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[2021] ZAMPMBHC 39
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Ithuba Holdings (Pty) Ltd v Lottostar (Pty) Ltd and Others (A46/2020) [2021] ZAMPMBHC 39 (30 August 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(MPUMALANGA
DIVISION, MBOMBELA)
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: YES
REVISED:
YES
31/08/2021
CASE
NO: A46/2020
In
the matter between:
ITHUBA
HOLDINGS (PTY)
LTD
Appellant
and
LOTTOSTAR
(PTY)
LTD
First Respondent
MPUMALANGA
GAMING BOARD
Second Respondent
BETTING
WORLD (PTY)
LTD
Third Respondent
NATIONAL
LOTTERIES COMMISSION
Fourth Respondent
JUDGMENT
Coram
:
MASHILE J
et
ROELOFSE AJ
:
PROCEDURAL
ISSUE
[1]
T
his is a full Court appeal following the Supreme Court of
Appeal (“SCA”) granting the Appellant (“Ithuba”)
leave to appeal to this court. The appeal was heard on 11 June 2021
by the court constituted by Mashile J, Sigogo and Roelofse
AJJ. On 31
July 2021, sadly Sigogo AJ passed away due to COVID-19 complications
leaving a vacancy amongst the members of the Court.
[2]
Section 14(5) of the Superior Courts Act 10 of 2013 (“
Superior
Courts Act&rdquo
;) makes a provision for instances where a vacancy
amongst the members of a court arises prior to the finalisation of a
judgment.
It provides:
“
If,
at any stage during the hearing of any matter by a full court, any
judge of such court is absent or unable to perform his or
her
functions, or if a vacancy among the members of the court arises,
that hearing must—
(a)
if the remaining judges constitute a
majority of the judges before whom it was commenced, proceed before
such remaining judges;
or
(b)
if the remaining judges do not
constitute such a majority, or if only one judge remains, be
commenced
de
novo,
unless all the parties to
the proceedings agree unconditionally in writing to accept the
decision of the majority of the remaining
judges or of the one
remaining judge as the decision of the court.”
[3]
Roelofse AJ and I remained and constituted the majority of judges
before whom the
appeal could have commenced. Notwithstanding the
provisions of
section 14(5)
of the
Superior Courts Act, the
views of
the parties were sought. The First (“Lottostar”) did not
wish to make any submissions. Ithuba, the Second
Respondent (“the
Board”) and the Fourth Respondent (“the Commission”)
informed the court that they had
no objection if Roelofse AJ and I
delivered the judgment. The third respondent (“Betting World”)
proffered no views.
The Court resolved to proceed to consider the
matter and to deliver this judgment.
INTRODUCTION
[4]
Mphahlele J, as she then was and sitting as a court of first
instance, dismissed an
application for a declaratory order and
interdictory relief brought by the Commission and Ithuba against
Lottostar. The Court
a quo
upheld one of the
points
in
limine
raised by the Board. In view of its conclusion on the
point in limine
, the Court
a quo
probably considered it
unnecessary to proceed to adjudicate over the remaining
point
in limine
and the merits of the matter. Ithuba applied for
leave to appeal. The Court
a quo
refused leave. Ithuba
petitioned the SCA hence this appeal is with leave of the SCA to the
Full Court.
[5]
The
point
in
limine
upheld by the Court
a
quo
[1]
concerns the requirement found in Section 41(3) of the Constitution
of the Republic of South Africa 1996 (the Constitution”),
which
provides that
Organs
of State involved in intergovernmental disputes must make every
reasonable effort to settle them by means of mechanisms and
procedures provided for that purpose and must exhaust all other
remedies before approaching courts to resolve them. In terms of
Section 41(4) if a court is not satisfied that the Organs of State
involved had adhered to the provisions of Section 41(3) prior
to
approaching a court, it is entitled to send the dispute back to the
parties concerned to try to resolve their controversy in
line with
the dispute resolution mechanisms prescribed in the Intergovernmental
Relations Framework Act, 13 of 2005 (“the
Framework Act”).
[6]
The provisions of Section 41 of the Constitution find expression in
the Framework
Act. Principally, the Court
a quo
held that
Ithuba, although not an Organ of State, fulfils and discharges duties
of the Commission, which it characterised as an
organ of State. As
such, reasoned the Court
a quo
, Ithuba was basically an
extension of the Commission. The dispute being between Ithuba and the
Board, amongst others, observance
of the provisions of Section 41(3)
of the Constitution and the Framework Act was mandatory. As a result
of the finding, the Court
a quo
directed the parties to
endeavour to resolve the dispute as contemplated in Section 41(3) of
the Constitution and the Framework
Act.
[7]
In consequence of the finding of the Court
a quo
as aforesaid
and lack of consideration of the other issues that were before it,
the matters that were before the Court
a quo
persisted before
this Court and require its attention. Tersely, these are:
firstly
,
whether or not the Appellant is an Organ of State for the purpose of
section 41 of the Constitution and the Framework Act;
secondly
,
whether or not the dispute between the parties is an
intergovernmental dispute;
thirdly
, whether or not the issue
of non-joinder arise; and
fourthly
, whether or not the First
Respondent’s business activities, insofar as it accepts bets on
the outcome of any lottery, are
unlawful.
