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Ambassador Duty Free (Pty) Ltd v Minister of Finance and Others (28368/2021; 32175/2021) [2022] ZAGPPHC 7 (17 January 2022)

80 Reportability
Constitutional Law
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Brief Summary

Constitutional Law — Delegation of legislative power — Unconstitutionality of provisions — The High Court declared sections 75(15)(a)(i)(bb) of the Customs and Excise Act 91 of 1964 and 74(3)(a) of the Value-Added Tax Act 89 of 1991 unconstitutional for permitting unlawful delegation of plenary legislative power to the Minister of Finance. The court also declared various amendments to the Schedules of these Acts unconstitutional. The Minister sought a suspension of the declarations of invalidity for 24 months, while the intervening applicant, Nu-Africa, argued for immediate prospective effect from 1 August 2021. The court held that it lacked the competence to suspend the declarations of invalidity and that all declarations require confirmation by the Constitutional Court, thus making no order as to costs.

Comprehensive Summary

Summary of Judgment


1. Introduction


The proceedings concerned the appropriate remedy following an earlier judgment of the Gauteng Division of the High Court, Pretoria, delivered on 21 September 2021, in which the court issued a set of declarations of constitutional invalidity (referred to in this judgment as “the review order”). This later judgment, delivered on 17 January 2022 by Fourie J, addressed the consequences and implementation of those declarations, including questions of prospective operation, suspension, and confirmation by the Constitutional Court.


The principal parties were Ambassador Duty Free (Pty) Ltd (applicant in one of the matters) and, in a related matter, Flemingo Duty Free Shops International SA (Pty) Ltd and International Trade & Commodities 2055 CC t/a Assortim Duty Free (applicants). The respondents across the matters were the Minister of Finance, the Commissioner for the South African Revenue Service, and the Minister of International Relations and Cooperation. Nu-Africa Duty Free Shops (Pty) Ltd participated as an intervening applicant, and had been the successful party in the earlier review proceedings on the constitutional point.


The general subject-matter of the dispute remained the constitutional validity of statutory provisions and related amendments affecting the regulation of duty-free purchases by diplomats, particularly the mechanism by which amendments were made to the relevant Schedules under the customs and VAT legislative framework. However, this judgment was confined to the remedial consequences of the previously granted declarations of invalidity and the procedural steps required in light of the Constitutional Court’s confirmation jurisdiction.


2. Material Facts


On 21 September 2021, the High Court issued a review order in which it upheld Nu-Africa’s contention that section 75(15)(a)(i)(bb) of the Customs and Excise Act 91 of 1964 and section 74(3)(a) of the Value-Added Tax Act 89 of 1991 were unconstitutional and invalid because they permitted an unlawful delegation of plenary legislative power to the Minister of Finance.


In the same review order, the court also declared unconstitutional various amendments to the Schedules of the Customs and Excise Act and the Value-Added Tax Act, which had been published in Government Gazette Nos. 44473 and 44705, and which had come into operation on 1 August 2021.


After the review order, the High Court granted leave to the Minister and Nu-Africa to file supplementary affidavits addressing the question of remedy. It was common cause between the Minister and Nu-Africa that the declarations of invalidity should operate prospectively only, but they differed on whether the declarations should be suspended and, if not suspended, on the timing and effect of prospective operation. The Minister sought a suspension for 24 months, whereas Nu-Africa contended for immediate prospective effect as from 1 August 2021.


A further issue arose as to whether all of the declarations of invalidity made in the review order—including those relating to the amended Schedules—were subject to the confirmation requirement in section 172(2) of the Constitution, or whether the Schedule-related declarations could take effect without confirmation on the basis that they were said to relate to delegated legislation.


3. Legal Issues


The central legal questions the court was required to determine were whether, in light of the Constitutional Court’s jurisprudence, the High Court was competent to suspend its declaration of constitutional invalidity of statutory provisions pending correction by Parliament, and how the court should address remedial requests when its declaration would in any event have no force unless confirmed by the Constitutional Court.


A second, closely related issue was whether the declarations of invalidity concerning the amended Schedules were declarations regarding delegated legislation (which would not require confirmation) or whether the Schedules remained part of an Act of Parliament (in which event confirmation would be required).


The dispute primarily concerned questions of law, particularly constitutional remedial competence and the classification of Schedules in relation to confirmation under section 172(2), and the application of those principles to the particular forms of invalidity declared in the earlier order.


