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Ekuphumleni Resort (Pty) Ltd and Another v Eastern Cape Gambling and Betting Board and Others (402/2007) [2010] ZAECGHC 5 (18 February 2010)

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IN THE HIGH COURT OF SOUTH AFRICA Case No: 402/2007

(EASTERN CAPE, GRAHAMSTOWN) Date heard: 2-3 December 2009

Date Delivered: 18 February 2010

REPORTABLE


In the matter between:


EKUPHUMLENI RESORT (PTY) LTD First Applicant


ELONWABENI RESORTS (PTY) LTD Second Applicant


and


THE EASTERN CAPE GAMBLING AND BETTING BOARD First Respondent


THE MEMBER OF THE EXECUTIVE COUNCIL FOR

THE DEPARTMENT OF ECONOMIC AFFAIRS,

ENVIRONMENT AND TOURISM IN THE EASTERN

CAPE PROVINCIAL GOVERNMENT Second Respondent


CLIFTON DUNES INVESTMENTS 224 (PTY) LTD

t/a LUKHANJI LEISURE Third Respondent


PEERMONT GLOBAL QUEENSTOWN (PTY) LTD Fourth Respondent


PEERMONT GLOBAL MTHATHA (PTY) LTD Fifth Respondent



JUDGMENT


KROON J:


Introduction:


  1. The Eastern Cape Gambling and Betting Act 5 of 1997 (the Act) provides for control over gambling and betting, and matters connected therewith, in the Eastern Cape Province. The control is vested in the first respondent, the Eastern Cape Gambling and Betting Board (the Board), a juristic person established under s 3 of the Act. In terms of s 4 of the Act it has the power inter alia to invite applications (bids) for licences provided for in the Act, in particular casino licences, to consider such bids and to award licences (with or without conditions) or to decline to do so.

  2. The two applicants, Ekuphumleni Resort (Pty) Ltd (Ekuphumleni) and Elonwabeni Resorts (Pty) Ltd (Elonwabeni), are companies associated with each other in the sense that they belong to the same stable. The second respondent is the Member of the Executive Council for the Department of Economic Affairs, Environment and Tourism in the Eastern Cape Government (the MEC). The third respondent is a company styled Clifton Dunes Investments 224 (Pty) Ltd t/a Lukhanji Leisure (Clifton Dunes). The fourth and fifth respondents, Peermont Global Queenstown (Pty) Ltd (Peermont Queenstown) and Peermont Global Mthatha (Pty) Ltd (Peermont Mthatha) are companies in the same stable.

  3. The Eastern Cape is divided into five geographic zones for licensing purposes, each zone being allocated one casino licence. Casino licences were previously granted by the Board in respect of zones 1, 2 and 5. This judgment concerns the later decisions of the Board relating to casino licences for zone 3, the Queenstown area, and zone 4, the Mthatha area.

  4. During 2006 the Board advertised for proposals or bids to be submitted in respect of casino licences for each of zones 3 and 4. Ekuphumleni, Clifton Dunes and Peermont Queenstown submitted competing proposals for the casino licence to be issued in respect of zone 3. Elonwabeni and Peermont Mthatha submitted competing proposals for the casino licence to be issued in respect of zone 4. In the result, the Board, on 3 November 2006:

    1. granted the licence in respect of zone 3 to Clifton Dunes and refused the bids of Ekuphumleni and Peermont Queenstown therefor;

    2. granted the licence in respect of zone 4 to Peermont Mthatha and refused the bid of Elonwabeni therefor.

  5. Aggrieved by these decisions the applicants jointly launched the present proceedings. The relief sought by the applicants was:

    1. orders reviewing and setting aside the decisions of the Board to grant the casino licence in respect of zone 3 to Clifton Dunes and the casino licence in respect of zone 4 to Peermont Mthatha;

    2. orders substituting this Court’s decisions for those of the Board and granting the said casino licences to Ekuphumleni and Elonwabeni, respectively;

    3. alternatively to (a) and (b), an order reviewing and setting aside the decision of the MEC not to request the Premier of the Eastern Cape to establish in terms of s 44 of the Act a gambling and betting review tribunal to review the decisions of the Board and directing the MEC to lodge such request with the Premier;1

    4. alternatively to (a), (b) and (c), an order referring the matters back to the Board with the direction that the Board ‘reconsider and objectively assess the applications for such casino licences by the applicants and the third to fifth respondents’;

    5. an order directing the Board to pay the costs of the application, and in the event of the other respondents opposing the application, directing them to pay the costs jointly and severally with the Board.

  6. Subsequent to the institution of the proceedings Peermont Mthatha opted not to take up the licence granted to it in respect of zone 4; with the result that there was no longer any grantee of the casino licence for zone 4, and the need for the latter order referred to in paragraph 5(a) above fell away. Although cited as respondents neither Peermont Mthatha nor Peermont Queenstown entered the lists. The Board, the MEC and Clifton Dunes did, however, oppose the application.

    Condonation

  7. The applicants launched the present proceedings on 5 March 2007. After receipt of further information (an aspect to which I revert below) the applicants filed supplementary papers on 15 February 2008 and 9 June 2008, which was followed by the filing on 25 June 2008 by the Board of what purported to be a record of the proceedings before it (also an aspect to which I revert below). The answering papers of the respondents were accordingly required to be filed by 31 July 2008. Those of the Board were filed on 17 December 2008, together with an application for condonation of the late filing. Certain confirmatory affidavits were filed on 8 January 2009. The answering papers of Clifton Dunes were filed on 23 January 2009, followed by an application dated 10 February 2009 for condonation of the late filing.

  8. The applicants’ replying papers in response to the respective answering papers of the Board and Clifton Dunes were filed on 10 February 2009. It may be noted that the matter was set down for hearing on 19 and 20 February 2009. I was advised by Mr Ford, who with Mr Rorke appeared for the applicants, that although, as reflected in the papers filed by them in response to the applications for condonation, the applicants opposed the grant of the condonation sought, the replying papers were filed against the event that the condonation sought was granted, in order to ensure that the matter proceed on the date of set down.

  9. The application for condonation by Clifton Dunes does not require discussion: it was overtaken by events in the form of a settlement reached between Ekuphumleni and Clifton Dunes, details of which will be set out later.

  10. I do not propose to deal in detail with the explanation proffered by the Board for the delay in the filing of its papers, which can only be stamped as having been substantial. The explanation in the main invoked the complexity of the matter and the alleged difficulty experienced in having a proper record of the proceedings before the Board prepared, together with certain alleged additional contributory factors. Whatever allowance should be made for the two main factors invoked by the Board the conclusion is inescapable that the Board’s representatives did not properly apply themselves to the tasks in hand and on the contrary made themselves guilty of gross dilatoriness deserving of the severe censure of this court.

  11. Moreover, by the adoption of a certain stance, which was in fact indefensible, the Board added substantially to the delay in the preparation of the record. As provided for in rule 53(3) it was incumbent on the Board to lodge with the registrar of this Court the record of the proceedings before it. In addition to other deficiencies in the Board’s compliance with this obligation (an aspect to which I revert later in another context), it took the stand that it was entitled to censor certain portions of the record and excise same. The issue related to the score sheets which individual members of the Board were required to complete in the process of adjudicating the competing bids for casino licences, the scores reflecting the assessment by the individual members of the extent to which the applicants for licences had met certain criteria.

  12. In the copies of the score sheets which were initially included in the record made available by the Board it had expunged the names of the individual members and replaced same with letters of the alphabet. This was allegedly done in order to protect the individual members (an allegation that the Board could not satisfactorily explain). Despite representations on behalf of the applicants the Board persisted in this attitude save for a relaxation at one stage to the effect that the names would be revealed to the applicants’ attorney provided he did not disclose same to his clients or to anyone else. Not surprisingly, this untenable offer was rejected.

  13. Eventually, the applicants were obliged to launch an application during September 2007 for an order that the names be disclosed. At the Board’s instance the proceedings were postponed on two occasions, with the result that an order that the names be revealed was only made by Leach J (as he then was) on 3 April 2008. He reasoned that the disclosure of the names was necessary in the interest of openness and transparency and relevant to the proper testing of the rationality of the assessments by the individual members, who were appointed for their expertise in various fields as well as to the issue whether their scoring was tainted by bias. The disclosure of the names dictated the further papers filed by the applicants thereafter.

  14. I am, however, mindful of the constitutional imperative regarding the fundamental right of persons to have access to the courts and I consider that to strike out the Board’s answering papers would be a drastic measure that would result in an inroad on the right referred to, which, notwithstanding the severe censure which the Board’s conduct attracts, would at the end of the day not be justified. I am accordingly persuaded that the condonation sought by the Board is to be granted (including condonation of the late filing of the confirmatory affidavits, which, although not specifically the subject of the condonation application, were treated as such during argument) and that order is made. In the circumstances it is unnecessary to embark on a consideration of the merits of the Board’s defence embraced in the answering papers.

  15. However, despite that conclusion the instant is not a case where the Board should only be mulct in the costs tendered by it (the costs of the application on an unopposed basis) and where the costs of the applicants’ opposition should follow the event: the action of the applicants in opposing the application for condonation by the Board (which in fact sought an indulgence) was reasonable and fully justified, which merits an order of costs in their favour. An appropriate order will be recorded at the end of this judgment.

    Further aspects relating to the record

  16. At the first hearing of the argument on the application (on 19 and 20 February 2009) it became clear that the Board’s then compliance with its obligation in terms of rule 53(3) to make available a record of the proceedings before it was still deficient. The record was incomplete and what had been placed before me as comprising the volumes of the record did not tally with those referred to by counsel during argument. This occasioned no small amount of inconvenience. I accordingly gave instructions that the house of the record should be put in order before the resumption of the hearing (which, for a number of reasons that need not be detailed, was only possible on 2 and 3 December 2009).

  17. Those instructions were addressed and by 2 December 2009 the Board had largely put its house in order (but it became apparent during the further hearing that there were still some omissions in the record). However, Mr Ford advised me that he would seek a special order as to costs on the basis of what he argued was the Board’s continued dilatoriness in the matter of the preparation of the record. This state of affairs had required a candidate attorney in the office of the applicants’ attorneys to travel from Port Elizabeth to Grahamstown and spend a day assisting the Board’s attorneys to finalise the record. In the result, Mr Soni, who with Mr Ntsaluba appeared for the Board, conceded that a special order of party and party costs was justified. Counsel placed on record that the attorney for the Board accepted that the situation in question had arisen due to his fault. That is, however, a matter between the attorney and the Board. Counsel were requested to favour me with an agreed draft order, but it would seem that sight was lost of the request. An appropriate costs order on the issue will be recorded at the end of this judgment.

    Withdrawal of Ekuphumleni’s application for substantive relief in respect of the Board’s decisions relating to zone 3

  18. After the mid-morning adjournment on 20 February 2009 (the second day of argument) Mr Ford and Mr Redding (who with Mr Goodman appeared for Clifton Dunes) advised me that agreement had been reached between Ekuphumleni and Clifton Dunes as follows. First, Ekuphumleni would no longer seek any of the substantive orders set out in the notice of motion relating to the Board’s decisions in respect of the casino licence for zone 3. Second, as between Ekuphumleni and Clifton Dunes each party would bear its own costs in the application. Mr Redding and his junior thereupon withdrew from the proceedings.

