Hotel Slots (Pty) Ltd and Another v Premier of the North-West (1187/97) [1999] ZANWHC 1 (10 June 1999)

REPORTABLE

CASE NO. 1187/97

IN

THE HIGH COURT OF SOUTH AFRICA

(BOPHUTHATSWANA PROVINCIAL DIVISION)

In the matter between:

HOTEL SLOTS (PTY) LTD 1ST

APPLICANT

STEPHEN

ANTHONY GOSSAYNN 2ND

APPLICANT

and

THE

PREMIER OF NORTH WEST RESPONDENT

CIVIL

JUDGMENT

MOGOENG J.

MAFIKENG

DATE OF HEARING : 20 MAY 1999

DATE OF JUDGMENT: 10 JUNE 1999

COUNSEL FOR APPLICANTS : E. ZAR S.C (with him M. BASSLIAN)

COUNSEL FOR RESPONDENT: J.P de BRUIN S.C (with him J.H.F PISTOR)

MOGOENG J: On 20 May 1999 I dismissed this application with costs, including costs consequent upon the employment of two counsel. What follows are the reasons for that order. The first Applicant is a company with limited liability, duly registered in terms of the company laws of this country. Second Applicant is a businessman and a director of the first Applicant. The Respondent is cited in his capacity as the political head of the North West Provincial Government. First Applicant resolved, on an undisclosed date, to set up, operate and maintain gambling machines at various premises in the North West Province. Pursuant thereto, gambling machines were distributed to these venues. The police learnt about this and cautioned the second Applicant about the illegality of his operations. Consequently, he held discussions with the Director of Public Prosecutions for the North West Province, J.J. Smit S.C, who advised him to approach the Chief State Law Adviser, N. Jagga. Several telephonic and person-to-person discussions took place between the second Applicant and Jagga. They were all about how the first Applicant could bring his operations within the precincts of the law. Annexure “APPL3" is the culmination of those discussions. This annexure states, inter alia, that the second Applicant would be protected from prosecution for his operations, by section 54(2) of the North West Casino, Gaming and Betting Act No. 13 of 1994 (the Act), for a period of six months of the date of the letter.

MOGOENG J: On 20 May 1999 I dismissed this application with costs, including costs consequent upon the employment of two counsel. What follows are the reasons for that order.

The first Applicant is a company with limited liability, duly registered in terms of the company laws of this country. Second Applicant is a businessman and a director of the first Applicant. The Respondent is cited in his capacity as the political head of the North West Provincial Government.

First Applicant resolved, on an undisclosed date, to set up, operate and maintain gambling machines at various premises in the North West Province. Pursuant thereto, gambling machines were distributed to these venues. The police learnt about this and cautioned the second Applicant about the illegality of his operations. Consequently, he held discussions with the Director of Public Prosecutions for the North West Province, J.J. Smit S.C, who advised him to approach the Chief State Law Adviser, N. Jagga.

Several telephonic and person-to-person discussions took place between the second Applicant and Jagga. They were all about how the first Applicant could bring his operations within the precincts of the law. Annexure “APPL3" is the culmination of those discussions.

This annexure states, inter alia, that the second Applicant would be protected from prosecution for his operations, by section 54(2) of the North West Casino, Gaming and Betting Act No. 13 of 1994 (the Act), for a period of six months of the date of the letter.

Subsequent thereto, Jagga wrote another letter to the second Applicant’s attorneys. Its essence was that the North West Casino, Gaming and Betting Amendment Act No. 9 of 1997 (the Amendment Act) was passed, that it repeals section 54(2) of the principal Act and prohibits any unlicensed operation of gaming machines. It also provides for a four months phasing out period subject to a fee of R1 000.00 per every machine operated. This letter also states that all previous communications should be regarded as being withdrawn. In response to this communication, the Applicants’ attorneys wrote a letter to the Department of Finance and Economic Affairs, North West Province, expressing their dissatisfaction about having to pay R100 000.00 for their one hundred machines. This amount was, nevertheless, paid. They claimed that they had an agreement which allowed them to operate for a period of six months in the Province. Finally, the Applicants indicated that they were in the process of bringing an application regarding the existence of the alleged agreement. Indeed this application was launched on 15 December 1997 for an order in the following terms: “ 1. Declaring that an agreement was entered into between the first Applicant alternatively the second Applicant and the Respondent in the terms as referred to in second Applicant’s affidavit annexed hereto.

2. That the Respondent be ordered to pay the sum of R100 000.00 paid in terms of the provisions of section 22 of the North West Casino, Gaming and Betting Amendment Act No. 9 of 1997.

Subsequent thereto, Jagga wrote another letter to the second Applicant’s attorneys. Its essence was that the North West Casino, Gaming and Betting Amendment Act No. 9 of 1997 (the Amendment Act) was passed, that it repeals section 54(2) of the principal Act and prohibits any unlicensed operation of gaming machines. It also provides for a four months phasing out period subject to a fee of R1 000.00 per every machine operated. This letter also states that all previous communications should be regarded as being withdrawn.

In response to this communication, the Applicants’ attorneys wrote a letter to the Department of Finance and Economic Affairs, North West Province, expressing their dissatisfaction about having to pay R100 000.00 for their one hundred machines. This amount was, nevertheless, paid. They claimed that they had an agreement which allowed them to operate for a period of six months in the Province. Finally, the Applicants indicated that they were in the process of bringing an application regarding the existence of the alleged agreement.

Indeed this application was launched on 15 December 1997 for an order in the following terms:

“ 1. Declaring that an agreement was entered into between the first Applicant alternatively the second Applicant and the Respondent in the terms as referred to in second Applicant’s affidavit annexed hereto.

2. That the Respondent be ordered to pay the sum of R100 000.00 paid in terms of the provisions of section 22 of the North West Casino, Gaming and Betting Amendment Act No. 9 of 1997.

3. That within a period of four weeks from date upon which the six months period expires in terms of the agreement referred to in 1 above, the Applicants shall be entitled to remove the gaming machines referred to in the schedule attached to “APPL5" to second Applicant’s affidavit for exportation out of the Republic of South Africa. That the Respondent be ordered to pay the costs hereof.” It follows from these prayers that the central issue that presents itself for determination in this matter, is whether or not an agreement was in fact entered into between the Applicants and the Respondent. All other prayers depend on the existence of the agreement for their survival. For the purpose of making this determination, I intend to focus largely on the Applicants’ version. To this end, I will make every effort to ensure that the salient features thereof, are reproduced as accurately as possible. Second Applicant met Jagga on an undisclosed date in Sandton. Jagga informed him that he would be able, in his official capacity as an employee of the Respondent, to secure a permit or agreement in terms of which the second Applicant would have the exclusive right to operate gaming machines in the North West Province for a period of six months. Jagga also said that if the relevant Board was not yet constituted to consider licences on the expiry of this period, the permit could be

extended for a further period. Ultimately, and on or about 09 October 1997, Jagga informed him that the permit or agreement as previously discussed had been issued and confirmed. On Friday, 10 October 1997 the second Applicant met Jagga in Sandton. They were in the company of about eight other people who were interested in securing permits to operate gaming machines in the Gauteng and Western Cape Provinces. Jagga repeatedly told those people that he had secured the

3. That within a period of four weeks from date upon which the six months period expires in terms of the agreement referred to in 1 above, the Applicants shall be entitled to remove the gaming machines referred to in the schedule attached to “APPL5" to second Applicant’s affidavit for exportation out of the Republic of South Africa.

That the Respondent be ordered to pay the costs hereof.”

It follows from these prayers that the central issue that presents itself for determination in this matter, is whether or not an agreement was in fact entered into between the Applicants and the Respondent. All other prayers depend on the existence of the agreement for their survival.

For the purpose of making this determination, I intend to focus largely on the Applicants’ version. To this end, I will make every effort to ensure that the salient features thereof, are reproduced as accurately as possible.

Second Applicant met Jagga on an undisclosed date in Sandton. Jagga informed him that he would be able, in his official capacity as an employee of the Respondent, to secure a permit or agreement in terms of which the second Applicant would have the exclusive right to operate gaming machines in the North West Province for a period of six months. Jagga also said that if the relevant Board was not yet constituted to consider licences on the expiry of this period, the permit could be extended for a further period.

