Comair Limited v Minister of Public Enterprises and Others (13034/2013) [2015] ZAGPPHC 361; 2016 (1) SA 1 (GP) (1 June 2015)

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[2015] ZAGPPHC 361
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Comair Limited v Minister of Public Enterprises and Others (13034/2013) [2015] ZAGPPHC 361; 2016 (1) SA 1 (GP) (1 June 2015)

IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case
Number: 13034/2013
DATE:
1 JUNE 2015
In
the matter between:
COMAIR
LIMITED
...........................................................................................................
APPLICANT
And
THE
MINISTER OF PUBLIC
ENTERPRISES
.............................................
FIRST
RESPONDENT
THE
MINISTER OF
FINANCE
.................................................................
SECOND
RESPONDENT
THE
MINISTER OF
TRANSPORT
...............................................................
THIRD
RESPONDENT
GOVERNMENT
OF THE REPUBLIC
OF
SOUTH
AFRICA
....................................................................................
FOURTH
RESPONDENT
SOUTH
AFRICAN AIRWAYS SOC
LTD
.......................................................
FIFTH
RESPONDENT
THE
STANDARD BANK OF SOUTH AFRICA
LTD
...................................
SIXTH
RESPONDENT
CITIBANK
N.A. (INC IN THE
USA)
......................................................
SEVENTH
RESPONDENT
NEDBANK
LTD
............................................................................................
EIGHTH
RESPONDENT
JUDGMENT
Fabricius
J,
1.
Comair
has operated in the airline industry in South Africa since 1946 and
following the deregulation of the domestic airline industry,
it
entered the main domestic routes in 1992. In 1996 it became a
franchise partner of British Airways and from that point its domestic

routes were all flown under the British Airways livery and branding.
In 2001 it launched its first low cost airline branded as

Khulula.com. South African Airways is a State-owned company, which is
governed by the
South African Airways Act of 2007
. The
State, represented by the Minister of Public Enterprises is its only
shareholder, and it is also a Schedule 2 public entity
in terms of
the
Public Finance Management Act 1 of 1999 (“PFMA”).
The
preamble to the former Act is contextually important inasmuch as it
provides that the sole shareholder, the State, “regards
South
African Airways as a national carrier and strategic asset that would
enable the State to preserve its ability to contribute
to key
domestic intra-regional and international air linkages”.
2.
Background
facts
:
On
26 September 2012 the Minister of Public Enterprises, with the
concurrence of the Minister of Finance, (although there is a dispute

about the concurrence aspect) provided a R 5 billion guarantee to
SAA. Comair says that this is not the first time that Government
has
been called upon to assist SAA financially. Since 2007 there have
been at least three instances of that funding. Government
had
indicated that these interventions were based on exceptional
circumstances, and were intended to allow SAA to operate on a

commercially viable basis in a competitive market, Comair alleges. In
the introduction to the Founding Affidavit under the heading
of
“SYNOPSIS” Comair then makes the following background
allegations:
2.1
SAA
has continued to operate on a non-commercial manner which is
anti-competitive and prejudicial to the other participants in the

domestic air transport services;
2.2
Because
of its undisciplined commercial behaviour SAA has repeatedly driven
itself into serious financial difficulties resulting
in it looking to
Government for a bailout;
2.3
There
is every indication that given SAA’s financial position,
further funding from Government will be required;
2.4
Given
SAA’s current financial woes it will be unable to repay any
loans drawn down against the guarantee. The obvious result
would be
that Government would be compelled (and ought reasonably to have
foreseen this reality) to make good on the guarantee.
In fact,
“guarantee” was a misnomer: the fact is that it amounts
to a form of direct government funding by the Executive
branch of
Government to SAA, in a move that unconstitutionally bypasses the
various safeguards inherent in the parliamentary appropriation

procedure. Further, the decision was taken notwithstanding the fact
that the Government had formulated a clear domestic air transport

policy in various documents since 1990, in terms of which it
committed itself to the following principles:
2.4.1
There should be a deregulated and openly competitive domestic air
transport environment;
2.4.2
SAA should operate autonomously and on a commercial basis, it should
not enjoy privileges as a result of being a government
enterprise;
2.4.3
Government would in future not guarantee loans to SAA or any other
airline with government interests, private airlines have
to borrow at
their own risk;
2.5
Comair
was provided with no opportunity to make representations to the
Government prior to the taking of the guarantee decision,

notwithstanding that the decision constitutes a fundamental deviation
from Government’s own domestic air transport policy,
and would
have a prejudicial effect on Comair and the domestic air transport
industry.
3.
Accordingly,
Comair alleges that given these facts, and the relevant policies that
Government issued, it has been compelled to launch
a review
application to vindicate its rights and those of the public.
Comair’s
cause of action
:
Given
the abovementioned brief facts which Comair referred to as background
material it alleged that the relevant decision to guarantee
loans by
SAA was:
3.1
Unlawful
and
ultra vires
the
PFMA
and in violation of the
separation of powers principle, and relevant sections of the
Constitution, because while the decision purported
to grant a
guarantee, in fact the guarantee was a form of direct executive
funding without the necessary legislative appropriation
procedures
being followed;
3.2
In
violation and
ultra vires
other provisions of the
PFMA
,
read together with the
SAA Act
;
3.3
In
violation of the requirements for lawful, reasonable and procedurally
fair administrative action (as guaranteed by
S. 33
of
the
Constitution
and given effect to by the
Promotion
of the Administrative Justice Act 3 of 2000 (“PAJA”)
)
and the rule of law, because the decision was;
3.3.1
in violation of the requirements of just administrative action;
3.3.2
in any event irrational;
3.3.3
procedurally unfair and in breach of Comair’s legitimate
expectations;
3.3.4
in violation of the constitutional rights under
s.
22, S. 9
of the
Bill
of Rights
, and was therefore in
breach of the Government’s obligations in terms of
s.
7 (2)
of the
Constitution
to protect, promote, and fulfil the rights in the
Bill
of Rights
.
4.
Relief
sought
:
Viewing
these rights cumulatively, Comair sought the following relief in the
initial Notice of Motion:
4.1
A
declaration to the effect that the guarantee decision was
unconstitutional and unlawful;
4.2
The
review and setting aside of the guarantee decision;
4.3
The
suspension of the setting aside of the guarantee decision for a
period of six months, during which time, to the extent that
the
Government decides to grant any financial assistance to SAA, it is to
do so in the light of the findings of this Court’s
judgment
and;
4.4
An
order that if the Ministers and/or the Government contemplate
granting any financial assistance to SAA during the two-year period

contemplated in the guarantee:
a)
such assistance must comply with
Government’s domestic air transport policy:
b)
they must file a proposal setting out the
form that the financial assistance is intended to take, the procedure
to be followed to
providing that assistance and any conditions
attaching thereto; and
c)
the Court may, at Comair’s instance,
determine whether the proposal complies with the judgment and order
of this Court.
In
crafting this relief Comair has sought, so it alleges, to ensure that
it is just and equitable, that a proper balance is struck
between the
need to vindicate the rights that have been violated, and the need to
ensure that the relief is fair to other affected
parties, including
the Government and SAA.
5.
The
mentioned guarantee to SAA for the sum of R 5.6 billion was fixed for
a period of two years until September 2014. Certain conditions
were
attached to it. The hearing of the application was set down for
February 2014. The First, Second and Fifth Respondents opposed
the
application, whilst the Third Respondent filed a Notice to Abide but
also filed an Explanatory Affidavit. On 12 June 2013,
realizing that
it would not make 30 September 2014 as a going-concern, The SAA Board
made an application to the Minister of Public
Enterprises for the
extension of the guarantee, pending the outcome of its application
for re-capitalization. The application was
accompanied by a
memorandum setting out the background to the application, and the
motivation and analysis of SAA’s financial
condition as a
going-concern. On 19 July 2013 the Minister of Public Enterprises
sent a letter to the Minister of Finance requesting
an extension of
the R 5.6 billion guarantee and indicated that it required the
extension in order to continue as a going-concern
immediately after
the expiry of the R 5.6 billion guarantee. The Minister tabled two
options in the letter pertaining to the form
of the extension; the
first being a two-year extension to 30 September 2016, and the second
a one-year extension to 30 September
2015. The Minister supported the
two-year extension to 30 September 2016. Prior to the Minister of
Finance making a financial decision
as to his concurrence, he met
with the Minister of Public Enterprises to deliberate on this
request. The Minister said that the
engagements were intended to
determine what the appropriate method would be to keep SAA as a
going-concern while the long term
turnabout strategy (“LTTS”)
was finalised and implemented. The result of these engagements was
consensus between the
Ministers, and it was decided that it would be
appropriate instead to grant SAA a perpetual guarantee so as to
provide it the time
needed for the finalization and implementation of
the LTTS. Accordingly these engagements resulted in the concurrence
by the Minister
of Finance as contemplated in
s. 70
of
the
PFMA
. On 29 November 2013, the Minister of Finance
conveyed his concurrence with a perpetual guarantee (“the
extended guarantee”).
The Minister also imposed conditions to
the extended guarantee which were the following: “a) to submit
monthly reports to
the National Treasury and the Department of Public
Enterprises on the implementation of the LTTS. These reports will be
considered
at the monthly meeting of the monitoring task team that
has been established. b) The Minister of Finance and the MPE to
jointly
approve SAA’s shareholders’ compact. c) The
shareholders’ compacts to be translated into performance
agreements
for the Executive Management team and be the basis for
determining remuneration. Punitive measures to be implemented in the
event
that SAA fails by a material margin to deliver on the
profitability target set in the LTTS (with these terms to be agreed
and defined
in the shareholder compact). d) In the event that SAA
substantially fails against the LTTS, Government has the right to
appoint
representatives to take over management of the Company (with
the term “substantial failure” to be agreed and defined

in the shareholder compact). e) The amount of the perpetual guarantee
to be reduced by the amount of any capital injection made
by the
shareholder”.
The
extended guarantee, as I will refer to it in this judgment was
therefore granted prior to the hearing of the application concerning

the initial guarantee.
Comair’s
amended Notice of Motion
:
As
a result of the extended guarantee approved by the Ministers, the
hearing in February 2014 did not proceed, and Comair filed
an amended
Notice of Motion dated 10 April 2014 with the following terms:
“
Declaring
that the decisions taken by the First Respondent, with the purported
concurrence of the Second Respondent: 1.1 On or
about 26 September
2012 to provide the Fifth Respondent with a R 5 billion guarantee
(“the guarantee”), from the
Fourth Respondent, for two
years from 1 September 2012 (“the guarantee decision”);
and
1.2
On or about 29 November 2013 to change the time-frame of the
guarantee from the Fourth Respondent into a perpetual guarantee

