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[2017] ZAGPPHC 150
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Net1 Applied Technologies South Africa and Others v Chief Executive Officer of the South African Social Security Agency and Others; Finbond Mutual Bank v Chief Executive Officer of the South African Social Security Agency and Others; Smart Life Insurance Company Limited v Chief Executive Officer of the South African Social Security Agency and Others (43557/16; 46024/16; 46278/16; 47447/16) [2017] ZAGPPHC 150 (9 May 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case
number: 43557/16
46024/16
46278/16
47447/16
Date:
9 May 2017
Reportable:
No
Of
interest to other judges: No
Revised.
In
the matter between:
Case
number: 43557/16
NET1
APPLIED TECHNOLOGIES SOUTH AFRICA FIRST
APPLICANT
MONEY
LINE FJNANCIAL SERVICES (PTY) LTD SECOND
APPLICANT
MANJE
MOBILE ELECTRONIC
PAYMENT THIRD
APPLICANT
SERVICES
(PTY) LTD
and
THE
CHIEF EXECUTIVE OFFICER OF
THE FIRST
RESPONDENT
SOUTH
AFRICAN SOCIAL SECURITY AGENCY
THE
SOUTH AFRICAN SOCIAL SECURITY SECOND
RESPONDENT
AGENCY
THE
MINISTER OF SOCIAL DEVELOPMENT OF THE THIRD
RESPONDENT
REPUBLIC
OF SOUTH AFRICA
THE
SOUTH AFRICAN RESERVE BANK FOURTH
RESPONDENT
THE
PAYMENT ASSOCIATION OF
SOUTH FIFTH
RESPONDENT
AFRICA
GRINDROD
BANK
LIMITED SIXTH
RESPONDENT
Case
number: 46024/16
FINBOND
MUTUAL BANK
APPLICANT
and
THE
CHIEF EXECUTIVE OFFICER OF
THE FIRST
RESPONDENT
SOUTH
AFRICAN SOCIAL SECURITY AGENCY
THE
SOUTH AFRICAN SOCIAL SECURITY SECOND
RESPONDENT
AGENCY
MINISTER
OF SOCIAL DEVELOPMENT OF THE THIRD
RESPONDENT
REPUBLIC
OF SOUTH AFRICA
THE
SOUTH AFRICAN RESERVE BANK FOURTH
RESPONDENT
THE
PAYMENT ASSOCIATION OF
SOUTH FIFTH
RESPONDENT
AFRICA
GRINDROD
BANK
LIMITED SIXTH
RESPONDENT
Case
number: 46278/16
THE
SMART LIFE INSURANCE COMPANY
LIMITED APPLICANT
and
THE
CHIEF EXECUTIVE OFFICER OF
THE FIRST
RESPONDENT
SOUTH
AFRICAN SOCIAL SECURITY AGENCY
THE
SOUTH AFRICAN SOCIAL SECURITY SECOND
RESPONDENT
AGENCY
THE
MINISTER OF SOCIAL DEVELOPMENT OF THIRD
RESPONDENT
THE
REPUBLIC OF SOUTH AFRICA
THE
SOUTH AFRICAN RESERVE BANK FOURTH
RESPONDENT
THE
PAYMENT ASSOCIATION OF
SOUTH FIFTH
RESPONDENT
AFRICA
GRINDROD
BANK
LIMITED SIXTH
RESPONDENT
Case
number: 47447/16
INFORMATION·TECHNOLOGY
CONSULTANTS APPLICANT
(PTY)
LTD
and
THE
CHIEF EXECUTIVE OFFICER OF
THE FIRST
RESPONDENT
SOUTH
AFRICAN SOCIAL SECURITY AGENCY
THE
SOUTH AFRICAN SOCIAL SECURITY SECOND
RESPONDENT
AGENCY
THE
MINISTER OF SOCIAL DEVELOPMENT OF THIRD
RESPONDENT
THE
REPUBLIC OF SOUTH AFRICA
THE
SOUTH AFRICAN RESERVE BANK FOURTH
RESPONDENT
THE
PAYMENT. ASSOCIATION OF
SOUTH FIFTH
RESPONDENT
AFRICA
GRINDROD
BANK
LIMITED SIXTH
RESPONDENT
IN
THE APPLICATIONS TO INTERVENE OF:
THE
BLACK SASH
TRUST FIRST
APPLICANT
SIPHO
LENNOX
BANI SECOND
APPLICANT
MARIA
HENDRICKS
THIRD
APPLICANT
PATRICIA
SAPTOE
FOURTH
APPLICANT
EVERNESS
VEPI NKOSI
FIFTH
APPLICANT
SANNIE
SEIPATI
NTHITE SIXTH
APPLICANT
ALETTA
BEZUIDENHOUT SEVENTH
APPLICANT
IN
THE APPLICATIONS FOR ADMISSION AS
AMICI CURIAE
OF:
DAVID
DANIEL
CONSTABLE FIRST
APPLICANT
LUNGILE
VICTOR
MNYATELI SECOND
APPLICANT
NELLIE
OERSON THIRD
APPLICANT
THENJIWE
JANUARY FOURTH
APPLICANT
JUDGMENT
VAN
DER WESTHUIZEN, AJ
[1]
Initially this judgment commenced as an extended and rather lengthy
judgment, however, after much reflection and reconsideration
and for
what follows, it was happily not to be.
