South Africa: North West High Court, Mafikeng

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Leus v Chairman of the North- West Liquor Board and Others (371/2000) [2001] ZANWHC 13 (8 March 2001)

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[2] Subsequent to this hearing, an employee of the liquor board fortuitously discovered information from his/her official computer that the third Respondent, who objected to the application, was granted a liquor store licence in 1998 for the same spot and market that the Applicant intended to serve. As a result of this information the liquor board decided not to grant the Applicant the licence that he had applied for. The Applicant was neither told about this information nor was he given an opportunity to comment on it. He learnt about the existence of this information, for the first time, when he received and read a letter from the liquor board informing him that his application was refused and why it was refused. The result is that he was denied the right to be heard and the fundamental right to fair administrative action. It was for this reason that the Applicant launched these proceedings for the review and setting aside of the decision of the liquor board.

[3] The parties are now in agreement that the liquor board’s failure to communicate the new information to the Applicant and to afford him the chance to comment on it if he so wished, prior to taking the decision on his application, amounts to an irregularity which justifies the setting aside of the decision of the liquor board. They are also ad idem that this Court must order the liquor board to then reconsider the Applicant’s application. Their disagreement which has necessitated argument in this matter relates to costs.

[4] Mr Pistor, for the first and second Respondents, submitted that the liquor board is a quasi-judicial body which should not ordinarily be saddled with costs for the wrong decisions it makes. For this reason, so he said, it can only be ordered to pay costs in circumstances where it has acted mala fide or has committed a gross irregularity, none of which were done in this case. He submitted that the Court should, in exercising its discretion whether or not to order costs against the liquor board, have due regard to these important considerations. He also urged the Court to bear in mind that the first and second Respondents are not really parties to this application and that the real parties are the Applicant and the third Respondent. Because the first and second Respondents are not parties, so the argument went, it is inappropriate to make an order for costs against them. Mr Stander, on behalf of the Applicant, accepted that the liquor board acted in a quasi-judicial capacity in considering the application. He however submitted that the considerations mentioned by Mr Pistor are not decisive of a question of costs since the Court always has a judicial discretion to exercise even in a situation where an administrative body was performing quasi-judicial functions when it made the decision that is being challenged.

[5] The questions whether a body which finds itself in the same position as the second Respondent is a party to the proceedings, properly so called, and when an order for costs is likely to be granted against it, were addressed by Innes J in KLIPRIVEIR LICENSING BOARD v EBRAHIM 1911 AD 458 at 463-464 in the following terms:

“‘Review is capable of three distinct and separate meanings:-

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .

(b) Review by motion. The process by which where a public body has a duty imposed on it by statute, or is guilty of gross irregularity or clear illegality in the performance of that duty, its proceedings may be set aside or corrected.’

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Where the form of relief sought falls substantially under the second of the above heads the public body, whose action is challenged, is necessarily made a party to the proceedings, and in certain circumstances costs may be awarded against it. But in the case of an appeal properly so called, or of the review of the proceedings of a judicial or quasi-judicial tribunal, where the relief sought is not based upon irregularity or illegality, the matter stands on a different footing.” (My emphasis)

[6] A brief discussion of the meaning of this quotation in respect of the two issues identified above, follows herebelow:

6.1 First, where the decision of the liquor board is sought to be reviewed and set aside on the grounds that the liquor board has committed an irregularity or illegality (or a gross irregularity or clear illegality), then the liquor board would invariably become a party to the proceedings. The liquor board or a similarly positioned body, would not always become a party to the proceedings whenever its decisions are challenged. Whether or not it becomes a party, even against its will, depends largely on the basis for challenging its decision. In this case, though the Applicant did not explicitly spell out the ground of review relied on, it is evident from the reading of the papers that he relies on an irregularity. This then makes the first and second Respondents parties to these proceedings.

6.2 Second, in the event of the decision of a quasi-judicial body being successfully challenged on the basis that that body is guilty of a gross irregularity or clear illegality, then an order for costs may well be made against such a body. Similar views were expressed by Lord de Villiers CJ in the same case at 462 as follows:

“ I am satisfied, however, that in a case like the present where the tribunal from which the appeal comes has acted in a judicial or quasi-judicial capacity, and no question is raised as to the good faith of such tribunal or as to the legality or regularity of its proceedings, it should not, in case of an appeal to a Superior Court, be subjected to the payment of the costs of such appeal. In the present case the Board acted in a quasi-judicial capacity, there was perfect good faith on its part, and although it may have gone wrong in its interpretation of the law there was no irregularity or illegality in its proceedings.” (My emphasis)

6.2.1 Simply put, the question of costs would not ordinarily arise where a quasi-judicial body acted wrongly but in good faith. However, the fact that a body acted in a quasi-judicial capacity and bona fide would be no defence to a prayer for costs if its decision is liable to be set aside on the grounds that it committed an irregularity or illegality. Therefore, save for special or exceptional circumstances, costs would ordinarily follow the result whenever a party has successfully challenged the decision of a liquor board on these grounds.

