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[2015] ZASCA 85
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Merafong City Local Municipality v AngloGold Ashanti Limited (20265/14) [2015] ZASCA 85; 2016 (2) SA 176 (SCA) (28 May 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20265/14
In
the matter between:
MERAFONG
CITY LOCAL
MUNICIPALITY
.............................................................
APPELLANT
and
ANGLOGOLD
ASHANTI
LIMITED
..........................................................................
RESPONDENT
Neutral
citation
:
Merafong
City Local Municipality v AngloGold Ashanti Ltd
(20265/2014)
[2015] ZASCA 85
(28 May 2015)
Coram:
Maya, Majiedt and Mbha JJA, Schoeman and Van der
Merwe AJJA
Heard:
19 May 2015
Delivered:
28 May 2015
Summary:
Review – invalidity of
administrative action – Minister’s ruling made in terms
of
s 8(9)
of the
Water Services Act 108 of 1997
overturning
municipality’s decision to levy a surcharge on water for
industrial use by mines, even if invalid, exists and
has legal
consequences which municipality cannot simply disregard until it is
set aside by court in proceedings for judicial review.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Kubushi J sitting as a court of
first instance):
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
MAYA
JA
(Majiedt, Mbha JJA, Schoeman and Van
der Merwe AJJA concurring):
[1]
At issue in this appeal is whether the appellant municipality
(Merafong) is entitled to ignore a ruling made by the Minister
of
Water Affairs and Forestry (the Minister) in terms of powers vested
in her by s 8(9) of the Water Services Act 108 of 1997 (the
Act). The
effect of the ruling was to prevent Merafong from levying incremental
surcharges on water for industrial use supplied
to mines owned by the
respondent (AngloGold),
which
are situated in Merafong’s jurisdictional area. The ruling
further required Merafong, AngloGold Ashanti and Rand Water
(formerly
the Rand Water Board)
[1]
to
negotiate a reasonable tariff for water supplied to the mines for
domestic use by the latter.
[2]
AngloGold, a public company, has conducted gold mining operations at
its mines Tautona, Mponeng and Savuka situate near Carletonville,
since the mid 1940’s. Its operations require water which it
uses mainly for two purposes. It uses it for industrial purposes
which include dust allaying during drilling and rock handling, as a
cooling medium, as a transport medium and as a solvent in
the
metallurgical process. It also uses water for domestic consumption by
its employees housed in hostels on the mine properties.
AngloGold has
its own water reticulation infrastructure. Water saved during the
mining activities is stored in reservoirs for treatment
and
recycling. Waste water from domestic use is treated in its sewage
plants operated on the mine premises. Anglogold therefore
purchases
water for industrial use (ie use of water for mining, manufacturing,
generating electricity, land-based transport or
any related
purpose)
[2]
and
domestic use only to recoup the loss incurred during the mining
operations.
[3]
The additional water has, since 1958, been directly supplied to it by
Rand Water. The latter body is a water board and organ
of State,
whose primary activity is to provide water services to other water
service institutions, including municipalities in
their capacity as
water service authorities. With the municipalities’ approval,
it also supplies water directly to users
for industrial use and acts
as a water service provider directly to consumers
[3]
in
terms of written water supply agreements. AngloGold’s water
supply has, at all times, been provided through Rand Water’s
system of reservoirs, pipelines and other apparatus which are
maintained by Rand Water. AngloGold therefore does not and has never
used Merafong’s water and sanitation services.
[4]
In December 1997, Parliament promulgated the Act, a major piece of
national legislation providing, inter alia, for the rights
of access
to the supply of water and sanitation envisaged in the
Constitution,
[4]
the
setting of national standards and norms and standards for tariffs in
respect of water services,
[5]
the
establishment and disestablishment of water boards and water services
committees and their duties and powers, the monitoring
of water
services and intervention by the Minister or by the relevant
province, the accountability of water service providers,
[6]
and
the promotion of effective water resource management and
conservation.
[7]
The
Act further recognises local government’s constitutional
authority to administer water and sanitation services
[8]
and
designates municipalities as water services authorities responsible
for progressively ensuring access to water services by consumers
[9]
in
their areas of jurisdiction.
[5]
In terms of s 6(1) of the Act, ‘no person may use water
services from a source other than a water services provider nominated
by the water services authority having jurisdiction in the area in
question, without the approval of that water services authority’.
