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[2023] ZAFSHC 422
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M Schutte Contractors CC and Another v Broad-based Black Economic Empowerment Commission and Another (3800/2022) [2023] ZAFSHC 422 (24 October 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable: YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
Case
no:
3800
/
2022
In
the matter between:
M
SCHUTTE CONTRACTORS CC
First
Applicant
[Registration
number: 2009[…]]
MICHELLE
JOUBERT
Second
Applicant
and
THE
BROAD-BASED BLACK ECONOMIC
First
Respondent
EMPOWERMENT
COMMISSION
SEBITLOANE
BOESMAN MOTHULI
Second
Respondent
[Identity
number: 7[…]]
CORAM:
VAN ZYL, J, DANISO, J
et
CRONJÉ, AJ
HEARD
ON:
12 SEPTEMBER 2023
DELIVERED
ON:
24 OCTOBER 2023
JUDGMENT
BY:
CRONJÉ, AJ
CRONJÉ,
AJ:
I
INTRODUCTION
[1]
The applicants brought an application to review and set aside the
final report of the first respondent
(“the Commission”)
dated 14 March 2022,
[1]
where
the Commission made a finding that: the second respondent (“the
Corporation”) was guilty of fronting.
[2]
Mrs Joubert was the sole member of the corporation. The review is
premised on the Promotion of Administrative Justice Act, 3 of
2000
(“PAJA”) alternatively, legality. The Commission opposed
the application whilst the second respondent (“Mr
Mothuli”)
did not, nor did he file a confirmatory affidavit to the answering
affidavit of the Commission.
[2]
There are few legislative instruments in South Africa that stir as
much aspiration, controversy
and emotion as the Broad-Based Black
Economic Empowerment Act, 53 of 2002 (“the Act”). This
Court has to evaluate the
facts and apply the law dispassionately.
[3]
The purpose of the Act has succinctly been set out by the
Constitutional Court in
Viking
Pony Africa Pumps (Pty) Ltd t/a Tricom Africa v Hidro-Tech Systems
(Pty) Ltd and Another
[3]
(
Viking
),
which for the sake of brevity is not quoted.
[4]
The preamble of the Act provides,
inter alia
, that it has as
purpose to promote the achievement of the constitutional right to
equality, increase broad-based and effective
participation of black
people in the economy and promote a higher growth rate, increased
employment and more equitable income distribution.
[5]
A “BBBEE initiative” means any transaction,
practice, scheme or other initiative
which affects compliance with
the Act or any other law promoting B-BBEE.
[6]
Section 1 of the Act defines “broad-based black economic
empowerment” as:
“
the
viable economic empowerment of all black people, in particular women,
workers, youth, people with disabilities and people living
in rural
areas, through diverse but integrated socioeconomic strategies
that include, but are not limited to—
(a)
increasing the number of black people that manage, own and control
enterprises and productive assets;
(b)
facilitating ownership and management of enterprises and productive
assets by communities, workers, cooperatives and other
collective enterprises;
(c)
human resource and skills development;
(d)
achieving equitable representation in all occupational categories and
levels in the workforce;
(e)
preferential procurement from enterprises that are owned or managed
by black people; and
(f)
investment in enterprises that are owned or managed by black people.”
[7]
Fronting is defined as:
““
fronting
practice” means a transaction, arrangement or other act or
conduct that directly or indirectly undermines or frustrates
the
achievement of the objectives of this Act or the implementation of
any of the provisions of this Act, including but not limited
to
practices in connection with a BBBEE initiative—
(a)
in terms of which black persons who are appointed to an enterprise
are discouraged or inhibited from substantially
participating in the
core activities of that enterprise;
(b)
in terms of which the economic benefits received as a
result of the broad-based black economic empowerment status
of an
enterprise do not flow to black people in the ratio specified in the
relevant legal documentation;
(c)
involving the conclusion of a legal relationship with a black person
for the purpose of that enterprise achieving
a certain level of
broad-based black economic empowerment compliance without granting
that black person the economic benefits that
would reasonably be
expected to be associated with the status or position held by that
black person; or
(d)
involving the conclusion of an agreement with another enterprise in
order to achieve or enhance broad-based black
economic empowerment
status in circumstances in which—
(i)
there are significant limitations, whether implicit or explicit, on
the identity of suppliers, service providers,
clients or customers;
(ii)
the maintenance of business operations is reasonably considered to be
improbable, having regard to the resources available;
(iii)
the terms and conditions were not negotiated at arm’s length
and on a fair and reasonable basis.”
[8]
Section 13J provides that the format and the procedure to be followed
in conducting any investigation
must be determined by the Commission
with due regard to the circumstances of each case, which may include
the holding of a formal
hearing.
[9]
The Commission is a statutory body established in terms of Section
13B (1) of the Act. It has
the powers in terms of Section 13F(1)(c) –
(d) and 13J (1) of the Act to receive complaints and conduct
investigations relating
to any matter arising from the Act.
Regulation 15 prescribes the process for lodging and processing of
complaints.
[10]
The Corporation was registered in 2009. It mainly specializes
in general pest and weed control and
initially appointed Mr Mothuli
during 2010 in terms of a verbal employment contract. The cost of
employment was R2 400.00
per month, which may increase on
meritorious performance and depending on his input. It was
required that he has to do a
pest control operator’s course
within two (2) years.
[11]
On 2 April 2012, the Corporation and Mr Mothuli concluded a written
contract of employment. He was appointed
as supervisor and pest
control officer with additional related duties as may conveniently be
performed therewith from time to time.
[12]
At that stage Mrs Joubert held 100% of the total member’s
interest (“interest”).
Due to the impressive
performance of Mr Mothuli, he was offered a member’s interest
in the Corporation and a Memorandum of
Agreement (“MOA”)
was thereafter entered into in terms of which he acquired 26% of the
interest for R300 000.00.
The price was payable in instalments
of R5 000.00 per month, which would be deducted by the
Corporation and paid to Mrs Joubert.
Upon payment of the full price,
Mrs Joubert would transfer his interest.
[13]
On 20 August 2013, Mr Mothuli became a member of the Corporation,
remained an employee and his income increased.
Mr Mothuli
enrolled for a weed control skills course, a structural pest control
skills course and a bush cutter-operating course
at AgriSETA.
With the assistance of Mrs Joubert, he obtained a driver’s
licence
during 2013.
[14]
Mr Mothuli was a hardworking member and employee until or about
2017. On 4 May 2017, he was issued
with a notice of suspension
pending investigation of possible fraud and/or theft. He refused to
sign the notice of suspension and
on 25 May 2017, he was provided
with a notice to attend a disciplinary hearing where
complaints/charges of theft and/or fraud of
fuel, theft and/or fraud
of assets, intimidation and acting in bad faith, stealing of overtime
funds, and threatening the continuation
of the well-being of the
Corporation were levelled against him. The notice
inter
alia
stated
that if he does not attend the enquiry, it may be proceeded in his
absence and his services be terminated. He was found guilty
on all
the charges on 13 October 2017. He was dismissed on 19 October
2017. It does not appear that he referred a dispute
against his
dismissal to the Commission for Mediation and Arbitration (“CCMA”)
or an accredited Bargaining Council.
[4]
[15]
Mrs Joubert thereafter brought an application in the Free State High
Court
[5]
for a declarator that
he shall cease to be a member of the Corporation; the fair value and
consideration of his 26% interest was
determined to be R116 638.58;
she shall acquire his entire interest; he was indebted to her for R85
000.00 (balance of purchase
price); and the R85 000.00 be set off
against the amount of R116 638.58. It does not appear that he brought
an application to rescind
the judgment or to appeal against the
judgment.
