Firstrand Bank Ltd. v National Lotteries Board (385/07) [2008] ZASCA 29; [2008] 3 All SA 121 (SCA); 2008 (4) SA 548 (SCA) (28 March 2008)

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Firstrand Bank Ltd. v National Lotteries Board (385/07) [2008] ZASCA 29; [2008] 3 All SA 121 (SCA); 2008 (4) SA 548 (SCA) (28 March 2008)

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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
CASE NO: 385/07
In the matter between :
FIRSTRAND BANK LIMITED
...
Appellant
and
THE NATIONAL LOTTERIES BOARD
...
Respondent
__________________________________________________________________________
Before: HOWIE P, STREICHER, NUGENT, COMBRINCK & CACHALIA JJA
Heard: 29 FEBRUARY 2008
Delivered: 28 MARCH 2008
Summary:
Lotteries Act 57 of 1997
– lottery – bank deposit
conferring chance to win a prize – whether a prohibited lottery.
Neutral citation: Firstrand Bank v National Lotteries Board
(385/07)
[2008] ZASCA 29
(28 March 2008)
__________________________________________________________________________
J U D G M E N T
__________________________________________________________________________
NUGENT JA
NUGENT
JA
:
[1] Across the country there are people who keep their
spare money under mattresses, or under the floorboards, or in glass
jars. No
doubt there are also many who have sufficient to warrant
keeping it in a safe. If all that money could be gathered and
deposited
with a bank and the bank then lent it out at interest it
can be expected that the bank’s income would be considerable. And
if the
customer is not paid interest on money that would otherwise
have remained under the mattress or in a glass jar he or she can
hardly
complain of being worse-off financially.
[2] But how does one persuade people who keep their
spare money under mattresses or in glass jars – of which there are
said to be
some 17 million in this country – to deposit it with a
bank instead? The cost of administering small accounts apparently
precludes
the payment of interest – at least at an appreciable rate
– and even if interest is paid there are some for whom banking is
not
attractive. However, the chance of instant wealth – even if its
realisation is remote – is notoriously mesmeric and it has occurred
to the appellant, which is a large and reputable bank (I will refer
to it as the bank), that this might attract at least some of
that
money. Events have proved the bank to be right.
[3] The scheme it has devised is not altogether novel. A
comparable scheme was used by the former government to attract loans
in the
form of Defence Bonus Bonds (I will return to them later) and
similar schemes are said to be used by banks abroad. I will set out
presently the details of the scheme that the bank has devised but
essentially it is this: a person who has money deposited in a
particular
32 day call account on a particular day in each month
qualifies to win one or more prizes that are randomly allocated. The
largest
is a prize of R1 million hence the name of the account: the
‘Million-a-Month Account.’
[4] The scheme has brought the bank into conflict with
the National Lotteries Board established by
s 2
of the
Lotteries Act
57 of 1997
. The Board contends that the scheme is a lottery that is
prohibited by the
Lotteries Act and
it applied to the High Court at
Pretoria (Seriti J) for a declaration to that effect and for
interdictory relief. The relief was
granted and the appellant now
appeals with the leave of this court.
[5] The Million-a-Month Account is relatively simple. It
is essentially a savings account (with certain additional features)
that
is operated at no cost to the customer from which money may be
withdrawn only upon 32 days’ notice to the bank. (Premature
withdrawals
are permitted but only upon payment of a charge that will
in some cases be a considerable portion of the money deposited.
1
)
Interest is paid on deposits at a rate that may fairly be called
nominal (0.25% annually) at the option of the depositor. The real
attraction of the account is that for each R100 that is credited to
the account on a selected date in each month the depositor has
one
chance of winning one or more monthly prizes. According to the bank’s
promotional material there were 114 monthly prizes at
the time the
application was brought: one prize of R1 million, two of R100 000,
ten of R20 000, one of 100 000 ‘e-bucks’,
and 100 of
R1 000. The prizes are awarded by computerized random-selection.