  19. Mr Ford, however, further advised me as follows. The abandonment of any substantive relief in respect of the grant of the casino licence to Clifton Dunes was not founded on any acceptance that the application for review thereanent was ill-founded on the merits, but was instead based on practical considerations. On that score counsel stated that what had weighed with him was the fact, invoked by and on behalf of Clifton Dunes, that it had acted on the grant to it of the casino licence in respect of zone 3, that over a protracted period it had expended very substantial sums of money in establishing and conducting the casino business in question and for that purpose had recruited a considerable number of persons into its employment, and the consequent substantial hurdles which Ekuphumleni would have had to overcome to avoid my exercising a discretion in Clifton Dunes’s favour by refusing to issue any orders that might have the effect of undoing the award of the licence to it. The allegations in the papers relied upon by Ekuphumleni in its attack on the Board’s decisions apropos the casino licence for zone 3 were, however, so counsel continued, not abandoned in that they remained relevant as having a bearing on the grounds relied upon by Elonwabeni for the relief it sought in the proceedings.

  20. The costs of the Board and the MEC incurred in respect of Ekuphumleni’s application remained an issue and argument thereon was subsequently presented. The issue will receive further attention in due course.

    Modus operandi of the Board in processing and adjudicating the applications before it

  21. Notwithstanding that the applications for the casino licence in respect of zone 3 and those in respect of the zone 4 licence constituted separate and discrete matters they were dealt with concurrently by the Board.

  22. During February 2006 the Board circulated a draft Request For Proposals (RFP) (which would serve as the invitation for bids for licences to be submitted). This was followed on 23 February 2006 by a Bidders’ Conference during which the draft was analysed and discussed in detail by the Board, all prospective bidders and the industry in general. With the input of all involved a final version of the RFP was produced. In March 2006 the Board utilised same to invite applications for casino licences in zones 3 and 4, to be submitted by 12 June 2006. The RFP spelt out the requirements of the process as well as the evaluation criteria the Board would adopt in considering the applications.

  23. After receipt of the bids investigations, eg site visits, were undertaken by the Board and thereafter public hearings on the bids were conducted. Further information was sought from the bidders. Thereafter the Board deliberated and adjudicated the respective bids. Finally, the decisions of the Board as to the awards of the licences were publicly announced.

  24. The Board resolved to award the casino licence in respect of zone 4 to Peermont Mthatha subject to certain conditions precedent and further conditions attaching to the licence once it had been issued. The nature and ambit of the conditions were still to be the subject of further negotiations. It was further resolved that in the event of Peermont Mthatha not timeously satisfying in full any or all conditions precedent for the issue of the casino licence, the licence in zone 4 would be re-advertised for applications. This resolution followed on the decision of the Board, to be elucidated below, that the bid of Elonwabeni should be disqualified for want of compliance with a certain prerequisite.

  25. Notwithstanding the disqualification the Board nevertheless proceeded to assess and evaluate Elonwabeni’s bid and to compare it with that of Peermont Mthatha. As explained by Ms Canca, the present chairperson of the Board, and the deputy chairperson during 2006, this procedure was followed against the event that it were subsequently found that Elonwabeni’s bid ought not to have been disqualified. (The same procedure was followed in respect of Ekuphumleni’s bid for the zone 3 licence, save that it was resolved that the decision on the issue whether Ekuphumleni should be disqualified would be held in abeyance until after the scoring process had been completed). Peermont Mthatha received a higher total score than Elonwabeni.

  26. It requires to be recorded that an analysis of the Board’s hearings and deliberations and of the content of the report of the Board to the MEC setting out the reasons for its decision, including inter alia the various scores allocated to Peermont Mthatha and Elonwabeni, respectively, reveals that apart from the disqualification of the latter for the alleged want of compliance with a minimum requirement, the Board did not conclude that Elonwabeni was otherwise not a suitable candidate to be awarded the casino licence for zone 4. On the contrary, the public statement of the Board made when the awards of the casino licences were announced, embraced the comment that all the bids submitted had been ‘of a very high standard’.

    Grounds invoked by Elonwabeni in the present proceedings

  27. In essence, the contentions of Elonwabeni were that the proceedings before the Board were unfair and fundamentally flawed in that:

    1. the bid of Elonwabeni had been irregularly, unfairly and invalidly disqualified;

    2. the conclusion of the Board that the bid of Peermont Mthatha was to be preferred above that of Elonwabeni was vitiated by bias against the latter and was irrational and not justifiable in terms of the reasons given for it (these contentions being based in the main on an analysis of the scoring by the individual Board members in respect of both zones 3 and 4 and alleged patent anomalies therein which remained unexplained on the papers as well as an alleged absence or insufficiency of reasons for the scores allocated in respect of the variety of criteria which came under consideration).

  28. Accordingly, the constitutional right of Elonwabeni to administrative action that is lawful, reasonable and procedurally fair, had been transgressed. The same right to lawfulness, reasonableness and procedural fairness is recognised by the Promotion of Administrative Justice Act 3 of 2000 (PAJA).2 Elonwabeni was in the circumstances entitled to relief in terms of s 6 of PAJA in the form of a judicial review of the administrative action.3

  29. Secondly, it was the contention of Elonwabeni that the decision of the MEC not to act in terms of s 44 of the Act4 and request the Premier to set up a review tribunal was subject to review in terms of the provisions of subparagraphs (e) and (f) of s 6 (2) of PAJA.5

    The disqualification of Elonwabeni’s bid for the casino licence in respect of zone 4

  30. Clause 4.3 of the RFP recorded that the Board was not obliged to issue a licence and if it found that all or any bids did not meet one or more of the criteria laid down it could decide not to issue a licence. Clause 5.3.8 prescribed certain minimum requirements to be applicable to each bid. Subclause (k) thereof provided as follows:

    If a management company is used in respect of the casino, a local management company at least 50% held by the Eastern Cape-based historically disadvantaged individuals or groupings holding shares in the casino is to derive at least 30% of the total management fees payable in respect of the casino’.

    Clause 5 concluded as follows:

    Applicants shall satisfy the Board that they comply with these minimum requirements, setting out the relevant information in support of this.

    If any of the above minimum requirements are not met, the Applicant shall be disqualified.’

  31. It was because the Board concluded that Elonwabeni had not met the requirements of clause 5.3.8(k) that it disqualified its bid. (Ekuphumleni’s bid was similarly disqualified on the basis that it had not met the requirements of clause 5.3.8(k) and for the further reason that it had not met the requirements of clause 5.3.8(l)).

    In its report to the MEC the Board, after quoting the terms of clause 5.3.8(k), recorded its resolution to disqualify Elonwabeni in the following terms:

    In relation to Peermont in respect of the initial submission, the PDI’s would have effectively shared 15% of the management fees.

    In relation to Elonwabeni the PDI’s would have shared/received 25% of the management fees.

    At the Public Hearings held on 11 September 2006, the applicants were quizzed on this and were subsequently given an opportunity to amend their [applications] in order to comply.

    Peermont submitted such an application as alluded to in the introduction. However, Elonwabeni did not submit such amendment to cure these defects and the Board was left with no alternative but to disqualify Elonwabeni.

    Although the overall scores indicate Ekuphumleni (sic – read Elonwabeni) as scoring lower than Peermont, it is important to note that non-compliance with a minimum requirement results in a disqualification.’

    (The disqualification of Ekuphumleni for failure to comply with clause 5.3.8(k) proceeded on a similar basis). The statement that Peermont Mthatha submitted an amended application (which does not form part of the papers), must be seen in the light of the comments that follow later concerning the Board’s approach to its bid.

  32. Both s 33(2) of the Constitution and s 5 of PAJA impose a duty on an administrative functionary to furnish reasons for the action taken by it. As was stated in Afrisun Mpumulanga (Pty) Ltd v Kunene NO and Others:6

    The importance of reasons cannot be over-emphasised. They show how the administrative body functioned when it took the decision and in particular show whether that body acted reasonably or unreasonably, lawfully or unlawfully and/or rationally or arbitrarily.’

    See, too, Réan International Supply Co v Mpumalanga Gaming Board7; Minister of Environmental Affairs and Tourism and Others v Phambili Fisheries (Pty) Ltd and Another8 (which cases further emphasised that the reasons should be properly informative).

  33. It is the contention of Elonwabeni that on a proper interpretation of clause 5.3.8(k) the requirements thereof are that the local management company be at least 50% owned by Eastern Cape-based historically disadvantaged individuals (HDI’s or PDI’s, ie previously disadvantaged individuals) or groupings holding shares in the casino, and that the company (as opposed to the individuals or groupings) receive at least 30% of the total management fees paid by Elonwabeni.

  34. The further contention is that Elonwabeni’s bid revealed that it had met the requirements of the clause, interpreted as set out above. The factors invoked are set out in the paragraphs that follow.

  35. Elonwabeni concluded the following agreements, which would have become operative in the event of it being awarded the casino licence in respect of zone 4:

    (a) an operating management agreement with Sun International Management Ltd (SIML) in terms of which SIML would be appointed as the manager of the operation of the casino;

    (b) a related agreement with Mthatha Casino Management Company (Pty) Ltd (MCMC) in terms of which MCMC would perform certain management functions in the operation of the casino.

  36. The firstmentioned agreement provided inter alia:

    1. that SIML would assist MCMC to ‘facilitate a transfer of skills and the establishment of know-how in the latter company’ relating to the management of the operation of the casino (the intention being, according to Mr Dondolo, a director of both applicants, who deposed to the founding affidavit, that in due course MCMC would assume the position of manager of the operation of the casino);

    2. that in return for its services as manager of the operation of the casino SIML would receive a basic fee equal to 2% per annum of the gross revenue of Elonwabeni plus an incentive fee equal to 10% per annum of the adjusted net profit of Elonwabeni, for the duration of the agreement.

    3. that SIML’s functions would not include the functions entrusted to MCMC (referred to in the succeeding paragraph).

  37. The secondmentioned agreement provided inter alia:

    (a) that MCMC would undertake the management functions necessary for the implementation of Elonwabeni’s empowerment policy;

    (b) that in return for its services MCMC would receive a basic fee equal to 1% per annum of the gross revenue of Elonwabeni plus an incentive fee equal to 5% per annum of Elonwabeni’s adjusted net profit, for the duration of the agreement.

  38. The shareholding in Elonwabeni was as follows:

    African Pioneer Ltd 51%

    Barnacle Shore Investments 100 (Pty) Ltd (Barnacle) 29%

    Zonwabise Resort Holdings (Pty) Ltd (Zonwabise) 20%

  39. The shareholding in MCMC was as follows:

    African Pioneer Ltd 38 shares

    SIML 25 shares

    Barnacle 10 shares

    Zonwabise 17 shares

    Umtata Community Chest 10 shares

  40. The black-owned stakes in those three of the abovementioned entities that were shareholders in Elonwabeni were as follows:

    African Pioneer Ltd 86.53%

    Barnacle 100%

    Zonwabise 86%

    (The black-owned stake in Umtata Community Chest was also 100%).

  41. Accordingly, so it was contended, MCMC is a local company as envisaged in clause 5.3.8(k), and in terms of the agreements referred to above more than 30% (namely, one third) of the total management fees that Elonwabeni would have paid would have accrued to it. Subject to what follows later in this judgment, the validity of the contention on behalf of Elonwabeni, that its bid complied with clause 5.3.8(k) as interpreted by it, was, correctly, not disputed.

