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Pretoria - The extension of a loan guarantee given to SA Airways did not contradict policy as the circumstances for the guarantee were exceptional, the High Court in Pretoria heard on Thursday.
Hamilton Maenetje, for SAA, said while Comair argued the payments and guarantees received by SAA contravened Domestic Aviation Transport Policy (DATP), within section 70 of the Public Finance Management Act (PFMA), this was not correct.
READ: Comair explains why it turned to court on SAA
"There is a second stage of inquiry which is relevant to that," he told the court.
"The policy is not a binding rule and is not to be applied in a binding and inflexable manner."
In October 2012 the government granted SAA a R5bn guarantee for a period of two years. SAA told parliament in February 2012 it needed between R4bn and R6bn for a recapitalisation programme.
One of the conditions for the R5bn guarantee in 2012 was that SAA's board had to develop a turnaround strategy. In October 2014 SAA was again seeking government support, two years after it was granted the R5bn in loan guarantees.
Comair failed to act
In January 2015 Finance Minister Nhlanhla Nene said SAA will receive another R6.5bn injection from state coffers, even though he had said in the previous October that there would be no more bailouts and that the airline would have to restructure.
Comair CEO Erik Venter said ahead of the case that the airline regarded the bailouts and certain other government payments to SAA as not compliant with the DATP or the law.
Maenetje said the rule in the policy that Comair had relied upon was that in future government would not grant SAA loan guarantees.
"The proper inquiry is there, in the context of the exercise of powers under section 70 [of the PFMA], they would under the circumstances in this case, there would have been exceptional circumstances that would've justified a departure [from policy]," he said.
"On the application of SAA [for the guarantee] we submit an exceptional case would've been made out by SAA for the guarantee and that, for any event, that would have justified a departure from any rule in policy."
He said on the previous occasions SAA was granted a guarantee, Comair failed to act.
"The existence of the policy created the legitimate expectation, and it doesn't have to put up a case on consistent practise, which give rise to a clear representation that there would be guarantees given to SAA," Maenetje said.
"At none of those times when the guarantees were extended Comair didn't act...The standard for legitimate expectation is clear and the expectation has to be reasonable and the test objective."
'Expensive waste of time'
The circumstances relating to national carrier's financial position leading to past guarantees were matters of public record. It could not be the case that a commercial competitor such as Comair would not have known of those factors.
"The expectation on the facts is demonstratably not reasonable," Maenetje.
Prior to proceedings concluding for the day, Matthew Chaskalson, for Nedbank, threw a fly into the soup by telling the court that the whole case was focused on a letter written by the minister of finance in September 2012.
However, this did not amount to a guarantee. "Where is the guarantee?" He asked.
"The only guarantees that have ever been issued are the actual guarantees that have been issued to the banks and individual decisions hadn't been ventilated yet.
"What I mean is this entire exercise has been a rather expensive waste of time."
He said the court was dealing with the power to guarantee a loan and issue a loan, with the letter signed by the minster at best amounting to "an intention to act in a particular way. It's not a guarantee".
"It's an agreement in principle. The only decision that took place were the only ones which took place for specific guarantees," he said.
"This whole case is really an exercise in nothing... The R5.006 billion guarantee does not exist."
Judge Hans Fabricius postponed the case till Friday morning.