4. Court’s Reasoning


The court approached the matter against the backdrop of section 172(2) of the Constitution, which provides that an order of constitutional invalidity of an Act of Parliament (or a provision of such an Act) has no force unless confirmed by the Constitutional Court. The court relied on the Constitutional Court’s statement in Minister of Justice and Constitutional Development and Others v Prince 2018 (6) SA 393 (CC) that it is neither necessary nor competent for a High Court to suspend an order of invalidity relating to an Act of Parliament, because such an invalidity order is not operative until confirmed. On this basis, the court accepted that it was bound by Prince and therefore could not itself grant a suspension of invalidity in respect of the statutory provisions.


Although counsel for Nu-Africa referred to earlier authority suggesting High Courts should engage with the remedial dimensions of retrospectivity and suspension, the court treated the apparent tension between those observations and Prince as resolved by the binding effect of Prince. The court considered that the earlier approach had been displaced at least by necessary implication insofar as it suggested High Court competence to suspend invalidity orders relating to Acts of Parliament.


The court then addressed the submission that the declarations of invalidity relating to the amended Schedules did not require confirmation because they were said to amount to invalidity of delegated legislation. The court rejected that characterisation. It reasoned that the Schedules to the Customs and Excise Act and the Value-Added Tax Act were “part and parcel of an Act of Parliament” and therefore retained the status of original legislation, not delegated legislation made by the Minister. The fact that the Minister purported to amend the Schedules under the impugned empowering provisions did not, in the court’s reasoning, transform the Schedules into ministerial subordinate legislation; rather, the constitutional vice lay precisely in the empowering provisions’ attempt to confer a power to amend what remained part of primary legislation, thereby amounting to an unlawful conferment of plenary legislative authority.


In consequence, the court concluded that all declarations of invalidity made in the review order, including those relating to the amended Schedules, were subject to Constitutional Court confirmation. The court considered it necessary to make an express order to avoid uncertainty.


The court further reasoned that even if it were wrong on the classification point and the Schedule-related declarations did not require confirmation, it would still not be appropriate to grant Nu-Africa’s requested order that those declarations should operate with immediate prospective effect from 1 August 2021. The court’s stated concern was that if the Constitutional Court were to suspend the declarations of invalidity in respect of the relevant empowering provisions, an immediate operative order concerning the Schedules could undermine the purpose and effect of such a suspension, which the court regarded as potentially contrary to the interests of justice.


While indicating that the question of suspension would ultimately fall to the Constitutional Court, the court recorded its own view that a suspension should be favourably considered to enable Parliament to correct the constitutional defects, ensure lawful regulation of diplomats’ duty-free purchasing quantities, and prevent abuse of diplomatic privileges.


On costs, the court noted that both the Minister and Nu-Africa had participated through supplementary affidavits and argument, and that the Constitutional Court would make the final remedial order in the confirmation proceedings. As there was “no clear winner” in the High Court on this remedial round, the court considered it fair to make no costs order for the post-21 September 2021 proceedings on remedy.


5. Outcome and Relief


The court ordered that the 17 January 2022 order should be read together with the earlier order of 21 September 2021.


It declared that the invalidity findings relating to section 75(15)(a)(i)(bb) of the Customs and Excise Act 91 of 1964, section 74(3)(a) of the Value-Added Tax Act 89 of 1991, and the amended Schedules to both Acts published in Government Gazette Nos. 44473 and 44705, were all subject to confirmation by the Constitutional Court and would have no force unless confirmed.


The court directed the Registrar of the High Court to forward the 21 September 2021 judgment and order, together with the 17 January 2022 judgment and order, to the Registrar of the Constitutional Court in terms of Rule 16(1) of the Constitutional Court Rules, within 15 days.


No order as to costs was made in respect of the proceedings conducted after 21 September 2021 on the issue of remedy.


Cases Cited


Mistry v Interim National Medical and Dental Council of South Africa 1998 (4) SA 1127 (CC).


S v Ntsele 1997 (11) BCLR 1543 (CC).


Minister of Justice and Constitutional Development and Others v Prince 2018 (6) SA 393 (CC).


Smit v Minister of Justice and Correctional Services 2021 (3) BCLR 219 (CC).


Legislation Cited


Constitution of the Republic of South Africa, 1996, section 172(2)(a).


Customs and Excise Act 91 of 1964, section 75(15)(a)(i)(bb).


Value-Added Tax Act 89 of 1991, section 74(3)(a).


Rules of Court Cited


Rules of the Constitutional Court, Rule 16(1).


