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[1998] ZAWCHC 2
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Stock Hotels and Resorts Cape (Pty) Ltd v Western Cape Gambling and Racing Board and Another (12016/98) [1998] ZAWCHC 2 (26 October 1998)
IN THE
HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO. 12016/98
In
the matter between:
STOCKS
HOTELS & RESORTS
(CAPE)
(PROPRIETARY) LIMITED
….........................................................................
Applicant
and
THE
WESTERN CAPE GAMBLING
AND
RACING BOARD
…...............................................................................................
First
Respondent
TRANSNET
PENSION FUND
…...................................................................
Second
Respondent
JUDGMENT
DELIVERED THIS 26TH DAY OF OCTOBER, 1998
LOUW,
J
:
The
question which arises in this application is whether applicant, who
has applied for a casino licence under the provisions of
the Western
Cape Gambling law, No.4 of 1996 ("the Gambling Law"), is
disqualified from obtaining or being granted such
a licence by virtue
of the provision of section 29(f) of the Gambling Law.
The
relevant part of section 29(f) provides that when
"..
any legal entity in respect of which the State, or any organ of the
State or any organisation with which the state is concerned
has any
financial interest, except as far as taxes are concerned, in any
gambling activity ..."
such
entity shall be disqualified from obtaining or being granted a
licence.
The second
respondent, the Transnet Pension Fund, which has been established
with legal personality in terms of section 2 of the
Transnet Pension
Fund Act, No. 62 of 1990 holds 26% of the shares in a company, Stocks
Hotels & Resorts Holdings (Pty) Ltd
("Holdings"), which
in turn holds 54,5% of the shares in another company, Stocks Hotels &
Resorts Limited ("Limited").
This is a public company
listed on the Johannesburg Stock Exchange. The balance of the shares
in Limited are held by various investors
on the Stock Exchange.
Limited holds 100% of the shares in Stocks Hotels & Resorts
(Cape) Holdings (Pty) Ltd ("Cape Holdings")
which company
in turn, holds 100% of the shares in applicant.
First
respondent, the Western Cape Gambling and Racing Board, ("the
Board"), which has been established by section 2 of
the Gambling
Law, is given the power to consider and grant applications for
licences under the Gambling Law. On 30 June, 1998,
the Board advised
the applicant that it had procured the opinion of senior counsel
which is to the effect that the applicant is
disqualified in terms of
section 29(f) of the Gambling Law from obtaining or being granted a
licence
“
...by
reason of the shareholding of the Transnet Pension Fund in the said
applicant".
The
Board suggested that the applicant seek "a declaratory order ...
to address this situation".
The
applicant now applies for an order declaring that it is not, by
reason of the 'provision of section 29(f), disqualified from
obtaining or being granted a casino licence by the Board.
The Board
has not given notice of its intention to oppose the application and
second respondent abides the decision of the Court.
There are
competing applicants for the casino licence. They have all been given
notice by the Board of the relief being sought by
the applicant and
they do not appear to oppose the relief sought.
Mr
E M du Toit,
who
with
Mr
Joseph
appeared
for the applicant submitted that applicant should be granted the
declarator sought for two reasons: First that on a proper
construction of section 29(f), the second respondent is not "the
State, or any organ of the State or any organisation with
which the
State is concerned". Secondly, that in any event, second
respondent's shareholding in Holdings does not constitute
"any
financial interest, except as far as taxes are concerned, in any
gambling activity".
Second
respondent is clearly not "the State". It is a pension fund
which exists and operates wholly for its members, the
employees of
Transnet Limited. It is not part of the "central institutions of
public administration"
(Baxter:
Administrative Law,
p.95)
and it is not an institution which
"
is under a duty to act in the public interest and not simply to its
own private advantage ".
(Baxter,
op cit.
P.
100)
I turn to
the question whether second respondent is an "organ of the
State" within the meaning of section 29(f).
