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[2010] ZAGPJHC 179
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Trans Hex Group Ltd v Matsapa Trading 609 CC NO and Others (09/42044) [2010] ZAGPJHC 179 (10 December 2010)
SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
REPUBLIC
OF SOUTH AFRICA
Case
No: 09/42044
Date:10/12/2010
In
the matter between:
TRANS
HEX GROUP
LIMITED
......................................................................
Applicant
and
MATSAPA
TRADING 609 CC
N.O.
....................................................
First
Respondent
SEKWATI
DONALD HLAKUDI
N.O.
.............................................
Second
Respondent
CONRAD
DINTWE BENN
N.O.
........................................................
Third
Respondent
THE
STATE DIAMOND
TRADER
…..............................................
Fourth
Respondent
THE
SOUTH AFRICAN DIAMOND AND PRECIOUS
METALS
REGULATOR
......................................................................
Fifth
Respondent
THE
MINISTER OF
MINERALS
........................................................
Sixth
Respondent
JUDGMENT
MEYER,
J
[1] The
applicant (‘Trans Hex’) is a diamond mining company which
produces and sells unpolished diamonds. The Diamonds
Act
1
inter alia
regulates
the buying, selling, importing and exporting of unpolished diamonds.
It also
aims
at securing for local beneficiation a supply of diamonds at fair
market value.
[2] The
South African Diamond and Precious Metals Regulator, which is the
fifth respondent (‘the Regulator’), and the
State Diamond
Trader, which is the fourth respondent (‘the Trader’),
are juristic persons that were established under
the provisions of
the Diamonds Act.
2
[3] The
objects of the Regulator are
inter
alia
to
‘ensure that the diamond resources of the Republic are
exploited and developed in the best interests of the people of South
Africa’ and to ‘promote equitable access to and local
beneficiation of the Republic’s diamonds’.
3
The objects of the Trader ‘are to promote equitable access to
and local beneficiation of the Republic’s diamonds’.
4
[4] The
Regulator and the Trader are clothed with specific functions in
respect of the buying and selling of diamonds. Those of
the
Regulator are to ‘implement, administer and control all matters
relating to the purchase, sale, beneficiation, import
and export of
diamonds’ and to ‘establish diamond exchange and export
centres, which shall facilitate the buying, selling,
export and
import of diamonds and matters connected therewith.’
5
A producer of unpolished diamonds may only sell its stones to
licensed persons at such diamond exchange export centre (‘DEEC’)
6
and may not export diamonds
inter
alia
unless
and until they have been offered for sale to licensed purchasers
locally at a DEEC.
7
The DEEC in Johannesburg, which has replaced the old Diamond Bourse,
is presently the only licensed forum established by the Regulator
at
which a South African producer may offer its unpolished diamond
production for sale if it intends thereafter to effect export
sales
of such diamonds as are not sold locally after they have been offered
for sale locally.
[5] The
Trader is enjoined to ‘acquire and supply unpolished diamonds
to local diamond beneficiators’.
8
Producers are in the first instance obliged to offer all the
unpolished diamonds produced in a particular production cycle to
the
Trader and the latter may select and buy a representative sample
thereof up to the prescribed percentage. S 59B of the Diamonds
Act
reads:
‘
(1) (a) The
Minister shall from time to time by notice in the
Gazette
determine
such percentage of diamonds produced in a production cycle as may be
required for local beneficiation and that the State
Diamond Trader
may buy.
(b) The
percentage contemplated in paragraph (a) may be based on carats and
value, and shall be a representative sample of a production
cycle of
any diamond producer.
(2) At the end of every
production cycle a diamond producer shall offer all the unpolished
diamonds produced by him or her in that
production cycle to the State
Diamond Trader and specify the fair market value of those diamonds,
to enable the State Diamond Trader
to inspect such diamonds for the
purpose of selecting diamonds for purchase as contemplated in
subsection (1).
(3) The State Diamond
Trader has one week after the verification contemplated in subsection
(5) or the fixing of the price in terms
of subsection (7) to buy
diamonds up to the percentage contemplated in subsection (1).
(4) If the State
Diamond Trader fails to buy the diamonds within the period
contemplated in subsection (3) the producer may withdraw
all his or
her diamonds offered in terms of subsection (2).
(5) The government
diamond valuator shall verify the prices specified in terms of
subsection (2).
(6) If the producer and
the government diamond valuator cannot agree on the prices, the
Regulator shall appoint an independent valuator
acceptable to the
producer.
(7) The independent
valuator shall fix the price of the unpolished diamonds within five
working days after appointment, which price
shall be regarded as the
fair market price of the unpolished diamonds in question.
(8) The cost of such
independent valuation shall be borne equally by the State Diamond
Trader and the producer concerned.