Ultimately, and on or about 09 October 1997, Jagga informed him that the permit or agreement as previously discussed had been issued and confirmed. On Friday, 10 October 1997 the second Applicant met Jagga in Sandton. They were in the company of about eight other people who were interested in securing permits to operate gaming machines in the Gauteng and Western Cape Provinces. Jagga repeatedly told those people that he had secured the

permit or agreement for the second Applicant which he had with him. It was then that Jagga handed the ‘official document’ to the second Applicant. That document is annexure “APPL3" mentioned above. The second Applicant holds the view that by the time “APPL3" was handed to him an agreement had been entered into between the Respondent on the one side and the Applicants or one of them, on the other. He also believes that in terms thereof the Respondent granted to the Applicants the exclusive right to operate gaming machines for a period of six months in the North West Province. Second Applicant registered his displeasure about annexure “APPL3", to the extent that it was silent on one of the towns in which gaming machines were to be operated, namely Vryburg. The oral agreement The Applicants’ case is that their agreement or permit with the Respondent is oral and annexure “APPL3" constitutes corroboration of that agreement. It is therefore virtually impossible to properly consider the existence or non-existence of the alleged oral agreement without some analysis of annexure “APPL3". The essential parts of annexure “APPL3" are reproduced hereunder: “Re: UNREGULATED GAMBLING OPERATIONS: PROVINCE OF THE NORTH WEST The meeting between yourself and the writer hereof on 24 September 1997 on the above stated subject matter have reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due to logistical reasons, the above stated anticipated progress however failed to materialize and it must further be conceded that there are at present no formal structure or progress in place whereby you may apply for a licence to operate gaming machines in the Province. . . .

permit or agreement for the second Applicant which he had with him. It was then that Jagga handed the ‘official document’ to the second Applicant. That document is annexure “APPL3" mentioned above. The second Applicant holds the view that by the time “APPL3" was handed to him an agreement had been entered into between the Respondent on the one side and the Applicants or one of them, on the other. He also believes that in terms thereof the Respondent granted to the Applicants the exclusive right to operate gaming machines for a period of six months in the North West Province. Second Applicant registered his displeasure about annexure “APPL3", to the extent that it was silent on one of the towns in which gaming machines were to be operated, namely Vryburg.

The oral agreement

The Applicants’ case is that their agreement or permit with the Respondent is oral and annexure “APPL3" constitutes corroboration of that agreement. It is therefore virtually impossible to properly consider the existence or non-existence of the alleged oral agreement without some analysis of annexure “APPL3". The essential parts of annexure “APPL3" are reproduced hereunder:

“Re: UNREGULATED GAMBLING OPERATIONS: PROVINCE OF THE NORTH WEST

The meeting between yourself and the writer hereof on 24 September 1997 on the above stated subject matter have reference.

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

Due to logistical reasons, the above stated anticipated progress however failed to materialize and it must further be conceded that there are at present no formal structure or progress in place whereby you may apply for a licence to operate gaming machines in the Province.

. . .

It must however be pointed out to you that although the absence of the said structures impacts on your rights, it does not guarantee you a licence (temporary or otherwise), but merely affects your right to at least apply therefore. It is furthermore accepted that you are a registered VAT payer in respect of the income you derived out of your operations thus far, and that you have numerous people in your employment. . . . . . . It is therefore conceded that, should you be operating under the circumstances as stipulated by this subsection [54(2) of the Act], you would be operating within the ambit of the Act and would not be subject to prosecution. You are furthermore notified that the Act is in the process of being revised in order to: (a) allow for route operator licensing; (b) the possible phasing out of unregulated operations by way of a period of grace; (c) the amendment of section 54(2) of the Act; and (d) such other amendments as the Honourable MEC for Finance and Economic Affairs may desire. It is furthermore confirmed that you would notwithstanding the provisions of section 54(2) of the Act, proceed to phase out your operations with a view to positioning yourself for a formal application. Such phasing out period would involve a period of six months from the date of this letter. . . . . . . . . . It is once again stressed that this does not constitute or purports to constitute a licence or temporary licence but merely an acknowledgement of your defence in terms of section 54(2) and the subsequent phasing out of your operations. It should furthermore be borne in mind that this also in no way creates any legitimate expectations to obtain a licence if and when the Board initiates applications in this regard.” (My emphasis)

It must however be pointed out to you that although the absence of the said structures impacts on your rights, it does not guarantee you a licence (temporary or otherwise), but merely affects your right to at least apply therefore.

It is furthermore accepted that you are a registered VAT payer in respect of the income you derived out of your operations thus far, and that you have numerous people in your employment.

. . . . . .

It is therefore conceded that, should you be operating under the circumstances as stipulated by this subsection [54(2) of the Act], you would be operating within the ambit of the Act and would not be subject to prosecution.

You are furthermore notified that the Act is in the process of being revised in order to:

(a) allow for route operator licensing;

(b) the possible phasing out of unregulated operations by way of a period of grace;

(c) the amendment of section 54(2) of the Act; and

(d) such other amendments as the Honourable MEC for Finance and Economic Affairs may desire.

It is furthermore confirmed that you would notwithstanding the provisions of section 54(2) of the Act, proceed to phase out your operations with a view to positioning yourself for a formal application. Such phasing out period would involve a period of six months from the date of this letter.

. . . . . . . . .

It is once again stressed that this does not constitute or purports to constitute a licence or temporary licence but merely an acknowledgement of your defence in terms of section 54(2) and the subsequent phasing out of your operations.

It should furthermore be borne in mind that this also in no way creates any legitimate expectations to obtain a licence if and when the Board initiates applications in this regard.” (My emphasis)

This letter was duly signed by Jagga. Applicants do not seem to know the exact nature of the arrangement they claim to have with the Respondent. They categorise it either as a permit on the one hand or an agreement on the other or as a permit/agreement. This betrays their own ambiguity about what they think they have with the Respondent and suggests a lack of confidence in their assertions. The Applicants have not said when and where the alleged agreement was concluded. Mr Zar, for the Applicants, said in response to the Court’s question about this issue, that the contract could have been concluded on 09 or 10 October 1997. He further said that it is a matter which could be properly addressed by a referral for oral evidence. What remains, however, is that the Applicants do not know when and where the agreement was entered into. Annexure “APPL3" is silent on the key terms of the agreement, allegedly discussed and agreed upon between the second Applicant and Jagga. Nowhere does it state that: (a) it constitutes or is an embodiment of an agreement or permit; (b) the Applicants would have the exclusive right to operate gaming machines in the Province; (c) the permit could be extended for a further period; (d) or the machines would be exported abroad after the expiry of the six months period.

This letter was duly signed by Jagga.

Applicants do not seem to know the exact nature of the arrangement they claim to have with the Respondent. They categorise it either as a permit on the one hand or an agreement on the other or as a permit/agreement. This betrays their own ambiguity about what they think they have with the Respondent and suggests a lack of confidence in their assertions. The Applicants have not said when and where the alleged agreement was concluded. Mr Zar, for the Applicants, said in response to the Court’s question about this issue, that the contract could have been concluded on 09 or 10 October 1997. He further said that it is a matter which could be properly addressed by a referral for oral evidence. What remains, however, is that the Applicants do not know when and where the agreement was entered into.

Annexure “APPL3" is silent on the key terms of the agreement, allegedly discussed and agreed upon between the second Applicant and Jagga. Nowhere does it state that:

(a) it constitutes or is an embodiment of an agreement or permit;

(b) the Applicants would have the exclusive right to operate gaming machines in the Province;

(c) the permit could be extended for a further period;

(d) or the machines would be exported abroad after the expiry of the six months period.

On the contrary, this letter is very emphatic on the fact that it must not be construed as a licence (temporary or otherwise), or as creating any legitimate expectation to obtain a licence but rather as a recognition and confirmation of the Applicants’ defence, in terms of section 54(2) of the Act, against prosecution. This in itself militates against any notion that the letter amounts to a corroboration of an agreement of some sort, as submitted by Mr Zar. Applicants have, at all times material hereto, been assisted by legal representatives. The second Applicant reported all the developments to them. Mr Viljoen, his attorney, was present at the meeting where annexure “APPL3" was handed to the second Applicant.

