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[2019] ZASCA 184
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Minister of Trade and Industry v Sundays River Citrus Company (Pty) Ltd (798/2018) [2019] ZASCA 184; [2020] 1 All SA 635 (SCA) (3 December 2019)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 798/2018
In
the matter between:
MINISTER
OF TRADE AND
INDUSTRY APPELLANT
and
SUNDAYS
RIVER CITRUS COMPANY (PTY)
LTD RESPONDENT
Neutral
citation:
Minister of Trade and Industry v Sundays River
Citrus Company (Pty) Ltd
(798/2018)
[2019] ZASCA 184
(03 December
2019)
Coram:
Petse DP, Swain, Mbha and Mbatha JJA and Eksteen AJA
Heard:
01 November 2019
Delivered:
03 December 2019
Summary:
Trade and Industry – grant payable to enterprises to
promote their competitiveness as incentive for job creation and
retention
– grant payable to enterprises undertaking investment
in competitiveness enhancing activities of existing operations –
calculation of grant based on the manufacturing value added by the
enterprise concerned in its manufacturing process – no
particular method of grant calculation prescribed – audited
financial statements but one of the methods that may be used
to
determine actual manufacturing value added.
ORDER
On
appeal from
: Eastern Cape Division of the High Court, Port
Elizabeth (Jaji J sitting as court of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Petse
DP (Swain, Mbha and Mbatha JJA and Eksteen AJA concurring):
[1]
At issue in this appeal is the question whether the Eastern Cape
Division of the High Court, Port Elizabeth (the high court)
was
correct, following upon a successful review of administrative action,
to direct the appellant, the Minister of Trade and Industry,
in
recalculating a grant payable to the respondent, Sundays River Citrus
Company (Pty) Ltd, in terms of a government scheme to
utilise the
‘pool account method’ of calculation instead of the
annual financial statement method (the AFS method).
The appellant
says the answer is in the negative. But the respondent says that this
question must be answered in the affirmative.
This issue arises
against the backdrop recounted below.
[2]
The respondent is an incorporated limited liability company. Its
principal place of business is in the Sundays River Valley,
Eastern
Cape. It conducts the business of packaging and marketing citrus
fruit on behalf of citrus fruit farmers in four different
centres in
the Eastern Cape. Its sole shareholder is another limited liability
incorporated company named SRCC Holdings (Pty) Ltd
(SRCC Holdings).
Some 106 citrus fruit farmers in the Sundays River Valley own shares
in SRCC Holdings.
[3]
The respondent’s business model operates along the following
lines. Citrus fruit farmers who are shareholders in SRCC
Holdings
deliver their harvest to the respondent’s warehouses. There the
fruit is washed, dried, waxed, sorted and packaged
for sale under
various brands both to international and local markets. The
respondent derives its income in the form of packing
fees and
marketing commission from its packaging and marketing activities on
behalf of the citrus fruit farmers. The net returns
from the sale of
the citrus fruit are then paid over to the farmers on a proportionate
basis after deduction of not only the respondent’s
operational
expenses but also costs associated with the preparation of the citrus
fruit for sale. Each farmer’s proportionate
share of the net
profits takes account of those costs according to each farmer’s
level of participation in the pool.
[4]
For accounting purposes, the revenue derived from the marketing and
sale of citrus fruit and expenditure incurred in generating
that
revenue is all dealt with in what the respondent describes as a ‘pool
account’ on behalf of all the participating
citrus fruit
farmers. The net profit earned from these activities is paid to the
participating farmers based on the extent of their
participation in
the various pools. The net profit in the various pools is arrived at
by deducting from the proceeds of sale, packing
and marketing fees,
cost of packing materials, distribution and related costs.
[5]
It is necessary to emphasise that given the nature of the
respondent’s business model, the calculation of the net profit
generated in the pool account is kept separate from the respondent’s
income statement. This entails that the packaging and
marketing fees
charged to the pool are reflected in the respondent’s pool
accounting records as expenses in the pool account
and are deductible
from the gross proceeds of the citrus fruit as are all other pool
expenses in arriving at the net profit.
[6]
In order to promote enterprise competitiveness and, as a consequence,
job creation and retention, the Department of Trade and
Industry
(DTI) introduced the Manufacturing Competitiveness Enhancement
Programme (the MCEP) some seven years ago in terms of which
it paid
grants to qualifying businesses. The MCEP’s main objective was
to design and administer incentive programmes seeking
to support and
enhance competitiveness of a variety of manufacturing entities across
a range of sectors. To qualify for a grant,
a business entity must
first apply to the DTI and receive approval, which will invariably be
granted if the criteria prescribed
by the DTI are met. Businesses
seeking to avail themselves of a grant were required to, amongst
others, invest in any one or more
of the following: capital equipment
for upgrading and expansions; enterprise-level competitiveness
improvement activities for new
or increased market access; and
product and process improvements.
