Case   CCT318/21
[2023] ZACC 07

Hearing Date: 08 September 2022

Judgement Date: 08 February 2023

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Wednesday, 8 February 2023, the Constitutional Court handed down its judgment in an application for leave to appeal brought by the Minister of Tourism (the Minister), the Department of Tourism (the Department) and the Director-General of that Department against Afriforum NPC (Afriforum) and Solidarity Trade Union (Solidarity). The application relates to a dispute between the parties on the use by the Minister and Department of Broad-based Black Economic Empowerment (B-BBEE) selection criteria in selecting small, micro and medium sized enterprises (SMMEs) that would benefit from the Tourism Relief Fund during the period of Covid-19.

Soon after the declaration of the state of disaster, following upon the outbreak of Covid-19 in the country, which severely affected businesses, the Minister established a fund to assist SMMEs to cope with the effects of Covid-19. The fund was called the Tourism Relief Fund. Among the criteria the Minister and the Department decided to use to select businesses which would benefit from this fund were B-BBEE criteria. The Minister was guided by the Tourism B-BBEE Codes of Good Practice to determine the businesses that would be given grants out of the Fund. The SMMEs which would benefit would be selected based on scores that would be given to them when applying for the fund.

Afriforum and Solidarity separately brought applications in the High Court to challenge the legality and the constitutionality of the use of the B-BBEE criteria in selecting SMMEs to benefit from the fund. Afriforum and Solidarity sought to have the Minister’s decision to include B-BBEE criteria as some of the criteria to be used to select SMME’s reviewed and set aside on various grounds. The grounds included that the Minister had no power to include such criteria in a fund related to providing relief to businesses that had suffered as a result of the Covid-19 pandemic. In this regard Afriforum and Solidarity argued that these selection criteria were based on race and had no place in which businesses were granted relief to the effects of Covid-19. The applicants opposed the applications on, among others, the basis that the Minister was obliged by law to include the selection criteria taken from the Tourism B-BBEE Code of Good Practice. In addition, the Minister stated that she was entitled to apply such criteria in order to advance the transformation goals of the Department. The High Court found that the consideration of race could hardly have created an “insurmountable advantage” for black businesses over white businesses. The High Court also said that the difference between two and eight points – which represented the difference in the total score caused by the use of the B-BBEE selection criteria - was capable of being bridged by the scoring in other categories in which it was possible for a white applicant to score more points than a black applicant. The High Court further found that the criteria were flexible and that the Minister’s decision was not irrational. It, accordingly, dismissed Afriforum’s and Solidarity’s applications. It also refused leave to appeal. Afriforum and Solidarity petitioned the Supreme Court of Appeal for leave to appeal against the decision of the High Court which the Supreme Court of Appeal granted. The Supreme Court of Appeal found that the Minister had erred in believing that she was obliged by section 10(1)(e) of the B-BBEE Act to apply the B- BBEE status levels as part of the criteria for eligibility for grants from the Tourism Relief Fund. The Supreme Court of Appeal concluded that the Minister’s decision was, therefore, materially influenced by an error of law and concluded that the High Court had erred. The Supreme Court of Appeal upheld the appeal by Afriforum and Solidarity and set aside the decision of the High Court.

Before the Constitutional Court that the matter had become moot because the state of disaster had been ended. It was also pointed out that all the money in the Tourism Relief Fund had been paid out and nobody sought to have that money paid back to the Fund. This was important because the dispute between the parties related to whether the Minister had had the power to include B-BBEE selection criteria in selecting SMMEs for relief in a Tourism Relief Fund related to Covid-19. The Minister and the Director-General agreed that, although the matter was moot, the Court should entertain it because there was a need for clarity on whether the Minister had power to use B-BBEE selection criteria. Afriforum and Solidarity argued that the matter was moot and there was really no need for the Court to decide the issue of powers of the Minister in relation to a Fund that has also been exhausted.

The Constitutional Court concluded that, the matter was moot and there were no sound reasons for it to, nevertheless, entertain the matter, particularly given the fact that its workload had increased significantly since the 17th Constitutional Amendment. It held that it would rather deal with the issues of the powers of the Minister to include the B-BBEE selection criteria in the next new matter that will raise such issue.

