ICASA did not oppose the application but filed heads of arguments
dealing with why it believes that its interpretation of section
65 of
the ECA was correct. It made no submission on the remainder of
the grounds of review.
The
first ground of review
11.
In the first ground of review, KZN Talk contends that ICASA’s
basis for rejecting its application for the Durban licence
was
materially affected by an error of law. ICASA was incorrect to
base its decision on the view that a 20% shareholding
constitutes
control for the purposes of 65 of the ECA. Instead, it should
have proceeded on the basis that the common law
definition of control
applies to section 65 of the ESA which –
absent any specific provisions built into a shareholders’
agreement that result
in control being achieved with a lower level of
shareholding – means a shareholding of more than 50%. KZN Talk
contended
that if this interpretation is correct, the rejection of
its application was unsustainable as a matter of law as neither
Primedia
nor
MSG
Afrika could be said to be in control of KZN Talk. ICASA’s
interpretation was wrong as a matter of law.
12.
ICASA had rejected KZN Talk’s application for a licence given
that Primedia already controls the four FM broadcasting
service
licences in South Africa and if it were to be awarded the Durban
radio licence, it would by virtue of the Primedia’s
shareholdong, be in breach of section 65(2)(a) of the ECA. It
also
6.
found
that MSG Afrika which has a controlling interest in another FM radio
station,
is also a shareholder of KZN Talk.
13.
It is common cause that ICASA’s decision to reject KZN Talk’s
application
rests squarely in its
interpretation of the ECA that a 20% shareholding in a licence
(whether direct or indirect) is deemed to be
control of that licensee
for the purposes of section 64, 65 and 66 of the ECA. Three
different interpretations of the meaning
of control in section 65(2)
of the ECA were presented to ICASA when it was considering who to
award the licence to. The first
interpretation is the one
ultimately adopted by ICASA, namely that where a party holds a 20%
shareholding in a given licensee that
amounts to deemed control.
The second interpretation was that advanced by KZN Talk before ICASA
during the hearings that
a party would be deemed to be in control
when it had a 25% shareholding. The third interpretation was
that contended for
by the National Association of Broadcasters (NAB),
which was to the effect that there was no deeming provision in
respect of control
under section 65 of the ECA and accordingly the
common definition of control applied. This would mean that a
party would
only be in control of a licensee if it was in a position
to determine the destiny of the licensee and its assets. This
would
in general require that a party held more than a 50%
shareholding of the licensee unless there were some specific
provisions built
into the shareholders’ agreement which
resulted in control being achieved with a lower level of
shareholding.
7.
14.
In this application, ICASA contended that the deeming provision in
section 66(5) of the ECA applies to section 65 and accordingly
that a
20% shareholding constitutes control in terms of section 65. In
the alternative ICASA contended that a shareholding
of 50% or a
special provision in a shareholders’ agreement are not the only
bases on which control may be established as
contended by KZN Talk.
Control may take other forms, including indirect shareholding or the
right to appoint a majority of
the board of directors. This
court should not narrow the meaning of control in section 65 and
elsewhere on the basis suggested
by KZN Talk.
15.
One Gospel contended further that the stark duality which KZN Talk
tries to force this debate – either the deeming provision
in
section 66(5) of the ECA applies to provision of control in section
65 of the ECA, or the common law definition of control applies
was
ill conceived and incorrect. Control can mean any number of
things, depending on the circumstances and context in which
it is
being assessed. What amounts to control is very much context
specific. The meaning of the word control must be
ascertained
in the context of the section and the statute as a whole, bearing in
mind the objects of the statute. In the light
of this interpretative
framework, ICASA’s interpretation of control in section 65 of
the ECA best accords with the objects
of the ECA, whilst KZN’s
interpretation is furthest removed from the objects of the ECA.
16.
