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[2016] ZAGPPHC 817
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South African Diamond Producers Organisation v Minister of Minerals and Energy N.O. and Others (98085/2007) [2016] ZAGPPHC 817 (6 September 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO.: 98085/2007
DATE:
6/9/2016
In
the matter between:
SOUTH
AFRICAN DIAMOND PRODUCERS
Applicant
ORGANISATION
and
THE
MINISTER OF MINERALS & ENERGY
N.O.
First respondent
THE
DEPARTMENT OF MENERALS AND
ENERGY
Second respondent
THE
MINISTER OF
FINANCE
Third respondent
THE
DEPARTMENT OF
FINANCE
Fourth respondent
THE
SOUTH AFRICAN STATE DIAMOND
AND Fifth
respondent
PRECIOUS
METAL REGULATOR
THE
SOUTH AFRICAN STATE DIAMOND
DEALER Sixth
respondent
JUDGMENT
VAN
DER WESTHUIZEN, A J
1.
This application relates to amendments that were made to
the Diamonds Act, No. 56 of 1986 and alleged to be
in conflict
with the provisions of the Constitution of South Africa, 1996.
2.
When this matter was called, there was only appearance on behalf of
the plaintiff, the fifth and sixth respondents. There was
no
appearance on behalf of the first, second, third and fourth
respondents, despite answering affidavits having been filed by them
and, in respect of first and second respondents; heads of argument
were also filed on their behalf.
3.
Mr Grobler SC assisted by Ms Gildenhuys appeared on behalf of the
plaintiff. Mr Semenya SC assisted by Machaba appeared on behalf
of
the fifth respondent and Mr Habedi appeared on behalf of the sixth
respondent.
4.
In this application a number of constitutional issues are raised.
These arose as a result of amendments made to the Act that
were made
in accordance with the Diamonds Amendment Act, No. 29 of 2005 (the
First amendment) and No. 30 of 2005 (the Second amendment)
respectively.
5.
The applicant contends that the aforementioned amendments infringe
upon its members' rights and in particular the rights protected
in
terms of the provisions of section 22 of the Constitution, 1996.
6.
Initially a number of constitutional issues were raised relating to a
number of amendments to the Act. These were narrowed down
to only
section 20A of the Act.
7.
The applicant contends that section 20A of the Act offends against
the provisions of section 22 and section 25(1) of the Constitution,
in that
(a)
Section 22 of the Constitution is infringed by section 20A of the
Act, the latter infringing
upon the applicant's members'
constitutional right to choose their trade, occupation or profession
freely; and
(b)
Section 25( 1) of the Constitution is infringed by section 20A of the
Act whereby the latter
arbitrarily deprives the applicant's
members of their property.
8.
The applicant defines in its heads of argument the contravention of
section 22 and section 25(1) of the Constitution by section
20A of
the Act as follows:
(a)
There is no sufficient reason for the regulation in question; and/or
(b)
There is no rational connection between section 20A and the
legitimate government purpose
of the Amendments; and/or
(c)
It goes much further than what is necessary to achieve the purpose of
the Amendments, i.e.
that the effect of the amendments is
disproportional in relation to the legitimate government purpose they
seek to attain.
9.
The submissions on behalf of the applicant in respect of the
aforementioned contentions are premised upon the position pre
amendment and post-amendment of the Act.
10.
In considering the applicant's submissions, they are to be measured
against what the position was pre-amendment. This can be
summarised
as follows:
10.1
Producers
[1]
could
be
in
possession
of
a diamond,
sell
or
export
i
t;
[2]
10.2
A
producer
may only
sell to a
licensee or a holder of a permit
in
terms of
section 26(e) of the Act;
[3]
10.3
A number of licensed dealers created a
modus operandi
at their
licensed business premises whereby unpolished diamonds were offered
on an anonymous tender basis to other South African
licensed dealers
for purchasing parcels on offer. Non-licensed experts, who attended
on behalf of prospective foreign buyers, assisted
the licensed
purchasers.
10.4
The sale was concluded between the producer or licensed dealer and
the South African licensed purchaser;
10.5
The
modus
operandi
described above,
allegedly not only assisted in determining the alleged correct market
value, but also enabled local producers to
mingle with prospective
foreign purchasers.
10.6
Allegedly, by following the
modus
operandi
described above, a prospective foreign purchaser was lined up,
should the parcels purchased be exported and sold on.
10.7
The business premises upon which the aforementioned
modus operandi
was conducted became known as
"
Trading
Houses".
