Peresoft Software and Support (Pty) Ltd v Minister of Since and Innovation (NO) and Another (11372/19) [2020] ZAGPPHC 430 (12 February 2020)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

(1) REPORTABLE: YES / NO.

(2) OF INTEREST TO OTHER JUDGES: YES / NO.'

(3) REVISED.

CASE NO.11372/19

In the matter between:

PERESOFT SOFTWARE AND SUPPORT (PTY) LTD APPLICANT

and

THE MINISTER OF SCIENCE AND INNOVATION

FIRST RESPONDENT

(NO)

DIRECTOR- GENERAL: SCEINCE AND

SECOND RESPONDENT

INNOVATION (NO)

IN RE:

The main application of:

THE MINISTER OF SCIENCE AND TECHNOLOGY FIRST RESPONDENT

THE CHAIRPERSON OF THE R & D TAX INCENTIVE SECOND

ADJUDICATION AND MONIITORING COMMITTEE RESPONDENT

DIRECTOR-GENERAL: SCIENCE AND TECHNOLOGY THIRD RESPONDENT

JUDGMENT

TLHAPI J

INTRODUCTION

[1] This is a review application by the applicant, which conducts business as a

developer of specialised computer software and which seeks to review and set aside

the refusal by the first respondent, to approve a tax incentive for a project which is

being researched and developed by the applicant. The tax incentive was introduced

during 2006 in terms of section 11D of the Income Tax Act 58 of 1962 (“the Act”).

[2] The object of the tax incentive scheme is to encourage the private sector to

participate in research and development in science and technology so as to improve

advancement in that field in the Republic of South Africa. In order to benefit from the

tax incentive, an application for approval for the research and development project

has to be made to the first respondent to enable the applicant to claim the tax benefit

from the South African Revenue Services. The application form is available on the

website of the Department, first respondent, and it is submitted electronically to the

first respondent. The application form is received by a Secretariat which is charged

with communicating the process from the first stage till the final stage of adjudication.

[3] The application is then referred to an expert who has the technical know -how

to consider and evaluate and prepare a report for an evaluation by the Research and

Development Tax Adjudication and Monitoring Committee established in terms of

section 11D (11) of the Act. The Committee comprises of officials from National

Treasury, the Department of Science and Innovation and the SA Revenue Services.

The Committee considers and debates the merits and demerits of the application

and makes recommendations to the first respondent for determination whether to

approve or not to approve the application.

[4] The applicant seeks the following order:

“1. Reviewing and setting aside of the refusal by the first respondent, on or

about 21 August 2018 under reference number 2017/003222/01 to

approve in terms of section 11D (9) of the Income Tax Act 58 of 1962,

the applicant’s research and development program for the

development of a Web enabled Cash Book to integrate with Sage 300

ERP accounting software;

2. Directing the first respondent to approve the said application by the

applicant;

3. Directing the first respondent, to inform the Commissioner of Revenue

in accordance with section 11D (16) of the Income Tax Act, of the

approval of the applicant’s research and development, setting out such

particulars as are required by the Commissioner;

4. Directing the first respondent to pay the applicant’s costs;

5. Further and/or alternative relief.”

[5] The application was opposed. An order authorizing a name change of the

respondents by substituting the names of the first and third respondents, to reflect

what they are presently known by was granted.

[6] The applicant states that the issue relates to it and the first respondent, that

even though mention is made of persons appointed by Department of Science and

Innovation, National Treasury and South African Revenue Services, it does not seek

to join them since none of them have an interest in the matter.

BACKGROUND

[7] Mr Robert Morris Perel (Mr Perel), a qualified computer programmer is the

sole director of the applicant. Since 1982 he has been involved in various aspects of

research, programming, development and creation of computer programs and soft-

ware. In 1983 he established Peresoft Software which was followed by registration of

a close corporation Peresoft Software and Support CC and, in 1996 it converted to

Peresoft Software and Support (Pty) Ltd. According to Mr Perel the applicant is a

well - known and internationally recognized developer and marketer of software,

specializing in the maintenance of accounting and financial management programs.

