Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others (CCT 27/03 ) [2004] ZACC 15; 2004 (4) SA 490 (CC) (12 March 2004)

[1] This application for special leave to appeal to this Court against a judgment of the Supreme Court of Appeal (the SCA)[1] concerns the allocation of fishing quotas. The applicant, Bato Star Fishing (Pty) Ltd, is dissatisfied with the allocation it received in the 2001 allocation process for the 2002 – 2005 fishing seasons and it seeks to review that allocation decision. The review succeeded in the Cape High Court (the High Court), but, on appeal, that judgment was overturned by the SCA. The case raises the question of the extent to which such a decision is susceptible to review under our new constitutional order.

[2] The first respondent is the Minister of Environmental Affairs and Tourism (the Minister) who is the member of Cabinet responsible for the administration of the relevant legislation. The second respondent is the Chief Director in the Department of Environmental Affairs and Tourism (the Chief Director), responsible for marine and coastal management who took the allocation decision under challenge in this case.[2] The third to eighteenth respondents are other rights holders in the deep-sea hake fishing industry (the other respondents) who oppose the relief sought by the applicant.

[3] The applicant has held fishing rights in the deep-sea trawl sector of the hake fishing industry since 1999. The industry is more than a hundred years old and is one of the most lucrative sectors of the South African fishing industry. It generates sales of more than R1,45 billion per annum, is the largest exporter of perishable frozen products in the country and has an international reputation for being a well-managed fishery producing a quality product. The deep-sea trawl sector is both capital- and labour-intensive, with a current fixed capital investment of some R5,4 billion and a labour force, directly involved in the industry, of about 8 000 workers.

[4] Hake is caught in four ways – by deep-sea trawling, by in-shore trawling, by long-lines and by hand-lines. For the purpose of the allocation of quotas, the industry is divided into four sectors based on these four methods. Of these sectors, the deep-sea trawl industry is the largest, the most technologically sophisticated and the most capital- and labour-intensive. Of a total allowable catch of 165 000 tonnes of hake in 2002, the deep-sea trawl sector was allocated 138 495 tonnes, while the in-shore trawl sector was allocated 10 165 tonnes, the long-line sector 10 840 tonnes and the hand-line sector 5 500 tonnes. These last two sectors have been introduced only in recent years and, because of their relatively simple technology that eschews the need for high levels of investment, have been earmarked by the Department of Environmental Affairs and Tourism (the Department) as key areas for transformation in the hake fishing industry.[3]

[5] According to industry estimates, each 1 000 tonnes of hake caught in the deep-sea trawl sector represents a turnover of approximately R13 million and a profit of approximately R5 million. Deep-sea trawling for hake was pioneered in South Africa by a handful of companies who remain dominant in the sector. Like most of the South African economy, the sector is dominated by companies that historically were established, owned and managed by white people. Accordingly one of the ten objectives identified in section 2 of the Marine Living Resources Act, 18 of 1998 (the Act) is:

“(j) the need to restructure the fishing industry to address historical imbalances and to achieve equity within all branches of the fishing industry.”

[6] This objective as well as all the other objectives set out in section 2 of the Act are, by their nature, incapable of immediate or short-term fulfilment. The objectives require action by the executive to facilitate their fulfilment in the medium- and long-term. Measures aimed at the achievement of the goal identified in section 2(j) of the Act need to be taken side by side with the steps designed to fulfil the other objectives identified in the Act. In particular, the Act recognises that the industry exploits a scarce marine resource that may be destroyed if not carefully managed and monitored. Most of the other objectives flow from this realisation. The other objectives identified in section 2 are the following:

“(a) The need to achieve optimum utilisation and ecologically sustainable development of marine living resources;

(b) the need to conserve marine living resources for both present and future generations;

(d) 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 ecological balance consistent with the development objectives of the national government;

(e) the need to protect the ecosystem as a whole, including species which are not targeted for exploitation;

(f) the need to preserve marine biodiversity;

(g) the need to minimise marine pollution;

(h) the need to achieve to the extent practicable a broad and accountable participation in the decision-making processes provided for in this Act;

(i) any relevant obligation of the national government or the Republic in terms of any international agreement or applicable rule of international law . . . .”

The sensitivity of the resource is real. In the 1960s and 1970s, a large number of foreign fishing vessels took to fishing in the hake fisheries off the South African coast and threatened the long-term sustainability of fish stocks. In 1977, South Africa accordingly introduced a 200-mile economic zone and excluded foreign fishing vessels from its waters. In order to protect the fishery, a total allowable catch was introduced for the first time in 1978, followed by a quota system for individual companies. The maintenance of the hake fish population as a sustainable living resource is thus appropriately a central tenet of the legislative scheme. This consideration clearly renders the achievement of a more equitable distribution of fishing rights more challenging for the Department, as the total allowable catch cannot simply be increased to accommodate more participants.

Applicant’s history in the fishing industry

[7] The applicant was formed in 1996 when it acquired the controlling share in three small fishing companies operating in the abalone sector of the industry. Seventy percent of the applicant is owned by a holding company, SA Amalgamated Union Fishing (Pty) Ltd (SAAUF), and the other thirty percent is owned by the applicant’s management. In turn, SAAUF has two major shareholders both of which are trade union investment companies. According to the applicant, the main purpose behind its formation was the establishment of a medium-sized black empowerment fishing company. In its first few years of operation, the applicant was only engaged in the abalone sector of the fishing industry. It built a processing factory and marketed abalone under its own brand names. Since 1996, however, the applicant has had its quotas of abalone reduced significantly. From the date of its establishment, the applicant sought to enter the hake deep-sea trawl sector. It applied for, but was refused, quotas in 1996, 1997 and 1998. In 1999, for the first time, it was allocated a quota of 750 tonnes. It received the same allocation in 2000, and in 2001 the allocation was increased to 803 tonnes.

The application process for rights for 2002 – 2005

[8] A development identified by the Department as desirable for the stabilisation of the industry was a move to longer term quota allocations, instead of quota allocations for one year only.[4] One of the advantages of a longer term quota allocation is that it permits industry players to make capital and human resource investments in the industry. The Department accordingly decided that it would be appropriate to issue rights for the deep-sea hake sector for a four year period, the initial period to cover the 2002 – 2005 fishing seasons. On 27 July 2001, the Department published in the Government Gazette an invitation to submit applications for a broad range of fishing rights, including the deep-sea hake sector.[5] At the same time, the Department issued the policy guidelines in terms of which the allocations would be made.[6] The allocations were to be made in terms of section 18 of the Act.