without a time-limit (“the extension decision”),
are
unconstitutional and unlawful.
Reviewing
and setting aside the guarantee (as extended).
Suspending
the setting aside of the guarantee for eight months from the date of
the order, during which time, to the extent that
the First, Second
and/or Fourth Respondents decide to grant any financial assistance
to the Fifth Respondent, they are to do
so in a manner which is
consistent with this Court’s judgment and order and in
accordance with the terms of paragraph 4
below.
Insofar
as the First, Second and/or Fourth Respondents contemplate granting
any financial assistance (including but not limited
to any
guarantees) the Fifth Respondent in substitution of or in addition
to the guarantee (as extended) during the suspension
period in
paragraph 3:
4.1
Any such financial assistance shall comply
with the Government’s domestic air transport policy as
reflected in the
Domestic Air
Transport Policy of May 1990
read
with the addendum to the
Domestic Air
Transport Policy of August 1991
,
the
White Paper on the National
Transport Policy, 1996
and the
Airlift Strategy
approved by the Cabinet on 26 July 2006 (save in the event of there
being reasonable grounds to deviate from, which are clearly
and
publicly given prior to taking the decision, and after allowing the
Applicant and other affected parties a reasonable opportunity
to
comment on any proposed deviation);
4.2
The First, Second and Fourth Respondents
shall, at least two months prior to taking their decision to grant
such financial assistance,
notify the Applicant and file in this
Court a proposal, confirmed on affidavit, setting out the form that
the financial assistance
is intended to take, the procedure to be
followed prior to providing that assistance, including the provision
of notice to affected
parties and a reasonable opportunity to comment
on the proposed decision to grant such financial assistance, and any
conditions
attaching to that assistance;
4.3
The Applicant may, within 10 days of
receipt of such proposal and on notice to the Respondents, apply to
this Court for a determination
of whether the proposal complies with
the judgment and order of this Court. Costs of the application were
also sought. The First
and Second Respondents were then called upon
in terms of
Rule 53 (1)
(a)
to show cause why the guarantee decision and the extension decision
should not be declared unconstitutional and unlawful, and the

guarantee should not be set aside. “Further documents relating
to the extension decision were then sought, and a Supplementary

Affidavit was filed which persisted in the relief relevant to the
granting of both guarantee decisions, although the first guarantee

had clearly expired.
6.
At
this stage of the proceedings, the affidavits without the answering
affidavits to the Amended Notice of Motion and the additional

Supplementary Founding Affidavit comprised some 2 000 pages.
After the answering affidavits were filed and the Replying Affidavits

thereto, as well as the affidavits relating to the Joinder
Application in terms of which Standard Bank of South Africa was
joined
as Sixth Respondent, Citibank was joined as Seventh
Respondent, and Nedbank Ltd as Eighth Respondent, the affidavits and
annexures
before me comprised some 4 800 pages, and that is
without further eight arch lever files containing documents relevant
to
the decision taken by the Ministers. Despite the fact that the
initial guarantee decision had lapsed, Comair persisted in seeking

relief in regard thereto. I managed to read all affidavits and
documents relevant to the issue between the parties, and wish to
say
that where I do not refer to any particular document in this
judgment, it must not be taken to mean that I have not read it
and am
not aware of its contents. Reading thousands of pages in Court
proceedings is one aspect, writing a judgment is another,
inasmuch as
it is requires of a Judge as to crisply and concisely as possible to
set out the parties various contentions on the
facts and the law, and
then to critically examine them and to arrive at a conclusion.
Analysing a few thousand pages in that context
is neither possible,
necessary, nor desirable and accordingly I will deal with the main
topics of the Applicant’s cause of
action and the Respondents’
answer thereto and the crux of their argument.
7.
7.1
After
the Sixth to Eighth Respondents had been joined not long before the
hearing and had filed affidavits and had presented argument,

Applicant produced a Draft Order in Court on 7 May 2015 which now
reads as follows:
“
DRAFT
ORDER
Declaring
that the decisions taken by the First Respondent, with the purported
concurrence of the Second Respondent:
1.1
on or about 26 September 2012 to provide
the Fifth Respondent with a R 5 billion guarantee (“the
Guarantee”), from the
Fourth Respondent, for two years from 1
September 2012 (“the Guarantee decision”); and
1.2
on or about 29 November 2013 to change the
time frame of the Guarantee from the Fourth Respondent into a
perpetual guarantee without
a time limit (“the Extension
decision”), are unconstitutional
Reviewing
and setting aside the Guarantee (as extended).
Declaring
that the declaration in prayer 1 and the setting aside in prayer 2
will only apply from 28 April 2015;
Declaring
that
4.1
the guarantee issued to the Sixth
Respondent as security for the Fifth Respondent’s obligations
to it under the loan agreement
signed on 27 June 2014; and
4.2
all other guarantees issued by the First,
Second or Fourth Respondents to ABSA, the Seventh Respondent and the
Eighth Respondent
pursuant to the Guarantee decision and/or the
Extension decision and/or the Guarantee prior to 28 April 2015
are
and remain valid and binding notwithstanding the grant of any relief
in this Order.
Suspending
the declarations in prayer 1 and the setting aside of the Guarantee
in prayer 2 for twelve months from the date of
the order, during
which time, to the extent that the First, Second or Fourth
Respondents decide to grant any financial assistance
to the Fifth
Respondent, they are to do so in light of the findings in this
Court’s judgment and order and in accordance
with the terms of
paragraph 6 below.
Insofar
as the First, Second and/or Fourth Respondents contemplate granting
any financial assistance (including but not limited
to any
guarantees) to the Fifth Respondent in substitution of the Guarantee
(as extended) during the suspension period in paragraph
5.
6.1
Any such financial assistance shall comply
with the Government’s domestic air transport policy as
reflected in the Domestic
Air Transport Policy of May 1990 read with
the Addendum to the Domestic Air Transport Policy of August 1991, the
White Paper on
National Transport Policy, 1996 and the Airlift
Strategy approved by Cabinet on 26 July 2006 (save in the event of
there being
reasonable grounds to deviate therefrom, which are
clearly and publicly given prior to taking the decision, and after
allowing
Comair and other affected parties a reasonable opportunity
to comment on any proposed deviation);
6.2
The First, Second and Fourth Respondents
shall, at least two months prior to taking the decision to grant such
financial assistance,
notify the Applicant and file in this Court a
proposal, confirmed on affidavit, setting out the form that the
financial assistance
is intended to take, the procedure to be
followed prior to providing that assistance and any conditions
attaching to that assistance.
6.3
The Applicant may, within 10 days of
receipt of such proposal and on notice to the Respondents, apply to
this Court for a determination
of whether the proposal complies with
the judgment and order of this Court.
Those
Respondents who oppose the relief sought herein are to pay the costs
of this application, jointly and severally, the one
paying, the
other to be absolved.”
I
was told that Applicant did not wish to impugn the individual
guarantees that Government had provided to the Banks as follows:
to
Nedbank on 10 December 2014, to ABSA on 28 January 2015, to Citibank
on 9 July 2014 and to Standard Bank on 9 July 2014. These
had not
been disclosed to Applicant until their Answering Affidavits to
Comair’s joinder application had been filed.
8.
Comair’s
“three key questions” and argument
:
According
to Comair’s Counsel, and as extensively dealt with in the Heads
of Argument, the application raised three key questions:
8.1
When is it lawful for Government Ministers
to bind the fiscus by granting significant guarantees to State-owned
companies?;
8.2
In the light of the Government’s
domestic air transport policy, when, and in what manner, is it
reasonable, rational and procedurally
fair for the Government to give
financial assistance to State-owned airlines?; and
8.3
On the facts of this case, was it lawful
and in accordance with the principles of just administrative action,
the principle of legality,
and the
Bill
of Rights
, for SAA to be provided
with a R 5 billion guarantee?
The
guarantee was advanced in order to enable SAA’s auditors to
sign off on the entity as a going-concern, and with the intention

that it would allow SAA to secure loans to provide working capital on
the basis of that guarantee. The guarantee was issued despite
the
fact that SAA was technically insolvent at the time. This is not in
dispute. It was submitted that this guarantee was issued
when it was
obvious that it would be called-up, thus binding the fiscus to make
payment in the sum of R 5 billion. Therefore, this
guarantee
functioned as a form of direct funding which violated the
requirements of the
PFMA
,
and the
Constitution
:
Two Ministers bound the Government to provide SAA with R 5 billion
while bypassing the normal parliamentary appropriation process
with
the various checks and balances. This violated the principle of
separation of powers. A guarantee was also issued in contradiction

of, and in violation of,
South
Africa’s Air Transport Policies
which specifically required, in the domestic sphere, equal treatment
of all participants, including SAA, and required Government
not to
provide guarantees for loans for SAA, while other private airlines
had to secure loans without such guarantees on ordinary
commercial
terms. The issue of the guarantee was not justified as a necessary
and reasonable exception to the policy (the policy
was not even
considered), nor was any lawful amendment to the policy made or
suggested, so said Comair. Comair’s entry into,
and continued
involvement in the domestic market was and is predicated on the
policy. It had a legitimate expectation that Government
would act in
accordance with the policy, and Government had therefore a duty to
consult with the industry prior to deviating from
it, or if intended
to do so. The guarantee decision was accordingly unlawful,
irrational, unreasonable and procedurally unfair
and violated
Government’s extant domestic air transport policy. Comair’s
conclusion was that the guarantee decision
was therefore in violation
of the requirements for just administrative action as required by
PAJA,
and the principle of legality, which requires the exercise of all
public power to be rational and lawful, and required proper
consultation in order for the decision making process to be rational,
and also for the constitutionally protected right to one’s

