/SG
IN THE HIGH COURT OF SOUTH AFRICA
(TRANSVAAL PROVINCIAL DIVISION)

				DATE: 05/03/2007
			CASE NO: 37942/2006
REPORTABLE

In the matter between:

UTHINGO MANAGEMENT (PTY) LTD			APPLICANT

And

THE MINISTER OF TRADE AND 
INDUSTRY							1ST RESPONDENT

THE NATIONAL LOTTERIES BOARD		2ND RESOPNDENT

GIDANI (PTY) LTD					3RD RESPONDENT 

JUDGMENT

SERITI, J

	This matter came before court by way of a motion.

	In the part A of the notice of motion the applicant was seeking an order, inter alia, in the following terms:

“2.	That pending the final determination of the applicant’s review application set out in Part B of this Notice of Motion:

(a)	the second and third respondents be interdicted and restrained from operating a national lottery within the Republic of South Africa;

(b)	the first respondent alternatively the second respondent be interdicted and restrained from terminating the national lottery presently operated by the applicant in terms of the Lotteries Act and the licence issued to it under section 13(1) of the Lotteries Act;”

	In part B of the notice of motion the applicant is seeking for an order, inter alia, in the following terms:

“2.	Reviewing and setting aside the decision of the first respondent to award to Gidani a licence issued in terms of section 13 of the Lotteries Act, 57 of 1997, to conduct a national lottery, which decision was communicated to the Applicant on 4 October 2006;

3.	Directing the first respondent to issue to Uthingo a licence, in terms of section 13 of the Lotteries Act, 57 of 1997, to operate the national lottery; ...”

	When the matter came before this court for hearing the prayers contained in part A of the notice of motion had fallen away.

	Only part B of the notice of motion had to be adjudicated upon.

	In its replying affidavit, the applicant stated that it seeks that the decision of the minister be referred back to the minister for consideration afresh in terms of the act.

2.	Founding Affidavit
	The founding affidavit was deposed to by Dr Isaac Seboko Monamodi, Chief Executive Officer of Uthingo Management (Pty) Ltd.

	In the first few paragraphs he describes who the parties are.  The second respondent, is described as the National Lotteries Board, a juristic person established in terms of the provisions of section 2 of the Lotteries Act.

	The deponent further alleges that the necessity for the interdict application arises only if the review application cannot be heard and judgment given in good time before the expiry of Uthingo’s licence to operate the national lottery at midnight on 1 April 2007. 

	The determination of the review application in good time prior to the expiry of the Uthingo licence on 1 April 2007 would avoid the need for seeking the interim interdict application comprising part A of the notice of motion.

	In terms of the review application, Uthingo seeks to review and set aside a decision taken by the Minister to award to Gidani a licence issued in terms of section 13 of the Lotteries Act to conduct the national lottery in South Africa.  The said decision was communicated to Uthingo on 4 October 2006. 

	In terms of the provisions of the Promotion of Administrative Justice Act 3 of 2000 read together with section 33 of the Constitution of the Republic of South Africa, 1996 and common law, Uthingo seeks the review and setting aside of the decision of the minister.

	The grounds upon which the review application is brought are the following:

1.	The provisions of the Lotteries Act requires of the Minister that, before he awards a licence to any person to operate the national lottery, he must first, in terms of section 13(2)(b) of the Lotteries Act, satisfy himself as to certain matters.

	There is nothing contained in the Minister’s reasons which indicates that he satisfied himself as to any of the requirements of section 13(2)(b) of the Lotteries Act.

	Insofar as concerns the requirement of section 13(2)(b)(iv) of the Lotteries Act, which require that the Minister be satisfied that no political party or office bearer in a political party have any financial interest in the applicant for the licence or in a shareholder of that applicant, there is in fact clear evidence that:

1.1	the Board, upon whom the Minister relied for all information and for purposes of assessing the application submitted for the licence, did not undertake any inquiries in relation to the shareholders of Gidani.

1.2	certain political office bearers of the ANC are shareholders in a shareholder of Gidani; and

1.3	despite extensive reports to the effect that Gidani contravenes the provisions of section 13(2)(b)(iv) of the Lotteries Act, neither the Minister nor the Board made any inquiries of and concerning the suitability of Gidani.

2.	Section 13(2)(b)(i) of the Lotteries Act also requires of the minister that he satisfy himself as to whether or not the proposed licensee has sufficient appropriate knowledge and experience (or unconstrained and continuous access thereto) to enable that proposed licensee to operate the national lottery.

	The Minister has again failed to state that he has satisfied himself as required by the abovementioned section 13(2)(b)(i).

	In fact, Gidani itself is a new company with no experience at all in gaming or in the operation of a national lottery.  From their shareholding and statements made by the representatives of Gidani, it is clear that the knowledge and experience is to be drawn from an offshore company called Intralot.

	Minister failed to address the question of whether or not Intralot has sufficient knowledge or experience or that Gidani has unconstrained and continuous access to that knowledge or experience.

3.	Furthermore it would appear as though Intralot may be disqualified from participation in either Gidani or in the operation of the national lottery on the basis that it does not meet the statutory requirement of being a fit and proper person.

