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[2011] ZASCA 154
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National Lotteries Board v South African Education and Environment Project (788/10) [2011] ZASCA 154; [2012] 1 All SA 451 (SCA); 2012 (4) SA 504 (SCA) (28 September 2011)
Links to summary
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 788/10
In
the matter between:
NATIONAL LOTTERIES BOARD
….......................................................
First
Appellant
TEBOGO MAITSE NO
…...................................................................
Second
Appellant
DORCAS JAFTA NO
….........................................................................
Third
Appellant
and
SOUTH AFRICAN EDUCATION AND
ENVIRONMENT PROJECT
…............................................................
First
Respondent
CLAREMONT METHODIST CHURCH SOCIAL
IMPACT MINISTRY, SIKHULA SONKE
…....................................
Second
Respondent
Neutral citation:
National
Lotteries Board v South African Education and Environment Project
(788/2010)
[2011] ZASCA 154
(28 September 2011).
Coram:
Brand, Van Heerden,
Cachalia, Shongwe and Seriti JJA
Heard:
16 September 2011
Delivered: 28 September 2011
Summary: Administrative action –
guidelines not to be applied rigidly and inflexibly – duty to
give reasons –
not ordinarily open to a decision maker, who is
required to give reasons, to respond to a challenge by offering new
reasons in
its answering affidavit.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
Western Cape
High Court, Cape Town (Gamble J sitting as court of first instance).
The following order is made:
The appeal is dismissed with costs,
including the costs of two counsel.
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA
(Brand,
Van Heerden, Shongwe and Seriti JJA concurring):
[1] This is an appeal, with leave of
the Western Cape High Court (Gamble J), against an order reviewing
and setting aside certain
decisions of the National Lotteries Board
(the board). The decisions relate to the board’s refusal to
approve three applications
by two registered charities for financial
grants from the National Lottery Distribution Trust Fund (the fund).
The main issue in
this appeal concerns whether or not the board was
justified in declining the applications because they did not comply
with the
guidelines for the distribution of moneys from the fund.
[2] The fund was created under s 21 of
the Lotteries Act 57 of 1997 (the Act) to receive moneys raised
through national lottery
competitions. The board, which is the first
appellant, administers the fund primarily for the purpose of
allocating grants to socially
worthy projects.
1
The South African Education and
Environment Project, the first respondent, and the Claremont
Methodist Church Social Impact Ministry,
Sikhula Sonke, the second
respondent, are the charities whose grant applications the board
declined. It shall be convenient to
refer to the first respondent by
its acronym SAEP and to the second respondent by its abbreviated
name, Sikhula Sonke.
[3] The two charities have, over a
period of time, applied to the board for funding. The projects for
which they seek funding support
pre-school and educational facilities
in deprived areas of Cape Town. SAEP operates in the Philippi area by
supporting crèches
started up by women in the Philippi
community, providing extra-curricular programmes in under-resourced
high schools; offering
bridging courses for promising students in
preparation for tertiary education and supporting university
students. Sikhula Sonke
offers ‘educare’ facilities to
approximately 4000 children in 65 pre-schools in the Khayelitsha
community.
[4] Distribution agencies, appointed
by the Minister of Trade and Industry, facilitate the adjudication of
funding applications
and the distribution of funds to charities whose
applications have been approved.
2
The agencies are not juristic persons
in their own right, but sub-committees of the board. They perform
their functions on the board’s
behalf. There are four such
agencies of which only two concern us namely, the DA for Charities,
represented by the second appellant,
and the DA for Arts represented
by the third appellant. The former is responsible for considering
applications from organisations
seeking funds earmarked for
‘charitable expenditure’:
3
The Minister of Trade and Industry has
determined that not less than 45 per cent of the amounts available
must be allocated for
these purposes. The latter is similarly
responsible for considering applications for ‘arts, culture and
the national historical,
natural, cultural and architectural
heritage’. In its case, not less than 28 per cent of the
amounts available in the fund
have to be paid to meet these
objectives.