Section 7(1) of the Act provides that ‘no person may obtain
water for industrial use from any source other than the distribution
system of a water services provider nominated by the water services
authority having jurisdiction in the area in question, without
the
approval of that water services authority’. Section 8 of the
Act governs the process employed by a water services authority
in
respect of applications for approval made in terms of ss 6 and 7,
which may not be unreasonably withheld and may be granted
subject to
reasonable conditions.
[10]
In
terms of s 8(4), such an applicant may appeal to the Minister
‘against any decision, including any condition imposed,
by that
water services authority in respect of the application’.
Subsection (9) empowers the Minister when adjudicating the
appeal to
‘confirm, vary or overturn any decision of the water services
authority concerned’. In addition to these
appeal powers, the
Minister has supervisory and control powers under s 10. She or he may
from time to time, with the concurrence
of the Minister of Finance,
prescribe norms and standards in respect of tariffs for water
services.
[6]
Municipalities assumed the status of water service authorities only
in July 2003 following the adoption of the Strategic Framework
document by the Department of Water Affairs and Forestry. On 11
February 2004, Merafong sent a written notice to all the mines
in its
area of jurisdiction, including AngloGold. It informed the mines that
it had, with effect from 1 July 2003, been accorded
the powers and
functions of a water services authority. It further requested the
mines to apply for approval for the supply of
water for industrial
use in terms of s 7 of the Act. This letter was followed by meetings
at which Merafong explained the implications
of the Act and its role
as a water services authority.
[7]
Anglogold replied on 8 April 2004 and requested Merafong’s
approval ‘to continue obtaining water from Rand
Water for its
mining operations and associated domestic applications at the tariff
set by, and under the conditions imposed by
Rand Water’.
Merafong responded by way of a letter dated 31 May 2004 headed
‘APPROVAL TO BE SUPPLIED WITH WATER’.
It stated that it
appointed Rand Water as its water service provider which would supply
water to the mines directly, bill and collect
water sales revenue and
assume responsibility for water quality and other technical aspects
of water supply as Merafong’s
agent. It also set out proposed
tariffs for water to be supplied to the mines which were
significantly higher than Rand Water’s
prices and included a
higher tariff for operational use compared to domestic use.
[8]
On 11 June 2014 AngloGold appealed to the Minister in terms of s 8(4)
of the Act. Its main complaints were that (a) the tariff
proposed by
Merafong was ‘excessively higher than the equivalent Rand Water
tariff while [Merafong] is not adding any value
to, or assuming any
responsibility for any aspect of the water supply’ (the
difference would amount to R498 599 per
month) and (b) Merafong
failed to recognise AngloGold’s role as a water service
provider or make any attempt, other than
to request information on
the mine’s consumption, to understand its economic situation.
As indicated above, the Minister
upheld the appeal. In her opinion
the tariff increase of 62 per cent was unreasonable because Merafong
would add no value to the
services provided to AngloGold by Rand
Water. She ruled that a surcharge could be levied only on the portion
of water that the
mines were using for domestic purposes and not for
industrial use ‘[s]ince water for industrial use is not defined
as a municipal
service in terms of section 1(xxv) of the [Act]’.
The Minister then directed Merafong, Anglogold and Rand Water to
negotiate
a reasonable tariff on the portion of water used by
Anglogold for domestic purposes.
[9]
Negotiations were initiated as ordered by the Minister. In July 2006
the parties concluded a draft interim agreement in terms
of which the
mines would be charged Merafong’s tariff for water for domestic
use and Rand Water’s industrial tariff
for the mine hostels and
operational water use. The negotiation process then stalled. From
July 2007 Merafong took over from Rand
Water and started invoicing
AngloGold for water supplied to it by Rand Water. It informed
AngloGold that it would levy a flat rate
on all water consumed on the
mines with effect from June 2006 although it did not do so until
2008. Since July 2007 Merafong has
charged AngloGold on a tariff far
exceeding what it paid Rand Water despite the Minister’s
ruling. (AngloGold was informed
by the Chamber of Mines that Merafong
regarded the ruling as invalid on constitutional grounds and that it
would ignore it.)
[10]
It appears from a legal opinion obtained by Merafong that its lawyers
advised it to convince the Minister to withdraw her decision
overturning its decision to impose tariffs on the mines. However, its
attempts at engaging the Minister (who was likely
functus
officio
in respect of her powers under s 8(9) in any event) towards this end
failed. The formal dispute it consequently declared against
her also
does not seem to have achieved the desired result.
[11]
And
it continued imposing and implementing the tariffs adopted by its
council on the mines on the basis that the Minister’s
ruling,
which it did nothing to challenge, was not applicable.
