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[2007] ZASCA 130
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Minister of Local Government, Housing and Traditional Affairs (Kwazulu-Natal) v Umlambo Trading 29 CC and Others (487/06) [2007] ZASCA 130; [2007] SCA 130 (RSA); 2008 (1) SA 396 (SCA) (28 September 2007)
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO: 487/06
Reportable
In the matter between
THE
MINISTER OF LOCAL GOVERNMENT, HOUSING AND TRADITIONAL AFFAIRS
(KWAZULU-NATAL)
...........................
Appellant
and
UMLAMBO TRADING 29 CC
...........................
First
Respondent
MANASE &
ASSOCIATES
...........................
Second Respondent
NEDBANK
LIMITED
...........................
Third
Respondent
ILEMBE
DISTRICT MUNICIPALITY
...........................
Fourth Respondent
Before
:
Howie
P, Van Heerden, Jafta, Mlambo and Cachalia JJA
Heard: 18
September 2007
Delivered: 28
September 2007
Summary:
Local Government: Municipal Systems Act 32
of 2000
,
ss 106(1)(b)
and (2) – appointment of person(s)
to investigate maladministration, fraud, corruption or other serious
malpractice in a municipality
in KwaZulu-Natal – in order for
investigator to have powers of subpoena, commission must be appointed
by the Premier by proclamation
in the Provincial Gazette in terms of
s 2 of the KwaZulu-Natal Commissions Act 3 of 1999
Neutral Citation: This judgment may be referred to as
Minister
of Local Government, Housing & Traditional Affairs
(KwaZulu-Natal) v Umlambo Trading 29 CC
[2007] SCA 130
(RSA)
JUDGMENT
VAN HEERDEN JA:
This is an appeal against a judgment of the Durban High Court in
terms of which subpoenas issued by the second respondent, Manase
and
Associates, a firm of chartered accountants, were set aside. The
subpoenas were purportedly issued during the course of a forensic
investigation and required the first respondent, Umlambo Trading 29
CC, a close corporation, and its bankers, Nedbank Limited (the
third
respondent), to produce certain documents, including bank
statements. The High Court (per Nicholson J) ordered the appellant,
the Minister of Local Government, Housing and Traditional Affairs,
who was an intervening party before it, to pay the first
respondent’s
costs. The appeal is before us with the leave of
the court below.
I will for the sake of
convenience refer to the appellant as the MEC, the first respondent
as Umlambo, the second respondent as
Manase, the third respondent as
Nedbank and the fourth respondent, the Ilembe District Municipality,
as the Municipality.
During November 2003, the
Municipality called for tenders for the conversion of recycled
shipping containers into spaza shops, salons
and other work places.
This was part of a program called the Mayor’s Container
Initiative. Umlambo was awarded a tender for
the supply of 44
recycled containers.
On 7 June 2005, the MEC
appointed Manase to conduct an investigation within the
Municipality. The relevant part of the MEC’s
five-page letter
of appointment reads as follows:
‘
I
have to inform you that the Minister of Local Government, Housing
and Traditional Affairs has, in terms of
section 106(1)(b)
of the
Local Government: Municipal Systems Act No. 32 of 2000
, approved
your appointment as the Investigator to conduct a forensic
investigation within the Ilembe District Municipality to cover
the
following matters over the periods specified below . . .
.
. .
The
provisions of the KwaZulu-Natal Commissions Act No. 3 of 1999 apply
directly to the above investigation and you are, herewith,
requested
to report directly to the Department, as your employer in this
matter, regarding all progress with your investigation.
. . ’
Pursuant
to this, Mr Krumchund Hariparshad, one of the partners of Manase,
telephonically contacted Umlambo’s sole member,
Ms Seetha
Singh, informing her that he was conducting an investigation into
the Mayor’s Container Initiative and that he
required the
following information:
(i) Umlambo’s original founding statement and any amendment
thereto;
(ii) a paid-up cheque;
(iii) a list of authorised signatories to Umlambo’s bank
account;
(iv) the physical address of Umlambo at which the containers were
being refurbished;
(v) Umlambo’s bank statements.