[1]
Once a business has been approved to receive a grant under the scheme
it becomes eligible to submit a claim to the DTI for payment
of the
grant in accordance with a prescribed formula set out in the MCEP’s
Guidelines. These Guidelines were revised from
time to time and those
that were in operation at the commencement of the proceedings in the
high court were contained in Version
4 of April 2014.
[7]
The MCEP also provides for a formula to be used in determining the
amount of the grant which represents the value that a manufacturer
adds to a product in the course of its manufacturing process. This
value is calculated as a defined percentage of the ‘Manufacturing
Value Added’
[2]
over a two
year period. The maximum amount of the grant is capped in accordance
with the size of the participating enterprise.
The respondent is one
of the approved beneficiaries of the scheme.
[8]
On 28 March 2013, and in line with the prescripts of the MCEP, the
respondent submitted a claim to the DTI for payment of the
grant due
to it. After an inordinate delay and persistent prompting from the
respondent, the DTI ultimately advised the respondent
that it had
calculated the grant amount in the sum of R 1 820 748.The
respondent disputed the correctness of this amount,
contending that
it was nowhere near the amount that it considered was due to it,
having regard to its Manufacturing Value Added.
Protracted
negotiations aimed at resolving the impasse then ensued. But the DTI
was not prepared to budge, asserting that its calculations
were
consonant with the Guidelines’ prescribed formula.
[9]
During November 2016, and after some three years had elapsed and
abortive attempts at negotiations with the DTI, the respondent
instituted motion proceedings against the appellant. In addition to
costs and further or alternative relief, it sought an order
in the
following terms:
‘
(a) That the
decision taken by the Department of Trade and Industry to pay to the
Applicant a grant in the sum of R1 820 748,00
in terms of
the calculation provided by it to the Applicant on 12 May 2016, as
its grant in terms of the Manufacturing Competitive
Enhancement
Programme, launched in 2012, be and is hereby reviewed and set aside.
(b) That the Department
of Trade and Industry is ordered to recalculate the Applicant’s
grant by utilising the pool account
method of calculation,
alternatively, the annual financial statement method of calculation;
(c) That the Department
of Trade and Industry is ordered to pay to the Applicant the sum
arrived at by utilising such calculation’.
[10]
In support of its application, the respondent averred, amongst other
things, that:
‘
18.1.
The Applicant converted from a co-operative to a private company in
2000, but its business is still operated on exactly the
same
co-operative principles that were applied when it was a co-operative.
Only
bona fide
citrus farmers, who deliver fruit to the
Applicant for grading, packing and marketing, qualify to become
shareholders of the Applicant’s
holding company.
18.2.
The pooling system is widely used by co-operatives in the
agricultural processing industry. When members deliver their produce
to a co-operative, such as the Applicant, the produce loses its
identity and is pooled or grouped based on certain criteria, e.g.
variety, quality grade and size. The delivered produce is graded and
sized in order to determine the number of standard units of
fruit
delivered in terms of each differentiated grouping of quality grade
and fruit size.
18.3.
The farmer member qualifies for pool participation based on the total
quantity of standard units of fruit that he delivered
over the
duration of the pool into each differentiated grouping in the pool.
The co-operative will then process the produce, for
example, making
wine or processing and packing fresh fruit as in the case of the
Applicant, and will then market the final product
under the label of
that co-operative. An example of this is Simonsvlei Wines, a product
of Simonsvlei (Co-operative) Ltd.
18.4.
In the case of the Applicant, all its pooled citrus is marketed both
nationally and internationally under various brand names
like
Sundays, Outspan etc. without any reference to the individual farmer
members. The farmer members share in the net proceeds
of the sales
according to their relative pool participation in the various pools.
19.
19.1.
The aforegoing manufacturing process of adding value to the product
requires appropriate accounting, that is, pool accounting.
The pool
account is in essence similar in nature to a trust account in the
sense that income and expenditure items are accounted
for therein, on
behalf of the pool participants, and the net profit remaining after
conclusion of all transactions is paid over
to the pool participants.
19.2.
In this regard, the Applicant invoices the pool account in respect of
packing and marketing fees which are sufficient to cover
the
Applicant’s operating costs incurred in providing the services,
as well as to provide the Applicant with a net profit
to ensure its
reserves are maintained. Once the citrus fruit from a specific year’s
produce has all been sold and all income
and costs have been
accounted for, the Applicant (like all other co-operatives)
calculates the net profit for each pool by deducting
from the sales
proceeds all the manufacturing costs such as the packing and
marketing fees, packing materials, distribution costs
and the like.
19.3.
Importantly, the packing and marketing fees charged by the Applicant
to the pool account are reflected in the Applicant’s
income
statement in the annual financial statements as its main income. Also
important, in this regard, is that the calculation
of the pool’s
net profit is kept separate from the Applicant’s income
statement, similar to the principles that would
be applied to a trust
account, and is called a pool account. The packing and marketing fees
invoiced to the pool by the Applicant
are therefore accounted for as
expenses in the pool account and are deducted from the fruit
proceeds, together with other pool
expenses, in order to arrive at
the net profit of the pool account that can be paid out to the
various farmer members participating
in the pool.