The
concept "organ of State" as used in section 7(1) of the
interim constitution
(Act 200
of 1993), was considered in Directory Advertising Cost Cutters v
Minister
for Posts, Telecommunications and Broadcasting and Others, 1996(3) SA
800 (T) at
810 F-G where van Dijkhorst, J, in disapproving of the wider meaning
given to
the concept in Baloro and Others v University of Bophuthatswana and
Others,
(1995(4) SA 197 (B), formulated the test as follows:
'The
concept as used in section 7(1) of the constitution must be limited
to institutions which are an intrinsic part of government
-i.e. part
of the public service or consisting of governmental appointees at all
levels of government - national, provincial, regional
and local - and
those institutions outside the public service which are controlled by
the State - i.e. where the majority of the
members of the controlling
body are appointed by the State or where the functions of that body
and their exercise is prescribed
by the State to such extent that it
is effectively in control. In short, the test is whether the State is
in control. "
and at
809G-H concluded
"An
'organ of State' CStaatsorgaan') is an institutional body by means of
which the State governs ...
An
organ of State is not an agent of the State; it is part of government
(at any of its levels) ".
In the
Baloro case, it was held that the university is an organ of State
under section 7(1) and that it is therefore subject to
the
application of Chapter 3 of the interim constitution.
In
Oostelike
Gauteng Diensteraad v Transvaal Munisipale Pensioenfonds en 'n Ander,
1997(8)
BCLR 1066
(T),
Cameron, J
held
that the
Transvaal
Munisipale Pensioenfonds
was
an "organ of State" within the meaning of section 7(1) of
the interim constitution.
Cameron,
J
came
to this conclusion after applying the "control test" in the
Directory
Advertising
case
"met 'n mate van soepelheid en aanpasbaarheid" and
after
analysing the statutes of the pension fund in the following terms":
"Dit
is natuurlik die geval dat die eerste respondent beheer en regeer
word kragtens sy statute, 'n Betragting van die statute
toon dat
hulle op hul beurt voorsiening maak vir 'n bestuurskomitee aan wie
die beheer van die fonds uitdruklik deur die statute
toevertrou word.
Die bestuurskomitee word deur lede van die eerste respondent verkies.
Die komitee het verdere wye magte wat die
bevoegdheid selfs insluit
om die eerste respondent te ontbind. Dit is verder die geval dat die
eerste respondent sy oorsprong in
'n ordonnansie het en dat hy tot
stand gekom het deur 'n wetgewende handeling deur die administrateur.
"
(At
1073J-1074A)
and
holding that the pension fund's existence was a subsiduary one:
'Ten
eerste is die eerste respondent ingestel vir werknemers wat in die
diens van die Staat staan. Ten tweede kan sy statute slegs
met die
goedkeuring van 'n uitvoerende staatsfunksionaris (die Premier)
gewysig word, en ten derde is die uitsluit/ike doel van
die eerste
respondent se bestaan om aan te sluit by en diensvoordele te verskaf
by die diens van staatsamptenare ".
Cameron,
J
concludes
that
'Die
eerste respondent wel aan die beheertoets voldoen. Die eerste
respondent is onder die beheer van die Staat, nie slegs in die
sin
dat die bestaansvoorwaardes in sy statute alleen gewysig kan word
deur staatsgoedkeuring nie, maar ook in die sin dat sy bestaan
J
n
newebestaan is. Sonder die Staat het die eerste respondent geen
bestaan nie ". (ax
1074C-E)
In
Mistry
v Interim National Medical and Dental Council of South Africa and
Others,
1997(7)
BCLR 933 (D),
Booysen,
J
concluded
with reference to the
Directory
Advertising
case,
that the first respondent was not an organ of State within the ambit
of section 7(1) of the interim constitution. He held
(and
McLaren,
J
agreed)
that
"...regard
must be had to a number of circumstances including the functions and
purpose of the body, the degree to which a
functionary of the State
such as a cabinet minister plays a role in the discharge by the
statutory body of its duties and functions,
as well as its
independence generally",
(at
947D-E)
These
judgments all concern the interpretation of the concept "organ
of State" found in section 7(1) of the interim constitution
and
relate to the question whether Chapter 3 of the constitution is
applicable to bodies such as a university, a pension fund,
and the
Medical and Dental Council. Specific principles of interpretation,
such as are found in section 35 of the interim constitution,
are
applicable to the interpretation of the concept "organ of State"
in section 7(1) read with the definition in section
233(1 Mix), which
provides that organs of State include "any statutory body or
functionary". An interpretation which
is appropriate in the
context of the interim constitution, therefore does not necessarily
apply to the Gambling Law, the provisions
of which are not in
pari
materia
with
those of the interim constitution.
