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[2008] ZAFSHC 72
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Pegma Thirteen Investments (Pty) Ltd v Free State Development Corporation (2681/2006) [2008] ZAFSHC 72 (18 September 2008)
IN
THE HIGH COURT OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case
No. :
2681/2006
In
the matter between:-
PEGMA
THIRTEEN INVESTMENTS (PTY) LTD
Applicant
and
FREE
STATE
DEVELOPMENT CORPORATION
Defendant
______________________________________________________________
HEARD
ON:
30
JULY 2008
_____________________________________________________
JUDGMENT
BY:
RAMPAI,
J
_____________________________________________________
DELIVERED
ON:
18
SEPTEMBER 2008
_____________________________________________________
[1] These
proceedings are concerned with the special plea raised by the
defendant to the claim filed by the plaintiff. The question
in this
case is whether the defendant, a
provincial
development corporation, is an organ of state as contemplated in law.
[2] The
plaintiff’s claim is delictual in nature. It was instituted on
27 June 2006. In its particulars of claim the plaintiff
alleged that
the defendant had unlawfully seized certain industrial assets at
Factory 30, Site 29, Industriqwa at Harrismith on
12 May 2003 and
that the plaintiff was deprived of the use and economic benefit of
such assets or the right to deal or to dispose
of them, as a
consequence of the defendant’s wrongful actions. According to
the plaintiff, the goods that were wrongfully
seized were released on
or about 10 July 2003. This then is the plaintiff’s cause of
action in respect of the first claim
of R1 497 304,78.
[3] In
its particulars of claim the plaintiff also alleged that, the
defendant, among others, had unlawfully seized a certain CNC
industrial machine at the place and time as specified in the first
claim and that, as a result of such wrongful seizure the plaintiff
was unable to contribute the said machine to the common coffers of
the partnership in terms of the partnership agreement the plaintiff
had concluded at Hillcrest in Pietermaritzburg in June 2003 with
Tekwani Sawmills (Pty) Limited. On or about 30 June 2003, so
alleged
the plaintiff further, Tekwani Sawmills (Pty) Limited cancelled the
partnership agreement, since the plaintiff could not
contribute the
machine. As a consequence of the defendant’s wrongful conduct,
which caused the cancellation of the partnership
agreement, the
plaintiff suffered a loss of R448 995,00 which was equivalent to half
the proceed which Tekwani Sawmills (Pty) limited
subsequently made in
connection with the export sale of wood products to Canada. This
then is the plaintiff’s cause of action
in respect of the
second claim. It is the plaintiff’s assertion that the
defendant is liable to compensate the plaintiff
for such damages.
[4] Before
pleading on the merits, the defendant, in its amended plea,
incorporated a special plea. It is, for obvious reasons,
unnecessary
to deal with the defendant’s ordinary plea. These proceedings
are about the defendant’s special plea only.
The essence of
the special plea is that, the defendant is an organ of state, as
contemplated in section 1 Act No. 40/2002; that
the defendant’s
wrongful conduct complained of, in other words, the cause of action,
which was alleged to have cost the plaintiff
to suffer damages, arose
on 12 May 2003; that the plaintiff failed to give in advance written
notice to the defendant of its intention
to institute the current
legal proceedings in terms of section 3 Act No. 40/2002; that the
defendant, as an organ of state, has
not consented in writing, to the
institution of the current legal proceedings without the requisite
notice and that, the plaintiff
was accordingly not entitled to
institute the current legal proceedings against the defendant. The
defendant’s special plea
was filed on 19 December 2007.
[5] The
plaintiff’s amended replication was then filed pursuant to the
filing of an amended plea by the defendant. Firstly,
in its
replication the plaintiff denies the averments set out in a special
plea that the defendant is an organ of state, which
was entitled to a
written notice in terms of section 3 Act No. 40/2002 prior to the
institution of these legal proceedings. The
plaintiff amplified its
denial by averring that the defendant was not one of the bodies
specified in the sub-paragraphs of the
definition of “organ of
state”, as contained in section 1 Act No. 40/2002. Secondly,
the plaintiff averred that the
defendant was not a person for whose
debt an organ of state was liable and, therefore, did not fall within
the ambit of sub-paragraph
(g) of the said definition. In the third
place, the plaintiff averred that the defendant did not exercise a
power or perform a
function in terms of the Constitution or a
provincial constitution referred to in section 142 of the
Constitution and, therefore,
did not fall within the ambit of
paragraph (c) of the said definition.
