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[2018] ZAKZPHC 31
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River Palace Tab CC t/a River palace TAB v KwaZulu-Natal Gaming and Betting Board and Another (6027/2017P) [2018] ZAKZPHC 31 (8 August 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
Number: 6027/2017P
In
the matter between:
RIVER
PALACE TAB CC t/a RIVER PALACE
TAB
Applicant
and
KWAZULU-NATAL
GAMING AND BETTING BOARD
First
Respondent
GRAND
GAMING KZN (PTY)
LTD
Second
Respondent
ORDER
The application is
dismissed with costs.
JUDGMENT
Delivered on 08 August
2018
Mbatha
J
Introduction
[1]
The applicant is River Palace Tab CC t/a River Palace Tab, a close
corporation (CC) duly incorporated and registered according
to the
close corporation laws of the Republic of South Africa and having its
principal place of business at first floor, 11 Nasik
Road, Merebank,
Durban, KwaZulu-Natal. The first respondent is the KwaZulu-Natal
Gaming and Betting Board (‘the Board’),
a Schedule 3 Part
C public entity in terms of the Public Finance Management Act
[1]
read with the KwaZulu-Natal Gaming and Betting Act
[2]
(‘the KZN Act’) and whose address for service is 330
Langalibalele Street, Pietermaritzburg, KwaZulu-Natal. The second
respondent is Grand Gaming KZN (Pty) Ltd, a company duly incorporated
and registered according to the company laws of the Republic
of South
Africa having its principal place of business at 309 Umhlanga Rocks
Drive, La Lucia Ridge, Durban, KwaZulu-Natal. It is
cited for its
interest in the matter. No relief is sought against the second
respondent.
[2]
On 7 February 2017 the applicant’s application for a licence to
operate five Limited Payout Machines (LPM’s) was
declined by
the Board on the basis that it was in breach of the provisions of reg
107 of the KwaZulu-Natal Gaming and Betting Regulations
(‘the
Regulations’).
[3]
As a
result of the decision of the Board the applicant brought this
application in terms of Rule 53 of the Rules of the Superior
Court.
The
substantive relief sought by the applicant before this court is
twofold: First, the applicant seeks an order reviewing and setting
aside the decision of the Board to refuse its application for a Type
‘A’ Site Operators Licence (‘the licence’)
to
operate five LPM’s. Secondly, it seeks an order of this court
substituting the decision of the Board with one awarding
the licence
to it.
The
relief sought by the applicant is opposed by the Board on the basis
that no case has been made out for the relief sought and
the
application should be dismissed with costs.
Background
to the applicant’s application to the Board
[3]
It is common cause that the applicant made an application to the
Board for a licence to operate five gaming machines from the
ground
floor premises at 11 Nasik Road, Merebank, Durban. The brothers
Derosh and Dilvir Sewraj each own a fifty percent members
share in
the applicant. On the upper level of the same premises River Palace
Tattersalls owned by their father Mr Shrikumar Sewraj
operates five
gaming machines in terms of a Type ‘A’ Site Operators
Licence. It has been averred by the applicant that
the two business
outlets are on different floors, have separate dedicated entrances,
though located in the same building. The premises
on which the
applicant and River Palace Tattersalls operate are owned by Dilvir
Investments CC, in which Shrikumar has the majority
interest.
[4]
The applicant’s application was considered by the Board’s
Licencing and Registration Committee (the Committee),
which compiled
an investigative report on the merits of the application.
Furthermore, the following findings were made: that
the
applicant was previously owned by Shrikumar, who transferred his
members interest in the applicant to his sons Derosh and Dilvir
,
on 9 June 2016, at no cost to them; that the applicant shares the
same trade name River Palace and that the applicant and River
Palace
Tattersalls share the same premises owned by Shrikumar, the licensee,
through his CC, Dilvir Investments CC. No rental for
the premises is
paid by the applicant to Dilvir Investments CC. The report further
disclosed that Derosh and Dilvir became co-owners
of the applicant in
2014. In 2013 Derosh was employed as a manager at River Palace
Tattersalls. Dilvir was employed as a manager
at the Wentworth Hotel.
[5]
The committee also noted that the applicant complied with the
provisions of the KZN Act in that its primary business was a betting
outlet, with a valid business licence number issued by the Ethekwini
Municipality for Totalisator Agency. The committee’s
view was
that the existence of the licensed site under Shrikumar t/a River
Palace Tattersalls, with five LPM’s situated in
the same
premises with the applicant operating on separate floors would not be
a bar to the applicant’s application. It concluded
that the
provisions of reg 107(3) do not prohibit the granting of a licence to
the applicant but requires a discretion of the Board
whether to
approve the application or not. In the light of the aforementioned
information the senior licensing and registration
officer on 27 and
28 October 2016 recommended that the application by the applicant for
five LPM’s be approved.
[6]
The report and the recommendation of the committee were subsequently
tabled before the Chief Executive Officer (CEO) of the
Board.