Its products are “sold and supported by more than 500 dedicated Solution Providers

throughout Africa, Asia, Australia, Europe Canada and the USA.

[8] During 2016 the applicant began research and development work on

developing a new program which it had not as yet officially named. The name to be

attached to the new program was in all likelihood going to be called “Cashbook” like

the present existing Cashbook. The applicant had already created its add-on to

operate on the Windows platform and the add-on was called RecXpress, ‘which

meant that Cashbook and RecXpress required a Windows operating system to

function. Cashbook and RecXpress are currently successfully marketed to

institutions worldwide.’ It was intended that the program which was being developed

would be a completely new one, which would ‘be a complete rewrite for a completely

different operating platform.’ The combination of the two programs, Cashbook and

RecXpress would enable users to operate them without necessarily using a

Windows operating system and regardless of any operating system the users may

have.’ The research and development involved the creation of a new program

described as a “We-enabled Cash Book to integrate with SAGE ERP accounting

software.” When completed it will be a program as envisaged in section 11D and

section 1 of the Copyright Act 98 of 1978.

[9] Mr Perel avers that during 2017 on the advice of one Mr Rogerio Manuel

Bandeira Russo (“Russo”), who had knowledge of the applicant’s business,

decided to apply for the tax incentive. He gave directive to Russo to make the

application on behalf of the applicant, which he did on 31 August 2017 by completing

a form which he uplifted from the website of the Department, the first respondent.

The application was duly completed by Russo and he had read it. Receipt was

acknowledged by Mr William Mabogoane of the Department.

[10] On 1 September 2017 Mr Mabogaone sent an e-mail which required answers

to 6 questions and, except for 2 questions which were added to the 6 questions,

these were identical to those contained in the application form initially completed by

Russo. Mr Perel referred the email to Russo and he agreed with the answers given

by Russo which were now written in red font. The answers were sent to the first

respondent and on 21 August 2018 the application was declined. Mr Perel stated

that the covering letter marked “A” and signed by the first respondent advised of the

right to review. The applicant contended that the refusal of the application amounted

administrative action reviewable within the meaning of the “PAJA”, the Promotion of

Administrative Justice Act 3 of 2000, (“the PAJA’)

A brief history to the technical background to the research and development project

(“R & D project)

[11] The applicant gave a brief history of the research and development project it

was engaged in and this narration was not disputed by the respondents.

11.1 The installation of software to conventional systems of programming

and setting up of computer systems entailed (i) the operating system

and computer program (ii) the application program. These programs

are interdependent for purposes of achieving real functionality.

11.2 Different computers can therefore only connect with each other if the

same or compatible software has been installed.

11.3 Operational costs are reduced in conventional systems only when the

systems operate over server-based databases.

11.4 ‘This limitation has become a serious shortcoming in conventional

systems, particularly in the global financial management and

accounting and financial fields”

[12] The applicant specializes in the financial management and accounting and

financial fields. As a result of the shortcomings in the conventional systems, a

modern system of programming is being developed which will allow for a faster,

reliable and cost effective and a higher volume of data processing being achieved.

Web-based programs no longer require the installation of the application software to

be installed in every computer and, the necessity to install updates to every

computer. Instead a copy of the application programme is installed at a location

somewhere in the world and access to the application is by way of a licenced

subscription to the application software, which is regularly updated and is available

to users at a much lower cost. Of importance is that the communicating computers

are still required to use the same operating system, because the application software

licence is still determined by the operating system. The applicant as a result

identified the need for a program which is presently being researched and

developed.

The applicant’s research and development project.

[13] The applicant avers that it has over the years developed a successful

Windows based program in the market called “Cashbook”. It is a system where, with

the consent of all interested parties there is a compilation of data that creates a

cashbook which complies with the financial and legal requirements of the country

where the product is being used.

[14] Over the years Cashbook and RecXpress have been marketed by SAGE

which also markets its own product known as SAGE 300 ERP, ‘which is a software

application program consisting of 8 modules and, which is used as a comprehensive

package for accounting and financial management in small and medium businesses’.

