About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
1992
>>
[1992] ZASCA 164
|
|
Minister of Home Affairs and Another v American Ninja IV Partnership and Another (709/91) [1992] ZASCA 164; 1993 (1) SA 257 (AD); [1993] 1 All SA 222 (A) (22 September 1992)
THE MINISTER OF HOME AFFAIRS
FIRST APPELLAANT
THE DIRECTOR-GENERAL OF HOME AFFAIRS SECOND APPELLANT
AND
AMERICAN NINJA IV PARTNERSHIP
FIRST RESPONDENT
ODDBALL HALL PARTNERSHIP
SECOND RESPONDENT
JUDGMENT BY: NESTADT, JA
CASE NO 709/91
/CCC
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the
matter between:
THE MINISTER OF HOME AFFAIRS
FIRST
APPELLANT
THE DIRECTOR-GENERAL OF HOME AFFAIRS SECOND APPELLANT
and
AMERICAN NINJA IV PARTNERSHIP
FIRST
RESPONDENT
ODDBALL HALL PARTNERSHIP
SECOND RESPONDENT
CORAM
: CORBETT CJ, BOTHA, NESTADT, F H GROSSKOPF JJA
et HARMS AJA
DATE HEARD
: 17 AUGUST 1992
DATE DELIVERED
: 22
SEPTEMBER 1992
JUDGMENT NESTADT, JA
:
Over the years the South African government has considered it desirable to
encourage the local
2
production of films. It has sought to achieve this by the grant of state
financial assistance to the South African film industry.
Such assistance has
comprised tax concessions and the payment of subsidies to producers. Schemes
embodying particulars of these benefits
have been announced from time to time. A
series of circulars were successively issued by the government department
responsible for
the administration of the schemes. The circular relevant to this
appeal is dated 1 August 1989. I refer to it as "the circular".
It was issued on
behalf of the Department of Home Affairs. In due course it will be necessary to
deal with its terms in some detail.
Suffice it at this stage to say that
provision is made for the payment of three kinds of tax-free subsidy to the
producers of South
African films. They are calculable as a percentage (i) of
"local production cost"; (ii) of "local revenue", and (iii) of "net foreign
revenue" (these expressions
3
being defined) . In each case it is stated that the percentage is not to
exceed a specified maximum. And, in the case of subsidies
on local and foreign
revenue, a maximum subsidy is specified, namely 75% of the local production cost
of the film (in the case of
subsidies on local revenue) and 50% of the total
production cost of the film (in the case of subsidies on foreign revenue).
Alleging
that they had each produced a film which qualified for the subsidies
referred to, two partnerships brought an application in the
Transvaal Provincial
Division for an order declaring that the Minister of Home Affairs was obliged to
pay them the prescribed subsidies.
Cited as respondents were
inter alia
the Minister and the Director-General of Home Affairs. The main basis (and the
only one now relevant) on which they opposed the relief
sought was that no
liability had been incurred in terms of the circular or otherwise. The matter
came before SPOELSTRA J. By this
4
time the partnerships' claims for subsidies in respect of local production
cost and local revenue had been settled. The written compromise
entered into
between the parties provided for payment of certain amounts to the partnerships
by the State without admission of any
liability. What remained in issue were the
partnerships' rights to subsidies in principle and in particular their claims to
a subsidy
based on foreign revenue. This issue the learned judge decided in
their favour. Thus he granted the declarator sought (subject to
the
qualification that the partnerships' respective rights to payment were "subject
to the terms and conditions" of the circular).
This is an appeal by the Minister and Director-General against such order. It
is brought with the leave of the court a
quo
. There was also before us a
cross-appeal by the partnerships against the refusal of their prayer for
attorney and (own) client
5
costs. It is, however, no longer being pursued. This follows on the Court,
during argument, querying whether, no leave to cross-appeal
having been granted,
it was competent. In what follows, I continue to refer to the parties by their
original designations, ie the
partnerships as the applicants and the Minister
and Director-General as the respondents.
