A “genius” business model to sidestep the Drugs and Drug Trafficking Act has been blown in court, with the high court ruling that it cannot declare it legal. 

On Monday, 29 August 2022, Judge Hayley Maud Slingers ruled against The Haze Club (THC), which had brought a high court application. 

The grow club, explained a press statement last year from Schindlers Attorneys — which had assisted Cliffe Dekker Hofmeyr and THC pro bono — was based on a business model whereby a person or entity leases out land, equipment and gardening services; grows, on behalf of its clients plant material, including cannabis; and does not own or provide its clients with, cannabis, cannabis seedlings or feminised cannabis seeds.

Effectively, it meant providing growing facilities for plants to be nurtured and harvested for their domestic consumption. But in many cases, the seeds were also provided by the clubs.

In the wake of the landmark Prince ruling in the Constitutional Court 0n 18 September 2018, which found that it was unconstitutional for the state to criminalise the possession, use or cultivation of cannabis by adults for personal consumption in their own homes and “properly designated places”, cannabis clubs have mushroomed across the country. This while the government pondered over policy reviews to unlock the socioeconomic potential of the cannabis and hemp industries. 

THC, one of many online grow clubs established after the Concourt ruling, was founded by Neil Liddell. Two years later, in October 2020, police raided his premises and seized plants. 

The State argued that the club did not operate in a private space and, therefore, fell afoul of the law.

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Liddell and his legal team had hoped to rely on the Prince ruling.

The government’s Cannabis Master Plan, aimed at providing “a broad framework for the development and growth of the South African cannabis industry to contribute to economic development, job creation, inclusive participation, rural development and poverty alleviation” hopes to commercialise the sector estimated to be worth about R28-billion. It hopes to create between 10,000 to 25,000 jobs across the entire value chain.

President Cyril Ramaphosa, during his State of the Nation Address in February, highlighted the sector’s enormous potential for investment and job creation.

The Cannabis for Private Purposes Bill is still before Parliament. 

In her ruling, Judge Slingers said that to allow a grow club model, as proposed by the applicants, to operate in the absence of statutory or legal regulations and guidelines “could have the practical effects of legalising dealing with cannabis”.

“It may be that the legislature envisages the legislation hereof in the future, but this does not mean that the court should anticipate it. The legalisation of dealing and cannabis concerns policy issues and falls within the realm of the legislature, not the judiciary.”

She said the applicants and their customers are not prevented from using and or cultivating cannabis — they are merely prevented from outsourcing that right. 

Operating a grow club is therefore still deemed to be a criminal act in terms of the Drug Trafficking Act and conviction can lead to imprisonment. 

Shaad Vayej, attorney at Cliffe Dekker Hofmeyr, who consulted on this matter for THC, says an appeal is likely. 

“Unfortunately, The Haze Club application was dismissed by the Cape Town High Court. This represents a narrow interpretation of the right to privacy, what constitutes a private space and the limitations on private cultivation of cannabis, as envisaged by the Constitutional Court in Prince 3. 

“However, it is not the end of the road as an appeal will likely be forthcoming.”

Vayej says in his view, the nature and extent of constitutional rights at play, most certainly warrants consideration by our apex court, and there are a number of practical issues which require clarity and supplementary submissions. “Therefore, this exercise may well be purely academic… due to the proposed removal of cannabis from schedule 2 of the Drugs and Drug Trafficking Act as it is apparent from the latest Draft Cannabis for Private Purposes Bill”, which if passed, the provisions of the drugs act prohibiting use, position and dealing in will no longer be applicable to cannabis, the whole plant or any portion thereof.”

He says whether cannabis private clubs will fall within the regulatory landscape in the absence of explicitly empowering legislation further than the Medicines and Related Substances Act remains a point of debate and concern. BM

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