[9] The policy guidelines stipulated that applications would be evaluated in terms of the objectives and principles set out in section 2 of the Act. The guidelines also identified a range of more specific policy considerations, in no order of preference. These included the importance of historical involvement in the industry, proof of investment and past performance in the industry, and demonstrated ability to create employment. While acknowledging the fact that transformation of the industry could not take place overnight, the guidelines nevertheless affirmed the objective of building a fishing industry whose “ownership and management, broadly reflects the demographics of South Africa”.

[10] In order to assess the degree of transformation of any particular applicant, the guidelines adopted a nuanced approach, recognising that transformation involves more than simply a change in ownership. So three relevant factors were listed. The first factor made it plain that equity within an applicant could be an acceptable alternative to the requirement of ownership. The other two factors were the distribution of wealth created through access to marine living resources and the extent to which an applicant employs people from historically disadvantaged sectors of the community. In respect of these three factors, the guidelines noted that “[i]n the more capital-intensive sectors of the fishing industry, a higher level of internal transformation of current rights holders rather than the introduction of new entrants is encouraged.” Moreover, in addressing the injustices of the past, the guidelines stipulated that “it is the intention to allocate a notable proportion” of the total allowable catch to deserving applicants in order to encourage transformation either through internal restructuring or through new entrants. In the hake sector, the guidelines emphasised that the long-line and hand-line sectors had been identified as suitable sectors for promoting small and medium enterprises owned and managed by people from historically disadvantaged communities. The guidelines also emphasised the importance of the sustainable utilisation of marine resources and the dangers of over-fishing.

[11] In its application, the applicant sought a substantial increase of its fishing rights. It sought an allocation of 12 000 tonnes (more than twelve times its allocation for 2001). The applicant stated that it could catch this quantity of fish by purchasing a new vessel and by making agreements with existing rights holders to purchase the balance. The applicant was not the only company to seek a considerable increase in the number of tonnes allocated to it. Overall, applications were made for 1,1 million tonnes of hake per annum – more than nine times the total allowable catch.

[12] All applications were initially screened by an Advisory Committee appointed by the Department. The screening process applied criteria drawn up by the Department based on the policy guidelines referred to above. The document listing the criteria commenced as follows:

“These criteria are based on the key aspects of the policies published by the Department in Government Gazette 22517 of 27 July 2001. It is the Department’s policy to endeavour to create stability in the industry in order to retain existing levels of investment and to attract further investment in the industry while at the same time seeking to transform the industry in line with the purposes of the Act. The policy on transformation is broadly to reward those ex-rights holders who have performed and taken steps to transform and to admit suitable new HDP [historically disadvantaged person] entrants that demonstrate both a capacity to catch, process and harvest the right applied for and a willingness to invest in the industry.”

Six factors were identified: involvement and investment in the industry; past performance; strategies for by-catch and offal utilisation; compliance; transformation and the extent to which the applicant has used or will use its allocation merely as a “paper quota” – i.e. will sell or transfer the quota to another company or individual. In relation to transformation the following criteria were identified: ownership (a specific points chart was provided in order to determine the percentage of the company owned by people from a historically disadvantaged sector of the community); management structure (a similar points chart was provided); workforce (percentage of the workforce from historically disadvantaged communities); transformation plan; and compliance with the Employment Equity Act, 55 of 1998. Criteria were set out in relation to each factor with an indication of how the factor concerned was to be scored.

[13] There were one hundred and ten applications for the hake deep-sea trawl sector of which fifty four (including the applicant) were existing rights holders. Points were awarded to each applicant in terms of the pre-determined scoring system, described above. The scores then formed the basis of the Chief Director’s evaluation of the applications. The applicant was a below average applicant, scoring 4.9 overall out of a possible total of 10. Seventy two of the one hundred and ten applicants scored better than this. On the transformation aspect, the applicant scored only 1.7 points out of a possible total of 4. It had a high score in respect of ownership, but its score was low in relation to the other aspects of transformation. Seventy seven of the other applicants outscored the applicant on transformation, including four of the five pioneer companies.

[14] Although the Advisory Committee did the initial scoring, it was not responsible for the allocation of quantum to each applicant. This was done by the Chief Director. The starting point for the allocation was that made in 2001. Five percent of the quota granted to each applicant in 2001 was deducted from their new quota and put into a redistribution pool. The redistribution pool was then distributed amongst rights holders in direct proportion to their scores. At the end of the process, rights were awarded to fifty one applicants, all of whom were existing rights holders. No new applicants were granted fishing rights.

[15] As a result of the allocation process, the applicant received a quota of 856 tonnes. On 24 December 2001 the Department announced the decision and released general reasons for the allocations made. The general reasons briefly described the decision-making process and its outcome, and annexed a list of the allocations and the manner in which their quantum had been calculated. The Department reserved an amount of 1 487 tonnes for appeals.

Institution of legal proceedings by the applicant

[16] The applicant, dissatisfied with this allocation, sought two different remedies. On the one hand, it appealed as it was entitled to do, in terms of section 80 of the Act to the Minister against the Chief Director’s decision. In this appeal, the applicant sought an allocation of 2 500 tonnes. The Department announced in early January 2003 that as a result of the appeal process, the applicant would receive an additional allocation which resulted in a total allocation of 873 tonnes. Secondly, it initiated review proceedings in the High Court to set aside the allocation decision. These proceedings were initiated on 27 February 2002. The Minister and Chief Director were cited as were all the remaining successful applicants in the allocation process. Sixteen of these fifty respondents opposed the relief sought by the applicant.