One of the grounds relied on in the founding affidavit for the relief claimed
is what is termed a "legitimate expectation" that the
subsidies would be paid.
The applicants say that they acquired this expectation not only from the terms
of the circular, but from
the respondents' prior conduct in,
inter alia
,
invariably paying the advertised subsidies to those producers who qualified for
payment under previous schemes. SPOELSTRA J rejected
this ground as a valid
cause of action. He held that the principle relied on gave rise only to a
procedural remedy; it did not found
6
a substantive right. Before us the correctness of this view was debated. Mr
Mendelow
for the respondents supported it. Mr
Levin
for the
applicants, citing English authority in support of his argument, contended that
SPOELSTRA J was wrong. It is unnecessary
to decide or even consider the point.
This is because of the conclusion I have come to concerning the applicants'
other cause of
action.
The founding affidavit does not spell it out very clearly, but it
sufficiently emerges that the applicants also rely on another source
of what I
call the State's alleged obligation to pay them the subsidies claimed. Their
case under this head was that the circular
contained an undertaking by the State
to pay the subsidies in question and that it became contractually bound to the
applicants to
do so. It was on this basis that the court a
quo
granted
the application. The central issue in this appeal is
7
whether this finding was correct.
In order to decide this, it is necessary to examine the facts and in
particular the terms of the circular more closely. One can do
so without
difficulty because on the papers there is no dispute of fact of any consequence;
and of course the terms of the circular
speak for themselves. It is a fairly
lengthy document. The following are its salient features:
(i) As already indicated, its provisions apply to "feature films" produced in
South Africa (actually Southern Africa) for local and
international release.
(ii) Clauses 3, 4 and 5 contain what the applicants contend is the undertaking
to pay the three kinds of tax-free
subsidy. In the case of subsidies in respect
of local production cost and local revenue, the wording used is that such
subsidies
"will be paid" (to the producer
8
of a South African film) . In the case of net
foreign revenue the undertaking is slightly different, viz, that the subsidy
"will be
payable". It was not suggested that there was any material difference
between these two expressions. (iii) The circular then goes
on to provide for
what are termed "registration procedures". Their effect (read with the
definition of "South African film") is to
make it a prerequisite of a claim for
any subsidy in terms of the scheme that the film be registered. Application to
register is
made to an official called the Head: Film Subsidy Administration,
Pretoria (the Head). The application, accompanied by a prescribed
deposit
payable to the Head, must generally be made before commencement of "principal
photography" of the film.
9
(iv) Diverse information is required to be given in the application for
registration and its correctness verified on oath. This includes
details as to
the identity of the producer; the working title of the film; the production
budget; the countries where the film is
expected to be released; where it is to
be produced; and when it is anticipated production will commence and be
completed. In addition
the application must not only provide proof that the
producer is a South African resident, but is to be accompanied by copies of
the
script of the film, any relevant distribution agreements and written
confirmation by a bank that it holds available on behalf
of the producer
sufficient funds to cover the total production budget.
(v) It is
stated to be within the Head's
10
discretion whether or not to register any film. Indeed, there is specific
provision that the Head may limit the number of films to
be registered "in order
to remain within the total amount available for the payment of such subsidies".
When he does register a film,
registration is evidenced by a certificate issued
by him. Such certificate is to specify the rates "applicable to the subsidies
available
in terms of this circular". He has the right to determine the rates
"at which any subsidies referred to in this circular will be
paid and the
maximum amount of any such subsidies payable". There follows an important
proviso, namely that "such rates or maxima
once registered may not subsequently
be reduced by the Head...without the prior written consent of the producer".
11
(vi) As will be seen later certain obligations are imposed on
the producer once registration has taken place. (vii) If, subsequent
to
registration, there is a "material change in respect of any of the information
included in the application for registration",
the producer must inform the Head
who may
inter alia
"in his absolute discretion...require that the
original registration be withdrawn and a new application submitted or limit the
terms
of any registration of the film...to the originally supplied information".