Umlambo’s attorney
responded on its behalf, requiring Manase to make the request for
the information in writing and stating
that Manase was not entitled
to the bank statements. On 14 June 2005, Manase responded by serving
on Singh, in her capacity as
Umlambo’s sole member, one of the
subpoenas in issue, signed by Hariparshad as ‘partner’.
The subpoena claimed
to be ‘in terms of
section 106(2)
of the
Local Government: Municipal Systems Act, Act
32 of 2000 (‘the
Systems Act’) read with section 4(1)(a) of the KwaZulu-Natal
Commissions Act, Act 3 of 1999’.
It required the production of
all the documents referred to in the preceding paragraph, save for
the bank statements. On 20 June
2005, Umlambo supplied the
documentation required, under cover of a letter addressed to Manase
by the close corporation’s
attorney.
The bank statements were sought
by Manase by way of a separate subpoena which was served on Nedbank.
By this time Umlambo’s
attorney had begun to question the
legality of Manase’s conduct and of the entire investigation
and had, in various letters
to Manase, sought the production of its
letter of appointment and the names of the chairperson and secretary
of the ‘commission’.
In
subsequent written communications, Manase refused to produce its
‘engagement letter’, stating that the MEC had expressly
prohibited its dissemination and that release of the letter might be
prejudicial to the rights of the Municipality. Relying, so
it was
contended, on its powers of subpoena derived from s 106(1)(b) of the
Systems Act and s 4(1)(a) of the KwaZulu-Natal Commissions
Act 3 of
1999 (‘the KZN Commissions Act’), Manase asserted that:
‘
In
terms of the powers granted to us as Commissioners of Enquiry, we
are entitled to call and subpoena witnesses and documentation,
lead
evidence and clarify matters beyond a reasonable doubt.’
Manase further indicated that it
was concerned about ‘material misrepresentations’ that
might have been made to the
Municipality in relation to the Mayor’s
Container Initiative. It now appears from Manase’s answering
affidavit (deposed
to by Hariparshad) that these
‘misrepresentations’ related to Umlambo’s
empowerment credentials and to what had
been communicated in that
connection to the Municipality when the tender fell to be
considered. Hariparshad also entertained a
suspicion that a corrupt
relationship existed between Umlambo and employees of the
Municipality, because the tender had been awarded
to Umlambo
although it had only ranked eighth on the list of tenderers.
Umlambo challenged the legal
authority of the ‘commission’, but Manase persisted with
its request for the bank statements
whilst declining production of
the letter of appointment. It informed Umlambo that ‘specific
individuals from Manase &
Associates, who will be undertaking
the investigation, are assigned the powers of a Commissioner of
Enquiry’ and that ‘the
commissioners are Messrs
Hariparshad, Roopram and Oosthuizen’. The latter two, it must
be noted, are not partners of Manase.
Nedbank did not wish to become
embroiled in litigation. In the result, Umlambo approached the High
Court seeking to halt the ‘investigation’
in its
entirety. The MEC sought and was granted leave to intervene. In the
affidavit filed on the MEC’s behalf, deposed to
by Mr Lionel
Pienaar, the General Manager: Local Government (KwaZulu-Natal), it
was contended that the KZN Commissions Act was
applicable, with the
‘necessary changes as the context may require’, as
provided for in s 106(2) of the Systems Act.
The letter of
appointment was annexed to the MEC’s affidavit, Pienaar
stating that ‘the need for confidentiality regarding
the
contents of the same has now passed’. Manase indicated that it
would abide the decision of the court, but it filed Hariparshad’s
affidavit ‘to advise the court’ of the reasons for the
issue of the subpoenas.
In its replying affidavit,
Umlambo attempted to amend significantly the fairly wide relief
which it had sought, as well as the grounds
on which it had
initially relied. In effect, the relief that Umlambo sought in its
amended form was for an order reviewing and
setting aside Manase’s
appointment by the MEC.
In dealing with the legality of
the steps taken by the MEC, Nicholson J commenced with a
consideration of the applicable legislation.