KZN Talk no longer relies on the interpretation that it had advanced
and relies on the interpretation contended for by the NAB
at the
hearings i.e. that the
8.
common
law definition of control should be applied in the context of section
65(2) of the ECA. It contended that ICASA wrongly
took the view
that a shareholding in a licence amounted to ‘control’ of
that licence whereas on a
proper
construction of the ECA that is not the case. Three reasons
were advanced why ICASA’s interpretation constitutes
an error
of law. The first is the location of section 66(5) of the ECA
and the heading of section 66. KZN Talk contended
that the fact
that the deeming provision that appears in section 66(5) of the ECA
is not replicated in section 65 suggests that
it was not intended
that the 20% shareholding rule embodied in section 66(5) was intended
to apply only in the context of section
66. The fact that no
definition of control appears in section 65 or in section 1 suggests
that it was intended that the word
‘control’, as used in
section 65, should be construed in accordance with the ordinary
meaning. It also relied
on the heading of section 66, which
refers to ‘cross-media’ control.
17.
The second argument advanced by KZN Talk was that the provisions of
the Independent Broadcasting
Authority Act 153 of 1993 (IBA Act)
contained a general definition of control (a shareholding) but also
contained a specific deeming
provision providing that, for
cross-media licences, a 20% shareholding would constitute control.
It observed that the ECA
contains no general definition of control
but retained the IBA Act deeming provision in respect of cross-media
control in section
66(5).
18.
The third argument advanced by KZN Talk was that if section 66(5) of
the
9.
ECA
applies to section 64, but this would render section 64 superfluous.
It contended that section 64 prohibits two things
in relation to
foreign broadcasting services: first section 64(a) provides that a
foreigner may not directly or indirectly exercise
control over a
commercial broadcasting licensee and secondly section 64(1)(b)
provides that a foreigner may not directly or indirectly
have a
financial interest or an interest in voting shares or paid-up capital
in a commercial broadcasting licensee exceeding 20%.
It argued
further that if the deeming provision applies and control in terms of
section 64(1)(a) is present when there is a 20%
shareholding, section
64(1)(a) will mean exactly the same as sub-section (1)(b) and is
superfluous.
19.
KZN Talk submitted that if the deeming provision in section 66(5)
does not apply to section
65, the common law approach to ‘control’
would apply. The common law approach is ‘in a position to
determine
the destiny of the licensee and its assets. It argued
that in practical terms, the control would in general
require
that a party held more than 50% of the licensee, unless there were
some
special provisions built into the shareholders agreement that secured
control despite a lowering shareholding.
20.
Section 64 of the ECA deals with limitations on foreign control of
commercial broadcasting
services. It provides that a foreigner
may not whether directly or indirectly exercise control over a
commercial broadcasting
licensee; or have a financial interest or an
interest either in voting shares or paid-up capital in a commercial
broadcasting licensee,
exceeding twenty (20) percent. It
provides
10.
that
not more than twenty (20) percent of the directors of a commercial
broadcasting
licensee may be foreigners.
21.
Section 65 of the ECA deals with the limitations on control of
commercial broadcasting services.
It provides,
inter alia,
that no person may directly or indirectly exercise control over
more than one commercial broadcasting service licence; be in a
position
to exercise control over more than two FM
commercial
broadcasting service licences; be in a position to control two FM
commercial broadcasting service licences which either
have the same
licence areas or substantially overlapping licence areas; be in a
position to exercise control over more than two
AM commercial
broadcasting service licences; be in a position to control two AM
commercial broadcasting service licences which
either have the same
licence areas or substantially overlapping licence areas.
22.
Section 66 of the ECA deals with limitations on cross-media control
of commercial broadcasting
services. It provides, amongst other
things, that no person who controls a newspaper may acquire or retain
financial control
of both a commercial television broadcasting
service licence and a commercial sound broadcasting service. No
person who is
in a position to control a newspaper may be in a
position to control either a commercial television broadcasting
service licence,
in an area where the newspaper has an average ABC
circulation of 20% of the total newspaper readership in the area, if
the licence
area of the commercial broadcasting service licence
overlaps
10.
substantially
with the circulation area of the newspaper concerned. The
Authority
may, on good cause shown and without departing from the objects and
principles enunciated in section 2, exempt affected
persons from any
of the limitations provided for in this section.
23.
