The Yeoville Judgment

Thabo Thlobelo, Abantu Tobacco & Liquor Laws

The outcome of the long-awaited judgement on the status of shebeens in Gauteng was delivered in the South Gauteng High Court on 1 November 2017, eight months after the matter was heard by the court.

The court session was very short. Justice Motojane delivered the judgment by reading an order as follows:

a)     The decision of the MEC to promulgate the provisions of the Gauteng Liquor Regulations and shebeen licences published under government notice 586 in Provincial Gazette 56, dated 01 March 2013, is reviewed and set aside.

The outcome of the long-awaited judgement on the status of shebeens in Gauteng was delivered in the South Gauteng High Court on 1 November 2017, eight months after the matter was heard by the court.

b)     The provisions of the regulations are declared ultra vires and therefore invalid.

c)      The declaration of invalidity shall not have a retrospective effect 

d)     The declaration of invalidity is suspended for two years to allow the defects to be remedied.

The big question to a liquor trader or a shebeen permit holder is how is the status or validity of the shebeen permit affected by the judgment, if it is indeed affected?

The answer to the question is that yes, the court had in effect declared the entire permit regime to have been invalid. In the words of the court: “It is so that the liquor trading by shebeen owners would be unlawful from the moment the order is granted and because of the illegality anyone running a shebeen will be prosecuted.”

These words must have been the most difficult to read for any shebeen permit holder in Gauteng. More than 15 000 shebeen permit holders would have been affected by the declaration of invalidity without the suspension of that invalidity by the court for two years.

On the papers, all parties accepted that the existence of shebeens are a reality in South Africa and that the Gauteng Liquor Act envisages that the regulations be promulgated, according to which shebeens will be “phased in” according to the dictates of the Gauteng Liquor Act. The court held that similar regulations must be put in place, provided there is public notification and public participation.

Background to the case

During November 2004, the MEC for Economic Development in Gauteng published regulations under section 141 of the Gauteng Liquor Act 02 of 2003, to regulate the sale and consumption of liquor at shebeens and to identify all shebeens operating in Gauteng. Any person running a shebeen in Gauteng could apply to the MEC for a shebeen permit to operate it. An applicant did not have to meet any substantive requirement, as would be the case in applying for a liquor licence under the Act, unless for an application of a shebeen permit, a proper completion and submission of form 10, which was published in the 2004 regulation.

Regulation set in place an interim system to facilitate the transition of regulation of shebeens from a permit system to a more to a more formalised licensing system, to be determined by the MEC in due course.

Because of a shared number of applications for permits, and upon realisation that the period set aside for applications was inadequate, the MEC issued subsequent notices of extended periods to enable as many people to apply as possible.

On 1 March 2013, the MEC published the Gauteng Liquor Regulations 2013 on shebeen licences.

On 10 May 2013, the MEC published a notice concerning the roll-out of shebeen licences in various administrative areas within Gauteng, to submit applications for the conversion of shebeen permits to shebeen licences.

It is important to note that the word “shebeen” is defined in the Act to mean “any unlicensed operation whose primary business is liquor and sells less than 60 cases of beer per week”. Shebeens are excluded in the kinds of licences contemplated by section 28 of the Gauteng Liquor Act.

The Act seeks to bring the shebeens, which have been previously unregulated, within the regulatory scheme of the Act. The Act provides in section 141(1)(m) that the MEC may make regulations regarding a “phased-in” approach, whereby shebeens would be given an opportunity to comply with the Act.

Matters in dispute

The applicants, Yeoville Ratepayers’ Association, contended the following:

1.      The MEC does not have powers under the Gauteng Liquor Act to convert permit to licences.

2.      The Act demands public notification and public participation before an administrative decision is taken or an administrator exercising public function or public power, to give members of the public an opportunity to be notified and participate in an administrative action or when decisions of an administrative nature are taken.

3.      Decisions taken by the MEC on his respective regulations on shebeens be reviewed and set aside.

The respondents, however, argued, among other, that the provision to provide notice and to give public participation was not intended for valid shebeen permit holders, but for new licence applicants.

The respondents further argued that the MEC is within his powers in accordance to the provisions of section 28(1) (c), which vests the powers to the board to “issue any other licence that the board, in its discretion, will deem appropriate”. The respondents further contested that the MEC is acting within his regulatory powers, and delegated authority according to section 141(1)(m).