[16]
On 15 October 2019, apparently in pursuance to the Court order, he
was removed as member of the Corporation.
As stated above, he
did not file an answering affidavit nor a confirmatory affidavit and
the allegations therefore are uncontested.
II
MR MOTHULI’S COMPLAINT
[17]
On or about 9 September 2017, he deposed to an affidavit when opening
the case against the Corporation.
His version of events is
broadly as follows. He bought the interest for his children’s
future and did not receive any dividends
but borrowed R20 000.00 from
Mrs Joubert in 2014 and R20 000.00 from Ms Joubert’s husband in
2015. He already paid R240 000.00
for his interest. The Corporation
lent him money to buy a house, but it was registered in the name of
the Corporation as it was
for more than R100 000.00. Mrs Joubert or
the Corporation assisted him to buy a Mazda 3 motor vehicle for R80
000.00 and in terms
of a verbal agreement and it was registered in
Mrs Joubert’s name. He would repay that amount after paying for
the interest.
[18]
According to him, the Corporation succeeded in obtaining a
tender at the Tshepong mine and a level 1 BEE rating. When he
requested
a certificate, Mrs Joubert refused to provide same and when
he enquired about his dividends he was informed that he received them
in 2017.
He did not receive same and was
informed that it was transferred into the Company’s account.
According to him he never
received any monies. He was thereafter
requested to return all the assets of the Corporation, including the
vehicle and the cell
phone. He confirms that he learned of
allegations of theft and fraud when he was requested to sign for
receipt of the suspension
notice. According to him this was the
result of his legal representatives’ engagement with Mrs
Joubert about his interest.
He was then offered an opportunity
to resign from the Corporation and to abandon his interest. He
denies that a hearing was
held.
[19]
He went to the South African Revenue Services (SARS) and was informed
that he received a refund in 2014 but
that the money was paid to the
Corporation. An amount of R9 519.00 appears in a Statement of
Account: Assessed Tax of SARS
dated 19 April 2017. Provisional tax of
R9 520.00 was applied leaving a deficit of R61.00.
III
THE APPLICANTS’ VERSION
[20]
One of the applicants’ complaints is that the Commission failed
to comply with Regulation 15(4) in
that it received the complaint on
5 September 2017, made preliminary findings in a letter dated 17
February 2020 and the final
findings and recommendations were only
received on 15 March 2022. The COVID-19 pandemic was only classified
as National Disaster
on 15 March 2020 and it could not have prevented
timeous investigation. Regulation 15(4) provides that its findings
and recommendations
should be made within one (1) year of receipt of
the complaint.
[6]
From
case law sourced by Daniso J the merits of the complaint appear to be
dispositive of the application in the applicants’
favour. I
deal with the merits on the basis that I may be wrong on this score.
[21]
Mr Mothuli received annual income of R120 000.00 in 2014, R125 000.00
in 2015, R129 500.00 in 2016, R133
652.00 in 2017, and in the year of
his dismissal (2018), he received R56 180.00 for five (5) months.
In respect of dividends/bonuses
he received R22 100.00 in 2014, R5
000.00 in 2015 and R20 000.00 in 2016. The Mazda vehicle was bought
for R85 500.00 and he used
it to drive to and from work and for his
personal use. He stayed in a property in Odendaalsrus which
belongs to Mrs Joubert
and never paid for occupation. The
Corporation bought a mattress and base set for him in an amount of R3
998.00, paid R10
122.00 to GL Electrical for electrical services for
the property where he stayed, and made payment of R122 714.20 from
June 2013
to February 2017. He received a cash payment of R15
000.00 during May 2016 for his wedding.
[22]
Mrs Joubert was largely in charge of the pest and weed control
operations whilst Mr Mothuli visited the sites,
attended site
meetings, was in control of the employees on the sites. She was in
the process of teaching him to do quotations and
cost estimates. She
dealt with general administration, which included quotations,
salaries, creditors, bookkeeping and ordering
of stock. They
shared an office and met on a daily basis to discuss the day-to-day
activities. No formal meetings were
held and no minutes of
meetings were kept. Decisions were made verbally and jointly on
day-to-day basis. A written resolution
by the members, dated 17
August 2016, shows that Mrs Joubert was authorized to sign a lease
agreement on behalf of the Corporation.
They both signed a
business overdraft agreement with Standard Bank on 7 December 2016.
[23]
The financial statements for 28 February 2014 show that Mrs Joubert
earned a gross salary of R154 950.00
whereas Mr Mothuli received R101
320.00. Dividends were declared in favour of the parties
respectively of R77 900.00 and
R22 100.00.
[24]
Whereas the Corporation had a profit of R208 546.00 in 2014, the 2015
statements showed a decrease in revenue
of approximately R500 000.00,
and a loss of R173 763.00. No dividends were declared for that year.
The Corporation’s financial
situation improved in 2016 but it
still suffered a loss and no dividends were declared. The
financial statements of February
2017 show that an amount of R367
484.00 was
borrowed
from Welkom Paint with no fixed terms of
repayment at an interest rate of 8% per annum. It does not
appear that any dividends
were declared for that financial year,
which is not surprising as the Corporation had to borrow monies for
operational expenses.
[25]
In their supplementary affidavit, the applicants state that the Final
Investigation Report (FIR) of the Commission
was not previously
supplied to them. The Commission had the power to summon the
applicants to appear and answer questions but failed
to do so and
adjudicated factual disputes without hearing evidence. Importantly,
they state that the Commission’s deponent
does not have
personal knowledge.
[26]
They deny any misrepresentation to Harmony Gold in respect of its
status as the Corporation’s rating
did not change after Mr
Mothuli became a member. The averment that Mr Mothuli did not derive
any economic benefit is denied.
[27]
The applicants concede that the financial statements were not signed
by Mr Mothuli, but denies that it excluded
him. I pause to
state that Section 58(3) of the Close Corporations Act provides that:
“
t
he annual
financial statements shall be approved and signed by or on behalf of
a
member holding a
member’s interest of at least 51 per cent
,
or members together holding members’ interests of at least 51
per cent, in the corporation.”
T
he
financial statements were available to Mr Mothuli and could be
discussed at any stage.
IV
THE COMMISSION’S VERSION
[28]
Only the Commission opposed the application. It firstly asked that
condonation be granted for the delay in
filing the answering
affidavit. I am satisfied with the explanation and condonation should
be granted, the Commission to pay the
costs thereof.
[29]
The explanation for the delay in finalising the investigation is to
be found in paragraph 37 of the answering
affidavit. It states that
it had limited resources to conduct investigations; the COVID-19
National Lockdown Restrictions were
imposed which affected timelines
in multiple matters under investigation. The
applicants
were
notified as required regarding the need for additional time to
complete the investigation.
[30]
Regulation 15(5) provides for the conditions for extension of time
for investigation:
“
If
the Commission is of the view that more time is warranted to conclude
its process in respect of an investigation as contemplated
in
sub-regulation (8), the Commission must inform
the
complainant
of the
need to extend the time
,
the
circumstances warranting a longer period
,
and the
exact period required as an extension
”.
[my emphasis]
[31]
The record filed by the Commission is silent on when, where and how
Mr Mothuli was informed. An exact period
is also absent. During
argument Ms K Moroka SC (assisted by Mr L Bomela), for the
Commission, submitted that the reference to “
the Applicants
”
who were allegedly requested for an extension is a typographical
error and should refer to the “
Complainant
”. The
Commission did not ask for condonation for the delay in finalising
the investigation. I will revert to this later herein.
The Commission
avers that Mr Mothuli filed a complaint on 28 August 2017. This
is denied by the applicants stating that it
was 5 September 2017.
