Gründlingh and Others v Phumelela Gaming and Leisure Limited

The first and second appellants are licensed bookmakers operating from Tattersalls premises in Pretoria. The respondent is a public company operating a computerised totalizator (tote) nationally under the brand name Saftote. The appellants began offering 'exotic' bets (such as trifectas, trios, jackpots) where the payouts were based on the dividends published by the respondent's totalizator, rather than using their own betting pools. The respondent brought an application in the Pretoria High Court seeking an interdict to stop this practice on two grounds: (1) that such bets were not 'fixed odds bets' as defined in the Gauteng Gambling Act 4 of 1995 and therefore unlawful for bookmakers to accept; and (2) that the practice constituted unlawful competition. Mynhardt J granted the interdict. The appellants appealed to the Supreme Court of Appeal with limited leave.

• Whether exotic bets with payouts based on totalizator dividends constitute 'fixed odds bets' within the meaning of section 55 of the Gauteng Gambling Act 4 of 1995
• Whether the use by bookmakers of totalizator dividends to determine payouts constitutes unlawful competition
• The proper interpretation of 'fixed odds bet' where odds are not immediately calculable but are ascertainable by formula
• Whether legislative history and amendments to the definition of 'fixed odds bet' assist in interpretation
• The test for unlawfulness in the context of commercial competition and the role of boni mores and public policy
• Whether appropriation of a competitor's business system, product, performance and results amounts to unlawful competition

The appeal was allowed with costs including the costs of two counsel. The orders of the High Court (interdicting the appellants from offering bets that were not 'fixed odds bets' and from using the respondent's totalizator results) were set aside and substituted with an order dismissing the application with costs including costs of two counsel.

The binding legal principles established are: (1) A 'fixed odds bet' as defined in the Gauteng Gambling Act 4 of 1995 includes bets where the odds are agreed upon by formula when the bet is laid, even if the actual quantum of the odds cannot be calculated until later (ie ascertainable odds bets, not just immediately calculable odds bets). The requirement is for 'agreed odds' not 'known odds' at the time of laying the bet. (2) In determining whether competitive conduct constitutes unlawful competition, the test is whether it offends the boni mores or legal convictions of the community, which includes consideration of public policy as expressed through legislation. Long-standing legislative permission or tolerance of a practice (in this case, bookmakers using totalizator dividends for nearly 50 years with only a brief interruption) indicates that the practice accords with the legal convictions of the relevant commercial community and is not unfair or dishonest competition, even where it involves use of a competitor's published results or data.

Comrie AJA in dissent made several notable observations: (1) There is a distinction between cases of 'unprotected copying' (not protected by intellectual property statutes) and cases of appropriation of business systems – the latter being more readily actionable. (2) The principle from Taylor & Horne (Pty) Ltd v Dentall (Pty) Ltd that competitor A cannot prevent competitor B from capitalizing on market demand created by A does not extend to permitting B to appropriate A's actual business system, product and performance. (3) Where a competitor directly misappropriates a rival's business system, product, performance and repute at no significant expense to himself, this should be condemned by right-thinking members of the community as 'reaping where one has not sown' (referencing the biblical language in International News Service v Associated Press). (4) Legislative sanction of a practice, while relevant to assessing community standards, is not necessarily determinative, particularly where there is no indication the legislature gave serious thought to the implications or fairness of the practice. (5) The National Gambling Act 7 of 2004 (which came into force during the appeal) expressly permits 'open bets' where payout is determined by reference to totalizator dividends, which is relevant to assessing contemporary community standards. The majority also made obiter observations about the historical development of totalizator and bookmaking legislation in South Africa and the distinction between fixed odds and starting price bets.

This case is significant in South African gambling law for clarifying the definition of 'fixed odds bets' under the Gauteng Gambling Act, holding that it includes bets where odds are ascertainable by formula even if not immediately calculable when the bet is laid. More broadly, it is important for the law of unlawful competition, demonstrating that long-standing legislative sanction of a commercial practice, even if interrupted briefly, may establish that practice as consistent with the boni mores and legal convictions of the relevant commercial community. The case illustrates the tension between protection of business investment and systems on the one hand, and freedom of competition in a free market economy on the other. It shows that legislative policy as expressed through regulatory amendments is a significant (though not necessarily determinative) factor in assessing whether competitive conduct violates public policy. The decision also demonstrates the distinction between unprotected copying, misappropriation of results, and appropriation of business systems – areas that require careful analysis of the specific facts and the relevant community's legal convictions.