Recycling and Economic Development Initiative of South Africa NPC v Minister of Environmental Affairs

• Jurisdiction: South Africa
• Judge: Cachalia JA, Saldulker JA, Van Der Merwe JA, Molemela JA and Rogers AJA
• Judgment Date: 24 January 2019
• Citation: 2019 (3) SA 251 (SCA)
• Docket Number: 1260/2017 [2019] ZASCA 1
• Hearing Date: 24 January 2019
• Counsel: G Budlender SC (with L Kelly) for the appellant in case Nos 1260/17 and 188/18 JG Dickerson SC (with K Reynolds) for the appellant in case Nos 1279/17 and 187/18. G Woodland SC (with J Rust) for the respondent in case Nos 1260/17 and 188/18. J Muller SC (with B Swart SC and J Myburgh) for the respondent in case Nos 1279/17 and 187/18.
• Court: Supreme Court of Appeal

Cachalia JA (Saldulker JA, Van der Merwe JA and Rogers AJA concurring):

Introduction H

[1] This appeal arises from two consolidated applications in the Western Cape Division of the High Court, Cape Town, [1] in which two solvent companies were placed under final liquidation at the instance of the Minister of Water and Environmental Affairs. [2] For convenience I shall hereafter refer to the said Minister as 'the Minister' or as the 'Environment I Minister' where it is necessary to distinguish between ministers of

Cachalia JA (Saldulker JA, Van der Merwe JA and Rogers AJA concurring)

different departments. The first, Recycling and Economic Development A Initiative of South Africa (Redisa), is a non-profit company; and the second, Kusaga Taka Consulting (Pty) Ltd (KT), a private company. They are the appellants. The Minister opposes both appeals.

[2] Redisa was responsible for the implementation of a waste-tyre B recycling scheme — the only one of its kind in South Africa — under the 'Redisa Plan' since 2012. [3] The Redisa Plan entailed the creation and management of a national network for collecting waste tyres, storing them and delivering them to recyclers for processing. This was envisaged as the beginning of a nascent waste-tyre recycling industry, and the foundation of secondary industries for the use of products created by C recyclers. The Redisa Plan was funded from a waste tyre management fee that tyre manufacturers paid to Redisa in terms of the Waste Tyre Regulations [4] promulgated under the Environment Conservation Act 73 of 1989 (ECA). The operative provisions of the ECA have been repealed, but the regulations remain valid under the National Environmental Management: Waste Act 59 of 2008 (the Waste Act). They D provide for the preparation, content, approval and review of waste-tyre management plans, referred to as 'integrated industry waste tyre management plans', which are 'industry waste management plans' under the Waste Act. Their purpose is to control the management of waste tyres and direct the manner in which waste tyres are to be collected and remediated. E

[3] On 29 November 2012 the Minister approved an 'industry waste tyre management plan' that Redisa had conceptualised and submitted to her under the Waste Act. This is the 'Redisa Plan', hereafter 'the Plan'. It was the product of several years of development by its creators and was F published in the Government Gazette on 30 November 2012. As the Minister states, it is or was, at the time of the proceedings in the court a quo, 'currently the only waste management measure in place for the management of waste tyres'. The Plan operates indefinitely, subject to a review conducted every five years. The first was in November 2017. G Redisa contracted KT to manage the implementation of the Plan. The Minister approved all of this and publicly commended its implementation 'as an important case study on how [to] . . . turn waste to worth'.

[4] But, three weeks after making this statement, on 1 June 2017, the H Minister sought and obtained an ex parte 'extremely urgent' provisional order, first against Redisa and then against KT on the same basis a week later. When Redisa and KT learnt of this, they applied, also urgently, for

Cachalia JA (Saldulker JA, Van der Merwe JA and Rogers AJA concurring)

the A provisional orders to be discharged. The applications were heard on 5 and 6 July 2017 and judgment was given on 15 September 2017, finally winding-up both entities on 'just and equitable' grounds. In addition, the court ordered that their assets be distributed to the Waste Management Bureau (WMB), a public body established under the Waste Act. In this regard the court a quo seems to have overlooked the fact that the B Minister had abandoned this extraordinary relief at the beginning of the hearing. The order was patently unlawful as it amounted to an arbitrary deprivation of Redisa's and KT's assets in violation of s 25 of the Constitution. The orders were formally abandoned after the judgment.