However, Cashbook and RecXpress are only available as an optional extra to users

of SAGE 300 ERP who have a windows operating system. This has been found to

restrict functionality between users who have a Windows operating system.

[15] In 2016 the applicant realized a need to move away from the limitations and

disadvantages encountered in a conventional system. It had to develop a new

program to ensure its standing as one of the world’s leading software developers in

the field of financial management and, to also to avail Cashbook and RecXpress to

all users of SAGE300 ERP, not limiting use to only those using Windows operating

systems. A new program with the following characteristics was required:

15.1 The new program had to be web-based

15.2 It had to make functionality available to all SAGE 300 ERP users

15.3 The SAGE guidelines were used to research and develop the new

project;

15.4 To date no program exists anywhere in the world which can make

Cashbook and RecXpress available to all users of the SAGE 300 ERP

available to users regardless of their operating systems. The project

was and still is new and the problems and uncertainties encountered

require further extensive research.

[16] The first respondent denies that what is envisaged by the applicant relates to

something new. It is contended that the software program the applicants seeks to

develop is aimed at resolving a technical problem which enhances the functionality

of SAGE 300 ERP accounting software program, in order to make it accessible on

different platforms and interfaces. There is already an existing Cashbook program.

What is envisaged is to improve the efficacy of an already existing program and it

does not qualify as a research and development program for purposes of benefitting

from the incentive in section 11D of the Act.

Difficulties and uncertainties encountered

[17] In order to gain access to the use of the application of software of his choice,

a user has to make use of a browser and the existing different operating systems

have a browser, which browser with its software is a computer program on its own.

Since the browsers use specific operating systems they cannot integrate with other

software designed for different operating systems. This causes uncertainties and

problems which call for investigation and experiments for possible solutions.

Presently there is no browser program in existence to avail Cashbook and Rec-

Xpress to users of SAGE 300 ERP and there is need to research and develop a

new program and a website having the envisaged capacity.

[18] Another uncertainty presents itself in each programming language since each

has its own syntax to create commands. The new program must be enabled to cross

the various barriers created by the different browsers to integrate with the SAGE 300

ERP software to capacitate functionality in Cashbook and RecXpress regardless of

the different operating systems. ‘The main difficulty lies in programming languages,

commands and operating systems acting as an integrated system to form a new

program. The applicant contends that the programming algorithms which originate

from these uncertainties take weeks or months to research and to develop into a

successful algorithm. The applicant contends that the first respondent failed to have

regard and consider any of the uncertainties and failed to apply its own definition of

uncertainties to the facts.

[19] The first respondent denied that the applicant’s envisaged program would

resolve any uncertainties. There was existing functionality in the market identified by

the applicant as the SAGE 300 ERP software, which has a functionality of Cashbook

and RecXpress which is accessible in certain platforms. What the applicant wants to

do is to increase accessibility on the Web. It was contended that there was no

evidence tendered that there were uncertainties encountered by the program. The

applicant had failed to demonstrate ‘any systematic investigative or systematic

experimental activities or testing of any software to resolve any uncertainty

suggested.

The application form and the replies to the questions posed by Mr Mabogoane

[20] The applicant dealt with the questions in the application form and those

forwarded by Mr Mabogoane and commented that the first respondent did not in its

reasons criticise the answers given in the reasons for the refusal of the application.

20.1 What is the scientific or technological objective (end goal) of the

project?

The applicant contended that the responses given on both occasions

related to the same thing which was that it was intended to develop a

web-based platform using a browser which could process accounting

process across the internet as opposed to the limitations of the use of

operating systems in conventional systems.

20.2 Explain the scientific or technological uncertainty that the project aims

to resolve?

The applicant contended that the two answers went hand in hand

because it was obvious that there would be uncertainty, because this

type of project had never been successfully attempted before, no

software existed from which solutions could be learnt. It was contended

that it should have been a matter of logic to the Committee appointed

to adjudicate the matter and, to give recommendations to the first

respondent in that where no example existed the whole project would

be clouded in uncertainty

20.3 Explain the scientific or technological advance the project aims to

achieve?