On 8 December 2016, the CEO, having considered the application, made
a recommendation to the Board that the application
be refused on the
basis that the applicant intends to operate a site situated in the
premises where a site operator licence has
already been granted to
another site operator, being Shrikumar t/a as River Palace
Tattersalls, that the site operator was ‘
associated
with’
the applicant and that the effect of granting another licence to
operate a site would be in contravention of reg 107(1),
which
allows only a maximum of five LPM’s on the premises to a single
entity. The meaning of the words ‘associated
with’ forms
the crux of this application as I will demonstrate later.
[7]
On 10 January 2017 the Licensing, Registration, Monitoring, Control
and Compliance Committee (LRMCC) compiled a report on the
basis of
the findings by the CEO, particularly on the effect of granting the
licence to the applicant and recommended the refusal
of the
application to the Board. The Board on 7 February 2017 subsequently
rejected the applicant’s application, on the following
grounds:
‘
a. the applicant and the
licensee share the same trading name, River Palace;
b. the licensee is a relative of the
members of the applicant;
c. the licensee, Mr Shrikumar Sewraj,
transferred the membership interest of the close corporation at no
cost to his sons Mr Derosh
Sewraj and Dilvir Sewraj;
d. the premises are owned by Shrikumar
Sewraj, the licensee, through his CC, Dilvir Investments CC and the
applicant does not pay
rent for the use of the premises.’
Legislative
framework
[8]
The relevant legislation governing the granting of the LPM licences
is the KwaZulu-Natal Gaming and Betting Act 8 of 2010; the
KwaZulu-Natal Gaming and Betting Regulations, PN 64 of 2012,
PG
983, date of commencement 29 June 2012; the
National Gambling Act 7
of 2004
and the
National Gambling Regulations GN
R.1342,
GG
26994, 12 November 2004.
(a) The National Act’s
purpose as stated in the preamble to the Act provides for the
co-ordination of concurrent national
and provincial legislative:
‘
competence
over matters relating to casinos, racing, gambling and wagering, and
to provide for the continued regulation of those
matters; for
that purpose to establish certain uniform norms and standards
applicable to national and provincial regulation
and licensing of
certain gambling activities; to provide for the creation of
additional uniform norms and standards applicable
throughout the
Republic; to retain the National Gambling Board; to
establish the National Gambling Policy Council;
to repeal the
National Gambling Act, 1996
; and to provide for matters incidental
thereto.’
(b) The KwaZulu-Natal
Gaming and Betting Act 8 of 2010 provides in its preamble
‘
for
the Regulation of gaming, horse racing and betting in the Province of
KwaZulu-Natal; restrictions on gaming and betting; the
establishment
of a provincial Gaming and Betting Board; the licensing of persons
conducting casinos and bingo games; the licensing
of gaming machine
operators, racecourse operators, totalisators and bookmakers; the
registration of certain persons; the imposition
of fees, taxes,
levies and penalties on the various gambling activities; the
appointment and authorisation of inspectors and their
powers and
duties; the establishment of a Horse Racing and Betting
Transformation Fund; and to provide for matters connected therewith.’
(c) The KwaZulu-Natal
Gaming and Betting Regulations were issued in terms of the
KwaZulu-Natal Gaming and Betting Act 8 of 2010.
The Regulations
cater for the issues relating to the appointment of the Board,
various licence applications, and issues specifically
dealing with
Limited Payment Machines, including Type ‘A’ site
operator licences and other issues relating thereto.
(d) Regulation 107 which
forms the subject matter of this application provides as follows:
‘
Maximum
number of limited payout machines.-
(1)
Subject to the provisions of this regulation, the maximum number of
limited payout machines which may be made available for
play in or on
the licensed premises of a type “
A
”
site operator or independent site operator, is five.
(2)
Where an applicant is the owner of several separate sites which are
situated in the same premises or building and such applicant
applies
for type “
A
” site operator licences or independent
site operator licences, in respect of more than one of such sites,
the Board may grant
the application in respect of one or more of the
sites and the maximum of five limited payout machines per site may be
approved
for each site.
(3)
Whenever an applicant applies for a type “
A
” site
operator licence or independent site operator licence, in respect of
a single site owned by him or her and which is
situated in premises
where site operator licences or independent site operator licences
have already been granted to other site
operators or independent site
operators who are not associated with such applicant, the Board may
grant the application in respect
of such premises: Provided that the
total number of limited payout machines in any single
bona fide
sports club, public bar, licensed tavern or licensed betting
outlet does not exceed the maximum of five as contemplated in
sub-regulation
(1).
(4)
Where an applicant conducts more than one primary business from the
same site, such as, but not limited to, a sports club and
a public
bar, such businesses are regarded as one business for the purpose of
an application for a type “
A
”
site operator licence and in the event that the licence is granted,
the total number of limited payout machines specified
in the licence
must not exceed the maximum of five prescribed in sub-regulation.’
