Emfuleni Resorts (Pty) Ltd v Chairperson, Eastern Cape Gambling and Betting Board and Others (1036/2018) [2019] ZAECGHC 67 (25 June 2019)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION, GRAHAMSTOWN)

Case No: 1036/2018

In the matter between:

EMFULENI RESORTS (PTY) LTD Applicant

And

THE CHAIRPERSON, EASTERN CAPE GAMBLING

AND BETTING BOARD

First

Respondent

THE EASTERN CAPE GAMBLING AND BETTING

BOARD

Second

Respondent

GEC GAMING (PTY) LTD

Third Respondent

K2014000230 (PTY) LTD

Fourth Respondent

VUKANI GAMING EASTERN CAPE (PTY) LTD Fifth

Respondent

JUDGMENT

BESHE J:

INTRODUCTION

[1] This is a review application that is premised to a large extent on the provisions of the Promotion of Administrative Justice Act[1] (PAJA) in particular Section 6 thereof. The relief that is sought by the applicant in this regard is couched in Part B of the application as follows:

“1. The decision of the second respondent, taken on 29 March 2018 and communicated to the applicant on 4 April 2018, to grant a Type D Independent Site Operator licence to the third respondent permitting it to offer gaming on limited payout machines at its gambling premises to be situated at the Baywest Mall, Baywest Boulevard, Hunters Retreat, Port Elizabeth is reviewed and set aside.

2. The decision of the second respondent, taken on 29 March 2018 and communicated to the applicant on 4 April 2018, to permit the fourth respondent to convert its Type B gambling machine site licence to a Type D Independent Site Operator licence is reviewed and set aside.

3. The second respondent, and any of the other respondents that oppose this application, are to pay the applicant’s costs.”

PARTIES

[2] It appears to be common cause that Emfuleni Resorts, the applicant holds a Casino licence that entitles it to operate the Boardwalk Casino and Entertainment World in Summerstrand, Port Elizabeth.

[3] The first respondent is cited in terms of Section 53 (1) of the Uniform Rules in her official capacity is the Acting Chairperson of the second respondent.

[4] The second respondent is the Eastern Cape Gambling and Betting Board and the board that took the impugned decisions.

[5] The third respondent is GEC Gaming (Pty) Ltd, trading as Royal Aces and Bistro with its principal place of business at 27 Jot Park, Walmer, Port Elizabeth (Royal Aces).

[6] The fourth respondent K2014000230 (Pty) Ltd, which trades as Spin and Win, Uitenhage (Spin

and Win).

[7] No substantive relief is apparently sought against third and fourth respondents. It will be sought in respect of third respondent only in the event of second respondent having issued a Type D ISO LPM licence.

[8] The fifth respondent is Vukani Gaming Eastern Cape (Pty) Ltd, with principal place of business at 13A Pickering Street, Newton Park, Port Elizabeth. Likewise, no relief is sought from fifth respondent and a cost order is only

sought in the event that fifth respondent opposes this application.

APPLICANT’S CASE

[9] The founding affidavit is deposed to by Ms Annabelle Thomas who describes herself as the Group Manager, Legal to Sun International Management Limited (SIML) to which both Boardwalk Casino and Wild Coast Sun in Port Edward belong. Ms Thomas also deposed to a supplementary affidavit following the receipt by applicant of the Rule 53 record from the first respondent.

[10] Emerging from the abovementioned founding papers are the following salient allegations:

The two decisions are impugned on the basis that they are irrational and unreasonable. They were taken in direct conflict not only with information provided to the second respondent as part of a public comment process, but with evidence commissioned by the second

respondent.

[11] Ms Thomas sketches the background that led to the taking of the impugned decisions as being the following:

In June 2017 second respondent invited representations regarding its intentions to issue a final Request for Proposals (RFP) in respect of Independent Site Operator Licences in the Eastern Cape.

As I understand, this concerned the licencing of Limited Payout Machines (LPMs).