11.
During 1993, the Diamond Board of South Africa issued a directive in
terms of which a condition on all diamond cutting and dealers
licenses was imposed, that reads as follows:
"A
licensee
or his
authorised
representative
may
when
viewing
or
purchasing unpolished
diamonds
on
premises approved
in terms of Section 48(1)(d) (selling office) or a premises
approved in terms
of
Section
48(2)(d)
(buying office),
only be
assisted
by another licensee or
a
natural person
registered as an authorised representative
in terms of
Section 54
of the
Diamonds Act, 1986."
12.
The said directive was contained in a letter addressed to all holders
of a diamond cutter's or diamond dealer's licence. A copy
of that
letter is attached to this judgment.
13.
It was further explained in the said letter that assistance was no
longer permitted in a buying office of a cutter/dealer or
a selling
office of a diamond producer at specified and stipulated areas. The
said letter further explained that the directive
also applied to the
purchasing of diamonds in the selling offices of diamond producers in
certain specified and stipulated areas.
14.
It was specifically mentioned in the aforesaid letter that the
directive did not apply to the viewing or purchasing of diamonds
in
any of the premises of the Diamond Bourse of South Africa, the
business premises of a licensed cutter or dealer (the particulars
of
such premises being reflected on the respective licences), or the
premises of Trans Hex in Parow.
15.
Section 48 of the pre-amended Act stipulated the premises upon which
unpolished diamonds may be sold and purchased. That section
provided
as follows:
"(1)
No producer,
manufacturer
of synthetic
diamonds,
dealer or holder
of
a
permit
referred
to in
section
40(1)(a)
or
(2) shall sell any
unpolished diamond elsewhere than on-
(a)
the business premises of
a
licensee;
(b)
any premise
registered
as
a
diamond
exchange in terms of this Chapter
,
·
(c)
the premises
referred to in subsection (2)(d);
or
(d)
such
other
premises
as
the
Board
may
approve
under section
49 on application
in
writing by such producer, manufacturer or
holder.
(2)
No
Licensee
or
holder
of
a
permit
referred
to
in
section 40(1)(b) shall receive or
purchase
any unpolished diamond elsewhere than
on-
(a)
the business premises of
a
licensee;
(b)
any
premises registered
as
a
diamond exchange in terms of this Chapter
,
·
(c)
the
premises referred to
in
subsection (1)(d); or
(d)
such
other
premises
as
the
Board
may
approve under
section
49
on
application
in
writing
by
the
licensee."
16.
The Act, pre- and post-amendment, is coached in language of
prohibition.
17.
In order to consider the aforementioned alleged infringements and to
determine whether section 20A of the Act impinges upon
sections 22
and 25(1) of the Constitution, the scope of section 20A of the Act is
to be determined.
18.
Section 20A of the Act provides as follows:
"(1)
No licensee
may be assisted by
a
non-licensee
or holder of
a
permit
referred
to
in
section
26 (e) during
the
viewing, purchasing
or selling
of unpolished
diamonds
at any
place where unpolished diamonds are offered
for sale in
terms of this Act, except at
a
diamond exchange and export
centre.
(2)
No holder
of
a
diamond
trading
house
licence
referred
to
in section 26 (f) or any person authorized in terms of this Act to
sell unpolished diamonds
may allow the
assistance
prohibited in subsection (1).
"
19.
The provisions of section 20A effectively put an end to the practice
that evolved pre-amendment of the Act and described above
as the
conducting of
"Trading
Houses".
Put
differently, it practically extended the directive of 1993 to all
premises upon which unpolished diamonds may be sold, offered
for
sale, viewed and purchased in terms of the Act.
20.
In this regard, the parties hold different views of whether the pre
amendment position relating to the
"Trading Houses"
was
lawful or unlawful. Mr Semenya submitted with reference to the
decision in
Saidex
(Pty) Ltd
v
Minister
of
Minerals
and
Energy
2011 JDR 0593 (SCA) that the conducting of
"Trading
Houses"
was unlawful
and that I am bound by that decision.
21.
The Supreme Court of Appeal in
Saidex
had limited
information relating to the letter of 1993 referred to above. That
letter was not before the Supreme Court of Appeal
and only limited
passages were quoted in the record before the Supreme Court of
Appeal. The appellants in that matter attempted
to rely on an alleged
exclusion contained in that letter. On the limited information before
it, the Supreme Court of Appeal ruled
that the conducting of the
business of
"
Trading
Houses"
was unlawful.
22.