[11]
Over an extended period, AngloGold sought to ascertain the legal
basis for the tariffs and surcharges imposed by Merafong.
When its
enquiries went unattended Anglogold withheld payment of the disputed
portion of the levies. In September 2007 Merafong
demanded payment of
the arrears on the threat that it would otherwise take ‘appropriate
steps … to limit water supply’
to AngloGold’s
mines. AngloGold yielded to the demand, but informed Merafong that it
did so, under protest and without prejudice
to its rights, to obviate
the drastic consequences and irreparable harm to its operations if
its water supply was cut. It still
asked Merafong to indicate the
legal basis for the disputed tariffs and surcharges. In response,
Merafong did not address the Minister’s
ruling and only listed
various constitutional and statutory provisions which it claimed
entitled it to do so.
[12]
The impasse lasted until Anglogold launched application proceedings
to enforce the Minister’s ruling. To that end it
sought a
declarator that Merafong may not levy a surcharge on water for
industrial and domestic use supplied to AngloGold by Rand
Water and
various ancillary relief and an alternative order reviewing and
setting aside Merafong’s imposition of a surcharge
on water for
both industrial and domestic use in terms of s 6(2)(
e
)(i)
and/or (ii) of the Promotion of Administrative Justice Act 3 of 2000
(PAJA). Merafong opposed the application and launched
a
counter-application. It sought a declarator that it has exclusive
authority to set tariffs relating to the provision of water.
In the
event that the court below found that s 8(9) empowered the Minister
to interfere with its powers relating to the setting
of water
services tariffs, it sought an order declaring the provisions
unconstitutional to that extent.
[13]
The court below granted the relief sought by Anglogold and dismissed
the counter-application. Its approach was that prior to
1 July 2003
Merafong had not yet appointed a water service provider for purposes
of ss 6 and 7 of the Act. Thus, the court found,
when AngloGold
sought Merafong’s approval to continue obtaining water from
Rand Water it did so, properly, in terms of those
provisions. The
court acknowledged Merafong’s executive and legislative powers
as a water services authority. But it held
that such powers were
subject to national legislation, ie the Act which expressly entitles
the Minister, in s 8(1), to intervene
where a municipality
unreasonably withheld its approval or imposed unreasonable conditions
in respect of applications made under
ss 6 and 7. The court concluded
that the Minister’s ruling was therefore lawful and bound
Merafong, alternatively that it
was valid until set aside by a court
of law.
[14]
On appeal before us it was argued on Merafong’s behalf that
AngloGold’s appeal to the Minister was ill-conceived
and the
judgment of the court below wrong. This was so because ss 6 and 7 of
the Act were not applicable to this case as the water
supplied by
Rand Water was not from ‘a source other than the distribution
system of a water services provider’ ie a
third party that was
neither a water service authority (in this case Merafong) or a water
service provider (in this case Rand Water)
within the contemplation
of these provisions. The appeal therefore had no basis, continued the
argument, and the Minister exceeded
her powers by making the disputed
ruling, which was a nullity and did not bind Merafong.
[15]
It seems to me that Merafong’s failure to challenge the
Minister’s ruling in judicial review proceedings, rather
than
the constitutional attack it launched against the empowering
statutory provisions, poses an insuperable difficulty for its
case. I
will assume without deciding that the Minister’s decision was
ultra
vires
as
was argued on its behalf. But even if unlawful, the Minister’s
ruling existed in fact and had legal consequences. Merafong
could,
therefore, not simply treat it as though it did not exist and act in
the very manner that it sought to prevent.
[12]
As
the Constitutional Court pointed out in
MEC
for Health, Eastern Cape & another v Kirland Investments (Pty)
Ltd t/a Eye and Lazer Institute
:
[13]
‘
Even
where the decision [by a state official] is defective …
government should generally not be exempt from the forms and
processes of review. It should be held to the pain and duty of proper
process. It must apply formally for a court to set aside
the
defective decision, so that the court can properly consider its
effects on those subject to it … Government should not
be
allowed to take shortcuts … Once the subject has relied on a
decision, government cannot, barring specific statutory
authority,
simply ignore what it has done. The decision, despite being
defective, may have consequences that make it undesirable
or even
impossible to set it aside. That demands a proper process, in which
all factors for and against are properly weighed …
[T]he
Constitution … does not require [public officials] to act
without erring. On the contrary, it anticipates imperfection,
but
makes it subject to the corrections and constraints of the law.’
[16]
It was contended for Merafong that it was not required to seek
judicial review of the Minister’s ruling in the circumstances
of this case because the Minister improperly exercised her powers
where the very preconditions for their invocation had not been
met.