[17] At about the same time, another disgruntled applicant, Phambili Fisheries (Pty) Ltd (Phambili), also launched an application to review the decision of the Chief Director. Because of the identity of the issues and parties in both cases, the applications were heard together by the High Court. One of the first issues raised in the High Court was that the applicant had failed to exhaust its internal remedies under the Act as required by section 7(2) of the Promotion of Administrative Justice Act, 3 of 2000 (PAJA).[7] After considering the matter, however, the High Court held that it was an appropriate case to permit the applicant to seek a review of the decision before exhausting its internal remedies.[8] This decision of the High Court was challenged by the respondents in the SCA on appeal. In the light of its other findings, the SCA did not find it necessary to deal with the issue and the decision of the High Court in this regard has not been directly challenged on appeal in this Court. It is thus not necessary for this Court to consider whether the decision of the High Court in this regard was correct. Suffice it to say that a court minded to grant permission to a litigant to pursue the review of a decision before exhausting internal remedies should consider whether the litigant should be permitted simultaneously to pursue those internal remedies. In considering this question, a court needs to ensure that the possibility of duplicate or contradictory relief is avoided.

[18] One judgment in respect of both matters was handed down by the High Court holding in favour of both the applicant and Phambili. The High Court granted the applications on a number of grounds including a finding that there was no direct evidence as to how the Chief Director arrived at the allocation decision under challenge; a conclusion that the Chief Director acted arbitrarily, capriciously, irrationally and without reason; and a holding that the Chief Director ignored relevant considerations and took account of extraneous ones such as the need for stability in the relevant sector of the fishing industry.

[19] The respondents in both matters successfully sought leave to appeal to the SCA, where once again both matters were heard simultaneously and only one judgment was handed down. Both appeals were upheld. It should be noted that the SCA expressly, and correctly, rejected the High Court’s conclusion that there was no evidence as to how the allocation decision was reached. The applicant thereafter sought special leave to appeal to this Court, but Phambili did not. Because of the inter-relatedness of the two matters, and in particular because the respondents in this matter relied on their affidavits filed in the Phambili matter, large parts of the record in the Phambili matter were, by agreement between the parties, also filed with the record in this Court.

The grounds of appeal raised in this Court

[20] The applicant relies on three grounds in its application for special leave to appeal to this Court: (a) that the SCA misconstrued the nature of the objectives in section 2 of the Act; (b) that the SCA incorrectly concluded that the Chief Director’s decision should not be set aside on the ground that he failed to apply his mind to the quantum of hake applied for by the applicant and its ability to catch such quantum; and (c) that the SCA erred in finding that the alleged “undisclosed policy change” by the Department did not infringe the applicant’s right to procedural fairness.

[21] The applicant did not mention PAJA either in its notice of motion and founding affidavit in the High Court, or in its application for special leave to appeal to this Court. At the hearing, applicant’s counsel were asked why their application was not founded on the provisions of PAJA and after the hearing, the Chief Justice issued directions calling upon the parties to lodge further written argument on the following questions: (a) whether the applicant’s cause of action is founded on the common law, PAJA and/or section 33 of the Constitution; (b) if the proper cause of action is PAJA, what effect if any that had on the grounds of appeal as argued by the applicant; and (c) what effect, if any, the partially successful appeal to the Minister in terms of section 80 of the Act had on the applicant’s grounds of review in this Court. Supplementary written argument was lodged by all the parties as requested.

[22] In Pharmaceutical Manufacturers Association of SA and Another: In Re Ex Parte President of the Republic of South Africa and Others,[9] the question of the relationship between the common law grounds of review and the Constitution was considered by this Court. A unanimous Court held that under our new constitutional order the control of public power is always a constitutional matter. There are not two systems of law regulating administrative action — the common law and the Constitution — but only one system of law grounded in the Constitution.[10] The courts’ power to review administrative action no longer flows directly from the common law but from PAJA and the Constitution itself. The grundnorm of administrative law is now to be found in the first place not in the doctrine of ultra vires,[11] nor in the doctrine of parliamentary sovereignty, nor in the common law itself,[12] but in the principles of our Constitution. The common law informs the provisions of PAJA and the Constitution, and derives its force from the latter.[13] The extent to which the common law remains relevant to administrative review will have to be developed on a case-by-case basis as the courts interpret and apply the provisions of PAJA and the Constitution.

[23] Section 33 of the Constitution provides that:

“(1) Everyone has the right to administrative action that is lawful, reasonable and procedurally fair.

(2) Everyone whose rights have been adversely affected by administrative action has the right to be given written reasons.

(3) National legislation must be enacted to give effect to these rights, and must –

(a) provide for the review of administrative action by a court or, where appropriate, an independent and impartial tribunal;

(b) impose a duty on the state to give effect to the rights in subsections (1) and (2); and

The transitional provisions of the Constitution in schedule 6 required that the legislation referred to in section 33(3) be passed within three years of the Constitution coming into force.[14] PAJA was assented to on 3 February 2000. The long title to PAJA states that it is –

“[t]o give effect to the right to administrative action that is lawful, reasonable and procedurally fair and to the right to written reasons for administrative action as contemplated in section 33 of the Constitution of the Republic of South Africa, 1996 . . .”.

[24] Section 6 of PAJA identifies the circumstances in which the review of administrative action may take place. PAJA itself provides a definition of “administrative action” in section 1, but the scope of that definition does not concern us in this case as it is, quite rightly, common cause that the decision of the Chief Director at issue constitutes administrative action as contemplated by PAJA. Section 6 provides that:

“(1) Any person may institute proceedings in a court or a tribunal for the judicial review of an administrative action.

(2) A court or tribunal has the power to judicially review an administrative action if –

(a) the administrator who took it –

(i) was not authorised to do so by the empowering provision;

(ii) acted under a delegation of power which was not authorised by the empowering provision; or

(iii) was biased or reasonably suspected of bias;

(b) a mandatory and material procedure or condition prescribed by an empowering provision was not complied with;

(d) the action was materially influenced by an error of law;

(e) the action was taken –

(i) for a reason not authorised by the empowering provision;

(ii) for an ulterior purpose or motive;

(iii) because irrelevant considerations were taken into account or relevant considerations were not considered;

(iv) because of the unauthorised or unwarranted dictates of another person or body;

(v) in bad faith; or

(vi) arbitrarily or capriciously;

(f) the action itself –

(i) contravenes a law or is not authorised by the empowering provision; or

(ii) is not rationally connected to –

(aa) the purpose for which it was taken;

(bb) the purpose of the empowering provision;

(cc) the information before the administrator; or

(dd) the reasons given for it by the administrator;

(g) the action concerned consists of a failure to take a decision;

(h) the exercise of the power or the performance of the function authorised by the empowering provision, in pursuance of which the administrative action was purportedly taken, is so unreasonable that no reasonable person could have so exercised the power or performed the function; or

(i) the action is otherwise unconstitutional or unlawful.