(9) For the purposes of
this section “production cycle” means a period mutually
agreed upon between the producer concerned
and the State Diamond
Trader before the commencement of a producer’s operations or
before the commencement of a new production
cycle, as the case may
be.’
[6] Regulation 3A
9
is also relevant. It reads:
‘
(1) A diamond
producer must, at the end of every production cycle, offer for sale
all unpolished diamonds produced to the State
Diamond Trader at a
place or premises to be determined by the State Diamond Trader.
(2) The producer shall
sort the unpolished diamonds according to value, gem and caratage for
the purposes of sub-regulation (1).
(3) The State Diamond
Trader may then purchase up to 10 percent in value and caratage of
the unpolished diamonds offered in terms
of sub-regulation (1).
(4) Any amendment of
the percentage referred to in sub-regulation (3) shall be determined
from time to time by the Minister subject
to the concurrence of the
Ministers of Finance and that of trade and Industry.
(5) Any diamond
producer who fails to offer all diamonds produced in the production
cycle to the State Diamond trader shall be
guilty of an offence.’
[7] This
case concerns Trans Hex’s production cycle 186. The third
respondent is a senior government diamond valuator in
the employ of
the Trader and manager of its diamond valuation department (‘the
GDV’). The first respondent is an independent
valuator and the
second respondent its only member (‘the IDV’). Trans Hex
offered the unpolished diamonds produced
in that cycle to the Trader.
A representative sample of 10 percent was selected on behalf of the
Trader. Trans Hex and the GDV
did not agree on the price and the IDV
fixed it. Trans Hex seeks the review and setting aside of the GDV’s
verification
and of the fixing of the price by the IDV. Trans Hex
also seeks declaratory relief relating to the performance of their
statutory
functions by the GDV and the IDV. The Trader (fourth
respondent) and the minister (sixth respondent) are not opposing the
application
and abide the decision of this court. The order prayed
for reads:
1. reviewing and
setting aside the “fixing’ by the first
alternatively
second
respondent on or about 5 August 2009 of the price of $788.84 per
carat in respect of the 10% representative sample selected
by the
fourth respondent and offered for sale by the applicant to the fourth
respondent (“the SDT parcel”) in respect
of the
applicant’s production cycle 186;
2. declaring that, for
purposes of fixing the prices of unpolished diamonds in terms of
section 59B(7) of the Diamonds Act, the
independent diamond valuator
shall, in addition to assessing the inherent properties and
characteristics of the stones, take into
account all relevant
information including the fair market value specified by the producer
in terms of section 59B(2), the market
prices recently achieved by
any producer in respect of comparable stones and the market prices
achieved by the relevant producer
in respect of the lots of stones
from which the stones comprising the SDT parcel were selected for
prospective purchase by the
fourth respondent, adjusted where
appropriate to take account of market trends;
3. reviewing and
setting aside the third respondent’s purported valuation on 18
June 2009 of the SDT parcel offered for sale
by the applicant to the
fourth respondent in respect of the applicant’s production
cycle 186;
4. declaring that, for
purposes of verifying the prices of unpolished diamonds in terms of
section 59B(5) of the Diamonds Act, the
government diamond valuator
is not tasked with valuing the stones
per
se
but
with verifying that the prices specified by the producer are fair
having regard, in addition to the inherent properties and
characteristics of the stones, to all relevant information including
the market prices recently achieved by any producer in respect
of
comparable stones and the market prices achieved by the relevant
producer in respect of the lots of stones from which the stones
comprising the SDT parcel were selected for prospective purchase by
the fourth respondent, adjusted where appropriate to take account
of
market trends.
[8]
At the end of its production cycle 186, which commenced on 16 April
2009 and ended on 8 June 2009, Trans Hex, by letter dated
17 June
2009, advised the Trader as follows:
‘
You will
appreciate that it is difficult for Trans Hex to specify the fair
market value of the current Cycle Tender 186 production
absent of
having obtained any indication from the market itself as to such
value. Nevertheless, in accordance with Section 59B(2)
and since, on
a previous production cycle (182), the State Diamond Trader was
unwilling to complete the inspection of our production
and select the
representative sample therefrom unless we departed from established
industry practice in determining fair market
value, without prejudice
to any of our rights, we set out below our best estimate of the fair
market value of the entire production
cycle so as to avoid any delays
and invite the State Diamond Trader’s representative to
complete its inspection of the sorted
production and select therefrom
a representative sample of up to 10 percent.
Cycle Tender
186: US$
15
942 991.’
[9] On 17 June 2009, the
Trader, through its representative, inspected the diamonds produced
in production cycle 186 (‘production
cycle 186’) and
selected a representative sample of 10% (‘the SDT parcel’).
Trans Hex was advised by letter
dated 22 June 1999, that the GDV had
‘done a valuation on the 10 percent offered to SDT (the
Trader) on the 18
th
June 2009 to verify that the prices are market related.’ The
results of the GDV’s prices were attached to this letter.
