Gauteng Gambling Board & another v MEC for Economic Development, Gauteng Provincial Government

The Gauteng Gambling Board (the Board) is a statutory body established under the Gauteng Gambling Act 4 of 1995. The Board owned premises in Centurion and decided to relocate to a new building it purchased and constructed in Bramley, Johannesburg, at a cost of approximately R101 million. The relocation was approved by the MEC's predecessor and the Provincial Treasury, using the Board's surplus funds. In 2011, the MEC requested the Board to accommodate a commercial entity called African Romance in the new Bramley building. The Board refused as the building was not designed to house additional entities, but offered to lease its Centurion building to African Romance. In October 2011, the MEC instructed the Board to provide 1000 square metres to African Romance and to relocate to Main Street in Johannesburg's CBD where the MEC's department was housed, purportedly to create a central hub for agencies linked to the department. The Board refused to comply, believing it had to act within its statutory powers and comply with the Public Finance Management Act 1 of 1999 (PFMA) and Treasury Regulations. The Board had just spent R101 million and believed further relocation expenses would be fiscally imprudent and potentially unlawful. On 16 January 2012, the MEC gave Board members two days to provide reasons why their membership should not be terminated. On 18 January 2012, the Board launched an urgent application to prevent dissolution. On 23 January 2012, before the matter was heard, the MEC terminated the membership of all Board members, ostensibly for refusing to relocate. The Board applied to set aside the termination. The High Court (Mathopo J) dismissed the application, and the Board appealed with leave.

• Whether the MEC had the power under the Gauteng Gambling Act to terminate the membership of all Board members for refusing to relocate offices
• Whether the MEC acted with an ulterior purpose in terminating the Board
• Whether the MEC's decision was contrary to the principle of legality
• Whether the Board was entitled to refuse the MEC's instruction on grounds of fiscal prudence and compliance with the PFMA and Treasury Regulations
• Whether section 8(2) and (3) of the Gauteng Gambling Act authorized the dissolution of the entire Board in these circumstances
• Whether the MEC afforded Board members adequate opportunity to be heard before terminating their membership

The appeal was upheld. The termination on 23 January 2012 of the membership of all members of the Gauteng Gambling Board was declared unlawful and invalid. The order of the court below was set aside. The respondent (MEC) was ordered to pay the costs of the first and second appellants on an attorney-client scale. The substituted order was made effective from the date of the judgment (27 May 2013) to preserve decisions made by the administrator and purported new Board members in the interim.

Public officials may exercise no power and perform no function beyond that conferred on them by law - this is the principle of legality, an incident of the rule of law. Acting with an ulterior motive or purpose in exercising statutory powers is unlawful and constitutes acting in fraudem legis. An MEC who purports to use a statutory power for one purpose (administrative efficiency) while actually using it for another purpose (to pressure compliance with an unlawful instruction) acts beyond legal powers and contrary to the principle of legality. Statutory bodies established under legislation have independent legal existence and must comply with their statutory obligations, including those under the PFMA and Treasury Regulations regarding fiscal prudence and accountability. Section 8(2) and (3) of the Gauteng Gambling Act, which permits termination of Board membership for "good reasons", is intended primarily for individual member disqualification, not dissolution of an entire Board. Section 18B is the proper mechanism for dealing with an allegedly errant Board as a whole, requiring prescribed procedures to be followed before termination.

The Court expressed strong displeasure at the high-handed manner in which the MEC behaved, including appointing an administrator immediately after dissolving the Board and the subsequent appointment of new Board members while the appeal was pending. The Court stated: "It is time for courts to seriously consider holding officials who behave in the high-handed manner described above, personally liable for costs incurred. This might have a sobering effect on truant public office bearers." The Court noted that while the MEC's conduct came close to contempt of court by attempting to frustrate relief sought by the Board, it could not conclusively be characterized as such. The Court observed that the State should be a model of compliance and that public officials and litigants have a duty not to frustrate the enforcement by courts of constitutional rights. The Court emphasized that constitutional remedies must be effective to vindicate rights and instill recognition that official conduct violating rights tramples on the Constitution itself. The Court commented that the MEC's behavior of attempting to "turn turpitude into rectitude" by playing the victim while acting in flagrant disregard of constitutional norms was inexcusable.

This case is significant for reinforcing the principle of legality in South African administrative and constitutional law - that all organs of state may only exercise powers conferred by law and may not act with ulterior motives. It establishes that using statutory powers for purposes other than those for which they were granted constitutes acting in fraudem legis and violates the principle of legality. The case emphasizes the independence of statutory bodies and their duty to comply with fiscal management legislation (PFMA and Treasury Regulations) even when instructed otherwise by political superiors. It demonstrates judicial willingness to scrutinize executive action and hold government officials accountable for high-handed conduct. The judgment signals that courts may in future consider personal cost orders against officials who abuse their powers, going beyond making the State (taxpayers) liable. The case also clarifies the proper interpretation of the Gauteng Gambling Act provisions regarding termination of Board members versus dissolution of an entire Board.