About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2010
>>
[2010] ZAFSHC 33
|
|
Vukani Gaming Free State (Pty) Ltd v Chairperson of the Free State Gambling and Racing Board and Others (2289/08) [2010] ZAFSHC 33 (18 March 2010)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No.: 2289/08
In the
review
between:-
VUKANI
GAMING FREE STATE (PTY) LIMITED
Applicant
and
THE
CHAIRPERSON OF THE FREE STATE
First
Respondent
GAMBLING AND RACING
BOARD
FREE
STATE GAMBLING AND RACING
Second
Respondent
BOARD
INTERPLAY
(PTY) LTD
Third
Respondent
THUO
GAMING FREE STATE (PTY) LTD
Fourth
Respondent
THE
MEMBER OF THE EXECUTIVE
Fifth Respondent
COUNCIL FOR
ECONOMIC AFFAIRS AND
TOURISM, FREE STATE
PROVINCE
_____________________________________________________
CORAM:
VAN
DER MERWE, J
et
MOOLLA,
AJ
_____________________________________________________
HEARD
ON:
8
FEBRUARY 2010
_____________________________________________________
JUDGMENT
BY:
VAN
DER MERWE, J
_____________________________________________________
DELIVERED
ON:
18
MARCH 2010
_____________________________________________________
[1] This is an
application to review and set aside the decisions of the second
respondent to grant licences in terms of the Free
State Gambling and
Racing Act, No. 6 of 1996 (“the Act”) to the third and
the fourth respondent and to refuse to grant
such licence to the
applicant.
[2] The
second respondent is the Free State Gambling and Racing Board (“the
board”), established in terms of section
2 of the Act. The
first respondent is the chairperson of the board. The fifth
respondent (“the MEC”) is the member
of the executive
council of the Free State Province responsible for the administration
of the Act. The board consists of eight
members appointed by the MEC
in consultation with the executive council of the province including
the chief executive officer of
the board, who in terms of section
4(3) of the Act, is,
ex
officio,
a
member of the board. At all times relevant hereto the chief
executive officer of the board was Ms Mokotudi Jennifer Bokwa.
[3] On
29 March 2007 the board published a notice inviting applications for
two limited gaming machine operator licences. The board
indicated
that the applications would be adjudicated upon in terms of a
document entitled “Request For Proposal” (“the
RFP”). A gaming machine is defined in section 1 of the Act as
“
any
electronic, electro-mechanical or mechanical device, contrivance or
machine which, upon insertion of a coin, banknote, token
or similar
object, or upon payment of any consideration, is available to play or
operate, the play or operation of which, whether
by reason of the
skill of the operator or application of the element of chance, or
both, may deliver or entitle the person playing
or operating the
machine, or any other person, to receive cash or anything of value
(other than an opportunity to play a further
game)”.
In
colloquial terms a gaming machine is therefore a “slot
machine”.
A
limited gaming machine is a gaming machine with a restricted prize.
In terms of the RFP the maximum prize which may be paid out
in
respect of a game played, is R500,00.
[4] The
limited gaming machine industry makes use of “route operators”
and “site operators”. A limited
gaming machine operator
licence is issued to a route operator and a limited gaming machine
site licence is issued to a site operator.
One route operator would
be linked to several site operators. In general the route operator
provides and maintains the limited
gaming machine equipment and the
necessary infrastructure while the site operators provide the venues
at which the limited gaming
machines are housed. After having been
issued with a licence, a route operator will assist potential site
operators to apply for
their limited gaming machine site licences.
Once such licences have been granted, an agreement between the route
operator and
each site operator will be entered into. One of the
obligations of the route operator in terms of such an agreement,
would be
to ensure that the premises on which the limited gaming
machines are to be installed at each site are prepared in accordance
with
the regulations. A route operator also arranges for the
installation of a so-called site data logger which connects the site
operator
to the central electronic monitoring system required by the
National Gambling Act, No. 7 of 2004
. The central electronic
monitoring system monitors every gaming event relating to a specific
machine. The data is provided to
the route operator on a regular
basis to enable it to audit the returns on each machine and to
determine the revenues due to it
and to the site operator
respectively. It is the duty of the route operator to ensure that
the operational costs of each machine,
including taxes and levies
payable to the gambling board, are paid. A successful route operator
therefore requires significant
knowledge of the industry, technical
skills and capital to roll out and maintain limited gaming machine
sites. It is not disputed
that an estimated R25 million in respect
of capital would be required at the inception of a limited gaming
machine operator licence
in terms of the RFP.
[5] Section
31 of the Act deals with limited gaming machine operator licences.
Section 31(2) of the Act provides as follows:
“
(2) A gaming machine operator
licence shall not be granted by the board:
unless the board is satisfied that
the applicant:
has appropriate knowledge and
experience, or is able to acquire such knowledge and experience, to
operate gaming machines; and
meets the prescribed requirements;
for the operation of more than the
prescribed number of gaming machines.”
In
terms of section 31(5) of the Act the board shall only grant a
limited
gaming machine operator licence after consultation with the MEC.
[6] It
is
stated
in the RFP that although in terms of the
National Gambling Act the
maximum number of limited gaming machines which may be licensed in
the Free State is 4 000, the board would award no more than
two
limited gaming machine operator licences, each in respect of 1 000
limited gaming machines. Important requirements of the
RFP are that
at least 70% of the financial interest in a licensee shall be held by
broad based black economic empowerment (“BEE”)
persons or
groups and that at least 55% of the shares in a licensee shall be
owned by residents of the Free State Province. The
RFP also
specifies and describes evaluation criteria for those proposals that
meet the requirements of the RFP. These are empowerment
and
community criteria, economic criteria, social criteria, financial
criteria, management criteria and development criteria.