(3) If any person relies on the ground of review referred in subsection 2 (g), he or she may in respect of a failure to take a decision, where –

(a) (i) an administrator has a duty to take a decision;

(ii) there is no law that prescribes a period within which the administrator is required to take that decision; and

(iii) the administrator has failed to take that decision,

institute proceedings in a court or tribunal for judicial review of the failure to take the decision on the ground that there has been unreasonable delay in taking the decision; or

(b) (i) an administrator has a duty to take a decision;

(ii) a law prescribes a period within which the administrator is required to take that decision; and

(iii) the administrator has failed to take that decision before the expiration of that period,

institute proceedings in a court or tribunal for judicial review of the failure to take the decision within that period on the ground that the administrator has a duty to take the decision notwithstanding the expiration of that period.”

[25] The provisions of section 6 divulge a clear purpose to codify the grounds of judicial review of administrative action as defined in PAJA. The cause of action for the judicial review of administrative action now ordinarily arises from PAJA, not from the common law as in the past. And the authority of PAJA to ground such causes of action rests squarely on the Constitution. It is not necessary to consider here causes of action for judicial review of administrative action that do not fall within the scope of PAJA. As PAJA gives effect to section 33 of the Constitution, matters relating to the interpretation and application of PAJA will of course be constitutional matters.[15]

[26] In these circumstances, it is clear that PAJA is of application to this case and the case cannot be decided without reference to it. To the extent, therefore, that neither the High Court nor the SCA considered the claims made by the applicant in the context of PAJA, they erred. Although the applicant did not directly rely on the provisions of PAJA in its notice of motion or founding affidavit, it has in its further written argument identified the provisions of PAJA upon which it now relies.

[27] The Minister and the Chief Director argue that the applicant did not disclose its causes of action sufficiently clearly or precisely for the respondents to be able to respond to them. Where a litigant relies upon a statutory provision, it is not necessary to specify it, but it must be clear from the facts alleged by the litigant that the section is relevant and operative.[16] I am prepared to assume, in favour of the applicant, for the purposes of this case, that its failure to identify with any precision the provisions of PAJA upon which it relied is not fatal to its cause of action. However, it must be emphasised that it is desirable for litigants who seek to review administrative action to identify clearly both the facts upon which they base their cause of action, and the legal basis of their cause of action. I turn now to deal separately with the three grounds upon which the applicant sought leave to appeal.

SCA’s application of section 2 of the Act

[28] The first ground of appeal raised by the applicant is that the “SCA misconstrued the nature of the objectives and principles in section 2 of the Act with the result that it failed to consider one of the applicant’s principal grounds of review.” As described above, section 2 of the Act identifies ten objectives and principles[17] to which “[t]he Minister and any organ of state shall in exercising any power under this Act, have regard . . . .” The applicant’s argument is that the Chief Director failed to give due consideration to section 2(j) which requires that regard be had to “the need to restructure the fishing industry to address historical imbalances and to achieve equity within all branches of the fishing industry.” In making this argument, the applicant also relies upon section 18(5) of the Act which provides that:

“In granting any right referred to in subsection (1), the Minister shall, in order to achieve the objectives contemplated in section 2, have particular regard to the need to permit new entrants, particularly those from historically disadvantaged sectors of society.”

[29] The High Court concluded that the peremptory provisions of section 2 had been ignored by the Chief Director, and that as a result, the decision was fatally flawed. The SCA did not agree with this conclusion. It held that, properly construed, the purpose of the two provisions was “to guide and not to fetter”[18] the decision-maker and on the facts held that it was clear that the Chief Director had taken the provisions of section 2 into account.

[30] In its supplementary written argument in this Court, the applicant identifies subsections 6(2)(b), (d), (e)(iii), (f)(i) and (ii), (h) and (i) as the provisions of PAJA upon which it relies. Its argument is thus that the Chief Director failed to comply with “a mandatory and material procedure or condition prescribed by” the empowering provision (section 6(2)(b)); that the decision was influenced by an error of law (section 6(2)(d)); that irrelevant considerations were taken into account and relevant ones not (section 6(2)(e)(iii)); that the decision was not empowered or authorised by the empowering provision (section 6(2)(f)(i)); that the decision was not rationally connected to the purpose of the empowering provisions (section 6(2)(f)(ii)(bb)); and that the exercise of the power was not reasonable as contemplated by section 6(2)(h). Although the applicant relies on section 6(2)(i) (that the decision was otherwise “unconstitutional or unlawful”), it points to no specific ground of review not otherwise covered by section 6(2). This argument need not be considered further.

[31] Of the grounds relied upon by the applicant, subsections 6 (2)(b), (d), (e)(iii) (at least in part), (f)(i) and (f)(ii)(bb) relate to the question of whether in making the decision, the Chief Director misdirected himself as to the legal obligations imposed upon him by the empowering legislation. The other grounds relied upon by the applicant, that is section 6(2)(e)(iii) (in part) and section 6(2)(h), relate to the question of whether the decision itself was “reasonable”. I shall address these two arguments separately.

Misconstruction of the empowering provisions

[32] The gravamen of the applicant’s complaint under this head is that the Chief Director paid insufficient attention to the requirements of section 2(j), as repeated in section 18(5) of the Act. The question to be considered is the proper interpretation of section 2(j) taking into account section 18(5) and, in particular, the nature of the obligations imposed upon the Chief Director by these provisions. In this regard, it should be noted that section 2 contains a wide number of objectives and principles,[19] for example, the conservation of the marine ecosystem, the sustainable use of marine living resources, and the need to utilise marine living resources to achieve economic growth, to build capacity in the industry and to create employment. Not all the objectives and principles will be relevant to every decision taken under the Act. In determining the amount of the total allowable catch, for example, the provision relating to the sustainable use of marine resources and the need to conserve the marine ecosystem will clearly be relevant, although once that decision has been taken and the process of allocation of fishing rights commences, those factors will be of less relevance. In relation to some decisions, the objectives and principles listed in section 2 may to some extent be in conflict with one another as they cannot all be fully achieved simultaneously. Moreover, there may be many different ways of achieving each of the objectives individually. The section does not give clear guidance on which method should be selected or how an equilibrium is to be reached.