	The Minister’s failure to comply with the provisions of the Lotteries Act, offends against the principle of legality enshrined in the Constitution of the Republic of South Africa, 1996, is ultra vires his powers under the Lotteries Act and conflicts with section 6(2)(b) and 6(2)(f)(i) of the Promotion of Administrative Justice Act.

4.	Section 13(3) of the Lotteries Act obliges the Minister, in considering whether to grant a new licence, to have considered whether or not Gidani, or any person for whose benefit the business of Gidani will be conducted, or any person who will or is likely to manage the business of Gidani, is a fit and proper person.

	The Board itself conducted no independent inquiries as far as concerned the “fit and proper” evaluation.  It apparently delegated to the National Intelligence Agency all responsibilities in that regard.

	Since the end of July 2006, there has been extensive media coverage raising concerns about Intralot’s conduct and investigations that have been conducted into that in other jurisdictions, which points towards that Intralot is not fit and proper.

	Despite the said extensive media coverage and the fact that the Board enjoys investigative powers, neither the Board nor the Mnister have made adequate inquiries into Gidani, its shareholders or the allegations that Intralot is tainted with impropriety in the running of other national lotteries.

	The Minister and the Board’s reliance upon the evaluation performed by the National Intelligence Agency cannot suffice for purposes of satisfying the requirement of section 13(3) of the Lotteries Act.

5.	The process to be followed in the award of the new licence was governed by the Lotteries Act, the Administrative Justice Act, section 33of the Constitution and the request for proposal (or “RFP”) issued by the Minister in terms of section 13(2)(a) of the Lotteries Act on 18 July 2005. 

The abovementioned documents read together put in place a procedure that the Minister and the Board were obliged to follow, and which Uthingo was entitled to expect would be followed.

Contrary to the procedure that was provided for in the RFP, on 31 July 2006 the Minister announced that he had chosen a “first preferred bidder” and a “second preferred bidder”.

Uthingo raised certain queries and in the course of responding to the queries raised, the Board and the Minister, gave an undertaking to Uthingo that if the discussions which were carrying on with Gidani are not successfully concluded by 31 August 2006, the Board will commence negotiations with Uthingo.

In spite of the undertaking mentioned above and despite the fact that discussions with Gidani were not concluded as at 31 August 2006, the Board and Minister failed to negotiate with Uthingo.

In the circumstances, the conduct of the Board and the Minister was procedurally unfair and unlawful vis-à-vis Uthingo and its rights, including its rights under the common law, section 6(2)(e) read with section 3 of the Administrative Justice Act and section 33 of the Constitution of the Republic of South Africa, 1996.

6.	The conduct of the Board and of the Minister in the process leading up to the decision to award the licence to Gidani, as well as statements made by the Chairperson of the Board, lead Uthingo to conclude that the Board and the Minister were biased against Uthingo and in favour of Gidani.

	This conclusion is all more compelling when regard is had to the identity of some of the shareholders of Gidani, including those shareholders who are political office bearers, or who are eminent figures in the South African political arena.

The belief that the Minister and the Board are biased against Uthingo and/or in favour of Gidani, which belief is reasonably held, offends against Uthingo’s rights under section 33 of the Constitution of the Republic of South Africa, 1996, the common law against bias and sections 6(2)(a)(iii) and 6(2)(e)(ii) and (v) of the Administrative Justice Act.

These grounds of review, taken both individually and together, justify the setting aside of the Minister’s decision as provided for in section 8(1)(c)(i) of the Administrative Justice Act.

Furthermore, the circumstances surrounding the taking of the decision to award the licence to Gidani, as also the grounds for the setting aside thereof, are such as to warrant the court’s substituting or varying the decision so as to grant the new licence to Uthingo, as contemplated in section 8(1)(c)(ii)(aa) of the Administrative Justice Act.

As far as Uthingo’s locus standi is concerned, the deponent sates that Uthingo is currently the operator of the national lottery and it was also an applicant for the new licence.

The reasons given by the Minister for his decision, indicates that Uthingo scored second highest after Gidani in the evaluations by the Board of the applicants who responded to the RFP.

Uthingo responded to and complied with all aspects of the RFP.  It submitted a compliant bid for the award of the new licence.

On 31 July 2006 at a meting held at dti campus the Minister announced that Gidani was chosen as the “first preferred bidder” and Uthingo was chosen as the so-called “second preferred bidder”.

It is uncertain of the procedure that the Board and the Minister had elected to follow in the form of the announcement of the so‑called “first preferred bidder” and “second preferred bidder”, as the RFP did not countenance such procedure.

On 18 August 2006 Uthingo received a reply from the Board.  In the said reply the Board stated, inter alia, that “The Board has entered into discussions with the preferred bidder (ie Gidani).  We have agreed that these discussions will cease on 31 August 2006.  If discussions have not been successfully concluded on or before this date, the Minister will inform you of this fact and discussion will commence with Uthingo”.

In a letter dated 31 August 2006 the Board wrote a letter to Uthingo, advising the latter that negotiations with Gidani have been concluded and that the matter has been forwarded to the Minister for his attention.

From the correspondence from the minister, it was clear to Uthingo that negotiations with Gidani were only finalised at the end of September 2006.  In keeping with its undertaking, the Board should have started negotiations with Uthingo from 1 September 2006, but failed to do so.

