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[2020] ZAGPPHC 430
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Peresoft Software and Support (Pty) Ltd v Minister of Since and Innovation (NO) and Another (11372/19) [2020] ZAGPPHC 430 (12 February 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
(1) REPORTABLE:
YES
/ NO.
(2) OF
INTEREST TO OTHER JUDGES: YES /
NO
.'
(3) REVISED.
CASE NO.11372/19
In
the matter between:
PERESOFT
SOFTWARE AND SUPPORT (PTY) LTD
APPLICANT
and
THE
MINISTER OF SCIENCE AND INNOVATION
FIRST RESPONDENT
(NO)
DIRECTOR-
GENERAL: SCEINCE AND
SECOND RESPONDENT
INNOVATION
(NO)
IN RE:
The
main application of:
PERESOFT
SOFTWARE AND SUPPORT (PTY) LTD
APPLICANT
and
THE
MINISTER OF SCIENCE AND TECHNOLOGY FIRST
RESPONDENT
(NO)
THE
CHAIRPERSON OF THE R & D TAX INCENTIVE
SECOND
ADJUDICATION
AND MONIITORING COMMITTEE RESPONDENT
(NO)
DIRECTOR-GENERAL:
SCIENCE AND TECHNOLOGY THIRD RESPONDENT
JUDGMENT
TLHAPI
J
INTRODUCTION
[1]
This is a review application by the applicant, which conducts
business as a
developer
of specialised computer software and which seeks to review and set
aside
the
refusal by the first respondent, to approve a tax incentive for a
project which is
being
researched and developed by the applicant. The tax incentive was
introduced
during
2006 in terms of section 11D of the Income Tax Act 58 of 1962 (“the
Act”).
[2]
The object of the tax incentive scheme is to encourage the private
sector to
participate
in research and development in science and technology so as to
improve
advancement
in that field in the Republic of South Africa. In order to benefit
from the
tax
incentive, an application for approval for the research and
development project
has
to be made to the first respondent to enable the applicant to claim
the tax benefit
from
the South African Revenue Services. The application form is available
on the
website
of the Department, first respondent, and it is submitted
electronically to the
first
respondent. The application form is received by a Secretariat which
is charged
with
communicating the process from the first stage till the final stage
of adjudication.
[3]
The application is then referred to an expert who has the technical
know -how
to
consider and evaluate and prepare a report for an evaluation by the
Research and
Development
Tax Adjudication and Monitoring Committee established in terms of
section
11D (11) of the Act. The Committee comprises of officials from
National
Treasury,
the Department of Science and Innovation and the SA Revenue Services.
The
Committee considers and debates the merits and demerits of the
application
and
makes recommendations to the first respondent for determination
whether to
approve
or not to approve the application.
[4]
The applicant seeks the following order:
“
1.
Reviewing and setting aside of the refusal by the first respondent,
on or
about
21 August 2018 under reference number 2017/003222/01 to
approve
in terms of section 11D (9) of the Income Tax Act 58 of 1962,
the
applicant’s research and development program for the
development
of a Web enabled Cash Book to integrate with Sage 300
ERP
accounting software;
2.
Directing the first respondent to approve the said application by the
applicant;
3.
Directing the first respondent, to inform the Commissioner of Revenue
in
accordance with section 11D (16) of the Income Tax Act, of the
approval
of the applicant’s research and development, setting out such
particulars
as are required by the Commissioner;
4.
Directing the first respondent to pay the applicant’s costs;
5.
Further and/or alternative relief.”
[5]
The application was opposed. An order authorizing a name change of
the
respondents
by substituting the names of the first and third respondents, to
reflect
what
they are presently known by was granted.
[6]
The applicant states that the issue relates to it and the first
respondent, that
even
though mention is made of persons appointed by Department of Science
and
Innovation,
National Treasury and South African Revenue Services, it does not
seek
to
join them since none of them have an interest in the matter.
BACKGROUND
[7]
Mr Robert Morris Perel (Mr Perel), a qualified computer programmer is
the
sole
director of the applicant. Since 1982 he has been involved in various
aspects of
research,
programming, development and creation of computer programs and soft-
ware.