trade in terms of s. 22 and to equal protection of the law in terms
of
s. 9
of the
Bill of Rights
.
9.
After
the extended guarantee was issued, and the further affidavits in
relation thereto filed, Comair persisted with this approach,
despite
the First and Second Respondents’ objection that the question
had become moot, inasmuch as the first guarantee had
expired, and
because the extended guarantee was not dependant on the first
guarantee for its validity.
10.
Is
the issue relating to the guarantee decision moot?:
I
do not intend dealing with the Respondents’ answer to Comair’s
cause of action relating to the first guarantee in
the present
context. On behalf of the First and Second Respondents Mr J. Gauntlet
SC submitted that it was common cause that the
first decision that
Comair attacked, and sought a review and a structural interdict, had
expired and had been replaced. Accordingly,
the relief sought in
prayer 1.1 of the Amended Notice of Motion was moot – not only
because the 2012 guarantee had expired
by effluxion of time, but also
because it had been replaced by the perpetual guarantee.
Nevertheless, and rather surprisingly,
Comair persisted in this
relief. Comair submitted in this context that even if prayer 1.1 of
the Amended Notice of Motion was technically
moot, it would
nevertheless be in the interests of justice for this Court to
determine the matter. It accepted that the case was
moot if it no
longer presented a live controversy, but sought to invoke issues of
extended standing under
s. 38
of the
Constitution
to circumvent Constitutional Court authority directly in point on the
topic of mootness. It was obvious that there is no live claim
for
restitution in the respect of the first guarantee. The order sought
in prayer 1.1 was also neither forward looking nor general
in its
application.
See:
Director-General Department of Home Affairs vs Mukhamadiva
2014
(3) BCLR 306
(CC) at 15
. It is clear that the relevant
principle is that Courts should not decide matters that are abstract
or academic, and which do not
have any practical effect either on the
parties before the Court or the public at large. Courts of law exist
to settle concrete
controversies and actual infringement of rights,
and not to pronounce upon abstract questions, or give advice on
differing contentions.
The same principle has been stated to mean
that one should rather not deal with vague concepts such as
“abstract”,
“academic” and “hypothetical”
as yardsticks. The question rather ought to be a positive one, i.e.
whether
a judgment or order of Court will have a practical effect,
and not whether it will be of importance for a hypothetical future
case.
See:
Premier van die Provinsie van Mpumalanga vs Groblersdal se
Stadsraad
1998 (2) SA 1136
(SCA) at 1141
. In
National
Coalition for Gay and Lesbian Equality vs Minister of Home Affairs
2000 (2) SA 1
(CC) at par. 21,
it was said that a matter is
moot and not justiciable if it no longer presents an existing or live
controversy. This seems to be
the most practical and decisive
question.
Mr
Gauntlet SC submitted that were prayer 1.1 of the Amended Notice of
Motion to be granted there would be no practical effect.
There was no
utility in the order, and no benefit in pronouncing on any of the
issues in relation to it. The controversy regarding
the legality of
the first decision would itself be resolved by adjudicating on the
second decision. Also, the elaborate remedial
relief sought
(including the suspension of setting aside that which had already
lapsed) cannot conceivably have any practical effect.
It would be an
elaborate academic exercise. I agree with this submission. Mr
Unterhalter SC on behalf of Comair submitted that
I need to take into
account the so-called Oudekraal-principle; i.e.:
Oudekraal
Estates (Pty) Ltd vs City of Cape Town
2004 (6) SA 222
(SCA) at par.
31
. The principle articulated in
this judgment is that a successful challenge to a previous
administrative decision does not automatically
result in nullity of a
subsequent administrative decision. The Court will still have to
determine whether the perpetual guarantee
should be set aside in this
particular context. The legal validity of the 2012 guarantee is not
at all, or for that matter on the
Ministers’ approach, a
pre-condition for the 2013 guarantee. Validity of the former does not
bear on the latter. Neither
the subsequent decision nor its
empowering provision rests on the legal validity of the initial
decision. The legal foundation
for the second decision is
s.
70
of the
PFMA
,
and not the existence of the first decision. The 2013 decision, which
was subject to its own conditions, supplanted the 2012 guarantee

decision. Comair also relied upon the interest of justice in this
context, which Mr Gauntlet SC classified as the assertion of
a
backstop. The argument was flawed, because the fact that it has
bearing on the interests of justice do not militate in favour
of
entertaining prayer 1.1 in circumstances where this would almost
duplicate much of the judicial resources to be expended on

determining prayer 1.2. He pointed out that the motion record then
stood at about 4147 pages, including the 1908 pages filed in
relation
to the relief now sought in prayer 1.2 of the Amended Notice of
Motion. It would not be in the interests of administrative
justice
that a Court of first instance and any potential Court of Appeal be
burdened with a record of twice the length. In any
event, whether or
not prayer 1.1 was determined, all the issues identified in Comair’s
Heads of Argument relating to the
extended guarantee would be
ventilated, and their case and arguments would be heard in
determining prayer 1.2.
11.
I
agree with the contentions advanced by Counsel for the First and
Second Respondents. The attack on the issue of the first guarantee

and the relief sought in that context is in my view moot in sense
that there would be no utility in the order, and no benefit in

pronouncing on any of the issues in relation to it. Any order in this
context would have no practical effect on either of the parties
or
others. I therefore do not intend dealing any further with any of the
arguments advanced in respect of the original Notice of
Motion,
although I appreciate that there would be a lot of overlapping when I
deal with the arguments pertaining to the extended
guarantee.
12.
The
extended guarantee (the perpetual guarantee):
In
respect of this decision Comair put forward the following background
facts: In late January 2014, and on the eve of the hearing
of the
matter in respect of the guarantee decision, and after pleadings had
closed and Heads of Argument had been filed, the Minister
of Finance
revealed in a Supplementary Affidavit that on 29 November 2013 he had
purportedly concurred, in terms of
s. 70
of the
PFMA
,
with a request from the Minister of Public Enterprises to extend the
guarantee in perpetuity (or to convert the guarantee to a
perpetual
guarantee). Comair says that the extension of the original guarantee
occurred by way of the second decision namely the
“extension
decision”. This extension occurred, so it was said, because SAA
had been unable to repay the R 1.54 billion
loan advanced on the
strength of the guarantee. In consequence thereof, Comair amended its
relief and it now challenged the lawfulness
of the extension decision
and
the guarantee decision. Its updated Heads of Argument of
23 February 2015 deal primarily with the unlawfulness of the
extension
decision. In this context it put forward six main grounds
for challenging the lawfulness of this decision:
12.1
Given
SAA’s remarkably poor financial position, the extension
decision was unlawful and in violation of the
PFMA
,
and in any event, irrational and unreasonable;
12.2
There
was a failure by the Ministers to consider the
Domestic Air
Transport Policy
when taking the decision, which decision
violates the policy;
12.3
The
decision was
ultra vires
s. 70
of the
PFMA
since there was no agreement in relation to the conditions;
12.4
The
decision was once again, irrational, and unreasonably taken prior to
the finalisation of the long-term turnaround strategy (“LTTS”);
12.5
The
decision was procedurally unfair because it was taken without first
consulting with participants in the market, such as Comair;
12.6
The
decision violated the constitutional requirement of equitable
treatment.
13.
Central
facts relied upon by Comair
:
Comair
alleges that these facts are common cause or have not been directly
or pertinently disputed by the Respondents;
13.1
SAA
sought the extension of the guarantee, which had been a two year
guarantee, because it was unable to repay the R 1.544 billion
loan
advanced to it on the strength of the guarantee;
13.2
SAA
was factually insolvent when the extension decision was taken, with
its liabilities exceeding its assets by billions;
13.3
SAA
would be unable to repay loans advanced against the guarantee;
13.4
SAA
was at that time only able to make repayment of the interest
obligations on its huge loan commitment by obtaining further loans
on
the central Government guarantees, which only added to its debt
burden;
13.5
The
Ministers were fully aware of SAA’s financial position and
therefore its inability to repay loans, but nevertheless granted
the
extension in perpetuity to allow further borrowing;
13.6
Despite
this, an approved LTTS, which the Ministers had required as a
condition for the grant of the guarantee, and which originally
had to
have been submitted by 31 January 2013, had still not been finalised
in an approved manner at the time the extension decision
was taken.
Furthermore, the Minister of Finance still required that changes be
made thereto, and the Treasury took the view that
the draft LTTS
prepared by SAA would not turn SAA around;
13.7
Considering
whether to grant the guarantee extension, the Ministers failed to
have regard to the domestic air transport policy,
which specifically
provided for how Government would deal with SAA and other
participants in the domestic air transport market;
13.8
The
Ministers did not consult with Comair prior to taking the extension
decision;
13.9
The
Ministers purported to grant the guarantee extension on 29 November
2013 and allowed SAA on the strength thereof to borrow at
least R 1.7
billion for the purposes of working capital, and allowed for the
extension of the terms for repayment of the R 1.54
billion. Yet, they
only finally reached agreement on the conditions that would apply to
the use of the guarantee in October 2014,
and only advised SAA of
these conditions thereafter.
14.
When
dealing with factual allegations which have not been admitted I will
follow the well-known approach to be taken in opposed
motion
proceedings where factual disputes arise as set out in
Plascon-Evans
Paints Ltd vs Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(AD) at
634
. The question in that context is whether the facts
averred in the Applicant’s affidavits which have been admitted
by the
Respondent, together with the facts alleged by the Respondent
justify the order sought. I will also deal with the question of
separation
of powers in the context of this case, and the role of the
Court in relation to policy decisions taken by the executive arm of
Government. I have firm views on this topic which I will express. I
will also deal with the correctness or otherwise of Comair’s

approach to this litigation namely that the extension decision, like
the guarantee decision is administrative action within the
ambit of
the definition of
s. 1
of
PAJA,
alternatively that if it is not, the principle of legality applies in
any event. I may immediately say that I do not agree that
this is the
correct approach. It is in my view jurisprudentially incorrect to
regard
PAJA
and the legality principle as parallel
bases for review, both equally available to Courts in cases where
public conduct could qualify
as administrative action, and thus to
treat the two bodies of law as free alternatives that one may pick
and choose between at
will, to use the phrase used by
C.
Hoexter, Administrative Law In South Africa 2
ND
Edition (2012) at 131.
This so-called “free alternative
trend” conflicts with clear precedent giving expression to an
established general principle
of constitutional adjudication.
See:
Minister of Health vs New Clicks South Africa (Pty) Ltd
2006
(2) SA 311
(CC)
,
par 92 and further
.
This
means that
PAJA
should apply where it is applicable, and general norms such as
legality may only be resorted once it has been determined that
PAJA
does not apply. The more general principle of constitutional
adjudication - subsidiarity – determines that any legislation

enacted pursuant to a constitutional command to give effect to
constitutional rights, may not be circumvented in favour of direct

reliance on the Constitution. This means that this principle is
intended to ensure that Courts show due regard to the interpretation