It is apparent from section 64 of the ECA which deals with
limitations on foreign control
of commercial broadcasting services
that a foreigner may not have a financial interest or an interest
either in voting shares or
paid up shares or paid-up capital in a
commercial broadcasting licensee exceeding 20%. Not more than
20% of the directors
of a commercial broadcasting licensee may be
foreigners. Unlike section 65, which does not specify the
circumstances that
are to be regarded as constituting ‘control’,
section 66(5) provides that a 20% shareholding in a commercial
broadcasting
service ‘is considered as constituting control’.
Thus, for the purposes of the application for cross media limitations
imposed by section 66, a 20% shareholding in an entity that holds a
commercial broadcasting service licence will be regarded as
conferring control of that entity.
24.
The concept of ‘control’ is a central to an understanding
and application of
the limitations imposed by section 65.
However, neither section 65 nor section 1 of the ECA provides a
definition of control.
The question to be determined is whether
the deeming provision contained in section 66(5) of the ECA is
applicable to section 65.
KZN Talk contended that it does not
apply.
12.
25.
Our courts have consistently held that in interpreting the meaning of
any
provision
of a statute, other parts of the statute may have a direct role to
play.
This
principle was put beyond doubt by Schreiner JA when he stated in
Jaga
v
Donges;
Bhana v Donges NO
1960 (4) SA 653
(A)
that:
“
[c]ertainly
no less important than the oft repeated statement that the words and
expressions used in a statute must be interpreted
according to their
ordinary meaning is the statement that they must be interpreted in
the light of their context.
…
[T]he
object to be attained is unquestionably the ascertainment of the
meaning of the language in its context.
…
[T]he
legitimate field of interpretation should not be restricted as a
result of excessive peering at the language to be interpreted
without
sufficient attention to the contextual
scene.”
26.
Schreiner JA accepted the “contextual scene” as
constituting at least “the
language of the rest of the
statute.” His dictum was followed with approval in,
inter alia
,
Aetna Ins Co v Minister if Justice
1960 (3)
SA 273
(A) at 284 where the remarks of Lord Greene MR in
Re Bidie
1949 Ch.121 were quoted with approval:
“
The
real question that we have to decide is, what does the word mean in
the context in which we here find it, both in the immediate
context
of the sub-section in which the word occurs and in the general
context of the Act, having regard to the declared intention
of the
Act and the obvious evil that it is designed to remedy.”
27.
In
University of Cape Town v Cape Bar Council
1986 (4) SA 903
(A) at 913 J to 914 A Rabie CJ held as follows:
“
I
would stress … that it is also a well-known rule of
construction that words used in a statue should be read in the light
of their context.”
13.
28.
In
Natal Joint Municipal Pension Fund v Endumeni Muncipality
2012
(4) SA 593
(SCA) at paragraph 18 – 9, the SCA held as follows:
“
[18]
Over the last century there have been significant developments in the
law relating to the interpretation of documents, both
in this country
and in others that follow similar rules to our own. It is
unnecessary to add unduly to the burden of annotations
by trawling
through the case law on the construction of documents in order to
trace those developments. The relevant authorities
are
collected and summarised in Bastian Financial Services (Pty) Ltd v
General Hendrik Schoeman Primary School. The present
state of
the law can be expressed as follows: Interpretation is the
process of attributing
meaning
to the words used in a document, be it legislation, some other
statutory instrument, or contract, having regard to the context
provided by reading the particular provision or provisions in the
light of the document as a
whole
and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than
one meaning is
possible each possibility must be weighed in
light
of all these factors. The process is objective, not subjective.
A sensible meaning is to be preferred to one that leads
to insensible
or unbusinesslike results or undermines the apparent purpose of the
document. Judges must be alert to, and
guard against, the
temptation to substitute what they regard as reasonable, sensible or
businesslike for the words actually used.
To do so in
regard
to a statute or statutory instrument is to cross the divide between
the interpretation and legislation; in a contractual
context it is to
make a contract for the parties other than the one they in fact
made. The ‘inevitable point of departure
is the language
of the provision itself’, read in context and having
regard
to the purpose of the provision and the background to the preparation
and
production of the document.