In 1983 he established Peresoft Software which was followed by
registration of
a
close corporation Peresoft Software and Support CC and, in 1996 it
converted to
Peresoft
Software and Support (Pty) Ltd. According to Mr Perel the applicant
is a
well
- known and internationally recognized developer and marketer of
software,
specializing
in the maintenance of accounting and financial management programs.
Its
products are “sold and supported by more than 500 dedicated
Solution Providers
throughout
Africa, Asia, Australia, Europe Canada and the USA.
[8]
During 2016 the applicant began research and development work on
developing
a new program which it had not as yet officially named. The name to
be
attached
to the new program was in all likelihood going to be called
“Cashbook” like
the
present existing Cashbook. The applicant had already created its
add-on to
operate
on the Windows platform and the add-on was called RecXpress, ‘which
meant
that Cashbook and RecXpress required a Windows operating system to
function.
Cashbook and RecXpress are currently successfully marketed to
institutions
worldwide.’ It was intended that the program which was being
developed
would
be a completely new one, which would ‘be a complete rewrite for
a completely
different
operating platform.’ The combination of the two programs,
Cashbook and
RecXpress
would enable users to operate them without necessarily using a
Windows
operating system and regardless of any operating system the users may
have.’
The research and development involved the creation of a new program
described
as a “
We-enabled Cash Book to integrate with SAGE ERP
accounting
software.”
When
completed it will be a program as envisaged in section 11D and
section
1
of the
Copyright Act 98 of 1978
.
[9]
Mr Perel avers that during 2017 on the advice of one Mr Rogerio
Manuel
Bandeira
Russo (“Russo”), who had knowledge of the applicant’s
business,
decided
to apply for the tax incentive. He gave directive to Russo to make
the
application
on behalf of the applicant, which he did on 31 August 2017 by
completing
a
form which he uplifted from the website of the Department, the first
respondent.
The
application was duly completed by Russo and he had read it. Receipt
was
acknowledged
by Mr William Mabogoane of the Department.
[10]
On 1 September 2017 Mr Mabogaone sent an e-mail which required
answers
to
6 questions and, except for 2 questions which were added to the 6
questions,
these
were identical to those contained in the application form initially
completed by
Russo.
Mr Perel referred the email to Russo and he agreed with the answers
given
by
Russo which were now written in red font. The answers were sent to
the first
respondent
and on 21 August 2018 the application was declined. Mr Perel stated
that
the covering letter marked “A” and signed by the first
respondent advised of the
right
to review. The applicant contended that the refusal of the
application amounted
administrative
action reviewable within the meaning of the “PAJA”, the
Promotion of
Administrative
Justice Act 3 of 2000, (“the PAJA’)
A
brief history to the technical background to the research and
development project
(“R
& D project)
[11]
The applicant gave a brief history of the research and development
project it
was
engaged in and this narration was not disputed by the respondents.
11.1
The installation of software to conventional systems of programming
and
setting up of computer systems entailed (i) the operating system
and
computer program (ii) the application program. These programs
are
interdependent for purposes of achieving real functionality.
11.2
Different computers can therefore only connect with each other if the
same or compatible
software has been installed.
11.3
Operational costs are reduced in conventional systems only when the
systems operate over
server-based databases.
11.4
‘This limitation has become a serious shortcoming in
conventional
systems,
particularly in the global financial management and
accounting
and financial fields”
[12]
The applicant specializes in the financial management and accounting
and
financial
fields. As a result of the shortcomings in the conventional systems,
a
modern
system of programming is being developed which will allow for a
faster,
reliable
and cost effective and a higher volume of data processing being
achieved.
Web-based
programs no longer require the installation of the application
software to
be
installed in every computer and, the necessity to install updates to
every
computer.
Instead a copy of the application programme is installed at a
location
somewhere
in the world and access to the application is by way of a licenced
subscription
to the application software, which is regularly updated and is
available
to
users at a much lower cost. Of importance is that the communicating
computers
are
still required to use the same operating system, because the
application software
licence
is still determined by the operating system. The applicant as a
result
identified
the need for a program which is presently being researched and
developed.
The
applicant’s research and development project.
[13]
The applicant avers that it has over the years developed a successful
Windows
based program in the market called “Cashbook”. It is a
system where, with
the
consent of all interested parties there is a compilation of data that
creates a
cashbook
which complies with the financial and legal requirements of the
country
where
the product is being used.
