The High Court recently ruled that findings by the B-BBEE Commission against Sasol Oil were capricious and irrational in several respects and its recommendations constituted an abuse of power.
The High Court (Gauteng Division, Pretoria) recently confirmed that findings of the Broad-Based Black Economic Commission (B-BBEE Commission) must be made within the precepts of the Promotion of Administrative Justice Act (PAJA), the Broad-Based Black Economic Empowerment Act (B-BBEE Act) and the regulations promulgated thereunder (B-BBEE Regulations). In summary, the B-BBEE Commission is required to conduct its investigations in a lawful, reasonable and procedurally fair manner, its findings must take account of all evidence before it and its findings must be rational.
These were the views of the High Court in its judgment on an application brought by Sasol Oil Limited (Sasol Oil) to review the findings made by the B-BBEE Commission against Sasol Oil. The matter arose after a complaint was laid with the B-BBEE Commission by one of the indirect B-BBEE shareholders of Sasol Oil to the effect that Sasol Oil was responsible for the unfair terms of a third-party funding agreement, even though Sasol Oil was not a party to that agreement. The complaint to the B-BBEE Commission had been preceded by a complaint by the shareholder to Sasol Limited in 2015 that the funding agreement unfairly favoured the funders and so undermined the B-BBEE rationale for the transaction. Upon receiving that complaint, Sasol Limited took the matter up with the B-BBEE shareholders and the funders through a facilitated negotiation which resulted in the conclusion of a settlement agreement in September 2016.
However, in October 2017 Sasol Oil received a notice from the B-BBEE Commission that it was investigating a complaint laid by the shareholder. Although Sasol Oil made comprehensive submissions denying its awareness of the funding agreement until December 2015; drew the B-BBEE Commission's attention to the settlement agreement, which it presumed had satisfactorily resolved the complaint; and pointed out that its B-BBEE rating did not depend in any way on whether the relevant indirect shareholder was the true beneficial owner of its shares, the final findings of the B-BBEE Commission were against Sasol Oil.
In concluding that the B-BBEE Commission's findings and recommendations were invalid, the High Court found that:
- the B-BBEE Commission's findings constituted administrative action that could be dealt with under PAJA, but could equally be reviewed under some of the provisions of the B-BBEE Act and B-BBEE Regulations;
- its decision on certain aspects was based on incorrect facts, rendering it reviewable, and was not based on admissible evidence, rendering it irrational;
- it took into account irrelevant considerations and relevant considerations were not considered within the meaning of the relevant provision of PAJA;
- its final findings were made arbitrarily or capriciously within the meaning of the relevant provision of PAJA;
- its final findings were irrational and unreasonable within the meaning of the relevant provisions of PAJA;
- its reasoning in reaching the conclusion that the black ownership claimed did not meet the requirements for exercisable voting rights, economic interest and net value was demonstrably flawed. The B-BBEE Commission misdirected itself in its conclusion that Sasol Oil had misrepresented its own BEE status;
- to ascribe a fronting intent to Sasol Oil through a funding agreement to which it was not a party, and which was concluded by independent parties, was irrational;
- the B-BBEE Commission merely paid lip service to giving Sasol Oil a fair hearing, which rendered its process unfair, as it did not act in full compliance with PAJA and the B-BBEE Regulations;
- the B-BBEE Commission's recommendations were reviewable and amounted to an abuse of power as it was not authorised, within the meaning of the relevant provision of PAJA, to make the recommendations, which were beyond its powers. It threatened to exercise its statutory powers for an ulterior purpose, within the meaning of the relevant provision of PAJA, of compelling Sasol Oil to adopt and implement its unlawful recommendations; and
- the findings were time-barred and the final findings themselves therefore contravened the B-BBEE Regulations, which prescribe that the B-BBEE Commission must issue its findings within one year of receiving a complaint.
In addition to ruling that the findings of the B-BBEE Commission were invalid and setting them aside, the High Court interdicted it from making unlawful demands of Sasol Oil and from threatening to invoke its powers against Sasol Oil if it did not comply with the B-BBEE Commission's unlawful demands.
The judgment should provide some comfort to businesses, particularly those under investigation or threatened investigation by the B-BBEE Commission. The High Court's decision in this judgment is also likely to encourage businesses to invoke their rights under PAJA, the B-BBEE Act and B-BBEE Regulations in their dealings with the B-BBEE Commission.
