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[2021] ZAGPPHC 256
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National Lotteries Commission v Minister of Trade, Industry and Competition and Others (11706/2021) [2021] ZAGPPHC 256 (7 May 2021)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
(1)
REPORTABLE: NO.
(2)
OF INTEREST TO OTHER JUDGES: NO
(3)
REVISED.
7
MAY 2021
CASE
NO: 11706/2021
In
the matter between:
THE
NATIONAL LOTTERIES COMMISSION
Applicant
and
THE
MINISTER OF TRADE, INDUSTRY
AND
COMPETITION
First
Respondent
ZANDILE
BROWN
Second
Respondent
THE
PARLIAMENTARY PORTFOLIO
COMMITTEE
ON TRADE AND INDUSTRY
Third
Respondent
J
U D G M E N T
This matter has been heard by
way of a virtual hearing and disposed of in the terms of the
Directives of the Judge President of
this Division. The
judgment and order are accordingly published and distributed
electronically.
DAVIS, J
[1]
Introduction
1.1
This
is the judgment in an urgent application for the review and setting
aside of the appointment by the Minister of Trade and Industry
(the
Minister) of an acting chairperson of the National Lotteries Board
(the board) on 30 November 2020 and any extension of her
appointment
beyond the initial expiry date thereof on 31 January 2021.
1.2
The
attack was launched by the National Lotteries Commission (the NLC) as
applicant, relying on a founding affidavit by the Commissioner
of the
NLC.
1.3
The
Minister is the first respondent and the second respondent is Ms
Zandile Brown, being the acting chairperson appointed by the
Minister. Apart from her citation as second respondent, Ms
brown took no part in the urgent application.
1.4
The
third respondent, the Parliamentary Portfolio Committee on Trade and
Industry (the PPC), has filed a notice to abide the decision
of this
court.
1.5
Apart
from the impugned appointment, a further consideration is the
continuance of payments in terms of the NLC’s annual budget
of
2020/2021. The parties all agree that pay-outs of expenditure
and distribution of funds arising from this budget, should
continue.
1.6
A
last aspect for consideration, is what interim relief should be
granted, if any, in the event that the appointment is set aside.
[2]
The statutory
provisions regarding the appointment of a chairperson of the Board of
the National Lotteries Commission
2.1
All the relevant
provisions regarding the appointment of a chairperson emanate from
the Lotteries Act, 57 of 1997 (the Act).
The NLC has been
established by section 2 of the Act, which, in terms of section 2(2),
is governed by a board.
2.2
The board, in
consultation with the Minister, appoints a Commissioner of the NLC
and the Commissioner, in turn, in consultation
with the board,
appoints senior executives of the NLC and other staff. This is
done in terms of sections 2B and 2D of the
Act.
2.3
In terms of section
3(1) of the Act the board comprises of a chairperson, one member
designated by the Minister and not more than
five other members “
who
have proven business acumen or applicable knowledge or experience
with regard to matters connected with the functions of the
board
”.
Of these members, one must be a practicing legal practitioner and at
least four shall be persons who are not in the
service of any sphere
of government. The chairperson of the distribution agency
created in the Act is also an
ex
officio
member of
the board, but with no voting rights.
2.4
The period for holding
office by board members shall not exceed five years. Subject to
section 3(3), casual vacancies which
occur when a member vacates his
or her position prior to the expiry thereof, may be filled by the
appointment of another person
for the remainder of the period for
which the person in respect of whom the vacancy arose, had been
appointed.
2.5
Section 3(3) determines
that the chairperson shall be appointed “…
only
after the Minister has by notice in the Gazette and in not less than
two newspapers circulating in every Province, invited
interested
parties to nominate a person suitable for appointment as chairperson
and the relevant committee of the National Assembly
has made
recommendations to the Minister in relation thereto after a
transparent and open process of considering persons so nominated
…
”.
[3]
The
appointment of Ms Brown
3.1
Until the Minister’s
impugned appointment of Ms Brown as acting chairperson, she was a
member of the board, having being designated
as such by the Minister
in terms of section 3(1)(b).
3.2
The previous
chairperson of the board was Prof Nevuthanda, whose term expired on
30 November 2020.
3.3
The Minister stated in
his answering affidavit that on 4 September 2020, “the
Department” published a notice in the
Government Gazette
calling for nominations for the position of chairperson of the
board. Nothing was said about publications
in other newspapers
but, as this point was not raised, it is, in his favour, assumed that
the Minister had also caused such publications
to take place.
3.4
After nominations had
been received, the Minister employed his own screening process and on
12 November 2020, that is 18 days before
the expiry of the period of
office of the then incumbent chairperson, provided the PPC with the
names of three candidates.