[6] No doubt the scheme has the many positive features
that we were told about by the bank though it seems to me that it
also has
the potential to be disadvantageous to some depositors. But
it is not for us to opine on whether the scheme is meritorious or
not.
Our concern is only whether it is prohibited by the
Lotteries
Act.
[7
] The
Lotteries Act reflects
an underlying policy that
is altogether different from the policy that underlay earlier
legislation dealing with lotteries. For over
a hundred years before
the
Lotteries Act took
effect lotteries were prohibited. The reason,
it seems, was their propensity to draw money from those who could
least afford it.
In England, where lotteries were also prohibited,
Lord Widgery CJ expressed it as follows in
Reader’s
Digest Association Ltd v Williams
:
2
‘
[T]he evil which the lottery law has sought to
prevent was the evil which existed where poor people with only a few
pence to feed
their children would go and put these few pence into a
lottery and lose them, and this sociologically was a bad thing.’
[8] The aim of the
Lotteries Act is
altogether
different. The loss of the ‘few pence’ is no longer considered to
be undesirable in itself. What is undesirable is
only that it should
be lost to someone other than the National Lottery, which is obliged
to pay part of its net income to worthy
causes.
3
I think it is also clear that the intention of the
Lotteries Act is
that the National Lottery should generate as much
money as possible for distribution to those causes.
[9] The National Lottery has a monopoly on collecting
money from the general public in this way. All other lotteries that
have a subscription
are prohibited – no matter how meritorious they
might be – but for lotteries of four kinds that are permitted under
very restrictive
conditions. Three are lotteries that are of
relatively minor significance (lotteries conducted at bazaars, fetes,
dinners and so
on,
4
private lotteries,
5
and society lotteries
6
).
The only commercial lotteries that are permitted are ‘promotional
competitions’ – lotteries that are conducted ‘for the
purpose
of promoting the sale or use of any goods or services’ – if they
comply with prescribed conditions, one of which is that
they may not
be ‘substantially similar’ to the National Lottery.
7
[10] Although the policy of the legislation has changed
the draftsman has nonetheless relied upon and largely adopted, for
the purpose
of describing an unlawful lottery, the rather unusual
structure of the Gambling Act 51 of 1965
8
and the content of its definitions (but with an
important addition that I will return to). The relevant provisions of
the Gambling
Act largely (but not exactly) replicated the structure
and content of the comparable provisions of some pre-Union
legislation.
9
[11] A lottery for purposes of the
Lotteries Act is
a
lottery as ordinarily understood but extended to include
‘
any game, scheme, arrangement, system, plan,
promotional competition or device for distributing prizes by lot or
chance…’.
Unauthorised lotteries are prohibited by
s 56
and the
conduct of a lottery is made an offence by
s 57.
The key to
determining whether a lottery is unlawful is
s 63
, which allows
lotteries that lack a ‘subscription’, and it is there that the
dispute in this matter lies. The section reads as
follows:
‘
Nothing in this Act shall apply in relation to
any lottery…in respect of which there is no subscription.’
[12] A ‘subscription’ is defined to mean
‘
the payment, or delivery of any money, goods,
article, matter or thing, including any ticket, coupon, or entry
form, for the right
to compete in a lottery’.
The punctuation in that definition might at first sight
suggest that the word ‘payment’ stands separately from the
remaining words,
and that ‘money’ and ‘delivery’ go hand in
hand. But if that were so the definite article preceding ‘payment’
would not
make grammatical sense. I think it is clear that the comma
after ‘payment’ appears inadvertently and that the definition
refers
to ‘the payment of money’ and the ‘delivery of (any
goods or other articles)’.
[13] A ‘subscription’ was also essential for a
lottery to be unlawful under the Gambling Act and legislation that
preceded it.
But the definition in the
Lotteries Act adds
to those
definitions. The definition in the Gambling Act included ‘any
ticket, coupon, or entrance form purporting to be supplied
free of
charge to the readers of any newspaper or other periodical
publication’. The definition in the
Lotteries Act goes
further by
including ‘any ticket, coupon or entry form’ without
qualification.