First, he had regard to
ss 106(1)(b) and (2) of the Systems Act which read as follows:
‘
(1)
If an MEC [Member of a provincial Executive Council] has reason to
believe that a municipality in the province cannot or does
not
fulfil a statutory obligation binding on that municipality or that
maladministration, fraud, corruption or any other serious
malpractice has occurred or is occurring in a municipality in the
province, the MEC must –
(a)
. . .
(b)
if the MEC considers it necessary, designate a person or persons to
investigate the matter.
(2)
In the absence of applicable provincial legislation, the provisions
of sections 2, 3, 4, 5 and 6 of the Commissions Act, 1947
(Act 8 of
1947), and the regulations made in terms of that Act apply, with the
necessary changes as the context may require, to
an investigation in
terms of subsection (1)(b).’
The High Court concluded that it
was clear that, in terms of section 106(2) of the Systems Act, the
relevant provisions of the Commissions
Act – national
legislation – applied only in the absence of ‘applicable
provincial legislation’. There
was no doubt that, in this
case, there
was
applicable provincial legislation in the form
of the KZN Commissions Act. The provisions of the Provincial Act
thus applied and
it was accordingly necessary to ascertain whether
the actions complained of by Umlambo were authorised in terms
thereof. In that
regard, Nicholson J stated:
‘
It
seems to me that a contextual reading of the subsection does not
allow such an interpretation. Clearly it was envisaged that
provincial legislation would be promulgated which would be
applicable. Such legislation is now in place.
1
Until such legislation was enacted the national Act was made
applicable, with the necessary changes as the context required in
the meantime. That seems to be to be the sensible and proper
interpretation of the plain meaning of the words.’
That, one would have thought, would
have been the end of the matter. However, notwithstanding his having
expressed himself quite
firmly on that issue, the learned judge
nonetheless remarked that the interpretation of the subsection was
not ‘absolutely
clear’. He thus considered himself
compelled to decide the matter on the basis that the provincial Act
also applied ‘with
the necessary changes as the context may
require’.
Section 2(1) of the KZN
Commissions Act provides that –
‘
The
Premier may by proclamation in the
Provincial
Gazette
of the Province of KwaZulu-Natal –
(a)
appoint a commission;
(b)
define the matter to be investigated by the commission and the terms
of reference of such commission;
(c)
make regulations –
(i)
providing for the procedure to be followed at the investigation and
for the preservation of confidentiality; and
(ii)
providing generally for all matters which he or she considers
necessary or expedient to prescribe for the purposes of the
investigation;
(d)
appoint a secretary to the commission, and such other officials as
he or she may deem necessary to assist the commission; and
(e)
designate any member of the commission as the chairperson of that
commission.’
A ‘commission’ is
defined to mean a commission appointed under s 127(2)(e)
of the Constitution, in terms of
which a Premier is responsible for appointing commissions of enquiry
for his or her province.
It was common cause that there
had been no publication of the ‘investigation’ or
‘commission’ in the
Provincial Gazette
. No matter
for investigation or terms of reference had been defined, no
regulations had been made, and no secretary or chairperson
had been
appointed, let alone published in the
Provincial Gazette
.
The principle of legality lies
at the centre of the appeal. It is a fundamental principle of the
rule of law that the exercise of
public power is only legitimate
where it is lawful. It is central to our constitutional order that
the legislature and the executive
are in every sphere constrained by
the principle that they may exercise no power and perform no
function beyond those conferred
on them by law. (See in this regard
Fedsure Life Assurance Ltd & Others v Greater Johannesburg
Transitional Metropolitan Council & Others
.
2
)
The MEC had no power to appoint
a commission; this power vested in the Premier in terms of the
applicable legislation. His appointment
of Manase as a ‘commission’
was thus unlawful. Moreover, as the MEC also had no power to issue
subpoenas, his purported
delegation of that power to Manase or
anyone else was likewise unlawful. That, it seems to me, is the
short answer in this appeal.
Furthermore, section 4, which
was expressly relied upon by Manase and the MEC, provides that a
commission shall have the power to
subpoena any person to attend a
sitting of the commission in order to give evidence or to produce
any book, document or object
before the commission at the time and
place specified in the subpoena. The court below considered that no
such place had been specified
in the subpoenas in question and that,
for that reason alone, they were probably defective.