[19]
All this is consistent with the ‘emerging trend in statutory
construction’. It clearly adopts as the proper
approach
to the interpretation of documents the second of the two
possible approaches mentioned by E Schreiner JA in Jaga
v Dongess NO
and Another; Bhana v Donges NO and Another, namely that from the
outset one considers the context and the language
together, with
neither predominating over the other. This is the approach that
courts in South Africa should follow, without
the need to cite
authorities from an earlier era that are not necessarily consistent
and frequently reflect an approach to interpretation
that is no
longer appropriate. The path that Schreiner JA pointed to is
now received wisdom elsewhere. Thus Sir
Anthony Mason CJ
said:
‘
Problems
of legal interpretation are not solved satisfactorily by ritual
incantations which emphasise the clarity of meaning which
words have
when viewed in isolation, divorced from their context. The
modern approach to
14.
interpretation
insist that context ne considered in the first instance, especially
in the case of general words, and not merely
at some later stage when
ambiguity might be though to arise.’”
29.
The point of departure is to ascertain the meaning of the word in the
context of the section
and the statute as a whole, bearing in mind
the objects of the statute. In the light of the interpretive
framework, ICASA’s
interpretation of control in section 65 of
the ECA best accords with the objects of the ECA whilst the
applicant’s interpretation
is further removed from the objects
of the ECA. Some of the primary objects of the ECA are to
‘promote competition
within the ICT sector’; ‘promote
the empowerment of historically disadvantaged persons, including
Black people, with
particular attention to the
needs
of women, opportunities for youth and challenges for people with
disabilities’; and to “ensure that commercial
and
community broadcasting
licences,
viewed collectively, are controlled by persons or groups of persons
from
a diverse range of communities in the Republic”.
30.
Another object of the ECA is to promote and facilitate the
achievement of the objects of
the ‘related legislation’
which is defined as including the Broadcasting Act 4 of 1999 (the
Broadcasting Act). The
objects of the
Broadcasting Act are
inter alia
, to ‘encourage ownership and control of
broadcasting services through participation by persons from
historically disadvantaged
groups’; to ‘ensure plurality
of news, views and information and provide a wide range of
entertainment and education
programmes’; to
‘
ensure
that the commercial and community licences, viewed collectively, are
controlled
by person or groups of persons from a diverse range of
15.
communities
in South Africa’; and to ensure ‘that the broadcasting
system is
controlled
by persons or groups of persons from a diverse range of
communities
in South Africa and within each element promotes ownership,
control
and management of broadcasting services by persons from historically
disadvantaged
groups’.
31.
These objects of the ECA of promoting diversity and competition in
ownership in the broadcasting
sector can best be achieved if the
notion of control (in sections precluding concentration and promoting
diversified ownership
and competition) is read expansively and widely
as possible. In that way, the net of
section 65
of the ECA is
opened up to ensnare and preclude as many instances of ‘control’
as possible, thus promoting a wider
base of ownership and thus
competition. In my view, applying the deeming provision of 20%
achieves these objectives of the
ECA as best as possible. On
the spectrum of meanings that can be afforded to the word ‘control’
in
section 65
, the common law definition punted by KZN Talk would not
achieve the primary objectives of the ECA because it narrows the
definition
of ‘control’ considerably.
32.
KZN Talk had contended that if the 20% deemed control definition from
section 66(5)
was also applied to
section 64
, it would render
sections 64(1)(a)
and
section 64(1)(b)
tautolgous. This is
incorrect. If the 20% deemed control definition in
section
66(5)
is also applied to
sections 64
to
66
, the two subsections of
section 64(1)
would not read identically or mean the same thing
16.
as
contended by KZN Talk. They have distinct and different meanings.
Section 64(1)(a)
provides that a foreigner may not directly or
indirectly
exercise
control over a commercial broadcasting licensee. Applying the
20% deemed control definition to this subsection would
mean that an
effective shareholding of 20% of the issued share capital would
amount to control, irrespective of the voting rights
attaching to
such shares.
Section 64(1)(b)
provides that a foreigner
may not directly or indirectly have a financial interest or an
interest in voting shares in commercial
broadcasting licensee
exceeding 20%.
Section 64
(1)(b) does not contain the word
‘control’. Instead it refers
to
a ‘financial interest’ or an ‘interest’.
This is even wider than the notion of share ownership
underpinning
the 20% deemed control definition. Therefore
section 64(1)(b)
clearly could not mean the same thing as
section 64(1)(a).
