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[2008] ZASCA 60
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Minister of Agriculture and Another v Bluelilliesbush Dairy Farming (Pty) Ltd and Another (270/2007) [2008] ZASCA 60; [2008] 4 All SA 81 (SCA); 2008 (5) SA 522 (SCA) (29 May 2008)

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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case : 270/2007
REPORTABLE
In the appeal between:
THE MINISTER OF AGRICULTURE
...
First
Appellant
THE DIRECTOR: ANIMAL HEALTH, DEPARTMENT OF AGRICULTURE
...
Second Appellant
and
BLUELILLIESBUSH DAIRY FARMING (PTY) LTD
...
First
Respondent
GRASSLANDS AGRICULTURE (PTY) LTD
...
Second
Respondent
Before: Cameron JA, Nugent JA, Cloete JA, Maya JA, and Cachalia JA
Heard: Tuesday 20 May 2008
Judgment: Thursday 29 May 2008
Animal Diseases Act 35 of 1984 – compensation under s 19(2) read
with regulation 30 – animals slaughtered because of infection
or
reasonably suspected infection with bovine tuberculosis – dairy
herd – ‘fair market value’ connotes value of animals free
of
infection
Neutral citation: Minister of Agriculture v Bluelilliesbush Dairy
Farming (270/07)
[2008] ZASCA 60
(29 May 2008)
JUDGMENT
_______________________________________________________
CAMERON JA:
This is an appeal by the Minister of Agriculture (the minister), the
director of animal health in the department (the director)
and the
Member of the Executive Council for agriculture in the Eastern Cape
against a judgment of Jansen J sitting in the High
Court in Port
Elizabeth. The judgment reviewed and set aside a decision of the
minister confirming a recommendation of the director
about the basis
on which compensation was to be calculated for animals slaughtered
under the Animal Diseases Act 35 of 1984 (the
Act).
1
The judgment upheld the basis for which the respondent companies
contended, and ordered payment to them of R14 395 537 (plus
interest).
2
The appeal, brought with leave granted by Jansen J, requires us to
resolve the parties’ contesting approaches to the question
of
compensation.
In May 2004, an outbreak of bovine tuberculosis (TB) occurred on the
farms on which the two respondents (the claimants) conduct
dairy
farming. The disease is extremely contagious and though it can be
treated the animals affected remain infectious: hence policy
is to
cull those found or suspected to have the disease. The claimants
form part of a group of companies that runs the largest
dairy
farming operation in the Eastern Cape, and one of the largest in the
country. The first claimant owns the dairy cattle, while
the second
is the trading entity that leases assets from other companies within
the group. The outbreak affected all eight farms
on which the group
farms. More than 7 000 cows, heifers, heifer calves, bull calves and
bulls had to be slaughtered. A director
of both claimants, Mr
Elliott (who was the claimants’ chief voice in the litigation),
described the outbreak in the months immediately
after it occurred
as ‘a catastrophic disaster’.
The appeal concerns the extent to which public funds may mitigate
the disaster. The Act provides that the owner of an animal destroyed
under its provisions may claim compensation for the loss.
3
The basis on which compensation may be awarded is set out in s 19(2)
(subsections (3) and (4) are not germane to the appeal):
‘
The director may, taking into
consideration –
the applicable compensation, based on a fair market
value of the animal or thing, which has been prescribed for purposes
of this
section or, where no compensation has been so prescribed,
any amount fixed by him in accordance with any criterion deemed
applicable
by him;
the value of any thing which has in connection with the
animal or thing been returned to the owner;
any amount which is due by the owner pursuant to any
provision of this Act in respect of the animal or thing to the
State; and
any amount which may accrue to the owner from any
insurance thereof,
fix a fair amount of compensation.’
4
The statute provides that a person who feels aggrieved by any
decision of or steps by the director may lodge an objection with
the
Minister (s 23(1)).
5
The objection must be lodged with the director-general of
agriculture, ‘who shall submit it together with his recommendation
to the Minister for a final decision’ (s 23(2)).
6
In this case, the Minister, after considering a written report
submitted to her in terms of s 23(3)(a),
7
upheld the director’s decision.
In a letter recording her decision dated 19 January 2006, the
Minister indicated that she had decided to uphold the director’s
decision:
‘
The reasons for my decision are
that the Director was correct in determining the fair amount of
compensation and did not act contrary
to the provision[s] of section
19 of the Animal Diseases Act …
The Director has fixed the price at slaughter price as
the animals infected with TB cannot recover from the disease and will
certainly
die.’