(viii) On completion of a film which has been registered,
the Head must be
informed of the producer's bank and account number "into which any subsidies due
in terms of the circular should
be paid".
12
(ix) Claims for subsidies "payable in terms of this circular" must be submitted
to the Head in the form of an affidavit verifying
the correctness of the claim.
Its manner of calculation and, depending on which subsidy is being claimed, a
host of other details
(in some cases confirmed or certified by an independent
accountant) have to be given. These elaborate requirements are obviously
designed to enable the claims to be thoroughly investigated and substantiated.
The same applies to the provision giving the Auditor-General
the right to
inspect books, records and documentation "pertaining to the production and
exploitation of any film...registered in
terms of this circular". This official
may also examine "all the relevant facts and information relating to the
13
payment of any subsidies in terms of this circular". The Head
has the right to demand immediate repayment of any subsidies incorrectly
or
erroneously overpaid to any producer.
(x) A certificate signed by the Head stating the amounts of subsidy paid to a
producer "will be regarded by any court as proof of
the correctness
(thereof)".
(xi) The Head has the right to amend the terms of the circular
but he may not thereby "prejudice or reduce the rights or claims of
a producer
in respect of a film...registered", (xii) Finally there is a clause in terms
whereof any dispute between a producer and
the Head regarding the interpretation
of the terms of the circular or the exercise of any of the powers of the Head is
to be referred
to
14
arbitration.
On 1 August 1989 a company called
American Ninja IV Management (Pty) Ltd made application for the registration of
a film called "American
Ninja IV". And on 16 August 1989 a company called
Oddball Management (Pty) Ltd made application for the registration of a film
called
"Oddball Hall". At this stage the applicants did not yet exist. They were
only subsequently formed. The papers do not disclose exactly
when this took
place but it can be accepted that it was prior to the production of the film
with which each partnership was concerned.
In the case of the first applicant,
American Ninja IV Management (Pty) Ltd became what is called the "managing
partner". Similarly
Oddball Management (Pty) Ltd became the managing partner of
the second applicant. But to return to the applications for registration.
Each
was granted. On 31 August 1989 the Head, by letter, informed each of the
15
applicants as follows:
"With reference to your application...I wish to inform you that the
abovementioned film (the title of the film is given) has been
registered... for
subsidy purposes, in accordance with circular...of 1 August
1989".
The applicable subsidy rates are then set out. In
each
case they are in identical terms. They are stated to
be "up to 25% of
the local production costs of the
film"; "at 70% of the local revenue, subject to a
maximum of 75% of the
local production costs of the film
or R2 million whichever is the lesser";
and "at 80% of
the net foreign revenue, subject to a maximum of 50% of
the total production costs of the film". (There was a
dispute whether "up to" was not a mistake but this issue
is no longer relevant.) The communication ends with this
intimation:
"Your attention is drawn to the fact that if subsequent to this registration
it appears that there is a material change in respect
of any of the information
included in your application for registration, the Head : Film Subsidy
Administration reserves the right
to cancel this
16
registration, limit the terms of registration or to impose such penalties as set
out in the relevant subsidy scheme."
It is common cause that
these letters were the
registration certificates (referred to in para
(v)
above).
The applicants' respective films having thus
been registered in terms of the circular, each of the
applicants, so the founding affidavit alleges, proceeded
to produce their films. In due course thereafter, the
films were exhibited both within and outside the
Republic. As a result of
their exploitation on the
international circuit, foreign revenue was earned.
This led the second applicant on 20 June 1990 to submit
to the second respondent a claim for a subsidy (in the
sum of R983 472.00) in respect of net foreign revenue
calculated in terms of the formula specified in the
relevant registration certificate. And on 6 August
1990, the first applicant similarly submitted its claim
17
for a subsidy (in the sum of R3.175 million) in respect of net foreign
revenue earned by it. As I have said, the respondents have
failed to pay. Nor
have they been prepared to give an undertaking that payment of what is allegedly
due to the applicants in terms
of the registration certificates will be made
(within a reasonable time or otherwise). On the contrary, their attitude has
been that
the State is not liable to the applicants. It was in these
circumstances that the application was launched.