[7] The
applicant (“Vukani”), the third respondent (“Interplay”)
and the fourth respondent (“Thuo”)
submitted proposals to
the board in response to the RFP. The proposals were scrutinised by
Gobodo Forensic Accounting which provided
the board with a voluminous
detailed report. Then followed a laborious and protracted process of
evaluation of the proposals by
the board. The process included a
public hearing where each proposal was presented as well as closed
sessions by the board with
each applicant. After several days the
board concluded its deliberations on 30 March 2008. On 1 April 2008
the board submitted
a written submission to the MEC in which the MEC
was informed that the board resolved to award the two limited gaming
machine operator
licences to Thuo and Interplay. In terms of the
submission it was recommended to the MEC that he should take
cognisance of this
decision in order to consult the board as required
by section 31(5) of the Act. On 10 May 2008 the decision to award a
licence
to each of Thuo and Interplay, was publically announced.
[8] Apart from costs,
Vukani now seeks an order in the following terms:
“
B1 Reviewing
and setting aside the decision of the Second Respondent, taken in
April or May 2008, to refuse the Applicant’s
application for a
Limited Gaming Machine Operator Licence in terms of section 24(4)(a)
read with section 23(b) of the Free State
Act.
B2 Reviewing and setting aside the
decision of the Second Respondent, taken in April or May 2008, to
grant a Limited Gaming Machine
Operator Licence to the Third
Respondent in terms of section 24(4)(b) read with section 23(b) of
the Free State Act.
B3 Reviewing and setting aside the
decision of the Second Respondent, taken in April or May 2008, to
grant a Limited Gaming Machine
Operator Licence to the Fourth
Respondent in terms of section 24(4)(b) read with section 23(b) of
the Free State Act.
B4 Directing the
Second Respondent forthwith to grant a Limited Gaming Machine
Operator Licence to the Applicant,
alternatively
directing the Second Respondent to reconsider the applications
referred to in paragraphs B1, B2 and B3 above.”
[9] The
board
and
the MEC abide the court’s decision. However, in an
“informatory affidavit” by Ms Bokwa, the following was
stated:
2.
The first
respondent, the members of the second respondent, and I have
acquainted ourselves with the contents of the applicant’s
Founding Affidavit and have compared such allegations with the three
application
s
which had been considered for the granting of the relevant
licence(s).
3.
.....
4.
After perusal of
the Founding Affidavit and consideration of the applications which
were submitted by the third and fourth respondents,
it emerged –
and the second respondent was advised – that those applications
are, in fact, deficient in the respects
alluded to in the applicant’s
Founding Affidavit and should, therefore, not have been considered by
the second respondent
and that, moreover, the licences could and/or
should not have been granted to the third and fourth respondents.
5.
The first and second respondents,
consequently, cannot object to the relief provided for in paragraphs
B2 and B3 of the applicant’s
Review Application.
6.
6.1 First and second respondents,
however, consider themselves dutibound to respectfully direct this
Honourable Court’s attention
to the fact that, in the recent
(subsequent to receipt of the Application for Review) process of
comparing all three the applications
which had been considered for
the granting of a Limited Gaming Machine Operator Licence or Limited
Gaming Machine Operator Licences
with legislative requirements, it
also appeared that neither the applicant’s application nor the
third respondent’s
application complied with the –
clearly, I believe, peremptory – provisions/requirements of
Section 24(2)(b) of the
Free State Gambling and Racing Act, No. 5 of
1996, as neither the application of the third respondent nor the
application submitted
by the applicant was accompanied by an approval
or representations of any of the local authorities within whose area
of jurisdiction
the relevant premises are situated.
6.2 The first respondent, the second
respondent, and I are, therefore, constrained to respectfully suggest
to this Honourable Court
that:
6.2.1 the relief
provided for in paragraph B1 of the applicant’s Application for
Review is academic;
6.2.2 the
relief provided for in paragraph B4 of the applicant’s
Application for review cannot be granted
alternatively
is untenable under the circumstances and might very well constitute
an illegality, as the applicant’s application cannot
sustain
consideration and the granting of a Limited Gaming Machine Operator
Licence.
7.
The first and second respondents abide
the decision of this Honourable Court, but take the liberty of
respectfully suggesting that:
7.1 merely the grant of the licences
to the third and fourth respondents should be reviewed and set aside;
7.2 an order pertaining to the
payment of costs should be based upon equitable consideration and
with due regard of the facts and
circumstances herein alluded to and
the time when this affidavit was filed and the other parties apprised
of the contents hereof.
8.
I
attach hereto as annexure “NJB1” my letter, dated 23
April 2008, and wherein the reasons for the second respondent’s
decision to grant licences to the third and fourth respondents and
not to grant a licence to the applicant, are set out.”
[10]
Thuo
also abides the decision of this court. Only Interplay opposes the
application. Interplay, however, does not contest the
granting of
prayer B3 in respect of Thuo. In essence, Interplay contends that
the decisions to award limited gaming machine operator
licence to
Interplay but not to Vukani, were not irregular and should not be set
aside.