The applicant contended that the two answers go hand in hand, the

second expanding on the first which was to make SAGE 300 ERP

available to users and to shorten the time in which reconciliations were

performed.

20.4 Describe the computer program or software you intend to create or

develop?

The applicant contended that the answers given go hand in hand and

they related to developing a compatible SAGE 300 ERP to operate

across the internet regardless of operating system; that it took years to

develop various developmental language, it was unique and protected

by copy right.

20.5 Explain the innovative nature of the computer program or software

Product. How is the software product newly introduced on the basis of

its scientific or technological characteristics?

The applicant contended that the answers given go hand in hand in

that the innovative nature in the new program was clearly stated.

20.6 Describe how the computer program or software you intend to create

could not be developed using the existing technology?

The applicant contended that the answers go hand in hand. The new

program required a web-based program with special characteristics

that are not available to SAGE 300 ERP users anywhere and it will

take a long time develop.

[21] The first respondent contended that in the responses to the questions the

“applicant failed to show that it was involved in the research and development of a

computer program that was geared to resolve technological uncertainty ..”

Reasons given by the First Respondent

[22] The applicant addressed the covering letter and the annexure “A” which

communicated the response to its failed application. It takes issue with the

covering letter which does not clearly indicate which requirements in section 11D

they failed to comply with. The applicant contended that under the heading

“Application of the Law” the first respondent while ascribing certain meanings, there

is no indication as to which part of the response falls short of any other meaning

ascribed to the words. Under the heading “Reasons for Non-approval” the applicant

contended that the response met every requirement in the reasons for disapproval

and as far as they viewed the entire document only one reason had been given in

contemplation of section 11 D(2) of the Act which appear in the words “failed to

demonstrate that the results of the proposed activities are a resolution of scientific or

technological uncertainty to meet the requirements of 11D(1)”.

[23] The applicant proceeded to deal with section 11D(1)(b)(iii) of the Act. The

applicant contended that it had been stated that the element, innovativeness was

expressed, in that the project was to create a program which will be the first ever

program of its kind. This complied with the research envisaged in 11D(1) of the Act.

The uncertainty in the results was the key feature of the research, that the applicant

was working towards the development or creation of a program, where every key-

stroke tried out and eventually used in the research process, was systematically

investigative or systematically experimental in nature or activity. He contended that

the applicant had therefore met the requirements of section 11D(1)(b)(iii).

[24] The first respondent contended that the applicant had misconstrued the

requirements of 11D(1)(b)(iii) in that it was not the uncertainty in the desired

outcome of the project that the applicant had to address, but it was for the applicant

to demonstrate that the research and development embarked upon was geared

towards resolving a scientific or technological uncertainty.

Grounds of Review

[25] The applicant contended that the nature of the form that was downloaded was

such that in parts it required a yes or no answer and, in certain parts certain answers

were not taken into account when evaluating his application. Incorrect interpretation

of and misconstruing of sections 11D(1) and 11D(1)(b)(iii) of the Act amounted to an

unfair administrative action as contemplated in section 3 of the Promotion of

Administrative Justice Act 3 of 2000 (“the PAJA), that such refusal adversely affected

his rights and should not have been refused without giving the applicant opportunity

to present or dispute information or arguments which they were not invited to

explain.

[26] The first respondent contended that it was not necessary for the applicant to

be afforded a third opportunity to make formal or oral representations and that it was

in the discretion of the first respondent to call for oral representation before the final

decision.

The Supplementary Affidavit in terms of Rule 53 (4) On the Uniform Rules of Court

[27] Having received the record the applicant did not file an amended notice of

Motion to incorporate additional relief, however it was indicated when responding to

the answering affidavit in reply, that reliance would also be had to section 6 of PAJA.