First respondent’s initial request for proposals (draft) issued in this regard did not have an impact on the Boardwalk’s

“catchment” area. Later during the same year, in November 2017, the final RFP included areas within the Boardwalk Casino

Catchment area. In response to the final RFP, Sun International submitted further representations along with a report prepared by a firm of economic consultants – Genesis Analytics (Pty) Ltd (Genesis). Sun International also attended hearings held by second respondent in this regard. The issuing and publishing of RFP is the subject of a separate legal suit against some of the respondents.

[12] An impact assessment was also commissioned by the second respondent to guide its division whether to roll out more LPMs in the province.

[13] According to the executive summary of the study commissioned by the second respondent, it was commissioned to determine the socio-economic and environmental impact of LPMs in the Gambling Sector of the Eastern Cape Province. To determine whether the province should increase the number of LPMs from 2000 to 6000. The study found that based on Population model per district

municipalities and metros, Nelson Mandela Metro and Cacadu District Municipality are relatively over operated with LPMs. The following

are inter alia conclusions that the study made:

Gambling in the Eastern Cape has a much negative impact on the household budgets with the per capital contribution / loss per annum to LPM being Eastern Cape (R5.75) compared to Western Cape (22.23), Gauteng (R7.00) and KwaZulu Natal (R11.76).

Geometrical existence of LPMs determined that there are two main clusters where route operators have invested. These are the Nelson Mandela Bay Metro and Buffalo City Metro.

Depending on the model used to assess the “DEGREE OF OVER / UNDERSATURATION” at a local municipality level, different

findings can be made. When using the population based method of one machine to every 1000 members of the population, it was found that the Nelson Mandela Bay Metro was heavily oversaturated.

When using a GDP or GVA method, it was found that Nelson Mandela Bay can still be allocated another 60 machines under the 2000 limit regime.

[14] Applicant makes the point that this information was highly relevant to the decision making process.

[15] On behalf of the applicant / Sun International, the second respondent’s attention was drawn to the harm that the Boardwalk would suffer if LPMs were to be rolled out in their catchment area. Namely, displacement of gambling revenue. That is because, according to applicant, there was already oversaturation of LPMs in the Boardwalk catchment area. It would be irrational to grant applications for LPM in those areas. Second respondent’s attention was also drawn to the fact that applicant paid a substantial amount of money for exclusivity in the catchment area of the Boardwalk Casino. And asserted that the decision to roll out more LPMs is unfair and affects the exclusivity for which applicant paid. Also in view of the fact that LPMs offer punters a gambling experience that is not much different to gambling on slot machines.

[16] The point was also made by the applicant that ignoring the finding of over saturation in the impact assessment is in conflict with Regulation 59 (3) and 62.

[17] Regulation 59 (3) of the Eastern Cape Gambling Regulations states that:

“(3) Subject to sub-regulation (2), the board shall only issue or allow route operator licences or limited gambling machine site licences which will allow more than 2000 limited gambling machine to be operated in the Province if‒

(a) it is satisfied that this will not lead to an over-saturated of limited gambling machines in the Province; and

(b) it has considered, both in regard to the existing limited gambling machines and such further machines as may exceed 2000‒

(i) the social impact;

(ii) the economic impact;

(iii) the environmental impact;

(iv) the impact on problem gambling; and

(v) any other information it considers relevant

and it is of the opinion that the exposure for play of more than 2000 limited gambling machines will be in the best interests of the Province.”

Regulation 62 provides that:

“62. Additional considerations in disposing of application for a gambling machine site licence.‒The board shall, in addition to the considerations mentioned in Chapter 3 of the Act, when considering an application for or transfer of a gambling machine site licence and when considering any conditions or requirements to which any such licence should advisably be made subject, take into consideration‒

(a) the extent to which persons, group or groups of persons previously disadvantaged by unfair discrimination will share in the ownership and profits of the licence holder;

(b) prevention of over-concentration of limited gambling machines in a particular area;

(c) any other factors which may affect the question whether it is desirable to grant such application or to attach any such condition or requirement;

(d) any other factors the board must consider in terms of the National Gambling Act, 1996 (Act No. 33 of 1996) in as far as it is set out herein;

(e) any other factors the board considers relevant.”

