Brief Summary

Private Security — Definition of 'security service' — Applicant sought declaratory relief asserting that its employees, described as 'end-controllers', do not provide a 'security service' as defined in the Private Security Industry Regulation Act 56 of 2001 — Dispute arose over whether the employees' auditing functions constituted a security service requiring registration — Court held that the core function of the employees must relate to the protection or safeguarding of persons or property from unlawful harm, as per the established interpretation of 'security service' — Applicant's employees did not meet this definition and thus were not required to register as security service providers.

Comprehensive Summary

Summary of Judgment

1. Introduction

This was an application brought on notice of motion for final relief in the North Gauteng High Court, Pretoria. The applicant, Vericon Outsourcing (Pty) Ltd, sought primarily a series of declaratory orders concerning whether it and certain of its employees fell within the regulatory ambit of the Private Security Industry Regulation Act 56 of 2001. In the alternative, it sought review and substitution (or remittal) of the Minister’s refusal to exempt it from the Act.

The respondents were the Minister of Safety and Security (first respondent) and the Private Security Industry Regulatory Authority (second respondent). The first respondent delivered a notice of intention to oppose but filed no answering affidavit and was not represented at the hearing. The second respondent opposed the application and sought dismissal with costs.

The procedural history included an earlier application for exemption submitted by the applicant to the Minister in January 2008, which was refused in June 2008. The present High Court proceedings followed that refusal. The matter was previously postponed on 25 September 2009 (with costs reserved) and was ultimately heard on 24 March 2010, with judgment delivered on 12 April 2010.

The dispute concerned whether the applicant’s employees described as “end-controllers” or “process controllers”, who performed verification and reconciliation functions at client premises, were in substance rendering a “security service” (and consequently whether the applicant was conducting a “security business” and acting as a “security service provider”), triggering registration obligations and compliance with the statutory Code of Conduct.

2. Material Facts

It was common cause that the applicant deployed employees at client premises, including Makro premises (as “end-controllers”) and Distell premises (as “process controllers”). The application turned on what these employees in fact did, and whether their functions constituted “protecting or safeguarding” persons or property in the statutory sense.

The applicant characterised its services as essentially an audit function, described as administrative work involving verification and reconciliation. On the applicant’s version, employees checked stock about to leave premises in order to confirm that items paid for corresponded with items removed, by comparing what the cashier recorded with goods physically present. The applicant emphasised specialised training, report writing, and evolving audit systems, and contended that this did not amount to security services.

The second respondent disputed this characterisation and placed facts before the court concerning the employees’ actual role at the sites. It relied on its own observations and documentation and contended that the employees’ primary function was to safeguard the clients’ property against theft and related risks.

In relation to Makro, the second respondent’s factual version (supported by photographs and signage) was that the applicant’s employees were stationed at exits and that their core duty was to ensure that customers did not remove goods without purchasing them, which was described as safeguarding property against theft.

In relation to Distell, the second respondent’s version (based on documents concerning roles and reporting lines) was that the applicant’s on-site management reported to Distell’s warehouse management and security control structures, and that process controllers performed functions directed at warehouse integrity and security. Those functions included wearing uniforms, conducting body searches, performing floor walks to detect irregularities and potential concealment of product, ensuring security and control of stock in high-value areas, locking and unlocking entrances and sealing them, controlling movement of employees and members of the public by restricting access to certain areas, liaising with outsourced security contractors regarding safeguarding measures, checking goods before clients were permitted to load them, and reporting (at least in part) to Distell’s security controller in relation to stock receipt.

The judgment treated the issue of the employees’ core function as a factual matter, and there was no finding that the second respondent’s denials or version were bald, fictitious, or implausible so as to be rejected on the papers.

3. Legal Issues

The central legal questions were whether, on the facts accepted in motion proceedings, the services rendered by the applicant through its “end-controllers” and “process controllers” constituted a “security service” as defined in section 1 of the Act, and whether this resulted in the applicant and/or those employees falling within the statutory definitions of “security service provider”, “security business”, and “security officer”, with consequential duties including registration under section 20 and compliance with the Code of Conduct under section 28.

A further legal issue, raised in the alternative, was whether the Minister’s refusal of the exemption application constituted reviewable administrative action under the Promotion of Administrative Justice Act 3 of 2000, particularly on the basis that the Minister allegedly failed to apply his mind, acted irrationally, or acted procedurally unfairly by allegedly not considering replying material.

The dispute largely concerned the application of legal definitions to facts, with a significant factual component regarding the employees’ real functions. It also involved a statutory value judgment in the exemption context, because exemption depended on whether exemption would not prejudice the achievement of the objects of the Act, and the onus to establish that requirement rested on the party seeking exemption.

4. Court’s Reasoning

The court first addressed the suitability of declaratory relief. It held that the applicant was sufficiently interested in an existing, future, or contingent right or obligation and that the case was appropriate for the exercise of the court’s discretion under section 19(1)(a)(ii) of the Supreme Court Act, with reference to the relevant authorities on declaratory orders.

However, because the matter proceeded by motion and there were factual disputes about what the employees did, the court applied the principle that final relief may be granted only on common cause facts, together with those alleged by the respondent, unless the respondent’s version can properly be rejected on the papers. The court referred to the summary of this approach in National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA), which incorporates the Plascon-Evans rule. The court expressly noted that there was no basis to reject the second respondent’s version on the papers.