4
[5] Despite the Minister’s
determinations and the overwhelming social need for these funds, the
board and DAs have consistently
failed to meet their targets. This
has resulted in major under-expenditure of the moneys earmarked for
allocation. According to
the board’s annual report, in 2008, it
set itself the ‘strategic objective’ to ‘disburse
85 per cent of
the funds allocated’, but made less than 50 per
cent available for allocation. Of this reduced amount the DA for
Charities
managed to distribute 40 per cent and the DA for Arts only
29 per cent of the total amount allocated. This represented 32.5 per
cent of the total amount available in the fund for distribution. In
2009, they fared even worse distributing only 42 per cent
of the
allocated funds, which represented only 15 per cent of the total
amount in the fund available for distribution. Of this
amount the DA
for Charities distributed 37 per cent and the DA for Arts only 28 per
cent. In total, in 2009, the fund had R6 billion
in unallocated
funds. For the years we are considering the fund had simply not
fulfilled its mandate.
[6] In its founding affidavit SAEP
initially sought to review seven of its failed funding applications
under
s 6
of the
Promotion of Administrative Justice Act 3 of 2000
.
In Sikhula Sonke’s case, two applications were put in issue.
When the review was launched, SAEP was content to pursue its
review
only in respect of four of its unsuccessful applications. And, when
the matter was called, SAEP abandoned one more leaving
three
remaining. Counsel for the board conceded the review in respect of
two of these applications leaving only one in issue, which
was
identified in the papers as the seventh application. Sikhula Sonke’s
dispute related to the eighth and ninth applications.
Three thus
remained, SAEP’s seventh application and Sikhula Sonke’s
eight and ninth applications.
[7] As I mentioned at the beginning,
the disputes over the three applications all concern how the DAs
applied the guidelines when
declining them. The board submits that
its guidelines are clear, not unduly burdensome and must be complied
with to the letter.
Counsel for the board urged us to have regard to
the fact that because the board processes large numbers of
applications, which
is an onerous administrative responsibility, it
cannot be expected to investigate every application that does not
adhere strictly
to the guidelines. Moreover, counsel for the board
submitted, the board’s staff establishment is limited and its
employees
are constrained to apply the guidelines strictly. The board
thus contends that by refusing to consider the three applications
here
in issue, it was merely applying the guidelines. It is therefore
necessary to consider the status of the guidelines issued by the
DAs
and how they are meant to be applied within the context of the Act’s
statutory framework.
[8] The board is listed as a public
entity in Schedule 3 of the
Public Finance Management Act 1 of 1999
.
It must therefore manage its finances properly by taking steps to
prevent irregular expenditure and payments that do not comply
with
its operational policies.
5
The powers regulating the manner in
which funding applications are made are provided for in the
(Lotteries) Act and regulations.
Under ss 28(2) and 30(2) of the Act,
the Ministers of Trade and Industry and of Finance may issue
directions (in the case of the
former, after consulting with the
Minister for Social Welfare or with the Ministers responsible for
arts, culture, science, land
technology and environmental affairs, as
the case may be) regarding the allocation of funds by the DAs for
Charities and Arts respectively.
When the decisions regarding these
allocations were made the directions were contained in regs 3 and 5
of the ‘Allocation
Regulations’.
6
In terms of s 32(3) of the Act the DAs
must comply with directions by the Minister of Trade and Industry ‘in
determining the
persons to whom, the purposes for which and the
conditions subject to which that distributing agency is to allocate
any amounts’.
At the time that the applications under
consideration were considered the Minister had not issued any such
directions.
7
Regulation 10(2) of the ‘Distributing
Agencies’ regulations prohibits the allocation of funds to
organisations under
legal administration, that are insolvent, or that
have previously breached conditions of their grants.
8
The regulations require applications
to be made on a prescribed form,
9
a matter which is relevant to SAEP’s
seventh application.