It is common cause that the Commission issued its preliminary
findings on 17 February 2020 and made
its final findings available on
14 March 2022.
[32]
The Commission denies that there is any basis to invoke the
provisions of PAJA in the review. Its salient
remedial
recommendations were:
That
the Corporation and Mrs Joubert must within thirty (30) days pay
reasonable compensation
to Mr Mothuli for his role as the owner of the 26% interest in the
Corporation, calculated from the date on which Mr Mothuli was
recorded on CIPC as the beneficial owner of the 26% interest in the
Corporation, the calculation of which must be approved by the
Commission;
That
the Corporation and Mrs Joubert must within thirty (30) days of the
findings issue a
written apology
to Mr Mothuli
for the
improper conduct
, the content of which
must be approved by the Commission;
The
Corporation and Mrs Joubert must, within ninety (90) days
attend
a training session on the B-BBEE Act
with any institution
accredited to provide such training in terms of the South African
Laws and provide proof to the Commission;
That
the Corporation and Mrs Joubert must, within ninety (90) days
attend
a training session on corporate governance
with any
institution accredited to provide such training in terms of the South
African Laws and provide proof to the Commission;
The
Corporation and Mrs Joubert must within thirty (30) days of the
findings submit a
written
undertaking under oath that they will refrain from any conduct that
is contrary to the objectives of the B-BBEE Act
and that they will for a period of twenty-four (24) months seek an
advisory opinion from the Commission prior to implementing a
B-BBEE
ownership initiative or scheme.
[my
emphasis]
[33]
It submits that the decision to sell the interest was not because Mrs
Joubert was impressed with the performance
of Mr Mothuli but for an
ulterior purpose. The terms and conditions of the MOA were not
negotiated at arm’s length on a fair
and reasonable basis in
that all power and control was concentrated in Mrs Joubert’s
interest whereas he was excluded from
running the business and could
not veto any decisions due to his 26% interest. The 26% interest
points to fronting. It appears
that the Commission took issue with
the fact that Mr Mothuli was both a member and an employee.
[7]
[34]
It refers to Clause 7.1 of the MOA that provides that:
“
The
business and affairs of the Close Corporation shall be managed by
Michelle Schutte (Mrs Joubert) and she will observe and give
effect
to all relevant provisions of the Act and all resolutions and
decisions of the members as to the nature, scope, extent,
limitations, duration and location of any business to be conducted by
the Close Corporation and as to the methods and procedure
of such
conduct and the allocation of duties among the members and generally
without limitation by reason of the aforegoing, as
to any matter or
thing relating to or concerning the business or affairs of the Close
Corporation.
”
[35]
The Commission takes issue with this, essentially averring that Mrs
Joubert has wide powers and the MOA was
“
designed to
exclude
” Mr Mothuli from the core business and operations
in contravention of the Act and the Code. The Applicants deny this
and
refers to Clause 10 which does empower Mr Mothuli to participate.
According to the Commission it is demonstrated that it was correct
in
finding that there were no meetings or recorded resolutions,
indicating that Mr Mothuli was never part of any major decisions.
This is clearly incorrect. A resolution by members was appended to
the founding affidavit that authorised Mrs Schutte to sign for
the
renewal of the lease agreement.
[36]
The Commission justifies its failure to hold a hearing on the basis
of s 13F (1)(d) and 13J (1) of the Act
and states that due process
was followed and the applicants afforded adequate opportunity to
reply to the allegations. It undertook
its own investigation and
arrived at an independent finding. It could not conclude the
investigation within one (1) year. The applicants
were notified that
it needs additional time to complete the investigation.
[8]
[37]
The Commission states that the increase in income of Mr Mothuli from
R2 400.00 to R10 000.00 per
month was purely related to Mr
Mothuli’s employment contract and had nothing to do with his
interest. At cessation
of membership, Mr Mothuli paid
R240 000.00 but never received any profit for his interest.
[38]
The Commission points out that Mrs Joubert approached the Court
[9]
in the midst of the investigation into the alleged conduct of
fronting and in anticipation of the outcome
[39]
The Commission denies that the financial statements were kept on the
desk for discussion by the members.
It states that there is no
record of such discussions and relies on Clause 7 of the MOA.
[40]
As stated above, Mr Mothuli did not present any version in answer to
the applicants’ founding affidavit,
nor was there a supporting
affidavit to the answering affidavit. What the Commission
states is therefore not even close to
hearsay but only deductions.
[41]
The Commission states that in terms of the mining charter and supply
chain policy of Harmony Gold Mine, a
26% member’s interest was
required to qualify to participate in the Supply Chain Procurement of
the mine. It relies on the
contract entered into between the mine and
the Corporation on 15 and 27 September 2016 respectively. Clause 12
deals with Black
Economic Empowerment. It refers to the
Broad-Based Socio-Economic Empowerment Charter for the South African
Mining industry
(“
Charter
”)
which requires meeting procurement spend targets.
[10]
Should the mine determine that the credentials of the Corporation are
unsatisfactory, it shall notify the Corporation in writing
whereafter
the mine and the Corporation shall meet in an attempt to agree on an
appropriate resolution. In the event that
no resolution is
reached, the mine shall be entitled (but not obliged) to terminate
the agreement.
V
THE PROCESS OF INVESTIGATION AND TIMELINES
[42]
During 7 March 2018, nearly a year after the complaint, the
Corporation received a letter of complaint from
the Commission. The
Commission requested certain documentation. Thirteen (13) days
thereafter, the attorneys for the Corporation
dispatched the
documents via courier.
[43]
Three months later, on 18 June 2018, the Corporation received a
letter from the Commission, dated 15 June
2018, wherein it stated
that it finalized an assessment and that there was merit to warrant
an investigation in terms of Section
13F(1)(d) and 13J(1) of the Act,
read with Regulation 15. It may upon investigation, make
findings in terms of Section 13J(3)
of the Act and the Corporation
will be afforded an opportunity to respond within thirty (30) days of
the findings. The Commission
sought additional documentation and the
Corporation had to reply by 26 June 2018, leaving it eight (8) days.
[44]
The Corporation replied that most, if not all, the additional
documents that were requested did either not
exist or was irrelevant
for purposes of the investigation. During February 2020,
approximately 20 (twenty) months after the last
engagement and before
the COVID-19 lockdown, the Corporation received a letter from the
Commission wherein the applicants were
informed that the Commission
“
finalized
”
its investigation and
found that the Corporation engaged in fronting. The applicants were
afforded 30 (thirty) days to respond.
[45]
Within the 30 (thirty) days, on 16 March 2020, the applicants’
attorneys replied and stated that the
applicants reject the adverse
findings and recommendations. It quoted Regulation 15(4) which
provides that the Commission must
within one (1) year of receipt of a
complaint, investigate the complaint and make a finding, with or
without recommendations. The
Commission failed to do so and the
complaints of Mr Mothuli were vexatious and without any merit.
The High Court application
was appended to the letter and a brief
overview of the engagement of Mr Mothuli in the Corporation was
provided. Reference
is made to his unlawful conduct which led
to the disciplinary inquiry. The members duly managed the affairs of
the Corporation
jointly, he was an active member and was afforded an
opportunity to vote and actively participated. He received a
substantial
salary increase from R2 400.00 per month to R10 000.00
per month after becoming a member. He shared in the profits as
and
when the business made a profit. He was assisted in the purchase
of a vehicle and with rental of a property.
[46]
Although the Commission states that a request for extension of the
investigation was made, I could not find
same in the pleadings or the
record.
[47]
Approximately 2 (two) years later, on 15 March 2022, the applicants
received the final findings of the Commission,
dated 7 March 2022.