[6] It
has to be mentioned that before the plaintiff initiated these action
proceedings under case number 2681/06 on 27 June 2006,
the plaintiff
launched urgent motion proceedings under case number 2399/06 on 5
June 2006. The motion proceedings, it will be
noted, were filed
twenty two days prior to the action proceedings. The relief, which
the plaintiff as the applicant sought, was
set out in the notice of
motion. The thrust thereof was “that the applicant’s
failure to give timeous notice in terms
of section 3(2)(a) Act No.
40/2002 be condoned” and “that the applicant be granted
leave to institute legal proceedings
against the respondent before 30
June 2006”.
[7] The
condonation application was unsuccessful. Fifteen days later the
action was instituted. The defendant filed its original
ordinary
plea on 4 August 2006. It contained no special plea. However, on 19
December 2007 it was amended. The amended plea
contained the special
plea, as I have earlier outlined. It is this special plea I have to
grapple with. If the defendant was
not an organ of state, then no
notice in terms of section 3 would have been necessary. In such an
event the special plea will
have to fail. The hearing of the main
action will then start. However, if the defendant was an organ of
state, then the requisite
written notice would have been necessary.
In such an event the special plea must be upheld. In his opening
address counsel for
the plaintiff indicated that, should the special
plea be upheld, the plaintiff would once again make an application to
have its
failure to give the defendant the requisite notice,
condoned. We shall cross that bridge when we come to it.
[8] The
first two sub-sections of section 3 Act No. 40/2002 provide as
follows:
“
3 Notice
of intended legal proceedings to be given to organ of state
(1) No legal proceedings for the
recovery of a debt may be instituted against an organ of state
unless-
(a) the creditor has given the organ
of state in question notice in writing of his or her or its intention
to institute the legal
proceedings in question; or
(b) the organ of state in question
has consented in writing to the institution of that legal
proceedings-
(i) without
such notice; or
(ii) upon receipt of a notice which
does not comply with all the requirements set out in subsection (2).
(2)
A notice must-
(a)
within
six months from the date on which the debt became due, be served on
the organ of state in accordance with section 4 (1);
and
(b) briefly set out-
(i) the facts
giving rise to the debt; and
(ii) such
particulars of such debt as are within the knowledge of the
creditor.”
[9] The
defendant contends that it is an organ of state and that there had
not been a proper compliance with the aforegoing section.
The
plaintiff contends that the defendant is not an organ of state as
defined and accordingly that, no such notice was required
to be given
to the defendant. Therefore, it is clear that, in order to determine
whether or not the defendant was entitled to
be notified of the
intended legal proceedings, it must, first and foremost, be
determined whether the defendant was an organ of
state or not. The
phrase, “an organ of state”, is defined in the 1996
National Constitution and in the 2002 National
Legislation.
[10] As
regards the constitutional meaning of the words “organ of
state”, section 239 of the 1996 RSA Constitution provides
as
follows:
“
239 Definitions
In the Constitution, unless the
context indicates otherwise-
'organ
of state'
means-
(a) any department of state or
administration in the national, provincial or local sphere of
government; or
(b) any other functionary or
institution-
(i) exercising a power or performing
a function in terms of the Constitution or a provincial constitution;
or
(ii) exercising
a public power or performing a public function in terms of any
legislation,
but
does not include a court or a judicial officer;”
[1
1] As
regards the statutory meaning of the words “organ of state”
section 1 Act No. 40/2002 provides:
“
1 Definitions
(1) In this Act, unless the context
indicates otherwise-
'organ of state'
means-
(a) any national or provincial
department;
(b) a municipality contemplated in
section 151 of the Constitution;
(c) any functionary or institution
exercising a power or performing a function in terms of the
Constitution, or a provincial constitution
referred to in section 142
of the Constitution;
(d) the South African Maritime Safety
Authority established by section 2 of the South African Maritime
Safety Authority Act, 1998
(Act 5 of 1998);
(e) The South African National Roads
Agency Limited contemplated in section 3 of The South African
National Roads Agency Limited
and National Roads Act, 1998 (Act 7 of
1998);
(f) National Ports Authority Limited,
contemplated in
section 4
of the
National Ports Act, 2005
, and any
entity deemed to be the National Ports Authority in terms of
section
3
of that Act;
[Para. (f) substituted by s. 88 of Act
12 of 2005.]
