2020 Lecture 10 The Endumeni approach PDF

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University of the Western cape Legal Interpretation LEG221 (2020)LECTURE 10OVERVIEW OF THE INTERPRETIVE PROCESS (PART I): THE ENDUMENI APPROACH1. Prescribed materialThe Constitution Act 200 of 1993: Section 35(2) The Constitution, 1996: Sections 39(2), 150 and 233 Natal Joint Municipal Pension Fund ...

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University of the Western cape Legal Interpretation LEG221 (2020) LECTURE 10 OVERVIEW OF THE INTERPRETIVE PROCESS (PART I): THE ENDUMENI APPROACH

1.

Prescribed material

The Constitution Act 200 of 1993: Section 35(2) The Constitution, 1996: Sections 39(2), 150 and 233 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) (16 March 2012) 2.

Study objectives

At the end of the lecture you should be able to: (1) Explain and apply the Endumeni approach to the interpretation of statutes; (2) Provide a definition of statutory interpretation based on the definition in the Endumeni case; (3) Explain why the Endumeni approach is also called (i) the contextual approach; (ii) the purposive approach; (iii) the unitary approach; and (iv) the iterative approach. (4) Write a short case note on the factual background, the interpretive approach, and its practical application in the Endumeni case. 3. The basic research question This lecture is the first lecture of the Part III of the module. In Part III of the module we shift our focus from finding the prevailing law (which primary rules of statute law are applicable) to interpreting the prevailing law in the context of the facts at hand. In Part II of the module we established that the sign in the park that reads: “No vehicles allowed in the park” indeed reflects the prevailing law on access to the parks in the City. Recall that we did so by establishing (i) that the sign refers to a by-law and not to a contract or decision by the civic park association (lecture 1); (ii) that the by-law was properly passed and put into operation (in so doing we found the original version of the by-law that was published in the Provincial Gazette) (lecture 5); (iii) whether the Gazetted version of the bylaw was ever amended or declared invalid and if so which version of the by-law is applicable to the dispute between Jabu and the City (in the process we edited the original text to bring it up to date with all subsequent changes) (Lectures 6 and 7); and (iv) whether there are any

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other by-laws dealing with access to public parks and if so whether the first by-law prevails over the other by-laws in the case of an unavoidable conflict (lectures 8 and 9). Researching the law became arduous and highly technical at times (or in hard cases can become so) but we have also learned a lot about the need for secondary rules to regulate the application of primary statutory rules. In particular, we learned that differences between two or more statutes must as far as possible be resolved through the harmonious interpretation of statutes. This means that a court must often not apply the most obvious meaning or interpretation of a statute (the prima facie meaning or ordinary meaning) but must rather actively explore and prefer any reasonable alternative meaning that would harmonise the two laws (refer back to Lectures 8 and 9). In Part II of the module we did not further investigate how this interpretive solution works in practical terms, but focussed on what happens when the solution fails and courts are forced to choose between two statutes that cannot be applied together to the same set of facts. We now return to the nature of harmonious interpretation in particular and statutory interpretation in general. In Part III of the module our focus falls on how courts interpret the legal meaning of a statute in the process of applying the statute to resolve a legal dispute. We know that no vehicles are allowed in the park but what does that mean in legal terms? May Jabu drive into the park in his motorised wheelchair? The rule of law guaranteed by section 34 of the Bill of Rights read with the founding provisions in section 1(c) requires that the answer must be determinable and determined by the by-law in question. But the by-law does not mention motorised wheelchairs. Perhaps the municipal council did not think about people in motorised wheelchairs when the passed the law, perhaps such wheelchairs did not exist when the law was passed many decades ago, perhaps they did think about motorised wheelchairs but did not think that the word “vehicles’ refers to such wheelchairs or any other vehicles that do not need a licence to be driven on a pubic road. Can we ever know what they had in mind? Does it matter in any case what the councillors had in mind when they passed the law? If not, how must a court decide whether the law should be interpreted to allow motorised wheelchairs or not? And how must the interpretation of the by-law by the court eventually be publicly justified in its judgment? What reasons or arguments can the court (and the opposing lawyers) eventually present to justify their interpretations of the by-law. In Part III of the module we explore these questions and seek to provide some answers. Recall what we said in the Module Outline about the importance of statutory interpretation. We referred to the case of the “alternative road” (involving a billion rand toll-road construction), the case of the “sentence of imprisonment” involving the deportation of foreigners, and the case involving the “review of a decision” involving the recall of former President Thabo Mbeki. How did the courts interpret these phrases in each of these cases and how did they justify the far-reaching consequences of these interpretations? In Part III we will find the answers to these questions and look at several other interesting and controversial cases of statutory interpretation over the past 150 years in our law. Many of these cases involve discriminatory laws typical of colonialism and apartheid. Indeed, the lessons we have learned from the way our courts approached the interpretation of these laws played a big role 2