[14] But for the moment I can leave tickets, coupons and
entry forms aside, because this case turns on the meaning of a
‘payment
of any money’ in return for the right to compete in a
lottery, as it is used in the definition. For there is no doubt that
the
bank’s scheme falls within at least the extended meaning of a
lottery as it is defined and the only question is whether it lacks
a
subscription and is thus excluded from the
Lotteries Act by
s 63.
[15] One submission that was made on behalf of the bank
can be disposed of immediately because it has no merit and merely
diverts
attention from the true enquiry. It was submitted that the
‘payment of money’, as it is understood in law, is confined to a
transfer
of money in extinction of a debt, and that it is used in
that sense in the definition. Because no obligation is extinguished
by the
transfer of money for deposit in the Million-a-Month Account,
so the argument went, it does not constitute a ‘payment’.
[16] A cursory examination of the Oxford English
Dictionary will reveal that the ordinary meaning of ‘payment’ is
not confined
to the transfer of money in extinction of a debt and
there is nothing in law that insists that it should bear only that
meaning.
It just as much describes a transfer of money in return for
something and it is used in that sense every day by millions of
people
in the English-speaking world who pay money in return for a
loaf of bread. That it is used with that meaning in the definition is
apparent from the language itself. And the transfer of money to a
bank in return for an undertaking that its equivalent will be
returned
in due course – a deposit –quite clearly falls within
the terms of that meaning. If there is any residual doubt on that
score
it is dispelled by the definition of a deposit in the Banks Act
94 of 1990.
10
There is nothing in that submission and the true case
for the bank lies elsewhere.
[17] It has been said in cases decided under the earlier
legislation that an essential element of a lottery (and thus of a
subscription)
in the context of gambling legislation is that
something is ‘staked’. This is how Watermeyer AJA expressed it in
R v Lew Hoi
11
after considering various dictionary definitions of a
lottery:
‘
Now it will be noticed that some of these
definitions widen the meaning of lottery by omitting the element of
wagering or gambling,
which is introduced when something is staked in
order to acquire a chance of drawing a prize…. The word may
sometimes be used in
that very wide sense but the current of
decisions of Courts of Law both in England and in South Africa show
that the gambling element
must be present for a scheme to be a
lottery of the kind which legislation seeks to prohibit.’
And later, after considering various cases on the
topic:
12
‘
Consideration of all this material leads me to
the conclusion that the essential characteristics of a lottery under
[Transvaal] Law
7 of 1890, are (a) some payment by the participant in
the form of a stake, (b) in return for this payment or in consequence
of it,
acquisition by the payer of a right to a prize on the
occurrence of an event, (c) determination of the occurrence of the
event by
chance.’
That description was subsequently adopted by this court
for purposes of the Gambling Act in
Minister
of Mineral and Energy Affairs v Lucky Horseshoe (Pty) Ltd.
13
[18] I think that care should be taken not to read more
into the first leg of the learned judge’s description of a lottery
than
is warranted. Clearly the learned judge did not mean that a
stake must necessarily be in the form of money – it is apparent
from
its ordinary meaning and from the statutory definitions of a
subscription that other forms of consideration will do. Nor did he
purport
to suggest that loss (or the risk of loss) through the
payment of money must take a particular form before it can be said to
constitute
a stake. I think it is apparent from the second leg of his
description that he meant only that the payment of the money must
have
the consequence – without purporting to prescribe what that
consequence might be – that a stake is created. The question
whether
there was a stake was not in issue in that case. Other cases
that have dealt with whether a ‘stake’ was present –
R
v Ellis Brown & Co
14
and
Lucky Horseshoe
15
are examples – have been concerned with whether the
payment of money and the chance of a prize were sufficiently
connected to say
that the one was given in return for the other and
are not helpful in resolving this case.
[19] A ‘stake’ in the present context has been
described variously as ‘that which is pledged or wagered; that
which is laid
down to abide the issue of a contest, to be gained by
victory or lost by defeat’
16
and as ‘that which is placed at hazard;
esp.
a sum of money or other valuable commodity deposited or
guaranteed, to be taken by the winner of a game, race, contest, etc’
17
and as ‘something (esp. money) bet in a wager, game or
contest’.
