ALERT DISPUTE RESOLUTION - Cliffe Dekker Hofmeyr

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ALERT DISPUTE RESOLUTION - Cliffe Dekker Hofmeyr
13 MAY 2020

DISPUTE RESOLUTION
ALERT

                                                Your JBCC Contract: COVID-19 and other
IN THIS ISSUE >                                 curse words
                                                What can parties to a JBCC (Joint Building Contracts
                                                Committee) Construction Contract do to prevent the COVID-19
  The setting aside                             pandemic infecting your contract? We look at a situation where
  of an adjudicator’s                           washing your hands and sterilising surfaces may not be enough.
  determination:
  Is the court hamstrung?
  The rise of alternative dispute resolution    Is the ban on tobacco and liquor unlawful
  (ADR) in the last decade or so cannot         and irrational?
  be overstated. The plethora of ADR
  institutions and a quick survey of            Is the continued ban on the sale of liquor and tobacco
  general commercial and service level          products really justifiable? And, if so, is there a less-restrictive
  agreements prove this to be the case.         means for government to achieve the same objective, while
  Stripped to its bare bones, ADR refers to     ensuring sectors in the entire value chain remain going
  any means of settling disputes without        concerns that provide secure jobs and contribute to much
  reference to litigation i.e. the courtroom.   needed tax revenue?

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ALERT DISPUTE RESOLUTION - Cliffe Dekker Hofmeyr
DISPUTE RESOLUTION

                                           The setting aside of an
                                           adjudicator’s determination:
                                           Is the court hamstrung?
                                           The rise of alternative dispute              With more and more parties resorting
                                           resolution (ADR) in the last decade or       to ADR as a means to settle their disputes,
A question that has                        so cannot be overstated. The plethora        the courts are often inundated with
                                           of ADR institutions and a quick survey       applications to either enforce or review
troubled legal practitioners
                                           of general commercial and service            and set aside awards and/or determinations
for some time is whether                   level agreements prove this to be the        arising from ADR proceedings. It is trite that
a party unsatisfied with                   case. Stripped to its bare bones, ADR        parties to an agreement are bound by the
the outcome of an ADR                      refers to any means of settling disputes     provisions contained therein including the
                                           without reference to litigation i.e. the     dispute resolution clause. As a result and in
process can and should                     courtroom. This typically takes the          relation to dispute resolution clause/s, the
challenge that outcome                     form of negotiation, conciliation,           parties often waive their rights to approach
and what form that                         mediation, adjudication, arbitration         the courts until the dispute resolution
challenge should take.                     (or a combination of any of these). In       mechanisms provided for in the agreement
                                           most cases it’s voluntarily and in some      have been exhausted and even then they
                                           instances it is obligatory. With ever-       can only approach the courts on a limited
                                           rising costs of litigation and the time      basis. A question that has troubled legal
                                           delays occasioned by litigation, ADR         practitioners for some time is whether
                                           offers an attractive offering in that it     a party unsatisfied with the outcome of
                                           is suitable for multi-party disputes;        an ADR process can and should challenge
                                           the costs are lower (and in many             that outcome and what form that challenge
                                           cases free when involving consumers          should take. Even though it only was in the
                                           or employees); it produces relatively        context of an adjudication, the Supreme
                                           speedy settlement of disputes; there         Court of Appeal (SCA) recently grappled
                                           is flexibility in the process; the parties   with some of these issues in Ekurhuleni
                                           are generally in control; the parties        West College v Segal and Another
                                           chose a forum; it can offer practical        (1287/2018) [2020] ZASCA 32 (2 April 2020).
                                           solutions; a wide range of issues can        In Segal, the SCA was called upon to
                                           be considered; shared future interests       adjudicate an appeal on two interrelated
                                           may be protected; it is generally            issues. Firstly, whether an adjudicator’s
                                           private and confidential; and it is a        determination in unterminated proceedings
                                           less confrontational alternative to the      was reviewable. Secondly, whether
                                           court system.                                the rules of natural justices applied to
                                                                                        adjudication proceedings.

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2 | DISPUTE RESOLUTION ALERT 13 May 2020
ALERT DISPUTE RESOLUTION - Cliffe Dekker Hofmeyr
DISPUTE RESOLUTION