afforded a constitutional right by the legislature, and to avoid the
development of parallel systems of law dealing with the same
subject
matter. The whole topic is dealt with clearly and concisely by
D.
Brand and M. Murcott
in
Annual
Survey Of South African Law, Juta & Company, 2013 at 61
and further. I associate myself with the criticism of the so-called
dual approach. It is jurisprudentially unsound.
15.
The
ability to review the extension decision:
Comair
submitted that the extension decision, like the guarantee decision is
administrative action: it falls within the definition
of
s.1
of
PAJA,
being the exercise by two Ministers of public
power conferred by
s. 70
of the
PFMA
,
that has the capacity to affect legal rights, legitimate expectations
or interests. It says that the nature of the decision does
not fall
within any of the exceptions to the definition of administrative
action in
PAJA
, and evidently does not constitute
executive action. In this context they say that administrative action
must therefore be lawful,
reasonable, rational and procedurally fair.
They submit that even if I were to hold that the extension decision
was not administrative
action, but a species of executive action, the
decision was certainly the exercise of a public power, and must
therefore comply
with the rule of law and its progeny, the principle
of legality. This required the decision to be rational (this included
the procedure
leading to and the substance of the decision, which
requires the consideration of relevant issues and material, and may
include
giving interested persons an opportunity to be heard), and it
must be
intra vires
the empowering legislation.
Moreover, where a decision has an effect on a party’s
legitimate expectations, our law has always
held that the principles
in relation to legitimate expectations would require such a party to
have a hearing.
See:
All-Pay Consolidated Investment
Holdings (Pty) Ltd and Others vs Chief Executive Officer of the South
African Social Security Agency
and Others
2014 (1) SA 604
(CC) par.
60
, relying on
Grey’s
Marine Hout Bay (Pty) Ltd and Others vs Minister of Public Works and
Others
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA) par. 23 and 24.
16.
Competition
Law issues
:
On
behalf of the First and Second Respondents it was submitted that
Comair’s complaints were wholly inter-twined with issues
to be
adjudicated by the
Competition Act No
89 of 1998
. Absent a determination
by the proper authorities that the competition issues raised by
Comair were meritorious, Comair’s
cause of action, as pleaded,
was not established. It did not assist Comair, so it was asserted,
when the deficiencies in the case
pleaded in the Founding Affidavit
had been pointed out, to jettison the competition complaints
comprising its cause of action as
formulated in its founding papers.
In its Founding Affidavit Comair identified the following
“difficulty” with Government
assistance to SAA: “It
[the decision to grant the guarantee] not only is in violation of the
Domestic Air Transport Policy,
constituting unequal treatment, but…
it clearly leads to a distortion of the market, because it requires
no specific alteration
by SAA of the very conduct that has caused its
financial difficulties, and reflected great harm upon firms that
compete under the
commercial disciplines of the market.” It is
clear that throughout the Founding Affidavit the issue is formulated
in different
guises, as Mr Gauntlett SC pointed out. At times it is
construed as a violation of policy, then an infringement of the right
to
equality, unreasonableness and procedural unfairness. Comair
itself said in this regard that “the situation is untenable as

a matter of economics, sustainability of the industry, and the
principles of competition and equality”. Also throughout the

founding papers Comair specifically referred to anti-competitive
conduct, unfair advantages created by the impugned decision,
inequality in the market, distortion of the market, SAA’s
dominance, anti-competitive effects including price predation,
dumping of excess volume, poaching of passengers, and the need for
pro-competitive conditions for maintaining and protecting competition

in the industry. All these issues are of course Competition Law
complaints, and many of the terms pleaded are defined and governed
by
the
Competition Act. When
the point of jurisdiction was raised by the
Respondents in this context, namely that only the competition
authorities had the jurisdiction
to determine these issues, Comair
made a U-turn, according to First and Second Respondents. However,
even when seeking to found
a review purportedly based on
unreasonableness, irrationality and procedural unfairness, Comair
contended that those decisions
led to a distortion of the market,
prejudiced competitors, permitted SAA to compete unfairly etc. I
agree with Mr Gauntlett SC
that I have no jurisdiction to decide
issues based on allegations which the competition authorities would
have to investigate and
determine them from a factual and a legal
point of view. Comair did not ask that these issues be referred to
the competition authorities
in terms of the
Competition Act. This
Act
does not contemplate concurrent jurisdiction. In
Gcaba
vs Minister for Safety and Security
2010 (1) SA 238
(CC)
it was confirmed that the Constitution recognises the need for
specificity and specialisation in a modern and complex society under

the rule of law, and once a set of carefully crafted rules and
structures have been created for the effective and speedy resolution

of disputes and protection of rights in a particular area of law it
is preferable to use that particular system. Any reliance on
market
distortion and anti-competitive behaviour must be dealt with in terms
of the provisions of
s. 65
(2)
of
the
Competition Act
.
This Court cannot entertain them. I will therefore not take any such
allegations and references to concepts which fall within
the ambit of
the
Competition Act
into
account, when determining whether or not Comair has established
the cause of action relied upon. I cannot however hold
in
limine
that the whole of its cause of
action is solely based on concepts that the competition authorities
would have to deal with. Looked
at it holistically, it is clear that
Comair relies also on the mentioned provisions of
PAJA
and the principle of legality. I therefore propose to deal with its
case on that basis alone.
17.
The
interpretation of
s. 70
of PFMA:
17.1
S.
70
of the
Act
reads as follows: “70. Guarantees,
indemnities and securities by Cabinet members. – (1) A Cabinet
member, with the written
concurrence of the Minister (given either
specifically in each case or generally with regard to a category of
cases and subject
to any conditions approved by the Minister), may
issue a guarantee, indemnity or security which binds –
(a)
the National Revenue Fund in respect of a financial commitment
incurred or to be incurred by the National Executive; or
(b)
a national public entity referred to in s. 66 (3) (c) in respect of a
financial commitment incurred or to be incurred by a public
entity.
(2)
Any payment under a guarantee, indemnity or security issued in terms
of –
(a)
Subsection (1) (a), is a direct charge against the National Revenue
Fund, and any such payment must in the first instance be
defrayed
from the Fund’s budgeted for the Department that is concerned
with the issue of the guarantee, indemnity or security
in question;
and
(b)
Subsection (1) (b), is a charge against a national public entity
concerned.
(3.)
A Cabinet member who seeks the Minister’s concurrence for the
issue of a guarantee, indemnity or security in terms of
(1) (a) or
(b), must provide the Minister with all relevant information as the
Minister may require regarding the issue of such
guarantee, indemnity
or security and the relevant financial commitment.
(4)
The responsible Cabinet member must at least annually report the
circumstances relating to any payments under a guarantee, indemnity

or security issued in terms of (1) (a) or (b), to the National
Assembly for tabling in the National Assembly”.
According
to the definition section, the “Minister” is the Minister
of Finance.
This
section must be read together with
s. 213
of the
Constitution
which establishes a National Revenue Fund
and which states in terms of s. 213 (2) that money may be withdrawn
from the National
Revenue Fund only –
(a)
In terms of an appropriation by an act of
parliament; or
(b)
As a direct charge against the National
Revenue Fund, when it is provided
for
in the Constitution or an act of parliament.
S.
218
of the
Constitution
provides for Government guarantees and states that a loan may only be
guaranteed if the guarantee complies with any conditions
set out in
national legislation. Each year, every government must publish a
report on the guarantees it has granted.
Comair
submitted that s. 70 must be interpreted with due regard to
s.
213 and 218 of the Constitution
, the principle of separation
of powers and the Bill of Rights. It relied upon, amongst others, In
re:
Certification of the Constitution of the Republic of South
Africa
1996 (4) SA 744
(CC) par. 109,
where it was stated
that the separation of powers principle includes “the principle
of checks and balances [which] focuses
on the desirability of
ensuring that the constitutional order, as a totality, prevents the
branches of Government from usurping
power from one another.”
See also
Doctors For Life Int vs Speaker of the National
Assembly and Others
[2006] ZACC 11
;
2006 (6) SA 416
(CC) par. 37
, where it
was stated that the principle of separation of powers is not simply
an abstract notion but was reflected in the very
structure of our
Government. Accordingly, so it was submitted, the
Constitution
made it clear that it is parliament that was vested with the primary
competence to authorize payments from the National Revenue
Fund, and
indeed it was only an act of parliament that could allow charges
against the National Revenue Fund other than by way
of appropriation.
It was for this reason that the power of appropriation was
quintessentially a legislative function.
17.2
In
the context of Applicant’s argument that SAA would not be in a
position to repay any loans made against a guarantee, and
that the
Ministers knew this or ought to have known it, it is appropriate at
this stage to emphasize what a “guarantee”
is in terms of
the provisions of s. 70. It is a means by which the guarantor
undertakes to pay on the happening of a certain event
but does not
promise that that event will not happen.
See:
Forsyth et al, Caney’s The Law of Suretyship 6
TH
Edition (Juta & Company Ltd, 2010 at 34.
It
is correct, as was contended by Mr Gauntlett SC, that the Ministers
did not need to have any optimism in this regard. It is the
essential
nature of a guarantee that it creates direct liability. Section 70
makes it abundantly clear that this is what was envisaged
by the
legislature.
This
interpretation is of course relevant to the topic of whether the
granting of a guarantee was irrational or not having regard
to the
dire financial affairs of SAA. It is clear that the word “guarantee”
must be interpreted in the context of s.
70 as a whole, which in
itself must be interpreted having regard to its purpose, keeping the
provisions of
s. 213 and 218
of the
Constitution
in mind. The plain meaning of the word is also indicative of the fact
that direct liability to pay is envisaged. For the correct
and modern
approach to interpretation of a statute or document see:
Natal
Point Municipal Pension Fund vs Endumeni Municipality
2012 (4) SA 593
SCA at 602
and further.
18.
Non-compliance
with s. 70:
While
conceding that the decisions were made pursuant to
s. 70
of the
PFMA
, and that s. 70 indeed authorizes
government guarantees, and accepting the constitutional validity of
s. 70, Comair contended that
the relevant decisions did not comply
with s. 70. Comair submitted that its ground of review in this
context was the Minister’s
failure to take account of the
extant
Domestic Air Transport Policy.
With reference to
the decision of
MEC for Agriculture, Conservation, Environment
and Land Affairs vs Sasol Oil (Pty) Ltd and Another
2006 (5) SA 483
(SCA) par. 19,
it submitted that extant policies were
relevant considerations which had to be taken into account by
decision makers, and when
Government had an extant policy that
governed a particular area of its activity, it and its officials were
not at liberty simply
to ignore that policy, and should seek to act
in accordance with it, unless there was a reasonable basis for
deviating from it,
with such deviating basis being clearly
articulated. It submitted that extant policies gave rise to
legitimate expectations, which
required decision makers to observe
procedural fairness when any decision was taken to deviate from a
policy or to amend it. It
is common cause that the Ministers did not
have regard to the policies relied upon Comair in this context and
particularly the
1990 Domestic Air Transport Policy (“DATP”),
the 1991 Addendum, 1996 White Paper on National Transport Policy, and
the
2006 Airlift Strategy
. It submitted that the key
principles that flowed from these documents were that:
1.)
Economic decisions in relation to the
domestic air transport market should be left to competitive forces to
resolve it;
2.)
All the participants in the domestic air
transport market should be treated equally by Government, in
particular insofar as government
contracts, financial support,
reciprocal privileges, the rendering of uneconomical services, the
strategic value of aircraft, etc.
are concerned;
3.)
SAA would not enjoy any privileges in terms
of any legislation or any other practice as a result of it being a
government enterprise;
4.)
Government would not guarantee new loans to
SAA or any other airline with government interest, whilst private
airlines had to borrow
at their own risk;
5.)
SAA should operate on a sound commercial
basis.
On
this basis it was contended that the
Domestic Air Transport
Policy
was materially relevant to whether or not the Minister
should have provided a guarantee to allow SAA to obtain loans. The
submission
therefore was that before taking the extension decision
the Minister should have properly considered the Policy, and only
deviated
therefrom on clearly articulated and reasonable grounds, and
after affording affected parties a reasonable opportunity for
submissions.
19.
Accordingly,
Comair submitted that the failure to have regard to the relevant
policy documents was a failure to have regard to relevant