Applicants queried the fact that Vryburg was not included in “APPL3" as one of the towns where gaming machines would be operated. At no stage did they question the absence of exclusivity, or demand a clear description of what was being communicated to them through “APPL3" as either a permit or agreement. Jagga was never asked to include a term relating to the extension of the permit and the exportation of the machines. One must accept that the Applicants were happy with “APPL3" as it is. They were happy to operate gaming machines without any threat of prosecution. After all that is what caused the second Applicant to approach Smit and Jagga in the first place. He had achieved what he set out to achieve by securing “APPL3". The Applicants certainly have a strange way of asserting their right to operate exclusively in the Province. In the first place their own attorneys made representations on behalf of one Mr Pestana of the Ritz Group to also operate gaming machines in this Province. This was on 17 October 1997. Their attorneys must have known then, Mr Viljoen in particular, that the Applicants are supposed to operate gaming machines to the exclusion of all other people. The Applicants neither terminated Mr Viljoen’s mandate for betraying them in this manner, nor did they seek to interdict the Ritz Group or raise this particular issue with Jagga.

On the contrary, this letter is very emphatic on the fact that it must not be construed as a licence (temporary or otherwise), or as creating any legitimate expectation to obtain a licence but rather as a recognition and confirmation of the Applicants’ defence, in terms of section 54(2) of the Act, against prosecution. This in itself militates against any notion that the letter amounts to a corroboration of an agreement of some sort, as submitted by Mr Zar.

Applicants have, at all times material hereto, been assisted by legal representatives. The second Applicant reported all the developments to them. Mr Viljoen, his attorney, was present at the meeting where annexure “APPL3" was handed to the second Applicant.

Applicants queried the fact that Vryburg was not included in “APPL3" as one of the towns where gaming machines would be operated. At no stage did they question the absence of exclusivity, or demand a clear description of what was being communicated to them through “APPL3" as either a permit or agreement. Jagga was never asked to include a term relating to the extension of the permit and the exportation of the machines. One must accept that the Applicants were happy with “APPL3" as it is. They were happy to operate gaming machines without any threat of prosecution. After all that is what caused the second Applicant to approach Smit and Jagga in the first place. He had achieved what he set out to achieve by securing “APPL3".

The Applicants certainly have a strange way of asserting their right to operate exclusively in the Province. In the first place their own attorneys made representations on behalf of one Mr Pestana of the Ritz Group to also operate gaming machines in this Province. This was on 17 October 1997. Their attorneys must have known then, Mr Viljoen in particular, that the Applicants are supposed to operate gaming machines to the exclusion of all other people. The Applicants neither terminated Mr Viljoen’s mandate for betraying them in this manner, nor did they seek to interdict the Ritz Group or raise this particular issue with Jagga.

With regard to the extension of the permit or agreement, the second Applicant said, in his affidavit, that if the Board was not yet in place to consider his application of a licence when the six months period expires, the permit could be extended. Could not would. However, Mr Zar submitted that the permit would be extended for as long as the Board was not established. I have not been able to find anything in the Applicant’s affidavit to suggest that the Respondent left himself with no choice but to extend the permit or agreement for as long as the Board was not yet established. The annexure also states clearly that the six months period of grace is intended to facilitate the winding up of the Applicants’ gambling operations. The purpose of the period of grace militates against the possibility of a renewal or extension of the permit. For the purpose of this discussion, it is important to bear in mind that the events leading to the delivery of the document by Jagga to the second Applicant are set out in a chronological order. This is the same sequence in which the second Applicant presented them. Accordingly, there can be no doubt that annexure “APPL3" was the climax of the second Applicant’s arduous struggle to operate gaming machines lawfully. On his own version, read and understood in its correct context, “APPL3" was regarded by both parties as the long-awaited

tangible proof of his permit or agreement to operate lawfully. This is how Jagga projected it or made it out to be in the presence of his potential clients. Having read it, the Applicants must have accepted it as a correct and true reflection of what they wanted to achieve hence their failure to question its alleged incompleteness. Annexure “APPL3" therefore constitutes the realisation of the Applicant’s dream. Accordingly, the permit or agreement relied on by the Applicants is nothing other than annexure “APPL3". This conclusion is fortified by the letter written by the second Applicant, on behalf of the first Applicant, to the Reserve Bank in the following terms:

With regard to the extension of the permit or agreement, the second Applicant said, in his affidavit, that if the Board was not yet in place to consider his application of a licence when the six months period expires, the permit could be extended. Could not would. However, Mr Zar submitted that the permit would be extended for as long as the Board was not established. I have not been able to find anything in the Applicant’s affidavit to suggest that the Respondent left himself with no choice but to extend the permit or agreement for as long as the Board was not yet established. The annexure also states clearly that the six months period of grace is intended to facilitate the winding up of the Applicants’ gambling operations. The purpose of the period of grace militates against the possibility of a renewal or extension of the permit.

For the purpose of this discussion, it is important to bear in mind that the events leading to the delivery of the document by Jagga to the second Applicant are set out in a chronological order. This is the same sequence in which the second Applicant presented them. Accordingly, there can be no doubt that annexure “APPL3" was the climax of the second Applicant’s arduous struggle to operate gaming machines lawfully. On his own version, read and understood in its correct context, “APPL3" was regarded by both parties as the long-awaited tangible proof of his permit or agreement to operate lawfully. This is how Jagga projected it or made it out to be in the presence of his potential clients. Having read it, the Applicants must have accepted it as a correct and true reflection of what they wanted to achieve hence their failure to question its alleged incompleteness. Annexure “APPL3" therefore constitutes the realisation of the Applicant’s dream. Accordingly, the permit or agreement relied on by the Applicants is nothing other than annexure “APPL3". This conclusion is fortified by the letter written by the second Applicant, on behalf of the first Applicant, to the Reserve Bank in the following terms:

“Hotel Slots (Pty) Ltd has recently received permission from the North West Province to continue a gaming machine operation for a limited period of six months or possibly longer. A copy of this correspondence is attached.” The attached copy of the document containing the permission was none other than annexure “APPL3". In sum, the Applicants did not enter into any oral agreement with the Respondent. Their own version negates the conclusion of the alleged oral agreement. The written agreement So far as the Applicants are concerned, we are clearly not dealing here with an agreement in a loose sense, but rather with a contract intended to give rise to an obligation and to bind parties to it. This would mean that both parties must be proved to have had animus contrahendi or the intention to enter into a contract. In other words it must be established that there was a meeting of the minds between the parties. The inevitable conclusion to arrive at, regard being had to “APPL3", is that their minds could only have met on the following issues: (a) “APPL3" does not constitute or purport to constitute a licence, temporary or otherwise; (b) it must not be understood to create a legitimate expectation that the Applicants would be granted a licence should they apply for one in future; (c) it acknowledges and confirms that the Applicants have a valid defence, in terms of section 54(2), to any possible prosecution resulting from their operations of gaming machines; (d) the Applicants may resume their operations for a period of six months;

“Hotel Slots (Pty) Ltd has recently received permission from the North West Province to continue a gaming machine operation for a limited period of six months or possibly longer. A copy of this correspondence is attached.”

The attached copy of the document containing the permission was none other than annexure “APPL3".

In sum, the Applicants did not enter into any oral agreement with the Respondent. Their own version negates the conclusion of the alleged oral agreement.

The written agreement

So far as the Applicants are concerned, we are clearly not dealing here with an agreement in a loose sense, but rather with a contract intended to give rise to an obligation and to bind parties to it. This would mean that both parties must be proved to have had animus contrahendi or the intention to enter into a contract. In other words it must be established that there was a meeting of the minds between the parties. The inevitable conclusion to arrive at, regard being had to “APPL3", is that their minds could only have met on the following issues:

(a) “APPL3" does not constitute or purport to constitute a licence, temporary or otherwise;

(b) it must not be understood to create a legitimate expectation that the Applicants would be granted a licence should they apply for one in future;

(c) it acknowledges and confirms that the Applicants have a valid defence, in terms of section 54(2), to any possible prosecution resulting from their operations of gaming machines;

(d) the Applicants may resume their operations for a period of six months;

(e) the six months period is specifically meant to enable the Applicants to phase out their operations within this period. It appears from this list that an agreement relating to the Applicants’ defence would be superfluous since the defence is created by law. A contract cannot change it. Reference to this defence in “APPL3" must therefore have been nothing more than an exposition of the law as it stands, as opposed to a term of contract. The six months period should have expired on 09 April 1998. The purpose of this period was not to allow the Applicants to operate pending the appointment of Board members and their readiness to consider applications for a licence to operate gaming machines. It was to facilitate the phasing out of the Applicants’ operations. This period therefore owes its determination and existence to the need to allow people to close down their operations. It was fixed to bring the operations to an end. The minds of the parties could not have met and did not meet on an agreement which would allow operations to endure beyond 10 April 1998. No such agreement was entered into since it would negate the very reason why the Applicants had to operate for six months, namely, to wind up their operations.