The
deeming provision in
section 66(5)
of the ECA applies to
section
65(2)
and control as used in
section 65(2)
should be interpreted to
include a 20% shareholding.
33.
The applicant has failed to prove that ICASA committed an error of
law in its interpretation
of
section 65(5)
of the ECA. This
ground of review fails.
The
second ground of review
34.
In the second ground of review it is contended that ICASA’s
decision was procedurally
unfair because while it afforded One Gospel
an opportunity to remedy what would otherwise have been a breach of
section 65(2)(b)
of the ECA, it afforded no such an opportunity to
KZN Talk. It ought also to have
17.
afforded
KNZ Talk an opportunity to adjust its shareholding to ensure
compliance
with
section 65(2)(a)
, as interpreted by ICASA. ICASA did not
give
any explanation for the disparate manner in which it treated KZN Talk
and One Gospel.
35.
One Gospel contended that the two situations are not in the least bit
alike. It had
provided an undertaking in relation to
overlapping directorships, which undertaking was accepted by ICASA.
ICASA was entitled
to accept such an undertaking which it did.
Section 9(7)
of the ECA provides that the Authority - ICASA, may
impose on an applicant any other specific terms and conditions
resulting from
undertakings made by such an applicant. One
Gospel contended that this is precisely what occurred in the present
instance.
KZN Talk did not provide any undertaking in relation
to the question of the meaning of control. It can therefore not
complain
of unequal treatment as it does now. The fact that the
interpretation of the meaning of control for purposes of section of
65 of the ECA may have been subject to extensive debate, does not
detract from the simple reality that it provided no undertaking
at
all. It denied that there was any procedural unfairness in the
form of unfair and unequal treatment or in any other form
in the
process and that this ground of review is contrived.
36.
It is common cause that at the time when One Gospel’s
application was considered,
one of its directors was also a director
of Kagiso, which exercised control over more than two commercial
broadcasting service
licences in the
18.
FM
sound broadcasting service. This was contrary to
section
65(2)(b)
of the
ECA
which provides as follows:
“
No
person may … be a director of a company which is, or two or
more companies which between them are, in a position to exercise
control over
more
than two commercial broadcasting service licences in the FM sound
broadcasting service.”
37.
Since this was contrary to the provisions of
section 65(2)(b)
of the
ECA, One Gospel was given the opportunity by ICASA to have its
director resign. The director in due course did so, but only
after
ICASA had already decided to award the licence to One Gospel.
This is clear from the following passage from the reasons:
“
As
already mentioned above, the concerns regarding Ms Motanyane’s
directorship
were raised during the public hearings and [One Gospel] gave
an
undertaking, which was later confirmed in writing, that should [it]
be
successful,
Ms Motanyane would resign as a director of [One Gospel]. The
undertaking was not contested by any of the parties
and [ICASA] is
satisfied
that
no other aspect of the application gave rise to material concerns on
[ICASA’s]
part, having regard to the factors to be considered in evaluating a
licence
application.”
38.
While One Gospel was given the opportunity to bring its management
structure into line with
the ECA, by ensuring that a director
resigned after its licence was granted, KZN Talk was not given a
similar opportunity to commit
to
bringing its shareholding structure into line with the provisions of
the ECA as interpreted by ICASA. There is no evidence
either
from the transcript or the affidavits filed with this court that KZN
Talk was provided with such an undertaking to dilute
their
shareholding to less than 20%.
39.
There is a critical distinction between the issues of overlapping
directorships
19.
and
deemed control. The statutory provisions regarding overlapping
directorship
are clear. In contrast there was considerable confusion on the
meaning
of ‘control’ under the relevant provisions of the ECA, as
demonstrated
by the varying interpretations offered by KZN Talk and the NAB.
As the replying affidavit explained at paragraph
39:
“
One
Gospel had no option but to make the ‘unequivocal and
unqualified undertaking regarding [Ms Motanyane’s]
resignation’.
In contrast, the issue of deemed control
remains unresolved and, indeed, ICASA’s ruling on this came as
a surprise to virtually
the entire industry. As set out in the
founding papers, it was inconsistent with ICASA’s past approach
and inconsistent
with the approach urged by the National Association
of Broadcasters, the industry body which represents broadcasters.”