[14]
Over the years Cashbook and RecXpress have been marketed by SAGE
which
also markets its own product known as SAGE 300 ERP, ‘which is a
software
application
program consisting of 8 modules and, which is used as a comprehensive
package
for accounting and financial management in small and medium
businesses’.
However,
Cashbook and RecXpress are only available as an optional extra to
users
of
SAGE 300 ERP who have a windows operating system. This has been found
to
restrict
functionality between users who have a Windows operating system.
[15]
In 2016 the applicant realized a need to move away from the
limitations and
disadvantages
encountered in a conventional system. It had to develop a new
program
to ensure its standing as one of the world’s leading software
developers in
the
field of financial management and, to also to avail Cashbook and
RecXpress to
all
users of SAGE300 ERP, not limiting use to only those using Windows
operating
systems.
A new program with the following characteristics was required:
15.1
The new program had to be web-based
15.2 It
had to make functionality available to all SAGE 300 ERP users
15.3
The SAGE guidelines were used to research and develop the new
project;
15.4 To
date no program exists anywhere in the world which can make
Cashbook and RecXpress
available to all users of the SAGE 300 ERP
available to users
regardless of their operating systems. The project
was and still is new and
the problems and uncertainties encountered
require further extensive
research.
[16]
The first respondent denies that what is envisaged by the applicant
relates to
something
new. It is contended that the software program the applicants seeks
to
develop
is aimed at resolving a technical problem which enhances the
functionality
of
SAGE 300 ERP accounting software program, in order to make it
accessible on
different
platforms and interfaces. There is already an existing Cashbook
program.
What
is envisaged is to improve the efficacy of an already existing
program and it
does
not qualify as a research and development program for purposes of
benefitting
from
the incentive in section 11D of the Act.
Difficulties
and uncertainties encountered
[17]
In order to gain access to the use of the application of software of
his choice,
a
user has to make use of a browser and the existing different
operating systems
have
a browser, which browser with its software is a computer program on
its own.
Since
the browsers use specific operating systems they cannot integrate
with other
software
designed for different operating systems. This causes uncertainties
and
problems
which call for investigation and experiments for possible solutions.
Presently
there is no browser program in existence to avail Cashbook and Rec-
Xpress
to users of SAGE 300 ERP and there is need to research and develop a
new
program and a website having the envisaged capacity.
[18]
Another uncertainty presents itself in each programming language
since each
has
its own syntax to create commands. The new program must be enabled to
cross
the
various barriers created by the different browsers to integrate with
the SAGE 300
ERP
software to capacitate functionality in Cashbook and RecXpress
regardless of
the
different operating systems. ‘The main difficulty lies in
programming languages,
commands
and operating systems acting as an integrated system to form a new
program.
The applicant contends that the programming algorithms which
originate
from
these uncertainties take weeks or months to research and to develop
into a
successful
algorithm. The applicant contends that the first respondent failed to
have
regard
and consider any of the uncertainties and failed to apply its own
definition of
uncertainties
to the facts.
[19]
The first respondent denied that the applicant’s envisaged
program would
resolve
any uncertainties. There was existing functionality in the market
identified by
the
applicant as the SAGE 300 ERP software, which has a functionality of
Cashbook
and
RecXpress which is accessible in certain platforms. What the
applicant wants to
do
is to increase accessibility on the Web. It was contended that there
was no
evidence
tendered that there were uncertainties encountered by the program.
The
applicant
had failed to demonstrate ‘any systematic investigative or
systematic
experimental
activities or testing of any software to resolve any uncertainty
suggested.
The
application form and the replies to the questions posed by Mr
Mabogoane
[20]
The applicant dealt with the questions in the application form and
those
forwarded
by Mr Mabogoane and commented that the first respondent did not in
its
reasons
criticise the answers given in the reasons for the refusal of the
application.
20.1
What is
the scientific or technological objective (end goal) of the
project?
The
applicant contended that the responses given on both occasions
related
to the same thing which was that it was intended to develop a
web-based
platform using a browser which could process accounting
process
across the internet as opposed to the limitations of the use of
operating
systems in conventional systems.
20.2
Explain
the scientific or technological uncertainty that the project aims
to resolve?