(g) any person for whose debt an organ
of state contemplated in paragraphs (a) to (f) is liable;
[Para. (g) added by s. 88 of Act 12 of
2005.]
[1
2] The
plaintiff places no reliance on the provisions of the following five
paragraphs of section 1,
supra
,
viz
(b), (d), (e), (f) and (g). Therefore, the plaintiff’s case
revolves around paragraph (a) and paragraph (c). Can the
defendant
be regarded as a provincial department in terms of paragraph (a) or a
developmental institution in terms of paragraph
(c). I propose to
deal with these two statutory segments separately. However, it seems
to me that a certain degree of overlapping
is inevitable. This is so
because the defendant performs functions that emanate from both
domains.
[13] As
regards the first segment I am called upon to determine whether or
not the defendant, a development corporation, qualifies
as a
provincial department as contemplated in paragraph (a). Mr.
Pammenter, counsel for the plaintiff, argued that the defendant
sought to suggest that it was an organ of state by virtue of it being
a provincial department and therefore, that it fell into
the ambit of
paragraph (a) of the definition of the words “organ of state”.
In developing that argument further, he
pointed out that the
Department of Tourism Environmental and Economic Affairs was indeed
listed in column 1, schedule 2 of the
Public Service Act of 1994,
However, he pointed out that such listed provincial department did
not include any reference to the
defendant in the said schedule.
Accordingly, counsel contended that the defendant was not defined as
a provincial department anywhere
in the schedule to the Public
Service Act.
[14] Mr.
Van der Walt, counsel for the defendant, argued that, although the
defendant was not listed in column 1, schedule 2 to
the Public
Service Act of 1994, the Free State Provincial Administration was
listed as was its Department of Tourism Environmental
and Economic
Affairs. As such he readily conceded that the defendant was not
expressly named and listed anywhere in the 1994 schedule
2 as a
provincial department under the auspices of the Free State Provincial
Administration or Free State Provincial Government,
as you like it.
But that was not all where the enquiry ended. He contended that the
defendant was under the control of the provincial
department within
the Free State Provincial Administration and that careful examination
of the relationship between the defendant
and the aforesaid
provincial department showed that the defendant was a mere instrument
under the real control of a public authority.
[15] In
the case of
GREATER
JOHANNESBURG TRANSITIONAL METROPOLITAN COUNCIL v ESKOM
2000 (1) SA 866
(SCA) at par. 11 the court observed that various
tests were applied by the courts in evaluating the relationship
between the State
and a statutory corporation. For the purposes of
determining whether or not the corporation is an operational
instrument, servant
or organ of the government. The tests are
discretionary test, proprietary test, financial test and functional
test as more fully
explained in that judgment.
“
[12] It is
not difficult to see why the test of control is appropriate for the
purpose of deciding whether a public corporation
is the alter ego of
the government that establishes it. The cardinal factor that has to
be considered in that type of case is the
relationship between the
corporation and the State and, more especially, whether the
corporation is properly to be regarded as
a separate institution to
which specific powers have been delegated by the State or whether it
is a department of the government
in the guise of a public
corporation (cf
Trendtex
Trading Corporation v Central Bank of Nigeria
[1976] 3 All ER 437
(QB) at 442d - 443h). It may then become
necessary to 'pierce the corporate veil' in order to determine
whether the corporation
is a mere puppet with the de facto control
vesting in the government.”
Per
Melunsky
AJA at par. [12] in
GREATER
JOHANNESBURG TRANSITIONAL METROPOLITAN COUNCIL v ESKOM
,
supra
.
[16] Before
I proceed to recite enactments, which underlie the measure of
governmental control over the defendant, it appears necessary
to make
a few comments about the origin of the defendant. It was established
pursuant to the passing of the provincial legislation
with the title:
Free State Development Corporation Act No. 9/1995, which was signed
by the Premier of the Free State Provincial
Government on 12
September 1995. It was subsequently amended by Act No. 4/2006. The
corporation is a juristic person and the
provisions of the Companies
Act No. 6 of 1973 apply to it (section 2). It has a share capital.
The Free State Provincial Government
is the sole holder of all the
shares of the Corporation. The rights attached to the shares are
exercised by the MEC responsible
for the provincial department of
Tourism Environmental and Economic Affairs (section 3). It has a
board of directors that manages
and controls its affairs. This, in
brief, is the unique character of the corporation, in other words,
the defendant.