  42. On the other hand, subject to what is stated in the following paragraph, the interpretation of clause 5.3.8(k) that was pressed on behalf of the Board during argument was that the minimum of 30% of the management fees paid by the casino was, immediately on receipt thereof, to be paid to the local management company’s HDI’s or groupings holding shares in the casino. The interpretation was voiced as follows in Ms Canca’s answering affidavit:

    The correct interpretation, certainly as the Board made clear to the Applicants, on three separate occasions, required that 30% of the total management fees should end up in the hands of HDI’s. Notwithstanding that they were told what the Board’s interpretation was and that they indicated that they were keen to meet the requirement, the applicants persisted, in my respectful submission, unreasonably with an interpretation that they knew was unacceptable to the Board, which had been tasked with assessing the bids and determining whether or not they met the minimum requirements.

    ……………..

    The requirement of the clause, as was also explained at the Bidders’ Conference and the public hearings, is that 30% of the total management fee should accrue to the HDIs, regardless of what percentage holding they have in the management company. The minimum of 50% ownership by the PDIs in the management company is to guard against a situation where the management fees are minimal or not paid but instead dividends are paid to the shareholders. Neither of the Applicants met the 30% requirement.’

  43. Mr Soni, if I understood his argument correctly, did not seek to dispute that on a linguistic approach to the interpretation of the clause Elonwabeni’s interpretation thereof was correct (an aspect to which I revert below). Instead, it was his argument that the Board was entitled to place the interpretation it wished on the clause, alternatively that during the public hearings the Board had ‘impliedly amended’ the clause with the result that it bore the meaning contended for by Ms Canca.

  44. However, as will be demonstrated below: Ms Canca’s version of what occurred at the Bidders’ Conference and the public hearings was materially incorrect; the Board in fact initially adopted the interpretation contended for by Elonwabeni; that interpretation was in law the correct one and the interpretation of Ms Canca is untenable; comments and queries at the public hearings relating to the latter interpretation (generally not by Board members) were no more than that; the Board did not intimate to the applicants that its initial interpretation was no longer operative; it did not intimate to the applicants that it accorded to the clause the meaning now ascribed to it by Ms Canca, nor even the possibility of its entertaining that interpretation; there was in fact no attempt, impliedly or otherwise, to amend the clause so that it bore a meaning different from its true meaning and the one originally attributed to it; it did not in fact afford the applicants a proper opportunity of amending their bids; nor was it consistent as to the basis on which Elonwabeni’s bid failed to comply with the clause; and the manner in which the resolutions to disqualify the applicants were reached attracts cognisable criticism.

  45. In the draft RFP circulated by the Board and thereafter considered at the Bidders’ Conference9 the original clause 5.3.8(k) (then numbered (j)) read as follows:

    Local management company at least 50% held by Eastern Cape based historically disadvantaged individuals or groupings holding shares in the casino in the same proportion as contemplated in paragraph (i) is to derive at least 30% of the total management fees payable in respect of the casino.’

  46. Adv K Harvey, in his capacity as Head: Legal Affairs of the Eastern Cape Government, had been appointed by the Board to respond to queries raised at the conference and explain the meaning of provisions in the draft RFP (the final version of which would in due course be submitted to the MEC for consideration by the Executive Council). Thus, Harvey, in response to a query, furnished an explanation of the meaning of the then clause 5.3.8(j). The relevant transcript of the proceedings reads as follows:

    MR PETZER: Chair, my second question relates to the management company requirement. As I read it there should be a local management company with at least 50% local PDI shareholding, but sharing in 30% of the management fees. Now is the 50% requirement, does it relate to control, is it a control issue, or why the difference between 50 and 30? Usually, shareholding goes together with the share of profits. Also I note that the language used is 30% of the total management fee, which is not 30% of dividends derived by the management company. So, it is a little bit unclear as to what is expected of us…….

    ADV HARVEY: Chair, the issue on management companies is that we have noticed in the past that largely management companies get their payments long before dividends are declared. The 30% is that, of ……. the total management fees that are payable, 30% must be paid, a minimum of 30% to a local management company, that is if you are paying out R100 million in management fees, to use Mr Young’s analogy we can let, 30% of that will be payable to the local management company and 70% to whatever other management companies may be involved, and of the local company, the PDI shareholders should own at least 50% of that. The reason for that being to allow them a second form of income from above the line, to help them to service their dividends.

    MR YOUNG: Just to confirm something for you Mr Chair, I don’t know whether I heard Mr Harvey properly. He says that if its 30% like empowerment, and the 50% is the local PDI component of shareholders, is that [what] was meant, or I mean, because, now there is a trust, is there something…….(interjection).

    ADV HARVEY: What we are saying, is that with regard to the management company, as opposed to the operating company itself, if there is a usage made of a management company, then there can be a [national] management company, but there must be also be a local management company for fill in functions, and that the local management company, at least 50% must be held by previously disadvantaged individuals.

    The local management company must receive a minimum of 30% of the total management fees that are payable. So of that management fees that are payable, effectively previously disadvantage[d] individuals should get a minimum of 15%, collectively between the trust and the other shareholders that there may be.

    CHAIRPERSON: All right, it would look like we have exhausted today.

    ……………….

    But I would like to allow for perhaps board members, and Mr Nodada, but if board members would like to issue a view, observation, some sentiment, feel free to, Chris, CEO? Any particular, I mean you would rather raise observation in terms of your experience and how things are?

    MR GUEST: Maybe just to add that the ruling for the management company, provisions of the shareholding and the management company, is to stop the profits from all being diverted into the management company, that is why we got that provision in there (inaudible).

    CHAIRPERSON: I did not hear you [properly]?

    MR GUEST: The management company, if there is a management company it should also be based on experience, in saying that a minimum must, there must be a minimum holding in the management company as distinct from the actual top rated company, and the reason is to safeguard the shipping [of] profits from the operating company to the management company, that is the whole reason for it. Thanks Chairman.

    CHAIRPERSON: Thank you.’

  47. Certain of the wording in the above extract is to be ascribed to the fact that earlier in the proceedings Harvey had intimated, apropos the relevant clause in the draft RFP, that for various reasons the Board favoured the approach that the engagement of a management company (as opposed to the licensee itself) to undertake the management of the casino, should not be compulsory and that ‘[a]ccordingly the board will consider amending the RFP to make it clear that the provisions of these minimum requirements for the shareholders in the management company, will only apply if use is made of a management company.’ In the result, the draft RFP was amended and clause 5.3.8(k) contained the final version of the relevant provision.

  48. Four observations fall to be made:

    (a) The amendment did not affect the meaning which, to the extent that is relevant for present purposes, is to be ascribed to the provision;

    (b) The meaning ascribed to the provision by Harvey was not questioned on behalf of the Board and, on the contrary, it is quite clear that inferentially the Board associated itself therewith and adopted same;

    (c) That meaning accords fully with the interpretation placed on the clause by the applicants, and the interpretation now advanced on behalf of the Board, as set out above, is contrary thereto and not reconcilable therewith;

    (d) Harvey’s comment that in the light of the stipulation that a minimum of 30% of the total management fees would accrue to the local management company, in effect previously disadvantaged individuals should get a minimum of 15% (of the management fees) is to be explained as follows: if management fees received by the local management company were in fact to be translated into dividends to be paid to the shareholders of the company the HDI shareholders, holding at least 50% of the shares, would in the result receive at least 15% of the fees.

  49. Before recording relevant extracts from the transcript of the public hearings it would be apposite to quote the terms of clause 2.12 of the RFP:

    Communications with applicants

    The Board may call upon applicants to submit presentations on certain aspects of their applications once the applications have been submitted. In addition the Board may interview applicants to obtain clarity on aspects of their applications, once submitted. The Board will strive to conduct the process of inviting presentations and calling for interviews in such a manner as to afford all applicants an equal opportunity of stating their cases.

    All other communications between the applicants and the Board will be in writing (excluding the bidders’ conference) and sent by registered post or hand-delivered to the Board at the following address:

    ………..

    Any attempt to communicate other than as prescribed above or to otherwise obtain information outside this process could lead to rejection of an application.

    In the light of these provisions it was, correctly, not in dispute that any communications between the Board and bidders subsequent to the public hearings were required to be in writing.

  50. After the public hearings the Board addressed a letter to Ekuphumleni requesting the latter’s representations in respect of a number of issues. Similarly, a letter was addressed to Elonwabeni requesting representations on a number of issues. Neither letter raised any aspect bearing on the issue of the applicants’ compliance with the requirements of clause 5.3.8(k), and no representations thereanent were requested or submitted, although other issues were addressed.

  51. The first relevant extract from the transcript of the public hearings proceeds as follows (Mr Mati being the then Chief Executive Officer of the Board):

    CHAIRPERSON: Alright thank you very much there. At exactly 14:00 we probably have two or …. maybe not too much more than that, questions to look at and I will ask then the CEO to start with the first enquiry.

    MR MATI: Thanks Chair. My question relates to the minimum requirements that [are] included in the RFP, which relate to the shareholding and the sharing of fees in the management company. The RFP states that at least 50% of the shares in the management company shall be held by historically disadvantaged groups and also it states further that no less than 30% of the fees will accrue to those historically disadvantaged groups.

    But in our analysis of the bid we came up with an effective figure, which points to a 25% of the fees accruing to PDI, which to us is 5% less than the minimum requirements in the bid and to take that 25% and try and analyse it further the applicant is not 100% PDI. Then it means that even that 25% is further [diluted] down to something like 21.75%.

    Therefore the effect is that the non-PDI elements are enjoying 78.25% of the management fees, as opposed to our imposed [maximum] of 70. So we would like a response to those observations that we’ve made, because to us they are in violation of the RFP minimum requirements.

    CHAIRPERSON: [Unclear] you did catch the detail?

    MALE SPEAKER 2: Yes I did.

    CHAIRPERSON: Alright thanks, let’s look at that one.

    MR. S. [DONDOLO]: Chairperson I think regarding that I will ask the Board that I must read what the requirements were of the Board exactly as it’s stated like it was said. And our interpretation of the requirements of which if you see in our answer we thought that we provided about 33% of the BEE, you know [vis-a-vis] the 30% requirement by the Board.

    Having said that maybe let me read it and after that I will make one or two comments. ‘If a management company is used in respect of the casino, a local management company must at least have 50% held by the Eastern Cape PDI’s, individuals or groups holding shares in the companies or individuals or groups’ ….let me re-read it again.

    If a management company is used in respect of the casino, a local management company must at least have 50% of the shares, must be in the hands of PDI’. With that one in our explanation we were saying the management company is formed and we have 75% of that management company and it goes further and say[s] ‘at least’ in our reading ‘at least 30% of the total management fee payable to the casino must then be re-directed to the management company.’

    That’s how we read it and then we then asked some legal people to give us some comments on that issue, because we are regarding it as serious and we then……the comments that came from our legal advisor said that our reading of the point is correct.

    Having said that if you look at the financial numbers Chair, and you look as it was asked, what is the cash flow going if you move away from the management company now and just look [at] it, it was explained properly in that [unclear]. You are right with your numbers; I have not tested the 21.75.

    You are right with the first number that talks about 25, whatever, because we did some numbers to check for our cash flow also when we were preparing for our funding structure. But the reading of that Chair is we read like that.

    CHAIRPERSON: Okay. Alright, thank you very much for that one.’

  52. The observations to be made in respect of this extract are the following:

    (a) Conspicuous by its absence in the comments by Mati was any statement that the explanation proffered by Harvey at the Bidders’ Conference fell to be revisited, and that in contradistinction to what he had explained it was the individual HDI shareholders of the local management company, and not the company itself, to whom the minimum 30% of management fees was to accrue.

    (b) On the other hand, the stance of the applicants was clearly and unambiguously stated.