Trans Hex was advised that the GDV ‘declared’ the fair
market value of the SDT parcel at $730.00 per carat.
[10] Trans Hex offered to sell
the remaining 90 percent of its production cycle 186 locally to
licensed purchasers by means of
the confidential tender process at
the DEEC. This process opened on 22 June 2009 and closed on 8 July
2009. Trans Hex set reserve
prices for its unpolished diamonds at
what its chief executive officer describes as ‘realistic
international levels’.
On 8 July 2009, Trans Hex received from
the DEEC a ‘seller complete tender results report’ in
respect of the DEEC
tender process relating to production cycle 186
(‘the DEEC tender results report’). This report details
amongst others
the reserve prices in respect of each lot, all bids
submitted, the highest bid submitted, the total carats comprising the
lots,
the number of stones comprising the lot, and whether or not the
lot was sold. It appears from this report that out of the 130
parcels or lots that were put out on tender 34 were sold to
successful bidders. Most of the unpolished diamonds comprising this
production cycle were thereafter sold in the export market.
[11] The chief executive
officer of Trans Hex states in its founding affidavit that ‘[h]aving
regard to the bids and the resultant
prices at which sales of its
production cycle 186 were subsequently concluded, it became apparent
to Trans Hex that it had under-estimated
the value of the stones on
17 June 2009.’ By letter dated 10 July 2009, Trans Hex advised
the GDV and the acting chief executive
officer of the Trader as
follows:
‘
You will recall
that in connection with Trans Hex’s production cycle for Cycle
Tender at the time you selected therefrom a
representative sample for
prospective purchase, Trans Hex indicated, on a ‘best-estimate’
basis that the fair market
value of its total production was $15,
942, 991 resulting in an indicated price of $1, 594, 299.10 ($879.85
per carat) for the
SDT’s representative sample (‘SDT
parcel’). We refer in this regard to our letter dated 17 June
2009. We have
now completed Cycle Tender 186 pursuant to which we
hereby advise of an upward revision in the fair market value for the
SDT parcel
to $1, 662, 464.17 ($917.47 per carat). We attach a
breakdown of price per parcel as forwarded to the Government Diamond
Valuator.’
[12] The GDV considered Trans
Hex’s upward revision from $879.85 to $917.47 per carat, but
insisted that $730 per carat constituted
the fair market value of the
SDT parcel. By letter dated 16 July 2009, the Regulator’s
acting chief executive officer advised
Trans Hex’s chief
executive officer that the GDV did not agree with Trans Hex’s
price, that the Regulator was accordingly
obliged to appoint an
independent valuator acceptable to Trans Hex, and
curriculum
vitae’s
of independent valuators were attached to assist Trans Hex in the
selection of an appropriate independent valuator.
[13] The second respondent was
acceptable to Trans Hex as an independent valuator and the first
respondent, which the second respondent
represented, was so appointed
on 30 July 2009. Trans Hex addressed a letter dated 4 August 2009 to
the IDV and annexed to its
letter a list of the individual prices
specified by Trans Hex in respect of its production cycle 186 as well
as the DEEC tender
results report. This letter reads:
‘
Further to your
appointment as independent valuator in respect of the pricing of the
10% parcel of Trans Hex’s Cycle 186 production
offered to the
State Diamond Trader, and to assist you in your evaluation thereof,
please find enclosed herewith details of the
individual lot prices
specified by Trans Hex in respect of its Cycle 186 production, as
well as full particulars of the DEEC tender
results in respect of the
balance of 90% of the Cycle 186 production run.
As you know, the
unpolished diamonds comprising the State Diamond Trader parcel which
you are required to evaluate constitute a
representative
sample of Trans Hex’s Cycle 186 production, as sorted by value,
gem and caratage. We accordingly expect the total value
of the
parcel to be materially consistent with actual market prices realized
in respect of the remainder of this production run.
Kindly note from the
enclosed that, save for four retained lots, being Lots No. 1419,
1452, 1454 and 1468, which did not achieve
the required reserve
price, all of the other lots comprising our Cycle 186 production run
were sold either locally or abroad at
prices equal to or greater than
Trans Hex’s reserve prices. The proceeds from such sales,
including export sales, have since
been received in full and, where
applicable, repatriated to South Africa.’
[14] Trans Hex’s
representative handed these documents to the IDV before he commenced
with his inspection of the SDT parcel,
but he declined to accept them
saying that he wished in the first instance to inspect the stones and
to make his own calculations
regarding their worth. It is undisputed
that the IDV’s determination was made in the absence of any
input from Trans Hex
despite its repeated efforts to draw information
to the IDV’s attention and without reference to the documents
tendered to
the IDV by Trans Hex. On 5 August 2009, the IDV produced
a ‘certificate of valuation’ in respect of the SDT
parcel.