[18] According to the applicant, and this appears to be common cause, one of the operators in question, Royal Aces is ± 18,5 kilometres from the Boardwalk Casino.

[19] Applicant also alludes to second respondent’s previous policy which, it is asserted, was cognisant of the logic and reasonableness of not rolling out LPMs within 75 kilometres of a casino. As well as to the fact that the draft RFP did not envisage the granting of licences in Nelson Mandela Bay because in its (applicant) assertion, of the conclusion in the impact study that that area was oversaturated. The possibility of the allocation of licences in the Nelson Mandela Bay area was only introduced in the final RFP.

[20] Applicant also dealt in some detail with the economic implications of the proliferation of LPMs on the business of casinos. Applicant equates sites that operate 40 LPMs to mini-casinos that have the effect of eroding casino revenues.

[21] Further that although the second respondent asserts that it did not only rely on the impact study when making its decision but also on the inputs of those who expressed their views as well as updated information on the status of operating LPMs in the province, applicant complains that, there is no evidence to substantiate the assertion that there was updated information. In addition, none of the interested parties supported the further roll out of LPMs in the Nelson Mandela Bay Metro.

[22] In addition to the complaints expressed above, applicant asserts that the impugned decisions are illegal due to non-compliance with Limited Payout Machines Regulations that govern LPMs. Applicant cites the following Regulations:

Regulation 3 (1) and (2)[2] which provide:

“3. (1) Subject to the provisions of sub-regulation (2), the maximum number of limited payout machines which may be allowed by a provincial licensing authority to be operated on a single site must be five.

(2) The Board may, on good course shown and upon application by a provincial licensing authority, approve the operation of limited payout machines in excess of five machines and not more than forty: Provided that such application must be made in respect of every site for which limited payout machines in excess of five is sought.”

Board refers to the National Gambling Board. According to the applicant, the second respondent did not comply with these regulations before taking the impugned decision. There is only evidence of approval having been sought after the decisions were taken and no evidence that such was indeed given.

[23] Applicant suggests that second respondent did not meaningfully engage with applicant’s objections. It is suggested that the board could not have heard enough time to consider all the issues raised by the applicant, must have done so cursorily at the meeting it held on the evening of the day oral hearings were held.

[24] In response to applicant’s allegations, the Chairperson of the second respondent Ms Ncumisa Mayosi retorts as follows:

She takes the court through the legislative framework applicable in both the National and Provincial spheres in regard to matters relating to casinos, racing, gambling and wagering.

[25] Regarding applicant’s complaint about breach of exclusivity, namely that by awarding and issuing LPM licences in the Nelson Mandela Bay Municipality trampled on its right to exclusivity, Ms Mayosi has this to say:

A casino differs vastly from a site that operates LPMs. The Gambling Act does not contain a definition or make provision for a mini

casino. She makes the point that the complaint that the applicant’s right to exclusivity will be breached by the further roll out of LPMs within its catchment area in misconceived.

[26] Non-compliance with LPM regulations; in particular Regulation 3 (2): Attention is drawn to a letter (attached) that was sent by the Eastern Cape Board to the National Board on the 19 April 2018 in compliance with Regulation 3 (2). The letter is titled:

NOTIFICATION OF OUTCOME OF APPLICATIONS FOR INDEPENDENT SITE OPERATOR LICENCES (TYPE D) (21-40 LIMITED PAYOUT MACHINES)

This title sheds light into the purpose of the communique to the National Board. It goes to outline the process that was followed in dealing with applications. It concludes thus:

20. As contemplated in the National Regulation 3 (2) and in accordance with the CED’s Forum resolution, we hereby submit to your office the approved applications for your consideration.

[27] There is however no indication whether the National Board granted the approval for the operation of LPM’s

(5-10).

