National Lotteries Board v Bruss NO and Others

The National Lotteries Board (appellant) sought declaratory relief against the trustees of the South African Children's Charity Trust (first to seventh and ninth respondents) and the SABC (eighth respondent). The Trust operated a competition called Winikhaya, broadcast on SABC, to raise funds for charity. Participants entered by sending a premium-rated SMS (R7.50) or postcard. Each entry constituted participation in a lucky draw with prizes including a monthly home loan prize of R500,000 and other prizes sponsored by various companies. The Trust contended the competition was a lawful promotional competition. The Board argued it was an unlawful lottery under the Lotteries Act 57 of 1997. The High Court dismissed the Board's application, finding the Board lacked power to seek such a declaration. The Board appealed with leave.

• Whether the National Lotteries Board has the power to institute legal proceedings to enforce the Lotteries Act and seek declaratory relief that a competition is an unlawful lottery
• Whether the Winikhaya competition involves a 'subscription' as defined in the Act, thus falling within its ambit
• Whether the Winikhaya competition constitutes a 'promotional competition' as defined in section 54 of the Act
• Whether the Winikhaya competition is an unlawful lottery in terms of sections 56 and 57 of the Act

The appeal was upheld. The court declared that: (i) the Winikhaya competition is not a promotional competition as contemplated in the Lotteries Act; (ii) the Winikhaya competition is an unlawful lottery as contemplated in sections 56 and 57 of the Act. The first to seventh and ninth respondents (in their capacities as trustees) were ordered to pay the costs of the appeal and the application in the High Court, including the costs of two counsel and reserved costs from 30 November 2006. The eighth respondent (SABC) was ordered to pay costs jointly and severally with the trustees, the one paying the other to be absolved, including costs of two counsel.

The binding legal principles established are: (1) Section 10(d) of the Lotteries Act impliedly confers on the National Lotteries Board the power to institute legal proceedings to enforce the Act, as this power is reasonably required to enable the Board to discharge its statutory function to 'monitor, regulate and police' lotteries and competitions. (2) Payment of money or delivery of any article (including an SMS or postcard) that provides the right to compete in a lottery constitutes a 'subscription' as defined in section 1 of the Act. (3) To qualify as a 'promotional competition' under section 1(xxiii), the dominant purpose of the lottery must be the promotion of sale or use of goods or services. Where the primary purpose is fundraising for charity and promotion of goods/services is merely incidental, the competition does not qualify as a promotional competition. (4) A lottery that involves a subscription and does not fall within any of the exemptions in the Act (including promotional competitions) is an unlawful lottery under sections 56 and 57.

The court made obiter observations regarding the difference between definitions in the Act and regulations. Boruchowitz AJA observed at [37] that it is not permissible to use a definition created by a Minister in regulations to interpret the intention of the Legislature in an Act of Parliament, citing Moodley v Minister of Education and Culture, House of Delegates. The court also noted that the Winikhaya competition had evolved over time, expanding from promoting SABC 1 and the Trust to including various sponsors and merchandise prizes, but this evolution did not change the fundamental character of the competition as a fundraising mechanism rather than a promotional competition. The court observed at [40] that no matter how meritorious a competition might be, if it does not comply with prescribed statutory conditions, it must be discontinued.

This case is significant in South African law for clarifying the scope and enforcement powers of the National Lotteries Board under the Lotteries Act 57 of 1997. It establishes that statutory bodies have implied powers to institute legal proceedings where reasonably necessary to discharge their statutory functions, particularly policing functions. The judgment provides important interpretation of key definitions in the Act, including 'subscription' and 'promotional competition'. It establishes that the dominant purpose test applies when determining whether a lottery is a promotional competition - the primary purpose must be promotion of goods or services, not merely incidental promotion in the course of fundraising. The case demonstrates the courts' willingness to look beyond form to substance in determining the true nature of competitions and lotteries. It also reinforces that even meritorious charitable activities must comply with statutory requirements.