[8]
On the day of hearing of the appeal, the Court had to make an
immediate decision on
two options. The first option was to adjudicate
over the
point in limine
and depending on whether or not the
appeal was upheld, remit the matter to the Court
a quo
to hear
the other issues. The second option was to hear the
point in
limine
together with the merits and resolve the matter as if the
Court
a quo
had pronounced on all the relevant issues. The
Court considered the choices and settled for the latter. The choice
was inspired
by the adequacy of the information at its disposal which
it could utilise to decide all the issues and the need to expedite
its
decision in view of a substantial period having lapsed without
finalisation.
GROUNDS
OF APPEAL
[9]
The grounds challenging the judgment and order of the Court
a quo
is that it erred in law and/or in fact in:
9.1
Holding that the Commission and Ithuba, as organs of State, by
launching the application,
did so prematurely and in contravention of
the provisions of Section 41 of the Constitution and the Framework
Act;
9.2
Finding that firstly, Ithuba was an Organ of State, secondly, it was
performing duties on
behalf of the State and thirdly, it should be
regarded as an Organ of State for purposes of the Framework Act;
9.3
Failing to have regard to the definition of an Organ of State as
described in Section 1
of the Framework Act;
9.4
Finding that Ithuba was bound to follow a dispute resolution process
described in the Framework
Act;
9.5
Relying on the judgment of
Allpay
Consolidated Investments Holdings (Pty) Ltd v Chief Executive
Officer, South African Social Security Agency
[2]
;
9.6
Failing to take into account that Lottostar against which relief is
sought, is not an Organ
of State for purpose of Section 41 of the
Constitution and the Framework Act;
9.7
Upholding the
point
in limine
and directing the parties
to take steps to resolve the dispute in accordance with Section 41 of
the Constitution and the Framework
Act, in consultation with the
Minister of Trade and Industry.
BACKGROUND
[10]
The salient background facts from which this matter traces its
origins are that
Ithuba holds an exclusive licence
to operate the National Lottery in terms of section 13 of the
Lotteries Act 57 of 1997 (“the
Lotteries Act&rdquo
;). The
exclusivity of the license of Ithuba derives from a deliberate scheme
in terms of which, at any given time, there will only
be one operator
of the National Lottery. The objective of the scheme is to strike a
balance between the advantages of gambling
and its potential
disadvantages.
[11]
In consequence, Ithuba is bound by a series of obligations stemming
from the regulatory scheme.
One of the obligations imposed on Ithuba
is that over the eight-year period of its Licence it is expected to
contribute 27% of
its ticket sales revenue to the National Lotteries
Distribution Trust Fund (“the Fund”). The contributions
to the Fund
are also used to fund good causes. It has also invested
heavily in establishing the infrastructure necessary for the
operation
of the National Lottery.
[12]
The exclusive right of Ithuba to operate the National Lottery is
statutorily protected. To this
end,
Sections 57(1(b)
and
57
(2)(g) of
the
Lotteries Act are
significant to note. I proceed to cite both
below in the sequence described:
12.1
“57(1)(b) a person will be guilty of an offence if he or she
“
conducts, facilitates, promotes or derives any benefit from
a lottery, promotional competition or sports pool . . . unless such
lottery, promotional competition or sports pool is or has been
authorised by this Act or any other law.”;
12.2
“57(2)(g) a person will be guilty of an offence if he or she
“
conducts, organises, promotes, devises or manages any
scheme, plan, competition, arrangement, system, game or device which
directly
or indirectly provides for betting, wagering, gambling or
any other game of risk on any outcome of any lottery unless
authorised
by or under this Act or any other law.”.
[13]
It is not disputed that Lottostar and Betting World (Pty) Ltd
(“Betting World”),
which was granted leave to intervene
as the third respondent in the Court
a quo
, accept bets on the
outcome of foreign lottery draws, including on the outcome of the
South African National Lottery. In making
these offerings, both rely
on their bookmaker licences issued by the Board in terms of the
Mpumalanga Provincial Gambling Act 5
of 1995 (“the Provincial
Gambling Act”).
[14]
The Provincial Gambling Act does not, however, empower the Board to
authorise bookmakers to accept
bets on the outcome of lottery draws.
This is because the regulation of lotteries is a matter reserved for
the exclusive legislative
competence of Parliament. Ithuba alleges
that as a result, the offerings made by Lottostar and Betting World
are unlawful. Ithuba
claims further that from a player’s
perspective, the experience of placing bets on the outcome of lottery
draws through Lottostar
and Betting World is almost indistinguishable
from the experience of playing the National Lottery through Ithuba.
[15]
Both Lottostar and Betting World therefore compete for the customers
of Ithuba but unlike the
latter, they carry no legislative
obligations that come with the
Lotteries Act insofar
as they do not
make contributions to the Fund. Their obligations extend only to
payment of tax at a rate of 1.5% of their ticket
sales revenue. These
less burdensome obligations, alleges Ithuba, allow Lottostar and
Betting World to offer higher prize pay-outs
and more regular prizes
to players, giving them an unfair advantage over Ithuba. It was
against these background facts that the
application that served
before the Court a quo was conceived.
ISSUES
[16]
The questions for adjudication on appeal are:
16.1
The correctness of the decision of the Court
a quo
upholding
the preliminary objection that in terms of Section 41(3) of the
Constitution and the Framework Act organs of State should
endeavor by
all means to resolve their disputes by employment of the alternative
dispute resolution measures described in the Framework
Act prior to
approaching courts;
16.2
If the decision of the Court a quo as outlined above is incorrect,
the question that arises is, should this
Court entertain the
remaining preliminary point of non-joinder and/or the merits of the
application instead of referring the matter
back to the Court, which
has already heard oral argument on both those matters;
16.3
Was the Court
a quo
correct
to characterize
the dispute between Ithuba and the Board as an
intergovernmental dispute;
16.4
The lawfulness of the business activities of Lottostar in accepting
bets on the outcome of any lottery.