[11] It
is clear that the evaluation of and the adjudication on the three
proposals by the board constituted one comprehensive integrated
process. In my judgment it follows that a material error by the
board or material flaw in the reasoning of the board in respect
of
only one of the proposals, would vitiate the whole process and all of
its results. In the result such error or flaw would require
setting
aside the whole result of the adjudication process and
reconsideration of all three proposals. This was conceded by Mr.
Cohen on behalf of Interplay.
[12] According
to the RFP the applicants should provide signed shareholders’
agreements. It is clear that the board abandoned
this requirement
and accepted proposed shareholders’ agreements. In this
regard, the RFP also provides that the board has
the right to waive
any immaterial defect or lack of compliance with any formality in any
proposal or process. None of the three
applicants submitted singed
shareholders’ agreements nor were they subsequently requested
to provide signed shareholders’
agreements. Instead the board
considered the proposals on the basis of the structure and effect of
their proposed shareholders’
agreements and proposed
shareholding.
[13] In
this regard it is admitted or not disputed that Vukani demonstrated
the following. In terms of Vukani’s proposed
shareholding the
BEE shareholding in Vukani would in fact be more than 70%, namely
79,26% and 55% of Vukani’s shareholding
would be held by
residents of the Free State. In terms of the proposed shareholders’
agreement Vukani Gaming Corporation
(Pty) Ltd would hold 45%
shareholding in Vukani, SACTWU Welfare Trust Free State 25%, Free
State Gaming Consortium (Pty) Ltd 15%
and Lehadima Gaming CC 15%.
Hosken Consolidated Investments Ltd through another company holds all
the shares in Vukani Gaming
Corporation (Pty) Ltd. The effect hereof
would be 24,26% BEE shareholding in Vukani. SACTWU is a labour union
in the clothing
and textile industry. At least 25 000 dependants of
SACTWU Free State will be indirectly benefitted via the 25%
shareholding of
SACTWU Welfare Trust Free State in Vukani. SACTWU
Welfare Trust Free State, Free State Gaming Consortium (Pty) Ltd and
Lehadima
Gaming CC are all three 100% Free State based BEE entities.
There is no limitation in terms of the shareholders’ agreement
on the right of shareholders to vote and to representation on the
board. In the result each holder of 7,5% of the shares in Vukani
would be entitled to appoint a director to the board of Vukani.
[14] Importantly,
the BEE shareholders in Vukani would acquire their shareholding
without having to pay anything in return. Hosken
Consolidated
Investments Ltd undertook to finance Vukani’s operation by a
loan which will be repaid from the profits of Vukani.
During the
period of repayment of the loan, however, no dividends would be
declared to any shareholder of Vukani. It is expected
that the
repayment of the loan would take about seven years but it may
possibly be a shorter period. The result of all this is
that
although none of the shareholders in Vukani would receive any
dividend for up to seven years, the BEE shareholders in Vukani
would
receive valuable and lucrative assets without risk and without them
having to pay anything to obtain the assets.
[15] This
position must be contrasted with the corresponding position of
Interplay. First, Interplay’s proposed shareholding
is unclear
and unsettled to say the least. Interplay is a so-called shelf
company of which the only registered shareholder is
Lebone Trust, a
family trust of which Mr. Quentin Eister and his sister are the
trustees. Only an incomplete draft shareholders’
agreement
between Lebone Trust, “Free State Women in Tourism”,
“Other Women Investors”, “Interplay
Employee Trust”
and “Youth Trust” was submitted by Interplay to the
board. However the “Other Women Investors”,
“Interplay
Employee Trust” and “Youth Trust” had not yet been
created. Moreover the draft agreement indicated
that Lebone Trust
would hold 45% of the issued shares, “Free State Women in
Tourism” 30%, “Interplay Employee
Trust” 10%,
“Youth Trust” 10% and “Investors” 15%. This
adds up to 110%.
[16] Second,
Interplay’s revised financial model, presented at an oral
hearing before the board, made provision that no dividends
would be
paid for the first seven years. This is of course similar to the
position with Vukani. The difference however is that
the proposed
BEE shareholders of Interplay would have to come up with considerable
funding to acquire their shareholding and to
so contribute to the
funding of the project.
[17] In
these circumstances I agree with Vukani’s submission that its
BEE shareholding structure should have been considered
a strength.
[18] However,
the aforesaid reasons of the board for refusing to issue a licence to
Vukani included the following:
“
(a) Although
55% of the shareholding in the applicant will be held by Free State
based BBBEE persons or groups, which meet the minimum
criteria laid
down in the RFP, the Board is not satisfied with the following:
No financial benefits will accrue to
the Free State based BEE shareholders in the sense that these
Shareholders will not receive
any financial benefits as a result of
their shareholding because of the fact that dividends will only be
declared in year 7,
despite a net profit projected in year 4.
The non-contribution by BEE
shareholders to the funding of the project places them in a
disadvantaged position, as they will only
accrue benefits after the
loan has been serviced.
The shareholding is structured in
such a manner that the Free State based companies will not have a
controlling interest in the
applicant.”
[1
9] The
board’s thinking is also reflected in a so-called confirmatory
affidavit by Ms Bokwa that forms part of Interplay’s
answering
affidavits. Ms Bokwa,
inter
alia
,
said:
“
21.3 There
was no indication in the Applicant’s application that its
shareholders would have a vote on the Applicant’s
annual
general meeting, at least not until the Applicant’s loan was
settled. There was no, proverbial,
“flow
through”
to the Applicant’s shareholders to have any say in the
Applicant’s business, at least not for seven years; which is
not what empowerment is all about.