3.5
On 18 November 2020 the
Chief Parliamentary Legal Advisor advised that the abovementioned
procedure followed by the Minister was
contrary to the Act, despite
the fact that it may have been followed by his predecessor and the
fact that such a process may have
led to the appointment of Prof
Nevuthanda.
3.6
Accordingly, the PPC
was furnished with the complete list of 42 nominees together with
their CV’s. On 24 November 2020
the PPC deliberated on
this list and the procedure to be followed by it in determining the
recommendations to be made to the Minister.
The minutes of the
PPC meeting annexed to the papers and the extracts therefrom reveal
divergent opinions, often split along political
party lines.
The only consensus was that no consensus on the recommendations would
be reached by 30 November 2020.
3.7
The Minister then
sought legal advice. He states that the advice he received was
to the effect that, although the Act makes
no provision for the power
of the Minister to appoint an interim chairperson, the Act “…
ought to be
interpreted to mean that [he] possesses an implied power to appoint
an interim chairperson
”.
This prompted the Minister to, on 30 November 2020, inform the board
that he intended appointing Ms Brown as interim
chairperson. He
invited the board to make representations in this regard. In
the meantime, he went ahead and appointed
Ms Brown as acting
chairperson of the board with effect from 1 December 2020 to 31
January 2021.
3.8
Two weeks later, on 15
December 2020, four of the remaining members of the board advised the
Minster that he had neither the express
nor implied power in terms of
the Act to appoint an acting chairperson and if he were to appoint Ms
Brown, he would be acting outside
his powers.
3.9
Apparently and, despite
opposition members of the board pressing for urgent resolution of the
matter, the board adjourned for the
Parliamentary recess.
3.10
The Minister reverted
to the board on 1 February 2021 and sent a letter to the four members
who previously objected, expressing
his intention to forge ahead with
the appointment of Ms Brown. He then extended her appointment
to the end of March 2021.
On 23 February 2021 the said members
responded and repeated their objections, this time bolstered by legal
advice obtained by them,
copies of which they furnished to the
Minister.
3.11
On 12 March 2021, the
PPC resolved to forward the names of three nominees to Parliament,
after which recommendations would be sent
to the Minister for his
consideration. Apparently, all this will take place sometime in
the second half of May 2021.
3.12
On 28 March 2021, the
Executive Committee of the NLC, through its attorneys, demanded the
withdrawal of the appointment of Ms Brown
as acting chairperson.
On 29 March 2021, the Minister reiterated his stance that he had
acted in terms of implied powers,
derived from the Act.
3.13
A meeting between the
Commissioner, the Minister and the Director-General of the Department
of Trade and Industry was suggested
by the Minister in an attempt to
resolve the impasse. In the meantime, the extended period of Ms
Brown’s acting appointment
was due to expire on 31 March 2021.
On that day, the Minister appeared before the PPC to solicit its
views on the interregnum.
The views were varied but the members
broadly conceded that an extension of the interim appointment might
be the only solution.
The applicant’s stance is that
neither the Director General nor the PPC could ratify the appointment
of Ms Brown, which was
viewed as an illegality. The result of
the PPC meeting, of which the applicant had received notice only by
chance, was that
the Minister extended Ms Brown’s acting
appointment to 31 May 2021.
3.14
The only apparent
relevance of the meeting of 31 March 2021 is that, contrary to the
position at the time when Ms Brown had initially
been appointed by
the Minister on 30 November 2020, he claimed that the extension of
her appointment from 1 April 2021 to 31 May
2021 had been “endorsed”
by the PPC.
3.15
So far the history and
current position regarding the acting chairpersonship of Ms Brown.
[4]
Was the Minsters’
appointment of Ms Brown as acting chairperson of the board of the NLC
lawful?
4.1
There is no dispute
that the Act does not expressly provide for the power of the Minister
to appoint an acting chairperson for the
board.
4.2
Counsel for the
Minister argued that such power must be inferred to have been implied
in the Act.
4.3
Implied powers are
generally inferred when their existence is necessary in order for a
functionary to exercise his or her express
powers. In this
regard, the court was referred to the following example from
Bloemfontein Town
Council v Richter
1938 AD 195
where the learned judges of appeal held at 227 “
I
have no hesitation in coming to the conclusion that … without
the right to remove the silt, the right and power of the
Municipality
[to supply the town of Bloemfontein with water] cannot be properly
enjoyed or exercised
”.