20. The pool account
method thus utilises the pooled citrus turnover and material input
costs relative to the packaging by the Applicant
of citrus fruit on
behalf of the farmer members, as well as the net payment to them in
lieu of citrus fruit delivered by them,
as input values in the
calculation of the MVA – as opposed to having regard only to
the Applicant’s own turnover and
material input costs as
reflected in its audited annual financial statements (“AFS
method”).
21. The pool account
method of calculation is, moreover, a more accurate assessment of the
MVA for a company which provides a co-operative
service to its farmer
members, than is the AFS method of calculation. This is so because it
provides a more realistic representation
of the cost of material used
in the manufacturing process and the value of the sales of
manufactured goods. It is therefore a more
realistic representation
of the cost of material used in the manufacturing process and the
value of the sales of manufactured goods.
It is therefore a more
realistic determination of the Applicant’s actual MVA. The pool
account method was regarded by Dectra,
after taking advice from
auditors PricewaterhouseCoopers (“PWC”), as fundamentally
correct and more relevant than the
AFS method, for the aforegoing
reasons, and it has been applied by Dectra and accepted by the DTI in
eleven applications (five
applications were approved prior to the
Applicant’s application and six applications were approved
after the Applicant’s
application) by other clients of Dectra
providing co-operative services, of the kind provided by the
Applicant, in the wine industry.
Details of those eleven applicants
are as follows:
21.1.
Langverwacht Koöperatiewe Wynmakery Beperk, approved by the DTI
on 22 February 2013 and the first claim payment made
on 26 July 2013;
21.2.
De Doorns Wynkelder Primary Co-operative Ltd, approved by the DTI on
30 August 2013 and the first claim payment made on 12
June 2014;
21.3.
Vredendal Wynkelder (Edms) Beperk, approved by the DTI on 1 August
2014 and the first claim payment made on 2 October 2015
with a second
claim payment made on 30 September 2016;
21.4.
Bonnievale Wynkelder Koöperatief Beperk, approved by the DTI on
29 April 2013 and the first claim payment made on 24
October 2013;
21.5.
Montagu Wine and Spirits Co (Pty) Ltd, approved by the DTI on 29
April 2013 and the first claim payment made on 4 November
2013;
21.6.
Slanghoek Wynkelder (Pty) Ltd, approved by the DTI on 5 March 2015
and the first claim payment made on 30 November 2015;
21.7.
Brandvlei Wynkelder (Edms) Beperk, approved by the DTI on 22 August
2014 and the first claim payment made on 4 February 2015;
21.8.
Ashton Wynkelder (Edms) Beperk, approved by the DTI on 23 January
2015 and the first claim payment made on 6 Novemer 2015;
21.9.
Appelsdrift Wynmakery (Edms) Beperk, approved by the DTI on 22 August
2014 and the first claim payment made on 17 June 2015;
21.10.
Die Roodezandt Koöperatiewe Wynmakery Beperk, approved by the
DTI on 18 March 2013 and the first claim payment made
on 13 August
2013; and
21.11.
Lutzville Wingerde Beperk, approved by the DTI on 31 May 2013 and the
first claim payment made on 30 October 2015 with a
second claim
payment made on the same date.’
[11]
The appellant opposed the application. In pursuit of that opposition,
it responded to the respondent’s categorical averments
set out
in the preceding paragraph thus:
‘
30. Ad Paragraph
18 thereof
Save to state that the
business model of the applying entity is irrelevant to the
calculation of the grant, the contents hereof
are noted. It may also
be noted that the Applicant is, by its own admission, a private
company and can accordingly not claim “co-operative”
status and/or the calculation of the grant in accordance with any
method other than that based on its
own
Audited Financial
Statements (AFS) in accordance with the Guidelines.
31. Ad Paragraph 19
thereof
The Applicant’s
method of earning income is, with respect, not relevant to the
calculation of the grant amount. The Applicant
has to satisfy the
qualifying criteria as provided for in the Guidelines and has to
submit audited financial statements to substantiate
the figures which
it submits as the basis for the calculation of the grant applied for.
The Applicant cannot, with respect, compile
two sets of financial
statements and then submit the statements which are of greater
advantage to it, as it appears to do in this
instance. The dti cannot
be held liable for any mistakes or misrepresentation made by the
Applicant or its consultant. Save for
the aforegoing, the contents
hereof are noted.
32. Ad Paragraph 20
thereof
Save to reiterate that
the acceptable method of calculating an applicant’s grant
amount, is the AFS method … the contents
hereof are noted. I
also repeat the submissions made at paragraph 30 above.