This
argument has no merit.
It
is clear from the Constitutional Court’s comments in
Kirland
that it matters not if the Minister’s decision did not meet the
preconditions set out in ss 6 and 7 for the exercise of her
appeal
powers under s 8(9). There the Court said:
[14]
‘
In
our post-constitutional administrative law, there is no need to find
that an administrator lacks jurisdiction whenever she fails
to comply
with the preconditions for lawfully exercising her powers. She acts,
but she acts wrongly, and her decision is capable
of being set aside
by proper process of law. So the absence of a jurisdictional fact
does not make the action a nullity. It means
only that the action is
reviewable, usually on the grounds of lawfulness (but sometimes also
on the grounds of reasonableness).
Our courts have consistently
treated the absence of a jurisdictional fact as a reason to set the
decision aside, rather than as
rendering the action non-existent from
the outset.’
[17]
It is clear from these dicta that Merafong was obliged to approach
the court to set the Minister’s ruling aside and that
it
breached the principle of legality by simply disregarding it. And the
collateral challenge it sought to mount against the ruling
does not
avail it because it is an organ of State. It is established in our
law that a collateral challenge to the validity of
an administrative
action is a remedy available to a person threatened by a public
authority with coercive action precisely because
the legal force of
the coercive action will most often depend upon the legal validity of
the administrative action in question.
[15]
The
notion that an organ of State can use this shield against another
organ of State is simply untenable. These findings dispense
with the
need to deal with the substantive issues raised in the matter. The
appeal must fail.
[18]
In the result the following order is made:
The
appeal is dismissed with costs, including the costs of two counsel.
____________________
MML
MAYA
Judge
of Appeal
APPEARANCES:
For
Appellants: MSM Brassey SC (ESJ Van Graan SC)
Instructed
by: De Swardt Vögel Myambo Attorneys, Pretoria
Symington
& De Kok, Bloemfontein
For
Respondent: NJ Graves SC (IB Currie)
Instructed
by: Knowles Husain Lindsay Inc, Johannesburg
McIntyre
& Van der Post, Bloemfontein
[1]
Established
under the Rand Water Board Incorporation Ordinance 32 of 1903
,
as consolidated in the Rand Water Board Statutes (Private Act) 17 of
1950, deemed to be a water board established in terms of
the
Water
Services Act 108 of 1997
.
[2]
As
defined in s 1 of the Act.
[3]
In
terms of ss 1 and 30(2)(
d
)
of the Act, respectively.
[4]
The
Constitution of the Republic of South Africa Act 108 of 1996.
[5]
Defined
in s 1of the Act as water supply services ie the abstraction,
conveyance, treatment and distribution of potable water,
water
intended to be converted to potable water or water for commercial
use but not water for industrial use, and sanitation
services ie the
collection, removal, disposal or purification of human excreta,
domestic waste-water, sewage and effluent resulting
from the use of
water for commercial purposes.
[6]
Defined
in s 1 of the Act as ‘any person who provides water services
to consumers or to another water services institution
[ie a water
services authority, a water service provider, a water board and a
water services committee] but does not include
a water services
intermediary [ie any person who is obliged to water services to
another in terms of a contract where the obligation
to provide water
services is incidental to the main object of that contract]
’
.
[7]
As
provided in the Act’s Preamble and s 2.
[8]
In
terms of para 5 of the Act’s Preamble and Part B of Schedule 4
read with s 156(1)(
a
)
of the
Constitution.
[9]
Defined
in s 1 of the Act as any end user who receives water services from a
water services authority including an end user in
an informal
settlement.
[10]
Section
8(1)(
a
)
and (
b
)
of the Act.
[11]
In
terms of
s 42
of the
Intergovernmental Relations Framework Act 13 of
2005
.
Section 40
of this Act enjoins all organs of State to make
every reasonable effort to avoid intergovernmental disputes when
exercising their
statutory powers or performing their statutory
duties and to settle such disputes without resorting to litigation.
[12]
Oudekraal
Estates (Pty) Ltd v City of Cape Town & others
2004
(6) SA 222
(SCA) para 40.
[13]
MEC
for Health, Eastern Cape & another v Kirland Investments
(Pty) Ltd t/a Eye and Lazer Institute
2014
(3) SA 481
(CC) paras 64, 65 and 88.
[14]
At
paragraphs 98-99.
[15]
Ibid
para 35;
City
of Tshwane Metropolitan Municipality v Cable City (Pty) Ltd
2010
(3) SA 589
(SCA) para 15.