The applicant contended
that the two answers went hand in hand
because it was obvious
that there would be uncertainty, because this
type of project had never
been successfully attempted before, no
software existed from
which solutions could be learnt. It was contended
that it should have been
a matter of logic to the Committee appointed
to adjudicate the matter
and, to give recommendations to the first
respondent
in that where no example existed the whole project would
be
clouded in uncertainty
20.3
Explain
the scientific or technological advance the project aims to
achieve?
The applicant contended
that the two answers go hand in hand, the
second expanding on the
first which was to make SAGE 300 ERP
available to users and to
shorten the time in which reconciliations were
performed.
20.4
Describe
the computer program or software you intend to create or
develop?
The
applicant contended that the answers given go hand in hand and
they
related to developing a compatible SAGE 300 ERP to operate
across
the internet regardless of operating system; that it took years to
develop
various developmental language, it was unique and protected
by
copy right.
20.5
Explain the innovative nature of the computer program or software
Product.
How is the software product newly introduced on the basis of
its
scientific or technological characteristics?
The
applicant contended that the answers given go hand in hand in
that
the innovative nature in the new program was clearly stated.
20.6
Describe
how the computer program or software you intend to create
could not be developed
using the existing technology?
The
applicant contended that the answers go hand in hand. The new
program
required a web-based program with special characteristics
that
are not available to SAGE 300 ERP users anywhere and it will
take
a long time develop.
[21]
The first respondent contended that in the responses to the questions
the
“
applicant
failed to show that it was involved in the research and development
of a
computer
program that was geared to resolve technological uncertainty ..”
Reasons
given by the First Respondent
[22]
The applicant addressed the covering letter and the annexure “A”
which
communicated
the response to its failed application. It takes issue with the
covering
letter which does not clearly indicate which requirements in section
11D
they
failed to comply with. The applicant contended that under the heading
“
Application
of the Law”
the
first respondent while ascribing certain meanings, there
is
no indication as to which part of the response falls short of any
other meaning
ascribed
to the words. Under the heading “
Reasons for Non-approval”
the applicant
contended
that the response met every requirement in the reasons for
disapproval
and
as far as they viewed the entire document only one reason had been
given in
contemplation
of section 11 D(2) of the Act which appear in the words “
failed
to
demonstrate
that the results of the proposed activities are a resolution of
scientific or
technological
uncertainty to meet the requirements of 11D(1)”.
[23]
The applicant proceeded to deal with section 11D(1)(b)(iii) of the
Act. The
applicant
contended that it had been stated that the element, innovativeness
was
expressed,
in that the project was to create a program which will be the first
ever
program
of its kind. This complied with the research envisaged in 11D(1) of
the Act.
The
uncertainty in the results was the key feature of the research, that
the applicant
was
working towards the development or creation of a program, where every
key-
stroke
tried out and eventually used in the research process, was
systematically
investigative
or systematically experimental in nature or activity. He contended
that
the
applicant had therefore met the requirements of section
11D(1)(b)(iii).
[24]
The first respondent contended that the applicant had misconstrued
the
requirements
of 11D(1)(b)(iii) in that it was not the uncertainty in the desired
outcome
of the project that the applicant had to address, but it was for the
applicant
to
demonstrate that the research and development embarked upon was
geared
towards
resolving a scientific or technological uncertainty.
Grounds
of Review
[25]
The applicant contended that the nature of the form that was
downloaded was
such
that in parts it required a yes or no answer and, in certain parts
certain answers
were
not taken into account when evaluating his application. Incorrect
interpretation
of
and misconstruing of sections 11D(1) and 11D(1)(b)(iii) of the Act
amounted to an
unfair
administrative action as contemplated in section 3 of the Promotion
of
Administrative
Justice Act 3 of 2000 (“the PAJA), that such refusal adversely
affected
his
rights and should not have been refused without giving the applicant
opportunity
to
present or dispute information or arguments which they were not
invited to
explain.
[26]
The first respondent contended that it was not necessary for the
applicant to
be
afforded a third opportunity to make formal or oral representations
and that it was
in
the discretion of the first respondent to call for oral
representation before the final
decision.
The
Supplementary Affidavit in terms of Rule 53 (4) On the Uniform Rules
of Court
[27]
Having received the record the applicant did not file an amended
notice of
Motion
to incorporate additional relief, however it was indicated when
responding to
the
answering affidavit in reply, that reliance would also be had to
section 6 of PAJA.