33. Ad Paragraph 21
thereof
33.1
It is denied that the “pool account method” or any
particular method which is preferable to any particular applying
entity, is the “fundamentally correct” method of
calculating a grant amount. It is submitted that the applying entity
cannot be prescriptive as to its preferred method of calculation and
the dti is not obliged to apply the method as prescribed by
the
entity.
33.2
With regard to the entities listed at sub-paragraphs 21.1 to 21.11,
it is submitted that the information supplied by entities
when
lodging applications for grants, is subject to a confidentiality
agreement and may not, without the said entity’s written
authorisation, be disclosed to any third parties.
33.3
Furthermore, the deponent to the Founding Affidavit is well aware of
the confidentiality of the information which is relied
upon in these
paragraphs. This is evident from the correspondence which was
addressed to the Applicant’s attorneys in reply
to a request
for the documentation relied upon in making these allegations. A hard
copy of the relevant correspondence is attached
hereto as annexure
“A”.
33.4
In the absence of the eleven wineries referred to, waiving the
benefit of the confidentiality agreements entered into with
them, the
dti is unable to properly deal with the allegations herein. In any
event, what is at issue in this litigation is whether
the calculation
effectively sought to be reviewed is correct and in accordance with
the Guidelines. It is of no assistance to the
Applicant to argue, in
effect, that if other grants had been incorrectly calculated, the
Applicant is entitled to benefit therefrom.
If it should be found
that any applicant has unduly benefited from the MCEP, the dti is
obliged, in terms of the Public Finance
Management Act, act 1 of 1999
(the”PFMA”), to recover such undue payment/benefit from
such applicant.’
[12]
In its heads of argument in the high court, the appellant conceded
that the decision made by the DTI with respect to the amount
determined by it as a grant payable to the respondent fell to be
reviewed and set aside. Following upon this concession, therefore,
all that remained to be determined by the high court on the merits
was the remedy as contemplated in s 8(1) of the Promotion of
Administrative Justice Act 3 of 2000 (PAJA).
[13]
In due course, the application came before Jaji J who, on 10 April
2018, granted an order
[3]
substantially in the terms sought in the notice of motion. On 19 June
2018 the learned Judge granted leave to the appellant to
appeal to
this court against paragraph (b) of his order.
[14]
As is apparent from the terms of the relief claimed by the respondent
in the high court, two main issues arose for decision.
First, the
respondent impugned the correctness of the appellant’s
calculation of the grant in the sum of R1 820 748.
Second,
the respondent sought an order directing the appellant to recalculate
the grant amount by utilising the ‘pool account
method’
of calculation or alternatively the annual financial statements
method of calculation. With respect to the recalculation,
the
respondent explained the basis upon which it relied in support of its
case. Having regard to the nature of the dispute between
the parties
and their respective contentions, the high court was called upon to
decide which one of the two methods of calculation
(or any other
method) would be appropriate upon remittal of the matter to the DTI
for reconsideration, having regard to the MCEP’s
Guidelines.
[15]
As already mentioned, the high court directed the appellant, in
recalculating the grant payable to the respondent, to utilise
the
‘pool account method of calculation’. The appellant
contests the propriety of this order on various grounds. The
thrust
of its contention in its heads of argument is that, in doing so, the
high court in essence found that the ‘respondent
had satisfied
the requirements of s 8(1)
(c)
(ii)
(aa)
of PAJA. It did
so, argues the appellant, in circumstances where the respondent had
not made out a case therefor.
[16]
Building on this contention the appellant’s primary submission
is that the main issue in this appeal is whether the high
court was
correct, in effect, concluding that the requirements of s
8(1)
(c)
(ii)
(aa)
of PAJA had been satisfied.
[17]
Before considering this issue it is convenient at this stage to deal
with three of the self-standing subsidiary points raised
by the
appellant. The first submission was that the high court erred in
categorising the grant payable under the MCEP as a reward
when in
truth it is an incentive. This submission only needs to be stated to
be rejected. It does not advance the appellant’s
case in any
way and is nothing short of a red herring.