[9] So, the Act and the applicable
regulations make it clear that the requirements for applications are
to be found in the regulations.
This does not mean that DAs may not
develop guidelines of the sort here in issue to assist them in making
their decisions. Indeed,
because the grant or refusal of an
application involves the exercise of a discretion, our courts have
recognised that it is prudent
for decision-makers to apply guidelines
or general criteria to assist them with this task.
10
And, provided that these criteria are
compatible with the enabling legislation, the only constraint is that
they may not be applied
rigidly or inflexibly in a particular case.
11
For if they are applied in this manner
the decision-maker elevates the guideline to an immutable rule and
thereby fetters its discretion,
which it may not do.
12
[10] At the same time decision-makers
must be consistent, particularly when dealing with large numbers of
applications, as the board
does. There is therefore a tension between
having to apply a guideline strictly and consistently when making
multiple decisions,
and applying it flexibly in a particular case. It
is this anxiety that motivates the litigation on the board’s
part –
a point counsel for the board sought to drive home by
insisting that a strict application of the guidelines is unavoidable.
But
this problem is inherent with multiple decisions, and does not
relieve an administrator of the duty to consider each application
individually and justify every decision. The law requires nothing
less. And it is no defence for the board to attempt to relieve
itself
of this duty by complaining that it has insufficient or inadequately
trained staff to do this.
[11] That the guidelines in issue here
in the main serve a useful purpose, and generally accord with the
regulations, is not disputed.
Their object is to ensure that moneys
are disbursed only to grantees that are demonstrably capable of
administering them for their
intended purpose and also that
applicants for funding are treated similarly. In addition they
minimize the danger of fraud. When
receiving an application for
funding the decision-maker’s mind must be directed to these
purposes. In doing so, it is entitled
to treat some aspects of the
guidelines as peremptory requirements, such as that the financial
statements of grantees be audited.
For it would be untenable to
insist on this requirement for some organisations, but not for
others. However, it is not entitled
to treat every departure from its
literal prescriptions as fatal. Not even statutory formalities are
approached in this way. The
real question a decision-maker must ask
itself is whether the object of the guidelines has been achieved.
13
If it has, then insignificant or
technical instances of non-compliance should generally be condoned.
[12] Against this background, it is
convenient to deal first with Sikhula Sonke’s two applications
and then consider SAEP’s
application.
Sikhula Sonke’s Eight
Application
[13] This application for funding was
made on 26 July 2007 and given the reference number 27999. The amount
requested was R570 000.
The DA for Charities declined the application
on 27 August 2008, some 13 months later for two reasons: first, that
on its application
form and financial statements the organisation was
named ‘Sikhula Sonke’ while its full name (Claremont
Methodist Church
Social Impact Ministry, Sikhula Sonke) appeared on
other supporting documents; and secondly, that ‘the management
is not
fully representative of the beneficiary community’.
[14] However, for reasons that do not
appear from the record, the DA made another decision on 15 October
2008. Again the application
was refused based on an ‘inconsistency
in names’. It informed Sikhula Sonke of its decision by letter
on 22 October
2008 and gave the reason for refusing the application
as:
‘
The
inconsistency in names in that the application form and the
financials are in the name of
SIKHULA
SONKE
and
the NPO Certificate, Articles of Association and the bank statements
are in the name of
CLAREMONT
METHODIST CHURCH SOCIAL IMPACT MINISTRY, SIKHULA SONKE
.’
[15] The board invited Sikhula Sonke
to appeal if it so wished. It did so on 18 November 2008. The grounds
of appeal indicated that
Sikhula Sonke was clearly an abbreviation of
the organisation’s full name, employed to avoid repetitive and
unwieldy references
to the full name; it was also a ‘trading
name’ used on all its stationery, letterheads, electronic
communications and
its website. Six months passed before Sikhula
Sonke was informed on 5 May 2009 that the appeal had failed. It
appears from the
record that a ‘Special Board Committee’
considered the appeal and confirmed the DA’s decision. The
reasoning
was based upon paragraph three of the 2007 Guidelines,
which required applications to ‘have exactly the
SAME
NAME
throughout’.
