2 December 2008

South Africa: Appeal Court Declares Winikhaya Competition an Unlawful Lottery

Johannesburg — THE National Lotteries Board yesterday won another battle against operators who conduct unlawful lotteries when the Supreme Court of Appeal upheld the board's appeal to declare popular TV competition WiniKhaya unlawful.

This March, the appeal court declared First National Bank's Million a Month Account an unlawful lottery.

The South African Children's Charity Trust was created in 2002 for the sole object of promoting and raising funds for charity and charitable causes. Its beneficiaries are charities in SA. To generate income for these charities, the trust promoted a campaign through a competition known as WiniKhaya which was broadcast by the SABC on TV.

The board contended that the competition was an unlawful competition, and applied for an order to put a stop to it.

Judge Roger Claassen held in November last year that the board lacked the power to seek an order to declare a promotional competition unlawful, and dismissed the application.

The trust said yesterday it would lodge an application to the Constitutional Court today to defend WiniKhaya.

"We launched WiniKhaya five years ago in good faith based on the best available legal advice, and have defended it against a piece of legislation that is ambiguous and poorly worded," trust chairman Jackie Schoeman said.

In the WiniKhaya competition, participants were required to send SMS messages to a predetermined cell phone number at a premium rate of R7,50 per SMS. This was substantially more than cellular rates offered by network operators for SMS messages.

Each SMS constituted one entry into the WiniKhaya competition, and entrants were furnished with voucher numbers which were then used in lucky draws. The cell phone operator deducted the SMS costs from entrants' accounts, and then made payments to the trust. The funds derived from the SMS messages were used to cover the cost of running the Winikhaya competition, including a portion of the prizes allocated.

The balance was then distributed to various charities supported by the trust.

The appeal court had to decide whether the board had the power to institute proceedings to stop the competition, whether the competition involved any "subscription" and whether the competition was an unlawful lottery.

Acting Judge of Appeal Phillip Boruchowitz said section 10 of the Lotteries Act implicitly conferred on the board the power to institute legal proceedings.

Boruchowitz also said section 63 of the act excluded from its ambit any lottery in respect of which there was no subscription.

Boruchowitz said it was clear from the WiniKhaya competition rules that the payment of R7,50 in respect of the SMS message formed a fundamental and integral part of the method of participation.

"I accordingly hold that the WiniKhaya competition involves a subscription as defined and falls within the ambit of the act."

Boruchowitz said the WiniKhaya competition as presently administered and implemented was an unlawful lottery as contemplated in terms of sections 56 and 57 of the act. Section 56 contained a general prohibition against the conduct of lotteries and competitions which were not authorised under the act.

"No matter how meritorious the competition might be, it does not comply with the prescribed conditions and the Trust is obliged to discontinue its operations," Boruchowitz said.

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