(e) the six months period is specifically meant to enable the Applicants to phase out their operations within this period.

It appears from this list that an agreement relating to the Applicants’ defence would be superfluous since the defence is created by law. A contract cannot change it. Reference to this defence in “APPL3" must therefore have been nothing more than an exposition of the law as it stands, as opposed to a term of contract.

The six months period should have expired on 09 April 1998. The purpose of this period was not to allow the Applicants to operate pending the appointment of Board members and their readiness to consider applications for a licence to operate gaming machines. It was to facilitate the phasing out of the Applicants’ operations. This period therefore owes its determination and existence to the need to allow people to close down their operations. It was fixed to bring the operations to an end. The minds of the parties could not have met and did not meet on an agreement which would allow operations to endure beyond 10 April 1998. No such agreement was entered into since it would negate the very reason why the Applicants had to operate for six months, namely, to wind up their operations.

In order for us to ascertain what Jagga’s standpoint is with regard to the so-called permit or agreement, we need go no further than to examine annexure “APPL3". The Applicants’ failure to challenge this document as not being a true reflection of the terms of their agreement or permit must vindicate Jagga in his assertion that there was no other arrangement or understanding. If there ever was a meeting of the minds then it could only have been on the abovestated issues and in particular on the fact that “APPL3" is not a permit to operate over six months but rather a mechanism designed to facilitate a smooth transition from unlicensed gaming operations to obligatory licensed operations. In other words, the Applicants were allowed to continue enjoying the protection of section 54(2) while making arrangements to pack and go. I am satisfied that no agreement was entered into between the Respondent and the Applicants on the terms alleged by the Applicants or at all. Annexure “APPL3" is a letter which is meant to clarify the position regarding the Applicants’ concerns. At best it is a legal advice by Jagga for the Applicants. Jagga is the Chief State Law Adviser. In this capacity he advises on new legislation and drafts Bills. He is therefore privy to information about an intended legislation before it even assumes the form of a draft Bill. That is how he came to know

that the Act was in the process of being revised and pre-empted a phasing out period of six months long before the legislation which would provide for this period was passed. “APPL3" is therefore nothing more than Jagga’s opinion of the legal position as it affected or would affect the Applicants’ operations. The enforceability and validity of the agreement Even if I assume in the Applicants’ favour that an agreement was in fact entered into between them and Jagga orally or as per “APPL3" or in the event I am wrong in finding that none was concluded, there are serious problems surrounding its enforceability. (a) The authority to conclude a contract on behalf of the State

In order for us to ascertain what Jagga’s standpoint is with regard to the so-called permit or agreement, we need go no further than to examine annexure “APPL3". The Applicants’ failure to challenge this document as not being a true reflection of the terms of their agreement or permit must vindicate Jagga in his assertion that there was no other arrangement or understanding. If there ever was a meeting of the minds then it could only have been on the abovestated issues and in particular on the fact that “APPL3" is not a permit to operate over six months but rather a mechanism designed to facilitate a smooth transition from unlicensed gaming operations to obligatory licensed operations. In other words, the Applicants were allowed to continue enjoying the protection of section 54(2) while making arrangements to pack and go.

I am satisfied that no agreement was entered into between the Respondent and the Applicants on the terms alleged by the Applicants or at all. Annexure “APPL3" is a letter which is meant to clarify the position regarding the Applicants’ concerns. At best it is a legal advice by Jagga for the Applicants. Jagga is the Chief State Law Adviser. In this capacity he advises on new legislation and drafts Bills. He is therefore privy to information about an intended legislation before it even assumes the form of a draft Bill. That is how he came to know that the Act was in the process of being revised and pre-empted a phasing out period of six months long before the legislation which would provide for this period was passed. “APPL3" is therefore nothing more than Jagga’s opinion of the legal position as it affected or would affect the Applicants’ operations.

The enforceability and validity of the agreement

Even if I assume in the Applicants’ favour that an agreement was in fact entered into between them and Jagga orally or as per “APPL3" or in the event I am wrong in finding that none was concluded, there are serious problems surrounding its enforceability.

(a) The authority to conclude a contract on behalf of the State

In the first place, it is the Applicants’ case that Jagga negotiated with them in his official capacity as an employee and agent of the Respondent. On the other hand, after Jagga had told them that the Premier of the North West Province has given him permission to act as a consultant during his spare time, the Applicants employed him as their agent and consultant. He had to represent them and negotiate on their behalf in order to secure the permit or agreement. This means that Jagga was, thereafter, negotiating with himself on behalf of government and on behalf of the Applicants. He was a double agent. An agreement resulting from such a divided loyalty and allegiance, can be nothing short of a product of corruption. The Applicants, knowing that they would thereby compromise Jagga’s position, paid him so that he could take a position more favourable to them. There is nothing to suggest that the Respondent was told of the fact that Jagga was wearing two hats, as the second Applicant put it, and that he condoned it. How then could a valid and binding agreement have resulted from such dealings which are clearly intended to give the Applicants preferential treatment over other potential and actual operators? The Applicants allege that they paid Jagga a deposit in cash for his services and that he did not give them a receipt. The fact that they did not demand a receipt shows that they knew that they were involved in something improper and wanted to accomplish their mission through the back door. No sensible businessman or director of a company would behave in this manner in an above-board business transaction. Such behaviour can be expected in deals which smack of bribery and corruption.

In the first place, it is the Applicants’ case that Jagga negotiated with them in his official capacity as an employee and agent of the Respondent. On the other hand, after Jagga had told them that the Premier of the North West Province has given him permission to act as a consultant during his spare time, the Applicants employed him as their agent and consultant. He had to represent them and negotiate on their behalf in order to secure the permit or agreement.

This means that Jagga was, thereafter, negotiating with himself on behalf of government and on behalf of the Applicants. He was a double agent. An agreement resulting from such a divided loyalty and allegiance, can be nothing short of a product of corruption. The Applicants, knowing that they would thereby compromise Jagga’s position, paid him so that he could take a position more favourable to them. There is nothing to suggest that the Respondent was told of the fact that Jagga was wearing two hats, as the second Applicant put it, and that he condoned it. How then could a valid and binding agreement have resulted from such dealings which are clearly intended to give the Applicants preferential treatment over other potential and actual operators? The Applicants allege that they paid Jagga a deposit in cash for his services and that he did not give them a receipt. The fact that they did not demand a receipt shows that they knew that they were involved in something improper and wanted to accomplish their mission through the back door. No sensible businessman or director of a company would behave in this manner in an above-board business transaction. Such behaviour can be expected in deals which smack of bribery and corruption.

These allegations bring yet another related issue into sharp focus, and that is Jagga’s authority to conclude this so-called agreement on behalf of the Respondent. As I said above, the Applicants contend that Jagga was clothed with the requisite authority to conclude a contract on behalf of the government. He is indeed a public servant, who is very active in gambling related matters. He held at least one meeting with the second Applicant at his office in Mafikeng prior to 10 October 1997 and annexure “APPL3" is written and signed by him (Jagga) in his official capacity on the letter-heads of the provincial government. Jagga said that he did not have such authority and that he would have acted ultra vires his powers had he purported to grant the Applicants a permit as alleged. This matter can best be addressed by considering whether the State has the capacity and authority to conclude contracts, where that authority derives and in whom it vests. Section 7(4) of the Republic of South Africa Act 32 of 1961 reads: “The State President shall . . . as head of State have such powers and functions as were immediately prior to the commencement of this Act possessed by the Queen by way of prerogative.” Section 6(4) of the Republic of South Africa Constitution Act 110 of 1983 carried the same powers and functions over in the following terms: “The State President shall . . . as head of the State have such powers and functions as were immediately before the commencement of this Act possessed by the State President by way of prerogative.”

These allegations bring yet another related issue into sharp focus, and that is Jagga’s authority to conclude this so-called agreement on behalf of the Respondent. As I said above, the Applicants contend that Jagga was clothed with the requisite authority to conclude a contract on behalf of the government. He is indeed a public servant, who is very active in gambling related matters. He held at least one meeting with the second Applicant at his office in Mafikeng prior to 10 October 1997 and annexure “APPL3" is written and signed by him (Jagga) in his official capacity on the letter-heads of the provincial government. Jagga said that he did not have such authority and that he would have acted ultra vires his powers had he purported to grant the Applicants a permit as alleged.

This matter can best be addressed by considering whether the State has the capacity and authority to conclude contracts, where that authority derives and in whom it vests. Section 7(4) of the Republic of South Africa Act 32 of 1961 reads:

“The State President shall . . . as head of State have such powers and functions as were immediately prior to the commencement of this Act possessed by the Queen by way of prerogative.”