LEGAL
FRAMEWORK
LEGISLATIVE
PROVISIONS
[17]
In their endeavor to assist this Court to arrive at a correct
decision, the parties have referred
to various statutory provisions
contained mainly in four pieces of legislations, the Constitution,
Framework Act,
Lotteries Act and
Provincial Gambling Act. The
provisions of the Sections from the different Acts that I have fully
described
supra
will
not be repeated below but reference to them will probably be made
during analysis. The starting point has to be Section 41
of the
Constitution, which is headed: PRINCIPLES OF CO-OPERATIVE GOVERNMENT
AND INTERGOVENMENTAL RELATIONS
:
“
(1)
All spheres of government and all organs of state within each sphere
must:-
(a)
preserve the peace, national unity
and the indivisibility of the Republic;
(b)
secure the well-being of the people of the Republic;
(c)
provide effective, transparent, accountable and coherent government
for the Republic
as a whole;
(d)
be loyal to the Constitution, the Republic and its people;
(e)
respect the constitutional status, institutions, powers and functions
of government in the
other spheres;
(f)
not assume any power or function except those conferred on them in
terms of
the Constitution;
(g)
exercise their powers and perform their functions in a manner that
does not encroach on
the geographical, functional or institutional
integrity of government in another sphere; and
(h)
co-operate with one another in mutual trust and good faith by:-
(i)
fostering friendly relations;
(ii)
assisting and supporting one another;
(iii)
informing one another of, and consulting one another on, matters of
common interest;
(iv)
co-ordinating their actions and legislation with one another;
(v)
adhering to agreed procedures; and
(vi)
avoiding legal proceedings against one another.
(2)
An Act of Parliament must:-
(a)
establish or provide for structures and institutions to promote and
facilitate intergovernmental
relations; and
(b)
provide for appropriate mechanisms and procedures to facilitate
settlement of intergovernmental
disputes.
(3)
…
(4)
…”
[18]
Section 45(1) of the Framework Act dealing with judicial proceedings
fortifies the provisions
of Section 41(3) of the Constitution and
provides that n
o government or Organ of
State may institute judicial proceedings in order to settle an
intergovernmental dispute unless the dispute
has been declared a
formal intergovernmental dispute in terms of section 41 and all
efforts to settle the dispute in terms of this
Chapter were
unsuccessful.
[19]
Section 239 of the Constitution describes organs that are Organs of
State. To this end, it provides:
"(a)
any department or state or administration in the national, provincial
or local sphere of
government; or
(b)
any other functionary or institution -
(i)
exercising a power or performing a
function in terms of the Constitution or a provincial constitution;
or
(ii)
exercising a public power or
performing a public function in terms of any legislation, but does
not include a court or a judicial
officer".
[20]
The meaning of Organ of State was decisive in persuading the Court
a
quo
to direct the parties to first
attempt to resolve the dispute in line with the provisions of Section
41 of the Constitution and
the Framework Act. As such, it is vital to
scrutinise the different statutory provisions to establish their
correct interpretation.
Depending on the interpretation that this
Court will ascribe to them, Section 41 of the Constitution and the
Framework Act may
or may not find application. According to the
Framework Act, the meaning of an Organ of
State is as defined in section 239 of the Constitution,
excluding
those listed in section 2(2)
. Section 2
of the Framework Act prescribes the institutions to which the Act
applies and those to which it does not and it stipulates:
“
Application
of Act
(1)
This Act applies to –
(a)
the national government;
(b)
all provincial governments; and
(c)
all local governments.
(2)
This Act does not apply to –
(a)
Parliament;
(b)
the provincial legislatures;
(c)
the courts and judicial officers;
(d)
any independent and impartial
tribunal or forum contemplated in section 34 of the Constitution and
any officer conducting proceedings
in such a tribunal or forum;
(e)
any institution established by
Chapter 9 of the Constitution;
(f)
any other constitutionally
independent institution; and
(g)
any public institution that does not
fall within the national, provincial or local sphere of government.”
CASE
AUTHORITY
[21]
Lottostar and the Board have referred this Court to
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
[3]
.
I have perused the judgment but could not decipher its significance
to the arguments before this Court other than the definition
of an
Organ of State. It follows that this Court will not derive any
benefit by making further reference to it. Perhaps I should
add that
all Organs of State generally derive their legitimacy and exercise
public power based on legislation but not all of them
are considered
Organs of State as intended in Section 41(3) of the Constitution and
the Framework Act.
The
Independent
Electoral
Commission v Langeberg Municipality
[2001] ZACC 23
;
2001
(3) SA 925
(CC)
,
to which I will refer later in this judgment is an illustration of
this point.
[22]
The above said, the same parties’ reference to
AAA
Investments
(Pty)
Ltd
v
Micro
Finance
Regulatory
Council
and
Another
[4]
ought
to receive this Court’s attention. Lottostar and the Board have
referred to Paragraph 22 of the judgment where the following
is
stated:
“
[22]
It is necessary to focus on the
reasoning that led to the conclusion that the Council exercised
public power. The High Court observed
correctly that private
institutions were increasingly being used to perform state
functions65
and,
relying on the definition of an organ of state in the Constitution,66
reasoned
that the nature of the functionary
was of little consequence. On this basis, the crucial inquiry for the
High Court was whether
the Council exercised public power because, if
this was so, the fact that it was authorised by its memorandum and
articles of association
would make no difference.”
