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[2014] ZAGPPHC 121
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Maxime Hotel (Pty) Ltd and Another v Chairperson: National Gambling Board N.O and Others (70868/2012) [2014] ZAGPPHC 121 (20 March 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 70868/2012
DATE:
20 MARCH 2014
IN THE MATTER
BETWEEN:
MAXIME HOTEL
(PTY) LTD
....................................................
FIRST
APPLICANT
EGOLI GAMING
(PTY) LTD
(TRADING AS
GOLDRUSH
GAMING)
................................................................................
SECOND
APPLICANT
AND
THE CHAIRPERSON:
NATIONAL
GAMBLING BOARD
N.O
.
…...............................................
FIRST
RESPONDENT
THE
ADMINISTRATOR: GAUTENG
GAMBLING BOARD
N.O
.
…..........................................
SECOND
RESPONDENT
THE MINISTER OF
TRADE
AND
INDUSTRY
....................................................................
THIRD
RESPONDENT
JUDGMENT
KOLLAPEN J:
1. The applicants
have brought proceedings in this Court in which they seek the
following relief:
An order ‘declaring
regulation 3(2) of the Regulations on Limited Payout Machines
published under GN R 1425 in GG 6977 of
21 December 2000 as amended
by the
National Gambling Act 7 of 2004
:
a) ultra vires the
powers, functions and duties of the National Board as outlined by the
National Gambling Act 2004
; and
b) as infringing
upon the exclusive licensing authority of the Gauteng Gambling Board
as contemplated by the
National Gambling Act, 2004
and the Gauteng
Gambling Act.’
2. The first and the
third respondents oppose the relief sought on the merits but have in
addition also raised various points in
limine in opposition.
In addition the
respondents have instituted a counter-application in which they seek
an order declaring regulation 3(2) to be valid
and of full force and
effect. Alternatively, in the event that the Court makes a finding
that regulation 3(2) is invalid, they
seek an order in terms of
Section 172 (1)(b)(ii) of the Constitution suspending the declaration
of invalidity for a period of two
years in order for Parliament or
the first or third respondent to remedy the defect.
THE FACTUAL
BACKGROUND
3. The first
applicant is the holder of a license issued by the second respondent
to operate 5 (five) limited pay-out machines (LPMs)
at its premises
at corner Bok and Banket Streets, Joubert Park, Johannesburg.
The second applicant
is the holder of a route operator license.
4. On the 8th of
June 2011, the first applicant applied to the second respondent for
the grant of additional gaming licenses in
order to operate 40
(forty) LPMs at its aforementioned premises.
5. On the 16th of
April 2012 the second respondent advised the second applicant (in its
capacity as operations manager of the first
applicant) that the
second respondent had approved its application to operate 40 LPMs,
subject to concurrence by the National Gambling
Board (the ‘NGB’).
6. On the 8th of
October 2012, the first respondent stated in a letter to the
applicants’ then-attorneys that:
‘The NGB
retains and has the ultimate authority to approve or disprove (sic)
any application for any license to operate machines
in excess of
five. The NGB’s role should not be viewed as a ‘concurrence’
or ratification of the PLA’s
decision as stipulated in your
letter, but has to satisfy itself that the national guidelines or
criteria for the evaluation of
such applications has been met to its
satisfaction.’
In the same letter
the first respondent advised that the application received from the
Gauteng Gambling Board (the ‘GGB’)
was yet to be
considered and that they had raised certain issues of concern with
regard to the application and had sought clarity
from the GGB in this
regard. Further they stated that they had since received a response
from the GGB and that the application
would be considered by the
Board’s structures.
7. In response
thereto, the applicants’ attorneys on the 19th of October 2012
raised concern about the delay in the processing
and finalising of
the application. They requested that the first respondent inform them
of the date on which the NGB would take
a decision on the
application.
The first respondent
replied on the 8th of November 2012 and it rejected any notion that
it was unnecessarily delaying processing
the application. On the
contrary, it stated that it needed to apply its mind in determining
the application and that the applicants
would be advised once a
determination had been made.