The
latter ground was expanded in counsel’s heads of argument. The
record of
proceedings
filed consisted among them documents they had not seen before, being
the
evaluation report of Mr Mensah and the minutes. What was not included
were the
initial
application form completed by Russo and his response to the email
questions of
Mr
Mabogaone These were annexed and dealt with in the founding
affidavit. Mr
Mensah’s
report makes no mention of his response to the emailed questions
neither
did
the first respondent mention that regard was had to them. It is
therefore inferred
that
first respondent, Mr Mensah and the R&D Tax Incentive
Adjudication and
Monitoring
Committee failed to consider the content of applicant’s
responses properly.
[28]
The applicant questions the authority, competency and qualification
of Mr
Mensah
to express expert opinion on programming and existing software in the
market,
since no mention is made of his expertise in the report. It is
contended
that
he erred in crucial aspects which destroy the legitimacy of his
report:
(i)
First, was
his reasoning that ‘a body of knowledge exists to the
taxpayer
to successfully execute the proposed activity’ when the
applicant
stated as at paragraph 22 – 27 of the founding affidavit that
there
was no existing software anywhere in the world to make the
product
researched and developed ‘as a web-based product to users of
SAGE
300 ERP software’ and that the product will be a completely new
product.
Mr Mensah had not mentioned the name of any software or
creators
of other software applications which he said were available to
the
applicant, to prove his claim.
(ii)
Second, was
the conclusion that the applicant’s activity was a ‘deemed
product
enhancement and would not render the resolution of a
scientific
or technological’ uncertainty. This stems from the erroneous
statement
that there was a body of knowledge available to the applicant.
The
applicant contends that the uncertainties have been dealt with in
paragraphs
28 to 34 of the founding affidavit.
(iii)
Third, the
applicant contended that Mr Mensah had misconstrued the
interpretation
of 11D(1) of the Act, where he introduced certainty or
success
in the research and development of the product, in order to
qualify
it for the tax incentive.
[29]
The applicant indicated what he accidentally failed to mention was
that SAGE
was
developing a new web-based version of the ERP 300 software and that
while the
application
was aimed at the present users of SAGE 300 ERP, it was also aimed for
the
future users of the software who will be using the web-based version
of SAGE 300
ERP.
The applicant also stated that it was constantly in touch with SAGE
to ensure
that
applicant’s development will integrate with the SAGE 300 ERP
software.
THE
ISSUES
[30]
The main issue raised in the founding affidavit was that it was
contended that
the
first respondent incorrectly interpreted section 11D(1)(b)(iii) of
the Act in the
reasons
for refusing the applicant’s application. It was contended that
the first
respondent
had disregarded the element of uncertainty in the analysis of the
answers
in
the application form and those given to Mr Mabogoane. It was also
contended in the
supplementary
affidavit that Mr Mensah had misconstrued the interpretation of
section
11(D)(1)
and in finding that the section introduced and element of certainty.
Another
issue
related to how to deal with new reasons which did not form part of
the first
respondent’s
reasons as communicated to the applicant.
THE
LAW
[31]
Section 11D(1) provides:
(1)
For the
purposes of this section ‘
research
and development’
means
systematic
investigative or systematic experimental activities of which the
result
is uncertain for the purpose of-
(a)
……………
.
(b)
creating or
developing –
(i)………….
(ii)………..
(iii)a computer program
as defined in
section 1
of the
Copyright Act
which
is of an innovative
nature;”
(iv)…………
Section
1
of the
Copyright Act 98 of 1978
defines the term computer program
as:
“
a set of
instructions fixed or stored in any manner and which when used
directly
or indirectly in a computer directs its operation to bring about a
result”.
[32]
It is my view that the issues to be determined herein are to be
considered in the
light
of the information that was before the adjudicating committee, having
regard to
the
application form, the answers by one Mr Russo on behalf of the
applicant and,
also
those subsequently given in response to Mr Mabogoane, also given by
Mr Russo.
The
decisions sought to be reviewed are contained in the letter and
annexure
communicated
to the applicant by the first respondent.