Moreover, s 4(2) provides that a
subpoena shall be signed and issued by the secretary of the
commission, and shall be served by
the secretary or any person
authorised by the secretary to do so, in the same manner as a
subpoena for the attendance of a witness
at a criminal trial in the
High Court. As no secretary had been appointed, plainly there could
not have been compliance with this
provision. The signature of
Hariparshad or a member of his staff could thus obviously not
suffice.
Importantly, the court below
expressed the view that the MEC was entitled in terms of s 106(1)(b)
of the Systems Act to appoint
a person to investigate the
maladministration and/or corruption he believed was taking place in
the Municipality, but that once
the appointed investigator required
powers of subpoena, the only viable route open to the MEC was to
approach the Premier with
a request for the proper appointment of a
commission in terms of s 2(1) of the KZN Commissions Act.
The court below went on to hold
that the failure properly to appoint a commission by proclamation in
the
Provincial Gazette
and all the other deficiencies to
which I have already alluded could not be regarded as ‘necessary
changes required by the
context of the appointment of an
investigator’ in the present case.
The
court concluded that the subpoenas issued to Umlambo and to Nedbank
were fatally defective as they had not been preceded by
the proper
appointment of a commission by proclamation in the
Provincial
Gazette.
All
the other deficiencies in the subpoenas flowed from that fatal flaw.
The court thus ordered that the subpoenas be set aside
and that the
MEC pay the costs of Umlambo’s application. In that, the court
was correct.
The KZN Commissions Act
3
certainly constitutes ‘applicable provincial legislation’
as contemplated by s 106(2) of the Systems Act. Moreover,
having
regard to the ordinary grammatical meaning of s 106(2), it is clear
that it is only in the
absence
of applicable provincial
legislation that ss 2 to 6 of the (national) Commissions Act, apply,
‘with the necessary changes
as the context may require’,
to an investigation in terms of s 106(1)(b). The quoted phrase does
not to my mind apply to
any ‘applicable provincial
legislation’. Nicholson J was quite correct in his conclusion
that this is ‘the sensible
and plain meaning’ of the
words of s 106(2). This being so, it was not necessary for him to
have considered whether the failure
to comply with the KZN
Commissions Act in the respects set out above could be accommodated
within the ambit of the quoted phrase.
As the subpoenas which Manase
purported to issue and serve on Umlambo and Nedbank were not
preceded by the proper appointment of
a commission by proclamation
in the
Provincial Gazette
, as required by s 2 of the KZN
Commissions Act, and as Manase had no authority to issue any
subpoena, these subpoenas were unlawful
and were correctly set aside
by the court below.
Order
In the circumstances, the appeal
is dismissed with costs.
B J VAN HEERDEN
JUDGE OF APPEAL
CONCUR:
HOWIE P
JAFTA JA
MLAMBO JA
CACHALIA
JA
1
It
should be noted that, by the time the Systems Act came into
operation on 1 March 2001, the following eight out of the nine
provinces
of South Africa had legislation dealing with commissions
appointed by the relevant Premier in terms of s 127(2)(e) of the
Constitution
(s 147(1)(d) of the Interim Consitution): the
Provincial Commissions Act 3 of 1994 (Eastern Cape); the North West
Commissions Act
18 of 1994; the Northern Cape Commissions of Inquiry
Act 4 of 1996; the Provincial Commissions Act 1 of 1997 (Gauteng);
the Commissions
Ordinance 5 of 1954 (Free State), as amended by the
Commissions Ordinance Amendment Act 4 of 1998 (Free State); the
Western Cape
Provincial Commissions Act 10 of 1998; the Mpumalanga
Commissions of Enquiry Act 11 of 1998 and the KwaZulu Natal
Commissions Act
3 of 1999. In the remaining province, the Northern
Province, corresponding legislation was promulgated in 2001 in the
form of the
Northern Province Commissions of Inquiry Act 4 of 2001.
See further in this regard 2(2)
Lawsa
2ed (2003) paras
196–216.
2
[1998] ZACC 17
;
1999
(1) SA 374
(CC) paras 56 and 58.
3
As
also the other provincial statutes referred to in n 1 above.