8. On the 6th of
December 2012, the applicants launched the current proceedings. It is
common cause that at the time that they did
so, the first respondent
had not taken a decision relative to the application of the first
applicant for a license to operate 40
LPMs. The applicants submit
that they are prejudiced financially by the failure to have a license
to operate 40 LPMs issued.
AN OVERVIEW OF
THE LEGAL FRAMEWORK
9. Schedule 4 of the
Constitution stipulates that gambling is one of the functional areas
of concurrent national and legislative
competence, while Section 1 of
the National Gambling Act 7 of 2004 (the ‘NGA’) provides
that the limited pay-out machine
industry is part of gambling and
therefore is a part of the concurrent provincial and national
legislative competence.
10. Section 18 of
the NGA provides that a provincial licensing authority may license a
person as a site operator to operate limited
pay-out machines.
Section 26 of the
NGA recognizes the potentially detrimental socio-economic impact of a
proliferation of limited pay-out machines
and it obliges the Minister
(the third respondent) to regulate the limited pay-out industry in
accordance with section 26. In
this regard Section 26 (2)(d) obliges
the third respondent to prescribe a limit on the maximum number of
licensed limited pay-out
machines within the Republic, within any
particular province and at any one site.
Finally, Section 30
of the NGA provides that each licensing authority has exclusive
jurisdiction within its province to the extent
provided in provincial
law to investigate and consider applications for, and issue
provincial licenses in respect of, casinos,
racing, gambling or
wagering.
11. The Regulations
on Limited Payout Machines, published under GN R 1425 in Government
Gazette No. 6977 of 21 December 2000 (‘the
LPM Regulations’)
provide inter alia as follows:
Regulation 3(1):
‘Subject to the provisions of sub-regulation (2), the maximum
number of limited pay-out machines which may
be allowed by a
provincial licensing authority to be operated on a single site must
be five.’;
Regulation 3(2):
‘The Board may, on good cause shown and upon application by a
provincial licensing authority approve the
operation of limited
pay-out machines in excess of five machines and not more than forty:
Provided that such application must be
made in respect of every site
for which limited pay-out machines in excess of five is sought.’
The reference to
‘Board’ in regulation 3(2) is a reference to the National
Gambling Board.
THE APPLICANTS’
SUBMISSIONS
12. The stance of
the applicants is that regulation 3(2), which grants to the first
respondent the power to issue LPMs in excess
of 5 per site, infringes
upon the exclusive licensing authority of the second respondent and
is, on account of that, invalid and
liable to be set aside.
13. In this regard
they contend that neither the
National Gambling Act No 33 of 1996
nor
its successor the
National Gambling Act No 7 of 2004
, provide for
the approval and issue of a provincial gambling license by the
National Gambling Board. They argue that this function
is located
exclusively within the powers of the Provincial Licensing Authority,
in this instance the Gauteng Gambling Board.
14. On this basis
they contend that
regulation 3(2)
of the Regulations on Limited
Payout Machines of the 21st of December 2000 which provides that the
National Gambling Board may
on application by the provincial
licensing authority approve an application for the licensing of a
site with more than 5 but less
than 40 limited pay-out machines,
falls outside of the subject matter that the third respondent can
make regulations about.
15. In the
alternative they contend that if it is found that the third
respondent can make regulations about the subject matter
of
regulation 3(2), then the third respondent cannot empower the
National Gambling Board to trump the decisions on the licensing
of
LPMs by the Gauteng Gambling Board.
16. Beyond opposing
the application on the merits the respondents have raised the
following points in limine:
a) The proceedings
are irregular in that the applicants, to the extent that they contend
that the first respondent has not taken
a decision on their
application for 40 LPMs, were obliged to seek relief in terms of the
Promotion of Just Administrative Act 3
of 2000 (‘PAJA’);
b) That the relief
sought is academic and moot to the extent that an order of invalidity
in relation to regulation 3(2) would leave
intact regulation 3(1)
which in any event provides that a provincial licensing authority may
not license more than 5 LMPS per site;
c) That the approval
of the applicants’ license application by the GGB was prima
facie invalid as the GGB was dissolved at
the time of the decision
and accordingly there could be no valid application submitted for
approval by the NGB;
d) That the
requirements for the exercise of the Court’s discretion in
terms of Section 19(1)(a)(iii) of the Supreme Court
Act, have not
been met on account of the non-joinder of other interested parties as
well as the failure by the applicants to seek
relief in terms of
PAJA;
e) The failure by
the applicants, to the extent that the issue in dispute and in
respect of which relief is sought is a constitutional
issue, to file
a notice in terms of Rule 16A of the Rules of this Court.