21.4 Not even a trickle of a financial
benefit would accrue to a shareholder of the Applicant until the loan
had been paid off.”
I do
not think
that
it is unfair to say that these remarks are both nonsensical and
wrong.
[20] All
three sub-paragraphs from the board’s reasons quoted above
contain fundamental misconceptions. Substantial financial
benefits
would accrue to the Free State based BEE shareholders of Vukani.
That the BEE shareholders of Vukani did not have to
contribute to the
funding of the project but nevertheless obtain a 79,26% shareholders
interest therein, place them in a very advantageous
position and not
the other way round. The Free State based BEE shareholders will hold
an unqualified 55% of the shares in Vukani
and an controlling
interest.
[21] In
my judgment the board materially misdirected itself in respect of
Vukani’s proposal. In the language of the Promotion
of
Administrative Justice Act, No. 3 of 2000 (“PAJA”),
irrelevant considerations were taken into account or relevant
considerations were not considered. To prefer Interplay’s
proposal to that of Vukani in respect of BEE considerations in
these
circumstances, is arbitrary, irrational and a decision that a
reasonable decision maker could not take. See sections 6(2)(e)(iii)
and (vi), 6(2)(f)(ii) and 6(2)(h) of PAJA.
See
also
PHARMACEUTICAL
MANUFACTURERS ASSO-CIATION OF SA AND ANOTHER: IN RE EX PARTE
PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA AND OTHERS
[2000] ZACC 1
;
2000 (2) SA 674
(CC) at 708 paras [85] and [86];
TRINITY
BROADCASTING (CISKEI) v INDEPENDENT COMMUNICATIONS AUTHORITY OF SOUTH
AFRICA
2004
(3) SA 346
(SCA) at 354 H – 355 A;
BATO
STAR FISHING (PTY) LTD v MINISTER OF ENVIRONMENTAL AFFAIRS AND OTHERS
[2004] ZACC 15
;
2004 (4) SA 490
(CC) at 512 – 513 paras [44] and [45].
[22] For
these reasons the decisions of the board to issue limited gaming
machine operator licences to Interplay and Thuo and the
refusal to
grant such licence to Vukani, must be reviewed and set aside. It
follows that prayers B1, B2 and B3 quoted above, must
be granted. In
the result it is unnecessary to consider the many other grounds for
review relied upon by Vukani.
[23] The
next question is whether the matter should be referred back to the
board for reconsideration of all three proposals as
should normally
be done or whether the board should be directed to issue a license to
Vukani as Vukani urged us to do.
[2
4] Section
72 of the Act provides for review by the High Court of a decision of
a competent authority such as the board. Section
73 of the Act then
provides:
“
The court reviewing a decision
of the competent authority in terms of section 72, shall if it sets
aside a decision, issue an order
that the competent authority
consider afresh the matter in respect of which the decision was made,
unless, in its opinion, exceptional
circumstances warrant another
order.”
This
provision echoes the provisions of section 8(1)(c) of PAJA.
In my view the reasons why exceptional circumstances are acquired
for the court to substitute its decision for that of an
administrative
functionary that is vested by statute with the power
or discretion in question, are not only the principle of separation
of powers,
but also that the administrative functionary is generally
best equipped by reason of its experience and knowledge of the
particular
field. Therefor, even if the court finds that there are
exceptional circumstances that may justify the court to substitute
its
decision for that of the administrative functionary, a court will
only do so if it is able to do so.
[25] There
is no
numerus
clausus
of what constitutes exceptional circumstances. A case is exceptional
when, upon a proper consideration of all the relevant facts,
a court
is persuaded that a decision to exercise a power should not be left
to the designated functionary. See
GAUTENG
GAMBLING BOARD v SILVERSTAR DEVELOPMENT LTD AND OTHERS
2005 (4) SA 67
(SCA) at 75 E – F. In the final analysis
“
... The court has a discretion,
to be exercised judicially upon a consideration of the facts of each
case, and ..., although the
matter will be send back if there is no
reason for not doing so, in essence it is a question of fairness to
both sides.”
See
LIVESTOCK
AND MEAT INDUSTRIES CONTROL BOARD v GARDA
1961 (1) SA 342
(AD) at 349 G.
[26] Certain
guidelines have however evolved over the years in this regard. In
JOHANNESBURG
CITY COUNCIL v ADMINISTRATOR, TRANSVAAL, AND ANOTHER
1969 (2) SA 72
(T) at 76 E – G the following was said:
“
2. The
Court will depart from the ordinary course in these circumstances:
(i) Where the end
result is in any event a foregone conclusion and it would merely be a
waste of time to order
the tribunal or functionary to reconsider the
matter. This applies more particularly where much time has already
unjustifiably
been lost by an applicant to whom time is in the
circumstances valuable, and the further delay which would be caused
by reference
back is significant in the context.
(ii) Where the
tribunal or functionary has exhibited bias or incompetence to such a
degree that it would be unfair
to require the applicant to submit to
the same jurisdiction again.”