18
[20] I have great difficulty envisaging how money that
is paid in return for a chance to win a prize could ever not have the
consequence
that a stake in some form is created – except, of
course, if this is just that case. The fact alone that a person is
willing to
give a prize in return for the payment of money seems to
me to demonstrate ineluctably that a consideration of some kind has
passed
that has value for why else would money be paid for the
exchange? And if that is so it seems to me to follow that whatever
passed
from one to the other was what was wagered or lost for the
chance of the prize and constitutes the stake.
[21] The bank’s case is that nothing is lost or put at
risk by the customer who pays money for deposit to the account – he
or
she is assured that its equivalent will be returned – and for
that reason the payment lacks the characteristics of a stake. That
argument appealed to Van Dyk J in
Boardman v
Minister van Finansies,
19
which is on all fours with the present case in all
material respects. I will return to that case – and the bank’s
argument –
presently but first there is an observation that needs
to be made.
[22] It is by no means clear to me that the meaning that
has been given to a lottery in earlier cases – in as much as it
requires
something to be staked – is equally applicable to a
lottery under the
Lotteries Act. As
pointed out in
Lew
Hoi
the word is capable in ordinary usage of
a wider meaning that omits the element of gambling – it might mean
merely the allotment
or distribution of anything by chance or fate
20
–
and it is quite possible that an unlawful lottery
was intended to have that wider meaning in the
Lotteries Act. It
seems to me that there are two pointers in that direction. The first
is the policy that underlies the
Lotteries Act
– which is not to
prevent money being lost in this way but rather to ensure that the
chance of instant wealth is attainable only
through the National
Lottery. It would make good sense in those circumstances to prohibit
other lotteries that might divert its customers
– whether or not
they require the payment of money. (If it is thought that nobody
would operate a lottery other than for a stake
an example is the
scheme that was considered in
Reader’s
Digest Association Ltd v Williams.
21
)
The second is the extension of the definition of a subscription in
the
Lotteries Act to
include the delivery not only of money or
property but also of ‘any ticket, coupon, or entry form’. Clearly
a ticket or coupon
or entry form alone does not have the
characteristics of a stake. I can see no reason for that extension
but to include amongst prohibited
lotteries any scheme in which a
prize may be won by chance merely by participants announcing their
wish to be eligible for the prize
by performing one of those acts.
[23] If the mere performance of one or other of the acts
described in the definition – which include the act of paying money
–
is all that is required of a subscription under the
Lotteries Act
then
clearly the Million-a-Month Account falls within its terms. But
on the approach that I take to the matter I need not decide whether
that is indeed the meaning. I have assumed for purposes of my
decision, in favour of the bank, that the payment must have the
consequence
that something is staked if the scheme is to be an
unlawful lottery.
[24] To return to the decision in
Boardman.
That case concerned the Defence Bonus Bonds that I
referred to earlier.
22
Money was lent to the government in the form of a bond
that was redeemable after not less than a year. Interest was paid on
the loan
at the rate of 5% but that is not material. The inducement
to purchase a bond was the chance that it offered of substantial
monetary
prizes that were allocated at random. Van Dyk J held that
the scheme was not an unlawful lottery under the Gambling Act because
the
investor was assured of receiving the equivalent of his or her
investment when the bond was redeemed and thus could suffer no loss.
The learned judge appears to have considered that to be self-evident
because he expressed himself in a scant two sentences (my
translation):
23
‘
I think that it is such general knowledge, that
the Court can take notice of it, that a lottery is a gamble and the
gamble lies in
the fact that a person will lose his or her ‘stake’
if [he or she does] not win the prize… [It] requires no persuasion
to come
to the conclusion that all the activities that occur with the
purchase and sale of bonus bonds with the exception that the owner
of
such a bond might also come into contention for a
bonus
over and above his or her 5% tax-free interest, take place without
any risk of loss of his or her investment.’
