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[2015] ZALCJHB 294
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Business Unity South Africa v Minister of Higher Education and Training and Others (JR1110/13) [2015] ZALCJHB 294; (2015) 36 ILJ 3057 (LC) (7 August 2015)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case no: JR 1110/13
In the matter between
BUSINESS
UNITY SOUTH AFRICA
Applicant
and
MINISTER
OF HIGHER EDUCATION AND TRAINING
First Respondent
THE NATIONAL SKILLS AUTHORITY
Second
Respondent
THE NATIONAL SKILLS FUND
Third
Respondent
Heard:
24 June 2015
Delivered:
7 August 2015
Summary:
Application to condone late filing of answering
affidavit – application to review and set aside regulations
issued by the
Minister for non-compliance with statutory consultation
process and being ultra vires– in limine points raised in
respect
of non-joinder,
locus
standi
, undue delay for purposes
of PAJA
JUDGMENT
COETZEE, AJ
[1]
This is an application to:
1.1
Review
and set aside the Sector Education and Training Authorities (SETAs)
Grant Regulations Regarding Monies Received by a SETA
and Related
Matters ("the 2012 Grant Regulations") promulgated in terms
of section 36 of the Skills Development Act 97
of 1998 ("the
SDA") in Government Notice R990 of 3 December 2012, and
1.2
Condone
the late filing of the answering affidavit of the first Respondent.
The
condonation application
[2]
The
Labour
Appeal Court has endorsed
the approach
in
Melane v Santam Insurance Company
Ltd
.
[1]
Accordingly, the court
is required
to
exercise
its
discretion
having
regard to the following factors:
2.1
The
degree
of
lateness;
2.2
The
explanation
for
lateness;
2.3
The
prospects of success; and
2.4
The
importance of the case.
[3]
The degree of lateness:
3.1
The
answering affidavit
was
delivered
sixteen
months
after
it
was
due
and
nine
working
days
before the matter was first enrolled for
hearing on 25 February 2015.
3.2
There
is no doubt that the affidavit was delivered extremely late.
[4]
The
explanation
for lateness:
4.1
The
Minister tenders the following explanation for the lateness:
'13. The founding
affidavit (read with the documentation attached as annexures) is
lengthy and complex. It raised complex
issues of law and fact. This
required careful analysis, consideration and debate during a series
of at least seven lengthy consultations
which were held with our
team.
14. This required
the attendance and involvements of a substantial number of officials
from our client, the Department
of Higher Education and Training, and
one of these consultations was held with the Minister and the
Director-General.
15. During
these consultations, counsel requested the officials to gather
various further information and documentation
which were not
immediately available, for consideration by counsel once these were
produced, and discussion at further consultations.
16. An initial draft
of the answering affidavit was prepared by junior counsel but
required considerable further input,
both in terms of further factual
instructions and documents from client, as well as input from senior
counsel.
17. There were
lengthy periods of delay experienced as a result of senior counsel
becoming ill on a few occasions. During
those periods, we were unable
to maintain regular contact with counsel. It was considered
appropriate by client that senior counsel
should be retained in the
matter in view of the fact that he was steeped in its complexities.
18. Regrettably,
these delays interrupted momentum in the finalisation of the
answering affidavit.'
[5]
The Applicant had by 25 February 2015
repeatedly
enquired
from
the
Respondents
whether they
intended
to
oppose
the
application;
had
given
notice
that the
matter
was enrolled
for
hearing on 25 February 2015; and had
delivered
heads
of argument.
The explanation does not deal
with these matters and why no extension of time to file an affidavit
has been directed to the Applicant.
[6]
No detail is provided
in respect of the consultations
and process of
gathering
additional
"information".
The
Respondents
do not say when
the
consultations
were
held
or
who attended;
nor
do
they explain
to
the
court
what
steps
were
taken
to
gather
information
or
on what
dates.
In the absence of that information, it is not possible to reach the
conclusion that the explanation for the
extensive delay is reasonable.
[7]
The Respondents have failed to persuade the
Court that there is an adequate explanation for the delay. Under
normal circumstances,
the inquiry would stop here.
[8]
I have, however, considered the prospects
of success:
8.1 The prospects of successfully opposing the
application are considered below in detail when the merits of the
application
are addressed. The Respondents' prospects of success are
not without merit.
[9]
The importance of the case needs also to be
considered:
9.1
The
Respondents submit that the matter is an important one for all the
parties and in the public interest.
9.2
The
Applicant concedes that the matter is important.
[10]
The setting aside of regulations of this
nature affects a wide range of employers and probably all the SETAs.
[11]
In my view, the importance of the matter
outweighs the other factors (the excessive delay, inadequate
explanation for the delay
and the prospects or lack thereof of
success in opposing the application). In this case, the public
interest of the matter demands
that the interests of justice should
be served. It is in the interest of justice that a decision on the
subject matter of this
application be made having full regard to the
input of the relevant parties. I do not intend to lay down a rule
that the interest
of justice in all cases should play a role in
granting or refusing condonation.
[12]
I have therefore, during the application,
condoned the late filing of the answering affidavit and the late
filing of the condonation
application.
[13]
I have taken the dilatory conduct of the
Respondents into account when considering a cost order. I have
ordered the First Respondent
to pay the costs of the condonation
application. In order to assist the Registrar, argument and judgment
on the condonation application
lasted an hour. The costs include the
cost of two counsel.
The parties
[14]
The Applicant, Business Unity South Africa
("BUSA"), is a professional association
representing businesses
in South Africa. All the businesses
that fall under
the
professional
association
of
BUSA
are
directly
affected
by
the
2012 Grant
Regulations
because
each
member
is
a
levy-paying
employer
which
is entitled
to
receive
a
mandatory grant.
[15]
The First
Respondent,
the
Minister of Higher Education and Training ("the Minister"),
is
responsible
for
the
promulgation
of
regulations
in
terms
of
the SDA.