The said letter forms part of the papers before me. I have referred
thereto above. On a clear and purposive reading of that
letter, no
exclusion is contained therein. It merely records that in terms of a
directive of the Diamond Board, assistance of non-licensed
persons
are no longer permitted on certain specified premises and with
reference to specific areas. The letter does not seek to
address an
illegal practice. Both parties debated the ambit of the 1993 letter.
23.
As referred to above, the Act pre- and post-amendment is coached in
language of prohibition. Pre-amendment, the Act did not
specifically
prohibit the practice of
"Trading
Houses".
It merely stipulated the acts and premises on which those acts
may be exercised under the particular licence granted. The Act
pre-amendment
did not prescribe a method of conducting the business
of producer or dealer. It did not prohibit any specific or particular
method
of business. The Act pre amendment required that the sale
and purchasing of unpolished diamonds were to be between licensed
persons. The issue of "assistance" was not addressed in the
Act pre-amendment.
24.
It is clear from the description of the so called
"Trading
Houses"
that viewing, selling, offering for sale and
purchasing of unpolished diamonds were in law permitted on those
premises. Such viewing,
selling, offering for sale and purchasing of
unpolished diamonds were conducted following the particular
modus
operandi
as described above. The sale and purchase
of unpolished diamonds on the premises of the
"Trading
Houses"
were concluded between licensed persons as
prescribed by the pre-amended Act.
25.
It follows that the conducting of the business of
"Trading
Houses"
pre amendment was not unlawful as
contended for by the respondents.
26.
It stands to be determined what mischief the amendment introduced in
section 20A of the Act aimed to address.
27.
It is submitted on behalf of the respondents that the mischief is
three fold. Firstly, the amendment sought to promote
local
beneficiation of South African unpolished diamonds. Secondly, it was
aimed at tightening the regulation of unpolished diamonds
and to
eliminate the illegal activities that were taking place in the
diamond trade. A third aim was to comply with the Kimberley
Process
Certification Scheme.
28.
There appears to be no real dispute in respect of the third aim
referred to above and it requires no further consideration.
29.
The first mischief is addressed in sections 59, 59A and 598 of the
amended Act. Those sections provide for the establishment
of the
State Diamond Trader, the sixth respondent, and its functions in
respect of local beneficiating of unpolished diamonds.
In terms of
section 598, the Minister is obliged to determine the percentage of
diamonds produced in a production cycle as may
be required for local
beneficiation and what the Stated Trader may purchase. It is common
cause between the parties that at present
the percentage determined
is 10% of the production of unpolished diamonds in a production
cycle.
30.
In respect of the second mischief aimed at, Mr Grobler submitted
that, once there has been compliance with the provisions of
section
598 of the post-amended Act, the remaining percentage of diamonds
produced in the relevant cycle may be dealt with by the
producer as
he may be deemed fit, provided that there is compliance with the
prescribed provisions of the post-amended Act. Mr
Grobler further
submitted that the mischief, if there was such, of the
modus
operandi
at
"Trading Houses"
no longer
impacted upon local beneficiating of unpolished diamonds.
31.
The respondents' contention in respect of the
modus operandi
of
the so-called
"
Trading
Houses"
is premised upon the view that the business of
"Trading
Houses"
was unlawful, hence necessitating the
amendment by section 20A. I have already found that conducting the
described business of
"Trading
Houses"
was not unlawful pre amendment.
32.
The business of
"Trading
Houses"
in
facilitating local buying and selling of unpolished diamonds, such
that was done pre-amendment, is acknowledged in section 26
of the
post-amended Act. The Act defines
"diamond trading houses"
as meaning "
the
premises at which
the
holder
of
a
diamond
trading
house
licence
may
facilitate
local buying
and
selling
of
unpolished
diamonds."
The concept of what
constitutes
"facilitation"
is not defined in the
Act. It bears its ordinary meaning.
33.
It follows that
per se,
the rights of the applicant's
members in conducting the business of
"Trading
Houses"
have not been impacted upon negatively by the amendment contained
in section 20A, other than the prohibition as to the described
modus
operandi
that was previously followed.
34.
The real dispute appears to be the prohibition of the described
modus
operandi
that was previously followed, i.e. that no licensee may
be assisted by a non-licensee or holder of a permit referred to in
section
26(e) of the post-amended Act in respect of the viewing,
purchasing or selling of unpolished diamonds other than at a diamond
exchange
or export centre.
35.