It reads:
‘
MATSAPA TRADING
609, officially appointed as the independent valuator for and on
behalf of “The South African Diamond and
Precious Metal
Regulator”, attest to the following:-
The valuation of rough
diamonds is based on the four C’s methodology.
Lots received : 33
Carats received :
1812.01
Cut/Shape : Mix
Country of origin :
South Africa
Conclusion
Taking into account the
details of the above mentioned diamond(s) the expected result of the
processing including all costs, profit
and risk calculations, the
current fair market value of a similar diamond or diamonds would be:-
Valuation: US $ 788.84
I hereby certify that I
have examined and valued the above diamond(s) to the best of my
knowledge and ability. In my opinion the
above valuation is true and
correct.’
[15] The IDV valuation of
$788.84 per carat is 16 percent below that of Trans Hex and amounts
to an aggregate difference in sale
price of $233,750.00 or of almost
R2 million in respect of the SDT parcel. On 5 August 2009, the
Trader confirmed to Trans Hex
that it was willing to purchase the SDT
parcel of 1.812.01 carats from Trans Hex at the price fixed by the
IDV, which was $1, 429,
385.97 ($788.84 per carat). By letters dated
6 August 2009, Trans Hex disputed the IDV’s determination,
inter alia
saying:
‘
In our view, you
failed properly to apply your mind in making your determination. In
particular, you failed to take into account
the market prices
actually offered and paid for the various lots making up the balance
of our Cycle 186 production. Having regard
to the fact that the
parcel in question comprises a 10 percent representative sample of
the entire Cycle 186 production, such
market-related prices
constitute best evidence of current fair market values and prices.’
[16] Trans Hex also informed
the Trader that pending a resolution of the matter, or, if
applicable, the final determination of review
proceedings, it would
not proceed with a sale of the SDT parcel to the Trader. In
response, the acting chief executive officer
of the Trader adopted
the stance that ‘according to the law’ the IDV ‘is
the sole arbiter in the determination
of the fair market value’
and that ‘[t]here is no recourse to review proceedings, such as
being considered by Trans
Hex, other than to challenge the law
itself.’ This contention has, quite correctly in my view, been
abandoned in the answering
affidavit of the Regulator and the GDV.
The IDV also seems to have adopted a similar stance to the one
originally adopted by the
Trader and now abandoned.
[17] On 14 August 2009, Trans
Hex requested the IDV in terms of s 5 of the Promotion of
Administrative Justice Act
10
(‘PAJA’) to furnish written reasons for its determination
of the price. The IDV was also asked for copies of any documents
to
which he had regard and for an outline of the nature and scope of any
oral evidence on which reliance was placed. The letter
addressed to
the IDV concludes as follows:
‘
In light of the
economic implications of any delays in resolving the matter, we ask
that your written reasons and any documents
are furnished to us by no
later than 31 August 2009. This affords you more than two weeks to
respond to our request, a period
which we trust you will find
adequate in the circumstances. Your co-operation in this regard
would be sincerely appreciated.’
There was no response to Trans
Hex’s requests for reasons and documents.
[18] The issues between the
parties raise the interpretation of s 59B of the Diamonds Act. Its
wording is clear and unambiguous.
The production cycle of a producer
of unpolished diamonds is the period mutually agreed between the
Trader and the producer.
The Trader may buy a representative sample
of up to the prescribed percentage in value and caratage of the
unpolished diamonds
produced in any production cycle. At the end of
a production cycle the producer is obliged to offer all the
unpolished diamonds
produced in that cycle to the Trader and to
specify the fair market value of those diamonds. The trader inspects
the diamonds
offered to it and selects a representative sample of up
to the prescribed percentage for potential purchase. The price to be
paid
by the Trader for the selected representative sample is
determined with reference to the fair market value of all the
unpolished
diamonds produced in the particular production cycle as at
the applicable date at the end of that cycle. The producer’s
specification of the fair market value accompanies its offer to the
Trader of all the unpolished diamonds produced at the end of
a
production cycle. The government diamond valuator is enjoined to
‘verify’ the price specified by the producer.
If there
is a coincidence of the values specified by the producer and verified
by the government diamond valuator or if they agree
on a price, the
Trader is afforded one week within which to buy the selected
represented sample up to the prescribed percentage
at such price. If
it fails to buy the diamonds within this period the producer may
withdraw all the diamonds offered to the Trader.
The Regulator is
enjoined to appoint an independent valuator acceptable to the
producer to fix the valuation where a producer
and the government
diamond valuator were unable to fix the price, either through a
coincidence of the values specified by the producer
and verified by
the government diamond valuator or by agreement between them. The
independent valuator is obliged to ‘fix’
the price of the
unpolished diamonds within five working days after his or her
appointment. The price thus determined by the independent
valuator
is final and is regarded as the fair market value. The Trader is
afforded one week after such fixing of the price to
buy the
unpolished diamonds up to the prescribed percentage at that price.