Hoexter in
Administrative
Law in South Africa
,
2
nd
ed at 44, with reference to this case, adds the following example of
necessity resulting in implied powers being inferred: “
the
power to make omelettes must necessarily include the power to break
eggs
”.
4.4
In
Chonco
v Minister of Justice and Constitutional Development
2010 (4) SA 82
(CC), Langa CJ used the term “auxiliary powers”
when he referred to unspecified powers “necessary” for
the President in relation to section 84(1) of the Constitution to
fulfill and discharge his functions as head of State and the National
Executive.
4.5
In the present case,
the power to appoint an acting chairperson is not “necessary”
for the Minister to fulfill his obligations
of appointing an actual
chairperson to the board. Rather, so the Minister argued, the
necessity is one for the functioning
of the board who “needs”
a chairperson. Without a chairperson, meetings cannot be called
in terms of section
4(1) of the Act, the chairperson’s casting
vote in case of a deadlock as provided for in section 4(4) of the Act
is lost
and the functioning of the board as prescribed by section 10
of the act may become compromised.
4.6
While all the
difficulties that the board may experience may be true, they are all
temporary in nature. The Act clearly also
did not envisage such
temporary situation to arise as one would have expected the exercise
of the express power to have been performed
timeously and prior to
the termination of the period of office of each successive
chairperson.
4.7
Another factor which
militates against the inferral of the implied or “auxiliary”
powers is the fact that the express
power provided to the Minister to
appoint a chairperson, is narrowly prescribed and provides for
parliamentary oversight or, at
least, participation.
Hoexter
(supra at 45) summarises the position in this regard as follows with
reference to
Winckler
v Minister of Correctional Services
2001 (2) SA 747
(C) and
Affordable
Medicines Trust v Minister of Health
[2005] ZACC 3
;
2006 (3) SA 247
(CC): “
A
court will be more inclined to find an implied power where the
express power is of a broad, discretionary nature – and less
inclined where it is a narrow, closely circumscribed power
”.
4.8
Moving away from the
issue of implied powers which are “necessary” to fulfill
the express powers, it was argued that
the power which the Minister
claims, is an “ancillary” power. Reliance was
placed in this regard on extracts
of academic writings quoted in
AmaBhungane Centre
for Investigative Journalism NPC and Another v Minister of Justice
and Constitutional Services and others (Media
Monitoring Africa Trust
and others as amici curiae) and a related matter
2021 (4) BCLR 349
(CC). However, the same author referred to
above,
Hoexter
,
also referred to in that judgment, explains that an ancillary power
can be inferred “…
if
the main purpose of the statute cannot be achieved without it”
.
An example was the ancillary power of the Industrial Court to
determine whether it has jurisdiction or not, without which
power it
could not otherwise function. See:
Nouwens
Carpets (Pty) Ltd v National Union of Textile Workers
1989 (2) SA 363
(N). In the present case, the Minister
did not need any ancillary power without which he could not appoint
an actual
chairperson. He only claims the existence of an
ancillary power as a result of a situation brought about by the PPC
and himself.
4.9
A further factor that
would militate against the inferral of the existence of such an
ancillary powers, would be if such a power
would contradict express
terms for the exercise of Ministerial power contained in a statute.
See:
City of Cape
Town v Real People Housing (Pty) Ltd
2010 (5) SA 196
(SCA) at [14]. In the present case, the
appointment of a chairperson, even in an acting capacity, without
nationwide canvassing
for nominations and without a “
transparent
and open process of considering persons so nominated
”
(as prescribed in section 3(3) of the Act), would not only be
contrary to the express terms of the Act but would, in fact
subvert
it.
4.10
Approaching the matter
on another tack, the argument on behalf of the Minister, was that the
power to make an acting appointment
“where a permanent
appointment is impossible” would be a legitimately implied
“primary” power of the Minister,
derived from the Public
Finance Management Act, 1 of 1999 (the PFMA). Schedule 3 of the
PFMA lists the NLC as one of the
“other public entities”
referred to in Chapter 6 of the PFMA. Section 46 of the PFMA
expressly makes the provisions
of Chapter 6 applicable to such
entities. This provides for accounting authorities, annual
budgets and financial reporting.
The section on which the argument
for the Minister relied, was Section 63(2) of the PFMA which provides
that “
The
executive authority responsible for a public entity under the
ownership control of the national or provincial executive must
exercise that executive’s ownership control powers to ensure
that the public entity complies with this Act and the financial
policies of that executive
”.