[16]
The
Second
Respondent,
the
National
Skills
Authority
("the
Authority"), does not
oppose
the
application.
It was
not
in
a
position
to
do
so
because
it
was not properly constituted.
The
Minister has, however, only during March
2015 appointed new
members
to
the
Authority
as
required
in terms
of the SDA.
[17]
The
Third
Respondent, the National Skills Fund ("the
Fund"),
is
a statutory body
established
in
terms
of
section
27
of
the
SDA
and
administered
by
the
Director General of the Department of Higher Education and Training
("the Department").
[18]
The Minister and the Fund oppose the
application on the strength
of
an affidavit by the Minister. The Minister and the Fund
are referred to
as the Respondents.
Jurisdiction
[19]
The parties filed comprehensive and helpful
heads of argument from which, in respect of the facts and
submissions, I have borrowed
extensively for purposes of this
judgment.
[20]
BUSA submits that the Labour Court has
jurisdiction to determine the issues in dispute.
[21]
The general
jurisdiction of the Labour Court is set out
in section 157 of the
Labour
Relations Act 66 of 1995 ("the LRA"):
21.1
In
terms of section 157(1), the Labour Court
has exclusive jurisdiction in respect of
all
matters
that
elsewhere
in
terms
of
this
Act
or
in
terms
of any
other
law are to be determined by the Labour Court;
21.2
In
addition,
the
Labour
Court
has
concurrent
jurisdiction
with
the
High
Court in respect of any alleged or threatened violation of any
fundamental right
entrenched
in
Chapter
2
of
the Constitution, which
arises
from:
'Employment and from labour
relations;
Disputes 'over the
constitutionality of any executive or administrative act or conduct
or any threatened executive or administrative
act or conduct, by the
State in its capacity as an employer'; and
The application of any law for
the administration of which the Minister is responsible.’
21.3 The Labour Court and Labour Appeal Court have
exercised jurisdiction in a range of challenges to laws impacting
on
labour relations based on their alleged inconsistency with the
Constitution or the empowering legislation.
21.4 In
addition,
the
Labour
Court
enjoys
general
review
jurisdiction
under section 158 (
1
)
(g) of
the
LRA,
which
provides that
it
may
'…
subject to section
145,
review the performance or purported performance of
any function
provided
for
in
this
Act
on
any
grounds
that
are
permissible
in
law'.
21.5 The Labour Court has held that the grounds
"permissible in law" include the grounds of review
set out
in the Promotion of Administrative Justice Act 3 of 2000 ("PAJA"),
in addition to any grounds of review arising
from any other
applicable law.
[22]
Accordingly,
the
Labour Court has
general
powers of review in
relation to labour
matters in respect
of
constitutionality
and any grounds
of
review
provided
for
in the LRA, PAJA or any other applicable law.
[23]
Where another
law
provides
that
any matter is "to be determined by the
Labour Court", the Labour Court's jurisdiction is exclusive.
[24]
Section 31 of
the
SDA
confers on
the
Labour
Court the
following
specific jurisdiction:
'31 Jurisdiction of
Labour Court
(1) Subject to the
jurisdiction of the Labour Appeal Court and except where this Act
provides otherwise, the Labour Court
has exclusive jurisdiction in
respect of all matters arising from this Act.
(2) The Labour Court may
review any act or omission of any person in connection with this Act
on any grounds permissible in
law.
(3) If proceedings
concerning any matter contemplated in subsection (1) are instituted
in a court that does not have jurisdiction
in respect of that matter,
that court may at any stage during proceedings refer the matter to
the Labour Court.'
[25]
The
2012
Grant
Regulations
were issued in
terms
of
section
36
of the
SDA
by
the Minister.
Accordingly,
they constitute
a
matter "arising from [the
SDA]"
and a
challenge
to
the
legality
of
regulations
made
under
the
SDA
falls
within
the
exclusive
jurisdiction
of
the
Labour
Court
in terms
of
section 31(1)
of
the
SDA.
[26]
In
any
event,
the
Labour
Court
specifically
has
the
power
to
review
the
2012
Grant Regulations (alternatively,
the
Minister's
decision
to make the regulations)
in
terms of section 31(2) of the SDA.
[27]
For these reasons, the Labour Court has
jurisdiction to determine the issues.
The regulatory
background
[28]
Before the Respondents' points
in
limine
are considered, it is necessary
to sketch the regulatory background to the matter.
[29]
The
Skills
Development
Levies
Act,
9
of
1999
established
a
compulsory
levy scheme
to
which employers are required to contribute
for the purpose
of
funding education
and
training as envisaged
in
the
SDA. The
amount
payable is
calculated
as 1%
of the total amount of remuneration paid to employees.
[30]
In
terms
of
the
SETAs
Grant
Regulations
Regarding
Monies
Received by
a
SETA and
related
Matters as published
in
Government Notice R713 of 18 July 2005
and
as
amended
by
Government
Notice
R.88
of
2
February
2007
("the 2005
Grant
Regulations"), an
employer
who
paid
skills
development
levies could claim 50% of those levies back
in the form of a mandatory grant provided that it complied with the
eligibility criteria.
[31]
The
2005
Grant
Regulations
were repealed by regulation 10
of
the
2012
Grant
Regulations.
It
is
the
2012
Grant
Regulations
that
form
the
subject
matter
of
this
review application.
[32]
Regulation
4(4)
of
the
2012
Grant
Regulations
reduced
the
mandatory
grant
that
an employer
could
claim
back
from
50%
to
20%
of
the total levies
by
the
employer.
[33]
It provides as follows:
‘
20%
of
the
total
levies
paid
by
the
employer
in
terms
of
section
3(1)
as
read
with
section 6
of the
Skills Development
Levies
Act during
each
financial
year
will be paid to the employer who submits a [Workplace Skills Plan]
and [Annual Training Report].'