The salient findings of the Commission were:
“
Mr
Mothuli did not receive an economic interest, voting rights and net
value realization, which conduct or act directly or indirectly
undermines the objectives of the Act. It was also stated that
Mr Mothuli was “discouraged and/or inhibited” from
substantially participating in the core activities of the
Corporation. The economic benefits received by the Corporation “as
a result of its broad-based black economic empowerment status”,
did not flow to Mr Mothuli commensurate with his 26% member’s
interest as a black person.
The
financial statements for 2017 reflect that Welkom Paint “benefitted
through loans, a company owned by Mrs Joubert, and
no records or
resolutions of members exist in respect of such significant transfers
of funds”.
The
financial statements of the Corporation are devoid of Mr Mothuli’s
signature, indicating a prohibition from accessing
the financial
information as well as involvement in financial control and/or
financial decisions which shows a gross undermining
of the
transformation requirements of the Act.
The
Corporation contravened Section 48(1) of the Close Corporation Act,
and “Where voting rights can be exercised and which
would have
demonstrated his participation and in the absence of the records “
it
is not possible to test and confirm participation, or lack thereof
”.
[my emphasis]
Black
ownership appears on paper, cannot successfully be confirmed in
practical terms for exercisable voting rights, economic interest
and
net value, which points to a fronting practice in terms of Section
130(1)(d) of the Act.
The
reduction of Mr Mothuli’s activities to fully exercise his
powers and rights, failure to have a decision-making structure
in
place, failure to hold strategic member meetings, shows undermining
of the principles of corporate governance and the Close
Corporations
Act and non-compliance with the provisions of the Act.
Mrs
Joubert shows non-compliance with the objectives of the Act and total
disregard of the principles of Corporate Governance and
the
provisions of the Corporations Act, “in an improper and
unethical manner, thus pointing to him [sic] possible being unfit
to
hold any membership or directorship in any entity.”
The
applicants knowingly misrepresented the status of the Corporation in
presenting it as 26% black-owned, using BEE certificates,
whilst
knowing that Mr Mothuli was not actively involved, which conduct is
contrary to the spirit and objections of the Act and
an offence in
Section 130(1)(a) of the Act “
if
that person knowingly misrepresents or attempts to misrepresent the
status of an enterprise
”.
[my
emphasis]
[48]
The applicants were afforded fourteen (14) days to agree to implement
the recommendations contained in paragraph
8 of the letter which,
inter alia
, provides that if the applicants are not agreeable
to the implementation of the recommendations in paragraph 7, “
which
are reasonable and appropriate to remedy the adverse findings
”,
the Commission may: institute criminal charges in terms of Section
13J(5) and 13O(1)(a)(d) of the Act; refer the corporate
governance to
CIPC with a view to institute proceedings in Court to declare Mrs
Joubert as delinquent and unfit to hold a membership
or a
directorship; institute proceedings to restrain the apparent breach
of the Act, including fronting and misrepresentation of
its status or
other remedial relief provided for in Section 13J(4) of the Act;
refer the findings to National Treasury for invoking
processes in the
Preferential Procurement Policy Framework Regulations (PPPFR)
relating to submission of false information in respect
of status of
the Corporation; register them for restricted supply on the register
for tender defaulters in terms of Section 13P
of the Act; and to bar
them from contracting or transacting any business with an organ of
state or public entity for up to ten
(10) years upon conviction.
VI
SUBMISSIONS MADE BY THE PARTIES
[49]
Mr W Groenewald, appearing for the applicants, argues that Mr Mothuli
was able to fully exercise his powers
and rights as a member. There
was no misrepresentation of the B-BBEE status as the Corporation was
already approved as a vendor
of Harmony before Mr Mothuli became a
member. The findings of the Commission are therefore not supported by
facts.
[50]
Section 48(1) of the Corporations Act provides that a member may by
notice to another member call a meeting
of members for purposes
disclosed in the notice. It is therefore not peremptory. The
members met on a daily basis and there
was no need to convene
meetings. Welkom Paint was a creditor of the Corporation and not the
other way round. The rationale for
the loan was clearly stated as to
the purchase of herbicides and discussions surrounding the loan were
held and the loan reflects
in the financial statements.
[51]
The High Court already declared the fair value and consideration of
Mr Mothuli’s 26% interest and the
Commission could therefore
not make a recommendation for payment of reasonable compensation to
Mr Mothuli.
[52]
He argues that the conclusion of the Commission that there seems to
be “
no possibility
” that Mr Mothuli may still owe
money on the purchase price of his shareholding, is without basis. Mr
Mothuli was charged
with substantial misconduct and a threat of a
disciplinary hearing to obtain the interest is unsupported by the
facts. The deponent
of the Commission did not sign the preliminary
findings or the recommendations and therefore does not have personal
knowledge.
[53]
He submits that the decision by the Commission constitutes
administrative action which is reviewable. The
Commission failed to
duly consider the written response to the preliminary finding and
rejected the applicants’ version and
merely accepted the
version of Mr Mothuli. The Commission made a finding on
incorrect facts and the decision of the Commission
therefore stands
to be reviewed in terms of Section 6(2) of PAJA.
[54]
Ms Moroka SC argued that the purpose of the Act is to increase the
effective participation of the majority
of South Africans in the
economy and to promote the achievement of the constitutional right to
equality, increase broad-based and
effective participation of black
people and more equitable income distribution.
[55]
They submit that the credentials of the Corporation were recognized
by Harmony without Mr Mothuli benefitting
any economic interest,
voting rights and value realization. Mr Mothuli was prevented from
substantially participating in the core
activities of the Corporation
and the benefits did not flow commensurate with his interest.
There is no proof that Mr Mothuli
had knowledge of the loan of Welkom
Paint. He was by “
agreement
” side-lined from
participation and the business was left in the hands of Ms Joubert.
[56]
They argue that the Commission assessed the merits, considered the
representations to the preliminary report,
conducted an investigation
and made remedial recommendations. The benefits attributed to Mr
Mothuli are reconcilable with an employment
relationship and do not
ordinarily flow to a member. Mr Mothuli did not receive
dividends or an interest in his capacity
as a 26% interest holder.
[57]
They affirm the basis for the delay in completion of the
investigation as found in the answering affidavit.
Non-compliance
with the time-frames were not due to any fault of the Commission.
[58]
It is argued that in line with the threat of termination of the
contract between the applicants and Harmony,
the applicants were
obliged to enter into the MOA. Mr Mothuli found himself in a position
of disadvantage, lack of economic advantage
and skills as enunciated
in the pre-amble of the Act. They submit that the MOA, the lack
of documents and financial records,
demonstrate that the MOA was just
a rouse designed to disguise a window-dressing type of relationship
as an empowerment deal.
Reference is made to
CCRC
E-loco Supply (Pty) Ltd v Broad-based Black Economic Empowerment
Commission and 2 others
[11]
where the Court held that the test for establishing a fronting
practice by the Commission and its recommendations flowing from
and
linked to the outcome of its investigations is whether the Applicant
is adversely affected in his rights and have an immediate,
final and
binding effect on those rights.
[12]
[59]
The Commission filed supplementary heads of argument. It is
submitted that fronting is egregious conduct
that is likened to
cartel conduct
, in that it is harmful and
secretive
,
difficult to detect unless a whistle-blower or aggrieved party
reports. It submits that the findings and recommendations are not
subject to a review in terms of PAJA with reference to
Viking
supra
.
[60]
For a decision to be reviewable under PAJA it has to adversely affect
the rights of a person and have direct
and external effect. Only when
the recommendations are implemented, does it have an external legal
effect. The recommendations
are not binding and PAJA does not
find application. The Commission’s powers should be
likened to the Competition Commission
which may refer the conduct to
the Competition Tribunal. In
Computicket
(Pty) Ltd v Competition Commission of South Africa
[13]
it was held that a decision to refer a complaint to the Tribunal did
not constitute an administrative action and therefore not
reviewable.