Held


The High Court held that, in light of section 172(2) of the Constitution and the Constitutional Court’s decision in Minister of Justice and Constitutional Development and Others v Prince 2018 (6) SA 393 (CC), it was not competent for the High Court to suspend its declarations of invalidity insofar as they related to provisions of an Act of Parliament, because such declarations have no force unless confirmed by the Constitutional Court.


It further held that the Schedules to the Customs and Excise Act and the Value-Added Tax Act were part of the Acts themselves and therefore constituted original legislation rather than delegated legislation, with the result that the declarations of invalidity relating to the amended Schedules also required confirmation by the Constitutional Court.


The court ordered that all declarations of invalidity made in the earlier review order were subject to Constitutional Court confirmation, directed transmission of the orders and judgments to the Constitutional Court under Rule 16(1), and made no costs order for the remedial proceedings after 21 September 2021.


LEGAL PRINCIPLES


A High Court’s declaration of constitutional invalidity concerning an Act of Parliament or a provision of an Act of Parliament has no force unless confirmed by the Constitutional Court in terms of section 172(2) of the Constitution. In that context, a High Court is not competent to suspend the operation of such an invalidity order, because the order is not operative pending confirmation.


The classification of a legislative instrument for purposes of confirmation depends on whether it constitutes original legislation (part of an Act of Parliament) or delegated legislation made pursuant to statutory authority. Where statutory Schedules are treated as part of the Act itself, they remain part of primary legislation, and invalidity declarations concerning them attract the confirmation requirement under section 172(2).


Where the remedial consequences of invalidity are to be finalised in confirmation proceedings, and where neither party achieves a clear success in interim remedial argument, a court may consider it equitable to make no order as to costs for that remedial stage, particularly where the Constitutional Court will determine the ultimate remedial outcome.

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[2022] ZAGPPHC 7
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Ambassador Duty Free (Pty) Ltd v Minister of Finance and Others (28368/2021; 32175/2021) [2022] ZAGPPHC 7 (17 January 2022)

IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 28368/2021
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES:NO
REVISED
DATE:
17 JANUARY 2022
In
the matter between:
AMBASSADOR
DUTY FREE (PTY) LTD
Applicant
and
THE
MINISTER
OF
FINANCE
First
Respondent
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE
Second Respondent
THE
MINISTER OF INTERNATIONAL RELATIONS
AND
COOPERATION
Third Respondent
and
NU-AFRICA
DUTY FREE SHOPS (PTY) LTD
Intervening Applicant
CASE
NO: 32175/2021
AND
in the matter between:
FLEMINGO
DUTY FREE SHOPS
INTERNATIONAL
SA {PTY} LTD
First Applicant
INTERNATIONAL
TRADE
&
COMMODITIES 2055 CC
t/a
ASSORTIM DUTY
FREE
Second Applicant
and
THE
MINISTER
OF
FINANCE
First Respondent
THE
COMMISSIONER FOR THE
SOUTH
AFRICAN REVENUE SERVICE
Second Respondent
THE
MINISTER OF INTERNATIONAL
Third Respondent
RELATIONS
AND COOPERATION
and
NU-AFRICA
DUTY
FREE
SHOPS
(PTY)
LTD
Intervening Applicant
JUDGMENT
ON REMEDY
D
S FOURIE, J:
[1]
In the judgment handed down on 21 September 2021 (the review order)
this
Court upheld the contention of the intervening applicant
(Nu-Africa) that sections 75(15)(a)(i)(bb) of the Customs and Excise
Act
91 of 1964 and 74(3)(a) of the Value-Added Tax Act 89 of 1991
permit an unlawful delegation of plenary legislative power to the

first respondent (the Minister) and are therefore unconstitutional
and invalid (paragraphs (D) 5.1 and 5.2 of the review order).
[2]
In the review order, this Court also declared unconstitutional
various
amendments to the Schedules of the Customs Act published in
Government Gazette Nos. 44473 and 44705 and the amended Schedule to

