Brief Summary

Mineral Rights — Preferent community prospecting rights — Application by community through corporate vehicle — Appellants, representing the Bengwenyama-Ya-Maswazi Community, sought prospecting rights for the farm Eerstegeluk under the Mineral and Petroleum Resources Development Act 28 of 2002 — Legal standing of the Tribal Council and the corporate entity Miracle Upon Miracle Investments (Pty) Ltd questioned — Court held that the corporate vehicle could be considered the community for MPRDA purposes, satisfying the qualifying criteria for prospecting rights — Previous lack of registered title not a barrier to granting rights — Decision to award rights to the Roka Phasha Community set aside, and rights awarded to the appellants.

Comprehensive Summary

Summary of Judgment

1. Introduction

This judgment of the Supreme Court of Appeal concerned an appeal and cross-appeal arising from judicial review proceedings under the Promotion of Administrative Justice Act 3 of 2000 (PAJA). The dispute related to competing claims for a preferent community prospecting right under section 104 of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) in respect of the farm Eerstegeluk 327 KT in Sekhukhuneland, Limpopo Province.

The appellants were the Bengwenyama-Ya-Maswazi Community, the Bengwenyama-Ya-Maswazi Tribal Council, and Miracle Upon Miracle Investments (Pty) Ltd (MUM). The respondents were Genorah Resources (Pty) Ltd, the Roka Phasha Phokwane Traditional Council, the Roka Phasha Community, and the Minister for Mineral Resources. The Minister took no part in the litigation, both in the High Court and on appeal, with the result that the appellants’ account of interactions with the Department was unchallenged on the papers.

The matter followed earlier litigation culminating in the Constitutional Court decision Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty) Ltd & others 2011 (4) SA 113 (CC), where a 2006 award of prospecting rights to Genorah over Nooitverwacht and Eerstegeluk was set aside due to failures of consultation and procedural fairness, and because the community had not been afforded a proper opportunity to apply for preferent rights under section 104.

In the North Gauteng High Court, Pretoria, Makgoka J reviewed and set aside (i) the Minister’s refusal of MUM’s section 104 application for Eerstegeluk and (ii) the Minister’s decision granting preferent prospecting rights over Eerstegeluk to the Roka Phasha parties and Genorah in a joint venture. However, the High Court declined to substitute its own decision granting rights to MUM, expressing reluctance primarily because the Minister had not properly considered MUM’s application and because of concerns about MUM’s shareholding arrangements and whether they sufficiently protected community benefit. The present appeal concerned whether the High Court erred in refusing substitution, while the cross-appeal challenged the setting aside of the Minister’s decisions.

The general subject-matter of the dispute was therefore the proper identification of the “community” entitled to section 104 preferent rights, the lawfulness of the Minister’s decisions in a contested application environment, and the lawfulness and appropriateness of substituting an administrative decision with a court order granting exclusive prospecting rights to the community’s corporate vehicle, subject to protective conditions in a shareholders’ agreement.

2. Material Facts

During November 2010, anticipating a favourable outcome in the Constitutional Court litigation then pending, the appellants (through the Tribal Council) lodged a section 104 application for preferent community prospecting rights in respect of Nooitverwacht and Eerstegeluk, using MUM as the corporate vehicle and applicant.

After lodging the application, the appellants’ attorneys repeatedly communicated with the Department, drawing attention to the Constitutional Court’s earlier concerns about the treatment of the community, and requesting to be informed of and afforded an opportunity to respond to competing applications. The Department did not provide substantive responses, although it later invited the appellants to present their application and, at that meeting, gave assurances that they would be given an opportunity to respond to departmental concerns and object to competing applications. It also became clear at this stage that an application submitted in the name of the BYMC (referred to by the appellants as being made by “impostors”) was not theirs.

The appellants subsequently learned of a competing section 104 application regarding Eerstegeluk, namely an application by the Roka Phasha Community in joint venture with Genorah. The Department eventually provided only extracts from competing applications. While the Department was still corresponding with MUM regarding a revised environmental plan for its application, the Minister refused MUM’s application for Eerstegeluk on the basis that the community was “neither the registered land owner nor the occupier” of the farm. Although the decision appeared to have been taken during February 2011, it was communicated to MUM only on 18 April 2011.

On 16 March 2011, the Minister granted preferent community prospecting rights over Eerstegeluk, purportedly under section 104, to the Roka-Phasha Phokwane Tribal Council in joint venture with Genorah. A subsequent press release (20 April 2011) publicised awards over Eerstegeluk and Nooitverwacht to the Roka Phasha parties and “the Community” (in a formulation that, on the appellants’ case, misrepresented the lawful representative structures of the BYMC and ignored prior antagonistic history).