[33]
It is also important to have regard to the purpose for which 11D was
enacted
being,
the grant of a 150% tax incentive for research and development, in
section
11D(1)
where it is provided, “
research and development”
means,
systematic
investigative
or systematic experimental activities of which the result is
uncertain
………”
and creating and
developing in 11D(1)(b)(iii) “
a
computer program
which
of an innovative nature”
……
……
(my
emphasis)
[34]
Counsel for the applicant contends that the reasons given by the
first
respondent
should be understood to carry the same meaning as that emphasized in
the
underlined wording in the Act. Since no definition of the words is
available in the
Act,
the applicable principles of interpretation should be followed, which
require that
the
ordinary meaning be given to words. Counsel for the first respondent
contended
that
in the first respondents reasoning, Annexure A which was attached to
the covering
letter
communicating the outcome, under title “Application of the
Law,” the meaning
and
interpretation of the words in section 11D are explained. He states
that section
11D
should be interpreted to mean that there must be an indication that
the program
is
resolving a scientific or a technological uncertainty. This calls for
an examination of
the
first respondent’s reasons which were recorded in two
paragraphs, in the following
manner:
“
Further for the proposed
activities to be classified as R&D in the Act, its
completion
must be dependent on the resolution of a scientific and or
technological
uncertainty”
“……
the applicant failed to demonstrate
that the results of the proposed
activities
are a resolution of scientific or technological uncertainty to
meet the
requirements
of section 11D(1) of the Act”.
It
is argued for the applicant that the qualifying reason is contained
in the
second
paragraph. In my view and having regard to the definition in section
11D,
the
applicant when presenting the application for the incentive should
still be engaged
in
a ‘systematic investigative activity’ or a ‘systematic
experimental activity’, the result
of
which is still uncertain, where no resolution has as yet been
achieved and where
the
activity is ongoing. There should be no room for certainty as yet
when the
application
is launched and when the application is adjudicated on behalf of the
first
applicant
because the program was still being researched and developed. It is
only
the
applicant who can give indication when it has found an solution to
its research and
development,
in which event the purpose for the incentive would not be available.
[35]
In this regard I would avoid using words not used in the legislation
enacted like
the
word ‘
resolution
’ as used in the first
respondent’s reasons, for the mere reason
that
it brings a different meaning to what is intended in the enactment
and this is
evident
in the response in paragraph [11] of the answering affidavit for
example, where
the
first respondent gives another meaning, an additional meaning to
‘systematic
investigative
or systematic experimental activity as described in 11D, to mean what
the
applicant must satisfy as described in the guidelines as the “
Hypothesis to
experimentation
and Observation and evaluation to logical conclusions.”
At paragraph
[58]
of the answering affidavit the deponent states: “
The
applicant has failed to show
that
it is involved in the research and development of computer programs
that is
geared
to resolve technological uncertainty …..unless the applicant
can demonstrate
that
the project will resolve a technological uncertainty which is already
existing, the
applicant’s
project does not meet the requirements.”
Another
example is the meaning
and
interpretation to be ascribed to the words “
of an innovative
nature”
as used in
section
11D(1)(b) (iii) as opposed to the use of the single word “
innovative”
in sections
11D(1)
(b)(ii) (bb) and (c).
[36]
Counsel for the applicant correctly points out that meaning to be
ascribed to the
words
are the ordinary meaning as dealt with in his heads of argument for
example at
paragraph
7.4 and 7.5, when dealing with the ordinary meaning that should be
ascribed
to the word “Uncertain” (taken from the Shorter Oxford
Dictionary (1968) and
the
South African Pocket Dictionary). Furthermore, it was contended that
in as far as
it
concerned the interpretation of the words “
innovative”
and “
of an innovative nature,”
the
first respondent had as at paragraph 97 of the answering affidavit
introduced
a
qualitative comparison between the applicant’s intended product
and that of other
similar
products, thereby rendering an incompatible interpretation of the
two. The Act
does
not define these two expressions and there had been no judicial
interpretation
existing.
It was contended that the rigid interpretation of the words was
indicative of
the
first respondent’s reliance on some guideline and did not allow
an interpretation
according
to the principles laid down by law.
[37]
It is my view that if the first respondent wished to elicit
information as described,
being
a reference to the “Guideline” and requiring the
applicant to expand on its
presentation,
it could have drawn the applicant’s attention to the guideline.