The
authors of
Constitutional
Law of South Africa,
pp10-25
et
seq
discuss
various aspects of the proper interpretation of section 7(1) in the
context of the applicability of Chapter 3 of the interim
constitution.
They point
out that generally
"...where
the government delegates power to another body or person to enact or
to enforce coercive laws which subject members
of the public to
punishment, Chapter 3 will apply. This prevents the legislature from
assigning to others powers that the legislature
itself could not
legitimately wield".
The
authors then set out three tests
'Though
this list may not be exhaustive, the primary litmus tests for
determining whether a particular entity or actor is statutory
body or
functionary are the government control test, the government entity
test, and the government function test".
Regarding
the "control test", the authors say:
"At
a minimum, a government control test entails that it is not enough
for a body to have been created by statute to warrant
application of
the constitution. To state the inquiry more positively, a government
control test would likely hold that in order
to subject a body to the
constitutional standards the court must answer affirmatively one of
the following two questions: Is the
body part of one of the three
branches of government? If not, does the government retain 'direct'
control over the body in question?
The
control test is permissive. It is designed to allow institutions
created and supported by government to operate without fear
of
constitutional sanctions ". (at
plO-26)
The
"government entity" test is a wider test, it appears:
'Does
the entity perform tasks pursuant to some form of statutory
authority? Is the task performed in furtherance of some government
objective? Such a test ensures that state-created and state-funded
bodies that serve State objectives cannot be insulated from
constitutional review.
Finally,
the "government function" test, the ambit of which is even
wider:
"Again
the court might wish to ask two questions. First, is the actor
exercising power normally associated with government?
Secondly, does
the actor possess the
indicia
of
government? This test makes the exercise of power, and not simply the
form of that power, the starting point for constitutional
analysis.
Where a private body exercises powers normally associated with
government, where the exercise of
such powers curtails or
suppresses our fundamental freedoms, and where the
t
government
acquiesces in the exercise of such power, then a court that is
concerned
with
the substance of our freedom, and not merely jts form, may feel
justified in subjecting such bodies to constitutional scrutiny
".
The
purpose of the above discussion of the concept of an "organ of
State" is to ascertain the actions of which entities
should be
held properly to be subject to the constitutional limits set out in
the bill of rights contained in Chapter 3 of the
interim
constitution. In interpreting the concept "organ of State"
in the Gambling Law, one must start from the context
of that Law and
also consider its object and purpose.
Since the
government control test appears to be the preferred test (even in a
constitutional setting) adopted by our courts, it
is appropriate to
consider the degree of control which the State has over the pension
fund.
Transnet
Ltd., for the benefit of whose employees the Fund was established, is
a trading company which is wholly owned by the State.
Section 2
of the Transnet Pension Fund Act, No. 62 of 1990 provides for the
establishment of the Fund. Section 5 of this Act provides
that
control and management of the pension fund shall be governed by the
Rules of the Fund and that the Rules shall be published
by the
Minister of Mineral and Energy Affairs and Public Enterprises (the
Minister) after having obtained the concurrence of the
Minister of
Finance. The Rules may be amended by the Board of Trustees of the
Fund,
subject to the approval of the Minister, acting with the concurrence
of the Minister of Finance.