[9]
In the notice of motion the applicant has confined itself to the
following grounds of review: (a) the alleged failure by the
Board to
recognise the separate legal personality of the applicant from the
entities owned by Shrikumar, River Palace Tattersalls
and Dilvir
Investments CC (s 6(2)(d) of PAJA);(b) the lack of authorisation on
the part of the CEO of the Board to take a decision
or make a
recommendation (s 6(2)(a) of PAJA); (c) the alleged taking into
account of irrelevant considerations by the Board (s
6(2)(e)(iii) of
PAJA) and (d) that the Board’s decision was arbitrary,
capricious and irrational. (s 6(2)(e)(vi) and s 6(2)
(f)(iii)(bb)-(dd))
Applicant’s
submissions
(a)
The alleged failure by the Board to recognise the separate legal
personality of the applicant from the entities owned by Shrikumar,
River Palace Tattersalls and Dilvir Investments CC (s 6(2)(d) of
PAJA)
[10]
It was argued on behalf of the applicant that the Board failed to
take into account that the applicant is a separate juristic
entity,
that it conflated the entities Dilvir Investments CC (the owner of
the premises) and the applicant, that the Board confused
the juristic
personality of the applicant with the legal personalities of Dilvir
Investments CC and River Palace Tattersalls. In
that regard the Board
has sought to pierce the corporate veil in circumstances where there
is no fraud or abuse of the corporate
entities. The confusion
regarding the corporate and juristic personality of the applicant and
that of its former member led to
the resolution by the Board to
reject the applicant’s application for a licence to operate
five LPM’s on the proposed
premises. Therefore the mistake of
fact led to the mistake of law.
[11]
The applicant submitted that the Board failed to appreciate that
there are two separate and distinct premises with separate
entrances
on separate floors of the building, which is adequate for purposes of
the application.
(b)
The alleged taking into account of irrelevant considerations by the
Board (s 6(2)(e)(iii) of PAJA)
[12]
Counsel for the applicant stated that the Board pointed out that
Derosh is the site key employee of the applicant and at the
same time
the site key employee of the licensee, River Palace Tattersalls,
which is of no consequence as the record reflects that
the manager of
River Palace Tattersalls is Shrikumar. The Board confused the son
from the father and confused premises from a site
and that all this
confusion was unnecessarily caused by the Board in its attempt to
pierce the corporate veil. Counsel for the
applicant argued that if
the applicant was treated as a juristic entity separate from its
members the granting of the licence to
the applicant will not have
the effect that the site would have an excess of five machines in
contravention of reg 107(1). The
Board misconstrued and failed to
comprehend the provisions of reg 107(1).
[13]
The applicant further submitted that the Board was bound by the
reasons set out in the Extract of the Minutes of the Board
meeting
held on 7 February 2017 and cannot supplement them ex post facto, as
it purports to rely on a new ground that the applicant
is associated
with a licensed site operator situated in the same premises, as this
would result in the overlap between the applicant
for the licence and
the current licensee at the premises. Be that as it may, in
addressing the issue of the association, it was
submitted on behalf
of the applicant that since the KZN Act does not have a definition
for the word ‘associate’, the
court should import the
definition of the word ‘associate’ from the
National
Gambling Act, Section
1, which defines the word ‘associate’
as follows:
‘
(a) an employer;
(b) a co-shareholder of a private
company contemplated in section 20 of the Companies Act, 1973
(Act No. 61 of 1973);
(c) a co-member of a Close Corporation
contemplated in section 2 of the Close Corporations Act, 1984 (Act
No. 69 of 1984); and
(d) a person to whom one has granted
or from whom one has received a general power of attorney;’
In
that regard counsel for the applicant submitted that the
aforementioned definition excludes the applicant, as a result there
is no infringement of reg 107(3).
(c)
The lack of authorisation on the part of the CEO of the Board to take
a decision or make a recommendation (s 6(2)(a) of PAJA)
[14]
The applicant also submitted that the CEO had no powers to decide or
make a recommendation to the Board and that the errors
which vitiated
the CEO’s thinking permeated the Board’s decision which
is reviewable in terms of s 6(2)(d), (e)(iii),
(e)(vi), (f)(ii)(aa),
(bb), (cc), and (dd) of PAJA. The applicant contends that reg 107
permits multiple licenses in separate sites
in the same building,
even in cases where one applicant owns those sites.
(d)
That the Board’s decision was arbitrary, capricious and
irrational. (s 6(2)(e)(vi) and s 6(2) (f)(ii)(bb)-(dd)).
[15]
Lastly, it was submitted that the Board acted contrary to its own
decision in a similar application that served before it brought
by a
company called Krummeck
.
In that matter the applicant, a licensee, was a co-owner or fifty
percent member of Kevdon CC t/a Village Tavern Car Wash R Coffee
Shop
which was licensed to operate five LPM’s on the same site. The
site was a single story structure which had been demarcated
as Shop 1
and Shop 2, but the applicant in that case was awarded a second
licence. Thus its decision in this application was arbitrary,
capricious and irrational.