Section 6(4) of the Republic of South Africa Constitution Act 110 of 1983 carried the same powers and functions over in the following terms:

“The State President shall . . . as head of the State have such powers and functions as were immediately before the commencement of this Act possessed by the State President by way of prerogative.”

Baxter,

ADMINISTRATIVE LAW (JUTA) at 389 lists those powers and functions. All of them are set out in sections 84(2) and 231 of the Constitution of the Republic of South Africa Act 108 of 1996 (the Constitution). This has obviated the enactment of a section similar to sections 6(4) and 7(4) above. For the purpose of this application, it is important to note that though section 231 provides for the conclusion of international agreements on behalf of the State, the entire Constitution and its predecessor are silent on national State contracts. The only avenue to look at for the authority of the State to conclude contracts on a national and provincial spheres is the common law. The Tender Board Act (national and provincial) has partially codified the contractual capacity and authority of the State. It certainly does not encompass the agreement under consideration, hence the relevance of the common law. In MINISTER OF HOME AFFAIRS v AMERICAN NINJA IV PARTNERSHIP [1992] ZASCA 164; 1993 (1) SA 257 (A) 268D NESTADT JA said: “ Obviously the State and its organs can contract. In the absence of any particular enabling statutory provision, the source of this power is the common law prerogative (Baxter Administrative Law at 389). Where such a contract is concluded the State exercises its powers with the concurrence of the persons affected and is liable under the State Liability Act 20 of

1957.” The common law prerogative referred to as at the time of the above decision is very much part of our law. The failure to make express provision for it in the Constitution has not disturbed the pre-existing legal position. It follows, therefore, that the President, the Ministers, the Premiers and Members of the Executive Council are clothed with the capacity and authority to conclude valid and binding contracts on behalf of the State. A contract which is, generally speaking, similar to the one in this matter, would be enforceable provided it meets the general requirements for the enforceability of contracts. (See Joubert, THE

LAW OF CONTRACT (JUTA) (1987) at 21). As a State contract it must satisfy the following requirements:

Baxter,

ADMINISTRATIVE LAW (JUTA) at 389 lists those powers and functions. All of them are set out in sections 84(2) and 231 of the Constitution of the Republic of South Africa Act 108 of 1996 (the Constitution). This has obviated the enactment of a section similar to sections 6(4) and 7(4) above. For the purpose of this application, it is important to note that though section 231 provides for the conclusion of international agreements on behalf of the State, the entire Constitution and its predecessor are silent on national State contracts.

The only avenue to look at for the authority of the State to conclude contracts on a national and provincial spheres is the common law. The Tender Board Act (national and provincial) has partially codified the contractual capacity and authority of the State. It certainly does not encompass the agreement under consideration, hence the relevance of the common law. In MINISTER OF HOME AFFAIRS v AMERICAN NINJA IV PARTNERSHIP [1992] ZASCA 164; 1993 (1) SA 257 (A) 268D NESTADT JA said:

“ Obviously the State and its organs can contract. In the absence of any particular enabling statutory provision, the source of this power is the common law prerogative (Baxter Administrative Law at 389). Where such a contract is concluded the State exercises its powers with the concurrence of the persons affected and is liable under the State Liability Act 20 of 1957.”

The common law prerogative referred to as at the time of the above decision is very much part of our law. The failure to make express provision for it in the Constitution has not disturbed the pre-existing legal position. It follows, therefore, that the President, the Ministers, the Premiers and Members of the Executive Council are clothed with the capacity and authority to conclude valid and binding contracts on behalf of the State. A contract which is, generally speaking, similar to the one in this matter, would be enforceable provided it meets the general requirements for the enforceability of contracts. (See Joubert, THE

LAW OF CONTRACT (JUTA) (1987) at 21). As a State contract it must satisfy the following requirements:

(a) it must be entered into in the ordinary or necessary course of government administration; (b) it must have been authorised by the responsible Minister of State or Member of the Executive Council of a Province; (See

QUINTESSENCE CO-ORDINATORS v GOVERNMENT OF THE REPUBLIC OF TRANSKEI 1993 (3) SA 184 (TkGD) at 193F and the authorities cited there). (c) it must be in writing; and (d) the authorisation by the Minister or the MEC must be unequivocal and in writing. It is befitting and imperative that a State contract be in writing and that the delegation of authority to State employees, public servants or any other person for that matter, be in writing. Corruption has reached alarming proportions in this country. Any charlatan can claim to be acting on behalf of the State with disastrous consequences. It would be a sad day if the courts would be willing to recognise oral authorisations and oral contracts allegedly entered into on behalf of the State and therefore in the public interest.

(a) it must be entered into in the ordinary or necessary course of government administration;

(b) it must have been authorised by the responsible Minister of State or Member of the Executive Council of a Province;

(See

QUINTESSENCE CO-ORDINATORS v GOVERNMENT OF THE REPUBLIC OF TRANSKEI 1993 (3) SA 184 (TkGD) at 193F and the authorities cited there).

(c) it must be in writing; and

(d) the authorisation by the Minister or the MEC must be unequivocal and in writing.

It is befitting and imperative that a State contract be in writing and that the delegation of authority to State employees, public servants or any other person for that matter, be in writing. Corruption has reached alarming proportions in this country. Any charlatan can claim to be acting on behalf of the State with disastrous consequences. It would be a sad day if the courts would be willing to recognise oral authorisations and oral contracts allegedly entered into on behalf of the State and therefore in the public interest.

The level of corruption in this country dictates that legislation be passed which deals specifically with the question of where the authority, to enter into contracts on behalf of the State, resides. Alternatively, the State Liability Act 20 of 1957 could be accordingly amended. If it were necessary to do so in respect of international agreements it should be equally important in respect of others. I think it is not good enough to leave this matter in the current state of flux and to be content with the fact that legislations, almost without fail, state who would have the authority to bind the State. What about contracts which are not regulated by legislation? Such all-encompassing legislation would obviate a proliferation of baseless litigation based on oral agreements or even written contracts concluded by public servants without the knowledge and actual authority of their superiors. This would not only protect the interests of the State but those of the unsuspecting members of the public as well. I know of at least two cases in which public servants at Director and Assistant Director level bound this Province to contracts involving millions of rands. The question that immediately presents itself for determination is whether Jagga, a public servant, had the requisite capacity and authority to enter into agreements on behalf of the Province. In the first place the Applicants

maintain that their agreement was oral. This fact alone is, in my view, good enough to make them fail. Having found that “APPL3" is what the Applicants regard as the permit or agreement, I will proceed to deal with the matter on that basis. The Applicants have said or produced nothing to suggest that Jagga had the requisite authority, from the Premier or the MEC for Finance and Economic Affairs, to conclude the said agreement on their behalf. The second Applicant’s first meeting with Jagga took place without the intervention of the Premier or the MEC. There is nothing to even suggest that the subsequent telephonic and person-to-person discussions had the blessings of the Premier or the MEC. The letter-heads of “APPL3" are miles apart from those of the office of the Premier annexed to the papers. Lastly, Jagga did not sign “APPL3" on behalf of anybody but on his own behalf.

The level of corruption in this country dictates that legislation be passed which deals specifically with the question of where the authority, to enter into contracts on behalf of the State, resides. Alternatively, the State Liability Act 20 of 1957 could be accordingly amended. If it were necessary to do so in respect of international agreements it should be equally important in respect of others. I think it is not good enough to leave this matter in the current state of flux and to be content with the fact that legislations, almost without fail, state who would have the authority to bind the State. What about contracts which are not regulated by legislation? Such all-encompassing legislation would obviate a proliferation of baseless litigation based on oral agreements or even written contracts concluded by public servants without the knowledge and actual authority of their superiors. This would not only protect the interests of the State but those of the unsuspecting members of the public as well. I know of at least two cases in which public servants at Director and Assistant Director level bound this Province to contracts involving millions of rands.

The question that immediately presents itself for determination is whether Jagga, a public servant, had the requisite capacity and authority to enter into agreements on behalf of the Province. In the first place the Applicants maintain that their agreement was oral. This fact alone is, in my view, good enough to make them fail. Having found that “APPL3" is what the Applicants regard as the permit or agreement, I will proceed to deal with the matter on that basis.