The Rules
of the Fund were published by the Minister under Government Notice
R2355 on 1 October, 1990, and provides that:
The
object of the Fund is to provide benefits for members and
beneficiaries of the Fund;
that the
Fund shall be controlled by a Board of Trustees, which is made up as
follows:
(I) (E)ach
trade union may appoint a member and an alternate;
(ii) the
Managing Director of Transnet Limited shall appoint a Chairman for
the Board and a number of members and their alternates
equal to the
aggregate number of members and alternates, respectively, appointed
by the trade unions; and
that the
duty of the Chairman, members and alternates towards the Fund shall
be of a fiduciary nature and that they shall, when
acting in such
capacities, seek only the benefit of the fund, its members,
pensioners and other beneficiaries, to the exclusion
of all other
considerations or objectives.
POWERS OF
THE BOARD
(1) The
Board may, with the approval of the Managing Director and the
Minister, acting in concurrence with the Minister of Finance
-
(aa)
amend the rules;
(bb)
prescribe the manner in which the award of benefits
shall be
considered by the Fund; and (cc) take any action (including the
control of the finances
and the
administration of the Fund) not specifically
provided
for in the Rules, that may be necessary to
achieve
the objects of the Fund.
(2)
The
board appoints an Investment Committee which consists
of -
(i)
the
Chairman of the Board;
(ii)
a
member of the personnel of an employer, engaged in
the
administration of the Fund and nominated by the
Chairman of the
Board;
(iii)
two
members of the Fund nominated by those members
of the Board
appointed by the managing director of
Transnet.
(iv)
one
member from among the members appointed by the
trade unions,
nominated by such members.
(3)
The
Investment Committee shall subject to the requirements
stipulated
in the
Pension Funds Act, 1956
, and the regulations
promulgated
thereunder in connection with the investment of
money,
invest or cause to be invested the monies of the fund not
immediately required for current expenses, to the best advantage
of
the Fund.
Such
control as there is by Transnet and the State is limited to -
the
appointment of the Chairman of the Board of Trustees by the
managing director of Transnet who also appoints an equal number
of
Board members as are appointed by representatives of trade unions;
and
the
Board exercising its powers (including the power to amend the Rules
of the fund) with the approval of the managing director
of Transnet
and the Minister, with the concurrence of the Minister of Finance.
The
State, through the Ministers therefore does have some control over
the functions of the Fund, but the effect of the control
is limited
by the nature of the functions of the Fund, the primary object of
which is to provide benefits for members and beneficiaries
of the
Fund. The Board appoints an investment committee which invests and
causes to be invested the monies of the Fund to the
best advantage
of the Fund. The State plays no role in the decisions of the
investment committee. Neither the State nor any organ
of State
derives any benefit whatsoever from the Fund. The investments of the
Fund, including the 26% shareholding in Holdings,
are made
independently of the State or any organ thereof.
The Rules
of the Fund and the provisions of the Transnet Pension Fund Act do
not suggest that the Fund is part of government in
the sense that it
is part of the public service or that it is an instrinsic part of
government. It is not controlled by the State
in the sense that the
majority of the members of its Board are appointed by the State. The
Fund does not exercise a governmental
function, nor are the
functions of the Fund, or the exercise of such functions, prescribed
by the State to the extent that it
can be said that the State is in
control of the Fund. The Rules do provide that the Board carries out
its powers with approval
of the Minister, acting in concurrence with
the Minister of Finance, but neither the Rules nor the Act require
that the Fund
carry out tasks in furtherance of some government
objective. It is not a body by means of which the State governs.
Having
regard to these considerations, I am of the view that the Fund is
not an "organ of State" as meant in section
29(f) of the
Gambling Law.
I turn
now to the question whether it can be said that the Fund is "an
organisation with which the State is concerned".
The terms
used by the legislature are of wide connotation. The Oxford English
Dictionary gives as one of the meanings of "concerned"-
'To be
in a relation of practical connection with; to have to do with; to
have a share in; to be engaged in, with ".