[2]
Various applicants brought similar applications against the first,
second and third respondents. At the commencement of the
hearing of
those applications, they were consolidated and heard together. It was
agreed between the parties that Grindrod Bank
Limited (Grindrod),
although the sixth respondent, would argue as applicant, as it
supports the relief sought by the various applicants.
This is a
consolidated judgment.
[3]
It·is recorded that various parties applied to intervene and
others to be admitted as
amici curiae.
I heard submissions
from those parties and indicated that I would consider the
applications to intervene and for the admission as
amici curiae
and deal therewith in this judgment. I have considered those
applications thoroughly and gave much thought thereto. For what
follows
in this judgment and in view of the approach taken herein, I
am of the view that those applications should not be granted. The
relief sought in those applications are not relevant, nor
appropriate, to the approach adopted in this judgment and particular
in view of the relief sought by the applicants and the relief I
intend granting. I shall briefly return thereto later in this
judgment.
[4]
Net1 Applied Technologies South Africa (Pty) Ltd (Net1) applied for
condonation of the filing of a supplementary affidavit responding
to
new facts raised in the application by The Blacksash Trust. Leave was
granted and the supplementary affidavit admitted into
evidence.
However nothing turns thereon.
[5]
The consolidated applications concern the meaning and legality of
amendments to regulations 21 and 26A of the Regulations under
the
Social Assistance Act 13 of 2004 (the Act), that were promulgated on
6 May 2016 (the Regulations).
[6]
The relief that all the applicants in the main applications seek is
in effect a declarator that the amended regulations, and
in
particular regulations 21 and 26A thereof, do not restrict
beneficiaries in the manner in which they operate their respective
bank accounts.
[7]
As the applications concern primarily the interpretation of the
aforementioned regulations, I do not intend to deal with other
issues, raised in the papers, that are not directly relevant to the
issue of interpretation.
[8]
When reference is made to applicants, it refers to the various
applicants in the main consolidated application excluding the
applicants in the. applications for intervention and admission as
amici curiae.
[9]
The crux of the first, second (SASSA) and third (the Department)
respondents' interpretation of the new regulations 21 and 26A,
relates to an interpretation as prohibiting all electronic debits,
stop orders and electronic fund transactions (EFTs) from beneficiary
accounts held at Grindrod. The alleged premise being that the bank
accounts held at Grindrod constitute a
"method determined by
the Agency".
[10]
Following on that interpretation, SASSA instructed Cash Paymaster
Services (Pty) Ltd (CPS) and Grindrod to stop all debit orders
being
processed off the beneficiary accounts with immediate effect from
promulgation of the new regulations.
[11]
The various applicants contested SASSA and the Department's
interpretation and have resisted implementation of the said
instruction.
Consequently, Net1, CPS and Grindrod have been
criminally charged under s 30 of the Act.
[12]
The practical implications of the first, second and third
respondents' interpretation of the said new regulations affect the
operation of over 10 million beneficiary bank accounts that translate
into a value of approximately R550 million per month.
[13]
In. this regard, the South African Reserve Bank (SARB) cautions that
the effect of the first, second and third respondents'
aforesaid
instruction
"would disrupt the system of collection and
payment by creditors and debtors"
that
"would result
in
a
broader economic impact"
due to the unsuccessful
collection of debts.