the VAT Act published in Government Gazette Nos 44473 and 44705
(paragraphs (D) 5.3 and 5.4 of the review order).
[3]
In the review order, leave was granted to the Minister and Nu-Africa
(in
paragraph (D) 8.1 of the order) to file a supplementary affidavit
on the question of remedy. Both parties are
ad idem
that
the order should only operate prospectively. However, the Minister
has argued in the supplementary affidavit that the declarations
of
invalidity should be suspended for a period of 24 months, whereas
Nu-Africa has contended that the declarations of invalidity
should
operate with immediate prospective effect as from 1 August 2021,
being the date on which the amended Schedules came into
effect.
[4]
As a preliminary matter, counsel for Nu-Africa has argued that the
Minister
as the party requesting a suspension of the order of
invalidity has a burden or onus to persuade the Court to exercise
such a power
(Mistrv v
Interim
National Medical and
Dental
Council
of
South
Africa
1998 (4) SA 1127
(CC) at par 37). He also made reference to a
dictum
of Kriegler J in
S
v
Ntsele
1997 (11) BCLR 1543
(CC) where the
learned Judge stated that High Courts must engage with issues of
retrospectivity, prospectivity or suspension when
declaring statutes
constitutionally invalid.
[5]
However, in their heads of argument both counsel have now pertinently
pointed out what the Constitutional Court said in
Minister
of
Justice
and Constitutional Development and Others v Prince
2018 (6) SA 393
(CC) concerning the competence of a High Court to
suspend a declaration of invalidity of an Act of Parliament when
deciding a constitutional
attack. In paragraph 2 of the judgment
Zondo ACJ stated the following:
"It
is
neither necessary nor competent for
a
High Court to
suspend an order of constitutional invalidity that relates to
a
statutory provision or an Act of Parliament1hen it grants such an
order of constitutional invalidity. It
is
unnecessary
because s. 172(2) of the Constitution provides that 'an order
of constitutional invalidity has no force unless it
is
confirmed
by the Constitutional Court'. That means that any order of
constitutional invalidity
of
an
Act of
Parliament
or a
provision
of
an Act of Parliament made by
a Court other than this Court does
not take effect for
as
long it
has
not been confirmed by this Court, Such
a
suspension order
is
incompetent because it purports to
suspend the operation of an order that
is
not in operation in
any event."
[6]
This view appears to be in contrast to the view expressed by Kriegler
J in
Ntsele
.
Counsel for NU-Africa submitted
that the contrasting approaches in
Prince
and
Ntsele
are not capable of clear resolution as
Ntsele
was not overruled explicitly in
Prince
.
It seems to me, as far as this issue is concerned, that
Ntsele
has at least been overruled by necessary implication as it was
clearly stated in
Prince
that the High Court is
not competent to suspend a declaration of invalidity that relates to
a statutory provision or an Act of Parliament.
Counsel for the
Minister as well as counsel for Nu-Africa have accepted that this
Court is bound by the abovementioned statement
of the Constitutional
Court in
Prince
and that it is not competent for
this Court to suspend a declaration of invalidity that relates to a
statutory provision or an Act
of Parliament. I agree with this
approach.
[7]
However, that is not the end of this debate. Counsel for Nu-Africa
has
nevertheless made submissions as to why suspension would not be
just and equitable. l was also invited to consider these submissions

or the benefit of the Constitutional Court when it decides the
confirmation proceedings. It was also contended that the above issues

do not concern the declarations of invalidity in respect of the
amended Schedules
as these declarations of invalidity do not
require confirmation by the Constitutional Court (unlike the order in
respect of the
Customs Act and VAT Act). It was therefore still
requested that the declarations of invalidity in paragraph (D) 5.3
and 5.4 of
the review order should operate with immediate prospective
effect as from 1 August 2021.
[8]
Counsel for the Minister has submitted, given that it is now common
cause
that it would not be competent for this Court to suspend the
declarations of invalidity, that no purpose would be served in
engaging
in a debate about the merits of Nu-Africa's contentions. Now
that the evidence is on record (to be supplemented by evidence in the

proceedings before the Constitutional Court), the parties may hold
their fire until the confirmation proceedings. Therefore, so
it was
contended, the appropriate way to proceed would be for this Court
simply to confirm its review order.
[9]
Nu-Africa has advanced various reasons as to why the Minister has not
discharged the onus regarding a suspension of the order of
invalidity. I do not think it is necessary for this Court to consider

the arguments put forward by both Nu-Africa and the Minister in this
regard as the issue of suspension will have to be decided
by the
Constitutional Court. l have nevertheless decided to merely state my
view on this issue as mentioned in par 13 below, if
that would be of
any assistance.
[1O]
However, I do think it is necessary to consider the submission that
the
declarations of invalidity in respect of the
amended Schedules
do not require confirmation by the Constitutional Court. Orders
of invalidity that relates to a statutory provision or an Act of

Parliament require confirmation, but orders of invalidity of
delegated legislation made in terms of an Act by a Minister do not