6.2.2 The Applicant was put to the expense of these review proceedings because of the irregularity committed by the second Respondent. In the absence of anything special or exceptional, and on the authority discussed below, then the second Respondent should be liable to pay costs to the Applicant. But for the reasons already highlighted, the first and second Respondents were unable to advance satisfactory reasons why they should not be ordered to pay costs. Since the question of costs was discussed out of turn, it will be reverted to briefly at the end of this judgment.

[7] The facts in LOXTON v KENHARDT LIQUOR LICENSING BOARD 1942 AD 275 (“Loxton”) are virtually on all fours with the facts of this case. The decision, which has never been qualified or overruled, and the reasons therefor are also instructive. For this reason, and in an attempt to explain the conclusion I have reached, the relevant parts of Loxton will be quoted extensively. The ensuing discussion entails three things. First, the necessity to observe the audi alteram partem rule in a situation which is similar to that of the liquor board, second, that failure by such a liquor board to afford a person like the Applicant a hearing before an adverse decision is made against him/her constitutes a gross irregularity and, third, costs will normally follow the result in such a case.

[8] Feetham JA had this to say about the failure to observe the audi alteram partem rule or the failure to ensure a fair hearing with respect to, information obtained subsequent to the proceedings, or of its own knowledge or information obtained from outside sources which is intended to be taken into account at 315:

“ Where an administrative authority entrusted with quasi-judicial functions holds an enquiry on a question submitted for its decision, and the party whose rights or claims are the subject of such enquiry is entitled to a hearing, it is one of the requisites of a fair hearing that, if the authority avails itself of its own knowledge, in regard to particular facts relevant to the question submitted to it, or of information in regard to such facts independently obtained from outside sources, it should give the party concerned notice of any points, derived from such knowledge or information, which may be taken into account against him, so as to give him an opportunity of meeting such points. Such, I think, is the general rule which may fairly be deduced from a series of cases in our Courts, and which has been recognised as applicable to proceedings before licensing authorities.”

The common features between the Respondents in the Loxton case and in the case before this Court is that they are both liquor licensing boards. Secondly, both liquor boards failed to inform the Applicant of the information which ultimately proved to be decisive of the application and thereby denied him the opportunity to express his views on that information or point. Evidently, such a failure amounts to an irregularity which renders the entire hearing unfair.

[9] The next issue discussed in the Loxton case relates to whether or not the irregularity of the nature referred to in the preceding paragraph, is a less serious one or a gross one. It is necessary to address this issue since Mr Pistor submitted that the first and second Respondents could only be liable for costs if they either acted mala fide or where they are guilty of a gross irregularity. He also submitted that the irregularity that these Respondents are guilty of is not gross. Feetham JA deals with this issue at 316-317 in the following terms:

“ The failure of the Licensing Board, in this case, to give the appellant any indication of the points which members of the Board were taking into account in regard to the labour position in Kenhardt, and the reasons why those efforts were unsuccessful, might therefore, prior to the 1928 Act, have been relied on as a ‘gross irregularity’, and would, in my opinion, have afforded ground for review under the common law, and justified the setting aside of the proceedings of the Board.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . the gross irregularity which tainted the proceedings of the Board, and which would in the past have afforded sufficient reason for setting those proceedings aside under the common law, brings the proceedings under sec.29(1)(a), because in committing that gross irregularity the Board must be held to have exercised its powers in an arbitrary or grossly unreasonable manner.” (My emphasis)

I must immediately point out that the language of s 29 of the Liquor Act of 1928 referred to in the above quotation is similar to that of s 131 of the Liquor Act of 1989 (“the Act”) which is now in operation. The decision of a liquor board may in terms of s 131 of the Act also be reviewed and set aside on the grounds, inter alia, that the liquor board exercised its power in an arbitrary or grossly unreasonable manner. There can be no doubt that the liquor board in this case has also committed a gross irregularity which amounts to the liquor board having exercised its powers in an arbitrary and grossly unreasonable manner.

[10] As a result of the gross irregularity committed by the liquor board in the Loxton case, the Court did not only allow the appeal against the liquor board but it also set aside its decision. In addition, it ordered the liquor board to consider the aggrieved party’s application again and ‘to pay the costs of the appeal and of the proceedings in the Cape Provincial Division.’ This decision on costs, which is based on the facts which are similar to those of the present case, reinforces the decision I have reached in paragraphs 6.2.1 and 6.2.2 above. There is no sound reason why the respondent liquor board, in this case, should be treated any differently particularly on the question of costs.

[11] In the result the following order is made:

(i) The decision of the second Respondent, refusing the Applicant’s application for a liquor store licence, is set aside;

(ii) The second Respondent is directed to consider afresh the Applicant’s application for a liquor store licence;

(iii) The second Respondent is to pay costs.

M.T.R. MOGOENG

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 07 FEBRUARY 2001

DATE OF JUDGMENT : 08 MARCH 2001

COUNSEL FOR APPLICANT : ADV J. STANDER

COUNSEL FOR 1^ST & 2^ND RESPONDENTS : ADV J.H.F PISTOR

ATTORNEYS FOR APPLICANT : SMIT STANTON & MOTLHABANI INC.

ATTORNEYS FOR RESPONDENTS : THE STATE ATTORNEY

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