considerations in terms of
s. 6 (2)
(e) (iii)
of
PAJA
,
and also a failure which violated the terms of
s.
70 (3)
of the
PFMA
which required all relevant information to be placed before the
Minister of Finance by the Minister of Public Enterprises at the
time
of issuing a guarantee. Comair submitted that the extension decision
at least impacted on Comair’s constitutional right
to equality
and rational regulation of the air transport industry, and the
deviation from the policy occasioned by the extension
decision
impacted on its legitimate expectation that Government would act in
accordance with its
Domestic Air
Transport Policy
. In this context
it relied on
Premier, Province of
Mpumalanga and Another vs Executive Committee of the Association of
Governing Bodies of State-Aided School
– Eastern Transvaal
1999
(2) SA 91
(CC)
at
par. 41.
20.
The
unlawfulness arising from the failure to consider the Policy:
Comair
submitted that this failure rendered the extension decision unlawful
in that:
1.)
There was a material failure to consider a
relevant consideration in violation of
s.
6 (2) (e) (iii) of PAJA
;
2.)
It rendered the extension decision
irrational and unreasonable, in terms of
PAJA
and/or the principle of legality;
3.)
It rendered the decision to be in violation
of
s. 70 (3)
of the
PFMA
since it evidenced a failure to place all relevant information before
the Minister of Finance by the Minister of Public Enterprises
at the
time of taking the extension decision, and was accordingly also
unlawful under
s. 6 (2) (i)
of
PAJA
and/or the principle of legality.
Given
SAA’s parlous financial position, at the time that the
extension decision was taken, it was evident, or ought to have
been
reasonably evident, that SAA would be unable to repay the loans to be
advanced against the guarantee as extended in perpetuity.
Both
Ministers admitted that SAA was, and is, in a dire financial
position, and was technically insolvent. I may say at this stage
that
the affidavits are abound with allegations and documentation and
annexures relating to the financial position of SAA, and
why it was
in such a position. I do not propose to deal with these topics in any
great detail inasmuch as it is common cause on
the papers that SAA
was technically insolvent and had been so for some time. “Technical
insolvency” in this context
meant that its assets were less
than its liabilities but that it was still able to pay its debts at
least for a certain period,
but not solely out of any profits. The
extension decision was therefore
ultra
vires
the Minister’s powers in
terms of
s. 70
of the
PFMA
read together with
s. 213 and 218
of the
Constitution
and the principle of separation of powers, so it was argued. In any
event, the decision was irrational and unreasonable as being
in
violation of
s. 6 (f) (ii) and (h)
of
PAJA
.
The crux of Comair’s argument in this context is that s. 70 is
not a back-door mechanism to allow for payment of money from
the
National Revenue Fund by two Ministers, as they see fit. Whatever the
worthiness of the cause the Ministers may wish to support,
or
whatever motive they may have to do so, this type of funding is the
exclusive prerogative of parliament through a constitutionally

compliant appropriation process. In this context reliance was again
placed on the
Certification of the
Constitution of Republic of South Africa decision supra at par. 109
where it was stated that “It
seems plain that when a legislature…determines appropriations
to be made out of public
funds, it is exercising its power that under
our Constitution is a power peculiar to elective legislative bodies.
It is a power
that is exercised by democratically elected
representatives after due deliberation.” The separation of
powers principle in
this context prevented the branches of Government
from usurping power from one another, so it was argued.
21.
The
Ministers’ and SAA’s argument relating to s. 70 of the
PFMA
:
In
this context I will deal with a number of contentions by Comair, SAA
and the Ministers. Before doing so however I deem it convenient
to
repeat what the Minister of Finance considered appropriate
considerations for a guarantee. The Minister makes a number of points

which I deem to be material within the context of whether or not his
decision amounted to administrative action, but also in the
context
of policy decisions that the Government is entitled to make when it
decides to act in terms of
s. 70
of the
PFMA
.
In my view the language of
s. 70
of the
PFMA
is quite clear, and its constitutionality is not being attacked in
these proceedings. The crux of Comair’s argument in this

specific context is that the Minister’s decision bypasses the
various safeguards inherent in the parliamentary appropriation

procedure, as they put it. The Minister of Finance (Minister P.
Gordhan, as he then was) said that
s.
70 (4)
of the
PFMA
expressly provides for the manner in which parliament was required to
oversee decisions taken in terms of s. 70. Any guarantee
cannot and
does not circumvent parliament therefore. It is a measure authorized
by constitutionally-enabling legislation. A guarantee
in terms of s.
70 is demonstrably not intended to bypass the ordinary budget
process. Any direct funding given to SAA is subject
to the same
parliamentary oversight as any other. As far as Comair’s
argument relating to policy was concerned, he said that
policies are
there to guide government conduct, but cannot constrain it. He also
added that one needed to take into account not
only the actual
financial position of SAA in the past or at the time, but needed to
take into account commercial, infrastructural,
macro-economic, public
finance, human resources and state ownership considerations into
account. These constituted a complex factual
matrix which should not
be divorced from the question for adjudication: whether the
government guarantee is reviewable, and not
whether this Court agrees
with the decision to grant the government guarantee.
22.
The
Minister of Finance’s affidavit:
The
Minister (Minister Nene) in the Further Supplementary Affidavit,
dated 21 November 2014 made the following assertion which I
deem to
be material to the outcome of this application, and which I have
selected from the about 110 page affidavit:
22.1
Comair’s
case has no merit because it is based on flawed commercial and
economic assumptions. It is limited to purely financial

considerations and fails to take into account other overwhelming
considerations in favour of granting the guarantee;
22.2
It
also significantly misconceives the nature and rationale of the
perpetual guarantee. The guarantee
substitutes
the guarantee
previously attacked by Comair;
22.3
It
is clear that in 2013 SAA had both a liquidity and insolvency
problem. Whilst SAA had requested a two year guarantee, this would

only have addressed the liquidity concern. To resolve the insolvency
aspect, it was necessary to grant a perpetual guarantee. This
is
because equity requires there be no obligation to pay the capital or
pay dividends. A time-limited guarantee would therefore
imply that
there was an obligation that all repayments must be made by the
termination date. That is why the Treasury memorandum,
was considered
in this context, and concluded that a perpetual guarantee was
required;
22.4
Comair’s
reliance on the binding nature of various government policies, was
misconceived in law;
22.5
A
decision taken by the Executive in the context of
s. 70
of the
PFMA
not only concerns itself with purely
financial considerations, but such decisions are complex in nature,
involving issues of public
finance and economics. They are
policy-laden and polycentric. The decisions have been deliberated on
with the expert assistance
of senior economists and other National
Treasury officials;
22.6
The
decisions are hard decisions made by Government of the day in
circumstances prevailing at the time. It was not for a commercial

competitor to second-guess these decisions;
22.7
Public
interest and consumer interest were clearly not served by withdrawing
all shareholders’ assistance inasmuch as having
regard to the
nature of Comair’s business, it would never be entirely
competitive with SAA in any event;
22.8
Unlike
an ordinary commercial enterprise, SAA served certain strategic state
purposes and Government had wider responsibilities
in this context.
It was not only concerned with financial returns, but also with
economics, development and equity impeditives.
Thus immediate
financial concerns were not decisive. (I may add at this stage that
that is exactly the reason why I do not propose
dealing with hundreds
of pages of financial statements and other analyses concerning SAA’s
financial position or its ability
to achieve a turnaround either
within the immediate future or further down the line. It is common
cause that SAA is technically
insolvent and this requires no further
debate);
22.9
Comair’s
case was premised on immediate financial considerations as they would
apply to a fully capitalized and purely private
airline. SAA was not
such an enterprise;
22.10
Comair’s
argument was also misplaced inasmuch as the original guarantee was
not merely extended, as it was put. It was replaced
with a perpetual
guarantee and the original guarantee had lapsed;
22.11
The
perpetual guarantee had its own conditions attached to it which were
intended to, and did, allow SAA to continue as a “going

concern”. There was accordingly no so-called violation of the
original guarantee condition;
22.12
Subjecting
the exercise of the executive s. 70 powers to Court scrutiny was
inappropriate in the circumstances of this case, and
would be
inconsistent with the doctrine of separation of powers. Overwhelming
public interest in exercising this statutory power
conferred by
s.
70
of the
PFMA
warranted the original guarantee
and the perpetual guarantee. Nothing in any of the policy documents
relied upon imposed a legally-relevant
fetter on the exercise of
statutory powers. Recommendations and arguments of the Treasury were
taken into account. Previous guarantees
were issued, and neither the
Cabinet nor parliament had ever questioned this exercise or
questioned the Minister’s political
and economic judgement. Any
such decision did not mean that it must be popular with all sectors
of society, or find favour with
SAA’s commercial competitors.
Government was of the view that the decisions were demonstrably in
the national interest. The
LTTS and its effect on the commercial
viability of SAA, cannot impact on the validity of the perpetual
guarantee. A perpetual guarantee
was deemed to be necessary having
regard to the history of SAA’s affairs, and its envisaged
future, and Government was entitled
to assess the situation as it
develops from time to time.
It
is my view that the Minister put the crux of his argument as follows
(par. 132 of the affidavit): “The correct review test
gives
effect to the separation of powers. In this context this
constitutional principle requires that Government be permitted to

exercise
s. 70
of the
PFMA
in order to protect with the guarantees as strategic asset in the
form of a national carrier entrusted with important developmental