[16] Before I consider whether the
board’s insistence on the strict application of this guideline
constituted a lawful basis
for refusing the application, I must
mention that the second reason given initially – that Sikhula
Sonke’s management
was not representative of the beneficiary
community – was abandoned on the second occasion when the
application was considered.
It appears that the DA introduced this
requirement in its public notice calling for funding applications.
How it could have done
so is difficult to understand. The Act
requires only that charitable expenditure be made ‘by any
organisation or institution
established for charitable, benevolent or
philanthropic purposes . . . .’
14
There is no requirement for the
organisation to be ‘representative of the beneficiary
community’ before it may qualify
for funding. There is a good
reason for this: the unavoidable consequence of imposing such a
condition would be to adversely impact
on poor and vulnerable
communities having access to sorely needed funds and services.
[17] The idea that an organisation may
be precluded from obtaining public funding to assist such communities
only because its racial
composition differs from the community it
intends assisting is not new. It resembles the racially
discriminatory welfare policy
from our recent past. That policy
promoted separate services for different race groups and separate
boards of management of welfare
organisations. Its effect was to
deepen mass poverty and social inequality.
15
To repeat that error would be so
inimical to the founding values of our Constitution –
non-racialism, equality and human dignity
(as it relates to ubuntu
16
)
– that it is an unimaginable basis for public policy. In the
absence of any suggestion that the Sikhula Sonke either employs
persons or dispenses funds on a racially discriminatory basis, the
board correctly abandoned this rationale for initially refusing
the
application.
[18] I turn to consider whether
Sikhula Sonke’s ‘inconsistency in the use of names’
was a proper basis for refusing
to approve its funding application.
The board’s justification for adopting the guideline that the
same name be used throughout
the application is to prevent fraud,
which could happen if funds are inadvertently paid to organisations
for which they were not
intended. Sikhula Sonke does not take issue
with the purpose of the guideline. Its complaint is that the
guideline was applied
rigidly resulting in the decision to refuse the
funding application being unreasonable or irrational.
[19] The undisputed facts support
Sikhula Sonke’s stance. It says that it did not understand the
guideline to mean that it
could not use abbreviations in its name.
That ‘Sikhula Sonke’ was obviously an abbreviation
appears from the following:
first, its auditors used the abbreviated
name in the annual financial statements; second, the annual reports
accompanying the application,
including the cover sheet and every
page of the 2006 and 2007 annual reports bear a logo which reads
‘Sikhula Sonke –
We grow together’, and the front
cover bears the full name; third, the letterhead used in
correspondence to the board includes
the logo in the top right-hand
corner of the page, with the full name in the top left-hand corner;
fourth, the letterhead and application
also confirms its registration
numbers as a non-profit and public benefit organisation. The persons
who processed the application
entered these numbers into a database,
which generated a printout that referred to the full name.
[20] There could thus have been no
doubt that the abbreviated and full names referred to one and the
same entity – more so
after the full facts were placed before
the Special Board Committee. Yet, in its answering papers, the board
insisted that the
difference in names could lead to a reasonable
suspicion of fraud. In their written submissions, counsel for the
board submitted
that it would have been unreasonable and
unnecessarily onerous to expect the board to embark on an
investigation to eliminate the
possibility of fraud. This submission
is utterly without merit. There was no need to embark on any
investigation as all the facts
were before it. And, if it remained
unsure afterwards it could have clarified the matter with a single
telephone call to Sikhula
Sonke or its auditors. Instead, the
official who declined the application for this reason applied the
guideline rigidly and thoughtlessly,
as did the Special Board
Committee. It follows that the high court was correct to conclude
that the board’s refusal to consider
the application fell to be
reviewed and set aside.