Prima
facie,
the
legislature seeks to exclude the State as such, any organ of the
State, as well as any other body or organisation with which
the
State is involved in any manner whatsoever, from having a financial
interest in gambling activities.
In
MAK Mediterranee SARL v The Fund Constituting the Proceedings
of
the
Judicial Sale
of
the
MC Thunder, 1994(3) SA 599 (C), Scott, J, as he then was, said the
following regarding the expressions "arising out of",
"relating to", "in respect of", "in the
nature of" and "in regard to":
"
It seems to me that expressions of the kind referred to above are
not readily capable of precise definitions, and have
meanings which
by their very nature are less than definite. When it becomes
necessary, therefore, to determine the limits of
the relationships
which they may be employed to describe, particularly in what may be
considered as borderline cases, it is inevitable,
I think, that
particular regard will have to be had to the context in which they
are used in the statutory provision in question
as well as other
indications, whether in the statutes or otherwise, which may present
themselves".
(At
606 F-G)
In
Jaga
v
Donges,
1950(4)
at 662, it is said -
"...the
context... is not limited for the language of the rest of the
statute regarded as throwing light of a dictionary
kind on the part
to be interpreted. Often of more importance is the matter of the
statute, its apparent scope and purpose, and,
within limits, its
background ";
and at
664 -
'Seldom
indeed is language so clear that the possibility of differences of
meaning is wholly excluded, but some language is much
clearer than
other language; the clearer the language the more it dominates over
the context, and vice versa, the less clear
it is the greater the
part that is likely to be played by the context".
»
I turn
first to Chapter IV of the Gambling Law, which deals with licencing
and approval. Section 26 read with section 2(2) of
the Gambling Law
reiterates the limited right to gambling for which it provides.
Section 27 sets out all the kinds of licences
which may be granted
by the Western Cape Gambling and Racing Board. Section 28 provides
that a limited class of person qualifies
to be awarded a licence to
conduct gambling. Section 29, in turn sets out those entities and
persons who may not participate
in the conduct of gambling. Persons
excluded include any person who does not qualify as stipulated in
section 28, political office-bearers,
the spouse of certain
disqualified persons and any legal entity in respect of which the
State, an organ of the State or any organisation
with which the
State is concerned has any financial interest in any gambling
activity. Section 30 further extends the disqualification
to obtain
a gambling licence to persons having certain direct or indirect
interests. It introduces the notion of "the power
to exercise a
significant influence over the gambling business" of another.
From
these sections one can infer that the legislature had in mind, on
the one hand, the granting of limited gambling rights to
suitable
persons, and, on the other hand, the exclusion of persons who are
not suitable for reasons of dishonesty, political
office,
insolvency, etc., as well as, generally, any State financial
interest in any gambling activity. The Law does, however,
not
indicate the ambit of the exclusion contained in the words "any
organisation with which the State is 'involved".
To
ascertain the meaning to be given to those words and to ascertain
what limitation, if any, is intended to the wide conotation
thereof,
regard must be had to factors outside the Gambling Law. To the
extent that it is necessary to establish the mischief
aimed at by
the legislature, regard may be had to the report of a judicial
commission of enquiry - see in this regard
Westinghouse
Brake and Equipment v Bilger Engineering,
1986(2)
SA 555 (A) at 562D-563A,
Attorney-General,
Eastern Cape v Blom & Others,
1988(4)
SA 645 (A) 668H-669F and
S
v Makwanyana & Another,
1995(3)
SA 391 (CO at 404-407.
The
Lotteries and Gambling Board was appointed in 1994 in terms of
section 3 of
the
Lotteries and Gambling Board Act No. 210 of 1993. In terms of this
Act the
Board was
requested to report to Government on the advisability of allowing
lotteries
and gambling in South Africa. The investigations of this Board
shortly
preceeded
the passing of the
National Gambling Act, No. 33 of 1996
and of the
Western
Cape Gambling Law. In its interim report of October, 1994, the Board
suggested
that gambling in South Africa should proceed from certain
fundamental
principles,
one of which is that
"...governments
should not have ownership, control, management of or shareholding in
other forms of lotteries or gambling
activities "
(the form
of gambling which is excluded by the words "other forms"
is a national state lottery).