The
Board’s submissions
[16]
The Board submitted that the applicant misinterpreted the provisions
of reg 107(1) which provides that in the ordinary course,
a single
premises, may only have five LPM’s on the property, not each
site as contemplated by the applicant. According to
the Board the
entire building in 11 Nasik Road, Merebank, irrespective of its
separate floors and separate entrances, constitutes
licensed
premises.
[17]
It was submitted on behalf of the Board that reg 107(1) expressly
states that there may not be more than five LPM’s on
the
licensed premises. The only exception is created by reg 107(2), where
it is in respect of an application by an existing site
operator or by
reg 107(3) in respect of the applicants who are not associated with
the existing site operator.
[18]
Regulation 107(3) grants the Board a discretion to grant a licence
for a site situated in the premises where other licenses
have already
been granted to other operators not associated with the applicant.
One needs to define what ‘
not
associated with’
means
in the context of the legislation. It is the Board’s case that
the words should be given their ordinary and commercially
suitable
meaning.
[4]
The Board referred
to the meaning in
The
Shorter Oxford English Dictionary
which describes ‘association’ as ‘The act of
associating or being associated’ and
The
Concise Oxford English Dictionary
[5]
which defines ‘association’ as ‘[a] connection or
cooperative link between people or organizations.’
[19]
Counsel for the Board went on further to state that the words ‘
not
associated with such applicant’
must be read in line with the preamble to the KZN Act, which provides
for ‘the regulation of gaming…; restrictions
on gaming
and betting; …’. Regulation 107(3) goes on further to
say that the Board may grant the application in respect
of such
premises, which gives it the power to exercise its discretion whether
to grant or refuse the application. This takes me
to the
consideration of the submissions made by the various parties herein.
[20]
It is common cause that our law recognises that a company or a CC
acquires an independent legal personality from its shareholders,
directors or members. When the veil is pierced, the separate legal
personality of the company or CC falls away. The rights and
liabilities of the company are treated as those of its shareholders,
directors and members in their personal capacity. The piercing
of the
corporate veil occurs if the shareholders are improperly using the
separate legal personality of the juristic entity.
[6]
In
Knoop
NO & others v Birkenstock Properties (Pty) Ltd & others
[7]
it was held that the corporate veil may be pierced where there is
proof of fraud or dishonesty or other improper conduct in the
establishment or the use of the company or the conduct of its
affairs. In the judgment of
Shipping
Corporation of India v Evdomon Corporation and another
[8]
Corbett CJ stated that the court required proof of ‘an element
of fraud or other improper conduct in the establishment or
use of the
company or the conduct of its affairs’ before a court can
pierce the corporate veil. The piercing of the veil
is an exceptional
remedy.
[21]
The judgment in
Airport
Cold Storage (Pty) Ltd v Ebrahim and others
[9]
dealt with the provisions of
s 65
of the
Close Corporations Act,
which
provides that where the incorporation of a CC or any act by it,
constitutes ‘a gross abuse of the juristic personality of
the
corporation as a separate entity’ the court may declare that
the CC is ‘deemed not to be a juristic person in respect
of
such rights, obligations or liabilities of the corporation’ as
the court specifies. In this case the court applied the
section as
the member of the CC had ignored the juristic nature of the CC
whenever it suited him. Therefore the sole member was
found to be
personally liable for the CC’s debts towards a particular
creditor.
[22]
However, in general, the principle remains that the CC is a separate
legal entity from its members. Therefore the piercing
of the veil can
only occur where there is unbecoming conduct from the members of the
CC. This principle was reaffirmed by the Supreme
Court of Appeal in
Hülse-Reutter
and others v Gödde
[10]
where the court held that
the court has no general discretion to disregard the existence of the
CC simply because it would be ‘just
or convenient’ to do
so. In this regard the applicant’s contention is that there has
been an error of law on the part
of the Board.
[23]
The courts have been guarded in defining the circumstances in which
the court would pierce the corporate veil. The Board considered
the
facts which prima facie appear to be an attempt at piercing the
corporate veil. However, one has to consider the factors that
need to
be considered in the interpretation of reg 107(3).
Review
in terms of PAJA
[24]
The general powers of the court to interfere with the exercise of a
discretion in the administrative decision are set out in
s 6(2)
of
PAJA.
Section 6(2)(h)
provides that ‘A court or tribunal has
the power to judicially review an administrative action if
the exercise
of the power or the performance of the function
authorised by the empowering provision, in pursuance of which the
administrative
action was purportedly taken, is so unreasonable that
no reasonable person could so exercise the power or performed the
function.’
In
Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Tourism
[11]
the court addressed the issue of reasonableness as follows:
‘
Even if it may be thought that
the language of
section 6(2)(h)
, if taken literally, might set a
standard such that a decision would rarely if ever be found
unreasonable,
[12]
that is not the proper constitutional meaning which should be
attached to the subsection. The subsection must be construed
consistently with the Constitution
[13]
and in particular section 33 which requires administrative action to
be ‘reasonable’. Section 6(2)(h) should
then be
understood to require a simple test, namely, that an administrative
decision will be reviewable if, in Lord Cooke’s
words, it is
one that a reasonable decision-maker could not reach.’