Mr
Mabogaone
posed almost similar questions as asked in the application form,
without
indicating
that a more comprehensive exposition was being asked for and to give
guidance
as to what was required to be explained. As I see it, it was
assumed by the
first
respondent that Mr Mabogoane’s additional questions would have
elicited
additional
comprehensive information, thereby taking the view that the applicant
was
given
a second chance to explain itself. Counsel for the first respondent
conceded in
argument
that some of the questions were similar to those in the application
form. It is
my
view that it is possible that the questions as formulated in the
application form could
be
viewed as being too simple and restrictive, in as far it they were
designed to give
answers
to what I believe are complex issues, especially where a tax
incentive of a
150%
is being applied for.
[38]
Those persons involved in the interpretation of a statutory provision
should not
engage
in a complex process or introduce into the provision that which is
not intended
by
the legislature. The principle applied in
Natal Joint Municipal
Pension Fund v
Endumeni
Municipality
2012
(4) SA 593
(SCA) at 603 – 604 should be followed, where
it
was stated:
“
[18]
The present state of the law can be expressed as follows:
Interpretation
is
a process of attributing meaning to words used in a document, be it
legislation,
some other statutory instrument or contract having regard to the
context
provided by reading the particular provision or provision in light of
the
document
as a whole and the circumstances attended upon its coming into
existence.
Whatever the nature of the document, consideration must be given
to
the language used in the light of the ordinary rules of grammar and
syntax;
the
context in which the provision appears; the apparent purpose for
which it is
directed
and the material known to those responsible for its production. Where
more
than one meaning is possible each possibility must be weighed in the
light
of
these factors. The process is objective not subjective. A Sensible
meaning
is
to be preferred to one that leads to insensible or unbusinesslike
results or
undermines
the apparent purpose of the document. Judges must be alert to,
and
guard against the temptation to substitute what they regard as
reasonable,
sensible
or businesslike for the words actually used. To do so in regard to a
statute
or statutory enactment is to cross the divide between interpretation
and
legislation
in a contractual context, it is to make a contract for the parties
other
than
the one they in fact made. The inevitable point of departure is the
language
of
the provision itself, read in context and having regard to the
purpose of the
provision
and the background to the preparation and production of the
documents.”
[39]
Counsel for the first respondent contended that in the preceding
paragraphs to
the
reasons in “Annexure A” the minister dealt with the
meaning of section 11D(1). It
is
my view that the meanings ascribed to ‘systematic;
investigative; experimental;
hypothesis”
are not definitions in the Act, however, it could be that they were
obtained
from
a guideline not forming part of the certified record of proceedings
and not availed
to
the applicant before adjudication. Interpretation of the words should
follow the trite
principles
already mentioned.
[40]
It was contended by the applicant that the first respondent could not
furnish
new
reasons not initially communicated to the applicant as it sought to
introduce the
guideline
and in my view certain portions of the report by Mr Mensah. In the
replying
affidavit
certain issues are raised about Mr Mensah’s qualifications and
the fact that
he
failed to file an affidavit relating to his expertise. Counsel for
the first respondent
dealt
with Mr Mensah’s evaluation by drawing comparisons to what was
alluded to in
the
founding affidavit. As I see it, most of the allegations in the
founding affidavit were
an
explanation of what the application was about, which comprehensive
narrative was
not
similar to that given in the application form and the follow up
answers to the query
of
Mr Mabogoane. My concern is that nowhere in the reasons of the first
respondent
especially
those as dealt with in “Annexure A”, does the first
respondent refer to Mr
Mensah’s
reasons as being one of the reasons and recommendations relied upon
when
deciding not to grant the application. Well, except for paragraph 2
of the reasons
of
the first respondent, where the first respondent echoes the
conclusion in Mr
Mensah’s
report.
I
have already indicated that in those reasons it is assumed that it
was the
guidelines
which were being referred to as seen from the answering affidavit and
which
guidelines do not form part of the record.
[41]
In
Jicama 17 (Pty) Ltd v West Coast District Municipality
2006
(1) SA 116
(C)
at
paragraphs [11] and [12] emphasised the importance of conveying
reasons to a
party
adversely affected thereby, so as not to allow reasons which come out
for the
first
time in an answering affidavit to supplement reasons already given.