[1
7] The
main objectives of the Free State Development Corporations are to
perform or promote urban and rural development in the Free
State
Province with regard to any matter falling within the functional
areas specified in schedule 4 and schedule 5 of the RSA
Constitution.
Such objectives have to be promoted in accordance with a policy
determined or direction given by the responsible
MEC. In realising
such objectives a special emphasis is placed on the promotion and
development of small business enterprises
(section 3).
[18] The
following provisions are useful to the enquiry: The MEC appoints the
board of directors of the Free State Development Corporation
(section
5(2)); the MEC may remove any director from office (section 7(2));
the MEC appoints persons to fill vacancies as and when
they arise on
the board of directors (section 7(3)); the MEC designates one of the
directors as a chairperson or acting chairperson
or substitute
chairperson of the board of directors (section 8); the MEC appoints a
managing director from among directors and
such managing director
becomes the chief executive officer of the Corporation (section 9);
the MEC, after consultation with the
MEC responsible for the
Department of Finance, confirms or rejects business agreements
concluded by the Corporation with third
parties (section 15); the
Free State Development Corporation has to submit its audited annual
financial statements to the MEC (section
17); the books of account,
the statements of account and annual financial statements of the
Corporation have to be audited by the
Auditor-General, whose office
is an institution of government (section 19); the Free State
Development Corporation has to submit
a report on its activities
annually to the MEC (section 20); the Free State Development
Corporation may only be liquidated or placed
under judicial
management provided the Provincial Executive Council of the Free
State Government has by special resolution, taken
a decision to that
effect (section 23A).
[1
9] It
is crystally clear from the aforegoing provisions of the particular
provincial legislation that, the government through the
MEC
responsible for the aforesaid provincial department in the Free State
Government, effectively controls the defendant. On the
strength of
the
de
facto
control of the defendant by the government, the contention of the
plaintiff to the effect that the defendant is an entity with
a
distinct and separate legal personality ought to be negated.
[
20] The
mere fact that the Free State Development Corporation was not
expressly the mentioned in the aforegoing schedule, unlike
the
provincial department concerned, does not justify the conclusion that
such Corporation and Department are completely separate
entities.
The Free State Provincial Government and its Department of Tourism
were established in terms of the RSA Constitution.
In turn, the
Department of Tourism created an operational instrument designed to
facilitate the governmental process and programmes
and policies
geared at the realisation of specific constitutional imperatives or
objectives. The instrument so created, was the
Corporation.
Therefore, the Corporation was established by the provincial
department as a form of its own extension. In my view
it is not a
separate institution to which specific powers have been delegated by
the Free State Provincial Government.
[
21] It
is clear from the aforegoing that, although the Development
Corporation is subject to the corporative laws of the country
and
although companies, by their very nature, are separate juristic
persons independent of their shareholders and controlled by
their
directors, the defendant has so many peculiar and distinctive
attributes that portray it as a juristic entity with a unique
corporative character. The Corporation is subject to so much
executive direction or governmental control that it is, in my view,
the other face of the governmental structure that established it.
Such an extensive measure of official control is something unknown
in
the conventional corporative world. The mere fact that it is not
exempted from the fiscal obligation to pay value-added tax
does not
change its character.
[22] It
seems to me that the Corporation cannot be correctly regarded as a
separate and autonomous enterprise to which the provincial
department
has delegated certain specific powers. There is such a strong
connective tissue between the Corporation and the Department
that the
former does not have an independent existence. I am persuaded that
the Corporation is an extension of the aforesaid provincial
department as defined in section 1 Act No. 40/2002. Section 1 Act
No. 40/2002 states that a provincial department means:
(a) a provincial
administration mentioned in the first column of schedule 1 to the
Public Service Act, 1994 (Proclamation 103 of
1994); or
(b) a department within a
provincial administration and mentioned in the first column of
schedule 2 to that.
Although
the corporation is not expressly mentioned in the schedules it is a
creature of what is expressly mentioned. Therefore,
the defendant as
an internally invented instrument of a scheduled provincial
department, is implicitly an organ of state. I am,
therefore,
inclined to uphold the defendant’s contention. So much about
paragraph (a) of the definition.
[23] In
the second place, the defendant also relies on paragraph (c) of the
statutory definition of the words “organ of state”.