[34]
In
addition,
the
2012
Grant
Regulations
introduced
a
"sweeping
mechanism" that had not been contained
in the 2005 Grant Regulations:
3.3
Regulation
3(11)
provides
that
:
'[a]t the end of the financial
year, it is expected that a SETA must have spent or committed
(through actual contractual obligations)
at least 95% of
discretionary funds available to it by 31 March of each year and a
maximum of 5% of uncommitted funds may be carried
over to the next
financial year.'
3.4
Regulation
3(12)
provides
that:
'[t]he remaining surplus of
discretionary funds must be paid by the SETA by 1 October of each
year into the National Skills Fund.'
[35]
The effect of these two regulations is
that
if
a SETA
has
not spent at least 95% of its discretionary funds,
the
surplus
will
be
swept
into
the
Fund
on
1
October of
each
year.
The
Applicant referred to this provision
as
"the sweeping mechanism".
[36]
The Applicant's objection is against the
introduction of the reduced mandatory grant from 50% to 20% and the
sweeping mechanism.
[37]
The Applicant contends
that
the
2012
Grant
Regulations
should
be
reviewed
and
set aside on the basis of review grounds
that fall into two categories:
37.1
The
first category is concerned with the process that was followed before
the
2012
Grant Regulations were made.
It
is submitted that the Minister failed
to
consult
with
the Authority
as
required in
terms
of
section
36
of
the
SDA
before
he
made
the
2012 Grant
Regulations. It is submitted that
this irregularity vitiates
the
2012
Grant Regulations in their entirety.
37.2
The
second
category
is concerned with the
substance
of the 2012 Grant Regulations. It is submitted that Regulations
4(4) and 3(12) are reviewable
in
light
of their content.
Applicant submits that
the reduction
in
the
mandatory
grants
and
the introduction
of
the
sweeping
mechanisms are
irrational and unreasonable. Moreover, it
is submitted that the sweeping mechanism
is
ultra vires
the SDA.
First
point
in limine
: non joinder
[38]
The Respondents ask for the application to
be dismissed or to be postponed for purposes of joining the three
labour federations
who have representation on the Authority. They are
COSATU, FEDUSA and NACTU ("the labour federations").
[39]
The Respondents argue that the labour
federations and the SETAs are necessary parties to this application.
[40]
The Respondent's maintain that the labour
federations and the SETAs have a “direct and substantial
interest”.
[2]
[41]
The Respondent's argue that the direct and
substantial interest of the labour federations flow from the fact
that they adopted a
specific view in respect of the two regulations
which form the subject matter of this application and because they
eventually persuaded
the Minister to formulate the two regulations
the way they wanted them. The only opposition thereto was the
Applicant and because
this primarily is a dispute between the
Applicant and the labour federations they have a sufficient interest
to be joined to these
proceedings.
[42]
A “direct and substantial interest”
has been defined as “a legal interest in the subject-matter of
the litigation
which may be affected prejudicially by the judgment of
the Court”.
[3]
The concept of a “direct and substantial interest” does
not include “merely a financial interest” because
such an
interest is “indirect”.
[4]
The question as to a direct and substantial interest turns on an
“analysis of the rights and obligations created by (a)
multi-party agreement”.
[5]
[43]
The Supreme Court of Appeal recently in the
City of Johannesburg and Others v The
South African Local Authorities Pension Fund and Others
[6]
endorsed the approach in
Amalgamated
Engineering
:
‘
[9]
As to the relevant principles of law, it has by now become
well-established that, in the exercise of its inherent
power, a court
will refrain from deciding a dispute unless and until all persons who
have a direct and substantial interest in
both the subject matter and
the outcome of the litigation, have been joined as parties (see eg
Amalgamated
Engineering Union v Minister of Labour
1949 (3) SA 637
(A) at 657 and 659;
Gordon
v Department of Health, KwaZulu-Natal
[2008] ZASCA 99
;
2008 (6) SA 522
(SCA) para 9). A ‘direct and substantial
interest’ is more than a financial interest in the outcome of
the litigation.
A test often employed to determine whether a
particular interest of a third party is the one or the other, is to
examine whether
a situation could arise in which, because the third
party had not been joined, any order the court might make would not
be res
judicata against that party, entitling him or her to approach
the court again concerning the same subject matter and possibly
obtain
an order irreconcilable with the order made in the first place
(see eg
Amalgamated
Engineering Union
at 661;
Transvaal
Agricultural Union v Minister of Agriculture and Land Affairs and
Others
2005 (4) SA 212
(SCA) paras 64-66).’ (Own emphasis added).
[44]
A key factor to determine whether a party
has a direct and substantial interest is whether any relief is
claimed against it.
[7]
The Supreme Court of Appeal held in
Gordon
v Department of Health, KwaZulu-Natal
[8]
that 'there was no potential prejudice to the
successful appointees as no relief was directed against them.'
[9]
[45]
The SCA took the same approach in
Blue
Moonlight
that:
'… no
relief is claimed against the provincial government, it cannot be
said to have a real and substantial interest in any
order that may be
made and any order that is made can be carried out without any
prejudice to the provincial government. Consequently,
its joinder was
not necessary.'
[10]
[46]
In the present matter, no relief is sought
against any of these parties as the relief sought concerns the review
of the funding
regulations, which are made and administered by the
Minister.
[47]
Any indirect effect that the order sought
may ultimately have on any of these parties does not constitute a
direct and substantial
interest warranting their joinder according to
common law principles.
[48]
In respect of the labour federations, they
are represented on the Authority. They are not the only parties and
interest groups represented
on the Authority.
[49]
It is, therefore, the Authority that must
be consulted, not the labour federations or for that matter, the
Applicant in this matter.
The labour federations have a right to
participate in the proceedings of the Authority. Their right to
participate in the proceedings
of the Authority will not be affected
by the outcome of these proceedings. These proceedings affect the
rights of the Busa members
and those of the Minister, not those of
the labour federations.
[50]
The labour federations do not have
sufficient interest in these proceedings to be joined.