[23]
Reference to the AAA Investment case
supra
is misplaced. The
Applicant in the AAA Investment case is undeniably an organ of State
but it cannot be readily brought under the
fold of Section 41(3) of
the Constitution and the Framework Act. An explanation of the
statement of the Constitutional Court in
the preceding paragraph is
simply that one must not look at the nature of the functionary and
necessarily make conclusions predicated
thereon but at times the
public power that such functionary exercises may be the determining
factor.
[24]
It will become clear as this judgment unfolds that both the
Commission and Ithuba are not Organs
of State as contemplated in both
Section 41(3) and the Framework Act. The relevance of AAA Investment
to this matter is as such,
not only doubted but it is misguided.
[25]
To turn back to the Langeberg Case mentioned above. To the extent
that one of the questions that
the Constitutional Court had to decide
pertained to whether or not the municipality was under obligation to
observe the provisions
of Section 41(3) and the Framework Act, this
case is ‘on all fours’ with the case
in casu
. In
Langeberg the Court held that while the Independent Electoral
Commission exercised public power and performed public functions,
it
did not mean that it was an Organ of State in the sense envisaged in
the Constitution and the Framework Act.
[26]
The Constitutional Court accepted that the Independent Electoral
Commission was established to
fulfil a public mandate by national
legislation but that being so it still remained independent from
Government notwithstanding
that its continued existence and
sustenance depended solely on Government. The Langeberg Municipality
was therefore not obliged
to first exhaust all efforts to settle the
dispute with the Independent Electoral Commission prior to
approaching court because
the latter was not an Organ of State.
[27]
A case that followed on the footsteps of Langeberg Municipality
supra
is
Education
for all and Others v Minister of Basic Education and Others
[5]
.
The
pertinence of this case warrants this Court to cite Paragraphs 33 and
34, which deal with the definitions of Organ of State
and government
and intergovernmental disputes, in full:
“
[33]
In my view the definitions of 'government' and 'intergovernmental
dispute' in s 1 are dispositive of this
issue. A government means the
national, a provincial or a local government. An intergovernmental
dispute means a dispute between
different governments or between
organs of state from different governments, arising from the sources
identified in the definition.
All the parties accepted that a school
governing body is an organ of state as defined in s 239 of the
Constitution. But as defined
in IRFA, the expression 'organ of state'
bears the meaning ascribed to that expression in s 239 of the
Constitution, excluding
those listed in s 2(2) of IRFA. One of the
exceptions, listed in s 2(2)(g), to which IRFA is expressly stated
not to apply, is
a public institution that does not fall within the
national, provincial or local sphere of government;
[34]
A school governing body manifestly does not fall within the sphere of
any of those governments.
As its preamble makes clear, IRFA was
enacted to give effect to s 41(2) of the Constitution, which calls
for an Act of Parliament
to establish or provide structures and
mechanisms to promote and facilitate intergovernmental relations and
to provide appropriate
mechanisms and procedures to facilitate the
settlement of intergovernmental disputes. Section 40(1) of the
Constitution says government
in the Republic is constituted as
national, provincial and local spheres of government. Sections 40 –
41 of the Constitution
are thus directed at spheres of government and
organs of state within each sphere. An intergovernmental dispute is
thus a dispute
between parties that are part of government, in the
sense of being either a sphere of government or an organ of state
within a
sphere of government.”
ANALYSIS
WAS
THE LAUNCHING OF THE APPLICATION BY THE COMMISSION AND ITHUBA IN
VIOLATION OF SECTIONS 41(3) OF THE CONSTITUTION AND 45 OF THE
FRAMEWORK ACT
[28]
If one has regard to the meaning of an Organ of State as described
above, it is manifest that
the Commission is not an Organ of State.
That conclusion is dispositive of the argument of Lottostar and the
Board that for purposes
of operating the national lotteries, Ithuba
is an extension of the Commission as it is an entity through which
the Commission discharges
or performs its public duties. Like in the
Education for all case
supra
, it is common cause that the
Commission is an Organ of State as defined in Section 239 of the
Constitution. That said, the definition
of Organ of State' bears the
meaning assigned to that it in Section 239 of the Constitution,
excluding those listed in Section
2(2) of the Framework Act. One of
the exceptions, listed in Section 2(2)(g), to which the Framework Act
is expressly stated not
to apply, is a public institution that does
not fall within the national, provincial or local sphere of
government. The attempt
by Lottostar to seek to distinguish between a
public institution and an Organ of State is unnecessary and in any
event misguided
because the Section is concerned with the definision
of an Organ of State and not of a public institution. The Commission
in this
matter is a public institution referred to in Section 2(2)(g)
of the Framework Act. Thus, paying attention to the provisions of
Section 4 alone, as does the Board, without examination of those of
Section 2 of the Framework Act could be misleading.
[29]
The Commission is in a similar position as the School Governing Body
in the Education for all
case in that it is a public institution that
does not fall within the national or provincial or local sphere of
government. As
such and inexorably, Ithuba could not have been
executing functions of an Organ of State when fulfilling its mandate
as entrusted
to it by the Commission. This Court’s conclusion
on this question means that it would have been of no consequence even
if
the dispute was between the Board and both the Commission and
Ithuba because while the Board is understandably an Organ of State,
its opponents are not.