In
Chapter 4 of its final report of March, 1995, the Board sets out
what it considers to be certain "principles for gambling
in
South Africa" which the government "must strictly adhere
to in policy and legislation". The Board stated that
-
"...gambling...
should be strictly controlled, well regulated and effectively
policed"
and that
"..
justice, fairness and equity in the system can only be served if the
utmost good faith, transparency and frankness prevails
".
Dealing
with the principle of protection of gamblers, the Board confirmed
that -
"..
policy and legislation... should proceed on the premise that control
structures, regulatory measures, rules and other
standards should
primarily be aimed at the protection of the gambler ... his good
faith and trust and his positive perception
of the industry should
be protected in policy and Law".
Concerning
the principles of "Transparency, Honesty, and Integrity"
it is stated that
"...
the gambling industry world wide ...is invariably associated with
crimes, abuse, manipulation, favouritism and many
other negative
aspects. It is, therefore, incumbent on the policy-makers,
legislature and the industry to avoid the development
of such a
perception in gamblers' eyes and the public ".
Turning
specifically to government involvement in the gambling industry, the
Board reconfirmed that -
"..
the government's involvement in other lotteries, gaming and wagering
should be excluded. Its functions should be limited
to
authorisation, control and regulation for the purpose of maintaining
law, order and fairness in the industry".
And
further stated:
'in
some (countries) the government owns, controls, and regulates every
facet of the industry. Information reveals that such jurisdiction
has a higher vulnerability to corruption, bribery and abuse ..."
and that
therefore,
"..
apart from the National Lottery, both central and provincial
governments should have no involvement in all other forms
of
gambling apart from the control thereof by legislation ".
Finally,
the Board recommended that
"...legislation
shall exclude central and provincial governments and parastatal
bodies from holding shares or other forms
of power in the gambling
industry excluding the national lottery".
Having
regard to the "principles of gambling" which underlie the
recommendation of the Lotteries and Gambling Board,
as well as the
recommendation itself, it seems clear that a fundamental principle
is that the involvement of Government in any
form in which it can
exercise an influence over any gambling operation, or which could be
in conflict, real or perceived, with
the duty of the Government to
institute measures to adequately and fairly authorise, control and
regulate the gambling industry,
or which might open the door to
corruption, bribery and abuse, should be excluded.
The
recommendation of the Board in regard to government involvement
appears to be reflected in
section 13(1)
of the
National Gambling
Act, No. 33 of 1996
, which provides:
"Subject
to the provisions of this Act, gambling in the Republic shall be
regulated in accordance with the following principles:
(a)
...
(f)
the State or any organ of the State or any organisation with which
the State is concerned shall from 10 May 1999, apart from
taxes and
levies, not have any financial interest in any gambling activity:
Provided that any provincial licencing authority
considering an
application for a licence contemplated in paragraph (j) before 10
May 1999 shall disregard such financial interest
held by the State,
such organ of the State or organisation ... ".
Paragraph
(j) relates to casino licences.
The
proviso to paragraph (f) of
Section 13(1)
of the
National Gambling
Act is
clearly intended to cater for the situation which existed in
the former TBVC states prior to the new gambling dispensation in
South Africa. As a result of investments made by agencies of some of
these "homeland" governments in Sun International,
certain
provincial government agencies still held shares in Sun
International who was lawfully conducting gambling in these
"states". This provision allows these provincial
governments time to divest themselves of their shareholding in Sun
International. See in this regard Brand: Gambling Laws
of
South
Africa,
p1-5.
Parliament
in
section 13(1)
of the
National Gambling Act laid
down the
principles in accordance with which gambling shall be regulated in
the Republic.