Sikhula Sonke’s Ninth
Application
[21] This application was submitted on
13 November 2008 to the DA for Charities. The amount requested was
R300 000 and a reference
number 33667 allocated to it. The DA
rejected the application seven months later, on 12 June 2009. On 2
July 2009, it furnished
its reasons. These were that the ‘Articles
of Association’ were submitted without a ‘Memorandum of
Association’
outlining the organisation’s objects; and
that only one set of financial statements for the 2008 year were
presented instead
of two, as the guidelines required.
[22] The high court found that the
facts relied on to support these reasons were demonstrably wrong. The
board wisely does not call
into question this finding on appeal. The
board, however, sought to rely on a new reason, introduced for the
first time in its
answering papers in the high court. This was that
the financial statements had not been signed by an independent
accounting officer
and that Sikhula Sonke had not provided proof of
the officer’s official registration.
[23] There is a factual dispute
between the parties as to whether the application that was submitted
by Sikhula Sonke to the board
included signed statements. When the
matter was argued before us, it was common cause that copies of both
the signed financial
statements were included in the bundle of
documents before us, as was an unsigned copy. Assuming, in the
board’s favour,
that the statements it received in support of
this application were unsigned, I do not think it was reasonable for
the board to
reject the application for this reason. If it had any
doubt regarding the efficacy of the statements, a phone call to the
accountants
would have clarified the matter – a simple exercise
that would not have unduly burdened the board. Instead the guideline
was applied rigidly without any justification. There is, therefore,
no merit in the board’s attempt to defend this decision
on this
basis.
[24] The high court dismissed this new
ground on another basis; it was impermissible, the learned judge
said, for the board to rely
on new reasons for the first time in its
answering affidavits. For this conclusion the high court relied on
the decision of Cleaver
J in
Jicama
17 (Pty) Ltd v West Coast District Municipality
,
17
which has an impressive English
pedigree.
18
[25] Counsel for the board, however,
submitted that this was not a ‘new reason’ but one that
appeared from the record.
The question therefore, so the submission
went, was whether, objectively viewed, it was reasonable for the
decision-maker to have
rejected the application. For this submission
counsel relied on a judgment by the Labour Appeal Court in
Fidelity
Cash Management Service v CCMA & others.
19
That case involved a review of an
arbitrator’s award. The court held that an award of this nature
may be set aside on review
only if it is one that no reasonable
decision-maker could reach. This question, the court said, must be
determined by reference
to all the evidence that was before the
decision-maker. And, it did not matter if the decision-maker failed
to identify good reasons
for his decision; as long as the decision,
viewed objectively, was reasonable, this was good enough.
[26] In my view reliance on
Fidelity
Cash
is misplaced. The
question here is not whether there were other reasons in the record
that justified the board’s decision,
but whether it could give
reasons other than those it gave initially for refusing the
application.
[27] The duty to give reasons for an
administrative decision is a central element of the constitutional
duty to act fairly. And
the failure to give reasons, which includes
proper or adequate reasons, should ordinarily render the disputed
decision reviewable.
In England the courts have said that such a
decision would ordinarily be void and cannot be validated by
different reasons given
afterwards – even if they show that the
original decision may have been justified.
20
For in truth the later reasons are not
the true reasons for the decision, but rather an ex post facto
rationalization of a bad decision.
Whether or not our law also
demands the same approach as the English courts do is not a matter I
need strictly decide.
[
28] In the present
matter the refusal of a funding application involves the exercise of
a discretion. This means that the board
could have exercised its
discretion by waiving the requirement for signed statements in the
guideline, or simply condoning the
failure to comply strictly with
it. It failed to exercise its discretion properly by applying the
guideline dogmatically. The fact
that it may have had other reasons
for having come to that conclusion does not change the fact that the
board exercised its discretion
unlawfully when it made the decision.
In fact, it exercised no discretion at all. This cannot be remedied
by giving different reasons
after the fact. The high court, in my
respectful view, got it right.
