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[2007] ZASCA 131
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Kwazulu CSM Monitoring Systems (Pty) Ltd v Kwazulu-Natal Gambling Board and Others (470/06) [2007] ZASCA 131; [2007] SCA 131 (RSA) (28 September 2007)
Links to summary
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case No: 470/06
NOT REPORTABLE
In
the matter between:
KWAZULU
CMS MONITORING SYSTEMS (PTY) LTD ...........................
APPELLANT
v
KWAZULU-NATAL
GAMBLING BOARD ........................... FIRST RESPONDENT
PROFESSOR
S V NZIMANDE ........................... SECOND RESPONDENT
THE
PREMIER OF KWAZULU-NATAL ........................... THIRD RESPONDENT
THE
NATIONAL GAMBLING BOARD OF SOUTH AFRICA ...........................
FOURTH RESPONDENT
THE
MINISTER OF TRADE AND INDUSTRY ........................... FIFTH
RESPONDENT
Coram:
Navsa, Jafta, Cachalia JJA, Malan et Mhlantla AJJA
Heard:
20 September 2007
Delivered:
28 September 2007
Summary: Regulation 156(8), PN 1087
PG, 7 November 2003, promulgated under s 87 of the Kwazulu-Natal
Gambling Act 10 of 1996
provides for a single central electronic
monitoring system for the Province ─ the Provincial Gambling
Board had authority to
contract for the procurement of the system.
Neutral
citation: This judgment may be referred to as
KwaZulu
CMS Monitoring Systems v KZN Gambling Board
[2007]
SCA 131 (RSA).
JUDGMENT
CACHALIA
JA
[1] Pursuant to a
public tender process the appellant concluded a contract with the
first respondent, hereafter referred to as the
Board, for the
provision of a central electronic monitoring system (CEMS) designed
to receive and send data to and from gaming machines.
Its function
was to monitor the operation of some 5 000 gaming machines that were
to be located at sites throughout the KwaZulu-Natal
Province. Shortly
after the contract’s conclusion in March 2004 the Board
allegedly repudiated it. This caused the appellant
to institute a
damages claim against the Board and the second respondent in the
Pietermaritzburg High Court. When the matter came
before Levinsohn
DJP he separated one issue for determination in terms of rule 33(4)
of the Uniform Rules of Court. This was
whether the Board had the
statutory authority to conclude the contract. He decided not, but
granted leave to this court.
[2] The dispute
concerns the proper interpretation of reg 156(8), P
N
1087, 2003
of
the regulations promulgated under s 87 of the Kwazulu-Natal Gambling
Act 10 of 1996 (the Act). At the time of the contract’s
conclusion it read as follows:
‘
The
electronic monitoring system referred to in this regulation shall be
a single one operated by the Province or entity contracted
by the
Province which shall have no other interest in respect of gaming in
the Province.’
The crisp question
is whether the regulation’s reference to the words ‘the
Province or entity contracted by the Province’
denotes the
Province’s executive, as the respondents contend, or a
significant entity within the ‘Province of Kwazulu-Natal’,
which is the appellant’s case. If the former interpretation is
correct, it means that only the provincial executive was authorised
to contract for the provision of a CEMS. If, however, the latter
interpretation prevails it would accord with the appellant’s
contention that the authority to conclude the contract vested in the
Board. To better understand the parties’ contentions it
is
necessary to examine reg 156(8) in its statutory context and
against the background of its promulgation.
[3] The Act’s
long title states its purpose as inter alia ‘to provide for
restrictions on gambling, the establishment
of a Provincial Gambling
Board, the licensing of persons conducting casinos and bingo games
and of gaming machine operators . . .
.’ The Board has two
objects. First, to ‘ensure that all gambling authorised under
this Act is conducted in a manner
which promotes the integrity of the
gambling industry and does not cause harm to the public interest (s
6(1)(a)). The second object
is to promote the Board’s
objectives in relation to the Province’s gambling industry. In
order to give effect to this
object the Board must within six months
of its first meeting refer to the Premier a macro-plan for the
licensing of route and site
operators, which inter alia, will specify
the number of gaming machines to be operated in the Province, the
types of premises on
which they should be permitted and any other
matter which the Premier directs the Board to take into account
(s 6(2)).
1
[4] The ‘Minister’,
defined in s 1 of the Act as the Member of the Executive Council or
the Premier, is responsible for
the administration of the gambling
portfolio in the Province. It will be convenient hereafter to refer
only to ‘the Premier’.