The Constitutional Court concluded that, the matter was moot and there were no sound reasons for it to, nevertheless, entertain the matter, particularly given the fact that its workload had increased significantly since the 17th Constitutional Amendment. It held that it would rather deal with the issues of the powers of the Minister to include the B-BBEE selection criteria in the next new matter that will raise such issue,.

 

The Full judgment  here

Case   CCT337/21
[2023] ZACC 05

Hearing Date: 16 August 2022

Judgement Date: 01 February 2023

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Tuesday, 31 January 2023 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment, particularly paragraphs 3 to 7 of the order, and cost order of the High Court of South Africa, Gauteng Division, Pretoria (High Court) dated 10 February 2021.

The applicant is Mr David John Riley, an adult male previously married to the respondent, Mrs Rochelle Tracy Riley. The parties were married to one another in Zimbabwe on 1 September 1989, out of community of property, with an accrual system. They had three children during the subsistence of their marriage, who are already majors. In 2015, they relocated to South Africa and Mrs Riley instituted divorce proceedings in the High Court. Despite the marriage being solemnised in Zimbabwe, the parties agreed that the High Court had jurisdiction to adjudicate the divorce proceedings and also agreed that the Court would apply the relevant Zimbabwean laws. The relevant Zimbabwean legislation applicable was the Matrimonial Causes Act,1 as amended (the Act).

The Act gave the High Court the discretion to make an order re-allocating matrimonial property when granting a decree of divorce. The High Court, as per Davis J, dissolved the Riley’s marriage on 28 February 2018 and ordered a re-distribution in terms of section 7(1) and 7(4) of the Act. The relevant portions of the divorce order are as follows: (a) both parties were to remain joint owners of the immovable property at 459 Rua de Masala, Maputo, Mozambique (the Mozambique property), and would be equally entitled to whatever rental income the property generates; (b) Mr Riley was to transfer 40% of his shareholding in his businesses in Mozambique, and in his South African business to Mrs Riley within 60 days from date of the order (the business shares); and (c) the parties were each to retain the movable property in their possession at the time of the order as their own.

In January 2019, Mrs Riley launched a contempt application in the High Court on the basis that she had not received her share of the rental income from the Mozambique property and secondly on the basis that Mr Riley had not transferred the business shares into her name. On 18 July 2019, the High Court granted an order of contempt in the form of a rule nisi, wherein Mr Riley was ordered to furnish reasons why the order should not be confirmed. The rule nisi was granted on the basis that Mr Riley had wilfully failed to comply with the divorce order. Mr Riley opposed the contempt application and brought a counter-application wherein he sought condonation for the late filing of his application for leave to appeal against the whole of the divorce order, and alternatively, an order for the variation of certain paragraphs of the divorce order. Amongst others, he sought an order that he retains sole ownership of the property in Mozambique and that he retain as his sole property all the points in the Dream Vacation Club subscription. Furthermore, that the entire paragraph relating to the transferring of the business shares to Mrs Riley be deleted.

The High Court held Mr Riley in contempt of the divorce order and sentenced him to imprisonment of 60 days, which was suspended in whole in the event that he made payment of Mrs Riley’s rental income share into her South African bank account within 30 days of the order. Second, it ordered that if Mr Riley did not ensure in future that Mrs Riley is paid her share of the rental money of the Mozambique property then she would be entitled to approach the court for further relief. Third, it made a variation of the order concerning the business shares and ordered Mr Riley to pay Mrs Riley a nominal equivalence of her 40% share of the businesses, and pay R44 000 for the nominal fee of the dream vacation points. Mr Riley applied for leave to appeal against the whole of the contempt order but this was dismissed. The Supreme Court of Appeal also dismissed Mr Riley’s application for leave to appeal.

Mr Riley, in his submissions to this Court, argued that his rights in terms of section 34 of the Constitution had been violated and that the matter raised several arguable points of law of general public importance. He contended that the High Court unilaterally amended the order of the Mozambique property and imposed as a fine, 60-day imprisonment which is against the jurisprudence of this Court, in that the enforcement of judgments debts does not form a part of contempt proceedings. Additionally, Mr Riley submitted that the High Court unilaterally varied or amended the divorced order initially issued by it notwithstanding that it was functus officio and without any jurisdiction to vary or amend its own orders.