If it fails to buy the diamonds within this period
the producer may
withdraw all the diamonds offered to the Trader at the end of the
particular production cycle.
[19] Trans Hex relies on the
provisions of s 6(2)(a)(i), 6(2)(c), 6(2)(d) and 6(2)(e)(i) of PAJA
for the review and setting aside
of the GDV’s valuation of the
SDT parcel on 18 June 2009. A court, in terms of these provisions,
has the power to review
an administrative action if the administrator
who took it was not authorised to do so by the empowering provision,
the action was
procedurally unfair, was materially influenced by an
error of law, or was taken for a reason not authorised by the
empowering provision.
Trans Hex also relies on the principle of
legality if the GDV’s verification is not reviewable under
PAJA.
11
The GDV remains bound by the principle of legality to exercise no
power and to perform no function beyond that conferred by law.
The
exercise by the GDV of the power to verify the fair market value
specified by Trans Hex is accordingly constrained by the
principle of
legality. If the GDV ventured outside the confines of s 59B(5) of
the Diamonds Act, his verification may be set aside.
The GDV and the
Regulator accept this. Trans Hex, in its replying affidavit, also
relies on further grounds for reviewing and
setting aside the GDV’s
verification of the prices specified by Trans Hex. ‘A party is
in principle not entitled to
rely on new matter, even if it has not
been struck out ...’
12
Trans Hex expressly elected not to amend or supplement its founding
papers and there seems to be no reason why a deviation from
the
general principle should be permitted.
[20] It is common cause that
the GDV undertook its own valuation of the SDT parcel on 18 June
2009. Trans Hex contends that the
GDV was not authorised by s 59B(5)
of the Diamonds Act ‘to value’ the SDT parcel at $730 per
carat, but only ‘to
verify’ the price specified by Trans
Hex. It also contends that the GDV’s valuation was brought
about or materially
influenced by an error of law since s 59B(5) of
the Diamonds Act requires a verification by the GDV and not a fresh
valuation of
its own. There is no merit in these contentions. The
government diamond valuator must verify the price – the fair
market
value - specified by the producer. The word ‘verify’
is not defined in the Diamonds Act. Some of the dictionary meanings
in the New Shorter Oxford English Dictionary
13
which could apply to the word ‘verify’ in this context
are: ‘Ascertain or test the accuracy or correctness of,
esp.
by examination or by comparison of data etc.; check or establish by
investigation.’ The government diamond valuator
is obliged to
take reasonable steps to make sure of the accuracy of the fair market
value specified by a producer.
14
The process of ascertaining or testing the accuracy or correctness
of the price that a producer has specified as the fair market
value
obviously entails an establishing by it of the fair market value of
the diamonds concerned through its own investigation.
The valuation
done by the GDV formed part of its execution of its statutory power
and duty to verify the price that had been specified
by Trans Hex as
the fair market value of the diamonds.
[21] Trans Hex contends that
it was not afforded the opportunity to inform the GDV of the basis of
its specification of an estimated
price of $879.85 per carat or to
justify its adjusted price of $917.47 per carat or to make
representations to the GDV prior to
the GDV’s valuation of the
stones at $730 per carat. The chief executive officer of Trans Hex
states that once Trans Hex
had offered all diamonds comprising a
production cycle to the Trader and the Trader had selected a
representative sample, Trans
Hex offers the balance of the production
cycle for sale at the DEEC and then turns to export sales. In
specifying the fair market
value when it offers the unpolished
diamonds produced by it in a production cycle to the Trader, Trans
Hex has regard to comparative
market information, including prices
achieved on the open market in respect of previous production cycles
and adjusted where appropriate
to take account of market trends.
Trans Hex contends that the best evidence or most reliable indicator
of the fair market value
will ordinarily be the prices attracted by
the balance of the production cycle from which the representative
sample was selected,
at the DEEC and/or on export. It contends that
since s 59B of the Diamonds Act sets no time limit for the
verification of the
specified fair market value, the government
diamond valuator should await the outcome of the DEEC tender and
export sales processes
so as to be able to test the fairness of the
specified value against the prices actually achieved at the DEEC
and/or on export.
Trans Hex contends that the GDV did not await the
outcome of the DEEC tender and export sales processes in respect of
the balance
of production cycle 186 and accordingly failed to take
relevant considerations into account in the verification of the
specified
fair market value.
[22] I have mentioned earlier
in this judgment that production cycle 186 ended on 8 June 2009.