The Applicants have said or produced nothing to suggest that Jagga had the requisite authority, from the Premier or the MEC for Finance and Economic Affairs, to conclude the said agreement on their behalf. The second Applicant’s first meeting with Jagga took place without the intervention of the Premier or the MEC. There is nothing to even suggest that the subsequent telephonic and person-to-person discussions had the blessings of the Premier or the MEC. The letter-heads of “APPL3" are miles apart from those of the office of the Premier annexed to the papers. Lastly, Jagga did not sign “APPL3" on behalf of anybody but on his own behalf.

Going back to the alleged oral agreement, it cannot be said that any contract, which defies all the principles of transparency by granting exclusive rights to an individual, who does not have to pay any income tax, was entered into in the ordinary or necessary course of government administration. Even if “APPL3" is the contract entered into, it still does not meet the requirements of a valid contract. Jagga was certainly on a frolic of his own in writing “APPL3". He just happened to have used his office and his official letter-heads. The Applicants cannot, in any event, claim that the agreement was concluded in the ordinary and necessary course of government administration when they claim to have paid Jagga a fee to act on their behalf in negotiating and concluding the agreement. As I said above, it has a ring of corruption which excludes it from the ambit of this requirement. In conclusion, the version and behaviour of the Applicants belie any suggestion that an oral agreement was entered into with the Respondent. At best for them they entered into some sort of an agreement with Jagga of which “APPL3" is proof. That agreement, if it is one, was entered into by Jagga and the Applicants and it has got nothing to do with the Respondent. Not only are the requirements for a valid and binding contract on behalf of the State not satisfied, but Jagga did not purport to conclude it on behalf of government. He did so on his own behalf and merely informed the MEC, the Director of Public Prosecutions and the police accordingly. (b) The legality of the contract

Going back to the alleged oral agreement, it cannot be said that any contract, which defies all the principles of transparency by granting exclusive rights to an individual, who does not have to pay any income tax, was entered into in the ordinary or necessary course of government administration. Even if “APPL3" is the contract entered into, it still does not meet the requirements of a valid contract. Jagga was certainly on a frolic of his own in writing “APPL3". He just happened to have used his office and his official letter-heads. The Applicants cannot, in any event, claim that the agreement was concluded in the ordinary and necessary course of government administration when they claim to have paid Jagga a fee to act on their behalf in negotiating and concluding the agreement. As I said above, it has a ring of corruption which excludes it from the ambit of this requirement.

In conclusion, the version and behaviour of the Applicants belie any suggestion that an oral agreement was entered into with the Respondent. At best for them they entered into some sort of an agreement with Jagga of which “APPL3" is proof. That agreement, if it is one, was entered into by Jagga and the Applicants and it has got nothing to do with the Respondent. Not only are the requirements for a valid and binding contract on behalf of the State not satisfied, but Jagga did not purport to conclude it on behalf of government. He did so on his own behalf and merely informed the MEC, the Director of Public Prosecutions and the police accordingly.

(b) The legality of the contract

Mr Zar submitted that the Applicants entered into a legal agreement with the Respondent. He initially said that the Applicants’ operations were protected by section 54(2) of the Act. He later submitted that no section of the Act rendered the Applicants’ operation of gaming machines unlawful and that no licence was required by the Act for the purpose of his client’s operations.

He and Mr de Bruin were in agreement that section 34 renders the operation of gaming machines in a casino illegal and not operations such as those of the Applicants. Mr de Bruin submitted that section 54 outlaws the operations of the Applicants. He further stated that section 54 of the Amendment Act expressly requires of anybody operating gaming machines to have a licence in order to be protected from a criminal prosecution. I am in respectful disagreement with both counsel. There is a misconception, especially in this province, to readily think of an hotel such as Sun City, when mention is made of a casino. It is, in my view, exactly for this reason that both counsel missed the point in this matter. I will now examine the provision of the Act to determine the legality of the Applicants’ operations both before and after the 1997 amendment of the Act. Before I do so, it is necessary to recall that the Applicants were and are still involved in the operation of gaming machines. Section 54 falls under chapter 4 of the principal Act which deals with gaming and betting. It is clear from section 52 that section 54 of the Act only deals with lottery, or lotto or any numbers or scratch game or sweepstake or sports pool or gambling or wagering or any other game of chance or activity, referred to as a game of chance. The definition section defines a game of chance (as used in chapter 4) in these terms: “‘ game of chance’, includes a lottery, lotto, numbers game, scratch game, sweepstake, sports pool, gambling or wagering, or any similar game of chance or activity mentioned in this Act or elsewhere, but does not include any game conducted in a casino.” (My emphasis)

Mr Zar submitted that the Applicants entered into a legal agreement with the Respondent. He initially said that the Applicants’ operations were protected by section 54(2) of the Act. He later submitted that no section of the Act rendered the Applicants’ operation of gaming machines unlawful and that no licence was required by the Act for the purpose of his client’s operations.

He and Mr de Bruin were in agreement that section 34 renders the operation of gaming machines in a casino illegal and not operations such as those of the Applicants. Mr de Bruin submitted that section 54 outlaws the operations of the Applicants. He further stated that section 54 of the Amendment Act expressly requires of anybody operating gaming machines to have a licence in order to be protected from a criminal prosecution.

I am in respectful disagreement with both counsel. There is a misconception, especially in this province, to readily think of an hotel such as Sun City, when mention is made of a casino. It is, in my view, exactly for this reason that both counsel missed the point in this matter. I will now examine the provision of the Act to determine the legality of the Applicants’ operations both before and after the 1997 amendment of the Act. Before I do so, it is necessary to recall that the Applicants were and are still involved in the operation of gaming machines.

Section 54 falls under chapter 4 of the principal Act which deals with gaming and betting. It is clear from section 52 that section 54 of the Act only deals with lottery, or lotto or any numbers or scratch game or sweepstake or sports pool or gambling or wagering or any other game of chance or activity, referred to as a game of chance. The definition section defines a game of chance (as used in chapter 4) in these terms:

“‘ game of chance’, includes a lottery, lotto, numbers game, scratch game, sweepstake, sports pool, gambling or wagering, or any similar game of chance or activity mentioned in this Act or elsewhere, but does not include any game conducted in a casino.” (My emphasis)

It then becomes necessary to consider the definition of a gaming machine and a casino. They are defined as follows in section 1: “‘gaming machine’ means any equipment or mechanical or electronic device, component or machine, used remotely or directly in connection with a game and which brings about the result of a wager by determining win or loss;” “‘casino’ means the business premises upon which gaming is conducted under a casino licence, and, in the event of more than one area on business premises being utilised for gaming, ‘casino’ shall mean such an area.” For the sake of completeness, ‘gaming’ is defined as the playing of any game. Apart from the definition section there is only one chapter that mentions gaming machines and it is definitely not chapter 4 which embodies the likes of sections 52 and 54. Such reference is found in chapter 3 which deals with casinos. Having located gaming machines under casinos, it follows that the operation of these machines by the Applicants must be examined in conjunction with the definition of a casino and the relevant sections which deal with gaming machines under chapter 3. It is clear from the definition of a casino that it is not a concept that necessarily requires that gaming machines must be housed in an hotel in order for a business operation to qualify as a casino. But of course the Applicants do not have a licence for their business operations and their operations, which are conducted in hotels in some areas and premises other than hotels elsewhere, do not qualify to be defined as casinos proper. Except for the absence of a licence, the Applicants’ operations are on all fours with the requirements of a casino. Therefore the Applicants have been and are still running an ‘unlicenced casino’.

It then becomes necessary to consider the definition of a gaming machine and a casino. They are defined as follows in section 1:

“‘gaming machine’ means any equipment or mechanical or electronic device, component or machine, used remotely or directly in connection with a game and which brings about the result of a wager by determining win or loss;”

“‘casino’ means the business premises upon which gaming is conducted under a casino licence, and, in the event of more than one area on business premises being utilised for gaming, ‘casino’ shall mean such an area.”

For the sake of completeness, ‘gaming’ is defined as the playing of any game.

Apart from the definition section there is only one chapter that mentions gaming machines and it is definitely not chapter 4 which embodies the likes of sections 52 and 54. Such reference is found in chapter 3 which deals with casinos. Having located gaming machines under casinos, it follows that the operation of these machines by the Applicants must be examined in conjunction with the definition of a casino and the relevant sections which deal with gaming machines under chapter 3. It is clear from the definition of a casino that it is not a concept that necessarily requires that gaming machines must be housed in an hotel in order for a business operation to qualify as a casino. But of course the Applicants do not have a licence for their business operations and their operations, which are conducted in hotels in some areas and premises other than hotels elsewhere, do not qualify to be defined as casinos proper. Except for the absence of a licence, the Applicants’ operations are on all fours with the requirements of a casino. Therefore the Applicants have been and are still running an ‘unlicenced casino’.