Mrs Riley opposed the application, submitting that the matter turned on two issues: whether Davis J could vary his own order in the terms he had; and secondly whether Mr Riley could be found to be in contempt of court. Mrs Riley accordingly denied that Davis J was functus officio and submitted that the divorce order could be varied in terms of rule 42(1)(c) of the Uniform Rules of Court, alternatively the common law. Moreover, that the High Court was correct in finding that Mr Riley’s non-compliance with the divorce order was wilful and mala fide. Mrs Riley further submitted that the portion of the order which directed Mr Riley to pay her an amount of R489 136.59 was not part of the variation of the divorce order but was the amount owed to her for her shares of the rental income since the date of the divorce order.

In a unanimous judgment written by Tshiqi J, this Court held that even though most of the criticisms directed at the High Court in how it dealt with the contempt application were to a certain extent errors of established legal principles, they nonetheless implicated sections 12 and 34 of the Constitution in a manner so serious that it warranted the attention of the Court, thus engaging its jurisdiction. The Court further held that it was necessary to determine whether an order of contempt of court may flow from an order couched in declaratory terms. The Court thus concluded that it was in the interests of justice for it to grant the applicant leave to appeal.

On the merits, the Court held that it was common cause that Mr Riley administered the rental income generated by the property, however this did not mean that the High Court’s order created a positive obligation on him to transfer and pay the amount to Mrs Riley. It was held that Mr Riley’s failure to make the payment did not place him in contempt of the court order as the evidence before the High Court did not establish that Mr Riley was wilful and mala fides in his failure to comply with the order. Additionally, it was held that even after having found Mr Riley in contempt of the declaratory order, a sentence of direct imprisonment, conditional upon payment of an amount of money was in any event not a competent order as it is an established principle that imprisonment for the failure to pay a debt is unconstitutional and that section 12(1) of the Constitution does not permit imprisonment of a judgment debtor against whom an order is made ad solvendam pecuniam (payment of money). In considering whether the High Court varying its divorce order mero motu thus making an order which differs materially from the prayers sought by the parties, the Court held that once a judgment has been handed-down, the Judge is functus officio; he or she has no power to make, alter or amend, in any material terms, his or her decision or order, except in the exceptional circumstances envisaged under rule 42. In this instance, the Court concluded that the High Court was correct in holding that it was not open to Mr Riley to unilaterally decide not to comply with the court order, but this did not give the High Court the competency to unilaterally vary the order materially on terms not sought by any of the parties. As a result, the appeal was upheld and the application holding Mr Riley in contempt was dismissed.

 

The Full judgment  here

Case   CCT167/21
[2023] ZACC 03

Hearing Date: 17 May 2022

Judgement Date: 01 February 2023

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On 1 February 2023 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Supreme Court of Appeal. The Supreme Court of Appeal dismissed an appeal against the judgment and order of the High Court of South Africa, Gauteng Local Division, Johannesburg (High Court). The application concerned whether the High Court was correct in setting- aside an award made by the arbitrator in terms of section 12B(4)(a) of the Petroleum Products Act 120 of 1977 (PPA). The award concluded that there was no bar to an award for monetary compensation being made which arose out of an unfair or unreasonable contractual practice.

Mfoza Service Station (Pty) Limited (Mfoza), conducts the business of a service station and entered into a lease agreement with Engen Petroleum Limited (Engen), a petroleum wholesaler which owns the premises from which Mfoza operated its petroleum retail business. The relationship between the parties was governed by the terms of the lease agreement entered into between them which has since come to an end. Following a dispute between the parties and allegations by Mfoza that Engen had breached the lease agreement, resulting in it suffering damages, the Controller of Petroleum Products (Controller) directed that the parties submit their dispute to arbitration. The Controller concluded that the requirements for a referral to arbitration had been met and referred the matter to arbitration. All of the claims of Mfoza in the arbitration were pleaded as breach of contract claims, and the only relief sought was the payment of damages which related to alleged past loss of profit, loss of goodwill and loss of property value suffered as a result of the conduct of Engen. Arbitration proceedings commenced, during which Engen raised three preliminary objections – only one of which is relevant in these proceedings. It objected to the monetary compensation sought by Mfoza on the basis that such relief amounted to a claim for damages. It said damages could not be awarded under the arbitral jurisdiction conferred upon the Arbitrator, in terms of section 12B(4)(a) of the PPA. This section states that an arbitrator “shall determine whether the alleged contractual practices concerned are unfair or unreasonable and, if so, shall make such award as he or she deems necessary to correct such practice”.