SAEP’s seventh application.
[29] This application, which was
allocated the reference number 35663, was submitted on 30 January
2009 for funding from the DA
for Arts. The amount applied for was
R313 560. This was in response to an advertisement calling for
applications. The applications
had to be supported by documentation.
Of importance in this regard was the requirement in the 2009
‘Guidelines for Submission
of Applications’ (referred to
below) that ‘[a]pplicants must ensure that their auditors are
registered with recognised
professional bodies eg Public Accountants
and Auditors Board’. However, the advertisement calling for
applications stated
only that the application be accompanied by
signed audited financial statements for the two most recent years
prepared by a firm
of registered auditors.
[30] The Record filed under Rule 53 of
the Uniform Rules indicates that the application was rejected at a
meeting on 28 May 2009
for two reasons: first, because both sets of
financial statements were not ‘audited’ and secondly,
since the auditors
had not signed one of the sets of statements.
However, when the decision was conveyed to SAEP on 15 July 2009, only
the first of
the reasons was given to justify the rejection.
[31] SAEP’s application included
its annual financial statements for the years ended 30 June 2007 and
30 June 2008. They included
reports from an independent accounting
officer, Mr Van der Rede, who is a registered member of the Chartered
Institute of Management
Accountants (CIMA). His report concludes that
SAEP’s financial statements accord with generally accepted
accounting practice.
The board’s internal check list, which is
used to capture the essential information pertaining to an
application, indicates
– with reference to Van der Rede –
that it was satisfied with the ‘auditor’s current
membership’.
On the face of it, the application apparently
complied both with Allocation regulation 5(5)(j), which requires an
applicant for
funding to keep proper accounting records, and with
regulation 5(5)(k), which obliges it to furnish a written report
regarding
its finances.
[32] On this basis, SAEP’s
founding affidavit took issue with the board’s reason –
that both financial statements
for both 2007 and 2008 were not
audited – for declining its application. In its answering
affidavit the board attempted to
justify this reason by pointing out
that Van der Rede’s report attached to the 2007 statements
refers to the 2006 statements
(The 2008 statements were not placed in
issue). The board now suggests that no financial statements were
submitted at all for 2007.
But this suggestion is disingenuous
because all but one of the pages of the financial statements refers
to 2007. The reference
to ‘2006’ on the offending page is
clearly an error. Indeed the board had found the same error in a
previous application
and quite properly merely asked SAEP to correct
it. The board then accepted the corrected version. It is incredulous
that the deponent
to the board’s answering affidavit now
attempts to make a case that this error amounted to ‘material
non-compliance’
with the guideline when it did not do so
previously.
[33] The board’s answering
affidavit also added that SAEP had not complied with the 2009
Guidelines in another respect; the
financial statements had been
signed off by Van der Rede, who is an ‘accounting officer’
and not an auditor whose qualifications
the board recognises.
[34] At this stage it is convenient to
deal with the 2009 Guidelines. Under the heading ‘Signed
Audited Financial Statements’
in section ‘F’ the
following is stated:
‘
It
is compulsory for organizations to submit signed audited financial
statements for the two most recent years. Organizations that
submit
only one set of signed, audited Financial Statements will not be
considered.
The
audited statements must be on a letterhead of the Audit Firm, must
reflect the registration number of the Audit Firm and must
be signed
and dated.
Financial
Statements must be for the most recent audits 2006/2007 and
2007/2008.
Applicants
must ensure that their auditors are registered with recognized
professional bodies e.g. Public Accountants and Auditors
Board.
Financial
Statements that have been reviewed by an Accounting Officer are not
audited. Any application (sic) that submits such statements
will be
declined.’
(Emphasis
added).
An
organization that does not have signed two-year audited financial
statements may form a partnership with an organization that
has the
required financial statements (See Partnership Guidelines) . . . .’