in the shift to the new approach to statutory interpretation. So, what is this new approach? The aim of this lecture is to answer this question by taking a closer look at a case that is widely regarded as one of the best examples and clarifications of the new approach: the Endumeni case. 4 Lecture notes 4.1 A constitutional starting point As with all areas of law, the post-apartheid constitutions continue to have a big impact on the way courts understand and approach the process of statutory interpretation. We already know (see lectures 8 and 9) that the Constitution regards it as acceptable not to apply a law according to its prima facie meaning or interpretation (also called its ordinary, plain, literal or natural meaning) if that meaning brings the law into conflict with another law, the Bill of Rights or international law and another reasonable interpretation of the law is possible. For convenience sake the four interpretive mandates included in the two post-apartheid constitutions are again quoted below. Note how all these provisions instruct the court not to apply the statutes in question literally. In the case of conflicts between statutes from different spheres, sections 150 provides as follows: Interpretation of conflicts 150. When considering an apparent conflict between national and provincial legislation, or between national legislation and a provincial constitution, every court must prefer any reasonable interpretation of the legislation or constitution that avoids a conflict, over any alternative interpretation that results in a conflict. In the case of conflicts between a statute and an international treaty, section 233 of the Constitution contains the following instruction: Application of international law 233. When interpreting any legislation, every court must prefer any reasonable interpretation of the legislation that is consistent with international law over any alternative interpretation that is inconsistent with international law. In the case of conflicts between any statute and the Bill of Rights, section 35(2) of the interim Constitution stated the following: Interpretation 35(2). No law which limits any of the rights entrenched in this Chapter, shall be constitutionally invalid solely by reason of the fact that the wording used prima facie exceeds the limits imposed in this Chapter, provided such a law is reasonably capable of a more restricted interpretation which does not exceed such limits, in which event such law shall be construed as having a meaning in accordance with the said more restricted interpretation. And section 39(2) of the Constitution of 1996 states as follows: 3