In his award, the Arbitrator concluded that as a matter of principle, there was no bar to an award for monetary compensation being made which arose out of an unfair or unreasonable contractual practice. He found that he had the power under the broad rubric of monetary compensation, to award damages as well as other forms of compensation. He dismissed the preliminary objection raised by Engen.

Aggrieved, Engen asked the High Court to review and set aside the award on the basis that the Arbitrator committed a material error of law which constituted a gross irregularity, in that he exceeded his powers as contemplated by section 33 of the Arbitration Act 42 of 1965 (Arbitration Act). The High Court’s stance was that the Arbitrator incorrectly interpreted the provisions of section 12B(4)(a) of the PPA to confer a right upon Mfoza to claim patrimonial damages. It said that the Supreme Court of Appeal and the Constitutional Court have held that the jurisdiction conferred in terms of section 12B(4)(a) is corrective. It relied on the view taken by the Supreme Court of Appeal in Business Zone SCA that an award of damages is not competent under the corrective remedial jurisdiction, but only under a compensatory remedial jurisdiction. As such, the relief sought by Mfoza did not fall within the corrective remedial jurisdiction of the Arbitrator, said the High Court. The High Court explained that the aim of section 12B(4)(a) was to address the unequal bargaining power between parties, being a wholesaler and a licenced retailer. It authorised corrective remedial action prospectively, and as such past wrongs could not be addressed in the form of a damages award.

The High Court found that the Arbitrator exceeded his powers as contemplated in section 33(1)(b) of the Arbitration Act and set aside the award. It found that damages were not available as a remedy under section 12B(4)(a) of the PPA and that the arbitrator was confined to determining his jurisdiction on the case pleaded and not on a case that was not before him. The latter was a reference to the forms of compensation other than damages that the Arbitrator made reference to and which the High Court said was not before him. The High Court further directed Mfoza to amend its statement of case to remove the claim for patrimonial damages.

Mfoza’s applications for leave to appeal the High Court order and judgment were dismissed by the High Court and Supreme Court of appeal, respectively.

On the merits, Mfoza that the restrictive interpretation of section 12B(4)(a) by the Supreme Court of Appeal in Business Zone SCA is incorrect. Mfoza also submitted that the use of the word “correct” should not be understood or interpreted narrowly to qualify or cut down the provision. The payment of compensation is amongst the awards that may be necessary to correct a party’s wrongful (or, in the context of section 12B, unfair or unreasonable) practice. It said in some instances compensation may, depending on the circumstances, be the only remedy available to correct the unfair or unreasonable contractual practice. Mfoza submitted that the High Court had no power to substitute the award. To support this contention, Mfoza stated that, unlike section 172(1)(b) of the Constitution and section 8 of the Promotion of Administrative Justice Act, section 33(1) of the Arbitration Act does not give the Court wide discretionary powers to make any just and equitable remedy. The section provides for only one remedy: setting aside.

Engen submitted that Mfoza’s application for leave to appeal does not engage the jurisdiction of this Court. It submitted that Mfoza does not seek to assert any constitutional right or constitutional issue. In addition, it denied that there are good prospects of success or that the interest of justice favours granting leave to appeal. It submitted that a monetary award does not alter, let alone transform, the structure of the parties’ relationship when they exercise their rights or carry out their duties – it does not correct the practice that has been submitted to the arbitrator. Engen submitted that this interpretation is supported by the text of section 12B, its underlying purpose, and the statutory context. Furthermore, it is also the interpretation which best gives effect to the spirit, purport and object of the Bill of Rights. Engen said that Mfoza’s complaint that the High Court exceeded its powers by substituting the award with its own order is misplaced. It said that the review application concerned a discrete legal question regarding the scope of an arbitrator’s powers. Having found that the Arbitrator was wrong to dismiss the in limine objection, was the end of the matter, and the order of substitution arose out of the setting aside order and did not exceed the power of the High Court sourced in section 33(1)(b) of the Arbitration Act.