                                           The setting aside of an
                                           adjudicator’s determination:
                                           Is the court hamstrung?...continued
                                           First the facts: Ekurhuleni West College       for the summary and interim resolution of
                                           (College) entered into an agreement            disputes expeditiously and inexpensively
The court therefore                        for the construction of a conference           as possible. However, the adjudicator’s
                                           centre on its premises with Trencon            determination was not exhaustive of the
concluded that the
                                           Construction (Pty) Ltd (Trencon). Various      disputes, as it may be overturned during
College’s review application               disputes arose between the parties upon        the final stage of the dispute resolution
was premature as the                       completion of the project. As per the          process. This meant that the determination
ADR proceedings had not                    provisions of the agreement, Trencon           could be revisited during a further step
                                           referred these disputes to adjudication.       in the agreed procedure. The court
terminated and there were                  Having considered the submissions by the       therefore concluded that the College’s
no grounds warranting                      parties and without requiring appearance,      review application was premature as
judicial interference, at                  the adjudicator made a determination           the ADR proceedings had not terminated
least at that stage.                       in favour of Trencon. Aggrieved by it,         and there were no grounds warranting
                                           the College exercised its right in terms       judicial interference, at least at that stage.
                                           of the agreement and gave a notice of
                                                                                          Were the rules of natural justice
                                           dissatisfaction and thus referred the
                                                                                          applicable to the adjudication
                                           dispute to arbitration. In addition, the
                                                                                          proceedings?
                                           College launched an application to
                                           review and set aside the determination,        In deciding this issue, the court referred
                                           which application was dismissed by the         to the generally accepted ratio that in the
                                           High Court.                                    case of a statutory tribunal its obligation
                                                                                          to observe the elementary principles of
                                           Did the notice of dissatisfaction and
                                                                                          justice derives from the expressed or
                                           the pending arbitration, on their own,
                                                                                          implied terms of the relevant enactment,
                                           preclude the review application?
                                                                                          while in the case of a tribunal created
                                           The construction agreement contained a         by contract, the obligation derives from
                                           provision stating that should either party     the expressed or implied terms of the
                                           be dissatisfied with the decision given by     agreement between the persons affected.
                                           the adjudicator, such party may deliver        A statutory tribunal would for example
                                           notice of dissatisfaction to the other party   be the housing tribunal established terms
                                           and to the adjudicator within a specified      of the Rental Housing Act 1999; the
                                           period and refer the dispute to arbitration.   Commission for Conciliation, Mediation
                                           The arbitrator would then have the power       and Arbitration established in terms
                                           to revise the adjudicator’s determination as   of the Labour Relations Act, 1995; the
                                           if it had not been issued or given.            Competition Tribunal established in terms
                                                                                          of the Competition Act, 1998; the National
                                           The SCA held that the central issue in
                                                                                          Consumer Tribunal established in terms
                                           this question was the nature and purpose
                                                                                          of the National Credit Act, 2005; the
                                           of the adjudication in terms of the
                                                                                          Water Tribunal established in terms of the
                                           agreement. Adjudication was designed
                                                                                          National Water Act, 1998 etc.

3 | DISPUTE RESOLUTION ALERT 13 May 2020
ALERT DISPUTE RESOLUTION - Cliffe Dekker Hofmeyr
DISPUTE RESOLUTION

                                           The setting aside of an
                                           adjudicator’s determination:
                                           Is the court hamstrung?...continued
                                           In this instance, the matter concerned a           contrary to public policy and nor show that
                                           tribunal created by greement (i.e. adjudication)   the express contractual provisions were
With the growing                           and the court readily accepted that courts         breached. As a result, the SCA dismissed
                                           should be very slow to import a tacit term         the appeal with costs and upheld the
popularity of ADR as
                                           into an agreement particularly where the           decision of the High Court.
a means of resolving                       parties have concluded a comprehensive
                                                                                              With the growing popularity of ADR as a
disputes, this decision                    written agreement that deals in great detail
                                                                                              means of resolving disputes, this decision
adds to the rising                         with the subject matter of the agreement
                                                                                              adds to the rising body of jurisprudence
                                           and it is not necessary to give the agreement
body of jurisprudence                      business efficacy. This is of course subject
                                                                                              demonstrating the judiciary’s deference
demonstrating the                          to the express terms of the agreement by
                                                                                              to the ADR process. The matter is also
                                                                                              important in that it demonstrates that
judiciary’s deference to the               which any or all of the fundamental principles
                                                                                              parties should always be aware that
ADR process.                               of justice may be excluded or modified.
                                                                                              provisions agreed upon in an agreement
                                           Consequently, the court found no merit in the
                                                                                              will trump any rules of natural justice
                                           College’s reliance on procedural unfairness
                                                                                              unless such rules are expressly included.
                                           and the rules of natural justice and held that
                                                                                              Lastly, parties should seek guidance, not
                                           the adjudicator conducted the proceedings
                                                                                              only in the enforcement of obligations
                                           as per the agreement. This was so because
                                                                                              by means of an ADR process but at the
                                           the adjudicator operated as a tribunal created
                                                                                              contracting stage to ensure that their
                                           by contract and the express contractual
                                                                                              rights are sufficiently protected.
                                           provisions regulated the procedure that
                                           he had to follow. The College did not
                                                                                              Vincent Manko and Mayson Petla
                                           challenge any of these provisions as being