[14]
New regulation 21 provides as follows:
"21 Method of
payment of social assistance
(1)
The Agency shall pay
a
social
grant-
(a)
into
a
bank
account of the beneficiary or institution where the beneficiary
resides, provided that
(i)
the
beneficiary of .the social grant consents to
payment
in accordance with sub regulation 21(1)(a) in writing and has
submitted such consent in person to the Agency;
(ii)
where
a
beneficiary is
unable to submit the consent contemplated in sub paragraph (i) in
person, alternative arrangements must be made with
the Agency; or
(b)
by the payment method determined by the Agency;
(2)
Social assistance must be paid monthly by the Agency
or a person appointed by the Agency for that purpose in terms of
section 4
of the SASSA Act;
(3)
Subject to the provisions of subregulation (2)-
(a)
in the case of manual payments
a
beneficiary must-
(i)
identify himself or herself by means of an identity
document or biometric identification;
(ii)
personally or via
a
person
appointed by the
beneficiary or Agency,
take receipt of the social assistance payable to him or her; and
(iii)
sign
an acknowledgement of the amount received, if he or she receives
payment of his or her social assistance manually;
(b)
a
beneficiary's signature or biometric
identification serves
as acknowledgement
of receipt for the amount received, unless the amount of the social
assistance is credited to an account held
at
a
financial institution.
(4)
The method of payment contemplated in sub-regulation
1(b) shall not allow for any deductions, except for deductions
allowed for
in terms of this Act."
[15]
The amended regulation 26A reads as follows:
"26A
Circumstances under which
a
deduction may be made directly
from
a
social grant
(1)
The Agency may allow only one deduction per month not
exceeding 10 percent of the value of the beneficiary's social grant
for
a
funeral policy
issued by an insurer registered under the Long-Term Insurance Act,
1998 (Act
52 of 1998) to be made directly
from
a
social grant
where-
(a)
the beneficiary of the social grant consents to such
deduction in writing and has submitted such consent in person to the
Agency;
(b)
a
beneficiary is unable to submit the consent
contemplated
in paragraph (a) in person, alternative arrangements must be made
with the Agency.
(2)
Despite sub-regulation (1) no deduction may be made
in respect of a-
(a)
foster child grant;
(b)
care dependency grant;
(c)
child support grant; and
(d)
social grant awarded for a period not exceeding
twelve months.
(3)
Active deductions for a funeral insurance or a
.funeral scheme from social grants that are excluded in terms of
sub-regulation (2),
may continue to be deducted from a social grant
for a period not exceeding six months following publication of these
Regulations
to allow the beneficiaries and funeral service providers
to make alternative payment arrangements."
[16]
The Supreme Court of Appeal has confirmed the approach to be followed
when interpreting a document, whether it be a statute
or other
statutory instrument or contract, in
Natal Joint Municipal Pension
Fund v Endumeni Municipality
2012(4) SA 593 (SCA). The following
was said in that regard at [18]:
"The present
state of the law can be expressed as follows. Interpretation is the
process of attributing meaning to the words
used in
a
document, be it legislation, some, other
statutory instrument, or contract, having regard to the context
provided by reading the
particular provision or provisions in the
light of the document as a whole and the circumstances attendant upon
its coming into
existence. Whatever the nature of the document,
consideration must be given to the language used in the light of the
ordinary rules
of grammar and syntax; the context in which the
provision appears; the apparent purpose to which it is directed and
the material
known to those responsible for its
production. Where more than one meaning is possible
each possibility must be weighed in the light of all these factors.
15
The process is objective not subjective. A sensible
meaning is to be
preferred to one that
leads to insensible or unbusinesslike results or undermines the
apparent purpose of the document. Judges must
be alert to, and guard
against, the temptation to substitute what they regard as reasonable,
sensible or
businesslike for the words
actually used. To do so in regard to
a
statute or statutory instrument is to cross
the divide between interpretation and legislation. In a contractual
context it is to
make
a
contract
for the pat1ies other than the one they in fact made. The 'inevitable
point of depat1ure is the language of the provision
itself',
16
read in context and having regard to the
purpose of the provision and the background to
the preparation
and
production of the document.
"
[17]
Counsel appearing on behalf of Net1 submitted that the first, second
and third respondents' aforementioned interpretation militates
against the ordinary language of the said regulations when read with
s 20 of the Act.
[18]
That section provides as follows:
"20.
Restrictions on transfer of rights and payments of
social assistance.-
(1)
A grant may not be transferred, ceded, pledged or in any other way
encumbered or disposed of unless the Minister on good grounds
in
writing consents thereto.
