THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case No 87/04
In the matter between:
FOODCORP (PTY) LTD Appellant
and
DEPUTY DIRECTOR GENERAL DEPARTMENT
OF ENVIRONMENTAL AFFAIRS AND TOURISM:
BRANCH MARINE AND COASTAL
MANAGEMENT First Respondent
THE MINISTER OF ENVIRONMENTAL AFFAIRS
AND TOURISM Second Respondent
THE HOLDERS OF RIGHTS IN THE PELAGIC
FISHING INDUSTRY Third Respondent
Coram: HARMS, SCOTT, BRA ND JJA AND ERASMUS & JAFTA
AJJA
Heard: 1 NOVEMBER 2004
Delivered: 19 NOVEMBER 2004
Subject: Administrative law – revi ew – fishing quotas – formula
produces irrational results – setting aside of allocations
J U D G M E N T
HARMS JA/
HARMS JA
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[1] This appeal relates to the revi ew of the allocation of commercial
fishing rights to pelagic fish for the 2002-2005 fishing seasons. ‘Pelagic
fish’ is a generic term that includes principally two species, namely pilchard
and Cape anchovy. Such rights are grante d in terms of s 18(1) of the Marine
Living Resources Act 18 of 1998 (hereinafter referred to as ‘the Act’) by the
Minister responsible for the Depart ment of Environmental Affairs and
Tourism (the second respondent) or his delegatee, a deputy director in the
department (the first respondent). Bef ore granting any fishing rights the
minister must determine the total a llowable catch (‘TAC’) which, in turn,
has to be allocated betw een different interest gr oups such as commercial
fishers (s 14(1), (2)). The allowable co mmercial catch then has to be divided
between the different commercial fi shers who qualify for a quota. To
qualify, an applicant must score a minimum number of points on a table
which was devised to ensure that the objectives and principles of the Act are
attained. The issue in this case concerns the formula used by the department
for allocating the allowable commerc ial catch between the successful
applicants. The appellant’s case is that the application of the formula
infringed its rights to administrative justice as contained in s 33 of the Bill of
Rights and the Promotion of Administrative Justice Act 3 of 2000 (‘PAJA’).
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[2] The matter was heard in the first instance by Van Zyl J and his
judgment is reported (2004 (5) SA 91 (C)). Since the judgment dealt fully
with the etymology of the word ‘pelagic’, the history of fishing in South
Africa, the nature of the pelagic fishin g industry, the habits of pelagic fish,
the history of the formula, and related ma tters, the reader interested in detail
is referred to it. In the event, Va n Zyl J dismissed the application but
subsequently granted leave to appeal to this court. In essence he found that
the review application was an appeal in disguise (para 65) and that this was
one of those cases in which due judici al deference should be accorded to
policy-laden and polycentric administra tive acts that entail a degree of
specialist knowledge and expertise that very few, if any, judges may be
expected to have (para 68).
[3] The long title of the Act indicates that the Act is intended to provide
for the conservation of the marine ecosystem, the long-term sustainable
utilisation of marine livin g resources and the orderl y access to exploitation,
utilisation and protection thereof. Ac cordingly, the Act provides for the
exercise of control over these resources in a fair and equ itable manner to the
benefit of all citizens.
[4] The objectives and principles of th e Act are spelt out in more detail in
s 2 and those relevant to a greater or lesser extent to the present litigation are
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the need to achieve optimum utilisation and ecologically sustainable
development of marine living resources; the need to conserve marine living
resources; the need to apply precautiona ry approaches in respect of the
management and development of marine living resources; the need to utilise
marine living resources to achieve economic growth, human resource
development, capacity building within fisheries and mariculture branches,
employment creation and a sound ecol ogical balance; and the need to
restructure the fishing industry to ad dress historical imbalances and to
achieve equity within all branches of the fishing industry.
[5] The department from time to time prepares an operational
management plan (OMP) in order to en able the minister to determine the
TAC and allocate commercial fishing rights. In 1999, OMP-99 was
prepared, which followed the method adopted in earlier years and in terms of
which rights to anchovies and pilcha rds were allocated separately. These
rights, it is said, were based on a global trade-off between those who
preferred to fish anchovies and those who wished to fish pilchards. The
reason for preferring the one to the other is based principally on the
manufacturing facilities or the market of a particular applicant: some have
canning factories, some have fish meal processing plants, and some have
both. Pilchards are preferably canned a nd anchovies are used to make fish
meal. The allocation of rights for 2001 took place in terms of this OMP.