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4 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                           Your JBCC Contract: COVID-19
                                           and other curse words
                                           What can parties to a JBCC (Joint             on 25 April 2020, commercial building
                                           Building Contracts Committee)                 projects will only be permitted to resume
As a “hands-on”                            Construction Contract do to prevent           operations once the country reaches
                                           the COVID-19 pandemic infecting your          Alert Level 3 and private residential
industry for which
                                           contract? We look at a situation where        projects only when Alert Level 2 is reached.
working from home is                       washing your hands and sterilising            This would mean that activity would, in a
generally impossible,                      surfaces may not be enough.                   large portion of the construction sector,
the construction sector                    COVID-19 and the consequential
                                                                                         still be suspended until, at the earliest, the
                                                                                         transition to Alert Level 3. No date has, at
is one of many which                       lockdown period in South Africa are
                                                                                         the time of publishing this article, been
has had to grapple with                    unprecedented circumstances which
                                                                                         forecast for the transition to Alert Level 3.
                                           no party to any construction contract
the COVID-19 induced                       has ever had to deal with, until now. As      However, while works have been
contractual mayhem.                        a “hands-on” industry for which working       suspended at most construction sites until
                                           from home is generally impossible, the        Alert Level 3 is reached, what is not yet
                                           construction sector is one of many which      clear is how Contractors and Employers
                                           has had to grapple with the COVID-19          are going to deal with the contractual
                                           induced contractual mayhem.                   aftermath once operations resume.
                                                                                         Although one cannot provide definitive,
                                           The construction sector and the work
                                                                                         broad stroke answers that cater to all
                                           performed, in general, was not regarded
                                                                                         construction projects, there are several key
                                           as an essential service, being the only
                                                                                         provisions that parties to the 2018 editions
                                           types of services capable of being
                                                                                         of the JBCC Principal Building Agreement
                                           rendered during the initial and extended
                                                                                         and the JBCC Nominated/Selected
                                           Alert Level 5 national lockdown. This
                                                                                         Subcontract Agreement (cumulatively
                                           led to the suspension of the works for
                                                                                         JBCC Agreements) should consider,
                                           most construction projects throughout
                                                                                         particularly relating to the revision of the
                                           the country, invariably causing delay to
                                                                                         practical completion date and termination.
                                           completion of projects.
                                                                                         Revised Practical Completion Date: How
                                           Under the current Alert Level 4 conditions,
                                                                                         long can the extension be and will I need
                                           most construction projects except for
                                                                                         to pay for the delay?
                                           public works projects, road and bridge
                                           projects, and critical maintenance and        It is inevitable that the suspension of
                                           repairs, are still not permitted to resume.   the works will result in the need for
                                           According to the Schedule of Services:        parties to revise the date for the practical
                                           Draft Framework for Sectors published         completion of a project. Clause 23.1

5 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                           Your JBCC Contract: COVID-19
                                           and other curse words...continued
                                           entitles a Contractor to “a revision of            It is accordingly imperative that all parties
                                           the date for practical completion by the           comply with the JBCC Agreements in
Clause 23.1 of the JBCC                    principal agent without an adjustment of           submitting and analysing claims relating
                                           the contract value for a delay to practical        to the extension of time. Clause 23.1 of
Agreements only provides
                                           completion caused by one or more of the            the JBCC Agreements only provides for
for the award of time and                  following events:                                  the award of time and not the adjustment
not the adjustment of the                                                                     of the contract value, and does not deal
                                           …
contract value, and does                                                                      with who should bear the ancillary costs
                                           23.1.5 Exercise of statutory power by a            incurred as a result of COVID-19, a prime
not deal with who should                   body of state or public or local authority         example being the security services
bear the ancillary costs                   that directly affects the execution of the         provided to secure the site, which, for the
incurred as a result of                    works                                              purposes of the lockdown, is an essential
COVID-19.                                                                                     service and can accordingly operate
                                           23.1.6 Force majeure” (our emphasis)
                                                                                              during this period. In an advisory note,
                                           In order to claim for the revision of the          the JBCC suggests that parties ought to
                                           practical completion date, a Contractor            consider sharing these costs amicably
                                           would need to comply with the notification         between them as fault would seemingly
                                           and claim provisions set out in clauses 23.4       not be attributed to either party in
                                           to 23.6 of the JBCC Agreements. In short,          the circumstances.
                                           the Contractor must:
                                                                                              Termination: Is this a ground to cut ties?
                                           ∞   Within 20 working days of becoming
                                               aware of such delay, give notice to            On the other end of the spectrum,
                                               the Principal Agent of the intention to        construction projects may need to be
                                               submit a claim, failing which the claim        suspended again in the future should
                                               for a revised practical completion date        the Alert Levels fluctuate and/or other
                                               will be forfeited;                             circumstances occur which may lead to
                                                                                              the impossibility of the completion of
                                           ∞   Within 40 working days from when the
                                                                                              the project for either party. Clause 29.20
                                               Contractor is able to quantify the delay
                                                                                              provides that “either party may give
                                               caused to the programme submit a
                                                                                              notice of intention to terminate this
                                               fully substantiated claim; and
                                                                                              agreement where:
                                           ∞   The claim should reference the clause
                                               the Contractor relies on, identify the         29.20.2 Progress of the works has ceased
                                               cause and effect of the delay on the           for a continuous period of ninety (90)
                                               practical completion date and identify         calendar days, or an intermittent period
                                               the working day period claimed.                totalling one hundred and twenty (120)
                                                                                              calendar days as a result of a force majeure
                                           Once the claim is submitted the Principal          event or the exercise of statutory power by
                                           Agent has 20 working days to respond               a body of state or public or local authority
                                           either granting, in full or in part, or refusing   that directly affects the execution of the
                                           the claim.                                         works” (our emphasis)

