Organisation Undoing Tax Abuse v Minister of Transport and others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Zondo CJ, Baqwa AJ, Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mbatha AJ, Mhlantla J, Rogers J and Tshiqi J
• Judgment Date: 12 July 2023
• Citation: 2023 JDR 2533 (CC)
• Hearing Date: 15 November 2022
• Docket Number: CCT 19/22
• Court: Constitutional Court

Zondo CJ:

Introduction

[1]

These are confirmation proceedings arising from a judgment of Basson J of the Gauteng Division of the High Court, Pretoria, (High Court) which concluded that the Administrative Adjudication of Road Traffic Offences Act [2] (AARTO Act) and the Administrative Adjudication of Road Traffic Offences Amendment Act [3] (AARTO Amendment Act) were inconsistent with the Constitution [4] and, therefore, invalid. This was pursuant to an application for such an order brought by the Organisation Undoing Tax Abuse (OUTA). The commencement date of the AARTO Amendment Act has not yet been proclaimed.

[2]

Subsequent to the handing down of the judgment, OUTA applied to this Court for an order confirming the order of invalidity of the High Court. The Minister of Transport (Minister) and the Road Traffic Infringement Agency (RTIA) unsuccessfully opposed OUTA’s application in the High Court. The Minister and RTIA appeal the order of the High Court and oppose OUTA’s application for its confirmation. The RTIA is an entity established by the AARTO Act to give effect to the objects of that Act and to enforce its scheme. The Road Traffic Management Corporation (RTMC), an entity

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established under section 3 of the Road Traffic Management Corporation Act, [5] was admitted as the fifth respondent in the confirmation proceedings. The City of Cape Town was admitted as an amicus curiae (friend of the court).

High Court

[3]

OUTA instituted an application in the High Court in which it challenged the constitutional validity of the AARTO Act and the AARTO Amendment Act and sought an order declaring that those Acts were inconsistent with the Constitution and, therefore, invalid.

[4]

There were two bases for OUTA’s constitutional challenge in respect of the AARTO Act. The one was that the subject matter of the AARTO Act fell within the functional area of the exclusive legislative competence of the provincial sphere of government. This would mean that the AARTO Act was inconsistent with the Constitution because it would have been passed by Parliament which had no legislative competence to pass it. The other was that the AARTO Act encroached on the exclusive executive competence of the local sphere of government and that this rendered the AARTO Act inconsistent with the Constitution because Parliament had no competence to pass a law that usurped the executive functions of municipalities.

[5]

OUTA also contended that, if the AARTO Act was not inconsistent with the Constitution, then at least section 17 of the AARTO Amendment Act, which amends section 30 of the AARTO Act, was inconsistent with the Constitution in so far as it prescribed that the service of documents under the AARTO Act could be effected not only by personal service or registered mail but also by ordinary postage or electronic service. The argument was that the consequences of a failure to comply with, for example, the infringement notice and infringement order under the AARTO Act were so serious that service should be effected only by way of personal service or registered mail.

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[6]

The Minister and the RTIA opposed OUTA’s application in the High Court. They contended that the AARTO Act fell within the concurrent legislative competence shared between Parliament and the provincial sphere of government. They contended, too, that the AARTO Act did not take away any executive function or powers from the local sphere of government nor did it encroach on those powers in any way.

[7]

The High Court concluded that the AARTO Act and the AARTO Amendment Act “unlawfully intrude upon the exclusive executive and legislative competence of the local and provincial governments, respectively, and as such the two Acts are unconstitutional”. The High Court also stated that the AARTO Act deprived municipalities of their exclusive traffic law enforcement powers in respect of traffic at the municipal level and in respect of municipal roads. Basson J stated that “those exclusive legislative and executive competences are effectively rendered meaningless”.