    (c) How Mati arrived at the figure of 25% is not clear. (In any event, both the figure of 25% and the ‘diluted’ figure of 21,75% exceed the figure of 15% mentioned at the Bidder’s Conference by Harvey as the theoretical effective accrual to HDI’s).

    (d) No basis was disclosed why the views of the Chief Executive Officer of the Board (who was not a member of the Board and had no voting power) should be regarded as reflective of the views of the Board and, again, conspicuous by its absence, is any indication that the Board intimated that it adopted those views and consequently rejected those put forward on behalf of the applicants, or even that the Board was entertaining the possibility of its doing so.

  53. The next extract reads as follows (Male speaker being Dondolo and Adrian another representative of the applicants):

    CHAIRPERSON: Thank you very much, again we have just a few questions which are very financial in nature and Mr Mati will lead us into that and Mr Mbangxa will follow.

    MR MATI Thank you Chair. My question concerns the management fees payable to the historically [disadvantaged] group within the applicant and Sun International Management Limited. The RFP clearly state[s] that the PDI’s will at least have 50% share in the management company and the RFP further states that out of the fees to emanate from the project at least 30% shall accrue to the PDI’s. Our calculations in analysing your bid reveal that instead of the 30/70% split we have a 25/75% split and now if you further [investigate the] companies within the PDI that is Zonwabisa [?] and African Pioneer those companies are not 100% PDI owned which means that that 25% I mentioned earlier is diluted. Now if you take out the diluting element of that the PDI percentage reduces further from 25% to an effective 21.63% which leaves now the non-PDI portion of that arrangement at 78.37%. Clearly this is not in line with the spirit of the RFP. The applicant is requested to explain why.

    MALE SPEAKER: Thank you Chair.

    CHAIRPERSON: Alright fine please go ahead.

    MALE SPEAKER: Thank you. As I explained yesterday that our reading on that point K we read it as if (1) the PDI of the Manco [ie management company] is 50% and the Manco received 33% and we thought in our mind that we have reached and exceeded and I am sure we said so, we have reached and exceeded the 30% that was requested. Whereas that is the case Chair I think if you start analysing and unpacking each and every company that is there it really without applying my mind only looking at African Pioneer and what I know recently what has happened to Zonwabisa where their PDI has also been diluted. It created a situation with your numbers without being tested that they are close to the number that you are saying but having said that Chair I think I will give over, fortunately we have got our colleagues here on the management side and last night we discussed and we revisited the document just to reanalyse and check whether what does that mean. Can I give over the Adrian?

    ADRIAN: Thanks Steve. Mr Mati, I think it really comes down to a matter of interpretation when you actually read clause K and perhaps maybe just for your benefit I will just read clause K and explain exactly how we arrived at our interpretation. It says, if a management company is used in respect of the casino a local management company at least 50% held by Eastern Cape based historically disadvantaged individuals or groupings holding shares in the casino is to derive at least 30% of the total management fees payable in respect of the casino. So the way we interpreted this is that the 50% as [Dondolo] mentioned must be the ownership in the local Manco and we then interpreted based on the wording of this that the amount of the management fees, the total management fees payable to that local Manco should be at least 30%. So if we work it out on that basis we would have come to a minimum amount of the management fees that is payable to PDI’s must be the 50% applied to the 30% which gives you 15%. So if you look at our management fee structure we allocate ⅓ of the revenues and one third of our gross operating profit to the local Manco, ⅓, the rest obviously goes to SIML for the operating management. So 33% of the total management fee streams does in fact go to the local Manco and in the case of the ownership of the local Manco we have got a figure of 75% which is well in access of the 50% requirement but obviously if you dilute, if you go into the actual underlying shareholdings it is effectively 95% of the 75%. So when we look at the 21% or 22% that you have arrived at Mr Mati we actually were of the opinion when preparing our bid and submitting our bid that we were in fact well in excess of the minimum. So it really comes down to a matter of interpretation and we have had our legal guys looking at this clause and they interpret it in that way. So may I ask that if we have got it wrong that you inform us and we can then respond accordingly in terms of how we would go about addressing it but the bottom line is we did interpret it that way?

    MALE SPEAKER: Can I just add Chair on that the complexity of the whole structure. Whilst we are having a 30% as per interpretation that it must be a minimum of 30% and we thought we were sitting, the management company is sitting on the 33 according to our interpretation and now with Zonwabisa even if anything happened the cashflow that will come to Zonwabisa there is a dilution in Zonwabisa. We are now responding between the management company and ourselves but within Zonwabisa as well as African Pioneer who has got another 5% there is a complexity whenever this whole thing is looked at because they are part of that PDI not only now for argument sake in Sanlam’s case they are the people that kick started us as a PDI and they put money at the beginning, now that is why they are sitting with 10% as we speak. It is as complex as that Chairperson, we are not doing something to try and you know runaway from the commitments or, because this we regard as very serious to us. We want to meet and exceed all your requirements in the document and if like it was said [by] Adrian if there is any way in which we can address then I am sure we will be able to on both of our proposals.

    Thank you Chairperson. I am sorry Garth wants to say something. Okay Chair that’s fine.

    CHAIRPERSON: Alright thank you. What you are saying there is in case this is an issue of reading, misreading, you know interpretation, you are in a position to re-look with dialoguing with the board so as to harmonise understandings, that is if necessary make adjustments accordingly.

    MALE SPEAKER: That is correct Chairperson, thank you.

    CHAIRPERSON: Alright thanks. ………….’

  54. The observations made in respect of the earlier extract apply here mutatis mutandis. Allied thereto is the fact that notwithstanding that it was stated on behalf of the applicants that they desired to meet and even exceed all of the RFP requirements, and a request was made that if the applicants had got it wrong they be so informed in order that they could then address the issue, no direction was given by the Board that the applicants submit amended bids in order to comply with a different interpretation of clause 5.3.8(k).

  55. The comments made above are underscored by the discussion on Peermont Mthatha’s bid at the public hearing. A Board member raised the query that it was not clear in the bid whether the management fees in question would be payable directly to the PDI’s or to the company which would then declare a dividend after payment of reasonable expenses. The response of the representatives of Peermont Mthatha was as follows: its interpretation of clause 5.3.8(k) was that the fees would be paid to the company; the matter had previously been clarified in writing with the Board which had confirmed that if the company had 50% PDI shareholding and was paid 30% of the total management fees, the minimum requirement would be met; the effect would be that the BEE partner would receive half of the dividends of the company which would be roughly 15% of the total management fees; however, so the representative continued, if their approach was incorrect they would seek an opportunity to correct their bid and engage further with the Board on the issue; but their stance was that the minimum requirement in question had been met. A further question, what percentage of the management fees from Manco would go to the BEE’s, elicited the response: ‘An effective 15%’. The discussion ended with the chairman thanking the representative and noting that he was willing to engage with the Board to ‘harmonise on this’. There was no further discussion.

  56. A further passage in the transcript reflects that Dondolo requested that an opportunity be afforded for a detailed response why Elonwabeni should not be disqualified. That request, however, related to an alleged non-compliance with another provision in the RFP, and is irrelevant for present purposes.

  57. The deliberations of the Board (held in camera) that followed on the public hearings and the communications referred to in paragraph 50 above, took place on 1 and 2 November 2006. The first extract from the relevant transcript of the deliberations reads as follows:

    MALE SPEAKER 3: Just a question Chair for clarity. Did they clarified their Manco position, because I think they weren’t meeting the minimum requirements for the fees for Manco, the issue is the fees from Manco. Have they clarified their position thereon meeting the 30% minimum, because I think that was an issue that they come back with the …. They weren’t meeting the 30%, because [of the] CEO’s calculation.

    CHAIRPERSON: Apparent to that [unclear – overspeaking].

    MALE SPEAKER 3: The management fees, the distribution of 30% minimum. I think they weren’t meeting that requirement, the minimum requirement.

    CHAIRPERSON: The dilution [unclear - overspeaking].

    MALE SPEAKER 3: Yes, correct. The CEO’s tables, I think he highlighted that.

    CHAIRPERSON: Did we receive any specifics?

    MALE SPEAKER 1: No.

    CHAIRPERSON: I think that could be factored in then, in evaluating.

    MALE SPEAKER 5: They have not met the minimum.

    MALE SPEAKER 3: Correct.

    MALE SPEAKER 5: The minimum of 30% for Manco.’ (My emphasis).

  58. The extract does not set out any motivation for the assertion that the applicants did not meet the minimum requirement set by clause 5.3.8(k) other than a reference to the ‘CEO’s tables’ or his ‘calculations’. It does not reflect any decision by the Board that the assertion was correct or that the Board should resile from the interpretation Harvey had put forward at the Bidder’s Conference. It does not reflect any discussion of the counter advanced on behalf of the applicants. The vague statement: ‘I think that was an issue that they come back with….’ in so far as it refers to an expectation that further representations from the applicants were expected as to their compliance with clause 5.3.8(k), enjoys no foundation in what transpired at the public hearings nor in the letters addressed by the Board to the applicants thereafter.

  59. The next extract reads as follows:

    CHAIRPERSON: …………………. Then we go to minimum requirements. Does it meet all the minimum requirements? [Overspeaking]

    FEMALE SPEAKER 2: Except for 30%.

    MALE SPEAKER 1: This, they were supposed to come back to us on Tuesday with the representation to any changes they wish to make. I was advised by Mfundo that Mr Dondolo indicated that he was of the view that the interpretation was correct, therefore there would be no submission.

    MALE SPEAKER 2: On the 30%?

    MALE SPEAKER 1: Yes. What they had submitted was correct.

    CHAIRPERSON: Is that in respect of the evaluations?

    MALE SPEAKER 2: Ja. [Overspeaking.]

    CHAIRPERSON: That is a repeat. This one is on page 31, 29. All right, it’s the other way. We have dealt with the minimum requirements. There is something [interjected]

    MALE SPEAKER 2: Maybe Chair before we move from this minimum requirements, just, they are saying that they stick to their interpretation of the bid. Maybe it would be wise for us to look at the bid application. We would be challenged by them if they don’t get this. And we say that all the interpretation is wrong. We need to just convince ourselves that each application will be [unclear – too soft].

    CHAIRPERSON: But can we write to that effect?

    MALE SPEAKER 2: I mean if they are not, but they have indicated [overspeaking].

    CHAIRPERSON: This was the table that was presented, analysing the shareholders.

    MALE SPEAKER 2: Ja, and I think when that, when that requirement was read. I also had some doubts whether they are wrong or correct. Maybe we need to read that requirement and see if maybe we come to a better understanding.

    CHAIRPERSON: Can we ring fence that, and just come to it after…………..’

  60. The comments on the preceding extract are mutatis mutandis of application to this extract. It may be added, firstly, that the alleged report attributed to Mfundo (whoever he may be) concerning a comment by Dondolo, and the comment itself, were not in writing and therefore not as required by the RFP. Secondly, the one comment by ‘MALE SPEAKER 2’ appears to reflect that he held the view (correctly, it may be added) that the Board should revert to the applicants on the issue of the interpretation to be accorded to clause 5.3.8(k), a step that was not taken. Thirdly, it appears that at that stage the Board was still to finalise its interpretation of clause 5.3.8(k).

  61. The next extract reads as follows:

    CHAIRPERSON: ………….. . Whilst the processing is going on, shall we look at the minimum requirements issue? What position are we taking on that one? There has been a suggestion and we will follow up the rest. Consensus.

    MALE SPEAKER 2: I think Chair. They do not meet the minimum requirement, the required 30% on empowerment, based on that I think they should be disqualified.