[30]
The decision of the Court as described above means that even if it
were to be assumed that the
Board has a direct and substantial
interest in the dispute, especially one that would require it to
defend itself, neither Ithuba
nor the Commission can be said to have
disregarded the dispute resolution provisions contained in Section
41(3) of the Constitution
and the Framework Act. The dispute is
between two private entities, Ithuba and Lottostar. In the
circumstances, the Court
a quo
erred in characterizing the
dispute as an intergovernmental one because both Lottostar, on the
one hand, and Ithuba and the Commission,
on the other, are not Organs
of State. As such, the parties were not prematurely before court and
should not have been sent away
to resolve their controversy as
contemplated in Section 41(3) of the Constitution and the Framework
Act.
SHOULD
THIS COURT ENTERTAIN THE REMAINING POINT
IN LIMINE
ON
NON-JOINDER AND THE MERITS OF THE APPLICATION INSTEAD OF REFERRING
THE MATTER BACK TO THE COURT
A QUO
[31]
It is trite that ordinarily, where a court disposes of a matter on a
point in limine
and does not address merits at all, a court
sitting as one of appeal should be wary to deal with the merits. This
is generally
so because it would be considering the matter without
the benefit of the views of the Court
a quo
. In those
circumstances, it is accepted that it is idyllic to remit the matter
back to the Court
a quo
for decision on the merits. This was
the approach adopted by Lottostar and the Board. Betting World was
somewhat indifferent insofar
as it did not have any intransigent
stance on the question of remission.
[32]
Section 19
of the
Superior Courts Act is
headed:
Powers
of Court on Hearing of Appeals. It provides that:
“
The
Supreme Court of Appeal or a Division exercising appeal jurisdiction
may, in addition to any power as may specifically be provided
for in
any other law -
(a)
(b)
(c)
(d)
confirm, amend or set aside the decision which is the subject of the
appeal and render any
decision which the circumstances may require.”
[33]
The rule as described above is not inflexible and a court has
discretion whether or not to remit.
On the date of hearing, this
Court took a short adjournment during which, acting in terms of
Section 19(d) of the Superior Court
Act, decided that the balance of
convenience and interest of justice weighed heavily in favour of the
Court hearing the merits
and making a decision without remitting it
back to the Court
a quo.
Factors that the Court considered
included, among others, the length of time that this case has taken
to get here and the enormous
legal expenses that have been incurred
by the parties to this litigation. Moreover, the Court had been
exposed to all the material
that served before the Court
a quo
and everyone involved was ready and willing to present argument.
[34]
A referral of the matter back to the Court
a
quo
to decide on the remaining
point
in limine
and the merits would only
perpetuate the status quo. If the actions of Lottostar and Betting
World of taking bets on the outcome
of lottery draws mean that the
two are deriving substantial financial free benefit from
infrastructure to which they did not make
any financial contribution
and such actions are later found to be unlawful, Ithuba will have
incurred inestimable financial losses
that may or may not be
recoverable. Accordingly, the balance of convenience and interest of
justice were skewed in favour of this
Court continuing to hear both
the remaining
point in limine
and the merits.
[35]
Before I conclude on the subject, I need to mention that Lottostar
makes the point that the dispute
is one between the Commission and
the Board both of which are Organs of State, the one in the national
and the other in the provincial
sphere of Government respectively.
The dispute between them concern the constitutional status, powers or
functions of any of those
Organs of State as contemplated in Section
167(4)(a) of the Constitution in respect of which the Constitutional
Court has
exclusive jurisdiction
.
The interpretation of the Commission of the Gambling Laws is in
conflict with the Board on this issue. The Commission has now
on
appeal left Ithuba to fight the dispute alone in circumstances where
the matter was not fully canvassed in the papers. For this
reason,
Lottostar feels that it would be appropriate to refer the matter back
to the Court a quo to be dealt with as intended in
Section 19(c)
of
the
Superior Courts Act, 10 of 2013
.
[36]
Section 167(4)(a) of the Constitution provides that ‘only the
Constitutional Court may
decide disputes between organs of state in
the national or provincial sphere concerning the constitutional
status, powers or functions
of any of those organs of state’.
My understanding of the argument of Lottostar is that this Court
lacks jurisdiction to
entertain this matter because the controversy
is between two Organs of State, the Commission/Ithuba and the Board,
the one in the
national and the other in the provincial sphere of
government respectively. This argument will not take this Court
anywhere. The
decision that the dispute is not between two Organs of
State necessarily denotes that Section 41(3) and the dispute
resolution
mechanisms laid down in the Framework Act do not find
application. As such, this matter does not fall under the exclusive
jurisdiction
of the Constitutional Court.
NON-JOINDER
[37]
Here Lottostar, supported by Betting World, argued that the main
relief declaring that a bookmaker,
holding a valid bookmaker’s
license under Provincial Gambling Laws, in this instance under the
Provincial Gambling Act, may
not offer bets on the outcome of
lotteries sought by Ithuba, will directly and substantially affect:
37.1
Each and every Provincial Gambling Authority, insofar as the scope
and ambit of its constitutional status,
powers or functions are
concerned;
37.2
Each and every other entity in the National Sphere of Government,
concerned with the regulation of the Gambling
Industry (as
effectively conceded by Ithuba; and
37.3
Each and every person holding a bookmaker’s license under the
Provincial Gambling Laws.
[38]
The essence of the argument of Lottostar and Betting World was that
the declaratory order would
constitute a judgment
in
rem
for
it would bind all bookmakers
holding
a valid bookmaker’s license under Provincial Gambling Laws.