Trans Hex invited the Trader to
inspect this cycle and to select a
representative sample of up to 10% on 17 June 2009. The Trader’s
representative did so
on 17 June 2009. The GDV undertook its
verification of the price specified by Trans Hex on 18 June 2009, and
it notified Trans
Hex of the outcome thereof on 22 June 2009. The
DEEC tender process relating to the remaining 90 percent of
production cycle
186 only opened on 22 June 2009 and ended on 8 July
2009. The DEEC tender results report became available on this latter
date,
which was well after the verification undertaken by the GDV had
been completed. These facts support the statement of the Regulator’s
acting chief executive officer in the answering affidavit of the
Regulator and of the GDV that the GDV would already have verified
the
specified market value of the diamonds by the time the DEEC tender
process is closed.
[23] The clear and unambiguous
provisions of s 59B of the Diamonds Act do not entitle a producer,
such as Trans Hex, to specify
a mere estimate of the fair market
value of the diamonds concerned, thereafter to test the market, and
to revise its estimated
value at a later stage once the outcome and
results of the DEEC tender process and of subsequent sales have
become available.
The price to be paid by the Trader for the
selected representative sample or part thereof is determined with
reference to the fair
market value of all the unpolished diamonds
produced in the relevant production cycle as at the applicable date
at the end of that
cycle. The price to be verified by the government
diamond valuator and the one to be fixed by the independent valuator
if there
was no agreement on the price between the producer and the
government diamond valuator is the fair market value of the diamonds
concerned at the relevant time at the end of the particular
production cycle. It is correct that the Diamonds Act does not
stipulate
a period within which the GDV’s verification is to
take place. It must therefore take place within a reasonable period
of
time and the GDV is required to act with the necessary promptitude
and expedition as it did in its verification in this instance.
Otherwise producers such as Trans Hex may be seriously prejudiced.
The wording of s 59B does not oblige the GDV to await the
outcome of
the DEEC tender process or of subsequent export sales before carrying
out a verification of the fair market value that
was stipulated by
the producer at the time when all the diamonds in a particular
production cycle were offered to the Trader.
If the legislation
intended that the price be determined with reference to the results
of the DEEC tender process or the actual
prices achieved for the
balance of the production cycle from which the representative sample
was selected, such would have been
provided for in specific terms.
The contentions of Trans Hex in this regard are irreconcilable with
the clear and unambiguous
wording of s 59B of the Diamonds Act.
[24] In any event, the
verification undertaken by the government diamond valuator in terms
of s 59B(5) of the Diamonds Act of the
price – the fair market
value - specified by a producer in terms of s 59B(1) does not have
direct external legal effect and
does not amount to administrative
action within the meaning of s 6(2) read with s 1 of PAJA. It is
only the price fixed by the
independent diamond valuator in terms of
s 59B(7) of the Diamonds Act - if the producer and the government
diamond valuator did
not agree on a price - that has the required
direct external legal effect and finality in order to be subject to
judicial review.
The verification of the price by the government
diamond valuator constitutes a mere intermediary step in the
determination of
the price that the Trader is obliged to pay if it
elects to buy the selected representative sample or part thereof and
such verification
of the price is not binding on the producer. I am
also unable to hold on the facts presented in this application that
the GDV
ventured outside the confines of s 59B(5) of the Diamonds
Act. The relief claimed in prayer 3 of the notice of motion must
accordingly
fail.
[25] It follows that the
declaratory relief which Trans Hex seeks against the GDV in terms of
prayer 4 of its notice of motion must
also fail for the reasons that
I have given. The gravamen of Trans Hex’s objection and also
for seeking the declaratory
relief is that the GDV failed to take
into account ‘... the market prices achieved by the relevant
producer in respect of
the lots of stones from which the stones
comprising the SDT parcel were selected for prospective purchase by
the fourth respondent
[the Trader], adjusted where appropriate to
take account of market trends.’ I should also add that the
verification of the
price by the government diamond valuator is an
expression of an expert opinion by him or her as to whether or not
the fair market
value of all the unpolished diamonds produced by a
diamond producer in a particular production cycle as specified by the
producer
constitutes the fair market value for those diamonds. Had
the Legislature intended to prescribe how the government diamond
valuator
should go about the execution of his or her statutory
function, which requires skill and expertise, it would have done so
in express
terms.
[26] In support of the relief
claimed by it for the review and setting aside of the ‘fixing’
by the IDV of the price
of $788.84 per carat for the diamonds in
issue, Trans Hex in the first instance avers that the IDV is
reasonably suspected by it
of bias within the meaning of s
6(2)(a)(iii) of PAJA.
15
The grounds upon which Trans Hex relies in support of its alleged
reasonable suspicion of bias form the subject of various disputes
of
fact that are not capable of resolution on the papers. Trans Hex
further relies on the provisions of s 6(2)(c) and 6(2)(e)(iii)
of
PAJA, which provide for the judicial review of an administrative
action that was procedurally unfair or taken because irrelevant
considerations were taken into account or relevant ones not
considered. A matter that is also raised on the papers is the
failure
of the IDV to have furnished reasons for its decision.