The latter ground was expanded in counsel’s heads of argument. The record of

proceedings filed consisted among them documents they had not seen before, being

the evaluation report of Mr Mensah and the minutes. What was not included were the

initial application form completed by Russo and his response to the email questions of

Mr Mabogaone These were annexed and dealt with in the founding affidavit. Mr

Mensah’s report makes no mention of his response to the emailed questions neither

did the first respondent mention that regard was had to them. It is therefore inferred

that first respondent, Mr Mensah and the R&D Tax Incentive Adjudication and

Monitoring Committee failed to consider the content of applicant’s responses properly.

[28] The applicant questions the authority, competency and qualification of Mr

Mensah to express expert opinion on programming and existing software in the

market, since no mention is made of his expertise in the report. It is contended

that he erred in crucial aspects which destroy the legitimacy of his report:

(i) First, was his reasoning that ‘a body of knowledge exists to the

taxpayer to successfully execute the proposed activity’ when the

applicant stated as at paragraph 22 – 27 of the founding affidavit that

there was no existing software anywhere in the world to make the

product researched and developed ‘as a web-based product to users of

SAGE 300 ERP software’ and that the product will be a completely new

product. Mr Mensah had not mentioned the name of any software or

creators of other software applications which he said were available to

the applicant, to prove his claim.

(ii) Second, was the conclusion that the applicant’s activity was a ‘deemed

product enhancement and would not render the resolution of a

scientific or technological’ uncertainty. This stems from the erroneous

statement that there was a body of knowledge available to the applicant.

The applicant contends that the uncertainties have been dealt with in

paragraphs 28 to 34 of the founding affidavit.

(iii) Third, the applicant contended that Mr Mensah had misconstrued the

interpretation of 11D(1) of the Act, where he introduced certainty or

success in the research and development of the product, in order to

qualify it for the tax incentive.

[29] The applicant indicated what he accidentally failed to mention was that SAGE

was developing a new web-based version of the ERP 300 software and that while the

application was aimed at the present users of SAGE 300 ERP, it was also aimed for

the future users of the software who will be using the web-based version of SAGE 300

ERP. The applicant also stated that it was constantly in touch with SAGE to ensure

that applicant’s development will integrate with the SAGE 300 ERP software.

THE ISSUES

[30] The main issue raised in the founding affidavit was that it was contended that

the first respondent incorrectly interpreted section 11D(1)(b)(iii) of the Act in the

reasons for refusing the applicant’s application. It was contended that the first

respondent had disregarded the element of uncertainty in the analysis of the answers

in the application form and those given to Mr Mabogoane. It was also contended in the

supplementary affidavit that Mr Mensah had misconstrued the interpretation of section

11(D)(1) and in finding that the section introduced and element of certainty. Another

issue related to how to deal with new reasons which did not form part of the first

respondent’s reasons as communicated to the applicant.

THE LAW

[31] Section 11D(1) provides:

(1) For the purposes of this section ‘research and development’ means

systematic investigative or systematic experimental activities of which the

result is uncertain for the purpose of-

(a) …………….

(b) creating or developing –

(i)………….

(ii)………..

(iii)a computer program as defined in section 1 of the Copyright Act

(iv)…………

Section 1 of the Copyright Act 98 of 1978 defines the term computer program

as:

“a set of instructions fixed or stored in any manner and which when used

directly or indirectly in a computer directs its operation to bring about a result”.

[32] It is my view that the issues to be determined herein are to be considered in the

light of the information that was before the adjudicating committee, having regard to

the application form, the answers by one Mr Russo on behalf of the applicant and,

also those subsequently given in response to Mr Mabogoane, also given by Mr Russo.

The decisions sought to be reviewed are contained in the letter and annexure

communicated to the applicant by the first respondent.