In this regard such
a notice was filed on the 19th of June 2013, which may render this
point in limine moot.
DISCUSSION AND
ANALYSIS OF THE POINTS IN LIMINE
The application
before the Gauteng Gambling Board is prima facie invalid
17. The third
respondent in argument contended that the application of the
applicants that served before the GGB and was approved
by way of the
letter of the 16th of April 2012, could never have constituted a
lawful approval as the GGB was dissolved during
that period and the
appointed administrator had no power to approve licenses.
18. The factual
basis of this argument was derived in part from the facts on the
papers as well as what I term additional facts
not on the papers,
particularly as they relate to the dissolution of the GGB. In
fairness this was never the case for the third
respondent, it being
raised for the first time in argument and its validity in part being
dependent on facts not canvassed on the
papers.
19. Whatever the
merits of the argument may be, I do not believe that the dictates of
fairness which must characterize civil proceedings
justify its
introduction.
It amounts to taking
the other party by surprise and relies on facts not canvassed on the
papers and is in my view not worthy of
further consideration.
Irregular
proceedings
20. It is common
cause that the first respondent has not taken a decision in respect
of the applicants’ application for the
issue of an operating
license in excess of 5 machines. In addition whatever the stance of
the second respondent may have been,
it did not have the power to
give final approval of the application, such power being vested
exclusively in the second respondent
in accordance with the
provisions of regulation 3(2).
21. When the
applicants submitted their application for an operating license for
40 LPMS, they must have done so mindful of the
architecture of the
Act and the regulations and in particular that the power to grant
such an operating license vested in the second
respondent.
In this regard
however it must be noted that the first respondent by way of the
letter of the 8th of November 2012 referred to above,
advised that
the application was under consideration and the applicant, without
further recourse to the first respondent, launched
these proceedings
on the 6th of December 2012.
22. That application
is for all intents and purposes still pending and the applicants in
such a situation may well insist on a decision
being taken by placing
the decision-maker on terms, alternatively it may consider the
failure to take a decision as a refusal of
the application in which
event it may avail itself of the remedies provided for in PAJA.
In INTERTRADE TWO
(PTY) LTD v MEC FOR ROADS AND PUBLIC WORKS, EASTERN CAPE AND ANOTHER
2007 (6) SA 442
(CkHC), PLASKETT J remarked as follows:
‘It is common
cause that no final decision has been taken in respect of the tenders
despite the effluxion of a more than reasonable
time for a decision
to be taken. This means that there can be no dispute that Intertrade
is entitled to relief: s 6(2)(g) together
with s 6(3)(a) of PAJA,
provide that the failure to take a decision within a reasonable time
is a ground of review and hence an
infringement of the fundamental
right to just administrative action.’ (at 453F)
23. The applicants
have done neither but have instead elected to launch a constitutional
challenge against the validity of regulation
3(2).
One can hardly
speculate what the decision of the second respondent will be (if it
makes a decision, which it is under a duty to
do) and in the event of
it approving the application there would be no need to deal with the
challenge brought in these proceedings
in relation to the validity of
regulation 3(2). On the other hand if it refuses the application or
fails to take a decision then
the applicant will have recourse to the
provisions of PAJA and in that challenge, the question of the
constitutional validity of
regulation 3(2) may be raised.
24. What the
applicants have done is to seek declaratory relief on the basis of
what they contend is a collateral challenge. The
application for the
license which is at the heart of the litigation and the cause of the
applicants’ concerns is not before
the Court but the applicants
seek declaratory relief which if granted, may well enable the
applicant to insist on the issuing
of the license.
