Minister of Home Affairs and Another v American Ninja IV Partnership and Another

• Jurisdiction: South Africa
• Citation: 1993 (1) SA 257 (A)

Minister of Home Affairs and Another v American Ninja IV Partnership and Another
1993 (1) SA 257 (A)

1993 (1) SA p257

Citation	1993 (1) SA 257 (A)
Court	Appellate Division
Judge	Corbett CJ, Botha JA, Nestadt JA, F H Grosskopf JA, Harms AJA
Heard	August 17, 1992
Judgment	September 22, 1992

Flynote : Sleutelwoorde B

State — Contracts by — Undertaking by State to pay subsidies to producers of locally made films — Particulars of scheme set out in departmental circular — After application by producer for registration of C film in terms of circular, department concerned issuing certificate entitling producer to subsidy — Relationship between State and producer essentially consensual in nature and terms of agreement between them contained in circular — State's subsidy quid pro quo for obligations undertaken by producer, such as production and marketing of registered D film and compliance with criteria specified in circular — Clear from provisions of circular that necessary animus contrahendi also present — Agreement contained in circular having contractual force and State bound thereby.

State — Contracts by — State's power to contract — In absence of E particular enabling statutory provision, source of State's power the common law prerogative — Where such contract concluded State liable under State Liability Act 20 of 1957.

Headnote : Kopnota

In the absence of any particular enabling statutory provision, the source of the State's power to contract is the common law prerogative. Where such F a contract is concluded the State exercises its powers with the concurrence of the persons affected and is liable under the State Liability Act 20 of 1957.

In order to encourage the production of locally made feature films, the Government decided to grant State financial assistance to the film industry, which assistance comprised tax concessions and the payment of subsidies to producers. To this end a circular, which incorporated the particulars of these benefits as well as the requirements which had to be G complied with in order to qualify for them, was issued

1993 (1) SA p258

A by the Ministry of Home Affairs. The respondents, each of them alleging that it had produced a film which qualified for these benefits, brought an application in a Provincial Division for an order compelling the first appellant to pay them the prescribed subsidies, which the first appellant had refused to do. The appellants opposed the relief sought on the basis that they had incurred no liability in terms of the circular or otherwise. The respondents contended that the circular contained an undertaking by the State to pay the subsidies in question; accordingly, the State had B become contractually bound to the respondents to do so. A Provincial Division granted the declarator sought on this basis, and the central issue in the appeal (leave having been granted by the Court a quo) was whether the finding was correct. The appellants contended that the State at all times retained a discretion whether or not to pay the subsidy, the circular having been a departmental regulation informing potential producers under which conditions the first respondent would consider C applications for a subsidy. According to the appellants, the true juristic character of the relationship between the parties, although containing elements of consensus, was more in the nature of a unilateral or authoritative act on the part of the State, so that the consent of the respondents played no role, and no liability to pay the subsidy arose unless and until the State decided to do so. What was envisaged, according to the appellants, was a 'two-tiered' system of registration: the D acceptance of the application for registration (the 'initial registration') was never intended to bring about a contract; it was only intended to 'give the State an idea of the extent of probable applications'; thereafter an applicant's claim had to be quantified and verified; if it was accepted, a second registration took place; only then would a contract on the terms specified in the circular eventuate. As the State had decided not to pay the subsidies claimed, it could not be held liable, there having been no second registration.

E Held, that the appellants' argument that the granting of the subsidies in terms of the circular constituted a unilateral act on the part of the State could not be sustained: the tenor of the relationship between the appellants and the respondents was essentially a consensual one involving a commercial transaction.

Held, further, that this relationship arose and could only arise from agreement (the terms of which were contained in the circular): in the F context used the word 'subsidy' denoted not a unilateral grant but a quid pro quo for the obligations undertaken by the producer, such as the duty to produce and market the film and to comply with the criteria specified in the circular.

Held, further, as to whether the agreement had been entered into with the necessary animus contrahendi, that it appeared from the terms of the circular that there was an existing promise by the State (albeit in relation to a performance in the future) that a tax-free subsidy 'will be G paid', as well as a series of firm obligations on the producer, which arose upon registration of the film: a case, thus, of mutual obligations by both parties to the agreement or, in other words, a bilateral contract.

Held, further, that the fact that there was an intention that the agreement must have contractual force was further demonstrated, inter alia, by the following provisions of the circular: once the film was registered, the subsidy rates could not be reduced unless the producer agreed thereto; the right to amend the terms of the circular was subject to the rights of the producer whose film had already been registered; the H official in charge of film subsidy administration had a right to repayment of any overpaid subsidies; the possibility of Court proceedings was contemplated; and the existence of an arbitration clause.