[51]
The Respondent's argue that the SETAs have
a direct and substantial interest in the matter in order to be
joined. That is so, it
is submitted, because the allocation of
mandatory grants and discretionary grants may be affected by the
outcome of this application.
That in turn would affect the projects
that they finance.
[52]
At best for the SETAs, they have a
financial interest in the outcome of these proceedings. That is not
sufficient to constitute
a direct and substantial interest.
[53]
The SETAs do not have any interest in these
proceedings sufficient to be joined.
Unreasonable
Delay
[54]
The second preliminary point raised by the
Respondents is that despite instituting the proceedings within the
180 day period provided
for in PAJA, the Applicant delayed
unreasonably in making the application.
[55]
The Respondents argued that the need to
achieve finality within a reasonable time is crucial in reviews.
[56]
This the submission goes was stressed in
Gqwetha v Transkei Development
Corporation Limited and Others
[11]
in these terms:
‘
[22]
It is important for the efficient functioning of public bodies….
that a challenge to the validity of their decisions
by proceedings
for judicial review should be initiated without undue delay. The
rationale
for that longstanding rule… is twofold. First, the failure to
bring a review within a reasonable time may cause prejudice
to the
respondent. Secondly, and in my view more importantly, there is a
public interest element in the finality of administrative
decisions
and the exercise of administrative functions. As pointed out by
Miller JA in
Wolgroeiers
Afslaers (Edms) Bpk v Munisipaliteit van Kaapstad
1978 (1) SA (A) at 41E-F (my translation):
“
It is
desirable and important that finality should be arrived at within a
reasonable time in relation to judicial and administrative
decisions
or acts. It can be contrary to the administration of justice and the
public interest to allow such decisions or acts
to be set aside after
an unreasonably long period of time has elapsed -
interest
rei publicae ut sit finis litium..
.
Considerations of this kind undoubtedly constitute part of the
underlying reasons for the existence of this rule.”
[23] Underlying this
latter aspect of the
rationale
is the inherent potential for
prejudice, both to the efficient functioning of the public body and
to those who rely upon its decisions,
if the validity of the
decisions remains uncertain. It is for that reason in particular that
proof of actual prejudice to the respondent
is not a precondition for
refusing to entertain review proceedings by reason of undue delay,
although the extent to which prejudice
has been shown is a relevant
consideration that might even be decisive where the delay has been
relatively slight…'
[57]
This
dictum
was
quoted with approval by the Supreme Court of Appeal in its judgment
in the
Opposition to Urban Tolling Alliance and Others v
The South African National Roads Agency Ltd and Others
[12]
(
OUTA
case). That
judgment held that:
‘
While
it is true that the principle of legality is constitutionally
entrenched, the constitutional enjoinder to fair administrative
action, as it has been expressed through PAJA, expressly recognizes
that even unlawful administrative action may be rendered unassailable
by delay.'
[13]
[58]
In this matter, the review falls under PAJA
that provides in section 7(1), in its relevant part:
'(1) Any proceedings
for judicial review in terms of section 6 (1) must be instituted
without unreasonable delay and
not later than 180 days after the
date:
(a)
…
.
(b)
…
.
on which the person concerned was informed of the administrative
action, became aware of the action and the reasons for it or
might
reasonably have been expected to have become aware of the action and
the reasons.'
[59]
This does not mean that a delay of 180 days
is necessarily acceptable. The proper approach has been explained by
the SCA in
OUTA
[14]
as follows:
‘
At
common law application of the undue delay rule required a two stage
enquiry. First, whether there was an unreasonable delay and,
second,
if so, whether the delay should in all the circumstances be condoned
(see eg
Associated
Institutions Pension Fund and Others v van Zyl and Others
2005 (2) SA 302
(SCA) para 47). Up to a point, I think, s 7(1) of
PAJA requires the same two stage approach. The difference lies, as I
see it,
in the legislature’s determination of a delay exceeding
180 days as
per
se
unreasonable.
Before the effluxion of 180 days, the first enquiry in applying s 7
(1) is still whether the delay (if any) was unreasonable.
But after
the 180 day period the issue of unreasonableness is predetermined by
the legislature. It is unreasonable
per
se
.
It follows that the court is only empowered to entertain the review
application if the interest of justice dictates an extension
in terms
of s 9. Absent such extension the court has no authority to entertain
the review application at all. Whether or not the
decision was
unlawful no longer matters. The decision has been ‘validated’
by the delay (see eg
Associated
Institutions Pension Fund
para 46). That of course does not mean that, after the 180 day
period, an enquiry into the reasonableness of the applicant’s
conduct becomes entirely irrelevant. Whether or not the delay was
unreasonable and, if so, the extent of that unreasonableness
is still
a factor to be taken into account in determining whether an extension
should be granted or not (see eg
Camps
Bay Ratepayers’ and Residents’ Association v Harrison
[2010] 2 All SA 519
(SCA) para 54).'
[60]
The Respondents on the strength of the
OUTA
case argue that the period of 180 days in PAJA means that any review
application after 180 days
per se
shows undue delay. The reverse, however, is not the case as an
applicant must launch the proceedings without any undue delay once
it
has knowledge of the facts.
[61]
The submission is that Applicant on its own
version knew on or about 3 December 2012 that the disputed 2012 grant
regulations had
been gazetted to come into effect on 1 April 2013.
[62]
Respondents argue that despite having
immediately raised its objection in the media and in correspondence,
Applicant did not bring
a review application at that time or,
according to the Respondents, within a reasonable period of time. The
Respondents argued
that Applicant should have seeked an interim
interdict to suspend implementation pending a review but instead
waited until 30 May
2013 before instituting these proceedings.
[63]
Respondents further submit that the initial
delay is exacerbated by the fact that more than two years have passed
since. They further
argue that the Applicant cannot hide behind
delays on the part of the Respondents as the Applicant is
dominus
litis
.