A contract is of course an agreement which is binding at law. So the first
enquiry is whether, on the facts referred to, an agreement
of the kind relied on
by the applicants, viz that the first respondent would pay the subsidies
claimed, was entered into. In a thorough
and detailed presentation of the
respondents' case, Mr
Mendelow
submitted that the answer was in the
negative. The pith of his argument was that the
18
circular was merely a departmental regulation informing potential producers
of films under what conditions the first respondent would
consider applications
for a subsidy; but there was no undertaking to pay the subsidy to an applicant
who complied with the terms
of the circular; this was so even though the film
was registered; such registration was nothing more than an acknowledgment of
receipt
of the application; whilst the relationship between the parties
contained elements of consensus, its true juristic character was
a unilateral or
authoritative act on the part of the State in the nature of a concession or
privileqium
; in other words the consent of the applicants played no
contractual role; it was only a step in the administrative process leading
to
the possible grant of a subsidy; the State at all times retained the discretion
whether or not to pay the subsidy; unless and
until it decided to pay, no
liability to do so arose.
19
In my view the argument cannot be sustained. It is true that a number of
authorities cited by counsel may be said to support the principles
contended
for. Thus in
Fellner vs Minister of the Interior
1954(4) SA 523(A) it was
held that even though the requirements of a regulation governing the issue and
renewal of passports were
complied with, the Crown was not contractually bound
to grant the application; it had undertaken no more than to consider it. In
Estate Breet vs Peri-Urban Areas Health Board
1955(3) SA 523(A) SCHREINER
JA rejected the notion that the relationship between an applicant for the
establishment of a township
and the Administrator was governed by a contract,
within the meaning of the Prescription Act, 18 of 1943, between them. And in
Dilokong Chrome Mines (Edms) Beperk vs Director-General of the Department of
Trade and Industry
(an unreported judgment of this Court given on 21 May
1992), BOTHA JA, dealing with an argument that an
20
export incentive scheme in terms whereof compensation
was advertised as
payable to those who qualified for it
had given rise to a contract between
the claimant and
the government department concerned, said (at pp 23-26
of the typed
judgment):
"Wat hier gebeur net, is dat die Minister, verteenwoordigend van die uitvoerende
gesag van die Staat, bekend gemaak het dat sekere
geldelike voordele beskikbaar
gemaak is vir sekere uitvoerders wat aan bepaalde vereistes voldoen en wat eise
indien volgens die
'riglyne' wat daarvoor voorgeskryf is. Hierdie oorwegings dui
op wat na my oordeel van fundamentele belang is in die huidige ondersoek:
die
aard van die onderliggende verhouding tussen die partye. Daardie verhouding is
die van owerheid teenoor onderdaan. Dit lê
op die gebied van die
administratiefreg. Dit kan natuurlik gebeur dat 'n kontraktuele verhouding
geskep word tussen die uitvoerende
gesag en 'n onderdaan, soos wanneer 'n
kommersiële ooreenkoms beklink word, maar in die huidige geval is die
beskikbaarstelling
aan onderdane van geldelike bystand uit die Staatskas deur
middel van 'n suiwer begunstigende beskikking, iets wat so eie is aan
'n
administratiefregtelike verhouding dat ek geen ruimte daarin kan sien vir 'n
bevinding van kontraktuele aanspreeklikheid van Staatskant
nie. ...Op die oog af
verklaar die kennisgewing dat die uitvoerende gesag die Staat verbind tot die
vergoeding van onderdane wat
aan sekere vereistes voldoen. Mense wat die
voordele kan en wil benut,
21
moet 'n bepaalde eisprosedure nakom, maar die kennisgewing gee nie te kenne dat
dit 'n voorvereiste is vir die totstandkoming van
die owerheid se verbintenis as
sodanig nie; die bestaan daarvan word reeds aanvaar. Anders as in die geval van
twee individue wat
op privaatregtelike terrein beweeg, is daar niks vreemds in
die gedagte dat die Staat eensydig aanspreeklikheid teenoor sy onderdane
opdoen
nie. Inteendeel sou dit vreemd wees om te dink dat die owerheid se onderneming
ingevolge die kennisgewing slegs deur middel
van aanname en omskepping tot 'n
kontrak afdwingbaar gemaak kan word."