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[6] The department then decided to develop a new OMP valid for the
period 2002 to 2005, known as OMP-02. It took into account that pelagic
fishing is a high volume low profit en terprise; pelagic fish is usually
processed; there are large fluctuati ons in the annual TAC, which have a
significant impact on businesses of rights holders; and that the different
sectors are interlinked: any targeti ng of anchovies is accompanied by a by-
catch of mostly juvenile pilchards, wh ich affects future populations of the
pilchard resource (pilchards take longe r to reach maturity and have a longer
life cycle than anchovies).
[7] Instead of allocating rights separa tely for anchovy and pilchard as in
the past, the decision was made to allo cate rights on a single percentage of
the combined anchovy-pilchard catch w ith ‘the personal trade-off decision
being left to the individual right-hol ders.’ The preferred ratio between
pilchards and anchovies was to be calculated from the information contained
in the application forms. To do a c onversion from separa te to combined
allocations, the 2001 rights allocation per right-holder was converted into an
equivalent single percentage right (‘ESPR’).
[8] Eventually a mathematical formul a or algorithm was developed with
the expert assistance of a professor of mathematics at the University of Cape
Town (Prof Butterworth) and which le d to a doctoral thesis on applied
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mathematics, parts of which are before us, by Mr D’Oliviera. This was the
‘policy-laden and polycentric act th at entails a degree of specialist
knowledge and expertise’ which the court below felt required judicial
deference and which cannot be assessed by judges (para 68).
[9] The Act provides that the minist er may, after consultation with a
forum created by the Act, make regula tions regarding the formula by which
a commercial fishing right as a portio n of the allowable commercial catch
must be determined (s 21(3)(a)). The OMP-02 clearly contained such a
formula and the minister, so it would a ppear, agreed to it. The fact of the
matter is, however, that the minister did not promulgate a regulation
accordingly (cf Interpretation Act 33 of 1957 s 15). Although the power to
make a regulation is permissive that does not mean that the minister is
entitled to adopt a binding formula w ithout promulgating a regulation.
However, if it is assumed that he adopted a formula merely for
administrative purposes, he could not thereby lay down an immutable rule,
ignoring his residual discretion. Othe rwise it would have amounted to the
unwarranted adherence to a fixed prin ciple, something the repository of a
discretion may not do ( Britten v Pope 1916 AD 150; Johannesburg Stock
Exchange v Witwatersrand Nigel Ltd 1988 (3) SA 132 (A) at 152C).
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[10] By virtue of s 79, the minister is entitled to delegate his powers under
the Act (except for making regulations). In this case he delegated the power
to award commercial fishing rights to the first respondent. The respondents
submitted that in doing so the minist er delegated the purely mechanical
function to apply the formula. Ther e is no evidence to support the
submission but if it had been done, the mi nister clearly denied the existence
of his discretion or fettered it because it is clear that after the application of
the formula no further consideration was given to the allocation by the
minister or, for that matter, the first respondent. As was said in Computer
Investors Group Inc v Minister of Finance 1970 (1) SA 879 (T) 898C-E:
‘Where a discretion has been conferred upon a public body by a statutory provision, such
a body may lay down a general principle for its general guidance, but it may not treat this
principle as a hard and fast rule to be applie d invariably in every case. At most it can be
only a guiding principle, in no way decisive. Ev ery case that is presented to the public
body for its decision must be considered on its merits. In considering the matter the
public body may have regard to a general principle, but only as a guide, not as a decisive
factor. If the principle is regarded as a decisive factor, then the public body will not have
considered the matter, but will have prejudge d the case, without having regard to its
merits. The public body will not have applied the provisions of the statutory enactment.’
It is no different under PAJA, especially s 6(2)(f)(ii)(aa).