(2)
Any act in contravention of subsection (1) is void
and if the Minister becomes aware of any such act, he or she may
order that payment
of the relevant grant be terminated or suspended
immediately and the Agency must, in writing by registered mail at the
last known
address of that beneficiary or procurator, as the case may
be, inform him or her in the official language of the Republic in
which
he or she made the application for the grant-
(a) of the Minister's
decision;
(b)
of
the reasons for that decision; and
(c)
that
he or she has a right of appeal contemplated in section 18
and of the mechanism and procedure to invoke that
right.
(3)
A
beneficiary must without limitation or restriction receive the full
amount of a grant to which he or she is entitled before any
other
person may exercise any right or enforce any claim in respect of that
amount.
(4) Despite subsection
(3), the Minister may prescribe circumstances under which deductions
may be made directly from social assistance
grants: Provided that
such deductions are necessary and in the interest of the beneficiary.
(5) An amount that
accrues or has accrued to a beneficiary or his or her estate in terms
of this Act may not be attached or subjected
to any form of execution
under a judgment or order of a court or by law, or form part of his
or her insolvent estate.
(6) Notwithstanding
the provisions of subsection (1), in the case of death of a parent,
procurator or primary care giver receiving
a grant on behalf of or in
respect of another person or child as the case may be, the Agency
must appoint a person to receive the
grant on behalf or in respect of
such person or child, and to use it for his or her benefit without
suspending the grant, subject
to prescribed conditions."
[19]
It may be prudent to recap on the payment system applicable in
respect of social grants. In a nutshell it involves the following
procedure. Social grants are paid from the budget of the Department
of Social Development, administered by SASSA through CPS. In
that
regard, SASSA pays over the total amount of social grant payments to
CPS. In turn, CPS pays the amount received from SASSA
into the SASSA
Funding Accounts at
inter alia,
Grindrod. From those accounts,
the respective payments to the recipients are paid into their
respective personal accounts held at
Grindrod. Each of those
recipients who hold the bank accounts with Grindrod in their own
names, have direct client/banker relationships
with Grindrod, or with
any other banking institution. The grant recipients hold their
accounts subject to the terms and conditions
of the respective bank
accounts. Furthermore, the Grindrod bank accounts operate within the
ordinary and regulated banking environment
of the National Payment
System.
[20]
No contractual relationship exists between SASSA and Grindrod.
Furthermore, SASSA does not operate the accounts held at Grindrod.
Each recipient of a grant is obliged to present himself or herself
every month at an ATM, CPS pay-point or other merchant's
point-of-sale
device to authenticate the transfer of the grant into
his or her bank account. This is also true where recipients of social
assistance
hold bank accounts at other banking institutions.
[21]
The process provides that "direct deductions" are made
prior to the recipient's receipt of the grant, i.e. before
the grant
is paid into the recipient's bank account. This much is clear from
the provisions of s 20(3) of the Act. In contrast
thereto, any
debit order against an account at Grindrod, or other bank
instit4tion, is made after the grant is paid into the said
account,
i.e. the processing of a debit order entails compliance on the part
of Grindrod, or other bank, with an instruction from
an account
holder to pay a third party and is effected only if sufficient funds
are in the said account.
[22]
In my view, from the foregoing procedure, it is clear that once the
grant is transferred into the recipient's account at Grindrod,
it
operates as any bank account at any Commercial Banking Institution.
There is clearly no difference and SASSA equally has no
control over
such account with Grindrod as it does not have control over any
account with a Commercial Bank. For the foregoing,
there is no merit
in the submission on behalf of the first, second and third
respondents that the Grindrod bank accounts are not
bank accounts
chosen by the beneficiaries, but is
"a
method of
payment chosen by the Agency".
[23]
Further support is to be found in the provisions of new regulation
21(1)(a) which stipulates that a social grant is to be paid
into a
bank account. The type of bank account is not defined, nor specified.
Regulation 21(1)(a) clearly provides for two
scenarios,
either
a bank account, or a payment method determined by the Agency. The
latter method envisages a specific alternative method that
is not a
bank account. No such determination appears to have been made, but
for the constrained and forced interpretation by the
first, second
and third respondents referred to above.
[24]
On a purposive reacii.ng of regulation 21(1), it is clear that the
prohibition in regulation 21(4) is not applicable in respect
of
regulation 21(1)(a). The two categories, regulations 21(a) and (b),
must of necessity entail different and distinct payment
methods. That
much is clear from the use of the disjunctive "or" in
regulation 21(1).