    PETER: Do we not want to see what the score is?

    FEMALE SPEAKER 1: Yes.

    CHAIRPERSON: No, then we will be changing our rules. It would then potentially be problematic to award somebody that did not meet the minimum requirements. But we will look at that and we will get the picture about what the total numbers say. Alright then, accepted then that they have been disqualified. Alright then so it shall be then, Elonwabeni disqualified from zone four.

    MALE SPEAKER 2: What are we saying about [unclear] to get Pilisa’s scores?

    CHAIRPERSON: Well, yes, we will also …..tomorrow….tomorrow morning. Basically that takes care of the major part of….

    FEMALE SPEAKER 2: Zone four.

    CHAIRPERSON: …..the major part of zone four, then tomorrow we will be looking at zone three and I think the idea also is that we conclude on zone three, zone four now. How long will it take, we can still stick round to look at the numbers just for comparative purposes. I think that a decision has been taken. It is disqualified and therefore ….there is only one applicant. Okay.’

  62. Part of the deliberations on the bid of Clifton Dunes proceeded as follows:

    CHAIRPERSON: ……..I take it then what we were doing yesterday was part deliberating at the same time where [unclear – too soft). So are we able to proceed if we have dealt with all the matters there with Lukhanji to receive similar presentation from …..

    MALE SPEAKER 6: Sorry Chair I just want to ask a question, where is this letter now? A question about management company and the shareholding, what I would want to confirm the local, the ownership of the management company by the local people, is it 30% or is it, do we have a minimum of 50% in the ownership of the consortium?

    CHAIRPERSON: The management company okay.

    MALE SPEAKER 3: Chair the ownership of the management company is 66.6% BEE consortium and then 33.3% by the William and Marjorie Osner Trust. Now the flow of fees is as follows: Gold Reef will receive 5%, BEE consortium will be 30% and William and Marjorie Osner Trust will receive 15%.

    MALE SPEAKER 2: Okay, Chairman understand that that leads us to the minimum requirement.

    MALE SPEAKER 6: They are there, or are you saying we are not there.

    CHAIRPERSON: We will look at that, let’s then flag that to take it up.

    MALE SPEAKER 2: Yes I was just saying the question leads us to the minimum requirement. I am not saying we are there yet.

    ……..

    FEMALE SPEAKER 2: ……Management Company in respect of the casino at least 50% held by Eastern Cape based historically disadvantaged persons and derive at least 30% of the total management fees payable in respect of the casino. They own 66, the BEE own 66,6% and they will derive 30% of the total management fees payable.

    ……..

    CHAIRPERSON: …… There was the issue ring-fenced around the split, the 66, 15 and split and the, was it 66,33 at the management company? Can we maybe start with that one?

    MALE SPEAKER 3: I didn’t get the question.

    CHAIRPERSON: It was the question asked around the management company whether it was 50/50 or?

    MALE SPEAKER 3: [Unclear] we have a BEE consortium only of 66.6% and then we have a [unclear – talking too softly] they will receive 5% of the fees. The BEE consortium the 30% [unclear – voice fades]. There does not appear to be any fees that are paid [unclear].

    CHAIRPERSON: Oh I see, okay alright, I do beg your pardon. Sorry I am forgetting something, that again in trying to take a lesson from yesterday we address the issue of the minimum requirements and see if the applicant has fulfilled all the conditions. Shall we look at that then?’

    ……..

  63. Thereafter consideration was given to the question whether Peermont Mthatha’s revised bid – the full details of which were not set out – complied with the provisions of clause 5.3.8(k), and the question was decided in the affirmative. (See, however, the comments made later in this judgment on the adjudication of this bid).10

  64. A further discussion on Ekuphumleni’s bid proceeded as follows:

    CHAIRPERSON: ……… Alright, well there are two issues that don’t seem to have been met here. ……..

    PETER: What are the two again?

    MALE SPEAKER 5: K and L.

    CHAIRPERSON: It is the financing of the HDI’s and also the percentage split in the management company.

    MALE SPEAKER 3: With L in respect to Mthatha, is the situation the same?

    MALE SPEAKER 5: Yes. No it’s not. It is not the same.

    CHAIRPERSON: And yesterday we were able to deal with it.

    FEMALE SPEAKER 1: These issues were brought to the attention of the applicant after the public hearings.

    MALE SPEAKER 2: Which ones?

    FEMALE SPEAKER 1: K and L

    MALE SPEAKER 2: Chair [unclear – overspeaking] public hearings.

    FEMALE SPEAKER 1: At the public hearings. I just want to make sure that its recorded that they were aware.

    CHAIRPERSON: So there was an opportunity to …..

    FEMALE SPEAKER 1: ….. to rectify that.

    MALE SPEAKER 2: Because the answer was clear, ten years is not long.

    CHAIRPERSON: …. Ja.

    MALE SPEAKER 5: They said they weren’t [unclear]

    CHAIRPERSON: And in fact this whole thing will not make sense if it’s ten years. Basically that is the average. If you are working on a ten year term then will think that you are not [unclear – too soft]. Shall we then make a determination then on the suitability?

    MALE SPEAKER 5: I move Chair that they have not met the minimum requirements and based on that I think they need to be disqualified.

    CHAIRPERSON: Move to disqualify.

    FEMALE SPEAKER 1: Do we go through the process like we did with the Mthatha?

    MALE SPEAKER 5: Yes I would suggest lets go through with recording the scores.

    CHAIRPERSON: The other is will it make, do any harm? But what is not being challenged is that the applicant has been disqualified.

    MALE SPEAKER 5: Ja.

    CHAIRPERSON: Alright, should we proceed with the scoring or should we not proceed with the scoring?

    ........

    MALE SPEAKER 10: If you don’t mind, anybody else, can you just for my level of [understanding], can you just explain to me again why on K and L they have been disqualified? To be absolutely clear on that.

    MALE SPEAKER 1: With regard to K, under minimum requirements, we say that if a management company is used in respect of the casino, the local management company shall at least have 50% of those shares held by Eastern Cape based Historically Disadvantaged Individuals or groups in the casino and it – (my emphasis) – has to derive at least 30% of the total management fees, in respect of the casino, in their case, it is only 25% of the management fees, of the total management fees and this was raised with them at the public hearings actually.

    MALE SPEAKER 10: In terms of the local managing company being held by 50%, are they all right on that one?

    MALE SPEAKER 1: Yes they are.

    MALE SPEAKER 10: So it is just at 25%?

    MALE SPEAKER 9: I think CEO you should also mention that, that 25% is further diluted.

    MALE SPEAKER 1: It is further diluted if you take into account the shareholders of African Pioneer and the shareholders of Zonwabise. Sun International are shareholders in Zonwabise and Sanlam are shareholders in African Pioneer which now brings down that 25% to something like 21%.

    MALE SPEAKER 10: Okay, and then L?’

    (There was no further discussion on the disqualification of Ekuphumleni’s bid on the grounds of non-compliance with clause 5.3.8(k)).

  65. The comments on extracts quoted in earlier paragraphs apply mutatis mutandis to the extracts set out in paragraphs [61], [62] and [64] above. The following may be added:

    (a) It falls to be repeated that, while the written communications between the Board and Ekuphumleni subsequent to the public hearings addressed inter alia the issue of the latter’s compliance with the minimum requirement set out in clause 5.3.8(l), there was no reference to clause 5.3.8(k) (nor did the communications to and from Elonwabeni relate thereto).

    (b) The manner in which the issue of Elonwabeni’s compliance with the clause was dealt with was at best perfunctory: There was no vote taken on the issue and it would seem that it was the absence of any dissenting voice against the comment that Elonwabeni was disqualified that resulted in the apparent resolution that it be disqualified.

    (c) At least one Board member (Male Speaker 10) required clarification of the basis on which Ekuphumleni’s bid had been disqualified for want of compliance with clause 5.3.8 (k) and in response Male Speaker 1 stated inter alia that it was the local management company that had to derive at least 30% of the total management fees, yet only 25% thereof would have been received.

  66. In paragraph 31 above I recorded the manner in which the Board, in its report to the MEC, motivated its disqualification of Elonwabeni’s bid. While it is true that the explanation embraces a reference to management fees accruing to HDI’s, I repeat that it is not correct that either at the public hearings or subsequent thereto Elonwabeni was requested to, or afforded an opportunity to, amend its application on the issue in question.

  67. It is further noteworthy that in its reports to the MEC in respect of the zone 3 and zone 4 licences the Board recorded the provision in the bids of Peermont Queenstown and Peermont Mthatha that ‘a service fee of 1,5% of revenue and 3% of gross operating profit will be paid to the local management company in which PDI shareholders own 50%. Thus empowerment shareholders shall be able to receive dividends from the first year of operation of the Manco.’ (My emphasis).

  68. It would seem, however, that an amendment to the provision was effected thereafter as appears from the following discussion during the Board’s deliberations on one of the Peermont bids:

    MALE SPEAKER 1: Thank you Chairperson and the members of the Board. Subsequent to the public hearings in the response by the Applicant, they made a re-submission to amend the shareholders agreement of their management company. The agreement that we have currently was that the management company was owned by empowerment partners, 50% and then Peermont Global 50%. The effect of the new change is that the management company will now be owned by employment (sic- read empowerment) partners 100% and then the revised shareholding structure is shown in the second page where the previous shareholder[s] have actually doubled their holding in the management company to now own 100% and then Peermont Global is only deriving fees only from the Applicant. The effect of this is that the management company will derive 30% of this from the Applicant and also we have not yet received the revised agreements, that is amendment number 1.

    CHAIRPERSON: Members do we accept the amendment?

    [unclear]

    CHAIRPERSON: Okay then, amendment accepted. Continue please.

    Nevertheless, the premise embraced in the amendment remained that the company was to derive the fees (the 30% referred to). This approach was in accordance with the interpretation placed on clause 5.3.8(k) by the applicants, but inconsistent with the present stance of the Board. Possibly, however, the Board was satisfied that because the fees would accrue to a company that was now 100% BEE owned that was tantamount to the HDI’s receiving same.

  69. For the sake of completeness it is necessary to advert to the following averments made by Ms Canca. During the Mthatha hearings (which preceded the Queenstown hearings) Elonwabeni’s representatives were told that in the view of the Board its bid did not comply with clause 5.3.8(k). It will be recalled that the Board’s interpretation was clearly spelt out during the Bidder’s Conference. The response of Elonwabeni’s representatives was to persist in their interpretation. A number of other issues were also raised with them and they requested time to deal with them. During the Queenstown hearings it was pointed out to Ekuphumleni’s representatives that its bid did not comply with clause 5.3.8(k). Their initial response was to reiterate the interpretation that they had accorded to the clause during the Mthatha hearings, but they added that they would engage in dialogue with the Board so as to harmonise understandings and if necessary make adjustments accordingly.

  70. Suffice it to say that in a number of material respects these averments do not enjoy support in the record of proceedings, as was shown in the discussion set out earlier. Further, as Dondolo stated, in the absence of further comment by the Board on the explanation furnished by him, Elonwabeni had no reason to suspect that its interpretation and explanation had not been accepted by the Board, particularly when the issue was not raised in the subsequent correspondence.