It was common cause that Eerstegeluk and Nooitverwacht were registered in the name of the State, not in the name of either contesting community. The respondents nevertheless defended the refusal of MUM’s application on the basis of lack of registered title, despite the fact that the Roka Phasha Community also lacked registered title.

On the merits relevant to section 104’s “registered or to be registered” requirement, the appellants placed before the court unchallenged expert historical evidence (Professor Pieter Delius) describing the BYMC’s longstanding connection to Eerstegeluk, including occupation from the 19th century, dispossession and removal in 1913, and repeated historical attempts to regain or purchase the land. The evidence indicated no link between the Roka Phasha and Eerstegeluk before the 1970s, suggesting their presence resulted from later government relocation decisions. The respondents did not present contradictory expert evidence on this history.

The appellants also relied on evidence (including a survey) indicating that the Roka Phasha community occupied only a strip of Eerstegeluk and constituted a small minority of its inhabitants, while the overwhelming majority of residents were members of the BYMC and regarded the Tribal Council as their traditional authority. The respondents disputed the reliability of this survey evidence largely on the basis that it was obtained by persons aligned with the appellants.

Before December 1998, the BYMC had lodged a land claim under the Restitution of Land Rights Act 22 of 1994, and the Regional Land Claims Commissioner had issued a memorandum recommending acceptance and publication of the claim. Importantly, no competing land claim over Eerstegeluk had been lodged by the Roka Phasha Community or any other community.

A further material factual issue concerned the corporate and governance arrangements of MUM. The shareholders’ agreement reflected that Nurinox (Pty) Ltd held 51% and Atlantic Nominees (Pty) Ltd held 49% of MUM’s shares, and that the BYMC was the sole shareholder of Nurinox. However, the governance provisions allowed each shareholder to appoint up to three directors, with ordinary board decisions by majority vote and deadlock provisions. A key clause (12.2) required 70% shareholder consent for specified reserved matters, which the appellants contended created a community veto, while the respondents contended that potential dilution mechanisms could undermine community control. During the appeal, the appellants proposed (and the SCA accepted as protective) an amendment raising the 70% threshold to 74.1%.

3. Legal Issues

The central legal questions the SCA was required to determine were predominantly questions of law and application of law to fact, with an additional remedial question involving the exercise of a review court’s discretion.

The first set of issues concerned representation and institutional standing: whether the Bengwenyama-Ya-Maswazi Tribal Council had a legal existence and could be treated as the authoritative voice of the BYMC for purposes of pursuing section 104 rights, particularly in light of the statutory framework governing traditional councils under the Traditional Leadership and Governance Framework Act 41 of 2003 (TLGFA) and provincial legislation.

The second set of issues concerned the meaning and operation of section 104 of the MPRDA, including whether it is competent for a company to apply for and hold a preferent community prospecting right, and whether—on the facts—MUM could properly be treated as the community’s vehicle such that the statutory requirements in section 104(2) (development and upliftment, a development plan, and benefits accruing to the community) were satisfied. This required evaluation of the shareholding and control arrangements to determine whether community benefit and control were sufficiently protected.

A further issue, arising particularly on Eerstegeluk, was whether the lack of present registered title in the name of the BYMC (or its structures) disqualified the community, given section 104(1)’s reference to land “registered or to be registered” in the name of the community.

Finally, there was a remedial issue: whether, after setting aside the Minister’s decisions as unlawful under PAJA, the proper remedy was remittal for reconsideration by the Minister or substitution by the court awarding MUM the exclusive prospecting right (subject to conditions), especially in circumstances where the administrative decision-making process was criticised as procedurally and substantively defective.

4. Court’s Reasoning

The SCA treated the description of the first appellant (“the community”) as amorphous, and recorded a concession by the appellants’ counsel that the litigation could proceed without relying on the first appellant as a separate juristic entity. The appeal thus focused on the position of the Tribal Council and MUM as the operative applicants.

On the legal status and legitimacy of the Tribal Council, the SCA analysed the constitutional and legislative framework recognising traditional leadership and governance, including sections 211 and 212 of the Constitution, the TLGFA, and the Limpopo Traditional Leadership and Institutions Act 6 of 2005. The respondents’ argument was that the relevant statutes did not recognise an entity called a “Tribal Council” and that the formal statutory processes for recognition and gazetting had not been followed.