The appellants insisted that the decision to be targeted in the
review was not that of the Minister (who merely considers an
objection
to the director’s decision), but that of the director
himself. Though nothing turns on this, since both Minister and
director
are before the court, in my view the claimants rightly
targeted the decision of the Minister, since in case of objection
the statute
subjects the decision of the director to overruling by
her, while making hers the ‘final decision’
8
.
It was common cause that the determination of the basis on which
compensation should be calculated constituted administrative action
under the Promotion of Administrative Justice Act 3 of 2000 (PAJA),
9
which was liable to review under that statute.
Section 19(2) of the Act makes clear that –
the power to fix compensation is vested in the director;
the compensation must be ‘a fair amount’;
in addition to the factors set out in subparagraphs (b)-(d), the
director is obliged to take into consideration in terms of (a)
the
applicable compensation prescribed for purposes of s 19, where such
compensation is prescribed; and
when compensation is prescribed, it must be ‘based on a fair
market value of the animal’.
The power to make regulations conferred by s 31 of the Act was
indeed exercised,
10
and reg 30 provides:
‘
Compensation
When compensation is payable to a responsible person
[defined as a manager or owner of land or an owner of animals] in
terms of section
19 of the Act, the applicable compensation shall –
in the case of an infected animal, be 80 per cent of
the fair market value thereof;
in the case of an animal killed for any controlled
veterinary act or for the prevention of the spreading of a
controlled animal
disease, be 100 per cent of the fair market value
thereof;
in the case of an infectious thing, excluding an
animal, and a contaminated thing, be 50 per cent of the fair market
value thereof.’
The parties’ dispute centres on the meaning to be given to ‘fair
market value’ in reg 30(a). Although the dispute was presented
as
requiring interpretation of the concept of ‘fair market value’,
this is not quite correct. The meaning of that phrase by
itself is
clear – it means the price that a willing buyer would pay a
willing seller in the open market. The real question is
this: what
is to be the subject of the valuation? Is it to be the animal in its
infected state (as the Minister and director contended)
– in which
case its value is that of a slaughter animal (being the value of the
usable parts of the slaughtered carcass)? Or
is it to be the animal
in its uninfected condition (as the claimants contended) – in
which case the fair market value is that
of a productive dairy
animal, which is about five times its value for slaughter?
To value the animals as if they were fit only for slaughter would,
the claimants point out, reduce their compensation to a fraction
of
the animals as a dairy herd. But the director – supported by the
departmental officers who conducted the statutory investigation,
and
confirmed by the Minister – contends that compensation under reg
30(a) is limited to slaughter value. This is because once
an animal
is infected its value is irredeemably diminished. Such an animal
cannot be used for breeding or milking, it will never
recover from
the disease, and it is anyhow infectious. It can therefore never be
sold for any purpose other than slaughter. This,
the director says,
is definitive of its statutory value.
Were subparagraph (a) to be taken on its own, the subject of the
valuation (that is, the ‘infected animal’ before or after
it
became infected) may be opaque. But it does not stand on its own. It
must be read with subparagraph (b), from which the subject
of the
valuation emerges limpidly. This prescribes compensation at ‘100
per cent of the fair market value’ of an animal killed
‘for any
controlled veterinary act or for the prevention of the spreading of
a controlled disease’. The Act’s definition
of ‘controlled
veterinary act’,
11
read with its definition of ‘controlled purpose’,
12
reveals that subparagraph (b) killings are for prevention only. The
animals are in other words uninfected.
It was common cause that the animals in this appeal were slaughtered
under (a), not (b). (The claimants’ founding affidavit asserts
that because of a certain number of ‘false positive’ responses
to the tests for bovine TB, and because all animals suspected
of
being infected were slaughtered, the animals slaughtered necessarily
included some uninfected animals.
13
In his answering affidavit, the director, Dr Botlhe Michael
Modisane, disputes this, though he concedes that ‘once there is an
outbreak of a disease such as bovine TB, most animals [testing
positive] are normally condemned for slaughter as a control measure’
– impliedly conceding that at least some of the animals
slaughtered may not have had the disease.)