When interpreting any legislation, and when developing the common law or customary law, every court, tribunal or forum must promote the spirit, purport and objects of the Bill of Rights. When looking at these four constitutional instructions about the proper interpretation of statutes in these cases of conflict, the following stand out: (i) The fact that these three provisions are included in the Constitution shows that any legal system needs rules and principles to regulate the application and interpretation of the primary legal rules contained in statutes. These provisions make the Constitution the primary source of this secondary law of interpretation. (ii) All four provisions assume that statutes can have more than one legally valid interpretation or meaning. One interpretation that on the face of it (“apparently” or “prima facie”) causes a constitutionally problematic conflict, and at least one other interpretation that avoids the conflict. These provisions openly reject the idea that a statute can only have one objectively correct interpretation and that it is the task of the court is to find that interpretation by adopting the correct method of interpretation. (iii) All three provisions embrace the potential plurality of legal meanings as a fortunate feature of statutes. The fact that statutes are open to interpretation allows courts to resolve conflicts between statutes and between statutes and other written sources of law. These provisions instruct courts to embrace this plurality and to adopt an interpretive stance that generates alternative meanings, rather than one that suppresses alternative meanings. (iv) All three provisions require that courts make a choice between competing interpretations of the same statutory rule on the basis of an important constitutional value. Section 150 prescribe that a statute must be interpreted to promote the value of cooperative government; section 233 that statutes must be interpreted to promote the founding value of cosmopolitanism; and section 35(2) that statutes must be interpreted to promote the value of human rights. This value- promoting approach to statutory interpretation in cases of conflict is extended to the interpretation of all statutes by section 39 of the Constitution, where the values at stake is described in section 39(1) as “the values that underlie an open and democratic society based on human dignity, equality and freedom” and in section 39(2) as “the spirt, purport and objects of the Bill of Right”. There have been numerous attempts in our case law over the past 25 years to clarify the implications of these provisions (especially section 39(2)) and the new approach to statutory interpretation these provisions introduced into our law. (Accept for now that the old approach was that courts must always apply the prima facie (ordinary; plain; literal) meaning of a statute, because that is the best available evidence of the intention of the legislature or regulator. Call this old approach the literal approach to statutory interpretation.) It is a symptom of the casuistic approach of our courts that these provisions were initially understood as regulating very specific interpretive problems, as opposed to introducing a new process of interpreting statutes that uniformly applies to all statutes, even where no conflict is involved. In fact, traditionalists who were opposed to the new approach sought to limit its use to situations where the constitutionality of a statute was directly challenged. In all other cases the old approach continued to apply. However, some of the special courts established to apply quasi-constitutional legislation, such as the Labour Court, the Equality Court and especially 4

the Land Claims Court, accepted that the new approach also applied to the application of quasi-constitutional legislation. These courts began to developed the new approach, which they called the purposive approach, and also started looking for early examples of the new approach in our older case law as pointers (we explore the relationship between the new approach and the old case law in more detail in lecture 11). Ironically, it was a judgment that does not refer to any of the constitutional provisions mentioned above that finally made clear that there is a new approach to the interpretation, not only of statutes, but of all legal documents, including contracts. This is the judgment by Wallis JA in Joint Natal Municipal Pension Fund v Endumeni Municipality. Strangely enough, Wallis JA decided to clarify the nature of the new approach, not with reference to the Constitution or the case law of the Constitutional Court or any of the Special Courts, but with reference to the approach recently adopted in English and Australian law to the interpretation of contracts. Taking his cue from recent development in the commonwealth has two negative consequences. First, in neither England nor Australia do the courts have the power to declare statutes unconstitutional (in fact, what is known as the weak or commonwealth model of judicial review has become popular among legal academics as an alternative to the model of strong review applicable in South Africa). Second, because of the focus on contracts, the role of public values in the interpretive process is underplayed (the process of strong review is justified as a means of ensuring the protection of public values against the legislative power of political majorities, something which arguably plays a smaller role in the interpretation of contracts and an even smaller role in the interpretation of wills). With these reservations, we can now look at the Endumeni case and the approach to the process of statutory interpretation that it mandates. 4.2 The Endumeni approach Exercise Read the judgment in Joint Natal Municipal Pension Fund v Endumeni Municipality and then answer the following questions: 1. Quote the wording of the proviso that was applicable to the dispute. 2. How did the dispute arise? Why was the original rule amended? Did the drafters of the new rule foresee or anticipate the scheme concocted by Mr Maltman and the Endumeni Municipality? 3. Who won the dispute in the High Court? Why (ie, how did the High Court interpret and apply the proviso)? The High Court ruled that Mr Maltman had exploited a loophole in the amended Rules and that it was not the role of the court to close loopholes or fill gaps in legislation. 4. Who won in the SCA? Why (ie, how did the SCA interpret and apply the rule)? The SCA stepped back and looked at the purpose of the rule and held that a sensible and 5

practical interpretation must prevail over the more obvious literal interpretation adopted by the High Court. In effect the SCA expanded the scope of the proviso beyond its letter, to cover the Maltman scheme which was not contemplated by the drafters and therefore not covered by the plain meaning of the way the proviso was formulated. 5. Wallis JA tried his best to formalise the approach that lead to the outcome in the case. Wallis JA said that this approach must in future be followed all cases. Can you summarise this approach in your own words, beginning with what interpretation is, and how it should be done?