Minister acted ultra vires the Act in allocating the status of “first preferred bidder” to Gidani and “second preferred bidder” to Uthingo.

Between the date of the announcement of Gidani as the “first preferred bidder” and the announcement that Gidani had been awarded the licence, a period of more than two months elapsed.  During that period, according to both the Minister and the Board, the Board and the Minister engaged in discussions with Gidani over the terms of the licence.

During that period, there was intense coverage in the national and local media concerning the identity of the shareholders and controlling officers of Gidani.

The media coverage was focused primarily on two matters, namely to demonstrate that persons who are shareholders in Gidani are political office bearers or are influentially associated with political parties and that, therefore Gidani falls foul of section 13(2)(b)(iv) of the Lotteries Act, alternatively that there is an apprehension that it has been favoured because of its political associations.  Secondly that the international operator and shareholder, that has partnered with the South African entities to form Gidani and to operate the national lottery in South Africa, is tainted with scandal and charges involving corruption and dishonesty elsewhere in the world.

If the above allegations are true, then it could not be said that Gidani meets the requirements underlying section 13(3) of the Lotteries Act.

The material allegations contained in these press reports as far as the shareholders of Gidani are concerned are as follows:

(a)	Included among the shareholders of Gidani are two members of the National Executive Committee of the African National Congress, Chris Nissen and Max Sisulu both of whom are, as such, political office bearers.

(b)	Cyril Ramaphosa, a former high ranking official in the ANC and a much talked candidate to succeed President Mbeki as President of the Republic of South Africa, is a trustee of a trust which is a significant shareholder in Gidani.

(c)	One of the shareholders in Gidani is a company known as Intralot South Africa (Pty) Ltd, which is a subsidiary of Intralot registered in Europe.  The largest shareholder of Intralot Europe is a Greek businessman, Mr Socrates Kokkalis, who, according to press reports, is facing a number of criminal charges in various countries, including espionage, money laundering, embezzlement, fraud and bribery.  Some of these charges are also said to relate to the business activities of Intralot Europe.

	The said press reports also detail the unlawful activities of Intralot in relation to the running of lotteries in countries where it was awarded lottery licences and the fact that in other countries it did not pass probity investigations conducted in anticipation of the award of lottery licenses.

	Gidani was incorporated in South Africa on 14 March 2005.  Prior to its incorporation Gidani had no experience or interest in the operation of a lottery and, save for Intralot, neither did any of its shareholders.

	From the above, it appears that the minister did not satisfy himself that:

(a)	There is no political party in the country that has any direct financial interest in Gidani or in a shareholder of Gidani; or

(b)	There is no political office bearer in the country that has direct financial interest in Gidani or in a shareholder of Gidani.

(c)	That the experience and technical knowledge that would ordinarily be necessary for Gidani to operate the national lottery will be provided by Intralot.

(d)	That Intralot satisfies the requirements of the RFP and the Lotteries Act as far as concerns its status as being fit and proper or as being capable of conducting the lottery with all due propriety and in accordance with, inter alia, the Lotteries Act.

	The unlawful process followed by the minister and the Board in the award of the licence to Gidani compromised the rights of Uthingo to procedural fairness.

	Had the minister and the Board properly performed their functions and responsibilities in terms of the Lotteries Act, the result would have been that Uthingo would have been awarded the new licence.

3.	First respondent’s answering affidavit
	The deponent thereof is Minister of Trade and Industry, Mr M. B. M Mphahlwa.  He alleges that he has furnished the applicant with his reasons for the decision to award the licence to Gidani and he stands by these reasons.

	As is reflected in the first paragraph of section 6 of the reasons, having applied his mind to the matter, he was satisfied that the evaluation process had been conducted fairly and independently by the Board and like the Board, he placed particular importance on the greater financial contribution which Gidani proposed to make to the National Lottery Distribution Trust Fund.  In his view, applicant, Gidani and Iqwija Gaming (Pty) Ltd had all shown that they could successfully operate the national lottery.

	What distinguished the Gidani bid from the other two bids was its commitment to pay a flat rate of 34% of its turnover to the National Lottery Distribution Trust Fund, whose funds are directed to socially beneficial projects.

	The commitment to contribute to the National Lottery Distribution Trust was a decisive factor.  He denies the allegation that he failed to apply his mind to the eligibility of Gidani in terms of section 13(2)(b)(iv) of the Act and the probity of Intralot.  Prior to taking decision to award the licence to Gidani, he considered the recommendation of the Board in great detail, together with his Director General held lengthy discussions on the recommendation and the competing merits of various bids, held three meetings with the Board to clarify matters arising out of their recommendation and sought legal advice from the departmental’s legal advisor on legal matters relating to the award of the licence.

	He applied his mind extensively to the eligibility of Gidani in terms of section 13(2)(b)(iv) because after the announcement of the preferred bidder but prior to the award of the licence, the involvement of Messrs Max Sisulu and Chris Nissen in Gidani had become an issue of public controversy.

	In his discussions with the Board on 25 June 2006 and 27 June 2006 the question of compliance with section 13(2)(b)(iv) was discussed.  The Board furnished him with written memorandum setting out the identities of the key individuals in each of the shareholders of the bidders.  He considered the said memorandum and was satisfied that none of the persons there listed were political office bearers within his understanding of that term as used in the Act.

