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NOT REPORTABLE                           /BB

IN THE HIGH COURT OF SOUTH AFRICA

(Transvaal Provincial Division)

Case number: 1347/2005

JUDGMENT DELIVERED:  5/6/06

In the matter between:

BOHLER UDDERHOLM AFRICA (PTY)  LTD                  Applicant

and

THE MANUFACTURING DEVELOPMENT BOARD       First Respondent

THE MINISTER OF TRADE AND INDUSTRY                   Second Respondent

JUDGMENT

PRETORIUS, J

This is an application for review of the decision of the first respondent not to grant Small and Medium Enterprise Development Programme Incentives to the applicant.

The applicant is a manufacturer of special steels with its principal place of business at 1 Isando Road, Isando.

The applicant applied to the first respondent on 14 February 2003 for Small and Medium Enterprise Development Programme Incentives (SMEDP).

The SMEDP came into existence during 1999 in terms of the Manufacturing Development Act, No 187 of 1993. Only certain legal entities could participate in the SMEDP namely, companies, close corporations, partnerships, sole proprietorship and co-operations. Divisions were excluded from participating.

The reason for this exclusion is that the SA Institute for Chartered Accountants complained about the Regional Industrial Development Programme (RIDP) where each division had to submit its own financial statements and statements of assets and liabilities as if it were a separate company. This caused great inconvenience and the workload vyas too much.

The first respondent regards a company which has branches in different parts of the country as a company which has "divisions" which do not qualify for incentives in terms of the SMEDP.

The applicant operates from various locations in South Africa as set out in their SMEDP application, but contends that it is operating as one entity with one accounting system and therefore do not operate as divisions.

The first respondent set out the process which an application for incentives follows. The last step, after the application has been assessed by the relevant persons, is when it is placed before the Management Committee which consists of the chairperson and two other people.

The Management Committee, during a meeting, re-assesses the application and ensures that it falls within the Board's guidelines.

This Management Committee rejected the applicant's application on 8 March 2004 "as it does not meet the requirements for incentives". There was no further reasons given for this finding.

The applicant launched an appeal against this decision within sixty days, as required, from the date being notified of the refusal.

The applicant addressed a letter, through its attorneys on 5 April 2004, setting out the grounds of appeal. This appeal letter was only acknowledged by the first applicant on 16 July 2004, despite the applicant requesting acknowledgement on six occasions.

On 14 October 2004 the applicant was advised that the Manufacturing Development Board did not approve the application as it does not meet the requirements of incentives.

The Board's decision was as follows:

"2004.0.21: The Board does not approve the application for standard SMEDP incentives, as divisions and branches are excluded from participation in the programme BM 15/09/2004.  The Board upholds its previous decision and does not approve the application for an expansion for standard SMEDP incentives, as divisions and branches are excluded from participating in the programme "

The applicant acted in accordance with the guidelines set out in the information brochure of the Department of Trade and Industry relating to applications for SMEDP incentives.

The information brochure does not have any definitions to define either "divisions" or "branches", nor does it define any of the entities which do qualify.

The applicant and not "divisions" or "branches" applied for the SMEDP incentives as set out in the application.

Furthermore, the applicant's audited financial statements for the year ended 31 December 2003 had not been drawn up on a divisional basis, but for the company as a whole.

The accounts reflect a single entity. The respondent states in the answering affidavit that it is simply unfortunate that the applicant’s application does not comply with the prerequisites of the SMEDP or incentives as a result of which its application was refused.

The respondent concedes that applicants' application complied with the guidelines as set out in the Information Brochure of the second respondent, but that applicant's internal make up did not comply with those guidelines.

There is no definition in the guidelines setting out what is regarded as divisions or branches. There is no definition for the legal entities which do qualify to participate in the SMEDP incentives. The applicant could not guess from the information brochure that it was not entitled to participate, as the guidelines filed by the first respondent was not available to applicants, but is a document for use by the first and second respondents.

The respondents admit that the applicant qualified in all aspects for the SMEDP incentives, except for the divisions and/or branches aspect.

The Management Committee, appointed by the first respondent accepted the fact that the administration of all the plants are centralised, as can be gathered from the remarks under the background column of the Management Committee notes.

In this instance there is no rational basis to exclude the applicant as a qualifying entity as it is a company with audited accounts which has been drawn up for a single entity, although trading from various locations. It had applied as a company and not as a division for the SMEDP incentives. It is also an important role player in the South African automobile industry.

The recommendation to the Management Committee and the Board] was not reasonable having regard to the facts at their disposal at the time or making the decision, and having regard to the lack of definitions in the Information  Brochure.

Ms Neukircher for the respondents conceded that although there are guidelines available regarding divisions! divisionalised entities, it was not available to applicants. These guidelines were filed and formed part of the record for review, but takes the matter no further as the applicant was not aware of these guidelines and they were not available to the applicant at the time the applicant applied for SMEDP incentives.

Section 33(1) of the Constitution of the Republic of South Africa, Act 108 of 1996 affords everyone the right to administrative action that is reasonable and procedurally fair, lawful.

Section 6(2) of The Promotion of Administrative Justice Act, 3 Of 2000 confers

the power to review administrative action judicially if:

"... (t)   the action itself­

(i)         …

(ii)        is not rationally connected to

            (aa)      the purpose for which it was taken

(bb)      the purpose for which it was taken;

(cc)      the information before the administrator;

(dd)      the reasons given for it by the administrator."

In Trinity Broadcasting (Ciskei) versus Independent communications Authority of South Africa 2004(3) SA 346 SCA on page 353 Howie JA dealt with the standard of review of administrative action and found:

"In requiring reasonable administrative action, the Constitution does not in my view, intend that such action must, in my view, intend that such action must, in review proceedings, be tested against the reasonableness of the merits of the action in the same way as in an appeal...

As made clear in Bel Porto, the review threshold is rationally. "

           

In this instance where the applicant applied as a single entity, for SMEDP incentives, had financial audited statements no guidelines available to applicant as to how applicant's internal make-up had to be determined, the Management Committee and the Board erred in finding the applicant included divisions and/ or branches.

I make the following order:

1.        The fist respondent's decision of 21 January 2004 not approving the applicant's application for standard SMEDP incentives, as well as its decision of 15 September 2004 upholding its previous decision, be and is hereby set aside.

2.         It is declared that pursuant to its application for SMEDP incentives dated 14 February 2003 the applicant is a qualifying entity for purposes of that application.

3.         The applicant's said application is referred back to the first respondent for reconsidering against the background of the declaratory order made in prayer 2 hereof

4.         Costs of the application to be paid by the first respondent

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C Pretorius

JUDGE OF THE HIGH COURT

Case number: 1347/2005

Heard on:  8 March 2006

For the Applicant: Adv ND Hollis SC

Instructed by: Larry Welman & Associates

For the Respondents: Adv B Neukircher

Instructed by:  State attorneys

Date of Judgment:  5 June 2006

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