[33] It is also important to have regard to the purpose for which 11D was enacted

being, the grant of a 150% tax incentive for research and development, in section

11D(1) where it is provided, “research and development” means, systematic

investigative or systematic experimental activities of which the result is

uncertain………” and creating and developing in 11D(1)(b)(iii) “a computer program

which of an innovative nature”…… ……(my emphasis)

[34] Counsel for the applicant contends that the reasons given by the first

respondent should be understood to carry the same meaning as that emphasized in

the underlined wording in the Act. Since no definition of the words is available in the

Act, the applicable principles of interpretation should be followed, which require that

the ordinary meaning be given to words. Counsel for the first respondent contended

that in the first respondents reasoning, Annexure A which was attached to the covering

letter communicating the outcome, under title “Application of the Law,” the meaning

and interpretation of the words in section 11D are explained. He states that section

11D should be interpreted to mean that there must be an indication that the program

is resolving a scientific or a technological uncertainty. This calls for an examination of

the first respondent’s reasons which were recorded in two paragraphs, in the following

manner:

“Further for the proposed activities to be classified as R&D in the Act, its

completion must be dependent on the resolution of a scientific and or

technological uncertainty”

“…… the applicant failed to demonstrate that the results of the proposed

activities are a resolution of scientific or technological uncertainty to meet the

requirements of section 11D(1) of the Act”.

It is argued for the applicant that the qualifying reason is contained in the

second paragraph. In my view and having regard to the definition in section 11D,

the applicant when presenting the application for the incentive should still be engaged

in a ‘systematic investigative activity’ or a ‘systematic experimental activity’, the result

of which is still uncertain, where no resolution has as yet been achieved and where

the activity is ongoing. There should be no room for certainty as yet when the

application is launched and when the application is adjudicated on behalf of the first

applicant because the program was still being researched and developed. It is only

the applicant who can give indication when it has found an solution to its research and

development, in which event the purpose for the incentive would not be available.

[35] In this regard I would avoid using words not used in the legislation enacted like

the word ‘resolution’ as used in the first respondent’s reasons, for the mere reason

that it brings a different meaning to what is intended in the enactment and this is

evident in the response in paragraph [11] of the answering affidavit for example, where

the first respondent gives another meaning, an additional meaning to ‘systematic

investigative or systematic experimental activity as described in 11D, to mean what

the applicant must satisfy as described in the guidelines as the “ Hypothesis to

experimentation and Observation and evaluation to logical conclusions.” At paragraph

[58] of the answering affidavit the deponent states: “The applicant has failed to show

that it is involved in the research and development of computer programs that is

geared to resolve technological uncertainty …..unless the applicant can demonstrate

that the project will resolve a technological uncertainty which is already existing, the

applicant’s project does not meet the requirements.” Another example is the meaning

and interpretation to be ascribed to the words “of an innovative nature” as used in

section 11D(1)(b) (iii) as opposed to the use of the single word “innovative” in sections

11D(1) (b)(ii) (bb) and (c).

[36] Counsel for the applicant correctly points out that meaning to be ascribed to the

words are the ordinary meaning as dealt with in his heads of argument for example at

paragraph 7.4 and 7.5, when dealing with the ordinary meaning that should be

ascribed to the word “Uncertain” (taken from the Shorter Oxford Dictionary (1968) and

the South African Pocket Dictionary). Furthermore, it was contended that in as far as

it concerned the interpretation of the words “ innovative” and “of an innovative nature,”

the first respondent had as at paragraph 97 of the answering affidavit introduced

a qualitative comparison between the applicant’s intended product and that of other

similar products, thereby rendering an incompatible interpretation of the two. The Act

does not define these two expressions and there had been no judicial interpretation

existing. It was contended that the rigid interpretation of the words was indicative of

the first respondent’s reliance on some guideline and did not allow an interpretation

according to the principles laid down by law.

[37] It is my view that if the first respondent wished to elicit information as described,

being a reference to the “Guideline” and requiring the applicant to expand on its

presentation, it could have drawn the applicant’s attention to the guideline. Mr

Mabogaone posed almost similar questions as asked in the application form, without

indicating that a more comprehensive exposition was being asked for and to give

guidance as to what was required to be explained. As I see it, it was assumed by the

first respondent that Mr Mabogoane’s additional questions would have elicited

additional comprehensive information, thereby taking the view that the applicant was

given a second chance to explain itself. Counsel for the first respondent conceded in

argument that some of the questions were similar to those in the application form. It is

my view that it is possible that the questions as formulated in the application form could

be viewed as being too simple and restrictive, in as far it they were designed to give

answers to what I believe are complex issues, especially where a tax incentive of a

150% is being applied for.