Turning to the statutory question, the court identified the definition of “security service” as central, particularly the phrase “protecting or safeguarding a person or property in any manner”. The court then applied the Constitutional Court’s interpretation in Bertie van Zyl (Pty) Ltd and Another v Minister for Safety and Security and Others [2009] ZACC 11, which held that “security service” in this context refers to protecting or safeguarding persons or property from unlawful physical harm, including theft and related criminal acts, and that the regulatory scheme targets those whose duty it is to protect against the dangers with which the private security industry is concerned.

On the accepted factual version (the second respondent’s version), the court concluded that the applicant’s employees at Makro were stationed at exits and tasked with preventing the removal of unpaid goods, which was characterised as safeguarding property against theft. At Distell, the detailed functions described—searches, control of access, securing entrances, inspection for irregularities and concealment, securing high-value areas, and coordination with security structures—were treated as functions directed at protection of property against criminal risk. In that light, the court found that the employees were providing a security service in the statutory sense, with the result that the applicant was not entitled to the declaratory relief sought.

The court then dealt with the alternative review of the Minister’s refusal to grant exemption. It addressed the procedural fairness contention based on the absence of replying papers from the Rule 53 record. The court relied on the Minister’s refusal letter, which referred specifically to both the initial exemption request and the subsequent reply (served on 5 March 2008), and concluded that the letter indicated that the Minister had considered both documents. The alleged procedural unfairness ground accordingly did not succeed on the facts as assessed by the court.

In addition, the court accepted a concession by the applicant’s counsel that if the applicant had not made out a proper case for exemption, the review could not succeed. The court examined the statutory exemption provisions, section 1(2) and section 20(5), and treated them as dealing with the same subject matter: exemption from the Act. The court emphasised that section 1(2) sets a substantive requirement for exemption, namely that exemption must not prejudice the achievement of the objects of the Act, and that the party seeking exemption bears the onus of establishing that requirement.

The court held that the applicant’s papers did not deal with the effect of exempting the applicant on the achievement of the Act’s objects (as set out in section 3). The court viewed the thrust of the exemption application as being that the applicant sought exemption because it was not a security service provider, rather than because exemption would be consistent with the Act’s objects. The court held that the isolated statement relied upon by the applicant (that any security element would be “insignificant or incidental”) did not go far enough to discharge the onus required for exemption. Consequently, the review application could not succeed.

Finally, on costs relating to the prior postponement, the court considered the limited information placed before it and concluded that it could not determine which party’s actions caused the postponement. It therefore ordered that the reserved wasted costs should be costs in the cause, rather than ordering the second respondent to pay those costs.

5. Outcome and Relief

The court dismissed the entire application, including both the declaratory relief and the alternative review relief, with costs.

The court further ordered that the wasted costs relating to the postponement of 25 September 2009 would be costs in the cause.

Cases Cited

Durban City Council v Association of Building Societies 1942 AD 27.

Langa CJ and Others v Hlophe 2009 (4) SA 382 (SCA).

National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA).

Bertie van Zyl (Pty) Ltd and Another v Minister for Safety and Security and Others [2009] ZACC 11.

Legislation Cited

Private Security Industry Regulation Act 56 of 2001.

Promotion of Administrative Justice Act 3 of 2000.

Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996).

Supreme Court Act (section 19(1)(a)(ii), as referenced in the judgment).

Rules of Court Cited

Uniform Rules of Court, Rule 53(1)(b).

Uniform Rules of Court, Rule 53(3).

Uniform Rules of Court, Rule 53(4).

Held

The court held that, on the facts to be accepted in motion proceedings, the applicant’s employees deployed as “end-controllers” at Makro and “process controllers” at Distell performed functions whose core purpose was the protection and safeguarding of property against criminal acts, including theft. Applying the Constitutional Court’s interpretation of “security service”, the court found that these employees rendered security services within the meaning of the Private Security Industry Regulation Act 56 of 2001, with the consequence that the applicant was not entitled to declaratory relief excluding it from the Act’s regulatory framework.

The court further held that the Minister’s refusal to grant exemption was not shown to be reviewable on the grounds advanced. The record and refusal correspondence indicated that the Minister considered the relevant documents, including the applicant’s replying material. In any event, the applicant failed to establish the statutory requirement for exemption that exemption would not prejudice the achievement of the objects of the Act, and therefore did not make out a proper case for exemption. The application was dismissed with costs, and the previously reserved postponement costs were ordered to be costs in the cause.

LEGAL PRINCIPLES

A court may entertain a request for declaratory relief where the applicant has an interest in an existing, future, or contingent right or obligation, and where the circumstances justify the exercise of the discretion to grant such relief under the relevant empowering provision.

In motion proceedings seeking final relief, factual disputes are resolved in accordance with the principle that a final order may be granted only on the applicant’s admitted allegations together with the respondent’s version, unless the respondent’s denials are so untenable that they can be rejected on the papers. Where there is no proper basis to reject the respondent’s version, the respondent’s factual version will be decisive for purposes of final relief.

For purposes of the Private Security Industry Regulation Act 56 of 2001, the concept of a “security service” centring on protecting or safeguarding persons or property must be understood as protection against unlawful physical harm, including theft and related criminal acts. Whether employees render security services depends materially on whether this protection function is their core duty, which is a factual enquiry.

Statutory exemption from the Act under sections 1(2) and 20(5) requires, as a substantive precondition, that the exemption not prejudice the achievement of the objects of the Act. The party seeking exemption bears the onus to establish that requirement, and it is insufficient to rely only on the contention that the services are not security services if exemption is sought in the alternative.

Vericon Outsourcing (Pty) Ltd v Minister of Safety and Security and Another (59156/08) [2010] ZAGPPHC 30 (12 April 2010)