[27] Trans Hex contends that
in fixing the price the independent valuator must have regard to the
debate between the producer and
the government diamond valuator. He
or she must, so it is contended, know each side’s position in
order to come down in
favour of one of them or to reject both in
favour of a third view. I disagree with this contention. It ignores
the distinction
between arbitration and valuation. The independent
valuator envisaged in ss 59B (6) and (7) of the Diamonds Act is
appointed merely
to fix the valuation, which the producer and the
government diamond valuator could not do. It is not the function of
the independent
valuator to reconcile the different points of view of
the producer and of the government diamond valuator. No dispute had
arisen
between the producer and the Trader prior to the independent
valuator fixing the price. Apposite is the following passage in the
judgment of Kuper J in
Sachs
v Gillibrand and Others
:
16
‘
I have come to
the conclusion that Mr. Frankel is correct in his contention that the
appointment envisaged in the article is not
an arbitrator but merely
a person to fix the valuation. The distinction between an
arbitration and a valuation was clearly drawn
in the case of
Carus-Wilson
and Greene
(1886),
18 Q.B.D. 7
, in the following passage in the judgment of LORD ESHER,
M.R., at p. 10:
‘
I think that
this case was clearly not one of arbitration, and that it falls
within the class of case where a person is appointed
to determine a
certain matter, such as the price of goods, not for the purpose of
settling a dispute which has arisen, but of preventing
any dispute.
At the time when the umpire was appointed, it cannot be pretended
that any dispute had arisen. The vendor and purchaser
had
respectively agreed to sell and to purchase the timber at a price to
be fixed by valuation, and, the price not yet being fixed,
there was
nothing in dispute between them. If the valuers could not agree as
to the price an umpire was to be appointed, but nothing
need be known
to the vendor and purchaser about the matter; there cannot be said
anything in dispute between them. ... My reason
for holding that the
umpire was not an arbitrator is that he was, in my opinion, merely
substituted for the valuers to do what
they could not do, viz. fix
the price of the timber. He was not to settle a dispute which had
arisen, but to ascertain a matter
in order to prevent disputes
arising.
This extract was cited
with approval in the case of
Heymann’s
Estate v. Featherstone,
1930
E.D.L. 105.
In my view the ‘arbitrator’ mentioned in the
article is merely the valuator referred to in that judgment.’
[28] In considering the
requirement of procedurally fair administrative action under the
Interim Constitution, O’Regan J,
writing for the Constitutional
Court in
Premier,
Mpumalanga, and Another v Executive Committee, Association of
State-Aided Schools, Eastern Transvaal
17
said this: ‘It needs to be emphasised that s 24(b) requires
that administrative action which affects or threatens legitimate
expectations be procedurally fair. That does not mean that in all
circumstances a hearing will be required. It is well-established
in
our legal system and in others that what will constitute fairness in
a particular case will depend on the circumstances of the
case.’
18
S 3(2) of PAJA also provides that ‘... fair administrative
procedure depends on the circumstances of each case.’
Taking
into account the factors referred to in s 4(b) of PAJA, it is
reasonable and justifiable in the circumstances for an independent
valuator appointed in terms of s 59B(6) of the Diamonds Act to get on
with his or her work by collecting and interpreting all relevant
facts and to reach his or her conclusion on such facts and
interpretations without affording the parties an opportunity to make
representations and seeking to reconcile different points of view.
Neither the wording of s 59B of the Diamonds Act, expressly
or by
necessary implication, nor the circumstances of this case nor the
factors referred to in s 3(4) of PAJA require the procedure
contended
for by Trans Hex.
[29] This does not mean that
the independent valuator may ignore information relevant to his or
her independent valuation. It is
common cause that Trans Hex
attempted to appraise the IDV of information relating to the DEEC
tender results in respect of the
balance of production cycle 186 and
to the actual prices realized locally and abroad in respect of the
remainder of that production
cycle before and at the time when the
IDV had undertaken the determination of the fair market value of the
unpolished diamonds
in issue. It is also common cause that the IDV’s
determination of the price was made without reference to this
information.
Although this information relates to transactions which
took place after the date of valuation, information of such
subsequent
transactions is relevant in the determination of the fair
market value if it is adjusted, where appropriate, and related back
to
the time of valuation. Such information is indicative market
trends.
19
No plausible reason is given in the answering affidavits as to why
this information was not taken into account. Relevant considerations
within the meaning of s 6(2)(e)(iii) of PAJA were accordingly not
considered by the IDV when he fixed the price for the diamonds
in
issue.
[30] A valuator usually
substantiates his or her valuation in a written valuation report.
20
The IDV has not furnished an adequate substantiated report of its
valuation at the time when it was done nor has it complied with
the
request of Trans Hex in terms of s 5(1) of PAJA to furnish written
reasons for the determination of the value of the diamonds
in issue.