(section 172(2)(a) of the Constitution and
Minister of Justice
and Constitutional Development
and Others
v
Prince
, supra,
par 2 and Currie & De Waal,
The
Bill of
Rights
Handbook,
6th Ed, p 117). This is so
despite the standard legislative formula found in definition sections
to the effect that
"this
Act"
includes any regulations issued in terms of powers granted by it
(The Bill of Rights Handbook,
supra p 117 and
the authorities cited).
[11]
The Schedules to the Customs Act and the VAT Act are not, in my view,
delegated legislation
made in terms of the Customs Act or the VAT Act
by the Minister. These Schedules are part and parcel of an Act of
Parliament (cf
Smit v Minister of Justice and Correctional
Services
2021(3) BCLR 219 (CC) par 35 and further). The
purported amendments to these Schedules by the Minister did not
change the statutory
status thereof to that of delegated legislation
created or made by the Minister, such as Regulations or even Rules.
On the contrary,
the reason why the amended Schedules were declared
unconstitutional is because section 75(15)(a)(i)(bb) of the Customs
Act and
section 74(3)(a) of the Value­ Added Tax Act purport to
confer on the Minister the power to amend these schedules and thereby

conferring on the Minister plenary legislative power. In short, these
Schedules, even in its amended form, remain part and parcel
of an Act
of Parliament as original legislation. l therefore do not agree with
the submission by counsel for Nu-Africa that the
declarations of
invalidity in respect of the amended Schedules do not require
confirmation by the Constitutional Court. In my view
all the
declarations of invalidity as referred to in paragraphs (D) 5.1 to
5.4 of the review order, require confirmation by the
Constitutional
Court. It will therefore be necessary to make an order in this regard
to avoid any misunderstanding or uncertainty.
[12]
However, even if I have misdirected myself in this regard and should
it be found that the
declarations of invalidity in respect of the
amended Schedules do not require confirmation by the Constitutional
Court, then there
is another reason why an order as requested by
Nu-Africa (that the declarations of invalidity with regard to the
amended schedules
should operate. with immediate prospective effect
as from 1 August 2021) should not be granted by this Court. If a
suspension order
were to be granted by the Constitutional Court in
respect of the relevant sections of the Customs Act and the Value
Added Tax Act,
it will defeat the purpose if an order were to be
granted now that the declarations of invalidity in respect of the
amended Schedules
should operate with immediate prospective effect as
from 1 August 2021. That will not be in the interest of justice.
[13]
I am therefore of the view that the Minister's request for a
suspension of the declarations
of invalidity should favourably be
considered to enable Parliament to correct the constitutional defects
in this legislation, to
provide for a lawful manner to properly
regulate the quantity of goods that may be purchased duty-free by
Diplomats and to prevent
any further abuse of these privileges.
[14]
That finally brings me to the issue of costs in respect of the
argument on remedy. Both
the Minister and Nu-Africa filed
supplementary affidavits and heads of argument. As far as the issue
of remedy is concerned, it
is to be expected that the Constitutional
Court will make a final order in this regard. There is no clear
winner as far as this
round before this Court is concerned. I am
therefore of the view that it will be fair to both parties if I make
no order as to
costs.
ORDER
In
the result I make the following order with regard to the issue of
remedy:
1)
This order should be read in conjunction with the order already

granted on 21 September 2021 under the above case numbers between the
same parties;
2)
The declarations of invalidity in respect of section 75(15)(a)(i)(bb)

of the Customs and Excise Act 91 of 1964, section 74(3)(a) of the
Value-Added Tax Act 89 of 1991, the amended Schedules to the
Customs
Act published in Government Gazette Nos. 44473 and 44705 and the
amended Schedule to the VAT Act published in Government
Gazette Nos.
44473 and 44705 (as more fully referred to in the review order in
paragraphs (D) 5.1 to 5.4) are all subject to confirmation
by the
Constitutional Court and shall have no force unless confirmed by the
Constitutional Court;
3)
The Registrar of this Court is directed to forward the judgment
and
order dated 21 September 2021 as well as this judgment and order to
the Registrar of the Constitutional Court in terms of the
provisions
of Rule 16(1) of the Constitutional Court Rules for consideration of
the declaration of invalidity orders made by this
Court, within 15
(fifteen) days of this order;
4)
No order as to costs is made in respect of the proceedings conducted

after 21 September 2021 on the issue of remedy.
D
S FOURIE
JUDGE
OF THE HIGH COURT
PRETORIA
17
January 2022

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