Section 5 of the Act establishes
the Board whose members the Premier appoints, in consultation with
the cabinet and after consulting
the Provincial Legislature’s
Portfolio Committee (see s 8). To be eligible for appointment to the
Board, persons must comply
with strict criteria (s 8). Board members
hold positions of public trust and the Board’s ‘independence
and integrity’
is of paramount importance (s 17(1)). The Act
disqualifies from appointment public servants, political office
bearers and persons
who have a financial interest in any gambling
activity (s 9(1)). The Board’s powers and functions derive from
s 7 of the Act.
They are extensive and include licensing, regulating
and controlling gambling activities in the Province (s 7(1)(bA)). It
also has
the responsibility ‘to determine norms and standards
for . . . gaming machines’ whenever there are no national norms
and standards (s 7(1)(o). The Board exercises its powers and performs
its functions independently.
[5] Chapter 5 of the
Act deals with gaming machines. It provides that no person is
entitled to maintain premises where gaming machines
are operated
unless in possession of a licence. There are three categories of
licences appropriate to gaming machines. First, gaming
machines in
casinos, second, those in bingo halls and third, those which ‘route
operators’ supply and maintain on premises
outside casinos and
bingo halls operated by ‘site operators’ (s 51).
2
This matter concerns
gaming machines, in the third category, which are referred to as
limited payout machines (LPM’s).
[6] Section 54
requires that ‘every gaming machine that is authorised by the
Board for use on licensed premises shall be connected
to the
prescribed electronic monitoring system’. This includes the
LPM’s we are concerned with. The Act does not specify
who or
which entity is responsible for the CEMS’s establishment. But s
87(1)(k) gives the Premier the power to make regulations
regarding
‘any matter applicable to the electronic monitoring system’.
[7] The regulations
prescribing the operation of the CEMS were initially promulgated as
part of the ‘gambling regulations’,
PN 274, 1998, PG
5301, 23 September 1998. Casinos, bingo halls and site operated LPM’s
were dealt with respectively in regs
58, 210 and 156. The three
regulations were, with the necessary changes as the context requires,
exactly the same in their terms.
Regulation 156(1) provided that the
CEMS that s 54 contemplates shall be any monitoring and control
system which –
‘
(a)
communicates directly, without using hard wires, with the motherboard
of every limited payout machine connected to such system;
is able to communicate with the
Board’s monitoring and control system through a protocol
determined by the Board; and
(c)
is certified by the South African Bureau of Standards as complying
with the standard referred to as South African Bureau of Standards
1718-3: 1996 Gaming Equipment Part 3: Monitoring and Control systems
for gaming equipment and
which
the Board approves for use in the Province
’
(My emphasis).
[8] Regulations
156(2) and (3) prescribed, in detail, the nature of the data and
information that the CEMS was required to provide
to the Board,
including information on certain revenue transactions, ‘significant
events’
and any other
information that the Board may have required.
3
Regulation 156(4)
imposed an obligation on route operators to store the information
specified in sub-regulation (3) for a period of
five years in
addition to other information which the Board may have required.
Regulation 156(5) imposed upon the Board an obligation
to ‘prescribe
a common protocol to facilitate communication between the Board and
the route operator’s monitoring and
control system . . . .’
The route operator was required, in terms of reg 156(6), to connect
all LPM’s to his or her monitoring
and control system (which
the Board had approved). Regulation 156(7) made it an offence for any
person to ‘modify or alter’
the CEMS without the Board’s
approval.
[9] In promulgating
the regulations dealing with the licensing of route and site
operators, including reg 156, the Premier gave effect
to the Board’s
‘Macro-Plan for the Licensing of Route and Site Operators’,
mentioned earlier, which he had published
in PN 33, PG 5227, on
15 September 1997. Clause 36 of the plan envisaged that
operators would be permitted a system of their
choice subject to its
ability to communicate with the Board’s ‘monitoring and
control system’, which could only
have meant the CEMS. The
system was to have operated as a single integrated one which,
according to Mr Mafayela who testified for
the appellant in the High
Court, would have been able to transmit information from each LPM to
a central site, linked to the Board.
[10] In its analysis
of reg 156 the court below observed that
‘
Regulation
156(1)(b) speaks of the electronic monitoring system contemplated by
section 54 of the Act being able to “communicate
with the
Board’s monitoring control system through a protocol determined
by the Board”. That connotes in my view a relationship
between
the first-mentioned system and the (Board’s)’.