In
the same judgment the Constitutional Court further held that what
constitutes a reasonable decision will depend on the facts
of each
case. In determining the reasonableness of the decision the court has
to consider the nature of the decision; the identity
and expertise of
the decision maker; the range of factors relevant to the decision;
the nature of the competing interests involved
and the impact of the
decision on the lives and well-being of those affected.
[25]
For this court to determine if the Board sufficiently considered the
application before it, in the exercise of its discretion,
I have
considered the facts which the Board took into account in coming to a
decision: The main factor which I find to be significant
is that of
the lease agreement between the applicant and the premises owner of
Dilvir Investments. Shrikumar acted in his personal
capacity to sign
the lease as a majority member of Dilvir Investments. This factor in
my opinion compromises the separate legal
personality of the
applicant.
[26]
In that regard the first point of call should lie with the
interpretation of the provisions of reg 107(3), being the empowering
provision that the Board took into account in consideration of the
application. My view is that the entire provisions of reg 107
should
be read conjunctively to give effect to the intention of the
legislature and the purpose of the regulation. Regulation 107(1)
provides that the maximum LPM’s per licensed premises, should
not exceed five; reg 107(2) refers to the applicant who is
the owner
of several separate sites situated in the same premises or building,
who at the discretion of the Board may be granted
an application in
respect of one or more sites and the maximum of five LPM’s per
site; in reg 107(3) the applicant may be
granted a licence at the
discretion of the Board in respect of a site owned by him situated in
premises where other site operators
have already been granted
licences to operate as long as such site operators are not associated
with the applicant and reg 107(4)
caters for a situation where the
applicant conducts more than one primary business from the same site,
which shall be considered
as one business for the purposes of an
application for a Type ‘A’ site operators’
licence. In the event
that such licence is granted, the number of
LPM’s will not exceed the maximum number prescribed in reg
107(1).
[27]
Regulation 107(1) in limiting the number of LPM’s shows that
the intention of the legislature was that the LPM’s
were never
intended to be the primary business of any licence holder, hence the
Board has a discretion to exercise in circumstances
where reg 107(2),
(3) and (4) are applicable.
[28]
I have considered whether the phrase ‘
not
associated with’
should be given the definition of ‘associate’ as stated
in the
National Gambling Act, which
defines the word ‘associate’
as ‘an employer; a co-shareholder of a private company
contemplated in section 20
of the Companies Act, 1973 (Act No.
61 of 1973); a co-member of a Close Corporation contemplated in
section 2 of the Close
Corporations Act, 1984 (Act No. 69 of 1984);
and a person to whom one has granted or from whom one has received a
general power
of attorney;’. It
does
not define the phrase ‘
not
associated with’
which means ‘unconnected with’ and not connected or
linked with other people or organisations. ‘Associate’
in
the National Act denotes a different meaning to the definition in the
National Gambling Act. I
accept the Board’s contention that it
should be interpreted purposively
[14]
in the context of the regulations and the empowering Acts.
[15]
In
general where there is a conflict between the provincial and the
national legislation, the national, legislation takes precedence
over
the provincial legislation as provided for in s 104 of the
Constitution.(
The
MEC: Department of Education, North West Province and another and
FEDSAS
[16]
).
It
is my opinion that when the interpretation of ‘
not
associated with’
is determined, the meaning attributed to ‘associate’ in
the National Act was not intended to refer to reg 107(3).
The
interpretation advanced by the applicant is in conflict with the
purpose of the Act and the Regulations. It is trite that where
there
is concurrent legislative competency and the National and Provincial
Acts overlap the provisions of the Act must be read
in the way that
best reflects the overall national objectives in a manner compliant
with the objectives of the Constitution. (see
FEDSAS
)
The
factors outlined by the Board as pointing to the association are
indicators to the association of the proposed business and
the
existing one. Regulation 107(3) need to be read in line with the
National Gambling Act and
the KZN Act which regulate the granting of
the LPM licences in line with the emphasis placed on the expansion of
LPM’s as
a primary business due to its socio-economic problems.
[29]
Having unpacked what the
phrase
‘not associated with such applicant’
means, I find that this is not a kind of an industry where a person
can run a string of LPM’s like the chicken franchises
where
there is unrestricted competition or where the applicants can obtain
licences without any form of restraint. The legislation
controls the
mushrooming of such industries due to its socio-economic impact on
the population. The fact that it requires that
there be a primary
business before the licence is granted is indicative of this strict
regulation.
[30]
The Board’s approach in considering the effect of the
association was not misplaced. The Board rightfully rejected the
application as it would have had the undesirable effect of a single
site with ten LPM’s, in contravention of reg 107(1).