Section 63 falls in Chapter 7 and not Chapter 6. It
primarily deals with the financial responsibility
of executive
authorities of departments who must perform their statutory functions
within the limits of funds authorized by the
fiscus in terms of
Chapter 4. Insofar as this also extends to public entities
under the ownership control of the national
executive, “ownership
control” is in itself defined in the PFMA as meaning: “
the
ability … to govern the financial and operating policies of
the entity
in
order to obtain benefits from its activities
”
(my emphasis). The definition of control, is defined as further
including the ability to appoint or remove all or
the majority of the
members of the board, to appoint or remove that entity’s chief
executive officer, to cast all or the
majority votes at meetings of
the board or to control the voting rights at a general meeting of
that entity.
4.11
Contrary hereto, the
Act prescribes that at meetings of the board, the Minister shall have
no
right to vote (Section 4(5)); the board, and not the Minister, shall
appoint the Commissioner (Section 2B(1)); it is the board,
and not
the Minister who may remove the Commissioner (or even appoint an
Acting Commissioner) (Sections 2B(2) and 2C). The
board is
furthermore funded by allocations from monies contained in the
National Lottery Distribution Fund as provided for in Chapter
3 of
the Act. The net proceeds of the fund is distributed and
allocated in terms of Section 26 of the Act, principally for
charitable expenditure, charities and grants. There is no talk
of “benefits” for the State as shareholder such
as in the
case of State Owned Entities as contemplated in Section 63 (2) of the
PFMA. The need for “ownership control”
as
contemplated in that section of the PFMA is not only absent, but in
fact the opposite is true, the NLC should be run by independent
and
impartial control. This much is clear from a reading of the Act
as a whole and, in particular, Section 3 thereof referred
to above.
Insofar as the Minister has executive compliance oversight functions
in relation to the NLC and its board, those
are in prescribed in the
Act and not in the PFMA.
4.12
Insofar as Section 3(3)
of the PFMA proclaims that, in the event of inconsistency between the
PFMA and the Act, the PFMA prevails,
there is no inconsistency in
this case: the PFMA does not prescribe how members of boards of
State Owned Entities or any
of the constitutional institutions, major
public entities or “other public entities” listed in
schedules 1, 2 and 3
of the PFMA are appointed and neither does it do
so in respect of the NLC. A conflict would only arise if the
sections relating
to the finances of the NLC (Section 9) or the
auditing of its accounts (Section 12) or distribution in terms of
Chapter 3(2) of
the Act were in conflict with the PFMA (which they
aren’t).
4.13
The contention that the
PFMA in general or Section 63(2) thereof in particular would by
implication afford the Minister powers beyond
that expressly provided
for or otherwise limited in the Act, is therefore rejected.
4.14
As a last ditch
attempt, the Minister argued that he had acted “in substantial
compliance” with the Act when Ms Brown
was appointed.
This argument is not correct. None of the express terms set out
in Section 3(3) (quoted in paragraph
2.5 above), ensuring a
transparent and open process for the appointment of a chairperson
have been followed. Insofar as the
Minister seeks to rely on
the endorsement of his actions by the PPC, that is also misplaced.
He had appointed Ms Brown on
30 November 2020 before he had even
received the PPC’s views on his intention to do so and the
PPC’s reluctant endorsement
of the extension of her
appointment, only came on 31 March 2021. This could hardly
amount to substantial compliance with
the parliamentary oversight
provisions contained in Section 3(3) of the Act.
4.15
I therefore find that
the appointment of Ms Brown as acting chairperson by the Minister had
been outside the provisions of the Act
and beyond the powers of the
Minister.
4.16
The consequence of the
above finding, is that the “domino effect” contemplated
as follows in
Seale
v Van Rooyen NO and Others
;
Provincial
Government North West Province v Van Rooyen NO and Others
2008 (4) SA 43
(SCA) at [13] comes into effect: “
I
think it is clear from
Oudekraal
…. That if the first act is set aside, a second act that
depends on its validity on the first act must be invalid as the
legal
foundation for its performance was non-existent …
”
(the reference is to
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
2004 (6) SA 222
(SCA)).
4.17
For the extensions of
the acting appointment (on 31 January 2021 and 31 March 2021) to have
had any validity, the initial appointment
had to have been valid.
Once the domino of the initial appointment toppled then so did the
dominoes of the extensions.
The fact that the last domino,
being the extension from 31 March 2021 was “endorsed” by
the PPC, does not detract from
this is as “
a
power that is exercised without authority cannot be ratified after
the fact
”.
See:
AAA Investments
(Pty) Ltd v Micro Finance Regulatory Council and Another
[2006] ZACC 9
;
2007 (1) SA 343
(CC) at
[91]
.