Held, further, that the appellants' contention that on a proper interpretation of the circular the State's obligation to pay subsidies arose only if and when a producer's duly documented claim was accepted and that if, in its discretion, the State decided not to accept the claim, no liability on its part arose had to be rejected because (1) the I 'two-tiered' system of registration contended for was incompatible with the terms of the circular, which referred only to a single registration, and (2) it failed to take account of the commercial realities of the transaction: no sensible businessman would have entered into the agreement evidenced by the circular unless the State were bound by its undertaking to pay the subsidies in question.

Held, accordingly, that in the case of each of the appellants an agreement had been entered into with the State on the terms set out in the circular; J that this agreement

1993 (1) SA p259

A had contractual force; and that it was therefore binding on the State. Appeal dismissed with costs.

The decision in the Transvaal Provincial Division in American Ninja IV Partnership and Another v Minister of Home Affairs and Another confirmed.

Case Information

Appeal from a decision in the Transvaal Provincial Division (Spoelstra J). The facts appear from the judgment of Nestadt JA. B

A Mendelow QC (with him H J S Meyer) for the appellants referred to the following authorities: Administrator, Transvaal, and Others v Traub and Others 1989 (4) SA 731 (A) at 758F-G; Fellner v Minister of the Interior 1954 (4) SA 523 (A); Estate Breet v Peri-Urban Areas Health Board 1955 (3) SA 523 (A); Mustapha and Another v Receiver of Revenue, Lichtenburg, and C Others 1958 (3) SA 343 (A) at 350B, 356E-F; Pahad v Director of Food Supplies and Distribution 1949 (3) SA 695 (A) at 711; Neebe v Registrar of Mining Rights 1902 TS 65 at 85; Ondombo Beleggings (Edms) Bpk v Minister of Mineral and Energy Affairs 1991 (4) SA 718 (A) at 725E-G; Publications Control Board v William Heinemann Ltd 1965 (4) SA 137 (A) at 148E-F, D 149C-D; R v Ndhlovu 1979 (4) SA 208 (SR) at 215A-B; Sachs v Dönges NO 1950 (2) SA 265 (A) at 307, 311, 314, 315; Sasseen v Minister of the Interior 1942 CPD 546; Boerne v Harris 1949 (1) SA 793 (A) at 799-800; Godfrey v Paruk 1965 (2) SA 738 (D) at 743; Plum v Mazista Ltd 1981 (3) SA 152 (A) at 164A; F Kleinwort Benson Ltd v Malaysia Mining Corporation E (MMC) [1989] 1 All ER 785 (CA) at 797e-g, 797j; Swart v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) at 202C; Vagar (t/a Rajshree Release) v Transavalon (Pty) Ltd (t/a Avalon Cinema) 1977 (3) SA 766 (W) at 775C; Video Rent (Pty) Ltd and Another v Flamingo Film Hire 1981 (3) SA 42 (C) at 46G-47C; Britten and Others v Pope 1916 AD 150 at 159-60; Johannesburg Town Council v Norman Anstey & Co 1928 AD 335 at 340; Richardson and F Others v Administrator, Transvaal 1957 (1) SA 521 (T) at 530A-C; Pietermaritzburg City Council v Local Road Transportation Board 1959 (2) SA 738 (N) at 774C-G; Waterfalls Town Management Board v Minister of Housing 1957 (1) SA 336 (SR) at 342F; Catholic Bishops Publishing Co v State President and Another 1990 (1) SA 849 (A); Administrator, Cape, and G Another v Ikapa Town Council 1990 (2) SA 882 (A); Administrator, Transvaal, and Another v J van Streepen (Kempton Park) (Pty) Ltd 1990 (4) SA 644 (A); Khan t/a Khan's Motor Transport v Chairman, Pietermaritzburg Local Road Transportation Board 1990 (3) SA 234 (N); O'Reilly v Mackman [1983] 2 AC 237; Badenhorst v Van Rensburg 1986 (3) SA 769 (A) at H 777I-778C; Tamarillo (Pty) Ltd v B N Aitken (Pty) Ltd 1982 (1) SA 398 (A) at 432; Resisto Dairy (Pty) Ltd v Auto Protection Insurance Co Ltd 1963 (1) SA 632 (A) at 644; Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T) at 1163-5...