[38] Those persons involved in the interpretation of a statutory provision should not

engage in a complex process or introduce into the provision that which is not intended

by the legislature. The principle applied in Natal Joint Municipal Pension Fund v

Endumeni Municipality 2012 (4) SA 593 (SCA) at 603 – 604 should be followed, where

it was stated:

“[18] The present state of the law can be expressed as follows: Interpretation

is a process of attributing meaning to words used in a document, be it

legislation, some other statutory instrument or contract having regard to the

context provided by reading the particular provision or provision in light of the

document as a whole and the circumstances attended upon its coming into

existence. Whatever the nature of the document, consideration must be given

to the language used in the light of the ordinary rules of grammar and syntax;

the context in which the provision appears; the apparent purpose for which it is

directed and the material known to those responsible for its production. Where

more than one meaning is possible each possibility must be weighed in the light

of these factors. The process is objective not subjective. A Sensible meaning

is to be preferred to one that leads to insensible or unbusinesslike results or

undermines the apparent purpose of the document. Judges must be alert to,

and guard against the temptation to substitute what they regard as reasonable,

sensible or businesslike for the words actually used. To do so in regard to a

statute or statutory enactment is to cross the divide between interpretation and

legislation in a contractual context, it is to make a contract for the parties other

than the one they in fact made. The inevitable point of departure is the language

of the provision itself, read in context and having regard to the purpose of the

provision and the background to the preparation and production of the

documents.”

[39] Counsel for the first respondent contended that in the preceding paragraphs to

the reasons in “Annexure A” the minister dealt with the meaning of section 11D(1). It

is my view that the meanings ascribed to ‘systematic; investigative; experimental;

hypothesis” are not definitions in the Act, however, it could be that they were obtained

from a guideline not forming part of the certified record of proceedings and not availed

to the applicant before adjudication. Interpretation of the words should follow the trite

principles already mentioned.

[40] It was contended by the applicant that the first respondent could not furnish

new reasons not initially communicated to the applicant as it sought to introduce the

guideline and in my view certain portions of the report by Mr Mensah. In the replying

affidavit certain issues are raised about Mr Mensah’s qualifications and the fact that

he failed to file an affidavit relating to his expertise. Counsel for the first respondent

dealt with Mr Mensah’s evaluation by drawing comparisons to what was alluded to in

the founding affidavit. As I see it, most of the allegations in the founding affidavit were

an explanation of what the application was about, which comprehensive narrative was

not similar to that given in the application form and the follow up answers to the query

of Mr Mabogoane. My concern is that nowhere in the reasons of the first respondent

especially those as dealt with in “Annexure A”, does the first respondent refer to Mr

Mensah’s reasons as being one of the reasons and recommendations relied upon

when deciding not to grant the application. Well, except for paragraph 2 of the reasons

of the first respondent, where the first respondent echoes the conclusion in Mr

Mensah’s report.

I have already indicated that in those reasons it is assumed that it was the

guidelines which were being referred to as seen from the answering affidavit and

which guidelines do not form part of the record.

[41] In Jicama 17 (Pty) Ltd v West Coast District Municipality 2006 (1) SA 116 (C)

at paragraphs [11] and [12] emphasised the importance of conveying reasons to a

party adversely affected thereby, so as not to allow reasons which come out for the

first time in an answering affidavit to supplement reasons already given. In National

Lotteries Board and Others v South African Education and Environment Project 2012

(4) SA 504 (SCA) at paragraphs [22] –[27] the following is stated:

“[24] ………the high court relied on the decision of Cleaver J in Jicama (Pty)

Ltd v West Coast District Municipality, which has an impressive English

Pedigree.”