6 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                           Your JBCC Contract: COVID-19
                                           and other curse words...continued
                                           Termination under clause 29.20.2 will not,     overcome except for, ironically, ceasing to
                                           aside from other contributory fact specific    work and self-isolating. The facts of each
The clauses considering                    circumstances, be available to either party    case will invariably have to inform whether
                                           unless the required time period for the        it would indeed be a force majeure for
termination and the
                                           suspension of the works is satisfied. The      the purposes of the JBCC Agreements.
revision of the practical                  applicability of this clause is thus largely   However, it would seem that very few
completion date in these                   dependent on regulatory time periods           contracting parties could have predicted
circumstances would be                     which have yet to be determined.               the far-reaching effects of the disease
                                                                                          which emanated on the other side of
academic, if the relevant                  However, the clauses considering
                                                                                          the world. This would in itself be both
party cannot establish                     termination and the revision of the
                                                                                          indicative and persuasive.
                                           practical completion date in these
whether the disease, or the                circumstances would be academic, if the        The “S-word”: Statute
effects thereof, is a force                relevant party cannot establish whether
                                                                                          The JBCC Agreements include another
majeure or an exercise of                  the disease, or the effects thereof, is a
                                                                                          provision which would apply to the present
                                           force majeure or an exercise of statutory
statutory power. So, is it?                                                               circumstances. This is the “exercise of
                                           power. So, is it?
                                                                                          statutory power by a body of state or
                                           The “F-word”: Force majeure                    public or local authority that directly
                                                                                          affects the execution of the works.” While
                                           The JBCC Agreements define a force
                                                                                          there may be room for debate as to
                                           majeure as “an exceptional event or
                                                                                          whether the national lockdown qualifies as
                                           circumstance that:
                                                                                          a force majeure, there can be little doubt
                                           ∞   could not have been reasonably             that the lockdown implemented under
                                               foreseen                                   the Disaster Management Act 57 of 2002
                                           ∞   is beyond the control of the parties,      (Act) and the myriad of accompanying
                                               and                                        regulations would constitute an exercise
                                           ∞   could not reasonably have been             of statutory power as envisaged in the
                                               avoided or overcome”.                      JBCC Agreements.

                                           Parties may argue that it is not necessarily   Does the Principal Agent need to issue a
                                           the COVID-19 disease itself that is stopping   Contract Instruction?
                                           activities on site, for example due to a       The Contractor, in terms of clause 2 of the
                                           large number of infected workers, but          JBCC Agreements, is under an obligation
                                           rather that it is the lockdown which would     to comply with the law specified in the
                                           be the main cause of the temporary             JBCC Agreement.
                                           suspension of the works. However, it can
                                           be further argued that the disease, and        In terms of clause 17 of the JBCC
                                           the possible effects on the construction       Agreements the Principal Agent may issue
                                           sector generally, fits into this definition    contract instructions to the Contractor
                                           as it could not have been foreseen at the      regarding the compliance with the laws
                                           time of contracting, it would be beyond        and regulations. The Principal Agent
                                           the control of the parties to the JBCC         therefore has a discretion in this regard.
                                           Agreements and could not reasonably be