It could be reviewed under the principle of legality.
[61]
It argues that paragraphs 18.5 to 18.5.4 of the final report makes it
clear that the Commission had no power
to force implementation of the
remedial recommendations.
[62]
The Commission is not obliged to hold a hearing and the applicants
were called to a meeting to employ alternative
dispute resolution
mechanisms.
[63]
In respect of non-compliance with the one (1) year period for
investigations Ms Moroka SC argues that the
applicants and
Complainant were notified regarding the need for additional time.
She refers, by analogy, to
Competition
Commission of South Africa v Pickfords Removals SA (Pty) Limited
[14]
(“
Pickfords
”)
that dealt with the Competition Act. The Constitutional Court,
inter
alia
,
held:
“
[18]
Therefore, this matter raises a constitutional issue. In addition,
this matter raises at least two arguable points
of law of general
public importance, namely: (a) whether section 67(1) of the
Competition Act constitutes a prescription provision
proper or a
procedural time-bar; and (b) whether the Tribunal has the power to
condone instances of non-compliance with section
67(1) of the
Competition Act
by
virtue of its powers under section 58(1)(c)(ii)
of
the Competition Act. The matter raises
novel
and complex questions
that this Court has not as yet pronounced on. And, as will be
seen later, there are strong
prospects
of success
.
It is therefore in the interests of justice that leave to appeal be
granted. The potential inability of the Commission to
investigate and
prosecute prohibited practices and
cartel
behaviour
has far-reaching consequences, as it also impacts on the civil and
criminal remedies available under the Competition Act.”
[my
emphasis]
[64]
Ms Moroka SC submits that the Commission had sufficient evidence to
find that its findings were rational,
reasonable and lawful.
They submit that the increase in income to R10 000.00 is
misleading as Mr Mothuli had to pay
R5 000.00 towards his
interest. The bank letter was sent to Ms Joubert as sole member.
Ms Joubert took a staff loan
and did not pay it back at the stage
when the complaint was filed, yet Mr Mothuli was required to pay
R5 000.00 and was never
consulted regarding her loan. There was
no difference between Mr Mothuli’s day-to-day operations as
employee. The Commission
avers that Clause 92 of Harmony’s
General Conditions for on-site services, provides that the charter
requires Harmony to
meet black empowerment procurement spent
targets. According to it, the 2014 amendments to the Codes of
Good Practice on Black
Economic Empowerment placed an obligation on
organs of state and public entities to apply the codes when awarding
licences, procuring
goods and services. The mining charter of 2013
require a 26% black shareholding by 2014.
VII
DISCUSSION
[65]
The principles applicable to the granting of condonation for delay
was affirmed by the Constitutional Court
in
Steenkamp
and Others v Edcon Limited
[15]
(Steenkamp)
where the Court held:
“
[36]
Granting condonation must be in the interests of justice. This
Court in Grootboom set
out the factors that must be
considered in determining whether or not it is in the interests of
justice to grant condonation:
“
[T]he
standard for considering an application for condonation is the
interests of justice. However, the concept ‘interests
of
justice’ is so elastic that it is not capable of precise
definition. As the two cases demonstrate, it includes:
the
nature of the relief sought; the extent and cause of the delay; the
effect of the delay on the administration of justice and
other
litigants; the reasonableness of the explanation for the delay; the
importance of the issue to be raised in the intended
appeal; and the
prospects of success. It is crucial to reiterate that
both Brummer and Van Wyk emphasise
that the
ultimate determination of what is in the interests of justice must
reflect due regard to all the relevant factors but
it is not
necessarily limited to those mentioned above. The particular
circumstances of each case will determine which of
these factors are
relevant.
It
is now trite that condonation cannot be had for the mere asking. A
party seeking condonation must make out a case entitling
it to the
court’s indulgence. It must show sufficient cause. This
requires a party to give a full explanation
for the non-compliance
with the rules or court’s directions. Of great
significance, the explanation must be reasonable
enough to excuse the
default.
The
interests of justice must be determined with reference to all
relevant factors. However, some of the factors may justifiably
be left out of consideration in certain circumstances. For
example, where the delay is unacceptably excessive and there is
no
explanation for the delay, there may be no need to consider the
prospects of success. If the period of delay is short
and there
is an unsatisfactory explanation but there are reasonable prospects
of success, condonation should be granted.
However, despite the
presence of reasonable prospects of success, condonation may be
refused where the delay is excessive, the
explanation is non-existent
and granting condonation would prejudice the other party. As a
general proposition the various
factors are not individually decisive
but should all be taken into account to arrive at a conclusion as to
what is in the interests
of justice.”
[66]
Public interest and policy considerations act as counterbalances to
keep administrative bodies’ conduct
in check for protection
against non-compliance by the State and such bodies. The applicants
gave a clear exposition of the delay.
The Commission answered to
these pertinent complaints in generalised fashion. One of the
averments, in reply, was that “
the Applicants were
notified
”. If the record contained a document that showed
notification to Mr Mothuli, there might have been room for arguing
that
the reference to the applicants was a typographical error. There
cannot in my view be any mistaken identity. Even if it did notify
Mr
Mothuli, the delay is so unreasonable that it would not assist the
Commission.
[67]
The import of the Regulations under the Act is clear in respect of
compliance with the timeframe. Even if
I am wrong in my conclusion on
condonation, there are only generalised explanations with
insufficient content. The public cannot
be held ransom by limited
resources – of which the papers are silent. The Covid-19 (hard)
lockdown did not last for the whole
period and only commenced in
March 2020. There are no specific references to dates. The “
multiple
matters
” are not specified. Even if there may have been
prospects for success, the lack of detail for the whole period does
not in
my view save the day for the Commission.
[68]
In respect of the exercise of a discretion to grant condonation, the
Court in
Steenkamp
held
“
[26]
The principle is firmly established in our law that where time limits
are set, whether statutory or in terms of
the rules of court, a court
has an inherent discretion to grant condonation where the interests
of justice demand it and where
the reasons for non-compliance with
the time limits have been explained to the satisfaction of the court.
In Grootboom this
Court held that—
“
[i]t
is axiomatic that condoning a party's non-compliance with the rules
of court or directions is an indulgence. The court
seized with
the matter has a discretion whether to grant condonation.”
[27]
And that—
“
It
is by now axiomatic that the granting or refusal of condonation is a
matter of judicial discretion. It involves a value
judgment by
the court seized with a matter based on the facts of that particular
case.”
[28]
As a point of departure, this Court must determine the nature of the
discretion applied by the Labour Court
when considering whether or
not to grant condonation: whether it was discretion in the true
sense or the loose sense.
The nature of the discretion applied
will determine the standard of interference this Court must adhere to
in this circumstance.
[29]
The discretion to grant or refuse condonation is wide and allows
for a court to consider a wide range
of “available
courses”
each of which falls within the ambit
of its powers, as this Court in Trencon explained:
“
A
discretion in the true sense is found where the lower court has a
wide range of equally permissible options available to it.
This
type of discretion has been found by this court in many instances,
including matters of costs, damages and in the award of
a remedy in
terms of section 35 of the Restitution of Land Rights Act. It
is ‘true’ in that the lower court has
an election of
which option it will apply and any option can never be said to be
wrong as each is entirely permissible. In contrast,
where a court has
a discretion in the loose sense, it does not necessarily have a
choice between equally permissible options. Instead,
as
described in Knox, a discretion in the loose sense—
‘
mean[s]
no more than that the court is entitled to have regard to a number of
disparate and incommensurable features in coming to
a decision’.”