24
[25] But a reference only to the beginning and the end
of the transaction is an incomplete description that misses the point
of the
transaction. To focus on those two events alone loses sight of
what has occurred to the money in between. It is not correct that
nothing is lost by the customer (and gained by the bank) only because
the money-equivalent is ultimately returned. What passes from
the
depositor to the bank – irretrievably for the period concerned –
is possession of the money with its potential to be turned
to
account. The very purpose of the transaction is to bring about the
transfer possession for possession of money – every banker
will
know – is what enables the bank to earn its interest.
[26] I have no doubt that a right of possession alone –
whether of property or of money – is a consideration that is
capable of
being staked. I would be most surprised if the right to
occupy a holiday house for the summer holidays is not capable of
being staked
in a game of poker only because it must be returned. I
would be equally surprised if the right to use a motor vehicle for a
period
of time is not capable of being staked on the turn of the dice
only because the vehicle would otherwise have remained stationary
in
the garage. And similarly I see no reason why a loan of money (which
is effectively what is in issue in this case) might not be
staked for
the chance to win a prize. Indeed, I find it surprising that a bank
should suggest that the possession of money – the
bread-and-butter
of banking – is not capable of constituting a stake. Particularly
when the whole purpose of the scheme is to persuade
people to part
with it irretrievably for a time by offering them the chance of a
prize.
[27] That the possession of money paid for credit to a
Million-a- Month Account is of considerable value to the bank goes
without
saying. In determining whether it constitutes a stake I do
not think it matters how – or even whether – the money would
otherwise
have been turned to account by the depositor. But in any
event I do not think it can be said that possession of the money that
is
paid in the present case has no value to the depositor – even if
it would otherwise have remained under the mattress. It has at
least
this value to every depositor that it can be exchanged for the chance
to be a millionaire.
[28] There can be no dispute that the money is paid to
the bank in return for the chance to win a prize: the very purpose of
the scheme
is to bring that exchange about. The unavoidable
consequence of making the payment is that possession is lost to the
depositor and
acquired by the bank – irretrievably for the period
that it remains with the bank. In my view that is indeed a
consideration that
is ‘laid down to abide the issue of [the]
contest [to become a millionaire]’, ‘something [that is] wagered
in a game’, and
constitutes a stake. That the outcome is determined
by chance is not in dispute. Those seem to me to be all the elements
of a lottery
as they were described in
Lew
Hoi
. In my view
Boardman
was wrong on that point (the claim in that case was
dismissed on other grounds).
[29] When legislation has received authoritative
judicial interpretation it has been accepted by this court (
Ex
parte Minister of Justice: In re Rex v Bolon
25
)
that it might be presumed that later legislation was intended to bear
that meaning. But it was pointed out in
Bolon
that for the presumption to be applied the
interpretation must be one that is ‘well settled and well
recognised’. I do not think
the finding in
Boardman
that I have referred to can be said to fall into that
category, particularly when it did not purport to be definitive of
the outcome
of that case. (It was held that even if the scheme fell
within the prohibition in the Gambling Act the state was not bound by
its
own legislation and on that ground the claim was dismissed.)
[30] There is a further issue that arises in this
appeal. The bank challenged the Board’s standing to seek the relief
that it sought.
Undoubtedly the bank was entitled to do so in law but
it is curious that it should have elected to do so. Counsel explained
that
if the Minister responsible for the administration of the Act
had brought the application instead, and the scheme had been declared
by a court to be lawful, the Minister would have been bound by that
decision. That would have precluded the Minister, so it was said,
from later declaring the scheme to be unlawful, because that issue
would already have been decided.
[31] It is not clear to me under which section of the
Lotteries Act it
is thought that the Minister might have acted
26
but in any event that reason for taking the point is
misguided. Insofar as the
Lotteries Act permits
the Minister to
declare something to be unlawful it does not purport to authorise the
Minister to determine whether or not it falls
within the terms of the
Act (that is the function of a court). It rather empowers the
Minister by declaration to bring under the
umbrella of the Act
something that would otherwise not have fallen within its terms. But
misguided as the reason for doing so might
be the point has been
taken and it falls to be dealt with.