priorities. That financial considerations may operate as
countervailing consideration is not a review ground. Financial
considerations
have been identified, assessed and considered. They
are qualitatively and quantitatively outweighed by more pressing
considerations.
Financial risks are also mitigated by the conditions
imposed by my predecessors’ concurrence…”
23.
I
must emphasize that it is not for a Court to decide whether or not
the Government is right in regarding SAA as a strategic asset
or not.
It is also not for me to decide whether I would have taken different
decisions relating to the viability of SAA and its
future. I may have
decided to engage strategic partners, as this topic was also debated,
and I may have decided to sell off certain
of its subsections, and I
may have decided to make it more compact and competitive. This is all
irrelevant in my view. If a government
takes a lawful policy
decision, it is not for a Court to decide otherwise. Fortunately, I
must add. I cannot second-guess or dispute
the Minister’s
opinion that SAA serves wider developmental and national needs. Its
disorderly failure would probably impact
drastically on the South
African economy, and in the assessment of National Treasury, which is
the guardian of the South African
economy, SAA’s disorderly
demise would be disastrous. It is his view that neither Minister was
bound to “support”
the various policy documents relied on
by Comair, especially not in preference to the
PFMA
.
The
PFMA
was constitutionally ordained legislation. It governs the impugned
decision. It also provides that it prevails in the event of
any
inconsistency between itself and any other legislation by way of the
provisions of s. 3 (3). It is obvious that a policy cannot
qualify as
legislation. The crux really is, in his view, that a decision
contemplated by s. 70 is a complex one which presents
multi-faceted
considerations bearing on Government’s developmental goals, the
impact on the national economy, job creation
and the balance of
payments amongst others. Most experts’ opinion that Comair
relied upon concerned themselves merely with
pure financial
considerations, but this was not the correct test to apply when
deciding what was necessary in the particular context.
The conditions
imposed provided sufficient safeguards in his opinion, and it is
clear from the information before him and his predecessor,
that
months of research, analysis, deliberation, negotiation and
re-evaluation preceded the consensus that was reached between
him and
the Minister of Public Enterprises. He concurred in writing and the
requirements of s. 70 were fully complied with.
24.
I
cannot fault the Minister’s reasoning in this context. There is
nothing in
s. 70
of the
PFMA
which
implies that it may only be resorted to when it is reasonably certain
that a guarantee will not be called up. Had the
Constitution
or the
PFMA
intended that a guarantee should only be
issued where payments would not be made under it,
s. 70 (4)
of the
PFMA
would therefore be redundant. This cannot
be a correct principle of construction of a Statute.
See
:
Steyn, Die Uitleg Van Wette 5
th
Edition, Juta and Company 1981, at 119 and 226
.
Also,
neither rationality nor reasonableness warrants a commercial
competitor’s attempt to achieve a judicial intervention
in
public finance decisions by the Ministers. Reliance on “commercial
irrationality” is also misplaced. The evidence
of economists in
this application is extremely interesting and enlightening but
certainly not decisive.
See:
Du Plessis vs De Klerk
[1996] ZACC 10
;
1996 (3) SA 850
(CC) at par. 180
:
“The judicial function simply does not lend itself to the kinds
of factual enquiries, cost-benefit analysis, political compromises,

investigations of administrative/enforcement capacities,
implementation strategies, and budget priority decisions which
appropriate
decision-making on social, economic and political
questions requires.” I agree with Mr Gauntlett SC that a s. 70
enquiry
is not a commercial or private financial one. It is an
economic or public finance one. The question is not whether in rand
and
cent terms it is the best solution for SAA, Comair, or the
shareholder, or chartered accountant of either. The question is
whether
– in the Minister’s estimation – the
immense importance of SAA’s strategic role to the South African
economy
warrants shareholder support in the form of a government
guarantee.
See
also:
Minister of Home Affairs vs
Scalabrini Centre
2013 (6) SA 421
(SCA) at par. 5
:
“It is not the providence of Courts, when judging the
administration, to make their own evaluation of the public good, or

to substitute the personal assessment of the social and economic
advantage of a decision. We should not expect Judges therefore
to
decide whether the country should join a common currency or to set a
level of taxation. These are matters of policy and the
preserve of
other branches of government and courts are not constitutionally
competent to engage in them.” (Quoted by
G.
Hoexter, Administrative Law in South Africa, 2
nd
Edition p. 148
). I may of course
add on a lighter note that most Judges would of course gladly have
something to say about the level of taxation,
but if they say that
they must do so in the tearoom and not in a judgment. In the same
vain one can refer to the dicta in
Ekhuruleni
Metropolitan Municipality vs Dada N. O.
2009 (4) SA 463
(SCA) at par.
1, 10
and
13
and Offit Enterprises (PTY) Ltd vs Coega Development Corporation
2010
(4) SA 242
(SCA) at par. 48
.
25.
The
correct legal position on government policy:
It
is clear from all the affidavits filed in these proceedings that
Comair to a very large extent relies on policy documents of
the
Government, and via that route attempts to establish a cause of
action within the framework of
PAJA
. It is therefore
necessary in my view to deal with the correct legal position. I
intend referring only to the most relevant considerations.
25.1
Policy
may not emasculate the power of the authorized decision maker.
See:
Akani Garden Route (Pty) Ltd vs Pinnacle Point Casino (Pty) Ltd
2001 (4) SA 501
(SCA) at par. 7
, where Harms JA said the
following: “”Government policy” is inherently vague
and may bear different meanings…I
do not consider it prudent
to define the word either in general or in the context of the Act. I
prefer to begin by stating the
obvious, namely that laws, regulations
and rules are legislative instruments, whereas policy determinations
are not. As a matter
of sound government, in order to bind the
public, policy should normally be reflected in such instruments.
Policy determinations
cannot override, amend or be in conflict with
laws (including subordinate legislation). Otherwise the separation
between legislature
and executive will disappear.”
This
approach was endorsed by the Constitutional Court which also held
that a policy must be consistent with the operative legislative

framework. It serves as a guide to decision-making and may not bind
the decision-maker inflexibly.
See:
Arun Property Development vs Cape Town City
2015 (2) SA 584
(CC) at 601 par. 45 – 46
.
It
is clear that the relevant policies invoked by Comair were not
adopted under the authorizing Act, the
PFMA
. The
policies cannot amend, dilute or undo s. 70 of the
PFMA
;
25.2
Policies
cannot supplant the statutory provisions which are sole source of the
ambit of the power of any procedure related to it.
See:
Computer Investor’s Group Inc vs Minister of Finance
1979
(1) SA 879
(T) at 898 C – E
: “Where a discretion
has been conferred upon a public body by a statutory provision, such
a body may lay down a general principle
for its general guidance, but
it may not treat this principle as a hard and fast rule to be applied
invariably in every case. At
most it can only be a guiding principle,
and in no way decisive. Every case that is presented to the public
body for its decision
must be considered on its merits. In
considering the matter the public body
may
(I underline)have
regard to a general principle, but only as a guide, not as a decisive
factor.” This exposition on the law
was also confirmed in –
(Pty) Ltd vs Deputy Director General, Department of
Environmental Affairs and Tourism: Branch Marine and Coastal
Management
2006 (2) SA 191
(SCA) at par. 10
.  I
therefore do not agree with Comair’s approach that the
Ministers were obliged to have had regard to the policies;
25.3
Policies
therefore cannot constrain the exercise of a discretion or detract
from a duty conferred by a statutory provision. This
point is related
to the first mentioned. A good South African authority is
Baxter,
Administrative Law, Juta and Company Ltd 1984, at 6
and the
decision of the
House of Lords in R v (Alconberry Developments
Ltd) vs Secretary of State for the Government, Transport and the
Regions,
[2003] AC 295
(HL) par. 143
. This case also
addressed the situation where the policy is one made under the same
Statute in terms of which the decision is to
be made. Here, as Mr
Gauntlett SC pointed out, Comair sought to transpose a shifting set
of policy documents over more than 25
years pertaining to Transport,
made under other Statutes, to a discretionary public finance decision
by another Minister in terms
of a section of another Statute, and one
constrained only by
s. 218 of the Constitution
. It is
not permissible;
25.4
A
policy may only be applied when it is compatible with the enabling
legislation.
See:
Baxter supra at 416.
In this case the enabling
legislation is
s. 70
of the
PFMA
. This
section does not authorize the formulation of transport policies, or
contemplate its own dilution by transport policies.
Accordingly this
section cannot be interpreted or applied in a manner subservient to
extraneous policies least of all, as Mr Gauntlett
SC submitted, a
compendium of policies comprising a mere addendum to a
pre-constitutional policy a White Paper which never made
it into Law,
and an expired strategy on airlifting. It is in any event clear from
the policy documents themselves that they, in
their own wording,
provided for a flexible approach defending on the actual factual
position from time to time, and unsurprisingly
reserved the
Government’s right to intervene appropriately when national
interest had to be considered, and the integration
of SAA into the
economy. In this context Minister Gordhan also stated that the
interests of the country, as determined by Government,
would not
necessarily coincide with that of suppliers and consumers of aviation
services.
The
Airlift Strategy 2006
says the following (at p. 12):
“…SAA is unique in the South African environment as the
only carrier that has extensive
international, regional and domestic
operations. Many of these actively promote the country’s
strategic interaction with
the international community”.
The
Ministers could therefore not have adopted the approach Comair
contended for. Had they done so, and considered themselves bound
by a
policy which is incompatible with the relevant enabling legislation,
they would have taken into account a consideration which
in Law was
not only irrelevant, but could not have been applied in the exercise
of their statutory powers.
I
do not therefore propose to deal with the wording of the policies
themselves any further, but it is clear from a mere reading
thereof
that their text and the context do not support the case put forward
by Comair. The
Airlift Strategy of
2006
clearly introduced the concept
of national interests, and what those are, is for the Government to
decide. They obviously change
over time and no reasonable observer
can expect that certain policies in relation to any particular topic,
would strictly be adhered
to regardless of national and global
circumstances.
26.
Is
the Minister’s decision in terms of s. 70 of the PFMA an
administrative action?:
In
determining this question one must have regard to the actual wording
of the section in the context of the Act, the mentioned