	At a meeting with the Board on 27 September 2006, his legal advisor, Mr Shaheed Alli orally advised him that having regard to the definition of “political office bearer” in section 1 of the Act and the provisions of the Constitution of the ANC, ordinary members of the National Executive of the ANC were not “political office bearers” for the purposes of section 13(2)(b)(iv) of the Act, and that it was only those officials on the National Executive Committee with specific duties to the ANC, namely the president, deputy president, national chairperson, secretary general, deputy secretary general and treasurer who were “political office bearers” for the purposes of the Act.

	On the basis of the advise given to him by Mr Alli, he remained satisfied that the involvement of Messrs Sisulu and Nissen in Gidani did not disqualify it in terms of section 13(2)(b)(iv).

	Except for key individuals involved in each of the shareholders, he was not aware of the identities of each of the individual shareholders in each of the shareholding companies of Gidani.  The Board directed a specific enquiry to Gidani in relation to section 13(2)(b)(iv) and in response Gidani confirmed that there were no political office bearers directly interested in any of its shareholders.  Having personally investigated the position of key individuals in the shareholders of Gidani, he was content to rely on the confirmation received from Gidani in respect of persons other than the key individuals.

	As far as the probity investigation of Intralot and Gidani are concerned he was informed by the Board that Gidani’s completed probity declaration was submitted to the National Intelligence Agency for investigation, and having conducted its probity investigation, the National Intelligence Agency gave its approval to Gidani.

	National Intelligence Agency is the primary intelligence gathering agency of South Africa State.  It has powers, personnel and international relationships with foreign intelligence agencies which made it particularly well suited to conduct a probity investigation of Gidani.

	After the award of the licence to Gidani, it came to his attention that the National Minister of Education Ms Naledi Pandor is a shareholder in Black Management Forum Investments (Pty) Ltd which is a 10% shareholder in the applicant.

	In view of the fact that he awarded the licence to Gidani, he conducted no probity investigation into the applicant.  He has not made a determination that the applicant and its shareholders and personnel were fit and proper to conduct the National Lottery.

	The licence of the applicant expires on 31 March 2007 and he has no powers to extend the said licence beyond 31 March 2007. 

	He denies that there was any abdication of his responsibilities in respect of the fit and proper assessment of Gidani and that he did not apply his mind to the requirements of section 13(2)(b)(iv) of the Act.

	He denies that he has given any undertaking that unless the negotiations are finalised with Gidani by 31 March 2007, he will enter into negotiations with the applicant.

	He further denies that Mr Chris Nissen is a member of the National Executive Committee of the ANC.

	Prior to deciding to award the licence to Gidani, he was satisfied that Intralot was a fit and proper person to be involved in the operation of the national lottery.

	On the basis of the Boards’ report and his discussions with his director general and the Board, he was satisfied that through its relationship with Intralot, Gidani had access to the necessary knowledge and experience.

	Confirmatory affidavit of Mr Shaheed Alli was attached.

4.	Second respondent’s answering affidavit
	Mr J A Foster, Chairperson of the National Lotteries Board deposed to the affidavit.

	He states that in recommending Gidani as the preferred bidder the most decisive factor was Gidani’s commitment to pay a flat rate of 34% of its turnover to the National Lottery Distribution Trust as opposed to the applicant’s commitment to pay a staggered contribution that was considerably lower, ranging between 27% and 30% depending on turnover.

	The applicant is the current operator of the national lottery, when considering how to evaluate the different bids for the second licence under consideration in this case, the Board decided that in the interest of fairness to all bidders, it would evaluate all the bids, including the applicant’s bid without reference to the applicant’s operation of the national lottery under the current licence.

	The methodology used to evaluate the different bids was put in place by the Board prior to the Board receiving any bids.

	One of the features of the method of evaluation adopted by the Board was the weight given by the Board to the respective bidders relative proposed contribution to the National Lottery Distribution Trust Fund.  The crucial importance of relative contributions to the National Lottery Distribution Trust Fund was emphasised in the RFP.

	He describes in details how the bids were evaluated.

	He further says that on 23 April 2006 the Board agreed to recommend Gidani as the preferred bidder and the applicant as the second preferred bidder.  The decision to identify a second preferred bidder was taken for the following reasons:

(a)	The RFP in paragraph 3.8 provides that should negotiations on the final terms of the licence fail to be concluded to the satisfaction of the Minister, the Minister reserves the right to take up negotiations with any other applicant.

(b)	Given the time pressure on the process, the Board was of the opinion that it would expedite matters if, in the event that negotiations on the final terms of the licence fail to be concluded to the satisfaction of the Minister, another bidder would already have been identified as the next preferred bidder.

(c)	The Board also believed that the announcement of a second preferred bidder would signal to the preferred bidder that the negotiations on the final licence were to be taken seriously and should not drag on endlessly.

	RFP requires all bidders to furnish detailed probity declarations in respect of shareholders, directors, management, employees and subcontractors.

	The Board does not have resources and expertise itself to confirm correctness of the contents of the probity declarations furnished by the bidders, particularly in view of the fact that much of the information concerned, relates to activities outside South Africa.