[30]
An indicator of a discretion being “true” is when, in
making the decision, “it is possible
that there could be a
legitimate difference of opinion as to the proper outcome of the
exercise of the discretion”. It
is permissible for
the decision-maker to choose any of the options available before
them. The discretion is thus “true”
where the
lower court “has an election of which option it will apply and
any option can never be said to be wrong as each
is entirely
permissible”.
[31]
The decision to grant condonation is either yes or no: there is no
wide range of available options for the
decision-maker as envisaged
in Trencon. A court can either grant or deny the
condonation. But the election of either
option is equally permissible
and is something that reasonable judges could disagree on. To
grant condonation is an exercise
of judicial discretion that is only
fettered by being judicially explained
[69]
Neither party referred to the judgement in
Interwaste
(Pty) Ltd and Others v Broad-Based Black Economic Empowerment
Commission and Others
[16]
(
Interwaste
),
which was sourced by Daniso, J.
[70]
In that matter the Court held that the only possible extension of
time to finalise the investigation, would
be in terms of Regulation
15(15). If the legislator intended that the non-compliance with
Regulation 15(4) (read together with
Regulation 15(15)) should be
condonable by the Court, it would have expressly provided for it in
the Act or Regulations. The Commission's
submission in that matter
was that it should be held that the time bar in Regulation 15(4) is
merely procedural and not a substantive
one, as it would defeat the
purpose of the Act and would undermine the Commission's work. The
Court held that the Commission does
not keep in mind the devastating
consequences a pending investigation by the Commission might have on
the accused party in conducting
its business while under
investigation for an indeterminate period of time. The Commission
therefore acted beyond its powers when
it issued its findings in
breach of the empowering provisions of Regulation 15(4). That Court
found that the Commission's final
findings fall to be reviewed and
set aside in terms of section 6(2)(a), 6(2)(b), 6(2)(d), 6(2)(e)(i)
and 6(2)(f)(i) of PAJA. As
is evident from my remarks above, I am in
agreement with it.
[71]
My view is that there are material differences, not only in respect
of condonation, but other principles
in the Competition Act that
underly the findings on a procedural bar.
[72]
Contrary to the B-BBEE Act, the Competition Act
[17]
,
makes provision for condonation.
“
58
(1) In addition to its other powers in terms of this Act, the
Competition Tribunal may—
(a)
– (b) …
(c)
subject to sections 13 (6), 14 (2) and 43B (4) (b), condone, on good
cause shown, any non-compliance of—
(i)
the Competition Commission or Competition Tribunal rules; or
(ii)
a time limit set out in this Act.”
[73]
In
Pickfords-supra
it was stated:
“
[50]
Save for the exclusions alluded to, section 58(1)(c)(ii) of the
Competition Act affords the Tribunal
an express, general power to
condone non-compliance with time-limits in the Competition Act. The
Competition Appeal Court found
that there is no express power in the
Competition Act for the Tribunal to condone non-compliance. It said
that the power must therefore
be implied. I disagree.
Section
58(1)(c)(ii) of the Competition Act expressly provides a general
power of condonation, save for the exclusions mentioned.
These
specific exclusions must have been deliberate on the part of the
Legislature. It brings to bear the maxim inclusio unius
est
exlusio alterius (the specific inclusion of one implies the
exclusion of the other). Of course, this maxim is not
a rigid
rule of statutory construction, and it must always be applied with
great caution
.
It has been described as a “principle of common sense”
rather than a rule of statutory construction. But
it is
certainly a cogent factor in favour of a finding that the power of
condonation for non-compliance with section 67(1) is included
in
section 58(1)(c)(ii).”
[my emphasis]
[74]
The notification of the complaint, the interim findings and the final
report all point to administrative
decisions that have direct and
external effect. The remedial recommendations of payment of
reasonable compensation, issuing a written
apology, attending a
training session on the B-BBEE Act, attending a training session on
corporate governance, and a written undertaking
under oath to refrain
from any conduct that is contrary to the objectives of the Act all
point to this. The dire consequences of
the implementation of the
actions envisaged for failure to do so adds weight to this view.
[75]
In
Greys
Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and
Others
[18]
it
was succinctly summarised by Nugent JA as follows:
“
Administrative
action means any decision of an administrative nature made…under
an empowering provision [and] taken…
by an organ of state,
when exercising a power in terms of the Constitution or a provincial
constitution, or exercising a public
power or performing a public
function in terms of any legislation, or [taken by] a natural or
juristic person, other than an organ
of state, when exercising a
public power or performing a public function in terms of an
empowering provision, which adversely effects
the rights of any
person and which has a direct external legal effect”.
[76]
Did the Commission make factual mistakes? Mr Mothuli filed a
complaint, which the Commission then investigated.
[77]
In
Maleka
v Health Professionals Council of South Africa and Others
[19]
(
Maleka
)
it was confirmed that rationality is the first element of reasonable
administrative action:
“
[36] Cora
Hoexter: Administrative Law in South Africa: states that rationality
is the first element of "reasonable" administrative
action as expressed in section 33(1) of the Constitution. She states
the meaning of rationality as follows:
"
This
mean in essence that
a
decision
must be supported by the evidence and information
before the administrator as well as
the reason given for it. It must also be
objectively
capable
of furthering the
purpose for which the power was given and for which the decision was
purportedly taken."”
[78]
This was affirmed by the Constitutional Court in
Pharmaceuticals
Manufacturers Association of SA: In re Ex Parte President of the
Republic of South Africa
[20]
where
it held:
“
It
is a requirement of the rule of law that the exercise of public power
by the Executive and other functionaries should not be
arbitrary. Decisions must be rationally related to the purpose
for which the power was given, otherwise they are in effect
arbitrary
and inconsistent with this requirement. It follows that in order
to pass constitutional scrutiny the exercise of
public power by
the Executive and other functionaries must, at least, comply
with the requirement. If it does not, it
falls short of the
standards demanded by our Constitution for such action.”
[79]
In
Pepcor
Retirement Fund and Another v Financial Services Board and
Another
[21]
(
Pepkor
)
the Supreme Court of Appeal held that administrative decision has to
be taken on an accurate factual basis as a result of which
a material
mistake of fact renders an administrative decision subject to review.
“
[38]
The factual mistake is required to be uncontentious and
objectively verifiable. The material error of fact will render a
decision
subject to review if the relevant decision has been made in
ignorance of the true facts material to that decision such as for
example
not considering relevant material and/or all of the material
provided and/or personal circumstances
.
[39]
An error of law which has a material impact on the decision renders
the decision subject to review where
it was decided that a
material error of law is an error that influence the outcome of a
decision.
[40]
Section 33(1) of the Constitution of the Republic of South Africa,
108 of 1996, gives anyone a right to administrative
action that is
procedurally fair. Section 6(2)(c) of PAJA allows review of an
administrative action on the ground that the action
was
procedurally
unfair
. Hoexter points out that procedural fairness is a
principle of good administration where context is all important. She
states that "the
content of fairness is not static but must
be tailored to the particular circumstances of each case. Procedural
fairness is
one of the grounds of review in terms of PAJA. Section
6(2)(c) of PAJA allows review of administrative action on the ground
that
the action was procedurally unfair. In terms of sections 3 and 4
of PAJA, the right to procedural fairness is given content.
[41]
The principle of legality requires rational decision-making. Both the
process by which the decision is made
and the decision itself must be
rational.”
[80]
The foundations of the requirement that administrative action has to
be lawful, reasonable and procedurally
fair can be traced back to our
common law. It was held in
Mbina-Mthembu
v Public Protector
[22]
:
”
[12]
At common law, the justification for the power of courts to
judicially review exercises of public power stems from the
rule of
law. The grounds of review that were developed over the centuries
fell within three broad categories – unlawfulness,
unreasonableness and
procedural
impropriety
. It is from this
source that the fundamental right to just administrative action arose
– the right to
administrative
action that is lawful, reasonable and procedurally fair
.”