[33] The applicant argues that the accommodation reached by the Chief Director is improper because it misinterprets section 2(j). The applicant argues in effect that the Chief Director “must give effect to” section 2(j) and that the effect of section 18(5) is to render section 2(j) of pre-eminent importance in relation to the other principles of section 2.

[34] The provisions of section 2 and section 18 make it plain that the obligation imposed upon the decision-maker is an obligation to “have regard to” the factors mentioned in section 2, and to “have particular regard to” the factor mentioned in the case of section 18(5).[20] The repetition of the requirement of the factor of transformation indicates its importance and the need for special attention to be given to the questions of restructuring and redress in the fishing industry. The historical imbalances which continue to disfigure the South African economy are felt acutely in the fishing industry. By underlining the importance of restructuring so as to redress imbalances, the Act emphasises that the unjust status quo cannot be maintained simply in the interest of stability. The thrust of the Act in this respect is in keeping with the Constitution, which opens its Preamble by recognising the injustices of the past, and then declares in section 1 that equality is a foundational value. When making his determination on quotas the Chief Director was accordingly obliged to give special attention to the importance of redressing imbalances in the industry with the goal of achieving transformation in the industry.

[35] However, what is also clear, as indicated above, is that the broad goals of transformation can be achieved in a myriad of ways. There is not one simple formula for transformation. To the extent that the Act emphasises the need for decisions to facilitate the process of transformation, it suggests no particular preference for the manner in which this should be achieved. The manner in which transformation is to be achieved is, to a significant extent, left to the discretion of the decision-maker.

[36] Section 18(5) is of great importance at the stage when fishing rights are allocated. This section requires the Minister to make allocations that will achieve the objective contemplated in section 2, and in doing so, he is enjoined to “have particular regard to the need to permit new entrants, particularly those from historically disadvantaged sectors of society”.

[37] Various objectives are set out in section 2. Sections 2(d) and 2 (j) are directed to transformation and capacity building. They provide that regard must be had to:

“(d) the need to utilise marine living resources to achieve economic growth, human resource development, capacity building within fisheries and mariculture brances, employment creation and a sound ecological balance consistent with the development objectives of the national government;

…

(j) the need to restructure the fishing industry to address historical imbalances and to achieve equity within all branches of the fishing industry.”

[38] Other constitutional values come into the equation as well. Section 24(b) of the Constitution states that everyone has the right −

“to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that —

(i) prevent pollution and ecological degradation;

(ii) promote conservation; and

(iii) secure ecologically sustainable development and use of natural resources while promoting justifiable social and economic development.”

[39] When allocations are made the obligation imposed by section 18(5) must be observed. This does not mean, however, that regardless of other considerations all new entrants must be catered for at every allocation, nor that new entrants must be admitted at every allocation in every sector of the fishing industry. The objectives in section 2 must be taken into account as well as they are of considerable importance to the consistent and sound development of the fishing industry as a whole.

[40] There can be no doubt that the development objectives of the national government include transformation of the economy. On an overall reading of the provisions of the Act, decision-makers, in allocating fishing rights, must seek to give effect to the objectives of the Act and, in particular, must ensure that a process of transformation takes place. To meet the obligations imposed in this regard by subsections 2(d), (j) and 18(5), there must, in the first place, be a recognition of the fact that Parliament required these needs to be fulfilled and that steps must be taken to ensure their fulfilment in time. At the very least, some practical steps must be taken in the process of the fulfilment of these needs each time allocations are made if possible. If no step is taken during a particular round of allocation, the decision-maker cannot be said to have paid due regard to these needs unless there is a reasonable explanation for the absence of such practical steps. A court will require such explanation and will evaluate it to determine whether or not it meets the obligations imposed on the Minister. But so long as the importance of the practical fulfilment of these needs is recognised and a court is satisfied that the importance of the practical fulfilment of sections 2(j) and 18(5) has been heeded, the decision will not be reviewable.

[41] The papers before us show that the importance of the practical fulfilment of sections 2(j) and 18(5) was recognised by the Department. The policy guidelines published at the same time as the invitation for applications on 27 July 2001 indicate that the transformation of the industry was a consideration central to the allocation process. So does the evaluation process of applicants for quotas. The actual allocation as well as the general reasons issued after the allocation process indicate that some steps were taken in relation to the section 2(j) objective but that no new entrants were admitted into the hake deep-sea trawl sector. The evidence shows however that new entrants, including the applicant, had been admitted in previous years. It is also clear that in relation to the deep-sea hake sector of the fishery and its own particular context, particularly its capital- and labour-intensive character, transformation was to be sought, not so much in admitting new entrants to the industry, as in concentrating on the transformation of those companies already in the industry.[21] There is therefore no question of a misapplication or misdirection by the Chief Director.

The ‘reasonableness’ of the Chief Director’s decision

[42] The second aspect of this argument raises the question, not of whether the Chief Director erred in law in failing to take the consideration identified in section 2(j) and 18(5) sufficiently into account, but whether the Chief Director’s decision was a decision within the terms of section 6(2)(h) of PAJA which provides that a decision must not be “so unreasonable that no reasonable person” could have reached it.

[43] In its original heads, the applicant based its argument on the judgment of Corbett JA in Johannesburg Stock Exchange and Another v Witwatersrand Nigel Ltd and Another[22] where it was held that:

“Broadly, in order to establish review grounds it must be shown that the president failed to apply his mind to the relevant issues in accordance with the ‘behests of the statute and the tenets of natural justice.’ [citations omitted] Such failure may be shown by proof, inter alia, that the decision was arrived at arbitrarily or capriciously or mala fide or as a result of unwarranted adherence to a fixed principle or in order to further an ulterior or improper purpose; or that the president misconceived the nature of the discretion conferred upon him and took into account irrelevant considerations or ignored relevant ones; or that the decision of the president was so grossly unreasonable as to warrant the inference that he had failed to apply his mind to the matter in the manner aforestated.”

It is well known that the pre-constitutional jurisprudence failed to establish reasonableness or rationality as a free-standing ground of review.[23] Simply put, unreasonableness was only considered to be a ground of review to the extent that it could be shown that a decision was so unreasonable as to lead to a conclusion that the official failed to apply his or her mind to the decision.