It seems to
me, however, that these cases are
distinguishable on the facts from the one before us and
that they are
therefore of no assistance to the
respondents. Obviously the State and its organs can
contract. In the absence of any particular enabling
statutory provision, the source of this power is the
common law prerogative (
Baxter
: Administrative Law p
389). Where such a contract is concluded the State
exercises its powers with the concurrence of the persons
affected and is liable under the State Liability Act, 20
of
1957. Sec 1
of this Act provides that any claim
22
against the State which would, if that claim had arisen against a person, be
the ground of an action, shall be cognizable by any competent
court whether the
claim arises out of any contract lawfully entered into on behalf of the State or
out of any wrong committed by
an authorised servant of the State acting as such.
On the other hand, the State may exercise its powers without the concurrence of
the persons affected. Here one has what Prof Baxter, op
cit
at p 351,
terms an authoritative or unilateral administrative act. I am satisfied that in
casu
the relationship between the parties was essentially contractual.
Unlike
Fellner
and
Estate Breet
we have a transaction which is a
commercial one. It involves the payment of money to the producers of certain
kinds of films whom
the State wishes to benefit. In
Dilokong
, as appears
from the latter part of the judgment which I have quoted (and from the facts set
out earlier by BOTHA JA) , liability
on the part of
23
the State did not arise from agreement; the State had unilaterally undertaken
liability; whoever qualified could claim. That is not
so here. Here (as in cases
such as
Mustapha and Another vs Receiver of Revenue, Lichtenburq and
Others
1958(3) SA 343(A),
S & T Import and Export (Pvt) Ltd vs
Controller of Customs and Excise
1981(4) SA 196 (ZAD) and
Ondombo
Beleggings (Edms) Bpk vs Minister of Mineral and Energy Affairs
1991(4) SA
718(A)), the relationship between the applicants and the respondents arose and
could only arise from agreement. I cannot
agree with Mr
Mendelow
that the
consent of an applicant for financial aid is not a prerequisite to the grant
thereof. The grant of financial aid had to
be sought by a producer. To obtain
it, he had to apply to register his film. Nor, as was argued, is it correct that
the use of "subsidy"
in the circular is indicative of there not having to be
consensus. The word may denote a unilateral grant, but in the context used
it
24
was a
quid pro quo
for the obligations undertaken by a producer. In
brief, they are to produce and market the registered film and (in order to
qualify
for the subsidy) comply with the criteria specified in the circular.
SPOELSTRA J found that the circular was an invitation by the
first respondent to
producers to avail themselves of the financial assistance referred to in it, in
other words an invitation to
do business; that the application for registration
constituted an offer to contract (on the terms stated in the circular); and that
the registration of the film was an acceptance of such offer. It may be that
this analysis does not sufficiently take into account
that it may be only on
registration that the specific subsidy rates are determined (by the Head). This
being so, there may not be
complete agreement until the producer accepts such
rates, usually by conduct in proceeding with production of a film and thereafter
claiming the subsidy. But
25
subject to this qualification I agree with the approach of the judge a
quo
. Certainly, the whole tenor of relationship between the parties is
consensual, the terms of their agreement being what is provided
for in the
circular. Of course, these terms were stipulated and therefore in a manner of
speaking imposed on the applicants by the
State. But one contracting party often
does this. If the party then decides to contract on that basis, it cannot be
suggested that
there was, for that reason, no agreement. To the contrary, he has
agreed to such terms. And the fact that they may be considered
harsh in certain
respects matters not.