	Besides engaging the services of Grant Thornton, whose brief was to determine whether the Board’s evaluation process had been properly followed and whether the process was applied in an unbiased, fair and impartial manner, the Board made sites visits.  At all international sites that the Board attended, it enquired from the local regulatory authorities whether they were aware of any probity problems with the relevant bidders.  In all the cases, the regulatory or state authorities in question stated that they were not aware of any probity problems.

	In respect of the two preferred bidders, the Board took the added step of investigating probity issues.  On receipt of the report of the National Intelligence Agency, same was transmitted to the Minister.

	On 25 June 2006 together with Chief Executive Officer of the Board Professor Vevek Ram, they held a meeting with the Minister, who was accompanied by his director general.  At the meeting wide range of issues contained in their recommendations were discussed.  At this meeting, Minister requested them to supply him with details of the key shareholders and personnel of each bidder.

	A follow-up meeting took place on 27 June 2006.

	After the announcement of the two “preferred bidders” several meetings were held with Gidani to negotiate the terms of the licence.  The said negations were concluded on 31 August 2006. 

On 4 September 2006 the Board wrote a letter to the Minister enclosing the Board’s report regarding the said negotiations.

	On 27 September 2006 he attended a meeting with the Minister at which meeting, the proposed licence was discussed.  In addition to the proposed terms of the licence, the “political office bearer” requirement of section 13(2)(b)(iv) of the Act was considered.  By the time of this meeting there had been considerable public controversy about the involvement of ANC National Executive Committee members in the shareholders of Gidani.

	During the meeting and at the request of the Minister, the legal advisor of the Minister, Mr Alli, gave oral advice on the “political office bearer” requirement.  He advised that the involvement of members of he National Executive Committee of the ANC in shareholders of Gidani, did not disqualify it in terms of section 13(2)(b)(iv) of the Act.

	On 29 September 2006 the Minister signed the licence. 

	After the award of the licence, it came to the attention of the Board that Ms Naledi Pandor, the National Minister of Education is a shareholder in Black Management Forum Investment (Pty) Ltd which is a 10% shareholder in the applicant.

	The probity declaration requires the disclosure of some, but by no means not all, persons who have a direct financial interest in the bidder or a shareholder of the bidder.  The identities of minor shareholders in subsidiaries of a bidder are not disclosed in the probity declaration.

	As part of his role in the performance of the evaluation exercise, he perused all the probity declarations of the bidders and satisfied himself that none of the persons shown by the probity declarations who had a direct financial interest in the bidders or their subsidiaries were political office bearers.  He was aware of the position of Messrs Nissen and Sisulu and concluded that they were not political office bearers within the meaning of the Act.

5.	Third respondent’s answering affidavit
	Same was deposed to by Mr Bongani Augustine Khumalo, its Chief Executive Officer and Chairman of the Board of Directors of Gidani.

	He described the shareholders of Gidani, and pointed out inter alia, that Mr Max Sisulu holds 2.5% of the shares of Wheatfield, which is a shareholder of Gidani.

	He further alleges that Mr Nissen is not a shareholder in Gidani.  He holds 8.9% of the shares in VG, which holds 75% of the shares in Vunani which holds 13.5% of the shares in Gidani.  As such, his interest in Gidani is both remote and miniscule (approximately an effective indirect shareholding of 0.9%.  Accordingly Mr Nissen does not hold a “direct financial interest” in Gidani or in a shareholder of Gidani as contemplated in section 13(2)(b)(iv) of the Act.

	In any event, Mr Nissen is not a “political office bearer”.  Contrary to what is alleged in the press reports relied upon by Uthingo, he is not a member of the NEC of ANC.  Mr Nissen holds no position in any elected national or provincial structure of the ANC.

	Mr Sisulu holds 2.5% of the shares in Wheatfields, which in turn holds 13.5% of the shares in Gidani.  As such, his interest in Gidani is both remote and miniscule (approximately an effective indirect shareholding of 0.3375%.  Accordingly Mr Sisulu does not hold a “direct financial interest” in Gidani or in a shareholder of Gidani as contemplated in section 13(2)(b)(iv) of the Act.

	Mr Sisulu is one of 87 members of the ANC’s NEC.  He is not an “official” or “office bearer” of the ANC.  In terms of clause 16 of the ANC’s constitution, its officials are the holders of the following posts: President, Deputy President, National Chairperson, Secretary General, Deputy Secretary General, Treasurer General and National Chaplaincy.  Mr Sisulu does not hold any of the said posts.  Alternatively, the Minister had rational grounds for being satisfied that Mr Sisulu is not a “political office bearer” and there are no grounds for interfering with the Minister’s judgment in this regard.  In any event even if Mr Sisulu is to be regarded as being an “official” of the ANC, his financial interests in Wheatfields and, indirectly in Gidani are of such minute proportions as to render the de minimis principle applicable.

	Intralot Greece, holds 60% shares in Intralot South Africa, which in turn holds 22.5% of the shares of Gidani Intralot Greece or subsidiaries of Intralot Greece have extensive knowledge and experience of operating national lotteries and related games in a wide range of jurisdictions.  Intralot presently operates the national lottery and related games in Bulgaria, Cyprus, Italy, Malta, Moldova, Peru and Poland.