  71. Mr Ford argued that a linguistic approach to the interpretation of clause 5.3.8(k) would, and could only, result in the conclusion that the interpretation contended for by Elonwabeni was correct and that the interpretation of the Board was untenable. Counsel’s argument must be upheld. He pointed out, correctly, that the subject of the sentence comprising the clause was the local management company, that the adjectival phrase ‘at least 50% held by the Eastern Cape-based historically disadvantaged individuals or groupings holding shares in the casino’, was descriptive of the company, that the verb of the sentence is contained in the phrase ‘is to derive’, and that the object of the sentence is ‘at least 30% of the total management fees payable in respect of the casino’. The interpretation of the applicants meets this linguistic analysis; that of the Board does not.

  72. Two further arguments invoked by counsel may be briefly stated. They were as follows:

    (a) The Board’s interpretation could result in a situation offensive to s 90 of the Companies Act 61 of 1973 and expose the company’s directors to a charge of reckless trading in terms of s 424 of the Companies Act. Section 90 permits a company to make payments to its shareholders only in circumstances where, in effect, there are no reasonable grounds for believing that the company would not remain solvent after such payment. The Board’s interpretation would, however, compel payment to a section of its shareholders (of a portion of the monies received as management fees) whatever the company’s financial position at the time.

    (b) The Board’s interpretation would result in discrimination on the grounds of race against, firstly, companies whose bids do not provide for direct payment of management fees to its HDI shareholders and, secondly, against shareholders who are not HDI’s. Such discrimination is proscribed by the equality provisions in s 9 of the Constitution, the rights in question not being limited in terms of any law of general application providing for a limitation that is reasonable and justified in an open and democratic society.

  73. Accordingly, so counsel argued, the interpretation contended for by the Board, could not have been the intention. Suffice it to say that there was merit in counsel’s submissions.

  74. Counsel further sought to place reliance on the absence of an explanation by the Board for what he termed its volte face from the stance put forward on its behalf by Harvey at the Bidder’s Conference. However, the mere fact that the Board may have changed its mind may perhaps be neither here nor there. Of more importance is its failure to apprise Elonwabeni of its change in stance, an aspect to which I revert below.

  75. The final point made by counsel was that there had been no proper deliberation or resolution by the Board on the issue whether Elonwabeni should be disqualified. I have already demonstrated that the process followed by the Board was indeed perfunctory. However, on a conspectus of all that transpired before the Board, in particular the absence of any dissenting voice, and the contents of the Board’s report to the MEC, it must be accepted that at the end of the day there was consensus that Elonwabeni be disqualified.

  76. However, for the reasons recorded earlier I hold that the interpretation placed by Elonwabeni on clause 5.3.8(k) is the correct one, and that which the Board seeks to place on it falls to be rejected.

  77. Mr Soni sought to meet any such finding by me with the submission that the Board was entitled to put such interpretation on the clause as it saw fit, and even if that interpretation were to be wrong in law, the Board’s implementation thereof could not found the review of the Board’s decision. Counsel invoked the dictum in Akani Garden Route (Pty) Ltd v Pinnacle Point Casino (Pty) Ltd11 that ‘laws, regulations and rules are legislative instruments, whereas policy determinations are not’. He argued that the RFP was not a legislative instrument, but, presumably, a policy determination; hence, if I understood the submission, it was open to the Board to place what interpretation it wished on a provision therein, even one incorrect in law.

  78. The argument cannot be upheld. I am not persuaded that the parallel which counsel sought to draw with policy determinations was apposite. The vehicle which the Board utilized to elicit bids for casino licences was the RFP. It was specifically stated therein inter alia that failure to comply with any of the minimum requirements would result in disqualification of the bid. One of those requirements was set in terms of the wording of clause 5.3.8(k). Accordingly (and contrary to counsel’s further submission that the Board had the power to determine what the meaning of the clause was, a submission which did not, as counsel argued it did, find support in the judgment in Hira and Another v Booysen and Another12), it was incumbent on the Board to accord to the clause the meaning which, as a matter of law, it bore. That it failed to do. It therefore committed an error of law and, it is hardly necessary to state, its administrative action, the disqualification of Elonwabeni’s bid, was materially influenced by that error as envisaged in s 6(2)(d) of PAJA;13 indeed, it was dictated by that error, which precluded the Board, however well-intentioned it might have been, from directing its mind to the real issues before it and fairly determining same.

  79. As recorded in paragraph 43 above Mr Soni‘s further argument (properly to be regarded as an alternative argument) was that the Board had ‘impliedly amended’ clause 5.3.8(k) so that its wording would bear the meaning contended for by Ms Canca. The amendment, so counsel submitted, was to be implied from the nature of the exchanges that took place during the public hearings.

  80. The short answer to the submission is that, as a proper study of the transcript of the public hearings clearly demonstrates, there was in fact no attempt by the Board during the hearings to effect such an amendment (assuming that it had the competence to do so, a question which is open to doubt). Indeed, counsel later felt obliged, first, to water his argument down to the submission that ‘it was quite clear that there were developments which suggested that the Board had changed its mind.’ (My emphasis). Finally, counsel was constrained to volunteer the concession that ‘what certainly emerges from the exchanges is that the message was not conveyed unequivocally’. It was only during its deliberations that the Board, without notice to Elonwabeni, adopted the interpretation it now seeks to support and disqualified Elonwabeni on the strength thereof. On that score, so counsel further conceded, the procedural fairness of the Board’s modus operandi may well be questioned, including a reference to the fact that the correspondence that followed on the public hearings did not embrace any amendment.

  81. It follows from what has gone before that the Board:

    1. acted unlawfully in adopting an interpretation of clause 5.3.8(k) that was wrong in law and disqualifying Elonwabeni on the strength of that interpretation;

    2. in any event acted grossly unreasonably and procedurally unfairly in adopting that interpretation during its deliberations, without notice to Elonwabeni and affording it an opportunity to make representations on the proposed interpretation and/or to amend its bid to meet the changed interpretation.

    Relief to be granted against the Board

  82. To meet Mr Ford’s reliance on the findings recorded in the preceding paragraph to found the review of the decision of the Board in terms of s 6 of PAJA Mr Soni initially made the submission that Elonwabeni had failed to exhaust an internal remedy available to it and accordingly fell to be non-suited in the present proceedings by reason of the provisions of s 7(2) of PAJA.14

  83. Echoing a stance in the Board’s papers, counsel submitted that the internal remedy contended for was provided for in s 44 of the Act.15 In short, it was said that it had been open to Elonwabeni to have approached the MEC with a request that he act as envisaged in the section: within 30 days of receipt of the Board’s report, and after inviting and considering any representations by the Board, lodge a written request with the Premier to establish a review tribunal to review the Board’s decision having regard to the provisions of subsections (6) and (7) (a request to which the Premier would have been enjoined to accede); and should the MEC have refused to do so Elonwabeni could have instituted review proceedings to have such refusal set aside and for an order directing the MEC to act in terms of the section.

  84. Leaving aside the fact that Elonwabeni did at an early stage raise with the Board the issue of the MEC acting in terms of s 44 (and received the reply that the issue was under consideration by the MEC), the suggestion that the institution of review proceedings in the High Court against the MEC constituted an internal remedy to be exhausted before the present proceedings were instituted has only to be stated to be rejected. Not surprisingly, Mr Soni thereafter intimated that he would not pursue the point.

  85. It was not in dispute that the findings recorded in paragraph 81 above dictate an order that the Board’s decision to disqualify the bid of Elonwabeni be set aside. It is the further or consequential relief to be granted that was the subject of debate.

  86. Mr Ford submitted that in the light thereof that the disqualification of Elonwabeni is to be set aside, that the Board’s reasons reflect that it did not conclude that Elonwabeni was otherwise not a suitable candidate to be awarded the casino licence in respect of zone 4, and that Peermont Mthatha, the entity to which the licence had been awarded, had elected to abandon the award, there was no legal impediment to the licence in question being awarded to Elonwabeni.

  87. Counsel stressed that in its report to the MEC on the decision made in respect of zone 3 the Board had recorded its resolution that in the event of Clifton Dunes (the successful bidder in the zone) not complying with the stipulated conditions timeously, the licence in respect of zone 3 would be granted to Peermont Queenstown, the next successful bidder. In zone 4 Elonwabeni, but for its wrongful disqualification, was the next successful bidder after Peermont Mthatha, and a similar resolution as was taken in respect of zone 3 would have been taken in respect of zone 4: that in the event of Peermont Mthatha falling out of the picture the licence would be granted to Elonwabeni.

  88. Counsel found support for his submission in the dictum in Akani16 at 508I that once a party loses its status as the successful applicant in the adjudication process, the runner-up takes its place as a matter of course. He therefore submitted that there was no reason why this court should not substitute its own decision for that of the Board by awarding the casino licence in respect of zone 4 to Elonwabeni.

  89. Counsel recognized the principles affirmed in Gauteng Gambling Board v Silverstar Development Ltd and Others.17 In that case a gambling board had refused the first respondent’s application for a casino licence. On review a provincial division set aside the refusal and directed the board to grant the licence to the first respondent. On appeal the board did not pursue a challenge to the setting aside of its decision, but contended that the court a quo had erred in assuming the decision-making function. The Appeal Court noted that an administrative functionary (such as a gambling board) that is vested by statute with the power to consider or approve or reject an application for a gambling licence is generally best equipped by the variety of its composition, by its experience and by its access to sources of relevant information and expertise to make the right decision. The court typically has none of these advantages and has to recognise its own limitations, which was why remittal is almost always the prudent and proper course.18 However, 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 the case is ‘exceptional’ as envisaged in s 8(1)(c)(ii)(aa) of PAJA. A case is so exceptional when, upon a proper consideration of all the relevant facts, a court is persuaded that the decision to exercise a power should not be left to the designated functionary. Such a decision is dependent on established principles informed by the constitutional imperative that administrative action must be lawful, reasonable and procedurally fair. Thus, remittal will not be ordered if procedural unfairness would be the consequence.19

  90. In the result, it was found in that case that remittal would have such consequence. The court reasoned as follows. The board’s reasoning for its decision reflected merely that it had preferred the bid of another applicant to that of the first respondent, but both bids had emerged with credit. The preferred applicant had become obliged to abandon the award to it of the licence, with the result that, at the time of the application before the court a quo the first respondent was the only remaining applicant for the casino licence in question. The board had laid no basis to suggest that a reasonable possibility existed that, upon a balanced reconsideration, it would make a finding adverse to the first respondent. Accordingly, with the benefit of the input before the board the court was in as good a position as the board to reach a decision and the court was moreover faced with the inevitability of the outcome if the board were once again to be called upon fairly to decide the matter. Equitable considerations favoured the first respondent including cognizance of the delay in the matter (which had in part been caused by the board). The decision of the court a quo against a remittal was accordingly upheld.20

  91. Counsel argued that on the facts the reasoning in Silverstar was mutatis mutandis of application to the instant matter. Accordingly, it would be proper for this Court to issue an order directing the Board to award and issue the casino licence in respect of zone 4 to Elonwabeni. Subject to follow what follows later, the submission of counsel must be upheld.

  92. Mr Soni, however, pursued a further issue raised in the Board’s papers. It concerned the later decision of Zonwabise to withdraw as one of the BEE partners of the applicants in their respective prospective ventures and a change in the shareholding of the applicants (the resultant position of Elonwabeni being the issue). The result, so it was contended, was twofold: Elonwabeni had lost its locus standi to bring the present proceedings insofar as concerned an order directing the Board to award it the licence in question; alternatively, it would not be proper for the Court to substitute its own decision and make that order but the matter should be remitted to the Board for further investigation and consideration of the effect of Zonwabise’s withdrawal.