[11] In the application for review the appellant launched a wide-ranging
attack on OMP-02, including an atta ck on the decision to move from
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separate quotas to a single quota and in the court below it relied on a number
of the provisions of PAJA to justif y its attack. On appeal, however, the
attack became more focussed and re liance was placed mainly on the
provisions of s 6(2)(h) of PAJA, wh ich permit a court to review an
administrative action if –
‘the exercise of the power or the perfor mance of the function authorised by the
empowering provision, in pursuance of whic h the administrative action was purportedly
taken, is so unreasonable that no reasonable pe rson could have so exercised the power or
performed the function.’
[12] In assessing whether the allocati on of the commercial fishing rights
under OMP-02 was ‘so unreasonable that no reasonable person could have
so exercised the power’ to grant rights, a number of matters must be kept in
mind: The right to just administrative action is derived from the Constitution
and the different review grounds have been codified in PAJA, much of
which is derived from the common law. Pre-constitutional case law must
now be read in the light of the Constitution and PAJA. The distinction
between appeals and reviews must be maintained since in a review a court is
not entitled to reconsider the matter and impose its view on the
administrative functionary. In exercising its review jurisdiction a court must
treat administrative decisions with ‘deference’ by taking into account and
respecting the division of powers inherent in the Constitution. This does not
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‘imply judicial timidity or an unread iness to perform the judicial function’.
The quoted provision, s 6(2)(h) of PA JA, requires a simple test namely
whether the decision was one that a reasonable decision-maker could not
have reached or, put slightly diffe rently, a decision-maker could not
reasonably have reached. (See the aut horities quoted by the court below in
para 60-64 to which must be added Bato Star Fishing (Pty) Ltd v Minister of
Environmental Affairs 2004 (4) SA 490 (CC) paras 42-50, Associated
Institutions Pension Fund v Van Zyl [2004] 4 All SA 133 (SCA) para 36 and
the unreported Zondi v Member of the Executive Council for Traditional and
Local Government Affairs (CC) (case CCT 73/03 delivered on 15 October
2004) paras 99-103.)
[13] In the light of those principles the appellant, wisely, did not pursue the
attack on OMP-02 or the decision to us e a single allocation. (It should be
noted that the minister’s determina tion of the TAC has never been in
contention.) The use of a formula to determine the allocation of fishing
rights is also not in issue.
[14] The appellant’s problem is with the blind application of the formula
and this can best be explained by refere nce to the facts raised pertinently in
the founding affidavit. During 2001, th e applicant’s pilchard allocation was
5,6% of the TAC. This translated into 10 125 tons of p ilchards. One reason
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the appellant had such an allocation is because it has a large canning facility
that can process 32 000 tons in a season (it does purchase pilchards to use its
capacity fully). Additionally, the appe llant received 0,1% as a bait quota
(which amounted to 310 tons). Two other companies, Lamberts Bay and
SASP, that have no canni ng facilities, received for bait 0,0057% (10 tons)
and 1% (1 713 tons) respectively of the pilchard TAC.
[15] On 7 February 2002, under th e OMP-02 formula, the appellant
received 4% of the TAC (a reduction of 1,7% of the TAC) while Lamberts
Bay and SASP received massive increas es to 3,4% and 3,2% of the TAC
respectively. Taking into account the fact that the provisional TAC for
pilchards was substantially lower, this translated into 5 524 tons for the
appellant and 4 674 an 4 414 tons for the other two companies respectively.
In real terms, the appellant’s alloca tion was reduced from 10 435 tons to 5
524 tons while Lamberts Bay’s was increased from 10 tons to 4 674 tons and
SASP’s from 1 713 to 4 414 tons. In ot her words, while during the 2001
season Lamberts Bay had an alloca tion equal to one-thousandth of the
appellant’s allocation, it was now increas ed to 84% thereof, an increase of
84 000%. The relative increase of SASP’s quota was from 16,9% to 79,9%,
an increase of 472%.
The Oceana Group’s tonnage, on the othe r hand, remained substantially the
same at about 26 000 tons.
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[16] Soon after awarding these rights the department must have realised
that something was wrong with the partic ulars fed into the formula. Part of
the problem may have been due to the fact that the application form was
ambiguous (something that was sought to be rectified by a letter which all
did not read or heed) and that some applicants did not understand the
implication of the choice they had to exercise in choosing a preferred ratio.
Consequently, forms were complete d on different bases by different
applicants and the department then us ed a mathematical model (which was
not necessarily the appropriate one) in an attempt to eliminate the
differences.