While it is correct that a judgment
in
rem
binds all persons whereas a judgment
in
personam
does not, this court is of the view that the relief sought by the
Commission, if granted, does not constitute a judgment in rem
and
would therefore not bind all bookmakers. This is why. In
Tshabalala
v Johannesburg City Council
[6]
,
the following was said about a judgment
in
rem
:
“
As
pointed out by Spencer Bower, sec. 243, judgments declaring the
legality, or the illegality, of a tax, are decisions in rem,
affecting as they do both the political and the financial status of
all citizens on whom the tax is imposed. It is, therefore,
not the
status of the tax that is affected. The second case referred to by
counsel for the appellant is Wakefield Corporation v
Cooke,
1904 A.C.
31
H.L. There a resolution passed in 1901 by an urban authority that
certain repairs to a street should be apportioned among the owners
of
adjoining premises was objected to by the respondents. It was
contended that in 1898 a court of summary jurisdiction had determined
that the same street was a highway repairable by the inhabitants of
Wakefield at large and that the matter was therefore res judicata.
The objection was sustained by a court of summary jurisdiction
and this decision, which was the subject of successive appeals,
was
finally confirmed by the House of Lords holding that the 1898
determination was a judgment in rem and conclusive as to the
status
of the street. Here again it was not the status of the resolution but
the status of the street that was determined. Mr.
Unterhalter was
unable to refer the Court to any case where a declaration of validity
or invalidity of a by-law was held to operate
as a judgment in rem
and I have not been able to find any such authority. Indeed, an
untenable position would arise if a palpably
ultra vires by-law,
declared to be valid by a magistrate, should preclude every other
magistrate with jurisdiction in the area
of the municipality and also
the Division of the Supreme Court of the Province from holding that
the by-law is invalid. If such
were the case the magistrate would in
effect confer on the municipality legislative powers beyond the scope
of the particular enabling
ordinance.”
[39]
The dictum in
Tshabalala
was interpreted as follows by the Constitutional Court in
Airports
Company South Africa v Big Five Duty Free (Pty) Limited and Others
[7]
at para [2]: “
A
judgment in rem determines the objective status of a person or
thing.”
[40]
Lottostar stated that the mere fact that Betting World which, like
Lottostar, holds a valid bookmaker’s
license, was permitted to
intervene as a result of its direct and substantial interest in the
relief sought, constitutes sufficient
proof that all other parties
operating and running similar businesses should be joined to this
dispute. To this end, this Court
was referred to the matter of
ABSA
Bank Limited v Naude NO and others
[8]
where it was stated that if an order or judgment cannot be sustained
without necessarily prejudicing the interests of third parties
that
had not been joined, then those third parties have a legal interest
in the matter and must be joined. For this reason, Lottostar
submitted that the non-joinder defence is valid and should be upheld,
the matter remitted back to the Court
a
quo
and all the necessary parties joined to the proceedings.
[41]
The starting point to mention in this regard is that it is not any
interest that a party may
have in a matter that will entitle it to be
joined to proceedings. It will be instructive to refer to
United
Watch & Diamond Co (Pty) Ltd v Disa Hotels Ltd and Another
[9]
where the Court quoted from what was said in an earlier case of
Henri
Viljoen
(Pty.) Ltd. v Awerbuch Brothers
[10]
,
where the court, following a profound scrutiny of authorities on the
meaning of direct and substantial interest, concluded that
it entails
the following: “. . .
an
interest in the right which is the subject-matter of the litigation
and . . . not merely a financial interest which is only an
indirect
interest in such litigation”
.
This position persists to date. The Absa v Naude case above does not
depart from the principles espoused in the cases referred
to above.
That said and as will be seen below, it does not apply to these facts
as Lottostar would have this Court believe.
[42]
To determine the interest, a court examines the right which is the
subject matter of the litigation
and not merely a financial interest,
which may be an indirect interest in such litigation.
[11]
The question is, will all the other parties in similar position as
Lottostar be legally prejudiced by the order that this Court
may
grant refusing the proposed joinder? Both the declarator and the
interdict are sought against Lottostar and not the Board nor
Betting
World and whoever else. Seen in this light, it is hard to appreciate
the direct and substantial interest that all these
other parties in
similar position as Betting World may have in the litigation between
Lottostar and Ithuba.
[43]
In support of Lottostar, Betting World asserted that joinder is
necessary but stopped short of
giving an undertaking that it would be
bound by the order of this Court on the very subject. The question
is, how can Betting World
claim that it would be adversely affected
if it fails to acknowledge that the order will affect it? That
refusal to make the undertaking
speaks volumes – it is
indicative that it will not be prejudicially affected by the order of
this Court. If this is so, I
cannot come to terms with how any other
party in a similar position will be adversely affected. As such, they
cannot be joined.
The argument by Betting World that the order that
the Court will grant will be
in rem
as opposed to
in
personam
cannot hold because the effect of the resultant order
will be limited to Lottostar.
[44]
Stripped of all the verbiage, an order in favour of Ithuba will not
be enforceable against Betting
World. This is why Betting World would
not guarantee that such order would, as a matter of course, be
applicable to it. Surely,
it is quite evident that the relief is
formulated in a manner that if this Court were to grant an order in
favour of Ithuba, that
order cannot be enforced against a party
conducting similar business elsewhere in this Province let alone in
all the other provinces.
No party therefore other than Lottostar has
any legal interest in this matter. The principles laid down by the
cases dealing with
n rem and in personam orders referred to by
Betting World are correct but are inappropriate for this situation.