7 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                           Your JBCC Contract: COVID-19
                                           and other curse words...continued
                                           The JBCC, in its advisory note, is of         able to operate during various Alert Levels.
                                           the opinion that the Contractor has an        This should be seen as an opportunity for
During these uncertain                     overarching statutory and contractual         parties to JBCC Agreements to innovate,
                                           obligation to comply with the law. It is      contribute to the market and add value to
times, Contractors and
                                           accordingly unnecessary for the Principal     society during these unprecedented times.
Employers alike should                     Agent to issue a contract instruction
                                                                                         To ensure clarity going forward, parties to
strive for more innovative                 regarding compliance with any extension
                                                                                         future JBCC Agreements should consider
methods to conduct                         to the lockdown, the Act and its
                                                                                         the effects that future pandemics and
                                           accompanying Regulations.
their business.                                                                          government interventions may have
                                           Once the fever stops?                         on a project and tailor their contracts
                                                                                         accordingly. This will ultimately ensure
                                           During these uncertain times, Contractors
                                                                                         certainty, and minimise risks and
                                           and Employers alike should strive for
                                                                                         costs associated with future disputes
                                           more innovative methods to conduct
                                                                                         and litigation.
                                           their business.
                                                                                         For current projects, communication
                                           For instance, WinSun3D – a Shanghai
                                                                                         between the Employer, Contractor,
                                           based 3D printing company –
                                                                                         Sub-Contractors and the Principal Agent
                                           is manufacturing and selling
                                                                                         will be vital to establish clear milestones
                                           “Print-While-You-Wait Isolation Pods”.
                                                                                         post lockdown, reach reasonable
                                           In South Africa, the current Regulations
                                                                                         compromises and ensure that this
                                           under the Act permit businesses to operate
                                                                                         contractual fever doesn’t turn into a
                                           if they are supplying an essential service.
                                                                                         full-blown infection.
                                           Moreover, construction firms who are
                                           able to undertake projects which meet the
                                                                                         Joe Whittle, Reece May and
                                           definition of an essential service will be
                                                                                         Lauren Loxton

8 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                           Is the ban on tobacco and liquor
                                           unlawful and irrational?
                                           Is the continued ban on the sale of             (3) the transportation of liquor for
                                           liquor and tobacco products really                  export purposes is permitted.
In order to fully appreciate               justifiable? And, if so, is there a
                                                                                           (4) no special or events liquor
                                           less-restrictive means for government
and discuss the                                                                                licenses may be considered for
                                           to achieve the same objective, while
Regulations, the starting                  ensuring sectors in the entire value
                                                                                               approval during the duration of
                                                                                               the national state of disaster.
point is to understand                     chain remain going concerns that
the levels of legislative                  provide secure jobs and contribute to           27 Tobacco products, e-cigarettes
                                           much needed tax revenue? We unpack                 and related products
hierarchy in South Africa.                 the lawfulness of the respective ban on
                                                                                               The sale of tobacco, tobacco
                                           liquor and tobacco, including whether
                                                                                               products, e-cigarettes and
                                           the ban is unlawful but rationale and
                                                                                               related products is prohibited.”
                                           if that is enough for government to
                                           continue to enforce it.                     The singling out of these products is
                                                                                       unique in that they appear as provisions
                                           On the eve of Thursday, 29 April 2020,
                                                                                       and not just as items listed (or excluded)
                                           the Minister of Cooperative Governance
                                                                                       in the Regulations’ annexure dealing with
                                           and Traditional Affairs, Dr Dlamini-Zuma
                                                                                       essential items.
                                           published the Alert Level 4 Regulations
                                           (Regulations). The more-detailed            In order to fully appreciate and discuss
                                           Regulations replaced all previous           the Regulations, the starting point is
                                           iterations. Of relevance to this article    to understand the levels of legislative
                                           are Regulations 26 and 27 which             hierarchy in South Africa. The hierarchy
                                           state respectively:                         applicable to legislation is as follows:

                                              “26 Sale, dispensing or                  ∞   The Constitution, which is the supreme
                                                  transportation of liquor                 law of the Republic and any law of
                                                                                           conduct inconsistent with it is invalid.
                                              (1) the sale, dispensing and
                                                                                       ∞   Original legislation, which includes
                                                  distribution of liquor is
                                                                                           Acts of Parliament such as the Disaster
                                                  prohibited.
                                                                                           Management Act 57 of 2002 (DMA).
                                              (2) the transportation of liquor         ∞   Subordinate or delegated legislation
                                                  is prohibited, except where              such as the promulgation of
                                                  alcohol is required for industries       regulations or directives. This
                                                  producing hand sanitizers,               law-making power is usually delegated
                                                  disinfectants, soap, alcohol for         to certain persons, for instance under
                                                  industrial use and household             the DMA the power is given to the
                                                  cleaning products.                       Minister of Cooperative Governance
                                                                                           and Traditional Affairs. The power may
                                                                                           also be granted to bodies established
                                                                                           under a particular piece of legislation.