[64]
The Respondents submit that in relation to
what is a reasonable period, the facts of crucial relevance is
potential prejudice:
64.1
It
is argued that serious prejudicial consequences would result if the
regulations were to be set aside.
64.2
This
is relevant as to the issue of unreasonable delay but also whether it
would be just and equitable to set aside the regulations.
64.3
Examples
of the disruption and prejudice which would result include: problems
relating to the lengthy process of planning undertaken
by SETAs; the
adoption and approval of SETAs’ strategic plans required for a
five year period; substantial reduction of 60%
in funds available for
discretionary grants such as PIVOTAL projects; reduction in funds
available for learnerships, scholarships
and bursaries; and
contractual commitments already made for hundreds of thousands of
beneficiaries, which cannot be undone.
64.4
The
policy objectives in the NSDS III strategy - which is not the subject
of the review - cannot be achieved if the 2012 Grant Regulations
are
swept away. These objectives include a vast increase in the number of
individuals assisted to study at universities, FET colleges
and other
programs.
64.5
This
would be undermined if the relief sought were to be granted - with
serious consequences for the overall objective of achieving
far
greater educational and training opportunities, aimed at overcoming
the serious deficiencies which are having a crippling effect
on the
economy and are causing serious levels of unemployment and social
problems.
[65]
The Applicant points out that the
Respondents' argument is "an astonishing allegation taking into
account the 16 month delay
in delivering the Minister's answering
affidavit as well as the cumulative delays by the Minister in filing
the full record of
decision". The Minister filed the final
portions of the record on 30 August 2013, two months after it was
required to be filed
in terms of the Rules of this Court.
[66]
The Applicant has explained the steps it
took before launching an application.
[67]
It first had to obtain a mandate from its
members which it obtained without delay during February 2013.
[68]
A meeting was held with the Minister on 7
March 2013 to share with the Minister its concerns regarding the
grant regulations. During
this meeting, it was agreed to have a
follow-up meeting which was held on 6 May 2013.
[69]
The Minister could not attend the meeting
of 6 May 2013 and the Applicant decided to launch the application as
the regulations took
effect from 1 April 2013. When those attempts
failed the application was launched.
[70]
BUSA launched the application on 30 May
2013. The first payments in terms of the grant regulations were only
due on 30 September
2013.
[71]
Thereafter BUSA has done what was necessary
to bring the application to Court as expeditiously as possible.
[72]
Applicant submits that the decision in the
OUTA
case
is distinguishable:
72.1
Firstly,
the extent of the delay in the
OUTA
matter. The application was brought
outside the period of 180 days, four years after the impugned
decision had been taken.
72.2
Secondly,
the application in
OUTA
,
if successful, would have absolutely prevented the proposed road
tolling, and the Court found, that it therefore have resulted
in
"severe prejudice" to the state and the public.
72.3
By
contract, the present matter does not seek to abolish regulations
governing SETA funding entirely. If successful, the proceedings
will
not result in a lacuna. The review of the regulations will further
not result in severe prejudice.
[73]
The Applicant acted with due diligence and
for the above reasons there was no unreasonable delay in launching
the proceedings.
[74]
The Respondents' point
in
limine
is dismissed.
Grounds
of Review
[75]
The first ground of review relied on by the
Applicant is that section 36 of the SDA provides that the Minister
may make regulations
"after consultation with the National
Skills Authority". This should be read with section 5(1) (a) (v)
of the SDA which
provides that one of the functions of the Authority
is to "advise the Minister on… any regulations to be
made."
[76]
Applicant argues that accordingly,
consultation with the Authority is a peremptory requirement for the
making of regulations by
the Minister. It is a specially–crafted
consultation requirement with a specific body which obliges the
Minister to draw
on the expertise and institutional composition of
the Authority and to take advice from that body.
[77]
The Applicant submits that the Minister's
engagement with the Authority before the Minister made the 2012 grant
regulations, was
wholly inadequate and did not amount to consultation
within the meaning of section 36.
[78]
The Respondents on the other hand submit
that there was substantial compliance with the requirement to consult
the Authority. They
do not deny that it was a requirement before the
regulations were issued.
[79]
What in fact happened was that on 12
January 2012, the Minister published a set of draft regulations. This
initial set of draft
regulations differed in material respects from
the 2012 grant regulations as finally promulgated, in particular the
draft regulations
did not contain the sweeping mechanism ultimately
contained in regulations 3(12) and provided for a reduction in
mandatory grants
from 50% of the total levies paid by an employer to
40% and not to 20% as contained in the published regulations.
[80]
These draft regulations served before the
Authority on 6 February 2012.
[81]
In March 2012, the Minister appointed a
Ministerial Task Team which prepared and circulated, but not to the
Authority, a report
recommending certain changes to the 2005 grant
regulations. Among the proposed changes was the Ministerial Task
Team's proposal
that the mandatory grant be reduced from 50% to 20%.
[82],
Development and Labour Council ("NEDLAC") on the draft
regulations. The proposal at this stage remained that the
mandatory
grant should be reduced to 40% and not 20%. Instead of the sweeping
mechanism which would transfer unclaimed funds into
the Fund, the
presentation proposed that unclaimed mandatory grants be transferred
into the Pivotal Grant.
[83]
NEDLAC discussed the draft regulations on
18 April 2012.
[84]
The draft regulations were discussed by a
sub-committee of the Authority on 15 May 2012. These were the draft
regulations without
the proposed reduction to 20% and without the
introduction of the sweeping mechanism.
[85]
Although the Authority held other meetings
during 2012, the proposals of the Ministerial Task Team were never
raised for discussion
and the report of the Ministerial Task Team had
never been provided to the Authority and the Minister did not consult
the Authority
on these proposals.
[86]
An official of the First Respondent, on 6
November 2012, submitted a proposal to the Minister pursuant to which
the Minister signed
the 2012 grant regulations on 15 November 2012.
This was unbeknown to the Applicant and the Authority.