The finding of
this Court that any order that it may grant against
Lottostar will be in personam obviates the need to extensively deal
with the
cases mentioned by Betting World. In the result, the
non-joinder defence ought to fail.
MERITS
[45]
The application that served before the Court
a
quo
was founded on the continued
infringement of
Sections 57(1)
and
57
(2)(g) of the
Lotteries Act by
Lottostar and Betting World, which was permitted to join the
proceedings following its successful application to that end.
Section
57(1)
of the
Lotteries Act provides
that:
“
Any
person who –
(a)
participates in; or
(b)
conducts, facilitates, promotes or
derides any benefit from the lottery, promotional competition or
sports pool, shall, unless such
lottery, promotional competition or
sports pool is or has been authorised by or under this Act or any
other law be guilty of an
offence.”
[46]
Section 57(2)(g) lays down that:
“
Any
person will be guilty of an offence if he or she –
conducts,
organises, promotes, devises or managers any scheme, plan,
competition, which directly or indirectly provides for betting,
wagering, gambling or any other game of risk on any outcome of any
lottery unless authorised by or under this Act or any other
law.”
[47]
Lottostar has been accused of taking fixed odds bets on the outcome
of foreign lotteries. Lottostar
does not contest that it does so but
does not believe that doing so contravenes Section 57(1)(a) or (b) or
Section 57(2)(g)
of the
Lotteries Act as
described above. It is
common cause that neither the
Lotteries Act nor the
National Gambling
Act allows Lottostar to engage in the activities defined here.
Lottostar, backed by Betting World, asserts that
its conduct is
permitted by the provisions of the Provincial Gambling Act.
[48]
The argument is that the bookmakers’ license of Lottostar
authorises it to engage in the
conduct that Ithuba brands unlawful.
The license sanctions. So continues the argument, Lottostar to take
bets on contingency, which
could incorporate outcome of a foreign
lottery. This approach is fallacious because it is clear from
Schedule 4 of the Constitution
that unlike in the case of gambling,
the Constitution does not give any concurrent competency to a
provincial legislature insofar
as lotteries are concerned. If the
provincial legislature lacks the competency to allow the conduct of
Lottostar, it is inconceivable
that Lottostar can claim to derive
power to engage in those activities from a source that naturally does
not have it.
[49]
Betting World has contended that while it is correct that a
provincial legislature cannot authorise
a party to operate a lottery,
it can nonetheless allow such a party to take bets on the outcome of
a lottery. Ithuba countered
this assertion by reference to the
definition of gambling in the Provincial Gambling Act, which
describes it as the playing of
any gambling game, bet or wage on any
lawful event excluding any lawful lottery or sports pull. I must
agree with Ithuba that the
definition of gambling as aforesaid lays
to rest the argument advanced by Betting World.
[50]
The second criticism of Betting World by Ithuba is that an endeavour
to distinguish between operation
of a lottery and taking bets on the
outcome of a lottery emasculates the very purpose of the scheme. The
objective of the scheme
was, and continues to be to have only one
lottery controlled by national legislation, the
Lotteries Act, in
terms of which one party is appointed and granted a license for a
period of eight years. The licensee collects money from which
it must
contribute 27% of it to projects perceived to be for good cause.
Accordingly, if parties who have no obligation to make
contribution
towards good cause projects, like Ithuba does, are allowed to take
bets on the outcome of a lottery, it brings down
the whole
arrangement. This could not have been the intention of the
legislature and the argument is rejected as devoid of any
merit.
FINDINGS
[51]
The Court
a quo
has erred:
51.1
By regarding both the Commission and Ithuba as Organs of State;
51.2
That Ithuba was involved in an intergovernmental dispute with the
Board;
51.3
By directing the parties to endeavour to resolve the dispute between
them in terms of the dispute mechanisms
prescribed in the Framework
Act.
[52]
The balance of convenience and the interest of justice were such that
this Court was entitled
to hear the merits of the matter
notwithstanding that it did not have a judgment of the Court
a quo
on the merits. Insofar as non-joinder is concerned, the relief sought
by Ithuba is against Lottostar and no other party. As such,
all the
other parties do not have legal interest to be joined.
CONCLUCION
[53]
This matter demonstrates how justice is often delayed
[12]
when meritless preliminary defences are raised in circumstances where
no real defence to the merits lie. After all and from the
onset,
Lottostar admitted that it engages in fixed odd bets on the outcome
of lotteries, an activity which is outlawed and criminalized
by
section 57(1)(a)
and (b) and
57
(2)(g) of the
Lotteries Act while
Lottostar continues to realize, large financial benefit from its
unlawful activities.
[54]
It is generally undesirable for a court to confine itself to the
adjudication and decision on
a preliminary defence/s where such
preliminary defence/s does not resolve the entire dispute. In this
matter, only one preliminary
defence was decided and pronounced upon,
leaving the other preliminary defence and the merits undecided. This
is more so undesirable
where there is a distinct possibility that the
decision on the special plea would prompt an appeal. It has been held
in
Churchill
v Premier of Mpumalanga and Another
[13]
at
paras. 4 to 6 as follows:
“
The
ambit of the appeal
[4]
The heads of argument before this court dealt only with the special
plea and not negligence
or vicarious liability. We asked appellant's
counsel at the outset what order should be made if the appeal
succeeded. It emerged
from the discussion that there was confusion
about the ambit of the appeal. Appellant's counsel took the view that
the high court's
judgment disposed of all issues of liability other
than the special plea and therefore, if the appeal succeeded, a
suitable declaratory
order should be made in regard to liability.