4.2.1 The story behind Endumeni Employees of municipalities in Kwa-Zulu Natal belonged to a pension fund (called the Superannuation Fund). As members of the fund, the employees paid pension every month at a fixed percentage of their salaries. The municipality also contributed to the pension fund every month (these employees “got paid” a pension). When an employee resigned or retired and left the fund, the pension pay-out is calculated not on the basis of the actual contributions made over the years but on the basis of the years in service and salary at that point. Actuaries calculate the expected pay-outs over every three-year period and make sure the fund has enough money by fixing the contributions of members and municipalities. The scheme worked well until “previously disadvantaged employees” (see para 33) were given large salary increases far beyond what the actuaries of the fund had anticipated and planned for. These employees were milking the pension fund with assistance of the municipalities. As a result, the pension fund became unsustainable. In response to this problem of excessive salary increases (see paras 31 and 32 and 33) and underfunded pension pay-outs, the actuary of the fund requested the MEC to amend the regulations applicable to the fund to solve the problem. The solution adopted by the MEC was to insert a proviso into the Regulations (see para 6). As far as relevant, the proviso reads as follows: “provided further that should at any time the pensionable emoluments [salary] of a member increase in excess of that assumed by the actuary, then the committee on the advice of the actuary, may direct that the local authority employing such member pay an adjusted contribution in terms of Regulation 21 to the Fund”. From the wording of the proviso it is clear what the drafters (the MEC on advice of the actuary) had in mind. If a municipality dramatically increases the salary of an employee then the fund can increase (adjust) the contribution which the municipality must pay every month to the fund (these payments are made under Regulation 21). This increase would prevent a short-fall when the employee eventually retires. In my view, it is fairly clear what the intention of the drafters was and that the ordinary meaning of the language chosen when formulating the proviso accurately captured that intention. The proviso speaks about salary increases of “a member”, and about the municipality “employing the member” and of an increase or adjustment in the monthly contributions usually made by the employer. 6

So, what was the problem with this solution? One of the disadvantages of the requirement that statutes must be published is that the legislature cannot anticipate all the situations in which the published statute will be later be applied. Publishing the statute also gives clever layers an opportunity to look for loopholes to find a way around the way the statutory rule has been formulated. Statutes are thus notoriously overinclusive (they include cases that should not have been included) and underinclusive (they failed to include cases tat should have been included) when compared to the problem they sought to address. The Endumeni case is a good example of an underinclusive rule. No sooner had the proviso been published and put into operation, then the employees of the municipalities who were used to milk the fund found a new way around the proviso (no doubt with the help of clever lawyers who are adept at finding and exploiting loopholes in statutes). The SCA called these the Maltman manoeuvres, after one of the employees of the Endumeni municipality. Mr Maltman looked at the wording of the proviso and designed a clever scheme to find a way around the letter of the law. Remember that the proviso applied when the salary of an existing member of the fund increases and then allowed the fund to increase the monthly contribution of the municipality from what had previously been calculated for the next three-year period. This is how Mr Maltman tried to get around the new law. First, he resigned from the fund, joined another fund, and then re-joined the original fund at a much higher salary (his salary was increased from R5000 to R34 000 per month). Technically speaking, his salary was not increased while he was a member of the fund because he had joined the fund at the increased salary. Second, Mr Maltman then resigned, got the huge pension pay-out and was immediately employed in the same position on a contract basis by the Endumeni municipality. This plan was clearly well orchestrated. The fund responded by claiming an increased contribution from the municipality under the proviso but did so in one lu...