[87]
The Department of Higher Education and
Training held a meeting on 28 November 2012 (after the Minister had
signed the regulations)
with some of the social partners, including
the Applicant.
[88]
At this meeting, the director general for
the first time referred to the proposal that the mandatory grant be
reduced to 20% and
that the sweeping mechanism be introduced. At the
meeting, the Department continued to refer to the regulations as a
proposal (although
it had been signed) that was open for discussion
and invited comments by 14 December 2012.
[89]
The officials of the Department did not
disclose that the 2012 grant regulations had already been signed and
were due to be promulgated
on 3 December 2012. A date before the date
on which
According
to the Minister, because of a communication problem, the Department
officials, on 28 November 2013, were unaware that
the Minister had
already signed the final regulations.
[91]
The Authority met on 29 and 30 November
2012 where a "revised" set of "draft" regulations
was presented. These
included regulations 4(4) and 3(12) which were
placed before the Authority for the first time. This, in fact was the
final set
of 2012 grant regulations which the Minister had already
signed on 15 November 2012.
[92]
The Minister promulgated the grant
regulations on 3 December 2012.
[93]
The Applicant submits that the consultation
requirements of section 36 read with section 5(1) (a) (v) of the SDA
were clearly not
satisfied in the present circumstances. There was no
consultation with the Authority at all regarding the reduction in the
mandatory
grant from 50% to 20% or the introduction of the sweeping
mechanism.
[94]
It is common cause that the Authority in
fact was informed for the first time of these two proposals on 28 and
29 November 2012,
some two weeks after the Minister had already
signed the 2012 grant regulations.
[95]
It cannot be disputed that the reduction of
the mandatory grant to 20% and the introduction of the sweeping
mechanism constituted
material changes to the draft regulations
published on 12 January 2012 and considered by the Authority.
[96]
The Minister did not afford the Authority
any opportunity to comment on the two material aspects of the
regulations and no information
regarding these two aspects was placed
before the Authority until two weeks after the Minister had already
signed the regulations
in final form.
[97]
I agree with the submission that the
purported consultation with the Authority on 20 and 28 November 2012
did not constituted adequate
or general consultation as the Minister
had already signed the 2012 grant regulations on 15 November 2012
without disclosing that
to the Authority. In addition, it afforded
the Authority an opportunity to comment on those regulations but then
promulgated the
regulations before the date for submission of
comments. The mere fact that the Applicant was given an opportunity
to make representations
to 14 December 2012 is an indication that the
Minister realised that the Authority had not been consulted on
material changes to
some of the regulations.
[98]
The Respondents submit that there was
substantial compliance with the requirement to consult the Authority
for the following reasons:
98.1
According
to the Respondents, of particular relevance is the fact that in
parallel to the Authority, there was a process conducted
within
NEDLAC where the relevant disputing parties - organised business and
the labour constituency - were represented, according
to the
Respondents, often by the same people as those sitting in the
Authority. They dealt with the same issue of the proposed
regulations
and changes to the grant system.
98.2
It
became apparent to the Minister that the business and labour
constituencies held, and articulated, divergent attitudes. These
could not be reconciled in Nedlac. It was, therefore, clear to the
Minister that it was not feasible to achieve a consensus position
within the Authority.
98.3
It
would accordingly serve no purpose for a formal consultation process
to be pursued with the Authority where its house was irretrievably
divided between the dominant schools of thought, being the business
and labour constituencies.
98.4
In
the circumstances, the realistic process to be followed was one in
which the Department received direct input separately from
the
disputing parties - business and labour. This occurred in various
forms: including the discussions in NEDLAC, through receiving
written
submissions and the meetings held separately by the Department and
ultimately the Minister with BUSA’s representatives.
98.5
The
clear objective of the requirement to consult the Authority was to
gather and consider the views of the members or delegates
who make up
the Authority, as representatives of their respective constituencies.
This was done outside the Authority.
98.6
Where
there was no single, unifying common view held by the members of the
Authority, it was not feasible or necessary to engage
in further
meetings with the Authority as a body. It was sensible for the
Department and the Minister to engage with each of the
constituencies’ representatives in NEDLAC, separate meetings
and correspondence.
98.7
This
allowed the constituent members of the Authority and NEDLAC -
particularly BUSA and organised labour - to debate and provide
their
respective inputs to the Department and the Minister, for their
consideration before the decision was taken to issue the
Regulations.
98.8
This
process, accordingly, achieved the legislature’s objective of
the requirement that the Minister should consult the Authority.
[15]
The differing views of all the members of the
Authority were submitted and considered.
[99]
The Respondents argue that, therefore,
there was substantial compliance with the requirements of the SDA in
respect of consultation.
Consideration
of the requirement to consult
[100]
The argument that there was substantial
compliance is unconvincing.
[101]
The requirement is a statutory one and the
function of the Authority is to advise the Minister. It is
insufficient to consult NEDLAC,
the individual representatives on the
Authority or any other body to advise the Minister in the place of
the Authority.
[102]
The Authority is a separate legal
persona
and a distinct statutory body from NEDLAC. The legislature mandated
consultation with the Authority and no other body or constituencies
in its stead.
[103]
The constituent membership of the Authority
is also much broader than that of NEDLAC. NEDLAC comprises of three
main constituencies
namely business, labour and government.
[104]
The Authority is widely constituted and
includes subject matter experts. Apart from organised labour and
business, the Authority
includes representatives appointed to
represent community and development interests, the interests of the
State and those of education
and skills development providers. Its
composition is far broader than just labour, business and government.
[105]
In addition, only three of the individuals
on the Authority, out of thirty representatives, were part of the
consultation process
in NEDLAC.
[106]
The Respondents' submission that the
Authority could never have formulated a unified view because it could
not reach consensus is
unsubstantiated as the Minister did not
approach the Authority for advice and cannot speculate on what the
outcome would have been.
[107]
It was possible for the Authority to obtain
the required support for a view in the absence of the Applicant
representatives. The
Authority must formulate its advice to the
Minister on regulations with a
⅔
vote
of the members of the Authority.