In
AIROADEXPRESS
(PTY) LTD v CHAIRMAN, LOCAL ROAD TRANSPORTATION BOARD, DURBAN, AND
OTHERS
[1986] ZASCA 6
;
1986
(2) SA 663
(AD), in a passage at 680 E – G that I find
particularly instructive, Van Heerden JA said the following:
“
But,
even if such a decision is set aside, it does not follow that a Court
will direct a local board to exercise its functions in
a manner
determined by the Court, eg by issuing a permit. On the contrary,
since the issue of a permit is in the discretion of
the board and not
of the Court, the ordinary course is to remit the matter to the board
for reconsideration. In special cases the
Court may, however, order
the board to issue a permit. This Court has held that ‘it is a
matter of fairness to both sides’:
Livestock
and Meat Industries Control Board v Garda
1961
(1) SA 342 (A)
at
349. But in the absence of exceptional circumstances such as bias or
gross incompetence on the part of the board, or a long delay
occasioned by an arbitrary decision, a court will not order the issue
of a permit unless the only proper decision of the board
on remittal
would be to grant the application. Cf
Garda's
case
supra
at 349;
Johannesburg
City Council v Administrator, Transvaal, and Another
1969
(2) SA 72
(T)
at
76;
Vries v Du Plessis NO
1967
(4) SA 469 (SWA)
at 482.”
Although
this was a minority judgment, the majority judgment does not effect
the validly of this passage. See
COIN
SECURITY GROUP (PTY) LTD v SMIT NO AND OTHERS
[1992] ZASCA 55
;
1992 (3) SA 333
(AD) at 347 H – J;
ERF
ONE SIX SEVEN ORCHARDS CC v GREATER JOHANNESBURG METROPOLITAN COUNCIL
(JOHANNESBURG ADMINISTRATION) AND ANOTHER
[1998] ZASCA 91
;
1999 (1) SA 104
(SCA) at 109 D – G.
[27] It
will be recalled that in its “informatory affidavit” the
board conceded that the proposals of Thuo and Interplay
were in fact
deficient in the respects alluded to in Vukani’s founding
affidavit and that as a result licences should not
have been granted
to Thuo or Interplay. These deficiencies included fundamental
disqualifying shortcomings. I agree with this
conclusion of the
board.
[28]
As I have already pointed out, neither Thuo nor Interplay dispute
that Thuo’s proposal submitted to the board was materially
defective. In the circumstances it suffices to say that it is
undisputed that Thuo’s proposal did not meet the requirement
of
at least 70% BEE financial interest and that its subsequent attempt
to amend its proposal by changing its proposed shareholding,
was
irregular and ineffective.
[29] As
I mentioned already, section 31(2)(a)(i) provides that a gaming
machine operator licence shall not be granted unless the
board is
satisfied that the applicant has appropriate knowledge and experience
to operate gaming machines or is able to acquire
such knowledge and
experience. It is common cause that Interplay has no such knowledge
and experience. Interplay’s case
before the board and in its
answering affidavits to the effect that it has the ability to acquire
the knowledge and experience
to operate gaming machines, hinged
particularly on the statement that Interplay will obtain the services
of Mr. Peter Heeger.
It is common cause that Mr. Heeger has
substantial experience in the gambling industry and that his services
could provide Interplay
with the necessary knowledge and experience.
During a closed session with the board, Mr. Eister indicated that Mr.
Heeger would
join Interplay as its chief executive officer or general
manager but that he could not do so at that point in time as he was
bound
to a restraint of trade agreement with Thuo. The statement was
considered by the board.
[30] In
an affidavit forming part of Vukani’s reply, this is denied by
Mr. Heeger in emphatic terms. He said that he never
concluded any
agreement with Interplay to take up the position of its general
manager or any other position. He said that during
late 2007/early
2008 he merely assisted Mr. Eister as a favour to a mutual friend and
that a salary was never discussed with him
by or on behalf of
Interplay.
[31] Although
this affidavit forms part of the reply, its contents must in the
particular circumstances of this case in my judgment
be accepted as
correct. The affidavit deals with a narrow issue. It was clear that
Vukani would and did rely heavily on this
evidence. At the hearing
before us the veracity of this evidence was not questioned, nor was
leave asked to reply thereto. I
have no doubt that if Mr. Heeger’s
evidence was not true, an application to file an affidavit or
affidavits to challenge
the truth or correctness of the evidence of
Mr. Heeger, would have been made. See
MARSHALL
v MARSHALL (PTY) LTD AND OTHERS
1954 (3) SA 571
(N) at 576 B – D.
[32] In
the circumstances the board should not have been influenced by the
allegation that Mr. Heeger would at least materially
contribute to
Interplay’s knowledge and experience to operate gaming
machines. In the absence of this allegation, Interplay
in my
judgment did not meet the peremptory requirement of section
31(2)(a)(i) of the Act. I should add that Interplay’s
response
hereto was that the board could and did intend to make it a condition
of the licence to be issued that Interplay demonstrate
the ability to
acquire the knowledge and experience. In my judgment this reasoning
is flawed. A peremptory requirement for a
licence to be granted
cannot be relegated to a condition to be fulfilled after a licence
has been granted.
[33] I
also agree with the linked submission that Interplay did not
demonstrate to the board that it would be able to obtain even
the
R17 million that it eventually said would be required to finance its
operations for the first year. The letters from RentWorks
Africa
(Pty) Ltd and Standard Bank Ltd referred to by Interplay in this
regard are vague and contain no commitment to provide any
finance.
In the result it is unnecessary to determine whether Interplay also
failed to comply with the provisions of section 24(2)(b)(ii)
of the
Act.