40.
It is plain that the decision of ICASA to award the licence to One
Gospel rather than KZN
Talk or the other applicants amounted to
administrative action in PAJA. That being the case, ICASA was
required to act in
a manner that was procedurally fair in dealing
with the multiple applications or the licence. In an analogous
context, the
awarding of tenders, the SCA has made clear that in
Metro Project CC and Another v Klersdorp Local Municipality
and
Others (
2004) 1 ALL SA 504
SCA at
paragraph 13, it is not permissible
to
treat different bidders in a unfair and unequal manner:
“
Fairness
must be decided on the circumstances of each case. It may in
given circumstances be fair to ask a tenderer to explain
an ambiguity
in its tender, it may be fair to allow a tenderer to correct an
obvious mistake; it may, particularly in a complex
tender, be fair to
ask for clarification or details
required
for its proper evaluation. Whatever is done may not cause the
process to lose the attribute of fairness.
Was
the tender process followed in the present case fair? A
high-ranking
municipal
official purported to give the ninth respondent an opportunity or
augmenting
its tender so that its offer might have a better chance of
acceptance
by the decision-making body. The augmented offer was at first
concealed from and then represented to the mayoral
committee as
having been the tender offer. It was accepted on that basis.
The deception stripped
20.
the
tender process of an essential element of fairness: the equal
evaluation of
tenders.
Where subterfuge and deceit subvert the essence of a tender process,
participation in it is prejudicial to every
one of the competing
tenderers whether it stood a chance of winning the tender or not.”
41.
ICASA effectively allowed One Gospel an opportunity to remove a
difficulty which would have
disqualified it. It gave One Gospel
an opportunity of augmenting its application so that its offer might
have a better chance
of acceptance and that in doing so it stripped
the licensing process of an essential element of fairness: the equal
evaluation
of the application. There is no explanation from
ICASA for the disparate manner in which it treated One Gospel and KZN
Talk.
The decision was therefore procedurally unfair as
contemplated by
section 6(2)(c)
of PAJA and falls to be reviewed and
set aside.
42.
Since, KZN Talk has succeeded with the second ground of review, it is
not necessary to determine
the third ground of review.
The
fourth ground of review
43.
It was contended that if ICASA’s finding that a shareholding of
more than 20% in a
company is to be recognised as control of that
company for purposes of
section 65(2)(a)
of the ECA, then it should
have rejected One Gospel’s application as well, on the
basis of the effective control that
Kagiso Media Limited (Kagiso) had
over Urban Brew (Pty) Ltd (Urban Brew) in terms of
section.
At the time the licence was awarded, Kagiso held a 50.1%
shareholding in Urban Brew, whose wholly-owned subsidiary
holds a 24%
21.
shareholding
in the second respondent. On the basis of Kagiso’s
shareholding in Urban Brew at the relevant time, Kagiso
was
effectively in deemed control of Urban Brew, which itself was in
control of One Gospel on the basis of
ICASA’s
view of a 20% shareholding which constitutes control. Kagiso
owns 100% of East Coast Radio, which is not
only a radio
station based in Kwazulu-Natal, but also holds an FM licence in
respect of substantially overlapping licence area
with the Durban
licence. As such, Kagiso’s effective control of Urban
Brew at the relevant time constituted a breach
of
section 65(3)
of
the ESA.
44.
Since I have upheld’s ICASA’s finding that a shareholding
of more than 20% in
a company is to be recognised as control,
One Gospel’s application for a licence should also have been
rejected for
the same reasons that the applicant’s application
was rejected. By failing to have done so, ICASA committed a
reviewable
irregularity. This ground of review succeeds.
An
appropriate relief
45.
ICASA does not take issue with KZN Talk’s proposed relief.
They contended that
should its grounds of review be upheld, the
matter should be remitted to it, to be determined
de novo
.
One Gospel as can be expected, contended the court should not review
and set aside ICASA’s decision because of the
consequences that
would follow were a court to declare the licence awarded to it be set
aside for redetermination by ICASA.