[my emphasis]
[81]
Sasol
Oil Limited v The B-BEE Commission and Others
[23]
(
Sasol
Oil
)
held: “
Evidently,
the Commission’s decision regarding the relationship between
Wingrove and Sasol Oil was based on incorrect facts
which renders it
reviewable. At the same time it is rendered
irrational
in that it is
not
based on admissible evidence
.”
[24]
[my emphasis]
The applicants were not afforded a fair opportunity to present their
case
viva
voce
in a hearing.
[82]
In terms of Section 13B(3)(b) of the Act, the Commission must be
impartial and perform its functions without
fear, favour or
prejudice. In terms of Section 13B(3)(c)(ii) it must exercise the
functions assigned to it in terms of this Act
or any other law in
accordance with the values and principles mentioned in section 195 of
the Constitution, which
inter alia
provides that public
administration must be governed by the democratic values and
principles enshrined in the Constitution, including
services that are
impartial, fair, equitable and without bias.
[83]
A perusal of the letter of the Commission, dated 17 February 2020,
and the final report, dated 7 March 2022,
brings the comments made in
Sasol Oil
in sharp focus where it was held:
“
[50]
Despite the
ambiguity Sasol Oil did respond. An examination of the contents of
the Final Findings letter with the Commission’s
Findings
however demonstrates that Sasol oil’s responses went down like
water off a duck’s back in that they appear
to have received no
consideration at all. The Commission’s findings in paragraph
6.1 to 6.10 and its threats in paragraphs
9.1 to 9.4 are word perfect
copies of the corresponding paragraphs of the Commission’s
earlier Findings letter on 18 October
2018.
[51] The
manner in which the invitation was made and a close examination of
the correspondence between Sasol
Oil and the Commission lead to the
conclusion that the Commission would appear to have been merely
paying lip service in its invitation
to Sasol Oil and that it was not
acting in full compliance with section 6(2)(c) of PAJA and in terms
of regulation 15(17) of the
BEE regulations. This renders the process
followed unfair.”
[84]
In
Cargo
Carriers Proprietary Limited v Broad-Based Black Empowerment
Commission and Others
[25]
(
Cargo
Carriers
)
the final findings of the Commission were a copy-and-paste of the
preliminary findings.
[85]
The problem with the Commission’s version is that it is not
backed by objective facts contrary to what
the applicants state. The
Commission opened itself up for criticism in its investigation when
its version to the allegations in
the founding affidavit were not
supported by Mr Mothuli. It rather chose to make deductions and
ignore pertinent averments by the
applicants under oath. In
Maleka
it was held:
“
[38]
The factual mistake is required to be uncontentious and objectively
verifiable. The material
error of fact will render a decision subject
to review if the relevant decision has been made in ignorance of the
true facts material
to that decision such as for example not
considering relevant material and/or all of the material provided
and/or personal circumstances.
relevant decision has been made in
ignorance of the true facts material to that decision such as for
example not considering relevant
material and/or all of the material
provided and/or personal circumstances.”
[86]
Sasol Oil
held that a decision based on incorrect facts is
reviewable. The salient factual errors committed by the Commission
can, in my
view, be summarised as follows:
86.1
The Commission failed to appreciate the division of labour and
responsibilities in the MOA. It failed to
consider how Mr Mothuli’s
involvement in the business changed and that the higher income that
he received was indicative
of a change in role and status. There is
no impediment to a person being a member and employee. The increase
in income was in any
event more than the instalment for the purchase
of the member interest. The argument that he received more income to
enable him
to pay for the interest does not mean that he did not
benefit. The alternative would have been a commercial loan. He
thereby acquired
an interest that had value;
86.2
There was no evidence under oath to controvert the applicants’
statement that he was afforded decision
making powers commensurate
with the change in status and on equal footing with Mrs Schutte. This
include insight in the financial
affairs, the financial statements
and daily meetings and discussions. The finding that there is no
significant indication or proof
of active participation by Mr
Mothuli, is not supported by the facts. The Commission’s
reliance on Section 48 of the Corporations
Act is untenable. He was a
co-signatory on the banking account which is supported by a letter
from Standard Bank dated 27 November
2014;
86.3
The financial statements are clear in respect of the financial state
of the business. It reflects monies
paid and also where dividends
were paid. The most glaring failure of the Commission is the failure
to appreciate the difference
between a debtor and creditor as is
found in attributing the borrowing from Welkom Paint as a loan to it;
86.4
It failed to apply caution to the averments of Mr Mothuli, who was
dismissed for serious misconduct involving
dishonesty and which
dismissal was not challenged. Even at face value, Mr Mothuli caused
the business from which he sought to derive
income and dividends harm
in stealing from its operations. To complain afterwards of a lack of
reward is, to say the least, astonishing.
The High Court disposed of
many of the issues, including his members interest, what he owed and
what was due to him;
86.5
The Corporation was already approved as a vendor of Harmony before
the change in membership. It was thus
not utilised for ulterior
purpose. The conclusion by the Commission that “
without
any shadow of doubt
, the arrangement between the
Applicants and Mr Mothuli constitutes BEE fronting”
[my
emphasis] is not supported by the facts, and again, in absence of a
pertinent reply under oath by Mr Mothuli himself is fatal
to the
conclusion;
86.6
The Commission’s findings that no profits were distributed to
the members during 2014 and 2015, fails
to have regard to paragraph
36.3 of the founding affidavit. Mr Mothuli received R383 080.00
in the financial year ending on
29 February 2016 and R19 063.00
for the financial year ending 28 February 2017. Loans had to be
paid by Mr Mothuli to
Mrs Joubert and therefore reflect in the
financial statements;
86.7
The Commission’s finding that there is no possibility that Mr
Mothuli still owes on the interest purchased
and that he should have
received his “
economic benefits and participation
”
without limitation, is not supported by the Court order granted on 26
September 2019;
86.8
The alleged “
staff loan
” in paragraph 16.7 of the
FIR was a payment of the purchase price for the interest;
86.9
Payments to Mrs Joubert was not received due to membership but as
repayment of loans.
86.10
Notwithstanding all the indicators to the contrary, the Commission
concluded that “
black ownership cannot be successfully
confirmed in practical terms for exercising voting rights, economic
interest and net value
”; and
86.11
It is unfortunate that it attacked the integrity of Mrs Schutte in
stating that her “
total disregard
for the
principles provided in the Close Corporations Act, in an
improper
and unethical manner
, thus pointing him [sic] possible
[sic] being
unfit to hold any membership or directorship
in any entity
” whereas a proper explanation was provided
for the way operations and management were conducted.
[87]
The findings of the
Commission are not factually nor legally reasonable or justifiable.
If the Commission
appreciated all the facts, it could not have found that there was
fronting.
[88]
Is there a legal basis in either the Act or PAJA for the
recommendations of the Commission? In
Sasol Oil
the Court
expressed itself as follows:
“
[54]
The recommendations were that Sasol Oil’s directors and senior
executives undergo BEE training and that Sasol Oil
undertake to abide
by the BEE Act on the advice of the Commission and further that it
publicly apologies for its role in the violation
of the BEE Act. The
most egregious of these recommendations was the recommendation that
it contribute 10% of its annual turnover
to a bursary fund. Counsel
for the Commission was hard pressed when requested by the court to
point to the source of the powers
that the Commission appeared to
have accorded itself.
“
[55]
I find that the Commission’s recommendations are reviewable in
that the Commission was not authorised to
make the recommendations
within the meaning of section 6(2)(a)(i) and that the Commission
threatened to exercise its statutory
powers for an ulterior purpose
of compelling Sasol Oil to adopt and implement its unlawful
recommendations within the meaning of
section 6(2)(e)(ii) of PAJA.”