Here
the question is whether the Free State Development Corporation can be
said to be an institution performing a function in
terms of the
national or provincial constitution.
[24] As
regards the second segment of the definition, I am called upon to
determine whether or not the defendant, a development
corporation,
qualifies as an institution as contemplated in paragraph (c) section
1 Act No. 40/2002.
[25] Mr.
Pammenter argued that, since the Free State Development Corporation
Act No. 6/1995 was a regional statute, it could never
be contended
that the development corporation thereby established, was a
functionary or an institution in terms of the national
constitution
as it was not incorporated in terms of such constitution nor was it
incorporated in terms of a provincial constitution
since the Free
State Province did not and still does not have such a constitution.
On the strength of this argument counsel submitted
that the defendant
could not rely on the definition of the words “organ of state”
in accordance with paragraph (c)
of the national statute in question.
[26] Mr.
Van der Walt argued that the words “any institution performing
a function in terms of the Constitution” did
not mean “any
institution incorporated or established in terms of the Constitution”
before paragraph (c) of the definition
can be invoked, as Mr.
Pammenter had argued. Quite to the contrary, he submitted that the
defendant qualified as an institution
as contemplated in the
paragraph in question.
[27] Indeed
the Free State Development Corporation was not established in terms
of any constitution, national or provincial. It
is also a fact that
currently the Free State Province has no written constitution. As
earlier pointed out the Free State Development
Corporation was
established in terms of a regional statute. However, nowhere does
segment (c) of the definition or the definition
as a whole for that
matter, require that any institution claiming to be an organ of state
must have been established or incorporated,
as Mr. Pammenter prefers
to say, in terms of the constitution.
[28] What
paragraph (c) basically requires is that a function performed and not
an agent performing such a function, must be a function
specified in
the constitution, either the national or provincial constitution. It
is a question of synthex. In the instant case
the national
constitution applies seeing that the province has no provincial
constitution of its own. There has to be a defined
connection
between what an organisation does on the ground and what the
constitution requires to be done before an organisation
can claim to
be an institution as contemplated in paragraph (c).
[29] The
Concise Oxford Dictionary p. 598 defines the word “institution”,
among others, as “an organ founded for
social purpose”.
Urban and rural developments are undoubtedly public functions with
strong connotations of social purpose.
The New Shorter Oxford
English Dictionary p. 1032 defines the word “function”
inter
alia
as “the activity proper or natural to a person or a thing, the
purpose or intended role of a person or a thing”. The
verb to
function is defined, among others, as “to fulfil the purpose or
task of a specified thing”. See Concise Oxford
Dictionary p.
466. The phrase “in terms of” is defined as “with
regard to the aspect or subject specified”.
See Concise Oxford
Dictionary p. 1210. See also
OOSTHUIZEN
AND ANOTHER v STANDARD CREDIT CORPORATION LTD
[1993] ZASCA 59
;
1993 (3) SA 891
(AD) at 908D read with 909I – 910B.
[
30] Putting
all these dictionary definitions together, suggests that the proper
construction of paragraph (c) as regards the words
“an organ of
state” is that an organisation has to fulfil a task or a
purpose of the constitution. This particular
paragraph can never be
correctly construed to mean that constitutional tasks, purposes or
functions may only be performed by “any
institution established
in terms of the Constitution”.
[
31] The
next obvious thing to do is to ascertain precisely the functions
which the defendant performs coupled with the primary objectives
it
strives to attain. The defendant was established as a development
corporation. It is, therefore, a vehicle created with the
purpose of
urban and rural development in the Free State Province. Such
development relates to matters that fall within the functional
spheres as specified in schedule 4 and schedule 5 of the
Constitution. The urban and rural development, the objectives for
which
the corporation was established, are thus specified in the
Constitution.
[32] Counsel
for the plaintiff argued that the aforesaid schedules of the
Constitution relate to the functional areas over which
a provincial
government can legislate and that seeing that the Free State
Development Corporation cannot pass any legislation,
it cannot be an
organ of state because schedule 4 and schedule 5 contemplate the
passing of legislation on those specified areas.
This argument fails
to impress. Nowhere in the Constitution or the relevant schedules
could I find anything or provision in support
of the construction the
plaintiff seeks to rely on. I find it difficult to accept that
because the Free State Development Corporation
has no legislative
competence, it cannot realise its objectives. Moreover, the argument
loses sight of the fact that, the Constitution
differentiates between
the legislative authority of a province (section 104) and the
executive authority of a province (section
125). Both of these two
sections expressly refer to the functional areas as specified in
schedule 4 and schedule 5.