The second question that arises for determination is whether the agreement
which was concluded in respect of each film was entered
into with the intention
that it should create legal relations. Unless it was, ie unless, judged
objectively, the parties had the
necessary
animus contrahendi
, no
26
contractual liability on the part of the first respondent to pay the
subsidies would have arisen. In considering this issue, we must
examine the
terms of the agreement, ie the circular, itself. They are, after all, the
primary source of determining the likely intention
of the parties. And they are,
I think, sufficiently unambiguous to make it unnecessary to look, as was
suggested, at the provisions
of prior schemes as an aid in interpretation. What
do the terms of the circular show? There is the basic undertaking itself, viz
that a tax-free subsidy "will be paid (payable)" ((ii) above). This is surely an
existing promise by the State, albeit in relation
to a performance in the
future. Contrast it with an expression such as payment of a subsidy "will be
considered" which, on the respondents'
approach, is what one would have expected
to find. From the producer's point of view, too, firm obligations, which arise
on registration,
are
27
stipulated for. SPOELSTRA J details them as follows:
"There is, for instance, the obligation to employ South African residents; he
must keep the department informed of the progress of
the production of the film
or material changes in the information supplied in his application for
registration; he must commence
with the principal photography within six months
after registration and complete it within a prescribed period; he must provide
confirmation
by a bank or other financial institution that there are sufficient
funds available to cover the budgeted production cost; he must
pay to the
department a substantial deposit which may be forfeited in whole or in part if
the film is not completed; and he must
market the film."
So we
have a case of mutual obligations by both
parties to the agreement; a bilateral contract. That
there was an intention that the agreement have
contractual force is further demonstrated by the proviso
((v) above) that once the film is registered, the
subsidy rates may not be reduced unless the producer
agrees. And, in the same vein, one has the right of
the Head to amend the terms of the circular but subject
to the rights of a producer whose film has already been
28
registered ((xi) above). That court proceedings may
result is clearly
contemplated by the provision as to a certificate signed by the Head having
evidential force ((x) above). As such
it is another pointer to the necessary
animus contrahendi
. So, too, is the right that is afforded the Head to
repayment of any overpaid subsidies. Take also the clause relating to the
payment
of a deposit ((iii) above). On registration of the film, it has to be
applied in a certain manner depending on whether the film is
completed or not.
Lastly, there is the arbitration clause ((xii) above). There can hardly be a
dispute referable to arbitration in
the absence of a liability on the part of
one or both parties to the agreement.
The answer proffered by the respondents to these cogent indications of a
contractual intention was, in effect, that on a proper interpretation
of the
circular, the State's obligation to pay subsidies only
29
arose if and when a producer's duly documented claim was accepted. If, in its
discretion, the State decided not to accept the claim
and pay the subsidy, no
liability on its part arose. Reliance was placed on certain surrounding
circumstances and in particular evidence
that the scheme for State financial aid
was being abused by certain producers. The respondents' answering affidavits
allege that
prior to the issue of the circular in August 1989, there had been
"an avalanche" of claims under previous schemes; many of such claims
were
regarded as coming from "adventurers" who were not genuine film producers; if
they were all to be paid, the amount budgeted
as financial aid to the film
industry would be exceeded "by hundreds of millions of rands". In these
circumstances, so it was said,
the State was anxious to curtail its liability
under the scheme. It had to know what its liability in respect of each film
would
be. But, so the argument proceeded,
30
at the stage of registration of a film, the State would not know for what
amount, if any, it was binding itself; there was only an
estimate of production
costs; the film might never be made; and in the present matter when application
for registration was made,
even the identity of the producer was uncertain; this
was because the applicants were (as has been said) not then in existence. These
matters would only be resolved or ascertained when a producer's claim to a
subsidy was lodged. On the strength of these considerations
the case sought to
be made out was that what was called "the initial" registration of the film was
never intended to bring about
a contract; it was only intended to "give the
State an idea of the extent of probable applications"; thereafter an applicant's
claim
had to be quantified and verified; if it was accepted, a second
registration would take place; only then would a contract on the
terms specified
in the circular
31
eventuate; before this happened, the terms of the circular were nothing more
than "guidelines" for those who wished to avail themselves
of the benefits of
the scheme. In other words, there was what was styled a "two-tiered system of
registration". The acceptance of
the application for registration related to the
first stage of registration. No second registration ever having occurred
(because
the State had not decided to pay the subsidies claimed), the State was
not liable.