[89]
On the facts taken individually and/or collectively, I cannot find
that there was fronting.
[90]
I wish to make some observations. It is trite that a Court will not
readily interfere in the management of
companies/entities unless
unlawfulness and/or illegality is manifest. Many trusts,
partnerships, family businesses and small companies,
do not always
keep records, pass resolutions, have formal meetings, or record
decisions in writing. This, although not debilitating
to the
business, may not necessarily be good (corporate) governance.
Notwithstanding that these loose arrangements in themselves
do not
necessarily lead to injustice, there should be more formality in the
way the business is conducted, especially where empowerment
is
undertaken. Empowerment is more than words on paper, an interest,
shareholding or being a beneficiary. Immaterial of the motive
for
empowerment, the practical effect should do justice to our
Constitutional values, recognising the value of persons, treating
all
with dignity, on equal footing and for economic progress.
VIII
COSTS
[91]
In its argument regarding costs the Commission refers to
Competition
Commission of South Africa v Pioneer Hi-Bred International Inc and
Others
(
Pioneer
).
[26]
It submits that no costs should be ordered against the Commission.
It asks for costs against the applicants in the answering
affidavit
but in the heads of argument it does not.
[92]
In
Pioneer
[27]
it was noted that it is undesirable for the Competition Commission to
be inhibited in the
bona
fide
fulfilment of its mandate by the threat of an adverse costs award. It
flows from the need to encourage organs of state to make
and to stand
by honest and
reasonable
decisions
,
made in the
public
interest
,
without the threat of undue financial prejudice if the decision is
challenged successfully. Factors are not limited to instances
of
mala
fides
or
irregularity
on the part of the Commission. The ordinary meaning of
fairness
goes to the idea of
treating
parties equitably and in an even-handed way
.
There should be sensitivity to creating sufficient space for the
Commission to be
independent
in its decision-making and to effectively carry out its powers and
duties.
Unreasonable
,
frivolous or vexatious pursuit of a particular stance may, however,
justify an order of costs against the Commission. This
will
depend on the facts of each case.
[93]
In
Tebeila
Institute of Leadership Education, Governance and Training v Limpopo
College of Nursing and Another
[28]
the Constitutional Court, however, confirmed the principles
enunciated in
Biowatch
Trust v Registrar Genetic Resources and Others
[29]
“
[17]
Second, it is nearly six years since this Court handed down Biowatch.
The applicant’s plaint affords this Court
a useful opportunity
to restate the principles laid down in Biowatch and to emphasise the
rationale behind them. In particular,
the case serves as a reminder
to judicial officers handing down costs orders that litigants
successfully asserting their constitutional
rights against state
institutions should get their costs unless there are “carefully
articulated and convincing” reasons
to deprive them of those
costs.”
[94]
The Act and Regulations set parameters within which the Commission is
expected to operate.
[95]
It opposed the application of the applicants by selecting what it
deemed to be contraventions and ignored
material and pertinent facts.
It made material errors in analysing and interpreting documents. When
confronted with answers, it
did not solicit the assistance of Mr
Mothuli.
[96]
Its delay was unreasonable, both in its justification and due
process. Whilst it may have been
bona fide
, its decisions were
not reasonable. Public interest is served by arriving at justifiable
reasonable conclusions and if need be
deductions supported by facts.
It committed irregularities in failing to comply with time limits and
acted unfairly in arriving
at far-reaching conclusions and
recommendations in an even-handed way without affording the
applicants a formal hearing. On this
basis I am of the view that it
would be fair that the Commission pays the costs of the application.
[97]
In the premises, I would make the
following order
:
ORDER
1.
Condonation is granted to the first respondent for the late filing of
its answering affidavit.
2.
The first respondent pays the costs of the condonation application.
3.
The final findings of the
Commission, dated 7 March 2022, is reviewed and set aside.
4.
The First Respondent pays the
costs of the application.
P
R CRONJé, AJ
I
concur:
C
VAN ZYL, J
I
concur:
N
S DANISO, J
On
behalf of the Applicants:
Adv
W Groenewald
Neuman
Van Heerden Attorneys
Phatshoane
Henney Attorneys
Bloemfontein
On
behalf of the First Respondent:
Adv
K D Moroka SC
Adv
L Bomela
State
Attorney
Bloemfontein
[1]
The final report’s date is 7 March 2022 – Record, p. 43
.
[2]
This was already alleged in a letter dated 17 February 2020;
Pleadings, p. 244, para 4.
[3]
(CCT 34/10) [2010] ZACC 21; 2011 (1) SA 327 (CC); 2011 (2) BCLR 207
(CC) (23 November 2010).
[4]
The services are free.
[5]
Case No. 4079/2019.
[6]
See
Sasol
Oil
para
[56] – [62].
[7]
There is nothing in our law that prohibits it.
[8]
The applicants deny it and nothing supporting the Commission’s
averment could be found in the pleadings or record of proceedings.
[9]
The application in the Free State High Court referred to above.
[10]
Mining
Charter, 2018: Broad-based Socio-Economic Empowerment Charter for
Mining and Minerals Industry: Amendment (www.gov.za)
.
[11]
Gauteng Division, Case No. 34701/19 (5 July 2021).
[12]
At para [28].
[13]
(118/CAC/APR12)
[2012] ZACAC 7
(29 October 2012).
[14]
(CCT123/19)
[2020] ZACC 14
;
2020 (10) BCLR 1204
(CC);
2021 (3) SA 1
(CC);
[2020] 1 CPLR 1
(CC) (24 June 2020).
[15]
(CCT29/18)
[2019] ZACC 17
;
2019 (7) BCLR 826
(CC); (2019) 40 ILJ
1731 (CC);
[2019] 11 BLLR 1189
(CC) (30 April 2019).
[16]
(34095/21) [2023] ZAGPPHC 1179 (5 July 2023).
[17]
89 of 1998.
[18]
[2005]
3 ALL SA 33
(SCA)
at para 21 as quoted in
Sasol
Oil supra.
[19]
(26463/2017) [2019] ZAGPPHC 319 (10 July 2019).
[20]
[2000]
ZACC 1
;
2000
(2) SA 674
(CC)
at para 85. Quoted in
Corruption
Watch and Another v Arms Procurement Commission and Others
(81368/2016) [2019] ZAGPPHC 351; [2019] 4 All SA 53 (GP); 2019 (10)
BCLR 1218 (GP); 2020 (2) SA 165 (GP); 2020 (2) SACR 315 (GP)
(21
August 2019).
[21]
(198/2002) [2003] ZASCA 56; [2003] 3 All SA 21 (SCA) (30 May 2003);
See also:
Dumani
v Nair and Another
(144/2012) [2012] ZASCA 196; 2013 (2) SA 274 (SCA); [2013] 2 All SA
125 (SCA) (30 November 2012).
[22]
(208/2018) [2019] ZAECBHC 4; [2019] 3 All SA 241 (ECB); 2019 (6) SA
534 (ECB) (7 March 2019).
[23]
(21415/2020) [2022] ZAGPPHC 431 (14 June 2022)
[24]
At para [23].
[25]
(76000/2019) [2022] ZAGPPHC 38 (28 January 2022).
[26]
(CCT 58/13) [2013] ZACC 50; 2014 (3) BCLR 251 (CC); 2014 (2) SA 480
(CC) (18 December 2013) at para [23] – [24].
[27]
At para [23] – [28].
[28]
[2015] ZACC 4.
[29]
[2009] ZACC 14
;
2009 (6) SA 232
(CC);
2009 (10) BCLR 1014
(CC).