They seek to make out a
case of
financial
prejudice, loss of goodwill, loss of employment for its staff and the
22.
impact
on its listenership and the local gospel music industry.
46.
This court has a discretion under PAJA regarding the grant of
appropriate
relief.
In
Bengwenyama Minerals (Pty) Ltd and
Others v Genorah Resources (Pty) Ltd and Others
2011
(4) SA 113
(CC) at paragraphs 84 – 85 the Constitutional Court
made clear that the principle of legality requires administrative
action
to be declared unlawful and it is only thereafter that
questions of discretionary remedy can arise:
“
It
would be conducive to clarity, when making the choice of a just and
equitable
remedy in terms of PAJA, to emphasise the fundamental constitutional
importance of the principle of legality, which requires
invalid
administrative action to be declared unlawful. This would make
it clear that the discretionary choice of a further
just and
equitable remedy follows upon that fundamental finding. The
discretionary choice may not precede the finding of
invalidity. The
discipline of this approach will enable courts to consider whether
relief which does not give full effect to the
finding of
invalidity,
is justified in the particular circumstances of the case before it.
Normally this would arise in the context of
third parties having
altered their position on the basis that the administrative action
was valid and would suffer prejudice if
the administrative action is
set aside, but even then the ‘desirability of certainty’
needs to be justified against
the fundamental importance of the
principle of legality.
The
apparent anomaly that an unlawful act can produce legally effective
consequences is not one that admits easy and consistently
logical
solutions. But then the law often is a pragmatic blend of logic
and experience. The
apparent
rigour of declaring conduct in conflict with the Constitution and
PAJA
unlawful is ameliorated in both the Constitution and PAJA by
providing
for
a just and equitable remedy in its wake. I do not think that it
is wise to attempt to lay down inflexible rules in determining
a just
and equitable remedy
following
upon a declaration of unlawful and administrative action. The
rule
of
law must never be relinquished, but the circumstances of each case
must be
examined
in order to determine whether factual certainty requires some
amelioration of legality and, if so, to what extent.
The
approach taken will depend on the kind of challenge presented –
direct or collateral; the interests involved, and the
extent of the
materiality of the breach of the constitutional right to just
administrative action en each particular case.”
47.
It is clear from the above that even where a third party such as One
Gospel has
23.
acted
on the basis that the administrative action was valid and would
suffer
prejudice
if the administrative action is set aside, this still needs to be
weighed
and
justified against the fundamental importance of the principle of
legality.
48.
One Gospel has not made out a proper case for it to be allowed to
continue operating under
the licence that was unlawfully awarded to
it. Its case for prejudice rests on an erroneous assumption
that if the review
succeeds, it licence would immediately and
permanently be terminated. This is not correct. KZN Talk
does not seek any
order awarding the licence to it but an order that
the matter be referred back to ICASA for it to take a fresh
decision.
This may take some time and there is no reason why I
cannot direct that One Gospel’s licence remain valid until
ICASA awards
the new licence. It is possible in relation to a
fresh decision to be taken by ICASA that One Gospel could be
re-awarded
with the licence. It will remain open to One Gospel
to seek to persuade ICASA that its application remains the best of
those
that qualify. Such an order would take care of all or any
of the difficulties that may arise.
49.
One Gospel has not made out a proper case of financial prejudice to
it. Whilst it
may suffer some degree of prejudice should the
orders sought be granted, both the extent and direct cause of such
prejudice remains
unclear. It has not provided information on
when many of the identified costs were incurred and commitments were
made.
It has also refused to provide copies of the contracts
which
would result in the alleged financial prejudice. It has also
failed to
24.
specify
the duration of the contracts and whether they have early termination
clauses
for the benefit of One Gospel. This is despite the fact that
these are
directly
relevant to the extent of any financial prejudice.
50.
The prejudice to One Gospel’s employees and to the public
carries little weight in
this remedial enquiry. One Gospel
points to the prejudice its employees may suffer if it were forced to
cease operating.
This is not relevant to the present
application. The employees will be entitled to the ordinary
remedies under the Labour
Relations Act. One Gospel has also
raised the prejudice to its listeners and the local gospel industry.
The interests
of other groups of listeners have been prejudiced by
the fact that One Gospel was unlawfully awarded the licence.