The minority judgment, penned by Mhlantla J (Madlanga J and Mlambo AJ concurring), found that this matter engaged this Court’s jurisdiction. However, the minority judgment parted ways with the majority judgment on the interpretation of the arbitrator’s remedial powers under section 12B(4)(a) of the PPA. The minority held that the arbitrator’s powers are wide therefore section 12B(4)(a) of the PPA includes monetary compensation. The minority’s interpretation of the arbitrator’s powers is that section 12B(4)(a) gives the arbitrator the power to make an award that she/he deems necessary to correct an unfair or unreasonable contractual practice, consequently that denotes broad and discretionary powers. The minority held that in so far as “compensation” is concerned, parallels cannot be drawn between the framing of section 12B(4)(a) and section 12B(4)(b) as contemplated in the majority judgment as both sections serve distinct purposes and functions.

The minority concludes that the functions and objects of “compensations” under section 12B(4)(a) and section 12B(4)(b) are distinct. Under section 12B(4)(a), compensation is remedial in nature and by contrast compensation under section 12B(4)(b) is meant to be punitive or retributive. The minority reasons that if the arbitrator’s powers are constrained to remedial action that operates prospectively, it would render the greater scheme and objective of the PPA of transforming contractual practices in the petroleum industry, nugatory. Therefore, the minority would have granted leave to appeal and granted the appeal.

The majority judgment, penned by Kollapen J (Majiedt J, Mathopo J, Tshiqi J and Unterhalter AJ concurring) found that the matter engaged the Constitutional Court’s constitutional jurisdiction and raised an arguable point of law of general public importance which ought to be considered by this Court. It found that determining the power of an arbitrator constitutes the exercise of public power pursuant to empowering legislation – being the PPA – and the interpretation of the section raises a constitutional matter. The need to pronounce on the scope of the arbitrator’s power in terms of section 12B(4)(a) transcends the interests of the parties and implicates the interests of a significant part of the general public – this is then also an arguable point of law of general public importance.The majority judgment further found that leave to appeal should be granted as it is in the interests of justice to provide certainty as to the powers of an arbitrator in terms of section 12B of the PPA.

On the merits, the majority judgment concluded that section 12B(4)(a) does not empower an arbitrator to make an award of damages or compensation as part of a corrective award arising out of an unfair or unreasonable contractual practice. It held that an arbitrator’s award may not go further than correcting the practice. The majority found that “to correct a practice” is about restoring the relationship by identifying the contractual practice that imperils the relationship and then making an award that will end the practice in question. While this Court had overturned the Supreme Court of Appeal’s decision in Business Zone SCA, it had only done so in parts. Further, where arbitrators are given the power to make a compensatory award in terms of section 12B(4)(b) and not under section 12B(4)(a), the choice of language and scope of power indicates the lawmakers’ clear intent to provide different powers in different circumstances. This structure of section 12B(4) also invokes the maxim inclusio unius est exlusio alterius (the specific inclusion of one implies the exclusion of the other). By including and excluding different kinds of remedial powers, the Legislature intended to provide different regimes of arbitral intervention. Moreover, the majority judgment held that the very nature of the arbitral system created by section 12B may not be suited to making a compensatory award. A number of features of the section are fit-for-purpose and fall into the limited scope of the arbitral system such as obliging parties to submit to arbitration upon a referral by the Controller and that the arbitrator’s award is final and binding upon the parties. Mfoza’s interpretation of section 12B(4)(a) could lead to disparate outcomes and consequences, which conflict with the constitutional values of fairness and equality.

Section 12B(4)(a) requires an arbitrator to establish whether the alleged contractual practices are unfair or unreasonable and, if so, to correct such practice by the making of an award. It follows that all that an arbitrator is required to do is to make a determination whether a contractual practice is unfair or unreasonable. There is no power nor requirement for the arbitrator to go beyond that and matters of fault, causation, loss, or damage fall outside of the enquiry. Once an arbitrator has made a determination that a contractual practice is unfair or unreasonable then the arbitrator has wide powers ¬ but they are confined to correcting the practice. One must therefore distinguish the limited nature of the determination that an arbitrator is required to make and the wide powers of redress following such a determination. The purpose of making the award is that it must be necessary to correct such practice. The arbitration model is a creation of statute and the power of the arbitrator is derived from the PPA. It is a power that must be exercised within its lawful parameters and for the purpose it has been given.

As to whether or not the High Court was entitled to make an order substituting the arbitrator’s award, the majority judgment found that the High Court’s order did not constitute an order of substitution and did not in any manner violate the provisions of section 33(1)(b) of the Arbitration Act.

Accordingly, the appeal was dismissed and the applicant was ordered to pay the costs of the appeal, including that of two counsel.

 

The Full judgment  here