	In terms of an arrangement between Gidani and Intralot Greece, Gidani has unconstrained and continuous access to Intralot Greece’s knowledge and experience.

	The negotiations between Gidani and National Lotteries Board were completed by 31 August 2006. 

	On 26 September 2006 Gidani provided the National Lotteries Board, with a written assurance that no political party or political office bearer has any direct financial interest in Gidani or any of its shareholders.

	The knowledge or experience that will be necessary for Gidani to operate the national lottery will, in large part, but not only, be provided by Intralot South Africa.  As appears from the affidavit of Mr Antonopuolos, the Intralot companies have vast knowledge and experience of operating national lotteries and Gidani will have unconstrained access to such knowledge and experience.

	Gidani provided the National Lotteries Board with detailed information regarding Gidani’s shareholding structure.  The National Lotteries Board had access to information concerning Gidani’s shareholding together with the written assurance given by Gidani that it complied with the requirements of the political shareholding criterion.

	The National Lotteries Board had detailed information concerning the allegations against Intralot and referred said information to the National Intelligence Agency for further investigation.  At the time Minister announced preferred bidders he had all necessary information to make up his mind as required by the Act.

	A supporting affidavit signed by Mr Constantinos Anlonopoulos, Chairman of the Board of directors and Chief Executive Officer of Intralot SA Integrated Systems and Services was attached.  He is also a member of boards of directors of Intracom Holdings SA and Gidani (Pty) Ltd.

	He dealt with the relationship between Gidani and Intralot group of companies and the “fit and proper” status of Intralot, and disputed the allegation that Intralot does not pass the probity test.  He referred to various jurisdictions where Intralot was found to be “fit and proper” to operate a national lottery.

	He also pointed out that as far as probity is concerned, Intralot complied fully with the probity questionnaire which was part of the Request for Proposal, and submitted its probity documents as part of Gidani’s response to the tender.

6.	Applicant’s replying affidavit
	It was deposed to by Dr Isaac Seboko Monamodi

	He sated that the duties imposed on the Minister by the Lotteries Act, particularly those imposed by section 13(2)(b)(iv) are mandatory.  The Minister has no discretion.  If a shareholder in Gidani (or a shareholder in a shareholder of Gidani) is a political office bearer, then the Minister cannot be satisfied that the requirements of section 13(2)(b)(iv) have been met.

	There is nothing contained in the Minister’s reasons that amounts to a statement of compliance with the requirements of the Lotteries Act.

	The National Lottery Board provided the Minister with a memorandum setting out the identities of key individuals in each of the shareholders.  The said memorandum is not a list of the shareholders and it describes key personnel in each of the shareholding entities, but does not contain a list of who the shareholders in those entities are.

	As far as the probity enquiry of Gidani and Intralot is concerned, the Minister relied on what the Board told him about the investigations carried out by National Intelligence Agency.  On the face of the National Intelligence Agency’s report, it is not clear who exactly, was investigated.  In fact, the NIA’s report refers to “security screening” and not probity investigation. 

	The fact that the honourable Minister Pandor is disqualified from being a shareholder of a shareholder in Uthingo was not fully appreciated at the time of the preparation of the bid documents.

	There was no intention on the part of either Uthingo or Ms Pandor to mislead the Board or the Minister.

7.	Supplementary Affidavit – Applicant
	On the day of the hearing, it was brought to the attention of the court that a day prior to the hearing, a notice of motion by the applicant and a supplementary affidavit were inserted in the court file by the applicant’s attorney.

	I was not aware of it until the first respondent’s counsel started arguing.

	In the said notice of motion, the applicant is seeking an order directing that the applicant be granted leave to introduce a supplementary affidavit of Mzolisi Goodman Diliza.

	In the said supplementary affidavit, Mr Diliza alleges that on Friday, 16 February 2007, he purchased 7500 ordinary shares of R1.00 each in BMFI, at a total purchase price in the amount of R7 500.00 from Ms Grace Naledi Pandor.  He took transfer of the said shares on Friday 16 February 2007. 

	The supporting affidavit to the application to file the abovementioned supplementary affidavit of Mr Diliza was deposed to by Dr Monamodi.  In the said supporting affidavit it is staed that the fact of Ms Pandor’s shareholding in BMFI was not known to the directors of the applicant nor its legal representatives prior to the launch of this application or the submission of the bid for the new national lottery licence.  The consultants retained by the applicants to assist in the preparation of he applicant’s bid did not pick up the shareholding of Ms Pandor in BMFI.

	The applicant, acted reasonably and relied on the consultants and the checking exercise the latter was required to perform to ensure the applicant’s compliance with the Lotteries Act.

	Applicant only became aware of the fact that Ms Pandor has a shareholding in BMFI on 19 January 2007, on receipt of the third respondent’s answering affidavit.

	After discussions between applicant and BMFI, Ms Pandor disposed of her shareholding in BMFI few days prior to the hearing of this application.

8.	Third respondent’s affidavit opposing admission of applicant’s supplementary affidavit
	Same was deposed to by Mr Bongani Augustine Khumalo.