There is
no reason in this case why the interests of one group of
listeners should be preferred over those of another or why the
interests
of the local industry and in particular gospel music should
be elevated above the public interest served by for example talk
radio.
51.
One Gospel’s approach is untenable due to the nature of this
matter. This application
concerns the award of a scarce
resource namely a commercial FM radio licence. This case is not
like those concerning tender
awards which generally last for the
relatively short duration of approximately two years. In the
contrary, the licence unlawfully
awarded to One Gospel is valid for a
ten year period until March 2022. Thereafter, ICASA would then
inevitably receive a
renewal for ten further years at the end of that
period. This is
because
when a licence expires, there is no competitive process where the
25.
incumbent
licensee and potential licensees compete for the fresh licence.
Instead there is only a renewal process governed
by section 11 of the
ECA and
regulation
10 of the relevant regulations, in terms of which ICASA would have a
very limited power to issue such refusal.
Section 11(7) of the
ECA entitles ICASA to do so only where it determines that the
licensee has materially and repeatedly failed
to comply with the
terms and conditions of the licence; the provisions of this Act or of
related legislation or any regulation
made by the Authority.
For this reason the refusal to renew such a licence is virtually
unprecedented. It cannot be
consistent with the rule of law
that One Gospel be allowed to operate under an unlawfully awarded
licence for ten or likely twenty
years. There are no
exceptional circumstances justifying the withholding of a remedy to
KZN Talk.
52.
This case is analogous to the decision of the SCA in
Eskom
Holdings Limited v New Reclamation Group (Pty) Ltd
2009 (4) SA
628
(SCA) at paragraph 18 where the court held that there was no
basis for refusing to review and set aside the tender award:
“
The
position is that the award of the tender to Kwanda was fatally
flawed. An order setting the award aside would accord with
what
Moseneke DCJ said in Steenkamp NO v Provincial Tender Board, Eastern
Cape:
‘
Ultimately
the purpose of a public remedy is to afford the prejudiced
party administrative justice, to advance efficient and
effective
public administration
compelled
by constitutional precepts at a broader level, to entrench the rule
of law.’
On
the other hand, the order sought by Kwande should the review be
upheld –
namely,
a declaratory order that the award of the tender was invalid,
suspended until the contract had run its course – would
not
fulfil any of these purposes.”
26.
53.
The conclusion is equally apposite in the present case. The
relief sought by KZN Talk
would afford it as the prejudiced party
administrative justice,
advance
efficient and effective public administration compelled by
constitutional precepts and at a broader level entrench the rule
of
law. One Gospel’s approach would not fulfil any of those
purposes.
54.
The application stands to be granted. There is no reason why
costs should not
follow
the result except against the first respondent. However the
costs are limited to 50% of the costs of the application.
55.
In the circumstances I make the following order:
55.1
The decision of the first respondent of 15 December 2011 to reject
the applicant’s application
for an individual commercial
free-to-air sound broadcasting service licence to broadcast in
Kwazulu-Natal on the FM
frequency
103 MHz (the Durban licence); and granting the Durban licence to the
second respondent; is reviewed and set aside.
55.2
The award of the Durban licence is remitted to the first respondent
for reconsideration.
55.3
Pending the first respondent’s reconsideration of the matter
and for a period of 180 calendar
days after the first respondent has
announced
the award of the Durban licence,
the second respondent is authorised to
27.
continue broadcasting as if it were in possession of a valid licence.
55.4
The second respondent is to pay 50% of the costs of the application
which costs include the employment
of two counsel.
FRANCIS
J
HIGH
COURT JUDGE
FOR
THE APPLICANT : G MARCUS SC WITH S
BUDLENDER
& J BERGER
INSTRUCTED
BY ROSIN WRIGHT
ROSENGARTEN
FOR
FIRST RESPONDENT : J BRICKHILL INSTRUCTED BY
BOWMAN
GILFILLAN
FOR
SECOND RESPONDENT : A BHAM SC WITH F I ISMAIL
INSTRUCTED
BY CLIFFE DEKKER
HOFMEYER
DATE
OF JUDGMENT : 5 AUGUST 2014