[108]
Excluding the five votes of the Applicant,
a sufficient number of votes remains to achieve a
⅔
vote
in favour of a unified point of view.
[109]
The Minister, in any event, must have
regard to the position of the Authority even if it were to provide
the Minister with an outcome
that it was unable to formulate a
uniform point of view.
[110]
The Respondents' submission that
consultation in the other for
fora
constitute substantial compliance is without foundation.
[111]
The Minister has failed to consult the
Authority on the proposed regulations and particularly on the two
regulations regulating
the mandatory grant and the sweeping mechanism
and this renders the regulations reviewable.
Unreasonableness
and irrationality
[112]
The second ground of review involves the
alleged unreasonableness and the irrationality of regulation 4(4)
dealing with the reduction
in the mandatory grants to 20% and
regulation 3(12) containing the sweeping mechanism.
[113]
It is submitted that the reduction of the
mandatory grant to 20% is unreasonable and irrational for two main
reasons.
112.1
The
first reason is that regulation 4(4) is not rationally related to the
primary objects of the SDA but would in fact serve to
frustrate those
objects. It is submitted that the reduction will reduce –
rather than increase – the funds available
to employers to
invest in education and training and will discourage –rather
than encourage – employers to pursue the
training and education
objectives listed in section 2(c)(i)(iiii) of the SDA.
112.2
According to the Applicant, the
disincentive effect has already been demonstrated on the facts with
SETAs reporting reductions in
the number of employers submitting
applications for mandatory grants.
112.3
The
Respondents counter the argument and submit that the reduction of
funds available to employers for training will be mitigated
by the
availability of more money available for discretionary grants.
112.4
The
Applicants submit that, in practice, the discretionary grants are
erratic and in many cases employers can only apply for them
after
training has been done. This is aligned with the Respondents'
significant policy change in terms of which priority has been
given
to academic qualifications rather than workplace skills, learning and
development. Therefore, there is no basis to argue
that employers are
likely to have greater access to funding through discretionary funds.
112.5
It
is further submitted by the Applicant that as the reduction took
effect immediately without any transitional period the existing
training and education programs developed by employers based on the
50% mandatory grant would have to radically reduce and possible
be
abandoned.
[114]
The second reason advanced by the Applicant
is that the Minister has offered no adequate justification for the
reduction in the
mandatory grant to 20%.
[115]
In the absence of reasons, section 5(3) of
PAJA provides that it "must be presumed in any proceedings for
judicial review that
the administrative action was taken without good
cause".
[116]
The Respondents' submission that a number
of reasons have been offered is countered by the Applicant pointing
out that those reasons
are set out in the answering affidavit and
have not been formulated and set out in the stated reasons for the
reduction so that
the Applicant could deal with them. The only
formulated and stated reason was indeed to improve the quality of
information provided
by employers.
[117]
Applicant made the following submissions:
116.1
This
reason, to improve the quality of information provided by employers,
could not explain or justify a reduction in the mandatory
grant to
20%. On the contrary, the reduction is likely to lead to even fewer
employers submitting the quality information (by reason
of lesser
funding) and the decision taken by the Minister is likely to
frustrate rather than to serve the apparent reasons that
might be
discerned from the report of the Ministerial Task Team which the
regulations were to address.
116.2
As
it was even with a mandatory grant of 50% payable to employers who
have submitted the required information, many employers did
not even
claim the mandatory grant.
116.3
By
substantially reducing the amount of the mandatory grant whilst still
requiring that essentially the same information to be submitted,
it
could not rationally be expected to result in an improved quality of
information received from employers. Accordingly, the means
adopted
by the regulation bear no rational relation to the end sought to be
achieved.
116.4
Thus
regulation 4(4) falls to be reviewed and set aside as it is not
rationally connected to the purpose for which it was taken
or the
information before the Minister as contemplated by section
6(2)(f)(bd) and (cc) of PAJA.
116.5
Secondly, it is submitted that it is so
unreasonable that no reasonable person could have so exercised the
power or performed the
function as contemplated by section 6(2) (h)
of PAJA.
Discussion of the
unreasonableness and the irrationality
[118]
It is difficult to understand how the
training and education objectives listed in section 2(c)(i)(iiii) of
the SDA can be better
achieved with the reduction in the mandatory
grant to employers. By reducing the mandatory grant to 20% with
immediate effect could
only discourage employers from pursuing
existing training and education programmes especially accompanied by
increased reporting
requirements on training and education plans in
the workplace.
[119]
The
reduction of the mandatory grant has been irrational in relation to
the stated purpose for the reduction.
The rationality of the sweeping mechanism
[120]
The further submission is that regulation
3(12) is irrational and unreasonable in providing for the sweeping
mechanism:
119.1
Regulation 3(11) provides that at the end
of each financial year a SETA must have spent at least 95% of its
discretionary funds.
The effect of regulation 3(12) is that the
"surplus of discretionary funds" must annually be paid to
the National Skills
Fund.
119.2
The
Applicant argues that regulation 3 imposes significantly more complex
and onerous compliance on SETAs relating to the allocation
of funds
in respect of discretionary grants and the requirement to spend or
commit at least 95% of their discretionary funds by
31 March of each
year.
119.3
It
is irrational to adopt such a scheme in circumstances where the
Ministerial Task Team has already found that SETAs were unable
to
deal adequately with the funds in the prior regime. The logical
conclusion in light of the Ministerial Task Team's finding regarding
the lack of capacity of SETAs is that the scheme is likely to result
in substantial discretionary grant funds remaining unspent
at the end
of the financial year which will then be swept into the Fund.
119.4
The
Fund, at the time, had net assets of more than R7 billion and was
already unable to spend the money that had accumulated. It
is,
therefore, irrational to require that further funds be swept into it.