[18]
The second submission was that the facts alleged on behalf of the
appellant in its answering affidavit created a dispute of
fact on the
papers as to whether it was appropriate to utilise the pool account
method in recalculating the respondent’s
manufacturing value
added. Relying on the rule in
Plascon-Evans
,
[4]
counsel for the appellant argued that the high court was thus
precluded from deciding the case on the papers. Counsel is mistaken
in advancing this contention. As Heher JA said in
Wightman
t/a JW Construction v Headfour (Pty) Ltd & another
[2008]
ZASCA 6
;
[2008] 2 All SA 512
(SCA);
2008 (3) SA 371
(SCA) para 13:
‘
A real, genuine
and bona fide dispute of fact can exist only where the court is
satisfied that the party who purports to raise the
dispute has in his
affidavit seriously and unambiguously addressed the fact said to be
disputed. There will of course be instances
where a bare denial meets
the requirement because there is no other way open to the disputing
party and nothing more can therefore
be expected of him. But even
that may not be sufficient if the fact averred lies purely within the
knowledge of the averring party
and no basis is laid for disputing
the veracity or accuracy of the averment. When the facts averred are
such that the disputing
party must necessarily possess knowledge of
them and be able to provide an answer (or countervailing evidence) if
they be not true
or accurate but, instead of doing so, rests his case
on a bare or ambiguous denial the court will generally have
difficulty in
finding that the test is satisfied. I say ‘generally’
because factual averments seldom stand apart from a broader matrix
of
circumstances all of which needs to be borne in mind when arriving at
a decision. A litigant may not necessarily recognise or
understand
the nuances of a bare or general denial as against a real attempt to
grapple with all relevant factual allegations made
by the other
party. But when he signs the answering affidavit, he commits himself
to its contents, inadequate as they may be, and
will only in
exceptional circumstances be permitted to disavow them. There is thus
a serious duty imposed upon a legal adviser
who settles an answering
affidavit to ascertain and engage with facts which his client
disputes and to reflect such disputes fully
and accurately in the
answering affidavit. If that does not happen it should come as no
surprise that the court takes a robust
view of the matter.’
[19]
Indeed, when members of the Bench pointed out to counsel that the
appellant had not pertinently answered to the allegations
made in
paragraphs 18 to 21 of the founding affidavit, wherein the respondent
comprehensively laid the basis upon which it relied
in motivating for
the utilisation of the pool account method (for recalculating the
manufacturing value added), he seemed not to
have a direct answer.
Instead, counsel referred us not to the appellant’s answer to
paragraphs 18 to 21 (quoted liberally
above) but to other paragraphs
of the answering affidavit. We were invited to infer from the
paragraphs to which we were referred
and the tenor
of the answering affidavit
that, in substance, the
respondent’s allegations were disputed. That cannot be.
[20]
It is trite that in motion proceedings the respondent is required to
set out clearly which of the applicant’s allegations
are
admitted and which are denied and to set out his version of the
relevant facts. It is generally not sufficient to rely on bare
or
unsubstantiated denials.
[5]
Nor
was it sufficient for the appellant in answering to the respondent’s
averments to envelope them ‘in a fog which
hides or distorts
the reality’
[6]
relating
to the use of the pool account method for beneficiaries of the scheme
in the wine industry. As this court rightly noted
in
Transnet
Ltd v Rubenstein
,
2006 (1) SA 591
(SCA) para 28, affidavits in motion proceedings
constitute both the pleadings and the evidence in support of the
cases advanced
by the parties. A party that chooses to be coy in
answering its opponent’s averments does so at its own peril.
Indeed, in
the totality of the evidence presented in the high court
it cannot be said that the affidavits filed on behalf of the
appellant
gave rise to a dispute of fact on the bases on which its
counsel relied in argument. Thus, the argument relating to the
perceived
dispute of fact is unavailing.
[21]
Last, I deal with the argument that the high court erred in finding
that the respondent had a legitimate expectation that its
application
for a grant would be assessed utilising the pool account method. On a
reading of the respondent’s affidavits
I did not understand it
to be the respondent’s case that it had a legitimate
expectation that it would be treated similarly
with the entities
named therein. As I see it what it sought to do was to point out that
the utilisation of the pool account method
was not something unusual
or extraordinary but a common occurrence within the DTI. And that it
was not seeking something outside
of the parameters of the MCEP.
After all, what the respondent claimed to be a realistic amount of
the grant payable to it represented
a percentage of the manufacturing
value added in its manufacturing process.
[22]
Section 8 of PAJA, headed ‘Remedies in proceedings for judicial
review’, empowers a court in proceedings for judicial
review to
grant any order that is just and equitable, having regard to the
exigencies of each case. Such orders include:
‘
(a)
directing
the administrator—
(i) to give reasons; or
(ii) to act in the manner
the court or tribunal requires;
. . .
(c)
setting aside
the administrative action and—
(i)
remitting the matter for reconsideration by the administrator, with
or without directions; or
(ii) in exceptional
cases—
(aa)
substituting
or varying the administrative action or correcting a defect resulting
from the administrative action’.
[23]
The exceptional remedy of substitution is an equitable one that has
its origin in our common law, long before the advent of
our
constitutional order and the enactment of PAJA. The circumstances
under which a court would be justified in exercising this
power were
over the years explained in various decisions by our courts. In
Johannesburg City Council v Administrator, Transvaal, &
another
1969 (2) SA 72
(T) at 75A-76C, Hiemstra J explained the
position thus:
‘
Ordinarily, when
an administrative decision is set aside, the matter is sent back for
reconsideration, but not necessarily so. An
early guideline is the
case of
Norman Anstey & Co v Johannesburg Municipality
,
1928 W.L.D. 235
, where GREENBERG, J., said at p. 242:
“
I
think the Court is only entitled to order the issue of a certificate
or licence when it is clear on the facts that the local authority
would be bound to grant the certificate or licence.”
