Council gets punitive cost orders for bullying Comair

The North Gauteng High Court earlier this month slammed the Air Services Licensing Council with punitive cost orders after setting aside an earlier decision to suspend listed airline company Comair’s domestic license to fly.

Moneyweb reported on May 11 last year that Comair rushed from the Council’s offices to court and obtained an “urgent, urgent” court order to prevent it from being grounded until its urgent application with the same aim could be heard the next week.

The airline did obtain an interdict the following week that allowed it to continue flying until a court review of the Council’s decision has been finalised. The review application was heard in March this year and the recent ruling set the Council’s decision aside.

Comair and the Council have been at loggerheads since early 2014 when rival FlySafair laid a complaint against Comair.

This came after the launch of FlySafair was delayed and FlySafair was compelled to comply with the relevant legislation following a similar complaint from Comair.

FlySafair in its complaint argued that Comair offended the legislation because the voting rights of foreign shareholders exceeded 25% “on a look-through basis”. This related to Bidvest’s 100% shareholding in BB Investments, which had a stake in Comair. Bidvest had a 47.9% foreign shareholding at the time.

Following correspondence between Comair, FlySafair later capitulated and indicated that it won’t persist with the complaint.

Thereafter in July 2015, without engaging Comair on the substance of the complaint, the Council notified Comair that it was non-compliant and set a 120-day deadline for it to comply.

Correspondence between Comair and the Council followed and Comair asked for the remainder of the 120-day period to be suspended for it to understand the reason why the Council considered it non-compliant and what step it should take to satisfy the Council. The court found that: “Apparently, the Council did not engage with Comair’s submission or indicate in which respect they were considered wrong, inaccurate or deficient.”

Comair argued that these and subsequent decisions of the Council were irrational, unreasonable, procedurally unfair and failed to take relevant information into account.

The Council argued that it did not take a decision, but merely exercised its powers in terms of the Air Services Licensing Act and that the application was premature.

The court rejected this argument and found that the Council’s decision amounted to administrative action as defined in the Promotion of Administrative Justice Act (PAJA). It further found that its decision was taken “without giving Comair an opportunity to explain itself”.

The court found that the Council’s repeated statements to Comair that it cannot revisit its own decision and that Comair would have to approach the court in this respect, is at odds with its contention before the court that it had not taken any decision. “This conduct is disingenuous of the Council,” the court stated.

The court found that Comair in May 2014 already supplied a full response to the FlySafair complaints and showed that only 16.79% of voting rights were held by non-resident entities. In November 2014 Comair supplied further information on request of the Council, including “proof of citizenship and ordinary residence of the directors… members… and both trustees and beneficiaries”.

This included reports from independent experts Computer Share Outsourcing and Strate Central Securities Depository and Vaco Holdings regarding Comair’s certified and uncertified shareholder.

The court found: “It is apparent from the correspondence between the Council and Comair that the Council did not engage with the extensive information provided to it, including the independent experts’ reports.”

The court found the Council informed Comair without any prior notice of its decision to suspend its license in July 2015. The Council’s secretariat further informed Comair that the Council obtained a legal opinion supporting Comair’s contention that it does comply. Despite an undertaking to do so, the legal opinion was never supplied to Comair.

The Council proceeded with its intention to implement the suspension and only the interdict saved Comair from serious commercial damages.

The court found that Comair “demonstrated comprehensively and in detail” that more than 75% of its voting rights were held by South African residents. The Council, however, “for no apparent reason” held in its Record of Decision that non-resident voting rights amounted to 50% of the total, the court found. This included “Allan Gray”.

In its calculation, the court found that the Council considered the residential address of Allan Gray and his family in Bermuda, which was irrelevant. “The Council ignored the extensive evidence that was put before it including that the shares were held by Unit Trust Funds and not by Allan Gray and his family, which was totally irrelevant”, the court found. It further considered Bidvest’s voting rights in BB Investments, which was equally irrelevant.

The court found that the look-through approach was not in line with the act.

The court is critical of the seven page heads of argument the Council filed in response to Comair’s 80-page document and states that it was “of very little help in writing this judgment”.

It further finds that “there are no convincing reasons why the Council allowed this matter to run its full course without making an attempt to settle it outside the court”. For these reasons, it found that a punitive cost order is appropriate.

The Council was ordered to pay Comair’s cost in both urgent application as well as the review application at a scale between attorney and client, including the cost of two counsel.

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