  93. On 15 February 2007 Zonwabise addressed a letter to the Board reading as follows:

    This company was party to the applications for new licences in Umtata and Queenstown through [its] shareholdings in Elonwabeni Resorts (Pty) Ltd. And Ekuphumleni Resorts (Pty) Ltd.

    We wish to advise you that our Board has resolved to have no part in any further protests or proceedings against you in regard to the awards made and we are taking steps to withdraw our interests in these companies.

    This letter is for you information only.’

  94. On 23 March 2007 the applicants’ attorney addressed the following letter to the Board, a copy of which was annexed to the further affidavit of Dondolo, referred to below.

    RE: CASINO LICENCE AWARD: ZONE 3 QUEENSTOWN AND ZONE 4 MTHATHA

    We write on the instructions of both Elonwabeni (Pty) Ltd and Ekuphumleni (Pty) Ltd.

    The purpose of this letter is to advise of the following:

  1. The resignation by the directors of the above companies, who were appointed at the instance of the shareholder, Zonwabise Resort Holdings (Pty) Ltd, namely B Siwisa and M Naran; and

  2. The sale and transfer of Zonwabise Resort Holdings (Pty) Ltd’s shares to a company which shall warehouse the shares for the benefit of HDI Groupings or individuals or entities.

    We are instructed that the sale and transfer referred to in 2 above will result in the individuals or groupings or entities being of the same empowerment and financial standing as the previous shareholders. In addition our client will appoint to the Board of both Elonwabeni and Ekuphumleni directors of the same calibre and HDI standing as those directors who have resigned.’

    In fact, paragraph 2 of the letter reflected what was then the intention. As will appear below, other arrangements were put in place.

  1. In his heads of argument Mr Soni referred to Ms Canca’s affidavit which averred inter alia that Zonwabise, which had held a shareholding of 24% in Ekuphumleni and 20% in Elonwabeni, had withdrawn from its association with the applicants (an allegation, counsel emphasised, not denied in the replying papers). Counsel pointed out that Zonwabise had been one of the applicants’ BEE partners and that it was a requirement of the RFP that a BEE partner who was part of the bid be found by the Board to be acceptable. When the application was launched Elonwabeni complied with that requirement, but, so it was submitted, it no longer does and until the Board had approved of the substituted BEE partner Elonwabeni was not entitled to pursue its application. In any event, so the further submission continued, Elonwabeni would have to amend its bids, but because the adjudication process had been completed amendments were no longer permissible.

  2. The lastmentioned aspect may be shortly disposed of. If changed circumstances have supervened since the adjudication process and prior to the issue of the licence, it would of course be proper, indeed obligatory, for the bidder who had been awarded the licence to bring that to the attention of the Board. However, if the changed circumstances are not material in the sense that they do not materially affect the basis on which the Board awarded the licence, there is no need for the award to be revisited. Counsel did not elucidate his contrary submission that amendments after completion of the adjudication process are not permissible.

  3. During the hearing on 19 February 2009 Mr Ford advised me that he would seek leave to tender a further affidavit dealing with the relevant events that had occurred after the Board had announced its decision. The affidavit, deposed to by Dondolo, was handed up the following morning. The affidavit explained the omission in the replying papers of a reference to the events by pointing out that those papers had been drafted at a time when the applicants and their legal representatives were under particularly severe time constraints due to the late filing of the answering papers, while at the same time heads of argument were in the course of preparation. The importance of the events in question had thus been overlooked. Dondolo submitted that in the light of the nature of the limited new facts introduced there could be no talk of any prejudice to the respondents.

  4. The affidavit canvassed the compliance by the applicants with the provisions of clause 5.3.1.4 of the RFP which is headed ‘Participation by historically disadvantaged individuals and groups in ownership and/or profits’. It alleged that the focus of the RFP is directed at promoting black economic empowerment through ownership of a stake in the business and/or profits as well as strategies to ensure genuine empowerment. It was pointed out that the Board had conducted its investigations into inter alia the probity and integrity of African Pioneer Ltd, its directors and shareholders and had completed same to its satisfaction.

  5. The affidavit then recorded that during March 2007 Zonwabise had disposed of its interests in the applicants to African Pioneer Ltd (and, inferentially, of its interest in MCMC as well). That disposal, so it was contended, did not bring about any change in the percentage of the stakes of historically disadvantaged individuals or groups holding an interest in the applicants and no further investigations of the nature referred to above were necessary. The only comment that Dondolo considered necessary was that while compliance with clause 5.3.1.4 was not an issue in the proceedings in this Court, it was proper for him to have brought the matter to my attention.

  6. More pertinent is that on Dondolo’s allegations the disposal by Zonwabise of its interests in the applicants and MCMC did not affect the fact of the compliance of Elonwabeni with the provisions of clause 5.3.8(k), on its correct interpretation, as elucidated in earlier paragraphs of this judgment.

  7. Mr Soni signified his consent to the affidavit being received by me. Save as is set out in the following paragraph he did not dispute the content of, or contentions in, the affidavit and the amplification of his argument was as reflected in the paragraph that follows.

  8. He submitted that the changed circumstances referred to above warranted the Board’s revisiting the issues of probity and integrity referred to by Dondolo, more especially since we are some three years down the line. Accordingly, the appropriate order in the circumstances would be that the matter be remitted to the Board for those issues to be revisited after further investigation. It was not for the Court to come to any conclusion thereanent.

  9. There was some debate at the Bar as to whether the Board (even though now differently constituted) should not have busied itself with conducting the investigations it argues are necessary during the period of some 10 months that elapsed between the two hearings of the matter, and whether by reason of it failure to do so no truck should be had with its argument. I do not consider it necessary to make any finding on this dispute.

  10. It seems to me that the answer to Mr Soni‘s argument is the following. As already indicated it is not in dispute that as part of its adjudication process the Board had investigated the probity and integrity of African Pioneer Ltd, its shareholders and directors, and had completed same to its satisfaction. It would not have lain in the Board’s mouth to suggest that simply in view of the lapse of time since it had completed its adjudication process it is now necessary to revisit those issues against the event that circumstances might have changed in the interim: the present application would have had to have regard to what was before the Board when it made its decision. However, it is known that certain changed circumstances have supervened. The question then is that posed in paragraph 96 above, restated as follows: do the changed circumstances in any way materially alter the basis on which the Board, as shown earlier in this judgment, concluded that but for its disqualification (which I have found is to be set aside) Elonwabeni was a suitable candidate to be awarded the casino licence in zone 4.

  11. In my judgment, this question falls to be answered in the negative. In essence, what has changed is the following: Instead of owning 51% of Elonwabeni African Pioneer Ltd now owns 71%; instead of owning 38 of the 100 shares in MCMC African Pioneer Ltd now owns 55 shares (in both cases the shareholding having been acquired from Zonwabise). In fact, the black-owned stake in Elonwabeni has marginally increased because of African Pioneer Ltd’s having a slightly higher BEE ownership component than did Zonwabise. There is no suggestion at all by or on behalf of the Board that if this position had obtained at the time when the bids were adjudicated, the Board’s investigations into the probity and integrity of African Pioneer Ltd, its directors and shareholders would have resulted in any other conclusion but that the Board was satisfied therewith. I accordingly find the suggestion that the matter be remitted for the purpose contended for on behalf of the Board to have no validity.

  12. There is, however, a second aspect. The question arises whether the grant of the casino licence to Elonwabeni requires to be made subject to conditions. As recorded in paragraph 24 above the award of the casino licence in respect of zone 4 to Peermont Mthatha was subject to certain conditions precedent and further conditions attaching to the licence once it had been issued. (Similarly, the award of the casino licence in respect of zone 3 to Clifton Dunes was made subject to conditions).

  13. In Silverstar21 the Appeal Court adverted to the fact that the judge in the provincial division had simply ordered the gambling board to grant the licence in question to the first respondent without making reference to the tender of the first respondent to submit its application to relevant conditions that the Board had imposed. It was considered appropriate to amend the order of the court a quo to take account of that situation: the direction that the licence be granted (on the terms set out in the first respondent’s application therefor) was accordingly qualified by the rider that the licence be subject to the said conditions.

  14. In his argument Mr Ford merely requested me to make an order directing the Board to grant the casino licence in respect of zone 4 to Elonwabeni. Neither he nor Mr Soni referred to the issue of the award of the licence being made subject to conditions, nor did the papers canvas this issue. In my view, having regard to the fact that the awards of the licences to Clifton Dunes and Peermont Mthatha were subject to conditions imposed, it is necessary that the question be addressed.

  15. It is clear, however, that that cannot be done by me. The questions whether conditions should be attached to the grant of the casino licence in zone 4 to Elonwabeni, and if so, what those conditions should be, are pre-eminently matters for the decision of the Board, more especially as the issues were not canvassed before me. For that purpose the matter must be remitted to the Board (although now differently constituted) for decision, after it has taken the necessary procedural steps.

    Other relief

  16. In the light of the conclusion reached by me that the disqualification of Elonwabeni’s bid must be set aside and an order issued directing the Board to award the casino licence in respect of zone 4 to Elonwabeni (subject to the comments in paragraph 109 above) it is unnecessary to give consideration to the further attacks levelled by Elonwabeni on the decisions reached by the Board or the alternative orders sought by Elonwabeni against the Board and/or the MEC (subject to the comments made below under the heading of costs).

    Costs

  17. In paragraph 15 above I recorded my conclusion that the costs of the Board’s application for condonation of the late filing of its answering papers, including the costs of the opposition to the application, must be paid by it. In paragraph 17 above I recorded that I would make an appropriate special order as to costs in respect of the Board’s dilatoriness in making available a proper record of the proceedings before it.

  18. The next issue concerns the costs of that part of the application which related to the relief sought by Ekuphumleni. The submission of the Board and the first submission of the MEC was simply that Ekuphumleni had withdrawn its application against them and accordingly the customary rule that costs follow the event should operate. The second submission by the MEC (also invoked by it in respect of the application of Elonwabeni) was that, on analysis, whatever the outcome in respect of the relief sought by Ekuphumleni in its notice of motion against the Board (ie whether the relief was granted or refused), the relief sought against the MEC could never have been entertained.

  19. I will deal below with the second submission advanced on behalf of the MEC when I consider the issue of the MEC’s costs in the application brought by Elonwabeni. At this stage I will confine myself to the counters advanced by Mr Ford against a ruling that having withdrawn its application vis-à-vis the Board and the MEC Ekuphumleni was liable to pay their costs. Counsel submitted that there was even a case for a costs order in favour of Ekuphumleni against those two entities or at least for a ruling that there be no order as to costs.

  20. The first aspect that counsel invoked is that subsequent to the withdrawal of Ekuphumleni of its prayers for substantive relief, Mr Soni, on behalf of the Board, nevertheless continued to address argument to me on a number of averments contained in the papers reflecting the bases of Ekuphumleni’s attack on the Board’s decisions on the applications for the licence in respect of zone 3, to which he, Mr Ford, had replied. The answer to the argument is threefold. First, prior to Ekuphumleni’s withdrawal of its application Mr Ford and thereafter Mr Soni had already addressed argument to me on those averments. Second, it was at my direction that Mr Soni continued thereafter to do so as I required him to meet Mr Ford’s stance that the averments had a bearing on the validity of the case advanced by Elonwabeni. Third, the circumstance that aspects relating to the Board’s decisions in respect of the applications in zone 3 were canvassed in advancing, or on the other hand, resisting, the case for Elonwabeni did not import Ekuphumleni’s application itself into that of Elonwabeni, and specifically it does not constitute a basis for Ekuphumleni’s avoiding the just desserts of the withdrawal of its application.