[32] The submission was said to go to the standing of
the Board to bring the proceedings but in truth it goes rather to
whether it
had the power to do so, which is something different.
Section 10
of the
Lotteries Act assigns
specific functions to the
Board in addition to its other functions in terms of the Act. Unlike
other legislation that creates statutory
bodies the statute does not
expressly confer any powers on the Board but I think it is implicit
that it has all the powers that are
necessary to fulfil its
functions. The functions that are expressly assigned to the Board
include ‘monitoring, regulating and policing’
promotional
competitions as that term is defined in the Act.
27
In my view the lottery that is being conducted by the
bank is indeed such a competition in that it is conducted for the
purpose of
promoting the use of its deposit account. (I should add
that while promotional competitions are permitted by the Act if they
comply
with prescribed conditions there is no suggestion that the
Million-a-Month Account conforms with those conditions.) On that
point,
too, the appeal must fail.
[33] The appeal is dismissed with costs that include the
costs of two counsel.
____________________
R.W. NUGENT
JUDGE OF APPEAL
CONCUR
:
HOWIE P)
STREICHER JA)
COMBRINCK JA)
CACHALIA JA)
1
The
terms upon which the account is operated provides for an early
redemption fee of 2% (including VAT) of the ‘amount invested
over
the remaining period of notice’ with a minimum charge of R250 for
amounts over R10 000 and R100 for amounts under R10 000.
2
[1976]
3 All ER 737
(QBD) at 739f-g. .
3
The
National Lottery is a lottery that is permitted to be conducted by
one licensee who has been licensed to conduct it under
s 13
of the
Lotteries Act.
4
>
Section
36.
5
">
5
Section
37.
6
">
6
Section
38.
7
">
7
Section
54.
8
">
8
The
provisions of the Gambling Act 51 of 1965 relating to lotteries were
repealed by the
Lotteries Act.
9
Act
9 of 1889 in the Cape, Law 7 of 1890 in the Transvaal, and Chapter
CXLIII of the Law Book in the Orange Free State, all of which
prohibited lotteries.
10
‘[A]n
amount of money paid by one person to another subject to an
agreement in terms of which…an equal amount or any part thereof
will be conditionally or unconditionally repaid …’.
11
1937
AD 215
at 219.
12
At
220.
13
1994
(2) SA 46
(A) 52A-G.
14
1938
AD 98.
15
Cited
above.
16
The
Imperial Dictionary.
17
Oxford
English Dictionary.
18
Black’s
Law Dictionary 8 ed.
19
1984
(1) SA 259
(T).
20
The
Imperial Dictionary quoted in
Lew Hoi
at 218 and the
definitions quoted in
Chief Constable, Durban v Stuart
30 NLR
58
at 62. .
21
[1976]
3 All ER 737
(QBD).
22
The
scheme is set out in Government Notice No. 372 dated 29 February
1980.
23
At
266F-H.
24
‘Ek
meen dat dit so algemene kennis is, dat die Hof daarvan kan kennis
neem dat lotery ‘n waagstuk is en die waagstuk lê juis
daarin dat
mens jou inset (“stake”) gaan verloor as jy nie die prys wen
nie…[Dit verg geen betoog] om tot die slotsom te
kom dat al die
aktiwieteite wat gebeur met die koop en verkoop van bonusobligasies
met die uitsondering dat die eienaar van so
‘n obligasie ook in
aanmerking mag kom vir ‘n
bonus
bo-en-behalwe sy 5%
belastingvrye rente, plaasvind sonder enige risiko van verlies van
sy belegging.’
25
1941
AD 345
at 359-360.
26
The
definition of a ‘lottery’ includes any scheme etc. that the
Minister declares to be a lottery by notice in the Gazette.
Section
54(4)
allows the Minister to declare a promotional competition to be
unlawful.
27
See
para 9 above.