9 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                            Is the ban on tobacco and liquor
                                            unlawful and irrational?...continued
                                            In terms of the relationship between            That being said, the DMA does not
                                            original legislation and subordinate            empower the Minister to prevent the actual
Considering the nature of                   legislation, subordinate legislation may        sale of tobacco and any other goods.
                                            not be in conflict with original legislation,   The only way that transactions may be
the pandemic, it appears
                                            otherwise it would be ultra vires. However,     regulated is in respect of transportation,
that the Minister is within                 if apparently contradictory provisions          and separately by preventing people
her powers to regulate                      are capable of a sensible interpretation        from physically attending at a premises
the sale of alcohol, even                   which would reconcile the apparent              where tobacco is being sold. It is
                                            contradiction, that interpretation should       arguable then that where a retailer or
though it amounts to a                      be preferred.                                   wholesaler/distributer has been granted
complete ban.                                                                               permission to trade, it must be granted
                                            Dealing with the liquor ban first,
                                                                                            permission to trade in its entire line
                                            section 27(2)(i) of the DMA is clear in that
                                                                                            of stock at least until it is depleted.
                                            the Minister may issue regulations or
                                                                                            Regulation 27 is aimed only at the sale of
                                            directions concerning “the suspension
                                                                                            tobacco products and does not at all refer
                                            or limiting of the sale, dispensing or
                                                                                            to the transportation or control of such
                                            transportation of alcoholic beverages in
                                                                                            products nor to access of premises where
                                            the disaster-stricken or threatened area”.
                                                                                            tobacco may be sold. This casts serious
                                            Considering the nature of the pandemic,
                                                                                            concerns over the blanket prohibition
                                            it appears that the Minister is within her
                                                                                            against the sale of tobacco products
                                            powers to regulate the sale of alcohol,
                                                                                            (and indeed against the sale of other
                                            even though it amounts to a complete ban.
                                                                                            products that an authorised retailer or
                                            With respect to tobacco products, the           wholesaler/distributer has in stock). It must
                                            DMA does not expressly empower the              always be remembered that as a state
                                            Minister with any specific powers relating      functionary, the Minister is only entitled
                                            to the regulation of the supply chain           to act within the limits of the empowering
                                            and ultimate sale of tobacco products.          legislation and any acts outside of those
                                            However, what the DMA does allow the            parameters will be unlawful.
                                            Minister to do is to publish regulations
                                                                                            Furthermore, even if the Regulations did
                                            or directions concerning “the regulation
                                                                                            control the transportation and access to
                                            of the movement of persons and goods
                                                                                            premises where tobacco products are
                                            to, from or within the disaster-stricken
                                                                                            sold, under the DMA and in relation to the
                                            or threatened area” and “the control
                                                                                            specific list of powers, the Minister is only
                                            and occupancy of premises in the
                                                                                            empowered to publish regulations and
                                            disaster-stricken or threatened area”. Again,
                                                                                            directions to the extent that they:
                                            considering the nature of the pandemic,
                                            this could mean that transportation of          ∞   assist and protect the public;
                                            tobacco products (and any other products)       ∞   provide relief to the public;
                                            could be subject to regulation as well          ∞   protect property;
                                            as compelling the closure of a premises
                                                                                            ∞   prevent or combating disruption; or
                                            where tobacco may be sold.
                                                                                            ∞   deal with the destructive and other
                                                                                                effects of the disaster.

10 | DISPUTE RESOLUTION ALERT 13 May 2020
DISPUTE RESOLUTION

                                            Is the ban on tobacco and liquor
                                            unlawful and irrational?...continued
                                            These are broad objectives and the            amongst others, set a side Regulation 27.
                                            Regulations or Directions published (in       We understand that pursuant to Part A
In the case of banning the                  respect of all aspects thereof including      of the court application Government has
                                            the sale of liquor and tobacco) must serve    decided to provide reasons to FITA for the
sale of tobacco, the power
                                            these purposes.                               ban. At the date of writing this article we
just does not seem to be                                                                  have not had sight of the reasons from
                                            The ban on tobacco sales appears to be
present and no amount                                                                     Government. The reasons, to the extent
                                            more of a general public health issue than
of rational behaviour can                   something directly related to flattening
                                                                                          disclosed, may assist FITA to supplement
                                                                                          Part B of its application to refine its
justify acting outside of the               the curve of infections; and in the absence
                                                                                          argument and grounds that the ban
confines of the law.                        of proper reasons from the Minister, the
                                                                                          is unlawful.
                                            decision also reeks of irrationality.
                                                                                          As mentioned above, arbitrary conduct
                                            Relatedly, and on that score, South Africa
                                                                                          is impermissible. The reasons by
                                            is founded on the Rule of Law. This means
                                                                                          government, to the extent disclosed, may
                                            that the government and its institutions
                                                                                          end up revealing such arbitrary/irrational
                                            (including the President and members of
                                                                                          conduct or they could reveal that
                                            the national executive when they make
                                                                                          government considered the matter
                                            high-level decisions) must, at all times,
                                                                                          thoroughly and acted rationally. But
                                            act in accordance with the “principle
                                                                                          even if the latter proves true, rationality
                                            of legality”: they must act lawfully, in
                                                                                          is not the only standard with which to
                                            good faith, for a proper purpose and
                                                                                          judge state conduct. State functionaries
                                            rationally – no arbitrary public conduct is
                                                                                          like the Minister may only act within the
                                            permissible in a constitutional democracy.
                                                                                          confines of the empowering legislation
                                            Where the decisions have failed to meet
                                                                                          or law. In the case of banning the sale of
                                            this standard, they have been set aside by
                                                                                          tobacco, the power just does not seem
                                            the courts.
                                                                                          to be present and no amount of rational
                                            As it currently stands, government has        behaviour can justify acting outside of the
                                            been threatened with legal action by          confines of the law.
                                            tobacco manufacturers for the ban,
                                                                                          Ultimately, if FITA does not withdraw its
                                            with Fair Trade Independent Tobacco
                                                                                          application, it is hoped that the judgment
                                            Association (FITA) representing some of
                                                                                          will clearly delineate the powers of the
                                            the countries tobacco manufacturers
                                                                                          Minister under the DMA.
                                            proceeding with a court application to,