The SCA rejected that approach as overly formalistic in the circumstances, emphasising the transitional provisions in section 28 of the TLGFA, under which pre-existing “tribes” and “tribal authorities” were deemed to be traditional communities and traditional councils for purposes of the new framework, subject to later compliance measures. On the record, the SCA accepted that the appellants had demonstrated longstanding de facto functioning and statutory recognition (including reliance on historical proclamations under the Black Authorities Act 68 of 1951), and that there was nothing to contradict the assertion that required transformation measures had been taken within the statutory timeframe. In that context, and given the consultation process described by the appellants, the SCA concluded that the Tribal Council had a legal existence and could properly be regarded as the authoritative voice of the BYMC in relation to the section 104 application.

Turning to section 104 of the MPRDA, the SCA adopted a purposive approach consistent with the Constitutional Court’s description of the MPRDA’s transformative and empowerment objectives in Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty) Ltd & others 2011 (4) SA 113 (CC). It reasoned that, in the commercial reality of prospecting and mining (requiring substantial finance and technical expertise), it would be unrealistic to expect many communities to meet the statutory requirements (such as financial resources and technical ability) without collaboration with commercial actors and the use of a corporate structure. The SCA treated the question not as one of rigid corporate separateness, but as whether—in substance—the community could be said to be applying through its chosen vehicle.

In addressing the respondents’ reliance on the principle of corporate personality (and the citation of Goldberg NO v P J Joubert Ltd 1960 (1) SA 521 (T)), the SCA held that the point did not answer the statutory and factual enquiry required in this context. The enquiry, in its view, was whether MUM’s application could be treated as the community’s application for purposes of section 104, given endorsement by the community through the Tribal Council and the alignment of the application with the MPRDA’s purpose. The SCA considered the evidence to demonstrate overwhelming community endorsement of using MUM as the vehicle, and noted that the Department itself had engaged with the appellants on issues such as community shareholding, indicating that it did not reject the corporate-vehicle approach as such.

A substantial part of the reasoning concerned whether the shareholders’ agreement adequately ensured that the benefits envisaged by section 104(2)(a)–(c) would accrue to the community, and whether the community had sufficient protection against being outvoted or having its interest diluted. The SCA acknowledged that the respondents had raised a legitimate concern about the interaction between a reserved-matters consent threshold (clause 12.2 at 70%) and potential dilution provisions (clause 17.4). It accepted, however, that the concern could be met by adjusting the consent threshold, and it treated the appellants’ proposed amendment to clause 12.2—raising the threshold to 74.1%—as an adequate safeguard to protect community interests and to ensure alignment with section 104(2)’s requirements. The SCA therefore concluded that, with that amendment, the agreement sufficiently protected the community’s interest and ensured that the statutory objectives would be met.

On the issue of registered title, the SCA relied on the wording of section 104(1), which expressly contemplates land that is “registered or to be registered” in the name of the community. Given the accepted and largely unchallenged evidence of the BYMC’s historical dispossession, the existence and acceptance of the land restitution claim, and the absence of any competing land claim by the Roka Phasha Community, the SCA agreed with the High Court’s conclusion that success in the BYMC’s land claim was overwhelmingly probable and that the ultimate result would be restitution and registration in the community’s name rather than alternative land. On that basis, it held that lack of current registered title did not bar the grant of a section 104 right in the circumstances.

The SCA also addressed the lawfulness of the Minister’s decision-making process, noting that the Department’s conduct after the Constitutional Court’s earlier criticisms was troubling. It highlighted the Constitutional Court’s observations (particularly regarding procedural fairness obligations) and concluded that the Department had again failed to afford the appellants a meaningful opportunity to be heard in relation to departmental concerns and competing applications, and had made a “startling” decision to exclude the BYMC’s application on a basis inconsistent with its prior approach.

Finally, on the question of remittal versus substitution, the SCA accepted the general proposition that the decision to grant prospecting rights lies within the Minister’s domain, but held that substitution is permissible where the original decision-maker has exhibited bias or incompetence. In this case, given the Department’s conduct and the strength of the appellants’ case on the record, the SCA considered substitution justified. It therefore replaced the High Court’s remittal approach with an order awarding MUM the exclusive prospecting right, subject to proof of the protective amendment to the shareholders’ agreement.

In relation to costs, the SCA recorded a concession by the appellants’ counsel that the record was more extensive than necessary, and it reflected this by ordering that the respondents pay 90% of the appellants’ costs of appeal and cross-appeal.

5. Outcome and Relief

The SCA dismissed the cross-appeal and upheld the appeal. It substituted the High Court’s order with an order reviewing and setting aside (i) the Minister’s decision refusing to award MUM exclusive section 104 prospecting rights over Eerstegeluk and (ii) the Minister’s decision awarding prospecting rights over Eerstegeluk to the Roka Phasha parties and Genorah in joint venture.