[28] As far as the complaint about the sudden inclusion of Nelson Mandela Bay Metro in the Final Request for Proposals (RFP) whereas Nelson Mandela Bay was not included in the Draft RFP second respondent’s answer is that: The DRFP was issued for purposes of comment only and did not amount to an invitation for ISO licences. Clause 23 thereof clearly stated that the second respondent reserved the right to cancel or amend the RFP. As to what informed the FRFP, it is suggested that: Responses to the DRFP were received from interested parties. A bidders’ conference was also held on

the 3 August 2017 where representations by parties were heard and dealt with.

As a result of comments and submissions received during the consultative process, the Nelson Mandela Bay Metro and Sarah Baartman

Municipalities were reopened after considering the total allocation model based partly on the study and on the Board’s LPM

policy.

That the Board took further steps to amend the DRFP after it had considered the representations that were made at the bidders’

conference and further submissions made by interested parties, after which it considered the study and the allocation model based on the spread of 1000 LPMs and decided to change the DRFP. It is denied that the amendment was sudden.

[29] It is asserted that the second respondent engaged with the submissions made by the parties and the objections raised by the applicant to the amendment of the DRFP. Ms Mayosi confirms that the applicant made oral submissions to the board in this regard on three occasions, 20 December 2017, 16 February 2018 (written submission) and 23 February 2018 (oral submission). And these were considered in full including the study that applicant had presented to the board. These were however rejected by the board.

[30] Second respondent’s response to applicant’s assertion that the decisions taken by the board the impugned decisions ignored evidence procured by the boards – in the form of the study it commissioned is the following:

That applicant read the study selectively and failed to consider the study and its recommendations holistically or properly. As the study found that additional LPMs could be rolled out in Nelson Mandela Bay, Buffalo City and Sarah Baartman.

[31] First and second respondents deny that the proliferation of LPMs cause loss of revenue by the Boardwalk and annex two surveys that show that despite proliferation of LPMs casino revenue has been on the increase since the 2011 throughout the country.

[32] Third to fifth respondents did not file any opposing affidavits, with fifth respondent opting to argue the matter on the papers.

[33] In reply applicant concedes that the impugned decisions do not technically amount to issuing casino licences which will be in breach of Boardwalk’s exclusivity. But insist that it is irrational, unreasonable and unfair of the first respondent to permit a proliferation of LPMs in the Boardwalk’s catchment area. Applicant asserts that the impugned decisions undercut the exclusivity that Boardwalk paid for and falls to be set aside. Applicant asserts that the Provincial Board did not receive any representations from interested parties that agitated for the addition of Nelson Mandela Bay to the RFP which may have led to the change / amendment of the DRFP.

[34] I am not certain what applicant means there is no support for the board’s allegation that it had due regard to applicant’s objection, specifically where it is alleged it was admitted by the first and second respondents that the board did not have time to consider the submissions before the oral hearings. Paragraphs 85 to 86 of the answering affidavit indicate that:

“85. The Board had received the applicant’s submissions on the 20 December 2017 and on the 16 February 2018, its further written submissions.

86. The Board had enough time to engage with the content of the applicant’s submissions prior to the oral hearings, and then deliberated on the oral submissions thereafter.”

I am unable to read any admission that the board did not have sufficient time to deliberate and decide on these objections.

ISSUED TO BE DETERMINED

[35] From the aforegoing, it is clear that the main issue to be decided is whether the second respondent’s

decisions in question should be reviewed, declared invalid and set aside. To a limited extent whether the decisions had the effect of breaching Boardwalk Casino’s right to exclusivity.

PARTIES’ SUBMISSIONS

[36] Applicant submits that the board (second respondent) did not comply with the LPM regulations in that it only sought permission to allow 5 but not more than 40 LPM’s to be operated on a particular site only after having identified third and fourth respondents as winners in the application process. Besides that, there is no evidence that the permission sought was granted by the National Gambling Board. And that therefore the impugned decisions are unlawful and fall to be set aside in terms of Section 6 (2) (b) and (6 (1) of PAJA. Section 6 (2) provides that:

“A court of tribunal has the power to judicially review an administrative action if:

(a) … … … .

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

(c) … … … .

(d) … … … .

(e) … … … .

(f) … … … .

(g) … … … .

(h) … … … .

(i) The action is otherwise unconstitutional or unlawful.”