Section 28 of the Act provides for the payment of a levy in respect of each gaming machine placed in the casino. Section 33 provides that any licence issued in terms of chapter 3 shall be issued on the written authority of the MEC for Economic Affairs. More importantly, section 34 provides as follows: “Any person who operates a casino or gaming machine without being in possession of a licence [or] fails to pay the licence fees contemplated in section 28 as required by those sections shall be guilty of an offence and liable on conviction to a fine not exceeding two hundred and fifty thousand rand or to imprisonment for a period not exceeding five years or to both such fine and imprisonment.” As I said above, the Applicants are operating an unlicensed casino. Their business operations have always been unlawful including the time after they were handed “APPL3" by Jagga. There is no connection whatsoever between their operations and the provisions of section 54 and the whole of chapter 4 for that matter. It was incorrect of counsel and Jagga to suggest that section 54 applies to the Applicants. The effect of an agreement concluded or anything done contrary to a clear prohibition by legislation was dealt with by INNES CJ in

SCHIERHOUT v MINISTER OF JUSTICE 1926 AD 99 at 109 as follows: “It is a fundamental principle of our law that a thing done contrary to the direct prohibition of the law is void and of no effect . . . . So what is done contrary to the prohibition of the law is not only of no effect, but must be regarded as never having been done - and that whether the lawgiver has expressly so decreed or not; the mere prohibition operates to nullify the act . . . . And the disregard of peremptory provisions in a statute is fatal to the validity of the proceeding affected.”

Section 28 of the Act provides for the payment of a levy in respect of each gaming machine placed in the casino. Section 33 provides that any licence issued in terms of chapter 3 shall be issued on the written authority of the MEC for Economic Affairs. More importantly, section 34 provides as follows:

“Any person who operates a casino or gaming machine without being in possession of a licence [or] fails to pay the licence fees contemplated in section 28 as required by those sections shall be guilty of an offence and liable on conviction to a fine not exceeding two hundred and fifty thousand rand or to imprisonment for a period not exceeding five years or to both such fine and imprisonment.”

As I said above, the Applicants are operating an unlicensed casino. Their business operations have always been unlawful including the time after they were handed “APPL3" by Jagga. There is no connection whatsoever between their operations and the provisions of section 54 and the whole of chapter 4 for that matter. It was incorrect of counsel and Jagga to suggest that section 54 applies to the Applicants.

The effect of an agreement concluded or anything done contrary to a clear prohibition by legislation was dealt with by INNES CJ in

SCHIERHOUT v MINISTER OF JUSTICE 1926 AD 99 at 109 as follows:

“It is a fundamental principle of our law that a thing done contrary to the direct prohibition of the law is void and of no effect . . . . So what is done contrary to the prohibition of the law is not only of no effect, but must be regarded as never having been done - and that whether the lawgiver has expressly so decreed or not; the mere prohibition operates to nullify the act . . . . And the disregard of peremptory provisions in a statute is fatal to the validity of the proceeding affected.”

The language of section 34 is clear enough to leave no doubt that any contract of the nature contended for by the Applicants is null and void and of no force. No room exists for a permit or agreement intended to circumvent the provisions of chapter 3, section 34 in particular. I may mention that the Amendment Act also renders the Applicants’ operations and the agreement unlawful in terms of sections 34 and 54, as amended. The declaration of rights The preceding analysis has an important bearing on the application under consideration. I am being asked, by the Applicants, to make a declaration that they have an agreement with the Respondent. Once again assuming that such an agreement does exist, I am being called upon to recognise and countenance a contravention of the Act and condone a criminal activity. It is an essential requirement for a declaration of rights that there be an interested party upon whom the declaration will be binding.

(See EX-PARTE

NELL 1963 (1) SA 754 (A)). The interest of the Applicants must be real and not an abstract, intellectual or academic one. (See DURBAN CITY COUNCIL v ASSOCIATION OF BUILDING SOCIETIES 1942 AD 27). I can only exercise my discretion to issue a declaration if the Applicants’ claim relates to an existing, future or contingent right or obligation. (See REINECKE v IGI LTD 1974 (2) SA 84 (A); SA MUTUAL LIFE v ANGLO TRANSVAAL COLLIERIES LTD 1977 (3) SA 642 (A)). None of these essentials exist in this application. The Applicants would therefore fail even if the agreement they contend for were not impeded by its illegality and other relevant considerations dealt with above.

The language of section 34 is clear enough to leave no doubt that any contract of the nature contended for by the Applicants is null and void and of no force. No room exists for a permit or agreement intended to circumvent the provisions of chapter 3, section 34 in particular. I may mention that the Amendment Act also renders the Applicants’ operations and the agreement unlawful in terms of sections 34 and 54, as amended.

The declaration of rights

The preceding analysis has an important bearing on the application under consideration. I am being asked, by the Applicants, to make a declaration that they have an agreement with the Respondent. Once again assuming that such an agreement does exist, I am being called upon to recognise and countenance a contravention of the Act and condone a criminal activity.

It is an essential requirement for a declaration of rights that there be an interested party upon whom the declaration will be binding.

(See EX-PARTE

NELL 1963 (1) SA 754 (A)). The interest of the Applicants must be real and not an abstract, intellectual or academic one. (See DURBAN CITY COUNCIL v ASSOCIATION OF BUILDING SOCIETIES 1942 AD 27). I can only exercise my discretion to issue a declaration if the Applicants’ claim relates to an existing, future or contingent right or obligation. (See REINECKE v IGI LTD 1974 (2) SA 84 (A); SA MUTUAL LIFE v ANGLO TRANSVAAL COLLIERIES LTD 1977 (3) SA 642 (A)). None of these essentials exist in this application. The Applicants would therefore fail even if the agreement they contend for were not impeded by its illegality and other relevant considerations dealt with above.

Applicants have additional problems. By their own admission the agreement was supposed to run for six months. They have, to date, been running their business for a period of about 18 months. The Respondent has never renewed or extended it and his attitude, on the papers before me, is irreconcilable with a desire to extend it. I cannot therefore make a declarator in respect of an agreement which has run its course three times over. Whatever rights, if any, they may have had, have ceased to exist by effluxion of time. They are the last to complain that their rights in terms of the so-called agreement were interfered with by the Amendment Act. They had already been in business for over two months from 10 October 1997 when they started operating in terms of section 22 of the Amendment Act. This Act allowed them a further four months. The entire period put together allowed them a total of six months to run their business. This is the same period referred to in Jagga’s letter, annexure “APPL3". They therefore have no reason to complain. What is more, the Applicants did not even qualify for the transitional arrangements facilitated by section 22 of the Amendment Act. They, as Mr Zar correctly conceded, have never operated in terms of section 54(2). Theirs was a full-blown casino operation. They should have been prosecuted rather than be allowed to operate. They must consider themselves lucky that they only had to pay R100 000.00 after operating long before 10 October 1997 and for 18 months thereafter. I will not make an order for the return of this money to the Applicants since it was lawfully obtained from them and, among other things, they benefited a lot more than this amount was intended to allow them to, by operating for an additional 14 months.

Applicants have additional problems. By their own admission the agreement was supposed to run for six months. They have, to date, been running their business for a period of about 18 months. The Respondent has never renewed or extended it and his attitude, on the papers before me, is irreconcilable with a desire to extend it. I cannot therefore make a declarator in respect of an agreement which has run its course three times over. Whatever rights, if any, they may have had, have ceased to exist by effluxion of time.

They are the last to complain that their rights in terms of the so-called agreement were interfered with by the Amendment Act. They had already been in business for over two months from 10 October 1997 when they started operating in terms of section 22 of the Amendment Act. This Act allowed them a further four months. The entire period put together allowed them a total of six months to run their business. This is the same period referred to in Jagga’s letter, annexure “APPL3". They therefore have no reason to complain. What is more, the Applicants did not even qualify for the transitional arrangements facilitated by section 22 of the Amendment Act. They, as Mr Zar correctly conceded, have never operated in terms of section 54(2). Theirs was a full-blown casino operation. They should have been prosecuted rather than be allowed to operate. They must consider themselves lucky that they only had to pay R100 000.00 after operating long before 10 October 1997 and for 18 months thereafter.

I will not make an order for the return of this money to the Applicants since it was lawfully obtained from them and, among other things, they benefited a lot more than this amount was intended to allow them to, by operating for an additional 14 months.