The Court then merely
saves time by giving a decision which is a foregone conclusion. In
Maske and Gilbert v Aberdeen Licensing Court
,
1930 AD 30
at p.
45, and in
Gildenhuys v Parys Liquor Licensing Board and Another
,
1957 (4) SA 142
(O) at p. 151, considerations of time impelled the
Court to make the decision itself, but there too the Court would not
have done
so if the end result had been open to doubt. In
Essack v
Durban City Council
,
1953 (4) SA 17
(N) at p. 23, the
consideration was that the respondent had revealed an unjustifiable
determination to adhere to a wrong decision
– an attitude
calculated to impair the prospects of applying its mind afresh. A
similar consideration applied in
Adam’s Stores (Pty.) Ltd v
Charlestown Town Board and Others
,
1951 (2) SA 508
(N).
In Livestock and Meat
Industries Control Board v Garda
,
1961 (1) SA 342
(AD), HOLMES,
A.J.A., stated the “basic principle” as follows at p.
349G:
“
From
a survey of the foregoing decisions it seems to me possible to state
the basic principle as follows, namely that the Court
has a
discretion, to be exercised judicially upon a consideration of the
facts of each case, and that, although the matter will
be sent back
if there is no reason for not doing so, in essence it is a question
of fairness to both sides.”’
[24]
In
Gauteng Gambling Board v Silverstar Development Ltd &
others
2005 (4) SA 67
(SCA) paras 28-29, Heher JA said:
‘
The power of a
court on review to substitute or vary administrative action or
correct a defect arising from such action depends
upon a
determination that a case is ‘exceptional’: s
8(1)(
c
)(ii)(
aa
) of the
Promotion of Administrative
Justice Act 3 of 2000
. Since the normal rule of common law is that an
administrative organ on which a power is conferred is the appropriate
entity to
exercise that power, a case is exceptional when, upon a
proper consideration of all the relevant facts, a court is persuaded
that
a decision to exercise a power should not be left to the
designated functionary. How that conclusion is to be reached is not
statutorily
ordained and will depend on established principles
informed by the constitutional imperative that administrative action
must be
lawful, reasonable and procedurally fair. Hefer AP said in
Commissioner, Competition Commission v General Council of the Bar
of South Africa and Others
2002 (6) SA 606
(SCA):
“
. . . (T)he remark in
Johannesburg City Council v Administrator, Transvaal, and Another
1969 (2) SA 72
(T) at 76D-E that “the Court is slow to assume a
discretion which has by statute been entrusted to another tribunal or
functionary”
does not tell the whole story. For, in order to
give full effect to the right which everyone has to lawful,
reasonable and procedurally
fair administrative action,
considerations of fairness also enter the picture. There will
accordingly be no remittal to the administrative
authority in cases
where such a step will operate procedurally unfairly to both parties.
As Holmes AJA observed in
Livestock and Meat Industries Control
Board v Garda
1961 (1) SA 342
(A) at 349G:
“
. . . the Court
has a discretion, to be exercised judicially upon a consideration of
the facts of each case, and . . . although
the matter will be sent
back if there is no reason for not doing so, in essence it is a
question of fairness to both sides.”
[See also
Erf One Six
Seven Orchards CC v Greater Johannesburg Metropolitan Council
(Johannesburg Administration) and Another
[1998] ZASCA 91
;
1999
(1) SA 104
(SCA) at 109F-G.]
I do not accept a
submission for the respondents to the effect that the Court
a quo
was in as good a position as the Commission to grant or refuse
exemption and that, for this reason alone, the matter was rightly
not
remitted. Admittedly Baxter
Administrative Law
at 682 - 4
lists a case where the Court is in as good a position to make the
decision as the administrator among those in which
it will be
justified in correcting the decision by substituting its own.
However, the author also says at 684:
“
The
mere fact that a court considers itself as qualified to take the
decision as the administrator does not of itself justify usurping
that administrator’s powers . . .; sometimes, however, fairness
to the applicant may demand that the Court should take such
a view.”
This, in my view, states
the position accurately. All that can be said is that considerations
of fairness may in a given case require
the court to make the
decision itself provided it is able to do so.”
An administrative
functionary that is vested by statute with the power to consider and
approve or reject an application is generally
best equipped by the
variety of its composition, by experience, and its access to sources
of relevant information and expertise
to make the right decision. The
court typically has none of these advantages and is required to
recognise its own limitations.
See
Minister of
Environmental
Affairs and Tourism and Others v Phambili Fisheries (Pty) Ltd
;
Minister of Environmental Affairs and Tourism and Others v Bato
Star Fishing
(Pty) Ltd
2003 (6) SA 407
(SCA) at paras [47]
to [50], and
Bato Star Fishing (Pty) Ltd v Minister of
Environmental Affairs and Others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) at paras [46] to [49]. That is why remittal is almost always the
prudent and proper course.’