Section 29(f)
of the Western Cape Gambling Law applies
one of these principles (the exclusion of the Government from having
a financial interest
in gambling) by disqualifying certain legal
entities (and not the Government per se) from obtaining or being
granted a casino
licence. The entities so disqualified are any legal
entities
in
respect of which
(1) the
State,
(2) any
organ of the State, or
(3) any
organisation with which the State is concerned, has any financial
interest … in any gambling activity. ,
Mr
du Toit
submitted
that the words "any organisation with which the State is
concerned "should not be read in isolation but that,
in
accordance with the
maxim
noscitur a sociis,
it
should be construed in context and
eiusdem
generis
with
the preceding words "State or any organ of the State" in
section 29(f)
of the Gambling Law and therefore, that the words do
not refer to any body with which the State has a little, or
occasionally,
to do with. In the context, he submitted it implies an
organisation forming part of the State or a body over which the
State
has some, probably significant, control. The State, through
the Ministers and Transnet, through its managing director, do have
some control over the appointment of Board members of the Fund and
over the exercise of its powers by the Fund, but that control
is
limited, both in itself and by the nature of the functions of the
Board. He submitted that the State can thus hardly be said
to be
effectively in control of the Fund or to be in a position to
influence the gambling operations to be conducted by the applicant.
The use
of the words "concerned with" however, implies more than
just a relationship involving control. It includes
the State being
engaged in or with an organisation, having to do with the
organisation or having some practical connection with
the
organisation.
The
object and purpose of the Fund is to provide benefits for its
members and beneficiaries, being the employees of Transnet Ltd,
a
company which is wholly owned by the State. The State, through the
ministers involved and with whose approval and concurrence
the Board
of Trustees of the Fund carries out its functions, is engaged with
the Fund in providing these benefits to Transnet
employees. There
is, however limited the control it has may be, a relationship of
practical connection between the State and
the Fund. Such connection
and control is sufficiently direct and close to conclude that,
having regard to the object and purpose
of the legislation, the Fund
is "an organisation with which the State is concerned"
within the meaning of
section 29(f)
of the Gambling Law.
I turn to
the question whether the Fund would, "in respect of" the
applicant have "any financial interest ... in
any gambling
activity ..." by reasons of its 26% shareholding in Holdings.
The words "any financial interest"
used in
section 29(f)
are wide. It is not easy to establish its limitations.
Financial
interest is defined in
section 1(18)
of the Gambling Law as:
"...in
relation to a company or corporation, means -
(a)
having a right or entitlement to share in profits or revenue;
(b)
being the holder of any real right in respect of any property of the
company or corporation;
(c)
being the owner or holder of a real or personal right in any
property used by the company or corporation in conducting its
gambling business; or
(d)
having a direct or an indirect interest in the voting shares of the
company or having an interest in a close corporation ".
Mr
du Toit
pointed
out that the prohibition is against having any financial interest in
"any gambling activity" and not against
having such
interest in any company, organisation or institution carrying on
"any gambling activity". A distinction
must therefore be
drawn, he submitted, between having "any financial interest"
in, for instance, a company itself on
the one hand, and having "any
financial interest" in the business (gambling activity) of a
company, on the other hand.
He submitted that while it may be said
that the Fund has a financial interest in the applicant, it does not
follow that the Fund
has a financial interest in the business
(gambling activity) of the applicant.
In
Stellenbosch
Farmers' Winery Ltd v Distillers Corporation (SA) Ltd and Another,
1962(1)
SA 458 (A) the meaning to be given to "financial interest in a
business" found in section 166(v) of the Liquor
Act, No. 30 of
1928, was considered. The effect of section 166(v), broadly speaking
was that certain classes of persons were
prohibited from having a
financial interest in certain kinds of licenced liquor businesses.