Decision of the court

The court held that the MEC acted outside the scope of the empowering statutory provision, namely section 141(1)(m) of the Act, and the promulgation of the regulations falls to be reviewed, and the MEC was found to have acted outside of the powers vested in him.

The court held further that there would be no harm if the regime applicable under the regulations is permitted to continue to exist for at least two years, to enable the MEC and other relevant authorities to promulgate regulations that achieve the legitimate aims of “phasing in” the licensing of shebeens under the Act.   

At the heart of the court’s reasoning is the vagueness of the regulations insofar as compliance with the Act is concerned. The court held that “to avoid conflict with the stated purpose of the Act, there has to be a process of notification and participation of interested persons during the process of conversion so that the appropriate conditions can be imposed where necessary”.

The judge further held that the decision to publish the regulations and conversion of permits to licences without public notice and public participation was unreasonable. The court held that no reasonable decision-maker could have decided to promulgate the rules that run counter to the very purpose of their promulgation. The court further held that the board cannot invoke section 28(1)(c) to justify conversion of shebeen permits to shebeen licences, in that by not providing for public notification and public participation, the MEC has created a new category of licence for shebeens, the one that could not fall under section 28(1)(c), as such licences, in the court’s view, also require public notification and public participation.

The court concluded that the regulations are in direct conflict with the stated purpose of the Act and are accordingly invalid.   

The real question in the Yeoville case was indeed to what extent should the MEC have complied with the Act. The court had essentially found the MEC to have fallen short of the Act in relation to the extent which the promulgations had complied with the Act. 

We now know that the regulations had fallen short of making a provision of notice of application for a licence as contemplated by section 24, as well as provision for objections as contemplated by section 25 of the Gauteng Liquor Act. Furthermore, regulation 7(1) provides that the board must, when considering the application, take into cognisance “whether the premises are suitable for the purpose for which they will be used as per the inspectorate report.”

Again, the regulation lacks clarity on the meaning of suitability of the premises.

Regulation 12 lists the general categories of conditions of the Gauteng Liquor Act that apply to shebeen licences, without mentioning which specific sections apply. If we take suitability of premises to mean description of the nature of premises, as provided by section 41 of the Gauteng Liquor Act, then almost all applications stand to have been rejected by the Gauteng Liquor Board. 

This will be mainly because of the threshold of the requirements of section 41(5). This section requires that “premises shall at all times comply with all laws, metropolitan or district council by-laws and regulations…” as the court has acknowledged the fact that most shebeens are operated in residential areas, almost all town planning schemes preclude the sale of liquor in residential areas.

Section 23(4) of the Gauteng Liquor Act further compounds the problem of substantively complying with the requirement of the Gauteng Liquor Act by shebeens. The section requires that “applications for taverns, pool club, pub, and liquor store and night club liquor licences shall also be accompanied by unequivocal approval by the relevant department of the relevant metropolitan or district council, in addition to any zoning or planning or environmental laws requirements”. Again, a large number of shebeens operate in premises that are not zoned for the nature of the business of selling liquor.

Even on the generous and broad interpretation of these two requirements, it seems impossible for shebeen owners to pass this requirement because of their location. The only way out of these requirements for shebeen owners is through applying for special consent use to the relevant municipalities, of which applications are not only cumbersome and expensive, but also technical, which necessitates further assistance and in many cases, requires more money.  

The court has held that it is not clear to what extent the shebeen licence holders are required to comply with the Gauteng Liquor Act. The Gauteng Liquor Board is tasked with a very delicate balancing act: on the one hand, to enable as many shebeen permit holders to be brought within the regime of all kinds of licences as contemplated by the Gauteng Liquor Act, and on the other, to comply substantively with the requirements of the Act so that whatever measure the MEC takes will not be found by the court to be invalid and unlawful.

This balancing act by the MEC through the Gauteng Liquor Board, in the phasing in of shebeens into the Gauteng Liquor Act, will require the collaboration of all stakeholders, including liquor traders’ associations; relevant municipal departments dealing with town planning and spatial planning; law enforcement, such as the South African Police; metropolitan police; liquor inspectors; interested members of society; advocacy groups dealing with alcohol abuse; and all other interested parties affected by the trade of liquor in Gauteng.