The dispute between the parties in this regard relates to whether the
described
modus
operandi
was unlawful or
not. The respondents contend that such method of business was
unlawful as was held by the Supreme Court of Appeal
in
SAIDEX,
supra,
hence the prohibition in section 20A.
36.
If the principle of facilitation permitted in section 20A of the Act
at exchange and export centres relates to
being
assisted
by
a
non licensee
or
holder
of
a
permit
referred
to
in
section
26
(e),
it is the very act that is submitted by the
respondents to have been previously unlawful. The applicant contends
otherwise.
37.
Mr Grobler urged me to hold that the past inequality of local
beneficiation is addressed in sections 59, 59A and 598 of the
amended
Act and hence that the prohibition in section 20A of the Act was
irrational and arbitrary and offends against the provisions
of
sections 22 and 25(1) of the Constitution.
38.
If was
submitted
on behalf of the applicant that the
prohibition
was
arbitrary
[4]
i
n
the
sense
that
i
t
deprived
the
applicant's
members
of
their
property,
the
right to
receive
full
market
value,
in the
absence
of
sufficient
reason
being
provided.
He further
submitted
that
i
t
was
i
rrational
with
reference to
l
egitimate
government purpose and that
i
t
goes
much
further
than
what
is
necessary.
[5]
39.
Mr Grobler submitted that the alleged rational for the prohibition in
section 20A, related to local beneficiation of unpolished
diamonds;
vague references being made in the answering papers to the Kimberley
Process Certification Scheme and the need to monitor
the movement of
unpolished diamonds form South Africa.
40.
The issue of local beneficiation is dealt with above.
41.
The issue relating to the Kimberley Process Certification Scheme is
of no real consequence and is not affected by the prohibition
in
section 20A. It is addressed in section 69 of the Act.
42.
The
remaining
i
ssue
of
monitoring
the
movement
of
unpolished
diamonds from South Africa is appropriately dealt with in numerous
sections of
the amended
Act.
The
reliance on
that issue
is
premised
upon a
misplaced interpretation of
the
modus
operandi
at
the
described
"
Trading
Houses".
The
establishment
of
the
State
Diamond
Trader
in any
event
addresses
that
issue
comprehensively.
The
establishment
of
diamond
exchanges
and
export
centres
further
addresses that
i
ssue.
[6]
43.
It was further submitted on behalf of the applicant that the
prohibition in section 20A is arbitrary, with no proportionality,
and
deprives the applicant's members of their right to conduct their
business in the best manner they deem fit.
44.
Nothing untoward appears in following the described
modus
operandi.
The amended Act countenances that very
method at a diamond exchange and export centre. There is no rational
in permitting the
modus operandi
at exchange and export
centres, but prohibiting it at trading houses.
45.
Mr Semenya submitted on behalf of the respondents that the alleged
loss of income complained of by the applicant, i.e. the earning
of a
lesser profit due to not being assisted by knowledgeable non
licensees, does not constitute an arbitrary and disproportional
deprivation of rights under sections 22 and 25(1) of the
Constitution. He submitted that no "property" was deprived
of in that regard.
46.
It was further submitted on behalf of the respondents that section
20A does not limit the freedom of choosing a trade or occupation
and
hence is not in conflict with section 22 of the Constitution.
47.
In my view, section 22 of the Constitution warrants the freedom of
choosing of a trade, occupation or profession and thereby
obtaining
the maximum benefit and advantage accruing therefrom within the four
corners of the law.
48.
It follows that, whilst the prohibited assistance is permitted at a
diamond exchange and export centre, prohibiting assistance
elsewhere
constitutes a deprivation of rights entrenched in sections 22 and 25(
1) of the Constitution.
49.
In my view, that deprivation is irrational, arbitrary and
disproportional.
50.
It is common cause that the onus relating to the provisions of
section 36 of the Act is upon the respondents. The respondents
have
for the foregoing failed to discharge that onus.
51.
It follows that the application must succeed on the limited
issue.
I
grant the following order:
(a)
It is declared that:
(i)
Section 20A of the Diamonds Act, 56 of 1986, as amended by the First
and Second Diamonds
Amendment Acts, 29 and 30 of 2005 respectively,
insofar as it infringes upon the rights of the members of the
applicant as embodied
in section 22 of the Constitution of South
Africa Act, 1996; and
(ii)
The arbitrary deprivation in terms of section 25(1) of the
Constitution of South
Africa Act, 1996 of the rights accrued by those
members of the applicant who perform the functions as tender houses,
to be unconstitutional;
(b)
Pending confirmation of prayer (a) by the Constitutional Court in
terms of section
172 of Act 10 of 1996, the first, second and fifth
respondents be interdicted, prohibited and restrained from
implementing section
20A of the Diamonds Act, 56 of 1986;
(c)
Costs to be paid by the respondents.