Nevertheless, the compensatory scheme contemplated by (b)
illuminates that in (a). The compensation to be paid under (b) is
clearly
the full fair market value of a healthy animal (in the case
of a dairy cow, its value as a productive animal, and not merely its
value for slaughter). The same compensatory scheme is plainly
contemplated in (a), which envisages that same value being reduced
by one-fifth for compensation purposes when the animal is (or is
reasonably suspected of being) infected. Indeed, that (a) allows
for
compensation at only a portion (four-fifths) of the ‘fair market
value’ of the animal seems to me to indicate conclusively
that the
regulation envisages the value of the animal as if it was not
infected. For if it was a reference to the value of the
animal in
its infected condition there is no apparent reason why compensation
should be set at only 80%. It would if that were
so serve the owner
better to send the animal to slaughter him- or herself, and thereby
receive the full value of its carcass on
slaughter. The regulation’s
compensatory scheme retains coherence only if the value to which it
refers is the value to be placed
on the animal as if it is not
infected.
The Minister and the director have not attacked the validity of the
regulations – indeed, they relied on them as correctly guiding
the
director in determining a fair amount as compensation under s 19.
And counsel for the Minister did not suggest in argument
that the
basis of valuation in (b) could be anything other than disease-free
value; nor that the basis of valuation in (a) could
be any different
that in (b).
It follows that the contentions of the claimants are correct and
that the review was rightly granted, for substantially the reasons
set out by Jansen J.
It should be added, however, that reasons of policy and good sense
appear to underscore the meaning in the regulations. The history
that led to the dispute is partly chronicled in departmental
memoranda and records released to the claimants in response to the
application. It appears that a voluntary animal health scheme was
introduced in 1969 to eradicate bovine TB. All animals testing
positive were sent for slaughter: the compensation paid to farmers
was based on 80% of the full market value (not slaughter value)
of
the animal. In 1992, after farmers and stock-owners from the former
homelands joined the department’s control scheme, the
department
reduced compensation to R200 per animal slaughtered, irrespective of
value, because of lack of funds. Unsurprisingly,
this proved
unpopular with farmers, according to an account set out in a
departmental memorandum, and very few presented their
herds for
testing. This led the department to recommend in September 1999 that
a new system of compensation be introduced to take
account of the
slaughter value of the animals – which was an improvement on the
previous system, but ignored the productive value
of dairy herds.
As the claimants pointed out, the departmental policy inadequately
takes account of the Act’s objectives, which are designed
to
elicit the voluntary cooperation of farmers. (The bovine TB control
scheme is itself voluntary.) To give infected or suspect
dairy cows
their slaughter value for compensation purposes offers no incentive
to farmers, small-scale or large-scale, to participate
in disease
control measures.
By corollary, as the claimants also pointed out, if fair market
value were assessed on the basis that the animals destroyed were
infected, the state would not be required to pay any compensation at
all – since the farmer could simply sell the infected cattle
out
of hand for whatever could be achieved on the open market (that is,
the animal’s hide and whatever meat could be salvaged
from it).
The meaning in the regulations, by contrast, ensures the cooperation
of farmers and their continued ability to farm.
It also eliminates
the prejudicial disadvantage dairy farmers would have suffered in
comparison with beef farmers had the director’s
basis prevailed.
Jansen J granted the claimants the full amount of compensation they
claimed in their notice of motion, declining over the Minister’s
initial opposition to refer the matter back to the director for
reconsideration, as PAJA requires bar in exceptional cases.
14
In doing so, he took account of a detailed schedule the claimants
attached to the application, setting out extensive details of
the
cattle destroyed, the meat and hide value recovered, and the dairy
value as indicated by sworn valuations. The answering affidavit’s
disputation of these details was oblique, and no controverting facts
of bases for valuation were put forward.
However, in argument before this court, the claimants conceded that
the figure awarded should be reduced to 80% of the market values
they set out in the schedule, since their claim had been made under
reg 30(a), and not (b), as seems to have been assumed in the
court
below. In the result, the claimants conceded that the amount awarded
in the court below fell to be reduced. After an adjournment
to
enable Mr Buchanan on behalf of the claimants to consult, the agreed
figure that is reflected in the order below was proffered
to the
court, and accepted by the Minister and the director.
In the light of this, Mr Nthai on behalf of the Minister and the
director, after the same adjournment, indicated that he conceded,
were the claimants’ contentions on fair market value to prevail,
that there would be no need to remit the matter.
Although the reduction of the amount of compensation represents a
measure of success for the appellants in monetary terms, the
main
and indeed overriding focus of the proceedings all along has been
the correct method of calculating the compensation payable
under the
regulations. It was the Minister’s and director’s approach to
this issue that obliged the claimants to go to court
and to defend
the judgment on appeal. It would therefore be unjust to deprive them
of any portion of their costs.