[33] Needless
to say, like the Free State Development Corporation, the provincial
executive authority has no legislative competence.
I pause to remark
that corollary argument was not advanced by the plaintiff to the
effect that public functions such as those
that the Free State
Development Corporation performs, can only be competently performed
by the provincial legislature since it
alone is a structure with
legislative powers.
[34] In
MITTALSTEEL
SOUTH AFRICA LTD (FORMERLY ISCOR LTD) v HLATSHWAYO
2007 (1) SA 66
(SCA) at par. [19] the court, endorsing its previous
decision, confirmed that any institution exercising a public power or
performing
a public function in terms of any legislation, was an
organ of state. The functional test is the vital test to be applied,
where,
as in this case, the functions performed are of public nature.
Conradie JA, writing for the unanimous court, observed that, where
an organisation was obviously performing a public function, the
control test was not even needed to prove that it was an organ
of
state. The functions were decisive.
[35] Still
at paragraph [19] Conradie JA further said the following about the
control test and the functions:
“
The control
test is useful in a situation when it is necessary to determine
whether functions, which by their nature might as well
be private
functions, are performed under the control of the State and are
thereby turned into public functions instead. This converts
a body
like a trading entity, normally a private body, into a public body
for the time and to the extent that it carries out public
functions.”
[3
6] Section
125(2) of the Constitution provides:
“
(2) The
Premier exercises the executive authority, together with the other
members of the Executive Council, by-
(a) implementing
provincial legislation in the province;
(b) implementing
all national legislation within the functional areas listed in
Schedule 4 or 5 except where the Constitution or
an Act of Parliament
provides otherwise;
(c) administering in the province,
national legislation outside the functional areas listed in Schedules
4 and 5, the administration
of which has been assigned to the
provincial executive in terms of an Act of Parliament;
(d) developing
and implementing provincial policy;
(e) co-ordinating
the functions of the provincial administration and its departments;
(f) preparing
and initiating provincial legislation; and
(g) performing
any other function assigned to the provincial executive in terms of
the Constitution or an Act of Parliament.”
[3
7] It
follows from the aforegoing constitutional provisions that the
premier and the provincial executive of a province are enjoined
and
authorised by the national constitution to fulfil such executive
functions. The Corporation was created with such executive
purpose
in mind. There can be no doubt that the regional statute, in other
words, Act No. 6/1995, in terms of which the Free State
Development
Corporation was established, was passed in accordance with section
125(2)(f), which empowers the Premier and the provincial
executive to
draft and to initiate provincial legislation in order to fulfil
certain public functions. But the actual passing
of provincial
statutes remains the prerogative of the provincial legislature
concerned.
[38] The
provisions of the regional statute read with the relevant provisions
of the Constitution as well as the largely uncontested
evidence of
the defendant’s witness, Mr. Van der Walt, collectively show
that the defendant was instrumental in implementing
the policies of
the Free State Provincial Government relative to the economic
development, poverty alleviation and reduction of
unemployment in the
province. These objectives are the hallmarks of governmental
endeavours to attain social justice. I am convinced,
therefore,
that, at all times since its establishment, the Corporation has been
performing these public functions in terms of the
national
constitution. It has been doing so in pursuit of the scheduled
matters and in keeping with its founding objectives.
[39] An
entity performs a public function when it practically seeks to
achieve some collective benefit for the general public or
a section
thereof and such entity is accepted by the public or a section of the
public as having authority to render such a service
or rather to
perform such a public function.
MITTALSTEEL
,
supra
,
at paragraph 20. In my view, the developmental activities of the
defendant crowned the defendant with such a profile. By virtue
of
the obviously public functions the corporation performs for the
general population of the province I am incline to find that
the
defendant was indeed an institution as contemplated in the second
segment, in other words, paragraph (c) of the definition.