[8]

The High Court adopted an approach to the interpretation of Schedules 4 and 5 which was urged upon it by counsel for OUTA and called “bottom up”. That approach entailed that, in determining the scope of the functional areas listed in Schedules 4 and 5, referred to later in this judgment, one needed to start with first carving out those functional areas within the exclusive legislative and executive competences and then move up to provincial and, ultimately, national spheres of government. The High Court rejected a contention by the Minister and the RTIA that the AARTO Act dealt with matters which fell under the functional area of “road traffic regulation” in Part A of Schedule 4. In support of its rejection of this contention, the High Court stated that the contention:

(a)

could not be correct and had been rejected by this Court in GDT; [6]

(b)

interpreted the functional competences conferred in Schedule 4 in isolation;

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(c)

ignored the exclusive competences conferred upon provinces and local government;

(d)

effectively deprived provincial and local government of legislative competence over a functional area which was reserved exclusively for those two government spheres; and

(e)

deprived municipalities of their exclusive executive traffic law enforcement functions and rendered their exclusive legislative and executive competences meaningless.

[9]

The High Court adopted an approach referred to as the “bottom-up” approach. This approach, in essence, requires a court confronted with such a matter to determine the functional areas that fall within the exclusive legislative competence of provinces, i.e. Schedule 5. Once those have been determined, then whatever remains is said to fall under concurrent national and provincial legislative competence under Schedule 4. The Court based this approach on the following passage of this Court’s judgment in Liquor Bill. [7]

“It follows that, in order to give effect to the constitutional scheme, which allows for exclusivity subject to the intervention justifiable under section 44(2), and possibly to incidental intrusion only under section 44(3), the Schedule 4 functional competences should be interpreted as being distinct from, and as excluding, Schedule 5 competences. That the division could never have been contemplated as being absolute is a point to which I return in due course.” [8] (Emphasis added.)

[10]

However, Liquor Bill is no authority for this “bottom-up” approach. The above passage must be understood in the context of the entire judgment. In particular, it must be understood in the light of the overall reasoning of the Court. In Liquor Bill this Court determined the scope of the functional area listed under Schedule 4 (via a process of interpretation of the wording of the functional area), without “carving out” - as the High

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Court would have us do - areas of exclusive provincial competence and assigning the remaining areas to the national sphere of government. After reaching its conclusion on the scope of the functional area, this Court remarked:

“It is sufficient to say that although our Constitution creates exclusive provincial legislative competences, the separation of the functional areas in Schedules 4 and 5 can never be absolute . . . That Schedule 4 legislation may impact on a Schedule 5 functional area finds recognition on one reading of section 44(3). Whatever its true reading this provision was not designed to undermine the Schedule 5 competences. They retain their full meaning and effect, except where encroachment by national legislation would in fact be ‘reasonably necessary for, or incidental to’ the effective exercise of a Schedule 4 power. Since however no national legislative scheme can ever be entirely water-tight in respecting the excluded provincial competences, and since the possibility of overlaps is inevitable, it will on occasion be necessary to determine the main substance of legislation, and hence to ascertain in what field of competence its substance falls; and, this having been done, what it incidentally accomplishes.” [9] (Emphasis added.)

[11]

The above-quoted passage, viewed in the light of what this Court actually did in Liquor Bill, makes it plain that the Liquor Bill case is not authority for a bottom-up approach. Instead, the case is authority for a holistic approach that considers:

(i)

the text of the Schedule,

(ii)

the substance and purposes of the legislation, and

(iii)

whether the subject matter of the legislation is one which requires intra- or inter-provincial regulation - all the while remaining cognisant of the need not to impair or undermine the competence of the provincial and, where applicable, local sphere of government.

[12]

There is nothing in the wording of Schedule 4 that makes it contingent upon or dependent on Schedule 5. The only internal qualifiers or “limiters” of what national government can and cannot do in relation to the functional areas listed under Schedule

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4 is the introducing sentence to Part B of Schedule 4. That qualifier applies in respect of the functional areas listed under Part B of Schedule 4. Had the drafters of the Constitution intended to assign powers in the manner adopted by the High Court, they would not have had to draft Schedule 4 - they could have simply said “national and provincial spheres of government shall have concurrent competence in respect of the functional areas that are not listed in [the current Schedule 5]”. That is, of course, not the case.

[13]

The High Court concluded that the AARTO Act and the AARTO Amendment Act were inconsistent with the Constitution and declared them invalid and ordered the...