The referral for oral evidence There is no material dispute of fact in this matter. Even if such a dispute existed, it arose long before the Applicants launched this application. They say so in their papers. They should have anticipated and prevented the problems the dispute could create by instituting action. Be that as it may, the disputes identified in this matter are capable of being decided on the papers before me. Three areas of dispute were identified by the Applicants. The first being when and how Jagga met the second Applicant and held discussions. To the extent that Jagga has admitted that they had such discussions on numerous occasions, then no real dispute exists. How many must he admit to resolve this problem, twenty times? What matters is that several discussions were held. Secondly, what was the discussion about? What predominated these discussions is that the Applicants wanted to operate gaming machines without running the risk of criminal prosecutions. This clearly appears from the Applicants’ version and annexure “APPL3". As regards what was undertaken and whether an agreement was entered into or a permit issued is both a factual and legal question which, as the foregoing analysis shows, is capable of resolution on the available information. A referral for oral evidence would have been a futile and time-wasting exercise.

The referral for oral evidence

There is no material dispute of fact in this matter. Even if such a dispute existed, it arose long before the Applicants launched this application. They say so in their papers. They should have anticipated and prevented the problems the dispute could create by instituting action. Be that as it may, the disputes identified in this matter are capable of being decided on the papers before me.

Three areas of dispute were identified by the Applicants. The first being when and how Jagga met the second Applicant and held discussions. To the extent that Jagga has admitted that they had such discussions on numerous occasions, then no real dispute exists. How many must he admit to resolve this problem, twenty times? What matters is that several discussions were held. Secondly, what was the discussion about? What predominated these discussions is that the Applicants wanted to operate gaming machines without running the risk of criminal prosecutions. This clearly appears from the Applicants’ version and annexure “APPL3". As regards what was undertaken and whether an agreement was entered into or a permit issued is both a factual and legal question which, as the foregoing analysis shows, is capable of resolution on the available information. A referral for oral evidence would have been a futile and time-wasting exercise.

There are no prospects of oral evidence tipping the balance in favour of the Applicants, should I refer the specified issues for oral evidence. The scales are severely depressed against them and the preponderance of probabilities undoubtedly favour the Respondent even on the Applicants’ own version. This is definitely not one of those rare cases which would warrant that, in the exercise of my discretion, I refer this matter for oral evidence. (See KALIL v DECOTEX AND ANOTHER 1988 (1) SA 943 (A) at 979H-I). Jagga’s role I would be failing in my duty if I were not to remark that Jagga did not emerge from this whole episode with his reputation or integrity unblemished or intact. His ill-considered actions are potentially embarrassing not only to him but to other key stakeholders as well. It ill-behoves a public servant, even in the name of the observance of the government’s open-door policy to behave as follows: (a) to make two telephonic and hold at least four person-to-person discussions with the Applicants about their business ambitions; (b) to have at least two meetings at the second Applicant’s home in Krugersdorp when he, Jagga, is stationed in Mafikeng; (c) to inform the Applicants that the Premier has given him permission to operate a consultancy for personal gain. Why was this necessary? He occupies an important position in government with regard to gambling matters, and his disclosure about the permission could, rightly or wrongly, be construed as a subtle marketing strategy employed in the course of his duties;

There are no prospects of oral evidence tipping the balance in favour of the Applicants, should I refer the specified issues for oral evidence. The scales are severely depressed against them and the preponderance of probabilities undoubtedly favour the Respondent even on the Applicants’ own version. This is definitely not one of those rare cases which would warrant that, in the exercise of my discretion, I refer this matter for oral evidence. (See KALIL v DECOTEX AND ANOTHER 1988 (1) SA 943 (A) at 979H-I).

Jagga’s role

I would be failing in my duty if I were not to remark that Jagga did not emerge from this whole episode with his reputation or integrity unblemished or intact. His ill-considered actions are potentially embarrassing not only to him but to other key stakeholders as well. It ill-behoves a public servant, even in the name of the observance of the government’s open-door policy to behave as follows:

(a) to make two telephonic and hold at least four person-to-person discussions with the Applicants about their business ambitions;

(b) to have at least two meetings at the second Applicant’s home in Krugersdorp when he, Jagga, is stationed in Mafikeng;

(c) to inform the Applicants that the Premier has given him permission to operate a consultancy for personal gain. Why was this necessary? He occupies an important position in government with regard to gambling matters, and his disclosure about the permission could, rightly or wrongly, be construed as a subtle marketing strategy employed in the course of his duties;

(d) to afford the Applicants a section 54(2) defence which they clearly did not qualify for. How did he satisfy himself that Hotel Slots (Pty) Ltd operate within the ambit of this section? Which section 54(2) operator would attempt to install 400 gaming machines at Potchefstroom alone? Which section 54(2) operator would, as Jagga states in “APPL3" page 2 second paragraph, have an income derived from such operations? Which genuine section 54(2) operator would be considering an application for a licence and could claim that his/her constitutional right to freely partake in economic activities (see p.1 of “APPL3" last paragraph) were being frustrated in the absence of a Board? Only a person whose premises are generally used for playing games of chance for stakes or gaming machines employs this language; (e) to go out of his way preparing a fairly comprehensive opinion, referring to cases, the Constitution and the Act, for a businessman. Remember, the Applicants already had the benefit of legal advice about their problems from their attorneys, as early as when they spoke to Captain Hechter and Jagga knew this. What business did Jagga have advising them? Why did he not give the Applicants’ legal representatives the citation of the relevant Act in one sentence and leave it to them to interpret it and offer advice to their clients; (f) to pre-empt the decision of the legislature with respect to the phasing-out period. Where did the pressure come from and what was the urgency? A cumulative effect of these factors renders Jagga’s behaviour curious and improper.

(d) to afford the Applicants a section 54(2) defence which they clearly did not qualify for. How did he satisfy himself that Hotel Slots (Pty) Ltd operate within the ambit of this section? Which section 54(2) operator would attempt to install 400 gaming machines at Potchefstroom alone? Which section 54(2) operator would, as Jagga states in “APPL3" page 2 second paragraph, have an income derived from such operations? Which genuine section 54(2) operator would be considering an application for a licence and could claim that his/her constitutional right to freely partake in economic activities (see p.1 of “APPL3" last paragraph) were being frustrated in the absence of a Board? Only a person whose premises are generally used for playing games of chance for stakes or gaming machines employs this language;

(e) to go out of his way preparing a fairly comprehensive opinion, referring to cases, the Constitution and the Act, for a businessman. Remember, the Applicants already had the benefit of legal advice about their problems from their attorneys, as early as when they spoke to Captain Hechter and Jagga knew this. What business did Jagga have advising them? Why did he not give the Applicants’ legal representatives the citation of the relevant Act in one sentence and leave it to them to interpret it and offer advice to their clients;

(f) to pre-empt the decision of the legislature with respect to the phasing-out period. Where did the pressure come from and what was the urgency?

A cumulative effect of these factors renders Jagga’s behaviour curious and improper.

This case strikes me as the worst imaginable abuse of due process, characterised by the employment of any conceivable loophole, technicality or legal stratagem. The objective apparently intended to be realised being to prolong the Applicants’ unlawful operations for as long as there exists some legal mechanism to make this possible. Consequently, this application has been on the roll for no less than fifteen months. This behaviour, whomsoever its author is, must be discouraged. It is on the strength of the foregoing comprehensive reasons that this application was dismissed with costs including those consequent upon the employment of two counsel. M.T.R.

MOGOENG

JUDGE

OF THE HIGH COURT

ATTORNEYS FOR APPLICANTS : MINCHIN & KELLY INC.

ATTORNEYS FOR RESPONDENT: THE STATE ATTORNEY

This case strikes me as the worst imaginable abuse of due process, characterised by the employment of any conceivable loophole, technicality or legal stratagem. The objective apparently intended to be realised being to prolong the Applicants’ unlawful operations for as long as there exists some legal mechanism to make this possible. Consequently, this application has been on the roll for no less than fifteen months. This behaviour, whomsoever its author is, must be discouraged.

It is on the strength of the foregoing comprehensive reasons that this application was dismissed with costs including those consequent upon the employment of two counsel.

M.T.R.

MOGOENG

JUDGE

OF THE HIGH COURT

ATTORNEYS FOR APPLICANTS : MINCHIN & KELLY INC.

ATTORNEYS FOR RESPONDENT: THE STATE ATTORNEY

22