The IDV has also not established that its departure from the
requirement to furnish adequate reasons had been reasonable
and
justifiable within the meaning of s 5(4) of PAJA. The conclusion of
the IDV is not even properly substantiated in its answering
affidavit. It’s conclusion is simply not capable of logical
analysis. It must accordingly, in terms of s 5(3) of PAJA,
be
presumed ‘... that the administrative action was taken without
good reason.’
[31] Finally, the declaratory
relief which Trans Hex seeks in terms of prayer 2 of its notice of
motion, should in my view fail.
Specific statutes sometimes require
particular factors to be taken into account for the determination of
market value, what a
willing buyer will pay and a willing seller will
take. S 59B of the Diamonds Act does not so require. The
independent valuator
must accordingly use his or her knowledge and
experience and make a reasoned determination of the fair market value
on relevant
facts and data and by the application of approaches and
techniques appropriate to the valuation of unpolished diamonds. He
or
she must collect and interpret all relevant information and data
and reach a skilful and independent valuation thereon.
21
The independent valuator must obviously assess the inherent
properties and characteristics of the stones and adequately
investigate
and analyse all available comparable transactions and
data. There appears to be no dispute about this. Had the
Legislature intended
to prescribe how an independent valuator who
must be acceptable to the producer concerned should go about the
execution of his
or her statutory function under S59B(7), it would
have done so in express terms.
[32] In the result:
1. The ‘fixing’ by
the first respondent on 5 August 2009 of the price of $788.84 per
carat in respect of the 10% representative
sample selected by the
fourth respondent and offered for sale by the applicant to the fourth
respondent in respect of the applicant’s
production cycle 186,
is reviewed and set aside.
2. The relief prayed for in
terms of prayers 2, 3, and 4 of the notice of motion is refused.
3. The first, third, and fifth
respondents are ordered to pay the applicant’s costs of this
application jointly and severally,
including the costs attendant upon
the engagement of two counsel, one of whom a senior counsel.
P.A. MEYER
JUDGE OF THE HIGH COURT
10 December 2010.
1
Act no 56 of 1986.
2
Sections 3 and 14 of the Diamonds Act.
3
Sections 4(a) and (b) of the Diamonds Act.
4
Section 14(1) of the Diamonds Act.
5
Section 59 of the Diamonds Act.
6
Chapter III of the Diamonds Act, and especially ss 19 – 21.
7
Section 48A of the Diamonds Act reads: ‘All unpolished
diamonds intended for export purposes must first in the prescribed
manner be offered at a diamond exchange and export centre.’
8
Section 59A(a) of the Diamonds Act
.
9
Government Gazette
No.
30061 (GNR 569 dated 9 July 2007).
10
Act No 3 of 2000.
11
See:
Competition Commission v
Telkom
(623/2009)
[2009] ZASCA
155
(27 November 2009), para [12];
Eskom
Holdings Ltd & Another v New Reclamation Group (Pty) Ltd
2009 (4) SA 628
(SCA), para [9];
Masetha
v President of the Republic of South Africa & Another
[2007] ZACC 20
;
2008 (1) SA 566
(CC), paras [80] – [81];
Minister
of Health & Another NO v New Clicks South Afrca (Pty) Ltd &
Others (Treatment Action Campaign & Another as
Amici Curiae)
2006 (2) SA 311
(CC), para [97].
12
See:
Van Zyl v Government of
the Republic of South Africa
2008 (3) SA 294
(SCA), para [42] fn 17.
13
1993 Edition, Vol 2 at p 3 564
14
See:
S v South African
Associated Newspapers
1970 (1)
SA 469
(W) at pp 478H – 479A.
15
This section of PAJA
inter alia
provides that a court has the
power to judicially review an administrative action if the
administrator who took it ‘was
biased or reasonably suspected
of bias.’
16
1959(2) SA 233 (W), at pp 235G – 236A.
17
1999 (2) SA 91
(CC), para [39].
18
In the footnote to this passage, reference is made to
Administrator, Transvaal and
Others v Traub and Others
[1989] ZASCA 90
;
1989
(4) SA 731
(A), at 758I – J, and to
Du
Preez and Another v Truth and Reconciliation Commission
[1997] ZASCA 2
;
1997 (3) SA 204
(A), at 231I – 232C.
19
See:
Bonnet v Department of
Agricultural Credit & Land Tenure
1974
(3) SA 737
(T), at p 753A – F.
20
Joubert: LAWSA Vol 30 (1
st
Reissue) para 206.
21
See:
Estate Milne v Donohoe
Investments (Pty) Ltd
1967 (2)
SA 359
(A),
at
p 373H;
Ingersoll-Rand Co (SA)
Ltd v Administrateur, Tvl
1991
(1) SA 321
(T), at p 339E.