Though the
Board has a discretion in terms of reg 107(3), the exercise thereof
is conditional upon the applicant not being associated
with any
existing licence holder on the same premises. The applicant’s
association with River Palace Tattersalls would have
resulted in the
circumvention of the provisions of regs 106 and 107 and
s 54
of the
National Gambling Act. The
objective highlighted by s 26 of the
National Act, is relevant to the way the Board exercises its
discretion, being limiting the
scourge of poverty caused by gambling.
It would also have the undesirable effect of having more than the
maximum number of allowed
LPM’s per site. I am quite convinced
that the applicant and River Palace Tattersalls are inextricably
linked to one another.
The phrase ‘
not
associated with’
should be given the meaning as advocated by the Board which indicates
‘a connection or cooperative link between persons or
organizations’. Though the applicant, Dilvir CC and River
Palace Tattersalls are separate legal entities, the Board has shown
that the association between the entities as well as the association
between the members of the entities would be in breach of
reg 107.
The applicant failed to show that the Board acted unreasonably, with
mala fide and irrationally.
[31]
The provisions of
s 26
of the
National Gambling Act which
I referred
to above regarding LPM’s provides as follows: ‘
S 26(1)
Cognisant of the potentially detrimental socio-economic impact of a
proliferation of limited payout machines, the minister must
regulate
the limited payout machine industry in accordance with this section…’
These cannot be regarded as irrelevant
matters.
Section
56(5)
provides that ‘When considering an application made in
terms of subsection (1) or (2) the Board must consider the economic,
social development and competition issues contemplated in
ss 53
and
54
of the
National Gambling Act.’
Section
30(7) which is in line with the National Act provides that ‘When
considering an application made in terms of subsection (1)
(the
application for a licence) the Board must consider the economic,
social development and competition issues contemplated in
ss 53
and
54
of the
National Gambling Act. Section
54(2) provides that after
considering the provisions of subsection (1) must refuse
application…if it appears that approving
the application would
result in the applicant alike or in conjunction with a related
person, achieving marketing power. These provisions
affirm that a
restrictive interpretation be given to the provisions of reg 107(3).
I have therefore given the legislative interpretation
which takes
into account the purpose of the enactment, as confirmed by the
Constitutional Court in the
Mohunran
& another v The National Director of Public Prosecutions &
another
.
[17]
[32]
The applicant gives the impression that it is entitled to the
granting of the licence irrespective of the provisions of
s 107(3)
whereas the discretion conferred on the Board requires the weighing
of the facts before it, the consideration of the empowering
provision
where there already exists LPM’s, the proportionality clauses
limiting the maximum number of LPM’s per site
and other
factors. The objective test is applied to discern if the
administrative action is reasonable or not.
[18]
The Board has satisfied the court that it exercised the discretion in
line with the aforementioned principles and I cannot
find that the
Board’s decision is reviewable.
[33]
There was no confusion by the Board as to the separate and distinct
legal entities of the applicant and the licensee, Shrikumar.
The main
issue being whether there is an association between the applicant and
the existing licensee. The Board’s decision
was based on the
totality of the evidence before it. The applicant relies on the
recommendation by the senior licencing registration
officers, who
recommended the granting of the application
at the discretion of
the Board
(My emphasis). Their report indicates that they were
alive to the unique situation which presented before them as it
appears in
the following paragraphs of their report:
‘
11.2 MATTERS WHICH DO NOT
RESULT IN DISQUALIFICATION BUT NEED TO BE NOTED BY THE BOARD
11.2.1 There is an already licensed
site, Shrikumar Sewraj t/a River Palace Tattersalls, with five (05)
LPMs, situated in the premises
with the applicant, River Palace tab
CC t/a River Palace Tab. The licensee operates on the ground floor of
the building while the
applicant operates on the first floor of the
building. The premises are owned by Mr Shrikumar Sewraj, the
licensee, through his
CC, Dilvir Investments CC and the applicant
does not pay rent for use of the premises.
The licensee, Mr Shrikumar Sewraj, is
the father of the members of the applicant, namely: Mr Derosh Rohul
Sewraj and Mr Dilvir Sewraj.
River Palace Tab CC t/a River Palace
Tab, the applicant, was previously owned by Mr Shrikumar Sewraj, the
licensee, who voluntarily
transferred the ownership of the business
to Mr Derosh Rohul Sewraj and Mr Dilvir Sewraj, the sons at no costs
on 09 June 2016
presumably to avoid the provisions of
Regulation
107(4)
which states as following:
‘
Where
an applicant conducts more than one primary business from the same
site, such as, but not limited to, a sports club and a
public bar
such businesses are regarded
as one business for the purpose of an application for a Type ‘A’
site Operator licence
and
in the event that the licence is granted, the total number of limited
payout machines specified in the licence
must
not exceed the maximum of five.
’
However in terms of
Regulation 107(3)
of the Regulations issued in terms of
the KZN Gaming and Betting Act 08 of 2010-
‘
Whenever
an applicant applies for a Type ‘A’ site operator licence
or independent site operator licence, in respect
of a single site
owned by him or her and which is situated in premises
where
site operator licences or independent site operator licences have
already been granted to other site operators or independent
site
operators who are not associated with such applicant, the Board may
grant the application in respect of such premises,
provided that the total number of limited payout machines in any
single site does not exceed the maximum of five.’