The following order is issued:
The appeal succeeds to the extent that the amount of compensation
the first and second appellants are ordered to pay is reduced
from
the sum of R14 395 537 to R10 853 777.
Save in this respect, the appeal is dismissed with costs.
E CAMERON
JUDGE OF APPEAL
CONCUR:
NUGENT JA
CLOETE JA
MAYA JA
CACHALIA JA
1
The
Act has been repealed by the
Animal Health Act 7 of 2002
, which has
not yet been brought into operation
.
2
Bluelilliesbush
Dairy Farming (Pty) Ltd v Minister of Agriculture
[2007]
3 All SA 35
(SE).
3
Animal
Diseases Act 35 of 1984, s 19(1):
‘
The owner of any animal or other thing which
has been destroyed or otherwise disposed of pursuant to any control
measure, or any
provision of section 17(3) or (5), or any other
provision of this Act, by the director or on his authority, may
submit an application
for compensation for the loss of the animal or
thing to the director.’
Section 1 read with s 2(1) defines ‘director’ as the director of
animal health of the department of agriculture, ‘who shall
be a
veterinarian’.
4
The
provisions of s
21 of the repealing 2002 statute appear to be
substantially identical to s 19 of the Act.
5
Section
23(1):
‘
Any person who feels aggrieved by any decision
of or steps taken by the director, or by any other person or body
referred to in
section 10(7)(a) [that is, a person or body empowered
by the Minister to exercise powers and duties under an animal health
scheme
established in terms of s 10], or by any employee or other
person under the control or direction of any such person or body, in
terms of this Act, may within the prescribed time and on payment of
the amount which is prescribed, lodge in accordance with the
provisions of this section an objection against the decision or
steps with the Minister.’
6
Section
23(2):
‘
An objection shall be submitted in the
prescribed manner to the Director-General, who shall submit it
together with his recommendation
to the Minister for a final
decision.’
7
Section
23(3)(a):
‘
For the purposes of his recommendation
contemplated in subsection (2), the Director-General may, if he
deems it necessary, designate
one or more senior officers in the
department to institute an investigation regarding the reasons for
the objection and the circumstances
which gave rise to the
complaint, and to submit to him a written report concerning it.’
(Sub-paragraph (b) disqualifies the director and any other officer
who has been involved in the decision or steps from being designated
to investigate.)
8
Section
23 (2), read with 23(4)(a):
‘
The Minister may, after consideration of the
objection and the recommendation of the Director-General, confirm,
vary or set aside
the relevant decision or steps …’
9
Section
1 of Act 3 of 2000 defines ‘administrative action’ as ‘any
decision taken … by (a) an organ of state when – …
(ii)
exercising a public power or performing a public function in terms
of any legislation; … which adversely affects the rights
of any
person and which has a direct, external legal effect …’. On the
interpretation of this definition, see
Grey’s Marine
Hout Bay (Pty) Ltd v Minister of Public Works
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA) paras 21- 24.
10
Animal
Disease Regulations, Government Notice R2026, published in
Government Gazette 10469 of 26 September 1986.
11
Animal
Diseases Act, s 1, definitions:
‘”
controlled veterinary act”,
in relation to any animal or thing, means –
(a) the isolation, detention, inspection, testing,
immunization, observation, sampling, marking, treatment, care,
destruction or
any other disposal of;
(b) the carrying out of any operation or of any
post-mortem examination on; or
(c) the rendering of any service pertaining specially
to the veterinary profession referred to in the rules made under
section 30
(1) (a) of the Veterinary and Para-Veterinary Professions
Act, 1982 (Act 19 of 1982), in respect of,
any such
animal or thing for any controlled purpose
’
.
12
Animal
Diseases Act,
s 1, definitions:
‘”
controlled purpose” means the prevention
of the bringing into the Republic, or the prevention or combating of
or control over
an outbreak or the spreading, or the eradication, of
any animal disease or, where applicable, of any parasite’.
13
Regulation
1 defines ‘infected animal’ as including
an ‘animal
that is infected, or is on reasonable grounds suspected to be
infected’.
14
PAJA
s 8(1)(c)(ii), Remedies in proceedings for judicial review, provides
that a court that sets aside administrative action may
‘in
exceptional cases’ substitute or vary the action or correct a
defect itself without remitting the matter.