constitutional provisions, and the functions that the Ministers
themselves have said that were performed and that are required
by the
particular section itself. An administrative action was described in
broad terms in
Grey’s Marine Houtbaai (Pty) Ltd and
Others vs Minister of Public Works and Others
supra
at
par. 24
, as follows: “The conduct of the bureaucracy
(whoever the bureaucratic functioning might be) in carrying out the
daily functions
of the State, which necessarily involves the
application of policy, usually after its translation into law, with
direct and immediate
consequences for individuals or groups of
individuals.” Administrative action excludes the executive
powers of Government,
which clearly includes the formulation of
government policy, but the implementation of policy is generally
regarded as being administrative
in nature.
See:
Permanent Secretary, Department of Education and Welfare,
Eastern Cape and Another vs Ed-U-College (PE) (s. 21) Inc.
2001 (2)
SA 1
(CC) at par. 18
.
In
Minister of Education vs Beauvallon Secondary School
[2015] 1
All SA 542
(SCA)
, it was said by Leach JA at
par. 12,
p. 549
, that there is no simple litmus test to determine
whether a decision by a public official is administrative or
executive in nature,
and in order to determine the issue a close
analysis needs to be undertaken of the nature of the public power or
function in question
in the light of the facts of each case. In doing
so, it is important to remember that a decision heavily influenced by
considerations
of policy is a clear indication of it being executive
rather than administrative, in nature.
Having
regard to considerations that were present in the Minister’s
mind, the purpose and the ambit of
s.
70
of the
PFMA,
read with
s.s 213 and 218
of the
Constitution,
it is my view that the action of the Minister in issuing the
perpetual guarantee or agreeing thereto was not of an administrative

nature, but rather of an executive nature. The provisions of
PAJA
that Comair relies upon can therefore not be used to found a cause of
action. It is of course obvious however that the relevant
Ministers,
when utilising
s. 70
of the
PFMA
,
must act lawfully, and there’s no doubt about that. The
Ministers said that there was agreement in relation to the
conditions,
and Comair has contended the contrary. Applying the
Plascon Evans
test
supra I cannot hold that there was no such agreement. The conditions
were agreed upon much later, but this cannot be an issue
in my view.
I do not agree with Mr Unterhalter SC on behalf of Comair, who
submitted that both the requesting Minister, and the
minister of
Finance must agree on the conditions on which a guarantee will be
provided, and that this must be done at the particular
time of the
guarantee. Section 70 does not say so, and it cannot be so
interpreted on a proper interpretation of the section, and
in the
context of the Act as a whole. The Act falls solely under the
auspices of the Minister of Finance, and it is he or she who
must
determine the conditions having regard to all relevant factors, the
object of the Act and the particular government purpose.
The
conditions were imposed on SAA and these also qualify the terms of
the guarantee. Mr Gauntlett SC submitted that Comair has
no
legitimate concern in whether the conditions, which were indisputably
imposed, and had been agreed upon, had been conveyed promptly,

perfectly and in
pari passu
to either SAA or the Banks which provided the funds on the strength
of the guarantee. Neither SAA nor the Banks have suffered any

uncertainty as regards the operative conditions of either guarantee.
No entity has demonstrated any prejudice to itself in this
context
and Comair certainly could not and did not. This point therefore
raises no reviewable irregularity either. As regards the
perpetual
guarantee Comair contended that the Minister of Finance could not
concur in granting the perpetual guarantee, because
the Minster of
Public Enterprises had requested a fixed guarantee. Mr Gauntlett SC
contended that neither in Contract Law nor in
Public Law nor in logic
does this argument apply. What was required by the section was that
the decision makers reach consensus.
The means for initiating the
decision-making process and through which concurrence is reached are
not prescribed, and cannot logically
mirror each other. Section 70
(1) contemplates a meeting of the mind, he said, not a paper trail
carbon copy. All that was required
was that the Minister of Finance
recorded his concurrence, at the
conclusion
of the decision making process in writing. This is what
s.
70 (1)
of the
PFMA
required, and I agree with his
contention. A purely contractual approach to this topic is out of
place. Both Ministers had deposed
that they had indeed reached
consensus in the terms recorded by the Minister of Finance. This puts
the matter beyond question because
concurrence is not a matter of
form but of fact. The decisions recorded in the Minister of Finance’s
concurrence and confirmed
on affidavit by both Ministers are
accordingly not capable of contestation.
27.
Alleged
violation of constitutional rights
:
Comair
in this context relies on the provisions of
s. 9 (1) and s. 22
of the
Constitution
. Mr Gauntlett SC contended that
because of the operation of the doctrine of avoidance and the
principle of subsidiarity, this challenge
does not properly arise.
There is no doubt in our law that where it is possible to decide any
case, civil or criminal, without
reaching a constitutional issue,
that is a cause which should be followed.
See:
S vs Mhlungu
[1995] ZACC 4
;
1995 (3) SA 867
(CC) at 895 E
and
Motsepe
vs Commissioner for Inland Revenue
[1997] ZACC 3
;
1997 (2) SA 898
(CC) at 908 D –
E
.
In
Minister of Health vs New Clicks
South Africa (Pty) Ltd
2006 (2) SA 311
(CC) par. 437
,
the following was said in this context: “Where, as here, the
Constitution requires parliament to enact legislation to give
effect
to the constitutional rights guaranteed in the Constitution, and the
parliament enacts such legislation, it will ordinarily
be
impermissible for a litigant to found a cause of action directly on
the Constitution without alleging that the Statute in question
is
deficient in the remedies that it provides. Legislation enacted by
parliament to give effect to a constitutional right ought
not to be
ignored. And where a litigant founds a cause of action on such
legislation, it is equally impermissible for a Court to
bypass the
legislation and to decide the matter on the basis of the
constitutional provision that is being given effect to by the

legislation in question.” Accordingly, in relation to
s.
9
of the
Constitution
,
Applicant had to make out a case justiciable before this Court in
terms of the
Promotion of Equality
and Prevention of Unfair Discrimination Act 4 of 2000
.
In relation to
s. 22
, in the light of the pleadings, the applicable
legislation would be the
Competition
Act 89 of 1998
. I agree with this
submission, and may add that during argument Mr Unterhalter SC did
not place much reliance, if any, on this
argument.
28.
In
the light of the above the conclusion is unavoidable that the
Ministers acted lawfully when guaranteeing the loan in perpetuity.

The provisions of
PAJA
do not apply. In any event,
Comair has not made out a case which would seek the granting of
relief in terms of
PAJA
. The policies relied on do not
establish a legitimate expectation either to be heard or consulted,
or that they would be followed
irrespective of the relevant facts
that Government needed to consider. The policies expressly recognised
the dynamic nature of
the market and the need for flexibility, and
the
SAA Act
in turn describes SAA as a strategic asset.
(See the third recital to the preamble to the
South African
Airways Act 5 of 2007
). Having regard to the past granting of
guarantees and taking a holistic view of these considerations, there
could never have been
a reasonable expectation that the Ministers
would not intervene in the drastic circumstances which Comair itself
conceded applied,
when the relevant decisions were made. In any
event, any such representation, if there was one, was made by the
Department of Transport
and not by the two decision makers. Also, any
representation made must be competent and lawful. This requirement is
also not met
because it is not competent in law for Cabinet Ministers
to fetter their constitutional statutory duties and functions, as I
have
already said with reference to the
Food Corp
supra.
It is therefore my finding that the facts clearly do not support a
basis for forming a legitimate expectation. Comair was
also in any
event unable to plead the necessary requirements to establish such a
legitimate expectation in its Founding Affidavit.
The doctrine must
be pleaded properly. See:
South African Veterinary Council vs
Szymanski
2003 (4) SA 42
(SCA) at par. 11 and 13
, and
Walele
vs City of Cape Town
[2008] ZACC 11
;
2008 (6) SA 129
(CC) at par. 36
. Whether
or not a legitimate expectation exists is a question of fact to be
determined in the prevailing circumstances in which
it is asserted.
The test is objective.
See:
President of the Republic of South Africa vs South African
Rugby and Football Union
2000 (1) SA 1
(CC) at par. 216
. I
therefore agree with Mr Gauntlett SC that Comair’s
conceptualisation of a legitimate expectation based on quotations
from policy – despite the quotations departing from established
practice, and despite the policy not emanating from the decision

makers, and not amounting to a representation by either decision
makers to Comair, is contrary to binding South African case law.
It
is accepted that only the clearest of assurances can give rise to a
legitimate expectation. The policy documents contain no
categorical
assurance. In any event it is clear that the policies were evolving.
There is therefore no merit in this ground for
review.
29.
Irrationality
of the decision in the context of the principle of legality
:
Having
regard to the perilous financial situation of SAA, it was submitted
that the decision to grant the perpetual guarantee was
irrational,
because the extension decision, in the light of the dire straits of
SAA, could not be located in any rational scheme
that would achieve
the objects of the
PFMA.
It
is clear that the exercise of public power must comply with the
doctrine of legality. The executive (in this context) may exercise
no
power and perform no function beyond that conferred upon it by law.
Any decision taken must be rationally related to the purpose
for
which the power was conferred.
See:
Pharmaceutical Manufacturers Association of South Africa and
another: In re Ex parte President of the Republic of South Africa
[2000] ZACC 1
;
2000 (2) SA 674
CC par. 84, Affordable Medicines Trust and Others vs
Minister of Health and Others
[2005] ZACC 3
;
2006 (3) SA 247
CC at par. 49, and
Democratic Alliance vs President of the Republic of South Africa
2012
(1) SA 417
SCA at 445 – 446.
I
have already mentioned the number of considerations that the
Ministers had in mind when agreeing to issue the perpetual guarantee,

which went beyond the purely financial aspects. For instance, SAA as
a national carrier with a mandate that requires it not to
operate for
purely commercial gain, but also to operate routes that are not
profitable in order to support the strategic interests
of South
Africa. As part of the developing turn-around strategy, such routes
would either be discontinued in the future, or possibly

