South African Reserve Bank and Another v Shuttleworth and Another

• Jurisdiction: South Africa
• Citation: 2015 (5) SA 146 (CC)

South African Reserve Bank and Another v Shuttleworth and Another
2015 (5) SA 146 (CC)

2015 (5) SA p146

Citation	2015 (5) SA 146 (CC)
Case No	CCT 194/14 and CCT 199/14; [2015] ZACC 17
Court	Constitutional Court
Judge	Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Khampepe J, Molemela AJ, Nkabinde J, Theron AJ and Tshiqi AJ
Heard	March 3, 2015
Judgment	June 18, 2015
Counsel	JJ Gauntlett SC (with NGD Maritz SC and E Muller) for the first applicant.; PMM Mtshaulana SC (with L Gcabashe and SMF Gumede) for the second applicant.; G Marcus SC (with M Chaskalson SC and K Hofmeyr) for the first respondent.; LT Sibeko SC (with AL Platt) for the second respondent.

Flynote : Sleutelwoorde B

Constitutional law — Parliament — Act of Parliament — Money Bills — What constitutes — Difference between taxes and regulatory charges — Dominant- C purpose test — Constitution, s 77 read with s 75.

Exchange control — Exchange Control Regulations — Exit charge on value of assets sought to be exported upon emigration — Whether regulatory charge, or revenue-raising mechanism subject to compliance with Currency and Exchanges Act 9 of 1933, s 9(4) and reg 10(1)(c); Constitution, D s 77 read s 75.

Exchange control — Exchange Control Regulations — Exit charge on value of assets sought to be exported upon emigration — Broad discretionary powers of minister to oppose — Necessary for flexible, speedy and expert approach to exchange control.

Headnote : Kopnota

E Section 9(1) of the Currency and Exchanges Act 9 of 1933 (the Act) provides that the President 'may make regulations in regard to any matter . . . relating to or affecting or having any bearing upon currency, banking or exchanges'. One such regulation, reg 10(1)(c) of the Exchange Control Regulations of 1961, provided that '(n)o person shall, except . . . in F accordance with such conditions as the [Minister of Finance] . . . may impose . . . enter into any transaction whereby capital or any right to capital is . . . exported from the Republic'. Notably reg 10(1)(c) was not tabled and approved in accordance with the procedures prescribed in s 9(4) of the Act for regulations made under s 9 which are 'calculated to raise any revenue'. The Minister, acting in terms of reg 10(1)(c), however, imposed a condition that raised an exit charge by making South African Reserve Bank (SARB) G approval of applications to exit more than R750 000 of 'blocked assets' 'subject to an . . . exit charge of 10% of that amount'.

This case concerns a legal challenge to the validity of this exit charge by the respondent, Mr Shuttleworth (MS). He had paid it upon transferring his remaining capital out of South Africa, but under protest pending reconsideration H by the SARB of its decision to impose the charge. When the SARB declined to do so (claiming it was bound by the ministerial condition) MS approached the High Court, attacking the constitutionality of the regulations broadly, and specifically also s 9(1) of the Act read with reg 10(1)(c), on the basis that it gave the Minister overbroad open-ended discretionary powers.

I That court held against MS that the exit charge was lawful (ie that it was not calculated to raise revenue and therefore did not have to comply with s 9(4) of the Act); and it held against the state respondents that some of the regulations were unconstitutional. MS appealed and the state parties cross-appealed to the Supreme Court of Appeal, which set aside the High Court judgment in its entirety. The SCA held the exit charge was a J revenue-raising mechanism for the state which could only be authorised in

2015 (5) SA p147

a money Bill enacted in accordance with the money Bill provisions of the A Constitution (ss 75 and 77) and not by way of delegated legislation (reg 10(1)(c)).

Next, the state parties applied to the Consitutional Court for leave to appeal and to appeal — and MS for leave to cross-appeal in the event leave to appeal was granted to the state parties, and to cross-appeal — against those portions of the SCA judgment adverse to them. The Constitutional Court, by a majority B (Froneman J dissenting [*] , identified the core issue in the main appeal as whether this exit charge constituted a regulatory charge, or whether it was a tax, a revenue-raising mechanism for the state. If it were the latter, the regulation that authorised the exit charge would be invalid because it had not been enacted in accordance with the prescribed strictures of ss 75 and 77 of the Consitution (and s 9(4) of the Act). The court — having granted leave to C appeal, and leave to cross-appeal only on the narrow issue of the constitutional validity of s 9(1) of the Act read with reg 10 (1)(c) — held as follows:

Main appeal

The procedural requirements of s 9(4) have been superseded by the Constitution. This meant that a Bill that was 'calculated to raise revenue' by D imposing a national tax must comply with the constitutional requirements for a money Bill. On the other hand, if the exit charge were not calculated to raise revenue and thus not akin to a money Bill, it would not have to comply with s 9(4). (Paragraph [62] at 172D – E.)