[44] There was some debate in the supplementary heads filed by the parties as to the precise meaning of section 6(2)(h) of PAJA which provides that if a decision “is so unreasonable that no reasonable person could have so exercised the power”, it will be reviewable. This test draws directly on the language of the well-known decision of the English Court of Appeal in Associated Provincial Picture Houses, Limited v Wednesbury Corporation.[24] The repetitiousness of the test there established has been found to be unfortunate and confusing. As Lord Cooke commented in R v Chief Constable of Sussex, ex parte International Trader’s Ferry Ltd:[25]

“It seems to me unfortunate that Wednesbury and some Wednesbury phrases have become established incantations in the courts of the United Kingdom and beyond. Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223, an apparently briefly-considered case, might well not be decided the same way today; and the judgment of Lord Greene MR ([1947] 2 All ER 680 at 683 and 685, [1948] 1 KB 223 at 230 and 234) twice uses the tautologous formula ‘so unreasonable that no reasonable authority could ever have come to it’. Yet judges are entirely accustomed to respecting the proper scope of administrative discretions. In my respectful opinion they do not need to be warned off the course by admonitory circumlocutions. When, in Secretary of State for Education and Science v Tameside Metropolitan Borough [1976] 3 All ER 665, [1977] AC 1014 the precise meaning of ‘unreasonably’ in an administrative context was crucial to the decision, the five speeches in the House of Lords, the three judgments in the Court of Appeal and the two judgments in the Divisional Court, all succeeded in avoiding needless complexity. The simple test used throughout was whether the decision in question was one which a reasonable authority could reach. The converse was described by Lord Diplock ([1976] 3 All ER 665 at 697, [1977] AC 1014 at 1064) as ‘conduct which no sensible authority acting with due appreciation of its responsibilities would have decided to adopt’. These unexaggerated criteria give the administrator ample and rightful rein, consistently with the constitutional separation of powers. . . . Whatever the rubric under which the case is placed, the question here reduces, as I see it, to whether the chief constable has struck a balance fairly and reasonably open to him.”

In determining the proper meaning of section 6(2)(h) of PAJA in the light of the overall constitutional obligation upon administrative decision-makers to act “reasonably”, the approach of Lord Cooke provides sound guidance. Even if it may be thought that the language of section 6(2)(h), if taken literally, might set a standard such that a decision would rarely if ever be found unreasonable,[26] that is not the proper constitutional meaning which should be attached to the subsection. The subsection must be construed consistently with the Constitution[27] and in particular section 33 which requires administrative action to be “reasonable”. Section 6(2)(h) should then be understood to require a simple test, namely, that an administrative decision will be reviewable if, in Lord Cooke’s words, it is one that a reasonable decision-maker could not reach.

[45] What will constitute a reasonable decision will depend on the circumstances of each case, much as what will constitute a fair procedure will depend on the circumstances of each case.[28] Factors relevant to determining whether a decision is reasonable or not will include the nature of the decision, the identity and expertise of the decision-maker, the range of factors relevant to the decision, the reasons given for the decision, the nature of the competing interests involved and the impact of the decision on the lives and well-being of those affected. Although the review functions of the court now have a substantive as well as a procedural ingredient, the distinction between appeals and reviews continues to be significant. The court should take care not to usurp the functions of administrative agencies. Its task is to ensure that the decisions taken by administrative agencies fall within the bounds of reasonableness as required by the Constitution.

[46] In the SCA, Schutz JA held that this was a case which calls for judicial deference.[29] In explaining deference, he cited with approval Professor Hoexter’s account as follows:

“[A] judicial willingness to appreciate the legitimate and constitutionally-ordained province of administrative agencies; to admit the expertise of those agencies in policy-laden or polycentric issues; to accord their interpretations of fact and law due respect; and to be sensitive in general to the interests legitimately pursued by administrative bodies and the practical and financial constraints under which they operate. This type of deference is perfectly consistent with a concern for individual rights and a refusal to tolerate corruption and maladministration. It ought to be shaped not by an unwillingness to scrutinize administration action, but by a careful weighing up of the need for  and the consequences of  judicial intervention. Above all, it ought to be shaped by a conscious determination not to usurp the functions of administrative agencies; not to cross over from review to appeal.”[30] (footnote omitted)

Schutz JA continues to say that “[j]udicial deference does not imply judicial timidity or an unreadiness to perform the judicial function”.[31] I agree. The use of the word “deference” may give rise to misunderstanding as to the true function of a review court. This can be avoided if it is realised that the need for courts to treat decision-makers with appropriate deference or respect[32] flows not from judicial courtesy or etiquette but from the fundamental constitutional principle of the separation of powers itself.

[47] This was also recognised in a recent House of Lords judgment, R (on the application of ProLife Alliance) v British Broadcasting Corporation.[33] In his speech, Lord Hoffmann commented:

“My Lords, although the word ‘deference’ is now very popular in describing the relationship between the judicial and the other branches of government, I do not think that its overtones of servility, or perhaps gracious concession, are appropriate to describe what is happening. In a society based upon the rule of law and the separation of powers, it is necessary to decide which branch of government has in any particular instance the decision-making power and what the limits of that power are. That is a question of law and must therefore be decided by the courts.

[76] This means that the courts themselves often have to decide the limits of their own decision-making power. That is inevitable. But it does not mean that their allocation of decision-making power to the other branches of government is a matter of courtesy or deference. The principles upon which decision-making powers are allocated are principles of law. The courts are the independent branch of government and the legislature and executive are, directly and indirectly respectively, the elected branches of government. Independence makes the courts more suited to deciding some kinds of questions and being elected makes the legislature or executive more suited to deciding others. The allocation of these decision-making responsibilities is based upon recognised principles. . . . [W]hen a court decides that a decision is within the proper competence of the legislature or executive, it is not showing deference. It is deciding the law.”[34]

[48] In treating the decisions of administrative agencies with the appropriate respect, a court is recognising the proper role of the executive within the Constitution. In doing so a court should be careful not to attribute to itself superior wisdom in relation to matters entrusted to other branches of government. A court should thus give due weight to findings of fact and policy decisions made by those with special expertise and experience in the field. The extent to which a court should give weight to these considerations will depend upon the character of the decision itself, as well as on the identity of the decision-maker. A decision that requires an equilibrium to be struck between a range of competing interests or considerations and which is to be taken by a person or institution with specific expertise in that area must be shown respect by the courts. Often a power will identify a goal to be achieved, but will not dictate which route should be followed to achieve that goal. In such circumstances a court should pay due respect to the route selected by the decision-maker. This does not mean however that where the decision is one which will not reasonably result in the achievement of the goal, or which is not reasonably supported on the facts or not reasonable in the light of the reasons given for it, a court may not review that decision. A court should not rubber-stamp an unreasonable decision simply because of the complexity of the decision or the identity of the decision-maker.