[17] The department consequently gave those applicants who had qualified
the opportunity to amend their pr eferred pilchard:anchovy ratio. The
appellant did so but its new preference was subjected by th e department to a
cap. In any event, on 10 May 2002, new rights (replacing those of 2
February) were allocate d. (The TAC for 2002 had in the meantime risen
from 136 500 to 257 978 tons but that ha s nothing to do with the case.) The
appellant’s percentage was increased from 4% to 4.2%, Lamberts Bay’s
from 3.4% to 3.7% and SASP’s from 3.2% to 3.34%. Translated into tons,
and compared to the 2001 allocations, the appellant’s rose from 10 435 to 10
832 tons, Lamberts Bay’s from 10 to 9 508 tons, and SASP’s from 1 713 to
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8622 tons. In other words, instead of one-thousandth of the appellant’s
quota, Lamberts Bay now had 87%, an in crease in relation to the appellant’s
quota of 87 000%. The relationship be tween quotas of the appellant and
SASP remained at about the same level of 471%. Since these two companies
have no canning facilities, th e more valuable pilcha rds are being used by
them to manufacture fish meal.
[18] How do the respondents explain th ese glaring anomalies? The answer
is that they simply do not proffer a ny explanation. Their counsel could not
suggest any, except for saying that the first respondent probably had not
noticed them. It is clearly not a case of the appellant having had a low score,
that a reallocation was necessary to restructure the industry, that the
appellant had been subject to some or other disqualification or the author of
its own misfortune, or that Lamberts Bay and SASP were entitled to special
treatment for some or other reason. Th e appellant argued that the anomalies
could be explained on the ground that the 2001 season was taken as a
benchmark without making any adjustments to take into account the fact that
it was an abnormal season with an overabundance of anchovies which
skewed the formula input. It also suggested that it may have been because of
the fact that the department had to make adjustments to the ratios selected by
applicants or that applicants did not understand the implications of their
choices or were opportunistic in selecti ng their preferred ratios. To come to
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any definitive conclusion in this regard is unnece ssary because the results
speak for themselves. One does not n eed to understand the ‘complex
processes, mathematical or otherwise’ (to quote the court below at para 68)
to realise that at least some of the re sults produced by the simple application
of the formula were irrational an d inexplicable and consequently
unreasonable.
[19] A reasonable decision-maker woul d, in my judgment, have used a
formula to make a provisional alloca tion but would have considered the
output as a result of the application of the formula and then have considered
whether the output gives reasonably justifiable results bearing in mind the
facts. That the results were distorte d would have been patent to anyone
applying his or her mind to them. Some participants were inexplicably and
unreasonably favoured; at least the a ppellant was prejudiced, but not only
the appellant. A reconsideration of the formula or of the input fed into it
would have been called for. If the probl em had not been solved thereby, the
results would have been adjusted to make some sense.
[20] Misallocations in respect of th ree important commercial fishers must
affect the allocations in relation to all the other quota holders. On a
recalculation they may get more or less of the TAC. They were all cited as
parties to the review but failed to ente r an appearance and oppose the setting
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aside of the allocations. Whether any quo ta holder has received more or less
than what was its due does not arise at th is stage. That is a matter for one or
other of the respondents when new qu otas are determined. Because of the
delay since the review application was launched during 2002, the allocation
for 2005 is the only one which is not of academic interest only and the
appellant has on appeal limited itself to relief in respect of that year.
[21] ORDER
1. The appeal is upheld with costs, including the costs of two counsel.
2. The order of the court below is set aside and replaced with the
following order:
(a) The decision of the first and/or second respondent pertaining
to the distribution of the total allowable catch in the pelagic
fishing industry amongst successful applicants for
commercial fishing for the 2005 season is reviewed and set
aside.
(b) The matter is referred back for fresh determinations as to the
distribution of the pelagic TAC (and thus the individual
rights allocations in the commercial pelagic fishing industry)
in respect of the 2005 season.
(c) The respondents are to pay th e costs of the application,
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including the costs of two counsel.
__________________
L T C HARMS
JUDGE OF APPEAL
AGREE:
SCOTT JA
BRAND JA
ERASMUS AJA
JAFTA AJA