Respondents' counsel contended that the appeal was limited to the
special plea and
indicated that if it was upheld the case should be
remitted to the high court to determine the issues of negligence and
vicarious
liability.
[5]
An examination of the record showed the respondents' approach to be
incorrect. Before
the trial started the judge noted that the parties
had agreed to separate the merits from issues of quantum and enquired
whether
the special plea could be determined on the basis of the
agreed facts. Counsel for the respondents, who was counsel before us,
said this was not possible, because if the court rejected the special
plea the remainder of the merits would need to be determined.
He
added that whether the plaintiff's injuries arose out of her
employment could best be determined in the context of all the
happenings on the day in question. The judge then made an order that
the case would proceed on the merits, with the issue of damages
and
quantum to stand over until there had been a final resolution of the
merits.
[6]
The confusion over the ambit of the appeal appears to have arisen
because the judgment
does not deal in any detail with the issues of
negligence and vicarious liability arising if the special plea was
dismissed. After
upholding the special plea, the judge said:
'There
is accordingly no need to consider the defendants’ other
defences. However, I need to say this and no more. Having
regard to
the evidential material before me as set out earlier in this
judgment, the defendants’ delictual defence would
have come to
naught.'
This
was an undesirable way in which to dispose of these matters given the
distinct possibility that the decision on the special
plea would
prompt an appeal to this court. But it is clear that, had he taken a
different view of the special plea, the plaintiff's
claim would have
succeeded. He should have given his reasons for that conclusion,
notwithstanding his view on the merits of the
special plea.”
[55]
The conduct of Lottostar is in contravention of the provisions of
Section 57(1)(a)
and (b) and
57
(2)(g) of the
Lotteries Act. In
the
result, the appeal is upheld and I propose the following order:
ORDER
1.
The order of the Court
a
quo
is set aside and is substituted for
the following:
1.1
The scheme, plan, arrangement or system of
Lottostar whereby it offers bets, whether or not of a fixed-odd
nature, on the outcome
of lotteries is declared unlawful;
1.2
Lotttostar is interdicted from offering
bets, whether or not of a fixed-odd nature, on the outcome of any
lottery; and
1.3
Lottostar, the Board and Betting World are
directed to pay the costs of Ithuba.
1.4
The costs are to include those of the
application for leave to appeal in the Court a quo and in the SCA;
1.5
In each case, the costs must include those
consequent upon the employment of two counsel.
B
A MASHILE
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA
I
agree,
J
H ROELOFSE
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA
This
judgment was handed down electronically by circulation to the parties
and/or parties’ representatives by email. The date
and time for
hand-down is deemed to be 30 August 2021 at 10:00.
APPEARANCES:
Counsel
for the Appellant:
Adv A Cockrel SC
Adv
N Stein
Instructed
by:
Maluleke Msimang & Associates
c/o
TM Chauke Attorneys
Counsel
for the First Respondent:
Adv M Oosthuizen SC
Adv
G Bensch
Instructed
by:
Luneburg & Janse Van Vuuren Inc
Counsel
for the Second Respondent:
Adv M Mphaga SC
Adv
B Nodada
Instructed
by:
State Attorney
Counsel
for the Third Respondent:
Adv J Blou SC
Adv
A Friedman
Instructed
by:
Roodt Incorporated
c/o
Seymore Du Toit & Basson Inc
Counsel
for the Fourth Respondent:
Adv E Labuschagne
SC
Adv
I Hlaletoa
Instructed
by:
Maluleke Inc t/a Maluks Inc
c/o
Swanepoel & Partners
Date
of Hearing:
11 June 2021
Date
of Judgment:
30 August 2021
[1]
The
other preliminary defence was one of non-joinder.
[2]
2014
(1) SA 604 (CC);
[3]
2014
(4) SA 179 (CC)
[4]
2006
(11) BCLR 1255 (CC)
[5]
2014
(4) SA 274 (GP)
[6]
1962
(4) SA 367
(T) at 369F to 370A
[7]
ZACC
33 at para [2].
[8]
[2015]
JOL 33323
(SCA)
[9]
[1972]
4 All SA 493 (C)
[10]
1953
(2) S.A. 151
(O)
[11]
See:
Milani
And Another v South African Medical And Dental Council And Another
1990
(1) SA 899
at 903 A-D, where the following was said:
“
Our
Courts have at times recognised that certain persons are affected by
legal proceedings but they have no right to be joined.
The
sub-tenant of the tenant in a suit against a lessor is a case in
point. (Compare Sheshe v Vereeniging Municipality
1951 (3) SA 661
(A) at 667A; and Ntai and Others v Vereeniging Town Council and
Another
1953 (4) SA 579
(A) at 591.) In the United Watch case supra
Corbett J at 417B - C said about such a sub-tenant:
'The
sub-tenants' right to, or interest in, the continued occupancy of
the premises sub-leased is inherently a derivative one
depending
vitally upon the validity and continued existence of the right of
the tenant to such occupation. The sub-tenant, in
effect, hires a
defeasible interest. (See Ntai and Others v Vereeniging Town Council
and Another
1953 (4) SA 579
(A) at 591.) He can consequently
have no direct legal interest in proceedings in which the tenant's
continuing right of
occupation is in issue, however much the
termination of that right may affect him commercially and
financially.'
[12]
The
Notice of Motion was issued on 31 October 2016, almost 5 years ago.
[13]
2021
(4) SA 422
(SCA)