The court then made
reference to sub-regulations 2, 3 and 6, and accepted that there were
two systems, the CEMS and the Board’s,
and that the Board’s
role was confined to determining ‘standards and criteria’
for the CEMS; it was not authorised
to contract for the CEMS.
[11] As I have
mentioned, the CEMS was envisaged as a single, integrated system,
which had to comply with the standards and criteria
that the Board
determined. The Board’s role was clearly not limited only to
setting standards and criteria for the CEMS. It
is apparent that reg
156, at least before its amendment by the addition of reg 156(8),
envisaged that the CEMS would provide
a wide range of data and
information to the Board to enable it to monitor each LPM. There is
no suggestion in regs 156(1) to 156(7)
that the Premier had any such
function. Thus, as the recipient of the data and information from the
CEMS, it was the Board’s
responsibility, not the Premier’s,
to approve the operation of the CEMS (s 156(1)(c)). The Premier’s
responsibility was
limited to prescribing by regulation its
operation. Furthermore, if the Premier was responsible for
establishing and operating the
CEMS, reg 156(7) would have made
alteration or modification of the system without the
Premier’s
approval
(not ‘the Board’s’ as the regulation read) an
offence. It is therefore, at the very least, implicit in
the Act,
read with regs 156(1) to 156(7) that the Board was authorised to
procure the CEMS.
[12] Before I deal
with reg 156(8), which the respondents contend conferred on the
provincial executive the authority to procure the
CEMS, it is
necessary to examine reg 58(8), which amended reg 58. This will place
the interpretation of reg 156(8) in its proper
historical context.
[13] Regulation 58
(which dealt with gaming machines in casinos) was amended in PN 38,
11 February 2000, by the addition of reg 58(8).
The amendment
was introduced in the context of a jurisdictional dispute over
whether the Board had the power to establish its own
provincial CEMS,
or whether the National Gambling Board should establish a single
national CEMS to which all provincial monitoring
and control systems
would be linked. The dispute reached the Constitutional Court
4
where the National
Board sought a declaration that there may only be a single national
CEMS. It also sought an interdict to restrain
the Premier and the
Board from establishing a provincial CEMS. The Minister of Trade and
Industry, who is responsible for the administration
of the National
Gambling Act, was also cited as a respondent, but he filed an
affidavit supporting the relief claimed. The court
dismissed the
application, without considering the merits of the dispute.
[14] Regulation
58(8) asserted emphatically that the Province had the authority to
establish the CEMS.
5
It did not deal with
who or which provincial entity was authorised to contract for the
CEMS, and was not intended to. The reason is
obvious; the Premier
assumed that the Board had the authority. It is clear from the
Constitutional Court judgment that he acknowledged
this, and the
matter was argued on this basis.
6
Likewise it must be
accepted that by amending reg 156 with the addition of reg 156(8) on
7 November 2003,
7
when the
jurisdictional dispute had as yet not been resolved, the Premier
intended to assert, as he had done when he amended reg 58(8),
that
there would be a
single
CEMS for site
operated LPM’s in the
Province
.
8
[15] The fact that
the April 2004 elections changed the provincial executive’s
political composition is, I think, also germane
to understanding reg
156(8)’s genesis. The provincial executive now fell under the
political control of the same party that
controlled the national
government. Shortly after the elections the Board repudiated the
contract. Later, the newly elected Premier
amended the regulations
yet again, to achieve the opposite result his predecessor had; he
made unequivocal provision for a national
CEMS to be established by
the National Board. Regulation 156 was substituted with a new
regulation and now reads as follows:
‘
The
electronic monitoring system for limited payout machines contemplated
by section 54 of the Act shall be the national central electronic
monitoring system established and monitored by the National Gambling
Board in terms of
section 27
of the
National Gambling Act 7 of
2004
’.
9
Regulation 210
(which deals with gaming machines in bingo halls) was similarly
amended. What is significant about the latest amendment is that the
Premier again accepted, albeit more explicitly, that the authority to
establish a CEMS lay with an
independent
board
,
not with a political authority.
[16] It is in this
context and against this background that reg 156(8) must be
interpreted. The court below concluded that the regulation
conferred
on the provincial executive the power to operate the CEMS. In
arriving at this conclusion he reasoned that
‘
.
. . (t)he Minister . . . expressly legislates that the electronic
monitoring system which is referred to in
regulation 156(1)
to
156
(7)
inclusive will be operated by “the province” or “entity”
contracted by the province. In my view the intention
was clear.