[35] These guidelines require only
that the applicants’ auditors are registered with a recognised
professional body. The Public
Accountants and Auditors Board is cited
as an example of such body. However, the prescribed form, referred to
earlier, says that
applicants must ensure that their auditors are
registered with one of three professional bodies: the Public
Accountants and Auditors
Board, the Institute for Commercial and
Financial Accountants, and the Institute for Certified Bookkeepers.
The board submits that
because CIMA, which recognises Van der Rede’s
qualifications, is not one of the professional bodies mentioned in
the prescribed form, it was justified in declining the application on
this ground.
[36] But the board has never before
since the publication of the prescribed form with the regulations in
2000, insisted on recognition
of only those professional bodies
mentioned in it. The 2007 and 2008 Charities Sector Guidelines, for
example, have a list of eight
professional bodies with which an
‘accounting officer’ may be registered. CIMA is one of
these. In the latest guidelines
issued in 2010, seemingly in
recognition of the undue formalism of the 2009 Guidelines, all first
time applications for less than
R750 000, need only be submitted
by a bookkeeper, accountant, or accounting officer. No formal
accreditation of their qualifications
by any professional body is
required. Also, in previous years, the board accepted financial
statements prepared by Van der Rede
without question. SAEP thus says
that it reasonably relied on this practice when it submitted these
financial statements.
[37] There is no dispute on the papers
that Van der Rede conducted a proper audit and that he had the
necessary qualifications and
competence to conduct audits into all
financial entities except for public companies (SAEP is not a public
company). The board
has not raised any concern regarding SAEP’s
financial integrity. In these circumstances the board’s
submission that
it acted reasonably when it declined the application
because of Van der Rede’s lack of accreditation by one of the
bodies
mentioned in the prescribed form, cannot withstand scrutiny.
The high court also observed that DAs have applied the concept of
‘auditing’ inconsistently and that the board’s
dogged insistence upon ‘audited’ financial statements
only by a recognised body this time was unreasonable and overly
rigid. Here too, the high court was correct in its conclusion.
[38] To summarise: in each of the
three decisions under review, the board adopted a rigidly formulaic
approach to the application
of the guidelines, treating them as
‘peremptory requirements’ without exception: in the
first, it rejected the application
merely because it used the
applicant’s abbreviated name instead of the same name
throughout the application as the guidelines
require; it declined the
second on the ground that the financial statements were not signed;
and it refused the third because of
its dogmatic insistence that the
‘auditor’ be recognised by one of three professional
bodies prescribed in the regulations
despite the board not having
previously adhered to this practice, and the guideline itself having
not clearly required this.
[39] I mentioned at the outset that
the funds of the board are aimed at supporting socially worthy
projects and, that for the years
under review, the board failed to
disburse R6 billion. The rigid and inconsistent application of the
guidelines, at least partly,
explains why this has happened. Equally
distressing is that the board does not appear to understand its
mandate properly. Mr Nevhutanda,
the chairperson of the board
and the deponent to its answering affidavit, seems to hold the view
that grants given by the board
are ‘gratuities,’ which
are allocated at the board’s discretion. He is wrong. The board
holds public funds in
trust for the purpose of allocating them to
deserving projects. And it must ensure that these funds are allocated
to those projects,
provided of course that they meet the necessary
requirements. The funds do not belong to the board to be disbursed as
its largesse.
[40] The appeal is dismissed with
costs, including the costs of two counsel.
______________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
For 1
st
, 2
nd
and
3
rd
Appellant: P Kennedy (with him F A Boda)
Instructed by:
Dockrat Inc Attorneys, Johannesburg
Honey Attorneys, Bloemfontein
For 1
st
and 2
nd
Respondent: D Borgström (with him L Ackermann)
Instructed by:
Edward Nathan Sonnenbergs, Cape Town
Matsepes Inc, Bloemfontein
1
Section
26 of the Act.
2
Sections
28(1) and 28(2) of the Act.
3
Sections
26(3)(b) and 28 of the Act.