25. Our Courts have
unequivocally cautioned that where it is possible to decide any case
without reaching a constitutional issue
that is the course to be
followed.
(See for example the
remarks of KENTRIDGE AJ in S v MHLUNGU AND OTHERS
[1995] ZACC 4
;
1995 (3) SA 867
(CC) at page 894, paragraph 59 which were quoted with approval by
CHASKALSON P in ZANTSI v COUNCIL OF STATE CISKEI AND OTHERS
[1995] ZACC 9
;
1995 (4)
SA 615
at page 618, paragraph 3.)
In Zantsi (supra)
CHASKALSON P affirmed this approach in quoting Matthews J in
Liverpool, New York and Philadelphia Steamship Co
v Commissioners of
Emigration
113 US 33
(1885) at 39 as follows:
‘Never. .
.anticipate a question of constitutional law in advance of the
necessity of deciding it;. . . never. . .formulate
a rule of
constitutional law broader than is required by the precise facts to
which it is to be applied.’
26. The applicants
argued that they were entitled to proceed in the manner in which they
did for the relief they seek, arguing that
it constituted a
collateral challenge and relying on the dicta in KOUGA MUNICIPALITY v
BELLINGAN AND OTHERS
2012 (2) SA 95
(SCA), where the Court endorsed
the view that where the State charges a person with contravening
legislation, that person may collaterally
challenge the validity of
the legislation in civil proceedings for a declaratory order. The
Court however specifically left open
the question whether a
collateral challenge by way of declaratory order may be brought by a
person who is merely liable to prosecution
and who has not been
charged.
27. I have serious
doubts as to whether the principles in Kouga are applicable in casu
and whether the applicants have a right to
launch a collateral
challenge.
A collateral
challenge is by its nature defensive and is ordinarily raised in
proceedings that are not designed directly to impeach
the validity of
the administrative act. (See OUDEKRAAL ESTATES (PTY) LTD v CITY OF
CAPE TOWN AND OTHERS
2004 (6) SA 222
(SCA), where the Court took the
view that the right to challenge the validity of an administrative
act collaterally arises because
the validity of the administrative
act constitutes the essential prerequisite for the legal force of the
action that follows).
28. In CITY OF
TSHWANE METROPOLITAN MUNICIPALITY v CABLE CITY (PTY) LTD
2010 (3) SA
589
(SCA), the Court, referring to the dicta in Oudekraal, affirmed
that the right to raise a collateral challenge to the validity of
an
administrative act arises and is justified because the party bringing
the challenge faces the threat of a public authority with
coercive
action, where the legal force of such action depends upon the
validity of the administrative act in question.
In Oudekraal (supra)
the Court remarked as follows:
‘It will
generally avail a person to mount a collateral challenge to the
validity of an administrative act where he is threatened
by a public
authority with coercive action precisely because the legal force of
the coercive action will most often depend upon
the legal validity of
the administrative act in question. A collateral challenge to the
validity of the administrative act will
be available, in other words,
only ‘if the right remedy is sought by the right person in the
right proceedings’’.
(at 245H-246A)
29. From this it is
reasonable to conclude that the right to raise a collateral challenge
is proscribed and in part depends on the
proximity of the risk faced.
My view is that the
applicant in these proceedings has not established such a right. It
could hardly be said that these applicants
face the threat of a
public body with coercive action - what they have done is to make an
application for a license which is in
the process of being
determined. An applicant for a license is hardly in the same position
as someone facing criminal prosecution
or indeed someone against whom
coercive state action is directed.
30. On their version
they contend that there has been an unreasonable delay on the part of
the first respondent in finalising the
application. Clearly in the
context of the factual matrix underpinning these proceedings, they
would have recourse to PAJA. For
the reasons given, they have not
established the right to bring a collateral challenge to the validity
of regulation 3(2). Of course
it is not as if they are left without a
remedy; it is simply a matter of concluding that the remedy lies
elsewhere.