The SCA substituted those administrative decisions with a decision awarding MUM exclusive prospecting rights over Eerstegeluk 327 KT, and directed the Minister to issue those rights upon proof that MUM had amended clause 12.2 of its shareholders’ agreement by substituting “74.1%” for “70%”.

On costs, the SCA ordered the first and second respondents (Genorah and the Roka Phasha Phokwane Traditional Council) jointly and severally to pay the applicants’ costs in the court below (including two counsel), and to pay 90% of the appellants’ costs of the appeal and cross-appeal (including two counsel).

Cases Cited

Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty) Ltd & others 2011 (4) SA 113 (CC).

Goldberg NO v P J Joubert Ltd 1960 (1) SA 521 (T).

Bengwenyama-ya-Maswazi Community v Minister for Mineral Resources (783/2013) [2014] ZASCA 139 (26 September 2014).

Legislation Cited

Constitution of the Republic of South Africa, 1996 (sections 211 and 212).

Mineral and Petroleum Resources Development Act 28 of 2002 (section 104; sections 16, 17, 22 and 23 referenced in the section 104 framework).

Promotion of Administrative Justice Act 3 of 2000 (sections 3 and 6(2)(a)(i), 6(2)(e)(iii), 6(2)(f)(i) referenced).

Traditional Leadership and Governance Framework Act 41 of 2003 (sections 2, 3, 4 and 28).

Limpopo Traditional Leadership and Institutions Act 6 of 2005 (sections 3, 10, 24 referenced).

Restitution of Land Rights Act 22 of 1994 (sections 2 and 11(6) referenced).

Black Authorities Act 68 of 1951.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The SCA held that the Bengwenyama-Ya-Maswazi Tribal Council had a cognisable legal existence within the post-constitutional statutory framework governing traditional councils, including transitional recognition under section 28 of the Traditional Leadership and Governance Framework Act 41 of 2003, and that it could, on the facts, be treated as the authoritative voice of the community in relation to the section 104 application.

It held that a community may, consistently with the purpose and structure of section 104 of the MPRDA, use a corporate vehicle to apply for and hold a preferent community prospecting right, and that MUM could, in substance, be regarded as the community for purposes of the application where the community endorsed the vehicle and the corporate arrangements adequately protected community benefit and control.

It held that the absence of current registered title in the community’s name did not preclude the grant of a section 104 right where the land was “to be registered” in the community’s name, and where the record showed an overwhelming likelihood of successful land restitution culminating in registration.

It held that the Minister’s decisions refusing MUM’s application and granting the respondents a preferent right were unlawful and correctly set aside, and that a substituted order awarding MUM the exclusive prospecting right was justified in light of the defective administrative process, subject to a condition strengthening community protection in MUM’s shareholders’ agreement by increasing a reserved-matters consent threshold to 74.1%.

LEGAL PRINCIPLES

A court summarising this judgment may extract the following legal principles as having been applied on the facts and within the statutory context addressed.

The interpretation and application of section 104 of the MPRDA must be approached purposively and consistently with the Act’s transformative objectives, including the expansion of opportunities for communities and historically disadvantaged persons, as articulated by the Constitutional Court in Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty) Ltd & others 2011 (4) SA 113 (CC).

Within that purposive framework, the use of a corporate vehicle by a community is not, in itself, inconsistent with section 104, provided that the arrangement substantively ensures that the right is exercised for the development and social upliftment of the community and that the envisaged benefits accrue to the community as contemplated by section 104(2).

The statutory regime governing traditional leadership, including transitional provisions in section 28 of the Traditional Leadership and Governance Framework Act 41 of 2003, may sustain the legal recognition of pre-existing traditional governance structures, with nomenclature (“tribal council” versus “traditional council”) not being determinative where the evidence demonstrates continuity of recognition and function within the legislative scheme.

The phrase “registered or to be registered” in section 104(1) is capable, on the record of this case, of accommodating circumstances where the community does not yet hold registered title but has instituted a land restitution claim with an overwhelmingly probable outcome of restoration and registration, such that lack of present registration does not necessarily bar a preferent right.

In administrative-law remedies, while the grant of prospecting rights is ordinarily within the Minister’s domain, a reviewing court may order substitution rather than remittal where the original decision-maker’s process shows defects of a kind (including bias or incompetence) that justify corrective judicial intervention on a sufficiently complete record, and where substitution better vindicates lawful and procedurally fair administration in the circumstances.

Bengwenyama-Ya-Maswazi Community and Others v Genorah Resources (Pty) Ltd and Others ([2014] ZASCA 140) [2014] ZASCA 226; 2015 (1) SA 219 (SCA) (26 September 2014)