[34] I
have already pointed out that the board erred in respect of Vukani’s
BEE shareholding and that the board not only should
have found that
Vukani complied with the RFP in this regard, but should have
considered it as a factor in its favour. The board
however also
provided the following further reasons for refusing to grant a
licence to Vukani:
“
(b) The
Board is not satisfied with the applicant’s level of commitment
to contribute to the economy of the Free State by
sourcing labour,
goods and services within the Province. The Applicant indicated that
they will provide the Board with Procurement
Policies that are in the
process of being developed. However, no targets were provided on
sourcing of goods and services from
previously disadvantaged groups
in the Free State Province.
(c) The Board is
not satisfied with the lack of benefits offered to employees beyond
the workplace.
(d) The Board is
not satisfied with the proposal on Corporate Social Investment (CSI),
especially related to the following:
(i) Funding of
CSI projects are done through the HCI Foundation. The Board is
concerned with the fact that Vukani FS may not have
an influence on
CSI projects and that the projects might therefore not benefit the
people of the Free State Province.
(ii) The
Applicant did not specify a definite percentage of what will be spend
towards CSI.”
[35] The
first point to be made here is that none of these matters constituted
non-compliance with the RFP or rendered Vukani’s
proposal
non-compliant. These were matters considered by the board in its
comparative evaluation of the three proposals. As the
proposals of
Thuo and Interplay are no longer in contention, the question now is
whether any of these matters could legitimately,
rationally or
reasonably justify the rejection of the proposal of Vukani on the
basis of individual evaluation thereof.
[36] I
think not. The evidence put forward by Vukani in this regard is not
disputed by Interplay. The group of companies to which
Vukani
belongs has been active in the limited gaming machine industry since
1996. Subsidiaries of Vukani hold and operate limited
gaming machine
operator licences in five provinces. Vukani’s proposal
indicated that it was preparing a preferential procurement
policy and
it attached to its proposal, as an example, the preferential
procurement policy of its Limpopo subsidiary. This policy
clearly
shows commitment to local procurement. Vukani’s proposal
further indicated that it would request at least two quotations
from
locally based SMME’s for all its procurement requirements
during the set-up phase of the business and that it would
ensure
ongoing support of such SMME’s throughout the project. It
listed the following items as being available from locally
based
companies: data cables and plugs, electronic equipment, signage,
stationary, promotional items, office equipment and furniture,
and
upgrading of such. The RFP provides that the sourcing of products
and services within the Free State Province is subject to
the
suppliers meeting the price, quality and other commercial criteria of
the applicant. Absolute specificity at the date of submission
of the
proposal was accordingly not possible. Nevertheless at Vukani’s
closed session with the board, the board pressed
Vukani’s
representatives to be more specific and to provide the names of
specific service providers. Vukani’s representatives
explained
that it was not possible to give names of SMME’s at that time
as some of the services that were required, were
services that were
not necessarily available in the Free State Province. They further
explained that the Vukani group in such
a situation assisted in the
setting up of a local SMME to provide the required services. It was
mentioned that, for example, the
Western Cape Vukani subsidiary could
not find a suitable SMME to revamp the games areas of sites. It
accordingly committed a portion
of the procurement to enable the
establishment of a new locally based black-owned business for this
purpose. More than R3 million
was subsequently channelled through
this SMME. The board indicated to Vukani’s representatives
that it understood and accepted
this explanation.
[37] Vukani
provides a medical scheme for its employees, a provident fund, life
and disability insurance including an income protector
plan, as well
as a company car and cellphone where necessary. Vukani does not
provide housing, but pointed out to the board that
whilst housing
would be a highly relevant consideration in the case of an
application for a casino licence, that is not the case
in respect of
an application for a limited gaming machine operator licence.
[38] Vukani’s
ability to contribute significantly to CSI in the different provinces
has been a key feature to the success
of its group’s licence
applications to date. This aspect was not placed in question in one
of the five other provinces in
which Vukani’s subsidiaries are
limited gaming machine operators. Vukani’s approach is to
obtain information at grassroots
level from persons residing in the
province on specific CSI opportunities. It uses its own staff
members and site owners to identify
specific needs in the provinces.
These opportunities are considered at Vukani provincial level and
once they have been considered
as suitable for that level, these
opportunities are referred to and again considered by Vukani’s
head office. These opportunities
are approved at that level. They
are finally referred to the HCI Foundation which is the CSI vehicle
for the entire group, including
Vukani. The involvement of the HCI
Foundation in relation to CSI commitments has been regarded as
extremely positive. Vukani’s
subsidiary’s licence in
Limpopo was in fact made conditional upon this involvement. HCI
Foundation has ensured that each
and every one of the group’s
CSI projects in the different provinces has been properly
scrutinised, executed and evaluated.
Vukani and its competitors are
focussed on route operating, whilst the HCI Foundation is completely
focussed on CSI. Its infrastructure
is geared to CSI and it is far
better equipped to investigate and monitor different CSI projects
than a route operator would be.
[39] The
RFP does not require that a specific percentage of what will be spent
towards CSI must be indicated. Also, the board did
not request
Vukani to provide a specific percentage, which Vukani could then have
addressed.
[40] In
my judgment the board could not factually, reasonably or rationally
be dissatisfied in respect of any of the aforesaid matters.
[41] What
remains is the belated suggestion that Vukani’s proposal should
not be (re)considered as a result of non-compliance
thereof with the
provisions of section 24(2)(b)(i) of the Act. This section provides
as follows:
“Any
application for a licence shall-
(a) .....