In
National
Lotteries
Board and Others v South African Education and Environment Project
2012
(4)
SA 504
(SCA) at paragraphs [22] –[27] the following is stated:
“
[24]
………the high court relied on the decision of
Cleaver J in Jicama (Pty)
Ltd v West Coast District
Municipality, which has an impressive English
Pedigree.”
[26]
….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
include proper or adequate reasons should ordinarily render the
disputed
decision reviewable.”
[42]
On what grounds is this decision reviewable? Although in the
founding affidavit
the
applicant based its grounds on a fair procedure that was not
followed, in that it
was
not called upon to explain its case, before the matter was
adjudicated or before
reasons
were given, it is indicative in the answering affidavit that the
first respondent
relied
on additional grounds which were not discovered. In that regard I
find that the
procedure
was unfair in that the first respondent also relied on a standard not
set out
in
the act or any regulation enacted but on guidelines to adjudicate the
application.
The
applicant was not made aware of the importance of structuring it’s
responses
according
to the standard in the guidelines. In the replying affidavit at
paragraph [15]
the
applicant addresses the qualifying criteria introduced by the first
respondent as an
ultra
vires
action
reviewable under several of the grounds in section 6 of the PAJA and
in
conclusion the applicant states that it is incorrect, arbitrary and
not rationally related
to
the facts.
[43]
I have already indicated that the applicant did not amend its notice
of motion to
insert
the additional grounds it relies on in terms of section 6 of PAJA
(i)
6 (2)
(d) where the decision was influenced by an error of law;
(ii)
6(2)(e)(iii)
irrelevant considerations were taken into account or relevant
considerations
were not considered’;
(iii)
6(2)(f)(ii)
where the action is not rationally connected to the purpose for
which
it was taken; and
(iv)
6(2)(c) the
action was procedurally unfair.
These
were stated in counsel’s heads of argument. My view is that if
such
grounds
can be determined from the facts then in the interests of justice the
decision
is
reviewable on those grounds so established.
[44]
I also find that the decision is reviewable in terms of section 6
(2)(d) in that the
decision
was influenced by the incorrect interpretation of the provisions of
sections
11D(1)
and 11D(1)(b)(iii). I am of the view that this is not a matter where
a court of law
is
competent to substitute the decision of the first respondent. It is a
complex matter
which
should be left to the first respondent to adjudicate, as it has
available to it a
process
of evaluation by experts in the field the applicant is engaged in, of
the research
and
development of a scientific and or technological computer program.
The Act also
makes
provision for oversight processes to be engaged by the first
respondent in
conjunction
with Treasury and the Receiver of Revenue, since this incentive has
the
potential
to also impact on the fiscus. I find that the applicant should be
referred
back
to the first respondent for the adjudication of its application as
set out in the order
below.
[45]
In the result the following order is granted:
[1]
The refusal of the applicant’s application by the first
respondent on 21
August 2018 under
reference 2017/003222/01 is hereby reviewed and
set aside in terms of
sections 6(2)(c) and 6(2)(d) of the PAJA.
[2]
The matter is referred back to the first respondent for adjudication
in
terms of the Act.
[3]
The first respondent is directed, within 45 days of the service of
this
order, through Mr
Mabogoane (Deputy Director) and or any competent
official in his place, to
review the questions in the query in the email dated
1 September 2017, in such
a manner setting out additional requirements
and answers required for
purposes of adjudicating the application for an
incentive by the
applicant in terms of the Act. The official is directed to
make available to the
applicant any material it has relied upon in the past
and which it shall rely
upon in setting out what is required from the
applicant and the
standards applicable in the adjudication of the
application.
[4]
The applicant is directed to supplement its answers in the
application as
directed in [3] as
required in the Act and in any manner it deems fit. The
applicant is directed to
serve the first respondent with its answers within
30 days of its receipt of
the question in [3] above;
[5]
The first respondent is ordered to pay the costs of the applicant
including those of two
counsel where engaged.
TLHAPI
V V
(JUDGE
OF THE HIGH COURT)
MATTER
HEARD ON
: 12
FEBRUARY 2020
JUDGMENT
RESERVED ON
: 12 FEBRUARY
2020
ATTORNEYS
FOR THE APPLICANTS
:
PIERRE
RETIEF INC.
ATTORNEYS
FOR THE RESPONDENTS
:
THE
STATE ATTORNEYS