The argument must be rejected. Firstly, it fails to take account of the
commercial realities of the transaction. It was within the
State's discretion
whether or not to accept an application for registration. It could therefore
control the claims for subsidies
that might be made against it. Furthermore, it
would know what the approximate amount of the subsidy in respect of local
production
costs was in each case likely to be. This is because, as has been
stated, a
32
detailed production budget has to be submitted with every application for
registration. And, seeing that subsidies in respect of local
and foreign revenue
are subject to a maximum calculable as a percentage of production costs, these
subsidies too could be be estimated.
Bear in mind also the provision ((vii)
above) entitling the Head to withdraw registration or limit its terms where the
information
contained in the application for registration has materially
changed. This, I would have thought, would include the case of the production
budget turning out to have been materially underestimated. So the State's
alleged financial dilemma is more apparent than real. In
any event, this is no
reason for inferring a lack of
animus contrahendi
. Even if it could be
said that the State entered into a bad or awkward bargain or that the scheme was
an unwise one, this is no ground
for relieving it of its obligations. There is
no question
33
of its undertaking being void for vagueness. The subsidies are determinable
by objective criteria. Moreover, the matter must also
be considered from the
producer's point of view. It is clear from the evidence that the assurance of a
subsidy was a significant
inducement to interested persons to embark on the
production of a film, including the expenditure of what appears to be
substantial
amounts of money. More especially is this so if regard is had to a
feature of the subsidy scheme that I have not yet mentioned. In
terms of sec 24
of the Income Tax Act, 101 of 1990, any taxpayer who qualifies for a subsidy
payable in terms of the circular forgoes
certain tax advantages that would
otherwise be available to him under sec 24 F of the Income Tax Act, 58 of 1962.
By providing that
a producer may only apply to register a film if the film will
not receive any benefits in terms of sec 24 F, the circular itself
anticipates
this. In the light of what
34
has been said, I cannot believe that any sensible business man would have
entered into the agreement evidenced by the circular unless
the State were bound
by its undertaking to pay the subsidies in question.
Secondly, the double system of registration contended for is quite
incompatible with the terms of the circular. The circular refers
only to a
single registration. If the intention had been that there be a second,
subsequent registration (when a claim for a subsidy
was accepted), this would
have been plainly stated in the circular. But it is silent in this regard. Nor
did the respondents adduce
any evidence of a second registration ever having
taken place in practice. The respondents' argument confuses the entering into of
a contract with its performance. In effect, the respondents say that the binding
force of the terms of the circular is suspended
until a producer's claim to a
subsidy is accepted. I am unable
35
to agree. There may be and often is an intent to contract even though you do
not know what your exact liability will be under the
agreement entered into.
That is the case here. It will be apparent from a number of the provisions of
the circular to which reference
has already been made that reciprocal rights and
obligations are created on registration. It is such registration that entitles a
producer to a subsidy provided, of course, that he produces the film and proves
his claim in accordance with the terms of the circular.
So while certain
provisions (governing how an application for registration is to be made and even
the framing and submission of a
claim) may be regarded as guidelines to a
producer, there are others which clearly show that binding contractual relations
come into
existence prior to the final stage of the State's acceptance of a
claim. The terms of the last paragraph of the Head's letter accepting
the
applications for
36
registration recognise this. I have in mind the reference to the Head's right
inter alia
to cancel the registration if there has been a material change
in the information submitted in the application.