The applicant, River Tab CC t/a River
Palace Tab, is associated to the licensee, Shrikumar Sewraj t/a River
Palace Tattersalls,
owing to the following grounds:
(a)
The applicant and the licensee share the same trading name,
River Palace;
(b)
The licensee is the father of the members of the applicant;
(c)
The licensee, Mr Shrikumar Sewraj, transferred the membership
interest of the close corporation at no cost to his sons, Mr Derosh
Rohul Sewraj and Dilvir Sewraj;
(d)
Lastly, the premises are owned by Shrikumar Sewraj, the
licensee, through his CC, Dilvir
Investments CC and the applicant does not pay rent for the use of the
premises.
Therefore, the provisions of
Regulation 107(3) of the KZN Gaming and Betting Regulations do not
prohibit the granting of the licence
to the applicant but requires a
discretion of the Board whether to approve the application or not.
The Board has already set a
precedent in a similar application, Kevin
Krummeck t/a Village Tavern, where an appeal against the refusal of
the application was
upheld and the Board granted the application.
11.2.2 Signage restricting
access to minors to be installed at the entrance, upon approval of
the licence by the Board.
11.2.3 The line of supervision
of the LPMs is obstructed. CCTV system is required in the gaming area
and must be reflected
on the floor plan.’
The
applicant can therefore not rely solely on their recommendation which
was qualified and subject to the consideration by the
Board.
[34]
It is important that when one reads the provisions of reg 107, that
one takes into account the definition of ‘premises’
in
the KZN Act which defines ‘premises’ to include ‘land
and any building, structure, vehicle, ship, boat, vessel,
aircraft or
container’ as against the definition of ‘site’. The
definition of ‘site’ in the Regulations
refers to
‘premises licensed for the placement of one or more limited
payout machines under authority of a site operator
licence or an
independent site operator licence.’ Regulation 107(1) refers to
the licensed premises which may only have a
maximum of five LPM’s.
Regulation 107(3) contemplates more than one site being granted a
licence within the same premises,
however, that is not the only
consideration that has to be taken into account by the Board.
Having
considered all the above it is my view that the Board did not
misconstrue the provisions of reg 107 nor did it make an error
of law
in so far as the interpretation of the provisions of reg 107(3) is
concerned. It adhered to the general requirement that
there must be a
maximum of five LPM’s, save only in circumstances where the
applicant owns several separate sites in the
same premises, where the
Board may in the exercise of its discretion, grant the application
for more than one site and may grant
a licence for a site in the
premises where other licenses have been granted to other operators
who are not associated with the
applicant.
[35]
The main object of the provision being to regulate the industry but
giving a discretion to the Board in the circumstances where
five
LPM’s are already in place, the effect thereof on the community
and the applicant and the significance of the ruling
in the matter.
Having considered that, I have come to the conclusion that the Board
has shown sufficient grounds for rejection
of the application through
the interpretation of the provisions of s 107(3), that it did not
consider irrelevant issues in taking
into account the purpose of the
Acts and the Regulations thereto and that it has not been shown that
it acted irrationally.
Authority
of the CEO
[36]
In terms of s 6(2)(a) of PAJA the court has the power to judicially
review an administrative action if the administrator who
took the
decision was not authorised to do so by the empowering provision,
acted under a delegated power which was not authorised
by the
empowering provision or was biased or reasonably suspected of being
biased. This is the challenge raised by the applicant
whose
submission is that the CEO took a decision for the Board.
The
composition of the Board must consists of fit and proper persons and
who must in terms of section 8(2) cumulatively have appropriate
knowledge or experience in legal matters, including the application
or administration of law, accounting and financial management
and
other fields. The applicant has not shown that the highly qualified
Board lacks the necessary expertise to rely on the CEO
for further
decisions. The applicant prefers to rely on the recommendation of a
preliminary investigative committee, a committee
established in terms
of s 18(1) to assist the Board in the performance of its functions
and conduct research into any matter falling
within the jurisdiction
of the Board in terms of the Act. Such committees are chaired by a
chairperson, who defers to the Board
that takes the final decision.
The decision by the investigative committee is not binding on the
Board and is subject to the exercise
of a discretion by the Board.
[37]
Section 22 of the KZN Act deals with the delegation of powers, duties
and functions by the Board to the CEO and provides that
where
appropriate the Board may in terms of s 22 (1)(a)(i) ‘to grant
a site operator or independent site operator licence,
to impose
conditions on the issue of such a licence and to amend, substitute or
rescind any condition,… .’ I must
emphasise that ‘where
appropriate’ can only mean that such powers can be exercised
within the specific confines of
the delegated authority only.