The recurring question was how to distinguish a regulatory charge from a tax that may be procured only through a money Bill. There were no bright lines E between the two: all regulatory charges raise revenue, and 'every tax was in some measure regulatory'. That explains the need, as a basic distinguishing device, to consider carefully the dominant purpose of a statute imposing a fee or a charge or a tax. If regulation of public conduct were the primary purpose of the revenue raised under the statute, it would be considered a fee or a charge rather than a tax; if the dominant purpose were to raise revenue to fund the state and its public operations, then the charge would ordinarily be a tax. F

Here the subject-matter was exchange-control legislation with the avowed purpose to curb or regulate the export of capital from the country. The plain dominant purpose of the instant measure was to regulate and discourage the export of capital and to protect the domestic economy. The G exit charge was not directed at raising revenue. The uncontested evidence of the Minister was that the exit charge was part of regulation directed at easing in the dismantling of exchange controls. And there were other factors that also pointed away from revenue-raising, such as that the charge was imposed on a discrete portion of the population — ie only those who had capital to externalise in excess of R750 000 were to be affected. H

It was true that during its subsistence the exit charge generated revenue of approximately R2,9 billion, but that garnering of income by the Treasury was incidental to the dominant object of regulating and discouraging capital flight. Revenue-raising was a mere by-product of the exit charge's true purpose: regulation of the export of capital. The exit charge was therefore not one which attracted the definition of 'money Bill'. The SCA therefore I erroneously concluded that the dominant purpose of the exit charge was to raise revenue and that therefore it had to be subjected to the requirements of s 75 of the Constitution. (Paragraphs [47], [48], [52] – [53], [55] – [57],

2015 (5) SA p148

A [61] and [64] at 167B, 168C – D, 169E – G, 170E – 171B, 172C and 173A – D.)

Cross-appeal

Not all wide legislative discretion was inconsistent with the constitutional norm and invalid. The broad discretionary power of the Minister under the impugned provisions was justified in that South Africa's exchange control B system required a flexible, speedy and expert approach to ensure that proper financial governance prevailed. Circumstances could change at any time, requiring an adaptation of the rules in place, so that it would be impossible to lay down rules or set out factors in advance. The cross-appeal must therefore fail. (Paragraphs [79] – [82] at 176H – 177G.)

Cases Considered

Annotations

Case law C

Southern Africa

AAA Investments (Pty) Ltd v Micro Finance Regulatory Council and Another2007 (1) SA 343 (CC) (2006 (11) BCLR 1255; [2006] ZACC 9): referred to

Affordable Medicines Trust and Others v Minister of Health and Another2006 (3) SA 247 (CC) (2005 (6) BCLR 529; [2005] ZACC 3): compared D

AM Moolla Group Ltd and Others v The Gap Inc and Others2005 (2) SA 412 (SCA) ([2005] 3 All SA 101; [2004] ZASCA 112): dictum in para [7] applied

American Chewing Products Corporation v American Chicle Company1948 (2) SA 736 (A): referred to E

Amoils v Johannesburg City Council 1943 TPD 386: referred to

Attorney-General, OFS v Cyril Anderson Investments (Pty) Ltd1965 (4) SA 628 (A): referred to

Biowatch Trust v Registrar, Genetic Resources, and Others2009 (6) SA 232 (CC) (2009 (10) BCLR 1014; [2009] ZACC 14): compared

Chairman, Board on Tariffs and Trade, and Others v Teltron (Pty) Ltd1997 (2) SA 25 (A) ([1996] ZASCA 142): referred to F

Cross-Border Road Transport Agency v Central African Road Services (Pty) Ltd and Another [2015] ZACC 12: referred to

CUSA v Tao Ying Metal Industries and Others2009 (2) SA 204 (CC) ([2009] (1) BCLR 1; [2009] 1 BLLR 1; (2008) 29 ILJ 2461; [2008] ZACC 15): G dictum in para [68] applied

Dawood and Another v Minister of Home Affairs and Others; Shalabi and Another v Minister of Home Affairs and Others; Thomas and Another v Minister of Home Affairs and Others2000 (3) SA 936 (CC) (2000 (8) BCLR 837; [2000] ZACC 8): distinguished and applied

Ex parte Chairperson of the Constitutional Assembly: In re Certification of the Constitution of the Republic of South Africa, 19961996 (4) SA 744 (CC) (1996 (10) BCLR 1253; [1996] ZACC 26): considered H

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