[25]
The dicta to which reference is made in paragraphs 23 and 24 above
were endorsed by the Constitutional Court in
Trencon Construction
(Pty) Ltd v Industrial Development Corporation of South Africa Ltd &
another
[2015] ZACC 22
;
2015 (5) SA 245
(CC);
2015 (10) BCLR 1199
(CC). The Constitutional Court emphasised that ‘substitution
remains an extraordinary remedy’ and that ‘remittal
is
still almost always the prudent and proper course’ to adopt.
[26]
The Constitutional Court continued:
[7]
‘
In our
constitutional framework a court considering what constitutes
exceptional circumstances must be guided by an approach that
is
consonant with the Constitution. This approach should entail
affording appropriate deference to the administrator.
Indeed,
the idea that courts ought to recognise their own limitations still
rings true. It is informed not only by the deference
courts
have to afford an administrator but also by the appreciation that
courts are ordinarily not vested with the skills and expertise
required of an administrator.’
[27]
However, for the reasons that follow, the appellant’s
contention that the high court invoked s 8(1)
(c)
(ii)
(aa)
of PAJA at all is plainly unsustainable.
[28]
It is now time to revert to the crux of the appeal. This is: whether
in granting the order at issue in this appeal, the high
court strayed
beyond the parameters of the power conferred on it by s 8(1)
(a)
(ii)
of PAJA. On this score the remarks of the Constitutional Court in
Steenkamp NO v Provincial Tender Board, Eastern Cape
2007 (3)
SA 121
(CC) para 29 are instructive. There, Moseneke DCJ stated:
‘
It goes without
saying that every improper performance of an administrative function
would implicate the Constitution and entitle
the aggrieved party to
appropriate relief. In each case the remedy must fit the injury. The
remedy must be fair to those affected
by it and yet vindicate
effectively the right violated. It must be just and equitable in the
light of the facts, the implicated
constitutional principles, if any,
and the controlling law. It is nonetheless appropriate to note that
ordinarily a breach of administrative
justice attracts public-law
remedies and not private-law remedies. The purpose of a public-law
remedy is to pre-empt or correct
or reverse an improper
administrative function. In some instances the remedy takes the form
of an order to make or not to make
a particular decision or an order
declaring rights or an injunction to furnish reasons for an adverse
decision. Ultimately the
purpose of a public remedy is to afford the
prejudiced party administrative justice, to advance efficient and
effective public
administration compelled by constitutional precepts
and at a broader level, to entrench the rule of law.
(Footnotes
omitted.)
[29]
This theme was elaborated upon in
Bengwenyama Minerals (Pty) Ltd &
others v Genorah Resources
(Pty) Ltd & others
2011 (4)
SA 113
(CC) where Froneman J held as follows:
‘
This “generous
jurisdiction” in terms of s 8 of PAJA provides for a wide range
of just and equitable remedies, including
declaratory orders . . .
orders directing the administrator to act in an appropriate manner,
and orders prohibiting him or her
from acting in a particular
manner.’
[8]
[30]
The learned Justice went on to say:
‘
I do not think
that it is wise to attempt to lay down inflexible rules in
determining a just and equitable remedy following upon
a declaration
of unlawful administrative action.’
[9]
[31]
Typically, an order of substitution under s 8(1)
(c)
(ii)
(aa)
entails that the reviewing court itself makes the decision that, in
its view, the administrator should have made. As a result,
the need
for remittal is obviated and the dispute between the parties is put
to an end once and for all. Here the high court did
not purport to
invoke s 8(1)
(c)
(ii)
(aa)
. Thus, the best that can be
said in favour of the appellant is that the order of the high court
had the effect of curtailing the
ambit of the parties’ dispute
and circumscribing the exercise of the administrator’s powers,
upon reconsideration of
the matter, in relation to the method of
calculation.
[32]
It is by now manifest that the cause of the appellant’s
discontent is in truth the fact that the high court directed
the DTI
to utilise the pool account method in its recalculation. Its
contention is that this aspect of the case ought to have been
left to
the DTI for it to recalculate the amount according to the prescripts
of the MCEP untrammelled by directions. This is so,
argues the
appellant, because it is not open to the respondent to prescribe to
the DTI to utilise another entity’s financial
records (this
being a reference to SRCC Holdings). But this submission stems from a
misconception on the appellant’s part.
As counsel for the
respondent pointed out, it is to the respondent’s pool accounts
that one must look in order to determine
the true extent of the
manufacturing value added in the respondent’s manufacturing
process as comprehensibly explained in
the respondent’s
founding affidavit.
[33]
In its heads of argument in this court the
appellant accepted that ‘the MCEP’s Guidelines do not
provide for the grant
to be calculated in accordance with either the
pool account method or the financial statement method’.