4.18
Having elected to
proceed with both parts A and B of the notice of motion, it follows
from the above findings that the NLC is entitled
to the primary
relief sought, namely the review and setting aside of Ms Brown’s
acting appointment and any extensions thereof.
[5]
Appropriate remedy
5.1
The parties are in
agreement that, should the above be the finding of this court, just
and equitable relief such as that contemplated
in
inter
alia
Bengwenyama
Minerals (Pty) Ltd and Others v General Resources (Pty) Ltd and
Others
2011 (4) SA
113
(CC), would be that prayer 4 of Part A of the NLC’s Notice
of Motion be granted, authorizing the payouts of expenditure and
distribution of funds to charitable organisations as contemplated in
the NLC budget for 2020/2021 approved under the impugned
chairpersonship of Ms Brown on 26 January 2021.
5.2
What the parties are
not in agreement with each other, is whether such just and equitable
relief should result in the suspension
of the finding of invalidity
of Ms Brown’s acting appointment. The Minister argues
that this should be ordered so as
not to leave the NLC rudderless.
5.3
The order of suspension
is discretionary and may be the use of a Court’s “
remedial
power under the Constitution to ensure that just and equitable
constitutional relief is afforded to litigants
”.
See:
Estate Agency
Affairs Board v Auction Alliance (Pty) Ltd and Others
2014 (3) SA 106
(CC).
5.4
Should a suspension of
the determination of invalidity be granted as prayed for by the
Minister, it would mean that the functioning
of the board continues
as if nothing untoward had happened. While it may be correct
that this would not “rock the boat”
of the board, the
concerns regarding the captaining of its ship and the hand on the
tiller raised by the NLC remain: the result
would be that, contrary
to the statutory prescripts contained in section 3(3) of the Act and
the express intention of the Legislature
that the person chairing the
board should be one selected from the widest national pool as
possible, a selection has been made
by the Minister from the very
limited pool of existing board members. This selection has
further been limited by the Minister
exercising it unilaterally and
without the input of the PPC or without considering other members
than the member designated by
him.
5.5
The selection by the
Minister of the member previously designated by him and appointed in
terms of section 3(1)(b) of the Act, has
its own problems.
Contrary to the principle of impartiality and absence of conflicts of
interests, the affidavits indicate
that there is a danger of a
blurring of roles and the existence of conflicting loyalties or
perspectives. Not only will the
suspension result in a
situation where a person in a position of potential conflict is left
at the helm, but in a situation where
such a potentially conflicted
person even has a casting vote at board meetings. This could
never have been what the Act intended.
In circumstances where
the Minister has himself extensively in his answering affidavit
raised concerns about the running of the
National Lottery, I find
myself unable to agree that the proposed suspension would be just and
equitable in these circumstances.
5.6
Furthermore, on the
Minister’s own papers, the consequence of the finding of
invalidity of the acting appointment as far as
it pertains to the
running of the board would only endure for a short while.
Within a matter of scant weeks from date of
this judgment, the
“relevant committee of the National Assembly” will make
its recommendations as to a proposed chairperson
know to the Minister
whereafter the appointment contemplated in section 3(1)(a) of the Act
can take place. In the meantime,
the day to day operations of
the NLC under the stewardship of the Commissioner will continue,
expenditures will be paid and distributions
will continue to be made.
[6]
Costs
Having regard to the above findings and the
considerations which led thereto, I find no reason why the customary
rule that costs
follow the event, should not apply.
[7]
Order:
1.
The decision of the
Minister of Trade, Industry and Competition to appoint Ms Zandile
Brown as acting chairperson of the National
Lotteries Board with
effect from 1 December 2020 and all extensions of that appointment
are declared invalid and are hereby reviewed
and set aside.
2.
The National Lotteries
Commission is authorized to continue to effect payments for
expenditures and the distribution of funds as
contemplated in the
annual budget of 2020/2021 approved on 26 January 2021.
3.
The said Minister,
cited in his capacity as such as first respondent, is ordered to pay
the costs of the application, including
the costs of two counsel.
N
DAVIS
Judge
of the High Court
Gauteng Division, Pretoria
Date of
Hearing: 30 April 2021
Judgment
delivered: 7 May 2021
APPEARANCES:
For
the Applicant:
Adv E C Labuschagne SC together with
Adv R Ferguson and
Adv R More
Attorneys for the
Applicant:
Maluleke Inc t/a Maluks Attorneys, Johannesburg
c/o Hahn & Hahn,
Pretoria
For
the First Respondent:
Adv N H Maenetje SC together with
Adv M Stubbs
Attorney
for the First Respondent: Cheadle
Thompson & Haysom Inc.,
Pretoria