(b) be
accompanied by-
(i) the approval
or representations of the local authority within whose area of
jurisdiction the premises in respect of which the
application is
made, are situated;”
It
is common cause that Vukani did not comply with this provision, nor
did Interplay.
[42] Counsel
for Vukani and Interplay are however agreed that this subsection is
inapplicable to an application for a limited gaming
machine operator
licence, on the basis that in the case of a limited gaming machine
operator licence, there are no premises “...
in respect of
which the application is made”. I agree, for the reasons that
follow.
[43] Section
23 of the Act provides for casino licences, limited gaming machine
operator licences, limited gaming machine site licences,
bingo
operator licences, manufacturer, maintenance or supplier licences,
totalizator licences, bookmaker licences and race-meeting
licences.
The essential functions of a limited gaming machine operator or route
operator are to assist in establishing site operators,
to provide and
maintain gaming machines and related equipment and to provide related
services and to ensure the proper distribution
of the proceeds of the
limited gaming machines. Section 31(3) provides that a limited
gaming machine operator licence shall authorise
the operation of
gaming machines specified in the licence, on the licenced premises of
the holders of gaming machine site licences.
Section 32 in turn
provides that a limited gaming machine site licence shall not be
granted unless the board is satisfied that
the premises in respect of
which the licence is to be granted will not be primarily utilised for
the operation of gaming machines
and that the limited gaming machine
site licence shall authorise the operation and keeping of gaming
machines in or on the licenced
premises specified in the licence.
Section 31(4) provides that the holder of a limited gaming machine
operator licence shall link
all the gaming machines in respect of
which the licence has been granted (that is situated in or on the
premises of the holders
of the site licences) to an electronic
monitoring system referred to in section 42. Electronic monitoring
system is defined in
section 42(3) as
“
any
electronic or computer or communication system or device that is so
designed that it may be used, or adapted, to send or receive
data
from gaming devices in relation to the security, accounting or
operation of gaming devices.”
For
understandable reasons there is no provision as to where the
electronic monitoring system should be situated. In my judgment
it
follows that an applicant for a limited gaming machine operator
licence does not make application in respect of premises of
its own.
The same applies to, for instance, maintenance or supplier licences
in terms of section 34.
[44] This
position must also be contrasted with that of a casino licence, bingo
operator licence, totalizator licence, bookmaker
licence and
race-meeting licence. A casino must obviously be situated at
specific premises. Section 30(2) provides that the board
shall only
grant a casino licence,
inter
alia
if satisfied that the applicant has consulted the local authority,
any regional or traditional authority, or any other competent
authority of the area where the casino will be or is situated and
that the applicant shall have and maintain sole and exclusive
legal
possession of the licensed premises. Section 30(3) provides that a
casino licence shall authorise the playing of casino
games on the
licensed premises specified in the licence. Similar provisions are
to be found in section 33 in respect of bingo
operator licences,
section 35 in respect of race-meeting licences, section 36 in respect
of totalizator licences and section 37
in respect of bookmaker
licences.
[45] The
point is perhaps best illustrated by the fact that the board regarded
the following letter by an environmental health practitioner
of the
Directorate of Community and Social Development: Health Management of
the Mangaung Local Municipality as compliance with
section
24(2)(b)(i) of the Act:
“To
Whom It May Concern:
During an
inspection conducted on the 11
th
June 2007, this letter serves to confirm that the premises located at
Unit 2 at 65 Kelner Street (Kelner Park) Westdene complied
with all
the Health Related Regulations.”
[46] It
follows that the only compliant and viable proposal before the board
was that of Vukani.
[47] It
is true that the board was under no obligation to grant any licence
and that the RFP provides that if fewer than two applicants
are found
suitable for licensing as limited gaming machine operators, the board
reserves the right to re-advertise and invite other
applications. At
no stage, however, did the board indicate that it would not grant
only one licence in the event of there being
only one suitable
candidate, nor did the board or Interplay suggest any reason or
ground for such stance. On the contrary, the
board understandably
appeared to be keen to make the benefits of limited gaming machines
operations available to the Free State
Province and its people.
These benefits have already been delayed considerably. The
suggestion that the board could refuse to
grant any licence simply
because there was only one suitable candidate, in the words of Heher
JA in the
SILVERSTAR
-case,
“...
approaches the level of frivolousness.”
These
matters, as Heher JA said, depend on evidence and not conjecture.
[48] As
stated before, the MEC also abides by this court’s decision.
There is therefore no reason to believe that consultation
with the
MEC in terms of section 31(5) of the Act could result in any
legitimate ground for refusing the award of a limited gaming
machine
operator licence to Vukani.
[49] Vukani
submitted that the board exhibited bias against it and/or in favour
of Interplay. In my judgment this was not proved.
I do not think
that the fact that the firm of attorneys of which Ms Bokwa’s
husband is a member previously acted in litigation
for Lebone Trust,
constitutes a conflict of interest or improper relationship or that
its non-disclosure was improper or indicative
of bias. In my view
nothing can be made of the fact that Ms Bokwa at the specific request
of Thuo destroyed a letter directed
by Thuo to the board. The letter
contained a major change of position by Thuo at a very late stage
that Thuo probably wisely decided
not to proceed with. The passage
in the transcription of the record of proceedings before the board
where according to Vukani
it was suggested that Ms Bokwa is aligned
to Interplay, is rather nebulous and in any event denied by Ms Bokwa.