                                                                                          Jackwell Feris, Imraan Abdulla
                                                                                          and Mukelwe Mthembu

11 | DISPUTE RESOLUTION ALERT 13 May 2020
CDH’s Dispute Resolution practice is ranked as a Top-Tier Firm in THE LEGAL 500 EMEA 2020
   Tim Fletcher is ranked as a Leading Individual in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Eugene Bester is recommended in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Jonathan Witts-Hewinson is recommended in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Pieter Conradie is recommended in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Rishaban Moodley is recommended in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Kgosi Nkaiseng is ranked as a Next Generation Partner in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Tim Smit is ranked as a Next Generation Partner in Dispute Resolution in THE LEGAL 500 EMEA 2020
   Gareth Howard is ranked as a Rising Star in Dispute Resolution in THE LEGAL 500 EMEA 2020
   CDH’s Construction practice is ranked in Tier 2 in THE LEGAL 500 EMEA 2020
   Joe Whittle is recommended in Construction in THE LEGAL 500 EMEA 2020
   Timothy Baker is recommended in Construction in THE LEGAL 500 EMEA 2020
   Siviwe Mcetywa is ranked as a Rising Star in Construction in THE LEGAL 500 EMEA 2020

  CHAMBERS GLOBAL 2017 - 2020 ranked our Dispute Resolution practice in Band 1: Dispute Resolution.

  CHAMBERS GLOBAL 2018 - 2020 ranked our Dispute Resolution practice in Band 2: Insurance.

  CHAMBERS GLOBAL 2020 ranked our Public Procurement sector in Band 2: Public Procurement.

  CHAMBERS GLOBAL 2017 - 2020 ranked our Dispute Resolution practice in Band 2: Restructuring/Insolvency.

  CHAMBERS GLOBAL 2020 ranked our Corporate Investigations sector in Band 3: Corporate Investigations.

  Tim Fletcher ranked by CHAMBERS GLOBAL 2019 - 2020 in Band 3: Dispute Resolution.

  Pieter Conradie ranked by CHAMBERS GLOBAL 2019 - 2020 as Senior Statespeople: Dispute Resolution.

  Tobie Jordaan ranked by CHAMBERS GLOBAL 2020 as an up and coming Restructuring/Insolvency lawyer.

  Jonathan Witts-Hewinson ranked by CHAMBERS GLOBAL 2017 - 2020 in Band 2: Dispute Resolution.

   CDH HAS BECOME THE EXCLUSIVE MEMBER FIRM IN AFRICA FOR THE:
   Insuralex Global Insurance Lawyers Group
   (the world’s leading insurance and reinsurance law firm network).                                        GLOBAL INSURANCE
                                                                                                            LAWYERS GROUP

   CLICK HERE TO READ MORE

12 | DISPUTE RESOLUTION ALERT 13 May 2020
CLIFFE DEKKER HOFMEYR               CLIFFE DEKKER HOFMEYR               CLIFFE DEKKER HOFMEYR                CLIFFE DEKKER HOFMEYR

         BAND 1                                BAND 2                                 BAND 2                         BAND 2
      Dispute Resolution                        Insurance                      Public Procurement               Restructuring/Insolvency

                                                                                      2019
                                                                          THE LEGAL DEALMAKER OF
                                                                          THE DECADE BY DEAL FLOW

                                                                          M&A Legal DealMakers of the
 CLIFFE DEKKER HOFMEYR                                                    Decade by Deal Flow: 2010-2019.
                                            2017-2020                     2019 1st    by BEE M&A Deal Flow.
         BAND 3                                                           2019 1st

                                                                                      by General Corporate
                                                                                      Finance Deal Flow.
    Corporate Investigations
                                                TIER 1                    2019 2nd    by M&A Deal Value.
                                            Dispute Resolution            2019	2nd   by M&A Deal Flow.