The question which arose was whether
S.A. Breweries Ltd directly or
indirectly acquired a financial interest in the licenced businesses
of Stellenbosch Farmers' Winery
Ltd when it acquired 98% of all the
shares of the Stellenbosch Farmers' Wine Trust Ltd, which company's
only business was the
holding of the shares in its wholly owned
subsiduary, Stellenbosch Farmers' Winery Ltd. It was held in the
court
a
quo,
and
on appeal, that a person who acquires shares in a company or in any
other company which is by shareholding on its part linked
with the
former company, either directly or through an intermediate
shareholding company or companies, acquires "a financial
interest" within the meaning of section 166(v) in any business
conducted by such company.
In
coming to the aforesaid conclusion,
de
Villiers, AJ
in
the court
a
quo
quoted
the following passage from the judgment of
Curlewis,
J
in
Rex
v McLachlan
1915
TPD 34
at 41 which deals with the interpretation of the words
"interested in a business":
"In
my opinion 'interest' means financial or pecuniary interest, the
interest of a person who has some share or participation
in either
the profits or losses, or in both the profits and losses of a
business, or in the takings or sales of the business.
I think it
refers to a person who has a pecuniary interest in the trade carried
on there ".
These
views were approved of on appeal in the
Stellenbosch
Farmers' Winery
case
(at 471, in the minority judgment, per
Hoexter,
ACJ).
At
476H-477A,
Wessels
AJA
(in
the majority judgment) said that the words "financial interest
in a business"
"...may
properly be used to describe or define the relationship between a
person and the business in question where he is
so circumstanced
with respect to it that his financial position is affected by it
either beneficially or detrimentally."
And that
the use of words "in" and "acquired" in the
section:
"...indicated
that the legislature intended penalising a transaction where the
person's interest results from something in
the nature of a right or
title which relates his own financial position to that of the
business in such a manner that the fluctuating
fortunes thereof
affect him either beneficially or detrimentally".
In
the course the majority judgment,
Wessels,
AJA
at
483
A-B
pointed
out that a financial interest in a business need not involve any
control over the business concerned.
The
reasoning set out in the
Stellenbosch
Farmers' Winery
case
is in my view applicable to this case. I do not therefore agree with
the distinction which
Mr
du Toit
has
sought to draw in this case between a financial interest in the
business of a company as opposed to such an interest in the
company
itself.
The
apparent object and purpose of the provisions of section 29(f) is to
exclude the State, in any form, from exercising an influence
over
the gambling activities of another entity and thus to exclude
possible fraud, corruption, bribery and abuse. In addition,
it is
the function of the State to authorise and control the gambling
industry with the purpose of maintaining law, order and
fairness in
such industry. Having regard to these functions of the State, I am
of the view that the words "financial interest
in any gambling
activity" should be read to include the case where such
interest derives from shareholding in a company,
either directly, or
through intermediate companies, which carries on gambling
activities. This is so whether or not such shareholding
gives rise
to any form of control over the gambling activities carried on. It
is the mere holding of a financial interest of
this nature by the
State, an organ of State or by an organisation with which the State
is concerned, in the gambling activities
of a legal entity, which
leads to the disqualification of such entity from acquiring a casino
license. The reason is that in
such a case, there would be conflict
between the duty of the State to control and regulate the gambling
industry and the financial
interest which the State, any organ of
State or any organisation with which the State is concerned has in
such gambling activities
to be carried on by the entity seeking a
casino licence.
It
follows that the Fund does have a "financial interest"
within the meaning of section 29(f), in the proposed gambling
activities of the applicant. This could result in a conflict, real
or perceived, between the State's duties of control and regulation
of the gambling industry and the financial interest of the Fund,
being a body with which the State is "concerned".
One of
the objects of the provision under consideration is to exclude this
conflict between duty and interest. It does so by
disqualifying the
applicant, being an entity in respect of which the Fund, an
organisation with which the State is concerned,
has a financial
interest in the very activity the State has a duty to control and
regulate.
It
follows that the application for the declaratory order sought by the
applicant cannot succeed.
The
application for the declaratory order sought by the applicant is
dismissed.
W J LOUW