[25]
Furthermore, I find support for the foregoing in the provisions of s
20(3) of the Act recorded above. That sub-regulation clearly
stipulates that a recipient is to receive the full grant amount
before any third party may exercise any rights or enforce any claim
in respect of that amount. Consequently, the full amount of the grant
(bar any direct deduction of a 10% funeraI subscription)
is to be
transferred into the recipient's bank account prior to any deduction
thereof by way of a debit order. No other deductions
may be made
prior to the transfer of the grant amount into the recipient's
account, whether at Grindrod or other banking institution.
[26]
Section 20(4) of the Act, recorded above, qualifies the provisions of
s 20(3) of the Act. It provides that the Minister may
prescribe
circumstances under which deductions may be directly made from social
assistance grants, provided that such deductions
are
"necessary
and in the interest of the beneficiary".
By necessary
implication such deduction must be made prior to the beneficiary
receiving the grant amount in his or her bank account.
Such
interpretation is in accordance with the dictionary meaning of the
word "direct", i.e.
should
be direct, straight
and close, not devious and remote".
(Concise Oxford English
Dictionary, s.v. 'direct')
[27]
Neither, in my view, does s 20(1) of the Act assist in interpreting
regulations 21 and 2'6A in accordance with first, second
·and
third respondents' view. That sub-section clearly does not apply in
respect of debit orders entered against a banking
account A debit
order is nothing more than an electronic form of payment that is
effected upon an instruction by the bank account
holder to his or her
bank in favour of a third party. In no way can it be interpreted as a
"cession, pledge or other encumberment".
The debit
order levied against a recipient's bank account is nothing other than
payment of a legitimate debt. In that sense, it
does not amount to a
transfer, cession, pledge, encumberance or disposal of such grant.
[28]
Futhermore, it is common cause that neither SASSA, nor the Minister
of Social Development, is extended regulatory powers under
the Act
that would empower them to regulate and impose rules and
·restrictions relating to electronic payment. Such powers
are
deferred to the SARB.
[29]
The first, second and third respondents correctly concede that where
recipients hold bank accounts with other commercial banking
institutions, their aforesaid interpretation of sub-regulations 21
and 26A does not and cannot apply. In my view that concession
puts
paid to the first, second and third respondents' arguments. The
procedure of payment of the grant amount into the beneficiary's
account with Grindrod outlined above, is no different to that where
the grant amount is paid into a recipient's bank account with
a
Commercial Bank. Accordingly, the first, second and third
respondents' interpretation is contrived, forced and untenable.
[30]
Applying the principles enuciated in
Natal Joint Pension Fund,
supra,
the first, second and third respondents' interpretation
cannot be upheld for the reasons dealt with above. From the
foregoing,
the language used in the light of the ordinary rules of
grammar and syntax; the context in which the provisions appear; the
apparent
purpose to which it is directed and the material known to
those responsible for its production, clearly militates against the
first,
second and third respondents' interpretation. That
interpretation leads to an insensible and unbusinesslike result. It
defies the
purpose of the provisions of the regulations. Accordingly,
the correct and appropriate interpretation of those regulations are
as contended for by the applicants.
[31]
In the alternative to a declarator, relief is sought in the form of a
review of the promulgation of the offending regulations.
In view of
the foregoing findings of the correct and appropriate interpretation
of the said regulations, it is not required to
further consider such
relief.
[32]
I have held above that the applications to intervene and for
admission as
amici curiae
cannot succeed. The relief that
those parties seek, go much further. It deals .with alleged
constitutional issues. ·Those
are not strictly relevant in
considering the interpretation of the provisions of regulations 21
and 26A, the subject of the main
applications. This is not the forum
to consider such issues and possible relief in that regard.
Accordingly, those applications
are refused. I intend to make no
order in respect of costs occasioned by those applications.
[33]
It follows that the applicants are entitled to a declarator.
I
grant the following order:
(a)
It
is declared that regulations 21 and 26A of the Regulations Relating
to the Application for and Payment of Social Assistance and
the
Requirements or Conditions in Respect 'of Eligibility for Social
Assistance, as amended under Government Notice R.511 in Government
Gazette 39978 of 6 May 2016, read with
section 20
of the
Social
Assistance Act 13 of 2004
, do not operate to restrict beneficiaries
in the operation of their bank accounts;
(b)
The
first, second and third respondents are to .pay .the costs, including
the cost of two counsel where applicable, jointly and
severally, the
one paying, the other to be absolved;
(c)
The
applications to intervene and the applications for admission as
amici
curiae
are refused;
(d)
No
order is made in respect of the costs occasioned by the applications
to intervene and for admission as
amici
curiae.
___________________
C
J VAN DER WESTHUIZEN
ACTING
JUDGE OF THE HIGH COURT