[49] Section 2 of the Act requires the decision-maker to have regard to a range of factors which are to some extent in tension. It is clear from this that Parliament intended to confer a discretion upon the relevant decision-maker to make a decision in the light of all the relevant factors. That decision must strike a reasonable equilibrium between the different factors but the factors themselves are not determinative of any particular equilibrium. Which equilibrium is the best in the circumstances is left to the decision-maker. The court’s task is merely to determine whether the decision made is one which achieves a reasonable equilibrium in the circumstances.

[50] If we are satisfied that the Chief Director did take into account all the factors, struck a reasonable equilibrium between them and selected reasonable means to pursue the identified legislative goal in the light of the facts before him, the applicant cannot succeed. The task of allocation of fishing quotas is a difficult one, intimately connected with complex policy decisions and requires ongoing supervision and management of that process by the departmental decision-makers who are experts in the field.

[51] The main basis for the applicant’s claim is the fact that the 2002 allocation took as its starting point the 2001 allocation and then only took a five percent “equity pool” from existing rights holders for re-allocation. This process, they argue, illustrates that insufficient weight was given to the section 2(j) criterion.

[52] The respondents’ answer is that the 2002 allocation, albeit for a four-year period, is near the start of a process of transformation in a complex, capital- and labour-intensive sector of the fishing industry in which instability would be detrimental to the overall management of the fishery. The government respondents argue that the four-year period will permit a reshuffling in the industry which will facilitate transformation in the medium-term. It is true that five percent of the overall allocation is a small amount. However, it cannot be said that in opting for this amount the Chief Director acted unreasonably. The question is not whether a different proportion of twenty five percent or fifty percent would have produced a different or better result, but whether in adopting five percent the Chief Director acted unreasonably. It is plain that the process of transformation of the fishing industry, and in particular, the highly complex, capital- and labour-intensive deep-sea hake fishery is no easy task. Parliament has identified the relevant policy considerations and has left the implementation of this task to the executive.

[53] In considering the Chief Director’s decision on the record before us, it is clear that he took into account the need for restructuring the fishing industry throughout the process – the policy guidelines identified transformation as a key consideration, as did the screening evaluation process and the final reasons given for the decision. The policy guidelines also recognised that the capital intensity and labour intensity of this sector make transformation more difficult and that given the need to continue to encourage investment the number of new entrants into this fishing sector needs to be limited. The focus, therefore, was always on the internal transformation of existing participants rather than new entrants. This focus cannot be said to be unreasonable in the light of the overall framework of the empowering legislation. It is clear from the record that the short-term strategy is to maintain stability in the sector, while the medium-term strategy of the Department is to seek a rationalisation of new entrants which will see the emergence of one or two major new players coupled with a continued emphasis on the importance of the internal transformation of pioneer companies as the route to the required restructuring.

[54] The evidence establishes that the Chief Director did take all the identified considerations into account. In particular, the Chief Director recognised that transformation as required by sections 2(j) and 18(5) of the Act can be achieved in a variety of ways and selected the way he thought appropriate in the circumstances. The Chief Director’s decision may or may not have been the best decision in the circumstances, but that is not for this Court to consider. The Court must merely decide whether the decision struck a reasonable equilibrium between the principles and objectives set out in section 2 and section 18(5) in the context of the specific facts of the deep-sea hake trawl sector. In my view, and for the reasons given above, the equilibrium achieved cannot be said to be unreasonable. In the circumstances, this ground of appeal will not succeed.

Failure to consider applicant’s application on its merits

[55] The second ground of appeal is that “the SCA incorrectly concluded that the Chief Director’s decision should not be set aside on the grounds that he did not apply his mind to the quantum of hake applied for by the applicant and the applicant’s ability to catch such quantum.” It will be recalled that the applicant made application for 12 000 tonnes of hake (more than twelve times its existing tonnage). In its supplementary argument, the applicant identifies section 6(2)(e)(iii), (h) and (i) as the provisions of PAJA upon which the cause of action is based. This is a similar complaint to the complaints concerning the lack of reasonableness and the failure to take relevant factors properly into account that were dealt with in the previous part of this judgment. Nevertheless, it is appropriate to consider it briefly here. The nub of this complaint is that the Chief Director did not apply his mind to the quantum of tonnage applied for by the applicant and, in particular, did not take into account the change in capacity of the applicant since 2001. The applicant argues that the Chief Director failed to take relevant considerations into account. In so arguing, it relies on Computer Investors Group Inc and Another v Minister of Finance,[35] where the court held:

“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 applied invariably in every case. At most it can be only a guiding principle, in no way decisive. Every 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 prejudged the case without having regard to its merits. The public body will not have applied the provisions of the statutory enactment.”

That case was different from this one. It concerned the way in which sales duty payable on certain imported computer equipment was to be calculated. The decision-makers in that case had wrongly concluded that the relevant provisions of the statute were not applicable to the calculation and had instead applied a different formula. They did not consider the merits or appropriateness of that formula to the calculation in issue. That formula was described by the court as “at most a very rough guide or check”.[36]

[56] This case is quite different. The Chief Director here has not applied a “rough guide or check” without considering its appropriateness in the place of an applicable statutory formula. Far from it. Each application was carefully considered and rated according to a range of criteria identified as relevant by the Department. Included in those criteria were “essential requirements” which related to ownership of or access to an appropriate vessel and the use of regulation size mesh for the bottom-trawl nets. The other criteria evaluated, as stated above, were the degree of transformation of the applicant, the degree of involvement and investment in the industry, past performance, legislative compliance and the degree of “paper quota” risk. Each application was then evaluated and scored according to these criteria. Those scores were then considered by the Chief Director. The scores achieved were used to calculate the distribution of the “equity pool”. This entailed an individualised approach to each application.

