Ithuba Holdings (Pty) Ltd v Lottostar (Pty) Ltd and Others (A46/2020) [2021] ZAMPMBHC 39 (30 August 2021)

Key Facts

Issues

• The lawfulness of Lottostar's business activities in accepting bets on the outcome of lotteries under Sections 57(1)(b) and 57(2)(g) of the Lotteries Act.
• Whether the Court a quo was correct to characterize the dispute between Ithuba and the Board as an intergovernmental dispute under the Framework Act and Constitution.
• If the Court a quo's decision on ADR compliance is incorrect, whether this Court should entertain the remaining preliminary point of non-joinder and/or the merits instead of referring the matter back to the Court a quo.
• The correctness of the Court a quo's decision to uphold the preliminary objection that organs of state should resolve disputes via ADR under Section 41(3) of the Constitution and Framework Act prior to approaching courts.

Holdings

• The Court a quo wrongly directed the parties to resolve the dispute under the Framework Act's alternative dispute resolution mechanisms. The High Court found that since the dispute is not intergovernmental, the Framework Act's procedures are inapplicable.
• The Court a quo incorrectly classified the National Lotteries Commission and Ithuba as Organs of State. The High Court held that these entities are not Organs of State as defined under the Framework Act, which excludes public institutions not within the national, provincial, or local spheres. Therefore, the requirement to resolve disputes through Section 41(3) of the Constitution and the Framework Act did not apply.
• The appeal is upheld, and the Court a quo's order is set aside. The High Court substituted the order to declare Lottostar's betting scheme unlawful, issue an interdict against such activities, and direct payment of costs to Ithuba. The costs include those from the leave to appeal application in both the Court a quo and the SCA.
• The Court a quo mischaracterized the dispute between Ithuba and Lottostar as an intergovernmental dispute. The High Court determined that both parties are private entities, and thus, the dispute does not fall under intergovernmental relations as per the Constitution and Framework Act.
• The High Court held that Lottostar's business activities of accepting bets on lottery outcomes are unlawful. This is because such activities violate Sections 57(1)(a), (b), and 57(2)(g) of the Lotteries Act, which criminalize unauthorized lottery betting. The court emphasized that Lottostar's conduct undermines the exclusive licensing scheme and the National Lottery's contribution to the Trust Fund.

Remedies

• Lottostar, the Board, and Betting World are directed to pay Ithuba's costs, including those of the application for leave to appeal in the Court a quo and in the SCA, as well as costs consequent upon the employment of two counsel.
• Lottostar is interdicted from offering bets, whether or not of a fixed-odd nature, on the outcome of any lottery.
• The scheme, plan, arrangement or system of Lottostar whereby it offers bets on the outcome of lotteries is declared unlawful.

Legal Principles

• The court applied a purposive interpretation of the Framework Act and Section 239 of the Constitution to determine the status of the Commission and Ithuba as organs of state. It emphasized statutory objectives over literal definitions, concluding that the Commission’s role as a public institution excluded it from being an organ of state under the Framework Act.
• The court addressed the non-joinder issue, determining that a declaratory order against Lottostar would not bind other bookmakers holding provincial licenses. It concluded the relief sought was in personam, not in rem, and thus no broader res judicata effect applied.
• The court assessed whether the Court a quo erred in upholding the preliminary objection under Section 41(3) of the Constitution and the Framework Act, focusing on the requirement for organs of state to resolve disputes via alternative mechanisms before litigation. It concluded the Commission and Ithuba are not organs of state, rendering Section 41(3) inapplicable.

Precedent Name

• Henri Viljoen (Pty.) Ltd. v Awerbuch Brothers
• ABSA Bank Limited v Naude NO and others
• Tshabalala v Johannesburg City Council
• AAA Investments (Pty) Ltd v Micro Finance Regulatory Council and Another
• United Watch & Diamond Co (Pty) Ltd v Disa Hotels Ltd and Another
• Milani And Another v South African Medical And Dental Council And Another
• Airports Company South Africa v Big Five Duty Free (Pty) Limited and Others
• Independent Electoral Commission v Langeberg Municipality
• Allpay Consolidated Investments Holdings (Pty) Ltd v Chief Executive Officer, South African Social Security Agency
• Churchill v Premier of Mpumalanga and Another
• Education for all and Others v Minister of Basic Education and Others

Cited Statute

• Intergovernmental Relations Framework Act, 13 of 2005
• Lotteries Act, 57 of 1997
• Superior Courts Act, 10 of 2013
• Constitution of the Republic of South Africa 1996

Judge Name

• Mashile J
• Roelofse Aj

Passage Text

• If one has regard to the meaning of an Organ of State as described above, it is manifest that the Commission is not an Organ of State. That conclusion is dispositive of the argument of Lottostar and the Board that for purposes of operating the national lotteries, Ithuba is an extension of the Commission as it is an entity through which the Commission discharges or performs its public duties.
• The conduct of Lottostar is in contravention of the provisions of Section 57(1)(a) and (b) and 57(2)(g) of the Lotteries Act. In the result, the appeal is upheld and I propose the following order: 1.1 The scheme... is declared unlawful; 1.2 Lottostar is interdicted...; 1.3 Lottostar, the Board and Betting World are directed to pay the costs of Ithuba.
• The Court a quo has erred: 51.1 By regarding both the Commission and Ithuba as Organs of State; 51.2 That Ithuba was involved in an intergovernmental dispute with the Board; 51.3 By directing the parties to endeavour to resolve the dispute between them in terms of the dispute mechanisms prescribed in the Framework Act.