31. To broaden the
circumstances under which a collateral challenge to the validity of
an administrative act may be brought carries
the real risk of
speculative and unnecessary challenges that may have little or no
practical effect.
The proximity of the
risk of facing coercive action by a public authority in my view
provides a useful moderating tool. On the one
hand it ensures that
those who face the real risk of coercive state action have recourse
to collaterally challenge the legal basis
of such action, while on
the other hand it guards against the proliferation of challenges
where the factual situation does not
demonstrate the existence of
such a risk. It may be a delicate exercise but it is certainly a
necessary one. As I understand it,
our courts while recognising the
right to bring a collateral challenge, have been careful in providing
the broad parameters within
which the right may be said to exist.
(See NATIONAL
INDUSTRIAL COUNCIL FOR THE IRON, STEEL, ENGINEERING AND METALLURGICAL
INDUSTRY v PHOTOCIRCUIT SA (PTY) LTD AND OTHERS
1993 (2) SA 245
(CPD)
and METAL AND ELECTRICAL WORKERS UNION OF SOUTH AFRICA v NATIONAL
PANASONIC CO (PAROW FACTORY)
1991 (2) SA 527
(CPD) where the Court
cautioned that a collateral challenge would only be allowed if the
right remedy was brought by the right
person in the right proceedings
and at the right time).
32. The applicants
have misconceived their remedy and should have proceeded in terms of
the provisions of PAJA which make express
provision for the setting
aside of an administrative act where the administrator was not
empowered to act.
The point in limine
in my view was well taken and the application falls to be dismissed
on this ground alone.
The relief sought is
moot and / or academic
33. The challenge of
the applicants is confined to regulation 3(2). The respondents
contend that even if successful, the outcome
of this litigation would
leave regulation 3(1) firmly in place and undisturbed which would
have the effect that the power of a
provincial licensing authority
would be restricted to the issue of an operating license for a
maximum of 5 limited pay-out machines.
It is argued that such relief
would have no consequence or benefit for the applicant in that it
already is the holder of the maximum
operating license that the
second respondent is empowered to issue, and the retention of
regulation 3(1) effectively precludes
the issue of any further
operating license by the second respondent in respect of the same
site.
34. The applicants’
stance is that they do not seek the striking down of regulation 3(2)
in its entirety but rather that the
power regulation 3(2) vests in
the first respondent, be declared ultra vires and that under such
circumstances the power of the
Court to read the regulation down in
order to still achieve the intention of the regulation is likely to
result in a re-formulated
regulation that would allow provincial
licensing authorities the power to issue operating licenses in excess
of 5 LPMs.
35. The nature of
the relief the applicants seek must be established from the papers.
The thread that consistently runs through
the papers is the stance of
the applicants that regulation 3(2) is ultra vires and they seek an
order declaring it to be invalid.
The notice of motion issued at the
behest of the applicants is clear and unambiguous in seeking an order
‘declaring regulation
3(2) ultra vires the powers, functions,
and duties of the National Board.’
This is the case the
applicants make out in their founding affidavit and it accordingly is
not open to the applicants, having taken
such a stance, to now
contend that they do not seek the striking down of regulation 3(2).
36. However even if
the applicants are correct in their assertions regarding the nature
of the relief they seek, and the option
of reading down which they
contend for results in saving regulation 3(2) in some re-shaped form,
what remains behind is regulation
3(1) which has not been the subject
of this application. In this regard there may be two possible
scenarios.
If regulation 3(2)
is struck down in its entirety, what remains is regulation 3(1) which
limits the power of a provincial licensing
authority to issue a
license for up to 5 LPMs.
37. If regulation
3(2) can be saved to the extent that it empowers the provincial
licensing authority to issue a license for more
than 5 but less than
40 LPMs, then a conflict would exist between regulation 3(2) and
regulation 3(1).
In both scenarios
the applicants would not be entitled to the issue of the license they
seek, rendering the relief they seek moot
and / or academic.
On this score the
point in limine is sustainable and the application falls to be
dismissed on this ground as well.