[121]
It is, therefore, submitted that the
promulgation of regulation 3(12) was not rationally connected to the
purpose for which it was
taken or to the information before the
Minister and that it is so unreasonable that no reasonable person
could have so exercised
the power or performed the function.
Consideration
of the rationality of the sweeping mechanism
[122]
The
promulgation of regulation 3(12), for the valid reasons advanced by
the Applicant in paragraph 119 above, was not rationally
connected to
the purpose for which it was taken or to the information before the
Minister and it is so unreasonable that no reasonable
person could
have so exercised the power or performed the function.
The sweeping mechanism is
ultra vires
[123]
The last ground of review is that the
sweeping mechanism is
ultra vires
the SDA. The submissions are:
122.1
The
SDA itself is prescriptive with regard to funding and section 14(3)
provides that the monies received by a SETA may be used
only in a
prescribed manner and in accordance with any prescribed standards to
"(a) fund the performance of its function;
and (b) pay for its
administration within the prescribed limits".
122.2
Regulation 3(12) now over and above
requires the SETAs to pay surplus money to the Fund. This is not a
purpose authorised by section
14(3) of the SDA. This makes regulation
3(12)
ultra vires
the SDA as the Minister has no competence in law to require the SETAs
to use money for an unauthorised purpose.
122.3
There
is a second reason why regulation 3(12) is
ultra
vires
. Considering the regulation from
a perspective of the Fund shows that section 27(2) of the SDA
provides that the Fund must be credited
with "(a) 20% of the
skills development levies, interest and penalties collected in
respect of every SETA; (c) money appropriated
by parliament for the
Fund; (f) money received from any other source".
122.4
Parliament has therefore stipulated that
the Fund must be credited with 20% of the Skills Development Levies
while the remaining
80% goes to the SETA.
122.5
The
Minister has now by regulation introduced a sweeping mechanism in
terms whereof the Fund may receive more than 20% of the Skills
Development Levies allocated to it by section 27(2)(a). The Minister
has no competence in law to second guess Parliament in this
manner.
Money received from "any other source" cannot be money
received from the SETA's as they receive their allocation
from the
SDA and no provision is made in the SDA or other legislation to
transfer part thereof to the Fund.
122.6
Parliament has the power to appropriate
more funds for the Fund and it is not competent for the Minister as a
delegated law maker
to do so by regulation.
Consideration
of the ultra vires arguments
[124]
Applicant's arguments in paragraph 122 are
valid. The sweeping mechanism is
ultra
vires
.
Relief
[125]
The Applicant asks for all the regulations
to be set aside, alternatively, that the two regulations that gave
rise to this application
be set aside. The parties argued against
relief that would leave a
lacuna
or create uncertainty.
[126]
The Minister initially consulted the
Authority on the regulations. The Minister, however, failed to
consult the Authority on the
amended proposals in respect of the
mandatory grant and the sweeping mechanism. Those two regulations
stand to be attacked.
[127]
Of the various arguments advanced, relief
that would grant the Minister time to correct the impugned
regulations seems the most
reasonable.
[128]
The court may suspend an order of
invalidity for a period of time to enable parties to take the
necessary steps to be in a position
to implement the Court's order
Costs
[129]
In my view, the dilatory conduct of the
Respondents in opposing the application warrant a cost order.
Although the Respondents succeeded
with the condonation application,
it is just and equitable that they pay the costs of the condonation
applications.
[130]
There is no reason why costs should not
follow the outcome of the review application.
[131]
I make the following order:
130.1
The
late filing of the Respondents' condonation application is condoned.
130.2
The
late filing of the Respondents' answering affidavit is condoned.
130.3
Regulations
3(12)
and
4(4)
of the Sector Education and Training Authorities (SETAs) Grant
Regulations Regarding Monies Received by a SETA and Related
Matters
promulgated in terms of
section 36
of the
Skills Development Act 97
of 1998
in Government Notice R.990 of 3 December 2012 are declared
invalid and set aside.
130.4
The
order in sub-paragraph 3 is suspended until 31 March 2016.
130.5
The
Respondents are ordered to pay the costs of the Application including
the Applicant's costs in opposing the Respondents' condonation
applications and the costs to include the cost of two counsel.
__________________
Coetzee AJ
Acting judge of
the Labour Court
Appearances
:
For the applicant: Advocate Alistair Franklin SC
and Jason Brickhill
Instructed
by: Bowman Gilfillan
For the Respondents: Advocate Paul Kennedy
SC and Ndumiso Mahlangu
Instructed by: State Attorney
[1]
1962 (4) SA 531(A)
at 532(C-D).
[2]
Amalgamated Engineering Union v Minister of
Labour
1949 (3) SA 637
(A)
at
651.
[3]
Erasmus: Superior Court Practice at B1-94.
[4]
Henry Viljoen (Pty) Ltd v Awerbuch Brothers
1953 (2) SA 151
(O) at 169H and Illovo Opportunities Partnership #61
v Illovo Junction Properties (Pty) Limited and Another
(2014) ZASCA
119
SCA
[5]
Rosebank Mall (Pty) Ltd v Cradock Heights
(Pty) Ltd
2004 (2) SA 353
(W) at para
14.
[6]
Case No: 20045/2014
[2015] ZASCA 4
(9 March 2015)
(Not yet reported) at para 9.
[7]
City of Johannesburg Metropolitan Municipality
v Blue Moonlight Properties 39 (Pty) Ltd
2011 (4) SA 337(SCA)
at paras 43 and 44.
[8]
2008 (6) SA 522 (SCA).
[9]
Ibid at para 11.
[10]
Blue Moonlight Properties
(
supra
)
at para 68.
[11]
2006 (2) SA 603
(SCA) at paras 22 to 23.
[12]
[2013] 4 ALL SA 639 (SCA).
[13]
Ibid at para 36.
[14]
OUTA
(
supra
)
at para 26.
[15]
Compare
Weenen
Transitional Local Council v van Dyk
[2002]
2 All SA 482
(A),
2002 (4) SA 653
(SCA) para