This
is expressly stated in s 22(2) which provides that ‘Any
delegation in terms of subsection (1) does not prevent the Board
from
exercising such power or performing such duty or function itself.’
In this case the applicant’s case was tabled
before the Board,
which took a decision. The CEO did not take a final decision. She
made a recommendation to the Board, which is
clear in that the LRMCC
compiled a report on the basis of the findings by the CEO, which was
tabled before the Board which had
to consider the provisions of reg
107. Regulation 107 confers authority on the Board, and not on the
CEO, in determination of such
issues. It is only the Board that made
a final decision.
I
therefore find that her recommendation can never be equated with a
decision taken by the Board.
The
Krummeck Decision
[38]
The
Krummeck
matter
upon which the applicant relied on as a precedent for its application
is distinguishable from the applicant’s case.
In the
Krummeck
case the CEO made a decision rejecting the application in terms of s
22 of the KZN Act.
Krummeck
then appealed to the Board as the decision was made by the CEO in
terms of s 140(1) of the KZN Act and reg 184(1). The Board upheld
the
appeal. I agree with counsel for the Board that mere inconsistency
does not constitute a ground of review in the absence of
a procedural
or substantive unfairness. The Board exercised its discretion which
this court will not interfere with.
[19]
[39]
The argument advanced on behalf of the applicant that they were not
informed that they were bypassing the provisions of reg
107, is
irrelevant as, reg 107 is the empowering provision in so far as the
consideration of the application was concerned. The
grounds stated by
the Board to the applicant are not different reasons, as they embody
what needs to be considered in the determination
of what the phrase
‘
not associated with’
means in terms of reg.
107(3).
The
substitution remedy (s 8(1) of PAJA)
[40]
In light of the conclusion that I have reached in the above
paragraphs, I do not deem it necessary to traverse this aspect
any
further. Suffice to state unequivocally that the applicant has failed
to make out a case on all the grounds of review it relied
upon. Thus,
I do not consider it necessary to consider the remedy sought by the
applicant.
[41]
In the result, the application is dismissed with costs.
__________________
Mbatha
J
Date
of Hearing: 04 May 2018
Date
of Judgment: 08 August 2018
Appearances
For
Applicant:
Adv G Harrison / P Nortje
Instructed
by: McNaught & Company
Suite
1
555
Bluff Road
Durban
c/o
Stowell and Company
295
Pietermaritz Street
Pietermaritzburg
For
First Respondent: Adv PJ Wallis
Instructed
by: PKX Attorneys
Suite
36
3
On Cascades Crescent
Pietermaritzburg
Second
Respondent: Grand Gaming KZN (Pty) Ltd
309
Umhlanga Rocks Drive
La
Lucia Ridge
Durban
[1]
1 of 1999.
[2]
8 of 2010.
[3]
KwaZulu-Natal Gaming and Betting
Regulations, 2012.
[4]
Natal Joint Municipal Pension Fund
v Endumeni Municipality
2012 (4) SA 593
SCA see specifically para 18.
[5]
2ed (2010).
[6]
Robinson v Randfontein Estates
Gold Mining Co Ltd
1921 AD
168.
[7]
[2009] ZAFSHC 67.
[8]
[1993] ZASCA 167
;
1994 (1) SA 550
(A) at 566E.
[9]
[2007] ZAWCHC 25
;
2008 (2) SA 303
(C) paras 11 and 53.
[10]
2001 (4) SA 1336
(SCA) para 20.
[11]
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 44.
[12]
See, for example, the discussion in P
Cane
An Introduction to
Administrative Law
3 ed
(Clarendon Press, Oxford 1996) at 209; and also C Hoexter
The
New Constitutional & Administrative Law,
Volume II Administrative
Law
(Juta, Cape Town 2002)
at 187.
[13]
Investigating Directorate: Serious
Economic Offences and Others v Hyundai Motor Distributors (Pty) Ltd
and Others: In Re Hyundai
Motor Distributors (Pty) Ltd and Others v
Smit NO and Others
[2000] ZACC 12
;
2001
(1) SA 545
(CC);
2000 (10) BCLR 1079
(CC) at paras 21-26.
[14]
Department of Education &
another v Hoerskool Ermelo & another
[2009]
ZACC 32
;
2010 (2) SA 415
(CC) paras 55-56. See also
MEC
for Education, Gauteng Province & others v Governing Body,
Rivonia Primary School & others
[2013]
ZACC 34
;
2013 (6) SA 582
(CC) para 36.
[15]
‘
[R]ead in context and having
regard to the purpose of the provision and the background to the
preparation and production of the’
regulation -
Natal
Joint Municipal Pension Fund v Endumeni Municipality
para18.
[16]
[2016]
ZASCA 192.
[17]
[2006] ZASCA 12
;
2007 (4) SA 222
(CC) paras 77-81.
[18]
Trinity Broadcasting Ciskei
Independent Communications Authority of SA
[2003]
4 All SA 589 (SCA).
[19]
Shidiack v Union Government
(Minister of the Interior)
1912
AD 642
at 651-652.