Nevertheless, it sought
to argue that the audited financial statement
method best achieved the apparent purpose of the MCEP. The
implication of this concession
is telling. Indeed it puts paid to the
very essence of the appellant’s case as it goes to show that
each case will necessarily
turn on its own facts.
[34]
The case of the appellant was presented on the footing that the way
paragraph (b) of the high court’s order was crafted
indicates
that it invoked s 8(1)
(c)
(ii)
(aa)
of PAJA. This then
gave rise to the question whether exceptional circumstances existed
to warrant this. The fallacy underpinning
counsel’s argument is
not hard to find. The argument entirely overlooks the true ambit of
the case that remained to be decided
by the high court once the
merits of the review were conceded. The whole dispute between the
parties centred around the method
of calculation. Other than
contending that the audited financial statements must be used, the
appellant failed to pertinently answer
the respondent’s case
which contended for the utilisation of the pool account method. On
the contrary, the respondent comprehensively
explained why this was
eminently the most appropriate method to adopt ‘because it
provides a more realistic representation
of the cost of material used
in the manufacturing process and the value of the sales of
manufactured goods’.
[35]
The reality is that in the light of this it would have been a futile
exercise to remit the question of the recalculation of
the grant
without the high court simultaneously issuing appropriate directions,
as it was statutorily empowered to do under s 8(1)
(a)
(ii) of
PAJA. This, particularly in the light of the factual matrix before it
and the entrenched diametrically opposed positions
adopted by the
parties. Ultimately, as the high court found on a conspectus of the
evidence placed before it, it turned out that
the position taken by
the appellant was indefensible. Had the high court not issued
directions, the dispute between the parties
would have remained
unresolved.
This
was all the more so in a case like the present where the DTI had –
to borrow the phraseology used in
Essack
above – ‘revealed an unjustifiable determination to
adhere to a wrong decision’ thereby evincing an attitude
that
it would utilise the audited financial statement method come what
may.
This would have had the distinct potential
for further litigation resulting in the wastage of both human and
financial resources.
[36]
Seen in this light there can be no doubt that the invocation of s
8(1)
(a)
(ii) of PAJA by the high court was appropriate.
Accordingly, this appeal falls to be dismissed.
[37]
There is in any event another insurmountable hurdle in the
appellant’s path. This is so because s 8(1)
(a)
(ii)
of PAJA empowered the high court to weigh the relevant factors
mentioned in this section and itself determine what an appropriate
remedy would be. In doing so, it exercised a discretion in the narrow
sense. This means that this court’s power to interfere
on
appeal is circumscribed.
[10]
However, as this point was not addressed by the parties either in
their heads of argument or oral argument nothing more need be
said
about it.
[38]
In the result the following order is made:
The
appeal is dismissed with costs.
_________________
X
M Petse
Deputy
President
APPEARANCES
For
Appellant:
B Boswell (with him
M N Pango)
Instructed
by:
State Attorney, Port
Elizabeth
State Attorney,
Bloemfontein
For
Respondent:
S C Rorke SC
Instructed by:
Mike Nurse Attorneys,
Port Elizabeth
Webbers Attorneys,
Bloemfontein
[1]
Part
3.1.3 of the MCEP Guidelines provides as follows:
‘
Applicants
will be able to apply for one or a combination of the
above-mentioned components at company and/or cluster level, based
on
their needs. Applicants can achieve this by investing in capital
equipment for upgrading and expansions; green technology
upgrades
for cleaner production and resource efficiency activities;
enterprise-level competitiveness improvement activities for
new or
increased market access, product and process improvement and related
skills development; as well as conducting feasibility
studies.’
[2]
The Manufacturing Value Added (MVA) is calculated by deducting the
sales value of imported goods, sales value of other bought
in
finished goods and material input costs (used in manufacturing
process) from an enterprise’s total sales or turnover
over a
two-year period. The total qualifying grant represents a percentage
of the MVA depending on the historical size of the
enterprise
concerned.
[3]
‘(a) That the decision taken by the Department of Trade and
Industry to pay to the applicant a grant in the sum of R 1
820 748,
00 in terms of the calculation provided by it to the applicant on 12
May 2016, as its grant in terms of the Manufacturing
Competitive
Enhancement Programme, launched in 2012, be and is hereby reviewed
and set aside;
(b)
That the Department of Trade and Industry is ordered to recalculate
the applicant's grant by utilising the pool account method
of
calculation;
(c)
That the Department of Trade and Industry is ordered to pay to the
applicant the sum arrived at by utilising such calculation;
(d)
That the respondent pay the costs of this application, inclusive of
the costs of postponement of 19 October 2017.’
[4]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
at 634-635.
[5]
Room
Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949 (3) SA 1155
(T) at 1163-1165.
[6]
See
Wightman
,
fn 6 above, para 16.
[7]
See para 43.
[8]
Para 83.
[9]
Para 85.
[10]
See
Trencon
,
fn 12 above, paras 84-90.