The merits
38. For the reasons
above there is no need to canvass the merits of the matter. However
in passing it may warrant mention that when
one has regard to the
policy choice of the law-maker to designate gambling a concurrent
national and provincial competence, what
follows in the division of
labour and powers with regard to the issue of operating licenses in
respect of LPMs appears to fit into
this architecture. The vesting of
the power to issue licenses for more than 5 LPMs with the National
Board is in keeping with the
powers Section 26 grants to the third
respondent to regulate the limited pay-out machine industry and to
prescribe the maximum
number of machines nationally, provincially and
per site.
39. On the contrary
it may well be consistent with ensuring the desired unity in economic
activity alluded to in EX PARTE PRESIDENT
REPUBLIC OF SOUTH AFRICA:
IN RE CONSTITUTIONALITY OF THE LIQUOR BILL
[1999] ZACC 15
;
2000 (1) SA 732
(CC).
In dealing with the
question whether the Liquor Bill infringed upon the provinces’
exclusive legislative mandate, CAMERON
AJ (as he then was) said the
following:
‘But it is
unnecessary to conclude that the competence in regard to ‘liquor
licences’ does not extend to intra-provincial
production and
distribution activities since the national government has, in my
view, in any event shown that, if the exclusive
provincial
legislative competence in respect of ‘liquor licences’
extends to licencing production and distribution,
its interest in
maintaining economic unity authorises it to intervene in these areas
under s 44(2). ‘Economic unity’
as envisaged in s 44(2)
must be understood in the context of our Constitution, which calls
for a system of co-operative government,
in which provinces are
involved largely in the delivery of services and have concurrent
legislative authority in everyday matters
such as health, housing and
primary and secondary education. They are entitled to an equitable
share of the national revenue, but
may not levy any of the primary
taxes and may not any tax which may ‘materially and
unreasonably’ prejudice national
economic policies, economic
activities across provincial boundaries or the national mobility of
goods, services, capital or labour.
Our constitutional structure does
not contemplate that provinces will compete with each other. It is
one in which there is to be
a single economy and in which all levels
of government are to co-operate with one another. In the context of
trade, economic unity
must, in my view, therefore mean the oneness,
as opposed to the fragmentation, of the national economy with regard
to the regulation
of inter-provincial, as opposed to
intra-provincial, trade. In that context it seems to follow that
economic unity must contemplate
at least the power to require a
single regulatory system for the conduct of trades which are
conducted at national (as opposed
to an intra-provincial) level.’
(At 768B-F)
40. In addition it
could hardly be said that regulation 3(2) constitutes an
unconstitutional infringement of the powers of provincial
licensing
authorities. Provincial authorities only have exclusive jurisdiction
to the extent provided for. The clear architecture
of the
National
Gambling Act and
its regulation create, in the constitutionally
permissible, and necessary and justifiable manner, the necessary
balance between
the national and provincial spheres of government in
properly regulating the gambling industry in general and the limited
pay-out
industry in particular.
I would have been
inclined under such circumstances to have also dismissed the
application on its merits.
For the reasons
already given there is no need to make any order in respect of the
counter-application.
ORDER
41. In the
circumstances I make the following order:
i. The application
is dismissed.
ii. The applicants
jointly and severally the one paying, the other to be absolved, are
ordered to pay the costs of the first and
the third respondents,
which in relation to the third respondent, shall include the costs of
two counsel.
N KOLLAPEN
JUDGE OF THE
NORTH GAUTENG HIGH COURT
70868/2012
HEARD ON: 17
FEBRUARY 2014
FOR THE
APPLICANTS: ADV P F LOUW SC & ADV N JAGGA
INSTRUCTED BY:
SHEPSTONE & WYLIE (ref: Tayob/SABI 25064.1)
FOR THE FIRST
RESPONDENT: ADV A J DICKSON SC
INSTRUCTED BY:
RAMUSHU MASHILE TWALA INC (ref: G Twala/RA/MAT7946)
FOR THE THIRD
RESPONDENT: ADV I ELLIS & ADV M MAJOZI
INSTRUCTED BY:
THE STATE ATTORNEY (PRETORIA) (ref: 1692/2013/Z49)