‘ring-fenced’. On behalf of the Fifth Respondent Mr
Maenetje SC said that there was no doubt that in the absence of

shareholder support, SAA would not be able to continue to operate.
This would be detrimental to the South African economy and strategic

objectives, given its contribution to South Africa generally and the
gross domestic product.
I
have read the divergent views of a number of experts in this context.
A number of inescapable facts however must not be forgotten:
Comair
does not compete with SAA internationally, and could not transport
the international tourists to South Africa. It could
not convey the
cargo to-and-from South Africa. It could not assimilate the dozens of
service providers to SAA and the many thousands
of employees, nor
could any other airline on short to medium notice.
Furthermore,
the possible or even probable inability to pay by the requester of a
loan in the context of
s. 70
of the
PFMA
is an inherent factor in the authority given to the Ministers to
guarantee such a loan. It is constitutionally envisaged and
permitted.
Amongst others,
s. 70
(4)
of the
PFMA
makes this abundantly clear.
I
agree with that submission. Any optimism or pessimism regarding the
recipients’ ability to re-pay any loan is not a requirement
for
any relevant guarantee.
Section 70
and
sections
213 and 218
of the
Constitution
do not require
this.
Having
regard to all of the material that was before the Ministers at the
time, and the whole history of SAA, I cannot say that
the decision to
guarantee loans on a perpetual basis subject to the stated (and
perfectly rational conditions) is of such a nature
that the purpose
of the
PFMA
is not achieved, or cannot be achieved, as
Mr Unterhalter SC submitted. I also keep in mind that members of the
executive have
a wide discretion in selecting means to achieve
constitutionally permitted objectives and that courts may not
interfere with the
means selected simply because they do not like
them or because there are other appropriate means that could have
been selected.
See:
Abbott vs Centre for the Study of Violence and Reconciliation
and Others
2010 (3) SA 293
CC at par. 51
.
The
Ministers gave reasons why failure of SAA would have been
catastrophic for all of its service providers and employees,
tourists,
trade to-and from South Africa and the economy as a whole,
including the financial markets and South Africa’s credibility

therein. In my view these were permissible and relevant
considerations in the present context and were mandated by the
Constitution
and the
PFMA
. The Ministers
therefore did act lawfully. Although they took most considerations
into account then the mere financial ones contained
in the Treasury
Memorandum, they were in my view entitled to do so, if not obliged.
That is part of the executive function herein:
to carefully consider
the wide ramifications of the failure of SAA. This they did. I have
also kept in mind that an enquiry into
rationality can be a slippery
path that might easily take one inadvertently into assessing whether
the decision is founded upon
reason – in contra-distinction to
one that is arbitrary – which is different to whether it was
reasonably made. All
that is required is a rational connection
between the power being exercised and the decision, and if that
exists, a finding of
objective irrationality will be rare.
See:
Minister of Home Affairs vs Scalabini Centre supra at par. 65 –
66
Whether
a decision is rationally related to its purpose is a factual enquiry
blended with a measure of judgement, it was held, and
here courts are
enjoined not to stray into executive territory.
The
decision-making process must also be rational.
See:
Democratic Alliance vs President of the Republic of South
Africa,
supra
at par. 12.
Mr
Unterhalter SC contended that the Minister of Finance did not
sufficiently weigh-up the financial aspects referred to in the

Treasury Memorandum versus the other factors that moved him to concur
in the request for a guarantee. Although he did give reasons
for his
decision, so he submitted, he did not show in his affidavit how this
assessment was made. A mere tabulation of relevant
factors was not
enough. This may well be so in certain cases but a holistic reading
of the First and Second Respondents’
affidavits do in my view
give sufficient details of the process of decision-making involved,
in which a number of government departments
had also made a
contribution, including the Department of Tourism. I cannot find
therefore that the process was irrational.
30.
Sixth
to Eighth Respondents’ arguments:
These
Respondents were joined on 18 March 2015. They filed affidavits and
raised certain issues pertaining to the relief sought
in the main
application. All had made individual loans to SAA which were backed
by a written guarantee of the Government, as represented
by the First
and Second Respondents. They submitted that if I were to grant prayer
1, i.e. declaring the guarantee unlawful, I
ought to make the order
prospective only, so that the individual guarantees would not be
affected. Applicant agreed in a supplementary
affidavit that “Comair
is willing to agree that the declaration of inability and the setting
aside of the Guarantee has a
prospective effect, and a declaration
that the Bank-specific guarantees already granted remain valid, so as
to ensure that the
security for loans already granted is protected”.
This
ought to have been the end of the Banks’ interest in the
proceedings, but further points were raised which I will briefly
deal
with.
30.1
On
behalf of the Seventh Respondent Mr Loxton SC submitted that in the
context of prayers 1 and 2, Comair had made a distinction
between the
decisions in the terms of which the guarantee was purportedly issued
and then extended, and the guarantee itself. The
guarantee did not
form part of the record and did not exist. Prayers 2 and 3 of the
Notice of Motion were incompetent and the whole
debate about the
effect of the suspension of the setting aside of the guarantee was
pointless. Mr Chaskalson SC on behalf of Nedbank
associated himself
with this argument with a good measure of glee, although this was not
raised in the Bank’s Answering Affidavit
made on 27 April 2015.
There is no merit in this argument, and it completely ignores the
commercial realities inherent in the process
of a Bank-specific
guarantee, and what the Ministers had said in their affidavits. In
Nedbank’s own affidavit the following
appears: “20.1 The
banks in this matter lent billions of Rands to SAA relying on
government’s decision to provide a
R 5, 006 billion guarantee
to SAA. They extended loans on the particular terms contained in
their respective loan agreements to
an entity that was at the time
factually insolvent, only because their loans would be secured by the
government”. The Minister
of Finance admitted that he had made
the relevant guarantee decision in terms of
s. 7 (1) (a)
of the
PFMA
. He also concurred in the granting of the
perpetual guarantee, he said. The same confirmation was made by the
Minister of Public
Enterprises in his (her) affidavits. In the 2014
Budget Review of the National Treasury the same factual assertion was
made. The
Treasury Memorandum of 30 October 2013
confirmed that a guarantee had been issued. The Annual Financial
Statements of 2013 of SAA, dated February 2014, reflected this
as
well. Standard Bank said so in its own affidavit, and so did ABSA in
its, although it had not been joined as a Respondent. Also,
on 28
September 2012, the Second Respondent wrote to SAA saying that the
Minister of Finance had provided his concurrence for a
government
guarantee of R 5, 005 billion effective from 1 September 2012 to 30
September 2014.
In
the light of these undisputed facts I am not inspired by this belated
argument, and it was not justified on the affidavits before
me. It
must be remembered that the guarantee/perpetual guarantee was given
to SAA via the responsible Minister. On the strength
of those
guarantees SAA approaches the financial market for a loan, which is
then guaranteed in writing by the particular Ministers
on behalf of
the Government. This is the practical way in which
s. 70
of the
PFMA
functions.
30.2
Nedbank
also belatedly objected to Comair’s standing herein. Apart from
a mere reference thereto in the First Answering Affidavit
of the
Minister of Public Enterprises, this was never an issue in the
further affidavits or the proceedings before me. Mr Chaskalson
SC
submitted that no-one had the standing to challenge the Ministers’
decision in the context of
s. 70
of the
PFMA
as this could only be done through a parliamentary process in terms
of the
Money Bills Amendment Procedure and Related Matters Act
No. 9 of 2009
. In my view this Act would not apply to such a
challenge as is clear from s. 3 thereof. Mr Unterhalter SC in turn
asked by which
process one had to approach Parliament and when, given
the provisions of
s. 70 (4)
of the
PFMA
?
There is no merit in this objection. The jurisdiction of a Court is
not easily ousted, and in the given context, where Comair
has
challenged the legality of the particular decisions, it would have
standing both in its own interests and in the interests
of the
public, as public money was involved.
Section
38
of the
Constitution
has undoubtedly been given an expansive interpretation.
See:
Kruger vs President of the Republic
of South Africa, supra at par. 23.
31.
Costs
:
Applicant
contended that it had acted in its own interests herein as well as in
the public interest. If it was not successful I
ought not to make a
costs order against it on the basis of various considerations held to
be relevant in
Biowatch Trust vs Registrar, Genetic Resources
2009 (6) SA 232
CC
. The main Respondents contended that
Comair had acted mainly in its own commercial interest and had, at
least to some appreciable
extent, based its cause of action on topics
that had to be dealt with by Competition Law authorities. The
phraseology used in the
Founding Affidavit clearly indicates this to
be so, but it is also perfectly obvious that considering all of the
Applicant’s
affidavits holistically, the main thrust of the
challenge was aimed at the Ministers’ decision in the context
of
s. 70
of the
PFMA
, and the whole
process involved in such decisions. This was a constitutional issue
in the context of the principle of legality.
This was not a spurious
challenge. There was no prior judicial pronouncement on the
interpretation of s. 70, and the topic is clearly
in the public
interest inasmuch as public funds are involved. The Applicant was
entitled to raise its concerns in Court. The perpetual
guarantee was
given by the Ministers shortly before the application in respect of
the first guarantee was to be heard. This, by
necessity, involved the
filing of further substantial affidavits and an analysis of the
information that was before the Ministers
at the time of their
decision. It is my view that from an
ex post facto
point of
view, the proceedings could have been curtailed substantially if all
necessary information/documentation had been made
available to Comair
timeously and more completely, also in respect of the specific
guarantees later given to the Bank Respondents.
Too many resources
were spent, and too much time expanded (but not in Court) on the
various financial experts, aviation experts
and economists, when it
ought to have been clear to all the parties that SAA was in fact
insolvent, that this did not have to be
debated further, and that the
crux of the case was whether under those circumstances the Ministers
were lawfully entitled to guarantee
the loans as they did.
The
views raised in these proceedings were genuine, substantive and
complex. In my view Comair should not be mulcted in costs because
it
was unsuccessful. It penned a genuine constitutional claim. The Bank
Respondents contended that Applicant ought to bear their
costs. They
are the “innocent parties” herein so I was told. They
were joined as Respondents at a rather late stage,
but there is also
clear evidence that they had known about this litigation for many
months. Their interest was limited to the relief
sought, but issues
were raised in the affidavits that went beyond that interest. They
also preferred to attend the Court hearing
throughout. I have
weighed-up all competing interests in this context and deem it fair
if no cost order is made in respect of these
Respondents either.
32.
The
result is therefore the following:
1.
The application is dismissed.
2.
No order as to costs is made.
JUDGE
H.J FABRICIUS
JUDGE
OF THE GAUTENG HIGH COURT, PRETORIA DIVISION
Case
no.: 13034/13
Counsel
for the Applicant: Adv D. N. Unterhalter SC
Adv
M. Du Plessis
Adv
A. Coutsoudis
Instructed
by: Webber Wentzel Attorneys
Counsel
for the 1
st
and 2
nd
Respondents: Adv J. J.
Gauntlett SC
Adv
S. Yacoob
Adv
F. Pelser
Instructed
by: The State Attorney
Counsel
for the 5
th
Respondent: Adv N. H. Maenetje SC
Adv
S. S. Linda
Instructed
by: Cliffe Dekker Hofmeyer Attorneys
Counsel
for the 6
th
Respondent: Adv B. E. Leech SC
Adv
K. S. Hofmeyr
Instructed
by: Werksmans Attorneys
Counsel
for the 7
th
Respondent: Adv C. Loxton SC
Adv
L. Sisilana
Instructed
by: Norton Rose Fulbright SA Inc
Counsel
for the 8
th
Respondent: Adv M. Chaskalson SC
Adv
K. S. Hofmeyr
Instructed
by: Werksmans Attorneys
Heard
on:5, 7, 8 & 14 May 2015
Date
of Judgment: 01/06/2015 at 10:00