In the said affidavit he stated that on Sunday, 18 February 2007 at 15H51 (ie less than 48 hours before the commencement of the hearing) the applicant’s attorneys transmitted a copy of the applicant’s supplementary affidavit together with an application for leave to introduce a supplementary affidavit to the third respondent’s attorneys at 11H20 on 19 February 2007, which was less than 24 hours before the commencement of the hearing.

Third respondent is opposing the introduction of the supplementary affidavit. 

The facts set out in the applicant’s supplementary affidavit, even if they might be true, are irrelevant and do not contribute to the determination of whether applicant has locus standi to bring review proceedings in this case.

When the applicant launched these proceedings it was clearly subject to an impediment to it being licensed to operate a national lottery.

It is highly improbable that the applicant only because aware of the shareholding of Ms Pandor in Black Management Forum Investment when third respondent served its answering affidavit on 19 January 2007.  The fact of Ms Pandor’s shareholding has been a matter of public record since at least November 2006 when various press reports were published in this regard.

The Business Day of 28 November 2006 carried an article dealing with the shareholding of Ms Pandor in Black Management Forum Investments, and the Sunday Times, of the same date also carried a similar article.

The delivery of the applicant’s supplementary affidavit on the eve of the hearing of this matter, left the third respondent with no opportunity to investigate the veracity of the allegations contained in the said supplementary affidavit, nor the proper compliance with the provisions of the Companies Act, 61 of 1973. 

The third respondent has also not been given sufficient time to investigate the circumstances surrounding the alleged sale of the shares of Ms Pandor.

The third respondent will suffer irreparable prejudice if the application of the applicant is granted at this late stage.

9.	Findings
	In the founding affidavit, the applicant states that its locus standi emanates, inter alia, from the fact that it is the current national lottery licence holder, submitted its bid in response to the RFP and was ranked second to the third respondent by the first and second respondents.

	In its answering affidavit the third respondent conceded the fact that the applicant has locus standi to launch the current proceedings.  The first and second respondent did not concede that the applicant has locus standi.

	It is common cause between the parties that Ms Pandor, Minister of National Education was a shareholder in Black Management Forum Investment (Pty) Ltd, and that the latter company is a 10% shareholder in the applicant.

	The said shareholding of the Minister of National Education disqualifies the applicant to be considered as a possible licensee of the national lottery licence.

	A day before the hearing of this application, the applicant served and filled a supplementary affidavit and the third respondent responded thereto.  Counsel for the second and third respondent’s advised the court that they do not object to the filling of the supplementary affidavit, but third respondent’s counsel objected to the filling of the said supplementary affidavit.

	The supplementary affidavit mentioned above, states, inter alia that the Minister of National Education has disposed of her shareholding in Black Management Forum Investment (Pty) Ltd.

	If the supporting affidavit of the applicant is allowed, it will be apparent that the fact which disqualifies the applicant from being a licence holder have been removed.

	The second and third respondents in my view correctly so, did not oppose the admission of the supplementary affidavit in order to allow all relevant facts to be before court so that the court can make a decision based on all known and relevant facts.

	The third respondent, who conceded the locus standi of the applicant, cannot justifiably object to the admission of evidence which confers locus standi on the applicant.

	Besides that the importance and urgency of the case, in my view does not allow the delay which might be caused by the consequences of disallowing the supplementary affidavit and holding that the applicant has no locus standi.

	It is in the interest of the parties, those who are likely to benefit from the new licence and the public at large that this matter should be finalised as soon as possible.

	My view is that the supplementary affidavit should be allowed and consequently, the applicant has locus standi to institute these proceedings.

	Section 10 of the Lotteries Act 57 of 1997 stipulates that:

“The board shall, applying the principles of openness and transparency and in addition to its other functions in terms of this Act –

(a)	advise the Minister on the issuing of the licence to conduct the National Lottery as contemplated in section 13(1) and on any matter contemplated in section 14(2)(g) ...”

	Section 13 thereof provides inter alia as follows:

“(1)	The Minister may, after consultation with the board, issue one licence at one time authorising a person to conduct the National Lottery, ...

(2)	Before a licence is granted under this section ...

	(b)	The Minister shall be satisfied that ...

(iv)	no political party in the Republic or political office bearer has any direct financial interest in the applicant or a shareholder of the applicant.

(3)	In considering whether to grant the licence, the Minister shall take into account ...

(b)	whether any person for whose benefit that business is likely to be conducted, is a fit and  proper person to benefit from it ...”

	Section 1 of Promotion of Administrative Justice Act 300 of 2000, defines an administrative action as any decision taken, or any failure to take a decision by – 

	(a)	an organ of state when – 

(i)	exercising a power in terms of the Constitution or a provincial constitution; or

(ii)	exercising a public function in terms of any legislation.

	Section 6 of the Promotion of Administrative Justice Act supra, deals with judicial review of administrative action and provides inter alia, as follows:

“(2)	A Court or tribunal has the power to judicially review an administrative action if – ...
(b)	a mandatory and material procedure or condition prescribed by an empowering provision was not complied with; ...
(e)	the action was taken ...
(iii)	because irrelevant considerations were taken into account or relevant considerations were not considered;
(iv)	because of the unauthorised or unwarranted dictates of another person or body; ...
			(f)	the action itself ...
				(iii)	is not rationally connected – 
				(aa)	the purpose for which it was taken;
(bb)	the purpose of the empowering provision;
(cc)	the information before the administrator; or
(dd)	the reasons given for it by the administrator;”

	As stated earlier, in his answering affidavit the Minister stated that at his meeting with members of the Board, the said members furnished him with written memorandum setting out the identities of the key individuals in each of the shareholders of the bidders.  He further stated that he considered the memorandum and he was satisfied that none of the persons there listed were “political office bearers”.