[57] In circumstances such as these, moreover, where the decision-maker is seeking to evaluate a large number of applications against similar criteria, the dictum in the Computer Investors Group case[37] is not relevant. In cases such as the present, it will be permissible, and indeed will often be desirable, for administrative decision-makers to adopt and apply general criteria evenly to each application in order to ensure that the decision subsequently made is fair and consistent.

[58] Although the starting point for the allocation was the 2001 allocation, the Chief Director did not simply repeat the allocations of 2001. In at least two cases, existing quota holder applicants were unsuccessful. This was an appropriate and fair procedure to follow, and one which did involve a consideration of the merits of each individual application.

[59] It is true that the amount of tonnage that the applicant sought was not directly taken into consideration in the calculation of its final allocation. It is not clear why it should have been. In total the applications lodged sought allocations of approximately 1,1 million tonnes of hake, nearly ten times the total allowable catch. The Chief Director was entitled to consider all the applications together in the light of their scores on the individualised assessment and previous quota allocations, having considered the “essential requirements” identified above, being the ability to ensure that the allocation was caught.

[60] There is therefore no indication of unreasonableness, nor of relevant factors having been ignored nor of irrelevant factors having been taken into account. For these reasons, this ground of attack must also fail.

Undisclosed policy change

[61] The third ground of appeal raised by the applicant was that the respondents changed the basis upon which the allocation would be made after the applications and policy guidelines were published without notice to the applicant, or indeed any of the applicants for fishing quotas. This ground is apparently based on section 6(2)(c) of PAJA which requires administrative action to be procedurally fair. In putting this argument forward, the applicant relied not only on the policy guidelines,[38] but also on a range of other instruments, including the White Paper[39] and certain draft policy documents. It is clear that the relevant policy guidelines for the purposes of this argument are those published on 27 July 2001 at the time of the invitation for applications. Unpublished guidelines, draft guidelines and policy documents subsequently overtaken by legislation or regulations cannot be relevant to determining whether there has been a change in policy. The guidelines issued on 27 July 2001, together with the terms of the Act, are the only materials which may be considered to determine this complaint.

[62] The applicant relies on paragraph 2 of those guidelines to make its case. Paragraph 2 provides in part that:

“To effectively address the injustices of the past in an orderly and just manner and to achieve equity in the fishing industry, it is the intention to allocate a notable proportion of the TAC/TAE[40] to deserving applicants in order to encourage transformation, either through the internal restructuring of current rights holders, or through the accommodation of new entrants.” (emphasis added)

The applicant argues that the proportion of the total allowable catch allocated is not a “notable” proportion and that therefore the policy was changed without notice to the applicant and to its detriment. Paragraph 2 however must be read in the context of the guidelines as a whole. Paragraph 1 states that:

“Cognisance has been taken of the fact that substantial investments have been made by many of the current rights holders. This factor, together with the need to create an environment that will promote further long-term investment in human and material resources are important considerations. Historical involvements, proof of investment and past performance are therefore important factors. Applicants that are able to demonstrate the creation of employment through the effective utilisation of their allocation will be viewed in a favourable light.”

[63] Moreover, it is clear from the guidelines that transformation requirements are met not only by permitting new entrants but also by transformation of existing rights holders. So another paragraph in paragraph 2 of the guidelines states:

“In determining the degree of transformation, the following factors will be taken into account:

ownership of, or equity within the applicant;

the distribution of wealth created gained through access to marine living resources;

the extent to which the applicant provides employment to members of historically disadvantaged sectors of the community.”

In this regard, the guidelines also make plain that for the purposes of transformation the situation in the capital-intensive sectors was to be treated somewhat differently to other sectors of the fishing industry. Another paragraph in the guidelines states that:

“In the more capital-intensive sectors of the fishing industry, a higher level of internal transformation of current rights holders rather than the introduction of new entrants is encouraged.”

[64] The corollary was that the less capital-intensive sectors of the industry were more appropriate for the form of transformation that required extensive admission of new entrants. The relevant guideline states:

“The hake line sector (longline and handline) has been identified as a suitable vehicle for the promotion of HDI’s [historically disadvantaged individuals] in the hake sector, more specifically small- and medium-sized enterprises (SMME’s). In order to achieve the objectives contemplated in section 2 of the Act, particular regard will be paid to the need to grant access to new entrants, particularly those from historically disadvantaged sectors of society.”

Finally it is clear from the guidelines that the Department sees transformation in the industry as a long-term goal:

“While it is acknowledged that transformation or restructuring of the fishing industry cannot be achieved overnight, it nevertheless is a primary objective to build a fishing industry that in its ownership and management, broadly reflects the demographics of South Africa today.”

[65] It is true that at the end of the day only a small portion of the total allowable catch was allocated to the “equity pool”. The question that arises is whether the small proportion that was allocated was such as could on an overall reading of the guidelines be said to constitute a change in policy of which the applicant should have been notified. In my view, it could not. The guidelines make plain that transformation is not going to happen “overnight” and that in the capital-intensive sectors, emphasis is being placed on the internal transformation of existing rights holders rather than the introduction of new entrants. It is also clear on the evidence before us that the pioneer companies are in the main making progress in the task of internal transformation. Moreover, in the hake industry, the long-line and hand-line sectors have been identified as suitable sectors for the promotion of small- and medium-sized enterprises owned and managed by historically disadvantaged persons. There has been a shift in the proportion of the total allowable catch allocated per sector in favour of those sectors, although it remains a small proportion of the overall total.

[66] In the circumstances, this ground of appeal, too, must fail.

Effect of internal appeal

[67] In the light of the decision I have reached, it is not necessary to consider the effect of the internal appeal to the Minister. It may be that the effect of that appeal was to replace the Chief Director’s decision with another decision by the Minister which would render any challenge to the decision of the Chief Director futile. We also do not need to decide whether, when an exemption is granted in terms of section 7(2)(c) of the Act, internal remedies may not be pursued, as the respondents argued. This question may stand over for another day.

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South Africa: Constitutional Court

Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others (CCT 27/03 ) [2004] ZACC 15; 2004 (4) SA 490 (CC) (12 March 2004)