On the principles
applicable to the determination of factual
disputes in applications, the evidence of Ms Bokwa in this regard
must be accepted.
The same applies to the evidence denying that Mr.
Eister knew about the results of the board’s adjudication
process before
he should have. The “confirmatory affidavit”
of Ms Bokwa which forms part of Interplay’s answering
affidavits
in this application, was primarily intended to deal with
the allegations of bias made by Vukani in respect of Ms Bokwa and the
board. It is correct that in this affidavit Ms Bokwa continued to
defend the board’s decision in respect of Vukani on grounds
that I have found to be untenable. This can however at least equally
be explained by incompetence, to which I will revert. The
reference
during the deliberations of the board to the first name of Mr. Eister
(and to the first name of Mr. Mutsi of Thuo) is
a red herring that
deserves no further consideration. Similarly, the submission that
Mr. Eister and the MEC had
“...
some sort of connection”
and that to the knowledge of the members of the board the MEC
favoured the award of a licence to Interplay, is in my view based
on
nothing more than speculation.
[50] Based
on what I have said before, I agree with Vukani that the rejection of
its proposal by the board is to a large extent
beyond comprehension.
Whilst I do not agree that this is an indication of bias, it does
show incompetence to such a degree that
it would in the circumstances
be unfair to require Vukani to again be evaluated by the board. The
parties represented before me
are agreed that six of the members of
the board, but not Ms Bokwa, have since been replaced as a result of
expiry of their terms
of office. I do not think however in the
circumstances that this makes any material difference.
[51] As
I have pointed out, there has already been a considerable delay in
the matter. Re-advertisement of the two (or four) limited
gaming
machine operator licences would cause a further substantial delay
that does not appear to be justified or fair in all the
circumstances
of this case.
[52] To
sum up, Vukani was the only compliant or suitable candidate for award
of a limited gaming machine operator licence by the
board. The board
has never indicated that it would not consider granting a licence in
such circumstances. Fairness requires that
the matter should not be
reconsidered by the board nor further delayed. In much the same
circumstances the court in
SILVERSTAR
held that exceptional circumstances justified an order directing the
issue of a licence. See also the unreported judgment of Kroon
J in
the High Court of South Africa, Eastern Cape, Grahamstown in the
matter of
EKUPHUMLENI
RESORT (PTY) LTD AND ANOTHER v THE EASTERN CAPE GAMBLING AND BETTING
BOARD AND OTHERS
,
Case No. 402/2007, delivered on 18 February 2010, paras [86] –
[91].
[53] The
matter can also be approached in the following manner. Although each
of the three factors mentioned in the quoted passage
in the
AIROADEXPRESS
-case,
supra
,
individually would constitute exceptional circumstances, all three of
these factors are present here. There was gross incompetence
on the
part of the board, there was a long delay occasioned by an
arbitratiary decision and the only proper decision of the board
on
remittal would be to grant the application of Vukani.
[54] For
these reasons I became convinced that exceptional circumstances
justify an order directing the board to grant a limited
gaming
machine operator licence to Vukani in respect of 1 000 limited gaming
machines in terms of Vukani’s proposal. Vukani
has correctly
accepted that the board may in respect of the licence impose such
conditions as the board considers appropriate in
terms of section 41
of the Act.
[55] The
costs of the application should be borne, jointly and severally, by
the parties that opposed the relief claimed, for the
duration of the
opposition. The board, its chairperson and the MEC filed a notice of
withdrawal of opposition on 17 June 2008,
whilst Thuo delivered its
notice of withdrawal of opposition on 1 June 2009. Vukani and
Interplay are agreed that the employment
of three counsel was
justified. Vukani also asked for an order that costs should include
the costs occasioned by its attorneys
having to listen to tapes of
the proceedings before the board and the costs associated with the
engagement of a sound engineer
in order to provide a workable
transcript thereof. There is no basis upon which Interplay or Thuo
could be ordered to pay these
costs. Also these costs were incurred
after 18 June 2008. Vukani reached an agreement with the board, its
chairman and the MEC
that any claim for costs by Vukani against them
would be limited to a claim up to and including 18 June 2008.
[56] The
following orders are issued:
1. An
order reviewing and setting aside the decision of the second
respondent to refuse the applicant’s application for a
limited
gaming machine operator licence.
2. An
order reviewing and setting aside the decision of the second
respondent to grant a limited gaming machine operator licence
to the
third respondent.
3. An
order reviewing and setting aside the decision of the second
respondent to grant a limited gaming machine operator licence
to the
fourth respondent.
4. An
order directing the second respondent to forthwith grant a limited
gaming machine operator licence to the applicant in accordance
with
its proposal, on such conditions as the second respondent considers
appropriate.
5. An
order directing the third respondent, jointly and severally with the
first, second and fifth respondents up to 18 June 2008
and with the
fourth respondent up to 1 June 2009, to pay the costs of the
application including the costs of three counsel where
so employed.
________________________
C.H.G. VAN DER MERWE,
J
I agree.
_______________
E.A.
MOOLLA
,
AJ
On behalf of the
applicant: Adv. P.B. Hodes SC
With him:
P. Farlam
Instructed by:
Matsepes Inc
BLOEMFONTEIN
On behalf of the third
respondent: Adv.
C.Z. Cohen SC
With him:
B. Knoetze SC and
J.G. Gilliland
Instructed by:
Symington & De
Kok
BLOEMFONTEIN
/sp