[37] It is further submitted on behalf of the applicant that by failing to take into account that the impugned decisions would significantly undercut Boardwalk Casino’s exclusivity, the board ignored vital evidence and as a result it took an irrational decision. That therefore it falls to be set aside in terms of Section 6 (2) (iii) of PAJA as well.

[38] It was submitted that the impugned decisions are irrational in that the changes to the Draft Request for Proposals is said to have been made as inter alia as a result of submissions made by interested parties. Yet the Rule 53 record reveals that the interested parties did not contend that LPMs should be made available in Nelson Mandela Bay Metro. Over and above the fact that the study it (second respondent) commissioned stated that there was oversaturation in the Nelson Mandela Bay Metro in this regard. It was submitted that there was therefore no rational basis for altering the Draft Request for Proposals. Also in view of Section 59 (3) of the Gambling Regulations which provides that the Board may not permit more than 2000 LPMs in the province unless it is satisfied that this will not lead to oversaturation.

[39] Applicant submits that the board did not meaningfully deal with its objections and its only engagement with

applicant’s objections made during the oral hearings and rejected same on the basis that the impact study was valid.

[40] Even though fifth respondent had signalled its intention to oppose the application, it did not file any opposing affidavit and opted to argue the matter on the papers. The relief sought by the applicant that the decisions taken by the second respondent should be reviewed and set aside is supported by the fifth respondent. In its submission, second respondent impermissibly granted the two licences notwithstanding that the Nelson Mandela Bay Municipality was oversaturated as confirmed by second respondent’s own study. This, in breach of Regulation 59 (3) of the Eastern Cape Regulations.

[41] The fifth respondent does not support the relief sought by the applicant that it should be declared that second respondent’s decisions breached the exclusivity that applicant is entitled to by virtue of the large sum of money it paid for such exclusivity. Fifth respondent agrees that this contention that the exclusivity of the casino licence that applicant paid for does not extend to the exclusion of roll out of LPMs or other gaming machines within applicant’s catchment area.

[42] I agree with first, second and fifth respondents that the complaint relating to exclusivity by the applicant does not have merit. The exclusivity only relates to the proliferation of other casinos in in applicant’s catchment area. I do not agree that the impugned decisions infringe on applicant’s right to exclusivity.

[43] The issues that require determination are whether the impugned decisions were unlawful, substantially irrational and unreasonable and or procedurally irrational.

DISCUSSION

[44] Gambling legislation is aimed at safeguarding people participating in gambling and their communities against

adverse effects of gambling. Legislation in this regard is to ensure that gambling activities are regulated, licenced, controlled and policed. That members of public who participate in any licenced gambling activity are protected, amongst other things.[3]

[45] Whereas it is the function and within the competency of the second respondent to determine the issuing of

licences such as the ones under consideration in this matter, it is the court’s responsibility to ensure that the decisions are taken in compliance with the constitution or in a constitutional manner that the second respondent acted lawfully.

[46] In support of its assertion that the impugned decisions are irrational, applicant repeatedly refers to a previous policy of the second respondent. Alleging inter alia that “the Board used to take the view that it was not appropriate to permit the operation of LPMs within a 75 kilometre radius of a casino”. Applicant however acknowledges that this policy was dropped before the impugned decisions were taken. In my view, this does not assist the applicant in its argument that the impugned decisions were irrational.

ALLEGED FAILURE TO COMPLY WITH THE LPM REGULATIONS (UNLAWFULNESS)

[47] Regulation 3 (2) places the onus on the Board (National) to approve the operation of LPMs in excess of five machines and not more than forty. The Board will do so upon good cause and upon application by a provincial licencing authority. Which in this case is the second respondent. In my view, the letter addressed to the Board on behalf of the second respondent after having identified third and fourth respondents as was in compliance with the regulation in question. Therefore it cannot be said that there was non-compliance with the regulation on the part of second respondent.