4
In
terms of s 26(2) of the Act the Minister of Trade and Industry makes
these allocations after consulting with the board. At
the time that
the applications under consideration were decided these percentages
were determined by the Minister in terms of
s 26(3) of the Act in GN
1468 of 2004, published in
GG
27118, 15 December 2004. This
determination is now contained in new regulations that applied from
30 July 2010, published in
GN R645 in
GG
33398, 20 July 2010.
5
Sections
51(1)(a)(i)
and
51
(b)(ii) of the
Public Finance Management Act 1 of
1999
.
6
‘
Allocation
of Money in National Lottery Distribution Trust Fund’
(‘Allocation Regulations’), published under
GN R3446,
GG
21619, 29 September 2000 – contained in annexure ‘LJK
20’, Vol 1 p 82-93. These regulations have subsequently
been
repealed and replaced (with effect from 30 July 2010) with the
‘Regulations Relating to the Allocation on Money in
National
Lottery Distribution Trust Fund’, published under RN R645,
GG
33398, 20 July 2010. The applications in this case fall to be
decided under the ‘old’ regulatory scheme applicable
at
the time that they were made – See
Unitrans
Passenger (Pty) Ltd t/a Greyhound Coach Lines v Chairman, National
Transport Commission
;
Transnet
Ltd (Autonet Division) v Chairman, National Transport Commission
1999 (4) SA 1
(SCA) para 15-19.
7
Such
directions are now contained in the ‘Directions for the
Distribution Agencies in Determining the Distribution of Funds
from
the National Lottery Distribution Trust Fund’, published under
GN R644,
GG
33398, 20 July 2010 (which took effect from
30 July 2010).
8
Published
under GN R182,
GG
22092, 22 February 2001, reg 10.
9
The
Regulations entitled ‘Allocation of Money in National Lottery
Distribution Trust Fund’ are published under GN
3446,
GG
21619, 29 September 2000. Regulation 7 provides for the funding
applications to be submitted to the DA on a prescribed form.
10
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs &
others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 57.
11
MEC
for Agriculture, Conservation, Environment & Land Affairs v
Sasol Oil (Pty) Ltd
2006 (5) SA 483
(SCA) para 19.
12
Foodcorp
(Pty) Ltd v Deputy Director-General, Department of Environmental
Affairs & Tourism: Branch Marine & Coastal Management
2006
(2) SA 191
(SCA) para 9.
13
Cf
Unlawful Occupiers, School Site v City of Johannesburg
2005
(4) SA 199
(SCA) para 22.
14
Section
1.
15
See
Leila Patel
Social Welfare and Social Development in South Africa
(2005) p 73-74.
16
The
concept of ‘ubuntu’ and its application to case law has
been controversial. Here I use it in the limited and,
I think,
uncontroversial sense that Mahomed J did in
S v Makwanyane &
another
[1995] ZACC 3
;
1995 (3) SA 391
(CC) para 263 where he said:
‘
[A]
“
need
for understanding but not for vengeance, a need for reparation but
not for retaliation, a need for
ubuntu
but not for victimization”. “The need for ubuntu”
expresses the ethos of an instinctive capacity for and enjoyment
of
love towards our fellow men and women; the joy and the fulfilment
involved in recognizing their innate humanity; the reciprocity
this
generates in interaction within the collective community; the
richness of the creative emotions which it engenders and the
moral
energies which it releases both in the givers and the society which
they serve and are served by.’
17
2006
(1) SA 116
(C) para 11.
18
R
(S) v Brent LBC
[2002] EWCA Civ 693
para 26 (Schieman L J);
R
v Westminister City Council, Ex Parte Ermakov
[1996] 2 All ER
302
(CA) at 315h-316d; H W R Wade & Forsyth
Administrative
Law
10 ed at 441-442.
19
[2008]
3 BLLR 197
(LAC) paras 102 and 103.
20
See
Wade & Forsyth (above n 18).