[5] C In finding that it was just and equitable to wind up the appellants, the court a quo upheld the Minister's broad contention that certain of Redisa's directors had not disclosed their relationship with or significant shareholding in KT and that this had enabled them to misappropriate public funds by using KT as their vehicle to unlawfully channel funds collected by Redisa under the Plan for their personal benefit. It also D upheld the Minister's second ground for winding-up Redisa, which was that Redisa's business plan on 23 May 2017 had acknowledged that it would have to begin to 'wind down' from 1 June 2017, if the Department of Water and Environmental Affairs (the Department) allocated insufficient funds to meet its operational requirements. So, once Redisa was E wound up, KT had to follow as its existence was entirely dependent upon the money it generated through the Plan. The reasons for the cessation of Redisa's funding as contemplated in the Plan will be explained below.

[6] The appellants applied for leave to appeal against the judgment and orders on several grounds: first, they said, the factual findings of F impropriety against them were not sustainable, having been comprehensively refuted in their answering papers; secondly, they asserted, there were no proper grounds for the resort to ex parte proceedings on the basis of bald assertions that they would dissipate public funds or tamper with evidence if notified of the application; thirdly, and crucially, they G pointed out that, having elected to proceed ex parte, the Minister had failed in her strict duty to disclose all relevant material to the court. In particular, they emphasised that she had not disclosed that her application to wind-up Redisa was the latest in a series of attempts by her to close down Redisa and terminate the Redisa Plan, which Redisa had challenged by way of review on three occasions in the High Court. H The first was successful and the two other applications were pending and well advanced when she launched this application. The Minister's conduct, they complained, warranted, without more, a discharge of the provisional orders against them. They also contended that it was in any event not shown that it was just and equitable to order their winding-up. I Finally, they argued that the court a quo had erred in conferring standing on the Minister, purportedly in terms of s 157(1)(d) of the Companies Act 71 of 2008 (the 2008 Act), to wind-up the two solvent companies.

[7] The court a quo granted leave to appeal to this court only on the fourth ground, the locus standi point, but refused leave on the other J grounds. This court subsequently granted leave on those grounds as

Cachalia JA (Saldulker JA, Van der Merwe JA and Rogers AJA concurring)

well. It is now necessary to explore the facts in more detail. As most of A the facts are common to both applications it will be convenient to recount them in a single narrative.

Background

The Redisa Plan B

[8] The Waste Act is intended to give effect to the environmental rights in s 24 of the Bill of Rights. Its objects include providing for reasonable measures for recycling and recovering waste, treating and safely disposing of waste as a last resort, and promising ecologically sustainable development while promoting justifiable economic and social development. C

[9] Section 6 obliges the Minister to establish a binding national waste- management strategy to give effect to the objects of the Act. Part 7 of ch 4 provides for the establishment of 'industry waste management plans', which can be formulated by a private entity or by an organ of state. They D regulate how an industry's waste is to be avoided, minimised, recycled, developed and disposed of.

[10] Waste tyres are an environmental problem and pose health risks if not disposed of safely. Approximately one million waste tyres are generated each month in South Africa. In addition, a large stockpile of E waste tyres has accumulated over a few decades. The purpose of the Plan is to manage this problem.

[11] The Plan was self-funding. Regulation 9(1)(k) of the Waste Tyre Regulations required producers to pay a fee to Redisa of R2,30 (excluding VAT) per kg of manufactured or imported tyres, for the collection, F storage and processing of waste tyres. This endured until February 2017, when the regulation was repealed, the circumstances of which are discussed later.

[12] Redisa was obliged to report to the Minister at regular intervals on certain key metrics and to submit annual audits to explain Redisa's G finances and the 'extent of the independence of the Redisa Board'. It did so. Its audited financial statements were unqualified.

The management contract with KT

[13] The Plan explicitly states that an 'external management company' H shall be responsible for its implementation and management. Redisa's memorandum of incorporation (MOI) also provides for this. The rationale for the appointment of a management company was to ensure 'confidentiality through the separation of functions [which] . . . is of vital importance to the competitiveness of the entire industry'. I

[14] The functions to be performed by the management company are extensive and include: managing Redisa's financial affairs; monitoring compliance by tyre manufacturers; furnishing consolidated management accounts and reporting; managing Redisa's operations; implementing and managing a National Centralised Computer System (NCCS); and reporting annually to the Department on all aspects of the Plan. J

Cachalia JA (Saldulker JA, Van der Merwe JA and Rogers AJA concurring)

The A Plan stipulates that 20% of the levies collected from tyre manufacturers, ie of the R2,30 per kg, will be allocated to administration (of...