  21. The second argument was a twofold one: Ekuphumleni had raised a sound attack on the Board’s conduct and decisions in respect of zone 3, which would otherwise have justified relief being granted in terms of one or more of its prayers had it not withdrawn the application for reasons not related to the merits of its attack; alternatively, there was at least a foundation for me to signal my displeasure at the conduct of the Board, both during its own proceedings and/or in the presentation of its case in the present proceedings. Either of these scenarios, it was contended, would justify one or other of the costs orders asked for.

  22. I am unable to uphold the argument. It is so that when an application has become moot, but issues of costs remain, the Court will not entertain any suggestion that the matter be referred to trial or for oral evidence if the sole purpose would be the determination of liability for costs, but will take a robust approach and do the best it can to resolve the dispute on the papers. However, a parallel cannot be drawn between that situation and the present case. A matter becomes moot when the need for the relief sought has fallen away or the relief has become inapplicable. It does not become moot when half-way through the argument the applicant develops serious second thoughts about its prospects of success and withdraws its application.

  23. Second, the submission that Ekuphumleni would otherwise have been successful is not helpful. Ekuphumleni decided against launching proceedings to interdict Clifford Dunes from acting on the award and issue to it of the casino licence in respect of zone 3 and establishing its venture. In the main, the reason was that it was advised that such proceedings could not be pursued with success as the requirement of showing irreparable harm would not have been met (and it would seem that Ekuphumleni’s attitude was that Clifford Dunes proceeded at its peril). Be that as it may. It was inevitable in the circumstances that in due course Ekuphumleni would be faced with the situation which in the result informed its decision to abandon its application. Accordingly, it ought to have taken stock of that prospect. In the circumstances whatever the nature of the criticisms levelled at the conduct of the Board they cannot justify either of the costs orders sought.

  24. Third, it is doubtful whether it may safely be excluded that but for Ekuphumleni’s withdrawal of its application fuller argument on the ‘merits’ of the application would have been presented. To the extent applicable, this last comment would also be applicable vis-à-vis the MEC.

  25. Further, as regards the costs of the MEC, the remarks in the succeeding paragraphs concerning Elonwabeni’s liability for the MEC’s costs in respect of that part of the application that related to relief sought by it would apply mutatis mutandis to the MEC’s costs in respect of that part of the application that related to relief sought by Ekuphumleni.

  26. Mr Ford’s argument was as follows: The falling away of the need to grant Elonwabeni’s prayer against the MEC was no more than the result of the grant of one of Elonwabeni’s other prayers: that an order issue directing the Board to award and issue the casino licence in respect of zone 4 to it. Had been necessary for me to decide the issue of the grant of the relief prayed for against the MEC the decision would have been in favour of Elonwabeni by reason of the foundation laid therefor in Elonwabeni’s papers and the alleged inadequate response thereto by the MEC. Accordingly, Elonwabeni was entitled to a costs order in its favour against the MEC; alternatively, as argued in the case of Ekuphumleni, having regard to the MEC’s conduct (relating to his approach to the issue whether he should not act in terms of s 44 of the Act and/or the nature of the case presented on his behalf in this Court), there was a sufficient basis revealed for the censure of the MEC by my making such an order or at least an order that each party pay its own costs.

  27. Again, I am unable to uphold the argument. Mr Lowe, who with Mr Bloem appeared for the MEC, did of course address argument to me to meet Mr Ford’s submissions in respect of the merits of his attack on the MEC’s decision and of the nature of the case presented on his behalf. It is, however, not necessary for me to embark on a consideration of that debate. The issue falls to be resolved on the second point taken by Mr Lowe.

  28. It is not to be gainsaid that the grant of an order directing the Board to award and issue the casino licence in respect of zone 4 to Elonwabeni, alternatively, an order remitting the matter to the Board for reconsideration (with whatever ancillary order and directions the Court might have thought appropriate) would have done away with the need for any order against the MEC. (The same comment applies had Ekuphumleni succeeded in securing, in addition to an order setting aside the award of the casino license in respect of zone 3 to Clifford Dunes, either an order directing the award of the license to Ekuphumleni or alternatively an order remitting the matter to the Board).

  29. Counsel submitted, however, that the dismissal of the prayers of Elonwabeni against the Board (and the same would apply to Ekuphumleni) would also of necessity have had to result in the dismissal of the prayer against the MEC. No doubt, counsel had in mind the following:

    (a) the extremely voluminous papers filed in the present proceedings;

    (b) the wide-ranging and minutely detailed attack launched by the founding papers (both initial and supplementary) on the Board, with reference not only to the reasons it furnished to the MEC in its reports to him in terms of s 44 (which was the information the MEC had before him), but also to the manner in which it had conducted the proceedings before it, and the manner in which it had set about the adjudication process and reached its decisions;

    (c) the extensive response thereto filed by the Board (notwithstanding Mr Ford’s trenchant strictures thereon for lacking essential detail);

    (d) the extensive reply to that response;

    (e) the very comprehensive heads of argument filed by counsel for the respective parties, which was followed by almost four days of extremely comprehensive argument and counter-argument by unquestionably able and competent counsel, and backed up by obvious diligent research.

  30. In short, counsel’s submission was that a denial of any relief to Elonwabeni against the Board would of necessity have had to be founded on a conclusion that on the merits Elonwabeni had failed to establish its case. Accordingly, having regard to the background that preceded such decision, there would have been no purpose in a review tribunal being established by the Premier and therefore no purpose in issuing an order setting aside the MEC’s decision not to submit a written request to the Premier to establish a review tribunal, and directing him to do so now. Implicit in the argument was the submission that the applicants should have anticipated such result in the event of it being non-suited against the Board.

  31. Mr Ford’s counter was the submission that had this Court’s finding been that the one or the other applicant had not crossed the threshold of establishing the requisite case for the relief sought against any of the other respondents, there would yet have been virtue in a review tribunal being established by the Premier and therefore in an order against the MEC as set out in the notice of motion. He argued that while this Court had the competence to require deponents to affidavits in applications to give viva voce evidence or to submit to cross-examination the review tribunal appointed by the Premier would not be so restricted and could call for other additional evidence, and that the tribunal had wider powers than this Court.

  32. The first submission was based on s 44(6) which entitles such tribunal to consider inter alia such further evidence as it deems relevant. Counsel was, however, not able to suggest what further evidence the tribunal might consider relevant. The theoretical power in question does not take the matter any further.

  33. The second submission was presumably based on the provisions of s 44(7) and (8) of the Act. The former subsection enjoins the tribunal to uphold a board’s decision unless the tribunal is satisfied that certain deficiencies in a board’s procedure or adjudication were present. The latter subsection enjoins the tribunal, in the event of rejecting the resolution of the board, to remit the application to the board for consideration afresh, but it may substitute its own decision on the application if satisfied that certain requisites are present. However, on analysis the deficiencies envisaged in the former subsection substantially correspond to the grounds on which this Court may, in terms of PAJA, interfere with administrative action. Second, the requisites for substitution of the tribunal’s decision for that of the board correspond to those which, in terms of Silverstar,22 entitle this Court to substitute its own decision for that of a board. The argument of counsel can therefore not be upheld.

  34. Accordingly, Mr Lowe’s submissions must be accepted and the relevant costs of the MEC must be paid by Ekuphumleni and Elonwabeni, respectively.

  35. It will fall within the province of the taxing master to determine the allocation of the costs which, in terms of this judgment, are to be paid by the respective parties.

    Order

  36. In the result, the following order is made:

    1. (a) The decision of the first respondent to disqualify the bid of the second applicant for the award to it of the casino licence in respect of zone 4 of the Eastern Cape Province is declared invalid and set aside.

    (b) Subject to 2 below, the first respondent is directed to award and issue to the second applicant the casino licence in respect of zone 4 of the Eastern Cape Province, on the terms set out in its application for the licence.

    2. The matter is remitted to the first respondent for determination by it, after following the prescribed procedure, of the question whether the licence awarded and issued to the second applicant should be made subject to any conditions and, if so, the terms thereof.

    3. The costs of the first respondent’s application for condonation of the late filing of its answering papers, including the costs of the first and second applicants’ opposition thereto, will be paid by the first respondent.

    4. The costs of the applicants in respect of the candidate attorney employed by their attorney travelling from Port Elizabeth to Grahamstown and assisting the first respondent’s attorney in the preparation of the record of the proceedings before the first respondent will be paid by the first respondent.

    5. Subject to 3 and 4 above, the second applicant’s costs in respect of that part of the application that related to the relief sought by it will be paid by the first respondent.

    6. Subject to 3 and 4 above, the costs of the first respondent in respect of that part of the application that related to the relief sought by the first applicant will be paid by the first applicant.

    7. The costs of the second respondent in the application will be paid by the first and second applicants, jointly and severally, the one paying the other to be absolved.

    8. The costs referred to in paragraphs 3, 5, 6 and 7 above will include the costs attendant on the employment of two counsel.

    _____________

    F KROON

    Judge of the High Court

    18 February 2010

    Appearances:

    For Applicants: EAS Ford SC & S Rorke

    Instructed by:

    Netteltons attorneys

    Grahamstown (Mr R Human)

    For 1st Respondent: V Soni SC & M Ntsaluba

    Instructed by:

    Borman & Botha attorneys

    Grahamstown (Mr J Powers)

    For 2nd Respondent: M J Lowe SC & G H Bloem

    Instructed by:

    Mlonyeni & Lesele Inc

    Grahamstown (Mr Mlonyeni)

    For 3rd Respondent: A Redding SC & I Goodman

    Instructed by:

    Wheeldon Rushmere & Cole

    Grahamstown (Mr Laing)

    1 Section 44(1) of the Act provides that after the Board has adjudicated an application for a casino licence, and, whether the application was granted or refused, the Board shall submit a report, setting out reasons for its decision to the MEC. Subsection (2) provides that the MEC may, within 30 days of receipt of the report, and after inviting and considering any representations by the Board, in writing request the Premier to establish a gambling and betting review tribunal to review the Board’s decisions having regard to the provisions of subsections (6) and (7). Subsection (4) enjoins the Premier, on receipt of such request, to appoint the review tribunal and refer the matter to it for review. The MEC had decided against submitting a request as envisaged to the Premier.



2 Sections 3 and 6.

3 Section 6(2) provides inter alia as follows:

‘A court or tribunal has the power to judicially review an administrative action if –

(a) the administrator who took it –

……..

(iii) was biased or reasonably suspected of bias;

……..

(c) the action was procedurally unfair;

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

(e) the action was taken –

……..

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

……..; or

(vi) arbitrarily or capriciously;

(f) the action itself –

……..

(ii) is not rationally connected to ……..

……..

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

……..

(h) the exercise of the power or the performance of the function authorised…….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.’

4 Note 1 above.

5 Note 3 above.

6 1999 (2) SA599 (T) at 630F-G.

9 Para [22] above.

10 Paragraphs [67] and [68] below.

11 2001 (4) SA 501 (SCA) at 509E.

13 Note 3 above.

14 In essence, the subsection provides that no court shall review administrative action in terms of PAJA unless any internal remedy provided for in any other law has first been exhausted, unless, in exceptional circumstances, the court exempts the applicant for the review from the obligation to exhaust any internal remedy if the court deems it to be in the interests of justice.

15 Note 1 above.

16 Note 11 above.

18 Para [29] at 76.

19 Para [28] at 75.

20 Paras [38] – [40] at 78 – 80.

21 Note 13 above.

22 Note 13 above.