[48] Regulation 59 (3) precludes the Provincial Board from permitting more than 2000 LPMs in the province unless it is satisfied this will not lead to oversaturation. [My emphasis] Applicant’s complaint is that second respondent’s

decision to roll out more LPMs in the Boardwalk’s catchment area stands to be reviewed and set aside because even on the reading of second respondent’s study, the Nelson Mandela Bay Metro is oversaturated. There are two reasons why in my view the impugned decisions do not fall foul of Regulation 59 (3). Firstly, the regulation is against oversaturation in the Province. Secondly, it is only part of the study – based on a certain methodology that the study makes a finding over of saturation in the Nelson Mandela Bay Metro. (Heavily so). The same study also concludes that when using another method, it was found that Nelson Mandela Bay can still be allocated another sixty (60) machines under the 2000 limit regime. Nowhere does the study show that there is oversaturation in the Eastern Cape Province as envisaged by Regulation 59 (3).

[49] The complaint that the impugned decisions were taken in a procedurally irrational manner is also not supported by the evidence. The second respondent appears to have undertaken an all-encompassing consultation before the two decisions were taken. This is especially so if one has regard to the guidance provided in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs[4] where the provisions of Section 6 (2) (h) of PAJA in particular were dealt with namely that:

“In determining the proper meaning of section 6(2)(h) of PAJA in the light of the overall constitutional obligation upon administrative decision-makers to act “reasonably”, the approach of Lord Cooke provides sound guidance. Even if it may be thought that the language of section 6(2)(h), if taken literally, might set a standard such that a decision would rarely if ever be found unreasonable, that is not the proper

constitutional meaning which should be attached to the subsection. The subsection must be construed consistently with the Constitution

and in particular s 33 which requires administrative action to be ‘reasonable’. Section 6(2)(h) should then be understood to require a simple test, namely that an administrative decision will be reviewable if, in Lord Cooke’s

words, it is one that a reasonable decision-maker could not reach.

What will constitute a reasonable decision will depend on the circumstances of each case, much as what will constitute a fair procedure will depend on the circumstances of each case. Factors relevant to determining whether a decision is reasonable or not will include the nature of the decision, the identity and expertise of the decision-maker, the range of factors relevant to the decision, the

reasons given for the decision, the nature of the competing interests involved and the impact of the decision on the lives and well-being of those affected. Although the review functions of the Court now have a substantive as well as a procedural ingredient, the distinction between appeals and reviews continues to be significant. The Court should take care not to usurp the functions of administrative agencies. Its task is to ensure that the decisions taken by administrative agencies fall within the bounds of reasonableness as required by the Constitution.”

[50] For the reasons stated herein above, I am therefore not persuaded that the decision taken by the second

respondent is one a reasonable decision-maker could not have taken.

[51] Accordingly, I am unable to find that the impugned decisions are invalid.

[52] The application is dismissed. Applicant is to pay first and second respondents’ costs, including those of two counsel, where applicable.

_____________­­__

NG BESHE

JUDGE OF THE HIGH COURT

APPEARANCES

For the Applicant : Adv: A Friedman

Instructed by

: DU PLESSIS VAN DER MERWE T/A BAKER McKENZIE

C/o NETTELTONS ATTORNEYS

118A High Street

GRAHAMSTOWN

Ref: Mr Nettelton

Tel.: 046 – 622 7149

For the 1st, 2nd Respondents : Adv: I Jamie SC and Adv: T Mayosi

Instructed by

: SMITH TABATA INC.

C/ o WHEELDON RUSHMERE & COLE

119 High Street

Ref: Glyn

Tel.: 046 – 622 7005

For the 5th Respondent : Adv: N Ferreira and Adv: M Finn

Instructed by

: EDWARD NATHAN SONNENBERGS INC.

C/o WHITESIDES ATTORNEYS

53 African Street

Ref: Mr Barrow/nc/C11908

Tel.: 046 – 622 3546

Date Heard

: 9 May 2019

Date Reserved

: 9 May 2019

Date Delivered

: 25 June 2019

[1] Act 3 of 2000.

[2] Limited Payout Machine Regulations of 2000 made by the Minister of Trade and Industry.

[3] See preamble to the National Gambling Act.