[40] As
regards the constitutional meaning of the words “organ of
state”, I now turn to section 239 of the Constitution,
which
provides as follows:
“
239 Definitions
In
the Constitution, unless the context indicates otherwise-
'organ
of state' means-
(a) any department of state or
administration in the national, provincial or local sphere of
government; or
(b) any
other functionary or institution-
(i) exercising a
power or performing a function in terms of the Constitution or a
provincial constitution; or
(ii) exercising
a public power or performing a public function in terms of any
legislation,
but does not
include a court or a judicial officer;”
[
41] It
will be readily appreciated that the constitutional definition of the
words “organ of state” is not the same
as the statutory
definition of those words. Counsel for the plaintiff suggested,
without conceding, that in terms of the constitutional
definition,
there may well be an argument that the defendant was an organ of
state. It is so that the statutory definition of
the words is more
restrictive than the constitutional definition. However, that does
not necessarily demonstrate that the lawmaker
intended to restrict
the constitutional provision by way of a statutory provision.
[42] It
was contended on behalf of the plaintiff that in view of the
constitutional definition of the words “organ of state”
as earlier set out in this judgment, it could not be argued that the
defendant was a state department in any of the three spheres
of
government, namely, national administration, provincial
administration or local government. The essence of the argument was
that the Corporation did not exercise functions conferred on it in
terms of the Constitution. On behalf of the defendant it was
contended that the Free State Development Corporation did not
exercise the functions that it was performing on the basis that such
functions were delegated to it, but that it was performing public
functions in terms of the Constitution and the regional statute.
[4
3] In
the case of
NATIONAL
GAMBLING BOARD v PREMIER, KWAZULU-NATAL, AND OTHERS
[2001] ZACC 8
;
2002 (2) SA 715
(CC) the court considered the aforesaid
constitutional provision. See paragraph [18] on p. 724. At
paragraph [19] Du Plessis
AJ said the following:
“
[19] The
parties are agreed that the national board, the Minister, the Premier
and the KZN board are 'organs of State', and rightly
so. The national
board and the KZN board are institutions 'exercising a public power
or performing a public function in terms of
any legislation' as
provided for in para (b)(ii) of the definition. The Premier and the
Minister are functionaries 'exercising
a power or performing a
function in terms of the Constitution or a provincial constitution'
as envisaged in para (b)(i) of the
definition.”
[4
4] The
learned Judge carried on and stated the following at paragraph [24]:
“
[24]
The purpose of the word 'constitutional' in s 167(4)(a) must now be
determined. The word is there used in the context of the
status,
powers or functions of organs of State. In para (b) of the definition
of organ of State a distinction is made between an
institution or
functionary 'exercising a power or performing a function in terms of
the Constitution' and those doing so 'in terms
of any legislation'.
The word 'constitutional' in s 167(4)(a) encapsulates the same
distinction: It refers to status, powers or
functions explicitly or
by implication provided for in terms of the Constitution, as opposed
to those provided for in terms of
any legislation.”
The
court found that an emphasis should be placed on the functions that
are performed in terms of the Constitution or any other
legislation.
See also
PRESIDENT
OF THE REPUBLIC OF SOUTH AFRICA v EISENBERG & ASSOCIATES
(MINISTER OF HOME AFFAIRS INTERVENING)
2005 (1) SA 247
(CPD) at 259E – 260B.
[45] I
am persuaded that the defendant performed functions in terms of the
Constitution about matters set out in schedule 4 and
5 of the
Constitution. This becomes even much clearer when the scheduled
matters are read in conjunction with the preamble to
the Constitution
as well as sections 9 to 10, 25(5), 25(8), 26(1), 26(2), 41(1)(b),
195(1)(c) and 195(2).
[46] In
the circumstances I have come to the conclusion that the defendant is
indeed an organ of the state in terms of section 1,
Act No. 40 of
2002. It follows, therefore, that the plaintiff was obliged to have
given the defendant notice in terms of section
3, Act No. 40 of 2002
of its intention to sue the defendant and well within six months from
the date on which the cause of action
arose. It was never done.
[47] Accordingly
I make the following order:
47.1 The
special plea succeeds.
47.2 The
plaintiff is directed to pay the costs hereof, occasioned by the
adjudication of the original dispute.
47.3 The
costs referred to in the aforegoing sub-paragraph shall include the
costs occasioned by the employment of two counsels.
______________
M. H. RAMPAI, J
On
behalf of the
plaintiff:
Adv. C.J. Pammenter, SC Instructed by:
Naudes
BLOEMFONTEIN
On
behalf of the defendant: Adv. D.J. van der Walt
With him:
Adv.
A.J. Benade Instructed by: Symington & De Kok
BLOEMFONTEIN
/sp