_________________________________
C
J VAN DER WESTHUIZEN
ACTING
JUDGE OF THE HIGH COURT
On
behalf of Applicant:
G
L Grabler SC
J L Gildenhuys
Instructed
by:
Cranko, Karp & Associates Inc
On
behalf of Fifth Respondent: IA M Semenya SC
T J Machaba
Instructed
by:
Mkhabela Huntly and Reynecke Inc
On
behalf of Sixth Respondent: H Habedi
Instructed
by:
Routledge Madise
1
st
Floor, S.A. Centre
Street/Breestraat
253
Johannesburg
260499
Excom
(011)
29-8444/9
Fax:
(011) 29-9167
South
African Diamond Board
Suid-Afrikaanse
Diamantraad
All
correspodence to be addressed to: The Chief Executive Officer
Alle
briefwisseling gerig te word aan: Die Hoof Uitvoerende Beampte
Reference:
C J Hambly Date 24 March 1993
Verwysing:
Datum
The
Directors
Rand
Vaal Diamonds (Pty) Ltd
3rd
Floor Sterns Centre
240
Conunissioner Street
JOHANNESBURG
2000
Attention:
Mr A Katz
Dear
Mr Katz
CONDITION
IMPOSED ON ALL DIAMOND CUTTING AND DEALERS IN TERMS OF SECTION 30 OF
THE DIAMONDS ACT, 1986
The
Board, at its meeting held on 18 Mach 1993, imposed with immediate
effect, the following condition on all diamond cutting and
dealers
licences:
"A
licensee
or
his
authorised
representative
may
when viewing or
purchasing unpolished diamonds on a premises approved in terms of
Section 4 8 ( 1) (d) (selling office) or a premises
approved in terms
of Section 4 8 ( 2 ) ( d) (buying office),
only
be
assisted
by another
licensee
or
a natural person registered as an authorised
representative in terms of Section 54 of the Diamonds Act, 1986 . "
In
terms of the Board's decision
, as
s
istance
is no longer
permitted
in a "buying office" of a
cutter/dealer or a "selling office" of a diamond
producer.
The decision therefore applies to the viewing and purchasing of
unpolished diamonds in places such as
Wolmaransstad;
Lichtenburg, Schweizer-Reneke; Barkly West; Kimberley; Boshof;
Christiana; Vredendal; Port Nolloth; and Springbok.
The
decision also applies to the purchasing of diamonds
in the "selling offices" of diamond producers
such as ,
Benguela Concessions/Merwest; Robbaai Beleggings; Carrig Damonds ;
Rovic Diamonds; Broad Acres Investments; Good
Hope
Diamonds and Estates·; Messina; Namagroen
Prospecting& Investments ; Kuboes Diamonds;
North
Bay Canning Co; Samada Diamonds; Berliner
Missionswerk; Baggers/Solid Pump/Commercia; and Port
Nolloth
Municipality.
Please
note, however , that the Board's decision does not apply to the
viewing or purchasing pf diamonds on any of the following
premises:
(a)
The premises of the Diamond Bourse of S A;
(
b) the business premises of a licensed cutter or dealer (the
particulars of such a premises are reflected on a cutter or dealer's
licence); and
(c)
the premises of Trans Hex in Parow.
You
are kindly requested to submit to the Board, within 14 days of the
date of this letter, your original licence docurnent (s)
for the
necessary endorsement.
Yours
faithfully
CHIEF
EXECUTIVE OFFICER
[1]
Defined in
Section 1
of the Act
[2]
Sections 18(a), 19(a) and 24(a) of the Act
[3]
Section 21(a) of the Act
[4]
First
National
Bank
of
SA
Ltd t/a
Wesbank v Commissioner,
South
African
Service
et al; First National
Bank
of
SA
Ltd tla
Wesbank v Minister of Finance
2002(4)
SA 768
(CC) at (100]; see also
Reflect-All
1025
CC
v MEC
for Public
Transport,
Gauteng
2009(6)
SA 391 CC)
at (48]-(49]
[5]
cf.
Affordable
Medicines
Trust
et al
v
Minister
of
Health of the Republic of South Africa
et
al
2005(6)
BCLR 529
CC at [60], [74], [77,] (80]
[6]
Section 59 of the Act