	The memorandum referred to in the previous paragraph emanates from the Lottery Board.  The said memorandum clearly does not contain a complete list of all the shareholders, particularly the shareholders in the entities that constitute the applicant.  It has only, the names of what it termed the “key personnel”.

	In Pepcor Retirement Fund v Financial Services Board 2003 (6) SA 38 (SCA) 58, par 47, the learned CLOETE JA said the following:

“In my view, a material mistake of fact should be a basis upon which a Court can review an administrative decision.  If legislation has empowered a functionary to make a decision, in the public interest, the decision should be made on the material facts which should have been available for the decision properly to be made.  And if a decision has been made in ignorance of facts material to the decision and which therefore should have been before the functionary, the decision should [subject to what is said in para (10) above] be reviewable ...”

	In S A Defence & Aid Fund and Another v Minister of Justice 1967 1 SA 31 CPD at p 33G-H the learned CORBETT J said:

“Before the State President is entitled to exercise this power to declare an organisation to be unlawful organisation he must be satisfied that one or more of the conditions set forth in paras (a) to (e) of sec 2(2) obtain.  In order to satisfy himself in this way he must have before him some information relating to such matters as the aims and objects of the organisation in question, its membership ...”

	In Rustenburg Platinum Mines Ltd (Rustenburg Section, Appellant – and Commissioner for Conciliation, Mediation and Arbitration, First Respondent, TJ Moropa NO, Second Respondent and Z Sidumo, Third Respondent, Case Number 598/05 (yet unreported judgment of the SCA,) at p23-24, para 29 the learned CAMERON JA said:

“For what both Carephone and PAJA required the LAC to do was to consider whether the commissioner’s decision to reinstate Sidumo was ‘rationally connected’ to the information before him and to the reasons he gave for it.  ‘Rational connection’ as FRONEMAN DJP explained in Carephone (para 37), in a passage this Court approved and applied in the light of PAJA, that there must be a rational objective basis justifying the connection the commissioner made between the material before him and the conclusion he reached.”

	My view is that for the Minister of Trade and Industry to comply with the requirements of section 13(2)(b)(iv) and (3)(b) of the Lotteries Act mentioned above, must at least be aware or have had information about all the shareholders of the third respondent and all individual shareholders in the entities which constitute the third respondent.  Failure to secure the said information will not enable the Minister to comply with the provisions of the Lotteries Act mentioned above.

The Lotteries Board, when advising the minister as required by section 10(a) of the Lotteries Act perform an administrative act, as the Minister might act in accordance with their recommendation.  Furthermore, when advising the Minister, the Board is bound to apply principles of openness and transparency.  Failure on their part to consider all the relevant and material information prior to advising the Minister, is also subject to judicial review as provided for in section 6(2) of the Promotion of Administrative Justice Act supra.

There are serious shortcomings in the investigation the Board carried out and consequently in the memorandum they presented to the minister.  The Board did not investigate and their memorandum does not contain information (which is material to the Minister and their recommendation) about the individual shareholders of the entities that constitute both the applicant and the third respondent.

Failure to investigate and determine all the individual shareholders in the entities which constitute both the applicant and third respondent resulted in the Board recommending the applicant as the “second preferred bidder” despite the fact that one of the shareholders in Black Management Forum Investment (Pty) Ltd is a “political office bearer” who has a direct financial interest in a shareholder of the applicant.

The Minister and the National Lotteries Board failed to consider or take into account a mandatory and material information prescribed by section 13 of the Lotteries Act, namely the shareholders in the entities which constitute the applicant.

Furthermore, irrelevant considerations, namely “key personnel” were taken into account.

This court is entitled to set aside the decision of the minister as provided for in section 6(2)(b) and (e)(iii) of the Promotion of Administrative Justice Act supra.

In the light of the finding I have made above, I do not believe that it is necessary to deal with the other arguments raised in this matter.  

The court therefore makes the following order:

1.	The decision of the first respondent to award to Gidani a licence issued in terms of section 13 of the Lotteries Act 57 of 1997 to conduct a national lottery is set aside.

2.	First, second and third respondents, jointly and severally are to pay the costs of the applicant, which costs will include costs consequent upon the employment of two counsel.

							W L SERITI
					JUDGE OF THE HIGH COURT

				I agree

JUDGE OF THE HIGH COURT
37942/2006
Heard on: 					06/02/2007
For the Applicant:				Adv J J Gauntlett SC & B Leach
Instructed by:				Werksman Inc, Pretoria
For the 1st and s2nd Respondents:	Adv M Kuper SC
Instructed by:				State Attorney, Pretoria
For the 3rd Respondent:			D N Unterhalter SC & 
N H Maenetje
Instructed by:				Bowman Gilfillan Inc, Pretoria
Date of Judgment:				05/03/2007