One final point on the
argument under consideration. It relates to the fact that the applicants were
only formed after registration.
As I have said, the respondents contend that
this detracts from there having been an intention to contract (at the stage of
registration).
This point was never raised by the respondents as a defence
either in this way or on the more basic issue of whether an agreement
was
concluded in the first place. It should not be allowed to be advanced now.
Besides, the evidence shows that American Ninja IV
Management (Pty) Ltd and
Oddball Management (Pty) Ltd, in applying for registration of their respective
films, were contracting for
the benefit of a partnership to be formed, ie
intending a
37
stipulatio alteri
; that the applications were accepted in the form
presented; and that the applicants had each accepted the benefits of the
contracts
entered into on their behalf. On this basis, the fact that the
applicants were not in existence when the films were registered would
not
detract either from the conclusion of an agreement or from it having been
entered into with the necessary intent. There is nothing
to indicate that the
respondents would not have been prepared to contract in this way or that it was
necessary that the identity
of all the partners be known at the stage of
registration.
What amounts to an alternative ground for resisting the
applicants' claims was, however, relied on by the respondents. It was that
even
if a contract was concluded, it was not binding because the Head had no
authority to enter into it. The argument rested on secs
31 and 32 of the
Exchequer Act, 66 of 1975. In
38
terms of sec 31(1)(p), the Treasury has the power to approve payments as "an
act of grace" from State money. In terms of sec 31(1)
(g) the Treasury has the
power to approve "gifts" of State moneys. However, in terms of a proviso to sec
31(1) amounts and gifts
in excess of R25 000 may not be approved unless moneys
for that purpose have been appropriated by Parliament. Sec 32 provides for
the
delegation of the Treasury's powers. It was said that the undertaking to pay the
subsidies claimed by the applicants had not
been approved by the Treasury; nor
had the power to approve such payments been delegated; and in any event moneys
for the purpose
had not been appropriated by Parliament. The argument is not
well-founded and can be briefly disposed of. The short answer to it
is that the
sections of Act 66 of 1975 relied on simply do not apply. Where, as here, the
State has entered into an ordinary commercial
contract, the State's liability
is, as I have said, governed by
39
Act 20 of 1957. In any event, payments under the circular would not be an act
of grace or a gift. These expressions are not defined
in the Act. They must
therefore be given their ordinary meaning. Both import the concept of a
gratuitous indulgence or favour in
return for which the promisee does not give
anything of value. That is not the case here. A producer under the scheme has
obligations,
the main one being the production of a film. Furthermore, the
State's motive was not pure liberality. One of its purposes was to
earn foreign
exchange for the country. So it required something in return for the payment of
a subsidy. For good reason, neither
"act of grace" nor "gift" is used in the
circular. The evidence shows that the Head was authorised to register the
applicants' films.
That is an end to this point.
To sum up, I am of the opinion that in the case of each of the applicants, an
agreement was entered
40
into with the State on the terms set out in the circular; that it has
contractual force; and that it is therefore binding on the State.
There is no
dispute that the first respondent is, in the event of the applicants properly
quantifying their claims in terms of the
provisions of the circular, the person
liable to make payment. I am further satisfied that the applicants have
sufficiently established
that they are each the "beneficial owner of the
copyright" in their respective films and that they are therefore "the producer"
(as
defined in the circular) thereof; and that such films are South African
films (also as defined) . In the result, they were entitled
to the declarator
sought and SPOELSTRA J correctly granted it. The following order is made:
(1) The appeal is dismissed with costs, including the costs of two
counsel.
(2)
No
order is made on the cross-appeal, save that
the
41
applicants (ie the respondents on appeal) are to pay the costs thereof,
including the costs of two counsel.
H H NESTADT
JA
CORBETT, CJ )
BOTHA, JA ) CONCUR
F H GROSSKOPF, JA)
HARMS, AJA )