Throughout
regulation 156
“the Board” is referred to. Now
by amendment it is the province alternatively an entity contracted by
it which operates
the electronic monitoring system. The Minister, if
he intended to could quite easily have used the word “Board”
instead
of “province”.’
[17] I respectfully
disagree with the learned judge’s interpretation. The word
‘Province’ is defined in s 1 of the
Act to mean the
‘Province of Kwazulu-Natal’. There is, in my view, no
cogent reason to depart from this meaning when
interpreting the
regulation. On the contrary, there is every reason not to. Indeed if
it was intended to depart from this meaning,
words indicating this
departure would specifically have been used. In any event the learned
judge’s interpretation is, with
respect, inconsistent with the
scheme of the Act, which, for good reason, places the responsibility
for gambling in the hands of
an independent board, not a politician.
[18] Properly
construed, I think, reg 156(8) meant that the
Province
of
KwaZulu-Natal would have had its own CEMS, operated by the Board or
any significant entity in the Province contracted by the Board.
The
reference to the word ‘single’ in the regulation
indicates, as I have mentioned, that the regulation was concerned
with having a single CEMS for the Province, not two (national and
provincial). This is the mischief that the regulation sought to
address. It did not, and indeed could not, confer any power on the
provincial executive which the Act did not give it. It follows
that
the appeal must succeed.
The following order
is made. The appeal is upheld with costs including the costs
consequent on the employment of two counsel.
The order of the
court below is replaced with the following order:
‘
It
is declared that the Board was authorised to conclude the contract.’
______________
A CACHALIA
JUDGE OF APPEAL
CONCUR:
NAVSA
JA
JAFTA
JA
MALAN
AJA
MHLANTLA
AJA
1
Brand
H
The Gambling Laws of South Africa
p 5-7.
2
Section
1 defines a ‘route operator’ as ‘a person who is
licensed in terms of this Act to provide gaming machines
to site
operators and to conduct any other prescribed activities’; a
‘site operator’ is defined as ‘a person
who is
authorised to keep gaming machines on his or her premises in terms
of a licence issued in accordance with this Act’.
3
‘
156
(2) The monitoring and control system contemplated in subregulation
(1) of this regulation shall provide either –
(a) on-line, real-time monitoring and data acquisition capability in
the format and media approved by the Board;
(b) dial-up monitoring and data acquisition capability in the format
and media approved by the Board; or
(c)
such other monitoring and data
acquisition capability as the Board may determine in the conditions
of licence.
(3) The monitoring system referred to in subregulation (1) of this
regulation shall be designed and operated to perform and report
functions relating to gaming machine meters and other functions in
such a manner that it –
(a) records the number and total value of tokens or coins placed in
each gaming machine for the purpose of activating play;
(b) records the number and total value of tokens or coins deposited
in the drop box of each gaming machine;
(c) records the number and total value of tokens or coins
automatically paid out by each gaming machine;
(d) records the number and total value of tokens or coins to be paid
manually;
(e) identifies any machine taken off-line or placed on-line of the
computer monitor system, including the date, time and machine
identification number;
(f) is capable of reporting any revenue transactions not directly
monitored by token or coin meter, such as but not limited to
tokens
and coins placed in the machine as a result of a hopper fill;
(g) identifies any significant events, which the Board may require
from time to time, and as may be defined in the South African
Bureau
of Standards standard referred to in subregulation (1) of this
regulation; and
(h) records any other information as the Board may, from time to
time, require.’
4
National
Gambling Board v Premier, KwaZulu-Natal
[2001] ZACC 8
;
2002
(2) SA 715
(CC) paras 5-10.
5
Id
para 34.
6
Id
para 25.
7
P
N
1087, 2003.
8
When
first promulgated
on 23 September 1998 reg 58
dealt with the CEMS in casinos, reg 209 with bingo equipment, reg
210 with LPM’s inside bingo
halls and reg 156 with LPM’s
outside bingo halls and casinos. Regulation 58(8) was then amended
on 11 February 2000, but
not regs 209, 210 and 156. This was
apparently an oversight because it left the other LPM’s out of
the loop. On 7 November
2003 reg 58(8) was amended to read as
follows:
‘
(8) The electronic monitoring system
referred to in this regulation and regulations 209 and 210 shall be
a single one operated by
the Province or entity contracted by the
Province which shall have no other interest in respect of gaming in
the Province’.
Regulation 156 was similarly amended by the addition of reg 156 (8).
9
P
N
1241, 2005.