                                                                 E-learning Offering

              ST P
                                                                 Our Employment practice recently launched an e-learning module:
                                                                 A better place to work
                                                                 The module will empower your organisation with a greater
                                                                 appreciation and understanding of what constitutes sexual
      SEXUAL                                                     harassment, how to identify it and what to do it if occurs.

                                                                 CLICK HERE FOR MORE INFORMATION

13 | DISPUTE RESOLUTION ALERT 13 May 2020
OUR TEAM
For more information about our Dispute Resolution practice and services, please contact:
               Tim Fletcher                          Tobie Jordaan                         Mongezi Mpahlwa                       Joe Whittle
               National Practice Head                Director                              Director                              Director
               Director                              T +27 (0)11 562 1356                  T +27 (0)11 562 1476                  T +27 (0)11 562 1138
               T +27 (0)11 562 1061                  E tobie.jordaan@cdhlegal.com          E mongezi.mpahlwa@cdhlegal.com        E joe.whittle@cdhlegal.com
               E tim.fletcher@cdhlegal.com
                                                     Corné Lewis                           Kgosi Nkaiseng                        Roy Barendse
               Thabile Fuhrmann                      Director                              Director                              Executive Consultant
               Chairperson                           T +27 (0)11 562 1042                  T +27 (0)11 562 1864                  T +27 (0)21 405 6177
               Director                              E corne.lewis@cdhlegal.com            E kgosi.nkaiseng@cdhlegal.com         E roy.barendse@cdhlegal.com
               T +27 (0)11 562 1331
               E thabile.fuhrmann@cdhlegal.com       Richard Marcus                        Byron O’Connor                        Pieter Conradie
                                                     Director                              Director                              Executive Consultant
               Timothy Baker                         T +27 (0)21 481 6396                  T +27 (0)11 562 1140                  T +27 (0)11 562 1071
               Director                              E richard.marcus@cdhlegal.com         E byron.oconnor@cdhlegal.com          E pieter.conradie@cdhlegal.com
               T +27 (0)21 481 6308
               E timothy.baker@cdhlegal.com          Burton Meyer                          Lucinde Rhoodie                       Nick Muller
                                                     Director                              Director                              Executive Consultant
               Eugene Bester                         T +27 (0)11 562 1056                  T +27 (0)21 405 6080                  T +27 (0)21 481 6385
               Director                              E burton.meyer@cdhlegal.com           E lucinde.rhoodie@cdhlegal.com        E nick.muller@cdhlegal.com
               T +27 (0)11 562 1173
               E eugene.bester@cdhlegal.com          Rishaban Moodley                      Belinda Scriba                        Jonathan Witts-Hewinson
                                                     Director                              Director                              Executive Consultant
               Jackwell Feris                        T +27 (0)11 562 1666                  T +27 (0)21 405 6139                  T +27 (0)11 562 1146
               Director                              E rishaban.moodley@cdhlegal.com       E belinda.scriba@cdhlegal.com         E witts@cdhlegal.com
               T +27 (0)11 562 1825
               E jackwell.feris@cdhlegal.com                                               Tim Smit
                                                                                           Director
               Anja Hofmeyr                                                                T +27 (0)11 562 1085
               Director                                                                    E tim.smit@cdhlegal.com
               T +27 (0)11 562 1129
               E anja.hofmeyr@cdhlegal.com

BBBEE STATUS: LEVEL ONE CONTRIBUTOR

Cliffe Dekker Hofmeyr is very pleased to have achieved a Level 1 BBBEE verification under the new BBBEE Codes of Good Practice. Our BBBEE verification is
one of several components of our transformation strategy and we continue to seek ways of improving it in a meaningful manner.

This information is published for general information purposes and is not intended to constitute legal advice. Specialist legal advice should always be sought in
relation to any particular situation. Cliffe Dekker Hofmeyr will accept no responsibility for any actions taken or not taken on the basis of this publication.

JOHANNESBURG
1 Protea Place, Sandton, Johannesburg, 2196. Private Bag X40, Benmore, 2010, South Africa. Dx 154 Randburg and Dx 42 Johannesburg.
T +27 (0)11 562 1000 F +27 (0)11 562 1111 E jhb@cdhlegal.com

CAPE TOWN
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T +27 (0)21 481 6300 F +27 (0)21 481 6388 E ctn@cdhlegal.com

STELLENBOSCH
14 Louw Street, Stellenbosch Central, Stellenbosch, 7600.
T +27 (0)21 481 6400 E cdhstellenbosch@cdhlegal.com

©2020 8956/MAY

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