[26] ….The question here is not whether there were other reasons in the

record that justified the board’s decision, but whether it could give reasons

other than those it gave initially for refusing the application”

[27] The duty to give reasons for an administrative decision is a central

element of the constitutional duty to act fairly. And the failure to give reasons

which include proper or adequate reasons should ordinarily render the

disputed decision reviewable.”

[42] On what grounds is this decision reviewable? Although in the founding affidavit

the applicant based its grounds on a fair procedure that was not followed, in that it

was not called upon to explain its case, before the matter was adjudicated or before

reasons were given, it is indicative in the answering affidavit that the first respondent

relied on additional grounds which were not discovered. In that regard I find that the

procedure was unfair in that the first respondent also relied on a standard not set out

in the act or any regulation enacted but on guidelines to adjudicate the application.

The applicant was not made aware of the importance of structuring it’s responses

according to the standard in the guidelines. In the replying affidavit at paragraph [15]

the applicant addresses the qualifying criteria introduced by the first respondent as an

ultra vires action reviewable under several of the grounds in section 6 of the PAJA and

in conclusion the applicant states that it is incorrect, arbitrary and not rationally related

to the facts.

[43] I have already indicated that the applicant did not amend its notice of motion to

insert the additional grounds it relies on in terms of section 6 of PAJA

(i) 6 (2) (d) where the decision was influenced by an error of law;

(ii) 6(2)(e)(iii) irrelevant considerations were taken into account or relevant

considerations were not considered’;

(iii) 6(2)(f)(ii) where the action is not rationally connected to the purpose for

which it was taken; and

(iv) 6(2)(c) the action was procedurally unfair.

These were stated in counsel’s heads of argument. My view is that if such

grounds can be determined from the facts then in the interests of justice the decision

is reviewable on those grounds so established.

[44] I also find that the decision is reviewable in terms of section 6 (2)(d) in that the

decision was influenced by the incorrect interpretation of the provisions of sections

11D(1) and 11D(1)(b)(iii). I am of the view that this is not a matter where a court of law

is competent to substitute the decision of the first respondent. It is a complex matter

which should be left to the first respondent to adjudicate, as it has available to it a

process of evaluation by experts in the field the applicant is engaged in, of the research

and development of a scientific and or technological computer program. The Act also

makes provision for oversight processes to be engaged by the first respondent in

conjunction with Treasury and the Receiver of Revenue, since this incentive has the

potential to also impact on the fiscus. I find that the applicant should be referred

back to the first respondent for the adjudication of its application as set out in the order

below.

[45] In the result the following order is granted:

[1] The refusal of the applicant’s application by the first respondent on 21

August 2018 under reference 2017/003222/01 is hereby reviewed and

set aside in terms of sections 6(2)(c) and 6(2)(d) of the PAJA.

[2] The matter is referred back to the first respondent for adjudication in

terms of the Act.

[3] The first respondent is directed, within 45 days of the service of this

order, through Mr Mabogoane (Deputy Director) and or any competent

official in his place, to review the questions in the query in the email dated

1 September 2017, in such a manner setting out additional requirements

and answers required for purposes of adjudicating the application for an

incentive by the applicant in terms of the Act. The official is directed to

make available to the applicant any material it has relied upon in the past

and which it shall rely upon in setting out what is required from the

applicant and the standards applicable in the adjudication of the

application.

[4] The applicant is directed to supplement its answers in the application as

directed in [3] as required in the Act and in any manner it deems fit. The

applicant is directed to serve the first respondent with its answers within

30 days of its receipt of the question in [3] above;

[5] The first respondent is ordered to pay the costs of the applicant

including those of two counsel where engaged.

TLHAPI V V

(JUDGE OF THE HIGH COURT)

MATTER HEARD ON

: 12 FEBRUARY 2020

JUDGMENT RESERVED ON

: 12 FEBRUARY 2020

ATTORNEYS FOR THE APPLICANTS : PIERRE RETIEF INC.

ATTORNEYS FOR THE RESPONDENTS : THE STATE ATTORNEYS